Palace Capital Plc – Results for the year ended 31 March 2022

PALACE CAPITAL PLC

(“Palace Capital”, the “Group” or the “Company”)

Preliminary Results for the year ended 31 March 2022

A STRONG PERFORMANCE UNDERPINNED BY ACTIVE ASSET MANAGEMENT

Palace Capital (LSE: PCA), the Main Market 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 & industrial sectors, announces its preliminary results for the year ended 31 March 2022.

Steven Owen, Interim Executive Chairman, commented:

“The Group has delivered a robust set of results driven by a combination of active operational and financial activity, property revaluation gains and profits arising from the disposal strategy resulting in a total accounting return of 14.8%.

“The Board announced in the Trading Update on 6 April 2022 that, in consultation with shareholders, it was considering a range of strategic options, including a return of capital, to unlock further value in the business. We expect to update the market on the strategic options that we will pursue before the Annual General Meeting in July 2022. The Board remains committed to maximising value for shareholders and closing the current share price discount to NAV.”

Financial highlights

• Adjusted profit before tax increased by 4.0% to £7.8 million (2021: £7.5 million), largely due to asset management lease activity and reversal of the ECL provision
• IFRS profit before tax of £24.6 million (2021: £5.5million loss), driven by disposal strategy, revaluation gain and trading profit
• Like-for-like portfolio valuation increase of 3.9% (2021: 4.0% decrease)
• Total Property Return of 12.5% for the year (2021: 1.0%), driven by increased earnings and capital growth
• EPRA NTA per share increased by 11.4% to 390p (2021 : 350p), driven by portfolio valuation gains and profits from the disposal strategy 
• Total Accounting Return of 14.8% (2021: minus 1.2%)
• LTV reduced to 28% (2021: 42%) as a result of £45.3 million reduction in net debt
• Total dividends paid or declared for the year increased by 26.2% to 13.25 pence per share (2021: 10.50 pence per share) and total dividends paid increased by 56.7% to 11.75 pence per share (2021: 7.50 pence per share)

Operational highlights

• Disposal strategy ahead of target with £31.5 million of gross proceeds achieved which is 19% above March 2021 book value, 12% ahead of purchase prices and capital expenditure, delivering an ungeared IRR of 11%. 55 lease events completed in the period totalling 319,000 sq ft at an average of 11% premium to ERV
• An additional £1.9 million of annualised net rental income gained in the year through asset management lease activity, acquisitions, and reduction in non-recoverable property costs. This takes into account income lost through disposals, lease expiries and lease breaks
• Portfolio repositioning in the year has delivered a higher quality portfolio consisting of 37 properties, improved EPC ratings (which support future rental uplifts), higher occupancy and weighting to core assets
• 98% rent collection for the 12 months to 31 March 2022
• Overall EPRA occupancy of 88.5% (2021: 86.4%), with majority of remaining vacancy having been recently refurbished or identified for strategic refurbishment or redevelopment
• WAULT of 4.7 years to break, 6.5 years to expiry, reflecting flexible lease terms
• Increased prioritisation of ESG initiatives and incorporated energy efficiency measures into our capital expenditure projects

Delivering strong total returns