Last checked at 23 Jun 2008 07:00
23 June 2008
Wynnstay Properties PLC
"the Company" or "Wynnstay"
Preliminary Results for Year Ended 25th March 2008
CHAIRMAN'S STATEMENT
I am pleased to report that the disruption in the financial markets and the slowdown in the commercial and residential property markets, which have been extensively reported in the media, have not materially affected the performance of your Company and that for the year ended 25th March 2008 the Company has delivered a very satisfactory financial performance, which provides a sound base for further growth.
Overview of financial results
| The financial results may be summarised as follows: | |||
| Change | 2008 | 2007* | |
| ● Net income before property revaluation, disposals and taxation | + 51.8% | £862,000 | £568,000 |
| ● Dividends per share, paid and proposed: | + 6.2% | 9.45p | 8.9p |
| ● Net asset value per share: | + 4.1% | 550p | 528p |
| ● Adjusted net asset value per share ** | + 2.0% | 572p | 561p |
* 2007 figures have been restated in accordance with International Financial Reporting Standards.
** Adjusted net asset value per share is net asset value determined in accordance with International Financial Reporting Standards and adjusted to exclude the provision for deferred tax on unrealised gains arising on the revaluation of the investment portfolio.
The growth in net income before property revaluation, disposals and taxation in 2008 reflects both the receipt of the lease surrender of £135,000, referred to later in this statement, as well as the substantial reduction in finance costs following the sale of property in 2007 and the resultant loan repayment.
As with the interim results on which I reported in November 2007, the financial statements included in this report have been prepared in accordance with International Financial Reporting Standards (IFRS) rather than, as previously, under UK Generally Accepted Accounting Principles (GAAP). The main impact of this change is a requirement to provide for deferred tax on unrealised gains which could potentially arise from the annual revaluation of investment properties in the portfolio to their market value. In previous years, this liability was quantified and reflected in the notes, rather than actually being provided for in the financial statements. The deferred tax provided in the financial statements at the year end amounts to £693,000, which equates to 22p per share.
As Wynnstay is an investment company, and this tax liability would only arise in the event of a disposal of properties in the portfolio, we have, in common with many other property companies, shown our net asset value per share in the summary above and in the financial statements both is in accordance with IFRS as well as adjusted to exclude this tax liability.
Property Management
Property income rose by just under 2% reflecting a number of new leases and licences granted and satisfactory rent review settlements negotiated during the year, notably at our retail premises in Gosport and at our industrial unit at Alton. Paul Williams has engaged actively and positively with our tenants and, as a result, the portfolio is fully income producing with the exception of one small office suite in Colchester and, once again, we have not suffered from any bad debts during the year.
Portfolio
As at 25th March 2008, our Independent Valuers, Sanderson Weatherall, have undertaken the annual valuation of the company's portfolio at £21,380,000, representing a like-for-like reduction of £135,000, or under 1%, over the year. This is a very satisfactory outcome given conditions in the market and reflects well on our sale and purchase strategy as well as on our choice of investments. Whilst a general softening of yields and well-publicised unfavourable conditions in the commercial property market generally led to reductions in value for some properties, in our case this was counterbalanced by increases in value for others reflecting new leases granted, successful rent reviews or changes in lease conditions securing longer term rental income.
During the year Paul Williams has been very active in seeking out new opportunities. As I have made clear in the past, it is important to be selective in making additions to the portfolio and during the year we have been offered a number of investments in southern England and the south Midlands.
Just before the year end, we entered into negotiations to purchase an industrial estate at Aylesford in Kent and I was pleased to be able to announce its acquisition on 2nd June. This freehold industrial/warehouse estate built in the early 1980's comprises 18 self-contained units of varying size, in three blocks totalling just over 50,430 sq.ft and was acquired for £4,530,000. The estate, which is now our largest single asset by value, is fully let to 15 tenants and currently produces an annual total rent of £367,204. It fits very well with our property acquisition requirements in terms of type, location and size and will provide opportunities for active asset management which should be value enhancing in the medium to longer term.
We have continued to evaluate the prospects for the redevelopment and change of use of certain of our properties. This is a time-consuming process but one which, where we are successful in obtaining planning permission, is considered capable of delivering further value to Shareholders.
Following the revaluation, as at the year end the industrial sector within the portfolio accounted for 63% by value, with the retail and office elements comprising 24% and 13% respectively. Following the addition of the recently acquired Aylesford estate referred to above, the industrial sector now accounts for 70% by value, with the retail and office elements comprising 20% and 10% respectively.
Borrowings and Gearing
Last year we were able to fully repay our variable rate borrowings, although the unutilised element of the facility remained fully available for drawdown to finance future acquisitions and has in fact been used to finance the acquisition of the Aylesford estate. Net borrowings at the year end were £2.71 million, compared with £3.16 million last year and, with Shareholders' Funds having increased by £ 0.7 million, net gearing at the yearend fell to 15.6% compared with 19.0% last year on a like-for-like basis.
Costs
As I reported at the interim stage, we undertook a review of our fixed overheads and took certain decisions that will significantly reduce our running costs. In addition, you will have noted that we have reclassified this year certain direct property costs that in prior years had been included in administrative costs. In addition to other cost reduction exercises, in December we were able to surrender the lease of our offices for which we received a capital payment of £135,000 which is reflected in the income statement, and we have since relocated to smaller and more cost-effective premises in Holborn. The relocation gave rise to certain one-off costs, but significant overhead savings of in excess of £100,000 per annum are anticipated for the current year and thereafter.
Taxation
Tax in the income statement beneficially reflects a tax credit of £155,000 following the changes to the industrial buildings allowance regime. Furthermore, following the revaluation of the investment property portfolio on 25th March 2008, the deferred tax provision has been reduced by £328,000.
Dividend
The Directors are recommending a total dividend for the year of 9.45p per share, compared with 8.9p last year, representing a 6.1% increase. An interim dividend of 2.6p was paid in December 2007 and, subject to approval of Shareholders at the Annual General Meeting, a final dividend of 6.85p per share will be paid on 1 August 2008 to Shareholders on the register on 4 July 2008.
Outlook
When I wrote to you in June 2007 with our results for last year, I remarked that a number of commentators had been calling the top of the property investment market for some time. In my interim statement in November 2007, I noted that financial markets had witnessed a period of significant dislocation and uncertainty as a result of the so called "credit crunch" originating from the problems in the US sub-prime lending market but which rapidly spread to banks and markets elsewhere, including the UK, and that this had begun to have an effect on the commercial property market.
Whilst the effect on the commercial property market has been severe, with some retail funds being forced to divest to meet redemption demands from investors and a much reduced deal flow, it has not materially affected your Company which remains in a strong financial position, with a diverse portfolio and low gearing. Indeed, as in the case of our Aylesford acquisition, the present uncertainty in the market may provide further opportunities for us to invest in commercial property on appropriate terms where we can see medium to long-term benefits for Shareholders.
One consequence of the events in the financial markets has been the peaking and subsequent reduction of interest rates which is advantageous for your Company. However, continued uncertainty in interbank lending has meant that the benefit of reductions in base rate have not been passed on to borrowers who are borrowing on a variable rather than a fixed rate basis.
Board and Management Changes
As reported last year Peter Kirkland, our Finance Director and Company Secretary, retired following the Annual General Meeting in July. Toby Parker was appointed as a Director on 26th July 2007 and to the position of Company Secretary with effect from the beginning of August 2007. I am pleased to report that he has settled in extremely well and has made a very positive contribution, working effectively with Paul Williams, especially in relation to the arrangements for our office move and the upgrading of our accounting systems.
Annual General Meeting
Our Annual General Meeting will be held at the Royal Automobile Club at 12 noon on Wednesday 16th July 2008. We had an excellent attendance last year and received positive feedback from a number of Shareholders. As always, I would encourage as many Shareholders as possible to attend this important event which provides an opportunity to learn more about Wynnstay and to meet the Directors as well as other Shareholders.
Colleagues and Advisers
I would like to express my grateful appreciation to Paul Williams and Toby Parker, to my fellow Directors and to our professional advisers for their support and advice throughout the past successful year.
Philip G.H. Collins
Chairman
Enquiries:
Wynnstay Properties plc
Paul Williams, Managing Director
Toby Parker, Finance Director - 020 7745 7160
Nominated Adviser & Broker
Charles Stanley Securities
Rick Thompson / Carl Holmes - 020 7149 6000
CONSOLIDATED INCOME STATEMENT YEAR ENDED 25TH MARCH 2008
| 2008 | 2007 | |
| £'000 | £'000 | |
| Property Income | 1,565 | 1,536 |
| Property Costs | (92) | (83) |
| Administrative Costs | (554) | (552) |
| ------------ | ------------ | |
| 919 | 901 | |
| Movement in fair value of: | ||
| Investment Properties | (135) | 2,595 |
| Other investments | (1) | 1 |
| Profit on Disposal of Investment Properties | - | 1,046 |
| ------------ | ------------ | |
| Operating Income | 783 | 4,543 |
| Investment Income | 38 | 16 |
| Other Income | 135 | - |
| Finance Costs | (229) | (350) |
| ------------ | ------------ | |
| Net Income before Taxation | 727 | 4,209 |
| Taxation | 251 | (464) |
| ------------ | ------------ | |
| Net Income after Taxation (attributable to equity holders of the parent) | 978 | 3,745 |
| Dividends paid | (286) | (266) |
| ------------ | ------------ | |
| Profit Retained | 692 | 3,479 |
| ====== | ====== | |
| Basic earnings per share | 31.0 | 118.7 |
| Normalised earnings per share | 31.0 | 85.5 |
CONSOLIDATED BALANCE SHEET AT 25TH MARCH 2008
| 2008 | 2007 | |
| £'000 | £'000 | |
| Non Current Assets | ||
| Investment Properties | 21,380 | 21,515 |
| Other property, plant and equipment | 11 | 15 |
| Investments | 3 | 4 |
| ------------ | ------------ | |
| 21,394 | ,534 | |
| Current Assets | ||
| Accounts Receivable | 152 | 422 |
| Cash at Bank and in Hand | 888 | 637 |
| ------------ | ------------ | |
| 1,040 | 1,059 | |
| Current Liabilities | ||
| Accounts payable | (557) | (939) |
| Income tax payable | (221) | (7) |
| ------------ | ------------ | |
| (778) | (946) | |
| ------------ | ------------ | |
| Net Current Assets | 262 | 113 |
| Total Assets Less Current Liabilities | 21,656 | 21,647 |
| Non-Current Liabilities | ||
| Loans payable | (3,600) | (3,800) |
| Deferred Tax | (693) | (1,176) |
| ------------ | ------------ | |
| Net Assets | 17,363 | 16,671 |
| ====== | ====== | |
| Capital and Reserves | ||
| Share Capital | 789 | 789 |
| Capital Redemption Reserve | 205 | 205 |
| Share Premium Account | 1,135 | 1,135 |
| Retained Earnings | 15,234 | 14,542 |
| ------------ | ------------ | |
| Equity attributable to equity holders of the parent | 17,363 | 16,671 |
| ====== | ====== |
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 25TH MARCH 2008
| 2008 | 2007 | |
| £'000 | £'000 | |
| Cash Flow from Operating Activities | ||
| Operating Income | 783 | 4,543 |
| Depreciation | 9 | 4 |
| Profit on disposal of investment properties | - | (1,046) |
| Decrease/(Increase) in fair value of investment properties | 135 | (2,595) |
| (Decrease) in fair value of investment | (1) | (1) |
| Decrease/(Increase) in accounts receivables | 269 | (56) |
| (Decrease)/Increase in accounts payable | (359) | 360 |
| Income tax paid | (40) | (131) |
| ----------- | ----------- | |
| Net cash from operating activities | 796 | 1,078 |
| ====== | ====== | |
| Cashflow from investing activities | ||
| Interest and Other income received | 172 | 15 |
| Interest payable | (226) | (361) |
| Sale of property, plant and equipment | - | 2,062 |
| Purchase of property, plant and equipment | (5) | (7) |
| ----------- | ----------- | |
| Net cash from investing activities | (59) | 1,709 |
| ====== | ====== | |
| Cashflow from financing activities | ||
| Dividends paid | (286) | (266) |
| Repayments on bank loans | (200) | (2,200) |
| ----------- | ----------- | |
| Net cash from financing activities | (486) | (2,466) |
| ====== | ====== | |
| Net increase in cash and cash equivalents | 251 | 321 |
| Cash and cash equivalents at beginning of period | 637 | 316 |
| ----------- | ----------- | |
| Cash and cash equivalents at end of period | 888 | 637 |
| ====== | ====== | |
Notes:
1. The financial information above does not constitute full accounts within the meaning of Section 240
Companies Act 1985 as amended (the 'Act'). Full accounts in respect of the year ended 25th March
2008, on which the auditors reported without qualification and which contained no statement under
Section 237 (2) or (3) of the Act, have been delivered to the Registrar of Companies.
2. Basic earnings per share are calculated by dividing net income after taxation attributable to Ordinary
Shareholders of £978,000 (2007: £3,745,000) by the weighted average number of 3,155,267 ordinary
shares in issue during the period (2007: 3,155,267). There are no instruments in issue that would have the
effect of diluting earnings per share.
3. A final dividend of 6.85p (2007: 6.45p) per share is being recommended and will be paid on 1st August 2008,
to Shareholders on the register at the close of business on 4th July 2008.
4. The 2008 Annual Report & Financial Statements are being posted to Shareholders today and copies may be
obtained by writing to the Secretary, Wynnstay Properties PLC, 18 Southampton Place, London WC1A 2AJ.
5. The Company's Annual General Meeting will be held at 12 noon on Wednesday 16th July 2008 at The Royal
Automobile Club, 89 Pall Mall, London SW1Y 5HS.