Half Yearly Report

13 February 2013

TOWN CENTRE SECURITIES PLC

Half year results for the six months ended 31 December 2012

Town Centre Securities PLC, the Leeds based property investment and development company, today announces its results for the six months ended 31 December 2012.

Financial Highlights:

• Underlying profit before tax £3.8m (2011: £4.0m)

• Underlying earnings per share 7.2p (2011: 7.6p)

• Net asset value per share 263p (2011: 284p; June 2012: 270p)

• Triple net asset value per share 286p (2011: 305p; June 2012: 294p)

• Statutory profit after tax £0.1m (2011: £1.8m) includes revaluation deficit of £3.6m (2011 deficit of £2.2m)

• Basic earnings per share 0.2p (2011: 3.4p)

• Discount to net asset value of 28.9% at 12 February 2013 closing share price of 187p

• Discount to triple net asset value of 34.6%

• Interim dividend of 3.1p (2011: 3.1p)

• Gross borrowings increased to £153.4m (2011: £142.5m; 30 June 2012: £145.5m) due to £9.7m spent on acquisitions

Operational Highlights:

• Overall occupancy level increased to 97.9% (2011: 97.2%; June 2012: 97.0%)

• Merrion Centre:

- trading well with footfall up 8.3% for the half year

- new retail project progressing with over 50% currently pre let

- leasing discussions progressing with Leeds City Council for an extended Merrion House

• continuing to establish Urban Exchange, Manchester as a retail destination

• Acquisitions during the period of 6/7 Park Row, Leeds and Apperley Bridge, Leeds/Bradford at an average running yield of 9.2%

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

"The increase in our borrowing costs, following refinancing at the end of 2011, resulted, as anticipated, in a slight fall in profits. Importantly our underlying portfolio performance was in line with our expectations, despite difficult market conditions.

"We have operated in a market lacking consumer and general business confidence for a number of years and we do not expect that situation to change in the short term. For the year as a whole, however, our outlook is unchanged. We retain a robust financial position with the majority of our funding secured until 2031 and bank funding until 2015 and 2016."

Chairman and Chief Executive's Statement

Introduction

I am pleased to announce the results for the first half of our 2012/13 financial year. The increase in our borrowing costs, following refinancing at the end of 2011, resulted, as anticipated, in a slight fall in profits. Importantly our underlying portfolio performance was in line with our expectations, despite difficult market conditions.

Our portfolio continued to show considerable resilience during the period with very high occupancy. In the current economic environment value for money retailing remains key, particularly for the Merrion Centre, and is clearly meeting consumer needs.

The regeneration of the Merrion Centre is central to our strategy and we have commenced work to create seven new retail and leisure units opposite the new Leeds Arena which we anticipate will be completed later this calendar year. These units have the potential to add around £0.6m to our annualised rent roll. In addition we are working up detailed plans to refurbish the Merrion Centre multi-storey car park which will add to income from increased customer flow.

Our discussions with Leeds City Council regarding Merrion House forming a major part of its occupation strategy for the city continue and are focussed on the opportunity to refurbish and extend this property.

Results

Underlying profit before tax for the six months ended 31 December 2012 amounted to £3.8m (2011: £4.0m). Underlying earnings per share amounted to 7.2p (2011: 7.6p). Statutory profit before tax amounted to £0.1m (2011: £1.8m) as a result of a valuation reduction in the first half of £3.6m (2011: reduction of £2.2m).

Rental income from investment properties was £8.7m (2011: £8.8m).

Income from car parks was £2.5m (2011: £2.3m), which after operating costs delivered a profit of £1.3m (£1.1m).

We maintained tight control over expenses with property expenses of £1.9m (2011: £1.9m) and administrative expenses of £2.1m (2011: £2.0m).

Net finance costs increased to £3.8m (2011: £3.5m). This reflects higher borrowing levels, as forecast at the year-end, and higher bank margins following our refinancing at the end of 2011. These higher borrowing costs will continue through the second half.

Net assets are £140.0m compared to £143.7m at 30 June 2012. Net assets per share are 263p (2011: 284p; June 2012: 270p).

Dividend

The interim dividend, which will be paid as a Property Income Distribution ("PID"), will be 3.10p per share (2011: 3.10p). The dividend will be paid on 28 June 2013 to shareholders registered on 31 May 2013.

As announced in September, the final dividend for the year to 30 June 2012 of 7.34p per share will be paid on 8 April 2013.

Review of activities

Operationally our asset management team has once again made a very strong contribution. We completed over fifty lettings and renewals during the period. The Merrion Centre again performed well with an increase in footfall of 8.3%. We converted a shop in York to a Tesco Metro in November. And since Urban Exchange at Piccadilly Basin in Manchester has become fully let we have made good progress in our objective to make it a strong retail and leisure destination.

We were affected by five tenant administrations during the period, of which three properties have since been re-let. Occupancy at the end of December was 97.9% (2011: 97.2%; June 2012 97%), although given recent administrations this is unlikely to improve before the year end.

Rent collections have once again been very strong with over 99% of rent due collected within five days of the quarter end.

As previously reported we made two acquisitions (Park Row, Leeds and Apperley Bridge) for a total of £9.7m, at a running yield of 9.2% and made no disposals. We are seeking further opportunities to add to our property portfolio and car parking business through acquisitions where we can create value. 

We continue to explore opportunities at our Whitehall Road site in Leeds and Piccadilly Basin in Manchester and have submitted a detailed planning application for a proposed new Waitrose store development at Milngavie outside Glasgow.

Car Parking

Our car park business achieved revenue growth of 9% to £2.5m. Performance was particularly strong at the Merrion Centre (where revenue increased by 13% and usage by 20%). Having significantly improved revenues over the last twelve months we now expect second half revenues to be broadly in line with last year.

Financing

Gross borrowings at 31 December 2012 were £153.4m (31 December 2011: £142.5m; 30 June 2012: £145.5m). The increase was due to expenditure on acquisitions of £9.7m referred to above. We have £90m of revolving credit facilities and a £5m overdraft facility in addition to £106m First Mortgage Debenture Stock 2031. The revolving credit facilities, with three banks, are due for renewal in 2015 and 2016.

Valuation

Our investment properties were valued at 31 December 2012 at £281.6m and our development properties were valued at £13.5m. £4.1m of investment property was valued by the Directors and the remaining investment and development property was valued by our external valuers. On a like for like basis the investment portfolio reduced slightly in value by £1.6m (0.6%) in the period. The total valuation movement was £3.6m (1.3%) after adjustment for capital expenditure and £0.4m of acquisition costs.

The initial yield on the investment portfolio is £6.9% (June 2012: 7.1%).

Outlook

We have operated in a market lacking consumer and general business confidence for a number of years and we do not expect that situation to change in the short term. For the year as a whole, however, our outlook is unchanged. We retain a robust financial position with the majority of our funding secured until 2031 and bank funding secured until 2015 and 2016. Our focus on value for money retailing in four of the top five cities in the UK outside London has enabled us to maintain high occupancy levels and generate strong income for shareholders. Our asset management skills are our greatest strength and we remain competitive, working with our tenants, which assists them in achieving their objectives.

Whilst we have made two acquisitions so far this year our priority is to focus on the opportunities in our existing portfolio, particularly at the Merrion Centre.

As ever, I would like to thank our loyal and hardworking team for their outstanding commitment and support.

Edward M Ziff13 February 2013

Consolidated income statement

for the six months ended 31 December 2012

The Directors have approved an interim dividend of 3.10p per share (2011: 3.10p). The 2012 final dividend was £3.9m (for the six months ended 31 December 2011: £3.9m).

Consolidated statement of comprehensive income

for the six months ended 31 December 2012

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

Consolidated balance sheet

as at 31 December 2012

Consolidated statement of changes in equity

for the six months ended 31 December 2012

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

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 2012 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 13 February 2013.

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 2012 were approved by the Board of Directors on 11 September 2012 and delivered to the Registrar of Companies. The report of the auditors 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 nor audited.

Basis of preparation

This interim financial information for the half year ended 31 December 2012 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 2012, 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 24 of its Annual Report and Accounts 2012 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 interim 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 2012 of 7.34p per share was approved at the Company's Annual General Meeting on 20 November 2012 and will be paid to shareholders on 8 April 2013. This dividend will comprise an ordinary dividendof 2.32p per share and a Property Income Distribution ("PID") of 5.02p per share.

An interim dividend in respect of 2013 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 28 June 2013 to shareholders on the register on 31 May 2013.

This dividend will be paid entirely as a PID.

7. Earnings per share

The diluted earnings per share as at 31 December 2012 is 0.2p per share and underlying is 7.2p (2011: 3.4p, underlying: 7.6p; 30 June 2012: 28.8p, underlying: 15.1p).

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. The Group has two classes of dilutive potential ordinary shares: those under the Executive Share Option Plan and the Share Incentive Plan.

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 2012:164,879,000) ordinary shares of 25p each.

Issued and fully paid

11. Cash flow from operating activities

12. Related party transactions

During the period, the Group acquired the entire issued share capital of Apperley Bridge Limited (Apperley). The vendors were E M Ziff and M A Ziff, directors of and shareholders in the Company. The transaction was approved by shareholders on 9 August 2012 and completed on 10 August 2012. The Group paid £1,314,319 in cash to purchase the entire share capital of Apperley and on completion advanced a loan of £1m to Apperley to enable it to repay outstanding liabilities on its balance sheet. The net assets of Apperley at acquisition were £1,444,319.

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 2012. A list of current directors is maintained on the Town Centre Securities PLC Group website: www.tcs-plc.co.uk.

Edward Ziff Chris Kelly

Chairman and Chief Executive Finance Director

13 February 2013