Town Centre Regulatory News (TOWN)

9 Sep 2005 07:00

Town Centre Securities PLC09 September 2005 For immediate release Friday, 9 September 2005 Town Centre Securities PLC Preliminary results for the year ended 30 June 2005 Town Centre Securities PLC, the Leeds based property investment and developmentGroup, today announces its preliminary results for the year ended 30 June 2005. Highlights • Net assets per share up 25% to 431p (2004: 344p), benefiting from the revaluation of the investment property portfolio and share buybacks; "triple" net asset value per share* up 21% to 346p (2004: 286p). • Net asset value uplift expressed on a per share basis: revaluation of property portfolio and other investments 72p, retained earnings and other recognised gains 7p and the year-on-year impact of the share buyback programme 8p. • Statutory profit before tax increased 29% to £8.5m (2004: £6.6m). • Underlying profit before tax, excluding disposals and exceptional costs, increased 2.5% to £8.2m (2004: £8.0m). • Basic earnings per share increased 96% to 15.9p (2004: 8.1p), benefiting from profits on disposal and a tax credit. Underlying earnings per share up 13% to 11.1p (2004: 9.8p). • Proposed final dividend of 4.3p (2004: 4.1p) making a total ordinary dividend per share of 6.2p (2004: 5.9p), an increase of 5.1% and a special dividend of 2.0p (2004: £nil) making a total dividend payment for the year of 8.2p. • 3.7m shares repurchased during the year at a cost of £11.7m helping to boost both earnings and net assets per share. *after taking into account the fair value adjustment on long term debt, andcapital gains tax Commenting on the preliminary results, Chairman and Chief Executive Edward Ziffsaid: "I am pleased to report another successful year for the Group after furtherstrong performance from our investment property portfolio, resulting in asubstantial revaluation surplus." "A combination of active asset management and our portfolio of developmentopportunities should enable us to drive the business forward and continue todeliver growth in shareholder value from the strong foundations already laid." For further information, please contact: Town Centre Securities PLC www.tcs-plc.comEdward Ziff, Chairman & Chief Executive 0113 222 1234John Sutcliffe, Finance Director Smithfield 020 7360 4900Reg Hoare/Katie Hunt 07884 494112 Notes to editors: The majority of the Group's property portfolio is represented by retailproperties located primarily in Leeds, York, Glasgow and Edinburgh together withsome office properties primarily in Leeds and Glasgow. In addition the Group hasa development portfolio principally in Leeds and Manchester. Chairman's Statement and Chief Executive's Operating Review Results I am pleased to report another successful year for the Group after furtherstrong performance from our investment property portfolio, resulting in asubstantial year end revaluation surplus of £43m, an increase of 13.4%. We nowown investment properties and developments in progress valued at £394m (2004:£352m). Our net assets increased to £240m, up 18.1% on last year, resulting innet assets per share increasing 25.3% to 431p (2004: 344p). Triple net assetvalue per share, after taking into account the fair value adjustment onlong-term debt and estimated capital gains tax on the disposal of allproperties, increased 21.0% to 346p (2004: 286p). We have commenced two major developments, in Leeds and Manchester, estimated tocost in the region of £45m, which are largely pre-let. These are expected to becompleted during the first half of 2006. Profit and LossTurnover for the year to 30 June 2005 was marginally lower than last year at£24.2m (2004: £24.4m). Pre-tax profit was 29% higher at £8.5m (2004: £6.6m).Property disposal profits were £2.3m (2004: a loss of £1.5m). During the year,the Remuneration Committee conducted a review of the pension arrangements inconsultation with the Company's advisors, Watson Wyatt, which has resulted in anexceptional pension accrual of £2.0m being made in respect of three ExecutiveDirectors. Internally, the Board's preferred measure of profit is underlying profit beforetax, which excludes all exceptional items and disposal profits. This measure was2.5% higher at £8.2m (2004: £8.0m) helped by reduced property related costs. Earnings per share were 96% higher at 15.9p (2004: 8.1p per share) due to thehigher disposal profits and a tax credit of £0.5m (2004: tax charge £1.7m).Excluding disposal profits, exceptional pension costs and the lower tax charge,underlying earnings per share increased by 13% to 11.1p (2004: 9.8p) benefitingfrom the lower average number of shares in issue during the year. Financing and gearingNet interest costs increased 2.7% to £11.3m (2004: £11.0m). Interest cover,expressed as the ratio of total operating profits (excluding the exceptionalpension cost) to interest was 1.72 times (2004: 1.73), reflecting the Group'scontinuing prudent financial position. Interest amounting to £0.25m has beencapitalised on major developments that commenced during the year. Year end borrowings were 8.6% higher at £140.8m (2004: £129.6m) following theinvestment in the development programme. However, taking into account theincrease in shareholder's funds, gearing has fallen to 58.5% (2004: 63.6%). Oftotal borrowings, long term fixed interest debt constitutes 60%, with thebalance on floating rates. At 30 June 2005 our weighted average cost of debt was8.53% (2004: 8.85%). The £85m 10.5% mortgage debenture matures in 2021 and at 30June 2005 had a fair value of £124.8m (2004: £106.4m). The increase in themarket value of the debenture results from lower comparative long term interestrates and institutional demand for high yielding debt securities. Totalborrowings compared to total property assets stood at 35.7% (2004: 36.8%). TaxationThe profit and loss account tax result for the year is a credit of £0.5m (2004:charge £1.7m). This credit arises from deferred tax provision releases inrespect of capital allowance timing differences after the disposal of certaininvestment properties, revisions to prior year capital allowance estimates andthe utilisation of capital losses and indexation relief in respect of theprofits made on investment property disposals. These adjustments are notexpected to recur on an annual basis. It is estimated that a capital gains tax liability of £21m would arise if allthe Group's assets were disposed of at the amounts stated in the accounts. Cash FlowTotal borrowings increased by £11.2m during the year. Operating cash flow lessinterest was £6.3m, whilst property sales generated £31.5m. These inflows wereoffset by property acquisitions of £13.2m and capitalised development costs of£14.4m. During the year, we purchased 3.7 million shares for cancellation at anaverage price of 313 pence per share resulting in a cash outflow of £11.7m. Wecontinue to operate well within our agreed banking facilities, which currentlytotal £204m, having successfully completed arrangements to increase certainfacilities during the year. DividendsThe Directors propose the payment of an increased final dividend of 4.3p pershare (2004: 4.1p), making a total ordinary dividend for the year of 6.2p pershare (2004: 5.9p), an increase of 5.1%. Furthermore, in view of the yearsbeneficial tax result, the Directors recommend a special dividend payment of2.0p per share, making a total dividend for the year of 8.2p. These dividendswill be paid on 3 January 2006 to shareholders on the register on 2 December2005. International Financial Reporting Standards (IFRS) We will adopt IFRS for the financial year ending 30 June 2006 and will presentour restated results for the year ended 30 June 2005 under IFRS in advance ofthe release of the half year results in March 2006. The two most significantimpacts that IFRS will have on the Company are that investment propertyrevaluation gains and losses will be included in the income statement, and thecontingent tax that may arise on the disposal of investment property will bededucted from shareholders' funds. Furthermore, IFRS only permits recognition ofthe liability to pay a final dividend when this has been approved byshareholders. A project plan is in place to enable the transition to IFRS withinthe required timeframe. Performance benchmarking and total shareholder returns (TSR) The Deutsche Bank FTSE Real Estate Index, for the year to the 30 June 2005,showed us ranked 11th out of 30 (TSR 44%) over one year, 4th out of 30 (TSR183%) over three years and 2nd out of 30 (TSR 407%) over five years. The Board's internal measure of performance is the creation of total shareholdervalue (TSV), calculated as the increase in net asset value plus dividends pershare. For the year ended 30 June 2005 TSV was 95p per share (2004: 80p),equating to a 27.6% (2004: 29.6%) return on opening net assets. Directors The board is delighted to announce that Robert Bigley will be joining us laterthis year as Corporate Development Director. He brings a wealth of experiencehaving been a partner within KPMG Corporate Finance and prior to that, aCorporate Finance Director with S G Hambros. Furthermore, I am pleased to report that John Sutcliffe will be staying asFinance Director reversing the earlier announcement that he would be leaving theGroup at the end of this calendar year. With these, and previous appointmentsmade, I now consider that the Board is back to full strength following thepassing of the Group's founder, my father, Arnold Ziff in July 2004. Annual Operating Review We continue to focus on our core strategic goals. Earnings and cash flow remaincrucial to the future success of this Group. I reported last year that, giventhe bullish nature of the property market, we have found it difficult to findnew opportunities that matched our objectives. Since then demand for the type ofproperty we aspire to own within the regional retail shop market has continuedto grow unabated and this continued investment strength is a concern to us.However, our investments are in good quality locations in prime retail centresmeaning that we are as well insulated as we can be against market valuationchanges. We have made significant progress on two major developments with a significantpre-let element which will be completed before the end of the 2006 financialyear. We are also beginning to take strategic shareholdings in other companiesoffering useful alternative opportunities to direct property investment. Property Investment Portfolio PerformanceThe annual independent valuation of our investment portfolio, carried out onceagain by Jones Lang LaSalle, resulted in a revaluation surplus of £43m, anincrease of 13.4%. This excludes £7.0m Stamp Duty Land Tax, followinglegislation changes, which was included in last year's valuation. The underlyingperformance of our portfolio beat that of the previous year and pleasingly allour business areas again performed strongly. Our Shopping Centres increased invalue by 13.6%, High Street Shops by 12.9%, Retail Warehouses and Food Stores by14.8% and Offices by 13.7%. Added together with the net income return generatedfrom our portfolio our properties achieved a total return of 20%. Disposals and AcquisitionsWe sold four principal investment properties; The Eagle Building on BothwellStreet in Glasgow, Clifton Arcade in Blackpool, Market Avenue in Huddersfieldand a single shop unit on King Street in Manchester, the proceeds of which, whenadded together with minor properties sold, totalled £32m. This figure includedour remaining show homes which were sold with vacant possession, following theexpiry of the leases to the original house builder. Our principal acquisition was a 40,000 sq ft store on Deansgate, Manchestercurrently leased to Daisy & Tom, a subsidiary of Chelsea Stores Limited. Thisproperty is situated between Spinningfields and the main retail district withinthe city centre. We acquired a 50% interest in a retail warehouse redevelopmentopportunity in Kilmarnock and also acquired two smaller properties to assistwith our longer-term redevelopment proposals in York and Rochdale. The cost ofthese acquisitions was £11.7m, a relatively modest sum compared to ouraspirations reflecting the difficulty in acquiring suitable investment stock onsatisfactory terms. Asset ManagementOur occupancy rate remains above 97%, a similar level to last year, whilstirrecoverable costs have also been maintained at a similarly low level to lastyear. Once again, substantial value has been extracted from concluded rent reviews andlease renewals in prime positions such as Victoria Street Blackpool, AbingdonStreet Blackpool, Boar Lane Leeds, The Headrow Leeds, Northumberland StreetNewcastle and Byres Road Glasgow. In total our like for like rental income hasincreased by 3% to £20.6m this year, and the rental value of the entireportfolio has increased by 7% to £24.3m. Key transactions from which we expect to derive future benefit include theletting of redundant space in the Merrion Centre to Luminar Leisure which, whenadded to their existing accommodation, will provide a leisure destination for2,500 people, and the letting of a retail warehouse unit of 8,500 sq ft to Nextin Kings Lynn. Our portfolio has significant long-term asset management opportunities and Ilook forward to reporting the progress made on these many initiatives in futurereports to shareholders. Property Development It is many years since we have undertaken and reported on so much pre-letdevelopment. We see this business activity increasing in the future as we beginto build on the prime development sites we own. During the last year we havemoved into the construction phase on part of our development sites in Leeds andManchester. Manchester - Piccadilly BasinThe construction of a fully pre-let retail warehouse unit for Danish retailerILVA, of 120,000 sq ft in total, commenced during the first half of thefinancial year. Completion is expected towards the end of this calendar yearwith a view to ILVA commencing trading soon thereafter. Adjoining the retailunit, work has commenced on a multi storey car park for 242 spaces due forcompletion later this calendar year. We have received a detailed planningconsent for a 33,000 sq ft office building, and hope to report on progress inthe near future. Leeds - Whitehall RiversideThe first major office building at this location, of 128,000 sq ft, is onschedule to complete during the first half of 2006. We have added to the firstpre-letting to Russell Mellon Europe with a further substantial letting of over50,000 sq ft to Cobbetts Solicitors, such that almost two thirds of thisbuilding is now pre-let. Leeds - Eastgate and Harewood QuarterTogether with our joint venture partner, Hammerson plc, we have made significantprogress towards the target of submitting a planning application later thisyear. The retail led, mixed use, urban regeneration scheme on a 20 acre site,includes over 1 million sq ft of retail space alongside leisure and residentialuses. This scheme should take another major step forward following thecompletion of negotiations to agree the pre-letting of the main anchor store. Outlook The results achieved this year demonstrate that our strategy for deliveringgrowth in shareholder value continues to be successful. The combination ofactive asset management, the portfolio of development opportunities and ourstrong and committed management team should enable us to drive the businessforward and continue to deliver growth in shareholder value from strongfoundations. Finally, I would like to express my sincere thanks to all my colleagues andstaff. Their commitment and effort has enabled us to achieve great things overrecent years and I am sure that with their continued enthusiasm and support,allied to all the opportunities we possess to develop the business, we can allhave great confidence in our future prospects. Edward ZiffChairman and Chief Executive9 September 2005 Consolidated Profit and Loss Accountyear ended 30 June 2005 2005 2004 Notes £000 £000--------------------------------------------------------------------------------Turnover 1Turnover including share of joint ventures 24,347 24,468Less share of joint ventures (123) (87)-------------------------------------------------------------------------------- 24,224 24,381--------------------------------------------------------------------------------Operating profitGroup operating profit 17,381 18,896Share of operating profit in joint ventures 106 84-------------------------------------------------------------------------------- Total operating profit: Group and share of jointventures 2 17,487 18,980Profit/(loss) on disposal of properties 2,306 (1,457)-------------------------------------------------------------------------------- Profit before interest 19,793 17,523 Net interest payable (11,309) (10,954)--------------------------------------------------------------------------------Profit before taxation 8,484 6,569Taxation 542 (1,716)-------------------------------------------------------------------------------- Profit for the financial year 9,026 4,853 Dividends 3 (4,457) (3,362)-------------------------------------------------------------------------------- Retained profit for the year 4,569 1,491-------------------------------------------------------------------------------- Earnings per ordinary share of 25p each: 4 Basic 15.9p 8.1p Diluted 15.7p 8.0pUnderlying earnings per ordinary share of 25p each: Basic 11.1p 9.8p Diluted 10.9p 9.7p Dividend per ordinary share of 25p each 3 8.2p 5.9p-------------------------------------------------------------------------------- All of the above results of the Group derive from continuing operationsthroughout the year. Statement of Group Total Recognised Gains and Lossesyear ended 30 June 2005 2005 2004 £000 £000--------------------------------------------------------------------------------Profit for the financial year 9,026 4,853 Unrealised surplus on the revaluation of properties 42,703 36,598 Share of unrealised surplus on the revaluation of jointventure properties 290 13 Unrealised surplus on the revaluation of fixed assetinvestments 580 65--------------------------------------------------------------------------------Total recognised gains relating to the year 52,599 41,529-------------------------------------------------------------------------------- Note of Group Historical Cost Profits and Lossesyear ended 30 June 2005 2005 2004 £000 £000--------------------------------------------------------------------------------Profit before taxation 8,484 6,569 Realisation of investment property revaluation gains 4,229 3,746 Realisation of gain on disposal of investments 53 2--------------------------------------------------------------------------------Historical cost profit before taxation 12,766 10,317--------------------------------------------------------------------------------Historical cost retained profit 8,851 5,239-------------------------------------------------------------------------------- Consolidated Balance Sheetas at 30 June 2005 2005 2004 £000 £000 £000 £000-------------------------------------------------------------------------------- Fixed assetsTangible assets 392,740 351,737Investments 6,220 383-------------------------------------------------------------------------------- 398,960 352,120Investment in joint venturesShare of gross assets 2,228 1,175Share of gross liabilities (731) (42)-------------------------------------------------------------------------------- 1,497 1,133-------------------------------------------------------------------------------- 400,457 353,253 Current assetsDebtors 4,887 2,456-------------------------------------------------------------------------------- Creditors (due within one year) Bank overdraft (secured) (5,579) (3,315)Other creditors (18,228) (15,314)-------------------------------------------------------------------------------- (23,807) (18,629)-------------------------------------------------------------------------------- Net current liabilities (18,920) (16,173)-------------------------------------------------------------------------------- Total assets less current 381,537 337,080liabilities Creditors (amounts due after morethan one year) Loan capital (secured) (135,196) (126,257) Provisions for liabilities and (5,873) (7,156)charges -------------------------------------------------------------------------------- Net assets 240,468 203,667--------------------------------------------------------------------------------Capital and reservesCalled up equity share capital 13,963 14,806Share premium account 818 510Capital redemption reserve 17,242 16,309Special reserve 3,151 3,151Property revaluation reserve 177,401 138,637Other reserve 684 157Profit and loss account 27,209 30,097-------------------------------------------------------------------------------- Equity shareholders' funds 240,468 203,667-------------------------------------------------------------------------------- Consolidated Cash Flow Statementyear ended 30 June 2005 2005 2004 £000 £000 £000 £000----------------------------------------------------------------------------------Net cash inflow from operating activities 17,654 20,056(Note 5) Returns on investments and servicing offinance Net interest paid (11,384) (11,163) Taxation (1,463) (448) Capital expenditure and financialinvestment Purchase of investment properties (13,159) (15,944)Expenditure on development properties (14,431) (1,770)Purchase of other tangible assets (215) (223)Proceeds from sale of properties 31,529 28,387Proceeds from sale of listed investments 238 217Proceeds from sale of other tangible 107 41assets Purchase of investments (4,116) (185)Loans to joint venture for purchase ofinvestment property (1,318) -Consideration paid for purchase of own (40) -shares ---------------------------------------------------------------------------------- Net cash (outflow)/inflow from capitalexpenditure and financial investment (1,405) 10,523 Equity dividends paid (3,365) (3,362)---------------------------------------------------------------------------------- Net cash inflow before financing 37 15,606 FinancingShares issued on take up of options 398 64Repurchase of share capital (11,699) (7,366)Loan repayments - (13,000)New loans 9,000 5,000----------------------------------------------------------------------------------Net cash outflow from financing (2,301) (15,302)----------------------------------------------------------------------------------(Decrease)/increase in cash in the year (2,264) 304---------------------------------------------------------------------------------- The Consolidated Cash Flow statement should be read in conjunction with Note 5to the Accounts. Notes to the Preliminary Statement 1. Segmental analysis The Group operates in one business segment; property investment, trading anddevelopment, wholly in the United Kingdom. 2. Exceptional Cost As a result of an actuarial review of the pension arrangements an exceptionalpension contribution of £2.0m has been accrued for, in respect of the executivedirectors, which reflects the increased cost of providing pension annuities overrecent years. 3. Dividends 2005 2004 £000 £000-------------------------------------------------------------------------------- Interim paid 1.9p per share (2004: 1.8p) 1,061 1,066Final proposed 4.3p per share (2004: 4.1p) 2,402 2,428Special dividend proposed 2.0p per share (2004: £nil) 1,118 -Over provision for prior year dividend (124) (132)-------------------------------------------------------------------------------- 4,457 3,362-------------------------------------------------------------------------------- 4. Earnings per share (EPS) 2005 2004-------------------------------------------------------------------------------------- Weighted Weighted average average number Earnings number Earnings of per of per Earnings shares share Earnings shares share £000 '000 Pence £000 '000 Pence--------------------------------------------------------------------------------------Basic EPSEarnings andearnings per share 9,026 56,934 15.9 4,853 60,367 8.1 Effect of dilutivesecurities Options - 596 (0.2) - 266 (0.1)-------------------------------------------------------------------------------------- Diluted EPS 9,026 57,530 15.7 4,853 60,633 8.0-------------------------------------------------------------------------------------- Basic EPS 9,026 56,934 15.9 4,853 60,367 8.1Exceptional(profit)/losson disposal ofproperties(after tax) (4,129) - (7.3) 1,047 - 1.7Exceptionalpension costs(after tax) 1,400 - 2.5 - - --------------------------------------------------------------------------------------- Underlying EPS 6,297 56,934 11.1 5,900 60,367 9.8-------------------------------------------------------------------------------------- Diluted EPS 9,026 57,530 15.7 4,853 60,633 8.0Exceptional(profit)/losson disposal ofproperties(after tax) (4,129) - (7.2) 1,047 - 1.7Exceptionalpension costs(after tax) 1,400 - 2.4 - - ---------------------------------------------------------------------------------------Dilutedunderlying EPS 6,297 57,530 10.9 5,900 60,633 9.7-------------------------------------------------------------------------------------- 4. Earnings per share (EPS) (continued) Underlying earnings and earnings per share have been disclosed in order that theeffects of exceptional items and prior year taxation on reported earnings can befully appreciated. Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the year excluding those held in the employee share trust which aretreated as cancelled. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. The Group has three classes of dilutive potential ordinary shares: thoseunder the Executive Share Option Plan, the Share Incentive Plan and the SAYEscheme. 5. Notes to the Consolidated Cash Flow Statement a. Reconciliation of operating profit to net cash inflow from operatingactivities 2005 2004 £000 £000-------------------------------------------------------------------------------- Operating profit 17,381 18,896Depreciation 186 186(Profit)/loss on sale of fixed assets (11) 1Profit on sale of investments (61) (31)(Increase)/decrease in debtors (2,431) 519Increase in creditors 2,590 485-------------------------------------------------------------------------------- Net cash inflow from operating activities 17,654 20,056-------------------------------------------------------------------------------- b. Analysis of changes in net debt As at Other As at 1 July Cash non-cash 30 June 2004 flow Movements 2005 £000 £000 £000 £000-------------------------------------------------------------------------------- Bank overdraft (3,315) (2,264) - (5,579)Loan capital due after more than oneyear (126,257) (9,000) 61 (135,196)-------------------------------------------------------------------------------- Net debt (129,572) (11,264) 61 (140,775)-------------------------------------------------------------------------------- The other non-cash movement represents the amortisation of debenture issuepremium of £61,000. c. Reconciliation of net cash flow to movement in net debt 2005 2004 £000 £000-------------------------------------------------------------------------------- (Increase)/decrease in bank overdraft (2,264) 304Net (increase)/decrease in loan capital (9,000) 8,000Other non-cash movements 61 55-------------------------------------------------------------------------------- Change in net debt (11,203) 8,359Opening net debt (129,572) (137,931)-------------------------------------------------------------------------------- Closing net debt (140,775) (129,572)-------------------------------------------------------------------------------- Other information (a) The proposed final dividend will be paid on 3 January 2006 to ordinary shareholders on the register at the close of business on 2 December 2005. (b) The annual report and accounts will be posted to all shareholders by 24 October 2005 and copies will be available to the public from that date at the company's registered office, Town Centre House, The Merrion Centre, Leeds, LS2 8LY. (c) The balance sheet at 30 June 2005 and the results for the year then ended and comparative figures for 2004 do not constitute statutory accounts in accordance with section 240 of the Companies Act 1985. The financial information above is derived from the Group's full statutory accounts on which the auditors have reported; their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. Statutory accounts for 2004 have been filed with the Registrar of Companies and those for 2005 will be delivered following the Company's Annual General Meeting. (d) This announcement is prepared on the basis of accounting policies which are to be set out in the Group's 2005 report and accounts, and in accordance with applicable UK accounting standards and the Companies Act 1985. The accounting policies are consistent with those applied in previous years as set out in the Group's 2004 report and accounts. This announcement was approved by the board of directors on 9 September 2005. This information is provided by RNS The company news service from the London Stock Exchange