Final Results
Panther Securities PLC
29 April 2002
Panther Securities PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
Panther Securities PLC, the property investment company has today announced its
preliminary results for the year ended 31 December 2001.
Highlights
• Pre-tax profits up 47% to £3.531 million (2000: £2.396 million)
• Earnings per share up 58% to 16.0p (2000: 10.1p)
• Final dividend of 3.5p per share declared together with a special dividend
of 2.0p making a total for the year of 9.0p (2000: 6.5p)
• Net Asset Value up 15% to 219.4p (2000: 190.5p)
Andrew Perloff, Chairman said:
' I am delighted to be able to report the results for the year ended 31st
December 2001. Pre tax profits have climbed significantly to £3,531,000 compared
with £2,396,000 for the year ended 31st December 2000 and the rental income
receivable for the year rose to £6,020,000 compared with £5,500,000 the previous
year.
' We continue to face the future with confidence. We have a solid and rising
rental income from a well-spread portfolio. Our finance is at fixed rates well
below the return, which we receive on our investments and we currently hold in
excess of £10 million in cash enabling us to increase our portfolio very
substantially should the right opportunities occur.'
Date: 29 April 2002
For further information please contact:
Andrew Perloff, Chairman Panther Securities PLC 020 7278 8011
Simon Courtenay City Profile 020 7448 3244
CHAIRMAN'S STATEMENT
Introduction
I am delighted to be able to report the results for the year ended 31st December
2001. Pre tax profits have climbed significantly to £3,531,000 compared with
£2,396,000 for the year ended 31st December 2000 and the rental income
receivable for the year rose to £6,020,000 compared with £5,500,000 the previous
year.
Disposals
During the year we sold nine small properties for a total of £1,325,000. This
will cut down on management time spent on lower value properties.
We also finally completed the sale of Elmbank Chambers in Glasgow for
£1,870,000. This figure was below our original expectation and was due to the
long delay caused by Glasgow Council's detailed planning requirements which also
increased costs of the scheme for converting this former office building into
flats. The sale still, however, showed a satisfactory profit on the previous
valuation and had the added benefit of ending the heavy vacant rates and
outgoings that we had to bear whilst it remained unoccupied.
During the year we realised our shareholding in Daejan Properties PLC at a
substantial profit. This has proved to be a successful investment as was our
holding in William Nash PLC which effectively liquidated itself by selling most
of its property assets. The proceeds of sale were then distributed to its
shareholders by way of dividends totalling 292p per share. The original holding
cost an average 150p per share and we still retain our holding in the now
de-listed company which retains some older style industrial investment property
in Kent. Surprisingly and pleasingly, the method of their distribution was
particularly tax efficient for us.
Acquisitions
It has always been our policy to invest in the higher yielding property sectors
with a view to building the Group's permanent rental income. We have, however,
in recent years also been upgrading the quality of the portfolio and the
following property acquisitions continue that trend.
In January we acquired a freehold shop/office building in Hazel Grove, Stockport
for £475,000 which produces £65,000 per annum in rent.
In February we acquired, at a cost of £2.3 million, a freehold parade of shops
with maisonettes above which occupies a site of nearly one acre in central
Dover. The property adjoins Dover's pedestrianised prime shopping street and
produces approximately £250,000 per annum.
In November we acquired a freehold block of shops/residential properties at the
corner of one of the main shopping streets in Bridgwater, Somerset for £1.8
million. This property produces approximately £190,000 per annum from tenants
which include Argos, Nationwide Building Society, Scope and The Outdoor Group
(Millets).
Also in November, we acquired a modern, virtual freehold shop and office parade
in High Street, Erdington, Birmingham at a cost of £2,150,000. This property
produces £226,000 per annum and is let to prime tenants which include the
Department of the Environment, Job Centre, Punch Taverns and Iceland.
Eurocity Properties PLC
We have recently increased our equity shareholding in 'Eurocity' to 29%.
Eurocity is a small AIM listed property company with an attractive but small
portfolio of shop investments mainly in Scotland. Unfortunately, it has a high
cost management, far in excess of what is necessary or viable for a company of
its size.
The company had recently wanted to change its style of business and its first
step was to enter into a preliminary agreement to make a large property company
acquisition in China. It was to be financed entirely for shares thus watering
down shareholders' holdings by 90%. We were opposed to this and managed to block
the proposal; we have also taken steps to try to remedy the excessive management
costs by calling an Extraordinary General Meeting to remove the existing
executive management and replacing it with our own. Our total investment is
currently under £500,000.
Panther House Redevelopment
Our redevelopment proposals for our buildings in Grays Inn Road and Mount
Pleasant are delayed and hampered by the constantly changing requirements of the
Local Authority. We have, however, started the preliminaries necessary to comply
with the preconditions of our existing planning permission for Panther House
whilst changing our plans to allow the Grays Inn Road frontage to be developed
independently.
Bristol Redevelopment
Our negotiations with Bristol City Council over the apportionment of the value
of various interests between our property and their site have taken much longer
than originally anticipated. This should, however, be completed shortly and will
enable us to formally offer, jointly with the Local Authority, the property for
sale by tender.
General Planning
With residential values having risen dramatically in recent years, it often
occurs that a secondary commercial property will have higher value as a
residential redevelopment. Within our portfolio there are a number of such
properties.
With interest rates at the lowest level for nearly 40 years, the seemingly
insatiable demand for new housing and with inflation on building materials
negligible, it seems surprising that last year saw the lowest amount of new
housing being built for 76 years. It is, however, not so surprising when you
consider the following cases.
We have owned, for about 20 years, a parade of 12 lock up shops in Beckenham,
Kent which comes under the London Borough of Bromley. It has the advantage of
adjoining a main line station and we considered it a very suitable case for
redevelopment, particularly in light of the fact that approximately 18 months
ago, 5 of the shops became vacant and most of the other shop leases were due to
expire or were holding over.
Our architect prepared an attractive five storey scheme for 34 flats above
ground level shops with suitable parking beneath. The planners liked the scheme
but would only proceed if it was changed to a four storey building. They
informed us that unless a revised, detailed scheme could be redrafted within
three months, their planning guidelines were due to change and anything
submitted after that time would have to allocate 25% of the housing over to
social housing.
Losing one floor made the scheme marginal. Losing a further 25% for social
housing made it unviable.
We therefore refurbished some of the vacant shops and now have a fully let
parade producing an excellent return. In this case, the losers were not Panther
but the first time buyers of Beckenham.
Brighton is a beautiful town on the south coast. For some years, we have owned a
double shop investment in York Place, which is the main Brighton to London road.
The opportunity arose to acquire 3 semi-derelict shops and upper parts adjoining
our property. These properties had been owned for many years by the Local
Authority for a proposed but cancelled road improvement scheme that would have
involved their demolition despite being in a conservation area.
Our intention was to seal off the upper parts and refurbish the ground floors.
The upper parts were extremely dilapidated and not financially viable because of
the Local Authority's refusal to allow any change in their inefficient,
historical layout. However, in due course the Planning Department relented and
told us that we could redevelop the site if we retained the facades and a few
internal divisions.
With flat prices in Brighton rising rapidly and a large depth of unused rear
site, we acquired two additional adjoining properties. Our architects prepared a
scheme, ensuring that they carefully liaised with the Local Authority and
allowing for a 25% social housing provision. After a year's careful consultation
with the Planning Department, our architects produced an attractive scheme for
shops, a pub and restaurant together with 52 flats, 14 of which were designated
for social housing use. Our planning application was duly submitted.
The Planning Department then held back our scheme for a further ten months
before submitting it to the Council Committee for consideration. Just two hours
before the committee meeting, our architects were faxed a copy of the Planning
Officer's recommendation for refusal which showed they wanted one floor lower at
the rear of the site - where it was totally unobtrusive. They did not like our
social housing partner, the YMCA, although we thought it ideal as the site
adjoins Brighton Technical College. They also required a £300,000 payment for
social amenities as they claimed we were not providing any on site and they even
said that they did not like some of the materials proposed. These points should
have been mentioned in the year of discussions.
Whilst we will probably appeal, we could easily return to our original scheme of
letting the ground floors only which would still give us an attractive return
and hold the property until common sense prevails. Once again, the real losers
in this case are the first time buyers but also there is the loss of 14 social
housing units in Brighton.
I am certain that these two examples are not unique by any means and are merely
the tip of an iceberg floating in the cold, icy waters of political correctness.
It seems to me that as soon as political correctness comes into the system and
the Planners demand 'affordable housing' they produce exactly the opposite
effect. You will notice that whilst many builders are reporting higher profits,
it is often from higher prices received for less units sold. This means that
'affordable housing' requirements make the rest of the housing less affordable
thus producing greater need for subsidised housing.
Finance
During the year we renegotiated our loans with the United Bank of Kuwait held
within the Northstar Group of Companies and on the existing security secured an
extra £2 million. We incurred a 'one-off break cost' of £130,000 and there will
be only a marginal increase in the total borrowing costs. We have, however,
agreed a number of rent reviews and new lettings in the Northstar portfolio
which more than compensates for the extra interest.
We also completed an additional £10 million loan facility with our main bankers,
HSBC PLC and, although, as at the year end only half had been drawn down, the
balance has now been received. This extra money was fixed for the 5 year period
and was at the lowest rate we have ever paid for a term loan.
Post Balance Sheet Events
Since the year end we have purchased the long leasehold (123 years at a
peppercorn) of 2-22 High Street, Bromley which is a parade of 11 lock-up shops
facing Bromley Station. We initially purchased the 60 year underlease then
subsequently acquired the head lease, thus obtaining a marriage value by merging
the two interests. The total cost was £2.7 million and the investment produces
about £290,000 per annum.
We have also purchased the long leasehold interest in 134/136 Above Bar Street,
Southampton at a cost of £860,000 which produces £90,000 net. This property is
in a prime position and occupied by Toni & Guy (multiple hairdresser) and Moss
Bros Group PLC.
Tax
Last year I wrote about the excessive burden of taxes and in particular where
certain investors in property investment companies are excluded from favourable
Capital Gains Tax treatment pointing out that property companies pay up to 4% to
the Treasury on purchases of their stock in trade. I further suggested last year
that higher rates of tax do not always produce more money for the Treasury.
In the latest budget, besides excluding property investment companies from the
Capital Gains relief when a company sells a wholly owned or part-owned
subsidiary, it has also announced proposals to counter avoidance of stamp duty
because they had received much less stamp duty than expected. Also under
consideration is increasing the stamp duty on leases.
As and when taxes became too high and morally indefensible, many people move
first from irritation to avoidance and then to evasion. It then becomes endemic
in the system as has happened in many European countries on property
transactions and has happened here with tobacco duties.
Dividends
An interim dividend of 3.5p per share was paid on 26th October 2001. We are
recommending a final dividend of 3.5p per share and, in view of the exceptional
profit on our investment in William Nash, a further special dividend of 2p per
share.
Asset values
An independent valuation of the Group's properties was undertaken by Messrs
Donaldsons, Chartered Surveyors which produced an increase in the value of the
investment portfolio of £3,707,000 equating to almost 22p per share.
Additionally, if the stock properties were included at their current valuation
the total net asset value would rise to 230p per share before allowing for tax.
Prospects
We continue to face the future with confidence. We have a solid and rising
rental income from a well-spread portfolio. Our finance is at fixed rates well
below the return which we receive on our investments and we currently hold in
excess of £10 million in cash enabling us to increase our portfolio very
substantially should the right opportunities occur.
Finally, I would like to thank all our staff, professional advisors and the
numerous firms we deal with and, of course, our tenants who have all contributed
to our success for the year.
Andrew S. Perloff
Chairman
29th April 2002
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31st December 2001
2001 2000
£'000 £'000
Turnover 7,933 6,499
Exceptional Turnover 1,495 -
Cost of sales (2,834) (1,519)
___________ _________
Gross profit 6,594 4,980
Administrative expenses (1,012) (764)
___________ _________
Operating profit 5,582 4,216
(Loss)/income from participating interests (18) 46
Profit on disposal of property 154 -
Profit on disposal of investments - 143
___________ _________
Profit on ordinary activities before interest 5,718 4,405
Interest receivable 325 381
Interest payable (2,512) (2,390)
___________ _________
Profit on ordinary activities before taxation 3,531 2,396
Taxation (810) (621)
___________ _________
Profit on ordinary activities after taxation 2,721 1,775
Minority interests (5) (7)
___________ _________
Profit attributable to members of the
Parent undertaking 2,716 1,768
Dividends (1,525) (1,103)
___________ _________
Retained profit for the year 1,191 665
Transferred from revaluation reserve 17 261
Purchase of own shares - (1,381)
Retained profit brought forward 9,283 9,738
___________ _________
Retained profit carried forward 10,491 9,283
___________ _________
Earnings per share 16.0p 10.1p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31st December 2001
2001 2000
£'000 £'000
Profit for the financial year after taxation 2,721 1,775
Unrealised surplus on revaluation of properties and investments 3,707 100
_________ ________
Total gains and losses relating to the year 6,428 1,875
_________ ________
NOTE OF CONSOLIDATED HISTORICAL COST PROFITS AND LOSSES
for the year ended 31st December 2001
2001 2000
£'000 £'000
Reported profit on ordinary activities before taxation 3,531 2,396
Realisation of property revaluation gains 17 -
Realisation of investments revaluation gains - 261
Purchase of own shares - (1,381)
_________ ________
Historical cost profit before taxation 3,548 1,276
_________ ________
Historical cost retained profit/(loss) 1,208 (455)
_________ ________
CONSOLIDATED BALANCE SHEET
at 31st December 2001
2001 2000
£'000 £'000
Fixed assets
Tangible assets 61,951 53,320
Investments 281 299
_______ _______
62,232 53,619
________ ________
Current assets
Stock 5,081 5,292
Current asset investments 626 1,092
Debtors: due within one year 753 681
Cash at bank and in hand 9,189 5,013
________ ________
15,649 12,078
________ ________
Creditors:
amounts falling due within one year (3,466) (3,057)
________ ________
Net current assets 12,183 9,021
________ ________
Total assets less current liabilities 74,415 62,640
Creditors:
amounts falling due after more than one year (37,137) (30,258)
Minority interests (92) (97)
________ ________
Net assets 37,186 32,285
________ ________
Capital and reserves
Called up share capital 4,237 4,237
Share premium account 2,862 2,862
Revaluation reserve 17,913 14,223
Capital redemption reserve 560 560
Negative goodwill reserve 1,123 1,120
Profit and loss account 10,491 9,283
________ ________
Equity shareholders' funds 37,186 32,285
________ ________
Net assets per share 219.4p 190.5p
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31st December 2001
2001 2000
£'000 £'000 £'000 £'000
Cash flow from operating activities 5,909 3,103
Returns on investments and servicing of finance (2,186) (2,010)
Taxation (599) (463)
Capital expenditure and financial investment (4,791) (497)
Acquisitions and disposals - (3)
Equity dividends paid (1,186) (1,143)
________ ________
Cash outflow before financing (2,853) (1,013)
Financing
Issue of shares - 3
Increase/(decrease) in debt 7,029 (283)
Purchase of own shares - (1,381)
__________ ________
7,029 (1,661)
________ ________
Increase/(decrease) in cash in the period 4,176 (2,674)
________ ________
Reconcilation of net cash flow to
Movement in net debt
Increase/(decrease) in cash in the period 4,176 (2,674)
Cash (inflow)/outflow from (increase)/decrease in debt (7,029) 283
_________ _______
Change in net debt resulting from cash flows (2,853) (2,391)
_______ _______
Movement in net debt in the period (2,853) (2,391)
Net debt at 1st January 2001 (25,245) (22,854)
_______ _______
Net debt at 31st December 2001 (28,098) (25,245)
________ ________
At 1st At 31st
January Cash December
2001 Flow 2001
£'000 £'000 £'000
Analysis of net debt
Cash at bank 5,013 4,176 9,189
Overdrafts - - -
_________ _______ _________
5,013 4,176 9,189
__________ ________ __________
Net debt due after 1 year 30,258 6,879 37,137
Net debt due within 1 year - 150 150
_________ _______ _________
(30,258) (7,029) (37,287)
__________ ________ __________
Total (25,245) (2,853) (28,098)
__________ ________ __________
Notes to the Accounts:
1. Dividends
The company has already paid an interim dividend of 3.5p per share (net)
(2000: 3.0p (net)) and the Directors now recommend payment of a final
dividend of 3.5p per share (net) (2000: 3.5p (net)) together with a
special dividend of 2p (net) (2000: nil). The final and special
dividends will be payable on 14th June 2002 to shareholders on the
register at the close of business on 24th May 2002.
2. Earnings per ordinary share
The calculation of earnings per ordinary share is based on earnings,
after minority interests, of £2,716,000 (2000 - £1,768,000) and on
16,947,117 ordinary shares being the weighted average number of ordinary
shares in issue during the year (2000 - 17,580,393).
3. Report and Accounts
The financial information for the year ended 31st December 2000 is
extracted from the group's financial statements to that date which
received an unqualified auditor's report and have been filed with the
Registrar of Companies.
The financial information for the year ended 31st December 2001 is
extracted from the group's financial statements to that date which
received an unqualified auditor's report and will be filed with the
Registrar of Companies in due course.
4. Annual General Meeting
The Annual General Meeting will be held on 13th June 2002.
5. Copies of the Report and Accounts will be posted to shareholders
shortly and will be available from the Company's registered office at
Panther House, 38 Mount Pleasant, London WC1X 0AP.
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