Half-year Report

RNS Number : 5010F
Palace Capital PLC
17 November 2020
 

17 November 2020

PALACE CAPITAL PLC

("Palace Capital" or the "Company")

Interim Results for the six months ended 30 September 2020

RESILIENT RENT COLLECTION AND ACTIVE ASSET MANAGEMENT ENSURE STABLE PORTFOLIO PERFORMANCE

Palace Capital (LSE: PCA), the Main Market listed property investment company that has a diversified portfolio of UK commercial real estate in carefully selected locations outside of London, announces its unaudited results for the six months ended 30 September 2020.

Financial Highlights

Active asset management underpins resilient rent collection and dividend payment

· 82% of all rents due on and since the September quarter day collected, a higher percentage than at the equivalent stage in the previous two quarters with December monthly payments still to come when collection is expected to exceed 90%. 

· 94% of rent due on the June quarter day was collected compared to 96% on the March quarter day (excludes deferred rent).  

· EPRA earnings of £3.2 million (September 2019: £6.7 million), with reduction reflecting a one-off surrender premium included in the comparative period last year.  

· IFRS loss before tax for the period of £7.2 million (September 2019: £1.2 million) reflecting £10.5 million loss on revaluation of investment properties.  

· Adjusted EPS of 7.3p, 146% cover of 5p dividend for the six-month period.  

· Q2 dividend of 2.5p declared and payable on 31 December 2020. Q1 dividend of 2.5p was paid in October 2020.  

· EPRA NTA per share of 347p reduced by 4.7% (March 2020: 364p) and IFRS net assets of £158.4 million (March 2020: £166.3 million), reflecting reductions due to asset revaluations following the pandemic and strategic capital expenditure on developments and refurbishments.  

· LTV at 42% reflecting drawdowns on development loan at Hudson Quarter, due to complete in March 2021, weighted average cost of debt reduced from 3.1% to 2.9%.  

· Solid balance sheet with cash reserves and immediately available facilities of £26.3 million as at 30 September 2020, to handle any unforeseen circumstances and to take advantage of potential opportunities in the short to medium term.

 

Operational highlights

Ongoing strategic disposals and redevelopment programme further enhancing portfolio quality

· 36 apartments now sold at an aggregate value of £9.6 million at flagship Hudson Quarter, York development. Practical completion of the scheme is now due in March 2021 and it remains on budget.  

· Disposals of Meadowcourt, Sheffield for £1.25 million, 30% above book value, and Hyde Abbey House, Winchester sold post half year end for £1.46 million, 17% above book value.  

· Rental concessions granted at Sol Northampton with Accor Hotels in return for a five-year lease extension until 2032 and with Gravity Fitness in return for removal of the break clause, securing the lease until 2034. Rental concession granted post the half year end at Broad Street Plaza, Halifax with TGI Friday's in return for three-year lease extension until 2030.  

· Agents instructed on four further sales of non-core assets, with a combined book value of £8.3 million as at 30 September 2020.

 

Balance Sheet

30 Sept 2020

31 March 2020

Property valuation

£281.6m

£277.8m

Net assets

£158.4m

£166.3m

EPRA NTA per share

347p

364p

 

Income Statement

Six months to
30 Sept 2020

Six months to
30 Sept 2019

Loss before tax

(£7.2m)

(£1.2m)

EPRA earnings

£3.2m

£6.7m

Earnings per share

(15.5p)

5.6p

Adjusted earnings per share

7.3p

8.5p

Total accounting return

(3.3%)

(1.5%)

Total shareholder return

7.2%

0.2%

Total dividend per share

5.0p

9.5p

Dividend cover

146%

90%

 

Neil Sinclair, Chief Executive of Palace Capital said:

"Our strength in the regional office and industrial sectors, reflected in the quality of our occupier base, has enabled us to maintain high levels of rent collection across the period, despite the ongoing Covid-19 headwinds. The resilience in the income collection and the successful active portfolio management are testament to our team's experience and hard work during an extremely challenging half year period.

"While the market continues to be relatively uncertain due to the Covid-19 pandemic and with the Brexit deadline also close, we remain confident that the outlook for the UK regions is a positive one; the supply of good quality, well located office assets remains constrained and our portfolio is therefore very well placed, with additional value identified and unlocked as we progress our redevelopment and refurbishment programmes."

Stanley Davis, Chairman of Palace Capital said:

"Our financial year commenced one week after lockdown, therefore the pandemic and its impact will have a clear bearing on our results for this year. However, our well-located portfolio has shown its strength during this uncertain time and is well positioned to benefit from the trends we are seeing emerge from the pandemic, including relocation to the regions.

"In the short term we will continue to deploy our strategy of maintaining maximum liquidity, ensuring strong rent collection and pursuing the disposal of non-core assets. At the same time, the recent news of a potential vaccination programme getting underway by the end of this year or early next year provides some welcome hope that we may be moving toward the end of this Covid related uncertainty. We are preparing ourselves for the post Covid-19 era and the economic recovery, so that we can take advantage of the investment opportunities that we believe will emerge and progress our total return strategy."

  For further information please contact:

 PALACE CAPITAL PLC

Neil Sinclair, Chief Executive / Stephen Silvester, Finance Director
Tel. +44 (0)20 3301 8331

 Broker

Numis Securities

Heraclis Economides / George Fry

Tel: +44 (0)20 7260 1000

 Broker

Arden Partners plc

Corporate Finance: Paul Shackleton / Ciaran Walsh

Corporate Broking: James Reed-Daunter

Tel: +44 (0)207 614 5900

 Financial PR 

FTI Consulting

Claire Turvey / Methuselah Tanyanyiwa

Tel: +44 (0)20 3727 1000

palacecapital@fticonsulting.com

 

About Palace Capital plc

Palace Capital plc (LSE: PCA) is a UK REIT that has a £281.6 million diversified portfolio of UK regional commercial property. The Company maintains a disciplined investment strategy focused on towns and cities outside of London that are characterised by thriving local economies and strengthening fundamentals. Within those locations the highly experienced management team select assets that provide opportunities to drive both capital value and long-term rental income through tailored active asset management programmes ultimately delivering attractive shareholder returns.

www.palacecapitalplc.com

 

 

CHAIRMAN'S STATEMENT

Our financial year commenced one week after lockdown; therefore, the pandemic and its impact has had a clear bearing on our results for this period and will continue to during the second half of the year.

PERFORMANCE

The Group made a loss after tax of £7.2 million in the period (September 2019: profit of £2.6 million). This was largely due to a 3.5% like-for-like reduction in property valuations in the period which compares to the MSCI UK quarterly property index which reported capital values down 3.7% in the same period. Rental income for the period reduced to £8.2 million (September 2019: £8.8 million) partially as a result of some increased vacancy across the portfolio and also due to the inclusion of a bad debt provision of £0.3 million in light of the Covid-related rent arrears.

The portfolio has an annual contracted rent roll of £16.9 million and a net income after property costs of £14.9 million per annum compared to an ERV of £20.2 million. Adjusted earnings totalled £3.4 million, translating to an adjusted EPS of 7.3p per share, 146% cover of the 5.0p per share for the period. Our second quarterly dividend of 2.5p will be payable on 31 December 2020 to shareholders on the register on 11 December 2020. The entire dividend will be paid as a Property Income Distribution.

BALANCE SHEET

Our balance sheet remains in good shape; an IFRS net asset value of £158.4 million with £26.3 million in cash and available facilities and, despite the like-for-like reduction in the portfolio valuations, our regional portfolio retains its resilient characteristics. As at 30 September 2020, our portfolio was independently valued by Cushman and Wakefield at £281.6 million and this valuation is not subject to 'material valuation uncertainty' which the valuer had applied to the year-end valuations.

The increase in LTV to 42% is largely due to drawdowns from the development facility for the continued construction progress at our Hudson Quarter development, which is due to complete in March 2021. This level of gearing is projected to fall to close to 30% once all residential units have been sold.

PANDEMIC RESPONSE

At the start of the first major lockdown in March, we immediately set our priorities as being to:

· Ensure the safety of our staff and sites;

· Maintain our robust rent collection;

· Comply with our banking covenants;

· Curtail all non-essential capital expenditure; and

· Continue with disposal of non-core properties at or above book value.

 

Our high rent collection figures have ensured compliance with our banking covenants for the last two quarters, while the continuation of our strategic disposal of non-core assets has further supplemented our cash reserves.

We have a high-quality occupier base and our asset managers, who have worked incredibly hard over the past number of months, are continuing their meaningful dialogue with all of our tenants throughout this challenging time. As at the date of this announcement, our top 20 tenants, who contribute 44% of our income are all up to date with their rental payments for the current quarter.

LOOKING FORWARD

While we are now in the middle of a second lockdown, which might be extended despite being due to end early next month, the recent news of a potential vaccination programme getting underway by the end of this year or early next year provides some welcome hope that we may be moving toward the end of this Covid related uncertainty. However, we have no reason to amend our prudent response strategy at present and maintaining a healthy cash position will enable us to deal with any other unexpected circumstances that may be forthcoming. These reserves will also allow us to reduce some of our debt during the financial year and to take advantage of the attractive investment opportunities that we believe will arise during 2021.

The management team's deep and long held experience in the real estate sector means we benefit from extensive networks and relationships which will hold us in good stead as and when distressed opportunities emerge next year. We have a track record, since the early years of Palace Capital, of successful corporate acquisitions, having acquired a Quintain subsidiary and Property Investment Holdings Ltd for £39.25 million and £32 million respectively. These cost-effective transactions were available to us because the companies in both cases had high leverage and being corporates, it facilitated significant savings in Stamp Duty Land Tax. These portfolio investments have performed exceptionally well for the Company and therefore this is an investment strategy with which we intend to continue.

The working from home guidance has of course influenced office occupation and I am in no doubt that our way of working has been changed long term. However, these trends towards flexible and home working were already underway pre Covid-19, and the forced move to remote working has simply accelerated this momentum. Our strong view is, however, that this shift in working patterns will benefit the regions as companies reflect on the requirement for expensive Central London offices.  Debate around the demise of the office is premature and recent lettings activity shows that employers remain convinced of the role of the workplace: significant pre-lettings in excess of 80,000 sq ft have recently been announced in the city centres of Edinburgh, Manchester and Leeds.

Previous forecasts of the demise of the office - in the early 1980s with the advancement of computer technology and again in the early 2000s during the dotcom era - proved unfounded and our view is that they will again. We have always pursued a very disciplined acquisition strategy, which has focused on good quality assets in town centres and close to transport hubs, including major railway stations, so we firmly believe that we will see continued demand for our regional offices, particularly in Manchester, Leeds, York, Newcastle-upon-Tyne and Liverpool.

Savills, in August of this year, published a report which compared the current supply / demand dynamics in the regional office market with 2009. The report estimated that since 2015, excluding London, 31 million sq ft of office space has been converted to residential under Permitted Development Rights in England. Current availability of Grade B and C space across the regional markets in England has fallen by 45% since 2015. In parallel to this, there has been limited speculative office development in the regions in recent years. They further reported in August that there was a total available office supply of 11.3 million sq ft in the UK regional office markets, reflecting a 17% decrease since the end of 2019. However, of that just over 3 million sq ft is Grade A reflecting a 4% decrease since the end of 2019. When this is compared to average annual take up levels, this reflects only enough supply to meet the demand for 11 months of take up. Against this market backdrop we are well placed to benefit as HM Government continues to pursue its levelling up agenda and businesses contemplate the relocation of some of their operations from London and the South East, or implement a 'hub and spoke' model with a greater regional presence to meet the demands of their employees in an environment where the competition for talent is strong.

DEVELOPMENT PIPELINE

Our strategy focuses on delivering attractive total returns to our investors. We achieve this through active asset management to maximise the income potential of our assets, but also by identifying and creating development and refurbishment opportunities that can ultimately provide a higher quality, more secure income. We have a pipeline of prime, city centre opportunities, two of which are in Milton Keynes and another in Leamington Spa. Our property in Leamington Spa is fully let until 2022 and while we have no significant expenditure envisaged on these properties in the next 12 months, we have identified opportunities to unlock further capital appreciation by way of the planning process and, ultimately, redevelopment. Milton Keynes (as recently highlighted in the Financial Times, 27/10/20) is one of the fastest growing cities in the UK and only 30 minutes by train from London so we have taken the view to accept some vacancy here forfeiting potential income as part of the development contribution to total returns. Leamington Spa is a quality town with high residential values that is only 65 minutes by train from the capital.

PORTFOLIO OVERVIEW

At Hudson Quarter, our flagship development in York, we have sold 36 apartments at a total value of £9.6 million and we have a further unit currently under offer. We had sold 28 as at 31 March 2020. The pace of the sales process has been impacted by the government lockdown, which closed our show apartment for four months from March to July and has now effectively closed it again until at least early December except by appointment. During this time, however, we have been actively targeting overseas buyers through social media particularly in the Middle East and Far East, where interest has been strong, given the quality of the product.

Due to the impact of Covid-19, sales are somewhat slow at the moment. This will have an impact on our ability to reinvest the proceeds during the early part of our next financial year, which was our original plan. However, we are confident that post lockdown and approaching completion of this high quality scheme, potential sales will accelerate. The proceeds from these will then enable us to repay any remaining development debt, reduce the Group's LTV and to take advantage of value enhancing opportunities.

As previously announced, 4,500 sq ft of the office space has been pre-let to the listed legal and professional services firm Knights, on a 10-year lease at a record rent for York, which will commence when our building is completed in March 2021. We have also had considerable interest in HQ, the self-contained 35,000 sq ft office building, and we believe that, with York being only 105 minutes by a non-stop train service from London and HQ being within a two minute walk from the Station, the development is extremely well positioned to be a beneficiary of the post pandemic environment.

The reduction in NAV reported today is impacted by our two leisure assets, Sol Northampton and Broad Street Plaza in Halifax, which have been mostly affected by the lockdown closures and the prevailing sentiment towards the leisure industry. However, news of a potential vaccine has improved the outlook for the industry and these assets are well placed to bounce back post pandemic. We have strong covenants in both schemes and rent payments across both assets are up to date. Moreover, we are in discussion with a number of potential tenants regarding the vacant space in these properties as parties start focusing on the recovery in the economy.

CONCLUSION & OUTLOOK

Notwithstanding a very challenging economic environment, we are continuing with our strategy of maintaining maximum liquidity, ensuring strong rent collection and pursuing the disposal of non-core assets. At the same time we are preparing ourselves for the post Covid-19 era as the Government focuses on the economic recovery, so that we can take advantage of the distressed opportunities that we believe will arise from the Spring of 2021 and move forward with our value enhancing redevelopment/refurbishment plans. This is not an easy time, but we have a great team and a quality Board. We are very confident in our ability to prosper in this new normal.

STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES

Whilst we consider there has been no material changes to the Group's principal risks, as set out on pages 43-45 of the Annual Report and Accounts for the year ended 31 March 2020, several risks continue to be elevated as a result of the ongoing Covid-19 pandemic.

The Board continues to monitor events and is taking appropriate action to prepare for any short to medium-term risks that could arise whilst this period of uncertainty continues. Our business is resilient, and we are able to respond quickly, positioning us well for the longer term.

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 https://www.palacecapitalplc.com/

By order of the Board

 

Stanley Davis, Chairman

16 November 2020 

 

 

Palace Capital plc

Condensed consolidated statement of comprehensive income

For the six months ended 30 September 2020

 

 

 

 

 

 

 

 

Notes

 

Unaudited

6 months to

30 September

2020

£000

Unaudited

6 months to

30 September

2019

£000

Audited

Year to

31 March

2020

£000

 

 

 

 

 

 

Rental and other income

 

  3

 

8,263

  11,917

21,147

Property operating expenses

 

 

 

(1,000)

(1,214)

(2,392)

Net property income

 

 

7,263

10,703

18,755

 

 

 

 

 

 

Dividend income from listed equity investments

 

 

-

53

105

Administrative expenses

 

 

(2,260)

(2,193)

(4,284)

Operating profit before gains and losses on property assets and listed equity investments

 

 

5,003

8,563

14,576

 

 

 

 

 

 

Profit/(loss) on disposal of investment properties

 

 

259

(24)

138

Loss on revaluation of investment properties

8

 

(10,457)

(6,177)

(17,154)

Reversal of impairment/(impairment) of trading properties

8

 

414

(305)

(763)

Loss on disposal of assets held for sale

 

 

-

(269)

(269)

(Loss)/gain on revaluation of listed equity investments

 

 

(167)

101

(425)

Operating (loss)/profit

 

 

(4,948)

1,889

(3,897)

 

 

 

 

 

 

Finance income

 

 

1

11

18

Finance expense

Debt termination costs

 

 

(1,796)

(2,414)

-

(3,845)

(501)

-

Changes in fair value of interest rate derivatives

 

 

(409)

(663)

(846)

Loss before taxation

 

 

(7,152)

(1,177)

(9,071)

 

 

 

 

 

 

Taxation

  4

 

-

3,729

3,632

(Loss)/profit for the period and total comprehensive income

 

 

(7,152)

2,552

(5,439)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per ordinary share

 

 

Basic

6

 

(15.5p)

5.6p

(11.8p)

Diluted

6

 

(15.5p)

5.6p

(11.8p)

         

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

 

 

Palace Capital plc

Condensed consolidated statement of financial position

30 September 2020

 

 

 

Notes

Unaudited

30 September

2020

£000

Unaudited

30 September

2019

£000

Audited

31 March

2020

£000

Non-current assets

 

 

 

 

 

Investment properties

 

8

241,403

255,514

248,699

Listed equity investments at fair value

 

 

2,373

3,066

2,540

Right of use asset

 

 

238

405

313

Property, plant and equipment

 

 

93

81

101

 

 

 

244,107

259,066

251,653

 

 

 

 

 

 

Current assets

 

 

 

 

 

Trading property

 

8

38,395

18,895

27,557

Trade and other receivables

 

9

10,014

7,102

9,323

Cash and cash equivalents

 

14,269

13,965

14,919

Total current assets

 

62,678

39,962

51,799

Total assets

 

 

306,785

299,028

303,452

 

 

 

 

 

     

Current liabilities

 

 

 

 

 

Trade and other payables

 

11

(13,170)

(9,700)

(14,053)

Borrowings

 

12

(1,836)

(1,836)

(1,836)

Lease liabilities for right of use asset

 

(172)

(168)

(164)

Total current liabilities

 

(15,178)

(11,704)

(16,053)

 

 

 

 

Net current assets

47,500

28,258

35,746

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Borrowings

 

12

(129,625)

(105,026)

(117,520)

Deferred tax

 

 

(228)

(204)

(228)

Lease liabilities for investment properties

 

 

(1,805)

(1,834)

(1,806)

Lease liabilities for right of use asset

 

 

(67)

(238)

(154)

Derivative financial instruments

 

(1,517)

(1,335)

(1,343)

Total non-current liabilities

 

(133,242)

(108,637)

(121,051)

 

 

 

 

 

Net Assets

 

 

158,365

178,687

166,348

 

 

 

 

 

   

Equity

 

 

 

 

 

Share capital

 

14

4,639

4,639

4,639

Share premium account

 

 

-

125,019

125,019

Merger reserve

 

 

3,503

3,503

3,503

Capital redemption reserve

 

 

340

340

340

Treasury share reserve

 

 

(1,287)

(1,348)

(1,349)

Capital reduction reserve

 

 

125,019

-

-

Retained earnings

 

26,151

46,534

34,196

Equity shareholders' funds

158,365

178,687

166,348

 

 

 

 

 

   

Basic NAV per ordinary share

 

7

344p

388p

361p

Diluted NAV per ordinary share

 

7

343p

388p

361p

EPRA NTA per ordinary share

 

7

347p

391p

364p

             

 

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 16 November 2020.

 

Palace Capital plc

Condensed consolidated statement of cash flows

For the six months ended 30 September 2020

 

 

 

 

 

 

Notes

Unaudited

6 months to

30 September

2020

£000

Unaudited

6 months to

30 September

2019

£000

Audited

Year to

31 March

2020

£000

Operating activities

 

 

 

 

Loss before tax

 

(7,152)

(1,177)

(9,071)

Adjustments for non-cash items: 

 

 

 

 

Loss on revaluation of properties

8

10,457

6,177

17,154

(Gain)/impairment of trading properties

8

(414)

305

763

Loss/(gain) on revaluation of investments

 

167

(101)

425

(Profit)/loss on sale of investment properties

8

(259)

24

(138)

Loss on disposal of investment property held for sale

8

-

269

269

Depreciation

 

23

16

32

Amortisation of right of use asset

 

74

82

148

Share-based payment

 

150

100

130

Net finance costs

 

2,204

3,066

5,174

Cash generated by operations

 

5,250

8,761

14,886

Changes in working capital

 

(974)

(1,353)

860

 

 

 

 

 

Cash flows from operations

 

4,276

7,408

15,746

Interest received

 

1

11

18

Interest and other finance costs paid

 

(1,855)

(1,985)

(3,680)

Corporation tax received/(paid) 

 

(1,128)

(1,554)

(2,173)

Cash flows from operating activities

 

1,294

3,880

9,911

 

 

 

 

 

Investing activities

 

 

 

 

Capital expenditure on refurbishments of property

8

(905)

(3,061)

(5,667)

Capital expenditure on developments

8

(2,856)

(1,363)

(3,925)

Capital expenditure on trading property

8

(10,125)

(4,833)

(13,915)

Proceeds from disposal of investment properties

8

1,219

1,476

2,708

Proceeds from assets held for sale

8

-

11,488

11,487

Amounts transferred out of/(into) restricted cash deposits

 

181

(620)

(525)

Purchase of non-current asset - equity investment

 

-

(328)

(329)

Dividends from listed equity investments

 

-

53

105

Purchase of property, plant and equipment

 

(14)

-

(36)

Cash flows from investing activities

 

(12,500)

2,812

(10,097)

 

 

 

 

 

Financing activities

 

 

 

 

Bank loan repaid

 

(1,071)

(16,717)

(18,325)

Proceeds from new bank loans

 

12,960

5,471

19,736

Loan issue costs

 

-

(627)

(978)

Dividends paid

5

(1,152)

(4,364)

(8,743)

Cash flows from financing activities

 

10,737

(16,237)

(8,310)

 

 

 

 

 

Net (decrease)/increase in cash

 

(469)

(9,545)

(8,496)

Opening cash and cash equivalents

10

13,899

22,395

22,395

Closing cash and cash equivalents

10

13,430

12,850

13,899

 

 

     

     

   

 

 

 

 

 

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 2020

 

 

 

Share

 Capital

£000

 

Share

 Premium

£000

Treasury Shares

Reserve

£000

 

Other

Reserves

£000

Capital reduction reserve

£000

 

Retained Earnings

£000

 

Total 

equity

 000

As at 31 March 2019

4,639

125,019

(1,771)

3,843

-

48,593

180,323

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

-

2,552

2,552

Share based payments

-

-

-

-

-

100

100

Costs from issue of new shares

-

-

-

-

-

-

-

Exercise of share options

-

-

423

-

-

(423)

-

Issue of deferred bonus share options

-

-

-

-

-

76

76

Dividends

-

-

-

-

-

(4,364)

(4,364)

 

 

 

 

 

 

 

 

As at 30 September 2019

4,639

125,019

(1,348)

3,843

-

46,534

178,687

 

 

 

 

 

 

 

 

Total comprehensive loss for the period

-

-

-

-

-

(7,991)

(7,991)

Share based payments

-

-

-

-

-

30

30

Exercise of share options

-

-

(1)

-

-

1

-

Issue of deferred bonus share options

-

-

-

-

-

1

1

Dividends

-

-

-

-

-

(4,379)

(4,379)

 

 

 

 

 

 

 

 

As at 31 March 2020

4,639

125,019

(1,349)

3,843

-

34,196

166,348

 

 

 

 

 

 

 

 

Total comprehensive loss for the period

-

-

-

-

-

(7,152)

(7,152)

Share based payments

-

-

-

-

-

150

150

Exercise of share options

-

-

62

-

-

(62)

-

Issue of deferred bonus share options

-

-

-

-

-

171

171

Dividends

-

-

-

-

-

(1,152)

(1,152)

Transfer to capital reduction reserve account*

-

(125,019)

-

-

125,019

-

-

 

 

 

 

 

 

 

 

As at 30 September 2020

4,639

-

(1,287)

3,843

125,019

26,151

158,365

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*During the year, the Group made an order to reduce the Group's share premium account and the crediting of the relevant sum to distributable profits. The Court order approving the Share Premium Reduction and a statement of capital were registered with the Registrar of Companies on 29 September 2020.  The Share Premium Reduction is now effective, and the amount that had been standing to the credit of the Company's share premium account (£125,018,886.38) has been credited to the Company's distributable profits.

 

 

 

 

Palace Capital plc

Notes to the condensed consolidated financial statements 

For the six months ended 30 September 2020

 

 

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 25 Bury Street, London, SW1Y 6AL.

 

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 2020, and are expected to be used in the Group's Annual Report for the year ended 31 March 2021.

The financial information for the year ended 31 March 2020 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 2020 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 2020 was unqualified and did not contain statements under s498(2) or (3) of the Companies Act 2006. The report for the year ended 31 March 2020 did include an emphasis of matter paragraph, drawing attention to the material valuation uncertainty statement made by the valuers. The opinion was not modified in respect of this matter.  The financial information for the periods ended 30 September 2019 and 30 September 2020 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 16 November 2020.

 

Copies of this statement are available to the public for collection at the Company's Registered Office at 25 Bury Street, London, SW1Y 6AL 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 created by Covid-19, coupled with the Group's cash resources, borrowing facilities, rental income, acquisitions and disposals of investment properties, committed capital and other expenditure and dividend distributions. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in these financial statements.

 

 

Although there has been significant headroom on the majority of covenants within the period ended 30 September 2020, the impact of Covid-19 and the resultant lock-down initially resulted in a number of tenants withholding rental payments and, in particular at the two leisure schemes in Halifax and Northampton. As a result, two of the facilities, Scottish Widows and Santander, did not meet their ICR covenant tests at the April 2020 test dates. On request the banks provided covenant waivers for both the April and July covenant test dates. All covenant tests were satisfied in both July and October 2020.

 

As part of the going concern assessment, and taking the above into consideration, the Directors reviewed a number of scenarios which included extreme downside sensitivities and reverse stress tests in relation to rental cash collection assuming no property acquisitions, no further capital expenditure beyond that committed and no dividends. The forecast shows there is enough headroom on all the interest cover bank covenants to ensure these covenants are not breached. £0.8m cash remains in a lock-up account on behalf of Scottish Widows in order to satisfy the LTV covenant.  On all other facilities there would need to be a significant reduction in the bank's property valuations to be at risk of breaching the respective LTV covenants. We would mitigate any potential risk of breaching the loan covenants by keeping an open dialogue with all tenants to ensure prompt rent collection, monitor lease renewals and actively seek to lease any vacant units at the property.

In addition, as at 30 September 2020 the Group had £14.3 million of cash and cash equivalents, of which £13.4 million was unrestricted cash, a reasonable gearing level of 42% and a fair value property portfolio of £281.6 million. The Directors have reviewed the forecasts for the Group taking into account the impact of Covid-19 on trading over the twelve months from the date of signing the 30 September 2020 Interim Report.

The forecasts have been assessed against a range of possible downside outcomes incorporating significantly lower levels of income in line with the possible effects of the pandemic. 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 the 30 September 2020 Interim Report.

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  Net property income

 

 

Unaudited

6 months to

30 September

2020

£000

Unaudited

6 months to

30 September

2019

£000

Audited

Year to

31 March

2020

£000

 

 

 

 

 

Rent receivable

 

8,216

8,813

17,717

Dilapidations & other income

 

27

238

439

Surrender premium

 

-

2,850

2,850

Insurance commission

 

20

16

141

Total revenue

 

8,263

11,917

21,147

Service charge & vacant rates

 

(681)

(732)

(2,218)

Other property costs

 

(319)

(482)

(174)

Property operating expenses

 

(1,000)

(1,214)

(2,392)

 

 

 

 

 

Net property income

 

7,263

10,703

18,755

 

4  Taxation

 

 

Unaudited

6 months to

30 September

2020

£000

Unaudited

6 months to

30 September

2019

£000

Audited

Year to

31 March

2020

£000

 

 

 

 

 

Current income tax charge

 

-

166

198

Tax overprovided in prior year

 

-

(168)

(222)

Capital gains charged in period

 

-

1,649

1,744

Deferred tax

 

-

(5,376)

(5,352)

Tax credit

 

-

(3,729)

(3,632)

 

  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.

 

5  Dividends

 

 

 

 

 

 

Payment Date

Unaudited

6 months to

30 September

2020

£000

Unaudited

6 months to

30 September

2019

£000

Audited

Year to

31 March

2020

£000

Ordinary dividends paid

 

 

 

 

 

2019 Interim dividend: 4.75p per share

 

12 April 2019

-

2,182

2,182

2019 Final dividend: 4.75p per share

 

13 July 2019

-

2,182

2,182

2020 Interim dividend: 4.75p per share

 

18 October 2019

-

-

2,189

2020 Interim dividend: 4.75p per share

 

27 December 2019

-

-

2,190

2020 Final dividend: 2.50p per share

 

14 August 2020

1,152

-

-

 

1,152

  4,364

  8,743

 

Proposed dividend

2021 Q1 interim dividend: 2.50p per share paid on 16 October 2020.

2021 Q2 interim dividend: 2.50p per share payable on 31 December 2020.

 

 

Earnings per share

 

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 (BPR) reporting framework the latest update of which was issued in November 2016. We report a number of these measures 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, associated closeout costs, one-off finance termination costs, and other one-off exceptional items. 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 EPRA diluted earnings per share also takes into account the dilution of share options and warrants if exercised.

Palace Capital 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. For Palace Capital this includes share-based payments being a non-cash expense and also one-off surrender premiums received. The corporation tax charge (excluding deferred tax movements, being a non-cash expense) is deducted in order to calculate the adjusted earnings per share. The earnings per ordinary share for the period is calculated based upon the following information:

 

 

 

Unaudited

6 months to

30 September

2020

£000

Unaudited

6 months to

30 September

2019

£000

Audited

Year to

31 March

2020

£000

 

 

 

 

 

 

Profit after tax attributable to ordinary shareholders for the period

(7,152)

2,552

(5,439)

 

 

 

 

 

 

Adjustments:

 

 

 

 

Loss on revaluation of property portfolio

10,457

6,177

17,154

 

(Gain)/impairment of trading stock

(414)

305

763

 

(Profit)/loss on disposal of investment properties

(259)

24

(138)

 

Loss on disposal of assets held for sale

-

269

269

 

Loss/(gain) on revaluation of listed equity investments

167

(101)

425

 

Debt termination costs

-

501

501

 

Fair value loss on derivatives

409

663

846

 

Deferred tax relating to EPRA adjustments and capital gains charged

-

(3,727)

(3,608)

 

EPRA earnings for the period

3,208

6,663

10,773

 

 

 

 

 

 

Share-based payments

150

100

130

 

Surrender premium

-

(2,850)

(2,850)

 

Adjusted profit after tax for the period

3,358

3,913

8,053

 

Tax excluding deferred tax on EPRA adjustments and capital gain charged

-

(2)

(25)

 

Adjusted profit before tax for the period

3,358

3,911

8,028

 

 

 

Unaudited

6 months to

30 September

2020

Unaudited

6 months to

30 September

2019

Audited

Year to

31 March

2020

 

Weighted average number of shares for basic earnings per share

46,053,190

45,940,198

45,988,353

 

Dilutive effect of share options

-

32,108

-

 

Weighted average number of shares for diluted earnings per share

46,053,190

45,972,306

45,988,353

 

 

 

 

 

 

Earnings per ordinary share

 

 

 

 

Basic

(15.5p)

5.6p

(11.8p)

 

Diluted

(15.5p)

5.6p

(11.8p)

 

EPRA and adjusted earnings per ordinary share

 

EPRA basic

7.0p

14.5p

23.4p

 

EPRA diluted

7.0p

14.5p

23.4p

 

Adjusted EPS

7.3p

8.5p

17.5p

 

 

 

 

 

Net asset value per share

 

The Group 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 Group has adopted these new guidelines and applies them in the 30 September 2020 Interim Report.

 

The Group considered EPRA Net Tangible Assets (NTA) to be the most relevant NAV measure for the Group 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. See further information on the calculation in appendix 1.

 

 

 

 

30 September 2020 (unaudited)

30 September 2019 (unaudited)

30 March 2020 (audited*)

EPRA NTA (£000)

EPRA NRV (£000)

EPRA NDV (£000)

EPRA NTA (£000)

EPRA NRV (£000)

EPRA NDV (£000)

EPRA NTA (£000)

EPRA NRV (£000)

EPRA NDV (£000)

Net assets attributable to shareholders

158,365

158,365

158,365

178,687

178,687

178,687

166,348

166,348

166,348

Include:

 

 

 

 

 

 

 

 

 

Real estate transfer tax

-

14,935

-

-

16,483

-

-

15,771

-

Fair value of fixed interest rate debt

-

-

(426)

-

-

(144)

-

-

(191)

Exclude:

 

 

 

 

 

 

 

 

 

Fair value of derivatives

1,517

1,517

-

1,335

1,335

-

1,343

1,343

-

Deferred tax on latent capital gains and capital allowances

228

228

-

204

204

-

228

228

-

EPRA NAV

160,110

175,045

157,939

180,226

196,709

178,543

167,919

183,690

166,157

EPRA NAV per share

347p

379p

342p

391p

426p

387p

364p

398p

360p

 

 

 

 

Unaudited

 30 September

2020

Unaudited

30 September

2019

Audited

31 March

2020

 

Number of ordinary shares issued at the end of the period

46,069,690

46,036,508

46,036,508

 

Dilutive effect of share options

84,934

32,108

32,108

 

Number of diluted ordinary shares for diluted and EPRA net assets per share

46,154,624

46,068,616

46,068,616

 

 

 

 

 

 

Net assets per ordinary share

 

 

 

 

Basic NAV

344p

388p

361p

 

Diluted NAV

343p

388p

  361p

 

EPRA NTA

347p

391p

  364p

 

EPRA NRV

379p

426p

  398p

 

EPRA NDV

342p

387p

360p

 

*The Group has adopted the new EPRA NAV measures post the 31 March 2020 audit, therefore the new EPRA NAV measures computed at 31 March 2020 are unaudited. 

 

 

 

 

 

 

 

 

 

 

8  Property Portfolio

 

Freehold Investment properties

Leasehold Investment properties

Total investment properties

 

£000

£000

£000

At 1 April 2019

237,291

21,040

258,331

Additions - refurbishments

5,495

661

6,156

Capital expenditure on developments

3,936

-

3,936

Loss on revaluation of investment properties

(13,756)

(3,398)

(17,154)

Disposals

(2,570)

-

(2,570)

At 31 March 2020

230,396

18,303

248,699

Additions - refurbishments

1,262

(82)

1,180

Capital expenditure on developments

2,941

-

2,941

Loss on revaluation of investment properties

(9,672)

(785)

(10,457)

Disposals

(960)

-

(960)

At 30 September 2020

223,967

17,436

241,403

 

 

 

 

Standing investment properties

Investment properties under construction

Total investment properties

Trading properties

Assets held for sale

Total property portfolio

 

£000

£000

£000

£000

£000

£000

At 1 April 2019

254,209

4,122

258,331

14,367

11,756

284,454

Additions - refurbishments

6,156

-

6,156

-

-

6,156

Capital expenditure on developments

-

3,936

3,936

-

-

3,936

Additions - trading properties

-

-

-

13,953

-

13,953

Impairment of trading properties

-

-

-

(763)

-

(763)

Loss on revaluation of investment properties

(16,868)

(286)

(17,154)

-

-

(17,154)

Disposals

(2,570)

-

(2,570)

-

(11,756)

(14,326)

At 31 March 2020

240,927

7,772

248,699

27,557

-

276,256

Additions - refurbishments

1,180

-

1,180

-

-

1,180

Capital expenditure on developments

-

2,941

2,941

-

-

2,941

Additions - trading properties

-

-

-

10,424

-

10,424

Reversal of impairment of trading properties

-

-

-

414

-

414

(Loss)/gain on revaluation of properties

(10,574)

117

(10,457)

-

-

(10,457)

Disposals

(960)

-

(960)

-

-

(960)

At 30 September 2020

230,573

10,830

241,403

38,395

-

279,798

 

 

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 make 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.

 

The pandemic and the measures taken to tackle Covid-19 continue to affect economies and real estate markets globally. Nevertheless, as at the valuation date property markets are mostly functioning again, with transaction volumes and other relevant evidence at levels where an adequate quantum of market evidence exists upon which to base opinions of value. Accordingly, and for the avoidance of doubt, the property valuation at 30 September 2020 is not reported as being subject to 'material valuation uncertainty' as defined by VPS 3 and VPGA 10 of the RICS Valuation - Global Standards.

 

At 30 September 2020, the Group's freehold and leasehold investment properties were externally valued by Royal Institution of Chartered Surveyors ("RICS") registered independent valuers. A reconciliation of the valuations carried out by the external valuers to the carrying values shown in the balance sheet was as follows:

 

 

 

 

Unaudited

 30 September

2020

£000

Unaudited

30 September

2019

£000

Audited

31 March

2020

£000

 

 

 

 

 

Cushman & Wakefield LLP (property portfolio)

 

281,595

275,800

277,770

Fair value of property portfolio

 

281,595

275,800

277,770

 

 

 

 

 

Adjustment in respect of minimum payment

 

 

 

 

under head leases included as a liability

 

1,805

1,835

1,806

Less trading properties

 

(38,395)

(18,895)

(27,557)

Less lease incentive balance in prepayments

 

(3,602)

(3,028)

(3,320)

Less rent top-up adjustment

 

-

(198)

-

 

 

 

 

 

Carrying value per financial statements

 

241,403

255,514

248,699

 

 

Investment properties with a carrying value of £236,639,500 (31 March 2020: £232,023,000) and trading properties with a carrying value of £38,395,000 (31 March 2020: £27,557,000) are subject to a first charge to secure the Group's bank loans amounting to £132,651,000 (31 March 2020: £120,761,000).

 

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 Group's financial and property management systems and is subject to the Group's overall control environment.

 

In addition, the valuation reports are based on assumptions and valuation models used by the 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 Executive Director responsible for the valuation process verifies all major inputs to the external valuation reports, assesses the individual property valuation changes from the prior 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 Group'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.

Reversal of impairment of trading properties

 

An impairment loss may only be reversed if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss had been recognised. If this is the case, then the carrying amount of the asset shall be increased to its recoverable amount. The increase will effectively be the reversal of an impairment loss.

 

9  Trade and other receivables

 

 

Unaudited

 30 September

2020

£000

Unaudited

30 September

2019

£000

Audited

31 March

2020

£000

Current

 

 

 

 

Trade receivables

 

3,285

2,223

2,572

Prepayments and accrued income

 

4,080

4,229

3,748

Other taxes

 

820

374

625

Other debtors

 

1,829

276

2,378

 

 

10,014

7,102

9,323

 

 

 

 

 

           

   

10  Cash and cash equivalents

 

 

Unaudited

30 September

2020

£000

Unaudited

30 September

2019

£000

Audited

31 March

2020

£000

Cash and cash equivalents - unrestricted

 

13,430

12,850

  13,899

Restricted cash

 

839

1,115

  1,020

 

 

14,269

13,965

  14,919

 

Restricted cash is cash where there is a legal restriction to specify its type of use. This is typically where the Group has agreed to deposit cash with a lender with regards to top-ups received from vendors on completion funds, to be realised over time consistent with the loss of income on vacant units, and where the Group has agreed to deposit cash with a lender to provide additional security over loan facilities.

 

11  Trade and other payables

 

 

Unaudited

 30 September

2020

£000

Unaudited

30 September

2019

£000

Audited

31 March

2020

£000

Current

 

 

 

 

Trade payables

 

2,702

1,888

2,911

Accruals

 

3,759

1,909

3,146

Deferred rental income

 

3,488

3,281

3,567

Taxes

 

1,862

2,418

2,085

Other payables

 

1,359

204

2,344

 

 

13,170

9,700

14,053

 

12  Borrowings

 

 

Unaudited

 30 September

2020

£000

Unaudited

30 September

2019

£000

Audited

31 March

2020

£000

Current borrowings

 

1,836

1,836

1,836

Non-current borrowings

 

129,625

105,026

117,520

Total borrowings

 

131,461

106,862

119,356

 

 

 

 

 

Non-current borrowings

 

 

 

 

Secured bank loans drawn

 

130,815

106,267

118,925

Unamortised facility fees

 

(1,190)

(1,241)

(1,405)

 

 

129,625

105,026

117,520

The maturity profile of the Group's debt was as follows

 

 

Unaudited

 30 September

2020

£000

Unaudited

30 September

2019

£000

Audited

31 March

2020

£000

 

 

 

 

 

Within one year

 

1,836

1,836

1,836

From one to two years

 

44,099

1,836

6,792

From two to five years

 

75,390

92,669

100,589

From five to ten years

 

11,326

11,762

11,544

Total borrowings

 

132,651

108,103

120,761

 

Facility and arrangement fees

As at 30 September 2020

Secured borrowings

 

 

All in cost

%

 

Maturity

date

Unamortised facility fees

£000

Facility drawn

£000

 

 

 

 

 

 

 

Scottish Widows

 

2.90%

July 2026

13,355

(151)

13,506

National Westminster Bank plc

 

2.16%

August 2024

28,242

(378)

28,620

Barclays

3.12%

June 2024

40,193

(223)

40,416

Barclays

3.30%

January 2022

17,553

(210)

17,763

Santander Bank plc

3.56%

August 2022

25,352

(148)

25,500

Lloyds Bank plc

2.01%

March 2023

6,766

(80)

6,846

 

 

 

 

131,461

(1,190)

132,651

 

Facility and arrangement fees

As at 31 March 2020

Secured borrowings

 

 

All in cost

%

 

Maturity

date

Loan balance

£000

Unamortised facility fees

£000

Facility drawn

£000

 

 

 

 

 

 

 

Scottish Widows

 

2.90%

July 2026

13,560

(164)

13,724

National Westminster Bank plc

 

2.70%

August 2024

28,225

(395)

28,620

Barclays

3.18%

June 2024

40,611

(255)

40,866

Barclays

3.48%

January 2022

4,649

(307)

4,956

Santander Bank plc

3.68%

August 2022

25,563

(187)

25,750

Lloyds Bank plc

2.55%

March 2023

6,748

(97)

6,845

 

 

 

 

119,356

(1,405)

120,761

 

Facility and arrangement fees

As at 30 September 2019

Secured borrowings

 

 

All in cost

%

 

Maturity

date

Loan balance

£000

Unamortised facility fees

£000

Facility drawn

£000

 

 

 

 

 

 

 

Scottish Widows

 

2.90%

July 2026

13,765

(177)

13,942

National Westminster Bank plc

 

2.86%

August 2024

19,560

(440)

20,000

Barclays

3.20%

June 2024

41,032

(284)

41,316

Santander Bank plc

3.72%

August 2022

25,774

(226)

26,000

Lloyds Bank plc

2.71%

March 2023

6,731

(114)

6,845

 

 

 

 

106,862

(1,241)

108,103

 

The Group has unused loan facilities amounting to £19,264,188 (31 March 2020: £32,924,000). A facility fee is charged on £11,380,000 with NatWest, 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.

A facility fee is charged on £7,884,188 at a rate of 1.30% p.a. and is payable quarterly. The £7,884,188 balance of the unused facilities relates to a Barclays loan secured on the Hudson Quarter, York development held by Palace Capital (Developments) Limited.

 

 

13  Derivatives financial instruments

 

The Group 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.

 

The contract rate is the fixed rate the Group are paying for its interest rate swaps.

 

The valuation rate is the variable LIBOR and bank base rate the banks are paying for the interest rate swaps.

Details of the interest rate swaps the Group has entered can be found in the table below.

 

The valuations of all derivatives held by the Group are classified as Level 2 in the IFRS 13 fair value hierarchy as they are based on observable inputs. There have been no transfers between levels of the fair value hierarchy during the year.

 

 

Bank

Notional principal

Expiry date

Contract rate %

 

Valuation rate %

Unaudited

30 September

2020

Unaudited 30 September 2019

Audited

31 March

2020

Barclays Bank plc 

34,597,900

25/01/2023

1.3420

0.0174

(1,048)

(897)

  (909)

Santander plc

19,154,930

03/08/2022

1.3730

0.0132

(469)

(438)

(434)

 

53,752,830

 

 

 

(1,517)

(1,335)

(1,343)

 

 

14  Share capital

Authorised, issued and fully paid share capital is as follows:

 

 

Unaudited

 30 September

2020

Unaudited

30 September

2019

Audited

31 March

2020

 

 

 

 

 

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

 

 

 

 

     

Share capital - £

 

4,638,852

4,638,852

4,638,852

           

 

 

The Company has set up an employee benefit trust, 'The Palace Capital Employee Benefit Trust', for the granting of shares applicable to Directors and employees under the Long-Term Incentive Plan. During the period, no ordinary shares held in treasury were transferred into The Palace Capital Employee Benefit Trust.

 

On 9 July 2020, the Company granted 33,182 shares, being the awards granted on 24 June 2019 under the Palace Capital Deferred Bonus Plan from The Palace Capital Employee Benefit Trust. As at 30 September 2020 there were 299,587 shares held in treasury.

 

The Company's issued share capital as at 30 September 2020 comprises 46,069,690 ordinary shares which is the denominator for the calculations of earnings per share and net asset value per share. This excludes the 318,825 ordinary shares held in treasury and the Employee Benefit Trust.  

 

APPENDIX 1: NOTES TO EPRA NAV CALCULATIONS    

 

 

 

At 30 September 2020

Current measures

 

Previously reported measures

EPRA NTA (£000)

EPRA NRV (£000)

EPRA NDV (£000)

 

EPRA NAV (£000)

EPRA NNNAV (£000)

Net assets attributable to shareholders

158,365

158,365

158,365

 

158,365

158,365

Include:

 

 

 

 

 

 

Real estate transfer tax

-

14,935

-

 

-

-

Fair value of fixed interest rate debt

-

-

(426)

 

-

-

Exclude:

 

 

 

 

 

 

Fair value of derivatives

1,517

1,517

-

 

1,517

-

Deferred tax on latent capital gains and capital allowances

228

228

-

 

228

-

At 30 September 2020

160,110

175,045

157,939

 

160,110

158,365

Diluted net assets per share

347p

379p

342p

 

347p

343p

 

 

 

At 30 September 2019

Current measures

 

Previously reported measures

EPRA NTA (£000)

EPRA NRV (£000)

EPRA NDV (£000)

 

EPRA NAV (£000)

EPRA NNNAV (£000)

Net assets attributable to shareholders

178,687

178,687

178,687

 

178,687

178,687

Include:

 

 

 

 

 

 

Real estate transfer tax

-

16,483

-

 

-

-

Fair value of fixed interest rate debt

-

-

(144)

 

-

-

Exclude:

 

 

 

 

 

 

Fair value of derivatives

1,335

1,335

-

 

1,335

-

Deferred tax on latent capital gains and capital allowances

204

204

-

 

204

-

At 30 September 2019

180,226

196,709

178,543

 

180,226

178,687

Diluted net assets per share

391p

426p

387p

 

391p

388p

 

 

 

At 31 March 2020

Current measures

 

Previously reported measures

EPRA NTA (£000)

EPRA NRV (£000)

EPRA NDV (£000)

 

EPRA NAV (£000)

EPRA NNNAV (£000)

Net assets attributable to shareholders

166,348

166,348

166,348

 

166,348

166,348

Include:

 

 

 

 

 

 

Real estate transfer tax

-

15,771

-

 

-

-

Fair value of fixed interest rate debt

-

-

(191)

 

-

-

Exclude:

 

 

 

 

 

 

Fair value of derivatives

1,343

1,343

-

 

1,343

-

Deferred tax on latent capital gains and capital allowances

228

228

-

 

228

-

At 31 March 2020

167,919

183,690

166,157

 

167,919

166,348

Diluted net assets per share

364p

398p

360p

 

364p

361p

 

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