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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Town Centre Securities Plc | LSE:TOWN | London | Ordinary Share | GB0003062816 | ORD 25P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 135.50 | 131.00 | 140.00 | 0.00 | 08:00:04 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Real Estate Investment Trust | 31.2M | -29.88M | -0.5687 | -2.38 | 71.18M |
TIDMTOWN
RNS Number : 7526J
Town Centre Securities PLC
14 September 2016
Wednesday 14 September For immediate release 2016
TOWN CENTRE SECURITIES PLC
Final results for the year ended 30 June 2016
RESILIENT PORTFOLIO PERFORMANCE WITH NET ASSETS INCREASED
Town Centre Securities PLC ("TCS"), the Leeds based property investment, development and car parking company, today announces its audited final results for the year ended 30 June 2016.
Financial highlights
-- Net assets per share up 3.8% at 357p (2015: 344p) -- Dividend up 5.4% to 11.0p (2015: 10.44p), 1.19 times covered
-- Statutory profit before tax of GBP11.9m (2015: GBP24.0m) and statutory earnings per share of 22.4p (2015: 45.1p)
-- EPRA profit before tax of GBP6.6m (2015: GBP6.5m) -- EPRA earnings per share of 12.4p (2015: 12.1p)
-- Total shareholder return of minus 3.9% (2015: + 19.1%) vs market of minus 11.7% (2015: + 20.0%) and total property return of 7.8% (2015: 12.2%)
-- All 3 bank facilities total GBP105m agreed at 50bp reduction in margin
Operating performance
-- Total property return of 7.8% (2015: 12.2%) broadly in line with IPD -- Passing rent up 2.8% like for like -- Total ERV up 2.1% like for like
-- Like for like property valuation increase of 2.2% (2015: 7.1%); initial yield of 5.7% (2014: 5.8%) and reversionary yield of 6.4% (2015: 6.8%)
-- Occupancy remains high at 98% (2015: 96%)
Operational highlights
-- Development programme on track to deliver increases of GBP1.8m pa in income and GBP10.5m in net assets. Total spend in the year GBP12.2m, costs to complete GBP26.0m
o Merrion House, Leeds - completion December 2017 which will add GBP0.9m to income and GBP9m to net assets
o Merrion Hotel, Leeds - completion April 2017 will add over GBP0.6m to annual income
o Whitehall Road, Leeds - completion April 2017 will add GBP0.4m to net profit and GBP1.5m to net assets
-- 2 JV's established as start of GBP240m residential programme at Piccadilly Basin, Manchester
o 91 unit scheme on Tariff Street underway with start on site 2016/17
o 24 unit loft scheme in Brownsfield Mill; JV formed with Urban Splash
-- Active capital recycling through
o Sales of properties at Albion Place, Leeds and Bothwell Street, Glasgow for a total consideration of GBP13.3m, exit yield 6.0% with the sales ahead of valuation
o 3 property acquisitions at a net initial yield of 5.7% for a total cost of GBP6.3m
-- Good progress with Merrion Centre enhancements
o Morrisons new store trading well with further expansion through a café in main mall
o New lettings to Bon Marche and Heron Foods in main mall
o New letting to Dockyard in Arena Quarter - now 90% let
o Former cinema refurbishment project underway
-- Expansion of Poundstretcher unit at Rochdale Retail Park and new drive thru created -- New hotel letting completed at Shandwick Place, Edinburgh -- GBP3.3m refurbishment of 3 car parks in Watford -- CitiPark profits up 30% on prior year both organic and as a result of acquisitions
Commenting on the results, Chairman and Chief Executive Edward Ziff, said:
"As I write this statement we are facing an extended period of uncertainty as a result of the Brexit vote on 23 June 2016.
There is no doubt that the market increases in value we have seen in the last couple of years have come to an end, but our portfolio has not seen the Brexit effects reported in central London and the end of year values reflect the hard work we have done in recent times. In fact we have seen excellent valuation results from some of our assets, particularly the development sites.
While the market absorbs the unfolding story of our exit from the European Union we will carry on doing what we have always done - we have an exciting development programme which will add three top quality assets to our investment portfolio while increasing rental income and net assets significantly and we will continue to generate gains through our intensive management activities.
I am particularly pleased to announce a 5.4% increase in our dividend this year; we are now confident that the increases in income from these three schemes will flow through to earnings over the next two to three years".
For further information, please contact:
Town Centre Securities PLC www.tcs-plc.com
Edward Ziff, Chairman and Chief Executive 0113 222 1234
Duncan Syers, Finance Director
MHP Communications
Reg Hoare / Gina Bell 020 3128 8100
Chairman and Chief Executive's Statement
Our portfolio has shown its resilience in performing well against a difficult market with like for like increases in valuation (2.2%), passing rent (2.8%) and ERV (2.1%). This bodes well for the difficult times ahead
Portfolio performance
The like for like increase in the value of our investment property portfolio this year has been 2.2% (2015: 7.1%) which reflects a reversionary yield of 6.4% (2015: 6.8%). The total property return of 7.8% is in broadly line with IPD with strong performances by Urban Exchange Retail Park, Manchester up GBP1.0m or 12.5%, Shandwick Place, Edinburgh up GBP0.9m or 7.7%, New Dock Car Park, Leeds up GBP1.0m or 12.5% and the development sites up GBP5.5m or 23.5%, offset by a 3% fall in the value of Merrion Centre principally relating to a reduction in the car park valuation.
The investment properties, developments, joint ventures and car parks at the year end stood at GBP375.5m (2015: GBP360.4m).
Results
Net assets and EPRA net assets at 30 June 2016 were GBP189.9m, representing 357 pence per share (2015 restated: GBP182.9m, 344 pence per share).
We report a statutory profit for the year of GBP11.9m (2015: GBP24.0m) which includes the property revaluation surplus of GBP3.5m this year (2015: GBP14.8m).
Our EPRA profit before tax of GBP6.6m (2015: GBP6.5m) (excluding property revaluation and property disposals) is in line with expectations. CitiPark's operating profit (before funding costs) was up GBP2.2m or 118% on the back of acquisitions over the last 2 years.
Statutory earnings per share (including property revaluation and property disposals) were 22.4p (2015: 45.1p). EPRA earnings per share were 12.4p (2015: 12.1p).
Certain figures in last year's accounts have been restated to bring them into line with current accounting standards and our accounting policies. The restatements did not have a material effect on any of the primary measures.
Dividends
The Board is recommending a final dividend of 7.9 pence per share, which, together with the interim dividend of 3.1 pence per share, gives a total of 11.0 pence per share. We have approved this 5.4% increase because of the increase in earnings which is expected to come from our development programme.
The final dividend comprises a Property Income Distribution of 4.0p and an ordinary dividend of 3.9p per share. The final dividend will be paid on 4 January 2017 to shareholders on the register on 2 December 2016.
Funding
Net debt at 30 June 2016 amounted to GBP185.8m (2015 restated: GBP179.1m). This comprised GBP106.0m of 5.375% First Mortgage Debenture Stock 2031 and GBP79.8m of revolving credit facilities. The increase in the level of net debt is principally due to capital expenditure on the development schemes. Borrowings represent 49% of property values (2015 restated: 50%).
The group has renewed its bank facilities during the year, all on a 3 year revolving credit basis; the total of the 3 facilities with Lloyds, RBS and Handlesbanken is GBP105m and these have been renewed with a reduction in the average margin of 50 basis points.
Development programme on track to deliver increases in income and net assets
Last year I reported on an extensive programme of asset management initiatives which have added over GBP20m to net assets over the last two years.
At the time of this report we are engaged in what is probably the biggest development programme the company has ever had ongoing at one time, at least since the construction of the Merrion Centre in the 1960's.
This development spend is on our existing assets at Merrion Centre Leeds, Whitehall Road Leeds and Piccadilly Basin Manchester. In the current low inflation economic environment investment is essential to create growth and these three projects alone will generate additional annual profits of GBP1.8m or 3p per share and are expected to increase net assets by around GBP10.5m and net assets per share by 20p. The first full year of these benefits will be 2018/19. While the income statement has seen no benefit to date these future gains are all contracted and we can be confident they will flow through to the bottom line. It is worth noting that we have fixed the contract price on all these developments during the year so we are not exposed to the current build cost inflation risk.
There is more to come from our land bank. At Whitehall Road Leeds we are marketing the further office opportunities with potential for 400,000 sq ft of space with river frontage. We are also preparing the way to start building work on the 500 space multi-storey car park.
In Manchester we have embarked on the first phase of an exciting residential development programme of 850 units by forming 2 joint ventures with specialist residential developers. The first is with Highgrove Investments and will deliver a 91 unit canal-side scheme with the start on site in the financial year 2016/7. We have also formed a JV with Urban Splash to create 24 loft style units in the listed Brownsfield Mill. In total the masterplan for this site comprises a GBP250m programme which will both maximise the value of our existing land asset as well as providing opportunities in the coming years to invest in residential assets and make development profits.
The area around the Piccadilly Basin is improving all the time and we intend to schedule in commercial and leisure development alongside the canal as soon as it is appropriate and the masterplan also includes a further multi-storey car park. We should stress that this site is ideally situated to benefit from the new HS2/3 station in due course.
Intensive asset management activities
We face an exciting future as we work through these schemes but there are also other opportunities around the portfolio. It is not only development which is bringing through gains; we continue to work the portfolio through intensive asset management. We have an excellent and hard-working estates team who have competed 141 transactions during the year moving like for like passing rent forward by 2.8% and the ERV by 2.1%.
In the Merrion Centre we now benefit from the increased rent from the new lease to Morrisons who have expanded their demise this year to include a main mall café area. We have let 2 further units in the Arena Quarter to Smoke BBQ and Dockyard; the scheme is now 90% let and we are currently considering offers on all the remaining units.
We are benefitting from the NHS and Bon Marche lettings concluded last year and have completed a letting to Heron Foods which will consolidate 3 smaller units. We have also recently let a small shop to Leeds United; this will be their only merchandise outlet away from Elland Road. There are further exciting letting discussions ongoing at present and we have every reason to be optimistic about the outlook for the centre maintaining its high occupancy.
We have started on a project to refurbish the former cinema partly as a leisure operation with further office accommodation. The leisure space will have aeroplane and F1 simulators; we have trialled the F1 units in the main mall and demonstrated good levels of demand. We have recently completed the initial preparatory infrastructure works and hope to start work on the refurbishment in 2016/17.
Rochdale Retail Park - this 65,000 sq ft scheme is let to Poundstretcher, Matalan, Halfords and Argos. We have extended the Poundstretcher unit this year which will generate an 8% return on capital employed.
We have continued to improve our assets in Glasgow and Edinburgh. We are now seeing income from the Bella Italia letting at Empire House where we obtained a change of use and significantly increased the income from this unit. We have concluded a letting to a budget hotel operation at Shandwick Place Edinburgh which has been a long and complex project which will also significantly enhance this asset.
At Milngavie Glasgow we are seeing the full year benefit of our new Waitrose supermarket development which opened in June 2015. There are other development opportunities on this site through our control of the access to the West of Scotland Rugby Club land.
Capital recycling
We have continued our capital recycling programme during the year, selling Bothwell Street Glasgow and Albion Street Leeds for a total consideration of GBP13.3m which equates to an exit yield of 6.0%. The sales were ahead of valuation. We also purchased a retail block in Wood Green London for GBP6.3m at an initial yield of 5.7%. This activity was all in the first half of the year, we have found the market impossible in recent months as the attention of investors has been focussed almost entirely on the Referendum. This capital recycling will continue in 2016/17 with further disposals of low growth assets and acquisitions in suburban London and the South East.
CitiPark
On the car park side we have continued to consolidate the assets we purchased in 2014/15. We have equipped all the new sites with our integrated parking management system which allows us to manage them from our central control room (the engine room). The GBP3m refurbishment of the 3 car parks in Watford is now complete and these are trading well. We are now moving on to upgrade our operation at Bell Street London where demand has increased significantly following the closure of an adjacent competitor operation.
The car park portfolio has traded well this year and we continue to benefit from strong income growth.
Outlook
As I write this statement we are facing an extended period of uncertainty as a result of the Brexit vote on 23 June 2016.
There is no doubt that the market increases in value we have seen in the last couple of years have come to an end, but our portfolio has not seen the Brexit effects reported in central London and the end of year values reflect the hard work we have done in recent times. In fact we have seen some excellent valuation results from some of our assets, particularly the development sites.
While the market absorbs the unfolding story of our exit from the European Union we will carry on doing what we have always done - we have an exciting development programme which will add 3 top quality assets to our investment portfolio while increasing rental income and net assets significantly and we will continue to generate gains through our intensive management activities.
I am particularly pleased to announce a 5.4% increase in our dividend this year; we are now confident that the increases in income from these three schemes will flow through to earnings over the next two to three years.
Detailed property schemes
Merrion House, Leeds - we have signed a GMP contract with BAM Construction for this GBP41m scheme with Leeds City Council contributing GBP29m. Construction is well underway with completion scheduled for December 2017 which will trigger a new 25 year CPI linked lease to Leeds City Council with an initial rent of GBP1.65m adding GBP0.9m to current income and GBP9m to net assets.
Merrion Hotel, Leeds - we have a fixed price contract for this GBP10m build which will deliver a 134 bedroom Ibis Styles 3 star hotel and a Marco Pierre Wright branded restaurant. Work is well underway with completion scheduled for April 2017. The hotel and restaurant will be run by Interstate under a management contract which is expected to deliver over GBP0.6m of EBITDA in year one rising to over GBP1.0m pa when mature. The hotel has been empty for some years so this income will all add to earnings. We have also increased rental income by GBP38k by re-organising and re-letting the ground floor retail units under the hotel.
Whitehall Road, Leeds - this 136 bedroom hotel is let to Premier Inn with the Whitbread covenant under a 25 year CPI linked lease with an initial rent of GBP0.68m pa. The build cost is fixed at GBP10m; the work is well underway with completion scheduled for April 2017. This expected to add GBP0.4m to net income and GBP1.5m to net assets.
We are marketing up to 400,000 sq ft of office space with river frontage along with a 500 space multi storey car park.
Piccadilly Basin, Manchester - the Council is now considering our Strategic Regional Framework which includes 800 residential units, a 500 space multi-storey car park, hotel and 200,000 sq ft of canal-side commercial/leisure. This area of Manchester has been transformed by the City Council's project along with the owners of Manchester City FC to bring residential and associated regeneration development down from the Etihad Stadium across Great Ancoats Street and into the city centre through the Piccadilly Basin. We have 2 joint ventures already in place with specialist residential developers: with Highgrove Investments for a 91 unit block on Tariff Street and with Urban Splash for a 24 unit loft style development in the listed Brownsfield Mill building. This residential expansion will benefit our existing retail on the site (Urban Exchange Retail Park) and will help to generate demand for further commercial development.
Merrion Centre asset management
Square feet Passing ERV rent 000 GBP'm % GBP'm Retail 210 3.7 42% 3.7 Leisure 234 1.7 19% 1.7 Office 249 2.1 23% 3.2 Car Parking 271 1.4 16% 1.7 964 8.9 100% 10.3 ------------ ------ ----- ------
The passing rent has increased by GBP0.5m pa primarily as a result of an increase in income from the car park. There has also been a shift from retail to leisure as the Arena Quarter income grows which also reflects further fast food presence.
The new 25 year lease which we completed in June 2014 gave Morrisons the opportunity to reveal the first store with a new shopfront design, expanding the store into the adjoining unit and adding GBP0.5m a year to rental income. This year Morrisons have added further to their floorspace by opening a main mall café area.
We have let 2 further units in the Arena Quarter. Smoke BBQ took a 4,300 sq ft unit in June 2015 under a 15 year lease with a stepped rent averaging GBP77,000 pa and are trading in line with expectations. Dockyard have taken a 25 year lease with a 15 year break at a base rent of GBP89,000 pa with turnover top ups; the whole scheme extends to 80,100 sq ft and now is 90% let. We are currently negotiating offers on all of the remaining units with one unit ready to exchange imminently.
Letting activity in the main mall has been high over recent years and we are now benefitting from the lettings to NHS and Bon Marche concluded last year with the stores now open and trading well. We have recently completed a letting to Heron Foods which will consolidate 3 smaller units and further improve the tenant mix. We have also recently let a small shop to Leeds United; this will be their only merchandise outlet away from Elland Road.
There are further exciting letting discussions ongoing at present and we have every reason to be optimistic about the outlook for the centre maintaining its high occupancy.
We have started on a project to refurbish the former cinema partly as a leisure operation with further office accommodation. The leisure space will have aeroplane and F1 simulators; we have trialled the F1 units in the main mall and demonstrated good levels of demand. We have recently completed the initial preparatory infrastructure works and hope to start work on the refurbishment in 2016/17.
Rochdale Retail Park - this 65,000 sq ft scheme is let to Poundstretcher, Matalan, Halfords and Argos. We have extended the Poundstretcher unit this year under a new 10 year lease which will generate an additional GBP75,000 of rental income, an 8% return on capital employed.
Shandwick Place Edinburgh - we have concluded a 30 year lease with Cityroomz with an initial rent of GBP90,000 pa stepping up to GBP100,000 and then CPI linked. Previously this part of the property comprised a number of small office suites which were management intensive and in recent years the income has been declining. The incoming tenant will be refurbishing at their cost of over GBP2m to provide 42 bedrooms.
Detailed portfolio performance
In terms of the investment property portfolio it has been a year of consolidation, with sales totalling GBP13.3m and purchases of GBP6.3m. This reflects our strategy of reinvesting in the London Suburban market and disposing of ex-growth properties.
Overall the investment property portfolio has been maintained at GBP314.0m (2015: GBP324.3m) with an average initial yield of 5.7% (2015: 5.8%) and an average reversionary yield of 6.4% (2015: 6.8%) which we consider is appropriate for our mixed portfolio as we enter a period of some uncertainty following the Brexit vote. Occupancy of around 98% has been maintained throughout the year.
Portfolio statistics
Total property returns TCS IPD Retail All 6.0% 6.3% Retail shopping centres 4.8% 5.7% Retail Warehouses 9.7% 5.3% Retail rest of UK high street retail 8.0% 10.5% Offices Rest of UK 7.2% 8.4%
The most notable gains are Urban Exchange Retail Park, Manchester up GBP1.0m or 12.5%, Shandwick Place, Edinburgh up GBP0.9m or 7.7%, Leeds Dock Car Park, Leeds up GBP1.0m or 12.5% and the development sites up GBP5.5m or 23.5%, offset by a 3% fall in the value of Merrion Centre principally relating to a reduction in the car park valuation.
PORTFOLIO ANALYSIS
Passing ERV Value % Valuation Initial Reversionary rent of incr/(decr) yield yield portfolio Retail & Leisure 5.1 5.6 90.7 24% 2.0% 5.3% 5.8% Merrion Centre (excl offices) 6.9 7.0 105.3 29% -3.8% 6.2% 6.3% Offices 2.9 4.1 47.0 13% 2.3% 5.8% 8.2% Out of town retail 3.3 3.6 55.7 15% 3.3% 5.5% 6.0% Distribution 0.3 0.4 4.8 1% 7.5% 5.8% 7.9% Residential 0.5 0.6 10.5 3% 2.7% 4.9% 5.3% -------- ----- ------ ----------- ------------- ------------- 19.0 21.3 314.0 85% -0.1% 5.7% 6.4% -------- ------------- Development property (car park income) 1.6 1.6 21.0 6% 31.6% Other Development sites 10.6 3% 6.6% Car parks 1.2 1.2 21.8 6% 7.5% -------- ----- Let portfolio 21.8 24.1 367.4 100% 2.2% ------ ----------- ------------- Voids (3%) 0.4 24.5 -----
The property values in the above table do not reflect all accounting adjustments within the financial statements.
Location Value % Leeds 194.9 53% Manchester 61.0 17% Scotland 81.0 22% London 30.5 8% ------ ----- 367.4 100% Sector Value % Retail/leisure 251.7 75% Office 47.0 14% Car parking 21.8 7% Distribution 4.8 1% Residential 10.5 3% ------ ----- 335.8 100% Development 31.6 ------ 367.4 Lease Expiries Value % 0-5 years 7.3 38% 5+ years 6.2 33% 10+ years 5.5 29% ------ ----- 19.0 100%
Financial review
We have increased property rental income in a challenging market and we can be confident we will see substantial increases in income from our development schemes. The car park business has shown excellent growth both organic and from acquisitions.
Property rental Car parking 2016 2015 2016 2015 GBP'000 GBP'000 GBP'000 GBP'000 Gross revenue * 16,879 15,940 10,118 6,870 Property expenses (1,818) (1,558) (5,843) (3,690) -------- -------- -------- -------- Net revenue 15,061 14,382 4,275 3,180 Other income 594 1,452 5 16 Administrative expenses (4,690) (4,737) (803) (584) -------- -------- -------- -------- Operating profit 10,965 11,097 3,477 2,612 -------- -------- -------- -------- Total operating profit 14,442 13,709 Finance costs (7,847) (7,258) Net income 6,595 6,451 -------- -------- * Gross revenue includes share of trading profits from joint ventures
PROPERTY
The table above sets out the passing rent from the property portfolio of GBP19.0m. This includes the passing rent from the Merrion Centre car park of GBP1.4m; whereas in the analysis above Merrion Centre car park revenue is included in the car park figures.
Property expenses comprise 11.3% of gross rentals compared to 9.8% in 2015. This is mainly due to the acquisition/development of 2 long leasehold properties with ground rental payments at Duke Street, London and Waitrose, Milngavie.
Other income includes sundry property income such as management fees and dilapidations receipts; last year also included GBP0.2m in respect of lease surrender premiums and GBP0.3m of advisory fees received which were one off deals.
Administrative expenses of the property business are principally staff costs. These have decreased this year reflecting a gradual restructuring of the property management team.
Net property revenues are up 3% and the current development programme will deliver increases in income as follows:
Merrion House - on completion (scheduled for December 2017) the rent from Leeds City Council increases from GBP700,000 pa to GBP1,650,000 pa.
Merrion Hotel - on completion (scheduled for April 2017) the hotel will be run under a management contract; the initial projections are for an EBITDA of GBP600,000 pa. There is no current income.
Premier Inn - on completion (scheduled for April 2017) the lease provides for a rent of GBP680,000 pa with a 5 month rent free period. The build cost is fixed at GBP10m.
This will translate into additional income as follows:
Financial years ending 2017 2018 2019 GBP'000 GBP'000 GBP'000 Merrion House 475 950 Merrion Hotel 150 625 725 Premier Inn 167 669 669 Interest cost @ 2.25% (57) (480) (585) Additional profit before tax 260 1,289 1,759 -------- -------- --------
CAR PARKING
Car park net revenue has increased by 34% both through organic growth and as a result of acquisitions as follows:
2016 2015 GBP'000 GBP'000 Like for like net revenue 3,908 3,132 Net revenue from acquisitions 367 48 4,275 3,180 -------- --------
The organic growth of 25% has come from all sites through strong trading demand and improved efficiency as a result of the central control room. Administrative expenses this year reflect the costs of the control room.
Balance sheet
Our total non current assets of GBP377.7m (2015: GBP361.6m) include GBP350.4m of investment properties (2015: GBP339.5m) and GBP25.1m of car parking assets (2015: GBP20.9m). The Merrion Centre car park is included in the investment property asset. The car parking assets include GBP4m (2015: GBP4m) of leasehold car parks which are accounted for under IFRS as goodwill. There are two such car parks with operating leases of 24 and 35 years.
We have continued to invest in our properties with a total of GBP11.0m of capital expenditure this year and loans to the joint venture of GBP4.9m. Capital recycling comprised GBP13.3m of sales and GBP6.3m of purchases. Along with other cash movements this resulted in an increase in borrowings from GBP179.1m to GBP185.8m.
The property and car parking balances reflect valuation gains of GBP3.0m in respect of the investment properties and GBP1.0m in respect of car parks (which includes GBP0.5m which is shown in the Statement of Changes in Equity as other comprehensive income).
All of our bank facilities have been renewed during the year and are now GBP105m in total from Lloyds, RBS and Handelsbanken. They are all 3 year revolving credit facilities secured on our investment properties and expire between September 2018 and February 2019. The quoted debenture stock is GBP106m secured against investment property and car parking assets and expires in November 2031.
Going concern and headroom
One of the most critical judgements for the Board is the headroom in the Group's bank facilities. This is calculated as the maximum amount that could be borrowed taking into account the properties secured to the funders and the facilities in place. The total headroom is currently GBP27.7m (2015: GBP27.3m) and is considered to be sufficient to support our going concern conclusions.
Other finance issues
We have adopted EPRA (European Public Real Estate Association) this year for earnings per share and net assets per share replacing our non GAAP measures which we previously described as "underlying".
Total shareholder return and total property return
Total shareholder return of minus 3.9% (2015: 19.1%) is calculated as the total of dividends paid during the financial year of 10.44p (2015: 10.44p) and the movement in the share price between 30 June 2015 (297p) and 30 June 2016 (275p). Most of the sector comparable companies have negative TSR's this year and the FTSE REIT index is minus 11.7% (2015: 20.0%) for the same period.
The Group's concentration on maximising income from our portfolio has led to long term out-performance of the relevant indices over 3, 5, 15, 20 and 25 years.
Total shareholder 10 15 20 25 returns 1 yr 3 yrs 5 yrs yrs yrs yrs yrs Town Centre Securities -3.9% 19.6% 12.4% -1.5% 10.5% 10.1% 10.6% FTSE All Share REIT index -11.7% 8.9% 7.9% -0.8% 5.1% 6.6% 6.7%
Total property return is calculated as the operating profit from the property rental business adding back administrative expenses and adjusting for the Merrion Centre car park income as a percentage of the opening investment properties excluding developments.
Risk
The directors have carried out a robust assessment of the principal risks facing the Group, including those that would threaten the business model, future performance, solvency or liquidity.
Key performance indicators
Our business model is predicated on delivering maximum returns to shareholders so that Total Shareholder Return is the main KPI. The table below shows a detailed exposition of the various components which contribute to the Total Shareholder Return along with some other statistics on our performance over the last 2 years.
2016 2015 ------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 01 DELIVERING * TSR over 3 years 19.6% (market 8.9%) * TSR over 3 years 28.1% (market 22.4%) RETURNS TO SHAREHOLDERS * Dividends 11.0p - 56 years unbroken record * Dividends 10.44p - 55 years unbroken record * Dividend cover 1.13 times * Dividend cover 1.16 times ------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 02 CREATING * Three development projects progressing on time and on * Three development projects progressing on time and on VALUE budget budget THROUGH DEVELOPMENT * Development schemes are expected to deliver GBP1.8m * Development schemes are expected to deliver GBP1.8m pa extra profit and GBP10.5m of additional net assets pa extra profit and GBP10.5m of additional net assets ------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 03 CREATING * 141 leasing transactions delivering and maintaining * 144 leasing transactions delivering and maintaining VALUE GBP19.8m of passing rent and GBP25.0m of ERV GBP22.2m of passing rent and GBP24.5m of ERV THROUGH ASSET MANAGEMENT ------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 04 CAPITAL * Sales of ex-growth properties GBP13.3m exit yield * Sales of ex-growth properties GBP9.7m exit yield 2.1% RECYCLING 6.0% (including a non-income producing site) * Purchases GBP6.3m average initial yield 5.7% * Purchases GBP11.3m average initial yield 5.8% ------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 05 CAR PARKING * Refurbishment and upgrade spend on new sites GBP5m * 6 new sites acquired cost GBP4.3m yield 10% * Profits from acquired sites GBP0.4m effective yield * Central control room development ongoing on cost 6.7% * Organic like for like growth in profits GBP3.9m or 25% * Central control room fully operational handling 4500 calls per month ------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 06 CONSERVATIVE * Interest cover 1.84 times * Interest cover 1.88 times FINANCING * 57% of debt long term (15 yrs) fixed interest * 59% of debt long term (16 yrs) fixed interest * Headroom GBP27.7m * Headroom GBP27.3m * Loan to value 49% * Loan to value 48% * Average interest cost 4.1% * Average interest cost 4.3% ------------- ----------------------------------------------------------------- -----------------------------------------------------------------
Car parking
At CitiPark, our car parking business, we have continued to consolidate the assets we purchased in 2014 & 2015. We have upgraded all of the new branches with our integrated parking management system, which allows us to manage all locations remotely from our Engine Room. The Engine Room is the 24/7 control centre that provides constant customer service and support to our patrons via an intercom system and a web chat service. The launching of the Engine Room in July 2016 has allowed us to rationalise staff levels from 41 permanent branch staff down to 34.
The GBP3m refurbishment of the three car parks in Watford is now complete and these are trading well and above expectation. Our next phase is to upgrade our operation at Bell Street, London where demand has increased significantly following the closure of an adjacent competitor car park.
Leeds Dock, formerly Clarence Dock, is now trading at full capacity due to increased corporate and individual season ticket sales largely as a result of several businesses moving into the vicinity. We have made recent improvements to this car park including the installation of Electric Vehicle Chargers, including a partnership with Tesla to have their Destination Chargers installed. We have plans to introduce our new partnership with Tesla at four other branches imminently.
Other generic electric vehicle charging points have been installed at the Merrion Centre in Leeds, with a plan to start rolling this out to all branches to cater for the ever-growing demand for electric vehicle charging.
Technological enhancements
Further technological developments have been made across our branch network with the introduction of contactless payment and Apple Pay. Online season ticket orders and pre-booking of parking spaces continues to operate well using our built-in-house booking platform BaySentry; entry and exit from our branches using QR Code technology can be integrated with mobile technologies such as iBeacon, Apple & Google Wallet to assist and improve customer service and efficiency. This works in the same way as an e-Boarding Pass does for an airplane journey.
We also have new products in the pipeline to ensure we are constantly improving our service. This includes a new CitiPass card which is a credit top-up payment service which works in the same way as the Oyster card and an emissions based tariff structure that would be especially beneficial in the central London branches and in areas where we work with local authorities where they charge for parking based on the emissions of the vehicle, not time.
Overall, the car park business has traded well this year and we continue to benefit from strong income growth.
TCS Energy
We believe passionately in operating the most sustainable and environmentally friendly business that we can, rather than focussing solely on minimising our waste output and maximising our recycling capabilities. At TCS we also seek to manage our consumption of natural resources and use energy, where we can, from renewable sources.
TCS Energy was established in April 2002. Since then we have installed 3 Solar Photovoltaic (PV) Farms. These are situated at Leeds Dock Car Park and Urban Exchange, Manchester.
In total, the electric energy that we have generated would enable 1,048,422 full kettles to boil, or an electric car to go 1,284,971 miles or would provide 28.41 households of 4 people with electricity for one year. It has also reduced CO(2) emissions by 141.16 tonnes for one year (all figures are approximate and taken from best available sources).
Leeds Dock
The Solar PV system at Leeds Dock MSCP consists of 641 Solyndra 200W Solar Modules mounted on feet above the white painted top deck of the Multi Storey Car Park. The system went live in 2011.
The system is connected to the Car Park electrical system via 9 Solarmax 13MT 13kW solar inverters.
The total system size is 128.2 kWp.
Production to date by calendar year is shown below:
2011 from September= 13,630kWh
2012= 97,780 kWh
2013= 94,480 kWh
2014 = 95,100 kWh
2015= 100,220 kWh
2016 to date. = 67,770 kWh
Urban Exchange - Array 1
The Phase 1 Solar PV system at Urban Exchange, Manchester consists of:240 REC 240W Solar PV modules. These are connected to the electrical system of the property via 3 Solarmax 15MT 15kW Solar inverters.The modules are mounted by a ballasted frame on the membrane roof of the premises.
The system size is 49.68kWp.
Production to date by calendar year has been:
2012 (from 5th July) = 16,746 kWh
2013= 40,887 kWh
2014= 39,882 kWh
2015 = 39,333 kWh
2016 (to 17th August) = 29,389 KWh
Urban Exchange - Array 2
The Solar PV system at Urban Exchange Phase 2 consists of:562 Canadian Solar 255W Solar PV modules mounted on a ballasted frame on the membrane roof of the building.
The modules are connected to the electrical system of the building via 3 Solarmax 30HT4, 30kW inverters and 1 Solarmax 15MT 15kW inverter.
The system size is: 143.82 kWp.
Production to date by calendar year has been:
2015 (from 4th February) = 67,833 kWh
2016 (to 17th August) = 75,426 kWh
Chairman & Chief Executive's Statement approved by the Board on 14 September 2016
Edward Ziff - Chairman & Chief Executive
Consolidated income statement for the year ended 30 June 2016 2016 2015 Restated Notes GBP000 GBP000 ------------------------------------- ------ ---------- ---------- Gross revenue 26,265 22,714 Property expenses (7,661) (5,248) ------------------------------------- ------ ---------- ---------- Net revenue 18,604 17,466 Administrative expenses 2 (5,493) (5,321) Other income 3 599 1,468 Valuation movement on investment properties 3,018 15,577 Reversal of impairment/(impairment) of car parking assets 500 (786) Profit on disposal of investment properties 1,140 236 Loss on disposal of investment property into joint ventures - (2,488) Share of post tax profits from joint ventures 1,400 5,109 ------------------------------------- ------ ---------- ---------- Operating profit 19,768 31,261 Finance costs (7,847) (7,258) ------------------------------------- ------ ---------- ---------- Profit before taxation 11,921 24,003 Taxation - - ------------------------------------- ------ ---------- ---------- Profit for the year attributable to owners of the Parent 11,921 24,003 ------------------------------------- ------ ---------- ---------- Earnings per share Basic and diluted 4 22.4p 45.1p EPRA (non-GAAP measure) 4 12.4p 12.1p ------------------------------------- ------ ---------- ---------- Dividends per share Paid during the year 5 10.44p 10.44p Proposed 5 7.90p 7.34p ------------------------------------- ------ ---------- ---------- Consolidated statement of comprehensive income for the year ended 30 June 2016 2016 2015 GBP000 GBP000 ------------------------------------- ------ ---------- ---------- Profit for the year 11,921 24,003 Items that may be subsequently reclassified to profit or loss Revaluation gain on car parking 500 - assets Revaluation gains on other investments 108 228 ------------------------------------- ------ ---------- ---------- Total comprehensive income for the year 12,529 24,231 ------------------------------------- ------ ---------- ---------- All recognised income for the year is attributable to owners of the Parent. Consolidated balance sheet as at 30 June 2016 2016 2015 2014 Restated Restated Notes GBP000 GBP000 GBP000 ------------------------------------- ------ ---------- ---------- ---------- Non-current assets Property rental Investment properties 6 325,313 320,141 307,474 Investments in joint ventures 7 25,093 19,344 1,748 ------------------------------------- ------ ---------- ---------- ---------- 350,406 339,485 309,222 ------------------------------------- ------ ---------- ---------- ---------- Car park activities Freehold and leasehold properties 6 21,075 16,841 17,315 Goodwill 4,024 4,024 - ------------------------------------- ------ ---------- ---------- ---------- 25,099 20,865 17,315 ------------------------------------- ------ ---------- ---------- ---------- Fixtures, equipment and motor vehicles 6 2,151 1,214 1,112 ------------------------------------- ------ ---------- ---------- ---------- Total non-current assets 377,656 361,564 327,649 ------------------------------------- ------ ---------- ---------- ---------- Current assets Investments 2,070 1,962 1,734 Non-current assets held for sale - 3,450 7,500 Trade and other receivables 7,388 6,871 4,705 Cash and cash equivalents - 1,515 - ------------------------------------- ------ ---------- ---------- ---------- Total current assets 9,458 13,798 13,939 ------------------------------------- ------ ---------- ---------- ---------- Total assets 387,114 375,362 341,588 ------------------------------------- ------ ---------- ---------- ---------- Current liabilities Trade and other payables (11,496) (11,857) (13,908) Financial liabilities (887) (38,668) (1,845) ------------------------------------- ------ ---------- ---------- ---------- Total current liabilities (12,383) (50,525) (15,753) ------------------------------------- ------ ---------- ---------- ---------- Non-current liabilities Financial liabilities (184,874) (141,959) (161,964) ------------------------------------- ------ ---------- ---------- ---------- Total liabilities (197,257) (192,484) (177,717) ------------------------------------- ------ ---------- ---------- ---------- Net assets 189,857 182,878 163,871 ------------------------------------- ------ ---------- ---------- ---------- Equity attributable to the owners of the Parent Called up share capital 8 13,290 13,290 13,290 Share premium account 200 200 200
Capital redemption reserve 559 559 559 Revaluation reserve 500 - - Retained earnings 175,308 168,829 149,822 ------------------------------------- ------ ---------- ---------- ---------- Total equity 189,857 182,878 163,871 ------------------------------------- ------ ---------- ---------- ---------- Net asset value per share 10 357p 344p 308p ------------------------------------- ------ ---------- ---------- ---------- Consolidated statement of changes in equity as at 30 June 2016 Share Capital Share premium redemption Revaluation Retained Total capital account reserve reserve earnings equity GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------------------- -------- -------- ----------- ------------ --------- -------- Balance at 1 July 2014 13,290 200 559 - 149,822 163,871 Comprehensive income for the year Profit - - - - 24,003 24,003 Other comprehensive income - - - - 228 228 -------- -------- ----------- ------------ --------- -------- Total comprehensive income for the year - - - - 24,231 24,231 Contributions by and distributions to owners Final dividend relating to the year ended 30 June 2014 - - - - (3,902) (3,902) Interim dividend relating to the year ended 30 June 2015 - - - - (1,648) (1,648) Other adjustments - - - - 326 326 --------------------------- -------- -------- ----------- ------------ --------- -------- Balance at 30 June 2015 13,290 200 559 - 168,829 182,878 Comprehensive income for the year Profit - - - - 11,921 11,921 Other comprehensive income - - - 500 108 608 -------- -------- ----------- ------------ --------- -------- Total comprehensive income for the year - - - 500 12,029 12,529 Contributions by and distributions to owners Final dividend relating to the year ended 30 June 2015 - - - - (3,902) (3,902) Interim dividend relating to the year ended 30 June 2016 - - - - (1,648) (1,648) --------------------------- -------- -------- ----------- ------------ --------- -------- Balance at 30 June 2016 13,290 200 559 500 175,308 189,857 --------------------------- -------- -------- ----------- ------------ --------- -------- Consolidated cash flow statement for the year ended 30 June 2016 2016 2015 Restated ------------------ -------------------- Notes GBP000 GBP000 GBP000 GBP000 -------------------------------- ------ -------- -------- --------- --------- Cash flows from operating activities Cash generated from operations 9 13,559 9,950 Interest paid (7,903) (7,759) -------------------------------- ------ -------- -------- --------- --------- Net cash generated from operating activities 5,656 2,191 -------------------------------- ------ -------- -------- --------- --------- Cash flows from investing activities Purchase and construction of investment properties (8,833) (22,132) Refurbishment of investment properties (4,890) (10,577) Consideration payable for business combinations - (4,024) Payments for leasehold property improvements (3,291) (312) Purchases of fixtures, equipment and motor vehicles (1,496) (532) Proceeds from sale of investment properties 16,050 16,821 Proceeds from sale of 54 - fixed assets Proceeds from sale of Merrion House to joint venture - 10,000 Investments in joint ventures (4,916) - Distributions received 567 - from joint ventures -------------------------------- ------ -------- -------- --------- --------- Net cash used in investing activities (6,755) (10,756) -------------------------------- ------ -------- -------- --------- --------- Cash flows from financing activities Proceeds from non-current borrowings 4,247 17,475 Dividends paid to shareholders (5,550) (5,550) -------------------------------- ------ -------- -------- --------- --------- Net cash (used in)/generated from financing activities (1,303) 11,925 -------------------------------- ------ -------- -------- --------- --------- Net (decrease)/increase in cash and cash equivalents (2,402) 3,360 Cash and cash equivalents at beginning of the year 1,515 (1,845) -------------------------------- ------ -------- -------- --------- --------- Cash and cash equivalents at end of the year (887) 1,515 -------------------------------- ------ -------- -------- --------- --------- Cash and cash equivalents at year end are comprised of the following: Cash - 1,515 Bank overdraft (887) - -------------------------------- ------ -------- -------- --------- --------- (887) 1,515 -------------------------------- ------ -------- -------- --------- ---------
Audited preliminary results announcements
The financial information for the year ended 30 June 2016 and the year ended 30 June 2015 does not constitute the company's statutory accounts for those years.
Statutory accounts for the year ended 30 June 2015 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2016 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
The auditors' reports on the accounts for 30 June 2016 and 30 June 2015 were 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.
1. Segmental information Segment assets 2016 2015 Restated GBP000 GBP000 ---------------------------------- --------- ------------ Property rental 360,422 351,016 Car park operations 26,692 24,346 ---------------------------------- --------- ------------ 387,114 375,362 ---------------------------------- --------- ------------ Segmental results 2016 2015 Restated --------------------------------- --------------------------------- Property Car Property Car park park rental operations Total rental operations Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ---------------------------------- --------- ------------ -------- ---------- ----------- -------- Gross revenue 16,147 10,118 26,265 15,844 6,870 22,714 Property expenses (1,818) (5,843) (7,661) (1,558) (3,690) (5,248) ---------------------------------- --------- ------------ -------- ---------- ----------- -------- Net revenue 14,329 4,275 18,604 14,286 3,180 17,466 ---------------------------------- --------- ------------ -------- ---------- ----------- -------- Administrative expenses (4,690) (803) (5,493) (4,737) (584) (5,321) Other income 594 5 599 1,452 16 1,468 Valuation movement
on investment properties 3,018 - 3,018 15,577 - 15,577 Reversal of impairment/(impairment) of car parking assets - 500 500 - (786) (786) Profit on disposal of investment properties 1,140 - 1,140 236 - 236 Loss on disposal of investment properties into joint ventures - - - (2,488) - (2,488) Share of post-tax profits from joint ventures 1,400 - 1,400 5,109 - 5,109 ---------------------------------- --------- ------------ -------- ---------- ----------- -------- Operating profit 15,791 3,977 19,768 29,435 1,826 31,261 Finance costs (7,847) - (7,847) (7,258) - (7,258) ---------------------------------- --------- ------------ -------- ---------- ----------- -------- Profit before taxation 7,944 3,977 11,921 22,177 1,826 24,003 Taxation - - - - - - ---------------------------------- --------- ------------ -------- ---------- ----------- -------- Profit for the year 7,944 3,977 11,921 22,177 1,826 24,003 ---------------------------------- --------- ------------ -------- ---------- ----------- --------
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 net revenue at the Merrion Centre and development sites for the year ended 30 June 2016, arising from car park operations, was GBP3,052,000. After allowing for an allocation of administrative expenses, the operating profit at these sites was GBP2,201,000.
2. Administrative expenses 2016 2015 GBP000 GBP000 ---------------------------- ------- ------- Employee benefits 3,479 3,479 Depreciation 205 176 Charitable donations 91 99 Other 1,718 1,567 ---------------------------- ------- ------- 5,493 5,321 ---------------------------- ------- ------- 3. Other income 2016 2015 GBP000 GBP000 ------------------------------------------------- ------------------------------------- --------- Commission received 140 110 Dividends received 26 26 Management fees receivable 242 216 Dilapidations receipts and income relating to lease premiums 24 380 Other 167 736 ------------------------------------------------- ------------------------------------- --------- 599 1,468 ------------------------------------------------- ------------------------------------- --------- 4. Earnings per share (EPS) The calculation of basic earnings per share has been based on the profit for the year, divided by the weighted average number of shares in issue. The weighted average number of shares in issue during the year was 53,161,950 (2015: 53,161,950). 2016 2015 ------------------------------ ------------------------- Earnings Earnings Earnings per Earnings per share share GBP000 p GBP000 p -------------------------------------------- --- --------- -------------- ---------- --------- Profit for the year 11,921 22.4 24,003 45.1 Valuation movement on investment properties (3,018) (5.7) (15,577) (29.3) (Reversal of impairment)/impairment of car parking assets (500) (0.9) 786 1.4 Valuation movement on properties held in joint ventures (668) (1.3) (5,013) (9.4) Profit on disposal of investment and development properties (1,140) (2.1) (236) (0.4) Loss on disposal of investment properties into joint ventures - - 2,488 4.7 --------------------------------------------- --------- -------------- ---------- --------- EPRA earnings and earnings per share 6,595 12.4 6,451 12.1 --------------------------------------------- --------- -------------- ---------- --------- 5. Dividends 2016 2015 GBP000 GBP000 --------------------------------------------- ------------- ------- 2014 final paid: 7.34p per 25p share - 3,902 2015 interim paid: 3.10p per 25p share - 1,648 2015 final paid: 7.34p 3,902 - per 25p share 2016 interim paid: 3.10p 1,648 - per 25p share --------------------------------------------- ------------- ------- 5,550 5,550 --------------------------------------------- ------------- -------
An interim dividend in respect of the year ended 30 June 2016 of 3.1p per share was paid to shareholders on 24 June 2016. This dividend was paid entirely as a Property Income Distribution (PID).
A final dividend in respect of the year ended 30 June 2016 of 7.90p per share is proposed. This dividend, based on the shares in issue at 14 September 2016, amounts to GBP4.2m which has not been reflected in these accounts and will be paid on 4 January 2017 to shareholders on the register on 2 December 2016. This dividend will comprise an ordinary dividend of 4.00p per share and a PID of 3.90p.
6. Non-current assets (a) Investment properties Freehold Long Development Total leasehold GBP000 GBP000 GBP000 GBP000 --------------------------- --------- ----------- ------------ --------- Valuation at 1 July 2014 - restated 274,497 5,199 27,778 307,474 Additions at cost 8,042 13,361 729 22,132 Other capital expenditure 10,490 87 - 10,577 Interest capitalised 501 - - 501 Disposals (27,319) (1,460) (5,245) (34,024) Transfer to assets held for sale (3,450) - - (3,450) Surplus on revaluation 11,986 3,413 178 15,577 Finance lease adjustments - 1,176 - 1,176 Movement in tenant lease incentives 178 - - 178 --------------------------- --------- ----------- ------------ --------- Valuation at 30 June 2015 - restated 274,925 21,776 23,440 320,141 --------------------------- --------- ----------- ------------ --------- Additions at cost 6,314 - - 6,314 Other capital expenditure 4,647 118 2,643 7,408 Interest capitalised 56 - - 56 Disposals (11,460) - (2,000) (13,460) (Deficit)/surplus on revaluation (3,308) 807 5,519 3,018 Movement in tenant lease incentives 1,836 - - 1,836 --------------------------- --------- ----------- ------------ Valuation at 30 June 2016 273,010 22,701 29,602 325,313 --------------------------- --------- ----------- ------------ ---------
(b) Freehold and leasehold properties - car park activities
Freehold Long Total leasehold GBP000 GBP000 GBP000 --------------------------- --------- ----------- ------- Valuation at 1 July 2014 - restated 2,500 14,815 17,315 Additions - 312 312 Impairment charge - (786) (786) --------------------------- --------- ----------- ------- Valuation at 30 June 2015 - restated 2,500 14,341 16,841 --------------------------- --------- ----------- ------- Additions - 3,291 3,291 Depreciation - (57) (57) Surplus on revaluation - 500 500 (Impairment)/reversal of impairment (500) 1,000 500 ----------- ------- Valuation at 30 June 2016 2,000 19,075 21,075 --------------------------- --------- ----------- -------
The historical cost of freehold and leasehold properties relating to car park activities is GBP21,747,000.
The Company occupies an office suite in part of the Merrion Centre. The Directors do not consider this element to be material.
The fair value of the Group's investment and development properties has been determined principally by independent, appropriately qualified external valuers CBRE, Jones Lang LaSalle and Sanderson Weatherall. The remainder of the portfolio has been valued by the Property Director.
Valuations are performed bi-annually and are performed consistently across the Group's whole portfolio of properties. At each reporting date appropriately qualified employees verify all significant inputs and review computational outputs. The external valuers submit and present summary reports to the Property Director and the Board on the outcome of each valuation round.
Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rents or business profitability, incentives offered to tenants, forecast growth rates, market yields and discount rates and selling costs including stamp duty.
The development properties principally comprise land in Leeds and Manchester. These have also been valued by appropriately qualified external valuers Sanderson Weatherall, 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 ERV Value Initial Reversionary rent yield yield GBP000 GBP000 GBP000 % % --------------------------- -------- ------- -------- -------- ------------- Retail and Leisure 5,027 5,398 88,961 5.3% 5.7% Merrion Centre (excluding offices) 6,831 7,063 105,300 6.1% 6.3% Offices 2,194 2,381 29,244 7.1% 7.7% Out of town retail 3,258 3,560 55,700 5.5% 6.0% Distribution 297 406 4,830 5.8% 7.9% Residential 544 588 10,500 4.9% 5.3% --------------------------- -------- ------- -------- -------- ------------- 18,151 19,396 294,535 5.8% 6.2% --------------------------- -------- ------- -------- -------- ------------- Development property 29,602 Car parks 17,771 Finance lease adjustments 4,480 --------------------------- -------- ------- -------- 346,388 --------------------------- -------- ------- --------
The effect on the valuation of applying a different yield and a different ERV would be as follows:
Valuation in the Consolidated Financial Statements at an initial yield of 6.8% - GBP304.2m, Valuation at 4.8% - GBP409.4m.
Valuation in the Consolidated Financial Statements at a reversionary yield of 7.2% - GBP306.6m, Valuation at 5.2% - GBP404.5m.
Property valuations can be reconciled to the carrying value of the properties in the balance sheet as follows:
Investment Freehold Properties and Leasehold Total Properties GBP000 GBP000 GBP000 -------------------------------- ------------- ---------------- -------- Externally valued by CBRE 203,065 - 203,065 Externally valued by Jones Lang LaSalle 94,625 14,250 108,875 Externally valued by Sanderson Weatherall 25,575 - 25,575 Investment properties valued by the Property Director 872 - 872 Finance lease obligations capitalised 1,176 3,304 4,480 Leasehold improvements - 3,521 3,521 -------------------------------- ------------- ---------------- -------- 325,313 21,075 346,388 -------------------------------- ------------- ---------------- --------
Leasehold improvements primarily relate to expenditure incurred on the refurbishment of three car parks in Watford that are held under operating leases.
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 years) both the independent valuers and the Property Director have used the actual rent passing and have also formed an opinion as to the two significant unobservable inputs being the market rental for that property and the yield (i.e. the discount rate) which a potential purchaser would apply in arriving at the market value. Both these inputs are arrived at using market comparables for the type, location and condition of the property.
(c) Fixtures, equipment and motor vehicles Accumulated Cost depreciation GBP000 GBP000 ------------------------------------ -------- ------------- At 1 July 2014 3,771 2,659 Additions 532 - Disposals (160) (32) Depreciation - 302 At 30 June 2015 4,143 2,929 ------------------------------------ -------- ------------- Net book value at 30 June 2015 1,214 ------------------------------------ -------- ------------- At 1 July 2015 4,143 2,929 Additions 1,496 - Disposals (1,266) (1,234) Depreciation - 527 At 30 June 2016 4,373 2,222 ------------------------------------ -------- ------------- Net book value at 30 June 2016 2,151 ------------------------------------ -------- -------------
7. Investments in joint ventures
2016 2015 GBP000 GBP000 ----------------------------------- ------- ------- At the start of the year 19,344 1,748 Additions - 12,487 Investments in joint ventures 4,916 - Dividends and other distributions (567) - received in the year Share of profits after tax 1,400 5,109 ----------------------------------- ------- ------- At the end of the year 25,093 19,344 ----------------------------------- ------- -------
Investments in joint ventures primarily relate to the Group's interest in the partnership capital of Merrion House LLP. This joint venture owns a long leasehold interest over a property that is let to the Group's joint venture partner, Leeds City Council ('LCC'). The property is currently in the process of a complete refurbishment. Under the arrangement LCC is required to contribute a fixed amount in cash and the Group is required to contribute the property and the balance of refurbishment cost. The net commitment from the Group in relation to this arrangement that has not yet been incurred is GBP8,890,000. The interest in the joint venture for each partner is an equal 50% share, regardless of the level of overall contributions from each partner. The investment property held within this partnership has been externally valued by CBRE at each reporting date.
The share of profits after tax of GBP1.4m includes an adjustment of GBP2.5m in respect of the property transferred to Merrion House LLP in the prior year, less the share of losses in the current period of GBP1.2m.
The net assets of Merrion House LLP for the current and previous year are as stated below:
2016 2015 GBP000 GBP000 --------------------- ------- ------- Non-current assets 35,500 35,000 Current assets 929 - Current liabilities (351) - --------------------- ------- ------- Net assets 36,078 35,000 --------------------- ------- -------
The profits of Merrion House LLP for the current and previous year are as stated below:
2016 2015 GBP000 GBP000 ---------------------------------- -------- ------- Income 1,400 65 Expenses (78) - 1,322 65 Valuation movement on investment properties (3,665) 10,025 ---------------------------------- -------- ------- Net (loss)/profit (2,343) 10,090 ---------------------------------- -------- -------
The Group's interest in other joint ventures are not considered to be material.
The joint ventures have no significant contingent liabilities to which the Group is exposed nor has the Group any significant contingent liabilities in relation to its interest in the joint ventures.
The Group's joint ventures, which are registered in England and operate in the United Kingdom, are as follows:
Beneficial Activity Interest % ----------------------------------- ----------- ------------- Buckley Properties (Leeds) Limited 50 Property Investment Merrion House LLP 50 Property investment Belgravia Living Group Limited 50 Property Investment Bay Sentry Limited 50 Software Development ----------------------------------- ----------- ------------- 8. Called up share capital
Authorised
The authorised share capital of the company is 164,879,000 (2015: 164,879,000) ordinary shares of 25p each. The nominal value of authorised share capital is GBP41,219,750 (2015: GBP41,219,750).
Issued and fully paid up
Number Nominal of shares value 000 GBP000 --------------------- ----------- -------- At 30 June 2015 and 30 June 2016 53,162 13,290 --------------------- ----------- --------
The Company has only one type of ordinary share class in issue. All shares have equal entitlement to voting rights and dividend distributions.
The Company has no share option schemes in current operation and there are no unexercised options outstanding at 30 June 2016.
9. Cash flow from operating activities 2016 2015 GBP000 GBP000 ------------------------------------- -------- --------- Profit for the financial year 11,921 24,003 Adjustments for: Depreciation 585 302 Profit on disposal of fixed (21) - assets Profit on disposal of investment properties (1,140) (236) Finance costs 7,847 7,258 Loss on disposal of investment properties into joint ventures - 2,488 Share of post tax profits from joint ventures (1,400) (5,109) Movement in valuation of investment properties (3,018) (15,577) Movement in lease incentives (1,836) (178) (Reversal of impairment)/impairment of car parking assets (500) 786 Decrease/(increase) in receivables 1,483 (2,167) Decrease in payables (362) (1,620) ------------------------------------- -------- --------- Cash generated from operations 13,559 9,950 ------------------------------------- -------- --------- 10. EPRA net asset value per share
The Basic and EPRA net asset values are the same, as set out in the table below.
2016 2015 GBP000 GBP000 ------------------------ -------- -------- Net assets at 30 June 189,857 182,878 Shares in issue (000) 53,162 53,162 Basic and EPRA net asset value per share 357p 344p ------------------------ -------- --------
11. Restatement of prior year figures
As reported in our interim report, a detailed review has recently been performed to ensure all of the Group's accounting policies are being applied appropriately. This review has identified certain areas that have previously not been accounted for in accordance with those accounting policies. These areas are summarised as follows:
a) Unamortised lease incentives have historically been recognised as a separate asset within the balance sheet. An adjustment of GBP4.0m has been made to the previously reported figures to de-recognise this asset and offset the movement in lease incentives against the valuation surplus on investment properties in each period.
b) Two of the properties held under long leasehold agreements have historically not been recognised as finance leases. The discounted value of rents payable on these leases amounting to GBP4.5m has now been recognised within financial liabilities with a corresponding increase in the fair value of long leasehold properties within investment properties.
c) The Group's development land assets have previously not been recognised at fair value. These assets have therefore been revalued based on fair value, resulting in an increase of GBP4.0m to the valuation at 30 June 2015.
d) Previously, three properties used in the car park business have been classified within investment properties. The fair value of these assets at 30 June 2015 of GBP13.3m has been re-classified from investment properties to freehold and leasehold properties.
e) Consideration paid for the acquisition of two car park businesses has previously been recognised within tangible fixed assets as lease premiums. These acquisitions are considered to be Business Combinations under IFRS3 (revised). The consideration is considered to represent goodwill on acquisition and GBP4.0m at 30 June 2015 has therefore been reclassified accordingly.
The impact on total assets and total liabilities as a result of the accounting adjustments arising from the above is set out in the table below. There has been no impact on the net assets or earnings per share as a result of these adjustments.
As at 30 June 2015 GBP000 ----------------------------------------------- ---------- Total assets as previously reported 370,882 a) Unamortised lease incentives adjustment (3,966) b) Finance lease accounting adjustment 4,480 c) Value adjustment relating to development land 3,966 ----------------------------------------------- ---------- Total Assets - restated at 30 June 2015 375,362 ----------------------------------------------- ---------- Total liabilities as previously reported (188,004) b) Finance lease accounting adjustment (4,480) ----------------------------------------------- ---------- Total Liabilities - restated at 30 June 2015 (192,484) ----------------------------------------------- ---------- Net Assets 182,878 ----------------------------------------------- ---------- Net Assets as previously reported 182,878 ----------------------------------------------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
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