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Town Centre Securities Plc - Final Results



('TCS' or the 'Company')

Final results for the year ended 30 June 2019


Delivering in an uncertain market


Town Centre Securities PLC, the Leeds, Manchester, Scotland, and London property investment, development and car parking company, today announces its audited final results for the year ended 30 June 2019.


Financial performance


  • Full year, fully covered, dividend maintained at 11.75p (2018: 11.75p)
  • TCS has now held or improved its dividend every year for the past 59 years

Net assets:

  • EPRA net assets per share down 7.8% to 354p (2018: 384p)
  • Devaluation of like for like investment portfolio limited to 3.8%

Profits and earnings per share:

  • EPRA profit before tax down 7.9% to £6.4m (2018: £6.9m), driven by various factors including investments, the short-term effect of retail CVAs, and a one-off dilapidation benefit in the prior year
  • EPRA earnings per share down 7.9% to 12.0p (2018: 13.0p)
  • Statutory loss before tax £12.5m (2018: profit of £18.4m) and statutory loss per share 23.5p (2018: profit of 34.6p), primarily reflect the unrealised £18.3m valuation movement on our investment properties


  • Headroom of over £26m at period end, following Merrion House financing
  • Loan to value of 49.3% as at 30 June 2019 (2018: 47.5%), driven by the unrealised valuation movement
  • Net cash borrowing at its lowest level for over three years


Operational performance

  • Robust underlying operational performance with like for like passing rent up 2.6% (2018: 4.1%) driven by the redevelopment at Milngavie
  • Overall occupancy level increased to 96% (2018: 95%)
  • Retail and Leisure exposure reduced to below 50% from 70% in 2016
  • Investment portfolio (including Joint Ventures) initial yield at 6.0%, with reversionary yield at 6.8%


Actively managing our assets

Our long-standing strategy has been to build a portfolio of assets that have opportunity for income and capital growth following active management and redevelopment. In the year this included:

  •  Conversion of the retail unit in Milngavie vacated by Homebase, creating two units let to Aldi and Home Bargains, driving an 8% increase in rent and a net 23% increase in value
  • Purchase of The Cube in Leeds and Ducie House in Manchester, both presenting significant opportunities for growth with redevelopment schemes underway in both buildings
  • Continued strengthening of our portfolio and responding quickly to changes in physical retailing enabled TCS to weather the current market challenges of retail CVAs and administrations:
  •  -> Eight tenants either went into administration or launched a CVA during the year
  •  -> Of those eight units, four have been re-let to new tenants and a further three have seen the incumbent retailer choose to remain at the same rent-
  •  -> One unit now void and in the process of being re-let. This unit represent just 0.4% of the total rent roll.
  • Our CitiPark business continued to grow and contribute a diversified source of earnings with net revenues up 8.2% year on year, and operating profit up 9.7% year on year

Maximising available capital

A conservative capital structure, with a mix of short and long-term secure financing, has always underpinned our approach. During the year:

  • TCS completed the innovative financing of Merrion House with Leeds City Council resulting in a cash advance of £26.4m in July 2018
  • We continue to dispose of ex-growth assets, most notably selling Rochdale Retail Park in January for £13.2m

Investing in our development pipeline

Our development pipeline, with an estimated GDV of over £600m, is a valuable and strategic point of difference for TCS which we continue to progress and improve. Notably in the past year:

  • We have completed construction of our 91-unit PRS scheme Burlington House in Manchester in joint venture with Highgrove Group. The scheme is already 99% let and is ahead of our rental expectations
  • We achieved planning approval for a 17-storey office tower above the Merrion Centre, adding to immediate value, and further improving the value of our development pipeline

Acquiring investment assets to diversify our portfolio

We continue to seek out diversification opportunities through the acquisition of investment assets that offer the opportunity for growth. In the year:

  • Reduced exposure to Retail. The proportion of Retail & Leisure assets by value within the portfolio fell to below 50%, from 55% last year and 70% in 2016
  • More specifically, when excluding Leisure tenants, the pure Retail proportion represents only 36% of the portfolio
  • In October 2018 we acquired The Cube in Leeds for £12m. The asset has provided valuable income in the year. We have re-let 20% of the office space, and are now in the process of redeveloping the remaining space for improved longer-term return

Commenting on the results, Chairman and Chief Executive Edward Ziff, said:

 "We have delivered a robust underlying performance, whilst continuing to re-position the portfolio for the long-term and maintaining our 59-year dividend record, despite a challenging retail sector context and ongoing economic uncertainty.

"Short-term fluctuations in valuations do not shake our confidence in our business model and conservative management approach. The strength of our portfolio and the quality of our development pipeline substantiate the potential for long-term growth. Although we see an ongoing role for the type of retail assets that we own in the areas we know intimately, we continue to increase our exposure to non-retail sectors.

"Given the current sector challenges and the growing gap between our share price and the underlying value of the business, we continue to look at our potential strategic options. We believe it is appropriate to accelerate the disposal of ex-growth retail properties, which despite the potential short-term impact to income, will de-risk the portfolio and free up capital to re-invest. We are in the process of reviewing priorities within our development pipeline where we see latent value, whilst the opportunity for an earnings and NAV enhancing share buy-back given our deeply discounted share price is also under consideration."