Final Results

TOWN CENTRE SECURITIES PLC

Final results for the year ended 30 June 2013

Town Centre Securities PLC ("TCS"), the Leeds based property investment and development company, today announces its final results for the year ended 30 June 2013.

Financial highlights

· Underlying* profit before tax £7.3m (2012: £7.3m)

· Underlying* earnings per share 13.7p (2012: 13.6p)

· Net asset value per share 267p (2012: 270p); discount to net asset value of 23.4% at last night's closing share price of 204.5p

· Triple net asset value per share 285p (2012: 294p per share); discount to triple net asset value of 28.2%

· Total dividend per share 10.44p (2012: 10.44p); proposed final dividend unchanged at 7.34p (2012: 7.34p)

· Statutory profit before tax amounted to £3.6m (2012: loss of £4.2m) resulting from lower revaluation deficit

· Basic earnings per share 6.7p (2012: loss per share of 7.9p)

· Borrowings increased to £158.4m (2012: £144.6m); reflecting acquisitions and capex on projects

*Excluding valuation movement, exceptional items and profits and losses on disposals

Operational highlights

· Results in line with expectations and on a par with last year

· Asset management activity improved occupancy level to 98.0% (2012: 97.0%)

· Portfolio continues to attract high quality retailers, with new lease agreements including Waitrose, Pure Gym and Burger King

· Four acquisitions for £11.6m and one disposal for £2.7m completed during the year

· Financing of £106m of debenture 2031 and £90m of revolving credit facilities 2015/16 provide good headroom for acquisitions

· Merrion retail and leisure project progressing well

· Car parking business performed well, with underlying net profit increasing by 3.2% to £2.4m. Plans to acquire and manage further car parks.

Commenting on the results, Chairman and Chief Executive Edward Ziff, said: 

"The Company has once again produced a good set of results despite a weak economic background. We have made significant progress during the year on a number of major projects, made four acquisitions and occupancy is at an all-time high.

"Our decision to invest in major cities continues to be a sound strategy during these economic times. Whilst economic data now shows that there was no double dip, there is no doubt that confidence is fragile and that a full recovery is some time away. We are encouraged by signs of improvement but remain focussed on progressing development opportunities on assets we own and other value enhancing projects."

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CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT

Introduction

I am pleased to present my tenth report as Chairman of Town Centre Securities PLC and that the Company has once again produced good results despite the economic background.

The Company has provided consistently strong returns. A shareholder investing £1,000 in the company in 1969 (from when records are available) has seen a total return on that investment of £429,000, compared to a sector average of £350,000. This is the fourth best performance over that period out of 12 real estate companies.

Results

Our underlying profit before tax of £7.3m (2012: £7.3m) (excluding property revaluation, exceptional items and property disposal) is in line with expectations. As anticipated, we experienced higher finance costs in the first full year since our refinancing, but this was offset by the addition of rental income from acquisitions and increased car park revenue.

We report a statutory profit for the year, after revaluation, of £3.6m (2012: loss £4.2m). This improvement reflects a lower revaluation deficit compared to last year. After adjustment for capital expenditure and acquisition costs the deficit was £3.8m (2012: deficit £11.4m). On a like for like basis the investment portfolio showed an increase in value of £1.0m.

Underlying earnings per share were 13.7p (2012: 13.6p). Basic earnings per share (including exceptional items and property disposals ) were 6.7p (2012: loss per share 7.9p).

Our property portfolio is now valued at £301.0m (2012: £287.6m). We purchased four properties during the year for a total consideration of £11.6m, and in addition, we now own 100% of a former joint venture, which brought five smaller properties into the portfolio.

Net assets at 30 June 2013 were £141.9m, representing 267 pence per share (2012: £143.7m, 270 pence per share). Triple net asset value was £151.6m, representing 285 pence per share (2012: £156.1m, 294 pence per share) the change reflecting movement in the mark to market value of the debenture.

Dividend

The Board is recommending an unchanged final dividend of 7.34 pence per share, which, together with the interim dividend of 3.1 pence per share, provides an unchanged total dividend of 10.44 pence per share. The final dividend comprises a Property Income Distribution of 6.52p and an ordinary dividend of 0.82p per share. The final dividend will be paid on 6 January 2014 to shareholders on the register on 6 December 2013.

Funding

Net debt at 30 June 2013 amounted to £158.4m (2012: £144.6m). This comprised £105.8m of 5.375% First Mortgage Debenture Stock 2031 and £52.6m of revolving credit facilities and overdrafts. The increase in the level of net debt is principally due to acquisitions (£11.6m) and capital expenditure (£3.2m).

The Company retains revolving credit facilities of £90m (expiring 2015/16) and an overdraft facility of £5m. The loan to value of our total borrowings is 52.6% (2012: 50.3%).

Property portfolio

We have made significant progress during the year on a number of major projects. At the Merrion Centre our retail and leisure project opposite the new Leeds Arena is taking shape. Pure Gym recently took occupation of their unit and are due to open shortly. Prior to our year end we exchanged agreements to lease with Costa Coffee, and with Cosmo, a pan-Asian cuisine restaurant with eleven units in the UK. Over 60% of the projected income is now committed and we have good interest in the remaining units.

I am delighted that we were granted planning consent to construct a new food store which has been pre-let to Waitrose, adjacent to our Homebase store in Milngavie, Glasgow. We expect to commence construction in the early part of 2014.

We have received council support for a residential scheme on the site we purchased earlier in the year at Apperley Bridge near Leeds. Rochdale Council has withdrawn its plans for a ring road extension which affected an out of town retail development site we own. This should now allow us to progress this scheme.

We completed four property acquisitions and one disposal during the year. The acquisitions of Park Row, Leeds, occupied by Lloyds TSB Bank plc, and Apperley Bridge, occupied by Barratts, with a combined yield of over 9% were completed in July and August 2012 respectively. In May 2013, we acquired a property in Kilburn, London, comprising a shop, occupied by GNC, the health and nutrition product retailer, and three apartments. We also acquired a small vacant shop adjacent to our existing properties on Shandwick Place, Edinburgh; the consideration for both properties was £1.75m. We disposed of a property in York in March 2013, for £2.7m (£0.2m above valuation).

Capital expenditure, including the creation of a Tesco Express in York, conversion of a property in Glasgow to a Burger King and the Merrion retail and leisure project amounted to £4.4m.

 At the end of June 2013 our occupancy level across the portfolio was 98% (June 2012: 97%). Although we experienced eight administrations during the year we have retained or replaced tenants at the majority of the affected units. Overall property income has increased to £17.5m and once again rent collections were very strong with over 99% of rents due collected within 5 days of the relevant quarter day.

Car parking

Town Centre Car Parks which operates eleven car parks and over 5,000 spaces in Leeds and Manchester has performed well during the year. On a like for like basis underlying net profit increased by 3.2%. Initiatives undertaken during the year included commencing the roll-out of new parking management systems at sites in Leeds including the Merrion multi-storey car park. This, coupled with the launch of the new web site (www.towncentrecarparks.com), will allow considerable flexibility in pricing and an overall improved customer experience.

Our team remains motivated to identify opportunities to acquire or manage new car parks and our planned refurbishment of the Merrion Centre multi-storey car park is expected to get underway in the new year.

Outlook

Our decision to invest in major cities continues to be a sound strategy during these economic times. Whilst data now shows that there was no double dip, there is no doubt that confidence is fragile and that a full recovery is some time away. We are encouraged by signs of improvement but remain focussed on progressing development opportunities on assets we own and other value enhancing projects.

As ever, I would like to thank our loyal and dedicated staff for their commitment to Town Centre Securities PLC. They remain focussed on maintaining and creating value on behalf of our shareholders.

Edward M ZiffChairman and Chief Executive18 September 2013

Business Review

Property review

We have delivered another stable year and believe we are well placed for what appears to be a gradual return to economic growth.

Portfolio Performance

The value of our portfolio now stands at £301.0m with a gross income of £22.4m and an occupancy rate, based upon income (rather than square footage), of 98%. The external valuation of our investment portfolio as at 30 June 2013 on a like for like basis showed a slight increase of 0.4% (£1.0m). Like for like income was static after completing over 90 leases, lease renewals and extensions. Including acquisitions and disposals, the total external valuation of our portfolio is £279.3m (2012: £269.0m) and reflects an initial yield of 7.2% (2012: 7.1%) and a reversionary yield of 7.5% (2012: 7.4%).

Our largest asset, the Merrion Centre in Leeds saw growth in value of 2.75% to £116.1m with a modest 2% rise in passing rent.

Within the remainder of the portfolio increases in value in our principal retail investments in Leeds and Glasgow were offset by a fall in value in the stand-alone offices, particularly in Scotland.

Acquisitions and Disposals

We made four acquisitions during the year. We reported the purchase of Park Row, Leeds and Apperley Bridge, for a total of £9.7m at a running yield of 9.2%, in the first half of the year. In the second half we added to our existing holdings on Shandwick Place, Edinburgh with the purchase of a small vacant shop unit for £0.3m and we acquired a shop with three upper floor residential apartments on Kilburn High Road for £1.45m at an initial yield of 6.8%.

We continue to seek retail opportunities where we can add value and in particular in Greater London. We saw attractive returns from the two stand-alone retail units we sold last year in Wood Green and Holloway Road and hence this strategy will be maintained.

Asset Management

The main focus of our asset management activity has been at the Merrion Centre with the creation of retail and leisure units facing the new Leeds Arena (which held its first concert in July). We are on programme to complete this first phase by December representing a capital commitment of £8m. This will create an additional 50,000 sq ft of accommodation with an ERV of £0.65m per annum. At the end of June, we had handed over the first pre let unit to Pure Gym for their fit out. Tenant demand has been encouraging with over 60% currently pre let and with a further 10% in solicitor's hands.

The second phase of the scheme will refurbish the existing 1,100 space multi-storey car park and is due to commence in the early part of 2014.

We successfully relet a former Pizza Hut on Sauchiehall Street, Glasgow to Burger King who took a new 20 year lease and we regeared the adjacent Starbucks who extended their lease by a further 10 years to 2024. Both demonstrated confidence in this retail location.

In York we took the opportunity to obtain vacant possession of a unit, extending and converting it for occupation by Tesco Express on a new 15 year lease.

Customer satisfaction

In March we commissioned an independent customer satisfaction study at the Merrion Centre. We were delighted that the majority of retailers rated their overall satisfaction as either good or excellent. The feedback was much appreciated and a number of opportunities for improvement were identified.

Development

With some signs that the occupation market is recovering we have recently obtained detailed consent for a 126 bed hotel on our Whitehall Riverside site in Leeds and have lodged a revised outline application on the remainder for 450,000 sq ft of commercial offices together with a 500 space multi-storey car park which will replace the current surface parking.

Agreement has been reached with Leeds City Council to refurbish and extend Merrion House at the Merrion Centre which will become its principal office building in the city and the single point of call for all customer enquiries. Subject to obtaining planning consent the building will comprise 170,000 sq ft of accommodation. Scheduled for completion in 2017 the Council will enter into a new 25 year lease.

In June we obtained planning consent for a 36,500 sq ft food store for Waitrose on land opposite our existing Homebase unit outside of Glasgow city centre. The site currently forms part of the West of Scotland Football Club and involves the relocation of a rugby pitch prior to commencing construction of the store. We intend to commence construction in the early part of 2014 targeting a store opening in Spring 2015.

Representations made by the Company to Rochdale Council have led to the withdrawal of proposals for a ring road which blighted our redevelopment site situated opposite our existing out of town retail investment, Central Retail Park. This now allows us to progress the scheme which has a detailed planning consent for 125,000 sq ft of open A1 and we will be seeking tenant interest.

We have received Council support for our redevelopment of the Apperley Bridge property which paves the way for an 80 unit residential development in the future. Currently the property is fully occupied and income producing for a further two years.

Town Centre Car Parks Review

We experienced another good year for our car park business with revenues increasing to £4.93m, delivering underlying profits of £2.4m (2012: £4.86m and £2.3m respectively). 

These results have been delivered despite a general fall in daily parking rates, particularly for commuters. Competing sites without planning permission have provided further pressure.

Our main success has been an active campaign to recruit corporate customers. We have also invested in our branches in Leeds. We installed a new parking management system (PMS) in the Merrion Centre using Automatic Number Plate Recognition (ANPR) technology. This is the first stage in a major refurbishment of this car park; the second phase begins in January 2014. We have also completed a similar installation at Whitehall Road. This has allowed us to increase revenue and decrease costs at this branch.

We have further developed our website, mobile app and use of social media. We believe that this will be a significant factor in our future development. We have a user friendly website where customers can pre-book season tickets, reserve spaces and get directions to each car park from their current location. Still in development, launching later in the year, we have planned integration of satellite navigation to mobile devices to enable customers to drive straight to any of our branches. We will also extend the use of barcodes to facilitate marketing campaigns with promotional discount vouchers.

The Leeds Arena opened on 24 July and we are an official parking partner under a management agreement with Leeds City Council. The Arena holds 13,000 people and our car park is within 100 yards of the main entrance.

We have a programme to acquire and manage further car parks to enable us to capitalise on our investment and hope to expand the portfolio in the current financial year. We will regularly upgrade to state of the art technology in our branches to improve service and efficiency, enhancing the customer experience and growing this business.

Richard LewisProperty Director

Financial review

Income statement

Underlying profit before tax was £7.3m (2012: £7.3m). This result excludes all exceptional items and property disposal profits and losses. Rental income increased by £0.4m. The increase in income from acquisitions and car parking was partially offset by disposals.

Our statutory result after taxation amounted to £3.6m. The revaluation movement this year was a reduction of £3.8m compared to a reduction in 2012 of £11.4m. 

Underlying administrative expenses were £4.2m (2012: £4.1m) and underlying property expenses were £4.0m (2012: £4.1m). Property expenses can be further analysed between property portfolio costs of £1.8m (2012: £1.8m) and car park operations expenses of £2.2m (2012: £2.3m). Administrative expenses can be analysed between the property business of £3.8m (2012: £3.9m) and car parks of £0.4m (2012: £0.2m).

Interest costs amounted to £7.7m (2012: £7.3m). This is the first full year since refinancing and costs have increased as expected, offset by a reduction in LIBOR in the second half. Interest cover was 1.95 times (2012: 2.0 times).

Balance sheet

Our net asset value at 30 June 2013 reduced marginally to £141.9m from £143.7m. This was due to the property valuation movement and dividend this year exceeding our profits. Net assets per share were 267p (2012: 270p per share).

Our property portfolio (excluding properties owned by joint ventures) is now valued at £301.0m (2012: £287.6m). 

Net borrowings increased during the year to £158.4m from £144.6m. This was mainly due to property acquisitions and capital expenditure during the year. As a result gearing has increased to 112% (2012: 101%). Gross borrowings of £159.1m comprised £106m of debenture loan and £52.7m of amounts drawn on our revolving credit facilities and a £0.4m overdraft. Net borrowings represented 52.6% of property assets (2012: 50.3%).

Cash flow

Cash inflows from operations amounted to £15.0m (2012: £13.8m). After net interest payments of £7.9m (2012: £7.7m) the net cash generated of £7.1m (2012: £6.1m) was absorbed by £11.6m spent on acquisitions and £3.2m (2012: £6.6m) on improving and refurbishing investment properties. Net disposal proceeds amounted to £2.5m (2012: £2.5m). Dividend payments amounted to £4.8m (2012: £5.5m). £8.9m was drawn down on existing facilities, resulting in a reduction in cash and cash equivalents of £1.3m.

Dividends

The total dividend comprises an interim dividend of 3.10p per share and the final dividend of 7.34p per share, unchanged from 2012. The dividend comprises PID payments of 9.62p per share and an ordinary dividend of 0.82p per share.

Chris KellyFinance Director

Consolidated income statement

for the year ended 30 June 2013

Consolidated statement of comprehensive income

for the year ended 30 June 2013

All recognised income for the year is attributable to owners of the Parent.

Consolidated balance sheet

as at 30 June 2013

Consolidated statement of changes in equity

as at 30 June 2013

1 Other reserves on the balance sheet consist of hedging reserve and capital redemption reserve in the table above.

Consolidated cash flow statement

for the year ended 30 June 2013

The Cash Flow Statement should be read in conjunction with Note 11.

Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2013 or 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, and (ii) did not contain a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for either year.

This preliminary announcement does not constitute the Group's annual report and accounts.

The financial information included in this preliminary announcement does not include all the disclosures required by IFRS and accordingly it does not itself comply with IFRS.

The accounting policies are consistent with those of the annual financial statements for the year ended 30 June 2012, as disclosed in those financial statements.

1. Segmental information

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.

A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those segments operating in other economic environments.

The Group operates in two business segments; comprising property investment and development, and car park operations. The Group's operations are performed wholly in the United Kingdom. The chief operating decision maker has been identified as the Board. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

Segment assets

Segmental results

2. Gross revenue

3. Property expenses

4. Administrative expenses

The Income Statement charge for share-based payments in accordance with IFRS 2 is not material.

5. Taxation

6. Earnings per share (EPS)

Underlying earnings and earnings per share have been disclosed in order that the effects of disposal gains and losses, revaluation movements and non-recurring items can be fully appreciated.

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held in the employee share trust which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has three classes of dilutive potential ordinary shares: those under the Executive Share Option Plan, the Share Incentive Plan and the Save As You Earn Scheme.

7. Underlying profit

To assist shareholders in understanding the underlying results and compare to those results in previous accounting periods, adjustments made to profit/(loss) before taxation are:

8. Dividends

The Directors are proposing a final dividend in respect of the financial year ended 30 June 2013 of 7.34p per share, which will absorb an estimated £3,902,000 of shareholders' funds. This dividend will comprise an ordinary dividend of 0.82p per share and a Property Income distribution (PID) of 6.52p per share and will be paid on 6 January 2014 to shareholders who are on the Register of Members on 6 December 2013.

9. Non-current assets

(a) Investment properties

Certain investment properties including operational car parks have been revalued as at 30 June 2013 on the basis of open market value in accordance with the Royal Institution of Chartered Surveyors Appraisal and Investment Manual at £279,305,000 (2012: £268,995,000). Of these properties, £276,505,000 (2012): £268,995,000) were valued by Jones Lang LaSalle and CB Richard Ellis. Certain other freehold properties have been valued at £8,142,000 by the Directors (2012: £5,153,000).

The Directors' valuation of residential property acquired for potential development and industrial property is supported by market evidence available as at 30 June 2013.

Investment properties are analysed as follows:

(b) Development properties

The Directors have considered the valuation of development properties in light of current market conditions and have taken an impairment where market value is considered lower than cost.

 (c) Fixtures, equipment and motor vehicles

10. Share capital

Authorised

164,879,000 (2012: 164,879,000) ordinary shares of 25p each. Nominal value of authorised share capital is £41,219,750 (2012: £41,219,750).

Issued and fully paid

11. Cash flow from operating activities

12. "Triple" net asset value per share

To assist shareholders in understanding the results, the table below shows how the "triple" net asset value was arrived at: