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