TIDMPNS
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of
this announcement, this information is now considered to be in the public
domain.
Panther Securities P.L.C.
("the Company" or "the Group")
Final results for the year ended 31 December 2019
CHAIRMAN'S STATEMENT
I am pleased to present our accounts for the year ended 31 December 2019 even
though they show a loss of GBP4,093,000 after allowing for a tax credit of GBP
870,000. This loss is mainly due to a directors' revaluation of our entire
portfolio amounting to an GBP8,832,000 decrease in value.
Our rental receivable during the year ended 31 December 2019 amounted to GBP
14,226,000 compared to the previous year of GBP13,607,000 despite having sold
over GBP40,000,000 of property during the previous year. The income lost from
these sold properties has more than been replaced by purchases probably costing
less than half the capital received from the earlier sales.
Disposals
Victoria Street, Wolverhampton
This freehold corner site which had been cleared after receiving planning
permissions for two alternative developments was sold for GBP710,000 against a
previous book value of GBP150,000.
Skinnergate, Darlington
A large, vacant freehold shop in Skinnergate, Darlington, with a book value of
GBP400,000, was sold to the local council for GBP355,000 after being vacated by
Argos PLC following their takeover and reorganisation by Sainsbury's. This
property was on the point of being let to a well-known multiple who withdrew a
few days before signing the lease. This was due to House of Fraser and Marks &
Spencer both announcing they were closing their stores in the town only the
previous week. Large stores are, of course, vital to town centres as they draw
in shoppers thus helping all town centre traders, large and small. I am not
sure central government even now understand this point.
High Street, Kings Lynn
Whilst not really a disposal, this single unit, let to a charity shop,
experienced a fire that completely destroyed the unit. We received insurance
proceeds of which GBP145,000 has been treated as value over its book value, after
we have provided about a third of the receipts to cover demolition and site
clearance (and left a small amount within Investment Properties to account for
the land value).
Acquisitions
New Century and Jackson House, Gateshead
In July 2019 we completed on the freehold purchase of New Century and Jackson
House in Gateshead for GBP4.65m. This is a large block containing a mix of
retail, offices and leisure with a net internal area of 91,663 sq. ft. located
in the centre of Gateshead directly opposite the metro station and
approximately a mile from Newcastle City Centre. The block is anchored by Pure
Gym on a long lease, with J D Wetherspoon, Argos and Peacocks being some of the
other well-known tenants. At the date of acquisition, the block was producing
an income of GBP790,000 per annum showing a return of 17.0% prior to costs.
There are various asset management opportunities to improve the income by
letting some vacant space.
De Clare Business Park, Pontygwindy Road, Caerphilly
On 4 September 2019 we completed the freehold acquisition of De Clare Business
Park, Caerphilly, South Wales for GBP2.7m. This business park is made up of four
independent modern office buildings with the majority of the offices let to the
government and local council. In total there is circa 48,241 sq. ft. of office
space with parking for 163 vehicles. With a current rent roll of GBP376,000 per
annum, this represents a return of 13.9% and adds non-retail diversification to
our portfolio. There is some vacant space available and we may be able to
increase the rents,
enhancing the scheme's value under our own management. During the acquisition
process we were able to agree terms for a letting of one of the vacant suites
at a higher rent per square foot than had previously been expected.
Beales
In last year's accounts I mentioned my private company had, in October 2018,
disposed of its interest in Beales's trading operations to its management who
were able to arrange additional finance from a private equity company with
extensive retail connections and experience.
I took this decision as I felt Beales had a much better chance of survival as
the management buyout was supported by a fund with deeper pockets and wider
retail connections than my own. However, central government actions, and
inactions, and shrinking markets overwhelmed department store groups' ability
to produce a profit thus many CVAs, administrations and store closures in the
retail sector have been occurring.
Beales was placed in administration on 20 January 2020. We received a number
of questions from concerned shareholders and stakeholders regarding the effect
on the Panther Group. On 27 January 2020 we announced that in a worst case
scenario if trading ceased in all thirteen of their stores owned by the Panther
Group there should not be a material effect on our current year's revenue or
long term effect on the freehold values of the properties they occupied.
Recently it was announced that practically all their stores would close due to
the severe deterioration in the trading climate caused by the COVID-19
pandemic.
The Panther Group owns Beales stores in Peterborough, Mansfield, Great
Yarmouth, two in Lowestoft, Skegness, St Neots, Spalding, Wisbech, Beccles,
Diss, Keighley, Bishop Auckland and Perth. These properties are all freehold
in town centre positions, mostly large in size, in different degrees of
primeness of position and desirability.
The total gross floor area of these buildings is about 750,000 sq. ft. and the
rental income lost from Beales' tenancies was about GBP887,000 per annum.
However, we should receive directly in a full year, rents or profits from three
car parks of circa GBP200,000 per annum plus the ability to create three further
small car parks maybe worth between GBP50-GBP60,000 per annum.
A number of the stores have exciting redevelopment possibilities which we are
currently exploring. Many are eminently splittable to smaller units thus
opening up the possibility of a much wider range of users.
Many people would consider this a disaster and in many respects it is. When a
large enterprise that has been trading for over 130 years fails, especially if
within a town's central shopping area or heart, it has several implications.
It is bad for the town, upsetting for the multi-generational families of
customers, financially disrupting and dispiriting for many hundreds of long
term, loyal and knowledgeable employees and also seriously financially
inconveniences thousands of reliable suppliers and concession occupiers.
I am very saddened by these circumstances, more so in the knowledge that
another of the most vital of the high street's failing retail groups could have
been saved if central government had been less rapacious in their financial
demands and burdens on a struggling sector.
However, I see this group of properties coming back into our fold as an
opportunity for our team, using their experience and asset management skills,
to formulate and promote new and more relevant uses for these properties. We
believe this will in due course produce a much greater income and capital value
for our group.
I have mentioned at length the Beales situation as the publicity is substantial
but shareholders should be aware it represents only about 6% of our income and
less than 10% of our group's assets and I believe have prospects of substantial
appreciation when business activity recovers from its present problems.
Because it will involve considerable extra work and attention by our team this
coming year, I have put their photos, roles and length of service with us in
the accounts so that shareholders can see that our Group is a skilled team.
Developments
High Street, Broadstairs
We have commenced the development of a mini market (a pre-let has been agreed
to a national convenience operator) which will have twelve flats on three
floors above. We anticipate we will let the flat units and retain the
completed development as an investment. This development is expected to be
completed towards the end of this year.
Newgate Street, Bishop Auckland
Planning permission has been obtained for partial demolition and conversion of
this former listed Beales store as three ground floor commercial units with
flexible A1/A3 use and either a 62 bedroom hotel or 27 apartments above. It is
currently being marketed to see if there is possible interest from a hotel
operator.
Barry Parade, London, SE22
This property has committee approval for redevelopment as a 5,400 sq ft retail/
commercial space which could probably be pre-let before a development commences
and also thirteen residential apartments in the upper part, four of these units
must be affordable. This approval is still subject to agreeing the Section 106
requirements which are quite extensive, expensive and still under negotiation.
This planning application is shown as being submitted in July 2018. This is
not quite the case. In December 2013 we asked our architects to discuss with
planners whether a redevelopment of this site would be favourably considered.
They were told the council would be pleased to see this site redeveloped
because it was currently both unattractive and inappropriate for the area. We
asked our architects to produce a brief outline of an attractive scheme that
would create best value for the site and submit it for a pre-application
response. It took five months to receive the pre-application written response
after about a three month delay for the initial meeting entirely caused by the
council.
We eventually submitted our planning application at the beginning of July 2015
after numerous reports and changes required by the council, mainly reducing the
height and size of the scheme also reducing down to nine large, luxury units,
the limit before you had to provide social housing on site.
On 29 September 2015 the planners asked us to withdraw our application as they
disliked the large luxury flats and there were many objections to the potential
tenant being a Co-op minimarket. We understood a Waitrose probably would have
had less objections!
The scheme was redrafted taking account of most of the planners' suggestions
and also providing the additional supporting reports required. The new
application was submitted in August 2016. The council then refused to accept
the application mentioning new requirements coming into force in 2017.
A further pre app was necessary at which point the council raised further
revisions and requested additional plans, reports and surveys. The new
application was eventually submitted in July 2018.
Committee approval was given subject to agreeing the Section 106 payments etc
at a committee meeting held on 29 January 2020. It will take about 18 months
to two years to develop ready for occupation. We will probably retain the
freehold and the commercial element as an investment and sell the residential
units on long leases when the development is completed. The history of this
property is particularly interesting to me as an original investment held since
my father purchased the freehold for GBP7,000 in 1950 and I have been dealing
with it since 1966, thus I felt it warrants a supplementary rambling to itself.
Financial Derivative
The liability on our interest rate swaps has risen slightly due to the market's
perception of future interest rates falling. However, on 1 December 2021 our
interest payable will, assuming our margin does not change on renewal, reduce
by about GBP625,000 per annum as one of the older swaps ceases.
Finance
As at 31 December 2019, the Group were utilising GBP60 million of our GBP74 million
facility and also had a GBP9,485,000 cash balance available.
Dividends
We have paid uninterrupted dividends for thirty seven years through good times
and occasional downturns and I see no reason to change this policy. I am well
aware that our shareholders appreciate the reliability of receiving dividends.
The back of the accounts shows an abbreviated schedule of the Group's progress
since its takeover by my group of investors in 1972.
The Directors are thus recommending a final dividend for the year ended 31
December 2019 of 6p per share. This will be payable on 7 September 2020 to
shareholders on the register at the close of business on 7 August 2020
(ex-dividend on 6 August 2020).
Prospects
For once I find this difficult to predict for despite many years of cautionary
and profitable investing, and minor development of properties in our ownership
we have always been careful
to manage our risk profile. We are currently in unknown territory due to a
pandemic virus attack affecting the entire population and the economy.
The government are taking all steps that they feel necessary to bring under
control this major health and economic hazard that could fatally affect much of
our population.
These measures may create as little as three months' disruption but maybe much
more. The forced closure of many businesses will cause hardship all the way
down the line.
The Chancellor has unveiled a huge assortment of assistance to help the entire
economy and congratulations are in order for the speed with which they have
unveiled these measures.
Of course, as usual, the property industry has been completely overlooked
whereas a vast number of other businesses have a one year business rates
holiday. Now that it is illegal to trade from many of these premises they have
no rental value and even if possible to re-let, it needs a long timescale and
generous incentives to do so. Should a qualifying business such as a retailer
or leisure operator exit the premises, then somehow the freehold owner would
then have to pay full rates with no income! Vacant rates were a ridiculous
imposition even before COVID-19 came along.
When a tenant, however successful, faces temporary financial problems, their
first port of call for help is their landlord as usually they get a quick and
helpful response whilst governments take much longer to help and often with
small print in the financial offer that excludes many.
I am hoping and expecting that this pandemic will not be quite as bad as some
doom-mongers predict and within 6 to 9 months we will be back to a normal free
enterprise system.
With this thought in place, whilst this situation may be temporarily testing to
our Group, we may recover strongly once the health of our nation and our
economy is back to normal.
However, I can confirm that we have enough financial resources, and with
supportive lenders, do not see any issue to prevent us surviving for more than
double the length of even the most pessimistic predictions. Further as already
announced we estimate that approximately 41% of our rental income comes from
businesses that have not been forced to close or been recommended to close
under government guidelines. The annual income from these businesses is
approximately GBP5.6m and would be enough to cover our interest obligations to
our lenders of approximately GBP4.1m and most of our overheads.
Finally, I would like to thank our small but dedicated team of staff, growing
team of financial advisers, legal advisers, agents and accountants for all
their hard work during the past year, which has been extremely busy and
promises to be even more demanding for the current year than usual. Special
thanks and good wishes are extended to our tenants and I hope they are able to
overcome the present troubled environment and make a full recovery when
business is back to normal.
Andrew S Perloff
CHAIRMAN
14 May 2020
CHAIRMAN'S RAMBLINGS
Regular readers of my ramblings will be aware of the special place Margate
holds in my heart. It was there in the 50s that my parents had owned The White
Hart, a seafront pub/hotel which they also ran, helped by their press ganged
children. Indeed, in those halcyon summer days of perpetual sunshine and no
health and safety laws, we were so small we had to stand on boxes to serve the
endless throng of thirsty customers.
It was unsurprising therefore that when I was finally old enough to be allowed
to take my first parent free holiday, it was to Margate I headed with two of my
friends.
I was eighteen years old and had been working for less than a year when we set
off for our 10-day summer holiday. The excitement! The world was our oyster
(though not in the case of one friend who was strictly kosher). Our
destination was a large old double building converted to a Kosher boarding
house - one hundred yards from the beach, close to the town centre and
Dreamland amusement park. A perfect position for young men ready to enjoy
their first taste of freedom away from loving but watchful parents. We had a
wonderful time, either on the beach or in local coffee bars depending on the
weather, with the local dance clubs luring us townwards in the evening. We
made friends with other young men and women and alcohol which necessitated one
of our party (the strictly kosher one) being carried back to the boarding house
nearly every night by me.
It was a long time ago and although most events have dimmed into a vague but
happy blur of memories, one incident stands out in sharp focus. It was yet
another beautiful, sunny day and we were in a nearby coffee bar, which was one
of our favourite haunts in a grand but faded glory Victorian hotel facing the
seafront. It was a very popular meeting spot, probably the Starbucks of its
day, and we soon came to know its habitués. We became friendly with a group of
young men who, although dressed menacingly in black leather jackets, were
really rather friendly. They obviously liked to imagine they were the Margate
chapter of the notorious Californian Hell's Angels and seemed immensely proud
of their large and gleaming motorbikes which were parked outside in a neat
line.
The apparent leader of the pack was a self-styled Marlon Brando and we soon
became pals. He surprised me one day when he offered to take me for a spin on
the back of his bike. Excited and certainly unthinking, I immediately agreed,
mounted the bike (helmetless) and, with a mighty rumble, off we went.
He followed the road which ran alongside the seafront through Cliftonville,
past open spaces, down Northdown Road into Margate, round the clock tower, past
Dreamland and the train station all at a comfortable pace. We then turned back
towards our coffee bar. I heard 'Marlon' shout "hold tight" and then his bike
sped up from probably 20-25 mph to at least the speed of light or maybe 80-90
mph. I grasped tightly round his waist whilst Margate harbour, the pier,
seafront, and indeed my short life, all flashed past me! I was petrified and
even more frightening was cornering. The correct way, as any biker worth his
salt, will tell you is to lean into a bend. Alarmed, I leant the opposite way
which apparently it was exactly not what to do. Although the terror seemed
never ending I doubt if we travelled for more than two minutes at this speed.
Needless to say I have never ridden, sat on or been a pillion passenger on a
motorbike since that date!
It was only after some years of mature reflection that I realised I had given
'Marlon' absolute control of my safety and my life for the 10 minutes I was his
pillion passenger. My life, my future, my hitherto unbroken bones and many
years' yet to be written Chairman's Ramblings were all in his hands!
Alive and undamaged I returned home shortly afterwards, having had a wonderful
holiday and was soon back to my usual routine.
Another place we regularly visited and which also still holds special memories
was near my home in Sutton, Box Hill, a National Trust beauty spot and at over
700 ft high is one of the largest hills in Surrey. At the base of the hill was
a historic and still old-fashioned hostelry. This may have had a greater
attraction than the natural, rustic beauty of the place as for the small fee of
5/- per person allowed you entrance to the hotel grounds where you could use
their open air pool and other facilities.
On one lazy summer Sunday I drove there with my father. While I swam, he sat
poolside on a wooden bench watching the activities.
As I swam I noticed with great interest a young and very attractive girl emerge
from the changing rooms. She looked like a young Bridget Bardot and whilst I
was frantically thinking how to get to know her, she walked past my father, put
her towel on his bench, sat down beside him and shortly began talking to him.
Opportunity should be my middle name! I jumped - yes jumped - out of the pool
and joined them.
Within a few minutes I suggested we should go for a swim and she agreed.
Rising elegantly from the bench she dived in and swam underwater the length of
the pool with the grace of Esther Williams. When she surfaced she waved and
shouted "Come on in". It was impossible to refuse the call of this Lorelei of
the Lido so I then instantly dived in, thinking I looked like one of Esther's
film partners, Johnny Weissmuller of Tarzan fame, but I was probably more like
Norman Wisdom in 'Trouble in Store'!
We swam and chatted in the pool for quite a while and conversation eventually
turned to work. When she asked what I did I told her I was an estate agent.
'Then you must drive" she replied. "Do you have your own car?". I told her
proudly that I was the owner of a pale blue mini FXV 512 which was in the car
park. She told me she was allowed to drive her mother's car, a Morris Minor,
but coincidentally her favourite car which she was desperate to buy was a Mini
as soon as she saved enough money. "Perhaps you would let me drive your car a
bit to practice in a Mini?". I instantly agreed. Hill starts and reversing
around corners were far from my mind but the thought of being alone with her
for half an hour in the car park or country lanes of Surrey was extremely
tempting. We hardly dried ourselves, dressing over our still damp costumes.
We walked out to the large car park and I helped her into the car. Before she
turned the key to start the engine, I held her hand on the gear stick and
guided her through the five forward gears and one reverse gear which was
difficult to find. I can still remember the electric shock of excitement as I
held her hand. She hitched her dress up, straightened her back, grasped the
steering wheel and started the engine. She put it into first gear and drove
round the car park slowly going through the lower gears.
She turned to me, smiled and sweetly said "I've got the hang of it now. Can I
drive for a while on the roads? I'll drive very, very carefully?". With those
country lanes in mind I readily agreed. She drove slowly up to the car park
exit then joined the road.
WHOOSH!!! the G force threw me back in the seat and she rushed through first,
second and third gears in less than 10 seconds flat! "Be careful of the gears"
I shouted pointlessly over the roar of the engine. She sat up straighter,
clasped the wheel tighter and with a fixed stare proceeded to race as fast as
the car would go. The main roads luckily had little traffic and she cornered a
roundabout or two on two wheels, leaning the right way was the last thing on my
mind. My various entreaties of "Be careful.... slow down a little........you will
ruin my engine.......we don't want an accident.....it's a small car" fell on deaf
ears. Finally I pleaded we must return as my father would be waiting and may
worry.
She drove me round the outskirts of Epsom and Dorking for over twenty minutes,
her peaches and cream complexion became flushed red with excitement and
exhilaration. Mine was also flushed but from fear! However, we got back in
one piece.
Upon our return we quickly dived back into the pool but the camaraderie and
ardour for each other had dimmed. Although we exchanged phone numbers we never
saw each other again. I suspect she thought I was a wimp and despite her
obvious attractions, I had no wish to join this nifty, nubile nymphet on her
inevitable early journey to the hereafter but I do hope she survived to live a
full and long life. Maybe someone of Lewis Hamilton's ilk is her grandson
having inherited her superb racing genes!
When I recall this short but exciting experience I once again realise, even if
it were for only 20 minutes, I had yet again given someone else full control
over my safety and life.
Control is an interesting word, especially in business situations.
Some years after these long forgotten events my business partners and I were
becoming more successful in the property business and I became increasingly
interested in corporate takeovers having completed my contested takeover of
Levers Optical Company Limited in 1972. This company is, as of course many of
you know, now Panther Securities PLC.
This gave me a taste for corporate acquisitions and to date I have initiated
ten takeovers of listed companies, of which two failed to achieve the control I
desired although were still profitable ventures. I completed seven successful
private corporate acquisitions and was again involved with three publicly
listed companies where I held 30% of the equity and was appointed a board
member which gave me some influence in the control (that word again) of the
company.
My early ideas on corporate takeovers were based on the belief that if you
could secure 51% of the voting equity you would be in control of the entire
company. Of course, then one automatically assumed you would have power to
appoint the Board of Directors but in practice this was not always so.
Every one of my corporate adventures could produce an interesting, amusing and
business related vignette all coming back to that word 'control'.
The optical company had people running their own minor internal department
empires and each had separately devised a benefit system just for themselves.
A poorly performing investment trust in mid takeover allowed the fund managers
to shift the previously unagreed cost of the takeover to a management fee which
they received and thus did not show up until sometime later, thus proving the
fund managers had control of the cheque book!
After I had secured 51% of another poorly performing investment trust with a
top line board, the Chairman instructed his brokers to sell the entire share
portfolio worth GBP1,000,000 even after he had been told in no uncertain terms
that this was prohibited by takeover rules. This sale went ahead anyway and
after the takeover was completed I was asked by my advisers if I wanted to make
a formal complaint. I declined as I had no wish to give the former Chairman, a
well-known and important influential figure, a problem, but also the portfolio
sale was what I would have wanted to do - but would not break the rules. Thus
they carried out my desired wishes, probably in anger. The point being the
Chairman had control by virtue of his authority.
A single department store with an excess of assets and ever reducing
profitability, where if we were successful we would have removed one overpaid
Managing Director. However, via old former owners' trusts, he had control and
managed to obtain a white knight rival store group takeover who, instantly upon
the rival's successful announcement of its offer becoming wholly unconditional,
terminated the employment of many of the department store's management staff
thus allowing the company to be profitable again. Surprise, surprise, the
Managing Director kept his highly paid job. Thus control with no equity was
with the Managing Director.
One small property company had a nice portfolio of income producing properties
mainly acquired for part cash and part shares and also building society loans -
initially the Managing Director had both board control and equity control but
the continuing acquisitions for equity reduced his shareholding well below
control level. This was risky but much more so as the family team that ran the
company had salaries and expenses way, way in excess of the company's net
income. They fell easily to a takeover and the company had to be bailed out
immediately to complete its survival and revival. Again, it was control that
they lost.
I could give more mini stories on every one of our corporate acquisitions but
it all boils down to control. Not just ownership but actual working control.
In the UK we have recently had one of the UK's most divisive elections which
has pleasingly probably resolved the Brexit conundrum. The Brexit question, in
simplistic terms, was about control of the UK either by a largely unknown group
of unelected bureaucrats which supposedly represented the interests of an ever
widening group of diverse countries, or UK elected MPs and a successful Brexit
via this election could bring back the control of the UK to its own elected
representatives. Of course many of our elected representatives are usually
inexperienced and unsuitable for the jobs they take on - but at least can be
sacked or changed after 5 years or sometimes sooner if they prove useless.
All UK general elections (as are all elections) are about control, either by
one faction or another, with each side having a different viewpoint - but each
side always offering something that isn't really theirs to give, invariably
causing problems if and whenever their promises are fully implemented.
The public realised this last election was simply a matter of control of our
country and only one long established party offered them the potential answer.
The public, in its wisdom, created the landslide result.
Taxation is like hell. Hell being a construct promoted many years ago by
religious long established institutions to keep people in line whereas taxation
forces people having to pay a share of running the country under harsh threats
of punishment by those whom the voters have elected to be in control of
government but I am forever surprised by its stupidity in enactment.
Recently I was informed by my accountant that one of my more recent personal
tax returns had been questioned as it appeared Beales had paid me GBP1,200 as an
annual director's salary. They had indeed issued me with a cheque after
standard tax deductions but I deliberately never cashed it as I felt unable to
take a salary from a continuing loss making business.
Despite the fact I did not receive any money, I was told as Beales must have
put it through their books I must pay tax on this non income. Of course, the
taxman never lost any money as Beales did not make profits to pay Corporation
Tax. I had to pay the GBP300 extra tax which they billed me for three further
six-monthly tax periods in the assumption I would continue to receive this
income. I also had to pay a GBP200 fee to my accountant and, to rub salt in the
wound, tax of GBP40 on top i.e., for GBP900 that I never received I had to pay GBP
1,440!!!
Logic, common sense or fairness is rare as hen's teeth in tax offices.
Many of our shareholders will know that my mother, Fay, died about three years
ago. A significant amount of inheritance tax was eventually paid after about
eighteen months of dealing with her estate.
As Benjamin Franklin remarked, there are only two certainties in life; one is
death and the other is taxes. This assumes that after death one does not have
to bother about tax.
Sometime last year I received a generic letter from the tax office addressed
"Dear Fay Perloff Deceased
Thank you for contacting us about your returns" .........
As you might expect, I was very upset. If my mother with her super powers was
going to contact anyone down here from heaven above, she could have at least
contacted me first!
So I suppose it's fair to finish on 'if the tax office is involved, heaven help
us'!
Supplementary Chairman's Ramblings
Barry Parade (now a Group property) was a third rate building containing twelve
lock up shops situated in an attractive corner position facing Peckham Rye
Park. The property at one time had a large Victorian era house with a good
sized corner garden and at a later date a parade of eight small lock up shops
built sometime in the early 1930's. The property was an early victim of a
German V1 rocket raid in 1944 when the big house was completely destroyed and
the lock up shops partially damaged. (This part of London, originally a smart
suburb of Georgian and Victorian London with many large attractive houses, and
later many huge estates of terraced houses built to house London's growing
population was by the 1950's in a severe decline as a residential area but
still able to provide good trade for the many local businesses).
I can remember visiting the site a number of times with my father and brother.
The trip round South London was exciting for a six year old child and I
remember seeing workmen repairing the war damaged shops. A few years later my
father arranged to have four lock up shops built
upon the site of the big house directly facing Peckham Rye. With hindsight I
now know the buildings were built very cheaply. Notwithstanding this the
shops, which were originally let at about GBP150 per annum each, were always
fully let and provided a useful facility for the local community.
I started managing the property in about 1966 when the area had become more run
down but it always held its income.
Just over twenty years ago the area began to change for the better due to the
boom in the residential housing market that was rippling through London. The
old houses that had been cheaply converted to flatlet houses were being
converted back to luxury houses and the flats upgraded so that just acceptable
living units became very desirable flats convenient for Central London.
I thus started considering the development potential. Due to the property's
existing income the building, with flats above, at that time did not appear a
particularly viable development proposal. However, within a few years
continued escalating residential prices completely changed the viability of any
possible scheme.
It has now taken well over seven years to reach this stage for a possible
redevelopment and it would seem it will take at least nine years from start to
finish of the scheme.
Perhaps as it was the last World War that started my family history of Barry
Parade, with its partial destruction by a wayward V1 rocket, it is a suitable
timeline for comparison.
Germany invaded Poland on 1st September 1939 - then France, Belgium, Holland
and Russia. Germany's conquering progress was only put on the back foot when
America entered the war after Pearl Harbour in December 1941 and thus were
eventually driven back into their own territory and defeated in May 1945, i.e.,
nearly six years of huge turmoil, destruction throughout most of Europe which
involved a monumental amount of planning and organisational ability first by
the Germans then by the Allies for an eventual successful outcome.
And yet in Southwark, on a small obviously poorly and underdeveloped site we
are unable to get permission to redevelop, let alone actually build a shop and
13 flats in over seven years!
I suspect if one needed planning permission to build a Wendy house in many
boroughs it would be the original applicant's grandchildren, rather than the
children who might get the benefit of playing in it!
Yours
Andrew S Perloff
Chairman
14 May 2020
P.S. My Ramblings were prepared well before the first inklings of the
COVID-19 pandemic started to cause such disruption to our everyday lives and
business activity which I have commented on at length in my Chairman's
Statement.
However, ......... It reminds me that in last year's accounts I had prepared and
arranged for a cartoon to be inserted headed 'The Ten Plagues of the High
Street' (all government created) with the United Kingdom looking like a war
graves cemetery with many lines of gravestones all either having shop group
names or left blank for unknown traders or those yet to follow.
I could not imagine that the 10th biblical plague would arrive. I am sure you
will be aware that this was called "The Killing of the First Born", i.e., the
oldest, which is nearly what is happening.
The government has pulled out all the stops and enlisted the most knowledgeable
medical advisors in an effort to control and eradicate this virus. We all
should be, and almost certainly are, supportive of their efforts.
GROUP STRATEGIC REPORT
About the Group
Panther Securities PLC ("the Company" or "the Group") is a property investment
company quoted on the AIM market (AIM). Prior to 31 December 2013 the Company
was fully listed and included in the FTSE fledgling index. It was first fully
listed as a public company in 1934. The Group owns and manages over 850
individual property units within over 120 separately designated buildings over
the mainland United Kingdom. The Group specialises in property investing and
managing of good secondary retail, industrial units and offices, and also owns
and manages many residential flats in several town centre locations.
Strategic objective
The primary objective of the Group is to maximise long-term returns for our
shareholders by stable growth in net asset value and dividend per share, from a
consistent and sustainable rental income stream.
Progress indicators
Progress will be measured mainly through financial results, and the Board
considers the business successful if it can increase shareholder return and
asset value in the long-term, whilst keeping acceptable levels of risk by
ensuring gearing covenants are well maintained.
Key ratios and measures
2019**** 2018**** 2017 2016
Gross profit margin (gross profit/ 76% 71% 71% 77%
turnover)
Gearing (debt*/(debt* + equity)) 41% 39% 45% 49%
Interest cover** 2.14 times 4.17 times 2.37 times 1.66 times
Finance cost rate (finance costs
excluding lease portion/ average
borrowings for the year) 7.1% 6.6% 6.4% 6.6%
Yield (rents investment properties
/ average market value investment 8.8% 7.7% 7.1% 7.7%
properties)
Net assets value per share 480p 532p 516p 407p
(Loss)/ earnings per share - (23.1)p 39.9p 120.2p (5.5)p
continuing
Dividend per share 12.0p 27.0p*** 22.0p*** 12.0p
Investment property acquisitions GBP8.1m GBP3.9m GBP8.9m GBP5.0m
Investment property disposal GBP1.1m GBP40.8m GBP2.2m GBP5.8m
proceeds
* Debt in short and long term loans, excluding any liability on financial
derivatives
**Profit before taxation excluding interest, less movement on investment
properties and on financial instruments and impairments, divided by interest
(excluding lease portion)
*** Includes 2018:15p (2017:10p) per share special dividend
**** IFRS 9 and 15 have only been reflected in 2018 and 2019 the prior year
figure not restated. IFRS 16 has only been reflected in 2019 and the prior year
figure not restated.
Business review
The Group's underlying performance was strong in the year ended 31 December
2019. The results are positive once you remove the fair value write down on
properties and the fair value loss on the financial derivatives is stripped
out. The Group showed higher rents, higher operating profits on a similar
level of debt and strong cash generation from operations. This can be seen in
the Consolidated statement of cash flow when the majority of the tax paid in
the year, which mainly relates to large disposals in the year ended 31 December
2018 is ignored. This year's figures provide confidence that the underlying
business is performing well and improving when compared to the prior year
(stripping out disposals and other non-cash movements).
The Directors believe (under normal circumstances) that we have made two decent
long-term purchases in 2019 at high returns, in Caerphilly and Gateshead, which
the Group purchased using free funds left over from the disposals in 2018.
This has replaced a large proportion of the income lost on the disposals in
2018.
The investment property values were written down by the Directors following the
in-house valuation. These valuations incorporated Brexit uncertainties at the
year end which impacted market values. These values also reflect the risks
associated with retailers as they try and adapt to the fast changing consumer
habits. However, the Group, being a secondary retail property investor, has a
lot of neighbourhood parades. These tend to have a higher proportion of
businesses which are providing non-retail offerings even though they are
shops. This includes things such as service providers, restaurants or take
away use, or convenience offerings, which have been less effected than pure
retail, and in some instances even provide additional opportunities i.e. being
able to offer their take away services via Just Eat etc. Even our pure retail
positions are mainly large blocks in the centre of towns and will no doubt
benefit from longer term plans from the Government and local councils looking
into town centre regeneration schemes. As such, if and when retail no longer
works, we believe we can create value from these sites with planning permission
to eventually give them other uses or purposes. In the meantime, they continue
in the most part to be strong cash contributors providing high returns on
initial investment.
The Group recognised a loss in value following the Directors' year end
valuation, of GBP8.8m (compared to a GBP6.4m million loss in 2018 also following a
Directors' valuation).
Going forward
We stated in this section in our 2018 accounts that "...we would be disappointed
if we did not pick up a few good investments in 2019, however these have to be
carefully selected as a lot of the risks perceived by the average property
investor are real." This was achieved with the purchases of Caerphilly and
Gateshead, both with a good spread of tenants and showing the usual high return
we seek.
Unfortunately, 2019 already seems like a lifetime ago. Since then not only
have Beales entered into administration (in January 2020), we now have the
COVID-19 to contend with, which affects a very large majority of our tenants.
Thankfully we still have a lot of capacity in terms of funds as we de-geared
substantially in 2018 following the large disposals and also have the benefit
of the non-reinvested cash funds. These facilities and cash funds will help us
weather the storm and we will be in a much stronger position than most. This
was planned but also slightly fortuitous, as we were preparing for Brexit
uncertainties but it provides capacity financially to withstand this health and
economic crisis. Taking these two issues in turn:
* Beales's administration
Even though it is sad to see the demise of another historic business, and one
we had a close association with, the financial reality is that the Directors
believe the vast majority of these properties will be worth a lot more in the
medium to longer term without this tenant. The rents were low compared to the
space they let and the rent was not always paid. Relating to the year ended 31
December 2019 the Group had circa GBP270,000 arrears unpaid but fully provided
against. Practically all the properties have better alternative values and
surprisingly all have different solutions.
Whether it is re-letting and carving up, utilising the valuable car parks,
full-scale redevelopments, or interest from councils as they look to revitalise
town centres, we see the former Beales sites as key. This is because they
usually were very central and our view is that all former stores have
potential. Some of these opportunities will be realised quicker than others
but we can already see a glimmer of a silver lining. It is just a shame that
the COVID-19 has curtailed and/ or slowed some of our discussions.
We are not concerned about these vacant properties in the medium to longer term
and see these as an opportunity. We hope to report back on progress within our
interim accounts.
* COVID-19
This has been a much more challenging, wide spread and fast changing situation
than the business has ever faced before. We believe for our size and within
the property sector, we have one of the most diverse and robust income
streams. We have such an array of tenants, spread over different geographic
locations, in different sectors, and lots of sizes of traders, from sole
traders to large multinational corporates. One of the key characteristics of
the business that we have developed over many decades, in fact since it
recovered from the 1970s property crash, is ensuring a strong diversified cash
flow and this is reflected in our investment decisions, which often show high
returns, generated from a spread of tenants. However, with the government
putting social distancing measures in place and requesting businesses to close,
this leaves us with very few tenants remaining open for trading. We do have
tenants such as supermarkets, chemists, take-aways, flat tenants, convenience
stores and certain industrial uses still open for business who hopefully will
pay their full rent. We have tried to assess what this means in terms of
rental over this period but it is such a fast moving situation that even those
you would not expect to be affected have been - however it looks like as a
minimum we will have our interest covered by income. We are taking mitigation
actions, such as reducing our outgoings and keeping good dialogue with our
tenants and ensuring those that can pay do.
The impact of COVID-19 is considered to be a non-adjusting post balance sheet
event and as such the Statement of Financial Position, including property
valuations, has been prepared on the facts and circumstances as at 31 December
2019.
However, even though there are uncertainties going forward which may affect
property prices in the short term, we are protected by our portfolio's
diversity, experienced management team, ability to adapt and by having access
to funds. We have low gearing levels, supportive lenders and cash reserves,
which the Directors believe can keep us going for over 21 months even when
assuming lower than expected levels of rents. We expect to receive as a
minimum circa 41% of our rents which are from businesses that are either not
required to close or recommended to by the government. This amounts to around GBP
5.6m.
Financing
The Group had previously entered into a GBP75 million club loan facility (GBP60
million term and GBP15 million revolving), which was renewed on 19 April 2016
with a five-year term. This is up for renewal in April 2021 - on 31 December
2019 the maximum loan facility was GBP74m due to loan repayment in the year. We
have had initial discussions with our lenders early in the year and they were
very positive in terms of renewing on similar terms. The discussions are
currently on hold as the Group and the banks deal with the current crisis.
However, our lenders' relationship teams are confident that when the COVID-19
crisis is over, we can quickly get back on track, and in the worst case
scenario would look for a short term extension (to give us more time for
discussions and negotiations).
At the Statement of Financial Position date the Group had GBP9.5m of cash funds,
GBP14m available facility and a further GBP10m included in our loan agreement but
requiring credit approval. In April 2020 cash was further increased as a net
amount of GBP3m was drawn on the facilities as well as the lenders agreeing to
release GBP1.5m of the GBP2.3m which was restricted to property purchases (and
included in the GBP9.5m total).
Financial derivative
We have seen a fair value loss (of a non-cash nature) in our long term
liability on derivative financial instruments of GBP0.997m (2018: GBP0.886m fair
value gain). Following this loss the total derivative financial liability on
our Consolidated Statement of Financial Position is GBP26.5m (2018: GBP25.5m).
These financial instruments (shown in note 5) are interest rate swaps that were
entered into to remove the cash flow risk of interest rates increasing by
fixing our interest costs. We have seen that in uncertain economic times there
can be large swings in the accounting valuations.
Small movements in the expectation of future interest rates can have a
significant impact on their fair value; this is partly due to their long dated
nature. These contracts were entered into in 2008 when long term interest
rates were significantly higher. In a hypothetical world if we could fix our
interest at current rates and term we would have much lower interest costs. Of
course we cannot undo these contracts that were entered into historically,
without a significant financial cost, but for accounting purposes these
financial instruments are compared to current market rates, with the additional
liability compared to the market rates, as shown on our Statement of Financial
Position.
In 2018 the Company entered into a new 10 year fixed interest rate swap
agreement, with a GBP25,000,000 nominal value which commences on 1 December
2021. The swap's interest rate is 2.131% which will come into existence when
the Company's current GBP25,000,000 swap with a rate of 4.63% ends, resulting in
an annual saving of circa GBP625,000. By entering this transaction, the Company
will have certainty that its interest costs from December 2021 will be
significantly lower compared to its current costs.
Financial Risk Management
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 and managing
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
with no hedge accounting applied. Mark-to-market valuations on our financial
instruments have been erratic due to current low market interest rates and due
to their long term nature. These large mark-to-market movements are shown
within the Income Statement.
However, the actual cash outlay effect is nil when considered alongside the
term loan, as the instruments have been used to fix the risk of further cash
outlays due to interest rate rises or can be considered as a method of locking
in returns (difference between rent yield and interest paid at a fixed rate).
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.
Credit risk
The Company and Group have implemented policies that require appropriate credit
checks on potential tenants before lettings are agreed. In many 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 reduced significantly due to the Group having a large spread of
tenants who operate in different industries.
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 exposure of the Company and Group to inflation is low due to the low
cost base of the Group and natural hedge we have from owning "real" assets.
Price risk on income is protected by the rent review clauses contained within
our tenancy agreements and often secured by medium or long-term leases.
Liquidity risk
The Company and Group actively manage liquidity by maintaining a long-term
finance facility, strong relationships with many banks and holding cash
reserves. This ensures that the Company and Group have sufficient available
funds for operations and planned expansion or the ability to arrange such.
Interest rate risk
The Company and Group have both interest bearing assets and interest bearing
liabilities. Interest bearing assets consist of cash balances which earn
interest at fixed rate when placed on deposit. 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 revisit the
appropriateness of this policy annually.
Principal risks and uncertainties of the Group
The successful management of risk is something the Board takes very seriously
as it is essential for the Group to achieve long-term growth in rental income,
profitability and value. The Group invests in long term assets and seeks a
suitable balance between minimising or avoiding risk and gaining from strategic
opportunities.
The Group's principal risks and uncertainties are all very much connected as
market strength will affect property values, as well as rental terms and the
Group's finance, or term loan, whose security is derived primarily from the
property assets of the business. The financial health of the Group is checked
against covenants that measure the value of the property, as a proportion of
the loan, as well as income tests. The two measures of the Group's finances
are to check if the Group can support the interest costs (income tests) and
also the ability to repay (valuation covenants).
The Group has a successful strategy to deal with these risks, primarily its
long lasting business model and strong management. This meant the business had
little or no issues during the 2008 financial crisis, which some commentators
say was the worst financial crisis since the Great Depression of the 1930s. We
hope that the current crisis will also show us in a good light due to the
preparations we made in 2018.
Market risk
If we want to buy, sell or let properties there is a market that governs the
prices or rents achieved. A property company can get caught out if it borrows
too heavily on property at the wrong time in the market, affecting its loan
covenants. If loan covenants are broken, the Company may have to sell
properties at non-optimum times (or worse) which could decrease shareholder
value. Property markets are very cyclical and we in effect have three
strategies to deal with or mitigate the risk, but also take advantage of this
opportunity:
1) Strong, experienced management means when the market is strong we look to
dispose of assets and when it is weak we try and source bargains i.e. an
emergent strategy also called an entrepreneurial approach.
2) The Group has a diversified property portfolio and maintains a spread of
sectors over retail, industrial, office and residential. The other
diversification is having a spread regionally, of the different classes of
property over the UK. Often in a cycle not all sectors or locations are
affected evenly, meaning that one or more sectors could be performing stronger,
maybe even booming, whilst others are struggling. The strong investment
sectors provide the Group with opportunities that can be used to support slower
sectors through sales or income.
3) We invest in good secondary property, which tends to be lower value/cost,
meaning we can be better diversified than is possible with the equivalent funds
invested in prime property. There are not many property companies of our size
who have over 850 individual units and over 120 buildings/ locations.
Secondary property also, very importantly, is much higher yielding which
generally means the investment generates better interest cover and its value is
less sensitive to market changes in rent or loss of tenants.
Property risk
As mentioned above we invest in most sectors in the market to assist with
diversification. Many commentators consider the retail sector to be in period
of severe flux, considerably affected by changing consumer habits such as
internet shopping as well as a preference for experiences over products. Of
the Group's investment portfolio, retail makes up the largest sector being
circa 60 to 65% by income generation. However, the retail sector is affected
to lesser degrees in what we would describe as neighbourhood parades, as
opposed to traditional shopping high streets. The large part of our retail
portfolio is in these neighbourhood parades, meaning we are less affected by
consumer habits and even benefit from some of the changes. Neighbourhood
parades provide more leisure, services and convenience retail.
For example, we have undertaken a few lettings to local or smaller store
formats, to big supermarket chains, which would not have taken place many years
ago. Block policy is another key mitigating force within our property risks.
Block policy means we tend to buy a block rather than one off properties,
giving us more scope to change or get substantial planning if our type of asset
is no longer lettable. The obvious example is turning redundant regional
offices into residential. In addition, by having a row of shops, we can
increase or reduce the size of retail units to meet the current requirements of
retailers.
Finance risk
The final principal risk, which ties together the other principal risks and
uncertainties, is that if there are severe adverse market or property risks
then these will ultimately affect our financing, making our lender either force
the Group to sell assets at non-optimal times, or take possession of the
Group's assets. We describe the above factors in terms of management, business
model and diversification to help mitigate against property and market risks
which as a consequence mitigate our finance risk.
The main mitigating factor is to maintain conservative levels of borrowing, or
headroom to absorb downward movements in either valuation or income cover. The
other key mitigating factor, is to maintain strong, honest and open
relationships with our lenders and good relationships with their key
competitors. This means that if issues arise, there will be enough goodwill
for the Group to stay in control and for the issues to resolve themselves and
hopefully
save the situation. As a Group we also hold uncharged properties and cash
resources, which can be used to rectify any breaches of covenants.
Other non-financial risks
The Directors consider that the following are potentially material
non-financial risks:
Risk Impact Action taken to mitigate
Reputation Ability to raise capital/ Act honourably, invest well
deal flow reduced and be prudent.
Regulatory changes Transactional and holding Seek high returns to cover
costs increase additional costs.
Lobby Government -"Ramblings".
Use advisers when necessary.
People related Loss of key employees/ low Maintain market level
issues morale/ inadequate skills remuneration packages,
flexible working and training.
Strong succession planning and
recruitment. Suitable working
environment.
Computer failure Loss of data, debtor External IT consultants,
history backups, offsite copies.
Latest virus and internet
software.
Asset management Wrong asset mix, asset Draw on wealth of experience
illiquidity, hold cash to ensure balance between
income producing and
development opportunities.
Continued spread of tenancies
and geographical location.
Prepare business for the
economic cycles.
Acts of God (e.g. Weather incidents, fire, Where possible cover with
COVID 19) terrorism, pandemics insurance. Ensure you carry
enough reserves and resources
to cover any incidents.
Subsequent to the year end an additional risk relating to COVID-19 has been
added. The Group's strategy for dealing with this risk is set out above within
the Group Strategic Report.
Section 172(1) statement
This is a reporting requirement and relates to companies defined as large by
the Companies Act 2006, this includes public companies as otherwise the Group
would not be considered large.
Each individual Director must act in the way he considers, in good faith, would
be the most likely to promote the success of the company for benefit of its
members as a whole, and in doing so the Directors have had regard to the
matters set out in section 172(1) (a) to (f) when performing their duty under
section 172.
The matters set out are:
(a) the likely consequences of any decision in the long term;
The longer term decisions are made at board level ensuring a wealth of
experience and a breadth of skills. The value creation in the business is
mainly generated by buying the investments at the right time in the financial
cycles, whilst reducing risk by choosing assets that have alternative or back
up values to the current use, as well as initial values.
It is also key that long term decisions are made in respect of ensuring that
property assets are maintained, where economically viable. Other areas to
ensure decisions are in tune with long term consideration are making sure the
best possible financing of the Group to match the requirements of the long-term
nature of property ownership. The board and management makes long term
decisions such as keeping a vigilant review of the changing nature of property
usage and tries were possible to diversify its income streams. Caerphilly and
Gateshead purchases in 2019 are good examples of long term decision making,
i.e. choosing offices and a leisure led retail scheme - as such giving some
protection against changing consumer habits in more general retail arena.
(b) the interests of the company's employees;
The company makes investment in and the development of talent of its employees,
including paying for professional development, providing in house updates and
encouraging knowledge sharing. The Group has a strong track record of
promoting from within the business and after the 2019 year end two surveyors
were promoted to Joint Head of Property. The Group undertakes team building
activities to encourage cohesion and working together.
(c) the need to foster the company's business relationships with suppliers,
customers and others;
Being in the secondary property industry the business is used to dealing with
many types of businesses as tenants from large multi-national businesses to
small sole traders - keeping good sound relationships with both is key. We
also use many small operators and suppliers and we ensure prompt payment,
paying within 30 days in most instances to again foster good working
relations. We set a purchase order system in 2018 and refined it in 2019 to
streamline and speed up payments supporting small suppliers.
(d) the impact of the company's operations on the community and the
environment;
The Group's investments by its very nature often have a significant impact on
local communities, providing services and convenience businesses, or places for
local enterprise or employment. Owning a parade of shops, we can ensure where
possible that these are viable locations by encouraging a variety of
offerings. The Group maintains and upkeeps its investment properties to a
viable level which benefits the local communities they provide accommodation
for or seeks improvements with planning which can enhance local areas. The
Group also ensures it recycles much of its head office paper and is moving
towards less paper communication; for instance 2019 was the first year where
invoices were emailed as standard to our tenants and we also encourage the
receipt of electronic invoices. We also ensure we upgrade our units to the
required EPC levels which by its very nature reduces the longer term
environmental impact of the use of these units.
(e) the desirability of the company maintaining a reputation for high standards
of business conduct;
The Group maintains an appropriate level of Corporate Governance that is
documented within its own section within these Financial Statements. With a
relatively small management team it is easier to monitor and assess the culture
and encourage the appropriate standards. The board strives to delegate and
empower its management teams to ensure the high standards are maintained at all
levels within the business.
and
(f) the need to act fairly as between members of the company.
The Group has excellent communication with its members, actively encouraging
participation and discussion at its AGMs and also circulating letters of our
announcements to ensure older members or those not accessing the LSE financial
news can keep up to date with relevant information. Our CEO and Chairman is
unpaid, his benefit or income from the company is pro-rata the same as all
members including minority shareholders.
The Group Strategic Report set out on the above pages, also includes the
Chairman's Statement shown earlier in these accounts and was approved and
authorised for issue by the Board and signed on its behalf by:
S. J. Peters
Company Secretary
Unicorn House
Station Close
Potters Bar
Hertfordshire EN6 1TL
14 May 2020
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2019
Notes 31 December 31 December
2019 2018
GBP GBP
'000 '000
Revenue 14,226 13,607
Cost of sales (3,429) (3,947)
Gross profit 10,797 9,660
Other income 443 457
Administrative expenses (1,676) (1,819)
Bad debt expense (524) (796)
Operating profit 9,040 7,502
Profit on disposal of investment properties 515 11,750
Movement in fair value of investment 4 (8,832) (6,396)
properties
723 12,856
Finance costs - interest (2,469) (2,526)
Finance costs - swap interest (2,437) (2,533)
Investment income 112 24
Loss on disposal of fixed assets - (41)
Profit (realised) on the disposal of 105 34
investments
Fair value (loss)/ gain on derivative 5 (997) 886
financial liabilities
(Loss)/ profit before income tax (4,963) 8,700
Income tax income/ (expense) 870 (1,653)
(Loss)/ profit for the year (4,093) 7,047
Continuing operations attributable to:
Equity holders of the parent (4,093) 7,047
(Loss)/ profit for the year (4,093) 7,047
(Loss)/ earnings per share
Basic and diluted - continuing operations 3 (23.1)p 39.9p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Notes 31 December 31 December
2019 2018
GBP'000 GBP'000
(Loss)/ profit for the year (4,093) 7,047
Items that will not be reclassified
subsequently to profit or loss
Movement in fair value of investments taken to (225) (197)
equity
Deferred tax relating to movement in fair
value of
investments taken to equity 38 34
Realised fair value on disposal of investments
previously taken to equity 48 -
Realised deferred tax relating to disposal of
investments previously taken to equity (8) -
Other comprehensive loss for the year, net of (147) (163)
tax
Total comprehensive (loss)/ income for the (4,240) 6,884
year
Attributable to:
Equity holders of the parent (4,240) 6,884
(4,240) 6,884
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Company number 00293147
As at 31 December 2019
Notes 31 December 31 December
2019 2018
ASSETS GBP'000 GBP'000
Non-current assets
Investment properties 4 169,340 170,236
Deferred tax asset 3,304 1,811
Right of use asset 373 -
Investments 927 1,850
173,944 173,897
Current assets
Stock properties 350 448
Investments 168 -
Current tax asset 601 -
Trade and other receivables 3,389 4,896
Cash and cash equivalents (restricted) 2,299 14,436
Cash and cash equivalents 7,186 5,614
13,993 25,394
Total assets 187,937 199,291
EQUITY AND LIABILITIES
Capital and reserves
Share capital 4,437 4,437
Share premium account 5,491 5,491
Treasury shares (213) (213)
Capital redemption reserve 604 604
Retained earnings 74,627 83,710
Total equity 84,946 94,029
Non-current liabilities
Long-term borrowings 6 58,955 58,864
Derivative financial liability 5 26,511 25,514
Leases 7,912 7,510
93,378 91,888
Current liabilities
Trade and other payables 8,541 10,192
Short-term borrowings 6 1,072 1,071
Current tax payable - 2,111
9,613 13,374
Total liabilities 102,991 105,262
Total equity and liabilities 187,937 199,291
The accounts were approved by the Board of Directors and authorised for issue
on 14 May 2020. They were signed on its behalf by:
A.S. Perloff
Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
Share Share Treasury Capital Retained Total
capital premium shares redemption earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 4,437 5,491 604 80,893 91,212
2018 (213)
Total comprehensive - - - 6,884 6,884
income -
Dividends - - - - (4,067) (4,067)
Balance at 1 January 4,437 5,491 604 83,710 94,029
2019 (213)
Total comprehensive - - - (4,240) (4,240)
loss -
Other movement (68) (68)
Dividends - - - - (4,775) (4,775)
Balance at 31 4,437 5,491 604 74,627 84,946
December 2019 (213)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
31 December 31 December
2019 2018
GBP'000 GBP'000
Cash flows from operating activities
Operating profit 9,040 7,502
Depreciation charges for the year - 13
Loss on current asset investments 15 -
Transfer stock to investment properties (141) -
Rent paid treated as interest (651) (571)
Profit before working capital change 8,263 6,944
Increase in stock investments (168) -
Decrease/ (increase) in receivables 1,507 (1,219)
Decrease in payables (1,802) (319)
Cash generated from operations 7,800 5,406
Interest paid (4,091) (4,375)
Income tax paid (3,303) (2,743)
Net cash generated from/ (used in) operating
activities 406 (1,712)
Cash flows from investing activities
Purchase of investment properties (8,138) (3,894)
Purchase of investments** - (2,271)
Purchase of current asset investments*** (3,996) -
Proceeds of current asset investments*** 3,981 -
Proceeds from sale of investment property 1,065 40,790
Proceeds from sale of investments** 851 275
Dividend income received 76 5
Interest income received 36 19
Net cash (used in)/ generated from investing
activities (6,125) 34,924
Cash flows from financing activities
Repayments of loans (1,071) (15,161)
Loan arrangement fees and associated costs - (375)
Draw down of loan 1,000 500
Dividends paid (4,775) (4,067)
Net cash used in financing activities (4,846) (19,103)
Net (decrease)/ increase in cash and cash (10,566) 14,109
equivalents
Cash and cash equivalents at the beginning of 20,050 5,941
year*
Cash and cash equivalents at the end of year* 9,485 20,050
* Of this balance GBP2,299,000 (2018: GBP14,436,000) is restricted by the Group's
lenders i.e. it can only be used for purchase of investment property.
** Shares in listed and/or unlisted companies. *** Shares in listed and/or
unlisted companies but held for trading purposes.
NOTES:
1. 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 will publish full financial statements that
comply with IFRSs which will shortly be available on its website and are to be
posted to shareholders shortly.
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 31 December 2019 or 2018. The
financial information for the year ended 31 December 2018 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 auditor's report on
those accounts was unqualified, 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 financial information for the year ended 31 December 2019 is derived from
the audited statutory accounts for the year ended 31 December 2019 on which the
auditors have given an unqualified report, that did not contain a statement
under section 498(2) or 498(3) of the Companies Act 2006 and did include
references to COVID-19 and the refinancing of debt facilities to which the
auditors drew attention by way of emphasis. The statutory accounts will be
delivered to the Registrar of Companies following the Company's annual general
meeting.
The accounting policies adopted in the preparation of this preliminary
announcement are consistent with those set out in the latest Group Annual
financial statements.
Going concern
The Group's business activities, together with the factors likely to affect its
future development, performance and position are set out in the Chairman's
Statement and Group Strategic Report. The financial position of the Group,
including key financial ratios, is set out in the Group Strategic Report. In
addition, the Directors' Report includes the Group's objectives, policies and
processes for managing its capital; the Group Strategic Report includes details
of its financial risk management objectives; and the notes to the accounts
provide details of its financial instruments and hedging activities, and its
exposures to credit risk and liquidity risk.
The Group is strongly capitalised, has high liquidity together with a number of
long term contracts with its customers many of which are household names. The
Group has a diverse spread of tenants across most industries and investment
properties based in many locations across the country.
The Group has a strong track record of obtaining long term finance and expects
this to continue as it has supportive lenders. The Group always maintains
excellent relations with its lenders.
The COVID-19 pandemic has provided a much harder set of circumstances for all
businesses. The Directors have prepared a detailed financial forecast assuming
a continued "lock down" scenario that demonstrates the Group is a going concern
even if the business effects of the lock down resulting from the COVID-19
pandemic continues to December 2021 (further details with the Strategic
Report). This forecast takes account of a level of minimal income from
businesses and trades that remain open (even in the lock down e.g. banks and
supermarkets). It also takes account of the Group's extensive cash reserves
(and available facility - some already drawn at the announcement date) and
shows the Group has enough financial resources to survive to beyond December
2021 - even with the current lock down and its effects continuing. The
Directors are aware that the Group's loan is up for renewal in April 2021,
however the Directors are confident that the Group has strong relationships
with its lenders and that even if the Group cannot renew for a full term it
should be able to get a short term renewal to tide it over. The Group has
further protection as the forecast does not take account of any cost saving
potential in 2020.
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 the foreseeable
future, even with the current COVID-19 situation. For these reasons they
continue to adopt the going concern basis in preparing the financial
statements.
2. Dividends
Amounts recognised as distributions to equity holders in the period:
2019 2018
GBP'000 GBP'000
Special dividend for the year ended 31
December 2018 of 15p per share (2017:10p 2,653 1,768
per share)
Final dividend for the year ended 31
December 2018 of 6p per share (2017: 7p per 1,061 1,238
share)
Interim dividend for the year ended 31
December 2019 of 6p per share (2018: 6p per 1,061 1,061
share)
4,775 4,067
The Directors recommend a payment of a final dividend for the year ended 31
December 2019 of 6p per share (2018 - 6p), following the interim dividend paid
on 28 November 2019 of 6p per share (2018 - 6p). In 2018 a special dividend was
also declared of 15p per share. The final dividend of 6p per share will be
payable on 7 September 2020 to shareholders on the register at the close of
business on 7 August 2020 (Ex dividend on 6 August 2020).
The full ordinary dividend for the year ended 31 December 2019 is anticipated
to be 12p per share, being the 6p interim per share paid and the recommended
final dividend of 6p per share.
3. (Loss)/ earnings per ordinary share (basic and diluted)
The calculation of (loss)/ profit per ordinary share is based on the (loss)/
profit, being a loss of GBP4,093,000 (2018 - profit of GBP7,047,000) and on
17,683,469 ordinary shares being the weighted average number of ordinary shares
in issue during the year excluding treasury shares (2018 - 17,683,469). There
are no potential ordinary shares in existence. The Company holds 63,460 (2018 -
63,460) ordinary shares in treasury.
4. Investment property
Investment
properties
GBP'000
Fair value
At 1 January 2018 201,825
Additions 3,894
Disposals (29,040)
Fair value adjustment on property held on operating leases (47)
Revaluation decrease (6,396)
At 1 January 2019 170,236
Additions 8,138
Transfer from stock properties 239
Disposals (550)
Fair value adjustment on investment properties held on leases 109
Revaluation decrease (8,832)
At 31 December 2019 169,340
Carrying amount
At 31 December 2019 169,340
At 31 December 2018 170,236
5. 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.
2019 2018
Bank loans GBP'000 GBP'000
Interest is charged as to: Rate Rate
Fixed/ Hedged
HSBC Bank plc* 35,000 7.01% 35,000 7.01%
HSBC Bank plc** 25,000 6.58% 25,000 6.58%
Unamortised loan arrangement fees (159) (322)
Floating element
HSBC Bank plc - -
Shawbrook Bank Ltd 186 257
60,027 59,935
Bank loans totalling GBP60,000,000 (2018 - GBP60,000,000) are fixed using interest
rate swaps removing the Group's 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 for Group and Company
The derivative financial assets and liabilities are designated as held for
trading.
Hedged Average Duration of 2019 2018
amount rate contract Fair value Fair value
remaining
GBP'000 'years' GBP'000 GBP'000
Derivative Financial
Liability
Interest rate swap 35,000 5.06% 18.69 (22,209) (21,482)
Interest rate swap 25,000 4.63% 1.92 (1,792) (2,517)
Interest rate swap 25,000 2.13% 10.00 (2,510) (1,515)
(26,511) (25,514)
Net fair value (loss)/ gain on derivative financial (997) 886
assets
* Fixed rate came into effect on 1 September 2008. Rate includes 1.95%
margin. The contract includes mutual breaks, the first potential one was 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 1.95% margin. This
contract includes a mutual break on the fifth anniversary and its duration is
until 1 December 2021.
6. Bank loans
2019 2018
GBP'000 GBP'000
Bank loans due within one year 1,072 1,071
(within current liabilities)
Bank loans due within more than one year 58,955 58,864
(within non-current liabilities)
Total bank loans 60,027 59,935
2019 2019 2019 2018
Analysis of debt maturity GBP'000 GBP'000 GBP'000 GBP'000
Interest* Capital Total Total
Trade and other payables** - 5,172 5,172 6,749
Bank loans repayable
On demand or within one year 1,561 1,072 2,633 2,764
In the second year 520 59,072 59,592 2,735
In the third year to the fifth 1 42 43 60,185
year
2,082 60,186 62,268 72,433
*based on the year end 3 month LIBOR floating rate - 0.68%, and bank rate of
0.10%.
** Trade creditors, other creditors and accruals
On 19 April 2016 the Group renewed its GBP75,000,000 loan facility by entering
into a new 5 year term loan with HSBC and Santander. The Group has the option
to draw down an additional GBP10,000,000 under the same agreement subject to the
banks' credit approval process. The Group has commenced talks with its lenders
to renew the facilities on similar terms and hopes to have this in place by 31
December 2020. The initial conversations have been very positive and the Board
believes there should be no issues with the Group's loan renewal.
A Shawbrook bank loan of GBP186,000 at the year end is repayable over its life to
September 2022.
Bank loans are secured by fixed and floating charges over the assets of the
Group.
The estimate of interest payable is based on current interest rates and as
such, is subject to change.
The Directors estimate the fair value of the Group's borrowings, by discounting
their future cash flows at the market rate (in relation to the prevailing
market rate for a debt instrument with similar terms). The fair value of bank
loans is not considered to be materially different to the book value. Bank
loans are financial liabilities.
7. Events after the reporting date
In January 2020, JE Beale PLC went into administration. They were a tenant
within 13 freehold department stores owned by the Group. The Group announced
in January 2020 that the Directors believed that this would not have a material
effect on revenues.
COVID-19, as a health issue and with the government imposed closures to
business and restriction on people's movements, will have a significant effect
on the 2020 results including a potential decline in revenues and/ or a future
impairment of assets. The financial effects cannot be reliably quantified at
this early stage, but the Group is in a strong financial position to weather
the crisis. More details on this are contained with the Group Strategic
Report.
The impact of COVID-19 is considered to be a non-adjusting post balance sheet
event and as such the Statement of Financial Position, including property
valuations, has been prepared on the facts and circumstances as at 31 December
2019.
8. Copies of the full set of Report and Accounts
Copies of the Company's report and accounts for the year ended 31 December 2019
will be posted to shareholders shortly, will also be available from the
Company's registered office at Unicorn House, Station Close, Potters Bar,
Hertfordshire, EN6 1TL and will be available for download on the Group's
website www.pantherplc.com.
9. Annual General meeting
Arrangements for the 2020 Annual General Meeting (AGM) in light of COVID-19.
In view of the COVID-19 pandemic and the Government's measures to restrict
travel and public gatherings currently in force (the Movement Restrictions),
including the prohibition on public gatherings of more than two people, the
Board has decided that it is not possible to hold the Company's AGM in its
usual format.
The Annual General Meeting of Panther Securities P.L.C. is planned to be held
on 23 June 2020 at Unicorn House, Station Close, Potters Bar, Herts., EN6 1TL
at 10.00 am but due to the COVID-19 restrictions NO additional members will be
allowed to be present.
A quorum will be made with S,J. Peters and A. S. Perloff Any member who
attempts to attend will not be allowed access. The only voting being accepted
will be via Proxy Voting and no one apart from the Chairman will be allowed to
be a Proxy.
Following the closure of the AGM a ZOOM meeting will be held for shareholders
who want to ask questions about the accounts and generally it will be capped at
a maximum of 100 people. If you want to have the login details you will need
to download the ZOOM application and email info@pantherplc.com with subject
"Shareholder meeting" at least 3 days before the meeting.
Panther Securities PLC +44 (0) 1707 667 300
Andrew Perloff, Chairman
Simon Peters, Finance Director
Allenby Capital Limited
+44 (0) 20 3328 5656
David Worlidge
Alex Brearley
END
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