TIDMPNS
RNS Number : 9259B
Panther Securities PLC
25 April 2012
Panther Securities P.L.C.
("Panther" or "the Company")
Final Results for the
year ended 31 December 2011
For further information please contact:
Panther Securities PLC +44 (0) 1707 667 300
Andrew Perloff, Chairman
Simon Peters, Finance Director
City Profile
Simon Courtenay
Abigail Genis +44 (0) 20 7448 3244
Chairman's Statement
I am once again pleased to be able to present satisfactory
figures for the year ended 31(st) December 2011. Under the
INTERNATIONAL Financial Reporting Standards our consolidated income
statement shows a loss of GBP850,000 compared to a profit of
GBP5,869,000 the previous year.
This apparent trading loss is due to the severe deterioration in
the liability of our financial derivatives by an additional
GBP10,635,000 counter-balanced by a valuation increase in our
investment properties as at the financial statement date of
GBP5,671,000. I have pointed out on previous occasions that both
these items should not be shown in an income statement (they had to
change the name as it used to be called profit & loss account)
but shown on the balance sheet and the notes to the financial
statements.
Leaving aside these non-cash flow items the Company is trading
well considering the difficult times we live in and the constant
extra burden placed upon us by uncomprehending government.
Our rental income receivable during the year end 31 December
2011 rose to GBP8,961,000 compared to GBP7,717,000 in the year
ended 31 December 2010 and is still rising due to our purchases
mentioned later in my report.
This year the Directors re-valued the entire portfolio which
produced a surplus of GBP5,671,000 compared to the previous year's
increase of GBP4,039,000.
Our costs of running the business increased during the year,
part of which was due to extra banking fees of GBP103,000 but also
by GBP272,000 due to extra vacant rates because of the unfair
removal of vacant rate relief for lower value properties.
Sales of more of our Elektron PLC shares and our entire holding
in O Twelve Estates produced a GBP2,007,000 profit and generated
free cash proceeds of GBP3,222,000.
This year has been an extremely busy and acquisitive year for
our Group. Property purchases totalling approximately GBP21,000,000
were successfully completed. Last year approximately GBP8,000,000
of purchases were completed. We always purchase assets where our
group experience leads us to believe there could be added income
and value created. Whilst we have been proved successful in this
regard for many years, one cannot predict the future but somehow it
feels right to be investing in property in these times.
Acquisitions during this accounting year
25/26/27 Victoria Street, Wolverhampton
In February 2011 we re-acquired 25/26/27 Victoria Street,
Wolverhampton for GBP202,000 (including stamp duty) having sold it
in June 2006 for GBP333,000. We own most of this island town centre
site, which has considerable re-development potential as the Town
Centre scheme and compulsory purchase order has been abandoned.
67 High Street, Ayr
In March 2011 we purchased 67 High Street, a vacant listed
freehold shop with upper part in the prime shopping position
opposite Marks & Spencer and BHS. Our purchase was from an LPA
Receiver at GBP289,000 (including stamp duty) and we hope that it
will have a considerable added value when let. We are in discussion
with a number of retailers about this unit.
Northgate Street and St Aldgate Street, Gloucester
In May 2011, we purchased this block of 17 shops and 21 flats in
the very centre of Gloucester. The property is situated close to
Debenhams and Marks & Spencer, and since our purchase the two
vacant shops have been let, increasing the income to GBP237,000 per
annum, from GBP207,000 per annum. We are seeking a single letting
of the 21 vacant flats to a social housing provider but, if
unsuccessful in this regard, will let them individually at a higher
total rental but involving more management costs and management
time. This freehold cost approximately GBP2,200,000 (including
stamp duty).
Five Department Stores
As announced in July 2011, we purchased five freehold department
stores which were owned and formerly occupied by the Anglia
Regional Co-operative Society Limited ("ARCS") trading as Westgate
Stores. The majority of the trade and assets of Westgate Stores in
May 2011 were acquired by Beale PLC, a fully listed department
store group in which the Company holds just under 20 per cent of
the issued share capital. We paid approximately GBP7,330,000
(including stamp duty) for the following five properties:
80 Newgate Street, Bishop Auckland, County Durham comprising
approximately 50,000 sq ft over three floors situated just off the
prime shopping position in the town centre.
49 Low Street, Keighley, West Yorkshire comprising approximately
35,000 sq ft on three floors. This property adjoins a Marks &
Spencer store and the main shopping centre in the town.
53-57 High Street, St Neots, Cambs comprising approximately
30,000 sq ft on two floors together with an 80 space car park to
the rear, adjoining the Marks & Spencer store.
Market Place/ Bridge Street, Spalding, Lincolnshire comprising
approximately 23,000 sq ft on two floors in the main trading
position of the town.
8 Market Place, Diss, Norfolk comprising approximately 8,000 sq
ft in the prime shopping area of the town centre.
80 Newgate Street, Bishop Auckland has a one year rent free
period (ending 21 May 2012), the other four stores have a two year
rent free period which ends on 21 May 2013. The leases are all on
full repairing and insuring terms for 15 years with rent reviews
every 5 years.
The rent of GBP100,000 p.a. on Bishop Auckland starts in May
2012 and in May 2013 a further rent of GBP575,000 p.a. is payable
on the other properties.
Templegate House, 115-123 High Street, Orpington
This property was purchased in July 2011, and is a long
leasehold (94 years remaining at a peppercorn rent) modern building
which contains five shops and 17,000 sq ft of office space over the
three floors above. The property was almost fully let and produced
rent of GBP276,000 per annum. The price we paid of GBP1,300,000
(including stamp duty) reflected the fact that two of the larger
tenants' leases were due to expire towards the end of the year. The
property was purchased from a LPA Receiver but only one office
tenant failed to renew, thus the property still produces over
GBP200,000 p.a. which should increase when vacant space is let.
79/97 Commercial Street, Batley
This freehold property also purchased in July 2011 is well
positioned in the town, and was purchased for GBP1,404,000
(including stamp duty). The property produced GBP143,000 per annum,
excluding income from two vacant shops. The tenants include Boots,
the Card Factory, Coral Estates, TUI UK and Kirkwood Hospice. One
further shop is now let.
The Mill and Warehouse, Upper Mills Trading Estate, Bristol
Road, Stonehouse
In August 2011, Panther purchased a 13,000 sq ft office with an
adjoining 12,000 sq ft warehouse building for GBP489,000 (including
stamp duty). The building was purchased for Panther's 75 per cent
owned subsidiary MRG Systems Ltd ("MRG"). The Board expects that
this will not only reduce MRG's rental cost of GBP30,000 a year and
provide it with a permanent office but it should also provide
additional space for MRG and allow them to sublet and generate
additional rental income to benefit the group overall.
Bentalls Complex, Colchester Road, Heybridge, Maldon, Essex
In August 2011, Panther purchased, via a sale and lease back
arrangement, a 200,000 sq ft freehold industrial building set in
8.5 acres of grounds for GBP3,921,000 (including stamp duty). The
property has been let for 10 years to Wyndeham Group Ltd for
GBP500,000 per annum, with a one year rent free period which
commenced at completion in August 2011. This property offers a high
return from a good covenant together with redevelopment prospects
on 2.5 acres of rear unused land.
Lyceum Building, Bold Street, Liverpool
In August 2011, Panther completed on this prime, iconic listed
building let to the Post Office with 3.5 years remaining on its
lease. The rent is GBP500,000 per annum. The tenant is not in
occupation but has sublet part of the building to the Co-operative
Building Society. The purchase price was GBP2,964,000 (including
stamp duty).
34 Marine Terrace, Margate, Kent
This freehold property was purchased by the Company in August
2011 for GBP190,000 (including stamp duty) and is positioned on the
seafront. The property has takeaway use and is let at GBP21,000 a
year. This investment is in a location where the Board hopes to see
improve in the medium to long-term.
Post Balance Sheet Acquisitions
In February 2012 the Company purchased the freeholds of a
further three Beales Department Stores, these being:-
Lowestoft, Suffolk
The freehold property now known as Beales department store,
London Road North, Lowestoft, is a modern store with 21,000 square
feet of selling space on two floors, situated on the town's main
pedestrianized shopping street close to Tesco Metro supermarket,
Sports Direct, BHS department store and Peacocks (R.I.P.).
Wisbech, Cambs
This property, now known as Beales department store on Little
Church Street, just off The Market Place, is a modern, two storey
department store containing 26,000 square feet of selling space,
being situated in the centre of town.
Beccles, Suffolk
This department store is an older store in two separate sections
adjoining but separated by a small vehicular service road and
contains approximately 17,000 square feet on mainly ground but also
first floor. The property fronts through from Smallgate to The Walk
which is close to the centre of this market town and to a Tesco
superstore.
All three properties are let on similar leases to Beale PLC
whereby rent is a share of profits until May 2014, thereafter to
market rent subject to negotiations.
In its announcement made in April 2011, the estimated turnover
for these stores to the Beale Group was approximately GBP6 million
(excluding VAT).
The price paid for the freehold properties was GBP2,250,000, of
which GBP300,000 is deferred, payable in three years' time.
Huntingdon, Cambs
In February 2012 Panther purchased a factory investment
comprising 96,000 square feet (90,000 feet ground floor) of modern
factory premises on 5.5 acres on the Stukeley Meadows Industrial
Estate, 1 mile north of Huntingdon town centre.
The property is let on an FR&I lease for 15 years from
February 2005 at GBP190,000 per annum exclusive with rent reviews
in 2010 (still outstanding) and 2015 to 65% of open market rental
value.
The property is held on a long lease for a term of 999 years
from February 2005 at a fixed rent of one peppercorn and the price
paid was GBP1,278,000 (including stamp duty).
Progress on Developments
59/61 High Street, Sittingbourne
This large shop unit with extensive upper parts has been
refurbished and split into two shop units and separate upper part.
The larger shop unit is let to a local, long established furniture
shop. When the property is fully let the Directors expect it will
show a 20% rental return on cost.
49/61 High Street, Croydon
Panther has agreed to lease 4,000 sq ft to Sainsbury's
Supermarkets Limited as a local convenience store at GBP55,700 per
annum exclusive. The remaining ground floor space of 3,000 sq ft
should let easily and leave the upper part to be converted (subject
to planning permission) as eight or nine flats and eventually
produce a valuable surplus on our initial investment of
approximately GBP600,000.
Holloway Head, Birmingham
This 450,000 sq ft development site will only take place when
the property market improves and we find a suitable partner to
carry out the scheme. The property is carried in our books at a
very conservative written down figure.
High Street, Broadstairs
Having received full planning for our 4,000 sq ft shop and 10
flats development situated in Charles Dickens' favourite seaside
resort, we will shortly be demolishing the building with a view to
carrying out the development as soon as a suitable prelet on the
shop is obtained. We currently have some interested parties with
one rental offer in hand which is currently under negotiation.
Tunnel Shoes Limited
Towards the end of the year we decided to sell Tunnel shoes (our
joint retailing venture) for a nominal sum. This accounts for a
loss of GBP224,000 in our operations. In this difficult retail
market this is not a great surprise and it is no great consolation
to know that we would have borne over half of this loss in vacant
rates and unrecovered insurance had we not tried out that
venture.
Wimbledon Studios
Whilst we only own a small proportion of the film studio's
operational company, we own the freehold from which they operate
and thus their success brings added value to our freehold. To date
they are making good progress towards profitability and they are
now noticing opportunities to profitably expand but this may need
extra capital. They are currently investigating whether they are
able to raise money under any of the government's new Enterprise
Investment Schemes. With the Twickenham Studios site due to close
in the next few years for residential development and the BBC
relocating most of its studio facilities to Salford, there is
likely to be studio space shortages in London in the next two to
three years which should benefit Wimbledon Studios
considerably.
This year we are holding our AGM at Wimbledon Studios and our
shareholders who are able to attend will be able to inspect one of
their prime assets.
Tenant Activity
During the accounting year we lost a total of 42 tenants which
produced GBP495,000 per annum rent.
During the same period we let to 61 new tenants at rents
totalling GBP720,000 per annum, yielding a net gain of GBP233,000
per annum after various rent free periods elapse.
Political Donations
Once again I am proposing a resolution to allow the company to
donate GBP25,000 to the Conservative Party who are the only party
capable of holding back the country from the abyss of excessive
debt caused by their predecessors. Whilst they have not yet been
able to produce policies to stimulate the economy I have no doubt
the intention is there when circumstances allow them too.
Finance
In July 2011 we completed our refinancing package. This was a
new 5 year club loan facility of GBP75,000,000 provided equally by
HSBC and Santander. This replaces our existing facility of
GBP42,500,000 with HSBC with whom we have had an excellent banking
relationship for over 30 years. We are, of course, pleased to have
this new banking relationship with Santander which we hope will
prove as reliable and long standing.
The additional finance has already allowed us to expand and make
a number of new purchases and, at the balance sheet date,
GBP60,000,000 of the loan facility had been drawn down and we have
yet to utilise the remaining GBP15,000,000 of the total
facility.
The benefit of these borrowings will be reflected in future
years' accounts, especially when we can invest the final
GBP15,000,000 which, not being fixed, would be at a much lower "all
in" interest cost (at current floating rate).
Tax
This year our tax payable is GBP678,000 with a large notional
reduction of GBP2,142,000 in our deferred tax. However, we also
paid over GBP800,000 in stamp duty tax and GBP700,000 in vacant
rates, plus approximately GBP90,000 in non-recoverable VAT. Plus
GBP169,000 National Insurance premiums a minimum total of
GBP2,437,000 towards government coffers and so an additional 1%
lowering of corporate profits tax is meaningless to most property
companies like ourselves.
A government that has between GBP100 billion and maybe as much
as GBP200 billion locked in the banking sector whose survival is
dependent on a property market that only works with willing buyers,
would seem foolish to constantly make property investment or
ownership less desirable or less financeable. So charging vacant
rates or extra stamp duty or heavier, mostly unnecessary,
environmental obligations and placing extra financial and
regulatory burdens on the banks which lower their lending ability,
only delays the recovery of their government loans still longer or,
worse, may cause some, or all, of this huge debt to be written off,
of course only done at a time which will be politically
expedient.
Dividends
During the year we paid an interim dividend of 3p per share. At
the time of the interim announcement in August 2011 we were unable
to give a view as to what final, if any, dividend could be paid due
to the uncertain times and also the much higher total annual
interest charges we would be paying partly due to our derivatives
arrangement having now crystalized and interest payment combined
with the higher margins now payable on our increased facility.
There is, of course, a hiatus between the cost of borrowing and
the receipt of benefits from investing the funds but the sale of
our entire holding of O Twelve shares gave us GBP3,222,000 of extra
liquidity. Thus I am pleased to say we have decided to pay a final
dividend of 9p per share to bring a yearly total of 12p and thus
continue our 30(th) year of uninterrupted dividends, these having
multiplied by a factor of 50 over that period.
Prospects
In the last two years we have invested GBP30,000,000 in
commercial property and anticipate investing at least another
GBP15,000,000 in the forthcoming year. I believe that this is
laying the foundation for much improved profitability and
increasing asset values for our Group in the years to come. In my
fifty years in the property industry I have rarely seen so many
good value investment opportunities for those capable of investing
for the longer term.
If it is possible to invest in a freehold building with an
honest, reliable tenant paying between 8% to 10% return for 10
years and which should provide some protection against inflation or
buy a piece of paper with a government promise of 2.5% return for
10/20 years, what should you choose? I suspect history already
tells us which is the better and wiser choice.
Finally I wish to thank our small but dedicated teams of staff,
financial advisers, legal advisers, agents and accountants for all
their hard work during the past year which has been busier and more
intensive than usual and, of course, our tenants, most of whom pay
their rents despite a difficult trading environment.
Andrew S Perloff
CHAIRMAN
25 April 2012
CHAIRMAN'S RAMBLINGS
This year marks the 200(th) anniversary of the birth of Charles
Dickens and having often used quotes from his novels I wondered if
I have any other possible connections.
And of course I have:-
In 1969 we purchased a freehold pub called the "Sir Robert Peel"
at 178 Bishopsgate. It was tiny with a frontage of about 14 ft. and
three vacant upper floors. We had agreed to purchase at GBP27,500
and found the raising of finance was slow. The pub owners, one of
the big brewers, were desperate to complete quickly and thus agreed
to lend us 90% of the purchase price for nine months thus enabling
them to transfer the liquor licence to a much bigger unit nearby.
This gave us time and we let the entire property to Dombey &
Son at GBP3,500 per annum, this is a very old established multiple
firm of men's made to measure suits whose name and city presence
was possibly the inspiration for Dickens' story "Dombey & Son"
which was about a ship owning brokerage company or vice versa. The
connection ends there.
However, as always, my stories don't. Over the next three years
property prices boomed and even more so in the city of London. In
1974 we decided to sell this investment at one of Healey and
Baker's auctions. We were hoping for GBP100,000 but it made
GBP126,000, a phenomenal profit. This was owned personally in an
investment partnership with my brother, sister and Malcolm Bloch
and this would be subject to 30% capital gains tax.
About the same time some listed property company shares I
personally owned had risen from GBP12,500 to over GBP50,000 in
value. A sale would crystallise another big capital gains tax
bill.
We had heard about a tax specialist who could legally, for a
fee, either substantially reduce or even remove completely the tax
liability.
Our accountant thus organised a meeting with the "specialist".
We met him at his smart office off Harley Street. He spoke so
quietly both Malcolm and I thought we had gone deaf.
His scheme was that various companies were formed A B & C -
and A sold part interest in the freehold investment to B which
leased part to C who gave a loan to A who then transferred the lot
to an outside party for real money and 'dished it out' to the
original property and company owners. This description is, of
course, complete rubbish but that's what it seemed like to us.
Our accountant had listened carefully and told us he understood
it, told us it was near the mark but legal and should work but if
it did not would take ten years to unravel before any tax would
have to be paid, but also we could have heavy court costs to argue
our case.
We thought about it for a month or so, put off by the
complexity, by which time my shares had fallen in value by 60% thus
I only had a small profit. We thus decided we would not bother but
reinvest the money to make more profit before the tax would become
due in two years' time.
Of course, you've guessed it, by the time our tax was due and
demanded, a severe property recession was in place, our money was
tied up in property and no cash was available to pay. The total
needed was about GBP30,000. We paid a little off and tried delaying
tactics by promising more but the more embarrassing problem was
that my sister's share of the capital gains tax was about GBP4,500
but the tax demand went directly to my brother-in-law, a pharmacist
employed on a good salary but never previously having had a capital
gains tax bill. To say he was shocked was an understatement.
Prevarication was no longer possible so we arranged to visit the
local tax collectors head office in Aldwych.
We met the local senior inspector in one of the bleakest offices
I have ever entered; no decoration, worn linoleum on the floor, an
old and cheap wooden desk and four uncomfortable chairs. The
inspector was pleasant whilst we explained our plight, in
particular that of our brother-in-law who was completely unaware of
his wife's investment and capital gains tax and also that she had
not received any money.
The inspector then laughed at the situation and explained that a
husband is responsible for his wife's debts, in particular her
taxes, whether he knew about them or not. Well, in Oliver Twist
when the magistrate told Mr Bumble "in the eyes of the law a man is
responsible for his wife's actions" he replied "if that is what the
law says then the law, Sir, is an ass".
Bumble was, of course, correct and in due course this onerous
anomaly of tax law was changed, but too late for us.
However, the tax inspector agreed to give us over six months'
(which turned out to be a year) to pay in stages which we
eventually did.
Tax is on everyone's mind and most people will know income tax
was brought in circa 1800 to finance the then forthcoming war with
France under its emperor Napoleon initially at less than 1p in the
pound on incomes of GBP60 per year (the average men's wage) rising
to 10% on incomes of GBP200 per year or more (the income of
moderately successful solicitors) and rose and fell during the wars
with Napoleon and was abolished in 1816 after his defeat at
Waterloo the previous year. However, it was reintroduced in 1842 by
the then Prime Minister, SIR ROBERT PEEL and remained and has
constantly risen ever since.
There has been much comment lately since the Budget when the top
rate of tax was reduced from 50p to 45p in the GBP1. If they had
pitched it at 35% this year going up to 45% next year, the 300,000
tax payers who pay 57% of all income tax would have brought forward
their income, dividends and gains early probably giving the
Chancellor an extra GBP10 billion to reduce their deficit when he
most needs it
Some of you will have noticed how sometimes over the last 15
years or so the immigration figure changed from "immigration" to
"net immigration" i.e., the amount of people who emigrated was
deducted from the total obviously to mislead the public but in this
ramble I'm more concerned about tax.
In the modern age of computer and monumental government snooping
and records, there is a huge amount of facts and figures available
to those who know where to look.
Apparently there are about 5,250,000 British ex-pats round the
world and it is a fair bet that a larger percentage of them than
those remaining in the UK, are those that had substantial wealth or
earning capacity and felt that our taxation system was unfair in a
more honest meaning of the word. If that amounted to just 3% of the
total i.e., 150,000 people, how much better the UK would be if they
were lured back by better tax rates. Currently 300,000 top earners
pay 57% of the total income tax (let alone all the other taxes) so
if they came back and paid the same rates, another 28% would be
paid - so top rate taxes could be substantially reduced so that
this could happen and those on lower levels of income would not
have to pay any income tax.
Now I know the HM Revenue and Customs keep records going back
many years. They should be able to say how many top earners, i.e.,
over GBP150,000 per annum, have left the UK in the last 10 or 15
years and thus we would know how much these high tax rates have
cost the country in lost taxes.
To be continued........
Andrew S Perloff
CHAIRMAN
25 April 2012
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2011
Notes 31 December 31 December
2011 2010
GBP'000 GBP'000
Revenue 1 11,940 10,085
Cost of sales 1 (4,148) (3,133)
Gross profit 7,792 6,952
Other income 76 238
Administrative expenses (3,230) (2,694)
4,638 4,496
Movement in fair value of investment
properties 6 5,671 4,039
---------------- ----------------
10,309 8,535
Share of trading loss from associate
undertaking 11 (171) (23)
Finance costs (2,954) (2,265)
Investment income 58 230
Profit on disposal of available for
sale
investments (shares) 2,007 2,473
Impairment of available for sale investments
(shares) (926) -
Fair value loss on derivative financial
liabilities 8 (10,635) (2,549)
(Loss)/ profit before income tax 1 (2,312) 6,401
Income tax credit/ (expense) 2 1,462 (532)
(Loss)/ profit for the year (850) 5,869
================ ================
Attributable to:
Equity holders of the parent (865) 5,864
Non-controlling interest 15 5
(Loss)/ profit for the year (850) 5,869
================ ================
(Loss)/ earnings per share
Basic and diluted 4 (5.1)p 34.8p
================ ================
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2011
Notes 31 December 31 December
2011 2010
GBP'000 GBP'000
(Loss)/ profit for the year (850) 5,869
----------- -----------
Other comprehensive income Movement
in fair value of available for
sale investments (shares) taken to equity 7 (517) 833
Realised fair value on disposal of available
for
sale investments (shares) previously
taken to equity 7 (2,366) (81)
Realised fair value on impairment of
available for
sale investments (shares) previously
taken to equity 7 476 -
Deferred tax relating to movement in
fair value of
available for sale investments (shares)
taken to equity 355 (199)
Other comprehensive (loss)/ income for
the year, net of tax (2,052) 553
Total comprehensive (loss)/ income for
the year (2,902) 6,422
=========== ===========
Attributable to:
Equity holders of the parent (2,917) 6,417
Non-controlling interest 15 5
(2,902) 6,422
=========== ===========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Company number 293147
As at 31 December 2011
Notes 31 December 31 December
2011 2010
ASSETS GBP'000 GBP'000
Non-current assets
Plant and equipment 489 552
Investment property 6 136,491 108,960
Goodwill 8 8
Interest in associate - 127
Available for sale investments (shares) 7 2,597 6,452
139,585 116,099
----------- -----------
Current assets
Inventories 321 321
Stock properties 7,015 7,985
Trade and other receivables 3,815 2,775
Cash and cash equivalents 5,482 6,587
16,633 17,668
----------- -----------
Total assets 156,218 133,767
=========== ===========
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Capital and reserves
Share capital 4,217 4,217
Share premium account 2,886 2,886
Capital redemption reserve 604 604
Retained earnings 59,248 63,515
66,955 71,222
Non-controlling interest 111 96
Total equity 67,066 71,318
----------- -----------
Non-current liabilities
Long-term borrowings 60,252 1,325
Derivative financial liability 8 19,928 9,293
Deferred tax liabilities 151 2,648
Obligations under finance leases 1,205 1,207
----------- -----------
81,536 14,473
----------- -----------
Current liabilities
Trade and other payables 7,228 5,336
Short-term borrowings 140 42,640
Current tax payable 248 -
----------- -----------
7,616 47,976
----------- -----------
Total liabilities 89,152 62,449
----------- -----------
Total equity and liabilities 156,218 133,767
=========== ===========
The accounts were approved by the Board of Directors and
authorised for issue on 25th April 2012. They were signed on its
behalf by:
A.S. Perloff, Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2011
Share Share Capital Retained Total
capital premium Redemption earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2010 4,217 2,886 604 60,303 68,010
Total comprehensive
income for the
year - - - 6,417 6,417
Dividends paid - - - (3,205) (3,205)
Balance at 1 January
2011 4,217 2,886 604 63,515 71,222
Total comprehensive
income for the
year - - - (2,917) (2,917)
Dividends paid - - - (1,350) (1,350)
-------- -------- ----------- --------- --------
Balance at 31
December 2011 4,217 2,886 604 59,248 66,955
======== ======== =========== ========= ========
Within retained earnings are unrealised gains of GBP170,000 and
deferred tax credit of GBP423,000 (2010 - unrealised gains of
GBP2,578,000 and a deferred tax expense of GBP164,000) relating to
fair value of available for sale investments (shares).
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2011
31 December 31 December
2011 2010
GBP'000 GBP'000
Cash flows from operating activities
Profit from operating activities 4,638 4,496
Add: Depreciation charges for the year 122 137
Profit before working capital change 4,760 4,633
Increase in inventory - (107)
Decrease in stock properties 60 113
(Increase)/ decrease in receivables (1,046) 237
Increase in payables 1,304 1,062
----------- -----------
Cash generated from operations 5,078 5,938
Interest paid (2,545) (2,266)
Income tax paid (511) (1,389)
----------- -----------
Net cash generated from operating activities 2,022 2,283
Cash generated from/ (used in) investing
activities
Purchase of plant and equipment (59) (796)
Purchase of investment properties (20,952) (8,454)
Purchase of available for sale investments
(shares) (693) (1,749)
Purchase of equity in associate undertaking - (150)
Proceeds from sale of fixed assets - 202
Proceeds from sale of investment property - 345
Proceeds from the disposal of available
for sale investments (shares) 3,222 3,172
Dividend income received 39 154
Interest income received 20 78
----------- -----------
Net cash used in investing activities (18,423) (7,198)
Financing activities
Repayments of loans (49,640) (140)
Payment of loan arrangement fees and
associated costs (714) -
New loans received 67,000 -
Dividends paid (1,350) (3,205)
----------- -----------
Net cash generated from/ (used in) financing
activities 15,296 (3,345)
Net decrease in cash and cash equivalents (1,105) (8,260)
Cash and cash equivalents at the beginning
of year 6,587 14,847
Cash and cash equivalents at the end
of year 5,482 6,587
=========== ===========
NOTES TO THE ANNUAL FINANCIAL REPORT ANNOUNCEMENT
For the year ended 31 December 2011
General Information
While the financial information included in this preliminary
announcement has been prepared in accordance with International
Financial Reporting Standards (IFRSs), this announcement does
not itself contain sufficient information to comply with IFRSs.
The Group expects to publish full financial statements that
comply with IFRSs in May 2012.
The financial information set out in the announcement does
not constitute the company's statutory accounts for the years
ended 31 December 2011 or 2010. The financial information
for the year ended 31 December 2010 is derived from the statutory
accounts for that year, which were prepared under IFRSs, and
which have been delivered to the Registrar of Companies. The
auditors reported on those accounts, their report was unqualified
and did not contain a statement under either Section 498(2)
or Section 498(3) of the Companies Act 2006 and did not include
references to any matters to which the auditors drew attention
by way of emphasis.
The statutory accounts for the year ended 31 December 2011
will be finalised on the basis of the financial information
presented by the directors in this preliminary announcement
and will be delivered to the Registrar of Companies following
the company's annual general meeting.
The accounting policies adopted in the preparation of these
condensed consolidated preliminary results are consistent
with those set out in the latest Group Annual financial statements.
There is no material seasonality associated with the Group's
activities.
Going concern
The Group is strongly capitalised, has considerable liquidity
together with a number of long term contracts with its customers
many of which are household names. The Group also has strong
diversity in terms of customer spread, investment location
and property sector.
As a consequence, the Directors believe the Group is very
well placed to manage its business risks successfully and
have a good expectation that both the Company and the Group
have adequate resources to continue their operations. For
these reasons they continue to adopt the going concern basis
in preparing the financial statements.
Principal risks and uncertainties
The Company and Group operations expose it to a variety of
financial risks the main two being the effects of changes
in credit risk of tenants and interest rate movement exposure
on borrowings. The Company and Group have in place a risk
management programme that seeks to limit the adverse effects
on the financial performance of the Company and Group by monitoring
levels of debt finance and the related finance costs. The
Company and Group also use interest rate swaps to protect
against adverse interest rate movements and no hedge accounting
is applied. In the current and prior year, mark to market
valuations on our financial instruments have been erratic,
and these large swings are shown within the income statement
contributing to the year's financial accounting loss. However,
the actual cash outlay effect is nil when considered with
the loan as the instruments are used to protect increases
in cash outlays.
Given the size of the Company and Group, the Directors have
not delegated the responsibility of monitoring financial risk
management to a sub-committee of the Board. The policies set
by the Board of Directors are implemented by the Company and
Group's finance department.
Price risk
The Company and Group are exposed to price risk due to normal
inflationary increases in the purchase price of the goods
and services it purchases in the UK. The Company and Group
also have price exposure on listed equities that are held
as investments. The Group has a policy of holding only a small
proportion of its assets as listed investments.
Credit risk
The Company and Group have implemented policies that require
appropriate credit checks on potential tenants before lettings
are agreed. In most cases a deposit is requested unless the
tenant can provide a strong personal or other guarantee. The
amount of exposure to any individual counterparty is subject
to a limit, which is reassessed annually by the Board. Exposure
is also reduced significantly as the Group has a large spread
of tenants who operate in different industries.
Liquidity risk
The Company and Group actively ensure liquidity by maintaining
a long-term finance facility and also hold significant cash
deposits, which are both to ensure the Company and Group has
sufficient available funds for operations and planned expansions.
Interest rate risk
The Company and Group have both interest bearing assets and
interest bearing liabilities. Interest bearing assets include
only cash balances which earn interest at fixed rate. The
Company and Group have a policy of only borrowing debt to
finance the purchase of cash generating assets (or assets
with the potential to generate cash). The Directors will revisit
the appropriateness of this policy should the Company and
Group operations change in size or nature.
NOTES TO THE CONSOLIDATED ACCOUNTS
For the year ended 31 December 2011
1. Revenue and cost of sales
The Groups' main operating segment is investment and dealing in
property and securities. The majority of the revenue, cost of sales
and profit or loss before taxation being generated in the United
Kingdom. The Group is not reliant on any key customers.
M.R.G. Systems Limited is an operating business segment whose
principal activity is that of electronic designers, engineers and
consultants. 70% of its revenues arose in the United Kingdom and
100% of its cost of sales.
Tunnel Limited was an operating segment whose principal activity
was that of value shoe retailer. Its activities were discontinued
in the year. 100% of its revenues arose in the United Kingdom. 50%
of the company was owned by the Group as a joint venture and only
the Group's share was represented in these accounts.
The split of assets, tax effect and cash flow of each segment is
not shown as these are not material in relation to M.R.G. Systems
Limited or Tunnel Limited.
Turnover arose as follows: 2011 2010
GBP'000 GBP'000
Rental income 8,961 7,717
Income from trading (Tunnel Limited)
- 50% share 224 231
Income from trading (M.R.G. Systems
Limited) 2,755 2,137
11,940 10,085
======== ========
Cost of sales arose as follows: 2011 2010
GBP'000 GBP'000
Cost of sales from rental income 2,346 1,856
Cost of sales from trading (Tunnel
Limited) - 50% share 131 122
Cost of sales from trading (M.R.G.
Systems Limited) 1,671 1,155
4,148 3,133
=========== ==========
Profit/(loss) before income tax: 2011 2010
GBP'000 GBP'000
Profit/ (loss) from investment and
dealing in properties (2,332) 6,407
Profit/ (loss) from trading (Tunnel
Limited) -50% share (41) (5)
Profit/ (loss) from trading (M.R.G.
Systems Limited) 61 (1)
(2,312) 6,401
=========== ==========
2. Income tax expense
The charge for taxation comprises the following:
2011 2010
GBP'000 GBP'000
Current year UK corporation
tax 678 798
Prior year UK corporation
tax 2 (45)
---------- ----------
680 753
Current year deferred tax
credit (2,142) (221)
---------- ----------
Income tax (credit)/ expense
for the year (1,462) 532
========== ==========
Domestic income tax is calculated at 26.5% (2010 - 28.0%) of the
estimated assessable profit or loss for the year. The future
provision for deferred tax has been calculated on the basis of 25%
(2010 - 27%).
The total charge for the year can be reconciled to the
accounting profit or loss as follows;
2011 2011 2010 2010
%
GBP'000 GBP'000 %
Profit or loss before taxation (2,312) 6,401
Profit or loss on ordinary activities
before tax multiplied by the
average of the standard rate
of UK corporation tax of 26.5%
(2010 - 28.0%) (613) 26.5 1,792 28
Tax effect of expenses that
are not deductible in determining
taxable profit 21 - 16 -
Dividend income not allowable
for tax purposes (10) - (43) -
Capital allowances for the year
in excess of depreciation 22 - (41) -
Non taxable movement in fair
value of investment properties (847) 36.5 (824) (13)
Non deductible movement in fair
value of available for sale 13 - - -
investments (shares)
Non deductible movement in fair
value of financial instruments 252 (10) 185 3
Tax effect of non deductible
loss in associate 45 (2) 8 -
Tax losses utilised - - (486) (8)
Marginal relief/ taxed at small
companies rate (4) - - -
Disposal of properties or shares (343) 16 (30) -
Prior year UK corporation tax 2 - (45) (2)
Tax charge (1,462) 67 532 8
========= ====== ========= ======
3. Dividends
Amounts recognised as distributions to equity holders in the
period:
2011 2010
GBP'000 GBP'000
Interim dividend (quarterly)
for the year ended 31 December
2009 of 5p per share - 844
Final dividend for the year
ended 31 December 2010 of
5p* per share (2009 of 4p
per share) 844 675
Interim dividend for the year
ended 31 December 2011 of
3p per share (2010 of 10p
per share) 506 1,686
1,350 3,205
========= =========
The Directors recommend a payment of a final dividend of 9p per
share (2010 - 5p *including a 3p special dividend), following the
interim dividends paid on 28 October 2011 of 3p per share. The
final dividend of 9p will be payable on 31 July 2012 to
shareholders on the register at the close of business on 6 July
2012 (Ex dividend on 4 July 2012). The full dividend for the year
ended 31 December 2011 is anticipated to be 12p.
4. (Loss)/ earnings per ordinary share (basic and diluted)
The calculation of earnings per ordinary share is based on
earnings, after excluding non-controlling interests, being a loss
of GBP865,000 (2010 - profit of GBP5,864,000) and on 16,869,000
ordinary shares being the weighted average number of ordinary
shares in issue during the year (2010 - 16,869,000). There are no
potential ordinary shares in existence.
5. Net assets per share
2011 2010
Total equity attributable to shareholders
per 25p ordinary share 397p 422p
====== ======
The calculation of net asset per ordinary share is based on the
equity attributable to shareholders of the equity in the parent
company, and on 16,869,000 ordinary shares being number of ordinary
shares in issue at 31 December 2011 and 31 December 2010.
6. Investment property
Investment
Properties
GBP'000
Fair value
At 1 January 2010 96,658
Additions 8,454
Fair value adjustment on property held on operating
leases 154
Disposals (345)
Revaluation increase 4,039
------------
At 1 January 2011 108,960
Additions 20,952
Transferred from stock 910
Fair value adjustment on property held on operating
leases (2)
Revaluation increase 5,671
At 31 December 2011 136,491
============
Carrying amount
At 31 December 2011 136,491
============
At 31 December 2010 108,960
============
At 31 December 2011, GBP123,791,000 (2010 - GBP89,020,000) and
GBP21,700,000 (2010 - GBP19,940,000) included within investment
properties relates to freehold and leasehold properties
respectively.
* Investment property held under an operating lease is initially
accounted for as if it were a finance lease, recognising as an
asset and a liability the present value of the minimum lease
payments due by the group to the freeholder. Subsequently and as
described in accounting policies, the fair value model of
accounting for investment property is applied to these
interests.
On the historical cost basis, investment properties would have
been included as follows:
2011 2010
GBP'000 GBP'000
Cost of investment properties 96,233 74,371
======== ========
Costs relating to ongoing and potential developments are
included in additions to investment properties and in the year
ended 31 December 2011 amounted to GBP59,000 (2010 -
GBP49,000).
The Group did have contractual obligations at the statement of
financial position date to purchase investment properties,
including a balance to pay of GBP1,257,000 and also a commitment to
spend GBP180,000 on developing investment property.
The market value shown at 31 December 2011 was valued internally
by the Directors. As at 31 December 2010, the investment properties
were valued independently at their open market value, by GL Hearn,
Chartered Surveyors.
The property rental income earned by the Group from its
investment property, all of which is leased out under operating
leases, amounted to GBP8,253,000 (2010 - GBP7,051,000).
7. Available for sale investments (shares)
Non-current
assets
GBP'000
Cost or valuation
At 1 January 2010 4,651
Additions 1,749
Disposals (700)
Recycling of revaluation through equity
on disposal (81)
Revaluation increase through equity (unrealised) 833
------------
At 1 January 2011 6,452
Additions 693
Disposals (1,215)
Impairment on revaluation through income
statement (926)
Movement in fair value taken to equity (517)
Realised fair value on disposal previously
taken to equity (2,366)
Realised fair value on impairment previously
taken to equity 476
At 31 December 2011 2,597
============
Comprising at 31 December 2011:
At cost 529
At valuation / net realisable value 2,068
-------------------------------------------------- ------------
Carrying amount
At 31 December 2011 2,597
============
At 31 December 2010 6,452
============
The available for sale investments represent investments in
listed and unquoted equity securities that offer the Group the
opportunity for return through dividend income and fair value
gains. They have no fixed maturity or coupon rate. The fair values
of the listed securities are based on quoted market prices. The
available for sale securities carried at fair value are classified
as level 1 in the fair value hierarchy specified in IFRS 7. The
fair value of available for sale investments in unquoted equity
securities, which are not publically traded, cannot be measured and
have therefore been shown at cost. The valuation of the available
for sale investments is sensitive to stock exchange conditions.
Panther Securities PLC holds 19.9% of the issued share capital
of Beale PLC at the year end. This has been treated as an
investment rather than as an associate under IAS 28, since, apart
from holding less than 20% of the issued share capital, the Group
could not exercise significant influence.
Price risk
For the year ended 31 December 2011 if the average share price
of the portfolio was 10% lower there would be a further impairment
charge in the year of GBP106,000 to the Income Statement and
GBP101,000 valuation movements charged to equity. Corresponding
gains would be seen for a 10% uplift.
8. Derivative financial instruments
The main risks arising from the Group's financial instruments
are those related to interest rate movements. Whilst there are no
formal procedures for managing exposure to interest rate
fluctuations, the Board continually reviews the situation and makes
decisions accordingly. Hence, the Company will, as far as possible,
enter into fixed interest rate swap arrangements. The purpose of
such transactions is to manage the interest rate risks arising from
the Group's operations and its sources of finance.
2011 2010
Bank loans GBP'000 GBP'000
Interest is charged as to: Rate Rate
Fixed/ Hedged
HSBC Bank plc* 35,000 7.06% 35,000 6.06%
HSBC Bank plc** 25,000 6.63% -
Unamortised loan arrangement fees (932) - -
Floating element
HSBC Bank plc - 7,500
Natwest Bank plc 1,324 1,465
------- -------
60,392 43,965
======= =======
Bank loans totalling GBP60,000,000 (2010 - GBP35,000,000) are
fixed using interest rate swaps removing the Group exposure to fair
value interest rate risk. Other borrowings are arranged at floating
rates, thus exposing the Group to cash flow interest rate risk.
Financial instruments
The derivative financial assets and liabilities are designated
as held for trading.
Hedged Average Duration 2011 2010
amount rate of contract Fair value Fair value
remaining
GBP'000 'years' GBP'000 GBP'000
Derivative Financial
Liability
Interest rate swap 35,000 5.06% 28.75 (14,261) (7,312)
Interest rate swap 25,000 4.63% 9.92 (5,667) (1,981)
(19,928) (9,293)
============ ============
Net fair value loss on derivative financial
assets (10,635) (2,549)
============ ============
* Fixed rate came into effect on 1 September 2008. Rate includes
2% margin (2010 1% margin). The contract includes mutual breaks,
the first one being on 23 November 2014 (and every 5 years
thereafter).
** This arrangement came into effect on 1 December 2011 when
HSBC exercised an option to enter the Group into this interest swap
arrangement. The rate shown includes a 2% margin. This contract
includes a mutual break on the fifth anniversary and its duration
is until 1 December 2021.
Interest rate derivatives are shown at fair value in the income
statement, and are classified as level 2 in the fair value
hierarchy specified in IFRS 7.
The vast majority of the derivative financial liabilities are
due in over one year and therefore they have been disclosed as all
due in over one year.
The above fair values are based on quotations from the Group's
banks and Directors' valuation.
Interest rate risk
For the year ended 31 December 2011, if on average the 3 month
LIBOR over the year had been 100 basis points (1%) higher with all
other variables held constant, under the financing structure in
place at the year end, post-tax profit for the year would have been
approximately GBP84,000 higher (2010 - the profit would have been
lower by GBP90,000). This analysis excludes any affect this rate
adjustment might have on expectations of future interest rates
movements which is likely to affect the estimation of the fair
value of the derivative financial assets/ liabilities (as this
movement would also be shown within the income statement affecting
post-tax profit or loss), but indicates the likely cash saving/
(cost) a 100 basis points (1%) movement would have had for the
Group. Going forward this is minimal due to the hedging of the
HSBC/ Santander loan.
Treasury management
The long-term funding of the Group is maintained by three main
methods, all with their own benefits. The Group has equity finance,
has surplus profits and cash flow which can be utilised, and also
has loan facilities with financial institutions. The various
available sources provide the Group with more flexibility in
matching the suitable type of financing to the business activity
and ensure long-term capital requirements are satisfied. Please
also see the Financial Risk management: Objectives, policies and
processes for managing risk, of the Corporate Governance
Report.
9. Events after the balance sheet date
There were no material transactions after the statement of
financial position date.
10. Investment in joint venture
Until November 2011, the Group owned 50% of the 2 GBP1 issued
equity shares in Tunnel Limited, a company incorporated in England
and Wales, which is a retailer of value shoes.
As well as the GBP1 equity investment, the Group originally
invested GBP85,000 by way of an interest free intercompany loan
which was mainly used for the purchase of stock. During the year,
the Company made a further loan of GBP100,000 (which was to be
repaid in priority to the other joint venture partner loans) and
paid for GBP44,000 salary costs on behalf of the management of
Tunnel Limited.
The joint venture company traded out of some of the Group's
premises which were provided on rent free terms with the intention
that once the business was established, market rents would be
payable.
In November 2011, the Company's equity holding in Tunnel Limited
was sold for GBP1 and the Group granted four month licenses on
three of the shops to enable the business to continue trading at no
rent for this period. Prior to the disposal of its equity interest,
the Group received GBP40,000 from the cash balances of Tunnel
Limited in part payment of its superior loan and all remaining
intercompany debt was written off as part of the disposal.
The Group's share of joint venture revenue, expenses and losses
excluding the loan write off are shown at note 1.
Whilst the Group's overall loss for the year on the joint
venture was GBP224,000, it estimates that it saved GBP92,000 in
costs of holding vacant properties (mainly in rates and insurance
paid). The disposal of Tunnel Limited has not been disclosed as a
discontinued operation as it is not considered to be material to
the Financial Statements.
11. Investment in associate undertaking
The Group purchased 25% of this entity being 150,000 ordinary
shares of GBP1 each (newly issued share capital for cash) in
Wimbledon Studios Limited for GBP150,000 in August 2010. The
company operates as an independent film studio letting out sets and
offices to media and television organisations. The entity operates
out of a Group wholly owned property for which a market rental has
been agreed (with one year's rent free).
In accordance with IAS 28 (revised 2008) - Investments in
Associates, the Group has equity accounted for its share of the
profits and losses and assets and liabilities of this entity.
The aggregated financial information of Wimbledon Studios
Limited for the period ended 31 December 2011 is set out below:
2011 2010
GBP'000 GBP'000
Profit and loss account:
Revenue 1,093 40
Net loss for entity (685) (93)
-------- --------
Panther Securities PLC's share
of net loss (171) (23)
======== ========
Balance sheet:
Non-current assets 1,033 627
Current assets 407 641
-------- ------
1,440 1,268
Non-current liabilities (891) (189)
Current liabilities (726) (573)
-------- ------
(1,617) (762)
-------- ------
Net (liabilities)/ assets (177) 506
-------- ------
Panther Securities PLC's share
of net (liabilities)/ assets (44) 127
======== ======
In accordance with IAS 28 (revised 2008) Investment in
Associates, where the Group's share of losses in the associate
exceeds its equity investment, the carrying value of that equity
investment is reduced to GBPnil and the remaining loss is taken
against any further long term interest that in substance forms part
of the investors net investment in the associate. Accordingly, the
GBP44,000 share of net liabilities referred to above has been
allocated against the carrying value of the overdraft provided by
the Group to the associate as discussed below.
The Group has also provided a GBP400,000 overdraft to the
associate undertaking. As at the year end, this was fully drawn
down but the associate also had GBP238,000 of cash at bank. This
loan is included in other receivables.
During the year GBP351,000 rent receivable was recognised by the
Group in respect of the Associate. At the Statement of Financial
Position date, the Group was owed rent and insurance of GBP142,000.
Additionally during the year GBP111,000 was recognised by the Group
as rental receivable in relation to equipment and fixtures. At the
Statement of Financial Position date the Group was owed GBP108,000,
which has been provided against in full.
12. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note.
The compensation of the Group's key management personnel is
shown in the accounts (see online) as well as the Directors'
emoluments in the notes and within the Directors' Remuneration
Report.
Notes 10 and 11 detail the Group's transactions with joint
ventures and associated undertakings.
In respect of Wimbledon Studios Limited, during the year the
Group provided a GBP400,000 overdraft facility to the company. As
discussed in note 11, the Groups GBP44,000 share of net liabilities
has been allocated against the carrying value of the overdraft
therefore showing a receivable of GBP356,000. At the Statement of
Financial Position date, the Group was also owed rent and insurance
of GBP142,000 and was also owed GBP108,000 in relation to the
rental of equipment and fixtures which has been provided
against.
Included in other receivables Panther Securities PLC had made
advances to the two independent directors of Wimbledon Studios
Limited of GBP62,500 each, in order for them to be able to purchase
their shareholdings in that company. Both loans are unsecured for a
maximum term of 3 years and attract interest of 4% per annum. One
of these was repaid in the year as the director stepped down and
the other remains fully outstanding. Fair value of this loan is
assessed to be the same as its carrying value.
Portnard Limited provided Panther Securities PLC with a
GBP7,000,000 interest free, unsecured bridging loan in July 2011
for a two week period. The loan assisted the Group in performing a
verbal commitment (but not a contractual one) in respect of the
acquisition of certain properties and was repaid when the
refinancing was completed with HSBC/ Santander. Portnard Limited is
the Group's largest shareholder and A S Perloff and his family
trusts have a beneficial interest in the company, as detailed in
the Directors report.
There were no further transactions with other related
parties.
13. Copies of the full set of Report and Accounts will be posted
to shareholders shortly, will be available from the Company's
registered office at Deneway House, 88-94 Darkes Lane, Potters Bar,
Hertfordshire, EN6 1AQ and also will be available for download on
the Group's website www.panthersecurities.co.uk in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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