22nd Nov 2007 11:51
Wynnstay Properties PLC22 November 2007 Wynnstay Properties PLC ("Wynnstay" or "the Company") Interim Results for the six months ended 29 September 2007 Chairman's Statement I am pleased to present your Company's interim results which show a substantialincrease in profits, earnings per share and net asset value per share, comparedwith the interim results last year. Whilst we do not revalue the portfolio atthe interim stage, net asset value per share reflects the property valuationconducted in March 2007 which produced a substantial increase over book valueand is thus well above the figure at this time last year. All the comparativefigures for 2006 have been restated to reflect the adoption for the first timein these financial statements of International Financial Reporting Standards inaccordance with the requirements of the London Stock Exchange, as explainedfurther below. The results for the six months to 29 September 2007 may be summarised asfollows:- 2007 2006*- Profit on Ordinary Activities before Taxation +18% £334,000 £283,000- Earnings per share +95% 12.3p 6.3p- Interim Dividend per share +6% 2.6p 2.45p- Net Asset value per share +28% 534p 418p- Adjusted net asset value per share** +28% 567p 442p * 2006 figures have been restated in accordance with International Financial Reporting Standards. ** Adjusted net asset value per share is net asset value per share determinedin accordance with International Financial Reporting Standards and adjusted toexclude the liability for capital gains tax on unrealised gains arising on therevaluation of the investment portfolio. Property income was only marginally higher than for the same period last year.However both property and finance costs were significantly lower than last year,reflecting the fact that we did not incur charges, such as insurance andbusiness rates on vacant properties, and lower interest paid on substantiallyreduced borrowings following the disposal of the Epsom and Diss propertiestowards the end of the last financial year. Administration and other costs roseprincipally as a result of one-off items involved in the arrangements forrecruiting a new Finance Director and Company Secretary to replace PeterKirkland. The results also reflect a tax credit, rather than a charge to taxsince, as I mentioned in my statement in June, following the changes to theindustrial buildings allowance regime introduced in the 2007 Budget, we canrelease the remaining deferred tax provision of £155,000 previously made inrespect of this liability. The two vacant industrial units referred to in my statement in last year'sannual report are now let and income producing so that the portfolio is nowfully let except for two small office suites in Colchester which represent lessthan 1% of total rental income. We have concluded very satisfactory rent reviewsat our retail premises in Gosport and at our industrial unit in Alton.Furthermore we were successful in our planning appeal in relation to one of theretail units at Dorking where we obtained a change of use from retail torestaurant. This flexibility of use will improve the unit's marketability shouldthe present tenants decide not to renew their lease. We are also continuing toexplore other redevelopment and change of planning use opportunities within theexisting portfolio. The first half of the year has been one of stability in the portfolio, with noacquisitions or disposals. We have examined a number of potential acquisitions,especially in the spring and early summer but, as I commented in my statement inJune, market conditions earlier in the year were not conducive to purchases atan attractive level. During the last four months, financial markets have witnessed a period ofsignificant dislocation and uncertainty as a result of the so-called "creditcrunch" originating from the problems in the US sub-prime lending market butwhich rapidly spread to banks and markets elsewhere, including the UK. Despitethe UK's apparent sound economy this uncertainty has led to a tightening inlending terms for many businesses and has begun to have an effect on thecommercial property market as businesses and buyers of commercial property findit more difficult to obtain funding. One positive effect, however, could bethat interest rates in the present cycle, which many appeared to think werecontinuing on an upward trend in the second half of 2007, may in fact havepeaked. So far as Wynnstay is concerned, we remain in a strong financial position, withlow gearing and substantial unused borrowing facilities. It remains to be seenwhat impact the conditions in the financial markets, and the changes to businessrates on vacant commercial property will have on valuations in the commercialproperty sector when we revalue our portfolio in March 2008. We have undertaken a review of our fixed overheads and have taken certaindecisions that will significantly reduce our running costs in the present yearand in future years. We have taken the opportunity offered by our landlord'sdesire to refurbish our present premises to offer a surrender of our lease for acapital payment and to move to smaller and more cost effective premises inSouthampton Row, Holborn, London WC1. Subject to completing the legalformalities, we expect that this move will make a further contribution to thefull year's profit, net of related expenses, of in excess of £100,000 and havean ongoing beneficial impact on running costs in future years. From 1st January 2008, our new registered office and address will be 16-19,Southampton Place, London WC1A 2AJ and the telephone number will be 020 77457160 In the light of these excellent results for your Company, the Directors havedecided to declare an interim dividend of 2.6p per share, representing anincrease of 6% over last year. This will be paid on 18 December 2007 to thoseShareholders on the register on 30th November 2007. Whilst we will, as always,have to take a decision on the appropriate amount to recommend as a finaldividend having regard to the results for the full year, the Board is hopefulthat this will reflect a similar percentage increase. As foreshadowed in my statement in the Annual Report and Financial Statements,the financial statements included in this report have been prepared inaccordance with International Financial Reporting Standards (IFRS) rather than,as previously, under UK Generally Accepted Accounting Principles (GAAP). Themain impact of this change is a requirement to provide for capital gains tax onunrealised gains which could potentially arise from the annual revaluation ofinvestment properties in the portfolio to their market value. Previously, thisliability was quantified and reflected in the notes, rather than actually beingprovided for in the financial statements. The amount involved is £1,021,000. As Wynnstay is an investment company and this tax liability would only arise inthe event of a disposal of properties in the portfolio we have, in common withmany other property companies, shown our net asset value per share in thesummary above and in the financial statements both in accordance with IFRS aswell as adjusted to exclude this tax liability. We recorded an excellent attendance at the Annual General Meeting in July andreceived positive feedback on the event from a significant number ofshareholders who welcomed the slightly different format adopted for the event.This gave those Shareholders who attended a first sight of their Company's newwebsite, www.wynnstayproperties.co.uk, which went live on 15 August 2007 and hasattracted a good level of activity. It also gave Shareholders an opportunity tomeet our new Finance Director and Company Secretary, Toby Parker, who joined usat the beginning of August and who, I am pleased to report, is working closelyand effectively with Paul Williams in your interest. Our Annual General Meeting next year will again be held at the Royal AutomobileClub, 89 Pall Mall, London SW1 on Wednesday 16 July 2008 and I look forward toseeing and talking to as many shareholders as possible at that time. Pleasenote that in response to some shareholders' comments, we have moved the meetingforward by just over a week in order to avoid the beginning of the main holidayseason. Finally, on behalf of the Board, I would like to thank all Shareholders fortheir continued interest in, and support for, Wynnstay, and to convey our bestwishes for Christmas and for 2008. Philip G.H. Collins Chairman 22nd November 2007 Enquiries: Philip Collins, Chairman, Wynnstay Properties PLC - 020 7626 3057 Rick Thompson, Nominated Adviser & Broker, Charles Stanley Securities - 020 7149 6000 Unaudited Consolidated Profit & Loss AccountSix months ended 29 September 2007 Six months ended Year ended 29 Sept 29 Sept 25 March 2007 2007 2006 £'000 £'000 £'000 Property Income 786 778 1,536 Property Costs (16) (30) (48) Increase in fair value of investment properties and - - 2,596investments Profit on Disposal of Investment Properties - - 1,046 Administrative Costs (334) (278) (587) Operating Income 436 470 4,543 Investment Income 13 4 16 Finance Costs (115) (191) (350) Net Income before Taxation 334 283 4,209 Taxation 55 (85) (464) Net Income after Taxation 389 198 3,745 Dividends paid - (note 2) (204) (189) (266) Profit Retained 185 9 3,479 Basic Earnings per share - (note 3) 12.3p 6.3p 118.7pNormalised Earnings per Share - (note 3) 12.3p 6.3p 85.5p Unaudited Consolidated Balance Sheet at 29 September 2007 29 Sept 29 Sept 25 March 2007 2006 2007 £'000 £'000 £'000 Non Current Assets Investment Properties 21,530 20,360 21,530 Investments 2 3 4 21,532 20,363 21,534 Current Assets Accounts Receivable 61 98 422 Cash at Bank and in Hand 478 180 637 539 278 1,059 Accounts Payable (594) (679) (946) Net Current (Liabilities)/Assets (55) (401) 113 Total Assets Less Current Liabilities 21,477 19,962 21,647 Loans Payable (3,600) (6,000) (3,800) 17,877 13,962 17,847 Deferred Tax (1,021) (761) (1,176) Net Assets 16,856 13,201 16,671 Capital and ReservesShare Capital 789 789 789Capital Redemption Reserve 205 205 205Share Premium Account 1,135 1,135 1,135Retained Reserves 14,727 11,072 14,542 Equity Shareholders' Funds - (note 4) 16,856 13,201 16,671 Unaudited Consolidated Statement of CashflowsSix months ended 29th September 2007 Six months ended Year ended 29 September 25 March (Restated) (Restated) 2007 2006 2007 £'000 £'000 £'000 Cash flow from operating activities Profit from Operations 436 470 4,543Depreciation 2 2 4Profit on disposal of investment properties - - (1,046)Increase in fair value of investment properties - - (2,595)Decrease in fair value of investment (2) - (1)(Increase)/Decrease in accounts receivables 361 (63) (56)(Decrease)/Increase in accounts payables (352) (11) 360Income tax paid (40) (86) (131) Net cash from operating activities 405 312 1,078 Cash flow from investing activitiesInterest received 13 4 15Interest payable (171) (258) (361)Sale of property, plant and equipment - - 2,062Purchase of property, plant and equipment (2) (5) (7) Net cash from investing activities (160) (259) 1,709 Cash flow from financing activitiesDividends paid (204) (189) (266)Repayment on bank loans (200) - (2,200) Net cash from financing activities (404) (189) (2,466) Net (decrease)/increase in cash and cash equivalents (159) (136) 321 Cash and cash equivalents at beginning of period 637 316 316 Cash and cash equivalents at end of period 478 180 637 NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Accounting Policies The interim financial information has been prepared using the recognition andmeasurement principles of International Financial Reporting Standards (IFRS).The detailed accounting policies which the group expects to be applicable forthe year ending 25th March 2008 are set out in note 6. The comparative figures represent the Group's results and cash flows for the 6months ended 29th September 2006 and for the year ended 25th March 2007,previously reported under UK GAAP, under the recognition and measurementprinciples of IFRS. The consolidated financial statements are presented in pounds sterling and allvalues are rounded to the nearest thousand (£'000) except where otherwiseindicated. This financial information does not constitute statutory accounts as defined insection 240 of the Companies Act 1985. The comparative financial information for the year ended 25th March 2007 wasderived from information extracted from the annual report and accounts for thatperiod, which has been filed with the UK Registrar of Companies as adjusted forthe transition to IFRS. The auditors have reported on those UK GAAP accounts,their report was unqualified and did not contain statements under sections 237(2) or (3) of the Companies Act 1985. 2. Dividends Paid Per Amount Share Absorbed Period Payment date (pence) £'000 6 months to 29 September 2007 18 December 2007 2.60 82 6 months to 29 September 2006 14 December 2006 2.45 77 Year ended 25 March 2007 2 August 2007 6.45 204 3. Earnings per share The calculation of basic earnings per share is based on earnings of £389,000(September 2006: £198,000; March 2007: £3,745,000) and 3,155,267 ordinaryshares. The calculation of normalised earnings per share is based on earnings of£389,000 (September 2006: £198,000; March 2007: £2,699,000) and 3,155,267ordinary shares. 4. Reconciliation of changes in equity Six months ended 29 September 2007 Capital Share Share Redemption Premium Retained Total Capital Reserve Account Earnings £'000 £'000 £'000 £'000 £'000 Balance at 26 March 2007 789 205 1,135 14,542 16,671Net Income for the year - - - 389 389Dividends - - - (204) (204)Balance at 29 September 2007 789 205 1,135 14,727 16,856 Six months ended 29 September 2006 Capital Share Share Redemption Premium Retained Total Capital Reserve Account Earnings £'000 £'000 £'000 £'000 £'000 Balance at 26 March 2006 789 205 1,135 11,063 13,192Net Income for the year - - - 198 198Dividends - - - (189) (189)Balance at 29 September 2006 789 205 1,135 11,072 13,201 Year ended 25th March 2007 Capital Share Share Redemption Premium Retained Total Capital Reserve Account Earnings £'000 £'000 £'000 £'000 £'000 Balance at 26 March 2006 789 205 1,135 11,063 13,192Net Income for the year - - - 3,745 3,745Dividends - - - (266) (266)Balance at 25 March 2007 789 205 1,135 14,542 16,671 5. Transition to International Financial Reporting Standards ('IFRS') Explanation of the transition to IFRS This is the first period that the group has adopted its financial statementsunder IFRS. The last financial statements presented under UK GAAP were for theyear ended 25 March 2007. As IFRS comparative figures must be presented for theyear ended 25 March 2008, the date of transition to IFRS was 26 March 2006. Thereconciliations below are presented to enable a comparison of the 2007 publishedinterim figures with those published in the corresponding period of the previousfinancial year, the latest period presented being for the year ended 25 March2007, and as at the date of transition to IFRS being 26 March 2006. Reconciliation of equity reporting under UK GAAP to equity under IFRS Six months ended Six months ended Year ended Year ended 29 September 29 September 25 March 26 March Notes 2007 2006 2007 2006 Equity shareholders' funds under UK 17,874 13,646 17,689 13,637GAAPIFRS adjustments :Fair value of investments (a) 3 2 3 2Deferred tax on property revaluation (c) (1,021) (447) (1,021) (447)Net IFRS adjustments (1,018) (445) (1,018) (445)Equity shareholders' funds under 16,856 13,201 16,671 13,192IFRS Reconciliation of profit reported under UK GAAP to profit under IFRS Six months ended Six months ended Year ended 29 September 2007 29 September 2006 25 March 2007 Notes Profit for the period under UK GAAP 187 9 1,457IFRS adjustments :Fair value of investments (a) (2) - 1Fair value of investment properties (b) - - 2,595Deferred tax on property revaluation (c) - - (574)Net IFRS adjustments (2) - 2,022Net Income for the period under IFRS 185 9 3,479 Notes to the reconciliation : (a) Investments are designated as held at fair value under IFRS and arecarried at bid price. Previously under UK GAAP they were carried at cost. Theaggregate difference increases retained earnings through the income statement. (b) Movements in the fair value of investment properties are required to beshown through the income statement under IFRS and are now included as retainedearnings. Under UK GAAP these movements were reflected through the revaluationreserve. (c) Under IFRS, provision is made for the potential capital gains tax arisingin the event that the investment properties were sold at the relevant periodend, with movement being reflected through the income statement. Restatement of Cash flow Statement Whilst the format of the cash flow statement is different from UK GAAP, thereare no material differences to Group cash flow under previous GAAP andInternational Financial Reporting Standards (IFRS). The principal reasons for the adjustments shown in the reconciliations betweenUK GAAP and IFRS are set out below: (a) Under UK GAAP the group's accounting policy was to carry fixed assetinvestments in the balance sheet at cost less any provision required forpermanent diminution in value. Under IFRS investments are carried at fair valueand movements in fair value are accounted for in the income statement. (b) Under UK GAAP valuation changes of investment properties are recogniseddirectly in reserves. Under IFRS fair value changes are included in the incomestatement. (c) Under UK GAAP no deferred tax was recognised on revaluation gains unlessa binding commitment to sell the property existed at the balance sheet date.Under IFRS the deferred tax on revaluation gains is required to be recognised inthe income statement and as a liability on the balance sheet. 6. ACCOUNTING POLICIES Basis of Preparation and Consolidation The Group Accounts have been prepared in accordance with International FinancialReporting Standards ("IFRS") as adopted by the European Union. This is the firstinterim period in which the financial statements have been prepared under IFRS. The disclosures required by IFRS 1 concerning the transition from UK GAAP(United Kingdom Generally Accepted Accounting Practice) to IFRS (InternationalFinancial Reporting Standards) are given in note 5. Investment Properties All the Group's investment properties are re-valued annually at 25 March. Theaggregate of any revaluation gain or loss is taken through the income statement. Depreciation In accordance with IAS 40, freehold and leasehold investment properties areincluded in the balance sheet at fair value, and are not depreciated. Depreciation of other plant and equipment is on a straight line basis calculatedat annual rates estimated to write off each asset over its useful life of 5years. Disposal of Investments The gains and losses on the disposal of investment properties and otherinvestments are included in the income statement below operating profit. Gross Rental Income Gross Rental Income represents the accrued charges under operating leases forrental of the Group's properties and is stated net of Value Added Tax. Allincome is derived in the United Kingdom. Repairs and Renewals Repairs and renewals are charged to the income statement as incurred. Deferred Taxation The tax expense represents the sum of the tax currently payable and deferredtax. Current tax is the expected tax payable on the taxable income for the yearbased on the tax rate entered or substantially enacted at the balance sheetdate, and any adjustment to tax payable in respect of prior years. Taxableprofit differs from profit before tax as reported in the income statementbecause it excludes items of income or expense that are deductible in otheryears, and it further excludes items that are never taxable or deductible. Deferred taxation is the tax expected to be payable or recoverable ondifferences between the carrying amounts of assets and liabilities in thefinancial statements, and the corresponding tax bases used in the computation oftaxable profits, and is accounted for using the balance sheet liability method.Deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Deferred tax is calculated at the rates that are expected to apply in the periodwhen the liability is settled, or the asset is realised. Deferred tax is chargedor credited in the income statement, except when it relates to items charged orcredited directly to equity, in which case the deferred tax is also dealt within equity. Investments Investments in subsidiaries are stated at cost less provision for impairment.Quoted investments are recognised as held at fair value, and are measured atsubsequent reporting dates at fair value, which is either at the bid price, orthe latest traded price, depending on the convention of the exchange on whichthe investment is quoted. Pensions Pension contribution towards employees' pension plans are charged to the incomestatement as incurred. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Wynnstay Props.