Delivering on our strategy for shareholders
Palace Capital (LSE: PCA) announces its audited preliminary results for the year ended 31 March 2024.
Steven Owen, Executive Chairman, commented:
“Notwithstanding challenging property and financial markets, we have continued to successfully progress our disposal strategy with the result that the Company is now in a substantial net cash position. Since 1 April 2023, the Company has exchanged or completed on the sale of 24 investment properties for £112.9 million and exchanged or completed on £4.4 million of sales of unencumbered residential units at Hudson Quarter, York. During FY24, the Company proactively reduced gross debt by £56.0 million to £8.3 million and the significant de-leveraging of the balance sheet has resulted in a net cash position of £11.5 million as at the year end which has increased to £19.7 million as at 5 June. Proforma net cash, assuming that all exchanged properties complete, is currently £30.1 million. The results below reflect the disposals and debt reduction strategy as well as the good progress made with our asset management activities.
“Since July 2022, cash returned to shareholders from share buyback programmes totals £21.9 million. Following the announcement of these results today, the Company will shortly be launching a tender offer to return capital of approximately £22 million to shareholders and a further announcement to shareholders will be made later this month with the details provided in a circular. Subject to shareholder approval at a specially convened General Meeting, the Company expects to complete the tender offer and return cash to shareholders during July 2024.
“Assuming that the properties currently under offer are sold, the Company will have six investment properties remaining valued at £54.4m. Each of these properties has its own asset management initiatives which are required to be completed in order to be ready for sale. In addition there are 13 apartments remaining at Hudson Quarter valued at £6.6 million assuming that the two under offer are sold. Sales of these will continue subject to market conditions which have materially improved since the start of 2024.
“An additional tender offer is likely to take place later in the year as further property sales are completed.”
| Income statement metrics | Year ended 31 March 2024 | Year ended 31 March 2023 | Change |
| Net rental income | £9.6m | £15.6m | (38.5%) |
| Adjusted profit before tax | £5.4m | £7.6m | (28.9%) |
| Adjusted earnings per share | 13.8p | 17.1p | (19.3%) |
| IFRS loss before tax | (£9.3m) | (£35.8m) | |
| Basic earnings per share | (23.7p) | (80.2p) | |
| Dividends | |||
| Dividend per share | 15.0p | 15.0p | |
| Balance Sheet and operational metrics | |||
| EPRA NTA per share | 262p | 296p | (11.5%) |
| Net asset value | £97.8m | £128.5m | (23.9%) |
| Share buybacks | (£15.2m) | (£6.7m) | 126.9% |
| Like-for-like portfolio valuation decrease | (15.5%) | (18.6%) | |
| Total accounting return | (6.4%) | (20.4%) | |
| Total shareholder return | 13.7% | (15.9%) | |
| EPRA occupancy rate | 82.0% | 87.7% | |
| Debt | |||
| Loan to value | nil | 31% | |
| Total gross debt | £8.3m | £64.3m | (87.1%) |
| Total net (cash)/debt | (£11.5m) | £58.8m | (119.6%) |
| Average cost of debt | 2.9% | 5.8% | (290 bps) |
| Average debt maturity | 2.3 years | 2.0 years |
Financial highlights
· Adjusted profit before tax of £5.4 million (2023: £7.6 million) reflecting the reduction in income following disposals, offset in part by the reduction in associated interest costs and recurring administrative expenses.
· IFRS loss before tax of £9.3 million (2023: £35.8 million loss) primarily due to the portfolio revaluation deficit of £15.4 million.
· Adjusted EPS of 13.8 pence (2023: 17.1 pence) reflecting the movement in adjusted profit before tax but partly mitigated by the accretive share buyback programmes.
· Total dividends paid or declared for the year of 15.0 pence per share (2023: 15.0 pence per share).
· EPRA NTA per share decreased by 11.5% to 262 pence (2023: 296 pence) due to the portfolio revaluation deficit, offset by the 8.0 pence per share buyback accretion.
· Total property portfolio valuation reduced by 15.5% on a like-for-like basis (2023: 18.6% decrease).
· Net cash position of £11.5 million (2023: Net debt £58.8 million, LTV 31%). In the twelve months to 31 March 2024, gross debt reduced by £56.0 million to £8.3 million. Net debt to net cash movement £70.3 million.
· Annualised administration cost savings of £0.9 million (2023: £1.4 million) following the Board changes and the relocation of the Company’s head office, together with other cost reduction measures.
· During FY24, further share buyback programme announced with 6.2 million shares purchased for £15.2 million. Total cash returned to shareholders from buyback programmes to date is £21.9 million.
· A resolution proposing the renewal of the share buyback authority to purchase up to 15% of shares will be proposed at the 2024 AGM.
Operational highlights
· Successful disposal of 21 investment properties for £93.7 million, 4.4% ahead of the 31 March 2023 book value.
· Sale of seven apartments at Hudson Quarter, York for £3.2 million.
· Post 31 March 2024, exchanged contracts or completed the sales of three investment properties totalling £18.5 million, and also conditionally exchanged on an office unit at St James’ Gate, Newcastle for £0.7 million. These sales were in aggregate 1.5% ahead of the 31 March 2024 book value.
· Apartment sales at Hudson Quarter, York have continued post 31 March 2024, with a further two apartment sales having exchanged to the value of £1.2 million. There are 13 units remaining and two units under offer.
· An additional £1.3 million of annualised net rental income was created during FY24 through leasing and review activity and the associated reduction in non-recoverable property costs which was, on average, 5% ahead of the 31 March 2023 ERVs. Annualised net rental income lost from lease expiries and breaks totalled £1.2 million resulting in a net additional annualised increase of £0.1 million from active asset management activity. Net rental income lost following disposals totalled £6.6 million per annum resulting in a net loss in annualised net rental income of £6.5 million.
· Rent collection for the 12 months to 31 March 2024 of 98% (2023: 99%).
· EPRA occupancy at 31 March 2024 increased on a like-for-like basis from 81.2% at 31 March 2023 to 82.0% at 31 March 2024. Proforma occupancy as at 5 June is 87.6%, reflecting post year end lettings and contracted disposals.
· WAULT of 5.4 years to break and 7.5 years to expiry reflecting asset management activities and resilience of portfolio (2023: 4.8 years to break and 6.5 years to expiry).
· Portfolio asset management activity and disposals continue to improve the EPC (Energy Performance Certificate) profile across the portfolio: 100% are now rated A-D and 81.0% are rated A-C (2023: 96.2% and 72.2% respectively).