Town Centre Regulatory News (TOWN)

15 February 2012

TOWN CENTRE SECURITIES PLC

Half year results for the six months ended 31 December 2011

Town Centre Securities PLC, the Leeds based property investment and development company, today announces its results for the six months ended 31 December 2011.

Financial Highlights:

• Underlying profit before tax £4.0m (2010: £4.4m)

• Underlying earnings per share 7.6p (2010: 8.3p)

• Net asset value per share 284p (2010: 277p; June 2011: 288p)

• Triple net asset value per share 305p (2010: 314p; June 2011: 341p)

• Statutory profit after tax £1.8m (2010: £7.8m) includes revaluation deficit of £2.2m (2010 surplus of £3.2m)

• Basic earnings per share 3.4p (2010: 14.7p)

• Discount to net asset value of 44.9% at 14 February 2012 closing share price of 156.5p

• Discount to triple net asset value of 48.7%

• Proposed interim dividend of 3.1p (2010: 3.1p)

• Gross borrowings £142.5m (2010: £144.6m). Gearing 94% (2010: 98%)

Operational Highlights:

• Overall occupancy level increased to 97.2% (2010: 95.6%; June 2011: 96.9%)

• Refinancing completed with RBS (5 years) and Lloyds (4 years). New four year Handelsbanken facility.

• Merrion Centre:

- trading well with footfall up by 1% for the half year including 7.6% in December

- Merrion Street refurbished retail units completed and let

- Merrion Way 'New Front' project progressing

• Good performance at Urban Exchange, Manchester following openings of M&S and Pure Gym

• Completed solar installation at Clarence Dock car park

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

"Town Centre Securities is weathering the current economic conditions well despite 2011 being a difficult period for retailers. 

We see attractive opportunities in our existing portfolio and are pursuing these as a priority. Managing our assets and our focus on value for money retailing remains central to our strategy ensuring that we maintain income generation at a level that sustains the business and our dividend."

Chairman and Chief Executive's Statement

Introduction

Town Centre Securities is weathering the current economic conditions well despite 2011 being a difficult period for retailers. 

Our focus on value for money retailing means that our properties, in particular The Merrion Centre, are fulfilling a consumer need and consequently our underlying profitability has remained strong. As a reflection of this and as a result of continued investment in our portfolio, our investment property valuation in the first six months of our financial year has remained stable.

We are very optimistic about the future for the Merrion Centre even in these challenging times. Our proposals to redevelop the Merrion Way frontage and the Merrion Multi Storey Car Park continue to progress. This is another significant step in the ongoing regeneration of the Centre.

I am delighted to report that we have completed our refinancing of £90m of revolving credit facilities. Along with our long term debenture (£106m) this provides the business with secure funding for the foreseeable future. It demonstrates confidence by RBS and Lloyds with whom we have renewed facilities and Handlesbanken who join our banking group.

Results

Underlying profit before tax for the six months ended 31 December 2011 amounted to £4.0m (2010: £4.4m). Underlying earnings per share amounted to 7.6p (2010: 8.3p). Statutory profit before tax amounted to £1.8m (2010: £7.8m). This reflects the first half valuation movement, a reduction of £2.2m. (2010: increase of £3.2m).

Rental income from investment properties was £8.8m (2010: £8.9m). Taking into account disposals last year, this is a positive performance. Across the entire portfolio, after significant management activity, income rose by 1% on a like for like basis with income from our lettings at Urban Exchange in Manchester offsetting reductions elsewhere. At the Merrion Centre, our largest asset, rental income remained stable. Overall voids are 2.8% (2010: 4.4%; June 2011: 3.1%), a good result in such a difficult environment. 

Income from car parks was £2.3m (2010: £2.4m) and after operating costs this business delivered a profit of £1.1m (2010: £1.3m).

For the business as a whole, property expenses reduced slightly to £1.9m (2010: £2.0m) and administrative expenses remained steady at £2.0m (2010: £2.0m). 

Net finance costs increased to £3.5m (2010: £3.3m) as a result of interest rate hedging entered into in March 2011. Future interest costs will increase due to the refinancing completed in December.

Net assets are £151.0m, a reduction of £1.9m compared to June 2011 when they amounted to £152.9m. Net assets per share are 284p (2010: 277p; June 2011: 288p).

Dividends

The interim dividend, which will be paid as a Property Income Distribution ("PID"), has been held at 3.10 pence per share. The dividend will be paid on 28 June 2012 to shareholders registered on 1 June 2012.

Review of activities

We completed the refurbishment of the Merrion Street retail units during the period which are now let to KFC and Coral. We also signed an agreement to lease with Poundworld at the end of December. The Merrion Centre as a whole has traded well with footfall in December up by 7.6% and by 1% for the six month period. 

In December we received planning permission for our 'New Front' project at the Merrion Centre. The scheme is to include 50,000 sq ft of new leisure units together with the refurbishment and enhancement of the 1,000 space Multi Storey Car Park. We anticipate the scheme progressing once sufficient prelets have been secured.

We are encouraged by the trading performance of M&S, GO Outdoors, Pure Gym and ALDI at Urban Exchange in Manchester. We continue to actively market the property as a retail destination in its own right.

We have continued to focus on asset management in the first half and have worked exceptionally hard on lettings and lease renewals achieving a reduced void level of 2.8% (2010: 4.4%; June 2011: 3.1%). Our expectation, however, is that there may be pressure on occupancy rates during the second half given economic circumstances.

We experienced six administrations in the period with a further four since the half year end although the majority of these tenants continue to trade. Rental collections were exceptionally strong with over 98% of rentals collected within five days of the due date at both the September and December quarters.

The installation of a solar photovoltaic scheme on the top floor of Clarence Dock car park in Leeds was completed at a cost of £0.4m and became operational in August benefitting from higher Feed In Tariff income as well as a reduction in energy costs which are in line with expectations.

We made one disposal during the period which was our retail property at Wood Green for £1.35m (book value £1.34m).

Car parking

Car park revenues for the period amounted to £2.3m (2010: £2.4m). Marketing initiatives at the Merrion Centre car park have increased car park income and helped to drive Merrion Centre footfall. We have invested in resources to grow income which led to a reduction in profitability in the period.

Financing

Gross borrowings at 31 December 2011 were £142.5m (31 December 2010: £144.6m; 30 June 2011: £140.5m). Together with our existing £106m First Mortgage Debenture Stock which matures in 2031, we now have £90m of revolving credit facilities following our bank refinancing as well as a £5m overdraft facility. These loans, with RBS, Lloyds and Handelsbanken, expire in 2015 and 2016.

Valuation

Our investment properties were valued at 31 December 2011 at £281.8m, of which £277.7m was valued by our external valuers, Jones Lang LaSalle and CB Richard Ellis. £4.1m of investment property and our development properties of £13.4m were valued by the directors and remained unchanged. The valuation deficit for the period was £2.2m.

The initial yield on the investment portfolio is 7.1% (June 2011: 7.0%).

Outlook

The uncertainty in the economy as a whole and particularly in the retail sector, leads us to adopt a cautious attitude towards the market. The tenant administrations we have experienced are being proactively managed. The majority of the affected properties remain occupied and trading and we are confident that the properties will be relet quickly. We see attractive opportunities in our existing portfolio and are pursuing these as a priority.

Managing our assets and our focus on value for money retailing remains central to our strategy ensuring that we maintain income generation at a level that sustains the business and our dividend.

At a time like this I am particularly appreciative of our talented and dedicated staff for their continued commitment, hard work and support.

Edward M Ziff

15 February 2012

Consolidated income statement

for the six months ended 31 December 2011

The Directors have approved an interim dividend of 3.10p per share (2010: 3.10p). The 2011 final dividend was £3.9m (for the six months ended 31 December 2010: £3.9m).

Consolidated statement of comprehensive income

for the six months ended 31 December 2011

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

Consolidated balance sheet

Consolidated statement of changes in equity

1 Other reserves on the balance sheet consist of the hedging reserve and capital redemption reserve in the table above.

Consolidated cash flow statement

The Consolidated Cash Flow Statement should be read in conjunction with Note 11.

Notes to the consolidated interim financial information

1. Basis of preparation

General information

Town Centre Securities PLC ("the Company") is a public limited company domiciled in the United Kingdom. Its shares are listed on the London Stock Exchange. The Consolidated Financial Statements of the Company for the year ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the "Group"). 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 for issue on 15 February 2012.

This interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2011 were approved by the Board of Directors on 13 September 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

This interim financial information has not been reviewed nor audited.

Basis of preparation

This interim financial information for the half year ended 31 December 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting', as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 30 June 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

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

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

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

Going concern basisThe Directors have reviewed the cash flow forecasts of the Group and the underlying assumptions on which they are based. The Directors consider that the Group has adequate financial resources, tenants with appropriate leases and covenants, and properties of sufficient quality to enable them to conclude that the Company will continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis of accounting in preparing its Consolidated Interim Financial Statements.

Principal risks and uncertainties

The Group set out on page 22 of its Annual Report and Accounts 2011 the principal risks and uncertainties that could impact its performance; these remain 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.

Our key risks relate to property valuations, availability of finance, occupancy levels and future income. Property values are currently stable and we have sufficient bank facilities and headroom in place. The Group has no over reliance on any one tenant or sector and has a skilled and experienced team of asset managers dealing with day-to-day management of our portfolio.

Forward-looking statementsCertain statements in this interim 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.

2. Revenue and underlying profit before taxation

3. 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. Management has determined the operating segments based on these reports.

Segment assets

Segmental results

4. Property expenses

5. Administrative expenses

6. Dividends

A final dividend in respect of 2011 of 7.34p per share was approved at the Company's Annual General Meeting on 30 November 2011 and paid to shareholders on 4 January 2012. This dividend comprised an ordinary dividend of 1.09p per share and a Property Income Distribution ("PID") of 6.25p per share.

An interim dividend in respect of 2012 of 3.1p per share is proposed. This amounts to an estimated dividend of £1.6m which has not been reflected in this report and will be paid on 28 June 2012 to shareholders on the register on 1 June 2012.

This dividend will be paid entirely as a PID.

7. Earnings per share

The diluted earnings per share as at 31 December 2011 is 3.4p per share and underlying is 7.6p (2010: 14.7p, underlying: 8.3p; 30 June 2011: 28.8p, underlying: 15.1p).

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

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

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

8. Tangible fixed assets

(a) Investment properties

(b) Development properties

(c) Fixtures, equipment and motor vehicles

9. Investments in joint ventures

10. Called up equity share capital

Authorised

164,879,000 (30 June 2011: 164,879,000) ordinary shares of 25p each.

Issued and fully paid

11. Cash flow from operating activities

Responsibility statement of the directors

for the six months ended 31 December 2011

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.

The Directors of Town Centre Securities PLC are listed in the Annual Report for 30 June 2011. A list of current directors is maintained on the Town Centre Securities PLC Group website: www.tcs-plc.co.uk.

Edward Ziff Chris Kelly

Chairman and Chief Executive Finance Director

15 February 2012