Half year results for the six months ended 31 December 2020

February2021

Town Centre Securities PLC announces its results for the six months ended 31 December 2020.

Significant progress made in resetting & reinvigorating the business for the future

Financial performance

Net assets:
o Resilient like for like portfolio valuation down only 0.8% from June 2020
o Statutory net assets of £152.0m or 286p per share down 2.3% (FY20: £155.5m, 292p). EPRA net tangible assets (‘NTA’) measure introduced at £147.8m or 278p per share (FY20 equivalent: 285p)
Profits and earnings per share:
o EPRA Earnings before tax of £0.2m (HY20: £4.1m), driven by an estimated £3.2m COVID-19 impact
o EPRA earnings per share of 0.4p (HY20: 7.7p)
o Statutory loss before tax of £3.5m (HY20: loss of £0.2m) and statutory loss per share of 6.6p (HY20: loss of 0.4p), including the unrealised £2.5m portfolio valuation and impairment movement (FY20: £26.4m)
Capital and financing:
o £41.2m of targeted retail asset sales during the first half has reduced absolute borrowing levels 20% to £147.6m at December 2020 (pre IFRS16 measure) (30 June 2020 £183.6m)
o Loan to value of 48.6% as at 31 December 2020 (FY20: 53.2%)
o Headroom of £12.8m at half-year end based on December 2020 borrowings and valuations (FY20: £14.8m)
Dividends:
o Interim dividend of 1.75p (HY20: 3.25p)
o Uncovered dividend reflects the anticipated quick recovery of our car parks and hotel once they are able to operate normally and also the strengthening of the balance sheet following the asset sales completed in the half-year

COVID-19 impact and response

Impact
• Estimated £3.2m impact of COVID-19 in the first half of the year driven by:
o £2.3m CitiPark impact due to lost car parking income and fixed costs
o £0.5m impact in the property business, primarily from bad debt
o £0.4m ibis Styles hotel impact driven by reduced bookings
• Rent receipts remain robust; as at 22 February of the £5.5m rent, service charge and VAT billed for the latest English and Scottish quarter £4.3m or 78% has been paid, with a further £0.5m or 9% agreed to be deferred, totalling 87%. This is consistent with the 89% for the previous billings since March 2020

Response and mitigating actions including during current lockdown
• Significant actions taken to mitigate the impact included:
o Closure of two car parks during the current lockdown to minimise costs
o Furloughing CitiPark operational branch staff, and some head office colleagues
o TCS board took a 20% salary and fees reduction for six months from April 2020 to September 2020
• Our long history of engagement with tenants has ensured equitable solutions have been reached in most instances, and we are continuing to support tenants during the latest lockdown

Good progress made on resetting and reinvigorating the business for the future

We have made meaningful progress in resetting and reinvigorating the business in the past six months, in particular in the disposal and debt reduction programme. Progress delivered under the four key strategic initiatives is as follows:

Actively managing our assets
• The proportion of retail and leisure assets in the portfolio has reduced to 39% from 47% in June 2020, and down from 70% in 2016. Pure retail now represents only 26% of the total portfolio and of that, 60% is in the resilient Merrion Estate
• Capital value of Ducie House has increased reflecting the completion of the £2.1m refurbishment scheme
• No exposure to any of the large department store failures, and whilst we saw five tenants either entering administration or CVAs in the first half, the exposure is modest representing circa 2% of income and we remain confident in maintaining occupation in the majority of the space

Maximising available capital
• £41.2m of retail asset sales were completed in the six months, marginally below June 2020 valuations
• Net debt has consequently reduced 20% to £147.6m (excluding IFRS 16 adjustments), with LTV reducing to 48.6% (FY20: 53.2%)
• Net profit after interest will be reduced by £1.3m annually as a result of the loss of related rent
• Following the disposals, we have bought back for cancellation £6.5m of our £106m 2031 5.375% debenture, helping reduce debt and average interest costs

Acquiring and improving investment assets to diversify our portfolio
• Completed the £4m redevelopment of the office space at 123 Albion Street, Leeds and secured a new 12-year lease with StepChange Debt Charity for the remaining 46,000 sq ft of office space
• We now have the opportunity to redevelop and modernise our Wade House office (having been vacated by StepChange Debt Charity), the third of our four Merrion Estate offices, a potentially valuable opportunity given the level of new development in the surrounding area

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
• In January 2021, we completed works to implement and secure the planning consent for our next PRS development, Eider House, in Manchester’s Piccadilly Basin

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

“The past six months have been critical in the resetting and reinvigorating of the business, and I am particularly pleased with both the progress of our disposal programme, and the resilience of the continuing portfolio. The reduction in absolute borrowing levels gives both additional security and, as the disposal programme continues, the ability to reinvest in the long-term growth opportunities in our development pipeline.

“COVID-19 continues to have a material impact on profitability. Although significant government support has been given to retail and leisure businesses, as a car park operator, we have continued to pay car park rent to our local government landlords, as well as business rates which to us seems extraordinarily one sided. I am confident in the ability of our CitiPark business to bounce back strongly once the current lockdown comes to an end.

“Overall, we remain committed to delivering on our accelerated four pillar strategy of: actively managing our assets, maximising available capital, investing in our development pipeline and acquiring and improving investment assets to diversify our portfolio.”

To view and download Announcements and Notice of Results please visit:
tcs-plc.co.uk/announcements

123 Albion Street

Ducie House

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Town Centre Securities PLC (TOWN.L) 138.50 -0.50 Last updated: 12/04/2021 at 13:25