CHAIRMAN'S STATEMENT – Andrew S Perloff Chairman
I am pleased to be able to report our results for the six months ended 30 June 2019 which show a profit of £885,000 before tax, which is much reduced when compared to last year's figure of £11,193,000, which benefitted from some very large value sales and positive revaluations of properties during that period.
The profit figure for the period under review was also reduced by an increased deficit on our swap liability of £1,864,000, as short-term interest and bond interest rates are currently around an all-time low.
However, our basic trading is sound with the current period rental income receivable at £7,023,000 compared to £7,069,000 for the half year period ended 30 June 2018.
For the most part rental income is holding up and also being successfully replaced by new acquisitions. We have, to date, only partially utilised the funds produced by our successful property sales over the last two years.
There was only one freehold sale included in this period's accounts, being that of Victoria Street, Wolverhampton for £710,000, a cleared site on which we had obtained planning permission for a large shop with flats or student accommodation above, which showed a good profit over book value. This exchanged in the period and completed after the period end.
Shareholders will recall that last November we purchased a freehold department store let to Debenhams' in a prime position in Dumfries. It was a relatively risky purchase at the time because of Debenhams' well publicised trading situation. They have since entered into and concluded a successful company voluntary arrangement (CVA) which allowed them to halve the rent and, surprisingly, also the business rates payable by the store. We still receive £168,000 p.a. on our £1,100,000 cost, which we consider to be a good return. With the approximately £65,000 p.a. business rates saving they achieved, it is quite possible that this store will continue to thrive for some time to everyone's benefit.
At the accounting half-year date, our current borrowings were approximately £58,981,000 compared to £74,931,000 the previous year, and we still had cash balances of about £14,510,000 available to invest.
In June 2019 we had a £15,000,000 unused facility, which is available for future property purchases. This is due to us paying down that amount out of the previous year's substantial and profitable sales, plus an option of a further £10,000,000 of facility, subject to credit approval.
Post Account 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 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 Wetherspoons, Argos and Peacocks being some of the other headline tenants. At the date of acquisition, the block was producing an income of £790,000 per annum. There are various asset management opportunities to improve its 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, which we hope to complete shortly at a higher rent per square foot than had previously been expected.
Business Rates
I have decided to repeat what I said in last year's interim statement as nothing has changed with regard to the Government's neglect of the high street's problems.
“Problems with the high street premises continue. These are almost entirely due to government greed and failure to act sensibly in good time. As well as central government/bureaucratic financial incompetence which we all expect, I would have thought that the political implications for the government which shows the dreadful state of the high street are immense as on every high street other than within the M25, with its numerous vacant or closing down stores is a billboard advertising the failure of government policies. The high street should be the beating heart of most communities and if its vibrancy improves most of its area residents 'happiness factor' improves.”
Dividends
The Directors have declared an interim dividend of 6p per share to shareholders on the register on 8 November 2019 (ex-dividend on 7 November 2019) which is to be paid on 28 November 2019. Subsequently, the Board will assess the business' situation, but expects to pay a total dividend of no less than 12p per share for the full year.