REG - Wynnstay Properties - Final Results and notice of AGM
12/06/2024 07:15
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RNS Number : 0445S Wynnstay Properties PLC 12 June 2024
The information communicated within this announcement is deemed to constitute
inside information for the purposes of the Market Abuse Regulation (EU) No.
596/2014 as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement, this
information is considered to be in the public domain.
WYNNSTAY PROPERTIES PLC
("Wynnstay" or the "Company")
AUDITED RESULTS FOR YEAR ENDED 25 MARCH 2024 AND NOTICE OF AGM
12 June 2024
Wynnstay Properties PLC is pleased to announce the publication of its audited
results for the year ended 25 March 2024.
The Annual Report and Financial Statements is available on the Company's
website www.wynnstayproperties.co.uk (//www.wynnstayproperties.co.uk) and
will shortly be posted to those shareholders who have elected to receive
documents by post, when a further announcement will be made.
This announcement contains three sections from the Annual Report and Financial
Statements: Introduction to Wynnstay, Chairman's Statement and Managing
Director's Review. It also contains the four Financial Statements contained in
the Annual Report and Financial Statements together with the notes to those
statements.
As stated in the note at the end of this announcement, the financial
information set out in the announcement does not constitute statutory accounts
as defined in section 435 of the Companies Act 2006.
The Company's Annual General Meeting ("AGM") will be held on Tuesday 16 July
2024. Details of the arrangements for the meeting are set out in the notice of
meeting in the Annual Report and Financial Statements.
This announcement was approved by the Board on 11 June 2024
For further information please contact:
Wynnstay Properties plc
Philip Collins (Chairman)
020 7554 8766
WH Ireland Limited (Nominated Adviser and Broker):
Chris Hardie, Hugh Morgan, Sarah Mather
020 7220 1666
LEI number is 2138006MASI24JYW5076.
For more information on Wynnstay visit: www.wynnstayproperties.co.uk
WYNNSTAY PROPERTIES PLC
INTRODUCTION TO WYNNSTAY
A distinctive approach to commercial property investment primarily for private
investors
Wynnstay is an AIM listed property investment and development business. Its
principal shareholders are private investors wishing to invest in a portfolio
of good quality secondary commercial properties for medium to long-term
capital and income growth. The portfolio is currently focused on industrial,
including trade counter, units.
Strategy
Wynnstay aims to achieve capital appreciation and generate rising dividend
income for shareholders from a diversified and resilient commercial property
portfolio in Central and Southern England, with diversity and resilience being
reflected in the location, number and nature of the properties, and the mix of
lease terms, tenants and uses.
For location, the focus is on areas where there is strong occupational demand
and often limited supply. Modest rents generally provide opportunity for
further rental growth over time as rent reviews and new lettings are concluded
and high levels of occupancy can be maintained. While many tenants have been
in occupation for a considerable time, voids can be managed and re-lettings
achieved successfully. The relatively small lot sizes of our assets also
appeal, when marketed for sale, to a wide range of investors.
The majority of properties are multi-let, resulting in a number of individual
tenancies in most locations, reducing exposure to any single tenant and risk
of loss of rental income in the case of defaults and voids.
Leases are mainly for terms of five years or more with short-term agreements
of two years or less typically avoided, and usually with upward only rent
reviews based on market rates. Flexibility in addressing tenant needs and
requirements generally mean that the terms agreed result in a mutually
beneficial outcome for both parties.
Tenants comprise a broad spread of occupiers, also reducing risk exposure:
national and local government, international businesses, national trading
chains and regional and local businesses. Uses include manufacturing and
services; storage and distribution; and trade counter and out-of-town retail.
Active direct management and close engagement and constructive business
relationships with tenants, together with refurbishment and selective
development over time, underpin capital value and increase income.
Managed for shareholders
The portfolio is directly, rather than externally, managed. Finance is largely
outsourced to an external provider to meet specific needs. All report to the
Board, the majority of whom are non-executive directors.
Management remuneration comprises salary and, where appropriate, a cash bonus.
Wynnstay does not offer incentive schemes, such as share plans, share options
or share bonuses.
As a result, both management and the Board are focused on Wynnstay's
performance for the benefit of shareholders, operational costs are closely
controlled, and dilution of shareholders' investment and potential conflicts
of interest are minimised.
Incremental growth
The portfolio has been built incrementally, with opportunities being taken to
dispose of assets as and when the time is appropriate and to reinvest in
assets that offer better long-term returns.
This is achieved gradually over time, without the need for deal-driven
activity in pursuit of corporate or portfolio expansion.
Funding
Wynnstay adopts a prudent, pragmatic approach to funding. Investments are
funded in part by retained profits and recycling capital receipts from
disposals and in part from borrowings, the majority at a fixed rate and held
at a modest loan-to-value level, from an experienced and supportive property
lender. This provides security at times of uncertainty in debt markets.
Valuation
Properties are valued on a cautious basis, based upon professional advice from
expert external valuers, recognising that commercial property is a cyclical
market that can exhibit significant upward and downward movements and that
steadiness and progression over the medium and long-term are most likely to be
in shareholders' interests.
Wynnstay on AIM
Wynnstay's shares were quoted on its AIM introduction in 1995 at a mid-market
price of 150p. On the day prior to the approval of this report, the mid-market
price was 675p, an increase of 450%. The dividend paid in 1995 was 4p per
share. The dividend paid and proposed for the current year will be 25.5p per
share, an increase of nearly 540%.
Performance
Wynnstay's distinctive approach has delivered on its strategy over both the
medium and long term. Shareholders have benefitted from substantial increases
in net asset value per share and dividends as the portfolio and its management
have delivered strong results.
Corporate Performance over five years
Year Ended 25 March 2020 2021 2022 2023 2024
pence pence pence pence pence
Net Asset Value per share: 792p 911p 1,090p 1,110p 1,136p
Annual
Five Year Net Asset Value: 40.8%
Cumulative Growth
Dividends per share, paid and proposed: 15.0p* 21.0p 22.5p 24.0p 25.5p
Annual
Five Year Dividend: 70.0%*
Cumulative Growth
% % % % %
Total Accounting Return(†): Annual 0.5% 16.9% 22.0% 3.9% 4.5%
Five Year Total Accounting Return(†): 54.2%
Cumulative Growth
Loan-to-value ratio 36.5% 29.4% 25.5% 25.3% 24.7%
Operating Costs/Portfolio Value 2.0% 2.5% 1.9% 1.6% (►) 1.5% (►)
Operating Costs/Income 30.3% 34.8% 32.0% 27.7% (►) 24.8% (►)
* No final dividend was paid in 2020 due to the uncertainties arising from
the Covid-19 pandemic. Two interim dividends of
7.5p each were paid for the year.
(†) Total accounting return is calculated by combining movements in net
asset value and dividends for the period expressed as a
percentage of the opening net asset value per share.
(►) Operating costs for 2024 have been adjusted for £27,000 of
non-recurring costs relating to new board appointments (2023:
£81,000).
We recognise the importance of a rising income stream for many shareholders
and we seek to develop our portfolio so that it can deliver a growing income
that can underpin progressive dividend payments to shareholders. We also know
that, in addition to rising dividends, shareholders expect appreciation in the
capital value of their investment.
Our objective is to achieve a reasonable balance between progressive dividend
payments and capital appreciation.
Dividends over the past five years have increased by 70%, albeit from a base
affected by the impact of the Covid pandemic. Net asset value per share
increased by 41%.
Total accounting return per share combines the movements in dividends and net
asset value, and demonstrates to shareholders the overall corporate
performance. This measure is reviewed both on an annual basis and cumulatively
over a rolling five-year period.
Over the last five years the Company has benefitted from a cumulative total
accounting return of 54.2%, reflecting an average annual rate of return of
10.8% per annum over this period.
Another key measure of performance for shareholders in investment businesses
is our ability to manage our cost base
relative to the value of the portfolio under management and the income
generated, both of which support dividend
payments to shareholders.
Operating costs relative to portfolio value have been at or below 2% for four
of the past five years and this year have been further reduced to a new low of
1.5%. In three of the past five years, operating costs relative to property
income have been within the range of 30-35%. Over the last two years, as a
result of the increase in rental income and tight cost control, this figure
has reduced to around 25%.
Loan-to-value ratio is an important measure for shareholders in businesses
that rely on debt for funding, such as property companies. It demonstrates the
ability to balance expansion of the portfolio and the returns that come from
using debt to do so with the need to manage risk through prudent external
financing. Wynnstay's facilities allow borrowing up to 50% of the value of the
assets secured. It is prudent, given the nature of the commercial property
market, to adopt an approach that gives us a good margin between our actual
borrowing and this facility limit with a range of circa 35-40% being
considered appropriate. Wynnstay's loan-to-value ratio has generally been well
within this range.
Portfolio Performance over five years
Year ended 25 March 2020 2021 2022 2023 2024
£'000 £'000 £'000 £'000 £'000
Property Income 2,271 2,438 2,308 2,312* 2,599*
Rental Income 2,271 2,140 2,252 2,304 2,541
Underlying(†)( ) ( )Five Year Rental Income: Cumulative Growth 18.9% 1,906 2,267
Portfolio Value 34,260 34,005 38,975 39,320 43,915
Underlying(†) Five Year Portfolio Value: Cumulative Growth 27.8% 28,180 36,015
% % % % %
Occupancy at year-end 94% 99% 100% 100% 99%
Rent Collection for year 100% 99%(►) 100% 100%(♦) 100%
Passing Rent to Estimated Rental Value 87.8% 92.5% 88.1% 92.4% 90.2%
years years years years years
Weighted average unexpired lease term:
- to lease break 3.6 2.8 3.0 3.1 2.9
- to lease expiry 4.8 4.5 4.4 4.4 4.1
* Includes for 2024 £58,000 of Other Property Income (2023:
£8,000). See note 2 of the Financial Statements.
(†)( ) Underlying Rental Income and Portfolio Value are for
properties that have been held in the portfolio throughout the five year
period.
(►) Excludes rent concessions of £29,000 granted to tenants as a result
of the Covid-19 pandemic.
(♦) After rounding for £8,000 bad debt (0.3%).
In assessing the performance of the portfolio, several key measures are used.
In addition to the overall property income and portfolio value, underlying
growth in both property income and value from those properties held in the
portfolio throughout the previous five years are assessed.
Like-for-like underlying rental income and portfolio value growth demonstrate
the ability to acquire and retain properties that are attractive to existing
and new tenants, to manage them well and to grow average rents over time thus
increasing income and capital value.
On this analysis, the core portfolio has performed very well over five years,
delivering rental income growth of 18.9% and portfolio value growth of 27.8%.
Occupancy and rent collections are also key performance measures for the
portfolio. Occupancy demonstrates the ability to retain tenants at renewal and
to let vacant premises when tenants do not renew which, in turn, underpin
rental income and shareholders' dividends as well as capital value. Ensuring
that rents are collected is essential to ensure that the portfolio delivers
the best results for shareholders and shareholders' dividends are protected.
Wynnstay's excellent record of rental collections and occupancy has been
maintained at or very close to 100% over the past five years.
The weighted average unexpired lease term of the portfolio as a whole provides
guidance on the anticipated continuity of rental income in future years. Most
leases are for five years and some (but not all) longer leases, such as for
ten years, may contain a break clause after five years. Typically, over the
past five years, our weighted average unexpired lease term has been between
2.8 and 3.6 years to lease break and between 4.1 and 4.8 years to lease
expiry.
Our passing (i.e. current) rental income relative to the estimated rental
value for the portfolio used by our valuers in the annual valuation gives an
indication of the potential additional income that may be realisable,
depending on market conditions, when rent reviews fall due or when properties
become vacant and are offered for reletting. Over the past five years, this
has typically demonstrated a % reversionary income potential in the range of
8% to 12%.
( )
Share Price Performance
Wynnstay is quoted on AIM, and therefore is not a constituent of the FTSE 350
Real Estate Investment Trusts Index, which contains a good cross-section of
quoted property companies of various forms, all much larger than Wynnstay.
Wynnstay's share price relative to the FTSE 350 Real Estate Investment Trusts
Index is shown in the chart below. Wynnstay's share price has substantially
outperformed the index over the ten-year period.
Source: W H Ireland Limited
Wynnstay's share price has also substantially outperformed the market indices
for the leading AIM companies and for other much larger companies within the
main market in the FTSE-350 index as shown in the chart below.
Source: W H Ireland Limited
WYNNSTAY PROPERTIES PLC
CHAIRMAN'S STATEMENT
I am pleased to report to shareholders on another active year at Wynnstay
during which we have made significant changes in the portfolio, with three
acquisitions and one disposal, and have completed our Board succession plans
by welcoming our new Managing Director, Chris Betts, and our two new
non-executive directors, Hugh Ford and Ross Owen.
This has been a successful year for Wynnstay's financial performance and thus
for you as shareholders who have seen further increases in net asset value and
in dividends and thus in total accounting return.
Wynnstay's overall financial performance in the financial year, compared to
the prior year, is summarised in the following overview table. The table
should be read in conjunction with the following commentary and the financial
statements.
Overview of Financial Performance: 2024 vs. 2023
% Change 2024 2023
• Rental Income
Annual* 10.3% £2,541,000 £2,304,000
Underlying* 3.0% £2,340,000 £2,272,000
• Net Property Income (adjusted) (†) 15.2% £1,817,000 £1,578,000
• Operating Income
Before fair value adjustment 38.4% £2,072,000 £1,497,000
After fair value adjustment 12.3% £2,069,000 £1,842,000
• Earnings per share (weighted average) 19.2% 50.3p 42.2p
• Dividends per share, paid and proposed 6.3% 25.5p 24.0p
• Net asset value per share 2.3% 1,136p 1,110p
• Loan to value ratio 24.7% 25.3%
• Total Accounting Return for the year(►) 4.5% 3.9%
* Annual Rental Income is shown in note 2 of the Financial Statements and
Underlying Rental Income is the like-for-like income from properties held in
the portfolio throughout both years.
(†) Excludes £27,000 of non-recurring costs incurred in 2024 (2023:
£81,000) relating to new Board appointments.
(►) Total accounting return is calculated by combining movements in net
asset value and dividends for the period expressed as a percentage
of the opening net asset value per share.
Commentary on Financial Performance in 2024
Rental income for the financial year increased by 10.3% compared to the
previous year to £2,541,000 (2023: £2,304,000). This increase reflects the
acquisition early in the year of Riverdale Industrial Estate, Tonbridge and,
towards the end of the year, of units at Wildmere Industrial Estate in Banbury
and at the IO Centre in Stevenage, as well as the outcome of several
successful rent reviews and new lettings within the existing portfolio.
Other property income of £58,000 (2023: £8,000) comprised a dilapidations
settlement with the outgoing tenant at our Hertford property, which we sold
during the year, and service charge related management fees.
Net property income rose to £1,790,000 (2023: £1,497,000) reflecting the
higher property income noted above and the overall property costs of £138,000
(2023: £96,000) and administrative costs of £671,000 (2023: £719,000) in
the financial year compared to the prior year in which significant management
succession costs were incurred.
Operating income benefitted from the sale of the Hertford property which
realised a net profit after costs of £282,000 (2023: nil) and after the fair
value adjustment arising from the annual revaluation, was £2,069,000 (2023:
£1,842,000).
Earnings per share rose by 19.2% to 50.3p per share.
As a result of the fair value adjustment arising from the valuation, to which
I refer below, the profit on disposal of Hertford and the positive income
generation in the business, the net asset value per share rose by 2.3% to
1,136p per share (2023: 1,110p).
The Board considers the outcome of the financial year to be very satisfactory.
Managing Director's Review
Our Managing Director, Chris Betts, has prepared a separate review which
follows this statement. This provides detail on the transactions mentioned
above, management activity in the portfolio over the year, succession and
operational changes introduced in the management of the business.
Valuation
Our Independent Valuers, BNP Paribas Real Estate, undertook the annual
revaluation as at 25 March 2024 valuing the Company's portfolio at
£43,915,000 (2023: £39,320,000). This represents a 11.7% increase of
£4,595,000 on the valuation as at 25 March 2023 and primarily reflects the
transactions in the year already mentioned above as well as the benefits of
the active management of the portfolio reported in the Managing Director's
Review.
The annual valuation is undertaken under accounting standards for use in our
financial statements in accordance with RICS Global Standards and values each
property as a separate asset on the basis of a sale of that property in the
open market. Therefore, the valuation does not take account of any additional
value that might be realised if the portfolio were to be offered on the open
market or any other special factors that may be relevant in the case of
individual potential purchasers, such as sales to other property investors,
existing tenants or adjoining owners.
Finance, Borrowings and Gearing
Wynnstay remains in a strong financial position, with a low loan-to-value
ratio under our secured facilities of 24.7 % (2023: 25.3%).
At the year-end, we held cash of £0.4 million (2023: £3.3 million) and our
borrowings were £10.843 million (2023: £9.951 million). The reduction in
cash held and the increase in our borrowing compared to the prior year
resulted from the acquisitions mentioned above. We drew down £950,000 under
our revolving credit facility to fund in the short-term part of the
acquisition costs.
The interest rate under our fixed term facility is fixed at 3.61% until
December 2026. In addition to our available cash balance and positive cash
flow from our property activities, just over £4 million of our £5m revolving
credit facility remained undrawn at the year-end.
Dividend
Over recent years we have sought to pursue a progressive dividend policy that
aims to provide shareholders with a rising income commensurate with Wynnstay's
underlying growth and finances.
In the light of the satisfactory results for the year, the Board recommends a
final dividend of 16.0p per share (2023:
15.0p). An interim dividend of 9.5p per share (2023: 9.0p) was paid in
December 2023. Hence, the total dividend for this year of 25.5p per share
(2023: 24.0p) represents an increase of 6.3% on the prior year.
Over the past five years, dividends have increased by 70.0% from 15.0p to
25.5p, although it should be noted that the level of dividend paid in 2020 was
affected by the uncertainty resulting from the outbreak of the Covid-19
pandemic.
Subject to shareholder approval, the final dividend will be paid on 26 July
2024 to shareholders on the register at the close of business on 21 June 2024.
Wynnstay's Financial Performance in the longer-term
In the Annual Report two years ago, we introduced a new section, entitled
Introduction to Wynnstay. This describes Wynnstay's distinctive approach to
commercial property investment primarily for private shareholders and provides
information both on the Company's performance and its share price performance
over time.
The section has been retained and further updated in this report to provide
additional information on the Company's performance. It highlights Wynnstay's
continued strength over time across a range of measures. It has also been
expanded to explain the principal measures that we use in assessing the
performance of the Company and the portfolio.
I encourage all shareholders to read this explanation of Wynnstay's rationale
and performance on pages 5 to 9 of this report.
Key points to which I would draw shareholders attention are illustrated on
Page 6 of this report. Wynnstay has delivered cumulative growth over five
years in total accounting return (net asset value and dividends) of 54.2% and
Wynnstay's share price has substantially outperformed established market
indices. In managing the portfolio, we have achieved substantial underlying
growth in rental income and portfolio value and maintained a consistent record
of full occupancy and rent collections.
The Board
I am pleased to report that our two new Non-executive Directors, Hugh Ford and
Ross Owen, have settled in well and have made valuable contributions to our
Board discussions.
We were delighted to welcome Chris Betts to the Board in September. He
established himself quickly and actively in his new role on which he reports
in his Managing Director's Review.
Shareholder Matters
I have reported in recent years on the liquidity and marketability of Wynnstay
shares.
Wynnstay has a small, and rather unusual, share register on which there are
under 250 accounts, a significant number of which are connected through family
relationships, with private investors rather than funds or institutions as
shareholders. In the main, they are long-term investors with some holdings
having passed from generation to generation since the company was founded in
1886. These long-term investors provide stability and continuity within
the shareholder base.
As a result of this relatively small shareholder base the volume and
proportion of Wynnstay shares traded in the market is less than for many
quoted companies with larger share registers and more dispersed holdings.
Fewer Wynnstay shares tend to be available to trade and then only usually in
modest quantities and with a sizeable "spread" between the bid and offer
price. Shares are typically traded at a significant discount to the net asset
value per share. However, both these features are also seen in other, much
larger, quoted property companies. As already noted above, Wynnstay's share
price has continued substantially to outperform the comparative real estate
sector.
At the Annual General Meeting in 2022, shareholders gave Wynnstay authority to
purchase its own shares so that the Company can act as a purchaser in the
market where it is appropriate, and in the interests of shareholders
generally, to do so. Other quoted property and investment companies, as well
as other quoted companies, use share buybacks on a routine basis to enhance
earnings and net asset value per share. Where shares are bought back dividends
cease to be payable, thus conserving cash in the business and benefitting
continuing shareholders and with the present intention being to hold any
shares bought back in treasury so that they are available for reissue where
there is market demand for shares or to facilitate individual property
acquisitions.
The volume of shares traded in the past two years has been relatively small
and the market has generally been able to absorb most of the shares offered.
The authority has so far been used once, to acquire 15,000 Ordinary Shares at
710p in September 2022. The Board keeps the position under review and may
exercise the authority when shares are available in the market and it is in
the interests of shareholders generally to do so.
We also consider that Wynnstay's future development would be assisted if
authority continued to be granted by shareholders, as has been the case for
many years, to issue a limited number of shares without first offering them to
existing shareholders. This gives Wynnstay flexibility, for instance, to issue
shares for small fundraisings which might support a larger acquisition and
allow the issue of shares as part consideration on individual property
acquisitions to vendors, where the vendors wish to retain an interest in a
broader portfolio of assets in a quoted company. Bringing in new investors
with an interest in commercial property and in Wynnstay's distinctive approach
to the share register would broaden the shareholder base and support its
future development.
Outlook
At this time last year, I noted that the UK had entered a further period of
uncertainty as a result of external international events, changes in
government administration, inflation levels not seen for forty years and rapid
successive increases in interest rates.
This uncertainty continued throughout the past year with recent events in the
Middle East and the continued war in Ukraine affecting trade and the economic
climate in many countries and, in the UK as well as other countries,
forthcoming elections taking place in 2024. However, inflation in the UK has
fallen from the very high levels seen in mid 2023, real earnings are
increasing and the employment data remains strong. While forecasts show
little growth in the economy and continuing concerns about the level of public
debt and the impacts of high taxation, the prospects of serious recession
appear to have receded. Over recent months interest rates which, at one point,
were forecast to reach 7% are now forecast to fall gradually over the next
year to eighteen months.
Despite these uncertainties, Wynnstay's business has prospered. We are
confident that our focused, stable and well-let portfolio can continue to
deliver growth of capital and income for shareholders in the medium and
long-term. The main risks to continued growth are economic and political, such
as significant disruption caused by events beyond our control or the UK
economy suffering a significant downturn, whether resulting from our own
circumstances in the UK or international events, or domestic political
upheaval any of which can affect the ability or willingness of businesses to
invest or of consumers to spend.
The commercial property market is very sensitive to changes in the economic
outlook and, in particular, to interest rates. This can result in strong,
sometimes extreme, swings in both optimism and pessimism, which can affect
asset values and market sentiment towards quoted property investments.
Wynnstay has always adopted a cautious and realistic approach in managing and
developing our portfolio and in valuing our assets. This has served
shareholders well over a long period of time.
Despite the uncertainties in the UK and elsewhere, the Board remains
optimistic about the future of Wynnstay's business.
Colleagues and Advisers
Our Managing Director, Chris Betts, and our finance and company secretarial
colleagues have continued to work effectively to deliver for shareholders. I
would like to thank them, as well as my colleagues on the Board and our
professional advisers, for their support over the year.
Shareholding Enquiries
From time to time we receive enquiries from shareholders with questions about
their shareholdings or about buying or selling Wynnstay shares or transferring
them, typically to relatives.
All enquiries about shareholdings, including changes of address and bank
details and about such transfers of shares, should be directed to our
Registrars, Link Group, whose details are on page 2.
As regards buying or selling shares, this can be carried out by registering
the holding online with our Registrars, Link Group, via their secure share
portal www.signalshares.com (http://www.signalshares.com) , which also enables
shareholdings to be managed quickly and easily. Shares can, of course, also be
bought and sold in the usual way through a stockbroker or an online platform.
Annual General Meeting
The AGM provides an important and valued opportunity for the Board to engage
with shareholders.
Our AGM this year will be held at 2.30pm on Tuesday 16 July 2024 at the Royal
Automobile Club, 89 Pall Mall, London SW1Y 5HS. The Notice of Meeting is to be
found at the end of this Annual Report.
I urge all shareholders to complete and return their proxy forms so that their
votes on the resolutions being put to the meeting can be counted.
Shareholders who have registered for Link services online can also benefit
from the ability to cast their proxy votes electronically, rather than by
post. Shareholders not already registered for Link services online will need
their investor code, which can be found on their share certificate or dividend
tax voucher, in order to register.
To maximise shareholder engagement, shareholders who are unable to attend the
AGM are encouraged to submit in
writing those questions that they might have wished to ask in person at the
meeting. Questions should be emailed to
company.secretary@wynnstayproperties.co.uk at least 48 hours in advance of
the AGM. You will receive a written response and, if there are common themes
raised by a number of shareholders, we aim to provide a summary for all
shareholders, grouping themes and topics together where appropriate, on the
Company's website following the AGM.
Finally, on behalf of the Board, I would like to thank all shareholders,
whether they have held shares for many years or have recently acquired shares,
for their interest in and support for Wynnstay.
Philip Collins
Chairman
11 June 2024
WYNNSTAY PROPERTIES PLC
MANAGING DIRECTOR'S REVIEW
I am pleased to make my first annual report to shareholders as Managing
Director on Wynnstay's operational activity. The past year has seen changes
both to the composition of the Company's portfolio and Board but the
underlying approach and focus on the delivery of attractive shareholder
returns remains.
Portfolio Composition
In addition to the previously reported purchase of Riverdale Industrial
Estate, Tonbridge for £2.35 million in May 2023, two further properties were
purchased in January 2024 as a package at a combined price of £2.525 million.
The larger property comprises a pair of trade-counter warehouse units totaling
13,140 sq ft on the Wildmere Industrial Estate in Banbury. These are let to
a national and a regional trade counter business and currently produce a total
annual rent of £103,425. The net initial yield from the investment is 6%,
which on current market rental evidence is anticipated to rise to around 7%
after a lease renewal or reletting in 2025 and a rent review in 2026.
The second property is located on the iO Centre, off Gunnels Wood Road in
Stevenage. It is a 999-year leasehold interest in a mid-terrace
trade-counter warehouse unit of 5,750 sq ft that is let to a national trade
counter business. The current rent of £57,530 per annum provides a net
initial yield of 6%, which is anticipated to rise to 7.2% on lease renewal or
reletting in 2026.
Both properties are in well-established and highly accessible industrial
warehouse locations. They are the same sort of relatively small and flexible
units that comprise most Wynnstay properties and which are attractive to a
wide range of businesses. In many locations in central and southern England,
the overall stock of such property is not rising in line with demand and in
many cases is being diminished, which increases the scope for rental growth.
These acquisitions complement the geographic spread of the portfolio.
As reported in our Interim Statement, the Hertford property was sold with
vacant possession in October 2023 for £910,000 generating a profit after tax
and costs over the investment value as at March 2023 of £282,000. The buyer
is a regional motor trade business, and their offer reflected the scarcity of
opportunities for owner-occupiers. This opportunistic sale represents the
culmination of the gradual divestment from a once-larger historic Wynnstay
holding of older, less flexible buildings which have more limited market
appeal. In this case, we were also able to secure a substantial
dilapidations settlement from the former tenant.
As a result of these transactions, the portfolio now comprises 84 leasing
units in 17 geographic locations.
Portfolio Activity
The number of lease events over the year is only a little down on that of the
previous 12 months. There have been four completed rent reviews including
three outstanding from 2022 to the same tenant at Tonbridge that were
concluded at a rate confirming the market rental anticipated on acquisition.
Three leases were renewed with current tenants. The most notable was a large
unit at Aylesford, where the rent increased by a third and was significantly
ahead of the market rent assumed in the March 2023 valuation. The other two
renewals were at Heathfield. At Aylesford, we were also able to take advantage
of a previous tenant's desire to assign their lease to secure a more valuable
longer-term new letting.
We have achieved four other new lettings to replace tenants who have vacated.
All were at rents noticeably in excess of the estimated rental value used by
the valuers in the March 2023 valuation.
Following the retirement of a tenant at Uckfield, we were able to quickly
agree terms for a new open market letting which completed in August 2023. The
lease of a unit in Hailsham was forfeited in May 2023 in the face of mounting
rent arrears, which we have subsequently recovered in full. Remarketing
brought several expressions of interest, and a new lease was completed in
December. Securing the letting required expenditure on an updated planning
permission for use of the premises and repair and redecoration of the roof and
elevations.
At Liphook a tenant opted not to renew their lease in December and a new
letting was completed in March 2024 with additional rental income from the
mezzanine floor installed by a former tenant. Two tenants at Aylesford
exercised break clauses during the year. In one case it was possible to
complete a new letting immediately after the break date so that a void did not
occur. The other unit remained vacant at year-end although an acceptable offer
had been received and the letting has since been completed.
Consequently, the vacancy rate across the portfolio at year-end was extremely
low representing approximately 0.75% both by floor area and market rent.
In a similar vein, rental collection has been very strong with only three
instances in the year of rent remaining outstanding 30 days after the due
date. In all cases the arrears have been received with the result that there
were no bad debts.
Property Valuation
Over most of the year the commercial property market reflected caution and
some trading difficulties for many businesses alongside continued high
interest rates that have impacted negatively on valuations. The final quarter
saw some market stabilisation and improved optimism, especially regarding the
interest rate environment. Nonetheless, a weaker investment market overall has
resulted in a softening of valuation yields compared to last year of
approximately 25bp across the portfolio.
However, the impact of this yield shift on the valuation was more than offset
by rental growth in our portfolio and our active asset management. Wynnstay's
like-for-like rental income increased by 3.0% and the current estimated rental
value used by our valuers increased by 5.5% over the year. This reflects the
strength of the industrial sector as a whole and the benefit of Wynnstay's
diverse and well-let portfolio in that sector. As a result, on a like-for-like
basis, the portfolio value rose by 0.5% to £38,915,000 and, with the three
properties acquired during the year, the total value of the portfolio rose to
£43,915,000 (2023: £39,320,000).
Management
As described in my Interim Report, an eight-week handover period with Paul
Williams last summer enabled a smooth succession as I was able to familiarise
myself with the portfolio, historical background, current issues and
management processes. There was ample opportunity for him to pass on his
intimate knowledge acquired over a long period of time. The result was
confidence that Wynnstay would maintain business as usual following my
appointment in September.
One particular theme that I have been able to follow up is the implementation
of a property management system to complement the new accounting software
introduced at the beginning of 2023. This was set-up with the software
supplier over the winter and went live at the start of the new financial year.
The system integrates with the accounting software and operates in real time,
enabling efficient monitoring and availability of data regarding invoicing,
rent collection and lease events. Risk is mitigated both in terms of
mistakes, but also business continuity.
We have also purchased valuation software that will enable direct prospective
performance analysis of the portfolio and its constituent properties and
testing of different scenarios for changed tenancies, capital expenditure,
sales and purchases and so on. The package will also enable direct valuation
and analysis of prospective purchases alongside advice that may be received
from professional advisors.
Future
Last year's Report outlined the impact of the Minimum Energy Efficiency
Standards legislation. Whilst there is currently some uncertainty over the
timetable for minimum EPC ratings for properties, there is no doubt that
improvements will continue to be required. We are continually monitoring the
opportunities to carry these out, ideally in conjunction with our tenants.
Often these can be changes to heating and lighting equipment that are of
modest cost. However, increasingly, we may need to look at the insulation of
the building fabric alongside energy generators such as PV panels.
Such considerations run parallel to assessment of the need to maintain,
refurbish and upgrade our buildings generally, especially where this will
result in increased rental income and enhance capital value. This forms part
of our renewed focus on assessing the performance potential of the portfolio
following my appointment. My initial review of the portfolio has been
favourable for the reasons outlined elsewhere in this report, but further
disposals may be identified as we consider whether capital may be better
employed in alternative investments, improving existing assets or pursuing
development opportunities within the portfolio.
Chris Betts
Managing Director
11 June 2024
WYNNSTAY PROPERTIES PLC
STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED 25 MARCH 2024
Notes 2024 2023
£'000 £'000
Property Income 2 2,599 2,312
Property Costs 3 (138) (96)
Administrative Costs 4 (671) (719)
Net Property Income 1,790 1,497
Movement in Fair Value of (3) 345
Investment Properties 10
Profit on Sale of Investment Property 282 -
Operating Income 2,069 1,842
Investment Income 6 29 27
Finance Costs 6 (455) (439)
Income before Taxation 1,643 1,430
Taxation 7 (287) (288)
Profit after Taxation and Total Comprehensive Income 1,356 1,142
Basic and diluted earnings per share 9 50.3p 42.2p
The Company has no items of other comprehensive income.
WYNNSTAY PROPERTIES PLC
STATEMENT OF FINANCIAL POSITION 25 MARCH 2024
2024 2023
Notes £'000 £'000
Non-Current Assets
Investment Properties 10 43,915 39,320
Investments 12 3 3
43,918 39,323
Current Assets
Trade and other receivables 14 413 482
Cash and Cash Equivalents 397 3,268
810 3,750
Current Liabilities
Trade and other payables 15 (828) (843)
)
Income Taxes Payable (347) (307)
(1,175) (1,150)
Net Current (Liabilities) / Assets (365) 2,600
Total Assets Less Current Liabilities 43,553 41,923
Non-Current Liabilities
Bank Loans Payable 16 (10,843) (9,951)
Deferred Tax Payable 17 (2,083) (2,034)
(12,926) (11,985)
Net Assets 30,627 29,938
Capital and Reserves
Share Capital 18 789 789
Capital Redemption Reserve 205 205
Share Premium Account 1,135 1,135
Treasury Shares (1,732) (1,732)
Retained Earnings 30,230 29,541
30,627 29,938
Net Asset Value pence per share 1,136p 1,110p
Approved by the Board and authorised for issue on 11 June 2024
P.G.H.
Collins
C.G. Betts
Director
Director
Registered number: 00022473
WYNNSTAY PROPERTIES PLC
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 25 MARCH 2024
2024 2023
£'000 £'000
Cash flows from operating activities
Income before taxation 1,643 1,430
Adjusted for:
Decrease/(increase) in fair value of investment properties 3 (345)
Interest receivable (29) (27)
Interest and finance costs payable 455 439
Profit on sale of investment property (282) -
Amortised loan fees 15 13
Revaluation movement -- 33
Changes in:
Decrease/(increase) in trade and other receivables 69 (181)
Increase/(decrease) in trade and other payables 25 (181)
Cash generated from operations 1,899 1,181
Income taxes paid (238) (206)
Net cash generated from operating activities 1,661 975
Cash flows from investing activities
Interest and other income received 29 27
Purchase of investment properties (5,213) -
Sale of investment property 891 -
Net cash generated from investing activities (4,293) 27
Cash flows from financing activities
Interest paid (457) (439)
Dividends paid (661) (622)
Repurchase of shares into treasury - (164)
Drawdown of bank loans net of fees 879 -
Net cash used in financing activities (239) (1,225)
(Decrease) in cash and cash equivalents (2,871) (223)
Cash and cash equivalents at beginning of period 3,268 3,491
Cash and cash equivalents at end of period 397 3,268
WYNNSTAY PROPERTIES PLC
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 25 MARCH 2024
YEAR ENDED 25 MARCH 2024
Capital Share
Share Redemption Reserve Premium Treasury Retained
Capital Account Shares Earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 26 March 2023 789 205 1,135 (1,732) 29,541 29,938
Total comprehensive - - - - 1,356 1,356
income for the year
Revaluation movement - - - - (6) (6)
Dividends - note 8 - - - - (661) (661)
Balance at 25 March 2024 789 205 1,135 (1,732) 30,230 30,627
YEAR ENDED 25 MARCH 2023
Capital Share
Share Redemption Reserve Premium Treasury Retained
Capital Account Shares Earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 26 March 2022 789 205 1,135 (1,570) 28,988 29,547
Total comprehensive - - - - 1,142 1,142
income for the year
Treasury Share repurchases - - - (162) - (162)
Revaluation movement - - - - 33 33
Dividends - note 8 - - - - (622) (622)
Balance at 25 March 2023 789 205 1,135 (1,732) 29,541 29,938
FUNDS AVAILABLE FOR DISTRIBUTION
2024 2023
£'000 £'000
Retained Earnings 30,230 29,541
Less: Cumulative Unrealised Fair Value (12,917) (13,376)
Adjustment of Property Investments net of tax
Treasury Shares (1,732) (1,732)
Distributable Reserves 15,581 14,433
WYNNSTAY PROPERTIES PLC
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 25 MARCH 2024
Explanation of Capital and Reserves:
· Share Capital: This represents the subscription, at par value, of the
Ordinary Shares of the Company.
· Capital Redemption Reserve: This represents money that the Company
must retain when it has bought back shares, and which it cannot pay to
shareholders as dividends: It is a non-distributable reserve and represents
paid up share capital.
· Share Premium Account: This represents the subscription monies paid
for Ordinary Shares of the Company in excess of their par value.
· Treasury Shares: This represents the total consideration and costs
paid by the Company when purchasing the 458,650 shares as referred to in Note
18.
· Retained Earnings: This represents the profits after tax that can be
used to pay dividends. However, dividends can only be paid from distributable
deserves as detailed in the preceding table.
WYNNSTAY PROPERTIES PLC
NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED 25 MARCH 2024
1. BASIS OF PREPARATION, MATERIAL ACCOUNTING POLICIES AND
ESTIMATES
Wynnstay Properties PLC is a public limited company incorporated and domiciled
in England and Wales. The principal activity of the Company is property
investment, development and management. The Company's ordinary shares are
traded on the AIM, part of The London Stock Exchange. The Company's
registered number is 00022473 and registered address is Hamilton House,
Mabledon Place, London WC1H 9BB. The material accounting policies are
summarised below.
1.1 Basis of Preparation
The financial statements have been prepared in accordance with UK adopted
International Accounting Standards ("IAS"). The financial statements have been
presented in Pounds Sterling being the functional currency of the Company and
rounded to the nearest thousand. The financial statements have been prepared
under the historical cost basis modified for the revaluation of investment
properties and financial assets measured at fair value through Operating
Income.
(a) New Interpretations and Revised Standards Effective for the year ended 25
March 2024
The Directors have adopted all new and revised standards and interpretations
issued by the International Accounting Standards Board ("IASB") and the
International Financial Reporting Interpretations Committee ("IFRIC") of the
IASB and adopted by applicable law that are relevant to the operations and
effective for accounting periods beginning on or after 26 March 2023:
· IAS 12 Income taxes: Deferred tax related to assets and liabilities
arising from a single transaction
· IAS 12 Income taxes: temporary recognition exception to accounting
for deferred taxes arising from the implementation of the international tax
reform (Pillar Two Model Rules)
· IAS 8 Accounting policies, Changes in Accounting Estimates and
Errors: Definition of accounting estimates
· IAS 1 Presentation of Financial Statements: Disclosure initiative -
accounting policies
The adoption of these interpretations and revised standards had no material
impact on the disclosures and presentation of the financial statements.
(b) Standards and Interpretations in Issue but not yet Effective
The International Accounting Standards Board ("IASB") and International
Financial Reporting Interpretations Committee ("IFRIC") have issued the below
revisions to existing standards or new interpretations or new standards with
an effective date of implementation after the period of these financial
statements.
The following new amendments applicable in future periods have been adopted
early:
· IAS 1 Presentation of Financial Statements: Classification of
Liabilities
· IAS 1 Presentation of Financial Statements: Non-current liabilities
with Covenants
The Company has early adopted amendments to IAS 1, "Presentation of Financial
Statement," issued by the International Accounting Standards Board (IASB) in
2020. These amendments, effective for annual periods beginning on or after 1
January 2024, clarify the classification of certain liabilities as current and
non-current.
While not yet mandatory for our current financial statements, early adoption
allows us to improve the disclosure of our financial liabilities underlying
terms. This early adoption has changed the classification of the Company's
Revolving Credit Facilities based on revised criteria for deferral rights. The
Revolving Credit Facility is secured on property assets and is committed until
16 December 2026. The quantified impact of the new classification of the
financial statements, particularly the current and non-current liabilities
breakdown has been disclosed in Note 16.
The following new amendments applicable in future periods have not been
adopted early as they are not expected to have a significant impact on the
financial statements of the Company:
· IFRS 16 Leases: Lease liability in a sale and leaseback
· IFRS 18 Presentation and disclosure in financial statements
· IFRS 19 Subsidiaries without public accountability
(c) Going concern
The financial statements have been prepared on a going concern basis. This
requires the Directors to consider, as at the date of approving the financial
statements, that there is reasonable expectation that the Company has adequate
financial resources to continue to operate, and to meet its liabilities as
they fall due for payment, for at least twelve months following the approval
of the financial statements.
The Directors have reviewed cash balances and borrowing facilities to cover at
least twelve months of operations, including financing costs and continuation
of employment and advisory costs as currently contracted without any reduction
for cost saving initiatives. The results of the review show that the Company
has cash and borrowing facilities to cover at least twelve months of
operations, and that the Company will satisfy the financial covenant ratios in
the borrowing facilities as described in Note 16. In addition, the Statement
of Financial Position as at 25 March 2024 shows that the Company had a cash
balance of £0.4m (2023: £3,268), an undrawn Revolving Credit Facility
availability of £4.1m (2023: £5.0m), net assets of £30.6m (2023: £29.9m),
and a gearing ratio of 34% (2023: 22%). The Revolving Credit Facility expires
on 16 December 2026. In the light of the foregoing considerations, the
Directors consider that the adoption of the going concern basis is reasonable
and appropriate.
1.2 Accounting Policies
Investment Properties
All the Company's investment properties are independently revalued annually
and stated at fair value as at 25 March. The aggregate of any resulting
increases or decreases are taken to operating income within the Statement of
Comprehensive Income. The basis of independent valuation is described in Note
10.
Investment properties are recognised as acquisitions or disposals based on the
date of contract completion.
Depreciation
In accordance with IAS 40 investment properties are included in the Statement
of Financial Position at fair value and are not depreciated.
Disposal of Investments
The gains and losses on the disposal of investment properties and other
investments are included in Operating Income in the year of disposal. Gains
and losses are calculated on the net difference between the carrying value of
the properties and the net proceeds from their disposal.
Property Income
Property income is recognised on a straight-line basis over the period of the
lease and is measured at the fair value of the consideration receivable. Lease
deposits are held in separate designated deposit accounts and are thus not
treated as assets of the Company in the financial statements. All income is
derived in the United Kingdom. When there are changes to a tenancy agreement
it is considered whether any lease incentives were given. Lease incentives are
amortised over the lease term.
Deferred Income
Deferred Income arises from rents received in advance of the period. See note
15.
Taxation
Current and deferred tax are recognised and measured in accordance with IAS
12. The Company provides for deferred tax on investment properties by
reference to the tax that would be due on the sale of the investment
properties.
Trade and Other Accounts Receivable
All receivables do not carry any interest and are short term in nature.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and on demand deposits.
Trade and Other Accounts Payable
All trade and other accounts payable are non-interest bearing.
Pensions
Pension contributions are charged to the Statement of Comprehensive Income as
incurred. The pension scheme is a defined contribution scheme.
Borrowings
Borrowings are classified as current liabilities unless the Company has a
right to defer settlement of the liability at the end of the reporting period
for at least 12 months.
Dilapidations
Dilapidations receipts are recognised in the Statement of Comprehensive Income
when the right to receive them arises. They are recorded in revenue as other
property income unless a property has been agreed to be sold whereby the
receipt is treated as part of the proceeds of sale of the property. See Note
2.
1.3 Key Sources of Estimation Uncertainty and Judgements
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that may affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period. The key sources
of estimation uncertainty that have a significant risk of causing material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are those relating to the fair value of investment properties
which are revalued annually by the Directors having taken advice from the
Company's independent external valuers, on the basis described in Note 10. A
key judgement taken by the Directors is as to whether a property is being held
for sale.
There are no other judgemental areas identified by management that could have
a material effect on the financial statements at the reporting date.
2. PROPERTY INCOME 2024 2023
£'000 £'000
Rental income 2,541 2,304
Other property income 58 8
2,599 2,312
Rental income comprises rents earned and apportioned over the lease period
taking into account rent free periods and rents received during the period.
Other property income comprises received dilapidations and miscellaneous
income arising from the letting of properties.
3. PROPERTY COSTS 2024 2023
£'000 £'000
Empty rates 2 2
Property management 48 33
50 35
Legal fees 50 40
Agent fees 38 21
138 96
4. ADMINISTRATIVE COSTS 2024 2023
£'000 £'000
Rents payable - short term lease 2 6
General administration, including staff costs 584 582
Auditors' remuneration - audit fees CLA Evelyn Partners Limited 45 41
Tax services - Saffrey LLP 13 9
Gleeds Advisory Limited
Non-Recurring costs - costs relating to new Board appointments 27 81
671 719
5. STAFF COSTS 2024 2023
£'000 £'000
Staff costs, including Directors' fees, during the year were as follows:
Wages and salaries 297 270
Social security costs 28 36
Other pension costs 51 49
376 355
Further details of Directors' emoluments, totalling £341,000 (2023:
£319,000), are shown under Directors' Emoluments in the Directors' Report and
form part of these Financial Statements. There are no other key management
personnel.
2024 2023
No. No.
The average number of employees, including Non-Executive Directors, engaged
wholly in management and administration was:
6 5
The number of Directors for whom the Company paid pension benefits
during the year was: 2 1
6. FINANCE COSTS (NET) 2024 2023
£'000 £'000
Interest payable and finance costs on bank loans 455 439
Less: Bank interest receivable 29 27
426 412
7. TAXATION 2024 2023
£'000 £'000
(a) Analysis of the tax charge for the year:
UK Corporation tax at 25% (2023: 19%)
Total current tax charge 238 206
Deferred tax - temporary differences 49 82
Tax charge for the year 287 288
(b) Factors affecting the tax charge for the year:
Net Income before taxation 1,643 1,430
Current Year:
Corporation tax thereon at 25% (2023: 19%) 411 272
Corporation tax adjustment for unrealised property value losses 1 (65)
Capital gains net tax movement on disposals 52 -
Capital allowances net tax movement on acquisitions (226) -
Deferred tax net adjustments arising from movement in property values 49 81
Total tax charge for the year 287 288
8. DIVIDENDS 2024 2023
£'000 £'000
Final dividend paid in year of 15.0p per share
(2023: Final dividend 14.0p per share) 405 378
Interim dividend paid in year of 9.5p per share
(2023: Interim dividend 9.0p per share) 256 244
661 622
On 11 June 2024 the Board resolved to pay a final dividend of 16p per share
which will be recorded in the Financial Statements for the year ending 25
March 2025.
9. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing Income after Taxation and
Total Comprehensive Income attributable to Ordinary Shareholders of
£1,356,000 (2023: £1,142,000) by 2,696,617 shares which is the weighted
average number of 2,696,617 (2023: 2,703,357) ordinary shares in issue during
the period excluding shares held as treasury. There are no instruments in
issue that would have the effect of diluting earnings per share.
10. INVESTMENT PROPERTIES 2024 2023
£'000 £'000
Properties
Balance at beginning of financial year 39,320 38,975
Additions 5,213 -
Disposals (615) -
Revaluation (shortfall) / surplus (3) 345
Balance at end of financial year 43,915 39,320
The Company's freehold and one long-leasehold properties were valued as at 25
March 2024 by BNP Paribas Real Estate Advisory & Property Management UK
Limited, Chartered Surveyors, acting in the capacity of external valuers, and
adopted by the Directors. The valuations were undertaken in accordance with
the requirements of IFRS 13 and the RICS Valuation - Global Standards 2020.
The valuation of each property was on the basis of Fair Value. The valuers
reported that the total aggregate Fair Value of the properties held by the
Company was £43,915,000.
The valuer's opinions were primarily derived from comparable recent market
transactions on arms-length terms.
In the financial year ending 25 March 2024, the total fees earned by the
valuer from Wynnstay Properties PLC and connected parties were less than 5% of
the valuer's Company turnover.
The valuation complies with International Financial Reporting Standards. The
definition adopted by the International Accounting Standards Board (IASB) in
IFRS 13 is Fair Value, defined as: 'The price that would be received to sell
an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date.'
These recurring fair value measurements for non-financial assets use inputs
that are not based on observable market data, and therefore fall within level
3 of the fair value hierarchy.
The most pertinent market data observed reflected net initial yields which
ranged from broadly 5.1% to 6.8% with equivalent yields estimated to range
between broadly 5.25% and 7.25% for the core industrial properties. The
portfolio, as a whole, exhibits a net initial yield of 5.89% (2023: 5.73%) and
a nominal equivalent yield of 6.31% (2023: 6.02%).
There have been no transfers between levels of the fair value hierarchy.
Movements in the fair value are recognised in profit or loss.
A 0.5% decrease in the weighted equivalent yield would result in a
corresponding increase of £4.07 million in the fair value movement through
profit or loss. A 0.5% increase in the same yield would result in a
corresponding decrease of £3.44 million in the fair value movement through
profit or loss.
11. OPERATING LEASES RECEIVABLE 2024 2023
The following are the future minimum lease payments receivable under £'000 £'000
non-cancellable operating leases which expire:
Not later than one year 271 324
Between 1 and 5 years 8,158 4,368
Over 5 years 2,211 2,752
10,640 7,444
Rental income under operating leases recognised through profit or loss
amounted to £2,541,000 (2023: £2,304,000).
Typically, the properties were let for a term of between 5 and 10 years at a
market rent with rent reviews every 5 years. The above maturity analysis
reflects future minimum lease payments receivable to the next break clause in
the operating lease. The properties are generally leased on terms where the
tenant has the responsibility for repairs and running costs for each
individual unit with a service charge payable to cover common services
provided by the landlord on certain properties. The Company manages the
services provided for a management fee and the service charges are not
recognised as income in the accounts of the Company as any receipts are netted
off against the associated expenditures with any residual balance being shown
as a liability.
If the tenant does not carry out its responsibility for repairs and the
Company receives a dilapidations payment, the resulting cash is recorded in
revenue as other property income unless a property has been agreed to be sold
where the receipt is treated as part of the proceeds of sale of the property.
See Note 2.
12. INVESTMENTS 2024 2023
£'000 £'000
Quoted investments 3 3
13. SUBSIDIARY COMPANY
The Company has the following dormant subsidiary which the Directors consider
immaterial to, and thus has not been consolidated into, the financial
statements. The subsidiary holds the legal title to an access road to an
investment property, the use of which is shared between the Company, its
tenants at the property and neighbouring premises.
Scanreach Limited 80%
owned Dormant Net
Assets: £4,447 (2023: £4,447)
14. ACCOUNTS RECEIVABLE 2024 2023
£'000 £'000
Trade receivables 285 296
Other receivables 128 186
413 482
Trade receivables include an adjustment for credit losses of £nil (2023:
£8,000). Any provision for impairment of trade receivables is established
using an expected loss model.
Trade receivables, which are the only financial assets at amortised cost, are
non-interest bearing and generally have a 15 day term. Due to their short
maturities, the carrying amount of trade and other receivables is a reasonable
approximation of their fair value.
Of the trade receivables balance at the end of the year £39,388 (2023:
£180,560) is due from the Company's largest customer. There are seven other
customers who represent more than 5% of the total balance of trade
receivables.
15. ACCOUNTS PAYABLE 2024 2023
£'000 £'000
Trade payables 33 39
Other creditors 2 80
Deferred income 628 584
Amount due to subsidiary 4 -
Accruals 161 140
828 843
The average credit period taken for trade purchases is 18 days (2023: 17
days). No interest is charged on the outstanding balances. The Directors
consider that the carrying amounts of trade and other payables is a reasonable
approximation of their fair value.
16. BANK LOANS PAYABLE 2024 2023
£'000 £'000
Non-current loans 10,843 9,951
In December 2021, a five-year Fixed Rate Facility of £10 million and a
Revolving Credit Facility of £5.0 million were entered into providing a total
committed credit facility of £15.0 million. Interest on loan amounts drawn
down under the Fixed Rate Facility of £10 million (2023: £10 million) is
charged at 3.61% per annum (2023: 3.61%) for the year ended 25 March 2024.
Loan arrangement fees amortised over the loan period amounted to £15,000
(2023; £13,000). Loan amounts drawn down under the Revolving Credit Facility
during the year amounted to £950,000. £50,000 of the loan amounts drawn down
was repaid in the period and the amortised balance drawn as at 25 March 2024
is £879,000 (2023: £nil). The Company has the right to defer settlement of
the liability under the Revolving Credit Facility for at least twelve months
after the reporting period.
Both facilities are repayable in one instalment on 17 December 2026. The
facilities include the following financial covenants which were complied with
during the year:
• Rental income shall not be less than 2.25 times the interest
costs.
• The drawn balance shall at no time exceed 50% of the market value
of the properties secured.
The facilities are secured by fixed charges over freehold land and buildings
owned by the Company, which at the year-end had a combined value of
£35,790,000 (2023: £35,885,000). The undrawn element of the facilities
available at 25 March 2024 was £4,100,000 (2023: £5,000,000).
Interest charged under the Revolving Credit Facility is linked to Bank of
England Base Rate as the reference rate.
17. DEFERRED TAX 2024 2023
£'000 £'000
Deferred Tax brought forward 2,034 1,953
Charged for the year 49 81
Deferred Tax carried forward 2,083 2,034
A deferred tax liability of £2,083,000 (2023: £2,034,000) is recognised in
respect of the investment properties and has been calculated at a tax rate of
25% (2023: 25%).
18. SHARE CAPITAL 2024 2023
£'000 £'000
Authorised
8,000,000 Ordinary Shares of 25p each: 2,000 2,000
Allotted, Called Up and Fully Paid
3,155,267 Ordinary shares of 25p each: 789 789
All shares rank equally in respect of shareholder rights.
In March 2010, the Company acquired 443,650 Ordinary Shares of Wynnstay
Properties PLC from Channel Hotels and Properties Ltd at a price of £3.50 per
share. On 19 July 2022, shareholders granted authority to make market
purchases of its shares for a period of five years from that date. Pursuant to
this share buyback authority, in September 2022, the Company acquired 15,000
Ordinary Shares of Wynnstay Properties PLC at a price of £7.10 per share,
representing less than 0.005 % of the issued share capital, with the aggregate
consideration paid for the shares being £106,500. The total cost of
establishing the share buyback authority, together with this acquisition, was
£164,000. The total of 458,650 shares acquired, representing 14.5% of the
total shares in issue, are held in treasury. As a result, the total number of
shares with voting rights is 2,696,617.
19. FINANCIAL INSTRUMENTS
The objective of the Company's policies is to manage the Company's financial
risk, secure cost-effective funding for the Company's operations and minimise
the adverse effects of fluctuations in the financial markets on the value of
the Company's financial assets and liabilities, on reported profitability and
on the cash flows of the Company.
As at 25 March 2024 the Company's financial instruments comprised borrowings,
cash and cash equivalents, quoted investments, short term receivables and
short-term payables. The main purpose of these financial instruments was to
raise finance for the Company's operations. Throughout the period under
review, the Company has not traded in any other financial instruments. The
Board reviews and agrees policies for managing each of the associated risks
and they are summarised below:
Credit Risk
The risk of financial loss due to a counterparty's failure to honour its
obligations arises principally in connection with property leases and the
investment of surplus cash.
Tenant rent payments are monitored regularly, and appropriate action is taken
to recover monies owed or, if necessary, to terminate the lease. The Company
carefully vets prospective new tenants from a credit risk perspective. Bad
debts are mitigated by close engagement with tenant businesses within a
well-diversified mix of some 84 units across the portfolio and close
monitoring of rental income receipts. The Company has regularly reviewed the
portfolio, including feedback from engagement with tenants, in order to assess
the risk of tenant failures.
The Company has no significant concentration of credit risk associated with
trading counterparties (considered to be over 5% of net assets) with exposure
spread over a large number of tenancies. In terms of concentration of
individual tenant's rents versus total gross annual passing rents the Company
has 4 tenants whose rent, on an individual basis, is between 5.0% and 7.4% of
total gross annual passing rents.
Funds are invested and loan transactions contracted only with banks and
financial institutions with a high credit rating. Concentration of credit risk
exists to the extent that as at 25 March 2024 and 2023 current account and
short-term deposits were held with two financial institutions, Handelsbanken
PLC and C Hoare & Co. The combined exposure to credit risk on cash and
cash equivalents at 25 March 2024 was £397,000 (2023: £3,268,000).
Currency Risk
As all of the Company's assets and liabilities are denominated in Pounds
Sterling, there is no exposure to currency risk.
Interest Rate Risk
The Company is exposed to interest rate risk that could affect cash flow as it
currently borrows at both floating and fixed interest rates. The Company
monitors and manages its interest rate exposure on a periodic basis but does
not take out financial instruments to mitigate the risk. The Company finances
its operations through a combination of retained profits and bank borrowings.
Liquidity Risk
The Company seeks to manage liquidity risk to ensure sufficient funds are
available to meet the requirements of the business and to invest cash assets
safely and profitably. The Board regularly reviews available cash balances and
cash forecasts to ensure there are sufficient resources for working capital
requirements and to maintain an adequate cash margin.
Interest Rate Sensitivity
Financial instruments affected by interest rate risk include loan borrowings
and cash deposits. The analysis below shows the sensitivity of the statement
of comprehensive income and equity to a 0.5% change in interest rates:
0.5% decrease 0.5% increase
in interest rates in interest rates
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Impact on interest payable - gain/(loss) 5 - (5) -
Impact on interest receivable - (loss)/gain (2) (16) 2 16
Total impact on pre-tax profit and equity 3 (16) (3) 16
The calculation of the net exposure to interest rate fluctuations was based on
the following as at 25 March:
2024 2023
£'000 £'000
Floating rate borrowings (bank loans) 879 -
Less: cash and cash equivalents (397) (3,268)
482 (3,268)
Carrying Amounts of Financial Instruments
Management believes the carrying amounts of most financial assets and
financial liabilities on the balance sheet represent a reasonable
approximation of their value. The classification and measurement of financial
instruments are performed in accordance with IFRS 9 'Financial Instruments'.
Exceptions to this approach, if any, are detailed below.
Fixed-Rate Borrowings
It's important to note that the carrying amounts of fixed-rate borrowings
might not always reflect their fair value due to changes in market interest
rates. The company performs regular assessments to determine the
recoverability of carrying amounts and the potential need for adjustments in
accordance with IFRS 9.
Financial assets 2024 2023
£'000 £'000
Quoted investments measured at fair value 3 3
Loans and receivables measured at amortised cost 285 296
Cash and cash equivalents measured at amortised cost 397 3,268
Total financial assets 685 3,567
Financial liabilities at amortised cost 10,843 9,951
Total liabilities 11,671 10,795
The only financial instruments measured subsequent to initial recognition at
fair value as at 25 March are quoted investments. These are included in level
1 in the IFRS 13 fair value hierarchy as they are based on quoted prices in
active markets.
Capital Management
The primary objectives of the Company's capital management are:
· to safeguard the Company's ability to continue as a going concern,
so that it can continue to provide returns for shareholders; and
· to enable the Company to respond quickly to changes in market
conditions and to take advantage of opportunities.
Capital comprises shareholders' equity plus net borrowings. The Company
monitors capital using loan to value and gearing ratios. The former is
calculated by reference to total debt as a percentage of the year end
valuation of the investment property portfolio. Gearing ratio is the
percentage of net borrowings divided by shareholders' equity. Net borrowings
comprise total borrowings less cash and cash equivalents. The Company's policy
is that the net loan to value ratio should not exceed 50% and the gearing
ratio should not exceed 100%.
2024 2023
£'000 £'000
Loans and overdraft 10,843 9,951
Cash and cash equivalents (397) (3,268)
Net borrowings 10,446 6,683
Shareholders' equity 30,627 29,936
Investment properties 43,915 39,320
Loan to value ratio 24.7% 25.3%
Net borrowings to value ratio 23.8% 17.0%
Gearing ratio 34.1% 22.3%
20. RELATED PARTY TRANSACTIONS
Related Party Transactions with the Directors have been disclosed under
Directors' Emoluments in the Directors' Report. On 30 March 2023 Mr. R.P. Owen
was paid a fee of £1,600 prior to his appointment as a Director for his
assistance in the later stages of the recruitment process for the new Managing
Director. There were no other Related Party Transactions during the year
(2023: £nil).
21. SEGMENTAL REPORTING
The Chief Operating Decision Maker ('CODM'), who is responsible for the
allocation of resources and assessing performance of the operating segments,
has been identified as the Board. IFRS 8 requires operating segments to be
identified on the basis of internal reports that are regularly reviewed by the
Board. The Board have reviewed the segmental information and concluded that
there are three operating segments.
Industrial Retail Office Total
2024 2023 2024 2023 2024 2023 2024 2023
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Rental Income 2,332 2,095 73 73 136 136 2,541 2,304
Other Property Income 58 8 - - - - 58 8
Profit /(Loss) on investment property at fair value 232 200 (75) (105) (160) 250 (3) 345
Total income and gain 2,622 2,303 (2) (32) (24) 386 2,596 2,657
Property expenses (138) (95) - - - - (138) (95)
Segment profit/(loss) 2,484 2,208 (2) (32) (24) 386 2,458 2,562
Unallocated corporate expenses (671) (720)
Profit on sale of 282 -
investment property
Operating income 2,069 1,842
Interest expense (all relating to property loans) (455) (439)
Interest income and 29 27
other income
Income before taxation 1,643 1,430
Industrial Retail Office Total
Other information
2024 2023 2024 2023 2024 2023 2024 2023
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Segment assets 41,685 36,855 830 905 1,400 1,560 43,915 39,320
Segment assets held 33,560 33,420 830 905 1,400 1,560 35,790 35,885
as security
22. CAPITAL COMMITMENTS
Significant capital expenditure contracted for at the end of the financial
year, but not recognised as liabilities in the financial
statements is: £nil (2023: £nil).
23. SUBSEQUENT EVENTS
On the 6 June 2024 the Company completed the sale of its property at North
Street, Midhurst for £345,000, representing a gross profit of £15,000 before
costs over the net book value of £330,000 as at 25 March 2024.
NOTE
The financial information set out in this announcement does not constitute
statutory accounts as defined in section 435 of the Companies Act 2006.
Accordingly pursuant to section 435(2), this announcement does not include the
auditor's report on the statutory accounts.
However, the financial information for the year ended 25 March 2024 contained
in the announcement is taken directly from the statutory accounts for that
year. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under either Section 498 (2) or Section 498
(3) of the Companies Act 2006 and did not include references to any matters to
which the auditor drew attention by way of emphasis.
The statutory accounts for the year ended 25 March 2024 have not yet been
delivered to the Registrar of Companies. The 2024 accounts will be delivered
to the Registrar of Companies following the Company's Annual General Meeting.
The statutory accounts for the year ended 25 March 2023 and for the prior
years referred to in this announcement have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their reports were
unqualified and did not contain a statement under either Section 498 (2) or
Section 498 (3) of the Companies Act 2006 and did not include references to
any matters to which the auditor drew attention by way of emphasis.
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