Interim Results
Wynnstay Properties PLC
22 November 2007
Wynnstay Properties PLC ('Wynnstay' or 'the Company')
Interim Results for the six months ended 29 September 2007
Chairman's Statement
I am pleased to present your Company's interim results which show a substantial
increase in profits, earnings per share and net asset value per share, compared
with the interim results last year. Whilst we do not revalue the portfolio at
the interim stage, net asset value per share reflects the property valuation
conducted in March 2007 which produced a substantial increase over book value
and is thus well above the figure at this time last year. All the comparative
figures for 2006 have been restated to reflect the adoption for the first time
in these financial statements of International Financial Reporting Standards in
accordance with the requirements of the London Stock Exchange, as explained
further below.
The results for the six months to 29 September 2007 may be summarised as
follows:-
2007 2006*
- Profit on Ordinary Activities before Taxation +18% £334,000 £283,000
- Earnings per share +95% 12.3p 6.3p
- Interim Dividend per share +6% 2.6p 2.45p
- Net Asset value per share +28% 534p 418p
- Adjusted net asset value per share** +28% 567p 442p
* 2006 figures have been restated in accordance with International Financial
Reporting Standards.
** Adjusted net asset value per share is net asset value per share determined
in accordance with International Financial Reporting Standards and adjusted to
exclude the liability for capital gains tax on unrealised gains arising on the
revaluation of the investment portfolio.
Property income was only marginally higher than for the same period last year.
However both property and finance costs were significantly lower than last year,
reflecting the fact that we did not incur charges, such as insurance and
business rates on vacant properties, and lower interest paid on substantially
reduced borrowings following the disposal of the Epsom and Diss properties
towards the end of the last financial year. Administration and other costs rose
principally as a result of one-off items involved in the arrangements for
recruiting a new Finance Director and Company Secretary to replace Peter
Kirkland. The results also reflect a tax credit, rather than a charge to tax
since, as I mentioned in my statement in June, following the changes to the
industrial buildings allowance regime introduced in the 2007 Budget, we can
release the remaining deferred tax provision of £155,000 previously made in
respect of this liability.
The two vacant industrial units referred to in my statement in last year's
annual report are now let and income producing so that the portfolio is now
fully let except for two small office suites in Colchester which represent less
than 1% of total rental income. We have concluded very satisfactory rent reviews
at our retail premises in Gosport and at our industrial unit in Alton.
Furthermore we were successful in our planning appeal in relation to one of the
retail units at Dorking where we obtained a change of use from retail to
restaurant. This flexibility of use will improve the unit's marketability should
the present tenants decide not to renew their lease. We are also continuing to
explore other redevelopment and change of planning use opportunities within the
existing portfolio.
The first half of the year has been one of stability in the portfolio, with no
acquisitions or disposals. We have examined a number of potential acquisitions,
especially in the spring and early summer but, as I commented in my statement in
June, market conditions earlier in the year were not conducive to purchases at
an attractive level.
During the last four months, financial markets have witnessed a period of
significant dislocation and uncertainty as a result of the so-called 'credit
crunch' originating from the problems in the US sub-prime lending market but
which rapidly spread to banks and markets elsewhere, including the UK. Despite
the UK's apparent sound economy this uncertainty has led to a tightening in
lending terms for many businesses and has begun to have an effect on the
commercial property market as businesses and buyers of commercial property find
it more difficult to obtain funding. One positive effect, however, could be
that interest rates in the present cycle, which many appeared to think were
continuing on an upward trend in the second half of 2007, may in fact have
peaked.
So far as Wynnstay is concerned, we remain in a strong financial position, with
low gearing and substantial unused borrowing facilities. It remains to be seen
what impact the conditions in the financial markets, and the changes to business
rates on vacant commercial property will have on valuations in the commercial
property sector when we revalue our portfolio in March 2008.
We have undertaken a review of our fixed overheads and have taken certain
decisions that will significantly reduce our running costs in the present year
and in future years. We have taken the opportunity offered by our landlord's
desire to refurbish our present premises to offer a surrender of our lease for a
capital payment and to move to smaller and more cost effective premises in
Southampton Row, Holborn, London WC1. Subject to completing the legal
formalities, we expect that this move will make a further contribution to the
full year's profit, net of related expenses, of in excess of £100,000 and have
an ongoing beneficial impact on running costs in future years.
From 1st January 2008, our new registered office and address will be 16-19,
Southampton Place, London WC1A 2AJ and the telephone number will be 020 7745
7160
In the light of these excellent results for your Company, the Directors have
decided to declare an interim dividend of 2.6p per share, representing an
increase of 6% over last year. This will be paid on 18 December 2007 to those
Shareholders on the register on 30th November 2007. Whilst we will, as always,
have to take a decision on the appropriate amount to recommend as a final
dividend having regard to the results for the full year, the Board is hopeful
that this will reflect a similar percentage increase.
As foreshadowed in my statement in the Annual Report and Financial Statements,
the financial statements included in this report have been prepared in
accordance with International Financial Reporting Standards (IFRS) rather than,
as previously, under UK Generally Accepted Accounting Principles (GAAP). The
main impact of this change is a requirement to provide for capital gains tax on
unrealised gains which could potentially arise from the annual revaluation of
investment properties in the portfolio to their market value. Previously, this
liability was quantified and reflected in the notes, rather than actually being
provided for in the financial statements. The amount involved is £1,021,000.
As Wynnstay is an investment company and this tax liability would only arise in
the event of a disposal of properties in the portfolio we have, in common with
many other property companies, shown our net asset value per share in the
summary above and in the financial statements both in accordance with IFRS as
well as adjusted to exclude this tax liability.
We recorded an excellent attendance at the Annual General Meeting in July and
received positive feedback on the event from a significant number of
shareholders who welcomed the slightly different format adopted for the event.
This gave those Shareholders who attended a first sight of their Company's new
website, www.wynnstayproperties.co.uk, which went live on 15 August 2007 and has
attracted a good level of activity. It also gave Shareholders an opportunity to
meet our new Finance Director and Company Secretary, Toby Parker, who joined us
at the beginning of August and who, I am pleased to report, is working closely
and effectively with Paul Williams in your interest.
Our Annual General Meeting next year will again be held at the Royal Automobile
Club, 89 Pall Mall, London SW1 on Wednesday 16 July 2008 and I look forward to
seeing and talking to as many shareholders as possible at that time. Please
note that in response to some shareholders' comments, we have moved the meeting
forward by just over a week in order to avoid the beginning of the main holiday
season.
Finally, on behalf of the Board, I would like to thank all Shareholders for
their continued interest in, and support for, Wynnstay, and to convey our best
wishes for Christmas and for 2008.
Philip G.H. Collins
Chairman
22nd November 2007
Enquiries:
Philip Collins, Chairman, Wynnstay Properties PLC - 020 7626 3057
Rick Thompson, Nominated Adviser & Broker, Charles Stanley
Securities - 020 7149 6000
Unaudited Consolidated Profit & Loss Account
Six months ended 29 September 2007
Six months ended Year ended
29 Sept 29 Sept 25 March 2007
2007 2006
£'000 £'000 £'000
Property Income 786 778 1,536
Property Costs (16) (30) (48)
Increase in fair value of investment properties and - - 2,596
investments
Profit on Disposal of Investment Properties - - 1,046
Administrative Costs (334) (278) (587)
Operating Income 436 470 4,543
Investment Income 13 4 16
Finance Costs (115) (191) (350)
Net Income before Taxation 334 283 4,209
Taxation 55 (85) (464)
Net Income after Taxation 389 198 3,745
Dividends paid - (note 2) (204) (189) (266)
Profit Retained 185 9 3,479
Basic Earnings per share - (note 3) 12.3p 6.3p 118.7p
Normalised Earnings per Share - (note 3) 12.3p 6.3p 85.5p
Unaudited Consolidated Balance Sheet
at 29 September 2007
29 Sept 29 Sept 25 March
2007 2006 2007
£'000 £'000 £'000
Non Current Assets
Investment Properties 21,530 20,360 21,530
Investments 2 3 4
21,532 20,363 21,534
Current Assets
Accounts Receivable 61 98 422
Cash at Bank and in Hand 478 180 637
539 278 1,059
Accounts Payable (594) (679) (946)
Net Current (Liabilities)/Assets (55) (401) 113
Total Assets Less Current Liabilities 21,477 19,962 21,647
Loans Payable (3,600) (6,000) (3,800)
17,877 13,962 17,847
Deferred Tax (1,021) (761) (1,176)
Net Assets 16,856 13,201 16,671
Capital and Reserves
Share Capital 789 789 789
Capital Redemption Reserve 205 205 205
Share Premium Account 1,135 1,135 1,135
Retained Reserves 14,727 11,072 14,542
Equity Shareholders' Funds - (note 4) 16,856 13,201 16,671
Unaudited Consolidated Statement of Cashflows
Six months ended 29th September 2007
Six months ended Year ended
29 September 25 March
(Restated) (Restated)
2007 2006 2007
£'000 £'000 £'000
Cash flow from operating activities
Profit from Operations 436 470 4,543
Depreciation 2 2 4
Profit on disposal of investment properties - - (1,046)
Increase in fair value of investment properties - - (2,595)
Decrease in fair value of investment (2) - (1)
(Increase)/Decrease in accounts receivables 361 (63) (56)
(Decrease)/Increase in accounts payables (352) (11) 360
Income tax paid (40) (86) (131)
Net cash from operating activities 405 312 1,078
Cash flow from investing activities
Interest received 13 4 15
Interest payable (171) (258) (361)
Sale of property, plant and equipment - - 2,062
Purchase of property, plant and equipment (2) (5) (7)
Net cash from investing activities (160) (259) 1,709
Cash flow from financing activities
Dividends paid (204) (189) (266)
Repayment on bank loans (200) - (2,200)
Net cash from financing activities (404) (189) (2,466)
Net (decrease)/increase in cash and cash equivalents (159) (136) 321
Cash and cash equivalents at beginning of period 637 316 316
Cash and cash equivalents at end of period 478 180 637
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Accounting Policies
The interim financial information has been prepared using the recognition and
measurement principles of International Financial Reporting Standards (IFRS).
The detailed accounting policies which the group expects to be applicable for
the year ending 25th March 2008 are set out in note 6.
The comparative figures represent the Group's results and cash flows for the 6
months ended 29th September 2006 and for the year ended 25th March 2007,
previously reported under UK GAAP, under the recognition and measurement
principles of IFRS.
The consolidated financial statements are presented in pounds sterling and all
values are rounded to the nearest thousand (£'000) except where otherwise
indicated.
This financial information does not constitute statutory accounts as defined in
section 240 of the Companies Act 1985.
The comparative financial information for the year ended 25th March 2007 was
derived from information extracted from the annual report and accounts for that
period, which has been filed with the UK Registrar of Companies as adjusted for
the transition to IFRS. The auditors have reported on those UK GAAP accounts,
their report was unqualified and did not contain statements under sections 237
(2) or (3) of the Companies Act 1985.
2. Dividends Paid
Per Amount
Share Absorbed
Period Payment date (pence) £'000
6 months to 29 September 2007 18 December 2007 2.60 82
6 months to 29 September 2006 14 December 2006 2.45 77
Year ended 25 March 2007 2 August 2007 6.45 204
3. Earnings per share
The calculation of basic earnings per share is based on earnings of £389,000
(September 2006: £198,000; March 2007: £3,745,000) and 3,155,267 ordinary
shares.
The calculation of normalised earnings per share is based on earnings of
£389,000 (September 2006: £198,000; March 2007: £2,699,000) and 3,155,267
ordinary shares.
4. Reconciliation of changes in equity
Six months ended 29 September 2007
Capital Share
Share Redemption Premium Retained Total
Capital Reserve Account Earnings
£'000 £'000 £'000 £'000 £'000
Balance at 26 March 2007 789 205 1,135 14,542 16,671
Net Income for the year - - - 389 389
Dividends - - - (204) (204)
Balance at 29 September 2007 789 205 1,135 14,727 16,856
Six months ended 29 September 2006
Capital Share
Share Redemption Premium Retained Total
Capital Reserve Account Earnings
£'000 £'000 £'000 £'000 £'000
Balance at 26 March 2006 789 205 1,135 11,063 13,192
Net Income for the year - - - 198 198
Dividends - - - (189) (189)
Balance at 29 September 2006 789 205 1,135 11,072 13,201
Year ended 25th March 2007
Capital Share
Share Redemption Premium Retained Total
Capital Reserve Account Earnings
£'000 £'000 £'000 £'000 £'000
Balance at 26 March 2006 789 205 1,135 11,063 13,192
Net Income for the year - - - 3,745 3,745
Dividends - - - (266) (266)
Balance at 25 March 2007 789 205 1,135 14,542 16,671
5. Transition to International Financial Reporting Standards ('IFRS')
Explanation of the transition to IFRS
This is the first period that the group has adopted its financial statements
under IFRS. The last financial statements presented under UK GAAP were for the
year ended 25 March 2007. As IFRS comparative figures must be presented for the
year ended 25 March 2008, the date of transition to IFRS was 26 March 2006. The
reconciliations below are presented to enable a comparison of the 2007 published
interim figures with those published in the corresponding period of the previous
financial year, the latest period presented being for the year ended 25 March
2007, and as at the date of transition to IFRS being 26 March 2006.
Reconciliation of equity reporting under UK GAAP to equity under IFRS
Six months ended Six months ended
Year ended Year ended
29 September 29 September 25 March 26 March
Notes 2007 2006 2007 2006
Equity shareholders' funds under UK 17,874 13,646 17,689 13,637
GAAP
IFRS adjustments :
Fair value of investments (a) 3 2 3 2
Deferred tax on property revaluation (c) (1,021) (447) (1,021) (447)
Net IFRS adjustments (1,018) (445) (1,018) (445)
Equity shareholders' funds under 16,856 13,201 16,671 13,192
IFRS
Reconciliation of profit reported under UK GAAP to profit under IFRS
Six months ended Six months ended Year ended
29 September 2007 29 September 2006 25 March 2007
Notes
Profit for the period under UK GAAP 187 9 1,457
IFRS adjustments :
Fair value of investments (a) (2) - 1
Fair value of investment properties (b) - - 2,595
Deferred tax on property revaluation (c) - - (574)
Net IFRS adjustments (2) - 2,022
Net Income for the period under IFRS 185 9 3,479
Notes to the reconciliation :
(a) Investments are designated as held at fair value under IFRS and are
carried at bid price. Previously under UK GAAP they were carried at cost. The
aggregate difference increases retained earnings through the income statement.
(b) Movements in the fair value of investment properties are required to be
shown through the income statement under IFRS and are now included as retained
earnings. Under UK GAAP these movements were reflected through the revaluation
reserve.
(c) Under IFRS, provision is made for the potential capital gains tax arising
in the event that the investment properties were sold at the relevant period
end, with movement being reflected through the income statement.
Restatement of Cash flow Statement
Whilst the format of the cash flow statement is different from UK GAAP, there
are no material differences to Group cash flow under previous GAAP and
International Financial Reporting Standards (IFRS).
The principal reasons for the adjustments shown in the reconciliations between
UK GAAP and IFRS are set out below:
(a) Under UK GAAP the group's accounting policy was to carry fixed asset
investments in the balance sheet at cost less any provision required for
permanent diminution in value. Under IFRS investments are carried at fair value
and movements in fair value are accounted for in the income statement.
(b) Under UK GAAP valuation changes of investment properties are recognised
directly in reserves. Under IFRS fair value changes are included in the income
statement.
(c) Under UK GAAP no deferred tax was recognised on revaluation gains unless
a binding commitment to sell the property existed at the balance sheet date.
Under IFRS the deferred tax on revaluation gains is required to be recognised in
the income statement and as a liability on the balance sheet.
6. ACCOUNTING POLICIES
Basis of Preparation and Consolidation
The Group Accounts have been prepared in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union. This is the first
interim period in which the financial statements have been prepared under IFRS.
The disclosures required by IFRS 1 concerning the transition from UK GAAP
(United Kingdom Generally Accepted Accounting Practice) to IFRS (International
Financial Reporting Standards) are given in note 5.
Investment Properties
All the Group's investment properties are re-valued annually at 25 March. The
aggregate of any revaluation gain or loss is taken through the income statement.
Depreciation
In accordance with IAS 40, freehold and leasehold investment properties are
included in the balance sheet at fair value, and are not depreciated.
Depreciation of other plant and equipment is on a straight line basis calculated
at annual rates estimated to write off each asset over its useful life of 5
years.
Disposal of Investments
The gains and losses on the disposal of investment properties and other
investments are included in the income statement below operating profit.
Gross Rental Income
Gross Rental Income represents the accrued charges under operating leases for
rental of the Group's properties and is stated net of Value Added Tax. All
income is derived in the United Kingdom.
Repairs and Renewals
Repairs and renewals are charged to the income statement as incurred.
Deferred Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax. Current tax is the expected tax payable on the taxable income for the year
based on the tax rate entered or substantially enacted at the balance sheet
date, and any adjustment to tax payable in respect of prior years. Taxable
profit differs from profit before tax as reported in the income statement
because it excludes items of income or expense that are deductible in other
years, and it further excludes items that are never taxable or deductible.
Deferred taxation is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the
financial statements, and the corresponding tax bases used in the computation of
taxable profits, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised.
Deferred tax is calculated at the rates that are expected to apply in the period
when the liability is settled, or the asset is realised. Deferred tax is charged
or credited in the income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with
in equity.
Investments
Investments in subsidiaries are stated at cost less provision for impairment.
Quoted investments are recognised as held at fair value, and are measured at
subsequent reporting dates at fair value, which is either at the bid price, or
the latest traded price, depending on the convention of the exchange on which
the investment is quoted.
Pensions
Pension contribution towards employees' pension plans are charged to the income
statement as incurred.
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