SUMMARY
· Net asset value (“NAV”) decreased in the year by £29.5 million to £95.1 million (159.4p per share; 2022: 208.9p per share) primarily as a result of a net £21.5 million write down in the carrying value of the Group’s investment properties in addition to a £5.2 million write down in the carrying value of the Group’s development site in Holyhead, Anglesey.
· Total cash deposits of £2.7 million (4.5p per share) at the year end and £9.0 million as at 17 November 2023.
· Cash deposits boosted after the year end by the placing in October 2023 of 5 million zero dividend preference shares of £1 each (the “ZDP shares”) and completion in November 2023 of a £12 million loan facility from A.S.K. Partners Limited.
· Construction progressing well and on budget for the 693 bed student accommodation development at The Island Quarter, Nottingham planned for completion in May 2024.
· £47.5 million facility agreement entered into with Barclays Bank PLC (“Barclays”) in December 2022, for a maximum term of 3 years, to enable the completion and subsequent letting of the student accommodation development at The Island Quarter, with £18.0 million drawn by 30 September 2023.
· Detailed planning consent granted in May 2023 for a 249,000 square foot bioscience building at The Island Quarter.
· Revised masterplan agreed with Nottingham City Council which, subject to investor and occupier appetite, increases the size of The Island Quarter development up to a maximum of 3.5 million square feet.
· Disposal of the development site at Haverfordwest, Pembrokeshire, for gross proceeds of £9.65 million to realise a profit of £0.1 million.
· Anglesey Freeport confirmed as one of the two newly established freeports in Wales with our 203 acre brownfield site at Rhosgoch, Anglesey assigned as a special area within that freeport.
· Conditional contract exchanged, at a cost of £450,000, for the purchase of a 14.7 acre plot at Bristol Fruitmarket site in the St Phillip’s Marsh area of Bristol.
Group net asset summary
| 2023 | 2022 | |||||||
| Per share | Per share | |||||||
| £’m | p | £’m | p | |||||
| Properties | 113.2 | 189.8 | 110.1 | 184.7 | ||||
| Cash | 2.7 | 4.5 | 17.4 | 29.1 | ||||
| Borrowings | (17.2) | (28.8) | – | – | ||||
| Provisions | – | – | (3.1) | (5.2) | ||||
| Other net (liabilities) / assets | (3.6) | (6.1) | 0.2 | 0.3 | ||||
| Net assets | 95.1 | 159.4 | 124.6 | 208.9 | ||||
Robert Ware, Chief executive commented:
“We are acutely aware of the impact that continuing economic and political uncertainty is having on the real estate sector and intend to maintain a disciplined approach to both our cash commitments and financial leverage to ensure our balance sheet remains robust.
Our results for the year are reflective of the currently subdued market. However, fundamentals for the private built student accommodation, build to rent and life science sectors, remain strong, with supply shortages likely to support improved future pricing. The value from our development projects will be created over the medium-term. Given the progress made, in particular at The Island Quarter, since its acquisition, we remain optimistic about the Group’s future prospects.”
Enquiries:
The Conygar Investment Company PLC
| Robert Ware: | 0207 258 8670 |
| David Baldwin: | 0207 258 8670 |
Liberum Capital Limited (nominated adviser and broker)
| Richard Lindley: | 0203 100 2222 |
| Jamie Richards: | 0203 100 2222 |
Temple Bar Advisory (public relations)
| Alex Child-Villiers: | 07795 425580 |
| Will Barker: | 07827 960151 |
Overview and results summary
The past year has been one of continual macroeconomic and geo-political uncertainty. The impact of this on the valuation of UK real estate, in particular from the sharp uplift in interest rates and increasing investor caution as higher inflation became embedded, has been significant. Property valuations in the UK fell across all sectors, as yields increased to reflect the higher interest rate environment.
The value of our investment property portfolio, after allowing for capital expenditure in the year, has declined by £21.5 million (16.3%). In addition, the value of our development site at Holyhead, Anglesey has been written down by £5.2 million. More recently the outlook for the UK economy has improved, with interest rates now at or near their peak and inflationary indicators suggesting further reductions.
The reduced valuations at 30 September 2023 relate primarily to the undeveloped and unconsented plots at both The Island Quarter, Nottingham and Holyhead. These have been partly offset by a valuation surplus from the ongoing student accommodation development to reflect the considerable progress made on site during the year for that asset. While these land price falls are unwelcome, such valuations tend to be volatile and highly sensitive to small changes in the underlying assumptions of key parameters, such as rental levels, net initial yields, construction costs, finance costs and void periods. As the economic situation improves and inflation eases, we expect to see a rebound in land values given the unprecedented recent rental growth in particular across the private built student accommodation (“PBSA”) and build to rent (“BTR”) sectors.
The Group has incurred net operational and administrative losses, excluding depreciation, of £4.2 million in the year as we seek to continue the transition of our initially consented development plots at The Island Quarter to income-producing assets. This cost increase, required to support both the implementation of our development programme and operations team comes at a point in the cycle when rental income receipts for the Group have reduced.
However, with the restaurant and events venue at 1 The Island Quarter (“1 TIQ”) now established and fully operational and the ongoing student accommodation development in Nottingham planned for completion in May 2024, we anticipate a material uplift in revenues in the medium-term.
The combined valuation and operational losses have been partly offset by the reversal of a £1.7 million deferred tax provision resulting in a total loss for the year of £29.5 million.
Cash deposits and debt financing
Our ambition at the start of the year was to raise significant additional funds to progress, at a pace, the construction of the consented student accommodation development at The Island Quarter and submit further planning applications to better enable investor participation in our development projects.
To that end, the Group entered into a new facilities agreement with Barclays Bank PLC in December 2022 comprising a development facility and an investment facility (together the “facilities”) up to £47.5 million in aggregate. The facilities will enable completion of the construction and subsequent letting of the 693 bed student accommodation development.
The cash deposits of the Group were £2.7 million at 30 September 2023.
However, the liquidity of the Group has materially increased since the balance sheet date by way of the placing in October 2023 of 5 million ZDP shares of £1 each in addition to the signing in November 2023 of a £12 million debt facility with A.S.K. Partners Limited (“ASK”), of which £5 million has been drawn at the date of signing these financial statements. In addition to the 5 million of placed ZDP shares, the Company subscribed for a further 10 million ZDP shares which it will look to place, subject to investor sentiment, during the 5-year term of the ZDP to further boost its cash deposits as required.
Bristol and other property assets
On 6 April 2023, the Group, by way of Conygar Bristol Limited, in which it holds an 80% interest, entered into a conditional contract with Wholesale Fruit Centre (Bristol) Limited to acquire the 14.7 acre site at St Philips Marsh where the Bristol Fruit Market is currently located, paying an initial deposit of £450,000.
Completion of the acquisition is conditional on the satisfaction or, where relevant, waiver of the grant of planning permission for a number of development options by 6 June 2025, subject to extension provisions. In addition, all tenants are required to have surrendered their existing leases by 6 April 2024 and the market licence in respect of the site terminated. The contract is capable of termination if the vacant possession condition has not been satisfied or waived by 6 April 2024 or if the vacant possession and planning permission conditions have not both been satisfied by 6 April 2028.
We intend to utilise part of the net proceeds from the ZDP share placing and ASK loan to further progress both the Bristol and Nottingham planning applications and hope to make announcements in that regard over the next financial year.
However, in order to progress thereafter our pipeline of development projects, in particular at The Island Quarter, we will need to raise substantial amounts either as debt, through asset sales, or from joint ventures and we are in discussions on a number of fronts in that regard.
Further details of the progress made during the year at The Island Quarter and our other projects are set out in the strategic report.
Dividend
The Board recommends that no dividend is declared in respect of the year ended 30 September 2023. More information on the Group’s dividend policy can be found within the strategic report.
Share buy-back authority
The Board will seek to renew the buy-back authority of 14.99% of the issued share capital of the Company at the forthcoming AGM as we consider the buy-back authority to be a useful capital management tool and will continue to use it, as our cash flows allow, when we believe the stock market value differs too widely from our view of the intrinsic value of the Company.
Outlook
We are acutely aware of the impact that continuing economic and political uncertainty is having on the real estate sector and intend to maintain a disciplined approach to both our cash commitments and financial leverage to ensure our balance sheet remains robust.
Our results for the year are reflective of the currently subdued market. However, fundamentals for the PBSA, BTR and life science sectors, remain strong, with supply shortages likely to support improved future pricing. The value from our development projects will be created over the medium-term. Given the progress made, in particular at The Island Quarter, since its acquisition, we remain optimistic about the Group’s future prospects.
N J Hamway R T E Ware
Chairman Chief executive