TIDMPCA
RNS Number : 6532P
Palace Capital PLC
21 November 2016
Palace Capital Plc
("Palace Capital", the "Company" or the "Group")
Interim results for the 6 months ended 30 September 2016
Palace Capital strategy gaining momentum
Income and capital focus delivering both dividend growth and NAV
per share growth
Palace Capital, the property investment company that focuses on
commercial property mainly outside London, is pleased to announce
its half yearly results for the six months to 30 September
2016.
Highlights
Financial Highlights
-- Interim dividend up 29% to 9p (H1 2016: 7p)
-- NAV per share up 1.2% to 419p at 30 September 2016 (FY 2016: 414p)
-- Portfolio valuation at 30 September 2016: GBP184.8 million
(31 March 2016: GBP174.5 million)
-- Rental income of GBP7.0 million (H1 2016: GBP5.4 million)
-- Profit before tax of GBP3.9 million (H1 2016: GBP7.6 million)
-- Adjusted EPS*: 10.8p (H1 2016: 9.1p)
-- Average cost of debt reduced to 2.9% (FY 2016: 3.1%)
-- Cash available at 30 September 2016: GBP9.3 million (FY 2016: GBP8.6 million)
*Adjusted EPS is recurring earnings per share, excluding one-off
exceptional items and fair value movements.
Operational Highlights
-- Annualised contracted rental income increased to GBP13.7 million (FY 2016: GBP13.5 million)
-- Acquisition of Boulton House, Manchester for GBP10.6 million
was made during H1, with an income of GBP0.6 million and a
potential reversion to GBP0.9 million, showing a 5.5% net initial
yield and 8.5% reversionary yield, with significant asset
management potential
-- Total ownership of 1.8 million sq ft
-- Overall occupancy maintained at 89%
-- WAULT of 5.8 years (to break) (FY 2016: 6.3 years)
-- Number of leases 210 (FY 2016: 194)
The Company's portfolio is benefitting from the active
management programme, including:
-- Improved occupier demand
-- Rental uplifts
-- Reducing incentives and increasing lease terms
-- Change of use and planning approvals
-- Vacant office space refurbishment
Stanley Davis, the Chairman of Palace Capital said;
"I am pleased to report that Palace Capital continues to
demonstrate both income and capital growth and we believe this sets
us apart from our peers. NAV per share is up to 419 pence per share
and proposed interim dividend is 9 pence per share. We have not
seen a negative impact from Brexit on our portfolio, which appears
to be a London-focused issue, in fact we have seen increased
activity in the towns and cities in which we operate.
We are making headway on several of our strategic assets and
with our policy of sourcing opportunities both directly and
corporately, I continue to be very optimistic about our
future."
Date: 21 November 2016
For further information contact:
Palace Capital plc
Neil Sinclair, Chief Executive
Stephen Silvester, Finance Director
Tel. +44 (0)20 3301 8331
Allenby Capital Limited (Nominated Adviser and Joint Broker)
Nick Naylor / James Reeve
Tel. +44 (0)20 3328 5656
Arden Partners plc (Joint Broker)
Chris Hardie / Ciaran Walsh
Tel. +44 (0)20 7614 5917
Capital Access Group (Financial PR)
Scott Fulton / Jessica Bradford
Tel. +44 (0)20 3763 3400
CHAIRMAN'S STATEMENT - INTERIM RESULTS - HALF YEARED 30
SEPTEMBER 2016
I am pleased to report our interim results for the six months
ended 30 September 2016 which show that the Company has made a
profit before tax of GBP3.9million. We have continued to develop
our portfolio during this period, albeit cautiously having some
regard to the emerging implications of the EU referendum.
At 30 September 2016, our portfolio was valued by Cushman &
Wakefield at GBP183.7 million, with a contracted rent roll of
GBP13.7 million per annum and a net income after property costs of
GBP11.7 million per annum. We maintain a conservative level of
gearing and during this period our European Public Real Estate
Association ("EPRA") NAV per share has increased by 1.2% to 419p
per share, representing a net asset value of GBP107.5 million.
We continue to grow recurring income in order to support our
progressive dividend policy. For the 6 months to 30 September 2016
rental income net of non-recoverable costs totalled GBP5.9 million,
up from GBP4.5 million in the comparative period, after stripping
out the one-off surrender premium of GBP3.0 million received from
Gala Casinos Limited at Sol Central, Northampton in September
2015.
The Board's clear strategy is to increase shareholder value by
continuing to make sensible opportunistic acquisitions. It is an
interesting observation that, since the management team took Board
control in July 2010, we have made only 10 acquisitions, 6 of which
have been corporate (i.e. acquiring the companies which owned the
properties). We now own 50 properties with a total floor area of
approximately 1.8 million sq. ft.
The significant acquisition made in this financial period was
the freehold of Boulton House, Chorlton Street, Manchester for
GBP10.6 million. The Company's management had been assessing the
Manchester market for over two years but when previous
opportunities arose the prices required would not have provided the
Company a sufficient return. However, the uncertainty caused by the
calling of the EU referendum meant that a number of potential
purchasers decided to withdraw from the market pending the outcome.
This gave us a window of opportunity to buy a significant office
building within 3-4 minutes' walk of Manchester Piccadilly
Station.
We have a highly experienced team and I consider that we are
very well placed to take advantage of the opportunities that we
think will arise in the months ahead.
We have continued to recycle our capital and actively manage our
portfolio. We have sold GBP2.9 million of our smaller or vacant
assets at or above book value during the half year period,
generating GBP0.9 million profit on disposal.
Strategic development
We have grown the Company by acquisition via equity issues and
conservative borrowing so that, as at today, the company has a
market capitalisation approaching GBP100 million. We intend to
continue to grow Palace Capital through selective acquisitions,
preferably off-market, where properties have either failed to sell
or where owners do not want exposure to a public marketing process.
This policy has stood us in good stead to date and we see no reason
to change our approach. We place emphasis on properties that have
short to medium term refurbishment and development potential.
In addition, we continue to seek and examine appropriate
corporate acquisitions which conform to our criteria.
I am particularly pleased with the strength of our Management
Team, with Richard Starr becoming a full time Executive Director in
July of this year and Andrew Thomas joining us as Investment
Manager from Orchard Street Investment Management.
Our model of outsourcing Property Management and Project
Management is pivotal as, in our view, it provides cost
efficiencies while allowing our team to focus on potential
acquisitions and managing the portfolio's assets to create
additional value.
Portfolio activity
Our particular brand of active management is delivering in terms
of adding value and boosting income. We announced a portfolio
update on 2 November 2016 and we would summarise the current
position on some of our key properties as follows:
Hudson House, Toft Green, York
This 103,000 sq. ft. office building is located within the
ancient City Wall, but only one minute's walk from York Railway
Station and is regarded as a prime location.
City of York Council & Network Rail have announced plans for
the surplus railway land around York Station to be redeveloped
comprehensively over the next 20 years. This will include a
significant commercial and residential element. This area is now
known as York Central and is an exciting opportunity that can only
benefit our property.
We already have consent for a change of use to 139 apartments.
In a further planning move, we now also have a resolution to grant
permission to convert Hudson House to 82 apartments and 37,000 sq
ft of offices.
Notwithstanding these alternative schemes, the Board believes
that the optimum value can be secured by redeveloping the entire
site. As a result, the Company's architects and planning advisers
are in detailed discussion with City of York Council. We had hoped
to be able to submit a planning application by the end of the year
but we are determined to iron out all issues first with the Council
and it is now envisaged that an application will be submitted in
March 2017.
The Company is currently bearing the cost of part of the
building remaining empty, pending the outcome of the planning
application. Vacant rates, although partly mitigated, as well as
service charge shortfall will affect profits in the short term. The
Directors believe that this is the correct approach, as since its
purchase in October 2013, the value of Hudson House has increased
from GBP3.8 million to GBP14.9 million as at 30 September 2016 and
they consider there to be further potential value achievable with a
redevelopment. Once planning consent is achieved, the Board will
seek to maximise the value having regard to minimising the risk to
shareholders.
Sol Central, Marefair, Northampton
We are making progress to improve our large mixed use leisure
scheme in Central Northampton although rather more slowly than we
would like. However, we submitted a planning application to change
the use of the former Gala Casino premises to Class A3 (Restaurant
and Cafes) and this was granted on 31 October 2016.
There is ongoing development activity in Northampton, much of it
within 15 minutes' walk of Sol Central. A new County Council
headquarters office building, known as 1 Angel Square, is due to be
completed next month and will accommodate 2,000 people, whilst the
town's new GBP330 million University campus is under construction.
These can only have a positive effect on Sol Central and its
ability to enhance income in the medium term.
Broad Street Plaza, Halifax
We only have a small unit unlet in this 118,000 sq. ft. leisure
complex. However, we are not passive owners, so we have instructed
a marketing company to advise as to increasing footfall and
awareness further, with an emphasis on social media.
Boulton House, Chorlton Street, Manchester
We completed the purchase of this 75,000 sq. ft. office building
in Central Manchester in August of this year. There is circa 18,500
sq. ft. of office space currently vacant and we have placed a
contract to refurbish this space. In addition, we intend to remodel
the entrance hall and part of the exterior.
The building is currently let at very modest rents. Demand for
well-located offices in Central Manchester is robust and we are
confident of the potential for future rental growth. It also has
significant medium term development potential, as it stands on a
site of c. 26,000 sq. ft. within three minutes' walk of Manchester
Piccadilly Railway Station.
Bank House, King Street, Leeds
We are refurbishing the space formerly occupied by AXA that
comprises c. 13,300 sq. ft. Coupled with the space adjoining of c.
3,300 sq. ft., we will be able to offer 16,600 sq. ft. on one floor
in January 2017 at a very competitive office rental level for
Central Leeds.
Former Polestar Building, Marsh Barton Trading Estate,
Exeter
We recently announced that we had let this 113,000 sq. ft.
industrial building to Wheatons (Exeter) Ltd on a lease for a term
of 10 years from August of this year without a break at an initial
rental of GBP282,000 per annum exclusive for the first 18 months,
rising to GBP452,000 per annum exclusive in February 2018 until a
rent review in August 2021, when the rent will rise to no less than
GBP485,900 per annum exclusive.
As stated in our annual report, Administrators were appointed to
our original tenant and then its successor and the outlook here did
not look promising earlier this year with the prospect of empty
rates, running costs, security etc. However, our team worked
diligently to conclude a transaction with the private equity group
that acquired the assets from the Administrator and this was
achieved earlier this month.
The Forum, Barnfield Road, Exeter
We announced earlier this month that we had finally let the
remaining vacant space in this 39,000 sq ft office building in
Central Exeter. This building formed part of the Sequel Portfolio
acquired from Quintain Estates and Development in 2013 and 10,300
sq. ft. had been vacant for some time. The final two lettings will
have a considerable cash flow benefit as we immediately benefit
from a cessation of empty rates and service charge shortfall of
GBP110,718 per annum, but we will also receive an additional
GBP81,589 per annum when the rent-free periods expire in May 2017.
At that time this property will produce GBP409,000 per annum
exclusive and will be a core part of our portfolio.
The Copperfield Centre, Dartford, Kent
We have completed our GBP2.25 million conversion scheme to
refurbish the vacant upper floor offices into 13 self-contained
residential apartments. We are currently in discussion with a party
interested in leasing all of these.
Solaris House, Kiln Farm, Pitfields, Milton Keynes
This 14,500 sq. ft. office building was vacated earlier this
year. We have placed a contract to refurbish the building as Milton
Keynes is one of the fastest growing cities in the UK. It will be
carried out to a similar standard to that of our two adjoining
office buildings currently let to Rockwell Automation until
December 2026.
Imperial Court & Imperial House, Leamington Spa
We recently renewed the lease with Altair UK that occupies 6,000
sq. ft. and we have increased the rental to GBP99,858 per annum.
The lease is for a term expiring in November 2022 but there is a
mutual break to determine in November 2019 to coincide with other
leases in the building. Imperial House occupies part of a site of
c. 70,000 sq. ft. and we are keeping our options open in respect of
a possible large redevelopment subject to a satisfactory and viable
planning consent.
There are several other active management initiatives
progressing with other properties in our portfolio in order to
increase income and net asset value.
Borrowings
We continue to build very close relationships with our lenders.
During the half year, we concluded a 10-year facility with Scottish
Widows on our Broad Street Plaza, Halifax property of GBP15.2
million at a fixed rate of 2.9%. With the fixed increases in rent
due in August 2017, we will achieve a near 17% return on our
equity. We also secured a loan of GBP6.0 million from Santander on
Boulton House, Manchester until June 2020 at a margin of 2.25% over
LIBOR. We have drawn down debt of GBP81.9 million which is a
conservative net loan to value ratio of 39% with an average debt
maturity of 5.1 years. The average cost of our debt is currently
2.9%, which can only be considered low compared against our peers
in the real estate market.
Dividend
We intend to pay an interim dividend of 9p (2015: 7p) on Friday
30 December 2016 to shareholders on the register as at 9 December
2016. As we work to increase income we will continue to pursue a
progressive dividend policy.
Outlook
Palace Capital is an exciting Company and I am privileged to be
Chairman of the Board. My thanks go to my fellow Board Members and
staff as well as our trusted advisers. I am delighted with the
progress that we continue to make. Looking forward we view the EU
referendum result as in the interests of Palace, as we believe that
significant opportunities will become available to enable us to
continue to create shareholder value.
As mentioned in previous statements our aspiration is to join
the Official List of the London Stock Exchange and this will be
kept under constant review. We are making headway on several of our
strategic assets and with our policy of sourcing opportunities both
directly and corporately, I continue to be very optimistic about
our future.
Stanley Davis, Chairman
21 November 2016
Palace Capital Plc
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2016
Notes Unaudited Unaudited Audited
6 months 6 months Year to
to to 31 March
30 September 30 September 2016
2016 2015 GBP000
GBP000 GBP000
Rental and
other income 3 7,076 8,364 14,593
Property operating
expenses (1,140) (880) (1,624)
--------------------------- ------ ------------------ ---------------------- ---------
Net rental income 5,936 7,484 12,969
Administrative costs (1,369) (1,035) (2,048)
Operating profit before
gains on investment
properties 4,567 6,449 10,921
Acquisition costs - (413) (815)
Gains on revaluation
of investment properties 8 32 2,308 3,620
Profit on disposal of
investment properties 873 208 290
---------------------------- ------ ------------------ ---------------------- ---------
Operating profit 5,472 8,552 14,016
Finance income - 8 34
Finance costs (1,562) (991) (2,298)
---------------------------- ------ ------------------ ---------------------- ---------
Profit before taxation 3,910 7,569 11,752
Taxation 4 (464) (396) (953)
---------------------------- ------ ------------------ ---------------------- ---------
Profit for the period
and total comprehensive
income 3,446 7,173 10,799
============================ ====== ================== ====================== =========
Earnings per ordinary share
Basic 6 13.4p 30.6p 43.9p
Diluted 6 13.4p 30.6p 43.9p
EPRA basic 6 10.4p 21.7p 31.3p
Adjusted EPS 6 10.8p 9.1p 18.9p
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Palace Capital Plc
Condensed consolidated statement of financial position
30 September 2016
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
Notes GBP000 GBP000 GBP000
Non-current assets
Goodwill - 6 -
Investment properties 8 184,787 140,350 174,542
Tangible fixed
assets 36 44 37
Deferred tax 165 500 334
Trade and other
receivables 9 809 935 825
----------------------------- ----- ------------- ------------- ---------
185,797 141,835 175,738
--- ----- ------------- ------------- ---------
Current assets
Trade and other
receivables 9 3,170 4,144 3,327
Cash and cash
equivalents 9,347 18,689 8,576
----------------------------- ----- ------------- ------------- ---------
Total current
assets 12,517 22,833 11,903
----------------------------- ----- ------------- ------------- ---------
Total assets 198,314 164,668 187,641
----------------------------- ----- ------------- ------------- ---------
Current liabilities
Trade and other
payables 10 (7,952) (7,132) (6,815)
Borrowings 11 (3,241) (850) (2,233)
----------------------------- ----- ------------- ------------- ---------
Total current
liabilities (11,193) (7,982) (9,048)
----------------------------- ----- ------------- ------------- ---------
Net current assets 1,324 14,851 2,855
------------------------------------ ------------- ------------- ---------
Non-current liabilities
Borrowings 11 (77,519) (49,678) (69,711)
Obligations under
finance leases (2,066) (2,070) (2,067)
----------------------------- ----- ------------- ------------- ---------
Total non-current
liabilities (79,585) (51,748) (71,778)
----------------------------- ----- ------------- ------------- ---------
Net Assets 107,536 104,938 106,815
----------------------------- ----- ------------- ------------- ---------
Equity
Share capital 12 2,580 2,862 2,862
Share premium
account 59,444 59,412 59,408
Merger reserve 3,503 3,503 3,503
Capital redemption
reserve 340 65 65
Treasury share
reserve (541) - -
Retained earnings 42,210 39,096 40,977
----------------------------- ----- ------------- ------------- ---------
Equity shareholders' funds 107,536 104,938 106,815
------------------------------------ ------------- ------------- ---------
Basic NAV per ordinary
share 7 419p 407p 414p
Diluted NAV per
ordinary share 7 419p 407p 414p
EPRA NAV per ordinary
share 7 419p 407p 414p
------------------------- ----- ------------- ------------- ---------
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
The condensed consolidated interim financial statements were
approved by the Board of Directors on 18 November 2016.
Palace Capital Plc
Condensed consolidated statement of cash flows
for the six months ended 30 September 2016
Notes Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
Operating activities
Profit before tax 3,910 7,569 11,752
Adjustments for non-cash
items:
Profit on sale of investment
properties (873) (208) (290)
Gain on revaluation
of investment properties (32) (2,308) (3,620)
Goodwill write-off - - 6
Depreciation 10 10 18
Share-based payment 95 50 110
Net finance costs 1,562 983 2,264
------------------------------ ------ ------------- ------------- ---------
Cash generated by operations 4,672 6,096 10,240
Changes in working capital 476 3,006 2,047
------------------------------ ------ ------------- ------------- ---------
Cash flows from operations 5,148 9,102 12,287
Interest received - 16 34
Corporation tax received
/ (paid) 10 (137) (158)
Interest and other finance
costs paid (1,269) (1,187) (3,455)
Cash flows from operating
activities 3,889 7,794 8,708
------------------------------ ------ ------------- ------------- ---------
Investing activities
Purchase of property,
plant and equipment (8) (1) (3)
Capital Expenditure
on refurbishment of
property (2,187) - (1,182)
Purchase of investment
property (10,950) (14,944) (21,689)
Proceeds from disposal
of investment properties 3,797 1,654 1,957
Payment to acquire subsidiary
undertakings - - (29,095)
Cash flows from investing
activities (9,348) (13,291) (50,012)
------------------------------ ------ ------------- ------------- ---------
Financing activities
Issue of ordinary share
capital 38 19,115 19,114
Dividends paid 5 (2,308) (1,416) (3,221)
Other loans repaid - (3,219)
Bank loan received 25,082 15,885 38,282
Bank loan repaid (16,031) (18,457) (17,010)
Capital element of finance
lease rental payments (1) (1) (2)
Purchase of treasury
shares (541) - -
Fees relating to cancellation
of deferred shares (9)
------------------------------ ------ ------------- ------------- ---------
Cash flows from financing
activities 6,230 11,907 37,163
------------------------------ ------ ------------- ------------- ---------
Net increase/(decrease)
in cash 771 6,410 (4,141)
Opening cash and cash
equivalents 8,576 12,279 12,278
Cash acquired 439
------------------------------ ------ ------------- ------------- ---------
Closing cash and cash
equivalents 9,347 18,689 8,576
============================== ====== ============= ============= =========
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Palace Capital Plc
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2016
Treasury Capital
Share Share Shares Merger Redemption Retained Total
Capital Premium Reserve Reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- --------- --------- -------- --------- ----------- ---------- --------
As at 31
March 2015 2,307 40,852 - 3,503 65 33,289 80,016
-------------------- --------- --------- -------- --------- ----------- ---------- --------
Total comprehensive
income for
the period - - - - - 7,173 7,173
Share based
payments - - - - - 50 50
Issue of
new shares 555 18,560 - - - - 19,115
Dividends - - - - - (1,416) (1,416)
As at 30
September
2015 2,862 59,412 - 3,503 65 39,096 104,938
-------------------- --------- --------- -------- --------- ----------- ---------- --------
Total comprehensive
income for
the period - - - - - 3,626 3,626
Share based
payments - - - - - 60 60
Issue of
new shares - (4) - - - - (4)
Dividends - - - - - (1,805) (1,805)
As at 31
March 2016 2,862 59,408 - 3,503 65 40,977 106,815
-------------------- --------- --------- -------- --------- ----------- ---------- --------
Total comprehensive
income for
the period - - - - - 3,446 3,446
Share based
payments - - - - - 95 95
Purchase
of treasury
shares - - (541) - - - (541)
Issue of
new ordinary
shares 2 36 - - - - 38
Redemption
of deferred
shares (284) - - 275 - (9)
Dividends - - - - - (2,308) (2,308)
-
As at 30
September
2016 2,580 59,444 (541) 3,503 340 42,210 107,536
==================== ========= ========= ======== ========= =========== ========== ========
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Palace Capital Plc
Notes to the condensed consolidated financial statements
for the six months ended 30 September 2016
1 General information
These financial statements are for Palace Capital Plc ("the
Company") and its subsidiary undertakings.
The Company's shares are admitted to trading on AIM, a market
operated by the London Stock Exchange plc. The Company is domiciled
and registered in England and Wales and incorporated under the
Companies Act 1985. The address of its registered office is 41
Chalton Street, London, NW1 1JD.
The nature of the Company's operations and its principal
activities are that of property investment in the UK mainly through
corporate acquisitions.
Basis of preparation
The condensed consolidated financial information included in
this half yearly report has been prepared in accordance with the
IAS 34 "Interim Financial Reporting", as adopted by the European
Union. The current period information presented in this document is
unaudited and does not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006.
The interim results have been prepared in accordance with
applicable International Accounting Standards (IAS) and
International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB). These standards
are collectively referred to as "IFRS".
The accounting policies and methods of computations used are
consistent with those as reported in the Group's Annual Report for
the year ended 31 March 2016 and are expected to be used in the
Group's Annual Report for the year ended 31 March 2017.
The financial information for the year ended 31 March 2016
presented in these unaudited condensed group interim financial
statements does not constitute the Company's statutory accounts for
that period but has been derived from them. The Report and Accounts
for the year ended 31 March 2016 were audited and have been filed
with the Registrar of Companies. The Independent Auditor's Report
on the Report and Accounts for the year ended 31 March 2016 was
unqualified and did not draw attention to any matters by way of
emphasis and did not contain statements under s498(2) or (3) of the
Companies Act 2006. The financial information for the periods ended
30 September 2015 and 30 September 2016 are unaudited and have not
been subject to a review in accordance with International Standard
on Review Engagements 2410, Review of Interim Financial Information
performed by the Independent Auditor of the Entity, issued by the
Auditing Practices Board.
The interim report was approved by the Board of Directors on 18
November 2016.
Copies of this statement are available to the public for
collection at the Company's Registered Office at 41 Chalton Street,
London, NW1 1JD and on the Company's website,
www.palacecapitalplc.com.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's Statement. The financial position of
the Group, its cash flows, liquidity position and borrowing
facilities are described in these financial statements.
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about future
trading performance. As part of the review the Directors have
considered the Group's cash balances, debt maturity profile of its
undrawn facilities, and the long-term nature of tenant leases. On
the basis of this review, and after making due enquiries, the
Directors have a reasonable expectation that the Group has adequate
resources to continue operational existence for the foreseeable
future. As a consequence, the Directors believe that the Group is
well placed to manage its business risk successfully.
Accordingly, they continue to adopt the going concern basis in
preparing the Half Year Report.
2 Segmental reporting
During the period the Group operated in one business segment,
being property investment in the UK and as such no further
information is provided.
3 Net property income
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
---------------------------- ------------- ------------- ----------------
Rent receivable 7,014 5,364 11,375
Surrender premium - 3,000 3,172
Management fees & other
income 62 - 46
----------------------------- ------------- ------------- ----------------
Total revenue 7,076 8,364 14,593
----------------------------- ------------- ------------- ----------------
Service charge & vacant
rates (942) (580) (1,511)
Repairs and dilapidation
costs (43) (154) (90)
Other property costs (155) (146) (23)
----------------------------- ------------- ------------- ----------------
Property operating expenses (1,140) (880) (1,624)
----------------------------- ------------- ------------- ----------------
Net property income 5,936 7,484 12,969
============================= ============= ============= ================
4 Taxation
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
-------------------------- ------------- ------------- ---------
Current income tax charge 295 396 726
Tax underprovided in
prior year - - 6
Deferred tax 169 - 221
--------------------------- ------------- ------------- ---------
Tax charge 464 396 953
=========================== ============= ============= =========
5 Dividends
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
Payment 2016 2015 2016
Date GBP000 GBP000 GBP000
--------------- ---------------- ------------- ---------------- ----------------------
Ordinary
dividends
paid
--------------- ---------------- ------------- ---------------- ----------------------
2015 Final dividend: 31 July
7p per share 2015 - 1,416 1,416
2016 Interim dividend: 30 December
7p per share 2015 - - 1,805
2016 Final dividend: 29 July
9p per share 2016 2,308 - -
2,308 1,416 3,221
============================ ============= ================ ======================
Proposed dividend
2017 Interim dividend:
9p per share payable
on 30 December 2016.
On 21 November 2016, the Group announced it would pay an interim
dividend of 9 pence per share to ordinary shareholders on the
register on 9 December 2016, the ex-dividend date will be 8
December 2016 and the dividends will be paid on 30 December
2016.
6 Earnings per share
The European Public Real Estate Association (EPRA) has issued
Best Practices Recommendations, the latest update of which was
issued in December 2014, which give guidelines for performance
measures.
EPRA earnings are calculated taking the profit after tax
excluding investment property revaluations and gains or losses on
disposals, changes in the fair value of financial instruments,
acquisition costs and debt close-out costs. EPRA earnings is
calculated on the basis of the basic number of shares in line with
IFRS earnings as the dividends to which they give rise accrue to
current shareholders and therefore it is more appropriate to use
the basic number of shares. The EPRA diluted earnings per share
also takes into account the dilution of share options and warrants
if exercised.
Palace Capital also report on an adjusted earnings measure which
is based on recurring earnings after tax excluding fair value
adjustments accounting for derivatives, investment property and
share based payments and on the basis of the basic number of
shares.
The earnings per ordinary share for the period is calculated
based upon the following information:
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
------------------------------ ------------- ------------- ---------
Profit after tax attributable
to ordinary shareholders
for the period 3,446 7,173 10,799
Adjustments to arrive
at EPRA profit
Gains on revaluation of
investment properties (32) (2,308) (3,620)
Profit on disposal of
investment properties (873) (208) (290)
Cost of acquisitions - 413 815
Debt termination cost 143 - -
EPRA earnings for the
period 2,684 5,070 7,704
------------------------------ ------------- ------------- ---------
Adjustments to arrive
at Adjusted earnings
Share-based payment 95 50 110
Surrender premium received - (3,000) (3,172)
Adjusted earnings for
the period 2,779 2,120 4,642
------------------------------ ------------- ------------- ---------
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2016 2015 2016
----------------------- ------------- ------------------------ ----------
Basic weighted average
number of ordinary
shares 25,706,969 23,413,287 24,597,258
Dilutive effect
of share options
& warrants 10,514 20,730 20,730
----------------------- ------------- ------------------------ ----------
Diluted weighted
average number of
ordinary shares 25,717,483 23,434,017 24,617,988
======================= ============= ======================== ==========
Earnings per ordinary
share
Basic 13.4p 30.6p 43.9p
Diluted 13.4p 30.6p 43.9p
EPRA basic 10.4p 21.7p 31.3p
EPRA diluted 10.4p 21.6p 31.3p
Adjusted EPS 10.8p 9.1p 18.9p
----------------------- ------------- ------------------------ ----------
7 Net asset value per share
EPRA NAV calculation makes adjustments to IFRS NAV to provide
stakeholders with the most relevant information on the fair value
of the assets and liabilities within a true real estate investment
company with a long-term investment strategy. EPRA NAV is adjusted
to take effect of the exercise of options, convertibles and other
equity interests and excludes the fair value of financial
instruments and deferred tax on latent gains. EPRA NNNAV measure is
to report net asset value including fair values of financial
instruments and deferred tax on latent gains.
Net asset value is calculated using the following
information:
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
--------------------------- -------------------------- ------------- --------------
Net assets at the end
of the period 107,536 104,938 106,815
Effect of exercise of
share options 71 109 109
--------------------------- -------------------------- ------------- --------------
Diluted net assets 107,607 105,047 106,924
--------------------------- -------------------------- ------------- --------------
Exclude fair value of
financial instruments
& exclude deferred tax
on latent capital gains - - -
--------------------------- -------------------------- ------------- --------------
EPRA NAV 107,607 105,047 106,924
--------------------------- -------------------------- ------------- --------------
Include fair value of
financial instruments
& include deferred tax
on latent capital gains - - -
--------------------------- -------------------------- ------------- --------------
EPRA NNNAV 107,607 105,047 106,924
--------------------------- -------------------------- ------------- --------------
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
--------------------------- -------------------------- ------------- --------------
Number of ordinary shares
of 10p each issued as
at the end of the period 25,650,692 25,781,229 25,781,229
Number of unexpired
share options 10,514 20,730 20,730
--------------------------- -------------------------- ------------- --------------
Number of diluted ordinary
shares 25,661,206 25,801,959 25,801,959
--------------------------- -------------------------- ------------- --------------
Basic NAV per ordinary
share 419p 407p 414p
Diluted NAV per ordinary
share 419p 407p 414p
EPRA NAV per ordinary
share 419p 407p 414p
EPRA NNNAV per ordinary
share 419p 407p 414p
--------------------------- -------------------------- ------------- --------------
8 Investment Properties
Freehold Leasehold
Investment Investment
properties properties Total
GBP000 GBP000 GBP000
At 1 April 2015 84,568 18,420 102,988
----------------------------- -------------- ------------ -------------------------------
Arising on acquisition
of subsidiary 44,880 - 44,880
Additions - new properties 18,653 4,886 23,539
Additions - refurbishments 1,149 33 1,182
Gains on revaluation
of investment properties 1,840 1,780 3,620
Disposals (1,667) - (1,667)
At 31 March 2016 149,423 25,119 174,542
----------------------------- -------------- ------------ -------------------------------
Additions - new properties 10,950 - 10,950
Additions - refurbishments 2,116 71 2,187
Gains on revaluation
of investment properties 205 (173) 32
Disposals (2,924) - (2,924)
At 30 September 2016 159,770 25,017 184,787
----------------------------- -------------- ------------ -----------------------------
Investment properties are stated at fair value based upon
external 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 arms-length transaction at the date of valuation, in
accordance with IFRS 13. The fair value of each of the properties
has been assessed by the directors. In determining the fair value
of investment properties, the directors make use of historical and
current market data as well as existing lease agreements
As a result of the level of judgement used in arriving at the
market valuations, the amounts which may ultimately be realised in
respect of any giving property may differ from the valuations shown
in the statement of financial position.
At 30 September 2016, the Group's freehold and leasehold
investment properties were externally valued by Royal Institution
of Chartered Surveyors ("RICS") registered independent valuers. A
reconciliation of the valuations carried out by the external
valuers to the carrying values shown in the balance sheet was as
follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
---------------------------- ------------- ------------- ---------
Fair value 183,650 139,315 173,441
---------------------------- ------------- ------------- ---------
Adjustment in respect
of minimum payment
under head leases included
as a liability 2,076 2,076 2,076
Less lease incentive
balance in prepayments (939) (1,041) (975)
Carrying value 184,787 140,350 174,542
============================ ============= ============= =========
Investment properties with a carrying value of GBP161,656,761
(31 March 2016: GBP151,065,990) are subject to a first charge to
secure the Group's bank loans amounting to GBP81,864,383 (31 March
2016: GBP72,678,233).
Valuation process
The valuation reports produced by the external 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 valuers. The
assumptions are typically market related, such as yields and
discount rates, and are based on their professional judgment and
market observations. Each property is considered a separate asset,
based on its unique nature, characteristics and the risks of the
property.
The executive director responsible for the valuation process,
verifies all major inputs to the external valuation reports,
assesses the individual property valuation changes from the prior
period valuation report and holds discussions with the external
valuers. When this process is complete, the valuation report is
recommended to the Audit Committee, which considers it as part of
its overall responsibilities.
The key 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 commercial investment portfolio has been derived
from capitalising the future estimated net income receipts at
capitalisation rates reflected by recent arm's length sales
transactions.
9 Trade and other receivables
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
------------------------ ------------- ------------- ---------
Current
Trade receivables 1,882 3,197 2,484
Prepayments and accrued
income 758 861 738
Other taxes - - 68
Other debtors 530 86 37
------------------------- ------------- ------------- ---------
3,170 4,144 3,327
======================== ============= ============= =========
Non-current
Prepayments and accrued
income 809 935 825
809 935 825
======================== ============= ============= =========
10 Current trade and other payables
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
----------------------- ------------- ------------- ---------
Trade payables 850 184 638
Accruals 3,155 1,967 1,807
Deferred rental income 1,491 2,756 2,605
Taxes 2,396 2,219 1,698
Other payables 60 6 67
------------------------ ------------- ------------- ---------
7,952 7,132 6,815
======================= ============= ============= =========
11 Borrowings
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
-------------------------- ------------- ------------- ---------
Current borrowings 3,241 850 2,233
Non-current borrowings 77,519 49,678 69,711
-------------------------- ------------- ------------- ---------
Total borrowings 80,760 50,528 71,944
========================== ============= ============= =========
Non-current borrowings
Secured bank loans drawn 78,623 50,242 70,445
Unamortised facility
fees (1,104) (564) (734)
-------------------------- ------------- ------------- ---------
77,519 49,678 69,711
========================== ============= ============= =========
The maturity profile of the Group's debt was as follows
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
GBP000 GBP000 GBP000
----------------------- ------------- ------------- ---------
Within one year 3,241 850 2,233
From one to two years 2,036 2,050 17,068
From two to five years 63,517 43,000 53,377
From five to ten years 13,070 - -
------------------------ ------------- ------------- ---------
Total borrowings 81,864 45,900 72,678
======================== ============= ============= =========
Facility and arrangement fees
As at 30 September 2016
Margin Maturity Unamortised
over date Facility facility
LIBOR drawn fees Loan balance
Secured borrowings % GBP000 GBP000 GBP000
--------------------- ------ -------- -------- ----------- ------------
Scottish Widows 2.10% Jul 2026 15,250 (236) 15,014
National Westminster
Bank plc 2.50% Mar 2021 26,168 (346) 25,822
Nationwide Building
Society 2.45% Nov 2020 19,167 (181) 18,986
Santander Bank
plc 2.25% Jun 2020 15,887 (276) 15,611
Lloyds Bank
plc 2.10% Apr 2019 4,187 (55) 4,132
Close Brothers
Group plc 4.00% Sep 2017 1,205 (10) 1,195
81,864 (1,104) 80,760
===================== ====== ======== ======== =========== ============
The Group has unused loan facilities amounting to GBP3.6m (31
March 16: GBP8.0m). Interest is charged on this facility at a rate
of 1.25% and is payable quarterly. This facility is secured on the
investment properties held by Property Investment Holdings Limited
and Palace Capital (Properties) Limited.
12 Share capital
Authorised, issued and fully paid share capital is as
follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
Ordinary 10p shares 25,800,279 25,781,229 25,781,229
Deferred 90p shares - 315,937 315,937
Share capital - number
of shares in issue 25,800,279 26,097,166 26,097,166
======================== ================================= ============= ==========
Share capital - GBP 2,580,028 2,862,466 2,862,446
======================== ================================= ============= ==========
17 June 2016 The Company purchased 91,587 of its own ordinary
shares of 10p each at an average price of 360 pence per ordinary
share. On 20 June 2016, it purchased 58,000 of its own ordinary
shares of 10p each at an average price of 360 pence per ordinary
share. All of the purchased shares are held as treasury shares.
Additional fees of GBP2,000 were incurred on the purchase of these
treasury shares.
On 20 June 19,050 warrants were exercised for 19,050 new
ordinary shares in the Company at a price of 200p thereby
generating cash proceeds of GBP38,100 for the Company. Following
the exercise of the warrants, the Company has no further warrants
outstanding.
A reduction of the Company's share capital by way of
cancellation of the Deferred Shares was carried out and completed
on 31 August 2016. The Company's issued share capital included
315,938 Deferred Shares as at 31 March 2016. The nominal value of
the Deferred Shares was part of the capital of the Company and
therefore not distributable. The Deferred Shares were created as a
result of the reorganisation of the Company's share capital on 18
October 2013 when each issued ordinary share of GBP0.01 was
consolidated and converted into one new Ordinary Share of GBP0.10
and one Deferred Share of GBP0.90. The Deferred Shares carried no
voting or dividend rights and only very limited rights to
participate in the capital of the Company upon a winding-up. These
rights are such as to make the Deferred Shares virtually worthless
in the hands of the holder.
In the Company's books the capital paid up on the Deferred
Shares represented GBP284,244, being the aggregate nominal value of
all the Deferred Shares. Cancelling the Deferred Shares with the
prior approval of Shareholders by way of a special resolution and
the subsequent approval of the Court has resulted in the removal of
them from the Company's balance sheet and permitted an amount of
GBP284,244 to be released to the Capital Redemption Reserve, which
may be used to reduce or eliminate losses (if any) arising on the
profit and loss account, and will also be retained for the
protection of the Company's creditors that are in existence as at
the date of the Capital Reduction. Additional fees of GBP8,786 were
incurred as a result of the cancellation of the Deferred Shares and
have been recognised as a debit against the Capital Redemption
Reserve.
The Capital Reduction took effect at the order of the Court
confirming the Capital Reduction and a statement of capital
approved by the Court has since been registered with the Registrar
of Companies.
Number of Total
Movement in ordinary number
ordinary authorised Price per share shares issued of shares
share capital pence 000s 000s
--------------------- ------ --------------- -------------- ----------
As at 1 Apr
2015 20,225,673
June
Equity issue 2015 360 5,555,556
As at 30 Sep
2015 25,781,229
------------------------------ --------------- -------------- ----------
As at 1 Apr
2016 25,781,229
------------------------------ --------------- -------------- ----------
Exercise of June
warrants 2016 200 19,050
As at 30 Sep
2016 25,800,279
------------------------------ --------------- -------------- ----------
Share buy-back June
by company 2016 360 (149,587)
====================== ===== =============== ============== ==========
Total number
of shares excluding
the number held
in treasury 25,650,696
============================== =============== ============== ==========
13 Retained earnings & Reserves
For the purpose of preparing the consolidated financial
statement of the Group, the following reserves are held:
- 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
- In June Palace Capital plc purchased 149,587 of its own shares
at an average price of GBP3.60. All these shares are held in
treasury.
- 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 cancellation of
Deferred Shares and the removal of them from the Company's balance
sheet.
14 Post balance sheet events
There have been no post balance sheet events that would require
disclosure or adjustments to these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFLTLDLIFIR
(END) Dow Jones Newswires
November 21, 2016 02:00 ET (07:00 GMT)
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