Last checked at 29 Apr 2009 07:00
Panther Securities P.L.C.
Annual Financial Report Announcement
Year ended 31 December 2008
ANNUAL FINANCIAL REPORT ANNOUNCEMENT
In accordance with the Disclosure and Transparency Rules, we set out below the extracts from the 2008 Annual Financial Report in un-edited full text.
For further information please contact:
| Panther Securities PLC | +44 (0) 20 7278 8011 |
| Andrew Perloff, Chairman | |
| Panther Securities PLC | +44 (0) 20 7278 8011 |
| Simon Peters, Finance Director |
CHAIRMAN'S STATEMENT
I am unhappy that for the first time in over twenty five years I cannot start my statement by expressing my pleasure or delight. Instead I must say that I am disappointed with the figures that I have to present to shareholders for the year ending 31st December 2008. However the figures do not directly reflect the satisfactory position in which our group finds itself or tell the entire story, one in which we have no noteworthy problems but have significant 'firepower' to take advantage of opportunities!
Under the International Financial Reporting Standards ("IFRS") there is a loss of £7.2 million (after a tax credit of £3.7 million) for the year ending 31st December 2008 compared to £7.4 million profit (after £1.6 million tax expense) for the previous year.
This sad turn of events is the consequence of changes in non-cash items such as the fall in value of our property investment portfolio and the very heavy cost should we wish or need to cancel out the 30 year interest rate swap arrangements which were entered into in July 2008 which is valued at our account year end with a negative value of £12 million which includes another derivative described later. This is cushioned by our deferred tax liability being proportionately reduced by a £5.7 million credit included in the tax expense for the year.
When we first produced figures under IFRS which brought substantial property revaluation increases into our income statement, I stated that it appeared inappropriate for property companies to present accounts in this way. It created erratic profit figures, compared with valuing capital items on the balance sheet and leaving the income statement to show a more realistic year by year comparison of underlying profits. Unfortunately once again erratic profits/losses are shown in our current accounts under IFRS rules.
However, HM Revenue and Customs has a different way of evaluating profits and we have provided approximately £2.3 million tax for the year ended 31st December 2008.
Rents receivable for the year ended 31st December 2008 were £7.1 million compared to £7.5 million the previous year, the reduction mainly being due to the sale of over £18 million worth of property in 2007 while only reinvesting about £9 million in property.
Disposals
In February 2008 we sold at auction the freehold investment at 245-249 Whitechapel Road, London, E1, for £2,655,000. This produced a profit of £1,253,000 over its book value which was an outstanding result. It had just been revalued by DTZ as at 31st December 2007. The property was producing £114,000 per annum at the time of the sale.
Elektron PLC vacated 59 & 61 Central Avenue, West Molesey in December after exercising their five year option to break. We were subsequently able to sell the freehold of No 59, the smaller of the two properties, to an adjoining occupier for £1,219,000 which showed a small profit of £43,000 on book value. 29 Central Avenue is the largest of the three factories originally purchased and let to part of the Elektron Group and is still occupied by them under a lease which has five years yet to run at £250,000 per annum exclusive (increased from original rent of £188,000 following a recent review).
Purchases
84 High Street, Margate, Kent
In March 2008 we purchased this vacant freehold corner shop and upper part for £317,000. It was previously occupied by the Woolwich Building Society and adjoins an existing freehold investment. We hope it will soon be let and show a good return.
Ellworthy Park, Frome, Somerset
In July 2008 we purchased seven newly built Georgian-style freehold commercial units totalling around 13,000 sq ft of office space for approximately £1,050,000 from a national house builder. Three units are already occupied and when all units are let we anticipate a return of over 12%.
8 High Street, Broadstairs
This was a small property purchased in November 2008 for £212,000, which adjoins our existing properties 10/12 High Street. This improves the development potential of the site and in due course will hopefully give much added value.
9/10/11 East Street, Southampton
In November 2008 we purchased for £808,000 a 125 year head-leasehold interest in 9/10/11 East Street, Southampton, which comprises three shop units that are fully let and produces £85,000 per annum net. This property is situated in one of the busiest central shopping streets of this important town.
Swindon Market
In December 2008 we purchased the Ground Leasehold interest in Market Hall, Market Street, Swindon for £512,000. The premises comprise a former market building divided into 65 small retail style units, totalling about 14,000 sq ft. It was built in an ultra modern style in 1994 from when the 99 year lease commences, but sits on a site that was the historic market in the heart of Swindon's shopping area. It has potential for either recreating the market to show a high rental return or for a larger development.
Post Balance Sheet Events
19 Queen Street, Ramsgate
We purchased this property for £105,000. Although it is smaller than we would normally consider, it was part of a package with four other vacant freehold former Woolwich branches which we had agreed to buy and have now sold on at a £200,000 profit, having let two units just prior to their sale. This small profit does show there is still an active market at the right price levels for buying, selling and letting.
Progress Report on Developments
21-27 Guildhall Street, Folkestone
During the year we spent approximately £328,000 on the completion of this development. Ten out of the twenty residential units are now occupied, but as we have been selective in our choice of tenants, full occupation has not been as quick as we had originally hoped. However, we predict that with the imminent arrival of the fast train service, commuting into London will be a real possibility from Folkestone and residential values will rise accordingly.
Top Cat Industrial Estate, Grimsby
The redevelopment of this 20,000 sq ft single storey factory into seven smaller industrial units has been successfully completed. Currently three units are occupied and we anticipate it will produce around £100,000 per annum once fully let.
Old Inn House, High Street, Sutton
There is little demand for medium size office units of 4,500 sq ft in Sutton, despite an excellent location, air-conditioning and parking etc. Three out of our four floors had become vacant so we decided to speculatively convert the first floor into six units of varying sizes. We have found that local agents are not always the best way to let small units, so without permission, we erected a giant banner 'Small Units to Let' on the most prominent part of the building. Consequently this floor is almost fully let.
We then did the same to the second floor, which is now fully let and by now we could have probably let the whole building, had it not been for the Local Authority who served an Enforcement Notice threatening us with prison unless we removed the banner. We lost our appeal against this but fortunately none of us were incarcerated. The Planning Officer subsequently discussed our problem and informed us verbally what size banner would be acceptable. We re-applied for planning and in due course planning permission was refused under delegated powers. Since curtailing our best form of advertising, lettings of the small units have slowed down considerably. To make up for this vindictively incompetent behaviour, Central Government further punished us by abolishing vacant rate relief. Most annoying however was the fact that when driving around Sutton shortly after this incident I noted that there were so many advertising banners of all sizes hanging from lampposts and many large buildings it looked like Coronation Day.
Brackla Shopping Centre Extension, Bridgend, Glamorgan
This £500,000 development of five extra units is proceeding well and letting terms have been agreed in principle for most of the units from well known multiples. This should produce an extra £100,000 per annum when completed and fully let.
199-203 High Street, Perth
Refurbishment of this is nearly complete and although originally planned as one large unit we have decided to split into two smaller ones as we have agreed a pre-let on one unit to a first class covenant. There is interest in the second unit and when fully let the property should produce over £60,000 pa ex.
205/207 High Street, Perth
This adjoining double unit was occupied by a franchisee of Bang & Olufsen at £45,000 pa but due to a 60/70% downturn in their business ceased trading. We are currently negotiating with potential tenants/purchasers of this unit.
Finance
We are now fully drawn down on our £42.5m facility with HSBC Bank plc which we have in place until 30 November 2011. Before that time we believe the general lending situation will recover and we should be able to refinance with HSBC Bank plc or another suitable lender.
In late 2008 we were in discussions with three banks regarding additional financing facilities. In particular HSBC Bank plc offered us a new significantly larger loan, however this required that we gave up our existing loan, which has more favourable terms. As we have still not fully utilised our significant cash funds, we felt that this facility was not necessary at present.
The other two banks also offered us facilities, one with terms that have been accepted in principle and the other was declined as not required at present.
As already mentioned, our accounts show a "mark to market" loss of £10 million on our swap arrangements which fixed £35 million of our borrowing at 5.06% (before margin). Additionally there is a book liability of £2 million should we wish to buy ourselves out of an option granted to HSBC for them to make us take an interest rate swap for 10 years at 4.63% on a nominal value of £25 million commencing in three years' time.
These are notional liabilities and we are unlikely to voluntarily crystallise these instruments but we did receive £2,360,000 when we cashed in our previous swaps earlier in the year. I have, of course, mentioned swaps are notoriously volatile and on 27 April 2009 the swaps had an approximate combined liability of £9,681,000.
Property Valuations
The directors valued the entire property portfolio as at the 31st December 2008 year end, which resulted in an overall decrease in value of £6.1 million in the investment portfolio, and a reduction in market value of £1.1 million on the stock properties. The market value of the stock properties is still £3.9 million above the figure shown in the accounts as they are shown at cost. The fall in value of our portfolio is less than many in the sector due to a number of factors. Our portfolio is secondary, where the yield softening has been significantly less than for prime properties. Also, we have a number of comparatively big rent reviews agreed or about to be agreed and the small number of developments being carried out on existing properties produce considerable added value as there is no land cost in the development. Additionally, small well let units still have reasonable private investment buyer demand. I am also pleased to say that there has been no significant deterioration in rental arrears despite the downturn.
Dividends
An interim dividend of 6p per share was paid on 29th September 2008 and in our Interim Statement on 28th August we announced a final dividend of 6p would be recommended to shareholders for approval at the next AGM. The Directors subsequently felt that in current times dividends being paid quarterly would be welcomed by shareholders and thus a 3p interim dividend was paid on 8th April with the balance of 3p being recommended for approval at the next AGM. This practice of paying quarterly will continue until further notice.
Political Donation
The thieving incompetents who currently are in control of the commanding heights of our economy are intent on distributing money everywhere in an effort to stem the problems either caused by them or allowed to happen under their watch. I believe the economy will improve, not because of them but in spite of them and their incompetence.
We must remember that they have severely depleted the pension funds with their tax raid which led to companies reducing their resources to bolster their pension funds which meant that when the inevitable downturn came, companies were short on working capital. This unfortunately coincided with the banking fraternity recklessly dissipating vast amounts of their own capital, to the extent of also risking depositors' money, thus contributing to a credit crunch, thus being unable to lend. Pension funds are a substantial source of equity funds and capital but have been hamstrung by the tax theft and new rules which force them to mainly lend to the Government who then manipulate the rate of interest they will pay, which then forces companies to put more into their pension funds, a vicious circle which is all part of the whirlpool of incompetence of this Government. I therefore have no hesitation in once again offering a resolution for the company to donate £25,000 to the Conservative Party. As usual I will not vote my personal interests on this resolution but mention I intend to give a separate personal donation of £10,000 as I feel it is so important for a change of Government for the benefit of our entire population and the property industry in particular.
The Conservative Party has not yet elucidated or clarified the full style of financial change that they feel will be needed and have even suggested they might have to continue with some of the profligate habits of the present incumbents. Indeed, not all their policies appear sensible to me. However, I do have a story that fits the bill.
I own a small apartment in Florida so for many years my family and I have regularly taken short holidays there. Within a day or two of arriving we always go to the local flea market which sells all manner of goods. My usual purchase is two pairs of shorts as my old ones always seem to have shrunk in my year's absence (it must be the heat). On one such visit I noticed the style of the shorts had changed although thankfully not the cheap price. They either had lots of pockets but required a belt or only one or two pockets with an elasticated waist. I much preferred last year's model which had lots of pockets and an elasticated waist - expressed my disappointment with the trader. He looked at me with utter disdain as I tried to decide between the $8 or the $10 pair. Then this Aristotle of the flea market muttered the words of wisdom which I cannot forget - "Life is just a series of trade-offs buddy" and so it is with our support for the Conservatives. We will never get exactly what we want or need but on balance they will be far better for our company and us as investors than the present incompetent incumbents. (By the way, I bought one of each.)
Prospects and "The Chopped Liver Syndrome"
Interest rates on bank deposits are at an all-time low, mostly at less than 1%, investment property and share prices are also at historically low rates, nearly double figure yields are often obtainable from reasonable quality investment property and shares or loan stock can show returns of 4% upwards (standard rate tax paid on ordinary shares) from well-known, long established financially sound quoted companies therefore it seems surprising that the vast majority of people who have cash on deposit have not yet jumped at the opportunity of investing directly into property or the stock market.
For me, it is what I call "the chopped liver syndrome" - to explain, it will not surprise you involves yet another story from my past.
Many years ago when I was in my early twenties, like most young men, after work or on the weekend I would rush out with my friends to clubs or parties and stay out all hours. I often did not have time to eat proper meals but would eat a quickly made snack or sandwich.
I was particularly partial to chopped liver. Even more so when, after one late night of clubbing, we went to eat at a café in Park Lane, one of my friends had ordered a toasted paté sandwich. Having limited knowledge of culinary matters, I said "urghh, paté - what's that?". My friend, knowing my habits, told me "it's a chopped liver sandwich with a posh name. Try some". I did and my love of chopped liver increased.
Many were the nights I rushed out, having only partaken of "chopped liver". Of course, I hardly cooked anything myself so it was prepared and left for me by my mother.
Well, one week my parents were on holiday, but had left the fridge well stocked with food, including plenty of my beloved "chopped liver". I had sandwiches for two days - wonderful! Three or four days later I was hungry and in a rush, so I gorged myself on a double helping of "chopped liver" straight from the fridge.
A little later I became violently sick after bouts of high fever and fits of shivering. About two hours later it happened again, then again and again. Of course I could not go out that night and did not eat the following day, but still the bouts of sickness continued although with less frequency. In between the hot and cold sweats I could only sip some cold water and for the next week or two my thoughts could not help but stray to thoughts of chopped liver and I could be sick again at the mere thought of it. Eventually this stopped, but for some time, any thought of chopped liver brought out a feverish sweat and feeling of nausea. It must have been three years, maybe more, before I could partake of my favourite dish again -
chopped liver, liver paté, paté de fois gras, duck or chicken liver parfait etc etc
Come on, Andrew! What's the relevance? Well, if you substitute the words "investment in shares and property" for "chopped liver", with minor adjustments to my story you will appreciate I could be referring to the stock market and property investment. Most investors have had a very "nasty turn" and will have had "hot and cold" flushes and different degrees of financial sickness and whenever they currently think about buying shares or property, will either lose sleep or come out in a sweat. In due course, time will cure this sickness and logic will take over and a meaningful recovery of value will take place, in stock markets and the property investment market. It should happen more quickly in the stock market and gradually with the property market, with those who have had the least financial sickness from their investments investing first and those most traumatised later.
There are many tempting investment dishes out there available to all who have mentally overcome the nasty but temporary financial sickness. It is still a matter of regaining lost confidence after having had a financial trauma and then many of the investment dishes should give delicious returns in the future.
I believe that despite the present economic problems, in due course our group will continue to make good and profitable progress.
Once again I have separated my personal ramblings from the business report and they follow.
I always finish by thanking our small dedicated team of staff, our financial advisers, legal advisers, agents, accountants who this year have had to work much harder than usual because of the troubled financial situation which causes many different problems besides just monetary ones, also, I would like to thank all our tenants who struggle so hard to make a fair return for their efforts and honour all their financial commitments.
As ever I always view the future with optimism and presently with undoubted and unbounded enthusiasm expecting that our company will be able to take advantage of some of the myriad opportunities that are out there in the market.
Andrew S Perloff 29 April 2009
CHAIRMAN Chairman's Ramblings
It would be remiss of me not to have a 'Bank' story to start my supplement.
About three years ago the last of my excessive salary bonus payments was paid as was usual, by direct transfer into my personal bank account with Barclays Bank, Harrow. This account was used only for minor personal expenditure so I wrote instructing the Bank to telegraphically transfer the majority of the money to my personal business account with HSBC. I phoned the branch to check they had received the letter but only got a robotic androgynous voice that we are all unfortunately only too familiar with - and I was unable and unwilling to deal with the 35 digits required to get the information I probably didn't want. Another week went by without response I wrote again suggesting they phone me. I received a call from a Barclays office in Leicester from someone whose command of the English language was negligible and accent unintelligible. I did eventually manage to elicit the phone number for human contact at my local branch. It turned out to be a fax number and I faxed two letters requesting a phone call - but no response! Shortly thereafter I received a call from a Kings Cross office of Barclays suggesting I go into a branch near me with my passport and various utility bills.
I then wrote to the Chairman of Barclays Bank expressing my dissatisfaction. I explained that I had banked with Barclays for 40 years, as had my father and uncle for 40 years before that and my grandfather for maybe 20 years before them so consequently I had a sentimental attachment to his bank but the inadequacies and incompetence were such that I reluctantly felt I had to close my account. I wrote that I found it irritating that I could not get my money out of an account on which only .1% was paid when elsewhere I was receiving 6%. I suggested if the bank stopped paying millions of pounds of bonuses to its gambling traders it would be able to invest in better quality staff who are the first point of contact for their customers. I received two separate suitably apologetic letters (not from him) that seemed to imply that the robotic answerers were a form of modernisation that were a benefit to customers.
Of course there was much more behind my sentimental attachment than a long family association with the Bank. In 1967, after having a loan application turned down three times by various banks for a property transaction, I managed to make an appointment with the manager of Martins Bank in Kingsway, Holborn. When Malcolm and I arrived, the Manager was too busy or could not be bothered with such a small transaction. We wanted £5,000 finance towards a purchase of three vacant freehold shops in separate areas of South London for £11,250. The Assistant Manager was sent in his place and although he seemed to us rather old-fashioned, he was very polite and friendly and he listened with genuine interest in our proposals. We stated that in acting as our own agents we could easily let the units at rents well over £2,500 per annum and then either refinance or sell the properties. He liked us and a new banking relationship was formed. We started to carry out other transactions arranged and agreed with this under Manager. However, we became very worried in 1969 when Barclays Bank took over Martins Bank for we felt we would lose our good relationship, but in fact it turned out to be beneficial. Our Assistant Manager was promoted to Joint Manager of a Mayfair branch of Barclays, then promoted to his own Branch, before being transferred several times further outside London. We moved our accounts to whichever Branch he went and he was a great help to us over the years. He knew our business and gave good advice. He also explained the Bank's application scoring systems so that we were able to tailor our requests to the Bank's required format.
When the property market collapsed in the mid seventies, he helped us deal with the local Head Office "Recovery Department" and he personally came and taught the meaning and significance of "cashflow" and how best to operate in straightened circumstances. We considered him a personal friend and indeed one day when he came round to our Mayfair office for a meeting and found me sniffling away with a bad cold, he promptly went into the kitchen and boiled up onions in milk which was his patent cold cure - and it worked!
However, some years later modernisation and reorganisation of Barclays Bank led to many Managers being retired young and early, introduction of forms for box ticking took place, robots began to take over, the new Managers did not know their customers and, more importantly, did not seem to care about them. Customers became just numbers on a balance sheet. This is when the banks began to lose the plot and started their drift towards oblivion!
Those were my personal dealings but one hundred years earlier a small woman aged about thirty five with a very noticeable stoop, one of the many immigrants from Eastern Europe who had arrived over the previous decade, walked up the steps and into the magnificent, recently built cathedral like building on the corner of Shoreditch High Street and Calvert Avenue. Her previously long, jet black hair had turned prematurely grey, but a hard life had not dimmed her fine facial features. She was holding the hand of a young, rosy faced boy, who with his short, jet black hair and similar facial features, was obviously her son. Twenty minutes later they came out. The young woman had lost her stoop and stood up straight with a bright smile on her face. It wasn't the Pope that had cured her stoop but the Barclays Bank Manager who had relieved her of three or four hundred gold sovereigns being the Perloff family's entire capital earned from the cabinet-making works situated round the corner. Up to that moment she had carried round the working capital in a leather pouch hidden under her dress suspended by a strap around her neck as she had done for some years. The little boy was my uncle and he was there because my grandmother spoke virtually no English and he was needed to open the account which would not be possible nowadays without passport and utility bills. He also told me that neither he nor the business ever had an overdraft during the following eighty years. Of course, if she had been alive today I have no doubt she would have gone back to the Branch and recovered her 'stoop' and her gold!
My grandmother's and my own life overlapped by only three years but two stories I rather like about her were relayed to me by my uncle which are symptomatic of a generation long gone.
By the early 1940's, the widow Perloff lived in a house in Highbury, luxury compared to the crowded and cramped accommodation housing two adults and up to ten children above the factory in Virginia Road, Shoreditch, where she had lived previously. My uncle, who still lived with her at Highbury, told me of the three or four times in broken English and Yiddish she had said "You know my darling David, I like it here. I'm very pleased that we don't live at Random". He was used to her saying things he did not fully understand and as a dutiful son, rarely questioned her. However, one morning he heard the BBC early morning radio news spoken in an Alvar Lidell accent "Last night the Luftwaffe flew over East London and the Docklands area and bombed at random".
Indeed, a few years later one night a random bombing raid came close to her house, the front wall was blown completely away exposing the occupants to the world at large. Grandma was in bed in her nightclothes and was rescued unhurt accordingly. For the few remaining years of her life whenever Germany or Germans were mentioned she would utter a loud, blood chilling Yiddish curse so frightening that my uncle would never tell me what it meant although I am reliably informed she was sweet natured to everyone else.
I suspect it wasn't the bombing at random that so annoyed her but the fact she was exposed to the rescue services in her nightwear.
Most people dislike those who give unwanted advice and then say "I told you so" if it should turn out to be correct. I, however, would like a little forbearance in this matter as for ten years I have been the grumpy, grouching, moaning Cassandra Chairman pointing out the defects of this anti property Government. Investors may start to call me Nostradamus Perloff.
In 2000 I pointed out the three stamp duty rises and the discriminatory taxation on property investors would take its toll.
The next year I complained about the general high taxation levels which I suggested may reduce the tax take. The following year I pointed out that raising the tax rates on property had indeed led to a reduction in receipts. The following year I had to report on the plethora of new red tape and the pension fund raid and restrictions on everyone's pension except those of existing MPs. In 2003 accounts I pointed to the new daft legislation "The proceeds of Crime Act" which involves billions of bits of paper being copied and stored to prove to people who already know who you are, who you are. I also suggested the Chancellor would look for a new imaginative way to tax the capital appreciation of home owners. The following year 2004 I pointed out the shambles of practically everything and this situation has got worse. I also highlighted the fiddling of MPs and MEPs expenses. Nowadays it's so regularly reported, it is an accepted fact of life. Year end 2005 Ramblings gave suggestions for improving matters by changing certain tax levels and when the Conservatives took on board part of my proposals for reducing inheritance tax, their popularity soared.
My April 2007 Ramblings gave you the 'four horsemen' of the financial apocalypse so accurate it even frightens me. This was prior to the millions of printed column inches about debt, bankers bonus systems, their big deals, the deceit, the horsemen had it all. The next half year statement I was the first to suggest bankers forfeit their bonus and pay back earlier bonuses. I also reminded you of J K Galbraith's quote that after a financial collapse people will look for and find the 'bezzle'. The next statement I gave a story about a cheating banker and his 'ponzi' scheme and shortly thereafter we have the Made-off Missing Millions and the Stanford Securities Scam and more fraud will keep coming each week.
I also mentioned my experience of some secondary Banks who acted foolishly because they were broke and circumstances forced them to and it is now happening again.
For the last four years, we have been seeking to purchase a small office building North of London for our own occupation.
One morning I passed the Barnet registry office, which is an attractive Georgian style building, with its own small car park. It appeared to have been vacant for four months. I wrote to Barnet Council a couple of times and eventually received a reply about the property. I was informed that it was to be reused by their Coroners' Office. My interest started about three years ago and it still appears to be deadly vacant, costing maintenance, insurance, security and vacant rates, ie generally wasting rate payers' money!
At a slightly later date, I noticed a Health Centre in Potters Bar had closed, this also was suitable for us. In fact, it had been on the disposal list for over a year, but the Health Authority was taking a long time trying to obtain a planning permission. By the time they did obtain a permission there was no developers left with any money to buy it and was eventually offered for sale by Tender. Rather surprisingly, we were the highest offer. After they prevaricated for about three or four months, we were then told they were not allowed to sell the property and were going to reuse it for a health centre. When they vacated the property it was in reasonable order and because they thought it would be sold as a site and thus did not bother to protect the roof or regularly visit the property. So when the usual petty criminals stole the lead or other materials from the roof the internal part of the building became unusable without major refurbishment, it will now need £500,000 to put it back into good order, ie almost as much as the property was worth. Not yet having the property back to use, I suspect they will change their mind again.
These two situations amount to about £1.5 million of waste in two small areas. This is going on throughout the length and breadth of the country in every single council. It's not their money - SO NOBODY CARES.
Politicians tell you they can't cut taxes because it will affect services. This is farcical nonsense. Just tell them to walk through any town hall, department of health office, indeed any office that is an arm of government - they will find mountains of waste.
A cut of at least 15% in total government expenditure could easily be achieved if all expenditure (including staff) was properly considered.
Several years ago as my secretary of many years was about to go on six months' maternity leave, we advertised and interviewed four or five possible candidates, one of whom was a young, intelligent woman who seemed ideal. In view of the particular circumstances we asked her if she was considering having a family in the near future (although we were told afterwards we were not allowed to ask those type of questions!). She assured us that was the furthest thing from her mind and subsequently started the following Thursday. By mid-afternoon of that day she left early as she was feeling sick.
She phoned in Friday after having seen her doctor to say she was pregnant and would only have been able to work two or three months before leaving for maternity leave. We paid her one month's money and wished her well. However, we did first have to consult lawyers because in theory she could claim maternity benefit then be entitled to return to work. Indeed it was made clear to us that women workers' rights made it possible in theory for this to happen time and again and again until we had every pregnant woman in London on the payroll until our company was bankrupt!
A few years ago a highly thought of colleague asked if we had a full time position for a young man who got by as a part-time fitness instructor. We happened to be looking for a caretaker/front desk attendant at our multi-let building in Whitechapel at that time. The duties were not onerous but required a small amount of dedication to see that the building ran smoothly, dealing with waste disposal, ensuring that the toilets were cleaned regularly and the car park was used as allocated. The caretaker was provided with two suits to wear on reception and overalls to wear when doing more messy jobs. We started to receive tenants' complaints; the caretaker looked slovenly, he was not to be found at appropriate times and was unhelpful and rude to the tenants. He was appropriately reprimanded and asked to improve his working habits.
The top floor of the building contained three flats, one of which was occupied by a female city worker. One day she phoned and complained about our caretaker and we suggested she came into our office to discuss her problems. She arrived shortly afterwards with her mother. She was distressed almost to a state of tears by her tale about the caretaker. She found his casual attitude to her very upsetting, such as when delivering some parcels for her and walking straight into her flat and even after his request for a date with her had been declined his manner became unpleasant.
We felt we had no option but to broach the subject with the caretaker. He came to our office and the problem was discussed and we heard his side of the story which did not differ much in content so much as in interpretation.
He was told no action would be taken this time but under no circumstances was he to approach our tenant unless it was a matter of business. A week or so later he deliberately delayed her as she was leaving the building for work and demanded to know why she had complained to his bosses. He was belligerent and he frightened her. She phoned us shortly thereafter and a director and maintenance man of this company went to see him immediately. He was very abusive and threatening and said he was leaving the job and would not give up the keys. He was then instantly dismissed. We did not pay him one month's notice pay because we felt he had behaved badly and put us to considerable inconvenience. He had worked for us for less than one year and was therefore not protected by the normal employment acts:- except he was Black.
Three or four weeks later we received a letter from his legal advisers who were obviously working on a contingency basis, suing us for unfair dismissal on grounds of Racial Discrimination, Health & Safety Discrimination, Sex Discrimination et al! It was obviously a standard letter. We felt it was such a ridiculous assertion that we decided to deal with the matter in-house rather than pay the £15,000 initial barrister's quote. It became a nightmare scenario as it involved so much paperwork and in-house argument about how best to deal with such an absurd claim. The first hearing, which necessitated our in-house legal team attending with a suitcase full of documents, resulted in most of the claims being withdrawn except the racial discrimination claims, which rules assume employers' guilt unless they can prove otherwise. At the first full hearing, for which we had been forced to appoint a specialist Barrister, we won by a majority verdict. In due course the former caretaker had a new contingency lawyer with legal aid. Although we won, it was not an outright complete victory and they threatened to further appeal. We decided to take a pragmatic view of the matter and pay an agreed settlement which was about one tenth of what was originally asked.
These two employment situations, the first of which was slightly comical, the second of which was considerably time-consuming, costly and disgracefully insulting, considering the rainbow colouring of our small but dedicated long-serving happy and easygoing staff. For over forty years I have hired and very occasionally fired staff without having any written contract of employment. We now have a twelve page harsh contract of employment. To fire an incompetent, deceitful, lazy or crooked employee one has to go through a complicated process which, if one takes one step wrongly, can cause you to lose an unfair dismissal claim at enormous cost.
We are a successful, well-capitalised company and can absorb and afford the stupidity of our employment laws, so why highlight them?
This country is going through a substantial downturn, where unemployment in the private sector is soaring and it will soon spread to the public sector by necessity if the country is not to be bankrupted. In downturns one of the biggest cost savings is the ability to substantially cut staff levels. The one sector that can help to relieve the human tragedy of mass unemployment is the small business sector. These millions of small business employ many millions of people and many small businesses could and will start to employ extra personnel in ones or twos, but because of the harsh rules pertaining to getting rid of unneeded personnel they will think twice about hiring (preferring to be under-staffed) and when absolutely necessary who will they choose? They will choose those with the least rights, and thus least ability to cripple their business. Once again ill thought out impractical protective legislation creates the exact opposite of its original good intentions.
This country is the most spied upon, surveillance gone mad country in the world. Big and small birds have fled this country because they are sick of bumping into the hundreds of thousands of surveillance cameras and their poles. I feel certain that speed cameras make the roads more dangerous - even the police agree because over 90% of those police caught on speed cameras are not prosecuted. Many people have said these cameras help to catch criminals and villains and indeed recently it was announced that the whereabouts of 2,000 convicted felons have been found. It was most unfortunate that they are all in our police forces! Of course our legislative geniuses know how to deal with that problem - they have created a new law that makes it a prisonable and illegal act to photograph police officers in the course of their duty.
The non-caring wasteful council employees, the health department non-jobs personnel, the gradual exposure of the inability for small businesses employers to hire and fire freely, pressed upon by parasitical contingency lawyers. These and the fact that the pension padded expense fiddling, incompetent and legislatively incontinent politicians having within a year to submit themselves to the voting opinion of the populace has created a growing vocal rumbling throughout the country as more and more people start to cry out.
Sack the BLEEPs!!
Andrew S Perloff
CHAIRMAN
| CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2008 |
| Notes | 31 December 2008 | 31 December 2007 | |
| £'000 | £'000 | ||
| Revenue | 2 | 9,296 | 9,516 |
| Cost of sales | 2 | (2,551) | (2,576) |
| Gross profit | 6,745 | 6,940 | |
| Other income | 311 | 86 | |
| Administrative expenses | (2,328) | (2,291) | |
| 4,728 | 4,735 | ||
| Profit on the disposal of investment properties | 1,400 | 5,457 | |
| Movement in fair value of investment properties | (6,062) | 182 | |
| 66 | 10,374 | ||
| Finance costs | (1,897) | (1,847) | |
| Investment income | 683 | 488 | |
| Profit or loss on disposal of available for sale | |||
| investments (shares) | (64) | 77 | |
| Movement in fair value of derivative financial instruments | (12,018) | (3) | |
| Premium received on disposal of derivative financial asset | 2,360 | - | |
|
| |||
| Profit or loss before income tax | (10,870) | 9,089 | |
| Income tax expense | 3 | 3,680 | (1,646) |
| Profit or loss for the year | (7,190) | 7,443 | |
| Attributable to: | |||
| Equity holders of the parent | (7,218) | 7,509 | |
| Minority interest | 28 | (66) | |
| Profit or loss for the year | (7,190) | 7,443 | |
| Earnings per share | |||
| Basic and diluted | 5 | (42.7)p | 44.3p |
| CONSOLIDATED BALANCE SHEET As at 31 December 2008 |
| Notes | 31 December 2008 | 31 December 2007 | |
| ASSETS | £'000 | £'000 | |
| Non-current assets | |||
| Property, plant and equipment | 21 | 24 | |
| Investment property | 7 | 97,092 | 101,200 |
| Derivative financial asset | - | 572 | |
| Available for sale investments (shares) | 3,794 | 5,209 | |
| 100,907 | 107,005 | ||
| Current assets | |||
| Inventories | 159 | 376 | |
| Stock properties | 8,863 | 9,165 | |
| Trade and other receivables | 3,278 | 2,992 | |
| Cash and cash equivalents | 13,922 | 12,572 | |
| 26,222 | 25,105 | ||
| Total assets | 127,129 | 132,110 | |
| EQUITY AND LIABILITIES | |||
| Equity attributable to equity holders of the parent | |||
| Capital and reserves | |||
| Share capital | 4,217 | 4,230 | |
| Share premium account | 2,886 | 2,886 | |
| Capital redemption reserve | 604 | 591 | |
| Retained earnings | 9 | 58,139 | 70,901 |
| 65,846 | 78,608 | ||
| Minority interest | 58 | 27 | |
| Total equity | 65,904 | 78,635 | |
| Non-current liabilities | |||
| Long-term borrowings | 42,500 | 35,011 | |
| Derivative financial liability | 12,021 | 575 | |
| Deferred tax liabilities | 2,290 | 9,321 | |
| 56,811 | 44,907 | ||
| Current liabilities | |||
| Trade and other payables | 4,414 | 4,696 | |
| Current tax payable | - | 3,872 | |
| 4,414 | 8,568 | ||
| Total liabilities | 61,225 | 53,475 | |
| Total equity and liabilities | 127,129 | 132,110 |
| CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 31 December 2008 |
| Notes | 31 December 2008 | 31 December 2007 | |
| £'000 | £'000 | ||
| Movement in fair value of available for | |||
| sale investments (shares) taken to equity | (4,681) | 227 | |
| Deferred tax relating to movement in fair value of | |||
| available for sale investments (shares) taken to equity | 1,334 | (60) | |
| Net income taken directly to equity | (3,347) | 167 | |
| Profit or loss for the year | (7,190) | 7,443 | |
| Total recognised income and expense for the year | (10,537) | 7,610 | |
| Attributable to: | |||
| Equity holders of the parent | (10,565) | 7,676 | |
| Minority interest | 28 | (66) | |
| (10,537) | 7,610 | ||
| CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2008 |
|
| Notes | 31 December 2008 | 31 December 2007 |
| £'000 | £'000 | ||
| Cash flows from operating activities | |||
| Profit before interest, investment income and tax | 4,728 | 4,735 | |
| Less: Profit on sale of non current assets | - | (4) | |
| Add: Depreciation charges for the year | 13 | 12 | |
| Less: Profit on appropriation of stock to fixed assets | (12) | - | |
| Profit before working capital change | 4,729 | 4,743 | |
| Decrease/ (Increase) in inventory | 217 | (107) | |
| Decrease in available for sale investments (shares) | - | 99 | |
| Decrease in stock properties | 302 | 209 | |
| Decrease in receivables | 183 | 377 | |
| (Decrease)/ increase in payables | (409) | 565 | |
| Cash generated from operations | 5,022 | 5,886 | |
| Interest paid | (1,767) | (2,080) | |
| Income tax paid | (6,358) | (1,427) | |
| Net cash from operating activities | (3,103) | 2,379 | |
| Cash from investing activities | |||
| Purchase of plant and equipment | (10) | (15) | |
| Purchase of investment properties | (4,442) | (9,324) | |
| Purchase of available for sale investments (shares) | |||
| - non current assets | (6,532) | (3,158) | |
| Premium on cancellation of financial derivatives | 2,360 | - | |
| Proceeds from sale of fixed assets | - | 4 | |
| Proceeds from sale of investment properties | 3,900 | 18,284 | |
| Proceeds from the disposal of available for sale investments (shares) - non current assets | 3,202 | 628 | |
| Dividend income received | 234 | 53 | |
| Interest income received | 449 | 435 | |
| Net cash from investing activities | (839) | 6,907 | |
| Financing activities | |||
| Repayment of loan | - | (2,113) | |
| Draw down on loans | 7,489 | - | |
| Investment in own shares for cancellation | (173) | (297) | |
| Dividends paid | (2,024) | (2,040) | |
| Net cash used in financing activities | 5,292 | 4,450 | |
| Net increase in cash and cash equivalents | 1,350 | 4,836 | |
| Cash and cash equivalents at the beginning of year | 12,572 | 7,736 | |
| Cash and cash equivalents at the end of year | 13,922 | 12,572 |
| NOTES TO THE ANNUAL FINANCIAL REPORT ANNOUNCEMENT For the year ended 31 December 2008 |
1. General Information
While the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in April 2009.
The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 December 2008 or 2007. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that year, which were prepared under IFRSs, which have been delivered to the Registrar of Companies. The auditors' opinion on those accounts was unqualified and did not contain a statement under s237(2) or (3) Companies Act 1985 and did not contain an emphasis of matter paragraph.
The statutory accounts for the year ended 31 December 2008 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting.
The accounting policies adopted in the preparation of these condensed consolidated preliminary results are consistent with those set out in the latest Group's Annual financial statements.
There is no material seasonality associated with the Group's activities.
Principles risks and uncertainties
The Company and Group operations expose it to a variety of financial risks the main two being the effects of changes in credit risk of tenants and interest rate movement exposure on borrowings. The Company and Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Company and Group by monitoring levels of debt finance and the related finance costs. The Company and Group also use interest rate swaps to protect against adverse interest rate movements, no hedge accounting is applied. In the year mark to market valuations on our financial instruments have been erratic, and these large swings are shown within the income statement adding to the year's financial accounting loss. However, the actual cash outlay effect is nil when considered with the loan as the instruments are used to protect increases in cash outlays.
Given the size of the Company and Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The policies set by the Board of Directors are implemented by the Company and Group's finance department.
Price risk
The Company and Group are exposed to price risk due to normal inflationary increases in the purchase price of the goods and services it purchases in the UK. The Company and Group also have price exposure on listed equities that are held as investments. Due to current economic climate the share portfolio fell in value. The Group has a policy of holding only a small proportion of its assets as listed investments. Credit risk
The Company and Group have implemented policies that require appropriate credit checks on potential tenants before lettings are agreed. In most cases a deposit is requested unless the tenant can provide a strong personal or other guarantee. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed annually by the Board. Exposure is also reduced significantly as the Group has a large spread of tenants who operate in different industries.
Liquidity risk
The Company and Group actively ensure liquidity by maintaining a long-term finance facility and also hold significant cash deposits which are both to ensure the Company and Group has sufficient available funds for operations and planned expansions.
Interest rate risk
The Company and Group have both interest bearing assets and interest bearing liabilities. Interest bearing assets include only cash balances which earn interest at fixed rate. The Company and Group have a policy of only borrowing debt to finance the purchase of cash generating assets (or the potential to generate cash). The Directors will revisit the appropriateness of this policy should the Company and Group operations change in size or nature.
Responsibility statements under the disclosure and transparency rules
The Annual Financial Report for the year ended 31 December 2008 contains the following statements:
The directors confirm that to the best of their knowledge:
The financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the company and the undertakings included in the consolidation taken as a whole; and
The Directors' Report and the Chairman's statement include a fair review of the development and performance of the business and position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
The directors of Panther Securities plc are listed in the latest Panther Securities plc Annual Report and a list of current directors is maintained on the Panther Securities plc website, together with the full financial statements: www.panthersecuritiesplc.com
By order of the board
……………………………………
Andrew Perloff
Dated: 29/04/2009
Chairman
…………………………………..
Simon Peters
Dated: 29/04/2009
Finance Director
2. Revenue and cost of sales
The Groups main business segment is investment and dealing in property and securities. The majority of the revenue, cost of sales and profit or loss before taxation being generated in the United Kingdom.
M.R.G. Systems Ltd is a separate business segment whose principal activity is that of electronic designers, engineers and consultants. 70% of its revenues arose in the United Kingdom and 100% of its cost of sales. Its net contribution to profit or loss before interest and tax in the year was a profit of £98,000 (2007 - loss of £240,000).
The split of assets, tax effect and cash flow of each segment is not shown as these are not material in relation to M.R.G. Systems Limited.
| Turnover arose as follows: | 2008 | 2007 |
| £'000 | £'000 | |
| Rental income from investment properties | 6,236 | 6,673 |
| Rental income from stock properties | 828 | 853 |
| Income from sale of stock shares | - | 114 |
| Income from sale of stock properties | 390 | 237 |
| Income from trading (M.R.G. Systems Ltd) | 1,842 | 1,639 |
| 9,296 | 9,516 |
| Cost of sales arose as follows: | 2008 | 2007 |
| £'000 | £'000 | |
| Cost of sales - from rental income | 1,310 | 1,340 |
| Stock shares recognised as an expense | - | 99 |
| Stock properties recognised as an expense | 378 | 138 |
| Cost of sales - trading (M.R.G. Systems Ltd) | 863 | 999 |
| 2,551 | 2,576 |
3. Taxation
The charge for taxation comprises the following:
|
| 2008 £'000 | 2007 £'000 |
| Current year UK corporation tax | 2,316 | 4,562 |
| Prior year UK corporation tax | (299) | 95 |
| Current year deferred tax | (5,697) | (3,011) |
| Income tax expense for the year | (3,680) | 1,646 |
Corporation tax is calculated at 28.5% (2007 - 30%) of the estimated assessable profit for the year.
4. Dividends
Amounts recognised as distributions to equity holders in the period:
|
| 2008 £'000 | 2007 £'000 |
| Final dividend for the year ended 31 December 2007 of 6p (2006 - 6p) per share | 1,012 | 1,020 |
| Interim dividend for the year ended 31 December 2008 of 6p (2007 - 6p) per share | 1,012 | 1,020 |
| 2,024 | 2,040 |
The Directors recommend payment of a final dividend of 3p per share (2007 - 6p), following the quarterly interim dividend paid on 8 April 2009 of 3p per share (2007 - 0p). The final dividend will be payable on 3 July 2009 to shareholders on the register at the close of business on 12 June 2009. The full dividend for the year ended 31 December 2008 being 12p.
5. Earnings per ordinary share (basic and diluted)
The calculation of earnings per ordinary share is based on earnings, after excluding minority interests, being a loss of £7,218,000 (2007 - profit of £7,509,000) and on 16,893,826 ordinary shares being the weighted average number of ordinary shares in issue during the year (2007 - 16,958,402).
6. Net assets per share
|
| 2008 £'000 | 2007 £'000 |
| Total equity attributable to shareholders per 25p ordinary share | 390p | 465p |
The calculation of net asset per ordinary share is based on the equity attributable to share holders of the equity in the parent company, and on 16,869,000 ordinary shares being number of ordinary shares in issue at 31 December 2008 (16,918,651 for 31 December 2007).
7. Investment property
| Investment Properties | |
| £'000 | |
| Fair value | |
| At 1 January 2007 | 104,521 |
| Additions | 9,324 |
| Disposals | (12,827) |
| Revaluation increase | 182 |
| At 1 January 2008 | 101,200 |
| Additions | 4,454 |
| Disposals | (2,500) |
| Revaluation decrease | (6,062) |
| At 31 December 2008 | 97,092 |
| Carrying amount | |
| At 31 December 2008 | 97,092 |
| At 31 December 2007 | 101,200 |
At 31 December 2008, £74,977,000 (2007 - 78,080,000) and £22,115,000 (2007 - £23,120,000) included within investment properties relates to freehold and leasehold properties respectively.
On the historical cost basis, investment properties would have been included as follows:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Cost | 61,628 | 58,567 |
| Cumulative depreciation | - | - |
| Net book amount | 61,628 | 58,567 |
At 31 December 2008, the investment properties were revalued at their open market value as at that date by the Directors, in accordance with the Statement of Asset Valuation Practice and Guidance Notes published by the R.I.C.S. and in accordance with international valuation standards. For the year ended 31 December 2007, Chartered Surveyors DTZ independently revalued the investment properties.
The property rental income earned by the Group from its investment property, all of which is leased out under operating leases, amounted to £6,236,000 (2007 - £6,673,000).
8. Annual General Meeting
The Annual General Meeting will be held on 9 June 2009.
9. Retained earnings
| 2008 | 2007 | |
| £'000 | £'000 | |
| At 1 January | 70,901 | 65,562 |
| Profit or loss for the period | (7,218) | 7,509 |
| Movement in fair value of available for sale investments (shares) taken to equity | (4,681) | 227 |
| Deferred tax relating to movement in fair value of available for sale investments (shares) taken to equity | 1,334 | (60) |
| Shares purchased for cancellation | (173) | (297) |
| Dividends paid | (2,024) | (2,040) |
| 58,139 | 70,901 |
10. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on Consolidation and are not disclosed in this note. There were no related party transactions in the year under review or within the comparative period.
11. Copies of the Report and Accounts will be posted to shareholders shortly and will be available from the Company's registered office at Panther House, 38 Mount Pleasant, London WC1X 0AP and on the Group's website www.panthersecurities.co.uk.