TIDMCIC

RNS Number : 0236Z

Conygar Investment Company PLC(The)

12 December 2017

12 December 2017

THE CONYGAR INVESTMENT COMPANY PLC

PRELIMINARY RESULTS FOR THE YEARED 30 SEPTEMBER 2017

SUMMARY

-- Net asset value per share 203.0p at 30 September 2017 increased by 3.1% from 196.9p at 30 September 2016.

   --     Disposed of the majority of our investment properties for GBP129.8 million. 

-- The disposal crystallised capital gains of GBP48.2 million realised between 2009 and March 2017 on assets acquired for GBP113.4 million. Net income before tax of GBP47.0 million was also received over the same period from these assets.

   --     Acquired a 37 acre development site in Nottingham city centre for GBP13.5 million. 
   --     Total cash available for acquisitions and development funding of GBP37 million and no debt. 

-- Bought back 10.3 million shares (13.4% of ordinary share capital) at an average price of 165 pence per share.

Summary Group Net Assets as at 30 September 2017

 
                                    Per Share 
                            GBP'm           p 
 Properties and Projects     70.9       106.0 
 Investment in Regional 
  REIT Limited               27.6        41.3 
 Cash and other net 
  assets                     37.3        55.7 
 Net Assets                 135.8       203.0 
                           ======  ========== 
 

Robert Ware, Chief Executive, commented:

"The disposal of the investment property portfolio enables us to concentrate on our goal of maximising the value of the development pipeline. This area of the business will be the main driver of shareholder growth in the medium term.

Our strong balance sheet, with cash reserves and no debt, places us in a good position to take advantage of opportunities as they arise and we will make further acquisitions if it makes sense to do so.

In the meantime, we will work hard to deliver the projects and investments we currently hold."

Enquiries:

The Conygar Investment Company PLC

   Robert Ware:                  020 7258 8670 
   Ross McCaskill:              020 7258 8670 

Liberum Capital Limited (Nominated Adviser and Broker)

   Richard Bootle:               020 3100 2222 
   Henry Freeman:              020 3100 2222 

Temple Bar Advisory (Public Relations)

   Alex Child-Villiers:          07795 425580 
   Will Barker:                    020 7002 1080 

Chairman's & Chief Executive's Statement

Results

We present the Group's results for the year ended 30 September 2017.

Net asset value per share increased by 3.1% to 203.0p (2016: 196.9p). The key components driving that growth were the profit on disposal of the investment property portfolio of GBP1.5 million, net rental and dividend income of GBP4.3 million and the impact of the share buy back programme. During the year, the Group bought back 10.34 million shares, or 13.4% of the share capital in issue as at 30 September 2016, at an average price of 165 pence per share. These purchases enhanced net asset value per share by 4.9 pence.

The profit before taxation for the year was GBP1.2 million (2016: loss of GBP4.7 million). The Group had cash balances of GBP37.2 million (2016: GBP63.7 million) at the year end and no bank debt (2016: GBP56.4 million). Conygar ZDP PLC was sold to Regional REIT Limited as part of the disposal of the investment property portfolio and so the zero dividend preference share liability, which amounted to GBP34.4 million at 30 September 2016, is no longer owed by the Group.

The balance sheet is strong and now consists of our investment properties under construction and development projects totalling GBP70.9 million, our investment in Regional REIT Limited which was worth GBP27.6 million at the year end and our cash deposits of GBP37.2 million.

This places us in a good position to deliver the inherent value of our development pipeline and also to take advantage of opportunities should they arise.

Progress

In March 2017, the Group disposed of the investment property portfolio to Regional REIT Limited, which attributed a value of GBP129.8 million to the portfolio. The bank facilities were transferred with the properties together with Conygar ZDP PLC and the net consideration amounted to GBP28 million, which was satisfied by the issue of 26.3 million Regional REIT shares at a price of 106.3p.

This transaction crystallised the substantial capital gains which had been made across the portfolio since the acquisition of the assets during the period following the global financial crisis of 2008. The assets were acquired for a total cost of GBP113.4 million and the total capital gains realised over the period from 2009 to March 2017 were GBP48.2 million, subject to the disposal of the Regional REIT shares. In addition, net income of GBP47.0 million was generated over the same period, excluding tax.

The development pipeline has progressed well during the year. A detailed review of the development pipeline can be found within the Strategic Report, which follows this Statement, but we should mention a few of the projects here which are either new or have progressed significantly during the year.

In December 2016, the Group acquired 37 acres in Nottingham city centre for GBP13.5 million. We expect to submit a planning application in the New Year. The site provides a unique opportunity to create a new vibrant district in the centre of a major UK city and we are working closely with Nottingham City Council to deliver this exciting project. We expect the application to consist of a mixed-use scheme of over two million square feet which will include apartments, student housing, offices, leisure uses and associated community retail offering along with open public spaces.

Construction of our site at Cross Hands, south west Wales, began in December 2016 and the works for the initial 65,000 square foot phase of the retail park completed on time and on budget in October 2017. We have now let 80% of this 106,000 square foot retail development and the tenants include B&M Retail Ltd, Iceland Foods Ltd, Pets at Home Ltd, Costa Coffee Ltd, Dominos PLC and David Jenkins Ltd. We are in discussions with other retailers to take the remaining space at the park and we aim to have let the site fully during the course of next year.

We have also completed the construction of the M&S Food Hall investment at our site in Ashby-de-la-Zouch and subsequently sold the unit in November 2017 for GBP4.35 million. Although we intended to hold this asset to provide us with long-term income, the unsolicited offer we received was compelling and enabled us to take advantage of the strong market we are seeing for good quality regional assets. After the year end, on 1 December 2017, we also agreed a lease with B&M Retail Ltd to construct a 20,000 square foot store with an additional 7,500 square foot garden centre on the remaining two acres of this site. The lease and construction of the store are conditional on planning approval and the planning application for this development will be submitted in the New Year.

Lastly, in July 2017, we exchanged a lease agreement with Premier Inn Hotels Limited to construct an 80-bed hotel, with a restaurant and bar, at our gateway site at Parc Cybi, on the outskirts of Holyhead, Anglesey. Ynys Mon County Council (the Isle of Anglesey County Council) granted detailed planning permission at the end of October 2017. Construction will commence early in the New Year and is expected to take approximately ten months.

Dividend

The Board recommends that no dividend is declared in respect of the year ended 30 September 2017 but it will continue to review the dividend payments annually. More information on the Group's dividend policy can be found within the Strategic Report.

Share Buy Back

During the year, the Group acquired 10,340,000 ordinary shares representing 13.4% of its ordinary share capital, at an average a price of 165.4p per share. This cost GBP17.1m and, as a result of the buy backs, net asset value per share has been enhanced by 4.9 pence per share. Following the year end, the Group has acquired a further 1,070,000 ordinary shares representing 1.4% of its ordinary share capital at an average price of 158.8p per share. This cost GBP1.7 million and has enhanced net asset value per share by 1.1 pence per share. The Group will seek to renew the buy back authority at the forthcoming AGM because we consider it to be a useful capital management tool.

Outlook

The disposal of the investment property portfolio enables us to concentrate on our goal of maximising the value of the development pipeline. This area of the business will be the main driver of shareholder growth in the medium term.

Our strong balance sheet, with cash reserves and no debt, places us in a good position to take advantage of opportunities as they arise and we will make further acquisitions if it makes sense to do so.

In the meantime, we will work hard to deliver the projects and investments we currently hold.

   N J Hamway                                                                         R T E Ware 

Chairman Chief Executive

Strategic Report

The Group's Strategic Report provides a review of the business for the financial year; discusses the Group's financial position at the year end and explains the principal risks and uncertainties facing the business and how we manage those risks. We also outline the Group's business model and strategy.

Strategy and Business Model

Conygar is an AIM quoted property investment and development group dealing primarily in UK property. Our aim is to invest in property assets and companies where we can add significant value using our property management, development and transaction structuring skills.

The business operates three major strands being, property investment, property development and investment in companies which trade or invest in property or hold substantial property assets. The property portfolio and the investment in Regional REIT Limited generate cash flows sufficient to maintain the Group's administrative costs while at the same time we are creating a pipeline of investment properties and development projects that are well positioned to deliver good returns in the medium term. We continue to focus upon positive cash flow and are prepared to use modest levels of gearing to enhance returns. Assets are recycled to release capital as opportunities present themselves and we will continue to buy back shares where appropriate. The Group is content to hold cash and adopt a patient strategy unless there is a compelling reason to invest.

Position of the Company at the year end

The make-up of the Company has changed during the year with the sale of the investment property portfolio. The portfolio of investment properties under construction and the development pipeline are progressing and construction is about to start at several more locations this year. The construction of these assets will provide income as will the shareholding in Regional REIT Limited. The balance sheet remains strong with cash of GBP37.2 million and there is no debt in the Group. The Group has adequate resources to maintain and develop its business and the balance sheet remains both liquid and robust.

Events since the balance sheet date

There have been no significant events since the balance sheet date apart from the granting of detailed planning permission for an 80-bedroom hotel at Parc Cybi, Holyhead, by Ynys Mon County Council and the sale of the M&S Food Hall in Ashby-de-la-Zouch for GBP4.35m.

Summary of Group Net Assets

The Group net assets as at 30 September 2017 may be summarised as follows:

 
                                    Per Share 
                            GBP'm           p 
 Properties and Projects     70.9       106.0 
 Investment in Regional 
  REIT Limited               27.6        41.3 
 Cash and other net 
  assets                     37.3        55.7 
 Net Assets                 135.8       203.0 
                           ======  ========== 
 

Investment properties and Investment in Regional REIT Limited

The Group completed the disposal of various Group undertakings on 24 March 2017 which, with the exception of the investment properties under construction, comprised the Group's entire investment property portfolio. The net consideration was satisfied by the issue of 26,326,644 ordinary shares in Regional REIT Limited at a price of 106.3 pence per share. The shares were valued at 105 pence per share at 30 September 2017 and this gave rise to a paper loss of GBP355,000 for the year. We will continue to monitor the performance of Regional REIT and its share price but at present, we are pleased with the progress of the company. We have received dividend income to date of GBP948,000 which is equivalent to a yield of more than 7% per annum. Annualised, this income covers the majority of our overheads.

Investment Properties Under Construction and Development Projects

Good progress has been made on most of our development projects and investment properties under construction since we last reported.

Nottingham

In December 2016, the Group acquired 37 acres in Nottingham city centre for GBP13.5 million. The mainly cleared site was formerly Boots, the Chemists' headquarters and laboratories and has been vacant for twenty years. A masterplan is currently being prepared and will include offices, residential, student accommodation and leisure facilities comprising some two million square feet. We believe that this is a very exciting opportunity to help shape a major UK city and will look to submit an outline application in early 2018.

Fishguard Harbour

At Fishguard Harbour, we received Reserved Matters planning permission for the marine-based infrastructure and development platform in February 2017. We are currently in the process of preparing our Harbour Revision Order application and intend to submit this to the Marine Management Organisation shortly. Once the Order has been formalised and we acquire some outstanding land, we will be in a position to start the development of the marine platform and marina. Simultaneously, we continue to prepare the detailed Reserved Matters application in respect of the 253 homes.

Haverfordwest

With disappointment and frustration, we withdrew our two planning applications for 100,000 square feet of retail units, a hotel, a 5-screen cinema and 602 car parking spaces in June 2017. We are working on fresh planning applications which we intend to submit in the coming year.

We have been working with a national housebuilder on a masterplan for the entire residential scheme and, jointly with them, we intend to submit a Reserved Matters application next year for the first phase of the development.

Cross Hands

We completed the construction of the initial 65,000 square foot phase of the retail park at Cross Hands, South West Wales in October 2017. The construction was delivered on time and on budget. We have let 80% of the 106,000 square foot development to a number of national retailers including B&M Retail Ltd, Iceland Foods Limited, Pets at Home Ltd, Costa Coffee Ltd, Dominos PLC and David Jenkins Ltd. We are in discussions with potential tenants on the remaining units and aim to have the scheme fully let during 2018.

Holyhead Waterfront

At Holyhead Waterfront, the Town and Village Green application, submitted by the Waterfront Action Group to prevent the development from progressing, was rejected by the appointed Inspector and, subsequently, acting on his recommendation, Ynys Mon County Council resolved to formally refuse the application in March 2017. The Judicial Review period ended in June 2017 and the decision is now completely free from challenge. We will now progress the detailed design and Reserved Matters application for the development over the coming year.

Ashby-de-la-Zouch

At Ashby-de-la-Zouch, we completed the construction of an 11,000 square foot Marks and Spencer Food Hall, that was pre-let for a fixed term of 15 years. Having received an unsolicited offer of GBP4.35m, we disposed of the property in November 2017 for a net initial yield to the purchaser of 4.75%. On the further 2 acres of the site, we have exchanged an agreement for lease with B&M Retail Ltd for fifteen years. Subject to securing planning permission, we intend to construct a 20,000 square foot store with a 7,500 square foot garden centre and 79 car parking spaces. The planning application will be submitted in the New Year with the aim of starting construction on site in early spring.

Parc Cybi Business Park, Holyhead and Rhosgoch

At Parc Cybi, Anglesey, we have exchanged an agreement for lease with Premier Inn Hotels Ltd to construct an 80-bedroom hotel with a restaurant and bar. We submitted a detailed application and received planning permission from Ynys Mon County Council in November 2017. The pre-let to Premier Inn is on a 25 year lease, with a first break clause at year 20. We are currently out to tender on the building contract and will look to start on site in the New Year.

The option agreement we signed with Horizon Nuclear Power (HNP) in December 2016, enabling them to instruct us to build a logistics centre on our 6.9 acre site at Parc Cybi is still in place. Similarly, the second option agreement that covers the 203 acre site at Rhosgoch for use during the construction of Wylfa B stands until December 2022. Rhosgoch is one of several sites that HNP are considering as a location for housing the temporary construction workers. The Development Consent Order for the entire Wylfa scheme and associated infrastructure is due to be submitted by Horizon Nuclear in the New Year.

In September 2017, we disposed of our 50% interest in the Roadking Holyhead Limited truck stop to our joint venture partners for GBP3.13 million. The cash generated will be used to fund the other projects at this location.

Llandudno Junction

In May 2016, Conwy County Borough Council approved our outline planning application for 90,000 square feet of retail floor space. We continue to work in partnership with Conwy County Council as its preferred development partner to bring forward this 90,000 square foot retail park. We are in discussions with a number of national retailers and we will provide further updates in the New Year.

King's Lynn, Norfolk

This is a six acre residential development site with planning permission for 94 dwellings near to King's Lynn, Norfolk. We are continuing to market this site and are in discussions with a number of interested parties.

Summary of Investment Properties Under Construction

 
                         2017    2016 
                        GBP'm   GBP'm 
 Nottingham             14.01       - 
 Cross Hands             8.14    2.68 
 Ashby-de-la-Zouch       3.55       - 
 Haverfordwest 
  (Retail)               3.52    3.40 
 Rhosgoch                3.46    3.40 
 Parc Cybi, Holyhead     1.61       - 
  (1) 
 Total investment 
  to date               34.29    9.48 
                       ======  ====== 
 

Summary of Development Projects

It remains our intention, once the individual projects are significantly advanced, to introduce third party valuations as soon as it is practical to do so. We remain confident that there is significant upside in these projects which will become evident over the medium term.

 
                          2017    2016 
                         GBP'm   GBP'm 
 Haverfordwest 
  2                      22.03   22.18 
 Holyhead Waterfront     10.86   10.31 
 Fishguard Waterfront     1.57    1.52 
 Fishguard Lorry 
  Stop                    0.54    0.54 
 King's Lynn              0.87    0.87 
 Llandudno Junction       0.71    0.61 
 Holyhead Truck 
  Stop 3                     -    3.18 
 Parc Cybi, Holyhead 
  1                          -    1.61 
 Total investment 
  to date                36.58   40.82 
                        ======  ====== 
 

1. Parc Cybi Business Park, Holyhead has been reclassified in the year to an investment property under construction.

2. The reduction in the Haverfordwest investment from 30 September 2016 arises due to the reimbursement of retention funds from Pembrokeshire County Council following completion of the infrastructure works at Haverfordwest.

3. On 29 September 2017, the Company disposed of its 50% interest in the Holyhead truck stop joint venture and assigned to the purchaser the GBP3.2m loan previously advanced to the operating company, Roadking Holyhead Limited.

Financial review

Net Asset Value

The net asset value at the year end was GBP135.8 million (2016: GBP152.0 million). The primary movements in the year were GBP3.4 million net rental income plus a GBP1.5 million profit on the sale of Group undertakings to Regional REIT Limited and GBP0.9m of dividend income from the Regional REIT investment, offset by GBP4.5 million of finance and administrative costs, a GBP0.4 million write down of our investment in Regional REIT Limited, and GBP17.1 million spent on purchasing Conygar shares. Excluding the amounts incurred purchasing Conygar shares, net asset value increased by 0.6% in the year.

 
                              2017     2016 
                             GBP'm    GBP'm 
 Net asset value             135.8    152.0 
 Share options                   -      4.1 
                           -------  ------- 
 Diluted net asset value     135.8    156.1 
                           =======  ======= 
 
 Basic NAV per share        203.0p   196.9p 
                           =======  ======= 
 Diluted NAV per share      203.0p   196.9p 
                           =======  ======= 
 
 

The NNNAV or "triple net asset value" is the net asset value taking into account asset revaluations, the mark to market costs of debt and hedging instruments and any associated tax effect. Our investment properties are carried on our balance sheet at independent valuation. Our investment properties under construction are carried at fair value and the development and trading assets are carried at the lower of cost and net realisable value. We have not sought to value these assets as, in our opinion, they are at too early a stage in their development to provide a meaningful figure, so cost is equated to fair value for these purposes. On this basis, there is no material difference between our stated net asset value and NNNAV.

Cash flow

The Group used GBP0.2 million cash in operating activities (2016: generated GBP2.5 million).

The primary cash outflows in the year were GBP13.5 million incurred on purchasing the Nottingham Island site, GBP8.3 million to repay Barclays debt and GBP16.7 million to buy back shares. These were partly offset by cash inflows of GBP20.8 million (net of costs) from the HSBC debt, resulting in a cash outflow during the year of GBP26.5 million (2016: cash inflow of GBP6.3 million).

Net Income From Investment Property Activities

 
                                   2017    2016 
                                  GBP'm   GBP'm 
 Rental income                      5.0     9.4 
 Direct property costs            (1.6)   (2.9) 
                                 ------  ------ 
 Rental surplus                     3.4     6.5 
                                 ------  ------ 
 Profit on sale of group            1.5       - 
  undertakings* 
 Sale of investment properties        -     7.0 
 Cost of investment properties 
  sold                                -   (7.3) 
 Total net income arising 
  from investment property 
  activities                        4.9     6.2 
                                 ======  ====== 
 
 

*Profit arising from the sale of the investment property portfolio to Regional REIT Limited.

Administrative Expenses

The administrative expenses for the year ended 30 September 2017 were GBP2.7 million compared with GBP2.4 million the previous year. The major items were salary costs of GBP1.7 million (2016: GBP1.4 million) and various costs arising as a result of the Group being listed on AIM.

Financing

At 30 September 2017, the Group had cash of GBP37.2 million (2016: GBP63.7 million). The decrease has resulted mainly from the cash used in buying back shares, administrative costs and investing in the investment properties under construction and development projects.

As at 30 September 2017, the Group no longer maintains any bank loan facilities.

Taxation

The tax charge for the year is GBP0.4 million on the pre-tax profit of GBP1.2 million and comprises GBP0.3 million of current tax and GBP0.1 million of deferred tax. Current tax is payable, at a rate of 19.5% for UK registered companies and 20% for those registered in Guernsey and Jersey, on net rental income after deduction of finance costs and administrative expenses. A deferred tax liability of GBP0.2 million has been recognised in respect of the surplus of the carrying value of the Regional REIT limited shares over their indexed base cost and Group capital losses. This charge has been partly offset by a GBP0.1 million deferred tax credit arising from movements in the carrying value of investment properties, held by UK registered subsidiaries, over their indexed base costs up to their sale on 24 March 2017.

Capital management

Capital Risk Management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

While the Group does not have a formally approved gearing ratio, the objective above is actively managed through the direct linkage of borrowings to specific property. The Group seeks to ensure that secured borrowing stays within agreed covenants with external lenders.

Treasury Policies

The objective of the Group's treasury policies is to manage the Group's financial risk, secure cost effective funding for the Group's operations and to minimise the adverse effects of fluctuations in the financial markets on the value of the Group's financial assets and liabilities, on reported profitability and on the cash flows of the Group.

The Group finances its activities with a combination of bank loans, cash and short term deposits. Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group's operations. The Group may also enter into derivative transactions to manage the interest rate risk arising from the Group's operations and its sources of finance. Derivative instruments may be used to change the economic characteristics of financial instruments in accordance with the Group's treasury policies.

The management of cash and similar instruments is monitored weekly with summary cash statements produced on a fortnightly basis and discussed regularly in management and Board meetings. The overall aim is to provide sufficient liquidity to meet the requirements of the business in terms of funding developments and potential acquisitions. Surplus funds are invested with a broad range of institutions with a range of maturities up to a maximum of 180 days. At any point in time, at least half of the Group's cash is held on instant access or short term deposit of less than 30 days.

Dividend policy

The Board recommends that no dividend is paid in respect of the year ended 30 September 2017.

Our dividend policy is consistent with the overall strategy of the business: namely to invest in property assets and companies where we can add significant value using our property management, development and transaction structuring skills.

Over the past eight years we have used the surplus cash flow from the investment property portfolio to enhance these properties by refurbishment, re-letting and extending tenancies, fund the operation of the business, create a medium term pipeline of development opportunities, pay a modest dividend and buy back shares where appropriate.

Given that the Group has made only a modest profit for the year ended 30 September 2017, the Board recommends that no dividend should be declared for this period. The Board will continue to review our dividend policy each year. Our focus is, and will continue to be, primarily growth in net asset value per share.

Share buy backs

During the year, the Group acquired 10,340,000 ordinary shares at an average price of 165.4p which represents 13.4% of its ordinary share capital. This cost GBP17.1 million and net asset value per share has been enhanced by approximately 4.9 pence per share. The Group will seek to renew the buy back authority at the forthcoming Annual General Meeting.

Principal risks and uncertainties

Managing risk is an integral element of the Group's management activities and a considerable amount of time is spent assessing and managing risks to the business. Responsibility for risk management rests with the Board, with external advisers used where necessary.

Strategic risks

Strategic risks are risks arising from an inappropriate strategy or through flawed execution of a strategy. By definition, strategies tend to be longer term than most other risks and, as has been amply demonstrated in the last few years, the economic and wider environment can alter quickly and significantly. Strategic risks identified include global or national events, regulatory and legal changes, market or sector changes and key staff retention.

The Board devotes a considerable amount of time and resource to continually monitoring and discussing the environment in which we operate and the potential impacts upon the Group. We are confident we have sufficiently high calibre directors and managers to manage strategic risks.

We are content that the Group has the right approach toward strategy and our financial performance and strong balance sheet are good evidence of that.

Operational risks

Operational risks are essentially those risks that might arise from inadequate internal systems, processes, resources or incorrect decision making. Clearly, it is not possible to eliminate operational risk, however a considerable amount of time and resource is applied towards ensuring we have the right calibre of staff and external support to minimise such risks, as most operational risks arise from people-related issues. We have also invested in improved IT systems to support the business and protect data. Our executive directors are very closely involved in the day-to-day running of the business to ensure sound management judgement is applied.

The Group has not suffered any material loss from operational risks during the year.

Market risks

Market risks primarily arise from the possibility that the Group is exposed to fluctuations in the values of, or income from, its investment property portfolio and development land bank. This is a key risk to the principal activities of the Group and the exposures are continuously monitored through timely financial and management reporting and analysis of available market intelligence.

Where necessary, management takes appropriate action to mitigate any adverse impact arising from identified risks and market risks continue to be monitored closely.

Estimation and judgement risks

To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and assumptions that affect the asset and liability items and revenue and expense amounts recorded in the accounts. These estimates are based on historical experience and various other assumptions that management and the board of directors believe are reasonable under the circumstances. The results of these considerations form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other sources.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the following:

Properties held for Development

The net realisable value of properties held for development requires an assessment of fair value of the underlying assets using property appraisal techniques and other valuation methods. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

Investment in Joint Ventures

The net realisable value of properties held for development within the joint ventures requires an assessment of fair value of the underlying assets using property appraisal techniques and other valuation methods. Such estimates are inherently subjective and in particular, during the early stages of the development process.

Investment Properties under Construction

The fair value of investment properties under construction rests in planned developments, and is difficult to estimate pending confirmation of designs and planning permission, and hence has been estimated by the Directors at cost as an approximation to fair value.

Financial Liabilities

The Group's policy is to manage the cost of borrowing using variable rate debt. Whilst floating rate borrowings are not exposed to changes in fair value, the Group is exposed to cash flow risk as costs increase if market rates rise. The Group's policy is to use derivative financial instruments to mitigate at least 50% of this risk in order to

achieve a sensible and appropriate level of interest rate protection whilst maintaining flexibility to match the commercial trading strategy.

All of the undertakings that were party to the Group's bank loans were sold on 24 March 2017. As at 30 September 2017, the Group no longer maintains any bank loan facilities or derivative financial instruments.

Financial Assets

The interest rate profile of the Group's cash at the balance sheet date was as follows:

 
                 30 Sep   30 Sep 
                     17       16 
                GBP'000  GBP'000 
Floating rate    37,170   63,662 
                =======  ======= 
 
 

Floating rate financial assets comprise cash and short term deposits at call and money market rates for up to thirty days and institutional cash funds.

Credit Risk

The risk of financial loss due to a counterparty's failure to honour its obligations arises principally in connection with property leases, the investment of surplus cash and transactions where the Group sells properties with an element of deferred consideration.

Tenant rent payments are monitored regularly and appropriate action is taken to recover monies owed or if necessary, to terminate the lease. Deferred consideration terms are only agreed with counterparties approved by the Board or where some additional security is available, and there were none as at 30 September 2017 (2016: none).

The Group policy has been to invest funds with a broad range of institutions having investment grade low risk credit ratings and a strong or superior ability to repay short term debt obligations. The unprecedented credit and banking market disruption of the global financial crisis had a significant impact upon the ability to rely upon either credit ratings or the ability of financial institutions to honour their commitments and the widespread nature of the financial crisis introduced considerable uncertainty into the process. As at 30 September 2017, the Group had a single balance of GBP59,000 (2016: GBP67,000) where the counter-party had failed to honour a notice deposit and a full impairment provision has been recorded against the balance. There are no other receivables which are past due but not impaired.

Liquidity Risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans secured on the Group's properties. The Group is exposed to liquidity risk should it encounter difficulties in realising assets mainly through the sale of properties. However, the Group maintains a prudent approach to financing and cash flow such that the adverse impact of this can be mitigated.

Price Risk

The Group's exposure to changing market prices on the value of financial instruments may have an impact on the carrying value of financial instruments and would arise principally as a result of entering into swaps or similar transactions to fix interest rates on the Group's borrowings. The Group's policies for managing this risk are to control the levels of fixed rate debt. As the Group's assets and liabilities are all denominated in Pounds Sterling, there is currently no exposure to currency risk.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 September 2017

 
                                                                                    Note        Year   Year Ended 
                                                                                               Ended       30 Sep 
                                                                                              30 Sep           16 
                                                                                                  17      GBP'000 
                                                                                             GBP'000 
 
 Rental income                                                                                 4,641        9,222 
 Other property income                                                                           367          213 
 Revenue                                                                                       5,008        9,435 
                                                                                           ---------  ----------- 
 
 Direct costs of: 
 Rental income                                                                                 1,608        2,909 
 Development costs written off                                                                    77        1,581 
 Direct Costs                                                                                  1,685        4,490 
                                                                                           ---------  ----------- 
 
 Gross Profit                                                                                  3,323        4,945 
 
 
 Profit on sale of group undertakings                                                          1,496            - 
 Movement on revaluation 
  of investment in Regional REIT 12                                                            (355)            - 
 Share of results of joint ventures 
  15                                                                                              29          (3) 
 Profit on sale/assignment of interest                                                             3            - 
  in joint venture 
 Loss on sale of investment properties 
  13                                                                                               -        (308) 
 Revaluation of investment properties 
  13                                                                                               -          992 
 Loss on impairment of goodwill                                                                    -      (3,173) 
 Dividends received from Regional                                                                948            - 
  REIT 
 Other gains and losses 6                                                                         92        (880) 
 Administrative expenses                                                                     (2,710)      (2,440) 
                                                                                           ---------  ----------- 
 
 Operating Profit/(Loss) 3                                                                     2,826        (867) 
 Finance costs 7                                                                             (1,785)      (4,135) 
 Finance income 7                                                                                174          259 
                                                                                           ---------  ----------- 
 
 Profit/(Loss) Before Taxation                                                                 1,215      (4,743) 
 Taxation 8                                                                                    (360)        (706) 
                                                                                           ---------  ----------- 
 
 Profit/(Loss) And Total Comprehensive 
  Income/(Charge) for the Year                                                                   855      (5,449) 
                                                                                           ---------  ----------- 
 
 All amounts are attributable to 
  equity shareholders 
 
 Basic earnings/(loss) per share 
  10                                                                                           1.21p      (6.90)p 
 Diluted earnings/(loss) per share 
  10                                                                                           1.21p      (6.90)p 
 
 
 

All of the activities of the Group are classed as continuing.

CONSOLIDATED Statement of Changes in Equity

for the year ended 30 September 2017

Attributable to the equity holders of the Company

 
                                              Capital                                        Non-Controlling 
                       Share       Share   Redemption    Treasury     Retained                     Interests       Total 
                     Capital     Premium      Reserve      Shares     Earnings       Total                        Equity 
                     GBP'000     GBP'000      GBP'000     GBP'000      GBP'000     GBP'000           GBP'000     GBP'000 
 Group 
 
 Changes 
  in equity 
  for the 
  year ended 
  30 September 
  2016 
 At 1 October 
  2015                 4,985     125,371        1,568    (23,321)       59,173     167,776                20     167,796 
 
   Loss for 
   the year                -           -            -           -      (5,449)     (5,449)                 -     (5,449) 
                  ----------  ----------  -----------  ----------  -----------  ----------  ----------------  ---------- 
 
 
 Total 
  comprehensive 
  charge for 
  the year                 -           -            -           -      (5,449)     (5,449)                 -     (5,449) 
 Cancellation 
  of share 
 premium 
  account                  -   (125,371)            -           -      125,371           -                 -           - 
 Dividend 
  paid                     -           -            -           -      (1,415)     (1,415)                 -     (1,415) 
 Purchase 
  of own shares            -           -            -     (8,873)            -     (8,873)                 -     (8,873) 
 Purchase 
  of non- 
 controlling 
  interest                 -           -            -           -            -           -              (20)        (20) 
                  ----------  ----------  -----------  ----------  -----------  ----------  ----------------  ---------- 
 At 30 September 
  2016                 4,985           -        1,568    (32,194)      177,680     152,039                 -     152,039 
                  ----------  ----------  -----------  ----------  -----------  ----------  ----------------  ---------- 
 
 Changes 
  in equity 
  for the 
  year ended 
  30 September 
  2017 
 At 1 October 
  2016                 4,985           -        1,568    (32,194)      177,680     152,039                 -     152,039 
 
 Profit for 
  the year                 -           -            -           -          855         855                 -         855 
                  ----------  ----------  -----------  ----------  -----------  ----------  ----------------  ---------- 
 
 
   Total 
   comprehensive 
   income for 
   the year                -           -            -           -          855         855                 -         855 
 Purchase 
  of own shares            -           -            -    (17,104)            -    (17,104)                 -    (17,104) 
 Cancellation 
  of treasury 
  shares             (1,629)           -        1,629      48,909     (48,909)           -                 -           - 
                  ----------  ----------  -----------  ----------  -----------  ----------  ----------------  ---------- 
 At 30 September 
  2017                 3,356           -        3,197       (389)      129,626     135,790                 -     135,790 
                  ==========  ==========  ===========  ==========  ===========  ==========  ================  ========== 
 

CONSOLIDATED BALANCE SHEET

at 30 September 2017

 
                                       Note          30 Sep     30 Sep 
                                               2017 GBP'000       2016 
                                                               GBP'000 
 Non-Current Assets 
 Property, plant and equipment           11              24         21 
 Investment in Regional REIT             12          27,643          - 
 Investment properties                   13               -    130,680 
 Investment properties under 
  construction                           14          34,293      9,476 
 Investment in joint ventures            15           7,267     10,110 
                                                     69,227    150,287 
                                             --------------  --------- 
 Current Assets 
 Development and trading properties      17          29,311     30,739 
 Trade and other receivables             18           1,166      3,675 
 Derivatives                             26               -         44 
 Cash and cash equivalents                           37,170     63,662 
                                             --------------  --------- 
                                                     67,647     98,120 
                                             --------------  --------- 
 Total Assets                                       136,874    248,407 
 
 Current Liabilities 
 Trade and other payables                19             879      4,263 
 Bank loans                              20               -      8,335 
 Tax liabilities                                          -        243 
                                                        879     12,841 
                                             --------------  --------- 
 Non-Current Liabilities 
 Bank loans                              20               -     47,210 
 Zero dividend preference 
  shares                                 21               -     34,415 
 Deferred tax                            24             205      1,902 
                                                        205     83,527 
                                             --------------  --------- 
 Total Liabilities                                    1,084     96,368 
                                             --------------  --------- 
 
 Net Assets                                         135,790    152,039 
                                             ==============  ========= 
 
 Equity 
 Called up share capital                 22           3,356      4,985 
 Capital redemption reserve                           3,197      1,568 
 Treasury shares                         23           (389)   (32,194) 
 Retained earnings                                  129,626    177,680 
                                             --------------  --------- 
 
 Total Equity Attributable 
  to Equity Holders                                 135,790    152,039 
                                             ==============  ========= 
 
 

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 30 September 2017

 
                                              Year Ended   Year Ended 
                                                  30 Sep       30 Sep 
                                              17 GBP'000           16 
                                                              GBP'000 
 Cash Flows From Operating Activities 
 Operating profit/(loss)                           2,826        (867) 
 Depreciation and amortisation of 
  reverse lease premium                               66          125 
 Profit on sale of group undertakings            (1,496)            - 
 Loss on revaluation of listed investment            355            - 
 Share of results of joint ventures                 (29)            3 
 Profit on sale of interest in joint                 (3)            - 
  venture 
 Development costs written off                        77        1,581 
 Other gains and losses                               25           17 
 Loss on sale of investment properties                 -          308 
 Surplus on revaluation of investment 
  properties                                           -        (992) 
 Loss on impairment of goodwill                        -        3,173 
                                            ------------  ----------- 
 Cash Flows From Operations Before 
  Changes In Working Capital                       1,821        3,348 
 Change in trade and other receivables             (659)        1,294 
 Change in land, development and 
  trading properties                               (127)          267 
 Change in trade and other payables                (436)        (320) 
                                            ------------  ----------- 
 Cash Flows From Operations                          599        4,589 
 Finance costs                                     (693)      (1,450) 
 Finance income                                       74          167 
 Tax paid                                          (181)        (815) 
                                            ------------  ----------- 
 Cash Flows (Used In)/Generated From 
  Operating Activities                             (201)        2,491 
                                            ------------  ----------- 
 
 Cash Flows From Investing Activities 
 Acquisition of and additions to 
  investment properties                         (22,149)      (9,759) 
 Proceeds from sale of investment 
  properties                                           -        6,842 
 Cash transferred on sale of group               (1,881)            - 
  undertakings 
 Costs paid on sale of group undertakings          (792)            - 
 Investment in joint ventures                      (282)        (215) 
 Proceeds from sale/assignment of                  3,125            - 
  interest in joint venture 
 Loans repaid by joint venture                         -          175 
 Purchase of plant and equipment                    (12)         (14) 
                                            ------------  ----------- 
 Cash Flows Used In Investing Activities        (21,991)      (2,971) 
                                            ------------  ----------- 
 
 Cash Flows From Financing Activities 
 Bank loans drawn down                            21,298       48,100 
 Bank loans repaid                               (8,335)     (29,816) 
 Costs paid on new bank loan                       (548)        (971) 
 Purchase of interest rate cap                         -        (269) 
 Dividend paid                                         -      (1,415) 
 Purchase of own shares                         (16,715)      (8,873) 
 Cash Flows (Used In)/Generated From 
  Financing Activities                           (4,300)        6,756 
                                            ------------  ----------- 
 
 Net (decrease)/increase in cash 
  and cash equivalents                          (26,492)        6,276 
 Cash and cash equivalents at 1 October           63,662       57,386 
 Cash and Cash Equivalents at 30 
  September                                       37,170       63,662 
                                            ------------  ----------- 
 

NOTES TO THE ACCOUNTS

For the year ended 30 September 2017

1. The financial information set out in this announcement is abridged and does not constitute statutory accounts for the year ended 30 September 2017 but is derived from those financial statements. The financial information is not audited. The auditors have reported on the statutory accounts for the year ended 30 September 2017, their report was unqualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006, and these will be delivered to the Registrar of Companies following the Company's annual general meeting. The financial information has been prepared using the recognition and measurement principle of IFRS.

2. The comparative financial information for the year ended 30 September 2016 was derived from information extracted from the annual report and accounts for that period, which was prepared under IFRS and which has been filed with the UK Registrar of Companies. The auditors have reported on those accounts, their report was unqualified and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

   3.    Operating PROFIT 

Operating profit is stated after charging:

 
                                               Year ended   Year ended 
                                                   30 Sep       30 Sep 
                                                       17           16 
                                                  GBP'000      GBP'000 
 Audit services - fees payable to 
  the parent company auditor for the 
  audit of the Company and the consolidated 
  financial statements                                 20           25 
                                              -----------  ----------- 
 
 Other services - fees payable to 
  the Company auditor for the audit 
  of the Company's subsidiaries pursuant 
  to legislation.                                      25           60 
                                              -----------  ----------- 
 
 Other services - fees payable to 
  the Company auditor for tax services                 20           20 
                                              -----------  ----------- 
 Depreciation of owned assets                           9            3 
                                              -----------  ----------- 
 Lease amortisation                                     -           18 
                                              -----------  ----------- 
 Operating lease rentals - land and 
  buildings                                           223          184 
                                              -----------  ----------- 
 Movement on provision for doubtful 
  debts                                                40          107 
                                              -----------  ----------- 
 
   4.     PARTICULARS OF EMPLOYEES 

The aggregate payroll costs of the above were:

 
                        Year ended  Year ended 
                            30 Sep      30 Sep 
                                17          16 
                           GBP'000     GBP'000 
Wages and salaries           1,516       1,264 
Social security costs          196         165 
                             1,712       1,429 
                        ==========  ========== 
 

The average monthly number of persons, including executive directors, employed by the Company during the year was seven (2016: seven).

   5.     DIRECTORS' EMOLUMENTS 
 
                                      Year ended  Year ended 
                                          30 Sep      30 Sep 
                                              17          16 
                                         GBP'000     GBP'000 
Emoluments                                 1,013         834 
                                      ==========  ========== 
 
Emoluments of highest paid director          354         352 
                                      ==========  ========== 
 

The board of directors comprise the only persons having authority and responsibility for planning, directing and controlling the activities of the Group.

   6.    OTHER GAINS AND LOSSES 
 
                                               Year ended   Year ended 
                                                   30 Sep       30 Sep 
                                                       17           16 
                                                  GBP'000      GBP'000 
  Movement in fair value of interest 
   rate swaps                                          59        (262) 
  Transaction costs                                     -        (650) 
  Other                                                33           32 
                                                       92        (880) 
                                       ==================  =========== 
 
   7.     FINANCE INCOME/COSTS 
 
                                        Year ended  Year ended 
Finance Income                              30 Sep      30 Sep 
                                                17          16 
                                           GBP'000     GBP'000 
Bank interest and interest receivable          174         259 
                                        ==========  ========== 
 
Finance Costs 
Bank loans                                (757)        (1,584) 
Amortisation of arrangement fees          (127)          (741) 
ZDP interest payable                         (901)     (1,810) 
                                        ----------  ---------- 
                                           (1,785)     (4,135) 
                                        ==========  ========== 
 
   8.         TAXATION ON ORDINARY ACTIVITIES 
   (a)          Analysis of tax charge in the year 
 
                                         Year ended   Year ended 
                                             30 Sep       30 Sep 
                                                 17           16 
                                            GBP'000      GBP'000 
 UK Corporation tax based on the 
  results for the year                          313          577 
 Over provision in prior years                 (11)      (1,773) 
                                        -----------  ----------- 
 Current tax                                    302      (1,196) 
 Deferred tax                                    58        1,902 
                                                360          706 
                                        ===========  =========== 
 
 (b) Factors affecting tax charge 
                   The tax assessed on the profit/(loss) for the 
              year differs from the standard rate of corporation 
                           tax in the UK of 19.5% (2016: 20.0%). 
                                         Year ended   Year ended 
                                             30 Sep       30 Sep 
                                                 17           16 
                                            GBP'000      GBP'000 
 Profit/(loss) before taxation                1,215      (4,743) 
                                        ===========  =========== 
 
 Profit/(loss) multiplied by rate 
  of tax                                        237        (949) 
 Effects of: 
 Tax impact of unrealised revaluation 
  movements                                      69        (198) 
 Utilisation of tax losses                     (98)        (129) 
 Movement in tax losses carried 
  forward                                       304          607 
 Non-taxable items                            (189)        1,314 
 Joint venture losses not taxable                 -           10 
 Capital allowances                            (76)         (78) 
 Impact of differing tax rates for               66            - 
  offshore entities 
 Over provision in prior years                 (11)      (1,773) 
                                        -----------  ----------- 
 Current tax charge/(credit) for 
  the year                                      302      (1,196) 
                                        ===========  =========== 
 
   9.       DIVIDS 

No dividend was paid in respect of the year ended 30 September 2017 (2016: nil).

   10.     EARNINGS PER SHARE 

The calculation of earnings per ordinary share is based on the profit after tax of GBP855,000 (2016: loss of GBP5,449,000) and on the number of shares in issue being the weighted average number of shares in issue during the period of 70,684,860 (2016: 78,920,377). There are no diluting amounts in either the current or prior years.

   11.     PROPERTY, PLANT AND EQUIPMENT 
 
                                Premises        Office      Furniture 
                                   Lease     Equipment     & Fittings        Total 
                                 GBP'000       GBP'000        GBP'000      GBP'000 
  Cost 
  At 1 October 2015                  157            75             95          327 
  Additions                            -            14              -           14 
                              ----------  ------------  -------------  ----------- 
 
  At 30 September 2016 
   and 1 October 2016                157            89             95          341 
  Additions                            -            12              -           12 
                              ----------  ------------  -------------  ----------- 
 
  At 30 September 2017               157           101             95          353 
                              ----------  ------------  -------------  ----------- 
 
  Depreciation/Amortisation 
  At 1 October 2015                  139            65             95          299 
  Provided during the 
   year                               18             3              -           21 
                              ----------  ------------  -------------  ----------- 
 
  At 30 September 2016 
   and 1 October 2016                157            68             95          320 
  Provided during the 
   year                                -             9              -            9 
                              ----------  ------------  -------------  ----------- 
 
  At 30 September 2017               157            77             95          329 
                              ----------  ------------  -------------  ----------- 
 
 
  Net book value at 30 
   September 2017                      -            24              -           24 
                              ==========  ============  =============  =========== 
 
  Net book value at 30 
   September 2016                      -            21              -           21 
                              ==========  ============  =============  =========== 
 
   12.     INVESTMENT IN REGIONAL REIT 

As set out in the Chairman's and Chief Executive's Statement, the Group completed the disposal of various Group undertakings on 24 March 2017. The net consideration was satisfied by the receipt of 26,326,644 ordinary shares in Regional REIT, at a price of 106.347 pence per share, which represented 8.76% of the issued share capital of Regional REIT at the balance sheet date.

Regional REIT is a United Kingdom based real estate investment trust whose shares were admitted to the premium segment of the Official List and to trading on the main market of the London Stock Exchange on 6 November 2015. Regional REIT is managed by London & Scottish Investments Limited, as asset manager, and Toscafund Asset Management LLP, as investment manager.

The consideration was subject to adjustment by reference to completion accounts, which were agreed in July 2017, with a balancing cash settlement of GBP3,407 paid by the Group to Regional REIT.

The movement in the market value of the shares during the period was as follows:

 
                                        GBP'000 
 Consideration shares at issue price     27,998 
 Movement in market value                 (355) 
                                       -------- 
 Valuation at 30 September 2017          27,643 
                                       ======== 
 

Under the terms of the sale agreement, the Company has agreed a lock-in arrangement in respect of the consideration shares. Specifically, the Company is not permitted to dispose (directly or indirectly) of the legal or beneficial ownership of one-third of the consideration shares until 24 March 2018 and a further one-third of the consideration shares until 24 September 2018.

   13.     INVESTMENT PROPERTIES 

With the exception of the investment properties under construction, set out in note 14, the Group's investment property portfolio was disposed of on 24 March 2017 as part of the corporate sale to Regional REIT. The movement in fair value of the investment properties up to the date of disposal was as follows:

 
                                                                      Reverse 
                                                             Long       Lease 
                                           Freehold     Leasehold    Premiums       Total 
                                            GBP'000       GBP'000     GBP'000     GBP'000 
       Valuation at 1 October 
        2015                                112,552        20,146         492     133,190 
       Additions                              1,446         2,226           -       3,672 
       Disposals                            (7,150)             -           -     (7,150) 
       Lease incentive granted                   80             -           -          80 
       Reverse lease premium 
        amortisation                              -             -       (104)       (104) 
       Movement on revaluation                (538)         1,530           -         992 
                                        -----------  ------------  ----------  ---------- 
       Valuation at 30 September 
        2016                                106,390        23,902         388     130,680 
       Additions                                 11            64           -          75 
       Reclassification to investment 
       Properties under construction        (1,170)             -           -     (1,170) 
       Reverse lease premium 
        amortisation                              -             -        (57)        (57) 
       Disposal of group undertakings     (105,231)      (23,966)       (331)   (129,528) 
                                        -----------  ------------  ----------  ---------- 
       At 30 September 2017                       -             -           -           - 
                                        ===========  ============  ==========  ========== 
 
 

The historical cost of properties held at 30 September 2016 was GBP161,164,000.

The properties were valued by Jones Lang LaSalle, independent valuers not connected with the Group, at 30 September 2016 at market value in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors which conform to international valuation standards. The valuations were arrived at by reference to market evidence of transaction prices and completed lettings for similar properties. The properties were valued individually and not as part of a portfolio and no allowance was made for expenses of realisation or for any tax which might have arisen. They assumed a willing buyer and a willing seller in an arm's length transaction. The valuations reflect usual deductions in respect of purchaser's costs and SDLT as applicable at the valuation date. The independent valuer made various assumptions including future rental income, anticipated void cost and the appropriate discount rate or yield.

As at 30 September 2017, the Group has pledged GBPnil (2016: GBP89,955,000) of investment property to secure Lloyds Bank, Jersey debt facilities and GBPnil (2016: GBP33,260,000) to secure Barclays Bank PLC debt facilities. Further details of these facilities are provided in note 26.

The property rental income earned from investment properties, leased out under operating leases, amounted to GBP5,008,000 (2016: GBP9,435,000). Apart from the corporate sale, there were no other investment property disposals in the current year. Details of the loss from the sale of investment properties in the prior year are set out below.

 
 
                                            30 Sep 
                                                16 
                                           GBP'000 
 Gross sale proceeds                         6,955 
 Sale fees                                   (113) 
                                         --------- 
 Net sale proceeds                           6,842 
 Book value of properties sold             (7,150) 
                                         --------- 
 Loss on sale of investment properties       (308) 
                                         ========= 
 
   14.     INVESTMENT PROPERTIES UNDER CONSTRUCTION 

Investment properties under construction are freehold land and buildings representing investment properties under development or construction and they amount to GBP34,293,000 (2016: GBP9,476,000) as at 30 September 2017. These properties comprise landholdings for current or future development as investment properties. This methodology has been adopted because the value of these properties is dependent on a detailed knowledge of the planning status, the competitive position of the assets and a range of complex development appraisals. The fair value of these properties rests in the planned developments, and is difficult to estimate pending confirmation of designs and planning permission, and hence has been estimated by the directors at cost as an approximation to fair value. Additions in the year include the acquisition of the Nottingham Island site for GBP13.5m including costs.

 
 Investment Properties under Construction      30 Sep     30 Sep 
                                                   17         16 
                                              GBP'000    GBP'000 
 At 1 October                                   9,476      3,156 
 Additions                                     22,038      6,320 
 Reclassify from investment properties          1,170          - 
 Reclassification from development              1,609          - 
  project 
 At 30 September                               34,293      9,476 
                                            =========  ========= 
 
   15.     INVESTMENT IN JOINT VENTURES 
 
 
 Investment in Joint Ventures                  30 Sep     30 Sep 
                                                   17         16 
                                              GBP'000    GBP'000 
 At 1 October                                  10,110      6,660 
 Share of results of joint ventures                29        (3) 
 Investment in joint venture                      253        218 
 Proceeds on sale/assignment of interest      (3,125)          - 
 in joint venture 
 Reclassify loan to joint venture                   -      3,235 
 At 30 September                                7,267     10,110 
                                            =========  ========= 
 
 

On 29 September 2017, the Group disposed of its 50% interest in the share capital of Roadking Holyhead Limited and assigned its loan to Roadking Holyhead Limited for a gross consideration of GBP3,125,500. Details of the profit from the sale are set out below:

 
                                               30 Sep 
                                                   17 
                                              GBP'000 
 Gross proceeds from sale/assignment            3,125 
 Sale fees                                       (10) 
                                            --------- 
 Net sale proceeds                              3,115 
 Book value of interest sold                  (3,112) 
                                            --------- 
 Profit on sale/assignment of interest in 
  joint venture                                     3 
                                            ========= 
 

As at the balance sheet date, the Group retained a 50% interest in Conygar Stena Line Limited, a property development company and CM Sheffield Limited a dormant company.

Loans to Joint Ventures

In accordance with IAS 39, loans to joint venture companies have not been disclosed separately on the balance sheet as the investments in those entities are net liabilities when the loans are excluded.

 
                                 30 Sep     30 Sep 
                                     17         16 
                                GBP'000    GBP'000 
 Conygar Stena Line Limited       8,098      7,733 
 C M Sheffield Limited                2          2 
 Roadking Holyhead Limited            -      3,235 
                              ---------  --------- 
                                  8,100     10,970 
                              =========  ========= 
 

The following amounts represent the Group's 50% share of the assets and liabilities, and results of the joint ventures which are included in the consolidated balance sheet and consolidated statement of comprehensive income.

 
                                  As at        As at 
                                 30 Sep       30 Sep 
                                     17           16 
                                GBP'000      GBP'000 
 Assets 
 Current assets                   7,282       10,203 
 
 Liabilities 
 Current liabilities               (15)         (93) 
 
 Net Assets                       7,267       10,110 
                            ===========  =========== 
 
                             Year ended   Year ended 
                                 30 Sep       30 Sep 
                                     17           16 
                                GBP'000      GBP'000 
 
 Operating profit/(loss)             29          (3) 
 Finance income                       -            - 
                            -----------  ----------- 
 Profit/(loss) before tax            29          (3) 
 Tax                                  -            - 
                            -----------  ----------- 
 Profit/(loss) after tax             29          (3) 
                            ===========  =========== 
 

There are no contingent liabilities relating to the Group's interest in joint ventures, and no contingent liabilities of the ventures themselves.

   16.   INVESTMENT IN SUBSIDIARY UNDERTAKINGS 

During the year, the directors commenced a programme to strike off the Group's dormant companies that are no longer required. The subsidiaries set out below, which as at the balance sheet date, are wholly owned and controlled by the Group, have been classified between those to be retained and those planned for striking off in the next financial year.

 
 
                                                          Country 
 Subsidiaries                                              of             % of 
                                                                          equity 
 Company name                    Principal activity       registration    held 
 
 Conygar Holdings Ltd            Holding Company          England         100% 
 Conygar Wales PLC               Holding Company          England         100%* 
 Conygar Developments            Property trading 
  Ltd                             and development         England         100%* 
 Conygar Haverfordwest           Property trading 
  Ltd                             and development         England         100%* 
                                 Property trading 
 Conygar Nottingham Ltd           and development         England         100%* 
                                 Property trading 
 Conygar Ynys Mon Ltd             and development         England         100%* 
                                 Property trading 
 Martello Quays Ltd               and development         England         100% 
 The Nottingham Island 
  Site Management Company 
  Ltd                            Dormant                  England         100%* 
 Lamont Property Holdings 
  Ltd                            Property investment      Jersey          100%* 
 Conygar Ashby Ltd               Property investment      Jersey          100%* 
 Conygar Cross Hands Ltd         Property investment      Jersey          100%* 
 
 
 Subsidiaries in the process 
 of being struck off 
 
 Coleridge (Fleet GP) 
  Ltd                            Dormant                  England         100%* 
 Conygar Bedford Square 
  Ltd                            Dormant                  England         100%* 
 Conygar Properties Ltd          Dormant                  England         100%* 
 Conygar Sunley Ltd              Dormant                  England         100%* 
 Loch (Warrington GP) 
  Ltd                            Dormant                  England         100%* 
 The Advantage Property 
  Income Trust Ltd               Dormant                  Guernsey        100%* 
 TOPP Holdings Ltd               Dormant                  Guernsey        100%* 
 TAPP Maidenhead Ltd             Dormant                  Guernsey        100%* 
 Conygar Haverfordwest 
  Retail Ltd                     Dormant                  Jersey          100%* 
 Lamont Property Acquisition 
 (Jersey) V Ltd                  Dormant                  Jersey          100%* 
 Lamont Property Acquisition 
 (Jersey) VII Ltd                Dormant                  Jersey          100%* 
 
 

* Indirectly owned

   17.   PROPERTY INVENTORIES 
 
                                  30 Sep    30 Sep 
                                      17        16 
                                 GBP'000   GBP'000 
 Properties held for resale 
  or development                  29,311    30,739 
                                ========  ======== 
 
 
   18.   TRADE AND OTHER RECEIVABLES 
 
 
                                  30 Sep    30 Sep 
                                      17        16 
                                 GBP'000   GBP'000 
 Trade receivables                    26       834 
 Provision for doubtful 
  debts                                -      (48) 
                                --------  -------- 
                                      26       786 
 Amounts owed by group                 -         - 
  undertakings 
 Other receivables                   535       845 
 Prepayments and accrued 
  income                             605     2,044 
                                --------  -------- 
                                   1,166     3,675 
                                ========  ======== 
 

The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to the short term nature of these financial assets.

19. TRADE AND OTHER PAYABLES

 
 
                                      30 Sep    30 Sep 
                                          17        16 
                                     GBP'000   GBP'000 
 Amounts owed to group                     -         - 
  undertakings 
 Social security and payroll              66         - 
  taxes 
 Trade payables                          545       976 
 Accruals and deferred 
  income                                 268     3,287 
                                    --------  -------- 
                                         879     4,263 
                                    ========  ======== 
 

The directors consider that the carrying amounts of the trade and other payables approximate to their fair value due to the short period of repayment.

   20.     BANK LOANS 
 
 
                            30 Sep    30 Sep 
                                17        16 
                           GBP'000   GBP'000 
 Bank loans                      -    56,435 
 Debt issue costs                -     (890) 
                           -------  -------- 
                                 -    55,545 
   ===============================  ======== 
 

All of the undertakings that were party to the Group's bank loans were sold on 24 March 2017 therefore, as at the balance sheet date, the Group no longer maintains any bank loan facilities. Further details of the Group's financial liabilities are given in note 26.

   21.   ZERO DIVID PREFERENCE SHARES 

Part of the consideration for the sale of its investment property portfolio was the transfer to Regional REIT Limited of the Group's interest in and obligations under the 30,000,000 zero dividend preference shares ("ZDP Shares").

The ZDP shares have an entitlement to receive a fixed cash amount on 9 January 2019, being the maturity date, but do not receive any dividends or income distributions. Additional capital accrues to the ZDP shares on a daily basis at a rate equivalent to 5.5% per annum. During the period ended 24 March 2017, the Group accrued for GBP901,000 of additional capital (year ended 30 September 2016: GBP1,810,000).

The movement on the zero dividend preference share liability during the year was as follows:

 
                                           Year   Year ended 
                                          ended       30 Sep 
                                         30 Sep           16 
                                             17 
                                        GBP'000      GBP'000 
 
 Balance at start of year                34,415       32,471 
 Amortisation of share issue costs           64          134 
 Accrued capital                            901        1,810 
 Transfer of obligation on sale of     (35,380)            - 
  group undertakings 
                                      ---------  ----------- 
 Balance at end of year                       -       34,415 
                                      =========  =========== 
 
 
   22.   SHARE CAPITAL 

Authorised share capital:

 
                                              30 Sep     30 Sep 
                                                  17         16 
                                                 GBP        GBP 
140,000,000 (2016: 140,000,000) Ordinary 
 shares of GBP0.05 each                    7,000,000  7,000,000 
                                           =========  ========= 
 
 
  Allotted and called 
   up: 
  Amounts recorded 
   as equity: 
 
  Ordinary shares of 
   GBP0.05 each 
                                           No   GBP'000 
  As at 30 September 
   2016                            99,714,123     4,985 
  Cancellation of treasury 
   shares                        (32,587,688)   (1,629) 
                                -------------  -------- 
  As at 30 September 
   2017                            67,126,435     3,356 
                                =============  ======== 
 
   23.   TREASURY SHARES 

In December 2010, the Group began a share buyback programme and during the year ended 30 September 2017 purchased 10,340,000 (2016: 5,299,819) shares on the open market at a cost of GBP17,103,676 (2016: GBP8,872,556). As seen in note 22 above, on 19 September 2017, 32,587,688 ordinary shares of 5 pence each were transferred out of treasury and cancelled. The remaining 235,000 shares bought back were held in treasury at 30 September 2017.

   24.   DEFERRED TAX LIABILITY 

The Group's deferred tax liabilities comprise amounts arising from unrealised revaluation movements as follows:

 
                                            30 Sep   30 Sep 
                                                17       16 
                                           GBP'000  GBP'000 
At the start of the year                     1,902        - 
Charge to the statement of comprehensive 
 income                                         58    1,902 
Transfer of obligation on sale of group 
 undertakings                              (1,755)        - 
                                           -------  ------- 
At the end of the year                         205    1,902 
                                           =======  ======= 
 

Deferred tax liabilities have been measured at a rate of 19% (2016: 20%), being the rate substantively enacted at the balance sheet date. They are calculated on the basis of the chargeable gain that would crystallise on the sale of the Group's investment properties and other fixed asset investments at each balance sheet date. The calculation takes account of any available indexation.

   25.   LEASE COMMITMENTS 

Group as lessee:

At 30 September 2017, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

 
                                          30 Sep   30 Sep 
                                              17       16 
                                         GBP'000  GBP'000 
Within one year                              180      180 
In the second to fifth years inclusive       131      311 
                                         -------  ------- 
                                             311      491 
                                         =======  ======= 
 

Prior to the sale on 24 March 2017, the Group held retail, office, industrial and leisure buildings as investment properties which were let to third parties. These were non-cancellable leases and the income profile based upon the unexpired lease length was as follows:

 
                                 30 Sep    30 Sep 
                                     17        16 
                                GBP'000   GBP'000 
 Less than one year                   -    10,553 
 Between one and five years           -    21,723 
 Over five years                      -    10,926 
                              ---------  -------- 
                                      -    43,202 
 ======================================  ======== 
 

The Group receives income under non-cancellable leases from existing property located at several of the Group's development sites. The income profile based upon the unexpired lease length was as follows:

 
                                30 Sep    30 Sep 
                                    17        16 
                               GBP'000   GBP'000 
 Less than one year                186       129 
 Between one and five years        508       404 
 Over five years                   296       338 
                              --------  -------- 
                                   990       871 
                              ========  ======== 
 
   26.   FINANCIAL INSTRUMENTS 

The interest rate profile of the Group bank borrowings at 30 September 2016 was as follows:

 
                        Interest                         30 Sep 
                         Rate             Maturity           16 
                                                        GBP'000 
 Lloyds Bank, Jersey    BOE base 
  (1)                    + 1.9%          2-5 years       48,100 
                                         Less than 
 Barclays (2)           LIBOR + 3.5%      1 year          8,335 
                                                         56,435 
                                                      ========= 
 
 
 

In addition to the bank debt, as at 30 September 2016, the Group had a financial liability of GBP34.4 million relating to 30,000,000 zero dividend preference shares ("ZDP Shares"). As set out in note 21, the Group's interest in and obligations under the ZDP shares were transferred to Regional REIT Limited on 24 March 2017.

Loans

All of the undertakings that were party to the Group's bank loans were sold on 24 March 2017 therefore, as at the balance sheet date, the Group no longer maintains any bank loan facilities.

As at 30 September 2016 and up to the date of disposal of the Group undertakings, TAPP Property Limited, TOPP Property Limited, TOPP Bletchley Limited, Lamont Property Acquisition (Jersey) I Limited, Lamont Property Acquisition (Jersey) II Limited and Lamont Property Acquisition (Jersey) IV Limited ("the borrowers") jointly maintained a facility with Lloyds Bank, Jersey of GBP48,100,000 under which GBP48,100,000 had been drawn down. This facility was repayable on or before 27 April 2021 and was secured by fixed and floating charges over the assets of the borrowers. The facility was subject to a maximum loan to value covenant of 65%, a historical interest cover ratio covenant of 200% and a historical debt service cover ratio of 110%.

On 26 October 2016, Conygar Dundee Limited, Conygar Hanover Street Limited, Conygar Stafford Limited and Conygar St Helens Limited repaid the outstanding balances of their facilities with Barclays Bank PLC of GBP8,335,000 (30 September 2016: GBP8,335,000).

From 2 December 2016 and up to the date of disposal of the Group undertakings, Conygar Dundee Limited, Conygar Hanover Street Limited, Conygar Strand Limited and Conygar St Helens Limited jointly maintained a facility with HSBC Bank PLC of GBP21,397,500 under which GBP21,397,500 had been drawn down. This facility was repayable on or before 2 December 2021 and was secured by fixed and floating charges over the assets of Conygar Dundee Limited, Conygar Hanover Street Limited, Conygar Strand Limited and Conygar St Helens Limited. The facility was subject to a maximum loan to value covenant of 65%, a historical and projected interest cover ratio covenant of 200% and a historical and projected debt service cover ratio of 120%.

Fair Values of Financial Assets and Financial Liabilities

The fair values of all the Group's financial assets and liabilities are set out below:

 
                                     Book Value   Book Value   Fair Value   Fair Value 
                                         30 Sep       30 Sep       30 Sep       30 Sep 
                                           2017         2016         2017         2016 
                                        GBP'000      GBP'000      GBP'000      GBP'000 
       Financial Assets 
       Cash                              37,170       63,662       37,170       63,662 
       Loans to joint ventures            8,100       10,970        8,100       10,970 
       Interest rate derivatives              -           44            -           44 
 
       Financial Liabilities 
       Floating rate borrowings               -       56,435            -       56,435 
       Fixed rate borrowings                  -       34,719            -       34,719 
 
 
 
 

Derivative Financial Instruments

All of the undertakings that were party to the Group's derivative financial instruments were sold on 24 March 2017 therefore, as at the balance sheet date, the Group no longer maintains any derivative financial instruments. The market value of the derivative financial instruments as at 30 September 2016 are set out below:

 
                                                 Market 
                                                  value 
                         Protected            at 30 Sep 
                                                   2016 
                              Rate   Expiry     GBP'000 
                                 % 
 
 GBP37 million cap            2.00   Feb-18          44 
 GBP36.1 million cap          2.50   Apr-21           - 
                                             ---------- 
                                                     44 
                                             ========== 
 

The valuation of the swaps was provided by JC Rathbone Associates Limited, was a tier 2 valuation and represented the change in fair value since execution. The fair value was derived from the present value of the future cash flows discounted at rates obtained by means of the current yield curve appropriate for those instruments.

The fair value of the Group's trade debtors and other receivables and trade creditors and other payables is not considered to vary from historic cost due to the short term nature of these financial assets and liabilities. As such, they are excluded from the disclosure.

The Report and Accounts for the year ended 30 September 2017 will be posted to shareholders shortly and copies may be obtained free of charge for at least one month following their posting by writing to The Secretary, The Conygar Investment Company PLC, Fourth Floor, 110 Wigmore Street, London, W1U 3RW. They are also available on the website www.conygar.com.

The Company's Annual General Meeting will be held at 4:30pm on 25 January 2018 at the offices of Gowling WLG (UK) LLP, 4 More London Riverside, London, SE1 2AU.

The directors of Conygar accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of Conygar (who have taken all reasonable care to ensure that such is the case) the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

This announcement is released by The Conygar Investment Company PLC and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Ross McCaskill, Finance Director.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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December 12, 2017 02:00 ET (07:00 GMT)

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