14 October 2022

 

TOWN CENTRE SECURITIES PLC

('TCS' or the 'Company')

Final results for the year ended 30 June 2022

 

Further progress in resetting and reinvigorating the business

 

Town Centre Securities PLC, the Leeds, Manchester, Scotland, and London property investment, development, hotel and car parking company, today announces its audited final results for the year ended 30 June 2022.

 

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

"It has been another year of recovery for the business, with robust rent collection and significant improvements in both our car park and hotel operations. Further successes after the year end, including the significantly accretive sale of our investment in YourParkingSpace (YPS), have helped to further reset TCS's financial position and enabled shareholders to benefit from this uplift, with the completion of a tender offer for 4 million of the Company's own shares. Further development site sales, will enable us to continue to strengthen the balance sheet through lowering our level of absolute debt and leverage, whilst also investing in our exciting development pipeline."

 

"Looking forward, the Russia‐Ukraine conflict and the unpredictability resulting from the situation has led to inflationary and other economic pressures on our business and those of our tenants including changes to consumer spending, increased property and other expenses, interest rate rises, a weakening sterling exchange rate, increased construction costs and rent affordability."

 

"Against this background, we remain focused on enhancing value for our shareholders and continue to consider further opportunistic disposals, the proceeds of which will be used to reduce debt. Unless there are acquisitions offering significant opportunities to increase value we are not envisaging any further property investments until there is stability in the real estate sector and wider economy."

 

"Overall, we remain committed to continuing to reset and reinvigorate TCS by delivering on our accelerated four pillar strategy of: actively managing our assets, maximising available capital, investing in our development pipeline and acquiring and improving investment assets to diversify our portfolio."

 

Financial performance

·    Net assets:

o Statutory net assets of £179.3m or 341p per share up 15.3% on prior year (2021: £155.4m, 292p), including a significant revaluation of the YPS investment ahead of its sale in July 2022

o EPRA net tangible assets* measure at £174.9m or 333p per share (2021: £151.0m or 284p) 

o Revaluation increase and reversal of impairment uplifts on property portfolio, hotel, car parks and TCS share of properties held in Joint Ventures in the year of £4.2m (2021: Increase of £1.4m)

o Revaluation gain on other investments (principally YPS) during the year of £15.3m (2021: £2.8m)

·    Profits and earnings per share:

o Statutory profit before tax of £11.0m (2021: loss of £0.6m) and statutory earnings per share of 20.9p (2021: loss of 1.1p)

o EPRA earnings*, profit of £3.3m (2021: £0.3m)

o EPRA earnings per share* of 6.2p (2021: 0.6p)

·    Financing strengthened:

o Headroom of £18.5m at the year-end based on June 2022 borrowings and valuations (2021: £12.1m). This now stands at £24.7m as at 12 October 2022 following the sale of the investment in YPS and a tender offer

o Seven properties were sold during the year, generating aggregate proceeds of £37.9m

o Net debt (excluding finance leases liabilities) reduced by 6.7% to £135.1m (FY21: £145.6m), with LTV** reducing to 46.4% (FY21: 51.3%) Net debt now stands at under £120m as at 12 October 2022 following the sale of the investment in YPS and a tender offer

·    Dividends increased and partially restored to pre-covid levels:

o Final dividend of 2.5p proposed, following interim dividend of 2.5p

o Total dividend for the year of 5.0p, fully covered by earnings (2021: 3.5p)

 

* Alternative performance measures are detailed, defined and reconciled within Note 4 and the financial review section of this announcement

** LTV Calculation includes finance lease assets and liabilities

 

Resetting and reinvigorating the business for the future 

 

It has been a year of recovery with a continued focus on resetting and reinvigorating the business, in particular with the disposal and debt reduction programme. Progress against the strategy is detailed below:

 

Actively managing our assets                          

Our long-standing strategy of active management and redevelopment, to drive income and capital growth, has continued:

 

·    The proportion of retail and leisure assets in the portfolio remains low at 31%, down from 40% in June 2020, and from 60% in 2016. Pure retail now represents only 23% of the total portfolio and of that, 55% is in the resilient Merrion Estate

·    We disposed of seven assets in the year, following completed asset management initiatives.

·    The exposure to tenants either entering administration or CVAs represented less than 1% of income (two tenants; no exposure to any high-profile retail failures)

·    39 new lettings were completed in the year, key highlights being significant individual lettings in Glasgow and Hampstead, and the near full occupancy of Ducie House in Manchester following its refurbishment during the pandemic

 

Maximising available capital

A conservative capital structure, with a mix of short and long-term secure financing, has always underpinned our approach:

 

·    £10.7m of disposal proceeds from the sale of investment properties in the year were used to part repay Group borrowings

·    Bought back for cancellation £3.4m of our £99.5m 2031 5.375% debenture

·    We are in the process of renewing our existing Lloyds and Handelsbanken bank facilities. These both expire at the end of June 2023. Our existing NatWest bank facility expires in September 2024, but with the option of two further one-year extensions

·    During the year we sold, subject to planning, our Port Street, Manchester surface car parks. Completion of the sale is expected to occur in December 2022, with the proceeds of £13.0m being applied to further reduce Group borrowings

 

Investing in our development pipeline

Our development pipeline, with an estimated GDV of over £740m, is a valuable and strategic point of difference for TCS which we continue to progress and improve. Notably, in the past year:

 

·    In April 2022 we submitted the Whitehall Riverside Masterplan in conjunction with Glenbrook. This includes detailed planning applications for a 500 unit 'Build to Rent' scheme; a 12-storey office building; a 478-space multi-storey car park and an outline for further hotel/office buildings on the remainder of the site

·    In June 2022 we submitted a pre-application presentation to Leeds City Council in relation to the existing consented 100MC office building and a three-storey vertical extension to Wade House, both at the Merrion Centre, with a view to delivering a further 1,078 student accommodation units

 

Acquiring and improving investment assets to diversify our portfolio

We continue to improve investment assets, and will consider new acquisition opportunities that offer the opportunity for both diversification and growth:

 

·    Completed the £7.1m acquisition of a mixed use prime retail site in Hampstead

 

Post year end events

The resetting and reinvigoration of the business for the future has continued:

 

·    In July 2022, we announced the significant disposal of the Company's investment in YourParkingSpace for total cash consideration of up to £20.7m

·    In August 2022, we completed a Tender Offer of 4 million shares at a price of 185p per share for a total cost of £7.4m, representing approximately 7.61% of the issued share capital, delivering a positive impact on net asset value per share and earnings per share for the benefit of continuing shareholders

 

-Ends-

For further information, please contact:

 

Town Centre Securities PLC                                                                               www.tcs-plc.co.uk / @TCS PLC

Edward Ziff, Chairman and Chief Executive                                                                                 0113 222 1234              

Stewart MacNeill, Group Finance Director

 

MHP Communications                                                                                                                tcs@mhpc.com

Reg Hoare / Matthew Taylor / Pauline Guenot                                                            020 3128 8567                                                                                                                                                                                                  

Liberum                                                                                                                                       www.liberum.com

Jamie Richards  / Lauren Kettle / Nikhil Varghese                                                                     020 3100 2123

 

Peel Hunt                                                                                                                                 www.peelhunt.com

Carl Gough / Henry Nicholls / Capel Irwin                                                                     020 3597 8673 / 8640

 

Chairman & Chief Executive's Statement

 

It has been another year of recovery and investment, with further successes as we have sought to reset and reinvigorate our business for the future.

 

Overview

After two years of work to significantly de-risk and de-gear the business, we are in a very strong position. In spite of presenting many challenges, the pandemic has offered a chance for us to reset and reinvigorate the business. I am pleased with what we have been able to achieve; disposing of less well performing assets and lowering our levels of absolute debt and leverage. This process has continued following the year end, with further significant transactions underway.

 

I have spoken before about my belief that our city centres need people and footfall in order to be vibrant and thriving spaces for our communities following the damage from the pandemic.. Though people are travelling abroad again and have returned to towns for shopping and socialising, flexible working means many office workers have remained at home. There seems to be an apathetic attitude from workers and businesses towards their role in the recovery of city centres.

 

Government, local authorities, local employers and large organisations have been weak in their efforts to get people back in the office, and I would urge them to do more. Employees undoubtedly perform best when interacting and collaborating closely, so getting them back in the office would be beneficial for all.

 

Performance

 

Our statutory profit in the year of £11.0m includes strong performances from our investment property portfolio, revaluation gains of £3.5m and surpluses generated from strategic disposals of £4.6m. Coupled with other comprehensive income gains of £16.0m, the Company's balance sheet has strengthened significantly from a net asset value per share  of 292p (at 30 June 2021) to 341p.

 

EPRA earnings per share* are 6.2p for the year (2021: 0.6p) and although not back to pre Covid-19 levels, this is an encouraging performance and is despite the impact the significant disposal programme undertaken has had on the core business.

 

Rent collection has continued to improve with over 99% of all rent and service charge income invoiced in the year collected.

 

As mentioned above, the Company has benefited from other comprehensive income gains in the year, which primarily relate to the significant disposal after the year end of the Company's investment in YourParkingSpace (YPS) for total cash consideration of up to £20.7m.

 

£37.9m of disposals during the year, together with the YPS sale and further sales in the pipeline, are enabling us to continue to strengthen the balance sheet of the Company through lowering our level of absolute debt and leverage.

 

* Alternative performance measures are detailed, defined and reconciled within Note 4 and the financial review section of this announcement

 

Key achievements

 

Maximising available capital by divesting ex-growth assets

 

Our proactive programme of disposals was accelerated again this year, with a strong market for us to sell into. We have disposed of seven assets during the year and believe we can reinvest further capital raised into our development pipeline and future acquisitions.

 

Acquiring investment assets

 

We acquired for £7.1m a 12,600 sq.ft mixed‐use property, located in a prime retail pitch adjacent to Hampstead tube station, which currently comprises four multi‐level units. The asset management opportunities and valuable parking spaces makes this a solid investment for TCS and aligns with our core strategy of acquisitions where long-term value can be added.

 

Citipark

 

The car park business has performed strongly as car park occupancy levels recovered well across the period, but more office workers need to return for our car parks to perform to their full potential.

 

Hotel

 

The hotel business also performed very strongly. Staycations continued to have a positive impact this year, and corporate activity also recovered, returning to pre-pandemic levels for the first time in Summer 2021. We are hugely encouraged by the signs of recovery within the hotel segment.

 

Stakeholder engagement

 

Tenants

 

Following a torrid time during the pandemic, unfortunately, a number of our tenants are now being hit hard with rising costs. We appreciate our tenants continuing to choose to work collaboratively with us, and I can guarantee we will work hard to do what we can to support and help along the way. A good landlord-tenant relationship is key to satisfactory outcomes for both parties, and we remain focused on prioritising our mutually beneficial tenant relationships.

 

Employees

 

In our property team, one of our long-standing property directors, Helen Green, retired this year. Helen has given many years of hard work and support to myself and the business, and I would like to thank her for her service to TCS and wish her and her family well for the future. Helen leaves a talented property team behind, who are well-equipped to face the important challenges ahead.

Our employees have demonstrated ongoing flexibility and dedication throughout the year again, many returning to the office full time, which has been pleasing to see.

 

Shareholder returns

 

Shareholder support remains important as we continue to recover from the past two years.

On 6 January 2022 we commenced another share buy-back programme and we acquired for cancellation 244,378 shares in the capital of the Company, at an average price of 158p per 0rdinary Share for a total consideration (incl SDRT and costs) of £389,060.

 

Following the year end, in August 2022, we completed a Tender Offer of 4,000,000 Ordinary Shares which were acquired for cancellation at a price of 185p per Ordinary Share for a total cost of £7.4m. This represented approximately 7.61 per cent of the issued share capital of the Company.

 

These buy-backs, conducted at a significant discount to the Company's net asset value, have a positive impact on net asset value per share and earnings per share for the benefit of continuing shareholders.

 

The Board has approved a final dividend of 2.5p, totaling 5.0p for the full year (compared to a total of 3.5p last year), continuing the 'steps in the right direction' approach from last year.

 

ESG and business responsibility

 

ESG is at the heart of our business with the Company continually looking at ways to improve the responsibility of the business. Our proposed development at Whitehall Riverside is a great example of how we are looking to deliver environmentally friendly buildings that meet the needs of potential occupiers, are sympathetic to their surroundings and make a positive contribution to both the users and visitors.

 

On a smaller scale we have phased out traditional business cards in favour of a QR card approach and I am particularly pleased with the recent roll out of our electric car scheme (under the Government's salary sacrifice scheme) that has been made available to all members of staff.

 

Giving back to communities has always been an essential part of the way we operate. In addition to the Marjorie and Arnold Ziff Charitable Foundation , our head office staff donated over 100 hours of their time in December 2021 to work shifts at the Leeds Hospitals Charity Shop.

 

Outlook

 

Following the good work of the last two years, I am excited by our diversified portfolio and the potential of our strong development pipeline. I believe these show we have a sound business that is well placed for the future and can only benefit as more and more people return to normal city life.

 

We have already been boosted in the new financial year by the sale (announced in July 2022) of the Company's investment in YourParkingSpace for up to £20.7m and the sale, subject to planning, of our two Port Street, Manchester surface car parks, for £13.0m. These sales provide further financial flexibility to continue to reduce debt and leverage, invest in accretive developments and to buy back shares as appropriate.

 

However, it is  hard to be completely optimistic. We have been through a tough time during the pandemic, and it is a shame to be faced with more turmoil in our world. The Russia‐Ukraine conflict and the unpredictability resulting from the situation has led to inflationary and other economic pressures on our business and those of our tenants including changes to consumer spending, increased property and other expenses, interest rate rises, a weakening sterling exchange rate, increased construction costs and rent affordability for tenants.

 

We remain focused on enhancing value for our shareholders and continue to look at further opportunistic disposals, the proceeds of which will be used to reduce debt. Unless there are acquisitions offering significant opportunities to increase value we are not envisaging any further property investments until there is stability in the real estate sector and wider economy.

 

Considering the balance of the underlying progress we are making in resetting and reinvigorating our business and these macro‐economic and geopolitical challenges, I remain encouraged about the many opportunities for TCS and committed to delivering on our accelerated four-pillar strategy and continuing to deliver value for all our stakeholders.

 

 

 Portfolio review

 

Valuation summary

 

TCS saw the like-for-like value of its portfolio increase by 1.2% (£3.5m) after capital expenditure of £9.0m in the year. In addition the Company has recognised a further surplus of £4.6m arising on the disposal of investment properties in the year.

 

£2.8m of the revaluation gain in the year is from the Company's retail and leisure portfolio, of which 62% is our key Merrion Centre investment, signaling a slight rebound in what has been a sector in decline over the last five years.

 

The valuation of all of our properties (except one) are carried out by CBRE and Jones Lang LaSalle.

 

Portfolio overview

 

	Passing rent	ERV		Value	% of portfolio	Valuation incr/(decr)		Initial yield	Reversionary yield
Retail & Leisure	1.1	1.7		22.1	7%	10.3%		4.8%	7.3%
Merrion Centre (ex offices)	4.9	5.2		58.8	19%	2.6%		7.8%	8.4%
Offices	4.5	6.5		91.0	30%	-0.5%		4.7%	6.7%
Hotels	0.5	1.0		9.1	3%	5.4%		5.2%	9.9%
Out of town retail	1.0	1.2		14.5	5%	0.0%		6.6%	7.5%
Residential	0.9	0.9		19.2	6%	2.2%		4.6%	4.6%
	12.9	16.5		214.7	70%	1.6%		5.7%	7.2%
Development property				42.6	14%	1.5%
Car parks				49.6	16%	-1.8%
Portfolio				306.9	100%	1.2%

 

Note: includes our share of Merrion House within Offices (£35.7m - see Note 7 of this announcement), our share of Burlington House within Residential (£11.5m - see Note 7 of this announcement) and Car Park Goodwill of £4.0m arising on individual car park assets, but specifically excluding goodwill arising from the current year car park operation acquisitions. All of the above are not included in the table set out in Note 5 of this announcement.

Note: excludes IFRS 16 adjustments that relate to Right-of-Use car park assets (£26.7m) as the Directors do not believe it is appropriate to include in this analysis assets where there is less than 50 years remaining on their lease and the Group does not have full control over these assets - These assets are included in the table set out in Note 5 of this announcement.

 

The table below reconciles the above table to that set out in Note 5 of this announcement:

	FY22	FY21
	£m	£m
Portfolio as per Note 5	282.4	305.9
50% share in Merrion House	35.7	35.8
50% share in Burlington House	11.5	11.3
Goodwill - Car Parks - Property specific only	4.0	4.0
Less - IFRS 16 right-of-use car parks	(26.7)	(27.8)
As per the above table	306.9	329.2

 

Sales and Purchases

During the financial year ended 30 June 2022 we have sold seven properties, above their 30 June 2021 book value, for gross proceeds of £37.9m.

Our continued commitment to asset recycling is clear. The table details the £135.4m of disposals since FY17 of which 83% were retail and leisure assets.

 

£m	Sales				Purchases
			% Retail & Leisure				% Retail & Leisure
FY17	22.3		88%		4.0		46%
FY18	10.1		95%		9.0		0%
FY19	14.0		100%		16.0		25%
FY20	2.5		100%		1.7		100%
FY21	48.0		93%		-
FY22	37.9		59%		7.0		100%
	134.8		83%		37.7		39%

 

Retail and leisure

 

The past 12 months has seen a shift in spend with consumers turning away from durable goods to social activities as coronavirus restrictions came to an end.

New leases signed continued to show a slight rental improvement. On a rolling four quarter basis, net effective rents in Q2 2022 were up +13.9% year on year, while headline rents reported an +8.1% growth over the same period illustrating some leasing confidence creeping back into certain parts of the market. Compared to 2019 equivalent levels, both net effective and headline rents continue to fall, albeit more marginally than experienced throughout 2020-21. Net effective rents were down just -4.9% compared to pre covid equivalents, whilst reporting quarter on quarter improvements, continuing to suggest that we have already reached the bottom of the cycle. [1]

Although food store sales volumes remain slightly above pre coronavirus levels they dipped during the financial year with ONS reporting sales down -5.8% year-on-year in June 2022 as households seek more value in their grocery shopping or are indeed forced to reduce volume of goods bought whilst grocery inflation nears double digits. 1

The number of transactions across the shopping centre investment market improved slightly however yields continue to come under increasing pressure as the cost of borrowing rises and there is greater economic concern. However TCS, as a proactive landlord, continues to build flexibility into its retail portfolio through active asset management creating the ability to diversify and unlock potential repositioning opportunities.

Overall the market has shown signs of stabilising however the outlook remains uncertain as the cost of living crisis continues to squeeze disposable income for many households.

 

Regional offices

 

Our office portfolio decreased in value by £0.5m or -0.5% over the year. This does not necessarily tell the whole story, with valuation decreases of over £2.0m over the Company's Leeds office estate, offset by gains made in Manchester of £1.5m.

Office take-up nationally totalled 3.83 million sq ft in the second quarter of 2022, indicating a rise of 23% on the previous quarter's level and 44% above the same period in 2021. Leasing activity is now 15% above the five-year Q2 average of 3.33 million sq ft and 6% above the overall five-year quarterly average of 3.62 million sq ft. These five-yearly averages need to be considered against the backdrop of the pandemic.

There is strengthening demand, particularly from large tenants looking at pre-let deals. This has been particularly noticeable in Central London, where the four largest deals to complete in Q2 were all pre-lets in excess of 100,000 sq ft.

On the supply side after peaking in Q4 2021, with 31.82 million sq ft available across the UK, supply levels in both the UK Regions and Central London have fallen in each of the subsequent quarters. By the end of Q2, there was 30.92 million sq ft available across the UK, with Central London accounting for 75% of this. In the UK Regions, the vacancy rate declined to 8.6%, while 8.1% was recorded across Central London.

 

Despite uncertainties around future levels of office occupation, there has been no reduction in prime rental levels with most city centres seeing prime rents continue to climb and are above their pre-pandemic levels.

The resilience of prime rents reflects the increasing focus of occupier demand towards top quality space, driven by the desire to create a vibrant and attractive work environment to encourage employees back to the office and assist with recruitment, retention and productivity strategies, as well as staff health & wellbeing issues. In addition, there is a greater focus on buildings that are sustainable and energy-efficient, as occupiers try to meet increasingly ambitious ESG aspirations.

The dearth of new development coming through will mean that upward pressure on prime rents will continue, and the gap with rents for poorer quality grade B stock is likely to widen.

 

Looking regionally at the Leeds office market, 201,000 sq ft was transacted in Q2 2022, bringing the H1 total to 430,000 sq ft, which is in line with average levels of this time of the year. The public services and professional services sectors were responsible for 80% of take up in Q2.

 

Availability saw its fifth consecutive quarterly increase, reaching 1.2m sq ft in Q2. However, this was from a historically low base during 2019 and early 2020 and, overall, availability remains 7.2% below the ten-year average levels.  There has been a notable increase in sublet space - now standing at 110,000 sq ft, double the ten-year pre-Covid average.

 

Prime rents remained at £34.00 per sq ft for the fourth quarter in a row, supported mainly by a lack of grade A availability. Typical rent-free periods remained at 24 months on a 10-year term, higher than the Big Nine average by four months.

Investment volumes reached £92m in Q2 2022, higher than long-term average levels (£60m). Although untested by a true prime grade A transaction, prime yields remain stable at 5.25%.

 

Across the Pennines in Manchester Q2 take-up continued the year's steady trajectory at 512,112 sq ft, bringing H1 total take up to just 2% under the 10-year average.

 

Availability across the city centre fell by 6% this quarter, although remained 15% above the 10-year average. Rent-frees remained at 24 months on 10-year deals, and 9-12 months on 5-year deals. Plug-and-play spaces continue to prove popular, achieving £5 per sq ft premiums on 5,000+ sq ft suites.

 

In Q2 prime rents rose to £39.50 per sq ft, and are widely expected to reach at least £40 per sq ft this year, reflecting strong demand for high-quality spaces with excellent ESG credentials.

 

On the investment side there were £191m of investment deals transacted in Q2, 15% above the 10-year average.

 

Residential

 

Residential property values have continued to grow, with supply constraints particularly key in Manchester. Our residential property portfolio, with over half in our successful Belgravia Living joint venture, has performed well, with occupancy levels of almost 100% now the norm. This has been reflected in a valuation uplift in the year of £0.4m or 2.2%. As 2023 progresses we are expecting to see further valuation uplifts as the rental income earned should increase on a unit by unit basis.

Nationwide has reported that annual UK house price growth has been consecutively in double digits in 2022, but the rate of growth is now slowing.

Supply of homes for sale remains low, with competition still strong for quality properties. This will sustain value growth in the short term, even if the speed of growth is gradually slowing. First time buyers are making up a growing share of the mortgaged market. 

The numbers of buyers looking for a residential property have more than doubled, and Buy-to-Let landlords continue to capitalise on the strength of the rental market, with rental growth now almost six times the pre-pandemic average. (Source: Zoopla).

Build-to-Rent schemes continue to perform well as an asset class with high occupancy, however consumer expectations are at an all-time high with levels of on-site amenity being a key deciding factor.

 

Other significant valuation movements

 

The value of the Company's development sites has increased marginally by £0.6m in the year as the next phases of both Whitehall Riverside, Leeds and Piccadilly Basin, Manchester are getting closer to having implementable planning permissions.

 

During the year, the value of the Company's freehold car parks has declined by £0.9m, with the majority of the decline relating to the Merrion MSCP, due to reduced occupancy levels during the work day.

 

As mentioned previously, our hotel has seen increased booking volumes since the end of the lockdowns, the success of the 'staycation' remains whilst business travel has also increased. Both of these have led to an increase in value of £0.5m in our Merrion hotel.

 

 

Location	Value	%
Leeds	200.7	65%
Manchester	74.0	24%
Scotland	11.5	4%
London	20.7	7%
	306.9	100%
Sector	Value	%
Retail/leisure	95.4	31%
Hotels	9.1	3%
Office	91.0	30%
Car parking	49.6	16%
Residential	19.2	6%
Development	42.6	14%
	306.9	100%
Lease Expiries	Value	%
0-5 years	7.4	56.9%
5-10 years	2.0	15.4%
Over 10 years	3.6	27.7%
	13.0	100%

 

 

Divisional review - Property

 

Overview

 

It has been another busy year for our dedicated property team, which manages acquisitions, disposals and planning for our increasingly diverse mixed-use portfolio and our development pipeline.

 

Whilst TCS has been successfully delivering business as usual with our existing portfolio, we have also been going through a shift in our focus. As we have continued to dispose of a number of assets, instead of simply replacing those with new acquisitions, we have been working to reimagine many of our existing assets and revisiting our development pipeline.

With an inevitable lull in delivery, COVID-19 afforded us the opportunity to look at our development pipeline again and determine where we need to bring forward new applications and new designs to replace our original proposals.

 

In line with this work, our relatively new property team is keen to bring new ideas to the table and relook at its systems and processes.

 

Disposals and acquisitions

 

We completed seven strategic disposals in the year, for proceeds of £37.9 million, as we sought to rebalance and diversify our portfolio. We have also disposed of assets to facilitate bringing forward further development, such as the Premier Inn on Whitehall Riverside.

We also agreed, subject to planning, with developers Select Property Group for the sale of Port Street, a part of the Manchester Piccadilly Basin scheme. Select have submitted plans to develop 485 apartments on the site, and we are positive about how this will complement our own strategic regeneration plans for the Basin.

 

We completed one acquisition in the year, 58-62 Heath Street in Hampstead. The 12,600 sq ft mixed-used property is located in a prime retail location adjacent to Hampstead tube station in one of the capital's most desirable suburbs. As of May, the property was fully let.

 

Rent collection

 

The strength of our relationships with our tenants has been demonstrated again, as our rent collection for the year was over 99% collected or agreed to be deferred, better than pre-pandemic levels. This is a very positive result, showing our ability to work with tenants to find solutions.

 

Asset management/letting progress in Manchester and Leeds

 

Ducie House

 

Across the last six months there have been a number of significant lettings at Ducie House. As we approach full occupancy, it has been pleasing to see the market respond so positively to the space we renovated in late 2020.

 

Merrion

 

We have seen shoppers consistently return to Leeds city centre for a number of months now, demonstrated by footfall within the Merrion Centre continuing to increase, although still not at pre-pandemic levels.

 

We have completed a number of positive lettings in the period, welcoming some interesting businesses in both retail and leisure.

 

Vicar Lane

 

Another success story during the year was at Vicar Lane. Having had a significant proportion of its units vacant for some time, it has been pleasing to see a number of new operators take space at Vicar Lane as it also nears full occupancy.

 

Residential

 

The residential portfolio, although smaller than it once was, has performed particularly well this year. We are seeing high levels of occupancy and rental growth, which is giving us the confidence to seek further acquisitions and bring forward development of further residential projects.

 

Development pipeline highlights

 

Wade House

 

Wade House is a 1960s office building, which became predominantly vacant around June time last year. Since then, we have been exploring options for redevelopment of that building and repurposing it for an alternative use.

 

We are currently in a pre application planning process to redevelop Wade House, as well as the adjacent 100MC site, as a comprehensive purpose-built student accommodation scheme. Work is ongoing around how those sites are redeveloped while maintaining occupancy and footfall in the vibrant area around the Merrion Centre. This area has seen significant development of student accommodation in recent years and a good proportion of our retail and leisure customers in Merrion are students. This has allowed us to rethink the next evolution of the Merrion estate, as a truly mixed-use site.

 

We have arranged some temporary lettings to local charities, like the Tutor Trust and the Children's Hospital to make best use of the available space in the meantime.

 

Piccadilly Basin

 

We are revisiting our own designs for Eider House, which was previously consented for 128 apartments. Since that joint venture scheme with the Belgravia Living Group entity was conceived and planning consent granted in 2018, a lot has changed in the world of build-to-rent accommodation. The knowledge we have gained from three years of operating Burlington House, our first build-to-rent development, has prompted us to submit a new application as part of the new phase of developing our campus of build-to-rent residential in Piccadilly Basin.

As part of our rethinking of Eider House, we are also looking at how we can reposition some future development opportunities in the vicinity of Eider House, Ducie House and Tariff Street, working with the local authority to review and update the strategic regeneration framework.

 

Whitehall Riverside planning case study

 

In April 2022, we submitted a new planning application for the development of Whitehall Riverside in Leeds city centre as part of a £280 million commercial partnership with build-to-rent residential developers Glenbrook.

 

Recognising the opportunity to deliver a unique neighbourhood in the West End of Leeds, our proposal comprises 500 build to rent apartments, a smart enabled and energy efficient office building and a state of the art multi-storey car park and travel hub for CitiPark. Building on the truly mixed-use nature of the masterplan, a significant focus will be on creating a sustainable and modern environment, with landscaping, cycling and pedestrian-friendly infrastructure.

 

TCS has owned the site for many years, having already delivered No.1 Whitehall Riverside (offices), Whitehall Waterfront (residential) and most recently the Premier Inn (hotel), completed in 2017.

 

George Street redevelopment

 

In our 2020 annual report, we discussed not proceeding with plans for a 50/50 joint venture with Leeds City Council to develop a 136-room aparthotel on George Street in Leeds. Work to find a solution for that project has been continuing ever since and we are still working to help the council deliver regeneration for a key part of the city.

 

Divisional review - Citipark

 

It has been a much improved year for Citipark, with its recovery ongoing. While many customers have returned, many workers are staying at home and we must continue to innovate to drive revenue and profitability.

 

Overview

 

Gross revenue for FY22 was £11.4m, a 70% increase on the prior year. Operating profit has also increased significantly to £3.1m from a breakeven position.

 

We remain cautiously optimistic about the recovery. Car park occupancy levels recovered well across the period, although this recovery was temporarily stalled with the emergence of the Omicron variant and government advice to work from home at the end of 2021. Despite that, performance has been in line with our expectations.

 

We've seen some geographical variation in performance but generally we are pleased to see customers returning as the public regain their confidence in the wake of the pandemic.

However, we are seeing that, due to changing working patterns and the prevalence of flexible working, our Monday to Friday, nine to five customer group is not returning to pre-pandemic levels. Throughout the pandemic, we've had to make some difficult decisions in order to streamline our operations, and we will continue to evolve and think differently, considering innovative new ways of using our car parks and spaces. We also have a development pipeline for many of our car parks, and these provide opportunities for us to consider other options depending on the pace of recovery.

 

Technology and innovation

 

We continue to focus on using technology as a key differentiator and a way to expand our revenue generation. Considering stakeholders and collaborating with our partners is a key focus as we seek to grow each of our platforms.

 

EV charging/CitiCharge

 

Our CitiCharge division is growing, with ongoing work to add more charging points across our portfolio.

 

A highlight of this year was the installation of 34 EV charging bays (including an option to increase to 82) with the Warwickshire NHS Trust.

 

We are very committed to expanding our offering, increasing the number of spaces and diversifying our offering via disabled charging bays and more. We are also looking to work with our enforcement business to expand the EV network with third party landowners and clients.

 

CitiPark app

 

We've seen some strong investment in the CitiPark app this year, including the change of payment flow to accommodate frictionless pay on entry as well as on exit and the inclusion of corporate billing allowing larger organisations to have one main account and just add and remove vehicles themselves and be billed accordingly.

We have a development pipeline to ensure ongoing investment in our app, with plans to add new products to ensure the customer journey improves year on year.

 

BaySentry Solutions

 

We continued the expansion of parking management company, BaySentry Solutions Ltd, this year with a further acquisition, which concluded in October. Having successfully onboarded a number of acquisitions and enjoyed steady revenue growth in this part of the business, we are in dialogue over further opportunities to grow in the coming year.

 

Alternative forms of income

 

Having first hosted a number of rooftop events last year, we continue to explore and welcome opportunities to use our locations for the hospitality industry.

 

YourParkingSpace

 

After the year end the Company completed the unconditional sale of its equity investment in YourParkingSpace Limited ("YPS") to Flowbird SAS for total cash consideration (net of fees and associated deal costs) of up to £20.7m; representing a significant uplift in value of the Group's investment.

 

The consideration from this sale helps to further strengthen the TCS balance sheet whilst providing the funds to invest in our development pipeline and make strategic technology investments.

 

Outlook

 

The potential impact of the current financial pressure on some sections of the UK economy is difficult to forecast, but we remain cautiously optimistic.

 

We have demonstrated our ability to be responsive and adaptive to challenges across the last two years. Our products and tariffs can be tailored to customer needs, and we will seek to help our customers while also trying to operate a successful and profitable business.

 

We have invested in our existing facilities and have a strong development pipeline for the future, including our new 478-space CitiPark multi‐storey car park in Leeds. We will also continue to grow our management agreement platform and invest in further acquisitions in our subsidiary companies.

 

Our app and our EV charging network provide exciting opportunities to help improve our customer experience while also improving our environmental impact.

 

FINANCIAL REVIEW

 

"The financial performance of the Company during the year ended 30 June 2022 shows a recovery from the prior years, which were significantly impacted by COVID-19. We saw consistently improving rent receipts throughout the year and strong recoveries in both our Car Park and Hotel businesses, however the acceleration of our disposal programme impacted the overall profitability of the business."

 

The statutory profit for the year was £11.0m, compared to a loss of £0.6m in the previous year, with the current year heavily influenced by Investment Property gains of over £8m (£3.5m of revaluation gain and £4.6m of profits recognized on disposal).

 

EPRA Earnings* were a profit of £3.3m in the year, compared to a profit of £0.3m in the prior year, highlighting the recovery seen in the underlying business

 

A final dividend of 2.5p per Ordinary Share has been approved by the Board, giving a full year dividend of 5.0p, up from 3.5p in the previous year.

 

During the year the Company sold seven separate investment property assets which generated £37.9m of proceeds. £10.7m of the proceeds were used to part repay Group Borrowings, £17.5m was temporarily held as collateral against the Company's Debenture Stock with the balance increasing the Company's cash resources.  Net borrowings has reduced from £145.6m to £135.1m in the year. Net borrowings represent total financial borrowings of £165.5m less lease liabilities of £28.7m and net overdrafts of £1.3m.  These disposals, partially offset by the property acquired during the year and the further post year end purchase will lead to a longer period of reduced earnings which will inevitably lead to a lower level of dividend payment than in recent years.

 

* Alternative performance measures are detailed, defined and reconciled within Note 4 and the financial review in this announcement

 

 

 

Income statement

EPRA Earnings* for the year ended 30 June 2022 were £3.3m.

£000s		FY22		FY21		YOY
Gross Revenue		28,141		21,429		31.3%
Impairment of debtors provision movement		49		788		(93.8%)
Property Expenses		(13,666)		(11,145)		22.6%
Net Revenue		14,524		11,072		31.2%
Other Income / JV Profit		2,497		2,962		(15.7%)
Other Expenses		0		0		-
Administrative Expenses		(6,531)		(5,585)		16.9%
Operating Profit		10,490		8,449		24.2%
Finance Costs		(7,215)		(8,145)		(11.4%)
EPRA Earnings		3,275		304		977.3%
Segmental		FY22		FY21		YOY
Property
Net Revenue		9,188		10,196		(9.9%)
Operating Profit		6,437		8,471		(24.0%)
CitiPark
Net Revenue		4,843		1,053		359.9%
Operating Profit		3,525		155		2174.2%
ibis Styles Hotel
Net Revenue		493		(177)		(378.5%)
Operating Profit		493		(177)		(378.5%)

 

 

Statutory profit

 

On a statutory basis the reported profit for the year was £11.0m.

The statutory profit reflects the EPRA Earnings* of £3.3m plus £3.5m of non-cash valuation and impairment movements plus the profit on disposal recognised of £4.5m on the seven investment properties and investments sold in the year less £0.3m of loss recognized on the repurchase of debenture stock in the year.

 

Gross revenue

 

Gross revenue was up £6.7m or 31.3% year on year, with key drivers being:

· Property sales during the year had a negative impact of £0.2m on the total Gross Revenue.

· CitiPark revenues have recovered strongly across the portfolio in the year, with gross revenue across the portfolio increasing by 70% in the year from £6.7m to £11.4m , with total occupancy now at just under 90% of pre COVD-19 levels.

· Income for the ibis Styles hotel, which was heavily impacted by COVID-19 has also recovered strongly increasing by £2.2m in the year, from £0.6m to £2.8m.

Property expense

 

Property expenses have increased in the  year by 22.6%, primarily reflecting the increased trading experienced in both the Hotel and Car Park businesses.

Other / JV income

 

Total Other / JV income was down 16% or £0.5m year-on-year, the majority of the difference relates to substantial dilapidation payments received by the Company in the previous year.

Administrative expenses

 

Administrative costs were £0.4m higher year on year reflecting the increased activity across all segments within the buisnesss.

Finance costs

 

Finance costs were 11.4% or £0.9m lower year on year as a result of the reduction in both the Company's bank borrowings and the buyback of £3.4m of debenture stock.

* Alternative performance measures are detailed, defined and reconciled within Note 4 and the financial review in this announcement

 

Balance sheet

The below table shows the year-end balance sheet as reported.

 

£m	FY22		FY21		vs FY21
Freehold and Right to Use Investment properties*	158.5		181.3		(12.6%)
Development properties	42.6		41.5		2.7%
Car Park related Assets, Goodwill and Investments**	97.9		82.7		18.4%
Hotel operations	9.1		8.6		n/a
	308.1		314.1		(1.9%)
Joint ventures	18.0		16.2		11.1%
Listed Investments	4.1		5.8		(29.3%)
Other non-current assets	1.0		1.0		0.0%
Total non-current assets inc available for sale	331.2		337.1		(1.8%)
Net borrowings	(163.8)		(174.6)		(6.2%)
Other assets/(liabilities)	11.9		(7.1)		(268.6%)
Statutory NAV	179.3		155.4		15.3%
Statutory NAV per share	341p		292p		16.8%
EPRA Net Tangible Assets (NTA)	174.9		151.0		15.8%
EPRA NTA per  share	333p		284p		17.3%
* includes Assets held for sale in FY21 of £3.9m
** includes Assets held for sale in FY22 of £20.4m

 

Non-current assets:

Our total non-current assets (including investments in JVs) of £331.2m (2021: £337.1) include £201.1 of investment properties (2021: £222.8m), £97.9m of non-current car parking assets (2021: £82.7m) and £9.1m of Operational Hotel assets (2021: £8.6). The car parking assets include £4.9m (2021: £4.8m) of goodwill and intangible assets arising on business combinations.

The reduction in non-current assets of £7.0m during the year comprises:

·    Disposals of £(34.3m)

·    Depreciation charge of £(2.5m)

·    Capital expenditure of £9.9m

·    Revaluation uplift/reversal of impairments totalling £19.5m

·    Operating profits generated and retained in JV entities £1.5m

 

Borrowings:

 

During the year our Net Borrowings have reduced by £10.8m, from £174.6m as at 30 June 2021 to £163.8m. This was primarily as a direct consequence of the disposals made throughout the year. As part of this we bought back £3.4m of our £99.5m 2031 5.375% debenture stock with the remaining reduction spread across our bank facilities.

Two of the three bank facilities expire within twelve months of the year end and are therefore classed as current liabilities in the balance sheet. During the year end we refinanced our £33m facility with NatWest, for a further three years on the same terms and margin albeit at lower facility limit of £25m, this facility will expire in September 2024, with an option for two further one-year extensions.

Our Lloyds Bank facility's was extended in the year and now expires in June 2023. The Lloyds facility is a £35m revolving credit facility with a further £5m overdraft facility and we are in the process of renewing this facility effective on expiry with a new three year facility (again with two one-year extensions)

Finally, our £35m Handelsbanken facility was reduced in the year to a £25m facility and  expires in June 2023. As with our Lloyds facility we are in the process of renewing this facility effective on expiry with a new three year facility (again with two one-year extensions)

Loan to value has been reduced to 46.4%, down from 51.3% a year ago. Note the calculation of loan to value includes both the finance lease assets and liabilities.

 

 

EPRA net asset reporting

 

We focus primarily on the measure of Net Tangible Assets (NTA). The below table reconciles IFRS net assets to NTA, and the other EPRA measures.

There are three EPRA Net Asset Valuation metrics, namely EPRA Net Reinstatement Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net Disposal Value (NDV). The EPRA NRV scenario, aims to represent the value required to rebuild the entity and assumes that no selling of assets takes place. The EPRA NTA is focused on reflecting a company's tangible assets. EPRA NDV aims to represent the shareholders' value under an orderly sale of business, where, for example, financial instruments are calculated to the full extent of their liability. All three NAV metrics share the same starting point, namely IFRS Equity attributable to shareholders.

 

					FY22		FY21
£m	FY22		FY21		p per share		p per share
IFRS reported NAV	179.3		155.4		341		292
Purchasers Costs 1	19.1		21.1
EPRA Net Reinstatement Value	198.4		176.5		378		332
Remove Purchasers Costs	(19.1)		(21.1)
Remove Goodwill 2	(4.4)		(4.4)
EPRA Net Tangible Assets	174.9		151.0		333		284
Fair value of fixed interest rate debt 3	1.3		(10.2)
EPRA Net Disposal Value	176.2		140.8		335		265
1 Estimated purchasers' costs including fees and stamp duty and related taxes
2 Removal of goodwill as per the IFRS Balance Sheet - relates predominantly to goodwill paid to acquire two long term car park leaseholds in London
3 Represents the adjustment to fair value (market price) of the 2031 5.375% debenture

 

 

Future financial considerations

 

Future P&L pressure

 

As highlighted elsewhere in this report, our recent disposal programme and the wider economy has had a material impact on profitability/financial recovery in the year ended 30 June 2022, in particular the changing ways people work and their shopping habits. Both of which have had an effect on our retail and leisure tenants but also in the revenue derived from our car park operation. We have seen recoveries in all segments of our business, although there is still a risk if these recoveries are stalled.

As has been seen, the acceleration of our retail disposal programme has  enabled us to reduce Company borrowings and gearing, although the disposal of income producing assets has had an impact on the earnings of the business. The Board is continuing to review options for how the proceeds of any further sales could be utilised including debt repayment, asset purchases and share buybacks.

Although we have started to increase the level of the dividend, the gradual recovery of our car park business and the loss of income due to disposals are likely to lead to continued pressure on our ability to pay a higher covered dividend.

 

Future balance sheet

 

As identified in the Risk Report, we have highlighted the continued pressure on retail and leisure assets to be a significant risk to the business. As part of the going concern and viability statement review process the Company has prepared consolidated forecasts and identified a number of mitigating factors to ensure that the ongoing viability of the business was not threatened.

 

Our expectation is that continued asset sales and debt repayments, will strengthen this further.

 

Going concern and headroom

 

One of the most critical judgements for the Board is the headroom in the Group's debt facilities. This is calculated as the maximum amount that could be borrowed, taking into account the properties secured to the funders and the facilities in place. The total headroom at 30 June 2022 was £18.5m (2021: £12.1m), which was considered to be sufficient to support our going concern conclusion. The properties secured under the Group's debt facilities would need to fall 24.4% in value before this headroom number was breached.

 

There have been a number of post balance sheet events that have impacted both the headroom but the percentage properties can fall by - taken in aggregation, these events have improved the headroom to £24.7m and percentage properties can fall by to 28.3%.

 

In assessing both the viability and going concern status of the Company, the Board reviewed detailed projections including various different scenarios. A summary of the approach and the findings is set out in the Risk Report, forming part of the Strategic Report of these financial statements.

 

Total shareholder return and total property return

 

Total shareholder return of minus 4.5% (2021: 55.8%) was calculated as the total of dividends paid during the financial year of 4.25p (2021: 3.5p) and the movement in the share price between 30 June 2021 (144p) and 30 June 2022 (133.5p), assuming reinvestment of dividends. This compares with the FTSE All Share REIT index at minus 5.2% (2021: 23.1%) for the same period.

 

The Company's share price continues to trade at a significant discount to its NAV, impacting total shareholder return.

Total shareholder returns % (CAGR)
Total shareholder returns		1 Year	10 Years	20 Years
Town Centre Securities		(4.5%)	2.3%	4.1%
FTSE All Share REIT index		(5.2%)	6.9%	3.1%

Total Property Return is calculated as the net operating profit and gains / losses from property sales and valuations as a percentage of the opening investment properties.

Total Property Return for the business for the reported 12 months was 8.7% (2021: 4.3%). This compared to the MSCI/IPD market return of 19.3% (2021: 6.4%).

The key drivers of the All Property index being higher than TCS is due to strong market performances of both industrial properties and retail warehouses of which TCS only has a small amount.

 

Consolidated income statement

for the year ended 30 June 2022

		2022	2021
	Notes	£000	£000
Gross revenue (excl service charge income)		25,383	18,703
Service charge income		2,758	2,726
Gross revenue		28,141	21,429
Release of provision for impairment of debtors		49	788
Service charge expenses		(3,666)	(3,656)
Property expenses		(10,000)	(7,489)
Net revenue		14,524	11,072
Administrative expenses	2	(6,531)	(5,585)
Other income	3	1,612	1,989
Valuation movement on investment properties		3,489	63
Impairment of car parking assets		(384)	(111)
Loss on disposal of investments		(89)	-
Profit/(loss) on disposal of investment properties		4,563	(2,320)
Share of post-tax profits from joint ventures		1,315	2,461
Operating profit		18,499	7,569
Finance costs		(8,063)	(8,145)
Finance income		576	-
Profit/(loss) before taxation		11,012	(576)
Taxation		-	-
Profit/(loss) for the year attributable to owners of the Parent		11,012	(576)
Earnings per share
Basic and diluted	4	20.9p	(1.1)p
EPRA (non-GAAP measure)	4	6.2p	0.6p
Dividends per share
Paid during the year	5	4.25p	3.5p
Proposed	5	2.5p	1.75p

 

 

Consolidated statement of comprehensive income

for the year ended 30 June 2021

 

		2022	2021
		£000	£000
Profit/(loss) for the year		11,012	(576)
Items that will not be subsequently reclassified to profit or loss
Revaluation gains on hotel assets		713	-
Revaluation gains on other investments		15,306	2,795
Total other comprehensive income		16,019	2,795
Total comprehensive income for the year		27,031	2,219
All profit and total comprehensive income for the year is attributable to owners of the Parent.