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Town Centre Securities PLC   -  TOWN   

Half year results

Released 07:00 26-Feb-2020

RNS Number : 1046E
Town Centre Securities PLC
26 February 2020
 

26 February 2020

Town Centre Securities PLC

(the 'Group' or the 'Company' or 'TCS') 

Half year results for the six months ended 31 December 2019

Delivering a resilient first six months, with continued investment in the portfolio 

Town Centre Securities PLC, the Leeds, Manchester, Glasgow and London property investment, development and car park operator, today announces its results for the six months ended 31 December 2019.

 Financial Performance

·     Interim dividend unchanged at 3.25p (2018: 3.25p)

·     The Company has applied IFRS 16 lease accounting standard for the first time which has reduced earnings by £0.3m. Going forward, the Company will also report Adjusted EPRA Earnings which removes the effect of IFRS 16

·     Adjusted EPRA Earnings before tax increased to £4.4m (2018: £3.7m), mainly driven by one off dilapidations income in the current year. EPRA Earnings were £4.1m (2018: £3.7m)

·     Adjusted EPRA earnings per share at 8.2p (2018: 6.9p). EPRA EPS at 7.7p (2018: 6.9p)

·     Statutory loss before tax of £0.2m with EPRA Earnings offset by unrealised valuation movements (2018: £8.7m loss)

·     Net assets per share down 3.2% since 30 June 2019 at 343p (2018: 361p; 30 June 2019: 354p)

·     Like for like portfolio value decreased by 1.2%

·     Merrion Estate increased in value by 0.3% including capex, driven by asset management initiatives

·     Net borrowings have continued to decrease to £174.0m excluding finance leases / IFRS 16 (30 June 2019: £177.5m)

·     Loan to value ratio of 48.5% (30 June 2019: 48.8%) (excluding finance leases / IFRS 16)

 

Operational Performance

·     Robust underlying operational performance

·     Like-for-like (LFL) passing rent up by 0.4% (FY19: 2.6%) versus a year ago, excluding the effect of Milngavie and The Cube redevelopment projects

·     Overall occupancy level increased to 96.7% (June 2019: 95.8%)

·     Retail & leisure exposure reduced to 49%, from 70% in 2016. Pure retail now only accounts for 35% of the portfolio by value

·     CitiPark continued to grow its revenues and operating profits

Operational Highlights

 

TCS continues to focus on delivering long term stable returns by investing in and repositioning the portfolio, unlocking the latent potential within the sizeable development pipeline, and maximising available capital. Particular progress to be highlighted includes:

 

·     Actively managing our assets - we have completed or renewed 42 leases since June 2019 and continue to see strong demand for our properties, at stable rental levels:

o Merrion Estate income has increased and the valuation, both including and excluding offices, has increased.

o Merrion footfall increased over the past 12 months, with the final ten weeks of the year particularly strong, up 6.7% on the prior year.

o New and renewed tenants include Co-op, Dominos, We are Cow, OKA, Greggs, and Whittard.

o Only one new administration and no new CVAs in the six months to 31 December 2019; the administration related to a small leisure unit in Leeds with annual rent of £125,000, with offers in place to re-let.

·     Maximising available capital through disposals and capital recycling - headroom has increased to £29.4m (30 June 2019: £26.1m) and we continue to actively manage our capital position:

o We exchanged contracts to sell a retail unit in Shandwick Place, Edinburgh in December 2019. The sale is not recognised as a disposal as at 31 December 2019. It completed in January 2020 selling for £2.0m, 5% above valuation.

o In conjunction with our joint venture (JV) partner we refinanced our Burlington House JV company, repaying the development finance and entering into a nine year fixed rate facility with PRS Finance PLC as part of the government's Private Rented Sector Housing Guarantee Scheme, borrowing £13.8m at a fixed rate of 3.02%.

o It is our intention to continue to dispose of ex-growth retail assets, but only at the right price.

·     Investing in our development pipeline - we have a development pipeline with an estimated gross development value of over £600m:

o We won the "Apartment Developer of the Year (under 100 homes)" award at the Insider North West Residential Property Awards in January 2020 for our Burlington House development.

o We are progressing with our proposed joint venture with Leeds City Council to develop a 136-room apart hotel in Leeds, and work is anticipated to begin in the next six months.

·     Repositioning and refurbishing existing investment assets - we continue to invest in our recently acquired investment assets:

o We are investing £4m in The Cube offices in Leeds. Acquired in 2018, this investment will create 50,000 sq ft of quality office space, and deliver a post-investment running yield of over 8.5%.

o We are investing £2m in Ducie House in Manchester. Acquired in 2018, this asset is a 33,000 sq ft multi-tenant office space which we will improve and update, creating a more flexible office offering.

·     CitiPark performance strengthened and the business continues to diversify:

o Income up 3.8% year on year, with operating profit (pre IFRS 16) up 4.0%.

o Investment in technology continues with our new CitiPark app proving highly successful. In addition, we have technology in place that allows us to operate our own parking charge operation enabling removal of third-party costs.

o Investment in YourParkingSpace.co.uk continues to deliver promising results and we have increased our stake to 19.9%.

 

 

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

 

"In our sixtieth year I am pleased to report a resilient set of results and the continuation of our strong dividend track record. We continue to invest in our assets, with significant redevelopment schemes underway in both Leeds and Manchester. Progress with our development pipeline continues, and following the successful completion of our first dedicated PRS building, Burlington House, in Manchester, it's pleasing to have been awarded Insider's North West Apartment Developer of the Year. Plans for our next development, a joint venture with Leeds City Council to build a 136-room aparthotel, are progressing well.

"The active management of our portfolio has ensured delivery of resilient earnings and a stable valuation. Of particular note, is the increase in value of the Merrion Estate. The ongoing diversification of our portfolio, with our retail assets representing only 35% of the portfolio, will continue as we actively look to further sell retail assets."

 

-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

Mark Dilley, Group Finance Director      

 

MHP Communications                                                                                                           0203 128 8572

Reg Hoare/ Alastair de Kare Silver/ Florence Mayo                                                          tcs@mhpc.com

 

 

Chairman and Chief Executive's Statement

 

Results

Our results for the six months ended 31 December 2019 are reported under the new accounting standard for leases, IFRS 16. The new standard is effective for the first time in these interim statements, and our results for the year ended 30 June 2019 are not restated due to the adoption method used. The change in accounting has only affected the results of our CitiPark operation where we have a number of leased operating car parks. However, the impact is material at a group level. Therefore, we are introducing an additional measure of Adjusted EPRA Earnings which excludes the effect of IFRS 16 and as such makes comparison with the prior year more meaningful. In addition, given the non-cash nature of IFRS 16 we shall also use the Adjusted EPRA Earnings measure when considering dividend cover.

Adjusted EPRA earnings for the six months ended 31 December 2019 increased by 18.5% to £4.4m (2018: £3.7m) and Adjusted EPRA earnings per share increased to 8.2p (2018: 6.9p). Reflecting the diversified and intensively managed nature of our assets, the like for like portfolio decreased in value by only 1.2%, despite the continued pressure on retail valuations generally in the marketplace. The modest devaluation did give rise to a revaluation charge in the income statement of £4.6m driving a post IFRS 16 statutory loss of £0.2m (2018: loss of £8.7m).

The application of IFRS 16 for the first six months of the year had the effect of reducing both profits and net assets by £0.3m. A more detailed explanation of the impact of the new accounting standard is given later in this release.

Our Adjusted EPRA earnings are up £0.7m year on year, and this is driven by the following items:

·     Other income is up £0.7m from a year ago due primarily to receipt of £0.5m of dilapidations in relation to a tenant exit from The Cube in Leeds;

·     Administrative expenses are £0.2m lower year on year, as a result of a number of one-off professional fees incurred in the prior year;

·     Interest costs are £0.1m lower than last year due to our lower borrowing levels in the past six months (excluding the effect of IFRS 16).

Net revenue is down £0.1m year on year (excluding IFRS 16), with reductions in property income due to the disposal of Rochdale Retail Park in the prior year, mostly offset by increases in car park and hotel income, and income from our Milngavie redevelopment. In the full year we expect net revenue to be more significantly down year on year as a result of lower income from The Cube as we undertake its redevelopment. The one-off dilapidations income will help offset this in the full year.

Net assets of £182.2m (30 June 2019: £188.3m) reduced 3.2% from the year end, principally as a result of the unrealised revaluation deficit of £4.6m.  Net assets per share decreased to 343p (30 June 2019: 354p). Our property portfolio reduced in value by 1.2% like for like compared to June 2019. Whilst we experienced some pressure on retail valuations, this revaluation, similar to the June revaluation, continues to track better than the market. A combination of the diversified nature of our portfolio, the quality of our retail assets with its particular focus on supermarket, discount and convenience, our skill at intensively managing our assets, and our redevelopment programme have all supported our asset valuation. The fact that the Merrion Estate's retail and leisure valuation improved from the year end is a testament to the continued hard work of the TCS team, and strength of the mixed-use asset.

Borrowings

We have continued to lower our borrowing levels. As at 31 December 2019 net borrowings (excluding IFRS 16 impact and excluding finance leases) stood at £174.0m, £3.5m lower than at the year end and £8.4m lower than a year ago.

Our loan to value level reduced 37bps from the June year end to 48.5%, despite the reduction in asset values (excluding finance leases).

Dividends

The interim dividend of 3.25p per share (2018: 3.25p) will be paid as a property income distribution and will amount to £1.7m.  It will be paid on 26 June 2020 to shareholders registered on 29 May 2020.  The final dividend for 2019 of 8.50p per share was paid on 7 January 2020.

In our sixtieth year we proudly maintain our record of maintaining or increasing our dividend every year.

Delivering long term stable returns

This year Town Centre Securities celebrates its 60th anniversary. We are proud of our history and heritage and of our record of delivering stable and growing long term returns for our shareholders. We have increased or maintained our dividend every single year. Such performance benefits not just shareholders but also all of our stakeholders such as employees, suppliers and tenants. Our strategy looking forward is intent on continuing to deliver long term returns and entails:

·     Actively managing our assets to optimise income and capital growth

·     Maximising available capital by divesting of ex-growth assets and refinancing to lower loan to value (LTV)

·     Investing in our development pipeline, continuing to unlock existing opportunities and create new ones

·     Acquiring investment assets to diversify our portfolio across sectors, with a focus on Leeds and Manchester

In addition, it is important to recognise some of the unique elements of our business that enable confident delivery in our strategy. They include:

·     We are a regional investor - with 78% of the portfolio located in Leeds and Manchester, TCS offers exposure to these two strong and growing northern cities.

·     The Merrion Estate is a good quality, high footfall mixed use property with significant development opportunity.

·     We have an increasingly diversified portfolio, with a large development pipeline.

·     We have a resilient and strong tenant base with the like of Leeds City Council, Morrisons and Waitrose representing our largest tenants.

·     There is a very strong alignment between management and shareholder interests with the Ziff family concert party owning 51% of the business. The business has a history of long-term thinking and is focused on income delivery.

·     TCS's CitiPark car parking operation adds further diversity with strong profit delivery and future growth potential.

Actively managing our assets

Our team continue to work extremely hard to actively manage our estate, securing income, extending lease terms and working closely with our tenants to improve opportunity for them and to help create places that attract people and create communities. We have completed or renewed 42 leases since July 2019 and are pleased with the continued demand of tenants for our properties. In addition, in the six months to 31 December 2019 we have had only one new administration and no new CVAs. The administration related to a small leisure unit in Leeds with annual rent of £125,000.

The proportion of retail and leisure assets in the portfolio has reduced to 49% from 50% in June 2019, and down from 70% in 2016. Pure retail now represents only 35% of the total portfolio and of that a third is in the Merrion Estate, and a further third is supermarket, discount, and convenience retailing.

Key highlights of recent activity include:

The Merrion Estate:

Merrion footfall of 11.2m over the 12-month period was robust, marginally up year on year, with the final ten weeks of the year particularly strong seeing footfall up 6.7% on the prior year. In addition, the continued development of significant levels of student accommodation opposite the Estate give confidence in the likelihood of continued increases in footfall. In the past six months, we have already seen developments by Vita and London & Scottish complete, with further developments by the likes of Unite and Vita well under way.

·     All of our offices remain fully let. Within Town Centre House we have renewed leases on over 20% of the space, increasing our WAULT to expiry from 1.8 years to 5.4 years, and increasing rent per sq ft to £18.50.

·     We have a significant and growing Asian food offering as part of the Merrion Estate, and in the past six months have agreed terms adding a further three Asian restaurants. These build on the success of existing restaurant tenants including Blue Sakura, My Thai and Fuji Hero, as well as an Asian supermarket.

·     We have agreed leases for a new Domino's pizza offer, and a new 4,000 sq ft Co-op, both reflecting the increasing demand in the local area from the ongoing student development as well as the proximity of the Leeds Arena.

·     We completed an investment project on the Wade Lane mall which involved refurbishing and renewing exteriors, and extending units to add a further 500 sq ft of lettable space, which delivered an increase in income of over £75,000 pa.

Rest of the portfolio:

·     Vicar Lane, Leeds - whilst we continue to review the larger scale investment opportunity, we have agreed a new lease with We are Cow, a leading independent retailer specialising in vintage clothing, with income of £75,000 on a ten-year lease

·     The Headrow, Leeds - lease renewals with both Whittard (5 year) and Greggs (10 year)

·     West Park, Harrogate - ten-year lease renewals with both OKA and Cotswold Outdoor

·     Bath Street, Glasgow - fifteen-year lease to The Scotch Malt Whisky Society

Our intensive asset management has ensured we delivered underlying like-for like rental growth of 0.4% (excluding the effect of the new income from the redevelopment of Milngavie in Scotland, and the reduced income due to the redevelopment of The Cube in Leeds). We continue to maintain a high level of occupancy across the portfolio with the proportion of available to let space occupied at the 31 December 2019 standing at 96.7% (June 2019: 95.8%).

Maximising available capital

We continue to look to maximise available capital partly through the disposal of ex-growth assets. In December 2019 we exchanged contracts to sell a retail unit in Shandwick Place in Edinburgh. The 6,000 sq ft unit was empty but let for a remaining eight years to Morrisons, and has been sold for £2m, 5% above valuation, at a yield of 7%. This sale completed in January 2020, and is treated as a current asset held for sale in the half year balance sheet. We continue to explore opportunities to dispose of further retail assets, but as a strategic seller shall only do so for the right deal.

Total net borrowings at 31 December 2019 were £178.4m (30 June 2019: £181.9m), plus IFRS 16 financial liabilities of £25.4m. Excluding finance-leases the net borrowing is £174.0m, giving a loan to value (LTV) ratio of 48.5% (30 June 2019: 48.8%).  This improvement in LTV is calculated on a pre-IFRS 16 basis excluding both the IFRS increase in assets and liabilities in order to give a more meaningful and comparable result.

The total borrowings comprise of £105.9m (net of £0.2m unamortised lease incentives) of 5.375% First Mortgage Debenture Stock 2031, and £108m of revolving credit facilities, of which we had drawn £69.5m at the half-year. Previously classed finance leases of £4.4m, the new IFRS 16 financial liability of £25.4m and net cash of £1.4m make up the remaining balance.

As demonstrated in these interim results, we continue to manage capital conservatively and once again report a decrease in absolute borrowing levels.

In December 2019 we completed an important refinancing of our Burlington House joint venture. This development of our first PRS asset, located in Piccadilly Basin, Manchester, was part funded by TCS and our joint venture partner, Highgrove and partly by a development finance loan from the Manchester Housing Fund. In December the joint venture company repaid the development finance and entered into a nine-year fixed rate facility with PRS Finance PLC as part of the government's Private Rented Sector Housing Guarantee Scheme, borrowing £13.8m at a fixed rate of 3.02%. This refinancing provides long term certainty at an attractive rate of interest.

Investing in our development pipeline

TCS owns a significant development pipeline which gives the Company a clear and material opportunity to grow over time. The current pipeline has an estimated gross development value (GDV) of over £600m, 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.

TCS has a successful track record in obtaining planning and delivering strategic developments. In the last three years, TCS has delivered Merrion House office, let to Leeds City Council, two new hotels in Leeds, and Burlington House PRS scheme in Manchester. In addition, over that time frame we have secured planning permission for a 17-storey office tower above Merrion and Eider House, our second PRS scheme in Manchester.

We were extremely pleased to have won the "Apartment Developer of the Year (under 100 homes)" award at the Insider North West Residential Property Awards in January 2020 for our Burlington House development.

We are making good progress with our next development scheme. The 50/50 joint venture with Leeds City Council to develop a 136 room Apart-Hotel on George Street is in the final phase of the legal process. We are about to commence stage four design and work is anticipated to begin in the next six months.

The key components of the development pipeline include:

·     Piccadilly Basin, Manchester. Mixed residential, commercial, and car-parking with a total estimated GDV of circa £300m.

·     Whitehall Road, Leeds. Office, car-parking, and potentially leisure provision with a total estimated GDV of over £170m.

·     Merrion, Leeds. Office and residential towers with a total estimated GDV of over £100m.

·     George Street, Leeds. Aparthotel with an estimated GDV of £12m.

Unlocking these opportunities over time will require capital and we continue to explore how we might fund these future developments.

Acquiring investment assets

We are making significant investments in two office properties acquired in 2018; The Cube in Leeds, and Ducie House in Manchester. Both redevelopments will deliver upgraded and modernised offices in high demand locations and will enable TCS to increase rents and capital values.

The Cube, Leeds

We originally purchased The Cube from Aviva in 2018 for £12m at a yield of over 12.5%. The building comprises 22,000 sq ft of leisure space on the ground floor, with 50,000 sq ft of office space over three floors. It is located in central Leeds in close proximity to the Merrion Estate. This was a strategic purchase, as the two office tenants had served notice to end their leases in 2019. TCS always planned to further invest in the office at the point of exit of the tenants.

-      10,000 sq ft of office space has since been re-let to the existing tenant, the Secretary of State.

-      The other tenant has now vacated, paying a £0.5m dilapidations settlement which is reflected in the half year P&L, helping to mitigate lost rental income.

-      Redevelopment work has now commenced targeting completion in July 2020.

-      This £4m investment upgrading the office space, is expected to deliver a post investment running yield in excess of 8.5%.

-      Rental income will be impacted by £1.2m on a full year basis whilst the space is being redeveloped.

Ducie House, Manchester

We acquired Ducie House in 2018, further extending our ownership in Piccadilly Basin, Manchester. Ducie House is a 33,000 sq ft flexible office conversion, originally a petticoat factory. It offers a mix of studio and office spaces of up to circa 4,000 sq ft.

Work is underway on a £2m refurbishment of the office. The redevelopment will improve common space, create greater office flexibility, improve and update the space and deliver improvements to the fabric of the building.

There will be a modest impact of circa £0.1m on income in the year, limited due to the fact that we had deliberately kept space unlet in the prior year ahead of this redevelopment. We are targeting a post investment running yield of greater than 8.5%.

We also continue to work on plans for a new development on the 63-space car park of Ducie House. Plans for a 60,000 sq ft interlinking office with an end value of over £21m and £1.3m of income are being developed.

CitiPark performs strongly and technology investment continues

Operating income for CitiPark of £6.4m was 3.8% higher year on year. The increase in operating income was translated strongly into operating profit before valuation movements of £2.4m (pre IFRS 16 basis), 4.0% better than prior year.

A strong and profitable standalone business in its own right, CitiPark also plays a valuable role in monetising what would otherwise be empty, non-income producing, development assets in Leeds and Manchester.

CitiPark continues to see strong income growth in Leeds with good growth at the Merrion Centre, Leeds Dock and Whitehall Road car parks. Strong demand for these branches, partly driven by reduction of capacity elsewhere in the city has also allowed rate increases to be introduced.

Continuing our focus on technology improvements, the recent launch of our new CitiPark app has been successful, offering customers the opportunity to pre-book and pay for parking using their mobile devices. In addition, utilising our BaySentry bespoke technology, we are now licensed to run our own in-house parking charge notice (PCN) operation allowing us to issue parking charges directly, cutting out the cost of third-party managers.

Increasingly, the CitiPark business is looking to expand beyond traditional car parking. The business already runs three solar energy farms in Manchester and Leeds, and through its relationships with Tesla and provision of electric vehicle charging points in all its branches, is continuing to explore how to develop a sustainability focused point of difference. The company has detailed planning consent on Whitehall Road in Leeds for a c. 500-space multi-storey car park, and continues to explore options to ensure that this new facility can be built to be fully ready for the next stage in the UK's transition to a large electric vehicle population.

TCS has further invested in YourParkingSpace, the online parking marketplace, increasing our equity share to 19.9% in line with option agreements originally put in place at the time of our initial investment. We continue to work closely with the founders as they rapidly grow this very exciting business.

Portfolio Performance

The value of investment properties, developments, joint ventures and car parks at the half-year stood at £361.4m (June 2019: £368.5m). This excludes the effect of IFRS 16, including this change the value at 31 December 2019 was £387.9m. See below for a full reconciliation of the effect of IFRS 16.

On a like for like basis the whole portfolio decreased in value by 1.2% since June (year to June 2019: 3.8% decrease). On an absolute basis the portfolio declined in value by 1.1% (June 2019: 4.6% decrease). The decrease in the value of our investment property portfolio is 1.8% (June 2019: 5.6% decrease) which reflects a reversionary yield of 6.9% (30 June 2019 6.8%). The increase in value of the development properties is 2.8%. (June 2019: 0.1% decrease). Car parks also increased 1.3% (June 2019: 3.8% increase).

There is much to be pleased with in the outcome of the latest valuations, most notably the small increase in valuation of the Merrion Estate as a whole including the retail and leisure elements. This is a function of the true mixed-used nature of the Merrion Estate and the tenant and customer confidence supported by a growing of footfall through the Estate, continued intensive asset management including £0.4m of investment in upgrading parts of the centre, and new leases to the likes of Dominos and the Coop, and other local brands. Contracted rent and ERV have both improved compared to June 2019.

In addition, improvements in the value of our development sites up £1.0m (2.8%) reflects the strong and desirable nature of our Leeds and Manchester development sites.

The reduction in the investment portfolio drives a net £4.4m reduction in value and charge to the consolidated income statement. The vast majority of this reduction has been within our retail portfolio which in total saw a 2.7% reduction in value compared to June 2019. Excluding the Merrion Estate, the retail & leisure portfolio declined in value by 5.3%.  The main changes being:

-      Our Vicar Lane island site in Leeds (£1.0m or 11.3% reduction) driven by a further 70bps shift in yield. Redevelopment opportunities are being considered for this asset.

-      Our Glasgow properties (£1.0m or 3.9% reduction) driven by a circa 25bps shift in yield as a result of wider market factors.

-      Our Urban Exchange retail warehouse in Manchester (£0.8m or 4.7%) driven by a circa 20bps shift in yield driven by retail sentiment and shortening lease lengths.

The one non-retail reduction of note was a £0.7m (6.0%) reduction in our Leeds office, The Cube. This is a function of the vacant nature of a large part of the office space as we redevelop the office, and a void due to the administration of one of the leisure unit tenants.

 

Passing rent
£m

ERV
£m

 

Value
£m

% of portfolio

Valuation incr/(decr)

 

Initial yield

Reversionary yield

 

 

 

 

 

 

 

 

 

 

Retail & leisure

3.5

4.1

 

58.6

15%

-7.0%

 

5.6%

6.7%

Merrion Centre (ex offices)

7.2

7.7

 

93.1

24%

0.3%

 

7.3%

7.8%

Offices

4.4

6.1

 

80.2

20%

-1.2%

 

5.2%

7.2%

Hotels

1.2

1.6

 

25.8

7%

-0.2%

 

4.3%

6.0%

Out of town retail

2.4

2.5

 

40.9

10%

-2.7%

 

5.5%

5.7%

Distribution

0.4

0.4

 

6.2

2%

0.3%

 

6.3%

6.6%

Residential

1.2

1.3

 

21.9

6%

0.6%

 

5.1%

5.8%

 

 

 

 

 

 

 

 

 

 

 

20.3

23.8

 

326.6

83%

-1.8%

 

5.9%

6.9%

 

 

 

 

 

 

 

 

 

 

Development property

2.3

2.3

 

37.8

10%

2.8%

 

 

 

Other car parks

1.6

1.6

 

27.0

7%

1.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

Let portfolio

24.1

27.6

 

391.3

100%

-1.1%

 

 

 

 

Note: Table includes Merrion House and Burlington House assets held in JVs, car park goodwill, and 27/31 Shandwick Place which is treated a held for sale on the balance sheet

Outlook

In our sixtieth year I am pleased to report a resilient set of results and to continue to maintain our strong dividend record. We continue to invest in our assets, with significant redevelopment and refurbishment schemes underway in both Leeds and Manchester. Progress with our development pipeline continues, and following the successful completion of our first dedicated PRS building, Burlington House, in Manchester, it's pleasing to have been awarded Insider's North West Apartment Developer of the Year. Our next development, a joint venture with Leeds City Council to build a 136-room aparthotel, is progressing well.

The active management of our portfolio has ensured delivery of resilient earnings and a stable valuation. Of particular note, is the increase in value of the Merrion Estate. The ongoing diversification of our portfolio, with our retail assets representing only 35% of the portfolio, will continue as we actively look to sell further retail assets, but as a strategic seller will only do so for the right deal.

IFRS 16

As stated above, these financial statements are presented in accordance with IFRS 16. Under IFRS 16, while total lease related charges over the life of a lease remain unchanged, the lease charges are now characterised as depreciation and financing expenses with higher total expense in the early periods of a lease and lower total expense in the later periods of the lease. In addition, on the balance sheet, the accounting treatment has the effect of creating new assets on the balance sheet for these "right of use" leased assets, partly offset by a liability reflecting the future obligation to make lease payments. On the balance sheet, as with the income statement, the effect is neutral over the life of the lease but lowers net asset value in the early periods, reverting over time.

The leases effected by the change in accounting treatment reside within the CitiPark segment of our financial results, flowing into the consolidated results.

In the six months ended 31 December 2019 the effect of IFRS 16 is as follows:

Income Statement:

A net reduction in statutory profit (and EPRA Earnings) of £0.26m, comprising a £0.57m increase in depreciation and a £0.51m increase in interest costs, partly offset by a £0.82m reduction in rental expense.

Balance Sheet:

A net reduction in net assets of £0.26m, comprising a £26.48m increase in car park non-current assets, more than offset by a £25.43m increase in financial liabilities and a £1.31m increase in current liabilities.

As a result of these changes we are introducing an additional income statement measure of Adjusted EPRA Earnings which removes the effect of IFRS 16 making the result directly comparable with the prior year's financial statements which have not been restated.

Given the effect on the balance sheet is minimal, accounting for only 0.14% of the change in net assets from 30 June 2019 we will only report on net assets including the IFRS 16 adjustment. However, both non-current assets and liabilities are materially affected and we shall highlight pre and post IFRS 16 values for clarity and comparison purposes.

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 60 of its annual report and accounts 2019 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 risks previously identified relate to major economic downturn, major tenant failure, and the longer cost of finance given current levels.

We have also three other key areas that we are particularly focused on. Those being: Development risk, due to the combination of uncertainty with regards to cost and availability of skilled labour post Brexit, and the macro-economic impact on demand for new property making outcomes less certain. Systems risk related to the increasing level of cyber security threats. GDPR risk and the need to carefully control the use of personal data.

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 2019 annual report.

TCS has considered the impact of the Coronavirus, and believes that our business should not suffer any unique challenges or impacts as a result of the virus, especially given TCS doesn't have an overseas reliance.

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                                         Mark Dilley

Chairman and Chief Executive                      Group Finance Director

26 February 2020

 

 

 

Consolidated income statement

for the six months ended 31 December 2019

 

Six months

Six months

Year

 

ended

ended

ended

 

31 December

31 December

30 June

 

2019

2018

2019

 

Unaudited

Unaudited

Audited

Notes

£000

£000

Gross revenue

 

15,815

15,813

31,189

Property expenses

 

(5,752)

(11,600)

Net revenue

10,185

10,061

19,589

Administrative expenses

 

(3,142)

(3,392)

(6,857)

Other income

1,097

425

574

Reversal of impairment/(impairment) of car parking assets

 

250

(300)

200

Valuation movement on investment properties

 

(4,639)

(11,227)

(18,308)

Profit/(loss) on disposal of investment properties

 

55

(856)

(709)

Share of post tax profits from joint ventures

 

446

637

1,067

Operating profit/(loss)

4,252

(4,652)

(4,444)

Finance costs                                                                               

3

(4,493)

(4,053)

(8,025)

Loss before taxation

(241)

(8,705)

(12,469)

Taxation

-

-

Loss for the period

(241)

(8,705)

(12,469)

All profits/(losses) for the period are attributable to equity shareholders.

Earnings per share

5

 

Basic and Diluted

(0.5p)

(16.4p)

(23.4p)

EPRA (non-GAAP measure)

7.7p

6.9p

12.0p

Adjusted EPRA (non-GAAP measure)

8.2p

6.9p

12.0p

 

Consolidated statement of comprehensive income

for the six months ended 31 December 2019

Six months

Six months

Year

ended

ended

ended

31 December

31 December

30 June

2019

2018

2019

Unaudited

Unaudited

Audited

£000

£000

£000

Loss for the period

(241)

(8,705)

(12,469)

Other comprehensive income

Revaluation gains on car park assets

-

-

500

Revaluation (losses)/gains on other investments

(1,285)

948

2,341

Total comprehensive loss for the period

(1,526)

(7,757)

(9,628)

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 balance sheet

as at 31 December 2019

 

31 December

31 December

30 June

 

2019

2018

2019

 

Unaudited

Unaudited

Audited

                                                                                              Notes 

£000

£000

£000

Non-current assets

Property rental

 

 

 

 

Investment properties

319,345

328,768

324,500

Investments in joint ventures

13,748

12,445

13,387

 

333,093

341,213

337,887

Car park activities

 

 

 

Freehold and leasehold properties                       

50,853

23,287

24,194

Goodwill                       

4,024

4,024

4,024

Investments

2,655

2,510

2,510

 

57,532

29,821

30,728

Fixtures, equipment and motor vehicles              

1,367

1,515

1,609

Total non-current assets

391,992

372,549

370,224

Current assets

Investments                                                                            9

4,586

4,478

5,871

Assets held for sale

1,900

-

-

Trade and other receivables

4,700

17,871

5,354

Cash and cash equivalents

24,971

242

23,692

Total current assets

36,157

22,591

34,917

Total assets

428,149

395,140

405,141

Current liabilities

Trade and other payables

(40,672)

(16,191)

(34,739)

Total current liabilities

(40,672)

(16,191)

(34,739)

Non-current liabilities

Financial liabilities

(205,272)

(187,100)

(182,152)

Total liabilities

(245,944)

(203,291)

(216,891)

Net assets

182,205

191,849

188,250

Equity attributable to owners of the Parent

Called up share capital                                      

10

13,290

13,290

13,290

Share premium account

200

200

200

Capital redemption reserve

559

559

559

Revaluation reserve

750

250

250

Retained earnings

167,406

177,550

173,951

Total equity

182,205

191,849

188,250

Net asset value per share

12

343p

361p

354p

 

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

 

Consolidated statement of changes in equity

for the six months ended 31 December 2019

 

Share

Capital

 

 

 

Share

premium

redemption

Revaluation

Retained

Total

capital

account

reserve

Reserve

earnings

equity

£000

£000

£000

£000

£000

£000

Balance at 1 July 2018

13,290

200

559

250

189,826

204,125

Comprehensive income for the year

 

 

 

 

 

 

Loss for the period

-

-

-

-

(8,705)

(8,705)

Other comprehensive income

-

-

-

-

948

948

Total comprehensive income for the period

-

-

-

-

(7,757)

(7,757)

Contributions by and distributions to owners

 

 

 

 

 

 

Dividends relating to the year ended 30 June 2018

-

-

-

-

(4,519)

(4,519)

Balance at 31 December 2018

13,290

200

559

250

177,550

191,849

 

Balance at 1 July 2019

 

13,290

 

200

 

559

 

250

 

173,951

 

188,250

Comprehensive income for the year

 

 

 

 

 

 

Loss for the period

-

-

-

-

(241)

(241)

Other comprehensive income

-

-

-

-

(1,285)

(1,285)

Transfer

-

-

-

500

(500)

-

Total comprehensive income for the period

-

-

-

500

(2,026)

(1,526)

Contributions by and distributions to owners

 

 

 

 

 

 

Dividends relating to the year ended 30 June 2019

-

-

-

-

(4,519)

(4,519)

Balance at 31 December 2019

13,290

200

559

750

167,406

182,205

 

 

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

 

Consolidated cash flow statement

for the six months ended 31 December 2019

 

 

Six months ended

Six months ended

Year ended

31 December 2019

31 December 2018

30 June 2019

Unaudited

Unaudited

Audited  

 

Notes

£000

£000

£000

£000

£000

£000

 

Cash flows from operating activities

 

Cash generated from operations

11

9,957

 

5,946

 

11,090

 

 

Interest paid

(3,985)

 

(4,054)

 

(7,678)

 

Net cash generated from operating activities

 

5,972

 

1,892

 

3,412

Cash flows from investing activities

 

Purchases and construction of investment properties

-

 

(25,517)

 

(25,517)

 

Refurbishment of investment properties

(1,973)

 

(1,626)

 

(3,740)

 

Payments for leasehold property improvements

(24)

 

(255)

 

(255)

 

Purchases of fixtures, equipment and motor vehicles

(74)

 

(344)

 

(814)

 

Proceeds from sale of investment properties

504

 

4,004

 

17,089

 

Proceeds from sale of fixed assets

-

 

23

 

23

 

Investments in joint ventures

85

 

(211)

 

(723)

 

Distributions received from joint ventures

-

 

28,145

 

28,145

 

Acquisition of non-listed investments

(145)

 

(385)

 

(385)

 

Net cash (used in)/generated from investing activities

(1,627)

 

   3,834 

 

  13,823

Cash flows from financing activities

 

Repayment of non-current borrowings

(3,130)

 

(10,957)

 

(16,252)

 

Dividends paid to shareholders

-

 

-

 

(6,247)

 

Net cash used in financing activities

 

(3,130)

 

(10,957)

 

(22,499)

Net increase/(decrease) in cash and cash equivalents

 

1,215

 

(5,231)

 

   (5,264)

Cash and cash equivalents at beginning of period

 

209

 

5,473

 

5,473

Cash and cash equivalents at end of period

 

1,424

 

242

 

209

 

 

 

 

 

 

 

Cash and cash equivalents at the year-end are comprised of the following:

 

 

 

 

 

 

 

Cash balances

 

24,971

 

17,402

 

23,692

Overdrawn balances

 

(23,547)

 

(17,160)

 

(23,483)

 

 

1,424

 

242

 

209

 

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

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 26 February 2020.

The comparative financial information for the year ended 30 June 2019 in this half-yearly report does not constitute statutory accounts for that year. The statutory accounts for the year ended 30 June 2019 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", as adopted by the European Union. 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 2019. The financial information for the six months ended 31 December 2019 and 31 December 2018 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.

The following new standards, amendments and interpretations are effective for the first time in these financial statements but none have had a material effect on the Group and so have not been discussed in detail:

·     IFRS 2 Share Based Payments (Amendment - Classification and Measurement of Share Based Payment Transactions)

·     IFRS 4 Insurance Contracts (Amendment - Applying IFRS 9 Financial Instruments

·     Annual Improvements to IFRSs 2014 - 2016 Cycle (IFRS 1 First-time Adoption of IFRS and IAS 28 Investments in Associates and Joint Ventures)

·     IAS 40 Investment Property (Amendment - Transfers of Investment Property)

·     IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration

 

The company has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its June 2019 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2019, and will be adopted in the 2020 annual financial statements. New standards impacting the group that will be adopted in the annual financial statements for the year ended 30 June 2020, and which have given rise to changes in the group's accounting policies are:

·     IFRS 16 Leases

This standard has been fully adopted in the period and the impact of this is set out in note 14. 

Use of estimates and judgements

There have been no changes in estimates of amounts reported in prior periods which have a material impact on the current half year period.

Going concern

The 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 and the group 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.

 

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

31 December

31 December

30 June

2019

2018

2019

£000

£000

£000

Property rental

363,262

355,641

363,375

Car park activities

54,187

27,599

31,466

Hotel operations

10,700

11,900

10,300

Total assets

428,149

395,140

405,141

 

Segmental results

 

 

Six months ended

31 December 2019

 

Six months ended

 31 December 2018

 

Property

Car park

Hotel

 

Property

Car park

Hotel

 

 

 

rental

activities

operations

Total

rental

activities

operations

Total

 

 

£000

£000

£000

£000

£000

£000

£000

£000

 

Gross revenue

7,990

6,416

1,409

15,815

8,243

6,181

1,389

15,813

 

Service charge income

1,475

-

-

1,475

1,581

-

-

1,581

 

Service charge expenses

(2,271)

-

-

(2,271)

(2,025)

-

-

(2,025)

 

Property expenses

(542)

(3,168)

(1,124)

(4,834)

(737)

(3,332)

(1,239)

(5,308)

 

Net revenue

6,652

3,248

285

10,185

7,062

2,849

150

10,061

 

Administrative expenses

(2,587)

(555)

-

(3,142)

(2,892)

(500)

-

(3,392)

 

Other income

1,097

-

-

1,097

420

5

-

425

 

Share of post tax profits from joint ventures

446

-

-

446

 

637

 

-

 

-

 

637

 

Operating profit before valuation movements

5,608

2,693

285

8,586

5,227

2,354

 

150

7,731

 

Valuation movement on investment properties

(4,639)

-

-

(4,639)

(11,227)

-

 

-

(11,227)

 

Reversal of impairment/(impairment) of car parking assets

-

250

-

250

 

 

-

 

 

(300)

 

 

-

 

 

(300)

 

Profit/(loss) on disposal of investment properties

55

-

-

55

 

(856)

 

-

 

-

 

(856)

 

Valuation movement on joint venture properties

-

-

-

-

 

-

 

-

 

-

 

-

 

Operating profit/(loss)

1,024

2,943

285

4,252

(6,856)

2,054

150

(4,652)

 

Finance costs

 

 

 

(4,493)

 

 

 

(4,053)

 

Loss before taxation

 

 

 

(241)

 

 

 

(8,705)

 

Taxation

 

 

 

-

 

 

 

-

 

Loss for the period

 

 

 

(241)

 

 

 

(8,705)

 

                         

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

The results for the car park operations include the car park at the Merrion Centre. As the value of the car park cannot be separated from the value of the Merrion Centre as a whole, the full value of the Merrion Centre is included within the assets of the property rental business.

The car park results also 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 total net revenue at the Merrion Centre and development sites for the six months ended 31 December 2019, all arising from car park operations, was £2,164,000 (2018: £2,012,000). After allowing for an allocation of administrative expenses, the operating profit at these sites was £1,740,000 (2018: £1,659,000).

 

3. Finance costs

Six months

Six months

Year

ended

ended

ended

31 December

31 December

30 June

2019

2018

2019

£000

£000

£000

Interest on debenture loan stock

2,849

2,849

5,698

Interest payable on bank borrowings

970

1,048

1,981

Amortisation of arrangement fees

166

156

346

Interest expense on lease liabilities

508

-

-

 

4,493

4,053

8,025

 

4. Dividends

Six months

Six months

Year

ended

ended

ended

31 December

31 December

30 June

2019

2018

2019

£000

£000

£000

2018 final dividend: 8.50p per 25p share

-

4,519

4,519

2019 interim dividend: 3.25p per 25p share

-

-

1,728

2019 final dividend: 8.50p per 25p share

4,519

-

-

 

4,519

4,519

6,247

 

A final dividend in respect of the year ended 30 June 2019 of 8.50p per share was approved at the company's annual general meeting (AGM) on 25 November 2019 and was paid to shareholders on 7 January 2020. This dividend comprised an ordinary dividend of 4.0p per share and a property income distribution (PID) of 4.5p.

An interim dividend in respect of the year ending 30 June 2020 of 3.25p per share is proposed. This dividend, based on the shares in issue at 26 February 2019, amounts to £1.7m which has not been reflected in these interim accounts and will be paid on 26 June 2020 to shareholders on the register on 29 May 2020. This dividend will be paid entirely as a PID.

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 number of shares in issue during the period was 53,161,950 (2018: 53,161,950).

 

Six months ended

31 December 2019

Six months ended

31 December 2018

Year ended

30 June 2019

 

Earnings

Earnings    per share

Earnings

Earnings

per share

Earnings

Earnings

per share

 

£000

Pence

£000

Pence

£000

Pence

Basic earnings and earnings per share

(241)

(0.4)

(8,705)

(16.4)

(12,469)

(23.4)

Valuation movement on investment properties

4,639

8.7

11,227

21.1

18,308

34.5

Reversal of impairment/(impairment) of car parking assets

(250)

(0.5)

 

300

 

0.6

 

(200)

 

(0.4)

Valuation movement on properties held in joint ventures

-

-

 

-

 

-

 

8

 

(0.0)

(Loss)/profit on disposal of investment properties

(55)

(0.1)

856

1.6

709

1.3

EPRA earnings and earnings per share

4,093

7.7

3,678

6.9

6,356

12.0

Impact of IFRS16 adjustments (note 14)

264

0.5

-

-

-

-

Adjusted EPRA earnings and earnings per share

4,357

8.2

3,678

6.9

6,356

12.0

 

The calculation of EPRA earnings per share has been based on the profit for the period, divided by the number of shares in issue throughout the period. It has been disclosed to demonstrate the effects of property disposal profits and losses, revaluation and impairment movements and other non-recurring items on earnings.

 

6. Tangible fixed assets

(a) Investment properties - property rental business

 

Long

 

 

Freehold

leasehold

Development

Total

£000

£000

£000

£000

Valuation at 1 July 2018

277,918

36,701

336,311

Additions at cost

16,968

-

-

16,968

Other capital expenditure

3,469

-

271

3,740

Disposals

(14,290)

-

(500)

(14,790)

(Deficit)/surplus on revaluation

(17,879)

(408)

(21)

(18,308)

Movement in tenant lease incentives

579

-

-

579

Valuation at 1 July 2019

266,765

21,284

36,451

324,500

Capital expenditure

1,677

-

296

1,973

Disposals

(525)

-

-

(525)

Transfer to assets held for sale

(1,900)

-

-

(1,900)

Deficit on revaluation

(4,903)

(740)

1,004

(4,639)

Movement in tenant lease incentives

(64)

-

-

(64)

Valuation at 31 December 2019

261,050

20,544

37,751

319,345

 

 (b) Freehold and leasehold properties - car park activities

Freehold

Leasehold

Total

£000

£000

£000

Valuation at 1 July 2018

3,000

20,423

23,423

Additions

-

255

255

Depreciation

-

(184)

(184)

Surplus on revaluation

500

-

500

Reversal of impairment

250

(50)

200

Valuation at 1 July 2019

3,750

20,444

24,194

IFRS16 adjustment - Right-of-Use Assets

-

27,051

27,051

Additions

-

24

24

Depreciation

-

(666)

(666)

Reversal of impairment

-

250

250

Valuation at 31 December 2019

3,750

47,103

50,853

 

The fair value of the group's investment and development properties has 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 assets have been valued by appropriately qualified external valuers Jones Lang LaSalle, taking into account the income from car parking and an assessment of their realisable value in their existing state and condition based on market evidence of comparable transactions.

 

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

 

 

 

 

 

Passing rent

 

 

ERV

 

 

Value

 

Initial

yield

 

Reversionary yield

 

£'000

£'000

£000

%

%

Retail and leisure

3,360

4,024

56,675

5.6%

6.7%

Merrion Centre (excluding offices)

7,236

7,518

90,725

7.5%

7.8%

Offices

2,949

4,615

47,850

5.8%

9.1%

Hotels

1,180

1,630

25,760

4.3%

6.0%

Out of town retail

2,358

2,477

40,900

5.5%

5.7%

Distribution

411

427

6,160

6.3%

6.6%

Residential

629

640

10,500

5.7%

5.8%

 

18,123

21,331

278,570

6.2%

7.2%

Development property

 

 

37,751

 

 

Car parks

 

 

22,973

 

 

Right-of-use assets

 

 

30,904

 

 

 

 

 

370,198

 

 

 

The effect on valuation of applying a different yield and a different ERV would be as follows:

Valuation at an initial yield of 7.2% - £304.8m, Valuation at 5.2% - £397.8m

Valuation at a reversionary yield of 8.2% - £309.9m, Valuation at 6.2% - £388.4m

 

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

 

 

Investment

Properties

Freehold and Leasehold

Properties

 

 

Total

 

£000

£000

£000

Externally valued by CB Richard Ellis

192,520

-

192,520

Externally valued by Jones Lang LaSalle

125,550

17,250

142,800

Investment and development properties valued by the Property Director

151

-

151

Right-of-Use Assets

1,124

29,780

30,904

Leasehold improvements

-

3,823

3,823

At 31 December 2019

319,345

50,853

370,198

 

All investment properties measured at fair value in the consolidated balance sheet 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 periods) both the independent valuers and the property director have used the actual rent passing and have also formed an opinion as to the two key 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.

 

(c) Fixtures, equipment and motor vehicles

 

 

Accumulated

Net book

 

Cost

depreciation

value

 

£000

£000

£000

At 1 July 2018

3,632

2,088

1,544

Additions

814

-

814

Disposals

(56)

(42)

(14)

Depreciation

-

735

(735)

At 1 July 2019

4,390

2,781

1,609

Additions

75

-

75

Depreciation

-

317

(317)

At 31 December 2019

4,465

3,098

1,367

 

7. Goodwill

 

Six months

Six months

Year

 

ended

ended

ended

 

31 December

31 December

30 June

 

2019

2018

2019

 

£000

£000

£000

At start and end of period

4,024

4,024

4,024

 

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.

8. Investments in joint ventures

 

Six months

Six months

Year

 

ended

ended

Ended

 

31 December

31 December

30 June

 

2019

2018

2019

 

£000

£000

£000

Interest in joint ventures

 

At start of period

13,387

39,742

39,742

Additions

-

-

723

(Repayment of)/loans to joint ventures

(85)

211

-

Loan interest

78

70

-

Share of profits after tax

368

567

1,067

Dividends and other distributions received in the year

-

(28,145)

(28,145)

At end of period

13,748

12,445

13,387

 

Investments in joint ventures primarily relates to the Group's interest in the partnership capital of Merrion House LLP. The investment property held within this partnership has been externally valued by CBRE at each reporting date.

9. Investments

 

Current asset investments

31 December

31 December

30 June

2019

2018

2019

£000

£000

£000

At start of the period

5,871

3,530

3,530

(Decrease)/Increase in value of investments

(1,285)

948

2,341

At the end of the period

4,586

4,478

5,871

 

Current asset investments relate to an equity shareholding in a company listed on the London Stock Exchange. This is stated at market value in the table above and has a historic cost of £889,130 (2018: £889,130).

Current asset investments are measured at fair value in the consolidated balance sheet and are categorised as level 1 in the fair value hierarchy as defined in IFRS13 as the inputs to the valuation are based on quoted market prices.

The maximum risk exposure at the reporting date is the fair value of the current asset investments.

 

Non-current asset investments

31 December

31 December

30 June

2019

2018

2019

£000

£000

£000

Equity investments

1,120

975

975

Loans

1,535

1,535

1,535

 

2,655

2,510

2,510

 

Non-current asset investments primarily relate to an equity shareholding and loans advanced to YourParkingSpace Limited, a privately owned company incorporated in the United Kingdom.

The asset is categorised as level 3 in the fair value hierarchy as defined in IFRS 13 as the inputs to the valuation are based on unobservable inputs.

 

10. Called up equity share capital

Authorised

164,879,000 (30 June 2019: 164,879,000) ordinary shares of 25p each.

Issued and fully paid                                                                                                     

Number of shares

Nominal

value

 

000

£000

At 1 July and 31 December 2019

 

53,162

13,290

       

 

11. Cash flows from operating activities

 

Six months

Six months

Year

 

ended

ended

ended

 

31 December

31 December

30 June

 

2019

2018

2019

 

£000

£000

£000

Loss for the period

(241)

(8,705)

(12,469)

Adjustments for:

Depreciation

983

451

919

Profit on disposal of fixed assets

-

(9)

(9)

(Profit)/loss on disposal of investment properties

(55)

856

709

Finance costs

4,493

4,054

8,025

Share of joint venture profits after tax

(446)

(637)

(1,067)

Movement in revaluation of investment properties

4,639

11,227

18,308

Movement in lease incentives

64

119

(579)

(Reversal of impairment)/impairment of car parking assets

(250)

300

(200)

Decrease/(increase) in receivables

729

(1,456)

(2,074)

Increase/(decrease) in payables

41

(254)

(473)

Cash generated from operations

9,957

5,946

11,090

12. Net asset value per share

Net asset value per share is calculated as the net assets of the Group attributable to shareholders at each balance sheet date, divided by the number of shares in issue at that date.

 

 

Six months

Six months

Year

 

ended

ended

ended

 

31 December

31 December

30 June

 

2019

2018

2019

Net asset value (£'000)

182,205

191,849

188,250

Number of ordinary shares in issue

53,161,950

53,161,950

53,161,950

Net asset value per share (pence)

343p

361p

354p

 

13. Related party information

There have been no material changes in the related party transactions described in the 2019 Accounts.

 

14. Adoption of IFRS16

Effective from 1 July 2019 the group has adopted IFRS16 - Leases, which has a fundamental impact on the accounting for various leasehold properties presented within the financial statements under car park activities. This involves recognising a Right-of-Use asset to be depreciated over the life of the lease, along with a financial liability and a corresponding interest expense. A modified retrospective approach has been adopted, meaning that the leases have been accounted for as if each of the lease terms commenced on 1 July 2019. Therefore, as at 1 July 2019, the value of both the Right-of-Use assets and financial liabilities both represent the net present value of minimum future lease liabilities.

The discount rate applied in the calculations is 3.5% which represents the incremental cost of borrowing.

The impact of the adoption of IFRS16 on the primarily statements is presented below.

Consolidated income statement

for the six months ended 31 December 2019

 

 

 

 

 

 

 

Pre IFRS16 adjustments

Rental expense

Depreciation charge

Interest expense

Post IFRS16 adjustments

 

£000

£'000

£'000

'000

£'000

Gross revenue

 

15,815

-

-

-

15,815

Property expenses

 

(5,874)

816

(572)

-

(5,630)

Net revenue

9,941

816

(572)

-

10,185

Administrative expenses

 

(3,142)

-

-

-

(3,142)

Other income

1,097

-

-

-

1,097

(Reversal of impairment)/impairment of car parking assets

 

250

 -

-

 -

250

Valuation movement on investment properties

 

(4,639)

 -

-

 -

(4,639)

Profit/(loss) on disposal of investment properties

 

55

 -

-

 -

55

Share of post tax profits from joint ventures

 

446

 -

-

 -

446

Operating profit

4,008

816

(572)

-

4,252

Finance costs                                 

 

(3,985)

-

-

(508)

(4,493)

Loss before taxation

23

816

(572)

(508)

(241)

Taxation

-

-

-

-

-

Loss for the period

23

816

(572)

(508)

(241)

 

Consolidated balance sheet

as at 31 December 2019

 

 

 

 

 

 

Pre IFRS16

Adjustments

Right-to-Use Assets

Lease liabilities

Post IFRS16 adjustments

 

£000

£000

£000

£'000

Non-current assets

 

Property rental

 

 

 

 

 

Investment properties

 

319,345

-

-

319,345

Investments in joint ventures

 

13,748

-

-

13,748

 

333,093

-

-

333,093

Car park activities

 

 

 

 

Freehold and leasehold properties

 

24,374

26,479

-

50,853

Goodwill                       

 

4,024

-

-

4,024

Investments

2,655

-

-

2,655

 

31,053

26,479

-

57,532

Fixtures, equipment and motor vehicles

 

1,367

-

-

1,367

Total non-current assets

365,513

26,479

-

391,992

Current assets

 

Investments

4,586

-

-

4,586

Assets held for sale

1,900

-

-

1,900

Trade and other receivables

4,700

-

-

4,700

Cash and cash equivalents

24,971

-

-

24,971

Total current assets

36,157

-

-

36,157

Total assets

401,670

26,479

-

428,149

Current liabilities

 

Trade and other payables

(39,363)

-

(1,309)

(40,672)

Total current liabilities

(39,363)

-

(1,309)

(40,672)

Non-current liabilities

 

Financial liabilities

(179,838)

-

(25,434)

(205,272)

Total liabilities

(219,201)

-

(26,743)

(245,944)

Net assets

182,469

26,479

(26,743)

182,205

             
 

 

INDEPENDENT REVIEW REPORT TO TOWN CENTRE SECURITIES PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2019 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

 

BDO LLP

Chartered Accountants

London, United Kingdom

26 February 2020

 

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

 


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