Wynnstay Properties : Annual Report and Financial Statements

WYNNSTAY PROPERTIES PLC

Registered number: 00022473

ANNUAL REPORT

and

FINANCIAL STATEMENTS

YEAR ENDED 25TH MARCH 2021

• Directors and Advisers

• Summary of Property Portfolio
  4 Chairman's Statement

1. Report of the Directors

1. Strategic Report

1. Chairman's Corporate Governance Statement
2. Corporate Governance, Remuneration and Audit Report

1. Independent Auditor's Report

1. Statement of Comprehensive Income
2. Statement of Financial Position
3. Statement of Cash Flows
4. Statement of Changes in Equity

1. Notes to the Financial Statements

1. Five Year Financial Review
2. Notice of Annual General Meeting

1. Biographies of the Directors
2. Link Group's Customer Support Centre

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WYNNSTAY PROPERTIES PLC

(Company incorporated in the United Kingdom)

DIRECTORS

P.G.H. COLLINS C.B.E.

(Non-Executive Chairman)

C.P. WILLIAMS, B.Sc., M.B.A., M.R.I.C.S.

(Managing Director)

C.H. DELEVINGNE

(Non-Executive Director)

P. MATHER B.Sc., F.R.I.C.S.

(Non-Executive Director)

C. M. TOLHURST, B.Sc., M.R.I.C.S., A.C.I.S.

(Non-Executive Director)

REGISTERED OFFICE

Hamilton House, Mabledon Place, London WC1H 9BB

AUDITORS

BDO LLP

55 Baker Street, London W1U 7EU

SOLICITORS

FIELDFISHER LLP

Riverbank House, 2 Swan Lane, London EC4R 3TT

NOMINATED ADVISER & BROKER PANMURE GORDON (UK) LIMITED One New Change, London EC4M 9AF

VALUERS

BNP PARIBAS REAL ESTATE ADVISORY & PROPERTY MANAGEMENT UK LIMITED 5 Aldermanbury Square, London EC2V 7BP

REGISTRARS

LINK GROUP

65 Gresham Street, London EC2V 7NQ

BANKERS

C. HOARE & CO.

37 Fleet Street, London EC4P 4DQ

HANDELSBANKEN PLC

5 Welbeck Street, London W1G 9YQ

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WYNNSTAY PROPERTIES PLC

SUMMARY OF PROPERTY PORTFOLIO

AT 25TH MARCH 2021

Aldershot	Eastern Road	1	Industrial Unit
Aylesford	Quarry Wood Industrial Estate	19 Industrial Units
Cosham	High Street	Offices
Hailsham	Crown Close Industrial Estate	7	Industrial Units
Heathfield	Station Road	5	Industrial Units
Hertford	Hertingfordbury Road	1	Industrial Unit
Ipswich	Trinity Street	5	Industrial Units
Lewes	Brooks Road	2	Retail Warehouse Units
Lichfield	1-4, Prospect Drive	4	Industrial Units
Liphook	Beaver Industrial Estate	17 Industrial Units
Liphook	Beaver Industrial Estate	Development Land
Midhurst	North Street	1	Retail Unit
Norwich	City Trading Estate	6	Industrial Units
Petersfield	Petersfield Trade Park	6	Industrial Units
Petersfield	Bedford Road	Development Land
Surbiton	St James Street	Offices
Uckfield	Bell Lane	4	Industrial Units
Weston-super-Mare	Phillips Road	1	Retail Warehouse Unit

All the above properties are Freehold.

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WYNNSTAY PROPERTIES PLC

CHAIRMAN'S STATEMENT

The Covid-19 pandemic and the resulting measures and restrictions imposed by the government have had a profound impact on many aspects of business and economic activity, in addition to their serious effects on families, friends and social activity; and they have created great challenges for the conduct of business operations as well as for all of us in our day-to-day personal lives. At Wynnstay, we have adapted our operations, risen to these challenges and worked constructively with our tenants, suppliers and professional advisers. As a result, I am delighted to report that Wynnstay has come through the year unscathed, in robust health and with excellent financial performance for shareholders. This is reflected in the following overview table.

Overview of financial performance
		Change	2021	2020
•	Property income	-5.8%	£2,140,000	£2,271,000
•	Profit before movement in fair value of investment	+2.1%	£1,179,000	£1,155,000
	properties, property sales and taxation
•	Profit after movement in fair value of investment	+2,970%	£3,653,000	£123,000
	properties, property sales and taxation
•	Earnings per share	+2,970%	134.7p	4.5p
•	Dividends per share, paid and proposed	+40.0%	21.0p	15.0p
•	Net asset value per share	+15.0%	911p	792p
• Loan to value ratio		29.4%	36.5%
•	Gearing ratio		32.4%	52.2%

Impact of Covid-19 pandemic

In common with most other companies, we moved our internal operations to remote working so that, for instance, all Board meetings in the year have been held virtually as has all other contact between Board members. Similarly other meetings with parties concerning the portfolio have been held virtually wherever possible.

Nevertheless, our Managing Director Paul Williams has continued, as far as practicable and consistent with the restrictions in place, to visit our properties, especially the multi-let estates, to keep in touch with tenants, discuss the impact of the pandemic on their businesses and to identify any potential issues affecting our interests.

The impact of the pandemic on commercial property was the subject of extensive press coverage in the early part of the year with particular focus on the effect on certain sectors of the market, notably retail, hospitality and leisure where Wynnstay does not have a significant representation in its portfolio, and on tenants' anticipated cash flow problems and thus on their ability to pay their rents when due.

Following the lifting of the first lockdown in the early summer of 2020, most of our tenants were able to resume their operations. During the second half of 2020 and the first quarter of 2021, despite further lockdowns and continuing restrictions, a number of our tenants that are part of quoted public companies reported increases in sales and profits as a result of higher levels of consumer spending on their goods and services, mainly related to home improvement and building trades.

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CHAIRMAN'S STATEMENT (continued)

As I reported last year, we have engaged particularly with small business tenants facing potential cash flow problems to explore how we might be able to help them. In particular we have accepted, as a concessionary arrangement for a limited period, monthly instead of quarterly in advance rent payments and, in a few cases, we have deferred part of a quarter's rent, spreading its payment over the remainder of our financial year. We have also granted two small business tenants concessionary arrangements in the form of rent holidays or longer term rent deferrals to assist them as their businesses were particularly seriously affected by the pandemic. The rental income foregone as a result of these arrangements in the year was £29,000. There have also been cases where we have been able to vary existing lease terms in a mutually beneficial way by extending leases or removing tenant break options, thus providing some short term cash flow relief for tenants while securing longer term rental income and potential increase in capital value for Wynnstay.

The pandemic has resulted in additional Board meetings and consultations between the Directors, with close focus on our tenants and the impact of government measures and restrictions on their businesses. There has been intensive management activity across the portfolio, which is described below. The outcome for the financial year was very uncertain in the spring and summer of 2020. In the event it has been a very successful year.

Portfolio

Rental income of £2,140,000 was slightly lower than last year (2020: £2,271,000).

Whilst we did not receive income from the two vacant units at Oakcroft Business Centre, Chessington, on which I have previously reported, this was offset by additional income from elsewhere in the portfolio where we have been through an extremely busy year of lease renewals, rent reviews and new lettings of premises that became vacant for various reasons. The benefits of this intensive activity are also reflected in the outcome of the portfolio revaluation described in the following section. Negotiations and completion of these transactions have taken place within normal timescales, despite the constraints of lockdowns and the requirement for remote working.

A particular focus of the activity was our Quarry Wood Industrial Estate at Aylesford, where the leases of nine of the eighteen units, let to five longstanding tenants, came up for renewal. We were able to retain all of our tenants and achieve very satisfactory outcomes in the negotiations for new leases at increased rents reflecting the healthy demand for good quality industrial units both in the area and in the south-east of England generally. In addition, we negotiated a surrender payment from one tenant and the reletting of the unit to a new tenant on current market terms, thus maintaining unbroken continuity of rental income.

In negotiations with existing tenants at Petersfield Business Park, we were also successful in renewing the lease of one unit at an increased rent and in retaining the tenants of two other units for the full remaining term of their leases by removing a future tenant break option in return for a short rent holiday, to which they would have been entitled if the future break option had not been exercised. Both transactions again reflected the healthy local market conditions for good quality premises and enabled us to retain tenants and full occupancy of our property.

On Beaver Industrial Estate at Liphook, we successfully completed one lease renewal and one rent review, again at increased rents reflecting the local market conditions. One tenant, an independent car parts wholesaler, went into liquidation in the second half of the year owing several months' rent and the appointed liquidator, who was unable to sell the business, subsequently disclaimed the lease and handed the unit back to us complete with all tenants' fixtures, fittings and stock. The unit has been cleared of this stock which is being sold and, as a result, we expect to receive some recoveries to set against the rent owed. The unit is being refurbished and is on the market to rent.

At City Trading Park Norwich, following the sale of a long established business by our previous tenant, we agreed terms with the new owner and renewed the leases of the three units that they now occupy. At Heathfield, we negotiated a surrender payment from one tenant and immediately relet the unit to a new tenant, who has subsequently carried out significant improvements to the unit. At Uckfield, we let two vacated units to new tenants at increased rents, and at Hailsham we let a vacated unit to a tenant already occupying two other units who required more space and, as part of the letting, we extended the term of both the existing leases.

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