REG - Palace Capital PLC - Preliminary Results for year ended 31 March 2024
06/06/2024 07:00
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RNS Number : 3133R Palace Capital PLC 06 June 2024
6 June 2024
PALACE CAPITAL PLC
("Palace Capital", the "Group" or the "Company")
Preliminary Results for the year ended 31 March 2024
DELIVERING ON OUR STRATEGY FOR SHAREHOLDERS
Palace Capital (LSE: PCA) announces its audited preliminary results for the
year ended 31 March 2024.
Steven Owen, Executive Chairman, commented:
"Notwithstanding challenging property and financial markets, we have continued
to successfully progress our disposal strategy with the result that the
Company is now in a substantial net cash position. Since 1 April 2023, the
Company has exchanged or completed on the sale of 24 investment properties for
£112.9 million and exchanged or completed on £4.4 million of sales of
unencumbered residential units at Hudson Quarter, York. During FY24, the
Company proactively reduced gross debt by £56.0 million to £8.3 million and
the significant de-leveraging of the balance sheet has resulted in a net cash
position of £11.5 million as at the year end which has increased to £19.7
million as at 5 June. Proforma net cash, assuming that all exchanged
properties complete, is currently £30.1 million. The results below reflect
the disposals and debt reduction strategy as well as the good progress made
with our asset management activities.
"Since July 2022, cash returned to shareholders from share buyback programmes
totals £21.9 million. Following the announcement of these results today, the
Company will shortly be launching a tender offer to return capital of
approximately £22 million to shareholders and a further announcement to
shareholders will be made later this month with the details provided in a
circular. Subject to shareholder approval at a specially convened General
Meeting, the Company expects to complete the tender offer and return cash to
shareholders during July 2024.
"Assuming that the properties currently under offer are sold, the Company will
have six investment properties remaining valued at £54.4m. Each of these
properties has its own asset management initiatives which are required to be
completed in order to be ready for sale. In addition there are 13 apartments
remaining at Hudson Quarter valued at £6.6 million assuming that the two
under offer are sold. Sales of these will continue subject to market
conditions which have materially improved since the start of 2024.
"An additional tender offer is likely to take place later in the year as
further property sales are completed."
Income statement metrics Year ended Year ended Change
31 March 2024 31 March 2023
Net rental income £9.6m £15.6m (38.5%)
Adjusted profit before tax £5.4m £7.6m (28.9%)
Adjusted earnings per share 13.8p 17.1p (19.3%)
IFRS loss before tax (£9.3m) (£35.8m)
Basic earnings per share (23.7p) (80.2p)
Dividends
Dividend per share 15.0p 15.0p
Balance Sheet and operational metrics
EPRA NTA per share 262p 296p (11.5%)
Net asset value £97.8m £128.5m (23.9%)
Share buybacks (£15.2m) (£6.7m) 126.9%
Like-for-like portfolio valuation decrease (15.5%) (18.6%)
Total accounting return (6.4%) (20.4%)
Total shareholder return 13.7% (15.9%)
EPRA occupancy rate 82.0% 87.7%
Debt
Loan to value nil 31%
Total gross debt £8.3m £64.3m (87.1%)
Total net (cash)/debt (£11.5m) £58.8m (119.6%)
Average cost of debt 2.9% 5.8% (290 bps)
Average debt maturity 2.3 years 2.0 years
Financial highlights
· Adjusted profit before tax of £5.4 million (2023: £7.6 million)
reflecting the reduction in income following disposals, offset in part by the
reduction in associated interest costs and recurring administrative expenses.
· IFRS loss before tax of £9.3 million (2023: £35.8 million loss)
primarily due to the portfolio revaluation deficit of £15.4 million.
· Adjusted EPS of 13.8 pence (2023: 17.1 pence) reflecting the
movement in adjusted profit before tax but partly mitigated by the accretive
share buyback programmes.
· Total dividends paid or declared for the year of 15.0 pence per
share (2023: 15.0 pence per share).
· EPRA NTA per share decreased by 11.5% to 262 pence (2023: 296
pence) due to the portfolio revaluation deficit, offset by the 8.0 pence per
share buyback accretion.
· Total property portfolio valuation reduced by 15.5% on a
like-for-like basis (2023: 18.6% decrease).
· Net cash position of £11.5 million (2023: Net debt £58.8 million,
LTV 31%). In the twelve months to 31 March 2024, gross debt reduced by £56.0
million to £8.3 million. Net debt to net cash movement £70.3 million.
· Annualised administration cost savings of £0.9 million (2023:
£1.4 million) following the Board changes and the relocation of the Company's
head office, together with other cost reduction measures.
· During FY24, further share buyback programme announced with 6.2
million shares purchased for £15.2 million. Total cash returned to
shareholders from buyback programmes to date is £21.9 million.
· A resolution proposing the renewal of the share buyback authority
to purchase up to 15% of shares will be proposed at the 2024 AGM.
Operational highlights
· Successful disposal of 21 investment properties for £93.7 million,
4.4% ahead of the 31 March 2023 book value.
· Sale of seven apartments at Hudson Quarter, York for £3.2 million.
· Post 31 March 2024, exchanged contracts or completed the sales of
three investment properties totalling £18.5 million, and also conditionally
exchanged on an office unit at St James' Gate, Newcastle for £0.7 million.
These sales were in aggregate 1.5% ahead of the 31 March 2024 book value.
· Apartment sales at Hudson Quarter, York have continued post 31 March
2024, with a further two apartment sales having exchanged to the value of
£1.2 million. There are 13 units remaining and two units under offer.
· An additional £1.3 million of annualised net rental income was
created during FY24 through leasing and review activity and the associated
reduction in non-recoverable property costs which was, on average, 5% ahead of
the 31 March 2023 ERVs. Annualised net rental income lost from lease
expiries and breaks totalled £1.2 million resulting in a net additional
annualised increase of £0.1 million from active asset management activity.
Net rental income lost following disposals totalled £6.6 million per annum
resulting in a net loss in annualised net rental income of £6.5 million.
· Rent collection for the 12 months to 31 March 2024 of 98% (2023:
99%).
· EPRA occupancy at 31 March 2024 increased on a like-for-like basis
from 81.2% at 31 March 2023 to 82.0% at 31 March 2024. Proforma occupancy as
at 5 June is 87.6%, reflecting post year end lettings and contracted
disposals.
· WAULT of 5.4 years to break and 7.5 years to expiry reflecting asset
management activities and resilience of portfolio (2023: 4.8 years to break
and 6.5 years to expiry).
· Portfolio asset management activity and disposals continue to improve
the EPC (Energy Performance Certificate) profile across the portfolio: 100%
are now rated A-D and 81.0% are rated A-C (2023: 96.2% and 72.2%
respectively).
PALACE CAPITAL PLC
Steven Owen, Executive Chairman
info@palacecapitalplc.com
Financial PR
FTI Consulting
Dido Laurimore/ Giles Barrie
Tel: +44 (0)20 3727 1000
palacecapital@fticonsulting.com
Palace Capital plc
For further information on Palace Capital plc (LSE: PCA) please visit
www.palacecapitalplc.com (http://www.palacecapitalplc.com/) .
The Annual Report and Accounts together with the Notice convening the 2024
Annual General Meeting will be published and posted to Shareholders in June
2024.
Cautionary Statement
This announcement does not constitute an offer of securities by the Company.
Nothing in this announcement is intended to be, or intended to be construed
as, a profit forecast or a guide as to the performance, financial or
otherwise, of the Company or the Group whether in the current or any future
financial year. This announcement may include statements that are, or may be
deemed to be, ''forward-looking statements''. These forward-looking statements
can be identified by the use of forward-looking terminology, including the
terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'',
''plans'', ''target'', ''aim'', ''may'', ''will'', ''would'', ''could'' or
''should'' or, in each case, their negative or other variations or comparable
terminology. They may appear in a number of places throughout this
announcement and include statements regarding the intentions, beliefs or
current expectations of the directors, the Company or the Group concerning,
amongst other things, the operating results, financial condition, prospects,
growth, strategies and dividend policy of the Group or the industry in which
it operates. By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on circumstances that
may or may not occur in the future and may be beyond the Company's ability to
control or predict. Forward-looking statements are not guarantees of future
performance. The Group's actual operating results, financial condition,
dividend policy or the development of the industry in which it operates may
differ materially from the impression created by the forward-looking
statements contained in this announcement. In addition, even if the operating
results, financial condition and dividend policy of the Group, or the
development of the industry in which it operates, are consistent with the
forward-looking statements contained in this announcement, those results or
developments may not be indicative of results or developments in subsequent
periods. Important factors that could cause these differences include, but are
not limited to, general economic and business conditions, industry trends,
competition, changes in government and other regulation, changes in political
and economic stability and changes in business strategy or development plans
and other risks.
Other than in accordance with its legal or regulatory obligations, the Company
does not accept any obligation to update or revise publicly any
forward-looking statement, whether as a result of new information, future
events or otherwise.
Executive Chairman's statement
Update on delivery of strategic objectives
Notwithstanding challenging property and financial markets, the past year was
again transformational for the Group as it continued to successfully deliver
on its disposal and debt reduction strategy resulting in a significantly
de-leveraged balance sheet which has put the Company into a substantial net
cash position. Since 1 April 2023 to date the Company has exchanged or
completed on the sale of 24 investment properties for £112.9 million and
exchanged or completed on £4.4 million of sales of unencumbered residential
units at Hudson Quarter, York. During FY24 the Company completed the sale of
21 investment properties for £93.7 million which is 4.4% ahead of the 31
March 2023 valuation and completed the sales of seven residential units at
Hudson Quarter, York, for £3.2 million, 5.3% ahead of the 31 March 2023
valuation.
During FY24, the Company proactively reduced gross debt by £56.0 million to
£8.3 million and the significant de-leveraging of the balance sheet resulted
in a net cash position of £11.5 million as at the year end which has
increased to £19.7 million as at 5 June. Proforma net cash, assuming that all
exchanged properties complete, is currently £30.1 million.
Since July 2022, cash returned to shareholders from share buyback programmes
totals £21.9 million of which £15.2 million was returned during FY24. As
part of its strategy of returning cash to shareholders, following the
announcement of these results today, the Company will be consulting with major
shareholders regarding the terms of a tender offer to return capital of
approximately £22 million to shareholders. It is expected that a further
announcement will be made later this month of a tender offer via a circular to
shareholders. Subject to shareholder approval at a specially convened General
Meeting the Company expects to complete the tender offer during July 2024.
As mentioned above, disposal activity has continued since the year end and we
have exchanged contracts or completed the sales of three investment properties
totalling £18.5 million, and also conditionally exchanged on an office unit
at St James' Gate, Newcastle for £0.7 million. These sales were in aggregate
1.5% ahead of the 31 March 2024 book value.
Total investment properties sold since the change of strategy in July 2022
amount to £124.0 million or £135.9 million including residential apartments.
Assuming that the properties currently under offer are sold, the Company will
have six investment properties remaining, each of which have their own asset
management initiatives that are required to be completed in order to be ready
for sale. Additionally, conditions in the investment market for certain types
of assets, particularly leisure assets, are such that, in the Board's view,
the sale of these assets should be deferred until market demand and pricing
improve, particularly given the high income yield and long unexpired lease
terms. Market conditions are continually assessed in order to determine the
optimum time to sell a property assuming all appropriate asset management
initiatives have been completed in relation to such properties. Further
commentary on each of the six investment properties can be found in the
Operational Review.
Operationally, the business remains robust. The team has been proactive in
implementing asset management plans to increase income, reduce void costs and
improve our ESG performance, including EPCs, as set out in the Operational
Review. Rent collection remains high and current occupancy levels remain
resilient.
Palace Capital continues to reduce its level of administrative expenses in
line with its strategy, with measures implemented in the financial year saving
£0.9 million. This includes reducing headcount and relocating its head office
to a smaller office in Victoria, London in December 2023. Annual occupancy
costs of the Company's premises are £0.25 million lower than those of its
former offices in Bury Street, SW1.
Annualised cost savings are now over £2.3 million compared to 2022. These
cost savings represent 51% of FY22 administrative expenses and 31% of FY22
EPRA earnings. We now have a Board of two members and an executive team of six
including myself focused on executing the strategy.
Overview of results
The Group's adjusted profit before tax decreased to £5.4 million (2023: £7.6
million) as a result of income lost through disposals. Investment property
sales during the year period realised a profit of £2.3 million (2023: £0.8
million) whilst trading profits from the sale of residential units contributed
£0.2 million (2023: £0.5 million).
The deficit on the revaluation of the portfolio for the year of £15.4 million
was due principally to softening yields across the whole portfolio but
particularly during the second half of the financial year in relation to the
two leisure assets which accounted for approximately half of the deficit. An
analysis of the valuation deficit is provided in the Operating Review.
Contractual payments to the former Chief Financial Officer and staff of £0.6
million, including associated costs, have been treated as an exceptional item.
A provision of £0.6 million in relation to the Short Term Incentive Plan
("STIP"), which was introduced during FY24, has been made although no payment
will be due until the Completion Date has been determined in accordance with
the rules of the STIP.
Together with other items totalling £0.6 million, the aggregation of the
profits and losses described in the preceding paragraphs account for the IFRS
loss before tax for the year of £9.3 million (2023: £35.8 million loss).
Principally as a result of the revaluation deficit on the portfolio equivalent
to 39 pence per share, offset by the 8 pence per share share-buyback
accretion, EPRA NTA per share decreased by 11.5% to 262 pence per share (2023:
296 pence per share).
As noted above, the Group's balance sheet has been significantly strengthened
following the £56.0 million reduction in gross debt during the year and the
Company being in a net cash position at the year end of £11.5 million (2023:
net debt £58.8 million, LTV 31%).
Board changes and Director Remuneration
I was appointed as Executive Chairman from the AGM held on 26 July 2023,
having previously been (Non-executive) Interim Executive Chairman. Due to the
reduced size of the Company and repayment of bank debt, Matthew Simpson
stepped down from the Board as Chief Financial Officer on 14 November 2023.
Contractual payments to the former Chief Financial Officer of £0.4 million,
including associated costs, have been treated as an exceptional item. Details
are provided in the Directors' Remuneration Report in the Annual Report.
The performance of the 'STIP approved by shareholders at the 2023 AGM and
predicated on the successful disposal of assets in a timely manner is
explained in the Directors' Remuneration Report. Payments, in cash, were made
under the Rules of the STIP to good leavers and these have been accounted for
in the period.
Dividend
The Group paid or declared dividends of 15.0 pence per share in relation to
the year ended 31 March 2024 (2023: 15.0 pence per share), including a
proposed final fourth quarter dividend of 3.75 pence per share. The fourth
quarter final dividend of 3.75 pence per share will be paid, subject to
shareholder approval at the AGM being held on 24 July 2024, on 23 August 2024
to shareholders on the register at 26 July 2024. The ex dividend date will be
25 July 2024. Of this, 1.35 pence per ordinary share will be paid as a
Property Income Distribution ('PID') and 2.40 pence per ordinary share will be
paid as a Non-Property Income Distribution ('Non-PID').
Outlook
Commercial property and financial markets remain challenging but there are
indications that UK interest rates will reduce over the next year following
the sharp fall in inflation over recent months. Until interest rates reduce
and confidence returns to some sectors of the real estate market it is
unlikely that there will be a material upward re-pricing of assets. Given the
reduction in property values seen since the peak of the last cycle in the
Spring of 2022 it is considered that valuations may be close to the bottom of
this current cycle.
At an operational level, the Company continues to make good progress with its
asset management activities despite the difficult and uncertain conditions in
financial and property markets.
Given its strong cash position, the Company remains well placed in terms of
flexibility and optionality regarding the timing of its disposal programme and
other strategic initiatives, including the tender offer referred to above.
Steven Owen
Executive Chairman
5 June 2024
OPERATIONAL REVIEW
SUMMARY OF THE YEAR
The business continues to perform well operationally. The team has been
proactive in implementing asset management plans to increase income, reduce
void costs and improve our ESG performance, including EPCs. Rent collection
remains strong and occupancy levels remain resilient. Total rent collection
for the 12 months to 31 March 2024 was 98% (2023: 99%).
During the year ended 31 March 2024, the Company disposed of 21 investment
properties for £93.7 million, 4.4% ahead of the 31 March 2023 book value.
Seven apartments at Hudson Quarter, York were sold during the year for £3.2
million leaving 13 units remaining at the year end.
ASSET MANAGEMENT
During FY24 there were 23 lease events completed totalling 162,000 sq ft of
space, 5% above the 31 March 2023 ERV ('FY23 ERV'), generating £0.9 million
of additional annualised income, principally from eight new lettings at 5%
above ERV, generating £0.8 million of additional annualised income.
In addition, void savings from new lettings was £0.4 million, resulting in a
total of £1.3 million of annualised net rental income created.
Portfolio asset management activity and disposals continue to improve the EPC
(Energy Performance Certificate) profile across the portfolio: 100% are now
rated A-D and 81.0% are rated A-C (2023: 96.2% and 72.2% respectively).
New lettings in the year included:
· 2 St James' Gate, Newcastle, where Orega, a premium, flexible,
serviced office workspace provider, entered into a 15 year management
agreement to take the second and third floors totalling 22,500 sq ft of the
seven storey, 82,500 sq ft building. Following a comprehensive refurbishment
the operation opened in January 2024, providing c.400 workstations. This
letting significantly increased the occupancy at the property and, together
with the letting to Softcat plc in December 2022, were the first two major
lettings at St James' Gate since the property was acquired in 2017.
· Broad Street Plaza, Halifax, where Calderdale and Huddersfield NHS
Foundation Trust entered into a new 15 year lease and took an additional 6,000
sq ft unit increasing their occupation to over 27,000 sq ft. The rent of £0.4
million per annum on the combined space is over £14 psf and is 41% higher
than the March 2023 ERV. The NHS now accounts for 19% of the net income from
the property.
· Boulton House, Manchester and King's Park House, Southampton where
three lettings totalling £0.2 million rent per annum were achieved at an
average premium to the FY23 ERV of 4%.
Other initiatives during FY24 included the following:
· East Grinstead - new 15 year reversionary lease at Unit A (21,500 sq
ft) from August 2027 to Wickes Group plc at a rent of £0.4 million per annum,
in line with FY23 ERV.
· Salisbury - new 10 year reversionary lease from September 2025 to
Booker Limited at a rent of £0.25 million per annum, which was 22% above the
FY23 ERV.
· HQ York - GRJ occupy the 4(th) and 5(th) floors at rent of £0.32
million per annum expiring November 2031 with a tenant break in December 2027.
We successfully removed the tenant's break in December 2027, thereby
increasing the building's WAULT from 4.9 to 6.5 years.
Since the year end, a key letting has been achieved at Imperial Court,
Leamington Spa (20,419 sq ft) where we have completed a 10 year lease with a
mutual break in year five to Lighthouse Games Ltd at a rent of £0.38 million
per annum, which is in line with the ERV.
Other initiatives since the year end include the agreement in principle with
Vue Cinemas at Sol, Northampton to regear their lease which would bring their
total term to 20 years expiring in 2044, with a material increase in rent and
five yearly upward only rent reviews linked to RPI with a cap and collar
structure. In return the Company will make a significant capital contribution
towards the comprehensive refurbishment of the cinema, including recliner
seating upgrade, associated auditoria decorative works and foyer
refurbishment.
These asset management initiatives are part of the process of creating value
and preparing assets for sale, the timing of which is firmly within the
control of the Company.
PORTFOLIO OVERVIEW
As at 31 March 2024 the portfolio comprised 12 properties (2023: 31)
comprising 62% office, 24% leisure, 4% retail and 10% residential.
CBRE independently valued the portfolio as at 31 March 2024 at £88.7 million,
resulting in a deficit of 15.5% on a like-for-like basis compared with the
valuation as at 31 March 2023. The largest declines were the two leisure
assets at 27.2% and offices at 12.5%.
The seven office assets fell 12.5%, which was driven predominantly by a
significant softening of yields to reflect the deterioration in the regional
office investment market. The largest falls were at Hudson Quarter, York
(24.0%), Exeter (19.4%) and Milton Keynes (15.5%) whereas gains were achieved
at Leamington Spa (+5.6%), Harlow (+4.9%) and Fareham (+4.5%) as a result of
asset management initiatives. The ERVs on individual office properties
remained broadly flat with the exception of Milton Keynes where there was an
increase of 22.5% which resulted in an overall increase of 3.0% across the
office portfolio.
The two leisure assets declined by 27.2% overall reflecting the severely
weakened leisure investment market. Sol, Northampton fell 37.5% in value and
Broad Street Plaza, Halifax fell 18.1%. The blended leisure NIY and Equivalent
yields both increased by c.250 bps to 13.4% and 12.8% respectively. Leisure
ERVs increased by 1.3%.
The value of the one retail property was virtually unchanged and residential
declined 2.2%.
PORTFOLIO OVERVIEW
FY24 FY23
Portfolio value £88.7m £192.4m
Net initial yield 8.0% 7.4%
Reversionary yield 13.0% 9.6%
Contractual rental income £8.0m £15.7m
Estimated rental value £10.6m £18.8m
WAULT to break 5.4 years 4.8 years
EPRA vacancy rate 18.0% 12.3%
DISPOSAL AND ASSET MANAGEMENT STRATEGY POST FY24
Since 31 March 2024 we have exchanged or completed on the sale of the
following three investment properties for £18.5 million, 0.1% ahead of the 31
March 2024 book value:
· Boulton House, Manchester for £8.8 million, completion due late
July 2024
· Kiln Farm, Milton Keynes for £6.4 million
· Sandringham House, Harlow for £3.3 million
We have also conditionally exchanged on a self-contained office unit at 3B St
James' Gate, Newcastle to an owner occupier for £0.7 million, 69% above the
value as at 31 March 2024 and are under offer to sell Copperfields, Dartford,
in an off-market transaction, and Admiral House and Nicholson Gate, Fareham.
The portfolio as at 5 June 2024 consists of nine properties being eight
investment properties and one residential property in York.
Apartment sales at Hudson Quarter, York have continued post 31 March 2024,
with a further two apartment sales having exchanged to the value of £1.2
million. There are 13 units remaining and two units under offer. Sales of
these will continue, subject to market conditions which have materially
improved since the start of 2024.
The strategy for the remaining six investment properties, which had a value of
£54.4 million as at 31 March 2024, assuming the completion of the sale of
those properties currently exchanged and that the agreed sales of Dartford and
Fareham complete is as follows:
Broad Street Plaza, Halifax
The investment market for leisure assets is currently difficult with debt
finance being hard to obtain for such assets, notwithstanding the diversity
and longevity of income from some of these assets, including Halifax. The lack
of liquidity in this sector means that valuations can be volatile. The current
income yield on a geared basis for Halifax is 35% and the WAULT to expiry is
14.8 years (9.6 years to break).
There are also various ongoing asset management initiatives that are targeted
to be completed prior to sale but the key determinant in terms of timing for
disposal is an improvement in debt markets and market sentiment for leisure
assets.
Sol, Northampton
As noted above, the agreement to regear the Vue lease is transformational for
this property and extends the WAULT to 13.4 years on expiry and 13.1 years to
break. There are also other negotiations with both existing and prospective
tenants for repositioning some of the units with the potential to improve and
diversify the overall leisure offering at the property which will contribute
towards it being an in-town destination centre.
On the investment side, as is the case with Halifax, the leisure market is
weak with a limited pool of buyers and therefore, the focus is on the asset
management activity to drive value and the timing for the disposal of Sol will
depend on an improvement in debt and property markets.
St James' Gate, Newcastle
Active asset management initiatives are underway and further lettings of the
vacant space are required in order to increase the occupancy from its current
level of 77% and extend the WAULT prior to the asset being ready for sale.
Additionally, a track record of occupancy and operating income under the
management agreement with Orega needs to be established before a sale can be
contemplated as to sell otherwise will not, in our view, realise full value.
The lettings to Softcat plc and Orega demonstrate the potential of this
property.
HQ, York (Commercial)
We are under offer on the lower ground vacant office suite (3,660 sq ft) and,
assuming the lease is completed, the property will be 90% occupied with only
half a floor (2,932 sq ft) remaining available. We have also removed
significant lease breaks on the 4(th) and 5(th) floors thus extending the
WAULT from 4.9 to 6.5 years. HQ York is an institutional grade property and
subject to market conditions and the level of interest rates, it is expected
that it will be marketed in Autumn 2024.
Imperial Court and House, Leamington Spa
This property is now fully let following the recent letting of Imperial Court
to Lighthouse Games. Other asset management activities are under way in order
to achieve a vacant possession block date in five years' time which will
provide an opportunity for a potential redevelopment of the entire site.
It is expected that this property will be marketed in Autumn 2024.
The Forum, Exeter
We are actively exploring the principle of a change of use for this 1970s
office building to one that we believe will realise more value on sale. As
part of this strategy, we are looking to achieve a vacant possession block
date within the next three years and are in the process of preparing a
pre-application submission to Exeter City Council.
If these initiatives are successful, we will then market the property for sale
which is likely to be in Q4 2024/Q1 2025 subject to market conditions.
Post 31 March 2024, total residential and investment sales exchanged or
completed currently stand at £20.4 million and as a result, since the change
of strategy announcement on 19 July 2022, investment property disposals
(either completed or exchanged) have generated proceeds of £124.0 million at
a 17.0% reduction to the March 2022 valuation (which was the peak of the
current property cycle) or 3.7% ahead when compared with the relevant March
valuation prior to sale.
Daniel Davies, Head of Asset Management
Thomas Hood, Head of Investment
5 June 2024
FINANCIAL REVIEW
Financial Overview
The Group's adjusted profit before tax decreased to £5.4 million (2023: £7.6
million) as a result of income lost through disposals.
Principally as a result of the revaluation deficit on the portfolio equivalent
to 39 pence per share, offset by the 8 pence per share share-buyback
accretion, EPRA NTA per share decreased by 11.5% to 262 pence per share (2023:
296 pence per share).
Against a backdrop of economic uncertainty, the Group continued to deliver at
an operational level, by significantly reducing gross debt in a rising
interest rate environment and making substantial progress in reducing
administration costs, with £0.9 million of annualised cost savings made in
the year.
Investment property sales during the year period realised a profit of £2.3
million (2023: £0.8 million) whilst trading profits from the sale of
residential units contributed £0.2 million (2023: £0.5 million).
The deficit on the revaluation of the portfolio for the year of £15.4 million
was due principally to softening yields across the whole portfolio but
particularly during the second half of the financial year in relation to the
two leisure assets which accounted for approximately half of the deficit.
Contractual payments to the former Chief Financial Officer and staff of £0.6
million, including associated costs, have been treated as an exceptional item.
A provision of £0.6 million in relation to the Short Term Incentive Plan
("STIP"), which was introduced during FY24, has been made although no payment
will be due until the Completion Date has been determined in accordance with
the rules of the STIP.
Together with other items totalling £0.6 million, the aggregation of the
profits and losses described in the preceding paragraphs account for the IFRS
loss before tax for the year of £9.3 million (2023: £35.8 million loss).
FINANCIAL HIGHLIGHTS
2024 2023
Income growth
IFRS loss before tax (£9.3m) (£35.8m)
Adjusted profit before tax £5.4m £7.6m
EPRA earnings £4.0m £5.7m
Basic EPS (23.7p) (80.2p)
EPRA EPS 10.1p 12.7p
Adjusted EPS 13.8p 17.1p
Dividend for the year 15.0p 15.0p
Capital growth
Like-for-like valuation decrease (15.5%) (18.6%)
Net Asset Value £97.8m £128.5m
Basic NAV per share 260p 294p
EPRA NTA per share 262p 296p
Total accounting return (6.4%) (20.4%)
Total shareholder return 13.7% (15.9%)
The summary of the Group financial results are as follows:
Income Statement Summary
Income Statement 31 March 31 March
2023
2024
£m
£m
Gross property income 12.1 17.9
Property operating expenses (2.5) (2.6)
Expected Credit Loss provision - 0.3
Net rental income 9.6 15.6
Recurring administration expenditure (2.6) (4.1)
Finance income 0.3 -
Finance costs (1.9) (3.9)
Adjusted profit before tax 5.4 7.6
Tax - 0.1
Adjusted profit after tax 5.4 7.7
Payments to former Directors and Staff (including associated costs) (0.6) (1.8)
Short term incentive plan provision (including associated costs) (0.6) -
Share based payments (0.2) (0.2)
EPRA earnings 4.0 5.7
Loss on revaluations (15.4) (42.9)
Trading profit 0.2 0.5
Profit on disposal of investment properties 2.3 0.8
Other income statement movements (0.5) 0.2
IFRS loss after tax (9.4) (35.7)
Net rental income reduced by £6.0 million or 38.5% to £9.6 million (2023:
£15.6 million) largely due to net income lost from disposals in the year of
£5.0 million. Property operating expenses remained stable at £2.5 million,
with void savings from disposals in the year of £0.2 million being offset by
a £0.1 million increase in void costs as a result of inflationary pressures
on service charge and insurance costs on our remaining vacant units.
The Company has continued to reduce its cost base, with annualised cost
savings of £0.9 million in the year. As a result of cost savings implemented
in the prior year of £1.4 million, total savings for FY23 and FY24 to date
are £2.3 million. Recurring administrative costs in the year reduced by 36.6%
to £2.6 million (March 2023: £4.1 million) for the period.
Finance costs reduced by £2.0 million or 51.3% to £1.9 million (2023: 3.9
million) as a direct result of repaying all of its floating rate debt
facilities in the year. The Group priorities keeping cash reserves in its
instant access deposit account, and during the year, our active cash
management enabled us to receive £0.3 million in interest income.
Rent collection remained strong at 98% (2023: 99%) throughout the year as
tenant financial covenant health remained robust through the economic
uncertainty.
Quarter Quarter Quarter Quarter Year ended
starting starting starting starting 31 Mar 24
Mar 23
Jun 23
Sep 23
Dec 23
£m
£m
£m
£m
£m
Total demanded 3.9 3.0 2.8 2.4 12.1
Total collected 3.9 3.0 2.7 2.3 11.9
Outstanding - - 0.1 0.1 0.2
Current collection rates 99% 99% 99% 96% 98%
Shareholder value
EPRA Net Tangible Assets ("NTA") decreased by 34.0 pence per share or 11.5% to
262 pence (2023: 296 pence) during the year. This was largely due to the
revaluation deficit of £15.4 million or 38.9 pence per share, equivalent to a
15.5% reduction in the portfolio on a like-for-like basis.
Other movements to note include the buyback of shares of £15.2 million,
increasing EPRA NTA by 8.0 pence per share, the profit on disposal of assets
and Hudson Quarter trading profit of £2.5 million, contributing 6.3 pence per
share. These were offset by the fair value, downward adjustment of trading
properties (HQ York residential) of £0.3 million, or 0.7 pence per share, the
payments including associated costs to the former Director and Staff of £0.6
million reducing EPRA NTA by 1.5 pence per share, and the Short Term Incentive
Plan provision of £0.6 million or 1.6 pence per share. Net adjusted earnings
after dividends paid, decreased EPRA NTA by a further 1.2 pence per share.
Other movements contributed to a further reduction of 4.4 pence per share.
EPRA Net Tangible Assets Movement
£m No. of diluted shares Pence per share
EPRA NTA at 31 March 2023 129.3 43,728,212 296p
Share buyback (15.2) (6,160,000) 8.0p
EPRA NTA after buyback 114.1 37,568,212 304p
Adjusted earnings before tax 5.4 13.8p
Profit on disposal of investment properties 2.3 5.8p
Hudson Quarter trading profit 0.2 0.5p
Loss on revaluation of investment properties (15.4) (38.9p)
Cash dividends paid (6.0) (15.0p)
Fair value adjustment of trading properties (0.3) (0.7p)
Short term incentive plan provision (incl. associated costs) (0.6) (1.6p)
Payments to former Directors and Staff (incl. associated costs) (0.6) (1.5p)
Other movements* (0.8) (13,687) (4.4p)
EPRA NTA at 31 March 2024 98.3 37,554,525 262p
*Other movements include debt termination costs, shares purchased by EBT, the
denominator effect of the reduced number of shares at period end compared with
the average for the period and the effect of rounding.
FINANCING
The Group significantly reduced its gross debt in the year by 87.1% to £8.3
million (2023: £64.3 million) and at the year end only one debt facility
remained which is at a fixed interest rate of 2.9% until July 2026. The
significant de-leveraging of the balance sheet resulted in a net cash position
of £11.5 million as at the year end (2023: Net debt £58.8 million, LTV 31%)
which has increased to £19.7 million as at 5 June. Proforma cash reserves,
assuming that all exchanged properties complete, are currently £30.1 million.
The average cost of debt in the year reduced to 2.9% (2023: 5.8%), as a result
of repaying all the floating rate debt facilities. This included full
repayment of the Santander, Barclays, NatWest, and Lloyds debt facilities. The
Group prioritised repayment of floating rate facilities to minimise the
exposure and impact of interest rate increases to the Group. At 31 March 2024,
we held £8.3 million of fixed debt (2023: £8.6 million), which was 100% of
overall debt (2023: 13%).
Set out below is a table showing the movement in gross debt during the year:
£m
Gross debt at 31 March 2023 64.3
Repayment of debt from disposals (54.6)
Amortisation of loans (1.4)
Gross debt at 31 March 2024 8.3
Amortisation of loans (0.1)
Gross debt at 5 June 2024 8.2
The Group's key debt metrics are summarised in the table below:
DEBT METRICS
31 March 31 March
2024 2023
Loan to value nil 31%
Total gross debt £8.3m £64.3m
Total fixed debt £8.3m £8.6m
Average cost of debt 2.9% 5.8%
Average debt maturity 2.3 years 2.0 years
NAV gearing nil 46%
Andrew Wolfe
FINANCIAL CONTROLLER
5 June 2024
RISK MANAGEMENT
RISK FRAMEWORK
The Board has overall responsibility for ensuring that an effective system of
risk management and internal control exists within the business and confirms
that it has undertaken a robust assessment of the Group's emerging and
principal risks and uncertainties.
Risk management is an inherent part of the Board's decision making process.
This is then embedded into the business and its systems and processes. The
Board reviews its overall risk appetite and regularly considers, via the Audit
and Risk Committee, the principal risks facing the company, management's plans
for mitigating these and emerging risks. The Committee also considers, at
least annually, the effectiveness of the Company's system of risk management
and internal control. Further information on the work of the Committee in this
area is available in the Audit and Risk Committee report in the Report and
Accounts.
Our approach to risk identification and our open and supportive culture means
that asset managers and key individuals in the finance team are able to report
directly and at an early stage on issues, allowing management to take
appropriate mitigating action.
EMERGING RISKS
If economic and geo-political stability remains uncertain or worsens, this
could have an impact on the commercial property market with reduced valuations
and rental income. Further cost of living issues may negatively impact
consumer sentiment and inflation could reduce spending further while direct
and indirect costs to the Group may increase further which may not be fully
recoverable. A prolonged bout, new variants of COVID-19 or further pandemics
may lead to further interruption of large parts of the economy for a
significant period.
GOING CONCERN ASSESSMENT
In accordance with the 2018 UK Corporate Governance Code (the Code), the
Directors have assessed the Group's position over the:
· Short-term (over the next 12 months to June 2025 as required by the
'Going concern' provision) and;
· Medium-term (a 3 year period to June 2027 as required by the
'Viability statement' provision)
GOING CONCERN
The Directors regularly assess the Group's ability to continue as a going
concern. The Strategic report sets out in detail the Group's financial
position, cash flows, liquidity position, borrowing facilities and the factors
which will affect future performance. In assessing the going concern, the
Directors considered:
· The Group's current financial position including cash and drawn debt
· The Group's 12 month 'base case scenario' forecast to June 2025,
which is management's best estimate of market and business changes, taking
into account:
o Disposal of investment properties
o Residential sales
o Ability to satisfy bank covenants
o Committed capital expenditure
o Rent collection
· Downside scenario on the 12 month base case scenario forecast to
June 2025
The Group is in a strong financial position. At 31 March 2024 the Group had
£19.8 million of cash and cash equivalents. The fair value of our property
portfolio is £88.7 million with net assets of £97.8 million. During the
year, the Group repaid £56.0 million of floating rate debt, funded by
investment property and Hudson Quarter residential sales, with drawn debt at
31 March 2024 of £8.3 million (31 March 2023: £64.3 million). The Group only
has one debt facility remaining, which is at a fixed interest rate of 2.9% and
matures in July 2026. The Group was in a net cash position of £11.5 million
at year end (31 March 2023: Net debt of £58.8 million, LTV of 31%). During
the year, the Group collected 98% of all rents and complied with all ICR and
LTV bank covenants, despite rising interest rates. At the date of this
assessment, there are no bank facilities expiring within the going concern
period. In addition to the strong financial position of the Group at 31 March
2024, the Group continued to strengthen its balance sheet post year end, with
three investment properties completed or exchanged for £18.5 million, 0.1%
ahead of 31 March 2024 book values. At the date of this assessment, cash of
£27.9 million and drawn debt of £8.2 million.
The Directors conducted a detailed 12 month base case scenario forecast to
June 2025, making various assumptions over asset sales, rent collection and
committed capital expenditure. The forecasts indicated that the Group:
· Has strong sustainable cash flows and would be able to meet its
liabilities as they fall due over the next 12 months and;
· Will comply with all ICR and LTV bank covenants
In addition to the detailed 12 month base case scenario forecast to June 2025,
the Directors have considered a downside scenario in assessing the Groups'
ability to continue as a going concern. Sensitivity analyses were undertaken
to assess the impact on the business and in particular the bank covenants.
The downside scenario assumptions used in the assessment included:
• 30% reduction in all property bank valuations
• 15% reduction in rent collection
• Slowdown in residential sales
Even on the downside scenario described above, the Group will still be able to
meet its liabilities as they fall due over the next 12 months and will still
be compliant on all ICR and LTV bank covenants. As the only debt facility
remaining is at a fixed interest rate of 2.9%, rising interest rates will not
impact its ICR covenants.
GOING CONCERN STATEMENT
Based on the analysis undertaken on the base case and downside scenario, the
Group has sufficient liquidity to meet its ongoing liabilities that fall due
over the assessment period. Given the market information available, the
Directors are not aware of any material uncertainty that exists that may cast
doubt upon the Group's or Company's ability to continue as a going concern. As
a result, the Directors consider it appropriate to continue to prepare the
financial statements on a going concern basis. The Board notes that it shall
take time to prepare assets for possible disposal in line with its stated
strategy.
VIABILITY
In accordance with provision 31 of the UK Corporate Governance Code and taking
into consideration the current economic uncertainty, the Directors have
assessed the prospects of the Group and future viability over a three-year
period to June 2027, being longer than the 12 months required by the "Going
Concern" provision.
The Board's assessment of the Group's viability for the next three years has
been made with reference to:
• The impact of the current economic uncertainties and resulting
impact on the Group and our tenants' ability to operate and meet their rental
obligations.
• The key principal risks of the business and its risk appetite.
• The impact on business operations, mainly rent collection, and
progress on residential sales at Hudson Quarter, in the event of a downturn in
the economy.
• The Group's current position and its ability to meet future
financial obligations to remain covenant compliant.
REVIEW PERIOD
The Board considers a period of three years to be appropriate over which to
assess the long-term viability of the Company for the following reasons:
• It reflects the Group's view on the length of time needed to
complete asset management initiatives
• The Group's debt maturity at 31 March 2024 was 2.3 years
• The Group's WAULT to break at 31 March 2024 was 5.4 years
ASSESSMENT
The Directors conducted a detailed 3-Year viability assessment which included
a base case scenario forecast to June 2027, making various assumptions over
asset sales, rent collection and committed capital expenditure.
In addition to the base case scenario, the Directors have undertaken a robust
scenario assessment of the risks which could threaten the 3-year viability or
the operational existence of the Group. As part of the reasonable downside
modelling, the Directors have stress-tested working capital model and cash
flows using the same assumptions as stated above in the Going Concern
assessment.
The Group will likely be smaller resulting from asset sales but having
assessed the current position of the Group, its prospects and principal risks
and taking into consideration the assumptions stated above, the Board has a
reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the next three years.
STRATEGIC RISKS FINANCIAL RISKS
01 02
MARKET CYCLE ECONOMIC AND POLITICAL CAPITAL STRUCTURE AND LIQUIDITY
Risk description Risk description
Failure to react appropriately to changing market conditions and adapt our An inappropriate level of gearing or failure to comply with debt covenants or
corporate strategy could negatively impact shareholder returns. A downturn manage re-financing events could put pressure on cash resources and lead to a
in the market could reduce the appetite in the investment market, leading to funding shortfall for operational activities.
lower valuations and affecting our disposal strategy and ability to return
capital to shareholders. Increasing costs of borrowing and increasing interest rates could affect the
Group's ability to borrow or reduce its ability to repay its debts
Uncertainty in the UK economic landscape, global supply chain issues,
inflation and interest rates brings risks to the property market, supply
chains and to occupiers' businesses. This can significantly impact market
sentiment and our ability to extract value from our properties resulting in
lower shareholder returns, reduced liquidity and increased occupier failure.
Mitigation Mitigation
The Board monitors macro economic issues, market indicators and reviews the The Board regularly reviews its capital risk management policy, gearing
Group's strategy and business objectives on a regular basis. It will tailor strategy and debt maturity profile. The Group's LTV limit is 35%, and capital
the delivery of the Company's strategy in light of current and forecast market has been used to repay debt to reduce exposure to interest rate volatility and
conditions. Disposal of other assets will continue if the market conditions ensure debt compliance. Management maintains a close relationship with its
allow for value to be achieved, whilst active asset management of the assets lender. The Board reviews financial forecasts on a regular basis,
will continue to support in delivering returns to shareholders. Third party including sensitivity against financial covenants. The Audit and Risk
agent's advice is taken on all disposals. Exco regularly reviews market Committee considers the going concern status of the Group biannually. The
conditions. Board considers the allocation of its capital in granular detail to ensure the
most efficient use. Sales of assets can be used to repay debt, fund working
capital requirements or return to shareholders.
Current position Current position
The Board is monitoring and considering the longer term impacts of the cycle The Group's weighted average debt maturity is currently c2.3 years. The
including the potential future of the office and the effects of the enhanced Group's LTV limit is 35% but current LTV is nil. The Company has repaid
ESG requirements. £56.0 million of bank debt in the year to 31 March 2024.
Likelihood after mitigation Likelihood after mitigation
Score 1 (low) - 10 (high)
Score 1 (low) - 10 (high)
6 3
Impact after mitigation Impact after mitigation
Score 1 (low) - 10 (high)
Score 1 (low) - 10 (high)
6 2
Overall Risk Rating Overall Risk Rating
Score 1 (low) - 20 (high)
Score 1 (low) - 20 (high)
12 5
03 04
PORTFOLIO STRATEGY ASSET MANAGEMENT
Risk description Risk description
An inappropriate investment strategy that is not aligned to overall corporate Failure to implement asset business plans and elevated risks associated with
purpose objectives, economic conditions, or tenant demand may result in lower refurbishment could lead to longer void periods, higher arrears and overall
investment returns. investment performance, adversely impacting returns and cashflows.
Mitigation Mitigation
The Board regularly reviews the Group's investment strategy and asset The process for reviewing asset business plans is embedded in the annual
allocation to ensure this is aligned to the overall corporate strategy. budget process. Our experienced management team and use of advisors and
property managers supports the execution of asset management strategies..
Current position Current position
The Company is selectively marketing certain assets, as the market Our refurbishment pipeline is continuously assessed to ensure the right
stabilisation and recovery continues. Asset management initiatives utilised to projects are being brought forward at appropriate times ensuring exposure at
maximise value. Appraisals for improving properties e.g. via refurbishment are any one time is limited. The Executive Committee is reviewing the Group's
ongoing for certain assets. Health and Safety systems and processes to ensure appropriate oversight of
assets.
Likelihood after mitigation Likelihood after mitigation
Score 1 (low) - 10 (high)
Score 1 (low) - 10 (high)
4 4
Impact after mitigation Impact after mitigation
Score 1 (low) - 10 (high)
Score 1 (low) - 10 (high)
6 4
Overall Risk Rating Overall Risk Rating
Score 1 (low) - 20 (high)
Score 1 (low) - 20 (high)
10 8
PORTFOLIO RISKS OPERATIONAL RISKS
05 06 07
VALUATION TENANT DEMAND BUSINESS CONTINUITY AND CYBER SECURITY
AND DEFAULT
Risk description Risk description Risk description
Decreasing capital and rental values could impact the Group's portfolio Failure to adapt to changing occupier demands and/or poor tenant covenants may Business disruption as a result of physical damage to buildings, Government
valuation leading to lower returns. Higher cost of debt can lead to property result in us losing significant tenants, which could materially impact income, policy and measures implemented in response to pandemics, cyber attacks or
yields to be pushed out and valuations to fall as a result. Increasing gilt capital values and profit. Rising inflation, interest rates and living costs other operational or IT failures or unforeseen events may impact income and
yields, can leave property investment less attractive unless the desired could impact tenant businesses, such as the leisure industry, as demand falls profits.
return can be achieved. for discretionary spending.
Mitigation Mitigation Mitigation
Independent valuations are undertaken for all assets at the half year and year Management maintain close relationships with tenants understanding their needs Our governance structure and internal control systems ensure sufficient Board
end. These are reviewed by management and the Board. Members of the Audit and and supporting them throughout their business cycle. Managing agents support oversight, with delegated responsibilities, segregation of duties and clear
Risk Committee meet with the valuers at least once a year to discuss rent collection and collection of arrears on a regular basis. Tenant due authorisation processes. A comprehensive programme of insurance is in place
valuations and the valuation process. Management actively review leases, diligence and credit checks are undertaken on an ongoing basis to review which covers buildings, loss of rent, cyber risks, Directors' and Officers
tenant covenants and asset management initiatives to grow capital and rental covenant strength of existing and prospective tenants. The finance and liability and public liability. Antivirus software and firewalls protect IT
values. property teams monitor all current tenant covenants and all future new systems and data is regularly backed up.
tenants. All arrears are monitored on an ongoing basis.
Current position Current position Current position
Valuations of the portfolio reflect the commercial property market in general. Rent collection rates remain robust at 98%. The team are closely monitoring The Board continues to review the internal control environment and ensure good
The team continue to work to mitigate against falls in value through active tenant covenants in high risk sectors, ensuring we are aware of any tenant governance practices are adopted throughout the business. Cyber security
asset management including ESG improvements. distress which can impact the rental collection. arrangements have been kept under regular review to ensure we are deploying
the most up to date technologies.
Likelihood after mitigation Score Likelihood after mitigation Score Likelihood after mitigation Score
1 (low) - 10 (high)
1 (low) - 10 (high)
1 (low) - 10 (high)
7 4 2
Impact after mitigation Impact after mitigation Impact after mitigation
Score 1 (low) - 10 (high)
Score 1 (low) - 10 (high)
Score 1 (low) - 10 (high)
8 7 2
Overall Risk Rating Overall Risk Rating Overall Risk Rating
Score 1 (low) - 20 (high)
Score 1 (low) - 20 (high)
Score 1 (low) - 20 (high)
15 11 4
ENVIRONMENTAL, SOCIAL AND GOVERNANCE RISKS
8 9 10
PEOPLE CLIMATE CHANGE REGULATORY AND TAX
Risk description Risk description Risk description
An inability to attract or retain staff with the right skills and experience Longer term failure to anticipate and prepare for transition and physical Non-compliance with the legal and regulatory requirements of a public real
or failure to implement appropriate succession plans may result in significant risks associated with climate change including increasing policy and estate company, including the REIT regime could result in convictions or fines
underperformance or impact the overall effectiveness of our operations. Health compliance risks associated with existing and emerging environmental and negatively impact reputation.
and Safety of staff and others including tenants both physically and mentally legislation could lead to increased costs and the Group's assets becoming
and providing a safe and healthy environment in our properties is of utmost obsolete or unable to attract occupiers.
importance. Failure to do so could lead to staff and tenant ill health,
litigation and regulatory issues, negative media and market sentiment against
the Company.
Mitigation Mitigation Mitigation
We engage with staff regularly and encourage a positive working environment. The Group's ESG Committee oversees the execution of ESG related matters and The Company employs experienced staff and external advisers to provide
We maintain an attractive reward and benefits package and undertake regular ensures these are integrated into our business model and corporate strategy. guidance on key regulatory, accounting and tax issues. Compliance with the
performance reviews for each employee. Insurance cover is in place for Climate related risks are considered as part of our overall corporate risk REIT regime is regularly monitored by the Board and the Executive team
Directors. Health and Safety is undertaken both internally and via the tenants assessment and ongoing environmental management of our buildings. consider the impact on the regime as part of their decision making.
and a key issue for our property managers.
Current position Current position Current position
A competitive employment market and inflationary pressures are driving There has been an increased focus on environmental management and management Emerging corporate governance and audit reforms, require additional processes
increased pay and benefits to ensure attraction and retention of individuals have focused on asset management initiatives to increase the EPC ratings of and procedures to be put in place and additional reporting on the company's
with the skills, knowledge and experience required to implement the strategy. our assets, increasing the marketability of the assets in a cost effective resilience. The Board is overseeing these changes.
The Group's headcount is now stable with sufficient cover if any key personnel way.
are unavailable. Employee engagement is high with regular meetings between
employees and the Directors ensuring that the Board understands the views of
the whole workforce.
Likelihood after mitigation Score Likelihood after mitigation Score Likelihood after mitigation Score
1 (low) - 10 (high)
1 (low) - 10 (high)
1 (low) - 10 (high)
5 5 4
Impact after mitigation Impact after mitigation Impact after mitigation
Score 1 (low) - 10 (high)
Score 1 (low) - 10 (high)
Score 1 (low) - 10 (high)
7 5 2
Overall Risk Rating Overall Risk Rating Overall Risk Rating
Score 1 (low) - 20 (high)
Score 1 (low) - 20 (high)
Score 1 (low) - 20 (high)
12 10 6
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the Group
and Company financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group and Company financial
statements for each financial year. Under that law, the Directors have
prepared the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as issued by UK adopted IFRS and
applicable law and have elected to prepare the Company financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group
and the Company for the period. In preparing each of the Group and Company
financial statements the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• for the Group financial statements, state whether they have been
prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international financial
reporting standards as issued by UK adopted IFRS and applicable law subject to
any material departures disclosed and explained in the financial statements;
• for the Company financial statements, state whether they have been
prepared in accordance with UK GAAP, subject to any material departure
disclosed and explained in the parent company financial statements;
• prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group and the parent Company will
continue in business; and
• under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report, Directors'
Remuneration Report and Corporate Governance Statement that complies with that
law and those regulations.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the
requirements of the Companies Act 2006 and, as regards the Group Financial
Statements, Article 4 of the IAS Regulations.
They are also responsible for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors confirm to the best of their knowledge:
• the financial statements have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006, international financial reporting standards as issued by
UK adopted IFRS and applicable law, and give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation as a whole;
• the Strategic Report includes a fair review of the development and
performance of the business and the financial position of the Company and the
undertakings included in the consolidation as a whole, together with a
description of the principal risks and uncertainties that they face; and
• the Annual Report and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for Shareholders to
assess the Group's and Company's performance, business model and strategy.
On behalf of the Board
Phil Higgins
Company Secretary
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2024
2024 2023
Note £'000 £'000
Revenue 1 19,599 32,973
Cost of sales 3b (9,776) (17,147)
Movement in expected credit loss 12 - 327
Net property income 9,823 16,153
Administrative expenses 3c (3,998) (6,094)
Operating profit before gains and losses on property assets
5,825 10,059
Profit on disposal of investment properties 2,298 819
Loss on revaluation of investment property portfolio 9 (15,383) (42,900)
Operating loss (7,260) (32,022)
Finance income 312 26
Finance expense 2 (1,909) (3,970)
Debt termination costs (459) (15)
Changes in fair value of interest rate derivatives - 210
Loss before taxation (9,316) (35,771)
Taxation 5 (46) 67
Loss after taxation for the year and total comprehensive loss attributable to (9,362) (35,704)
owners of the Parent
Earnings per ordinary share
Basic 6 (23.7p) (80.2p)
Diluted 6 (23.7p) (80.2p)
All activities derive from continuing operations of the Group. The notes form
an integral part of these financial statements.
Consolidated Statement of Financial Position
as at 31 March 2024
2024 2023
Note £'000 £'000
Non-current assets
Investment properties 9 73,845 176,504
Right of use asset 11 38 132
Trade and other receivables 12 5,625 4,360
Property, plant and equipment 11 - 23
79,508 181,019
Current assets
Trading property 10 8,126 11,055
Trade and other receivables 12 3,352 4,190
Cash and cash equivalents 13 19,766 5,509
31,244 20,754
Total assets 110,752 201,773
Current liabilities
Trade and other payables 14 (4,066) (8,339)
Borrowings 15 (318) (8,545)
Lease liabilities for right of use asset 18 (39) (132)
Creditors: amounts falling due within one year (4,423) (17,016)
Net current assets 26,821 3,738
Non-current liabilities
Borrowings 15 (7,933) (55,129)
Short term incentive plan provision (565) -
Deferred tax liability 5 (57) (76)
Lease liabilities for investment properties 18 - (1,077)
Net assets 97,774 128,475
Equity
Called up share capital 19 3,756 4,639
Treasury shares - (7,343)
Merger reserve 3,503 3,503
Capital redemption reserve 1,223 340
Capital reduction reserve 89,931 118,477
(Accumulated losses)/retained earnings (639) 8,859
Equity - attributable to the owners of the Parent 97,774 128,475
Basic NAV per ordinary share 7 260p 294p
Diluted NAV per ordinary share 7 260p 294p
These financial statements were approved by the Board of Directors and
authorised for issue on 5 June 2024 and are signed on its behalf by:
STEVEN OWEN
Executive Chairman
Consolidated Statement of Changes in Equity
for the year ended 31 March 2024
Share Treasury Share Other Capital Reduction Reserve Retained Earnings/ (Accumulated Losses) Total
Capital
Reserves
Equity
Reserve
£'000 £'000
£'000
£'000 £'000
Note £'000
At 31 March 2022 4,639 (717) 3,843 125,019 44,420 177,204
Total comprehensive loss for the year - - - - (35,704) (35,704)
Share-based payments 20 - - - - 177 177
Exercise of share options - 71 - - (71) -
Issue of deferred bonus share options - - - - 37 37
Dividends paid 8 - - - (6,542) - (6,542)
Share buyback - (6,697) - - - (6,697)
At 31 March 2023 4,639 (7,343) 3,843 118,477 8,859 128,475
Total comprehensive loss for the year - - - - (9,362) (9,362)
Share-based payments 20 - - - - 137 137
Exercise of share options - 161 - - (273) (112)
Dividends paid 8 - - - (6,045) - (6,045)
Share buyback - (15,179) - - - (15,179)
Shares purchased by employee benefits trust - (140) - - - (140)
Cancellation of treasury shares (883) 22,501 883 (22,501) - -
At 31 March 2024 3,756 - 4,726 89,931 (639) 97,774
The share capital represents the nominal value of the issued share capital of
Palace Capital plc.
Treasury shares represents the consideration paid for shares bought back from
the market. On 27 March 2024 all shares held in Treasury were cancelled.
Other reserves comprise the merger reserve and the capital redemption reserve.
The merger reserve represents the excess over nominal value of the fair value
consideration for the acquisition of subsidiaries satisfied by the issue of
shares in accordance with S612 of the Companies Act 2006.
The capital redemption reserve represents the nominal value of cancelled
preference share capital redeemed.
The capital reduction reserve represents distributable profits generated as a
result of the share premium reduction and cancellation of shares.
Consolidated Statement of Cash Flows
for the year ended 31 March 2024
Note 2024 2023
£'000 £'000
Operating activities
Loss before taxation (9,316) (35,771)
Finance income (312) (26)
Finance expense 2 1,909 3,970
Changes in fair value of interest rate derivatives - (210)
Loss on revaluation of investment property portfolio 9 15,383 42,900
Profit on disposal of investment properties (2,298) (819)
Debt termination costs 459 15
Depreciation of tangible fixed assets 11 23 30
Amortisation of right of use asset 11 119 82
Share-based payments 20 137 177
Increase in receivables (2,536) (1,140)
Decrease in payables (3,369) (415)
Decrease in trading property 2,929 9,233
Net cash generated from operations 3,128 18,026
Interest received 312 26
Interest and other finance charges paid (2,339) (3,427)
Corporation tax paid in respect of operating activities - (171)
Net cash flows from operating activities 1,101 14,454
Investing activities
Capital expenditure on refurbishment of investment property (1,544) (1,371)
Proceeds from disposal of investment property 92,217 15,410
Purchase of property, plant and equipment 11 - (8)
Net cash flow generated from investing activities 90,673 14,031
Financing activities
Bank loans repaid 17 (56,022) (37,419)
Loan issue costs paid 17 - (461)
Dividends paid 8 (6,045) (6,542)
Share buyback (15,179) (6,697)
Payment of share options exercised (271) -
Net cash flow used in financing activities (77,517) (51,119)
Net increase/(decrease) in cash and cash equivalents 14,257 (22,634)
Cash and cash equivalents at beginning of the year 5,509 28,143
Cash and cash equivalents at the end of the year 13 19,766 5,509
Notes to the Consolidated Financial Statements
BASIS OF ACCOUNTING
Basis of preparation
These preliminary results have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the UK Financial Conduct Authority and in
accordance with International Accounting Standards, in conformity with the
requirements of the Companies Act 2006, and International Financial Reporting
Standards, as issued by the IASB (IFRS-UK) and applicable law.
The financial information does not constitute the Group's financial statements
for the periods ended 31 March 2024 or 31 March 2023, but is derived from
those financial statements. Financial statements for the year ended 31 March
2023 have been delivered to the Registrar of Companies and those for the year
ended 31 March 2024 will be delivered following the Company's Annual General
Meeting. The auditor's reports on both the 31 March 2023 or 31 March 2024
financial statements were unqualified; did not draw attention to any matters
by way of emphasis; and did not contain statements under section 498 (2) or
(3) of the Companies Act 2006.
The Directors continue to adopt the going concern basis in preparing the
Group's financial statements. The consolidated financial statements of the
Group comprise the results of Palace Capital plc ("the Company") and its
subsidiary undertakings.
The Company is quoted on the Main Market of the London Stock Exchange and is
domiciled and registered in England and Wales and incorporated under the
Companies Act. The address of its registered office is Thomas House, 84
Eccleston Square, London, SW1V 1PX.
BASIS OF PREPARATION
The Group financial statements have been prepared in accordance with
UK-adopted International Accounting Standards, (the 'applicable framework'),
and have been prepared in accordance with the provisions of the Companies Act
2006 (the 'applicable legal requirements'). The Group financial statements
have been prepared under the historical cost convention as modified by the
revaluation of investment properties, the revaluation of property, plant and
equipment, pension scheme and financial assets held at fair value.
EXEMPTION TO THE AUDIT OF SUBSIDIARY ACCOUNTS UNDER SECTION 479A OF THE
COMPANIES ACT 2006
The following subsidiaries which consolidate into the Group accounts are
exempt from being audited under section 479A of the Companies Act 2006:
Palace Capital (Leeds) Limited (Registered number: 06068651)
Palace Capital (Northampton) Limited (Registered number: 04982121)
Palace Capital (Properties) Limited (Registered number: 07866050)
Palace Capital (Developments) Limited (Registered number: 09849073)
Palace Capital (Manchester) Limited (Registered number: 09937194)
Palace Capital (Signal) Limited (Registered number: 06991031)
Property Investment Holdings Limited (Registered number: 00582889)
Palace Capital (Newcastle) Limited (Registered number: 05348319)
Palace Capital (York) Limited (Registered number: 12080228)
Palace Capital (Dartford) Limited (Registered number: 10523678)
GOING CONCERN
The Directors have made an assessment of the Group's ability to continue as a
going concern which included the current economic headwinds created by rising
inflation and rising interest rates, coupled with the Group's cash resources,
borrowing facilities, rental income, disposals of investment properties,
committed capital and other expenditure and dividend distributions.
The Group's business activities, together with the factors likely to affect
its future performance and position, are set out in the Strategic Report. The
financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in these financial statements. In addition,
note 26 to the financial statements includes the Group's objectives, policies
and processes for managing its capital, its financial risk management
objectives, details of its financial instruments and its exposures to credit
risk and liquidity risk.
As at 31 March 2024 the Group had £19.8m of unrestricted cash and cash
equivalents and a property portfolio with a fair value of £88.7m. At 31 March
2024 the Group has £8.3m of debt, which was all at a fixed interest rate of
2.9% until July 2026, resulting in the Group being in a net cash position of
£11.5m. The Directors have reviewed the forecasts for the Group taking into
account the impact of rising inflation and rising interest rates on trading
over the 12 months from the date of signing this annual report. The forecasts
have been assessed against a downside scenario incorporating lower levels of
income. See Going Concern and Viability Statement of the Annual Report for
further details.
The Directors have a reasonable expectation that the Group have adequate
resources to continue in operation for at least 12 months from the date of
approval of the financial statements. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
NEW STANDARDS ADOPTED DURING THE YEAR
New standards effective for the year ended 31 March 2024 did not have a
material impact on the financial statements and were
not adopted.
New standards issued but not yet effective
There are no other standards that are not yet effective that would be expected
to have a material impact on the Group in the current or future reporting
periods and on the foreseeable future transactions, other than IFRS 18 which
was recently issued by the IASB and management are still considering if and
how this will impact the presentation of the Statement of Comprehensive
Income.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
Palace Capital plc and its subsidiaries as at the year-end date.
Subsidiaries are all entities over which the Company has control being: power
to direct the activities of the entity; exposure to variable returns from the
entity; and the ability of the Company to use its power to affect those
variable returns. Where necessary, adjustments have been made to the financial
statements of subsidiaries and associates to bring the accounting policies
used and accounting periods into line with those of the Group. Intra-group
balances and any unrealised gains and losses arising from intra-group
transactions are eliminated in preparing the Consolidated Financial
Statements.
The results of subsidiaries acquired during a year are included from the
effective date of acquisition, being the date on which the Group obtains
control until the date that control ceases.
The consideration transferred for the acquisition of a subsidiary is the fair
value of the assets transferred, the liabilities incurred and the equity
interests issued by the Group. This fair value includes any contingent
consideration. Acquisition-related costs are expensed as incurred.
If the consideration is less than the fair value of the assets and liabilities
acquired, the difference is recognised directly in the Statement of
Comprehensive Income.
Where an acquired subsidiary does not meet the definition of a business, it is
accounted for as an asset acquisition rather than a business combination. A
business is an integrated set of activities and assets that is capable of
being conducted and managed for the purpose of providing goods or services to
customers, generating investment income (such as dividends or interest) or
generating other income from ordinary activities.
Revenue
Revenue is primarily derived from property income and represents the value of
accrued charges under operating leases for rental of
the Group's investment properties. Revenue is measured at the fair value of
the consideration received. All income is derived in the United Kingdom.
Rental income from investment properties leased out under operating leases is
recognised in the Statement of Comprehensive Income on a straight-line basis
over the term of the lease. Contingent rent reviews are recognised when such
reviews have been agreed with tenants. Lease incentives, rent concessions and
guaranteed rent review amounts are recognised as an integral part of the net
consideration for use of the property and amortised on a straight-line basis
over the term of lease. Judgement is exercised when determining the term over
which the lease incentives should be recognised.
Amounts received from tenants to terminate leases or to compensate for
dilapidations are recognised in the Group Statement of Comprehensive Income
when the right to receive them arises. Surrender premium income are payments
received from tenants to surrender their lease obligations and are recognised
immediately in the Group's Consolidated Statement of Comprehensive Income.
Insurance commissions are recognised as performance obligations are fulfilled
in terms of the individual performance obligations within the contract with
the insurance provider. Revenue is determined by the transaction price in the
contract and is measured at the fair value of the consideration received.
Revenue is recognised once the underlying contract between insured and insurer
has been signed.
Revenue from the sale of trading properties is recognised when control of the
trading property, along with the significant risks and rewards, have
transferred from the Group, which is usually on completion of contracts and
transfer of property title.
Service charge income relates to expenditure that is directly recoverable from
tenants. Service charge income is recognised as revenue in the period to which
it relates as required by IFRS 15 Revenue from Contracts with Customers.
Dividend income comprises dividends from the Group's listed equity investments
and is recognised when the Shareholder's right to receive payment is
established. Revenue is measured at the fair value of the consideration
received. All income is derived in the United Kingdom.
The disposal of investment properties is recognised when significant risks and
rewards attached to the property have transferred from the Group. This will
ordinarily occur on completion of contract, with such transactions being
recognised when this condition is satisfied. The profit or loss on disposal of
investment property is recognised separately in the Consolidated Statement of
Comprehensive Income and is the difference between the net sales proceeds and
the opening fair value asset plus any capital expenditure during the period to
disposal.
Deferred income
Where invoices to customers have been raised which relate to a period after
the Group year end, being 31 March 2024, the Group will recognise deferred
income for the difference between revenue recognised and amounts billed for
that contract.
Cost of sales
Cost of sales includes direct expenditure relating to the construction of the
trading properties, capitalised interest, and selling costs incurred as a
result of residential sales. Selling costs includes agent and legal fees. Cost
of sales is expensed to the income statement and is recognised on completion
of each residential unit. The cost for each unit is calculated using the ratio
of the unit selling price, over the total forecasted sales proceeds of all
residential units. This ratio is then applied to the total forecasted
development cost to get the cost of sale per unit.
Service charges and other such receipts arising from expenses recharged to
tenants are as stated in note 3b. Notwithstanding that the funds are held on
behalf of the occupiers, the ultimate risk for paying and recovering these
costs rests with the Group.
Borrowing costs
Bank borrowings are initially recognised at fair value net of any transaction
costs directly attributable to the issue of the instrument. After initial
recognition, loans and borrowings are subsequently measured at amortised cost
using the effective interest method. Amortised cost is calculated by taking
into account any issue costs, and any discount or premium on settlement. Gains
and losses are recognised in profit or loss in the Consolidated Statement of
Comprehensive Income when the liabilities are derecognised, as well as through
the amortisation process.
Interest associated with trading properties is capitalised from the start of
the development work until the date of practical completion. The rate used is
the rate on specific associated borrowings. Interest is then expensed through
the income statement post completion of the development.
Financial assets
The Group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises in-the-money derivatives (see "Financial liabilities"
section for out-of-the-money derivatives classified as liabilities). They are
carried in the Consolidated Statement of Financial Position at fair value with
changes in fair value recognised in the Consolidated Statement of
Comprehensive Income in the finance income or expense line.
Amortised cost
Impairment provisions for current and non-current trade receivables are
recognised based on the simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses. During
this process the probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit loss for
the trade receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being
recognised within cost of sales in the Consolidated Statement of Comprehensive
Income. On confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the associated
provision.
The Group's financial assets measured at amortised cost comprise trade and
other receivables and cash and cash equivalents in the Consolidated Statement
of Financial Position.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, and other short-term highly liquid investments with original maturities
of three months or less.
Financial liabilities
The Group classifies its financial liabilities into one of two categories,
depending on the purpose for which the liability was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises out-of-the-money derivatives (see "Financial assets"
for in-the-money derivatives where the time value offsets the negative
intrinsic value). They are carried in the Consolidated Statement of Financial
Position at fair value with changes in fair value recognised in the
Consolidated Statement of Comprehensive Income.
Amortised cost
Trade payables and accruals are initially measured at fair value and are
subsequently measured at amortised cost, using the effective interest rate
method.
Other financial liabilities
Bank borrowings are initially recognised at fair value net of any transaction
costs directly attributable to the issue of the instrument. Such
interest-bearing liabilities are subsequently measured at amortised cost using
the effective interest rate method, which ensures that any interest expense
over the period to repayment is at a constant rate on the balance of the
liability carried in the Consolidated Statement of Financial Position. For the
purposes of each financial liability, interest expense includes initial
transaction costs and any premium payable on redemption, as well as any
interest or coupon payment while the liability is outstanding.
Contributions to pension schemes
The Company operates a defined contribution pension scheme. The pension costs
charged against profits are the contributions payable to the scheme in respect
of the accounting period.
Investment properties
Investment properties are those properties that are held either to earn rental
income or for capital appreciation or both.
Investment properties are measured initially at cost including transaction
costs and thereafter are stated at fair value, which reflects market
conditions at the balance sheet date. Surpluses and deficits arising from
changes in the fair value of investment properties are recognised in the
Consolidated Statement of Comprehensive Income in the year in which they
arise.
Investment properties are stated at fair value as determined by the
independent external valuers. The fair value of the Group's property portfolio
is based upon independent valuations and is inherently subjective. The fair
value represents the amount at which the assets could be exchanged between a
knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's
length transaction at the date of valuation, in accordance with Global
Valuation Standards. In determining the fair value of investment properties,
the independent valuers make use of historical and current market data as well
as existing lease agreements.
The Group recognises investment property as an asset when it is probable that
the economic benefits that are associated with the investment property will
flow to the Group and it can measure the cost of the investment reliably. This
is usually the date of completion of acquisition or completion of construction
if the development is a mixed-use scheme.
Investment properties cease to be recognised on completion of the disposal or
when the property is withdrawn permanently from use and no future economic
benefit is expected from disposal.
The Group evaluates all its investment property costs at the time they are
incurred. These costs include costs incurred initially to acquire an
investment property and costs incurred subsequently to add to, replace part
of, or service a property. Any costs deemed as repairs and maintenance or any
costs associated with the day-to-day running of the property are recognised in
the Consolidated Statement of Comprehensive Income as they are incurred.
Trading properties
Trading property is developed for sale or held for sale after development is
complete, and is carried at the lower of cost and net realisable value.
Trading properties are derecognised on completion of sales contracts. Costs
includes direct expenditure and capitalised interest. Cost of sales, including
costs associated with off-plan residential sales, are expensed to the
Consolidated Statement of Comprehensive Income as incurred.
Current taxation
Current tax assets and liabilities for the period not under UK REIT
regulations are measured at the amount expected to be recovered from or paid
to the tax authorities. The tax rates and the tax laws used to compute the
amount are those that are enacted or substantively enacted, by the balance
sheet date.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in profit or loss, except when it relates to items charged
or credited directly to other comprehensive income, in which case the deferred
tax is also dealt with in other comprehensive income.
Dividends to equity holders of the parent
Interim ordinary dividends are recognised when paid and final ordinary
dividends are recognised as a liability in the period in which they are
approved by the Shareholders.
Share-based payments
The fair value of the share options are determined at the grant date and are
expensed on a straight-line basis over the vesting period. Non-market vesting
conditions are taken into account by adjusting the number of equity
instruments expected to vest at each reporting date so that ultimately the
cumulative amount recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market vesting
conditions are factored into the fair values of the options granted. As long
as all other vesting conditions are satisfied, a charge is made irrespective
of whether the market vesting conditions are satisfied. The cumulative expense
is not adjusted for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied.
Equity
The share capital represents the nominal value of the issued share capital of
Palace Capital plc. Share premium represents the excess over nominal value of
the fair value consideration received for equity shares net of expenses of the
share issue. Treasury share reserve represents the consideration paid for
shares bought back on the open market. The merger reserve represents the
excess over nominal value of the fair value consideration for the acquisition
of subsidiaries satisfied by the issue of shares in accordance with S612 of
the Companies Act 2006. The capital redemption reserve represents the nominal
value of cancelled share capital redeemed. The capital reduction reserve
represents distributable profits generated as a result of the share premium
reduction or cancellation of shares.
Critical accounting judgements and key sources of estimation and uncertainty
The preparation of the financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates. Information about such judgements and
estimation is contained in the accounting policies or the notes to the
accounts, and the key areas are summarised below.
Estimates
Property Valuation
The key source of estimation uncertainty rests in the values of property
assets, which significantly affects the value of investment properties in the
Consolidated Statement of Financial Position. The investment property
portfolio is carried at fair value, which requires a number of estimates in
assessing the Group's assets relative to market transactions. The approach to
this valuation and the amounts affected are set out in the accounting policies
and note 9.
Trading properties are held at the lower of cost and net realisable value. Net
realisable value is the value of an asset that can be realised upon the sale
of the asset, less a reasonable estimate of the costs associated with the
eventual sale or disposal of the asset.
The Group has valued the investment properties at fair value. To the extent
that any future valuation affects the fair value of the investment properties
and assets held for sale, this will impact on the Group's results in the
period in which this determination is made.
Short term incentive plan
The amount recognised as the short term incentive plan ('STIP') provision is
management's estimate of the total expected payout when the plan comes to an
end, which has been assumed as when all of the assets are sold. As the STIP is
"backend loaded" and only pays out when the Remuneration Committee has
determined that the performance period has ended under the Rules of the STIP,
the total estimated provision has been calculated over the three year period
to June 2027, consistent with that adopted for the Viability Statement. As a
result, the provision recognised on the balance sheet for the year ended 31
March 2024 represents 12 months of this total estimated provision which has
been calculated by reference to sales achieved to date and the assumed sales
of the remaining assets to reflect the uncertainty around financial and
property markets. The timing and success of future sales will impact the
timing and quantum of the total payment.
1. RENTAL AND OTHER INCOME
The chief operating decision maker ("CODM") takes the form of the Group's
Executive Committee which is of the opinion that the principal activity of the
Group is to invest in commercial real estate in the UK.
Operating segments are identified on the basis of internal financial reports
about components of the Group that are regularly reviewed by the CODM.
The internal financial reports received by the Group's Executive Committee
contain financial information at a Group level as a whole and there are no
reconciling items between the results contained in these reports and the
amounts reported in the financial statements. Additionally, information is
provided to the Group's Executive Committee showing gross property income and
property valuation by individual property. Therefore, each individual property
is considered to be a separate operating segment in that its performance is
monitored individually.
The Directors have considered the requirements of IFRS 8 as to aggregation of
operating segments into reporting segments. All of the Group's revenue is
generated from investment and trading properties located outside of London.
The properties are managed as a single portfolio by an asset management team
whose responsibilities are not segregated by location or type but are managed
on an asset-by-asset basis.
The route to market is determined by reference to the current economic
circumstances that fluctuate through the life cycle of the portfolio. The
Group holds a diversified portfolio across different sectors including office,
retail, leisure, and residential. The Group has from time to time engaged in
development projects such as Hudson Quarter, York. This is not regarded as a
separate business or division.
The Directors therefore consider that the individual properties have similar
economic characteristics and therefore have been aggregated into a single
reportable segment under the provision of IFRS 8.
All of the Group's properties are based in the UK. No geographical grouping is
contained in any of the internal financial reports provided to the Group's
Executive Committee and, therefore, no geographical segmental analysis is
required.
Revenue - type 2024 2023
£'000 £'000
Gross rental income 11,603 17,425
Dilapidations and other property related income 453 401
Insurance commission 58 68
Gross property income 12,114 17,894
Service charge income 4,286 4,974
Trading property income 3,199 10,105
Total revenue 19,599 32,973
No single tenant accounts for more than 10% of the Group's total rents
received from investment properties in the year. The biggest tenant is 14.8%
of the rent roll as at 31 March 2024. Similarly, there was no individual or
corporate that accounts for more than 10% of the trading property income.
2. INTEREST PAYABLE AND SIMILAR CHARGES
2024 2023
£'000 £'000
Interest on bank loans 1,655 3,643
Amortisation of loan arrangement fees 213 317
Other finance charges 41 10
1,909 3,970
3. PROFIT FOR THE YEAR
a) The Group's profit for the year is stated after charging the following:
2024 2023
£'000 £'000
Depreciation of tangible fixed assets and amortisation of right of use assets: 142 112
Auditor's remuneration:
Fees payable to the Auditor for the audit of the Group's annual accounts and 192 231
subsidiaries' annual accounts
Additional fees payable to the Auditor in respect of the 2022 audit - 15
Fees payable to the Auditor and its related entities for other services:
Audit related assurance services in respect of the interim results - 11
192 257
b) The Group's cost of sales comprise the following:
2024 2023
£'000 £'000
Void property costs 1,871 2,076
Legal, lettings and consultancy costs 601 502
Property operating expenses 2,472 2,578
Service charge expenses 4,286 4,974
Trading property cost of sales 3,018 9,595
9,776 17,147
c) The Group's administrative expenses comprise the following:
2024 2023
£'000 £'000
Recurring staff costs 1,675 2,560
Short term incentive plan provision (including associated costs) 640 -
Payments to former Directors and Staff (including associated costs) 611 1,835
Accounting, tax and audit fees 280 318
Other overheads* 249 624
Share-based payments 137 177
Stock Exchange costs 132 207
Amortisation of right of use asset 119 82
PR and marketing costs 79 108
Legal and professional fees 40 82
Depreciation of tangible fixed assets 23 30
ESG costs 13 71
3,998 6,094
*Other overheads comprise of rent, rates, service charge, consulting, and
other office costs
d) EPRA cost ratios are calculated as follows:
2024 2023
£'000 £'000
Gross property income 12,114 17,894
Administrative expenses 3,998 6,094
Property operating expenses 2,472 2,578
Movement in expected credit loss - (327)
EPRA costs (including property operating expenses) 6,470 8,345
EPRA cost ratio (including property operating expenses) 53.4% 46.6%
Less property operating expenses (2,472) (2,578)
EPRA costs (excluding property operating expenses) 3,998 5,767
EPRA cost ratio (excluding property operating expenses) 33.0% 32.2%
Total expense ratio 3.6% 3.0%
4. EMPLOYEES AND DIRECTORS' REMUNERATION
Staff costs during the period were as follows:
2024 2023
£'000 £'000
Non-Executive Directors' fees 151 300
Wages and salaries 1,181 1,828
Pensions 124 147
Social security costs 219 262
Total recurring staff costs 1,675 2,537
Payments to former Directors and staff (incl. NI and pension contributions) 564 1,677
Short term incentive plan provision (incl. NI) 565 -
Share-based payments 137 177
2,941 4,391
The average number of employees of the Group and the Company during the period
was:
2024 2023
Number Number
Directors 2 3
Senior management and other employees 6 8
8 11
Key management are the Group's Directors. Remuneration in respect of key
management was as follows:
2024 2023
£'000 £'000
Emoluments for qualifying services 398 711
Social security costs 74 117
Pension 25 35
Total recurring key management costs 497 863
Payments to former Directors and Staff (incl. NI and pension contributions) 357 1,677
Short term incentive plan provision (incl. NI) 256 -
Share-based payments 16 32
1,126 2,572
5. TAXATION
2024 2023
£'000 £'000
Tax underprovided in prior year 65 -
Deferred tax (19) (67)
Tax charge/(credit) 46 (67)
2024 2023
£'000 £'000
Loss on ordinary activities before tax (9,316) (35,771)
Based on loss for the period: Theoretical Tax at 25% (2023: 19%) (2,329) (6,797)
Effect of:
Net expenses not deductible for tax purposes 40 41
Deferred tax released to profit and loss on Hudson Quarter residential sales (19) (67)
Tax underprovided in prior year 65 -
REIT exempt income (1,135) (1,775)
Non-taxable items 3,424 8,531
Tax charge/(credit) for the period 46 (67)
As a UK REIT, the income profits of the Group's UK property rental business
are exempt from corporation tax, as are any gains it makes from the disposal
of its properties, provided they are not held for trading. The Group is
otherwise subject to UK corporation tax at the prevailing rate.
Deferred taxes relate to the following:
2024 2023
£'000 £'000
Deferred tax liability - brought forward (76) (143)
Overprovided in prior year - (21)
Deferred tax release on sale of trading property 19 88
Deferred tax liability - carried forward (57) (76)
2024 2023
£'000 £'000
Investment property unrealised valuation gains (57) (76)
Deferred tax liability - carried forward (57) (76)
The deferred tax liability of £57,000 relates to investment properties
transferred into trading stock, prior to the Group becoming a REIT. As at 31
March 2024 the Group had approximately £5,915,000 (2023: £5,915,000) of
realised capital losses to carry forward. There has been no deferred tax asset
recognised as the Directors do not consider it probable that future taxable
profits will be available to utilise these losses.
Finance Act 2021 sets the main rate of UK corporation tax at 19%, with an
increase in the main rate to 25% with effect from 1 April 2023. The deferred
tax liability relates to trading properties and has been calculated on the
basis of 25%.
6. EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share and diluted earnings per share have been calculated
on the loss after tax attributable to ordinary Shareholders for the year (as
shown on the Consolidated Statement of Comprehensive Income) and for the
earnings per share, the weighted average number of ordinary shares in issue
during the period (see table below) and for diluted weighted average number of
ordinary shares in issue during the year (see table below).
2024 2023
£'000 £'000
Loss after tax attributable to ordinary Shareholders for the year (9,362) (35,704)
2024 2023
No. of shares No. of shares
Weighted average number of shares for basic earnings per share 39,524,282 44,525,518
Dilutive effect of share options - -
Weighted average number of shares for diluted earnings per share 39,524,282 44,525,518
Earnings per ordinary share
Basic (23.7p) (80.2p)
Diluted (23.7p) (80.2p)
Key Performance Measures
The Group financial statements are prepared under IFRS which incorporates
non-realised fair value measures and non-recurring items. Alternative
Performance Measures ("APMs"), being financial measures which are not
specified under IFRS, are also used by management to assess the Group's
performance. These include a number of European Public Real Estate Association
("EPRA") measures, prepared in accordance with the EPRA Best Practice
Recommendations reporting framework the latest update of which was issued in
November 2019. The Group reports a number of these measures (detailed in the
glossary of terms) because the Directors consider them to improve the
transparency and relevance of our published results as well as the
comparability with other listed European real estate companies.
EPRA EPS and EPRA Diluted EPS
EPRA Earnings is a measure of operational performance and represents the net
income generated from the operational activities. It is intended to provide an
indicator of the underlying income performance generated from the leasing and
management of the property portfolio. EPRA earnings are calculated taking the
profit after tax excluding investment property revaluations and gains and
losses on disposals, changes in fair value of financial instruments and
one-off finance termination costs. EPRA earnings is calculated on the basis of
the weighted average basic number of shares in line with IFRS earnings as the
dividends to which they give rise accrue to current Shareholders.
Adjusted profit before tax and Adjusted EPS
The Group also reports an adjusted earnings measure which is based on
recurring earnings before tax and the weighted average basic number of shares.
This is the basis on which the Directors consider dividend cover. This takes
EPRA earnings as the starting point and then adds back tax and any other fair
value movements or one-off items that were included in EPRA earnings. This
includes share-based payments being a non-cash expense, as well as payments to
former Directors and Staff, and the Short Term Incentive Plan provision
('STIP'), which are one-off exceptional items. The STIP was excluded from
adjusted earnings as the provision is deemed not to be in the ordinary course
of business and the performance criteria of the plan is based on the selling
of assets. The plan was designed to be back end loaded in terms of paying out
in order to be aligned with shareholders' interests and is therefore deemed to
be an exceptional item as it does not reflect earnings from trading in the
portfolio as it is capital in nature. The corporation tax charge (excluding
deferred tax movements, being a non-cash expense) is deducted in order to
calculate the adjusted earnings per share, if the charge is in relation to
recurring earnings.
The EPRA and adjusted earnings per share for the period are calculated based
upon the following information:
2024 2023
£'000 £'000
Loss after tax for the year (9,362) (35,704)
Adjustments:
Loss on revaluation of investment property portfolio 15,383 42,900
Profit on disposal of investment properties (2,298) (819)
Trading profit (181) (510)
Debt termination costs 459 15
Changes in fair value of interest rate derivatives - (210)
EPRA earnings for the year 4,001 5,672
Payments to former Directors (including associated costs) 611 1,835
Share-based payments 137 177
Short term incentive plan provision (including associated costs) 640 -
Adjusted profit after tax for the year 5,389 7,684
Tax excluding deferred tax on EPRA adjustments and capital gain charged 46 (67)
Adjusted profit before tax for the year 5,435 7,617
EPRA and adjusted earnings per ordinary share
EPRA Basic 10.1p 12.7p
EPRA Diluted 10.1p 12.7p
Adjusted EPS 13.8p 17.1p
7. NET ASSET VALUE PER SHARE
The Group has adopted the EPRA NAV measures which came into effect for
accounting periods starting 1 January 2020. EPRA issued best practice
recommendations (BPR) for financial guidelines on its definitions of NAV
measures. The NAV measures as outlined in the BPR are EPRA net tangible assets
(NTA), EPRA net reinvestment value (NRV) and EPRA net disposal value (NDV).
The Group considered EPRA Net Tangible Assets (NTA) to be the most relevant
NAV measure for the Group and we are now reporting this as our primary NAV
measure, replacing our previously reported EPRA NAV and EPRA NNNAV per share
metrics. EPRA NTA excludes the intangible assets and the cumulative fair value
adjustments for debt-related derivatives which are unlikely to be realised.
As at 31 March 2024
EPRA NTA EPRA NRV EPRA NDV
£'000 £'000 £'000
Net assets attributable to Shareholders 97,774 97,774 97,774
Include:
Fair value adjustment of trading properties 449 449 449
Real estate transfer tax - 5,294 -
Fair value of fixed interest rate debt - - 606
Exclude:
Deferred tax on latent capital gains and capital allowances 57 57 -
EPRA NAV 98,280 103,574 98,829
Number of ordinary shares issued for diluted and EPRA net assets per share 37,554,525 37,554,525 37,554,525
EPRA NAV per share 262p 276p 263p
The adjustments made to get to the EPRA NAV measures above are as follows:
• Fair value adjustment of trading properties: Difference between
trading property held on the balance sheet at cost in terms of IAS 2, being
£8.126 million and the fair value of that trading property of £8.575
million, resulting in a fair value adjustment of £0.449 million.
• Real estate transfer tax: Gross value of property portfolio as
provided in the Valuation Certificate (i.e. the value prior to any deduction
of purchasers' costs).
• Fair value of fixed interest rate debt: Difference between any
financial liability and asset held on the balance sheet of the Group and the
fair value of that financial liability or asset.
• Deferred tax on latent capital gains and capital allowances: Exclude
the deferred tax as per IFRS balance sheet in respect of the difference
between the fair value and the tax book value of investment property,
development property held for investment, intangible assets, or other
non-current investments as this would only become payable if the assets were
sold.
As at 31 March 2023
EPRA NTA EPRA NRV EPRA NDV
£'000 £'000 £'000
Net assets attributable to Shareholders 128,475 128,475 128,475
Include:
Fair value adjustment of trading properties 730 730 730
Real estate transfer tax - 11,922 -
Fair value of fixed interest rate debt - - 863
Exclude:
Deferred tax on latent capital gains and capital allowances 76 76 -
EPRA NAV 129,281 141,203 130,068
Number of ordinary shares issued for diluted and EPRA net assets per share 43,728,212 43,728,212 43,728,212
EPRA NAV per share 296p 323p 297p
2024 2023
No of shares No of shares
Number of ordinary shares issued at the end of the year (excluding treasury 37,554,525 43,718,381
shares)
Dilutive effect of share options - 9,831
Number of ordinary shares issued for diluted and EPRA net assets per share 37,554,525 43,728,212
Net assets per ordinary share
Basic 260p 294p
Diluted 260p 294p
EPRA NTA 262p 296p
8. DIVIDENDS
Payment date Dividend 2024 2023
per share £'000 £'000
2024
Interim dividend 29 December 2023 3.75 1,409 -
Interim dividend 13 October 2023 3.75 1,408 -
7.50 2,817 -
2023
Final dividend 04 August 2023 3.75 1,583 -
Interim dividend 14 April 2023 3.75 1,645 -
Interim dividend 13 January 2023 3.75 - 1,651
Interim dividend 14 October 2022 3.75 - 1,651
15.00 3,228 3,302
2022
Final dividend 05 August 2022 3.75 - 1,736
Interim dividend 14 April 2022 3.25 - 1,504
7.00 - 3,240
Dividends reported in the Group Statement of Changes in Equity 6,045 6,542
Dividends (continued)
2024 2023
£'000 £'000
August 2024 final dividend in respect of year end 31 March 2024: 3.75p (2023 1,408 1,621
final dividend: 3.75p)
April 2024 interim dividend in respect of year end 31 March 2024: 3.75p (2023 1,408 1,645
interim dividend: 3.75p)
2,816 3,266
Final dividends on ordinary shares are subject to approval at the Annual
General Meeting. Such dividends are not recognised as a liability as at 31
March 2024.
9. PROPERTY PORTFOLIO
Freehold Leasehold Total
investment properties investment properties investment properties
£'000 £'000 £'000
At 31 March 2022 216,110 16,607 232,717
Additions - refurbishments 1,026 156 1,182
Loss on revaluation of investment properties (38,663) (4,237) (42,900)
Disposals (14,495) - (14,495)
At 31 March 2023 163,978 12,526 176,504
Additions - refurbishments 1,544 - 1,544
Loss on revaluation of investment properties (15,383) - (15,383)
Disposals (76,294) (12,526) (88,820)
At 31 March 2024 73,845 - 73,845
Total investment properties Trading properties Total property portfolio
£'000 £'000 £'000
At 1 April 2022 232,717 20,287 253,004
Additions - refurbishments 1,182 - 1,182
Additions - trading property - 363 363
Loss on revaluation of properties (42,900) - (42,900)
Disposals (14,495) (9,595) (24,090)
At 1 April 2023 176,504 11,055 187,559
Additions - refurbishments 1,544 - 1,544
Additions - trading property - 90 90
Loss on revaluation of properties (15,383) - (15,383)
Disposals (88,820) (3,019) (91,839)
At 31 March 2024 73,845 8,126 81,971
The property portfolio has been independently valued at fair value. The
valuations have been prepared in accordance with the RICS Valuation - Global
Standards July 2017 ("the Red Book") and incorporate the recommendations of
the International Valuation Standards and the RICS valuation - Professional
Standards UK January 2014 (Revised April 2015) which are consistent with the
principles set out in IFRS 13. At 31 March 2024, the Group's freehold
properties were externally valued by CBRE, a Royal Institution of Chartered
Surveyors ("RICS") registered independent valuer.
The valuer in forming its opinion makes a series of assumptions, which are
typically market related, such as net initial yields and expected rental
values, and are based on the valuer's professional judgement. The valuer has
sufficient current local and national knowledge of the particular property
markets involved and has the skills and understanding to undertake the
valuations competently.
In addition to the loss on revaluation of investment properties included in
the table above, realised gains of £2,298,000 (2023: £819,000) relating to
investment properties disposed of during the year were recognised in profit or
loss.
The Group developed a mixed-use scheme at Hudson Quarter, York. Part of the
scheme consists of commercial units which the Group holds for leasing or has
let. As a result of achieving practical completion in April 2021, the
commercial element of the scheme is classified as investment properties.
A reconciliation of the valuations carried out by the independent valuers to
the carrying values shown in the Statement of Financial Position was as
follows:
2024 2023
£'000 £'000
Property portfolio valuation 88,670 192,355
Adjustment in respect of minimum payment under head leases - 1,077
Less trading properties at lower of cost and net realisable value (8,126) (11,055)
Less lease incentive balance included in accrued income (6,250) (5,143)
Less fair value uplift on trading properties (449) (730)
Carrying value of investment properties 73,845 176,504
The valuations of all investment property held by the Group is classified as
Level 3 in the IFRS 13 fair value hierarchy as they are based on unobservable
inputs. There have been no transfers between levels of the fair value
hierarchy during the year.
Valuation process
The valuation reports produced by CBRE, the independent valuers, are based on
information provided by the Group such as current rents, terms and conditions
of lease agreements, service charges and capital expenditure. This information
is derived from the Group's financial and property management systems and is
subject to the Group's overall control environment.
In addition, the valuation reports are based on assumptions and valuation
models used by the independent valuers. The assumptions are typically market
related, such as yields and discount rates, and are based on their
professional judgement and market observations. Each property is considered a
separate asset, based on its unique nature, characteristics and the risks of
the property. Only one investment property in the property portfolio was
valued on a residual basis.
The Head of Investment, responsible for the valuation process verifies all
major inputs to the external valuation reports, assesses the individual
property valuation changes from the prior year valuation report and holds
discussions with the independent valuers.
When this process is complete, the valuation report is recommended to the
Audit & Risk Committee, which considers it as part of its
overall responsibilities.
The assumptions made in the valuation of the Group's investment properties
are:
• The amount and timing of future income streams;
• Anticipated maintenance costs and other landlord's liabilities; and
• An appropriate yield
Valuation technique
The valuations reflect the tenancy data supplied by the Group along with
associated revenue costs and capital expenditure. The fair value of the
investment portfolio has been derived from capitalising the future estimated
net income receipts at capitalisation rates reflected by recent arm's length
sales transactions. The residential assets reflect the trading properties held
at 31 March 2024 as the Group's entire property portfolio was valued.
31 March 2024 Office Leisure Significant unobservable inputs
Retail Residential Total
Fair value of property portfolio 55,035,000 21,550,000 3,510,000 8,575,000 88,670,000
Area (sq ft) 374,129 304,319 27,019 n/a 705,467
Gross Estimated Rental Value 6,897,920 3,367,812 346,000 n/a 10,611,732
Net Initial Yield
Minimum 2.8% 13.2% 8.5% n/a 2.8%
Maximum 12.3% 13.7% 8.5% n/a 13.7%
Weighted average 5.4% 13.4% 8.5% n/a 8.0%
Reversionary Yield
Minimum 9.1% 10.7% 8.3% n/a 8.3%
Maximum 15.2% 19.3% 8.3% n/a 19.3%
Weighted average 11.8% 15.0% 8.3% n/a 13.0%
Equivalent Yield
Minimum 8.6% 12.4% 8.4% n/a 8.4%
Maximum 11.8% 13.2% 8.4% n/a 13.2%
Weighted average 9.7% 12.8% 8.4% n/a 11.7%
31 March 2023 Office Industrial Significant unobservable inputs
Leisure Other Total
Fair value of property portfolio 95,615,000 35,855,000 29,290,000 31,595,000 192,355,000
Area (sq ft) 622,905 339,470 304,319 84,851 1,351,545
Gross Estimated Rental Value 11,050,952 2,820,749 3,324,009 1,556,403 18,752,113
Net Initial Yield
Minimum 0.3% 3.7% 10.5% 5.3% 0.3%
Maximum 24.4% 8.1% 12.3% 9.9% 24.4%
Weighted average 6.6% 6.3% 11.5% 7.2% 7.4%
Reversionary Yield
Minimum 6.9% 6.6% 8.7% 5.3% 5.3%
Maximum 26.2% 8.4% 12.0% 10.0% 26.2%
Weighted average 10.8% 7.4% 10.5% 7.2% 9.6%
Equivalent Yield
Minimum 6.8% 6.3% 10.0% 6.0% 6.0%
Maximum 9.9% 7.1% 10.6% 9.8% 10.6%
Weighted average 9.4% 6.6% 10.3% 7.4% 9.0%
The "other" sector includes Residential, Retail and Retail Warehousing
sectors.
The following descriptions and definitions relate to valuation techniques and
key unobservable inputs made in determining fair values:
Market comparable method
Under the market comparable method (or market comparable approach), a
property's fair value is estimated based on comparable transactions in the
market.
Unobservable input: estimated rental value
The rent at which space could be let in the market conditions prevailing at
the date of valuation (range: £346,000 to £1,970,107 per annum).
Rental values are dependent on a number of variables in relation to the
Group's property. These include: size, location, tenant, covenant strength and
terms of the lease.
Unobservable input: net initial yield
The net initial yield is defined as the initial gross income as a percentage
of the market value (or purchase price as appropriate) plus standard costs of
purchase.
Sensitivities of measurement of significant unobservable inputs
As set out within accounting estimates and judgements above, the Group's
property Portfolio Valuation is open to judgements inherently subjective by
nature.
Unobservable input Impact on fair value measurement of significant increase in input Impact on fair value measurement of significant decrease in input
Gross Estimated Rental Value Increase Decrease
Net Initial Yield Decrease Increase
Reversionary Yield Decrease Increase
Equivalent Yield Decrease Increase
-5% in passing +5% in passing +0.25% in net -0.25% in net
rent (£m) rent (£m) initial yield (£m) initial yield (£m)
(Decrease)/increase in the fair value of investment properties as at 31 March (4.00) 4.00 (2.53) 2.70
2024
(Decrease)/increase in the fair value of investment properties as at 31 March (9.63) 9.63 (6.14) 6.92
2023
10. TRADING PROPERTY
Total
£'000
At 1 April 2022 20,287
Costs capitalised 363
Reversal of impairment of trading properties (9,595)
At 1 April 2023 11,055
Costs capitalised 90
Disposal of trading properties (3,019)
At 31 March 2024 8,126
The Group developed a large mixed-use scheme at Hudson Quarter, York. Part of
the approved scheme consists of residential units which the Group is in the
process of selling. As a result, the residential element of the scheme is
classified as trading property.
11. PROPERTY, PLANT AND EQUIPMENT
IT, fixtures and fittings Right of use asset
£'000 £'000
At 1 April 2022 296 461
Additions 8 197
At 1 April 2023 304 658
Additions - 57
Written off during the year - (32)
At 31 March 2024 304 683
Depreciation
At 1 April 2022 251 444
Provided during the year 30 82
At 1 April 2023 281 526
Provided during the year 23 119
At 31 March 2024 304 645
Net book value at 31 March 2024 - 38
Net book value at 31 March 2023 23 132
12. TRADE AND OTHER RECEIVABLES
2024 2023
£'000 £'000
Current
Gross amounts receivable from tenants 1,979 2,550
Less: expected credit loss provision (653) (653)
Net amount receivable from tenants 1,326 1,897
Other taxes 165 97
Other debtors 904 993
Accrued income 625 783
Prepayments 332 420
3,352 4,190
Non-current
Accrued income 5,625 4,360
5,625 4,360
Total trade and other receivables 8,977 8,550
Accrued income amounting to £5,143,000 as at 31 March 2023 (2022:
£3,926,000) was classified previously as a current asset in error rather than
allocated between current and non-current assets in line with their expected
recovery. The accrued income relates to rents recognised in advance of
receipt as a result of spreading the effect of rent free and reduced rent
periods, capital contributions in lieu of rent free periods and contracted
rent uplifts over the expected terms of their respective leases. The
comparatives have been restated accordingly to correct the allocation between
current and non-current assets. As such, £4,360,000 of these amounts are
classified as non-current assets and £783,000 as current assets as at 31
March 2023 (2022: £3,375,000 and £551,000 respectively). There is no
effect on the profit or net assets in any period presented.
The carrying value of trade and other receivables classified at amortised cost
approximates fair value.
As at 31 March 2024 the lifetime expected credit loss provision for trade
receivables and contract assets is as follows:
More than More than More than Total
30 days
60 days
90 days
Current
£'000
past due past due past due
£'000
£'000 £'000 £'000
Expected loss rate 9% 4% 4% 58%
Gross carrying amount 603 287 76 1,013 1,979
Loss provision 53 13 3 584 653
Changes to credit risk management
Impairment calculations have been carried out on trade receivables using the
IFRS 9 simplified approach, using 12 months of historic rental payment
information, and adjusting risk profiles based on forward-looking information.
In addition, the Group has reviewed its register of tenants at higher risk,
particularly in the leisure and retail sectors, those in administration or CVA
and the top 20 tenants by size with the remaining tenants considered on a
sector by sector basis.
Concentration of credit risk
The credit risk in respect of trade receivables is not concentrated as the
Group operates in many different sectors and locations around the UK, and has
a wide range of tenants from a broad spectrum of business sectors. 87% of the
ECL provision relates to tenants in the leisure sector.
How forward looking information was incorporated
In calculating the ECL provision, the Group used forward looking information
when assessing the risk profiles of each tenant, most notably around the
assessment over the likelihood of tenants having the ability to pay rent as
demanded, as well as the likelihood of rent deferrals and rent frees being
offered to tenants.
Key sources of estimation uncertainty
The Group's risk profile rates form a key part when calculating the ECL
provision. Default rates were applied to each tenant based on the ageing of
the outstanding receivable. Tenants were classified as either low (default
range of 0.5% - 8%), medium (default range of 20% - 50%), high (default range
of 65% - 80%), or extremely high risk (set default range of 100%), with
default rates applied to each risk profile. These rates have been calculated
by using historic and forward-looking information and is inherently
subjective.
A sensitivity analysis performed to determine the impact on the Group
Statement of Comprehensive Income from a 10% increase in each of the risk
profile rates would result in a decrease in profit by £146,000.
The Group does not hold any material collateral as security.
As at 31 March 2023 the lifetime expected credit loss provision for trade
receivables and contract assets was as follows:
More than 30 days More than 60 days More than 90 days
Current past due past due past due Total
£'000 £'000 £'000 £'000 £'000
Expected loss rate 2% 3% 4% 92%
Gross carrying amount 1,810 39 32 669 2,550
Loss provision 33 1 1 618 653
Movement in the expected credit loss provision was as follows:
2024 2023
£'000 £'000
Brought forward 653 980
Receivables written off during the year as uncollectable - (50)
Provisions released (146) (305)
Provisions increased 146 28
653 653
13. CASH AND CASH EQUIVALENTS
All of the Group's cash and cash equivalents at 31 March 2024 and 31 March
2023 are in sterling.
2024 2023
£'000 £'000
Cash and cash equivalents 19,766 5,509
The Directors consider that the carrying amount of cash and cash equivalents
approximates to their fair value.
14. TRADE AND OTHER PAYABLES
2024 2023
£'000 £'000
Trade payables 50 508
Other taxes 480 646
Other payables 1,138 1,484
Deferred rental income 1,694 3,359
Accruals 704 2,342
4,066 8,339
The deferred rental income in the year ended 31 March 2023 of £3,359,000 was
recognised as income in the year to 31 March 2024.
The Directors consider that the carrying amount of trade and other payables
measured at amortised cost approximates to their
fair value.
15. BORROWINGS
2024 2023
£'000 £'000
Current liabilities
Bank loans 318 8,563
Unamortised lending costs - (18)
318 8,545
Non-current liabilities
Bank loans 7,993 55,770
Unamortised lending costs (60) (641)
7,933 55,129
Total borrowings
Bank loans 8,311 64,333
Unamortised lending costs (60) (659)
8,251 63,674
The maturity profile of the Group's debt was as follows:
2024 2023
£'000 £'000
Within one year 318 8,563
From one to two years 318 37,027
From two to five years 7,675 18,743
8,311 64,333
Facility and arrangement fees
As at 31 March 2024
Secured Borrowings All in cost Maturity date Total Facility Unused loan facilities Facility drawn Unamortised facility fees Loan Balance
£'000 £'000 £'000 £'000 £'000
Scottish Widows 2.90% July 2026 8,311 - 8,311 (60) 8,251
8,311 - 8,311 (60) 8,251
As at 31 March 2023
Secured Borrowings All in cost Maturity date Total Facility Unused loan facilities Facility drawn Unamortised facility fees Loan Balance
£'000 £'000 £'000 £'000 £'000
Santander Bank plc 6.38% May 2027 11,750 - 11,750 (337) 11,413
Lloyds Bank plc 6.13% March 2024 6,845 - 6,845 (18) 6,827
National Westminster Bank plc 6.28% August 2024 37,724 (20,000) 17,724 (171) 17,553
Barclays 6.13% June 2024 19,385 - 19,385 (62) 19,323
Scottish Widows 2.90% July 2026 8,629 - 8,629 (71) 8,558
84,333 (20,000) 64,333 (659) 63,674
An investment property is subject to a first charge to secure the Group's bank
loans amounting to £8,311,000 (2023: £64,333,000).
The Group has unused loan facilities amounting to £Nil (2023: £20,000,000).
A facility fee was charged on this balance at a rate of 1.05% p.a. and was
payable quarterly. This facility was secured on the investment properties held
by Property Investment Holdings Limited, Palace Capital (Properties) Limited
and Palace Capital (Leeds) Limited as part of the NatWest loan.
The Group constantly monitors its approach to managing interest rate risk. The
Group repaid all of its floating rate debt in the year and as a result, all of
its debt is now fixed.
The Group has a loan with Scottish Widows for £8,311,000 (2023: £8,629,000)
which is fully fixed at a rate of 2.9%.
During the year, the Group repaid the debt facility with Barclays Bank plc in
full. The balance at 31 March 2023 was £19,385,000.
During the year, the Group repaid the debt facility with Santander plc in
full. The balance at 31 March 2023 was £11,750,000.
During the year, the Group repaid the debt facility with Lloyds Bank plc in
full. The balance at 31 March 2023 was £6,845,000.
During the year, the Group repaid the debt facility with National Westminster
Bank plc in full. The balance at 31 March 2023 was £17,724,000. At the same
time the £20.0m undrawn Revolving Credit Facility was cancelled.
The fair value of borrowings held at amortised cost at 31 March 2024 was
£8,857,000 (2023: £64,537,000). The difference in the fair value and
carrying value of borrowings reflects the valuation of the fixed rate debt
being higher than its carrying value. This is a level 2 fair value valuation
of the fixed rate debt and was determined by an independent third party. The
valuation is based on a net present value of the difference between the
contracted rate and the valuation rate when applied to the projected balances
for the period from the reporting date to the contracted expiry date.
The Group's bank loans are subject to various covenants including Loan to
Value, Interest Cover and Debt Service Cover requirements. During the year,
the Group met all of its covenants.
16. GEARING AND LOAN TO VALUE RATIO
The calculation of gearing is based on the following calculations of net
assets and net (cash)/debt:
2024 2023
£000 £'000
EPRA net asset value (note 7) 98,280 129,281
Borrowings (net of unamortised issue costs) 8,251 63,674
Lease liabilities for investment properties - 1,077
Cash and cash equivalents (19,766) (5,509)
Net (cash)/debt (11,515) 59,242
NAV gearing nil 46%
The calculation of bank loan to property value is calculated as follows:
2024 2023
£000 £'000
Fair value of investment properties 80,095 180,570
Fair value of trading properties 8,575 11,785
Fair value of property portfolio 88,670 192,355
Borrowings 8,311 64,333
Cash at bank (19,766) (5,509)
Net (cash)/debt (11,455) 58,824
Loan to value ratio nil 31%
17. RECONCILIATION OF LIABILITIES TO CASH FLOWS FROM
FINANCING ACTIVITIES
Bank borrowings
£'000
Balance at 1 April 2022 101,237
Cash flows from financing activities:
Bank borrowings repaid (37,419)
Loan arrangement fees paid (461)
Non-cash movements:
Amortisation of loan arrangement fees 317
Balance at 1 April 2023 63,674
Cash flows from financing activities:
Bank borrowings repaid (56,022)
Capitalised loan fees (73)
Non-cash movements:
Amortisation of loan arrangement fees 213
Debt termination costs 459
Balance at 31 March 2024 8,251
18. LEASES
Operating lease receipts in respect of rents on investment properties are
receivable as follows:
2024 2023
£'000 £'000
Within one year 7,610 15,524
From one to two years 7,802 13,277
From two to three years 7,385 13,046
From three to four years 5,849 12,030
From four to five years 4,741 8,742
From five to 25 years 30,580 42,755
63,967 105,374
Lease liabilities are classified as follows:
2024 2023
£'000 £'000
Lease liabilities for investment properties - 1,077
Lease liabilities for right of use asset 39 132
39 1,209
Lease obligations in respect of rents payable on leasehold properties were
payable as follows:
2024 2023
Present value
of lease
payments
£'000
Lease Present value of lease
payments payments
£'000 Interest £'000
£'000
Within one year - - - -
From one to two years - - - -
From two to five years - - - 1
From five to 25 years - - - 4
After 25 years - - - 1,072
- - - 1,077
Lease obligations in respect of rents payable on right of use assets were
payable as follows:
2024 2023
Present value
of lease
payments
£'000
Lease Present value of lease
payments payments
£'000 Interest £'000
£'000
Within one year 40 (1) 39 132
The net carrying amount of the leasehold properties is shown in note 9.
The Group has over 70 leases granted to its tenants. These vary depending on
the individual tenant and the respective property and demise and vary
considerably from short-term leases of less than one year to longer-term
leases of over 10 years.
A number of these leases contain rent free periods. Standard lease provisions
include service charge payments and recovery of other direct costs.
19. SHARE CAPITAL
2024 2023
Authorised, issued and fully paid share capital is as follows: £'000 £'000
37,560,295 ordinary shares of 10p each (2023: 46,388,515) 3,756 4,639
3,756 4,639
2024 2023
Reconciliation of movement in ordinary share capital £'000 £'000
At start of year 4,639 4,639
Treasury shares cancelled in the year (883) -
At end of year 3,756 4,639
Movement in ordinary authorised share capital Number of ordinary shares issued Total number of shares
As at 31 March 2022 and 31 March 2023 46,388,515
27 March 2024 (8,828,220)
As at 31 March 2024 37,560,295
Movement in treasury shares Number of ordinary
shares issued Total number
of shares
As at 31 March 2023 2,668,220
Shares repurchased and transferred to Treasury 3 April 2023 75,000
Shares repurchased and transferred to Treasury 17 April 2023 75,000
Shares repurchased and transferred to Treasury 11 May 2023 50,000
Shares repurchased and transferred to Treasury 12 May 2023 52,000
Shares repurchased and transferred to Treasury 16 May 2023 53,000
Shares repurchased and transferred to Treasury 24 May 2023 100,000
Shares repurchased and transferred to Treasury 5 June 2023 100,000
Shares repurchased and transferred to Treasury 20 June 2023 215,000
Shares repurchased and transferred to Treasury 22 June 2023 160,000
Shares repurchased and transferred to Treasury 27 June 2023 350,000
Shares repurchased and transferred to Treasury 29 June 2023 275,000
Shares repurchased and transferred to Treasury 6 July 2023 300,000
Shares repurchased and transferred to Treasury 18 July 2023 75,000
Shares repurchased and transferred to Treasury 9 August 2023 750,000
Shares repurchased and transferred to Treasury 11 August 2023 2,814,495
Shares repurchased and transferred to Treasury 21 August 2023 100,000
Shares repurchased and transferred to Treasury 25 August 2023 300,000
Shares repurchased and transferred to Treasury 5 September 2023 315,505
Cancellation of treasury shares 27 March 2024 (8,828,220)
As at 31 March 2024 -
Total number of shares excluding the number of shares held in treasury at 31 37,560,295
March 2024
Year ended 31 March 2024
On 3 April 2023, 75,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 17 April 2023, 75,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 11 May 2023, 50,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 12 May 2023, 52,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 16 May 2023, 53,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 24 May 2023, 100,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 5 June 2023, 100,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 20 June 2023, 215,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 22 June 2023, 160,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 27 June 2023, 350,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 29 June 2023, 275,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 6 July 2023, 300,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 18 July 2023, 75,000 shares were purchased by the Group on the open market
and transferred into treasury reserves.
On 9 August 2023, 750,000 shares were purchased by the Group on the open
market and transferred into treasury reserves.
On 11 August 2023, 2,814,495 shares were purchased by the Group on the open
market and transferred into treasury reserves.
On 21 August 2023, 100,000 shares were purchased by the Group on the open
market and transferred into treasury reserves.
On 25 August 2023, 300,000 shares were purchased by the Group on the open
market and transferred into treasury reserves.
On 5 September 2023, 315,505 shares were purchased by the Group on the open
market and transferred into treasury reserves.
On 27 March 2024, 8,828,220 shares were cancelled by the Group.
Shares held in Employee Benefit Trust
2024 2023
Authorised, issued and fully paid share capital is as follows: No. of No. of
shares shares
Brought forward 1,914 458
Transferred under scheme of arrangement - 40,000
Shares exercised under deferred bonus share scheme (13,521) (38,544)
Shares exercised under employee LTIP scheme (42,440) -
Shares purchased by EBT 59,817 -
At end of year 5,770 1,914
Share options:
2024 2023
Reconciliation of movement in outstanding share options No. of options No. of options
At start of year 537,877 1,078,826
LTIP's exercised in the year (68,612) -
Prior period accrued dividends on vested options - 32,491
Lapsed in the year (290,147) (544,727)
Deferred bonus share options issued - 9,831
Deferred bonus share options exercised (9,831) (38,544)
At end of year 169,287 537,877
As at 31 March 2024, the Company had the following outstanding unexpired
options:
Description of unexpired share options 2024 2023
Weighted average Weighted average
No. of option price No. of option price
options Options
Employee benefit plan 169,287 0p 528,046 0p
Deferred bonus share scheme issued - 0p 9,831 0p
Total 169,287 0p 537,877 0p
Exercisable - 0p - 0p
Not exercisable 169,287 0p 537,877 0p
The weighted average remaining contractual life of share options at 31 March
2024 is 0.6 years (2023: 1.0 years).
20. SHARE-BASED PAYMENTS
Employee benefit plan
The following table illustrates the number and weighted average exercise
prices of, and movements in, share options during the period:
Number of Exercise Average Grant Vesting
options price share price at date date
date of
exercise
Outstanding at 31 March 2022 1,078,826 0p
Deferred bonus share options issued 9,831 0p 285p 18 August 2022 18 August 2023
Deferred bonus share options exercised (38,544) 0p 263p 15 June 2021 15 June 2022
Prior period accrued dividends on vested options 32,491 0p
Lapsed in the year (LTIP 2019) (241,147) 0p
Lapsed in the year (LTIP 2020) (124,123) 0p
Lapsed in the year (LTIP 2021) (179,457) 0p
Outstanding at 31 March 2023 537,877 0p
Deferred bonus share options exercised (9,831) 0p 254.5p 18 August 2022 18 August 2023
Exercised during the year (LTIP 2020) (68,612) 0p 226.5p 14 October 2020 14 October 2023
Lapsed in the year (LTIP 2020) (236,175) 0p
Lapsed in the year (LTIP 2021) (53,972) 0p
Outstanding at 31 March 2024 169,287 0p
LTIP 2021
The options are awarded to employees on achievements against targets on two
separate measures over the three-year period. For directors, the options are
subject to a two-year holding period following vesting. Half the options will
be awarded based on the first target and half based on the achievement of the
second.
Total property return growth is calculated as Total Property Return of the
Company over the Performance Period beginning on 31 March 2021 and ending on
31 March 2024, using the Total Property Return ("TPR") as calculated by MSCI
for the Group as compared with the TPR for the MSCI IPD Index (the
"Comparator") over the same period. The TPR for the Group and the Comparator
will be its percentage increase over the three-year Performance Period.
Total Shareholder return (TSR) measures the total Shareholder return (price
rise plus dividends) over the period from 16 November 2021 to 15 November
2024. The percentage of the TSR metric will be adjusted downwards according to
the Company's share price discount to net asset value at the time of vesting.
Share Price Discount will be calculated with reference to the closing share
price on 15 November 2024 and EPRA Net Tangible Assets as at 30 September
2024. The base price is £2.44 per share which was the market price at the
grant date.
Annualised TSR over the Vesting % TPR equivalent total over performance period Vesting %
TSR performance period
<5% 0 <0.5% 0
Equal to 5% 20 Equal to 0.5% 20
Between 5% and 9% 20-100 Between 0.5% and 2.5% 20-100
Equal to 9% 100 Equal to 2.5% 100
The fair value of grants was measured at the grant date using a
Black−Scholes pricing model for the TPR tranche and using a Monte Carlo
pricing model for the TSR tranche, taking into account the terms and
conditions upon which the instruments were granted. The services received and
a liability to pay for those services are recognised over the expected vesting
period. The main assumptions of both the Black−Scholes and Monte Carlo
pricing models are as follows:
Monte Carlo TSR Black-Scholes PV
Tranche Tranche
Grant date 16 November 2021 16 November 2021
Share price £2.44 £2.44
Exercise price 0p 0p
Term 5 years 5 years
Expected volatility 38.03% 38.03%
Expected dividend yield 0.00% 0.00%
Risk free rate 0.59% 0.59%
Time to vest (years) 3.0 3.0
Expected forfeiture p.a. 0% 0%
Fair value per option £1.28 £2.44
The expense recognised for employee share-based payment received during the
period is shown in the following table:
2024 2023
£'000 £'000
LTIP 2019 - 15
LTIP 2020 51 87
LTIP 2021 86 75
Total expense arising from share-based payment transactions 137 177
21. RELATED PARTY TRANSACTIONS
Charitable donations amounting to £Nil (2023: £6,000) have been made by the
Group to Variety, the Children's Charity, a charity where Neil Sinclair,
previously Chief Executive, was a Trustee.
Dividend payments made to Directors amounted to £2,306 (2023: £27,598)
during the year. See note 4 for further details of key management
remuneration.
22. CAPITAL COMMITMENTS
The obligation for capital expenditure relating to the enhancement of
investment properties entered into by the Group amounted to £176,608 (2023:
£456,901).
23. POST BALANCE SHEET EVENTS
On 17 April 2024, the Group completed on the disposal of Sandringham House,
Harlow, for a total consideration of £3.3m.
On 19 April 2024, the Group completed on the disposal of Kiln Farm, Milton
Keynes, for a total consideration of £6.5m.
On 29 April 2024, the Group exchanged on the disposal of the whole share
capital of Palace Capital (Manchester) Limited, for a total consideration of
£8.8m. Completion of the sale is due to take place by 22 July 2024.
On 5 June 2024, the Group conditionally exchanged on the disposal of unit 3B
at St James' Gate, Newcastle for a total consideration of £0.7m. Completion
of the sale is due to take within the next three months.
Post year end, the Group exchanged on two residential units at Hudson Quarter
for a total consideration of £1.2m.
24. FINANCIAL RISK MANAGEMENT
The Group's principal financial liabilities are loans. The Group has rent and
other receivables, trade and other payables and cash and short-term deposits
that arise directly from its operations. The Group is exposed to market risk
(including real estate risk), credit risk and liquidity risk.
The Group's senior management oversee the management of these risks, and the
Board of Directors has overall responsibility for the determination of the
Group's risk management objectives and policies and it sets policies that seek
to reduce risk as far as possible without unduly affecting the Group's
competitiveness and flexibility. Further details regarding these policies are
set out below:
The Group manages its capital structure, and makes adjustments to it, in the
light of changes in economic conditions.
To maintain or adjust the capital structure, the Group may adjust the dividend
payment to Shareholders, return capital to Shareholders
or issue new shares.
Capital risk management
The Group considers its capital to comprise its share capital, share premium,
other reserves, capital reduction reserves and retained earnings which
amounted to £97,774,000 (2023: £128,475,000). The Group's capital management
objectives are to safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for Shareholders and
benefits for other stakeholders and to provide an adequate return to
Shareholders by pricing its services commensurately with the level of risk.
Within the subsidiaries of the Group, the business has covenanted to maintain
a specified leverage ratio and a net interest expense coverage ratio, all the
terms of which have been adhered to during the year.
Market risk
Market risk arises from the Group's use of interest bearing, and tradable
instruments. It is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in interest rates
(interest rate risk) or other market factors.
Interest rate risk
The interest rate exposure profile of the Group's financial assets and
liabilities as at 31 March 2024 and 31 March 2023 were:
Nil rate Floating rate assets Fixed rate liability
assets and liabilities £'000 £'000 Total
£'000 £'000
As at 31 March 2024
Trade and other receivables 2,230 - - 2,230
Cash and cash equivalents - 19,766 - 19,766
Trade and other payables (2,457) - - (2,457)
Bank borrowings - - (8,251) (8,251)
Lease liabilities - - (39) (39)
(227) 19,766 (8,290) 11,249
Nil rate assets Floating rate assets Fixed rate Floating rate
and liabilities £'000 liability liability Total
£'000 £'000 £'000 £'000
As at 31 March 2023
Trade and other receivables 2,890 - - - 2,890
Cash and cash equivalents - 5,509 - - 5,509
Trade and other payables (4,334) - - - (4,334)
Bank borrowings - - (8,558) (55,116) (63,674)
Lease liabilities - - (1,209) - (1,209)
(1,444) 5,509 (9,767) (55,116) (60,818)
The Group has loans amounting to £Nil (2023: £55,116,000) which have
interest payable at rates linked to the SONIA interest rates or bank base
rates. A 1% increase in the SONIA or base rate will have the effect of
increasing interest payable by £Nil (2023: £551,000).
The Directors regularly review the Group's position with regard to interest
rates in order to minimise its risk.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group.
The Group has its cash held on deposit with two large banks in the United
Kingdom. At 31 March 2024 the cash balances of the Group were £19,766,000
(2023: £5,509,000). The concentration of credit risk held with Barclays Bank
plc, the largest of these banks, was £19,262,000 (2023: £2,997,000).
Credit risk also results from the possibility of a tenant in the Group's
property portfolio defaulting on a lease. The largest tenant by contractual
income amounts to 14.8% (2023: 6.0%) of the Group's anticipated income. The
Directors assess a tenant's creditworthiness prior to granting leases and
employ professional firms of property management consultants to manage the
portfolio to ensure that tenants debts are collected promptly and the
Directors in conjunction with the property managers take appropriate actions
when payment is not made on time.
The carrying amount of financial assets (excluding cash balances) recorded in
the financial statements, net of any allowances for losses, represents the
Group's maximum exposure to credit risk without taking account of the value of
any collateral obtained. The carrying amount of these assets at 31 March 2024
was £2,230,000 (2023: £2,890,000). The details of the provision for expected
credit loss are shown in note 12.
Liquidity risk management
The Group's policy is to hold cash and obtain loan facilities at a level
sufficient to ensure that the Group has available funds to meet its
medium-term capital and funding obligations. The Group holds cash to enable
the Group to manage its liquidity risk.
The Group monitors its risk to a shortage of funds using a monthly working
capital model. This process considers the maturity of both the Group's
financial investments and financial assets (e.g. accounts receivable, other
financial assets) and projected cash flows
from operations.
The tables below summarise the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments:
On demand 0-1 years 1-2 years 2-5 years Total
£'000 £'000 £'000 £'000 £'000
As at 31 March 2024
Interest bearing loans - 550 541 7,735 8,826
Trade and other payables 1,892 - - 565 2,457
1,892 550 541 8,300 11,283
On demand 0-1 years 1-2 years 2-5 years > 5 years Total
£'000 £'000 £'000 £,000 £'000 £'000
As at 31 March 2023
Interest bearing loans - 12,161 38,606 19,598 - 70,365
Lease liabilities - 54 54 162 5,839 6,109
Trade and other payables 4,334 - - - - 4,334
4,334 12,215 38,660 19,760 5,839 80,808
Company Statement of Financial Position
as at 31 March 2024
Note 2024 2023
£000 £'000
Fixed assets
Investments in subsidiaries 2 94,382 104,730
Property, plant and equipment 3 - 22
94,382 104,752
Current assets
Trade and other receivables 4 30,602 30,155
Cash at bank and in hand 11,483 1,049
42,085 31,204
Total assets 136,467 135,956
Current liabilities
Creditors: amounts falling due within one year 5 (63,616) (33,660)
Net current liabilities (21,531) (2,456)
Non-current liabilities
Short term incentive plan provision (565) -
Net assets 72,286 102,296
Equity
Called up share capital 6 3,756 4,639
Treasury shares - (7,343)
Merger reserve 3,503 3,503
Capital redemption reserve 1,223 340
Capital reduction reserve 89,931 118,477
Accumulated losses (26,127) (17,320)
Equity - attributable to the owners of the Parent 72,286 102,296
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and has not presented its own Statement of
Comprehensive Income in these financial statements. The Company's loss after
tax for the year was £8,671,000 (2023: £21,688,000).
The financial statements were approved by the Board of Directors and
authorised for issue on 5 June 2024 and are signed on its behalf by:
STEVEN OWEN
Executive Chairman
Company Statement of Changes in Equity
as at 31 March 2024
Share Treasury Other Capital Reduction Reserve Retained Total
Capital Share Reserves £'000 Earnings/ (Accumulated Losses) Equity
£'000 Reserve £'000 £'000 £'000
£'000
At 31 March 2022 4,639 (717) 3,843 125,019 4,225 137,009
Total comprehensive loss for the year - - - - (21,688) (21,688)
Transactions with Equity Holders
Share-based payments - - - - 177 177
Exercise of share options - 71 - - (71) -
Issue of deferred bonus share options - - - - 37 37
Dividends - - - (6,542) - (6,542)
Share buyback - (6,697) - - - (6,697)
At 31 March 2023 4,639 (7,343) 3,843 118,477 (17,320) 102,296
Total comprehensive loss for the year - - - - (8,671) (8,671)
Transactions with Equity Holders
Share-based payments - - - - 137 137
Exercise of share options - 161 - - (273) (112)
Dividends - - - (6,045) - (6,045)
Share buyback - (15,179) - - - (15,179)
Shares purchased by employee benefits trust - (140) - - - (140)
Cancellation of treasury shares (883) 22,501 883 (22,501) - -
At 31 March 2024 3,756 - 4,726 89,931 (26,127) 72,286
Treasury shares represents the consideration paid for shares bought back on
the open market. On 27 March 2024 all shares held in Treasury were cancelled.
Other reserves comprise the merger reserve and the capital redemption reserve.
The merger reserve represents the excess over nominal value of the fair value
consideration for the acquisition of subsidiaries satisfied by the issue of
shares in accordance with S612 of the Companies Act 2006.
The capital redemption reserve represents the nominal value of cancelled
preference share capital redeemed.
The capital reduction reserve represents distributable profits generated as a
result of the share premium reduction.
Notes to the Company Financial Statements
Accounting policies
Palace Capital plc is a company incorporated in England and Wales under the
Companies Act. The address of the registered office is given on the contents
page and the nature of the Group's operations and its principal activities are
set out in the Strategic Report. The financial statements of the Company have
been prepared in accordance with FRS 102, the Financial Reporting Standard
applicable in the United Kingdom and the Republic of Ireland.
The preparation of financial statements in compliance with FRS 102 requires
the use of certain critical accounting estimates. It also requires Company's
management to exercise judgement in applying the Company's accounting policies
(as detailed below). The Statement of Financial Position heading relating to
the Company's investments and property, plant and equipment is in accordance
with the balance sheet formats of the Companies Act 2006. Assets are
classified in accordance with the definitions of fixed and current assets in
the Companies Act instead of the presentation requirements of IAS 1
Presentation of Financial Statements
Dividends revenue
Revenue is recognised when the Company's right to receive payment is
established, which is generally when Shareholders of the paying company
approve the payment of the dividend.
Valuation of investments
Investments in subsidiaries are measured at cost less accumulated impairment.
Where merger relief is applicable, the cost of the investment in a subsidiary
undertaking is measured at the nominal value of the shares issued together
with the fair value of any additional consideration paid.
Current taxation
Current tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the tax
authorities. The tax rates and the tax laws used to compute the amount are
those that are enacted or substantively enacted, by the balance sheet date.
Deferred taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax balances are recognised in respect of timing differences that
have originated but not reversed on the balance sheet date. Deferred tax
liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised.
Deferred tax balances are not recognised in respect of permanent differences
between the fair value of assets acquired and the future
tax deductions available for them and the differences between the fair values
of liabilities acquired and the amount that will be assessed for tax.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in profit or loss, except when it relates to items charged
or credited directly to other comprehensive income, in which case the deferred
tax is also dealt with in other comprehensive income.
Trade and other receivables
Trade and other receivables and intercompany receivables are recognised and
carried at the original transaction value. A provision for impairment is
established where there is objective evidence that the Company will not be
able to collect all amounts due according to the original terms of the
receivables concerned.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Company are
classified according to the substance of the contractual arrangements entered
into and the definitions of a financial liability and an equity instrument. An
equity instrument is any contract that evidences a residual interest in the
assets of the Company after deducting all of its liabilities. The accounting
policies adopted for specific financial liabilities and equity instruments are
set out below:
Trade payables
Trade payables are initially measured at fair value and are subsequently
measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the fair value of
proceeds received, net of direct issue costs.
Parent company disclosure exemptions
In preparing the separate financial statements of the Parent Company,
advantage has been taken of the following disclosure exemptions available in
FRS 102:
• no cash flow statement has been presented for the Parent Company;
• disclosures in respect of the Parent Company's financial instruments
have not been presented as equivalent disclosures have been provided in
respect of the Group as a whole;
• disclosures in respect of the Parent Company's share-based payment
arrangements have not been presented as equivalent disclosures have been
provided in respect of the Group as a whole; and
• disclosure has been given for the aggregate remuneration of the key
management personnel of the Parent Company as their remuneration is included
in the totals for the Group as a whole.
Judgements in applying accounting policies and key sources of estimation
uncertainty
Investments and loans to subsidiary undertakings (see note 2)
The most critical estimates, assumptions and judgements relate to the
determination of carrying value of unlisted investments in the Company's
subsidiary undertakings and the carrying value of the loans that the Company
has made to them. The nature, facts and circumstance of the investment or loan
are taken into account in assessing whether there are any indications of
impairment.
Provisions provided in the year reflect the reduction in net asset value of
subsidiaries for the year ended 31 March 2024. The carrying value of the
subsidiaries represents the net asset value (NAV) of the subsidiary as at 31
March 2024. The NAV of the subsidiaries are affected by the fair value of the
Group's investment property.
1. PROFIT FOR THE FINANCIAL PERIOD
The Company has taken advantage of section 408 of the Companies Act 2006 and
consequently a profit and loss account for the Company alone has not been
presented.
2. INVESTMENTS IN SUBSIDIARIES
Cost: Investments
in subsidiaries
£'000
At 1 April 2022 180,956
Write-down of investments -
At 1 April 2023 180,956
Additions 8,851
Disposals (12,521)
At 31 March 2024 177,286
Provision for impairment:
At 1 April 2022 58,092
Provided during the year 18,134
At 1 April 2023 76,226
Provided during the year 8,341
Disposals (1,663)
At 31 March 2024 82,904
Net book value at 31 March 2024 94,382
Net book value at 31 March 2023 104,730
During the year, Palace Capital plc waived loans to subsidiaries to the value
of £8,851,000. The waived loans were capitalised to the investment in
subsidiaries, subsequently an impairment of £8,341,000 was recognised to
reflect the reduction in net asset value of subsidiaries for the year ended 31
March 2024. The carrying value of the subsidiaries represents the net asset
value (NAV) of the subsidiaries as at 31 March 2024.
During the year a subsidiary, Palace Capital (Liverpool) Limited, was disposed
of which resulted in a reversal of an impairment previously recognised of
£1,663,000.
The Group comprises a number of companies; all subsidiaries included within
these financial statements are noted below:
Subsidiary undertaking: Class of share held % shareholding Principal activity
Palace Capital (Leeds) Limited Ordinary 100 Property Investments
Palace Capital (Northampton) Limited Ordinary 100 Property Investments
Palace Capital (Properties) Limited Ordinary 100 Property Investments
Palace Capital (Developments) Limited Ordinary 100 Property Investments
Palace Capital (Halifax) Limited Ordinary 100 Property Investments
Palace Capital (Manchester) Limited Ordinary 100 Property Investments
Palace Capital (Signal) Limited Ordinary 100 Property Investments
Property Investment Holdings Limited Ordinary 100 Property Investments
Palace Capital (Dartford) Limited Ordinary 100 Property Management
Palace Capital (Newcastle) Limited Ordinary 100 Property Investments
Palace Capital (York) Limited Ordinary 100 Property Investments
Associated Company:
HBP Services Limited* Ordinary 21.4 Property Management
Clubcourt Limited* Ordinary 40 Property Management
* Held indirectly
The results of the associated companies are immaterial to the Group.
The registered addresses for the subsidiaries across the Group are consistent
based on their country of incorporation and are as follows: Thomas House, 84
Eccleston Square, London, SW1V 1PX
On 10 July 2023 the 100% holding in Palace Capital (Liverpool) Limited was
disposed of.
On 29 April 2024, contacts were exchanged for the sale of Palace Capital
(Manchester) Limited with completion expected in July 2024.
3. PROPERTY, PLANT AND EQUIPMENT
IT, fixtures and fittings £'000
At 31 March 2022 291
Additions 8
At 31 March 2023 299
Additions -
At 31 March 2024 299
Depreciation
At 31 March 2022 248
Provided during the period 29
At 31 March 2023 277
Provided during the period 22
At 31 March 2024 299
Net book value at 31 March 2024 -
Net book value at 31 March 2023 22
4. TRADE AND OTHER RECEIVABLES
2024 2023
£,000 £'000
Amounts owed by subsidiary undertakings 28,581 28,034
Trade debtors 1,582 1,703
Other debtors 39 47
Accrued interest on amounts owed by subsidiary undertakings 309 309
Prepayments 91 62
30,602 30,155
Trade debtors represent amounts owed from subsidiary undertakings in relation
to management charges.
All amounts that fall due for repayment within one year and are presented
within current assets as required by the Companies Act. The amounts owed by
subsidiary undertakings are repayable on demand with no fixed repayment date,
although it is noted that a significant proportion of the amounts may not be
sought for repayment within one year depending on activity in the subsidiary
undertakings.
A loan amounting to £8,761,009 remains outstanding at 31 March 2024 (2023:
£14,023,501) from Palace Capital (Developments) Limited. No interest is
charged on this loan. This loan is repayable on demand.
A loan amounting to £142,417 remains outstanding at 31 March 2024 (2023:
£1,079,417) from Palace Capital (Halifax) Limited. No interest is charged on
this loan. This loan is repayable on demand.
A loan amounting to £7,363,467 remains outstanding at 31 March 2024 (2023:
£4,945,582) from Palace Capital (Northampton) Limited. No interest is charged
on this loan. This loan is repayable on demand.
A loan amounting to £Nil remains outstanding at 31 March 2024 (2023:
£3,084,996) from Palace Capital (Manchester) Limited. No interest is charged
on this loan. This loan is repayable on demand.
A loan amounting to £12,313,905 remains outstanding at 31 March 2024 (2023:
£3,101,452) from Palace Capital (Newcastle) Limited. No interest is charged
on this loan. This loan is repayable on demand.
5. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2024 2023
£,000 £'000
Trade creditors 123 124
Amount owed to subsidiary undertaking 62,824 32,143
Other taxes 247 268
Other creditors - 15
Accruals and deferred income 422 1,110
63,616 33,660
A loan amounting to £30,280,243 remains outstanding at 31 March 2024 (2023:
£19,264,032) to Palace Capital (Signal) Limited. No interest is charged on
this loan. This loan is repayable on demand.
A loan amounting to £11,280,188 remains outstanding at 31 March 2024 (2023:
£10,612,686) to Property Investment Holdings Limited. No interest is charged
on this loan. This loan is repayable on demand.
A loan amounting to £Nil remains outstanding at 31 March 2024 (2023:
£2,146,000) to Palace Capital (Liverpool) Limited. No interest is charged on
this loan. This loan was repaid as part of the disposal of the holding in
Palace Capital (Liverpool) Limited.
A loan amounting to £76,508 remains outstanding at 31 March 2024 (2023:
£120,000) to Palace Capital (York) Limited. No interest is charged on this
loan. This loan is repayable on demand.
A loan amounting to £2,601,593 remains outstanding at 31 March 2024 (2023:
£153,534 debtor) to Palace Capital (Leeds) Limited. No interest is charged on
this loan. This loan is repayable on demand.
A loan amounting to £18,585,423 remains outstanding at 31 March 2024 (2022:
£1,645,430 debtor) to Palace Capital (Properties) Limited. No interest is
charged on this loan. This loan is repayable on demand.
6. SHARE CAPITAL
The details of the Company's share capital are provided in note 19 of the
notes to the Consolidated Financial Statements.
7. LEASES
Operating lease payments in respect of rents on leasehold properties occupied
by the Company are payable as follows:
2024 2023
£'000 £'000
Within one year 40 134
40 134
8. POST BALANCE SHEET EVENTS
There are no post balance sheet events.
Officers and Professional Advisors
Directors
Steven Owen Executive Chairman
Mark Davies Independent Non-Executive
Director
Secretary
Phil Higgins
Registered office
Thomas House
84 Eccleston Square
London
SW1V 1PX
Registered number
05332938 (England and Wales)
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Registrar
EQUINITI LIMITED
Aspect House
Spencer Road
Lancing
West Sussex
BN 99 6DA
Broker
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Glossary
Adjusted EPS: Is adjusted profit before tax less corporation tax charge on
recurring earnings (excluding deferred tax movements) divided by the average
basic number of shares in the period.
Adjusted profit before tax: Is the IFRS profit before taxation excluding
investment property revaluations, gains/losses on disposals, acquisition
costs, fair value movement in derivatives, share-based payments and
exceptional items.
Balance sheet gearing: Is the balance sheet net debt divided by IFRS net
assets.
Dividend cover: Is the Adjusted profit before tax plus trading profit divided
by dividends paid in the period, expressed as a percentage.
Employee Benefit Trust (EBT): the Employee Benefit Trust, administrator of the
Company's share plans.
Expected credit loss (ECL): In accordance with IFRS 9, the risk of
recoverability of our rental arrears are assessed. This is done using a
probability weighted estimate of credit losses, being the difference between
the cash flows that are due in accordance with the contract and the cash flows
that the Group expects to receive.
EPRA: Is the European Public Real Estate Association.
EPRA cost ratio (including direct vacancy costs): Is a proportionally
consolidated measure of the ratio of net overheads and operating expenses
against gross rental income (with both amounts excluding ground rents
payable). Net overheads and operating expenses relate to all administrative
and operating expenses, net of any service fees, recharges or other income
specifically intended to cover overhead and property expenses.
EPRA cost ratio (excluding direct vacancy costs): Is the ratio calculated
above, but with direct vacancy costs removed from the net overheads and
operating expenses balance.
EPRA diluted EPS: Is EPRA earnings divided by the average diluted number of
shares in the period.
EPRA earnings: Is the IFRS profit after taxation excluding investment property
revaluations, gains/losses on disposals and changes in fair value of financial
derivatives.
EPRA EPS: Is EPRA earnings divided by the average basic number of shares in
the period.
EPRA net assets (EPRA NAV): Are the balance sheet net assets according to the
definitions of the various NAV measures defined in the EPRA Best Practice
Recommendations that came into effect for accounting periods starting 1
January 2020.
EPRA net tangible assets (EPRA NTA): Is the NAV adjusted to reflect the fair
value of trading properties and to exclude deferred taxation and derivatives.
EPRA NTA per share: Is EPRA NTA divided by the diluted number of shares at the
period end.
EPRA occupancy rate: Is the ERV of occupied space divided by ERV of the whole
portfolio, excluding developments and residential property.
EPRA topped-up net initial yield: Is the current annualised rent, net of
costs, topped up for contracted uplifts, where these are not in lieu of rental
growth, expressed as a percentage of capital value.
EPRA vacancy rate: Is the ERV of vacant space divided by ERV of the whole
portfolio, excluding developments and residential property.
Equivalent yield: Is the net weighted average return a property will produce
based upon the timing of the income received. In accordance with usual
practice, the equivalent yields (as determined by the external valuers) assume
rent received annually in arrears.
Estimated rental value (ERV): Is the external valuers' opinion as to the open
market rent which, on the date of valuation, could reasonably be expected to
be obtained on a new letting or rent review of a property.
IAS/IFRS: Is the International Financial Reporting Standards issued by the
International Accounting Standards Board and adopted by the UK.
Interest cover ratio (ICR): Is the number of times net interest payable is
covered by underlying profit before net interest payable and taxation.
Investment Property Databank (IPD): A wholly-owned subsidiary of MSCI
producing an independent benchmark of property returns and the Group's
portfolio returns.
Key Performance Indicators (KPIs): Are the most critical metrics that measure
the success of specific activities used to meet business goals - measured
against a specific target or benchmark, adding context to each activity being
measured.
Like-for-like net rental income: Is the change in net rental income on
properties owned throughout the current and previous periods under review.
This growth rate includes revenue recognition and lease accounting adjustments
but excludes properties held for development in either period, properties with
guaranteed rent reviews, asset management determinations and surrender
premiums.
Like-for-like valuation: Is the change in the fair value of properties owned
throughout the entire year.
This excludes properties acquired during the year and disposed of during the
year, but includes capital expenditure spent on the properties.
Loan to value (LTV): Is the ratio of principal value of gross debt less cash,
short-term deposits and liquid investments to the aggregate fair value of
properties and investments.
MSCI Inc. (MSCI IPD): Is a company that produces independent benchmarks of
property returns. The Group measures its performance against both the Central
London Offices Index and the UK All Property Index.
Net asset value (NAV) per share: Is the equity attributable to owners of the
Group divided by the number of ordinary shares in issue at the period end.
Net initial yield (NIY): Is the current annualised rent, net of costs,
expressed as a percentage of capital value, after adding notional purchaser's
costs.
Net rental income: Is the rental income receivable in the period after payment
of net property outgoings. Net rental income will differ from annualised net
rents and passing rent due to the effects of income from rent reviews, net
property outgoings and accounting adjustments for fixed and minimum contracted
rent reviews and lease incentives.
Net reversionary yield (NRY): Is the anticipated yield, which the initial
yield will rise to once the rent reaches the estimated rental value.
Passing rent: Is the gross rent, less any ground rent payable under head
leases.
Peer Group: A selection of small/medium sized property companies within the
listed real estate sector with a diversified portfolio.
Proforma: Is a method of calculating financial results using certain
projections or presumptions.
Property Portfolio: the total fair value of all investment properties and
trading properties as determined by the independent valuer, CBRE.
Portfolio Valuation: The value of the Company's property portfolio, including
all investment and trading properties as valued by our independent valuer,
CBRE.
Property Income Distribution (PID): A dividend received by a Shareholder of
the principal company in respect of profits and gains of the Property Rental
Business of the UK resident members of the REIT Group or in respect of the
profits or gains of a non-UK resident member of the REIT Group.
Real Estate Investment Trust (REIT): A UK Real Estate Investment Trust must be
a company listed on a recognised stock exchange with at least three-quarters
of its profits and assets derived from a qualifying property rental business.
Income and capital gains from the property rental business are exempt from tax
but the REIT is required to distribute at least 90% of those profits to
Shareholders. Tax is payable on profits from non-qualifying activities of the
residual business.
Tenant (or lease) incentives: Are any incentives offered to occupiers to enter
into a lease. Typically the incentive will be an initial rent free period, or
a cash contribution to fit-out or similar costs. Under accounting rules the
value of lease incentives given to tenants is amortised through the Income
Statement on a straight-line basis to the lease expiry.
Total Accounting Return (TAR): Is the increase or decrease in EPRA NAV per
share plus dividends paid in the year, and this can be expressed as a
percentage of EPRA NAV per share at the beginning of the period.
Total Expense Ratio: Is calculated as total administrative costs for the year
divided by total asset value in the year.
Total Shareholder Return (TSR): Is calculated as the movement in the share
price for the period plus dividends paid in the year, divided by opening share
price
Weighted average debt maturity: Is measured in years when each tranche of
Group debt is multiplied by the remaining period to its maturity and the
result is divided by total Group debt in issue at the period end.
Weighted average interest rate: Is the loan interest per annum at the period
end, divided by total debt in issue at the period end.
Weighted average unexpired lease term (WAULT): Is the average lease term
remaining to first break, or expiry, across the portfolio weighted by rental
income. This is also disclosed assuming all break clauses are exercised at the
earliest date,
as stated.
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