Wynnstay Properties PLC Final Results and notice of AGM

RNS Number : 0445S

Wynnstay Properties PLC

12 June 2024

 

 

The information communicated within this announcement is deemed to constitute inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this information is considered to be in the public domain.

 

 

WYNNSTAY PROPERTIES PLC

("Wynnstay" or the "Company")

 

 

AUDITED RESULTS FOR YEAR ENDED 25 MARCH 2024 AND NOTICE OF AGM

12 June 2024

 

 

Wynnstay Properties PLC is pleased to announce the publication of its audited results for the year ended 25 March 2024.

 

The Annual Report and Financial Statements is available on the Company's website www.wynnstayproperties.co.uk and will shortly be posted to those shareholders who have elected to receive documents by post, when a further announcement will be made.

 

This announcement contains three sections from the Annual Report and Financial Statements: Introduction to Wynnstay, Chairman's Statement and Managing Director's Review. It also contains the four Financial Statements contained in the Annual Report and Financial Statements together with the notes to those statements.

 

As stated in the note at the end of this announcement, the financial information set out in the announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. 

 

The Company's Annual General Meeting ("AGM") will be held on Tuesday 16 July 2024. Details of the arrangements for the meeting are set out in the notice of meeting in the Annual Report and Financial Statements.

 

This announcement was approved by the Board on 11 June 2024

 

 

For further information please contact:

 

Wynnstay Properties plc

Philip Collins (Chairman)

020 7554 8766

WH Ireland Limited (Nominated Adviser and Broker):

Chris Hardie, Hugh Morgan, Sarah Mather

020 7220 1666

LEI number is 2138006MASI24JYW5076.

 

For more information on Wynnstay visit: www.wynnstayproperties.co.uk

 

WYNNSTAY PROPERTIES PLC

INTRODUCTION TO WYNNSTAY

 

A distinctive approach to commercial property investment primarily for private investors

 

Wynnstay is an AIM listed property investment and development business. Its principal shareholders are private investors wishing to invest in a portfolio of good quality secondary commercial properties for medium to long-term capital and income growth. The portfolio is currently focused on industrial, including trade counter, units.

 

Strategy

Wynnstay aims to achieve capital appreciation and generate rising dividend income for shareholders from a diversified and resilient commercial property portfolio in Central and Southern England, with diversity and resilience being reflected in the location, number and nature of the properties, and the mix of lease terms, tenants and uses.

 

For location, the focus is on areas where there is strong occupational demand and often limited supply. Modest rents generally provide opportunity for further rental growth over time as rent reviews and new lettings are concluded and high levels of occupancy can be maintained.  While many tenants have been in occupation for a considerable time, voids can be managed and re-lettings achieved successfully. The relatively small lot sizes of our assets also appeal, when marketed for sale, to a wide range of investors.

 

The majority of properties are multi-let, resulting in a number of individual tenancies in most locations, reducing exposure to any single tenant and risk of loss of rental income in the case of defaults and voids.

 

Leases are mainly for terms of five years or more with short-term agreements of two years or less typically avoided, and usually with upward only rent reviews based on market rates. Flexibility in addressing tenant needs and requirements generally mean that the terms agreed result in a mutually beneficial outcome for both parties.

 

Tenants comprise a broad spread of occupiers, also reducing risk exposure: national and local government, international businesses, national trading chains and regional and local businesses. Uses include manufacturing and services; storage and distribution; and trade counter and out-of-town retail.

 

Active direct management and close engagement and constructive business relationships with tenants, together with refurbishment and selective development over time, underpin capital value and increase income.

 

Managed for shareholders

The portfolio is directly, rather than externally, managed. Finance is largely outsourced to an external provider to meet specific needs. All report to the Board, the majority of whom are non-executive directors.

 

Management remuneration comprises salary and, where appropriate, a cash bonus. Wynnstay does not offer incentive schemes, such as share plans, share options or share bonuses.

 

As a result, both management and the Board are focused on Wynnstay's performance for the benefit of shareholders, operational costs are closely controlled, and dilution of shareholders' investment and potential conflicts of interest are minimised.

 

Incremental growth

The portfolio has been built incrementally, with opportunities being taken to dispose of assets as and when the time is appropriate and to reinvest in assets that offer better long-term returns.

 

This is achieved gradually over time, without the need for deal-driven activity in pursuit of corporate or portfolio expansion.

 

Funding

Wynnstay adopts a prudent, pragmatic approach to funding. Investments are funded in part by retained profits and recycling capital receipts from disposals and in part from borrowings, the majority at a fixed rate and held at a modest loan-to-value level, from an experienced and supportive property lender. This provides security at times of uncertainty in debt markets.

 

Valuation

Properties are valued on a cautious basis, based upon professional advice from expert external valuers, recognising that commercial property is a cyclical market that can exhibit significant upward and downward movements and that steadiness and progression over the medium and long-term are most likely to be in shareholders' interests.

 

Wynnstay on AIM

Wynnstay's shares were quoted on its AIM introduction in 1995 at a mid-market price of 150p. On the day prior to the approval of this report, the mid-market price was 675p, an increase of 450%. The dividend paid in 1995 was 4p per share. The dividend paid and proposed for the current year will be 25.5p per share, an increase of nearly 540%.

 

Performance

Wynnstay's distinctive approach has delivered on its strategy over both the medium and long term. Shareholders have benefitted from substantial increases in net asset value per share and dividends as the portfolio and its management have delivered strong results.

 

Corporate Performance over five years

 

Year Ended 25 March		2020		2021		2022		2023		2024
		pence		pence		pence		pence		pence
Net Asset Value per share: Annual		792p		911p		1,090p		1,110p		1,136p
Five Year Net Asset Value: Cumulative Growth	40.8%
Dividends per share, paid and proposed: Annual		15.0p*		21.0p		22.5p		24.0p		25.5p
Five Year Dividend: Cumulative Growth	70.0%*
		%		%		%		%		%
Total Accounting Return†: Annual		0.5%		16.9%		22.0%		3.9%		4.5%
Five Year Total Accounting Return†: Cumulative Growth	54.2%
Loan-to-value ratio		36.5%		29.4%		25.5%		25.3%		24.7%
Operating Costs/Portfolio Value		2.0%		2.5%		1.9%		1.6% ►		1.5% ►
Operating Costs/Income		30.3%		34.8%		32.0%		27.7% ►		24.8% ►
*   No final dividend was paid in 2020 due to the uncertainties arising from the Covid-19 pandemic. Two interim dividends of       7.5p each were paid for the year. †   Total accounting return is calculated by combining movements in net asset value and dividends for the period expressed as a       percentage of the opening net asset value per share. ► Operating costs for 2024 have been adjusted for £27,000 of non-recurring costs relating to new board appointments (2023:     £81,000).
We recognise the importance of a rising income stream for many shareholders and we seek to develop our portfolio so that it can deliver a growing income that can underpin progressive dividend payments to shareholders. We also know that, in addition to rising dividends, shareholders expect appreciation in the capital value of their investment.   Our objective is to achieve a reasonable balance between progressive dividend payments and capital appreciation.   Dividends over the past five years have increased by 70%, albeit from a base affected by the impact of the Covid pandemic. Net asset value per share increased by 41%.   Total accounting return per share combines the movements in dividends and net asset value, and demonstrates to shareholders the overall corporate performance. This measure is reviewed both on an annual basis and cumulatively over a rolling five-year period.   Over the last five years the Company has benefitted from a cumulative total accounting return of 54.2%, reflecting an average annual rate of return of 10.8% per annum over this period.   Another key measure of performance for shareholders in investment businesses is our ability to manage our cost base relative to the value of the portfolio under management and the income generated, both of which support dividend payments to shareholders.   Operating costs relative to portfolio value have been at or below 2% for four of the past five years and this year have been further reduced to a new low of 1.5%. In three of the past five years, operating costs relative to property income have been within the range of 30-35%.  Over the last two years, as a result of the increase in rental income and tight cost control, this figure has reduced to around 25%.   Loan-to-value ratio is an important measure for shareholders in businesses that rely on debt for funding, such as property companies. It demonstrates the ability to balance expansion of the portfolio and the returns that come from using debt to do so with the need to manage risk through prudent external financing. Wynnstay's facilities allow borrowing up to 50% of the value of the assets secured. It is prudent, given the nature of the commercial property market, to adopt an approach that gives us a good margin between our actual borrowing and this facility limit with a range of circa 35-40% being considered appropriate. Wynnstay's loan-to-value ratio has generally been well within this range.   Portfolio Performance over five years
Year ended 25 March			2020		2021		2022		2023		2024
			£'000		£'000		£'000		£'000		£'000
Property Income			2,271		2,438		2,308		2,312*		2,599*
Rental Income			2,271		2,140		2,252		2,304		2,541
Underlying†   Five Year Rental Income: Cumulative Growth	18.9%		1,906								2,267
Portfolio Value			34,260		34,005		38,975		39,320		43,915
Underlying† Five Year Portfolio Value: Cumulative Growth	27.8%		28,180								36,015
			%		%		%		%		%
Occupancy at year-end			94%		99%		100%		100%		99%
Rent Collection for year			100%		99%►		100%		100%♦		100%
Passing Rent to Estimated Rental Value			87.8%		92.5%		88.1%		92.4%		90.2%
			years		years		years		years		years
Weighted average unexpired lease term: -       to lease break -       to lease expiry			3.6 4.8		2.8 4.5		3.0 4.4		3.1 4.4		2.9 4.1
*       Includes for 2024 £58,000 of Other Property Income (2023: £8,000). See note 2 of the Financial Statements. †     Underlying Rental Income and Portfolio Value are for properties that have been held in the portfolio throughout the five year period.   ►   Excludes rent concessions of £29,000 granted to tenants as a result of the Covid-19 pandemic. ♦    After rounding for £8,000 bad debt (0.3%).

 

In assessing the performance of the portfolio, several key measures are used.

 

In addition to the overall property income and portfolio value, underlying growth in both property income and value from those properties held in the portfolio throughout the previous five years are assessed.

 

Like-for-like underlying rental income and portfolio value growth demonstrate the ability to acquire and retain properties that are attractive to existing and new tenants, to manage them well and to grow average rents over time thus increasing income and capital value.

 

On this analysis, the core portfolio has performed very well over five years, delivering rental income growth of 18.9% and portfolio value growth of 27.8%.

 

Occupancy and rent collections are also key performance measures for the portfolio. Occupancy demonstrates the ability to retain tenants at renewal and to let vacant premises when tenants do not renew which, in turn, underpin rental income and shareholders' dividends as well as capital value. Ensuring that rents are collected is essential to ensure that the portfolio delivers the best results for shareholders and shareholders' dividends are protected.  Wynnstay's excellent record of rental collections and occupancy has been maintained at or very close to 100% over the past five years.

 

The weighted average unexpired lease term of the portfolio as a whole provides guidance on the anticipated continuity of rental income in future years. Most leases are for five years and some (but not all) longer leases, such as for ten years, may contain a break clause after five years. Typically, over the past five years, our weighted average unexpired lease term has been between 2.8 and 3.6 years to lease break and between 4.1 and 4.8 years to lease expiry.

 

Our passing (i.e. current) rental income relative to the estimated rental value for the portfolio used by our valuers in the annual valuation gives an indication of the potential additional income that may be realisable, depending on market conditions, when rent reviews fall due or when properties become vacant and are offered for reletting. Over the past five years, this has typically demonstrated a % reversionary income potential in the range of 8% to 12%.

 

Share Price Performance

Wynnstay is quoted on AIM, and therefore is not a constituent of the FTSE 350 Real Estate Investment Trusts Index, which contains a good cross-section of quoted property companies of various forms, all much larger than Wynnstay. Wynnstay's share price relative to the FTSE 350 Real Estate Investment Trusts Index is shown in the chart below. Wynnstay's share price has substantially outperformed the index over the ten-year period.

 

 

Source: W H Ireland Limited

 

Wynnstay's share price has also substantially outperformed the market indices for the leading AIM companies and for other much larger companies within the main market in the FTSE-350 index as shown in the chart below.

 

Source: W H Ireland Limited

 

WYNNSTAY PROPERTIES PLC

 

CHAIRMAN'S STATEMENT

 

I am pleased to report to shareholders on another active year at Wynnstay during which we have made significant changes in the portfolio, with three acquisitions and one disposal, and have completed our Board succession plans by welcoming our new Managing Director, Chris Betts, and our two new non-executive directors, Hugh Ford and Ross Owen.

 

This has been a successful year for Wynnstay's financial performance and thus for you as shareholders who have seen further increases in net asset value and in dividends and thus in total accounting return.

 

Wynnstay's overall financial performance in the financial year, compared to the prior year, is summarised in the following overview table.  The table should be read in conjunction with the following commentary and the financial statements.

 

Overview of Financial Performance:  2024 vs. 2023

	% Change	2024	2023
• Rental Income   Annual*   Underlying*	10.3% 3.0%	£2,541,000 £2,340,000	£2,304,000 £2,272,000
• Net Property Income (adjusted) †	15.2%	£1,817,000	£1,578,000
• Operating Income   Before fair value adjustment   After fair value adjustment	38.4% 12.3%	£2,072,000 £2,069,000	£1,497,000 £1,842,000
• Earnings per share (weighted average)	19.2%	50.3p	42.2p
• Dividends per share, paid and proposed	6.3%	25.5p	24.0p
• Net asset value per share	2.3%	1,136p	1,110p
• Loan to value ratio		24.7%	25.3%
• Total Accounting Return for the year►		4.5%	3.9%

 

*   Annual Rental Income is shown in note 2 of the Financial Statements and Underlying Rental Income is the like-for-like income from properties held in the portfolio throughout both years.

^†     Excludes £27,000 of non-recurring costs incurred in 2024 (2023: £81,000) relating to new Board appointments.

^►  Total accounting return is calculated by combining movements in net asset value and dividends for the period expressed as a percentage
      of the opening net asset value per share.

 

Commentary on Financial Performance in 2024

Rental income for the financial year increased by 10.3% compared to the previous year to £2,541,000 (2023: £2,304,000).  This increase reflects the acquisition early in the year of Riverdale Industrial Estate, Tonbridge and, towards the end of the year, of units at Wildmere Industrial Estate in Banbury and at the IO Centre in Stevenage, as well as the outcome of several successful rent reviews and new lettings within the existing portfolio.

 

Other property income of £58,000 (2023: £8,000) comprised a dilapidations settlement with the outgoing tenant at our Hertford property, which we sold during the year, and service charge related management fees.

 

Net property income rose to £1,790,000 (2023: £1,497,000) reflecting the higher property income noted above and the overall property costs of £138,000 (2023: £96,000) and administrative costs of £671,000 (2023: £719,000) in the financial year compared to the prior year in which significant management succession costs were incurred.

 

 

Operating income benefitted from the sale of the Hertford property which realised a net profit after costs of £282,000 (2023: nil) and after the fair value adjustment arising from the annual revaluation, was £2,069,000 (2023: £1,842,000).

Earnings per share rose by 19.2% to 50.3p per share.

 

As a result of the fair value adjustment arising from the valuation, to which I refer below, the profit on disposal of Hertford and the positive income generation in the business, the net asset value per share rose by 2.3% to 1,136p per share (2023: 1,110p).

 

The Board considers the outcome of the financial year to be very satisfactory.

 

Managing Director's Review

Our Managing Director, Chris Betts, has prepared a separate review which follows this statement. This provides detail on the transactions mentioned above, management activity in the portfolio over the year, succession and operational changes introduced in the management of the business. 

 

Valuation

Our Independent Valuers, BNP Paribas Real Estate, undertook the annual revaluation as at 25 March 2024 valuing the Company's portfolio at £43,915,000 (2023: £39,320,000). This represents a 11.7% increase of £4,595,000 on the valuation as at 25 March 2023 and primarily reflects the transactions in the year already mentioned above as well as the benefits of the active management of the portfolio reported in the Managing Director's Review.

 

The annual valuation is undertaken under accounting standards for use in our financial statements in accordance with RICS Global Standards and values each property as a separate asset on the basis of a sale of that property in the open market. Therefore, the valuation does not take account of any additional value that might be realised if the portfolio were to be offered on the open market or any other special factors that may be relevant in the case of individual potential purchasers, such as sales to other property investors, existing tenants or adjoining owners.

 

Finance, Borrowings and Gearing

Wynnstay remains in a strong financial position, with a low loan-to-value ratio under our secured facilities of 24.7 % (2023: 25.3%).

 

At the year-end, we held cash of £0.4 million (2023: £3.3 million) and our borrowings were £10.843 million (2023: £9.951 million). The reduction in cash held and the increase in our borrowing compared to the prior year resulted from the acquisitions mentioned above. We drew down £950,000 under our revolving credit facility to fund in the short-term part of the acquisition costs.

 

The interest rate under our fixed term facility is fixed at 3.61% until December 2026. In addition to our available cash balance and positive cash flow from our property activities, just over £4 million of our £5m revolving credit facility remained undrawn at the year-end.

 

Dividend

Over recent years we have sought to pursue a progressive dividend policy that aims to provide shareholders with a rising income commensurate with Wynnstay's underlying growth and finances.

 

In the light of the satisfactory results for the year, the Board recommends a final dividend of 16.0p per share (2023:

15.0p). An interim dividend of 9.5p per share (2023: 9.0p) was paid in December 2023. Hence, the total dividend for this year of 25.5p per share (2023: 24.0p) represents an increase of 6.3% on the prior year.

 

Over the past five years, dividends have increased by 70.0% from 15.0p to 25.5p, although it should be noted that the level of dividend paid in 2020 was affected by the uncertainty resulting from the outbreak of the Covid-19 pandemic.

 

Subject to shareholder approval, the final dividend will be paid on 26 July 2024 to shareholders on the register at the close of business on 21 June 2024.

 

Wynnstay's Financial Performance in the longer-term

In the Annual Report two years ago, we introduced a new section, entitled Introduction to Wynnstay. This describes Wynnstay's distinctive approach to commercial property investment primarily for private shareholders and provides information both on the Company's performance and its share price performance over time.

 

The section has been retained and further updated in this report to provide additional information on the Company's performance. It highlights Wynnstay's continued strength over time across a range of measures. It has also been expanded to explain the principal measures that we use in assessing the performance of the Company and the portfolio. 

 

I encourage all shareholders to read this explanation of Wynnstay's rationale and performance on pages 5 to 9 of this report.

 

Key points to which I would draw shareholders attention are illustrated on Page 6 of this report. Wynnstay has delivered cumulative growth over five years in total accounting return (net asset value and dividends) of 54.2% and Wynnstay's share price has substantially outperformed established market indices.  In managing the portfolio, we have achieved substantial underlying growth in rental income and portfolio value and maintained a consistent record of full occupancy and rent collections.

 

The Board

I am pleased to report that our two new Non-executive Directors, Hugh Ford and Ross Owen, have settled in well and have made valuable contributions to our Board discussions.

 

We were delighted to welcome Chris Betts to the Board in September.  He established himself quickly and actively in his new role on which he reports in his Managing Director's Review.

 

Shareholder Matters

I have reported in recent years on the liquidity and marketability of Wynnstay shares.

 

Wynnstay has a small, and rather unusual, share register on which there are under 250 accounts, a significant number of which are connected through family relationships, with private investors rather than funds or institutions as shareholders. In the main, they are long-term investors with some holdings having passed from generation to generation since the company was founded in 1886. These long-term investors provide stability and continuity within

the shareholder base.

 

As a result of this relatively small shareholder base the volume and proportion of Wynnstay shares traded in the market is less than for many quoted companies with larger share registers and more dispersed holdings. Fewer Wynnstay shares tend to be available to trade and then only usually in modest quantities and with a sizeable "spread" between the bid and offer price. Shares are typically traded at a significant discount to the net asset value per share. However, both these features are also seen in other, much larger, quoted property companies. As already noted above, Wynnstay's share price has continued substantially to outperform the comparative real estate sector.

 

At the Annual General Meeting in 2022, shareholders gave Wynnstay authority to purchase its own shares so that the Company can act as a purchaser in the market where it is appropriate, and in the interests of shareholders generally, to do so. Other quoted property and investment companies, as well as other quoted companies, use share buybacks on a routine basis to enhance earnings and net asset value per share. Where shares are bought back dividends cease to be payable, thus conserving cash in the business and benefitting continuing shareholders and with the present intention being to hold any shares bought back in treasury so that they are available for reissue where there is market demand for shares or to facilitate individual property acquisitions.

 

The volume of shares traded in the past two years has been relatively small and the market has generally been able to absorb most of the shares offered. The authority has so far been used once, to acquire 15,000 Ordinary Shares at 710p in September 2022. The Board keeps the position under review and may exercise the authority when shares are available in the market and it is in the interests of shareholders generally to do so.

 

We also consider that Wynnstay's future development would be assisted if authority continued to be granted by shareholders, as has been the case for many years, to issue a limited number of shares without first offering them to existing shareholders. This gives Wynnstay flexibility, for instance, to issue shares for small fundraisings which might support a larger acquisition and allow the issue of shares as part consideration on individual property acquisitions to vendors, where the vendors wish to retain an interest in a broader portfolio of assets in a quoted company. Bringing in new investors with an interest in commercial property and in Wynnstay's distinctive approach to the share register would broaden the shareholder base and support its future development.

 

Outlook

At this time last year, I noted that the UK had entered a further period of uncertainty as a result of external international events, changes in government administration, inflation levels not seen for forty years and rapid successive increases in interest rates.

 

This uncertainty continued throughout the past year with recent events in the Middle East and the continued war in Ukraine affecting trade and the economic climate in many countries and, in the UK as well as other countries, forthcoming elections taking place in 2024.  However, inflation in the UK has fallen from the very high levels seen in mid 2023, real earnings are increasing and the employment data remains strong.  While forecasts show little growth in the economy and continuing concerns about the level of public debt and the impacts of high taxation, the prospects of serious recession appear to have receded. Over recent months interest rates which, at one point, were forecast to reach 7% are now forecast to fall gradually over the next year to eighteen months.

 

Despite these uncertainties, Wynnstay's business has prospered. We are confident that our focused, stable and well-let portfolio can continue to deliver growth of capital and income for shareholders in the medium and long-term. The main risks to continued growth are economic and political, such as significant disruption caused by events beyond our control or the UK economy suffering a significant downturn, whether resulting from our own circumstances in the UK or international events, or domestic political upheaval any of which can affect the ability or willingness of businesses to invest or of consumers to spend.

 

The commercial property market is very sensitive to changes in the economic outlook and, in particular, to interest rates.  This can result in strong, sometimes extreme, swings in both optimism and pessimism, which can affect asset values and market sentiment towards quoted property investments. Wynnstay has always adopted a cautious and realistic approach in managing and developing our portfolio and in valuing our assets. This has served shareholders well over a long period of time.

 

Despite the uncertainties in the UK and elsewhere, the Board remains optimistic about the future of Wynnstay's business.

 

Colleagues and Advisers

Our Managing Director, Chris Betts, and our finance and company secretarial colleagues have continued to work effectively to deliver for shareholders. I would like to thank them, as well as my colleagues on the Board and our professional advisers, for their support over the year.

 

Shareholding Enquiries

From time to time we receive enquiries from shareholders with questions about their shareholdings or about buying or selling Wynnstay shares or transferring them, typically to relatives.

 

All enquiries about shareholdings, including changes of address and bank details and about such transfers of shares, should be directed to our Registrars, Link Group, whose details are on page 2.

 

As regards buying or selling shares, this can be carried out by registering the holding online with our Registrars, Link Group, via their secure share portal www.signalshares.com, which also enables shareholdings to be managed quickly and easily. Shares can, of course, also be bought and sold in the usual way through a stockbroker or an online platform.

 

Annual General Meeting

The AGM provides an important and valued opportunity for the Board to engage with shareholders.

 

Our AGM this year will be held at 2.30pm on Tuesday 16 July 2024 at the Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS. The Notice of Meeting is to be found at the end of this Annual Report.

 

I urge all shareholders to complete and return their proxy forms so that their votes on the resolutions being put to the meeting can be counted.

 

Shareholders who have registered for Link services online can also benefit from the ability to cast their proxy votes electronically, rather than by post. Shareholders not already registered for Link services online will need their investor code, which can be found on their share certificate or dividend tax voucher, in order to register.

 

To maximise shareholder engagement, shareholders who are unable to attend the AGM are encouraged to submit in

writing those questions that they might have wished to ask in person at the meeting. Questions should be emailed to [e-mail] at least 48 hours in advance of the AGM. You will receive a written response and, if there are common themes raised by a number of shareholders, we aim to provide a summary for all shareholders, grouping themes and topics together where appropriate, on the Company's website following the AGM.

 

Finally, on behalf of the Board, I would like to thank all shareholders, whether they have held shares for many years or have recently acquired shares, for their interest in and support for Wynnstay.

 

Philip Collins

Chairman

11 June 2024

 

WYNNSTAY PROPERTIES PLC

 

MANAGING DIRECTOR'S REVIEW

I am pleased to make my first annual report to shareholders as Managing Director on Wynnstay's operational activity. The past year has seen changes both to the composition of the Company's portfolio and Board but the underlying approach and focus on the delivery of attractive shareholder returns remains.

Portfolio Composition

In addition to the previously reported purchase of Riverdale Industrial Estate, Tonbridge for £2.35 million in May 2023, two further properties were purchased in January 2024 as a package at a combined price of £2.525 million.

The larger property comprises a pair of trade-counter warehouse units totaling 13,140 sq ft on the Wildmere Industrial Estate in Banbury.  These are let to a national and a regional trade counter business and currently produce a total annual rent of £103,425.  The net initial yield from the investment is 6%, which on current market rental evidence is anticipated to rise to around 7% after a lease renewal or reletting in 2025 and a rent review in 2026.

The second property is located on the iO Centre, off Gunnels Wood Road in Stevenage.  It is a 999-year leasehold interest in a mid-terrace trade-counter warehouse unit of 5,750 sq ft that is let to a national trade counter business.  The current rent of £57,530 per annum provides a net initial yield of 6%, which is anticipated to rise to 7.2% on lease renewal or reletting in 2026.

Both properties are in well-established and highly accessible industrial warehouse locations.  They are the same sort of relatively small and flexible units that comprise most Wynnstay properties and which are attractive to a wide range of businesses.  In many locations in central and southern England, the overall stock of such property is not rising in line with demand and in many cases is being diminished, which increases the scope for rental growth.  These acquisitions complement the geographic spread of the portfolio.

As reported in our Interim Statement, the Hertford property was sold with vacant possession in October 2023 for £910,000 generating a profit after tax and costs over the investment value as at March 2023 of £282,000.  The buyer is a regional motor trade business, and their offer reflected the scarcity of opportunities for owner-occupiers. This opportunistic sale represents the culmination of the gradual divestment from a once-larger historic Wynnstay holding of older, less flexible buildings which have more limited market appeal.  In this case, we were also able to secure a substantial dilapidations settlement from the former tenant.

As a result of these transactions, the portfolio now comprises 84 leasing units in 17 geographic locations.

Portfolio Activity

The number of lease events over the year is only a little down on that of the previous 12 months. There have been four completed rent reviews including three outstanding from 2022 to the same tenant at Tonbridge that were concluded at a rate confirming the market rental anticipated on acquisition.

Three leases were renewed with current tenants. The most notable was a large unit at Aylesford, where the rent increased by a third and was significantly ahead of the market rent assumed in the March 2023 valuation. The other two renewals were at Heathfield. At Aylesford, we were also able to take advantage of a previous tenant's desire to assign their lease to secure a more valuable longer-term new letting.

We have achieved four other new lettings to replace tenants who have vacated. All were at rents noticeably in excess of the estimated rental value used by the valuers in the March 2023 valuation. 

Following the retirement of a tenant at Uckfield, we were able to quickly agree terms for a new open market letting which completed in August 2023. The lease of a unit in Hailsham was forfeited in May 2023 in the face of mounting rent arrears, which we have subsequently recovered in full. Remarketing brought several expressions of interest, and a new lease was completed in December. Securing the letting required expenditure on an updated planning permission for use of the premises and repair and redecoration of the roof and elevations.

At Liphook a tenant opted not to renew their lease in December and a new letting was completed in March 2024 with additional rental income from the mezzanine floor installed by a former tenant. Two tenants at Aylesford exercised break clauses during the year. In one case it was possible to complete a new letting immediately after the break date so that a void did not occur. The other unit remained vacant at year-end although an acceptable offer had been received and the letting has since been completed.

 

Consequently, the vacancy rate across the portfolio at year-end was extremely low representing approximately 0.75% both by floor area and market rent.

In a similar vein, rental collection has been very strong with only three instances in the year of rent remaining outstanding 30 days after the due date. In all cases the arrears have been received with the result that there were no bad debts.

Property Valuation

Over most of the year the commercial property market reflected caution and some trading difficulties for many businesses alongside continued high interest rates that have impacted negatively on valuations. The final quarter saw some market stabilisation and improved optimism, especially regarding the interest rate environment. Nonetheless, a weaker investment market overall has resulted in a softening of valuation yields compared to last year of approximately 25bp across the portfolio.

However, the impact of this yield shift on the valuation was more than offset by rental growth in our portfolio and our active asset management. Wynnstay's like-for-like rental income increased by 3.0% and the current estimated rental value used by our valuers increased by 5.5% over the year. This reflects the strength of the industrial sector as a whole and the benefit of Wynnstay's diverse and well-let portfolio in that sector. As a result, on a like-for-like basis, the portfolio value rose by 0.5% to £38,915,000 and, with the three properties acquired during the year, the total value of the portfolio rose to £43,915,000 (2023: £39,320,000).

Management

As described in my Interim Report, an eight-week handover period with Paul Williams last summer enabled a smooth succession as I was able to familiarise myself with the portfolio, historical background, current issues and management processes.  There was ample opportunity for him to pass on his intimate knowledge acquired over a long period of time.  The result was confidence that Wynnstay would maintain business as usual following my appointment in September.

One particular theme that I have been able to follow up is the implementation of a property management system to complement the new accounting software introduced at the beginning of 2023. This was set-up with the software supplier over the winter and went live at the start of the new financial year. The system integrates with the accounting software and operates in real time, enabling efficient monitoring and availability of data regarding invoicing, rent collection and lease events.  Risk is mitigated both in terms of mistakes, but also business continuity.

We have also purchased valuation software that will enable direct prospective performance analysis of the portfolio and its constituent properties and testing of different scenarios for changed tenancies, capital expenditure, sales and purchases and so on.  The package will also enable direct valuation and analysis of prospective purchases alongside advice that may be received from professional advisors.

Future

Last year's Report outlined the impact of the Minimum Energy Efficiency Standards legislation. Whilst there is currently some uncertainty over the timetable for minimum EPC ratings for properties, there is no doubt that improvements will continue to be required.  We are continually monitoring the opportunities to carry these out, ideally in conjunction with our tenants.  Often these can be changes to heating and lighting equipment that are of modest cost. However, increasingly, we may need to look at the insulation of the building fabric alongside energy generators such as PV panels.

 

Such considerations run parallel to assessment of the need to maintain, refurbish and upgrade our buildings generally, especially where this will result in increased rental income and enhance capital value. This forms part of our renewed focus on assessing the performance potential of the portfolio following my appointment. My initial review of the portfolio has been favourable for the reasons outlined elsewhere in this report, but further disposals may be identified as we consider whether capital may be better employed in alternative investments, improving existing assets or pursuing development opportunities within the portfolio.

 

Chris Betts

Managing Director

11 June 2024

 

 

WYNNSTAY PROPERTIES PLC

STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED 25 MARCH 2024

 

 

 

 

	Notes	2024	2023
		£'000	£'000
Property Income	2	2,599	2,312
Property Costs	3	(138)	(96)
Administrative Costs	4	(671)	(719)
Net Property Income		1,790	1,497
Movement in Fair Value of Investment Properties	10	(3)	345
Profit on Sale of Investment Property		282	-
Operating Income		2,069	1,842
Investment Income	6	29	27
Finance Costs	6	(455)	(439)
Income before Taxation		1,643	1,430
Taxation	7	(287)	(288)
Profit after Taxation and Total Comprehensive Income		1,356	1,142
Basic and diluted earnings per share	9	50.3p	42.2p

 

 

The Company has no items of other comprehensive income.

WYNNSTAY PROPERTIES PLC

 

STATEMENT OF FINANCIAL POSITION 25 MARCH 2024

 

 

 

 

		2024	2023
	Notes	£'000	£'000
Non-Current Assets
Investment Properties	10	43,915	39,320
Investments	12	3	3
		43,918	39,323
Current Assets
Trade and other receivables	14	413	482
Cash and Cash Equivalents		397	3,268
		810	3,750
Current Liabilities
Trade and other payables	15	(828)	(843) )
Income Taxes Payable		(347)	(307)
		(1,175)	(1,150)
Net Current (Liabilities) / Assets		(365)	2,600
Total Assets Less Current Liabilities		43,553	41,923
Non-Current Liabilities
Bank Loans Payable	16	(10,843)	(9,951)
Deferred Tax Payable	17	(2,083)	(2,034)
		(12,926)	(11,985)
Net Assets		30,627	29,938
Capital and Reserves
Share Capital	18	789	789
Capital Redemption Reserve		205	205
Share Premium Account		1,135	1,135
Treasury Shares		(1,732)	(1,732)
Retained Earnings		30,230	29,541
		30,627	29,938
Net Asset Value pence per share		1,136p	1,110p

 

Approved by the Board and authorised for issue on 11 June 2024

 

P.G.H. Collins                                                      C.G. Betts

Director                                                                Director

Registered number: 00022473

WYNNSTAY PROPERTIES PLC

 

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 25 MARCH 2024

 

 

 

 

	2024	2023
	£'000	£'000
Cash flows from operating activities
Income before taxation	1,643	1,430
Adjusted for:
Decrease/(increase) in fair value of investment properties	3	(345)
Interest receivable	(29)	(27)
Interest and finance costs payable	455	439
Profit on sale of investment property	(282)	-
Amortised loan fees	15	13
Revaluation movement	--	33
Changes in:
Decrease/(increase) in trade and other receivables	69	(181)
Increase/(decrease) in trade and other payables	25	(181)
Cash generated from operations	1,899	1,181
Income taxes paid	(238)	(206)
Net cash generated from operating activities	1,661	975
Cash flows from investing activities
Interest and other income received	29	27
Purchase of investment properties	(5,213)	-
Sale of investment property	891	-
Net cash generated from investing activities	(4,293)	27
Cash flows from financing activities
Interest paid	(457)	(439)
Dividends paid	(661)	(622)
Repurchase of shares into treasury	-	(164)
Drawdown of bank loans net of fees	879	-
Net cash used in financing activities	(239)	(1,225)
(Decrease) in cash and cash equivalents	(2,871)	(223)
Cash and cash equivalents at beginning of period	3,268	3,491
Cash and cash equivalents at end of period	397	3,268

 

WYNNSTAY PROPERTIES PLC

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 25 MARCH 2024

 

 

 

YEAR ENDED 25 MARCH 2024
	Share Capital	Capital Redemption Reserve	Share Premium Account	Treasury Shares	Retained Earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 26 March 2023	789	205	1,135	(1,732)	29,541	29,938
Total comprehensive income for the year	-	-	-	-	1,356	1,356
Revaluation movement	-	-	-	-	(6)	(6)
Dividends - note 8	-	-	-	-	(661)	(661)
Balance at 25 March 2024	789	205	1,135	(1,732)	30,230	30,627
YEAR ENDED 25 MARCH 2023
	Share Capital	Capital Redemption Reserve	Share Premium Account	Treasury Shares	Retained Earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 26 March 2022	789	205	1,135	(1,570)	28,988	29,547
Total comprehensive income for the year	-	-	-	-	1,142	1,142
Treasury Share repurchases	-	-	-	(162)	-	(162)
Revaluation movement	-	-	-	-	33	33
Dividends - note 8	-	-	-	-	(622)	(622)
Balance at 25 March 2023	789	205	1,135	(1,732)	29,541	29,938

 

 

FUNDS AVAILABLE FOR DISTRIBUTION
	2024	2023
	£'000	£'000
Retained Earnings	30,230	29,541
Less: Cumulative Unrealised Fair Value          Adjustment of Property Investments net of tax	(12,917)	(13,376)
Treasury Shares	(1,732)	(1,732)
Distributable Reserves	15,581	14,433

 

 

WYNNSTAY PROPERTIES PLC

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 25 MARCH 2024

 

 

 

Explanation of Capital and Reserves:

·    Share Capital: This represents the subscription, at par value, of the Ordinary Shares of the Company.

·    Capital Redemption Reserve: This represents money that the Company must retain when it has bought back shares, and which it cannot pay to shareholders as dividends: It is a non-distributable reserve and represents paid up share capital.

·    Share Premium Account: This represents the subscription monies paid for Ordinary Shares of the Company in excess of their par value.

·    Treasury Shares: This represents the total consideration and costs paid by the Company when purchasing the 458,650 shares as referred to in Note 18.

·    Retained Earnings: This represents the profits after tax that can be used to pay dividends. However, dividends can only be paid from distributable deserves as detailed in the preceding table.

 

WYNNSTAY PROPERTIES PLC

NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED 25 MARCH 2024

 

1.        BASIS OF PREPARATION, MATERIAL ACCOUNTING POLICIES AND ESTIMATES

 

Wynnstay Properties PLC is a public limited company incorporated and domiciled in England and Wales. The principal activity of the Company is property investment, development and management. The Company's ordinary shares are traded on the AIM, part of The London Stock Exchange.  The Company's registered number is 00022473 and registered address is Hamilton House, Mabledon Place, London WC1H 9BB. The material accounting policies are summarised below.

 

1.1       Basis of Preparation

The financial statements have been prepared in accordance with UK adopted International Accounting Standards ("IAS"). The financial statements have been presented in Pounds Sterling being the functional currency of the Company and rounded to the nearest thousand. The financial statements have been prepared under the historical cost basis modified for the revaluation of investment properties and financial assets measured at fair value through Operating Income.

 

(a) New Interpretations and Revised Standards Effective for the year ended 25 March 2024

The Directors have adopted all new and revised standards and interpretations issued by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB and adopted by applicable law that are relevant to the operations and effective for accounting periods beginning on or after 26 March 2023:

 

·    IAS 12 Income taxes: Deferred tax related to assets and liabilities arising from a single transaction

·    IAS 12 Income taxes: temporary recognition exception to accounting for deferred taxes arising from the implementation of the international tax reform (Pillar Two Model Rules)

·    IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of accounting estimates

·    IAS 1 Presentation of Financial Statements: Disclosure initiative - accounting policies

 

The adoption of these interpretations and revised standards had no material impact on the disclosures and presentation of the financial statements.

 

(b) Standards and Interpretations in Issue but not yet Effective

The International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC") have issued the below revisions to existing standards or new interpretations or new standards with an effective date of implementation after the period of these financial statements.

 

The following new amendments applicable in future periods have been adopted early:

 

·    IAS 1 Presentation of Financial Statements: Classification of Liabilities

·    IAS 1 Presentation of Financial Statements: Non-current liabilities with Covenants

 

The Company has early adopted amendments to IAS 1, "Presentation of Financial Statement," issued by the International Accounting Standards Board (IASB) in 2020. These amendments, effective for annual periods beginning on or after 1 January 2024, clarify the classification of certain liabilities as current and non-current.

 

While not yet mandatory for our current financial statements, early adoption allows us to improve the disclosure of our financial liabilities underlying terms. This early adoption has changed the classification of the Company's Revolving Credit Facilities based on revised criteria for deferral rights. The Revolving Credit Facility is secured on property assets and is committed until 16 December 2026. The quantified impact of the new classification of the financial statements, particularly the current and non-current liabilities breakdown has been disclosed in Note 16.

 

 

The following new amendments applicable in future periods have not been adopted early as they are not expected to have a significant impact on the financial statements of the Company:

 

·    IFRS 16 Leases: Lease liability in a sale and leaseback

·    IFRS 18 Presentation and disclosure in financial statements

·    IFRS 19 Subsidiaries without public accountability

 

(c) Going concern

The financial statements have been prepared on a going concern basis. This requires the Directors to consider, as at the date of approving the financial statements, that there is reasonable expectation that the Company has adequate financial resources to continue to operate, and to meet its liabilities as they fall due for payment, for at least twelve months following the approval of the financial statements.

 

The Directors have reviewed cash balances and borrowing facilities to cover at least twelve months of operations, including financing costs and continuation of employment and advisory costs as currently contracted without any reduction for cost saving initiatives. The results of the review show that the Company has cash and borrowing facilities to cover at least twelve months of operations, and that the Company will satisfy the financial covenant ratios in the borrowing facilities as described in Note 16. In addition, the Statement of Financial Position as at 25 March 2024 shows that the Company had a cash balance of £0.4m (2023: £3,268), an undrawn Revolving Credit Facility availability of £4.1m (2023: £5.0m), net assets of £30.6m (2023: £29.9m), and a gearing ratio of 34% (2023: 22%). The Revolving Credit Facility expires on 16 December 2026. In the light of the foregoing considerations, the Directors consider that the adoption of the going concern basis is reasonable and appropriate.

 

1.2       Accounting Policies

 

Investment Properties

All the Company's investment properties are independently revalued annually and stated at fair value as at 25 March. The aggregate of any resulting increases or decreases are taken to operating income within the Statement of Comprehensive Income. The basis of independent valuation is described in Note 10.

 

Investment properties are recognised as acquisitions or disposals based on the date of contract completion.

 

Depreciation

In accordance with IAS 40 investment properties are included in the Statement of Financial Position at fair value and are not depreciated.

 

Disposal of Investments

The gains and losses on the disposal of investment properties and other investments are included in Operating Income in the year of disposal. Gains and losses are calculated on the net difference between the carrying value of the properties and the net proceeds from their disposal.

 

            Property Income

Property income is recognised on a straight-line basis over the period of the lease and is measured at the fair value of the consideration receivable. Lease deposits are held in separate designated deposit accounts and are thus not treated as assets of the Company in the financial statements. All income is derived in the United Kingdom. When there are changes to a tenancy agreement it is considered whether any lease incentives were given. Lease incentives are amortised over the lease term.

 

Deferred Income

Deferred Income arises from rents received in advance of the period. See note 15.

 

Taxation

Current and deferred tax are recognised and measured in accordance with IAS 12.  The Company provides for deferred tax on investment properties by reference to the tax that would be due on the sale of the investment properties.

 

Trade and Other Accounts Receivable

All receivables do not carry any interest and are short term in nature.

 

Cash and Cash Equivalents

Cash and cash equivalents comprise cash at bank and on demand deposits.

 

Trade and Other Accounts Payable

All trade and other accounts payable are non-interest bearing.

 

Pensions

Pension contributions are charged to the Statement of Comprehensive Income as incurred. The pension scheme is a defined contribution scheme.

 

Borrowings

Borrowings are classified as current liabilities unless the Company has a right to defer settlement of the liability at the end of the reporting period for at least 12 months.

 

Dilapidations

Dilapidations receipts are recognised in the Statement of Comprehensive Income when the right to receive them arises. They are recorded in revenue as other property income unless a property has been agreed to be sold whereby the receipt is treated as part of the proceeds of sale of the property. See Note 2.

 

1.3       Key Sources of Estimation Uncertainty and Judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses.

  

Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period. The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are those relating to the fair value of investment properties which are revalued annually by the Directors having taken advice from the Company's independent external valuers, on the basis described in Note 10. A key judgement taken by the Directors is as to whether a property is being held for sale.

 

There are no other judgemental areas identified by management that could have a material effect on the financial statements at the reporting date.

 

 

2.    PROPERTY INCOME	2024	2023
	£'000	£'000
Rental income	2,541	2,304
Other property income	58	8
	2,599	2,312
Rental income comprises rents earned and apportioned over the lease period taking into account rent free periods and rents received during the period. Other property income comprises received dilapidations and miscellaneous income arising from the letting of properties.

 

 

3.    PROPERTY COSTS	2024	2023
	£'000	£'000
Empty rates	2	2
Property management	48	33
	50	35
Legal fees	50	40
Agent fees	38	21
	138	96
4.    ADMINISTRATIVE COSTS	2024	2023
	£'000	£'000
Rents payable - short term lease	2	6
General administration, including staff costs	584	582
Auditors' remuneration - audit fees CLA Evelyn Partners Limited	45	41
Tax services - Saffrey LLP Gleeds Advisory Limited	13	9
Non-Recurring costs - costs relating to new Board appointments	27	81
	671	719
5.    STAFF COSTS	2024	2023
	£'000	£'000
Staff costs, including Directors' fees, during the year were as follows:
Wages and salaries	297	270
Social security costs	28	36
Other pension costs	51	49
	376	355
Further details of Directors' emoluments, totalling £341,000 (2023: £319,000), are shown under Directors' Emoluments in the Directors' Report and form part of these Financial Statements. There are no other key management personnel.
	2024	2023
	No.	No.
The average number of employees, including Non-Executive Directors, engaged wholly in management and administration was:	6	5
The number of Directors for whom the Company paid pension benefits during the year was:	2	1

 

 

 

 

6.    FINANCE COSTS (NET)	2024	2023
	£'000	£'000
Interest payable and finance costs on bank loans	455	439
Less: Bank interest receivable	29	27
	426	412

 

7.    TAXATION	2024	2023
	£'000	£'000
(a) Analysis of the tax charge for the year:
UK Corporation tax at 25% (2023: 19%)
Total current tax charge	238	206
Deferred tax - temporary differences	49	82
Tax charge for the year	287	288
(b) Factors affecting the tax charge for the year:
Net Income before taxation	1,643	1,430
Current Year:
Corporation tax thereon at 25% (2023: 19%)	411	272
Corporation tax adjustment for unrealised property value losses	1	(65)
Capital gains net tax movement on disposals	52	-
Capital allowances net tax movement on acquisitions	(226)	-
Deferred tax net adjustments arising from movement in property values	49	81
Total tax charge for the year	287	288
8.    DIVIDENDS	2024	2023
	£'000	£'000
Final dividend paid in year of 15.0p per share
(2023: Final dividend 14.0p per share)	405	378
Interim dividend paid in year of 9.5p per share
(2023: Interim dividend 9.0p per share)	256	244
	661	622
On 11 June 2024 the Board resolved to pay a final dividend of 16p per share which will be recorded in the Financial Statements for the year ending 25 March 2025.

 

 

9.    EARNINGS PER SHARE

Basic earnings per share are calculated by dividing Income after Taxation and Total Comprehensive Income attributable to Ordinary Shareholders of £1,356,000 (2023: £1,142,000) by 2,696,617 shares which is the weighted average number of 2,696,617 (2023: 2,703,357) ordinary shares in issue during the period excluding shares held as treasury. There are no instruments in issue that would have the effect of diluting earnings per share.

 

 

10. INVESTMENT PROPERTIES	2024	2023
	£'000	£'000
Properties
Balance at beginning of financial year	39,320	38,975
Additions	5,213	-
Disposals	(615)	-
Revaluation (shortfall) / surplus	(3)	345
Balance at end of financial year	43,915	39,320

 

The Company's freehold and one long-leasehold properties were valued as at 25 March 2024 by BNP Paribas Real Estate Advisory & Property Management UK Limited, Chartered Surveyors, acting in the capacity of external valuers, and adopted by the Directors. The valuations were undertaken in accordance with the requirements of IFRS 13 and the RICS Valuation - Global Standards 2020.

 

The valuation of each property was on the basis of Fair Value. The valuers reported that the total aggregate Fair Value of the properties held by the Company was £43,915,000.

 

The valuer's opinions were primarily derived from comparable recent market transactions on arms-length terms.

 

In the financial year ending 25 March 2024, the total fees earned by the valuer from Wynnstay Properties PLC and connected parties were less than 5% of the valuer's Company turnover.

 

The valuation complies with International Financial Reporting Standards. The definition adopted by the International Accounting Standards Board (IASB) in IFRS 13 is Fair Value, defined as: 'The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.'

 

These recurring fair value measurements for non-financial assets use inputs that are not based on observable market data, and therefore fall within level 3 of the fair value hierarchy.

 

The most pertinent market data observed reflected net initial yields which ranged from broadly 5.1% to 6.8% with equivalent yields estimated to range between broadly 5.25% and 7.25% for the core industrial properties. The portfolio, as a whole, exhibits a net initial yield of 5.89% (2023: 5.73%) and a nominal equivalent yield of 6.31% (2023: 6.02%).

 

There have been no transfers between levels of the fair value hierarchy. Movements in the fair value are recognised in profit or loss.

 

A 0.5% decrease in the weighted equivalent yield would result in a corresponding increase of £4.07 million in the fair value movement through profit or loss. A 0.5% increase in the same yield would result in a corresponding decrease of £3.44 million in the fair value movement through profit or loss.

 

 

11.  OPERATING LEASES RECEIVABLE		2024		2023
The following are the future minimum lease payments receivable under non-cancellable operating leases which expire:		£'000		£'000
Not later than one year		271		324
Between 1 and 5 years		8,158		4,368
Over 5 years		2,211		2,752
		10,640		7,444
Rental income under operating leases recognised through profit or loss amounted to £2,541,000 (2023: £2,304,000).   Typically, the properties were let for a term of between 5 and 10 years at a market rent with rent reviews every 5 years. The above maturity analysis reflects future minimum lease payments receivable to the next break clause in the operating lease. The properties are generally leased on terms where the tenant has the responsibility for repairs and running costs for each individual unit with a service charge payable to cover common services provided by the landlord on certain properties. The Company manages the services provided for a management fee and the service charges are not recognised as income in the accounts of the Company as any receipts are netted off against the associated expenditures with any residual balance being shown as a liability.   If the tenant does not carry out its responsibility for repairs and the Company receives a dilapidations payment, the resulting cash is recorded in revenue as other property income unless a property has been agreed to be sold where the receipt is treated as part of the proceeds of sale of the property. See Note 2.
12. INVESTMENTS			2024		2023
			£'000		£'000
Quoted investments			3		3
13.  SUBSIDIARY COMPANY   The Company has the following dormant subsidiary which the Directors consider immaterial to, and thus has not been consolidated into, the financial statements. The subsidiary holds the legal title to an access road to an investment property, the use of which is shared between the Company, its tenants at the property and neighbouring premises.   Scanreach Limited                  80% owned            Dormant                    Net Assets: £4,447 (2023: £4,447)

 

14. ACCOUNTS RECEIVABLE	2024	2023
	£'000	£'000
Trade receivables	285	296
Other receivables	128	186
	413	482
Trade receivables include an adjustment for credit losses of £nil (2023: £8,000). Any provision for impairment of trade receivables is established using an expected loss model.   Trade receivables, which are the only financial assets at amortised cost, are non-interest bearing and generally have a 15 day term. Due to their short maturities, the carrying amount of trade and other receivables is a reasonable approximation of their fair value.   Of the trade receivables balance at the end of the year £39,388 (2023: £180,560) is due from the Company's largest customer. There are seven other customers who represent more than 5% of the total balance of trade receivables.
15. ACCOUNTS PAYABLE	2024	2023
	£'000	£'000
Trade payables	33	39
Other creditors	2	80
Deferred income	628	584
Amount due to subsidiary	4	-
Accruals	161	140
	828	843
The average credit period taken for trade purchases is 18 days (2023: 17 days). No interest is charged on the outstanding balances. The Directors consider that the carrying amounts of trade and other payables is a reasonable approximation of their fair value.

 

16. BANK LOANS PAYABLE			2024		2023
			£'000		£'000
Non-current loans			10,843		9,951
In December 2021, a five-year Fixed Rate Facility of £10 million and a Revolving Credit Facility of £5.0 million were entered into providing a total committed credit facility of £15.0 million. Interest on loan amounts drawn down under the Fixed Rate Facility of £10 million (2023: £10 million) is charged at 3.61% per annum (2023: 3.61%) for the year ended 25 March 2024. Loan arrangement fees amortised over the loan period amounted to £15,000 (2023; £13,000). Loan amounts drawn down under the Revolving Credit Facility during the year amounted to £950,000. £50,000 of the loan amounts drawn down was repaid in the period and the amortised balance drawn as at 25 March 2024 is £879,000 (2023: £nil). The Company has the right to defer settlement of the liability under the Revolving Credit Facility for at least twelve months after the reporting period. Both facilities are repayable in one instalment on 17 December 2026. The facilities include the following financial covenants which were complied with during the year: •     Rental income shall not be less than 2.25 times the interest costs. •     The drawn balance shall at no time exceed 50% of the market value of the properties secured. The facilities are secured by fixed charges over freehold land and buildings owned by the Company, which at the year-end had a combined value of £35,790,000 (2023: £35,885,000). The undrawn element of the facilities available at 25 March 2024 was £4,100,000 (2023: £5,000,000). Interest charged under the Revolving Credit Facility is linked to Bank of England Base Rate as the reference rate.
17.  DEFERRED TAX			2024		2023
			£'000		£'000
Deferred Tax brought forward			2,034		1,953
Charged for the year			49		81
Deferred Tax carried forward			2,083		2,034
A deferred tax liability of £2,083,000 (2023: £2,034,000) is recognised in respect of the investment properties and has been calculated at a tax rate of 25% (2023: 25%).
18.  SHARE CAPITAL			2024		2023
			£'000		£'000
Authorised
8,000,000 Ordinary Shares of 25p each:			2,000		2,000
Allotted, Called Up and Fully Paid
3,155,267 Ordinary shares of 25p each:			789		789
All shares rank equally in respect of shareholder rights.
In March 2010, the Company acquired 443,650 Ordinary Shares of Wynnstay Properties PLC from Channel Hotels and Properties Ltd at a price of £3.50 per share. On 19 July 2022, shareholders granted authority to make market purchases of its shares for a period of five years from that date. Pursuant to this share buyback authority, in September 2022, the Company acquired 15,000 Ordinary Shares of Wynnstay Properties PLC at a price of £7.10 per share, representing less than 0.005 % of the issued share capital, with the aggregate consideration paid for the shares being £106,500. The total cost of establishing the share buyback authority, together with this acquisition, was £164,000. The total of 458,650 shares acquired, representing 14.5% of the total shares in issue, are held in treasury. As a result, the total number of shares with voting rights is 2,696,617.
19. FINANCIAL INSTRUMENTS
The objective of the Company's policies is to manage the Company's financial risk, secure cost-effective funding for the Company's operations and minimise the adverse effects of fluctuations in the financial markets on the value of the Company's financial assets and liabilities, on reported profitability and on the cash flows of the Company.   As at 25 March 2024 the Company's financial instruments comprised borrowings, cash and cash equivalents, quoted investments, short term receivables and short-term payables. The main purpose of these financial instruments was to raise finance for the Company's operations. Throughout the period under review, the Company has not traded in any other financial instruments. The Board reviews and agrees policies for managing each of the associated risks and they are summarised below:   Credit Risk The risk of financial loss due to a counterparty's failure to honour its obligations arises principally in connection with property leases and the investment of surplus cash.   Tenant rent payments are monitored regularly, and appropriate action is taken to recover monies owed or, if necessary, to terminate the lease. The Company carefully vets prospective new tenants from a credit risk perspective. Bad debts are mitigated by close engagement with tenant businesses within a well-diversified mix of some 84 units across the portfolio and close monitoring of rental income receipts. The Company has regularly reviewed the portfolio, including feedback from engagement with tenants, in order to assess the risk of tenant failures.   The Company has no significant concentration of credit risk associated with trading counterparties (considered to be over 5% of net assets) with exposure spread over a large number of tenancies. In terms of concentration of individual tenant's rents versus total gross annual passing rents the Company has 4 tenants whose rent, on an individual basis, is between 5.0% and 7.4% of total gross annual passing rents.   Funds are invested and loan transactions contracted only with banks and financial institutions with a high credit rating. Concentration of credit risk exists to the extent that as at 25 March 2024 and 2023 current account and short-term deposits were held with two financial institutions, Handelsbanken PLC and C Hoare & Co. The combined exposure to credit risk on cash and cash equivalents at 25 March 2024 was £397,000 (2023: £3,268,000).   Currency Risk As all of the Company's assets and liabilities are denominated in Pounds Sterling, there is no exposure to currency risk.   Interest Rate Risk The Company is exposed to interest rate risk that could affect cash flow as it currently borrows at both floating and fixed interest rates. The Company monitors and manages its interest rate exposure on a periodic basis but does not take out financial instruments to mitigate the risk. The Company finances its operations through a combination of retained profits and bank borrowings.   Liquidity Risk The Company seeks to manage liquidity risk to ensure sufficient funds are available to meet the requirements of the business and to invest cash assets safely and profitably. The Board regularly reviews available cash balances and cash forecasts to ensure there are sufficient resources for working capital requirements and to maintain an adequate cash margin.   Interest Rate Sensitivity Financial instruments affected by interest rate risk include loan borrowings and cash deposits. The analysis below shows the sensitivity of the statement of comprehensive income and equity to a 0.5% change in interest rates:
	0.5% decrease in interest rates			0.5% increase in interest rates
	2024	2023		2024		2023
	£'000	£'000		£'000		£'000
Impact on interest payable - gain/(loss)	5	-		(5)		-
Impact on interest receivable - (loss)/gain	(2)	(16)		2		16
Total impact on pre-tax profit and equity	3	(16)		(3)		16

 

The calculation of the net exposure to interest rate fluctuations was based on the following as at 25 March:
	2024		2023
	£'000		£'000
Floating rate borrowings (bank loans)	879		-
Less: cash and cash equivalents	(397)		(3,268)
	482		(3,268)
Carrying Amounts of Financial Instruments Management believes the carrying amounts of most financial assets and financial liabilities on the balance sheet represent a reasonable approximation of their value. The classification and measurement of financial instruments are performed in accordance with IFRS 9 'Financial Instruments'. Exceptions to this approach, if any, are detailed below.   Fixed-Rate Borrowings It's important to note that the carrying amounts of fixed-rate borrowings might not always reflect their fair value due to changes in market interest rates. The company performs regular assessments to determine the recoverability of carrying amounts and the potential need for adjustments in accordance with IFRS 9.
Financial assets		2024	2023
		£'000	£'000
Quoted investments measured at fair value		3	3
Loans and receivables measured at amortised cost		285	296
Cash and cash equivalents measured at amortised cost		397	3,268
Total financial assets		685	3,567
Financial liabilities at amortised cost		10,843	9,951
Total liabilities		11,671	10,795
The only financial instruments measured subsequent to initial recognition at fair value as at 25 March are quoted investments. These are included in level 1 in the IFRS 13 fair value hierarchy as they are based on quoted prices in active markets.   Capital Management The primary objectives of the Company's capital management are:   ·     to safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders; and ·     to enable the Company to respond quickly to changes in market conditions and to take advantage of opportunities.   Capital comprises shareholders' equity plus net borrowings. The Company monitors capital using loan to value and gearing ratios. The former is calculated by reference to total debt as a percentage of the year end valuation of the investment property portfolio. Gearing ratio is the percentage of net borrowings divided by shareholders' equity. Net borrowings comprise total borrowings less cash and cash equivalents. The Company's policy is that the net loan to value ratio should not exceed 50% and the gearing ratio should not exceed 100%.
		2024	2023
		£'000	£'000
Loans and overdraft		10,843	9,951
Cash and cash equivalents		(397)	(3,268)
Net borrowings		10,446	6,683
Shareholders' equity		30,627	29,936
Investment properties		43,915	39,320
Loan to value ratio		24.7%	25.3%
Net borrowings to value ratio		23.8%	17.0%
Gearing ratio		34.1%	22.3%
20. RELATED PARTY TRANSACTIONS   Related Party Transactions with the Directors have been disclosed under Directors' Emoluments in the Directors' Report. On 30 March 2023 Mr. R.P. Owen was paid a fee of £1,600 prior to his appointment as a Director for his assistance in the later stages of the recruitment process for the new Managing Director. There were no other Related Party Transactions during the year (2023: £nil).

 

21.  SEGMENTAL REPORTING

The Chief Operating Decision Maker ('CODM'), who is responsible for the allocation of resources and assessing performance of the operating segments, has been identified as the Board. IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Board. The Board have reviewed the segmental information and concluded that there are three operating segments.

 

 

	Industrial		Retail		Office		Total
	2024	2023	2024	2023	2024	2023	2024	2023
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Rental Income	2,332	2,095	73	73	136	136	2,541	2,304
Other Property Income	58	8	-	-	-	-	58	8
Profit /(Loss) on investment property at fair value	232	200	(75)	(105)	(160)	250	(3)	345
Total income and gain	2,622	2,303	(2)	(32)	(24)	386	2,596	2,657
Property expenses	(138)	(95)	-	-	-	-	(138)	(95)
Segment profit/(loss)	2,484	2,208	(2)	(32)	(24)	386	2,458	2,562
Unallocated corporate expenses							(671)	(720)
Profit on sale of investment property							282	-
Operating income							2,069	1,842
Interest expense (all relating to property loans)							(455)	(439)
Interest income and other income							29	27
Income before taxation							1,643	1,430

 

 

Other information	Industrial		Retail		Office		Total
	2024	2023	2024	2023	2024	2023	2024	2023
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Segment assets	41,685	36,855	830	905	1,400	1,560	43,915	39,320
Segment assets held as security	33,560	33,420	830	905	1,400	1,560	35,790	35,885

 

22.  CAPITAL COMMITMENTS

Significant capital expenditure contracted for at the end of the financial year, but not recognised as liabilities in the financial statements is: £nil (2023: £nil).

 

23.  SUBSEQUENT EVENTS

On the 6 June 2024 the Company completed the sale of its property at North Street, Midhurst for £345,000, representing a gross profit of £15,000 before costs over the net book value of £330,000 as at 25 March 2024.

 

 

 

NOTE

 

The financial information set out in this announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.  Accordingly pursuant to section 435(2), this announcement does not include the auditor's report on the statutory accounts.

 

However, the financial information for the year ended 25 March 2024 contained in the announcement is taken directly from the statutory accounts for that year.  The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

 

The statutory accounts for the year ended 25 March 2024 have not yet been delivered to the Registrar of Companies. The 2024 accounts will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

The statutory accounts for the year ended 25 March 2023 and for the prior years referred to in this announcement have been delivered to the Registrar of Companies. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

 

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