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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Palace Capital Plc | LSE:PCA | London | Ordinary Share | GB00BF5SGF06 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 240.00 | 236.00 | 240.00 | 240.00 | 235.00 | 240.00 | 11,168 | 16:35:01 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Agents & Mgrs | 33.3M | -35.7M | -0.9506 | -2.47 | 88.27M |
From Apr 2019 to Apr 2024
TIDMPCA
RNS Number : 2140Y
Palace Capital PLC
04 December 2017
Palace Capital plc
("Palace Capital" or the "Company")
Interim Results for the 6 months ended 30 September 2017
Palace Capital strategy progressing on all fronts
Continuing growth in NAV and dividend
Completed major acquisition post the period end
Palace Capital, the property investment company that focuses on commercial property mainly outside London, is pleased to announce its half yearly results for the six months to 30 September 2017.
HIGHLIGHTS
Financial Highlights
Hot Features
Premium
-- Interim dividend (as announced on 30 November 2017) -
up 5.6% to 9.5p (H1 2017: 9p)
-- NAV per share - up 1.8% to 451p (March 2017: 443p)
-- Portfolio valuation at 30 September 2017 (prior to the
acquisition of RT Warren (Investments) Ltd portfolio,
independently valued at GBP71.8m): GBP202.8m up 10.7%
including an uplift of 1.5% on a like-for like basis (March
2017: GBP183.2m)
-- Profit before tax of GBP4.9m - up 25.6% (H1 2017: GBP3.9m)
-- Adjusted EPS*: 12.8p - up 18.5% (H1 2017: 10.8p)
-- Average cost of debt 2.9% (March 2017: 2.9%)
*Adjusted EPS is recurring earnings per share, excluding one-off exceptional items and fair value movements
Operational Highlights
-- Contracts exchanged on 18 September 2017 for the GBP68m
acquisition of RT Warren (Investments) Ltd (including
retained debt of GBP14.5m). This transaction completed
post period end on 9 October 2017
-- Corporate acquisition of St James Gate, Newcastle-upon-Tyne
for GBP20m, showing 8.6% net initial yield
-- Planning consent secured at the 2-acre Hudson House site,
Toft Green, York for 127 apartments, 34,000 sq ft offices,
5,000 sq ft retail & car parking
-- Annualised contracted rental income GBP14.1m - up 11%
(March 2017: GBP12.7m)
-- Refinancing of GBP27.0m debt facility for 5 years with
Santander UK, secured on Boulton House Manchester, Sol
Central Northampton & St James Gate Newcastle-upon-Tyne
-- Application to join the premium listing segment of the
Official List of the London Stock Exchange expected in
2018
-- Overall occupancy (excluding Hudson House) is 89% (March
2017: 91%)
-- WAULT of 5.2 years to break (March 2017: 5.8 years)
The Company has built a high-quality portfolio of properties. This is down to careful stock selection, taking advantage of corporate opportunities and selling those properties which have limited or no prospect for growth or are too small for the Company's stated criteria. This active management programme continues to support the Company's progressive dividend policy.
Stanley Davis, Chairman of Palace Capital, said:
"I am very pleased to report that Palace Capital shows increasing growth, both in income and capital value. Our NAV per share as at the half year was 451p, although this has been affected by the equity raise undertaken by the Company in October of this year. Our NAV on our readmission in October 2013 was 218p so we have made tremendous progress.
"We are making headway on some of our strategic assets and, with the completion of the acquisition of the high-quality RT Warren portfolio in early October, we remain very positive about our future."
Date: 4 December 2017
For further information contact:
Palace Capital plc
Neil Sinclair, Chief Executive
Stephen Silvester, Finance Director
Tel. +44 (0)20 3301 8331
Allenby Capital Limited (Nominated Adviser and Joint Broker)
Nick Naylor / James Reeve / Asha Chotai
Tel. +44 (0)20 3328 5656
Arden Partners plc (Joint Broker)
Chris Hardie / Ciaran Walsh
Tel. +44 (0)20 7614 5917
Capital Access Group (Financial PR)
Scott Fulton
Tel. +44 (0)20 3763 3400
About Palace Capital plc (www.palacecapitalplc.com):
Palace Capital is a UK property investment company admitted to trading on the AIM Market of the London Stock Exchange (LSE: PCA). The Company is not sector specific and looks for opportunities where it can enhance the long-term income and capital value through asset management and strategic capital development in locations outside London. In its last reported financial year, Palace Capital produced a 20.0% increase in adjusted profit before tax, a 7.0% uplift in EPRA NAV per share and a 16.0% increase in dividends.
INTERIM RESULTS FOR THE HALF YEARED 30 SEPTEMBER 2017
Chairman's Statement
I am pleased to report our interim results for the six months ended 30 September 2017 which shows that the Company has made a profit before tax of GBP4.9m, up from GBP3.9m in the comparative period. We have continued to actively manage our portfolio with successful lettings, rent reviews, renewals of leases and asset sales.
At 30 September 2017, our portfolio was valued by Cushman & Wakefield at GBP202.8m, with a contracted rent roll of GBP14.1m per annum and a net income after property costs of GBP12.4m per annum. We are conservatively geared as, although our net loan to value ("LTV") rose after the Newcastle acquisition to 42%, it was subsequently reduced after the half year to 30%. Our EPRA NAV per share has increased by 1.8% to 451p per share (March 2017: 443p), although this has subsequently been affected by the equity raise undertaken by the Company in October of this year. At 30 September 2017 the Company had a net asset value of GBP111.6m (March 2017: GBP109.6m). Our net assets have materially increased since the period end with the acquisition of RT Warren and the associated GBP70m equity raise.
We continue to grow our recurring income which enables us to maintain our progressive dividend policy. This is very important to us in order to reward existing shareholders and attract new ones. For the 6 months to 30 September 2017 rental income, net of non-recoverable costs, totalled GBP6.5m (up from GBP5.9m in the comparative period).
Our strategy is to increase shareholder value by making selective acquisitions and taking advantage of opportunities when they arise. Since the management team took control in July 2011, we have made 12 acquisitions of which 8 have been corporate. This has been tax efficient strategy, saving considerable SDLT and, in some instances, acquiring unutilised tax losses.
We are very selective in the acquisitions we make and prefer to acquire "off-market" - as a result we can go many months before we make an acquisition. In the 6-month period we acquired the corporate entity that owns St James Gate, Newcastle-upon-Tyne (an office, hotel, retail & residential complex situated very close to Newcastle Railway Station) for GBP20m. Newcastle is a growing city where the Council has ambitious plans for the city centre. With a net initial yield of 8.6% and borrowing costs of under 3%, this investment provides us with very strong cash-flow.
We have added to our highly experienced team in order to service our new acquisitions and to maintain our active management programme. We are very well placed to take advantage of new opportunities as they arise.
Recycling our capital is an integral part of our strategy. We have sold over GBP3.0m of our smaller or vacant assets during the half year period, releasing cash to reinvest in the income-generating complex at St James Gate, Newcastle-upon-Tyne.
STRATEGIC DEVELOPMENT
We have grown the Company and its subsidiaries (the "Group") with active management of the acquired portfolios and properties. During the 6-month period we exchanged contracts to acquire RT Warren (Investments) Limited for GBP68m (which includes retained debt of GBP14.5m), which was completed on 9 October 2017. This company owns 21 commercial properties in prosperous towns and cities, largely in the South East, together with 65 residential properties. The Board believes this was the best quality portfolio we had been offered in over two years and fitted our stated strategy. It was financed by an equity raise of GBP70m which has had an immediate dilutive effect on net assets per share. I am very confident that we will extract considerable value and I am pleased to report that we have already managed to let the vacant London Court in Southampton for 10 years with a 5 year break at a headline rental of GBP150,000 per annum. We also have exciting plans for some of our other properties. It is our intention to sell the low yielding residential element of the RT Warren Portfolio by the spring of 2018 as it is not core to our business and then reinvest the proceeds in higher yielding, commercial properties.
Our model of outsourcing property management allows us not only to limit our direct overheads but also to focus on potential acquisitions and our active asset management programme. Following the acquisition of RT Warren we are in the process of rationalising the number of managing agents we use.
PORTFOLIO ACTIVITY
Hudson House, Toft Green, York:
We have announced that we secured planning consent to redevelop this site into 127 flats, 5,000 sq. ft of commercial/restaurant space and an office block of 34,000 sq ft of net lettable space. Our project managers have invited tenders to demolish the building which we are hopeful will commence in February 2018. This will allow us to save empty rates, service charge shortfall and insurance on an annualised basis of approximately GBP0.5m - an immediate positive effect on our profitability.
The residential market in York and nearby towns, such as Harrogate, is still buoyant with a number of developments successfully completed and sold. We are in active talks with a potential joint venture partner to move the project forward and we are working on construction starting in the final quarter of 2018. As our plans develop we will update shareholders.
We believe that this is a great development site in the fast-growing city of York situated only one minute's walk from the railway station.
Broad Street Plaza, Halifax
This 5-year-old leisure scheme is providing exceptional returns for us. In August, fixed rental increases totalling GBP154,000 per annum from Vue, Apcoa, JD Wetherspoon, TGI Fridays and Pure Gym came into effect so this property now produces GBP1.95m rent per annum. As interest on our loan from Scottish Widows of GBP14.8m is at the fixed rate of 2.9%, our interest payments are GBP425,000 per annum so our current net income is GBP1,525,000 per annum. On an equity investment of GBP9m made in March 2016 this represents almost a 17% return. In addition, Calderdale Council have made a huge investment in the historic Piece Hall which has increased the number of visitors to Halifax and early indications are that it has added to footfall and turnover at Broad Street Plaza.
Sol Central, Marefair, Northampton
The leisure occupational market has slowed but as we seek new tenants for the vacant space, our existing quality tenants still provide us with a return of circa 14.5% on our initial investment. We have taken the opportunity of renewing the roof and external lighting system as well as appointing additional letting agents.
Boulton House, Chorlton Street, Manchester
We took advantage of buying this 75,000 sq ft office building when a number of competitors withdrew from the market following the Government announcement of the date of the EU Referendum. Passing rents were in the region of GBP12.50-GBP13.00 per sq ft. We have carried out a limited refurbishment to the vacant space and revitalised the entrance which has enabled us to complete lettings of 6,500 sq ft at a headline rental of GBP17.25 per sq ft. Notwithstanding market sentiment, the letting market in Manchester is reasonably buoyant and we are confident of letting the remaining space in the months ahead.
Bridge House, 41-45, High Street, Weybridge
This prime retail and office building is due to fall vacant during the course of next year. As part of our active management strategy we have commenced initial discussions with the local planning authority with a view to the redevelopment of the site in this high value location.
A&B Bridge Park, Imberhorne Lane, East Grinstead
This retail warehouse was built in 2012 and is let to Wickes & Pets at Home. Wickes hold a lease until August 2027 and at the rent review in August we achieved a GBP50,000 per annum increase to GBP401,405 per annum. Pets at Home hold a lease until July 2027 at a rental of GBP112,613 per annum but with an option on their part to terminate in July 2022. Post the end of the half year we paid GBP30,000 to them to remove that break so we now have continuity of income of at least GBP514,018 per annum until 2027.
Stratton House, Cater Road, Bristol
This leasehold property acquired as part of the Sequel Portfolio in 2013 has required a large amount of management effort relative to its size and location. This was sold in August of this year for GBP2.25m which equated to book value.
Princeton House, 1-5 Victoria Road, Farnborough
This property was acquired as part of the Property Investment Holdings portfolio in 2014. It comprises an office building of approximately 8,300 sq ft used as a Job Centre and is let to Trillium (Prime) Property Group until April 2018 at a rental of GBP75,299 per annum. Since the end of the half year, this lease has been extended for a further 10 years with a break at the 5(th) year at a rental of GBP93,344 per annum rising to GBP140,000 per annum in April 2019. The tenant will be the Secretary of State for Communities & Local Government.
Other disposals since the period end
As active managers, we seek to solve issues at the earliest opportunity. The former Polestar Building at Marsh Barton, Exeter is a case in point. This 113,000 sq ft freehold and leasehold industrial property was old and in poor condition which was let to a printing company that went into administration. We subsequently relet the property to another printing company who also went into administration. The potential for the site included redevelopment for a retail warehouse and we are delighted that contracts have now been exchanged for the sale of the site to an operator for GBP3.29m which is in excess of its book value.
Finally, Whittle House in Coventry is a long leasehold office building of 17,800 sq ft which was refurbished by the previous occupier. Despite every effort to effect a letting, the interest was less than expected, so we took the decision to sell at book value. This relieves us from empty rates and running costs and was completed post period end.
Conclusion
Our active management strategy has focused on selling smaller properties and those that have limited or no possibility of further growth resulting in the quality of our portfolio being increased. With the acquisition of RT Warren now completed, we believe that the Company has an exciting and diversified portfolio which we can grow by active management and future acquisitions.
BORROWINGS
We continue to have very close relationships with our lenders. During the half year we concluded a new 5-year facility for GBP27m from Santander UK which is secured on our Manchester, Northampton and Newcastle properties at a margin of 2.5% above 3-month LIBOR.
At the end of the half year we had borrowings of GBP92.7m. Subsequently with the acquisition of RT Warren we assumed their loan from Barclays Bank of GBP14.5m which expires in January 2018. In negotiation with Barclays we took the opportunity of discussing with them not only a new, increased, 5-year facility on RT Warren but also refinancing our facility with Nationwide, who, we understand, are withdrawing from commercial property lending, which expires in 2021.
We have now agreed terms on a new GBP40m facility with Barclays at a margin of 1.95% over Libor and expect to conclude this before the end of the calendar year.
DIVID
On 30 November 2017 we announced an interim dividend of 9.5p (2017: 9p) which will be paid on 29 December 2017 to shareholders on the register as at 8 December 2017. This dividend is in line with our stated policy to pursue a progressive dividend policy and as forecasted at the time of the announcement of the acquisition of RT Warren and the associated fundraising. At the same time we announced that in 2018 we will move to a quarterly dividend policy with the first payment expected in April 2018 in respect of the final quarter of 2017.
OUTLOOK
I have been in business for many years and Palace Capital is the most exciting company which I have been associated with and am privileged to chair. My thanks go to the Company's dedicated Executive Team and staff. From a company with a market capitalisation of only GBP108,000 in 2010 we have come a long way. I am in no doubt that with our high quality portfolio, selective stock acquisition and active management strategy shareholders have every reason to be optimistic about our future.
Stanley Davis, Chairman
1 December 2017
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2017
Unaudited Unaudited Audited
6 months 6 months to Year to
to 30 September 31 March
30 September 2016 2017
Notes 2017 GBP000 GBP000
GBP000
Rental and other
income 3 7,138 7,076 14,266
Property operating expenses (675) (1,140) (2,055)
------------------------------------ --- --------- ------------- ------------- ----------
Net rental income 6,463 5,936 12,211
Administrative costs (1,487) (1,369) (2,915)
Operating profit before gains
on investment properties 4,976 4,567 9,296
Gains on revaluation of investment
properties 8 1,396 32 3,101
(Loss)/Profit on disposal of
investment properties (159) 873 3,191
----------------------------------------- --------- ------------- ------------- ----------
Operating profit 6,213 5,472 15,588
Finance income - - 3
Finance costs (1,354) (1,562) (3,014)
----------------------------------------- --------- ------------- ------------- ----------
Profit before taxation 4,859 3,910 12,577
Taxation 4 (507) (464) (3,191)
----------------------------------------- --------- ------------- ------------- ----------
Profit for the period and total
comprehensive income 4,352 3,446 9,386
========================================= ========= ============= ============= ==========
Earnings per ordinary share
Basic 6 17.3p 13.4p 36.6p
Diluted 6 17.3p 13.4p 36.5p
EPRA basic 6 12.4p 10.4p 21.2p
Adjusted EPS 6 12.8p 10.8p 22.2p
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Condensed consolidated statement of financial position
30 September 2017
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
Notes GBP000 GBP000 GBP000
Non-current assets
Investment properties 8 202,832 184,787 183,916
Tangible fixed assets 129 36 43
Deferred tax - 165 -
Trade and other receivables 9 - 809 -
---------------------------------------- --------- ------------- ------------- ---------
202,961 185,797 183,959
-------- --------- ------------- ------------- ---------
Current assets
Trade and other receivables 9 5,018 3,170 2,511
Cash and cash equivalents 8,733 9,347 11,181
---------------------------------------- --------- ------------- ------------- ---------
Total current assets 13,751 12,517 13,692
---------------------------------------- --------- ------------- ------------- ---------
Total assets 216,712 198,314 197,651
---------------------------------------- --------- ------------- ------------- ---------
Current liabilities
Trade and other payables 10 (8,353) (7,952) (6,161)
Borrowings 11 (2,186) (3,241) (2,036)
---------------------------------------- --------- ------------- ------------- ---------
Total current liabilities (10,539) (11,193) (8,197)
---------------------------------------- --------- ------------- ------------- ---------
Net current assets 3,212 1,324 5,495
--------------------------------------------------- ------------- ------------- ---------
Non-current liabilities
Borrowings 11 (90,464) (77,519) (75,758)
Deferred tax (2,499) - (2,187)
Obligations under finance
leases (1,588) (2,066) (1,950)
---------------------------------------- --------- ------------- ------------- ---------
Total non-current liabilities (94,551) (79,585) (79,895)
---------------------------------------- --------- ------------- ------------- ---------
Net Assets 111,622 107,536 109,559
---------------------------------------- --------- ------------- ------------- ---------
Equity
Share capital 12 2,580 2,580 2,580
Share premium account 59,444 59,444 59,444
Merger reserve 3,503 3,503 3,503
Capital redemption
reserve 340 340 340
Treasury share reserve (2,250) (541) (2,250)
Retained earnings 48,005 42,210 45,942
---------------------------------------- --------- ------------- ------------- ---------
Equity shareholders' funds 111,622 107,536 109,559
--------------------------------------------------- ------------- ------------- ---------
Basic NAV per ordinary
share 7 442p 419p 436p
Diluted NAV per ordinary
share 7 441p 419p 434p
EPRA NAV per ordinary
share 7 451p 419p 443p
----------------------------------- --- --------- ------------- ------------- ---------
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
The condensed consolidated interim financial statements were approved by the Board of Directors on 1 December 2017.
Condensed consolidated statement of cash flows
For the six months ended 30 September 2017
Unaudited
Unaudited 6 months Audited
6 months to to Year to
30 September 30 September 31 March
Notes 2017 2016 2017
GBP000 GBP000 GBP000
Operating activities
Profit before tax 4,859 3,910 12,577
Adjustments for non-cash items:
Loss/(Profit) on sale of investment
properties 159 (873) (3,191)
Gain on revaluation of investment
properties (1,396) (32) (3,101)
Depreciation 30 10 20
Share-based payment 100 95 237
Net finance costs 1,354 1,562 3,011
------------------------------------- ------- ------------- ------------- ---------
Cash generated by operations 5,106 4,672 9,553
Changes in working capital (847) 476 741
------------------------------------- ------- ------------- ------------- ---------
Cash flows from operations 4,259 5,148 10,294
Corporation tax (paid) / received (111) 10 (1,047)
Interest and other finance
costs paid (913) (1,269) (2,516)
Cash flows from operating activities 3,235 3,889 6,731
------------------------------------- ------- ------------- ------------- ---------
Investing activities
Purchase of property, plant
and equipment (117) (8) (26)
Capital Expenditure on refurbishment
of property (925) (2,187) (4,579)
Purchase of investment property (20,000) (10,950) (10,950)
Proceeds from disposal of investment
properties 3,246 3,797 12,447
Cash flows from investing activities (17,796) (9,348) (3,108)
------------------------------------- ------- ------------- ------------- ---------
Financing activities
Issue of ordinary share capital - 38 29
Dividends paid 5 (2,389) (2,308) (4,617)
Bank loan received 17,545 25,082 25,813
Bank loan repaid (2,682) (16,031) (19,952)
Capital element of finance
lease rental payments (361) (1) -
Purchase of treasury shares - (541) (2,250)
Payment of share options exercised - - (41)
Fees relating to cancellation
of deferred shares - (9)
------------------------------------- ------- ------------- ------------- ---------
Cash flows from financing activities 12,113 6,230 (1,018)
------------------------------------- ------- ------------- ------------- ---------
Net (decrease)/increase in
cash (2,448) 771 2,605
Opening cash and cash equivalents 11,181 8,576 8,576
Closing cash and cash equivalents 8,733 9,347 11,181
===================================== ======= ============= ============= =========
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2017
Treasury
Share Share Shares Merger Capital Redemption Retained Total
Capital Premium Reserve Reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- --------- --------- -------- --------- ------------------ ---------- --------
As at 31 March
2016 2,862 59,408 - 3,503 65 40,977 106,815
-------------------- --------- --------- -------- --------- ------------------ ---------- --------
Total comprehensive
income for the
period - - - - - 3,446 3,446
Redemption of
shares - - (541) - - - (541)
Share based
payments - - - - - 95 95
Issue of new
shares 2 36 - - - - 38
Redemption of
deferred shares (284) - - - 275 - (9)
Dividends - - - - - (2,308) (2,308)
As at 30 September
2016 2,580 59,444 (541) 3,503 340 42,210 107,536
-------------------- --------- --------- -------- --------- ------------------ ---------- --------
Total comprehensive
income for the
period - - - - - 5,940 5,940
Redemption of
shares - - (1,816) - - - (1,816)
Share based
payments - - - - - 142 142
Issue of new
shares - - 107 - - - 107
Exercise of
share options - - - - - (41) (41)
Dividends - - - - - (2,309) (2,309)
As at 31 March
2017 2,580 59,444 (2,250) 3,503 340 45,942 109,559
-------------------- --------- --------- -------- --------- ------------------ ---------- --------
Total comprehensive
income for the
period - - - - - 4,352 4,352
Share based
payments - - - - - 100 100
Dividends - - - - - (2,389) (2,389)
As at 30 September
2017 2,580 59,444 (2,250) 3,503 340 48,005 111,622
==================== ========= ========= ======== ========= ================== ========== ========
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
Notes to the condensed consolidated financial statements
For the six months ended 30 September 2017
1 General information
These financial statements are for Palace Capital plc ("the Company") and its subsidiary undertakings.
The Company's shares are admitted to trading on AIM, a market operated by the London Stock Exchange plc. The Company is domiciled and registered in England and Wales and incorporated under the Companies Act 2006. The address of its registered office is Lower Ground Floor, One George Yard, London, EC3V 9DF.
The nature of the Company's operations and its principal activities are that of property investment in the UK mainly through corporate acquisitions.
Basis of preparation
The condensed consolidated financial information included in this half yearly report has been prepared in accordance with the IAS 34 "Interim Financial Reporting", as adopted by the European Union. The current period information presented in this document is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The interim results have been prepared in accordance with applicable International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). These standards are collectively referred to as "IFRS".
The accounting policies and methods of computations used are consistent with those as reported in the Group's Annual Report for the year ended 31 March 2017 and are expected to be used in the Group's Annual Report for the year ended 31 March 2018.
The financial information for the year ended 31 March 2017 presented in these unaudited condensed group interim financial statements does not constitute the Company's statutory accounts for that period but has been derived from them. The Report and Accounts for the year ended 31 March 2017 were audited and have been filed with the Registrar of Companies. The Independent Auditor's Report on the Report and Accounts for the year ended 31 March 2017 was unqualified and did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006. The financial information for the periods ended 30 September 2016 and 30 September 2017 are unaudited and have not been subject to a review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board.
The interim report was approved by the Board of Directors on 1 December 2017.
Copies of this statement are available to the public for collection at the Company's Registered Office at Lower Ground Floor, One George Yard, London, EC3V 9DF and on the Company's website, www.palacecapitalplc.com.
Going Concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in these financial statements.
The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future trading performance. As part of the review the Directors have considered the Group's cash balances, debt maturity profile of its undrawn facilities, and the long-term nature of tenant leases. On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue operational existence for the foreseeable future. As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully.
Accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.
2 Segmental reporting
During the period the Group operated in one business segment, being property investment in the UK and as such no further information is provided.
3 Net property income
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------- ------------- ------------- ---------
Rent receivable 7,138 7,014 13,809
Management fees & other income - 62 457
-------------------------------- ------------- ------------- ---------
Total revenue 7,138 7,076 14,266
-------------------------------- ------------- ------------- ---------
Service charge & vacant rates (675) (942) (2,055)
Repairs and dilapidation costs - (43) -
Other property costs - (155) -
-------------------------------- ------------- ------------- ---------
Property operating expenses (675) (1,140) (2,055)
-------------------------------- ------------- ------------- ---------
Net property income 6,463 5,936 12,211
================================ ============= ============= =========
4 Taxation
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------- ------------- ------------- ---------
Current income tax charge 490 295 683
Tax overprovided in prior year - - (13)
Deferred tax 17 169 2,521
-------------------------------- ------------- ------------- ---------
Tax charge 507 464 3,191
================================ ============= ============= =========
5 Dividends
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
Payment Date 2017 2016 2017
GBP000 GBP000 GBP000
----------------------- --------------- ------------- ------------- ---------
Ordinary dividends
paid
----------------------- --------------- ------------- ------------- ---------
2016 Final dividend:
9p per share 29 July 2016 - 2,308 2,308
2017 Interim dividend: 30 December
9p per share 2016 - - 2,309
2017 Final dividend:
9.50p per share 28 July 2017 2,389 - -
----------------------- --------------- ------------- ------------- ---------
2,389 2,308 4,617
======================================= ============= ============= =========
Proposed dividend
2018 Interim dividend: 9.5p per share payable on 29 December
2017.
On 30 November 2017, the Group announced it would pay an interim dividend of 9.5 pence per share to ordinary shareholders on the register on 8 December 2017, the ex-dividend date will be 7 December 2017 and the dividends will be paid on 29 December 2017.
6 Earnings per share
The European Public Real Estate Association (EPRA) has issued Best Practices Recommendations, the latest update of which was issued in December 2014, which give guidelines for performance measures.
EPRA earnings are calculated taking the profit after tax excluding investment property revaluations and gains or losses on disposals, changes in the fair value of financial instruments, acquisition costs and debt close-out costs. EPRA earnings is calculated on the basis of the basic number of shares in line with IFRS earnings as the dividends to which they give rise accrue to current shareholders and therefore it is more appropriate to use the basic number of shares. The EPRA diluted earnings per share also takes into account the dilution of share options and warrants.
Palace Capital also report on an adjusted earnings measure which is based on recurring earnings after tax excluding fair value adjustments accounting for derivatives, investment property and share based payments and on the basis of the basic number of shares.
The earnings per ordinary share for the period is calculated based upon the following information:
Unaudited
Unaudited 6 months Audited
6 months to to Year to
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
----------------------------------- ------------- ------------- ---------
Profit after tax attributable
to ordinary shareholders for
the period 4,352 3,446 9,386
Adjustments to arrive at EPRA
profit
Gains on revaluation of investment
properties (1,396) (32) (3,101)
Loss/(Profit) on disposal of
investment properties 159 (873) (3,191)
Debt termination cost - 143 155
Deferred tax charge on revaluation
gains and capital allowances
reversed - - 2,200
EPRA earnings for the period 3,115 2,684 5,449
----------------------------------- ------------- ------------- ---------
Adjustments to arrive at Adjusted
earnings
Share-based payment 100 95 237
Adjusted earnings for the period 3,215 2,779 5,686
----------------------------------- ------------- ------------- ---------
Unaudited
Unaudited 6 months Audited
6 months to to Year to
30 September 30 September 31 March
2017 2016 2017
--------------------------------- ------------- ------------- ----------
Basic weighted average number
of ordinary shares 25,156,703 25,706,969 25,650,141
Dilutive effect of share options
& warrants 36,322 10,514 87,584
--------------------------------- ------------- ------------- ----------
Diluted weighted average number
of ordinary shares 25,193,025 25,717,483 25,737,725
================================= ============= ============= ==========
Earnings per ordinary share
Basic 17.3p 13.4p 36.6p
Diluted 17.3p 13.4p 36.5p
EPRA basic 12.4p 10.4p 21.2p
EPRA diluted 12.4p 10.4p 21.2p
Adjusted EPS 12.8p 10.8p 22.2p
--------------------------------- ------------- ------------- ----------
7 Net asset value per share
EPRA NAV calculation makes adjustments to IFRS NAV to provide stakeholders with the most relevant information on the fair value of the assets and liabilities within a true real estate investment company with a long-term investment strategy. EPRA NAV is adjusted to take effect of the exercise of options, convertibles and other equity interests and excludes the fair value of financial instruments and deferred tax on latent gains. EPRA NNNAV measure is to report net asset value including fair values of financial instruments and deferred tax on latent gains.
Net asset value is calculated using the following information:
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
--------------------------------- -------------------------- ------------- ----------
Net assets at the end of the
period 111,622 107,536 109,559
Effect of exercise of share
options - 71 -
--------------------------------- -------------------------- ------------- ----------
Diluted net assets 111,622 107,607 109,559
--------------------------------- -------------------------- ------------- ----------
Exclude fair value of financial
instruments & exclude deferred
tax on latent capital gains 2,499 - 2,200
--------------------------------- -------------------------- ------------- ----------
EPRA NAV 114,121 107,607 111,759
--------------------------------- -------------------------- ------------- ----------
Include fair value of financial
instruments & include deferred
tax on latent capital gains (2,499) - (2,200)
--------------------------------- -------------------------- ------------- ----------
EPRA NNNAV 111,622 107,607 109,559
--------------------------------- -------------------------- ------------- ----------
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
--------------------------------- -------------------------- ------------- ----------
Number of ordinary shares of
10p each issued as at the end
of the period 25,250,692 25,650,692 25,150,692
Dilutive effect of share options 36,322 10,514 87,584
--------------------------------- -------------------------- ------------- ----------
Number of diluted ordinary
shares 25,287,014 25,661,206 25,238,276
--------------------------------- -------------------------- ------------- ----------
Net assets per ordinary share
Basic NAV 442p 419p 436p
Diluted NAV 441p 419p 434p
EPRA NAV 451p 419p 443p
EPRA NNNAV 441p 419p 434p
--------------------------------- -------------------------- ------------- ----------
8 Investment Properties
Freehold Leasehold
Investment Investment
properties properties Total
GBP000 GBP000 GBP000
At 1 April 2016 149,423 25,119 174,542
------------------------------------- ------------ ------------ ------------------------------- Additions - new properties 10,950 - 10,950 Additions - refurbishments 4,505 74 4,579 Gains on revaluation of investment properties 3,090 11 3,101 Disposals (7,740) (1,516) (9,256) At 31 March 2017 160,228 23,688 183,916 ------------------------------------- ------------ ------------ ------------------------------- Additions - new properties 20,000 - 20,000 Additions - refurbishments 891 34 925 Gains on revaluation of investment properties 1,155 241 1,396 Disposals (795) (2,610) (3,405) At 30 September 2017 181,479 21,353 202,832 ------------------------------------- ------------ ------------ -----------------------------
Investment properties are stated at fair value based upon external valuations and is inherently subjective. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arms-length transaction at the date of valuation.
As a result of the level of judgement used in arriving at the market valuations, the amounts which may ultimately be realised in respect of any giving property may differ from the valuations shown in the statement of financial position.
At 30 September 2017, the Group's freehold and leasehold investment properties were externally valued by Royal Institution of Chartered Surveyors ("RICS") registered independent valuers. A reconciliation of the valuations carried out by the external valuers to the carrying values shown in the balance sheet was as follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------ --------------- ------------- ---------
Fair value 202,840 183,650 183,175
------------------------------------ --------------- ------------- ---------
Adjustment in respect of minimum
payment
under head leases included
as a liability 1,600 2,076 1,959
Less lease incentive balance
in prepayments (1,608) (939) (1,218)
Carrying value 202,832 184,787 183,916
==================================== =============== ============= =========
Investment properties with a carrying value of GBP186,180,000 (31 March 2017: GBP162,320,000) are subject to a first charge to secure the Group's bank loans amounting to GBP93,757,000 (31 March 2017: GBP78,730,000).
Valuation process
The valuation reports produced by the external valuers are based on information provided by the Group such as current rents, terms and conditions of lease agreements, service charges and capital expenditure. This information is derived from the Group's financial and property management systems and is subject to the Group's overall control environment. In addition, the valuation reports are based on assumptions and valuation models used by the valuers. The assumptions are typically market related, such as yields and discount rates, and are based on their professional judgment and market observations. Each property is considered a separate asset, based on its unique nature, characteristics and the risks of the property.
The executive director responsible for the valuation process, verifies all major inputs to the external valuation reports, assesses the individual property valuation changes from the prior period valuation report and holds discussions with the external valuers. When this process is complete, the valuation report is recommended to the Audit Committee, which considers it as part of its overall responsibilities.
The key assumptions made in the valuation of the group's investment properties are:
- The amount and timing of future income streams;
- Anticipated maintenance costs and other landlord's liabilities; and
- An appropriate yield.
Valuation technique
The valuations reflect the tenancy data supplied by the group along with associated revenue costs and capital expenditure. The fair value of the commercial investment portfolio has been derived from capitalising the future estimated net income receipts at capitalisation rates reflected by recent arm's length sales transactions.
9 Trade and other receivables
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------- ------------- ------------- ---------
Current
Trade receivables 2,285 1,882 951
Prepayments and accrued income 2,230 758 1,499
Other taxes 359 - -
Other debtors 144 530 61
-------------------------------- ------------- ------------- ---------
5,018 3,170 2,511
=============================== ============= ============= =========
Non-current
Prepayments and accrued income - 809 -
- 809 -
=============================== ============= ============= =========
10 Current trade and other payables
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
----------------------- ------------- ------------- ---------
Trade payables 875 850 570
Accruals 1,346 3,155 1,317
Deferred rental income 4,273 1,491 2,860
Taxes 1,852 2,396 1,408
Other payables 7 60 6
------------------------ ------------- ------------- ---------
8,353 7,952 6,161
======================= ============= ============= =========
11 Borrowings
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
-------------------------- --------------- --------------- ---------
Current borrowings 2,186 3,241 2,036
Non-current borrowings 90,464 77,519 75,758
--------------------------- --------------- --------------- ---------
Total borrowings 92,650 80,760 77,794
=========================== =============== =============== =========
Non-current borrowings
Secured bank loans drawn 91,571 78,623 76,694
Unamortised facility fees (1,107) (1,104) (936)
--------------------------- --------------- --------------- ---------
90,464 77,519 75,758
========================== =============== =============== =========
The maturity profile of the Group's debt was as follows
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
----------------------- ------------- ------------- ---------
Within one year 2,186 3,241 2,036
From one to two years 2,186 2,036 2,036
From two to five years 76,751 63,517 61,806
From five to ten years 12,634 13,070 12,852
------------------------ ------------- ------------- ---------
Total borrowings 93,757 81,864 78,730
======================== ============= ============= =========
Facility and arrangement fees
As at 30 September 2017
Unamortised
All in facility
cost Maturity Facility drawn fees Loan balance
Secured borrowings % date GBP000 GBP000 GBP000
--------------------- -------- -------- -------------- ----------- ------------
Scottish Widows 2.90 Jul 2026 14,814 (212) 14,602
National Westminster
Bank plc 2.84 Mar 2021 31,250 (305) 30,945
Nationwide Building
Society 3.12 Nov 2020 16,755 (138) 16,617
Santander Bank
plc 2.59 Aug 2022 27,000 (419) 26,581
Lloyds Bank plc 2.44 May 2019 3,938 (33) 3,905
93,757 (1,107) 92,650
===================== ======== ======== ============== =========== ============
The National Westminster Bank plc facility is secured on the investment properties held by Property Investment Holdings Limited and Palace Capital (Properties) Limited. Interest is charged on the unutilised element of this facility at 1.25% per annum, and is payable quarterly. This facility was fully drawn down as at 30 September 2017 (31 March 2017: GBP3.6m undrawn).
12 Share capital
Authorised, issued and fully paid share capital is as follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
Ordinary 10p shares 25,800,279 25,800,279 25,800,279
Share capital - number of shares
in issue 25,800,279 25,800,279 25,800,279
================================== ============= ============= ==========
Share capital - GBP 2,580,028 2,580,028 2,580,028
================================== ============= ============= ==========
The Company has set up an employee benefit trust, 'The Palace Capital Employee Benefit Trust', for the granting of shares applicable to directors and employees under the Long-Term Incentive Plan. On 19 September 2017 The Company transferred 100,000 ordinary shares held in Treasury into The Palace Capital Employee Benefit Trust.
On 19 September 2017 the Company granted 66,352 ordinary shares for awards made under the 2014 LTIP from The Palace Capital Employee Benefit Trust. As at 31 March 2017 there were 649,587 shares held in treasury but as a result of the 100,000 shares transferred into the Employee Benefit Trust, there are 549,587 shares remaining in Treasury.
Movement in ordinary authorised share Price per share Number of ordinary Total number capital pence shares issued of shares --------------------- ---------- --------------- ------------------ ------------ As at 1 Apr 2016 25,781,229 Exercise of warrants June 2016 200 19,050 As at 30 Sep 2016, 31 March 2017 and 30 Sep 2017 25,800,279
The Company's issued share capital as at 30 September 2017 comprises 25,250,692 ordinary shares which can be used by shareholders as the denominator for the calculations which excludes the 549,587 ordinary shares held in treasury.
13 Retained earnings & Reserves
For the purpose of preparing the consolidated financial statement of the Group, the following reserves are held:
- Share Capital represents the nominal value of the issued
share capital of Palace Capital plc
- Share Premium represents the excess over nominal value
of the fair value consideration received for equity shares
net of expenses of the share issue.
- The Merger Reserve represents the excess over nominal
value of the fair value consideration for the acquisition
of subsidiaries satisfied by the issue of shares in accordance
with S612 of the Companies Act 2006.
- The Capital redemption reserve represents the cancellation
of Deferred Shares and the removal of them from the Company's
balance sheet.
- The Treasury share reserve represents buyback of the
company's own shares. These shares are recognised at
cost as a deduction from equity shareholders' funds.
Subsequent consideration received for the sale of such
shares is also recognised in equity, with any difference
between the sale proceeds and the original cost being
taken to revenue reserves. No gain or loss is recognised
in the performance statements on transactions in treasury
shares.
14 Post balance sheet events
On 9 October 2017 the acquisition of the entire share capital of the investment property company, R.T Warren (Investments) Limited completed for a total consideration of GBP53.3m. The Company undertook a share placing and open offer raising GBP70.0m on the AIM. 20,588,236 new shares were issued at an issue price of 340 pence per share. Following Admission of the shares, the issued ordinary share capital of the Company consists of 45,838,928 ordinary shares. This figure excludes the 549,587 ordinary shares held in treasury.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFETFILLIID
(END) Dow Jones Newswires
December 04, 2017 02:00 ET (07:00 GMT)
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