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 £4,093,000 after allowing for a tax credit of
£870,000. This loss is mainly due to a directors’ revaluation
of our entire portfolio amounting to an £8,832,000 decrease in
value.
Our rental receivable during the year ended 31 December 2019 amounted to £14,226,000 compared
to the previous year of £13,607,000 despite having sold over
£40,000,000 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lost from these sold properties has more than been replaced by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
£710,000 against a previous book value of £150,000.
Skinnergate, Darlington
A large, vacant freehold shop in Skinnergate, Darlington, with a book value of £400,000, was
sold to the local council for £355,000 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 £145,000 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 £4.65m. 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 £790,000 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 £2.7m. 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 £376,000 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
£887,000 per annum. However, we should receive directly in a
full year, rents or profits from three car parks of circa £200,000
per annum plus the ability to create three further small car parks
maybe worth between £50-£60,000 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 £7,000
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 £625,000 per annum as one of the older
swaps ceases.
Finance
As at 31 December 2019, the Group
were utilising £60 million of our £74 million facility and also had
a £9,485,000 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 £5.6m and would be enough to cover our
interest obligations to our lenders of approximately £4.1m 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
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 £1,000,000 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 £1,200 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 £300 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 £200 fee to my
accountant and, to rub salt in the wound, tax of £40 on top i.e.,
for £900 that I never received I had to pay £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 £150 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.
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/ turnover) |
76% |
71% |
71% |
77% |
|
|
|
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 properties) |
8.8% |
7.7% |
7.1% |
7.7% |
|
|
|
Net assets value per
share |
480p |
532p |
516p |
407p |
|
|
|
(Loss)/ earnings per share
– continuing |
(23.1)p |
39.9p |
120.2p |
(5.5)p |
|
|
|
Dividend per share |
12.0p |
27.0p*** |
22.0p*** |
12.0p |
|
|
|
Investment property
acquisitions |
£8.1m |
£3.9m |
£8.9m |
£5.0m |
|
|
|
Investment property disposal
proceeds |
£1.1m |
£40.8m |
£2.2m |
£5.8m |
|
|
|
* 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 £8.8m (compared to a £6.4m 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:
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 £270,000 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.
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 £5.6m.
Financing
The Group had previously entered into a £75 million club loan
facility (£60 million term and £15 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 £74m 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 £9.5m
of cash funds, £14m available facility and a further £10m included
in our loan agreement but requiring credit approval. In
April 2020 cash was further increased
as a net amount of £3m was drawn on the facilities as well as the
lenders agreeing to release £1.5m of the £2.3m which was restricted
to property purchases (and included in the £9.5m 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 £0.997m
(2018: £0.886m fair value gain). Following this loss the
total derivative financial liability on our Consolidated Statement
of Financial Position is £26.5m (2018:
£25.5m).
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 £25,000,000 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
£25,000,000 swap with a rate of 4.63% ends, resulting in an annual
saving of circa £625,000. 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/ deal flow
reduced |
Act honourably, invest well and be
prudent. |
Regulatory changes |
Transactional and holding costs increase |
Seek high returns to cover additional costs.
Lobby Government -“Ramblings”. Use advisers when necessary. |
People related issues |
Loss of key employees/ low morale/ inadequate skills |
Maintain market level remuneration packages, flexible working and
training. Strong succession planning and recruitment. Suitable
working environment. |
Computer failure |
Loss of data, debtor history |
External IT
consultants, backups, offsite copies. Latest virus and internet
software. |
Asset management |
Wrong asset mix, asset illiquidity,
hold cash |
Draw on wealth of experience 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. COVID 19) |
Weather incidents, fire, terrorism, pandemics |
Where possible cover with 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 2019 |
31
December 2018 |
|
|
£’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
properties |
4 |
(8,832) |
(6,396) |
|
|
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
investments |
|
105 |
34 |
Fair value (loss)/ gain on
derivative financial liabilities |
5 |
(997) |
886 |
(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 2019 |
31
December 2018 |
|
|
£’000 |
£’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 equity |
|
(225) |
(197) |
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 tax |
|
(147) |
(163) |
Total comprehensive (loss)/
income for the year |
|
(4,240) |
6,884 |
|
|
|
|
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
2019 |
31 December
2018 |
ASSETS |
|
£’000 |
£’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 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
Balance at 1
January 2018 |
4,437 |
5,491 |
(213) |
604 |
80,893 |
91,212 |
Total comprehensive
income |
- |
- |
- |
- |
6,884 |
6,884 |
Dividends |
- |
- |
- |
- |
(4,067) |
(4,067) |
|
|
|
|
|
|
|
Balance at 1
January 2019 |
4,437 |
5,491 |
(213) |
604 |
83,710 |
94,029 |
Total comprehensive
loss |
- |
- |
- |
- |
(4,240) |
(4,240) |
Other movement |
|
|
|
|
(68) |
(68) |
Dividends |
- |
- |
- |
- |
(4,775) |
(4,775) |
Balance at 31
December 2019 |
4,437 |
5,491 |
(213) |
604 |
74,627 |
84,946 |
CONSOLIDATED
STATEMENT OF CASH FLOWS
For the year ended 31 December 2019 |
|
|
31
December 2019 |
31
December 2018 |
|
|
£’000 |
£’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 equivalents |
|
(10,566) |
14,109 |
|
|
|
|
Cash and cash equivalents at the
beginning of year* |
|
20,050 |
5,941 |
Cash and cash equivalents at the
end of year* |
|
9,485 |
20,050 |
|
|
|
|
* Of this balance £2,299,000 (2018: £14,436,000) 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.
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
£’000 |
2018
£’000 |
Special dividend for the year ended
31 December 2018 of 15p per share (2017:10p per share) |
2,653 |
1,768 |
Final dividend for the year ended 31
December 2018 of 6p per share (2017: 7p per share) |
1,061 |
1,238 |
Interim dividend for the year ended
31 December 2019 of 6p per share (2018: 6p per share) |
1,061 |
1,061 |
|
|
|
|
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 £4,093,000 (2018 – profit of
£7,047,000) 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 |
|
|
£’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 |
£’000 |
£’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 £60,000,000 (2018 - £60,000,000) 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 amount |
Average rate |
Duration of contract remaining |
2019
Fair value |
2018
Fair value |
|
£’000 |
|
‘years’ |
£’000 |
£’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 assets |
(997) |
886 |
* 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 |
|
£’000 |
£’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 |
£’000 |
£’000 |
£’000 |
£’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 year |
1 |
42 |
43 |
60,185 |
|
|
|
|
|
|
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 £75,000,000 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 £10,000,000 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 £186,000 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