Final Results

Town Centre Securities PLC, the Leeds, Manchester, Scotland, and London property investment, development, hotel and car parking company, today announces its audited final results for the year ended 30 June 2024.

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

"We have benefitted from the last three years' disposal and asset management programmes and reduction in borrowings, which positioned us well to contend with the ongoing macro-economic challenges. During the year we were also able to use our strengthened financial position to launch and complete a successful NAV per share accretive tender offer."

"Our property rental business, car park and hotel operations continue to deliver resilient underlying revenues and earnings against challenging macro-economic conditions. These conditions have led to movements in the underlying yields and a further valuation reduction of our property portfolio, in particular with our office investments. In the last four months we have seen inflation falling closer to the Government's target of 2 percent, and the Bank of England have reduced interest rates by 25bps, which may lead to an improvement in liquidity in the property investment markets and result in valuations stabilising. However, with continued low levels of variable interest rate bank debt, I am confident that we are in a strong position in these uncertain times."

"Our attention is now focusing on investing in our development programme over the coming years. However we remain ever mindful that taking advantage of potentially accretive opportunities needs to be balanced against retaining robust finances."

"Overall, the business has now been reset, with a more diverse portfolio of assets, lower levels of gearing and more importantly historically low levels of variable rate borrowings - and is now looking predominantly at bringing forward our development pipeline. We look ahead with confidence."

Financial performance

Net assets - resilient relative performance:

o Like for like portfolio valuation down 4.7% from June 2023:

§ Comparable with the MSCI/IPD All Property Capital Index which fell by 4.5% over the period

§ reduction primarily due to real estate investor and market sentiment around the macro-economic outlook adversely impacting valuation yields

o Statutory net assets of £119.6m or 284p per share (FY23: £141.1m, 291p). EPRA net tangible assets ('NTA')$ measure at £116.7m or 277p per share (FY23 equivalent: £137.7m, 284p)

Statutory results - reduced loss before tax :

o Statutory loss before tax of £8.0m (FY23: loss of £29.5m) and statutory loss per share of 17.9p (FY23: earnings of 60.1p) due to valuation reduction

• EPRA results - improvement in underlying earnings, also benefited from a tax credit of £1.7m in the year:

o EPRA earnings* before tax of £3.8m (FY23: £3.1m)

o EPRA earnings per share before tax* of 8.5p (FY23: 6.2p)

• Loan to Value increased in the period by 500bps to 50.8% following successful tender offer and reduction in portfolio value:

o Total net borrowings of £137.2m (FY23: £129.9m) including £82.4m debenture

Shareholder returns - enhanced by tender offer:

o As previously announced, no proposed final dividend, but significant interim dividends due to REIT requirements paid making the total dividend for the year of 8.5p (FY23: 5.0p)

o NAV enhancing tender offer in the first half of the year (6,292,920 shares bought back in total) following on 4,075,000 bought back in FY23, at a total cost of £9.44m

** LTV Calculation includes finance lease assets and liabilities

Protecting shareholder value whilst safeguarding the business for the future

Progress delivered under the four key strategic initiatives is as follows:

Actively managing our assets

• We now have a well diversified portfolio comprising: 30% invested in retail and leisure; 29% offices; 16% car parks; 13% residential; 8% developments; and 4% hotels
• The portfolio is also very well focused, with 88% located in Leeds and Manchester
• The void rate across our portfolio increased to 8.1% at 30 June 2024 (5.5% at 30 June 2023)
• Strong rent collection for the period of 99.2% (FY23: 99.1%)
• Eleven new commercial lettings and lease renewals at ERV across the portfolio in the period totaling £0.7m of rental income per annum
• Wilko (with one store in the Merrion Centre) and the Merrion nightclub operator entered into CVAs during the period
• Rolling out our own car park management system across our car park portfolio which will ultimately give us both operational and financial efficiencies

Maximising available capital

• The first element of deferred consideration arising from the successful sale of our investment in YourParkingSpace Limited was received in July 2023 (£4.4m) with the contingent consideration received in April 2024 (£2.3m)
• After the year end, in July 2024, the final element of deferred consideration was received (£3.1m)
• Comfortable loan to value headroom over our bank facilities of £20.4m based on 30 June 2024 borrowings and valuations
• Loan to value increased to 50.8% following revaluation decreases and impairments in the period and a slight increase in borrowings (FY23: 45.8%)

Investing in our development pipeline

Our development pipeline, with an estimated GDV of over £400m, is a valuable and strategic point of difference for TCS which we continue to progress and enhance. Notably, in the past six months:

• In December 2023 a planning application was submitted for student accommodation as part of the Merrion Centre's evolution. This application incorporates a 1,110 new bed purpose built student accommodation scheme based on the redevelopment of Wade House and the adjacent 100MC site
• Following the securing of a planning consent at Whitehall Riverside in May 2023 (the formal decision notice was then issued in March 2024) we continue to move forward with both build contractors/professional teams and potential tenants for all phases of the development

Acquiring and improving investment assets to diversify our portfolio

We continue to improve investment assets, with a stable portfolio of diverse properties:

• We increased the number of car parks operated under our CitiPark brand to 20, with three new car park management agreements secured in the year
• Acquired a city centre car park investment property leased to NCP in Wellington Street, Sheffield for £1.5m

Outlook - strong financial position to pursue attractive opportunities

• Focus on bringing forward our developments
• Continue to explore opportunities to acquire assets in Leeds and Manchester; appetite to also make acquisitions in London
• Resilient trading performance has continued into the first half of FY25:

o Significant headroom of £20.4m on existing revolving credit facilities

o Weighted average cost of borrowings at period end 5.3%, 87.5% at fixed rates

• The Company's share price continues to trade at a significant discount to its NAV (50.4% as at 14 October 2024)

Following a year of further consolidation, the business remains in a strong position. We have addressed challenges as they have arisen, and I'd like to express my gratitude to my colleagues for their continued contributions to our business's success.

There were no significant changes to our Property portfolio during the year, with the only acquisition being a car park investment in Sheffield that is operated by NCP. Our CitiPark business continues to perform well, notwithstanding the ongoing curtailment of the commuting week since the pandemic. The addition of two car park management agreements in London and one in Manchester brings the number of car parks operated under the CitiPark brand to 20. The hotel business continues to trade very well having just had a record year.

Having significantly reduced our borrowings and strengthened our balance sheet through our divestment and asset management activity in the past three years, we were able to complete a buyback of shares via a tender offer representing approximately 13% of the issued share capital of the Company. As anticipated, the tender offer resulted in the Company leaving the REIT regime with effect from 30 June 2023.

Now we have successfully reset the business, our focus is to bring forward our development pipeline of over £400m GDV and also seek out new opportunities for value creation.

In December we submitted a planning application for a significant student accommodation scheme at the Merrion Centre. For the first time in the centre's 60-year history, TCS is looking to introduce residential accommodation, adding to the existing retail, leisure and office space. To address burgeoning demand for student accommodation, TCS's planning application is designed to deliver 1,110 student bedrooms.

Following the grant of detailed planning consent at Whitehall Riverside in May 2023, we continue to make progress with professional teams and prospective tenants for all phases of the development. Ground enabling works have started and our readiness to commence construction will be dictated by the letting and investment market.

Financial performance

• Our statutory loss in the year of £8.0m (2023: £29.5m loss) was predominantly incurred as a result of valuation losses in our investment property portfolio, with a like-for-like portfolio valuation down 4.7% from June 2023. This compares to a decrease of 4.5% in the MSCI/IPD All Property Capital Index over the same period, influenced by market sentiment concerning the macro‐economic outlook adversely impacting valuation yields ‐ particularly in the office sector.
• Taking into account other comprehensive income of £0.6m, the cost of buying in shares for cancellation of £9.4m and £4.6m in dividends paid, net asset value per share was 284p, compared with 291p at 30 June 2023.
• Net borrowings, excluding lease liabilities, stood at £108.6m at 30 June 2024 (£101.9m at 30 June 2023), with only 12.5% of this exposed to variable interest rates.
• EPRA earnings per share are 12.3p for the year (2023: 6.2p) - with the recognition and subsequent movement on deferred tax assets and liabilities accounting for 3.8p of the increase.
• 99% of all rent and service charge income invoiced in the year was collected.
• During the year the Company received two further amounts relating to the sale of its investment in YourParkingSpace, with a further final receipt in July 2024. Since the July 2022 sale the Company has received total consideration of over £18m with a further £3m received after the year end, crystalising a profit of £18.5m in the two-year period.

Market context

​

We have not seen meaningful rental growth in the commercial sectors in which we operate for a number of years, and don't anticipate this to change for the foreseeable future. The constraints this places on income from our property portfolio provide further validation of our strategy to have a full solution car parking business.

In the office sector, the work from home trend in the wake of the Covid pandemic seems to have stabilised with workers gravitating back to the office, which although slow is to be encouraged.

Across the country, prime space for retail and leisure is generally well occupied, although non-prime sites continue to struggle. Despite cost-of-living pressures, consumer demand in the food and beverage sector - a key part of our leisure portfolio - has remained buoyant. The retail sector has bottomed out and is where we see the opportunity for value to be found.

TCS does not have any significant on-site development work underway at present, a consequence of the high inflationary environment of the preceding 18-24 months.

Strategy

Over the last four years the Company has successfully repositioned itself. Following a successful disposal programme, net borrowings have been reduced from £184m in June 2020 to £108.6m, with only 12.5% of this current balance at a variable interest rate. In this time period the percentage of the portfolio represented by retail and leisure properties has reduced from 40% to 30%.

As a Board we continue to review the Company's strategy and have adapted this to be more focussed on managing the current investment property portfolio, progressing the development sites and investing in further accretive property, technological and other business opportunities.

People and culture

I'm delighted that Jacob Ziff joined TCS in April as Associate Director of Investment. Previously at investment brokerage Clifton Agency, Jacob brings valuable experience and contacts, particularly within the M25. He will focus on creating a strategy for property investment and will also support in managing the existing TCS property portfolio.

Jeremy Collins retired as a Non-executive Director at the end of the financial year. On behalf of the Board, I would like to thank Jeremy for his contributions since joining the TCS Board in 2018, and wish him well for the future.

Sustainability and communities

TCS has always had a strong commitment to philanthropy, and we are proud to contribute to charitable and community-based programmes. Through the staff charitable foundation we established with a portion of the proceeds from the sale of YPS, colleagues are invited to suggest causes they want to support and TCS will offer matched funding to selected initiatives.

Environmental sustainability is a key focus for TCS, in both our property portfolio and our CitiPark business, and we were delighted to be recognised with the esteemed 'Green World Ambassador Status' in the Green Apple Awards. 39% of our investment property portfolio has an EPC rating of B or higher, and environmental considerations are central in the design of our developments at Whitehall Riverside.

Dividend

Although the Company left the REIT regime with effect from 1 July 2023, it is still required to pay 90% of the tax-exempt profits arising from its property rental business during the year to 30 June 2023, with this payment to be paid before 1 July 2024. The interim dividend of 2.5 pence per ordinary share announced with the half year results was instead paid out as a Property Income Distribution ('PID') rather than an Ordinary Dividend, on 14 June 2024 to shareholders on the register on 24 May 2024. To satisfy the 90% profits requirement, a further special interim dividend of 6 pence per ordinary share was paid out on the same date. This is in place of a final dividend for the year ended 30 June 2024. This brings the total dividend paid for the year ended 30 June 2024 to 8.5p, a 70% increase on the 5p dividend paid for the year ended 30 June 2023. For the year ending 30 June 2025 and onwards the Company expects to return to paying regular dividends every six months, with the next payment expected to be the interim dividend to be announced in March 2025. The Board will continue to review capital allocations to optimise long‐term returns for shareholders, including exploring options beyond paying regular Ordinary Dividends for returning cash to shareholders where appropriate.

Outlook

As we look to the future, we will continue our work to optimise returns from our property portfolio and car parking operations, and will evaluate investments that meet our criteria.

Our strong financial footing, deep expertise and flexible approach mean we are well placed to capitalise on suitable opportunities as they emerge.

Portfolio review

Valuation summary

The like-for-like value of our portfolio decreased by 4.7% (£12.1m) after capital expenditure of £4.0m in the year.

Significant valuation losses have been recognised across our retail, office and car park portfolios.

The valuation of all of our properties (except one) was carried out by CBRE and Jones Lang LaSalle.

Portfolio overview

Note: includes our share of Merrion House within Offices (£27.5m - see Note 8 of these financial statements) and Car Park Goodwill of £2.5m arising on individual car park assets, but specifically excluding goodwill arising from car park operation acquisitions. None of the above is included in the table set out in Note 7 of this announcement.

Note: excludes IFRS 16 adjustments that relate to Right-of-Use car park assets (£21.7m) as the Directors do not believe it is appropriate to include in this analysis assets where there are fewer than 50 years remaining on their lease and the Group does not have full control over these assets. These assets are included in the table set out in Note 7 of this announcement.

The table below reconciles the above table to that set out in Note 7 of these financial statements:

Sales and Purchases

During the financial year ended 30 June 2024 we sold two relatively small properties above their 30 June 2023 book value, for gross proceeds of £0.2m.

Our continued commitment to asset recycling is clear. The table details the £168.4m of disposals since FY17, of which 71% were retail and leisure assets.

Retail and leisure

The Retail and Leisure market has continued to decline this year, albeit at a slower rate than last year. We have seen this with the valuation movements on the Merrion Centre and our out-of-town retail property.

As the online retail market grows, high street units are having to diversify their offering to become more than just shops; some are now incorporating experiences, entertainment and restaurants. A trend that we are looking to replicate throughout our portfolio.

Regional offices

The office market is continuing to face significant macroeconomic pressures. Flexible workspaces are increasingly in demand, reflecting the shift to hybrid working since the pandemic. Co-working spaces, quality buildings and adaptable offices are more popular, as are those in prime locations. Over the coming years we will be investing significant capital in our existing office space as sustainability and flexible space continue to be priorities.

Our 50% stake in Merrion House has also reduced in the year. As a relatively long-dated and less riskier asset, the valuation of this property is correlated more to the UK bond market rather than the underlying physical asset. As the economy improves we expect these revaluation deficits to partially reverse.

Residential

The residential market has continued to grow, in particular in Manchester, however our portfolio of residential assets has only grown by 1.3% in the year. The removal of multiple dwellings relief on stamp duty has effectively increased the purchasers costs assumed by valuers for multiple-unit buildings - this has affected all of our residential properties.

Car parks

During the year, the Company's freehold and long leasehold car park assets fell in value by £1.7m, a drop of 4.1%. Occupancy levels across the portfolio remain consistent however increased operating costs and rental charges negatively impacted the underlying values.

Other valuation movements

The value of the Company's development sites increased by £2.8m in the year, reflecting increases to the alternative use value for our Whitehall Road development site in Leeds.

Divisional review - Property

Overview

Following a year of economic headwinds, we remain in a strong financial position and continue to take a long-term approach to our portfolio.

Against a backdrop of high interest rates and uncertain market sentiment around the economy and the timing and outcomes of the general election, the property sector faced ongoing challenges. Although utility costs are no longer making the headlines, for some retail and leisure tenants in particular, energy prices reducing from peak levels came too late, with some retrenching and reducing their portfolio and others driven out of business altogether. This also led to some tenants looking to rebase rents.

Valuations have been suppressed, driven by changes in prime yields and a dearth of investment transactions resulting in a lack of comparable data. Rent collection has been excellent, excluding the impact of business failure.

Acquisitions and disposals

The reporting period was quiet in terms of portfolio changes, with our only activity in this area an opportunistic acquisition of a car parking asset in Sheffield, which has an incumbent operator.

We do have an appetite to acquire - signalled by Jacob Ziff joining the business to lead on acquisitions and investment strategy - but are being considered and cautious about where we invest.

Performance by segment

The office segment has borne the brunt of suppressed valuations, although take-up of our assets has remained in line with long-term averages as tenants cater for peak occupancy, even if their staff are tending to work fewer days in the office. Our office assets in Manchester have seen high occupancy and swift relets when vacancies have arisen. We divided the vacant space at 123 Albion Street to let to a quality tenant. In the same building, ground floor space that was previously a retail outlet and latterly used as Job Centre office space was re-let to two leisure operators, demonstrating the versatility of the property.

Similarly, at the Merrion Centre, we are seeing greater demand from leisure operators than retailers, so some outlets have changed usage. In addition to the cross-sector impacts of inflation and interest rates, retailers have also had to contend with a material uptick in shoplifting, putting further pressure on operating costs. The demise of the nightclub operator as part of a wider trend seen in this sector provides a further opportunity to explore other options for a sizeable unit in the Merrion Centre.

Although we have a limited portfolio in the residential segment, our assets have seen high occupancy and increasing rents as demand continues to outstrip supply. By way of example, we are refurbishing all 20 apartments on Bath Street, Glasgow. As we have completed floors, we have relet properties at rates that exceed our target rental levels. Similarly, our build-to-rent site in Manchester, comprising 91 premium, canal-side apartments is performing well, with tenants a combination of international students and professionals. There is an opportunity for TCS to be more active in this segment, by bringing forward our development pipeline or through targeted acquisitions.

Our hotel operation has performed strongly with continued high occupancy, resilient income and an increased valuation. We were pleased to let the ground floor restaurant unit that adjoins the hotel. We are also involved in the George Street development, applying our expertise by working with Leeds City Council as the development manager for another hotel. We supported the council in entering an agreement for lease with Premier Inn earlier in the autumn and achieving a resolution to grant planning permission in November.

Development pipeline

Having received resolution to grant planning permission in May 2023, we received the decision notice for Whitehall Riverside in March 2024. We have been working through the detailed design work on the car park and offices with a view to bringing these forward at the same time, and are in discussions with several potential pre-let parties. We have also had interest in another plot on the development, which is a hotel.

Several factors are making the viability of development appraisals for office space more challenging currently, including high interest rates, the sentiment on prime yields, build costs, where rent levels need to be, and concession packages required by tenants. Over the next couple of years, we expect to see a high margin between rents in new build and refurbished properties, and it will be interesting to determine how important the sustainability credentials of new build properties are to tenants and whether they are prepared to pay a premium for these. Plans for our Whitehall Riverside development are designed to offer best-in-class sustainability credentials, despite the additional costs involved. As we refurbish existing properties we seek to make environmental upgrades, although the economics and likely rent levels mean that measures tend to be more incremental, such as adding solar and improving thermal performance.

Our proactive approach to re-imagining space is exemplified in the proposed Wade House and 100MC developments at the Merrion Centre, for which we submitted planning applications in December for the repurposing of these erstwhile office assets to create purpose-built student accommodation. We are progressing detailed design work on Wade House, with a view to being onsite next year, subject to funding.

We reviewed our land holdings in Manchester to assess the need to refresh the strategic regeneration framework. As a result of the review and other priorities, we decided to pause the refresh, although we are looking to bring forward a residential application on Eider House.

Outlook

Our focus for the next year and beyond is to bring forward our developments, which will also reduce our void levels. These are currently relatively high, partly on account of the need for vacant possession to facilitate redevelopment, as is the case for Wade House.

We will continue to explore opportunities to acquire assets in Leeds and Manchester, and there is appetite to make acquisitions in London, where TCS currently only has two sites. The Group is in a strong financial position to pursue attractive opportunities as they arise, and we look ahead with confidence.

Divisional review - CitiPark

Overview

Our CitiPark business generated revenues of £13.4m during the year (2023: £13.1m). We have increased our portfolio without the need for significant capital investment, continued our focus on innovation, and our enforcement business has performed well.

Performance

Overall revenue generation has remained positive, although there are location-specific variances. While performance in Manchester has been beyond pre-pandemic levels, for example, some locations are seeing a more difficult recovery trajectory. In addition to well documented, sector-wide shifts as a Tuesday to Thursday commuting week has become standard for many people, our branches in Watford have been impacted by the increases in rents, rates and the closure of local businesses.

We have continued to seek capital-light portfolio growth, alternative sources of income and other ways to strengthen the CitiPark brand and business, both organically and inorganically. Our parking management agreement platform has grown well, with three new branches in the last 12 months adding 1,500 spaces to our portfolio: New Jackson in Manchester, and two in central London, at Portman Square and the Barbican.

We are also exploring ways to capitalise our underutilised space through alternative uses for some of our larger locations. For example, we are in discussion with a leisure operator about using the roof space at the Merrion Centre, which would generate welcome additional rental income.

Technology and innovation

Our CitiCharge EV charging business remains a core element of our growth strategy. Our proprietary EV platform has been a source of revenue as well as enhanced customer experience in terms of charging rates and reliability. As we have grown organically through investment and upgrade programmes, some assets have seen a significant uplift in utilisation, for example at the Merrion Centre and Leeds Dock. Data and insights from our CitiCharge platform on utilisation and charging rates also allow us to make more informed decisions on the further roll-out of the technology.

Our rebranded CitiPark app performed so strongly and received such positive feedback since its launch during the year that we decided to use it as the basis for creating our own parking management system. In addition to being more cost-effective than the previous licensed model, it allows us greater flexibility and control. We are delighted with the functionality of our system and are well underway with rolling this out across our portfolio. Having developed constructive relationships with suppliers of cameras and other hardware, we are now looking to offer our solutions to third parties on a 'white label' basis.

As we have evolved our branches to being barrierless for reasons of customer experience as well as operational efficiencies and environmental benefits, we have also seen stronger synergies with our enforcement business.

Outlook

We are confident in the outlook and have a strong team in place to execute our strategy. We see further opportunities to progress our capital-light model, with sound growth prospects in both existing and new parking management partnerships. We also see scope to grow our enforcement business, both organically and inorganically. There will be challenges, some of which are of our own making - as we look to develop a new flagship multi-storey car park on our Whitehall Road site. EV and battery storage will be a focus for us, particularly with central and local government encouraging more sustainable methods of transport in city centres. Our EV charging infrastructure, green season tickets and tariffs are further encouraging the uptake of electric vehicles.

FINANCIAL REVIEW

"The financial performance of the Company during the year ended 30 June 2024 shows underlying EPRA profits (after adjusting for the effects of taxation and deferred tax) 25% ahead of the previous period, however the statutory profit of the year is again affected by both reductions in investment property values and impairments to the group car parking portfolio, as real estate investor and market sentiment across these segments remain subdued"

The statutory loss for the year was £8.0m, compared to a loss of £29.5m in the previous year.

EPRA Earnings* were a profit of £5.5m in the year, compared to a profit of £3.1m in the prior year. The EPRA profit for the current year included a net taxation credit of £1.7m; excluding this the EPRA profit of the Company would have been £3.8m, representing a 25% improvement in the underlying performance of the Company .

The Board is not recommending the payment of a final dividend for the year, giving a full year dividend of 8.5p, which is 70% higher than the previous year.

During the year the Company received both the first element of deferred consideration and the contingent consideration from the sale of it's investment in YPS, generating further proceeds of £6.7m. In addition the Company increased net borrowings during the year by £6.8m.

The funds generated have been deployed in a number of ways:

• £1.5m acquisition of a car park investment property in Sheffield
• £2.5m of investment in existing properties and our development portfolio
• £9.4m to fund a tender offer in the first five months of the year
• £4.2m as dividends paid to shareholders in the year

Net borrowings has increased from £101.9m to £108.6m in the year. Net borrowings represent total financial borrowings of £138.6m less lease liabilities of £28.6m and net cash of £1.4m.

* Alternative performance measures are detailed, defined and reconciled within Notes 11 and 21 of these financial statements

Income statement

EPRA Earnings* for the year ended 30 June 2024 were £5.7m.

Statutory profit

On a statutory basis the reported loss for the year was £8.0m.

The statutory profit reflects the EPRA Earnings* of £5.5m less £14.2m of non-cash valuation and impairment movements less the profit on disposal recognised of £0.2m on the two small investment properties and investments sold in the year plus £0.9m of deferred taxation on valuation movements in the year.

Gross revenue

Gross revenue was up £1.6m or 5.3% year-on-year, with key drivers being:

• Property revenue during the year had a positive impact of £1.1m on the total Gross Revenue. There were no significant disposals during the year with the Company benefiting from a full year of Burlington House revenue following the acquisition of the remaining 50% in March 2023.
• CitiPark revenues have continued to grow in the year, with gross revenue across the portfolio increasing by 2% from £13.1m to £13.4m.
• Income for the ibis Styles hotel, has also continued to grow with revenue of £3.3m in the year, up £0.2m from £3.1m last year.

Other / JV income

Total Other / JV income was up 12.8% or £0.2m year-on-year, the majority of the difference relates to development manager fees receivable in the current year on a contract completed in the year.

Administrative expenses

Administrative costs were £0.5m or 7.6% higher year-on-year, with increased staff costs and computer expenses the key drivers to this increase.

Finance costs

Finance costs were 4.6% or £0.3m higher year-on-year as a result of the increase in the Company's bank borrowings which were primarily used to fund the Company's buyback of shares in November 2023.

* Alternative performance measures are detailed, defined and reconciled within Note 5 below in this announcement

Balance sheet

The below table shows the year-end balance sheet as reported.

Non-current assets:

Our total non-current assets (including investments in JVs) of £263.7m (2023: £280.2m) have reduced by £16.5m during the year, this movement is made up of the following:

• Disposals, including YPS receipts of £(7.0m)
• Depreciation charge of £(2.1m)
• Capital expenditure of £6.1m
• Revaluation uplift/reversal of impairments totalling £(14.0m)
• Operating profits generated and retained in JV entities and other movements of £0.5m

Borrowings:

During the year our Net Borrowings have increased by £8.0m, from £129.9m as at 30 June 2023 to £137.1m at the year end. This increase was primarily to fund the tender offer completed by the Company in November 2023.

We have extended our NatWest revolving credit facility by one year, it is now due to expire in September 2025, although we have the ability to extend this facility for a further year, subject to bank consent. Our other two revolving credit facilities were refinanced last year with expiry's of June 2026.

Loan-to-value has been increased to 50.8%, up from 45.8% a year ago, due to both the increase in borrowings and decrease in property values during the year. Note the calculation of loan-to-value includes both the finance lease assets and liabilities.

EPRA net asset reporting

1 Estimated purchasers' costs including fees and stamp duty and related taxes

2 Removal of goodwill as per the IFRS Balance Sheet - relates predominantly to goodwill paid to acquire two long term car park leaseholds in London

3 Represents the adjustment to fair value (market price) of the 2031 5.375% debenture and the single asset facility

Future financial considerations

Future P&L pressure

The wider economy and underlying property values are still struggling, with uncertainty around office based working and shopping habits. In terms of our own specific business we have seen recoveries in all segments, although there is still a risk if these recoveries are stalled.

This has resulted in the earnings of the business growing in the year and we increased the level of the dividend paid.

Future balance sheet

As identified in the Risk Report, we have highlighted the continued pressure on retail and office investments to be a significant risk to the business. As part of the going concern and viability statement review process the Company has prepared consolidated forecasts and identified a number of mitigating factors to ensure that the ongoing viability of the business was not threatened.

Going concern and headroom

One of the most critical judgements for the Board is the headroom in the Group's debt facilities. This is calculated as the maximum amount that could be borrowed, taking into account the properties secured to the funders and the facilities in place. The total headroom at 30 June 2024 was £20.4m (20223: £34.0m), which was considered to be sufficient to support our going concern conclusion. The properties secured under the Group's debt facilities would need to fall 26.0% in value before this headroom number was breached.

In assessing both the viability and going concern status of the Company, the Board reviewed detailed projections including various different scenarios. A summary of the approach and the findings is set out in the Risk Report, forming part of the Strategic Report of these financial statements.

Total shareholder return and total property return

Total shareholder return of 14.7% (2023: minus 3.2%) was calculated as the total of dividends paid during the financial year of 8.5p (2023: 5.0p) and the movement in the share price between 30 June 2023 (125.0p) and 30 June 2024 (133.5p), assuming reinvestment of dividends. This compares with the FTSE All Share REIT index at 18.2% (2023: minus 22.1%) for the same period.

The Company's share price continues to trade at a significant discount to its NAV, impacting total shareholder return.

Total shareholder returns % (CAGR)

Total Property Return is calculated as the net operating profit and gains / losses from property sales and valuations as a percentage of the opening investment properties.

Total Property Return for the business for the reported 12 months was 1.7% (2023: minus 6.0%). This compared favourably to the MSCI/IPD market return of 0.1%.

Consolidated income statement

for the year ended 30 June 2024

Items that will not be subsequently reclassified to profit or loss

All profit and total comprehensive income for the year is attributable to owners of the Parent. The Notes following are an integral part of these Consolidated Financial Statements.

Consolidated balance sheet

as at 30 June 2024

Cash and cash equivalents at the year end are comprised of the following:

The Consolidated Cash Flow Statement should be read in conjunction with Note 12.

Audited preliminary results announcements

Segmental information

The chief operating decision-maker has been identified as the Board. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

All results are derived from activities conducted in the United Kingdom.

The net revenue at the development sites for the year ended 30 June 2024, arising from car park operations, was £1,854,000. After allowing for an allocation of administrative expenses, the operating profit at these sites was £1,221,000.

Revenue received within the car park and hotel segments as well as other income in the Property segment is the only revenue recognised on a contract basis under IFRS 15. All other revenue within the Property segment comes from rental lease agreements.

Administrative expenses

Taxation for the year i s lower (2023: lower) than the standard rate of corporation tax in the United Kingdom of 25% ( 2023: 19%). The differences are explained below:

Earnings per share

The calculation of basic earnings per share has been based on the profit for the year, divided by the weighted average number of shares in issue. The weighted average number of shares in issue during the year was 44,862,101 (2023: 49,075,785).

EPRA earnings for the year ended 30 June 2024 includes a tax credit £2,888,000 relating to the initial recognition of a deferred tax asset for historical trading losses.

There is no difference between basic and diluted earnings per share.

There is no difference between basic and diluted EPRA earnings per share.

Dividends

An interim dividend in respect of the year ended 30 June 2024 of 8.5p per share was paid to shareholders on 16 June 2023. This dividend was paid entirely as a Property Income Distribution (PID).

No final dividend is proposed in respect of the year ended 30 June 2024.

• Non-current assets
• Investment properties

At 30 June 2024, investment property valued at £175,810,000 (2023: £181,340,000) was held as security against the Group's borrowings.

During the year the Group acquired an investment property for a cash consideration of £1,544,000 and recognised an additional IFRS16 right-of-use asset of £1,316,000.

During the prior year the Group acquired an investment property that it had previously owned 50% of, through the Group's joint venture investment in Belgravia Living Group Limited ("BLG"). The property acquisition was facilitated by the acquisition by the Group of the remaining 50% interest in BLG.

Right-of-use investment property assets include long leasehold property interests.

Freehold and leasehold properties - car park activities

The historical cost of freehold properties and Right-of-use assets relating to car park activities is £30,153,000 (2023: £30,153,000).

At 30 June 2024, freehold properties and Right-of-use assets relating to car park activities, held as security against the Group's borrowings are held at £35,450,000 (2023: £35,610,000).

Freehold and leasehold properties - hotel operations

Freehold

£000

At 30 June 2024, freehold and leasehold property relating to hotel operations valued at £9,900,000 (2023: £9,500,000) was held as security against the Group's borrowings.

The fair value of the Group's investment and development properties, freehold car parks, hotel operations and assets held for sale have been determined principally by independent, appropriately qualified external valuers CBRE and Jones Lang LaSalle. The remainder of the portfolio has been valued by the Property Director.

247,700

Car parks above include £1.5m of a car park categorised as an investment property.

254,092

Investment properties (freehold and Right-of-use), freehold properties (PPE) and hotel operations.

The effect on the total valuation (excluding development property and car parks) of £163.6m of applying a different weighted average yield and a different weighted average ERV would be as follows:

Valuation in the Consolidated Financial Statements at an initial yield of 5.7% - £192.2m, Valuation at 7.7% - £142.4m.

Valuation in the Consolidated Financial Statements at a reversionary yield of 7.7% - £184.9m, Valuation at 9.7% - £146.6m.

Investment properties (development properties)

The key unobservable inputs in the valuation of one of the Group's development properties of £14.8m is the assumed per acre or per unit land value. The effect on the development property valuation of applying a different assumed per acre or per unit land value would be as follows:

Valuation in the Consolidated Financial Statements if a 5% increase in the per acre or per unit value - £15.5m, 5% decrease in the per acre or per unit value - £14.1m.

Freehold car park activities

The effect on the total valuation of the Group's freehold car park properties of £26.6m in applying a different yield/discount rate (valuation based on 6.6%) and a different assumed rental value/net income (valuation based on £1.9m) would be as follows:

Valuation in the Consolidated Financial Statements based on a 1% decrease in the yield/discount rate - £31.3m, 1% increase in the yield/discount rate - £23.1m

Valuation in the Consolidated Financial Statements based on a 5% increase in the assumed rental value/net income - £27.9m, 5% decrease in the assumed rental value/net income - £25.3m

Right-of-use car park activities

The effect on the total valuation of the Group's Right-of-use car park properties of £30.2m in applying a different discount rate (valuation based on 10.7%) and a different assumed net income (valuation based on £3.2m) would be as follows:

Valuation in the Consolidated Financial Statements based on a discount rate of 9.7% - £32.3m, Valuation at 11.7% - £28.0m

Valuation in the Consolidated Financial Statements assuming net revenue 10% above anticipated - £32.6m, Valuation at 10% below anticipated - £27.9m.

Valuation of investment properties (freehold and Right-of-use), freehold properties (PPE), hotel operations and assets held for sale at fair value

Fixtures, equipment and motor vehicles

Accumulated

The full amount of investments in joint ventures relates to equity investments.

On 14 April 2023, the Group acquired the entire share capital of Belgravia Living Group Limited and therefore no longer accounts for this as a joint venture. As a result of this acquisition, Belgravia Living Group Limited became a wholly owned subsidiary of the Company and the investments made are eliminated on consolidation. The consideration for the acquisition was £1, with the key asset acquired being a £23.4m investment property and an associated bank loan of £14.4m.

The losses of Merrion House LLP for the current and previous year are as stated below:

The Group's interest in other joint ventures are not considered to be material. The book value of the Group's investment in Bay Sentry Limited is £nil (2023: £nil).

The joint ventures have no significant contingent liabilities to which the Group is exposed nor has the Group any significant contingent liabilities in relation to its interest in the joint ventures.

A full list of the Group's joint ventures, which are all registered in England and operate in the United Kingdom, is set out as follows:

Listed investments relate to an equity shareholding in a company listed on the London Stock Exchange. This is stated at market value in the table above and has a historic cost of £875,000 (2023: £875,000).

The maximum risk exposure at the reporting date is the fair value of the other investments.

Non-listed investments

The interest earned on the deferred consideration loan notes is 5% per annum. The current element of deferred consideration was received by the Company in July 2024.

The contingent consideration loan notes were initially recognised at fair value, based on the estimated performance of YPS in the 14 month period ended October 2023. This is an estimate prepared by the Company. The contingent consideration loan notes are then accounted for using the fair value through profit and loss basis. Following completion of the sale of its investment in YPS, the Company did not have access to regular YPS management information, however it does receive ad hoc updates. The valuation of the contingent consideration at 30 June 2023 was based on the performance of YPS for the period ended 30 June 2023 and assumed no further growth in the remaining four months of the earnout period.

At 30 June 2023 these loan note assets were categorised as level 3 in the fair value hierarchy as defined in IFRS 13 as the inputs to the valuation are based on unobservable inputs.

Deferred tax assets and liabilities

The Company left the REIT regime with effect from 1 July 2023, therefore the profits of the Company are now subject to corporation tax. This has resulted in the recognition of a deferred tax asset, primarily relating to trading losses from previous periods that are available to offset taxation on future profits. In assessing the recognition of a deferred tax asset with respect to losses, management has reviewed the type of losses, the period in which they arose and then the future profitability of the group or, where relevant, individual corporate entities.

The Group also has various non-trading losses and surplus management expenses from previous periods, however the associated deferred tax assets have not been recognised as there is insufficient evidence to show that their future utilization is probable.. The total value of losses not included within the deferred tax asset is £1,328,000.

In addition the Group has uncrystallized capital losses of £24,282,000 on investment property and car park valuation losses that have not been recognised.

The total net deferred tax balance as at 30 June 2024 includes the credit to the income statement of £2,588,000 less deferred tax liabilities arising in the period on revaluation gains recognised in the consolidated statement of comprehensive income of £236,000 (30 June 2023: £nil).

Called up share capital

Authorised

The authorised share capital of the company is 164,879,000 (2023: 164,879,000) Ordinary Shares of 25p each. The nominal value of authorised share capital is £41,219,750 (2023: £41,219,750).

Issued and fully paid up

At the year end the Company had authority to buy back for cancellation a further 6,324,402 Ordinary Shares.

Cash flows from operating activities

Net asset value per share

The Basic and diluted net asset values are the same, as set out in the table below.