Conygar Investment : Interim Report 2024

THE CONYGAR INVESTMENT

COMPANY PLC

INTERIM REPORT

Six months ended 31 March 2024

The Conygar Investment Company PLC

Interim results

for the six months ended 31 March 2024

Summary

• Net asset value ("NAV") decreased in the period by £3.8 million to £91.2 million equating to 153.0p per share (30 September 2023: 159.4p per share). This is derived primarily from net operational, debt financing and administrative costs compounded by writing down £1.4m of costs in connection with the proposed residential development at the Fruitmarket site in the St Philip's Marsh area of Bristol.
• Cash deposits were boosted in the period from the placing in October 2023 of 5 million zero dividend preference shares of £1 each (the "ZDP shares") and the drawing down of the first tranche of a £12 million loan facility from A.S.K Partners Limited ("ASK"). As at 31 March 2024, the Group had total cash deposits of £6.1 million, equating to 10.3p per share (30 September 2023: £2.7 million (4.5p per share)).
• Construction of the 693-bed student accommodation development at The Island Quarter, Nottingham ("TIQ") is expected to complete, as planned and on budget, before the end of June 2024 with lettings progressing well for the September 2024 student intake.
• Detailed planning application submitted in February 2024 for the second phase of student accommodation at TIQ comprising a 383-bed scheme to adjoin, and complement, the first phase development.
• Revenues and margins steadily increasing at The Island Quarter's ("1 TIQ") restaurant and events venue as the reputation for this unique local offering becomes more established.

Group net assets summary
	31 Mar	31 Mar	30 Sept
	2024	2023	2023
	£'m	£'m	£'m
Properties	131.6	115.6	113.2
Cash	6.1	13.3	2.7
Borrowings	(45.4)	-	(17.2)
Provisions	-	(2.5)	-
Other net liabilities	(1.1)	(4.1)	(3.6)
Net assets	91.2	122.3	95.1
NAV per share	153.0p	205.1p	159.4p

The Conygar Investment Company PLC

Interim results

for the six months ended 31 March 2024

Chairman's and Chief Executive's statement

Progression

Against a challenging and uncertain market backdrop we have continued to make steady progress, in particular at our mixed-use development site at TIQ, such that we should be well positioned to benefit from both the improving economic outlook and resultant uplift in investment activity.

During the period, we have made significant progress towards completing construction of the first phase student accommodation development at TIQ with practical completion expected before the end of June. Given the inflationary pressures, economic uncertainty and supply chain shortages experienced during the development we are delighted to be completing this phase on time and on budget.

Lettings for the 693-bed development are also progressing well, with approximately 40% of all enquiries converting into reservations. As such, we are targeting full occupancy and a net operating income, for the 2024- 2025 academic year of circa £5m. Furthermore, in February 2024, we submitted a detailed planning application for the adjoining second phase of student accommodation to complement the current development. This phase comprises a 383-bed scheme for which we are hopeful of a positive determination from the planning committee in the coming months.

Valuation

The fair value of TIQ has been considered by the Board by reference to any changes in the assumptions set out in the reported 30 September 2023 valuation provided by Knight Frank LLP, progression of the project and the recoverability of costs incurred since that date. During the period, no planning permissions were granted or buildings completed, however there have been significant cash outlays, in particular to progress construction of the first phase student accommodation development.

Whilst we recognise the negative valuation impact from the recent abolition of multiple dwellings relief, the fundamentals within both the purpose-built student accommodation ("PBSA") and residential build to rent ("BTR") sectors, which comprise approximately 65% by plot size of TIQ, remain very positive. Student numbers in the UK are at record highs, compounded by an increasing demand from the international market and there remains a material imbalance between supply and demand across both sectors such that rental growth prospects remain strong. With inflationary pressures easing and interest rate reductions anticipated in the second half of 2024 it bodes well for property yield improvements across the real estate sector, over the coming years.

As a result, the overall fair value for TIQ is assumed to have been maintained throughout the period subject to an uplift to reflect the value enhancement from costs incurred since 30 September 2023, primarily in connection with the ongoing student accommodation development and submission of the second phase student accommodation application, resulting in a £18.4 million increase in the carrying value at 31 March 2024 to £114.7 million.

Elsewhere at TIQ

At 1 TIQ, against a backdrop of squeezed household budgets and rising costs, compounded by a recent increase in the minimum wage, we realised a loss in the period of £0.3 million. However, as a result of increasing capacity, in particular for our outdoor events space, and the provision of a stretch tent cover, to enable its all-weathers use, total revenues for the venue have increased by 30% compared with the same six-month period in the prior year. This expansion, supplemented by significant improvements in food, beverage and wage margins since the start of the year, and the onset of the summer months should enable enhanced returns in the next six months with gross revenues projected for the full year in excess of £6 million.

Other property assets

Following the recent announcement by the UK government of its intention, in support of their nuclear ambitions, to acquire the Wylfa site on Anglesey, we are becoming increasingly confident as to the potential and range of opportunities offered by our Welsh sites which are ideally located to support any such future development. At the 203 acre brownfield site at Rhosgoch, classified as a special area in the Anglesey freeport, we continue to receive considerable interest from the renewables sector. However, while we await future announcements from the UK government as to their intentions for the Wylfa site we do not anticipate making any firm commitments in that regard.

At Holyhead Waterfront, also in Anglesey, we continue to await the determination of the detailed application submitted in 2021. As set out in the September 2023 annual report, we have currently fully written down the value of this project.

Results summary

The Group has incurred a loss in the six months to 31 March 2024 of £3.8 million. This is substantially derived from net operational, financing and administrative losses of £2.4 million (£2.1 million excluding depreciation) as we continue the transition of our consented development plots at TIQ to income-producing assets. We have also written down the carrying value of the proposed residential project in Bristol by £1.4 million to reflect the market conditions currently impacting the viability and better progression of this project.

However, with the restaurant and events venue at 1 TIQ now well established and expanding its operations, in addition to the first phase student accommodation development in Nottingham becoming rent-producing from September 2024, we anticipate a material uplift in revenues in the coming year to offset against these operational costs.

Cash deposits and debt financing

The cash deposits of the Group have increased in the period from £2.7 million at 30 September 2023 to £6.1 million at 31 March 2024 primarily as a result of placing 5 million ZDP shares and drawing down the first tranche of the £12 million loan facility from ASK.

The ZDP shares, which were issued in October 2023 at a price of £1 per ZDP share, have a life of five years and a final capital entitlement of 153.86 pence per ZDP share, equivalent to a gross redemption yield of 9% per annum on the issue price. The Company also subscribed for a further 10 million ZDP shares which it will look to place, subject to investor sentiment, during their 5-year term to further boost the Group's cash reserves as required.

The loan facility from ASK is for an initial term of 2 years with interest paid at the Bank of England base rate plus a margin of 5.9%. The net proceeds from drawing the first £5 million tranche of this facility, in addition to the net proceeds from placing the ZDP shares have been and will continue to be utilised in the progression of TIQ whilst we advance discussions with potential investors to enable the funding for future phases of this substantial mixed- use development.

Outlook

Investment activity will take time to return to the levels seen before the market downturn. However, as inflation and interest rates recede, such that costs become more stabilised, the viability of funding opportunities should improve. Given the significant progress made at TIQ and with investors prioritising high quality and sustainable investments we are optimistic that opportunities will evolve over the coming months and years which should enable us to maximise the returns from this and our other development sites.

N J Hamway	R T E Ware
Chairman	Chief Executive
15 May 2024

Financial review

Net asset value

During the six months ended 31 March 2024, the Group's NAV decreased by £3.8 million to £91.2 million (31 March 2023: £122.3 million; 30 September 2023: £95.1 million). The primary movements in the period were management and administrative costs of £2.3 million, a £1.4 million write down in the carrying value of the proposed residential development in Bristol, expensed finance costs of £0.4 million and other net direct property costs. These were partly offset by a gross profit, before administrative costs, at 1 TIQ of £0.5 million and interest received from cash deposits.

Cash flow and financing

At 31 March 2024, the Group had cash deposits of £6.1 million and net borrowings, including the accrued capital entitlement of the ZDP shares, of £45.4 million (31 March 2023: cash of £13.3 million and no debt; 30 September 2023: cash of £2.7 million and net borrowings of £17.2 million).

The primary cash inflows in the period were £18.9 million, drawn down under the Barclays debt facility, net proceeds of £4.3 million from the issue of ZDP shares and net proceeds of £4.4m from drawing down the first tranche of the ASK loan. These were partly offset by £19.8 million incurred on the Group's development and investment properties, including £17.6 million of construction costs and professional fees in connection with the first phase of student accommodation at TIQ, plus fees in connection with the detailed planning application, submitted in February 2024, for a second phase of student accommodation. Further costs were incurred to complete the fitting out of the restaurant and events venue at 1 TIQ, to progress the potential development project in Bristol and fund the net operational and administrative costs of the Group, resulting in a net cash inflow for the period of £3.4 million.

The £47.5 million Barclays debt facility, which expires in December 2025, will enable the Group to complete construction of the student accommodation development at TIQ and enable the subsequent letting and stabilisation of this asset. The net proceeds from the ZDP shares and ASK debt are being utilised to cover our net operational costs and further progress TIQ as we seek the longer term development funding required to progress this substantial project.

Net income from property activities	Six months ended	Year ended
	31 Mar	31 Mar	30 Sept
	2024	2023	2023
	£'m	£'m	£'m
Rental income	0.1	0.1	0.1
Restaurants and events income	2.2	1.6	4.3
Direct costs of rental income	(0.4)	(0.2)	(0.5)
Direct costs of restaurants and events income	(1.7)	(1.7)	(3.9)
	0.2	(0.2)	0.0
Proceeds from property sale	-	9.7	9.6
Cost of property sale	-	(9.5)	(9.5)
Total net income arising from property activities	0.2	0.0	0.1
Administrative expenses

The administrative expenses for the period ended 31 March 2024 were £2.3 million (period ended 31 March 2023: £2.3 million; year ended 30 September 2023: £4.8 million). As we reported in September 2023, properly managing the substantially increased development and operations teams, in particular at TIQ, has required an increase in Group overheads.

Taxation

No current tax is payable for the six months ended 31 March 2024 (period ended 31 March 2023: £nil; year ended

30 September 2023: £nil) as the Group has been loss-making over those periods and continues to have available losses to offset against any resulting taxable profits.

The writing down at 30 September 2023 in the carrying value of the Group's investment properties resulted in the full reversal of a £1.7 million net deferred tax charge. The Directors have assessed the potential deferred tax liability of the Group as at 31 March 2024 in respect of the chargeable gains that would be payable if the investment properties were sold at their reported values. Based on the unrealised chargeable gain of £nil as at 30 September 2023, and remaining as at 31 March 2024, no deferred tax liability has been recognised (31 March 2023: £4.7 million).

As at 31 March 2024, the Group has further unused tax losses of £51.9 million (31 March 2023: £24.4 million; 30

September 2023: £48.1 million) for which no deferred tax asset has been recognised in the consolidated balance sheet.

1 TIQ and investment properties under construction
	31 Mar	31 Mar	30 Sept
	2024	2023	2023
	£'m	£'m	£'m
Phase 1 - 1 TIQ	13.9	14.2	14.0
Phase 2A - first phase student accommodation	82.6	26.8	65.6
Undeveloped plots	31.0	65.5	29.5
Virgin Active Gym (freehold interest)	1.2	1.2	1.2
Total	128.7	107.7	110.3

1. The Group's investment properties under construction at TIQ were valued by the Company's Directors at 31 March 2024 and 31 March 2023 and by Knight Frank LLP, in their capacity as external valuers, as at 30 September 2023.

Development and trading properties
	31 Mar	31 Mar	30 Sept
	2024	2023	2023
	£'m	£'m	£'m
Rhosgoch	2.5	2.5	2.5
Parc Cybi	0.4	0.4	0.4
Holyhead Waterfront (2)	-	5.0	-
Total	2.9	7.9	2.9

1. Development and trading properties are stated at the lower of cost and net realisable value.
2. The value of the development site at Holyhead Waterfront was fully written down at 30 September 2023.

The Conygar Investment Company PLC

Consolidated statement of comprehensive income

For the six months ended 31 March 2024

		Six months ended	Year ended
		31 Mar	31 Mar	30 Sept
		2024	2023	2023
	Note	£'000	£'000	£'000
Rental income	3	112	97	141
Restaurant and events income		2,151	1,646	4,257
Proceeds on sale of development and trading properties		-	9,650	9,650
Revenue		2,263	11,393	14,048
Direct costs of rental income		(353)	(190)	(513)
Direct costs of restaurant and events income		(1,691)	(1,745)	(3,928)
Costs on sale of development and trading properties		-	(9,476)	(9,524)
Development / other project costs written off		(1,444)	(56)	(5,164)
Direct costs		(3,488)	(11,467)	(19,129)
Gross loss		(1,225)	(74)	(5,081)
Fair value adjustment of property		-	-	(30)
Fair value adjustment of investment properties
under construction		-	-	(21,546)
Administrative expenses		(2,346)	(2,292)	(4,775)
Operating loss		(3,571)	(2,366)	(31,432)
Finance costs	5	(427)	-	-
Finance income	5	157	87	186
Loss before taxation		(3,841)	(2,279)	(31,246)
Taxation	6	-	-	1,714
Loss and total comprehensive
charge for the period		(3,841)	(2,279)	(29,532)
Basic and diluted loss per share	8	(6.44p)	(3.82p)	(49.52p)

All amounts are attributable to equity shareholders of the Company.

All of the activities of the Group are classed as continuing.

The Conygar Investment Company PLC

Consolidated statement of changes in equity

For the six months ended 31 March 2024

		Capital
	Share	redemption	Retained	Total
	capital	reserve	earnings	equity
	£'000	£'000	£'000	£'000
Changes in equity for the
six months ended 31 March 2023
At 1 October 2022	2,982	3,928	117,694	124,604
Loss for the period	-	-	(2,279)	(2,279)
Total comprehensive charge for the period	-	-	(2,279)	(2,279)
At 31 March 2023	2,982	3,928	115,415	122,325
Changes in equity for the
year ended 30 September 2023
At 1 October 2022	2,982	3,928	117,694	124,604
Loss for the year	-	-	(29,532)	(29,532)
Total comprehensive charge for the year	-	-	(29,532)	(29,532)
At 30 September 2023	2,982	3,928	88,162	95,072
Changes in equity for the
six months ended 31 March 2024
At 1 October 2023	2,982	3,928	88,162	95,072
Loss for the period	-	-	(3,841)	(3,841)
Total comprehensive charge for the period	-	-	(3,841)	(3,841)
At 31 March 2024	2,982	3,928	84,321	91,231

All amounts are attributable to equity shareholders of the Company.

The Conygar Investment Company PLC

Consolidated balance sheet

As at 31 March 2024

		31 Mar	31 Mar	30 Sept
		2024	2023	2023
	Note	£'000	£'000	£'000
			(as restated)
Non-current assets
Property, plant and equipment	9	14,999	15,364	15,116
Investment properties under construction	10	114,748	93,560	96,350
Deferred tax asset	6	-	2,986	-
		129,747	111,910	111,466
Current assets
Development and trading properties	11	2,880	7,880	2,880
Inventories	12	77	69	110
Trade and other receivables	13	1,026	1,554	2,203
Tax asset		28	28	28
Cash and cash equivalents		6,122	13,257	2,676
		10,133	22,788	7,897
Total assets		139,880	134,698	119,363
Current liabilities
Trade and other payables	14	3,210	6,860	7,091
Provision for liabilities and charges	15	-	813	-
		3,210	7,673	7,091
Non-current liabilities
Deferred tax liability	6	-	4,700	-
Bank borrowings	16	40,785	-	17,200
ZDP shares	17	4,654	-	-
		45,439	4,700	17,200
Total liabilities		48,649	12,373	24,291
Net assets		91,231	122,325	95,072
Equity
Called up share capital	18	2,982	2,982	2,982
Capital redemption reserve		3,928	3,928	3,928
Retained earnings		84,321	115,415	88,162
Total equity		91,231	122,325	95,072
Net assets per share	20	153.0p	205.1p	159.4

As at 1 October 2022, the Group's then operational restaurant, beverage and events venue at 1 TIQ was reclassified, at fair value, from an investment property under construction to property, plant and equipment. However, for the 31 March 2023 interim report 1 TIQ was reported as an investment property and so has been restated above to ensure consistency with the 30 September 2023 annual report disclosure.

The Conygar Investment Company PLC

Consolidated cash flow statement

For the six months ended 31 March 2024

	Six months ended	Year ended
	31 Mar	31 Mar	30 Sept
	2024	2023	2023
	£'000	£'000	£'000
Cash flows from operating activities
Operating loss	(3,571)	(2,366)	(31,432)
Deficit on revaluation of properties	-	-	21,576
Development and other project costs written off	1,444	56	5,164
Profit on sale of development and trading properties	-	(174)	(126)
Depreciation of property, plant and equipment	306	-	595
Cash flows from operations before changes in working capital	(1,821)	(2,484)	(4,223)
Decrease / (increase) in inventories	33	(37)	(78)
(Increase) / decrease in trade and other receivables	(523)	80	(1,125)
Additions to development and trading properties	(78)	(141)	(294)
Net proceeds from sale of development and trading properties	-	9,645	9,490
(Decrease) / increase in trade and other payables	(631)	2,059	1,207
Net cash flows (used in) / generated from operations	(3,020)	9,122	4,977
Cash flows from investing activities
Additions to investment properties	(19,689)	(12,283)	(35,731)
Additions to property, plant and equipment	(184)	(226)	(479)
Finance income	157	87	186
Cash flows used in investing activities	(19,716)	(12,422)	(36,024)
Cash flows from financing activities
Bank loan drawn	23,888	-	18,033
Bank loan arrangement fees	(566)	(804)	(924)
Gross proceeds from issue of ZDP shares	5,000	-	-
ZDP arrangement fees	(660)	-	(113)
Interest paid	(1,480)	-	(634)
Cash flows generated from (used in) financing activities	26,182	(804)	16,362
Net increase / (decrease) in cash and cash equivalents	3,446	(4,104)	(14,685)
Cash and cash equivalents at the start of the period	2,676	17,361	17,361
Cash and cash equivalents at the end of the period	6,122	13,257	2,676