RNS announcement

6 June 2016

Palace Capital plc

("Palace Capital" or the "Company")

Audited results for the year ended 31 March 2016 -

Palace Capital delivers income and value creation

Palace Capital, the property investment company that focuses on commercial property outside London, is pleased to announce its audited results for the year ended 31 March 2016. 

HIGHLIGHTS

Corporate highlights

·      Portfolio valuation at 31 March 2016: increased by 69% to £174.5 million (31 March 2015: £103.0 million)

·      EPRA NAV per share: increased by 5% to 414p at 31 March 2016 (31 March 2015: 396p) includes the absorption of equity raised at 360p

·      Profit before tax of £11.8 million (31 March 2015: £14.0 million)  

·      EPRA earnings: increased by 64% to £7.7 million (31 March 2015: £4.7 million)

·      EPRA EPS: increased by 13% to 31.3p (31 March 2015: 27.7p)

·      Final dividend of 9p proposed, making a total for the year of 16p which is a 23% increase (31 March 2015: 13p)

Operational highlights

Five acquisitions totalling £66.0m:

·      Broad Street Plaza, Halifax for £24.18 million

·      Sol Central, Northampton for £20.7 million

·      249 Midsummer Boulevard, Milton Keynes for £7.225 million

·      Bank House King Street, Leeds for £10.0 million

·      46-54 High Street, Sutton for £3.95 million

Three sales, totalling £2.0million, all well above book value:

·      Unit 1, Clayton Manor, Burgess Hill for £1.25 million

·      54 Albert Road North, Reigate for £0.45 million

·      Unit F, 61 Albert Road North, Reigate for £0.31 million

Asset management highlights

·      Approval by City of York Council for 139 apartments at Hudson House, York in February 2016

·      Secured the surrender of a lease held by Gala Casinos at Sol Central, Northampton for £3.8 million plus £0.2 million rates refund

·      Strip out of the Gala space in anticipation of agreeing new leases with prospective tenants completed

·      Work nearing completion on office-to-residential conversion of 14 apartments at The  Copperfields, Dartford, Kent

·      Rent roll up 52% to £13.5 million per annum (31 March 2015: £8.9 million)

·      Weighted average unexpired lease term 6.3 years (31 March 2015: 4.5 years)

Financial highlights

·      £20m equity raised at 360p in June 2015

·      £80.0 million new debt facilities secured across the portfolio including a £30.0 million revolving credit facility on a 5 year term

·      Loan to value net of cash: 37% (31 March 2015: 23%)

·      Weighted average cost of debt: 3.1% (31 March 2015: 3.9%)

·      Weighted average debt maturity: 3.9 years (31 March 2015: 2.8 years)

* EPRA is the European Public Real Estate Association

Neil Sinclair, Chief Executive of Palace Capital, said:

"This has been a particularly exciting year for us and we are delighted with the progress that we are making. Our property portfolio has been strengthened by the acquisition of first class assets in growth locations as our active asset management strategy continues to grow both our rental income and capital values.

We are confident that our ability to source off market opportunities and our active asset management strategy will enable us to fulfil our progressive dividend policy for the benefit of shareholders in the medium term"

Notice of AGM

A copy of the annual report and accounts and notice of annual general meeting ("AGM") will shortly be posted to shareholders and is available from the Company's website, www.palacecapitalplc.com. The AGM will be held at the offices of Hamlins LLP, Roxburghe House, 273-287 Regent Street, London W1B 2AD at 10.00 a.m. on 6 July 2016.

For further information contact:

Palace Capital plc

Neil Sinclair, Chief Executive

Stephen Silvester, Finance Director

Tel. 44 (0)20 3301 8331

Allenby Capital Limited (Nominated Adviser and Joint Broker)

Nick Naylor / James Reeve

Tel. 44 (0)20 3328 5656

Arden Partners plc (Joint Broker)

Chris Hardie / Ciaran Walsh

Tel. 44 (0)207 614 5917

Capital Access Group (Financial PR)

Simon Courtenay

Tel. 44 (0)20 3763 3400

We are delighted to report the Company's results for the year ended 31 March 2016, which show that we made a profit before tax of £11.8m. Net Asset Value per share increased by 5% from 396p to 414p and this includes the absorption of the dilutive impact of our £20m share placing last June at 360p per share.

The carrying value of the Company's portfolio is now at £174.5m compared to £103.0m 12 months prior largely reflecting acquisitions of £66m during the year.

Our contracted rent roll is now £13.5m per annum with a net income of £11.8m per annum allowing for head rents, service charge shortfall and empty rates. The latter would have been considerably lower but for the fact that one of our significant assets at Hudson House, York, the 103,000 sq ft office building adjoining the Railway Station, cannot be let on reasonable leases as it is pending refurbishment/redevelopment.

Our bank borrowings are at £71.9m representing a net LTV of 37% meaning we remain conservatively geared.

We have adopted a progressive dividend policy allowing our shareholders to benefit as the company prospers. We paid an interim dividend of 7.0 pence per share on 30 December 2015 and as we stated on 10 May 2016 we intend to pay a final dividend of 9.0 pence per share on 29 July 2016 to those shareholders on the register as at 8 July 2016.

We are making sure and steady progress. We have strict criteria on any potential acquisition so we are cautious but very opportunistic and only focus on those where we can achieve the desired

return. We are constantly travelling around the country meeting owners and agents and this has helped us to source and conclude off-market acquisitions.

Our focus has been to acquire properties outside London. We made the small £1.8m acquisition of Hockenhull Estates in 2011 comprising nine Cheshire based income producing properties but then made the significant £39.25m corporate acquisition of the Quintain subsidiary known as the Signal Portfolio in October 2013 comprising 24 properties and the £32m corporate acquisition of Property Investment Holdings Ltd in August 2014 comprising 17 properties.

We were investing in the regional market at a time when there were very few players with no talk of a Northern Powerhouse or Regional Devolution. We have seen very considerable growth from these two major acquisitions. The remaining properties in the Signal Portfolio have recently been valued at £71.0m and it is worth bearing in mind that £3.9m of sales have already taken place. In addition the remaining properties in the PIH portfolio have been valued at £36.5m with £2.0m of sales having been completed from this portfolio. The Board considers there are still considerable asset management opportunities on these two portfolios and we envisage continuing growth from them.

Our enlarged network has allowed us to make five opportunistic acquisitions totalling £66.0m in the last financial year three of which were off market. These were:

·      Bank House, King Street, Leeds - £10.0m

·      Sol Central, Northampton - £20.7m

·      46-54 High Street, Sutton - £3.95m

·      249 Midsummer Boulevard, Milton Keynes - £7.225m

·      Broad Street Plaza, Halifax - £24.18m

Further details of these acquisitions are contained in our Property Report.  As with the rest of our portfolio,  we will apply our own style of active management to all of these acquisitions, however, in our Portfolio Update announced on 10 May 2016 we made particular reference to Broad Street Plaza, Halifax. We have now received credit approval from a major insurance company to replace the existing short-term facility with a new loan of £15.2m for a term of ten years at a fixed interest rate of 3.5% including margin. Not only does this provide us with a current return on our equity of 14.5% but this rises to 16% in 2017 when the fixed rent increases take place. In addition, we have also been advised that we can claim full capital allowances as these have not been claimed to date so we have every opportunity of an exceptional return from this property. We are cash managers as well as property asset managers and Broad Street Plaza is a particular example.

Broad Street Plaza is within half a mile of one of the country's most successful but largely unknown urban regeneration schemes. Dean Clough in Halifax is a former mill which was once a carpet factory and which closed in 1983. It is now flourishing after tens of millions of pounds of investment with over 1,000,000 sq. ft of offices, restaurants, galleries and retail and is virtually fully occupied. This is very complementary to Broad Street Plaza.

We are really excited about Hudson House, York situated within a minute's walk from the Railway Station. City of York Council are one of only three councils in the country to recently announce a major initiative to see surplus railway land developed into thriving office, retail and residential schemes. This will be known as York Central and can only benefit our 103,000 sq ft office building where we are planning a major office and residential scheme. Our view is that public transport and in particular railway hubs such as York will play an increasing part for an office and residential development to be successful. We are exceptionally well placed at Hudson House as York is a growing business, educational and tourist destination.

We are delighted to have appointed Stephen Silvester as Group Finance Director and Matthew Simpson as Finance Manager during the year.  We are also pleased to report that our Property Director, Richard Starr will be joining us as a full-time Executive Director on Monday 4 July 2016. They have made a significant contribution to the growth of Palace Capital.  With Andrew Thomas joining us on 13 June 2016  as Investment Manager, we will have a formidable acquisition, asset management and finance team.

We are looking at a number of significant opportunities at the moment as we strive to grow the Company and joining the Official List of the London Stock Exchange remains our objective. Our acquisition strategy remains cautious but opportunistic. We are very grateful for the support shown by our shareholders and we believe we have the management team to achieve our goals. We look to the future with continued confidence.

Neil Sinclair FRICS

Chief Executive

3 June 2016

This year we have continued to build our property portfolio through five acquisitions totalling £66.0 million. At the same time we have sold some of our smaller holdings above book value. We now have a property portfolio valued at £174.5 million which is a meteoric rise since the significant purchase in October 2013 of the Signal portfolio.

KEY STATISTICS

• 54 properties comprising 1.85 million sq ft of space.

• Over 140 tenants providing a contractual rent roll of £13.5 million per annum at 31 March 2016 (2015: £8.9 million).

• 34 new lettings and lease renewals completed during the year representing 10% of the total floor area.

• Diversity of sectors within the portfolio including offices, industrial and retail, which is complemented by our new acquisitions in the leisure sector.

• WAULT increased to 6.3 years (2015: 4.5 years) - a reflection of our active asset management initiatives.

ACQUISITIONS

These are referred to in the Chief Executive's Review and are set out in more detail below.

Bank House, Leeds

In April 2015 we completed the purchase of Bank House, Leeds for £10 million reflecting a net initial yield of 8.6%. A Grade II listed city centre office property, built in 1970, comprising 88,000 sq. ft. around a large central atrium. The property is home to The Bank of England, who have occupied it since it was built, as well as Walker Morris who are the largest independent firm of solicitors in Leeds.

Since the purchase we have extended the Bank of England lease until July 2023 with a minimum increase in the annual rent from £115,000 per annum to £232,000 per annum at the March 2020 rent review. The first floor, as anticipated, became vacant recently and we are in the process of starting a refurbishment programme following the settlement of dilapidations. When completed, this will provide a single floor plate of 17,000 sq. ft. which will be one of the largest second-hand office floors available.

We will be seeking to attract occupiers looking for a discount to the prime rents.

Sol Central, Northampton

In May 2015, we acquired the holding company of a prominent city centre leisure scheme, Sol Central in Northampton for £20.7m reflecting a net initial yield of 8.86%. Comprising a 10 screen cinema, casino, 151 room hotel, gym and 375 space car park, this 200,000 sq ft development has not been trading at its optimum level for a number of years. Significantly, the scheme lacks restaurants.

We intend to transform the scheme to create a dominant city centre offering to take advantage of the number of Council led initiatives within the city centre. A specialist architect and technical team have been instructed to ensure our vision can be achieved. To facilitate this we have taken a surrender of the lease to Gala Casino, who vacated in 2011 in return for £4 million to account for loss of rent, dilapidations  and a rates rebate in August 2015.

46-54 High Street, Sutton

In August 2015, we completed the purchase of 46 - 54 High Street Sutton for £3.95 million reflecting a net initial yield of 8%. Comprising three retail units and 15,000 sq ft of offices, the building is held on a lease with 120 years unexpired from The London Borough of Sutton, with ground rent of 12.5% of rents receivable.  Located moments from the railway station, the offices are let to Sutton Housing Partnership at £13.50 per sq. ft. which we consider modest  and offers excellent rental growth potential in December 2017 when the next rent review is due.  One of the retail units was recently let to Foxtons on a new 15 year lease.

Since the start of 2016 we have acquired two further investments, taken advantage of the new £30million Revolving Credit Facility with NatWest Bank and the capital created from our historic ownership.

249 Midsummer Boulevard, Milton Keynes

In February we completed the purchase of 249 Midsummer Boulevard, Milton Keynes for £7.225m reflecting a net initial yield of 7.25%. The property comprises 49,000 sq. ft. and is multi let to seven tenants including DHL & Crawford's. The majority of tenants are paying an average of £12 per sq. ft. which is a discount to a recently let suite at £13.50 per sq. ft. Milton Keynes is one of the fastest growing towns in the UK and so we consider there is excellent potential for these rents to continue to rise in line with those being currently achieved. The building is situated on a large site and has the potential for significant development in the medium term.

Broad Street Plaza, Halifax

Our final purchase of the financial year was completed in March. A significant leisure scheme known as Broad Street Plaza, Halifax was acquired for £24.18m providing a net initial yield of 7.25%. Significantly 40% of the leases benefit from minimum uplifts which will increase this yield to over 8% by August 2017. The scheme provides an excellent WAULT of 14 years to break. Whilst the scheme is trading well, we consider that this could be improved and we are undertaking various marketing initiatives to ensure the scheme reaches its full potential.

We set out below the highlights of our existing holdings:

HOCKENHULL PORTFOLIO

This was the initial portfolio acquired in 2011. Comprising nine individual properties, the portfolio remains fundamentally unchanged during the year although we have renewed two leases.

SIGNAL PORTFOLIO

The significant portfolio purchase in October 2013 has performed exceptionally well. We regularly visit the properties and meet our tenants which gives us immediate knowledge of occupational requirements so that we can ensure maximum occupation where possible In 2013 the Government introduced Legislation Permitted known as Development Rights PDR which grants permission in certain circumstances to allow the conversion of office space to residential use. We have taken advantage of this in Dartford and York. There is continual demand for residential properties in good locations which is being supported by institutional investors who now consider the private rented sector a sustainable investment. It is our opinion that there is long-term rental growth in this sector and will be looking to retain these units.

Hudson House, York

We have worked with our technical team to take this property into its next phase. The property comprises a 1960's 103,000 sq. ft. office building directly opposite York Railway Station. Transport links are excellent with a direct fast service to London and Edinburgh.

In September 2014 an application was made to convert the property into 82 residential units as well as create 37,000 sq. ft. of grade A office.  A resolution to grant consent was approved in April 2016, subject to a section 106 agreement, as stated in our Portfolio Update in May 2016. An alternative consent had also been granted to convert the building into 139 residential units through PDR in February of this year. We are currently evaluating all our options to maximise value and will update our shareholders in due course.

Copperfields, Dartford

This is a mixed-use retail and office property in a commuter town, South East of London. Situated directly opposite the Priory Shopping Centre and within walking distance of the train station, the scheme provides nine retail units below vacant offices. PDR was granted for the conversion of the offices to 14 residential units in October 2015. The conversion is due to complete in August 2016 and our intention is to rent them. Once completed we will have transformed a tertiary shopping scheme into a vibrant mixed use investment. 

Point Four Industrial Estate, Avonmouth

This 10 unit scheme is fully let to seven different tenants. Significantly we have completed the letting of a vacant unit to an existing tenant, who also extended their current leases so they are all co-terminus after 10 years. Refurbishment works were carried out to ensure the unit was let in an improved condition.  In addition, minimum uplifts at the rent review in year 5 were agreed based on 2% per annum compound. We have negotiated to remove break clauses and settled rent reviews on other units at marginally higher than the passing rents.

Cater Road, Bristol

Following extensive negotiations, the lease with Computershare was surrendered and a new lease for 15 years to Wincanton Holdings Ltd was completed. The tenant has an option to determine after 10 years whilst the rent is subject to a minimum increase at rent review after five years, based on a minimum of 2.5% per annum compound.

Marsh Barton Trading Estate, Exeter

Following the year end the tenant company appointed Administrators. The Administrator is seeking to grant a licence to a newly formed company for 12 months, providing continuity of income.  We are undertaking a strategic review to assess the long-term prospects for this well positioned site, as there is potential for a significant redevelopment.

Kiln Farm, Milton Keynes

The tenant at unit 2 has exercised their option to determine the lease from March 2016. We are progressing the dilapidation negotiations on this 14,500 sq ft office building and will evaluate all the options before deciding the best way forward.

Allen House, Stockport

Following the surrender of the lease in September 2015, we have been seeking to sell this 68,000 sq ft property. Demand has been limited but there are reasonably regular inspections so we are hopeful for an early sale.

Victoria Road, Stoke On Trent

The lease expired in September 2015 and a schedule of dilapidations with the outgoing tenant was settled at £250,000. We are seeking a buyer for this 45,000 sq ft building as the costs of refurbishment are not in the best interests of the Company.

Argent Court, Tolworth

This property has performed extremely well. Having purchased the property for £750,000 in October 2013, separate parts were sold in November and December 2013 for £1,070,000. We are now proposing to sell the remainder due to imminent lease expiries and strong demand from owner-occupiers.

PIH PORTFOLIO

Ovest House, Brighton

This is excellently located, equidistant between the Railway Station and the sea, within the city centre. We have undertaken a refurbishment of the 4th floor and reception area following a successful dilapidations settlement with the previous tenant. This attracted Quarto Publishing Plc to the property who have agreed to occupy all the offices being let at a 40% increase in rent. We have negotiated surrenders of the other leases to facilitate this and the new tenant will refurbish the remaining floors. The remaining floors will be refurbished to a similar specification.

Clayton Industrial Estate, Burgess Hill

We completed the letting to Polar Audio following a minor refurbishment using the dilapidation settlement from the former tenant. A new lease for 10 years incorporating an option to determine at year 5 was completed in August 2015. The tenant has an option to purchase at £1,450,000 no later than 28 July 2016.

Albert Road North, Reigate

We have sold No. 54 in April 2015 for £445,000 and Unit F at No. 61 in January 2016 for £310,000, both of which were in excess of book value.

There have been changes in legislation which affect the portfolio and we highlight these below:

MINIMUM ENERGY EFFICIENCY STANDARDS (MEES)

As of April 2018, it will be unlawful for commercial and residential landlords of properties with an Energy Performance Certificate (EPC) rating of less than "E" to grant new leases or renew tenant leases (except for some exemptions). Landlords will need to carry out works to improve the energy performance of their buildings to a rating of "E" or above or face civil penalties.

We have instructed a specialist to undertake a full review of our holdings to ensure that none of our holdings are affected.

STAMP DUTY LAND TAX

In March 2016, the Chancellor of the Exchequer introduced reforms to Stamp Duty Land Tax on commercial property which increased the top rate payable from 4% to 5% above £250,000. This has been factored into the latest independent valuations carried out as at 31 March 2016. Despite this impact, our portfolio valuations have continued to grow  over the year.

THE FUTURE

We remain committed to our active brand of asset management and are confident there are still plenty of opportunities for us to continue to grow the income to support our progressive dividend policy, whilst we grow capital value through our expenditure and refurbishment programmes. 

RICHARD STARR MRICS

OVERVIEW AND HEADLINE RESULTS

This year we delivered a profit before tax of £11.8m, which reflects a basic earning per share of 43.9p. EPRA earnings is the industry measure of underlying profit stripping out revaluation gains and one-off acquisition costs. EPRA earnings for the year ended 31 March 2016 increased by 64% to £7.7m compared to £4.7m last year and as a result EPRA earnings per share improved to 31.3p from 27.7p.

The value of our portfolio increased by 69% at the year-end to £174.5m from £103.0m principally as a result of the opportunistic acquisitions made throughout the year and also due to £3.6m of revaluation gains. EPRA net assets per share increased by 10% to 414p taking into account the dilution from the £20 million equity raise and FY15 final dividend paid in July 2015. This 36p increase together with the total dividends of 16p paid in relation to FY16 represents a 14% total business return.

Our capital base grew during the year as a result of the £20.0m capital raising in June 2015 and also £80.0m of new debt facilities raised and this was utilised to fund £66.0m of new acquisitions in the year.

RECURRING EARNINGS

Rental income net of property costs totalled £13.0m in the year ended 31 March 2016 (2015: £7.4m), driven by the new acquisitions and also supported by the significant £3.0m surrender premium received from Gala Casinos at Sol Central, the Northampton leisure scheme acquired in June of last year. Administrative expenses increased to £2.0m from a low base in the prior year of £1.4m due to a strategic decision to increase resources and build a team capable of delivering results across a far larger portfolio. There was also a mid-year review into director remuneration to bring it closer in line with our peer group. Finance costs increased to £2.3m from £1.4m as a result of the increase in debt finance to help fund the acquisitions. Despite increasing the base costs of the business, underlying EPRA earnings grew 64% to £7.7m from £4.7m reflecting the increasing profitability of the business as a result of both scale and reliable stock selection.

Looking forward, the business is now capable of scalability, with the team and systems in place to support a significant growth in the portfolio. 249 Midsummer Boulevard, Milton Keynes and Broad Street Plaza, Halifax were acquired close to the year-end. Next year the impact of these on recurring earnings will be significant and at the time of writing the Group has a current gross rent roll of £13.5m per annum up from £8.9m per annum at 31 March 2015 and net of non-recoverable property costs of £11.8m per annum.

VALUATION GAINS & PROFITS ON DISPOSAL

The movement in the values of our investment properties can make a significant impact on our profit before tax, as demonstrated last year when we saw £9.8m uplift on the portfolio. This year £3.6m gains were achieved, however this should be combined with the £3.0m surrender premium received from Gala Casinos due to the direct impact the loss of income has on the Sol Central property valuation in the short-term, results in a £6.6m overall gain.

The portfolio has almost doubled in the past year and therefore the impact of like for like uplift in values is diminished as the initial absorption of purchase costs and stamp duty are taken into account this year. The 1% increase in stamp duty for commercial properties valued over £250,000 to 5% has had a one-off impact on the net valuations performed by the Independent Valuers this year. Despite this, we continue to see the impact of our asset management and capex initiatives particularly at our strategic properties such as Hudson House, York where we received approvals in the year and we have seen a significant uplift in value with this property now valued at £14.9m.

We continue to recycle capital through disposals of individual units and small properties where we can realise profit that reflects good value from our investment and £0.3m profit on disposal was achieved from three disposals during the current year.

EPS

Basic earnings per share (EPS) were 43.9p compared to 82.4p last year, down primarily due to the significant valuation surplus last year. Similarly to the adjustments we make to profit before tax which remove unrealised capital profits and one-off items such as profits on disposal and costs on acquisition we report EPRA earnings per share. This improved to 31.3p from 27.7p due to the significant one-off impact of the Gala surrender premium. Finally, we also report an adjusted earnings per share to provide a basis for dividend cover which excludes the impact of the surrender premium and this was 18.9p for the year.

DIVIDENDS

We are recommending a final dividend of 9p per share to be paid on 29 July 2016 to shareholders registered at the close of business on 8 July 2016. Taken with the interim dividend of 7p our full year dividend will be up 23% to 16p. The Company is very well placed to provide our shareholders with an increased dividend yield due to the growth in our portfolio and the core assets producing stable, long-term income. However, we continue to reinvest surplus funds into our strategic assets to provide investors with a two- pronged return through both income and capital growth.

NET ASSETS

At 31 March 2016 our net assets per share were 414p an increase of 18p since 31 March 2015.

2015. The increase in our net assets was driven by the increase in value of our investment properties, profits on disposal of investment properties and surplus profits remaining after dividends paid. We calculate an EPRA NAV consistent with standard practice in the property industry to adjust for any dilution of outstanding share options and fair value adjustments of financial instruments which we believe better reflects the underlying net assets attributable to shareholders. Our EPRA NAV was 414p at 31 March 2016 up from 396p at 31 March 2015. In fact, the growth was greater when the dilution of the £20.0m equity raise at 360p in June 2015 is taken into account along with the final dividend of 7p relating to FY15 resulting in an overall increase of 10% from 377p.

DEBT FINANCING

During the year our debt profile transformed. We entered into £80.0m of new debt facilities across the Group. The existing facility secured on the Signal portfolio was refinanced with a new five year £20.0m facility at a lower margin of 2.45% and due to the uplift in value since acquisition we were able to release six properties which became uncharged.

We also replaced the existing £16.0m NatWest facility on the PIH portfolio with a new combined £30.0m revolving credit facility secured across the existing portfolio and a number of new acquisitions. Lloyds and Santander also provided new facilities on the Bank House, Leeds and Sol Central, Northampton acquisitions made during the year and finally we took over the £15.2m Barclays facility secured on the Broad Street Plaza, Halifax property acquired in March 2016.

The Group debt profile is now spread across the majority of the UK clearing banks at an average margin of 2.5% over 3 month libor. We continue to take the decision not to put hedging in place as a result of the historically low interest rates and therefore enjoy an all in average cost of debt of 3.1% currently one of the lowest in the sector. The average debt maturity is 3.9 years which gives us security over income streams net of interest costs for a number of years before the need to refinance.

NET DEBT AND GEARING

Each debt facility is secured at a SPV level and we assess the gearing mainly through interest cover ratios (ICR) and loan to value ratios (LTV). In normal market conditions we gear our assets at a SPV level within a range of 40-60% LTV. At a group level we measure both the debt to net asset value ratio (NAV gearing) and loan to value net of cash. NAV gearing at 31 March 2016 was 61% up from 31% last year and the net LTV ratio was 37% at 31 March 2016 up from 23% last year. The Group remains conservatively geared and at year-end had £8.0m of unutilised facilities available along with £18.0m of properties uncharged.

TAXATION

The Group has a tax charge of £0.95m for the year ended 31 March 2016. This includes a corporation tax charge of £0.71m to reflect the tax payable on taxable profit in the year, an income tax charge of £0.02m on non- resident landlord income and an adjustment of £0.22m to reduce the deferred tax asset as a result of the utilisation of tax losses in the year. The effective tax rate for the year for tax payable remains low at 13% due to utilisation of brought forward losses and capital allowances.

STEPHEN SILVESTER ACA