Palace Capital Plc – Interim Results

PALACE CAPITAL PLC

(“Palace Capital” or the “Company”)

Interim Results for the six months ended 30 September 2021

ACTIVE ASSET MANAGEMENT AND PORTFOLIO REPOSITIONING DRIVE PERFORMANCE  

Palace Capital (LSE: PCA), the Main Market listed property investment company that has a diversified portfolio of UK commercial real estate in carefully selected locations outside of London with a focus on the office and industrial sectors, announces its unaudited results for the six months ended 30 September 2021.

Highlights

Active asset management and improved rent collection drive performance and increased dividend payment

• IFRS profit before tax for the period up 211% to £8.0 million (September 2020: £7.2 million loss) as a result of development profits, leasing activity, property valuation increases, and profits on disposals . 
• Basic EPS up 212% to 17.4p (September 2020: 15.5p loss).  
• Adjusted EPS of 8.7p, reflecting a 1.4x cover of the 6.25p dividend for the period.
• EPRA NTA per share of 362p, up 3.6% (March 2021: 350p) and IFRS net assets of £163.6 million (March 2021: £157.8 million).  
• Increased EPRA earnings of £3.7 million (September 2020: £3.2 million).  
• 97% of rents collected for the June quarter and 90% of all rents due on and since the September quarter day collected to the date of this announcement, both higher than the equivalent quarter in 2020. This is expected to increase to 95% when the monthly payments for December are received.  
• 8.3% increase in minimum quarterly dividend to 3.25p per share, with the Q2 dividend at this level payable on 31 December 2021.
• Group LTV reduced to 36% (March 2021: 42%) reflecting strong sales at Hudson Quarter, York and ongoing disposal programme, with all disposals above book value.
• Solid balance sheet with cash reserves and immediately available facilities of £18.7 million as at 30 September 2021.
• £26.5 million development facility from Barclays Bank now reduced to £1.6 million, which will be repaid in full by the end of this month.
• Net Debt of £93.2 million (March 2021: £118.9 million).  
• Total accounting return of 5.2% (September 2020: -3.3%).

Strategic disposals and continuing Hudson Quarter sales providing capital for reinvestment

• 64 apartments completed or exchanged at Hudson Quarter for a total of £21.0 million with an additional 8 under offer to the value of £3.0 million. 
• £18.9 million of property sold or exchanged under the £30 million disposal strategy, of which £12.0 million was exchanged or completed by 30 September 2021, and a further £6.9 million exchanged or completed since 30 September 2021. All disposals were above book value. 
• 29 lease events in the period providing £0.6 million additional income per annum, 3% ahead of ERV.  
• ESG embedded in asset business plans as a priority focus, with an improving EPC profile. Portfolio 98% 2023 EPC compliant .

Stanley Davis, Chairman of Palace Capital said:

“We are making strong progress across the business and the focus we have been able to put towards implementing our strategy as we have emerged from the pandemic is clearly reflected in the numbers we are reporting today. Our rent collection levels are high, we are achieving strong sales at Hudson Quarter, including two, three bedroom apartments at £1.20 million and £1.05 million. Our £30 million disposal programme is on track and our balance sheet is in good health. This is enabling us to look at potential investments, both direct property and corporate opportunities, as we seek to recycle capital with one acquisition in legals.

“Since the end of the half year the letting market has further improved and we are seeing increased activity at our office holdings as the regions see a return to normal working activity. Avison Young in their Q3 update of regional activity in the Big Nine Regional Cities state that “Occupier confidence across the Big Nine office markets has reached its highest level since the pandemic started which is reflected in the strongest take up for two years. Increasing confidence has released pent up demand and requirements that have been on hold during the past 18 months. As such there has been a depth to the number and size of deals this quarter, including some exceptional lettings.” We have holdings in the city centres of Leeds, Manchester, Liverpool and Newcastle, four of the Big Nine.

“Finally, I am due to stand down as Chairman at the end of this calendar year. It has been the most wonderful journey since Neil Sinclair and I started working together at Palace in 2010. I never expected to face a pandemic, but the Board and the Management Team have responded magnificently, and I see nothing other than an exciting future for Palace Capital.”