Conygar Investment Company Plc (LON:CIC) have today published preliminary results for the year ended 30th September 2021.
· Net asset value increased by £25.3 million (28.5%) to £114.1 million (217.4p per share).
· Total cash deposits of £13.7 million (26.0p per share).
· No debt and no borrowings.
· £29.2 million surplus on valuation of the Group’s investment properties, comprising a £28.7 million uplift at The Island Quarter, Nottingham, and £0.5 million uplift at Cross Hands, Carmarthenshire. The combined surplus amounts to an increase of 55.6p per share before other net operational and administrative costs. At The Island Quarter, the resulting £70.5 million valuation equates to approximately £2 million per acre.
· Development progressing for the first phase of the mixed-use development at The Island Quarter and resolution passed to grant planning permission for a 700-bed student accommodation scheme.
· Detailed planning application submitted in January 2021 for the next phase of The Island Quarter development which includes a hotel, to be managed by Intercontinental Hotels Group, residential rental apartments and co-working space.
· A further planning application was submitted in October 2021 for the proposed waterfront development in Holyhead, Anglesey, supplementing the outline consent previously granted in 2014, which includes a 250-berth marina, 259 townhouses and apartments and associated retail and public realm.
· Bought back 1.09 million shares (2.0% of ordinary share capital) at an average price of 111.5p per share.
Group net assets summary
| 30 September 2021 | Per share | 30 September 2020 | Per share | |
| £’m | p | £’m | p | |
| Properties | 108.4 | 206.6 | 56.2 | 104.9 |
| Cash | 13.7 | 26.0 | 32.1 | 60.0 |
| Provisions | (7.3) | (13.9) | – | – |
| Other | (0.7) | (1.3) | 0.5 | 0.9 |
| Net assets | 114.1 | 217.4 | 88.8 | 165.8 |
Robert Ware, Conygar Investment Company Chief Executive commented:
“The speed and effectiveness of the UK’s vaccination programme has enabled a quicker and stronger economic recovery than many commentators predicted. This success has been mirrored in the real estate sector with commercial property values increasing in the last year, on average by approximately 7%, driven by higher transaction volumes and the hardening of yields across much of the market. Our results have benefited from this economic bounce and reflect a significant improvement to those reported in the previous year.
Although we are acutely aware that a sustained economic recovery remains far from assured, and that the expectations within the real estate industry have changed markedly over recent years, we are increasingly confident that our property portfolio is well positioned to benefit both from the renewed market optimism and significant post COVID-19 social changes.”
Chairman’s & chief executive’s statement
Results summary
We present the Group’s results for the year ended 30 September 2021.
The Group’s net asset value per share has increased by 51.6p (31%) in the year to 217.4p as at 30 September 2021 (2020: 165.8p). The profit before tax, which includes a £29.2 million unrealised surplus from the revaluation of our investment properties, was £28.2 million (2020: loss of £8.2 million).
As at 30 September 2020, the Group’s investment in The Island Quarter, Nottingham, was reported at cost as the fair value at that date was not readily determinable. However, the substantial progress made during the year to corroborate the project’s design, market comparables and development cash flows, as well as the significant progress made on planning and the commencement of development, has enabled this 36-acre site to be more reliably valued by Knight Frank LLP as at 30 September 2021.
The resulting valuation of £70.5 million, which represents a £28.7 million (69%) surplus over cost, provides support and justification for the direction of travel taken to date as we start to unlock, for the benefit of all stakeholders, the full potential of a project which will, in due course, provide an exciting new destination as well as substantial investment and employment opportunities for the city of Nottingham. Further details of the basis and valuation sensitivities are set out in note 12.
Since acquiring The Island Quarter in 2016, we have made significant headway in developing the concept and strategy and over the last year have submitted three detailed planning applications for the early phase developments. Two of these have subsequently been granted with the third, which includes two hotels, residential apartments and co-working space, expected to be considered by the planning committee at the end of 2021. The detailed applications granted to date have enabled us to commence the construction of the first phase, which includes a 21,500 square foot food and beverage-led building, planned for completion by Easter 2022, and initiate the on-site preliminary groundworks for a 700-bed student accommodation scheme which we hope to have operational for the September 2023 university intake.
In addition, the valuation of our retail park at Cross Hands, Carmarthenshire, has increased in the year by 7.6% from £16.5 million at 30 September 2020 to £17.8 million at 30 September 2021, in line with the increase in capital values reported across the retail warehousing sector.
Retailers with a predominantly out-of-town presence have been much better protected from the rise of online retailing than those with a more traditional high street focus where click-and-collect, larger car parking provisions and the drive-to convenience have proved more desirable, as highlighted by their higher footfall throughout the pandemic and quicker recovery post-lockdowns.
At our retail park in Cross Hands, from which over 70% of the Group’s rental income is currently derived, we have collected 97% of the rents receivable in the year which reduces to 92% for the Group as a whole. Of the remainder, 2% are expected to be received in full by the end of the calendar year, 1% are on deferred payment terms to be settled in full by March 2022 and 5% have been provided for in these financial statements.
This is a pleasing result, particularly given the volatility in the retail sector throughout the pandemic, which confirms the strength and adaptability for the vast majority of the Group’s tenants.
During the year we have also made good progress on the rest of the portfolio, the brief highlights of which are set out below.
At Holyhead Waterfront in Anglesey we have submitted a further application, to supplement the outline consent granted in 2014, for a waterfront development to include both residential apartments and a 250-berth marina, which we are very hopeful will provide a catalyst for the regeneration of Holyhead.
Interest continues, from the renewables sector, in our 203-acre site at Rhosgoch, Anglesey. However, growing concerns about the capacity for the UK’s existing nuclear capability to phase out gas power and meet the government’s net zero targets have reopened the possibility for at least one more large scale nuclear project this parliament. Whilst exploratory talks continue between the UK government and various operators, for a possible nuclear capability on the Isle of Anglesey, we have not progressed the renewables option for our sites at Rhosgoch and Parc Cybi as they, in addition to Holyhead, would be ideally located to support the infrastructure required for such a project.
As previously reported, we exchanged a conditional contract in 2019 to sell our industrial property in Selly Oak, Birmingham, to a specialist provider of student accommodation. The conditionality within the agreement requires, in addition to other matters, the granting of a permission on the site for a student accommodation scheme which was duly obtained, subject to agreeing the section 106, in September 2021. This we hope will be the catalyst for the completion of the property’s sale in the coming months.
Elsewhere, we are completing the construction of a spine road and associated drainage at Haverfordwest in Pembrokeshire to open up the site for future development and have sold two of our smaller development sites at King’s Lynn, Norfolk and Fishguard Lorry Stop in Pembrokeshire.
Cash flow
The net cash outflow in the year was £18.5 million, including £16.9 million incurred to progress our property developments. As at 30 September 2021, the Group has available cash deposits of £13.7 million, much of which is allocated to the implementation of essential infrastructure and completion of the first phase development at Nottingham. However, in order to further progress our pipeline of development projects, in particular The Island Quarter, we will need to raise substantial amounts either as debt, through asset sales or from joint ventures and we are in advanced discussions on a number of fronts in that regard.
Dividend
The Board recommends that no dividend is declared in respect of the year ended 30 September 2021. More information on the Group’s dividend policy can be found within the strategic report.
Share buy back
During the year, the Group acquired 1,092,000 ordinary shares, representing 2.0% of its ordinary share capital, at a cost of £1.22 million which equates to an average price of 111.5p per share. As a result of the buy backs, net asset value per share has been enhanced by 1.1p per share. The Group will seek to renew the buy back authority of 14.99% of the issued share capital of the Company at the forthcoming AGM. We consider the buy back authority to be a useful capital management tool and will continue to use it when we believe the stock market value differs too widely from our view of the intrinsic value of the Company.
Board change
We are pleased to welcome David Baldwin to the Board. David was appointed as Finance Director on 10 May 2021 having been with the Company for five years as Financial Controller and also, since 6 April 2020, as Company Secretary.
Outlook
The speed and effectiveness of the UK’s vaccination programme has enabled a quicker and stronger economic recovery than many commentators predicted. This success has been mirrored in the real estate sector with commercial property values increasing in the last year, on average by approximately 7%, driven by higher transaction volumes and the hardening of yields across much of the market. Our results have benefited from this economic bounce and reflect a significant improvement to those reported in the previous year.
Although we are acutely aware that a sustained economic recovery remains far from assured, and that the expectations within the real estate industry have changed markedly over recent years, we are increasingly confident that our property portfolio is well positioned to benefit both from the renewed market optimism and significant post COVID-19 social changes.
N J Hamway R T E Ware
Chairman Chief Executive
