TIDMPCA
RNS Number : 4575T
Palace Capital PLC
15 November 2023
15 November 2023
Palace Capital plc
("Palace Capital" or the "Company")
Interim Results for the six months ended 30 September 2023
FOCUSED ON MAXIMISING CASH RETURNS TO SHAREHOLDERS
Palace Capital (LSE: PCA) announces its unaudited results for
the six months ended 30 September 2023.
Steven Owen, Executive Chairman, commented:
"We continue to make good progress in achieving disposals at
values ahead of book enabling us to further reduce debt and
leverage as we deliver on our strategy of maximising cash returns
to shareholders. Proactive balance sheet management ensures Palace
Capital is in a strong financial position, with net debt currently
at GBP7.7 million and leverage at 6.5%, both having been reduced
since the period end. This provides the Company with the
flexibility and optionality regarding the timing of future
disposals and other strategic initiatives, including various
options for returning capital to shareholders. The results below
reflect the disposals strategy.
"At an operational level, the Company continues to make good
progress with its asset management activities notwithstanding the
difficult and uncertain conditions in financial and property
markets.
"Since July 2022, we have returned GBP21.9 million of capital to
shareholders through share buybacks. It is expected that further
progress regarding disposals and options for returning capital,
including a potential tender offer, will be announced in a Trading
Update during the first quarter of 2024."
Income Statement metrics Six months Six months Change
to to
30 Sept 2023 30 Sept 2022
Adjusted profit before tax GBP2.3m GBP3.5m -34.3%
Adjusted earnings per share 5.5p 7.9p -30.4%
E PRA earnings GBP2.2m GBP2.1m +4.8%
IFRS loss before tax (GBP0.2m) (GBP12.4m)
Basic earnings per share (0.4p) (27.4p)
Dividends
Total dividend paid per share 7.5p 7.0p +7.1%
Balance Sheet and operational metrics 30 Sept 2023 31 March 2023 Change
EPRA NTA per share 294p 296p -0.7%
Net asset value GBP110.0m GBP128.5m -14.4%
Like-for-like portfolio valuation
decrease (4.4%) (18.6%)
EPRA occupancy rate 87.6% 87.7%
Debt
Loan to value 9% 31%
Total drawn debt GBP20.2m GBP64.3m -68.6%
Average cost of debt 5.4% 5.8% -40bps
Average debt maturity 1.6 years 2.0 years
Financial highlights
-- Adjusted profit before tax of GBP2.3 million (September 2022:
GBP3.5 million) reflecting the reduction in income following
disposals
-- IFRS loss before tax for the period of GBP0.2 million
(September 2022: GBP12.4 million loss) primarily due to the
valuation deficit of GBP5.6 million offset by the profit on
property disposals of GBP3.5 million
-- Adjusted EPS of 5.5 pence (September 2022: 7.9 pence)
-- 7.5 pence per share of dividends paid, an increase of 7.1% (September 2022: 7.0p)
-- Completed GBP15.2 million of share buybacks in the period, an
8.0 pence per share accretion to EPRA NTA
-- EPRA NTA per share of 294 pence reduced by 0.7% (March 2023:
296 pence) and IFRS net assets of GBP110.0 million (March 2023:
GBP128.5 million)
-- Investment property portfolio valuation reduced by 4.4% on a like-for-like basis
-- Portfolio ERV growth over the half year was 2.6% on a like-for-like basis
-- LTV of 9% at 30 September 2023 (March 2023: 31%), which has
reduced further post period-end to 6.5 %
-- Gross debt reduced by GBP44.1m or 68.6% in the period to GBP
20.2 million (March 2023: GBP 64.3 million). Gross debt reduced by
a further GBP6.2 million post period-end to GBP14.0 million
Operational highlights
-- In the period to 30 September 2023, sale of 12 investment
properties for GBP66.9 million, 7% ahead of the 31 March 2023 book
value
-- Post period end, a further three investment properties have
been sold for GBP6.4 million, bringing the total sales year to date
to GBP73.3 million, 6% ahead of the March 2023 book value
-- Apartment sales at Hudson Quarter, York, have been slower,
reflecting the wider housing market but continue to progress. A
further six apartments have been sold since 31 March 2023 for a
total of GBP2.6 million, with aggregate proceeds of the 109 units
sold totalling GBP40.1 million. Since 30 September two units are
under offer for GBP1.2 million, leaving 16 units remaining
-- Portfolio WAULT resilient at 4.9 years (March 2023 4.8 years)
-- An additional GBP1.1 million of annualised net rental income
was created during the half year through leasing and review
activity and the associated reduction in non-recoverable property
costs which was, on average 3% ahead of the 31 March 2023 ERVs.
Annualised net rental income lost from lease expiries and breaks
totalled GBP0.5 million resulting in a net additional annualised
increase of GBP0.6 million from active asset management activity.
Net rental income lost following disposals totalled GBP4.2 million
per annum resulting in a net loss in annualised net rental income
of GBP3.6 million
-- Rent collection for the first half of the financial year was 99% (31 March 2023: 99%)
-- EPRA occupancy remains stable at 87.6% (31 March 2023: 87.7%)
-- Total Property Return of 2.4%, outperforming the MSCI UK
Quarterly Property Index benchmark performance of -0.5%.
Palace Capital plc
Steven Owen, Executive Chairman
info@palacecapitalplc.com
Financial PR
FTI Consulting
Dido Laurimore / Giles Barrie
Tel: +44 (0)20 3727 1000
palacecapital@fticonsulting.com
Cautionary Statement
This announcement does not constitute an offer of securities by
the Company. Nothing in this announcement is intended to be, or
intended to be construed as, a profit forecast or a guide as to the
performance, financial or otherwise, of the Company or the Group
whether in the current or any future financial year. This
announcement may include statements that are, or may be deemed to
be, "forward-looking statements". These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms "believes", "estimates", "anticipates",
"expects", "intends", "plans", "target", "aim", "may", "will",
"would", "could" or "should" or, in each case, their negative or
other variations or comparable terminology. They may appear in a
number of places throughout this announcement and include
statements regarding the intentions, beliefs or current
expectations of the directors, the Company or the Group concerning,
amongst other things, the operating results, financial condition,
prospects, growth, strategies and dividend policy of the Group or
the industry in which it operates. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future and may be beyond the Company's ability to control or
predict. Forward-looking statements are not guarantees of future
performance. The Group's actual operating results, financial
condition, dividend policy or the development of the industry in
which it operates may differ materially from the impression created
by the forward-looking statements contained in this announcement.
In addition, even if the operating results, financial condition and
dividend policy of the Group, or the development of the industry in
which it operates, are consistent with the forward-looking
statements contained in this announcement, those results or
developments may not be indicative of results or developments in
subsequent periods. Important factors that could cause these
differences include, but are not limited to, general economic and
business conditions, industry trends, competition, changes in
government and other regulation, changes in political and economic
stability and changes in business strategy or development plans and
other risks.
Other than in accordance with its legal or regulatory
obligations, the Company does not accept any obligation to update
or revise publicly any forward-looking statement, whether as a
result of new information, future events or otherwise.
EXECUTIVE CHAIRMAN'S STATEMENT
Update on delivery of strategic objectives
At our Full Year results announced in June, it was noted that
the year ahead was likely to be further affected by continuing
macroeconomic and geo-political uncertainty although the inflation
outlook in the UK was expected to improve. Increased interest rates
continue to adversely impact the commercial property market in
relation to general investment activity, although the Company has
had an active first half, disposing of GBP66.9 million of
investment properties at 7% above the 31 March 2023 valuation. This
includes the office building in Maidenhead sold after the Trading
Update of 26 July 2023 for GBP9.0 million, 9.7% ahead of the March
2023 valuation.
Since 30 September 2023, three investment properties have been
sold for GBP6.4 million, 2% above the March 2023 valuation: the
long leasehold interest of a residential block at HQ York for
GBP1.5 million; Bank House, Leeds, for GBP2.65 million: and
Princeton House, Farnborough, for GBP2.28 million. These take total
investment property sales in the year to date to GBP73.3 million,
which is 6% above the March 2023 valuation.
Unsurprisingly, activity in relation to residential sales at
Hudson Quarter, York, has been more muted with a further six
apartment sales completed during the half year period for GBP2.6
million and since 30 September two units are under offer for GBP1.2
million, leaving 16 units remaining.
Total investment properties sold since the change of strategy in
July 2022 amount to GBP84.4 million or GBP94.5 million including
residential apartments.
Operationally, the business remains robust. The team has been
proactive in implementing asset management plans to increase income
and reduce void costs with lettings, renewals and rent reviews on
average 3% ahead of the 31 March 2023 estimated rental values.
During the first half, 14 lease events comprising five new
lettings, three lease renewals and six rent reviews were completed
across 129,000 sq ft of space providing GBP0.8 million of
additional annualised income. Including the associated reduction in
non-recoverable property costs of GBP0.3 million, an additional
GBP1.1 million of annualised net rental income was created during
the first half.
There were two key lettings during the period:
Firstly, at 2 St James' Gate, Newcastle, where Orega, a premium,
flexible, serviced office workspace provider, entered into a 15
year management agreement to take the second and third floors
totalling 22,500 sq ft of the seven storey, 82,500 sq ft building.
Following a comprehensive refurbishment, which is currently
underway, the operation is expected to open shortly, providing
c.400 workstations. This letting significantly increased the
occupancy at the property, taking it from 65% as at 31 March 2023
to 88% as at 30 September 2023 and, together with the letting to
Softcat plc in December 2022, are the first two major lettings at
St James' Gate since the property was acquired in 2017.
Secondly, at Broad Street Plaza, Halifax, where Calderdale and
Huddersfield NHS Foundation Trust entered into a new 15 year lease
and took an additional 6,000 sq ft unit increasing their occupation
to over 27,000 sq ft. The new rent on the combined space is over
GBP14 psf and is 41% higher than the March 2023 ERV. The NHS now
accounts for over 16% of the net income from the property and we
believe that the letting was the key reason why the property
increased in value as at September 2023 compared with March
2023.
In terms of managing our own costs, Palace Capital continues to
reduce its level of administrative expenses in line with its
strategy, with measures implemented in the period saving GBP0.5
million and GBP0.9 million in the year to date. This includes
reducing headcount and relocating its head office to a smaller
office in Victoria, London on expiry of its current lease term on 1
December 2023. Annual occupancy costs of the Company's new premises
will be GBP0.25 million lower than those of its former offices in
Bury Street, SW1.
During the half year period, the Company purchased 6.2 million
shares for GBP15.2 million, contributing an additional 8.0 pence to
EPRA NTA. Since July 2022, cash returned to shareholders through
the share buyback programmes to date totals GBP21.9 million.
Overview of results
The Group's adjusted profit before tax reduced to GBP2.3 million
(September 2022: GBP3.5 million) as a result of income lost through
disposals. Investment property sales during the half year period
totalled GBP66.9 million, which realised a profit of GBP3.4 million
(September 2022: GBP0.9 million). Trading profits from the sale of
residential units realised a profit of GBP0.1 million (September
2022: GBP0.1 million).
The whole portfolio was independently valued by CBRE as at 30
September 2023 at GBP124.5 million, a reduction of 4.4% on a
like-for-like basis. The valuation deficit of GBP5.6 million
equates to 13.5 pence per share.
The investment portfolio (excluding residential properties held
as trading properties) was valued at GBP115.2 million and a net
initial yield (NIY) of 8.1%. Within the investment portfolio the
office and leisure assets, which comprise 84% of the portfolio,
were valued at NIYs of 7.4% and 11.0% respectively.
The ERVs used by the valuers were, on the whole portfolio, 2.6%
higher on a like-for-like basis than as at 31 March 2023. Within
the portfolio the ERV growth for the office and leisure assets was
2.1% and 5.1% respectively.
EPRA NTA decreased by 2.0 pence per share or 0.7% to 294 pence
(March 2023: 296 pence) during the period, principally as a result
of the revaluation deficit of GBP5.6 million or 13.5 pence per
share offset by the 8.0 pence per share share buyback accretion and
the profit from the disposal of investment properties, which
contributed 8.2 pence per share. The excess of dividends paid per
share over adjusted earnings per share was -2.0 pence per share and
other items, principally the denominator effect of the reduced
number of shares at period end compared with the average for the
period, was -2.7 pence per share.
The Group's balance sheet remains strong with cash reserves of
GBP8.9 million as at 30 September 2023. Gross debt reduced by 68.6%
in the period to GBP20.2 million (March 2023: GBP64.3 million),
which has resulted in the loan to value ratio reducing to 9% (March
2023: 31%). Since the half year end, gross debt has reduced by a
further GBP6.2 million and proforma LTV has reduced to 6.5%.
Directorate Change
Today, the Company has announced further progress in the
delivery of its strategy to focus on maximising cash returns to
shareholders. In light of this, Matthew Simpson, CFO and the Board
have agreed that now is the right time for Matthew to step down as
a Director and from the Board. The Company's financial
circumstances (including cancellation of bank facilities and
reduced portfolio size) mean that the CFO role is significantly
reduced and therefore no longer requires the level of expertise and
skillset that Matthew contributes.
Matthew's CFO report is contained within this Half Year Report
below.
Going forward, the financial operations of the Company will be
managed by the Financial Controller and Financial Planning Analyst
with operational oversight by myself as Executive Chairman and by
the Audit and Risk Committee on behalf of the Board. After a short
handover, Matthew will leave the Company at the end of this
month.
Matthew leaves with the Board's best wishes and gratitude for
his eight years with the Company, latterly as CFO and prior to that
as Financial Controller. He has supported the Board in reshaping
the Company over the last sixteen months including returning cash
to shareholders and reducing bank debt.
Dividend
The Group increased its paid dividends by 7.1% to 7.5 pence per
share (September 2022: 7.0 pence per share) in relation to the
period ended 30 September 2023. The Company has declared an interim
dividend of 3.75 pence per share which will be paid on 29 December
2023 as a Property Income Distribution (PID). The record date will
be 24 November 2023.
As previously reported, the dividend policy is that the current
level of dividend is expected to be maintained and paid from
adjusted profits including trading profits. As the portfolio has
been significantly repositioned and cash returned to shareholders
in the last 12 months, if this level of dividend cannot be achieved
then, as a minimum, the dividend payment is expected to be set at
the Property Income Distribution (PID) level.
AGM update
In line with best practice recommendations, the Company provides
an update on communication with shareholders on issues where there
were significant votes against a resolution at the AGM. In relation
to the votes for the resolution seeking approval of my own
re-election, 77% of votes cast at the AGM were in favour of the
resolution. Mark Davies, Senior Independent Director contacted a
major shareholder who had voted against the resolution. That
shareholder subsequently confirmed that this had been an
administrative error and that they had intended to vote in favour
of the resolution, as they had done with all of the other
resolutions proposed. Had this been correctly cast, the votes in
favour of the resolution would have been 91% instead of the 77%
recorded.
We continue to communicate with our major shareholders on
significant issues affecting the Company and welcome constructive
dialogue.
General Meeting
The Company has successfully used share buybacks as one method
of returning capital to shareholders. Accordingly, further
authority is sought for the Company to acquire its own shares,
having fully utilised the authority for the market purchase of its
own shares previously provided by shareholders at the AGM held on
26 July 2023. The Company will hold a General Meeting to consider
this resolution with the General Meeting being held in person at
the offices of CMS Cameron McKenna Nabarro Olswang LLP, Cannon
Place, 78 Cannon Street, London EC4N 6AF at 1.00 p.m. on Monday 4
December 2023. The number of shares subject to the proposal is
5,634,044 shares representing approximately 15% of the issued
ordinary share capital of the Company as at 14 November 2023. Full
details are contained in the Notice of General Meeting which will
shortly be available on the Company's website www.palacecapitalplc
.com. The Company is utilising the authority provided by
shareholders at the 2023 AGM to hold a general meeting on a shorter
timescale of 14 clear days' notice to provide the Company with the
appropriate flexibility, which is considered by the Directors to be
in the best interests of the Company.
Outlook
The commercial property market remains challenging but the
disposals in the current financial year to date represent a further
significant step forward in reducing debt and leverage and
demonstrate continued progress in our strategy of maximising cash
returns to shareholders. The Company is in a strong financial
position and its current low leverage of 6.5% provides it with the
flexibility and optionality regarding the timing of further
disposals and other strategic initiatives, including various
options for returning capital to shareholders.
At an operational level, the Company continues to make good
progress with its asset management activities notwithstanding the
difficult and uncertain conditions in financial and property
markets.
It is expected that further progress regarding disposals and
options for returning capital, including a potential tender offer,
will be announced in a Trading Update during the first quarter of
2024.
Steven Owen
Executive Chairman
CHIEF FINANCIAL OFFICER'S REPORT
Financial Overview
The Company's adjusted profit before tax reduced by 34.3% to
GBP2.3 million (September 2022: GBP3.5 million) and EPRA NTA per
share by 0.7% to 294 pence (March 2023: 296 pence). Against a
backdrop of economic uncertainty, Palace Capital continued to
deliver at an operational level, by reducing gross debt in a rising
interest rate environment and making continued progress in reducing
administration costs. In line with the strategy of returning
capital to shareholders, the Company has increased the dividend
paid by 7.1% in the period compared with the previous half year and
completed GBP15.2 million of share buybacks in the period, which
was accretive to EPRA NTA by 8.0 pence per share. The summary of
the Company's financial results are as follows:
Income Statement Summary
Income Statement 30 Sept 30 Sept
2023 2022
GBPm GBPm
-------- --------
Gross property income (excluding ECL provision) 6.9 8.7
-------- --------
Property operating expenses (1.5) (1.3)
-------- --------
Expected Credit Loss provision - (0.1)
-------- --------
Net property income (excluding trading
profit) 5.4 7.3
-------- --------
Recurring administration expenditure (1.7) (2.0)
-------- --------
Finance income 0.2 -
-------- --------
Finance costs (1.6) (1.8)
-------- --------
Adjusted profit before tax 2.3 3.5
-------- --------
Tax - 0.1
-------- --------
Adjusted profit after tax 2.3 3.6
-------- --------
Payments to former Directors (including
associated costs) - (1.4)
-------- --------
Share based payments (0.1) (0.1)
-------- --------
EPRA earnings 2.2 2.1
-------- --------
Loss on revaluations (5.6) (15.6)
-------- --------
Trading profit 0.1 0.1
-------- --------
Profit on disposal of investment properties 3.4 0.9
-------- --------
Change in fair value of interest rate
derivatives - 0.2
-------- --------
Debt termination costs (0.3) -
-------- --------
IFRS earnings (0.2) (12.3)
-------- --------
Net property income in the period reduced to GBP5.4 million
(September 2022: GBP7.3 million) as result of the twelve investment
property disposals in the period, which were 7% ahead of the 31
March 2023 book value. Property operating expenses have risen by
GBP0.2 million as a result of inflationary pressures on service
charge and insurance costs on our void units. Rent collection has
remained consistently high at 99% throughout the period.
The Company has continued to reduce its cost base, with
annualised cost savings of GBP0.5 million in the period and GBP0.9
million in the year to date. As a result of cost savings
implemented in the prior year of GBP1.4 million, total savings for
FY23 and FY24 to date are GBP2.3 million. Recurring administrative
costs reduced by 15% to GBP1.7 million (September 2022: GBP2.0
million) for the period
Finance costs have reduced by 11.1% or GBP0.2 million to GBP1.6
million (September 2022: GBP1.8 million) following the significant
reduction in our debt in the period, despite the increases in Bank
of England base rates.
EPRA NTA Movement
EPRA NTA decreased by 2 pence per share or 0.7% to 294 pence
(March 2023: 296 pence) during the period. The revaluation deficit
of GBP5.6 million or 13.5 pence per share reduced EPRA NTA as a
result of a 4.4% like-for-like reduction in the property portfolio.
This was offset by the GBP15.2 million of shares purchased through
the share buyback programme in the period, which was accretive by
8.0 pence per share, and the profit from the disposal of investment
properties which contributed 8.2 pence per share. These disposals
were 7% ahead of the 31 March 2023 book value.
Adjusted earnings before tax of GBP2.3 million increased EPRA
NTA by 5.5 pence per share, this was offset by the dividends paid
in the period of 7.5 pence per share. Hudson Quarter trading profit
(net of fair value adjustment to trading properties) increased EPRA
NTA by 0.1 pence per share, whilst other movements contributed to a
reduction of 2.8 pence per share.
GBPm No. of shares Pence
(diluted) per share
EPRA NTA at 31 March 2023 129.3 43,728,212 296.0p
------- -------------- ------------
Share buyback (15.2) (6,160,000) 8.0p
------- -------------- ------------
EPRA NTA after share buyback 114.1 37,568,212 304.0p
------- -------------- ------------
Profit on sale of investment
properties 3.4 8.2p
------- -------------- ------------
Adjusted earnings before tax 2.3 5.5p
------- -------------- ------------
Hudson Quarter trading profit 0.1 0.4p
------- -------------- ------------
Loss on revaluation of investment
property (5.6) (13.5p)
------- -------------- ------------
Cash dividends paid (3.2) (7.5p)
------- -------------- ------------
Fair value adj. of trading
properties (0.1) (0.3p)
------- -------------- ------------
Other movements* (0.4) (8,259) (2.8p)
------- -------------- ------------
EPRA NTA at 30 September
2023 110.6 37,559,953 294.0p
------- -------------- ------------
*Other movements include debt termination costs, shares
purchased by EBT, the denominator effect of the reduced number of
shares at period end compared with the average for the period and
the effect of rounding.
FINANCING
The Company has made further significant progress in reducing
its drawn debt which has been reduced by GBP44.1 million, or 68.6%
to GBP20.2 million (March 2023: GBP64.2 million). This includes the
repayment of the Santander and Lloyds debt facilities, which had
drawn debt at 31 March 2023 of GBP11.8 million and GBP6.8 million
respectively. The repayment of these two facilities enabled the
release from charge of GBP34.0 million of property, giving the
Group further flexibility and optionality regarding the timing of
the sales of such properties.
The Company prioritises the efficient use of its capital, and
the GBP44.1 million reduction in debt has resulted in an LTV of 9%
at 30 September 2023 (March 2023: 31%) and reduced our average cost
of debt to 5.4% (March 2023: 5.8%). The Company has remained
compliant with all covenants on its bank facilities in the
period.
At 30 September 2023 cash and net debt was GBP8.9 million (March
2023: GBP5.5 million) and GBP11.3 million (March 2023: GBP58.8
million) respectively, with the disposal proceeds from Hudson
Quarter residential sales continuing to enhance cash reserves, as
this cash is unfettered and free from bank debt.
Since 30 September 2023, the Company has repaid a further GBP6.2
million of drawn debt, resulting in a net debt of GBP7.7 million
and an LTV of 6.5%. This includes the full repayment of the NatWest
term loan and the cancellation of the undrawn Revolving Credit
Facility of GBP20.0 million.
Set out below is a table showing the movement in drawn debt
during the year:
GBPm
--------------------------------- ------
Drawn debt at 31 March 2023 64.3
--------------------------------- ------
Repayment of debt from disposals (43.2)
Amortisation of loans (0.9)
Drawn debt at 30 September 2023 20.2
--------------------------------- ------
Repayment of debt from disposals (5.9)
Amortisation of loans (0.3)
--------------------------------- ------
Drawn debt at 14 November 2023 14.0
--------------------------------- ------
At 30 September 2023 we held GBP8.4 million of fixed rate debt
(March 2023: GBP8.6 million) which was 42% of overall drawn debt
(March 2023: 13%), as shown in the table below:
DEBT AT 30 SEPTEMBER 2023
Years
Fixed Floating Total drawn to
GBPm GBPm GBPm maturity
---------------- ----- -------- ----------- ---------
Barclays - 5.9 5.9 0.7
NatWest - 5.9 5.9 0.9
Scottish Widows 8.4 - 8.4 2.8
---------------- ----- -------- ----------- ---------
8.4 11.8 20.2 1.6
---------------- ----- -------- ----------- ---------
Following the repayment of the NatWest facility the percentage
of fixed rate debt has increased to 60% from 42%.
The Company's key debt metrics are summarised in the table
below:
DEBT METRICS
30 September 31 March
2023 2023
------------------------ ------------ --------
Net loan to value ratio 9% 31%
Debt drawn GBP20.2m GBP64.3m
Total fixed debt GBP8.4m GBP8.6m
Average cost of debt 5.4% 5.8%
Average debt maturity 1.6yrs 2.0yrs
NAV gearing 10% 46%
------------------------ ------------ --------
Matthew Simpson
CHIEF FINANCIAL OFFICER
14 November 2023
Statement of Principal Risks
We consider there has been no material changes to the Company's
principal risks, as set out in the Annual Report and Accounts for
the year ended 31 March 2023 and summarised below. However, several
risks continue to be elevated as a result of the ongoing economic
outlook for the UK.
This includes increased risks relating to Market Cycle, Economic
and Political, Liquidity and Valuation through increased economic
uncertainty, higher interest rates, inflation and energy costs
which may negatively impact revenues and costs for our tenants, for
the commercial property market and the Company. We are working with
our tenants, banks and other stakeholders to mitigate these
risks.
01 02 03
MARKET CYCLE ECONOMIC AND POLITICAL CAPITAL STRUCTURE
Risk description Risk description Risk description
Failure to react appropriately Uncertainty in the An inappropriate level
to changing market UK economic landscape, of gearing or failure
conditions and adapt global supply chain to comply with debt
our corporate strategy issues, inflation covenants or manage
could negatively impact and interest rates, re-financing events
shareholder returns. cost of energy crisis could put pressure
brings risks to the on cash resources
property market, supply and lead to a funding
chains and to occupiers' shortfall for operational
businesses. This can activities.
significantly impact
market sentiment and
our ability to extract
value from our properties
resulting in lower
shareholder returns,
reduced liquidity
and increased occupier
failure.
05
04 PORTFOLIO STRATEGY 06
LIQUIDITY - ASSET MANAGEMENT
Risk description Risk Description Risk description
Increasing costs of An inappropriate investment Failure to implement
borrowing due to increasing strategy that is not asset business plans
interest rates could aligned to overall and elevated risks
affect the Company's corporate purpose associated with refurbishment
ability to borrow or objectives, economic could lead to longer
reduce its ability conditions or tenant void periods, higher
to repay its debts demand may result arrears and overall
in lower investment investment performance,
returns adversely impacting
returns and cashflows.
08 09
07 TENANT DEMAND BUSINESS CONTINUITY
VALUATION AND DEFAULT AND CYBER SECURITY
Risk description Risk description Risk description
Decreasing capital Failure to adapt to Business disruption
and rental values could changing occupier as a result of physical
impact the Company's demands and/or poor damage to buildings,
portfolio valuation tenant covenants may Government policy
leading to lower returns. result in us losing and social distancing
significant tenants, measures implemented
which could materially in response to pandemics,
impact income, capital cyber attacks or other
values and profit. operational or IT
Rising inflation, failures or unforeseen
interest rates and events may impact
living costs could income and profits.
impact tenant businesses,
such as the leisure
industry, as demand
falls for discretionary
spending.
10 11 12
PEOPLE CLIMATE CHANGE REGULATORY AND TAX
Risk description Risk description Risk description
An inability to Failure to anticipate Non-compliance with the
attract or retain and prepare for transition legal and regulatory
staff with the right and physical risks requirements of a public
skills and experience associated with climate real estate company,
or failure to implement change including including the REIT regime
appropriate succession increasing policy could result in convictions
plans may result and compliance risks or fines and negatively
in significant underperformance associated with existing impact reputation.
or impact the overall and emerging environmental
effectiveness of legislation could
our operations. lead to increased
costs and the Company's
assets becoming obsolete
or unable to attract
occupiers.
Statement of Directors' Responsibilities
The Directors confirm that the condensed set of consolidated
financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and that the interim
management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed interim
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The Directors of Palace Capital plc are listed on the Company
website www.palacecapitalplc.com
By order of the Board
Phil Higgins
Company Secretary
14 November 2023
Palace Capital plc
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months 6 months Year to
to to 31 March
30 September 30 September 2023
Notes 2023 2022 GBP000
GBP000 GBP000
Revenue 3 12,108 14,340 32,973
Cost of sales 4 (6,551) (6,934) (17,147)
Movement in expected credit
loss - - 327
------------------------------------ ------- ------------- ------------- ---------
Net property income 5,557 7,406 16,153
Administrative expenses (1,816) (3,529) (6,094)
Operating profit before gains
and losses on property assets 3,741 3,877 10,059
Profit on disposal of investment
properties 3,383 882 819
Loss on revaluation of investment
properties 9 (5,613) (15,587) (42,900)
Operating profit/(loss) 1,511 (10,828) (32,022)
Finance income 176 2 26
Finance expense (1,552) (1,725) (3,970)
Debt termination costs (6)
(324) (15)
Changes in fair value of interest
rate derivatives - 184 210
Loss before taxation (189) (12,373) (35,771)
Taxation 5 16 31 67
------------------------------------ ------- ------------- ------------- ---------
Loss after taxation for the
period and total comprehensive
loss attributable to owners
of the Parent (173) (12,342) (35,704)
==================================== ======= ============= ============= =========
Earnings per ordinary share
Basic 6 (0.4p) (27.4p) (80.2p)
Diluted 6 (0.4p) (27.4p) (80.2p)
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Palace Capital plc
Condensed consolidated statement of financial position
For the six months ended 30 September 2023
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
Notes GBP000 GBP000 GBP000
Non-current assets
Investment properties 9 111,337 213,928 176,504
Right of use asset 33 - 132
Property, plant and equipment 16 34 23
111,386 213,962 176,659
---------------------------------- ----- ------------- ------------- ---------
Current assets
Trading property 10 8,713 17,005 11,055
Trade and other receivables 11 8,079 8,191 8,550
Cash and cash equivalents 12 8,870 12,888 5,509
Derivative financial instruments 15 - 252 -
---------------------------------- ----- ------------- ------------- ---------
25,662 38,336 25,114
---------------------------------- ----- ------------- ------------- ---------
Total assets 137,048 252,298 201,773
---------------------------------- ----- ------------- ------------- ---------
Current liabilities
Trade and other payables 13 (6,962) (7,408) (8,339)
Borrowings 14 (11,951) (1,718) (8,545)
Lease liabilities for
right of use asset (33) - (132)
Creditors: amounts falling
due within one year (18,946) (9,126) (17,016)
---------------------------------- ----- ------------- ------------- ---------
Net current assets 6,716 29,210 8,098
------------------------------------------ ------------- ------------- ---------
Non-current liabilities
Borrowings 14 (8,078) (86,247) (55,129)
Deferred tax liability (61) (113) (76)
Lease liabilities for
investment properties - (1,077) (1,077)
Net Assets 109,963 155,735 128,475
---------------------------------- ----- ------------- ------------- ---------
Equity
Called up share capital 16 4,639 4,639 4,639
Merger reserve 3,503 3,503 3,503
Capital redemption reserve 340 340 340
Treasury share reserve (22,457) (6,669) (7,343)
Capital reduction reserve 115,249 121,779 118,477
Retained earnings 8,689 32,143 8,859
---------------------------------- ----- ------------- ------------- ---------
Equity shareholders' funds 109,963 155,735 128,475
------------------------------------------ ------------- ------------- ---------
Basic NAV per ordinary
share 7 293p 354p 294p
Diluted NAV per ordinary
share 7 293p 354p 294p
EPRA NTA per ordinary
share 7 294p 356p 296p
----------------------------------- ----- ------------- ------------- ---------
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 14 November 2023.
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 2023
Treasury Capital
Share Shares Other reduction Retained Total
Capital Reserve Reserves reserve Earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- --------- -------- ---------- ---------- ---------- --------
As at 31 March 2022 4,639 (717) 3,843 125,019 44,420 177,204
-------------------------- --------- -------- ---------- ---------- ---------- --------
Total comprehensive loss
for the period - - - - (12,342) (12,342)
Share based payments - - - - 100 100
Exercise of share options - 73 - - (73) -
Issue of deferred bonus
share options - - - - 38 38
Dividends paid - - - (3,240) - (3,240)
Share buyback - (6,025) - - - (6,025)
As at 30 September 2022 4,639 (6,669) 3,843 121,779 32,143 155,735
-------------------------- --------- -------- ---------- ---------- ---------- --------
Total comprehensive loss
for the period - - - - (23,362) (23,362)
Share based payments - - - - 77 77
Exercise of share options - (2) - - 2 -
Issue of deferred bonus
share options - - - - (1) (1)
Dividends paid - - - (3,302) - (3,302)
Share buyback - (672) - - - (672)
As at 31 March 2023 4,639 (7,343) 3,843 118,477 8,859 128,475
-------------------------- --------- -------- ---------- ---------- ---------- --------
Total comprehensive loss
for the period - - - - (173) (173)
Share based payments - - - - 68 68
Exercise of share options - 65 - - (65) -
Dividends - - - (3,228) - (3,228)
Share buyback - (15,179) - - - (15,179)
As at 30 September 2023 4,639 (22,457) 3,843 115,249 8,689 109,963
========================== ========= ======== ========== ========== ========== ========
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Palace Capital plc
Condensed consolidated statement of cash flows
For the six months ended 30 September 2023
Unaudited
6 months Unaudited Audited
to 6 months to Year to
30 September 30 September 31 March
Notes 2023 2022 2023
GBP000 GBP000 GBP000
Operating activities
Loss before taxation (189) (12,373) (35,771)
Finance income (176) (2) (26)
Finance expense 1,552 1,725 3,970
Changes in fair value of interest
rate derivatives - (184) (210)
Loss on revaluation of investment
property portfolio 9 5,613 15,587 42,900
Profit on disposal of investment
properties (3,383) (882) (819)
Debt termination costs 324 6 15
Depreciation of tangible fixed
assets 7 17 30
Amortisation of right of use
asset 99 17 82
Share-based payment 68 100 177
Increase in trade and other receivables (680) (779) (1,140)
Decrease in trade and other payables (1,231) (1,411) (415)
Decrease in trading property 2,342 3,282 9,233
---------------------------------------- ------- ------------- ------------- ---------
Net cash generated from operations 4,346 5,103 18,026
---------------------------------------- ------- ------------- ------------- ---------
Interest received 176 2 26
Interest and other finances charges
paid (1,818) (1,619) (3,427)
Corporation tax paid in respect
of operating activities - (106) (171)
---------------------------------------- ------- ------------- ------------- ---------
Net cash flows from operating
activities 2,704 3,380 14,454
---------------------------------------- ------- ------------- ------------- ---------
Investing activities
Capital expenditure on refurbishment
of investment property 9 (2,657) (608) (1,371)
Proceeds from disposal of investment
properties 9 65,835 4,692 15,410
Purchase of property, plant and
equipment - (6) (8)
Cash flows from investing activities 63,178 4,078 14,031
---------------------------------------- ------- ------------- ------------- ---------
Financing activities
Bank loan repaid (44,096) (13,037) (37,419)
Loan issue costs (18) (411) (461)
Dividends paid 8 (3,228) (3,240) (6,542)
Share buyback (15,179) (6,025) (6,697)
Cash flows from financing activities (62,521) (22,713) (51,119)
---------------------------------------- ------- ------------- ------------- ---------
Net increase/(decrease) in cash 3,361 (15,255) (22,634)
Opening cash and cash equivalents 12 5,509 28,143 28,143
---------------------------------------- ------- ------------- ------------- ---------
Closing cash and cash equivalents 12 8,870 12,888 5,509
Palace Capital plc
Notes to the condensed consolidated financial statements
For the six months ended 30 September 2023
1 General information
These financial statements are for Palace Capital plc ("the
Company") and its subsidiary undertakings (together "the
Group").
The Company's shares are admitted to trading on the Main Market
of the London Stock Exchange. The Company is domiciled and
registered in England and Wales and incorporated under the
Companies Act 2006. The address of its registered office is Fora
Victoria, 6-8 Greencoat Place, London, SW1P 1PL.
The nature of the Company's operations and its principal
activities are that of property investment in the UK.
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 2023 and are expected to be used in the
Group's Annual Report for the year ended 31 March 2024.
The financial information for the year ended 31 March 2023
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 2023 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 2023 was
unqualified and did not contain statements under s498(2) or (3) of
the Companies Act 2006. The financial information for the periods
ended 30 September 2022 and 30 September 2023 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 14
November 2023.
Copies of this statement are available to the public for
collection at the Company's Registered Office at Fora Victoria, 6-8
Greencoat Place, London, SW1P 1PL and on the Company's website,
www.palacecapitalplc.com .
Going Concern
The Directors have made an assessment of the Group's ability to
continue as a going concern which included the current
uncertainties around the economic climate brought on by rising
inflation and rising interest rates. In this assessment, the
Directors considered the impact on the Group's cash resources,
borrowing facilities (including impact on bank covenants), rental
income, disposals of investment and trading properties, committed
capital and dividend distributions. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities
are described in these financial statements.
As at 30 September 2023 the Group had GBP8.9m of unrestricted
cash and cash equivalents, a low gearing level of 9% and a fair
value property portfolio of GBP124.5m. The Directors have reviewed
the forecasts for the Group taking into account the impact of
rising inflation and rising interest rates on trading over the 12
months from the date of signing this report.
The Directors have a reasonable expectation that the Group have
adequate resources to continue in operation for at least 12 months
from the date of approval of the financial statements.
Accordingly, they continue to adopt the going concern basis in
preparing the Interim 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 Revenue
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
--------------------------------- ------------- ------------- ---------
Gross rental income 6,839 8,616 17,425
Dilapidations and other property
related income 55 4 401
Insurance commission - - 68
---------------------------------- ------------- ------------- ---------
Gross property income 6,894 8,620 17,894
Trading property income 2,584 3,523 4,974
Service charge income 2,630 2,197 10,105
---------------------------------- ------------- ------------- ---------
Total revenue 12,108 14,340 32,973
---------------------------------- ------------- ------------- ---------
4 Cost of sales
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
-------------------------------- ------------- ------------- ---------
Void costs 1,027 847 2,076
Legal, lettings and consultancy
costs 457 458 502
--------------------------------- ------------- ------------- ---------
Property operating expenses 1,484 1,305 2,578
Trading property costs of sales 2,437 3,432 4,974
Service charge expense 2,630 2,197 9,595
--------------------------------- ------------- ------------- ---------
Total cost of sales 6,551 6,934 17,147
--------------------------------- ------------- ------------- ---------
5 Taxation
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
------------- ------------- ------------- ---------
Deferred tax (16) (31) (67)
Tax credit (16) (31) (67)
============== ============= ============= =========
As a result of the Company's conversion to a REIT on 1 August
2019, the Group is no longer required to pay UK corporation tax in
respect of property rental income and capital gains relating to its
property rental business.
6 Earnings per share
Basic earnings per share and diluted earnings per share have
been calculated on profit after tax attributable to ordinary
Shareholders for the year (as shown on the Consolidated Statement
of Comprehensive Income) and for the earnings per share, the
weighted average number of ordinary shares in issue during the
period (see table below) and for diluted weighted average number of
ordinary shares in issue during the year (see table below).
Unaudited
6 months Unaudited Audited
to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
-------------------------------- ------------- ------------- ----------
Loss after tax attributable
to ordinary Shareholders
for the year (173) (12,342) (35,704)
-------------------------------- ------------- ------------- ----------
Unaudited
6 months Unaudited Audited
to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
-------------------------------- ------------- ------------- ----------
Weighted average number
of shares for basic earnings
per share 41,505,586 45,033,081 44,525,518
Dilutive effect of share
options - 9,831 -
Weighted average number
of shares for diluted earnings
per share 41,505,586 45,042,912 44,525,518
================================ ============= ============= ==========
Earnings per ordinary share
Basic (0.4p) (27.4p) (80.2p)
Diluted (0.4p) (27.4p) (80.2p)
The Group financial statements are prepared under IFRS which
incorporates non-realised fair value measures and non-recurring
items. Alternative Performance Measures ("APMs"), being financial
measures, which are not specified under IFRS, are also used by
management to assess the Group's performance. These include a
number of European Public Real Estate Association ("EPRA")
measures, prepared in accordance with the EPRA Best Practice
Recommendations reporting framework the latest update of which was
issued in November 2019. The Group reports a number of these
measures (detailed in the glossary of terms) because the Directors
consider them to improve the transparency and relevance of our
published results as well as the comparability with other listed
European real estate companies.
EPRA Earnings is a measure of operational performance and
represents the net income generated from the operational
activities. It is intended to provide an indicator of the
underlying income performance generated from the leasing and
management of the property portfolio. EPRA earnings are calculated
taking the profit after tax excluding investment property
revaluations and gains and losses on disposals, changes in fair
value of financial instruments and one-off finance termination
costs. EPRA earnings is calculated on the basis of the basic number
of shares in line with IFRS earnings as the dividends to which they
give rise accrue to current Shareholders.
The Group also reports an adjusted earnings measure which is
based on recurring earnings before tax and the basic number of
shares. This is the basis on which the Directors consider dividend
cover. This takes EPRA earnings as the starting point and then adds
back tax and any other fair value movements or one-off items that
were included in EPRA earnings. This includes share-based payments
being a non-cash expense, as well as payments to former Directors,
which is a one-off exceptional item. The corporation tax charge
(excluding deferred tax movements, being a non-cash expense) is
deducted in order to calculate the adjusted earnings per share, if
the charge is in relation to recurring earnings.
The 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
2023 2022 2023
GBP000 GBP000 GBP000
---------------------------------- ------------- ------------- ---------
Loss after tax attributable
to ordinary shareholders for
the period (173) (12,342) (35,704)
Adjustments:
Loss on revaluation of investment
property portfolio 5,613 15,587 42,900
Profit on disposal of investment
properties (3,383) (882) (819)
Trading property revenue and
cost of sales (147) (91) (510)
Debt termination costs 324 6 15
Changes in fair value of interest
rate derivatives - (184) (210)
EPRA earnings for the period 2,234 2,094 5,672
---------------------------------- ------------- ------------- ---------
Share-based payments 68 100 177
Payments to former Directors
(including associated costs) - 1,380 1,835
Adjusted profit after tax for
the period 2,302 3,574 7,684
---------------------------------- ------------- ------------- ---------
Tax excluding deferred tax on
EPRA adjustments and capital
gain charged (16) (31) (67)
---------------------------------- ------------- ------------- ---------
Adjusted profit before tax for
the period 2,286 3,543 7,617
---------------------------------- ------------- ------------- ---------
EPRA and adjusted earnings per
ordinary share
EPRA basic 5.4p 4.6p 12.7p
---------------------------------- ------------- ------------- ---------
EPRA diluted 5.4p 4.6p 12.7p
---------------------------------- ------------- ------------- ---------
Adjusted EPS 5.5p 7.9p 17.1p
---------------------------------- ------------- ------------- ---------
7 Net asset value per share
The Company has adopted the new EPRA NAV measures which came
into effect for accounting periods starting 1 January 2020. EPRA
issued new best practice recommendations (BPR) for financial
guidelines on its definitions of NAV measures. The new NAV measures
as outlined in the BPR are EPRA net tangible assets (NTA), EPRA net
reinvestment value (NRV) and EPRA net disposal value (NDV). The
Company has adopted these new guidelines and applies them in the 30
September 2023 Interim Report.
The Company considered EPRA Net Tangible Assets (NTA) to be the
most relevant NAV measure for the Company and we are now reporting
this as our primary NAV measure, replacing our previously reported
EPRA NAV and EPRA NNNAV per share metrics. EPRA NTA excludes the
intangible assets and the cumulative fair value adjustments for
debt-related derivatives which are unlikely to be realised.
30 September 2023 30 September 2022 31 March 2023
(unaudited) (unaudited) (audited)
EPRA EPRA EPRA EPRA EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NTA NRV NDV NTA NRV NDV
(GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000) (GBP000)
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net assets
attributable
to
shareholders 109,963 109,963 109,963 155,735 155,735 155,735 128,475 128,475 128,475
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Include:
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Fair value
adjustment
of trading
properties 587 587 587 1,390 1,390 1,390 730 730 730
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Real estate
transfer
tax - 7,589 - - 14,347 - - 11,922 -
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Fair value of
fixed interest
rate debt - - 929 - - 1,233 - - 863
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Exclude:
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Fair value of
derivatives - - - (252) (252) - - - -
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Deferred tax on
latent capital
gains and
capital
allowances 61 61 - 113 113 - 76 76 -
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
EPRA NAV 110,611 118,200 111,479 156,986 171,333 158,358 129,281 141,203 130,068
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
EPRA NAV per
share 294p 315p 297p 356p 389p 360p 296p 323p 279p
--------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
------------------------------------- --------------------- --------------------- --------------------
Number of ordinary shares
issued at the end of the period 37,559,953 44,027,014 43,718,381
Dilutive effect of share options - 9,831 9,831
------------------------------------- --------------------- --------------------- --------------------
Number of diluted ordinary
shares for diluted and EPRA
net assets per share 37,559,953 44,036,845 43,728,212
------------------------------------- --------------------- --------------------- --------------------
Net assets per ordinary share
Basic NAV 293p 354p 294p
Diluted NAV 293p 354p 294p
EPRA NTA 294p 356p 296p
8 Dividends
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 September 30 September 31 March
Payment Date 2023 2022 2023
GBP000 GBP000 GBP000
----------------------- --------------- ------------- ------------- ---------
Ordinary dividends
paid
----------------------- --------------- ------------- ------------- ---------
2022 Interim dividend:
3.25p per share 14 April 2022 - 1,504 1,504
2022 Final dividend:
3.75p per share 5 August 2022 - 1,736 1,736
2023 Interim dividend:
3.75p per share 14 October 2022 - - 1,651
2023 Interim dividend:
3.75p per share 13 January 2023 - - 1,651
2023 Interim dividend:
3.75p per share 14 April 2023 1,645 - -
2023 Final dividend:
3.75p per share 4 August 2023 1,583 - -
3,228 3,240 6,542
======================== ============================== ============= =========
Proposed dividend
2024 Q1 interim dividend: 3.75p
per share paid on 13 October
2023.
2024 Q2 interim dividend: 3.75p
per share payable on 29 December
2023.
9 Property Portfolio
Freehold Investment Leasehold Investment Total investment
properties properties properties
GBP000 GBP000 GBP000
At 1 April 2022 216,110 16,607 232,717
----------------------------------- -------------------- --------------------- -----------------
Additions - refurbishments 1,026 156 1,182
Loss on revaluation of investment
properties (38,663) (4,237) (42,900)
Disposals (14,495) - (14,495)
----------------------------------- -------------------- --------------------- -----------------
At 31 March 2023 163,978 12,526 176,504
Additions - refurbishments 2,657 - 2,657
Reclassification of leasehold
property to freehold property 3,000 (4,077) (1,077)
Loss on revaluation of investment
properties (5,613) - (5,613)
Disposals (52,685) (8,449) (61,134)
----------------------------------- -------------------- --------------------- -----------------
At 30 September 2023 111,337 - 111,337
----------------------------------- -------------------- --------------------- -----------------
Investment Trading Total property
properties properties portfolio
GBP000 GBP000 GBP000
At 1 April 2022 232,717 20,287 253,004
---------------------------- --------------- -------------- ---------------
Additions - refurbishments 1,182 - 1,182
Additions - trading
properties - 363 363
Loss on revaluation
of properties (42,900) - (42,900)
Disposals (14,495) (9,595) (24,090)
---------------------------- --------------- -------------- ---------------
At 31 March 2023 176,504 11,055 187,559
Additions - refurbishments 2,657 - 2,657
Additions - trading
properties - 95 95
Reclassification of
leasehold property
to freehold property (1,077) - (1,077)
Loss on revaluation
of properties (5,613) - (5,613)
Disposals (61,134) (2,437) (63,571)
At 30 September 2023 111,337 8,713 120,050
---------------------------- --------------- -------------- ---------------
The property portfolio has been independently valued at fair
value. The valuations have been prepared in accordance with the
RICS Valuation - Global Standards July 2017 ("the Red Book") and
incorporate the recommendations of the International Valuation
Standards and the RICS valuation - Professional Standards UK
January 2014 (Revised April 2015) which are consistent with the
principles set out in IFRS 13.
The valuer in forming its opinion makes a series of assumptions,
which are typically market related, such as net initial yields and
expected rental values, and are based on the valuer's professional
judgement. The valuer has sufficient current local and national
knowledge of the particular property markets involved and has the
skills and understanding to undertake the valuations
competently.
At 30 September 2023, the Company's property portfolio was
externally valued by CBRE, a Royal Institution of Chartered
Surveyors ("RICS") registered independent valuer. A reconciliation
of the valuations carried out by the external valuer to the
carrying values shown in the balance sheet was as follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
---------------------------------- ------------- ------------- ---------
CBRE (property portfolio) 124,455 235,620 192,355
Adjustment in respect of minimum
payment
under head leases included
as a liability - 1,077 1,077
Less trading properties at
lower of cost and net realisable
value (8,713) (17,005) (11,055)
Less lease incentive balance
in accrued income (3,818) (4,374) (5,143)
Less fair value uplift on trading
properties (587) (1,390) (730)
----------------------------------- ------------- ------------- ---------
Carrying value of investment
properties 111,337 213,928 176,504
=================================== ============= ============= =========
Investment properties with a carrying value of GBP64,970,000 (31
March 2023: GBP162,420,000) are subject to a first charge to secure
the Group's bank loans amounting to GBP20,238,000 (31 March 2023:
GBP64,333,000). Trading properties with a carrying value of
GBP8,713,000 (31 March 2023: GBP11,055,000) are not secured to the
Group's bank loans and are therefore uncharged.
Valuation process - investment properties
The valuation reports produced by the independent valuers are
based on information provided by the Group such as current rents,
terms and conditions of lease agreements, service charges and
capital expenditure. This information is derived from the Company's
financial and property management systems and is subject to the
Group's overall control environment.
In addition, the valuation reports are based on assumptions and
valuation models used by the independent valuers. The assumptions
are typically market related, such as yields and discount rates,
and are based on their professional judgment and market
observations. Each property is considered a separate asset, based
on its unique nature, characteristics and the risks of the
property.
The Head of Investment is responsible for the valuation process
verifies all major inputs to the external valuation reports,
assesses the individual property valuation changes from the prior
year valuation report and holds discussions with the independent
valuers. When this process is complete, the valuation report is
recommended to the Audit Committee, which considers it as part of
its overall responsibilities.
The key assumptions made in the valuation of the Company's
investment properties are:
-- The amount and timing of future income streams;
-- Anticipated maintenance costs and other landlord's
liabilities;
-- An appropriate yield; and
-- For investment properties under construction: gross
development value, estimated cost to complete and an appropriate
developer's margin.
Valuation technique - standing investment properties
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.
10 Trading property
Total
GBP000
-------------------------------- --------
At 1 April 2022 20,287
--------------------------------- --------
Costs capitalised 363
Disposal of trading properties (9,595)
At 31 March 2023 11,055
Costs capitalised 95
Disposal of trading properties (2,437)
At 30 September 2023 8,713
--------------------------------- --------
The Group has developed a large mixed-use scheme at Hudson
Quarter, York. Part of the approved scheme consisted of residential
units which the Group held for sale. As a result, the residential
element of the scheme was classified as trading property.
11 Trade and other receivables
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
------------------------------- ------------- ------------- ---------
Current
Trade receivables 2,040 1,557 1,897
Prepayments and accrued income 4,139 4,879 5,563
Other taxes 255 116 97
Other debtors 1,645 1,639 993
-------------------------------- ------------- ------------- ---------
8,079 8,191 8,550
=============================== ============= ============= =========
12 Cash and cash equivalents
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
-------------------------- ------------- ------------- ---------
Cash and cash equivalents 8,870 12,888 5,509
8,870 12,888 5,509
========================== ============= ============= =========
13 Trade and other payables
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
----------------------- ------------- ------------- ---------
Current
Trade payables 79 468 508
Accruals 2,077 1,473 2,342
Deferred rental income 2,285 3,485 3,359
Other taxes 798 740 646
Other payables 1,723 1,242 1,484
------------------------ ------------- ------------- ---------
6,962 7,408 8,339
======================= ============= ============= =========
14 Borrowings
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
-------------------------- ------------- ------------- ---------
Current borrowings
Bank loans 12,086 1,718 8,563
Unamortised lending costs (135) - (18)
--------------------------- ------------- ------------- ---------
11,951 1,718 8,545
-------------------------- ------------- ------------- ---------
Non-current borrowings
Bank loans 8,152 86,998 55,770
Unamortised lending costs (74) (751) (641)
--------------------------- ------------- ------------- ---------
8,078 86,247 55,129
-------------------------- ------------- ------------- ---------
Total borrowings
Bank loans 20,238 88,716 64,333
Unamortised lending costs (209) (751) (659)
--------------------------- ------------- ------------- ---------
20,029 87,965 63,674
========================== ============= ============= =========
The maturity profile of the Group's debt was as follows
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
----------------------- ------------- ------------- ---------
Within one year 12,086 1,718 8,563
From one to two years 318 55,346 37,027
From two to five years 7,834 31,652 18,743
Total borrowings 20,238 88,716 64,333
======================== ============= ============= =========
Facility and arrangement fees
As at 30 September 2023 (unaudited)
Unamortised
All in Maturity Facility facility
cost date drawn fees Loan balance
Secured borrowings % GBP000 GBP000 GBP000
--------------------- -------- ---------- -------- ----------- ------------
Scottish Widows 2.90% July 2026 8,470 (74) 8,396
National Westminster August
Bank plc 7.29% 2024 5,898 (106) 5,792
Barclays 7.14% June 2024 5,870 (29) 5,841
20,238 (209) 20,029
===================== ======== ========== ======== =========== ============
During the period, the Company repaid the Lloyds loan in full on
31(st) May 2023. The Group also repaid the Santander loan in full
on 4(th) August 2023.
As at 31 March 2023 (audited)
Unamortised
All in cost Maturity Facility facility
% date drawn fees Loan balance
Secured borrowings GBP000 GBP000 GBP000
--------------------- ------------- ----------- -------- ----------- ------------
Scottish Widows 2.90% July 2026 8,629 (71) 8,558
National Westminster
Bank plc 6.28% August 2024 17,724 (171) 17,553
Barclays 6.13% June 2024 19,385 (62) 19,323
Santander Bank plc 6.38% May 2027 11,750 (337) 11,413
Lloyds Bank plc 6.13% Mach 2024 6,845 (18) 6,827
64,333 (659) 63,674
===================== ============= =========== ======== =========== ============
As at 30 September 2022 (unaudited)
Unamortised
All in cost Maturity Facility facility
% date drawn fees Loan balance
Secured borrowings GBP000 GBP000 GBP000
--------------------- ------------- ----------- -------- ----------- ------------
Scottish Widows 2.90% July 2026 8,788 (82) 8,706
National Westminster
Bank plc 4.29% August 2024 20,804 (180) 20,624
Barclays 3.29% June 2024 27,779 (95) 27,684
Santander Bank plc 4.39% May 2027 24,500 (377) 24,123
Lloyds Bank plc 4.14% March 2024 6,845 (17) 6,828
88,716 (751) 87,965
===================== ============= =========== ======== =========== ============
At 30 September 2023, the Company has unused loan facilities
amounting to GBP20,000,000 (31 March 2023: GBP20,000,000). A
facility fee is charged on this balance at a rate of 1.05% p.a. and
is payable quarterly. This facility is secured on the investment
properties held by Property Investment Holdings Limited, Palace
Capital (Properties) Limited and Palace Capital (Leeds) Limited as
part of the NatWest loan.
Post period end, the NatWest term loan was fully repaid and the
undrawn Revolving Credit Facility of GBP20,000,000 cancelled.
15 Derivatives financial instruments
The Company adopts a policy of entering into derivative
financial instruments with banks to provide an economic hedge to
its interest rate risks and ensure its exposure to interest rate
fluctuations is mitigated.
At 30 September 2023, the Company has no derivative financial
instruments as they all matured in the prior financial year. The
Company continues to monitor swap rates on an on-going basis.
Details of the interest rate swaps the Company has entered can
be found in the table below.
Unaudited
Unaudited 30 September Audited
Notional Contract Valuation 30 September 2022 31 March
principal Expiry date rate rate 2023 GBP000 2023
Bank % % GBP000 GBP000
Barclays Bank
plc - - 1.34% - - 252 -
Santander
plc - - 1.37% - - - -
-------------- ----------- ------------- ---------- ----------- ------------- ------------- ---------
- - 252 -
-------------- ----------- ------------- ---------- ----------- ------------- ------------- ---------
16 Share capital
Authorised, issued and fully paid share capital is as
follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
Share capital - GBP000 4,639 4,639 4,639
Ordinary 10p shares 46,388,515 46,388,515 46,388,515
Share capital - number of shares
in issue 46,388,515 46,388,515 46,388,515
================================== ============= ============= ==========
Movement in treasury shares is as follows:
Treasury shares at 31 March 2023 2,668,220
Share buybacks in the period 6,160,000
---------------------------------------- ----------
Treasury shares at 30 September 2023 8,828,220
======================================== ==========
Total number of shares in issue
at 30 September 2023 (excluding shares
held in treasury) 37,560,295
---------------------------------------- ----------
17 Post balance sheet events
On 13 October 2023, Palace Capital completed the disposal of the
Ground Floor, Victoria at Hudson Quarter, York for a total
consideration of GBP1.5 million. The property was not charged to
any loan facility.
On 20 October 2023, the Company completed the disposal of Bank
House, Leeds for a total consideration of GBP2.65 million. The
property was charged against the loan facility with NatWest plc and
as a result, GBP2.5 million of the total consideration was used to
repay the loan facility on 23 October 2023.
On 6 November 2023, the Company completed the disposal of
Princeton House, Farnborough for a total consideration of GBP2.28
million. The Property was charged against the loan facility with
NatWest plc and, as a result, GBP0.9 million of the total
consideration was used to repay the loan facility on 9 November
2023.
On 9 November 2023, the Company fully repaid the remaining loan
facility with NatWest plc of GBP2.5 million, and cancelled the
undrawn Revolving Credit Facility of GBP20.0 million.
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END
IR FFDFULEDSESF
(END) Dow Jones Newswires
November 15, 2023 02:00 ET (07:00 GMT)
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