Final Results
Wynnstay Properties PLC
19 June 2007
19 June 2007
Wynnstay Properties PLC
'the Company' or 'Wynnstay'
Preliminary Results for Year Ended 25th March 2007
CHAIRMAN'S STATEMENT
I am pleased to report that 2006-2007 has been an exceptionally good year for
Wynnstay in financial terms. We achieved highly successful sales of our Epsom
and Diss properties, whilst favourable taxation factors resulted in a 76% rise
in earnings per share, before taking account of property disposals.
Additionally, the Company benefited from a further substantial increase in the
revaluation of the portfolio. Taken together, these factors resulted in
Shareholders' funds increasing by almost 30% for the year under review.
Overview of financial results
The financial results may be summarised as follows:
Change 2007 2006
- Profit before property disposals and taxation: + 2.5% £567,000 £553,000
- Profit on ordinary activities before taxation: + 191.7% £1,613,000 £553,000
- Basic Earnings per share: + 347.5% 54.6p 12.2p
- Normalised Earnings per share: + 76.2% 21.5p 12.2p
- Dividends per share, paid and proposed: + 7.2% 8.9p 8.3p
- Net asset value per share: + 29.9% 561p 432p
These results reflect a substantial profit from two disposals, firstly of the
Epsom property with the benefit of planning permission for conversion to
residential use and secondly of our property at Diss. Marginally lower property
income was more than matched by reductions in administration and finance costs.
The year's results also benefited from a significant tax credit, reflecting a
combination of capital allowance claims and the partial write-back of the
deferred tax provision to which I refer below. The year-end property revaluation
produced a highly satisfactory increase in the value of the portfolio and, as a
result, Net Assets rose from £13.64 million to £17.69 million.
Property Management
The small decline in rental income of 2.6% compared with the previous year,
resulted principally from our office property at Epsom having been vacant
throughout the year until the completion of its sale in January 2007 as well as
from the Diss property which fell vacant from the expiry of its lease in
November 2006. However, these income shortfalls were largely offset by a number
of new leases and satisfactory rent review settlements negotiated during the
year, most notably at our retail investment in Colchester. Our Managing
Director, Paul Williams, deserves special credit for the way in which he worked
with our advisers and handled the planning requirements as well as the
subsequent tender process for the sale of the Epsom property, and the
negotiations relating to and the subsequent sale by auction of the Diss
property, both of which produced an excellent outcome for Shareholders.
Currently, we have two vacant industrial units where, in both cases, we have
agreed terms with new tenants and when these leases complete, the portfolio will
be fully let save for two small office suites. I am pleased to report that the
close relationship that we maintain with our tenants means that we have not
suffered from any bad debts during the year.
Portfolio
Our Independent Valuers, Sanderson Weatherall, revalued the Company's portfolio
at £21,515,000, representing a like-for-like increase of 13.7% over the past
year. Increases were seen across the entire portfolio, reflecting the benefit
of rent reviews and new leases concluded, together with a further hardening of
yields generally and favourable market conditions for properties of the size and
type within the Company's portfolio.
Throughout the past year Paul Williams has been very active in seeking out new
investments. In addition to a number of individual properties across the
southern part of England, he has considered larger estates and portfolios. We
have entered into negotiations and made offers on some of these opportunities.
However the prices being sought or ultimately obtained were not in our view
sufficiently attractive to make them worthwhile investments for your company.
During the current year we will be evaluating the prospects for the
redevelopment of certain of our properties which, were we to be successful in
obtaining planning permission, are considered capable of delivering further
value to Shareholders.
Following the revaluation, the industrial sector within the portfolio now
accounts for 57% by value, with the retail and office elements comprising 26%
and 17% respectively.
Borrowings and Gearing
The disposal of the Epsom and Diss properties enabled us to repay entirely our
variable rate borrowings, although the unutilised element of the facility
remains fully available for drawdown to finance future acquisitions. Net
borrowings at the year end were £3.16 million, compared with £5.68 million last
year and, with Shareholders' Funds having increased by £4.05 million, net
gearing at the year end fell to 18% compared with 42% last year.
Taxation
This year the Company is in the unusual position of enjoying a tax credit,
rather than having a charge to tax on its profits. This arises from a partial
write back of the deferred tax provision made in prior years, coupled with the
benefit of successful claims we have made for plant and machinery and industrial
buildings allowances at various properties in relation to 2006-7 as well as for
prior tax years. Following changes to the industrial buildings allowance regime
announced in this year's Budget, we expect to release the remaining deferred tax
provision in the year ending 25th March 2008. The disposals at Epsom and Diss
were achieved without any charge to Capital Gains Tax.
Dividend
The Directors are recommending a total dividend for the year of 8.9p per share,
compared with 8.3p last year, representing a 7.2% increase. An interim dividend
of 2.45p was paid in December 2006 and, subject to approval of Shareholders at
the Annual General Meeting, a final dividend of 6.45p per share will be paid on
2nd August 2007 to Shareholders on the register on 6th July 2007.
Outlook
Your Company has entered the present financial year in a strong position. With
our exceptionally low gearing, and with substantial unused borrowing facilities,
we are well positioned to invest when the right properties become available on
acceptable terms or should we prove successful in identifying a suitable
corporate opportunity which matches our property investment criteria.
Base rate has increased four times since August last year and, with actual and
forecast levels of inflation being higher than we have experienced for a number
of years, it may be that there will be further increases over the coming months.
A number of commentators have also been calling the top of the commercial
property investment market for some time, but nevertheless there still appears
to be a strong demand which continues to drive the market and is reflected in
prices and valuations. The proposed changes announced in the Budget to restrict
the existing relief from business rates on vacant commercial property seem
likely to affect valuations. Under these changes, such premises will now only
qualify for relief over a very limited period and inevitably this will impose
additional financial burdens on landlords. The Board's view remains that in
these market conditions, it remains important to be extremely selective in
making acquisitions in order that they will add shareholder value in the medium
to longer term.
For the current accounting year, we will be required by the London Stock
Exchange, as a company whose shares are listed on the Alternative Investment
Market, to produce financial statements in accordance with International
Financial Reporting Standards rather than, as at present, under UK Generally
Accepted Accounting Principles. The main impact of this will be a requirement
for the Company to provide for Capital Gains Tax on the unrealised surpluses
within its portfolio. At present this contingent liability is quantified and
reflected in the notes, rather than being actually provided for in the financial
statements.
Board and Management Changes
Peter Kirkland, our Finance Director and Company Secretary, has indicated his
intention to retire and will be leaving us following the Annual General Meeting
in July. He joined Wynnstay in 1995 as our first full-time Finance Director,
following a career which started in the City and then took him into senior
executive and Board positions in a number of substantial companies in the
construction and property sectors.
His financial and commercial experience of these sectors has proved invaluable
to Wynnstay as has his great attention to detail and his willingness to adapt to
the wide-ranging demands of working in a small quoted company. His experience
and skills were amply displayed and were particularly valuable, for instance,
during the negotiation of our borrowing facilities and their more recent
renewal, but he has also provided practical advice in dealing with a broad range
of property issues. While Peter has been at Wynnstay, it has developed and
grown substantially and successfully, and I am personally indebted to him for
the constant support and wise counsel that he has provided to me, as well as to
the Board generally, since I became Chairman in 1998.
In recognition of his services, the Board agreed to enhance his pension
arrangements by making a special net one-off contribution of £35,000 to his
scheme during the year under review. As I pointed out last year, Shareholders
will be aware that Wynnstay is not a company which has paid large bonuses in the
past, nor has Peter benefited from share options during his term of office. In
such circumstances the Board considered that this payment was fully merited and
I am sure you will join with me in wishing Peter a long and happy retirement. I
expect to be in a position to announce his successor shortly.
Annual General Meeting
Our Annual General Meeting will be held at the Royal Automobile Club at 12 noon
on Thursday 26th July 2007.
Philip G.H. Collins
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT YEAR ENDED 25TH MARCH 2007
2007 2006
£'000 £'000 £'000 £'000
Turnover
Gross Rental Income 1,520 1,560
Fees and Commissions 16 17
------------ ------------
1,536 1,577
Property Outgoings (48) (62)
------------ ------------
1,488 1,515
Administrative Expenses (587) (589)
------------ ------------
Operating Profit 901 926
Profit on Disposal of Investment Properties 1,046 -
------------ ------------
1,947 926
Finance Costs
Interest Payable (350) (385)
Investment Income 16 12
------------ ------------
(334) (373)
------------ ------------
Profit on Ordinary Activities before Taxation
1,613 553
Taxation on Profit from Ordinary Activities 110 (168)
------------ ------------
Profit after Taxation Attributable to Ordinary
Shareholders
1,723 385
Dividends (266) (253)
------------ ------------
Retained Profit for the Financial Year 1,457 132
======= =======
Basic Earnings per Share 54.6p 12.2p
Normalised Earnings per Share 21.5p 12.2p
CONSOLIDATED BALANCE SHEET AT 25TH MARCH 2007
2007 2006
£'000 £'000 £'000 £'000
Fixed Assets
Tangible Assets 21,530 20,357
Quoted Investments 1 1
------------ ------------
21,531 20,358
Current Assets
Debtors 422 35
Cash at Bank and in Hand 637 316
------------ ------------
1,059 351
Creditors: Amounts falling due within one year
(946) (758)
------------ ------------
Net Current Assets/(Liabilities) 113 (407)
------------ ------------
Total Assets Less Current Liabilities 21,644 19,951
Creditors: Amounts falling due after more than
one year
(3,800) (6,000)
------------ ------------
17,844 13,951
Provisions for Liabilities and Charges (155) (314)
------------ ------------
Net Assets 17,689 13,637
====== ======
Capital and Reserves:
Share Capital 789 789
Reserves
Capital Redemption Reserve 205 205
Share Premium Account 1,135 1,135
Capital Reserve 151 151
Revaluation Reserve 9,031 6,277
------------ ------------
Non-Distributable Reserves 10,522 7,768
Profit and Loss Account 6,378 5,080
------------ ------------
Equity Shareholders' Funds 17,689 13,637
====== ======
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 25TH MARCH 2007
2007 2006
£'000 £'000 £'000 £'000
Cash Flow from Operating Activities 1,209 1,004
Returns on Investment and Servicing of
Finance
Interest Received 15 10
Interest Paid (361) (388)
------------ ------------
Net Cash (Outflow) from Returns on Investment
and Servicing of Finance
(346) (378)
Taxation Paid (131) (127)
Capital Expenditure and Financial Investment
Purchase of Tangible Fixed Assets (7) (3)
Disposal of Tangible Fixed Assets 2,062 1
------------ ------------
Net Cash Inflow/(Outflow) from Investing
Activities
2,055 (2)
Equity Dividends Paid (266) (253)
------------ ------------
Net Cash Inflow before Financing 2,521 244
Financing
Repayment of Bank Loan (2,200) (200)
------------ ------------
Increase in Cash in the Period 321 44
====== ======
Reconciliation of Net Cash Flow to Movement
in Net Debt
Increase in Cash in the Period 321 44
Cash Inflow from Debt Financing 2,200 200
------------ ------------
Movement in Net Debt in the Period 2,521 244
Net Debt at 25th March 2006 (5,684) (5,928)
------------ ------------
Net Debt at 25th March 2007 (3,163) (5,684)
====== ======
OTHER FINANCIAL STATEMENTS FOR THE YEAR ENDED 25TH MARCH 2007
2007 2006
£'000 £'000
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Profit for the Financial Year after Taxation 1,723 385
Unrealised Surplus on Revaluation of Investment Properties 2,595 1,605
------------ ------------
Total Recognised Gains and Losses for the Year 4,318 1,990
====== ======
RECONCILIATION OF MOVEMENT OF SHAREHOLDERS' FUNDS
Opening Shareholders' Funds as at 26th March 2006 13,637 11,900
Profit for the Financial Year after Taxation 1,723 385
Dividends (266) (253)
Other recognised Gains and Losses - as per Statement of Total
Recognised Gains and Losses
2,595 1,605
------------ ------------
Closing Shareholders' Funds as at 25th March 2007 17,689 13,637
====== ======
NOTE OF HISTORICAL COST PROFITS AND LOSSES
Profit on Ordinary Activities before Taxation 1,613 553
Realisation of Property Revaluation Gains from Previous Years (159) -
------------ ------------
Historical Cost Profit on Ordinary Activities before Taxation 1,454 553
====== ======
Historical Cost Profit for the Year Retained after
Taxation and Dividends 1,298 132
====== ======
Notes:
1. The financial information above does not constitute full accounts within
the meaning of Section 240 Companies Act 1985 as amended (the 'Act'). Full
accounts in respect of the year ended 25th March 2006, on which the auditors
reported without qualification and which contained no statement under Section
237 (2) or (3) of the Act, have been delivered to the Registrar of Companies.
2. Basic earnings per share have been calculated on profits after taxation
attributable to Shareholders of £1,723,000 (2006: £385,000) and on 3,155,267
ordinary shares being the weighted average number of shares in issue in both
periods. Normalised earnings per share have been calculated on profits after
taxation attributable to Shareholders, excluding profit on property disposals,
of £677,000 (2006: £385,000) on the same weighted average of 3,155,267 shares.
3. A final dividend of 6.45p (2006: 6.0p) per share is being recommended and
will be paid on 2nd August 2007, to Shareholders on the register at the close of
business on 6th July 2007.
4. The 2007 Annual Report & Financial Statements will be posted to
Shareholders shortly and copies may be obtained by writing to the Secretary,
Wynnstay Properties PLC, Cleary Court, 21 St. Swithin's Lane, London EC4N 8AD.
5. The Company's Annual General Meeting will be held at 12 noon on Thursday
26th July 2007 at The Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS.
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