Half year results for the six months ended 31 December 2022
Town Centre Securities PLC, today announces its results for the six months ended 31 December 2022.
Resilient performance given macro-economic conditions
Financial performance
• Net assets – resilient performance
o Like for like portfolio valuation down 7.0% from June 2022:
- outperformance versus the MSCI/IPD All Property Capital Index which fell by 17.5% over the period
- reduction primarily due to real estate investor and market sentiment around the macro-economic outlook
o Statutory net assets of £152.2m or 314p per share (FY22: £179.3m, 341p). EPRA net tangible assets (‘NTA’)* measure at £148.4m or 306p per share (FY22 equivalent: £174.9.0m, 333p)
• Profits and earnings per share – impacted by valuation reduction:
o Statutory loss before tax of £19.1m (HY22: profit of £10.5m) and statutory loss per share of 38.4p (HY22: earnings of 19.8p)
o EPRA earnings* before tax of £1.7m (HY22: £2.6m)
o EPRA earnings per share* of 3.5p (HY22: 5.0p)
• Loan to Value reduced in the period by 290bps to 43.5% following debt repayments and despite reduction in portfolio value
• Shareholder Returns – enhanced by share buy backs and tender offer:
o Maintained interim dividend of 2.5p (HY22: 2.5p) reflecting the relative stability in underlying earnings excluding valuation reduction
o Earnings and NAV enhancing tender offer and subsequent share buy back in HY23 (4,075,000 shares bought back in total) following on from those undertaken in FY22
Protecting shareholder value whilst continuing to reset and reinvigorate the business for the future
We have continued to reset the business in the past six months with three further sales and one strategic acquisition. Progress delivered under the four key strategic initiatives is as follows:
Actively managing our assets
• The proportion of retail and leisure assets in the portfolio has stabilised at 29% (2016: 60%; 2020: 40%), following the sale of over £100m of assets since March 2020
• Pure retail now represents only 18% of the total portfolio with the resilient Merrion Estate representing 70% of this
• 10 new commercial lettings and lease renewals across the portfolio in the period
• No tenants entered into a CVA during the period reflecting our resilient tenant portfolio
Maximising available capital
• Three properties sold during the six months (in Glasgow, Uddingston and part of our Piccadilly Basin development site in Manchester) for a total of £20.3m
• The release in July 2022 of £18.7m of funds, originally generated from investment property sales, that had been locked into our debenture security pool
• Aggregate proceeds generated of £39.0m and crystalising a small loss on disposal of £0.2m
• Completion of the sale of our investment in YourParkingSpace Limited in July 2022, generating initial cash proceeds of £11.6m and further receipts between July 2023 and July 2024
• Loan to value headroom over our bank facilities of £32.7m based on 31 December 2022 borrowings and valuations, rising to £37m following the inclusion of the Weymouth Street, London property within the banking security pool
• Loan to value** reduced to 43.5% (FY22 equivalent 46.4%).
• Following the period end, we bought back for cancellation £13.7m of our £96.1m 2031 5.375% debenture stock for a total cash consideration of £13.3m including accrued interest:
o Helps to reduce debt and to rebalance the profile of the Group’s borrowings
o Makes a total of £23.6m of the debenture bought back over last three years
Acquiring and improving investment assets to diversify our portfolio
• Sufficient headroom to progress development and investment across the entire portfolio having:
o Acquired 45 Weymouth Street, London for £7.1m, a prime mixed-use property (to read full story click here)
o Disposed of Port Street, Manchester surface car park for £12.95m
o Expected sale in March 2023 of part of Whitehall Road, Leeds for £13.0m. As at the date of this announcement this sale is not unconditional.
Investing in our development pipeline
• Our development pipeline, with an estimated GDV of over £550m, is a valuable and strategic point of difference which we continue to progress and improve
Outlook
• Resilient trading performance has continued into the opening months of 2023:
o Rent collections remain robust with over 99% of amounts invoiced in Q2 now collected
o Car parks recovery momentum continues other than for those reliant on office workers
o ibis Styles Leeds City Centre Arena hotel benefitting from recovery, events and staycations
o One further disposal at Whitehall Road, Leeds expected to complete in coming weeks
o Now looking at acquisitions and bringing forward sections of our development pipeline
* Additional EPRA measures are described in greater detail further on in these half year results with EPRA earnings and earnings per shares detailed, defined and reconciled within note 5 of these half year results
** Loan to value is calculated as the amount of financial liabilities less cash and cash equivalents (including overdrafts) as a percentage of total assets less cash and cash equivalents
Commenting on the results, Chairman and Chief Executive, Edward Ziff, said:
“It has been another six months where we have further strengthened TCS through our disposal programme, the resulting repayment and redeployment of borrowings, and a successful tender offer.
“We continue to see further trading recoveries in both our car park and hotel operations whilst the property disposals have as expected reduced the scale of the property rental business; at the same time we continue to navigate our way through the current challenging macro-economic conditions given its impact on our tenants, the valuation reduction of our property portfolio and impairments to our car park portfolio. With low levels of bank debt and reduced loan to value I am confident that we are in a strong position to face up to the challenges that may present themselves. ”
“The cost of living crisis, rising utility costs, interest rates increases and the ongoing Russia/Ukraine conflict are affecting all stakeholders and we remain committed to supporting them, in particular our dedicated employees. We continue to focus on maintaining good landlord-tenant relationships, with open dialogue and collaboration cornerstones of this approach.”
“Having undertaken such a successful disposal programme, our attention is now turning to opportunities to selectively acquire assets and invest in our development programme, ever mindful of adding value whilst retaining robust finances.”