Conygar Inv Regulatory News (CIC)

29 November 2012

THE CONYGAR INVESTMENT COMPANY PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2012

The Conygar Investment Company PLC, announces its results for the year ended 30 September 2012.

HIGHLIGHTS

·; Net asset value per share increased by 7% to 165.9p (2011: 155.2p). EPRA NAV per share increased by 8% to 166.9p (2011: 153.9p).

·; Pre-tax profit for the year £7.46 million compared with £1.76 million last year.

·; Acquired a portfolio of nine freehold and long leasehold properties (the "Edinmore portfolio") for £39.8 million with a net initial yield of 10.6%. Valued at £42.4 million as at 30 September 2012.

·; Obtained planning consents for our £100 million waterfront development at Fishguard, West Wales and our mixed-use marina development at Holyhead, Anglesey, Wales.

·; Net debt of £48.2 million representing gearing of 31.3% against net asset value and 27.4% on loan to value basis.

·; Strong cash flow and debt capacity for future acquisitions, with total cash and undrawn committed facilities exceeding £50 million.

·; Share buy back: the Group acquired 9.1% of its ordinary share capital at a weighted average price of 90.8p per share.

·; Post period end, submitted planning application in respect of the 60,000 square foot Sainsbury's retail food store and 835 residential plots in Haverfordwest.

Summary Group Net Assets As At 30 September 2012

Robert Ware, Chief Executive, commented:

"Notwithstanding the backdrop of general economic struggles, the outlook for Conygar remains promising and our cautious business model ensures we manage the downside whilst positioning the Group to take full advantage of the upside. The balance sheet is strong and we are well funded. We continue to make good progress on both development projects and the investment property portfolio, whilst managing the associated risks.

We remain positive about the future for your business and look forward to continuing our progress particularly in the development portfolio during the forthcoming year."

Enquiries:

The Conygar Investment Company PLC

Robert Ware: 020 7258 8670

Peter Batchelor: 020 7258 8670

Oriel Securities Limited (Nominated Adviser)

Michael Shaw: 020 7710 7600

Neil Langford: 020 7710 7600

Temple Bar Advisory (Public Relations)

Alex Child-Villiers: 07795 425580

Chairman's & Chief Executive's Statement

Results

We are pleased to report a net asset value per share of 165.9p, which is an increase of 7% from last year. The major components of that growth are the profit after tax of £5.6 million and the positive impact of the share buy back programme. Net asset value as at 30 September 2012 was £154.0 million compared with £158.5 million at 30 September 2011. However, the Group spent £8.5 million on share buybacks during 2012 and paid a dividend of £1.1 million. Excluding these, net assets increased by 3%. On an EPRA basis, net asset value per share increased by 8% to 166.9p.

The profit before taxation for the year was £7.5 million (2011: £1.8 million). Net property income was £13.4 million (2011: £10.0 million) before financing and overheads. Whilst our primary focus is on growing net asset value per share, it is also good to see the improved profitability of the business.

The Group's investment properties as at 30 September 2012 were independently valued at £176.0 million (2011: £139.2 million) and have an annual contracted rent roll of £15.8 million (2011: £12.1 million). The Edinmore portfolio acquired in the year increased in value by 6% whilst the existing properties fell by 1.6%, on a like for like basis. We continue to concentrate on asset management and the result is pleasing given the difficulties being experienced in the property market outside central London.

The development land bank is held at cost of £30.8 million (2011: £29.4 million), after additions of a further £1.4 million during 2012. During the year, we were pleased to announce the granting of outline planning permission for our two mixed use marina developments at Holyhead Waterfront, Anglesey and Fishguard, West Wales. We have also now submitted the planning application in respect of the 60,000 square foot Sainsbury's retail food store and 835 residential plots at Haverfordwest. The development team continues to deliver good progress on all of our projects and, whilst the planning process is frustratingly slow, we remain on target to deliver projects comprising more than 2,000 homes, 1,400 marina berths and in excess of 400,000 square feet of commercial and retail development. All of these matters are covered in more detail under the Business Review.

The Group continues to deliver on its strategy, having established an investment property portfolio generating surplus cash flow whilst at the same time creating a pipeline of exciting development projects that are well positioned to deliver good returns in the medium term. The business is well funded and the balance sheet remains strong. We will recycle assets to release capital as opportunities present themselves and will continue to buy back shares to enhance net asset value per share. This is a business model that has delivered growth throughout the nine year life of the Group.

Acquisitions and disposals

In December 2011, we acquired a portfolio of properties from a consortium including a subsidiary of Caledonia Investments plc and Buccleuch Property in an off-market transaction for a total cash consideration, including all costs, of £39.8 million (the "Edinmore portfolio"). The annual rent roll is approximately £4.2 million representing a net initial yield of 10.6%. This high yielding portfolio has a good spread of risk and offers considerable upside from both lease re-gears and development opportunities. It fits well with our strategy of acquiring assets with strong existing cash flow to which we can add further value.

The Group disposed of four investment properties during the year for total net proceeds of £4.05 million, generating a surplus of £431,000 over valuation. We will continue to dispose of assets as opportunities arise and where no further value can be added by the Group. 

Dividend

The Board is pleased to recommend a final dividend of 1.25p per ordinary share in respect of the year ended 30 September 2012 to be paid on 22 January 2013 to shareholders on the register on 7 December 2012. This is an increase of 14% over last year. Our dividend policy is unchanged in that we will aim to provide some income return to shareholders but for the most part retain profits for reinvestment in the business.

Share Buy Back

During the year, the Group acquired 9,320,000 ordinary shares representing 9.1% of its ordinary share capital, at a weighted average price of 90.8p per share. This cost £8.5 million and, as a result of the buy backs, net asset value per share has been enhanced by approximately 6.5 pence per share or 4%. The Group will seek to renew the buy back authority at the forthcoming AGM and will continue to utilise it as and when it makes sense to do so and certainly whilst our shares continue to trade at such a significant discount to our underlying value.

Financing

At 30 September 2012, the Group had bank debt of £81 million and cash of £32 million available to pursue investment opportunities and to fund progress on our developments. When combined with funds available from the committed bank facility, this amount increases to £50 million. This excludes any further finance available in respect of new acquisitions. The Group bank debt stands at 46% loan to value or 27% net of cash.

During November 2011, the Group re-couponed its existing interest rate swaps from 2.38% to 1.33%, having already reduced them during the previous financial year from 5.2%. In June 2012, we entered into a new interest rate swap agreement for the remaining £15.3 million unhedged balance of our external bank debt with a fixed rate of 0.99%. Aside from reducing the on-going interest rate charge in the income statement, our external bank debt is now fully hedged and the weighted average cost of all debt including margin has fallen to 4.44%.

Also during November 2011, the Group drew down £33 million from its facility with Lloyds Banking Group, which was used to acquire the Edinmore portfolio. The ability to deploy cash quickly was a major competitive advantage when acquiring this portfolio.

In August 2012, we announced the £20 million refinancing of the Edinmore portfolio with Barclays Bank PLC. This four year facility is secured on the nine properties of the Edinmore portfolio and is fully fixed for the term at an all in cost of 4.5%.

We are presently in discussions with several banks with a view to refinancing the £11.5 million debt facility which matures in January 2013. The assets secured on this facility are valued at £31 million so we are confident that refinancing is a viable proposition. In any event, we have the cash available to repay the facility whilst negotiations continue.

Review of Remuneration Policy

At the last Annual General Meeting, the Chairman committed to consult with a wide range of shareholders with respect to the Group's remuneration arrangements for Executive Directors. We have also monitored and reviewed the topical debates in this area. It is essential that remuneration remains sufficiently competitive to attract, retain and motivate high quality management to achieve challenging targets. The Group has been well run and has continued to grow through one of the worst downturns in living memory. However, we acknowledge that bonus payments, in whatever form, should only arise for true out-performance and to that end, we have increased the post-tax hurdle rate on the Profit Sharing Plan to 10% per annum on a cumulative basis. In addition, we have introduced a share price condition. The remuneration committee does not intend to pay out a bonus unless the market share price is at least 65% of audited net asset value per share. We have also made a number of lesser amendments to clarify and simplify the Plan, but in the main, our shareholder consultees were satisfied that the basic structure is appropriate for our business model.

Summary of Group Net Assets

The Group net assets as at 30 September 2012 may be summarised as follows:

Outlook

There can be no doubt the going remains exceedingly tough. With a fragile economy, struggling to climb out of recession combined with continued scarce financing, the property market remains weak, particularly outside London. Signs of recovery are few. Businesses and households remain cautious, and rightly so, given the considerable challenges still to be met, whether domestically or further afield.

Notwithstanding the backdrop of general economic struggles, the outlook for Conygar remains promising and our cautious business model ensures we manage the downside whilst positioning the Group to take full advantage of the upside. The balance sheet is strong and we are well funded. We continue to make good progress on both development projects and the investment property portfolio, whilst managing the associated risks.

We remain positive about the future for your business and look forward to continuing our progress particularly in the development portfolio during the forthcoming year.

N J Hamway R T E Ware

Chairman Chief Executive

BUSINESS REVIEW

INVESTMENT PROPERTIES

Summary of portfolio

Asset management

At 30 September 2012, the contracted rent for the investment property portfolio was £15.8 million with an ERV of £17.5 million. The ERV of vacant space is £2.1 million of which Advantage, Reading and Brunswick Point, Leeds account for 40% by rental value. The overall vacancy rate in the portfolio is 10.40% down from 11.19% in 2011 and the average unexpired lease length fell to 4.50 years from 5.21 years at 30 September 2011, mostly due to the impact of acquiring the Edinmore portfolio.

Clearly tenants and their businesses remain under pressure and therefore we seek to maintain close communication and early discussions with tenants where leases are shortening or breaks impending. We are fortunate that our arrears are less than 1% of the rent roll and that 95% - 98% of rent is collected within ten days of a quarter.

In terms of lettings:

·; We agreed 4 new lettings contributing £156,212 pa of new income at or around ERV.

·; We agreed 16 lease renewals retaining £1,775,581 pa of income at an aggregate premium of 7.55% to ERV.

The highlights include:

Norfolk House, Birmingham

The 4th and part 5th floors of Norfolk House, Birmingham were let to the Secretary of State, occupying a total of 19,279 sq ft on two leases expiring on 25 March 2015. The total annual rent payable is just over £250,000. Each of the leases had a break clause on 24 March 2013. Following discussions with the tenant's managing agent, terms were agreed for the break clauses to be removed from the leases in return for a rent free period of 6 weeks. The passing rents of just over £250,000 per annum will therefore run until lease expiry in 2015. It is particularly good news to obtain another 2 years' income secured at existing levels of rent in return for only 6 weeks' rent free and is a good example of the importance of maintaining close and frequent dialogue with occupiers.

31 Foleshill Road, Coventry

31 Foleshill Road comprises 14,888 sq ft and is let to Halfords Limited on a lease which was due to expire on the 23 June 2016. A re-gear of the lease to Halfords has subsequently completed on the following terms:-

·; Term - 10 years from 29 June 2012.

·; Tenant Breaks - none.

·; Rent - as existing, £209,281 per annum.

·; Incentives - 18 months' rent free from 29 September 2012.

As a consequence of the re-gearing of the lease, the valuation of this asset increased by £115,000 and, more importantly, the investment is now a more attractive proposition, which provides Conygar with further flexibility with regard to its strategy for this asset going forward.

7 West Street, Horsham

7 West Street, Horsham was let in the latter part of 2010 to British Bookshops and Stationers Limited on a 10 year lease at £95,000 per annum. However, British Bookshops and Stationers Limited became a casualty of the difficult retail market in 2011 and went into Administration with the lease being disclaimed by the Administrator on 19 March 2011.

The property was subsequently marketed and a letting to C & H Fabrics Limited has subsequently been completed. The lease is for a term of 10 years from 20 December 2011, at an improved rent of £105,000 per annum, which is in line with ERV. The tenant was granted a three month rent free period during its fit out, followed by six months' rent free, which has been provided by discounting the annual rent by 50% for the first year of the term.

The tenant, C & H Fabrics Limited was founded in 1933 and has seven retail outlets in the South East, with the new branch at Horsham adding to that portfolio. The tenant carried out a substantial refit of the property and created a new staircase to link the ground floor and first floor in order to trade on the first floor, which was poor quality storage previously. The letting of 7 West Street, Horsham on a 10 year lease at a rent of £105,000 per annum to a long established retailer represents an excellent outcome for Conygar, in what is a challenging environment in the retail sector, at present.

15b Blackpole Trading Estate, Worcester

The property consists of a 100,000 sq ft industrial unit on an established trading estate in Worcester and is let in its entirety to Exel Europe, who use the property for the servicing of a distribution contract with Network Rail. They have always been reluctant to enter into long term leasing commitments, which do not mirror the terms of their distribution contract. During the financial year, two separate transactions have been concluded with Exel Europe:

·; In December 2011, a lease for a further year to 31 December 2012 was completed, at an increased rent of £390,000 per annum (ERV £360,000 per annum) to reflect a short term extension to their Network Rail contract. This reflects an 8.3% uplift on the passing rent and on ERV.

·; In advance of the lease expiry in December 2012, a reversionary lease has been completed, which will retain Exel at the new passing rent until 30 September 2013.

Discussions are ongoing with respect to the tenant's continued occupation of the property but, for now, the income has been retained in a very difficult local market. 

Disposals

The Group disposed of four investment properties during the year at Carnoustie House, Warrington; Hortonwood, Telford; and Units 1 and 2 Silver Court, Welwyn. Total net sale proceeds were £4.05 million, generating a surplus over valuation of £431,000. We will continue to dispose of assets as opportunities arise and where no further value can be added by the Group.

Valuations

The investment property portfolio has been independently valued by Jones Lang LaSalle at £176.0 million as at 30 September 2012. The investment property portfolio marginally increased in value by 0.2%, however the Edinmore portfolio acquired in the year increased by 6%, whilst the existing properties fell in value by 1.6% on a like for like basis. The investment property market outside central London continues to be difficult and challenging. Assets require active management to protect income and value.

Capital Expenditure

We incurred £429,000 of capital expenditure during 2012, which was fully financed from our existing cash flow. We are undertaking refurbishment of some of the space within the Edinmore portfolio, in particular at Norfolk House, Birmingham where the vacant 2nd floor will be brought up to standard. It is likely that this level of capital expenditure will continue into 2013.

Summary of Edinmore Portfolio - Acquired December 2011

Ashby Park, Ashby de la Zouch

Three freehold office buildings totalling 95,000 square feet let to three tenants, Alstom Power, Findel Education and Hill Rom Limited, with a total rental income of £1,059,000 pa. There is also a 3 acre development site.

Norfolk House, Birmingham

A 115,000 square foot freehold building consisting of 89,000 square feet of office space with the balance being retail space and is located next to the Bull Ring in Birmingham City centre. It should benefit from the nearby redevelopment of New Street Station, The Pallisades Shopping Centre, and a new 250,000 square foot store for John Lewis. The current rental income is £1,039,000 pa.

Watt Place, Hamilton International Technology Park, Blantyre

A 34,300 square foot freehold industrial unit let to motor vehicle component manufacturer, CTS Corporation UK Limited on a lease expiring in February 2016. The current rental income is £189,000 pa.

Compass House, Dundee

A 30,500 square foot heritable office building in Dundee's prime waterfront location that is let to The Scottish Ministers until March 2019. Total rental income is £380,000 pa.

Witham Park House, Lincoln

A former factory divided into three separate freehold blocks and converted into 101,000 square feet of offices. The majority of the building is let to Lincolnshire County Council with lease expiry dates ranging from 2012 to 2018. Current rental income is £461,000 pa. 

Charles House, Northampton

A 28,600 square foot freehold building built over 5 floors let on a number of short leases. Current rental income is £185,000 pa.

Tollgate Business Park, Stafford

A 55,000 square foot freehold industrial/office building let to Elster Metering until April 2015 at £291,000 pa.

1 Cotham Street, St Helens

A 41,600 square foot freehold building let to Wilkinsons at £466,000 pa and purpose built for them with a lease expiry in October 2015.

Network House, Wolverhampton

A 33,300 square foot freehold building consisting of 14,000 square feet of offices and 19,300 square feet of retail space. The existing office accommodation is currently vacant, however, the property offers a redevelopment opportunity. Current rental income is £80,000 pa.

DEVELOPMENT PROJECTS

Haverfordwest

This 93 acre site at Haverfordwest, Pembrokeshire, close to the town centre already has planning consent for 900 residential units.

However, we have a conditional contract with Sainsbury's for the sale of 9 acres for a supermarket, subject to the obtaining of a suitable planning consent. The planning application was submitted in November 2012 for a retail food store comprising 60,000 square feet of sales floor space, a restaurant, a 500 space car park and filling station. Our application also includes proposals for 835 residential plots on our remaining site.

As stated previously, the addition of Sainsbury's to this development will significantly change the economics of the project and, if successful, enable us to bring forward the residential development, having more than covered all our infrastructure and services costs through the net proceeds from Sainsbury's. We shall make a further announcement in due course.

Holyhead Waterfront

We are pleased to have received planning permission for our mixed use development. The consent includes plans for 326 apartments and townhouses, a 500 berth marina, 50,000 square feet of retail, leisure, restaurants, hotel and office space, with a very flexible design layout and in a prime location overlooking the marina. We are also making a provision for various local amenities and visitor attractions. The site covers in excess of half a mile of water frontage and is being developed jointly with Stena Line Ports Limited.

The obtaining of this consent was a massive effort by the team and followed a considerable amount of work in dealing with the myriad of issues associated with a complex regeneration scheme of this nature. We are currently in the process of finalising the section 106 planning agreement and planning conditions. Simultaneously, we are in discussions with various parties with respect to both the residential and commercial elements of the scheme. The undoubted boost to the local economy provided by the recent commitment of Hitachi to develop the multi-billion pound Wylfa B nuclear power station will certainly help our scheme.

Parc Cybi Business Park, Holyhead

We continue to market our logistics development site at Parc Cybi, and discussions are continuing with several potential occupiers. Having been designated an Enterprise zone, we are confident that the site will benefit from occupier incentives such as business rate exemption. We were also pleased to have obtained the offer of £2.2 million of EU funding which will be used to drive forward the first phase development consisting of 130,000 square feet of office and distribution warehousing.

The logistics development will be complemented by our plans to create a transport hub and lorry park facility to support the port of Holyhead on an adjacent 9 acre site. The planning application for this development has been submitted.

Fishguard Waterfront

We were extremely pleased to be granted outline planning consent for our mixed use marina development at Fishguard in West Wales. The main elements of the scheme include a 450 berth marina with workshops, stores and ancillary facilities; 253 new residential apartments incorporating extensive landscaped gardens and a 19 acre platform for the potential expansion of the existing Stena Line port. The end value of the development is expected to be in excess of £100 million.

We have recently successfully completed an archaeological survey in the area and are negotiating a section 106 planning agreement with the local authority. We are also working with local organisations and businesses who are helping us shape the detail of the proposed development. We also commenced negotiations with the various landowners; Stena Line, Pembrokeshire County Council and The Crown Estate, who own the relevant surrounding harbour area. The proposal will transform the area, create much needed employment opportunities and further enhance and ensure the future of the commercial port and we believe that certain EU backed Welsh Government infrastructure funds might be available for funding support which would be a valuable benefit given the difficulty accessing sensible private sector development funding in the UK at present.

Fishguard Lorry Stop and Distribution Facility

This lorry stop and distribution park project consists of a secure 24 hour truck stop together with approximately 190 spaces for tractor and trailers, vehicle refuelling and wash facilities, plus an amenity building. There will also be around 30,000 square feet of industrial and warehousing units to support the lorry stop. Planning consent has been obtained and the necessary site acquired.

As this project offers significant employment and infrastructure benefits to the community, we have secured an offer of £1.1 million grant funding from the South West Wales Property Development Fund and discussions are currently taking place with both hauliers and the port operator, Stena Line. It remains our intention to commence development once we have secured sufficient pre-lets.

Pembroke Dock Waterfront

Work on the various design and engineering solutions continues at this £100 million development of the Pembroke Dock Waterfront in West Wales and we are in the process for applying for the consents and licences necessary to progress work in the harbour. At the same time we are in discussions with several potential tenants and occupiers with a view to moving ahead with the first phase of the development. We have also submitted an application to an EU backed Welsh Government infrastructure fund for funding support which would help fund the significant infrastructure works at this development. 

King's Lynn, Norfolk

This 6 acre residential development opportunity has planning permission for 94 dwellings near to King's Lynn, Norfolk. In addition to the residential development, the site offers some potential for mixed or commercial uses, subject to planning. We have since renewed the planning permission, subject to completion of the Section 106 agreement, and the site is being actively marketed.

Summary of Development Projects

The expenditure in the year on our development land bank amounted to £1.4 million. Our total investment to date is now £30.8 million at cost (analysed below) or 33p per share. We will continue to progress these projects in a risk-averse manner and to avoid any speculative development. The planning process for complex schemes can be frustrating and the slow economic recovery acts to defer development projects such as ours. However, our strong balance sheet enables us to continue to invest in the projects so we are positioned to generate significant returns as and when the market recovers.

The development team continues to deliver good progress on all seven of our projects and we remain on target to deliver projects comprising more than 2,000 homes (of which 1,200 are waterside), 1,400 marina berths and in excess of 400,000 square feet of commercial and retail development. We are also accessing government and EU funding support through grants (in the case of Parc Cybi and Fishguard Lorrystop) or infrastructure funding for projects such as Pembroke Dock and Fishguard Waterfront. This support can make significant differences to the viability and deliverability of such developments and we are spending considerable time ensuring we optimise our entitlement.

It remains difficult to provide shareholders with a meaningful guide as to the valuation of the various projects. It is our intention to introduce third party valuations as soon as it is practical to do so. We believe that there is significant upside in these projects which will become evident over the medium term.

FINANCIAL REVIEW

Net Asset Value

The net asset value at the year end was £154.0 million (2011: £158.5 million) representing a 2.9% decrease in the period. The primary movements were £13.4 million net rental income and £8.5 million spent on purchasing own shares. Excluding the amounts incurred purchasing own shares and paying dividends, net asset value increased 3.2% in the year.

On an EPRA basis, the net asset value is:

The EPRA net asset value is calculated on a fully diluted basis and excludes the impact of hedging instruments as these are held for long term benefit and not expected to crystallise at the balance sheet date.

The NNNAV or "triple net asset value" is the net asset value taking into account asset revaluations, the mark to market costs of debt and hedging instruments and any associated tax effect. Our investment properties are carried on our balance sheet at independent valuation and there is no associated tax liability. Our development and trading assets are carried at the lower of cost and net realisable value. We have not sought to value these assets as, in our opinion, they are at too early a stage in their development to provide a meaningful figure, so cost is equated to fair value for these purposes. On this basis, there is no material difference between our stated net asset value and NNNAV.

Revaluation

The Group's investment properties were independently valued by Jones Lang LaSalle as at 30 September 2012. In their opinion, the open market value of the investment property portfolio was £176.0 million. The total portfolio increased in value by £354,000 over the year.

Cashflow

The Group generated £4.1 million cash in operating activities (2011: £11.9 million used), of which £1.3 million was incurred as expenditure on development and trading properties.

The Group generated a further £4.0 million cash from the sale of investment properties, spent £40.2 million on the acquisition of investment properties, spent £8.1 million on redeeming preference shares, drew down £53.0 million and repaid £6.8 million in bank loans and spent £8.5 million on the purchase of own shares resulting in an overall cash outflow of £4.2 million during the year.

Net Income From Property Activities

Administrative Expenses

The administrative expenses for the year ended 30 September 2012 were £2.5 million, a decrease of 53% from the previous year. The primary reasons for this are the profit share payment of £2.6 million paid in 2011 to the executive directors. The majority of other costs arise as a result of the Group being quoted on AIM with no significant changes in 2012.

Taxation

The tax charge for the year of £1.8 million on the pre-tax profit of £7.5 million represents an effective tax charge of 24% (2011: 39%). Tax is payable at the full UK corporation tax rate of 25% on net rent income after deduction of finance costs and administrative expenses. The prior year tax charge was higher owing to the preference share interest being non-deductible. There is no tax payable in respect of investment property capital gains or any valuation uplift, which is the main reason for the low effective tax rate in the current year.

Financing

At 30 September 2012, the Group had cash of £31.5 million. The Group also has unutilised facilities of £22 million with Lloyds Banking Group.

The bank debt at 30 September 2012 was £80.9 million. The loan to value is 46% excluding cash so there is capacity to raise further funding should it be required. This excludes any further finance that might be released from re-financing any cash funded acquisitions.

The interest rate risk on the facility continues to be managed by way of interest rate swaps. During November 2011, the Group re-couponed its existing interest rate swaps from 2.38% to 1.33%, having already reduced them during the previous financial year from 5.2%. In June 2012, we entered into a new interest rate swap agreement for the remaining £15.3 million unhedged balance of our external bank debt with a fixed rate of 0.99%. Aside from reducing the on-going interest rate charge in the income statement, all of our external bank debt is hedged and the weighted average cost of all debt including margin has fallen to 4.44%. The fair value of these derivative financial instruments is provided for in full on the balance sheet.

In August 2012, we announced the £20 million refinancing of the Edinmore portfolio with Barclays Bank PLC. This four year facility is secured on the nine properties of the Edinmore portfolio and is fully fixed for the term at an all in cost of 4.5%.

The finance costs for the year amounted to £3.3 million (2011: £3.9 million), primarily consisting of £2.7 million bank loan interest (2011: £2.8 million). Finance income amounted to £0.1 million (2011: £0.2 million) reflecting the low returns on short term cash deposits. As a matter of policy the Group retains instant access to all cash deposits so it is readily available for use in the business.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2012

All of the activities of the Group are classed as continuing.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2012

CONSOLIDATED BALANCE SHEET

At 30 September 2012

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 September 2012

NOTES TO THE ACCOUNTS

For the year ended 30 September 2012

1. The financial information set out in this announcement is abridged and does not constitute statutory accounts for the year ended 30 September 2012 but is derived from those financial statements. The financial information is not audited. The auditors have reported on the statutory accounts for the year ended 30 September 2012, their report was unqualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006, and these will be delivered to the Registrar of Companies following the Company's annual general meeting. The financial information has been prepared using the recognition and measurement principle of IFRS.

2. The comparative financial information for the year ended 30 September 2011 was derived from information extracted from the annual report and accounts for that period, which was prepared under IFRS and which has been filed with the UK Registrar of Companies. The auditors have reported on those accounts, their report was unqualified and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

3. Operating PROFIT

Operating profit is stated after charging:

4. PARTICULARS OF EMPLOYEES

The aggregate payroll costs of the above were:

The average monthly number of persons, including executive directors, employed by the Company during the year was seven (2011 - seven).

5. DIRECTORS' EMOLUMENTS

Last year Emoluments included a £2.65 million payment under the Conygar profit sharing plan.

The board of directors comprise the only persons having authority and responsibility for planning, directing and controlling the activities of the Group.

6. OTHER GAINS AND LOSSES

7. FINANCE INCOME / COSTS

8. TAXATION ON ORDINARY ACTIVITIES

(a) Analysis of charge in the year

9. DIVIDENDS

The directors have recommended a final dividend of 1.25 pence per ordinary share in respect of the year ended 30 September 2012 (2011 - 1.1 pence). This final dividend will amount to £1,160,000 (2011: £1,124,000), if approved at the AGM. In accordance with IFRS, it has not been included as a liability in the financial statements.

10. EARNINGS PER SHARE

The calculation of earnings per ordinary share is based on the profit after tax attributable to equity shareholders of £5,647,000 (2011 - £1,078,000) and on the number of shares in issue being the weighted average number of shares in issue during the period of 100,847,230 (2011 - 109,602,651). The diluted earnings per share calculation is based on profit for the year of £5,647,000 (2011 - £1,717,000) and on 100,848,260 (2011 - 119,171,352) ordinary shares. The diluted ordinary shares are calculated as follows:

11. PROPERTY, PLANT AND EQUIPMENT

12. INVESTMENT PROPERTIES

Group

The historical cost of properties held at 30 September 2012 is £244,847,000 (2011: £211,359,000).

The properties were valued by Jones Lang LaSalle, independent valuers not connected with the Group, at 30 September 2012 at market value in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors which conform to international valuation standards.

The Group has pledged £102,550,000 (2011 - £105,085,000) of investment property to secure Lloyds Banking Group debt facilities, £31,805,000 (2011 - £34,065,000) to secure Capita debt facilities and £42,360,000 (2011 - £nil) to secure Barclays Bank PLC debt facilities. Further details of these facilities are provided in note 28.

The property rental income earned from investment property, which is leased out under operating leases amounted to £16,187,000 (2011 - £13,010,000).

13. INVESTMENTS

Joint Ventures

The Group has a 50% interest in a joint venture, Conygar Stena Line Limited, which is a property development company. It also has a 50% interest in a joint venture, CM Sheffield Limited, which is a property trading company.

The following amounts represent the Group's 50% share of the assets and liabilities, and results of the joint ventures. They are included in the balance sheet and income statement:

There are no contingent liabilities relating to the Group's interest in joint ventures, and no contingent liabilities of the ventures themselves.

14. FIXED ASSET INVESTMENTS

Subsidiaries

The principal companies in which the Company's interest is more than 10% are as follows:

* Indirectly owned

15. GOODWILL

The goodwill arose upon the acquisition of the non-controlling interests in Martello Quays Limited and represents the excess of the consideration over the fair value of the identifiable net assets acquired. The goodwill has been wholly allocated to the development project within Martello Quays Limited, which is considered to represent a single income and cash generating unit. Management analysis indicates that the net present value of the project exceeds its carrying value and therefore no impairment is appropriate.

IFRS requires management to undertake an annual test for impairment of indefinite lived assets, such as goodwill, and to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment testing is an area involving management judgment, requiring assessment as to whether the carrying value of the assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management's expectations of:

- Timing and quantum of future capital expenditure;

- Timing and quantum of future revenue streams; and

- The selection of discount rates to reflect the risks involved.

The Group prepares and approves formal five year forecasts for Martello Quays Limited which are used in the value in use calculations. Five years is considered to be the optimum period for a meaningful forecast and takes into account available sources of both internal and external information. The Group's review includes the key assumptions related to sensitivity in the cash flow projections.

The impairment review is based upon value in use calculations. The period of review is five years and it is assumed that no growth occurs over the period. A range of pre-tax risk adjusted discount rates (5-15%) were used in order to reflect inherent uncertainties and to produce a sensitivity analysis.

Key assumptions used in value in use calculations

- Valuation of completed construction

The valuation of the completed construction is based upon current knowledge of the local market utilising both internal and external sources of information and evidence.

- Budgeted capital expenditure

The cash flow forecasts for capital expenditure are based upon on past experience and estimates provided from both internal and external sources.

- Pre-tax risk adjusted discount rate

The discount rate applied to the cash flows is generally based upon the risk free rate for ten year government bonds adjusted for a risk premium to reflect the systematic risk of the project, likely cost of funding and underlying uncertainties.

Sensitivity to changes in assumptions

Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the project to exceed its recoverable amount.

16. TRADING INVESTMENTS

17. PROPERTY INVENTORIES

18. TRADE AND OTHER RECEIVABLES

The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to the short term nature of these financial assets.

19. TRADE AND OTHER PAYABLES

The directors consider that the carrying amounts of the trade and other payables approximate to their fair value due to the short period of repayment.

20. BANK LOANS

21. PREFERENCE SHARES

As part of the offer for The Advantage Property Income Trust Limited, the Company issued 62,979,750 convertible preference shares of £0.01 each, of which none (2011: 32,457,595) were outstanding at the year end. The preference shares were convertible at any point into ordinary shares at the option of the preference shareholder. The conversion rate was one ordinary share for five preference shares. Any preference shares not converted were redeemed for £0.25 each on 31 December 2011.

Although equity share capital at law, the preference shares were classified as hybrid instruments under IFRS consisting of a discounted debt element of £0.20 per share and an equity element of £0.02 per share which was credited to an equity reserve. A notional interest element was charged to the income statement over the period to redemption.

The movement on the preference shares during the year was as follows:

22. SHARE CAPITAL

Authorised share capital:

Allotted and called up:

Amounts recorded as liability:

The Preference shares were issued in connection with the offer for The Advantage Property Income Trust

Limited. They were convertible at any stage into Ordinary shares. The conversion rate was one Ordinary share for five Preference shares. Any Preference shares not converted were redeemed for £0.25 each on 31 December 2011.

During the year, the Company issued 26,900 (2011: 5,971,000) ordinary shares of £0.05 each in respect of conversions of 134,500 (2011: 29,855,450) preference shares. The carrying value of the liability which was treated as consideration for these issues was £37,000 (2011: £6,885,000) and £3,000 (2011: £597,000) was transferred from the merger (2011 - equity) reserve to reflect the equity elements of the preference shares.

The resulting movement on the group's share capital during the year was as follows:

Allotted and Called Up

23. TREASURY SHARES

In December 2010, the Group began a share buyback programme and during the year ended 30 September 2012 purchased 9,320,000 (2011 - 21,237,981) shares on the open market at a cost of £8,464,000 (2011 - £24,649,000). As can be seen in note 22 above, on 12 January 2012, 9,900,000 ordinary shares of 5 pence each were transferred out of treasury and cancelled. The remaining 20,657,981 (2011 - 21,237,981) shares bought back were held in treasury as at 30 September 2012.

24. ACQUISITIONS

On 16 December 2011, the Group acquired nine freehold and long leasehold buildings (the "Edinmore portfolio") from a consortium including the Edinmore group and Buccleuch Property, for a total cash consideration of £39.8 million. The annual rent roll was, at the time of acquisition, approximately £4.22 million representing a net initial yield of 10.56%. The portfolio consists of:

·; Ashby Park, Ashby de la Zouch

·; Norfolk House, Birmingham

·; Watt Place, Hamilton International Technology Park, Blantyre

·; Compass House, Dundee

·; Witham Park, Lincoln

·; Charles House, Northampton

·; Tollgate Business Park, Stafford

·; 1 Cotham Street, St Helens

·; Network House, Wolverhampton

25. SHARE BASED PAYMENTS

No options were granted in either the current or prior year.

The Group and Company recognised total expenses of £nil (2011 - £nil) in relation to equity settled share-based payment transactions.