Half Yearly Report

12 February 2014

Half year results for the six months ended 31 December 2013

Town Centre Securities PLC, the Leeds based property investor, developer and car park operator, today announces its results for the six months ended 31 December 2013.

Financial Highlights:

• Underlying profit before tax £4.0m (2012: £3.8m)

• Underlying earnings per share 7.5p (2012: 7.2p)

• Net asset value per share 283p (2012: 263p; June 2013: 267p)

• Triple net asset value per share 301p (2012: 286p; June 2013: 285p)

• Statutory profit after tax £12.3m (2012: £0.1m) includes revaluation gain of £8.2m (2012 deficit of £3.6m)

• Basic earnings per share 23.2p (2012: 0.2p)

• Discount to net asset value of 20% at 11 February 2014 closing share price of 226.5p

• Discount to triple net asset value of 25%

• Interim dividend of 3.1p (2012: 3.1p)

• Gross borrowings reduced to £158.1m (2012: £153.4m; 30 June 2013: £159.1m)

Operational Highlights:

· Overall occupancy level maintained at 98% (2012: 98%; June 2013: 98. %)

· Over sixty letting transactions during the period

· Merrion Centre:

o new retail and leisure units progressing with over 70% currently let or exchanged

o contracts exchanged with Leeds City Council for an extended Merrion House

· Significant progress with our development plans for Milngavie, Glasgow and Whitehall Riverside, Leeds 

· Undrawn bank facilities of £35.3m

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

"I am very pleased to report a 4% increase in the value of our investment portfolio and a 6% increase in net assets during the first half. Town Centre Securities has benefitted from the improved sentiment towards the regional property market as well as from our focus on property management activity and the development projects we have committed to undertake in Leeds, Glasgow and elsewhere.  

"Our strong asset management capability continues to maintain our high occupancy levels which in turn underpin our rental income and profitability. Our performance remains in line with our expectations and we look forward to the future with greater confidence." 

Chairman and Chief Executive's Statement

Introduction

I am very pleased to report a 4% increase in the value of our investment portfolio and a 6% increase in net assets during the first half giving an increase in net assets to 283 pence per share.

Town Centre Securities has benefitted from the improved sentiment towards the regional property market as well as from our focus on property management activity and the development projects we have committed to undertake in Leeds, Glasgow and elsewhere.

Results

Underlying profit before tax for the six months ended 31 December 2013 amounted to £4.0m (2012: £3.8m). Underlying earnings per share amounted to 7.5p (2012: 7.2p). With a portfolio valuation increase in the first half of £8.2m (2012: reduction of £3.6m) statutory profit before tax amounted to £12.3m (2012: £0.1m).

Rental income from investment properties was £8.9m (2012: £8.7m). Income from car parks was £2.5m (2012: £2.5m).

Property and administrative expenses totalled £4.0m (2012: £4.0m) and net finance costs increased marginally to £3.9m (2012: £3.8m). 

Net assets increased by 6% to £150.5m (June 2013: £141.9m). Net assets per share increased to 283p (2012: 263p; June 2013: 267p).

Triple net asset value was £160.3m, representing 301p per share (2012: £152.1m, 286p per share).

Dividends

The interim dividend of 3.1p per share (2012: 3.1p) will be paid as a Property Income Distribution and will amount to £1.6m. It will be paid on 27 June 2014 to shareholders registered on 30 May 2014. The final dividend for 2013 amounting to £3.9m was paid on 6 January 2014.

Review of activities

Our asset management team has maintained the quality and occupancy of our portfolio. Having completed over 60 transactions during the period, occupancy remains at 98% (2012: 98%; June 2013: 98%). Rent collections continued to be very strong with over 99% collected within five days of the quarter date. 

We have now substantially completed the nine retail and leisure units on Merrion Way. Of these Pure Gym and Costa are open and trading well, and Cosmo will shortly commence their fit out and hope to be open in the autumn. With leases exchanged on two further units, 70% of the rental value of the development is now secured. Work will commence on the refurbishment of the Merrion Centre multi-storey car park creating a modern, state of the art facility due for completion in time for Christmas trading 2014.

Following exchange of contracts with Leeds City Council in September for the refurbishment and extension of Merrion House, we will be submitting a detailed planning application shortly. Tender returns for the construction of a supermarket for Waitrose at Milngavie, Glasgow are expected in the next month, facilitating a start on site this spring. Waitrose are planning the store opening in spring 2015.

We are progressing the sale of our site at Apperley Bridge, Bradford for which we now have planning permission for a residential scheme. At Whitehall Riverside, Leeds, we have obtained detailed planning consent for a 128 bedroom hotel and outline planning consent for a 600,000 sq ft mixed use development, including three eight-storey office buildings and a 500 space multi-storey car park. At a time when there is little or no available large floor plate, Grade A facilities in Leeds we are actively seeking tenant interest.

Car parking

Car park revenues for the period remained in line with the same period last year at £2.5m (2012: £2.5m) with underlying profitability of £1.3m (2012: £1.2m). We have benefitted from our investment in new parking management equipment in Leeds and from our increasing use of social media. 

Financing

Gross borrowings at 31 December 2013 were £158.1m (2012: £153.4m; 30 June 2013: £159.1m). We have £106m First Mortgage Debenture Stock 2031 and have drawn £52.1m against our £90m of revolving credit facilities and overdraft of £5m. The revolving credit facilities are due for renewal between December 2015 and September 2016. There is significant headroom in our facilities and we are operating well within our loan to value and interest cover covenants.

Valuation

Our investment properties were valued at £291.1m at 31 December 2013, with assets held for resale valued at £7.8m, giving a total of £298.9m and our development properties are carried at £13.7m. £290.5m of the investment property was valued by our external valuers with the remainder valued by the Directors. On a like for like basis the valuation increased by £11.2m (4%). After adjusting for capital expenditure the valuation increase was £8.2m (3%).

The initial yield on the investment portfolio is 6.8% (June 2013: 7.2%).

Outlook

I am delighted that we are now seeing an improved sentiment towards the regional property market. Our investments in the major cities of Leeds, Manchester, Edinburgh and Glasgow have seen improvements in valuation in the first half year. We are pleased that development opportunities in Leeds and Glasgow, on assets we own, are moving forward and will benefit shareholders. 

Our strong asset management capability continues to maintain our high occupancy levels which in turn underpin our rental income and profitability. Our performance remains in line with our expectations and we look forward to the future with greater confidence.

I would like to thank our dedicated staff for their continuing hard work and commitment.

Edward M ZiffChairman and Chief Executive12 February 2014

Consolidated income statement

for the six months ended 31 December 2013

The Directors have approved an interim dividend of 3.1p per share (2012: 3.1p). The 2013 final dividend was £3.9m (for the six months ended 31 December 2012: £3.9m).

Consolidated statement of comprehensive income

for the six months ended 31 December 2013

All recognised income for the period is attributable to equity shareholders.

Consolidated balance sheet

as at 31 December 2013

Consolidated statement of changes in equity

for the six months ended 31 December 2013

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

Consolidated cash flow statement

for the six months ended 31 December 2013

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

Notes to the consolidated interim financial information

1. Basis of preparation

General information

Town Centre Securities PLC (the "Company") is a public limited company domiciled in the United Kingdom. Its shares are listed on the London Stock Exchange. The Consolidated Financial Statements of the Company for the year ended 30 June 2013 comprise the Company and its subsidiaries (together referred to as the "Group"). The address of its registered office is Town Centre House, The Merrion Centre, Leeds LS2 8LY. The principal activities of the Group during the period remained those of property investment, development and trading and the provision of car parking.

This interim financial information was approved for issue on 12 February 2014.

This interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2013 were approved by the Board of Directors on 18 September 2013 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

This interim financial information has not been reviewed or audited.

Basis of preparation

This interim financial information for the half year ended 31 December 2013 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 30 June 2013, which have been prepared in accordance with IFRS as adopted by the European Union.

Accounting policies

The accounting policies adopted are consistent with those of the previous financial year.

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

Going concern basis

The Directors have reviewed the cash flow forecasts of the Group and the underlying assumptions on which they are based. The Directors consider that the Group has adequate financial resources, tenants with appropriate leases and covenants, and properties of sufficient quality to enable them to conclude that the Company will continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis of accounting in preparing its consolidated interim financial statements.

Principal risks and uncertainties

The Group set out on page 26 of its Annual Report and Accounts 2013 the principal risks and uncertainties that could impact its performance; these remain unchanged since the Annual Report was published. The Group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity.

Our key risks relate to property valuations, availability of finance, occupancy levels and future income. Property values are currently stable and we have sufficient bank facilities and headroom in place. The Group has no over reliance on any one tenant or sector and has a skilled and experienced team of asset managers dealing with day-to-day management of our portfolio.

Forward-looking statements

Certain statements in this half year report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

2. Revenue and underlying profit before taxation

3. Segmental information

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

4. Property expenses

5. Administrative expenses

6. Dividends

A final dividend in respect of 2013 of 7.34p per share was approved at the Company's Annual General Meeting (AGM) on 19 November 2013 and was paid to shareholders on 6 January 2014. This dividend comprised an ordinary dividend of 0.82p per share and a Property Income Distribution (PID) of 6.52p per share.

An interim dividend in respect of 2014 of 3.1p per share is proposed. This amounts to an estimated dividend of £1.6m which has not been reflected in this report and will be paid on 27 June 2014 to shareholders on the register on 30 May 2014.

This dividend will be paid entirely as a PID.

7. Earnings per share

The diluted earnings per share as at 31 December 2013 was 23.2p per share and underlying was 7.5p (2012: 0.2p earnings per share, underlying earnings: 7.2p; 30 June 2013: 6.7p earnings per share, underlying earnings: 13.7p).

Underlying earnings and earnings per share have been disclosed in order that the effects of disposal profits 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 the conversion of all dilutive potential ordinary shares.

8. Tangible fixed assets

(a) Investment properties

(b) Development properties

(c) Fixtures, equipment and motor vehicles

9. Investments in joint ventures

10. Called up equity share capital

Authorised

164,879,000 (30 June 2013: 164,879,000) ordinary shares of 25p each.

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:

Responsibility statement of the directors

The Directors confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union. The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

· an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last Annual Report and Accounts.

The Directors of Town Centre Securities PLC are listed in the Annual Report for 30 June 2013. A list of current Directors is maintained on the Town Centre Securities PLC Group website: www.tcs-plc.co.uk.

Edward M Ziff Chris Kelly

Chairman and Chief Executive Finance Director

12 February 2014