Panther Securities Regulatory News (PNS)

20 Sep 2006 07:00

Panther Securities PLC20 September 2006 CHAIRMAN'S STATEMENT Introduction I am pleased to report the interim figures for the six months to 30th June 2006.Pre-tax profits amount to £1,692,000 compared to £2,785,000 for the same periodlast year. Rental income receivable amounted to £3,724,000, as against £4,505,000 for theprevious year's period. These current year's figures are mainly lower due to the substantial propertysales in earlier years, leaving lower rents in 2006, and there were largerprofits produced on disposals in the period to June 2005. Finance The funds received from our property sales have not yet been reinvested andnormally one would expect to receive higher rents than the interest received onthe equivalent cash. Under these circumstances, we have taken the opportunity to temporarily repay£8,000,000 off our HSBC loan. This facility still allows us to redraw the fundswhen we find suitable investment opportunities. We have also repaid £631,000 ofbuilding society loans as a consequence of the two Scottish property disposals.Currently, £40,000,000 is available to us under the HSBC facility, part of whichmay be drawn without granting further security to the bank. We also had over£5,500,000 cash at the balance sheet date. Disposals In February 2006 we sold two properties at auction; 22 Westburn Street,Greenock, for £700,000 and 70 High Street, Elgin for £583,000. Together aftercosts, they showed a small profit on the December 2005 revaluation. However,they produced a good profit over the value attributed to them when we originallyacquired Eurocity Properties PLC in November 2002. In the same month we sold virtually all of our shareholding in Hawtin PLC whichgave us a profit of approximately £480,000. Shareholders may recall that weacquired 15% of Hawtin PLC at a cost of £1,488,000 in June 2004. A year later,we started discussions with Hawtin's board with a view to our making an agreedoffer for the company. By November 2005, however, it was apparent and announcedthat an agreement could not be reached. Shortly thereafter, we were approachedby a prospective purchaser for our holding, the sale of which was successfullyconcluded in February 2006. We purchased Hawtin at 13p per share and sold at 18.25p per share - a most satisfactory result. We retain a residual holding of623,000 shares. Acquisitions In March 2006, we bought a large freehold property for a total cost of £990,000.It comprises four adjoining shops and upper parts in Queens Road,Southend-on-Sea, close to the prime retail area and is let in its entirety toHMV PLC. In June 2006, we acquired a freehold double shop and upper parts at 182/184Northdown Road, Cliftonville, Kent. It is close to some of our existingproperties and was acquired at a cost of £410,000. This is let to W H Smith PLC,who sub-let at a profit rent. In the same month we acquired the freehold of 25 Guildhall Street, Folkestone,for approximately £232,000. It is sited between 21/23 and 27 Guildhall Street,Folkestone, which are properties we have owned for some time. We are currentlycarrying out a major rebuild of No 27 to provide 13 residential units in theupper parts. We are also converting the upper part of No 23 into threeself-contained residential units, although we have not yet decided whether wewill retain and let the units, or sell them off individually. Investments Elektron PLCOur investment in Elektron PLC is performing well, and Elektron recentlyannounced improved figures and an increased dividend. We were originallyattracted to the transaction because they became our tenants in the largefactory premises in West Molesey, which have considerable long-term potential. Real Estates Investors PLCWe have a substantial holding in this small AIM Listed property company, andwhilst the current share price is slightly below our book value, we have everyconfidence in the management of this company. We have recently sold ourinvestment at 30 High Street, Paisley to them for £1,100,000, with part paymentof £200,000 by way of ordinary shares, valued at 10p each. This sale is inexcess of the December 2005 Valuation and the profit will be brought into thefull year's figures. Post Balance Sheet EventsAs well as the sale of 30 High Street, Paisley mentioned above, we have alsosold 206/208 Main Street, Barrhead, for £975,000. This sale was also well overthe December 2005 Valuation, and the profit will also be included in the figuresfor the year ended 31st December 2006. Other Events RamsgateIn my chairman's statement for last year's accounts, I mentioned the long delayswe experienced in our efforts to obtain planning permission on our site in HighStreet, Ramsgate. I am pleased to say that at last we received planningpermission for 20 flats. MRG Systems LimitedWe have long held an investment in MRG Systems Limited, a small high-techcompany, whose founding was financed by us in 1985/6. The company specialises inteletext systems and, although successful in a very limited field, its turnoverand profits are erratic. Our original investment of £75,000 now has a value based on its share of its netassets of £300,000. This is not material in relation to our total net assets.Recently, however, the founding director and major shareholder expressed a wishto retire. It was therefore agreed that MRG Systems Limited would purchase hisholding for cancellation out of the cash profits it had produced over the lastfew years. There is of course an existing management team to continue runningthe business. We are thus left owning 72% of MRG Limited, which becomes asubsidiary, and means under current accounting rules has to be fullyconsolidated in our accounts and this of itself will have an increased taxcharge on profits by virtue of it becoming a subsidiary. This distorts ourturnover and overheads but not the profit for an investment that is very, veryminor to our overall business. Once again, accounting rules distort and taxrules punish, rather than contribute to an understanding of the accounts. DividendsAn interim dividend of 6p per share was paid on 27th June 2006 and your boardanticipate recommending a final dividend of not less than 5p per share for theyear ending 31st December 2006. THE SHAMBLES GETS WORSE..... my interim statement does not allow space for afull rant on the foolishness of the system we "hard labour" under, but mysupplement gives two stories from my past property dealings, which may have somerelevance. The first, "The Tailor who Cried" and the second, "The Salesman whoDied". OUTLOOKWhilst it is difficult to find attractive investment opportunities for the fundswe have available, our existing portfolio seems to be producing some goodopportunities for improvement in both income and profits in due course. I alsobelieve there will be more interesting opportunities available to us in the nearfuture, because of our strong liquidity, which allows us to act quickly anddecisively in situations where vendors' cash requirements mean speed is moreimportant than the prices being obtained. ANDREW S PERLOFF CHAIRMAN'S SUPPLEMENT The Tailor who Cried Some 35 years ago, whilst still a young man, I had the task of dealing with alease renewal on a shop and upper part in Commercial Road, E1, close toLimehouse Station. The property had been let on a 21 year full repairing andinsuring lease at a rental fixed throughout the term at £250 per annum (a longletting at a fixed rent was not unusual at that time) and this had now expired. I had served a termination notice, offering a new lease, but no reply wasforthcoming. The tenant thus lost his renewal rights. As the tenant had alwayspaid promptly, I and my partner Malcolm decided to call in to see him anddiscuss the matter. When we called the door was opened by a short (much shorter than me) old (much,much, older than I then was) Jewish tailor, who had taken the original lease andapparently lived upstairs. The shop consisted of a bare shop divided in half bya large cutting table. The walls had numerous paper patterns pinned to them andit was apparent that the property had not received a visit from a decoratorsince the lease commenced. The chalk-dust covered suit worn by our tenant hadcertainly seen better days. After the tailor had regaled us with his gloomy stories of poor trade, the highcost of materials, and how nobody wanted bespoke suits, I reduced the proposedrent from £750 pa to £600 pa. He became more mournful, saying he would have togive up the business and work for someone else doing alterations, so I suggestedthat, if he wished, he could vacate the shop and thus stop paying rent, althoughhe must carry out the schedule of dilapidations for the redecoration of thepremises, which I suggested, would cost no more than £500-£600. This burden wasobviously too much for him to bear, he prostrated himself upon the cuttingtable, crying loudly with profuse tears, "I've no money, I'll go bankrupt, meand Golda will have to live with her sister, who hates me, my wife will leaveme, I'll have to go to a hostel!" Malcolm and I were visibly moved by this poor man's terrible plight, and wantingto help him, I instantly agreed to waive the dilapidations and reluctantlyallowed him to stay on at the same rent until we could re-let. His tearssubsided and we left, with him thanking us, but still sobbing slightly, eyesbright with tears. Four or five months later, the property was let at £1,000 paas a Chinese take-away shop and subsequently sold. This incident would have all but been forgotten but for the fact that four orfive years later I let a room in Panther House to a small Jewish tailor.Assuming tailoring to be a small world, I asked him if he knew my former tenant."Oh, yes" he replied, "what a very, very clever man! He works from his home inKenton, a beautiful detached freehold that he bought for nothing in 1952. Hemakes a wonderful living." I could not help but feel relief that his circumstances were so much better thanI had originally feared, but also slightly foolish that I had been so easilymisled. I don't know if he ever won prizes for his tailoring, but he certainlywould have been a contender for a Laurence Olivier Drama Award. The Salesman who Died About 10 years after the tailor incident, I came to be letting a shop and upperpart in Upper Street, Islington. Two Iranian exiles approached us wanting to rent the property for an antiquecarpet showroom. They could not supply references, but they explained that theyhad escaped from Iran with their stock of carpets, and had been experiencedtraders in their own country before being forced to leave. They offered to pay nine months' rent in advance if we were to let them have athree month rent free period to fit out the shop. This clinched matters, asmoney was tight at that time. They took over the shop and made it into a veryattractive showroom, with carpets draped all round the walls, and stacked on thefloors. We were very pleased with this letting. A year passed, and it was abouttime to start collecting rent. From the outset, however, they were bad payers,and gradually they fell further and further into arrears. They were alwayspleasant to speak to, and they always had an excuse. For the sake of expedience,I shall call them Nazir and Wazir, Wazir appearing to be the main partner. One day when total arrears had reached six months rent, Malcolm phoned and spoketo Nazir, saying that we were at the end of our patience, to which Nazirpleasantly replied that he fully understood, but Wazir signed all cheques andwas at home ill. Malcolm said "All right, I'll phone in two weeks and hopefullyhe will be better and back at work. Malcolm called again after two weeks and wastold Wazir was seriously ill and in hospital, and could not receive visitors atthe moment. After another month of hearing nothing, Malcolm phoned again and, withoutwaiting for an excuse, angrily began with, "We can't wait any longer, we musthave some rent!" Nazir cut in, "Wazir died last week!". That, of course, was a conversationstopper. After humming and hawing, Malcolm expressed our deepest sympathies, andsaid that we would leave matters for another month, to enable Nazir to sortmatters out. Six weeks later, we had heard no more, so we decided to callunexpectedly at the shop to see if Nazir had "done a runner". When we arrived outside the shop, all appeared exactly as normal, fully stockedand open for trade. We walked in, and behind an antique desk at the back of theshop sipping coffee from dainty china coffee cups were Nazir AND Wazir. We approached Wazir and expressed surprise at his good health and livelinessafter hearing of his death from Nazir. He replied, "Ah, yes. Thanks be to theall merciful God. From my deathbed almighty God produced a miraculous recoveryfor me. Praise be to God." Well, his God wasn't my God, and didn't feel able to produce any miraculousrecovery of our rent arrears. So, in due course, with rather less divinemethods, we managed to repossess and re-let the property. However, some five years later, about 1988 or '89, at the height of the lastproperty boom, we sold the property at a miraculous price. So, with hindsight,perhaps his God did produce a miracle for us - but just took a little longer toget around to non-believers. Over the years, I have many examples of people who, to protect their ownfinancial interests, will tell little "porky pies". You may ask what is the relevance of these stories, and how they relate to mydissatisfaction with Government - I will explain. We have three main political parties, all promising to spend huge sums eithergreater but never less than their opponents. These carefully thought outpolicies are based on the hypothesis that numerous surveys and polls show thatwhen "Joe Public" are asked whether they would like Government to spend moremoney on Education, the National Health Service, the Police etc, etc, thequestioner nearly always gets the answer - YES! But the real meaning of that answer is "YES, but somebody else's money, NOT MY MONEY". If, after answering yes to that question, a person instead was then asked tomake a donation of £250 to their local hospital and a blank cheque produced forthem to sign, I suspect that the local hospital in question would have severaladditional emergency cases to deal with. ANDREW S PERLOFF Panther Securities P.L.C. CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Revenue 4,247 4,905 8,498Cost of sales (1,165) (1,216) (2,035)------------------------------------------------------------------------------Gross profit 3,082 3,689 6,463 Other income 54 52 133Administrative expenses (1,026) (870) (2,061)------------------------------------------------------------------------------ 2,110 2,871 4,535 Profit on the disposal ofinvestment properties 171 662 1,607Movement in fair value ofinvestment properties 70 0 22,537Finance costs (1,437) (1,587) (3,281)Investment income 323 522 877Profit on the disposal of available for sale investments (shares) 480 87 87Profit on sale of subsidiary 0 66 66Surplus of assets acquired overconsideration given 0 17 17Share of result from associate (25) 147 104------------------------------------------------------------------------------Profit before tax 1,692 2,785 26,549 Income tax expense (112) (512) (5,938)------------------------------------------------------------------------------Profit for the period 1,580 2,273 20,611============================================================================== Attributable to:Equity holders of the parent 1,589 2,273 20,611Minority interest (9) 0 0------------------------------------------------------------------------------Net profit for the period 1,580 2,273 20,611============================================================================== Earnings per share Basic and diluted 9.3p 13.4p 121.3p============================================================================== Panther Securities P.L.C. CONSOLIDATED BALANCE SHEET As at 30 June 2006 30 June 30 June 31 December 2006 2005 2005ASSETS £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 20 7 9Investment property 100,170 79,119 99,881Goodwill 13 0 0Interests in Associate 0 407 364Available for sale investments(shares) 1,779 3,078 3,047-------------------------------------------------------------------------------- 101,982 82,611 103,301 Current assetsInventories 152 0 0Stock properties 9,770 9,525 9,534Available for sale investments(shares) 424 423 410Trade and other receivables 3,547 3,424 3,196Cash and cash equivalents 5,594 13,715 14,546-------------------------------------------------------------------------------- 19,487 27,087 27,686--------------------------------------------------------------------------------Total assets 121,469 109,698 130,987================================================================================ 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 59,650 42,460 59,925-------------------------------------------------------------------------------- 67,357 50,167 67,632 Minority interest 116 0 0--------------------------------------------------------------------------------Total equity 67,473 50,167 67,632-------------------------------------------------------------------------------- Non-current liabilitiesLong-term borrowings 38,009 47,635 46,562Deferred tax liabilities 10,778 5,566 11,010-------------------------------------------------------------------------------- 48,787 53,201 57,572 Current liabilitiesTrade and other payables 3,988 3,703 4,350Short-term borrowings 109 224 187Current tax payable 1,112 2,403 1,246-------------------------------------------------------------------------------- 5,209 6,330 5,783--------------------------------------------------------------------------------Total liabilities 53,996 59,531 63,355----------------------------------------------------------------------------------------------------------------------------------------------------------------Total equity and liabilities 121,469 109,698 130,987-------------------------------------------------------------------------------- Panther Securities P.L.C. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENDITURE for the six months ended 30 June 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Movement in fair value of available forsale investments (shares) taken toequity 116 (35) (66) Deferred tax relating to movement infair value ofavailable for sale investments(shares) taken to equity (110) 12 20-------------------------------------------------------------------------------- Net income/ (expense) takendirectly to equity 6 (23) (46) Profit for the period 1,580 2,273 20,611--------------------------------------------------------------------------------Total recognised income and expensefor the period 1,586 2,250 20,565================================================================================ Attributable to:Equity holders of the parent 1,595 2,250 20,565Minority interest (9) 0 0-------------------------------------------------------------------------------- 1,586 2,250 20,565================================================================================ Panther Securities P.L.C. CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2006 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Cash flows from operating activitiesProfit before interest, investmentincome and tax 2,110 2,871 4,535Add: Depreciation charges for the year 3 3 9Less: Provision against available forsale investments (shares) - currentassets (13) 0 13--------------------------------------------------------------------------------Profit before working capital change 2,100 2,874 4,557 (Increase) / decrease in stockproperties (189) 230 221(Increase) / decrease in receivables (192) 839 1,067Increase / (decrease) in payables (636) 25 328--------------------------------------------------------------------------------Cash generated from operations 1,083 3,968 6,173 Interest paid (1,437) (1,754) (3,105)Income tax paid (479) (765) (1,896)--------------------------------------------------------------------------------Net cash from operating activities (833) 1,449 1,172-------------------------------------------------------------------------------- Cash from investing activitiesPurchase of plant and equipment (3) (1) (9)Purchase of investment properties (1,516) (282) (632)Purchase of available for saleinvestments (shares) - non current assets 0 (100) (100)Purchase of available for saleinvestments (shares) - current assets (1) (7) (7)Investment in subsidiaries 0 (76) (76)Acquisition of subsidiary - cash andcash equivalents acquired 361 0 0Proceeds from disposal of subsidiary 0 66 66Proceeds from sale of investment properties 1,469 9,637 12,707Proceeds from disposal of available forsale investments (shares) - non currentassets 1,749 399 399Dividend income received 8 7 37Interest income received 315 516 840-------------------------------------------------------------------------------- 2,382 10,159 13,225Cash from financing activitiesNew loans net of repayments (8,631) (11,276) (12,384)Dividends paid (1,870) (1,954) (2,804)-------------------------------------------------------------------------------- (10,501) (13,230) (15,188)--------------------------------------------------------------------------------Net (decrease) in cash and cashequivalents (8,952) (1,622) (791) Cash and cash equivalents at thebeginning of period 14,546 15,337 15,337--------------------------------------------------------------------------------Cash and cash equivalents at the end ofperiod 5,594 13,715 14,546================================================================================ Panther Securities P.L.C. NOTES TO THE INTERIM FINANCIAL REPORT For the six months ended 30 June 2006 1. Basis of preparation of accounts The results for the year ended 31 December 2005 have been audited whilst theresults for the six months ended 30 June 2005 and 30 June 2006 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 for theyear ended 31 December 2005 have been delivered to the Registrar of Companies.The auditors' opinion on these accounts was unqualified and did not contain astatement made under s237(2) or s237(3) of the Companies Act 1985. Copies of thereport are available from the address shown in note 8. 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 11 September2006. The Interim figures are prepared on the basis of the accounting policies set outin the last annual report to 31 December 2005. 2. Taxation The charge for taxation comprises the following: 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Current period UK corporation tax 455 2,060 2,242Prior period UK corporation tax 0 29 (180)Current period deferred tax (343) (1,577) 3,876-------------------------------------------------------------------------------- 112 512 5,938================================================================================ The taxation charge is calculated by applying the Directors' best estimate ofthe annual effective tax rate to the profit for the period. 3. Dividends Amounts recognised as distributions to equity holders in the period: 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Final dividend for the year ended 31December 2005 of 5p (2004 - 4p) per share 850 680 680*Special interim dividend for the year ended 31 December 2005 of 10p per share 0 1,274 1,274Interim dividend for the year ended 31December 2006 of 6p (2005 - 5p) per share 1,020 0 850-------------------------------------------------------------------------------- 1,870 1,954 2,804================================================================================ *A S Perloff waived his personal entitlement to the special 10p dividend for theyear ended 31 December 2005. The Directors anticipate recommending a final dividend of not less than 5p pershare for the year ended 31 December 2006. 4. Earnings per ordinary share (basic and diluted) The calculation of earnings per ordinary share is based on earnings, afterminority interests, of £1,589,000 (30 June 2005 - £2,273,000 and 31 December2005 - £20,611,000) and on 16,998,151 (30 June 2005 and 31 December 2005 -16,998,151) ordinary shares being the weighted average number of ordinary sharesin issue throughout the six months ended 30 June 2006. 5. Net assets per share 30 June 30 June 31 December 2006 2005 2005 Net assets per share 396p 295p 398p-------------------------------------------------------------------------------- The calculation of net asset per ordinary share is based on the equityattributable to share holders of the equity in the parent company, and on16,998,151 (30 June 2005 and 31 December 2005 - 16,998,151) ordinary sharesbeing the weighted average number of ordinary shares in issue throughout the sixmonths ended 30 June 2006. 6. Investment Properties 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Fair value of investment property At 1 January 99,881 87,812 87,812Additions 1,516 282 632Disposals (1,297) (8,975) (11,100)Revaluation increase 70 0 22,537-------------------------------------------------------------------------------- 100,170 79,119 99,881================================================================================ 7. Retained earnings 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000At 1 January 59,925 42,164 42,164Profit for the period 1,589 2,273 20,611Movement in fair value of available for saleinvestments (shares) taken to equity 116 (35) (66)Deferred tax relating to movement in fairvalue of available for sale investments(shares) taken to equity (110) 12 20Dividends paid (1,870) (1,954) (2,804) 59,650 42,460 59,925-------------------------------------------------------------------------------- 8. 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