29th Apr 2015 10:54
LONDON (Alliance News) - Panther Securities PLC Wednesday said pretax profit fell by almost half in 2014, largely a result of fair value losses on an increase in liabilities related to swaps derivatives and lower margins on rental income.
The AIM-listed property investment company said its pretax profit fell to GBP4.2 million from GBP8.2 million in 2014. Revenue remained at GBP12.5 million but the percentage of that amount that was converted to profit fell. Administrative expenses were down to GBP2.6 million from GBP2.7 million.
The fair value of the company's investment properties increased by GBP13.1 million, compared with a GBP742,000 gain in the prior year.
Chairman Andrew Perloff said the swaps liability increased "with a vengeance" in 2014, reversing an improvement recorded at the end of 2013 and resulting in a total liability of GBP24.5 million. The fair value loss amounted to GBP9.8 million, compared with a GBP6.0 million fair value gain in 2013.
"Of course this is caused by the artificially induced and unprecedented low interest-rates but this low interest environment does have the effect of also improving property values," Perloff said in a statement.
The swaps contracts were agreed in 2008, when long-term interest rates were higher, in order to guard against higher interest rates.
According to Perloff, the company expects the liability for the derivative instruments "should reduce significantly" in the event that "long-term interest rates normalise", meaning rise.
The chairman said the GBP13.1 million fair value gain on the company's portfolio was the result of an independent revaluation by GL Hearn Chartered Surveyors, whereas the prior year's GBP742,000 gain was the directors' valuation.
"The reason for this is not that the directors' valuation was too cautious or the independent valuer's optimistic but, in my opinion, just reflects the property 'Boom' values in London and closely surrounding areas which has slowly rippled outwards towards other parts of the country where much of our portfolio is situated. I believe this will continue even though central London values may be faltering," Perloff said.
"Regarding the valuation, some of the increase related to our sites that have residential development value and thus saw larger than average increases on these. However, a big factor and nearly a third of this increase was due to the letting achieved at the former Wimbledon Studios. The net effect of the combined property and swap valuations resulting from the low interest rates is fortunately still positive this year," the chairman added.
Panther shares were down 0.8% at 315.00 pence late Wednesday morning.
By Samuel Agini; [email protected]; @samuelagini
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