Town Centre Regulatory News (TOWN)

RNS Number : 6124S

Town Centre Securities PLC

14 September 2010

 

Tuesday 14 September 2010

 

TOWN CENTRE SECURITIES PLC

 

Final results for the year ended 30 June 2010

 

Town Centre Securities PLC ("TCS") the Leeds based property investment and development company, today announces its final results, for the year ended 30 June 2010.

 

Financial highlights

 

o Profit before tax

o Underlying* profit £7.6m (2009: £7.8m)

o Statutory profit after tax £39.6m (2009: loss £111.6m), includes impact of property revaluation gain of £25.4m (2009: deficit £107.7m), of which £19.7m was reported at the interim stage.

 

o Earnings per share

o Underlying* earnings per share 14.8p (2009: 14.8p)

o Basic earnings per share 74.5p (2009: loss 210.3p)

 

o Net assets per share

o Net asset value per share 269p (2009: 202p)

o Triple net asset value per share 306p (2009: 264p)**

o Discount to net asset value of 48.3% at last night's closing share price of 139p

 

o Investment property portfolio valuation of £272.5m reflecting an 11.2% increase on a like for like basis 

 

o Dividends per share

o Proposed final dividend of 7.34p (2009: 5.4p)

o Final dividend to be paid as a PID of 7.23p and an ordinary dividend of 0.11p

o Total dividend per share of 10.36p (2009: 8.15p)

 

o Reduced borrowings £141.3m (2009: £166.3m): Gearing 99% (2009: 155%)

o Well within existing facilities and covenants

o Significant headroom for asset purchases and development within our existing portfolio

 

 

* See notes 6 and 7 for reconciliation to statutory profit.

** See note 13

 

 

Operational highlights:

 

o Merrion Centre income grew for fifth consecutive year (increase of 3.8%)

o Total voids reduced to 6.8% (2009: 8.4%)

o Significant management activity - 38 lettings and 31 lease renewals and extensions

o Car park expansion - over 4000 spaces now under management control

o Disposal of assets raised proceeds of £22.8m 

o Acquired two shops in London suburbs

Commenting on the results, Chairman and Chief Executive Edward Ziff, said: 

 

"This year, in contrast to the previous year, has been much more stable for the property sector and for Town Centre Securities. I am encouraged by the way in which we successfully negotiated the severe downturn and demonstrated the strength and resilience of our business.

 

"I believe there will be income and investment management opportunities for us to build on our solid foundations in the new financial year although the outlook for rental income and capital growth is relatively flat. I am also hopeful that at the Merrion Centre we can add long term value and growth to what has already proven to be an extremely resilient asset that underpins the quality of our income. 

 

"Most importantly, we manage our portfolio to generate a sustainable and progressive dividend for the benefit of our shareholders and will continue to deliver attractive returns."

 

 

For further information, please contact:
Town Centre Securities PLC			www.tcs-plc.co.uk
Edward Ziff, Chairman and Chief Executive			0113 222 1234
Chris Kelly, Finance Director
Hogarth
Reg Hoare / Vicky Watkins			0207 357 9477

 

Chairman and Chief Executive's Statement

 

Results

 

The results for the year demonstrate that Town Centre Securities has come out of the protracted downturn in the property market in a strong position. Underlying profit before tax (excluding property valuation, debenture profit and other one off movements) was £7.6m, compared with £7.8m in the prior year.

 

Our statutory profit after tax amounted to £39.6m, compared to a loss of £111.6m in 2009. This includes a revaluation surplus of £25.4m (2009: deficit £107.7m) and a gain of £9.0m arising from the repurchase of debenture stock in August 2009. Basic earnings per share amounted to 74.6p (2009: loss of 210.3p). Underlying earnings per share were 14.8p (2009: 14.8p).

 

Net assets now stand at £142.9m (269p per share) at 30 June 2010, compared to £107.2m (202p per share) at 30 June 2009. Triple net asset value has increased to £162.9m (306p per share) from £140.5m at 30 June 2009 (264p per share).

 

Our property values have increased on a like for like basis by 11.2% compared to last year (2009: 25.6% reduced), with a surplus on revaluation of £25.4m. On a like for like basis our rental income has increased by 3% during this financial year. Inevitably, following the net disposals we have made since 2008, our overall portfolio is smaller, and thus our revenues have fallen by £4.3m from £27.3m to £23.0m. 

 

We have achieved considerable savings in our underlying administrative costs which fell by 21% to £4.5m (2009: £5.7m) and will continue to fall as the full year effects of further savings comes through. However, property costs have increased as a consequence of considerable letting activity and the cost of void properties. We anticipate that these will be lower in the coming year.

 

During the year under review the Group agreed payments to Edward Ziff and Richard Lewis totalling £2.1m as compensation for sacrifice of pension benefits resulting from the termination of the Group's existing pension arrangement. This resulted in a £1.4m charge to administrative expenses to supplement provisions made in prior years. This removes the risk the Company had to significant fluctuation in future pension costs and reduces the level of future pension expense. 

 

During the year we acquired two properties in North London and made further property disposals which generated proceeds of £22.8m. The latter gave rise to a small loss on disposal.

 

Dividend

 

Your Board is recommending a final dividend of 7.34p (2009:5.4p) per ordinary share. The total dividend is 10.36p (2009: 8.15p) per ordinary share. 

 

Under REIT rules 90% of the profits of our property rental business, after certain deductions, must be distributed to shareholders as a Property Income Distribution (PID). Accordingly the final dividend is made up of a PID of 7.23 per share (2009:4.1p) and an ordinary dividend amounting to 0.11p per share (2009:1.3p).

 

The final ordinary dividend and the PID will be paid on 5 January 2011 to shareholders on the register on 10 December 2010.

 

Funding

 

The Company has again reduced debt levels. Net debt at 30 June 2010 was £141.3m (2009: £166.3m). The debt comprised £105.7m of 5.375% debenture stock maturing in 2031 and term loans and other bank borrowings of £35.6m.

 

As reported this time last year, on 4 August 2009 RBS completed a tender offer, at the Company's request, which resulted in the purchase by the Company of £43.8m of debenture stock for £34m (an average price of 77.6p). This reduced our overall debt and increased net assets by £9m. A further £200,000 of debenture stock was purchased by private treaty in December 2009.

 

The Group's borrowings are well within existing facilities and covenants and provide significant headroom for asset purchases and development within our existing portfolio. Our gearing is now 99% compared to 155% a year ago and net borrowings are 48.6% of property assets.

 

Strategy

 

We are, first and foremost, a Property Investment Company which seeks to provide a return to shareholders through a strong income that results in a sustainable dividend policy. Our great strength, which is clear from these results, is our ability to manage our portfolio, delivering income in line with our mantra of 'Right Tenant, Right Property, Right Rent'. Consequently, our low level of acquisitions in recent months has been as a result of our policy to seek value today rather than the promise of value tomorrow. We seek secure and growing income, in good and improving locations.

 

The dramatic change in property values provides an opportunity for us to invest in new property although we are convinced we will create a greater return from our existing portfolio at the current time. 

 

A further key element of our strategy is also to grow and improve our car parking business because it offers attractive income generating opportunities. Apart from seeking to generate greater revenue from our existing car park portfolio, on 1 July 2010 we took over the management of the Merrion Centre multi-storey car park.

 

At this point in the economic cycle we do not intend to enter into significant development activity unless there is a high degree of certainty of return on new investment. Indeed we have now concluded an agreement with Hammerson PLC by which they have assumed total control of the Eastgate Quarters scheme in Leeds which we had been jointly developing with them. Under the agreement we have no obligations to costs going forward and this allows us to focus on our core business. We will continue to be involved in a local liaison role. As stated above, our strongly held view is that the best short-term opportunities are likely to present themselves within our existing portfolio, particularly in the Merrion Centre.

 

The proposed Leeds Arena site which is due to open in 2013 is on our doorstep and will change the dynamic and nature of footfall and trade in this part of Leeds and in the Merrion Centre presenting further opportunity for retail and leisure units, as well as for the Merrion Centre Car Park. In the short term we continue to benefit from car park income from our well located development sites in Leeds and Manchester where there is significant long- term development potential.

 

During a period of great economic turbulence we have continued to adopt a prudent approach to our balance sheet. We have successfully reduced debt and by adopting a proactive approach have benefited shareholders by avoiding recourse to equity markets. 

 

Property portfolio

 

Our property portfolio continues to be principally a mix of retail, office, car parking and out of town retail assets. The portfolio remains concentrated in the North of England and Scotland and is largely based in the major cities of Leeds, Manchester, Edinburgh and Glasgow.

 

We have a wide spread of tenants with only two tenants with three properties and ten tenants with two. The occupancy levels of our portfolio have increased and we now have 6.8% voids compared to 8.4% at 30 June 2009.

 

Our single largest asset is the Merrion Centre in Leeds. This asset has proved extremely resilient throughout the downturn and this is the fifth consecutive year in which Merrion income has grown. The completely refurbished offices at Town Centre House (46,000 sq ft) have been let during the year - a real success story in a very difficult letting environment.

 

In Manchester we have made some progress letting Urban Exchange at Piccadilly Basin which currently represents 4.4% of our total voids. This property, (120,000sq ft) formerly entirely let to ILVA which went into administration, has ALDI as a current tenant of part. We are hopeful of shortly entering into an agreement to lease the entire first floor and we expect to let the remaining space by the end of 2011.

 

Town Centre Car Parks

 

Our car park business has performed well this year in the face of strong competition in its areas of operation, Leeds and Manchester. We now have an operating portfolio with over 4,000 spaces. We are developing a strong brand which enhances our reputation, customer service experience and competitiveness. We are seeking suitable acquisition and management opportunities nationwide.

 

Board changes

 

In April 2010 we appointed Chris Kelly as Finance Director. Chris was previously a senior audit partner with Ernst & Young.

 

On 30 November 2009 Bob Bigley stepped down from the Board and left the Company. Bob had been on the Board since 2005 when he joined as Corporate Development Director. He also took over as Finance Director in October 2008. On behalf of the Company I would like to express our thanks to him for his contribution, support and advice and wish him well in his new role.

 

Outlook

 

This year, in contrast to the previous year, has been much more stable for the property sector and for Town Centre Securities. I am encouraged by the way in which we successfully negotiated the severe downturn and demonstrated the strength and resilience of our business.

 

I believe there will be income and investment management opportunities for us to build on our solid foundations in the new financial year although the outlook for rental income and capital growth is relatively flat. I am also hopeful that at the Merrion Centre we can add long-term value and growth to what has already proven to be an extremely resilient asset that underpins the quality of our income. 

 

Most importantly, we manage our portfolio to generate a sustainable and progressive dividend for the benefit of our shareholders and will continue to deliver attractive returns. 

 

Finally, we could not have achieved all that we have without a strong and active team. I would like to express my thanks to all of our staff at TCS who have provided great support to myself and the Board and enabled the business to maintain its strong foundations and income generation.

 

 

 

 

E.M. Ziff

Chairman and Chief Executive

14 September 2010

Property Report

 

Portfolio performance

 

The independent valuation of our investment portfolio has been split between Jones Lang LaSalle and CB Richard Ellis. The value of our investment portfolio as at 30 June 2010 stands at £272.5m, representing an increase in the year of 11.2% on a like for like basis. The overall initial yield has improved to 7.3% from 7.9% and we have grown rental income by almost 3% on a like for like basis.

 

The growth in income despite further rental pressures in the marketplace, particularly in the retail sector, has been encouraging against a background of a further five tenant administrations and liquidations (2009: 13) and 31 lease renewals and extensions.

 

PORTFOLIO PERFORMANCE
						Value	Proportion of	Valuation
						£m	portfolio %	movement %
Retail						85.1	31.2	9.2
Merrion Centre (excl offices)						75.9	27.9	13.4
Office						46.7	17.1	12.1
Car Parking						13.3	4.9	3.9
Out of town retail						42.7	15.7	11.8
Residential						6.4	2.3	16.4
Properties owned all year						270.1	99.1	11.2
Acquisitions (retail)						2.4	0.9	33.3
Total investment portfolio						272.5	100.0	11.3

Note: Merrion Centre offices are included in office sector in this table

 

The Merrion Centre valuation grew 14.5% (including offices) from £96.7m to £110.7m. When looked at as a whole (including £34.8m of office accommodation), the Merrion Centre comprises over 40% of our investment portfolio. Out of town retail growth was also particularly strong.

 

GEOGRAPHICAL SPLIT BY LOCATION
					£m	% by value
Yorkshire and North East (Merrion)					110.7	40.6
Scotland					71.7	26.3
North West					40.8	15.0
Yorkshire and North East (rest)					41.4	15.2
Midlands					4.8	1.8
London					3.1	1.1
					272.5	100.0

 

Acquisitions and disposals

We made two retail acquisitions in November 2009 totalling £1.8m in North London suburbs, off initial yields of 7%. Both have performed well seeing 33% capital growth in the period to June 2010.

 

We made seven disposals in the period with proceeds totalling £22.8m, disposing of properties where we were mainly concerned with future income stability. 

 

Portfolio review

Our clear focus has been on the management of our portfolio. Void levels have been reduced from 8.4% (2009) to 6.8%. We hope to exchange an agreement for lease on 55,000 sq ft at the Urban Exchange store in Manchester, which will reduce voids further to 5.3%. We completed the sale of the two remaining residential units at our Harrogate development and successfully let the extensively refurbished and extended Town Centre House (46,000 sq ft) in the Merrion Centre at an average rental of £13.00 per square foot per annum. During the year we completed 38 lettings and over 30 lease renewals and extensions which further secured our income position going forward. The portfolio includes a wide variety of tenants, with our top ten tenants in terms of passing rents being spread across a number of sectors.

 

Top 10 Tenants

Passing rent £1m+ Q-Park

Leeds City Council

Between £500k-£1m Wm Morrison

Waitrose

Homebase

Matalan

Between £250k-£500k DSG Retail

Austin Reed

Luminar

Pizza Hut

 

Merrion Centre, Leeds

With 800,000 sq ft, (c six acres) this Island Site is mixed use with no over reliance on a single sector. It is a major retail destination with annual footfall of c10million visitors and plenty of car parking. We have high visit frequency with a very even spread of age groups, demonstrating its widespread appeal. The mixed use nature of the centre in the value sector of the market and our active in-house management has delivered good growth in the year. As a whole, including the office accommodation, Merrion Centre has generated income of over £8.8m in 2010 an increase of 3.8% over 2009 with more to come from new lettings and extensions. Of this income 42% is retail and leisure 12%. Office accommodation represents 27%, of which Merrion House (140,000 sq ft) is let to Leeds City Council, producing £1.4m per annum and car parking a further 19%. The Merrion Centre represents over 40% of our investment portfolio in capital and in rents received. Retail voids have remained low at 2.6% and office voids are minimal. 

 

The retail offering in the Merrion Centre has excellent anchor tenants in Wm Morrison, Home Bargains and Peacocks and a good mix of value retailers. We continue to be successful in replacing occupiers who vacated and have welcomed retailer BrightHouse as a new mini anchor to the main mall along with Grainger Games, GNC and Card Zone. We have recently created four small retail units, three of which are let, demonstrating our ability to seek ways of improving space utilisation and quality of income. Our main office occupiers, Leeds City Council and the Foundation for Consumer Credit continue to offer long-term secure income and have now been joined by professional practice Hoare Lee and the Public and Commercial Services Union who have taken space in Town Centre House. We consider the balanced spread of income throughout the centre together with a high percentage of quality tenants provides a stable base from which to add further value. Seven tenants account for 54% of the income. In taking over the day to day control of the multi-storey car park from Q-Park we now have further flexibility to maximise opportunities and increase footfall.

 

LEASE PROFILE
			Passing rent £m	Proportion of portfolio %	ERV £m	Initial yield %	Reversionary Yield %
Retail			6.6	34.7	6.4	7.2	7.0
Merrion Centre (excl offices)			6.8	35.8	6.8	7.4	8.1
Office			3.6	19.0	3.4	7.3	7.1
Out of town retail *			2.0	10.5	2.3	6.4	7.1
Let portfolio			19.0	100.0	18.9	7.3	7.0
Urban Exchange void					0.9
Other voids					0.4
Total portfolio					20.2

 

* Reflects occupied element of Urban Exchange

 

Our portfolio lease profile is spread reasonably evenly across four sectors. In addition we have good security of income and a long lease profile. 33.7% of our leases by rental income expire within five years. Almost 40% of leases have over ten years to expiry including 72% of the leases on our out of town retail sites and nearly 60% of our office leases.

 

RENT ROLL BY LEASE EXPIRY AND VOIDS
			Analysis by lease expiry
			0-5 years	5-10 years	Over 10 years	Voids
			%	%	%	%
Retail			39.6	31.1	29.3	1.8
Merrion Centre (excl offices)			47.5	25.9	26.6	2.6
Office			22.3	18.3	59.4	3.9
Out of town retail			0.0	28.2	71.8	29.6
Total portfolio			33.7	26.5	39.8	6.8

 

Development

 

There has been no development activity in the last year. We continue to monitor the occupational markets which are showing some signs of improvement. Our principal development sites, respectively in Leeds and Manchester, provide good income as surface car parks and our retail site in Rochdale is attracting occupier interest.

 

Town Centre Car Parks

 

Our car parks are operated under the Town Centre Car Parks (TCCP) brand. Total car park revenues during the year amounted to £4.7m (2009: £4.7m).

 

We have three multi-storey car park sites with a combined 2,980 spaces and over 1,000 spaces on surface car parks which we operate in Leeds and Manchester. Our multi-storey car parks at Clarence Dock and the Merrion Centre in Leeds and Tariff Street in Manchester all operate under the ParkMark award for safe, secure, crime free car parks. This is an important part of the TCCP offer and we know, from customer feedback, that our customers appreciate the hands on, friendly and reliable service they receive from our staff.

 

Our multi-storey sites have 24/7 opening hours and CCTV, including off site monitoring. We have state of the art facilities, which allow us to create a well run, user friendly, safe and convenient environment which makes car parking a comfortable experience.

 

We have successfully continued to maintain the revenues we earn from Clarence Dock, though the overall development scheme has not been as successful as was initially hoped. We signed a ten year lease with Yorkshire Water to operate as their partner for car parking at Clarence Dock which has offset a decline in revenues from short term parking caused by the difficult economic conditions. The contract operates for a full year for the first time in 2010/11 and so we will see further growth in revenues. Our car park at Tariff Street, Manchester is still in its development phase and we anticipate better revenues once we have further developed the site at Piccadilly Basin.

 

Our surface car park operations are based at six sites in Leeds and Manchester. These are run as efficiently as possible with our staff performing an important role in ensuring a consistent service at all times.

 

 

FINANCIAL REVIEW

 

Income Statement

 

Our underlying profit before tax was £7.6m (2009: £7.8m). This result excludes all exceptional items and property disposal profits and losses. A reduction in rental income of £4.3m arising from the disposal of property during the year has largely been offset by the resultant decrease in financing costs. 

 

The statutory profit after tax amounted to £39.6m (2009: loss £111.6m). The debenture buy back profit amounted to £9.0m and the property revaluation gain amounted to £25.4m (2009: deficit £107.7m).

 

Underlying administrative expenses have reduced by £1.2m (21%) since last year as a result of efficiency measures instigated in 2009 and continued this year. The main areas of savings have been in salaries and legal and professional fees. As set out in the Chairman and Chief Executive's Statement a charge of £1.4m was incurred in terminating the directors' existing pension arrangement.

 

Property expenses (excluding car parks) have increased by £0.5m to £2.2m as a consequence of the number of administrations previously suffered as well as a high level of lease renewals and extensions. We also suffered additional running costs for Town Centre House until we had substantially completed the lettings process. 

 

Car parking property expenses amounted to £2.0m (2009: £2.0m). These have been tightly controlled during the year.

 

Net interest costs substantially reduced from £10.7m to £7.6m. Our debenture loan has reduced from £149.7m to £105.7m. Our interest rate swap expired in October 2009 and our effective rate of interest on term loans reduced as we did not carry an interest rate hedge for the remainder of the year. Interest cover was two times (2009: 1.7 times). 

 

Balance Sheet

 

Our Balance Sheet is considerably stronger than a year ago. Net assets per share, property values, gearing and loan to value have all improved significantly.

 

Net assets at 30 June 2010 totalled £142.9m compared to £107.2m last year. This gives net assets per share of 269p per share (2009: 202p). Triple Net Asset Value (after adjusting for the issue premium and mark to market of the debenture) amounted to 306p per share (2009: 264p).

 

Our property portfolio (excluding property owned by joint ventures) is valued at £291.0m (2009: £284.6m). Of this amount £272.5m (2009: £265.9m) in aggregate was valued by Jones Lang LaSalle and CB Richard Ellis. The remaining properties £18.5m (2009: £18.7m) were valued by the Directors.

Net borrowings at the year end were £141.3m (2009: £166.3m). This decrease of 15% resulted from the profit on the debenture buy-back and from the sale of properties. Gross borrowings comprised the debenture loan of £106.0m, term loans of £35m and overdraft and money market borrowings of £0.8m. 

 

At 30 June 2010 gearing had reduced to 99% from 155% and net borrowings were 48.6% of property assets compared to 58.4% a year ago. Thus we have much increased headroom within our loan to value covenants and our unutilised committed facilities of £50m and undrawn overdraft and money market facilities of £14.2m provide funds for future growth. 

 

Cash Flow

 

The cash flow statement shows a net increase in cash and cash equivalents of £7.9m in the year ended 30 June 2010. Cash generated from operations was £13.6m (2009: £14.9m).

 

During the year, the debenture repurchase amounted to £35.0m of which £18.8m was released from being held as security against the debenture and the remainder was raised from the sale of property and the draw down of term loans. During the year the sale of properties generated £22.8m (2009: £47.0m) and £5.0m was invested in new properties and the refurbishment of other properties (2009: £11.3m).

 

Dividend

 

Following a year of sound trading performance and the restructuring of our debt which generated a profit of £9.0m, the benefits to shareholders of our REIT status is demonstrated by a total dividend payment of 10.36p (2009: 8.15p). The final dividend of 7.34p, when added to the interim PID dividend of 3.02p, gives a total dividend for the year of 10.36p per share. The PID element of the final dividend is 7.23p per share. Our policy is to pay a sustainable and progressive dividend.

 

Taxation and REIT

 

Our tax credit for the year amounted to £0.3m (2009: £1.0m) and related to the release of prior year provisions.

 

We continue to pay our REIT entry charge in instalments and this amounted to £2.4m in 2010. We have further payments to make of £3.9m at the balance sheet date.

 

Future Prospects

 

With significantly reduced debt levels, secured debenture finance and much improved headroom and covenant compliance, our financial position is strong. The improvements to our cost base will increase future cash generation. We continue to benefit from low interest rates and are vigilant to signs that our interest costs will grow in future. We have the further benefit of significant unutilised committed facilities to enable us to grow the business over the coming years.

Consolidated Income Statement

For the year ended 30 June 2010

 

 

		2010	2009
	Notes	£000	£000
Gross revenue	2	22,951	27,286
Property expenses	3	(4,265)	(3,707)
Net revenue		18,686	23,579
Administrative expenses	4	(6,098)	(5,744)
Other income		796	501
Loss on disposal of investment properties		(338)	(9,178)
Profit on disposal of other fixed assets		3	21
Profit on repurchase of debenture stock		8,956	-
Profit on disposal of shares in joint venture		-	860
Loss on disposal of listed investments		-	(3,374)
Valuation movement on investment properties	9	25,441	(106,113)
Impairment loss on development properties		(45)	(1,620)
Operating profit/(loss)		47,401	(101,068)
Finance income		62	303
Finance costs		(7,615)	(11,012)
Share of post tax losses from joint ventures		(553)	(835)
Profit/(loss) before taxation		39,295	(112,612)
Taxation credit	5	273	1,048
Profit/(loss) for the year attributable to equity holders of the Company		39,568	(111,564)
Earnings/(loss) per ordinary share of 25p each:	6
Basic		74.6p	(210.3p)
Diluted		74.6p	(210.2p)
Underlying (non-GAAP measures)		14.8p	14.8p
Dividends per ordinary share:	8
Paid during the period		8.42p	8.15p
Proposed		7.34p	5.40p

 

 

 

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2010

 

		2010	2009
	Notes	£000	£000
Profit/(loss) for the financial period		39,568	(111,564)
Revaluation gains/(losses) on cash flow hedge		548	(780)
Revaluation gains/(losses) on other investments		50	(2,269)
Total comprehensive income/(expense) for the year		40,166	(114,613)

 

Consolidated Balance Sheet

as at 30 June 2010

 

All recognised expense for the year is attributable to equity shareholders.

		2010	2009
	Notes	£000	£000
Non-current assets
Investment properties	9	276,760	258,535
Development properties	9	13,333	14,389
Fixtures, equipment and motor vehicles	9	670	635
Investments in joint ventures		2,495	2,562
Unamortised tenant lease incentives		1,514	1,276
Total non-current assets		294,772	277,397
Current assets
Investments		559	509
Non-current assets held for sale		892	11,700
Trade and other receivables		4,207	3,354
Restricted cash	10	-	18,825
Total current assets		5,658	34,388
Total assets		300,430	311,785
Current liabilities
Financial liabilities - borrowings		(784)	(8,681)
Trade and other payables		(11,643)	(11,693)
Fair value of derivative		(74)	(622)
Current tax liabilities		(3,162)	(3,205)
Total current liabilities		(15,663)	(24,201)
Net current (liabilities)/assets		(10,005)	10,187
Non-current liabilities
Non-current tax liabilities		(1,318)	(3,907)
Financial liabilities - borrowings		(140,537)	(176,475)
Total non-current liabilities		(141,855)	(180,382)
Total liabilities		(157,518)	(204,583)
Net assets		142,912	107,202
Shareholders' equity
Called up share capital	11	13,290	13,287
Share premium account		198	185
Other reserves		485	(63)
Retained earnings		128,939	93,793
Total equity		142,912	107,202
Net assets per share		269p	202p

 

		Share Capital	Share premium account	Hedging reserve1	Capital redemption reserve1	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 July 2008		13,287	185	158	559	208,822	223,011
Loss for the period		-	-	-	-	(111,564)	(111,564)
Other comprehensive expense:
Revaluation losses on cash flow hedge		-	-	(780)	-	-	(780)
Revaluation losses on other investments		-	-	-	-	(2,269)	(2,269)
Total comprehensive expense for the period ended 30 June 2009		-	-	(780)	-	(113,833)	(114,613)
Other adjustments		-	-	-	-	6	6
Reversal of historic loss on revaluation of investments recognised in loss for period		-	-	-	-	3,130	3,130
Final dividend relating to the year ended 30 June 2008 paid in December 2008		-	-	-	-	(2,870)	(2,870)
Interim dividend relating to the year ended 30 June 2009 paid in June 2009		-	-	-	-	(1,462)	(1,462)
		-	-	-	-	(1,196)	(1,196)
Balance at 30 June 2009		13,287	185	(622)	559	93,793	107,202
Balance at 1 July 2009		13,287	185	(622)	559	93,793	107,202
Profit for the period		-	-	-	-	39,568	39,568
Other comprehensive income:
Revaluation gains on cash flow hedge		-	-	548	-	-	548
Revaluation gains on other investments		-	-	-	-	50	50
Total comprehensive income for the period ended 30 June 2010		-	-	548	-	39,618	40,166
Issued on take up of share options		3	13	-	-	-	16
Other adjustments		-	-	-	-	3	3
Final dividend relating to the year ended 30 June 2009 paid in December 2009		-	-	-	-	(2,870)	(2,870)
Interim dividend relating to the year ended 30 June 2010 paid in March 2010		-	-	-	-	(1,605)	(1,605)
		3	13	-	-	(4,472)	(4,456)
Balance at 30 June 2010		13,290	198	(74)	559	128,939	142,912
1 Other reserves on the balance sheet consist of Hedging Reserve and Capital redemption reserve in the table above

 

 

Consolidated Cash Flow Statement

For the year ended 30 June 2010

 

			2010			2009 restated
	Notes	£000		£000	£000		£000
Cash flows from operating activities
Cash generated from operations	12			13,575			14,918
Interest paid				(7,782)			(11,023)
Interest received				9			64
Tax received				-			13
Net cash generated from operating activities				5,802			3,972
Cash flows from investing activities
Purchases and refurbishment of investment properties		(4,919)			(10,614)
Property development		(105)			(647)
Purchases of plant and equipment		(196)			(412)
REIT entry charge instalment payment		(2,359)			(2,656)
Proceeds from sale of investment properties		22,657			47,023
Proceeds from sale of shares in joint venture		-			3,366
Proceeds from sale of development property		161			-
Proceeds from sale of property, plant and equipment		19			197
Proceeds from sale of investments		-			716
Dividends received from joint venture		100			100
(Increased)/repayment of joint ventures		(586)			9,153
Net cash generated from investing activities				14,772			46,226
Cash flows from financing activities
Proceeds from issue of share capital		16			-
Proceeds from other non-current borrowings		8,000			-
Repayment of other non-current borrowings		-			(31,000)
Release (restriction) of cash held against debenture	10	18,825			(18,825)
Re-purchase of share capital		(35,043)			-
Dividends paid to shareholders		(4,475)			(4,334)
Net cash used in financing activities				(12,677)			(54,159)
Net increase/(decrease) in cash and cash equivalents				7,897			(3,961)
Cash and cash equivalents at 1 July				(8,681)			(4,720)
Cash and cash equivalents at 30 June				(784)			(8,681)

The cash flow statement should be read in conjunction with Note 12.

 

Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2010 or 2009 but is derived from those accounts. Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, and (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for either year.

 

This preliminary announcement does not constitute the Group's annual report and statutory accounts.

 

The financial information included in this preliminary announcement does not include all the disclosures required by IFRS and accordingly it does not itself comply with IFRS.

 

The accounting policies are consistent with those of the annual financial statements for the year ended 30 June 2009, as disclosed in those financial statements.

 

1. Segmental information

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.

 

A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those segments operating in other economic environments.

 

The Group operates in two business segments; comprising property investment and development, and car park operations. The Group's operations are performed wholly in the United Kingdom. The chief operating decision maker has been identified as the Board. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

 

Segment assets

	2010	2009
	£000	£000
Property rental	286,510	298,427
Car park operations	13,920	13,358
	300,430	311,785

 

Segment liabilities

	2010	2009
	£000	£000
Property rental	160,455	205,762
Car park operations*	(2,937)	(1,179)
	157,518	204,583

\* The car park business has positive cash balances, which reduced Group bank borrowings to the Consolidated Balance Sheet figure.

 

Segmental results

		2010				2009
	Property		Car park		Property		Car park
	rental		operations	Total	rental		operations	Total
	£000		£000	£000	£000		£000	£000
Gross revenue	18,211		4,740	22,951	22,577		4,709	27,286
Property expenses	(2,249)		(2,016)	(4,265)	(1,713)		(1,994)	(3,707)
Net revenue	15,962		2,724	18,686	20,864		2,715	23,579
Administrative expenses	(5,928)		(170)	(6,098)	(5,686)		(58)	(5,744)
Other income	796		-	796	501		-	501
Property valuation movement	24,896		500	25,396	(104,995)		(2,738)	(107,733)
Profit on disposal of shares in joint venture	-		-	-	-		860	860
Other exceptional items	8,621		-	8,621	(12,531)		-	(12,531)
Operating profit/(loss)	44,347		3,054	47,401	(101,847)		779	(101,068)
Finance income	62		-	62	234		69	303
Finance costs	(7,615)		-	(7,615)	(11,012)		-	(11,012)
Share of post tax (losses)/profits from joint ventures	(553)		-	(553)	(850)		15	(835)
Profit/(loss) before taxation	36,241		3,054	39,295	(113,475)		863	(112,612)
Taxation credit/(charge)	153		120	273	1,097		(49)	1,048
Profit/(loss) for the year	36,394		3,174	39,568	(112,378)		814	(111,564)

 

 

2. Gross revenue

	2010	2009
	£000	£000
Rental income from investment properties	18,211	22,577
Income from car park activities	4,740	4,709
	22,951	27,286

 

 

3. Property expenses

	2010	2009
	£000	£000
Car park expenses	1,970	1,892
Depreciation	46	102
Other	2,249	1,634
Non-recurring items:
- Exceptional lease premiums paid	-	353
- Release of provision for void costs arising from tenant administration	-	(274)
	4,265	3,707

 

4. Administrative expenses

	2010	2009
	£000	£000
Remuneration	3,143	3,824
Depreciation	92	137
Charitable donations	53	258
Other	1,217	1,525
Non-recurring items:
- Exceptional pension contribution	1,365	-
- Staff severance costs	228	-
	6,098	5,744

The Income Statement charge for share-based payments in accordance with IFRS 2 is not material.

 

 

5. Taxation

	2010	2009
	£000	£000
Analysis of credit in period
Current tax
- Current year	-	170
- Adjustment in respect of previous years	(273)	(1,218)*
Total taxation	(273)	(1,048)

* Of the total 2009 adjustment, £1,012,000 relates to the release of tax provisions made in previous years.

 

6. Earnings per share ("EPS")

		2010				2009
			Weighted				Weighted
			average				average	(Loss)/
			number of	Earnings	(Loss)/		number of	earnings
	Earnings		shares	per share	earnings		shares	per share
	£000		000	Pence	£000		000	Pence
Basic EPS
Earnings/(loss) and earnings/(loss) per share	39,568		53,055	74.6	(111,564)		53,062	(210.3)
Effect of dilutive securities
Options	-		6	-	-		4	-
Diluted EPS	39,568		53,061	74.6	(111,564)		53,066	(210.2)
Basic EPS	39,568		53,055	74.6	(111,564)		53,062	(210.3)
Release of exceptional tax provision relating to prior years	-		-	-	(1,012)		-	(1.9)
Loss on disposal of properties	338		-	0.6	9,178		-	17.3
Loss on disposal of listed investments	-		-	-	3,374		-	6.4
Profit on repurchase of debenture stock	(8,956)		-	(16.9)	-		-	-
Exceptional pension contribution	1,365		-	2.6	-		-	-
Profit on disposal of shares in joint venture	-		-	-	(860)		-	(1.6)
Valuation movement on investment properties	(25,441)		-	(48.0)	106,113		-	200.0
Impairment loss on development properties	45		-	0.1	1,620		-	3.0
Revaluation movement on investment properties in joint ventures	726		-	1.4	927		-	1.7
Exceptional surrender premium	-		-	-	353		-	0.7
Release of provision for tenant administration	-		-	-	(274)		-	(0.5)
Staff severance costs	228		-	0.4	-		-	-
Underlying EPS	7,873		53,055	14.8	7,855		53,062	14.8
Diluted EPS	39,568		53,061	74.6	(111,564)		53,066	(210.2)
Release of exceptional tax provision relating to prior years	-		-	-	(1,012)		-	(1.9)
Loss on disposal of properties	338		-	0.6	9,178		-	17.3
Loss on disposal of listed investments	-		-	-	3,374		-	6.3
Profit on repurchase of debenture stock	(8,956)		-	(16.9)	-		-	-
Exceptional pension contribution	1,365		-	2.6	-		-	-
Profit on disposal of shares in joint venture	-		-	-	(860)		-	(1.6)
Valuation movement on investment properties	(25,441)		-	(47.9)	106,113		-	200.0
Impairment loss on development properties	45		-	0.1	1,620		-	3.0
Revaluation movement on investment properties in joint ventures	726		-	1.4	927		-	1.7
Exceptional surrender premium	-		-	-	353		-	0.7
Release of provision for tenant administration	-		-	-	(274)		-	(0.5)
Staff severance costs	228		-	0.4	-		-	-
Diluted underlying EPS	7,873		53,061	14.8	7,855		53,066	14.8

 

Underlying earnings and earnings per share have been disclosed in order that the effects of disposal losses, revaluation movements and non-recurring items can be fully appreciated.

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held in the employee share trust which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has three classes of dilutive potential ordinary shares: those under the Executive Share Option Plan, the Share Incentive Plan and the Save As You Earn Scheme.

 

7. Underlying profit

To assist shareholders in understanding the underlying results and compare to those results in previous accounting periods, adjustments made to profit/(loss) before taxation are:

	2010	2009
	£000	£000
Profit/(loss) before taxation	39,295	(112,612)
Less: valuation movement on investment properties	(25,441)	106,113
Less: profit on repurchase of debenture stock	(8,956)	-
Less: profit on disposal of other fixed assets	(3)	(21)
Less: profit on disposal of shares in joint venture	-	(860)
Less: release of provision for tenant administration	-	(274)
Add: exceptional pension contribution	1,365	-
Add: revaluation deficit - joint ventures	726	927
Add: loss on disposal of investment properties	338	9,178
Add: staff severance costs	228	-
Add: impairment loss on valuation of development property	45	1,620
Add: tax on joint ventures	22	30
Add: loss on disposal of listed investments	-	3,374
Add: exceptional surrender premium	-	353
Underlying profit	7,619	7,828

 

8. Dividends

	2010	2009
	£000	£000
2008 final paid: 5.4p per 25p share	-	2,870
2009 interim paid: 2.75p per 25p share	-	1,462
2009 final paid: 5.4p per 25p share	2,870	-
2010 interim paid: 3.02p per 25p share	1,605	-
	4,475	4,332

The Directors are proposing a final dividend in respect of the financial year ended 30 June 2010 of 7.34p per share, which will absorb an estimated £3,902,000 of shareholders' funds. This dividend will comprise an ordinary dividend of 0.11p per share and a Property Income Distribution ("PID") of 7.23p per share, and will be paid on 5 January 2011 to shareholders who are on the Register of Members on 10 December 2010.

 

9. Tangible fixed assets

(a) Investment properties

		Long
	Freehold	leasehold	Total
	£000	£000	£000
Valuation at 1 July 2008	402,716	19,697	422,413
Investment property refurbishment	9,966	169	10,135
Disposals	(55,345)	(856)	(56,201)
Decrease in value on revaluation	(102,622)	(3,490)	(106,112)
Transfer to non-current assets held for sale	(11,700)	-	(11,700)
Valuation at 30 June 2009	243,015	15,520	258,535
Valuation at 1 July 2009	243,015	15,520	258,535
Investment property refurbishment	2,247	-	2,247
Additions	1,832	-	1,832
Disposals	(11,295)	-	(11,295)
Increase/(decrease) in value on revaluation	25,991	(550)	25,441
Valuation at 30 June 2010	261,790	14,970	276,760

 

Certain investment properties including operational car parks have been revalued as at 30 June 2010 on the basis of open market value by Jones Lang LaSalle and CB Richard Ellis at £272,460,000 (2009: £265,905,000) in accordance with the Royal Institution of Chartered Surveyors Appraisal and Investment Manual. Certain other freehold properties have been valued at £4,300,000 by the Directors (2009: £4,330,000).

The Directors' valuation of residential property acquired for potential development and industrial property is supported by market evidence available as at 30 June 2010.

 

Investment properties are analysed as follows:

	2010	2009
	£000	£000
Investment property (externally valued)	272,460	265,905
Less: externally valued properties transferred to current assets	-	(11,700)
Residential property acquired for potential development	3,804	3,804
Industrial property	496	526
	276,760	258,535

 

(b)  Development properties

		£000
Cost at 1 July 2008		15,715
Additions		294
Decrease in value on revaluation		(1,620)
Cost at 30 June 2009		14,389
Cost at 1 July 2009		14,389
Additions		42
Disposals		(161)
Impairment		(45)
Transfer to non-current assets held for sale		(892)
Cost at 30 June 2010		13,333

 

The directors have considered the valuation of development properties in the light of current market conditions and have taken an impairment where market value is considered lower than cost.

 

(c) Fixtures, equipment and motor vehicles

		Accumulated
	Cost	depreciation
	£000	£000
At 1 July 2008	2,455	1,812
Additions	412	-
Disposals	(431)	(255)
Depreciation	-	244
At 30 June 2009	2,436	1,801
Net book value at 30 June 2009		635
At 1 July 2009	2,436	1,801
Additions	196	-
Disposals	(45)	(30)
Depreciation	-	146
At 30 June 2010	2,587	1,917
Net book value at 30 June 2010		670

The net book value of property, plant and equipment includes £nil (2009: £0.7m) in respect of borrowing costs capitalised during the year.

 

10. Restricted cash

At 30 June 2009, £18.8m cash was held as security against the debenture, following the disposal of certain charged properties. Following the debenture stock re-purchase in August 2009, the funds were no longer restricted.

 

 

11. Share capital

Authorised

2010: 164,879,000 (2009: 164,879,000) ordinary shares of 25p each. Nominal value of authorised share capital is £41,219,750 (2009: £41,219,750).

 

Issued and fully paid

	Number of	Nominal
	shares	value
Ordinary shares of 25p each	£000	£000
At 1 July 2008	53,149	13,287
At 30 June 2009	53,149	13,287
At 1 July 2009	53,149	13,287
Issued on take-up of options	12	3
At 30 June 2010	53,161	13,290

 

12. Cash flow from operating activities

	2010	2009
	£000	£000
Profit/(loss) for the financial year	39,568	(111,564)
Adjustments for:
Tax credit	(273)	(1,048)
Depreciation	146	244
Loss on disposal of investment properties	338	9,178
Profit on repurchase of debenture stock	(8,956)	-
Profit on disposal of investment in joint venture	-	(860)
Profit on disposal of other fixed assets	(3)	(21)
Realised losses on disposal of listed investments	-	3,374
Finance income	(62)	(303)
Finance expense	7,615	11,012
Share of joint venture losses after tax	553	835
Movement in revaluation of investment properties	(25,396	107,733
Increase in receivables	(1,044)	(52)
Increase/(decrease) in payables	1,089	(3,610)
Cash generated from operations	13,575	14,918

 

 

13. "Triple" net asset value per share

To assist shareholders in understanding the results, the table below shows how the "triple" net asset value was arrived at:

	2010	2009
	£000	£000
Closing net assets	142,912	107,202
Add: debenture issue premium	(331)	(346)
Less: debenture mark to market (after tax at nil%; 2009: nil%)	20,297	33,667
	162,878	140,523
Shares in issue (000)	53,161	53,149
"Triple" net asset value per share	306p	264p

 

 

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