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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% | 145.00 | 138.00 | 144.00 | 145.00 | 145.00 | 145.00 | 2,406 | 13:30:05 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Real Estate Investment Trust | 31.2M | -29.88M | -0.5687 | -2.55 | 76.17M |
TIDMTOWN
RNS Number : 1050Q
Town Centre Securities PLC
24 February 2021
Wednesday 24 February 2021
TOWN CENTRE SECURITIES PLC
('TCS' or the 'Company')
Half year results for the six months ended 31 December 2020
Significant progress made in resetting and reinvigorating the business for the future
Further reduction of retail assets as a proportion of the portfolio
Town Centre Securities PLC, the Leeds, Manchester, Scotland, and London property investment, development and car parking company, today announces its results for the six months ended 31 December 2020.
Financial performance
-- Net assets:
o Resilient like for like portfolio valuation down only 0.8% from June 2020
o Statutory net assets of GBP152.0m or 286p per share down 2.3% (FY20: GBP155.5m, 292p). EPRA net tangible assets ('NTA') measure introduced at GBP147.8m or 278p per share (FY20 equivalent: 285p)
-- Profits and earnings per share:
o EPRA Earnings before tax of GBP0.2m (HY20: GBP4.1m), driven by an estimated GBP3.2m COVID-19 impact
o EPRA earnings per share of 0.4p (HY20: 7.7p)
o Statutory loss before tax of GBP3.5m (HY20: loss of GBP0.2m) and statutory loss per share of 6.6p (HY20: loss of 0.4p), including the unrealised GBP2.5m portfolio valuation and impairment movement (FY20: GBP26.4m)
-- Capital and financing:
o GBP41.2m of targeted retail asset sales during the first half has reduced absolute borrowing levels 20% to GBP147.6m at December 2020 (pre IFRS16 measure) (30 June 2020 GBP183.6m)
o Loan to value of 48.6% as at 31 December 2020 (FY20: 53.2%)
o Headroom of GBP12.8m at half-year end based on December 2020 borrowings and valuations (FY20: GBP14.8m)
-- Dividends:
o Interim dividend of 1.75p (HY20: 3.25p)
o Uncovered dividend reflects the anticipated quick recovery of our car parks and hotel once they are able to operate normally and also the strengthening of the balance sheet following the asset sales completed in the half-year
COVID-19 impact and response
Impact
-- Estimated GBP3.2m impact of COVID-19 in the first half of the year driven by:
o GBP2.3m CitiPark impact due to lost car parking income and fixed costs
o GBP0.5m impact in the property business, primarily from bad debt
o GBP0.4m ibis Styles hotel impact driven by reduced bookings
-- Rent receipts remain robust; as at 22 February of the GBP5.5m rent, service charge and VAT billed for the latest English and Scottish quarter GBP4.3m or 78% has been paid, with a further GBP0.5m or 9% agreed to be deferred, totalling 87%. This is consistent with the 89% for the previous billings since March 2020
Response and mitigating actions including during current lockdown
-- Significant actions taken to mitigate the impact included:
o Closure of two car parks during the current lockdown to minimise costs
o Furloughing CitiPark operational branch staff, and some head office colleagues
o TCS board took a 20% salary and fees reduction for six months from April 2020 to September 2020
-- Our long history of engagement with tenants has ensured equitable solutions have been reached in most instances, and we are continuing to support tenants during the latest lockdown
Good progress made on resetting and reinvigorating the business for the future
We have made meaningful progress in resetting and reinvigorating the business in the past six months, in particular in the disposal and debt reduction programme. Progress delivered under the four key strategic initiatives is as follows:
Actively managing our assets
-- The proportion of retail and leisure assets in the portfolio has reduced to 39% from 47% in June 2020, and down from 70% in 2016. Pure retail now represents only 26% of the total portfolio and of that, 60% is in the resilient Merrion Estate
-- Capital value of Ducie House has increased reflecting the completion of the GBP2.1m refurbishment scheme
-- No exposure to any of the large department store failures, and whilst we saw five tenants either entering administration or CVAs in the first half, the exposure is modest representing circa 2% of income and we remain confident in maintaining occupation in the majority of the space
Maximising available capital
-- GBP41.2m of retail asset sales were completed in the six months, marginally below June 2020 valuations
-- Net debt has consequently reduced 20% to GBP147.6m (excluding IFRS 16 adjustments), with LTV reducing to 48.6% (FY20: 53.2%)
-- Net profit after interest will be reduced by GBP1.3m annually as a result of the loss of related rent
-- Following the disposals, we have bought back for cancellation GBP6.5m of our GBP106m 2031 5.375% debenture, helping reduce debt and average interest costs
Acquiring and improving investment assets to diversify our portfolio
-- Completed the GBP4m redevelopment of the office space at 123 Albion Street, Leeds and secured a new 12-year lease with StepChange Debt Charity for the remaining 46,000 sq ft of office space
-- We now have the opportunity to redevelop and modernise our Wade House office (having been vacated by StepChange Debt Charity), the third of our four Merrion Estate offices, a potentially valuable opportunity given the level of new development in the surrounding area
Investing in our development pipeline
-- Our development pipeline, with an estimated GDV of over GBP600m, is a valuable and strategic point of difference for TCS which we continue to progress and improve
-- In January 2021, we completed works to implement and secure the planning consent for our next PRS development, Eider House, in Manchester's Piccadilly Basin
Commenting on the results, Chairman and Chief Executive, Edward Ziff, said:
" The past six months have been critical in the resetting and reinvigorating of the business, and I am particularly pleased with both the progress of our disposal programme, and the resilience of the continuing portfolio. The reduction in absolute borrowing levels gives both additional security and, as the disposal programme continues, the ability to reinvest in the long-term growth opportunities in our development pipeline.
"COVID-19 continues to have a material impact on profitability. Although significant government support has been given to retail and leisure businesses, as a car park operator, we have continued to pay car park rent to our local government landlords, as well as business rates which to us seems extraordinarily one sided. I am confident in the ability of our CitiPark business to bounce back strongly once the current lockdown comes to an end.
"Overall, we remain committed to delivering on our accelerated four pillar strategy of: actively managing our assets, maximising available capital, investing in our development pipeline and acquiring and improving investment assets to diversify our portfolio."
-Ends-
For further information, please contact:
Town Centre Securities PLC www.tcs-plc.co.uk / @TCS PLC
Edward Ziff, Chairman and Chief Executive 0113 222 1234
Mark Dilley, Group Finance Director
MHP Communications 020 3128 8572
Reg Hoare / Alistair de Kare-Silver / Florence Mayo tcs@mhpc.com
Chairman and Chief Executive's Statement
Resetting and reinvigorating the business for the future
The past six months have continued to be challenging for the business as a result of the ongoing COVID-19 disruption. However, we remain convinced by our strategic direction, and have continued to take action to reset and reinvigorate the business for the future. Our aim is to create a business that:
- Has lower levels of absolute debt and leverage - Is diversified with a much-reduced level of retail property - Is diversified with a capital light, profitable car park business
- Has rebased and has significant growth opportunities as a result of our significant development pipeline and asset management opportunities
The first half of this financial year has seen us particularly focus on the first two of these areas, through both our asset sales activity and redevelopment of 123 Albion Street and Ducie House. In terms of the third and fourth items, we expect the car park business to recover strongly post COVID-19; and our development pipeline has been a long-standing and consistent point of strength and difference for the Company.
We firmly believe that our long-held belief in seeking to work in the best interests of all stakeholders; a key focus of management throughout the pandemic, has been a key reason for our relative resilience during this time.
Impact of COVID-19
We estimate that the ongoing disruption due to COVID-19 has impacted earnings by GBP3.2m in the six months to 31 December 2020. This is split as follows:
- GBP2.3m in CitiPark due to a combination of lower levels of demand, especially during the second lockdown in November and the introduction of the tiers limiting commuting and shopping customers. The financial impact is exacerbated by the level of fixed costs, in particular rent and rates
- GBP0.5m in the property segment, as a result of provisions taken for unreceived rent due as at 31 December 2020, offset by targeted cost savings
- GBP0.4m in our ibis Styles hotel in Leeds, where the on-going disruption has suppressed demand
Our level of rent receipts within the property business has continued to be resilient. This is an indicator of the diversified strength of our property portfolio, the relative strength of the majority of our tenants, and most importantly, the quality of relationships built with tenants over the long-term. Rent concessions have been agreed on a tenant by tenant basis. The resulting impact is that revenue recognised is GBP0.8m less than gross billings, being either; amounts not expected to be received or those waived by rent concessions.
Rent Collections as at 22 February:
March - % Latest % Cumulative % December Quarter * ** Total billed GBP19.4m GBP5.5m GBP24.9m =========== ---- ========= ---- =========== ---- Total collected GBP16.9m 87% GBP4.3m 78% GBP21.2m 85% ----------- ---- --------- ---- ----------- ---- Agreed to be deferred *** GBP0.2m 2% GBP0.5m 9% GBP0.7m 3% =========== ==== ========= ==== =========== ==== Agreed total GBP17.1m 89% GBP4.8m 87% GBP21.9m 88% =========== ==== ========= ==== =========== ====
*English & Scottish quarters, and monthly billings (collections from 25 March)
**English quarter (collections due on 29 December and 1 January) and Scottish quarter (collection due on 2 February)
*** Agreed to be deferred and still outstanding
As highlighted as part of our FY20 year end results we have been executing on a detailed strategic and operational plan which includes:
- Accelerating our asset disposal programme rapidly and reducing the size of our retail portfolio. Since the COVID-19 outbreak, we have sold GBP41.2m of assets, all of which has been retail
- Working closely with all our tenants to support wherever we can, agreeing to share the financial cost of closure where appropriate and doing our best to ensure that following the disruption as many of our tenants as possible are able to bounce back strongly
- Reducing variable costs wherever possible, including making use of government support initiatives, in particular the furlough scheme
- Supporting our community, and in particular key workers wherever possible, especially within our car park and hotel businesses
- Supporting our employees, where home working has been necessary, and where employees and their families have been impacted either directly by the virus or by associated consequences of it
Results
EPRA earnings for the six months ended 31 December 2020 were GBP0.2m (HY20: GBP4.1m) giving EPRA earnings per share of 0.4p (HY20: 7.7p). Reflecting the diversified and intensively managed nature of our assets, the like for like portfolio decreased in value by only 0.8%, despite the continued pressure on retail valuations generally in the marketplace. The modest devaluation did give rise to a net revaluation charge in the income statement of GBP2.5m driving a post IFRS 16 statutory loss of GBP3.5m (HY20: loss of GBP0.2m).
The key drivers of the GBP3.9m reduction in EPRA Earnings are as follows:
-- GBP3.2m impact of COVID-19, as detailed earlier
-- GBP0.4m net impact after interest, because of the GBP41.2m of property sales agreed in the first half
-- GBP0.3m of other property income, primarily as a result of 123 Albion Street still being redeveloped in the period (prior year saw a one off GBP0.5m dilapidations payment relating to the property)
Statutory Net Assets of GBP152.0m (30 June 2020: GBP155.5m) reduced 2.3% from the year end, principally as a result of the unrealised revaluation deficit of GBP2.5m. Net assets per share decreased to 286p (30 June 2020: 292p).
The Company is introducing the new EPRA net asset measures and will report primarily on EPRA Net Tangible Assets (EPRA NTA); which in the case of TCS reduces statutory net assets by the GBP4.1m of reported Goodwill. EPRA NTA for the half year is GBP147.8m compared to a FY20 comparative of GBP151.5m, down 2.4%. EPRA NTA per share is 278p (FY20 comparable 285p). The full breakdown of the new EPRA net asset measures is detailed later.
Our property portfolio reduced in value by 0.8% like for like compared to June 2020. Whilst we experienced some continued pressure on retail valuations, this revaluation, similar to the June revaluation, continues to track better than the market. A combination of the diversified nature of our portfolio, the quality of our retail assets with its particular focus on supermarket, discount and convenience, our skill at intensively managing our assets, and our redevelopment programme have all supported our asset valuation. The valuation was particularly supported at the half year by improvements in value of our office portfolio, and improvements in the value of our Manchester development site driven by a strengthening local PRS market.
Borrowings
Our accelerated disposal programme has allowed us to continue to lower our borrowing levels. As at 31 December 2020 net borrowings (excluding IFRS 16 impact and excluding finance leases) stood at GBP147.6m, GBP36.0m lower than at the year end.
Our loan to value level reduced 460 bps from the June year end to 48.6%, despite the reduction in asset values (excluding finance leases).
Dividends
An interim dividend of 1.75p per share (HY20 3.25p) will be paid as a property income distribution and will amount to GBP0.9m. It will be paid on the 25 June 2021 to shareholders registered on 28 May 2021. The final dividend for 2020 of 1.75p was paid on the 5 January 2021.
Whilst this interim distribution is uncovered by the earnings in the half-year, the Board believes it is important for us to continue to pay some level of dividend to shareholders. Although it is not possible to accurately predict the end of the current lockdown measure, 2020's experience of the quick recovery of our car parks and hotel once able to operate normally, and the strengthening of the balance sheet following the recent disposals gives the Board confidence in making this decision. At the same time, we are cognisant to support all other stakeholders, for example, in the form of rent relief for tenants, support for our employees and our desire to support our local communities during these difficult times.
Portfolio Performance
The value of investment properties, developments, joint ventures and car parks at the half-year stood at GBP306.9m (June 2020: GBP348.3m including assets held for sale), or GBP332.6m (June 2020: GBP374.7 including assets held for sale) when taking account the effect of IFRS 16.
The key driver of the reduction in portfolio value from June 2020 is the GBP41.2m of asset sales completed since the year end.
On a like for like basis the whole portfolio decreased in value by 0.8% since June (FY20: 6.9% decrease) accounting for a GBP2.6m like for like reduction in value (investment, development, car park and joint venture assets). On an absolute basis the portfolio declined in value by 1.0% (June 2020: 6.9% decrease). The decrease in the value of our investment property portfolio (including JVs) is 1.8% (June 2020: 8.6% decrease) which reflects a reversionary yield of 7.4% (June 2020: 7.0%). The increase in value of the development properties is 6.1%. (June 2020: 2.6% increase). Car park values remained flat (June 2020: 1.3% increase).
The results of the latest valuation continue to highlight three key factors that differentiate our portfolio:
- The resilience of our portfolio; its diversified regional nature, strong loyal tenants, and the reducing exposure to retail and leisure
- The strength of our asset management and capital investment activities adding value and further growth potential
- The growing potential in our significant development pipeline
The proportion of retail and leisure assets within the portfolio has further reduced to 39%, down from 47% in June 2020, and of that, pure retail represents only 26% of the overall portfolio. The retail and leisure element of the Merrion Estate represents 60% of all retail and leisure, and it was pleasing to see its value reduce by only 3.7% since June; despite the continuing pressure on retail generally and the effect of COVID-19. Our focus on convenience, discount and grocery retailing as well as our heritage of forming long term supportive relationships with our tenants are key attributes to preserving value.
In the past year, we have continued to invest in two key assets: 123 Albion Street, Leeds and Ducie House Manchester. As expected, absolute capital values on these two buildings have risen by GBP5.7m over the past twelve months reflecting the capital investment made. We expect values to improve further as these redeveloped assets quickly mature and additional new leases are secured.
Our development pipeline value increased by GBP2.3m or 6.1% driven by a 9.7% increase in the value of our Piccadilly Basin, Manchester holding as a result of rising market value in the land.
Passing rent ERV Value % of Valuation Initial Reversionary GBPm GBPm GBPm portfolio incr/(decr) yield yield Retail & Leisure 2.3 2.6 30.8 9% -11.7% 7.2% 7.9% Merrion Centre (ex offices) 5.6 7.6 82.6 25% -3.7% 6.4% 8.7% Offices 5.3 6.2 86.9 26% 3.0% 5.8% 6.7% Hotels 1.2 1.6 23.1 7% 0.0% 4.8% 6.7% Out of town retail 1.1 1.2 14.5 4% -1.8% 7.1% 7.5% Distribution 0.4 0.4 6.0 2% 0.0% 6.5% 6.7%
Residential 1.1 1.1 20.8 6% 0.4% 4.8% 5.0% 17.0 20.6 264.6 80% -1.8% 6.1% 7.4% -------- ------------- Development property 1.6 1.6 40.1 12% 6.1% Other Car parks 0.9 0.9 26.8 8% 0.0% -------- ------ ------ ----------- ------------- Let portfolio 19.5 23.1 331.4 100% -1.0% -------- ------ ------ ----------- -------------
Note: This table differs to Non-current assets value of GBP333.7m. The above includes Merrion House and Burlington House non-current assets held in JVs (GBP47.0m, rather than the net JV value of GBP15.5m). In addition, the above excludes the effect of IFRS16 (GBP25.8m), Investments (GBP3.4m), Finance Leases (GBP3.3m) and Fixtures & Fittings (GBP1.1m)
In conducting the interim valuations, our valuers have now removed their "material valuation uncertainty" clause (as set out in the RICS Valuation Global Standards) from all our sectors with the exception of the valuation for our ibis Styles hotel in Leeds (2.6% of total non-current assets).
Maximising available capital
In the past six months we have, as intended, accelerated our retail disposal programme. Between July and December 2020, we have sold retail assets for a total consideration of GBP41.2m.
The properties disposed of included:
- Our two properties in Milngavie, Scotland let to Waitrose, Aldi and Home Bargains - Our Waitrose store in Glasgow - Five properties in London in Wood Green and Chiswick - Blackpool Market
The sales were agreed on average 2% below June 2020 values. The proceeds have initially been used to repay debt and complete the redevelopments of 123 Albion Street and Ducie House. The disposals reduce net income by GBP2.3m, or circa GBP1.3m annually when allowing for lower interest costs.
We continue to market a number of other retail properties and intend to complete further sales over the coming months. However, in the current market nothing is certain, and we will only sell at commercially sensible values. This activity was already part of our strategic plans, and has been accelerated to speed up the reduction of debt and the reduction in exposure to retail property within the portfolio.
Net borrowings (excluding finance leases) at 31 December 2020 were GBP147.6m (30 June 2020: GBP183.6m), plus IFRS 16 financial liabilities and finance leases of GBP28.6m. The Loan to value (LTV) ratio is 48.6% (30 June 2020: 53.2%). LTV is calculated on a pre-IFRS 16 basis excluding both the IFRS increase in assets and liabilities in order to give a more meaningful result, and to be consistent with covenant reporting. Headroom at 31 December 2020 was GBP12.8m (FY20: GBP14.8m).
The total borrowings comprise of GBP99.3m (net of GBP0.2m unamortised lease incentives) of 5.375% First Mortgage Debenture Stock 2031, and GBP50.7m of bank debt. There were a further GBP57.3m of undrawn revolving credit facilities at the half-year. Previously classed finance leases of GBP3.3m, the IFRS 16 financial liability of GBP25.3m and net cash of GBP1.3m make up the remaining balance.
In the half year period, we took the opportunity to use some of the sales proceeds to buy back for cancellation GBP6.5m of our debenture. The transaction has the effect of reducing overall interest costs, increasing LTV covenant headroom within the facility and increasing flexibility going forward. The purchase was completed at a cost marginally above par.
Actively managing our assets
Never has it been more important for our dedicated team to work to actively manage our estate, securing income, extending lease terms, and working closely with our tenants to support them through the current challenges. Despite the immediate urgencies created by COVID-19, we also continue to focus on pursuing new opportunities to help create places that attract people and create communities.
We have completed or renewed 14 leases since July 2020. Whilst the retail and leisure industries have been under significant pressure, with many company failures our retail and leisure portfolio has proven more resilient given the emphasis on grocery, convenience and discounter retailing. We have no exposure to any of the large high street retail failures such as Arcadia or Debenhams. Since July 2020, five tenants have entered into CVAs or administration; Deltic Group, Café Nero, STA Travel, Slam Trading, and Select. The billable rent due from these tenants totalled GBP0.3m for the first six months of the year, representing circa 2% of income billed in the half-year. Deltic is by far the most significant of these, occupying a nightclub in the Merrion Centre and accounting for GBP0.2m of the GBP0.3m of rent. As a prime spot, close to the student heart of the city, we have already received good interest in the premises from a number of operators and are confident of our ability to quickly secure a new long-term lease.
The proportion of retail and leisure assets in the portfolio has reduced to 39% from 47% in June 2020, and down from 70% in 2016. Pure retail now represents only 26% of the total portfolio, of which 60% is in the Merrion Estate.
Key highlights of recent activity include:
Ducie House, Manchester
We have now completed our GBP2.1m refurbishment of Ducie House in Manchester. Ducie House is a 33,000 sq ft multi-tenant office building. The work included essential fabric and M&E repairs post acquisition. This included full roof, façade, and window repairs as well as new boilers and lifts. Air conditioning/heating were also fitted to the newly refurbished offices. We adopted a strategy of restructuring the building's configuration to provide three additional meeting rooms, shower facilities and booth spaces. We have also refurbished the common areas on the upper floors to provide further amenity space including break out booths with balcony space and improved toilet/kitchen facilities. We have restructured the space within the building to provide larger office space to accommodate greater requirements and facilitate organic growth within the building.
Whilst we have supported many of our tenants through the COVID-19 crisis, we have seen a very positive response following our investment and continue to expect the investment to deliver increased net income of circa GBP0.3m per annum and a post investment return in excess of 8.5%. The value of Ducie House increased by GBP1.0m to GBP9.0m reflecting the additional capex spent in the six months to 31 December 2020. It is our expectation that this will continue to improve as the vacant space lets and rental levels continue to improve. In January, we signed the first new lease for one of the larger duplex offices with textile company NB Avenue Limited.
Urban Exchange, Manchester
Urban Exchange is a 120,000 sq ft retail outlet within our Piccadilly Basin ownership in the centre of Manchester. It is let to Aldi, M&S, Pure Gym, and Go Outdoors. As previously reported, Go Outdoors was put into administration by its owners in 2020. Since that point, we have been receiving full rent from the administrator and are in active discussions regarding the future of the store, with indications that there is a desire to keep the store open and trading. However, in order to ensure we keep all options open to us, we have undertaken a project to design a conversion of the Go Outdoors space (61,000 sq ft occupying the whole of the mezzanine floor and atrium entrance) into modern Grade A office space. Whilst at an early stage, the project is feasible and the initial economics look strong, providing important options for the future of this space.
Acquiring investment assets
123 Albion Street, Leeds
Acquired in 2018, we have now completed a net GBP4m refurbishment of this building. The newly refurbished building comprises 22,000 sq ft of flexible commercial space on the ground floor, with 56,000 sq ft of good quality office space over three upper floors. It is located in central Leeds in close proximity to the Merrion Estate and is part of Leeds's Innovation District. The refurbishment programme has delivered quality Grade A offices, new lifts, feature glazing, a newly modelled feature entrance atrium, private reception and ample parking with cycling storage and CitiCharge EV chargers, showers, lockers and changing facilities.
Over 10,000 sq ft of the office space was subject to a lease renewal with the Secretary of State in 2019, and we have now agreed a new lease for the remaining 46,000 sq ft to StepChange Debt Charity. StepChange is the UK's leading debt charity offering free expert advice to individuals enabling them to tackle and manage their debts. We have agreed a new 12-year lease, which involves the charity moving out of our Wade House office (on the Merrion Estate) into this newly refurbished space. The asset was valued at GBP12.1m twelve months ago and has increased to GBP16.3m following the renovation. We expect this to increase again as part of the June 2021 valuation.
StepChange has been a valuable TCS tenant for almost 20 years and had regularly expanded with TCS. The StepChange business has now reached a stage where new Leeds offices with much larger floor plates were required in order to take the business forward efficiently. It is pleasing, both for TCS and for the wider City of Leeds, that we have been able to satisfy StepChange's new office requirement enabling them to continue their important and valuable work.
The Arena Quarter, where the Merrion Estate is located, has been transformed in recent years with the development of the first direct Arena and substantial investment by Leeds' two largest universities, a brand-new Head Office for Leeds City Council and further investment in hotels, leisure units and over 8,000 new residential and student residential units. These new developments, on and adjacent to the Merrion Estate, including the tallest building in Leeds (IQ Altus under construction), have transformed the area. This now presents TCS with an opportunity to redevelop or refurbish Wade House on the back of the new demand. Wade House represents the last of the four main office buildings that form part of the Merrion Estate, and one that is now in need of investment. Having already redeveloped Town Centre House and Merrion House, it is time to improve Wade House. We have received speculative interest in the building and have been working up various plans for some time. We are in detailed discussions with potential partners and are confident in delivering on this new opportunity.
Investing in our development pipeline
TCS owns a significant development pipeline which gives the Company a clear and material opportunity for future growth. The current pipeline has an estimated gross development value (GDV) of over GBP600m, with the majority of the developments already being part of the relevant local government approved strategic planning frameworks or actually in possession of detailed planning permission.
We take a conservative approach to development to ensure we never over-commit ourselves, which has proven crucial following the COVID-19 crisis. However, TCS does have a successful track record in obtaining planning and delivering strategic developments. In the last four years, TCS has delivered Merrion House office, let to Leeds City Council, two new hotels in Leeds, and the Burlington House PRS scheme in Manchester. In addition, over that time frame, we have secured planning permission for a 17-storey office tower above Merrion and at Eider House, our second PRS scheme in Manchester.
It is expected that Eider House will constitute our next development and we have carried out works in January 2021 to implement the planning consent for the site. We are currently determining appropriate timing and ownership structure for the development.
The key components of the development pipeline include:
-- Piccadilly Basin, Manchester. Mixed residential, commercial, and car-parking with a total estimated GDV of circa GBP300m
-- Whitehall Road, Leeds. Office, car-parking, and potentially leisure provision with a total estimated GDV of over GBP170m
-- Merrion, Leeds. Office and residential towers with a total estimated GDV of over GBP100m
CitiPark heavily impacted but preparing for the bounce back
Of all the parts of the business, the Company's car parking business has been most hard hit by COVID-19. As an operating business dependent on commuter, retail and leisure parking, each lockdown has had a material impact on revenue. The introduction in late 2020 of the tiering system further limited movement and therefore parking demand. In addition, with the fixed costs of rent and business rates accounting for two-thirds of operating expenses, the impact on profitability is significant.
Operating income for the first six months was GBP3.5m, GBP2.9m (45%) down on the prior year. Operating profit was GBP0.4m, GBP2.3m down year on year.
Consistent with actions taken in the second quarter of 2020, CitiPark continues to implement operational plans aimed at maximising income whilst minimising costs. Actions include:
- Temporarily closing branches where it is economically the right thing to do, and diverting customers to neighbouring and open CitiPark branches
- Making use of the government furlough scheme to minimise wage costs, whilst maintaining employment to be ready to quickly reopen
- Closed floors or sections of branches to allow business rates reduction claims - Cancelling or suspending non-essential costs and services where possible
During the January / February 2021 lockdown, we have closed two branches and kept 17 open and trading; however, with reduced available spaces to minimise cost. It was reassuring that in the late summer / early autumn of 2020, as lockdown restrictions were eased, CitiPark experienced a rapid and significant increase in demand. We firmly expect this to be the case again as 2021 progresses and, in particular, as the benefit of the vaccination programme kicks in.
Increasingly, the CitiPark business is looking to expand beyond traditional car park ownership. The business already runs three solar energy farms in Manchester and Leeds, and through its creation of CitiCharge, which provides electric vehicle (EV) charging points in all its branches, is continuing to explore how to develop a sustainability focused point of difference. In the first half of the year, we won an order to supply 35 EV chargers to Coventry NHS hospital, a significant contract with a potential opportunity for further collaboration on future NHS projects. In addition, we have also installed CitiCharge EV chargers at 123 Albion Street as part of that redevelopment.
Furthermore, with the aim of driving capital light growth, CitiPark continues to look for new opportunities for revenue generation. In FY20, we reported on securing the management contract for the 978 space Manchester Arena car park. We also previously reported on the formation of BaySentry Solutions Ltd, a British Parking Association approved parking enforcement company. To build on that opportunity, we have recently acquired all 75 parking enforcement contracts from an independent operator for a modest sum. We see great opportunity to develop a sizable, fair and professional enforcement business; utilising our developed technology to deter inconsiderate parking and help owners effectively manage their car parks.
TCS's investment in YourParkingSpace, the online parking marketplace, has continued to strengthen following a GBP5m investment from Pelican Capital, fuelling the next phase of growth for the business. As part of the transaction, TCS exercised our third and final investment option and now have 19.9% voting share with additional 1.2% non-voting shares, convertible to voting on exit. Our cost of equity investment totals GBP1.0m, which following an external fair value exercise is valued at GBP1.5m in the half year balance sheet. We continue to retain a Board position and are looking forward to working closely with the founders and new investors as we rapidly grow this very exciting business.
Outlook
The past six months have been critical in the resetting and reinvigorating of the business, and I am particularly pleased with both the progress of our disposal programme, and the resilience of the continuing portfolio. The reduction in absolute borrowing levels gives both additional security and, as the disposal programme continues, the ability to reinvest in the long-term growth opportunities in our development pipeline.
COVID-19 continues to have a material impact on profitability. Although significant government support has been given to retail and leisure businesses, as a car park operator we have continued to pay car park rent to our local government landlords, as well as business rates which to us seems extraordinarily one sided. I am confident in the ability of our CitiPark business to bounce back strongly once the current lockdown is removed.
Overall, we remain committed to delivering on our accelerated four pillar strategy of: actively managing our assets, maximising available capital, investing in our development pipeline and acquiring and improving investment assets to diversify our portfolio.
EPRA Net Asset reporting
Following the introduction of the new EPRA net asset reporting, we will focus primarily on the measure of Net Tangible Assets (NTA). The below table reconciles IFRS net assets to NTA, and the other new EPRA measures.
There are three new EPRA Net Asset Valuation metrics, namely EPRA Net Reinstatement Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net Disposal Value (NDV). The EPRA NRV scenario, aims to represent the value required to rebuild the entity and assumes that no selling of assets takes place. The EPRA NTA is focused on reflecting a company's tangible assets. EPRA NDV aims to represent the shareholders' value under an orderly sale of business, where, for example, financial instruments are calculated to the full extent of their liability. All three new NAV metrics share the same starting point, namely IFRS Equity attributable to shareholders.
HY21 FY20 HY21 FY20 GBPm GBPm p per share p per share IFRS reported NAV 152.0 155.5 286 292 Purchasers Costs(1) 21.2 24.1 EPRA Net Reinstatement Value 173.2 179.6 326 338 Remove Purchasers Costs (21.2) (24.1) Remove Goodwill(2) (4.1) (4.0) EPRA Net Tangible Assets 147.8 151.5 278 285 Fair value of fixed interest rate debt(3) (15.9) (17.7) EPRA Net Disposal Value 131.9 133.8 248 252
(1) Estimated purchasers' costs including fees and stamp duty and related taxes
(2) Removal of goodwill as per the IFRS Balance Sheet - relates predominantly to goodwill paid to acquire two long term car park leaseholds in London
(3) Represents the adjustment to fair value (market price) of the 2031 5.375% debenture
Responsibility statement of the directors
The directors confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union. The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last Annual Report and Accounts.
A list of current directors is maintained on the Town Centre Securities PLC Group website: www.tcs-plc.co.uk .
Principal risks and uncertainties
The group set out on page 50 of its annual report and accounts 2020 the principal risks and uncertainties that could impact its performance; these remain largely unchanged since the annual report was published. The group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity.
As identified in the 2020 annual report the emergence of COVID-19 has served to increase the risk levels across many aspects of the business. The key underlying risks facing the business continue to relate to tenant strength, particularly in the retail arena, portfolio valuation and the related funding headroom which is driven by portfolio valuation. Systems risk related to the increasing level of cyber security threats and GDPR risk and the need to carefully control the use of personal data continue to demand vigilance from all staff.
TCS continues to operate in a conservative manner with processes and procedures in place to ensure risk management is central to all business planning and decision making. These processes and procedures remain as detailed in the 2020 annual report.
Forward-looking statements
Certain statements in this half year report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
The group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Edward Ziff OBE DL Mark Dilley Chairman and Chief Executive Group Finance Director
23 February 2021
Consolidated income statement
for the six months ended 31 December 2020
Six months Six months Year ended ended ended 31 December 31 December 30 June 2020 2019 2020 Unaudited Unaudited Audited Notes GBP000 GBP000 GBP000 --------------------------------------------- ----------- ----------- -------- Gross revenue 10,436 15,892 27,989 Service charge income 1,301 1,475 2,803 Provision for impairment of debtors (22) (77) (1,478) Service charge expenses (1,808) (2,271) (4,011) Property expenses (3,655) (4,834) (9,244) -------------------------------------------- ----------- ----------- -------- Net revenue 6,252 10,185 16,059 Administrative expenses (2,780) (3,142) (6,197) Other income 462 1,097 1,218 Other expenses - - (777) Reversal of impairment of car parking assets 6 250 250 250 Valuation movement on investment properties 6 (4,096) (4,639) (26,324) (Loss)/profit on disposal of investment properties (1,100) 55 168 Share of post tax profits from joint ventures 8 1,787 446 450 Operating profit/(loss) 775 4,252 (15,153) Finance costs 3 (4,293) (4,493) (9,009) Loss before taxation (3,518) (241) (24,162) Taxation - - - --------------------------------------------- ----------- ----------- -------- Loss for the period (3,518) (241) (24,162) --------------------------------------------- ----------- ----------- -------- All losses for the period are attributable to equity shareholders. Earnings per share 5 Basic and Diluted (6.6p) (0.5p) (45.5p) EPRA (non-GAAP measure) 0.4p 7.7p 3.9p --------------------------------------------- ----------- ----------- --------
Consolidated statement of comprehensive income
for the six months ended 31 December 2020
Six months Six months Year ended ended ended 31 December 31 December 30 June 2020 2019 2020 Unaudited Unaudited Audited GBP000 GBP000 GBP000 ---------------------------------------------------------- ----------- -------- Loss for the period (3,518) (241) (24,162) Items that will not be subsequently reclassified to profit or loss Revaluation gains/(losses) on other investments 930 (1,285) (2,363) ------------------------------------------------- ------- ----------- -------- Total other comprehensive income/(loss) 930 (1,285) (2,363) Total comprehensive loss for the period (2,588) (1,526) (26,525) ------------------------------------------------- ------- ----------- --------
All recognised income for the period is attributable to equity shareholders.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Consolidated balance sheet
as at 31 December 2020
31 December 31 December 30 June 2020 2019 2020 Unaudited Unaudited Audited Notes GBP000 GBP000 GBP000 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Non-current assets Property rental Investment properties 6 259,854 319,345 280,914 Investments in joint ventures 8 15,538 13,748 13,751 ------------------------------------------------------------------------------------------------ ----------------------------- ----------- ----------- --------- 275,392 333,093 294,665 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Car park activities Freehold and leasehold properties 6 49,695 50,853 50,159 Goodwill 7 4,144 4,024 4,024 Investments 9 3,415 2,655 2,656 57,254 57,532 56,839 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Fixtures, equipment and motor vehicles 6 1,058 1,367 1,113 ------------------------------------------------------------------------------------------------ ----------------------------- ----------- ----------- ---------
Total non-current assets 333,704 391,992 352,617 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Current assets Investments 9 3,937 4,586 3,508 Assets held for sale - 1,900 23,199 Trade and other receivables 5,121 4,700 3,468 Cash and cash equivalents 17,842 24,971 12,643 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Total current assets 26,900 36,157 42,818 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Total assets 360,604 428,149 395,435 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Current liabilities Trade and other payables (12,995) (15,493) (13,100) Financial liabilities 10 (49,284) (25,179) (72,266) Total current liabilities (62,279) (40,672) (85,366) ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Non-current liabilities Financial liabilities 10 (146,365) (205,272) (154,591) ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Total liabilities (208,644) (245,944) (239,957) ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Net assets 151,960 182,205 155,478 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Equity attributable to owners of the Parent Called up share capital 11 13,290 13,290 13,290 Share premium account 200 200 200 Capital redemption reserve 559 559 559 Revaluation reserve 750 750 750 Retained earnings 137,161 167,406 140,679 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Total equity 151,960 182,205 155,478 ------------------------------------------------------------------------------------------------------------------------------- ----------- ----------- --------- Net asset value per share 13 286p 343p 292p ------------------------------------------------------------------------------------------------ ----------------------------- ----------- ----------- ---------
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Consolidated statement of changes in equity
for the six months ended 31 December 2020
Share Capital Share premium redemption Revaluation Retained Total capital account reserve Reserve earnings equity GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------------------------------------- ------- ---------- ----------- -------- ------- Balance at 1 July 2019 13,290 200 559 250 173,951 188,250 Comprehensive income/(loss) for the year Loss for the period - - - - (241) (241) Other comprehensive loss - - - - (1,285) (1,285) Transfer - - - 500 (500) - ------------------------------------- ------ ------- ---------- ----------- -------- ------- Total comprehensive income for the period - - - 500 (2,026) (1,526) Contributions by and distributions to owners Dividends relating to the year ended 30 June 2019 - - - - (4,519) (4,519) ------------------------------------- ------ ------- ---------- ----------- -------- ------- Balance at 31 December 2019 13,290 200 559 750 167,406 182,205 ------------------------------------- ------ ------- ---------- ----------- -------- ------- Balance at 1 July 2020 13,290 200 559 750 140,679 155,478 Comprehensive income/(loss) for the year Loss for the period - - - - (3,518) (3,518) Other comprehensive income - - - - 930 930 Total comprehensive loss for the period - - - - (2,588) (2,588) Contributions by and distributions to owners Dividends relating to the year ended 30 June 2020 - - - - (930) (930) ------------------------------------- ------ ------- ---------- ----------- -------- ------- Balance at 31 December 2020 13,290 200 559 750 137,161 151,960 ------------------------------------- ------ ------- ---------- ----------- -------- -------
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Consolidated cash flow statement
for the six months ended 31 December 2020
Six months Six months ended Year ended ended 31 December 31 December 30 June 2020 2020 2019 Unaudited Unaudited Audited ------------------ ------------------- Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------------------------------------- ------ -------- -------- -------- -------- ------- -------- Cash flows from operating activities Cash generated from operations 12 2,329 9,957 14,433 Interest paid (3,523) (3,985) (7,648) Net cash (used in)/generated from operating activities (1,194) 5,972 6,785 ----------------------------------------------- -------- -------- -------- -------- ------- ---------- Cash flows from investing activities Purchases and construction of investment properties - - (1,610) Refurbishment of investment properties (2,033) (1,973) (5,442) Payments for leasehold property improvements - (24) (25) Purchases of fixtures, equipment and motor vehicles - (74) (93) Purchases of plant and equipment (126) - -
Proceeds from sale of investment properties 40,789 504 2,494 Investments in joint ventures - 85 86 Acquisition of non-listed investments (258) (145) (146) Net cash generated from/(used in) investing activities 38,372 (1,627) (4,736) --------------------------------------------------------- -------- -------- -------- ------- ---------- Cash flows from financing activities (Repayment of)/proceeds from non-current borrowings (36,174) (2,305) 8,000 Movement in lease liabilities (820) (825) (1,650) Dividends paid to shareholders - - (6,247) Net cash (used in)/generated from financing activities (36,994) (3,130) 103 ----------------------------------------------- -------- -------- -------- -------- ------- ---------- Net increase in cash and cash equivalents 184 1,215 2,152 Cash and cash equivalents at beginning of period 2,361 209 209 ----------------------------------------------- -------- -------- -------- -------- ------- ---------- Cash and cash equivalents at end of period 2,545 1,424 2,361 ----------------------------------------------- -------- -------- -------- -------- ------- ---------- Cash and cash equivalents at the year-end are comprised of the following: Cash balances 17,841 24,971 12,643 Overdrawn balances (15,296) (23,547) (10,282) ----------------------------------------------- -------- -------- -------- -------- ------- ---------- 2,545 1,424 2,361 ----------------------------------------------- -------- -------- -------- -------- ------- ----------
The Consolidated Cash Flow Statement should be read in conjunction with Note 12.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Notes to the consolidated interim financial information
1. Financial information
General information
Town Centre Securities PLC (the "Company") is a public limited company domiciled in the United Kingdom. Its shares are listed on the main market of the London Stock Exchange. The address of its registered office is Town Centre House, The Merrion Centre, Leeds LS2 8LY. The principal activities of the group during the period remained those of property investment, development and trading and the provision of car parking.
This interim financial information was approved by the board on 23 February 2021.
The comparative financial information for the year ended 30 June 2020 in this half-yearly report does not constitute statutory accounts for that year. The statutory accounts for the year ended 30 June 2020 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Basis of preparation
These condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting", as adopted by the European Union. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the accounts for the year ended 30 June 2020. The financial information for the six months ended 31 December 2020 and 31 December 2019 is unaudited.
Significant accounting policies
The accounting policies adopted are consistent with those of the previous financial year.
The group's financial performance is not seasonal.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
In the current environment, the directors consider the revenue to be of particular importance and therefore we set out below our revenue policy in respect of rental income:
Rental income
Revenue includes the fair value of rental income management charges from properties (net of Value Added Tax).
Deferred income is only recognised to the extent it is expected to be recovered from tenants.
This income is recognised as it falls due, in accordance with the lease to which it relates. Any lease incentives are spread evenly across the period of the lease.
This income is recognised (to the extend it is expected to be recovered from tenants) as follows:
i) rental income is recognise on an accrual basis on a straight-line based over the term of the lease;
ii) turnover rents are based on underlying turnover and are recognised in the period to which turnover relates;
iii) rent reviews are recognised with effect from the review date; and
iv) rent concessions are spread evenly over the life of the lease
The directors have also reassessed the classification of the service charge income which has previously been net off against service charge costs within property expenses. This service charge income and service charge costs have now been split out on the face of the income statement, and the prior period has also been adjusted to reflect the income and cost recognised in previous accounting periods. There is no change to net revenue disclosed in the prior periods.
Use of estimates and judgements
There have been no changes in estimates of amounts reported in prior periods which have a material impact on the current half year period.
Going concern
The accounts for the six months ended 31 December 2020 have been prepared on a going concern basis. In light of the on-going COVID-19 pandemic the Directors have considered various downside scenarios to the Group's financial forecasts in assessing its ability to continue as a going concern. Despite the negative economic impacts and the uncertainty in respect of the timeline for recovery, the scenarios reviewed confirm the appropriateness of preparing these financial statements on a going concern basis. The Group is currently in compliance with all of its covenants. The most material risk concerns the impact of the COVID-19 pandemic on the valuation of the property portfolio and our ability to meet gearing covenants, although the Group does have potential mitigants at its disposal to address these uncertainties which include, but are not limited to, further disposals of assets, pledging as additional security ungeared properties currently valued at GBP3.6m million at 31 December 2020 and seeking lender consent to an extension of financial covenant waivers to cover extended periods of disruption. However, in light of the uncertainty in respect of the on-going adverse impacts and duration of COVID-19, a material uncertainty exists which may cast doubts on the Group's ability to continue as a going concern and therefore its ability to realise its assets and settle its liabilities in the ordinary course of business. These financial statements do not include the adjustments that would be necessary should the going concern basis of preparation no longer be appropriate.
2. Segmental information
The chief operating decision-maker has been identified as the board. The board reviews the group's internal reporting in order to assess performance and allocate resources. The board has determined the operating segments based on these reports.
Segmental assets
31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 ----------------------------- ----------- ------- Property rental 299,777 363,262 333,307 Car park activities 52,645 54,187 53,498 Hotel operations 8,630 10,700 8,630 -------------------- ------- ----------- ------- Total assets 361,052 428,149 395,435 -------------------- ------- ----------- -------
Segmental results
Six months ended Six months ended 31 December 2020 31 December 2019 ----------------------------------------- Property Car Hotel Property Car Hotel park park rental activities operations Total rental activities operations Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ------------------------ -------- ---------- ---------- ------- -------- ---------- ---------- ------- Gross revenue 6,573 3,504 359 10,436 8,067 6,416 1,409 15,892 Service charge income 1,301 - - 1,301 1,475 - - 1,475 Provision for impairment of debtors (22) - - (22) (77) - - (77) Service charge expenses (1,808) - - (1,808) (2,271) - - (2,271) Property expenses (607) (2,585) (463) (3,655) (542) (3,168) (1,124) (4,834) ------------------------ -------- ---------- ---------- ------- -------- ---------- ---------- -------
Net revenue 5,437 919 (104) 6,252 6,652 3,248 285 10,185 Administrative expenses (2,229) (551) - (2,780) (2,587) (555) - (3,142) Other income 462 - - 462 1,097 - - 1,097 Share of post tax profits from joint ventures 477 - - 477 446 - - 446 ------------------------ -------- ---------- ---------- ------- -------- ---------- ---------- ------- Operating profit before valuation movements 4,147 368 (104) 4,411 5,608 2,693 285 8,586 Valuation movement on investment properties (4,096) - - (4,096) (4,639) - - (4,639) Reversal of impairment of car parking assets - 250 - 250 - 250 - 250 (Loss)/profit on disposal of investment properties (1,100) - - (1,100) 55 - - 55 Valuation movement on joint venture properties 1,310 - - 1,310 - - - - Operating profit/(loss) 261 618 (104) 775 1,024 2,943 285 4,252 Finance costs (4,293) (4,493) Loss before taxation (3,518) (241) Taxation - - ------------------------ -------- ---------- ---------- ------- -------- ---------- ---------- ------- Loss for the period (3,518) (241) ------------------------ -------- ---------- ---------- ------- -------- ---------- ---------- -------
All results are derived from activities conducted in the United Kingdom.
The results for the car park operations include the car park at the Merrion Centre. As the value of the car park cannot be separated from the value of the Merrion Centre as a whole, the full value of the Merrion Centre is included within the assets of the property rental business.
The car park results also include car park income from sites that are held for future development. The value of these sites has been determined based on their development value and therefore the total value of these assets has been included within the assets of the property rental business.
The total net revenue at the Merrion Centre and development sites for the six months ended 31 December 2020, all arising from car park operations, was GBP795,000 (2019: GBP2,164,000). After allowing for an allocation of administrative expenses, the operating profit at these sites was GBP374,000 (2019: GBP1,740,000).
Revenue received within the car park and hotel segments is the only revenue recognised on a contract basis under IFRS 15. All other revenue within the property segment comes from rental lease agreements.
3. Finance costs
Six months Six months Year ended ended ended 31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 --------------------------------------------- ----------- ------- Interest on debenture loan stock 2,787 2,849 5,698 Interest payable on bank borrowings 735 970 1,950 Amortisation of arrangement fees 160 166 327 Loss on repurchase of debenture stock 114 - - Interest expense on lease liabilities 497 508 1,034 4,293 4,493 9,009 -------------------------------------- ----- ----------- -------
In November 2020, the Company repurchased GBP6,500,000 of its own debenture stock. The premium associated with this purchase of GBP114,000 has been recognised within Finance Costs.
4. Dividends
Six months Six months Year ended ended ended 31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 -------------------------------------- ----------- ------- 2019 final dividend: 8.50p per 25p share - 4,519 4,519 2020 interim dividend: 3.25p per 25p share - - 1,728 2020 final dividend: 1.75p per 25p share 930 - - --------------------------------- --- ----------- ------- 930 4,519 6,247 --------------------------------- --- ----------- -------
A final dividend in respect of the year ended 30 June 2020 of 1.75p per share was approved at the company's annual general meeting (AGM) on 17 November 2020 and was paid to shareholders on 5 January 2021. The entire dividend was paid as an ordinary dividend.
An interim dividend in respect of the year ending 30 June 2021 of 1.75p per share is proposed. This dividend, based on the shares in issue at 24 February 2021, amounts to GBP0.9m which has not been reflected in these interim accounts and will be paid on 25 June 2021 to shareholders on the register on 28 May 2021. This dividend will be paid entirely as a PID.
5. Earnings per share
The calculation of basic earnings per share has been based on the profit for the period, divided by the number of shares in issue. The number of shares in issue during the period was 53,161,950 (2019: 53,161,950).
Six months Six months ended ended 31 December 31 December Year ended 2020 2019 30 June 2020 ---------------------------------------- -------------------- -------------------- -------------------- Earnings Earnings Earnings Earnings per share Earnings per share Earnings per share GBP000 Pence GBP000 Pence GBP000 Pence ---------------------------------------- -------- ---------- -------- ---------- -------- ---------- Basic earnings and earnings per share (3,518) (6.6) (241) (0.4) (24,162) (45.5) Valuation movement on investment properties 4,096 7.7 4,639 8.7 26,324 49.5 Reversal of impairment of car parking assets (250) (0.5) (250) (0.5) (250) (0.5) Valuation movement on properties held in joint ventures (1,310) (2.5) - - 350 0.7 Loss/(profit) on disposal of investment properties 1,100 2.1 (55) (0.1) (168) (0.3) Loss on repurchase of debenture stock 114 0.2 ---------------------------------------- -------- ---------- -------- ---------- -------- ---------- EPRA earnings and earnings per share 232 0.4 4,093 7.7 2,094 3.9 ---------------------------------------- -------- ---------- -------- ---------- -------- ----------
The calculation of EPRA earnings per share has been based on the profit for the period, divided by the number of shares in issue throughout the period. It has been disclosed to demonstrate the effects of property disposal profits and losses, revaluation and impairment movements and other non-recurring items on earnings.
6. Tangible fixed assets
(a) Investment properties - property rental business
Right to use assets Freehold Long leasehold Other Development Total GBP000 GBP000 GBP000 GBP000 GBP000 ------------------------------------ --------------------------- ----------- ----------- -------- Valuation at 1 July 2019 266,765 21,284 - 36,451 324,500 Additions at cost 1,610 - - - 1,610 IFRS 16 adjustments - - 518 518 518 Other capital expenditure 5,630 - - 348 5,978 Purchase of freehold 14,129 (13,594) - - 535 Disposals (2,425) - - - (2,425) Transfer to assets held for sale (23,199) - - - (23,199) Deficit on revaluation (25,206) (2,070) - 952 (26,324) Movement in tenant lease incentives (279) - - - (279) -------------------------- -------- --------------------------- ----------- ----------- -------- Valuation at 1 July
2020 237,025 5,620 518 518 280,914 -------------------------- -------- --------------------------- ----------- ----------- -------- Capital expenditure 2,018 - - 15 2,033 Disposals (18,899) - - - (18,899) Transfer to assets held - - - - - for sale Valuation movement (6,411) 30 - 2,285 (4,096) Movement in tenant lease incentives (98) - - - (98) Valuation at 31 December 2020 213,635 5,650 518 40,051 259,854 -------------------------- -------- --------------------------- ----------- ----------- --------
(b) Freehold and leasehold properties - car park activities
Right to use assets Freehold Leasehold Other Total GBP000 GBP000 GBP000 GBP000 -------------------------------- ------------------------- ------------------ ------- Valuation at 1 July 2019 3,750 20,444 - 24,194 Additions - 25 - 25 IFRS16 adjustment - (3,301) 30,322 27,021 Depreciation - (187) (1,144) (1,331) Reversal of impairment - 250 - 250 ------------------------- ----- ------------------------- ------------------ ------- Valuation at 1 July 2020 3,750 17,231 29,178 50,159 ------------------------- ----- ------------------------- ------------------ ------- IFRS16 adjustment - - (48) (48) Additions - - - - Depreciation - (94) (572) (666) Reversal of impairment - 250 - 250 Valuation at 31 December 2020 3,750 17,387 28,558 49,695 ------------------------- ----- ------------------------- ------------------ -------
The fair value of the group's investment and development properties has been determined principally by independent, appropriately qualified external valuers CBRE and Jones Lang LaSalle. The CBRE valuation report has explicitly mentioned material valuation uncertainty in relation to the ibis Styles Hotel at the Merrion Centre, due to Novel Coronvirus (COVID-19). The remainder of the portfolio has been valued by the property director.
Valuations are performed bi-annually and are performed consistently across the group's whole portfolio of properties. At each reporting date appropriately qualified employees verify all significant inputs and review computational outputs. The external valuers submit and present summary reports to the Property Director and the Board on the outcome of each valuation round.
Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rents or business profitability, incentives offered to tenants, forecast growth rates, market yields and discount rates and selling costs including stamp duty.
The development properties principally comprise land in Leeds and Manchester. These assets have been valued by appropriately qualified external valuers Jones Lang LaSalle, taking into account the income from car parking and an assessment of their realisable value in their existing state and condition based on market evidence of comparable transactions.
Property income, values and yields have been set out by category in the table below.
Initial Reversionary Passing ERV Value yield yield rent GBP'000 GBP'000 GBP000 % % -------------------------- --------- ------- ------- --------- -------------- Retail and leisure 2,339 2,561 30,770 7.2% 7.9% Merrion Centre (excluding offices) 5,593 7,566 82,604 6.4% 8.7% Offices 3,664 4,524 51,031 6.8% 8.4% Hotels 1,180 1,630 23,080 4.8% 6.7% Out of town retail 1,081 1,155 14,500 7.1% 7.5% Distribution 411 427 6,010 6.5% 6.7% Residential 553 580 9,640 5.4% 5.7% -------------------------- --------- ------- ------- --------- -------------- 14,821 18,443 217,635 6.4% 8.0% -------------------------- --------- ------- ------- --------- -------------- Development property 40,051 Car parks 22,787 Right-of-use assets 29,076 -------------------------- --------- ------- ------- 309,549 -------------------------- --------- ------- -------
The effect on valuation of applying a different yield and a different ERV would be as follows:
Valuation at an initial yield of 7.4% - GBP280.3m, Valuation at 5.4% - GBP349.6m
Valuation at a reversionary yield of 9.0% - GBP285.4m, Valuation at 7.0% - GBP340.6m
Property valuations can be reconciled to the carrying value of the properties in the balance sheet as follows:
Investment Freehold Properties and Leasehold Properties Total GBP000 GBP000 GBP000 ---------------------------------------- ----------- -------------- ------- Externally valued by CB Richard Ellis 141,745 - 141,745 Externally valued by Jones Lang LaSalle 117,440 17,500 134,940 Investment and development properties valued by the Directors 151 - 151 Right-of-Use Assets 518 28,558 29,076 Leasehold improvements - 3,637 3,637 ---------------------------------------- ----------- -------------- ------- At 31 December 2020 259,854 49,695 309,549 ---------------------------------------- ----------- -------------- -------
All investment properties measured at fair value in the consolidated balance sheet are categorised as level 3 in the fair value hierarchy as defined in IFRS13 as one or more inputs to the valuation are partly based on unobservable market data. In arriving at their valuation for each property (as in prior periods) both the independent valuers and the property director have used the actual rent passing and have also formed an opinion as to the two key unobservable inputs being the market rental for that property and the yield (i.e. the discount rate) which a potential purchaser would apply in arriving at the market value. Both these inputs are arrived at using market comparables for the type, location and condition of the property.
(c) Fixtures, equipment and motor vehicles
Accumulated Net book Cost depreciation value GBP000 GBP000 GBP000 -------------------- ------ ------------ -------- At 1 July 2019 4,390 2,781 1,609 Additions 93 - 93 Depreciation - 589 (589) -------------------- ------ ------------ -------- At 1 July 2020 4,483 3,370 1,113 -------------------- ------ ------------ -------- Additions 126 - 126 Depreciation - 181 (181) -------------------- ------ ------------ -------- At 31 December 2020 4,609 3,551 1,058 -------------------- ------ ------------ --------
7. Goodwill
Six months Six months Year ended ended ended 31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 ------------------- ----------- ----------- ------- At start of period 4,024 4,024 4,024 Additions at cost 120 - - ------------------- ----------- ----------- ------- At end of period 4,144 4,024 4,024 ------------------- ----------- ----------- -------
Goodwill represents the difference between the fair value of the consideration paid on the acquisitions of car park businesses and the fair value of the assets and liabilities acquired as part of these business combinations.
8. Investments in joint ventures
Six months Six months Year ended ended Ended 31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 ------------------------------------- ----------- ----------- ------- Interest in joint ventures At start of period 13,751 13,387 13,387 Repayment of loans to joint ventures - (85) (86) Share of profits after tax 1,787 446 450 At end of period 15,538 13,748 13,751 ------------------------------------- ----------- ----------- ------- Investments in joint ventures are broken down as follows: 31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 ---------------------------------- ----------- ----------- ------- Equity 9,961 8,075 8,452 Loans 5,577 5,673 5,299 15,538 13,748 13,751 ---------------------------------- ----------- ----------- -------
Investments in joint ventures primarily relates to the Group's interest in the partnership capital of Merrion House LLP and loan to Belgravia Living Group Limited. The investment property held within these joint ventures has been externally valued at each reporting date.
9. Investments
Current asset investments
31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 --------------------------------------------------- ----------- ------- At start of the period 3,508 5,871 5,871 Increase/(decrease) in value of investments 429 (1,285) (2,363) At the end of the period 3,937 4,586 3,508 -------------------------------------------- ----- ----------- -------
Current asset investments relate to an equity shareholding in a company listed on the London Stock Exchange. This is stated at market value in the table above and has a historic cost of GBP889,130 (2019: GBP889,130).
Current asset investments are measured at fair value in the consolidated balance sheet and are categorised as level 1 in the fair value hierarchy as defined in IFRS13 as the inputs to the valuation are based on quoted market prices.
The maximum risk exposure at the reporting date is the fair value of the current asset investments.
Non-current asset investments
31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 -------------------------- ----------- ------- Equity investments 1,880 1,120 1,121 Loans 1,535 1,535 1,535 3,415 2,655 2,656 ------------------- ----- ----------- -------
Non-current asset investments primarily relate to an equity shareholding and loans advanced to YourParkingSpace Limited, a privately owned company incorporated in the United Kingdom.
The asset is categorised as level 3 in the fair value hierarchy as defined in IFRS 13 as the inputs to the valuation are based on unobservable inputs.
10. Financial liabilities
31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 ----------------------------------------------- ----------- ------- Current Bank overdraft 15,296 23,547 10,282 Bank borrowings 32,330 - 60,326 Lease liabilities 1,658 1,632 1,658 -------------------------------------- ------- ----------- ------- 49,284 25,179 72,266 -------------------------------------- ------- ----------- ------- Non-Current Bank borrowings 18,387 69,542 19,796 Lease liabilities 28,596 29,859 28,919 5.375% First mortgage debenture stock 99,382 105,871 105,876 146,365 205,272 154,591 -------------------------------------- ------- ----------- ------- 195,649 230,451 226,857 -------------------------------------- ------- ----------- -------
One of the bank facilities has been extended during the period and is now due to expire in 2022. This has therefore been transferred to non-current liabilities.
In November 2020, the Company repurchased GBP6,500,000 of its own debenture stock. The premium associated with this purchase of GBP114,000 has been recognised within Finance Costs.
Bank overdrafts have previously been recognised within Trade and Other Payables. Due to the nature of these liabilities the presentation of overdrawn bank balances has been reviewed and it is considered presentation within Financial Liabilities is more appropriate. The presentation has been amended for each period as set out in the table above.
Fair value of current borrowings
The fair value of bank borrowings and overdrafts approximates to their carrying value.
Fair value of non-current borrowings
31 December 2020 31 December 2019 30 June 2020 ---------------------------- ---------------------- ---------------------- ---------------------- Book value Fair value Book value Fair value Book value Fair value GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ---------------------------- ---------- ---------- ---------- ---------- ---------- ---------- Debenture stock 99,382 115,159 105,871 117,343 105,876 123,578 Non-current bank borrowings 50,717 50,717 69,542 69,542 80,122 80,122 ---------------------------- ---------- ---------- ---------- ---------- ---------- ----------
11. Called up equity share capital
Authorised
164,879,000 (30 June 2020: 164,879,000) ordinary shares of 25p each.
Issued and fully paid Number of Nominal shares value 000 GBP000 --------------------------- --------- ------- At 1 July and 31 December 2020 53,162 13,290 --------------------------- --------- -------
12. Cash flows from operating activities
Six months Six months Year ended ended ended 31 December 31 December 30 June 2020 2019 2020 GBP000 GBP000 GBP000 ----------------------------------------- ----------- ----------- -------- Loss for the period (3,518) (241) (24,162) Adjustments for: Depreciation 847 983 1,920 (Profit)/loss on disposal of investment properties 1,100 (55) (168) Finance costs 4,293 4,493 9,009 Share of joint venture profits after tax (1,787) (446) (450) Movement in revaluation of investment properties 4,096 4,639 26,324 Movement in lease incentives 98 64 279 Reversal of impairment of car parking assets (250) (250) (250) (Increase)/decrease in receivables (1,576) 729 1,097 (Decrease)/increase in payables (974) 41 834 ----------------------------------------- ----------- ----------- -------- Cash generated from operations 2,329 9,957 14,433 ----------------------------------------- ----------- ----------- --------
13. Net asset value per share
Net asset value per share is calculated as the net assets of the Group attributable to shareholders at each balance sheet date, divided by the number of shares in issue at that date.
Six months Six months Year ended ended ended 31 December 31 December 30 June 2020 2019 2020 Net asset value (GBP'000) 151,960 182,205 155,478 ------------------------------------ ------------ ------------ ----------- Number of ordinary shares in issue 53,161,950 53,161,950 53,161,950 ------------------------------------ ------------ ------------ ----------- Net asset value per share (pence) 286p 343p 292p ------------------------------------ ------------ ------------ -----------
14. Related party information
There have been no material changes in the related party transactions described in the 2020 Accounts.
INDEPENT REVIEW REPORT TO TOWN CENTRE SECURITIES PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2020 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and related notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Material uncertainty related to going concern
We draw attention to note 1 of the interim financial statements, which indicates the directors' consideration over going concern, including the potential impact of the current COVID19 outbreak on the Group and its future compliance with debt facility covenants. As stated in note 1, these events or conditions, along with other matters as set out in note 1 indicate that a material uncertainty exists that may cast significant doubt on the Group and Parent Company's ability to continue as a going concern. Our report is not modified in respect of this matter.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, United Kingdom
23 February 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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