Town Centre Regulatory News (TOWN)

TOWN CENTRE SECURITIES PLC

('TCS' or the 'Company')

Half year results for the six months ended 31 December 2022

Resilient performance given macro-economic conditions

Town Centre Securities PLC, the Leeds, Manchester, Scotland, and London property investment, development, hotel and car parking company, today announces its results for the six months ended 31 December 2022.

Financial performance

· Net assets - resilient performance:

o  Like for like portfolio valuation down 7.0% from June 2022:

§ outperformance versus the MSCI/IPD All Property Capital Index which fell by 17.5% over the period

§ reduction primarily due to real estate investor and market sentiment around the macro-economic outlook

o  Statutory net assets of £152.2m or 314p per share (FY22: £179.3m, 341p). EPRA net tangible assets ('NTA')$ measure at £148.4m or 306p per share (FY22 equivalent: £174.9.0m, 333p)

· Profit and earnings per share - impacted by valuation reduction:

o  Statutory loss before tax of £19.1m (HY22: profit of £10.5m) and statutory loss per share of 38.4p (HY22: earnings of 19.8p)

o  EPRA earnings$ before tax of £1.7m (HY22: £2.6m)

o  EPRA earnings per share$ of 3.5p (HY22: 5.0p)

· Loan to Value reduced in the period by 290bps to 43.5% following debt repayments and despite reduction in portfolio value

· Shareholder returns - enhanced by share buy backs and tender offer:

o  Maintained interim dividend of 2.5p (HY22: 2.5p) reflecting the relative stability in underlying earnings excluding valuation reduction

o  Earnings and NAV enhancing tender offer and subsequent share buy back in HY23 (4,075,000 shares bought back in total) following on from those undertaken in FY22

Protecting shareholder value whilst continuing to reset and reinvigorate the business for the future 

We have continued to reset the business in the past six months with three further sales and one strategic acquisition. Progress delivered under the four key strategic initiatives is as follows:

Actively managing our assets

· The proportion of retail and leisure assets in the portfolio has stabilised at 29% (2016: 60%; 2020: 40%), following the sale of over £100m of assets since March 2020

· Pure retail now represents only 18% of the total portfolio with the resilient Merrion Estate representing 70% of this

· 10 new commercial lettings and lease renewals across the portfolio in the period

· No tenants entered into a CVA during the period reflecting our resilient tenant portfolio

Maximising available capital

· Three properties sold during the six months (in Glasgow, Uddingston and part of our Piccadilly Basin development site in Manchester) for a total of £20.3m

· The release in July 2022 of £18.7m of funds, originally generated from investment property sales, that had been locked into our debenture security pool

· Aggregate proceeds generated of £39.0m and crystalising a small loss on disposal of £0.2m

· Completion of the sale of our investment in YourParkingSpace Limited in July 2022, generating initial cash proceeds of £11.6m and further receipts between July 2023 and July 2024

· Loan to value headroom over our bank facilities of £32.7m based on 31 December 2022 borrowings and valuations, rising to £37m following the inclusion of the Weymouth Street, London property within the banking security pool

· Loan to value* reduced to 43.5% (FY22 equivalent 46.4%).

· Following the period end, we bought back for cancellation £13.7m of our £96.1m 2031 5.375% debenture stock for a total cash consideration of £13.3m including accrued interest:

o  Helps to reduce debt and to rebalance the profile of the Group's borrowings

o  Makes a total of £23.6m of the debenture bought back over last three years

Acquiring and improving investment assets to diversify our portfolio

· Sufficient headroom to progress development and investment across the entire portfolio having:

o  Acquired 45 Weymouth Street, London for £7.1m, a prime mixed-use property

o  Disposed of Port Street, Manchester surface car park for £12.95m

o  Expected sale in March 2023 of part of Whitehall Road, Leeds for £13.0m. As at the date of this announcement this sale is not unconditional.

Investing in our development pipeline

· Our development pipeline, with an estimated GDV of over £550m, is a valuable and strategic point of difference which we continue to progress and improve

Outlook

· Resilient trading performance has continued into the opening months of 2023:

o  Rent collections remain robust with over 99% of amounts invoiced in Q2 now collected

o  Car parks recovery momentum continues other than for those reliant on office workers

o  ibis Styles Leeds City Centre Arena hotel benefitting from recovery, events and staycations

o  One further disposal at Whitehall Road, Leeds expected to complete in coming weeks

o  Now looking at acquisitions and bringing forward sections of our development pipeline

$ Additional EPRA measures are described in greater detail further on in these half year results with EPRA earnings and earnings per shares detailed, defined and reconciled within note 5 of these half year results

* Loan to value is calculated as the amount of financial liabilities less cash and cash equivalents (including overdrafts) as a percentage of total assets less cash and cash equivalents

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

"It has been another six months where we have further strengthened TCS through our disposal programme, the resulting repayment and redeployment of borrowings, and a successful tender offer.

"We continue to see further trading recoveries in both our car park and hotel operations whilst the property disposals have as expected reduced the scale of the property rental business; at the same time we continue to navigate our way through the current challenging macro-economic conditions given its impact on our tenants, the valuation reduction of our property portfolio and impairments to our car park portfolio. With low levels of bank debt and reduced loan to value I am confident that we are in a strong position to face up to the challenges that may present themselves. "

"The cost of living crisis, rising utility costs, interest rates increases and the ongoing Russia/Ukraine conflict are affecting all stakeholders and we remain committed to supporting them, in particular our dedicated employees. We continue to focus on maintaining good landlord-tenant relationships, with open dialogue and collaboration cornerstones of this approach."

"Having undertaken such a successful disposal programme, our attention is now turning to opportunities to selectively acquire assets and invest in our development programme, ever mindful of adding value whilst retaining robust finances."

-Ends-

For further information, please contact:

Chairman and Chief Executive's Statement

Resetting and reinvigorating the business for the future

We have continued to see a good recovery across all three operational segments of the business in the past six months, although the disposal programme of the last three years has reduced the absolute level of rental income. Our property and car park portfolio has reduced in value over the six months but at a less extreme rate than the relevant indices, benefitting from our relatively resilient portfolio; indeed we believe the reduction reflected worsening real estate investor and market sentiment around the UK's economic outlook, as opposed to any real concerns around our portfolio.

 Our aim continues to be to create a business that:

- Has lower levels of absolute debt and leverage

- Is diversified with a much-reduced level of retail property

- Is diversified with a capital light, profitable car park business

- Has rebased and has significant growth opportunities as a result of our valuable development pipeline and asset management opportunities

Rent receipts within the property business have remained resilient, with rent collections as at 1 March 2023:

The performance above mirrors the experience of the previous twelve months ended 30 June 2022, where 99.2% of all amounts billed had been received.

We have continued the execution of our detailed strategic and operational plan which includes:

- Our asset disposal programme and reducing the size of our retail portfolio. Since the start of the COVID-19 pandemic, we have now sold over £100m of assets, the majority of which have been retail

- Working closely with all our tenants to support wherever we can and doing our best to ensure that following the disruption of the last few years as many of our tenants as possible are able to bounce back strongly

- Supporting our employees and their families who have been impacted by the ongoing cost of living crisis

Results

The statutory loss for the six months ended 31 December 2022 was £19.1m (HY22: profit of £10.5m) giving a loss per share of 38.4p (HY22: earnings per share of 19.8p). The key drivers for this loss were the valuation decreases on investment properties of £14.2m and the impairment of car parking assets totalling £2.7m. The like for like portfolio decreased in value by 7.0% over the six months under review as a result of investor and market sentiment around the UK's economic outlook.

EPRA earnings for the six months ended 31 December 2022 were £1.7m (HY22: £2.6m) giving EPRA earnings per share of 3.5p (HY22: 5.0p). The reduction includes the continued recoveries seen in both our car park and hotel operations, coupled with the resilience of the rental collections but are offset by the award and payment of executive directors bonuses of £0.7m in the period as a result of completion of the YPS Investment sale and a reduction in other income. Other income typically includes surrender and dilapidations' payments which can be significant individual sums. In HY22 dilapidations receipts totalled £0.6m, whereas in the current six-month period only £6,000 have been received.

Statutory Net Assets of £152.2m (30 June 2022: £179.3m) decreased by 15.1% from the year end. Net assets per share decreased to 314p (30 June 2022: 341p), a reduction of only 8%, highlighting the accretive nature of both the tender offer and shares bought back in market for cancellation in the six months and prior financial year.

EPRA Net Tangible Assets (EPRA NTA); which in the case of TCS reduces statutory net assets by the £3.8m of reported Goodwill (FY22 comparable £4.4m), for the half year is £148.4m compared to £174.9m at FY22, down 15.1%. EPRA NTA per share is 306p (FY22 comparable 333p). The full breakdown of the EPRA net asset measures are detailed later.

Borrowings

Net borrowings, which includes lease liabilities, have reduced by 23% over the six months from £163.8m to £125.8m. Significant receipts in the period from property disposals, the release of the cash secured within the Company's debenture security pool and the initial consideration from the sale of our investment in YPS have all contributed to this reduction.

The decrease in borrowings, although partially offset by the reductions we have seen in our property portfolio values, have seen our loan to value level reduced by 290 bps from the June year end to 43.5%.

On 28 January 2023, the Company completed the buyback for cancellation of £13.7m of its £96.1m 2031 5.375% debenture stock. This will result in an additional one-off finance gain of £0.3m in the remaining six months of FY23.

Dividends

A maintained interim dividend of 2.5p per share (HY22 2.5p) will be paid on the 16 June 2023 to shareholders registered on 19 May 2023; a property income distribution amounting to £1.2m in total. The final dividend for 2022 of 2.5p was paid on the 6 January 2023. The ex-dividend date for the interim dividend will be 18 May 2023.

Although EPRA earnings in the current period are lower than the HY22 comparative, the maintenance of the interim dividend at 2.5p reflects the resilience of our core business and also the strengthening of the balance sheet following the assets sales completed - this dividend represents 71% of EPRA earnings.

A further benefit of the tender offer and buy backs is that the total cash cost of the dividend falls due to the reduced number of shares in issue, enabling a saving of £101,875 compared to last year.

Portfolio Performance

The value of investment properties, developments, joint ventures and car parks at the half-year stood at £274.4m (June 2022: £306.9m).

The following table provides an overview of the performance of the portfolio, including our share of joint venture assets, in the six months ended 31 December 2022 highlighting the balance of the Company's portfolio in light of our strategy of reducing exposure to retail and leisure and also the underlying value of our development pipeline.

The following table reconciles the above analysis to that set out in Note 6.

Note - the IFRS 16 Right-of-Use car parks (£26.1m) are excluded in the portfolio analysis above as the Directors do not believe it is appropriate to include these assets where there is less than 50 years remaining on their lease and the Group does not have full control over them.

On a like for like basis the whole portfolio decreased in value by 7.0% since June 2022 (FY22: 1.2% increase) accounting for a £19.5m like for like decrease in value (investment, development, car park and joint venture assets). This reduction has been driven by investor and market sentiment in particular within the retail, office and car parking sectors, where we have seen circa 10% like for like declines in value in the six months.

Our development pipeline value increased by £1.5m or 4.7% in the six months as we continue to bring this land forward within the planning frameworks.

Maximising available capital

In the past six months we have continued our asset disposal programme. Between July and December 2022, we sold three properties for a total consideration of £20.3m.

The properties disposed of are:

- Our Buchanan Street/Gordon Street retail investments in Glasgow;

- A 2-storey office building in Uddingston, Scotland; and

- Port Street surface car park, Manchester (part of our Piccadilly Basin development site).

The sales, after taking into account selling fees, crystalised a small loss on disposal in the period of £0.2m.

At 30 June 2022, the Company had £18.7m of funds secured within the debenture security pool, and as these funds were ring fenced and not immediately available to the Group they were included within Trade and other receivables. These funds, which originated from investment property disposals prior to 30 June 2022, were released from the security pool in July 2022 and became free cash.

In July 2022, the Company also received initial consideration from the sale of its investment in YourParkingSpace ('YPS') of £11.6m.

The funds generated from the disposals, the release of the debenture cash and the YPS sale were then used to repay borrowings, fund a tender offer to buy back shares in the Company and to acquire the new Weymouth Street property in London.

Net borrowings at 31 December 2022 were lower at £125.8m (30 June 2022: £163.8m). The Loan to value (LTV) ratio has reduced further and is 43.5% (30 June 2022: 46.4%). LTV is calculated as net borrowings as a percentage of total assets (less cash). Headroom at 31 December 2022 was £32.7m (FY22: £18.5m).

The total borrowings comprise of £96.0m (net of £0.1m unamortised lease incentives) of 5.375% First Mortgage Debenture Stock 2031, £5.8m of bank debt and £28.4m of lease liabilities. There were a further £79.2m of undrawn revolving credit facilities at the half-year.

As mentioned above, after the period end we agreed to buyback for cancellation £13.681m of our debenture stock, reducing the nominal value outstanding to £82.4m; this compares to its original nominal value of £106.0m, having bought back a total of £23.6m of stock in recent years. Buying back the debenture increases our financial flexibility and frees up funds for investment into our portfolio activities.

Actively managing our assets

We have completed or renewed 10 commercial leases in the period representing annual rental income of £0.3m in aggregate.

The proportion of retail and leisure assets within the portfolio has further reduced to 29% (FY22: 31%), down from 60% in June 2016, and of that, pure retail represents only 18% of the overall portfolio (FY22: 23%). The retail and leisure element of the Merrion Estate represents 66% of all retail and leisure.

Acquiring investment assets

45 Weymouth Street, London

We have acquired for £7.1m a recently refurbished, 4,760 sq.ft, Grade II listed property which currently comprises residential accommodation on the third floor, with office space to lower ground, ground, first and second floors. Following the period end we have secured lettings on all floors with the exception of one floor which will be the London base for TCS following the sale of its property investment in Duke Street, London in 2021.

The building is located in the centre of the world's most renowned medical district, moments from London and Harley Street clinics, as well as the Princess Grace and King Edward VII Hospitals.

This strategic purchase forms part of our ongoing strategy to continue to diversify our portfolio and generate long term capital growth. 

Investing in our development pipeline

TCS owns a significant development pipeline which gives the Company a clear and material opportunity for future growth. The current pipeline, following the sale of the Port Street surface car park in December 2022, has an estimated gross development value (GDV) of over £550m, with the majority of the developments already being part of the relevant local government approved strategic planning frameworks or actually in possession of detailed planning permission.

We take a conservative approach to development to ensure we never over-commit ourselves. Alongside this, the Company has a successful track record in obtaining planning and delivering strategic developments.

The key components of the development pipeline include:

· Piccadilly Basin, Manchester. Mixed residential, commercial, and car-parking with a total estimated GDV of circa £170m

· Whitehall Riverside, Leeds. Office, car-parking, and potentially leisure provision with a total estimated GDV of over £290m

· Merrion Estate, Leeds. Office and residential towers with a total estimated GDV of over £90m

Piccadilly Basin

We sold our Port Street surface car park, a part of our Piccadilly Basin development site, to the Select Property Group in December 2022.

Our Dale and Burlington Street surface car parks are key components of the Piccadilly Basin Strategic Regeneration Framework ('SRF'). Over the coming six months we will be looking to refresh this SRF to bring it up to date and relevant to unlock the potential of this truly unique part of the city centre.

Whitehall Riverside

We continue to work with Glenbrook to bring forward a new masterplan which will provide a mixed-use riverside scheme in one of the city's most strategic locations just four minutes' walk from Leeds train station.

Glenbrook's plans for up to 500 apartments across two buildings of 15 and 18 stories with ground floor commercial units was approved at the December 2022 planning committee, subject to the agreement and completion of a Section 106 of the Town and County Planning Act 1990 agreement with the local authority. This agreement was completed in February 2023. In addition Glenbrook are still to finalise their funding agreement in connection with this purchase. Assuming all outstanding conditions are met, the sale of part of Whitehall Riverside to Glenbrook is expected to complete in March 2023.

Separately we are bringing forward an application for a development comprising up to 235,000 sq ft of Grade A office space across three buildings, a 478 space CitiPark multi-storey car park and travel hub, and a 108 key aparthotel.

New landscaping and public realm will improve connectivity to, and further complement the existing riverside environment with a series of interlinked pedestrian and cycling routes to support health and well-being whilst also attracting new residents and visitors to the scheme.

The new Whitehall Riverside proposals offer a revitalised masterplan relevant for the demand of today designed with flexibility in mind to adapt to the changing requirements of workspace, residential, electric vehicles and visitor economy.

Merrion Estate

The Arena Quarter, where the Merrion Estate is located, has been transformed with the development of the first direct Arena and substantial investment by Leeds' two largest universities, the Leeds City Council head office and further investment in hotels, leisure units and over 8,000 new residential and student residential units. These new developments, on and adjacent to the Merrion Estate, include the tallest building in Leeds (IQ Altus). The momentum behind development has not stopped with a further 4,000 new residential and student units in the pipeline in the immediate vicinity of the Merrion Estate.

This now presents the Company with an opportunity to redevelop and reposition its Wade House property on the back of this continuing demand. Wade House represents the last of the three main office buildings that form part of the Merrion Estate, and one that is now most in need of investment, TCS having already redeveloped Town Centre House and Merrion House. Improving the environmental credentials of this building will be at the forefront of the redevelopment.

CitiPark recovering well, capital light growth continuing with a further acquisition

Car park occupancy levels have continued to recover well with all key sites now back to pre Covid-19 occupancy levels with the exception of our two Leeds based multi storey car parks at the Merrion Centre and Leeds dock which are more reliant on office workers.

Our CitiCharge division continues to grow and now has 68 EV chargers with a further 20 installs in the pipleline across the Group's car park portfolio.

ESG and business responsibility

Building on the success of previous initiatives, including the interaction with local communities, the solar farms and the roll-out of EV charging facilities, the Company continues to look at ways to improve the overall responsibility of the business. We have maintained our key partnerships with First Give (helping local schools to inspire young people to make a change in society) and the Leeds Hospitals Charity both in the form of donations but also in helping with fundraising events. This summer the Leeds Hospitals Charity are promoting the Leeds Bear Hunt; a large-scale public art trail across Leeds, which will include the Merrion Centre. 

During the period we rolled out an employee wide electric vehicle salary sacrifice scheme to further encourage the take up of electric cars

Following its inception in 2022 the Sustainability and Climate Change committee have been working to develop and implement the sustainability strategy of the Company. In addition to working with the Carbon Trust the Committee has been exploring the possibility of sustainable debt funding, either through green loans or other structured finance products. 

Share buy back programmes

We launched a tender offer for the Company's shares in July 2022 which successfully bought in for cancellation 4m shares in the Company at 185p per share. The transaction costs in connection with this tender, which was on top of the 185p per share, amounted to £365,000 or 9.1p per share bought in for cancellation. This reflected the Board's belief that share buybacks are an appropriate means of returning value, whilst maximising sustainable long term growth for shareholders, given the enhancement to NAV and earnings per share that results from reducing the number of shares in issue. This is particularly the case given the significant discount that this price was relative to reported net asset value.

In addition to the tender offer, during the period a total of 75,000 shares were purchased as part of a separate on-market share buy back programme, returning a total of £122,000 to shareholders. The transaction costs in connection with the share buy back programme amounted to £2,000. This share buy back programme was restricted to 75,000 so as not to impinge on the REIT status of the Company.

Outlook

The trading performance seen in the six months ended 31 December 2022 is continuing into the opening months of 2023. Rent collections remain robust with over 99% of the amounts invoiced at the last quarter date now collected. Our programme of disposals has slowed, with one further disposal expected to complete in the coming weeks once the final conditions of sale are met. Reflecting our much improved financial flexibility, we are now looking at investment acquisitions and bringing forward sections of our development pipeline.

The momentum in our car parks recovery has continued through 2022 however for those car parks that are particularly reliant on office workers, this recovery remains slow.

The ibis Styles Leeds City Centre Arena hotel has now fully recovered and continues to benefit from 'staycations', the return of the corporate mid-week market and the full programme of events at the nearby Leeds Arena.

Overall, we remain committed to delivering on our accelerated four pillar strategy of: actively managing our assets, maximising available capital, investing in our development pipeline and acquiring and improving investment assets to diversify our portfolio.

EPRA Net Asset reporting

The below table reconciles IFRS net assets to Net Tangible Assets (NTA), and the other EPRA measures.

There are three EPRA Net Asset Valuation metrics, namely EPRA Net Reinstatement Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net Disposal Value (NDV). The EPRA NRV scenario, aims to represent the value required to rebuild the entity and assumes that no selling of assets takes place. The EPRA NTA is focused on reflecting a company's tangible assets. EPRA NDV aims to represent the shareholders' value under an orderly sale of business, where, for example, financial instruments are calculated to the full extent of their liability. All three NAV metrics share the same starting point, namely IFRS Equity attributable to shareholders.

1Estimated purchasers' costs including fees and stamp duty and related taxes

2Removal of goodwill as per the IFRS Balance Sheet - relates predominantly to goodwill paid to acquire two long term car park leaseholds in London

3Represents the adjustment to fair value (market price) of the 2031 5.375% debenture

Responsibility statement of the directors

The directors confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union. The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

· an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last Annual Report and Accounts.

A list of current directors is maintained on the Town Centre Securities PLC Group website: www.tcs-plc.co.uk.

Principal risks and uncertainties

The group set out on page 42 of its annual report and accounts 2022 the principal risks and uncertainties that could impact its performance; these remain largely unchanged since the annual report was published. The group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity.

The key underlying property risks facing the business continue to relate to tenant strength, particularly in the retail arena, portfolio valuation and the related funding headroom which is driven by portfolio valuation.

Systems risk related to the increasing level of cyber security threats and GDPR risk and the need to carefully control the use of personal data continue to demand vigilance from all staff.

TCS continues to operate in a conservative manner with processes and procedures in place to ensure risk management is central to all business planning and decision making. These processes and procedures remain as detailed in the 2022 annual report.

In terms of tax risk, as a UK REIT, a failure to comply with certain UK REIT conditions resulting in the loss of this status could result in property income and asset sales being subject to UK corporation tax. This risk is associated with both the recent programme of asset sales the Company has embarked on and the requirement of the Company to have at least 35% of it's share capital held 'beneficially by the public'.

At 31 December 2022 this percentage was 35.19%. New Fortress Capital Limited, which is assumed to be a close company and not held 'beneficially by the public' or the Ziff Concert Party would need to acquire a further 92,000 shares in the Company from the public to take the percentage below 35%. This would cause the Company to automatically lose its status as a REIT with effect from the beginning of the accounting period in which the 35% threshold was crossed.

The Board review the 'beneficially by the public' percentage on a monthly basis as part of the Company's board meetings. In the period since 31 December 2022 to the date of this announcement this percentage has remained at 35.19%. The Ziff Concert Party are aware of the potential impact any increase in shareholding would have on the Company's REIT status.

Forward-looking statements

Certain statements in this half year report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

The group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Edward Ziff OBE DL Stewart MacNeill

Chairman and Chief Executive Group Finance Director

8 March 2023

Consolidated condensed income statement

for the six months ended 31 December 2022

Consolidated condensed statement of comprehensive income

for the six months ended 31 December 2022

All recognised income for the period is attributable to equity shareholders.

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Consolidated condensed balance sheet

as at 31 December 2022

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Consolidated condensed statement of changes in equity

for the six months ended 31 December 2022

 The accompanying notes are an integral part of these condensed consolidated interim financial statements. 

Consolidated condensed cash flow statement

for the six months ended 31 December 2022

The Consolidated Cash Flow Statement should be read in conjunction with Note 12.

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Notes to the consolidated interim financial information

1. Financial information

General information

Town Centre Securities PLC (the "Company") is a public limited company domiciled in the United Kingdom. Its shares are listed on the main market of the London Stock Exchange. The address of its registered office is Town Centre House, The Merrion Centre, Leeds LS2 8LY. The principal activities of the group during the period remained those of property investment, development and trading and the provision of car parking.

This interim financial information was approved by the board on 8 March 2023.

The comparative financial information for the year ended 30 June 2022 in this half-yearly report does not constitute statutory accounts for that year as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 30 June 2022 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Basis of preparation

These condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting", in accordance with UK adopted international accounting standards. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the accounts for the year ended 30 June 2022. The financial information for the six months ended 31 December 2022 and 31 December 2021 is unaudited.

Significant accounting policies

The accounting policies adopted are consistent with those of the previous financial year.

The group's financial performance is not seasonal.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

In the current environment, the directors consider the revenue to be of particular importance and therefore we set out below our revenue policy in respect of rental income:

Rental income

Revenue includes rental income net of VAT.

Most of the Group's rental income is billed either monthly or quarterly in advance. A receivable and deferred income is recognised at the date payment is due

Rent receivables recognised are subject to impairment (refer to the Trade and Other Related Party receivables policy in the financial statements of the Company for the year ended 30 June 2022).

Any lease incentives are spread on a straight-line basis across the period of the lease.

Rental income is recognised as revenue (to the extent it is considered collectible) as follows:

i) Fixed rental income is recognised on a straight-line basis over the term of the lease;

ii) turnover rents are based on underlying turnover and are recognised in the period to which the turnover relates;

iii) rent reviews are recognised in the period to which they relate providing they have been agreed or otherwise on agreement; and

iv) Where rent concessions have been granted that reduce the payments due under a lease in future periods the total revised consideration (plus any prepaid or accrued lease payments) is spread over the remaining lease term from the date the concession is granted.

Use of estimates and judgements

There have been no changes in the method of applying appropriate accounting estimates in the period. Any difference between the receivables previously recognised and the cash subsequently collected has been disclosed in the income statement. There have been no other estimates of amounts reported in prior periods which have a material impact on the current half year period.

Going concern

The financial information for the six months ended 31 December 2022 have been prepared on a going concern basis. In light of the current macro-economic environment the Directors have considered various downside scenarios to the Group's financial forecasts in assessing its ability to continue as a going concern. Despite the negative economic impacts and the uncertainty created, the scenarios reviewed confirm the appropriateness of preparing these financial statements on a going concern basis. The Group is currently in compliance with all of its covenants. The most material risks concern the impact on the valuation of the property portfolio and our ability to meet bank loan and debenture covenants, although the Group does have potential mitigants at its disposal to address these uncertainties which include, but are not limited to, further disposals of assets, pledging as additional security ungeared properties valued at £9.5m at 31 December 2022 and seeking lender consent to an extension of financial covenant waivers to cover extended periods of disruption.

2. Segmental information

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. The board has determined the operating segments based on these reports.

Segmental assets

Segmental results

All results are derived from activities conducted in the United Kingdom.

The car park results include car park income from sites that are held for future development. The value of these sites has been determined based on their development value and therefore the total value of these assets has been included within the assets of the property rental business.

The net revenue at the development sites for the six months ended 31 December 2022, arising from car park operations, was £2,436,000. After allowing for an allocation of administrative expenses, the operating profit at these sites was £864,000.

Revenue received within the car park and hotel segments, along with service charge income from the property rental segment, is the only revenue recognised on a contract basis under IFRS 15. All other revenue within the property segment comes from rental lease agreements.

3. Finance costs

4. Dividends

A final dividend in respect of the year ended 30 June 2022 of 2.5p per share was approved at the company's annual general meeting (AGM) on 22 November 2022 and was paid to shareholders on 6 January 2023. The entire dividend was paid as an ordinary dividend.

An interim dividend in respect of the year ending 30 June 2023 of 2.5p per share is proposed. This dividend, based on the shares in issue at 8 March 2023, amounts to £1.2m which has not been reflected in these interim accounts and will be paid on 16 June 2023 to shareholders on the register on 19 May 2023. This dividend will be paid entirely as a Property Income Distribution.

5. Earnings per share

The calculation of basic earnings per share has been based on the profit for the period, divided by the number of shares in issue. The weighted average number of shares in issue during the period was 49,685,860 (2021: 52,945,786).

There is no difference between basic and diluted earnings per share.

There is no difference between basic and diluted EPRA earnings per share.

6. Tangible fixed assets

(a) Investment properties - property rental business

Included within Investment properties (Development) is an asset valued at £10.0m (2021: £8.5m) that relates to land that is expected to be sold in March 2023. At 31 December 2022 there was sufficient uncertainty around both the Section 106 planning agreement with the local authority and the purchasers funding agreement that the sale was judged to not be highly probable and accordingly not transferred assets held for sale.

 (b) Freehold and right of use properties - car park activities

The historical cost of freehold properties and right-of-use assets relating to car park activities is £30,153,000 (2021: 30,153,000)

(c) Freehold properties - hotel operations

The fair value of the Group's investment and development properties, freehold car parks, hotel operations and assets held for sale have been determined principally by independent, appropriately qualified external valuers CBRE and Jones Lang LaSalle. The remainder of the portfolio has been valued by the Property Director.

Valuations are performed bi-annually and are performed consistently across the Group's whole portfolio of properties. At each reporting date appropriately qualified employees verify all significant inputs and review computational outputs. The external valuers submit and present summary reports to the Property Director and the Board on the outcome of each valuation round.

Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rents or business profitability, incentives offered to tenants, forecast growth rates, market yields and discount rates and selling costs including stamp duty.

The development properties principally comprise land in Leeds and Manchester. These have also been valued by appropriately qualified external valuers Jones Lang LaSalle, taking into account an assessment of their realisable value in their existing state and condition based on market evidence of comparable transactions and residual value calculations.

Leasehold (right-of-use) car park properties are accounted for using the cost model including an assessment of the future value of the minimum lease payments and are amortised on a straight line basis over the remaining term of the lease or useful economic live if deemed to be shorter.

Property income, values and yields have been set out by category in the table below.

Investment properties (freehold and right of use) and hotel operations

The effect on valuation (excluding development property and car parks) of applying a different yield and a different ERV would be as follows:

Valuation at an initial yield of 7.7% - £132.4m, Valuation at 5.7% - £178.7m

Valuation at a reversionary yield of 9.5% - £136.1m, Valuation at 7.5% - £172.3m

Investment properties (development properties)

The key unobservable inputs in the valuation of one of the Group's development properties of £14.8m is the assumed per acre or per unit land value. The effect on the development property valuation of applying a different assumed per acre or per unit land value would be as follows:

Valuation in the Consolidated Financial Statements if a 5% increase in the per acre or per unit value - £15.5m, 5% decrease in the per acre or per unit value - £14.1m.

The other key development property in the Group is valued on a per acre development land value basis, the effect on the development property valuation of applying reasonable sensitivities would not create a material impact.

Freehold car park activities

The effect on the total valuation of the Group's freehold car park properties of £27.5m in applying a different yield/discount rate would be as follows:

Valuation in the Consolidated Financial Statements based on a 1% decrease in the yield/discount rate - £32.4m, 1% increase in the yield/discount rate - £23.9m

Property valuations can be reconciled to the carrying value of the properties in the balance sheet as follows:

All investment properties, freehold properties held in property plant and equipment, hotel operations and assets held for sale are measured at fair value in the consolidated balance sheet and are categorised as level 3 in the fair value hierarchy as defined in IFRS13 as one or more inputs to the valuation are partly based on unobservable market data. In arriving at their valuation for each property (as in prior years) both the independent external valuers and the Directors have used the actual rent passing and have also formed an opinion as to the two significant unobservable inputs being the market rental for that property and the yield (i.e. the discount rate) which a potential purchaser would apply in arriving at the market value. Both these inputs are arrived at using market comparables for the type, location and condition of the property.

(d) Fixtures, equipment and motor vehicles

7. Goodwill and intangible assets

Goodwill represents the difference between the fair value of the consideration paid on the acquisitions of car park businesses and the fair value of the assets and liabilities acquired as part of these business combinations.

Intangible assets represent short term customer contracts relating to car park enforcement businesses acquired in the periods.

8. Investments in joint ventures

Investments in joint ventures primarily relates to the Group's interest in the partnership capital of Merrion House LLP and loan to Belgravia Living Group Limited. The investment property held within these joint ventures has been externally valued at each reporting date.

9. Investments