Town Centre Regulatory News (TOWN)

TOWN CENTRE SECURITIES PLC

('TCS' or the 'Company')

Half year results for the six months ended 31 December 2023

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 2023.

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

"We have benefitted from the last three years' disposal and asset management programmes and reduction in borrowings, which positioned us well to contend with the ongoing macro-economic challenges in the six month period ending 31 December 2023. During the first half we were able to use our strengthened financial position to launch and complete a successful NAV per share accretive tender offer."

"Our property rental business, car park and hotel operations continue to deliver resilient underlying revenues and earnings against challenging macro-economic conditions. These conditions have led to movements in the underlying yields and a further valuation reduction of our property portfolio, in particular with our office investments. Expectations are that inflation may fall to the Government's target of 2 percent by the end of Q2 2024, and that the Bank of England may then start lowering interest rates, which may lead to an improvement in liquidity in the property investment markets and result in valuations stabilising. However, with continued low levels of variable interest rate bank debt, I am confident that we are in a strong position in these uncertain times."

"Rising costs, interest rate increases and the ongoing geopolitical conflicts 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 the cornerstones of our approach."

"Our attention is now focussing on investing in our development programme over the coming years. However we remain cautious and ever mindful that taking advantage of potentially accretive opportunities needs to be balanced against retaining robust finances."

"Overall, the business has now been reset, with a more diverse portfolio of assets, lower levels of gearing and more importantly historically low levels of variable rate borrowings - and is now looking predominantly at bringing forward our development pipeline."

Financial performance

· Net assets per share - successful tender offer offset valuation decline:

o  Like for like portfolio valuation down 4.4% from June 2023:

§ similar to the MSCI/IPD All Property Capital Index which fell by 3.9% over the period

§ reduction primarily due to market sentiment around the macro-economic outlook adversely impacting valuation yields - in particular in the office sector

o  Statutory net assets of £124.0m or 294p per share (FY23: £141.1m, 291p). EPRA net tangible assets ('NTA')* measure at £120.6m or 286p per share (FY23 equivalent: £137.7m, 284p)

· Statutory results - loss reflects valuation reduction:

o  Statutory loss before tax of £9.7m (HY23: loss of £19.1m)

o  Statutory loss per share of 15.3p (HY23: loss of 38.4p)

· EPRA results - relative stability in underlying earnings:

o  EPRA earnings* of £3.8m (HY23: £1.7m) include the benefit of £1.7m of taxation credit - with the recognition of a deferred tax asset arising from brought forward trading losses

o  EPRA earnings per share* of 7.9p (HY23: 3.5p)

· Loan to Value** increased in the period from 45.6% to 50.3% following a small increase in borrowings coupled with the reduction in portfolio value

· Shareholder returns:

o  Proposed interim dividend of 2.5p, (HY23: 2.5p) reflecting the relative stability in underlying earnings once the effect of the one-off taxation credit is excluded

o  NAV per share enhancing tender offer completed in December 2023 (6,292,920 shares bought back in for cancellation at 150p per share including transaction costs compared to a 30 June 2023 NTA measure of 286p per share - representing 13.0% of the issued share capital of the Company at that time)

o  As expected, the tender offer resulted in the Company leaving the REIT regime, with the entire profits of the business now subject to corporation tax and the recognition of deferred tax assets and liabilities.

* Alternative performance measures are detailed, defined and reconciled within Note 4 and the financial review section of this announcement

** LTV Calculation includes finance lease assets and liabilities

Protecting shareholder value whilst safeguarding the business for the future 

Progress delivered under the four key strategic initiatives is as follows:

Actively managing our assets

Our long-standing strategy of active management and redevelopment, to drive income and capital growth, has continued:

· We now have a well diversified portfolio comprising: 30% invested in retail and leisure; 29% offices; 16% car parks; 13% residential; 8% developments; and 4% hotels

· The void rate across our portfolio had reduced to 4.5% at 31 December 2023 (5.5% at 30 June 2023)

· Strong rent collection for the period of 99.2% (FY23: 99.1%)

· Nine new commercial lettings and lease renewals at ERV across the portfolio in the period totalling £0.3m of rental income per annum

· Wilko, who previously traded from a 6,000 sq ft store on the edge of the Merrion Centre, were the only tenant to enter into a CVA during the period

· Rolling out our own car park management system across our car park portfolio which will ultimately give us both operational and financial efficiencies

Maximising available capital

A conservative capital structure, with a mix of short and long-term secure financing, has always underpinned our approach:

· The first element of deferred consideration arising from the sale of our investment in YourParkingSpace Limited was received in July 2023 (£4.4m) with further receipts due in the next six months totalling £5.3m

· Comfortable loan to value headroom over our bank facilities of £20.0m based on 31 December 2023 borrowings and valuations

· Loan to value* increased to 50.3% following revaluation decreases and impairments in the period and a slight increase in borrowings (FY23: 45.8%)

Investing in our development pipeline

Our development pipeline, with an estimated GDV of over £400m, is a valuable and strategic point of difference for TCS which we continue to progress and enhance. Notably, in the past six months:

· In December 2023 a planning application was submitted for student accommodation as part of the Merrion Centre's evolution. This application incorporates a 1,110 new bed purpose built student accommodation scheme based on the redevelopment of Wade House and the adjacent 100MC site

· Following the securing of a planning consent at Whitehall Riverside back in May 2023 we continue to move forward with both build contractors/professional teams and potential tenants for all phases of the development

Acquiring and improving investment assets to diversify our portfolio

We continue to improve investment assets, with a stable portfolio of diverse properties:

· During the period we:

o  Acquired a city centre car park investment property leased to NCP in Wellington Street, Sheffield for £1.5m

o Two new car park management agreements won in the period, increasing the number of car parks operated under the CitiPark brand to 20

Outlook

· Resilient trading performance has continued into the second half of FY24:

o  Rent collections remain robust with over 99% of amounts invoiced in the last quarter of the year now collected

o  Car parks recovery momentum continues, other than for those reliant on office workers such as Merrion MSCP

o  Significant headroom of £20m on existing revolving credit facilities

o  Only 12.5% of borrowings at the period end subject to variable interest rates, with £82.4m of debenture fixed until 2031 and £14.2m of property specific debt fixed until 2029

o  Weighted average cost of borrowings at period end 5.3%

-Ends-

For further information, please contact:

Town Centre Securities PLC  www.tcs-plc.co.uk / @TCS PLC

Edward Ziff, Chairman and Chief Executive 0113 222 1234

Stewart MacNeill, Group Finance Director

MHP 020 3128 8100

Reg Hoare / Matthew Taylor tcs@mhpgroup.com

Chairman and Chief Executive's Statement

Resetting and reinvigorating the business for the future

We have seen a stable performance across all three operational segments of the business in the past six months. Our property and car park portfolio has reduced in value by 4.4% like for like over the six months. We believe the reduction reflects the general market as opposed to any real concerns around our portfolio.

 Our strategy over the last three years has been to create a business that:

- Has lower levels of absolute debt and leverage

- Is diversified with a much-reduced level of retail property following £120m of property sales during the period

- Works 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

- 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

- Has supported 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 2023 was much reduced at £7.3m (HY23: loss of £19.1m) giving a loss per share of 15.3p (HY23: loss per share of 38.4p). The key drivers for this loss were the valuation decreases on investment properties of £8.3m, valuation decreases on joint venture investment properties (TCS Share) of £2.5m and the impairment of car parking assets totalling £1.1m. The like for like portfolio decreased in value by 4.4% over the six months under review as a result of market sentiment around the UK's economic outlook.

EPRA earnings for the six months ended 31 December 2023 were £3.8m (HY23: £1.7m) giving EPRA earnings per share of 7.9p (HY23: 3.5p). Underlying this increase in EPRA earnings is the recognition on 1 July 2023 and subsequent part release of a deferred tax asset resulting from the Company exiting the REIT regime - the net effect in the period was to increase EPRA earnings by £1.7m or 3.5p.

Statutory Net Assets of £124.0m (30 June 2023: £141.1m) decreased by 12.1% from the year end. Net assets per share however increased marginally in the six months to 294p (30 June 2023: 291p) highlighting the accretive nature of the tender offer completed in the period when coupled with the statutory loss resulting in the period.

EPRA Net Tangible Assets (EPRA NTA); which in the case of TCS reduces statutory net assets by the £3.4m of reported Goodwill (FY23 comparable £3.4m), for the half year is £120.6m compared to £137.7m at FY23, down 12.4%. EPRA NTA per share is 286p (FY23 comparable 284p). The full breakdown of the EPRA net asset measures are detailed later. 

Borrowings

Net borrowings, which includes lease liabilities, have increased by 6% over the six months from £129.9m to £138.1m. The increase in borrowings were used to fund the tender offer.

The increase in borrowings and the valuation reductions we have seen in our property portfolio have resulted in our loan to value level increasing by 450 bps from the June year end to 50.3%.

Dividends

A maintained interim dividend of 2.5p per share (HY23 2.5p) will be paid on the 14 June 2024 to shareholders registered on 24 May 2024; amounting to £1.1m in total. The final dividend for 2023 of 2.5p was paid on the 4 January 2024. The ex-dividend date for the interim dividend will be 23 May 2024.

The maintenance of the interim dividend at 2.5p reflects the resilience of the underlying earnings of our core business and also the strengthening of the balance sheet following the asset sales completed over the last 3 years - this dividend represents 31% of EPRA earnings (57% of EPRA earnings before tax).

Portfolio Performance

The value of investment properties, developments, joint ventures and car parks at the half-year stood at £255.6m (June 2023: £264.7m).

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 2023 highlighting the balance of the Company's portfolio in light of our strategy of reducing exposure to retail and leisure and also the underlying current and potential future 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 (£23.9m) are excluded in the portfolio analysis above as the Directors do not believe it is appropriate to include these assets where the Group does not have full control over them.

On a like for like basis the whole portfolio decreased in value by 4.4% since June 2023 (FY23: 12.6% reduction) accounting for a £10.9m 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 office sector, where we have seen an 11.7% like for like declines in value in the six months.

Maximising available capital

In the past six months we have sold a single non-core investment property for £200k, above its £160k book value.

In July 2023, the Company received £4.4m; the first tranche of deferred consideration due following the sale of its investment in YourParkingSpace in July 2022. A further £5.3m is due to be received in the next six months representing the final two receipts in relation to this very successful transaction.

Net borrowings as at 31 December 2023 are £138.1m - comprising of £82.3m (net of £0.1m unamortised loan issue costs) of 5.375% First Mortgage Debenture Stock 2031, £26.8m of bank debt (net of cash) and £29.0m of lease liabilities. There were a further £79.2m of undrawn revolving credit facilities at the half-year.

Actively managing our assets

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

In addition to the further roll-out of CitiCharge EV charging in our car parks we have added two further car parks under management to the CitiPark portfolio, bringing the total to 20.

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 has an estimated gross development value (GDV) of over £400m, 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

Our Dale and Burlington Street surface car parks are key components of the Piccadilly Basin Strategic Regeneration Framework ('SRF'). We are currently looking at refreshing this SRF to bring it up to date and relevant in order to unlock the potential of this truly unique part of the city centre.

Whitehall Riverside

Having secured detailed planning consent for both the No5 Whitehall Riverside office building and neighbouring Multi-Storey Car Park we are progressing with both the detailed design and potential tenants.

Merrion Estate

In December 2023 a planning application was submitted for student accommodation as part of the Merrion Centre's evolution. For the first time, the Merrion Centre is looking to introduce residential accommodation to its ever changing, dynamic offering that has been proudly part of the retail, office and leisure landscape of Leeds for the last 60 years.

In a bid to address the burgeoning demand for accommodation in the area, this planning application introduces two new buildings within the Merrion Centre. These structures are designed to deliver 1,110 student bedrooms, comprising a range of studios and cluster bedrooms. The student accommodations will be complemented across both buildings with a range of amenities, including residents' lounges, co-working spaces, meeting spaces, cinema, gym, karaoke room, secure cycle spaces and external terraces.

CitiPark recovering well, capital light growth continuing with a further two car parks under management

Our underlying car park business is resilient and the addition of two further car park management agreements brings the number of car parks operated under the CitiPark brand to 20.

Over the last 18 months we have been developing our own CitiPark barrierless car park management system which we are now rolling out across all branches, which will enable the car park business to benefit from both operational and financial efficiencies over the coming years.

Our CitiCharge division continues to grow and now has 51 EV chargers with a further 8 installs in the pipeline across the Group's car park portfolio. In addition we manage a further 77 EV chargers with NHS, commercial and retail partners.

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 CitiCharge 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. In November 2023 we supported the Yorkshire Children's Charity with a fundraising event held at DriftStop within the Merrion Centre which brought together business leaders, professionals and community members for the evening.

As at 31 December 2023 the number of vehicles operated through the Company's electric vehicle salary sacrifice scheme had increased to five with a further order currently in the pipeline.

Following its inception in 2022, the Sustainability and Climate Change committee have been working to develop and implement the sustainability strategy of the Company. Since the year end, formal terms of reference have been approved and adopted by the Board for the committee.

Tender Offer

We launched a tender offer for the Company's shares in November 2023 which successfully bought in for cancellation 6,292,920 shares in the Company at 145p per share. The transaction costs in connection with this tender, which was on top of the 145p per share, amounted to £315,000 or 5.0p 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 per share that results from reducing the number of shares in issue. This is particularly the case given the significant discount that the tender offer price was relative to reported net asset value.

Following the tender offer, the percentage of ordinary shares in the Company held beneficially by the public fell below the 35% threshold required for the Company not to be considered a 'close company' for UK taxation purposes. As such, the Company automatically lost its REIT status with effect from 30 June 2023. The loss in REIT status will result in the Group's profits and gains being subject to corporation tax, from 1 July 2023, at the standard corporation taxation rate of 25%.

Further information regarding the close company condition and the implications and consequences of the loss of REIT status, were set out in Part IV (Risk Factors) and in Section B (the UK REIT Regime and UK Taxation) of Part VI of the 8 November 2023 circular to shareholders.

Outlook

The trading performance reported in the six months ended 31 December 2023 is continuing into the opening months of 2024.

Overall, the business has now been reset, with a more diverse portfolio of assets, lower levels of gearing and more importantly historically low levels of variable rate borrowings and we are now looking predominantly at bringing forward our development pipeline

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 in the United Kingdon. The interim management report includes a fair review of the information required by DTR 4.2.4, 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 52 of its annual report and accounts 2023 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 2023 annual report.

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

19 March 2024

Consolidated condensed income statement

for the six months ended 31 December 2023

Consolidated condensed statement of comprehensive income

for the six months ended 31 December 2023

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 2023

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 2023

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 2023

The Consolidated Cash Flow Statement should be read in conjunction with Note 14.

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 19 March 2024.

The comparative financial information for the year ended 30 June 2023 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 2023 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 2023. The financial information for the six months ended 31 December 2023 and 31 December 2022 is unaudited.

Significant accounting policies

The accounting policies adopted are consistent with those of the previous financial year, although as the Group left the REIT regime with effect from 1 July 2023 the accounting policy on taxation has been expanded to provide additional disclosure specifically around the transition out of the REIT regime. Further details around this policy are detailed below.

The group's financial performance is not seasonal.

In the current environment, the directors consider 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 2023).

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.

Taxation

The Group's tax expense comprises both current tax and deferred tax expense.

Current tax is the expected tax payable on taxable profit for the year and is calculated using tax rates and laws substantively enacted at the balance sheet date.

A deferred tax asset represents a tax deduction that is expected to arise in a future period. It is only recognised to the extent that it is probable that the tax deduction will be capable of being offset against taxable profits and gains in future periods. A deferred tax liability represents taxes which will become payable in a future period as a result of a current or prior year transaction. Deferred tax assets and liabilities are netted off on the balance sheet. The tax rates used to determine deferred tax are those enacted or substantively enacted at the balance sheet date that are expected to apply when the deferred tax asset or liability are realised.

Current tax and deferred tax are recognised in the consolidated income statement except when it relates to items recognised in other comprehensive income or directly in equity, in which case it is credited or charged to other comprehensive income or directly to equity respectively.

In the period from 2 October 2007 to 30 June 2023 the Company elected for Group REIT status. During this period the Group did not recognise any deferred tax assets as there was insufficient evidence to support that there would be any future taxable profits in the Group.

The Group left the REIT regime with effect from 1 July 2023 and the profits of the Group are now all subject to corporation tax. This has resulted in the recognition of a deferred tax asset relating to trading losses from previous periods where there is sufficient evidence that they will be offset against future taxable profits.

Use of estimates and judgements

With the exception of taxation, 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.

Taxation

Significant judgment is required in determining the provision for income tax and the calculation of any deferred tax balances. The Group recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts initially recorded, such differences impact the income tax and deferred tax provisions in the period in which such determination is made. Some subsidiaries have generated or generate tax losses. Often these can be used to offset taxable gains of subsequent periods. The Group monitors the development of such tax loss situations. Based on the business plans of the Group, the recoverability of such tax losses is determined. In the case that a tax loss is deemed to be recoverable, the recognition of a deferred tax asset for such a tax loss is then decided. This judgement resulted in the recognition of a deferred tax asset as at 1 July 2023 of £2,429,000.

Going concern

The financial information for the six months ended 31 December 2023 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 £3.8m at 31 December 2023 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 2023, arising from car park operations, was £1,018,000. After allowing for an allocation of administrative expenses, the operating profit at these sites was £674,000.

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. Taxation

The Company left the REIT regime with effect from 1 July 2023, therefore the profits of the Company are now subject to corporation tax.

5. Dividends

A final dividend in respect of the year ended 30 June 2023 of 2.5p per share was approved at the company's annual general meeting (AGM) on 1 December 2023 and was paid to shareholders on 4 January 2024. The entire dividend was paid as an ordinary dividend.

An interim dividend in respect of the year ending 30 June 2024 of 2.5p per share is proposed. This dividend, based on the shares in issue at 19 March 2024, amounts to £1.054m which has not been reflected in these interim accounts and will be paid on 14 June 2024 to shareholders on the register on 24 May 2024. This dividend will be paid entirely as an Ordinary Dividend.

6. Earnings per share

The calculation of basic earnings per share has been based on the loss for the period, divided by the number of shares in issue. The weighted average number of shares in issue during the period was 47,532,181 (2022: 49,685,860).

EPRA earnings for the 6 months ended 31 December 2023 includes a tax credit £1,675,000 relating to the recognition of a deferred tax asset for historical trading losses.

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

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

7. Tangible fixed assets

(a) Investment properties - property rental business

 (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 (30 June 2023: £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 5.9% - £192.8m, Valuation at 7.9% - £143.9m

Valuation at a reversionary yield of 7.3% - £187.4m, Valuation at 9.3% - £147.1m

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 £26.4m 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 - valuation increase to £31.0m, 1% increase in the yield/discount rate - valuation decrease to £22.9m

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