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Conygar Investment Company PLC

Conygar Investment Company PLC well positioned with a strong balance sheet

Robert Ware, Conygar Investment Chief Executive, commented:

“Significant progress and change has occurred over the year. With the sale of our holding in Regional REIT and the sale or forward sale of certain assets, our balance sheet is now stronger than a year ago, consisting only of our properties and cash reserves, with no debt. We have submitted outline planning for the Nottingham City Centre site, taken full control of the Holyhead Waterfront development, are delivering our properties under construction and are also well positioned to capitalise on other opportunities when they arise.”

Conygar Investment Company PLC (LON:CIC), today announce preliminary results for the year ended 30 September 2018

Highlights

· Net asset value per share 201.3p.

· Outline planning submitted to Nottingham City Council for a mixed use scheme consisting of over 2 million square feet.

· Exchanged a lease agreement with Lidl UK to construct a 23,000 square foot store at Cross Hands, south west Wales.

· Disposed of M&S Food Hall at Ashby-de-la-Zouch for £4.4 million.

· Agreed a lease with B&M Retail and a forward sale at Ashby-de-la-Zouch.

· Planning permission granted and construction started for an 80 bed Premier Inn at Parc Cybi, Anglesey. Forward sold for £6.9 million.

· Purchase of industrial property in Selly Oak, Birmingham for £3.5 million in April 2018.

· Sold all 26.3 million Regional REIT shares for £25.5 million.

· Total cash available of £49.3 million with no debt or borrowings.

· Bought back 7.13 million shares (10.7% of ordinary share capital) at an average price of 165.9 pence per share.

We present the Group’s results for the year ended 30 September 2018.

Net asset value per share was 201.3p (2017: 203.0p).

Significant progress and change has occurred over the year. Following the sale of the investment property portfolio in 2017, the Group has sold all of its holding in Regional REIT Ltd. We have taken full control of the development project at Holyhead Waterfront, which was previously a 50%/50% joint venture with Stena Line. We have sold one asset and conditionally agreed to forward sell two assets taking advantage of the favourable market conditions we have seen for assets with long-term income, let to strong tenants.

As referred to in our interim results for the six months ended 31 March 2018, we have written down the values of two of our development projects, at Fishguard Waterfront and Llandudno Junction, and this has been the main cause of the loss before taxation for the year of £3.8 million (2017: profit of £1.2 million).

Despite this loss, the balance sheet remains strong and now consists of our investment properties under construction and development projects totalling £70.2 million and our cash deposits of £49.3 million.

This places us in a good position to deliver our development pipeline and also to capitalise on opportunities when they arise.

Progress

The Group disposed of its entire holding of 26.3 million shares in Regional REIT Limited, realising a total of £25.5 million. The total gain from the investment property portfolios sold to Regional REIT is £45.7 million over seven years, on an original investment cost of £113.4 million.

The development pipeline has progressed well during the year. In June, the Group submitted an outline planning application for a mixed used scheme of over two million square feet at its 37 acre site in Nottingham City Centre. We have continued to work closely with Nottingham City Council to deliver this exciting project, which will include offices, apartments, student housing, leisure uses and associated community retail offering, along with open public spaces. We expect a decision from the Council with regard to the planning application shortly and we are keen to begin the infrastructure works as soon as possible.

As mentioned above, the Group has decided to sell or forward sell a number of assets which it originally intended to hold to provide long-term income. The unsolicited offers received were compelling and highlight that, despite the current uncertainty in the UK economy, there is still a strong appetite for good quality regional assets. In November 2017, we sold our M&S Food Hall investment in Ashby-de-la-Zouch for £4.35 million, realising a profit of £446,000. At the same site, we exchanged a lease agreement with B&M Retail Ltd to construct a 20,000 square foot store with an additional 7,500 square foot garden centre and parking. Subsequently, an offer was received to forward purchase this asset and once constructed, which we expect will be by next autumn, the disposal will result in the Group receiving £4.3 million for the land and completed development.

On Parc Cybi, Anglesey, detailed planning permission was granted by Ynys Mon County Council (the Isle of Anglesey County Council) for an eighty bedroom hotel, which once built, is subject to a 25 year lease with Premier Inn Hotels Limited. Similarly to Ashby-de-la-Zouch, an offer was received for this asset which will result in the Group receiving net proceeds of £6.9 million for the completed development. These net proceeds equate to a net initial yield of 4.7% and again this disposal highlights the attraction of assets benefitting from long-term income let to high quality occupiers.

In September, we were pleased to announce that we had exchanged a lease agreement with Lidl UK Gmbh to construct a 23,000 square foot store on our retail park at Cross Hands, in south west Wales. Once Lidl is operating, approximately 75,000 square feet of the park will be income generating, leaving just 15,000 square feet of constructed space available to let and 0.75 acres available for future construction. We continue to aim to have this site fully operational by next autumn.

In May, the Group agreed with its partner, Stena Line Ports Limited, to take 100% control of its joint venture development project at Holyhead Waterfront. The transaction enables us to progress with the scheme as planned and we are working towards obtaining detailed planning permission in the coming months. As part of the transaction, Stena was granted 999 year leases of the platform at Soldier’s Quay, which is not required for the waterfront development, and a warehouse, which is situated at Soldier’s Point and is used by Stena. We retain a right to call for a sublease if this warehouse is required for the waterfront development in the future. As part of the transaction, Stena repaid £2.5 million to Conygar, which is Stena’s 50% share of a loan the Group made to the joint venture company. As consideration for the sale of its shares in the joint venture company, Stena received £1 and will receive 20% of the profit after tax of the development once it has completed.

Lastly, in April, we acquired an industrial property in Selly Oak, Birmingham for £3.5 million which generates income of £215,000 per annum. The property is located in a predominantly residential area and it benefits from good medium term redevelopment prospects.

Dividend

The Board recommends that no dividend is declared in respect of the year ended 30 September 2018. More information on the Group’s dividend policy can be found within the Strategic Report.

Share Buy Back

During the year, the Group acquired 7,130,000 ordinary shares representing 10.7% of its ordinary share capital, at an average price of 165.9p per share at a cost of £11.8m. As a result of the buy backs, net asset value per share has been enhanced by 4.4 pence per share. Following the year end, the Group has acquired a further 2,550,000 ordinary shares representing 3.8% of its ordinary share capital at an average price of 171.5p per share. This cost £4.4 million and has enhanced net asset value per share by 1.6 pence per share. The Group will seek to renew the buy back authority at the forthcoming AGM as we consider it to be a useful capital management tool.

Outlook

Conygar Investment balance sheet is now stronger than a year ago, consisting only of our properties and cash reserves, with no debt. Accordingly, we are well positioned to deliver the development projects and also, to make further acquisitions should the right opportunities arise.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.