TIDMWSP
RNS Number : 6046C
Wynnstay Properties PLC
14 June 2023
The information communicated within this announcement is deemed
to constitute inside information for the purposes of the Market
Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018. Upon the
publication of this announcement, this information is considered to
be in the public domain.
WYNNSTAY PROPERTIES PLC
("Wynnstay" or the "Company")
AUDITED RESULTS FOR YEARED 25 MARCH 2023 AND NOTICE OF AGM
14 June 2023
Wynnstay Properties PLC is pleased to announce the publication
of its audited results for the year ended 25 March 2023.
The Annual Report and Financial Statements is available on the
Company's website www.wynnstayproperties.co.uk and will shortly be
posted to those shareholders who have elected to receive documents
by post, when a further announcement will be made.
This announcement contains three sections from the Annual Report
and Financial Statements: Introduction to Wynnstay, Chairman's
Statement and Managing Director's Review. It also contains the four
Financial Statements contained in the Annual Report and Financial
Statements together with the notes to those statements.
As stated in the note at the end of this announcement, the
financial information set out in the announcement does not
constitute statutory accounts as defined in section 435 of the
Companies Act 2006.
The Company's Annual General Meeting ("AGM") will be held on
Tuesday 18 July 2023. Details of the arrangements for the meeting
are set out in the notice of meeting in the Annual Report and
Financial Statements.
This announcement was approved by the Board on 13 June 2023
For further information please contact:
Wynnstay Properties plc
Philip Collins (Chairman)
020 7554 8766
WH Ireland Limited (Nominated Adviser and Broker):
Chris Hardie, Hugh Morgan, Sarah Mather
020 7220 1666
LEI number is 2138006MASI24JYW5076.
For more information on Wynnstay visit:
www.wynnstayproperties.co.uk
WYNNSTAY PROPERTIES PLC
INTRODUCTION TO WYNNSTAY
A distinctive approach to commercial property investment
primarily for private investors
Wynnstay is an AIM listed property investment and development
business. Its principal shareholders are private investors wishing
to invest in a portfolio of good quality secondary commercial
properties for medium to long-term capital and income growth. The
portfolio is currently focused on industrial, including trade
counter, units.
Strategy
Wynnstay aims to achieve capital appreciation and generate
rising dividend income for shareholders from a diversified and
resilient commercial property portfolio in Central and Southern
England, with diversity and resilience being reflected in the
location, number and nature of the properties, and the mix of lease
terms, tenants and uses.
For location, the focus is on areas where there is strong
occupational demand. While many tenants have been in occupation for
a considerable time, where a tenant leaves, voids can be managed
and re-lettings can be achieved.
The majority of properties are multi-let, resulting in a number
of individual tenancies in most locations, reducing exposure to any
single tenant and risk of loss of rental income in the case of
defaults and voids.
Leases are mainly for terms of five years or more with
relatively few short-term agreements (two years or less), and
usually with upward only rent reviews based on market rates.
Flexibility in addressing tenant needs and requirements generally
mean that the terms agreed result in a mutually beneficial outcome
for both parties.
Tenants comprise a broad spread of occupiers, also reducing risk
exposure: national and local government, international businesses,
national trading chains and regional and local businesses. Uses
include manufacturing and services; storage and distribution; and
trade counter and out-of-town retail.
Active direct management and close engagement and constructive
business relationships with tenants, together with refurbishment
and selective development over time, underpin capital value and
increase income.
Managed for shareholders
The portfolio is directly, rather than externally, managed.
Finance and administrative operations are largely outsourced to
external providers to meet specific needs. All report to the Board,
the majority of whom are non-executive directors.
Management remuneration comprises salary and, where appropriate,
a cash bonus. Wynnstay does not offer incentive schemes, such as
share plans, share options or share bonuses.
As a result, both management and the Board are focused on
Wynnstay's performance for the benefit of shareholders, operational
costs are closely controlled and dilution of shareholders'
investment and potential conflicts of interest are minimised.
Incremental growth
The portfolio has been built incrementally, with opportunities
being taken to dispose of assets as and when the time is
appropriate and to reinvest in assets that offer better long-term
returns.
This is achieved gradually over time, without the need for
deal-driven activity in pursuit of corporate or portfolio
expansion.
Funding
Wynnstay adopts a prudent, pragmatic approach to funding.
Investments are funded in part by retained profits and recycling
capital receipts from disposals and in part from borrowings, the
majority at a fixed rate and held at a modest loan-to-value level,
from an experienced and supportive property lender. This provides
security at times of uncertainty in debt markets.
Valuation
Properties are valued on a cautious basis, based upon
professional advice from expert external valuers, recognising that
commercial property is a cyclical market that can exhibit
significant upward and downward movements over time and that
steadiness and progression are most likely to be in shareholders'
interests.
Wynnstay on AIM
Wynnstay's shares were quoted on its AIM introduction in 1995 at
a mid-market price of 150p. On the day prior to the approval of
this report, the mid-market price was 675p, an increase of 350%.
The dividend paid in 1995 was 4p per share. The dividend paid and
proposed for the current year will be 24p per share, an increase of
500%.
Performance
Wynnstay's distinctive approach has delivered on its strategy
over both the medium and long term. Shareholders have benefitted
from substantial increases in net asset value per share and
dividends as the portfolio and its management have delivered strong
results.
Corporate Performance over 5 years
Year Ended 25 March 2023 2022 2021 2020 2019
pence pence pence pence pence
------ ------- ------- ------ ------ ------
Net Asset Value per share 1,110p 1,090p 911p 792p 807p
------ ------- ------- ------ ------ ------
Five Year Net Asset Value
Growth 37.5%
------ ------- ------- ------ ------ ------
Dividends per share, paid
and proposed 24.0p 22.5p 21.0p 15.0p 19.0p
------ ------- ------- ------ ------ ------
Five Year Dividend Growth 26.3%
------ ------- ------- ------ ------ ------
Portfolio Performance
Year ended 25 March 2023 2022 2021 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------ -------- -------- -------- -------- --------
Property Income 2,312* 2,308 2,438 2,271 2,216
------ -------- -------- -------- -------- --------
Rental Income 2,304 2,252 2,140 2,271 2,216
------ -------- -------- -------- -------- --------
Underlying 5 Year Rental
Income Growth 25.5% 2,179 1,730
------ -------- -------- -------- -------- --------
Portfolio Value 39,320 38,975 34,005 34,260 35,095
------ -------- -------- -------- -------- --------
Underlying 5 Year Portfolio
Value Growth 31.2% 37,220 28,365
------ -------- -------- -------- -------- --------
% % % % %
------ -------- -------- -------- -------- --------
Loan-to-value ratio 25.3% 25.5% 29.4% 36.5% 35.6%
------ -------- -------- -------- -------- --------
Gearing ratio 22.3% 21.8% 32.4% 52.2% 52.7%
------ -------- -------- -------- -------- --------
Occupancy at year-end 100% 100% 99% 94% 100%
------ -------- -------- -------- -------- --------
Rent Collection for year 100% 100% 99% 100% 100%
------ -------- -------- -------- -------- --------
Operating Costs/Income 31.1% 32.0% 34.8% 30.3% 28.2%
------ -------- -------- -------- -------- --------
Operating Costs/Portfolio
Value 1.8% 1.9% 2.5% 2.0% 1.8%
------ -------- -------- -------- -------- --------
years years years years years
------ -------- -------- -------- -------- --------
Weighted average unexpired
lease term:
* to lease break 3.1 3.0 2.8 3.6 2.8
4.4 4.4 4.5 4.8 4.2
* to lease expiry
------ -------- -------- -------- -------- --------
* Includes GBP8,000 of Other Property Income. See note 2 of the Financial Statements.
Underlying Rental Income and Portfolio Value are for properties
that have been held in the portfolio throughout the five year
period. As a result, a property purchased in September 2019 with
Rental Income of GBP111,000 and valuation of GBP1,840,000 and
properties sold in the period with an aggregate Rental Income of
GBP351,000 and an aggregate valuation of GBP5,920,000 have been
excluded.
Excludes rent concessions of GBP29,000 granted to tenants as a
result of the Covid-19 pandemic.
After rounding for GBP8,000 bad debt (0.3%).
Excludes GBP81,000 of non-recurring costs incurred in 2023
relating to new Board appointments.
Share Price Performance
Although Wynnstay is quoted on AIM, and therefore is not a
constituent of the FTSE 350 Real Estate Investment Trusts Index,
the index contains a good cross-section of quoted property
companies of various forms, all much larger than Wynnstay.
Wynnstay's share price relative to the FTSE 350 Real Estate
Investment Trusts Index is shown in the chart below. Wynnstay's
share price has substantially outperformed the index over the
ten-year period.
WYNNSTAY PROPERTIES PLC
CHAIRMAN'S STATEMENT
Against the background of considerable economic and political
uncertainty, which has affected the financial and property markets
as well as the personal finances of all of us, I am pleased to
report on another successful year for Wynnstay and its
shareholders.
Last year's report introduced a new section, entitled
Introduction to Wynnstay. This described Wynnstay's distinctive
approach to commercial property investment primarily for private
shareholders and provided information both on the Company's
performance and its share price performance over time. The section
has been retained and updated in this report and continues to
highlight Wynnstay's continued strength over time across a range of
measures. I encourage all shareholders to read it.
The past year has also been significant for Wynnstay as we have
planned and been preparing for succession on the Board, including
the appointment of two new Non-executive Directors and the
appointment of a new Managing Director to succeed Paul Williams. I
will report further on these appointments later in this
statement.
Returning to the past year, Wynnstay's financial performance is
summarised in the following overview table.
Overview of financial performance
Change 2023 2022
-- Rental Income
Annual* 2.3% GBP2,304,000 GBP2,252,000
Underlying* 10.4% GBP2,304,000 GBP2,087,000
--------- --------------- ---------------
(4.6)% GBP1,497,000 GBP1,569,000
* Net Property Income **
--------- --------------- ---------------
(75.7)% GBP1,842,000 GBP7,581,000
* Operating Income
--------- --------------- ---------------
-- Income before Taxation (80.1)% GBP1,430,000 GBP7,202,000
--------- --------------- ---------------
-- Earnings per share (weighted
average) (78.9)% 42.2p 199.8p
--------- --------------- ---------------
* Dividends per share, paid and proposed 6.7% 24.0p 22.5p
--------- --------------- ---------------
* Net asset value per share 2.0% 1,110p 1,090p
--------- --------------- ---------------
* Loan to value ratio 25.3% 25.5%
--------- --------------- ---------------
* Gearing ratio 22.3% 21.8%
--------- --------------- ---------------
* Annual Rental Income is shown in note 2 of the Financial
Statements and Underlying Rental Income is the like-for-like income
from properties held in the portfolio throughout both years and
thus excludes rental income in 2022 of GBP165,000 from the Surbiton
property sold in February 2022.
** Excludes GBP81,000 of non-recurring costs incurred in 2023
relating to new Board appointments.
An innovation in this Annual Report is that our Managing
Director, Paul Williams, has prepared a separate review of the
management activity within the portfolio during the year, including
some market context for this activity, the revaluation and the
financial results. His review, which follows this statement, also
gives a retrospective review of the evolution of the portfolio over
his time at Wynnstay. He also comments on the important focus given
over the past two years to improving the energy efficiency of our
properties.
Portfolio and Valuation
There were no changes in the portfolio in the year. We continued
actively to identify and pursue suitable additions to the
portfolio. Opportunities at acceptable prices proved difficult for
most of the year and we considered that it was prudent to retain
cash until conditions for acquisitions improved. Late in the year
negotiations commenced for the GBP2.5m acquisition of Riverdale
Industrial Estate, Tonbridge and the transaction was eventually
completed after the year-end. Further details are contained in the
Managing Director's Review.
Whilst annual rental income increased by 2.3% to GBP2,304,000
compared to the prior year (2022: GBP2,252,000), the underlying
rental income on a like-for-like basis, excluding the Surbiton
property sold late in the prior year, increased by 10.4% to
GBP2,304,000 (2022: GBP2,087,000). This significant increase in
income reflects the benefits of the active management of the
portfolio described in the Managing Director's Review.
Our Independent Valuers, BNP Paribas Real Estate, undertook the
annual revaluation as at 25 March 2023 valuing the Company's
portfolio at GBP39,320,000. This represents a 0.9% increase of
GBP345,000 on the valuation as at 25 March 2022 and again reflects
the benefits of the active management of the portfolio.
Although the increase in the valuation this year (0.9%) is
modest compared to last year (2022: 23.7%), it should be recalled
that last year's impressive increase reflected conditions in late
2021 and early 2022 and it was self evident that the market was
likely to turn - as was indeed the case in the third and fourth
quarters of 2022. This reversal resulted in significant valuation
reductions in the commercial property sector, including for other
quoted property companies with industrial portfolios. The
reductions followed changes in the market after March 2022 as
successive significant rate increases, rising inflation and
economic uncertainty impacted yields. So it is worth reflecting on
some reasons why the Wynnstay portfolio has performed well compared
to some others.
Wynnstay's portfolio stands apart from other quoted property
companies with industrial portfolios in that our assets are located
in areas where there is robust occupational demand and limited
supply, where modest rents generally provide opportunity for
further rental growth over time as rent reviews arise and new
lettings are achieved. The relatively small lot sizes of our assets
also appeal, when marketed for sale, to a wide range of private
investors.
The nature of the property valuation process means that there
will always be a range within which the valuers work to reach a
final valuation figure. Wynnstay has always valued its portfolio on
a cautious basis based on professional advice from expert external
valuers, recognising that commercial property is a cyclical market
that can exhibit significant upward and downward movements over
time and that steadiness and progression are most likely to be in
shareholders' interests.
While this year the yields used by our valuers in determining
the investment value of the assets generally moved out by between
0.25% and 0.5%, and in one case by 1%, the valuation benefitted
overall from the management activity described in the Managing
Director's Review which delivered increases in rental income and
these increases, together with other market data, underpinned the
estimated rental values used in the valuation.
The annual valuation is undertaken under accounting standards
for use in our financial statements in accordance with RICS Global
Standards and values each property as a separate asset on the basis
of a sale of that property in the open market. Therefore, the
valuation does not take account of any additional value that might
be realised if the portfolio were to be offered on the open market
or any other special factors that may be relevant in the case of
individual potential purchasers, such as sales to other property
investors, existing tenants or adjoining owners.
Income (Profit) and Costs
Income (Profit) for the year is shown in the Statement of
Comprehensive Income.
Net Property Income, before the fair value adjustment of
investment properties, property sales and taxation, for the year
was GBP1,497,000 (2022: GBP1,569,000).
Operating Income after the fair value adjustment and property
sales before taxation fell to GBP1,842,000 (2022: GBP7,581,000)
principally as a result of the fact that no assets were sold in the
year to generate profits on disposal and the valuation surplus for
the year of GBP345,000 was much lower that the exceptional increase
in the prior year (2022: GBP5,887,000).
The combined result is Income before Taxation for the year of
GBP1,430,000 (2022: GBP7,202,000).
We continue our policy of exercising tight control over
administrative costs. Non-recurring costs of GBP81,000 were
incurred on succession matters, described further below. Property
costs were lower than in the prior year at GBP96,000 (2022:
GBP125,000) as no significant void or refurbishment costs were
incurred.
Finance, Borrowings and Gearing
Wynnstay remains in a strong financial position.
At the year-end, we held cash of GBP3.3 million (2022: GBP3.5
million), our core borrowing was unchanged at GBP10.0 million
(2022: GBP10.0 million) and our interest rate is fixed at 3.61%
until December 2026. Net gearing was 22.3% (2022: 21.8%). In
addition to our available cash balance and positive cash flow from
our property activities, our GBP5m revolving credit facility
remained undrawn.
As already mentioned above, since the year-end we have invested
GBP2.5m of our year-end cash resources on the acquisition in
Tonbridge described in the Managing Director's Review.
Dividend
Over recent years we have sought to pursue a progressive
dividend policy that aims to provide shareholders with a rising
income commensurate with Wynnstay's underlying growth and
finances.
In the light of the satisfactory results for the year, the Board
recommends a final dividend of 15.0p per share (2022: 14.0p). An
interim dividend of 9.0p per share (2022: 8.5p) was paid in
December 2022. Hence, the total dividend for this year of 24.0p per
share (2022: 22.5p) represents an increase of 6.7% on the prior
year.
Over the past five years, dividends have increased by 26.3% from
19.0p to 24.0p.
Subject to shareholder approval, the final dividend will be paid
on 26 July 2023 to shareholders on the register at the close of
business on 30 June 2023.
Board Succession
In the course of reviewing the composition of the Board and
succession planning, Charles Delevingne expressed his wish to
retire from the Board. Accordingly, we appointed a firm
specialising in non-executive appointments to identify suitable
candidates. Our external recruitment process attracted keen
interest from a good range of qualified candidates and, in March
2023, we announced the appointment of two new Non-executive
Directors, Hugh Ford and Ross Owen.
Hugh is a solicitor who has practiced in a major city firm and
in industry, latterly in a major listed property company. Ross is a
chartered surveyor with extensive commercial property investment
management experience both as a partner in private practice and as
a consultant and adviser. Further information on their careers is
provided in the biographies at the end of this report. Their
complementary backgrounds, experience and skills in business and
commercial property will bring fresh insight and perspective to our
Board deliberations on the evolution of Wynnstay's portfolio and
the Company's future direction.
I am sure that I speak on behalf of all shareholders in thanking
Charles Delevingne for his contribution to Wynnstay's success over
the past twenty years during which his wisdom and guidance have
been invaluable in implementing the major changes we have made to
the portfolio which have underpinned delivery of our successful
results for shareholders.
Management Succession
Paul Williams was appointed as Managing Director in 2006 and,
having reached normal retirement age late last year, he indicated
his wish to stand down when a suitable successor had been
identified. Accordingly, we appointed a firm specialising in senior
recruitment in the commercial property sector to carry out a search
and announced a few weeks ago the appointment of Christopher Betts
as Paul's successor. He will join Wynnstay next month as Managing
Director designate and will join the Board, following a short
handover period, later this summer.
During Paul's tenure as Managing Director the Company's
portfolio has been transformed, as he reflects in his review below.
When he was appointed, the portfolio comprised, in the main, small
single-tenanted assets with a mix of industrial, office and retail
uses. Under his leadership, Wynnstay has concentrated its
investments into larger, multi-let, assets predominantly in the
industrial, including trade-counter, sector. He has focused
acquisitions on higher quality assets let to tenants with better
covenants as well as identifying sites suitable for development
adjacent to existing assets and planning small-scale developments
that enhance the value of those assets.
In managing the portfolio to bring about this transformation,
Paul has displayed the benefit of his wide experience in commercial
property and his personal skills in dealing with people and the
issues and challenges that arise, some in the ordinary course and
others in unusual circumstances. He has built strong relationships
with many of our tenants that has been invaluable in understanding
their needs and maintaining them as longstanding occupiers and
ensuring that they respect their lease obligations to us.
These strong relationships combined with Paul's patience and
tenacity have resulted in few bad debts and few voids in the
portfolio over his seventeen years at Wynnstay. Where tenants have
faced difficulties, he has been sympathetic in dealing with them
unless, of course, he was dealing with those who might wish to
avoid their obligations through their own business failings.
Wynnstay's scale and structure in which the Managing Director is
the only full-time employee mean that Paul has had to turn his hand
to many different tasks and challenges, including several office
moves and technological changes as the Company adapted to new ways
of operating, including the sudden change to virtual working as a
result of Covid-19.
On behalf of shareholders, I thank Paul for his significant
contribution to the Company's evolution over this period and wish
him a long and happy retirement.
Our Managing Director designate, Christopher Betts, has been a
Chartered Surveyor for over 30 years. After graduating from Oxford
Brookes University with a BSc in Estate Management, he joined
Cluttons as a graduate trainee where he spent his first ten years
in professional practice.
Subsequently, he has worked for various commercial property
businesses including British Land, Frogmore and Romulus. Latterly
he has been advising on and implementing a strategy and management
programme at Peabody Trust for their London and South-East
corporate office portfolio following significant recent mergers
with other social housing providers.
Shareholder Matters
In my statement last year, I reported on the Board's review of
the liquidity and marketability of Wynnstay shares and on the
actions being taken as a result.
You will recall that Wynnstay has a small, and rather unusual,
share register on which there are under 250 accounts, a significant
number of which are connected through family relationships, with
private investors rather than funds or institutions as
shareholders. In the main, they are long-term investors with some
holdings having passed from generation to generation since the
company was founded in 1886. These long-term investors provide
stability and continuity within the shareholder base. As a result
of this base the volume and proportion of Wynnstay shares traded in
the market is less than for many quoted companies with larger share
registers and more dispersed holdings. Fewer Wynnstay shares tend
to be available to trade and then only usually in modest quantities
and with a sizeable "spread" between the bid and offer price.
Shares are typically traded at a significant discount to the net
asset value per share. However, both these features are also seen
in other, much larger, quoted property companies.
Among the actions we decided to take was the provision of
further succinct information on Wynnstay, its business and
performance and to demonstrate Wynnstay has performed well for its
investors, both against its objectives and relative to other quoted
property companies, in the medium to long-term. The information
provided last year has been updated and is contained in the
Introduction to Wynnstay section above. The Company specific
information demonstrates, in the Board's view, the benefits of
Wynnstay's distinctive approach and the share price comparison
shows that Wynnstay's share price has continued substantially to
outperform the comparative real estate sector.
Share prices in the sector were buoyant during the first half of
the last calendar year, but then declined substantially as concerns
about the economy, inflation and interest rates affected both
valuations and market sentiment towards the sector. While
Wynnstay's share price has not been immune from this decline, the
impact on Wynnstay has been significantly less than on the sector
as a whole. The chart in the Introduction to Wynnstay section above
shows that over the past ten years, while Wynnstay's share price
has more than doubled, the performance of the comparative real
estate sector has remained flat.
We also decided to ask shareholders to give Wynnstay authority
to purchase its own shares so that the Company can act as a
purchaser in the market where it is appropriate, and in the
interests of shareholders generally, to do so. Other quoted
property and investment companies, as well as other quoted
companies, use share buybacks on a routine basis to enhance
earnings and net asset value per share. Where shares are bought
back dividends cease to be payable, thus conserving cash in the
business and benefitting continuing shareholders and with the
present intention being to hold any shares bought back in treasury
so that they are available for reissue where there is market demand
for shares or to facilitate individual property acquisitions.
Shareholders granted this authority at the Annual General
Meeting in July 2022. The volume of shares traded since then has
been relatively small and the market has generally been able to
absorb most of the shares offered. However, the authority was used
to acquire 15,000 Ordinary Shares at 710p in September 2022. The
Board keeps the position under review and may exercise the
authority when shares are available in the market and it is in the
interests of shareholders generally to do so.
We also considered that Wynnstay's future development would be
assisted if authority continued to be granted by shareholders, as
has been the case for many years, to issue a limited number of
shares without first offering them to existing shareholders. This
gives Wynnstay flexibility, for instance, to issue shares for small
fundraisings which might support a larger acquisition and allow the
issue of shares as part consideration on individual property
acquisitions to vendors, where the vendors wish to retain in
interest in a broader portfolio of assets in a quoted company.
Bringing in new investors with an interest in commercial property
and in Wynnstay's distinctive approach to the share register would
broaden the shareholder base and support its future
development.
Outlook
At this time last year, I noted that the UK had entered a
further period of uncertainty, following Brexit and the Covid
pandemic, as a result of the effects of the Russian invasion of
Ukraine and of rising inflation imposing real pressure on business
costs and household incomes with consequent potential impacts on
the economy.
This uncertainty continued throughout the year, not least as a
result of the several changes of administration in government.
Inflation reached levels not seen for forty years, with a major
contributor being huge increases in energy prices which have
affected both businesses and consumers although government measures
have provided some relief. However, recent economic news has been
more positive than might have been expected last autumn, when a
long economic recession was forecast and inflation was continuing
to rise.
Despite these conditions, Wynnstay remains in a very healthy
position. We have a focused, stable and well-let portfolio which
has been enhanced through acquisitions and disposals over the
years. It is delivering, and is capable of continuing to deliver,
growth of capital and income for shareholders in the medium and
long-term. The main risks to continued growth are economic and
political, such as significant disruption caused by events beyond
our control or the UK economy suffering a significant downturn
which affects the ability or willingness of businesses to invest or
of consumers to spend.
The commercial property market is cyclical. Asset values can
move up and down over time as a result, as we have seen over the
past several years. Wynnstay has always adopted a cautious and
realistic approach in valuing our assets and to the management and
development of the business. As noted above, our annual revaluation
is undertaken for accounting purposes and values our individual
assets, not the portfolio as a whole.
Within the Wynnstay portfolio, the first few months of this
financial year have been encouraging in terms of rental growth as
the update in the Managing Director's Review describes.
Accordingly, despite the broader uncertainties in the economy and
elsewhere, the Board is optimistic about the current outlook for
Wynnstay's business.
Colleagues and Advisers
Our Managing Director, Paul Williams, and our finance and
company secretarial colleagues have continued to work effectively
to deliver for shareholders. I would like to thank them, as well as
my colleagues on the Board and our professional advisers, for their
support over the year.
This support has been especially evident over the past year in
addressing Board succession, and also in the prior year when we
changed both our auditors and our nominated advisers and corporate
brokers.
Shareholding Enquiries
From time to time we receive enquiries from shareholders with
questions about their shareholdings or about buying or selling
Wynnstay shares or transferring them, typically to relatives.
All enquiries about shareholdings, including changes of address
and bank details and about such transfers of shares, should be
directed to our Registrars, Link Group.
As regards buying or selling shares, this can be carried out by
registering the holding online with our Registrars, Link Group, via
their secure share portal www.signalshares.com, which also enables
shareholdings to be managed quickly and easily. Shares can, of
course, also be bought and sold in the usual way through a
stockbroker or an online platform.
Annual General Meeting
The AGM provides an important and valued opportunity for the
Board to engage with shareholders.
Our AGM this year will be held at 2.30pm on Tuesday 18 July 2023
at the Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS. The
Notice of Meeting is to be found at the end of this Annual
Report.
I urge all shareholders to complete and return their proxy forms
so that their votes on the resolutions being put to the meeting can
be counted.
Shareholders who have registered for Link services online can
also benefit from the ability to cast their proxy votes
electronically, rather than by post. Shareholders not already
registered for Link services online will need their investor code,
which can be found on their share certificate or dividend tax
voucher, in order to register.
To maximise shareholder engagement, shareholders who are unable
to attend the AGM are encouraged to submit in writing those
questions that they might have wished to ask in person at the
meeting. Questions should be emailed to
company.secretary@wynnstayproperties.co.uk at least 48 hours in
advance of the AGM. You will receive a written response and, if
there are common themes raised by a number of shareholders, we aim
to provide a summary for all shareholders, grouping themes and
topics together where appropriate, on the Company's website
following the AGM.
Finally, on behalf of the Board, I would like to thank all
shareholders, whether they have held shares for many years or have
recently acquired shares, for their interest in and support for
Wynnstay.
Philip Collins
Chairman
13 June 2023
WYNNSTAY PROPERTIES PLC
MANAGING DIRECTOR'S REVIEW
In my final full year at Wynnstay I am pleased to have the
opportunity to report on the management activity within the
portfolio during the year and to reflect on the evolution of the
Wynnstay portfolio over the last seventeen years while I have been
Managing Director.
The Portfolio during 2022-23
I will focus primarily on the portfolio which, as at the
year-end, comprised 83 units and a development site in 15
locations.
Due to the number of leases, in most years there is inevitably a
reasonable level of lease negotiation activity. However, the year
just ended has been one of the most active that I can remember with
ten lease renewals, five rent reviews, two leases being varied and
one new letting. In addition, there were extended negotiations on
one acquisition completed following the year-end to which I refer
below.
Of the lease renewals that completed during the year, four were
at Aylesford, two at Lichfield, two at Hailsham and one each at
Ipswich and Uckfield. It is always pleasing to retain tenants on
renewal and as a consequence of the ten renewed leases the rents
receivable under these leases have increased by over 16% which will
be reflected in future rental income. We completed five rent
reviews, three at Petersfield and two at Aylesford and as a result
of these five reviews the rents receivable under these leases have
increased by over 17%.
With the good level of tenant retention through lease renewals,
there are fortunately fewer vacant properties arising and hence
less expenditure on empty property rates and refurbishment costs
and inevitably less new letting activity. However, at Liphook one
tenant did vacate early in the year and the unit was very quickly
relet at a rent which is over 33% higher than previously received.
This new letting creates excellent evidence to support rental
increases elsewhere on the estate where further reviews are due in
the next year or two.
During the year we completed two variations of existing leases.
The first was at Cosham where we removed a tenant break clause thus
securing annual rental income from the tenant for a further five
years. The second was at Lichfield where a tenant break option that
would have been due in 2026 was removed such that the rent will now
continue until at least 2031 and will remain subject to an upward
only rent review in 2026.
Portfolio in the current year
Compared with the active year I have described above, in the
current year there will be a smaller number of lease negotiation
transactions overall. However, there are some significant leases
where renewals or reviews are due and where useful evidence for the
level of market rents has been established in transactions
completed in the prior year described above or in the early months
of current year. Hence, I am optimistic about the outlook for the
current year.
Portfolio Valuation
The lease activity described above has had a significant
positive effect on the March valuation. As already noted in the
Chairman's Statement, our Independent Valuers, BNP Paribas Real
Estate, undertook the annual revaluation as at 25 March 2023
valuing the Company's portfolio at GBP39,320,000. This represents a
0.9% increase of GBP345,000 on the valuation as at 25 March
2022.
The Chairman has pointed out in his statement that while this
percentage increase is modest compared to last year (2022: 23.7%),
it should be considered against the background of significant
valuation reductions in the commercial property sector and he has
commented on some of the reasons for this. I hope that the lease
negotiation activity of the past year and in the current year to
date, together with the further activity over the course of the
rest of the year to which I have referred above will assist in
underpinning the valuation in March 2024.
Post year-end acquisition
As announced on 28 April 2023, we exchanged contracts for the
purchase of Riverdale Industrial Estate, Tonbridge and completion
took place in May 2023. We had agreed terms for this acquisition in
mid-December 2022, but for various reasons the legal due diligence
took several months. The total acquisition cost of approximately
GBP2.5 million was funded entirely from the Company's existing cash
resources.
This freehold property comprises of five industrial units
arranged as two terraces with a central service yard. The estate is
fully let to four tenants with a range of lease expiry dates. The
current rent from the estate is GBP140,350 per annum and is subject
to three outstanding upward only rent reviews effective from 29
September 2022 and a pending lease expiry effective from 30
November 2023. The net initial yield is 5.6%, which is anticipated
to rise to around 6.9% when the outstanding rent reviews and lease
renewal have been concluded.
The acquisition provides a good strategic fit with the existing
portfolio in the south-east of England, including Quarry Wood
Industrial Estate at Aylesford.
Energy efficiency in the portfolio
Over the past two years we have focused on improving the energy
efficiency of all the properties in the portfolio. To achieve
net-zero carbon by 2050 the UK government is setting and reviewing
targets and regulations for the continual improvement of
properties' Energy Performance Certificate (EPC) ratings as key to
achieving this goal. Current EPC ratings for commercial properties
run from A to G, with buildings that are rated A considered the
most, and those rated G the least, energy-efficient. The latest
government target is that, from 1 April 2023, all new lettings of
non-domestic private rented property must have an EPC rating of E
or above.
During the year there has been considerable activity, working
with our tenants at various individual properties generally at
modest cost and often undertaken where tenants wish to make other
changes to suit their business needs, to achieve or improve upon
existing EPC ratings to ensure we meet the Government's target.
I am pleased to report that the target of having all properties
in the portfolio with EPC ratings of E and above by 1 April 2023
was exceeded, with many of the properties achieving an EPC rating
of C and above. The Government's latest proposal is that all new
lettings of commercial buildings should achieve an EPC rating of C
or above by April 2025 and Wynnstay continues to work towards
achieving this goal across its portfolio in advance of this
deadline .
Reflections on the evolution of the portfolio
I have been Managing Director of Wynnstay for over seventeen
years, having been appointed in February 2006. On my appointment,
the portfolio comprised, in the main, small single-tenanted assets
with a mix of industrial, office and retail uses. Since then,
Wynnstay has concentrated its investment principally into larger,
multi-let, assets predominantly in the industrial, including
trade-counter, sector. I am pleased to have been able to take the
lead in bringing about this transformation, upgrading the quality
of the assets and the tenant covenants. I am particularly proud of
delivering our successful development at Petersfield last year
which had to be undertaken against the challenges of Covid-19 and
its effects on the construction industry. It has proved to be an
excellent addition to the portfolio.
At the time of my appointment the portfolio comprised 55 units
in 20 locations with a value of just over GBP20 million producing a
rental income of just over GBP1.5 million per annum. The current
portfolio, following the recent acquisition at Tonbridge, comprises
88 units and a development site in 16 locations with a value of
close to GBP42 million and a rental income of about GBP2.5 million
per annum. In total, the portfolio now comprises over 250,000
square feet of lettable space.
Looking back over the past seventeen years, I have sold 16 of
the 23 assets that I inherited in 2006 and have added 11 assets to
the portfolio. Of the original 23 assets only 7 remain in the
portfolio, with the offices in Surbiton having been bought and sold
during my tenure.
The assets sold comprised mainly small, single-tenanted,
properties including retail shops and small offices divided into
suites, often with individuals as tenants and single industrial
units. Where there have been redevelopment opportunities, typically
for residential use, the assets have been sold at prices that
reflected the higher value use or the greater value for development
to a neighbour.
The funds realised from these disposals have been redeployed
into larger, better quality, assets including several multi-let
industrial estates such as those at Aylesford, our largest asset,
Ipswich, Lichfield, Liphook and Petersfield. The tenants now
include well-known national brands, often owned by quoted
companies, with stronger covenants than those of our historic small
business tenants. Some assets offered opportunities for
development, such as at Aylesford, Liphook and Petersfield.
During the same period Wynnstay's net asset value and dividends
have increased from 418p and 8.3p per share to 1,110p and 24.0p per
share respectively. Wynnstay's share price has substantially
outperformed the FTSE 350 Real Estate Investment Trusts Index over
the last ten years as shown in the Introduction to Wynnstay section
above. I am pleased to have played my part in delivering these
results to shareholders.
This performance has been achieved despite various major hurdles
ranging from the global financial crisis of 2008-9 to the Covid-19
crisis of 2020-22 and now to the gloomy world economic outlook that
has developed since Covid-19 notably as a result of the Russian
invasion of Ukraine and several other regional conflicts and
geopolitical tensions. Over the period, the commercial property
market in the UK has been through several cycles of upturns and
downturns, the latest arising from the impact of rising inflation
and interest rates over the past year.
I have certainly enjoyed my time at Wynnstay dealing with the
many and varied tenants and their businesses, meeting and trying to
work with them, on a principal-to-principal basis, to achieve the
optimum result for them and their businesses as well as, of course,
for Wynnstay shareholders. Maintaining positive and constructive
relations with tenants is essential in a commercial property
business and especially so in difficult times whether due to
general economic conditions or to specific trading difficulties in
a tenant's business and even when I have not been the giver of good
news to a tenant.
As with all commercial property portfolios, tenants sometimes
produce unexpected challenges. For instance, in Wynnstay's case, I
recall the meat pie-making tenant who went into liquidation just
before Christmas, leaving freezers full of ingredients at our unit.
The electricity supplier had disconnected the power supply and the
staff had vacated the unit. I was faced on repossession of the unit
in January with arranging the disposal of considerable volumes of
rotting meat which was a most unpleasant experience. On a more
positive note, another tenant on liquidation left the premises full
of racking and a large volume of motor spare parts which I was able
to sell by auction over time, realising not only sufficient funds
to cover the outstanding rent, but also the refurbishment of the
premises for reletting at an increased rent.
In the coming weeks, I will be familiarising my successor, Chris
Betts, with the Wynnstay portfolio and our tenants in order to
ensure a smooth transition as well as discussing with him some of
the opportunities that may arise depending on the direction that he
and the Board may wish to take the portfolio. I am confident that
Wynnstay can continue to grow successfully for the benefit of all
shareholders, of which I plan to continue to be one, and I will
follow the Company's future development with great interest.
Finally, I would like to thank the Board, our professional
advisers, our service providers and suppliers for their support
over many years and to thank all the Wynnstay shareholders over the
past seventeen years for their loyalty and commitment.
Paul Williams
Managing Director
13 June 2023
WYNNSTAY PROPERTIES PLC
STATEMENT OF COMPREHENSIVE INCOME FOR YEARED 25 MARCH 2023
Notes 2023 2022
GBP'000 GBP'000
Property Income 2 2,312 2,308
Property Costs 3 (96) (125)
Administrative Costs 4 (719) (614)
Net Property Income 1,497 1,569
Movement in Fair Value of
Investment Properties 10 345 5,887
Profit on Sale of Investment
Property - 125
Operating Income 1,842 7,581
Investment Income 6 27 --
Finance Costs 6 (439) (379)
Income before Taxation 1,430 7,202
Taxation 7 (288) (1,784)
Income after Taxation and
Total Comprehensive Income 1,142 5,418
Basic and diluted earnings
per share 9 42.2p 199.8p
The Company has no items of other comprehensive income.
WYNNSTAY PROPERTIES PLC
STATEMENT OF FINANCIAL POSITION 25 MARCH 2023
2023 2022
Notes GBP'000 GBP'000
Non-Current Assets
Investment Properties 10 39,320 38,975
Investments 12 3 3
39,323 38,978
Current Assets
Trade and other receivables 14 482 301
Cash and Cash Equivalents 3,268 3,491
3,750 3,792
Current Liabilities
Trade and other payables 15 (844) (1,048)
Income Taxes Payable (308) (284)
(1,152) (1,332)
Net Current Assets 2,598 2,460
Total Assets Less Current
Liabilities 41,921 41,438
Non-Current Liabilities
Bank Loans Payable 16 (9,951) (9,938)
Deferred Tax Payable 17 (2,034) (1,953)
(11,985) (11,891)
Net Assets 29,936 29,547
Capital and Reserves
Share Capital 18 789 789
Capital Redemption Reserve 205 205
Share Premium Account 1,135 1,135
Treasury Shares (1,734) (1,570)
Retained Earnings 29,541 28,988
29,936 29,547
Net Asset Value pence per
share 1,110p 1,090p
Approved by the Board and authorised for issue on 13 June
2023
P.G.H. Collins C.P. Williams
Director Director
Registered number: 00022473
WYNNSTAY PROPERTIES PLC
STATEMENT OF CASH FLOWS FOR THE YEARED 25 MARCH 2023
2023 2022
GBP'000 GBP'000
Cash flows from operating activities
Income before taxation 1,430 7,202
Adjusted for:
Increase in fair value of investment
properties (345) (5,887)
Interest receivable (27) -
Interest and finance costs payable 439 379
Profit on sale of investment property - (125)
Amortised loan fees 13 -
Revaluation movement 33 -
Changes in:
(Increase)/decrease in trade and
other receivables (181) 41
(Decrease)/increase in trade and
other payables (181) 153
Cash generated from operations 1,181 1,763
Income taxes paid (206) (284)
Net cash generated from operating
activities 975 1,479
Cash flows from investing activities
Interest and other income received 27 -
Purchase of investment properties - (1,583)
Sale of investment properties - 2,618
Net cash generated from investing
activities 27 1,035
Cash flows from financing activities
Interest paid (439) (379)
Dividends paid (622) (583)
Drawdown of bank loans net of fees - 9,938
Repurchase of shares into treasury (164) -
Repayment of bank loans - (10,000)
Net cash used in financing activities (1,225) (1,024)
(Decrease)/increase in cash and
cash equivalents (223) 1,490
Cash and cash equivalents at beginning
of period 3,491 2,001
Cash and cash equivalents at end
of period 3,268 3,491
WYNNSTAY PROPERTIES PLC
STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 25 MARCH 2023
YEARED 25 MARCH 2023
Capital Share
Share Redemption Premium Treasury Retained
Capital Reserve Account Shares Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 26 March
2022 789 205 1,135 (1,570) 28,988 29,547
Total comprehensive
income for the
year - - - - 1,142 1,142
Treasury Share
repurchases - - - (164) - (164)
Revaluation movement - - - - 33 33
Dividends - note
8 - - - - (622) (622)
--------- ----------- -------- ---------- ---------- -------
Balance at 25 March
2023 789 205 1,135 (1,734) 29,541 29,936
--------- ----------- -------- ---------- ---------- -------
YEARED 25 MARCH 2022
Capital Share
Share Redemption Premium Treasury Retained Total
Capital Reserve Account Shares Earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 26 March
2021 789 205 1,135 (1,570) 24,153 24,712
Total comprehensive
income for the
year - - - - 5,418 5,418
Dividends - note
8 - - - - (583) (583)
--------- ----------- -------- ---------- ---------- -------
Balance at 25 March
2022 789 205 1,135 (1,570) 28,988 29,547
--------- ----------- -------- ---------- ---------- -------
FUNDS AVAILABLE FOR DISTRIBUTION
2023 2022
GBP'000 GBP'000
Retained Earnings 29,541 28,988
Less: Cumulative Unrealised Fair Value
Adjustment of Property Investments net of tax (13,376) (12,996)
Treasury Shares (1,734) (1,570)
Distributable Reserves 14,431 14,422
WYNNSTAY PROPERTIES PLC
STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 25 MARCH 2023
Explanation of Capital and Reserves:
-- Share Capital: This represents the subscription, at par
value, of the Ordinary Shares of the Company.
-- Capital Redemption Reserve: This represents money that the
Company must retain when it has bought back shares, and which it
cannot pay to shareholders as dividends: It is a non-distributable
reserve and represents paid up share capital.
-- Share Premium Account: This represents the subscription
monies paid for Ordinary Shares of the Company in excess of their
par value.
-- Treasury Shares: This represents the total consideration and
costs paid by the Company when purchasing the 458,650 shares as
referred to in Note 18.
-- Retained Earnings: This represents the profits after tax that
can be used to pay dividends. However, dividends can only be paid
from distributable deserves as detailed in the preceding table.
WYNNSTAY PROPERTIES PLC
NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEARED 25 MARCH 2023
1. BASIS OF PREPARATION, ACCOUNTING POLICIES AND ESTIMATES
Wynnstay Properties PLC is a public limited company incorporated
and domiciled in England and Wales. The principal activity of the
Company is property investment, development and management. The
Company's ordinary shares are traded on the AIM, part of The London
Stock Exchange. The Company's registered number is 00022473.
1.1 Basis of Preparation
The financial statements have been prepared in accordance with
UK adopted International Accounting Standards ("IAS"). The
financial statements have been presented in Pounds Sterling being
the functional currency of the Company and rounded to the nearest
thousand. The financial statements have been prepared under the
historical cost basis modified for the revaluation of investment
properties and financial assets measured at fair value through
Operating Income.
The financial information set out in this announcement does not
constitute statutory accounts as defined in section 435 of the
Companies Act 2006. Accordingly pursuant to section 435(2), this
announcement does not include the auditor's report on the statutory
accounts.
(a) New Interpretations and Revised Standards Effective for the
year ended 25 March 2023
The Directors have adopted all new and revised standards and
interpretations issued by the International Accounting Standards
Board ("IASB") and the International Financial Reporting
Interpretations Committee ("IFRIC") of the IASB and adopted by
applicable law that are relevant to the operations and effective
for accounting periods beginning on or after 26 March 2022:
-- Amendment to IFRS 16: Leases Covid 19-Related Rent Concessions .
-- IAS 37: Provisions, Contingent Liabilities and Contingent Assets .
The adoption of these interpretations and revised standards had
no material impact on the disclosures and presentation of the
financial statements.
(b) Standards and Interpretations in Issue but not yet
Effective
The International Accounting Standards Board ("IASB") and
International Financial Reporting Interpretations Committee
("IFRIC") have issued the below revisions to existing standards or
new interpretations or new standards with an effective date of
implementation after the period of these financial statements.
The following new amendment applicable in future periods has not
been early adopted as it is not expected to have a significant
impact on the financial statements of the Company:
-- Amendments to IAS 1: Classification of Liabilities as Current
or Non-current (effective for accounting
periods beginning on or after 1 January 2023).
-- Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies.
-- Amendments to IAS 8 Definition of Accounting Estimates.
-- Amendments to IAS 12 Deferred Tax related to Assets and
Liabilities arising from a Single Transaction.
(c) Going concern
The financial statements have been prepared on a going concern
basis. This requires the Directors to consider, as at the date of
approving the financial statements, that there is reasonable
expectation that the Company has adequate financial resources to
continue to operate, and to meet its liabilities as they fall due
for payment, for at least twelve months following the approval of
the financial statements.
The Directors have reviewed cash balances and borrowing
facilities to cover at least twelve months of operations, including
financing costs and continuation of employment and advisory costs
as currently contracted without any reduction for cost saving
initiatives. The results of the review show that the Company has
cash and borrowing facilities to cover at least twelve months of
operations, and that the Company will satisfy the financial
covenant ratios in the borrowing facilities as described in Note
16. In addition, the Statement of Financial Position as at 25 March
2023 shows that the Company held a cash balance of GBP3.3m and net
assets of GBP29.9m and had a low gearing ratio of 22.3%. In the
light of the foregoing considerations, the Directors consider that
the adoption of the going concern basis is reasonable and
appropriate.
1.2 Accounting Policies
Investment Properties
All the Company's investment properties are independently
revalued annually and stated at fair value as at 25 March. The
aggregate of any resulting increases or decreases are taken to
operating income within the Statement of Comprehensive Income. The
basis of independent valuation is described in Note 10.
Investment properties are recognised as acquisitions or
disposals based on the date of contract completion.
Depreciation
In accordance with IAS 40, freehold investment properties are
included in the Statement of Financial Position at fair value and
are not depreciated.
The Company has no other property, plant and equipment.
Disposal of Investments
The gains and losses on the disposal of investment properties
and other investments are included in Operating Income in the year
of disposal. Gains and losses are calculated on the net difference
between the carrying value of the properties and the net proceeds
from their disposal.
Property Income
Property income is recognised on a straight-line basis over the
period of the lease and is measured at the fair value of the
consideration receivable. Lease deposits are held in separate
designated deposit accounts and are thus not treated as assets of
the Company in the financial statements. All income is derived in
the United Kingdom. When there are changes to a tenancy agreement
it is considered whether any lease incentives were given. Lease
incentives are amortised over the period of the earliest of the
lease termination date or the tenant lease break option date.
Deferred Income
Deferred Income arises from rents received in advance of the
period to which they relate and are treated as Trade and Other
Payables in the Statement of Financial Position. See note 15.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax. Current tax is the expected tax payable on the
taxable income for the year based on the tax rate enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable in respect of prior years. Taxable profit differs from
income before taxation because it excludes items of income or
expense that are deductible in other years, and it further excludes
items that are never taxable or deductible.
Deferred taxation is the tax expected to be payable or
recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profits and is
accounted for using the statement of financial position liability
method. Deferred tax liabilities are recognised for all taxable
temporary differences (including unrealised gains on revaluation of
investment properties) and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be
utilised.
The Company provides for deferred tax on investment properties
by reference to the tax that would be due on the sale of the
investment properties. Deferred tax is calculated at the rates that
are expected to apply in the period when the liability is settled,
or the asset is realised. Deferred tax is charged or credited to
Income after Taxation and Total Comprehensive Income, including
deferred tax on the revaluation of investment property.
Trade and Other Accounts Receivable
Trade and other receivables are initially measured at the
operating lease measurement value and subsequently measured at
amortised cost as reduced by appropriate allowances for expected
credit losses. All receivables do not carry any interest and are
short term in nature.
Cash and Cash Equivalents
Cash comprises cash at bank and on demand deposits. Cash
equivalents are short term (less than three months from inception),
repayable on demand and are subject to an insignificant risk of
change in value.
Trade and Other Accounts Payable
Trade and other payables are initially measured at fair value
and subsequently measured at amortised cost. All trade and other
accounts payable are non-interest bearing.
Pensions
Pension contributions towards the employee's pension plan are
charged to the statement of comprehensive income as incurred. The
pension scheme is a defined contribution scheme.
Borrowings
Interest rate borrowings are initially recognised at fair value,
being proceeds received less any directly attributable transaction
costs. Borrowings are subsequently stated at amortised cost. Any
difference between the proceeds (net of transaction costs) and the
redemption value is recognised in profit or loss over the period of
the borrowings using the effective interest method. Borrowings are
classified as current liabilities unless the Company has an
unconditional right to defer settlement of the liability for at
least 12 months after the reporting date.
Dilapidations
Dilapidations receipts are recognised in the Statement of
Comprehensive Income when the right to receive them arises. They
are recorded in revenue as other property income unless a property
has been agreed to be sold whereby the receipt is treated as part
of the proceeds of sale of the property. See Note 2.
1.3 Key Sources of Estimation Uncertainty and Judgements
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that may affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expenses.
Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that
period. The key sources of estimation uncertainty that have a
significant risk of causing material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are those relating to the fair value of investment properties which
are revalued annually by the Directors having taken advice from the
Company's independent external valuers, on the basis described in
Note 10. A key judgement taken by the Directors is as to whether a
property is being held for sale.
There are no other judgemental areas identified by management
that could have a material effect on the financial statements at
the reporting date.
2. PROPERTY INCOME 2023 2022
GBP'000 GBP'000
Rental income 2,304 2,252
Other property income 8 56
2,312 2,308
Rental income comprises rents earned and apportioned over the
lease period taking into account rent free periods and rents
received during the period. Other property income comprises
unexpended dilapidations and miscellaneous income arising from
the letting of properties.
3. PROPERTY COSTS 2023 2022
GBP'000 GBP'000
Empty rates 2 3
Property management 33 65
35 68
Legal fees 40 34
Agent fees 21 23
96 125
4. ADMINISTRATIVE COSTS 2023 2022
GBP'000 GBP'000
Rents payable - short term lease 6 32
General administration, including staff costs 582 548
Auditors' remuneration - audit fees CLA Evelyn
Partners Limited 41 31
Tax services - Saffrey Champness 9 3
Non-Recurring costs - costs relating to new
Board appointments 81 -
719 614
5. STAFF COSTS 2023 2022
GBP'000 GBP'000
Staff costs, including Directors' fees, during
the year were as follows:
Wages and salaries 270 289
Social security costs 36 34
Other pension costs 49 13
355 336
Further details of Directors' emoluments, totalling GBP319,000
(2022: GBP302,000), are shown under Directors' Emoluments in
the Directors' Report and form part of these Financial Statements.
There are no other key management personnel.
2023 2022
No. No.
The average number of employees, including
Non-Executive Directors, engaged wholly in
management and administration was: 5 5
The number of Directors for whom the Company
paid pension benefits
during the year was: 1 1
6. FINANCE COSTS (NET) 2023 2022
GBP'000 GBP'000
Interest payable and finance costs on bank
loans 439 379
Less: Bank interest receivable 27 -
412 379
7. TAXATION 2023 2022
GBP'000 GBP'000
(a) Analysis of the tax charge for the year:
UK Corporation tax at 19% (2022: 19%)
Total current tax charge 206 293
Deferred tax - temporary differences 82 1,491
Tax charge for the year 288 1,784
(b) Factors affecting the tax charge for
the year:
Net Income before taxation 1,430 7,202
Current Year:
Corporation tax thereon at 19% (2022: 19%) 272 1,368
Corporation tax adjustment for unrealised (65) -
property value gains
Capital gains net tax movement on disposals - 106
Deferred tax adjustment for change to 25%
tax rate (2022: 25%) - 467
Deferred tax net adjustments arising from
revaluation of properties properties 81 (157)
Total tax charge for the year 288 1,784
In the Spring Budget 2021 the UK Government announced that
from 1 April 2023 the corporation tax rate would rise from
19% to 25% on all profits in excess of GBP250,000. This new
law was substantively enacted on 24 May 2021.
8. DIVIDS 2023 2022
GBP'000 GBP'000
Final dividend paid in year of 14.0p per
share
(2022: Final dividend 13.0p per share) 378 352
Interim dividend paid in year of 9.0p per
share
(2022: Interim dividend 8.5p per share) 244 231
622 583
On 13 June 2023 the Board resolved to pay a final dividend
of 15p per share which will be recorded in the Financial Statements
for the year ending 25 March 2024.
9. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing Income
after Taxation and Total Comprehensive Income attributable
to Ordinary Shareholders of GBP1,142,000 (2022: GBP5,418,000)
by the weighted average number of 2,703,357 (2022: 2,711,617)
ordinary shares in issue during the period excluding shares
held as treasury. There are no instruments in issue that would
have the effect of diluting earnings per share.
10. INVESTMENT PROPERTIES 2023 2022
GBP'000 GBP'000
Properties
Balance at beginning of financial year 38,975 34,005
Additions - 1,583
Disposals - (2,500)
Revaluation Surplus 345 5,887
Balance at end of financial year 39,320 38,975
The Company's freehold properties were valued as at 25 March
2023 by BNP Paribas Real Estate, Chartered Surveyors, acting in the
capacity of external valuers, and adopted by the Directors. The
valuations were undertaken in accordance with the requirements of
IFRS 13 and the RICS Valuation - Global Standards 2020.
The valuation of each property was on the basis of Fair Value.
The valuers reported that the total aggregate Fair Value of the
properties held by the Company was GBP39,320,000.
The valuer's opinions were primarily derived from comparable
recent market transactions on arms-length terms.
In the financial year ending 25 March 2023, the total fees
earned by the valuer from Wynnstay Properties PLC and connected
parties were less than 5% of the valuer's Company turnover.
The valuation complies with International Financial Reporting
Standards. The definition adopted by the International Accounting
Standards Board (IASB) in IFRS 13 is Fair Value, defined as: 'The
price that would be received to sell an asset, or paid to transfer
a liability, in an orderly transaction between market participants
at the measurement date.'
These recurring fair value measurements for non-financial assets
use inputs that are not based on observable market data, and
therefore fall within level 3 of the fair value hierarchy.
The most pertinent market data observed reflected net initial
yields which ranged from broadly 4.15% to 6.50%, with equivalent
yields estimated to range between broadly 5.50% and 6.75%. The
portfolio exhibits a net initial yield of 5.73% (2022: 5.19%) and a
nominal equivalent yield of 6.02% (2022: 5.71%).
There have been no transfers between levels of the fair value
hierarchy. Movements in the fair value are recognised in profit or
loss.
A 0.5% decrease in the weighted equivalent yield would result in
a corresponding increase of GBP3.67 million in the fair value
movement through profit or loss. A 0.5% increase in the same yield
would result in a corresponding decrease of GBP3.09 million in the
fair value movement through profit or loss.
11. OPERATING LEASES RECEIVABLE 2023 2022
The following are the future minimum GBP'000 GBP'000
lease payments receivable under non-cancellable
operating leases which expire:
Not later than one year 324 354
Between 1 and 5 years 4,368 4,753
Over 5 years 2,752 622
7,444 5,729
Rental income under operating leases recognised through profit
or loss amounted to GBP2,304,000 (2022: GBP2,252,000).
Typically, the properties were let for a term of between 5 and
10 years at a market rent with rent reviews every 5 years. The
above maturity analysis reflects future minimum lease payments
receivable to the next break clause in the operating lease. The
properties are generally leased on terms where the tenant has
the responsibility for repairs and running costs for each individual
unit with a service charge payable to cover common services provided
by the landlord on certain properties. The Company manages the
services provided for a management fee and the service charges
are not recognised as income in the accounts of the Company as
any receipts are netted off against the associated expenditures
with any residual balance being shown as a liability.
If the tenant does not carry out its responsibility for repairs
and the Company receives a dilapidations payment, the resulting
cash is recorded in revenue as other property income unless a
property has been agreed to be sold where the receipt is treated
as part of the proceeds of sale of the property. See Note 2.
12. INVESTMENTS 2023 2022
GBP'000 GBP'000
Quoted investments 3 3
13. SUBSIDIARY COMPANY
The Company has the following dormant subsidiary which the Directors
consider immaterial to, and thus has not been consolidated into,
the financial statements. The subsidiary holds the legal title
to an access road to an investment property, the use of which
is shared between the Company, its tenants at the property and
neighbouring premises.
Scanreach Limited 80% owned Dormant Net Assets: GBP4,447 (2022:
GBP4,447)
14. ACCOUNTS RECEIVABLE 2023 2022
GBP'000 GBP'000
Trade receivables 296 215
Other receivables 186 86
482 301
Trade receivables include an adjustment for credit losses of
GBP8,000 (2022: GBPnil). Trade receivables of GBPnil (2022: nil)
are considered past due, but not impaired. A provision for impairment
of trade receivables is established using an expected loss model.
Trade receivables, which are the only financial assets at amortised
cost, are non-interest bearing and generally have a 15 day term.
Due to their short maturities, the carrying amount of trade and
other receivables is a reasonable approximation of their fair
value.
Of the trade receivables balance at the end of the year, GBP180,560
(2022: GBP188,816) is due from the Company's largest customer.
There are two other customers who represent more than 5% of the
total balance of trade receivables.
15. ACCOUNTS PAYABLE 2023 2022
GBP'000 GBP'000
Trade payables 39 7
Other creditors 80 84
Deferred income 585 535
Accruals 140 422
844 1,048
The average credit period taken for trade purchases is 17 days
(2022: 4 days). No interest is charged on the outstanding balances.
The Directors consider that the carrying amounts of trade and
other payables is a reasonable approximation of their fair value.
16. BANK LOANS PAYABLE 2023 2022
GBP'000 GBP'000
Non-current loan 9,951 9,938
In December 2021, a five-year Fixed Rate Facility of GBP10 million
and a Revolving Credit Facility of GBP5.0 million were entered
into providing a total committed credit facility of GBP15.0 million.
Interest on loan amounts drawn down under the Fixed Rate Facility
of GBP10 million (2022: GBP10 million) is charged at 3.61% per
annum (2022: 3.61%) for the year ended 25 March 2023. Loan arrangement
fees amortised over the loan period amounted to GBP13,000 (2022;
GBP3,250). No loan amounts have been drawn down under the Revolving
Credit Facility during the year and the balance drawn as at 25
March 2023 is GBPnil (2022: GBPnil).
Both facilities are repayable in one instalment on 17 December
2026. The facilities include the following financial covenants
which were complied with during the year:
* Rental income shall not be less than 2.25 times the
interest costs
* The drawn balance shall at no time exceed 50% of the
market value of the properties secured.
The facilities are secured by fixed charges over freehold land
and buildings owned by the Company, which at the year-end had
a combined value of GBP35,885,000 (2022: GBP35,330,000). The
undrawn element of the facilities available at 25 March 2023
was GBP5,000,000 (2022: GBP5,000,000).
Interest charged under the Revolving Credit Facility is linked
to Bank of England Base Rate as the reference rate.
17. DEFERRED TAX 2023 2022
GBP'000 GBP'000
Deferred Tax brought forward 1,953 461
Charge for the year 81 1,492
Deferred Tax carried forward 2,034 1,953
A deferred tax liability of GBP2,024,000 (2022: GBP1,953,000)
is recognised in respect of the investment properties and has
been calculated at a tax rate of 25% (2021: 25%).
18. SHARE CAPITAL 2023 2022
GBP'000 GBP'000
Authorised
8,000,000 Ordinary Shares of 25p each: 2,000 2,000
Allotted, Called Up and Fully Paid
3,155,267 Ordinary shares of 25p each: 789 789
All shares rank equally in respect of shareholder
rights.
In March 2010, the Company acquired 443,650 Ordinary Shares of
Wynnstay Properties PLC from Channel Hotels and Properties Ltd
at a price of GBP3.50 per share. In September 2022, the Company
acquired 15,000 Ordinary Shares of Wynnstay Properties PLC in
the market at a price of GBP7.10 per share, representing less
than 0.005 % of the issued share capital, with the aggregate
consideration paid for the shares being GBP106,500. The total
cost of establishing the share buyback authority which lasts
for five years, together with this purchase in the market was
GBP164,000. The total of 458,650 shares acquired, representing
14.5% of the total shares in issue, are held in treasury. As
a result, the total number of shares with voting rights is 2,696,617.
19. FINANCIAL INSTRUMENTS
The objective of the Company's policies is to manage the Company's
financial risk, secure cost-effective funding for the Company's
operations and minimise the adverse effects of fluctuations in
the financial markets on the value of the Company's financial
assets and liabilities, on reported profitability and on the
cash flows of the Company.
At 25 March 2023 the Company's financial instruments comprised
borrowings, cash and cash equivalents, short term receivables
and short-term payables. The main purpose of these financial
instruments was to raise finance for the Company's operations.
Throughout the period under review, the Company has not traded
in any other financial instruments. The Board reviews and agrees
policies for managing each of the associated risks and they are
summarised below:
Credit Risk
The risk of financial loss due to a counterparty's failure to
honour its obligations arises principally in connection with
property leases and the investment of surplus cash.
Tenant rent payments are monitored regularly, and appropriate
action is taken to recover monies owed or, if necessary, to terminate
the lease. The Company carefully vets prospective new tenants
from a credit risk perspective. Bad debts are mitigated by close
engagement with tenant businesses within a well-diversified mix
of some 83 units across the portfolio and close monitoring of
rental income receipts. The Company has regularly reviewed the
portfolio, including feedback from engagement with tenants, in
order to assess the risk of tenant failures.
The Company has no significant concentration of credit risk associated
with trading counterparties (considered to be over 5% of net
assets) with exposure spread over a large number of tenancies.
In terms of concentration of individual tenant's rents versus
total gross annual passing rents the Company has 3 tenants whose
rent, on an individual basis, is between 5.1% and 7.6% of total
gross annual passing rents.
Funds are invested and loan transactions contracted only with
banks and financial institutions with a high credit rating. Concentration
of credit risk exists to the extent that as at 25 March 2023
and 2022 current account and short-term deposits were held with
two financial institutions, Handelsbanken PLC and C Hoare & Co.
The combined exposure to credit risk on cash and cash equivalents
at 25 March 2023 was GBP3,268,000 (2022: GBP3,491,000).
Currency Risk
As all of the Company's assets and liabilities are denominated
in Pounds Sterling, there is no exposure to currency risk.
Interest Rate Risk
The Company is exposed to interest rate risk that could affect
cash flow as it currently borrows at both floating and fixed
interest rates. The Company monitors and manages its interest
rate exposure on a periodic basis but does not take out financial
instruments to mitigate the risk. The Company finances its operations
through a combination of retained profits and bank borrowings.
Liquidity Risk
The Company seeks to manage liquidity risk to ensure sufficient
funds are available to meet the requirements of the business
and to invest cash assets safely and profitably. The Board regularly
reviews available cash balances and cash forecasts to ensure
there are sufficient resources for working capital requirements
a nd to maintain an adequate cash margin.
Interest Rate Sensitivity
Financial instruments affected by interest rate risk include
loan borrowings and cash deposits. The analysis below shows the
sensitivity of the statement of comprehensive income and equity
to a 0.5% change in interest rates:
0.5% decrease 0.5% increase
in interest rates in interest rates
2023 2022 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000
Impact on interest payable - - - -
- gain/(loss)
Impact on interest receivable
- (loss)/gain (16) (17) 16 17
Total impact on pre-tax profit
and equity (16) (17) 16 17
The calculation of the net exposure to interest rate fluctuations
was based on the following as at 25 March:
2023 2022
GBP'000 GBP'000
Floating rate borrowings (bank loans) - -
Less: cash and cash equivalents 3,268 3,491
3,268 3,491
Fair Value of Financial Instruments
Except as detailed in the following table, management consider
the carrying amounts of financial assets and financial liabilities
recognised at amortised cost approximate to their fair value.
2023 2023 2022 2022
Book Value Fair Value Book Value Fair Value
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing borrowings
(note 16) (9,951) (9,951) (9,938) (9,938)
Total (9,951) (9,951) (9,938) (9,938)
2023 2022
Categories of Financial Instruments GBP'000 GBP'000
Financial assets:
Quoted investments measured at fair value 3 3
Loans and receivables measured at amortised
cost 307 215
Cash and cash equivalents measured at
amortised cost 3,268 3,491
Total financial assets 3,578 3,709
Financial liabilities at amortised cost 9,951 10,451
Total liabilities 10,795 10,986
The only financial instruments measured subsequent to initial
recognition at fair value as at 25 March are quoted investments.
These are included in level 1 in the IFRS 13 fair value hierarchy
as they are based on quoted prices in active markets.
Capital Management
The primary objectives of the Company's capital management are:
* to safeguard the Company's ability to continue as a
going concern, so that it can continue to provide
returns for shareholders: and
* to enable the Company to respond quickly to changes
in market conditions and to take advantage of
opportunities.
Capital comprises shareholders' equity plus net borrowings. The
Company monitors capital using loan to value and gearing ratios.
The former is calculated by reference to total debt as a percentage
of the year end valuation of the investment property portfolio.
Gearing ratio is the percentage of net borrowings divided by
shareholders' equity. Net borrowings comprise total borrowings
less cash and cash equivalents. The Company's policy is that
the net loan to value ratio should not exceed 50% and the gearing
ratio should not exceed 100%.
2023 2022
GBP'000 GBP'000
Loans and overdraft 9,951 9,938
Cash and cash equivalents (3,268) (3,491)
Net borrowings 6,683 6,447
Shareholders' equity 29,936 29,547
Investment properties 39,320 38,975
Loan to value ratio 25.3% 25.5%
Net borrowings to value ratio 17.0% 16.5%
Gearing ratio 22.3% 21.8%
20. RELATED PARTY TRANSACTIONS
Related Party Transactions with the Directors have been disclosed
under Directors' Emoluments in the Directors' Report. There were
no other Related Party Transactions during the year (2022: GBPnil).
21. SEGMENTAL REPORTING
The Chief Operating Decision Maker ('CODM'), who is responsible
for the allocation of resources and assessing performance of the
operating segments, has been identified as the Board. IFRS 8
requires operating segments to be identified on the basis of
internal reports that are regularly reviewed by the Board. The
Board have reviewed segmental information and concluded that there
are three operating segments .
Industrial Retail Office Total
2023 2022 2023 2022 2023 2022 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Rental Income 2,095 1,884 73 68 136 300 2,304 2,252
Other Property Income 8 56 - - - - 8 56
Profit /(Loss) on
investment property
at fair value 200 5,872 (105) 40 250 (25) 345 5,887
Total income and
gain 2,303 7,812 (32) 108 386 275 2,657 8,195
Property expenses (95) (125) - - - - (95) (125)
Segment profit/(loss) 2,208 7,687 (32) 108 386 275 2,562 8,070
------- ------- ------- ------- ------- ------- ------- -------
Unallocated corporate
expenses (720) (614)
Profit on sale of
investment property - 125
Operating income 1,842 7,581
Interest expense
(all relating to
property loans) (439) (379)
Interest income 27 -
and
other income
------- -------
Income before taxation 1,430 7,202
------- -------
Other information Industrial Retail Office Total
2023 2022 2023 2022 2023 2022 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 36,855 36,655 905 1,010 1,560 1,310 39,320 38,975
Segment assets
held
as security 33,420 33,010 905 1,010 1,560 1,310 35,885 35,330
22. CAPITAL COMMITMENTS
Significant capital expenditure contracted for at the end of
the financial year, but not recognised as liabilities in the
financial statements is: GBPnil (2022: GBPnil).
23. SUBSEQUENT EVENTS
On 9 May 2023 the Company acquired Riverdale Industrial Estate,
Tonbridge for GBP2.35m before costs. The Property is freehold
and comprises five industrial units arranged as two terraces
with a central service yard. The estate is fully let to four
tenants with a range of lease expiry dates. The current passing
rent totals GBP140,350 per annum and is subject to three outstanding
upward only rent reviews effective from 29 September 2022 and
a pending lease expiry on 30 November 2023. The total acquisition
cost of approximately GBP2.5 million, which includes stamp duty
and other acquisition costs, was funded entirely from the Company's
existing cash resources.
NOTE
The financial information set out in this announcement does not
constitute statutory accounts as defined in section 435 of the
Companies Act 2006. Accordingly pursuant to section 435(2), this
announcement does not include the auditor's report on the statutory
accounts.
However, the financial information for the year ended 25 March
2023 contained in the announcement is taken directly from the
statutory accounts for that year. The auditors reported on those
accounts; their report was unqualified and did not contain a
statement under either Section 498 (2) or Section 498 (3) of the
Companies Act 2006 and did not include references to any matters to
which the auditor drew attention by way of emphasis.
The statutory accounts for the year ended 25 March 2023 have not
yet been delivered to the Registrar of Companies. The 2023 accounts
will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
The statutory accounts for the year ended 25 March 2022 and for
the prior years referred to in this announcement have been
delivered to the Registrar of Companies. The auditors reported on
those accounts; their reports were unqualified and did not contain
a statement under either Section 498 (2) or Section 498 (3) of the
Companies Act 2006 and did not include references to any matters to
which the auditor drew attention by way of emphasis.
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