Annual Report &
Accounts 2017
Proud to
be making
a difference
TOTAL SHAREHOLDER RETURN (%)
TOTAL PROPERTY RETURN (%)
TCS
FTSE All Share REIT Index
9.6
9.2
7.9
6.1
17.2
12.3
9.6
5.8
10.9
8.3
TCS
IPD
6.0
5.5
9.5
6.3
4.1
3.2
3.6
1.7
2.6
1.0
1.7
1.7
1 YEAR
3 YEARS
5 YEARS
15 YEARS
25 YEARS
ALL
PROPERTY
RETAIL
ALL
RETAIL
WAREHOUSES
OFFICES
(REST OF UK)
SHOPPING
CENTRES
HIGH STREET
RETAIL
Town Centre Securities PLC
are a specialist regional property
investor with a £385m portfolio.
Operating principally in Leeds, Manchester, Scotland and London, we have a
long track record as a listed company with 57 years of dividend payments either
maintained or increased. Our strategy is focused on active management of
income based on local knowledge. We are conservatively funded and we have
delivered high long term returns for shareholders which compare favourably
against market indices.
Introduction
Who we are and what we do
Financial highlights
Five year record
Strategic Report
Business Model and Strategy
Chairman and Chief Executive’s Statement
Intensive Asset Management
Development Programme
Detailed Portfolio Performance
Financial Review
Key Performance Indicators
Car Parking
TCS Energy
Corporate Social Responsibility
Sustainability Report
IFC-3
IFC
2-3
2-3
4-9
4
10-43
10-15
16-31
32-33
34-36
37
38-42
43
44-47
48
Locations of Property Portfolio
Property Valuation Reconciliation
The Board
Valuers’ Reports
JLL
CBRE
Corporate Governance
Directors’ Remuneration Report
Financial Statements
Directors’ Report
Independent Auditors’ Report
Consolidated Financial Statements
Company Financial Statements
49
49
50-51
52-53
52
53
54-60
61-64
65-99
65-66
67-69
70-90
91-99
Notice of Annual General Meeting
100-103
Investor Information
104
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
01
FINANCIAL HIGHLIGHTS
TOTAL SHAREHOLDER RETURN
STATUTORY PROFIT BEFORE TAX
9.6%
2016: -3.9%
£6.7m
2016: £11.9m
EPRA NET ASSETS PER SHARE
EPRA PROFIT BEFORE TAX
359p
£7.0m
2016: 357p
2016: £6.6m
5 YEAR RECORD
EPRA NET ASSETS PER SHARE:
EPRA EARNINGS PER SHARE:
359P
267
308
344
357
359
13.2p
13.7
14.4
12.1
12.4
13.2
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
DIVIDENDS PER SHARE:
EPRA PROFIT BEFORE TAX (000’s):
11.50p
£7m
10.44 10.44 10.44 11.00 11.50
7,284 7,629
6,451 6,595 7,036
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
02 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
TOTAL PROPERTY RETURN
STATUTORY EARNINGS PER SHARE
6.0%
2016: 7.8%
12.7p
2016: 22.4p
TOTAL DIVIDENDS PER SHARE
EPRA EARNINGS PER SHARE
11.5p
2016: 11.0p
13.2p
2016: 12.4p
PROPERTIES AND BORROWINGS (£m):
362
377
385
307
51%
321
158
50%
160
50%
174
49%
186
49%
189
2013
2014
2015
2016
2017
57 YEARS OF UNBROKEN DIVIDENDS
Portfolio
Borrowings
Loan to Value
10
7.5
5.0
2.5
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
03
BUSINESS MODEL AND STRATEGY
We aim to maximise shareholder value by investing in
property and car parking assets.
Our strategic priorities are:
Intensive Management
For many years we have managed our properties
intensively to maximise income. This has translated
into excellent total returns and has allowed us to
maximise and maintain our long term outstanding
dividend growth.
We concentrate our portfolio in the strong regional
cities of Leeds, Manchester, Glasgow and Edinburgh
along with suburban London.
Property Sales and Re-Investment
Property can reach a plateau in respect of value and
income in a low growth economy. It is crucial that such
properties are sold and the capital re-invested in
opportunities where growth can be achieved.
Investment in Car Parking
We have always believed that car parking can generate
above average returns. We built up a substantial business
in the 1990’s and we intend to do the same again.
Secure Funding
We are conservatively funded - the majority of our
borrowings are long term fixed interest. Our loan
to value is moderate at 49% and we have £26m of
headroom as protection for the future.
57 YEARS OF
UNBROKEN
DIVIDENDS
04 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
05
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
I am delighted with the progress that we have made as a business in this
financial year, against a challenging backdrop. We have continued with
our capital recycling and development programmes and our portfolio
has continued to perform better than earlier market forecasts with like
for like increases in passing rent (2.3%) and ERV (2.7%) and the valuation
maintained on a like for like basis.
Edward Ziff OBE
Chairman and Chief Executive
06 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
Portfolio performance
The total like for like valuation of the portfolio is broadly flat year on year.
The like for like decrease in the value of our investment property
portfolio this year has been 1.4% (2016: increase of 0.2%) which reflects
a reversionary yield of 6.5% (2016: 6.4%). The like for like increase in
development property is 20.1% (2016: 23.5%) The total property return
is 6.0% (2016: 7.8%).
The investment properties, developments, joint ventures and car parks
value at the year end stood at £381.1m (2016: £375.5m).
Results
Net assets and EPRA net assets at 30 June 2017 were £191.1m, representing
359 pence per share (2016: £189.9m, 357 pence per share).
We report a statutory profit for the year of £6.7m (2016: £11.9m) which
includes the property revaluation deficit of £1.1m this year (2016: surplus
of £3.5m).
Our EPRA profit before tax of £7.0m (2016: £6.6m) (excluding property
revaluation and property disposals) is in line with expectations. CitiPark’s
operating profit (before funding costs) was up £0.4m or 12%.
Statutory earnings per share (including property revaluation and
property disposals) were 12.7p (2016: 22.4p). EPRA earnings per share
were 13.2p (2016: 12.4p).
Dividends
The Board is recommending a final dividend of 8.25p per share, which,
with the interim dividend of 3.25p per share gives a total of 11.50p.
We have approved this 4.5% increase to reflect the improvement of
earnings within the year.
The final dividend comprises a Property Income Distribution of 7.00p
and an ordinary dividend of 1.25p per share. The final dividend will be
paid on 4 January 2018 to shareholders on the register on 8 December 2017.
Operational Review
We made strong progress against our stated strategic plan:
Intensive Management
We have continued to proactively manage our portfolio
with 178 transactions completed this year (2016: 141).
The total rent roll has risen by 2.6%, occupancy at the
year end was 99% and 99% of rent collections were
achieved within 5 days of the due date.
Merrion Centre
The centre saw record breaking visitor numbers with 11.5m visitors
over the year – an increase of 3.4% on the previous year. We fully let the
Arena Quarter in the first half which completes the £17m scheme which
has transformed the north side of the centre. On a like for like basis the
rent roll has risen by 3.3% and the occupancy is at 99%.
Other properties
We have recently acquired the remaining 50% of Buckley House in Leeds
from the Evans Property Group (‘Evans’); previously this property was
held in a joint venture with TCS owning 50%. It is an excellent time to
achieve 100% ownership of this property as it completes our island
site which is immediately outside the new Victoria Gate John Lewis
scheme and we expect retail demand in this location to improve
significantly over the next few years.
The acquisition was part of a swap deal in which we sold
a long lease for a 0.6 acre plot at our Piccadilly Basin site.
Evans has obtained planning for a 5 star Dakota Hotel which
will help stimulate further development activity. As part of the
swap deal we also received £975,000 in cash.
We completed value adding income and asset schemes at our
Rochdale retail park, at Shandwick Place, Edinburgh and at
Wood Green, London.
Property Sales and Re-investment
Capital Recycling
We continue to use our capital recycling programme
to maximise the growth potential of the portfolio;
we sold two properties in Shandwick Place, Edinburgh for £2m,
an exit yield of 6.1% and we sold Empire House, Sauciehall Street,
Glasgow for £17.5m an exit yield of 5.7%; both deals exceeded
previous valuations.
As income gains flow from our development programme we will
continue to take the opportunity to re-position from Scotland into
Leeds, Manchester and the London suburbs, and we are currently
looking at a number of possible investment opportunities.
Development programme
Our development programme, creating and improving
investment properties from within our portfolio, has continued
to progress well.
Merrion House remains on track for completion in January 2018.
The ibis Styles Hotel, at the Merrion Centre, opened under
management on 8 April and is trading above expectations and
the lease to Premier Inn at Whitehall Road, Leeds completed
in February 2017. These three schemes will add £1.8m to our
income.
We are at the beginning of a major residential development
programme on our Piccadilly Basin site in Manchester. The Council
approved Strategic Planning Framework includes a total of 850
residential units as well as a new multi-storey car park and
canal-side commercial development.
The residential programme has now started; we are on site with
our flagship 91 unit scheme at Tariff Street with our JV partners
in Belgravia Living Group. We also have a JV with Urban Splash
who are developing 31 loft style units. We have secured planning
for our 126 unit Eider House residential development which we
will move onto after Tariff Street is established. We see this as
part of an ongoing programme for years to come as we intend
to expand our residential portfolio.
At our Whitehall Road site in Leeds the market has also been
active. The current scheme has outline permission for 324,000
sq ft of offices plus a 500 space multi-storey car park. We intend
to bring forward the construction of the multi-storey car park
and a further building (either office, residential or hotel) as the
market dictates.
In addition to the above we are looking to bring forward proposals
relating to our ownerships at Vicar Lane, Leeds and Milngavie,
Glasgow where the Waitrose we completed last year is trading
well and we have access to further development land. The car
park acquired this year at Rickmansworth also has residential
development possibilities.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
07
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
Investment in Car Parking
CitiPark
The car park portfolio has traded well this year and we continue
to benefit from strong income growth, particularly at Watford
where the full results of the refurbishment have shown through
for the first time this year.
All of the branches are trading well and the centralised Engine Room shows
continuing improvement and has increased the efficiency of the operation.
Our process of technological development has continued this year; the
rollout of Tesla destination charging points to all our branches is now complete
and we also offer other customers electric charging. We were the first car
park company to implement an emission based tariff which we introduced
at Clipstone Street, London. We have continued to develop our own online
booking system and this is now used extensively for our season ticket sales.
This year we invested in YourParkingSpace.co.uk (YPS), an on-demand parking
app that allows drivers to search, book and park in thousands of spaces across
the UK. This follows a successful partnership with CitiPark.
In June 2017 we completed the purchase of a 140 space freehold multi-storey car
park right next to Rickmansworth underground station. We have previously
traded from this branch as a tenant.
Secure Funding
Net debt at 30 June 2017 amounted to £188.8m (2016: £185.8m).
This comprised £105.8m (net of £0.3m of unamortised lease
incentives) of 5.375% First Mortgage Debenture Stock 2031
and £108m of revolving credit facilities, of which we had drawn
£81.7m at the year end. Finance leases of £4.4m net of cash of £3.1m make up
the remaining balance. The increase in the level of net debt is principally due
to capital expenditure on the development schemes. Borrowings represent
49% of property values (2016: 49%).
Team
It is important to recognise the contribution of the entire team in delivery of
these results and the progress the Company continues to make.
This year sees a number of Board changes worthy of comment. The Company
welcomes Mark Dilley who joined TCS on the 10th July as Group Finance
Director. Mark joins from Asda where he served for 14 years within its Finance
team, before which he worked at JP Morgan and Unilever.
The Company would like to thank the out-going Finance Director Duncan
Syers, and also John Nettleton, a Non-Executive Director as they both retire
from Town Centre Securities.
Duncan completes his second term of office at TCS and leaves with gratitude
and appreciation for his long-standing contribution to the Company. He has
played a significant role in developing our car parking business through two
phases of expansion, whilst shepherding the company through challenging
economic times. The Board wishes him a long, happy, and healthy retirement
and success in all his future endeavours.
John Nettleton joined the Board in 2004 and has played a crucial role in
helping guide the business through significant times of change. He has always
been generous in his giving of time and wisdom to the business. His humour
and humility will be missed around the Board table and the Company sincerely
thanks him for his service and wishes him and his family good health and
happiness in the future. John will step down with effect from the Company’s
Annual General Meeting on 28 November 2017.
The Board intends appointing a new Non-Executive Director in the near future.
08 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
Outlook
Despite a challenging start to the year, with the
Brexit vote in June 2016 creating uncertainty
in the markets and many pessimistic forecasts
of the effect on property values and the
economy, we are pleased with the progress
that we have achieved.
Our performance this year has belied the
market backdrop, and while some of our assets
have experienced market driven falls in value,
our continuing intensive management of the
portfolio has again produced increases in
rental income and also in capital value which
have shown through in these results and
proved the pessimists wrong. We expect this
to continue.
Our capital recycling programme has
accelerated with the disposals from our
Scottish portfolio and we expect to make
further disposals of mature assets in the
forthcoming year. We are actively looking
to invest as and when we see the right
opportunities.
The development programme has gone well
and continues to drive increases in income
throughout the portfolio which has allowed
us to be bold in terms of disposing of mature
ex-growth properties. The portfolio holds
extensive further development opportunities.
Edward Ziff OBE
Chairman and Chief Executive
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
09
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
INTENSIVE ASSET MANAGEMENT
Merrion Centre, Leeds
The Merrion Centre comprises 1m sq ft of retail, leisure, car parking and office space occupying a key position on the north side of the
retail centre of Leeds and linking with the two Leeds Universities to the north of the scheme.
Originally developed in the 1960s the 120,000 sq ft office building and Morrisons store were added in the early 1970’s. We have
continued to invest in the centre every year with over £70m committed in the last 5 years. The latest additions have been the Arena
Quarter and car park refurbishment and the ibis Styles hotel. These successful developments continue the ongoing diversification of
users within the Merrion Centre
The centre offers affordable occupational costs to the discount retail sector. Key tenants in the main retail mall include Morrisons, Boots,
Superdrug, Home Bargains, Poundworld, Rymans, Peacocks, Bon Marche and O2.
We have always worked closely with our tenants and we continue to maintain a high occupancy level of 99%. We have also been
able, through active management, to keep the rent roll moving forward; on a like for like basis the increase has been 3.3% this year.
This year we have completed a letting to Heron Foods for 10 years adding £68,000 to rental income for instance.
By Sector
SQ FT 000
‘000
PASSING RENT
%
£m
ERV
£m
RETAIL
LEISURE
HOTEL
OFFICE
CAR PARKING
210
234
80
249
271
3.9
1.9
0.6
2.1
1.5
39
19
6
21
15
3.9
1.9
1.0
3.3
1.8
TOTAL
1,044
10.0
100
11.9
10 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
11
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
INTENSIVE ASSET MANAGEMENT
Merrion Centre, Leeds
During the year, the main achievement has been the completion of the lettings of the Arena Quarter. This £17m project was started in 2012 to
capitalise on the opening of the Leeds Arena. The northern side of the centre has been completely transformed into a food and leisure hub
along with a complete refurbishment of the multi-storey car park. The scheme was fully let earlier in the year with lettings to Bengal Brasserie
and a Burger King franchise with rents rising £155,000 pa. The total cost of the retail refurbishment of the Arena Quarter has been £6.5m (part of
the £17m) and the rent roll now stands at £820,000 pa; an increase of £580,000 pa compared to 2012 when we started the project.
12 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
13
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
INTENSIVE ASSET MANAGEMENT
Vicar Lane, Leeds
Flannels, Vicar Lane
14 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
Buckley House
We have recently acquired 50% of Buckley House in Leeds from the Evans
Property Group; previously this property was held in a joint venture with TCS
owning the other 50%. It is an excellent time to achieve 100% ownership of
this property as it completes our island site which is immediately outside the
Victoria Gate John Lewis anchored scheme and we expect retail demand in
this location to improve significantly over the next few years.
The acquisition was part of a swap deal; we sold a long lease on a 0.6 acre
ownership from our Piccadilly Basin site in Manchester. Evans has obtained
planning for a 5 star Dakota Hotel on this site which will help stimulate further
development activity. As part of the swap deal we also received £975,000 in cash.
The total ownership on Vicar Lane now comprises a 0.65 acre island site
with 10 retail units, a total of 40,000sq ft of retail space together with upper
floor offices and 17 apartments. The main retail tenants include Flannels
(18,500 sq ft) and High and Mighty occupying (3,000 sq ft). We recently
let 7,000 sq ft to existing occupier Man Behind the Curtain restaurant
in a relocation deal. This is the brand of Michelin starred chef Michael
O’Hare and is scheduled to open in October in the basement formerly part
occupied by Ladbrokes.
The plan for this block is primarily refurbishment/renewal and asset management
and we believe it will provide asset and rental growth over the next few years.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
15
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DEVELOPMENT PROGRAMME
DEVELOPMENT PROGRAMME
Town Centre Securities has always focused on building a strong income yielding portfolio. This continues to be our primary aim and
key strategic initiative.
As we have grown our business over the years, we have been able to acquire a number of sites that give opportunity for significant
development at the appropriate time.
A key focus for Town Centre Securities is to identify the right time to develop these opportunities.
2016/17 saw us make significant progress in numerous sites including the ibis Styles and Premier Inn Hotels in Leeds. Growth
opportunities are inherent within the portfolio and is a key strength of the business.
16 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
17
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DEVELOPMENT PROGRAMME
Merrion House, Leeds
Merrion House will be a 170,000 sq ft state of the art
office building let for 25 years to Leeds City Council
(LCC). It will house all of the Council’s public facing
departments and over 2,000 employees.
The redevelopment will transform a 1970’s office block
into an innovative public sector building which will
facilitate a significant saving in operating costs for LCC.
The scheme is on target for completion by January
2018. This will trigger the new 25 year lease to LCC
which will increase our share of the rental income from
£700,000 pa to £1,664,000 pa.
The total cost of the scheme to TCS is £33m with LCC
purchasing their 50% interest for £28m.
Refurbished Merrion House
18 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
New extension to Merrion House
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
19
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DEVELOPMENT PROGRAMME
ibis Styles, Leeds City Centre Arena Hotel and Marco’s New York Italian
20 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
ibis Styles Hotel open and trading.
The original Merrion Hotel was built in the 1960’s and was effectively unusable before this
redevelopment. The opening of the ibis Styles Hotel and adjoining Marco’s New York Italian Bar and
Restaurant has transformed this area of Leeds and helps further establish the Arena Quarter.
The total cost of the refurbishment has been £10m and the 134 bedroom hotel and restaurant have
opened and are trading under a management agreement using the ibis Styles Hotel and Marco’s New
York Italian brands. Early trading in this new development has been ahead of expectations.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
21
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DEVELOPMENT PROGRAMME
ibis Styles, Leeds City Centre Arena Hotel and Marco’s New York Italian
22 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
23
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DEVELOPMENT PROGRAMME
Premier Inn, Whitehall Road, Leeds
24 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
PREMIER INN WHITEHALL ROAD, LEEDS HANDED OVER ON TIME AND ON BUDGET
The build was completed on time and on budget of £10m. Handover to Premier Inn triggered the new 25 year lease (with the Whitbread PLC
guarantee) generating an annual rent of £680,000 with RPI uplifts.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
25
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DEVELOPMENT PROGRAMME
Whitehall Road, Leeds
This 4.35 acre site is now established at the core of the grade A office area for Leeds City Centre. It currently trades as a 460 space surface car
park (See Pin Reference 10 on page 27). Both the city centre and the train station (which will include HS2) are a short walk away.
The masterplan is for 324,000 sq ft of offices in three buildings along with a 500 space multi-storey car park. There is also potential to replace
one of the office buildings with around 310 residential units.
Whitehall Road Masterplan
4
5
3
2
6
1
1
2
3
4
5
6
No. 1 Whitehall Riverside
(completed 2007)
No. 2 Whitehall Riverside
No. 3 Whitehall Riverside
No. 7 Whitehall Road
CitiPark Multi-story car park
Premier Inn (completed)
TCS Assets
The site’s central location and river frontage gives it particular appeal and this area of Leeds has seen substantial development in recent
times which has delivered two benefits for Whitehall Road - rental values have now been established at £28psf, and the availability for new
requirements is being eroded as other large scale lettings reduce supply.
This will be particularly evident once the adjoining site has been chosen for the Government Property Unit office requirement, which will take up
much of the remaining availability.
We have ongoing discussions regarding potential requirements and we expect to be announcing plans for the next building over the coming
year. Detailed planning has now been granted for 180,000 sq ft of the aforementioned office space and the 500 space multi-storey car park.
We are currently planning to start work on the car park over the next year to capitalise on the increasing demand which will result from
developments on adjoining sites.
26 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
2
1
3
4
1
2
3
4
5
6
First Direct Arena
Merrion House
Merrion Centre
Town Hall
Vicar Lane Island site
Corn Exchange
TCS Assets
7
8
9
10
11
12
13
Trinity Shopping Centre
No. 1 Whitehall Riverside
Premier Inn
Whitehall Road CitiPark Car Park
Victoria Gate
Victoria Quarter
Leeds Station
6
13
11
5
12
7
9
8
10
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
27
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DEVELOPMENT PROGRAMME
Piccadilly Basin, Manchester
The original ownership of the basin dates back to the 1970’s and was acquired through the takeover of the Rochdale Canal Company.
The land assembly continued into the 1980s, and following which a number of significant commercial and residential developments have
been completed and now form part of the wider Manchester Piccadilly Basin. The Basin now comprises circa 12.5 acres and includes a variety of
buildings, car parking and future development sites. The following buildings have been developed by TCS over the past 15 years:
Urban Exchange. A 116,000 sq ft retail building let to Aldi, Marks & Spencer, Go Outdoors and Pure Gym with a current annual rental income of £1.1m pa.
Carvers Warehouse. A 22,000 sq ft listed multi let office building with an annual rental value of £0.3m
Brownsfield Mill. A 40,000 sq ft listed mill building due to undergo conversion into loft style apartments in a JV with Urban Splash
30 Tariff Street. A 240 space multi-storey car park
21 Ducie Street. A 33,000 sq ft new build office occupied by BDP Architects (sold)
Jacksons Warehouse. A residential conversion of a former mill building overlooking the marina (sold)
Vantage Quay. A new 120 unit residential apartment building (sold)
A 480 space surface car park with permanent planning permission
We have secured an approved Strategic Regeneration Framework with Manchester City Council which identifies 800 residential units, a 500
space multi-storey car park and a 200,000 sq ft of canalside commercial development. This gives us access to a fast track planning process
where we bring forward schemes which fit within the framework.
•
•
•
•
•
•
•
•
28 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
12
1
2
3
4
5
Urban Exchange
Tariff Street. Multi-storey Car Park
Planned location of Dakota Deluxe Hotel
Dale Street Car Park
Carvers Warehouse
TCS Assets
6
7
8
9
Jacksons Warehouse
Port Street Car Park
Brownsfield Mill
Burlington House
Development Site
10
BDP Office
11
12
Planned location of Eider House
Piccadilly Station
10
3
2
11
4
9
5
6
1
8
7
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
29
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DEVELOPMENT PROGRAMME
Piccadilly Basin, Manchester
Burlington House
30 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
The agreement with Manchester City Council has allowed us to draw up a residential development programme for many years to come which
will create an opportunity to build up a significant residential rental portfolio in this prime area of Manchester.
We are already on site with the first phase with our Joint Venture Partners in Belgravia Living Group; Burlington House will comprise 91 units in a
flagship scheme. We expect a build period of 21 months at a total cost of £22m and the total value of the scheme when complete is expected
to be over £26m, with a net rental value of £1.2m. We also have detailed consent for a further 126 unit residential block, Eider House, and aim to
commence development of this prior to completion of Burlington House.
Alongside this we have agreed with Urban Splash, the urban regeneration specialists, a redevelopment of Brownsfield Mill into 31 loft-style
apartments. We will receive an initial £1m upon the granting of planning, plus 12.5% of the gross sale proceeds. The scheme has recently achieved
detailed planning permission and is expected to start on site later this year.
The swap agreement with Evans Property Group includes the sale of 0.6 acres for a 5 star 137 bedroom Dakota Deluxe Hotel. This is expected to
open by the end of 2019 and will bring welcome commercial activity and demand to the site.
Dakota Deluxe Hotel
Eider House
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
31
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
DETAILED PORTFOLIO PERFORMANCE
Richard Lewis
Property Director
The post-Brexit performance of the portfolio has been much better
than market forecasts. The Merrion Centre has reduced in value
by 6.2% on yield shift but this has been offset by increases at Vicar
Lane, Leeds (19%), Premier Inn Leeds (12%) and Leeds Dock Car
Park (11%). Overall the portfolio has maintained value this year.
The investment property portfolio has been valued at £323m (2016: £314m) with an average initial yield of 5.6% (2016: 5.7%) and an average
reversionary yield of 6.5% (2016: 6.4%) which we consider is appropriate for our mixed portfolio. Occupancy of around 99% has been maintained
throughout the year, well above the industry average.
% OF
PORTFOLIO
VALUATION
+/-%
INITIAL
YIELD
REVERSIONARY
YIELD
VALUE
£m
93.4
106.9
52.6
54.0
5.6
10.7
25%
28%
14%
14%
1%
3%
323.1
86%
24.8
2.6
25.3
7%
1%
7%
375.7
100%
5.0%
6.5%
4.4%
6.2%
6.4%
4.7%
5.6%
5.6%
7.3%
6.8%
6.5%
6.5%
5.5%
6.5%
3.4%
-6.2%
3.3%
-2.9%
15.8%
1.7%
-1.9%
35.1%
-37.5%
6.3%
0.0%
Portfolio Analysis
RETAIL & LEISURE
MERRION CENTRE (EXCL OFFICES)
OFFICES
OUT OF TOWN RETAIL
DISTRIBUTION
RESIDENTIAL
DEVELOPMENT PROPERTY (CAR PARK INCOME)
OTHER DEVELOPMENT SITES
CAR PARKS
LET PORTFOLIO
VOIDS (1%)
PASSING
RENT
4.9
7.3
2.4
3.5
0.4
0.5
19.1
1.9
1.3
22.3
ERV
£m
5.6
8.3
3.8
3.7
0.4
0.6
22.4
1.9
1.3
25.6
0.2
25.8
32 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
PORTFOLIO ANALYSIS
Portfolio Analysis
By Location:
Total Value: £375.7m
59% LEEDS
16% MANCHESTER
17% SCOTLAND
9% LONDON
By Sector:
Total Value: £375.7m
68% RETAIL/LEISURE
14% OFFICE
7% CAR PARKING
3% RESIDENTIAL
1% DISTRIBUTION
7% DEVELOPMENT
By Lease Expiries:
TPR: £19.1m
46% 0-5 YEARS
28% 5-10 YEARS
26% 10+ YEARS
TOP TEN TENANTS
£1m+
MORRISONS
WAITROSE
£500k-£1m
LEEDS CITY COUNCIL
HOMEBASE
MATALAN
STEP CHANGE
PURE GYM
£250k-£500k
ALDI
GO OUTDOORS
DUNE
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
33
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
FINANCIAL REVIEW
Duncan Syers
Finance Director to 5 September 2017
Mark Dilley
Finance Director (joined 10 July 2017)
The key elements of our strategy have combined to strengthen
both revenues and income:
•
•
•
Intensive asset management across the portfolio has driven
increases in like for like revenues
The combination of property sales and reinvestments has
ensured that we are now beginning to see revenue gains from
our development programme
Continuing to invest and be innovative in our CitiPark business
has ensured revenue and income improvements.
34 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
Results
GROSS REVENUE*
PROPERTY RENTAL
CAR PARKING
2017
£000’s
16,571
2016
£000’s
16,147
2017
£000’s
10,969
2016
£000’s
10,118
PROPERTY EXPENSES
(1,896)
(1,818)
(6,252)
(5,843)
NET REVENUE
14,675
14,329
4,717
4,275
OTHER INCOME/JV PROFIT
1,578
1,326
ADMINISTRATIVE EXPENSES
(5,465)
(4,690)
OPERATING PROFIT
10,788
10,965
TOTAL OPERATING PROFIT
14,675
14,442
FINANCE COSTS
(7,639)
(7,847)
EPRA
7,036
6,595
0
(830)
3,887
5
(803)
3,477
Gross Revenue
Total revenues were up 4.9% year on year. Key drivers
include:
- Merrion Centre rents up 3.3% LFL primarily from
new Arena lettings
- New 2016 London acquisitions annualising
- Lease renewal at Waterside Distribution Park
- New development income from the two hotels
starting to flow through
CitiPark revenues were up 8.4% with strong increases
seen in Manchester, Watford, and the Leeds Dock
and Leeds Whitehall Road branches.
The current development programme will deliver
annual increases in revenue of £1.8m. In addition,
the disposals completed in the year will reduce
annualised rental incomes by £1.3m prior to any
reinvestment.
Property expenses - have been maintained at 11%
of gross rentals
Other income - increases in sundry property
income such as management fees and dilapidations
receipts;
Administrative expenses - increased versus last
year driven by a combination of strengthening the
Estates team, an increase in overall bonus costs, and
the impact of accrual releases in the prior year.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
35
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
FINANCIAL REVIEW
Balance Sheet
Our total non-current assets (including JVs) of £385.1m (2016: £377.7m) include £354.6m of investment properties (2016: £350.4m) and £28.5m of
non-current car parking assets (2016: £25.1m). The Merrion Centre car park is included in the investment property asset. The car parking assets
include £4m (2016: £4m) of leasehold car parks which are accounted for under IFRS as goodwill. There are two such car parks with operating
leases of 22 and 35 years.
We have continued to invest in our properties with a total of £18.7m (majority being on the two hotels) of capital expenditure this year and
loans to the Merrion House joint venture of £4.3m. Capital recycling comprised £22.4m of sales and £4.1m of purchases. Along with other cash
movements this resulted in an increase in borrowings from £185.8m to £188.8m.
The property and car parking balances reflect valuation losses of £2.1m in respect of the investment properties and gains of £1.1m in respect
of car parks (which includes £0.1m which is shown in the Statement of Changes in Equity as other comprehensive income).
Our bank facilities total £108m from Lloyds, RBS and Handelsbanken and are 3 year revolving credit facilities secured on our investment
properties and expire between November 2018 and April 2020. The quoted debenture stock is £106m secured against investment property
and car parking assets and expires in November 2031.
Going concern and headroom
One of the most critical judgements for the Board is the headroom in the Group’s bank facilities. This is calculated as the maximum amount that
could be borrowed taking into account the properties secured to the funders and the facilities in place. The total headroom is currently £26m
(2016: £27.7m) and is considered to be sufficient to support our going concern conclusion.
Total shareholder return and total property return
Total shareholder return of 9.6% (2016: minus 3.9%) is calculated as the total of dividends paid during the financial year of 11.15p (2016: 10.44p)
and the movement in the share price between 30 June 2016 (275p) and 30 June 2017 (290p), and assumed dividends are reinvested.
This compares with the FTSE REIT index of 9.2% (2016: minus 11.7%) for the same period.
The Group’s concentration on maximising income from our portfolio has led to out-performance of the relevant indices over 1, 3, 5, 15 and 25 years.
Total Shareholder Return
TCS
FTSE All Share REIT Index
Total Property Return (12 months ending June 2017)
TCS
MSCI Quarterly Index
17.2
12.3
10.9
8.3
9.6
5.8
9.6
9.2
7.9
6.1
4.1
3.2
3.6
1.7
1.7
1.7
2.6
1.0
9.5
6.3
6.0
5.5
1 YEAR
3 YEARS
5 YEARS
15 YEARS
25 YEARS
RETAIL
RETAIL
WAREHOUSE
SHOPPING
CENTRES
REST OF
UK OFFICES
STANDARD
RETAIL
ALL
PROPERTY
* 15 & 25 year comparable vs FTSE All Share Real Estate market
as REIT Index did not exist
Total property return is calculated as the operating profit from the property rental business adding back administrative expenses and
adjusting for the Merrion Centre car park income, as a percentage of the opening investment properties excluding developments.
Total Property Return for the business for the reported 12 months is 6.0% (2016: 7.8%). This compared to the MSCI/IPD market return of
5.5% (2016: 8.9%)
Risk
The directors have carried out a robust assessment of the principal risks facing the Group, including those that would threaten the
business model, future performance, solvency or liquidity. The detailed Risk Register is shown on pages 59 and 60.
Key Performance Indicators (KPI’s)
Our business model is predicted on delivering maximum return to shareholders so that Total Shareholder Return is the main KPI.
Shown overleaf is a detailed explanation of the various components which contribute to Total Shareholder Return along with some
other statistics of our performance over the last 2 years.
36 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
KEY PERFORMANCE INDICATORS
2017
2016
•
•
•
TSR over 3 years 7.9% (market 6.1%)
Dividends 11.50p – 57 years unbroken record
Dividend cover 1.2 times
•
•
•
TSR over 3 years 19.6% (market 8.9%)
Dividends 1 1.0p – 56 years unbroken record
Dividend cover 1.13 times
•
Two hotel schemes completed on time and
to budget
•
Merrion House progressing to completion in
January 2018 on budget
•
Development schemes are expected to
deliver £1.8m pa extra profit and £10.5m of
additional net assets
•
Three development projects progressing on
time and on budget
•
Development schemes are expected to
deliver £1.8m pa extra profit and £10.5m of
additional net assets
•
178 leasing transactions delivering and
maintaining £22.3m of passing rent and
£25.8m of ERV
•
141 leasing transactions delivering and
maintaining £19.8m of passing rent and
£25.0m of ERV
•
Sales of ex growth properties £19.5m
exit yield 7% ahead of previous valuation
•
£23m re-invested in development schemes
•
Sales of ex growth properties £13.3m
exit yield 6.0%
•
Purchases £6m average initial yield 5.7%
01
DELIVERING RETURNS
TO SHAREHOLDERS
02
CREATING VALUE
THROUGH DEVELOPMENT
03
CREATING VALUE
THROUGH ASSET
MANAGEMENT
04
CAPITAL RECYCLING
05
CAR PARKING
•
•
•
•
Refurbishment and upgrade spend £4m
Profits from refurbished sites £0.5m effective
yield on cost 12.5%
Growth in net revenue 10.3%
Engine Room fully operational handling 5,700
calls per month
06
CONSERVATIVE
FINANCING
•
•
•
•
•
Interest cover 1.9 times
56% of debt long term (14 yrs) fixed interest
Headroom £26m
Loan to value 49%
Average interest cost 3.9%
•
Refurbishment and upgrade spend on new
sites £5m
•
Profits from acquired sites £0.4m effective yield
on cost 6.7%
•
Organic like for like growth in net revenue
of 25%
•
•
•
•
•
•
Engine Room fully operational handling 4,500
calls per month
Interest cover 1.84 times
57% of debt long term (15 yrs) fixed interest
Headroom £27.7m
Loan to value 49%
Average interest cost 4.1%
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
37
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
CAR PARKING
38 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
CAR
PARKING
At CitiPark, our car parking business,
we have continued to consolidate
the assets we purchased in 2014 and
2015. We have upgraded all of the new
branches with our integrated parking
management system, which allows us to
manage all locations remotely from our
Engine Room.
In total, across 16 branches we operate
over
6,400
Car parking spaces
Operating Profit per space is:
£610
per space
We continue to look for opportunities
throughout the UK on either a freehold
or long-leasehold basis.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
39
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
CAR PARKING
Ben Ziff
Managing Director
CitiPark has had another good year
with turnover up 8.4% to £11.0m and
profit growth of 11.8% to £3.9m.
Our investment in technology and in
the Engine Room continues to drive
profit through to the bottom line.
40 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
We have benefitted again from the capital investment in the business; this is the first full year of trading from the refurbished branches in
Watford. The majority of the growth however has come from our core assets.
Merrion is ahead of last year and will show further growth once Merrion House is complete in January 2018 – over 2,000 Leeds City Council
employees will return to the centre and we expect to see parking numbers increase. Whitehall Road has continued to be our strongest performer
as the branch closest to it has reduced in capacity through the development of offices. Leeds Dock continues to perform ahead of budget – the
increase in occupancy in office lettings in the scheme has continued to show significant season ticket demand. As the car park is now effectively
full we will be seeing increases in rates going forward. Piccadilly Basin has also performed strongly although we will lose part of the capacity
through the Dakota Hotel site sale. We expect this to be largely mitigated by increased occupancy elsewhere on the site.
The Engine Room is the 24/7 control centre that provides constant customer service and support to our patrons via an intercom system and a
web chat service. The launching of the Engine Room in June 2015 has allowed us to rationalise staff levels and it continues to drive efficiencies
through the operations.
The next phase of our refurbishment programme is to upgrade our operation at Bell Street, London where demand has increased significantly
following the closure of an adjacent competitor car park and also at Clipstone Street, London where we will add £0.1m to profits through letting
part of the space to a storage operation.
It is also pleasing to announce another acquisition; in June 2017 we completed the purchase of a 140 space freehold multi-storey car park right
next to Rickmansworth underground station. We have previously traded from this branch as a tenant. Now that we have acquired the freehold
we will be bringing forward refurbishment plans for this branch.
Technological Enhancements
Our process of technological development has continued this year; the rollout of Tesla destination electric charging points to all our branches is
now complete and we also offer generic electric vehicle charging. We were the first private car park company to implement an emission based
tariff which we introduced at Clipstone Street, London.
We have continued to develop our own online booking system and this is now used extensively for our season ticket sales which allows us to
minimise the administrative cost of taking these bookings.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
41
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
YourParkingSpace.co.uk
We are delighted to announce an investment in
YourParkingSpace.co.uk (YPS). As a business
we are always open to strategic acquisitions
and investments that will enhance our core
businesses. The investment in YPS is a decision
taken in order to complement the focus of our
property business and directly enhance our
CitiPark division.
YPS was formed in November 2013. The business originated in the sharing economy sector, specialising in driveway rentals, before expanding
to encompass all types of under-utilised parking inventory nationwide, with clients ranging from private individuals with vacant driveways,
to major hotel brands, local authorities, and many of the traditional car park operators. The company has been named in this year’s Mishcon
The LEAP 100, a list of Britain’s most exciting, fastest growing companies.
YPS is an on-demand parking service which connects drivers with over 250,000 parking spaces across the UK, ranging from private driveways
owned by individuals to operator-managed car parks and commercial parking inventory. To-date YPS has generated over £10 million in revenue
for its parking space providers. The service, which operates a mobile app and website, is available UK-wide.
The investment rationale was strengthened following the observation of the transformational effect of the internet across almost every industry.
Today, the vast majority of industries are dominated by major online brands. Examples of this includes: Airbnb and Booking.com in the hotel
industry, SkyScanner and Kayak in the travel sector and Match.com and Tinder in the dating industry. The parking industry is one of the few
remaining sectors awaiting the emergence of a dominant online brand.
The parking industry within the local authority is worth over £1.5 billion each year*. The private sector’s value is estimated to be significantly
higher. The market is huge, there’s a significant consumer appetite for innovation, and it is our belief that YPS, with the support and
investment from our businesses can deliver on its growth plans to transform the industry and in the process, generate additional value for
CitiPark, whilst significantly improving customer experience and the perception of the industry as a whole.
* http://www.britishparking.co.uk/write/documents/library/reports%20and%20research/bpa_uk_parking_sector_report_awweb.pdf
42 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
TCS Energy
We believe passionately in operating the most sustainable and
environmentally friendly business that we can. In addition to our
focus on the Green Agenda we have chosen to actively manage
our consumption of natural resources by using energy which we
generate from renewable sources.
Ben Ziff
Managing Director
TCS Energy was established in April 2002. Since then we have installed 3 Solar Photovoltaic (PV) Farms. These are situated at Leeds Dock
Car Park and Urban Exchange, Manchester.
LEEDS DOCK
The Solar PV system at Leeds Dock MSCP consists of 641 Solyndra 200W Solar Modules. The total system size is 128.2 kWp
Production by calendar year is shown below:
h
W
K
0
8
7
,
7
9
h
W
K
0
8
4
4
9
,
h
W
K
0
0
1
,
5
9
h
W
K
0
2
2
,
0
0
1
h
W
K
9
9
0
8
8
,
h
W
K
0
8
3
6
5
,
2012
2013
2014
2015
2016
2017
(Up to 1 Aug)
URBAN EXCHANGE 1
295
TONNES
Cumulative
CO2 avoided
The Phase 1 Solar PV system at Urban Exchange, Manchester consists of: 240 REC 240W Solar PV modules. The system size is 49.68kWp.
Production by calendar year has been:
h
W
K
7
8
8
0
4
,
h
W
K
2
8
8
9
3
,
h
W
K
3
3
3
9
3
,
h
W
K
6
6
6
6
3
,
h
W
K
4
6
9
,
7
2
2013
2014
2015
2016
2017
(Up to 1 Aug)
URBAN EXCHANGE 2
109
TONNES
Cumulative
CO2 avoided
The Solar PV system at Urban Exchange Phase 2 consists of: 562 Canadian Solar 255W Solar PV modules. The system size is 143.82 kWp.
Production by calendar year has been:
h
W
K
6
6
6
6
3
,
h
W
K
4
6
9
,
7
2
2016
2017
(Up to 1 Aug)
Total KWh Generated
130
TONNES
Cumulative
CO2 avoided
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
43
CORPORATE SOCIAL RESPONSIBILITY
We continue to demonstrate both corporate and
individual staff commitment to our local community.
In recognition of the importance of this commitment to our business, we have, for the first time this year, had a
designated CSR Coordinator, Charlotte Daisy Ziff. She has expanded our grass roots involvement in local charitable
and community organisations and, to encourage engagement amongst our staff in charitable activities, is introducing
an employee involvement programme for TCS and CitiPark.
The charities we have partnered with this year are: Candlelighters at whose annual awards dinner we were proud to
sponsor an award, The Leeds Jewish Welfare Board, Variety The Children’s Charity, LionHeart, The British Legion and,
most recently, Autism Angels. In addition to those partnerships we have sponsored a number of stand alone initiatives,
including the Physcap Three Peaks Challenge. In total, charitable donations by the company amounted to £125,000
(£121,000 in 2015-16), around £35,000 of which we raised through events, collections and competitions in the Merrion
Centre alone.
A key element of our work in the local community this year has been our partnerships with local schools (including
Leeds City Academy, a deprived inner city school), as well as our continued support of Child Friendly Leeds from whom
we won an award through recognizing our contribution as one of their ‘Gold Ambassadors’. It is our firm belief that by
supporting children and young adults in the local community, we can ensure a brighter future for the city of Leeds. Highlights
of our work this year include the two competitions that we organised in conjunction with local businesses for local
school children. We gave local pupils the chance to display their artwork on the hoardings around the Merrion House
project. In partnership with BAM, we entered the decorated hoardings into the ‘Ivor Goodsite Hoarding Competition’
and were awarded runners up for 2017. The second coincided with Healthy Eating Week, which encouraged each
participating class to grow fruits and vegetables in hard hats which were then used as hanging baskets around each
school, the class with the most bumper crop winning a meal, and a chance to learn more about healthy eating, at
Marco Pierre White’s new Leeds restaurant in the Merrion Centre.
We are actively seeking further partnerships and opportunities to further our work in this area and already have some
exciting initiatives in the pipeline, including increasing the scope of our mentoring and work experience offering for
local children and young adults in partnership with social enterprise ‘Ahead Partnership’.
Each of our Executive Directors has given time and personal commitment to one of our nominated charities by holding
leadership positions. Edward Ziff, is the Chairman and Trustee of the Leeds Teaching Hospital Charitable Foundation
and continues a long association with the Leeds Jewish Welfare Board. Richard Lewis was Chairman of Trustees of the
LionHeart charity until July 2017 and Duncan Syers is Chairman of the Yorkshire region of Variety and a trustee of the
national charity
Finally, although not the aim of our charity involvement and community participation, we are always delighted when
the work of our people in this regard is recognised: in recognition of his tireless work for charitable causes and in local
community life, Edward Ziff was awarded an OBE for services to the community and economy in The Queens Birthday
Honours List 2017.
44 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
45
CORPORATE SOCIAL RESPONSIBILITY
46 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
Human Rights
We have a relatively small team in our Head Office and we pride ourselves on our treatment of our employees. However, we do not see a role for
the company in affecting wider human rights.
Emissions
The occupancy rate of our properties is 98% and therefore our tenants effectively control the emissions from our properties. We occupy a small
part of the Merrion Centre and the top two floors of Duke Street, London for our own use and hence our emissions are not significant.
The CitiPark subsidiary business operates a fleet of electric hybrid vehicles for the management of its branch network. These vehicles emit 39g/
km of CO2.
Health & Safety
We are committed to achieving a safe and secure working environment both in our own office locations and in our properties, particularly those
where we maintain an on-site management function such as the Merrion Centre. We have an established Group health and safety policy, which
is approved at Board level annually, and we review health and safety issues and incidents at every Board meeting.
Our operational teams have clear health and safety objectives and review procedures regularly taking action where necessary. Richard Lewis is
the Board member with this responsibility and he is supported by specialist external advisers.
Sustainability
As our portfolio is 99% occupied it is our tenants who are responsible for the energy and waste management. We manage the Merrion Centre
which comprises around 34% of our portfolio and the sustainability report is set out overleaf.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
47
SUSTAINABILITY REPORT
Merrion Centre Environmental Report - Waste Initiative – “resource not waste”
Our philosophy on waste management is firstly to understand how waste is created
and then look at ways of avoiding waste to landfill through Prevention, Reduction, Re-
use, Recycling and Recovery. The Merrion Centre has migrated waste services to Mitie
Waste Management with AWM undertaking the waste collections and disposal. The first
stage of this partnership is to capture accurate data on the waste being produced so a
thorough strategy can be established which maximises both financial and environmental
sustainability. Our aim is to achieve zero waste to landfill.
In summary, The Merrion Centre produced 677,688kgs (678 tonnes) of waste last year and
561,824kgs (562 tonnes) of the waste was recycled/recovered, which equates to 82.90%
that did not go to landfill.
Sustainability Projects
•
•
•
•
•
•
•
•
The Merrion Centre has undergone a transformation with redevelopment happening across
the site and the main shopping centre has itself seen improvements through upgrade projects
with sustainability in mind:
Roofing insulation – a programme of works is currently underway replacing the roofs
across the Centre. The former cinema, Wade House and part of the main Morrisons roof
have now been replaced ensuring insulation is installed which meets building regulations.
LED alterations – an ongoing programme to exchange existing lights with LED options
is underway, replacing all failing fittings with LED. Any new lighting installations are LED
fittings and a larger scheme for light replacement throughout the Centre is currently
being devised.
Upgrading mains cables – a full assessment of the electric mains coming into the Merrion
Centre has been undertaken, including assessing the load requirements against the installation.
A strategy to upgrade cables has been devised and where possible any cables where the
load can be reduced is being addressed accordingly.
Energy Initiatives & Utility Savings
The Merrion Centre have been working on a number of energy saving initiatives including
Installation of PIR’s – a number of PIR sensors have been installed in locations of reduced
usage including in the bin stores, storage areas and service corridors this will limit the energy
usage whilst ensuring areas are well lit when needed. The next stage is to review the
service yard.
Lights out – time clocks have been amended to ensure lighting is reduced to the minimal
requirement out of hours when the Centre is closed. This is not only saving energy but
also adding to the life of the lamps.
WC Water Consumption – a programme to refurbish the wc’s in Wade House has commenced
and as part of these works consideration has been given to water consumption. The
flushers have been reduced to improve consumption. A review of all the Wade House
urinal cisterns and flow rates has been undertaken to ensure there is not an excess of
water each flush. We continue to operate an ecocap system in the Town Centre House
wc’s, which saves water and money whilst protecting the environment and is a fully
biodegradable product. From using the Ecocap system in Town Centre House, In the past
year we have saved 373,220 litres of water which equates to a saving of approx. £480.
Utilities Services Tender – The Merrion Centre energy services were tendered in
December 2016 and The Energy Brokers Limited (TEBL) were successful in winning
the contract. TEBL are responsible for utility procurement and management services.
All services are reviewed on an ongoing basis to better understand the complexity,
reduce consumption and improve energy efficiency.
Through the introduction of our initiatives, last year the Merrion Centre was able to save
£22,715, which equates to a 16% reduction on electrical consumption for our tenants
and this is not withstanding the expansion of the centre and the arrival of new tenants.
Following this success, we’ve also commenced initiatives focusing on gas and water
consumption and in the last 6 months of the year saw an initial reduction of up to 14% savings.
48 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
LOCATIONS OF PROPERTY PORTFOLIO
Edinburgh
Princes Street
Shandwick Place
Glasgow City Region
Bath Street
Buchanan Street
Byres Road
Nerston, East Kilbride
King Street, Kilmarnock
Tannochside Business Park, Uddingston
Homebase, Milngavie
Waitrose, Milngavie
Ilford
CitiPark: Clements Road
Leeds City Region
CitiPark: Leeds Dock
CitiPark: Merrion Centre
CitiPark: Whitehall Road
Thorntons Chambers, Leeds
The Merrion Centre, Leeds
TCS Head Office, Town Centre House
Wade House
Merrion House
Central Road
Vicar Lane
Buckley House
Waterside Business Park
Premier Inn, Whitehall Road
West Park, Harrogate
London
CitiPark: Bell Street
CitiPark: Clipstone Street
9-13 Cheapside, Wood Green
6 Duke Street
448-450 Holloway Road
106a Kilburn High Road
Manchester City Region
CitiPark: Dale Street
CitiPark: Ducie Street
CitiPark: Port Street
CitiPark: Tariff Street
Brownsfield Mill
69-77 Dale Street
Carver’s Warehouse
Belgravia Living Offices
Abingdon Street Market, Blackpool
Urban Exchange
Rochdale Retail Park
Rickmansworth
CitiPark: Rickmansworth
Watford
CitiPark: Church
CitiPark: Gade
CitiPark: Sutton
Property Valuation Reconciliation
EXTERNALLY VALUED BY CB RICHARD ELLIS
EXTERNALLY VALUED BY JONES LANE LASALLE
INVESTMENT PROPERTIES VALUED BY THE PROPERTY DIRECTOR
FINANCE LEASE OBLIGATIONS CAPITALISED
LEASEHOLD IMPROVEMENTS
INVESTMENT
PROPERTIES
£000
FREEHOLD & LEASE
PROPERTIES
£000
200,970
123,745
897
1,159
-
326,771
-
15,350
-
3,303
3,842
22,495
TOTAL
£000
200,970
139,095
897
4,462
3,842
349,266
The CBRE Valuation Report amalgamates valuations of investment properties and joint venture properties as follows
INCLUDED WITHIN INVESTMENT PROPERTIES
INCLUDED WITHIN JOINT VENTURES
VALUATION PER VALUERS REPORT
200,970
26,930
227,900
200,970
26,930
227,900
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
49
THE BOARD
Edward Ziff OBE (57)
Chairman and Chief Executive
Richard Lewis (62) FRICS
Property Director
Edward Ziff joined the Company in 1981
before being appointed to the Board
in 1985, becoming Managing Director
in 1993, Chief Executive in 2001 and
succeeded his Father and Founder of the
Company as Chairman in 2004. Edward is
a life-long supporter of Leeds the city and
plays an active role in the community.
A passionate family man, Edward
brings a strong pastoral care aspect to
the business, encouraging individual
leadership and an active role in the
community through local charities. He is a
governor of the Grammar School at Leeds
and is also Chair and Trustee of the Leeds
Teaching Hospital Charitable Foundation.
In 2013 he was awarded an Honorary
Doctorate of Business Administration by
Leeds Beckett University. Edward was
awarded an OBE for services to the Leeds
community and economy in the 2017
Queen’s birthday honours list.
Richard joined TCS in April 2000 to
rejuvenate the development side of the
business and was appointed to the Board
in 2001. Following a restructuring, he took
over responsibility for the group property
portfolio becoming Property Director
in 2008. Richard is a firm believer in the
need to deliver quality and sustainable
schemes and is an advocate of public/
private partnering. Richard is Chairman of
the LionHeart benevolent fund and also a
Board member of CityCo, a company that
strives to make Manchester city centre a
better place to work, visit and live. Richard
has been presented with the Lifetime
Achievement Award at the Yorkshire
Property Awards due to his work on some
of the biggest city schemes in Leeds.
Duncan Syers (61) ACA
Finance Director
Having trained and qualified with Price
Waterhouse, Duncan was previously
Finance Director of Town Centre
Securities from 1993 to 2001. He left
when the original car park business was
sold to Q Park NV in 2001 as part of the
sale and became Group Finance Director
of Q Park. From 2003 to 2012 he pursued
his own business interests and returned
to the group in 2013 to advise on the
expansion of the car park business. He
was re-appointed as Finance Director in
April 2014 and is retiring from the Board
on 5th September.
Mark Dilley (45) ACMA
Finance Director
Ben Ziff (30)
Managing Director CitiPark & TCS Energy
Mark joined the Board on 10 July 2017 from
Asda Stores Limited (part of Walmart)
where he held a number of senior
finance roles over the last fourteen years,
including most recently as Vice President,
Retail and Property Finance where he
was responsible for all Asda stores and
distribution centres as well as new store
acquisitions. Prior to Asda, Mark held
senior finance positions at JP Morgan in
London for six years. Mark is a graduate of
the University of Oxford and is a qualified
accountant.
Ben joined TCS in 2008, moving into the
car park subsidiary as Managing Director
in 2009. In 2013, he successfully led a
team in the redevelopment of the Merrion
Centre multi-storey car park, which
turned a 60’s structure into a state of
the art facility which is amongst the best
in the country. Since 2014, Ben has led
the acquisitions programme which has
doubled the size of the car park business.
His knowledge of the energy sector led
to the development of TCS Energy in
2012 which pursues green and renewable
energy production. Ben has ensured
the Group uses cutting edge tech to
revolutionise and maximize its operation.
In September 2015, Ben was appointed on
the Board of Directors.
50 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
THE NON-EXECUTIVE BOARD
John Nettleton (69) FRICS ACAArb
Remuneration Committee, Nominations
Committee and Audit Committee
Michael Ziff (64) Hon DUniv (Brad)
Nominations Committee
John Nettleton was appointed to the
Board in July 2004. A chartered surveyor
and arbitrator specialising in retail property
and development, he was senior partner
of Donaldsons Chartered Surveyors from
1997 until his retirement in June 2004.
He is the Senior Non-Executive Director.
John retires from the Board on 28 November
2017.
Dr Michael Ziff was appointed to the Board
in July 2004. He is a Director of W Barratt
& Co Ltd, Transworld Business Advisors
UK Ltd and Mr Arkwrights Emporium
Franchise Ltd. He is President of Maccabi
GB and a member of the international
board of trustees of Maccabi World Union.
He is also President of UK Israel Business.
Ian Marcus (58) FRICS
Remuneration Committee, Nominations
Committee and Audit Committee
Paul Huberman (56) FCA CTA
Remuneration Committee, Nominations
Committee and Audit Committee
Ian Marcus was appointed to the board
on 1 January 2015. He spent over 32
years as an investment banker latterly
at Credit Suisse. Ian is Chairman of The
Prince’s Regeneration Trust, a Crown
Estate Commissioner and a member
of Redevco’s Advisory Board, Senior
Adviser to Eastdil Secured and the Senior
Independent Director for Secure Income
REIT. He is a former chairman of The Bank
of England Commercial Property Forum
and a Past President of the British Property
Federation.
Paul Huberman was appointed a Director
on 1 January 2015. He brings over 30
years’ experience in the property and
finance sector. Paul was previously
Finance Director at 3 quoted companies.
He is currently a Non-Executive Director
of Galliard Homes Limited, a London
housebuilder and a Non-Executive
Director at a privately-owned property
group. Until its recent MBO, Paul was a
Non-Executive Director at JCRA Group
Ltd, the holding company of J C Rathbone
Associates Ltd, the independent advisers
on interest rate risk management, debt
finance and foreign exchange exposure.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
51
VALUERS REPORT
The Directors
Town Centre Securities PLC
Town Centre House
The Merrion Centre
Leeds
LS2 8LY
30 June 2017
Dear Sirs
Town Centre Securities PLC – Property Portfolio Valuation – 30 June 2017
In accordance with your written instructions we have inspected and valued the various freehold and leasehold properties held by
Town Centre Securities PLC and its various subsidiary companies, for year end accounts purposes as at 30 June 2017.
We confirm that these valuations have been prepared in accordance with the RICS Valuation – Professional Standards, January
2014, published by the Royal Institution of Chartered Surveyors in our capacity of external valuers on the basis of Market Value.
No allowances have been made for expenses of realisation or for taxation that might arise in the event of a disposal, deemed or
otherwise. All rental and capital values stated are exclusive of Value Added Tax. Each property has been considered as if free and
clear of all mortgages or other charges which may have been secured thereon. The interests have been valued subject to and
with the benefit of any lettings which have been disclosed.
Having regard to the foregoing we are of the opinion that the aggregate Market Value of the freehold and leasehold interests
owned by the Group and valued by JLL, as at 30 June 2017, subject to and with the benefit of the tenancies currently subsisting,
is:
Freehold
£109,345,000
Long leasehold £29,750,000
Total
£139,095,000
In accordance with our standard practice, we confirm that our valuations have been prepared for Town Centre Securities PLC
and for the purpose to which this certificate refers. No responsibility is accepted to any third party in respect of the information or
advice contained herein, except in circumstances where our prior written approval has been granted.
Yours faithfully
Richard W Longton MRICS
Director
For and on behalf of Jones Lang LaSalle Limited
52 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
The Directors
Town Centre Securities PLC
Town Centre House
The Merrion Centre
Leeds
LS2 8LY
28 July 2017
Dear Sirs
Town Centre Securities PLC – 30 June 2017 valuations
In accordance with your written instructions we have inspected and valued the following properties held by
Town Centre Securities PLC and its various subsidiary companies for accounts purposes as at 30 June 2017:
The Merrion Centre, Leeds;
The Merrion Hotel, Leeds;
Merrion House, Leeds;
Homebase, Main Street, Milngavie;
Waitrose, Milngavie;
363-381 Byres Road and 9-19 Grosvenor Lane, Glasgow;
Phases 1 and 2, Central Retail Park, Rochdale;
6 Duke Street, London;
106A Kilburn High Road, London;
9 Cheapside, 9-10 Cheapside, and 12-13 Cheapside, Wood Green;
448 Holloway Road, London.
The valuations have been prepared in accordance with the RICS Valuation - Professional Standards global - January 2014 and the
RICS Valuation Professional Standards UK January 2014 (revised April 2015), (“the Red Book”) and should be read in conjunction with
our Valuation Report as at 30 June 2017 on behalf of Town Centre Securities PLC.
The valuations have been prepared in our capacity as external valuers, on the basis of Fair Value. No allowance has been made for
expenses of realisation or for taxation that might arise in the event of a disposal, deemed or otherwise and the capital value stated
is exclusive of Value Added Tax.
The properties have been considered as if free and clear of all mortgages or other charges which may have been secured thereon.
The properties have been valued subject to and with the benefit of any lettings which have been disclosed.
Having regard to the foregoing we are of the opinion that the Fair Value of the freehold interests in the above properties owned by
the Group, as at 30 June 2017, subject to and with the benefit of the tenancies currently subsisting, is:
£227,900,000 (TWO HUNDRED AND TWENTY-SEVEN MILLION, NINE HUNDRED THOUSAND POUNDS)
In accordance with our standard practice, we confirm that our valuations have been prepared for Town Centre Securities PLC
and for the purpose to which this certificate refers. No responsibility is accepted to any third party in respect of the information or
advice contained herein, except in circumstances where our prior written approval has been granted.
Yours faithfully
Yours faithfully
Jonathan Adams MRICS
For and on behalf of CBRE Limited
RICS approved valuer
Senior Director
Max Field MRICS
For and on behalf of CBRE Limited
RICS approved valuer
Director
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
53
CORPORATE GOVERNANCE
Town Centre Securities PLC became a listed company 57 years
ago and has throughout its history provided superior returns to
shareholders. As chairman, I take my responsibilities for ensuring
strong corporate governance very seriously, as did my father
before me.
We have always had a strong, independent presence of Non-Executive Directors on our Board and
those Directors have provided invaluable support and guidance for me and my fellow Executives
having challenged and tested our decisions and strategies.
We try wherever possible to comply with the various rules which apply to our Corporate Governance.
Those rules are primarily focused on much bigger companies than ours and sometimes we have to
make pragmatic compromises because of our size and the nature of our shareholder base.
Those compromises are always made using common sense and with due consideration of the best
interests of all shareholders.
I truly believe our Board is now one of the best in our sector and should provide investors with
absolute confidence that their interests are in safe hands.
Edward Ziff OBE
Chairman and Chief Executive
13 September 2017
54 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
This report along with the Directors’ Remuneration Report on
pages 61 to 64 to provides details of our corporate governance
procedures and processes. On page 58 we also set out the
Statement of Compliance which lists the exceptions to this
statement.
Board of Directors
Details of the Board of Directors are given on pages 50 to 51
of this report. At the end of the year the Board comprised
four Non-Executive Directors and four Executive Directors,
including the Chairman and Chief Executive.
Chairman: Edward Ziff OBE
Leadership of the Board and the Company.
Successful achievement of objectives and execution of
strategy.
Responsible for identifying and recruiting Board
members.
Ensure long-term business sustainability
Management and Implementation of Board decisions
Property Director: Richard Lewis
Identify and propose commercial acquisitions and / or
disposals
Manage development programme
Propose major projects or bids
Oversee all banking investments and debt
Manage commercial expenditure
Finance Director: Mark Dilley
Provide advice and guidance on financial strategy
Responsible for ensuring the Group’s financial
commitments, targets and obligations met
Budget and management
Ensure compliance with statutory regulations
Assist with shareholder communications
Managing Director: Ben Ziff
Provide advice and guidance on car parking strategy
Responsible for implementing agreed business plan for
CitiPark
Responsible for identifying and recruiting CitiPark
senior management team
Identify and propose car park acquisitions and/or
disposals
Our four Non-Executive Directors bring considerable
experience and expertise to the work of the Board and
provide a significant independent view to our deliberations.
They regularly challenge and question the conclusions of the
Executive and have a particular focus on the interests of the
non-family shareholders.
Under the Code two Non-Executive Directors are not
considered to be independent, Michael Ziff (due to his
shareholding and his close family ties) and John Nettleton
(due to the length of his service). The Board consider that
both bring extensive experience and expertise and provide
invaluable contributions to the work of the Board. John
Nettleton is the Senior Non-Executive Director.
We are required to identify the Senior Independent
Non-Executive Director. Ian Marcus and Paul Huberman were
appointed on the same day and, while they have different skills
and experience neither is senior to the other. Therefore for the
sake of compliance with the code the position will alternate
- from the date of this report until the next one it will be Paul
Huberman.
The full Board met eight times in the year and the record of
Directors’ attendance at Board meetings is set out overleaf.
Additionally the Board meets once a year to review the
strategic direction of the Group. The Board manages overall
control of the Group’s affairs by the schedule of matters
reserved for its decision. These include the approval of
Financial Statements, business plans, all major acquisitions
and disposals, risk management strategy and treasury
decisions.
The Board has established two divisional Boards, the Property
Review Board and the CitiPark Board, which comprise
Executive Directors and senior managers and met ten times
during the year. The Board has delegated responsibility to
the divisional Boards for assisting the Executive Directors
on measures relating to the Board’s strategies and policies,
operational management and the implementation of the
systems of internal control, within agreed parameters.
There is an agreed procedure for Directors to take
independent professional advice at the Company’s expense, if
necessary, in the performance of their duties. This is in addition
to the access which every Director has to the Company
Secretary. The Group maintains liability insurance on behalf of
Directors and Officers of the Company.
On appointment, the Directors receive information about
the Group’s operations, the role of the Board, the Group’s
corporate governance policies and the latest financial
information. Training and briefings are available to all Directors
on appointment and subsequent training is also undertaken as
appropriate.
The Chairman and Chief Executive meets with the Non-
Executive Directors at least once a year without the other
Executive Directors present to discuss the performance of
the Board and to appraise the Chairman and Chief Executive’s
performance.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
55
Committees of the Board
Nominations Committee
John Nettleton (Chair)
Edward Ziff
Ian Marcus
Paul Huberman
Michael Ziff
The Nominations committee only meets when circumstances
require it. This year a new Finance Director was recruited so there
were a series of meetings as part of the recruitment process.
During the year there were regular discussions regarding succession
planning but there have been no meetings.
As detailed earlier, John Nettleton is due to retire in November
2017, and the company intends to appoint a new independent
Non-Executive Director. This individual will join the Nominations
Committee and ensure that the majority of members are independent
Audit Committee
Paul Huberman (Chair)
Edward Ziff
Ian Marcus
John Nettleton
The Audit Committee is chaired by Paul Huberman and meets
twice a year and considers the following issues:
•
•
•
•
•
final and interim financial statements and matters raised by management
and the external auditors
the effectiveness of the Group’s system of internal controls and
risk management
the risk register
the full and half year valuations
the external auditor, their effectiveness, objectivity and independence and
the terms of engagement and scope of the audit
Remuneration Committee
John Nettleton (Chair)
Ian Marcus
Paul Huberman
The Remuneration Committee meets once a year in September
to approve the pay and incentive awards of the Executive Board.
Details are set out in the Remuneration Report.
CORPORATE GOVERNANCE
Performance of the Board
The effectiveness of the Board, its committees and Directors
was reviewed during the year as part of the September Audit
Committee proceedings. Given the size of the Board and
nature of the business the Directors performed a self-evaluation.
The evaluation of the Board and its committees, which did not
highlight any areas of concern, considered:
•
•
•
•
•
•
•
The Directors’ understanding of the roles and responsibilities
of the Board and of its committees;
The structure of the Group, including succession planning in
key areas of the business;
The Board’s understanding of the Group’s activities and the
appropriateness of its strategic plan;
Whether Board meetings effectively monitor and evaluate
progress towards strategic goals;
Board composition and the involvement of each Director in
the business of the Group;
The overall effectiveness of the Board in the provision of the
necessary experience required to direct the business
efficiently; and
The effectiveness of the Board committees in performing their
roles.
The evaluation of the performance of individual Directors was
undertaken by the Chairman and Chief Executive and the
performance of the Chairman and Chief Executive was
evaluated by the Non-Executive Directors led by the Senior
Non-Executive Director, taking into account the views of the
Executive Directors.
Attendance at Board Meetings (8)
E M ZIFF
R A LEWIS
D S SYERS
C B A ZIFF
J NETTLETON
M A ZIFF
I MARCUS
8
8
8
8
8
8
8
Attendance at Audit Committee Meetings (2)
P HUBERMAN
J NETTLETON
I MARCUS
2
2
2
56 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
Audit Committee Report
Internal Control
At their February and September meetings, as appropriate, the
Audit Committee reached the following conclusions:
•
•
•
•
•
The 2017 Annual Report is fair, balanced, understandable
and provides shareholders with the necessary information to
assess TCS’s position and performance, business model and
strategy
The conclusions on risk management are set out on pages 59
and 60
The Committee reviewed the methodology and outcomes of
the valuations based on reports prepared by the valuers along
with a commentary by the Property Director. The Main Board
also considered this report which set out the process which
included discussions between management and the external
valuers and also a meeting with the Auditors. The Committee
is confident that the valuations were properly conducted as
described in the Financial Statements. The independence
qualifications and objectivity of the valuers were also
monitored by the Committee.
The scope of the forthcoming year’s audit was discussed in
advance by the Audit Committee and the Committee reached
a positive conclusion on the effectiveness of the audit process.
Audit fees were reviewed by the Audit Committee and then
referred to the Board for approval.
Assignments awarded to BDO have been, and are subject to,
controls by management that have been agreed by the Audit
Committee so that audit independence is not compromised. A
summary of the auditor’s remuneration for non-audit services
is provided in Note to the Consolidated Accounts.
These controls have provided the Audit Committee with
adequate confidence in the independence of BDO in its
reporting on the audit of the Group.
Provision C.2.3 of the Code requires that the Directors review,
at least annually, the effectiveness of the Company’s risk
management and internal control systems and should report
to shareholders that they have done so. The Board of Directors
is responsible for ensuring that adequate internal controls are
in place to safeguard the assets and interests of the Group and
considerable importance is placed on maintaining a strong
control environment. The review includes controls over the
preparation of consolidated accounts. However, any such
control system can only give reasonable and not absolute
assurance against material misstatement or loss.
The processes and procedures for identifying and managing
the risks faced by the Group have been operating fully
throughout the year and up to the date of this report. No
significant failings or weaknesses were identified during the
year under review.
The Group’s policies and procedures have been reviewed to
ensure compliance with the Bribery Act 2010 which came into
force on 1 July 2011.
The key control procedures, which the Directors have
established with a view to providing effective internal control,
are as follows:
•
•
•
•
•
A bi-annual review by the Board of all significant business risks,
which also identifies procedures to manage and mitigate such
risks;
A clearly defined organisational structure with appropriate
levels of authority and segregation of duties;
A comprehensive system of financial reporting to the Board
and Senior Executives based upon an annual budget in line
with strategic objectives. Performance is monitored and
relevant action is taken throughout the year through reporting
of variances from budget and updated profit forecasts;
Active participation by the Board in treasury management
matters. Cash flow projections are prepared monthly on a
rolling two year basis; and
Capital expenditure and disposal proposals are appraised
and monitored on a project by project basis. Significant
acquisitions, capital expenditure and disposals are ratified by
the Board.
The Group does not have an internal audit function because,
given the size of the Group, it is not considered necessary. The
need for an internal audit function is considered by the Audit
Committee annually.
The terms of reference for the standing Committees of the
Board (Audit Committee, Remuneration Committee and
Nominations Committee) and the terms and conditions of
appointment of Non executive Directors are available on
application to the Company Secretary at the Company’s
registered office.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
57
CORPORATE GOVERNANCE
Relations with Shareholders
Statement of Directors responsibility
The Directors are responsible for preparing the Annual
Report, the Directors’ Remuneration Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the Directors
have prepared the Group Financial Statements in accordance
with International Financial Reporting Standards (IFRS) as
adopted by the European Union, and the Parent Company
Financial Statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company
law the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the Company and of the
profit or loss of the Group for that period. In preparing these
Financial Statements, the Directors are required to:
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are reason-
able and prudent;
state whether IFRS as adopted by the European Union and ap-
plicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the
Group and Parent Company Financial Statements respectively;
and
prepare the financial statements on a going concern basis
unless it is inappropriate to assume that the Company will
continue in business.
•
•
•
•
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and the Group and enable them to ensure that the Financial
Statements and the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards the Group
Financial Statements, Article 4 of the IAS Regulation. They are
also responsible for safeguarding the assets of the Company
and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
Financial Statements may differ from legislation in other
jurisdictions.
The Directors’ responsibility statement for the year ended
30 June 2017 is set out on page 58 and was approved by the
Board on 13 September 2017.
By order of the Board.
Duncan Syers
Company Secretary
13 September 2017
The Board is committed to maintaining good communications
with shareholders. The Chairman and Chief Executive and
Finance Director maintain a dialogue with institutional
shareholders and analysts immediately after the
announcement of the half year and full year results. Their
views are reported to the Board as appropriate. The Company
also encourages communications with private shareholders
throughout the year and welcomes their participation at
shareholder meetings.
The principal communication with private shareholders is
through the Annual Report and Accounts, the Half Year Report
and the Annual General Meeting (AGM). The Notice of AGM
and any related papers are communicated to shareholders at
least 20 working days before the meeting to give shareholders
sufficient time to consider the business of the meeting. All
Directors attend the AGM and shareholders are given the
opportunity to ask questions of the Board and meet all the
Directors informally after the meeting.
Separate resolutions are proposed for each item of business
and the proxy votes for, against and withheld are announced.
An announcement confirming resolutions passed at the AGM
is made through the London Stock Exchange immediately
after the meeting. The Senior Independent Director is available
to shareholders at all times if they have concerns they wish to raise.
The Group has a comprehensive website on which up to
date information is available to all shareholders and potential
investors (www.tcs-plc.co.uk).
Statement of compliance with the Code
The Board of Directors has complied with the Code
throughout the year except for the following matters:
•
•
•
•
•
EM Ziff combines the roles of Chairman and Chief Executive.
Code Provision A.2.1 requires that a justification for the
combination of roles is required. As Chairman and Chief
Executive, EM Ziff is responsible for the Board and the Group’s
business. In view of the current size and complexity of the
Group the Directors believe that the benefits of splitting the
roles would be outweighed by the cost;
Code Provision A.3.1 requires that the Chairman is determined
independent under the Code at the date of appointment.
EM Ziff was previously Chief Executive and therefore
was not independent at the date of appointment;
Under the Articles it is not currently a requirement for the
Chairman and Chief Executive and the Executive Directors to
retire by rotation as recommended by Code
Provision B.7.1. The Chairman and Chief Executive and the
Executive Directors voluntarily offer themselves for retirement
by rotation Details of the re-elections are given in the Notice
of AGM
The Chairman and Chief Executive has a service contract
with a notice period greater than one year, such being the
recommended limit in Code Provision 0.1.5.
58 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
Risk Management
Risk management is an integral part of our daily activities and is fundamental to the Investment Property business.
Shareholder returns are generated by our property portfolio whose ownership is under the control of the Group. The portfolio is in diverse
locations and sectors and the income is derived from a well-spread tenancy base. Rents are receivable under long term leases so, other than
in tenant failures, income is assured. As such, the Directors consider the business environment to be low risk.
The first line of defence in our risk management process is an active property management system:
•
We hold regular meetings of our property management teams and every property is considered and reviewed regularly. Action is taken
wherever possible to maximise return and mitigate risk
•
That action includes selling properties which are at risk of falling value and purchasing property which have potential for growth in value
The Board meet regularly and review the activities of the property management team. All significant investment and property management
decisions are approved by the Board. At our twice yearly audit meetings we review and consider an updated risk register which includes
mitigation in respect of all significant risks facing the business.
The risk register is summarised below:
Risk stays the same
Risk increased
Risk decreased
PRINCIPAL RISKS AND THEIR IMPACT
HOW IS RISK MANAGED
RISK EXPOSURE CHANGE IN THE YEAR
PROPERTY AND MARKETS
MAJOR ECONOMIC DOWNTURN
Potential major downturn in results and
performance.
DEVELOPMENT/REFURBISHMENT
Delays and other contractual disputes
leading to an increase in costs for the
Group.
Planning constraints leading to delays
and cost over-runs.
MAJOR TENANT FAILURE
Reduction in profits and property values.
Following the Brexit vote the risk of a
downturn is theoretically higher. However,
the market consensus is that the banks are
in a much more stable state now so a major
crisis is less likely.
The 2 hotel developments have now been
completed so the current risk exposure
relates mainly to Merrion House which is
nearing completion. This risk has therefore
reduced significantly this year.
Occupier demand remains stable although
a sustained recession would increase
occupier failures.
This risk is probably in every company’s
risk register. To put this into perspective
we have, in the last 10 years, experienced
the most significant financial crisis in living
history and the group is in good health.
This risk is therefore extremely unlikely in
the context of this review as it would have
to be much worse than the 2008/9 crisis
to have a significant long term effect on
shareholder returns. It therefore does not
merit any further analysis.
Fixed price contracts are agreed wherever
possible and have been in respect of the 3
major schemes.
The Board is regularly updated with detailed
reports of progress, with a focus on
sensitivity and exposure analysis.
The biggest rent payer organisation are
Morrisons at £1.285m and Waitrose at
£1.264m. All of these properties would be
readily lettable so this risk is low. Leeds City
Council are currently paying us £700,000.
Merrion House would probably be
unlettable in its current state so this is the
only tenant failure worth considering in this
review. However the likelihood of a failure
in a major local authority is extremely small.
In general the other major rent payers are
in premises which could be re-let and the
wide spread of our income over different
locations and from different tenants makes
this risk low.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
59
CORPORATE GOVERNANCE
PRINCIPAL RISKS AND THEIR IMPACT
HOW IS RISK MANAGED
RISK EXPOSURE CHANGE IN THE YEAR
FINANCIAL
INTEREST RATE RISES
Increased costs.
With £106m of the debt portfolio at a fixed
interest rate the protection is appropriate.
BREACH OF FINANCIAL COVENANTS
ON BANK BORROWINGS
The Board closely monitors compliance, using
multiple financial models which feeds into
responsible financial planning.
The impact would be high and could lead
to withdrawal of facilities.
MAJOR INCIDENT
Loss of property income and
reputational risk.
CORPORATE
HUMAN RESOURCES
Failure to retain and attract key staff
members could hinder efficiency and
decision-making process in the future.
This risk only relates to the Merrion Centre as
there are no other significant concentrations
of property in one location. The financial risk is
covered by maintaining appropriate insurance
cover and the mitigation is having appropriate
health and safety procedures.
The Group invests significant amounts of capital
and time into ensuring a positive and harmonious
working atmosphere. Individual and collective
staff welfare is of crucial importance to the Board
and the lack of layers within the Group means
that employees have closer access to the Board
than most market competitors.
Overall debt levels have increased this year
and the current likelihood of rises in short
term interest rates has increased based on
increasing inflation figures. However the
consensus expectations are for a series of
small incremental increases which would not
constitute a major risk for the Group.
All major covenants have been complied with
and there is sufficient headroom capacity to
withstand current expectations of the market
downturn.
There are no significant staffing issues to
highlight.
Viability Statement
The Board has assessed the prospects of the Group over a longer period than the twelve months covered by the going concern review. The
period of the review runs until 30 June 2022. The Board considers the resilience of projected liquidity as well as compliance with secured debt
covenants and UK REIT rules, under a range of RPI and property valuation assumptions.
The principal risks and the key assumptions that were relevant to this assessment were as follows:
RISK
Tenant Risk
Borrowing Risk
Liquidity Risk
ASSUMPTION
Tenants continue to comply with their rental obligations over the term
of their leases and do not suffer any insolvency events over the term of
the review.
The Group continues to comply with all relevant loan contacts.
The Group continues to generate sufficient cash to cover its costs
while retaining the ability to make distributions
Based on the work performed, the Board has a reasonable expectation that the Group will be able to continue in business and meet its
liabilities as they fall due over approximately a five year period of its assessment.
Directors’ Responsibility Statement
Each of the Directors, whose names and functions are listed confirm that, to the best of their knowledge:
The Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit of the Group; and
The Chairman and Chief Executive’s Statement and Strategic Report includes a fair review of the development and performance of the
business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
Approved by the Board
Edward Ziff OBE
Chairman & Chief Executive
13 September 2017
Mark Dilley
Group Finance Director
13 September 2017
60 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
DIRECTORS REMUNERATION REPORT
POLICY REPORT
Town Centre Securities PLC has in recent years only operated
one Annual Bonus Plan which rewards and incentivises the
Executive Directors to achieve their goals. The maximum
award under this plan is 60% although this level has never
been awarded.
Whilst the performance and rewards of most quoted property
companies and REITS are studied for comparable data, the
Remuneration Committee uses its discretion to assess the
annual bonus, if any. The Committee sets the objectives of the
Executive Directors and judges the achievements by them.
Awards under the annual bonus plan are made in the context
that:
•
•
•
Salary increases have been limited for many years (the salary
of the Chief Executive has only increased by 9% in 5 years)
Bonus awards have never reached the maximum of 60% and
have averaged 18% over the last 5 years
All final salary related pension commitments have been closed
out
It remains, however critical to the Group’s future success that
the Executive Board are properly rewarded and motivated to
continue to produce superior shareholder returns.
The aim of the Group’s remuneration policy is to remunerate
the Directors fairly for their performance. As a property
company the market performance is directly linked to
valuation movements and consequently it is Group policy
that Directors are not rewarded for market driven changes in
the value of the investment portfolio or the share price. It is
our view that our approach to remuneration is pragmatic and
reflects the aspiration of all shareholders.
During 2016/17 the Directors have made significant progress in
moving towards strategic goals set in their annual objectives.
EM Ziff and RA Lewis received a 2% increase in salary in
October 2016 and a 2.5% salary increase was approved for the
year beginning 1 October 2017.
The salary of M Dilley was agreed by negotiation but with
reference to his package in his previous employment.
Discretionary annual bonuses for the Executive Directors as
set out in the report below have been agreed for significant
achievements.
J A Nettleton
Chairman of the Remuneration Committee
13 September 2017
Policy Report
The Remuneration Committee implements the Group’s policy,
which is to provide remuneration packages with fixed and
variable elements that fairly reward the Executive Directors
for their contribution to the business. It seeks to ensure that
the packages are sufficiently competitive to attract, retain and
motivate the Directors to manage the Group successfully,
without making excessive payments. The policy seeks to
achieve the Group’s strategic and financial objectives by
aligning the interests of the Directors and shareholders.
Fixed remuneration
The fixed element of Directors’ remuneration comprises Base
Salary, Benefits and Pension (see below for the pension). This
element seeks to ensure that the Group attracts and retains
appropriately talented individuals and provides a framework
for them to save for retirement. The Committee considers
the overall balance between the elements. Salaries are
determined with regard to individual and Group performance
and to market rates and comparable roles at comparable
companies. Benefits principally comprise company cars or a
salary alternative, permanent health and medical insurance
premiums. The Chairman and Chief Executive receives
re-imbursement of the costs of maintaining a flat in London
which is regularly used for company meetings. The value of
the benefits are not pensionable.
EM Ziff and RA Lewis receive no pension contributions.
The Group makes payments to a defined contribution scheme
for M Dilley of 13% of salary and for CBA Ziff of 13% of salary.
Variable remuneration
The Group operates an annual bonus plan under which
awards are discretionary and the Committee considers the
performance of each individual Director and of the Group in
assessing the level of payments under the plan. In particular
profit and growth in shareholder value (measured by the
increase in net asset value per share and dividends paid as well
as any increase in share value) were carefully considered by
the Remuneration Committee in awarding the bonus reported
when such increases were the result of Directors’ input. The
maximum award is up to 60% of salary. This bonus is not
pensionable. It is Group policy to reward exceptional growth or
performance.
The Directors participate annually in the Share Incentive
Plan (All Employee Incentive Plan), which was approved by
shareholders in December 2003. The current investment limit
is £1,800 per annum with a share matching element equal to
100% of the investment made subject to forfeiture should the
individual cease to be employed during the first three years of
the plan.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
61
DIRECTORS REMUNERATION REPORT
POLICY REPORT
Service agreements and external appointments
Remuneration of other employees
Remuneration of other employees is set at a level to attract,
motivate and retain talented individuals. This may include a
company car or car allowance as appropriate. Remuneration
levels are recommended by the Executive Directors and noted
by the Remuneration Committee.
Employees are eligible to participate in the Group bonus
scheme and the SIP scheme. The Group makes pension
contributions for eligible employees at rates which vary
depending on seniority.
Consideration of shareholder views
The Group welcomes comments on its remuneration from
shareholders, although no such comments have been
received during the year. These comments are reviewed by
the Remuneration Committee who consider the comments
particularly with a view to overall levels of remuneration.
The Chairman and Chief Executive has a service contract
that is subject to not less than 2 years notice. RA Lewis has no
service contract; M Dilley and CBA Ziff have service contracts
with one years’ notice. The contracts provide for retirement
at 65. The Group can discharge any obligation in relation to
the unexpired portion of their notice period or any notice
required to be given under their service contracts by making
a payment in lieu thereof. If the Group terminates the contract
without giving notice and/or makes a payment in lieu of any
damages to which the executive may be entitled the payment
is to be calculated in accordance with common law principles,
including those relating to mitigation of loss and accelerated
receipt. Directors are permitted to accept Non-Executive
appointments by prior arrangement and provided there is
no conflict with the Group’s objectives. All Non-Executive
positions are listed in the Directors’ biographies on page 50;
none of the Directors receive any remuneration for those
activities.
Non-Executive Director Remuneration
The Non-Executive Directors do not have service contracts.
They are appointed for an initial three year period and this
may be renewed on expiry of that period. The Non-Executive
Directors are not entitled to participate in bonus, or share
based payment schemes and any other benefits.
Performance Graph
The following graph shows the Company’s TSR performance compared to the FTSE All Share REIT Index, measured in the same
way over the eight years ended 30 June 2017. This index has been chosen because the Directors consider it the most appropriate
comparison.
Town Centre Securities
FTSE All Share REIT Index
400
350
300
250
200
150
100
50
0
Jun 09
Jun 10
Jun 11
Jun 12
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Total Shareholder Return (TSR) comprises the total of dividends paid and the increase in net assets per share
62 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
DIRECTORS REMUNERATION REPORT
IMPLEMENTATION REPORT
Directors Remuneration
EXECUTIVE CHAIRMAN
AND CHIEF EXECUTIVE
SALARIES & FEES
BONUSES
TAXABLE BENEFITS
SIP SHARES
PENSION CONTRIBUTIONS
TOTAL
2017
£000
2016
£000
2017
£000
2016
£000
2017
£000
2016
£000
2017
£000
2016
£000
2017
£000
2016
£000
2017
£000
2016
£000
EM ZIFF
571
560
115
56
121
100
EXECUTIVE DIRECTORS
RA LEWIS
DS SYERS
CBA ZIFF
NON EXECUTIVE DIRECTORS
JA NETTLETON
MA ZIFF
P HUBERMAN
I MARCUS
319
223
123
312
210
78
1,236
1,160
47
47
47
47
47
47
47
47
188
188
64
-
33
212
-
-
-
-
-
31
22
25
134
-
-
-
-
-
24
20
11
23
26
6
176
155
-
8
-
-
8
-
-
-
-
-
1,424
1,348
212
134
184
155
2
2
-
2
6
-
-
-
-
-
6
2
2
2
1
7
-
-
-
-
-
7
-
-
22
16
38
-
-
-
-
-
-
-
21
10
31
-
-
-
-
-
809
718
409
368
265
185
281
120
1,668
1,487
47
55
47
47
47
47
47
47
196
188
38
31
1,864
1,675
Footnotes
The Directors’ service contracts were entered into as follows; EM Ziff 22 May 1985 and CBA Ziff 17 September 2015.
In May 2017 EM Ziff and CBA Ziff accepted an invitation to participate in the SIP by each agreeing to purchase shares to the value of £1,800,
paid between June 2017 and November 2017. They will be eligible to receive “matching” shares on a one for one basis. The number of shares
will be determined at the end of November 2017. For illustration, based on the share price as at 30 June 2017, this would equate to each
Director receiving 620 partnership shares and 620 matching shares. In November 2016 EM Ziff and RA Lewis received 638 partnership shares
and 638 matching shares in respect of the 2016 Share Incentive Plan. The total number of partnership and matching SIP shares beneficially
held at 30 June 2017 is shown below.
The increase in the salary of the CEO was 2% compared to the overall increase of 5% in other staff salary costs.
The remuneration of the CEO for the last 5 years is 2013 - £0.60m, 2014 - £0.78m, 2015 - £0.78m, 2016 - £0.72m, 2017 - £0.81m.
Share Incentive Plan
The total number of partnership and matching SIP shares beneficially held at 30 June were:
E M ZIFF
R A LEWIS
D S SYERS
C B A ZIFF
2017
NO. OF SHARES
2016
NO. OF SHARES
7,044
7,044
1,040
7,044
7,542
7,542
1,040
7,542
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
63
DIRECTORS REMUNERATION REPORT
IMPLEMENTATION REPORT
Directors Interests in Shares
Details of the interests of the Directors and their connected parties in the ordinary share capital of the Company and movements in Directors’
shareholdings during the year are set out overleaf. There have been no movements in Directors’ shareholdings between 1 July 2017 and 13
September 2017.
The non-beneficial interest disclosures include 1,069,278 ordinary shares over which a power of attorney has been granted by ME Ziff jointly to
EM Ziff and MA Ziff for personal estate management reasons and 6,133,932 ordinary shares over which a power of attorney has been granted
by AL Manning to EM Ziff for personal estate management reasons. Non-beneficial holdings include shares held in trust and under powers of
attorney.
EM Ziff , RA Lewis and DS Syers are directors of TCS Trustees Limited, Trustee for the shares that are required for the All Employee Share
Incentive Plan. At 30 June 2017, TCS Trustees Limited held 24,490 ordinary shares (2016: 65,700) on behalf of all participants including those
share awards of Executive Directors shown below.
The interests of the Directors and their connected parties in the ordinary share capital of the Company are as follows:
Directors’ Interest in Shares
EM ZIFF
RA LEWIS
DS SYERS
CBA ZIFF
JA NETTLETON
MA ZIFF
I MARCUS
P HUBERMAN
30 JUNE 2017
NUMBER OF SHARES
BENEFICIAL
5,480,652
NON-BENEFICIAL
18,456,606
BENEFICIAL
BENEFICIAL
BENEFICIAL
BENEFICIAL
325,937
24,706
171,067
36,000
BENEFICIAL
2,609,513
NON-BENEFICIAL
12,322,675
BENEFICIAL
BENEFICIAL
-
-
Other Unaudited Disclosures
30 JUNE 2017
£000
30 JUNE 2016
£000
TOTAL EMPLOYEE REMUNERATION
TOTAL DIVIDENDS PAID
4,622
5,928
4,301
5,550
Gender and Diversity
The Board’s policy is to treat all employees equally whatever their gender or ethnicity. The total of the Group employees comprises 33 females
and 89 males and the Board is wholly male.
Voting at Annual General Meeting
At the Annual General Meeting on 23 November 2016 the prior years’ remuneration report was approved unanimously.
Board Remuneration including theoretical maximum bonuses
EM Ziff
571
123
115
229
Salary (100%)
RA Lewis
319
26 64
128
CBA Ziff
123
29 33 45
£000
0
100
200
300
400
500
600
700
800
900
1000
1100
This report was approved by the Board on 13 September 2017 and signed on its behalf by
Benefits including pension
and SIP shares (100%)
Bonus (Paid)
Bonus (UnPaid)
J A Nettleton
Chairman of the Remuneration Committee
64 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
DIRECTORS REPORT
The Directors have pleasure in presenting the Annual Report & Accounts for the year ended 30 June 2017
Principal activities
The principal activities of the Group during the financial year
remained those of property investment, development and trading
and the provision of car parking.
Results for the year and dividends
The results are set out in the Consolidated Income Statement on page 70.
An interim dividend of 3.25p per share was paid on 23 June 2017 as a
PID. The Directors now recommend the payment of a final dividend of
8.25p per share comprising a PID of 7.00p per share and an ordinary
dividend of 1.25p per share. The proposed final dividend will be paid
on 4 January 2018 to ordinary shareholders on the register at the
close of business on 8 December 2017.
Non-current assets
Details of movements in non-current assets are set out in Note 12 to
the Consolidated Financial Statements.
Investment properties are held at fair value and were revalued by
Jones Lang LaSalle and CBRE as at 30 June 2017, on the basis of open
market value, or were revalued by the Directors. The key assumptions
are set out in Note 12 to the Consolidated Financial Statements. In
arriving at the valuation, each property has been valued individually.
Share capital
There were no changes in the Company’s issued share capital during
the year as set out in Note 23 to the Consolidated Accounts.
Purchase of own shares
The Company did not purchase any of its own shares during the year.
At the forthcoming Annual General Meeting (AGM) the Company
will be seeking to renew its authority to purchase up to 14.99% of the
ordinary shares in issue, assuming the remaining authority is fully
utilised. Shares will only be purchased if the Board believes it can
take advantage of stock market conditions to enhance returns for the
remaining shareholders.
Donations
The Group made no political contributions in either year.
Taxation
The Company is not a close company.
Directors and directors’ interests
The Directors of the Company and their biographical details are
shown on page 50. None of the Directors have any contracts of
significance with the Company. Details of the Executive Directors’
service contracts are given in the Directors’ Remuneration Report on
page 60.
Beneficial and non-beneficial interests of the Directors in the shares
of the Company as at 30 June 2017 are disclosed in the Directors’
Remuneration Report on page 64. Details of the interests of the
Directors in share options and awards of shares can be found within
the same report.
In accordance with the Company’s Articles of Association
EM Ziff and RA Lewis will retire by rotation at the Company’s AGM
on 28 November 2017. EM Ziff and RA Lewis will offer themselves for
re-election.
Directors’ indemnity insurance
In accordance with the Company’s Articles of Association, the
Company has provided to all the Directors an indemnity (to the
extent permitted by the Companies Act 2006) in respect of liabilities
incurred as a result of their office and the Company has taken out an
insurance policy in respect of those liabilities. Neither the indemnity
nor insurance provides cover in the event that the Director is proven
to have acted dishonestly or fraudulently.
Annual General Meeting
A Notice of Meeting can be found on pages 100 to 103 explaining
the business to be considered at the AGM on 28 November 2017.
This will include renewal of the Company’s authority to purchase,
in the market, its own shares and allot shares for cash other than
on a pre-emptive basis to existing shareholders.
Disclosure of information to the auditors
The Directors who held office at the date of approval of this
Directors’ Report confirm that, so far as they are each aware, there
is no relevant audit information of which the Company’s auditors
are unaware and each Director has taken all the steps that they
ought to have taken as a Director to make themselves aware of
any relevant audit information and to establish that the Company’s
auditors are aware of that information.
Going concern
After consideration of future trading activities and making
appropriate enquiries, including a review of forecasts, budgets
and banking facilities, the Directors are satisfied that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future. For this reason they continue to
adopt the going concern basis in preparing the Financial Statements.
Independent auditors
The auditors, BDO LLP, have indicated their willingness to continue
in office, and a resolution that they be re-appointed will be
proposed at the AGM.
Relationship Agreement
In accordance with the UK Listing Rules, the Company has entered
into an agreement with the Ziff family concert party which, as it
controls more than 30% of the Group’s total issued share capital, is
deemed a controlling Shareholder. The relationship agreement is
intended to ensure the controlling Shareholder complies with the
independence provisions in Listing Rule 9.2.2A.
Under the terms of the relationship agreement, the Principal
Concert Party Shareholders (Mr E Ziff & Mr M Ziff) have agreed to
procure the compliance of other individual members of the Ziff
family concert party who are treated as controlling shareholders
with independence obligations in the relationship agreement.
The Ziff family concert party, as controlling shareholders of the
Company have a combined aggregate holding of approximately
52% of the Company’s voting rights.
The Board confirms that, since the entry into the relationship
agreement until 13 September 2017, being the latest practicable
date prior to the publication of this annual report and accounts:
• the Company has complied with the independence provisions
included in the relationship agreement;
• so far as the Company is aware, the independence provisions
included in the relationship agreement have been complied with
by the Ziff family concert party and their associates; and
• so far as the company is aware, the procurement obligation
included in the relationship agreement has been complied with
by the Principal Concert Party Shareholders.
Substantial shareholdings
Excluding those of the Directors, the Company had been notified
of the following substantial interests in its share capital at 13
September 2017:
A L Manning
New Fortress Finance
Holdings Limited
Number
of shares
% of issued
capital
6,133,931
3,736,000
11.54
7.03
The Directors’ Report was approved by the Board
on 13 September 2017
DS Syers
Company Secretary
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
65
FINANCIAL STATEMENTS
DIRECTORS REPORT
OPINION
We have audited the financial statements of Town Centre Securities PLC (the ‘parent company’) and its subsidiaries (the ‘group’) for
the year ended 30 June 2017 which comprise the consolidated statement of comprehensive income, the consolidated and company
balance sheets, the consolidated and company statements of changes in equity, the consolidated cash flow statement and the
notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has
been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in preparing the parent company
financial statements is applicable law and United Kingdom Accounting Standards including Financial Reporting Standard 102 The
Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion
• The financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2017
and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to
report to you whether we have anything material to add or draw attention to:
• the disclosures in the annual report set out on page 59 that describe the principal risks and explain how they are being managed
or mitigated;
• the directors’ confirmation in the annual report that they have carried out a robust assessment of the principal
risks facing the group, including those that would threaten its business model, future performance, solvency or liquidity;
• the directors’ statement set out on page 58 in the financial statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting in preparing the financial statements and the directors’ identification of any material
uncertainties to the group and the parent company’s ability to continue to do so over a period of at least twelve months from the
date of approval of the financial statements;
• whether the directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
• the directors’ explanation set out on page 60 in the annual report as to how they have assessed the prospects of the group, over
what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have
a reasonable expectation that the group will be able to continue in operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
66 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS REPORT
To the members of Town Centre Securities PLC
Valuation of the Group’s property interests
Risk
Response
The valuation of the Group’s property interests (pages 82 to 84) is the key
driver of the Group’s net asset value and underpins the results for the year.
These interests consist of investment and development properties, car
park fixed assets, and interests in joint ventures being the Group’s share
of the fair value of investment and development properties within these
entities.
This is an area of significant judgement, with all the interests in property
listed above being subject to independent revaluation to open market
value at each reporting date.
Due to the diverse nature of the Group’s property portfolio, incorporating
a range of geographic areas and industry sectors, there are a number of
different assumptions made by the Group’s external valuers in determining
fair value.
The valuation of the Group’s property interests, including those held
in joint ventures, depends on the individual nature of each property,
including its location, and the rental income it generates. The assumptions
on which the valuations are based are further influenced by quality of
tenant, prevailing market yields and comparable market transactions.
Development properties are valued using the residual appraisal method,
which estimates the fair value of the completed project, including a
suitable developers profit and deducting expected costs to complete.
Both of these valuation methods involve a significant amount of
judgement and the Directors have engaged third party valuation experts
to perform the valuations for each property and development.
We consider this to be a significant risk area as small percentage changes
in each key assumption could materially affect the carrying value of the
assets concerned.
Our audit approach to this area included an assessment
of the external valuation experts and their objectivity,
independence and qualifications to undertake this work.
We confirmed that valuations had been performed
on bases consistent with practices approved by the
Royal Institute of Chartered Surveyors (“RICS”) and the
requirements of IFRS.
We tested the key inputs used in the valuation
calculations by agreeing underlying data used to internal
tenancy schedules, capital expenditure details and lease
terms, which were agreed back to appropriate supporting
documentation. This indicated no difference in internal
data used to that used within the valuation calculations.
We attended meetings with the experts to further
understand the methodology applied and challenge
them on any key assumptions made. In doing this we
considered movements in yield that were outside of
a tolerable range based on our own and wider market
expectations. From these discussions and comparison
to other market data available there was no indication of
any bias on the part of the valuation experts and all key
movements were appropriately justified.
For development properties we agreed that the costs
to complete incorporated into the residual value
calculations were consistent with the actual development
plans in place. We considered the accuracy of the
development project forecasts by considering historic
estimates of costs to complete.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For
planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level
the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the
extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also
take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
The materiality for the group financial statements as a whole was set at £3,900,000 (2016: £3,700,000). This was determined with
reference to a benchmark of total non-current assets (of which it represents 1 per cent) which we consider to be one of the principal
considerations for members of the company in assessing the financial performance of a property investment group.
International Standards on Auditing (UK) also allow the auditor to set a lower materiality for particular classes of transactions,
balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. In this context,
we set a lower level of materiality of £440,000 (2016: £400,000) to apply to all classes of transactions and balances excluding
non-current assets, any property revaluation movements and gains or losses on disposal of properties. This lower level of materiality
was set with reference to a benchmark of profit before interest and tax, adjusted for property revaluation movements (of which it
represents 5%) which we consider to be a key consideration in assessing the financial performance of the business.
Performance materiality was set at 60% of the above materiality levels.
We agreed with the Audit Committee that we would report to the committee all individual audit differences in excess of £50,000.
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the group and its environment, including the group’s system of
internal control, and assessing the risks of material misstatement in the financial statements at the group level.
Financial information relating to the parent company and all other material components of the group was subject to full scope audit
by the group audit team.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
67
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS REPORT
To the members of Town Centre Securities PLC
Other information
The other information comprises the information included in the annual report including the Strategic Report, the Directors’
Report, the Chairman and Chief Executive’s Statement, the Corporate Social Responsibility Statement, the Valuers’ Reports, the
Corporate Governance Report and the Director’s Remuneration Report other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of the other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other
information and to report as uncorrected material misstatements of the other information where we conclude that those items meet
the following conditions:
• Fair, balanced and understandable set out on page 57 – the statement given by the directors that they consider the annual
report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary
for shareholders to assess the group’s performance, business model and strategy, is materially inconsistent with our knowledge
obtained in the audit; or
• Audit committee reporting set out on page 57 – the section describing the work of the audit committee does not appropriately
address matters communicated by us to the audit committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code set out on page 58 – the parts of the directors’
statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a
departure from a relevant provision of the UK Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal
requirements;
• the information about internal control and risk management systems in relation to financial reporting processes and about share
capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and Transparency Rules sourcebook
made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements; and
•
supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
information about the company’s corporate governance code and practices and about its administrative, management and
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in:
• the strategic report or the directors’ report; or
• the information about internal control and risk management systems in relation to financial reporting processes and about share
capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a corporate governance statement has not been prepared by the parent company.
68 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS REPORT
To the members of Town Centre Securities PLC
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 58, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s 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 and the company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
We consider that the audit procedures we have undertaken in accordance with ISAs (UK) have provided us with reasonable
assurance that irregularities, including fraud, would have been detected to the extent that they could have resulted in material
misstatements in the financial statements. Our audit was not designed to identify misstatement or other irregularities that would not
be considered to be material to the financial statements.
Following the recommendation of the audit committee, we were appointed by the shareholders at the company annual general
meeting on 23 November 2016 to audit the financial statements for the year ending 30 June 2017. The period of total uninterrupted
engagement is 2 years, covering the years ending 2016 and 2017.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we
remain independent of the group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Russell Field (Senior Statutory Auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
13 September 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
69
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2017
Gross revenue
Property expenses
NET REVENUE
Administrative expenses
Other income
Valuation movement on investment properties
Reversal of impairment of car parking assets
Profit on disposal of investment properties
Share of post tax profits from joint ventures
OPERATING PROFIT
Finance costs
PROFIT BEFORE TAXATION
Taxation
PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT
EARNINGS PER SHARE
Basic and diluted
EPRA (non-GAAP measure)
DIVIDENDS PER SHARE
Paid during the year
Proposed
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 30 June 2017
Profit for the year
ITEMS THAT MAY BE SUBSEQUENTLY RECLASSIFIED TO PROFIT OR LOSS
Revaluation gains on car parking assets
Revaluation gains on other investments
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Notes
2017
£000
2016
£000
3
3
4
7
8
9
11
11
10
10
27,540
26,265
(8,148)
(7,661)
19,392
18,604
(6,295)
(5,493)
707
(2,085)
1,000
303
599
3,018
500
1,140
1,342
1,400
14,364
19,768
(7,639)
(7,847)
6,725
11,921
-
-
6,725
11,921
12.7p
13.2p
22.4p
12.4p
11.15p
10.44p
8.25p
7.90p
2017
£000
2016
£000
6,725
11,921
100
324
500
108
7,149
12,529
All profit and total comprehensive income for the year is attributable to owners of the Parent. The Notes on pages 74 to 90 are an integral part
of these Consolidated Financial Statements.
70 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
For the year ended 30 June 2017
NON-CURRENT ASSETS
PROPERTY RENTAL
Investment properties
Investments in joint ventures
CAR PARK ACTIVITIES
Freehold and leasehold properties
Goodwill
Investments
Fixtures, equipment and motor vehicles
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Investments
Trade and other receivables
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Financial liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT
Called up share capital
Share premium account
Capital redemption reserve
Revaluation reserve
Retained earnings
TOTAL EQUITY
Notes
2017
£000
2016
£000
12
14
12
13
15
12
15
16
17
18
326,771
325,313
27,852
25,093
354,623
350,406
22,495
4,024
1,950
21,075
4,024
-
28,469
25,099
1,972
2,151
385,064
377,656
2,394
3,311
3,124
2,070
7,388
-
8,829
9,458
393,893
387,114
(10,846)
(11,496)
-
(887)
(10,846)
(12,383)
18
(191,969)
(184,874)
(202,815)
(197,257)
191,078
189,857
23
13,290
13,290
200
559
600
200
559
500
176,429
175,308
191,078
189,857
NET ASSET VALUE PER SHARE
21
359p
357p
The financial statements on pages 70 to 90 were approved by the Board of Directors on 13 September 2017 and signed on its behalf by:
EM ZIFF OBE
Chairman and Chief Executive
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
71
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
BALANCE AT 1 JULY 2015
Comprehensive income for the year
Profit
Other comprehensive income
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Contributions by and distributions to owners
Final dividend relating to the year ended 30 June 2015
Interim dividend relating to the year ended 30 June 2016
BALANCE AT 30 JUNE 2016
Comprehensive income for the year
Profit
Other comprehensive income
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Contributions by and distributions to owners
Final dividend relating to the year ended 30 June 2016
Interim dividend relating to the year ended 30 June 2017
Called up
share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
13,290
200
559
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Revaluation
reserve
£000
Retained
earnings
£000
Total
equity
£000
-
-
500
500
168,829
182,878
11,921
108
11,921
608
12,029
12,529
-
-
(3,902)
(3,902)
(1,648)
(1,648)
13,290
200
559
500
175,308
189,857
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
100
-
-
6,725
324
7,049
6,725
424
7,149
(4,200)
(4,200)
(1,728)
(1,728)
BALANCE AT 30 JUNE 2017
13,290
200
559
600
176,429
191,078
72 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
Interest paid
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase and construction of investment properties
Refurbishment of investment properties
Payments for leasehold property improvements
Purchases of fixtures, equipment and motor vehicles
Proceeds from sale of investment properties
Proceeds from sale of fixed assets
Payments for acquisition of non-listed investments
Loans to joint ventures
Distributions received from joint ventures
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from non-current borrowings
Dividends paid to shareholders
Net cash generated from/(used in) financing activities
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of the year
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
Cash and cash equivalents at year end are comprised of the following:
Cash
Bank overdraft
The Consolidated Cash Flow Statement should be read in conjunction with Note 24.
2017
2016
Notes
£000
£000
£000
£000
24
18,159
(8,051)
13,559
(7,903)
10,108
5,656
(12,136)
(10,612)
(498)
(586)
21,574
61
(1,950)
(4,250)
1,031
7,197
(5,928)
(8,833)
(4,890)
(3,291)
(1,496)
16,050
54
-
(4,916)
567
(7,366)
(6,755)
4,247
(5,550)
1,269
4,011
(887)
3,124
3,124
-
3,124
(1,303)
(2,402)
1,515
(887)
-
(887)
(887)
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
73
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these Consolidated Financial Statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
Town Centre Securities PLC (the Company) is a public limited company domiciled in the United Kingdom. Its shares are listed on the London
Stock Exchange. The Consolidated Financial Statements of the Company for the year ended 30 June 2017 comprise the Company and its
subsidiaries (together referred to as the Group). The address of its registered office is Town Centre House, The Merrion Centre, Leeds LS2 8LY
Basis of Preparation
Statement of compliance
The Consolidated Financial Statements of Town Centre Securities PLC have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006.
Income and cash flow statements
The Group presents its Income Statement by nature of expense. The Group reports cash flows from operating activities using the indirect
method. The acquisitions of investment properties are disclosed as cash flows from investing activities because this most appropriately
reflects the Group’s business activities. Cash flows from investing and financing activities are determined using the direct method.
Preparation of the Consolidated Financial Statements
The Consolidated Financial Statements have been prepared under the historical cost convention as modified by the revaluation of the
Group’s property interests and other investments.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. Changes in assumptions may have
a significant impact on the financial statements in the period the assumptions are changed. Management believes that the underlying
assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the Consolidated Financial Statements, are disclosed in Note 2.
Changes in accounting policy and disclosure
a) Standards, amendments to published standards and interpretations effective for the period ended 30 June 2017
There are no IFRSs or IFRIC interpretations that are effective for the first time for the period ended 30 June 2017 that have had a material
effect on the Group.
b) New standards, amendments to published standards and interpretations issued but not effective for the period ended 30 June 2017
and not early adopted
The effects of IFRS 9, IFRS 15 and IFRS 16 are still being assessed by the Directors, as the adoption of this new standard may have a significant
effect on the Group’s future financial statements.
Going concern
The Directors have reviewed the cash flow forecasts of the Group and the underlying assumptions on which they are based. The
Consolidated Financial Statements include details of bank and debenture facilities and of investment properties at open market value. The
Group uses external valuers to determine the value of properties and these values are used in the assessment of loan to value covenants,
compliance with which is reviewed on a regular basis.
The Group’s business activities, together with the factors likely to affect its future development, are set out in the Chairman and Chief
Executive’s Statement. In addition, the Directors considered the Accounting Polices note which includes the Group’s objectives, policies and
processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its
exposure to credit and liquidity risk.
The Board considers that it has adequate financial resources (as set out in Note 18), tenants with appropriate leases and covenants, and
properties of sufficient quality to enable it to conclude that it is well placed to manage its business risks in the current economic climate. The
Directors have therefore concluded that the Group has adequate resources to continue in operational existence for the foreseeable future
and continue to adopt the going concern basis of accounting in preparing the Consolidated Financial Statements.
Consolidation
a) Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus
costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The
excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the
cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Income
Statement.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Joint Arrangements
A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to
joint control.
74 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
1. ACCOUNTING POLICIES continued
Investments in joint ventures are accounted for using the equity method of accounting and are initially recognised at cost.
The Group’s share of its joint ventures post-acquisition profits or losses is recognised in the Income Statement. Investments in joint ventures
are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of net assets of the joint ventures less
any impairment in the value of the investment.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint
venture. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted by the
Group.
Segmental Reporting
An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that
are different from those of other business segments.
The Group operates in two business segments comprising property rental and car park operations. The Group’s operations are performed
wholly in the United Kingdom.
The chief operating decision-maker has been identified as the Board. The Board reviews the Group’s internal reporting in order to assess
performance and allocate resources. Management has determined the operating segments based on these reports.
Non-Current Assets
a) Investment properties
Investment property comprises freehold land and buildings and long-leasehold buildings. This comprises mainly retail units, offices and
operational car parks, and is measured initially at cost, including related transaction costs. These are held as investments to earn rental
income and for capital appreciation and are stated at fair value at the balance sheet date.
Investment properties held under finance leases are initially valued at the present value of minimum lease payments payable over the term of
the lease.
After initial recognition investment property is carried at fair value, based on market values. It is then determined twice annually by
independent external valuers or held at Directors’ valuation if appropriate. The gains or losses arising from these valuations are included
in the Consolidated Income Statement. When an existing investment property is redeveloped for continued future use as an investment
property, it remains an investment property whilst in development.
The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income
from future leases in light of current market conditions.
Subsequent expenditure is added to the asset’s carrying amount only when it is probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the
Consolidated Income Statement during the financial period in which they are incurred.
Borrowing costs associated with direct expenditure on properties undergoing major refurbishment are capitalised. The amount is calculated
using the Group’s weighted average cost of borrowing.
Property that is being constructed or developed for future use as an investment property is also classified as investment property under the
sub-heading development property and is stated at fair value.
The gain or loss arising on the disposal of investment properties is determined as the difference between the net sale proceeds and the
carrying value of the asset at the beginning of the period and is recognised in the Consolidated Income Statement of the period during
which the sale becomes unconditional. In circumstances where the exchange of contracts and the completion of the disposal fall on either
side of the balance sheet date, the asset is re-classified as a current asset in the Consolidated Balance Sheet.
Freehold land held for development is not depreciated.
(b) Freehold and leasehold properties
Freehold and leasehold properties are initially recognised at cost and are subsequently carried at fair value, based on periodic valuations
by a professionally qualified valuer. These revaluations are made with sufficient regularity to ensure that the carrying amount does not differ
materially from that which would be determined using fair value at the end of the reporting period. Changes in fair value are recognised in
other comprehensive income and accumulated in the revaluation reserve except to the extent that any decrease in value in excess of the
credit balance on the revaluation reserve, or reversal of such a transaction, is recognised in profit or loss. Freehold land is not depreciated.
Properties held under finance leases are initially valued at the present value of minimum lease payments payable over the term of the lease.
Depreciation on assets under construction does not commence until they are complete and available for use. Depreciation is provided on all
other items within this category so as to write off their carrying value over their expected useful economic lives.
At the date of revaluation, the accumulated depreciation on the revalued freehold property is eliminated against the gross carrying amount
of the asset and the net amount is restated to the revalued amount of the asset. The excess depreciation on revalued freehold buildings,
over the amount that would have been charged on a historical cost basis, is transferred from the revaluation reserve to retained earnings
when freehold land and buildings are expensed through the consolidated statement of comprehensive income (e.g. through depreciation,
impairment). On disposal of the asset the balance of the revaluation reserve is transferred to retained earnings.
(c) Fixtures, equipment and motor vehicles
Fixtures, equipment and motor vehicles are shown at historical cost less depreciation and provision for impairment. Historic cost includes
expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight line basis at rates appropriate
to write off individual assets over their estimated useful lives of between three and ten years.
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. An asset’s carrying amount
is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the
Consolidated Income Statement.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
75
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
1. ACCOUNTING POLICIES continued
Fair Value
Fair value estimation under IFRS 13 requires the Group to classify for disclosure purposes fair value measurements using a fair value hierarchy
that reflects the significance of the inputs used in making the measurements on its financial assets. The fair value hierarchy has the following
levels:-
Level (1) quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level (2) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices); and
Level (3) inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The fair value of assets held for sale, other financial assets and investment property are determined by using valuation techniques. See note 2
for further details of the judgements and assumptions made in relation to investment properties.
Goodwill
Goodwill represents the excess of the cost of a business combination over the Group’s interest in the fair value of identifiable assets,
liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued.
Direct costs of acquisition are recognised immediately as an expense. Goodwill is capitalised as an intangible asset with any impairment
in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets,
liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of
comprehensive income on the acquisition date.
Impairment of assets
Assets other than investment properties are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of any asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Investments
The Group classifies its listed investments as available for sale financial assets.
Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories
of financial assets.
Purchases and sales of investments are recognised on the trade date, which is the date the Group commits to purchase or sell the asset.
Investments are initially recognised at fair value plus transaction costs. Investments are derecognised when the rights to receive cash flows
from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
Available for sale financial assets are subsequently carried at fair value. The fair values of listed investments are based on current bid prices.
Unrealised gains and losses arising from changes in the fair value of securities classified as available for sale are recognised in equity. When
securities classified as available for sale are sold, the accumulated fair value adjustments are included in the Income Statement as gains and
losses from investment securities.
Dividends on available for sale equity instruments are recognised in the Consolidated Income Statement when the Group’s right to receive
payment is established.
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is
impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security
below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available for sale financial
assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on
that financial asset previously recognised in profit or loss – is removed from equity and recognised in the Consolidated Income Statement.
Operating leases
(a) A Group company is the lessee
Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Payments made
under operating leases (net of any incentives received from the lessor) are charged to the Consolidated Income Statement on a straight line
basis over the period of the lease.
(b) A Group company is the lessor
Properties leased to third parties under operating leases are included in investment property in the Consolidated Balance Sheet. The leases
in our portfolio have a wide variety of term and tenures and there is no standard.
Unamortised tenant lease incentives
Leasehold incentives given to tenants on entering property leases are recognised as unamortised lease incentives. The operating lease
incentives are spread over the non-cancellable life of the lease. Where this ends with a clean break clause the incentives are spread to this
date unless management is reasonably certain that the break will not be exercised.
Trade receivables
Trade receivables are recognised initially at fair value and are subsequently measured at cost less provision for impairment. A provision
for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of the receivables concerned. The amount of the provision is recognised in the Consolidated Income
Statement.
Held for sale assets
Held for sale assets are investment properties which are designated as available for sale and not recognised in any of the categories above.
Held for sale assets are held at fair value and are derecognised when the Group has transferred substantially all the risks and rewards of
ownership.
76 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
1. ACCOUNTING POLICIES continued
Cash and cash equivalents
Cash and cash equivalents are carried in the Consolidated Balance Sheet at cost. Cash and cash equivalents comprise cash in hand, deposits
held at call with banks, other short-term, highly liquid investments with original maturities of three months or less and bank overdrafts. Bank
overdrafts are included within borrowings in current liabilities on the Consolidated Balance Sheet.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Borrowings
Borrowings are recognised net of transaction costs incurred. Debt finance costs are amortised based on the effective interest rate.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve
months after the balance sheet date.
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a “finance lease”),
the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased
property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment
is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated
statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportion of the lease
liability. The capital element reduces the balance owed to the lessor. Where substantially all of the risks and rewards incidental to ownership
are not transferred to the Group (an “operating lease”), the total rentals payable under the lease are charged to the consolidated statement of
comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of
the rental expense over the lease term on a straight-line basis.
Derivative financial instruments (derivatives) and hedge accounting
The Group occasionally uses interest rate swaps to help manage its interest rate risk. In accordance with its treasury policy, the Group does not
hold or issue derivatives for trading purposes.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk
management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes
in fair value or cash flows of hedged items.
All derivatives are initially recognised at fair value at the date the derivative is entered into and are subsequently re-measured at fair value. The
fair value of interest rate swaps is based on broker quotes.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument.
Cash flow hedges
Where a derivative is designated as a hedge of the variability of a highly probable forecast transaction, e.g. an interest payment, the element
of the gain or loss on the derivative that is an effective hedge is recognised directly in equity. When the forecast transaction subsequently
results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognised directly in equity are
reclassified into the Consolidated Income Statement in the same period or periods during which the asset acquired or liability assumed affects
the Consolidated Income Statement, i.e. when interest income or expense is recognised.
Taxation
The tax charge in the Consolidated Income Statement comprises tax currently payable.
Town Centre Securities PLC elected for group Real Estate Investment Trust (REIT) status with effect from 2 October 2007. As a result the Group
no longer pays United Kingdom corporation tax on the profits and gains from its qualifying rental business in the United Kingdom provided it
meets certain conditions. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal. On entering the
REIT regime an entry charge equal to 2% of the aggregate market value of the properties associated with the qualifying rental business was
payable. Deferred tax accrued at the date of conversion in respect of the assets and liabilities of the qualifying rental business was released to
the Income Statement as the relevant temporary differences are no longer taxable on reversal.
In respect of non-qualifying activities and related profits, gains and losses:
(a) Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the Consolidated Financial Statements. However, no provision for deferred tax is made for temporary
differences arising on the initial recognition of assets or liabilities that affect neither accounting nor taxable profit or loss. Deferred tax is
determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the Group is entitled to settle its current tax assets and liabilities on a net basis.
(b) Current tax
The charge for current tax is based on the results for the period as adjusted for items which are non-assessable or disallowed. It is calculated
using rates of tax that have been enacted by the balance sheet date.
Employee benefits
The Group operates defined contribution arrangements for all eligible Directors and employees. A defined contribution plan is a pension plan
under which the Group pays contributions into a private or publicly administered pension insurance plan. Pension costs are charged to the
Consolidated Income Statement in the period when they fall due. Pre-paid contributions are recognised as an asset to the extent that a cash
refund or a reduction in future payments is available.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
77
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
1. ACCOUNTING POLICIES continued
Revenue recognition
(a) Rental income
Revenue includes the fair value of rental income and management charges from properties (net of Value Added Tax).
This income is recognised as it falls due, in accordance with the lease to which it relates. Any lease incentives are spread evenly across the
period of the lease.
This income is recognised as follows:
i) rental income is recognised on an accrual basis on a straight line basis over the term of the lease;
ii) turnover rents are based on underlying turnover and are recognised in the period to which the turnover relates; and
iii) rent reviews are recognised with effect from the review date.
(b) Car park income
Contract car park income is recognised as revenue as it falls due, in accordance with the contract to which it relates. Daily car park income is
recognised when received.
(c) Interest income
Interest income on any short-term deposits is recognised in the Consolidated Income Statement as it accrues.
(d) Other income
Other income includes dividend income, which is recognised when the right to payment is established and surrender premiums or lease
assignments received from outgoing tenants prior to the termination of their lease.
(e) Service charge income
Service charge income receivable from tenants relating to management fees is credited to gross income in the Consolidated Income
Statement and recognised in line with the underlying contractual arrangement, i.e. when the service is provided.
Dividend distribution
Dividend distributions to the Company’s shareholders are recognised in the Consolidated Financial Statements in the period in which the
dividends are approved by the Company’s shareholders.
Reserves
Reserves are analysed in the following categories:
- Share capital represents the nominal value of issued share capital.
- Share premium represents any consideration received in excess of nominal value of the shares issued.
- Capital redemption reserve represents the nominal value of the Company’s own shares that have been repurchased and cancelled.
- Revaluation reserve represents the surplus valuation movement upon revaluation of freehold and leasehold property relating to car park
activities.
- Retained earnings represents the cumulative profit or loss position less dividend distributions.
Financial risk management
The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk, cash flow and fair value interest rate risk, capital risk and
price risk.
(a) Credit risk
The Group has no significant concentrations of credit risk. It has policies in place to ensure that rental contracts are made with customers with
an appropriate credit history. The Group has policies that limit the amount of credit exposure to any financial institution. The Group has no
significant concentration of credit risk as exposure is spread over a large number of counterparties and tenants.
(b) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an
adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying
businesses, Group treasury policy aims to maintain flexibility in funding by keeping committed credit lines available.
(c) Cash flow and fair value interest rate risk
The Group has no significant interest bearing assets. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.
The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash
flows. Interest costs may increase as a result of such changes. They may reduce profits or create losses in the event that unexpected
movements arise.
The Group continually reviews interest rates and interest rate risk and has a policy of monitoring the costs and benefits of interest rate fixing
instruments with a view to hedging exposure to interest rate risk on a regular basis.
At 30 June 2017, 56.4% (2016: 58.6%) of the Group’s borrowings were under long term fixed rate agreements and therefore were protected
against future interest rate volatility.
(d) Capital risk
The Group’s objective in managing capital is to maintain a strong capital base to support current operations and planned growth and to
provide for an appropriate level of dividend payments to shareholders.
The Group is not subject to external regulatory capital requirements.
(e) Price risk
Current asset investments are subject to price risk as a result of fluctuations in the market. The Group limits the amount of exposure by
continually assessing the performance of these investments.
(f) Compliance with covenants
The Group’s bank facilities and the mortgage debenture stock include a number of covenants principally relating to income and capital cover.
The Directors monitor performance against these covenants on a regular basis.
78 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the
related actual results. The only estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value
amounts of assets and liabilities within the next financial year are the Group’s property investments. The basis of valuation is set out in Note 12.
3. SEGMENTAL INFORMATION
The chief operating decision-maker has been identified as the Board. The Board reviews the Group’s internal reporting in order to assess
performance and allocate resources. Management has determined the operating segments based on these reports.
(A) SEGMENT ASSETS
Property rental
Car park operations
2017
£000
2016
£000
364,120
360,422
29,773
393,893
26,692
387,114
(B) SEGMENTAL RESULTS
2017
2016
Property
rental
£000
Car park
operations
£000
Total
£000
Property
rental
£000
Car park
operations
£000
Total
£000
Gross revenue
Service charge income
Service charge expenses
Property expenses
NET REVENUE
Administrative expenses
Other income
Share of post-tax profits from joint ventures
16,571
10,969
27,540
10,118
26,265
2,346
(3,284)
-
-
2,346
(3,284)
(2,574)
16,147
1,676
(958)
(6,252)
(7,210)
(920)
(5,843)
14,675
4,717
19,392
14,329
(5,465)
(830)
(6,295)
(4,690)
707
871
-
-
707
871
594
732
OPERATING PROFIT BEFORE VALUATION MOVEMENTS
10,788
3,887
14,675
10,965
Valuation movement on investment properties
(2,085)
-
(2,085)
Reversal of impairment of car parking assets
-
1,000
1,000
Profit on disposal of investment properties
Share of post-tax profits from joint ventures
303
471
-
-
303
471
3,018
-
1,140
668
OPERATING PROFIT
Finance costs
PROFIT BEFORE TAXATION
Taxation
PROFIT FOR THE YEAR
9,477
4,887
14,364
15,791
3,977
(7,639)
6,725
-
6,725
-
-
4,275
(803)
5
-
3,477
-
500
-
-
1,676
(2,574)
(6,763)
18,604
(5,493)
599
732
14,442
3,018
500
1,140
668
19,768
(7,847)
11,921
-
11,921
All results are derived from activities conducted in the United Kingdom.
The results for the car park operations include the car park at the Merrion Centre. As the value of the car park cannot be separated from the
value of the Merrion Centre as a whole, the full value of the Merrion Centre is included within the assets of the property rental business.
The car park results also include car park income from sites that are held for future development. The value of these sites has been determined
based on their development value and therefore the total value of these assets has been included within the assets of the property rental busi-
ness.
The net revenue at the Merrion Centre and development sites for the year ended 30 June 2017, arising from car park operations, was
£2,361,000. After allowing for an allocation of administrative expenses, the operating profit at these sites was £1,946,000.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
79
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
4. ADMINISTRATIVE EXPENSES
Employee benefits
Depreciation
Charitable donations
Other
5. SERVICES PROVIDED BY THE GROUP’S EXTERNAL AUDITORS
During the year the Group obtained the following services from the Group’s auditors at costs as detailed below:
Audit services:
– Fees payable to the Group auditors for the audit of the Consolidated Financial Statements
– Audit of the Company’s subsidiaries pursuant to legislation
- Other audit related services
Non-audit services:
– Financial due diligence
– Other non-audit services
TOTAL OTHER SERVICES
TOTAL AUDITORS’ REMUNERATION
6. EMPLOYEE BENEFITS
Wages and salaries (including Directors’ emoluments)
Social security costs
Other pension costs
2017
£000
2016
£000
3,844
3,479
318
78
2,055
6,295
205
91
1,718
5,493
2017
£000
2016
£000
60
10
20
25
4
29
119
60
10
20
-
-
-
90
2017
£000
2016
£000
4,002
3,701
527
93
474
126
4,622
4,301
Employee benefits detailed above are charged to the Consolidated Income Statement through administrative expenses and property
expenses. There has been no equity-based remuneration in either year presented.
Disclosures required by the Companies Act 2006 on Directors’ remuneration, including salaries, share options, pension contributions and
pension entitlement are included on pages 61 to 64 in the Directors’ Remuneration Report and form part of these Consolidated Financial
Statements.
The average monthly number of staff employed during the year was 116 (2016: 122).
The Group operates pension arrangements for the benefit of all eligible Directors and employees, which are defined contribution
arrangements. The assets of the arrangements are held separately from those of the Group in independently administered funds.
80 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
7. OTHER INCOME
Commission received
Dividends received
Management fees receivable
Dilapidations receipts and income relating to lease premiums
Other
8. FINANCE COSTS
Interest expense
Interest and amortisation of debenture loan stock
Interest payable on bank borrowings
Amortisation of arrangement fees
Interest capitalised
TOTAL FINANCE COSTS
9. TAXATION
2017
£000
2016
£000
169
27
241
195
75
707
140
26
242
24
167
599
2017
£000
2016
£000
5,698
1,896
456
(411)
5,698
1,874
331
(56)
7,639
7,847
Taxation for the year is lower (2016: lower) than the standard rate of corporation tax in the United Kingdom of 20% (2016: 20%).
The differences are explained below:
Profit before taxation
Profit on ordinary activities multiplied by rate of corporation tax in the United Kingdom of 20% (2016: 20%)
Effects of:
– United Kingdom REIT tax exemption on net income before revaluations
– United Kingdom REIT tax exemption on revaluations
– Profit on joint ventures already taxed
TOTAL TAXATION
2017
£000
6,725
1,345
2016
£000
11,921
2,384
(1,556)
(1,776)
217
(6)
-
(604)
(4)
-
FACTORS AFFECTING CURRENT AND FUTURE TAX CHARGES
Town Centre Securities PLC elected for group REIT status with effect from 2 October 2007. As a result the Group no longer pays United
Kingdom corporation tax on the profits and gains from its qualifying rental business in the United Kingdom provided it meets certain
conditions. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
81
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
10. DIVIDENDS
2015 final paid: 7.34p per 25p share
2016 interim paid: 3.10p per 25p share
2016 final paid: 7.90p per 25p share
2017 interim paid: 3.25p per 25p share
2017
£000
-
-
4,200
1,728
5,928
2016
£000
3,902
1,648
-
-
5,550
An interim dividend in respect of the year ended 30 June 2017 of 3.25p per share was paid to shareholders on 23 June 2017. This dividend was
paid entirely as a Property Income Distribution (PID).
A final dividend in respect of the year ended 30 June 2017 of 8.25p per share is proposed. This dividend, based on the shares in issue at 13
September 2017, amounts to £4.4m which has not been reflected in these accounts and will be paid on 4 January 2018 to shareholders on the
register on 8 December 2017. This dividend will comprise a PID of 7.00p per share and an ordinary dividend of 1.25p.
11. EARNINGS PER SHARE
The calculation of basic earnings per share has been based on the profit for the year, divided by the weighted average number of shares in
issue. The weighted average number of shares in issue during the year was 53,161,950 (2016: 53,161,950).
Profit for the year
Valuation movement on investment properties
Reversal of impairment of car parking assets
Valuation movement on properties held in joint ventures
Profit on disposal of investment and development properties
EPRA EARNINGS AND EARNINGS PER SHARE
2017
2016
Earnings
£000
6,725
2,085
(1,000)
(471)
(303)
7,036
Earnings
per share
p
Earnings
£000
Earnings
per share
p
12.7
3.9
(1.9)
(0.9)
(0.6)
13.2
11,921
(3,018)
(500)
(668)
(1,140)
6,595
22.4
(5.7)
(0.9)
(1.3)
(2.1)
12.4
There is no difference between basic and diluted earnings per share and EPRA earnings per share.
12. NON-CURRENT ASSETS
(A) INVESTMENT PROPERTIES
Valuation at 1 July 2015
Additions at cost
Other capital expenditure
Interest capitalised
Disposals
(Deficit)/surplus on revaluation
Movement in tenant lease incentives
Valuation at 30 June 2016
Additions at cost
Other capital expenditure
Interest capitalised
Disposals
(Deficit)/surplus on revaluation
Transfers
Movement in tenant lease incentives
VALUATION AT 30 JUNE 2017
82 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
Freehold
£000
274,925
6,314
4,647
56
(11,460)
(3,308)
1,836
Long
leasehold
£000
Development
£000
Total
£000
21,776
23,440
320,141
-
118
-
-
807
-
-
2,643
-
6,314
7,408
56
(2,000)
(13,460)
5,519
-
3,018
1,836
273,010
22,701
29,602
325,313
4,074
12,174
176
(18,596)
(6,444)
12,612
(145)
-
40
-
-
(132)
-
-
-
8,260
235
(2,675)
4,491
(12,612)
-
4,074
20,474
411
(21,271)
(2,085)
-
(145)
276,861
22,609
27,301
326,771
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
(B) FREEHOLD AND LEASEHOLD PROPERTIES - CAR PARK ACTIVITIES
Valuation at 1 July 2015
Additions
Depreciation
Surplus on revaluation
Reversal of impairment
Valuation at 30 June 2016
Additions
Depreciation
Surplus on revaluation
Reversal of impairment
Freehold
£000
2,500
-
-
-
(500)
2,000
-
-
-
-
Long
leasehold
£000
14,341
3,291
(57)
500
1,000
19,075
498
(178)
100
1,000
VALUATION AT 30 JUNE 2017
2,000
20,495
The historical cost of freehold and leasehold properties relating to car park activities is £22,245,000.
Total
£000
16,841
3,291
(57)
500
500
21,075
498
(178)
100
1,000
22,495
The Company occupies an office suite in part of the Merrion Centre. The Directors do not consider this element to be material.
The fair value of the Group’s investment and development properties has been determined principally by independent, appropriately qualified
external valuers CBRE and Jones Lang LaSalle. The remainder of the portfolio has been valued by the Property Director.
Valuations are performed bi-annually and are performed consistently across the Group’s whole portfolio of properties. At each reporting date
appropriately qualified employees verify all significant inputs and review computational outputs. The external valuers submit and present
summary reports to the Property Director and the Board on the outcome of each valuation round.
Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rents or
business profitability, incentives offered to tenants, forecast growth rates, market yields and discount rates and selling costs including stamp
duty.
The development properties principally comprise land in Leeds and Manchester. These have also been valued by appropriately qualified
external valuers Jones Lang LaSalle, taking into account the income from car parking and an assessment of their realisable value in their
existing state and condition based on market evidence of comparable transactions.
Property income, values and yields have been set out by category in the table below.
Retail and Leisure
Merrion Centre (excluding offices)
Offices
Out of town retail
Distribution
Residential
Development Property
Car Parks
Finance lease adjustments
Passing Rent
£000
ERV
£000
Value
£000
4,898
7,304
1,739
3,528
376
536
5,558
93,380
8,297
106,883
2,145
25,712
3,694
53,950
387
616
5,595
10,690
Initial
Yield
%
5.0%
6.5%
6.4%
6.2%
6.4%
4.7%
Reversionary
Yield
%
5.6%
7.3%
7.9%
6.5%
6.5%
5.5%
18,381
20,697
296,210
5.9%
6.6%
27,301
21,292
4,463
349,266
The effect on the valuation of applying a different yield and a different ERV would be as follows:
Valuation in the Consolidated Financial Statements at an initial yield of 6.9% - £304.9m, Valuation at 4.9% - £407.8m.
Valuation in the Consolidated Financial Statements at a reversionary yield of 7.6% - £310.6m, Valuation at 5.6% - £402.5m.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
83
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
Property valuations can be reconciled to the carrying value of the properties in the balance sheet as follows:
Externally valued by CBRE
Externally valued by Jones Lang LaSalle
Investment properties valued by the Property Director
Finance lease obligations capitalised
Leasehold improvements
Investment
Properties
£000
200,970
Freehold
and Leasehold
Properties
£000
Total
£000
-
200,970
123,745
15,350
139,095
897
1,159
-
-
3,303
3,842
897
4,462
3,842
326,771
22,495
349,266
Leasehold improvements primarily relate to expenditure incurred on the refurbishment of three car parks in Watford that are held under
operating leases.
All investment properties measured at fair value in the consolidated balance sheet are categorised as level 3 in the fair value hierarchy as
defined in IFRS13 as one or more inputs to the valuation are partly based on unobservable market data. In arriving at their valuation for each
property (as in prior years) both the independent valuers and the Property Director have used the actual rent passing and have also formed
an opinion as to the two significant unobservable inputs being the market rental for that property and the yield (i.e. the discount rate) which
a potential purchaser would apply in arriving at the market value. Both these inputs are arrived at using market comparables for the type,
location and condition of the property.
(C) FIXTURES, EQUIPMENT AND MOTOR VEHICLES
At 1 July 2015
Additions
Disposals
Depreciation
At 30 June 2016
Net book value at 30 June 2016
At 1 July 2016
Additions
Disposals
Depreciation
AT 30 JUNE 2017
NET BOOK VALUE AT 30 JUNE 2017
13. GOODWILL
At the start of the year
Additions at cost
AT THE END OF THE YEAR
Cost
£000
4,143
1,496
(1,266)
-
4,373
4,373
586
(140)
-
4,819
Accumulated
depreciation
£000
2,929
-
(1,234)
527
2,222
2,151
2,222
-
(103)
728
2,847
1,972
2016
£000
-
4,024
4,024
2017
£000
4,024
-
4,024
Goodwill represents the difference between the fair value of the consideration paid on the acquisitions of car park businesses and the fair
value of the assets and liabilities acquired as part of these business combinations. These transactions relate to businesses that held car parks
under operating leases with a net asset value of £nil. Goodwill therefore represents the full consideration of these acquisitions.
A review of the year end carrying value has been performed to identify any potential impairment. This has been based on the discounted future
cash flows that are expected to be generated by the assets acquired. The cash generating units are the individual car parks acquired. The key
assumptions used in preparing these cash flow forecasts are an underlying revenue growth rate of 1% (2016: 1%) and a discount rate of 8%
(2016: 8%). The assumptions used in the cash flow are based on historical experience of the sector.
As the discounted future cash flows are in excess of the year end carrying value, no impairment of the carrying value is required.
84 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
14. INVESTMENTS IN JOINT VENTURES
At the start of the year
Additions
Investments in joint ventures
Disposal of joint venture interest
Dividends and other distributions received in the year
Share of profits after tax
AT THE END OF THE YEAR
2017
£000
2016
£000
25,093
19,344
-
4,250
(1,800)
(1,033)
1,342
27,852
-
4,916
-
(567)
1,400
25,093
Investments in joint ventures primarily relate to the Group’s interest in the partnership capital of Merrion House LLP. This joint venture owns a
long leasehold interest over a property that is let to the Group’s joint venture partner, Leeds City Council (‘LCC’). The property is currently in the
process of a complete refurbishment. Under the arrangement LCC is required to contribute a fixed amount in cash and the Group is required to
contribute the property and the balance of refurbishment cost. The net commitment from the Group in relation to this arrangement that has not
yet been incurred is £4.9m. The interest in the joint venture for each partner is an equal 50% share, regardless of the level of overall contributions
from each partner. The investment property held within this partnership has been externally valued by CBRE at each reporting date.
The share of profits after tax for the year ended 30 June 2016 of £1.4m includes an adjustment of £2.5m in respect of the property transferred to
Merrion House LLP in the prior year, less the share of losses in the period of £1.2m.
The net assets of Merrion House LLP for the current and previous year are as stated below:
2017
£000
2016
£000
Non-current assets
Current assets
Current liabilities
NET ASSETS
The profits of Merrion House LLP for the current and previous year are as stated below:
Income
Expenses
Valuation movement on investment properties
NET (LOSS)/PROFIT
53,860
35,500
431
(1,839)
52,452
2017
£000
1,400
(109)
1,291
941
2,232
929
(351)
36,078
2016
£000
1,400
(78)
1,322
(3,665)
(2,343)
The Group’s interest in other joint ventures are not considered to be material.
The joint ventures have no significant contingent liabilities to which the Group is exposed nor has the Group any significant contingent
liabilities in relation to its interest in the joint ventures.
The Group’s joint ventures, which are registered in England and operate in the United Kingdom, are as follows:
Merrion House LLP
Belgravia Living Group Limited
Bay Sentry Limited
15. INVESTMENTS
Current asset investments
At the start of the year
Increase in value of investments
AT THE END OF THE YEAR
Beneficial Interest %
Activity
50
50
50
Property Investment
Property Investment
Software Development
2017
£000
2,070
324
2,394
2016
£000
1,962
108
2,070
Current asset investments relate to an equity shareholding in a company listed on the London Stock Exchange. This is stated at market value in
the table above and has a historic cost of £889,130 (2016: £889,130).
Current asset investments are measured at fair value in the consolidated balance sheet and are categorised as level 1 in the fair value hierarchy
as defined in IFRS13 as the inputs to the valuation are based on quoted market prices.
The maximum risk exposure at the reporting date is the fair value of the current asset investments.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
85
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
Non-current asset investments
Equity investments
Loans
2017
£000
415
1,535
1,950
2016
£000
-
-
-
Current asset investments relate to an equity shareholding and loans advanced to YourParkingSpace Limited, a privately owned company
incorporated in the United Kingdom.
16. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: provision for impairment of receivables
Other receivables and prepayments
2017
£000
1,810
(435)
1,375
1,936
3,311
2016
£000
3,181
(380)
2,801
4,587
7,388
The Directors consider that the carrying amount of net trade receivables approximates their fair value. The credit risk in respect of trade
receivables is not concentrated as the Group has many tenants spread across a number of industry sectors. In addition, the tenants’ rents are
payable in advance.
As at 30 June 2017, trade receivables which had not been impaired can be analysed as follows:
Outside credit terms
2017
2016
Total
£000
1,375
2,801
Movements in the Group provision for impairment of trade receivables are as follows:
At the start of the year
Provision for receivables impairment
Receivables written off as uncollectible
Provision held within acquired subsidiaries
Unused amounts reversed
AT THE END OF THE YEAR
Within credit
terms
£000
Less than
one month
£000
One to two
months
£000
Older than
two months
£000
1,050
2,548
226
116
63
57
2017
£000
380
48
(16)
30
(7)
435
36
80
2016
£000
300
158
(45)
-
(33)
380
The creation and release of the provision for impaired receivables have been included in administrative expenses in the Consolidated Income
Statement.
The ageing of the provision is as follows:
2017
2016
Total
£000
435
380
Less than
one month
£000
One to two
months
£000
Older than
two months
£000
8
4
27
45
400
331
The only class within trade receivables is rent receivable. Other receivables do not contain impaired assets. The maximum exposure to credit
risk at the reporting date is the carrying value of trade receivables as mentioned above.
The Group does not hold any material collateral as security.
In assessing whether trade receivables are impaired, each debt is considered on an individual basis and provision is made based on specific
knowledge of each tenant, together with the consideration of appropriate economic market indicators.
86 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
17. TRADE AND OTHER PAYABLES
Trade payables
Social security and other taxes
Other payables and accruals
2017
£000
35
449
10,362
10,846
2016
£000
889
560
10,047
11,496
18. FINANCIAL LIABILITIES - BORROWINGS
All the Group’s borrowings are either at floating or fixed rates of interest. The Group takes on exposure to fluctuations in interest rates on its
financial position and its cash flows. Interest costs may increase or decrease as a result of such changes.
Non-current
Bank borrowings
Finance leases
5.375% First mortgage debenture stock
Current
Bank borrowings
Overdraft
TOTAL BORROWINGS
2017
£000
2016
£000
81,663
4,462
74,561
4,480
105,844
105,833
191,969
184,874
-
-
-
887
191,969
185,761
The total overdraft facility is based on the Group’s right of set off.
The debenture, bank loans and overdrafts are secured by fixed charges on properties, valued at £340,065,000 (2016: £317,970,000)
owned by the Company and its subsidiary undertakings.
The Group’s remaining contractual non-discounted cashflows for financial liabilities is set out below:
2017
2016
Trade and
other creditors
£000
Bank
borrowings
£000
Debenture
stock
£000
Finance
leases
£000
Total
£000
Trade and
other creditors
£000
Bank
borrowings
£000
Debenture
stock
£000
Finance
leases
£000
Total
£000
In one year or less or on demand
6,553
1,654
5,698
212
14,117
6,064
2,555
5,698
213
14,530
In more than one year but not
more than five years
In more than five years
-
-
83,419
22,790
836
107,045
-
159,159
18,008
177,167
-
-
77,488
22,790
841
101,119
-
164,857
18,237
183,094
6,553
85,073
187,647
19,056
298,329
6,064
80,043
193,345
19,291
298,743
The debenture issue premium is net of issue costs and is amortised over the life of the debt agreement.
The numbers disclosed in the maturity profile above have been calculated to include notional interest payments, using the interest rates pre-
vailing at the balance sheet date. The calculation is based on the assumption that the level of borrowings remains unchanged until maturity.
The Group had undrawn committed floating rate bank facilities as follows:
Expiring in one year or less
Expiring in more than one year
2017
£000
-
26,000
26,000
2016
£000
-
24,113
24,113
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
87
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
19. FINANCIAL INSTRUMENTS
The Group finances its operations through a combination of retained cash flows, debentures, finance leases and bank borrowings. Procedures
are in place to monitor interest rate risk as considered appropriate by management. Numerical financial instruments disclosures are set out
below. Additional disclosures are set out in the accounting policies relating to financial risk management. The carrying value of short-term
receivables and payables approximate to their fair values. All financial liabilities are denominated in Sterling.
Interest rate risk
The interest rate risk of the Group’s financial liabilities is as follows:
Debenture stock
Bank floating rate liabilities
Finance leases
As at 30 June 2017
As at 30 June 2016
Nominal
value
£000
Weighted
average
rate
%
Weighted
average
period
Years
106,001
5.375
82,000
4,462
192,463
2.03
5.0
14
2
120
Nominal
value
£000
106,001
75,000
4,480
185,481
Weighted
average
rate
%
Weighted
average
period
Years
5.375
2.22
5.0
15
2
121
Floating rate financial liabilities bear interest at rates for term loans based on LIBOR plus an average margin of 1.72% and for the overdraft of
2.00% above base rate.
Facilities provided by banks and other investors are a mixture of fixed rates and floating charge funding. Floating rate borrowings are exposed
to the risk of rising interest rates which the Group manages by the use of appropriate financial hedging instruments, primarily interest rate
swaps.
An increase in LIBOR by one percentage point would have reduced profit for the year by approximately £839,000 (2016: £687,000).
Financial instruments held for trading purposes
It is, and has been throughout the year under review, the Group’s policy not to trade in financial instruments.
Foreign currency exposure
The Group has no exposure to foreign currency as it has no overseas operations and all sales and purchases are made in Sterling.
Effective interest rates
The effective interest rates at the balance sheet date were as follows:
Bank overdraft facility
Bank borrowings
Debenture loan
Finance leases
2017
2.25%
2.03%
2016
2.5%
2.22%
5.375%
5.375%
5.0%
5.0%
Fair value of current borrowings
The fair value of bank borrowings and overdrafts approximate to their carrying value.
Fair value of non-current borrowings
Debenture stock
Non-current borrowings
2017
2016
Book value
£000
Fair value
£000
Book value
£000
Fair value
£000
105,844
110,176
105,833
109,762
81,663
81,663
74,561
74,561
The above debenture stock has been valued as at 30 June 2017 by JC Rathbone Associates on the basis of open market value.
88 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
20. FINANCE LEASES
The Group has a long leasehold interest in two properties that are classified as finance leases.
Future lease payments are as follows:
In one year or less on demand
In more than one year but not more than five years
In more than five years
Minimum
lease
payments
£000
212
836
2017
Interest
£000
212
836
18,008
13,546
19,056
14,594
Present
value
£000
-
-
4,462
4,462
Minimum
lease
payments
£000
213
841
18,237
19,291
2016
Interest
£000
213
841
13,757
14,811
Present
value
£000
-
-
4,480
4,480
21. EPRA NET ASSET VALUE PER SHARE
The Basic and EPRA net asset values are the same, as set out in the table below.
Net assets at 30 June
Shares in issue (000)
Basic and EPRA net asset value per share
2017
£000
2016
£000
191,078
189,857
53,162
359p
53,162
357p
22. COMMITMENTS
The Group has capital commitments of £nil (2016: £15,703,000) in respect of capital expenditure contracted for at the balance sheet date but
not yet incurred, for investment and development property.
MINIMUM TOTAL FUTURE LEASE PAYMENTS RECEIVABLE:
Within one year
One to five years
In more than five years
MINIMUM TOTAL FUTURE LEASE PAYMENTS PAYABLE:
Within one year
One to five years
In more than five years
2017
£000
15,838
69,086
2016
£000
15,571
51,690
91,496
88,209
2017
£000
1,370
5,482
27,619
2016
£000
1,399
5,482
28,989
Future lease commitments relate to six car parks operated under lease agreements. The annual rent for these car parks ranges from £50,000
to £400,000 and the remaining term on the leases are all less than 35 years.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
89
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Continued
23. CALLED UP SHARE CAPITAL
Authorised
The authorised share capital of the company is 164,879,000 (2016: 164,879,000) ordinary shares of 25p each.
The nominal value of authorised share capital is £41,219,750 (2016: £41,219,750).
Issued and fully paid up
AT 30 JUNE 2016 AND 30 JUNE 2017
Number of
shares
000
Nominal
value
£000
53,162
13,290
The Company has only one type of ordinary share class in issue. All shares have equal entitlement to voting rights and dividend distributions.
The Company has no share option schemes in current operation and there are no unexercised options outstanding at 30 June 2017.
24. CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the financial year
Adjustments for:
Depreciation
Profit on disposal of fixed assets
Profit on disposal of investment properties
Finance costs
Share of post tax profits from joint ventures
Movement in valuation of investment properties
Movement in lease incentives
Reversal of impairment of car parking assets
Decrease in receivables
Decrease in payables
Cash generated from operations
2017
£000
2016
£000
6,725
11,921
905
(23)
(303)
7,639
(1,342)
2,085
145
(1,000)
4,192
(864)
18,159
585
(21)
(1,140)
7,847
(1,400)
(3,018)
(1,836)
(500)
1,483
(362)
13,559
25. REMUNERATION OF KEY MANAGEMENT PERSONNEL
The remuneration of the Executive Directors, who are the key management personnel of the Group, is set out below in aggregate for each of
the applicable categories specified in IAS 24 ‘Related Party Disclosures’. Further information about the remuneration of individual Directors is
provided in the audited part of the Directors’ Remuneration Report on page 63.
2017
£000
1,630
38
1,668
2016
£000
1,456
31
1,487
Short-term employee benefits
Post-employment benefits
90 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
As of 30 June 2017
FIXED ASSETS
Investment properties
Property, plant and equipment
Investments
CURRENT ASSETS
Investments
Debtors
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Financial liabilities – borrowings
Other creditors
NET CURRENT LIABILITIES
TOTAL ASSETS LESS CURRENT LIABILITIES
Financial liabilities – borrowings
NET ASSETS
EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT
Called up share capital
Share premium account
Capital redemption reserve
Other reserves
Profit and loss account
TOTAL SHAREHOLDERS’ FUNDS
COMPANY NUMBER: 623364
Notes
2017
£000
2016
£000
4
4
5
6
7
9
8
79,061
74,021
698
557
250,643
246,892
330,402
321,470
2,394
2,070
114,855
95,019
117,249
97,089
(13,057)
(19,498)
(119,251)
(91,403)
(132,308)
(110,901)
(15,059)
(13,812)
315,343
307,658
9
(187,507)
(180,394)
127,836
127,264
10
13,290
13,290
200
559
200
559
80,057
80,057
33,730
33,158
127,836
127,264
As permitted by Section 408 of the Companies Act 2006, the Parent Company’s Profit and Loss Account has not been included in these
financial statements. The profit shown in the financial statements of the Parent Company was £6,500,000 (2016: £11,484,000).
The financial statements on pages 91 to 99 were approved by the Board of Directors on 13 September 2017 and signed on its behalf by
EM ZIFF OBE
Chairman and Chief Executive
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
91
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
BALANCE AT 1 JULY 2015
13,290
200
559
80,057
27,224
121,330
Called up
share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Other
reserve
£000
Retained
earnings
£000
Total
equity
£000
Comprehensive income for the year
Profit
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Contributions by and distributions to owners
Final dividend relating to the year ended 30 June 2015
Interim dividend relating to the year ended 30 June 2016
BALANCE AT 30 JUNE 2016
Comprehensive income for the year
Profit
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Contributions by and distributions to owners
Final dividend relating to the year ended 30 June 2016
Interim dividend relating to the year ended 30 June 2017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,484
11,484
11,484
11,484
(3,902)
(3,902)
(1,648)
(1,648)
13,290
200
559
80,057
33,158
127,264
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,500
6,500
6,500
6,500
(4,200)
(4,200)
(1,728)
(1,728)
BALANCE AT 30 JUNE 2017
13,290
200
559
80,057
33,730
127,836
92 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2017
1. ACCOUNTING POLICIES
Basis of Preparation
The Company Financial Statements have been prepared in accordance with FRS 102, (The Financial Reporting Standard applicable in
the United Kingdom and Republic of Ireland), the going concern basis, the historical cost convention as modified by the revaluation of
investment properties, and in accordance with the Companies Act 2006 and applicable law.
In the prior year, one of the company’s development properties with a value of £4.5m was transferred to another group company, however
this disposal was not reflected in the accounts of the company. An adjustment to the prior year fixed asset and debtors figures has been
made to reflect this disposal.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires
management to exercise judgement in applying the Company’s accounting policies (see note 2).The principal accounting policies, which
have been applied consistently, are as set out below:
Financial reporting standard 102 - reduced disclosure exemptions
The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS
102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”:
• the requirements of Section 4 Statement of Financial Position paragraph 4.12(a)(iv);
• the requirements of Section 7 Statement of Cash Flows;
• the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
• the requirements of Section 11 Financial Instruments paragraphs 11.41(b), 11.41(c), 11.41(e), 11.41(f), 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)
(iv), 11.48(b) and 11.48(c);
• the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
• the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Town Centre Securities PLC as at 30 June 2017 and these financial
statements may be obtained from Companies House, Cardiff CF4 3UZ.
Deferred Taxation
Town Centre Securities PLC elected for group REIT status with effect from 2 October 2007. As a result the Company no longer pays United
Kingdom corporation tax on the profits and gains from qualifying rental business in the United Kingdom provided it meets certain conditions.
Non-qualifying profits and gains of the Company continue to be subject to corporation tax as normal. On entering the REIT regime an entry
charge equal to 2% of the aggregate market value of the properties associated with the qualifying rental business was payable. Deferred
tax accrued at the date of conversion in respect of the assets and liabilities of the qualifying rental business was released to the income
statement as the relevant temporary differences are no longer taxable on reversal. From 17 July 2012 there is no REIT entry charge payable
where the Company makes acquisitions of companies owning qualifying properties.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the
balance sheet date.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to
reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured
on an undiscounted basis.
Investment Properties
Investment properties are included in the accounts at open market values based on an independent external valuation, as at 30 June each
year, or held at Directors’ valuation. Movements in fair value are taken through the income statement.
Depreciation
In accordance with FRS102, no depreciation or amortisation is provided in respect of freehold and long leasehold investment properties,
including fixed plant, which is included in properties. The requirement of the Companies Act 2006 (the Act) is to depreciate all properties but
that requirement conflicts with FRS102. The Directors consider that this accounting policy is necessary for the accounts to give a true and
fair view. Depreciation or amortisation is only one of the factors reflected in the accounts’ valuation and the amount attributable to this factor
cannot be separately identified or quantified. If this departure from the Act had not been made, the profit for the financial year would have
been reduced by depreciation.
Investments
Quoted investments included in the accounts are valued at market bid price at the balance sheet date.
Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group’s interest in
the joint venture. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted
by the Group.
Investment Income
Income from investments is accounted for on the payment date of the dividends.
Investments in Subsidiary Undertakings
Investments in subsidiary undertakings are stated in the balance sheet of the Company at cost less impairment.
Joint Ventures
A joint venture is a contractual arrangement whereby the Company and other parties undertake an economic activity that is subject to joint
control.
Investments in jointly controlled entities are valued at cost less impairment.
Turnover
Turnover, which excludes value added tax, represents the invoiced value of rent and services supplied to customers. Rental income is
accounted for as it falls due in accordance with the lease to which it relates.
Unamortised tenant lease incentives
Leasehold incentives given to tenants on entering property leases are recognised as unamortised lease incentives. The operating lease
incentives are spread over the non-cancellable life of the lease. Where this ends with a clean break clause the incentives are spread to this
date unless management is reasonably certain that the break will not be exercised.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
93
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2017
Derivative financial instruments (derivatives) and hedge accounting
The Company occasionally uses interest rate swaps to help manage its interest rate risk. In accordance with its treasury policy, the Company
does not hold or issue derivatives for trading purposes.
The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its
risk management objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both
at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in fair value or cash flows of hedged items.
All derivatives are initially recognised at fair value at the date the derivative is entered into and are subsequently re-measured at fair value.
The fair value of interest rate swaps is based on broker quotes.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument.
Cash flow hedges
Where a derivative is designated as a hedge of the variability of a highly probable forecast transaction, e.g. an interest payment, the element
of the gain or loss on the derivative that is an effective hedge is recognised directly in equity. When the forecast transaction subsequently
results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognised directly in equity are
reclassified into the Income Statement in the same period or periods during which the asset acquired or liability assumed affects the Income
Statement, i.e. when interest income or expense is recognised.
Reserves
Reserves are analysed in the following categories:
- Share capital represents the nominal value of issued share capital.
- Share premium represents any consideration received in excess of nominal value of the shares issued.
- Capital redemption reserve represents the nominal value of the Company’s own shares that have been repurchased and cancelled.
- Other reserves relates to the revaluation of the company’s investments
- Retained earnings represents the cumulative profit or loss position less dividend distributions.
2. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The only estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
value amounts of assets and liabilities within the next financial year are investment properties (Note 4).
3. EMPLOYEE BENEFITS
Wages and salaries (including Directors’ emoluments)
Social security costs
Other pension costs
2017
£000
2,663
450
69
2016
£000
2,241
391
108
3,182
2,740
Employee benefits are charged to the Profit and Loss account through administrative expenses.
The aggregate remuneration of the Directors of the Company was £1,864,000 (2016: £1,675,000).
The average monthly number of staff employed during the year was 70 (2016: 73). Disclosures required by the Companies Act 2006 on
Directors’ remuneration, including salaries, share options, pension contributions and pension entitlement, are included on page 63 in the
Remuneration Report and form part of the Consolidated Financial Statements. The remuneration paid to the Parent Company auditors in
respect of the audit of the Parent Company Financial Statements for the year ended 30 June 2017 is included in note 5 to the Consolidated
Financial Statements.
4. TANGIBLE ASSETS
INVESTMENT PROPERTIES
Valuation at 1 July 2016
Additions
Disposals
Valuation movement
Movement in tenant lease incentives
VALUATION AT 30 JUNE 2017
Freehold
£000
45,681
2,670
(1,494)
235
(121)
Long
leasehold
£000
Development
£000
Total
£000
7,340
21,000
74,021
16
-
(16)
-
434
3,120
(2,675)
(4,169)
5,991
-
6,210
(121)
46,971
7,340
24,750
79,061
The above freehold and long leasehold properties have been valued as at 30 June 2017 on the basis of open market value by Jones Long
LaSalle and CBRE in accordance with the Royal Institution of Chartered Surveyors Appraisal and Investment Manual.
In the prior year, one of the company’s development properties with a value of £4.5m was transferred to another group company, however this
disposal was not reflected in the accounts of the company. An adjustment to the prior year fixed asset and debtors figures has been made to
reflect this disposal.
94 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Continued
FIXTURES, EQUIPMENT AND MOTOR VEHICLES
Balance at 1 July 2016
Additions
Disposals
Depreciation
BALANCE AT 30 JUNE 2017
NET BOOK VALUE AT 30 JUNE 2017
Net book value at 30 June 2016
TOTAL TANGIBLE ASSETS
AT 30 JUNE 2017
At 30 June 2016
5. FIXED ASSET INVESTMENTS
SHARES IN GROUP UNDERTAKINGS
At 1 July
Additions
AT 30 JUNE
OTHER INVESTMENTS
At 1 July
Additions
AT 30 JUNE
INTEREST IN JOINT VENTURES
At 1 July
Share of profits after tax
Dividends Received
Transfer to shares in group undertakings
AT 30 JUNE
TOTAL FIXED ASSET INVESTMENTS
Cost
£000
2,718
409
(140)
-
Accumulated
depreciation
£000
2,161
-
(101)
229
2,987
2,289
698
557
79,759
74,578
2017
£000
2016
£000
245,092
245,092
3,601
-
248,693
245,092
-
1,950
1,950
1,800
129
(129)
(1,800)
-
-
-
1,779
21
-
-
-
1,800
250,643
246,892
As permitted by Section 615 of the Companies Act 2006, where the relief afforded under Section 612 of the Companies Act 2006 applies, cost
is the aggregate of the nominal value of any other consideration given to acquire the share capital of the subsidiary undertakings.
6. LISTED INVESTMENTS
At 1 July
Increase in value of investments
AT 30 JUNE
2017
£000
2,070
324
2,394
2016
£000
1,962
108
2,070
Listed investments, all of which are listed on a recognised stock exchange, are stated at market value in the table above and have a historic cost
of £889,130 (2015: £889,130).
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
95
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Continued
7. DEBTORS
Trade debtors
Less: provision for impairment of debtors
Amounts owed by subsidiary undertakings
Other debtors and prepayments
Amounts owed by subsidiary undertakings are unsecured, interest free and repayable on demand.
8. OTHER CREDITORS
Trade creditors and accruals
Taxation and social security
Amounts owed to subsidiary undertakings
2017
£000
229
(30)
199
2016
£000
333
(16)
317
109,161
86,669
5,495
114,855
8,033
95,019
2017
£000
3,102
358
115,791
119,251
2016
£000
2,875
16
88,512
91,403
Amounts owed to subsidiary undertakings are unsecured, interest free and repayable on demand.
9. FINANCIAL INSTRUMENTS
The Company’s borrowings are at both floating and fixed rates of interest. The Company takes on exposure to fluctuations in interest rates on
its financial position and cash flows. Interest costs may increase or decrease as a result of such changes.
Non-current
Bank borrowings
5.375% First mortgage debenture stock
Current
Bank borrowings
TOTAL BORROWINGS
2017
£000
2016
£000
81,663
74,561
105,844
105,833
187,507
180,394
13,057
19,498
200,564
199,892
The debenture, bank loans and overdrafts are secured by fixed charges on properties, valued at £340,065,000 (2016: £317,970,000) owned by
the Company and its subsidiary undertakings.
The debenture issue premium is net of issue costs and is amortised over the life of the debt agreement.
96 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Continued
The Company had undrawn committed floating rate bank facilities as set out below:
Expiring in one year or less
Expiring in more than one year
2017
£000
-
26,000
26,000
2016
£000
-
24,113
24,113
Included within facilities expiring in one year or less are overdraft facilities subject to annual review. There are net cash balances of £15,853,000
held by other Group companies which offset the Company’s overdraft on consolidation. The total overdraft facility is based on the Group’s
right of set off. Other facilities are available to provide funding for future investments.
The Company finances its operations through a combination of retained cash flows, debentures and bank borrowings. Procedures are in place
to monitor interest rate risk as considered appropriate by management. Numerical financial instruments disclosures are set out overleaf.
All financial liabilities are denominated in Sterling.
INTEREST RATE RISK
The interest rate risk of the Company’s financial liabilities is as follows:
Debenture stock
Bank floating rate liabilities
As at 30 June 2017
As at 30 June 2016
Weighted
average
rate
%
Weighted
average
period
Years
5.375
2.03
14
2
Nominal
value
£000
106,001
95,057
201,058
Nominal
value
£000
106,001
94,498
200,499
Weighted
average
rate
%
5.375
2.52
Weighted
average
period
Years
15
2
Floating rate financial liabilities bear interest at rates for term loans based on LIBOR plus an average margin of 1.72% and for the overdraft of
2% above base rate.
FINANCIAL INSTRUMENTS HELD FOR TRADING PURPOSES
It is, and has been throughout the year under review, the Company’s policy not to trade in financial instruments.
FOREIGN CURRENCY EXPOSURE
The Group has no exposure to foreign currency as it has no overseas operations and all sales and purchases are made in Sterling.
EFFECTIVE INTEREST RATES
The effective interest rates at the balance sheet date were as follows:
Bank overdraft facility
Bank borrowings
Debenture loan
2017
2.25%
2016
2.5%
2.03%
2.22%
5.375%
5.375%
FAIR VALUES OF CURRENT BORROWINGS
Where market values are not available, fair values of financial assets and liabilities have been calculated by discounting expected future cash
flows at prevailing interest rates and by applying year end exchange rates. The carrying amounts of short-term borrowings approximate to
book value.
FAIR VALUE OF NON-CURRENT BORROWINGS
Debenture stock
Long-term bank borrowings
2017
2016
Book
value
£000
Fair
value
£000
Book
value
£000
Fair
value
£000
105,844
110,176
105,833
109,762
81,663
81,663
74,561
74,561
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
97
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Continued
10. CALLED UP SHARE CAPITAL
AUTHORISED
164,879,000 (2015: 164,879,000) ordinary shares of 25p each.
ISSUED AND FULLY PAID
AT 30 JUNE 2016 AND 30 JUNE 2017
Number of
shares
000
Nominal
value
£000
53,162
13,290
The company has only one type of ordinary share class in issue. All shares have equal entitlement to voting rights and dividend distributions.
11. SUBSIDIARY COMPANIES
The Company’s wholly owned active subsidiary undertakings at 30 June 2017, registered in England or Scotland and operating in the United
Kingdom, are as follows:
Company No.
Activity
Held directly
TCS Holdings Limited
Apperley Bridge Limited
Dundonald Property Investments Limited
Buckley Properties (Leeds) Limited
TCS Park Row Limited
Citipark PLC
Citipark UK Limited
TCS (Merrion House JVC02) Limited*
TCS Development Management (Merrion) Limited
TCS (Residential Conversions) Limited
Tassgander Limited
Caledonia Management Limited*
TCS (Property Management) Limited*
TCS Trustees Limited*
TCS Properties Limited*
TCS (Whitehall Plaza) Limited
TCS (9 Cheapside) Limited
TCS (Tariff Street) Limited
TCS (Brownsfield Mill) Limited
TCS (Merrion Hotel) Limited
Blackpool Markets Limited
Emett Exhibitions Limited
Milngavie East Limited
No 29 Management Co (Eastgate) Limited
T Herbert Kaye’s Estates Limited
TCS (Bolton) Limited
TCS Piccadilly Limited
TCS Whitehall Riverside Limited
TCS (Rochdale JV) Limited
TCS (Rochdale Management) Limited
TCS Car Parks Limited
TCS Eastgate Limited
TCS Finance Limited
TCS Trading Limited
The Merrion Centre Limited
Town Centre Enterprises Limited
Town Centre Securities (Developments) Limited
Town Centre Securities (Manchester) Limited
Town Centre Securities (Scotland) Limited
Town Centre Services Limited
TCS PLC
TCS (EX TCCP) PLC
98 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
2271353
6879596
3672365
647309
8077103
8837214
8837203
8561356
8696141
3946495
4077297
SC449689
5281225
3112923
2831154
9922032
10139127
09929851
10291290
10380988
2740190
1544918
SC464805
3873683
0226678
4104688
4317396
4329860
7712764
7712123
4847697
6554827
3108777
3060862
0814845
0221003
3946549
0129485
0748937
2285764
4329979
3385312
Property investment
Property investment
Property investment
Property investment
Property investment
Car park operations
Car park operations
Property investment
Property investment
Management company
Property investment
Management company
Management company
Trustee for employee benefit plans
Property investment
Property investment
Property investment
Property investment
Property investment
Hotel operator
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Continued
Held indirectly
TCS Freehold Investments Limited
TCS Leasehold Investments Limited
Town Centre Car Parks Limited
TCCP (Clarence Dock) Limited
TCS (Milngavie) Limited
Dundonald (Cumbernauld) Limited
TCS (Merrion House JVC01) Limited
TCS (Bothwell Street) Limited
Dundonald Property Developments Limited
Riverside (Leeds) Limited
TCS (Greenhithe) Limited
TCS (Isleworth) Limited
TCS (Parliament Street 1) Limited
TCS (Parliament Street 2) Limited
TCS Energy Limited
TCS (Mill Hill) Limited
TCS (Residential) Limited
TCS Solar Limited
Company No.
Activity
3684812
3684827
5494592
6219875
6391627
5983938
8561354
4240551
6430444
4569350
4413344
4413343
4768830
4768845
4414144
4413341
4249007
5113915
Property investment
Property investment
Car park operations
Car park operations
Property investment
Property investment
Property investment
Property investment
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
*The subsidiaries marked with an asterix above are exempt from preparing audited statutory accounts under section 479a of the Companies Act 2006.
The registered office of all subsidiaries is at the following address:
Town Centre House
The Merrion Centre
Leeds
LS2 8LY
The Company’s joint ventures, which are all registered in England and operate in the United Kingdom, are as follows:
Proportion of ordinary shares held %
Activity
50
50
Property investment
Software Development
Belgravia Living Group Limited
Bay Sentry Limited
The registered offices of joint ventures are as follows:
Bay Sentry Limited
Town Centre House
The Merrion Centre
Leeds
LS2 8LY
Belgravia Living Group Limited
Middleton House
Westland Road
Leeds
LS11 5UH
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
99
NOTICE OF ANNUAL GENERAL MEETING
Notice is given that the fifty-seventh Annual General Meeting of Town Centre Securities PLC (“Company”) will be held at Town Centre House,
The Merrion Centre, Leeds LS2 8LY on Tuesday 28 November 2017 at 10.30am for the following purposes:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10
TO CONSIDER AND, IF THOUGHT FIT, TO PASS THE FOLLOWING RESOLUTIONS AS ORDINARY RESOLUTIONS:
To receive the Company’s Annual Accounts, Strategic Report and Directors’ and Auditors’ Reports for the year ended 30 June 2017.
To approve the Directors’ Remuneration Report (other than the part containing the Directors’ Remuneration Policy) for the year ended
30 June 2017.
To approve the Directors Remuneration Policy contained in the Directors Remuneration Report
To declare a final dividend for the year ended 30 June 2017 of 8.25p per ordinary share in the capital of the Company, to be paid on
4 January 2017, to shareholders whose names appear on the register at the close of business on 8 December 2017.
To re-appoint MA Ziff, who retires by rotation, as a Director of the Company.
To re-appoint I Marcus, who retires by rotation, as a Director of the Company.
To appoint MJ Dilley, who has been appointed by the Board since the last Annual General Meeting as a Director of the Company.
To re-appoint BDO as auditors of the Company.
To authorise the Directors to determine the remuneration of the auditors.
That, pursuant to section 551 of the Companies Act 2006 (“Act”) the Directors be and are generally and unconditionally authorised to
exercise all powers of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any securities into
shares in the Company up to an aggregate nominal amount of £4,430,162, provided that (unless previously revoked, varied or renewed)
this authority shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or on
27 February 2019 (whichever is the earlier), save that the Company may make an offer or agreement before the expiry of this authority
which would or might require shares to be allotted or rights to subscribe for or to convert any security into shares to be granted after such
expiry and the Directors may allot shares or grant such rights pursuant to any such offer or agreement as if the authority conferred by this
resolution had not expired.
This authority is in substitution for all existing authorities under section 551 of the Act (which, to the extent unused at the date of this
resolution, are revoked with immediate effect).
TO CONSIDER AND, IF THOUGHT FIT, TO PASS THE FOLLOWING RESOLUTIONS AS SPECIAL RESOLUTIONS:
11.
That, subject to the passing of resolution 10 and pursuant to section 570 of the Act, the Directors be and are generally empowered to allot
equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred by resolution 10 as if section
561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities:
11.1
in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise):
11.1.1
to holders of ordinary shares in the capital of the Company in proportion (as nearly as practicable) to the respective numbers of ordinary
shares held by them; and
11.1.2
to holders of other equity securities in the capital of the Company, as required by the rights of those securities, or, subject to such rights, as
the Directors otherwise consider necessary,
but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to treasury shares,
fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the requirements of any regulatory
body or stock exchange; and
11.2
otherwise than pursuant to paragraph 11.1 of this resolution shares may be issued upto a total aggregate nominal value of £664,524
These authorities (unless previously revoked, carried or renewed) shall expire at the conclusion of the next Annual General Meeting of the
Company after the passing of this resolution or on 27 February 2019 (whichever is earlier), save that the Company may make an offer or
agreement before the expiry of this power which would or might require equity securities to be allotted for cash after such expiry and the
Directors may allot equity securities for cash pursuant to any such offer or agreement as if the power conferred by this resolution had not
expired.
This power is in substitution for all existing powers under section 570 of the Act (which, to the extent unused at the date of this resolution,
are revoked with immediate effect).
12.
That, subject to the passing of resolution 10, the directors be and are generally empowered in addition to any authority granted under
resolution 11 to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authorities granted by resolution
10 as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity
securities:
100 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
NOTICE OF ANNUAL GENERAL MEETING
Continued
12.1
Up to an aggregate nominal amount of £664,524; and
12.2
used only for the purposes of financing (or refinancing, if such refinancing occurs within six months of the original transaction) a transaction
which the directors determine to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on
Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this notice,
and this power shall expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution or on
27 February 2019 (whichever is the earlier), save that the Company may make an offer or agreement before this power expires which
would or might require equity securities to be allotted for cash after this power expires and the directors may allot equity securities for cash
pursuant to any such offer or agreement as if this power had not expired.
13.
That, pursuant to section 701 of the Act, the Company be and is generally and unconditionally authorised to make market purchases (within
the meaning of section 693(4) of the Act) of ordinary shares of 25p each in the capital of the Company (“Shares”), provided that:
13.1
the maximum aggregate number of Shares which may be purchased is 7,968,976
13.2
the minimum price (excluding expenses) which may be paid for a Share is 25p; and
13.3
the maximum price (excluding expenses) which may be paid for a Share is the higher of:
13.3.1
an amount equal to 105% of the average of the middle market quotations for a Share as derived from the Daily Official List of the London
Stock Exchange PLC for the five business days immediately preceding the day on which the purchase is made; and
13.3.2
an amount equal to the higher of the price of the last independent trade of a Share and the highest current independent bid for a Share on
the trading venue where the purchase is carried out.
This authority (unless previously revoked, varied or renewed) shall expire at the conclusion of the next Annual General Meeting of the
Company after the passing of this resolution or on 27 February 2019 (whichever is the earlier), save that the Company may enter into a
contract to purchase Shares before the expiry of this authority under which such purchase will or may be completed or executed wholly or
partly after such expiry and may make a purchase of Shares pursuant to any such contracts as if the authority conferred by this resolution
had not expired.
14.
That a general meeting of the Company (other than an Annual General Meeting) may be called on not less than 14 clear days’ notice.
By order of the Board
DS SYERS
Company Secretary
13 September 2017
Registered Office:
Town Centre House, The Merrion Centre, Leeds LS2 8LY
Registered in England and Wales No. 00623364
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
101
NOTICE OF ANNUAL GENERAL MEETING
Continued
NOTES
1.
2.
3.
4.
5.
6.
The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the register of
members of the Company as at 6.00pm on 24 November 2017 (or, in the event that the meeting is adjourned, in the register of members at
close of business on the date which is two days before the date of any adjourned meeting) shall be entitled to attend or vote at the meeting
in respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall
be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the meeting.
In order to gain admittance to the meeting, members may be required to produce their attendance card which is attached to the Form of
Proxy enclosed with this document, or otherwise prove their identity.
A shareholder is entitled to appoint one or more persons as proxies to exercise all or any of his or her rights to attend, speak and vote at the
meeting. A proxy need not be a shareholder of the Company. A shareholder may appoint more than one proxy in relation to the meeting
provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him/her. To appoint more than
one proxy, you will need to complete a separate Form of Proxy in relation to each appointment. Additional proxy forms may be obtained by
contacting the Company’s registrar at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU or you may photocopy the proxy form. You will
need to state clearly on each proxy form the number of shares in relation to which the proxy is appointed. A failure to specify the number of
shares each proxy appointment relates to or specifying a number which when taken together with the number of shares set out in the other
proxy appointments is in excess of the number of shares held by the shareholder may result in the proxy appointment being invalid. You can
only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
The appointment of a proxy will not preclude a member from attending and voting in person at the meeting if he or she so wishes.
A Form of Proxy is enclosed. To be valid, it must be completed, signed and sent to the offices of the Company’s registrars, Capita Asset
Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so as to arrive no later than 10.30am on Friday 24 November 2017 (or, in the
event that the meeting is adjourned, no later than 48 hours (excluding any part of a day that is not a working day) before the time of any
adjourned meeting).
As an alternative to completing the hard copy Form of Proxy, a shareholder can appoint proxies electronically by logging onto www.
capitashareportal.com where full instructions are given. For an electronic proxy appointment to be valid, the appointment must be received
by the Company’s registrar by no later than 10.30am on Friday 24 November 2017 (or in the event that the meeting is adjourned, no later
than 48 hours (excluding any part of a day that is not a working day) before the time of any adjourned meeting).
Any electronic communication sent by a member to the Company or the Company’s registrar which is found to contain a virus will not be
accepted by the Company but every effort will be made by the Company to inform said member of the rejected communication.
A shareholder or shareholders having a right to vote at the meeting and holding at least 5 per cent of the total voting rights of the Company
(see Note 8 below), or at least 100 shareholders having a right to vote at the meeting and holding, on average, at least £100 of paid share
capital, may require the Company to publish on its website a statement setting out any matter that such shareholder(s) propose to raise at
the meeting relating to either the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to
be laid before the meeting or any circumstances connected with an auditor of the Company ceasing to hold office since the last Annual
General Meeting of the Company in accordance with Section 527 of the Act.
Any such request must:
6.1
identify the statement to which it relates, by either setting out the statement in full or, if supporting a statement requested by another
shareholder, clearly identifying the statement which is being supported;
6.2
comply with the requirements set out in Note 7 below; and
6.3
be received by the Company at least one week before the meeting.
Where the Company is required to publish such a statement on its website:
6.4
6.5
6.6
7.
7.1
it may not require the shareholder(s) making the request to pay any expenses incurred by the Company in complying with the request;
it must forward the statement to the Company’s auditors no later than the time when it makes the statement available on the website; and
the statement may be dealt with as part of the business of the meeting.
Any request by a shareholder or shareholders to require the Company to publish audit concerns as set out in Note 6 above:
may be made either:
7.1.1
in hard copy, by sending it to the Company Secretary, Town Centre House, The Merrion Centre, Leeds LS2 8LY; or
7.1.2
in electronic form, by sending it to 0113 234 0442, marked for the attention of the Company Secretary, or to info@tcs-plc.co.uk (please state
“TCS: AGM” in the subject line of the email);
7.2
7.3
8.
must state the full name(s) and address(es) of the shareholder(s); and
(where the request is made in hard copy from or by fax) must be signed by the shareholder(s).
As at 12 September 2017 (being the last practicable date prior to the publication of this notice) the Company’s issued share capital consists
of 53,161,950 ordinary shares of 25p each, carrying one vote each. The Company does not hold any ordinary shares in treasury. Therefore,
the total voting rights in the Company as at 12 September 2017 are 53,161,950.
102 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
NOTICE OF ANNUAL GENERAL MEETING
Continued
9.
Shareholders have the right to ask questions at the meeting relating to the business being dealt with at the meeting in accordance with
Section 319A of the Act. The Company must answer any such questions unless:
9.1
9.2
9.3
10.
to do so would interfere unduly with the preparation for the meeting or would involve the disclosure of confidential information;
the answer has already been given on a website in the form of an answer to a question; or
it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
Where a copy of this notice is being received by a person who has been nominated to enjoy information rights under Section 146 of the Act
(“Nominee”):
10.1
the Nominee may have a right under an agreement between the Nominee and the shareholder by whom he/she was appointed, to be
appointed, or to have someone else appointed, as a proxy for the meeting; or
10.2
if the Nominee does not have any such right or does not wish to exercise such right, the Nominee may have a right under any such
agreement to give instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of shareholders in relation to the appointment of proxies in Notes 3 to 5 above does not apply to a Nominee. The
rights described in such notes can only be exercised by shareholders of the Company.
11.
Biographical details of all those Directors who are offering themselves for appointment or re appointment at the meeting are set out on page
50 and 51 of the Annual Report and Accounts.
12.
A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each such
representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual
shareholder, provided that (where there is more than one representative and the vote is otherwise than on a show of hands) they do not do
so in relation to the same shares.
13.
The following documents will be available for inspection during normal business hours at the registered office of the Company from the
date of this notice until the time of the meeting. They will also be available for inspection at the place of the meeting from at least 15 minutes
before the meeting until it ends:
13.1
copies of the service contracts of the Executive Directors; and
13.2
copies of the letters of appointment of the Non executive Directors.
14.
The information required by Section 311A of the Act to be published in advance of the meeting, which includes the matters set out in this
notice and information relating to the voting rights of shareholders is available at www.tcs-plc.co.uk.
TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
103
INVESTOR INFORMATION
Registrar
All general enquiries concerning shareholdings in Town Centre Securities PLC should be addressed to:
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone:
Telephone outside
United Kingdom:
Email:
Website:
Dividends
Interim dividend:
Final dividend:
0871 664 0300
(Calls cost 12p per minute plus network extras.
Lines are open from 8.30am - 5.30pm,
Monday to Friday.)
+44 (0) 371 664 0300
shareholder.services@capitaregistrars.com
www.capitaassetservices.com
3.25p per share paid on 23 June 2017 to
shareholders on the register on 26 May 2017
8.25p per share to be paid on 4 January 2018
to shareholders on the register on 8 December 2017
Payment of dividends
Shareholders whose dividends are not currently paid to mandated accounts may wish to consider having their dividends paid
directly into their bank or building society account. This has a number of advantages, including the crediting of cleared funds into the
nominated account on the dividend payment date. If shareholders would like their future dividends to be paid in this way, they should
complete a mandate instruction available from the registrars. Under this arrangement tax vouchers are sent to the shareholder’s
registered address.
ADVISORS
CONTACT INFORMATION
Independent auditor
BDO LLP
Brokers
Liberum
Bankers
Lloyds Banking Group PLC
The Royal Bank of Scotland PLC
Svenska Handelsbanken AB (Publ)
Solicitors
DLA Piper UK LLP
Leslie Wolfson
Bond Dickinson LLP
Principal Valuers
Jones Lang LaSalle
CBRE
Corporate public relations
MHP Communications
Registered office
Town Centre House
The Merrion Centre
Leeds LS2 8LY
Registered number
623364 England
Email
info@tcs-plc.co.uk
Website
www.tcs-plc.co.uk
Registrar and transfer office
Capita Asset Services
Trustees to mortgage debenture holders
Capita IRG Trustees
7th Floor
Phoenix House
18 King William Street
London EC47 HEE
104 TOWN CENTRE SECURITIES PLC
Annual Report and Accounts 2017
info@tcs-plc.co.uk
tcs-plc.co.uk
@tcs_plc
Town Centre House
The Merrion Centre
Leeds LS2 8LY
+44 (0)113 222 1234
6 Duke Street
Marylebone
London W1U 3EN
+44 (0)20 3370 0080