Worsley Investors Limited Half-year Report

Fecha : 26/03/2020 @ 02:00
Fuente : UK Regulatory (RNS & others)
Emisora : Worsley Investors Limited (WINV)
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Worsley Investors Limited Half-year Report

Worsley Investors (LSE:WINV)
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TIDMWINV

RNS Number : 6404H

Worsley Investors Limited

26 March 2020

26 March 2020

Worsley Investors Limited

(the "Company")

Half Year Report for the six months ended 31 December 2019

The Company is pleased to announce the release its half year report and unaudited consolidated financial statements for the six months ended 31 December 2019 (the "Half Year Report"). A copy of the Half Year Report will be posted to shareholders this week and will be available to view on the Company's website shortly at: www.worsleyinvestors.com

Enquiries:

For further information, please contact:

Worsley Associates LLP (Investment Advisor)

Blake Nixon

   Tel:       +44 (0) 203 873 2288 

Shore Capital (Financial Adviser and Broker)

Robert Finlay / Anita Ghanekar / Hugo Masefield

   Tel:       +44 (0) 20 74080 4090 

Praxis Fund Services Limited (Administrator and Secretary)

Matt Falla / Katrina Rowe

   Tel:       +44 (0) 1481 737600 

LEI: 213800AF85VEZMDMF931

Performance Summary

 
 
                                 31 December    30 June 2019 
                                        2019                   % change 
----------------------------- 
 Net Asset Value ("NAV") per 
  share                             43.69p*#          46.14p    (5.31)% 
                               -------------  --------------  --------- 
 Share price(1)                       31.47p          31.85p    (1.19)% 
                               -------------  --------------  --------- 
 Share price discount to NAV           28.0%           31.2%       n.a. 
                               -------------  --------------  --------- 
 

* Refer to Note 15 for reconciliation to previous NAV announcement.

# Adjusted NAV for impact of recent capital raise: 37.64p.

 
 Total return                       Six months      Year ended 
                                         ended    30 June 2019 
                                   31 December 
                                          2019 
 NAV Total Return(2)                   (5.31)%           2.42% 
                                 -------------  -------------- 
 Share price Total Return 
                                 -------------  -------------- 
 - Worsley Investors Limited           (1.19)%        (19.57)% 
                                 -------------  -------------- 
 - FTSE All Share Index                  5.48%           0.57% 
                                 -------------  -------------- 
 - FTSE Real Estate Investment 
  Trust Index                           19.24%          (5.2)% 
                                 -------------  -------------- 
 

Worsley Associates LLP was appointed on 31 May 2019 as Investment Advisor (the "Investment Advisor") to Worsley Investors Limited (the "Company"). At an EGM held on 28 June 2019, an ordinary resolution was passed to adopt the new Investment Objective and Policy. Prior to that time, the Company had been in managed wind-down. The new Investment Objective and Policy are set out under note 16 below.

Past performance is not a guide to future performance.

(1) Mid-market share price (source: Shore Capital and Corporate Limited).

(2) On a pro forma basis, which includes adjustments to add back any prior NAV reductions from share redemptions.

Source : Worsley Associates LLP and Shore Capital and Corporate Limited.

Foreign exchange rates:

 
 Date                GBP/EUR 
 31 December 2019     1.1825 
                    -------- 
 30 June 2019         1.1166 
                    -------- 
 

Chairman's Statement

The six months to 31 December 2019 saw substantial progress towards re-launching the Company as an influential investor in smaller British quoted companies. Readers will recall that just before the start of the period, on 28 June 2019, shareholders overwhelmingly supported our proposals to change the investment objective and policy of the Company. Rather curiously, although a substantial majority voted also to change the name of the Company, it was insufficient to meet the threshold required in law to change the Company's name by special resolution and so we laboured on for most of the period with the former name. This anomaly was finally corrected at the AGM held on 11 December 2019 and so the Company is now, "Worsley Investors Limited".

Results

The Company's performance is summarised above. In brief, the NAV total return for the period was a GBP507,000 diminution, of which by far the largest contribution was owing to foreign exchange translation, given that the GBP/EUR exchange rate moved from 1.1166 to 1.1825 and our principal asset, the Curno cinema, is denominated in Euros and accounted for some 89% of NAV as at 31 December 2019. Excluding exchange rate movements, the Group essentially broke even over the half year. This is broadly in line with the Board's expectations given where we are in the development of the Company.

The effect of changes to the Company's service providers and the simplification of the group structure reduced our cost base progressively through the half year, although this was partly masked in these financial statements by one-off costs related to the name change and transaction costs for the recent capital raise, which was consummated after the period end. Given these factors are now behind us, we expect the Company to be profitable going forwards. The Company's financial strength was then augmented by a net GBP3.63million injection of additional cash via the equity raise after the period end. This is discussed further later in this statement.

The adverse foreign exchange translation during the reporting period has reversed subsequently, and moved further in the Company's favour given that the GBP/EUR exchange rate has moved from 1.1825 at the end of December to 1.0759 as at 24 March 2020, being the latest practicable date prior to writing this report. The local currency valuation of the property may well change as at the end of the current quarter, but on a pro forma basis, this exchange rate movement would add GBP882,000 to the sterling value of the company or 2.61p per share, taking into account the increase in the number of shares in issue during the current quarter.

Curno

Our largest exposure remains our legacy asset from the former investment strategy, being the UCI cinema in Curno in northern Italy. Further details are given in the Investment Advisor's report as set out below. Trading during the period and into January and February was much improved on prior periods and we felt that it was likely to generate a useful additional amount of volume-related rental in the remainder of the year and thereby demonstrate the value potential inherent in the asset. Be that as it may, as a result of the coronavirus outbreak in Italy, the Italian government closed cinemas (and many other types of venue) on 3 March 2020. As at the time of writing, this closure remains in place and it is not at all clear when it will be lifted. Our disposal of this asset is therefore currently on hold until the situation is clarified. The base rental on the property is fixed and benefits from a substantial parental guarantee, as described in the Investment Advisor's report.

Capital Raise

The Investment Advisor during the period continued discussions with existing and prospective shareholders with a view to expanding the Company's equity capital base. The procedural aspects took longer than anticipated with the consequence that the formal announcement was not made until after the year end, the prospectus publication on 10 February 2020, and the completion of an open offer and a placement (the "Initial Issue") (together the "Capital Raise") was on 17 March 2020. The open offer was made pre-emptively to all shareholders on the register at the time of announcement, with those shares not taken up by qualifying shareholders then being offered to other investors under the Initial Issue. The new shares were issued at 30 pence per share, a discount to the 31 December NAV of 43.69p per share. Those shareholders who chose not to take up their entitlement will have been marginally diluted as a consequence, but they will also benefit from the reduction in corporate running costs per share and from the ability of the Company to proceed with the new investment objective and policy. Our capital raise took place against a difficult and worsening market background and in that light, to issue 12,982,488 new ordinary shares raising gross proceeds of GBP3.9 million (GBP3.63 million net of expenses) is a creditable result. On behalf of the Board, I would like to thank all shareholders who subscribed.

By the end of December 2019, from the limited funds available for investment, the Investment Advisor had made two initial "preliminary" investments and in the short time since the Capital Raise, a further two such holdings have been added. While the results so far are modestly profitable, the more important point is that implementation of the new investment policy and objective has been initiated.

Future prospects

The dominant market theme for the moment is the economic impact of the world-wide coronavirus pandemic. Quite rightly, from a public policy and humanitarian perspective, governments have focused on containing or at least slowing the spread of the disease in the hope of ensuring that the peak infection can be brought within the capacity of their health services to cope. Decisive action by China, where the virus appears to have first emerged, has borne fruit albeit after five months or so. Whether or not more liberal countries with greater regard for individual freedoms will be as effective so quickly remains to be seen. What is clear is that, in closing down large swathes of the economy, there will be significant economic damage and recession in most countries this year at least.

Some sectors are more obviously exposed than others - air transport, hotels and eateries are obvious candidates -- and we have already seen failures by some of the weaker participants. Notwithstanding pledges of U.K. government support, there will no doubt be others. In constructing business plans and funding structures, very few businesses will have contemplated scenarios where their turnover would fall to zero in the space of weeks and then stay there for an indeterminate number of months.

The unsurprising effect has been enormous turmoil in equity markets with a wide dispersion in share price performances, most pertinently in those in Britain where we plan to invest further. It is usually the outcome that smaller companies' share prices are hit at least as badly as larger companies (and often more) and they take longer to recover as and when confidence returns to the market. The other side of that coin is that exaggerated price movements in the market create a rich pool of opportunities for a skilled and experienced investor such as Worsley Associates LLP, and Mr. Nixon in particular. Having the cash to deploy in such circumstances is an exciting combination.

Taking into account the net cash raised and exchange movements since period end, the Company's Net Asset Value on a pro forma basis is now approximately GBP13.6 million, or 40.2 pence per share. As the Company executes on its portfolio strategy and in due course disposes of the Curno asset, the Board hopes that the combination of organic returns and increasing size will make the Company attractive to a growing universe of potential investors and consequently, as circumstances permit, we shall look to raise additional capital, the effects of which will include spreading the operational costs of the company over a larger asset base and increasing the size and number of potential investees where the Company can bring influence to bear to improve shareholder outcomes.

W. Scott

Chairman

25 March 2020

Investment Advisor's Report

Investment Advisor

The Investment Advisor is regulated by the FCA and is authorised to provide investment management and advisory services.

During the period, the Investment Advisor's focus has been the extensive preparatory work involved around the capital raising launched in February 2020 and continuing to address remaining legacy issues.

Curno Cinema Complex

The Group's Italian multiplex cinema complex, located in Curno, on the outskirts of Bergamo, is let in its entirety to UCI Italia S.p.A. (" UCI ").

The key rental terms of the lease are as follows:

Base Rent

Calendar 2020 - EUR830,000

Thereafter to be indexed to 100% of the Italian ISTAT Consumer Index on an upwards-only basis.

Variable Rent

There will be an incremental rent of EUR1.50 per ticket sold above a minimum threshold of 350,000 tickets per year up to 450,000 tickets per year, rising in 50,000 ticket stages above this level up to EUR2.50 per extra ticket.

Tenant Guarantee

The lease benefits from a rental guarantee of EUR13m, reducing over 15 years to EUR4.5m, given by a U.K. domiciled European holding company for the UCI group, United Cinemas International Acquisitions Limited, which as at 31 December 2018 had shareholders' funds of GBP291.3m.

Trading

Paid ticket sales (i.e. excluding complimentaries) for calendar 2019 came in at 353,503, which is estimated to be up some 14% on calendar 2018, and with the final quarter being particularly strong.

The ticket overage produced supplementary rent for 2019 of EUR5,255.

Calendar 2020 started well, with January sales up on 2019, following the release on 1 January of an Italian blockbuster movie , Tolo Tolo.

Valuation

As at 31 December 2019, the Group's independent asset valuer, Knight Frank LLP, fair valued the Curno cinema at EUR9.9 million (GBP8.388 million), and this has been adopted in these accounts.

In executing a new 15 year lease, UCI has made a substantial commitment to the Bergamo cinema market. Given the excellent cash flow generated by the asset, and the clear evidence of a major turnaround in underlying trading, it remains the board's view that it ought to be possible to realise a sum in excess of its current carrying value.

In November CBRE commenced updating interested investors in respect of the cinema's significantly improved trading profile. The outbreak of coronavirus in Italy has inevitably led to a pause in these discussions.

The Group will retain the Curno cinema until a disposal can be effected at a price which the board believes properly reflects its medium term prospects.

Investment Strategy

The Investment Advisor's strategy allies the taking of holdings in British quoted securities priced at a deep discount to their intrinsic value, as determined by a comprehensive and robust research process. Most of these companies will have smaller to mid-sized equity market capitalisations, which will in general not exceed GBP600 million. It is intended to secure influential positions in such British quoted securities, with the employment of activism as necessary to drive highly favourable outcomes.

During the period, the Group took advantage of distressed prices in two companies to buy its maiden "preliminary" (less than 2% of Net Assets) holdings. Total cost of these was GBP124,000 and as at 31 December 2019, the combined market value was GBP127,000.

Two further positions have been initiated since 31 December 2019.

Name Change

At the 2019 Annual General Meeting held on 13 December 2019 the shareholders voted by special resolution to change the name of the Company to Worsley Investors Limited.

Results for the period

Cash revenue for the six months period to 31 December 2019 from Curno was EUR409,000 (GBP360,000) (31 December 2018: EUR423,000 (GBP376,000)), which after allowance for the EUR5,255 ticket overage (which is not budgeted), was in line with expectations.

Property expenses, mainly local Curno property taxes, of some EUR77,000 (GBP68,000) (31 December 2018: EUR78,000 (GBP70,000)), were incurred.

General and administrative expenses of GBP350,000 included expenses which are not strictly first half trading items and fall into three elements:

   --      Items which were incurred before 30 June 2019 (GBP33,000); 

-- Amortisation of the property disposal warranty insurance entered into in May 2017 (GBP38,000), albeit a similar sum will be amortised in the second half of the year; and

-- One-off charges, such as in connection with the Name Change and the capital raising (GBP22,000).

The adjusted expense figure of GBP258,000 is reflective of the very substantial reduction in the Group's ongoing Guernsey and Luxembourg operating costs resulting from the changes in the Group's service providers.

Taxation is payable on Italian income and in Luxembourg, and for the period an amount of GBP42,000 was expensed. This was an increase from 31 December 2018 (GBP12,000), the comparative having benefited significantly from the tax advantages associated with the rental incentives provided in the 2018 period to UCI in connection with it entering the new lease.

The Group expects, excluding the costs of the capital raising, to be profitable on a cash basis over the remainder of the financial year.

Net Assets at 31 December 2019 were GBP9.07m, which compares with the GBP9.58m contained in the 30 June 2019 audited accounts. The decrease is almost entirely owing to a foreign exchange translation loss over the period of GBP500,000 which reflects the substantial impact of the strengthening of Pounds sterling on the Group's predominantly Euro denominated asset base.

Financial Position

The Group's Statement of Financial Position as at 31 December 2019 was strong with GBP701,000 held in cash and no debt. Allied to the current profitable trading, the financial position remains secure.

Since 31 December 2019 this has been augmented with the approximately GBP3.63m (net) secured in the Capital Raise, which closed on 17 March 2020.

In due course these resources are expected to be supplemented by funds produced by the sale of the Curno cinema.

Euro

After allowance for receipt of the Capital Raise moneys and exchange movements since period end, approximately 72% of the Group's pro forma 31 December 2019 Total Assets are denominated in Euros, of which the Curno property was some 64%.

The Pounds sterling Euro cross rate will remain a substantial influence on Group Net Assets until Curno's disposal.

Outlook

The coronavirus, which as widely reported has led to government closures of cinemas in Italy, including the Group's, has little direct impact on the Group - revenue from ticket overage was less than 1% of 2019 rental revenue, with the remainder fixed and guaranteed by a company of substantial net worth. Nonetheless, it will, of necessity, delay the ultimate disposal of the Curno cinema.

In the meantime, as noted previously, the Company's ongoing strategy targets special situations. Equity markets have been significantly impacted as a result of uncertainty created by the coronavirus outbreaks, and within the British smaller capitalisation stocks targeted by the Company share price falls in some cases have been very substantial. This has thrown up numerous situations worthy of consideration.

With a significant proportion of its assets held in cash as a result of the capital raising, the Company is very well placed to capitalise .

Worsley Associates LLP

25 March 2020

Condensed Unaudited Consolidated Statement of Comprehensive Income

For the six months ended 31 December 2019

 
 
                                                                 For the six        For the 
                                                                month period      six month 
                                                                          to      period to 
                                                                 31 December    31 December 
                                                                        2019           2018 
                                                                 (Unaudited)    (Unaudited) 
                                                       Notes         GBP000s        GBP000s 
----   ---------------------------------------------  ------  --------------  ------------- 
 
                                                         3 
                                                         & 
       Gross property income                             6               363            376 
       Property operating expenses                       6              (68)           (70) 
 
 Net property income                                                     295            306 
----------------------------------------------------  ------  --------------  ------------- 
 
       Valuation gain on investment property             6                87            240 
       Valuation gain on investments at 
        fair value through profit or loss                7                 3              - 
       Loss on liquidation of subsidiary                                   -           (43) 
       General and administrative expenses               4             (350)          (463) 
----  ----------------------------------------------  ------  --------------  ------------- 
 Operating profit                                                         35             40 
----------------------------------------------------  ------  --------------  ------------- 
 
       Net foreign exchange gain on liquidation 
       Foreign exchange loss                                               -              4 
       Share in loss of joint venture                                      -           (14) 
       Net finance costs                                                   -            (2) 
----  ----------------------------------------------  ------  --------------  ------------- 
 Profit before tax                                                        35             28 
----------------------------------------------------  ------  --------------  ------------- 
 Income tax expense                                                     (42)           (12) 
 (Loss)/profit for the period                                            (7)             16 
----------------------------------------------------  ------  --------------  ------------- 
 
 Other comprehensive (loss)/income 
  Foreign exchange translation (loss)/gain                             (500)            135 
 ---------------------------------------------------  ------  --------------  ------------- 
 Total items that are or may be reclassified 
 to profit or loss                                                     (500)            135 
----------------------------------------------------  ------  --------------  ------------- 
 
 Total comprehensive (loss)/income 
  for the period                                                       (507)            151 
----------------------------------------------------  ------  --------------  ------------- 
 
 Basic and diluted (loss)/earnings 
  per ordinary share (pence)                             5            (0.03)           0.07 
----------------------------------------------------  ------  --------------  ------------- 
 
 

The accompanying notes form an integral part of these Financial Statements

Condensed Unaudited Consolidated Statement of Changes in Equity

For the six months ended 31 December 2019

 
 
 
                                                                   Foreign 
                                     Revenue   Distributable      currency         Total 
                                     reserve         reserve       reserve        equity 
                                 (Unaudited)     (Unaudited)   (Unaudited)   (Unaudited) 
                                     GBP000s         GBP000s       GBP000s       GBP000s 
-----------------------------   ------------  --------------  ------------  ------------ 
 
 Balance at 1 July 2019             (46,210)          43,653        12,134         9,577 
 Loss for the period                     (7)               -             -           (7) 
 Other comprehensive loss                  -               -         (500)         (500) 
 Balance at 31 December 2019        (46,217)          43,653        11,634         9,070 
------------------------------  ------------  --------------  ------------  ------------ 
 

For the six months ended 31 December 2018

 
 
                                                                   Foreign 
                                     Revenue   Distributable      currency         Total 
                                     reserve         reserve       reserve        equity 
                                 (Unaudited)     (Unaudited)   (Unaudited)   (Unaudited) 
                                     GBP000s         GBP000s       GBP000s       GBP000s 
-----------------------------   ------------  --------------  ------------  ------------ 
 
 Balance at 1 July 2018             (46,315)          44,853        12,093        10,631 
 Profit for the period                    16               -             -            16 
 Other comprehensive income                -               -           135           135 
 Balance at 31 December 2018        (46,299)          44,853        12,228        10,782 
------------------------------  ------------  --------------  ------------  ------------ 
 

The accompanying notes form an integral part of these Financial statements

Condensed Unaudited Consolidated Statement of Financial Position

As at 31 December 2019

 
                                                   31 December 
                                                          2019   30 June 2019 
                                                   (Unaudited)      (Audited) 
                                           Notes       GBP000s        GBP000s 
---------  -----------------------------  ------  ------------  ------------- 
 Non-current assets 
  Investment property                        6           8,087          8,476 
 
 Current assets 
  Investments at fair value 
   through profit or loss                    7             127              - 
  Cash and cash equivalents                                701            793 
  Trade and other receivables                8              43            162 
  Lease incentive                            6             287            301 
  Tax receivable                                           115             96 
 
 Total assets                                            9,360          9,828 
----------------------------------------  ------  ------------  ------------- 
 
 Non-current liabilities 
  Provisions                                                43             45 
 
 Current liabilities 
  Trade and other payables                   9             152            172 
  Tax payable                                               95             34 
 
 Total liabilities                                         290            251 
----------------------------------------  ------  ------------  ------------- 
 
 Total net assets                                        9,070          9,577 
----------------------------------------  ------  ------------  ------------- 
 
  Equity 
  Revenue reserve                                     (46,217)       (46,210) 
  Distributable reserve                                 43,653         43,653 
  Foreign currency reserve                              11,634         12,134 
 
 Total equity                                            9,070          9,577 
----------------------------------------  ------  ------------  ------------- 
 
 Number of ordinary shares                          20,758,441     20,758,441 
 
 Net asset value per ordinary share 
  (pence)                                   11           43.69          46.14 
----------------------------------------  ------  ------------  ------------- 
 

The Financial statements were approved by the Board of Directors and authorised for issue on 25 March 2020. They were signed on its behalf by:

W. Scott

Director

The accompanying notes form an integral part of these Financial statements

Condensed Unaudited Consolidated Statement of Cash Flows

For the sixth months ended 31 December 2019

 
                                                        31 December   31 December 
                                                               2019          2018 
                                                        (Unaudited)   (Unaudited) 
                                              Notes         GBP000s       GBP000s 
 ----------------------------------------  ----------  ------------  ------------ 
 
 Operating activities 
  Profit before tax                                              35            28 
  Adjustments for: 
  Valuation gain on investment property         6              (87)         (341) 
  Gains on i nvestments at fair value 
   through profit or loss                       7               (3)             - 
  Gain on financial instruments                                   -           (4) 
  Foreign exchange loss on investment 
   property                                     6               476             - 
  Share in loss of joint venture                                  -            14 
  Decrease/(increase) in trade and 
   other receivables                                             75         (415) 
  Decrease in provisions                                        (2)          (56) 
  (Increase)/decrease in trade and 
   other payables                                              (20)            25 
  Purchase of investments at fair                             (124)             - 
   value through profit or loss 
  Net finance cost                                                -             2 
 Net cash generated/(used in) from operations                   350         (747) 
-----------------------------------------------------  ------------  ------------ 
 
  Interest paid                                                   -           (2) 
  Tax paid                                                       58          (12) 
 Net cash inflow/(outflow) from operating 
  activities                                                    408         (761) 
-----------------------------------------------------  ------------  ------------ 
 
 Investing activities 
  Return of capital from joint ventures                           -           151 
 Net cash inflow from investing activities                        -           151 
-----------------------------------------------------  ------------  ------------ 
 
  Effects of exchange rate fluctuations                       (500)           120 
 Decrease in cash and cash equivalents                         (92)         (490) 
-----------------------------------------------------  ------------  ------------ 
 
  Cash and cash equivalents at start 
   of the period                                                793         3,298 
 Cash and cash equivalents at the period 
  end                                                           701         2,808 
-----------------------------------------------------  ------------  ------------ 
 
 

The accompanying notes on form an integral part of these Financial statements

1. Operations

Worsley Investors Limited (formerly AXA Property Trust Limited) (the "Company") is a limited liability, closed-ended investment company incorporated in Guernsey. The Company historically invested in commercial property in Europe which was held through Subsidiaries. The Condensed Unaudited Consolidated Financial Statements (the "Financial Statements") of the Company for the period ended 31 December 2019 comprise the Financial Statements of the Company and its Subsidiaries (together referred to as the "Group").

Worsley Associates LLP was appointed on 31 May 2019 as Investment Advisor to the Company.

At an EGM held on 28 June 2019, an ordinary resolution was passed to adopt a new Investment Objective and Policy. Please refer to the Investment Policy set out under note 16 below for further details.

2. Significant accounting policies

Basis of preparation

These Financial Statements have been prepared in accordance with International Accounting Standard ("IAS") 34 'Interim Financial Reporting' as required by DTR 4.2.4R, the Listing Rules of the London Stock Exchange and applicable legal and regulatory requirements. They do not include all the information and disclosures required in Annual Financial Statements and should be read in conjunction with the Company's last Annual Report and Audited Consolidated Financial Statements for the year ended 30 June 2019.

The same accounting policies and methods of computation are followed in the Interim Financial Report as compared with the most recent Annual Financial Statements (30 June 2019).

Going concern

Following the adoption of a new Investment Objective and Policy, the Financial Statements have been prepared on a going concern basis reflecting the current transition stage of the Company. The Directors, at the time of approving the Financial Statements, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the next 12 months. The lease income generates enough cash flows to pay on-going expenses. The Directors have considered the cash position and performance of the current invested capital made by the Group and concluded that it is appropriate to adopt the going concern basis in the preparation of these Financial Statements. Since 31 December 2019, this has been augmented with the approximately GBP3.63m (net) secured in the Capital Raise, which closed on 17 March 2020.

3. Gross property income

Gross property income for the period ended 31 December 2019 amounted to GBP0.363 million ((31 December 2018: GBP0.376 million). The Group leases out its investment property under an operating lease which is structured in accordance with local practices in Italy.

As a result of the ongoing discussions with the tenant at the Curno property, the previous investment manager entered into negotiations in early 2018 with the aim of negotiating overall terms which would improve liquidity and maximise potential pricing. As a result, a new lease was signed in December 2018 summarised as follows:

   -     Term 

15 years fixed, from 1 January 2019 until 31 December 2033, with an automatic nine-year extension unless cancelled by the tenant with a minimum 12-month notice period.

   -     Base Rent 

Year 1 - EUR800,000

Year 2 (i.e. from January 2020) - EUR830,000, and thereafter to be indexed to 100% of the ISTAT Consumer Index on an upwards-only basis.

As part of the overall negotiation package an amount of EUR330,329 lease incentive was paid in December 2018 to the tenant. The new lease has been treated as backdated with an effective commencement date of 1 July 2018. A further amount of EUR330,329 was granted to the tenant as a discount on rent which adjusted the rental income received from 1 July 2018 to 31 December 2018 to be in line with that receivable under the new lease agreement. Please refer to note 6 for further details.

   -     Variable Rent 

There will be an incremental rent of between EUR1.50 and EUR2.50 per ticket sold above a minimum threshold of 350,000 tickets per year. Variable rent earned in the period ended 31 December 2019 was EUR5, 255 (31 December 2018: Nil).

4. General and administrative expenses

 
                                              31 December   31 December 
                                                     2019          2018 
                                              (Unaudited)   (Unaudited) 
                                                  GBP000s       GBP000s 
-------------------------------------   ---  ------------  ------------ 
 Administration fees                                   55           132 
 General expenses                                      41            16 
 Audit fees                                            30            91 
 Legal and professional fees                           38            96 
 Directors' fees 
  (note 13)                                            26            29 
 Insurance fees                                        61            31 
 Corporate Broker fees                                 23            13 
 Investment management fees                             -            55 
 Investment advisor fees (note 13)                     76             - 
 Total                                                350           463 
-------------------------------------------  ------------  ------------ 
 
 

5. Basic and diluted loss/profit per Share

The basic and diluted gain or loss per share for the Group is based on the net loss for the period of GBP0.007 million (31 December 2018: net profit of GBP0.016 million) and the weighted average number of Ordinary Shares in issue during the period of 20,758,441 (31 December 2018: 23,402,881). There are no instruments in issue which could potentially dilute earnings or loss per Ordinary Share.

6. Investment property

 
                                                          31 December 
                                                                 2019   30 June 2019 
                                                          (Unaudited)      (Audited) 
                                                              GBP000s        GBP000s 
 -----------------------------------------------------   ------------  ------------- 
 Value of investment property before lease incentive 
  adjustment 
  at beginning of period/year                                   8,777          7,871 
 Fair value adjustment                                             87            799 
 Foreign exchange translation                                   (476)            107 
 
  Independent external valuation                                8,388          8,777 
 
 Adjusted for: Lease incentive (note 3) *                       (287)          (301) 
 Foreign exchange translation                                    (14)              - 
 
 Fair value of investment property at the end 
  of the period/year                                            8,087          8,476 
-------------------------------------------------------  ------------  ------------- 
 
 

Investment property is carried at fair value. The fair value adjustment has been adjusted with carrying amount of the lease incentive.

The property has been valued on the basis of fair value, being the price which would be received if the asset were sold in an orderly transaction between market participants at the measurement date. Quarterly valuations are carried out at 31 March, 30 June, 30 September and 31 December by Knight Frank LLP, external independent valuers.

* The Lease incentive is classified as a separate item within the Consolidated Statement of Financial Position and hence to avoid double counting has been deducted from the Independent property valuation to arrive at fair value for accounting purposes.

The resultant fair value of investment property is analysed below by valuation method, according to the levels of the fair value hierarchy. The different levels have been defined as follows:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 which are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3: inputs for the asset or liability which are not based on observable market data (unobservable inputs).

The investment property (Curno) is classified as Level 3.

The significant assumptions made relating to its independent valuation are set out below:

 
 Significant assumptions                               31 December 2019   30 June 2019 
                                                            (Unaudited)      (Audited) 
----------------------------------------------------  -----------------  ------------- 
 
 Gross estimated rental value per square metre p.a.           125.00EUR      125.00EUR 
 
 True equivalent yield                                            8.39%          8.61% 
 

An increase/decrease in ERV (Estimated Rental Value) will increase/decrease valuations, while an increase/decrease to yield decreases/increases valuations. The table below sets out the sensitivity of the independent property valuation to changes of 50 basis points in Fair Value.

The external valuer has carried out its valuation using the comparative and investment methods. The external valuer has made the assessment on the basis of a collation and analysis of appropriate comparable investment and rental transactions. The market analysis has been undertaken using market knowledge, enquiries of other agents, searches of property databases, as appropriate and any information provided to them. The external valuer has adhered to the RICS Valuation - Professional Standards.

 
 Movement                                31 December 2019         30 June 2019 
                                              (Unaudited)            (Audited) 
---------------  -------------------  -------------------  ------------------- 
 Increase of 50   Property valuation   Decrease of EUR0.6   Decrease of EUR0.6 
  basis points                                    million              million 
 Decrease of 50   Property valuation   Increase of EUR0.6   Increase of EUR0.6 
  basis points                                    million              million 
 

Property assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to uncertainty. There is no assurance that estimates resulting from the valuation process will reflect the actual sales price even where a sale occurs shortly after the valuation date. Rental income and the market value for properties are generally affected by overall conditions in the local economy, such as growth in Gross Domestic Product ("GDP"), employment trends, inflation and changes in interest rates. Changes in GDP may also impact employment levels, which in turn may impact the demand for premises. Furthermore, movements in interest rates may affect the cost of financing for real estate companies.

Both rental income and property values may be affected by other factors specific to the real estate market, such as competition from other property owners, the perceptions of prospective tenants of the attractiveness, convenience and safety of properties, the inability to collect rents because of the bankruptcy or the insolvency of tenants, the periodic need to renovate, repair and release space and the costs thereof, the costs of maintenance and insurance, and increased operating costs. The Investment Advisor addresses market risk through a selective investment process, credit evaluations of tenants, ongoing monitoring of tenants and through effective management of the property.

The amounts recognised in the Statement of Comprehensive Income of the Group in relation to the investment property are as follows:

Property income

 
                                                       31 December   31 December 
                                                              2019          2018 
                                                           GBP000s       GBP000s 
                                                       (Unaudited)   (Unaudited) 
----------------------------------------------------  ------------  ------------ 
 
 Property income received (net of lease incentives)            360           376 
 Straight-lining of lease incentives                             3             - 
----------------------------------------------------  ------------  ------------ 
 Property income                                               363           376 
----------------------------------------------------  ------------  ------------ 
 

Expense from services to tenants, other property operating and administrative expenses

 
                                              31 December   31 December 
                                                     2019          2018 
                                                  GBP000s       GBP000s 
                                              (Unaudited)   (Unaudited) 
-------------------------------------------  ------------  ------------ 
 
 Property expenses arising from investment 
  property which generates income                      68            70 
-------------------------------------------  ------------  ------------ 
 Total property operating expenses                     68            70 
-------------------------------------------  ------------  ------------ 
 
 

There were no p roperty expenses arising from investment property which did not generate income.

7. Investments at fair value through profit or loss ("FVTPL")

 
 
                                                                        31 December 2019     30 June 2019 
                                                                                 GBP000s          GBP000s 
                                                                             (Unaudited)        (Audited) 
 
       Fair value of investments at FVTPL at beginning of period/year                  -                - 
       Purchases                                                                     124                - 
       Unrealised gains                                                                3                - 
---------------------------------------------------------------------  -----------------  --------------- 
       Total investments at FVTPL                                                    127                - 
---------------------------------------------------------------------  -----------------  --------------- 
 

The fair value of investments at FVTPL are analysed below by valuation method, according to the levels of the fair value hierarchy. The different levels have been defined as follows:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 which are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3: inputs for the asset or liability which are not based on observable market data (unobservable inputs).

As at 31 December 2019, the investments at FVTPL are classified as Level 1.

8. Trade and other receivables

 
                                              31 December 
                                                     2019   30 June 2019 
                                                  GBP000s        GBP000s 
                                              (Unaudited)      (Audited) 
-----------------------------------------    ------------  ------------- 
 Other receivables                                      3             21 
 VAT receivable                                         8             65 
 Prepayments                                           32             69 
 Subsidiary company liquidation proceeds                -              7 
 Total                                                 43            162 
-------------------------------------------  ------------  ------------- 
 

The carrying values of trade and other receivables are considered to be approximately equal to their fair value.

Rent receivable is non-interest bearing and typically due within 30 days.

9. Trade and other payables

 
                                       31 December 2019   30 June 2019 
                                                GBP000s        GBP000s 
                                            (Unaudited)      (Audited) 
------------------------------------  -----------------  ------------- 
 Investment Advisor fee (note 13)                    11             13 
 Administration fees                                 22             10 
 Legal and professional fees                          -             10 
 Audit fee                                           23             40 
 Director fees payable (note 13)                      -              5 
 Broker fees                                         19              6 
 Other                                               77             88 
 Total                                              152            172 
------------------------------------  -----------------  ------------- 
 

Trade and other payables are non-interest bearing and are normally settled on 30-day terms.

The carrying values of trade and other payables are considered to be approximately equal to their fair value.

10. Share capital

 
                                                  31 December 2019       30 June 2019 
                                                  Number of shares   Number of shares 
                                                       (Unaudited)          (Audited) 
 Shares of no par values issued and fully paid 
 Balance at the start of the period/year                20,758,441         23,402,881 
 Share redemptions                                               -        (2,644,440) 
-----------------------------------------------  -----------------  ----------------- 
 Balance at the end of the period/year                  20,758,441         20,758,441 
-----------------------------------------------  -----------------  ----------------- 
 

11. Net asset value per ordinary share

The Net Asset Value per Ordinary Share at 31 December 2019 is based on the net assets attributable to the ordinary shareholders of GBP9.070 million (30 June 2019: GBP9.577 million) and on 20,758,441 (30 June 2019: 20,758,441) ordinary shares in issue at the Consolidated Statement of Financial Position date.

12. Financial risk management

The Company's financial risk management objectives and policies are consistent with those disclosed in the Company's Audited Annual Financial Statements for the year ended 30 June 2019.

13. Related party transactions

The Directors are responsible for the determination of the Company's investment objective and policy and have overall responsibility for the Group's activities including the review of investment activity and performance.

Mr Nixon, a Director of the Company, is also Founding Partner and a Designated Member of Worsley Associates LLP ("Worsley"). The total charge to the Consolidated Income Statement during the period in respect of Investment Advisor fees to Worsley was GBP76,464 (31 December 2018: GBPnil) of which GBP10,768 (30 June 2019: GBP12,500) remained payable at the period end.

Upon appointment of Worsley as Investment Advisor (31 May 2019), Mr Nixon waived his future Director fee as he is a member of the Investment Advisor.

As at 31 December 2019, Mr Nixon held 29.81% of the shares in the Company (30 June 2019: 29.81%).

All the above transactions were undertaken at arm's-length.

The aggregate remuneration and benefits in kind of the Directors (and directors of the Subsidiaries) in respect of the Company's period ended 31 December 2019 amounted to GBP25,965 (31 December 2018: GBP29,250) of which GBPnil (30 June 2019: GBP4,610) remained payable at the period end.

For details on Director dealing please refer to Note 16.

14. Commitments and contingent liability

As at 31 December 2019 the Company has no commitments (30 June 2019: no commitments).

Disposal of the Curno property may, depending on the terms, incur Italian taxes which would be material in the context of shareholders' Funds. As at the 31 December 2019 and up to the date of approval, no disposal was in discussion. As a result, no provision has been included in these Financial Statements.

15. NAV reconciliation

The following is a reconciliation of the NAV per share attributable to ordinary shareholders as presented in these Financial Statements to the unaudited NAV per share reported to the London Stock Exchange.

 
                                                                             NAV per 
                                                                            Ordinary 
                                                                      NAV      Share 
 31 December 2019                                                 GBP000s        GBP 
 
 NAV reported to London Stock Exchange (unaudited)                  9,084     43.76p 
 Adjustment to lease incentive                                       (14)    (0.07)p 
 NAV to shareholders per Financial Statements (unaudited)           9,070     43.69p 
--------------------------------------------------------------   --------  --------- 
 

16. Subsequent events

On 10 February 2020, the Company published a new prospectus with the intention to raise up to GBP6.2 million through an offer of 20,758,441 new ordinary shares at an issue price of 30 pence per new ordinary share (the Capital Raise). The Company received valid applications from qualifying shareholders and other investors for a total of 12,982,488 Ordinary Shares at the price of 30 pence per share, raising gross proceeds of some GBP3.9 million.

On 11 February 2020, Mr Scott purchased 50,000 shares of the Company for GBP15,500.

On 24 February 2020, Mr Scott purchased 100,000 shares of the Company for GBP29,500.

On 17 March 2020, under the Capital Raise Mr Scott purchased 250,000 shares of the Company for GBP75,000 and Mr Nixon purchased 3,894,746 shares of the Company for GBP1,168,424.

The Directors' total interest in issued share capital following admission of new Ordinary Shares is as follows:

 
 Name of Director     Ordinary Shares to be held   Total interest in issued share 
                      following Admission of New      capital following Admission 
                                 Ordinary Shares           of New Ordinary Shares 
 Mr Nixon                             10,083,126                           29.88% 
                    ----------------------------  ------------------------------- 
 Mr Scott                                400,000                            1.19% 
                    ----------------------------  ------------------------------- 
 

As a result of the coronavirus outbreak in Italy, the Italian government closed cinemas (and many other types of venue) on 3 March 2020. As at the time of writing, this closure remains in place and it is not clear when it will be lifted. The disposal of this asset is therefore unlikely before the situation is clarified. The base rental on the property is fixed and benefits from a parental guarantee, as described in the Investment Advisor's report.

The Board will work closely with the Investment Advisor to consider and to manage the position as events unfold.

There were no other post period end events which require disclosure in these Financial Statements.

Investment Policy

Investment Objective and Policy Change

At an EGM held on 28 June 2019, an ordinary resolution was passed to adopt a new Investment Objective and Policy.

Investment Objective

The Company's investment objective is to provide shareholders with an attractive level of absolute long-term return, principally through the capital appreciation and exit of undervalued securities. The existing real estate asset of the Company will be realised in an orderly manner, that is with a view to optimising the disposal value of such asset.

Investment Policy

The Company aims to meet its objectives through investment primarily, although not exclusively, in a diversified portfolio of securities and related instruments of companies listed or admitted to trading on a stock market in the British Isles (defined as (i) the United Kingdom of Great Britain and Northern Ireland; (ii) the Republic of Ireland; (iii) the Bailiwicks of Guernsey and Jersey; and (iv) the Isle of Man). The majority of such companies will also be domiciled in the British Isles. Most of these companies will have smaller to mid-sized equity market capitalisations (the definition of which may vary from market to market, but will in general not exceed GBP600 million). It is intended to secure influential positions in such British quoted securities with the deployment of activism as required to achieve the desired results.

The Company, Property Trust Luxembourg 2 SARL and Multiplex 1 SRL ("the Group") may make investments in listed and unlisted equity and equity-related securities such as convertible bonds, options and warrants. The Group may also use derivatives, which may be exchange traded or over-the-counter.

The Group may also invest in cash or other instruments including but not limited to: short, medium or long term bank deposits in Pound sterling and other currencies, certificates of deposit and the full range of money market instruments; fixed and floating rate debt securities issued by any corporate entity, national government, government agency, central bank, supranational entity or mutual society; futures and forward contracts in relation to any other security or instrument in which the Group may invest; put and call options (however, the Group will not write uncovered call options); covered short sales of securities and other contracts which have the effect of giving the Group exposure to a covered short position in a security; and securities on a when-issued basis or a forward commitment basis.

The Group pursues a policy of diversifying its risk. Save for the Curno Asset until such time as it is realised, the Group intends to adhere to the following investment restrictions:

-- not more than 30 per cent. of the Gross Asset Value at the time of investment will be invested in the securities of a single issuer (such restriction does not, however, apply to investment of cash held for working capital purposes and pending investment or distribution in near cash equivalent instruments including securities issued or guaranteed by a government, government agency or instrumentality of any EU or OECD Member State or by any supranational authority of which one or more EU or OECD Member States are members);

-- the value of the four largest investments at the time of investment will not constitute more than 75 per cent of Gross Asset Value;

-- the value of the Group's exposure to securities not listed or admitted to trading on any stock market will not exceed in aggregate 35 per cent. of the Net Asset Value;

-- the Group may make further direct investments in real estate but only to the extent such investments will preserve and/or enhance the disposal value of its existing real estate asset. Such investments are not expected to be material in relation to the portfolio as a whole but in any event will be less than 25 per cent. of the Gross Asset Value at the time of investment. This shall not preclude Property Trust Luxembourg 2 SARL and Multiplex 1 SRL (the "Subsidiaries") from making such investments for operational purposes;

-- the Company will not invest directly in physical commodities, but this shall not preclude its Subsidiaries from making such investments for operational purposes;

-- investment in the securities, units and/or interests of other collective investment vehicles will be permitted up to 40 per cent. of the Gross Asset Value, including collective investment schemes managed or advised by the Investment Advisor or any company within the Group; and

-- the Company must not invest more than 10 per cent. of its Gross Asset Value in other listed investment companies or listed investment trusts, save where such investment companies or investment trusts have stated investment policies to invest no more than 15 per cent. of their gross assets in other listed investment companies or listed investment trusts.

The percentage limits above apply to an investment at the time it is made. Where, owing to appreciation or depreciation, changes in exchange rates or by reason of the receipt of rights, bonuses, benefits in the nature of capital or by reason of any other action affecting every holder of that investment, any limit is breached by more than 10 per cent., the Investment Advisor will, unless otherwise directed by the Board, ensure that corrective action is taken as soon as practicable.

Borrowing and Leverage

The Group may engage in borrowing (including stock borrowing), use of financial derivative instruments or other forms of leverage provided that the aggregate principal amount of all borrowings shall at no point exceed 50 per cent. of Net Asset Value. Where the Group borrows, it may, in order to secure such borrowing, provide collateral or security over its assets, or pledge or charge such assets.

Corporate Information

 
 Directors (All non-executive)          Registered Office 
 
  W. Scott (Chairman)                    Sarnia House 
  R. H. Burke                            Le Truchot 
  B. A. Nixon                            St Peter Port 
                                         Guernsey, GY1 1GR 
 Investment Advisor                     Administrator and Secretary 
 
  Worsley Associates LLP                 Praxis Fund Services Limited 
  First Floor                            Sarnia House 
  Barry House                            Le Truchot 
  20 - 22 Worple Road                    St Peter Port 
  Wimbledon, SW19 4DH                    Guernsey, GY1 1GR 
  United Kingdom 
 Financial Adviser                      Corporate Broker 
 
  Shore Capital and Corporate Limited    Shore Capital Stockbrokers Limited 
  Cassini House                          Cassini House 
  57 St James's Street                   57 St James's Street 
  London, SW1A 1LD                       London SW1A 1LD 
  United Kingdom                         United Kingdom 
 Independent Auditor                    Registrar 
 
  BDO Limited                            Computershare Investor Services 
  Place du Pre                           (Guernsey) Limited 
  Rue du Pre                             1(st) Floor 
  St Peter Port                          Tudor House 
  Guernsey, GY1 3LL                      Le Bordage 
                                         St Peter Port 
                                         Guernsey, GY1 1DB 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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