Palace Capital Plc - Annual Results

Palace Capital plc




Palace Capital (LSE: PCA), the Main Market listed real estate investment company that has a diversified portfolio of UK commercial real estate in carefully selected locations outside of London, is pleased to announce its annual results for the year ended 31 March 2019 following its first full year on the Main Market of the London Stock Exchange.

Positive financial results despite economic uncertainty

·      Profit before tax of £6.4 million

·      Adjusted profit before tax of £8.9 million

·      Adjusted earnings per share of 17.3p

·      Dividend maintained at 19.0p or £8.7 million paid

·      Decrease in net assets of 1.6%, to £180.3 million

·      EPRA NAV of 407p

Outperforming property portfolio

·      Total property return of 7.1%, well ahead of MSCI UK Quarterly Index figure of 4.6%

·      Like-for-like valuation increase of 0.5%, compared to MSCI growth in UK capital values of 0.1%

·      Like-for-like rental value up 1.1% to £16.4 million

·      37 new leases completed at an average of 14% above ERV

·      Occupancy of 87%, with some tactical vacancies held for accretive asset management

·      Sale of 50 non-core residential assets for £18.2 million

·      Acquisition of One Derby Square, Liverpool for £14.0 million with considerable asset management opportunities

·      £5.6 million invested in accretive refurbishment and development projects

Significant progress on Hudson Quarter York development

·      Demolition and site preparation completed in the year, scheme launching June 2019

·      Funding secured with Barclays Bank for development facility totalling £26.5 million

·      £33.6 million construction contract signed and two year project commenced

·      Fundamentals of City of York showing positive momentum, early occupier interest encouraging

Capital structure remains robust

·      Debt facilities total £145.9 million, with £22.9 million of cash available for acquisitions

·      Loan to value ratio 34% within target range

·      Average cost of debt reduced to 3.3%

Proposed REIT conversion to support Total Return Strategy

·      UK REIT conversion recommended by the Board following extensive professional, independent advice

·      Conversion expected 1 August 2019

 Palace Capital Chairman, Stanley Davis, commented:

"We've delivered another set of positive results against an uncertain economic backdrop, generating a total property return of 7.1% well above the UK Quarterly Property Index - testimony to our strategy of focussing on selected regions outside of London. Having taken extensive independent advice, it is clear that Palace Capital has now reached a certain scale where the benefits of converting to a REIT are tangible and we are convinced that this is the best course to support our Total Return Strategy as the Company continues to grow. The Board is therefore recommending that the Company converts to a REIT, which will also unlock new pools of capital and improve liquidity."

Neil Sinclair, Chief Executive of Palace Capital, commented:

"Our portfolio structure and proactive approach to asset management has enabled us to continue to grow both income and capital values, building further on our strong track record. We are well positioned to take advantage of investment opportunities, but remain disciplined in this regard as we believe that pricing in the market at the moment does not provide sustainable value and, therefore, doesn't meet our strict criteria. Our priority is therefore to exploit our own portfolio, where there is significant reversionary potential and accretive redevelopment opportunities. Looking ahead to FY20, we will remain focussed on growing income through lease restructuring, improving occupancy and other asset management projects including refurbishments and developments."