TIDMWINV
RNS Number : 4799S
Worsley Investors Limited
17 March 2021
17 March 2021
Worsley Investors Limited
(the "Company")
Half Year Report for the six months ended 31 December 2020
The Company is pleased to announce the release its half year
report and unaudited consolidated financial statements for the six
months ended 31 December 2020 (the "Half Year Report"). A copy of
the Half Year Report will be posted to shareholders this week and
will be available to view on the Company's website shortly at:
www.worsleyinvestors.com
Enquiries:
For further information, please contact:
Worsley Associates LLP (Investment Advisor)
Blake Nixon
Tel: +44 (0) 203 873 2288
Shore Capital (Financial Adviser and Broker)
Robert Finlay / Anita Ghanekar / Hugo Masefield
Tel: +44 (0) 20 74080 4090
Praxis Fund Services Limited (Administrator and Secretary)
Matt Falla / Katrina Rowe
Tel: +44 (0) 1481 737600
LEI: 213800AF85VEZMDMF931
Performance Summary
31 December 30 June 2020
2020 % change
-----------------------------
Net Asset Value ("NAV") per
share 39.89p 38.20p 4.42%
------------- -------------- ---------
Share price(2) 27.40p 24.30p 12.76%
------------- -------------- ---------
Share price discount to NAV 31.31% 36.40% n.c
------------- -------------- ---------
31 December 31 December
2020 2019
------------------------------
Earnings/(loss) per share(1) 2.00p (0.03)p
------------- ------------
Total return Six month
period to
31 December Year ended
2020 30 June 2020
NAV Total Return(3) adjusted
for capital raise 4.42% (2.28)%
------------- --------------
Share price Total Return(4)
------------- --------------
- Worsley Investors Limited 12.76% (23.70)%
------------- --------------
- FTSE All Share Index 9.33% (12.99)%
------------- --------------
- FTSE Real Estate Investment
Trust Index 11.08% (10.08)%
------------- --------------
Worsley Associates LLP ('Worsley Associates') was appointed on
31 May 2019 as Investment Advisor (the "Investment Advisor") to
Worsley Investors Limited (the "Company"). At an EGM held on 28
June 2019, an ordinary resolution was passed to adopt new
Investment Objective and Policy. The Investment Objective and
Policy are set out under Note 15 below.
Past performance is not a guide to future performance.
(1) Earnings/(loss) per share based on the net profit/(loss) for
the period/year of GBP0.675 million (30 June 2020: net loss of
GBP0.419 million) and the weighted average number of Ordinary
Shares in issue during the period/year of 33,740,929 (30 June 2020:
24,447,454).
(2) Mid-market share price (source: Shore Capital and Corporate
Limited).
(3) On a pro forma basis, which includes adjustments as
necessary to take account of the effect of capital alterations
during the period. NAV Total Return is a measure showing how the
NAV per share has performed over a period of time, taking into
account both capital returns and any dividends paid to
shareholders.
(4) A measure showing how the share price has performed over a
period of time, taking into account both capital returns and any
dividends paid to shareholders.
Source : Worsley Associates LLP and Shore Capital and Corporate
Limited.
Chairman's Statement
The six month period to 31 December 2020 was modestly rewarding
for the Company despite some very difficult external factors. In
headline terms, our NAV Total Return was a positive 4.42%, our
share price rose by 12.76% and the discount of share price to NAV
narrowed somewhat to 31.31% albeit that is still much wider than we
would like. Our Investment Advisor, Worsley Associates, has
deployed the cash raised earlier in 2020 with considerable success
but that success has been largely tempered by the situation in
Italy which has affected trading at the Curno cinema and has made
it extremely difficult to progress the realisation of that
asset.
Curno
As with most of the rest of Europe and the UK., Italy relapsed
into a "second wave" of the COVID-19 pandemic in the autumn and,
for a second time, the government there closed entertainment
venues, including cinemas, in October 2020 and so they have
remained since. This has had two effects on our Curno asset: it has
frustrated our ability to conduct and conclude a normal realisation
process; and it has substantively cut the revenue flows for our
tenant, UCI, which has sought a further renegotiation of 2021
rentals, none of which has yet been paid. Worsley Associates has
worked cooperatively with our tenant, making constructive proposals
to relieve the trading stresses arising from the enforced closure.
Negotiations continue and we are hopeful that a consensual outcome
can be achieved. Further detail is given in the Investment
Advisor's report.
Core Equity Portfolio
Shareholders will recall that we raised GBP3.61million net of
expenses by way of a pro rata share issue in February 2020. Those
funds have been deployed in the Company's core strategy of equity
holdings in smaller to mid-sized market capitalisation British
quoted securities priced at a deep discount to their intrinsic
value. The net gains of GBP1.012million have been more than
satisfactory and the internal rate of return in calendar 2020 of in
excess of 100% p.a. on the capital invested serves to confirm the
continuing validity of the strategy developed over several decades
and now expressed at Worsley Associates. Our most notable disclosed
core strategy positions were Smiths News Plc (formerly Connect
Group Plc) and Northamber plc. Our other, as yet undisclosed,
positions also have excellent potential.
Financial Reporting Date and Other Matters
We have continued to bear down on the operating costs of our
public company structure and the benefits of this continue to flow
through in the half year just ended. As previously indicated, the
Company's financial year end will move to 31 March from this year
and therefore the current reporting period will be the nine months
to 31 March 2021. By moving to a less congested quarter date, we
hope to contain the stress on the administrative and auditing
infrastructure and thereby ameliorate the inevitable cost pressure
from this source.
Outlook
The Investment Advisor has fully invested the cash available to
it with promising results to date. COVID-19 has dealt us a set of
circumstances beyond our control and this has had two main
consequences for us overall. First, it has delayed the optimal sale
of the Curno cinema which would release substantial proceeds to
redeploy in our core equity strategy. Second, it has created a
general weakness in the share prices of many smaller companies -
particularly prior to the approval of COVID-19 vaccines and their
roll-out to the UK. population. The establishment of our portfolio
during that period gave the Investment Advisor the opportunity to
initiate positions at very attractive levels, capturing above-trend
returns as prices recover. That said, the wider economic damage
caused by the pandemic will take some time to repair fully and the
combination of stressed valuations and the improving outlook post
the vaccination of a large portion of the population means that we
still have a rich opportunity set in an improving market for some
time to come.
It has been immensely frustrating to all concerned that
circumstances have been such that we have not yet been in a
position to release the funds tied up in Curno for redeployment in
the core equity strategy. Achieving this, at an optimal value, will
be a major strategic priority over the next year. Once we have done
so, we hope to be in a better position to consider restarting our
placing programme to raise additional capital thereby not only
improving investor returns by spreading the fixed costs of our
operating structure over a larger capital base, but also improving
liquidity for investors through a larger and more diverse share
register.
The environment for the Company's investment strategy continues
to be fertile and we remain very positive.
I would like to take this opportunity to thank Shareholders for
their continued support in challenging times and to look forward
with them to better days ahead.
W. Scott
Chairman
16 March 2021
Investment Advisor's Report
Investment Advisor
The Investment Advisor, Worsley Associates LLP, is regulated by
the FCA and is authorised to provide investment management and
advisory services.
In the period under review, the Investment Advisor has been
focussed on the initial equities portfolio reaching the level of
full investment and the oversight of the Curno cinema, on which the
COVID-19 pandemic continued to have a major impact.
Curno Cinema Complex
The Group's Italian multiplex cinema complex, located in Curno,
on the outskirts of Bergamo, is let in its entirety to UCI Italia
S.p.A. (" UCI ").
The cinema lease had been amended in June 2020, but the closure
of the cinema under Italian regulations for a second time, in
October 2020, led UCI in February 2021 to seek a further
renegotiation of 2021 rentals under the lease, talks in respect of
which are ongoing.
The current key rental terms of the lease, which has a final
termination date of 31 December 2042, are:
Base Rent
1 January 2020 until 28 February 2021 - EUR830,000 per annum
1 March 2021 to 31 December 2021 - EUR915,000 per annum
Thereafter to be indexed to 100% of the Italian ISTAT Consumer
Index on an upwards-only basis.
Variable Rent
Incremental rent is payable at the rate of EUR1.50 per ticket
sold above a minimum threshold of 350,000 tickets per year up to
450,000 tickets per year, rising in 50,000 ticket stages above this
level up to EUR2.50 per extra ticket.
Tenant Guarantee
The lease benefits from a rental guarantee of an initial
EUR13million, reducing over 15 years to EUR4.5million, given by a
U.K. domiciled European holding company for the UCI group, United
Cinemas International Acquisitions Limited, the parent of which,
Odeon Cinemas Group Limited, recently raised term debt of some
GBP400million.
Tenant break option
UCI has the right to terminate the lease on 30 June 2035 .
Trading
The cinema, which had been closed for some five months, finally
reopened on 19 August 2020, with social distancing measures in
place, and in the two months thereafter encouraging attendance
levels were reported.
However, on 26 October 2020, the governmental authorities of
Lombardy, Italy, decreed that, owing to the impact of COVID-19, all
cinemas in the region, which included UCI Curno, were to close
temporarily. As of the time of writing the earliest date prescribed
for a reopening is 6 April 2021.
The rental holiday under the June 2020 amendment to the lease
expired at the end of November 2020, and the December 2020 rental
was received prior to period end. The profile of 2021 rentals, none
of which has yet been paid, is under discussion with UCI.
Valuation
As at 31 December 2020, the Group's independent asset valuer,
Knight Frank LLP, fair valued the Curno cinema at EUR9.6 million
(30 June 2020: EUR9.6 million), and this has been adopted in these
Financial Statements.
Given the enhanced rental generated by the asset under the June
2020 amendment, it had been the Board's expectation that valuation
of the Curno cinema at 31 December 2020 would exceed its June 2020
carrying value.
The principal reason for the valuation remaining unchanged,
notwithstanding this, was that the valuer assumed a waiver of the
March 2021 quarterly rentals, in recognition of the second cinema
closure, and that offset the positive impact of the amended
lease.
In September 2020 the Group's Italian real estate adviser, CBRE
S.p.A., had resumed dialogue with interested investors, but
following the second closure discussions were suspended, pending
the cinema's reopening.
The Group will retain the Curno cinema until a disposal can be
effected at a price which the board believes properly reflects its
medium term prospects.
Investment Strategy
The Investment Advisor's strategy allies the taking of holdings
in British quoted securities priced at a deep discount to their
intrinsic value, as determined by a comprehensive and robust
research process. Most of these companies will have smaller to
mid-sized equity market capitalisations, which will in general not
exceed GBP600 million. It is intended to secure influential
positions in such British quoted securities, with the employment of
activism as necessary to drive highly favourable outcomes.
Following a persistent weakness in the prices of British
equities, and in particular smaller companies, over most of 2020, t
he U.S. election at the beginning of November 2020, followed the
next week by news of the first effective COVID-19 vaccine, sparked
a strong rebound over the subsequent two months, and prices, after
a dip in January, have trended slightly better since.
The Company's portfolio, in the period since the 2020
preliminary results announcement on 5 October, reached full
investment. Most notable was the acquisition of a second
disclosable public equity position, a holding of some 3% in
Northamber plc, a small, AiM traded, company, the combined value of
whose net cash and freehold property on its own broadly matches its
c. GBP20million market capitalisation.
This is in addition to the holding of some 4% in Smiths News plc
(formerly Connect Group plc), which is England's major distributor
of newspapers and magazines. Smiths News in early November
published its 2020 financial results, which showcased its
outstanding cash flow generation, notwithstanding the lockdowns in
response to COVID-19, and a refinancing of its borrowings. We
anticipate a continuance of its strong performance in 2021.
As previously reported, preliminary (less than 2% of Net Assets)
holdings have also been taken in a number of companies. In three
instances, following substantial price recoveries on the back of
the UK. Government's outstanding COVID-19 vaccination roll out, a
substantial proportion of the holding has been exited.
The resultant position as at 9 March 2021 was that the Company
held 13 stocks in its portfolio, which had a total cost of GBP3.34
million and a combined market value of some GBP5.43 million. The
surplus on the portfolio of in excess of 60% of cost, a figure
which substantially understates the annualised return (given the
holdings were purchased over a period of significantly less than a
year), is considered highly satisfactory.
Results for the period
Cash revenue for the six months to 31 December 2020 from Curno
was EUR69,200 (GBP62,000) (31 December 2019: EUR400,000
(GBP360,000)). This reflected the five-month rental holiday granted
under the 2020 lease amendment.
Property expenses, mainly local Curno property taxes, of some
EUR87,000 (GBP79,000) (31 December 2019: EUR77,000 (GBP68,000)),
were incurred.
General and administrative expenses of GBP273,000 (31 December
2019: GBP350,000) were in line with expectations, given the costs
of the 2020 lease amendment of EUR8,900 (GBP8,000) and amortisation
of the property disposal warranty insurance entered into in May
2017 (GBP7,000) were recognised for in the period.
Transaction charges incurred on equity acquisitions were
GBP16,000 (31 December 2019: nil). As previously noted, although
expensed under the strictures of IFRS 9, when making decisions
regarding purchases such incidentals are considered an inherent
part of the overall investment cost.
The substantial reduction in the Group's ongoing operating costs
is pleasing, but the scope for further reduction before the
ultimate sale of Curno is now relatively limited.
The strong performance of the equities portfolio was reflected
in a GBP1.012million gain (31 December 2019: GBP3,000).
Taxation is payable on an ongoing basis on Italian income and in
Luxembourg, with a small legacy exposure in Germany. For the period
an amount of GBP47,000 ( 31 December 2019: GBP42,000) was expensed,
most of which was non-cash.
The Group continues to expect to be modestly profitable on an
ongoing cash basis.
Net Assets at 31 December 2020 were GBP13.458million, which
compares with the GBP12.890m contained in the 30 June 2020 audited
financial statements. The increase is principally owing to the net
impact of the profit of GBP675,000 offset by a GBP113,000 reduction
in the Pounds sterling fair value of the Curno property in the
period.
Financial Position
The Group's Statement of Financial Position as at 31 December
2020 was comfortable with GBP464,000 held in cash and no debt.
Allied to the ready liquidity of the equity portfolio and positive
ongoing cash flows the financial position remains secure.
In due course the sale of the Curno cinema will provide further
resources for investment.
Euro
As at 31 December 2020, some 65% of Total Assets are denominated
in Euros, of which the Curno property was some 63%. The Pounds
sterling Euro cross rate moved during the period from 1.1040 as at
30 June 2020 to 1.1185 as at 31 December 2020. This rate will be a
substantial influence on Group Net Assets until Curno's
disposal.
Outlook
Whilst COVID-19 continues to have little direct impact on the
Group, the closure of Italian cinemas has given rise to further
renegotiation of the terms of the Curno cinema lease. The
consequent significant delay in disposal prospects, although
unavoidable, is nevertheless disappointing.
The Worsley investment strategy targets special situations. Even
though, as intimated above, UK equity markets, following the
approvals of several COVID-19 vaccines, have recovered
significantly, experience has shown that opportunities arise in all
markets, as some companies are inevitably sold off when
expectations for them fail to be met.
A return to normal levels of economic activity in Britain is
considered unlikely before 2022. As always, UK stock market prices
have advanced in anticipation of recovery. Be that as it may, there
continue to be a number of companies whose share prices fail to
reflect their underlying strengths.
With an equity portfolio which is well underpinned by deep
value, prospects for the Company remain sound.
Worsley Associates LLP
16 March 2021
Interim Management Report
A description of the important events which have occurred during
the first six months of the financial year and their impact on the
performance of the Company as shown in the Financial Statements is
given in the Chairman's Statement, the Investment Advisor's Report
and the Notes to the Financial Statements, and are incorporated
here by reference.
Statement of principal risks and uncertainties
The Board is responsible for the Company's system of internal
controls and for reviewing its effectiveness. The Board, through
its Audit Committee, has carried out a robust assessment of the
principal risks and uncertainties facing the Company, using a
comprehensive risk matrix as the basis for analysing the Company's
system of internal controls while monitoring the investment limits
and restrictions set out in the Company's investment objective and
policy.
The principal risks assessed by the Board relating to the
Company were disclosed in the Annual Financial Report for the year
ended 30 June 2020. The principal risks disclosed include
investment risk, operational risk, accounting, legal and regulatory
risk, financial risks and foreign exchange risk. A detailed
explanation of these can be found on page 17 of the Annual
Financial Report. The Board and Investment Advisor do not consider
these risks to have materially changed during the six months ended
31 December 2020 and they are not expected to change in the
remainder of the financial year.
Going concern
The Directors, at the time of approving the Financial
Statements, have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
next 12 months. The lease income generates enough cash flows to pay
on-going expenses. The Directors have considered the cash position
and performance of the current capital invested of the Group and
concluded that it is appropriate to adopt the going concern basis
in the preparation of these Financial Statements.
Going concern is assessed over a minimum period of 12 months
from the approval of these Financial Statements. The Board
considers there to be no material uncertainty due to the fact that
the Group currently has no borrowing, retains a significant cash
balance and that the Company's equity investments comprise
predominantly readily realisable securities.
Interim Report is Unaudited
This Interim Report has not been audited, nor reviewed by
auditors pursuant to the Auditing Practices Board guidance on
Review of Interim Financial Information.
Responsibility Statement
We confirm to the best of our knowledge that:
-- the Condensed Unaudited Interim Financial Statements have
been prepared in accordance with International Accounting Standard
34 'Interim Financial Reporting'; as required by Disclosure
Guidance & Transparency Rule ("DTR") 4.2.4R of the UK's
Financial Conduct Agency ("FCA"); and
-- the Interim Management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events which 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 year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions which have taken place in the first six
months of the current financial year and which have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last Annual Report which could do so.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website, and for the preparation and dissemination of
financial statements. Legislation in Guernsey governing the
preparation and dissemination of financial statement may differ
from legislation in other jurisdictions.
On behalf of the Board
W.Scott
Chairman
16 March 2021
Condensed Unaudited Consolidated Statement of Comprehensive
Income
For the six months ended 31 December 2020
For the six For the
month period six month
to period to
31 December 31 December
2020 2019
(Unaudited) (Unaudited)
Notes GBP000s GBP000s
---- ------ --------------------------------------- ------ -------------- -------------
3 &
Gross property income 6 385 363
Property operating expenses 6 (79) (68)
Net property income 306 295
----------------------------------------------------- ------ -------------- -------------
Net gain on investments at fair
value through profit or loss 7 1,012 3
Unrealised gain on investment property 6 - 90
Lease incentive movement 3 (323) (3)
General and administrative expenses 4 (273) (350)
---- ----------------------------------------------- ------ -------------- -------------
Operating profit 722 35
----------------------------------------------------- ------ -------------- -------------
Profit before tax 722 35
----------------------------------------------------- ------ -------------- -------------
Income tax expense (47) (42)
Profit/(loss) for the period 675 (7)
----------------------------------------------------- ------ -------------- -------------
Other comprehensive loss
Foreign exchange translation loss (107) (500)
------------------------------------------------ ------ -------------- -------------
Total items which are or may be reclassified
to profit or loss (107) (500)
----------------------------------------------------- ------ -------------- -------------
Total comprehensive profit/(loss)
for the period 568 (507)
----------------------------------------------------- ------ -------------- -------------
Basic and diluted earnings/(loss)
per ordinary share (pence) 5 2.00 (0.03)
----------------------------------------------------- ------ -------------- -------------
The accompanying notes form an integral part of these Financial
Statements
Condensed Unaudited Consolidated Statement of Changes in
Equity
For the six months ended 31 December 2020
Foreign
Revenue Distributable currency Total
reserve reserve reserve equity
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP000s GBP000s GBP000s GBP000s
----------------------------- ------------ -------------- ------------ ------------
Balance at 1 July 2020 (46,629) 47,263 12,256 12,890
Profit for the period 675 - - 675
Other comprehensive income - - (107) (107)
Balance at 31 December 2020 (45,954) 47,263 12,149 13,458
------------------------------ ------------ -------------- ------------ ------------
For the six months ended 31 December 2019
Foreign
Revenue Distributable currency Total
reserve reserve reserve equity
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP000s GBP000s GBP000s GBP000s
----------------------------- ------------ -------------- ------------ ------------
Balance at 1 July 2019 (46,210) 43,653 12,134 9,577
Loss for the period (7) - - (7)
Other comprehensive loss - - (500) (500)
Balance at 31 December 2019 (46,217) 43,653 11,634 9,070
------------------------------ ------------ -------------- ------------ ------------
The accompanying notes form an integral part of these Financial
Statements
Condensed Unaudited Consolidated Statement of Financial
Position
As at 31 December 2020
31 December
2020 30 June 2020
(Unaudited) (Audited)
Notes GBP000s GBP000s
--------- -------------------------------- ------ ------------ -------------
Non-current assets
Investment property 6 7,710 8,135
Current assets
Cash and cash equivalents 464 2,632
Investments held at fair value
through profit or loss 7 4,530 1,684
Trade and other receivables 8 89 100
Lease incentive 6 873 561
Tax receivable 54 130
Total assets 13,720 13,242
------------------------------------------- ------ ------------ -------------
Non-current liabilities
Provisions 45 46
Current liabilities
Trade and other payables 9 138 205
Tax payable 79 101
Total liabilities 262 352
------------------------------------------- ------ ------------ -------------
Total net assets 13,458 12,890
------------------------------------------- ------ ------------ -------------
Equity
Revenue reserve (45,954) (46,629)
Distributable reserve 47,263 47,263
Foreign currency reserve 12,149 12,256
Total equity 13,458 12,890
------------------------------------------- ------ ------------ -------------
Number of ordinary shares 33,740,929 33,740,929
Net asset value per ordinary share
(pence) 11 39.89 38.20
------------------------------------------- ------ ------------ -------------
The Financial Statements were approved by the Board of Directors
and authorised for issue on 16 March 2021. They were signed on its
behalf by:
W. Scott
Chairman
The accompanying notes form an integral part of these Financial
Statements
Condensed Unaudited Consolidated Statement of Cash Flows
For the sixth months ended 31 December 2020
31 December 31 December
2020 2019
(Unaudited) (Unaudited)
Notes GBP000s GBP000s
---------------------------------------- ------ ------------ ------------
Operating activities
Profit before tax 722 35
Adjustments for:
Unrealised gain on investment property 6 - (90)
Net gains on investments held at
fair value through profit or loss 7 (1,012) (3)
Dividend income 5 -
Lease incentive movement 3 323 3
Foreign exchange loss on investment
property 6 102 476
(Increase)/decrease in trade and
other receivables (307) 75
Decrease in provisions (1) (2)
Decrease in trade and other payables (67) (20)
Purchase of investments held at
fair value through profit or loss 7 (1,866) (124)
Sale of investments held at fair
value through profit or loss 7 23 -
Net cash (used in)/generated from operations (2,078) 350
------------------------------------------------- ------------ ------------
Tax paid 17 58
Net cash (outflow)/inflow from operating
activities (2,061) 408
------------------------------------------------- ------------ ------------
Effects of exchange rate fluctuations (107) (500)
Decrease in cash and cash equivalents (2,168) (92)
------------------------------------------------- ------------ ------------
Cash and cash equivalents at start
of the period 2,632 793
Cash and cash equivalents at the period
end 464 701
------------------------------------------------- ------------ ------------
The accompanying notes form an integral part of these Financial
Statements
Notes to the Condensed Unaudited Consolidated Financial
Statements
For the six months ended 31 December 2020
1. Operations
Worsley Investors Limited (the "Company") is a limited
liability, closed-ended investment company incorporated in
Guernsey. The Company historically invested in commercial property
in Europe which was held through Subsidiaries. The Condensed
Unaudited Consolidated Financial Statements (the "Financial
Statements") of the Company for the period ended 31 December 2020
comprise the Financial Statements of the Company and its
Subsidiaries (together referred to as the "Group").
Worsley Associates LLP was appointed on 31 May 2019 as
Investment Advisor to the Company.
At an EGM held on 28 June 2019, an ordinary resolution was
passed to adopt a new Investment Objective and Policy. Please refer
to the Investment Policy for further details.
2. Significant accounting policies
Basis of preparation
These Financial Statements have been prepared in accordance with
International Accounting Standard ("IAS") 34 'Interim Financial
Reporting' as required by DTR 4.2.4R, the Listing Rules of the
London Stock Exchange and applicable legal and regulatory
requirements. They do not include all the information and
disclosures required in Annual Financial Statements and should be
read in conjunction with the Company's last Annual Report and
Audited Consolidated Financial Statements for the year ended 30
June 2020.
The same accounting policies and methods of computation are
followed in the Interim Financial Report as compared with the most
recent Annual Financial Statements for the year ended 30 June
2020.
Going concern
The Directors, at the time of approving the Financial
Statements, have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
next 12 months. The lease income generates enough cash flows to pay
on-going expenses. The Directors have considered the cash position
and performance of the current capital invested of the Group and
concluded that it is appropriate to adopt the going concern basis
in the preparation of these Financial Statements.
Going concern is assessed over a minimum period of 12 months
from the approval of these Financial Statements. The Board consider
there to be no material uncertainty owing to the fact that the
Group currently has no borrowing, retains a significant cash
balance and that the Company's equity investments comprise
predominantly readily realisable securities.
3. Gross property income
Gross property income for the period ended 31 December 2020
amounted to GBP0.385 million (31 December 2019: GBP0.363 million).
The Group leases out its investment property under an operating
lease which is structured in accordance with local practices in
Italy. The Group's lease agreement in place as at 31 December 2020
was consistent with that as disclosed in the Company's Audited
Annual Financial Statements for the year ended 30 June 2020.
Property income
31 December 31 December
2020 2019
GBP000s GBP000s
(Unaudited) (Unaudited)
---------------------------------------------------- ------------ ------------
Property income received (net of lease incentives) 62 360
Straight-lining of lease incentives 323 3
---------------------------------------------------- ------------ ------------
Property income 385 363
---------------------------------------------------- ------------ ------------
Expense from services to tenants, other property operating and
administrative expenses
31 December 31 December
2020 2019
GBP000s GBP000s
(Unaudited) (Unaudited)
------------------------------------------- ------------ ------------
Property expenses arising from investment
property which generates income 79 68
------------------------------------------- ------------ ------------
Total property operating expenses 79 68
------------------------------------------- ------------ ------------
There were no p roperty expenses arising from investment
property which did not generate income.
4. General and administrative expenses
31 December 31 December
2020 2019
(Unaudited) (Unaudited)
GBP000s GBP000s
------------------------ ---------------------------- ------------ ------------
Administration fees 54 55
General expenses 49 41
Audit fees 21 30
Legal and professional fees 17 38
Directors' fees
(note 13) 23 26
Insurance fees 16 61
Corporate broker fees 13 23
Investment advisor fees (note 13) 80 76
Total 273 350
---------------------------------------------------------- ------------ ------------
5. Basic and diluted earnings/(loss) per ordinary share
(pence)
The basic and diluted earnings/(loss) per share for the Group is
based on the net profit for the period of GBP0.675 million (31
December 2019: net loss of GBP0.007 million) and the weighted
average number of Ordinary Shares in issue during the period of
33,740,929 (31 December 2019: 20,758,441). There are no instruments
in issue which could potentially dilute earnings or loss per
Ordinary Share.
6. Investment property
31 December
2020 30 June 2020
(Unaudited) (Audited)
GBP000s GBP000s
----------------------------------------------- ------------ -------------
Valuation of investment property before lease
incentive adjustment
at beginning of period/year 8,696 8,777
Fair value adjustment - (175)
Foreign exchange translation (113) 94
Independent external valuation 8,583 8,696
Adjusted for: Lease incentive* (873) (561)
Fair value of investment property at the end
of the period/year 7,710 8,135
------------------------------------------------- ------------ -------------
* The Lease incentive is separately classified as a current
asset within the Consolidated Statement of Financial Position and
to avoid double counting is hence deducted from the Independent
property valuation to arrive at fair value for accounting
purposes.
The property is carried at fair value. The lease incentive
granted to the tenant is amortised over the term of the lease. In
accordance with IFRS, the external independent valuation is reduced
by the carrying amount of the lease incentive as at the valuation
date. Quarterly valuations are carried out at 31 March, 30 June, 30
September and 31 December by Knight Frank LLP, external independent
valuers.
The resultant fair value of investment property is analysed
below by valuation method, according to the levels of the fair
value hierarchy. The different levels have been defined as
follows:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
which are observable for asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability which are not based
on observable market data (unobservable inputs).
The investment property (Curno) is classified as Level 3.
The significant assumptions made relating to its independent
valuation are set out below:
Significant assumptions 31 December 2020 30 June 2020
(Unaudited) (Audited)
---------------------------------------------------- ----------------- -------------
Gross estimated rental value per square metre p.a. 114.00 EUR 114.00EUR
Equivalent yield 9.10% 8.90%
An increase/decrease in ERV (Estimated Rental Value) will
increase/decrease valuations, while an increase/decrease to yield
decreases/increases valuations. The table below sets out the
sensitivity of the independent property valuation to changes of 50
basis points in Fair Value.
The external valuer has carried out its valuation using the
comparative and investment methods. The external valuer has made
the assessment on the basis of a collation and analysis of
appropriate comparable investment and rental transactions. The
market analysis has been undertaken using market knowledge,
enquiries of other agents, searches of property databases, as
appropriate and any information provided to them. The external
valuer has adhered to the RICS Valuation - Professional
Standards.
Movement 31 December 2020 30 June 2020
(Unaudited) (Audited)
--------------- ------------------- --------------------- --------------------
Increase of 50 Property valuation Decrease of EUR0.6 Decrease of EUR0.5
basis points equivalent million million
yield
Decrease of 50 Property valuation Increase of EUR0.6 Increase of EUR0.6
basis points equivalent million million
yield
Increase of 50 Gross estimate Decrease of EUR0.05 Decrease of EUR0.05
basis points rental value million million
Decrease of 50 Gross estimate Increase of EUR0.05 Increase of EUR0.05
basis points rental value million million
Property assets are inherently difficult to value owing to the
individual nature of each property. As a result, valuations are
subject to uncertainty. There is no assurance that estimates
resulting from the valuation process will reflect the actual sales
price even where a sale occurs shortly after the valuation date.
Rental income and the market value for properties are generally
affected by overall conditions in the local economy, such as growth
in Gross Domestic Product ("GDP"), employment trends, inflation and
changes in interest rates. Changes in GDP may also impact
employment levels, which in turn may impact the demand for
premises. Furthermore, movements in interest rates may affect the
cost of financing for real estate companies.
Both rental income and property values may be affected by other
factors specific to the real estate market, such as competition
from other property owners, the perceptions of prospective tenants
of the attractiveness, convenience and safety of properties, the
inability to collect rents because of the bankruptcy or the
insolvency of tenants, the periodic need to renovate, repair and
release space and the costs thereof, the costs of maintenance and
insurance, and increased operating costs. The Investment Advisor
addresses market risk through a selective investment process,
credit evaluations of tenants, ongoing monitoring of tenants and
through effective management of the property.
The valuation report received from the independent valuer
included a 'Material Valuation Uncertainty' paragraph in relation
to the market risks linked to the COVID-19 pandemic: this paragraph
explains that the valuer has attached less weight to previous
market evidence for comparison purposes to achieve an informed
opinion on value. The valuer therefore recommends that a higher
degree of caution should be attached to this valuation compared to
valuations carried out under normal circumstances.
7. Investments at fair value through profit or loss
("FVTPL")
31 December 2020 30 June 2020
GBP000s GBP000s
(Unaudited) (Audited)
Fair value of investments at FVTPL at beginning of period/year 1,684 -
Purchases 1,866 1,633
Sales (23) (30)
Realised gains 10 12
Unrealised gains 993 69
---------------------------------------------------------------------- ----------------- -------------
Total investments at FVTPL 4,530 1,684
---------------------------------------------------------------------- ----------------- -------------
As at 31 December 2020, the cost of the Investments at FVTPL was
GBP3.467million (30 June 2020: GBP1.615million).
31 December 2020 31 December 2019
GBP000s GBP000s
(Unaudited) (Unaudited)
Realised gains 10 -
Unrealised gains 993 3
------------------------------------------------ ----------------- -----------------
Total gains on investments at FVTPL 1,003 3
------------------------------------------------ ----------------- -----------------
Dividend income 9 -
------------------------------------------------ ----------------- -----------------
Total gains on financial assets at FVTPL 1,012 3
------------------------------------------------ ----------------- -----------------
The fair value of investments at FVTPL are analysed below by
valuation method, according to the levels of the fair value
hierarchy. The different levels have been defined as follows:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
which are observable for asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability which are not based
on observable market data (unobservable inputs).
The following table analyses within the fair value hierarchy the
Company's financial assets at fair value through profit or
loss:
31 December 2020 Level 1 Level 2 Level 3 Total
GBP000s GBP000s GBP000s GBP000s
Fair value through profit or loss
- Investments 3,498 1,032 - 4,530
=========== ======== ======== ========
As at 31 December 2020, within the Company's financial assets
classified as Level 2, securities totalling GBP836,000 are traded
on the London Stock Exchange or AiM Market, with the remaining
securities of GBP196,000 being traded on the Aquis Exchange.
30 June 2020 Level 1 Level 2 Level 3 Total
GBP000s GBP000s GBP000s GBP000s
Fair value through profit or loss
- Investments 1,007 677 - 1,684
=========== ======== ======== ========
As at 30 June 2020, within the Company's financial assets
classified as Level 2, securities totalling GBP512,000 were traded
on the London Stock Exchange or AiM Market, with the remaining
securities of GBP165,000 being traded on the Aquis Exchange.
The valuation and classification of the investments are reviewed
on a regular basis. The Board determines whether or not transfers
have occurred between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input which is
significant to the fair value measurement as a whole) at the end of
each reporting period.
8. Trade and other receivables
31 December
2020 30 June 2020
GBP000s GBP000s
(Unaudited) (Audited)
---------------------- ------------ -------------
Other receivables - 9
Rent receivable - 5
Dividends receivable 4 -
VAT receivable 60 69
Prepayments 25 17
Total 89 100
------------------------ ------------ -------------
The carrying values of trade and other receivables are
considered to be approximately equal to their fair value.
Rent receivable is non-interest bearing and typically due within
30 days.
9. Trade and other payables
31 December 2020 30 June 2020
GBP000s GBP000s
(Unaudited) (Audited)
-------------------------------------- ----------------- -------------
Investment Advisor's fee (note 13) 13 25
Administration fees 13 30
Audit fee 22 39
Directors' fees payable (note 13) - 5
Other 90 106
Total 138 205
-------------------------------------- ----------------- -------------
Trade and other payables are non-interest bearing and are
normally settled on 30-day terms. The carrying values of trade and
other payables are considered to be approximately equal to their
fair value.
10. Share capital
31 December 2020 30 June 2020
Number of shares Number of shares
(Unaudited) (Audited)
Shares of no par values issued and fully paid
Balance at the start of the period/year 33,740,929 20,758,441
Share issues - 12,982,488
Balance at the end of the period/year 33,740,929 33,740,929
----------------------------------------------- ----------------- -----------------
31 December 2020 30 June 2020
GBP000s GBP000s
(Unaudited) (Audited)
------------------------------------------------------------------ ----------------- -------------
Balance at the start of the period/year 12,890 9,577
Profit/(loss) for the period/year and other comprehensive income 568 (297)
Share issue - 3,895
Share issue costs - (285)
Balance at the end of the period/year 13,458 12,890
----------------- -------------
11. Net asset value per ordinary share
The Net Asset Value per Ordinary Share at 31 December 2020 is
based on the net assets attributable to the ordinary shareholders
of GBP13.458 million (30 June 2020: GBP12.890 million) and on
33,740,929 (30 June 2020: 33,740,929) ordinary shares in issue at
the Consolidated Statement of Financial Position date.
12. Financial risk management
The Company's financial risk management objectives and policies
are consistent with those disclosed in the Company's Audited Annual
Financial Statements for the year ended 30 June 2020.
13. Related party transactions
The Directors are responsible for the determination of the
Company's investment objective and policy and have overall
responsibility for the Group's activities including the review of
investment activity and performance.
Mr Nixon, a Director of the Company, is also Founding Partner
and a Designated Member of Worsley Associates LLP ("Worsley"). The
total charge to the Consolidated Income Statement during the period
in respect of Investment Advisor fees to Worsley was GBP80,409 (31
December 2019: GBP76,464) of which GBP13,315 (30 June 2020:
GBP24,555) remained payable at the period end.
Upon appointment of Worsley as Investment Advisor (31 May 2019),
Mr Nixon waived his future Director's fee as he is a member of the
Investment Advisor.
As at 31 December 2020, Mr Nixon held 29.88% of the shares in
the Company (30 June 2020: 29.88%).
As at 31 December 2020, Mr Scott held 1.19% of the shares in the
Company (30 June 2020: 1.19%).
The aggregate remuneration and benefits in kind of the Directors
and directors of its subsidiaries in respect of the Company's
period ended 31 December 2020 amounted to GBP22,829 (31 December
2019: GBP25,965) in respect of the Group of which GBP17,500 (31
December 2019: GBP22,095) was in respect of the Company.
All the above transactions were undertaken at arm's length.
14. Commitments and contingent liability
As at 31 December 2020 the Company has no commitments (30 June
2020: no commitments).
Disposal of the Curno property may, depending on the terms,
incur Italian taxes which would be material in the context of
shareholders' Funds. As at 31 December 2020 and up to the date of
approval, no disposal was in discussion. As a result, no provision
has been included in these Financial Statements.
15. Subsequent events
The cinema lease had been amended in June 2020, but the closure
of the cinema under Italian regulations for a second time, in
October 2020, led UCI in February 2021 to seek a further
renegotiation of 2021 rentals under the lease, talks in respect of
which are ongoing.
On the 10 March 2021, the financial year end of Property Trust
Luxembourg 2 S.A.R.L. was changed from 30 June to 31 March to be in
line with the Company's year end.
There were no other post period end events which require
disclosure in these Financial Statements.
Portfolio statement (unaudited)
as at 31 December 2020
Fair value % of total
Currency GBP'000 net assets
----------------------------------- ---------- ----------- ------------
UCI Curno EUR 8,583 63.78%
Less: lease incentive EUR (873) (6.49%)
----------- ------------
Total 7,710 57.29%
Smiths News Plc (formerly Connect
Group Plc) GBP 2,932 21.79%
Northamber Plc GBP 459 3.41%
Total equities greater than 2% of
Net Assets 3,391 25.20%
Other equities 1,139 8.46%
Total equities 4,530 33.66%
Total investments 12,240 90.95%
----------- ------------
Investment Policy
Investment Objective and Policy Change
At an EGM held on 28 June 2019, an ordinary resolution was
passed to adopt a new Investment Objective and Policy.
Investment Objective
The Company's investment objective is to provide shareholders
with an attractive level of absolute long-term return, principally
through the capital appreciation and exit of undervalued
securities. The existing real estate asset of the Company will be
realised in an orderly manner, that is with a view to optimising
the disposal value of such asset.
Investment Policy
The Company aims to meet its objectives through investment
primarily, although not exclusively, in a diversified portfolio of
securities and related instruments of companies listed or admitted
to trading on a stock market in the British Isles (defined as (i)
the United Kingdom of Great Britain and Northern Ireland; (ii) the
Republic of Ireland; (iii) the Bailiwicks of Guernsey and Jersey;
and (iv) the Isle of Man). The majority of such companies will also
be domiciled in the British Isles. Most of these companies will
have smaller to mid-sized equity market capitalisations (the
definition of which may vary from market to market, but will in
general not exceed GBP600 million). It is intended to secure
influential positions in such British quoted securities with the
deployment of activism as required to achieve the desired
results.
The Company, Property Trust Luxembourg 2 SARL and Multiplex 1
SRL ("the Group") may make investments in listed and unlisted
equity and equity-related securities such as convertible bonds,
options and warrants. The Group may also use derivatives, which may
be exchange traded or over-the-counter.
The Group may also invest in cash or other instruments including
but not limited to: short, medium or long term bank deposits in
Pound sterling and other currencies, certificates of deposit and
the full range of money market instruments; fixed and floating rate
debt securities issued by any corporate entity, national
government, government agency, central bank, supranational entity
or mutual society; futures and forward contracts in relation to any
other security or instrument in which the Group may invest; put and
call options (however, the Group will not write uncovered call
options); covered short sales of securities and other contracts
which have the effect of giving the Group exposure to a covered
short position in a security; and securities on a when-issued basis
or a forward commitment basis.
The Group pursues a policy of diversifying its risk. Save for
the Curno Asset until such time as it is realised, the Group
intends to adhere to the following investment restrictions:
-- not more than 30 per cent. of the Gross Asset Value at the
time of investment will be invested in the securities of a single
issuer (such restriction does not, however, apply to investment of
cash held for working capital purposes and pending investment or
distribution in near cash equivalent instruments including
securities issued or guaranteed by a government, government agency
or instrumentality of any EU or OECD Member State or by any
supranational authority of which one or more EU or OECD Member
States are members);
-- the value of the four largest investments at the time of
investment will not constitute more than 75 per cent of Gross Asset
Value;
-- the value of the Group's exposure to securities not listed or
admitted to trading on any stock market will not exceed in
aggregate 35 per cent. of the Net Asset Value;
-- the Group may make further direct investments in real estate
but only to the extent such investments will preserve and/or
enhance the disposal value of its existing real estate asset. Such
investments are not expected to be material in relation to the
portfolio as a whole but in any event will be less than 25 per
cent. of the Gross Asset Value at the time of investment. This
shall not preclude Property Trust Luxembourg 2 SARL and Multiplex 1
SRL (the "Subsidiaries") from making such investments for
operational purposes;
-- the Company will not invest directly in physical commodities,
but this shall not preclude its Subsidiaries from making such
investments for operational purposes;
-- investment in the securities, units and/or interests of other
collective investment vehicles will be permitted up to 40 per cent.
of the Gross Asset Value, including collective investment schemes
managed or advised by the Investment Advisor or any company within
the Group; and
-- the Company must not invest more than 10 per cent. of its
Gross Asset Value in other listed investment companies or listed
investment trusts, save where such investment companies or
investment trusts have stated investment policies to invest no more
than 15 per cent. of their gross assets in other listed investment
companies or listed investment trusts.
The percentage limits above apply to an investment at the time
it is made. Where, owing to appreciation or depreciation, changes
in exchange rates or by reason of the receipt of rights, bonuses,
benefits in the nature of capital or by reason of any other action
affecting every holder of that investment, any limit is breached by
more than 10 per cent., the Investment Advisor will, unless
otherwise directed by the Board, ensure that corrective action is
taken as soon as practicable.
Borrowing and Leverage
The Group may engage in borrowing (including stock borrowing),
use of financial derivative instruments or other forms of leverage
provided that the aggregate principal amount of all borrowings
shall at no point exceed 50 per cent. of Net Asset Value. Where the
Group borrows, it may, in order to secure such borrowing, provide
collateral or security over its assets, or pledge or charge such
assets.
Corporate Information
Directors (All non-executive) Registered Office
W. Scott (Chairman) Sarnia House
R. H. Burke Le Truchot
B. A. Nixon St Peter Port
Guernsey, GY1 1GR
Investment Advisor Administrator and Secretary
Worsley Associates LLP Praxis Fund Services Limited
First Floor Sarnia House
Barry House Le Truchot
20 - 22 Worple Road St Peter Port
Wimbledon, SW19 4DH Guernsey, GY1 1GR
United Kingdom
Financial Adviser Corporate Broker
Shore Capital and Corporate Limited Shore Capital Stockbrokers Limited
Cassini House Cassini House
57 St James's Street 57 St James's Street
London, SW1A 1LD London SW1A 1LD
United Kingdom United Kingdom
Independent Auditor Registrar
BDO Limited Computershare Investor Services (Guernsey)
Place du Pre Limited
Rue du Pre 1(st) Floor
St Peter Port Tudor House
Guernsey, GY1 3LL Le Bordage
St Peter Port
Guernsey, GY1 1DB
Registration Number
43007
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