Annual Report and Accounts 2024 Creating quality spaces 2021 2020 2023 2022 55.8% 2024 14.7% 1.7% (3.2%) (4.5%) (50.4%) 2024 2021 2020 2023 2022 5.0p 5.0p 3.5p 8.5p 5.0p (£24.1m) (£29.5m) (45.5p) 2020 2024 2021 2020 2022 2023 (£8.0m) (£0.6m) (60.1p) 2023 20.9p 2022 2024 (17.9p) 2021 (1.1p) 341p 291p 292p 292p 284p 2024 2021 2020 2023 2022 8.7% (6.0%) (2.1%) 4.3% 2021 2022 2020 2023 2024 £11.0m £1.7m £5.5m £3.1m £3.3m 2024 2021 2020 2023 2022 £0.3m £1.7m £5.5m £3.1m £3.3m 2024 2021 2020 2023 2022 EPRA earnings after tax1 £5.5m EPRA net tangible assets per share2 277p Total shareholder return2 14.7% Total property return2 1.7% 2024 2021 2020 2023 2022 3.1p 6.2p 12.3p 6.2p 0.6p 2024 2021 2020 2023 2022 277p 284p 333p 2024 2021 2020 2023 2022 284p 284p Statutory profit/(loss) after tax (£8.0m) Statutory earnings per share (17.9p) EPRA earnings per share1 12.3p Total dividends per share 8.5p IFRS net assets per share1 284p tcs-plc.co.uk Who we are Town Centre Securities PLC (‘TCS’) is a property investment and development company with assets of over £290m. Our purpose Through the acquisition and active management of property in popular locations we create quality spaces for our tenants, help communities to thrive and generate value for Shareholders over the long term. 01 | STRATEGIC REPORT Highlights 1 Chairman & Chief Executive’s Statement 2 Our Purpose in Action 6 Market Overview 12 Our Business Model 14 Our Strategy 16 Key Performance Indicators 18 Portfolio Review 20 Divisional Review 24 Section 172 Statement 30 Responsible Business 34 Risk Report 50 Financial Review 58 02 | CORPORATE GOVERNANCE Introduction from the Chairman 62 Board of Directors 64 Statement of Compliance with the UK Corporate Governance Code 70 Nomination Committee Report 72 Audit Committee Report 74 Directors’ Remuneration Report 78 Directors’ Report 85 Statement of Directors’ Responsibilities 87 03 | FINANCIAL STATEMENTS Independent Auditor’s Report 89 Consolidated Income Statement 98 Consolidated Statement of Comprehensive Income 98 Consolidated Balance Sheet 99 Consolidated Statement of Changes in Equity 100 Consolidated Cash Flow Statement 101 Notes to the Consolidated Financial Statements 102 Company Balance Sheet 132 Statement of Changes in Equity 133 Notes to the Company Financial Statements 134 04 | SHAREHOLDER INFORMATION Notice of Annual General Meeting 143 Investor Information 150 Glossary 151 Highlights 1 Alternative performance measures are detailed, defined and reconciled within notes 11 and 22 and defined within the glossary of these financial statements. 2 Alternative performance measures – See financial review and glossary for definition of these terms at the end of these financial statements. Financial Resilient underlying performance 01 01 STRATEGIC REPORT We have benefitted from the last three years’ disposal and asset management programmes and reduction in borrowings, which positioned us well to contend with the ongoing macro-economic challenges. However, with continued low levels of variable interest rate bank debt, I am confident that we are in a strong position in these uncertain times.” Edward Ziff OBE DL Chairman & Chief Executive development Sustainable Chairman & Chief Executive’s Statement Following a year of further consolidation, the business remains in a strong position. We have addressed challenges as they have arisen, and I’d like to express my gratitude to my colleagues for their continued contributions to our success. There were no significant changes to our property portfolio during the year, with the only acquisition being a car park investment in Sheffield that is operated by NCP. Our CitiPark business continues to perform well, notwithstanding the ongoing curtailment of the commuting week since the pandemic. The addition of two car park management agreements in London and one in Manchester brings the number of car parks operated under the CitiPark brand to 20 – read more on page 25. The hotel business continues to trade very well having just had a record year. Having significantly reduced our borrowings and strengthened our balance sheet through our divestment and asset management activity in the past three years, we were able to complete a buy-back of shares via a tender offer representing approximately 13% of the issued share capital of the Company. As anticipated, the tender offer resulted in the Company leaving the REIT regime with effect from 30 June 2023. Now we have successfully reset the business, our focus is to bring forward our development pipeline of over £400m GDV and also seek out new opportunities for value creation. In December we submitted a planning application for a significant student accommodation scheme at the Merrion Centre. For the first time in the centre’s 60-year history, TCS is looking to introduce residential accommodation, adding to the existing retail, leisure and office space. To address burgeoning demand for student accommodation, TCS’s planning application is designed to deliver 1,110 student bedrooms. Following the grant of detailed planning consent at Whitehall Riverside in May 2023, we continue to make progress with professional teams and prospective tenants lined up for all phases of the development. Ground enabling works have started and our readiness to commence construction will be dictated by the letting and investment market. Overview Financial performance 1 Alternative performance measures are detailed and reconciled within note 11 and the financial review and defined within the glossary in these financial statements. ◆Our statutory loss in the year of £8.0m (2023: £29.5m loss) was predominantly incurred as a result of valuation losses in our investment property portfolio, with a like-for-like portfolio valuation down 4.7% from June 2023. This compares to a decrease of 4.5% in the MSCI/IPD All Property Capital Index over the same period, influenced by market sentiment concerning the macro-economic outlook adversely impacting valuation yields – particularly in the office sector. ◆Taking into account other comprehensive income of £0.6m, the cost of buying in shares for cancellation was £9.4m and £4.6m in dividends paid; net asset value per share was 284p, compared with 291p at 30 June 2023. ◆Net borrowings, excluding lease liabilities, stood at £108.6m at 30 June 2024 (£101.9m at 30 June 2023), with only 12.5% of this exposed to variable interest rates. ◆EPRA earnings per share are 12.3p for the year (2023: 6.2p) with the recognition and subsequent movement on deferred tax assets and liabilities accounting for 3.8p of the increase. ◆99% of all rent and service charge income invoiced in the year was collected. ◆During the year the Company received two further amounts relating to the sale of its investment in YourParkingSpace, with a further final receipt in July 2024. Since the July 2022 sale the Company has received total consideration of over £18m with a further £3m received after the year-end, crystallising a profit of £18.5m in the two-year period. Asset sales £0.2m 2023 | £37.9m 2022 | £48.0m READ MORE PAGE 23 Proportion of retail and leisure 30% 2023 | 31% 2022 | 29% READ MORE PAGE 22 Net asset value per share 284p 2023 | 291p 2022 | 341p READ MORE PAGE 60 CitiPark London, Barbican. 03 01 STRATEGIC REPORT 02 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT Edward Ziff welcomes Jacob Ziff to the business. Chairman & Chief Executive’s Statement continued Market context We have not seen meaningful rental growth in the commercial sectors in which we operate for a number of years, and don’t anticipate this to change for the foreseeable future. The constraints this places on income from our property portfolio provide further validation of our strategy to have a comprehensive car parking business. In the office sector, the post-pandemic practice of working from home seems to be reversing, with workers slowly gravitating back to the office, which is encouraging. Across the country, prime space for retail and leisure is generally well occupied, although non-prime sites continue to struggle. Despite cost-of-living pressures, consumer demand in the food and beverage sector – a key part of our leisure portfolio – has remained buoyant. The retail sector has bottomed out and is where we see opportunity. TCS does not have any significant on-site development work underway at present, a consequence of the high inflationary environment of the preceding 18–24 months. Strategy Over the last four years the Company has successfully repositioned itself. Following a successful disposal programme, net borrowings have been reduced from £184m in June 2020 to £111.1m, with only 12.5% of this current balance at a variable interest rate. CitiPark Leeds Pride 2024. As we were going to print we received sad news regarding two former directors of the Company. David Whitehead, a former executive director and John Nettleton, a former non-executive director have both sadly passed away in the last few days. Full obituaries for both individuals will be incorporated into next years annual report. In the meantime, our thoughts and prayers are with both families at this time. Both gentlemen added considerably to the company with their own skills. I am personally much indebted to them and I am extremely grateful for all they did, their friendship and wise counsel. I and all who knew them will miss them enormously.” Progressing the development sites and invest in additional accretive property and technological opportunities. Portfolio decrease 4.7% 2023 | 12.6% DECREASE In this time period the percentage of the portfolio represented by retail and leisure properties has reduced from 40% to 30%. As a Board we continue to review the Company’s strategy and have adapted this to be more focused on managing the current investment property portfolio, progressing the development sites and investing in further accretive property, technological and other business opportunities. People and culture I’m delighted that Jacob Ziff joined TCS in April as Associate Director of Investment. Previously at investment brokerage Clifton Agency, Jacob brings valuable experience and contacts, particularly within the M25. He will focus on creating a strategy for property investment and will also support in managing the existing TCS property portfolio. Jeremy Collins retired as a Non-Executive Director at the end of the financial year. On behalf of the Board, I would like to thank Jeremy for his contributions since joining the TCS Board in 2018, and wish him well for the future. Sustainability and communities TCS has always had a strong commitment to philanthropy, and we are proud to contribute to charitable and community- based programmes. Through the staff charitable foundation we established with a portion of the proceeds from the sale of YPS, colleagues are invited to suggest causes they want to support and TCS will offer matched funding to selected initiatives. Environmental sustainability is a key focus for TCS, in both our property portfolio and our CitiPark business, and we were delighted to be recognised with the esteemed ‘Green World Ambassador Status’ in the Green Apple Awards. 39% of our investment property portfolio has an EPC rating of B or higher, and environmental considerations are central in the design of our developments at Whitehall Riverside. Dividend Although the Company left the REIT regime with effect from 1 July 2023, it is still required to distribute 90% of the tax- exempt profits arising from its property rental business during the year to 30 June 2023, with this payment to be made before 1 July 2024. The interim dividend of 2.5 pence per ordinary share announced with the half-year results was paid out as a Property Income Distribution (‘PID’) rather than an Ordinary Dividend, on 14 June 2024, to shareholders on the register on 24 May 2024. To satisfy the requirement to pay out 90% of profits, a further special interim dividend of 6 pence per ordinary share was paid out on the same date. This is in place of a final dividend for the year ended 30 June 2024. This brings the total dividend paid for the year ended 30 June 2024 to 8.5p, a 70% increase on the 5p dividend paid for the year ended 30 June 2023. For the year ending 30 June 2025 and onwards the Company plans to return to paying regular dividends every six months, with the next payment expected to be the interim dividend to be announced in March 2025. The Board will continue to review capital allocations to optimise long-term returns for shareholders, including exploring options beyond paying regular Ordinary Dividends for returning cash to shareholders where appropriate. Outlook As we look to the future, we will continue our work to optimise returns from our property portfolio and car parking operations, and will evaluate investments that meet our criteria. Our strong financial footing, deep expertise and flexible approach mean we are well placed to capitalise on suitable opportunities as they emerge. Edward Ziff OBE DL Chairman & Chief Executive 15 October 2024 04 05 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Creating quality spaces Our purpose Through the acquisition and active management of property in popular locations, we create quality spaces for our tenants, help communities to thrive and generate value for Shareholders over the long term. Our Purpose in Action Designed for modern needs, but with flexibility front of mind so they can adapt to the changing demands of the office and residential sectors, electric vehicles, and the visitor economy. 07 06 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT 01 STRATEGIC REPORT Generating value for stakeholders over the long term Actions ◆Proud to be involved with a number of community-based programmes including Leeds Hospitals Charity, the Yorkshire Children’s Charity, Flourishing Families and First Give. ◆Implementing a regular calendar of activity throughout the year at the Merrion Centre to attract footfall and enhance customer experience. ◆We are setting up a staff charitable foundation with a view to colleagues suggesting the causes they want to support. We believe how we do business is just as important as what we do. Our sustainability strategy sets out our ESG goals, aligned to our purpose and business model. Good health and wellbeing Our charitable work with children (eg. our work with the First Give and Flourishing Families). Affordable and clean energy Producing our own solar energy through the development of three solar farms in Leeds and Manchester. Sustainable cities and communities and Responsible consumption and production Electric vehicle charging network, and the newly-formed CitiCharge business. Also our five-year Merrion Centre sustainability plan. Reduced inequalities and Partnerships for the goals Local charitable partnerships including Tempus Nova. for Investors Reliable and long-term capital growth. for Tenants Creating spaces that help support businesses and provide safe environments for residential tenants. for Employees Committed to providing a safe and secure working environment. for Communities Striving to make a positive contribution that helps communities thrive and by supporting local initiatives and charities. Our Purpose in Action continued Delivering Helping communities thrive SEE ESG PAGE 34–49 SEE OUR STAKEHOLDERS PAGE 30–33 01 STRATEGIC REPORT 08 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT 09 The Merrion Centre celebrated its 60th anniversary on 26 May 2024. The Centre is a 1,000,000 sq ft mixed-use island site in a prime location in Leeds city centre comprising commercial, retail, leisure, offices, a 960-space multi-storey car park and the ibis Styles hotel. When first opened the Centre broke new ground, combining daytime shopping with evening entertainment, fundamentally changing retail in Leeds. The Centre is strategically placed in the Arena Quarter amongst established offices, prestigious universities, colleges, nightlife venues and adjoining retail and leisure areas and is continually evolving. Recent years have seen over £200m invested in and adjacent to the Merrion Centre, with the centre continually evolving. The strength and numerous benefits of this location are illustrated in the high footfall figures, with over 200,000 internal visitors per week. Investment in The Merrion Centre continues. External frontages, elevations, office buildings and internal malls have all been subject to varying levels of refurbishment. An extensive phased redevelopment programme is well underway at the Centre, with the current focus on both the refurbishment of Town Centre House and the proposal for 1,100 student beds within the Centre. Our Purpose in Action continued Merrion Centre 60th anniversary The Merrion Centre has continually adapted to serve a diverse clientele over the years, from our long-standing customers to the growing office workforce, students, and commuters. As we look to the future, I am confident the Merrion Centre will continue to be a central destination in Leeds for many years to come.” Edward Ziff OBE DL Chairman & Chief Executive 01 STRATEGIC REPORT 10 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT 11 Market Overview Over the last 12 months the economy has remained subdued with very little in the way of investment property transactions outside of the private rent and purpose-built student accommodation sectors. Here we identify the key trends impacting our business, the opportunities and challenges they present and how we are responding. Our market Ducie House, Manchester. Market trend Market trend Market trend Market trend UK economic growth – cost of living, inflation, political unrest and interest rates Flexible working and office space Changing consumer shopping habits Environmentally friendly and sustainable solutions Description: With a change in government, the political focus remains on the cost-of-living crisis, controlling inflation and generating economic growth for the country. Over the last few years the Bank of England steadily increased the underlying base rate to 5.25%, which was stable during the year ended 30 June 2024. This has only recently started to come down, with an initial 25bps reduction in August 2024. Any change in government will bring a level of uncertainty, and the new Labour government is no exception to this – existing and potential retail and leisure tenants are still evaluating their own portfolios and potential expansion plans, whereas the office market remains very quiet. Description: Working practices have remained consistent over the last year, with very few employers mandating full-time office working. From talking to our tenants and other stakeholders we see hybrid and flexible approaches when it comes to working practices, which is affecting demand for office space as well as occupancy levels in some of our city centre car parks. The environmental credentials of a building have always been important to tenants, however for new prime offices these are as important – if not more so – than the underlying rental value. Over the coming years we expect this to affect both the estimated rental values achievable and the underlying investment yields for every property, whether new-build or an existing investment. The new minimum energy efficiency standard of EPC B, which becomes mandatory in April 2030, is a key metric in where we invest and update our existing portfolio. Description: Online shopping continues to challenge the retail sector’s traditional business model of operating large stores on the high street and in shopping centres. Reduced requirements and smaller store sizes are now the norm, with town and city centres having to evolve their offering. This has resulted in further retail casualties during the year, however the operators that keep pace with changing customer needs and identify optimal in-store propositions should be able to thrive. For example, younger shoppers, despite being online more than any other group, show a preference for a hybrid, off- and online shopping experience. In contrast, older shoppers now fall broadly into two camps, with those continuing to visit physical shops and those that do the majority of their shopping online. Description: Consumers are increasingly focused on the impact of their activities on the planet and are looking for environmentally friendly and sustainable options. In the property sector, this includes minimising the environmental impact of buildings, ensuring buildings are digitally efficient, developing sustainable and energy efficient solutions, as well as considering the health and wellbeing of employees, tenants and visitors. In the automotive sector, demand for electric cars is rising; the UK Government’s plan to phase out the sale of new petrol and diesel cars by 2035 means that the infrastructure to charge them when consumers are on the move is now crucial with more charging points needed in more locations around the country. How we are responding How we are responding How we are responding How we are responding 88% of our assets are located in Leeds and Manchester, with our portfolio diversified over a number of sectors, including retail, leisure, offices, car parking and residential. We are well positioned to take advantage of investments in a number of these areas by developing high-quality assets when opportunities arise. Office space currently accounts for 28% of our portfolio, with our focus on high-quality assets in city centres. The majority of these, including our latest developments, 123 Albion Street and Ducie House, are multi-tenanted and we have focused on providing flexible attractive working environments. Engagement with our tenants is a key tenet of our business; this is currently evolving to include working to report on and reduce our combined emissions, improving the energy efficiency of our buildings and increasing waste recycling. Where it is not possible to create attractive office space, we are looking at alternative uses. For example, we have submitted detailed plans to convert Wade House, an office building at the Merrion Centre, into new student accommodation. In line with our strategy of the last four years, we have diversified our portfolio and reduced our retail exposure. Pure retail now accounts for only 19% of our portfolio value, down from 60% eight years ago. The majority of our current retail tenants are classed as ‘essential’ and operate in food, discount and convenience retail. These are the more stable and resilient segments of the sector which are less impacted by the growth in online shopping. Across our buildings we integrate high standards of environmental design and target the latest standards including EPC A ratings, BREEAM Outstanding as well as net zero carbon in the operation of our new developments. With wellbeing never so important, our developments will not only focus on first-class places to live and work, but they will offer space to relax, unwind and enjoy the surroundings. We operate three solar photovoltaic farms on top of buildings we own in Leeds and Manchester, which generated over 189,000 kWh of energy in the year (FY23: 182,000 kWh) and avoided over 111 tonnes of CO2 (FY23: 115 tonnes). We continue to look at innovative ways to further reduce our environmental impact. In our Car Parking division, we have continued our roll-out of EV charging points and rapid chargers across our car parks and alongside our buildings. We currently operate 61 chargers across CitiPark’s Car Parking portfolio and a further 38 chargers with NHS and retail partners. 12 13 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Our Business Model Experienced team with in-depth knowledge of the communities in which we operate. We create vibrant local communities in areas of strong economic growth, and contributing to these communities is at the heart of our culture. Development pipeline of over £400m of high-quality assets Our pipeline presents significant long-term growth opportunities. Mix of short and long-term financing We leverage our portfolio to provide innovative and secure funding. A resilient and robust business with 60 years’ heritage We take a long-term view underpinned by a significant family shareholding. Established relationships with diverse, high-quality tenants Our tenants include household names such as Morrisons, Iceland and Greggs, as well as small and growing companies. What sets us apart – investment case What we do Portfolio value by location Portfolio value by sector Actively manage assets to optimise income and capital growth Refurbish and upgrade Renew leases Reduce voids Maximise available capital by utilising a combination of secured lending, retained profits and share capital Create a long-term quality portfolio Invest in our development pipeline, continuing to unlock existing opportunities and create new ones Acquire investment assets to diversify our portfolio across sectors, with a focus on Leeds, Manchester and London How we generate value for our key stakeholders For investors We provide reliable returns and long-term capital growth. For tenants For commercial tenants we create spaces that help support businesses and meet their changing needs. We provide safe environments for our residential tenants, with modern city living a pre-requisite. Offices 28% Retail and Leisure 30% Car Parking 16% Hotel 4% Residential 12% Development 10% Leeds 61% Manchester 27% London 9% Scotland 2% Sheffield 1% For employees We are committed to providing a safe and secure working environment with opportunities for career progression. For communities We strive to make a positive contribution through development that helps communities to thrive and by supporting local initiatives and charities. Our diversified portfolio spans a wide range of sectors across key regional locations. We have a strong record of creating long-term value through income and capital growth. 14 15 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Our Strategy 1 See glossary for definition of these terms at the end of these financial statements. Loan to value 50.8% – Financial liabilities totalling £138.6m less the net cash of £1.4m as a percentage of total assets worth £292.4m, less cash and cash equivalents of £22.2m. WHAT WE DO: Actively manage assets to optimise income and capital growth PROGRESS: ◆The proportion of retail and leisure assets in the portfolio has now settled at 30%, down from 60% in 2016. Pure retail now represents only 18% of the total portfolio, and of that, 66% is in the resilient Merrion estate. ◆We made no significant disposals within the year following the completion of a successful disposal programme over the last four years. ◆One further acquisition was completed in the year. A multi- storey car park investment in Sheffield that is let to NCP. PRIORITIES ◆Future opportunities have been identified at Vicar Lane, Leeds and the Merrion Centre. WHAT WE DO: Maximise available capital by utilising a combination of secured lending, retained profits and share capital PROGRESS: ◆Net borrowings (total borrowings of £138.6m less finance lease liabilities of £28.6m and less net cash of £1.4m) increased 5.6% to £108.6m, with loan-to-value (‘LTV’) increasing to 50.8% (FY23: 45.8%) These increases were primarily as a result of the successful tender offer in the year. ◆We extended our existing NatWest facility by a further year; it now expires in September 2025. ◆Our existing Lloyds and Handelsbanken facilities expire in June 2026, although the Lloyds facility can be extended by two further years. PRIORITIES ◆We will continue to review our portfolio with an increased focus on bringing forward our development pipeline. ◆Optimising our capital structure to reduce gearing and absolute borrowing levels whilst reducing the exposure to variable interest rates is an ongoing focus. WHAT WE DO: Invest in our development pipeline, continuing to unlock existing opportunities and create new ones PROGRESS: ◆Our development pipeline, with an estimated GDV of over £400m, is a valuable and strategic point of difference for TCS which we continue to progress and improve. ◆In December 2023 we submitted a detailed planning application for 1,110 student bedrooms at the Merrion Centre – including the conversion of Wade House, an existing 13-storey office building, and the creation of a new tower. PRIORITIES ◆We continue to review the sequence of our development pipeline. WHAT WE DO: Acquire investment assets to diversify the portfolio across sectors, with a focus on Leeds, Manchester and London PROGRESS: ◆Completed the £1.5m acquisition of the multi-storey car park on Wellington Street, Sheffield. PRIORITIES ◆We continually review opportunities to acquire new investment assets across all sectors, in particular in Leeds, Manchester and London. ◆Sites with asset management and/or development opportunities are a particular focus. We have clear plans to further enhance shareholder value 17 01 STRATEGIC REPORT 16 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT Capital expenditure in FY24 on the existing portfolio £5.3m (FY23: £32.7m) Void rate at 30 June 2024 stands at: 8.1% (30 June 2023: 5.6%) KPIs: Loan to value1 as at 30 June 2024 50.8% (FY23: 45.8%) LTV headroom over our bank facilities as at 30 June 2024 £20.4m (FY23: £30.0m) Generated from asset sales in the year ended 30 June 2024 £0.2m (FY23: £33.4m) Weighted average cost of net borrowings at 30 June 2023 5.3% (FY23: 5.1%) KPIs: Key Performance Indicators 1 See glossary for definition of these terms at the end of the financial statements. SEE OUR STRATEGY PAGE 15 Actively manage assets to optimise income and capital growth Invest in our development pipeline, continuing to unlock existing opportunities and create new ones Maximise available capital by utilising a combination of secured lending, retained profits and share capital Acquire investment assets to diversify the portfolio across sectors, with a focus on Leeds, Manchester and London KPIs: KPIs: Retail and leisure proportion of portfolio 30% (FY23: 29%) Percentage of portfolio now invested in residential 12% (FY23: 12%) Percentage of the portfolio located in Leeds and Manchester 88% (FY23: 90%) Development pipeline remains in place £400m (FY23: £400M) Electric Vehicle charging bays across our portfolio 61 (FY23: 51) SEE OUR STRATEGY PAGE 14 18 19 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Diversified portfolio Portfolio Review Valuation summary The like-for-like value of our portfolio decreased by 4.7% (£12.1m) after capital expenditure of £5.3m in the year. Portfolio value by location Portfolio value by sector Offices 28% Retail and Leisure 30% Car Parking 16% Hotel 4% Residential 12% Development 10% Leeds 61% Manchester 27% London 9% Scotland 2% Sheffield 1% 21 20 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT 01 STRATEGIC REPORT Leeds Merrion Centre – Pho 37. Portfolio Review continued Significant valuation losses have been recognised across our retail, office and car park portfolios. The valuation of all of our properties (except one) was carried out by CBRE and Jones Lang LaSalle. Portfolio overview Passing rent £m ERV £m Value £m % of portfolio Valuation incr/(decr) Initial yield Reversionary yield Retail & Leisure 1.2 1.3 13.8 5% -5.0% 8.1% 8.8% Merrion Centre (exc. offices) 4.5 4.8 50.3 20% -10.0% 8.5% 9.1% Offices 4.5 6.5 72.9 28% -9.7% 5.9% 8.4% Hotels 0.9 0.9 9.9 4% 4.2% 8.4% 8.4% Out-of-town retail 1.0 1.1 12.5 5% -3.8% 7.9% 8.1% Residential 1.3 2.1 31.7 12% 1.3% 3.9% 6.3% 13.4 16.7 191.1 74% -6.7% 6.7% 8.2% Development property 24.45 10% 13.6% Car parks 40.48 16% -4.1% PORTFOLIO 256.0 100% -4.7% Note: includes our share of Merrion House within Offices (£27.5m – see note 14 of these financial statements) and car park goodwill of £2.5m (see note 13 of these financial statements) arising on individual car park assets, but specifically excluding goodwill arising from car park operation acquisitions. None of the above is included in the table set out in note 12 of these financial statements. Note: excludes IFRS 16 adjustments that relate to right-of-use car park assets (£21.7m) as the Directors do not believe it is appropriate to include in this analysis assets which have fewer than 50 years remaining on their lease and the Group does not have full control over these assets. These assets are included in the table set out in note 12 of these financial statements. The table below reconciles the table to the left to that set out in note 12 of these financial statements: FY24 £m FY23 £m Portfolio as per note 12 247.7 254.1 50% share in Merrion House 27.5 30.7 Goodwill – Car Parks – Property specific only 2.5 3.0 Less – IFRS 16 right-of-use car parks and investment properties (21.7) (23.1) AS PER THE TABLE TO THE LEFT 256.0 264.7 Sales and purchases During the financial year ended 30 June 2024 we sold two relatively small properties above their 30 June 2023 book value, with gross proceeds of £0.2m. Our continued commitment to asset recycling is clear. The table below details the £168.4m of disposals made since FY17, of which 71% were retail and leisure assets. Sales Purchases £m % retail & leisure £m % retail & leisure FY17 22.3 88% 4.0 46% FY18 10.1 95% 9.0 0% FY19 14.0 100% 16.0 25% FY20 2.5 100% 1.7 100% FY21 48.0 93% – – FY22 37.9 59% 7.0 100% FY23 33.4 21% 18.8 0% FY24 0.2 0% 1.5 0% 168.4 71% 58.0 25% Retail and Leisure The Retail and Leisure market has continued to decline this year, albeit at a slower rate than last year. We have seen this with the valuation movements on the Merrion Centre and our out-of-town retail property. As the online retail market grows, high street units are having to diversify their offering to become more than just shops; some are now incorporating experiences, entertainment and restaurants. A trend that we are looking to replicate throughout our portfolio. Regional offices The Office market is continuing to face significant macroeconomic pressures. Flexible workspaces are increasingly in demand, reflecting the shift to hybrid working since the pandemic. Co-working spaces, quality buildings and adaptable offices are more popular, as are those in prime locations. Over the coming years we will be investing significant capital in our existing office space as sustainability and flexible space continue to be priorities. Our 50% stake in Merrion House has also reduced in the year. As a relatively long- dated and less risky asset, the valuation of this property is correlated more to the UK bond market rather than the underlying physical asset. As the economy improves we expect these revaluation deficits to partially reverse. Residential The residential market has continued to grow, in particular in Manchester, however our portfolio of residential assets has only grown by 1.3% in the year. The removal of multiple dwellings relief on stamp duty has effectively increased the purchasers’ costs assumed by valuers for multiple- unit buildings – this has affected all of our residential properties. Car Parks During the year, the Company’s freehold and long leasehold car park assets fell in value by £1.7m, a drop of 4.1%. Occupancy levels across the portfolio remain consistent however increased operating costs and rental charges negatively impacted the underlying values. Other valuation movements The value of the Company’s development sites increased by £2.8m in the year, reflecting increases to the alternative-use value for our Whitehall Road development site in Leeds. Percentage of Residential 12% 2023 | 12% Percentage of Offices 28% 2023 | 32% 22 23 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 CitiPark Divisional Review Overview Our CitiPark business generated revenues of £13.4m during the year (2023: £13.1m). We have increased our portfolio without the need for significant capital investment, continued our focus on innovation, and our enforcement business has performed well. Performance Overall, revenue generation has remained positive, although there are location- specific variances. While performance in Manchester has exceeded pre-pandemic levels, for example, some locations are seeing a more difficult recovery trajectory. In addition to well documented, sector-wide shifts, as a Tuesday to Thursday commuting week has become standard for many people, our branches in Watford have been impacted by the increases in rents, rates and the closure of local businesses. We have continued to seek capital-light portfolio growth, alternative sources of income and other ways to strengthen the CitiPark brand and business, both organically and inorganically. Our parking management agreement platform has grown well, with three new branches in the last 12 months adding 1,500 spaces to our portfolio: New Jackson in Manchester, and two in central London, at Portman Square and the Barbican. We are also exploring ways to capitalise on our underutilised space through alternative uses for some of our larger locations. For example, we are in discussion with a leisure operator about using the roof space at the Merrion Centre, which would generate welcome additional rental income. Technology and innovation Our CitiCharge EV charging business remains a core element of our growth strategy. Our proprietary EV platform has been a source of revenue as well as providing an enhanced customer experience in terms of charging rates and reliability. As we have grown organically through investment and upgrade programmes, some assets have seen a significant uplift in utilisation, for example at the Merrion Centre and Leeds Dock. Data and insights from our CitiCharge platform on utilisation and charging rates also allow us to make more informed decisions on the further roll-out of the technology. Our rebranded CitiPark app performed so strongly and received such positive feedback that we decided to use it as the basis for creating our own parking management system. In addition to being more cost- effective than the previous licensed model, it allows us greater flexibility and control. We are delighted with the functionality of our system and are well underway with rolling this out across our portfolio. Having developed constructive relationships with suppliers of cameras and other hardware, we are now looking to offer our solutions to third parties on a ‘white label’ basis. As we have evolved our sites to being barrierless for reasons of customer experience as well as providing operational efficiencies and environmental benefits, we have also seen stronger synergies with our enforcement business. Outlook We are confident in the outlook and have a strong team in place to execute our strategy. We see further opportunities to progress our capital-light model, with sound growth prospects in both existing and new parking management partnerships. We also see scope to grow our enforcement business, both organically and inorganically. There will be challenges, some of which are of our own making – as we look to develop a new flagship multi-storey car park on our Whitehall Road site. EV and battery storage will be a focus for us, particularly with central and local government encouraging more sustainable methods of transport in city centres. Our EV charging infrastructure, green season tickets and tariffs are further encouraging the uptake of electric vehicles. Three new sites in the last 12 months adding 1,500 spaces to our portfolio CitiCharge at Merrion. EV charging bays at the end of the year 61 2023 | 51 CitiPark revenue £13.4m 2023 | £13.1M 25 01 STRATEGIC REPORT 24 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT Property Divisional Review continued Overview Against a backdrop of high interest rates and uncertain market sentiment around the economy and the timing and outcomes of the general election, the property sector faced ongoing challenges. Despite a year of economic headwinds, we remain in a strong financial position and continue to take a long-term approach to our portfolio. Although utility costs are no longer making the headlines, for some retail and leisure tenants in particular, energy prices reducing from peak levels came too late, with some retrenching and reducing their portfolio and others driven out of business altogether. This also led to some tenants looking to rebase rents. Valuations have been suppressed, driven by changes in prime yields and a dearth of investment transactions, resulting in a lack of comparable data. Rent collection has been excellent, excluding the impact of business failure. Vicar Lane, Leeds. 27 26 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT 01 STRATEGIC REPORT Bath Street, Glasgow. (CGI) Divisional Review continued Acquisitions and disposals The reporting period was quiet in terms of portfolio changes, with our only activity in this area an opportunistic acquisition of a car parking asset in Sheffield, which has an incumbent operator. We do have an appetite to acquire – signalled by Jacob Ziff joining the business to lead on acquisitions and investment strategy – but are taking a considered and cautious approach to where we invest. Performance by segment The office segment has borne the brunt of suppressed valuations, although take-up of our assets has remained in line with long- term averages as tenants cater for peak occupancy, even if their staff are tending to work fewer days in the office. Our office assets in Manchester have seen high occupancy and swift relets when vacancies have arisen. We divided the vacant space at 123 Albion Street to let to a quality tenant. In the same building, ground floor space that was previously a retail outlet and latterly used as office space by Job Centre was re- let to two leisure operators, demonstrating the versatility of the property. Similarly, at the Merrion Centre, we are seeing greater demand from leisure operators than retailers, so some outlets have had their usage changed. In addition to the cross-sector impacts of inflation and interest rates, retailers have also had to contend with a material uptick in shoplifting, putting further pressure on operating costs. The demise of the nightclub operator as part of a wider trend seen in this sector provides a further opportunity to explore other options for a sizeable unit in the Merrion Centre. Although we have a limited portfolio in the residential segment, our assets have seen high occupancy and increasing rents as demand continues to outstrip supply. By way of example, we are refurbishing all 20 apartments on Bath Street, Glasgow. As we have completed floors, we have relet properties at rates that exceed our target rental levels. Similarly, our build-to-rent site in Manchester, comprising 91 premium, canal-side apartments is performing well, with tenants a combination of international students and professionals. There is an opportunity for TCS to be more active in this segment, by bringing forward our development pipeline or through targeted acquisitions. Our hotel operation has performed strongly with continued high occupancy, resilient income and an increased valuation. We were pleased to let the ground floor restaurant unit that adjoins the hotel. We are also involved in the George Street development, applying our expertise by working with Leeds City Council as the development manager for another hotel. We supported the council in entering an agreement for lease with Premier Inn earlier in the autumn and achieving a ‘resolution to grant’ planning permission in November. Development pipeline Having received ‘resolution to grant’ in May 2023, we received the planning permission decision notice for Whitehall Riverside in March 2024. We have been working through the detailed design work on the car park and offices with a view to bringing these forward at the same time, and are in discussions with several potential pre-let parties. We have also had interest in another plot on the development, which is a hotel. Several factors are making the viability of development appraisals for office space more challenging currently, including high interest rates, the sentiment on prime yields, build costs, where rent levels need to be, and concession packages required by tenants. Over the next couple of years, we expect to see a high margin between rents in new build and refurbished properties, and it will be interesting to determine how important the sustainability credentials of new build properties are to tenants and whether they are prepared to pay a premium for these. Plans for our Whitehall Riverside development are designed to offer best-in- class sustainability credentials, despite the additional costs involved. As we refurbish existing properties we seek to make environmental upgrades, although the economics and likely rent levels mean that measures tend to be more incremental, such as adding solar and improving thermal performance. Our proactive approach to reimagining space is exemplified in the proposed Wade House and 100MC developments at the Merrion Centre, for which we submitted planning applications in December for the repurposing of these erstwhile office assets to create purpose-built student accommodation. We are progressing detailed design work on Wade House, with a view to being onsite next year, subject to funding. We reviewed our land holdings in Manchester to assess the need to refresh the strategic regeneration framework. As a result of the review and other priorities, we decided to pause the planned refresh, although we are looking to bring forward a residential application on Eider House. Outlook Our focus for the next year and beyond is to bring forward our developments, which will also reduce our void levels. These are currently relatively high, partly on account of the need for vacant possession to facilitate redevelopment, as is the case for Wade House. We will continue to explore opportunities to acquire assets in Leeds and Manchester, and there is appetite to make acquisitions in London, where TCS currently only has two sites. The Group is in a strong financial position to pursue attractive opportunities as they arise, and we look ahead with confidence. 100 MC, Leeds. (CGI) We expect to see a high margin between rents in new build and refurbished properties Our assets have seen high occupancy and increasing rents as demand continues to outstrip supply. Generated Revenues £15.3m 2023 | £14.2M 28 29 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Section 172 Statement Statement by the Directors in performance of their statutory duties in accordance with s172(1) Companies Act 2006 The Board believes that, individually and collectively, they have acted in a way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, having regard to the stakeholders and matters set out in s172(1) (a–f) Companies Act 2006. We have continued to protect and generate value for our stakeholders for 64 years and remain committed to pursuing our strategy for long-term value creation. We believe that consideration of our stakeholders is the foundation of what we do and the basis of every decision that is made throughout the Company. To demonstrate how entrenched this is in the way we act as a business we have included cross-references to where you can find further examples across this report: Why invest in Town Centre Securities? Clear demonstration of the value we provide to Shareholders Pages 14–15 Strategy Clearly defined plans for the future of the business Pages 16–17 Responsible business Demonstrating understanding of how our business impacts those around us Pages 34–49 How the Board factors its stakeholders into decision-making The table below sets out who we believe to be our key stakeholders, why they are important to us and, subsequently, how we factored their interests into our decision-making process to promote the success of the business as a whole. Our stakeholders: Why they are important: How we engaged during the year: SHAREHOLDERS Shareholders are key to ensuring we have the capital to continue doing what we do. They keep us accountable and provide direction and approval of future plans. The primary communication with Shareholders is through the Annual Report and Accounts, the half-year release and the Annual General Meeting (‘AGM’). All Directors attend the AGM (either in person or by teleconference), and we encourage Shareholders to ask questions of the Board and to meet informally after. In addition, the Chairman & 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, and at other times throughout the year; taking on board suggestions especially with regard to non-financial reporting. During the year the Board considered key decisions around the implementation of the strategy of the business. Following a successful four-year disposal programme that has reduced the Company’s exposure to retail and leisure tenants, the levels of debt and increased loan-to-value headroom on its individual bank facilities, the Board reviewed the updated capital allocations and working capital requirements of the Group. With the levels of gearing and surplus cash and, together with the discount to net tangible assets the Company’s shares traded, the Board determined that a tender offer would be in the best interests of Shareholders. In addition the Board considered the payment of a further special interim dividend. As part of these processes the Board were provided with briefing papers, prepared and presented by the Executive Directors. These papers not only presented the impact the potential tender offer would have on key financial metrics, the risks associated with the challenges our economy is facing, but also on the longer-term loan-to-value headroom under the Company’s debt facilities. As a result of these decisions, the Company launched a tender offer in November 2023, with the Company acquiring in for cancellation 6,292,920 of it’s own Ordinary Shares in December 2023. A further ‘special interim dividend’ of 6.0p per Ordinary Share was declared in May 2024 and paid in June 2024 alongside the previously declared interim dividend of 2.5p per Ordinary Share. EMPLOYEES Our employees allow us to continue to deliver and maintain quality environments and services for our customers, and sustain long-term growth, providing value to our Shareholders. Ensuring we have happy employees with challenging work, in turn produces higher quality outcomes and benefits all stakeholders. We are committed to the personal and professional development of our employees, supporting employees through studies. We continue to look for ways to improve the rewards and support we give our staff beyond their base salary, and have a number of schemes in place to enable this. This includes but is not limited to salary sacrifice schemes for childcare vouchers, cycle to work and electric car initiatives; Westfield Health care for head office-based staff; a company pension scheme and access to a pension advisor; and a share-save scheme allowing all staff to benefit from the HMRC scheme, with TCS also contributing shares. The canteen and break-out spaces enable all employees and Directors to engage with each other outside of the pure work environment. For the second year running, coinciding with Mental Health Awareness Month in May 2024, all TCS head office staff were encouraged to take up to three hours, to do something for themselves, during office hours. Examples included exercise, going to an appointment, gardening or cooking. The only stipulation was that it was to be only for the individual’s benefit. Members of the senior management team attend all Board Meetings, and regularly provide their own perspective on the health and wellbeing of all staff. The Board are also very conscious of the ongoing cost-of-living crisis and 30 members of staff, in the September 2024 pay review, have been awarded bonuses in addition to salary increases. Although not necessarily a formal Board decision matter, the seriousness of the cost of living, inflation and interest rate rises has been discussed both at Board level and at the Remuneration Committee, where the Board decision was then ratified. Ian Marcus, Non-Executive Director is our workforce representative. Further details on our workforce engagement can be found on page 37. 31 01 STRATEGIC REPORT 30 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT Section 172 Statement continued Our stakeholders: Why they are important: How we engaged during the year: TENANTS Delivering for customers is at the heart of everything we do. Whether that is locally-based businesses in our mixed-use developments or users of our state-of-the-art car parks. If our customers are satisfied, then we know we are delivering enjoyable and high-quality environments. We value highly the long-term relationships we have with our tenants. We speak to all our tenants on a regular basis, in an attempt to understand the pressures that they are under and how we can work with them to get through the crisis and ensure they remain tenants in the longer term. We have been particularly keen to ensure that small and long-term loyal tenants are helped not only financially but with wider operational support as well. A particular focus in the current year was around waste recycling and engaging with tenants helping them understand the importance of proper waste disposal and the environmental benefits of effective waste segregation. In the coming year we will also be engaging with tenants around their own green house gas emissions (in particular Scope 1, 2 and 3), starting with our top 20 tenants (rental value) as well as a collaborative approach to improving the EPC ratings of all our properties. All decisions made with regards to new tenants and rent concessions are made at the monthly property review meetings, with all executive Board members in attendance. The monthly minutes of both the property review and CitiPark management meetings then form an integral part of the main executive Board meetings. Further details on our engagement with our customers can be found on pages 12–13. DEBT FUNDERS Our economic model assumes that we leverage assets developed to continue to invest and grow. This makes the availability of secured debt funding key to business development. We see our three main bank debt funding providers and our debenture holders as key stakeholders. We remain in regular communication with our banks. We have made sure to update them on rents received and key measures related to overall Company performance and the assets specifically secured to their facilities. In addition, we prepare a debenture specific presentation (available on our website) which the Chief Executive and Finance Director are more than happy to present to any of our debenture holders. As part of the monthly Board papers, summaries of each of the Company’s debt facilities, together with the properties secured, are provided. During the year the Board has discussed the levels of debt financing required, following reductions in our bank facilities and in previous years, the Board decided not to further reduce the quantum of any of the three debt facilities available to the Company. Our stakeholders: Why they are important: How we engaged during the year: COMMUNITY We believe we have a duty to make a positive contribution locally and be considered an integral part of the community. During the year the Merrion Centre has hosted weekly and more permanent events, primarily aimed at children and families – examples of which is the Leeds Bear Hunt (in support of the Yorkshire Children’s Charity) and the Leeds Piano Trail. Hosted by Leeds Hospitals Charity, the 7 Stories of MND exhibition can be found at the Merrion Centre, representing seven individuals who are living with Motor Neurone Disease (‘MND’) or have loved ones who have died of the condition. Further details on our engagement with the community can be found on page 37. ENVIRONMENT The Board acknowledges that it has a responsibility to minimise its environmental impact. In the coming year the Board, along with the Sustainability and Climate Change Committee, will develop the TCS ‘Pathway to Net Zero’. This will be a collaborative approach with our tenants, helping to reduce emissions, encourage recycling and to improve the environmental credentials of our existing buildings. The strategy for future developments is to not only provide buildings that are sympathetic to their existing surroundings, but also to safeguard them for future generations, some of the key targets being: • EPC A Rating • BREEAM ‘Outstanding’ • Net zero Carbon in operation • 38.5% less energy consumption than buildings regulations stipulate, with 100% of energy coming from renewable sources Board discussions and ultimately decisions around the Company’s development pipeline are a standing agenda item at the Board meetings. Briefing papers around the proposed developments include key environmental and placemaking credentials. Further details on our engagement with the environment can be found on pages 39–49. 32 33 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Responsible Business ESG Introduction: TCS has been committed to generating long- term sustainable success since its foundation over 64 years ago and still retains the ethos of its founder that business should make a positive contribution to the communities in which it operates. The Marjorie & Arnold Ziff Charitable Foundation is a registered charity which, whilst managed separately with its own resources based on a TCS shareholding, plays a key role in facilitating the Ziff family to support the local community. Edward Ziff, our current Chair & CEO, was awarded an OBE for service to the community in 2017 and is Chair and Trustee of Leeds Cares, a charity which supports Leeds Teaching Hospitals. We recognise the need to develop a more formal structure to support our activities and ambitions in this area and are continuing on the journey to create an ESG framework with clearly articulated targets and metrics to measure progress against our focus areas. Governance The Board currently has responsibility for overseeing our activities in this area and ensuring that ESG issues are considered in all our decision-making. When we invest our capital we always look to protect the environment, benefit the communities that surround us, and take into account the needs of all our stakeholders. Our approach ESG is at the heart of everything we do. We aim to ensure that all the activities we undertake as part of our four strategic workstreams are underpinned by the following five ESG principles which form the basis of our ESG programme: • Minimise our environmental impact • Engage with our external stakeholders • Engaged and committed employees • Make a positive contribution to the communities we operate in • Always do the right thing The table below details some of the ESG-focused activities that are currently underway across the business and outlines how they fit into our strategic framework. Key Strategic projects 1 Merrion Centre waste and sustainability plan, Green Apple Award recognition 2 Energy efficiency programmes lowering service charge and utility costs for tenants 3 Head office with living walls and improved circulation space 4 Investment in EV charging infrastructure and growth in EV charging across CitiPark portfolio 5 Solar farm investments in Leeds and Manchester 6 EPC A and BREEAM ‘Outstanding’ targets for all new buildings 7 WELL building standard target 8 Full recycling options at Burlington House 9 Merrion House facilities including recycling and cycle storage 10 Burlington House value-added services including cleaning, deliveries and fitness 11 Piccadilly Basin – street art project, security improvements 12 Environmental targets for all future developments 13 Continued development of the CitiCharge and CitiPark apps 14 Significant CSR programme supporting local communities and charities 15 Specific parking rates for EV/Hybrid drivers at Clipstone Street, Merrion and the AO Arena 16 Investment in WiredScore and Built AI 17 Westfield Health benefits for staff 18 Ongoing Share Incentive Plan (‘SIP’) scheme to engage and benefit all staff 19 Go Ultra Low status for CitiPark 20 Installation of PIR and LED lighting systems in properties and car parks 21 Ian Marcus appointed workforce Board representative 22 Development of our ‘Pathway to Net Zero’ 23 Electric vehicle salary sacrifice scheme available to all staff 24 Our tenant engagement plan to enhance the reporting on GHG emissions and EPC improvement process Actively managing our assets Maximising available capital Investing in development assets Investing in existing assets MINIMISE OUR ENVIRONMENTAL IMPACT 1, 2 1, 4, 5, 13, 15 6, 8 12, 19, 20, 22, 24 ENGAGE WITH OUR EXTERNAL STAKEHOLDERS 2, 4, 15 2, 6, 7, 8, 9, 11 2, 6, 9, 10, 16, 24 ENGAGED AND COMMITTED EMPLOYEES 3, 17, 23 18, 21 MAKE A POSITIVE CONTRIBUTION TO OUR COMMUNITIES 14 11 ALWAYS DO THE RIGHT THING 6, 7 22 35 01 STRATEGIC REPORT 34 Town Centre Securities PLC Annual Report and Accounts 2024 STRATEGIC REPORT People and communities Alignment with the UN Sustainable Development Goals (‘SDGs’) TCS recognises the importance of the UN SDGs and as we further develop our ESG programme we are using these to inform our decision-making and target-setting. The key SDGs that TCS has an impact on and our activities in these areas are set out below: Goal 3 Good health and wellbeing Our charitable work with children (eg our work with First Give, the Yorkshire Children’s Charity and Flourishing Families) together with our response to Mental Health Awareness Month in May, where all members of staff were encouraged to take three hours away from work, but still paid, to do something for themselves. Goal 7 Affordable and clean energy Producing our own solar energy through the development of three solar farms in Leeds and Manchester. Goals 11 & 12 Sustainable cities and communities and Responsible consumption and production The continued expansion of our EV charging network through our CitiCharge business. Our tenant engagement plan to report on the combined GHG emissions of our portfolio as well as our EPC improvement programme. Goals 10 & 17 Reduced inequalities and Partnerships for the goals Local charitable partnerships including Tempus Nova and the Yorkshire Children’s Charity. Responsible Business continued ENGAGED AND COMMITTED EMPLOYEES We have a relatively small team at our head office and pride ourselves on how we treat our employees. We pride ourselves on being a business that has a family feel to it, building a clear culture over our 60 years in business as a small company that cares for and looks after its employees, creating opportunity and giving accountability. Expectations of staff are high and at times demanding. However we endeavour to always support staff, and go above and beyond any documented HR policy. We like all staff to know that if they have a problem, work- based or personal, that they can talk with the Directors and senior management in the knowledge that the Company will do everything it can to support them. We believe in the concept of opportunity for all, and do not tolerate any form of discrimination. Our Non-Executive Director Ian Marcus has taken on responsibility as our Board representative for the wider workforce. Whenever in the office Ian meets with staff members. Ian’s responsibility in this regard enables us to assess the culture and engagement within the business and challenge management where necessary in this regard. TCS runs a Share Incentive Plan (‘SIP’) scheme available to all staff, operated under HMRC guidelines. It is an attractive benefit and helps to engage colleagues in the wider success of the business. Human rights Although we do not have a dedicated human rights policy, a respect for human rights is implicit in our employment practices and our engagement with third parties. Work environment We continually look for opportunities to improve the work environment for our staff. This is exemplified by our Leeds head office which has been designed to be a modern and comfortable place to work. In addition, we have improved benefits in recent years for head-office staff, improving Company pension contributions above statutory requirements, introducing a health insurance policy, a new electric vehicle salary sacrifice scheme and health-screening. We are committed to learning and development and are supporting colleagues through Chartered Surveyor and Chartered Accountant qualifications. We have also given work experience opportunities to local students. Diversity and inclusivity are important in our business with a 70/30 male to female split across the whole business. MAKING A POSITIVE CONTRIBUTION TO COMMUNITIES We contribute to a broad range of local causes, with charities focused on children and young adults particularly close to our hearts. We complement our support for long-standing partners with standalone initiatives. We also seek to improve and create a sense of wider community in our areas of operation, using our assets and resources to work with other community partners: Young people – First Give We are the main sponsor of the First Give programme in Yorkshire – a charity that encourages students to learn about social issues in their communities, and then ultimately to plan and deliver social action activities, including fundraising, for their chosen charities. Contributing to the community – Merrion Centre To celebrate its 60th anniversary an exhibition inside the Merrion Centre ran throughout the summer. It featured “Then and Now” images showcasing the centre’s evolution, a scale model of the 1m sq ft Merrion estate, and video content documenting the centre’s 60-year history. In addition to the exhibition, the centre will host various activities for shoppers, including the display of the original Rowland Emmet machine, “The Flying Kite”. Contributing to the community – Merrion Centre During summer weekly free events are being held in the Merrion Centre to encourage local families and children to visit the centre. Activities include: the Monopoly Leeds Takeover, the Leeds Piano Trail and other interactive events. Contributing to the community – CitiPark at Leeds Pride Sponsoring Leeds Pride reflected on our ongoing commitment to inclusivity and diversity. Participating in events like Leeds Pride not only strengthens our bonds as a team but also reaffirms our dedication to supporting the broader community. Gender split 70% MALE 30% FEMALE 36 37 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Responsible business continued Environment DELIVERING THE PROGRAMME ENVIRONMENTAL REPORT In alignment with our commitment to sustainability, this report emphasises our progress towards achieving sustainable targets and highlights the initiatives implemented to mitigate our environmental impact. As in previous years this Sustainability Report focuses on the Merrion Centre, our largest and most complicated asset. This report does not include metrics related to the rest of the estate, as much of it is let to third-party tenants who are responsible for the generation of, and reporting on, their own environmental footprint. With growing concerns about sustainability and the long-term effects of human activities on the environment, it has become essential for organisations such as ours to adopt responsible practices. The primary objective of this report is to outline the steps we aim to take in reducing our ecological footprint, ranging from energy consumption and waste reduction to improving resource efficiency. By implementing these strategies, we seek to contribute to a more sustainable future while ensuring compliance with environmental regulations and aligning with global practices. Key achievements and aims: Energy consumption and efficiency One of our key initiatives is a lighting energy saving scheme designed to reduce electricity consumption by 81%. This scheme reflects our commitment to sustainability by significantly lowering our energy use, cutting carbon emissions, and improving overall efficiency. Through these measures, we aim to contribute to a more sustainable future while meeting our environmental goals and reducing operating costs. Waste Equally important is our comprehensive waste management strategy. Over the last 12 months we produced on average 45.91 tonnes of waste per month. We continue to achieve our goal of zero waste to landfill with 50.5% of the total waste produced this year being recycled and 49.5% sent to an energy recovery facility. To further improve these statistics, we are placing specific emphasis on improving waste segregation, particularly in the areas of dry and mixed recycling and food waste streams. To ensure the success of this initiative we aim to educate and engage our tenants, helping them understand the importance of proper waste disposal and the environmental benefits of effective waste segregation. In alignment with these educational campaigns, we aim to enhance and improve our waste segregation signage across the site to foster tenant participation and make sustainable practices an integral part of our operations. Another goal is to significantly improve how we manage and recycle used cooking oil by making the process more convenient and accessible to all. This not only contributes to our sustainability strategy but also benefits our initiatives by generating funds that will be reinvested to help drive further improvements and community engagement. This year we raised £2,832 through this initiative. Sustainable cleaning We are pleased to report on the continued use of OdorBac Tec 4, a sustainable and environmentally friendly cleaning solution. OdorBac has proven to be an effective and safe chemical that supports our efforts to maintain a clean and healthy environment while minimising our ecological footprint. The introduction of the plastic closed loop system has supported our aim of zero plastic waste as the containers used for OdorBac are now being reused in a continuous cycle. A dosing system is to be introduced imminently which will ensure the correct amount of OdorBac is used in all cleaning processes, preventing overuse and minimising waste. This initiative aligns with our commitment to sustainable practices and further enhances the efficiency and effectiveness of our cleaning operations. Solar energy Solar energy is a clean, renewable resource that can help reduce our carbon footprint, lower energy costs, and support sustainability goals. We will aim to evaluate and strategically identify suitable sites so we can potentially maximise the environmental benefits of this initiative. During the year we generated 189,159kWh of electricity from our existing three solar farms (FY23: 182,106kWh). In the past 12 months there have been no incidents of environmental non-compliance and no environmental fines were received. TCS continue to pursue our ambitious sustainable targets; we are confident in our ability to drive positive change and serve as a model for responsible business practices within our industry. ENGAGE WITH OUR EXTERNAL STAKEHOLDERS CitiPark LED diagrid facade The flagship CitiPark branch at Leeds Merrion Centre has this year supported a variety of regional, national and international causes by illuminating its external LED diagrid facade facing Merrion Way. We have used it to support various initiatives/ causes including supporting the England Lionesses team in the Euros (red, white and blue), Candlelighters ‘Pink It Up’ campaign (pink), Ukraine (blue and yellow) and Holocaust Memorial Day (purple). Merrion Estate Our ‘Shop, Eat, Drink & Be Merrion’ strategy to ensure the Merrion Centre remains one of the city’s prime retail and leisure destinations. This includes creating safe places to sit, relax and meet whilst shopping, such as ‘The Green’ and ‘The Library which have been well received by visitors. We continue to focus on the unique benefits the Merrion Centre offers visitors. As a destination where larger brand essential stores sit alongside some of the city’s most unique independent retailers, our ongoing campaigns aim to highlight our diverse mix of venues to our ever-changing visitor demographic. Communication is paramount and we pride ourselves on our continuous engagement with tenants both face-to-face and digitally throughout the year. Engaging young people Participating in the Monopoly takeover of Leeds, we displayed a giant boot in the Merrion Centre. With 22 locations throughout Leeds, this encouraged families to travel around Leeds, completing puzzles and collecting stamps. During the year we partnered with Child Friendly Leeds and Leeds Youth Voice on a campaign to raise awareness of disabilities called ‘Everyone’s Included: the Leeds SEND and Inclusion Strategy’. This was based on listening to the voices of children and young people. As part of this, an exhibition was held in the Merrion Centre enabling visitors to view, hear and feel the emotions of young people and understand more about hidden disabilities and how we as a city can make a difference. ALWAYS DO THE RIGHT THING TCS takes its responsibilities as a listed UK business extremely seriously, and is committed to upholding high standards of corporate governance. Whilst we spend considerable time ensuring we review our compliance against rules, laws and codes, we also spend much time ensuring we abide by the spirit of such requirements, instilling a culture within the organisation of ‘doing the right thing’. Key areas of focus include: • Implementing the Corporate Governance Code – As detailed on page 67, TCS has worked closely as a Board to review the requirements of the Code and be clear where we believe compliance is necessary and right, and where it is appropriate to explain why we take a different approach. • Debenture holders, engagement – TCS has in place a long-term debenture where most of our day-to-day contact is with the debenture trustee. When asked, Edward Ziff and the Group Finance Director will present to the bond-holders to ensure they fully understand the status of TCS and the security of their investment. • Health and Safety (‘H&S’) – We are committed to providing a safe and secure working environment, in our own offices and in our properties, particularly those such as the Merrion Centre, where we maintain an on-site management function. We have an established Group health and safety policy, which is approved by the Board annually, and we review health and safety issues and incidents at every Board meeting. The Property Director oversees its implementation, and chairs a quarterly internal meeting reviewing all aspects of H&S across the business as a whole – from our offices to our properties, car parks and hotel. We have implemented a new reporting and monitoring system in the past year to facilitate this. Our operational teams have clear health and safety objectives and review procedures regularly, taking action where necessary. • Whistleblowing – we have a whistleblowing policy in place that is reviewed at least annually. We see this policy as an important feature to encourage and enable all staff members to ‘do the right thing’. Responsible Business continued The Library, Leeds Merrion Centre 38 39 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 SECR – Greenhouse gas emissions (‘GHG’) statement In line with the Companies Act 2006 (2013 Regulations) and the Streamlined Energy and Carbon Reporting (‘SECR’) requirement, Town Centre Securities PLC (‘TCS’) is disclosing its annual global greenhouse gas (‘GHG’) emissions. We are required to report the Company’s emissions of carbon dioxide equivalence (‘CO2e’), a CO2e intensity value, and our consumption of energy in the UK. The methodologies and processes used to calculate these emissions are also disclosed. TCS has addressed environmental impacts through a number of measures and processes, primarily within the Merrion Centre and its five- year sustainability plan, as detailed earlier in the Responsible business section of this Strategic Report. The table below includes emissions for the consumption and combustion of fuel (Scope 1), of purchased electricity (Scope 2), and the electricity and gas consumption arising from the transporting of energy from where it is generated (Scope 3) to the premises and other assets operated by TCS. TCS has a fleet of 15 vehicles (five of which are electric and three are petrol/electric hybrid cars) which is the sum of the Company’s Scope 1 GHG emissions. Scope 2 emissions are made up of electricity consumed at TCS’s head office and for part of the current year, by its recently opened London office. All of TCS’s operations are in the UK, therefore all values below are both Group totals and UK totals. 2024 2023 Unit ENERGY CONSUMPTION (ALL UK-BASED)1 Transport fuel 274,907 175,066 Kilowatt hours of energy used Electricity 115,092 109,223 Kilowatt hours of energy used TOTAL 389,999 284,289 Kilowatt hours of energy used 2024 2023 Unit CO2E EMISSIONS (ALL UK-BASED)1 Scope 12 65.52 40.68 Tonnes of CO2e Scope 23 25.18 23.40 Tonnes of CO2e Scope 34 25.15 18.76 Tonnes of CO2e TOTAL 115.85 82.84 Tonnes of CO2e 2024 2023 Unit CARBON INTENSITY Reference 1: Area 671 671 Sq m (office area for Group) Reference 2: Employee 30 30 Employees (FTE) Reference 3: Gross revenue (£’000) 28,983 27,631 Gross revenue (excl. service charge income) CO2e by area1 0.17 0.12 Tonnes CO2e per m2 CO2e by employee1 3.74 2.76 Tonnes CO2e per employee (FTE) CO2e by £’000 of Gross revenue 0.0040 0.0030 Tonnes CO2e per Gross Revenue (‘000) 1 All of the Group’s operations are UK-based. In previous years all CO2 emissions were based on kg of CO2 as opposed to tonnes of CO2. All prior-year comparatives have been restated to reflect tonnes of CO2. 2 Scope 1 emissions are traditionally emitted from fuel combustion in either buildings or Company leased/owned vehicles. 3 Scope 2 emissions are derived from electricity consumption at TCS’s office and by the electric vehicles within their Company car fleet. 4 Scope 3 emissions are derived from the transporting of energy from where it is generated, to either TCS’s office or to the Company’s car fleet. Scope 3 also includes, where relevant, emissions from personal or privately hired vehicles used for Company business. METHODOLOGY AND SCOPE Carbon dioxide equivalence (‘CO2e’) emission data have been collected, calculated, consolidated and analysed following the GHG Protocol (Corporate Accounting & Reporting Standard) following the ‘operational control’ approach. The Company was responsible for the internal management controls governing the data collection process and any estimations or extrapolations. An external consultant was responsible for the data aggregation, GHG calculations, and the emissions statements. GHG emissions were calculated according to the Greenhouse Gas Protocol Corporate Greenhouse Gas Accounting and Reporting Standard. Emission factors of supplied electricity for locations and vehicle charging (both GHG emissions and energy use based on vehicle mileage) were sourced from the UK Government GHG Conversion Factors for Company Reporting 2020 (DEFRA agency) – this represents the annual average CO2e emissions of the UK’s electricity grid. The boundary for reporting includes assets (in the case of TCS these are offices and Company-owned/leased vehicles) that are operated by the Group and does not include the energy and emissions of building tenants who lease property from TCS, nor does it include the communal areas of the Group’s properties; tenants are responsible for reporting their GHG emissions under their own Scope 2 disclosures. Energy consumption values for offices, and their corresponding GHG emissions, are based on values provided by utility suppliers eg electricity or natural gas bills. Company vehicle mileage is based on the actual vehicle mileage for all of the Company’s fleet and is used as the basis for calculating energy consumption and emissions from fuel and electric charging. Responsible Business continued 40 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 41 Responsible Business continued TCFD TASK FORCE ON CLIMATE- RELATED DISCLOSURES Throughout the year to June 2024, we have continued to develop and implement our strategy and actions to address climate change. The Board recognises the relevance of climate change to our business and the importance of clear disclosures for climate-related matters. As we stated last year, we know that our climate-related strategy to protect the business and enhance the resilience of our assets is not a simple and quick process. At the same time, we believe in implementing actions that are also in line with our overall corporate strategy and take into account the resources available to the Company. The Board intends to decarbonise the Company’s assets in line within the timeframe of the UK Government’s 2050 ambition. As part of this, we are now taking steps to increase our Scope 3 emissions coverage and to model our net zero pathway, which we will publish in next year’s report. During the year our asset portfolio has remained largely unchanged apart from the acquisition of one car park. We review our risk and opportunity exposure from climate change twice a year and have assessed that this exposure remains unchanged year-on-year. We are aware that there is further work to do in how we embed climate change throughout our business and these actions are covered in our TCFD disclosure. Our report this year remains in accordance with UKLR 6.6.6(8). We have provided detail on the 11 specific TCFD requirements and the actions we are taking to achieve full compliance with the TCFD recommended disclosures in a table on pages 48–49. We have concluded that we are in full compliance with the governance and risk management sections, as well as Part A of the strategy recommendations. The remaining requirements are considered to be partial compliance. Highlights of the actions we have taken during the year are outlined in the table below: Published formal terms of reference for the SCC Committee Set a target to be carbon neutral for our Scope 1 and 2 emissions in the next two years Implemented a ‘traffic light’ system to better understand and monitor our risk exposure and opportunities Started to implement a tenant engagement programme on climate- related issues Started to review the actions required to achieve net zero in line with the UK Government target of 2050, or earlier Improved percentage of EPC ratings A & B within the portfolio The disclosures have all been based on the four pillars of the TCFD framework: • Governance • Strategy • Risk management • Metrics and targets Governance The Board is ultimately responsible for overseeing all activities, including those that relate to climate change and sustainability. The following diagram summarises the informing and reporting structure of the Company, with regards to climate-related matters: Strategy The following table provides a summary of the risks and opportunities identified by the SCC Committee and the Board. These have been reviewed twice during the year and remain unchanged. While we have already assessed the material impact of flooding across our two main centres – Leeds and Manchester – it is our intention to review risks and opportunities based against tailored physical and transition climate scenarios during the current year. In line with TCFD recommendations, these risks and opportunities are monitored across multiple time horizons. These are aligned with our wider business planning and investment horizon: • Short term – Short term – up to three years to identify any critical and immediate works required on our existing portfolio. • Medium term – from three to ten years to accommodate development plans or any significant redevelopment works. • Long term – beyond ten years to be aligned with the Company’s longer-term net zero pathway. CLIMATE- RELATED RISKS DESCRIPTION IMPACT AND MITIGATING FACTORS SHORT TERM MEDIUM TERM LONG TERM Physical Flooding Exposure to flood risk from extreme weather events. Losses from assets located in high-risk zones, primarily cost of repairing assets and business interruption. Actual percentage of portfolio in Flood Risk Zone 3 – less than 4% and relates solely to development sites, where further flood mitigation will form part of the underlying development. Temperature rises (+1.5ºC, +2ºC and +4ºC) Change in tenant requirements regarding offices, especially if they are themselves committing to net zero targets. Increased construction costs for new developments, although this is mitigated by the additional rental income derived from ‘best in class’ environmental buildings. Increased risk of ‘breakdowns’ to key elements of plant and machinery, for example, air conditioning units. Cost of repairing assets and business interruption. Continual maintenance plan to mitigate significant one-off costs and further specific buildings phased redevelopment plans, for example the current phased HVAC upgrading of Town Centre House, the Merrion Centre. The Sustainability and Climate Change Committee (‘SCC Committee’), which was formed in 2022, includes two executive members of the Board and members of the senior management team and meets formally at least twice every year. It is chaired by Stewart MacNeill, Group Finance Director with responsibility for reporting to the Board after each biannual formal meeting. The key aim of the Committee is to continue to develop the Company’s sustainability strategy and decarbonisation targets for discussion and approval by the Board and then inform the different business segment management teams for implementation. In addition, the SCC Committee is also responsible for reporting to the Group Audit Committee on both climate-related risks, which are included in the Company’s six-monthly risk report, and disclosures. These are then reviewed by the Audit Committee and approved by the Board. A summary of the risk report and the climate- related disclosures are included in the Financial Statements on pages 50 and 54. As part of our approach to embedding climate-related issues and the related cost implications into our business processes, we now incorporate environmental and energy audits into the due diligence process for both refurbishments and potential new acquisitions, which are presented and discussed at both property review board meetings and Board meetings prior to any approvals. Governance – during the year Formal terms of reference of the SCC Committee were agreed and adopted during the year and are available on our website at tcs-plc.co.uk/investors. To support the development of our climate strategy and actions, we have engaged a specialist ESG consultancy who are supporting members of the SCC Committee. This has involved a series of workshops to review the actions taken within the business and to help us develop an ESG strategy which takes into account climate-related risks and opportunities identified to date and outlines possible actions going forward. While we start to model our net zero pathway, we plan to be carbon neutral for our Scope 1 and 2 emissions during the next two years. Informing Strategy Direct Reporting The Board of Town Centre Securities PLC SCCC member representation at all meetings Group Audit Committee Property Review Board (monthly) CitiPark Management meeting (monthly) Hotel Management meeting (monthly) Sustainability and Climate Change Committee (‘SCCC’) (twice yearly) 42 43 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Responsible Business continued CLIMATE- RELATED RISKS DESCRIPTION IMPACT AND MITIGATING FACTORS SHORT TERM MEDIUM TERM LONG TERM Transition Regulations and standards Evolving policies designed to ensure that the UK meets its 2050 net zero carbon commitment. Cost of upgrading assets to a minimum ‘B’ rating by 2030 – current estimate £16.8m – detailed review every six months. Constructive and regular tenant engagement is critical to ensuring our buildings are well prepared for future legislation and our own ESG targets. Regulations and standards (emerging risk) Cost of Carbon. Any future legislation to introduce carbon taxation/ pricing could have a material impact on our business in the medium to long term. While we continue to collect Scope 3 emissions data, we will take advice on how best to ensure that a theoretical cost of carbon is factored in to our decision-making process. Reputation Targets and benchmarks are set that are either unrealistic or trivial. Reputational risk if milestones are not met or the metrics do not show improving trends. We aim to be transparent and honest about our targets, our activities and how we are performing. Our aim is to achieve these targets and provide comfort that the company is committed to improving environmental standards. The financial implications of reputational risk would primarily be around the demand from potential tenants and the impact on estimated rental values alongside the cost of further third party borrowings. Market Increased operating costs in particular with regard to both energy and water costs. Energy costs are also volatile with unexpected and abrupt changes. Increased costs to impact the business directly and the affordability of rent indirectly for tenants, leading to potential tenant defaults or lower ERVs. Our tenant engagement programme will be key to helping mitigate this cost. CLIMATE-RELATED OPPORTUNITIES Transition Resource efficiency Increasing awareness of climate- related issues is helping with the take-up of energy and water- efficient solutions, including LED lighting, retrofitting buildings and electric vehicles. Ongoing cost reductions for both the business and its tenants. Collaboration with our tenants is key to mitigating this: our ongoing tenant engagement programme, looking at waste recycling, GHG emissions and Building efficiencies/EPC are our primary actions. Products and services Expansion of both the CitiCharge APP and the number of EV charging stations across the Group’s portfolio. Helping to generate a more diverse set of income streams for the Car Parking business, whilst promoting electric vehicles nationwide. Further technological innovation, with a new barrierless and ANPR-based car park management system, reducing both the requirement for paper tickets whilst also reducing the idling time on entry and exit of the car parks. Reduce the carbon footprint of our car parks and facilitating the reduction of emissions by our customers. Developing ‘best in class’ new energy efficient buildings to generate more secure future income streams, whether this is an office building or a new multi-storey car park with the capability of 100% EV charging parking spaces. Ability to generate a rental premium, especially for BREEAM ‘Outstanding’ space, and also faster rates of letting. Strengthening of the environmental credentials of our portfolio. Markets New financing/green loans for energy- efficient buildings. Especially in light of the Company’s development aspirations at both Whitehall Riverside and Piccadilly Basin. Reduced finance costs. With 89% of the Company’s property portfolio being in Leeds and Manchester, two cities that have similar profiles (both historically and economically), we have not broken down our strategy by geographical area. By identifying these risks and communicating them to the Board on a six-monthly basis, the Company is in a position to react and update the strategy accordingly. Strategy – during the year The key elements and actions undertaken in relation to this strategy during the year, broken down into the three operational segments, can be summarised as follows: Property rental • Prioritising properties with EPC ratings of D or lower and developing and implementing individual ‘energy efficiency plans’ to improve these ratings. During the year, our estimate of the capital expenditure required to bring the portfolio in line with an EPC rating of B by 2030 reduced from £19.3m to £16.8m. This reduction in our estimate can be attributed to two units totalling over 72,000 sq ft achieving an EPC re-rating during the year to B or better. Capital expenditure to meet our EPC target is incorporated into the annual cash and investment projections of the Company. A capital investment of £2m has been allocated for 2024/25 and we anticipate that this annual allocation will increase the nearer we get to 2030 in order to meet EPC targets and as we develop our pathway to net zero. This will be updated on an annual basis. • Designing and developing ‘best in class’ energy-efficient buildings. • Increasing electric and hybrid vehicles in our fleet, whilst encouraging staff to convert to electric vehicles through our ‘love electric’ salary sacrifice scheme. • Improving the lighting used within the estate including a phased conversion to LED. • Investigating the potential opportunities for expanding our photo-voltaic generation capability through the installation of further solar farms across the roofs and flat surfaces of our portfolio. Car park activities • Installing barrierless parking equipment and ANPR cameras. • Increasing electric and hybrid vehicles into our fleet. • Increasing the usage of both the CitiPark and CitiCharge apps. • Expanding the network of EV chargers within our car parks and those that we have an existing arrangement with (for example provision of enforcement services). Hotel operations • Improving energy efficiency within the hotel. Risk management Climate-related risks are specifically identified in the Company’s risk register and are set out in our risk report on page 54. The SCC Committee reviews and assesses the climate-related risks at each meeting in order to ensure that all risks have been identified and that they have been assigned an appropriate level of importance. Management of these risks is then undertaken by the property investment and estates management teams, together with input where necessary from external advisers, including insurance brokers and flood-risk assessors. Exposure to extreme weather events is not seen as a high risk, with the Company’s portfolio located outside of areas at risk of serious flooding and not at risk of sea- level rises. The Company does operate two subterranean multi-storey car parks in London but both have significant ‘flood’ storage chambers with pumps to combat surface rainwater collecting in them. The concept of ‘always doing the right thing’ has been part of the ethos of the Company since its inception. As a Board we are very much aware that tenants are putting environmental considerations at the forefront of their decision-making; it is not now just about the rental value. As part of our actions to address climate- related issues, during the year we agreed to formalise our tenant engagement programme to firstly better understand their own climate-related ambitions and to identify and prioritise areas for collaboration. In designing new buildings, a key tenet of our development plans is to be sympathetic to the existing surroundings, whilst safeguarding them for future generations. This approach is highlighted in our Whitehall Riverside development. With increasing focus on biodiversity and nature, we are firmly of the belief that such a development will be warmly received by potential tenants willing to pay premium rents for sustainably designed buildings. Risk management – during the year We have now implemented a ‘traffic light’ system, that grades every risk and opportunity both for probability and impact. This system has highlighted the only key material risk for the Company to be around the requirement for a minimum EPC rating of ‘B’ before 2030. We have started to look at how we could model a range of internal carbon prices and the impacts, if any, these would have on our strategy and decision-making. This will be a long-term programme and will form one of the key considerations within our pathway to net zero. 44 45 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Metrics and target TCS reports annually on its Scope 1, 2 and 3 GHG emissions, the electricity generated from its three solar farms and certain waste and recycling metrics from the Merrion Centre. The Company’s website also includes details around the EPC certificated values for the portfolio with all new buildings targeting EPC B or greater. At the time of writing, the EPC rating across the Company’s portfolio breaks down as follows: EPC Rating A B C D E F G Total Percentage of portfolio 5% 34% 28% 19% 13% 1% 0% 100% In addition, the key new initiatives and sustainability projects undertaken in the Merrion Centre are reported within the Responsible Business section of this Annual Report. The Merrion Centre acts as an innovation centre, where successful initiatives are then rolled out across the rest of the TCS portfolio. During the year the SCC Committee met to discuss the current metrics reported on and agreed that a further metric around electricity generated from our solar farms should be included. There were no other changes proposed to the metrics and targets. The following table summarises the performance of the Company in the year: Category Metric FY24 FY23 Target Actual Target met? Energy consumption and efficiency Total kilowatt hours of energy used 389,999 284,289 5% reduction year-on-year 37% increase GHG emissions Tonnes CO2 by £’000 of Gross revenue 0.004 0.003 5% reduction year-on-year 32% increase Energy generation kwh of solar PV generation 189,159 182,106 5% increase year-on-year 4% Waste management Waste diverted from landfill 100% 100% Maintain 100% Maintained Percentage of waste recycled 51% 52% 5% increase year-on-year 2% reduction Carbon footprint of new developments Embodied carbon footprint per sq ft n/a n/a 5% reduction year-on-year Building efficiency Percentage of portfolio EPC A or B 39.2% 33.4% 5% increase year-on-year 17% Estimate of cost to bring portfolio to EPC B or better £16.8m £19.3m n/a Sustainable transportation Average number of EV Charging bays in operation at the end of the year 61 51 25% increase year-on-year 20% Number of fully electric vehicles operated by the Company 5 4 n/a Number of employees in EV salary sacrifice scheme 3 3 n/a Physical risk Percentage of portfolio in a Flood risk Zone 3 area 3.7% 2.2% n/a 1 No new developments completed in the year. 2 Specifically excludes listed buildings and properties held for redevelopment. Responsible Business continued No Yes Clearly we are disappointed to have only achieved two of our targets, although it is important to recognise the improvement in EPC B rating or percentage of target achieved, which has been identified as one of our key risks. Increased interaction with our tenants and other stakeholders around climate-related issues is going to be a priority for the coming year, with a collaborative approach to both improving the EPC ratings of individual units but also the collection of emissions data, with a view to including these in our GHG emissions data. The first phase of this process will target our 20 largest tenants (in terms of rent) – this covers over 70% of the entire rental income of the Company. We will be reporting on this in our Annual Report next year. Our emissions have shown significant increases in the year. As can be seen in our SECR reporting on page 40 the increase is in relation to transport fuels and is a direct result of business development and the continued growth of both the enforcement barriers and electric vehicle charging arms of the car park business. The distance travelled by our fleet has increased by 37% in the year, however this translates into only a 17% increase in revenue in these two arms of our car park business. We will continue to monitor this, with a view to converting all fossil fuel vans and vehicles to electric at the time of next replacement. At present TCFD metrics are not formally incorporated into the remuneration policy of either the Executive Directors or management. However, the Remuneration Committee is looking into a proposal where the overall performance against targets is included in the assessment of any Executive Director bonuses paid in future periods. As part of this proposal, we may review our range of performance targets and identify those which are most material to the Company in terms of impact and performance. For the next year, the SCC Committee will be specifically targeting improvements on the following metrics, along with the development of the Company’s pathway to net zero: • Increased percentage of portfolio EPC A or B • Scope 1 and 2 emissions reduction • Increased Scope 3 emissions coverage • Increase in PV Coverage This will involve significant engagement with our existing tenants. 46 47 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Responsible Business continued Governance DISCLOSURE COMPLIANCE a) Describe the Board’s oversight of climate- related risks and opportunities F The Company established a Sustainability and Climate Change (‘SCC’) Committee in 2022. The two key responsibilities of this Committee are to focus on the Company’s developing carbon neutrality plan and net-zero strategy and to implement and report on the TCFD framework. The Board assumes overall responsibility and accountability for the management of climate-related risks and opportunities. An important part of the Board’s oversight of climate-related risks and opportunities lies with the SCC Committee. During the year formal terms of reference for the Committee have been agreed and adopted. Following this the Board believe they are fully compliant with the related part of the TCFD disclosure requirements. b) Describe management’s role in assessing and managing climate-related risks and opportunities F Management has undertaken a review of the Company’s risk management approach and climate- related issues have been integrated into the core risk management process as a principal risk. As above, the formal terms of reference of the SCC Committee have been agreed and adopted. Following this the Board believe they are fully compliant with the related part of the TCFD disclosure requirements. Risk management DISCLOSURE COMPLIANCE a) Describe the organisation’s processes for identifying and assessing and managing climate-related risks F The Company has formed a Sustainability and Climate Change Committee to identify, assess and manage climate-related risks which reports through to the Board. This Committee will continue to meet and will lead on the Company’s thinking and planning re: its decarbonisation planning. b) Describe the organisation’s processes for managing climate- related risks F The Company considers and assesses climate-related risks and opportunities through the Sustainability and Climate Change Committee and the Board. A ‘Traffic Light’ system has now been incorporated into the schedule of risks and opportunities to highlight material and/or urgent risks. Following the implementation of this the Board believe they are fully compliant with the related part of the TCFD disclosure requirements c) Describe how processes for identifying, assessing and managing climate risks are integrated in to the Company’s overall risk management F Following their identification two years ago as an emerging risk, climate-related risks are now a principal business risk. These risks are identified, assessed, managed and monitored by the Sustainability and Climate Change Committee with recommendations made to the Board. KEY COMPLIANCE F Full P Partial Strategy DISCLOSURE COMPLIANCE a) Describe the climate- related risks and opportunities the organisation has identified over the short, medium, and long term F The short and medium-term risks identified include increased risk of the breakdown of machinery; unattractiveness of buildings to potential occupiers due to poor carbon performance; and increased regulatory and policy measures. The opportunities identified include: improved commercial opportunities of owning assets which are energy efficient; increasing revenue streams from EV charging and the possibility of securing more competitive financing. Further details of the risks and opportunities has been set out on the risks and opportunities table on page 54. The Board and SCC Committee have performed a review of the material climate-related risks and opportunities and, following the adoption of formal terms of reference and the implementation of the ‘traffic light’ system, have assessed full compliance with the requirements of the disclosures. b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning P Climate-related risks have been integrated within the Company’s Principal Risks as set out on page 54. Climate and energy performance have been fully integrated into both the development and asset management decision-making process, however with only one investment acquisition in the year and no significant developments undertaken, this process has not been fully tested. As a result the Board has assessed partial compliance with the requirements of the disclosure. Full compliance is expected to be achieved as the Company undertakes development in the coming years, where it is expected that these processes will inform the Company further on the impact of climate-related risks and opportunities on the business. c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario P The Company’s assets are exclusively located across the UK in well-connected regional transport hubs, predominantly Leeds and Manchester. The Company is continually reviewing its exposure to climate-related risks and the inherent uncertainty around the medium and long-term time frames; for this reason it is deemed to be partially compliant. Under a 2°C scenario, the Company’s strategy is considered resilient, bearing in mind the physical locations of its assets and the development opportunities offered. A more detailed review of each individual property and the resilience of the plant and machinery will be undertaken over the next 12 months. This will be reported back to the SCC Committee and ultimately the Board, at which 12 the Board expect to reconsider its compliance with this part of the TCFD disclosure requirements. Metrics and targets DISCLOSURE COMPLIANCE a) Disclose the metrics used by the organisation to assess climate- related risks and opportunities in line with its strategy and risk management processes F GHG emissions and energy consumption, are disclosed in a separate dedicated section of the Annual Report including Scopes 1, 2 & 3 (selected) and are aligned to the Greenhouse Gas Protocol Corporate Standard and DEFRA Environmental Reporting Guidelines. The other metrics used by the Company to assess climate-related risks and opportunities are disclosed in the table on page 46. Over the next 12 months the Company will be engaging initially with it’s top 20 tenants (representing over 75% of rental income) in relation to both widening the collection of Scope 3 emissions data and agreeing a collaborative approach to improving the environmental credentials of the individual units. This process will then be extended to all tenants in the following 12 months. Following the successful completion of this programme full compliance is expected. b) Describe Scope 1, Scope 2 and if appropriate, Scope 3 greenhouse gas (‘GHG’) emissions, and the related risks F GHG emissions are disclosed in the Annual Report and are aligned to the Greenhouse Gas Protocol Corporate Standard. The related potential risks can be viewed on pages 43–44. During 2024/25, we will aim to increase our collection of Scope 3 emissions, initially with the Company’s top 20 tenants, but ultimately across the whole portfolio. Following the successful completion of this programme full compliance is expected. c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets F We continue to develop our metrics and targets and by next year we are looking to be compliant in this area. In addition to the ongoing metrics and targets set out on page 46, we have specific targets for any new development, these are highlighted in our S172 statement on page 33. TCFD’s recommended disclosures 48 49 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Risk Report Protecting value by identifying and managing our principal and emerging risks is an integral part of our operations. Risk management We take risk management very seriously, such that reference to, and consideration of, key risks form part of the day-to-day workings of the Company. Whilst we recognise that a level of risk-taking is inherent within the running of a commercial enterprise, we work to ensure that risk assessment and mitigation is central to business planning and decision-making. The business has a number of formal meetings during the year where risk assessment is a core element of the agenda. We pay particular attention to new and emerging risks, in order to ensure we put in place actions which attempt to remove or reduce risk before it occurs. We use our formal meeting structures to identify emerging risks, as well as highlighting existing risks. These meetings include but are not limited to: Annual Strategy Review Begins with a review of key risks facing the business and a review of how the strategy will best mitigate those risks. Bi-annual Audit Committee Undertakes a formal review of the risk register and mitigating action plans. Quarterly IT & Data Governance Committee This committee of senior management reviews IT and data specific risks and ensures that key risks are understood and managed. This includes a review of adherence to the GDPR regulations. Monthly Board meetings Each meeting includes a review of financial performance, debt levels and banking covenants, an IT update, and a review of the papers and actions from the Property Review Group (see below). Monthly Property Review Group A meeting of the Executive Board and senior Property and Finance management, tasked at undertaking a review of the Property Portfolio. This includes occupancy levels, tenancy changes, adherence to payment terms and bad debt levels, and Health and Safety and IT-related matters. Monthly CitiPark Board meeting A meeting of the Executive Board and senior CitiPark, Property, and Finance management, tasked at reviewing the performance of the CitiPark business, including key risks and areas such as IT and Health and Safety. Joint Venture Board meetings Formal Board structures and quarterly Board meetings are in place for the Company’s joint venture investment, Merrion House LLP. Bi-annual Sustainability and Climate Change Committee Development of the Company’s sustainability strategy including both the identification and assessment of environmental and social risks. Our Principal Risk Register is summarised as follows: RISK LIKELIHOOD IMPACT CHANGE FROM FY23 Macroeconomic Economic and political outlook High Medium No change Corporate Strategy Low High No change People Low High No change Systems, process and financial management Medium High No change GDPR Medium High No change Regulatory and tax framework Low High No change Major incident/business disruption Medium High No change Property Investment risk Medium Low No change Development risk High High No change Valuation risk Medium Medium No change Tenant and sector risk High Medium No change Climate change risk Medium Low No change Financing Capital and financial risk Low High No change Cost of debt High Medium No change Financial covenant compliance Low Low No change Macroeconomic risks RISK LIKELIHOOD IMPACT MITIGATION TREND ECONOMIC AND POLITICAL OUTLOOK A broad economic downturn, following Brexit, the lasting impact of COVID-19 and more recently geopolitical unrest, the cost-of-living crisis and the energy crisis or broader cyclical reasons could result in tenant failures, falling asset values, rising debt costs, or less debt availability and will in all likelihood have lasting economic effect. H M An economic downturn at some point in the cycle is inevitable. TCS would not escape the impact of an economic downturn, however specific mitigating factors for TCS include: • Rents paid in advance. • High levels of occupancy and a long history of ensuring on-time payment by tenants. • A reduced level of retail exposure, with much of the remaining portfolio focused on discount and convenience retailing. • Avoidance of speculative developments. • Concentrated portfolio of car parks in highly sought-after locations. • Revolving credit facilities ranging from ten months to two years in length, with significant headroom. These are paired with two long-term fixed interest finance arrangements that account for 87.5% of our debt at 30 June 2024 (ignoring finance leases). Corporate risks RISK LIKELIHOOD IMPACT MITIGATION TREND STRATEGY The Company’s strategy could be inappropriate for the current stage of the property cycle and the economic climate, resulting in lower profits and therefore a pressure on dividend and shareholder return. This risk has been exacerbated by the recent economic challenges effecting the entire country which will change people’s and firms’ attitudes towards property usage. L H The Board undertakes regular reviews of the strategy and believe the following helps to mitigate risk: • All key decisions are reviewed and approved at Board-level. • The strategy of developing diverse multi-use sites and lowering exposure to retail remains appropriate. • The strategy to sell retail and leisure assets has resulted in these assets now representing only 30% of the portfolio. • The experience and expertise of the team, particularly in relation to the property markets of Leeds and Manchester. • The presence of the Ziff Concert Party ensures a strong alignment of management and shareholder aims. PEOPLE The inability to attract and retain high calibre staff, affecting the ongoing success of the Company. L H The Company benefits from the long service of a number of key individuals, including family members of the Concert Party, which helps guarantee stability. In addition: • Base salary packages are kept competitive within the market. • The Remuneration Committee reviews succession plans and pay levels annually. • New recent appointments demonstrate the attractiveness of the business to new recruits at all levels. • A history of conservative financial management combined with the development opportunities of the business make the Company attractive to new recruits, highlighted by recent appointments. KEY Likelihood H High M Medium L Low Impact H High M Medium L Low Change from FY2023 Improving No change Worsening 50 51 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Risk Report continued Corporate risks continued RISK LIKELIHOOD IMPACT MITIGATION TREND SYSTEMS, PROCESSES AND FINANCIAL MANAGEMENT Weak controls, putting at risk the protection of the Company’s assets and ability to deliver on its strategy, resulting in financial loss, fraud, and suboptimal returns. Risk to data and systems as a result of cyber-attacks. M H The Company has a strong culture of safeguarding assets, being conservative in its approach, and using professional experts to ensure risk levels are restricted and are as low as reasonably possible: • IT systems are supported in-house, with key services having been moved to the cloud. • Horizon is our combined property and accounting IT solution and ensures we remain well controlled in this respect. This was upgraded a few years ago and resides in the cloud, further safeguarding business continuity. • Financial processes relating to cash are tight, robust, and reviewed regularly. Clear and separated authorisation processes are in place and robustly adhered to. • Insurance policies are fully in place to safeguard assets. • Staff are trained in all aspects of cyber-security and penetration, and phishing tests are carried out to test for weaknesses. • A summary of the internal financial control review processes can be found in the Audit Committee Report of the Annual Report. • IT/change management protocols – the change management process has been updated to include a formal log detailing all software upgrades, including the purpose and testing of all updates. • Internal Audit function is engaged to perform two reviews per year, reporting directly back to the Audit Committee. GDPR Financial and reputational risk arising from a breach of GDPR regulations, potentially resulting in fines and damage to customer trust. M H Given the nature of the business, we do not hold significant amounts of customer data, with the CitiPark business our highest risk area. That said, the Company has taken seriously the requirements of the legislation and has implemented a detailed action plan that has been reviewed at Board level. Key aspects include: • Updated all privacy-related statements and policies. • Trained all staff on their own and the Company’s responsibilities. This is a rolling programme of two to three electronic training courses a year. • IT & Data Governance Committee in place, meeting quarterly, to oversee all aspects of GDPR and wider cyber-security. REGULATORY AND TAX FRAMEWORK Non-compliance with tax, legal, or regulatory obligations could result in financial penalties, reputational damage, and higher levels of cost. L H The Company takes its legal responsibilities seriously. Matters are reviewed regularly at Board and Audit Committee-level, and the Company makes use of third-party professional services to ensure compliance. Actions include: • Regulatory and corporate compliance matters are typically referred to one or both of the Company’s brokers and if necessary the Company’s legal advisor. • PWC are engaged as the Company’s tax advisors and are tasked with ensuring we remain compliant in all aspects of tax. • The Corporate and Criminal Offences legislation (‘CCO’) is a key consideration and a workshop has been held to ensure risks and mitigating actions are clearly understood. RISK LIKELIHOOD IMPACT MITIGATION TREND MAJOR INCIDENT AND BUSINESS DISRUPTION Cost and business down-time as a result of a major incident. This risk is primarily associated with the Merrion Centre, due to its importance to the portfolio and as the location of Company’s head office. M H The provision of insurance across the portfolio is the main mitigation to this risk, with policies in place to protect income as a result of disruption. In terms of disruption to the head office the following actions are in place: • All personnel either have laptops or have technology at home which enables remote working. • Our geographical focus in Leeds and Manchester enables a hands-on approach with the majority of our properties and tenants. • Back-up procedures are in place to ensure minimal loss of data in the event of damage to IT hardware. • Horizon and email (Microsoft 365) are both cloud based technology significantly improving business continuity. Property risks RISK LIKELIHOOD IMPACT MITIGATION TREND INVESTMENT RISK New investment opportunities cannot be sourced at economical prices. M L The Company has clear plans in place to minimise the impact of this risk, including: • The Company typically targets assets of higher value than sought by individual investors, but lower than many larger property or overseas investors. • The Company looks to build strong relationships with partners to generate opportunities that can be exploited together. For example, our Whitehall Riverside development in Leeds, which has been brought forward to be developed in conjunction with Glenbrook. • The existing portfolio has enough development potential to provide growth opportunities, even if asset purchase prices rise and it is not viable to acquire new sites, for example the Group’s development sites at both Piccadilly Basin, Manchester and Whitehall Riverside, Leeds. DEVELOPMENT RISK Development projects may exceed cost estimates and/or newly developed properties may fail to rent. The scale of such projects means they are of material size to the Company. With the property market in a state of flux in the current climate any long-term investment with significant capital required represents a heightened level of risk. Build-cost inflation is currently making previously viable developments unviable. H H The Company has numerous actions in place to mitigate such risks including: • Build projects are generally contracted with third parties on a fixed-cost basis. • Where possible, the Company seeks to undertake a development where there is a significant level of pre-let commitments. • Where that is not possible (eg. PRS residential investments), a detailed market analysis will be undertaken, and the Company will ensure that locations are in high demand and that target rental levels are achievable. • When in joint venture arrangements, formal Board structures are created with at least quarterly meetings to review progress and performance, and to ensure that all development risks are being managed appropriately. KEY Likelihood H High M Medium L Low Impact H High M Medium L Low Change from FY2023 Improving No change Worsening 52 53 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Risk Report continued RISK LIKELIHOOD IMPACT MITIGATION TREND VALUATION RISK A material devaluation in assets. This risk is particularly high in relation to retail assets due to the changing nature of shopping habits; although the improving retail sentiment is modifying this risk, it is now affecting it to office lettings, with changing work habits and the fact more people are adopting a hybrid approach being one of the key drivers. M M The key mitigation to this risk is ensuring there is enough headroom in terms of uncharged assets of undrawn, charged facilities. Key actions include: • Our bank facilities all have significant portfolios of property secured against them, with material headroom on each. As at the date of this report, total bank borrowings due for repayment in the next year is £2.5m, an amount that could be entirely refinanced with the Company’s existing £15m Handelsbanken facility or £30m Lloyds facility – both of which do not fall for renewal until June 2026. • All three facilities allow charging of development and car park assets, maximising our drawdown ability. In addition, the Lloyds facility has removed any cap on such assets. • Asset cover in the long-term debenture can drop from the required 1.67x to 1.5x without triggering a covenant break. • The Company recycles assets believed to be at greatest risk of devaluation, and has continued with its disposal of retail assets. TENANT AND SECTOR RISK Individual tenant failures, or exposure to a specific sector. This risk has been heightened by the cost-of-living crisis, inflation and increased interest rates particularly on Retail and Office tenants. Increased costs for tenants, whether utility or staff costs will affect the affordability of rents. H M There have been an increasing number of CVAs and administrations within the Retail sector. Furthermore due to the requirement for many retail and leisure tenants to close for an extended period during the COVID-19 crisis, their ability to pay rent and to remain a going concern is a risk. TCS are taking a number of actions: • Since 2016 the Company has significantly reduced its exposure to Retail and Leisure from 60% to 30% of value at June 2024. • Now a mixed-use asset, the Merrion Centre now depends upon Mall Retail for less than 25% of its income. • We have a diversified tenant base, and limited exposure to individual tenants. Our top tenants are Leeds City Council, Step Change, Pure Gym and Morrisons. • CitiPark income helps further mitigate the reliance on specific property tenants. CLIMATE CHANGE RISKS The impact of climate change will be felt across the entire world, with extreme weather events and increased average temperatures a key factor over the coming years. The risks identified will be both physical and transitional. As well as the physical risk to places, a change in tenant requirements and the wish for more and more environmentally friendly buildings will be more prevalent which will lead to even greater construction costs. Average temperature rises will also have an impact on plant and machinery, rendering them obsolete quicker or involving additional maintenance costs. M L The physical location of the Company’s assets, with the majority in either Manchester or Leeds, are in places not at risk of severe flooding and with a substantial development pipeline, the Company is able to ensure that new developments are both sustainable and innovative: • Continuous maintenance cycle with in-house teams ensure plant and machinery are not susceptible to elongated breakdowns. • Sustainability is at the heart of what we do with the Merrion Centre acting as a test bed for the roll-out of future initiatives across the entire portfolio. • Evolving how buildings are constructed, with increased ESG credentials, is seen more as an opportunity – with prime occupiers willing to pay premium rents for the right buildings, especially with more and more companies making net-zero commitments. Property risks continued Financing risks RISK LIKELIHOOD IMPACT MITIGATION TREND CAPITAL AND FINANCIAL RISK The Company has insufficient funds or lines of credit. With property valuations decreasing, this area of risk has increased, however the asset sale programme and repayment of borrowings has mitigated this increase. L H The majority of mitigating actions are contained within the Valuation risk category above. In addition: • The Board reviews cash balances, forecast cash flow, borrowing levels and headroom on a monthly basis. • The Company demonstrated during the last downturn the strength of its conservative approach and long-standing relationships with its banks. • The Company has recently renewed both its existing Lloyds and Handelsbanken facilities – these facilities expire at the end of June 2026. • Following the acquisition of the remaining half of the Belgravia Living Group, the Company now consolidates a ‘ring-fenced’ long term facility that expires in January 2029. • The Company’s policy of asset sales has enabled a reduction in absolute debt levels. At today’s date the balance outstanding on the Company’s revolving credit facilities is £13.75m. COST OF DEBT Rising debt costs. H M The following actions help mitigate the risk to the Company: • At today’s date 87.5% of the Company’s debt is in the form of fixed interest, long-term borrowings. • The Board takes moving SONIA rates into account when considering three-year budgets and affordability. FINANCIAL COVENANT COMPLIANCE Breaching a financial covenant under one of the Group’s debt facilities. M L The following actions help mitigate the risk to the Company: • The Company has a significant amount of income to interest headroom on all of its bank facilities and also on the debenture facility. • The Company is in regular dialogue with all of its debt providers, ensuring that if there are any potential future breaches, these are discussed and appropriate courses of action are agreed in advance. • The Company has £4m of assets currently unsecured under any debt facility that could be added to the relevant security pool. • The Company could cancel any underutilised proportion of the facility, reducing non-utilisation interest. KEY Likelihood H High M Medium L Low Impact H High M Medium L Low Change from FY2023 Improving No change Worsening 54 55 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Going concern In making their assessment of the ability of the Group to continue as a going concern the Directors have considered the impact of an economic downturn on the Group’s forecasts including the effect on liquidity and compliance with bank loan and debenture covenants. The Group owns a portfolio of multi-let regional property assets located throughout the UK, and operates car parking and hotel businesses. The Group is funded in part by a £82.4m debenture which is due for repayment in 2031 and an asset- specific facility of £13.8m which is due for repayment in 2029. In addition the business has three bilateral Revolving Credit Facilities (‘RCFs’) totalling £70m which, as at the year- end, were due for repayment or renewal between September 2025 and June 2026. Each of the debt facilities is ring-fenced within security sub-pools of assets charged to the respective lender. The Group has one bank facility falling due for repayment in September 2025, within the going concern period. This facility has a one-year extension, which if exercised will extend the repayment date to September 2026. As at the date of this report, the Group has drawn in aggregate, under all three RCFs, total borrowings of £13.75m. One of the most critical judgements for the Board is the loan to value (‘LTV’) headroom in the Group’s debt 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. These covenants range from 60% to 67.5% LTV. The total LTV headroom at 30 June 2024 was £20.4m (2023: £30.8m). Overall, the properties secured under the Group’s debt facilities would need to fall 26.0% in value before this LTV headroom level was breached. As at the date of this report the headroom metrics and percentage fall have increased to £23.5m and 28.3% respectively following the post-balance sheet transactions highlighted in this Financial Report. In addition to the LTV covenants, the Group’s debt facilities include income cover covenants of between 100% for the debenture and 175% on the three revolving credit facilities and asset-specific loan. At the year-end the actual income cover levels ranged from 239% (for the 100% debenture covenant) up to 385% on the Handelsbanken facility. In order to assess the potential impact of a future economic downturn on the Group and its ability to continue as a going concern, management have analysed the portfolio’s tenant base, car parking and hotel operations and produced forecasts to 31 October 2025. These forecasts reflect management’s view of a worst case scenario. Including assumptions that rent receipts are materially lower than normally experienced and that the car park and hotel businesses recover over the forecast period to a materially lower level than expected. These scenarios include a base case, downside case and then a more extreme downside case to show the effect a more significant downturn in the Group’s performance would have on its funding cash headroom and any of its financial covenants. In addition the Company has performed a reverse stress exercise whereby it has looked at each individual facility and at how much of a downturn (compared to the conservative base case cashflows prepared by the Company) there would need to be before any of the financial covenants are breached. The Group’s forecasts, including the various scenarios, show that both the cash headroom figure is resilient and the financial covenant tests are met. Under the base case the minimum cash headroom is expected to be £20.7m, which compares to a minimum of £18.9m under the downside scenario. The significant downside case applied a total discount of 6% to rental income receipts and a 15% discount to budgeted car park income levels. The cash headroom in the Group did not go negative in the period to June 2027 and none of the other financial covenants were breached. The reverse stress test shows that the financial covenants are not breached until either of the discounts applied in the significant downside case are pushed even further. This breach is forecast to occur in Q1 of FY26 and last until Q2 of FY26 before the position then improves. The Group is currently experiencing collection rates of over 99% of rent and service charge income invoiced, and for the first two months of FY25 the car park and hotel businesses are trading significantly ahead of expectation, and this is expected to continue. The forecasts show that the Group has sufficient resources to continue to operate as a going concern for at least the period to 31 October 2025. Based on the forecasts, including the mitigating options available to the Group in the event of the occurrence of the downside scenarios, the Directors consider it appropriate to prepare these financial statements on the going-concern basis. Further details on these forecasts and the approach taken by the Directors is set out in the viability statement section on the next page. Risk Report continued Viability statement In accordance with the requirements of the UK Corporate Governance Code, the Board have assessed the prospects of the Company and future viability over a period longer than the 12 months required by the going-concern provision. This review has been as part of a longer-term three-year strategic planning exercise and three-year budgeting process. The Board’s review considered cash flows, profitability, borrowing headroom and other key financial ratios, and required the business to have clarity on its approach to bank financing over a longer period. In taking this longer-term perspective, the Board considers the risks covered in this Risk Management review. In particular the key risks identified are: • The potentially lasting effect of the current economic downturn (cost-of- living crisis, inflation and increasing interest rates) on our assets, tenants, Hotel operation, Car Parking operations, and the wider economy. • Further changes in the macroeconomic environment affecting rental income levels and property values. • Changes in the level of tenant and sector risk affecting occupancy levels and lettings. • Changes in availability of capital, affecting committed expenditure and investment transactions. The review considered a base case, a sensitised ‘downside’ scenario and a more drastic ‘significant downside’ scenario. These scenarios included: • A range of levels of rent receipts affecting quarterly income up to the end of June 2027. • A range of levels of car parking income affecting profitability up to the end of June 2027. • A range of levels of hotel net income affecting profitability up to the end of June 2027. • The effect on cash, borrowing levels, facility headroom and income cover covenants of all of the above. Furthermore the Group carried out reverse stress tests on each individual facility; this was an exercise to see how far rental receipts and car park income would need to fall, before the Group ran out of either cash headroom or breached any of its banking covenants. The reductions in both rental receipts and car park income applied in this exercise were significantly greater than that experienced by the Group during the last five years. The results of the reverse stress test show that the sensitivities occur between Q1 of FY26 and Q2 of FY26 and are only temporary. Aligned to our going-concern statement, the greatest uncertainty and risk lies in relation to our asset valuations and the possibility of breaching bank and debenture covenants and to possible breaches of our income cover covenants. Clearly there is still a risk, however this has been significantly diminished with our disposal programme of the last three years, the repayment of borrowings and the fixed interest borrowings of the Group, which represent 87% of borrowings. It is however likely that this reduced risk will continue beyond the shorter-term future covered by the going-concern statement. In reviewing these scenarios, the Board have also considered the actions they could take to mitigate any significant downsides, especially in regard to any potential breach of the Group’s existing borrowing facilities and banking covenants. The key actions being: • The Group has £3.8m of properties that are not currently secured under any of our existing borrowing facilities – these could be pledged as security and increase borrowing headroom. • The Group could move properties around the various facility ‘security pools’ (those assets currently charged under each facility) which could also unlock additional borrowing headroom. • Ceasing all future capital expenditure. • Seeking lender consent for financial covenant waivers. • Cancellation of committed facilities that the Group is not expecting to use, thereby reducing non-utilisation interest. Based on the results of their review, whilst taking into account the level of uncertainty, the Directors do not have a significant doubt that the Company will be able to continue in operation and meet its liabilities as they fall due over the longer-term period of their assessment. The Board’s review considered cash flows, profitability, borrowing headroom and other key financial ratios, and required the business to have clarity on its approach to bank financing over a longer period. 56 57 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Financial Review The financial performance of the Company during the year ended 30 June 2024 shows underlying EPRA profits (after adjusting for the effects of taxation and deferred tax) 25% ahead of the previous period, however the statutory profit of the year is again affected by both reductions in investment property values and impairments to the Group car parking portfolio, as real estate investor and market sentiment across these segments remain subdued.” The statutory loss for the year was £8.0m, compared to a loss of £29.5m in the previous year. EPRA Earnings* were a profit of £5.5m in the year, compared to a profit of £3.1m in the prior year. The EPRA profit for the current year included a net taxation credit of £1.7m; excluding this the EPRA profit of the Company would have been £3.8m, representing a 25% improvement in the underlying performance of the Company. The Board is not recommending the payment of a final dividend for the year, giving a full-year dividend of 8.5p, which is 70% higher than the previous year. During the year the Company received both the first element of deferred consideration and the contingent consideration from the sale of its investment in YPS, generating further proceeds of £6.7m. In addition the Company increased net borrowings during the year by £6.8m. The funds generated have been deployed in a number of ways: • £1.5m acquisition of a car park investment property in Sheffield • £2.5m of investment in existing properties and our development portfolio • £9.4m to fund a tender offer in the first five months of the year • £4.2m as dividends paid to shareholders in the year Net borrowings have increased from £101.9m to £108.6m in the year. Net borrowings represent total financial borrowings of £138.6m, less lease liabilities of £28.6m and net cash of £1.4m. * Alternative performance measures are detailed, defined and reconciled within notes 11 and 21 of these Financial Statements. Financial Review Ducie House, Manchester. STATUTORY PROFIT On a statutory basis the reported loss for the year was £8.0m. The statutory profit reflects the EPRA Earnings* of £5.5m less £14.2m of non-cash valuation and impairment movements, less the profit on disposal recognised of £0.2m on the two small investment properties and investments sold in the year, plus £0.9m of deferred taxation on valuation movements in the year. Gross revenue Gross revenue was up £1.6m or 5.3% year- on-year, with key drivers being: • Property revenue during the year had a positive impact of £1.1m on total Gross revenue. There were no significant disposals during the year with the Company benefiting from a full year of Burlington House revenue following the acquisition of the remaining 50% in March 2023. • CitiPark revenues have continued to grow in the year, with gross revenue across the portfolio increasing by 2% from £13.1m to £13.4m. • Income for the ibis Styles hotel, has also continued to grow with revenue of £3.3m in the year, up £0.2m from £3.1m last year. Other/JV income Total Other/JV income was up 12.8% or £0.2m year-on-year, the majority of the difference relates to development manager fees receivable in the current year on a contract completed in the year. Administrative expenses Administrative costs were £0.5m or 7.6% higher year-on-year, with increased staff costs and computer expenses the key drivers to this increase. Finance costs Finance costs were 4.6% or £0.3m higher year-on-year as a result of the increase in the Company’s bank borrowings which were primarily used to fund the Company’s buy-back of shares in November 2023. * Alternative performance measures are detailed, defined and reconciled within notes 11 and 22 of these Financial Statements. INCOME STATEMENT EPRA Earnings* for the year ended 30 June 2024 were £5.7m. £000s FY24 FY23 YOY Gross revenue 31,968 30,363 5.3% Impairment of debtors provision movement 0 0 – Property expenses (15,803) (15,551) 1.6% Net revenue 16,165 14,812 9.1% Other income/JV profit 1,990 1,764 12.8% Other expenses 0 0 – Administrative expenses (7,293) (6,780) 7.6% OPERATING PROFIT 10,862 9,796 10.9% Net finance costs (7,043) (6,733) 4.6% Taxation 1,685 0 – EPRA EARNINGS 5,504 3,063 79.7% Segmental FY24 FY23 YOY PROPERTY Net revenue 9,886 9,435 4.8% Operating profit 6,264 5,911 6.0% CITIPARK Net revenue 5,641 4,891 15.3% Operating profit 3,919 3,360 16.6% IBIS STYLES HOTEL Gross revenue 638 486 31.3% Operating profit 638 486 31.3% INVESTMENTS Other income and operating profit 41 39 5.1% 58 59 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 Financial Review continued BALANCE SHEET The below table shows the year-end balance sheet as reported. £m FY24 FY23 vs FY23 Freehold and right-to-use investment properties 156.5 162.9 (3.9%) Development properties 24.5 20.9 17.2% Car park-related assets, goodwill and investments 62.9 74.0 (15.0%) Hotel Operations 9.9 9.5 4.2% 253.8 267.3 (5.1%) Joint ventures 4.8 7.1 (32.4%) Listed investments 3.3 4.1 (19.5%) Other non-current assets 1.8 1.7 5.9% TOTAL NON-CURRENT ASSETS INCL. AVAILABLE FOR SALE 263.7 280.2 (5.9%) Net borrowings (137.1) (129.9) (5.5%) Deferred tax 2.4 0.0 – Other assets/(liabilities) (9.4) (9.2) (2.2%) STATUTORY NAV 119.6 141.1 (15.2%) STATUTORY NAV PER SHARE 284p 291p (2.6%) EPRA NET TANGIBLE ASSETS (‘NTA’) 116.7 137.7 (15.3%) EPRA NTA PER SHARE 277p 284p (2.6%) Non-current assets: Our total non-current assets (including investments in JVs) of £263.7m (2023: £280.2m) have reduced by £16.5m during the year, this movement is made up of the following: • Disposals, including YPS receipts of £(7.0m) • Depreciation charge of £(2.1m) • Capital expenditure of £6.1m • Revaluation uplift/reversal of impairments totalling £(14.0m) • Operating profits generated and retained in JV entities and other movements of £0.5m Borrowings: During the year our Net borrowings have increased by £7.2m, from £129.9m as at 30 June 2023 to £137.1m at the year-end. This increase was primarily to fund the tender offer completed by the Company in November 2023. We have extended our NatWest revolving credit facility by one year; it is now due to expire in September 2025, although we have the ability to extend this facility for a further year, subject to bank consent. Our other two revolving credit facilities were refinanced last year with expiries of June 2026. Loan-to-value has been increased to 50.8%, up from 45.8% a year ago, due to both the increase in borrowings and decrease in property values during the year. Note the calculation of loan-to-value includes both the finance lease assets and liabilities. EPRA net asset reporting We focus primarily on the measure of Net Tangible Assets (‘NTA’). The below table reconciles IFRS net assets to NTA, and the other EPRA measures. There are three EPRA Net Asset Valuation metrics, namely EPRA Net Reinstatement Value (‘NRV’), EPRA Net Tangible Assets (‘NTA’) and EPRA Net Disposal Value (‘NDV’). The EPRA NRV scenario, aims to represent the value required to rebuild the entity and assumes that no selling of assets takes place. The EPRA NTA is focused on reflecting a company’s tangible assets. EPRA NDV aims to represent the Shareholders’ value under an orderly sale of business, where, for example, financial instruments are calculated to the full extent of their liability. All three NAV metrics share the same starting point, namely IFRS Equity attributable to shareholders. £m FY24 FY23 FY24 p per share FY23 p per share IFRS REPORTED NAV 119.6 141.1 284 291 Purchasers’ costs1 18.4 19.3 EPRA NET REINSTATEMENT VALUE 138.0 160.4 327 331 Remove purchasers’ costs (18.4) (19.3) Remove goodwill2 (2.9) (3.4) EPRA NET TANGIBLE ASSETS 116.7 137.7 277 284 Fair value of fixed interest rate debt3 11.9 14.2 EPRA NET DISPOSAL VALUE 128.6 151.9 305 313 1 Estimated purchasers’ costs including fees and stamp duty and related taxes. 2 Removal of goodwill as per the IFRS Balance Sheet – relates predominantly to goodwill paid to acquire two long- term car park leaseholds in London. 3 Represents the adjustment to fair value (market price) of the 2031 5.375% debenture and the single asset facility. CitiPark, London Barbican. Future financial considerations Future P&L pressure The wider economy and underlying property values are still struggling, with uncertainty around office based working and shopping habits continuing. In terms of our own specific business we have seen recoveries in all segments, although there is still a risk if these recoveries are stalled. This has resulted in the earnings of the business growing in the year, and we increased the level of the dividend paid. Future balance sheet As identified in the Risk Report, we have highlighted the continued pressure on retail and office investments to be a significant risk to the business. As part of the going concern and viability statement review process, the Company has prepared consolidated forecasts and identified a number of mitigating factors to ensure that the ongoing viability of the business was not threatened. Going concern and headroom One of the most critical judgements for the Board is the headroom in the Group’s debt 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 at 30 June 2024 was £20.4m (2023: £34.0m), which was considered to be sufficient to support our going-concern conclusion. The properties secured under the Group’s debt facilities would need to fall 26.0% in value before this headroom number was breached. In assessing both the viability and going- concern status of the Company, the Board reviewed detailed projections including various different scenarios. A summary of the approach and the findings is set out in the Risk Report, forming part of the Strategic Report of these financial statements. Total shareholder return and total property return Total shareholder return of minus 14.7% (2023: minus 3.2%) was calculated as the total of dividends paid during the financial year of 8.5p (2023: 5.0p) and the movement in the share price between 30 June 2023 (125.0p) and 30 June 2024 (133.5p), assuming reinvestment of dividends. This compares with the FTSE All Share REIT Index at 18.2% (2023: -22.1%) for the same period. The Company’s share price continues to trade at a significant discount to its NAV, impacting total Shareholder return. Total Shareholder returns % (CAGR) Total Shareholder returns 1 Year 10 Years 20 Years Town Centre Securities 14.7% (2.3%) 1.2% FTSE All Share REIT Index 18.2% 1.9% 2.6% Total Property Return is calculated as the net operating profit and gains / losses from property sales and valuations as a percentage of the opening investment properties. Total Property Return for the business for the reported 12 months was 1.7% (2023: -6.0%). This compared favourably to the MSCI/IPD market return of 0.1%. Stewart MacNeill Group Finance Director This Strategic Report and the information referred to herein was approved on behalf of the Board on 15 October 2024 Edward Ziff OBE DL 15 October 2024 60 61 STRATEGIC REPORT 01 STRATEGIC REPORT Town Centre Securities PLC Annual Report and Accounts 2024 The Board has taken steps to implement the 2018 UK Corporate Governance Code (the ‘Code’) in a way that is appropriate for Town Centre Securities.” Edward Ziff OBE DL Chairman & Chief Executive introduction Chairman’s Introduction from the Chairman Wherever possible, the Board seeks to comply with the principles set out in the 2018 UK Corporate Governance Code (the ‘Code’). However, the Board takes a pragmatic approach and, because of the size and nature of the Company, makes a carefully considered judgement about how it should apply the Code. The Board keeps this under regular review and decisions on these matters are made by the Board taking into account the best interests of all stakeholders. The Board currently consists of two Independent Non-Executive Directors (Jeremy Collins retired from the Board on 30 June 2024) who, as well as contributing invaluable support and guidance, offer significant challenge to me and the other Executive Directors. The Board’s focus throughout this year has been on the difficult economic conditions with the goal of ultimately protecting Shareholder value. These conditions have significantly influenced the Board and the long-term strategy of the Company, with the reduction of borrowings a key priority. We now have historically low levels of borrowing and with the early signs of recovery in the economy are looking at both our existing development pipeline and also other investments. Throughout the year, the three Independent Non-Executive Directors have provided robust challenge. We report below in more detail why the Board continues to believe that it is appropriate for the roles of Chairman & Chief Executive to be combined. Clearly, the Board is aware that this is not in compliance with the Code and recognises that a number of Shareholders will have concerns about this. It is a matter which the Independent Non-Executives keep under continual review to ensure that is in the best interests of the Company’s stakeholders. The presence on the Board of key executive management provides the Non-Executive Directors with direct access to these major functions rather than through the Chief Executive. In addition, the Independent Non- Executive Directors are extremely rigorous in their review of my performance as Chairman, focusing on ensuring the Chairman: • demonstrates objective judgement and promotes a culture of openness and debate; and • facilitates constructive Board relations and the effective contribution of all Non- Executive Directors. The Board papers circulated in advance of each Board meeting include both Property and CitiPark Board papers which are prepared by the individual management teams for these divisions, ensuring that all Board members are kept appraised of the key issues in the separate parts of the business. This then ensures that the interaction between the Non-Executive Directors and the rest of the Board is based on informed opinions and up-to- date information. All Board decisions are subject to unanimous decisions promoting significant and detailed debate between the Board members. Having the senior management team present also promotes a more inclusive culture, the ability to respond to questions quicker and facilitates a wider and more diverse range of opinions. Involving the senior management within Board meetings encourages an open culture that enables effective links between the Non-Executive Directors, Executive Directors and senior management. The Independent Non-Executive Directors are firmly of the view that my holding the combined role of Chairman & Chief Executive continues to be in the best interests of the Company. Whilst the combined role remains appropriate for the time being, with me being in a unique position – my father having founded the Company and the Ziff family being the largest Shareholder overall – the Board will continue to review the situation on a regular basis. I also wanted to take the opportunity to directly address the issue concerning the number of Independent Non-Executive Directors. Currently less than half the Board are independent (as required by the Code). However, given my combined role as Chair & CEO, the Board agreed that including wider management representation during Board meetings, for example the CitiPark Managing Director, would allow the Non-Executive Directors to have greater access to those parts of the business. This provides more opportunity for a robust assessment of the Company at a level aside from the CEO. This level of representation of management and increased access for robust challenge by Non-Executive Directors is highly unusual at Board-level. Again, this is a matter which the independent Directors have reviewed and concluded that given the size of the Company, three independent Directors is appropriate and that to change the composition of the Board would at this point be disruptive and add unnecessary cost. This is a matter that will be kept under review and is covered specifically in the Board evaluation exercise. Following the retirement of Jeremy Collins; the Board has not increased the number of independent Directors however it will remain a key focus of the Nomination Committee over the next 12 months. Edward Ziff OBE DL Chairman & Chief Executive 15 October 2024 Our Section 172 statement demonstrates how Directors have discharged their duties to the Company’s stakeholders. This statement can be found on pages 30 to 33. 63 02 CORPORATE GOVERNANCE 62 Town Centre Securities PLC Annual Report and Accounts 2024 CORPORATE GOVERNANCE Board of Directors EXECUTIVE BOARD Edward Ziff | OBE DL Stewart MacNeill | FCA Ben Ziff Craig Burrow Michael Ziff | Hon DUniv (Brad) Ian Marcus | OBE MA FRICS Paul Huberman | FCA CTA Jeremy Collins Chairman & Chief Executive Group Finance Director Managing Director CitiPark TCS Energy and Technology Group Property Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director* APPOINTED: 08/1985 APPOINTED: 06/2021 APPOINTED: 09/2015 APPOINTED: 01/2023 APPOINTED: 07/2004 APPOINTED: 01/2015 APPOINTED: 01/2015 APPOINTED: 02/2018 RETIRED: 06/2024 INDEPENDENT: No INDEPENDENT: No INDEPENDENT: No INDEPENDENT: No INDEPENDENT: No INDEPENDENT: Yes INDEPENDENT: Yes INDEPENDENT: Yes SKILLS AND EXPERIENCE Edward joined the Company in 1981 before being appointed to the Board in 1985, becoming Managing Director in 1983, Chief Executive in 2001 and succeeding his father and founder of the Company as Chairman in 2004. Edward is a life-long supporter of the city of Leeds 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. Edward’s position as son of the founder of the TCS, and his lifelong experience working at different levels in the business make him uniquely qualified to lead the Company. In addition, the wider role he plays in the Leeds community in particular, supports him in leading this proudly Leeds- based business. EXTERNAL APPOINTMENTS He is a Trustee of the United Hebrew Congregation, Leeds, a member of the council of University College School, London, and a Deputy Lieutenant for the County of West Yorkshire. PREVIOUS EXPERIENCE 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. He was previously Chair and Trustee of Leeds Hospitals Charity. SKILLS AND EXPERIENCE Stewart’s chartered accounting qualification clearly underpins his ability to deliver in his role as Group Finance Director. In addition, his 20 years’ experience in the property industry, having specialised on the finance side since 2002, ensure he is able to guide and add value in both the operational aspects and strategic direction of the business. EXTERNAL APPOINTMENTS He is an executive of Blizzard Properties, a small private property development and consultancy business that specialises in out-of-town retail. PREVIOUS EXPERIENCE Stewart formally joined the Board in June 2021, having spent the previous four months acting as the Company’s Interim Chief Financial Officer. Prior to TCS, he spent the bulk of his professional career at LXB Properties, the real estate investment company which focused on edge-of-town and out-of-town retail assets, and most recently worked at a small development consultancy business. Stewart is a graduate of the University of Cambridge and a Fellow of the Institute of Chartered Accountants of England and Wales. SKILLS AND EXPERIENCE Ben’s long and close contribution to the business ensures he is always able to take the wider, cross-business long-term view. In addition, his wide knowledge of the rapidly changing effects of technology ensures that we are able to take advantage of new ways of doing business across the Property, Energy and Parking subsidiaries of the Company. Ben joined TCS in 2008, becoming CitiPark Managing Director in 2009. In September 2015, Ben was appointed to the Board of Directors. EXTERNAL APPOINTMENTS He is a mentor at the Creative Destruction Lab, part of the Saïd Business School at the University of Oxford. PREVIOUS EXPERIENCE In 2013, Ben successfully led a team in the redevelopment of the Merrion Centre multi-storey car park, which turned a 1960’s structure into a state-of-the-art facility featuring Skidata, ApplePay, Contactless Payment and ANPR technologies. Since 2014, Ben has led the acquisitions programme which has doubled the size of the car park division. Ben’s personal interest in combining tech, renewable energy and electric vehicle charging led to the development in 2012, of TCS Energy, which pursues renewable energy production and storage to add to our existing portfolio of solar farm installations. Ben has ensured the Group uses cutting-edge technology to revolutionise and maximise its operations, including guiding the Board’s financial investment of YourParkingSpace.co.uk, which TCS successfully exited in July 2022. SKILLS AND EXPERIENCE Craig is a chartered surveyor with over 20 years’ experience in the Leeds and Manchester office market. He is well known throughout the region’s business community for his long-standing positions on boards, committees and steering groups. EXTERNAL APPOINTMENTS He is Chair of the Yorkshire Property Charitable Trust, a member of the committee of the Crypt Factor and Yorkshire Property Charity Lunch. PREVIOUS EXPERIENCE Craig joined the Company in October 2020 as Development Director becoming Group Property Director in January 2023. He has significant experience in the property industry having started as a commercial agent at Weatherall Green & Smith, and then at DTZ Debenham Tie Leung before moving to Bruntwood, where for most of his 13 years he was the Director of Leeds, responsible for overseeing all aspects of managing the Leeds portfolio including asset management, acquisitions, disposals, investments and redevelopments including Platform, Hepworth Point and Sovereign Square. SKILLS AND EXPERIENCE Michael’s lifelong involvement with the Company and his retail experience puts him in a unique position to understand TCS, and to give counsel based on the founding principles of the business and the importance of taking a long-term strategic view. Michael was appointed to the Board in July 2004. EXTERNAL APPOINTMENTS He is a Director of Transworld Business Advisors UK Ltd and LBFB Ltd M&A, corporate advisors and Business & Franchise brokerage company. He is Co-chair of the London Jewish Forum, an advocacy charity working closely with the Jewish community, the police, the National Health Service and London- based politicians (MPs and local councillors). He is Chair of the Faith & Belief Forum, a leading interfaith charity, President and trustee of Maccabi GB, and International Vice president of Maccabi World Union, a sports and wellbeing youth and education charity. He is also Trustee of the Polack’s House Education Trust and Member of the FA Antisemitism Task Force. SKILLS AND EXPERIENCE Ian’s significant experience in the Property and Corporate Finance worlds give him an experience base and a network that can valuably inform, guide and support TCS both in making day-to-day operational decisions, and in setting the long-term strategic direction of the business. He has broad remuneration experience which supports his role as Chair of the Remuneration Committee. Ian Marcus was appointed to the Board in January 2015. EXTERNAL APPOINTMENTS Ian is a member of Redevco’s Advisory Board. He is Senior Advisor to Eastdil Secured, the Chair of Shurgard Self Storage SA, Senior Advisor to Elysian Residences, Advisor to Work.Life, and a senior advisor to Anschutz Entertainment Group. Ian is also a Non-Executive Director of Green Mountain Global and a visiting Professor at Aberdeen University. PREVIOUS EXPERIENCE Ian spent over 32 years as an investment banker, latterly at Credit Suisse. Ian was previously a Crown Estate Commissioner, a Trustee of The Prince’s Foundation, is a former chairman of the Bank of England Commercial Property Forum, a past President of the British Property Federation, past Chair of the Investment Property Forum and former President of Cambridge University Land Society. SKILLS AND EXPERIENCE Paul was appointed a Director in January 2015. He brings over 36 years’ experience in the property and finance sectors. Paul’s previous experience as Finance Director at three quoted companies, and his ongoing work in the real estate arena mean that he can robustly challenge and scrutinise the financial affairs of the business, leading the Audit Committee, as well as contributing meaningfully to the broader operational and strategic activities of the Company. EXTERNAL APPOINTMENTS He is currently a part-time Executive Director of Galliard Homes Limited, a London housebuilder, a Non-Executive Director at GetBusy plc, a developer of document management and task management software, a Non- Executive Director at a privately- owned property group, and a Non-Executive Director at The Industrial Dwellings Society (1885) Ltd, a housing association. PREVIOUS EXPERIENCE Paul was previously Finance Director at three quoted Companies. He was a Non- Executive Director at GRIT Real Estate Income Group Ltd, a listed pan-African property investment company, a Non-Executive Director at LiFE At Ltd, a multi branch London-based residential estate agency and a Non-Executive Director at JCRA Group Ltd, the holding company of JC Rathbone Associates Ltd, the independent advisors on interest rate risk management, debt finance and foreign exchange exposure. SKILLS AND EXPERIENCE Jeremy was appointed to the Board in February 2018 and has over 35 years’ experience in retail property development and management. Jeremy’s wide experience base as a property professional, particularly in the Retail field, puts him in a strong position to help TCS really understand the challenges of owning retail property during a period of such significant change. His guidance on the changing face of retail combined with the importance of creating mixed-use communities plays an important role in the Company’s strategic planning. EXTERNAL APPOINTMENTS During the year Jeremy was Property Director and Executive Board member at Fenwick. PREVIOUS EXPERIENCE Jeremy spent 15 years at John Lewis including as Property Director until 2018. Previous experience includes working for Lend Lease, MEPC and Grosvenor Square Properties. Jeremy’s first job was at Wirral Metropolitan Borough Council, which gave him an insight into the workings of local authorities and began his passion for urban regeneration. He graduated from the University of Reading, qualified as a chartered surveyor, and is a past President of the British Council of Shopping Centres. * Jeremy retired in June 2024. THE NON-EXECUTIVE BOARD COMMITTEE MEMBERSHIP Audit Committee Member Sustainability and Climate Change Committee Member Nomination Committee Member Chairman of Committee Remuneration Committee Member Town Centre Securities PLC Annual Report and Accounts 2024 64 65 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Corporate Governance Report Details of the Board of Directors are given on pages 64 to 65 of this report. At the end of the year the Board comprised three Non-Executive Directors, two of whom are independent and four Executive Directors, including the Chairman & Chief Executive. The key roles and responsibilities are as follows: Edward Ziff | OBE DL Chairman & CEO • Ensure a robust decision-making process is in place and all appropriate information is provided to the Board in a timely manner. • Set the Board agenda, focusing on strategic matters and giving adequate time to other key issues as required. • Manage the Board to allow time for discussion of complex or contentious issues. • Ensure the Board discharges its responsibilities with respect to risk management and governance, promoting high standards of corporate governance. • Effective communication with Shareholders and other stakeholders. • 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. • Ensure implementation of Board decisions. Stewart MacNeill | FCA Group Finance Director ◆Provide advice and guidance on financial strategy. ◆Ensure the Group’s financial commitments, targets and obligations are met. ◆Budget-setting and performance management. ◆Ensure compliance with statutory regulations. ◆Assist with Shareholder communications. ◆Oversee all banking and debt facilities. ◆Board responsibility for IT and data security. Our three Non-Executive Directors (four during the year) 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 all Shareholders, including non-family Shareholders. Ian Marcus | FRICS Senior Independent Director ◆Support the Chairman and CEO’s delivery of objectives. ◆Lead the Non-Executive Directors in the oversight and evaluation of the Chairman & CEO. ◆Being available to Shareholders to express concerns that the normal channels have failed to resolve, or for which they would be inappropriate. ◆Take responsibility for an orderly succession process for the Chairman were it to be required. Ben Ziff Managing Director, CitiPark ◆Provide advice and guidance on Car Parking strategy. ◆Implement agreed business plan for CitiPark. ◆Identify and recruit CitiPark senior management team. ◆Identify and propose car park acquisitions and/or disposals. ◆Identify and lead relationship with Property and Car Parking-related technology investments. Craig Burrow Group Property Director ◆Oversee the asset management of the Company’s property portfolio. ◆Identify and propose commercial acquisitions and/or disposals. ◆Manage the development programme. ◆Propose major projects and bids. ◆Manage commercial expenditure. In accordance with the UK Corporate Governance Code the Board considers Jeremy Collins, Paul Huberman, and Ian Marcus to be independent and confirm that they: • have not been an employee of the Company or Group during the prior five years; • have not had any material business relationship with the Company or been a Director or a senior employee of a body which has had such a relationship with the Company; • have not received or receive remuneration from the Company other than Directors’ fees, nor do they participate in any Company Share Plan, nor are a member of the Company’s pension scheme; • do not have close family ties with the Company’s advisors, Directors, or senior employees; • have no cross Directorships or significant links with other Directors through involvement in other Companies and bodies other than that referred to below; • do not represent a significant Shareholder; and • have not been a Director of the Company for more than nine years since their first appointment. One of the Non-Executive Directors, Michael Ziff, is not considered to be independent, due mainly to his shareholding in the Company and his close family ties. The Board consider that he brings extensive experience and expertise and provides an invaluable contribution to the work of the Board. The remaining three Non-Executive Directors are considered to be Independent. Additionally, under the Code, the Company is required to identify a 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. Consequently, for the purpose of compliance with the Code, the position will alternate on an annual basis. Over the past year Ian Marcus has stood as our Senior Independent Director and therefore, from the date of this report until the next, the position will be rotated to Paul Huberman. Prior to the introduction of the 2018 UK Corporate Governance Code, Ian Marcus was appointed as a workforce representative. His role has been key in ensuring workforce representation in the discussions and decisions of the Board, useful in enabling all Directors to perform their duties under Section 172 Companies Act 2006. The full Board met eight times in the year and the record of Directors’ attendance at the Board meetings is set out overleaf. This year the Board met once specifically to review the strategic direction of the Group. The Board manages overall control of the Group’s affairs in accordance with the schedule of matters reserved for its decision. These include the approval of financial statements, business plans including environmental and sustainability considerations, all major acquisitions and disposals, risk management strategy and treasury decisions. The Board has established two divisional Boards, the Property Review Board (eight meetings in the year) and CitiPark Board (eight meetings in the year), and a separate Sustainability and Climate Change Committee – which comprise Executive Directors and senior management. The Board has delegated responsibility to the divisional Boards and Committee 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 are provided with information about the Group’s operations, the role of the Board, the Group’s corporate governance policies and the latest financial information. Additionally, upon appointment, Directors are provided with induction including training in respect of all their responsibilities in accordance with the UK regulatory regime. Subsequent training is also undertaken as appropriate. The appointment and removal of Directors is governed by the Company’s Articles of Association, the UK Corporate Governance Code and the Companies Act 2006 and other related legislation. The Articles are available on application to the Company Secretary at the Company’s registered office. The Independent Non-Executive Directors meet 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. 2018 UK Corporate Governance Code (the ‘Code’) As part of the Company’s commitment to good corporate governance, a review of compliance with the 2018 code was undertaken and areas of non-compliance identified. The Board has undertaken several changes to comply with the 2018 code and several other actions remain ongoing. Detail on compliance with the Code is provided on pages 70 to 71. Town Centre Securities PLC Annual Report and Accounts 2024 66 67 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Corporate Governance Report continued LISTING RULES In accordance with UKLR 6.6.1 the following information has been disclosed as set out below. LISTING RULE REQUIREMENT LOCATION A statement of the amount of interest capitalised during the period under review and details of any related tax relief. Not applicable Information required in relation to the publication of unaudited financial information. Not applicable Details of any long-term incentive schemes. No such long-term incentive plans Details of any arrangements under which a Director has waived emoluments, or agreed to waive any future emoluments, from the Company. Not applicable Details of any non pre-emptive issues of equity for cash. No such share allotments Details of any non pre-emptive issues of equity for cash by any unlisted major subsidiary undertaking. No such share allotments Details of parent participation in a placing by a listed subsidiary. Not applicable Details of any contract of significance in which a Director is or was materially interested. No such contract Details of any contract of significance between the Company (or one of its subsidiaries) and a controlling Shareholder. No such contract Details of waiver of dividends by a Shareholder. No such waiver Board statement in respect of relationship agreement with the controlling Shareholder. Directors’ Report, page 86 Performance of the Board The effectiveness of the Board, its committees and Directors was reviewed as part of Board proceedings. Given the size of the Board and nature of the business the Directors performed an internal Board evaluation. The Board recognises the requirement to consider the use of an external evaluator at least every three years. The Board have not yet engaged with an external evaluator and during the next financial year will consider the appropriateness of this measure for Town Centre Securities. 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, considering the views of the Executive Directors. The Independent Non-Executive Directors met at least once during the year without the Chairman and Non-Independent Directors. Committees of the Board Nomination Committee Edward Ziff (Chair) Ian Marcus Paul Huberman Jeremy Collins (retired 30 June 2024) Michael Ziff Audit Committee Paul Huberman (Chair) Ian Marcus Jeremy Collins (retired 30 June 2024) Remuneration Committee Ian Marcus (Chair) Paul Huberman Jeremy Collins (retired June 2024) Attendance at Board Meetings (of 8) Edward Ziff 8 Ben Ziff 8 Stewart MacNeill 8 Craig Burrow 8 Michael Ziff 8 Attendance at Board Meetings (of 8) continued Ian Marcus 8 Paul Huberman 8 Jeremy Collins 8 Attendance at Audit Committee Meetings (of 2) Paul Huberman 2 Ian Marcus 2 Jeremy Collins 2 Town Centre House, Leeds. Town Centre Securities PLC Annual Report and Accounts 2024 68 69 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Statement of Compliance with the UK Corporate Governance Code The UK Corporate Governance Code (‘the Code’) can be found on the FRC’s website: frc.org.uk. Under the Code, the Board is required to make a number of statements. These statements are set out below: 1. COMPLIANCE WITH THE CODE: As a Company listed on the London Stock Exchange, Town Centre Securities PLC is subject to the requirements of the Code. The Board is required to comply with the Code and, where it does not, to explain the reasons for non-compliance. The Board now reports against the 2018 Corporate Governance Code and has also produced a Section 172 Statement demonstrating how Directors have performed their duties in compliance with Section 172 of the Companies Act 2006. Statement of compliance with the Code The Board has considered the principles and provisions of the Code, published by the Financial Reporting Council (‘FRC’). The Board of Directors has complied with the Code throughout the year except for the following matters: UK CORPORATE GOVERNANCE CODE PROVISION MITIGATION EXPLANATION OF DEPARTURE FROM THE CODE PROVISION 9 The roles of the Chairman and Chief Executive should not be exercised by the same individual. The Board acknowledges that the appointment of Edward Ziff as Chairman & CEO and his tenure depart from the UK Code. Edward Ziff became Chief Executive in 2001 and succeeded his father as Chairman in 2004. The Board unanimously agreed that, for a number of reasons, including cost efficiency, that taking on both roles would be in the Company’s best interests. The Board is focused on the commercial success of the Company and believes that continuing the combined position of Chairman & Chief Executive is the best way to achieve this. Furthermore, the Board noted the contributions which have been made by Edward Ziff in delivering the strategy of the Company, whilst utilising his position to act as an ambassador for the Company. As mentioned previously, the Company took the step to include wider management representation at Board-level as a measure to give the Non-Executive Directors greater access and further avenues to scrutinise the business. This ensures an appropriate level of robust challenge and is an ongoing focus for the Non-Executive Directors. The Independent Directors meet at least annually in a private session chaired by the Senior Independent Director to consider the governance of the Company including the division of responsibilities for the Chairman and CEO. Edward Ziff will stand for re-election at all future Annual General Meetings in accordance with the 2018 Code requirements. PROVISION 19 Chair not to remain in post for more than nine years. Edward Ziff was appointed Chairman & CEO in 2004, which the Board feels continues to be in the best interest of the Company. Due to this combined role Edward Ziff is not considered to be independent. Edward Ziff has over 37 years’ experience on the TCS Board and is well respected within both the Leeds and Manchester property markets – which geographically represent 89% of the Group’s property portfolio. His invaluable knowledge of the Group’s largest single asset, the Merrion Centre, Leeds would be very difficult to replicate. Edward Ziff has significant contacts within the local area in which the business operates (for example at the local authorities, Leeds University and the Leeds Hospitals Charity). The Board believes that the valuable experience provided by Edward Ziff continues to benefit the Company. PROVISION 39 Notice or contract periods should be set at one year or less. The Chairman & Chief Executive has a service contract with a notice period greater than one year. Given the role and experience of the Chairman & Chief Executive, and his deep knowledge of the Company, the Board believes the longer notice period continues to be appropriate. PROVISION 11 At least half the Board, excluding the Chairman to be independent. The Board noted that less than half of the Board is considered to be independent. The composition of the Board is regularly reviewed to ensure that there in an appropriate balance of skills and experience. The Board currently comprises three Non-Executive Directors (four during the year). Again, without the unusual wider management representation on the Board, the Company would meet the required ratio of Independent Directors. 2. GOING CONCERN The Board is required to confirm that the Group has adequate resources to continue in operation for at least 12 months. The Directors are satisfied that the Group has adequate resources to continue to be operational as a going concern for the foreseeable future and therefore have adopted the going-concern basis in preparing the Group’s 2024 Financial Statements. More details can be found in the Risk Report on page 56 and the Directors’ Report on page 86. 3. VIABILITY STATEMENT The Board is required to assess the viability of the Company taking into account the current position and the potential impact of the principal risks and uncertainties facing the business. The Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three years ended 30 June 2027. Our Viability Statement can be found in the Risk Report on page 60. 4. PRINCIPAL RISKS FACING THE GROUP The Board is required to confirm that a robust assessment of the principal and emerging risks facing the Company has been carried out and should describe those risks and explain how they are being managed or mitigated. A robust assessment of the principal risks facing the Company was undertaken during the year, including those that would threaten its business model, future performance, solvency or liquidity. These risks and how they are being managed or mitigated can be found in the Risk Report starting on page 50. 5. RISK MANAGEMENT AND INTERNAL CONTROL The Board is required to monitor the Company’s risk management and internal control systems and, at least annually, carry out a review of their effectiveness. The Board conducted a review of the effectiveness of the systems of risk management and internal control during the year and considers that there is a sound system in place. More detail can be found in the Audit Committee Report on page 74. 6. FAIR, BALANCED AND UNDERSTANDABLE The Board is required to confirm that it considers the Annual Report, taken as a whole, to be fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s position and performance, business model and strategy. The Directors consider, to the best of each person’s knowledge and belief, that the Annual Report, taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s position and performance, business model and strategy. This is considered in the Audit Committee Report on page 74 and the Statement of Director’s Responsibilities on page 87. Relations with Shareholders The Board is committed to maintaining good communication with Shareholders. The Chairman & Chief Executive and Group 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 release and the Annual General Meeting (‘AGM’). The Notice of AGM and 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 in person (or by teleconference) 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 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 (tcs-plc.co.uk). Edward Ziff OBE DL Chairman & Chief Executive 15 October 2024 Town Centre Securities PLC Annual Report and Accounts 2024 70 71 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Weymouth Street, London. Dear Shareholder, I am pleased to continue to act as Chairman of the Nomination Committee. The other members of the Committee are Ian Marcus, Paul Huberman and Michael Ziff. The Committee comprises an equal number of Non-Independent Directors to Independent Directors. The Committee met formally once during the year.” Edward Ziff OBE DL Chairman & Chief Executive Nomination Committee Report Responsibilities of the Nomination Committee The Committee is responsible for the regular review of the structure, size and composition (including the skills, knowledge, independence and experience) of the Board, and it makes recommendations to the Board with regard to any changes. The Committee also considers succession planning for the Executive Board in the course of its work, taking into account the challenges and opportunities being faced and the skills and expertise required. Work of the Committee during the year The effectiveness of the Board, its Committees and Directors was reviewed as part of the September Board proceedings. More detail can be found in the Directors’ Report on page 85. As a result of this exercise, the Committee will be focusing on continuing to develop its succession plan for the Board. A central part of this plan will be to seek to make the Board more diverse. The Company continues to face new challenges with significant uncertainty in the general economy. The Committee will be considering the Board’s skill set to ensure it is able to lead the Company and a diverse Board will be key to the Board’s effectiveness. The Company’s approach to diversity is set out later in this report. As previously announced, Jeremy Collins, Non-Executive Director, retired from his role as Non-Executive Director with effect from 8 February 2021. We wish Mark all the best in his future endeavours. The Committee recognises that the Chair of the Board has remained in post beyond nine years and the reasons for this are regularly and rigorously reviewed by the Independent Non-Executive Directors to ensure this remains in the best interests of the Company and its stakeholders. This exercise by the Independent Non-Executive Directors also incorporates a review of the combined role of Chairman & Chief Executive Officer. Further information can be found on page 63. Following the introduction of the new UK Corporate Governance Code, all Directors are put forward for re-election at each Annual General Meeting. Biographies of the Board members can be found on pages 64 to 65. Diversity and inclusivity The Board embraces the supporting principles on diversity and inclusivity in its broadest sense: diversity of skills, background, experience, knowledge, outlook, approach, gender and ethnicity. In addition, the Company has regard for diversity in recruitment at all levels. At the Company’s head office in Leeds, 14 of the Company’s 30 employees are female. The Company drives diversity through its university placements, adding to its core strategy on enhancing diversity via a strong and diverse pipeline of talent throughout the Group at all levels. The Board does not meet any of the targets on Board diversity as set out in UKLR 6.6.6(9). As a relatively small Plc based in Leeds, the Company has always recruited Board and executive management members primarily for their skills and experience. The experience of the Company is that the potential pool of candidates does not allow it to fulfil any of the diversity and inclusivity targets in the listing rules. In assessing the members of the executive management team, the Company has included all heads of departments and the key members of the individual business segment meetings. The composition of the Board and at executive management level as at both 30 June 2023 and at the date of this report is as follows: Gender identity Number of Board members Percentage of the Board Number of senior positions on the Board Number in executive management Percentage of executive management Men 8 100% 3 5 62.5% Women 0 0% 0 3 37.5% Not specified/prefer not to say 0 0% 0 0 0% Ethnic background White British or other white 8 100% 3 8 100% Mixed/Multiple ethnic groups 0 0% 0 0 0% Black/African/Caribbean/ Black British 0 0% 0 0 0% Other ethnic group, including Arab 0 0% 0 0 0% Not specified/prefer not to say 0 0% 0 0 0% The Board is committed to ensuring it has an appropriate balance of skills, knowledge and experience. Diversity is a vital part of the continued assessment and enhancement of Board composition, and the Board recognises the benefits of diversity amongst its members, and the senior team. As mentioned earlier in this Report, the Board recognises that its composition should enable it to meet future challenges and assist it in discharging its responsibilities to all of its stakeholders. All Board appointments are made on merit and whilst the Nomination Committee has decided not to employ specific diversity targets, it continues to actively support diversity in all forms. The Board is committed to furthering its diversity and is looking to address the issue wherever the opportunity arises to do so. The Committee is committed to ensuring that recruiting a female Independent Non-Executive Director is a priority when a future vacancy arises. Edward Ziff OBE DL Chairman of Nomination Committee 15 October 2024 Town Centre Securities PLC Annual Report and Accounts 2024 72 73 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE CitiPark New Jackson, Manchester. Dear Shareholder, As Chairman of the Audit Committee (‘the Committee’) I am pleased to present the report of the Committee for the year ended 30 June 2024.” Paul Huberman FCA CTA Chairman of the Audit Committee Audit Committee Report The Audit Committee consists of the Board’s two Independent Non-Executive Directors (Three during the year – Jeremy Collins retired as a Non-Executive Director on 30 June 2024). I am a qualified Chartered Accountant and experienced senior finance executive having been Finance Director of three different listed Companies, and more recently a Non- Executive Director at Galliard Homes and Grit Real Estate Income Group. Ian Marcus has a breadth of experience in Investment Banking, and as a Non-Executive Director with past Audit Committee responsibilities. Jeremy Collins was also a member of the Committee up until his retirement on 30 June 2024, bringing valuable experience from his prior roles, including as Property Director at John Lewis. The Board is therefore satisfied that at least one member of the Audit Committee has recent and relevant financial experience. The Committee as a whole has relevant sector experience. Executive Directors, including Edward Ziff, join Committee meetings by invitation but are not members of the Committee. The Committee meets alone with the external auditor without Executives present at least twice a year. The Audit Committee carries out an annual review of its Terms of Reference. The Terms of Reference ensures the Committee’s role is fully compliant with the 2018 UK Corporate Governance Code and reflects best practice. This is available to view on the Company’s website. Responsibilities The Committee’s role includes, but is not limited to, assisting the Board to discharge its responsibilities and duties for financial reporting, internal control, management of risk and the appointment, reappointment and remuneration of an independent external auditor. The Committee is responsible for reviewing the scope, terms of engagement, and results of the audit work and the effectiveness of the auditor. The Committee is responsible for monitoring the integrity of the Financial Statements, announcements and judgements, as well as reviewing the Company’s internal financial controls. The Committee also satisfies itself of the auditor’s independence and objectivity, reviews and approves the level of non-audit services, and the Group’s arrangements on whistleblowing. Any matter the Committee considers needs action or improvement is reported to the Board. In addition, the Committee continues to review annually whether an internal audit function is required. Report on the Committee’s activities during the year During the year, the Committee met two times and discharged its responsibilities by: • Reviewing the Group’s draft Annual Report and Financial Statements and its interim results statement prior to discussion and approval by the Board. • Reviewing the continuing appropriateness of the Group’s accounting policies. • Reviewing BDO’s plan for the 2024 Group audit and approving their terms of engagement and proposed fees. • Reviewing reports prepared by management on internal control issues, as necessary. • Considering the effectiveness, objectivity and independence of BDO as external auditors and recommending to the Board their reappointment. • Reviewing management’s biannual risk review report and the effectiveness of the material financial, operational and compliance controls that help mitigate the key risks. • Reviewing the effectiveness of the Group’s whistleblowing policy. • Monitoring the level of non-audit fees and the scope of non-audit services provided in the year by the auditors. • Reviewing progress against the IT infrastructure and security action plan. • Considering management’s approach to the Viability Statement in the 2024 Annual Report. • Reviewing the terms of reference of the Audit Committee. • Carrying out an annual performance evaluation exercise and noting the satisfactory operation of the Committee. • Reviewing the Group’s Non-Audit Services Policy. • Reviewing the Group’s tax compliance. • Reviewing the Group’s TCFD disclosures. • Reviewing the longer-term viability of the business and its going-concern status. Significant issues considered in relation to the Financial Statements During the year, the Committee considered key accounting matters and judgements in respect of the financial statements. The Committee received detailed reporting from the Finance Director and BDO with respect to key areas of management judgement and reporting. Using BDO’s assessment of risk and the Committee’s own independent knowledge of the Company, estimates and judgements of management in relation to the preparation of the financial statements were reviewed and challenged. The significant accounting matters and judgements related to: • Investment Property Valuation – the Committee reviewed the reports of the independent valuers JLL and CBRE, and the Chair and other members of the Committee attended the valuation review meetings with management, BDO and CBRE and then JLL. • Treatment of property sales and investment acquisitions in the year. • The recognition of the first element of deferred consideration and the contingent consideration arising from the sale of the Company’s investment in YourParkingSpace.co.uk (‘YPS’), and the valuation of the final element of deferred consideration at the year-end. • Going concern and covenant compliance – the Committee reviewed and approved the going-concern analysis. • Viability Statement and appropriateness of period of the statement – the Committee reviewed and agreed the longer-term viability analysis and recommended timeframe. As part of this process a number of stress scenarios were provided to the Committee. The assumptions behind those scenarios were robustly examined. • Treatment of outstanding rental income due from tenants as at the year-end that was more than three months overdue; the Committee agreed that it was appropriate to provide for non-payment of the amounts due unless there was reasonable certainty of the recoverability of specific balances. • Accounting for IFRS16 – the Committee reviewed and approved the application of IFRS16 within the accounts, reviewing the effects of the standard. • Critical accounting estimates and judgements – the Committee reviewed and approved the specific disclosures around the critical accounting estimates and judgements used in preparing the financial statements. Town Centre Securities PLC Annual Report and Accounts 2024 74 75 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Going concern and viability The Committee and the wider Board have spent significant time during the year reviewing and stress-testing the financial robustness of the Company. This is detailed in the Risk Review on page 59, but in summary key Audit Committee activities included: • Detailed reviews of predicted cash flow forecasts under different scenarios, and review of predicted bank and debenture covenant tests. • Detailed discussions regarding the Viability Statement and Going Concern statement included within this Report and Accounts. Fair, balanced and understandable In its review the Audit Committee has determined that the 2024 Annual Report, taken as a whole, is fair, balanced and understandable and provides Shareholders with the necessary information to assess the Company’s position and performance, business model and strategy. Risk management and internal controls The UK Corporate Governance Code provides that the Directors should monitor the Company’s risk management and internal control systems and, at least annually, carry out a review of their effectiveness and should report to Shareholders in the Annual Report. The monitoring and review should cover all material controls, including financial, operational and compliance controls. The Board recognises that effective risk management is critical to the achievement of the Group’s strategic objectives, and the Audit Committee plays a key role in reviewing identified risks and assessing the effectiveness of mitigation plans. The principal risks and uncertainties identified by the Board and the processes in place to manage and mitigate such risks are summarised in the Risk Management section. All individual risks identified have remained unchanged in the year. The macroeconomic environment in the UK has worsened over the year, however the Company has mitigated this with the robustness of the Group’s property portfolio, its tenant mix, the underlying trade in both the Group’s Car Parking and Hotel businesses and the reduction in borrowings over the year. The risk management system is designed to give the Board confidence that the risks are being managed or mitigated as far as possible. However, it should be noted that no system can eliminate the risk of failure to achieve the Group’s objectives entirely and can only provide reasonable but not absolute assurance against material misstatement or loss. The key elements of the internal control framework are as follows: • A comprehensive system of financial budgeting and forecasting based on an annual budget in line with strategic objectives. Performance is monitored and action is taken throughout the year based on variances to budget and forecast. • Rolling 18-month cash-flow forecasting that is reviewed by the Board at least six times a year. • An organisational structure with clearly defined roles, separation of duties, and authority limits. • Close involvement of the Executive Directors in day-to-day operations, and regular formal meetings with senior management to review the business. • Monthly meetings of the Executive, the Property Review Group, the CitiPark Board, and quarterly meetings of the IT and Data Governance Committee. • A documented appraisal and approval process for all significant capital expenditure. • Approval by the Board for all material acquisitions, disposals and capital expenditure. • The maintenance of a risk register, and a formal review of significant business risks twice a year. • A formal whistleblowing policy and anti-bribery policy. The Board has delegated responsibility for reviewing the effectiveness of the risk management framework and internal control to the Audit Committee. Oversight of the external auditors BDO were appointed as the Company’s auditors following a formal tender process in 2015/16. Current UK regulations require rotation of the lead audit partner every five years, a formal tender of the auditor every ten years and a change of auditor every 20 years. The 2024 audit was the third audit by Chris Young. BDO presented their audit plan for the year-end to the Board, where the key audit risks and areas of judgement were highlighted, and the level of audit materiality agreed. BDO presented detailed reports of their findings to the Committee before the Interim and Full- Year results. The Committee questioned and challenged the work undertaken and the key assumptions made in reaching their conclusions. Auditor independence and objectivity The Committee recognises the importance of auditor objectivity and independence and understands that this can be compromised by the provision of non-audit work. All taxation advice is provided separately by PwC. However, there may be certain circumstances where, due to BDO’s expertise and knowledge of the Company, it may be appropriate for them to undertake non-audit work. The Company has put in place a formal process for agreeing and approving non-audit work by the Audit Committee alongside a Non-Audit Services Policy as mentioned previously. BDO have confirmed to the Audit Committee that they remain independent and have maintained internal safeguards to ensure the objectivity of the engagement partner and audit staff is not impaired. Audit fees for the year are broken down as follows: £’000’s Audit of year-end consolidated Financial Statements 246 Audit of Company subsidiaries pursuant to legislation 10 Other Audit-related services 40 TOTAL AUDIT SERVICES 296 Other non-audit services – TOTAL AUDITOR’S REMUNERATION 296 Audit Committee Report continued The Committee ensures it is able to assess the quality of BDO’s audit in three key ways: It ensures there is a comprehensive engagement agreement in place, secondly the Committee reviews the detailed audit planning document provided by BDO, and thirdly BDO produces a detailed audit report that is thoroughly reviewed by the Committee with follow-up iterations as necessary. In addition to meeting the auditors without management present, the committee are able to stress test the independence and quality of the review. The review described above allows the Committee to determine and understand the degree to which the auditors have challenged management and if necessary require the auditors to revisit particular aspects in more detail. In this past year, the attendance of Committee members at the Valuation Review meetings has allowed the Committee to witness first-hand the level of scrutiny and challenge given by the auditors to management and CBRE and JLL. In the year ended 30 June 2024 the Committee has not asked the auditors to look at any specific areas not already covered by the audit plan. Auditor reappointment The Committee reviewed the effectiveness of the external audit process and the performance of the Auditor and for the reasons stated above, believe that BDO remain independent and recommend that BDO be reappointed as external auditors for the Company. The Committee note the requirements for the external auditors’ position to undergo tender and propose for this to be undertaken prior to 2025/2026. Internal audit In 2023 the Group appointed an external accountancy firm, independent of the auditors, to provide an internal audit service. This service provides two reviews per annum – each review on a specific targeted activity of the Group. The activity chosen will be agreed between the internal auditors and the audit committee. Whistleblowing The Group has in place a whistleblowing policy which encourages employees to report any malpractice or illegal acts or omissions or matters of similar concern by other employees or former employees, contractors, suppliers or advisors. The policy provides a mechanism to report any ethical wrongdoing or malpractice or suspicion thereof. The Committee review this policy annually. Committee evaluation As part of the Board and Committee self-evaluation process it was felt that the Committee continued to operate at a high standard and was effective in its support to the Board during the year. Paul Huberman Chairman of the Audit Committee 15 October 2024 Town Centre Securities PLC Annual Report and Accounts 2024 76 77 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Ducie House, Manchester. On behalf of the Board I am pleased to present the Directors’ Remuneration Report of the Remuneration Committee (the ‘Committee’).” Ian Marcus Chairman of Remuneration Committee Directors’ Remuneration Report The report is divided into two sections: • This Annual Statement for the year ended 30 June 2024, which summarises remuneration outcomes and how the Remuneration Policy will operate for the year ending 30 June 2025. • The Annual Report on Remuneration which explains how the Remuneration Policy was implemented in the year ended 30 June 2024, and how the Remuneration Policy will be implemented for the year ended 30 June 2025. There are no proposed changes to the Remuneration Policy from that which was approved by Shareholders last year. Only the Annual Statement and Annual Report on Remuneration will be subject to a vote at the forthcoming 2024 AGM. Pay and performance during 2024 In determining the bonus award levels for the year ended 30 June 2024 the Remuneration Committee have taken full account of the progress made by the Company in the past year. As there were no specific benchmarks set for these bonuses, they were entirely at the discretion of the Remuneration Committee. Bonus award for the year ended 30 June 2024 Following a change to the Remuneration Policy at the Company’s AGM in 2022 we are able to award exceptional bonuses in relation to significant transactions that are outside of the ordinary course of business for the Company. These bonuses are on top of the annual bonus opportunity of up to a maximum of 100% of base salary. During the year the Committee approved extraordinary bonuses in relation to both the first element of deferred consideration and the contingent consideration received from the sale of the Company’s investment in YourParkingSpace Ltd (‘YPS’). The financial performance assessment considered the following achievements: • The EPRA profit for the year of £5.5m (£4.4m if you add back the extraordinary bonuses paid but before adjusting for taxation) and £3.1m in FY23 (£3.9m if you add back the extraordinary bonus award relating to the sale of YPS). • EPRA Net Tangible Assets per share at the year-end of 277p, FY23: 284p. In addition to financial performance the overall strength and security of the Group remains strong, with key factors being: • A tender offer which successfully resulted in the Company acquiring in for cancellation 6,292,920 of its own shares and returning to Shareholders £1.45 per Ordinary Share. • The one-year extension of one of the Company’s revolving credit facilities which was due to expire in September 2024, which now expires in September 2025, although we still have the ability to request a further one-year extension. • Repositioning and repurposing an number of our investment properties including the phased refurbishments of our Scottish residential portfolio and a key office building in Leeds. • The planning application submitted for 1,100 student beds as part of the continued evolution of the Merrion Centre. Having considered the overall performance of the Company, the Committee has approved awards in connection with the annual bonus opportunity of 10% of base salary for 2024; this award was debated and agreed in a meeting of the Committee in October 2024 and is not included in the results of the Company for the year ended 30 June 2024. Other activities We met twice during the year. In accordance with its terms of reference, the Committee continues to review the remuneration policy periodically to seek to ensure a clear linkage between Executive Directors’ pay and Group performance. In reviewing the remuneration policy, the Committee not only assesses the alignment between policy, strategy and Shareholder interests, but also the extent to which remuneration is sufficiently competitive to recruit, motivate and retain key talent. In previous years and following a market benchmarking exercise undertaken by Willis Towers Watson the Committee came to a number of conclusions which were reported in the 2019 and 2020 Report and Accounts: • Overall Maximum Potential Remuneration (‘MPR’) for Executive Directors is low in comparison to the Company’s property sector peers. Whilst base salaries are competitive, maximum bonus opportunity is significantly lower than that of peers. This opportunity was increased to a maximum of 100% following the 2021 AGM where changes to the Remuneration Policy were approved, however this is still considered to be low. • Actual remuneration is also low relative to peers, with an average bonus pay-out of 12% of base salary over the last five years. • The lack of a Long-Term Incentive Plan (‘LTIP’) contributes to lower overall pay levels and means that remuneration does not actively assist to align all Executives to longer-term Shareholder interests. Implementation of the remuneration policy in 2024 • There will be cost-of-living increases of 3% for three of the Executive Directors. Edward Ziff has agreed not take a cost-of-living increase. • Actual cash bonuses of 10% have been awarded following discussion at the September 2024 meeting of the Remuneration Committee. These bonuses will be paid during the year ending 30 June 2025. • Exceptional bonuses have been paid during the year to three of the Executive Directors in connection with the first element of deferred consideration and the contingent consideration received from the sale of the Company’s investment in YourParkingSpace Limited. • The Remuneration Committee continue to discuss with the Executive Directors whether to include suitable weightings, measures and targets or if the bonus award remains entirely discretionary. If adopted these will be disclosed retrospectively in our subsequent report as and when bonuses become payable, owing to commercial sensitivity. • Pension and benefits will operate as in 2023. Edward Ziff and Stewart MacNeill continue to engage with Shareholders, both family and, where possible, larger independent Shareholders on all topics including remuneration. In addition, I am available to any Shareholder who would like to discuss their concerns on remuneration throughout the year, not only at the AGM. Town Centre Securities PLC Annual Report and Accounts 2024 78 79 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Remuneration policy 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 (although this is being phased out), permanent health and medical insurance premiums. During the year the Chairman & Chief Executive receives reimbursement of the costs of maintaining a flat in Leeds. The value of the benefit is not pensionable. The Company makes no pension contributions in respect of Edward Ziff. The Group makes payments of 13% of salary to a defined contribution scheme for Stewart MacNeill, Ben Ziff and Craig Burrow. The Committee recognises the guidance of the 2018 Corporate Governance Code in relation to the alignment of Executive pensions with the wider staff pool. The contributions of 13% made by the Company in relation to Stewart MacNeill, Ben Ziff and Craig Burrow are in alignment with contributions made on behalf of other members of the senior management team. Variable remuneration The Group operates two bonus plans; the first is 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 movement in net asset value per share and dividends paid as well as any movement in share value) are carefully considered by the Remuneration Committee in awarding the bonuses when such increases were the result of Directors’ input. Specific benchmarks are not set which enables the Committee to award bonuses for both innovation and performance that can’t be measured against rigid financial metrics, although clearly the financial impact is considered; in particular the gearing level, absolute level of external debt and ultimately the capital structure of the business. The maximum award under this plan is 100% of base salary. In addition to the above plan the Committee are able to award exceptional bonuses that are no more than 10% of the profits generated from any significant transactions that are outside of the ordinary course of business for the Company, subject to a maximum of £3m in any one financial year. The purpose of this is to encourage relatively small but ultimately value- enhancing strategic and innovative technological investments that are complementary to the existing core businesses of TCS. These bonuses are 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. Service agreements and external appointments Edward Ziff has a service contract that is subject to not less than two years’ notice. Ben Ziff, Stewart MacNeill and Craig Burrow have service contracts with one year’s, six months’ and six months’ notice respectively. 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. Non-Executive Director remuneration The Non-Executive Directors do not have service contracts. They are appointed for an initial three-year period and are now up for re-election on an annual basis. The Non-Executive Directors are not entitled to participate in bonus, or share-based payment schemes and do not receive any other benefits. 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. In 2019 the Company improved pension contributions for more junior staff and also introduced a Westfield Health policy for a large number of staff members. Directors’ Remuneration Report continued Board remuneration including theoretical maximum bonuses Year ended 30 June 2024. £’000s Salary Benefits Bonus (paid) Bonus (unpaid) 0 400 200 600 1000 1400 800 1200 1600 Craig Burrow 191 33 27 32 228 Stewart MacNeill 141 182 73 Edward Ziff 576 264 190 738 Ben Ziff 258 44 364 213 1800 2000 Note: The unpaid element of the bonus represents the difference between the maximum possible bonus award of 100% of salary and the actual amount received in the year. Annual Report on Remuneration Single total figure of remuneration for each Director (audited) The following table sets out the total single figure of remuneration for each Director for the years ended 30 June 2024 and 30 June 2023. Fixed Variable Total £’000 Total Fixed remuneration £’000 Total Variable Remuneration £’000 Salaries and fees £’000 Taxable benefits1 £’000 Pension contributions3 £’000 Bonuses £’000 SIP shares2 £’000 Executive Chairman and Chief Executive E M Ziff5 2024 738 188 – 264 2 1,192 926 266 2023 706 53 – 220 2 981 759 222 Executive Directors C B A Ziff 2024 258 8 34 364 2 666 300 366 2023 250 7 33 440 2 732 290 442 C Burrow4 2024 228 3 28 32 2 293 259 34 2023 111 1 11 10 – 133 123 10 S MacNeill 2024 182 1 24 73 2 282 207 75 2023 165 1 21 67 2 256 187 69 2024 1,407 200 86 733 8 2,433 1,692 741 2023 1,232 62 65 737 6 2,102 1,359 743 Non-Executive Directors M A Ziff 2024 56 – – – – 56 56 – 2023 53 – – – 53 53 – P Huberman 2024 60 – – – – 60 60 – 2023 57 – – – – 57 57 – I Marcus 2024 60 – – – – 60 60 – 2023 57 – – – – 57 57 – J Collins 2024 56 – – – – 56 56 – 2023 53 – – – – 53 53 – 2024 232 – – – – 232 232 – 2023 220 – – – – 220 220 – 2024 1,639 200 86 733 8 2,665 1,924 741 2023 1,452 62 65 737 6 2,322 1,579 743 Note: 1 Taxable benefits include cash and non-cash benefits principally Company cars or a cash alternative, permanent health and medical insurance premiums. Until 31 December 2022, Edward Ziff received reimbursement of the costs of maintaining a flat in London which was regularly used for Company meetings. From 1 January 2023, following his move to London, the Company reimburses Edward Ziff the costs of maintaining a flat in Leeds. The value of the benefits is not pensionable. 2 No long-term incentive plan was in operation for the relevant years although Directors were awarded shares under the Company SIP. 3 Edward Ziff received no pension contribution. The Group made payments to a Defined Contribution scheme and/or cash alternative for Ben Ziff, Stewart MacNeill and Craig Burrow (all at 13% of base salary). 4 Craig Burrow joined the Board in January 2023. 5 Edward Ziff’s salary for the year ended 30 June 2023 has been restated to include a payment received in January 2023 that was not previously included. Town Centre Securities PLC Annual Report and Accounts 2024 80 81 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Notes to the single figure table – Annual bonus targets and outcomes for 2024 The current AGM-approved bonus scheme allows for a maximum pay-out of 100% of base salary. During the year ended 30 June 2024, all Executive Directors received a bonus equalling 15% of base salary relating to the performance of the Company in the year ended 30 June 2023. The decision to award these bonuses was deferred until after the year-end; once the draft results of the Company were better known, in particular the valuation movements on the Company’s investment property portfolio and impairments on the Company’s car park assets. • Exceptional bonuses were paid to Edward Ziff, Ben Ziff and Stewart MacNeill during the year of £162,520, £325,039 and £48,756 respectively, following receipt of the first element of deferred consideration and the earnout consideration from the YourParkingSpace investment sale. Scheme interests awarded during the financial year Town Centre Securities PLC does not currently operate a long-term incentive plan. It does operate an All Employee Share Incentive Plan, approved by Shareholders in December 2003. The 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. In May 2024 all four Executive Directors accepted the annual invitation to participate in this All Employee Share Incentive Plan by each agreeing to purchase shares to the value of £1,800, paid between June 2024 and November 2024. 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 2024. For illustration, based on the share price as at 30 June 2024, this would equate to each Director receiving 1,348 partnership shares and 1,348 matching shares. In November 2023 Edward Ziff, Ben Ziff, Stewart MacNeill and Craig Burrow received 1,290 partnership shares and 1,290 matching shares in respect of the 2023 Share Incentive Plan. The total number of partnership and matching SIP shares beneficially held at 30 June 2024 is shown below. Executive Holding of partnership and matching SIP Shares (30 June 2024) Edward Ziff 13,462 Ben Ziff 13,462 Stewart MacNeill 5,338 Craig Burrow 7,936 Directors’ Shareholdings (audited) The table below sets out the shares held by the Directors as at 30 June 2024: Beneficial Non-beneficial Edward Ziff 5,496,926 10,853,427 Ben Ziff 778,100 – Stewart MacNeill 5,338 – Craig Burrow 18,287 – Michael Ziff 2,452,255 7,443,445 The non-beneficial interest disclosures include 649,278 Ordinary Shares held by the estate of Dr Marjorie Ziff, an estate to which Edward and Michael Ziff are executors, and 3,409,982 Ordinary Shares over which a power of attorney has been granted by AL Manning to Edward Ziff for personal estate management reasons. Non-beneficial holdings include shares held in trust and under powers of attorney. Edward Ziff, Stewart MacNeill and Ben Ziff are Directors of TCS Trustees Limited, Trustee for the shares that are required for the All Employee Share Incentive Plan. At 30 June 2024, TCS Trustees Limited held 84,993 Ordinary Shares (2023: 35,237) on behalf of all participants, including those share awards of Executive Directors shown above. Performance graph and table The following graph shows the Company’s Total Shareholder Return (‘TSR’) performance compared to the FTSE All Share REIT Index, over the ten years ended 30 June 2024. This index has been chosen because the Directors consider it the most appropriate comparison and TCS is a constituent of this list. This chart illustrates the movement in value of a hypothetical investment of £100 in TCS and the FTSE All Share REIT index. 0 20 40 60 80 100 120 140 160 180 Jun-24 Jun-23 Jun-22 Jun-21 Jun-20 Jun-19 Jun-18 Jun-17 Jun-16 Jun-15 Jun-14 TOWN Source: DataStream FTSE UK REITs Directors’ Remuneration Report continued Over the long term TCS has outperformed FTSE All Share REIT Companies. On a 20-year basis TCS TSR was 1.2% versus the FTSE All Share REIT at 2.6%. On a ten-year basis TCS TSR was 4.2% behind the FTSE All Share REIT at -2.3%. The table below sets out the total remuneration and incentive plan pay-outs for the Executive Chairman and CEO over a ten-year period. Single total figure of remuneration (£’000s) Annual bonus pay-out (% of maximum) 2023/24 1,192 15% 2022/23 981 0% 2021/22 1,019 45% 2020/21 685 0% 2019/20 713 0% 2018/19 711 0% 2017/18 914 40% 2016/17 809 20% 2015/16 718 10% 2014/15 782 30% Percentage change in remuneration of the Directors The table below sets out a comparison of the percentage change in base salary, taxable benefits and bonus of the Directors versus the total employee population from 2019 to 2020, from 2020 to 2021, from 2021 to 2022 and from 2022 to 2023. Salary change 2019 to 2020 2020 to 2021 2021 to 2022 2022 to 2023 2023 to 2024 Edward Ziff (1.6%) 0.8% 7.3% 3.7% 4.5% Ben Ziff 10.3% 3.6% 8.0% 4.0% 3.7% Stewart MacNeill n/a n/a 0.0% 3.3% 10.4% Craig Burrow n/a n/a n/a n/a 4.0% Michael Ziff (0.8%) 0.8% 4.8% 7.5% 5.1% Ian Marcus (0.8%) 0.8% 4.8% 7.5% 5.0% Paul Huberman (0.8%) 0.8% 4.8% 7.5% 5.0% Jeremy Collins (0.8%) 0.8% 4.8% 7.5% 5.1% Average employee1 5.5% 6.9% 5.4% 8.6% (9.8%) 1 Average pay for employees is calculated on a like-for-like basis for comparison purposes. Taxable benefits change 2019 to 2020 2020 to 2021 2021 to 2022 2022 to 2023 2023 to 2024 Edward Ziff 0.0% (38.9%) (2.3%) 23.6% 253.5% Ben Ziff 28.6% (92.6%) 100.0% 69.9% 10.8% Stewart MacNeill n/a n/a 0.0% 7.6% 55.1% Craig Burrow n/a n/a n/a n/a 196.5% Michael Ziff 0.0% 0.0% 0.0% 0.0% 0.0% Ian Marcus 0.0% 0.0% 0.0% 0.0% 0.0% Paul Huberman 0.0% 0.0% 0.0% 0.0% 0.0% Jeremy Collins 0.0% 0.0% 0.0% 0.0% 0.0% Average employee 21.9% 0.0% 0.0% 0.0% 0.0% Town Centre Securities PLC Annual Report and Accounts 2024 82 83 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Percentage change in remuneration of the Directors continued Bonus change 2019 to 2020 2020 to 2021 2021 to 2022 2022 to 2023 2023 to 2024 Edward Ziff 0.0% 0.0% n/a (24.9%) 20.0% Ben Ziff 0.0% 0.0% n/a 303.7% (17.5%) Stewart MacNeill n/a n/a n/a 37.5% 11.6% Craig Burrow n/a n/a n/a n/a 219.5% Michael Ziff 0.0% 0.0% 0.0% 0.0% 0.0% Ian Marcus 0.0% 0.0% 0.0% 0.0% 0.0% Paul Huberman 0.0% 0.0% 0.0% 0.0% 0.0% Jeremy Collins 0.0% 0.0% 0.0% 0.0% 0.0% Average employee 0.0% 0.0% n/a n/a (44.1%) Relative importance of spend on pay The table below shows how expenditure on total pay compares to other financial outgoings. 2023 (£’000) 2024 (£’000) % change Staff remuneration costs 7,000 7,376 5.4% Dividends to Shareholders 2,423 4,638 91.4% External appointments No Executive Directors have other external appointments for which they are paid. During the year Edward Ziff was the unpaid Chair and Trustee of Leeds Hospitals Charity. Implementation of the remuneration policy for 2025 The following table outlines how TCS intends to implement the remuneration policy in the year ending 30 June 2025. Component Implementation for 2025 Base salary The Committee usually agrees base salary increases effective from October. This year the Committee has agreed that there will be a 3% cost-of-living increase to three of the Executive Directors. Benefits Benefits provisions will be as per 2024, to include cash and non-cash benefits principally Company cars or a cash alternative, permanent health and medical insurance premiums. The Chairman & Chief Executive receives reimbursement of the costs of maintaining a flat in Leeds. Pension Edward Ziff does not receive a contribution. The Group makes payments to a Defined Contribution scheme for Stewart MacNeill, Ben Ziff and Craig Burrow of 13% of base salary. Annual bonus The Remuneration Committee are able to award two types of bonus: An annual bonus with a maximum opportunity of up to 100% of base salary. Exceptional bonuses that are no more than 10% of the profits generated from any significant transactions that are outside of the ordinary course of business for the Company, subject to a maximum of £3m in any one financial year. The purpose of this is to encourage relatively small but ultimately value-enhancing strategic and innovative technological investments that are complementary to the existing core businesses of TCS. All bonuses are currently entirely at the discretion of the Remuneration Committee. The Committee is currently discussing potential measures and weightings and if adopted will only be disclosed retrospectively owing to commercial sensitivity. SIP Executive Directors will continue to participate in the SIP. NED fees NED fees will increase by 3% with effect from October 2024. Consideration by the Directors of matters relating to Directors’ remuneration The Remuneration Committee formally met twice during the year and following Directors were members of the Committee during 2024: • Ian Marcus • Paul Huberman • Jeremy Collins The key activities of the Committee during the year were: • Whilst no bonus was approved during the year relating to the year ended 30 June 2024, a bonus of 10% of base salary was approved after the year-end which will be included in the results of the Company for the year ending 30 June 2025. • Approving exceptional bonuses awarded to Edward Ziff, Ben Ziff and Stewart MacNeill arising from receipts of the first element of deferred consideration and the contingent consideration from the sale of the Company’s investment in YourParkingSpace Limited. • Approving the salaries for 2024 (cost-of-living increases for all the Executive Directors). • Setting the bonus targets for 2025. • Reviewing Service Contracts for continued appropriateness. • Discussing structures for any potential future LTIP scheme. • Reviewing the Terms of Reference • Reviewing changes to Corporate Governance and the Committee’s approach to these changes. Statement of voting in relation to the 2023 AGM Annual Report on Remuneration Votes for 97.93% Votes against 2.07% This report was approved by the Board on 15 October 2024 and signed on its behalf by Ian Marcus Chairman of Remuneration Committee 15 October 2024 Directors’ Remuneration Report continued Directors’ Report The Corporate Governance Statement on pages 62 to 84 form part of this report. Principal activities The principal activities of the Group during the financial year remained those of property investment, development and trading and the provision of a hotel and car parks. Company status Town Centre Securities PLC is a public limited liability Company incorporated under the laws of England and Wales. It has premium listing on the London Stock Exchange main market for listed securities (LON: TOWN). Results for the year and dividends The results for the year are set out in the Consolidated Income Statement on page 98. An interim dividend of 8.5p per share was paid on 14 June 2024 as a PID. The Directors do not propose the payment of a final dividend. 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 2024, 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. Financial instruments The key risks rising from financial instruments are considered to be trade debtors, lease liabilities and borrowings, which are set out in further detail on pages 125 to 127. Share capital The changes in the Company’s issued share capital during the year are as set out below in the Purchase of own shares section. At 30 June 2024, there were 42,162,679 Ordinary Shares of 25p per share in issue and fully paid. The Company does not hold any Ordinary Shares in treasury. Purchase of own shares During the year, the Company purchased 6.292,920 of its own ordinary shares for cancellation as part of a tender offer announced on 8 November 2023. The aggregate consideration including associated costs for the tender offer was £9,439,961. At the forthcoming AGM, the Company will be seeking to renew its authority to purchase up to 15% 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. Other forms of capital utilised by the Company In addition to share capital, the Company utilises a variety of other forms of debt financing – these are set out in note 18 to the financial statements. Shareholder voting rights The Company has only one type of Ordinary Share class in issue and 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 2024. Town Centre Securities confirms that there are no restrictions concerning the transfer of securities in the Company; no special rights to control attached to securities; no restrictions on voting rights; no agreements between holders of securities regarding their transfer known to the Company; and no agreements to which the Company is a party that might affect its control or trigger any compensatory payments for Directors following a successful takeover bid. Political donations The Group made no political contributions in the financial year (2023: nil). Taxation The Company left the REIT regime with effect from 1 July 2023 and all profits of the Group are now subject to corporation tax. Directors and Directors’ interests The Directors of the Company and their biographical details are shown on pages 64 to 65. 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 80. The Directors present their report for the year ended 30 June 2024. Town Centre Securities PLC Annual Report and Accounts 2024 84 85 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Beneficial and non-beneficial interests of the Directors in the shares of the Company as at 30 June 2024 are disclosed in the Directors’ Remuneration Report on page 82. 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 UK Corporate Governance Code all Directors will retire at the Company’s AGM on 19 November 2024 and offer themselves for re-election. Service agreements of Executive Directors and terms of conditions of Non-Executive Directors are available for inspection at the Company’s registered office. Workforce engagement Ian Marcus, Non-Executive Director, agreed to be workforce champion for the Company. Further details on workforce engagement are included on page 37. Emission reporting The Group’s Greenhouse Gas Emissions Statement is included within the Strategic Report on page 40. Power of Directors The Directors manage the business of the Company under the powers set out in the Company’s Articles of Association (the ‘Articles’) and those contained within relevant UK legislation. 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 provide cover in the event that the Director is proven to have acted dishonestly or fraudulently. The Company has appropriate Directors’ & Officers’ Liability insurance cover in respect of potential legal actions against the Directors. 2024 Annual General Meeting A Notice of Meeting can be found on pages 143 to 149 explaining the business to be considered at the AGM on 27 November 2024 at Town Centre House, Leeds. 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. Going concern Further detail is set out on page 56 of the Strategic Report. 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. 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. Each Director has taken all the reasonable 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 made aware of that information. Relationship agreements 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 was intended to ensure the Controlling Shareholder complied 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 56.7% of the Company’s voting rights. The Board confirms that, since the entry into the relationship agreement and until 14 October 2024, 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 As at 14 October 2024, being the last practicable date, the Company had been notified, in accordance with the UK Listing Authority’s Disclosure Guidance and Transparency Rules, that the Shareholders in the table below held, or were beneficially interested in, 3% or more of the voting rights in the Company’s issued share capital. Number of shares % of issued capital Ziff Concert Party 23,984,400 56.89% New Fortress Finance Holdings Limited 4,085,380 9.69% Post-balance sheet events Post-balance sheet events since 30 June 2024 are detailed in note 27. By order of the Board Edward Ziff OBE DL Chairman & Chief Executive 15 October 2024 Directors’ Report continued Statement of Directors’ Responsibilities 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 UK adopted international accounting standards 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 reasonable and prudent; • state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the Financial Statements; • state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the Group and Parent Company financial statements respectively; • prepare the financial statements on the going-concern basis unless it is inappropriate to presume that the Company will continue in business; and • prepare a Directors’ report, a strategic report and Directors’ remuneration report which comply with the requirements of the Companies Act 2006. 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 enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and Accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for Shareholders to assess the Group’s performance, business model and strategy. Website publication The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. Directors’ responsibilities pursuant to DTR4 The Directors confirm to the best of their knowledge: • The financial statements have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and Company. • The Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and Company, together with a description of the principal risks and uncertainties that they face. This responsibility statement for the year ended 30 June 2024 was approved by the Board on 15 October 2024. For and on behalf of the Board Edward Ziff OBE DL Chairman & Chief Executive 15 October 2024 The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations. Town Centre Securities PLC Annual Report and Accounts 2024 86 87 CORPORATE GOVERNANCE 02 CORPORATE GOVERNANCE Ducie House, Manchester. Town Centre Securities PLC Annual Report and Accounts 2024 88 CORPORATE GOVERNANCE Independent Auditor’s Report to the members of Town Centre Securities Plc Opinion on the financial statements 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 2024 and of the Group’s loss for the year then ended; • the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; • 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. 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 2024 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, the company balance sheet, the company statement of changes in equity and notes to the financial statements, including material and significant accounting policy information. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of 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 United Kingdom and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee. Independence Following the recommendation of the audit committee, we were initially appointed by the Directors for the year ended 30 June 2016. We were reappointed by the Members on 1 December 2023 to audit the financial statements for the year ended 30 June 2024 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 9 years, covering the years ended 30 June 2016 to 30 June 2024. We remain 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. The non-audit services prohibited by that standard were not provided to the Group or the Parent Company. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting included: • Using our knowledge of the Group and its market sector together with the current economic environment to assess the Directors’ identification of the inherent risks to the Group’s business and how these might impact the Group’s ability to remain a going concern for the going concern period, being the period to 31 October 2025, which is at least 12 months from when the financial statements are authorised for issue; • We assessed the forecast cash flows with reference to historic performance and challenged the Directors’ assumptions in comparing them to the historic and current performance of the Group; • We agreed the Group’s underlying borrowing facilities and the related covenants to supporting financing agreements; • We obtained covenant calculations and forecast calculations to test for any potential future breaches. We also considered the covenant compliance headroom for sensitivity to both future changes in property valuations and group’s financial performance. We considered the Director’s mitigating actions in the event of the occurrence of the downside scenarios in light of supporting evidence and ensured that they were realistic within the required timescales; • We challenged the Directors’ as to their intentions for loan facilities maturing during the going concern period. As at 30 June 2024, the Group had drawn down £13.8m out of a total of £70m across its three revolving credit facilities (“RCFs”). We confirmed that one of the RCFs, with a balance of £2.5m, due for repayment in September 2025 can be extended by an additional one year at the option of the Parent Company if exercised and approved by the lender; • We considered the ability of the group to repay the above £2.5m RCF during the going concern period and note that the RCF repayment date can be extended by an additional year to 2026, however should a need for repayment arise, the group has significant headroom of at least £20m within its RCFs which could be used to repay the facility is required during the going concern period. • We considered board minutes, and evidence obtained through the audit and challenged the Directors on the identification of any contradictory information in the forecasts and impacting the going concern assessment; and • We analysed the Director’s stress testing calculation and challenged the assumptions made using our knowledge of the business and current economic climate, to assess the reasonableness of the scenarios selected. 89 03 FINANCIAL STATEMENTS Independent Auditor’s Report continued to the members of Town Centre Securities Plc Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Overview COVERAGE 100% (2023: 100%) of Group profit before tax 100% (2023: 100%) of Group revenue 100% (2023: 100%) of Group total assets KEY AUDIT MATTERS 2024 2023 Valuation of property interests ✔ ✔ Change in tax regime status and accounting for deferred tax ✔ MATERIALITY Group financial statements as a whole £2.9m (2023: £2.8m) based on 1.1% (2023: 1%) of Group non-current assets 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. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. The Group operates solely in the United Kingdon through a number of legal entities, which form reporting components. Significant components were defined as those reporting components contributing more than 15% towards Group assets, turnover or profits or if judgmentally considered to be significant by nature. Of the 20 active components in the Group, 6 were considered significant. The financial information relating to the Parent Company and all other significant components of the Group were subject to full scope audits by the Group audit team. Our audit procedures for non-significant components were limited to those areas deemed material to the Group accounts on either an individual or aggregate basis across all components. Revenue, tax and property valuations across the Group were areas which have been subject to a full scope audit by the Group engagement team. Climate change Our work on the assessment of potential impacts on climate-related risks on the Town Centre Securities Plc operations and financial statements included: • Enquiries and challenge of management to understand the actions they have taken to identify climate-related risks and their potential impacts on the financial statements and adequately disclose climate-related risks within the annual report; • Our own qualitative risk assessment taking into consideration the sector in which the Group operates and how climate change affects this particular sector; • Involvement of climate-related experts in evaluating management’s risk assessment; and • Review of the minutes of Board and Audit Committee meeting and other papers related to climate change and performed a risk assessment as to how the impact of the Group’s commitment as set out in pages 42 to 49 may affect the financial statements and our audit. We challenged the extent to which climate-related considerations, including the expected cash flows from the initiatives and commitments have been reflected, where appropriate, in management’s going concern assessment and viability assessment. We also assessed the consistency of management’s disclosures included as ‘Other Information’’ on pages 42 to 49 with the financial statements and with our knowledge obtained from the audit. Based on our risk assessment procedures, we did not identify there to be any Key Audit Matters materially impacted by climate-related risks. Key audit matters Key audit matters are those matters that, in our professional judgement, 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, including 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. Key audit matter How the scope of our audit addressed the key audit matter Valuation of property interests Refer to accounting policies on the Group property interests in note 1 (pages 104 to 105). See notes 12 and 14 for details of Group property interests. The valuation of the Group’s property interests (see note 12) is the key driver of the Group’s net asset value and underpins the results for the year. These interests consists of investment and development properties and freehold car park fixed assets totalling £217.5m (2023: £218.5m) and an interest in a joint venture being the Group’s share of the fair value of investment property within this joint venture totalling £27.5m (2023:£30.7m). All interests in property as listed above are subject to independent revaluation to open market value at each reporting date by independent external valuation experts, with the exception of one property totalling £51,000 (2023: £51,000) which is subject to valuation by the Property Director. The valuation of the Group’s property interests, including those held in the joint venture, 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 the quality of tenants, prevailing market yields and comparable market transactions. Assets held as development properties are valued using a comparable sales approach. The hotel property and freehold car park properties which are classified as property, plant and equipment and carried at fair value are valued using a discounted cash flow model. All of these valuation methods involve significant judgment and estimation to be applied by management and the external valuation experts, increasing the inherent risk in this area. We consider this to be a significant risk area as small percentage changes in each key assumption could materially affect the carrying value of these assets concerned and hence we consider this to be a key audit matter. Experience of valuers and relevance of their work. We obtained the valuation reports prepared by the independent valuers and with the assistance of our real estate experts discussed the basis of the valuations with them, read the valuation reports and confirmed that all valuations had been prepared in accordance with applicable valuation guidelines and the requirements of the applicable accounting standards and were therefore appropriate for determining the carrying value in the Group’s financial statements. We assessed the independent external valuations experts’ objectivity, independence and qualifications to undertake the valuations. Data provided to the valuer We validated, on a sample basis, the underlying data provided to the valuer by the Directors. This data included internal tenancy schedules, capital expenditure details and lease terms, which were agreed back to appropriate supporting documents. Assumptions and estimates used by the valuers. We held meetings with both independent external valuation experts in which we confirmed directly with these experts that the valuation had been performed on the basis consistent with practices approved by the Royal Institute of Chartered Surveyors (“RICS”) and the requirements of the accounting standards. With assistance of our real estate RICS qualified valuation experts, we developed yield expectations on each property using available independent industry data, reports and comparable transactions in the market around the period end. Our real estate experts also attended the audit meetings with the Group’s valuers to assist us in assessing that explanations provided were appropriate and in line with market knowledge. We compared the key valuation assumptions against our independently formed market expectations. Where the valuation was outside of our expected range we challenged the independent valuer on specific assumptions and reasoning for the yields applied and corroborated their explanations where relevant, including agreeing to third party documentation. For development properties valued on comparable basis, we have obtained details of the comparable sites and checked the appropriateness of using this information with the valuation calculation; For freehold car parks valued on an income-based method, we assessed the level of income provided to the valuers through comparison to actual income generated from historic period and challenged the external experts on the discount rate applied within the calculation using knowledge from the market and our internal specialists; and Similarly, for the hotel property interest we assessed the level of income included within the valuation calculations through comparison to historic actuals and challenged the independent external valuers on assumptions made regarding the discount rate applied in the calculation. Key observations: Based on our work, we consider that the assumptions adopted by the Directors in the valuation of investment property were reasonable and the methodology applied was appropriate. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 90 91 03 FINANCIAL STATEMENTS Independent Auditor’s Report continued to the members of Town Centre Securities Plc Key audit matter How the scope of our audit addressed the key audit matter Change in tax regime status and accounting for deferred tax Refer to the accounting policies on Taxation in Note 1 to the consolidated financial statements. See Notes 9 and 19 of the consolidated financial statements for the Details of the tax disclosures. As disclosed in Note 1 to the consolidated financial statements, the Group and the Parent Company left the Real Estate Investment Trust (REIT) regime with effect from 1 July 2023 and from this date, the profits of the Group and the Parent Company are now all subject to corporation tax. The Group has recognised a deferred tax asset relating to trading losses from previous periods. The Directors have assessed that there is sufficient evidence that these losses will be offset against future taxable profits. The change in status has resulted in material changes to the Group and the Parent Company’s financial reporting, in particular the recognition, measurement and presentation of deferred tax balances and related disclosures. As a result, this increases the inherent risk of error in determining deferred tax asset and liability balances. Additionally, future forecasts may not support the recoverability of deferred tax assets. Given the significance of the change to the tax regime status on the Group and the Parent Company, we consider this to be a Key Audit Matter. We reviewed correspondences between the Parent Company’s tax advisors, and HMRC to assess if the Parent Company left the REIT regime with effect from 1 July 2023. We obtained the Director’s tax calculations and with the assistance of our tax specialists, we assessed the appropriateness and completeness of the amounts recognised against the requirements of the applicable accounting standards. We discussed with the Directors to understand and challenge the available losses and how they will be utilised against future profitability. We challenged the recoverability of the deferred tax assets by assessing the projected future profitability of the Group and the period of time over which the losses are expected to be utilised. We checked the consistency of the projected future profitability with the forecasts audited as part of the of going concern and longer term viability assessment. We agreed the underlying information related to available tax losses in the Director’s tax calculation to the Group’s 30 June 2023 filed tax computations to assess the completeness and accuracy of deferred tax balances. For deferred tax liabilities arising from uplifts in property valuations we assessed the basis for the deferred tax liability calculations by agreeing the fair values of each property to the independent property valuations, and our audit work on the valuations. We also agreed the tax bases applied by the Directors for each of the property assets to the valuation of each property asset on the 1 July 2023, being the date of exit from the REIT regime. We assessed the accuracy of the tax disclosures in the financial statements by agreeing the tax calculation to the disclosures in the financial statements and checking the disclosures against the requirements of the applicable standard. Key observations: Based on our work, we consider the Group’s and the Parent company’s accounting for the Change in tax regime status and the related deferred tax balances to be reasonable. Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. 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. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Group financial statements Parent company financial statements 2024 £m 2023 £m 2024 £m 2023 £m Materiality 2.9 2.8 1.0 1.0 Basis for determining materiality 1.1% of Non-current assets 1% of Non-current assets 1.2% of Non-current assets, excluding investments in subsidiaries 1% of Non-current assets, excluding investments in subsidiaries Rationale for the benchmark applied Non-current assets are considered to be the principal considerations for the users of the financial statements in assessing the financial performance of the Group. Non-current assets are considered to be the principal considerations for the users of the financial statements in assessing the financial performance of the parent company. Investment in subsidiaries have been excluded as the key driver of the Company is deemed to be its investment property. Performance materiality 2.0 1.96 0.7 0.7 Basis for determining performance materiality 70% of materiality 70% of materiality 70% of materiality 70% of materiality Rationale for the percentage applied for performance materiality In determining 70% performance materiality, we have considered our risk assessment, including our assessment of the Group’s overall control environment and the level of misstatements in previous years. In determining 70% performance materiality, we have considered our risk assessment, including our assessment of the Group’s overall control environment and the level of misstatements in previous years. In determining 70% performance materiality, we have considered our risk assessment, including our assessment of the Group’s overall control environment and the level of misstatements in previous years. In determining 70% performance materiality, we have considered our risk assessment, including our assessment of the Group’s overall control environment and the level of misstatements in previous years. Specific materiality We also determined that for other account balances, a misstatement of less than materiality for the financial statements as a whole could influence the economic decisions of users. We concluded that for balances excluding non-current assets, property revaluation movements including impairment charges, gains or losses on disposal of properties, changes in the fair value of financial instruments, a user of the financial statements may be influenced by amounts lower than financial statement materiality based on total non-current assets. As a result, we determined that specific materiality for the measurement of these areas should be lower. We determined specific materiality for these items to be £220,000 (2023: £225,000). This is based on 5.8% of adjusted earnings (2023:7.4% of “EPRA” European Public Real Estate Association earnings). As a result of the exit from the REIT regime, the group is subject to tax on its profits. This has resulted in the recognition of a significant deferred tax asset for available losses that are expected to be utilised as well as deferred tax liabilities on any uplifts in property valuations. In the current year, there is a significant tax credit recognised in the income statement which distorts EPRA earnings when compared to previous years. As such, and having assessed the relevant industry benchmarks, we consider it more appropriate to adopt an adjusted earnings figure in setting specific materiality. In particular, we consider it appropriate to apply profit before tax adjusted for fair value movements. This is prevalent when a listed property group is a taxpayer as opposed to non-tax payer within the REIT regime. We further applied a performance materiality level of 70% (2023: 70%) of specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated. Parent company specific materiality was capped at £215,000 (2023: £140,000) which equates to 3.0% (2023: 1%) of adjusted earnings. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 92 93 03 FINANCIAL STATEMENTS Independent Auditor’s Report continued to the members of Town Centre Securities Plc Component materiality For the purposes of our Group audit opinion, we set financial statement materiality for each significant component of the Group on, the same basis as Group materiality, being 2% (2023: 2%) of the total assets of each component dependent on the size and our assessment of the risk of material misstatement of the component. Component financial statement materiality ranged from £96,000 to £2,333,000 (2023: £150,000 to £1,994,000). In the audit of each component, we further applied performance materiality levels of 70% (2023: 70%) of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated. Specific materiality for each component, was calculated on the same basis as outlined above for the parent company, specific materiality. Specific materiality for the components ranged from £2,000 to £215,000 (2023: £6,080 to £120,000). For each specific materiality set, we applied a performance materiality level of 70% (2023: 70%) Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £10,000 (2023:£11,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Other information The directors are responsible for the other information. The other information comprises the information included in the Annual Report and Accounts other than the financial statements and our auditor’s report thereon. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Corporate governance statement The UK Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements, or our knowledge obtained during the audit. GOING CONCERN AND LONGER-TERM VIABILITY • The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 56; and • The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate set out on page 57. OTHER CODE PROVISIONS • Directors’ statement on fair, balanced and understandable set out on page 71; • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 71; • The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 71; and • The section describing the work of the audit committee set out on page 74. Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. STRATEGIC REPORT AND DIRECTORS’ REPORT 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 • the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and 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. DIRECTORS’ REMUNERATION In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION 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. Responsibilities of Directors As explained more fully in the Statement of Directors’ Responsibilities, 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 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. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 94 95 03 FINANCIAL STATEMENTS Non-compliance with laws and regulations Based on: • Our understanding of the Group and the industry in which it operates; • Discussion with management and those charged with governance, which included the Audit Committee; and • Obtaining an understanding of the Group’s policies and procedures regarding compliance with laws and regulations. we considered the significant laws and regulations to be the Companies Act 2006, applicable accounting standards, the UK Listing Rules and UK tax law and regulations. The Group is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be UK VAT regulations. Our procedures in respect of the above included: • Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and regulations; • Review of correspondence with regulatory and tax authorities for any instances of non-compliance with laws and regulations; • Review of financial statement disclosures and agreeing to supporting documentation; • Involvement of tax specialists in the audit; and • Review of legal expenditure accounts to understand the nature of expenditure incurred. Fraud We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included: • Enquiry with management and those charged with governance regarding any known or suspected instances of fraud; • We obtained an understanding of the Group’s policies and procedures relating to: • Detecting and responding to the risks of fraud; and • Internal controls established to mitigate risks related to fraud. • Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud; • Discussion amongst the engagement team as to how and where fraud might occur in the financial statements; • Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and • Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these. Based on our risk assessment, we considered the area’s most susceptible to fraud to be the valuation of the Group’s property interests, management bias and override of controls and the potential manipulation of revenue through the posting of fraudulent journal entries. Independent Auditor’s Report continued to the members of Town Centre Securities Plc Our procedures in respect of the above included: • Testing a sample of journal entries throughout the year, which met a defined risk criterion, by agreeing to supporting documentation; • Involvement of forensic specialists within the audit to assess the susceptibility of the financial statements to material fraud; • Assessing significant inputs to valuations by testing source documentation to verify their accuracy and completeness; • Involvement of valuation experts to assist the audit team in challenging the external valuer assumptions and data used in the valuation reports; • Using data analytics to identify any revenue journal entries which were outside our expectations. We then vouched these to supporting documentation to confirm that they are valid revenue transactions recorded in the correct period; and • Testing of consolidation journals including a sample of manual adjustments at the consolidation level to supporting documents. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Christopher Young (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, UK 15 October 2024 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 96 97 03 FINANCIAL STATEMENTS Consolidated Income Statement for the year ended 30 June 2024 Notes 2024 £’000 2023 £’000 Gross revenue 3 28,983 27,631 Service charge income 3 2,985 2,732 Gross revenue 3 31,968 30,363 Service charge expenses 3 (3,982) (3,991) Property expenses 3 (11,821) (11,560) Net revenue 16,165 14,812 Administrative expenses 4 (7,293) (6,780) Other income 7 965 880 Valuation movement on investment properties 12 (7,625) (21,033) Impairment of car parking assets 12 (3,259) (10,467) Impairment of goodwill 13 (577) (991) Loss on disposal of investments (191) (777) Valuation movement on investments 15 408 1,162 Profit on disposal of investment properties 27 4,123 Share of post-tax losses from joint ventures 14 (2,175) (4,066) Operating loss (3,555) (23,137) Finance costs 8 (7,209) (6,948) Finance income 8 166 594 Loss before taxation (10,598) (29,491) Taxation 9 2,588 – Loss for the year attributable to owners of the Parent Company (8,010) (29,491) Earnings per share Basic and diluted 11 (17.9p) (60.1p) EPRA (non-GAAP measure) 11 12.3p 6.2p Dividends per share Paid during the year 10 11.0p 5.0p Proposed 10 – 2.5p Consolidated Statement of Comprehensive Income for the year ended 30 June 2024 Notes 2024 £’000 2023 £’000 Loss for the year (8,010) (29,491) Items that will not be subsequently reclassified to profit or loss Revaluation gains on car parking assets 12 994 929 Revaluation gains on hotel assets 12 642 642 Revaluation (losses)/gains on other investments 15 (763) 16 Deferred tax on freehold car park valuation gains (236) – Total other comprehensive income 637 1,587 Total comprehensive loss for the year (7,373) (27,904) All profit and total comprehensive income for the year is attributable to owners of the Parent Company. The notes on pages 102 to 131 are an integral part of these Consolidated Financial Statements. Consolidated Balance Sheet as at 30 June 2024 Notes 2024 £’000 2023 £’000 Non-current assets Property rental Investment properties 12 180,977 183,801 Investments in joint ventures 14 4,752 7,123 185,729 190,924 Car park activities Freehold and leasehold properties 12 56,823 60,791 Goodwill and intangible assets 13 2,892 3,674 59,715 64,465 Hotel operations Freehold and leasehold properties 12 9,900 9,500 9,900 9,500 Fixtures, equipment and motor vehicles 12 1,446 1,269 Investments 15 3,965 7,503 Deferred tax assets 19 2,352 – Total non-current assets 263,107 273,661 Current assets Trade and other receivables 16 3,996 3,264 Cash and cash equivalents 22,152 23,320 Investments 15 3,177 6,436 Total current assets 29,325 33,020 Total assets 292,432 306,681 Current liabilities Trade and other payables 17 (13,425) (12,387) Bank overdrafts (20,760) (21,700) Financial liabilities 18 (1,768) (4,665) Total current liabilities (35,953) (38,752) Non-current liabilities Financial liabilities 18 (136,842) (126,841) Total non-current liabilities (136,842) (126,841) Total liabilities (172,795) (165,593) Net assets 119,637 141,088 Equity attributable to the owners of the Parent Company Called-up share capital 24 10,540 12,113 Share premium account 200 200 Capital redemption reserve 3,309 1,736 Revaluation reserve 4,184 2,784 Retained earnings 101,404 124,255 Total equity 119,637 141,088 Net asset value per share 22 284p 291p Company number: 00623364 The financial statements on pages 98 to 131 were approved by the Board of Directors on 15 October 2024 and signed on its behalf by E M Ziff Chairman & Chief Executive FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 98 99 03 FINANCIAL STATEMENTS Called-up share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Revaluation reserve £’000 Retained earnings £’000 Total equity £’000 Balance at 30 June 2022 13,132 200 717 1,213 164,042 179,304 Comprehensive income for the year Loss for the year – – – – (29,491) (29,491) Other comprehensive income – – – 1,571 16 1,587 Total comprehensive income for the year – – – 1,571 (29,475) (27,904) Contributions by and distributions to owners Arising on purchase and cancellation of own shares (1,019) – 1,019 – (7,888) (7,888) Final dividend relating to the year ended 30 June 2022 – – – – (1,212) (1,212) Interim dividend relating to the year ended 30 June 2023 – – – – (1,212) (1,212) Balance at 30 June 2023 12,113 200 1,736 2,784 124,255 141,088 Comprehensive income for the year Loss for the year – – – – (8,010) (8,010) Other comprehensive income – – – 1,400 (763) 637 Total comprehensive loss for the year – – – 1,400 (8,773) (7,373) Contributions by and distributions to owners Arising on purchase and cancellation of own shares (1,573) – 1,573 – (9,440) (9,440) Final dividend relating to the year ended 30 June 2023 – – – – (1,054) (1,054) Interim dividend relating to the year ended 30 June 2024 – – – – (3,584) (3,584) Balance at 30 June 2024 10,540 200 3,309 4,184 101,404 119,637 Consolidated Statement of Changes in Equity for the year ended 30 June 2024 Consolidated Cash Flow Statement for the year ended 30 June 2024 Notes 2024 2023 £’000 £’000 £’000 £’000 Cash flows from operating activities Cash generated from operations 25 12,594 13,769 Interest received 8 415 Interest paid (6,001) (6,149) Net cash generated from operating activities 6,601 8,035 Cash flows from investing activities Purchase and construction of investment properties (1,544) (7,526) Refurbishment of investment, freehold and leasehold properties (2,481) (1,145) Purchases of fixtures, equipment and motor vehicles (525) (576) Proceeds from sale of investment properties 187 51,723 Proceeds from sale of investments 6,658 11,195 Investments in joint ventures – (3,500) Distributions received from joint ventures 196 – Purchase of investments (250) – Purchase of subsidiary, net of cash acquired – 887 Net cash generated from investing activities 2,241 51,058 Cash flows from financing activities Proceeds from non-current borrowings 9,750 16,000 Repayment of non-current borrowings (3,087) (60,241) Arrangement fees paid (419) – Principal element of lease payments (1,665) (1,657) Dividends paid to shareholders (4,209) (2,423) Purchase of own shares (9,440) (7,888) Net cash used in financing activities (9,070) (56,209) Net (decrease)/increase in cash and cash equivalents (228) 2,884 Cash and cash equivalents at beginning of the year 1,620 (1,264) Cash and cash equivalents at end of the year 1,392 1,620 Cash and cash equivalents at the year-end are comprised of the following: Cash balances 22,152 23,320 Overdrawn balances (20,760) (21,700) 1,392 1,620 The Consolidated Cash Flow Statement should be read in conjunction with note 25. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 100 101 03 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 2024 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 UK-adopted international accounting standards (‘IFRS’). 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. Adoption of new and revised standards In the current financial year, the Group has adopted a number of minor amendments to standards effective in the year issued by the IASB, none of which have had a material impact on the Group. Disclosure of accounting policies Amendments to IAS 1, which change the disclosure requirements with respect to accounting policies from ‘significant accounting policies’ to ‘material accounting policy information’. The amendments provide guidance on when accounting policy information is likely to be considered material. Definition of accounting estimates Amendments to IAS 8, which added the definition of Accounting Estimates in IAS 8. The amendments also clarified that the effects of a change in an input or measurement technique are changes in accounting estimates, unless resulting from correction of prior-period errors. There was no material effect from the adoption of other amendments to IFRS effective in the year. They have no significant impact on the Group as they are either not relevant to the Group’s activities or require accounting which is consistent with the Group’s current accounting policies. Standards and interpretations in issue not yet adopted The following are new standards, interpretations and amendments, which are not yet effective, and have not been early adopted in this financial information. These amendments and new standards are not expected to have an effect on the Group’s future financial statements: Classification of Liabilities as Current or Non-Current (Amendment to IAS 1) The IASB issued amendments to IAS 1 – Classification of Liabilities as Current or Non-current in January 2020, which have been further amended partially by amendments Non-current Liabilities with Covenants issued in October 2022. The amendments require that an entity’s right to defer settlement of a liability for at least twelve months after the reporting period must have substance and must exist at the end of the reporting period. Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement for at least twelve months after the reporting period. The effective date of the amendments by one year to annual reporting periods beginning on or after 1 January 2024. Subsequent to the release of amendments to IAS 1 Classification of Liabilities as Current or Non-Current, the IASB amended IAS 1 further in October 2022. If an entity’s right to defer is subject to the entity complying with specified conditions, such conditions affect whether that right exists at the end of the reporting period, if the entity is required to comply with the condition on or before the end of the reporting period and not if the entity is required to comply with the conditions after the reporting period. The amendments also provide clarification on the meaning of ‘settlement’ for the purpose of classifying a liability as current or non-current. IFRS 18 Presentation and Disclosure in Financial Statements IFRS 18 Presentation and Disclosure in Financial Statements replaces IAS 1 Presentation of Financial Statements and is mandatorily effective for annual reporting periods beginning on or after 1 January 2027. IFRS 18, which was published by the IASB on 9 April 2024, and has not yet been endorsed in the UK, sets out significant new requirements for how financial statements are presented, with particular focus on: • The statement of profit or loss • Aggregation and disaggregation of information • Disclosures related to management-defined performance measures There are other new standards and amendments to standards and interpretations which have been issued that are effective in future accounting periods, and which the Group has decided not to adopt early. None of these are expected to have a material impact on the condensed consolidated financial statements of the Group. Going concern In making their assessment of the ability of the Group to continue as a going concern the Directors have considered the impact of an economic downturn on the Group’s forecasts including the effect on liquidity and compliance with bank loan and debenture covenants. The Group owns a portfolio of multi-let regional property assets located throughout the UK, and operates car parking and hotel businesses. The Group is funded in part by a £82.4m debenture which is due for repayment in 2031 and an asset-specific facility of £13.8m which is due for repayment in 2029. In addition the business has three bilateral Revolving Credit Facilities (‘RCFs’) totalling £70m which, as at the year-end, were due for repayment or renewal between September 2025 and June 2026. Each of the debt facilities is ring-fenced within security sub-pools of assets charged to the respective lender. The Group has one bank facility falling due for repayment in September 2025, within the going-concern period. This facility has a one-year extension, which if exercised will extend the repayment date to September 2026. As at the date of this report, the Group has drawn in aggregate under all three RCFs total borrowings of £13.75m. One of the most critical judgements for the Board is the loan to value (‘LTV’) headroom in the Group’s debt 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. These covenants range from 60% to 67.5% LTV. The total LTV headroom at 30 June 2024 was £20.4m (2023: £30.8m). Overall, the properties secured under the Group’s debt facilities would need to fall 26.0% in value before this LTV headroom level was breached. As at the date of this report the headroom metrics and percentage fall have increased to £23.5m and 28.3% respectively following the post-balance sheet transactions highlighted in this Financial Report. In addition to the LTV covenants, the Group’s debt facilities include income cover covenants of between 100% for the debenture and 175% on the three revolving credit facilities and asset-specific loan. At the year-end the actual income cover levels ranged from 239% for the 100% debenture covenant up to 385% on the Handelsbanken facility. In order to assess the potential impact of a future economic downturn on the Group and its ability to continue as a going concern, management have analysed the portfolio’s tenant base, car parking and hotel operations and produced forecasts to 31 October 2025. These forecasts reflect management’s view of a worst case scenario including assumptions that rent receipts are materially lower than normally experienced and that the car park and hotel businesses recover over the forecast period to a materially lower level than expected. These scenarios include a base case, downside case and then a more extreme downside case to show the effect a more significant downturn in the Group’s performance would have on its funding cash headroom and any of its financial covenants. In addition, the Company has performed a reverse stress exercise whereby it has looked at each individual facility and at how much of a downturn (compared to the conservative base case cashflows prepared by the Company) there would need to be before any the financial covenants are breached. The Group’s forecasts, including the various scenarios, show that the cash headroom figure is resilient and the financial covenant tests are met. Under the base case the minimum cash headroom is expected to be £20.7m, which compares to a minimum of £18.9m under the downside scenario. The significant downside case applied a total discount of 6% to rental income receipts and a 15% discount to budgeted car park income levels. The cash headroom in the Group did not go negative in the period to June 2027 and none of the other financial covenants were breached. The reverse stress test shows that the financial covenants are not breached until either of the discounts applied in the significant downside case are pushed even further. This breach is forecast to occur in Q1 of FY26 and last until Q2 of FY26 before the position then improves. The Group is currently experiencing collection rates of over 99% of rent and service charge income invoiced, and for the first two months of FY25 the car park and hotel businesses are trading significantly ahead of expectation and this is expected to continue. The forecasts show that the Group has sufficient resources to continue to operate as a going concern for at least the period to 31 October 2025. Based on the forecasts, including the mitigating options available to the Group in the event of the occurrence of the downside scenarios, the Directors consider it appropriate to prepare these financial statements on the going-concern basis. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 102 103 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 1. Accounting policies continued Consolidation (a) Subsidiaries Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The consolidated financial statements present the results of the Company and its subsidiaries (‘the Group’) as if they formed a single entity. Intercompany transactions and balances between Group Companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. A Company purchase that does not meet the definition of a business is treated as an asset acquisition (eg, this may be the case if a property is acquired in a corporate wrapper). The asset(s) (and any associated acquired liabilities) acquired are recognised at fair value of the consideration paid on the date that control is obtained. Where the Company increases its stake in a previously held joint venture (‘JV’) that does not constitute a business and thereby obtains control, an accumulated cost approach is used. The carrying value of the equity accounted JV at the date of obtaining control is considered to form part of the consideration paid, in additional to the fair value of any additional consideration paid to acquire the additional stake. The assets acquired (and any associated liabilities) are recognised based on the combined accumulated cost. (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. 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. Any impairment is initially recognised against the equity value, or if nil, against any outstanding loan balances. 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 four business segments comprising property rental, car park operations, hotel operations and in investments. 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/right-of-use land and buildings that are held to earn rental income and/or for capital appreciation, rather than for sale in the ordinary course of business or for use in production or administrative functions. This comprises mainly retail units and offices. Investment property is recognised when it is probable that the future economic benefits that are associated with the investment property will flow to the Group and the cost of the investment property can be measured reliably. Typically these criteria are met on unconditional exchange. Investment property is measured initially at cost including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and other costs incurred in order to bring the property to the condition necessary for it to be capable of operating. After initial recognition investment property is carried at fair value as determined by an independent external RICS qualified valuer or, if considered appropriate, as determined by the Directors. The fair value of investment properties 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 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. 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 unless borrowings are specifically taken out for redevelopment of the asset in which case the specific borrowing rate is used. Investment property is de-recognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The date of disposal is the date the purchaser obtains control of the property. 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 and is recognised in the Consolidated Income Statement. (b) Freehold and right of use properties (property, plant and equipment) Freehold properties are initially recognised at cost and are subsequently carried at fair value, based on periodic valuations by a professionally qualified valuer. The fair value of freehold properties take into account tenure, lease terms and structural condition. The inputs underlying the valuations include business profitability and market rents, forecast growth rates, market yields and discount rates and selling costs including stamp duty. 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 the Consolidated Income Statement. 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. On disposal of the asset the balance of the revaluation reserve is transferred to retained earnings. Leasehold properties held under leases, where a right-of-use asset is recognised, are initially valued at the present value of minimum lease payments payable over the term of the lease. See leased assets (where Group acts as lessee) policy below for further details. Freehold land is not depreciated. 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, or over the lease term if shorter. (c) Fixtures, equipment and motor vehicles (property, plant and equipment) Fixtures, equipment and motor vehicles are carried 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. 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. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 104 105 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 1. Accounting policies continued 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 not subject to amortisation and is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it may be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount may not be recoverable. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets. Any impairment recognised is charged to the Consolidated Income Statement. 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 Income Statement on the acquisition date. Intangible assets – car park activities Intangible assets are recognised where the Group controls the asset, it is probable that future economic benefits attributable to the asset will flow to the Group and we can reliably measure the cost of the asset. Intangible assets are amortised using the straight-line method over their useful economic life. The amortisation is charged to the Consolidated Income Statement as a direct car park property cost. Investments – investments in shares The Group’s investments comprise investments in quoted and unquoted equity investments. Other than where the Group has taken an irrevocable election to recognise investments as fair value through other comprehensive income, the Group treats all investments as fair value through profit and loss. 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; where the investment is not subsequently measured at fair value through profit or loss, transaction costs are directly attributable to the acquisition of the financial asset. 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. Equity instruments are valued at fair value at each reporting date. The fair values of listed investments are based on current bid prices. Any fair value gains and losses arising on equity instruments classified as fair value through profit and loss are recognised in the income statement. However, an assessment for each individual equity instrument not held for trading is considered, to establish whether an irrevocable election under IFRS 9 should be made to classify the instrument at fair value through other comprehensive income. Where this election has been made, fair value gains are recognised through other comprehensive income. To date, this election has been made for all listed investments held and the Company’s investment in YourParkingSpace Limited. Dividends on equity instruments are recognised in the Consolidated Income Statement when the Group’s right to receive payment is established. Investments – deferred and contingent consideration The Group’s investments in loan notes, both deferred and contingent consideration elements, are classified as financial assets within the balance sheet of the Company. The Company is holding these investments solely to receive future cashflows in accordance with the terms of the different loan note instruments. The deferred consideration loan notes will ultimately result in the payment of both 100% of the principal and an interest charge – there are no other cashflows and are accounted for using the ‘amortised cost’ basis. The contingent consideration loan notes will ultimately result in the payment of Principal with no Interest, with the quantum of the actual payment contingent and based on the net revenue of YPS earned post completion. Due to the variable nature of this ultimate receipt they are accounted for using the ‘Fair Value through profit or loss’ (‘FVTPL’) basis. Trade and related-party receivables Trade and related-party receivables (such as loans to joint ventures or loans to investments) are recognised initially at fair value and are subsequently measured at amortised cost less provision for impairment. The amount of the provision is recognised in the Consolidated Income Statement. Impairment provisions for current and non-current lease and trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non- payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. Impairment provisions are recognised within the Consolidated Income Statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, 12-month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit). This is in respect of non-substantial modifications only. Cash and cash equivalents Cash and cash equivalents carried in the Consolidated Balance Sheet are held at amortised 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 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 held at amortised cost and 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 12 months after the balance sheet date. Bank overdrafts The Group’s banking facility has an agreement which allows the right of off-set between fellow group companies. Interest payments and covenant tests are conducted on a net basis across the accounts within the banking facility. Whilst management monitors cash on a net basis, the fact that accounts were not actually swept and netted off at 30 June 2024 (and 30 June 2023 respectively) has meant that the cash and overdraft balances have been presented on a gross basis. Leased (right-of-use) assets (where Group acts as a lessee) All leases are accounted for by recognising a right-of-use asset and a lease liability except for: • Leases of low value assets; and • Leases with a duration of 12 months or less. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group’s lease-specific incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: • amounts expected to be payable under any residual value guarantee; • the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option; and • any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: • lease payments made at or before commencement of the lease; • initial direct costs incurred; and • the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset. Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease (because, for example, it reassesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 106 107 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 1. Accounting policies continued Leased (right-of-use) assets (where Group acts as a lessee) continued When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification: • if the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease in accordance with the above policy; • in all other cases where the renegotiated increases the scope of the lease (whether that is an extension to the lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date, with the right-of-use asset being adjusted by the same amount; and • if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right-of-use asset is adjusted by the same amount. Operating leases (Group acts as lessor) Leases are classified as operating leases unless the risks and rewards incidental to ownership of the asset pass to the lessee. In the case of properties where the Group has a leasehold interest, this assessment is made by reference to the Group’s right-of-use assets arising under the headlease rather than by reference to the underlying asset. Where an investment property is held under a leasehold interest, the headlease is initially recognised as an asset at cost plus the present value of minimum lease payments. The corresponding lease liability on the head lease is included in the balance sheet as a finance lease obligation. 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. Taxation The Group’s tax expense comprises both current tax and deferred tax expense. (a) Current tax Current tax is the expected tax payable on taxable profit for the year and is calculated using tax rates and laws substantively enacted at the balance sheet date. (b) Deferred income tax A deferred tax asset represents a tax deduction that is expected to arise in a future period. It is only recognised to the extent that it is probable that the tax deduction will be capable of being offset against taxable profits and gains in future periods. A deferred tax liability represents taxes which will become payable in a future period as a result of a current or prior-year transaction. Deferred tax assets and liabilities are netted off on the balance sheet. The tax rates used to determine deferred tax are those enacted or substantively enacted at the balance sheet date that are expected to apply when the deferred tax asset or liability are realised. Current tax and deferred tax are recognised in the Consolidated Income Statement except when it relates to items recognised in other comprehensive income or directly in equity, in which case it is credited or charged to other comprehensive income or directly to equity respectively. In the period from 2 October 2007 to 30 June 2023 the Company elected for Group REIT status. During this period the Group did not recognise any deferred tax assets as there was insufficient evidence to support that there would be any future taxable profits in the Group. The Group left the REIT regime with effect from 1 July 2023 and the profits of the Group are now all subject to corporation tax. This has resulted in the recognition of a deferred tax asset relating to trading losses from previous periods where there is sufficient evidence that they will be offset against future taxable profits. 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. Revenue recognition (a) Rental income Revenue includes rental income net of VAT. Most of the Group’s rental income is billed either monthly or quarterly in advance. A receivable and deferred income is recognised at the date payment is due providing the Directors consider the amount to be collectible. If the Directors consider an unrecognised amount is collectible subsequent to its due date, then the receivable is recognised at that date. Rent receivables recognised are subject to impairment (refer to the Trade and Other Related Party receivables policy above). Any lease incentives are spread on a straight-line basis across the period of the lease. Rental income is recognised as revenue (to the extent it is considered collectible) as follows: i) fixed rental income is recognised 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; iii) rent reviews are recognised in the period to which they relate providing they have been agreed or otherwise on agreement; and iv) where rent concessions have been granted that reduce the payments due under a lease in future periods the total revised consideration (plus any prepaid or accrued lease payments) is spread over the remaining lease term from the date the concession is granted. (b) Car park income Contract car park income is recognised on a straight-line basis over the relevant period, in accordance with the contract to which it relates. Daily car park and car parking enforcement income is recognised when received. Where the Group is employed under a car parking management agreement and acts as agent, the Group only recognises the management fee income (on a straight-line basis) and if applicable its share of any operating profits of the car parks managed. (c) Hotel income Room revenue is recognised on a daily basis in accordance with the date of the overnight stay. Food and beverage revenue is recognised at the point of sale. (d) Interest income Interest income on any short-term deposits is recognised in the Consolidated Income Statement as it accrues. (e) Other income Other income is recognised when the right to payment is established. This includes dividend income, management fees and surrender premiums or dilapidations payments received from outgoing tenants prior to the termination of their lease. (f) Service charge income Many of the Group’s leases also include the provision of services (eg for security, cleaning etc). Revenue from the provision of services is recognised in accordance with the provisions of IFRS 15 as the services are provided to the tenant. Services are typically provided evenly over the lease term. The transaction price is generally specified in the lease contract to reflect the market value of providing the services. Dividend distribution Dividend distributions to the Company’s shareholders are recognised in the Consolidated Financial Statements as follows: i) interim dividends are recognised in the period they are paid; and ii) final dividends are recognised in the period in which the dividends are approved by the Company’s shareholders. Share buy-backs Where shares are redeemed or purchased wholly out of profits available for distribution, a sum equal to the total amount paid by the Company’s share is deducted from the Company’s retained earnings. Where shares are redeemed or purchased wholly out of profits available for distribution, a sum equal to the amount by which the Company’s share capital is diminished on cancellation of the shares (the nominal value of the shares) is transferred to the capital redemption reserve. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 108 109 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 1. Accounting policies continued 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 property relating to car park activities and hotel operations. • 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 As noted in the Group’s rental income policy above, receivables are only recognised for rental income when the amount due is considered collectable at the time of billing. Management continue to assess the collectability of unpaid amounts that are billed and due; and applies a general loss rate. For individual material amounts, if it becomes probable that the amount will be paid then the receivable will be recognised at that date, along with the related income. Whether an amount is considered to be collectable requires judgement. In making that judgement management consider (on a lease by lease basis) payment history and changes in the credit risk of the tenant. The Group’s accounting policy means that no impairment loss is separately recognised in the Consolidated Income Statement for these amounts as no financial asset was recognised at the date of the transaction. These amounts are considered not collectable and remain unpaid. The material financial assets to which the ECL impairment model is applied are set out below: • Cash and cash equivalents (£22,152,000 at 30 June 2024 and £23,320,000 at 30 June 2023) – all cash and cash equivalents are held with high quality financial institutions for which there is considered to be no significant credit risk, as such any ECL in respect of this balance is immaterial. • Trade receivables (£1,746,000 at 30 June 2024 and £1,345,000 at 30 June 2023) – the Directors have applied the simplified approach to trade receivables. Trade receivables have been grouped together based on shared credit risk characteristics and days past due. Loss rates have then been applied to each group based on historical payment profiles adjusted to reflect current and forward-looking information. • Deferred Consideration Loan Notes (£nil at 30 June 2024, £4,493,000 in current assets and £3,025,000 in non-current assets at 30 June 2023) – all deferred consideration loan notes are ultimately due from significant US-based financial institutions for which there is considered to be no significant credit risk, as such any ECL in respect of these balances are immaterial. (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. The maturity profile and details of undrawn banking facilities are set out in note 18. (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 2024, 87.5% (2023: 93.4%) 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. 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 as follows: i. Group’s property investments – the basis for valuation is set out in note 12. ii. Asset acquisition – the judgement that the Group’s acquisition of the remaining 50% of the Belgravia Living Group Ltd joint venture was not a business combination but actually to facilitate the acquisition outright of a single investment property. iii. Impairments have been applied to the Group’s right-of-use car park assets and goodwill as set out in notes 12 and 13 – these have been based on an assessment of the Group’s weighted average cost of capital and suitable discount rates. iv. Taxation – Significant judgment is required in determining the provision for income tax and the calculation of any deferred tax balances. The Group recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts initially recorded, such differences impact the income tax and deferred tax provisions in the period in which such determination is made. Some subsidiaries have generated or generate tax losses. Often these can be used to offset taxable gains of subsequent periods. The Group monitors the development of such tax loss situations. Based on the business plans of the Group, the recoverability of such tax losses is determined. In the case that a tax loss is deemed to be recoverable, the recognition of a deferred tax asset for such a tax loss is then decided. This judgement resulted in the recognition of a net deferred tax asset with a book value at 30 June 2024 of £2,352,000, which comprises deferred tax assets of £8,835,000 and deferred tax liabilities of £6,483,000. 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) Segmental assets 2024 £’000 2023 £’000 Property rental 215,062 212,249 Car park activities 60,328 64,993 Hotel operations 9,900 9,500 Investments 7,142 19,939 292,432 306,681 FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 110 111 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 3. Segmental information continued (B) Segmental results 2024 2023 Property rental £’000 Car park activities £’000 Hotel operations £’000 Investments £’000 Total £’000 Property rental £’000 Car park activities £’000 Hotel operations £’000 Investments £’000 Total £’000 Gross revenue (excl. service charge income) 12,314 13,361 3,308 – 28,983 11,445 13,066 3,120 – 27,631 Service charge income 2,985 – – – 2,985 2,732 – – – 2,732 Gross revenue 15,299 13,361 3,308 – 31,968 14,177 13,066 3,120 – 30,363 Service charge expenses (3,982) – – – (3,982) (3,991) – – – (3,991) Property expenses (1,431) (7,720) (2,670) – (11,821) (751) (8,175) (2,634) – (11,560) Net revenue 9,886 5,641 638 – 16,165 9,435 4,891 486 – 14,812 Administrative expenses (5,571) (1,722) – – (7,293) (5,242) (1,538) – – (6,780) Other income 924 – – 41 965 834 7 – 39 880 Share of post-tax profits from joint ventures 1,025 – – – 1,025 884 – – – 884 Operating profit before valuation movements 6,264 3,919 638 41 10,862 5,911 3,360 486 39 9,796 Valuation movement on investment properties (7,625) – – – (7,625) (21,033) – – – (21,033) Impairment of car parking assets – (3,259) – – (3,259) – (10,467) – – (10,467) Impairment of goodwill – (577) – – (577) – (991) – – (991) Loss on disposal of investments – – – (191) (191) – – – (777) (777) Valuation movement on investments – – – 408 408 – – – 1,162 1,162 Profit on disposal of investment properties 27 – – – 27 4,123 – – – 4,123 Valuation movement on joint venture properties (3,200) – – – (3,200) (4,950) – – – (4,950) Operating (loss)/profit (4,534) 83 638 258 (3,555) (15,949) (8,098) 486 424 (23,137) Finance costs (7,209) (6,948) Finance income 166 594 Loss before taxation (10,598) (29,491) Taxation 2,588 – Loss for the year (8,010) (29,491) All results are derived from activities conducted in the United Kingdom. The car park results 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 business. The net revenue at the development sites for the year ended 30 June 2024, arising from car park operations, was £1,854,000. After allowing for an allocation of administrative expenses, the operating profit at these sites was £1,221,000. Revenue received within the car park and hotel segments as well as other income in the Property segment is the only revenue recognised on a contract basis under IFRS 15. All other revenue within the Property segment comes from rental lease agreements. 4. Administrative expenses 2024 £’000 2023 £’000 Employee benefits 4,457 4,344 Depreciation 168 124 Charitable donations 77 60 Other 2,591 2,252 7,293 6,780 Depreciation charged to the Consolidated Income Statement as an administrative expense relates to depreciation on central office equipment, including fixtures and fittings, computer equipment and motor vehicles. Depreciation on operational equipment and right-of-use assets within both the car park and hotel businesses are charged as direct property expenses within the Consolidated Income Statement. 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: 2024 £’000 2023 £’000 Audit services: – Fees payable to the Group auditors for the audit of the Consolidated Financial Statements 246 205 – Audit of the Company’s subsidiaries pursuant to legislation 10 10 – Other audit-related services 40 38 Total audit services 296 253 Non-audit services: – Other non-audit services – – Total other services – – Total auditors’ remuneration 296 253 6. Employee benefits 2024 £’000 2023 £’000 Wages and salaries (including Directors’ emoluments) 6,417 6,080 Social security costs 705 705 Other pension costs 254 215 7,376 7,000 Disclosures required by the Companies Act 2006 on Directors’ remuneration, including salaries, share options, pension contributions and pension entitlement are included on pages 81 to 82 in the Directors’ Remuneration Report and form part of these Consolidated Financial Statements. The average monthly number of staff employed during the year was 150 (2023: 129). 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. All of the pension costs in the table above relate to defined contribution schemes. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 112 113 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 7. Other income and expenses Other income 2024 £’000 2023 £’000 Commission received 169 154 Dividends received 41 39 Service charge management fees 258 260 Development management fees 158 – Dilapidations receipts and income relating to surrender premiums 267 312 Other 72 115 965 880 8. Finance costs 2024 £’000 2023 £’000 Interest payable on debenture loan stock 4,430 4,819 Loss on repurchase of debenture stock – (379) Interest payable on bank borrowings 1,570 1,330 Amortisation of arrangement fees 286 230 Interest expense on lease liabilities 923 948 Total finance costs 7,209 6,948 Interest receivable on loans to joint ventures (159) (245) Other interest receivable (7) (349) Total finance income (166) (594) Net finance costs 7,043 6,354 9. Taxation 2024 £’000 2023 £’000 Current Current year – – Adjustments in respect of prior years – – – – Deferred tax Recognition of previously unrecognised trading losses (2,888) – Utilisation of trading losses 1,203 – Origination and reversal of timing differences (903) – Adjustments in respect of prior periods – – (2,588) – (2,588) Taxation for the year is lower (2023: lower) than the standard rate of corporation tax in the United Kingdom of 25% (2023: 19%). The differences are explained below: 2024 £’000 2023 £’000 Loss before taxation (10,598) (29,491) Loss on ordinary activities multiplied by rate of corporation tax in the United Kingdom of 25% (2023: 19%) (2,649) (5,603) Effects of: – Valuation movements on which deferred tax is not recognised 2,701 – – Recognition of carried-forward trading losses (2,888) – – Expenses not deductible for tax purposes 248 – – United Kingdom REIT tax exemption on net income before revaluations – (582) – United Kingdom REIT tax exemption on revaluations – 6,185 Total taxation credit (2,588) – The Company left the REIT regime with effect from 1 July 2023, therefore the profits of the Company are now subject to corporation tax. 10. Dividends 2024 £’000 2023 £’000 2022 final paid: 2.5p per share – 1,212 2023 interim paid: 2.5p per share – 1,212 2023 final paid: 2.5p per share 1,054 – 2024 interim paid: 8.5p per share 3,584 – 4,638 2,424 An interim dividend in respect of the year ended 30 June 2024 of 8.5p per share was paid to shareholders on 16 June 2023. This dividend was paid entirely as a Property Income Distribution (‘PID’). No final dividend is proposed in respect of the year ended 30 June 2024. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 114 115 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 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 44,862,101 (2023: 49,075,785). 2024 2023 Earnings £’000 Earnings per share p Earnings £’000 Earnings per share p Loss for the year and earnings per share (8,010) (17.9) (29,491) (60.1) Valuation movement on investment properties 7,625 17.0 21,033 42.9 Deferred tax on valuation movements (903) (2.0) – – Impairment of car parking assets 3,259 7.3 10,467 21.3 Impairment of goodwill 577 1.3 991 2.0 Valuation movement on properties held in joint ventures 3,200 7.2 4,950 10.1 Profit on disposal of investment and development properties (27) (0.1) (4,123) (8.4) Loss on disposal of investments 191 0.4 777 1.6 Valuation movement on investments (408) (0.9) (1,162) (2.4) Gain on repurchase of debenture stock – – (379) (0.8) EPRA earnings and earnings per share 5,504 12.3 3,063 6.2 EPRA earnings for the year ended 30 June 2024 includes a tax credit £2,888,000 relating to the initial recognition of a deferred tax asset for historical trading losses. There is no difference between basic and diluted earnings per share. There is no difference between basic and diluted EPRA earnings per share. 12. Non-current assets (A) Investment properties Freehold £’000 Right-of-use asset £’000 Development £’000 Total £’000 Valuation at 30 June 2022 156,230 2,250 42,626 201,106 Additions at cost 7,526 – – 7,526 Held in subsidiaries acquired 23,400 – 706 24,106 Other capital expenditure 735 31 395 1,161 Disposals (7,645) – (21,250) (28,895) Valuation movement (19,376) (31) (1,626) (21,033) Movement in tenant lease incentives (170) – – (170) Valuation at 30 June 2023 160,700 2,250 20,851 183,801 Additions at cost – 2,860 – 2,860 Other capital expenditure 1,716 – 765 2,481 Disposals (160) – – (160) Movement in tenant lease incentives (380) – – (380) Valuation movement (10,466) 6 2,835 (7,625) Valuation at 30 June 2024 151,410 5,116 24,451 180,977 At 30 June 2024, investment property valued at £175,810,000 (2023: £181,340,000) was held as security against the Group’s borrowings. During the year the Group acquired an investment property for a cash consideration of £1,544,000 and recognised an additional IFRS16 right-of-use asset of £1,316,000. During the prior year the Group acquired an investment property that it had previously owned 50% of, through the Group’s joint venture investment in Belgravia Living Group Limited (‘BLG’). The property acquisition was facilitated by the acquisition by the Group of the remaining 50% interest in BLG. Right-of-use investment property assets include long leasehold property interests. The Company occupies an office suite in part of the Merrion Centre and one floor of an investment property in London. The Directors do not consider these elements to be material. (B) Freehold and leasehold properties – car park activities Freehold £’000 Right-of-use asset £’000 Total £’000 Valuation at 30 June 2022 29,200 43,026 72,226 Additions 6 – 6 IFRS 16 adjustment – (95) (95) Depreciation (312) (1,496) (1,808) Valuation movement 929 – 929 Impairment (4,713) (5,754) (10,467) Valuation at 30 June 2023 25,110 35,681 60,791 IFRS 16 adjustment – (95) (95) Depreciation (272) (1,336) (1,608) Valuation movement recognised in Other Comprehensive Income 994 – 994 Reversal of impairment/(impairment) 768 (4,027) (3,259) Valuation at 30 June 2024 26,600 30,223 56,823 The historical cost of freehold properties and right-of-use assets relating to car park activities is £30,153,000 (2023: £30,153,000). At 30 June 2024, freehold properties and right-of-use assets relating to car park activities, held as security against the Group’s borrowings are held at £35,450,000 (2023: £35,610,000). (C) Freehold and leasehold properties – hotel operations Freehold £’000 Valuation at 30 June 2023 9,500 Depreciation (242) Valuation movement 642 Valuation at 30 June 2024 9,900 At 30 June 2024, freehold and leasehold property relating to hotel operations valued at £9,900,000 (2023: £9,500,000) was held as security against the Group’s borrowings. The fair value of the Group’s investment and development properties, freehold car parks, hotel operations and assets held for sale have 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 biannually 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 an assessment of their realisable value in their existing state and condition based on market evidence of comparable transactions and residual value calculations. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 116 117 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 12. Non-current assets continued Property income, values and yields have been set out by category as at 30 June 2024 in the table below. Passing rent £’000 ERV £’000 Value £’000 Initial yield % Reversionary yield % Retail and leisure 1,178 1,282 13,810 8.1% 8.8% Merrion Centre (excluding offices) 4,514 4,815 50,254 8.5% 9.1% Offices 2,688 4,845 45,376 5.6% 10.1% Hotels 875 875 9,900 8.4% 8.4% Out of town retail 1,041 1,070 12,500 7.9% 8.1% Residential 1,319 2,108 31,720 3.9% 6.3% 11,615 14,995 163,560 6.7% 8.7% Development property 24,451 Car parks 38,017 IFRS 16 adjustment – Right-of-use assets held within car park activities 20,356 IFRS 16 adjustment – Right-of-use assets held within investment properties 1,316 247,700 Car parks above include £1.5m of a car park categorised as an investment property. Property income, values and yields have been set out by category as at 30 June 2023 in the table below. Passing rent £’000 ERV £’000 Value £’000 Initial yield % Reversionary yield % Retail and leisure 984 1,292 14,510 6.4% 8.4% Merrion Centre (excluding offices) 4,610 4,919 51,414 8.5% 9.0% Offices 3,040 4,953 52,966 5.4% 8.8% Hotels 816 816 9,500 8.1% 8.1% Out of town retail 1,006 1,070 13,000 7.3% 7.8% Residential 1,392 1,526 31,060 4.2% 4.6% 11,848 14,576 172,450 6.5% 8.0% Development property 20,851 Car parks 37,644 IFRS 16 adjustment – Right-of-use assets held within car park activities 23,147 254,092 Investment properties (freehold and right-of-use), freehold properties (‘PPE’) and hotel operations The effect on the total valuation (excluding development property and car parks) of £163.6m of applying a different weighted average yield and a different weighted average ERV would be as follows: Valuation in the Consolidated Financial Statements at an initial yield of 5.7% – £192.2m, valuation at 7.7% – £142.4m. Valuation in the Consolidated Financial Statements at a reversionary yield of 7.7% – £184.9m, valuation at 9.7% – £146.6m. Investment properties (development properties) The key unobservable inputs in the valuation of one of the Group’s development properties of £14.8m is the assumed per acre or per unit land value. The effect on the development property valuation of applying a different assumed per acre or per unit land value would be as follows: Valuation in the Consolidated Financial Statements if a 5% increase in the per acre or per unit value – £15.5m, 5% decrease in the per acre or per unit value – £14.1m. The other key development property in the Group is valued on a per acre development land value basis; the effect on the development property valuation of applying reasonable sensitivities would not create a material impact. Freehold car park activities The effect on the total valuation of the Group’s freehold car park properties of £26.6m in applying a different yield/discount rate (valuation based on 6.6%) and a different assumed rental value/net income (valuation based on £1.9m) would be as follows: Valuation in the Consolidated Financial Statements based on a 1% decrease in the yield/discount rate – £31.3m; 1% increase in the yield/ discount rate – £23.1m. Valuation in the Consolidated Financial Statements based on a 5% increase in the assumed rental value/net income – £27.9m; 5% decrease in the assumed rental value/net income – £25.3m. Right-of-use car park activities The effect on the total valuation of the Group’s right-of-use car park properties of £30.2m in applying a different discount rate (valuation based on 10.7%) and a different assumed net income (valuation based on £3.2m) would be as follows: Valuation in the Consolidated Financial Statements based on a discount rate of 9.7% – £32.3m; valuation at 11.7% – £28.0m. Valuation in the Consolidated Financial Statements assuming net revenue 10% above anticipated – £32.6m; valuation at 10% below anticipated – £27.9m. Property valuations can be reconciled to the carrying value of the properties in the balance sheet as follows: Investment properties £’000 Freehold and leasehold Properties £’000 Hotel operations £’000 Total £’000 Externally valued by CBRE 88,940 19,150 9,900 117,990 Externally valued by Jones Lang LaSalle 90,670 7,450 – 98,120 Investment properties valued by the Directors 51 – – 51 Properties held at valuation 179,661 26,600 9,900 216,161 IFRS 16 right-of-use assets held at depreciated cost 1,316 30,223 – 31,539 180,977 56,823 9,900 247,700 Valuation of investment properties (freehold and right-of-use), freehold properties (’PPE’), hotel operations and assets held for sale at fair value All investment properties, freehold properties held in property plant and equipment, hotel operations and assets held for sale are measured at fair value in the Consolidated Balance Sheet and 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 external valuers and the Directors 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 (ie. 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. (D) Fixtures, equipment and motor vehicles Accumulated Cost £’000 Depreciation £’000 At 1 July 2022 4,994 4,018 Additions 576 – Depreciation – 283 At 30 June 2023 5,570 4,301 Net book value at 30 June 2023 1,269 At 1 July 2023 5,570 4,301 Additions 525 – Depreciation – 348 At 30 June 2024 6,095 4,649 Net book value at 30 June 2024 1,446 FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 118 119 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 13. Goodwill and intangible assets 2024 £’000 2023 £’000 Goodwill At the start of the year 3,445 4,436 Impairment (577) (991) At the end of the year 2,868 3,445 Intangible assets At the start of the year 229 476 Amortisation (205) (247) At the end of the year 24 229 Total goodwill and intangible assets 2,892 3,674 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. The transactions prior to 30 June 2020 relate to businesses that held car parks under leases with a net asset value of £nil and amounted to consideration (before any impairment) of £4,024,000. 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 to the carrying value of goodwill. This has been based on the discounted future cash flows that are expected to be generated by the assets acquired over the remaining lease length. 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% (2023: 1%) and a discount rate of 10.3% (2023: 8.5%). This discount rate has increased in the year to reflect the fact that the Company has exited the REIT regime and is now liable to pay corporation tax on all of its activities. The assumptions used in the cash flow are based on the Group’s historical experience of the sector and expectation of future growth rate for the industry, with the key underlying reasons for the impairment being the increase in discount rate applied to the cashflow forecasts and an increase in the underlying cost base of the car parks (staff costs and utility costs). The recoverable amount of Goodwill has been determined on the basis of value-in-use. The effect on the value of goodwill at the year-end of £2.9m of applying a different discount rate would be as follows: Valuation in the Consolidated Financial Statements assuming a discount rate of 11% – £2.8m; valuation at 9.5% – £3.0m. Goodwill amounting to £2,456,000 at 30 June 2024 (£3,033,000: 30 June 2023) relate to assets with definite useful lives based on the unexpired duration of certain car park leases, the calculation of value is based on the projected cashflows over these periods. The balance of goodwill and intangible assets are not significant and relate to assets with indefinite useful lives. 14. Investments in joint ventures 2024 £’000 2023 £’000 At the start of the year 7,123 18,016 Investments in joint ventures – 3,500 Loan interest – 245 Valuation movement on investment properties (3,200) (4,950) Share of post-tax profits from joint ventures before valuation movements 1,025 884 Distributions (196) – Amounts eliminated on consolidation of subsidiary – (10,572) At the end of the year 4,752 7,123 The full amount of investments in joint ventures relates to equity investments. On 14 April 2023, the Group acquired the entire share capital of Belgravia Living Group Limited and therefore no longer accounts for this as a joint venture. As a result of this acquisition, Belgravia Living Group Limited became a wholly owned subsidiary of the Company and the investments made are eliminated on consolidation. The consideration for the acquisition was £1, with the key asset acquired being a £23.4m investment property and an associated bank loan of £14.4m. Merrion House LLP owns a long leasehold interest over a property that is let to the Group’s joint venture partner, Leeds City Council (‘LCC’). 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 assets and liabilities of Merrion House LLP for the current and previous year are as stated below: 2024 £’000 2023 £’000 Non-current assets 55,050 61,450 Cash and cash equivalents 602 767 Debtors and prepayments – Trade and other payables (594) (700) Current financial liabilities (1,777) (1,717) Non-current financial liabilities (43,776) (45,554) Net assets 9,505 14,246 The losses of Merrion House LLP for the current and previous year are as stated below: 2024 £’000 2023 £’000 Revenue 3,674 3,460 Expenses (13) (23) Finance costs (1,611) (1,669) Valuation movement on investment properties (6,400) (10,400) Net loss (4,350) (8,632) The Group’s interest in other joint ventures are not considered to be material. The book value of the Group’s investment in Bay Sentry Limited is £nil (2023: £nil). 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. A full list of the Group’s joint ventures, which are all registered in England and operate in the United Kingdom, is set out as follows: Beneficial Interest % Activity Merrion House LLP 50 Property investment Bay Sentry Limited 50 Software Development FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 120 121 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 15. Investments 2024 £’000 2023 £’000 Current Assets Loan notes – deferred consideration 3,177 4,493 Loan notes – contingent consideration – 1,943 3,177 6,436 Non-Current Assets Listed investments 3,305 4,068 Non-Listed investments 660 410 Loan notes – deferred consideration – 3,025 3,965 7,503 7,142 13,939 Listed investments 2024 £’000 2023 £’000 At start of the year 4,068 4,096 Disposals – (44) (Decrease)/increase in value of investments (763) 16 At the end of the year 3,305 4,068 Listed 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 £875,000 (2023: £875,000). Listed 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 IFRS 13 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 other investments. Non-listed investments 2024 £’000 2023 £’000 At the start of the year 410 410 Additions 250 – At the end of the year 660 410 The non-listed investments are categorised as level 3 in the fair value hierarchy as defined in IFRS 13 as the inputs to the valuation are based on unobservable inputs. Loan notes – deferred consideration 2024 £’000 2023 £’000 Current assets At the start of the year 4,493 – Transferred from non-current assets 3,025 – Loan notes issued to the Company in the period – 4,287 Loan interest 158 206 Expenses (122) – Amounts received at maturity (4,377) – 3,177 4,493 Non-current assets At the start of the year 3,025 – Loan notes issued to the Company in the period – 2,888 Loan interest – 137 Transferred to current assets (3,025) – – 3,025 The interest earned on the deferred consideration loan notes is 5% per annum. The current element of deferred consideration was received by the Company in July 2024. The deferred consideration loan notes are accounted for using the amortised cost basis and are assessed for impairment under the IFRS 9 expected credit loss model. Loan notes – contingent consideration 2024 £’000 2023 £’000 At the start of the year 1,943 – Loan notes issued to the Company in the period – 743 Unwind of discount applied to contingent consideration 32 38 Valuation movement 408 1,162 Expenses (102) – Amounts received at maturity (2,281) – – 1,943 The contingent consideration loan notes were initially recognised at fair value, based on the estimated performance of YPS in the 14-month period ended October 2023. This is an estimate prepared by the Company. The contingent consideration loan notes are then accounted for using the fair value through profit and loss basis. Following completion of the sale of its investment in YPS, the Company did not have access to regular YPS management information, however it does receive ad hoc updates. The valuation of the contingent consideration at 30 June 2023 was based on the performance of YPS for the period ended 30 June 2023 and assumed no further growth in the remaining four months of the earnout period. At 30 June 2023 these loan note assets were categorised as level 3 in the fair value hierarchy as defined in IFRS 13 as the inputs to the valuation are based on unobservable inputs. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 122 123 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 16. Trade and other receivables 2024 £’000 2023 £’000 Trade receivables 1,995 1,698 Less: provision for impairment of receivables (249) (353) 1,746 1,345 Other receivables and prepayments 2,250 1,919 3,996 3,264 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. The provision for impairment of receivables has been calculated after taking into account the financial position of tenants. Due to the nature of income, debts are generally recovered in advance and full provision has been made for income recognised but not recovered during the year. As such, the credit risk relating to trade and other receivables in considered to be low and any expected credit loss would be immaterial. As at 30 June 2024, trade receivables which had not been impaired can be analysed as follows: Total £’000 Within credit terms £’000 Outside credit terms Less than one month £’000 One to two months £’000 Older than two months £’000 2024 1,746 1,746 – – – 2023 1,345 1,345 – – – Movements in the Group provision for impairment of trade receivables are as follows: 2024 £’000 2023 £’000 At the start of the year 353 277 Provision for receivables impairment 117 304 Receivables written off as uncollectible (89) (149) Unused amounts reversed (132) (79) At the end of the year 249 353 The ageing of the provision is as follows: Total £’000 Less than one month £’000 One to two months £’000 Older than two months £’000 2024 249 – – 249 2023 353 – – 353 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. 17. Trade and other payables 2024 £’000 2023 £’000 Trade payables 1,400 603 Social security and other taxes 516 3,252 Other payables and accruals 11,509 8,532 13,425 12,387 18. Financial liabilities 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. 2024 £’000 2023 £’000 Current Bank borrowings – revolving credit facilities – 3,000 Lease liabilities 1,768 1,665 1,768 4,665 Non-current Bank borrowings – revolving credit facilities 13,434 3,841 Bank borrowings – single asset facility 14,239 14,313 Lease liabilities 26,833 26,362 5.375% First mortgage debenture stock 82,336 82,325 136,842 126,841 Total borrowings 138,610 131,506 The movement in financial liabilities during the year can be summarised as follows: 2024 £’000 2023 £’000 At the start of the year 131,506 162,522 Cash items Borrowings repaid (incl. cancellation of debenture stock) (3,087) (60,750) Borrowings drawn down 9,750 16,000 Principal element of lease payments (1,665) (1,657) Arrangement fees paid (419) (100) Total cash items 4,579 (46,507) Non-cash items Amortisation of arrangement fees relating to banking facilities 286 230 Held within subsidiaries acquired – 14,313 Movement in leases 2,239 948 Total non-cash items 2,525 15,491 At the end of the year 138,610 131,506 The debenture, bank loans and overdrafts are secured by fixed charges on properties and restricted cash, valued at £221,610,000 (2023: £226,450,000) owned by the Company and its subsidiary undertakings. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 124 125 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 18. Financial liabilities continued The gross cash and overdraft balances on the individual accounts are summarised as follows: 2024 £’000 2023 £’000 Cash balances 22,152 23,320 Overdrawn balances (20,760) (21,700) Cash and cash equivalents 1,392 1,620 Included within cash balances are restricted cash balances of £729,000 at 30 June 2024 (2023: £693,000) and £681,000 (2023: £nil) of balances held by the Group as agent on behalf of customers for which a corresponding liability is presented within trade and other payables. The Group’s remaining contractual non-discounted cashflows for financial liabilities are set out below: 2024 Trade and other creditors £’000 Bank borrowings – RCFs £’000 Debenture stock £’000 Bank borrowings – single asset facility £’000 Lease liabilities £’000 Total £’000 Within one year 1,400 988 4,430 417 1,769 9,004 1 – 2 years – 14,603 4,430 417 1,777 21,227 2 – 3 years – – 4,430 417 1,786 6,633 3 – 4 years – – 4,430 417 1,795 6,642 4 – 5 years – – 4,430 14,008 1,804 20,242 5 – 10 years – – 93,048 – 9,167 102,215 10 – 15 years – – – – 9,426 9,426 In more than 15 years – – – – 24,704 24,704 1,400 15,591 115,198 15,676 52,228 200,093 2023 Trade and other creditors £’000 Bank borrowings – RCFs £’000 Debenture stock £’000 Bank borrowings – single asset facility £’000 Lease liabilities £’000 Total £’000 Within one year 603 3,267 4,430 417 1,665 10,382 1 – 2 years – 2,638 4,430 417 1,674 9,159 2 – 3 years – 1,595 4,430 417 1,682 8,124 3 – 4 years – – 4,430 417 1,691 6,538 4 – 5 years – – 4,430 417 1,700 6,547 5 – 10 years – – 97,479 14,008 8,643 120,130 10 – 15 years – – – – 8,897 8,897 In more than 15 years – – – – 23,571 23,571 603 7,500 119,629 16,093 49,523 193,348 The debenture issue premium is net of issue costs and is amortised over the life of the debt agreement. The amounts disclosed in the maturity profile above have been calculated to include notional interest payments, using the interest rates prevailing 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: 2024 £’000 2023 £’000 Expiring in 1 year or less – 27,000 Expiring in more than 1 year 56,250 36,000 56,250 63,000 The availability of undrawn funds is subject to compliance with banking covenants. Performance against covenants is monitored continually and calculations are formally prepared at the end of each quarter. There have been no instances of non-compliance during the year. 19. Deferred tax assets and liabilities 2024 £’000 2023 £’000 Assets Carried forward losses 1,685 – IFRS 16 Right of Use Assets 7,150 – 8,835 – Liabilities IFRS 16 lease liabilities 5,418 – Investment property and freehold car park revaluation gains 1,065 – 6,483 – Net deferred tax asset 2,352 – The Company left the REIT regime with effect from 1 July 2023, therefore the profits of the Company are now subject to corporation tax. This has resulted in the recognition of a deferred tax asset, primarily relating to trading losses from previous periods that are available to offset taxation on future profits. In assessing the recognition of a deferred tax asset with respect to losses, management has reviewed the type of losses, the period in which they arose and then the future profitability of the Group or, where relevant, individual corporate entities. The Group also has various non-trading losses and surplus management expenses from previous periods, however the associated deferred tax assets have not been recognised as there is insufficient evidence to show that their future utilisation is probable. The total value of losses not included within the deferred tax asset is £1,328,000. In addition the Group has uncrystallised capital losses of £24,282,000 on investment property and car park valuation losses that have not been recognised. The total net deferred tax balance as at 30 June 2024 includes the credit to the income statement of £2,588,000 less deferred tax liabilities arising in the period on revaluation gains recognised in the consolidated statement of comprehensive income of £236,000 (30 June 2023: £nil). 20. 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. Under the terms of the Group’s bank borrowing facilities, the Group is required to comply with the following financial covenants on the properties secured under each facility: • the Loan to Value percentage must not exceed 60% on the Group’s revolving credit facilities (‘RCF’); • on the Group’s single asset facility the Loan to Value percentage must not exceed 67.5%; • the ratio of rental income and net car park income (where applicable) must not be less than 175% of the interest charge under the facility; and • in addition, under one of the facilities, both of the above tests are performed on a Group-wide basis and the consolidated loan to value percentage must not exceed 60% and the ratio of rental income and net car park income must not be less than 175% of the interest charged under the three bank facilities and the debenture. Under the terms of the Group’s debenture, the Group is required to comply with the following financial covenants: • the asset cover percentage must not be less than 150%; and • the ratio of rental income and net car park income (where applicable) must not be less than 100% of the debenture interest. The Group has met all of these financial covenants during the year. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 126 127 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 20. Financial instruments continued Interest rate risk The interest rate risk of the Group’s financial liabilities is as follows: As at 30 June 2024 As at 30 June 2023 Nominal value £’000 Weighted average rate % Weighted average period Years Nominal value £’000 Weighted average rate % Weighted average period Years Debenture stock 82,417 5.375 7 82,417 5.375 8 Bank floating rate liabilities 13,750 7.19 2 7,000 6.63 1 Bank fixed rate liabilities 13,800 3.02 5 13,800 3.02 6 Bank overdrafts 20,760 7.5 0.5 21,700 7.0 0.5 Lease liabilities 28,601 3.7 33 28,028 3.5 33 159,328 152,945 The above amounts represent the monetary liabilities and are therefore different to the book values set out in note 18 as a result of unamortised arrangement fees at 30 June 2024 of £397,000 (2023: £222,000). Floating rate financial liabilities bear interest at rates for term loans based on SONIA plus an average margin of 1.9% and for the overdraft of 2.3% above base rate. Under the overdraft facility, the Group is able to offset positive cash balances against overdrawn balances. 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 where necessary by the use of appropriate financial hedging instruments, primarily interest rate swaps. An increase in SONIA by one percentage point would have reduced profit for the year by approximately £99,000 (2023: £344,000). 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. Interest rates The interest rates (Effective interest rate (‘EIR’) or Incremental borrowing rate (‘IBR’) at the balance sheet date were as follows: 2024 2023 Bank overdraft facility EIR 7.5% 7.00% Bank borrowings EIR 7.19% 6.63% Debenture loan EIR 5.375% 5.375% Lease liabilities IBR 3.7% 3.5% Fair value of current borrowings The fair value of bank borrowings and overdrafts approximates to their carrying value. Fair value of non-current borrowings 2024 2023 Book value £’000 Fair value £’000 Book value £’000 Fair value £’000 Debenture stock 82,337 72,506 82,325 68,169 Non-current bank borrowings – revolving credit facilities 13,434 13,434 3,788 3,788 Non-current bank borrowings – single asset facility 14,239 12,174 14,313 14,313 The above debenture stock has been valued as at 30 June 2024 (and 30 June 2023 respectively) by J C Rathbone Associates. The fair valuation of the debenture stock and the single asset facility are categorised as level 2 in the fair value hierarchy as defined in IFRS13 as the fair value is calculated with reference to similarly quoted instruments. All financing liabilities are held at amortised cost. Capital management The Group manages its capital to ensure that entities in the Group will each be able to continue to operate as a going concern while maximising the return to stakeholders through the optimisation of debt and equity. The capital structure of the Group consists of financial liabilities as per note 18 and equity as per the consolidated statement of changes in equity. The Group’s capital structure is reviewed regularly by the Directors. 21. Lease liabilities At 30 June 2024 the Group has a long leasehold interest in six (30 June 2023: six) properties that are accounted for under IFRS16. Future lease payments are as follows: 2024 2023 Minimum lease payments £’000 Interest £’000 Present value £’000 Minimum lease payments £’000 Interest £’000 Present value £’000 Within one year 1,769 988 781 1,665 923 742 1 – 2 years 1,777 960 817 1,674 897 777 2 – 3 years 1,786 931 855 1,682 869 813 3 – 4 years 1,795 900 895 1,691 840 851 4 – 5 years 1,804 868 936 1,700 810 890 5 – 10 years 9,167 3,813 5,354 8,643 3,721 4,922 10 – 15 years 9,426 2,772 6,654 8,897 2,779 6,118 In more than 15 years 24,704 12,398 12,306 23,571 11,045 12,526 52,228 23,630 28,598 49,523 21,884 27,639 22. Net asset value per share The basic and diluted net asset values are the same, as set out in the table below. 2024 £’000 2023 £’000 Net assets at 30 June 119,637 141,088 Shares in issue (000) 42,163 48,456 Basic and diluted net asset value per share 284p 291p 23. Commitments The Group has commitments of £854,000 (2023: £nil) in respect of capital expenditure contracted for at the balance sheet date but not yet incurred, for investment and development properties. Minimum total future lease payments receivable: 2024 £’000 2023 £’000 Within one year 9,175 10,586 1 – 2 years 8,604 10,031 2 – 3 years 7,314 9,326 3 – 4 years 6,659 7,828 4 – 5 years 5,792 7,104 5 – 10 years 21,311 24,824 10 – 15 years 9,846 10,133 In more than 15 years 1,163 6,343 The Group has a wide range of leases in place with tenants across a broad range of properties, sectors, tenures and rental values. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 128 129 03 FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements continued 24. Called up share capital Authorised The authorised share capital of the Company is 164,879,000 (2023: 164,879,000) Ordinary Shares of 25p each. The nominal value of authorised share capital is £41,219,750 (2023: £41,219,750). Issued and fully paid up Number of shares 000 Nominal value £’000 At 30 June 2023 48,456 12,113 Purchase and cancellation of own shares (6,293) (1,573) At 30 June 2024 42,163 10,540 The Company has only one type of Ordinary Share class in issue. All shares have equal entitlement to voting rights and dividend distributions. At the year-end the Company had authority to buy back for cancellation a further 6,324,402 Ordinary Shares. 25. Cash flows from operating activities 2024 £’000 2023 £’000 Loss before tax (10,598) (29,491) Adjustments for: Depreciation 2,199 2,333 Amortisation 205 247 Profit on disposal of fixed assets – (48) Profit on disposal of investment properties (27) (4,123) Loss on sale of investments 191 795 Movement in valuation of investments (408) (1,162) Finance costs 7,209 6,948 Finance income (166) (594) Share of post tax losses from joint ventures 2,175 4,066 Movement in valuation of investment properties 7,625 21,033 Movement in lease incentives 380 170 Impairment of car parking assets 3,259 10,467 Impairment of goodwill 577 991 Increase in receivables (731) (218) Increase in payables 704 2,355 Cash generated from operations 12,594 13,769 26. Related party transactions The only related party transactions that have taken place during the year relate to the remuneration of the Executive Directors, and other members of the concert party who are the key management personnel of the Group, and any dividends paid to the Directors and their family members. Further information about the remuneration of individual Directors is provided in the audited part of the Directors’ Remuneration Report on page 81. 2024 £’000 2023 £’000 Short-term employee benefits – excl exceptional bonuses 1,934 1,863 Short-term employee benefits – exceptional bonuses 539 727 Post-employment benefits 89 65 Dividends paid to the Ziff Concert Party 2,641 1,327 5,203 3,982 The Ziff Concert Party includes Edward Ziff, Ben Ziff (Executive Directors) and Michael Ziff (Non Executive Director) together with their immediate family members, the estate of Edward Ziff and Michael Ziff’s late mother,their sister and a number of trusts that Edward Ziff and Michael Ziff are not beneficiaries of but they do control. Exceptional bonuses are no more than 10% of the profits generated from any significant transactions that are outside of the ordinary course of business for the Company, subject to a maximum of £3m in any one financial year. The purpose of this is to encourage relatively small but ultimately value-enhancing strategic and innovative technological investments that are complementary to the existing core businesses of TCS. 27. Post Balance Sheet Events On 26 July 2024 the Company received the final element of deferred consideration arising from the sale of its investment in YourParkingSpace Limited. The proceeds of £3.1m (which were net of selling costs of £0.1m) were added to the cash funds held within the Group. On 25 August 2024 the Company paid extraordinary bonuses to three of the executive directors totalling £249,000 in relation to the above final receipt from the YourParkingSpace Limited sale. As they were not contractually committed these amounts were not accrued at the year end. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 130 131 03 FINANCIAL STATEMENTS Notes 2024 £’000 2023 £’000 Fixed assets Investment properties 4 82,005 82,040 Property, plant and equipment 4 639 712 Investments 5 240,617 247,238 323,261 329,990 Current assets Debtors 6 107,556 113,984 Cash 14 14 107,570 113,998 Creditors: amounts falling due within one year Financial liabilities – borrowings 8 (20,760) (24,116) Other creditors 7 (222,805) (217,768) (243,565) (241,884) Net current liabilities (135,995) (127,886) Total assets less current liabilities 187,266 202,104 Financial liabilities – borrowings 8 (95,770) (86,750) Net assets 91,496 115,354 Equity attributable to the owners of the Parent Company Called up share capital 9 10,540 12,113 Share premium account 200 200 Capital redemption reserve 3,309 1,736 Other reserve 57,524 57,524 Retained earnings 19,923 43,781 Total shareholders’ funds 91,496 115,354 Company number: 00623364 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 loss shown in the financial statements of the Parent Company was £9,780,000 (2023: £6,385,000). The financial statements on pages 132 to 142 were approved by the Board of Directors on 15 October 2024 and signed on its behalf by E M Ziff Chairman & Chief Executive Company Balance Sheet as at 30 June 2024 Called up share capital £’000 Share premium account £’000 Capital redemption reserve £’000 Other reserve £’000 Retained earnings £’000 Total equity £’000 Balance at 30 June 2022 13,132 200 717 63,313 54,689 132,051 Comprehensive income for the year Loss – – – – (6,385) (6,385) Total comprehensive income for the year – – – – (6,385) (6,385) Reserve transfer – impairment of investment in subsidiaries – – – (5,789) 5,789 – Contributions by and distributions to owners Arising on purchase and cancellation of own shares (1,019) – 1,019 – (7,888) (7,888) Final dividend relating to the year ended 30 June 2022 – – – – (1,212) (1,212) Interim dividend relating to the year ended 30 June 2023 – – – – (1,212) (1,212) Balance at 30 June 2023 12,113 200 1,736 57,524 43,781 115,354 Comprehensive income for the year Loss – – – – (9,780) (9,780) Total comprehensive income for the year – – – – (9,780) (9,780) Contributions by and distributions to owners Arising on purchase and cancellation of own shares (1,573) – 1,573 – (9,440) (9,440) Final dividend relating to the year ended 30 June 2023 – – – – (1,054) (1,054) Interim dividend relating to the year ended 30 June 2024 – – – – (3,584) (3,584) Balance at 30 June 2024 10,540 200 3,309 57,524 19,923 91,496 Statement of Changes in Equity for the year ended 30 June 2024 FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 132 133 03 FINANCIAL STATEMENTS Notes to the Company Financial Statements 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 certain investments and in accordance with the Companies Act 2006 and applicable law. 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; • 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 11.42, 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; and • 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 2024 and these Financial Statements may be obtained from Companies House, Crown Way, Cardiff CF4 3UZ. 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. Investments Investments are held on the balance sheet at fair value. Any fair value gains and losses are taken to the income statement. Investment income Income from investments is accounted for when the right to payment is established. Investment in subsidiary undertakings Prior to the adoption of FRS 102, investments in subsidiaries were revalued with any gains arising recognised in the other reserve. On adoption of FRS 102 on 1 July 2015, the Directors of the Company elected to measure the fixed asset investments at deemed cost being the carrying amount at the date of transition as determined under the entity’s previous financial reporting framework. Investments are assessed at each reporting date to determine whether there is any indication that an investment is impaired. Where there is an indication, the carrying value of the investment is tested for impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment losses are recognised in the Company’s profit for the year and a transfer is made from the other reserve to retained earnings within the Statement of Changes in Equity (where the impairment is less than the amount of other reserve related to that investment). On disposal of an investment, any gain/loss on disposal is recognised in the profit/loss for the year of the Company and any other reserve related to the investment disposed of is transferred from the other reserve to retained earnings within the Statement of Changes in Equity. The unrealised non-distributable reserve represents distributions made by subsidiaries in prior years in the form of non-qualifying consideration which have given rise to a non-distributable gain. Amounts sitting in the reserve are transferred to retained earnings within the Statement of Changes in Equity when the gain becomes realised. 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. Cash and cash equivalents Cash and cash equivalents are carried in the 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 Balance Sheet. Where there is a formal legal arrangement with a right to offset the net position of the individual accounts will be presented in cash or current liabilities as appropriate. 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 on a straight line basis 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. 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. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 134 135 03 FINANCIAL STATEMENTS 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 2024 £’000 2023 £’000 Wages and salaries (including Directors’ emoluments) 3,917 4,204 Social security costs 482 541 Other pension costs 186 166 4,585 4,911 Employee benefits are charged to the Profit and Loss account through administrative expenses. All of the pension costs in the table above relate to defined contribution schemes. The aggregate remuneration of the Directors of the Company was £2,665,000 (2023: £2,554,000). The average monthly number of staff employed during the year was 45 (2023: 46). Disclosures required by the Companies Act 2006 on Directors’ remuneration, including salaries, share options, pension contributions and pension entitlement, are included on page 81 in the Remuneration Report and form part of the Consolidated Financial Statements. The remuneration paid to the Parent Company’s auditors in respect of the audit of the Parent Company Financial Statements for the year ended 30 June 2024 is included in note 5 to the Consolidated Financial Statements. 4. Tangible assets Investment properties Freehold £’000 Long leasehold £’000 Development £’000 Total £’000 Valuation at 30 June 2023 58,600 2,640 20,800 82,040 Additions 92 1,544 765 2,401 Valuation movement (5,061) 6 2,835 (2,220) Movement in tenant lease incentives (216) – – (216) Valuation at 30 June 2024 53,415 4,190 24,400 82,005 The above freehold and long leasehold properties have been independently externally valued as at 30 June 2024 and 30 June 2023 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. The historical cost of the Company’s investment properties is £78,067,000 (2023: £75,666,000). 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 an assessment of their realisable value in their existing state and condition based on market evidence of comparable transactions and residual value calculations. Fixtures, equipment and motor vehicles Cost £’000 Accumulated depreciation £’000 Balance at 30 June 2023 2,519 1,807 Additions 71 – Depreciation – 144 Balance at 30 June 2024 2,590 1,951 Net book value at 30 June 2024 639 Net book value at 30 June 2023 712 Total tangible assets At 30 June 2024 83,244 At 30 June 2023 82,752 Notes to the Company Financial Statements continued 5. Fixed asset investments 2024 £’000 2023 £’000 Shares in Group undertakings At 1 July 233,562 239,351 Impairment – (5,789) At 30 June 233,562 233,562 Listed investments At 1 July 4,068 4,096 Disposals – (44) Revaluation (763) 16 At 30 June 3,305 4,068 Other investments At 1 July 9,608 19,661 Additions 250 – Loan interest 159 347 Revaluation 485 1,166 Disposals (6,752) (11,566) At 30 June 3,750 9,608 Interest in joint ventures At 1 July – 6,325 Loans advanced – 3,500 Share of profit after tax – 245 Disposals – (10,070) At 30 June – – Total fixed asset investments 240,617 247,238 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 shares issued plus the fair value of any other consideration given to acquire the share capital of the subsidiary undertakings. 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 £875,000 (2023: £875,000). Other investments include the following elements of consideration arising from the sale of the Company’s investment in YourParkingSpace Limited – deferred consideration loan notes at 30 June 2024 of £3,177,000 (30 June 2023: £7,518,000) and contingent consideration loan notes at 30 June 2024 of £nil (30 June 2023: £1,943,000). These loan notes have a historic cost of £2,887,000 (2023: £7,918,000). The interest earned on the deferred consideration loan notes is 5% per annum. The current element of deferred consideration was received by the Company in July 2024. The deferred consideration loan notes are accounted for using the amortised cost basis and are assessed for impairment under the IFRS 9 expected credit loss model. The contingent consideration loan notes were initially recognised at fair value, based on the estimated performance of YPS in the 14-month period ended October 2023. This is an estimate prepared by the Company. The contingent consideration loan notes are then accounted for using the fair value through profit and loss basis. Following completion of the sale of its investment in YPS, the Company did not have access to regular YPS management information, however it does receive ad hoc updates. The valuation of the contingent consideration at 30 June 2023 was based on the performance of YPS for the period ended 30 June 2023 and assumed no further growth in the remaining four months of the earnout period. At 30 June 2023 these loan note assets were categorised as level 3 in the fair value hierarchy as defined in IFRS 13 as the inputs to the valuation are based on unobservable inputs. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 136 137 03 FINANCIAL STATEMENTS 6. Debtors 2024 £’000 2023 £’000 Trade debtors 631 411 Less: provision for impairment of debtors (262) (299) 369 112 Amounts owed by subsidiary undertakings 106,063 113,245 Other debtors and prepayments 1,124 627 107,556 113,984 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 Company has many tenants spread across a number of industry sectors. In addition, the tenants’ rents are payable in advance. The provision for impairment of receivables has been calculated after taking into account the financial position of tenants. Due to the nature of income, debts are generally recovered in advance and full provision has been made for income recognised but not recovered during the year. As such, the credit risk relating to trade and other receivables in considered to be low and any expected credit loss would be immaterial. The credit recognised in relation to the reversal of impairment of debtors for the year ended 30 June 2024 was £65,000 (2023: expense relating to impairment of £117,000). Amounts owed by subsidiary undertakings are unsecured, interest free and repayable on demand. The directors do not expect the balances due from subsidiaries to be received in the next 12 months. 7. Other creditors 2024 £’000 2023 £’000 Trade payables 146 117 Taxation and social security 233 2,505 Amounts owed to subsidiary undertakings 218,177 211,761 Other payables and accruals 4,249 3,385 222,805 217,768 Amounts owed to subsidiary undertakings are unsecured, interest free and repayable on demand. 8. 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. 2024 £’000 2023 £’000 Non-current Bank borrowings 13,434 4,425 5.375% First mortgage debenture stock 82,336 82,325 95,770 86,750 Current Bank borrowings 20,760 24,116 Total borrowings 116,530 110,866 The debenture, bank loans and overdrafts are secured by fixed charges on properties and restricted cash, valued at £221,610,000 (2023: £226,450,000) 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. Notes to the Company Financial Statements continued The Company had undrawn committed floating rate bank facilities as set out below: 2024 £’000 2023 £’000 Expiring in 1 year or less – 27,000 Expiring in more than 1 year 56,250 36,000 56,250 63,000 The availability of undrawn funds is subject to compliance with banking covenants. Included within facilities expiring in one year or less are overdraft facilities subject to annual review. There are net cash balances of £19,633,000 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: As at 30 June 2024 As at 30 June 2023 Nominal value £’000 Weighted average rate % Weighted average period Years Nominal value £’000 Weighted average rate % Weighted average period Years Debenture stock 82,417 5.375 7 82,417 5.375 8 Bank overdraft 20,760 7.50 0.5 24,116 7.0 0.5 Bank floating rate liabilities 13,750 7.19 2 7,000 6.63 1 116,927 113,533 The above amounts represent the monetary liabilities and are therefore different from the book values set out in as a result of unamortised arrangement fees at 30 June 2024 of £397,000 (2023: £222,000). Floating rate financial liabilities bear interest at rates for term loans based on LIBOR plus an average margin of 1.65% and for the overdraft of 2.00% 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: 2024 2023 Bank overdraft facility 7.5% 7.00% Bank borrowings 7.19% 6.63% Debenture loan 5.375% 5.375% FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 138 139 03 FINANCIAL STATEMENTS 8. Financial instruments continued 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. The carrying amounts of short-term borrowings approximate to fair value. Fair value of non-current borrowings 2024 2023 Book value £’000 Fair value £’000 Book value £’000 Fair value £’000 Debenture stock 82,337 72,506 82,417 68,169 Long-term bank borrowings 13,434 13,434 4,425 4,425 9. Called up share capital Authorised 164,879,000 (2023: 164,879,000) ordinary shares of 25p each. Issued and fully paid up Number of shares 000 Nominal value £’000 At 30 June 2023 48,456 12,113 Purchase and cancellation of own shares (6,293) (1,573) At 30 June 2024 42,163 10,540 The Company has only one type of Ordinary Share class in issue. All shares have equal entitlement to voting rights and dividend distributions. 10. Subsidiary Companies The Company’s wholly owned active subsidiary undertakings at 30 June 2024, registered in England or Scotland and operating in the United Kingdom, are as follows: Company number Activity Held directly TCS Holdings Limited 2271353 Property investment Buckley Properties (Leeds) Limited* 647309 Property investment Citipark plc* 8837214 Car park operations TCS (Residential Conversions) Limited* 3946495 Property investment TCS Property Management Limited* 5281225 Management company TCS Trustees Limited* 3112933 Trustee for employee benefit plans TCS Properties Limited* 2831154 Property investment TCS (Brownsfield Mill) Limited* 10291290 Property investment TCS (Merrion Hotel) Limited* 10380988 Hotel operator Bay Sentry Solutions Limited* 12133595 Car park operations Belgravia Living Group Limited* 09554878 Property Investment TCS (Whitehall Plaza) Limited 9922032 Dormant Dundonald Property Investments Limited 3672365 Dormant TCS (9 Cheapside) Limited 10139127 Dormant Notes to the Company Financial Statements continued Company number Activity Held directly continued TCS (Tariff Street) Limited 09929851 Dormant TCS Development Management (Merrion) Limited 8696141 Dormant Citicharge Limited 13322988 Dormant Apperley Bridge Limited 6879596 Dormant TCS Park Row Limited 8077103 Dormant Citipark Management Limited 8837203 Dormant TCS (Merrion House JVC02) Limited 8561356 Dormant Tassgander Limited 4077297 Dormant Blackpool Markets Limited 2740190 Dormant Emett Exhibitions Limited 1544918 Dormant Milngavie East Limited SC464805 Dormant No 29 Management Co (Eastgate) Limited 3873683 Dormant T Herbert Kaye’s Estates Limited 0226678 Dormant TCS (Bolton) Limited 4104688 Dormant TCS Piccadilly Limited 4317396 Dormant TCS Whitehall Riverside Limited 4329860 Dormant TCS (Rochdale JV) Limited 7712764 Dormant TCS (Rochdale Management) Limited 7712123 Dormant TCS Car Parks Limited 4847697 Dormant TCS Eastgate Limited 6554827 Dormant TCS Finance Limited 3108777 Dormant TCS Trading Limited 3060862 Dormant The Merrion Centre Limited 0814845 Dormant Town Centre Enterprises Limited 0221003 Dormant Town Centre Securities (Developments) Limited 3946549 Dormant Town Centre Securities (Manchester) Limited 0129485 Dormant Town Centre Securities (Scotland) Limited 0748937 Dormant Town Centre Services Limited 2285764 Dormant TCS plc 4329979 Dormant Citiflex plc 3385312 Dormant Held indirectly TCS Freehold Investments Limited 3684812 Property investment TCS Leasehold Investments Limited 3684827 Property investment Town Centre Car Parks Limited 5494592 Car park operations TCCP (Clarence Dock) Limited* 6219875 Car park operations TCS (Milngavie) Limited* 6391627 Property investment TCS (Merrion House JVC01) Limited* 8561354 Property investment KBT Cornwall Limited* 8087077 Car park operations Belgravia Living (Burlington House) Limited* 9948722 Property investment BLG (Burlington House) Limited 11284761 Property investment Parking Ticketing Limited 7818341 Dormant * The subsidiaries marked with an asterisk above are exempt from preparing audited statutory accounts under section 479a of the Companies Act 2006. FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 140 141 03 FINANCIAL STATEMENTS Company number Activity Held indirectly continued Dundonald (Cumbernauld) Limited 5983938 Dormant TCS (Bothwell Street) Limited 4240551 Dormant Dundonald Property Developments Limited 6430444 Dormant Riverside (Leeds) Limited 4569350 Dormant TCS (Greenhithe) Limited 4413344 Dormant TCS (Isleworth) Limited 4413343 Dormant TCS (Parliament Street 1) Limited 4768830 Dormant TCS (Parliament Street 2) Limited 4768845 Dormant TCS Energy Limited 4414144 Dormant TCS (Mill Hill) Limited 4413341 Dormant TCS (Residential) Limited 4249007 Dormant TCS Solar Limited 5113915 Dormant The Company’s directly owned joint ventures, which are all registered in England and operate in the United Kingdom, are as follows: Proportion of ordinary shares held % Activity Bay Sentry Limited 50 Software development The Company also has an indirect 50% interest in Merrion House LLP. The registered office of subsidiaries and joint ventures is as follows: KBT Cornwall Limited Bay Sentry Solutions Limited 20–22 Wenlock Road 20 Wenlock Road London London N1 7GU N1 7GU All other subsidiaries and joint venues Town Centre House The Merrion Centre Leeds LS2 8LY Notes to the Company Financial Statements continued 10. Subsidiary companies continued Notice is hereby given that the 2024 Annual General Meeting (the ‘Meeting’) of Town Centre Securities Plc (the ‘Company’) will be held at Town Centre House, The Merrion Centre on Wednesday 27 November 2024 at 10:00am. You will be asked to consider and, if thought fit, pass the Resolutions below. Resolutions 1 to 13 will be proposed as ordinary resolutions. For an ordinary resolution to be passed, a simple majority of the votes cast must be in favour of the resolution. Resolutions 14 to 17 will be proposed as special resolutions. For a special resolution to be passed, at least 75% of the votes cast must be in favour of the resolution. Shareholders will be able to attend the AGM in person this year. We encourage all Shareholders to vote via proxy in advance of the AGM. Your vote is important, and you are encouraged to use it. Shareholders should vote by way of proxy in advance of the Meeting. To ensure your vote is counted, you should appoint the ‘Chair of the Meeting’ as your proxy. This notice includes the resolutions (‘Resolutions’) to be discussed at the AGM. You are requested to complete and submit a Form of Proxy as soon as possible whether you intend to attend the AGM or not. In any event, the Proxy instruction should reach the Company’s Registrar by 10.00am on Monday 25 November 2024. Completion of a Form of Proxy will not preclude you from attending the AGM physically. Notice of Annual General Meeting Ordinary resolutions Resolution 1: Annual Financial Statements and Directors’ Report 1. To receive the Company’s Annual Financial Statements (together with the Directors’ Report and the Auditor’s Report) for the financial year ended 30 June 2024. Resolution 2: Directors’ Remuneration Report 2. To approve the Directors’ Remuneration Report set out on pages 78 to 84 of the Company’s 2024 Annual Report for the year ended 30 June 2024 (excluding the Directors’ remuneration policy included in the report). Resolution 3 to 9: Re-election of Directors 3. To re-elect Michael Ziff as a Non-Executive Director of the Company. 4. To re-elect Ian Marcus as a Non-Executive Director of the Company. 5. To re-elect Paul Huberman as a Non-Executive Director of the Company. 6. To re-elect Edward Ziff as an Executive Director of the Company. 7. To re-elect Benjamin Ziff as an Executive Director of the Company. 8. To re-elect Stewart MacNeill as an Executive Director of the Company. 9. To re- elect Craig Burrow as an Executive Director of the Company. Resolution 10: Reappointment of auditors 10. To reappoint BDO LLP as the auditors of the Company, to hold office from the conclusion of this Meeting until the conclusion of the next General Meeting at which annual financial statements are laid before the Company’s Shareholders. Resolution 11: Remuneration of auditors 11. To authorise the Directors to determine the remuneration of the Company’s auditors. Resolution 12: Authority to make political donations 12. To authorise, in accordance with Part 14 of the UK Companies Act 2006 (the ‘Act’), the Company and all companies that are subsidiaries of the Company at the date on which this resolution is passed, or at any time when this resolution has effect to: (a) make political donations to political parties and/or independent election candidates; (b) make political donations to political organisations other than political parties; and (c) incur political expenditure, 04 SHAREHOLDER INFORMATION 143 FINANCIAL STATEMENTS Town Centre Securities PLC Annual Report and Accounts 2024 142 (as such terms are defined in the Act), up to an aggregate amount of £50,000, and the amount authorised under each of paragraphs (a) to (c) above shall also be limited to such amount, during the period beginning on the date of the passing of this resolution and ending at the conclusion of the next Annual General Meeting of the Company to be held in 2024. Upon the passing of this resolution, all existing authorisations and approvals relating to political donations or expenditure under Part 14 of the Act shall be revoked without prejudice to any donation made, or expenditure incurred, prior to the passing of this resolution pursuant to such authorisation or approval. For the purpose of this resolution, the terms ‘political donation’, ‘political parties’, ‘independent election candidates’, ‘political organisation’ and ‘political expenditure’ shall have the meanings given by sections 363 to 365 of the Act. Resolution 13: Authority to allot Ordinary Shares 13. To generally and unconditionally authorise the Board, in substitution for any existing authority, but without prejudice to the exercise of any such authority prior to the date of the passing of this resolution, pursuant to and in accordance with Section 551 of the Act to exercise all the powers of the Company to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company: (a) up to an aggregate nominal amount of £3,513,556.50 (representing 14,054,226 ordinary shares) (such amount to be reduced by any allotments or grants made under paragraph (b) below in excess of such sum); and (b) comprising equity securities (as defined in the Act) up to a nominal amount of £7,027,113.25 (representing 28,108,453 Ordinary Shares) (such amount to be reduced by any allotments or grants made under paragraph (a) above) in connection with an offer by way of a rights issue: (i) to ordinary Shareholders in proportion (as nearly as may be practicable) to their existing holdings; and (ii) to holders of other equity securities as required by the rights of those securities or as the Board otherwise considers necessary, and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary, expedient or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter, provided that this authority shall expire at the conclusion of the next Annual General Meeting of the Company, to be held in 2025, or 27 February 2026, whichever is earlier, save that the Company may, before such expiry, make an offer or enter into an agreement which would or might require shares to be allotted, or rights to subscribe for or to convert securities into shares to be granted, after such expiry; and the Board may allot shares or grant such rights in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. Special resolutions Resolution 14: Authority to disapply pre-emption rights 14. That, if resolution 13 above is passed, the Board be given power to allot equity securities (as defined in the Act) for cash under the authority given by that resolution and/or to sell Ordinary Shares held by the Company as treasury shares for cash as if Section 561 of the Act did not apply to any such allotment or sale, such power to be limited: (a) to the allotment of equity securities and sale of treasury shares in connection with an offer of, or invitation to apply for, equity securities (but in the case of the authority granted under paragraph (b) of resolution 13, by way of a rights issue only): (i) to ordinary Shareholders in proportion (as nearly as may be practicable) to their existing holdings; and (ii) to holders of other equity securities, as required by the rights of those securities, or as the Board otherwise considers necessary, and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter; and (b) in the case of the authority granted under paragraph (a) of resolution 14 and/or in the case of any sale of treasury shares, to the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (a) above) up to a nominal amount of £527,033.50, such power to apply until the end of the next Annual General Meeting to be held in 2025, or 27 February 2026, whichever is earlier, but, in each case, during this period the Company may make offers and enter into agreements, which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power ends and the Board may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not ended. Resolution 15: Additional authority to disapply pre-emption rights for purposes of acquisitions or capital investments 15. That, if resolution 13 above is passed, the Board be given the power, in addition to any power granted under resolution 14 above, to allot equity securities (as defined in the Act) for cash under the authority granted under paragraph (a) of resolution 13 and/or to sell Ordinary Shares held by the Company as treasury shares for cash as if Section 561 of the Act did not apply to any such allotment or sale, such power to be: (a) limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £527,033.50; and (b) used only for the purposes of financing a transaction which the Board determines 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, or for the purposes of refinancing such a transaction within six months of it taking place, such power to apply until the end of the next Annual General Meeting to be held in 2025, or 27 February 2026, whichever is earlier, but, in each case, during this period the Company may make offers and enter into agreements, which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power ends and the Board may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not ended. Notice of Annual General Meeting continued Resolution 16: Authority to purchase Company’s own shares 16. That the Company be generally and unconditionally authorised for the purpose of Section 701 of the Act to make market purchases (within the meaning of Section 693(4) of the Act) of Ordinary Shares of £0.25 each in the capital of the Company, provided that: (a) the maximum number of Ordinary Shares which may be purchased is 6,324,402; (b) the minimum price, exclusive of any expenses, which may be paid for each Ordinary Share is £0.25; (c) the maximum price, exclusive of any expenses, which may be paid for each Ordinary Share is an amount equal to the higher of: (i) 105% of the average mid-market value of an Ordinary Share, as derived from the London Stock Exchange Daily Official List for the five business days prior to the day on which the purchase is made; and (ii) an amount equal to the higher of the price of the last independent trade of an Ordinary Share and the highest current independent bid for an Ordinary Share. (d) this authority shall expire on the date of the next Annual General Meeting of the Company or on 27 February 2026, whichever is the earlier, but, in each case, provided that the Company may, before such expiry, enter into a contract or contracts to purchase shares which will or may be executed wholly or partly after the expiry of such authority and the Company may make a purchase of shares under such contract or contracts as if the authority had not expired. Resolution 17: Notice of General Meetings, other than Annual General Meetings 17. That a General Meeting (other than an Annual General Meeting) of the Company may be called on not less than 14 clear days’ notice. By order of the Board Dr Edward Ziff OBE DL Chairman & Chief Executive 15 October 2024 Registered Office: Town Centre House, The Merrion Centre, Leeds, LS2 8LY Registered in England and Wales No. 00623364 Explanatory notes Ordinary resolutions Resolution 1: To receive the Annual Financial Statements and Directors’ Report Under the Company’s Act 2006, the Directors are required to present the Strategic Report, Directors’ Report, Auditor’s Report and Annual Financial Statements of the Company to the Meeting. These are contained in the Company’s 2024 Annual Report and Financial Statements for the year ended 30 June 2024 (the ‘Annual Report’), which was circulated at the time of this Notice and is also available on the Company’s website at tcs-plc.co.uk. Resolution 2: Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy) for the year ended 30 June 2024. Under the Companies Act 2006 (the ‘Act’), the Directors must prepare an Annual Report detailing the remuneration of the Directors and a statement by the Chairman of the Remuneration Committee (together, the ‘Directors’ Remuneration Report’). The Act also requires that a resolution be put to Shareholders each year for their approval of that report. The Directors’ Remuneration Report can be found on pages 78 to 84 of the Annual Report. Resolution 2 is an advisory vote only and the Directors’ entitlement to remuneration is not conditional on it. Resolutions 3 – 9: Re-election of Directors The Board has agreed a policy whereby all Directors will seek annual re-election at the AGM, in accordance with the FRC Code of Corporate Governance. The Board believes that each Director seeking re-election continues to have the requisite skills and experience, and to demonstrate the necessary commitment, to contribute effectively to the Board. In addition, the Board confirms that each Non-Executive Director is able to commit sufficient time to meet their Board responsibilities. The biographical details of the Directors seeking re-election at the Meeting are set out on pages 64 to 65 of the Annual Report. None of the Non-Executive Directors seeking re-election at the Meeting have any existing or previous relationship, transaction or arrangement with the Company, nor with any controlling Shareholder of the Company or any associate of a controlling Shareholder of the Company, within the meaning of Listing Rule 13.8.17R(1). In considering the independence of the Non-Executive Directors, the Board has taken into account guidance from the UK Corporate Governance Code. Resolution 10: Reappointment of the auditors At each General Meeting at which the Company’s Annual Financial Statements are presented to its members, the Company is required to appoint auditors to serve until the next such meeting. The Board, on the recommendation of the Audit Committee, recommends the reappointment of BDO LLP as auditors of the Company. Resolution 11: Remuneration of auditors The remuneration of the Company’s auditors must be fixed by the Company in a General Meeting or in such manner as the Company may determine in a General Meeting. This resolution gives authority to the Directors to approve the terms of engagement and determine the remuneration of the Company’s auditors. 04 SHAREHOLDER INFORMATION SHAREHOLDER INFORMATION 144 145 Town Centre Securities PLC Annual Report and Accounts 2024 Resolution 12: Authority to make political donations Under the Act, political donations to any political parties, independent election candidates or political organisations other than political parties, or the incurring of political expenditure, are prohibited unless authorised by Shareholders in advance. As the legislation is capable of wide interpretation, the terms ‘political donation’, a ‘political party’, a ‘political organisation’ or ‘political expenditure’ are not easy to define. For example, sponsorship, subscriptions, payment of expenses, paid leave for employees fulfilling public duties, and support for bodies representing the business community in policy review or reform, may fall within the scope of these matters. Therefore, notwithstanding that the Company has not made a political donation in the past, and has no intention, either now or in the future, of making any political donation or incurring any political expenditure, the Board has decided to propose Resolution 12 to avoid running the risk of the Company or its subsidiaries inadvertently breaching the Act through the undertaking of routine activities. As permitted under the Act, this resolution also covers any political donations made or political expenditure incurred by any subsidiaries of the Company. This resolution caps the amount of all forms of political donations and expenditure that the Company and its subsidiaries would be permitted to make at an aggregate of £50,000. Resolution 13: Authority to allot Ordinary Shares The purpose of this resolution is to give the Directors authority to allot shares in place of the existing authority approved at the Annual General Meeting of the Company held on 1 December 2023, which expires at the end of the 2024 Annual General Meeting. The authority in paragraph (a) of the resolution will allow the Directors to allot new shares and grant rights to subscribe for, or convert other securities into, shares up to a nominal value of £3,513,556.50 (representing 14,054,226 Ordinary Shares), which is equivalent to approximately one third of the total issued Ordinary Share capital of the Company as at 14 October 2024, which is the latest practicable date prior to publication of this Notice. In accordance with institutional guidelines issued by the Investment Association, paragraph (b) of Resolution 13 will allow Directors to allot, including the Ordinary Shares referred to in paragraph (a) of Resolution 13, further of the Company’s Ordinary shares in connection with a pre-emptive offer by way of a rights issue to Ordinary Shareholders up to a maximum nominal amount of £7,027,113.25 representing approximately two thirds (66.67%) of the Company’s existing issued Ordinary Share capital and calculated as at 17 October 2024 (being the latest practicable date prior to publication of this document). The Company does not currently hold any shares in treasury. The Board believes it is in the best interests of the Company to have these authorities so that the Board can allot securities at short notice and without the need to hold a General Meeting. The authorities sought in paragraphs (a) and (b) of resolution 13 are without prejudice to previous allotments made under such existing authorities. The authorities will only be valid until the conclusion of the next Annual General Meeting of the Company to be held in 2025 or 27 February 2026, whichever is earlier. Special Resolutions Resolution 14: Authority to disapply pre-emption rights At the Annual General Meeting held on 1 December 2023, the Directors were given the authority to issue equity securities of the Company and sell treasury shares in exchange for cash until the 2024 Annual General Meeting. Resolution 14 renews this authority allowing Directors to issue equity securities and to sell treasury shares for cash on a non-pre-emptive basis: (i) to Ordinary Shareholders in proportion to their existing shareholdings and to holders of other equity securities as required by the rights of those securities, or as the Directors consider necessary, and to deal with, among other things, treasury shares, fractional entitlements and legal and practical problems in any territory, for example, in the case of a rights issue or other similar share issue; and (ii) otherwise, up to an aggregate nominal amount of £527,033.50 (representing 2,108,134 Ordinary Shares). This number represents approximately 5% of the issued share capital as at 14 October 2024 the latest practicable date prior to publication of this Notice. The Directors believe that this resolution will assist them in taking advantage of business opportunities as they arise. The Company does not currently hold any shares in treasury. These authorities are without prejudice to allotments made under previous authorities and will only be valid until the conclusion of the next Annual General Meeting to be held in 2025 or 27 February 2026, whichever is earlier. Resolution 15: Additional authority to disapply pre-emption rights for purposes of acquisitions or capital investments On 5 May 2016, the Pre-emption Group published a monitoring report on the implementation of its 2015 Statement of Principles for Disapplying Pre-emption Rights and a recommended template resolution for disapplying pre-emption rights. The template recommends Companies request authority to disapply pre-emption rights in respect of the additional 5% to be used when the Board considers the use to be for an acquisition or specified capital investment in accordance with the 2015 Statement of Principles as a separate resolution to the disapplication to issue shares on an unrestricted basis. Resolution 16 seeks this separate authority. Where the authority granted under resolution 15 is used, the Company will disclose this in the announcement regarding the issue, the circumstances that have led to its use and the consultation process undertaken. Notice of Annual General Meeting continued In accordance with the section of the Statement of Principles regarding cumulative usage of authorities within a rolling three- year period, the Directors also confirm their intention that (except in relation to an issue pursuant to resolution 15 in respect of the additional 5% referred to above) no more than 7.5% of the issued ordinary share capital will be issued for cash on a non-pre-emptive basis during any rolling three-year period, without prior consultation with Shareholders. The Directors believe that this resolution will assist them in taking advantage of business opportunities as they arise. These authorities are without prejudice to allotments made under previous authorities and will only be valid until the conclusion of the next Annual General Meeting to be held in 2025, or 27 February 2026, whichever is earlier. Resolution 16: Authority to purchase Company’s own shares Resolution 16 is a special resolution that will grant the Company authority to make market purchases of up to 6,324,402 Ordinary Shares, representing 15% of the Ordinary Shares in issue as at the date of the Notice. The Directors have no present intention to exercise the authority granted by this resolution, but the authority provides the flexibility to allow them to do so in future. The Directors would not exercise the authority unless they believed that the expected effect would promote the success of the Company for the benefit of its Shareholders as a whole. Any shares bought back will either be cancelled or placed into treasury at the determination of the Directors. The maximum price which may be paid for each ordinary share must not be more than the higher of (i) 105% above the average of the mid-market values of the ordinary shares for the five business days before the purchase is made or (ii) the higher of the price of the last independent trade and the highest current independent bid for the ordinary shares. The minimum price which may be paid for each ordinary share is £0.25. This authority shall expire at the Annual General Meeting to be held in 2025 or on 27 February 2026, whichever is the earlier, when a resolution to renew the authority will be proposed. Resolution 17: Notice of General Meetings other than Annual General Meetings Under the Act, the notice period required for all General Meetings of the Company is 21 clear days. Annual General Meetings will always be held on at least 21 clear days’ notice, but Shareholders can approve a shorter notice period for other general meetings. At last year’s Annual General Meeting Shareholders authorised the calling of general meetings (other than an Annual General Meeting) on not less than 14 clear days’ notice, and it is proposed that this authority be renewed. Resolutions and important notes The formal notice convening the Meeting (‘the Notice’) is set out on pages 143 to 149 of this document and includes explanatory notes to each of the resolutions to be proposed at the Meeting. There will be an opportunity for you to raise questions at the Meeting about the resolutions set out in the Notice and about the business of the Company. Further Information Further information relating to the Company and its financial information can be found in the Company’s Annual Report and financial statements for the year ended 30 June 2024, which was circulated at the same time as this Notice and is also available on the Company’s website at tcs-plc.co.uk Recommendation The Board considers that Resolutions 1 to 17 are in the best interests of the Company and its Shareholders as a whole and recommends that you vote in favour of such resolutions, as the Directors intend to do in respect of their own beneficial holdings. Important notes The following notes explain your general rights as a Shareholder and your right to attend and vote at this Annual General Meeting or to appoint someone else to vote on your behalf. 1. 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 close of business on Monday 25 November 2024 (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. 2. In order to gain admittance to the meeting, members maybe asked to prove their identity. 3. 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 using a hard copy proxy form, 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 Link Group, PXS 1, Central Square, 29 Wellington Street, Leeds, LS1 4DL 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. 04 SHAREHOLDER INFORMATION SHAREHOLDER INFORMATION 146 147 Town Centre Securities PLC Annual Report and Accounts 2024 4. You can vote either: • by logging on to investorcentre.linkgroup.co.uk/Login/Login where full instructions can be found; • through the Link Investor Centre app (see notes below); • by requesting a hard copy form of proxy directly from the registrar, Link Group, by emailing shareholderenquiries@ linkgroup.co.uk or calling on Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 and 17:30, Monday to Friday excluding public holidays in England and Wales; or • in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below; or • if you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to proxymity.io (see notes below). For an electronic proxy appointment to be valid, the appointment must be received by the Company’s registrar by no later than 10.00am on Monday 25 November 2024 (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). For a hard copy form of proxy to be valid, it must be completed, signed and sent to the offices of the Company’s registrars, Link Group, PXS 1, Central Square, 29 Wellington Street, Leeds, LS1 4DL, so as to arrive no later than 10.00am on Monday 25 November 2024 (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. 5. If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last by the registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of use carefully. Electronic communication facilities are open to all Shareholders and those who use them will not be disadvantaged. 6. The return of a completed proxy form, electronic filing, any CREST Proxy Instructions or appointment of a proxy via Proxymity will not prevent a Shareholder from attending the Meeting and voting in person if he/she wishes to do so. Unless otherwise indicated on the Form of Proxy, CREST, Proxymity or any other electronic voting instruction, the proxy will vote as they think fit or, at their discretion, withhold from voting. 7. Link Investor Centre is a free app for smartphone and tablet provided by Link Group (the company’s registrar). It allows you to securely manage and monitor your shareholdings in real time, take part in online voting, keep your details up to date, access a range of information including payment history and much more. The app is available to download on both the Apple App Store and Google Play, or by scanning the relevant QR code below. Notice of Annual General Meeting continued 8. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST manual (available from euroclear.com). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 9. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & International Limited’s specifications, and must contain the information required for such instructions, as described in the CREST manual. The message must be transmitted to be received by the issuer’s agent (ID RA10) by 10:00am on Monday 25 November 2024. For this purpose, the time of receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. 10. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & International Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 11. If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to proxymity.io. Your proxy must be lodged by 10:00am on 25 November 2024 in order to be considered valid or, if the meeting is adjourned, by the time which is 48 hours before the time of the adjourned meeting. Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. An electronic proxy appointment via the Proxymity platform may be revoked completely by sending an authenticated message via the platform instructing the removal of your proxy vote. 12. A Shareholder or Shareholders having a right to vote at the meeting and holding at least 5% of the total voting rights of the Company (see note 14 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 Auditors’ 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: 12.1 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; 12.2 comply with the requirements set out in note 7 below; and 12.3 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: 12.4 it may not require the Shareholder(s) making the request to pay any expenses incurred by the Company in complying with the request; 12.5 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. 13. Any request by a Shareholder or Shareholders to require the Company to publish audit concerns as set out in note 6 above: 13.1 may be made either: 13.1.1 in hard copy, by sending it to the Company Secretary, Town Centre House, The Merrion Centre, Leeds, LS2 8LY; or 13.1.2 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); 13.2 must state the full name(s) and address(es) of the Shareholder(s); and 13.3 (where the request is made in hard copy from or by fax) must be signed by the Shareholder(s). 14. As at 14 October 2024 (being the last practicable date prior to the publication of this notice) the Company’s issued share capital consists of 42,162,679 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 14 October 2024 are 42,162,679. 15. 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: 15.1 to do so would interfere unduly with the preparation for the meeting or would involve the disclosure of confidential information; 15.2 the answer has already been given on a website in the form of an answer to a question; or 15.3 it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. 16. 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’): 16.1 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 16.2 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. 17. Biographical details of all those Directors who are offering themselves for appointment or re-appointment at the meeting are set out on page 64 and 65 of the Annual Report and Accounts. 18. 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. 19. 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. 19.1 copies of the service contracts of the Executive Directors; and 19.2 copies of the letters of appointment of the Non-Executive Directors. 20. 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 tcs-plc.co.uk. 04 SHAREHOLDER INFORMATION SHAREHOLDER INFORMATION 148 149 Town Centre Securities PLC Annual Report and Accounts 2024 Investor Information Registrar All general enquiries concerning shareholdings in Town Centre Securities PLC should be addressed to: Link Group PXS Central Square 29 Wellington Street Leeds LS1 4DL Telephone: 0371 664 0300 (Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open from 9.00am–5.30pm, Monday to Friday excluding public holidays in England and Wales.) Telephone from outside United Kingdom: +44 (0) 371 664 0300 Email: shareholderenquiries@linkgroup.co.uk Website: linkassetservices.com Dividends Interim dividend: 8.5p per share paid on 14 June 2024 to Shareholders on the register on 24 May 2024. There is no proposed final dividend. 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 Independent auditors BDO LLP Brokers Panmure Liberum Peel Hunt Bankers Lloyds Banking Group Plc The Royal Bank of Scotland Plc Svenska Handelsbanken AB (Publ) Solicitors DLA Piper UK LLP Bond Dickinson LLP TLT LLP Principal valuers Jones Lang LaSalle CBRE Corporate public relations MHP Communications Contact information Registered office Town Centre House The Merrion Centre Leeds LS2 8LY Registered number 623364 England Email info@tcs-plc.co.uk Website tcs-plc.co.uk Company Secretary Tom Evans Town Centre House The Merrion Centre Leeds LS2 8LY Registrar and transfer office Link Group Trustees to mortgage debenture holders Link Market Services Trustees Limited c/o Apex Corporate Trustees (UK) Limited 6th Floor 125 Wood Street London EC2V 7AN Glossary AGM Annual General Meeting CVA Company Voluntary Arrangement, a process under UK insolvency law which allows a company to reschedule its debts with the consent of a specified majority of its creditors. EPC Energy Performance Certificate EPRA European Public Real Estate Association EPRA EPS A measure of EPS designed by EPRA to present underlying earnings from core operating activities EPRA Guidance The EPRA Best Practices Recommendations Guidelines October 2019 EPRA NTA A measure of NAV designed by EPRA to present the fair value of a company on a long-term basis. For these purposes, the Group uses EPRA Net Tangible Assets as defined in the EPRA Guidance EPS Earnings per share calculated as the profit or loss for the period after tax attributable to Shareholders of the Company divided by the weighted average number of shares in issue in the period ERV Estimated rental value: the independent valuer’s opinion of the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property GDV Gross Development Value IFRS International Financial Reporting Standards LTV Loan-to-value: • Facility specific – the outstanding amount of a loan as a percentage of property value • Group LTV – The amount of financial liabilities less cash and cash equivalents (incl. overdrawn balances) as a percentage of the Group’s total assets less cash and cash equivalents NAV Net asset value Net borrowings Total financial liabilities less IFRS 16 lease liabilities and cash equivalents Net initial yield Annualised net rents on an investment property as a percentage of the investment property valuation less purchaser’s costs Post investment yield Annualised net rents on a property as a percentage of the total development costs of a property REIT Real Estate Investment Trust Reversionary yield ERV on an investment property as a percentage of the investment property valuation less purchaser’s costs Total property return Calculated as the net operating profit and gains/losses from property sales and valuations as a percentage of the opening portfolio carrying value Total Shareholder return The movement in share price over a period plus dividends paid in the period expressed as a percentage of the share price at the start of the period Void rate The percentage of the portfolio (based on rental and estimated rental value) of units that are not subject to a lease or an agreement for lease. This measure excludes units that are specifically held for redevelopment Weighted average unexpired lease term The term to the first tenant break or expiry of the leases in the portfolio weighted by rental value before rent concessions, also referred to as WAULT 04 SHAREHOLDER INFORMATION SHAREHOLDER INFORMATION 150 151 Town Centre Securities PLC Annual Report and Accounts 2024 Printed by a CarbonNeutral® Company certified to ISO 14001 environmental management system. This product is made using recycled materials limiting the impact on our precious forest resources, helping reduce the need to harvest more trees. 100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets the chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled and the remaining 1% used to generate energy. The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released. CBP00019082504183028 152 Town Centre Securities PLC Annual Report and Accounts 2024 Town Centre Securities PLC Annual Report and Accounts 2024 Town Centre Securities PLC Town Centre House The Merrion Centre Leeds LS2 8LY Tel: 0113 222 1234 45 Weymouth Street London W1G 8BY tcs-plc.co.uk