PNS Panther Securities Plc

26 September 2024

Panther Securities PLC

(the "Company" or the "Group")

Interim Report for the six months ended 30 June 2024

Chairman's Statement

Once again, I am pleased to announce our results for the half year ended 30 June 2024.  Our profit for this period was £3,351,000 compared to £7,049,000 for the previous year's equivalent period.

Last year's six-month period was helped by a revaluation gain on investment properties of £5,041,000 which, whilst flattering profits in 2023, obscures the underlying improvement in 2024 on the Group's underlying financial performance shown by its rental growth.

Rents Receivable

During this 2024 interim accounting period, rents receivable amounted to £7,231,000 compared to £6,736,000 for the equivalent period in the previous year.

Our rental income is gradually increasing, in some part due to the refurbishing works and splitting up of some of our larger vacant units, with more manageable and attractive units which are easier to let.  Whilst the current period shows a decline in expenditure, this will rise in our second half year period, as some larger works proceed, some with pre-lets signed.

Interest Costs

Our interest costs are approximately £218,000 lower in the current period, mainly due to the swap rearrangements which took effect on 1 September 2023 (see note 7) but also due to our bank loans' lower margins following the refinance that was completed in March 2024.

Bad Debts

This period's bad debts appear to have over doubled to £482,000 although the last period had a historically low bad debt charge and I can only speculate that some of the additional difference may reflect a timing situation, as many of our tenants were nervous of the probable (and now in effect) change of political direction and held onto their cash longer than usual.

Property Values

The Directors have taken the view that there is no overall change in the value of the Group's total property portfolio as at 30 June 2024.

Derivative Value

As at 30 June 2024, our derivative financial asset's value was £5.02m, an increase of £2.52m relative to 31 December 2023.  Our derivative arrangements have very volatile values but are currently providing continuous positive cash flow benefits to our Group.

Tax

Our future tax payable is now at a rate of 25% on profits whereas it was 19% up to 31 March 2023.

Property Lettings/Improvements

Padholme Road, Peterborough

This 50,000 sq ft warehouse was purchased vacant and let towards the end of 2023 at £345,000 pa.  It was refurbished by our new tenants, Anglia Home Furnishing Limited, with our financial assistance.  However, the AHF Group was sold to a much larger group who believed they may need a larger warehouse in due course.  They therefore negotiated a three-month rolling break clause to be inserted into their lease for which we received £500,000.  We believe that due to the improvements made to the property, as and when they decide to vacate this property, it should hopefully achieve a higher rental value.  At the time of publishing this statement they had not exercised their break clause.

53/55 High Street, St Neots

After splitting this former Beales unit into two or three units, approximately half the space has been let to Poundstretcher on a 10-year lease at £90,000 pa.

Unit 10, Chorley Industrial Estate

This unit has been re-let at £95,000 pa.  Previously this was vacant for almost a year.

Small units

There are also many small units that have been let or have had lease extensions granted, several of which are at slightly increased rentals.

Post 30 June 2024 improvements in lettings/sales

Chorley Industrial Estate

Whilst only producing a slight increase in rents payable, a new lease has been agreed with a very substantial European company on four units, with two already occupied by them.  However, it will soon become a 15-year lease (with a break at 10) with £318,000 pa to be receivable from this strong covenant.  Their main existing unit lease was due to expire in two years' time.  This extra security of a longer-term lease should give added value to this estate.

Brackla Shopping Centre

We have agreed a lease, subject to the Group spending £500,000 on repairs and improvements, and with planning permission for a change of use to a medical use already obtained by the incoming tenant.  This lease will be at circa £95,000 pa for 20 years (with break at 15) to a global healthcare company.  This unit is currently vacant and was previously let at £45,000 pa (a couple of years ago).  This will substantially improve the value of the Brackla Shopping Centre.

Auction Properties

In July 2024 we sold three mature freehold property investments at auction.  These were in Blackburn, Hull and Widnes.  A total of £1,336,000 was received compared to the book valuation of £1,235,000.

Having owned these properties for many years, we felt that as the leases ended in a year or two, that if vacated by the tenants their values would fall considerably.  Building our cash reserves seems a sensible policy under our new government.

Developments in limbo

I have mentioned several times our potential developments at Swindon and Barry Parade, Peckham when I previously optimistically believed that we had jumped through all the hoops necessary to obtain planning permission, but it has proved impossible to deal with the respective local authorities' requirements.  Thus, we are looking at alternative ways of making these two central sites productive.

Political Donation

At our AGM the resolution to pay £25,000 to the Reform UK party was passed by 13 shareholders representing 84% of those voting and eight shareholders who voted against this resolution representing the remaining 16%.  This is, of course, without any of my personal holding being voted.

Dividends

On 27 July 2024 (after the period end) we paid a 6p per share final dividend in relation to the year ended 31 December 2023 which is accrued in these interim accounts (as it was approved by shareholders at our AGM in June 2024).

We are declaring an interim dividend for the year ending 31 December 2024 of 6p per share to be paid on 29 October 2024 to shareholders on the register at 11 October 2024 (ex-dividend on 10 October 2024).

We expect to maintain our ordinary dividend for the 2024 full year totalling 12p per share.

Prospects

With a new government comprised of mostly business inexperienced politicians, it is hard to be too optimistic about the country's successful progress, but despite some of the dreadful ideas being promoted in our new government's first few months, I believe that our Group is in a sound financial position, i.e., substantial cash, spare bank facilities, growing income from a large spread of tenants, which will enable us to take up any potential profitable opportunities that will very likely come our way.

Andrew S Perloff

Chairman

26 September 2024

Chairman's Ramblings

As I have mentioned several times through previous ramblings, a Chinese quote sometimes said on departing from business meetings, "May you live in exciting times", is often thought of as a blessing, but it is really a curse upon you.

In this country, we are now living in exciting times.  Since July 4^th, Independence Day in United States of America but in our Dis-United Kingdom, that date should be named Serfdom Day.

From the moment the new government walked through the door of 'No. 10' in their freebie designer clothes and phenomenally overpriced reality blurred spectacles, a plethora of new rules, regulations, taxes and vindictive proposals have been issued, promised or suggested by the new team.

There is no doubt the Conservatives, R.I.P., deserved to lose any election.  They were so politically inept for so many years by destroying the High Street, attacking high end tourist trade, attacking successful high earners and pandering to tiny minorities who were very loud protestors, hanging their hat on green policies and taxes which only impoverish the already poorer members of our own population and becoming energy reliant on foreign nations by not utilising our own energy sources and thus paying billions of pounds elsewhere to meet our own energy demands.

The Tory leadership failed to oversee our own bureaucracy effectively, so that whatever government service we need or require is dealt with badly and inefficiently, thus expensively.  Failing to halt the huge increase in immigration, the enormity of which is such that many migrants to the UK cannot be properly housed, educated, medically looked after, fed or clothed without substantially further impoverishing the UK's own lower income families.  The tensions this causes build up and I believe that this will cause social problems.

However, it seems that the new teams of government leaders' paymasters, the unions, will be lavishly rewarded, which I believe will encourage others to demand unreasonable and unaffordable pay demands.  This may cause inflation to stay higher than expected thus interest rates may remain higher than anticipated.

Now the new team have discovered 'black holes' in this country's finances, we have been promised brutal tax increases on those with the 'broadest shoulders'.  There may still be a few first-class seats left on planes flying to a more pleasant economic climate than here, but I suspect many of those 'broad shoulders' will have left this country by the time our new seemingly vindictive administration can put the plans into full action, thus making it necessary for extra money to be raised from the 'working class' who are already just managing.

I seem to recall a part of a song by Ron and the Rude Boys appropriate for the grand finale of our new leaders' conference.

♬ ♬

The pensioners and working class

Can kiss my ****

We've got all the government jobs at last!

Yours

Andrew S Perloff

Chairman

26 September 2024

* Of this balance £4,000 (30 June 2023:  £4,000, 31 December 2023: £954,000) is restricted by the Group's lenders i.e. it can only be used for the purchase of investment property (or otherwise by agreement).

** Shares in listed and/or unlisted companies. These were held for longer term growth and dividend return.

Panther Securities P.L.C.

NOTES TO THE INTERIM FINANCIAL REPORT

for the six months ended 30 June 2024

1.   Basis of preparation of interim financial statements

The results for the year ended 31 December 2023 have been audited whilst the results for the six months ended 30 June 2023 and 30 June 2024 are unaudited. 

The financial information set out in this interim financial report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory accounts for the year ended 31 December 2023 which were prepared in accordance with UK-adopted international accounting standards ("IFRS"), were filed with the Registrar of Companies. The auditors reported on these accounts, their report was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain any statements under Section 498 (2) or Section 498 (3) of the Companies Act 2006.

These condensed consolidated interim financial statements are for the six month period ended 30 June 2024. They have been prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.

A number of new and amended standards and interpretations are effective from 1 January 2024 but they do not have a material effect on the Group's financial statements.

2.   Revenue and cost of sales

The Group's only operating segment is investment and dealing in property and securities.  All revenue, cost of sales and profit or loss before taxation is generated in the United Kingdom.  The Group is not reliant on any key customers.

3.   Income tax expense

The charge for taxation comprises the following:

The taxation charge is calculated by applying the Directors' best estimate of the annual effective tax rate to the profit for the period. 

4.   Dividends

Amounts recognised as distributions to equity holders in the period:

The final dividend of 6p per share for the year ended 31 December 2023 (and 2022) was not paid during the period to 30 June 2024 but declared and approved at the AGM held in June 2024 (being accrued in these accounts) and was paid on 17 July 2024 (19 July 2023).

*Accrued at June and paid after period end. 

5.   Earnings per share (basic and diluted)

The calculation of basic and diluted earnings per ordinary share is based on earnings being a profit of £3,351,000 (30 June 2023 - £7,049,000 and 31 December 2023 - £4,423,000).

The basic earnings per share is based on the weighted average of the ordinary shares in existence throughout the period, being 17,456,929 to 30 June 2024 (17,471,929 to 31 December 2023 and 17,471,929 to 30 June 2023).  There are no potential shares in existence for any period and therefore diluted and basic earnings per share are equal.   

Panther Securities PLC owns 305,000 ordinary shares in the Company which are currently held in treasury (31 December 2023 and 30 June 2023 - 275,000).

6. Investment properties

The Directors undertook the valuation as at 30 June 2024 (for 30 June 2023 and 31 December 2023 both were also Director's valuations, however both were heavily influenced by an independent valuation by Carter Jonas dated July 2023 - on the majority of the portfolio).  For 31 December 2023 guidance was also received on a number of properties not valued by Carter Jonas and adopted as Director's valuations at the year end. 

7.   Derivative financial instruments

The main risks arising from the Group's financial instruments are those related to interest rate movements. Whilst there are no formal procedures for managing exposure to interest rate fluctuations, the Board continually reviews the situation and makes decisions accordingly. Hence, the Company will, as far as possible, enter into fixed interest rate swap arrangements. The purpose of such transactions is to manage the interest rate risks arising from the Group's operations and its sources of finance.

* Fixed rate came into effect on 1 September 2008 and lasts for 30 years.  The rate includes 2.30% margin (2.70% margin prior to 28 March 2024). There are no breaks and the rate dropped to 3.40% from 5.06% on 1 September 2023.  The end of its term is 31 August 2038.  The fixed rate financial derivatives (swaps) are referenced to SONIA. 

Bank loans totalling £60,000,000 (2023 - £60,000,000) are fixed using interest rate swaps removing the Group's exposure to interest rate risk. The remaining borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.  The Group at the period end had a £55,000,000 term facility and a £13,000,000 revolving facility (with £4,350,000 undrawn at the period end).

The derivative financial assets and liabilities are designated as held for trading.

*The Group has paid £5 million in February 2021 to vary this long-term swap agreement. The agreement varied the fixed rate previously at 5.06% until 31 August 2038 on a nominal value of £35 million. Following the variation, the Group's fixed rate dropped on 1 September 2023 to 3.40% saving the Group circa £581,000pa in cash flow until the end point of the instrument.

Interest rate derivatives are shown at fair value in the Statement of Financial Position, with charges in fair value taken to the Income Statement.  Interest rate swaps are classified as level 2 in the fair value hierarchy specified in IFRS 13.

The vast majority of the derivative financial assets are due in over one year and therefore they have been disclosed as all due in over one year. 

The above fair values are based on quotations from the Group's banks and Directors' valuation.

Treasury management

The long-term funding of the Group is maintained by three main methods, all with their own benefits.  The Group has equity finance, has surplus profits and cash flow which can be utilised and also has loan facilities with financial institutions.  The various available sources provide the Group with more flexibility in matching the suitable type of financing to the business activity and ensure long-term capital requirements are satisfied. 

8.   Deferred taxation

The following are the major deferred tax assets and liabilities recognised by the Group, and the movements thereon, during the current and prior reporting periods.

Deferred taxation arises in relation to:

Deferred tax

As at 30 June 2024 the substantively enacted rate was 25% (also 25% as at 30 June 2023 and 31 December 2023) and this has been used for the deferred tax calculation.

9.   Net asset value per share

10. Copies of this report are to be sent to all shareholders and are available from the Company's registered office at Unicorn House, Station Close, Potters Bar, EN6 1TL and will also be available for download from our website www.pantherplc.com.

Allenby Capital Limited                                                     +44 (0) 20 3328 5656

(Nominated Adviser and Joint Broker)                             

Alex Brearley

Piers Shimwell