15 June 2023
PALACE CAPITAL PLC
(“Palace Capital”, the “Group” or the “Company”)
Preliminary Results for the year ended 31 March 2023
FOCUSED ON MAXIMISING CASH RETURNS TO SHAREHOLDERS
Palace Capital (LSE: PCA) announces its audited preliminary results for the year ended 31 March 2023.
Steven Owen, Interim Executive Chairman, commented:
“Despite a difficult market backdrop, the Group sold a number of assets during the year, reducing its debt and progressing its strategy to maximise cash returns to shareholders. A total of eight investment properties were sold for £15.6 million, which was 8% ahead of the 31 March 2022 book value, together with £10.1 million of sales of unencumbered residential units at Hudson Quarter, York. Progress has continued since the year end, and we have either exchanged contracts on or completed the sales of properties totalling £43.4 million, 6% ahead of the 31 March 2023 book value and an accretion of 6 pence per share in EPRA NTA. In the twelve months to 31 March 2023, gross debt reduced by £37.5 million to £64.3 million (net debt £58.8 million) and by 31 July 2023 gross and net debt is expected to be c.£34 million and c.£20 million respectively, equating to a proforma LTV of c.13%.
“The Board’s strategy remains focused on maximising cash returns to shareholders, whilst continuing to remain mindful of consolidation in the Real Estate sector. As part of its considerations, certain properties are either being marketed for sale or are being prepared and readied for sale, whilst other properties are undergoing asset management initiatives in order to prepare them for sale at a future date. Given its low leverage, the Company is well placed in terms of flexibility and optionality regarding the timing of its disposal programme and other strategic initiatives, including various options for returning capital to shareholders. Since July 2022, cash returned to shareholders from share buyback programmes totals £7.9 million.
“It is expected that further progress will be announced in a Trading Update to be released on 26 July 2023 prior to the AGM.”
| Income statement metrics | Year ended31 March 2023 | Year ended31 March 2022 | Change |
| Net rental income | £15.6m | £15.2m | +2.6% |
| Adjusted profit before tax | £7.6m | £7.8m | -2.6% |
| Adjusted earnings per share | 17.1p | 16.9p | +1.2% |
| IFRS (loss)/profit before tax | (£35.8m) | £24.6m | |
| Basic earnings per share | (80.2p) | 53.1p | |
| Dividends | |||
| Dividend per share | 15.0p | 13.25p | +13.2% |
| Balance Sheet and operational metrics | |||
| EPRA NTA per share | 296p | 390p | -24.1% |
| Net asset value | £128.5m | £177.2m | -27.5% |
| Like-for-like portfolio valuation (decrease)/increase | (18.6%) | 3.9% | |
| Total property return | (11.6%) | 12.5% | |
| Total accounting return | (20.4%) | 14.8% | |
| EPRA occupancy rate | 87.7% | 88.5% | |
| Debt | |||
| Loan to value | 31% | 28% | |
| Total gross debt | £64.3m | £101.8m | -36.8% |
| Average cost of debt | 5.8% | 3.2% | +260bps |
| Average debt maturity | 2.0 years | 1.9 years |
Financial highlights
· Adjusted profit before tax decreased by 2.6% to £7.6 million (2022: £7.8 million), principally due to higher finance costs offset by an increase in net rental income and a reduction in recurring administration expenses.
· IFRS loss before tax of £35.8 million (2022: £24.6 million profit), due primarily to the portfolio revaluation deficit of £42.9 million.
· Adjusted EPS increased by 1.2% to 17.1 pence (2022: 16.9 pence) due to the accretive share buyback programmes.
· Total dividends paid or declared for the year increased by 13.2% to 15.0 pence per share (2022: 13.25 pence per share).
· EPRA NTA per share decreased by 24.1% to 296 pence (2022: 390 pence), due to the portfolio revaluation deficit, offset by the 8 pence per share buyback accretion.
· Total property portfolio valuation reduced by 18.6% on a like-for-like basis (2022: 3.9% increase).
· Total Property Return of -11.6% for the year (2022: +12.5%) outperforming the MSCI UK Quarterly Property Index benchmark of -12.6%.
· LTV 31% (2022: 28%). In the twelve months to 31 March 2023 gross debt reduced by £37.5 million to £64.3 million (net debt £58.8 million) and by 31 July 2023 gross and net debt is expected to be c£34 million and c.£20 million respectively equating to proforma LTV of c.13%.
· Annualised administration cost savings of £1.4 million following the Board changes and the relocation of the Company’s head office, together with other ongoing cost reduction measures.
· During FY23 two share buyback programmes announced with 2.6 million shares purchased for £6.7 million. Since 1 April 2023, a further 0.5 million shares have been purchased for £1.2 million. Total cash returned to shareholders from the buyback programmes to date is £7.9 million. The Company today announces an extension of the share buyback programme announced on 6 February 2023 to repurchase up to a further 1 million shares in the capital of the Company for an amount not exceeding £2.5m (excluding stamp duty and expenses) under the resolution passed at the 2022 AGM. A resolution proposing the renewal of this authority will be proposed at the 2023 AGM.
Operational highlights
· Successful disposal of eight investment properties for £15.6 million, 8% ahead of the 31 March 2022 book value.
· Sale of 23 apartments at Hudson Quarter, York for £10.1 million.
· Post 31 March 2023, exchanged contracts or completed the sales of nine investment properties totalling £43.4 million, 6% ahead of the 31 March 2023 book value and an accretion of 6 pence per share in EPRA NTA.
· Apartment sales at Hudson Quarter, York have continued post 31 March 2023, with a further five apartment sales having completed to the value of £2.2 million. There are 18 units remaining.
· 14 new lettings, 15 lease renewals and 16 rent reviews were completed across 228,000 sq ft of space generating £1.1 million of additional annualised contracted rent, 11% ahead of 31 March 2022 ERV, which demonstrates the strong reversionary potential within the portfolio.
· Robust rent collection for the 12 months to 31 March 2023 of 99% (2022: 98%).
· Overall EPRA occupancy remained stable at 87.7% (2022: 88.5%).
· WAULT of 4.8 years to break and 6.5 years to expiry reflecting asset management activities and resilience of portfolio (2022: 4.7 years to break and 6.5 years to expiry).
· Portfolio asset management activity continues to improve the EPC (Energy Performance Certificate) profile across the portfolio: 96.2% are now rated A-D and 72.2% are rated A-C (2022: 88.8% and 55.2% respectively).
Total returns
| Year ended31 March 2023 | Year ended31 March 2022 | |
| Total accounting return | -20.4% | +14.8% |
| Income return | +7.3% | +6.5% |
| Capital return | -17.7 | +6.0% |
| Total property return | -11.6% | +12.5% |
Audio Webcast
A live webcast of the presentation including Q&A will be held today at 09:30am UK Time for investors and analysts and will be available on https://brrmedia.news/PCA_FYR. This will be available for playback after the event and on our website https://palacecapitalplc.com.
PALACE CAPITAL PLC
Steven Owen, Interim Executive Chairman / Matthew Simpson, Chief Financial Officer
info@palacecapitalplc.com
Financial PR
FTI Consulting
Dido Laurimore/ Giles Barrie
Tel: +44 (0)20 3727 1000
palacecapital@fticonsulting.com