Panther Securities Regulatory News (PNS)

14 Sep 2005 07:00

Panther Securities PLC14 September 2005 INTRODUCTION I am delighted to report the interim figures for the six months to 30th June2005. Pre-tax profits amount to £2,768,000, compared to £1,726,000 (restated)for the same period last year. Rental income receivable amounted to £4,505,000 as against £4,650,000 for thecomparable half year. The figure is lower due to the sales last year of Eurocity(Crawley) Ltd and the Grays Inn Road properties, and of Copthall House,Coventry, early this year. DISPOSALS CoventryThe major disposal during this first half year was the sale (in February 2005)of our shops and office complex, Copthall House Coventry at a price of£9,250,000. This property was producing a gross income of approximately £760,000p.a. and after all expenses a net income of £480,000 p.a. This property waspurchased in July 1996 for £3,245,000 and proved to be a good investment whichalways produced a high return. The December 2003 independent valuation was£5,250,000, but this figure was increased to £8,500,000 for December 2004accounts after conditional agreements for its sale were in place.Stirling, ScotlandIn February the freehold shop investment at 14-18 King Street, Stirling was soldfor £525,000, this figure being approximately 10% in excess of its book value.This property was one of the Scottish portfolio of Eurocity Properties PLC whichhas performed better than expected. Abraxus PLCThe 29% shareholding in this company acquired in November 2004 for £312,000 wassold in January for a £90,000 profit before costs. RamsgateWe disposed of a small property in High Street Ramsgate which was held for manyyears as trading stock. This was sold at auction for £400,000, a figure well inexcess of its original cost and £160,000 in excess of the last valuation inDecember 2003. We still hold another property in High Street Ramsgate, for whichwe are attempting to obtain planning permission for residential development. Ifsuccessful there should be substantial added value. QUOTED INVESTMENTS Hawtin PLCIn June 2004 Panther acquired approximately 15% of Hawtin PLC ("Hawtin"), an AIMlisted company at a cost of £1,488,000, one of my private companies having oneweek previously purchased 14.5% at the same price of 13p per share. I wasshortly thereafter invited to and did join its board. In June 2005 Hawtinannounced that it was in discussions with Panther which might or might not leadto an offer for Hawtin. Hawtin owns two substantial factory investments and 35acres of virgin land in Blackwood/Gwent South Wales, the smaller part of whichis zoned for residential use and the larger part for industrial use, this usehaving a much lower value than the residential use. We are currently still intalks and hope to be able to report back with further news in due course. Real Estate Investors PLCWe are pleased with the performance of our holding of 8.8% in this propertyinvestment company and expect this to prove a profitable investment. Elektron PLCOur holding is approximately 11.5% of this company which is performing extremelywell. Its profits have increased substantially and the company has recommencedpaying dividends after three years of being unable to do so. FINANCE In the annual report & accounts for the year ending 31st December 2004 Imentioned the arrangements for our new £75,000,000 seven year loan facility withHSBC PLC of which only £43,000,000 is currently drawn down and we have theability to draw an additional £7,000,000 without providing extra security. Ourcash balances are currently over £12,000,000. We thus have considerable ability to make acquisitions. DIVIDENDS Following the sale of Copthall House, a special interim dividend of 10p pershare was paid on 28th June 2005. We will be paying a second interim dividend of5p per share on 28th October 2005 to shareholders on the register at close ofbusiness on 30th September 2005. The Board's intention is also to recommend afinal dividend of not less than 4.5p per share for the year ended 31st December2005. THE ACCOUNTS These figures are the first required to be produced under the "new"international financial reporting standards. The main differences so far as theyrelate to us are twofold: (I) the deferred tax provision is now provided for on the balance sheet as aliability, rather than disclosed by way of a note to the accounts. Thisprovision reduces the net asset value per share by 31p in these interimaccounts. In many cases our property sales have been sufficiently above the lastbook value so as to substantially absorb this deferred tax liability. (2) any surplus on revaluation of property investments will now go directlythrough the income statement (even though it is unrealised) as opposed to beingcredited to revaluation reserve on the Balance Sheet. REVALUATION To address this change in presentation, your Directors are proposing tocommission an independent revaluation of our entire property portfolio, theresult of which will be included in our December 2005 accounts. Our lastindependent revaluation was carried out over 18 months ago. THE SHAMBLES CONTINUES In my last Annual Report I reported at length on the many problems imposed uponthe business community. I briefly mentioned that I expected a new land tax to"help provide extra residential development". It now transpires that theTreasury is considering the inclusion of commercial development in theirproposed Development Land Tax. The free market system is already sorting out theperceived problem of the residential market. I would anticipate that a tax oncommercial development would cause a substantial drop in new development andthus existing space would increase in value and the massive governmentbureaucracy which is the major user of space would have to pay a huge amount inextra rents. This would, of course then be passed on to the taxpayer - "plus cachange, plus c'est la meme chose". Some of you may have read that photos for passport applications should no longershow one smiling. Why would any one want to? OUTLOOK Whilst we are noticing an increase in small business failures our widespreadportfolio both by way of type of use, i.e. factory/shop/office and residentialand location from Elgin to Plymouth, shields us from any severe downturn in oneor other particular sector or location. Our finances are currently the strongest they have ever been and with ourcurrent liquidity I sometimes feel the hardest thing to do is NOT invest, but Ihave no doubt that, in due course, suitable attractive opportunities will comeour way fully justifying our patience. ANDREW S. PERLOFFChairman CONSOLIDATED INCOME STATEMENTfor the six months ended 30 June 2005 Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Sales revenue 4,905 4,648 9,194Cost of sales (1,216) (765) (1,487) ------- ----- -------Gross profit 3,689 3,883 7,707 Other income 52 31 98Administrative expenses (870) (539) (1,988) ----- ----- ------- 2,871 3,375 5,817 Profit on the disposal of investment 662 0 527 propertiesMovement in fair value of investment 0 0 4,714 propertiesFinance costs (1,072) (1,879) (3,633)Investment income 7 31 45Profit on the disposal of available for 87 0 43 sale investments (shares)Profit on sale of subsidiary 66 149 82Income from associate 147 50 37 ----- ----- -----Profit before tax 2,768 1,726 7,632 Income tax expense (512) (453) (1,541) ----- ----- ------- Profit for the period 2,256 1,273 6,091 ===== ===== ===== Attributable to:Equity holders of the parent 2,256 1,271 6,087Minority interest 0 2 4 ----- ----- -----Net profit for the period 2,256 1,273 6,091 ===== ===== ===== Earnings per share Basic and diluted 13.3 p 7.5 p 35.8 p ------- ------ ------ CONSOLIDATED BALANCE SHEETAs at 30 June 2005 30 June 30 June 31 December 2005 2004 2004ASSETS £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 7 16 9Investment property 79,119 93,004 87,812Interests in associate 407 273 260Available for sale investments (shares) 3,078 2,115 3,419 ------ ------ ------ 82,611 95,408 91,500 Current assetsStock properties 9,525 8,828 9,755Available for sale investments (shares) 423 1,600 323Trade and other receivables 3,424 3,186 4,263Cash and cash equivalents 13,715 2,094 15,337 ------- ------ ------ 27,087 15,708 29,678 ------- ------ ------- Total assets 109,698 111,116 121,178 ======= ======= ======= EQUITY AND LIABILITIESEquity attributable to equity holders of the parentCapital and reservesShare capital 4,250 4,250 4,250Share premium account 2,886 2,886 2,886Capital redemption reserve 571 571 571Retained earnings 42,460 37,242 42,164 ------ ------ ------ 50,167 44,949 49,871 Minority interest 0 92 94 ------ ------- ------ Total equity 50,167 45,041 49,965 ====== ====== ====== Non-current liabilitiesLong-term borrowings 47,635 53,362 58,925Deferred tax liabilities 5,566 7,218 7,154 ------ ------ ------ 53,201 60,580 66,079 Current liabilitiesTrade and other payables 3,703 3,744 3,845Short-term borrowings 224 750 210Current tax payable 2,403 1,001 1,079 ------- ------- ------ 6,330 5,495 5,134 -------- ------- ------ Total liabilities 59,531 66,075 71,213 -------- ------- ------- Total equity and liabilities 109,698 111,116 121,178 ======== ======== ======= CONSOLIDATED CASH FLOW STATEMENTfor the six months ended 30 June 2005 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000Cash flows from operating activities Operating profit before interest, 2,871 3,375 5,817 investment income and taxAdd: Depreciation charges for the period 3 7 14 Less: Profit on disposal of 0 28 0 available for sale investments (shares) ------ ------ ------ Operating profit before working 2,874 3,410 5,831 capital change (Increase) / decrease in stock 230 (38) (967) properties(Increase) / decrease in receivables 839 47 1,416 Increase / (decrease) in payables 25 2,334 1,080 ------ ------ -----Cash generated from operations 3,968 5,753 7,360 Interest paid (1,754) (1,940) (3,999)Income tax paid (765) (171) (1,353) ------- ------- -------Net cash from operating activities 1,499 3,642 2,008 ======= ======= ====== Cash from investing activitiesPurchase of plant and equipment (1) 0 0Purchase of investment properties (282) (1,056) (1,087)Purchase of available for sale (7) (1,465) (1,798) investments (shares) - current assetsPurchase of available for sale (100) (832) 0 investments (shares) - non current assetsInvestment in subsidiaries (76) 0 0Proceeds from disposal of 66 26 (42) subsidiaryProceeds from sale of investment 9,637 0 9,490 propertyProceeds from the disposal of 399 500 830 available for sale investments (shares) - non current assetsDividend income received 7 31 45Interest income received 516 61 360 ------- ------ ----- 10,159 (2,735) 7,798Cash from financing activitiesNew loans net of repayments (11,276) (577) 4,447Dividends paid (1,954) (680) (1,360) -------- ------- ------- (13,230) (1,257) 3,087 --------- ------- ------ Net increase / (decrease) in cash (1,622) (350) 12,893 and cash equivalents Cash and cash equivalents at the 15,337 2,444 2,444 beginning of period ------- ------ ------ Cash and cash equivalents at the 13,715 2,094 15,337 end of period ======= ====== ====== EXPLANATION OF TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDSfor the six months ended 30 June 2005 Reconciliation of equity andstatement of recognisedincome and expenses Share Share Revaluation Capital Retained Total capital premium reserves Redemption earnings £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2005 4,250 2,886 27,515 783 19,554 54,988(under UK GAAP)Change in accounting policy 0 0 0 (212) 783 571 - Negative goodwill Change in accounting policy 0 0 0 0 (7,154) (7,154) - Deferred tax Change in accounting policy 0 0 0 0 680 680 - Accrued dividend Change in accounting policy 0 0 0 0 786 786 - shares carried at fair value Change in accounting policy 0 0 (27,515) 0 27,515 0 ----- ------ -------- ----- ------ ------ - Revaluation reserve Balance at 1 January 2005 4,250 2,886 0 571 42,164 49,871 (under IFRS) Addition of negative goodwill 0 0 0 0 17 17 Movement in fair value of 0 0 0 0 (35) (35) available for sale investments (shares)Deferred tax relating to 0 0 0 0 12 12 movement on fair value of available for sale investments (shares)Net profit for the period 0 0 0 0 2,256 2,256Dividends paid 0 0 0 0 (1,954) (1,954) ----- ------ ------ ------ -------- -------Balance at 30 June 2005 4,250 2,886 0 571 42,460 50,167 ====== ====== ====== ====== ======== ======(under IFRS) Notes to the reconciliation of equity at 30 June 2005Under International Financial Reporting Standards (IFRS), any negative goodwill arising isrequired to be taken directly to reserves, this has resulted in an increase in retainedearnings by £783,000 under IFRS compared to UK GAAP. Under IFRS, deferred taxation is required to be recognised on revaluation gains arising oninvestment properties. This has resulted in an increase in the deferred taxation provisionfor £7,154,000 under IFRS compared to UK GAAP. Under IFRS, dividends declared after the balance sheet date should not be recognised as aliability at the balance sheet date. This has resulted in an increase in retained earnings by£680,000 under IFRS compared to UK GAAP. Under IFRS, gains and losses arising on revaluations of available for sale investments(shares) are taken directly to reserves as part of retained earnings. This has had an effect of increasing retained earnings by £786,000 under IFRS compared to UKGAAP. Under IFRS, gains and losses arising on revaluations of investment properties are takendirectly through the income statement as part of retained earnings. This has had an effect ofincreasing retained earnings by £27,515,000 under IFRS compared to UK GAAP. At 1 January At 30 JuneReconciliation of equity 2004 2004 £'000 £'000 Shareholders equity (under UK GAAP) 50,104 50,916 Adjustments:Negative goodwill taken to reserves 571 571Deferred taxation provision (7,189) (7,218)Accrued dividend 680 680 ------ ------ Shareholders equity (under IFRS) 44,166 44,949 ======= ====== Reconciliation of profit 30 June 30 December 2004 2004 £'000 £'000 Profit on ordinary activities after tax 1,494 1,534(under UK GAAP) Adjustments:Negative goodwill released in period (221) (221)Revaluation of properties through Income statement 0 4,714 Deferred tax (charge) / release 0 64 ------- ------ Profit for the period (under IFRS) 1,273 6,091 ====== ====== Notes to the reconciliation of profit The treatment of negative goodwill under IFRS has had the effect to decrease the reportedprofit by £221,000 under IFRS compared to UK GAAP at both 31 December 2004 and 30 June2004. The treatment of revaluation gains under IFRS has had the effect of increasing profit inthe period to 31 December 2004 by £4,714,000 compared to UK GAAP. The treatment of deferred taxation under IFRS has had the effect of increasing profit inthe period to 31 December 2004 by £64,000 compared to UK GAAP. Explanation of material adjustments to the cash flow statement The treatment of items in the cash flow statement has had no material effect on the overallcash flow position of the group. 1. General information The results for the year ended 31 December 2004 have been audited whilst theresults for the six months ended 30 June 2004 and 30 June 2005 are un-audited.The interim report is un-audited and does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985. The statutory accounts forthat year, which were prepared under UK Generally Accepted Accounting Principles(GAAP), have been delivered to the Registrar of Companies. The auditors' opinionon these accounts was unqualified and did not contain a statement made unders237(2) or s237(3) of the Companies Act 1985. There is no material seasonality associated with the group's activities. To the best of the Directors' knowledge, the half yearly interim financialreport gives a true and fair view of the assets, liabilities, financial positionand profit or loss of the entity and were approved by the board on 8 September2005. 2. Accounting policies The interim financial report has been prepared in accordance with InternationalFinancial Reporting Standards (IFRS's), including IAS34 "Interim financialreporting". In the current year, the group has adopted all of the new and revised standardsand Interpretations issued by the International Accounting Standards Board (theIASB) and the International Financial Reporting Interpretations Committee(IFRIC) of the IASB that are relevant to its operations and effective foraccounting periods beginning on 1 January 2005. The adoption of these new and revised standards and Interpretations has resultedin significant changes to the group's accounting policies in the following areasand comparative information has been restated accordingly: a. Excess of fair value of acquired assets and liabilities over purchaseconsideration (IFRS3 - Business combinations)Where the fair value of the assets and liabilities acquired in a businesscombination exceeds the purchase consideration, the excess is taken directly toincome. Under UK GAAP such amounts are treated as negative goodwill and held onthe balance sheet - amounts which arose on past acquisitions have been adjustedwithin reserves as part of the transition to IFRS. b. Taxation (IAS12)Income tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the period. Taxableprofit differs from profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. Thegroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is recognised on differences between the carrying amounts of assetsand liabilities in the financial statements and the corresponding tax bases usedin the computation of taxable profit, and is accounted for using the balancesheet liability method. Deferred tax liabilities are generally recognised forall taxable temporary differences and deferred tax assets are recognised to theextent that it is probable that taxable profits will be available against whichdeductible temporary differences can be utilised. Such assets and liabilitiesare not recognised if the temporary difference arises from goodwill or from theinitial recognition (other than in a business combination) of other assets andliabilities in a transaction that affects neither the taxable profit nor theaccounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset realised. Deferred tax ischarged or credited to profit or loss, except when it relates to items chargedor credited directly to equity, in which case the deferred tax is also dealtwith in equity. Deferred tax assets and liabilities are offset when there is a legallyenforceable right to set off current tax assets against current tax liabilitiesand when they relate to income taxes levied by the same taxation and the Groupintends to settle its current assets and liabilities on a net basis. Corporation tax for the interim period is charged at 30% (2004 - 30%),representing the best estimate of the weighted average annual corporation taxrate expected for the full financial year. Under UK GAAP, deferred tax liabilities relating to potential property surpluseswere not required to be provided in the accounts unless there was an intentionto sell. c. Events after the balance sheet date (IAS10)IAS10 requires that a liability should not be recognised in respect of adividend until the paying company has an obligation to make the payment. Thiswould normally be when it was declared or approved at the Annual General Meetingin the case of the final dividend for the year. As a result the 2004 proposedfinal dividend is excluded from the IFRS balance sheet and written back toretained earnings. IFRS also requires that dividends and distributions are presented in a differentway to current UK GAAP. Under IFRS, dividends are not considered to be anexpense of the paying company so they are not included in the income statementand are instead treated as a reserve item. d. Investment Properties (IAS40)Investment properties, which are properties held to earn rentals and/or capitalappreciation are accounted for as follows:i. investment properties are revalued annually by the directors and byindependent professional valuers at intervals of not more than three years atfair value at the balance sheet date. Gains or losses arising from changes inthe fair value of investment property are included in profit or loss for theperiod in which they arise. ii. no depreciation is provided in respect of leasehold investment propertieswith over 20 years to run. Under UK GAAP, revaluation gains and losses were taken to a revaluation reserve.Accumulated revaluation surpluses relating to investment properties as at thetransition date have been reallocated to retained earnings. This treatment doesnot, however, have any impact on the distributable profits. e. Available for sale investmentsUnder UK GAAP, the group accounted for its available for sale investments at thelower of cost and net realisable value. Under IAS 39, these investments arecarried at fair value and classified in the balance sheet as available for saleinvestments. Movements in fair value are taken directly to equity and recycledthrough the income statement when the investments are realised. Fair values of these investments are based on quoted market prices whereavailable. 3. Taxation The charge for taxation comprises the following: 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Current UK corporation tax 2,060 453 1,693 Prior year UK corporation tax 29 0 (88) Current year deferred tax (1,577) 0 (64) ------- ------ ------ 512 453 1,541 ======= ====== ====== 4. Dividends Amounts recognised as distributions to equity holders in the period: 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Final dividend for the year 680 - 680 ended 31 December 2004 of 4p (2003 - 4p) per share Special Interim dividend for 1,274 - - the year ended 31 December 2005 of 10p (2004 - 0p) per share * Interim dividend for the year ended 31 December 2004 of 4p per share - 680 680 ---- ----- ------ 1,954 680 1,360 ===== ===== ====== * A S Perloff waived his personal entitlement to the special 10p dividend. 5. Earnings per share Earnings per ordinary share have been calculated on profit attributable tomembers from continuing activities of the parent company and on 16,998,151 30June 2004 - 16,998,151) ordinary shares being the weighted average number ofordinary shares in issue throughout the six months ended 30 June 2005. 6. Net assets per share 30 June 30 June 31 December 2005 2004 2004 Net assets per share 295p 264p 293p ----- ----- ---- 7. Copies of this report are to be sent to all shareholders and are availablefrom the Company's registered office at Panther House, 38 Mount Pleasant, LondonWC1X 0AP. This information is provided by RNS The company news service from the London Stock Exchange