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Palace Capital Plc - Half-year Report 2020

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PALACE CAPITAL PLC

("Palace Capital" or the "Company")

Interim Results for the six months ended 30 September 2020

RESILIENT RENT COLLECTION AND ACTIVE ASSET MANAGEMENT ENSURE STABLE PORTFOLIO 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, announces its unaudited results for the six months ended 30 September 2020.

Financial Highlights

Active asset management underpins resilient rent collection and dividend payment

· 82% of all rents due on and since the September quarter day collected, a higher percentage than at the equivalent stage in the previous two quarters with December monthly payments still to come when collection is expected to exceed 90%. 

· 94% of rent due on the June quarter day was collected compared to 96% on the March quarter day (excludes deferred rent).  

· EPRA earnings of £3.2 million (September 2019: £6.7 million), with reduction reflecting a one-off surrender premium included in the comparative period last year.  

· IFRS loss before tax for the period of £7.2 million (September 2019: £1.2 million) reflecting £10.5 million loss on revaluation of investment properties.  

· Adjusted EPS of 7.3p, 146% cover of 5p dividend for the six-month period.  

· Q2 dividend of 2.5p declared and payable on 31 December 2020. Q1 dividend of 2.5p was paid in October 2020.  

· EPRA NTA per share of 347p reduced by 4.7% (March 2020: 364p) and IFRS net assets of £158.4 million (March 2020: £166.3 million), reflecting reductions due to asset revaluations following the pandemic and strategic capital expenditure on developments and refurbishments.  

· LTV at 42% reflecting drawdowns on development loan at Hudson Quarter, due to complete in March 2021, weighted average cost of debt reduced from 3.1% to 2.9%.  

· Solid balance sheet with cash reserves and immediately available facilities of £26.3 million as at 30 September 2020, to handle any unforeseen circumstances and to take advantage of potential opportunities in the short to medium term.

Operational highlights

Ongoing strategic disposals and redevelopment programme further enhancing portfolio quality

· 36 apartments now sold at an aggregate value of £9.6 million at flagship Hudson Quarter, York development. Practical completion of the scheme is now due in March 2021 and it remains on budget.  

· Disposals of Meadowcourt, Sheffield for £1.25 million, 30% above book value, and Hyde Abbey House, Winchester sold post half year end for £1.46 million, 17% above book value.  

· Rental concessions granted at Sol Northampton with Accor Hotels in return for a five-year lease extension until 2032 and with Gravity Fitness in return for removal of the break clause, securing the lease until 2034. Rental concession granted post the half year end at Broad Street Plaza, Halifax with TGI Friday's in return for three-year lease extension until 2030.  

· Agents instructed on four further sales of non-core assets, with a combined book value of £8.3 million as at 30 September 2020.

Balance Sheet

30 Sept 2020

31 March 2020

Property valuation

£281.6m

£277.8m

Net assets

£158.4m

£166.3m

EPRA NTA per share

347p

364p

 

Income Statement

Six months to
30 Sept 2020

Six months to
30 Sept 2019

Loss before tax

(£7.2m)

(£1.2m)

EPRA earnings

£3.2m

£6.7m

Earnings per share

(15.5p)

5.6p

Adjusted earnings per share

7.3p

8.5p

Total accounting return

(3.3%)

(1.5%)

Total shareholder return

7.2%

0.2%

Total dividend per share

5.0p

9.5p

Dividend cover

146%

90%


Neil Sinclair, Chief Executive of Palace Capital said:

"Our strength in the regional office and industrial sectors, reflected in the quality of our occupier base, has enabled us to maintain high levels of rent collection across the period, despite the ongoing Covid-19 headwinds. The resilience in the income collection and the successful active portfolio management are testament to our team's experience and hard work during an extremely challenging half year period.

"While the market continues to be relatively uncertain due to the Covid-19 pandemic and with the Brexit deadline also close, we remain confident that the outlook for the UK regions is a positive one; the supply of good quality, well located office assets remains constrained and our portfolio is therefore very well placed, with additional value identified and unlocked as we progress our redevelopment and refurbishment programmes."

Stanley Davis, Chairman of Palace Capital said:

"Our financial year commenced one week after lockdown, therefore the pandemic and its impact will have a clear bearing on our results for this year. However, our well-located portfolio has shown its strength during this uncertain time and is well positioned to benefit from the trends we are seeing emerge from the pandemic, including relocation to the regions.

"In the short term we will continue to deploy our strategy of maintaining maximum liquidity, ensuring strong rent collection and pursuing the disposal of non-core assets. At the same time, the recent news of a potential vaccination programme getting underway by the end of this year or early next year provides some welcome hope that we may be moving toward the end of this Covid related uncertainty. We are preparing ourselves for the post Covid-19 era and the economic recovery, so that we can take advantage of the investment opportunities that we believe will emerge and progress our total return strategy."