The Conygar Investment Company Plc – Interim Results for the six months ended 31 March 2018

The Conygar Investment Company PLC

Interim Results for the six months ended 31 March 2018

Highlights

·     Net asset value per share 198p at 31 March 2018 decreased from 203p at 30 September 2017. 

·     Disposed of M&S Food Hall at Ashby-de-la-Zouch for £4.4 million and subject to planning, agreed a lease with B&M Retail and a forward sale.

·     Planning permission granted and construction started for an 80 bed Premier Inn at Parc Cybi, Anglesey.

·     Purchase of industrial property in Selly Oak, Birmingham for £3.5 million in April 2018.

·     Bought back 2.27 million shares (3.4% of ordinary share capital) at an average price of 154.3 pence per share.

·     Total cash available of £35.7 million and no debt.

Summary Group Net Assets as at 31 March 2018

Robert Ware, Chief Executive of The Conygar Investment Company, commented:

“The development pipeline, which is held at cost, presents considerable potential for growth in net asset value per share in the coming years and the team will continue to work hard to deliver these projects. 

Our balance sheet remains strong, with cash reserves and no debt, and we are therefore well placed to maximise the value of the projects and investments we hold and to acquire further assets when it makes sense to do so.”

Enquiries:

The Conygar Investment Company PLC

Robert Ware: 020 7258 8670

Ross McCaskill: 020 7258 8670

Liberum Capital (Nominated Adviser)

Richard Bootle: 020 3100 2222

Henry Freeman: 020 3100 2222

Temple Bar Advisory (Public Relations)

Alex Child-Villiers: 07795 425 580

The Conygar Investment Company PLC

Interim Results

for the six months ended 31 March 2018

Chairman's and Chief Executive's Statement

Progress and Results Summary

The net asset value per share for the six months ended 31 March 2018 decreased to 198.3p from 203.0p at 30 September 2017 (201.0p at 31 March 2017). 

The loss before taxation of £4.3 million compares with a profit of £0.6 million for the six months ended 31 March 2017.  The reasons for the loss in the period are as follows: firstly, there was a paper loss of £1.6 million relating to the Regional REIT shares we hold.  The share price was 98.9 pence per share as at 31 March 2018 and this gave rise to the decrease in value to £25.1 million.  The share price has since recovered to 99.9 pence per share as at the close of business on 21 May 2018.  The shares continue to provide the Group with an important income stream which amounted to £1.1 million in the six month period ended 31 March 2018.

Secondly, we have written down the values of two of our development projects, the most significant of which is the Fishguard Waterfront development.  We announced in January 2018 that we could no longer progress our plans for this mixed-use marina development as Stena Line Ports informed us that the proposed development would interfere with their harbour and ferry operations.  Accordingly, the project cannot go ahead and we have written off a total of £2.4 million.

We have also written off the value of our £0.8 million investment in the Llandudno Junction Project.  We have been working in partnership with Conwy County Council as its preferred development partner to bring forward a 90,000 square foot retail park.  The outlook for retailers is difficult and we believe that we will be unable to deliver the retail park as planned.  However, we hope to devise alternative schemes for the site.

In November 2017, we sold the recently constructed M&S Food Hall at Ashby-de-la-Zouch for £4.4 million, realising a profit of £0.5 million.  On the remaining two acres, we have exchanged a lease agreement with B&M Retail Ltd to construct a 20,000 square foot store with an additional 7,500 square foot garden centre. This agreement is conditional on planning approval, which we hope to receive in the coming weeks.  We have also agreed terms to sell this asset once the construction has completed.

Also in November 2017, detailed planning permission was granted for an 80-bedroom Premier Inn Hotel at Parc Cybi, Anglesey, on the outskirts of Holyhead.  Construction of this hotel began in April 2018 and is expected to complete in early 2019.

After the period end, in April 2018, the Group acquired an industrial property in Selly Oak, Birmingham for £3.5 million, generating income of £215,000 per annum.  The property is located in a predominantly residential area and has strong short to medium term redevelopment prospects and we intend to maximise the value of the site in the near future.

On the financing side, the Group used £3.5 million surplus cash to buy back 3.4% of its shares at an average price of £1.54 per share and this has enhanced net asset value per share by 2 pence.

Development Projects

We continue to make good progress on the majority of our development projects since we last reported.

Work on the planning application for our 37 acre site in Nottingham City Centre is progressing well and we expect to submit the planning application at the end of June 2018.  The application will consist of a mixed-use scheme of over two million square feet which will include apartments, student housing, offices, leisure uses and associated community retail offering along with open public spaces.

We have agreed, subject to contract, with our partner, Stena Line Ports Limited (“Stena”), in the development at Holyhead Waterfront to take full control of the joint venture.  Both parties are working hard to finalise the legal documentation for this agreement and a further announcement will be made once this has completed.  The transaction will enable us to progress with the scheme as planned and we will continue work to obtain detailed planning permission in the coming months.  As part of the transaction, the joint venture company will grant 999 year leases to Stena of the platform at Soldier's Quay, which is not required for the waterfront development, and a warehouse which is situated at Soldier's Point and currently used by Stena.  We have a right to call for a sublease if this warehouse is required for the waterfront development in the future.  Stena will also repay £2.5 million to Conygar, which is its 50% share of a loan Conygar made to the joint venture company, and Stena will receive 20% of the profits of the development once it has completed. 

The option agreement we signed with Horizon Nuclear Power in December 2016, enabling them to construct a logistics centre on our 6.9 acre site at Parc Cybi, is still in place.  Similarly, the second option agreement, which covers the 203 acre site at Rhosgoch for use in the construction of Wylfa B stands until 2022.  The submission of the Development Consent Order for the entire Wylfa B scheme and associated infrastructure by Horizon Nuclear Power has been delayed but is expected to be submitted shortly.

We completed the construction of the initial 65,000 square foot phase of the retail park at Cross Hands, South West Wales in 2017.  The majority of the site is now let and we are finalising the lease for a new 22,000 square foot store which will be built on completion of the legal documentation.

At Haverfordwest, we have successfully discharged the three pre-commencement conditions of the residential permission relating to masterplanning, phasing and ecology.  We plan to submit a reserved matters application for approximately one hundred units this summer.  We continue to work on plans for the retail site where we withdrew our planning application in 2017.

Outlook

It is disappointing that we have written down the value of a number of the development projects over the past six months.  Despite this, the development pipeline, which is held at cost, presents considerable potential for growth in net asset value per share in the coming years and the team will continue to work hard to deliver these projects. 

Our balance sheet remains strong, with cash reserves and no debt, and we are therefore well placed to maximise the value of the projects and investments we hold and to acquire further assets when it makes sense to do so.

N J Hamway                                                    R T E Ware

Chairman                                                        Chief Executive

Financial review

Net Asset Value

The net asset value at 31 March 2018 was £128.1 million (31 March 2017: £141.8 million; 30 September 2017: £135.8 million). The primary movements in the six month period were £1.0 million from investment property sales and net rental income plus £1.1 million of dividends from Regional REIT Limited offset by a £1.6 million write down of the value of our investment in Regional REIT Limited, £3.2 million of development costs written off, £1.6 million of administrative costs and £3.5 million spent on purchasing our own shares.

Cash Flow

The Group used £0.5 million cash in operating activities (31 March 2017: used £1.8 million; 30 September 2017: used £0.2 million).

The primary cash outflows in the period were £2.6 million incurred on investment properties under construction and £3.9 million to buy back shares. These were partly offset by cash inflows of £4.3 million from the sale of an investment property and £0.9 million from the sale of 908,251 Regional REIT Limited shares, resulting in a net cash outflow during the period of £1.5 million (31 March 2017: £17.6 million outflow; 30 September 2017: £26.5 million outflow).

Net Income from Investment Property Activities

*Profit arising from the sale of the investment property portfolio to Regional REIT Limited.

Administrative Expenses

The administrative expenses for the six month period ended 31 March 2018 were £1.6 million (six month period ended 31 March 2017: £1.3 million). The major items were salary costs of £1.1 million and various costs arising as a result of the Group being quoted on AIM.

Financing

At 31 March 2018, the Group had cash of £35.7 million (31 March 2017: £46.0 million; 30 September 2017: £37.2 million). The decrease has resulted mainly from the cash used in buying back shares, administrative costs and investing in the investment properties under construction and developments projects. 

As at 31 March 2018, the Group has no bank loan facilities.

Summary of Investment Properties Under Construction

Summary of Development Projects

1)     In November 2017, the recently constructed M&S Food Hall at Ashby-de-la-Zouch was sold for £4.35 million.

2)     As set out in the Chairman's and Chief Executive's Statement, the Company wrote off its investment in Fishguard Waterfront in the current period and wrote down the carrying value of the proposed Fishguard Lorry Stop.

3)     As set out in the Chairman's and Chief Executive's Statement, the Company wrote off its investment in Llandudno Junction in the current period.

4)     On 29 September 2017, the Company disposed of its 50% interest in the Holyhead truckstop joint venture and assigned to the purchaser the £3.2m loan previously advanced to the operating company, Roadking Holyhead Limited.

The Conygar Investment Company PLC

Consolidated Statement of Comprehensive Income

For the six months ended 31 March 2018

 All of the activities of the Group are classed as continuing.

The Conygar Investment Company PLC

Consolidated Statement of Changes in Equity

For the six months ended 31 March 2018

The Conygar Investment Company PLC

Consolidated Balance Sheet

As at 31 March 2018

The Conygar Investment Company PLC

Consolidated Cash Flow Statement

For the six months ended 31 March 2018

The Conygar Investment Company PLC

Notes to the Interim Results

For the six months ended 31 March 2018

1.         Basis of Preparation

The accounting policies used in preparing the condensed financial information are consistent with those of the annual financial statements for the year ended 30 September 2017 other than the mandatory adoption of new standards, revisions and interpretations that are applicable to accounting periods commencing on or after 1 October 2017, as detailed in the annual financial statements. 

The condensed financial information for the six month period ended 31 March 2018 and the six month period ended 31 March 2017 has been reviewed but not audited and does not constitute full financial statements within the meaning of section 435 of the Companies Act 2006.

The financial information for the year ended 30 September 2017 does not constitute the Group's statutory accounts for that period but it is derived from those accounts. Statutory accounts for the year ended 30 September 2017 have been delivered to the Registrar of Companies. The auditors have reported on these accounts; their report was unqualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The board of directors approved the above results on 21 May 2018.

Copies of the interim report may be obtained from the Company Secretary, The Conygar Investment Company PLC, Fourth Floor, 110 Wigmore Street, London, W1U 3RW.

2.         Segmental Information

       IFRS 8 requires the identification of the Group's operating segments which are defined as being discrete components of the Group's operations whose results are regularly reviewed by the Board of directors. The Group divides its business into the following segments:

·     Investment in the shares of Regional REIT Limited;

·     Investment properties, including investment properties under construction, which are owned or leased by the Group for long-term income and for capital appreciation; and,

·     Development properties, which include sites, developments in the course of construction and sites available for sale.

The only items of revenue or profit/loss relating to the investment in Regional REIT Limited are the dividends received from that investment, the fair value movement during each reporting period and the loss on sale of shares in the current period. The only item of revenue or profit/loss relating to the development properties is the write off of development costs and therefore only the segmented balance sheet is reported.

Balance Sheet

3.     Finance Income/Costs   

5.     Earnings per Share

The calculation of losses / earnings per ordinary share is based on the loss after tax of £4,140,000 (31 March 2017: profit of £495,000; 30 September 2017: profit of £855,000) and on the number of shares in issue being the weighted average number of shares in issue during the period of 65,774,072 (31 March 2017: 72,708,193; 30 September 2017: 70,684,860). There are no diluting amounts in either the current or prior periods.  The total number of ordinary shares in issue (net of 2,505,000 shares purchased by the Company and held as treasury shares) at the date of this report was 64,621,435.

6.     Investment in Regional REIT

Regional REIT is a United Kingdom based real estate investment trust whose shares were admitted to the premium segment of the Official List and to trading on the main market of the London Stock Exchange on 6 November 2015. Regional REIT is managed by London & Scottish Investments Limited, as asset manager, and Toscafund Asset Management LLP, as investment manager.

The movement in the number and value of the shares during the period was as follows:

The Company has agreed a lock-in arrangement in respect of the shares. Specifically, the Company is not permitted to dispose (directly or indirectly) of the legal or beneficial ownership of 8,775,548 shares until 24 September 2018.

7.     Investment Properties Under Construction

Investment properties under construction are freehold land and buildings representing investment properties under development or construction and they amount to £33,075,000 as at 31 March 2018 (31 March 2017: £28,513,000; 30 September 2017: £34,293,000). These properties comprise landholdings for current or future development as investment properties. This methodology has been adopted because the value of these properties is dependent on a detailed knowledge of the planning status, the competitive position of the assets and a range of complex development appraisals. The fair value of these properties rests in the planned developments, and is difficult to estimate pending confirmation of designs and planning permission, and hence has been estimated by the directors at cost as an approximation to fair value. 

The movement in the carrying value of investment properties under construction during the period was as follows:

8.     Investment in Joint Ventures

The Group has a 50% interest in a joint venture, Conygar Stena Line Limited, which is a property development company and a 50% interest in a joint venture, CM Sheffield Limited, which is a dormant company.

On 29 September 2017, the Group disposed of its 50% interest in the share capital of Roadking Holyhead Limited and assigned its loan to Roadking Holyhead Limited for a gross consideration of £3,125,500.

The following amounts represent the group's 50% share of the assets and liabilities, and results of the joint ventures which are included in the balance sheet and income statement:

9.     Development and Trading Properties

The above amounts relate to development properties, which include sites, developments in the course of construction and sites available for sale. The movement in the carrying value of development and trading properties during the period was as follows:

As set out in the Chairman's and Chief Executive's Statement, the Company is unable to progress its proposals for a mixed-use development at Fishguard, West Wales as Stena Line Ports informed the company that the proposed development would interfere with their harbour and ferry operations. Accordingly, the project cannot go ahead and the Company has written off a total of £2.4 million.

The Company has also written down its £0.8m investment in the Llandudno Junction project. 

10.   Net Asset Value per share

Net asset value per share is calculated as the net assets of the Group divided by the number of shares in issue. There are no diluting or adjusting amounts for the reported periods.

11.    Related Party Transactions

The Group has made advances to the following joint ventures in order to provide both long term and additional working capital funding. All amounts are repayable upon demand and will be repaid from the trading activities of those subsidiaries. No provisions have been made against the outstanding amounts.

The loans to Conygar Stena Line Limited may be analysed as follows:

Key Management Compensation

Key management personnel have the authority and responsibility for planning, directing and controlling the activities of the Group and are considered to be the directors of the Company. Amounts paid in respect of key management compensation, including amounts paid to Mr P M C Rabl in advance of his stepping down on 25 January 2018, were as follows:

Independent Review Report to The Conygar Investment Company PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 which comprises the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and the related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the AIM Rules (“the AIM rules”). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting,” as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 is not prepared, in all material aspects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules.

Rees Pollock

Chartered Accountants and Registered Auditors

London

21 May 2018

Notes:

(a)           The maintenance and integrity of The Conygar Investment Company PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website.

(b)           Legislation in the United Kingdom governing the presentation and dissemination of financial information may differ from legislation in other jurisdictions.

The directors of Conygar accept responsibility for the information contained in this announcement.  To the best knowledge and belief of the directors of Conygar (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.