Town Centre Securities PLC Annual Report and Accounts 2022 Contents_GEN_Page Contents_GEN_PageL2Contents Generation – Section Town Centre Securities PLC Annual Report and Accounts 2022 ## ENHANCING ## SHAREHOLDER ## VALUE ## Annual Report & Accounts 2022 | Contents_GEN_Page Contents_GEN_PageL2Contents Generation – Section ## TOWN CENTRE ## SECURITIES (‘TCS’) IS A ## PROPERTY INVESTMENT ## AND DEVELOPMENT ## COMPANY WITH ## ASSETS OF OVER ## £370 MILLION. ## Our purpose ### Through the acquisition and active ### management of property in sustainable ### locations, we create quality spaces for ### our tenants, help communities to thrive ### and generate value for shareholders ### over the long term. | 01 \| STRATEGIC REPORT | 03 \| FINANCIAL STATEMENTS | | --- | --- | | Highlights 1 | Independent auditor’s report 85 | | At a glance 2 | Consolidated income statement 92 | | Market overview 4 | Consolidated statement of comprehensive income 92 | | Business model 8 | Consolidated balance sheet 93 | | Chairman & Chief Executive’s statement 10 | Consolidated statement of changes in equity 94 | | Strategy and KPIs 14 | Consolidated cash flow statement 95 | | Case study 16 | Notes to the consolidated financial statements 96 | | Portfolio review 20 | Company balance sheet 126 | | Divisional reviews 24 | Statement of changes in equity 127 | | Section 172 statement 30 | Notes to the Company financial statements 128 | Responsible business 32 Risk Report 42 04 | SHAREHOLDER INFORMATION Financial Review 52 Notice of Annual General Meeting 137 Investor information 145 02 | CORPORATE GOVERNANCE Glossary 146 Introduction from the Chairman 58 Board of Directors 60 Statement of compliance with the UK Governance Code 66 Nomination Committee Report 68 Audit Committee Report 70 Directors’ remuneration Report 74 Directors’ Report 81 Statement of Directors’ responsibilities 83 tcs-plc.co.uk ## 01 | STRATEGIC REPORT ## Highlights | STATUTORY PROFIT/(LOSS) | | | | | STATUTORY EARNINGS | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | BEFORE TAX | | | | | PER SHARE | | | | | £11.0m | | | | | 20.9p | | | | | | | | 2022 | £11.0m | | | | 20.9p2022 | | | | (£0.6m) | 2021 | | | | 2021(1.1p) | | | | | | 2020(£24.1m) | | | | 2020(45.5p) | | | | (£12.5m) | | 2019 | | | (23.4p) | 2019 | | | | | | 2018 £18.4m | | | | 2018 34.6p | | | | | | 1 | | | | 1 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | EPRA EARNINGS BEFORE TAX | | | | EPRA EARNINGS PER SHARE | | | | | | £3.3m | | | | 6.2p | | | | | | 2022 | | £3.3m | | 2022 | | 6.2p | | | | 2021 | £0.3m | | | 2021 | 0.6p | | | | | 2020 | £1.7m | | | 2020 3.1p | | | | | | 2019 | | | £6.4m | 2019 | | | 12.0p | | | 2018 | | | £6.9m | 2018 | | | | 13.0p | | TOTAL DIVIDENDS PER SHARE | | | | IFRS NET ASSETS PER SHARE | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | 5p | | | | 341p | | | | | 2022 | | 5.0p | | 2022 | | 341p | | | 2021 | 3.5p | | | 2021 | 293p | | | | 2020 | | 5.0p | | 2020 | 292p | | | | 2019 | | | 11.75p | 2019 | | 354p | | | 2018 | | | 11.75p | 2018 | | | 384p | | | | | | | 2 | | | | | | 2 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | TOTAL SHAREHOLDER RETURN | | | | | | TOTAL PROPERTY RETURN | | | | | | | | | (4.5)% | | | | | | 8.7% | | | | | | | | | | (4.5)% | 2022 | | | | | 2022 | | | | | 8.7% | | | | | 2021 | | | 55.8% | | 2021 | | 4.3% | | | | | | (50.4%) | | 2020 | | | | (2.1%) | 2020 | | | | | | | | | (25.0%) | 2019 | | | | | 2019 | 1.3% | | | | | | | | | 2018 | 3.2% | | | | 2018 | | | | | | 9.4% | | | | 2017 | | 9.6% | | | 2017 | | | 6.0% | | | | 1 Alternative performance measures are detailed, defined and reconciled within note 11 and the financial review in these financial statements. 2 See glossary for definition of these terms at the end of the financial statements. | 1 At a glance Town Centre Securities PLC | Annual Report and Accounts 2022 | ## At a glance ## Who we are ## TOWN CENTRE SECURITIES ## IS A UK REAL ESTATE ## INVESTMENT TRUST THAT ## HAS BUILT A DIVERSIFIED, ## MIXED-USE PORTFOLIO WITH ## A HIGH-QUALITY TENANT ## BASE FOCUSED ON REGIONAL ## CENTRES, PRIMARILY LEEDS ## AND MANCHESTER. ## Our portfolio covers a wide range of sectors: | OFFICE SPACE | RETAIL | LEISURE | RESIDENTIAL | | --- | --- | --- | --- | | Over 360,000 sq ft of | Focused on the | Key tenants include | Geographically spread | | prime office space, let | more stable, essential | PureGym, Costa and | over Leeds, Manchester, | | to long-standing tenants | retailing sector including | Tenpin, in addition to | London and Glasgow | | including Leeds City | food, discount and | a growing number of | with plans to develop | | Council, StepChange | convenience. | reputable regional and | more residential | | and PureGym. | | resilient restaurant, café | properties. | and bar operators. ### PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO VALUE ## 30% 23% 8% 6% ### LEEDS | Retail/Leisure | 33% | | --- | --- | | Hotels | 5% | | Office | 37% | | Car parking | 17% | | Development | 7% | | Residential | 1% | 2 | ## 01 | STRATEGIC REPORT The Merrion Estate, Leeds | HOTEL | CAR PARKING | DEVELOPMENT | | --- | --- | --- | | We manage one hotel | Pioneering technology | Currently progressing | | in Leeds under the ibis | focused car parking | our second purpose- | | Styles brand. | operator managing car | built private rental sector | | | parks in key locations | project, Eider House, | | | in Leeds, London, | Manchester, on the | | | Manchester and Watford, | back of the successful | | | in addition to offering | completion of the nearby | | | parking enforcement | Burlington House in | | | services nationwide. | June 2019. | | PORTFOLIO VALUE | PORTFOLIO VALUE | PORTFOLIO VALUE | Read more on | Page 20 | ## 3% 16% 14% ### MANCHESTER | Retail/Leisure | 20% | | --- | --- | | Hotels | 0% | | Office | 22% | | Car parking | 5% | | Distribution | 0% | | Residential | 16% | | Development | 37% | | 3 Market overview Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Market overview ## OUR MARKET ## PROGRESS ### With its over 60-year heritage, ### TCS has a strong history of ### delivering returns over the ### longer term. We achieve this by ### responding to market trends to ### build opportunities for the future, ### while at the same time managing ### challenges to the business ### effectively and in the interests ### of our broader stakeholders. Here we identify the key trends impacting our business, the opportunities and challenges they present and how we areresponding. ### LOAN TO VALUE ## 46.4% 2021 | 51.3% Vicar Lane, Leeds 4 | ## 01 | STRATEGIC REPORT ## OUR MARKET ## PROGRESS ### UK economic growth – In particular, we continue to see Flexible working and ### cost of living, inflation strong demand for the private rental office space ### and interest rates sector and purpose-built student Uncertainty remains over future accommodation in Leeds and Over the recent past, political working practices with employers Manchester. These sectors have attention has rightly focused on the reporting varying experiences of attracted significant investment from pandemic, the war in Ukraine and employees returning to the office. large funds looking for stable income the cost of living crisis. In the longer While we expect many companies streams. There is also generally less term, we expect attention to refocus will adopt a more hybrid and flexible volatility through the economic cycle on rebalancing and growing the UK approach, we are confident about outside London and the South East. economy with government initiatives the future of office space, particularly Increased interest rates and the and investment in infrastructure high-quality office space which can ongoing cost of living crisis will slow projects, including the extension of provide flexibility to enable companies the momentum in the housing and HS2 to Manchester, the Transpennine and their employees to work in an student housing markets, however, North railway upgrade and other attractive environment as well as with demand is still strong, and the improvements to the National Rail greater agility and efficiency. expectation is that the demand for network, to lead to greater economic these properties will return to the growth outside the South East and the How we are responding long-term average as opposed any strengthening of major cities in the Office space currently accounts for significant reductions. North West and North East. 30% of our portfolio, with our focus on high-quality office spaces in How we are responding city centres. The majority of these, 89% of our assets are located in Leeds including our latest developments, and Manchester and we also have a 123 Albion Street and Ducie House, long-standing presence in Scotland. are multi-tenanted and we have Leeds has attracted significant focused on providing flexible, dynamic investment in the last few years with and attractive working environments. strong economic growth forecast over the next five years. Manchester is the Where it is not possible to create leading professional and business dynamic office space, we are looking service centre outside of London at alternative uses. For example, and Greater Manchester’s economy options are being considered for is also forecast to grow significantly the refurbishment of Wade House over the next five years. As mentioned and we have started a consultation previously, we will be concentrating process on converting this existing future development on Leeds and building to student accommodation. Manchester to take advantage of In addition, we are considering the infrastructure support for the options at our key development sites, region and our extensive local market including updates to the Strategic knowledge and understanding of Regeneration Framework at Piccadilly these regions. Currently, our long-term Basin, Manchester and the planning development portfolio of GDV £740m applications submitted back in focuses on high-profile regeneration March 2022 on our site at Whitehall areas such as the iconic Piccadilly Riverside, Leeds. Basin in Manchester, the Whitehall Riverside development in Leeds and the opportunities created by the Burlington House, Manchester Innovation District and Arena Quarter at the Merrion Estate in Leeds. We are well-positioned to take advantage of investment in these areas by developing high-quality assets on a case-by-case basis when opportunities arise. | 5 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Market overview continued ### Changing consumer How we are responding ### shopping habits Across our buildings we integrate high Online shopping continues to challenge standards of environmental design and the retail sector’s traditional business target the latest standards including EPC model of operating large stores on the A ratings, BREEAM Outstanding and target high street and in shopping centres. The net zero carbon in our new developments. cost of living crisis is only adding to the With wellbeing now so important our challenge for traditional retailers, where developments will not only focus on they are looking at reduced requirements first-class places to live and work, but and smaller store sizes. While town and they will offer space to relax, unwind city centres are looking to address falling and enjoy thesurroundings. footfall by evolving their offering to provide | more food and beverage outlets and | We operate three solar photovoltaic | | --- | --- | | other experiences, physical retail sales | farms on top of buildings we own in | | have continued to fall steadily, leading to | Leeds and Manchester, which generated | | significant shop closures and job losses. | in the year over 187,000 kWh of energy | (FY21:223,000kWh) and avoided over How we are responding 109 tonnes of CO (FY21: 132 tonnes). We 2 continue to look at innovative ways to In line with our strategy, we continue to further reduce our environmental impact. diversify our portfolio and reduce our retail exposure. We have sold a number In our car parking division, we continue to of non-core retail assets during the year, invest significantly in technological and above the 30 June 2021 book value, with environmentally friendly solutions. We proceeds amounting to £37.9m. Retail have continued our roll-out of EV charging now accounts for only 23% of our portfolio points and rapid chargers across our car value, down from 60% six years ago. The parks and alongside our buildings, and are majority of our current retail tenants are developing ‘energy centres’ in some of our classed as ‘essential’ and operate in food, car parks where we can recharge our own discount and convenience retail. These are batteries during periods of low demand the more stable and resilient segments of and then sell our own electricity, capturing the sector which are less impacted by the an additional income stream. In addition growth in online shopping. to our own car parks, we completed the installation of 34 EV charging bays ### Environmentally friendly and (including an option to increase to 82) with ### sustainable solutions the Coventry and Warwickshire NHS Trust. Consumers are increasingly focused on the impact of their activities on the planet and are looking for environmentally friendly and sustainable options. In the property sector, this includes minimising the environmental impact of buildings, ensuring the buildings are digitally efficient, developing sustainable and energy-efficient solutions, as well as considering the health and wellbeing of both the employees/ tenants and visitors. In the automotive sector, demand for electric cars is rising; and demand for electrified cars among new car purchasers in the UK now stands at circa 40%. The increasing number of electric cars means that the infrastructure to charge them when consumers are on the move is now needed across the country. 123 Albion Street, Leeds 6 | ## 01 | STRATEGIC REPORT | 7 Business model Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Business model ## WE HAVE A STRONG RECORD ## OF CREATING LONG-TERM ## VALUE THROUGH INCOME ## AND CAPITAL GROWTH. ## What sets us apart – investment case ### Our diversified portfolio spans a wide range of ### sectors across key regional locations. ### PORTFOLIO VALUE BY LOCATIONPORTFOLIO VALUE BY SECTOR Retail/Leisure 31% Residential 6% Leeds 65% London 7% Office 30% Hotels 3% Manchester 24% Scotland 4% Car parking 16% Development 14% | Development pipeline of over | Established relationships with | A resilient and robust business | | --- | --- | --- | | £740m of high-quality assets | diverse, high-quality tenants | with 60 years’ heritage | | Our pipeline presents significant | Our tenants include household names | We take a long-term view underpinned | | long-term growth opportunities and | such as Morrisons, Iceland and Greggs | by a significant family shareholding. | | to realise cash in the short-to-medium | as well as small and growing companies. | | term for use across the business. ### Mix of short and long-term Experienced team with in-depth ### financing knowledge of the communities ### We leverage our portfolio to provide where we operate innovative and secure funding. We create vibrant local communities in areas of strong economic growth; and contributing to these communities is at the heart of our culture. 8 | ## 01 | STRATEGIC REPORT ## What we do How we generate ## value for our key ## stakeholders ### Actively manage assets to optimise income ### and capital growth ### For investors ### Refurbish and upgrade ### We provide reliable ### Renew leases ### returns and long-term ### Reduce voids ### capital growth. ### For tenants ### Maximise available capital by divesting ### We create spaces ### ex-growth assets and refinancing to lower ### that help support ### loan-to-value ratios ### businesses and meet ### their changing needs. ### For employees ### We are committed ### Invest in our Acquire investment ### to providing a safe ### development assets to diversify ### and secure working ### pipeline, continuing portfolio across ### environment with ### to unlock existing sectors, with a focus ### opportunities for ### opportunities and on Leeds, Manchester ### career progression. ### create new ones and London ### For communities ### We strive to make a ### positive contribution ### through development that ## CREATE A ### helps communities to thrive ### and by supporting local ## LONG-TERM ### initiatives and charities. ## QUALITY ## PORTFOLIO | 9 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Chairman & Chief Executive’s Statement ## SUSTAINABLE ## DEVELOPMENT ## “ It has been another year of ## recovery and investment, ## with further successes as ## we have sought to reset ## and reinvigorate our ## business for the future.” Edward Ziff OBE DL | Chairman & Chief Executive | 10 | ## 01 | STRATEGIC REPORT ## SUSTAINABLE ## DEVELOPMENT Town Centre House (TCS Head Office), Leeds | Overview | Performance | | ASSET SALES | | --- | --- | --- | --- | | After two years of work to significantly | • Our statutory profit in the year of £11.0m | | | | de-risk and de-gear the business, we | | includes strong performances from our | | | are in a very strong position. In spite of | | investment property portfolio, revaluation | | ## £37.9m presenting many challenges, the pandemic gains of £3.5m and surpluses generated has offered a chance for us to reset and from strategic disposals of £4.6m. 2021 | £48.0m reinvigorate the business. I am pleased Coupled with other comprehensive 2020 | £2.5m | with what we have been able to achieve; | | income gains of £16.0m, the Company’s | | | | | --- | --- | --- | --- | --- | --- | | disposing of less well-performing assets | | balance sheet has strengthened | | | Read more on \| page 22 \| | | and lowering our levels of absolute debt | | significantly from a net asset value per | | | | | and leverage. This process has continued | | share of 292p (at 30 June 2021) to 341p. | | | | | following the year end, with further | | | 1 | | | | | • EPRA earnings per share | | are 6.2p for | PROPORTION OF RETAIL | | significant transactions underway. the year (2021: 0.6p) and although ### AND LEISURE not back to pre-COVID-19 levels, this I have spoken before about my belief that is an encouraging performance and our city centres need people and footfall is despite the impact the significant in order to be vibrant and thriving spaces disposal programme undertaken has ## 31% for our communities following the damage had on the core business. from the pandemic. Though people are 2021 | 29% • Rent collection has continued to travelling abroad now and have returned to 2020 | 40% improve with over 99% of all rent and towns for shopping and socialising, flexible service charge income invoiced in the working means many office workers Read more on | page 22 | year collected. have remained at home. There seems to be an apathetic attitude from workers • As mentioned above, the Company has and businesses towards their role in the benefited from other comprehensive ### NET ASSET VALUE PER SHARE recovery of city centres. income gains in the year, which primarily relate to the significant disposal after the Government, local authorities, local year end of the Company’s investment in employers and large organisations have YourParkingSpace (‘YPS’) for total cash ## 341p | been weak in their efforts to get people | consideration of up to £20.7m. £37.9m | | | --- | --- | --- | | back in the office, and I would urge them to | of disposals during the year, together | 2021 \| 292p | | do more. Employees undoubtedly perform | with the YPS sale and further sales in | | 2020 | 292p | best when interacting and collaborating | the pipeline, are enabling us to continue | | | --- | --- | --- | | closely, so getting them back in the office | to strengthen the balance sheet of the | Read more on \| page 54 \| | | would be beneficial for all. | Company through lowering our level of | | absolute debt and leverage. 1 Alternative performance measures are detailed, defined and reconciled within note 11 and the financial review in these financial statements. | 11 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Chairman & Chief Executive’s Statement continued ### Key achievements Our employees have demonstrated Outlook ongoing flexibility and dedication Maximising available capital by Following the good work of the last two throughout the year again, many returning divesting ex-growth assets years, I am excited by our diversified to the office full-time, which has been portfolio and the potential of our strong Our proactive programme of disposals pleasing to see. development pipeline. I believe these show was accelerated again this year, with a we have a sound business that is well placed strong market for us to sell into. We have Shareholder returns for the future and can only benefit as more disposed of seven assets during the year Shareholder support remains important and more people return to normal city life. and believe we can reinvest further capital as we continue to recover from the past raised into our development pipeline and two years. We have already been boosted in the new futureacquisitions. financial year by the sale (announced in On 6 January 2022, we commenced July 2022) of the Company’s investment Acquiring investment assets another share buy-back programme and in YourParkingSpace for up to £20.7m and We acquired for £7.1m, a 12,600 sqft we acquired for cancellation 244,378 the sale, subject to planning, of our two mixed-use property, located in a prime shares in the capital of the Company, at an Port Street, Manchester surface car parks, retail pitch adjacent to Hampstead tube average price of 158p per Ordinary share for £13.0m. These sales provide further station, which currently comprises four for a total consideration (incl SDRT and financial flexibility to continue to reduce multi-level units. The asset management costs) of £389,060. debt and leverage, invest in accretive opportunities and valuable parking developments and to buy back shares spaces make this a solid investment for Following the year end, in August 2022, as appropriate. TCS and aligns with our core strategy of we completed a Tender Offer of 4,000,000 acquisitions where long-term value Ordinary Shares which were acquired However, it is hard to be completely can be added. for cancellation at a price of 185.0p per optimistic. We have been through a tough Ordinary Share for a total cost of £7.4m. time during the pandemic, and it is a CitiPark | | This represented approximately 7.61 per | shame to be faced with more turmoil in | | --- | --- | --- | | The car park business has performed | cent of the issued share capital of | our world. The Russia/Ukraine conflict and | | strongly as car park occupancy levels | the Company. | the unpredictability resulting from the | | recovered well across the period, but more | | situation has led to inflationary and other | | office workers need to return for our car | These buy-backs, conducted at a | economic pressures on our business and | | parks to perform to their full potential. | significant discount to the Company’s | those of our tenants including changes to | | | net asset value, have a positive impact | consumer spending, increased property | | Hotel | on net asset value per share and earnings | and other expenses, interest rate rises, a | | | per share for the benefit of continuing | weakening sterling exchange rate, increased | The hotel business also performed very shareholders. construction costs and rent affordability strongly. Staycations continued to have a positive impact this year, and corporate for tenants. The Board has approved a final dividend activity also recovered, returning to of 2.5p, totalling 5.0p for the full year We remain focused on enhancing value pre-pandemic levels for the first time in (compared to a total of 3.5p last year), for our shareholders and continue to look Summer 2021. We are hugely encouraged continuing the ‘steps in the right direction’ at further opportunistic disposals, the by the signs of recovery within the approach from last year. proceeds of which will be used to reduce hotelsegment. debt. Unless there are acquisitions offering ### ESG and business responsibility ### Stakeholder engagement significant opportunities to increase value ESG is at the heart of our business with the we are not envisaging any further property Tenants Company continually looking at ways to investments until there is stability in the Following a torrid time during the improve the responsibility of the business. real estate sector and wider economy. pandemic, unfortunately, a number Our proposed development at Whitehall of our tenants are now being hit hard Riverside is a great example of how we Considering the balance of the underlying with rising costs. We appreciate our are looking to deliver environmentally progress we are making in resetting tenants continuing to choose to work friendly buildings that meet the needs of and reinvigorating our business and collaboratively with us, and I can guarantee potential occupiers, are sympathetic to these macro-economic and geopolitical we will work hard to do what we can to their surroundings and make a positive challenges, I remain encouraged about the support and help along the way. A good contribution to both the users and visitors. many opportunities for TCS and committed landlord-tenant relationship is key to to delivering on our accelerated four-pillar satisfactory outcomes for both parties, On a smaller scale we have phased out strategy and continuing to deliver value for and we remain focused on prioritising our traditional business cards in favour of a QR all our stakeholders. mutually beneficial tenant relationships. card approach and I am particularly pleased with the recent roll-out of our electric car Employees Edward Ziff OBE DL scheme (under the Government’s salary Chairman & Chief Executive In our property team, one of our long- sacrifice scheme) that has been made 13 October 2022 standing property Directors, Helen Green, available to all members of staff. retired this year. Helen has given many | years of hard work and support to myself | Giving back to communities has always | | --- | --- | | and the business, and I would like to thank | been an essential part of the way we | | her for her service to TCS and wish her and | operate. In addition to the Marjorie and | | her family well for the future. Helen leaves | Arnold Ziff Charitable Foundation, our head | | a talented property team behind, who | office staff donated over 100 hours of their | | are well-equipped to face the important | time in December 2021 to work shifts at the | | challenges ahead. | Leeds Hospitals Charity Shop. | 12 | ## 01 | STRATEGIC REPORT Heath Street, Hampstead | 13 Strategy and KPIs Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Strategy and KPIs ## STRATEGY ### We have clear plans to further enhance shareholder value ### WHAT WE DO: WHAT WE DO: ### Actively manage assets Maximise available capital ### to optimise income and by divesting ex-growth assets ### capital growth and refinancing to lower Loan ### to Value | PROGRESS: | | PROGRESS: | | PRIORITIES: | | | --- | --- | --- | --- | --- | --- | | • The proportion of retail and leisure | | • We sold seven properties during the | | • We will continue to review our | | | | assets in the portfolio now at circa | | year for £37.9m, £4.6m above June | | portfolio and will continue the | | | 31%, down from 60% in 2016. Pure | | 2021’s valuation. | | strategy of selling assets, although | | | retail now represents only 23% of the | | | | with an increased focus on asset | • £10.7m of the proceeds were used to total portfolio and of that, 55% is in sales that will facilitate bringing part repay Group Borrowings, £17.5m the resilient Merrion Estate. forward our development pipeline. was temporarily held as collateral • We disposed of seven assets in the against the Company’s Debenture • Optimising our capital structure year, following completed asset Stock with the balance increasing to reduce gearing and absolute management initiatives. the Company’s cash resources. Net borrowing levels is an on-going focus. borrowings (total borrowings of • We have no exposure to any of the ### KPIs: £162.5m less finance lease liabilities large department stores/fashion 1 of £28.7m and net overdrafts of LOAN TO VALUE AS AT retailers and only two tenants either £(1.3)m) consequently reduced 7% to 30 JUNE 2022 entering administration or CVAs. The 1 £135.1m, with Loan to Value (‘LTV’) exposure is immaterial representing ## reducing to 46.4% (FY21: 51.3%). 46.4% less than 1% of income and we remain Included in the reduction of net confident in maintaining occupation (FY21: 51.3%) borrowings was the buy-back for in the majority of the space. cancellation of £3.4m of our £99.5m LTV HEADROOM OVER OUR THREE • 39 new lettings within the year; in FACILITIES AS AT 30 JUNE 2022 – 2031 5.375% debenture. Manchester Ducie House is almost THIS HAS INCREASED TO £24.7M • We renewed our existing NatWest FOLLOWING THE POST BALANCE SHEET fully occupied, following the recent facility, which now expires in EVENTS INCLUDED IN NOTE 26 TO refurbishment, and within the THESE FINANCIAL STATEMENTS September 2024. Company’s Leeds-based portfolio there were 14 lettings in the Merrion • We extended our existing Lloyds ## £18.5m | Centre alone; and then significant | Bank facility until June 2023, and | | | --- | --- | --- | | individual lettings in Glasgow | are currently progressing with | (FY21: £12.1M) | | and Hampstead. | new three- year (plus two one-year | | GENERATED FROM ASSET SALES IN THE extensions) facilities with both YEAR ENDED 30 JUNE 2022 ### PRIORITIES: Lloyds and Handelsbanken. • During the year, TCS sold, subject ## • Future opportunities identified at £37.9m to planning, its two Port Street, Vicar Lane, Leeds and Wade House (FY21: £48.0M) Manchester surface car parks, both in the Merrion Centre. of which form part of the Company’s ### KPIs: wider Piccadilly Basin development site. Completion of the sale is likely to CAPITAL EXPENDITURE IN FY22 ON THE EXISTING PORTFOLIO occur in December 2022, subject to (FY21: £2.2M) planning. The total consideration of £13.0m is not materially different to ## £1.6m the 30 June 2022 carrying value of these properties. 1 POST INVESTMENT YIELD ON ALL FUTURE DEVELOPMENTS TARGETED AT GREATER THAN: ## 8.5% 14 | 01 | STRATEGIC REPORT Loan to Value 46.4% – The amount of financial liabilities of £162.5m plus net overdrafts of £1.3m as a percentage of total assets £375.1m less cash and cash equivalents of £22.2m. # WHAT WE DO: Invest in our development pipeline, continuing to unlock existing opportunities and create new ones # PROGRESS: - Our development pipeline, with an estimated GDV of over £740m, is a valuable and strategic point of difference for TCS which we continue to progress and improve. - In April 2022 we submitted the Whitehall Riverside Masterplan in conjunction with our commercial partner, Glenbrook. This includes detailed planning applications for a 500 unit 'Build to Rent' scheme; a 12-storey office building; a 478-space multi-storey car park and an outline for further hotel/office buildings on the remainder of the site. - In June 2022 we submitted of a pre-application presentation to Leeds City Council in relation to the existing consented 100MC office building and a three-storey vertical extension to Wade House, both at the Merrion Centre, with a view to delivering a further 1,078 student accommodation units. # PRIORITIES: - We continue to review the sequence of our development pipeline. # KPIs: DEVELOPMENT PIPELINE REMAINS IN PLACE, ALTHOUGH CONTRACTS ARE IN PLACE TO SELL TWO OF THE OPPORTUNITIES WITH A COMBINED GDV OF OVER £250M £740m (FY21: £600M) # WHAT WE DO: Acquire investment assets to diversify the portfolio across sectors, with a focus on Leeds, Manchester and London # PROGRESS: - Completed the £7.1m acquisition of 58–62 Heath Street, Hampstead. # PRIORITIES: - We continually review opportunities to acquire new investment assets across all sectors, in particular in Leeds, Manchester and London. - Sites with asset management and/or development opportunities are a particular focus. 1 See glossary for definition of these terms at the end of these financial statements. # KPIs: RETAIL AND LEISURE PROPORTION OF PORTFOLIO 31% (FY21: 29%) REVERSIONARY YIELD¹ 7.2% (FY21: 6.9%) NUMBER OF CAR PARKS 4 (outside of the CitiPark brand) under management ![img-0.jpeg](img-0.jpeg) | 15 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Case study ## REDEVELOP ### Up until recently this key ### development site has been ### operated by CitiPark as a surface ### level car park. TCS and Glenbrook ### have now submitted full detailed ### planning applications as part of ### the £280m masterplan for the ### development of this strategically ### important site in Leeds city centre. The masterplan being brought forward by TCS includes detailed proposals for a smart-enabled and energy efficient office building of 118,165 sq ft, and a state of the art multi-storey car park and travel hub for CitiPark. This will deliver one of the largest EV charging sites in the North of England using renewable and sustainable electricity. A further two buildings are proposed as future phases, including an aparthotel and additional office accommodation. The landscaping and public realm proposal will deliver a new riverside park and enhance the biodiversity of the riverside environment. A series of interlinked green streets and cycling routes will improve connectivity and access to the existing riverside to create a high-quality destination, attracting new residents and visitors to the scheme. No. 2/No.5 Whitehall Riverside No. 2 Whitehall Riverside 16 | ## 01 | STRATEGIC REPORT The strategy for the development of Whitehall Riverside not only includes provisions to be sympathetic to its existing surroundings, but also to safeguard for future generations. The key considerations which highlight the environmental and sustainable considerations around future TCS developments are as follows: ## REDEVELOP • Target EPC A rating • BREEAM target ‘Outstanding’ • Targeting 38.5% less energy consumption than buildings regulations target • 100% of energy from renewable energy sources • All electric building • Fabric-first approach to minimise energy demand • Heating and cooling via zoned VRF system with heat recovery • NABERS accredited • WELL accreditation – base build designed to WELL Ready With a focus not only on first-class places to live and work, Whitehall Riverside will offer space to relax, unwind and enjoy the surroundings by the River Aire. With wellbeing so important, visitors will be able to enjoy: • Over 100 new places to sit alongside the riverside, within the new green space and along the green streets • Attractive, enjoyable, well-overlooked pedestrian routes between Whitehall Road and Riverside • Extended, high-quality cycle route along Whitehall Road and an improved connection to the River Aire footbridge • Generous walkways and street tree planting along Whitehall Road ## No.2/No.5 ## WHITEHALL ## RIVERSIDE | 17 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Case study continued ## REINVIGORATE ### Over the last decade TCS ### has invested heavily in the ### phased redevelopment ### and refurbishment of the ### Merrion Centre, transforming ### it into a vibrant, relevant, ### mixed-use destination. Following the completion of recent projects including Merrion House, a new ibis Styles hotel, refurbishment of the 1,000 space CitiPark car park and the successful attraction of a whole host of new retail and leisure brands, we are looking ahead to future plans for the estate. Working closely with Leeds City Council, we have been exploring the reinvention of Wade House and re-imagining of the previously consented new build office on the site of the former cinema (100MC) through a collaborative pre-application process. We have recently submitted a pre-application presentation to Leeds City Council in relation to the existing consented 100MC office building and a three-storey vertical extension to Wade House, both at the Merrion Centre, with a view to delivering a further 1,078 student accommodation units. Current Wade House Reception 18 | ## 01 | STRATEGIC REPORT 100 MC ## REINVIGORATE ### LTV HEADROOM OVER OUR ### BANK FACILITIES ## £18.5m 2021 | £12.1m ## 100 MC ## AND WADE ## HOUSE | 19 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Portfolio review ### VALUATION SUMMARY ## TCS SAW THE LIKE- ## FOR-LIKE VALUE OF ITS ## PORTFOLIO INCREASE ## BY 1.2% (£3.5M) AFTER ## CAPITAL EXPENDITURE ## OF £9.0M IN THE YEAR. ### In addition, the Company has recognised a ### further surplus of £4.6m arising on the disposal ### of investment properties in the year. ### £2.8m of the revaluation gain in the year is from the ### Company’s retail and leisure portfolio, of which 62% ### is our key Merrion Centre investment, signalling a ### slight rebound in what has been a sector in decline ### over the last five years. ### The valuation of all of our properties (except one) ### is carried out by CBRE and Jones Lang LaSalle. 20 | ## 01 | STRATEGIC REPORT ### Retail and leisure The past 12 months has seen a shift in spend with consumers turning away from durable goods to social activities as coronavirus restrictions came to an end. New leases signed continued to show a slight rental improvement. On a rolling four-quarter basis, net effective rents in Q2 2022 were up +13.9% year on year, while headline rents reported an +8.1% growth over the same period illustrating some leasing confidence creeping back into certain parts of the market. Compared to 2019 equivalent levels, both net effective and headline rents continue to fall, albeit more marginally than experienced throughout 2020/21. Net effective rents were down just -4.9% compared to pre- COVID-19 equivalents, whilst reporting quarter-on-quarter improvements, continuing to suggest that we have 1 already reached the bottom of the cycle . Although food store sales’ volumes remain slightly above pre-coronavirus levels they dipped during the financial year with ONS reporting sales down -5.8% year-on-year; in June 2022 as households seek more value in their grocery shopping or are indeed forced to reduce volume of goods bought whilst grocery inflation nears 1 double-digits. The number of transactions across the shopping centre investment market improved slightly, however, yields continue to come under increasing pressure as the cost of borrowing rises and there is greater economic concern. However, TCS as a pro-active landlord, continues to build flexibility into its retail portfolio through active asset management creating the ability to diversify and unlock potential repositioning opportunities. Overall the market has shown signs of stabilising, however, the outlook remains uncertain as the cost of living crisis continues to squeeze disposable income for many households. 1 Savills Research – Shopping Centre and High Street Spotlight Q2 2022. ibis Styles Hotel, Wade Lane, Leeds | 21 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Portfolio review continued ### Regional offices ### Portfolio overview Our office portfolio decreased in value by PASSING % OF VALUATION INITIAL REVERSIONARY RENT ERV VALUE PORTFOLIO INCR/(DECR) YIELD YIELD £0.5m or -0.5% over the year. This does not necessarily tell the whole story, with Retail & 1.1 1.7 22.1 7% 10.3% 4.8% 7.3% valuation decreases of over £2.0m over the Leisure Company’s Leeds office estate, offset by Merrion Centre 4.9 5.2 58.8 19% 2.6% 7.8% 8.4% gains made in Manchester of £1.5m. (ex offices) Offices 4.5 6.5 91.0 30% -0.5% 4.7% 6.7% Office take-up nationally totalled 3.83m sq ft in the second quarter of 2022, indicating a rise of 23% on the previous quarter’s Hotels 0.5 1.0 9.1 3% 5.4% 5.2% 9.9% level and 44% above the same period in 2021. Leasing activity is now 15% above the Out-of-town 1.0 1.2 14.5 5% 0.0% 6.6% 7.5% five-year Q2 average of 3.33m sq ft and retail 6% above the overall five-year quarterly Residential 0.9 0.9 19.2 6% 2.2% 4.6% 4.6% average of 3.62m sq ft. These five-yearly averages need to be considered against TOTAL 12.9 16.5 214.7 70% 1.6% 5.7% 7.2% the backdrop of the pandemic. Development There is strengthening demand, 42.6 14% 1.5% property particularly from large tenants looking at pre-let deals. This has been noticeable in Car parks 49.6 16% -1.8% Central London, where the four largest deals to complete in Q2 were all pre-lets PORTFOLIO 306.9 100% 1.2% in excess of 100,000 sq ft. Note: Includes our share of Merrion House within Offices (£35.7m – see note 14 of these On the supply side after peaking in Q4 financial statements), our share of Burlington House within Residential (£11.5m – see note 2021, with 31.82m sq ft available across the 14 of these financial statements) and Car Park Goodwill of £4.0m (see note 13 of these UK, supply levels in both the UK regions financial statements) arising on individual car park assets, but specifically excluding and Central London have fallen in each of goodwill arising from the current year car park operation acquisitions. All of the above the subsequent quarters. By the end of Q2, are not included in the table set out in note 12 of these financial statements. there was 30.92m sq ft available across the Excludes IFRS 16 adjustments that relate to right-of-use car park assets (£26.7m) as the UK, with Central London accounting for Directors do not believe it is appropriate to include in this analysis assets where there is less 75% of this. In the UK regions, the vacancy than 50 years remaining on their lease and the Group does not have full control over these rate declined to 8.6%, while 8.1% was assets – these assets are included in the table set out in note 12 of these financial statements. recorded across Central London. Despite uncertainties around future levels of office occupation, there has ### The table below reconciles the above Sales and purchases been no reduction in prime rental levels table to that set out in note 12 of these During the financial year ended 30 June with most city centres seeing prime rents financial statements: 2022 we have sold seven properties, continue to climb and are above their above their 30 June 2021 book value, pre-pandemic levels. FY22 FY21 for gross proceeds of £37.9m. £M £M The resilience of prime rents reflects Our continued commitment to asset Portfolio as per 282.4 305.9 the increasing focus of occupier note 12 recycling is clear. The table details the demand towards top-quality space, £135.4m of disposals since FY17 of which | 50% share in | | | driven by the desire to create a vibrant | | --- | --- | --- | --- | | | 35.7 35.8 | 83% were retail and leisure assets. | | | Merrion House | | | and attractive work environment to | encourage employees back to the office SALES PURCHASES 50% share in 11.5 11.3 and assist with recruitment, retention and Burlington House % % productivity strategies, as well as staff | | | | | RETAIL & | RETAIL & | | | --- | --- | --- | --- | --- | --- | --- | | | | | £M | LEISURE £M | LEISURE | health & wellbeing issues. In addition, | | Goodwill – car parks | 4.0 4.0 | | | | | | | – Property-specific | | | | | | there is a greater focus on buildings that | | | | FY17 | 22.3 88% 4.0 46% | | | | only are sustainable and energy efficient, | | | FY18 | 10.1 95% 9.0 0% | as occupiers try to meet increasingly | | --- | --- | --- | --- | --- | | Less – IFRS 16 | (26.7) (27.8) | | | | | right-of-use car parks | | | | ambitious ESG aspirations. | | | | FY19 | 14.0 100% 16.0 25% | | | AS PER THE ABOVE | 306.9 329.2 | | | | The dearth of new development coming TABLE FY20 2.5 100% 1.7 100% through will mean that upward pressure on FY21 prime rents will continue, and the gap with 48.0 93% – – rents for poorer quality grade B stock is FY22 37.9 59% 7.0 100% likely to widen. 134.8 83% 37.7 39% 22 | ## 01 | STRATEGIC REPORT ### Looking regionally at the Leeds office On the investment side there were £191m Other significant market, 201,000 sq ft was transacted in Q2 of investment deals transacted in Q2, 15% ### valuation movements 2022, bringing the H1 total to 430,000 sq above the ten-year average. The value of the Company’s development ft, which is in line with average levels for sites has increased marginally by ### this time of the year. The public services Residential £0.6m in the year as the next phases and professional services sectors were Residential property values have of both Whitehall Riverside, Leeds responsible for 80% of take up in Q2. continued to grow, with supply constraints and Piccadilly Basin, Manchester are particularly key in Manchester. Our getting closer to having implementable Availability saw its fifth consecutive residential property portfolio, with over planningpermissions. quarterly increase, reaching 1.2m sq ft in half in our successful Belgravia Living Q2. However, this was from a historically joint venture, has performed well, with During the year, the value of the low base during 2019 and early 2020 and, occupancy levels of almost 100% now Company’s freehold car parks has declined overall, availability remains 7.2% below the the norm. This has been reflected in a by £0.9m, with the majority of the decline ten-year average levels. There has been valuation uplift in the year of £0.4m or relating to the Merrion MSCP, due to a notable increase in sublet space – now 2.2%. As 2023 progresses we are expecting reduced occupancy levels during the standing at 110,000 sq ft, double the to see further valuation uplifts as the rental work day. ten-year pre-COVID-19 average. income earned should increase on a unit by unit basis. As mentioned previously, our hotel has Prime rents remained at £34.00 per sq ft seen increased booking volumes since the for the fourth quarter in a row, supported Nationwide has reported that annual UK end of the lockdowns, the success of the mainly by a lack of grade A availability. house price growth has been consecutively ‘staycation’ remains whilst business travel Typical rent-free periods remained at 24 in double digits in 2022, but the rate of has also increased. Both of these have led months on a ten-year term, higher than the growth is now slowing. to an increase in value of £0.5m in our Big Nine average by four months. Merrion hotel. Supply of homes for sale remains low, Investment volumes reached £92m in Q2 with competition still strong for quality 2022, higher than long-term average levels properties. This will sustain value growth in (£60m). Although untested by a true prime the short term, even if the speed of growth grade A transaction, prime yields remain is gradually slowing. First-time buyers stable at 5.25%. are making up a growing share of the mortgaged market. Across the Pennines in Manchester Q2 take up continued the year’s steady The numbers of buyers looking for a trajectory at 512,112 sq ft, bringing residential property have more than H1 total take up to just 2% under the doubled, and buy-to-let landlords continue ten-year average. to capitalise on the strength of the rental market, with rental growth now almost Availability across the city centre fell by six times the pre-pandemic average. 6% this quarter, although remained 15% (Source: Zoopla). above the ten-year average. Rent-frees remained at 24 months on ten-year deals, Build-to-rent schemes continue to perform and 9–12 months on five-year deals. Plug- well as an asset class with high occupancy, and-play spaces continue to prove popular, however, consumer expectations are at an achieving £5 per sq ft premiums on 5,000+ all-time high with levels of on-site amenity sq ft suites. being a key deciding factor. In Q2 prime rents rose to £39.50 per sq ft, and are widely expected to reach at least £40 per sq ft this year, reflecting strong demand for high-quality spaces with excellent ESG credentials. | LOCATION VALUE % | | | SECTOR VALUE % | | LEASE EXPIRIES VALUE % | | | --- | --- | --- | --- | --- | --- | --- | | Leeds | 200.7 65% | | Retail/leisure | 95.4 31% | 0–5 years | 7.4 56.9% | | Manchester | | 74.0 24% | Hotels | 9.1 3% | 5–10 years | 2.0 15.4% | | Scotland | | 11.5 4% | Office | 91.0 30% | Over 10 years | 3.6 27.7% | | London | | 20.7 7% | Car parking | 49.6 16% | | 13.0 100% | | | 306.9 100% | | Residential | 19.2 6% | | | | | | | Development | 42.6 14% | | | 306.9 100% | 23 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Divisional review ## PROPERTY ### Overview ### It has been another busy year ### for our dedicated property team, ### which manages acquisitions, ### disposals and planning for ### our increasingly diverse ### mixed-use portfolio and our ### developmentpipeline. Whilst TCS has been successfully delivering business as usual with our existing portfolio, we have also been going through a shift in our focus. As we have continued to dispose of a number of assets, instead of simply replacing those with new acquisitions, we have been working to reimagine many of our existing assets and revisiting our development pipeline. With an inevitable lull in delivery, COVID-19 afforded us the opportunity to look at our development pipeline again and determine where we need to bring forward new applications and new designs to replace our original proposals. In line with this work, our relatively new property team is keen to bring new ideas to the table and re-look at its systems and processes. | DISPOSALS AND ACQUISITIONS | RENT COLLECTION | | --- | --- | | We completed seven strategic disposals | The strength of our relationships with our | | in the year, for proceeds of £37.9 million, | tenants has been demonstrated again, as | | as we sought to rebalance and diversify | our rent collection for the year was over | | our portfolio. We have also disposed of | 99% collected or agreed to be deferred, | | assets to facilitate bringing forward further | better than pre-pandemic levels. This is a | | development, such as the Premier Inn on | very positive result, showing our ability to | ### TOP 10 TENANTS Whitehall Riverside. work with tenants to find solutions. Leeds City Council 12% We also agreed, subject to planning, ### RENT COLLECTED with developers Select Property Group Wm Morrison Supermarkets Plc 8% for the sale of Port Street, a part of the Step Change Debt Charity 7% Manchester Piccadilly Basin scheme. Select have submitted plans to develop ## PureGym Limited 5% 95.5% 485 apartments on the site, and we are The Instant Group 3% 2021 | 92.6% positive about how this will complement | Aldi Stores Limited 2% | | our own strategic regeneration plans for | | | --- | --- | --- | --- | | | | the Basin. | RENT DEFERRED | | The Flannels Group Limited | 2% | | | | Watches of Switzerland 2% | | We completed one acquisition in the | | year, 58–62 Heath Street in Hampstead. T J Morris Ltd t/a Home Bargains 1% ## The 12,600 sq ft mixed-use property is 0.5% Go Outdoors Limited 1% located in a prime retail location adjacent 2021 | 0.8% to Hampstead tube station in one of the Top 10 44% capital’s most desirable suburbs. As of Other 56% May, the property was fully let. From 31 March 2020 to date 24 | ## 01 | STRATEGIC REPORT ### DEVELOPMENT PIPELINE HIGHLIGHTS ### Wade House As part of our rethinking of Eider House, we are also looking at how we can Wade House is a 1960’s office building, reposition some future development which became predominantly vacant opportunities in the vicinity of Eider House, around June time last year. Since then, Ducie House and Tariff Street, working with we have been exploring options for the local authority to review and update redevelopment of that building and the strategic regeneration framework. repurposing it for an alternative use. ### Whitehall Riverside planning We are currently in a pre-application | planning process to redevelop Wade | In April 2022, we submitted a new | | --- | --- | | House, as well as the adjacent 100MC | planning application for the development | | site, as a comprehensive purpose-built | of Whitehall Riverside in Leeds city | | student accommodation scheme. Work | centre as part of a £280m commercial | | is ongoing around how those sites | partnership with build-to-rent residential | | are redeveloped while maintaining | developers, Glenbrook. | occupancy and footfall in the vibrant | area around the Merrion Centre. This | Recognising the opportunity to deliver a | | --- | --- | | area has seen significant development | unique neighbourhood in the West End | | of student accommodation in recent | of Leeds, our proposal comprises 500 | | years and a good proportion of our retail | build-to-rent apartments, a smart-enabled | | and leisure customers in Merrion are | and energy efficient office building and a | | students. This has allowed us to rethink | state-of-the-art multi-storey car park and | | the next evolution of the Merrion estate, | travel hub for CitiPark. Building on the | | as a truly mixed-use site. | truly mixed-use nature of the masterplan, | a significant focus will be on creating a We have arranged some temporary sustainable and modern environment, lettings to local charities, like the with landscaping, cycling and pedestrian- Tutor Trust and the Children’s Hospital friendly infrastructure. to make best use of the available space in the meantime. TCS has owned the site for many years, having already delivered No.1 Whitehall ### Piccadilly Basin Riverside (offices), Whitehall Waterfront (residential) and most recently the Premier We are revisiting our own designs for Inn (hotel), completed in 2017. Eider House, which was previously consented for 128 apartments. Since that ### George Street redevelopment joint venture scheme with the Belgravia | | Living Group entity was conceived and | In our 2020 Annual Report, we discussed | | --- | --- | --- | | Port Street (CGI) | planning consent granted in 2018, a lot | not proceeding with plans for a 50/50 | | | has changed in the world of build-to-rent | joint venture with Leeds City Council | | | accommodation. The knowledge we have | to develop a 136-room aparthotel on | | | gained from three years of operating | George Street in Leeds. Work to find | | | Burlington House, our first build-to-rent | a solution for that project has been | | | development, has prompted us to submit | continuing ever since and we are still | | | a new application as part of the new | working to help the council deliver | | | phase of developing our campus of build- | regeneration for a key part of the city. | to-rent residential in PiccadillyBasin. ## Our ## residential ## portfolio ### RESIDENTIAL The residential portfolio, although smaller than it once was, has performed particularly well this year. We are seeing high levels of occupancy and rental growth, which is giving us the confidence to seek more acquisitions and bring forward development of further residential projects. Burlington House, Manchester | 25 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Divisional review continued ## PROPERTY Asset management/letting Merrion Vicar Lane We have seen shoppers consistently return Another success story during the year was progress in Manchester to Leeds city centre for a number of months at Vicar Lane. Having had a significant and Leeds now, demonstrated by footfall within the proportion of its units vacant for some Merrion Centre continuing to increase, time, it has been pleasing to see a number Ducie House although still not at pre-pandemic levels. of new operators take space at Vicar Lane Across the last six months there have been as it also nears full occupancy. a number of significant lettings at Ducie We have completed a number of positive House. As we approach full occupancy, lettings in the period, welcoming some it has been pleasing to see the market interesting businesses in both retail respond so positively to the space we andleisure. renovated in late 2020. ## MCR Carvers Warehouse, Manchester OUR MANCHESTER ### CORPORATE OFFICES/HQS PORTFOLIO: VALUE £M % ## MANCHESTER BBC, ITV, The Co-Operative Group, Boohoo, Retail/leisure 14.5 20% THG and Amazon. ## KEY FACTS Office 16.5 22% Car parking 3.8 5% ### KEY GROWTH SECTORS ### With an urban population of over Residential 11.6 16% ### 2.8 million, Greater Manchester is Business, financial and professional Development 27.6 37% ### the second most populous urban services, cultural, creative, digital, retail Total Manchester 74.0 100% and more recently science, research and ### area in the UK. development. Over the last five years there has been significant investment ### MANCHESTER AS in both student accommodation of ### A PERCENTAGE OF residentialaccommodation. ### TOTAL PERIOD ## 24% 2021 | 22% 26 | ## 01 | STRATEGIC REPORT OUR LEEDS ### CORPORATE OFFICES/HQS PORTFOLIO: VALUE £M % ## LEEDS Channel 4, Asda, Morrisons, PwC, KPMG, Retail & leisure 66.0 33% HSBC, DLA Piper, Yorkshire Bank, Lloyds ## KEY FACTS | | Bank, Yorkshire Bank, Direct Line Group, | Offices 74.0 37% | | --- | --- | --- | | | Addleshaw Goddard, Eversheds, Pinsents, | Hotels 9.1 5% | | With an urban population of over | First Direct, Centrica, BT. | | Residential 2.1 1% ### 1.9 million, Leeds-Bradford is the Industrial 0.0 0% ### fourth most populous urban area ### KEY GROWTH SECTORS Car parks 34.6 17% ### in the UK. Digital technologies, healthcare and Development 15.0 7% innovation, manufacturing, financial Total Leeds 200.8 100% and professional services. Significant investment in student accommodation in ### particular around the Merrion Estate. LEEDS AS ### A PERCENTAGE OF ### TOTAL PERIOD ## 65% 2021 | 68% ## LDS 123 Albion Street, Leeds | 27 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Divisional review continued ## CITIPARK ### OUR PORTFOLIO ## IT HAS BEEN A MUCH ## IMPROVED YEAR FOR ## CITIPARK, WITH ITS ## RECOVERY ONGOING. ## WHILE MANY CUSTOMERS ## HAVE RETURNED, MANY ## WORKERS ARE STAYING ## AT HOME AND WE MUST ## CONTINUE TO INNOVATE ## TO DRIVE REVENUE ## ANDPROFITABILITY. ### RENT COLLECTED FROM Overview However, we are seeing that, due to changing working patterns and the ### MARCH 2020 Gross revenue for FY22 was £11.4m, a 70% prevalence of flexible working, our Monday increase on the prior year. Operating profit to Friday, nine-to-five customer group is not has also increased significantly to £3.1m returning to pre-pandemic levels. Throughout from a breakeven position. the pandemic, we’ve had to make some ## 95.5% difficult decisions in order to streamline our We remain cautiously optimistic about 2021 | 92.6% operations, and we will continue to evolve the recovery. Car park occupancy levels and think differently, considering innovative recovered well across the period, although new ways of using our car parks and spaces. this recovery was temporarily stalled with We also have a development pipeline for the emergence of the Omicron variant and many of our car parks, and these provide government advice to work from home at the opportunities for us to consider other options end of 2021. Despite that, performance has depending on the pace of recovery. been in line with our expectations. We’ve seen some geographical variation in performance but generally we are pleased to see customers returning as the public regain their confidence in the wake of the pandemic. 28 | ## 01 | STRATEGIC REPORT Proposed multi-storey car park, Whitehall Riverside, Leeds ### Technology and innovation We have a development pipeline to ensure The consideration from this sale helps to ongoing investment in our app, with further strengthen the TCS balance sheet We continue to focus on using technology plans to add new products to ensure the whilst providing the funds to invest in our as a key differentiator and a way to expand customer journey improves year on year. development pipeline and make strategic our revenue generation. Considering technology investments. stakeholders and collaborating with our ### BaySentry Solutions partners is a key focus as we seek to grow ### Outlook each of our platforms. We continued the expansion of parking management company, BaySentry The potential impact of the current financial ### EV charging/CitiCharge Solutions Ltd, this year with a further pressure on some sections of the UK acquisition, which concluded in October. economy is difficult to forecast, but we Our CitiCharge division is growing, with Having successfully onboarded a number remain cautiously optimistic. ongoing work to add more charging points of acquisitions and enjoyed steady revenue across our portfolio. growth in this part of the business, we are We have demonstrated our ability to be in dialogue over further opportunities to responsive and adaptive to challenges A highlight of this year was the installation grow in the coming year. across the last two years. Our products and of 34 EV charging bays (including tariffs can be tailored to customer needs, an option to increase to 82) with the ### Alternative forms of income and we will seek to help our customers Warwickshire NHS Trust. while also trying to operate a successful Having first hosted a number of rooftop and profitable business. We are very committed to expanding events last year, we continue to explore our offering, increasing the number of and welcome opportunities to use our We have invested in our existing facilities spaces and diversifying our offering via locations for the hospitality industry. and have a strong development pipeline disabled charging bays and more. We are for the future, including our new 478-space ### also looking to work with our enforcement YourParkingSpace CitiPark multi-storey car park in Leeds. We business to expand the EV network with After the year end the Company completed will also continue to grow our management third-party landowners and clients. the unconditional sale of its equity investment agreement platform and invest in further in YourParkingSpace Limited (‘YPS’) to acquisitions in our subsidiary companies. ### CitiPark app Flowbird SAS for total cash consideration We’ve seen some strong investment in the (net of fees and associated deal costs) of up Our app and our EV charging network CitiPark app this year, including the change to £20.7m; representing a significant uplift in provide exciting opportunities to help of payment flow to accommodate frictionless value of the Group’s investment. improve our customer experience while pay on entry as well as on exit and the also improving our environmental impact. inclusion of corporate billing allowing larger organisations to have one main account and just add and remove vehicles themselves and be billedaccordingly. | 29 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Section 172 Statement ## STATEMENT BY THE DIRECTORS IN ## PERFORMANCE OF THEIR STATUTORY ## DUTIES IN ACCORDANCE WITH S172(1) ## COMPANIES ACT 2006. ### The Board believes that, We believe that consideration of our stakeholders is the foundation of what we do and the basis of every decision that is made throughout the Company. To demonstrate how ### individually and collectively, entrenched this is into the way we act as a business we have included cross-references ### they have acted in a way they to where you can find further examples across this report: ### consider, in good faith, would ### be most likely to promote the ### success of the Company for WHY INVEST STRATEGY RESPONSIBLE ### the benefit of its members as IN TOWN BUSINESS ### a whole, having regard to the CENTRE ### stakeholders and matters set SECURITIES? ### out in s172(1) (a-f) Companies ### Act 2006. We have continued Clear demonstration Clearly defined plans Demonstrating of the value for the future of the understanding ### to protect and generate value we provide to business of how our ### for our stakeholders for 62 shareholders business impacts ### years and remain committed to those around us ### pursuing our strategy for long- ### term value creation. Pages 8 to 9 Pages 14 to 15 Pages 32 to 40 ### How the Board factors its stakeholders into decision-making The table below sets out who we believe to be our key stakeholders, why they are important to us and, subsequently, how we factored their interests into our decision-making process to promote the success of the business as a whole. OUR WHY THEY ARE HOW WE ENGAGED STAKEHOLDERS: IMPORTANT: DURING THE YEAR: SHAREHOLDERS Shareholders are key to The primary communication with shareholders is through the Annual Report and Accounts, the Half- ensuring we have the Year release and the Annual General Meeting (‘AGM’). All Directors attend the AGM (either in person capital to continue doing or by teleconference), and we encourage shareholders to ask questions of the Board and meet what we do. They keep us informally afterwards. accountable and provide In addition, the Chairman and Chief Executive, and Finance Director maintain a dialogue with direction and approval for institutional shareholders and analysts immediately after the announcement of the half-year and future plans. full-year results, and at other times throughout the year; taking on board suggestions especially with regard to non-financial reporting, for example, the EPC reporting now included in our investorpresentations. During the year the Board considered key decisions around the implementation of the strategy of the business, reviewing and ultimately approving property disposals, property acquisitions and corporate acquisitions. Where the Company then had significant free cash, the Board then reviewed and ultimately approved share and debenture buybacks in the period. As part of this process the Board were provided briefing papers prepared and presented by the Executive Directors and members of the senior management team. These papers not only presented the impact the potential transactions would have on key financial metrics, the risks associated with the challenges our economy is facing but also on the longer term loan to value headroom under the Company’s debt facilities. As a result of these decisions, the Company sold seven properties, acquired one, completed one corporate acquisition and bought back for cancellation over 600,000 Ordinary Shares and £3.4m of debenture during the year. The Board also considered a more formal tender offer for shares, however this was not implemented until after the year end, with the key factor being the significant material information regarding the sale of the Company’s investment in YourParkingSpace Limited effectively delaying any ultimate decision regarding a tender offer. 30 | ## 01 | STRATEGIC REPORT OUR WHY THEY ARE HOW WE ENGAGED STAKEHOLDERS: IMPORTANT: DURING THE YEAR: EMPLOYEES Our employees allow us We are committed to the personal and professional development of our employees, supporting to continue to deliver employees through studies. and maintain quality We continue to look for ways to improve the rewards and support we give our staff beyond their environments and services base salary, and have a number of schemes in place to enable this. This includes but is not limited to for our customers, and salary sacrifice schemes for childcare vouchers and cycle-to-work initiatives; Westfield Health care sustain long-term growth, for head-office-based staff; a company pension scheme and access to a pension adviser; a share- providing value to our save scheme allowing all staff to benefit from the HMRC scheme with TCS also contributing shares. shareholders. Ensuring we have happy employees with The canteen and break-out spaces enable all employees and Directors to engage with each other challenging work in turn outside of the pure work environment. produces higher quality outcomes and benefits Members of the senior management team attend all Board meetings, and regularly provide their all stakeholders. own perspective on the health and wellbeing of all staff, including a new flexible working policy. We are in the process of updating the employee handbook with the overall aim of improving it all for all employees, the key changes are around a specific working from home policy and enhancements to the maternity and paternity policies. Furthermore, the Company has implemented an electric car salary sacrifice scheme to provide employees electric vehicles in a tax efficient manner. The Board are also very conscious of the ongoing cost of living crisis and all 124 members of staff, in the September 2022 pay review, have been awarded bonuses as well as their salaries reviewed upwards. Although not necessarily a formal Board decision matter, the seriousness of cost of living, inflation and interest rate rises has been discussed both at Board level and at the Remuneration Committee, where the Board decision was then ratified. Ian Marcus, Non-Executive Director is our workforce representative. Further details on our workforce engagement can be found on page 40. TENANTS Delivering for customers is We speak to all our tenants on a regular basis, in an attempt to understand the pressures that they at the heart of everything we are under and how we can work with them to get through the current economic crisis and ensure do. Whether that is locally they remain as tenants in the longer term. We have been particularly keen to ensure that small and based businesses in our long-term loyal tenants are helped not only financially but with wider operational support as well. In mixed-use developments Merrion Centre in particular we are working with all our tenants to help bring customers and workers or users of our state-of- back to the shops, restaurants and offices and enabling socially distanced shopping and working the-art car parks. If our has been critical. customers are satisfied, then All decisions made with regards to new tenants and rent concessions are made at the monthly we know we are delivering property review meetings, with all Executive Board members in attendance. enjoyable and high-quality environments. We value During the year, negotiations with tenants, and in particular with respect to significant tenants in highly the long-term administration have been elevated to Board decisions. As with all Board decisions briefing papers relationship we have with are prepared and circulated in advance of the meeting. our tenants. The monthly minutes of both the property review and CitiPark management meetings then form an integral part of the main Executive Board meetings. Further details on our engagement with our customers can be found on page 12. DEBT FUNDERS Our economic model We remain in regular communication with our banks. We have made sure to update them on rents assumes that we leverage received and key measures related to overall Company performance and the assets specifically assets developed to continue secured to their facilities. to invest and grow. This In addition, we prepare a debenture-specific presentation (available on our website) which the Chief makes the availability of Executive and Finance Director are more than happy to present to any of our debenture holders. secured debt funding key to business development. We As part of the monthly board papers, summaries of each of the Company’s debt facilities together see our three main bank debt with the properties secured are provided. During the year the Board has discussed the levels providers and our debenture of debt required, as a result of these discussions and decisions the Company has reduced the holders as key stakeholders. quantum of tow of the three debt facilities available to the Company, with the view to reducing the level of commitment fees paid but retaining sufficient facilities to enable the Company to operate with sufficient headroom. COMMUNITY We believe we have a duty to During the year, TCS head office staff collectively donated more than 100 hours of their time to make a positive contribution work shifts at the Leeds Hospitals Charity Shop. locally and be considered an Further details on our engagement with the community can be found on page 40. integral part of the community. ENVIRONMENT The Board acknowledges The Merrion Estate’s five-year sustainability programme is coming to an end. Recent initiatives that it has a responsibility to include SMART meters to help reduce consumption, a review of all travel plans and upgraded minimise its environmental cycle storage and shower facilities to encourage cycling initiatives. impact. The strategy for future developments is to not only provide buildings that are sympathetic to their existing surroundings, but also to safeguard for future generations. Some of the key targets being: • EPC A Rating • BREEAM ‘Outstanding’ • Net zero carbon in operation • 38.5% less energy consumption than buildings regulations • 100% of energy from renewable sources Board discussions and ultimately decisions around the Company’s development pipeline are a standing agenda item at the Board meetings. Briefing papers around the proposed developments include key environmental and placemaking credentials. Further details on our engagement with the environment can be found on pages 35 to 38. | 31 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Responsible business ## PROGRESS ### INTRODUCTION ## OVER THE LAST DECADE ## TCS HAS INVESTED ## HEAVILY IN THE PHASED ## REDEVELOPMENT AND ## REFURBISHMENT OF ## THE MERRION CENTRE, ## TRANSFORMING IT INTO ## A VIBRANT, RELEVANT, ## MIXED-USE DESTINATION. Merrion Centre TCS has been committed to generating Edward Ziff, our current Chairman and Governance long-term sustainable success since its CEO, was awarded an OBE for service to The Board currently has responsibility for foundation over 62 years ago and still community in 2017 and is Chairman and overseeing our activities in this area and retains the ethos of its founder that business Trustee of Leeds Cares, a charity which ensuring that ESG issues are considered should make a positive contribution to the supports Leeds Teaching Hospitals. in all our decision-making. When we invest communities in which it operates. our capital we always look to protect the We recognise the need to develop a environment, benefit the communities that The Marjorie & Arnold Ziff Charitable more formal structure to support our surround us, and take into account the foundation is a registered charity which, activities and ambitions in this area and are needs of all our stakeholders. whilst managed separately with its own continuing on the journey to create an ESG resources based on a TCS shareholding, framework with clearly articulated targets plays a key role in facilitating the Ziff family and metrics to measure progress against to support the local community while our focus areas. 32 | ## 01 | STRATEGIC REPORT Leeds Hospital Charity ### Our approach ESG is at the heart of everything we do. We aim to ensure that all the activities we undertake as part of our four strategic workstreams are underpinned by the following five ESG principles which form the basis for our ESG programme: • Minimise our environmental impact • Engage with our external stakeholders • Engaged and committed employees • Make a positive contribution to the communities we operate in • Always do the right thing The table below details some of the ESG-focused specific activities that are currently underway across the business and outlines how they fit into our strategic framework. ACTIVE LY MAXIMISING MANAGING OUR AVAILABLE INVESTING IN INVESTING IN ASSETS CAPITAL DEVELOPMENT EXISTING ASSETS MINIMISE OUR ENVIRONMENTAL IMPACT 1, 2 1, 4, 5, 13, 15 6, 8 12, 19, 20, 22 ENGAGE WITH OUR EXTERNAL STAKEHOLDERS 2, 4, 15 2, 6, 7, 8, 9, 11 2, 6, 9, 10, 16 ENGAGED AND COMMITTED EMPLOYEES 3, 17 18, 21 MAKE A POSITIVE CONTRIBUTION TO 14 11 OUR COMMUNITIES ALWAYS DO THE RIGHT THING 6, 7 22 ### Key Strategic projects 1 Merrion Centre waste and sustainability plan, Green Apple 13 Launch of CitiCharge Award recognition 14 Significant CSR programme supporting local communities 2 Energy efficiency programmes lowering service charge costs and charities 3 Head office with living walls and improved space 15 Specific parking rates for EV/Hybrid drivers at Clipstone Street, Merrion and the AO Arena 4 Investment in EV charging infrastructure 16 Investment in WiredScore 5 Solar farm investments in Leeds and Manchester 17 Westfield Health benefits for staff 6 EPC A and BREEAM Outstanding targets for all new buildings 18 On-going SIP scheme to engage and benefit 7 WELL Building Standard target all staff 8 Full recycling options at Burlington House 19 Go Ultra Low status for CitiPark 9 Merrion House facilities including recycling and cycle store 20 Installation of PIR and LED lighting systems in properties and 10 Burlington House value-added services including cleaning, car parks deliveries and fitness 21 Ian Marcus appointed workforce Board representative 11 Piccadilly Basin – street art project, security improvement 22 Merrion Centre carbon neutrality plan 12 Environmental targets for all future developments | 33 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Responsible business continued ### Alignment with the UN Sustainable Development Goals (SDGs) TCS recognises the importance of the UN SDGs and as we further develop our ESG programme we are using these to inform our decision-making and target setting. ### The key SDGs that TCS has an impact on and our activities ### in these areas are set out below: Goal 3 Good health and wellbeing – our charitable work with children (e.g. our work with the Ahead Partnership). Goal 7 Affordable and clean energy – producing our own solar energy through the development of three solar farms in Leeds and Manchester. Goals 11 & 12 Sustainable cities and communities and Responsible consumption and production – EV charging network, and newly formed CitiCharge business. Also our five-year Merrion Centre sustainability plan. Goals 10 & 17 Reduced inequalities and Partnerships for the goals – local charitable partnerships including Tempus Nova. 34 | ## 01 | STRATEGIC REPORT ### DELIVERING THE PROGRAMME: It should be noted, however, that a great Sustainability projects deal of work has been undertaken to Due to focus being aimed at supporting ### Minimise environmental impact promote and drive a sustainable approach our tenants whilst coming out of the Environmental report to property management, including: global pandemic, our opportunities to • Continue our work on modernising Our aim continues to be based around initiate various sustainability projects have the supply distribution within the ensuring that we operate in a responsible been limited. Despite this we have looked centre, with the aim of utilising manner, whilst directing our efforts to continue with existing schemes and modern technology to help reduce towards a more sustainable future and where possible introduce new tasks that our energyfootprint. ensuring that we achieve being carbon help keep momentum going in the right neutral in the coming years. • Through our re-tendering practices, direction. These measures include: we are ensuring our supply partners • The creation of our central mall seating As with previous years this sustainability meet a clear sustainable criteria before area, where second-hand furniture and report focuses on the Merrion Centre, our we are willing to engage with them. materials have been utilised to create largest and most complicated asset. This a comfortable, but sustainable area for • We are currently undertaking a revised report does not include metrics related to the general public to sit. five-year PPM report that will ensure the rest of the estate, as much of it is let to we continue to modernise our ageing • The Merrion Centre is now into its third third-party tenants who are responsible for equipment and deliver better energy year of being a member of the #Refill the generation of, and reporting on, their management opportunities. campaign, which aims to help reduce environmental footprint. plastic pollution by making it easy to • Additional LED lighting installed into refill your reusable water bottle instead the main square, North Mall, service As already noted our aim in the coming of buying a plastic one. For more tunnel and balcony, giving better energy months is to work towards carbon information visit www.refill.org.uk. performance for one of the last remaining neutrality and to that end, we have non-LED areas of the Merrion Centre. • Power distribution – Our rolling engaged with the Carbon Trust to target programme continues to upgrade and three areas: 1) Identification of our carbon Waste initiative improve our power distribution network liabilities; 2) Implementation of initiatives As we come out of the pandemic, with the Merrion Centre: to reduce our liabilities that are within our our waste volumes have increased control; 3) Use of a recognised scheme to • Smart meters installed to help proportionally with tenants re-opening and offset the remaining carbon liabilities. We monitor performance. returning to business as normal. During hope to have the agreement to begin this this process TCS has made every effort • Further LED lighting was installed in process in place by November 2022. Our to identify new and improved methods the centre back of house. aim during this process is to pass on any to enhance our waste credibility. One • Removal of redundant or ageing lessons learnt to our tenants across the such scheme is the implementation power distribution. various portfolios. of our Ethicoil collection service, that sees the used cooking oil from our food • Our use of the Ecocap waterless The Merrion Centre | | and beverage tenants, centralised and | urinal systems in Town Centre House, | | --- | --- | --- | | With the effects of the pandemic receding, | collected for recycling. Any funds raised | continues to save more than 360,000 | | we have been able to review several of our | from this service are reinvested into our | litres of water per annum. As we | | systems and processes to identify further | sustainability initiative (£747 between | refurbish our toilets, we will continue to | | measures we can take to greater improve | January 2022 and April 2022). | identify systems that will give equal or | | our sustainability mission. These include: | | improved performance. | • A review of our use of vehicles and where possible utilising electric power. This is in the form of our cherry picker ### REGARDING OUR VOLUME hire and our CitiPark electric vehicles ### OF WASTE: into which further investment into was made in the past year. ### The Merrion Centre • The introduction of a second green ### space within the Merrion Centre, to produced on average 41 further support both our young and ### tonnes of waste per month, ageing demographic of visitors. ### which is an increase of 64% • Following the successful launch of the ### OdorBac cleaning product in the centre, over the previous period. we have rolled it out to our office ### Through our waste partners, buildings, along with mobilising the ### 100% of our waste avoids system to our national portfolio. ### landfill. This includes 52% of • We continue to use the escalator ### sanitiser that cleans the handrail on the total waste produced this each rotation. ### year being recycled and 48% ### sent to an Energy Recovery Electric Vehicle Charging ### Facility (‘ERF’). at CitiPark’ | 35 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Responsible business continued ### Utilities SECR – Greenhouse gas emissions (‘GHG’) statement As with most businesses, our costs in In line with the Companies Act 2006 (2013 Regulations) and the Streamlined Energy relation to our energy consumption have and Carbon Reporting (‘SECR’) requirement, TCS is disclosing its annual GHG emissions. seen a major increase. The turbulent times We are required to report the Company’s emissions of carbon dioxide equivalence (CO e), 2 in the Ukraine, coupled with the low storage a CO e intensity value, and the consumption of energy in the UK. The methodologies and 2 stock in Norway has resulted in our contract processes used to calculate these emissions are also disclosed. costs increasing significantly by 64%. This increase serves to remind us that our TCS has addressed environmental impacts through a number of measures and processes, objectives in moving towards a renewable primarily within the Merrion Centre and its five-year sustainability plan, as detailed earlier energy source are now even more pressing. in the Responsible business section of this Strategic Report. Whilst our energy usage over the past two The table below includes emissions for the consumption and combustion of fuel (Scope 1), years has been below expectation due to of purchased electricity (Scope 2) and the electricity and gas consumption arising from the the pandemic, our general consumption transport of energy from where it is generated (Scope 3) to the premises and other assets in 2021/22 has remained -8% on our pre- operated by TCS. TCS has a fleet of fifteen vehicles (five of which are electric and three that pandemic levels. This has been achieved as are petrol/electric hybrid cars) which is the sum of the Company’s Scope 1 GHG emissions. a result of many of the measures identified Scope 2 emissions are made up of electricity consumed at TCS’s head office. All of TCS’s | earlier in this report. | operations are in the UK, therefore all values below are both Group totals and UK totals. | | | --- | --- | --- | | We are pleased to report that the last of our | | 2021 2022 UNIT | | gas dependency at the Merrion Centre has | | 1 | ENERGY CONSUMPTION (ALL UK-BASED) now been removed, another milestone in | | Transport Fuel | | 2 | | | --- | --- | --- | --- | --- | | working towards carbon neutrality. | | | | 41,507 92,249 Kilowatt hours of energy used | | | Electricity | 3 | | | 94,484 101,679 Kilowatt hours of energy used TOTAL 135,991 193,928 Kilowatt hours of energy used ### Methodology and scope Carbon dioxide equivalence (CO e) 2 5 (RESTATED) emission data have been collected, 2021 2022 UNIT calculated, consolidated and analysed following the GHG Protocol CO E EMISSIONS (ALL UK-BASED) 1 2 (Corporate Accounting & Reporting | | Scope 1 | 2 | | | | --- | --- | --- | --- | --- | | | | | 10,150 22,893 kgs of CO | e | | Standard) following the ‘operational | | | | 2 | | control’ approach. Emission factors | Scope 2 | 3 | | | | | | | 23,093 26,146 kgs of CO | e | 2 of supplied electricity for locations | | Scope 3 | 4 | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | – | 15,539 kgs of CO | | e | | and vehicle charging (both GHG | | | | | | 2 | | emissions and energy use based on | TOTAL | | | | | | | | | | 33,243 64,578 | | kgs of CO | e | 2 vehicle mileage) were sourced from the UK Government GHG Conversion (RESTATED) 5 Factors for Company Reporting 2020 2021 2022 UNIT (DEFRA agency) – this represents the annual average CO e emissions of the CARBON INTENSITY 2 UK’s electricity grid. The boundary Reference 1: Area 8,311 6,500 Square metres (office area for Group) for reporting includes assets (in the case of TCS these are offices and Reference 2: Employee 30 27 Employees (FTE) company owned/leased vehicles) that Reference 3: Gross Revenue (£’000) 5 18,703 23,585 Gross Revenue are operated by the Group and does (excl. service charge income) not include the energy and emissions CO e by area 2 of building tenants who lease property 2 3.99 9.94 kg CO e per m 2 from TCS, nor does it include the CO 2 e by employee 1,108 2,392 kg CO e per employee (FTE) 2 communal areas of the Group’s properties; tenants are responsible for CO e by £’000 of Gross Revenue 5 2 1.777 2,544 kg CO e per Gross Revenue (£’000) 2 reporting their GHG emissions under their own scope 2 disclosures. Energy 1 All of the Group’s operations are UK-based, there are no non-UK-based operations. consumption values for offices, and 2 Scope 1 emissions are traditionally emitted from fuel combustion in either buildings or Company | their corresponding GHG emissions, | | leased/owned vehicles. | | --- | --- | --- | | are based on values provided by utility | 3 Scope 2 emissions are derived from electricity consumption at TCS’s office and by the electric | | | suppliers e.g. electricity or natural | | vehicles within their Company car fleet. | gas bills. Company vehicle mileage 4 Scope 3 emissions are derived from the transport of energy from where it is generated, to either is estimated and is used as the basis TCS’s office or to the Company’s car fleet. Scope 3 also includes, where relevant, emissions from for calculating energy consumption personal or privately-hired vehicles used for company business. and emissions from fuel and 5 Gross Revenue in FY21 restated to correctly include all Gross Revenue (excl. service charge electriccharging. income) arising in the year. 36 | ## 01 | STRATEGIC REPORT ### Task force on climate-related The TCFD framework is part of the remit of this committee, along with the implementation ### disclosures of our carbon neutrality plan, which is initially targeting three areas: • identification of our carbon liabilities The Board recognises the importance of clear disclosures around climate-related • implementation of initiatives to reduce our liabilities matters, whilst recognising that a strategy • use of a recognised scheme to offset the remaining liabilities. to protect the business and ultimately The SCC Committee also considered the resilience of the Company’s existing portfolio to enhance the resilience of our assets different climate related scenarios, including a +2c scenario, in particular with a view to the against the effects of climate change geographical locations of each site and the plant and machinery in situ. Following this the will not be a simple and quick process. Company is taking further steps to review and consider the impact of additional climate related scenarios which it expects to be able to report on over the next 12 to 24 months. In accordance with LR 9.8.6(8) R the Company has complied with the Governance, Strategy Assessment and the management of climate related risks is then fed into the Company’s and Risk Management recommendations for six-monthly Risk Report. This years Risk Report includes a specific section on Climate TCFD except for assessing the resilience of Related risks for the first time. This is then reviewed and approved by the Board. A its strategy when taking into consideration summary of which can be found on pages 42 to 48 of the Annual Report. different climate related scenarios. The Company is also in the process of complying ### Strategy with the requirements of the Metrics and targets recommendations. The disclosures The following table provides a summary of the risks and opportunities identified the SCC have all been based on the TCFD framework Committee and by the Board: of four pillars: • Governance SHORT MEDIUM LONG CLIMATE-RELATED RISKS AND OPPORTUNITIES TERM TERM TERM • Strategy | • Risk Management | Physical Flooding Exposure to flood risk from extreme weather • • • | | | | | --- | --- | --- | --- | --- | | • Metrics and Targets | | Temperature | Change in tenant requirements regarding | • • • | | | | rises (+2ºC) | offices, especially if they are themselves | | | Governance | | | committing to net zero targets. Leading to | | increased construction costs but then also the The Board is responsible for overseeing opportunity to lease buildings at a premium all activities, including those that relate to rent as the demand from occupiers has been increasing for purpose build developments climate change and sustainability. These with class-leading environmental credentials activities can be broken down into two distinct categories, one in relation to the Increased risk of ‘breakdowns’ to key elements • • of plant and machinery, for example, air existing investment property portfolio conditioning units. where in its simplest form the strategy is ‘how we can improve the environmental Transition Regulations Evolving policies designed to ensure that • • • and Standards the UK meets its 2050 net zero carbon performance of an existing building’ commitment. in particular improving the EPC rating/ Increased regulation and standards provide encouraging recycling/recommending opportunities, especially around expanding to tenants ways to reduce utility bills and and using the Company’s experience with a second on the development portfolio EV charging points, but also the continued roll-out of the CitiCharge App which provides where ensuring that buildings are designed further income streams over and above pure appropriately from the start, in particular parkingfees. with a net zero target, and sympathetic Reputation Benchmarks to be reported on, even if key • • to the increasingly climate-conscious milestones are not met. Ensuring that reporting requirements of tenants. The case is transparent and accurate study on pages 16 and 17 of this Annual Report give examples of the Whitehall With 89% of the Company’s property portfolio in Leeds and Manchester, two cities that Riversidestrategy. have similar profiles (both historically and economically), we have not broken down our strategy by geographical area. A separate Sustainability and Climate Change Committee (‘SCC Committee’) By identifying these risks and communicating them to the Board on a six-monthly basis, has been set up comprising two executive the Company is in a position to react and update the strategy accordingly. members of the Board and members of the senior management team – currently the The strategy is, however, built into the business at all levels, from new large-scale Property Director and the Centre Manager developments, the increasing number of EV charging stations within the CitiPark of the Company’s largest single asset, business to recent rolling out of a Company-wide electric car scheme available to all the Merrion Centre. The key aim of the staff. In looking at investment acquisitions, the EPC rating and other environmental committee is to develop and implement considerations are all factored into the recommendations made by the property team the Company’s sustainability strategy to the Board. The assessment of how much it would cost to improve these ratings are which includes both environmental reflected in ultimately the purchase price for these properties. In managing existing and social risk management. assets, improving the environmental credentials is one of the ways to increase and unlock value. When all asset management opportunities are completed, the Board may then look to dispose of the asset. | 37 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Responsible business continued ### Risk management Exposure to extreme weather events is not Although seen as a risk, we are firmly of seen as a high risk, with the Company’s the belief that this is an opportunity for the Climate-related risks have been added portfolio located outside of areas at Company with potential tenants willing to the Company’s risk register. The SCC risk of serious flooding and not at risk to pay premium rents for sustainably Committee regularly reviews and assesses of sea level rises. The Company does designed buildings. the climate related risks in order to ensure operate two subterranean multi-storey that all risks have been identified and that ### car parks (‘MSCPs’) in London but both Metrics and targets they have been assigned an appropriate have significant ‘flood’ storage chambers level of importance. The SCC Committee TCS reports annually on its scope 1, 2 and with pumps to combat surface rainwater and reports through to TCS’s six-monthly 3 GHG emissions, the electricity generated collecting in them. risk review framework. Management from its three solar farms and certain waste of these risks is then undertaken by and recycling metrics from the Merrion The concept of ‘always doing the right the property investment and estates Centre. The Company’s website also includes thing’ has been part of the ethos of the management teams, together with input details around the EPC-certificated values Company since its inception. As a Board where necessary from external advisers, for the portfolio with all new buildings we are very much aware that tenants are including insurance brokers and flood risk targeting EPC B or greater. In addition putting environmental considerations at assessors. With the support of our property the key new initiatives and sustainability the forefront of their decision-making, it is director and the Merrion Centre manager, projects undertaken in the Merrion Centre not now just about the rental value. we have implemented and recently are reported within the Responsible Business completed a five-year sustainability plan for section of this Annual Report. The Merrion In designing new buildings, a key tenet of the Merrion Centre. We have recently been Centre acts as an innovation centre, where our development plans is to be sympathetic awarded a Green Apple Environment Award successful initiatives are then rolled out to the existing surroundings whilst for the sustainability work undertaken on across the rest of the TCS portfolio. We aim safeguarding them for future generations. the centre’s recycling facilities. to build into future reporting the results of This approach is highlighted in our Whitehall the Carbon Trust’s review of our carbon Riverside development, about which further neutral plan and expand our scope 3 GHG detail can be found in the case study on reporting to include downstream emissions pages 16 and 17 of this Annual Report. relating to our tenants. ### TCFD’s recommended disclosures DISCLOSURE Describe the Board’s oversight of The Company established a Sustainability and Climate Change Committee in 2022. The two key climate-related risks and opportunities responsibilities of this committee is to focus on the Company’s carbon neutrality plan and to implement and report on the TCFD framework. The Board assumes overall responsibility and accountability for the management of climate-related risks and opportunities. Describe the management’s role in Management has undertaken a review of the company’s risk management approach and climate-related assessing and managing climate- issues have been integrated into the core risk management process as a principal risk. related risks and opportunities Describe the climate-related risks and The short- and medium-term risks identified include increased risk of the breakdown of machinery; opportunities the organisation has unattractiveness of buildings to potential occupiers due to poor carbon performance; and increased identified over the short, medium, regulatory and policy measures. The opportunities identified include: improved commercial opportunities and long term of owning assets which are energy efficient; and the possibility of securing more competitive financing. Describe the impact of climate related Climate-related risks have been integrated within the company’s Principal Risks. Climate and risks and opportunities the organisation’s energy performance have been fully integrated into both development and asset management businesses, strategy and financial planning decision-making process. Describe the resilience of the organisation’s The Company’s assets are exclusively located across the UK in well-connected regional transport hubs, strategy, taking into consideration different predominantly Leeds and Manchester. The Company is continually reviewing its exposure to climate- climate-related scenarios, including a 2C or related risks. Under a 2°C scenario, the Company’s strategy is considered resilient, bearing in mind the lower scenario physical locations of its assets and the development opportunities offered. Describe the organisation’s processes for The Company has formed a Sustainability and Climate Change Committee to identify and assess and manage identifying and assessing and managing climate related risks which reports through to the Board. This committee will continue to meet and will be climate-related risks leading on the Company’s thinking and planning re its carbon neutrality plan and its net zerostrategy. Describe the organisation’s processes for The Company considers and assesses climate-related risks and opportunities through the Sustainability managing climate-related risks and Climate Change Committee and the Board. Describe how processes for identifying, Climate-related risks have been identified by the Board as an emerging business risk. These risks are assessing and managing climate risks are identified, assessed, managed and monitored by the Sustainability and Climate Change Committee with integrated in to the Company’s overall recommendations made to the Board. risk management Disclose the metrics used by the GHG emissions and energy consumption, are disclosed in the Annual Report including Scopes 1, 2 & 3 organisation to assess climate-related risks and are aligned to the Greenhouse Gas Protocol Corporate Standard and DEFRA Environmental Reporting and opportunities in line with its strategy Guidelines. As described above we are in the process of expanding our scope 3 GHG reporting to include and risk management processes downstream emissions relating to our tenants. Describe Scope 1, Scope 2 and if GHG emissions are disclosed in the Annual Report and are aligned to the Greenhouse Gas Protocol appropriate, Scope 3 greenhouse gas Corporate Standard. The related potential risks can be viewed in the Risk Report on page 47. (GHG) emissions, and the related risks Describe the targets used by the We are now reporting Scope 3 emissions and beginning to gain greater visibility of our carbon footprint. organisation to manage climate-related Over the coming 12 months the Sustainability and Climate Change Committee will looking into further risks and opportunities and performance metrics in particular around the Company’s carbon neutrality plan. against targets 38 | ## 01 | STRATEGIC REPORT ### Engage with our external Communication is paramount and we pride ### stakeholders ourselves on our continuous engagement with tenants both face to face and digitally CitiPark diagrid throughout the year. The flagship CitiPark branch at Leeds Merrion Centre has this year supported Engaging young people a variety of regional, national and Once again we welcomed a new ‘roar- international causes by illuminating its some’ friend over the school holidays as external LED diagrid facing Merrion Way. we played host to a life-size Brachiosaurus on our main mall as part of the city-wide We have used it to support various Leeds Jurassic Trail. This free trail saw initiatives/causes including supporting the thousands of families transiting to the England Lionesses team in the Euros (red, Merrion Centre to see our biggest dino white & blue), Candlelighters ‘Pink It Up’ installation to date. campaign (pink), the Ukraine (blue/yellow) and Holocaust Memorial Day (purple). Our collaboration with local Leeds schools in conjunction with Child Friendly Leeds Merrion Estate and local Yorkshire-based community We recommenced activity as part of our interest company, Lemon Balm, saw us ‘Shop, Eat, Drink & Be Merrion’ strategy promoting wellbeing and supporting Merrion Goes Green to ensure the Merrion Centre remains climate resilience through horticultural one of the city’s prime retail and leisure therapy. Pupils between the ages 6–10 destinations. This included the introduction years learned about seeds and plants of new look ‘green’ seating spaces on the alongside the fantastic work of St Gemma’s main mall to create a safe place to sit, relax hospice, before growing edible and and meet whilst shopping. This has been biodiverse plants in biodegradable pots well received by visitors. with peat-free compost to be planted ### within the hospice grounds. The plants were showcased We continue to focus on the unique ### on display or transferred attributes the Merrion Centre offers Once transferred from the schools, St ### customers. A destination where larger to the hospice kitchens to Gemma’s gardening team then prepared the brand essential stores sit alongside some ground where the plants were showcased ### be used to create meals for of the city’s most unique independent on display or transferred to the hospice ### retailers; our ongoing campaigns aim to patients, their families and kitchens to be used to create meals for highlight our diverse mix of venues to our ### patients, their families and the team. the team. ever-changing customer demographic. TCS working with local schools to promote wellbeing and support St Gemma’s Hospice’ | 39 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Responsible business continued ### Engaged and committed We are committed to learning and Always do the right thing ### employees development and are supporting TCS takes its responsibilities as a listed colleagues through Chartered Surveyor We have a relatively small team at our head UK business extremely seriously, and is and Chartered Accountant qualifications. office and pride ourselves on how we treat committed to upholding high standards We have also given work experience our employees. of corporate governance. Whilst we spend opportunities to local students. considerable time ensuring we review our We pride ourselves on being a business compliance against rules, laws and codes, Diversity and inclusivity are important in that has a family feel to it, building a clear we also spend much time ensuring we our business with a 70/30 male to female culture over our 60 years in business of abide by the spirit of such requirements split across the whole business. being a small Company that cares for and instilling a culture within the and looks after its employees, creating organisation of ‘doing the right thing’. During the year the Company has been opportunity and giving accountability. Key areas of focus include: putting in place an electric car leasing Expectations of staff are high and at times • Implementing the Corporate scheme that has been made available to demanding. However we endeavour to Governance Code – As detailed on all employees. Within the first month three always support staff, and go above and page 66, TCS has worked closely as a employees have already ordered new beyond any written down HR policy. We Board6to review the requirements of electric cars under this scheme. like all staff to know that if they have a the Code and be clear where we believe problem, work-based or personal, that compliance is necessary and right, and ### Making a positive contribution they can talk with the Directors and senior where it is appropriate to explain why ### to communities management in the knowledge that the we take a different approach. Company will do everything it can to We contribute to a broad range of local • Debenture holders, engagement – support them. We believe in the concept causes, with charities focused on children TCS has in place a long-term debenture of opportunity for all, and are intolerant and young adults particularly close to our where most of our day-to-day contact towards any form of discrimination. hearts. We complement our support for is with the debenture trustee. When longstanding partners with standalone asked, Edward Ziff and the Group Our Non-Executive Director Ian Marcus initiatives. We also seek to improve and Finance Director will present to the has taken on responsibility as our Board create a sense of wider community bond holders to ensure they fully representative for the wider workforce. in our areas of operation, using our understand the status of TCS and the Whenever in the office Ian meets with assets and resources to work with other security of their investment. staff members. Ian’s responsibility in this communitypartners: • Health and Safety (‘H&S’) – We are regard enables us to assess the culture • Young people – First Give committed to providing a safe and and engagement within the business and We are the main sponsor of the First secure working environment, in our challenge management where necessary Give programme in Yorkshire – a charity own offices and in our properties, in this regard. that encourages students to learn about particularly those – such as the Merrion social issues in their communities, Centre where we maintain an on-site TCS runs a Share Incentive Plan (‘SIP’) and then ultimately to plan and deliver management function. We have an scheme available to all staff. Under the social action activities, including established Group health and safety HMRC guidelines it is an appealing benefit fundraising to their chosen charities. policy, which is approved by the Board and helps to engage colleagues in the • Placemaking – Canal-Side Mural annually, and we review health and wider success of the business. The Company has engaged four safety issues and incidents at every acclaimed local artists to create a canal- Board meeting. The Property Director Human rights side mural at Manchester’s Piccadilly oversees its implementation, and chairs Although we do not have a separate Basin to bring the space to life. The a quarterly internal meeting reviewing Human Rights Policy, a respect for human second mural has now been created to all aspects of H&S across the business rights is implicit in our employment further enhance the up-and-coming area as a whole from our offices to our practices and our engagement with and bring a piece of bespoke, modern properties, car parks and hotel. We third parties. art for residents and workers to enjoy. have implemented a new reporting and • Contributing to the community – monitoring system in the past year to Work environment International Volunteers Day facilitate this. Our operational teams | We continually look for opportunities to | In December 2021, to coincide with | have clear health and safety objectives | | --- | --- | --- | | improve the work environment for our staff. | International Volunteers Day, TCS head | and review procedures regularly, taking | | Key to this is our Leeds head office which | office staff collectively donated more | action where necessary. | | has been designed to be a modern and | than 100 hours of their time to work | | • Whistleblowing – we have a comfortable place to work. shifts at the Leeds Hospitals Charity whistleblowing policy in place that shop which opened on the main mall at is reviewed at least annually. We see In addition, we have improved benefits in the Merrion Centre in May 2021. this policy as an important feature to recent years for head office staff, improving • Award – Green Apple Award encourage and enable all staff members Company pension contributions above During the year the Merrion Centre has to ‘do the right thing’. statutory requirements, and introducing a successfully won its first International health insurance policy. Green Apple Environment Award for the sustainability work undertaken on the recycling facility in the centre. 40 | ## 01 | STRATEGIC REPORT ### Once again we welcomed Leeds Jurassic Trail at the Merrion Centre ### a new ‘roar-some’ friend ### over the school holidays ### as we played host to a life- ### size Brachiosaurus on our ### main mall as part of the ### city-wide Leeds Jurassic ### Trail. This free trail saw ### thousands of families ### transiting to the Merrion ### Centre to see our biggest ### dino installation to date. Local art installations across Piccadilly Basin Canalside planting as part of Manchester Flower Festival | 41 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Risk Report ## PROTECTING VALUE BY IDENTIFYING ## AND MANAGING OUR PRINCIPAL AND ## EMERGING RISKS IS AN INTEGRAL ## PART OF OUR OPERATIONS. ### Risk management • Annual Strategy Review This includes occupancy levels, tenancy – begins with a review of key risks facing changes, adherence to payment terms We take risk management very seriously, the business and a review of how the and bad debt levels, and Health and such that reference to, and consideration strategy will best mitigate those risks. Safety and IT-related matters. of, key risks form part of the day-to- day workings of the Company. Whilst • Bi-annual Audit Committee • Monthly CitiPark Board Meeting we recognise that a level of risk-taking – undertakes a formal review of the risk – a meeting of the Executive Board and is inherent within the running of a register and mitigating action plans. senior CitiPark, Property, and Finance commercial enterprise, we work to ensure management, tasked at reviewing the • Quarterly IT & Data that risk assessment and mitigation are performance of the CitiPark business, Governance Committee central to business planning and including key risks and areas such as IT – chaired by the Group Finance Director, decision-making. and Health and Safety. this committee of senior management reviews IT and data-specific risks and • Joint Venture Board Meetings The business has a number of formal ensures that key risks are understood – formal Board structures and quarterly meetings during the year where risk and managed. This includes a review Board meetings are in place for the assessment is a core element of of adherence to the GDPR regulations. Company’s two main joint venture theagenda. companies, Merrion House LLP and • Monthly Board Meetings Belgravia Living Group Ltd. – each meeting includes a review of We pay particular attention to new and financial performance, debt levels and • YourParkingSpace.co.uk emerging risks, in order to ensure we put banking covenants, an IT update, and a – TCS Board Directors sit on the Board in place actions which attempt to remove review of the papers and actions from of YPS, which meets formally on a or reduce risk before it occurs. We use the Property Review Group (see below).. monthly basis. Following the sale of our our formal meeting structures to identify investment in YPS after the year end we • Monthly Property Review Group emerging risks, as well as highlighting no longer have any representation on – a meeting of the Executive Board existing risks. These meetings include YPS’s Board. and senior Property and Finance but are not limited to: management, tasked at undertaking a review of the Property Portfolio. ### Our Principal Risk Register is summarised as follows: RISK LIKELIHOOD IMPACT CHANGE FROM FY21 Macro Economic Economic & Political outlook High Medium No Change Corporate Strategy Low High No Change People Low High No Change Systems, Process & Financial Management Medium High No Change GDPR Medium High No Change Regulatory & Tax Framework Low High No Change Tax Risk Medium Medium Worsening Major Incident/Business Disruption Medium High No Change Property Investment Risk Medium Low No Change Development Risk High High No Change Valuation Risk Medium Medium No Change Tenant & Sector Risk High Medium No Change Climate Change Risk Medium Low N/a Financing Capital & Financial Risk Low High No Change Cost of Debt High Medium No Change Financial Covenant Compliance Low Low Improving 42 | ## 01 | Likelihood H M L High Medium Low STRATEGIC REPORT Impact H M L High Medium Low Change from HY20 Improving No Change Worsening ## MACROECONOMIC RISKS RISK LIKELIHOOD IMPACT MITIGATION TREND ### ECONOMIC AND An economic downturn at some point in the cycle is inevitable, with H M ### POLITICAL OUTLOOK the impact of Brexit, the recovery from COVID-19, the ongoing conflict in Ukraine and the cost of living/energy crisis still relatively unknown. A broad economic downturn, TCS would not escape the impact of an economic downturn, however, following Brexit and more specific mitigating factors for TCS include: recently the conflict in Ukraine, the cost of living – Rents paid in advance. crisis and the energy crisis – High level of occupancy and a long history of ensuring on-time or broader cyclical reasons payment by tenants. could result in tenant failures, – A reduced level of retail exposure, with much of the remaining falling asset values, rising portfolio focused on discount and convenience retailing. debt costs, or less debt availability. In addition, the – Avoidance of speculative developments. lasting impact of COVID-19 – Concentrated portfolio of car parks in highly sought-after locations. and the longer-term effects – Bank agreements ranging from one to two years in length, and the of the actions taken by long-term debenture accounting for 72% of our debt at the year end. government to manage the disruption will in all likelihood have lasting economic effect. ## CORPORATE RISKS RISK LIKELIHOOD IMPACT MITIGATION TREND ### STRATEGY The Board undertakes regular reviews of the strategy and believe the L H following will help to mitigate risk: The Company’s strategy could be inappropriate for – All key decisions are reviewed and approved at Board level. the current stage of the – The strategy of developing diverse multi-use sites and lowering property cycle and the exposure to retail remains appropriate. economic climate, resulting – The strategy to sell retail and leisure assets has resulted in these in lower profits and therefore assets now representing only 31% of the portfolio. a pressure on dividend and – The experience and expertise of the team, particularly in relation to shareholder return. This risk the property markets of Leeds and Manchester. has been exacerbated by the recent economic challenges – The presence of the Ziff Concert Party ensures a strong alignment of effecting the entire country management and shareholder aims. which will change people and firms’ attitudes towards property usage. ### PEOPLE The Company benefits from the long service of a number of key L H individuals, including family members of the Concert Party, which The inability to attract and helps guarantee stability. In addition: retain high-calibre staff, affecting the ongoing success – Base salary packages are kept competitive within the market. of the Company. – The Remuneration Committee reviews succession plans and pay levels annually. – New recent appointments demonstrate the attractiveness of the business to new recruits at all levels. – A history of conservative financial management combined with the development opportunities of the business make the Company attractive to new recruits. | 43 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Risk Report continued ## CORPORATE RISKS continued RISK LIKELIHOOD IMPACT MITIGATION TREND ### SYSTEMS, The Company has a strong culture of safeguarding assets, being M H ### PROCESSES conservative in its approach, and using professional experts to ensure ### AND FINANCIAL risk levels are restricted to be as low as reasonably possible: ### MANAGEMENT – IT systems are supported in-house, with key services having been Weak controls putting at moved to the cloud. risk the protection of the – Horizon is our combined property and accounting IT solution Company’s assets and ability and ensures we remain well controlled in this respect. This was to deliver on its strategy, upgraded a few years ago and resides in the cloud, further resulting in financial loss, safeguarding business continuity. fraud, and suboptimal returns. Risk to data and systems as a – Financial processes relating to cash are tight, robust, and reviewed result of cyber-attacks. regularly. Clear and separated authorisation processes are in place and robustly adhered to. – Insurance policies are fully in place to safeguard assets. – Staff are trained in all aspects of cyber security and penetration, and phishing tests are carried out to test for weaknesses. – A summary of the internal financial control review processes can be found in the Audit Committee report of the Annual Report. ### GDPR Given the nature of the business, we do not hold significant amounts M H of customer data, with the CitiPark business our highest risk area. Financial and reputational That said, the Company has taken seriously the requirements of the risk arising from a breach of legislation and has implemented a detailed action plan that has been GDPR regulations, potentially reviewed at Board level. Key aspects include: resulting in fines and damage to customer trust. – Updated all privacy-related statements and policies. – Trained all staff on their and the Company’s responsibilities. – IT & Data Governance Committee in place, meeting quarterly, to oversee all aspects of GDPR and wider cyber security. ### REGULATORY AND TAX The Company takes its legal responsibilities seriously. Matters are L H ### FRAMEWORK reviewed regularly at Board and Audit Committee level, and the Company makes use of third-party professional services to ensure Non-compliance with compliance. Actions include: tax, legal, or regulatory obligations could result – Link Company Matters resigned as Company Secretary in the in financial penalties, summer of 2021 – however regulatory and corporate compliance reputational damage, and matters are typically referred to one or both of the Company’s higher levels of cost. brokers and if necessary the Company’s legal adviser. – PwC are engaged as the Company’s tax advisers and are tasked with ensuring we remain compliant in all aspects of tax. – The Corporate and Criminal Offences legislation (‘CCO’) is a key consideration and a workshop has been held to ensure risks and mitigating actions are clearly understood. ### MAJOR INCIDENT AND The provision of insurance across the portfolio is the main mitigation M H ### BUSINESS DISRUPTION to this risk, with policies in place to protect income as a result of disruption. In terms of disruption to the head office the following Cost and business down-time actions are in place, all of which have ensured our ability to function as a result of a major incident. fully during the COVID-19 disruption: This risk is primarily associated with the Merrion Centre, – All personnel either have laptops or have technology at home due to its importance to the which enables remote working. portfolio and as the location – Our geographical focus in Leeds and Manchester enables a of Company’s head office. hands-on approach with the majority of our properties and tenants is possible. – Back-up procedures are in place to ensure minimal loss of data in the event of damage to IT hardware. – Horizon and email (Microsoft 365) are both cloud-based technology significantly improving business continuity. 44 | ## 01 | Likelihood H M L High Medium Low STRATEGIC REPORT Impact H M L High Medium Low Change from HY20 Improving No Change Worsening ## CORPORATE RISKS continued RISK LIKELIHOOD IMPACT MITIGATION TREND ### TAX RISK The Board reviews compliance with the UK REIT rules at least every six M M months and is in more frequent contact with PwC on both the current As a UK REIT, a failure to REIT status of the Group but also the impact future investments and comply with certain UK disposals will have on this status. If the balance of business assets REIT conditions resulting in threshold was breached and was not expected to be remedied in the the loss of this status could short term then the Company would look to dispose of or exercise lease result in property income breaks on a number of right of use car park assets. The Ziff Concert and asset sales being subject Party is also completely aware of the potential impact any increase in to UK corporation tax. This shareholding would have on the Company’s REIT status. risk is associated with both the recent programme of asset sales the Company has embarked on and the requirement of the Company to have at least 35% of its share capital held ‘beneficially by the public’. Balance of business assets At the start of each accounting period, 75% of the assets of the Company must be involved in the property rental business. For the year ended 30 June 2022 this percentage was 80%. Further rental property disposals and/or increases to the non property rental assets will reduce this percentage. As a UK REIT, a breach of this 75% threshold does not automatically mean the Company leaving the UK REIT regime. It is only on the third occasion in a ten- year period that leaving the regimeoccurs. Share Capital – beneficially owned by the public test Immediately following the July/August 2022 tender offer this percentage was 35.27%. New Fortress Capital Limited, which is assumed to be a close company and not held ‘beneficially by the public’ or the Ziff Concert Party would need to acquire a further 132,464 shares in the Company from the public to take the percentage below 35%. This would cause the Company to automatically lose its status as a REIT with effect from the beginning of the accounting period in which the 35% threshold was crossed. | 45 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Risk Report continued ## PROPERTY RISKS RISK LIKELIHOOD IMPACT MITIGATION TREND ### INVESTMENT RISK The Company has clear plans in place to minimise the impact M L of this risk, including: New investment opportunities cannot be sourced at – The Company typically targets assets of higher value than sought economic prices. by individual investors, but lower than many larger property or overseas investors. – The Company looks to build strong relationships with partners to generate opportunities that can be exploited together. For example, our Belgravia Living PRS venture and our Whitehall Riverside, Leeds development which is being brought forward in conjunction withBruntwood. – The existing portfolio has enough development potential to provide growth opportunities even if asset purchase prices rise and it is not viable to acquire new sites, for example, the Group’s development sites at both Piccadilly Basin, Manchester and Whitehall Riverside, Leeds. ### DEVELOPMENT RISK The Company has numerous actions in place to mitigate such H H risks including: Development projects may exceed cost estimates and/or – Build projects are generally contracted with third parties on a fixed newly developed properties cost basis. may fail to rent. The scale of – Where possible, the Company seeks to undertake a development such projects means they where there is a significant level of pre-let commitments. are of material size to the – Where that is not possible (e.g. PRS residential investments), a Company. With the property detailed market analysis will be undertaken, and the Company market in a state of flux in the will ensure that locations are in high demand and that target current climate any long-term rental levels are achievable. investment with significant capital required represents – When in Joint Venture, formal Board structures are created a heightened level of risk. with at least quarterly meetings to review progress and Build cost inflation is currently performance, and to ensure that all development risks are making previously viable being managed appropriately. developments unviable. ### VALUATION RISK The key mitigation to this risk is ensuring there is enough headroom M M in terms of uncharged assets of undrawn, charged facilities. Key A material devaluation in actions include: assets. This is particularly high in relation to retail assets – Our bank facilities all have significant portfolios of property secured due to the changing nature of against them, with material headroom on each. As at the date of shopping habits, although the this report, total bank borrowings are just under £23.1m, an amount improving retail sentiment is that could be entirely refinanced with the Company’s existing changing this risk, it is more £25m NatWest facility – which does not fall for renewal until relocating it to office lettings, September 2024. with changing work habits – Further significant development land sales will significantly reduce and the wish for more people the Company’s exposure on its existing facilities. adopting a hybrid approach – All three facilities allow charging of development and car park being one of the key drivers. assets, maximising our drawdown ability. In addition, Lloyds facility has removed any cap on such assets. – Asset cover in the long-term debenture can drop from the required 1.67x to 1.5x without triggering a covenant break. – The Company recycles assets believed to be at greatest risk of devaluation, and has continued with its disposal of retail assets. 46 | ## 01 | Likelihood H M L High Medium Low STRATEGIC REPORT Impact H M L High Medium Low Change from HY20 Improving No Change Worsening ## PROPERTY RISKS continued RISK LIKELIHOOD IMPACT MITIGATION TREND ### TENANT AND There have been an increasing number of CVAs and administrations H M ### SECTOR RISK within the Retail sector. Furthermore due to the requirement for many retail and leisure tenants to close for an extended period during the Individual tenant failures, COVID-19 crisis, their ability to pay rent and to remain a going concern or exposure to a specific is a risk. TCS are taking a number of actions: sector. This risk was heightened by the impact – Since 2016 the Company has significantly reduced its exposure to of COVID-19 particularly on Retail from 60% to 31% of value at June 2022. Retail and Leisure tenants. – Now a mixed-use asset, the Merrion Centre now depends upon Mall The lack of clarity around Retail for less than 25% of its income. how the government’s – We have a diversified tenant base, and limited exposure to individual rent moratorium is to be tenants. Our top tenants are Leeds City Council, Step Change Debt ended. Increased costs to Charity and Morrisons. the tenants, whether utility or staff costs will effect the – In normal times, CitiPark income helps further mitigate the reliance affordability of rents. on specific property tenants. ### CLIMATE CHANGE The physical location of the Company’s assets, with the majority in M L ### RISKS either Manchester or Leeds, are in places not at risk of severe flooding and with a substantial development pipeline, the Company is able to The impact of climate change ensure that new developments are both sustainable but alsoinnovative: will be felt across the entire world, with extreme weather – Continuous maintenance cycle with in-house teams ensure plant events and increased average and machinery are not susceptible to elongated breakdowns. temperatures a key factor – Sustainability at the heart of what we do with the Merrion Centre over the coming years. The acting as test bed for the roll-out of future initiatives across the risks identified will be both entire portfolio. physical and transitional. – Evolving ways buildings are constructed, with increased ESG As well as the physical credentials, are seen more as an opportunity – with prime occupiers risk to places, a change in willing to pay premium rents for the right buildings, especially with tenant requirements and more and more companies making net zero commitments. the wish for more and more environmentally friendly buildings will be more prevalent which will lead to even greater construction costs. Average temperature rises will also have an impact on plant and machinery, rendering them obsolete quicker or involving additional maintenance costs. | 47 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Risk Report continued ## FINANCING RISKS RISK LIKELIHOOD IMPACT MITIGATION TREND ### CAPITAL AND The majority of mitigating actions are contained within the Valuation L H ### FINANCIAL RISK risk category above. In addition: The Company has insufficient – The Board reviews cash balances, forecast cash flow, borrowing funds or lines of credit. levels and headroom on a monthly basis. With property valuations – The Company demonstrated during the last downturn the strength decreasing as a result of of its conservative approach and longstanding relationships with COVID-19 this area of risk its banks. has temporarily increased, however, the asset sale – The Company is in the process of renewing both its existing Lloyds programme and the and Handelsbanken facilities – both of these facilities expire at the stabilisation of values has end of June 2023. reduced this risk. – The Company’s continuing policy of asset sales will enable a reduction in absolute debt levels. ### COST OF DEBT The following actions help mitigate the risk to the Company: H M Rising debt costs. – More than 72% of debt is in the form of fixed, long-term debenture borrowing in place to 2031. – The Board takes moving SONIA rates into account when considering three-year budgets and affordability. ### FINANCIAL COVENANT The following actions help mitigate the risk to the Company: L L ### COMPLIANCE – The Company has a significant amount of income to interest Breaching a financial headroom on all three of its bank facilities and also on the covenant under one of the debenture facility. Group’s debt facilities. – The Company is in regular dialogue with all of its debt providers, ensuring that if there are any potential future breaches, these are discussed and appropriate courses of action are agreed in advance. – The Company has £3.1m of assets currently unsecured under any debt facility that could be added to the relevant security pool. – The Company could cancel any underutilised proportion of the facility, reducing non-utilisation interest. 48 | ## 01 | STRATEGIC REPORT | Going concern | As at the date of this report the headroom | The Group’s forecasts, including the | | --- | --- | --- | | In making their assessment of the ability of | metrics and percentage fall have increased | various scenarios, show that the cash | | the Group to continue as a going concern | to £24.7m and 28.3% respectively following | headroom figure is resilient whilst the | | the Directors have considered the impact | the post balance sheet transactions | financial covenant tests are more sensitive. | | of an economic downturn on the Group’s | highlighted in this financial report. | Under the base case the minimum cash | | forecasts including the effect on liquidity | | headroom is expected to be £24.0m, which | | and compliance with bank loan and | In addition to the LTV covenants, the | compares to a minimum of £19.0m under | | debenture covenants. | Group’s debt facilities include income | the downside scenario. The significant | | | cover covenants of between 100% for the | downside case applied a total discount of | | The Group owns a portfolio of multi-let | debenture and 175% on the three revolving | 13% to rental income receipts and a 37% | | regional property assets located throughout | credit facilities. At the year end the actual | discount to pre COVID-19 car park income | | the UK, and operates car parking and hotel | income cover levels ranged from 187% (for | levels. The cash headroom in the Group did | | businesses. The Group is funded in part | the 100% debenture covenant) up to 513% | not go negative in the period to June 2025 | | by a £96.1m debenture which is due for | on the Lloyds facility. | and none of the other financial covenants | | repayment in 2031. In addition the business | | were breached. The reverse stress test | | has three bilateral Revolving Credit Facilities | In order to assess the potential impact | shows that the financial covenants are | | (‘RCF’) totalling £85m which, as at the year | of a future economic downturn on the | not breached until either of the discounts | | end, were due for repayment or renewal | Group and its ability to continue as a going | applied in the significant downside case | | between June 2023 and September 2024. | concern, management have analysed the | are pushed even further. This breach | | Each of the debt facilities is ring-fenced | portfolio’s tenant base, car parking and | is forecast to occur in Q4 of FY24 and | | within security sub pools of assets charged | hotel operations and produced forecasts | under the reverse stress test the position | | to the respective lender. | to 31 December 2023. These forecasts | thenimproves. | reflect management’s view of a worst-case | The Group has two bank facilities falling | scenario including assumptions that rent | Over the entire COVID-19 period the Group | | --- | --- | --- | | due for repayment and renewal on 29 June | receipts are materially lower than normally | has collected or agreed to defer 95.7% of | | 2023, within the going concern period, | experienced and that the car park and | rent and service charge income invoiced, | | and the Group is in the process of agreeing | hotel businesses recover over the forecast | and for the first two months of FY23 the | | terms with both banks to renew these | period to a materially lower level than | car park and hotel businesses are trading | | facilities for new three-year (plus two one- | was experienced before the COVID-19 | significantly ahead of expectation and this | | year extensions) facilities on terms similar | pandemic. These scenarios include a base | is expected to continue. | | to the current ones. | case, downside case and then a more | | | | extreme significant downside case to show | The forecasts show that the Group has | | As at the date of this report, the Group has | the effect a more significant downturn | sufficient resources to continue to operate | | drawn in aggregate under all three facilities | in the Group’s performance would have | as a going concern for at least the period to | | total borrowings of £23.1m. This figure is | on its funding cash headroom and any | 31 December 2023. Based on the forecasts, | | expected to reduce significantly following | of its financial covenants. In addition the | including the mitigating options available | | completion of the two development land | Company has performed a reverse stress | to the Group in the event of the occurrence | | sales expected in the first half of the year | exercise whereby it has looked at each | of the downside scenarios, the Directors | | ending 30 June 2023. | individual facility and at how much of a | consider it appropriate to prepare these | | | downturn (compared to the conservative | financial statements on the going concern | | In the unlikely event that both sales do | base case cash flows prepared by the | basis. Further details on these forecasts and | | not complete, and the Group is not able | Company) there would need to be before | the approach taken by the Directors is set | | to secure new bank facilities, either with | any of the financial covenants | out below in the Viability statement section | | its existing two lenders that have facilities | are breached. | on the next page. | expiring in June 2023 or a new debt provider, then there is sufficient headroom within the remaining £25m NatWest facility Ducie House, Manchester to substitute properties into its security group and to fully repay the other facilities in full. The NatWest facility does not expire until September 2024 and then there are options in place to extend this facility by a further two years. One of the most critical judgements for the Board is the Loan-to-Value (‘LTV’) headroom in the Group’s debt facilities. This is calculated as the maximum amount that could be borrowed, taking into account the properties secured to the funders and the facilities in place. These covenants range from 60% to 66.7% LTV. The total LTV headroom at 30 June 2022 was £18.5m (2021: £12.1m). Overall, the properties secured under the Group’s debt facilities would need to fall 21.2% in value before this LTV headroom level wasbreached. | 49 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Risk Report continued ### Viability statement The review considered a base Aligned to our Going Concern statement, ### case, a sensitised ‘downside’ the greatest uncertainty and risk lies In accordance with the requirements of ### scenario and a more drastic in relation to our asset valuations and the UK Corporate Governance Code, the ### ‘significant downside’ scenario. the possibility of breaching bank and Board have assessed the prospects of the ### These scenarios included: debenture covenants and to possible Company and future viability over a period breaches of our income cover covenants. longer than the 12 months required by the • A range of levels of rent receipts Clearly there is still a risk, however, this Going Concern provision. This review has affecting quarterly income up to the has been significantly diminished over the been as part of a longer-term three-year end of June 2025. last 12 months with the acceleration of our strategic planning exercise and three-year • A range of levels of car parking income disposal programme, the repayment of budgeting process. affecting profitability up to the end of borrowings and the gradual recovery of all June 2025. segments of our business. It is, however, The Board’s review considered cash flows, • A range of levels of hotel net income likely that this reduced risk will continue profitability, borrowing headroom and affecting profitability up to the end of beyond the shorter-term future covered by other key financial ratios, and required the June 2025. the Going Concern statement. business to have clarity on its approach to bank financing over a longer period. • The effect on cash, borrowing levels, ### In reviewing these scenarios, facility headroom and income cover ### the Board have also considered covenants of all of the above. ### In taking this longer-term ### the actions they could take ### perspective, the Board considers Furthermore the Group carried out reverse to mitigate any significant ### the risks covered in this Risk stress tests on each individual facility, downsides, especially in regard ### this was an exercise to see how far rental to any potential breach of the ### Management review. In particular ### receipts and car park income would need Group’s existing borrowing ### the key risks identified are: ### to fall, before the Group ran out of either facilities and banking covenants. • The potentially lasting effect of cash headroom or breached any of its ### The key actions being: COVID-19 on our assets, tenants, hotel banking covenants. The reductions in • The Group has £3.1m of properties that operation, car parking operations, and both rental receipts and car park income are not currently secured under any the wider economy. applied in this exercise were significantly of our existing borrowing facilities – • Further changes in the macro-economic greater than that experienced by the these could be pledged as security and environment affecting rental income Group during the COVID-19 period. increase borrowing headroom. levels and property values. • The Group could move properties The results of the reverse stress test show • Changes in the level of tenant and around the various facility ‘security that the sensitivities occur in Q4 of FY24 sector risk affecting occupancy levels pools’ (those assets currently charged and are only temporary. and lettings. under each facility) which could also • Changes in availability of capital, unlock additional borrowing headroom. affecting committed expenditure and • Further assets, sales in addition to the investment transactions. two development land sales that are expected to complete in the first half of Urban Exchange, Manchester the year ending 30 June 2023. • Ceasing all future capital expenditure. • Seeking lender consent for financial covenant waivers. • Cancellation of committed facilities that the Group is not expecting to use, thereby reducing non-utilisation interest. Based on the results of their review, whilst taking into account the level of uncertainty, the Directors do not have a significant expectation to doubt that the Company will be able to continue in operation and meet its liabilities as they fall due over the longer- term period of their assessment. 50 | ## 01 | STRATEGIC REPORT 123 Albion Street, Leeds | 51 Town Centre Securities PLC | Annual Report and Accounts 2022 | Financial Review # FINANCIAL REVIEW "The financial performance of the Company during the year ended 30 June 2022 shows a recovery from the prior years, which were significantly impacted by COVID-19. We saw consistently improving rent receipts throughout the year and strong recoveries in both our car park and hotel businesses, however the acceleration of our disposal programme impacted the overall profitability of the business." Stewart MacNeill | Group Finance Director | Overview The statutory profit for the year was £11.0m, compared to a loss of £0.6m in the previous year, with the current year heavily influenced by Investment Property gains of over £8m (£3.5m of revaluation gain and £4.6m of profits recognised on disposal). ![img-1.jpeg](img-1.jpeg) EPRA Earnings¹ were a profit of £3.3m in the year, compared to a profit of £0.3m in the prior year, highlighting the recovery seen in the underlying business. A final dividend of 2.5p per Ordinary Share has been approved by the Board, giving a full-year dividend of 5.0p, up from 3.5p in the previous year. During the year the Company sold seven separate investment property assets which generated £37.9m of proceeds. £10.7m of the proceeds were used to part repay Group Borrowings, £17.5m was temporarily held as collateral against the Company's Debenture Stock with the balance increasing the Company's cash resources. Net borrowings has reduced from £145.6m to £135.1m in the year. Net borrowings represent total financial borrowings of £165.5m less lease liabilities of £28.7m and net overdrafts of £1.3m. These disposals, partially offset by the property acquired during the year and the further post year-end purchase will lead to a longer period of reduced earnings which will inevitably lead to a lower level of dividend payment than in recent years. 1 Alternative performance measures are detailed, defined and reconciled within note 11 and the financial review in these financial statements. ## 01 | STRATEGIC REPORT ibis Styles Leeds City Arena Hotel, Leeds ### INCOME STATEMENT 2 | EPRA Earnings | for the year ended 30 June 2022 were £3.3m. | | | | --- | --- | --- | --- | | £’000s FY22 FY21 YOY | | | SEGMENTAL FY22 FY21 YOY | | Gross Revenue 28,141 21,429 31.3% | | | 1. PROPERTY 2 2 2 | | Impairment of debtors | | 49 788 (93.8%) | | Net Revenue 9,188 10,196 (9.9%) provision movement Operating Profit 6,437 8,471 (24.0%) Property Expenses (13,666) (11,145) 22.6% Net Revenue 14,524 11,072 31.2% 2. CITIPARK 2 2 2 Other Income/JV Profit 2,497 2,962 (15.7%) Net Revenue 4,843 1,053 359.9% Other Expenses 0 0 – Operating Profit 3,525 155 2174.2% Administrative Expenses (6,531) (5,585) 16.9% | OPERATING PROFIT 10,490 8,449 24.2% | 3. IBIS STYLES HOTEL 2 2 2 | | --- | --- | | Net Finance Costs (7,215) (8,145) (11.4%) | Net Revenue 493 (177) (378.5%) | | EPRA EARNINGS 3,275 304 977.3% | Operating Profit 493 (177) (378.5%) | ### STATUTORY PROFIT Gross revenue Property expense Gross revenue was up £6.7m or 31.3% year Property expenses have increased in the On a statutory basis the reported profit for on year, with key drivers being: year by 22.6%, primarily reflecting the the year was £11.0m. increased trading experienced in both 1. Property sales during the year had a the hotel and car park businesses. The statutory profit reflects the EPRA | | 2 | negative impact of £0.2m on the total | | | --- | --- | --- | --- | | Earnings | of £3.3m plus £3.5m of non-cash | | | | | | Gross Revenue. | Other/JV income | valuation and impairment movements plus | the profit on disposal recognised of £4.5m | 2 . CitiPark revenues have recovered | | Total Other/Joint Venture (‘JV’) income | | --- | --- | --- | --- | | on the seven investment properties and | | strongly across the portfolio in the | was down 16% or £0.5m year on year, | | investments sold in the year less £0.3m | | year, with gross revenue across the | the majority of the difference relates to | | of loss recognised on the repurchase of | | portfolio increasing by 70% in the | substantial dilapidation payments received | | debenture stock in the year. | | year from £6.7m to £11.4m, with total | by the Company in the previous year. | occupancy now at just under 90% of | | pre COVID-19 levels. | Administrative expenses | | --- | --- | --- | | 3 . Income for the ibis Styles hotel, which | | Administrative costs were £0.4m higher | | | was heavily impacted by COVID-19 has | year on year reflecting the increased | | | also recovered strongly increasing by | activity across all segments within | | | £2.2m in the year, from £0.6m | the businesses. | to £2.8m. Finance costs Finance costs were 11.4% or £0.9m lower year on year as a result of the reduction in both the Company’s bank borrowings and the buy-back of £3.4m of debenture stock. 2 Alternative performance measures are detailed, defined and reconciled within note 11 and the financial review in these financial statements. | 53 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Financial Review continued ### BALANCE SHEET The below table shows the year-end balance sheet as reported. £m FY22 FY21 VS FY21 3 Freehold and Right-to-Use Investment properties 158.5 181.3 (12.6%) Development properties 42.6 41.5 2.7% 4 Car park related Assets, Goodwill and Investments 97.9 82.7 18.4% Hotel operations 9.1 8.6 n/a 308.1 314.1 (1.9%) Joint ventures 18.0 16.2 11.1% Listed Investments 4.1 5.8 (29.3%) Other non-current assets 1.0 1.0 0.0% TOTAL NON-CURRENT ASSETS INCL AVAILABLE FOR SALE 331.2 337.1 (1.8%) Net borrowings (163.8) (174.6) (6.2%) Other assets/(liabilities) 11.9 (7.1) (268.6%) STATUTORY NAV 179.3 155.4 15.3% STATUTORY NAV PER SHARE 341p 292p 16.8% EPRA NET TANGIBLE ASSETS (NTA) 174.9 151.0 15.8% EPRA NTA PER SHARE 333p 284p 17.3% 3 Includes Assets held for sale in FY21 of £3.9m. 4 Includes Assets held for sale in FY22 of £20.4m. ### Non-current assets Borrowings Finally, our £35m Handelsbanken facility was reduced in the year to a £25m facility Our total non-current assets (including During the year our Net Borrowings have and expires in June 2023. As with our investments in JVs) of £331.2m (2021: reduced by £10.8m, from £174.6m as at 30 Lloyds facility we are in the process of £337.1) include £201.1m of investment June 2021 to £163.8m. This was primarily renewing this facility effective on expiry properties (2021: £222.8m), £97.9m of as a direct consequence of the disposals with a new three-year facility (again with non-current car parking assets (2021: made throughout the year. As part of this two one-year extensions). £82.7m) and £9.1m of Operational Hotel we bought back £3.4m of our £99.5m 2031 assets (2021: £8.6m). The car parking 5.375% debenture stock with the remaining Loan to Value has been reduced to 46.4%, assets include £4.9m (2021: £4.8m) of reduction spread across our bank facilities. down from 51.3% a year ago. Note the goodwill and intangible assets arising calculation of Loan to Value includes both on business combinations. Two of the three bank facilities expire the finance lease assets and liabilities. within 12 months of the year end and are | The reduction in non-current assets of | therefore classed as current liabilities in | | --- | --- | | £7.0m during the year comprises: | the balance sheet. During the year end we | | • Disposals of £(34.3m) | refinanced our £33m facility with NatWest, | for a further three years on the same terms • Depreciation charge of £(2.5m) and margin albeit at lower facility limit of • Capital expenditure of £9.9m £25m, this facility will expire in September • Revaluation uplift/reversal of 2024, with an option for two further one- impairments totalling £19.5m year extensions. • Operating profits generated and retained in JV entities of £1.5m Our Lloyds Bank facilities were extended in the year and now expire in June 2023. The Lloyds facility is a £35m revolving credit facility with a further £5m overdraft facility and we are in the process of renewing this facility effective on expiry with a new three-year facility (again with two one-year extensions). 54 | 01 | STRATEGIC REPORT ## EPRA net asset reporting We focus primarily on the measure of Net Tangible Assets ('NTA'). The below table reconciles IFRS net assets to NTA, and the other EPRA measures. There are three EPRA Net Asset Valuation metrics, namely EPRA Net Reinstatement Value ('NRV'), EPRA, NTA and EPRA Net Disposal Value ('NDV'). The EPRA NRV scenario, aims to represent the value required to rebuild the entity and assumes that no selling of assets takes place. The EPRA NTA is focused on reflecting a company's tangible assets. EPRA NDV aims to represent the shareholders' value under an orderly sale of business, where, for example, financial instruments are calculated to the full extent of their liability. All three NAV metrics share the same starting point, namely IFRS Equity attributable to shareholders. | €'000s | FY22 | FY21 | FY22 P PER SHARE | FY21 P PER SHARE | | --- | --- | --- | --- | --- | | **IFRS REPORTED NAV** | **179.3** | **155.4** | **341** | **292** | | Purchasers Costs^{5} | 19.1 | 21.1 | | | | **EPRA NET REINSTATEMENT VALUE** | **198.4** | **176.5** | **378** | **332** | | Remove Purchasers Costs | (19.1) | (21.1) | | | | Remove Goodwill^{6} | (4.4) | (4.4) | | | | **EPRA NET TANGIBLE ASSETS** | **174.9** | **151.0** | **333** | **284** | | Fair value of fixed interest rate debt^{7} | 1.3 | (10.2) | | | | **EPRA NET DISPOSAL VALUE** | **176.2** | **140.8** | **335** | **265** | 5 Estimated purchasers' costs including fees and stamp duty and related taxes. 6 Removal of goodwill as per the IFRS Balance Sheet – relates predominantly to goodwill paid to acquire two long-term car park leaseholds in London. 7 Represents the adjustment to fair value (market price) of the 2031 5.375% debenture. ## FUTURE FINANCIAL CONSIDERATIONS ### Future P&L pressure As highlighted elsewhere in this report, our recent disposal programme and the wider economy has had a material impact on profitability/financial recovery in the year ended 30 June 2022, in particular the changing ways people work and their shopping habits. Both of which have had an effect on our retail and leisure tenants but also in the revenue derived from our car park operation. We have seen recoveries in all segments of our business, although there is still a risk if these recoveries are stalled. As has been seen, the acceleration of our retail disposal programme has enabled us to reduce Company borrowings and gearing, although the disposal of income producing assets has had an impact on the earnings of the business. The Board is continuing to review options for how the proceeds of any further sales could be utilised including debt repayment, asset purchases and share buy-backs. Although we have started to increase the level of the dividend, the gradual recovery of our car park business and the loss of income due to disposals are likely to lead to continued pressure on our ability to pay a higher covered dividend. ### Future balance sheet As identified in the Risk Report, we have highlighted the continued pressure on retail and leisure assets to be a significant risk to the business. As part of the going concern and viability statement review process the Company has prepared consolidated forecasts and identified a number of mitigating factors to ensure that the ongoing viability of the business was not threatened. Our expectation is that continued asset sales and debt repayments, will strengthen this further. ## GOING CONCERN AND HEADROOM One of the most critical judgements for the Board is the headroom in the Group's debt facilities. This is calculated as the maximum amount that could be borrowed, taking into account the properties secured to the funders and the facilities in place. The total headroom at 30 June 2022 was £18.5m (2021: £12.1m), which was considered to be sufficient to support our going concern conclusion. The properties secured under the Group's debt facilities would need to fall to 24.4% in value before this headroom number was breached. As disclosed in note 26, there have been a number of post balance sheet events that have impacted both the headroom and the percentage properties can fall by – taken in aggregation, these events have improved the headroom to £24.7m and percentage properties can fall by 28.3%. In assessing both the viability and going concern status of the Company, the Board reviewed detailed projections including various different scenarios. A summary of the approach and the findings is set out in the Risk Report, forming part of the Strategic Report of these financial statements. | 55 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Financial Review continued ### TOTAL SHAREHOLDER RETURN AND TOTAL PROPERTY RETURN Total shareholder return of minus 4.5% (2021: 55.8%) was calculated as the total of dividends paid during the financial year of 4.25p (2021: 3.5p) and the movement in the share price between 30 June 2021 (144p) and 30 June 2022 (133.5p), assuming reinvestment of dividends. This compares with the FTSE All Share REIT index at minus 5.2% (2021: 23.1%) for the same period. The Company's share price continues to trade at a significant discount to its NAV, impacting total shareholder return. ### TOTAL SHAREHOLDER RETURNS % (CAGR) | TOTAL SHAREHOLDER RETURNS | 1 YEAR | 10 YEARS | 20 YEARS | | --- | --- | --- | --- | | Town Centre Securities | (4.5%) | 2.3% | 4.1% | | FTSE All-Share REIT index | (5.2%) | 6.9% | 3.1% | Total Property Return is calculated as the net operating profit and gains/losses from property sales and valuations as a percentage of the opening investment properties. Total Property Return for the business for the reported 12 months was 8.7% (2021: 4.3%). This compared to the MSCI/IPD market return of 19.3% (2021: 6.4%). The key drivers of the All Property index being higher than TCS is due to strong market performances of both industrial properties and retail warehouses of which TCS only has a small amount. Group Finance Director This Strategic Report and the information referred to herein was approved on behalf of the Board on 13 October 2022. Chairman & Chief Executive 13 October 2022 ![img-2.jpeg](img-2.jpeg) 56 | ## 02 | 02 | CORPORATE GOVERNANCE CORPORATE GOVERNANCE ## CORPORATE ## GOVERNANCE ### CORPORATE GOVERNANCE Introduction from the Chairman 58 Board of Directors 60 Statement of compliance with the UK Governance Code 66 Nomination Committee Report 68 Audit Committee Report 70 Directors’ remuneration Report 74 Directors’ Report 81 Statement of Directors’ responsibilities 83 | 57 | 57 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Corporate Governance ## INTRODUCTION ## FROM THE ## CHAIRMAN ### INTRODUCTION ## THE BOARD HAS TAKEN ## STEPS TO IMPLEMENT THE ## NEW 2018 UK CORPORATE ## GOVERNANCE CODE (THE ## ‘CODE’) IN A WAY THAT IS ## APPROPRIATE FOR TOWN ## CENTRE SECURITIES. ### Our section 172 statement ### demonstrates how Directors ### have discharged their duties to ### the Company’s stakeholders. ### This statement can be found on ### pages 30 to 31. 58 | ## 02 | CORPORATE GOVERNANCE ### Wherever possible, the Board The presence on the Board of key executive Whilst the combined role remains management provides the Non-Executive appropriate for the time being, with me ### seeks to comply with the Directors with direct access to these major being in a unique position – my father ### principles set out in the 2018 UK functions rather than through the Chief having founded the Company and the Ziff ### Corporate Governance Code Executive. In addition, the three independent family being the largest shareholder overall ### (the ‘Code’). However, the Board Non-Executives are extremely rigorous in – the Board will continue to review the ### takes a pragmatic approach and, their review of my performance as Chairman situation on a regular basis. focusing on ensuring theChairman: ### because of the size and nature of • demonstrates objective judgement and I also wanted to take the opportunity to ### the Company, makes a carefully promotes a culture of openness and directly address the issue concerning the ### considered judgement about debate; and number of independent Non-Executive ### how it should apply the Code. Directors. Currently less than at least half • facilitates constructive Board relations ### The Board keeps this under the Board are independent (as required by and the effective contribution of all the Code). However, given my combined ### regular review and decisions on Non-Executive Directors. role as Chairman/CEO, the Board agreed ### these matters are made by the The Board papers circulated in advance of that including wider management ### Board taking into account the each Board meeting include both property representation during Board meetings, for | best interests of all stakeholders. | review and CitiPark Board papers which are | example the CitiPark Managing Director | | --- | --- | --- | | | prepared by the individual management | and the Property Director, would allow the | | The Board currently consists of three | teams for these divisions, ensuring that | Non-Executive Directors to have greater | | independent Non-Executive Directors | all Board members are kept appraised | access to those parts of the business. | | who, as well as contributing invaluable | of the key issues in the separate parts of | This provides more opportunity for a | | support and guidance, offer significant | the business. This then ensures that the | robust assessment of the Company at | | challenge to me and the other Executive | interaction between the Non-Executive | a level aside from the CEO. This level | | Directors. The Board’s focus throughout | Directors and the rest of the Board is | of representation of management and | | most of this year has been on the difficult | based on informed opinions and up-to- | increased access for robust challenge by | | economic conditions resulting from the | date information. All Board decisions are | Non-Executive Directors is highly unusual | | COVID-19 recovery, inflationary pressures | subject to unanimous decisions promoting | at Board level. Again, this is a matter which | | on all costs, the cost of living crisis and | significant and detailed debate between | the independent Directors have reviewed | | the conflict in Ukraine, and with the goal | the Board members. Having the senior | and concluded that given the size of the | | of ultimately protecting shareholder value. | management team present also promotes | Company, three independent Directors | | The Board has also been able to refocus on | a more inclusive culture, the ability to | is appropriate and that to change the | | the long-term strategy of the Company. | respond to questions quicker and to | composition of the Board would at this | | | facilitate a wider and more diverse range | point be disruptive and add unnecessary | | The independent Non-Executive Directors | of opinions. | cost. This is a matter that will be kept | | have provided robust challenge. | | under review and is covered specifically | | | Involving the senior management within | in the Board evaluation exercise. During | | We report below in more detail why | Board meetings encourages an open | the last year the Board has not increased | | the Board continues to believe that it is | culture that enables effective links between | the number of independent Directors, | | appropriate for the roles of Chairman | the Non-Executive Directors, Executive | however, it will remain a key focus of the | | and Chief Executive to be combined. | Directors and senior management. | Nomination Committee over the next | | Clearly, the Board is aware that this is | | 12 months. | | not in compliance with the Code and | The independent Directors are firmly of the | | | recognises that a number of shareholders | view that my holding the combined role of | | Edward Ziff OBE DL will have concerns about this. It is a matter Chairman and Chief Executive continues Chairman & Chief Executive which the independent Non-Executives to be in the best interests of the Company. 13 October 2022 keep under continual review and will continue to keep under review to ensure that it is in the best interests of the Company’sstakeholders. Town Centre House, Leeds | 59 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Board of Directors EXECUTIVE BOARD Edward Ziff | OBE DL Stewart MacNeill | FCA Ben Ziff Chairman & Chief Executive Group Finance Director Managing Director CitiPark & TCS Energy APPOINTED 08/1985 06/2021 09/2015 INDEPENDENT COMMITTEE MEMBERSHIP | BIOGRAPHY | SKILLS AND EXPERIENCE | SKILLS AND EXPERIENCE | SKILLS AND EXPERIENCE | | --- | --- | --- | --- | | | Edward Ziff joined the Company | Stewart’s chartered accounting | Ben’s long and close involvement | | | in 1981 before being appointed | qualification clearly underpins | with the business ensures he is | | | to the Board in 1985, becoming | his ability to deliver in his role | always able to take the wider, | | | Managing Director in 1983, | as Group Finance Director. In | cross-business long-term view. | | | Chief Executive in 2001 and | addition, his 20 years’ experience | In addition, his wide knowledge | | | succeeded his father and founder | in the property industry having | of the rapidly changing effects | | | of the Company as Chairman | specialised on the finance side | of technology ensures that we | | | in 2004. Edward is a life-long | since 2002, ensure he is able to | are able to take advantage of | | | supporter of Leeds the city | guide and add value in both the | new ways of doing business | | | and plays an active role in the | operational aspects and strategic | across both the Property and Car | | | community. A passionate family | direction of the business. | Parking parts of the Company. | man, Edward brings a strong EXTERNAL APPOINTMENTS Ben joined TCS in 2008, pastoral care aspect to the becoming CitiPark Managing business, encouraging individual He is a Non-Executive Director Director in 2009. In September leadership and an active role of IW Topco Limited, a small 2015, Ben was appointed to the in the community through family-run private property Board of Directors. localcharities. business and is also an executive of Blizzard Properties, a small PREVIOUS EXPERIENCE Edward’s position as son of the private property development founder of the TCS, and his In 2013, Ben successfully led a and consultancy business that lifelong experience working at team in the redevelopment of specialises in out-of-town retail. | different levels in the business | | the Merrion Centre multi-storey | | --- | --- | --- | | make him uniquely qualified to | PREVIOUS EXPERIENCE | car park, which turned a 1960’s | | lead the Company. In addition, | Stewart formally joined the Board | structure into a state-of-the-art | | the wider role he plays in the | in June 2021, having spent the | facility featuring cutting-edge | | Leeds community in particular, | previous four months acting as | systems: Skidata, ApplePay, | | support leading this proudly | the Company’s Interim Chief | Contactless Payment and ANPR | | Leeds-based business. | Financial Officer. Prior to TCS, he | technologies. Since 2014, | | | spent the bulk of his professional | Ben has led the acquisitions | EXTERNAL APPOINTMENTS career to date at LXB Properties, programme which has doubled He is Chairman and Trustee the real estate investment the size of the car park division. of Leeds Hospitals Charity, a company which focused on Ben’s personal interest in COMMITTEE Trustee of the United Hebrew combining tech, renewable edge-of-town and out-of-town MEMBERSHIP Congregation, Leeds, a member energy and Electric Vehicle retail assets, and most recently of the council of University worked at a small development Charging led to the development Audit Committee Member College School, London and consultancy business. Stewart of TCS Energy in 2012 which a Deputy Lieutenant for the is a graduate of the University pursues renewable energy Nomination Committee Member County of West Yorkshire. of Cambridge and a Fellow production and storage. Ben has Remuneration Committee Member of the Institute of Chartered ensured the Group uses cutting- PREVIOUS EXPERIENCE Accountants of England edge technology to revolutionise Sustainability and Climate In 2013 he was awarded an andWales. and maximise its operations, Change Committee Member Honorary Doctorate of Business including guiding the Board’s Chairman of Committee Administration by Leeds Beckett financial investment of University. Edward was awarded YourParkingSpace.co.uk. an OBE for services to the Leeds community and economy in the 2017 Queen’s birthday honourslist. 60 | No No No ## 02 | CORPORATE GOVERNANCE THE NON-EXECUTIVE BOARD Michael Ziff | Hon DUniv (Brad) Ian Marcus | FRICS Paul Huberman | FCA CTA Jeremy Collins Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director 07/2004 01/2015 01/2015 02/2018 | SKILLS AND EXPERIENCE | SKILLS AND EXPERIENCE | SKILLS AND EXPERIENCE | SKILLS AND EXPERIENCE | | --- | --- | --- | --- | | Michael’s lifelong involvement | Ian’s significant experience in the | Paul Huberman was appointed | Jeremy was appointed to the | | with the Company and his | Property and Corporate Finance | a Director in January 2015. He | Board in February 2018 and | | retail experience puts him in a | worlds give him an experience | brings over 34 years’ experience | has over 35 years’ experience | | unique position to understand | base and a network that can | in the property and finance sector. | in retail property development | | TCS and give counsel based on | valuably inform, guide and | | andmanagement. | Paul’s previous experience as | the founding principles of the | support TCS both in making day- | | | | --- | --- | --- | --- | | | | Finance Director at three quoted | Jeremy’s wide experience base | | business and the importance of | to-day operational decisions, and | | | | | | companies, and his ongoing work | as a property professional, | | taking a long-term strategic view. | in setting the long-term strategic | | | | | | in the real estate arena mean | particularly in the Retail field, | | Michael was appointed to the | direction of the business. He has | | | | | | that he can robustly challenge | puts him in a strong position | | Board in July 2004. | broad remuneration experience | | | | | | and scrutinise the financial | to help TCS really understand | which supports his role as EXTERNAL APPOINTMENTS affairs of the business, leading the challenges of owning retail Chairman of the Remuneration | | | the Audit Committee, as well as | property during a period of such | | --- | --- | --- | --- | | He is a Director of W Barratt & | Committee. Ian Marcus was | | | | | | contributing meaningfully to the | significant change. His guidance | | Co Ltd, Transworld Business | appointed to the Board in | | | | | | broader operational and strategic | on the changing face of retail | | Advisors UK Ltd, London Business | January 2015. | | | | | | activities of the Company. | combined with the importance of | Franchise & Brokerage Ltd, EXTERNAL APPOINTMENTS creating mixed-use communities Board of Deputies Charitable EXTERNAL APPOINTMENTS plays an important role in the Foundation and Board of Ian is a member of Redevco’s He is currently a Non-Executive Company’s strategic planning Deputies of British Jews Limited. Advisory Board. He is Senior Director of Galliard Homes He is President and a trustee of Adviser to Eastdil Secured, the EXTERNAL APPOINTMENTS Limited, a London housebuilder, Maccabi GB and International Senior Independent Director for a Non-Executive Director at LiFE Jeremy is Property Director Vice President of Maccabi World Shurgard Self Storage SA, Senior At Ltd, a multi-branch London- and Executive Board member Union. He is a trustee of the Adviser to Elysian Residences, based residential estate agency, atFenwick. Western Charitable Foundation, Adviser to Work.Life, and a a Non-Executive Director at the Western Marble Arch Senior Adviser to Anschutz PREVIOUS EXPERIENCE GetBusy plc, a developer of | Synagogue and the Polacks | Entertainment Group. Ian is a | | | | --- | --- | --- | --- | | | | document management and task | Jeremy spent 15 years at John | | House Educational Trust and | trustee of the Saracens Multi | | | | | | management software, a Non- | Lewis including as Property | | also Hon President of UK Israel | Academy Trust. | | | | | | Executive Director at a privately- | Director until 2018. Previous | Business. He has recently PREVIOUS EXPERIENCE owned property group, and a experience includes working for stepped down as a Member of | | | Non-Executive director at The | Lend Lease, MEPC and Grosvenor | | --- | --- | --- | --- | | Council at the University | Ian spent over 32 years as an | | | | | | Industrial Dwellings Society (1885) | Square Properties. Jeremy’s first | | of Bradford. | investment banker latterly | | | | | | Ltd, a housing association. | job was at Wirral Metropolitan | at Credit Suisse. Ian was Borough Council, which gave him previously a Crown Estate PREVIOUS EXPERIENCE an insight into the workings of Commissioner, a Trustee of The Paul was previously Finance local authorities and began his Princes Foundation, is a former Director at three quoted passion for urban regeneration. Chairman of the Bank of England companies. Previously Paul was He graduated from the University Commercial Property Forum, a Non-Executive Director at GRIT of Reading, qualified as a the immediate past president of Real Estate Income Group Ltd, chartered surveyor, and is a Past the Cambridge University Land a listed pan African property President of the British Council of Society and a Past President of investment company and a Shopping Centres. the British Property Federation. Non-Executive Director at JCRA Group Ltd, the holding company of JC Rathbone Associates Ltd, the independent advisers on interest rate risk management, debt finance and foreign exchangeexposure. | 61 No Yes Yes Yes Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Board of Directors continued ## DETAILS OF THE BOARD OF DIRECTORS ARE ## GIVEN ON PAGES 60 TO 61 OF THIS REPORT. ## AT THE END OF THE YEAR THE BOARD ## COMPRISED FOUR NON-EXECUTIVE DIRECTORS, ## THREE OF WHOM ARE INDEPENDENT, AND ## THREE EXECUTIVE DIRECTORS, INCLUDING THE ## CHAIRMAN AND CHIEF EXECUTIVE. ### The key roles and responsibilities are as follows: Edward Ziff | OBE DL Stewart MacNeill | FCA Ben Ziff Paul Huberman | FCA CTA Chairman & Chief Executive Group Finance Director Managing Director CitiPark Senior Independent Director • Ensure a robust decision- • Provide advice and • Provide advice and • Support the Chairman making process is in guidance on financial guidance on car parking and CEO’s delivery place and all appropriate strategy. strategy. of objectives. information is provided • Ensure the Group’s financial • Implement agreed business • Lead the Non-Executive to the Board in a commitments, targets and plan for CitiPark. Directors in the oversight timelymanner. obligations are met. and evaluation of the • Identify and recruit CitiPark • Set the Board agenda, Chairman and CEO. • Budget setting and senior management team. focusing on strategic performance management. • Being available to • Identify and propose matters and giving shareholders to express • Ensure compliance with car park acquisitions adequate time to other concerns that the normal statutory regulations. and/or disposals. key issues as required. channels have failed to • Assist with shareholder • Identify and lead • Manage the Board to allow resolve, or which would communications. relationship with Property- time for discussion of be inappropriate. and Car Park-related complex or contentious • Oversee all banking and • Take responsibility for an technology investments. issues. debt facilities. orderly succession process • Ensure the Board • Board responsibility for IT for the Chairman were it to discharges its and data security. be required. responsibilities with respect to Risk Management and Governance, promoting high standards of Corporate Governance. • Effective communication with shareholders and other stakeholders. • Leadership of the Board and the Company. • Successful achievement of objectives and execution of strategy. • Responsible for identifying and recruiting Board members. • Ensure long-term business sustainability. Our four Non-Executive Directors bring considerable experience and expertise to the • Ensure implementation of work of the Board and provide a significant independent view to our deliberations. Board decisions. They regularly challenge and question the conclusions of the Executive and have a particular focus on the interests of all shareholders, including non-family shareholders. 62 | ## 02 | CORPORATE GOVERNANCE ### In accordance with the UK Additionally, under the Code, the Company There is an agreed procedure for Directors ### Corporate Governance Code the is required to identify a Senior Independent to take independent professional advice ### Board considers Jeremy Collins, Non-Executive Director. Ian Marcus and at the Company’s expense, if necessary, in ### Paul Huberman and Ian Marcus Paul Huberman were appointed on the the performance of their duties. This is in ### to be independent and confirm same day and, while they have different addition to the access which every Director ### that they: skills and experience, neither is senior to has to the Company Secretary. The Group the other. Consequently, for the purpose of maintains liability insurance on behalf of • have not been an employee of the compliance with the Code, the position will Directors and Officers of the Company. Company or Group during the prior alternate on an annual basis. Over the past five years; year, Ian Marcus has stood as our Senior On appointment, the Directors are • have not had any material business Independent Director and therefore, from provided with information about the relationship with the Company or been the date of this report until the next, the Group’s operations, the role of the Board, a Director or a senior employee of a position will be rotated to Paul Huberman. the Group’s corporate governance policies body which has had such a relationship and the latest financial information. with the Company; | | | Prior to the introduction of the 2018 | Additionally, upon appointment, | | --- | --- | --- | --- | | • have not received or receive | | UK Corporate Governance Code, Ian | Directors are provided with induction | | | remuneration from the Company | Marcus was appointed as a workforce | including training in respect of all their | | | other than Directors’ fees, nor do they | representative. His role has been key in | responsibilities in accordance with the UK | | | participate in any Company Share Plan, | ensuring workforce representation in the | regulatory regime. Subsequent training is | | | nor are a member of the Company’s | discussions and decisions of the Board, | also undertaken as appropriate. | | | pension scheme; | useful in enabling all Directors to perform | | | | | their duties under Section 172 Companies | The appointment and removal of | • do not have close family ties with the Act 2006. Directors is governed by the Company’s Company’s advisers, Directors, or Articles of Association, the UK Corporate senioremployees; The full Board met eight times in the year Governance Code and the Companies Act • have no cross directorships or and the record of Directors’ attendance 2006 and other related legislation. The significant links with other Directors at the Board meetings is set out overleaf. Articles are available on application to through involvement in other companies Additionally, the Board met every week as the Company Secretary at the Company’s and bodies other than that referred a result of the COVID-19 crisis, although registeredoffice. tobelow; those meetings are not included in the • do not represent a significant formal reporting below. This year the The Independent Non-Executive Directors shareholder; and Board met twice specifically to review meet at least once a year without the other • have not been a Director of the the strategic direction of the Group. Executive Directors present to discuss Company for more than nine years The Board manages overall control of the performance of the Board and since their first appointment. the Group’s affairs in accordance with to appraise the Chairman and Chief the schedule of matters reserved for its Executive’s performance. One of the Non-Executive Directors, Michael decision. These include the approval of Ziff, is not considered to be independent, ### Financial Statements, business plans, 2018 UK Corporate Governance due mainly to his shareholding in the ### all major acquisitions and disposals, Code (the ‘Code’) Company and his close family ties. The risk management strategy and As part of the Company’s commitment Board consider that he brings extensive treasurydecisions. to good corporate governance a review experience and expertise and provides an of compliance with the 2018 Code was invaluable contribution to the work of the The Board has established two divisional undertaken and areas of non-compliance Board. The remaining three Non-Executive Boards, the Property Review Board (eight identified. The Board has undertaken Directors are considered to be independent. meetings in the year) and CitiPark Board several changes to comply with the 2018 (eight meetings in the year), which Code and several other actions remain comprise Executive Directors and senior ongoing. Details on compliance with the management. The Board has delegated Code is provided on pages 66 to 67. responsibility to the divisional Boards for assisting the Executive Directors on measures relating to the Board’s strategies and policies, operational management and the implementation of the systems of internal control, within agreed parameters. | 63 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Board of Directors continued ### LISTING RULES Performance of the Board ### In accordance with listing rule 9.8.4 R the following information The effectiveness of the Board, its committees and Directors was reviewed as ### has been disclosed as set out below. part of Board proceedings. Given the size of the Board and nature of the business the Directors performed an internal Board LISTING RULE REQUIREMENT LOCATION evaluation. The Board recognises the requirement to consider the use of an A statement of the amount of interest Not applicable external evaluator at least every three capitalised during the period under years. The Board have not yet engaged review and details of any related with an external evaluator and during tax relief. the next financial year will consider the Information required in relation Not applicable appropriateness of this measure for Town to the publication of unaudited Centre Securities. financial information. The evaluation of the Board and its committees, which did not highlight any Details of any long-term No such long-term incentive plans areas of concern, considered: incentive schemes. • the Directors’ understanding of the roles and responsibilities of the Board and of its committees; Details of any arrangements No such long-term incentive plans • the structure of the Group, including under which a Director has succession planning in key areas of waived emoluments, or agreed the business; to waive any future emoluments, from the Company. • the Board’s understanding of the Group’s activities and the Details of any non pre-emptive issues No such share allotments appropriateness of its strategic plan; of equity for cash. • whether Board meetings effectively monitor and evaluate progress towards strategic goals; Details of any non pre-emptive issues No such share allotments • Board composition and the involvement of equity for cash by any unlisted of each Director in the business of the major subsidiary undertaking. Group; • the overall effectiveness of the Board Details of parent participation in Not applicable in the provision of the necessary a placing by a listed subsidiary. experience required to direct the business efficiently; and • the effectiveness of the Board Details of any contract of Not applicable Committees in performing their roles. significance in which a Director is or was materially interested. The evaluation of the performance of individual Directors was undertaken by Details of any contract of No such contract the Chairman and Chief Executive and significance between the Company the performance of the Chairman and (or one of its subsidiaries) and Chief Executive was evaluated by the a controlling shareholder. Non-Executive Directors led by the Senior Non-Executive Director, considering the Details of waiver of dividends No such waiver views of the Executive Directors. The by a shareholder. independent Non-Executive Directors met at least once during the year without the Chairman and non-independent Directors. Board statement in respect of Directors’ Report, page 83 relationship agreement with the controlling shareholder. 64 | ## 02 | CORPORATE GOVERNANCE ### Committees of the Board | NOMINATION COMMITTEE | REMUNERATION COMMITTEE | ATTENDANCE AT BOARD MEETINGS (OF 8) | | --- | --- | --- | | Edward Ziff (Chairman) | Ian Marcus (Chairman) | Ian Marcus 8 | | Ian Marcus | Paul Huberman | Paul Huberman 8 | | Paul Huberman | Jeremy Collins | Jeremy Collins 8 | Jeremy Collins ATTENDANCE AT BOARD MEETINGS (OF 8) ATTENDANCE AT AUDIT COMMITTEE Michael Ziff MEETINGS (OF 2) Edward Ziff 8 Paul Huberman 2 AUDIT COMMITTEE Ben Ziff 8 Ian Marcus 2 Paul Huberman (Chairman) Stewart MacNeill 8 Jeremy Collins 2 Ian Marcus Michael Ziff 8 Jeremy Collins 123 Albion Street | 65 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Statement of compliance with the UK Corporate Governance Code The UK Corporate Governance Code (the ‘Code’) can be found on the FRC’s website: frc.org.uk. Under the Code, the Board is required to make a number of statements. These statements are set out below: ### 1. Compliance with the Code As a Company listed on the London Stock Exchange, Town Centre Securities PLC is subject to the requirements of the Code. The Board is required to comply with the Code and, where it does not, explain the reasons for non-compliance. The Board now reports against the 2018 Corporate Governance Code and has also produced a Section 172 Statement demonstrating how Directors have performed their duties in compliance with Section 172 of the Companies Act 2006. Statement of compliance with the Code The Board has considered the principles and provisions of the Code, published by the Financial Reporting Council (‘FRC’). The Board of Directors has complied with the Code throughout the year except for the following matters: | UK CORPORATE | | EXPLANATION OF | | --- | --- | --- | | GOVERNANCE CODE PROVISION | | DEPARTURE FROM THE CODE | | Provision 9 The roles of the Chairman | | The Board acknowledges that the appointment of Edward Ziff as Chairman and CEO | | | and Chief Executive | and his tenure depart from the UK Code. | should not be exercised Edward Ziff became Chief Executive in 2001 and succeeded his father and founder by the same individual. of the Company as Chairman in 2004. The Board unanimously agreed that, for a number of reasons, including cost-efficiency, that taking on both roles would be in the Company’s best interests. The Board is focused on the commercial success of the Company and believes that continuing the combined position of Chairman and Chief Executive is the best way to achieve this. Furthermore, the Board noted the contributions which have been made by Edward Ziff in delivering the strategy of the Company, whilst utilising his position to act as an ambassador for the Company. As mentioned previously, the Company took the step to include wider management representation at Board level as a measure to give the Non-Executive Directors greater access and further avenues to scrutinise the business. This ensures an appropriate level of robust challenge and is an ongoing focus for the Non-Executive Directors. The Independent Directors meet at least annually in a private session chaired by the Senior Independent Director to consider the governance of the Company including the division of responsibilities for the Chairman and CEO. Edward Ziff will stand for re-election at all future Annual General Meetings in accordance with the 2018 Code requirements. Provision 19 Chairman not to remain Edward Ziff was appointed Chairman and CEO in 2004, which the Board feels in post for more than continues to be in the best interest of the Company. Due to this combined role Edward nine years. Ziff is not considered to be independent. Edward Ziff has over 36 years’ experience on the TCS Board and is well respected within both the Leeds and Manchester property markets – which geographically represent 90% of the Group’s property portfolio. His invaluable knowledge of the Group’s largest single asset, the Merrion Centre, Leeds, would be very difficult to replicate. Edward Ziff has significant contacts within the local area in which the business operates (for example, the local authorities, Leeds University and the Leeds Hospitals Charity). The Board believes that the valuable experience provided by Edward Ziff continues to benefit the Company. Provision 39 Notice or contract The Chairman and Chief Executive has a service contract with a notice period greater periods should be set than one year. to one year or less. Given the role and experience of the Chairman and Chief Executive, and his deep knowledge of the Company, the Board believes the longer notice period continues to be appropriate. Provision 11 At least half the Board, The Board noted that less than half of the Board is considered to be independent. excluding the Chairman The composition of the Board is regularly reviewed to ensure that there is an to be independent. appropriate balance of skills and experience. The Board currently comprises four Non-Executive Directors. Again, without the unusual wider management representation on the Board, the Company would meet the required ratio of Independent Directors. 66 | ## 02 | CORPORATE GOVERNANCE ### 2. Going concern The Board is required to confirm that the Group has adequate resources to continue in operation for at least 12 months. The Directors are satisfied that the Group has adequate resources to continue to be operational as a going concern for the foreseeable future and therefore have adopted the going concern basis in preparing the Group’s 2022 financial statements. More details can be found in the Risk Report on page 42 and the Director’s Report on page 81. ### 3. Viability statement The Board is required to assess the viability of the Company taking into account the current position and the potential impact of the principal risks and uncertainties facing the business. The Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three years ended 30 June 2025. Our Viability statement can be found in the Risk Report on page 50. ### 4. Principal risks facing the Group The Board is required to confirm that a robust assessment of the principal and emerging risks facing the Company has been carried out and should describe those risks and explain how they are being managed or mitigated. A robust assessment of the principal risks facing the Company was undertaken during the year, including those that would threaten its business model, future performance, solvency or liquidity. These risks and how they are being managed or mitigated can be found in the Risk Report starting on page 42. ### 5. Risk management and internal control The Board is required to monitor the Company’s risk management and internal control systems and, at least annually, carry out a review of their effectiveness. The Board conducted a review of the effectiveness of the systems of risk management and internal control during the year and considers that there is a sound system in place. More detail can be found in the Audit Committee Report on page 72. ### 6. Fair, balanced and understandable The Board is required to confirm that it considers the Annual Report, taken as a whole, to be fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. The Directors consider, to the best of each person’s knowledge and belief, that the Annual Report, taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. This is considered in the Audit Committee Report on page 72 and the Statement of Director’s Responsibilities on page 83. ### Relations with shareholders The Board is committed to maintaining good communication with shareholders. The Chairman & Chief Executive and Group Finance Director maintain a dialogue with institutional shareholders and analysts immediately after the announcement of the half-year and full-year results. Their views are reported to the Board as appropriate. The Company also encourages communications with private shareholders throughout the year and welcomes their participation at shareholder meetings. The principal communication with private shareholders is through the Annual Report and Accounts, the Half-Year release and the AGM. The Notice of AGM and related papers are communicated to shareholders at least 20-working days before the meeting to give shareholders sufficient time to consider the business of the meeting. All Directors attend the AGM in person (or by teleconference) and shareholders are given the opportunity to ask questions of the Board and meet all the Directors informally after the meeting. Separate resolutions are proposed for each item of business and the proxy votes for, against and withheld are announced. An announcement confirming resolutions passed at the AGM is made through the London Stock Exchange immediately after the meeting. The Senior Independent Director is available to shareholders if they have concerns they wish to raise. The Group has a comprehensive website on which up-to-date information is available to all shareholders and potential investors (www.tcs-plc.co.uk). Dr Edward Ziff OBE DL Chairman & Chief Executive 13 October 2022 | 67 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Nomination Committee Report ## “DEAR ## SHAREHOLDER, ## I am pleased to continue to act ## as Chairman of the Nomination ## Committee. The other members ## of the Committee are Jeremy ## Collins, Ian Marcus, Paul Huberman ## and Michael Ziff. The Committee ## therefore comprises a majority ## of Independent Directors. The ## Committee formally met once ## during the year.” Edward Ziff OBE DL | Chairman & Chief Executive | 68 | ## 02 | CORPORATE GOVERNANCE ## “DEAR ## SHAREHOLDER, CitiPark Leeds Dock ### Responsibilities of the The Committee recognises that the The Board is committed to ensuring ### Nomination Committee Chairman of the Board has remained in it has an appropriate balance of skills, post beyond nine years and the reasons for knowledge and experience. Diversity is The Committee is responsible for the this are regularly and rigorously reviewed by a vital part of the continued assessment regular review of the structure, size and the independent Non-Executive Directors and enhancement of Board composition, composition (including the skills, knowledge, to ensure this remains in the best interests and the Board recognises the benefits independence and experience) of the Board, of the Company and its stakeholders. This of diversity amongst its members, and and it makes recommendations to the Board exercise by the independent Non-Executive the senior team. As mentioned earlier with regard to any changes. Directors also incorporates a review of in this report, the Board recognises the combined role of Chairman and Chief that its composition should enable it to The Committee also considers succession Executive Officer. Further information can meet future challenges and assist it in planning for the Executive Board in the be found on page 59. discharging its responsibilities to all of course of its work, taking into account the its stakeholders. challenges and opportunities being faced Following the introduction of the new UK and the skills and expertise required. Corporate Governance Code, all Directors All Board appointments are made on merit are put forward for re-election at each and whilst the Nomination Committee ### Work of the Committee Annual General Meeting every year. has decided not to employ specific ### during the year Biographies of the Board members can diversity targets, it continues to actively The effectiveness of the Board, its be found on pages 60 to 61. support diversity in all forms. The Board is Committees and Directors was reviewed as committed to furthering its diversity and is part of the September Board proceedings. ### Diversity and inclusivity looking to address the issue wherever the As a result of this exercise, the Committee opportunity arises to do so. The Committee The Board embraces the supporting will be focusing on continuing to develop is committed to ensuring that recruiting principles on diversity and inclusivity its succession plan for the Board. A central a female independent Non-Executive in its broadest sense: diversity of skills, part of this plan will be to seek to make Director is a priority when future vacancies background, experience, knowledge, the Board more diverse. The Company arise. The Board currently consists of seven outlook, approach, gender and ethnicity. continues to face new challenges with men and at the senior management level In addition, the Company has regard for significant uncertainty in the general within the business, below the Board, there diversity in recruitment at all levels. At economy. The Committee will be are five men and one woman. the Company’s head office in Leeds, 13 of considering the Board’s skill set to ensure the Company’s 27 employees are female. it is able to lead the Company and a The Company drives diversity through Edward Ziff OBE DL diverse Board will be key to the Board’s its university placements, adding to its effectiveness. The Company’s approach Chairman & Chief Executive core strategy on enhancing diversity via to diversity is set out later in this report. 13 October 2022 a strong and diverse pipeline of talent throughout the Group at all levels. | 69 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Audit Committee Report ## “DEAR ## SHAREHOLDER, ## As Chairman of the Audit ## Committee (‘the Committee’) I am ## pleased to present the report of ## the Committee for the year ended ## 30 June 2022.” Paul Huberman FCA CTA | Chairman of the Audit Committee | 70 | ## 02 | CORPORATE GOVERNANCE ## “DEAR Vicar Lane, Leeds ## SHAREHOLDER, ### The Audit Committee consists of The Audit Committee carries out an annual • Reviewing BDO’s plan for the 2022 review of its Terms of Reference. The Terms Group audit and approving their terms ### the Board’s three Independent of Reference ensures the Committee’s of engagement and proposed fees. ### Non-Executive Directors. I am a role is fully compliant with the 2018 UK • Reviewing reports prepared by ### qualified Chartered Accountant Corporate Governance Code and reflects management on internal control ### and experienced senior finance best practice. This is available to view on issues, as necessary. ### executive having been Finance the Company’s website. • Considering the effectiveness, ### Director of three different listed objectivity and independence of BDO as ### Responsibilities ### companies, and more recently external auditor and recommending to The Committee’s role includes, but is ### a Non-Executive Director at the Board their reappointment. not limited to, assisting the Board to ### Galliard Homes and Grit Real • Reviewing management’s biannual risk discharge its responsibilities and duties review report and the effectiveness of ### Estate Income Group. Ian Marcus for financial reporting, internal control, the material financial, operational and ### has a breadth of experience management of risk and the appointment, compliance controls that help mitigate reappointment and remuneration of ### in Investment Banking, and the key risks. an independent external auditor. The ### as a Non-Executive Director Committee is responsible for reviewing the • Reviewing the effectiveness of the ### with past Audit Committee Group’s whistleblowing policy. scope, terms of engagement, and results ### responsibilities. Jeremy Collins is of the audit work and the effectiveness of • Monitoring the level of non-audit fees ### also a member of the Committee, the auditor. The Committee is responsible and the scope of non-audit services for monitoring the integrity of the provided in the year by the auditor. ### bringing valuable experience financial statements, announcements ### from his prior roles, including as • Reviewing progress against the IT and judgements, as well as reviewing the infrastructure and security action plan. ### Property Director at John Lewis. Company’s internal financial controls. ### The Board is therefore satisfied • Considering management’s approach The Committee also satisfies itself of the to the Viability statement in the 2022 ### that at least one member of the auditor’s independence and objectivity, Annual Report. reviews and approves the level of non-audit ### Audit Committee has recent and services, and the Group’s arrangements on • Reviewing the terms of reference of ### relevant financial experience. whistleblowing. Any matter the Committee the Audit Committee. ### The Committee as a whole has considers needs action or improvement • Carrying out an annual performance ### relevant sector experience. is reported to the Board. In addition, the evaluation exercise and noting the Committee continues to review annually satisfactory operation of the Committee. Executive Directors, including Edward Ziff, whether an internal audit function • Reviewing the Group’s Non-Audit join Committee meetings by invitation but isrequired. Services Policy. are not members of the Committee. The Committee meets alone with the external • Reviewing the Group’s compliance with ### Report on the Committee’s auditor without Executives present at least the requirements necessary to qualify ### activities during the year twice a year. as a REIT. During the year, the Committee met twice • Reviewing the longer time viability of the The Committee’s main focus has been to and discharged its responsibilities by: business and its going concern status. | monitor closely the Company’s financial | • Reviewing the Group’s draft Annual | | | --- | --- | --- | | position as it continues to suffer the impact | | Report and financial statements and | | of the COVID-19 pandemic. In particular, | | its interim results statement prior to | | the Committee has taken steps to ensure | | discussion and approval by the Board. | | that a rigorous valuation process was | • Reviewing the continuing | | | undertaken and Committee members | | appropriateness of the Group’s | | attended a number of meetings with the | | accounting policies. | external valuers. | 71 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Audit Committee Report continued ### Significant issues Going Concern and Viability The risk management system is designed ### considered in relation to to give the Board confidence that the risks The Committee and the wider Board have ### the financial statements are being managed or mitigated as far as spent significant time during the year possible. However, it should be noted that During the year, the Committee considered reviewing and stress testing the financial no system can eliminate the risk of failure key accounting matters and judgements robustness of the Company. This is to achieve the Group’s objectives entirely in respect of the financial statements. The detailed in the Risk Review on page 42, and can only provide reasonable but Committee received detailed reporting but in summary key Audit Committee not absolute assurance against material from the Finance Director and BDO with activities included: misstatement or loss. respect to key areas of management • detailed reviews of predicted cash flow judgement and reporting. forecasts under different scenarios, and The key elements of the internal control review of predicted bank and debenture framework are as follows: Using BDO’s assessment of risk and covenant tests; and • A comprehensive system of financial the Committee’s own independent • detailed discussions regarding the budgeting and forecasting based on knowledge of the Company, estimates Viability statement and Going concern an annual budget in line with strategic and judgements of management in statement included within this Report objectives. Performance is monitored relation to the preparation of the financial and Accounts. and action is taken throughout the year statements were reviewed and challenged. based on variances to budget ### The significant accounting matters and Fair, balanced and and forecast. judgements related to: ### understandable • Investment Property Valuation – the • Rolling 18-month cash flow forecasting In its review the Audit Committee has Committee reviewed the reports of the that is reviewed by the Board on a determined that the 2022 Annual Report, independent valuers JLL and CBRE, and monthly basis. taken as a whole, is fair, balanced and the Chairman and other members of • An organisational structure with clearly understandable and provides shareholders the Committee attended the valuation defined roles, separation of duties, and with the necessary information to assess review meetings with management, authority limits. the Company’s position and performance, BDO and CBRE and then JLL. business model and strategy. • Close involvement of the Executive • Treatment of property sales and Directors in day-to-day operations, and investment acquisitions in the year. regular formal meetings with senior ### Risk management and • The investment in YPS, and its valuation management to review the business. ### internal controls at the year end. • Monthly meetings of the Executive, the The UK Corporate Governance Code • Going concern and covenant compliance Property Review Group, the CitiPark provides that the Directors should – the Committee reviewed and approved Board, and quarterly meetings of the IT monitor the Company’s risk management the Going Concern analysis. and Data Governance Committee. and internal control systems and, at • Viability statement and appropriateness • A documented appraisal and approval least annually, carry out a review of of the period of the statement – the process for all significant capital their effectiveness and should report to Committee reviewed and agreed the expenditure. shareholders in the Annual Report. The longer-term viability analysis and monitoring and review should cover all • Approval by the Board for all material recommended timeframe. As part material controls, including financial, acquisitions, disposals and capital of this process a number of stress operational and compliance controls. expenditure. scenarios were provided to the The Board recognises that effective risk • The maintenance of a risk register, and Committee. The assumptions management is critical to the achievement a formal review of significant business behind those scenarios were of the Group’s strategic objectives, and risks twice a year. robustly examined. the Audit Committee plays a key role in • A formal whistleblowing policy and anti- • Treatment of outstanding rental income reviewing identified risks and assessing bribery policy. due from tenants as at the year end the effectiveness of mitigation plans. that was more than three months The Board has delegated responsibility overdue; the Committee agreed that it The principal risks and uncertainties for reviewing the effectiveness of the risk was appropriate to provide for non- identified by the Board and the processes management framework and internal payment of the amounts due unless in place to manage and mitigate such risks control to the Audit Committee. there was reasonable certainty of the are summarised in the Risk Management recoverability of specific balances. section. All individual risks identified have either remained unchanged or • Accounting for IFRS16 – the Committee improved in the year. All the changes are reviewed and approved the application driven by improvements the business is of IFRS16 within the accounts, reviewing seeing as the country recovers from the the effects of the standard. COVID-19 pandemic. The key points being • Critical accounting estimates and the robustness of the Group’s property judgements – the Committee reviewed portfolio and tenant mix and the recoveries and approved the specific disclosures seen in both the Group’s car parking and around the critical accounting estimates hotel businesses. and judgements used in preparing the financial statements. 72 | ## 02 | CORPORATE GOVERNANCE ### Oversight of the external auditor In the year ended 30 June 2022 the Committee has not asked the auditors to look at any specific areas not already covered by the BDO were appointed as the Company’s auditors following a formal audit plan. tender process in 2015/16. ### Auditor reappointment Current UK regulations require rotation of the lead audit partner every five years, a formal tender of the auditor every ten years and The Committee reviewed the effectiveness of the external a change of auditor every twenty years. The 2022 audit was the audit process and the performance of the Auditor and for the first audit by Chris Young. reasons stated above, believe that BDO remain independent and recommend that BDO be reappointed as external auditor for the BDO presented their audit plan for the year end to the Board, Company. The Committee note the requirements for the external where the key audit risks and areas of judgement were auditor position to undergo tender and propose for this to be highlighted, and the level of audit materiality agreed. BDO undertaken prior to 2025/26. presented detailed reports of their findings to the Committee ### before the Interim and Full-Year results. The Committee Internal audit questioned and challenged the work undertaken and the key The Group does not have a dedicated stand-alone internal audit assumptions made in reaching their conclusions. function. This decision is made taking into account the size and complexity of the Group. Where appropriate reviews are either ### Auditor independence and objectivity carried out by staff members, or where appropriate by third-party experts. The need for an internal audit function is considered by The Committee recognises the importance of auditor objectivity the Audit Committee annually. and independence and understands that this can be compromised by the provision of non-audit work. All taxation advice is provided ### Whistleblowing separately by PwC. However, there may be certain circumstances where, due to BDO’s expertise and knowledge of the Company, The Group has in place a whistleblowing policy which encourages it may be appropriate for them to undertake non-audit work. The employees to report any malpractice or illegal acts or omissions Company has put in place a formal process for agreeing and or matters of similar concern by other employees or former approving non-audit work by the Audit Committee alongside a employees, contractors, suppliers or advisers. The policy provides Non-Audit Services Policy as mentioned previously. BDO have a mechanism to report any ethical wrongdoing or malpractice or confirmed to the Audit Committee that they remain independent suspicion thereof. The Committee review this policy annually. and have maintained internal safeguards to ensure the objectivity ### of the engagement partner and audit staff is not impaired. Committee evaluation As part of the Board and Committee self-evaluation process it was Audit fees for the year are broken down as follows: felt that the Committee continued to operate at a high standard and was effective in its support to the Board during the year. £’000s Audit of Year-End Consolidated Financial Statements 155 Paul Huberman Audit of Company subsidiaries pursuant to legislation 7 Chairman of the Audit Committee 13 October 2022 Other Audit-related services 28 TOTAL AUDIT SERVICES 190 Other non-audit services 2 TOTAL AUDITOR’S REMUNERATION 192 The Committee ensures it is able to assess the quality of BDO’s audit in three key ways: firstly, it ensures there is a comprehensive engagement agreement in place, secondly the Committee reviews the detailed audit planning document provided by BDO, and thirdly BDO produces a detailed audit report that is thoroughly reviewed by the Committee with follow-up iterations as necessary. In addition to meeting the auditor without management present, the Committee are able to stress test the independence and quality of the review. The review described above allows the Committee to determine and understand the degree to which the auditor has challenged management and if necessary require the auditor to revisit particular aspects in more detail. In this past year, the attendance of Committee members at the Valuation Review meetings has allowed the Committee to witness first hand the level of scrutiny and challenge given by the auditors to management and CBRE and JLL. | 73 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Directors’ Remuneration Report ## “DEAR ## SHAREHOLDER, ### VALUATION SUMMARY ## On behalf of the Board I am ## pleased to present the Directors’ ## Remuneration Report of the ## Remuneration Committee ## (the ‘Committee’).” ### The report is divided into three sections: • This annual statement for the year ended 30 June 2022, which summarises remuneration outcomes and how the Remuneration Policy will operate for the year ending 30 June 2023. • The Remuneration Policy Report. The current Directors’ Remuneration Policy (‘Policy’) was approved by shareholders at the Company’s AGM in 2021 and the Company is seeking approval of a new Directors’ Remuneration Policy (‘New Policy’) at the forthcoming AGM. • The Annual Report on Remuneration which explains how the Remuneration Policy was implemented in the year ended 30 June 2022, and how the new Remuneration Policy (which includes a significant addition to the existing bonus award structure), if approved, will be implemented for the year ended 30 June 2023. Ian Marcus | Chairman of Remuneration Committee | 74 | ## 02 | CORPORATE GOVERNANCE ## “DEAR Ducie House, Manchester ## SHAREHOLDER, ### The Committee has decided to In addition to financial performance the • The lack of a Long-Term Incentive Plan strength and security of the Group has (‘LTIP’) contributes to lower overall pay ### put forward a New Policy which been improved in the last year, with key levels and means that remuneration does ### the Committee intend to seek factors being: not actively assist to align all Executives ### shareholder approval of at the • The disposals of seven further properties to longer-term shareholder interests. ### 2022 AGM. In 2019, Willis Towers above their 30 June 2021 book values. ### Implementation of the ### Watson undertook an independent • The successful acquisition and ### remuneration policy in 2022 ### market benchmarking exercise integration of a number of car park • There will be cost of living increases of enforcement businesses within the ### which is referred to later in this 4% for all three of the Executive Directors. Group, including the increased adoption ### report. The Committee have of technology within these operations. • The annual bonus opportunity was ### considered the extent to which the increased to a maximum of 100% • The progress made in letting the ### result of that exercise can be used of salary during the year. Actual recently refurbished space at Ducie bonuses of between 30% and 45% ### to inform the proposed new policy. House in Manchester. have been awarded. • Bringing forward the Group’s ### Pay and performance during 2022 • The Remuneration Committee are development pipeline, in particular at In determining the bonus award levels currently discussing with the Executive Whitehall Riverside, Leeds and our Port for the year ended 30 June 2022 the Directors whether to include suitable Street car parks in Manchester. Remuneration Committee have taken weightings, measures and targets or ### Other activities if the bonus award remains entirely full account of the progress made by the Company in the past year. There were no discretionary. If adopted these will We met twice during the year. specific benchmarks set for these bonuses, be disclosed retrospectively in our they are entirely at the discretion of the In accordance with its terms of reference, subsequent report as and when Remuneration Committee. the Committee continues to review the bonuses become payable, owing to remuneration policy periodically to seek to commercial sensitivity. ### Bonus award for the year ended ensure a clear linkage between Executive • Pension and benefits will operate as ### 30 June 2022 Directors’ pay and Group performance. per 2021. In reviewing the policy, the Committee The maximum bonus for the Executive Edward Ziff and Stewart MacNeill continue not only assesses the alignment between Directors was increased to 100% of to engage with shareholders, both family policy, strategy and shareholder interests, base salary following a change to the and where possible larger independent but also the extent to which remuneration is Remuneration Policy approved at the shareholders on all topics including sufficiently competitive to recruit, motivate Company’s AGM in 2021. The Committee remuneration. In addition, I am available and retain key talent. In previous years has approved actual awards of between to any shareholder who would like to and following a market benchmarking 30% and 45% of base salary for 2022. discuss their concerns on remuneration exercise undertaken by Willis Towers throughout the year, not only at the AGM. The financial performance assessment Watson the Committee came to a number considered the following achievements: of conclusions which were reported in the ### Remuneration policy | • The accounting profit in the year of | | 2019 and 2020 Report and Accounts: | | | | --- | --- | --- | --- | --- | | | £11.0m, compared to a loss of £0.6m in | • Overall Maximum Potential Remuneration | | The Remuneration Committee implements | | | the previous year. | | (‘MPR’) for Executive Directors is low in | the Group’s policy, which is to provide | | | | | comparison to the Company’s property | remuneration packages with fixed and | • The recovery in the EPRA profit to £3.3m, sector peers. Whilst base salaries variable elements that fairly reward the from a low of £0.3m in the previous are competitive, maximum bonus Executive Directors for their contribution year – in particular the recoveries seen opportunity is significantly lower than that to the business. It seeks to ensure that the in both the Car Park and Hotel divisions of peers. This opportunity was increased packages are sufficiently competitive to of the Company – which were both to 100% following the 2021 AGM where attract, retain and motivate the Directors significantly affected by COVID-19. changes to the Remuneration Policy were to manage the Group successfully, without • EPRA Net Tangible Assets per share approved, however, this is still considered making excessive payments. The policy increasing 17.3% from 284p to 333p to be low. seeks to achieve the Group’s strategic in the year. • Actual remuneration is also low relative and financial objectives by aligning the • Net debt (including finance leases) to peers, with an average bonus pay-out interests of the Directors and shareholders. reducing 6.7% in the year, from £175.5m of 15.5% of base salary over the last to £163.8m. fiveyears. • Group Loan to Value reducing from 51.3% to 46.4% in the year. | 75 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Directors’ Remuneration Report continued Fixed remuneration The maximum award was increased to 100% If the Group terminates the contract without of salary for FY22 at the AGM of the Company giving notice and/or makes a payment in lieu The fixed element of Directors’ remuneration in 2021. This bonus is not pensionable. of any damages to which the executive may comprises Base Salary, Benefits and Pension It is Group policy to reward exceptional be entitled the payment is to be calculated (see below for the pension). This element growth or performance. It is proposed that, in accordance with common law principles, seeks to ensure that the Group attracts and for FY23 and onwards, the Remuneration including those relating to mitigation of retains appropriately talented individuals Committee are able to award exceptional loss and accelerated receipt. Directors and provides a framework for them to save bonuses (on top of the approved annual are permitted to accept Non-Executive for retirement. The Committee considers bonus opportunity of up to 100% of base appointments by prior arrangement and the overall balance between the elements. salary detailed above), that are no more provided there is no conflict with the Salaries are determined with regard to than 10% of the profits generated from any Group’s objectives. individual and Group performance and significant transactions that are outside of the to market rates and comparable roles at Non-Executive Director remuneration ordinary course of business for the Company, comparable companies. Benefits principally subject to a maximum of £3m in any one The Non-Executive Directors do not have comprise Company cars or a salary alternative financial year. Attached to these exceptional service contracts. They are appointed for although this is being phased out, permanent bonuses will be a service condition that an initial three-year period and are now health and medical insurance premiums. will enable the Company to recover these up for re-election on an annual basis. The The Chairman & Chief Executive receives amounts if the Director were to leave within Non-Executive Directors are not entitled reimbursement of the costs of maintaining twelve months of receipt. The purpose of to participate in bonus, or share-based a flat in London which is regularly used for this is to encourage relatively small but payment schemes and any other benefits. Company meetings. The value of the benefits ultimately value enhancing strategic and is not pensionable. The Company makes no innovative technological investments that Remuneration of other employees pension contributions in respect of Edward are complementary to the existing core Remuneration of other employees is set at a Ziff. The Group makes payments to a defined businesses of TCS and to act as a long-term level to attract, motivate and retain talented contribution scheme for both Stewart incentive scheme for the Executive Directors. individuals. This may include a Company MacNeill and Ben Ziff of 13% of salary. | | Assuming this amendment to the policy is | car or car allowance as appropriate. | | --- | --- | --- | | The Committee recognises the guidance | approved at the AGM, it is expected that | Remuneration levels are recommended by | | of the 2018 Corporate Governance Code | the Remuneration Committee will consider | the Executive Directors and noted by the | | in relation to the alignment of Executive | the payment of exceptional bonuses to | Remuneration Committee. Employees are | | pensions with the wider staff pool. The | the Executive Directors in connection with | eligible to participate in the Group bonus | | contributions of 13% made by the Company | the profits crystallised from the sale of the | scheme and the SIP scheme. The Group | | in relation to Stewart MacNeill and Ben Ziff | Company’s investment in YourParkingSpace | makes pension contributions for eligible | | are in alignment with contributions made | Limited. The Directors participate annually | employees at rates which vary depending | | on behalf of other members of the senior | in the Share Incentive Plan (All Employee | on seniority. In 2019, the Company improved | | management team. | Incentive Plan), which was approved by | pension contributions for more junior staff | | | shareholders in December 2003. The current | and also introduced a Westfield Health policy | | Variable remuneration | investment limit is £1,800 per annum with a | | for a large number of staff members. share matching element equal to 100% of the The Group operates an annual bonus plan investment made subject to forfeiture should Consideration of shareholder views under which awards are discretionary and the individual cease to be employed during the Committee considers the performance At the 2021 AGM the Board noted the fact, the first three years of the plan. of each individual Director and of the Group when excluding controlling shareholder in assessing the level of payments under votes, that the proportion of non-controlling Service agreements and the plan. In particular profit and growth in shareholders voting to pass resolution 6, external appointments | shareholder value (measured by the increase | | my reappointment as a Non-Executive | | --- | --- | --- | | in net asset value per share and dividends | Edward Ziff has a service contract that is | Director, was 81.0%. As mentioned in | | paid as well as any increase in share value) | subject to not less than two years’ notice. | previous years, it is believed that the level | | are carefully considered by the Remuneration | Ben Ziff and Stewart MacNeill have service | of votes against resolution 6 related to | | Committee in awarding the bonuses when | contracts with one years’ and six months’ | concerns around remuneration, in particular | | such increases were the result of Directors’ | notice respectively. The contracts provide for | given my responsibility as Chairman of the | | input. Specific benchmarks are not set to | retirement at 65. The Group can discharge | Remuneration Committee. The Committee | | enable the Committee to award bonuses | any obligation in relation to the unexpired | has discussed my position and experience | | for both innovation and performance that | portion of their notice period or any notice | as a Non-Executive including remuneration | | aren’t necessarily capable of being measured | required to be given under their service | responsibilities elsewhere, and I continue to | | against rigid financial metrics, although | contracts by making a payment in lieu thereof. | have the full support of the wider Board and | | clearly the financial impact is considered. | | importantly the majority of shareholders. | ### Board remuneration including theoretical maximum bonuses Year ended 30 June 2022 (£’000s) 0 400200 600 1000 1400800 1200 1600 Salary Benefits Edward Ziff 648 35929345 Bonus (paid) Bonus (unpaid) Ben Ziff 240 37 109 133 Stewart MacNeill 11222160 48 Note: The unpaid element of the bonus represents the difference between the maximum possible bonus award of 100% of salary and the actual amount awarded. 76 | ## 02 | CORPORATE GOVERNANCE ### Annual Report on Remuneration Single total figure of remuneration for each Director (audited) The following table sets out the total single figure of remuneration for each Director for the years ended 30 June 2022 and 30 June 2021. Fixed Variable | | | | | 1 | | | 3 | | | | | | 2 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Salaries and fees Taxable benefits | | | | | Pensions contributions | | | | Bonuses SIP shares | | | | | | TOTAL | | | 2022 | 2021 | 2022 | 2021 | | 2022 | 2021 | | 2022 | | 2021 | 2022 | 2021 | | 2022 | | 2021 | | £’000 | £’000 | £’000 | £’000 | | £’000 | £’000 | | £’000 | | £’000 | £’000 | £’000 | | £’000 | | £’000 | EXECUTIVE CHAIRMAN & CHIEF EXECUTIVE E M Ziff 648 604 43 44 – 293 – 2 2 986 650 EXECUTIVE DIRECTORS 4 M Dilley – 213 – 2 – 30 – – – – – 245 C B A Ziff 240 222 4 2 31 29 109 – 2 2 386 255 5 L M Shillaw – 67 – 1 – 11 – – – – – 79 6 S MacNeill 160 13 1 – 21 2 48 – – – 230 15 1,048 1,119 48 49 52 72 450 – 4 4 1,602 1,244 NON-EXECUTIVE DIRECTORS M A Ziff 50 48 – – – – – – – – 50 48 P Huberman 54 51 – – – – – – – – 54 51 I Marcus 54 51 – – – – – – – – 54 51 J Collins 50 48 – – – – – – – – 50 48 208 198 – – – – – – – – 208 198 1,256 1,317 48 49 52 72 450 – 4 1 1,810 1,442 Note: 1 Taxable benefits include cash and non-cash benefits principally Company cars or a cash alternative, permanent health and medical insurance premiums. Edward Ziff receives reimbursement of the costs of maintaining a flat in London which is regularly used for Company meetings. The value of the benefits are not pensionable. 2 No long-term incentive plan was in operation for the relevant years although Directors were awarded shares under the Company SIP. 3 Edward Ziff received no pension contribution. The Group made payments to a Defined Contribution scheme and/or cash alternative for Mark Dilley, Lynda Shillaw, Ben Ziff and Stewart MacNeill (all at 13% of base salary). 4 Mark Dilley left the Board in February 2021. 5 Lynda Shillaw left the Board in August 2020. 6 Stewart MacNeill joined the Board in June 2021. Notes to the single figure table – Annual bonus targets and outcomes for 2022 The current AGM-approved bonus scheme allows for a maximum pay-out of 100% of base salary. For the year ended 30 June 2022, the Executive Directors received bonus awards of between 30% and 45% of base salary. • A bonus to all executive directors of 25% of base salary relating to the performance of the Company in the year ended 30 June 2022. • A bonus to Edward Ziff and Ben Ziff of 20% of base salary and a bonus of 5% of base salary to Stewart MacNeill primarily in relation to the strategic acquisitions and investments made by the Company in the year ended 30 June 2021. The decision to award these bonuses was deferred until November 2021 and not paid until March 2022 once these investments had been shown to be value enhancing to the Company as a whole and until the full impacts of the pandemic had been absorbed by the business. Scheme interests awarded during the financial year Town Centre Securities PLC does not currently operate a long-term incentive plan. It does operate an All Employee Share Incentive Plan, approved by shareholders in December 2003. The investment limit is £1,800 per annum with a share matching element equal to 100% of the investment made subject to forfeiture should the individual cease to be employed during the first three years of the plan. In May 2022, all three Executive Directors accepted the annual invitation to participate in this All Employee Share Incentive Plan by each agreeing to purchase shares to the value of £1,800, paid between June 2022 and November 2022. They will be eligible to receive ‘matching’ shares on a one-for-one basis. The number of shares will be determined at the end of November 2022. For illustration, based on the share price as at 30 June 2022, this would equate to each Director receiving 1,348 partnership shares and 1,348 matching shares. In November 2021, Edward Ziff, Mark Dilley and Ben Ziff received 1,299 partnership shares and 1,299 matching shares in respect of the 2021 Share Incentive Plan. The total number of partnership and matching SIP shares beneficially held at 30 June 2022 is shown below. EXECUTIVE HOLDING OF PARTNERSHIP AND MATCHING SIP SHARES (30 JUNE 2022) Edward Ziff 10,936 Ben Ziff 10,936 | 77 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Directors’ Remuneration Report continued Payments to past Directors/payments for loss Edward Ziff and Ben Ziff are Directors of TCS Trustees Limited, of office (audited) Trustee for the shares that are required for the All Employee Share Incentive Plan. At 30 June 2022, TCS Trustees Limited held During the financial year, payments of £174,250 were paid to 55,239 Ordinary Shares (2021: 73,049) on behalf of all participants Mark Dilley, a former Director of the Company. including those share awards of Executive Directors shown above. Directors’ shareholdings (audited) On 10 August 2022, 444,683 Ordinary Shares in which Edward Ziff The table below sets out the shares held by the Directors as at has a non-beneficial interest were acquired by the Company for 30 June 2022: cancellation as part of the tender offer announced on 15 July 2022. EXECUTIVE BENEFICIAL NON-BENEFICIAL Following this sale to the Company, Edward Ziff’s shareholding Edward Ziff 5,491,588 13,848,110 in the Company now totals 5,491,588 beneficial shares and 13,403,427 non-beneficial shares. Ben Ziff 772,762 0 Performance graph and table Michael Ziff 2,559,207 7,443,445 The following graph shows the Company’s Total Shareholder Return (‘TSR’) performance compared to the FTSE All Share REIT The non-beneficial interest disclosures include the 649,278 Index, over the ten years ended 30 June 2022. This index has been Ordinary Shares over which a power of attorney has been granted chosen because the Directors consider it the most appropriate by Mrs ME Ziff jointly to Edward and Michael Ziff for personal estate comparison and TCS is a constituent of this list. This chart management reasons and 6,404,665 Ordinary Shares over which a illustrates the movement in value of a hypothetical investment power of attorney has been granted by AL Manning to Edward Ziff of £100 in TCS and the FTSE All Share REIT index. for personal estate management reasons. Non-beneficial holdings include shares held in trust and under powers of attorney. 300 250 200 100 50 0 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Source: DataStream. TCS FTSE UK REITs Over the long term, TCS has outperformed FTSE All Share REIT companies. On a 20-year basis TCS TSR was 4.1% versus the FTSE All Share REIT at 3.1%. On a 10-year basis TCS TSR was 2.3% behind the FTSE All Share REIT at 6.9%. The table below sets out the total remuneration and incentive plan pay-outs for the Executive Chairman & CEO over a ten-year period. | SINGLE TOTAL FIGURE | ANNUAL BONUS | | --- | --- | | OF REMUNERATION | PAY-OUT | | (£’000S) | (% OF MAXIMUM) | 2021/22 986 45% 2020/21 650 0% 2019/20 674 0% 2018/19 684 0% 2017/18 914 40% 2016/17 809 20% 2015/16 718 10% 2014/15 782 30% 2013/14 784 33% 2012/13 604 0% 78 | 02 |^{}[] CORPORATE GOVERNANCE ### Percentage change in remuneration of the Directors The table below sets out a comparison of the percentage change in base salary, taxable benefits and bonus of the Directors versus the total employee population from 2019 to 2020, from 2020 to 2021 and from 2021 to 2022. | SALARY CHANGE | 2019 TO 2020 | 2020 TO 2021 | 2021 TO 2022 | | --- | --- | --- | --- | | Edward Ziff | (1.6%) | 0.8% | 7.3% | | Ben Ziff | 10.3% | 3.6% | 8.0% | | Stewart MacNeill | N/A | N/A | 0.0% | | Michael Ziff | (0.8%) | 0.8% | 4.8% | | Ian Marcus | (0.8%) | 0.8% | 4.8% | | Paul Huberman | (0.8%) | 0.8% | 4.8% | | Jeremy Collins | (0.8%) | 0.8% | 4.8% | | **Average Employee^{7}** | **5.5%** | **6.9%** | **5.4%** | 7 Average pay for employees is calculated on a like-for-like basis for comparison purposes. | TAXABLE BENEFITS CHANGE | 2019 TO 2020 | 2020 TO 2021 | 2021 TO 2022 | | --- | --- | --- | --- | | Edward Ziff | 0.0% | (38.9%) | (2.3%) | | Ben Ziff | 28.6% | (92.6%) | 100.0% | | Stewart MacNeill | N/A | N/A | 0.0% | | Michael Ziff | 0.0% | 0.0% | 0.0% | | Ian Marcus | 0.0% | 0.0% | 0.0% | | Paul Huberman | 0.0% | 0.0% | 0.0% | | Jeremy Collins | 0.0% | 0.0% | 0.0% | | **Average Employee** | **21.9%** | **0.0%** | **0.0%** | | BONUS CHANGE | 2019 TO 2020 | 2020 TO 2021 | 2021 TO 2022 | | --- | --- | --- | --- | | Edward Ziff | 0.0% | 0.0% | n/a | | Ben Ziff | 0.0% | 0.0% | n/a | | Stewart MacNeill | N/A | N/A | n/a | | Michael Ziff | 0.0% | 0.0% | 0.0% | | Ian Marcus | 0.0% | 0.0% | 0.0% | | Paul Huberman | 0.0% | 0.0% | 0.0% | | Jeremy Collins | 0.0% | 0.0% | 0.0% | | **Average Employee** | **0.0%** | **0.0%** | **n/a** | ### Relative importance of spend on pay The table below shows how expenditure on total pay compares to other financial outgoings. | | 2021 (£'000) | 2022 (£'000) | % CHANGE | | --- | --- | --- | --- | | Staff remuneration costs | 5,319 | 5,807 | 9.2% | | Dividends to shareholders | 1,860 | 2,237 | 20.3% | ### External appointments Stewart MacNeill is a Non-Executive Director of a small family-owned property group and receives a salary of £24,000 per annum. None of the other Executive Directors have other external appointments for which they are paid. Edward Ziff is the unpaid Chairman and Trustee of Leeds Cares. | 79 Town Centre Securities PLC | Annual Report and Accounts 2022 | # Directors' Remuneration Report continued ## Implementation of the remuneration policy for 2023 The following table outlines how TCS intends to implement the remuneration policy in the year ending 30 June 2023. | COMPONENT | IMPLEMENTATION FOR 2023 | | --- | --- | | Base salary | The Committee usually agrees base salary increases effective from September/October. This year the Committee has agreed that there will be a 4.0% cost of living increase to the Executive Directors | | Benefits | Benefits provisions will be as per 2022, to include cash and non-cash benefits principally Company cars or a cash alternative, permanent health and medical insurance premiums. The Chairman & Chief Executive receives reimbursement of the costs of maintaining a flat in London which is regularly used for Company meetings | | Pension | Edward Ziff does not receive a contribution. The Group makes payments to a Defined Contribution scheme for Stewart MacNeill (13% base salary) and Ben Ziff (13% base salary) | | Annual bonus | It is proposed that, for FY23 and onwards, the Remuneration Committee are able to award exceptional bonuses (on top of the approved annual bonus opportunity of up to 100% of base salary approved at the last AGM), that are no more than 10% of the profits generated from any significant transactions that are outside of the ordinary course of business for the Company, subject to a maximum of £3m in any one financial year. Attached to these exceptional bonuses will be a service condition that will enable the Company to recover these amounts if the Director were to leave within twelve months of receipt. The purpose of this is to encourage relatively small but ultimately value enhancing strategic and innovative technological investments that are complementary to the existing core businesses of TCS and to act as a long-term incentive scheme for the Executive Directors. Assuming this amendment to the policy is approved at the AGM, it is expected that the Remuneration Committee will consider the payment of exceptional bonuses to the Executive Directors in connection with the profits crystallised from the sale of the Company's investment in YourParkingSpace Limited. All bonuses are currently entirely at the discretion of the Remuneration Committee The Committee is currently discussing potential measures and weightings and if adopted will only be disclosed retrospectively owing to commercial sensitivity | | SIP | Executive Directors will continue to participate in the SIP | | NED fees | NED fees will increase by 7.5% with effect from September 2022 | ## Consideration by the Directors of matters relating to Directors' remuneration The Remuneration Committee formally met twice during the year and the following Directors were members of the Committee during 2022: - Ian Marcus - Paul Huberman - Jeremy Collins The key activities of the Committee during the year were: - Approving the bonus outcome for 2022 (between 30% and 45% of base salary) - Approving the salaries for 2022 (cost of living increases for Edward Ziff and Ben Ziff) - Setting the bonus targets for 2023 - Reviewing Service Contracts for continued appropriateness - Discussing structures for any potential future LTIP scheme - Reviewing the Terms of Reference - Reviewing changes to Corporate Governance and the Committee's approach to these changes - Reviewing the Remuneration Policy ## Statement of voting in relation to the 2021 AGM | | ANNUAL REPORT ON REMUNERATION | | --- | --- | | Votes For | 95.57% | | Votes Against | 4.43% | This report was approved by the Board on 13 October 2022 and signed on its behalf by **Ian Marcus** Chairman of the Remuneration Committee 13 October 2022 80 | 02 |^{}[] CORPORATE GOVERNANCE ## Directors' Report ### The Directors present their report for the year ended 30 June 2022. #### Principal activities The principal activities of the Group during the financial year remained those of property investment, development and trading and the provision of a hotel and car parking. #### Company status Town Centre Securities PLC is a public limited liability Company incorporated under the laws of England and Wales. It has premium listing on the London Stock Exchange main market for listed securities (LON: TOWN). #### Results for the year and dividends The results for the year are set out in the Consolidated Income Statement on page 92. An interim dividend of 2.5p per share was paid on 24 June 2022 as a Property Income Distribution ('PID'). The Directors now propose a payment of a final dividend of 2.5p per share all payable as an ordinary dividend for approval of the shareholders at the forthcoming AGM. The proposed final dividend will be paid on 6 January 2023 to ordinary shareholders on the register at the close of business on 9 December 2022. The ex-dividend date will be 8 December 2022. #### Non-current assets Details of movements in non-current assets are set out in note 12 to the Consolidated Financial Statements. Investment properties are held at fair value and were revalued by Jones Lang LaSalle and CBRE as at 30 June 2022, on the basis of open market value, or were revalued by the Directors. The key assumptions are set out in note 12 to the Consolidated Financial Statements. In arriving at the valuation, each property has been valued individually. #### Financial instruments The key risks rising from Financial instruments are considered to be Trade Debtors, Lease Liabilities and Borrowings, which are set out in further detail on pages 117 to 125. #### Share capital The changes in the Company's issued share capital during the year are as set out in note 23 to the Financial Statements. At 30 June 2022, there were 52,530,599 Ordinary Shares of 25p per share in issue and fully paid. The Company does not hold any Ordinary Shares in treasury. #### Purchase of own shares During the year the Company purchased 600,436 shares of its own shares for cancellation as part of a share buy-back programme commenced on 17 June 2021. At the forthcoming AGM, the Company will be seeking to renew its authority to purchase up to 15% of the Ordinary Shares in issue, assuming the remaining authority is fully utilised. Shares will only be purchased if the Board believes it can take advantage of stock market conditions to enhance returns for the remaining shareholders. #### Shareholder voting rights The Company has only one type of Ordinary Share class in issue and all shares have equal entitlement to voting rights and dividend distributions. The Company has no share option schemes in current operation and there are no unexercised options outstanding at **30 June 2022**. Town Centre Securities confirm that there are no restrictions concerning the transfer of securities in the Company; no special rights to control attached to securities; no restrictions on voting rights; no agreements between holders of securities regarding their transfer known to the Company; and no agreements to which the Company is a party that might affect its control or trigger any compensatory payments for Directors following a successful takeover bid. #### Political donations The Group made no political contributions in the financial year (2021: nil). #### Taxation The Company is not a close company. #### Directors and Directors' interests The Directors of the Company and their biographical details are shown on pages 60 to 61. None of the Directors have any contracts of significance with the Company. Details of the Executive Directors' service contracts are given in the Directors' Remuneration Report on page 76. Beneficial and non-beneficial interests of the Directors in the shares of the Company as at 30 June 2022 are disclosed in the Directors' Remuneration Report on page 78. Details of the interests of the Directors in share options and awards of shares can be found within the same report. In accordance with the UK Corporate Governance Code all Directors will retire at the Company's AGM on 22 November 2022 and offer themselves for re-election. Service agreements of Executive Directors and terms of conditions of Non-Executive Directors are available for inspection at Company's registered office. #### Workforce engagement Ian Marcus, Non-Executive Director, agreed to be workforce champion for the Company. Further details on workforce engagement are included on page 40. #### Emission reporting The Group's greenhouse gas emissions statement is included within the Strategic Report on page 36. #### Power of Directors The Directors manage the business of the Company under the powers set out in the Company's Articles of Association (the 'Articles') and those contained within relevant UK legislation. | 81 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Directors' Report continued ### Directors' indemnity insurance In accordance with the Company's Articles of Association, the Company has provided to all the Directors an indemnity (to the extent permitted by the Companies Act 2006) in respect of liabilities incurred as a result of their office and the Company has taken out an insurance policy in respect of those liabilities. Neither the indemnity nor insurance provide cover in the event that the Director is proven to have acted dishonestly or fraudulently. The Company has appropriate Directors' & Officers' Liability insurance cover in respect of potential legal actions against the Directors. ### 2022 Annual General Meeting A Notice of Meeting can be found on pages 137 to 145 explaining the business to be considered at the AGM on 22 November 2022 at Town Centre House, Leeds. This will include renewal of the Company's authority to purchase, in the market, its own shares and allot shares for cash other than on a pre-emptive basis to existing shareholders. ### Going concern Further detail is set out on page 49 of the Strategic Report. ### Independent auditors The auditors, BDO LLP, have indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the AGM. ### Relationship agreements In accordance with the UK Listing Rules, the Company has entered into an agreement with the Ziff Family Concert Party which, as it controls more than 30% of the Group's total issued share capital, is deemed a controlling Shareholder. The relationship agreement is intended to ensure the controlling Shareholder complies with the independence provisions in Listing Rule 9.2.2A. Under the terms of the relationship agreement, the Principal Concert Party Shareholders (Mr E Ziff & Mr M Ziff) have agreed to procure the compliance of other individual members of the Ziff Family Concert Party who are treated as controlling shareholders with independence obligations in the relationship agreement. The Ziff Family Concert Party, as controlling shareholders of the Company, have a combined aggregate holding of approximately 54.7% of the Company's voting rights. The Board confirms that, since the entry into the relationship agreement until 13 October 2022, being the latest practicable date prior to the publication of this Annual Report and Accounts: - the Company has complied with the independence provisions included in the relationship agreement; - so far as the Company is aware, the independence provisions included in the relationship agreement have been complied with by the Ziff Family Concert Party and their associates; and - so far as the Company is aware, the procurement obligation included in the relationship agreement has been complied with by the Principal Concert Party Shareholders. ### Substantial shareholdings As at 13 October 2022, being the last practicable date, the Company had been notified, in accordance with the UK Listing Authority's Disclosure Guidance and Transparency Rules, that the shareholders in the table below held, or were beneficially interested in, 3% or more of the voting rights in the Company's issued share capital. | | NUMBER OF SHARES | % OF ISSUED CAPITAL | | --- | --- | --- | | Ziff Concert Party | 26,522,418 | 54.7% | | New Fortress Finance Holdings Limited | 4,834,769 | 9.96% | ### Post balance sheet events Post balance sheet events since 30 June 2022 are detailed in note 26. By order of the Board **Edward Ziff OBE DL** Chairman & Chief Executive 13 October 2022 82 | ## 02 | CORPORATE GOVERNANCE ## Statement of Directors’ responsibilities ### The Directors are responsible for preparing the Annual Report, the Website publication Directors’ Remuneration Report and the Financial Statements in The directors are responsible for ensuring the annual report and accordance with applicable law and regulations. the financial statements are made available on a website. Financial statements are published on the company’s website in accordance Company law requires the Directors to prepare Financial with legislation in the United Kingdom governing the preparation Statements for each financial year. Under that law the Directors and dissemination of financial statements, which may vary from have prepared the Group Financial Statements in accordance legislation in other jurisdictions. The maintenance and integrity of with international accounting standards in conformity with the company’s website is the responsibility of the directors. The the requirements of the Companies Act 2006 and prepared in directors’ responsibility also extends to the ongoing integrity of accordance with the international financial reporting standards the financial statements contained therein. adopted pursuant to Regulations (EC) No 1606/2002 as it applies in the European Union, and the Parent Company Financial ### Directors’ responsibilities pursuant to DTR4 Statements in accordance with United Kingdom Generally The directors confirm to the best of their knowledge: Accepted Accounting Practice (United Kingdom Accounting • The financial statements have been prepared in accordance Standards and applicable law). Under company law the Directors with the applicable set of accounting standards and Article 4 must not approve the Financial Statements unless they are of the IAS Regulation and give a true and fair view of the assets, satisfied that they give a true and fair view of the state of affairs liabilities, financial position and profit and loss of the group of the Group and the Company and of the profit or loss of the and company. Group for that period. In preparing these Financial Statements, the Directors are required to: • The annual report includes a fair review of the development • select suitable accounting policies and then apply and performance of the business and the financial position them consistently; of the group and company, together with a description of the principal risks and uncertainties that they face. • make judgements and accounting estimates that are reasonable and prudent; This responsibility statement for the year ended 30 June 2022 • state whether they have been prepared in accordance with was approved by the Board on 13 October 2022. international accounting standards in conformity with the ### requirements of the Companies Act 2006, subject to any material Disclosure of information to the auditors departures disclosed and explained in the financial statements The Directors who held office at the date of approval of this • state whether they have been prepared in accordance with Directors’ Report confirm that, so far as they are each aware, there international financial reporting standards adopted pursuant is no relevant audit information of which the Company’s auditors to Regulation (EC) No 1606/2002 as it applies in the European are unaware. Each Director has taken all the reasonable steps Union and applicable UK accounting standards, subject to any that they ought to have taken as a Director to make themselves material departures disclosed and explained in the Group and aware of any relevant audit information and to establish that the Parent Company financial statements respectively; Company’s auditors are made aware of that information. • prepare the financial statements on the going concern basis For and on behalf of the Board unless it is inappropriate to presume that the company will continue in business; | • prepare a directors’ report, a strategic report and directors’ | | Edward Ziff OBE DL | | --- | --- | --- | | | remuneration report which comply with the requirements of | Chairman and Chief Executive | | | the Companies Act 2006. | 13 October 2022 | The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the group’s performance, business model and strategy. | 83 Town Centre Securities PLC | Annual Report and Accounts 2022 | Town Centre Securities PLC | Annual Report and Accounts 2022 | ## FINANCIAL ## STATEMENTS FINANCIAL STATEMENTS Independent auditor’s report 85 Consolidated income statement 92 Consolidated statement of comprehensive income 92 Consolidated balance sheet 93 Consolidated statement of changes in equity 94 Consolidated cash flow statement 95 Notes to the consolidated financial statements 96 Company balance sheet 126 Statement of changes in equity 127 Notes to the Company financial statements 128 Notice of Annual General Meeting 137 Investor Information 145 Glossary 146 Vicar Lane, Leeds 84 | 84 | ## 03 | FINANCIAL STATEMENTS ## Independent auditor’s report ### to the members of Town Centre Securities Plc ### OPINION ON THE FINANCIAL STATEMENTS In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2022 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; • the Parent Company financial Statements have been properly prepared in accordance with United Kingdom Accounting standards; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Town Centre Securities Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 30 June 2022 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company balance sheets, the consolidated and company statements of changes in equity, the consolidated cash flow statement and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 the Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). ### BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee. ### Independence Following the recommendation of the audit committee, we were initially appointed as auditors by the directors for the year ended 30 June 2016. We were reappointed by the Members on 29 December 2021 to audit the financial statements for the year ending 30 June 2022 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 7 years, covering the years ending 30 June 2016 to 30 June 2022. We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Group or the Parent Company. ### CONCLUSIONS RELATING TO GOING CONCERN In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting included the following considerations: • Using our knowledge of the Group and its market sector together with the current economic environment to assess the Directors’ identification of the inherent risks to the Group’s business and how these might impact the Group’s ability to remain a going concern for the going concern period, being the period to 31 December 2023, which is at least 12 months from when the financial statements are authorised for issue; • We assessed the forecast cash flows with reference to historic performance and challenged the Director’s assumptions in comparing them to the historic and current performance of the Group; • We agreed the Group’s underlying borrowing facilities and the related covenants to supporting financing agreements; • We obtained covenant calculations and forecast calculations to test for any potential future breaches. We also considered the covenant compliance headroom for sensitivity to both future changes in property valuations and Group’s financial performance. We considered the directors’ mitigating actions in the event of the occurrence of the downside scenarios in light of supporting evidence and ensured that they were realistic within the required timescales; • We challenged the Directors’ as to their intentions for loan facilities maturing during the going concern period; • We assessed the inputs into the forecasts. Income was agreed to supporting documentation as appropriate, which included agreeing a sample of leases to underlying lease agreements. Expenses were assessed based on our knowledge of the business and historic results; • We considered board minutes, and evidence obtained through the audit and challenged the directors on the identification of any contradictory information the forecasts and impacting the going concern assessment; and • We analysed the Director’s stress testing calculations and challenged the assumptions made using our knowledge of the business and current economic climate, to assess the reasonableness of the scenarios selected. | 85 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Independent auditor's report continued to the members of Town Centre Securities Plc Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the Parent Company's reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. ### OVERVIEW | **COVERAGE** | 100% (2021: 100%) of Group profit before tax 100% (2021: 100%) of Group revenue 100% (2021: 100%) of Group total assets | | | --- | --- | --- | | **KEY AUDIT MATTERS** | 2022 | 2021 | | Valuation of property interests | ✓ | ✓ | | Revenue recognition | – | ✓ | | Prior period adjustments | – | ✓ | | Revenue recognition was considered a key audit matter in 2021 given the uncertainty caused by the COVID-19 pandemic during the year. In the current year the impact of the COVID-19 pandemic has was limited and as such we no longer considered it a key audit matter for the 2022 audit. | | | | The prior period adjustments were considered a key audit matter in 2021 given the nature and impact of the adjustments in that year. | | | | **MATERIALITY** | Group financial statements as a whole £3.1m (2021: £3.3m) based on 1% (2021: 1%) of Group non-current assets | | ### AN OVERVIEW OF THE SCOPE OF OUR AUDIT Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. The Group operates solely in the United Kingdom through a number of legal entities, which form reporting components. Significant components were defined as those reporting components contributing more than 15% towards Group assets, turnover or profits, or if judgementally considered to be significant by nature. Of the 16 active components in the Group, 7 were considered significant. The financial information relating to the Parent Company and all significant components of the Group were subject to full scope audits by the Group audit team. Our audit procedures for non-significant components was limited to those areas deemed material to the Group accounts on either an individual or aggregate basis across all components. Revenue and investment property valuations across the Group were areas which have been subject to a full scope audit by the Group engagement team. 86 | ## 03 | FINANCIAL STATEMENTS ### Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How the scope of our audit addressed the key audit matter VALUATION The valuation of the Group’s property Experience of valuers and relevance of their work OF PROPERTY interests (see note 12) is the key driver of We obtained the valuation reports prepared by the independent INTERESTS the Group’s net asset value and underpins valuers and discussed the basis of the valuations with them. the results for the year. We determined whether the basis of the valuations was in Refer to accounting These interests consist of investment and accordance with the requirements of accounting standards. policies on the Group development properties and freehold car property interests in We assessed the independent external valuation experts’ park fixed assets totalling £239.4m (2021: note 1 (on pages 96 to objectivity, independence and qualifications to undertake £259.1m) and interests in joint ventures 105) See notes 12 and 14 the valuations. being the Group’s share of the fair value of for details of the Group investment and development properties Data provided to the valuer propertyinterests within these joint ventures totalling £48.2m We validated the underlying data provided to the valuer by (2021 £47.1m). the Directors. This data included internal tenancy schedules, All interests in property as listed above capital expenditure details and lease terms, which were agreed are subject to independent revaluation to back to appropriate supporting documentation. open market value at each reporting date Assumptions and estimates used by the valuers by independent external valuation experts, with the exception of one property totalling We held meetings with both of the independent external £51,000 (2021: £11,000) which is subject to valuation experts in which we confirmed directly with these valuation by the Property Director. experts that the valuations had been performed on bases consistent with practices approved by the Royal Institute of The valuation of the Group’s property Chartered Surveyors (‘RICS’) and the requirements of the interests, including those held in joint accounting standards. ventures, depends on the individual nature of each property, including its location, We discussed with the independent valuation experts the and the rental income it generates. The methodology they applied and challenged them on any key assumptions on which the valuations are assumptions made. In doing this, we considered movements based are further influenced by quality in yield that were outside of a tolerable range based on our of tenants, prevailing market yields and own and wider market expectations. comparable market transactions. For development properties valued on a residual basis, Assets held as development properties are we obtained the development appraisal and assessed the valued using a comparable sales approach costs and assumptions included against our knowledge or based on the residual development and experience. For development properties valued on a value of the site, which estimates the fair comparable basis, we have obtained details of the comparable value of the completed project, including a sites and checked the appropriateness of using this information suitable developers profit and deductions with the valuation calculation. for expected costs to complete. For freehold car parks valued on an income based method All of these valuation methods involve we assessed the level of income provided to the valuers significant judgement and estimation to be through comparison to actual income generated from historic applied by management and the external periods, and challenged the external experts on the discount valuation experts, increasing the inherent rate applied within the calculation using knowledge from the risk in this area. market and our internal specialists. We consider this to be a significant risk Similarly, for the hotel property interest we assessed the level area as small percentage changes in each of income included within the valuation calculations through key assumption could materially affect the comparison to historic actuals and challenged the independent carrying value of the assetsconcerned. external valuers on assumptions made regarding the discount rate applied in the calculation. Key observations Based on our work we consider that the assumptions adopted by the Directors in the valuation of investment property were reasonable and the methodology applied was appropriate. | 87 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Independent auditor’s report continued ### to the members of Town Centre Securities Plc ### OUR APPLICATION OF MATERIALITY We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Group financial statements Parent company financial statements 2022 2021 2022 2021 £m £m £m £m Materiality 3.1 3.3 1.1 1.1 | Basis for determining | 1% of Non-current assets 1% of Non-current assets 1% of Non-current assets, | | 1% of Non-current assets, | | --- | --- | --- | --- | | materiality | | excluding investment in | excluding investment in | | | | subsidiaries | subsidiaries | | Rationale for the | Non-current assets are considered to be the | Non-current assets are considered to be the | | | benchmark applied | principal considerations for the users of the | principal considerations for the users of the financial | | | | financial statements in assessing the financial | statements in assessing the financial performance of | | | | performance of the Group. | the Parent Company. Investment in subsidiaries have | | been excluded as the key driver of the Company is deemed to be its trading assets. Performance materiality 2.015 2.145 0.72 0.72 Basis for determining 65% of materiality – in determining performance 65% of materiality – in determining performance performance materiality materiality we have considered our risk assessment, materiality we have considered our risk assessment, including our assessment of the Group’s overall including our assessment of the Group’s overall control environment. control environment. ### Specific materiality We also determined that for other account balances a misstatement of less than materiality for the financial statements as a whole could influence the economic decisions of users. We concluded that for balances excluding non-current assets, property revaluation movements, gains or losses on disposal of properties, changes in the fair value of financial instruments and movements in accrued income receivable relating to financial instruments, a user of the financial statements may be influenced by amounts lower than financial statement materiality based on total non-current assets. As a result, we determined that specific materiality for the measurement of these areas should be lower. In the prior year, Group specific materiality was £200,000, based on a three year 5% EPRA earnings average (£142,000), 1% of expected revenue for the year (£193,000) and a three-year 1% revenue average (£262,000). Given this range, it was concluded that a Group specific materiality of £200,000 was appropriate for the year. Given the limited impact of COVID-19 in the current year and the increase in profitability of the group we concluded that a Group specific materiality of £225,000 was appropriate for the year. This equates to 8% of EPRA earnings excluding accrued interest income. Parent Company specific materiality was set at £120,000 (2021: £120,000) which equates to 7% of EPRA earnings excluding accrued interest. 88 | 03 | FINANCIAL STATEMENTS ### Component materiality We set financial statement materiality for each component of the Group on the same basis as Group materiality, being 1% (2021: 1%) of the total non-current assets of each component dependent on the size and our assessment of the risk of material misstatement of that component. Component financial statement materiality ranged from £40,000 to £1,210,000 (2021: £1,000 to £1,265,000). In the audit of each component, we further applied performance materiality levels of 65% (2021: 65%) of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated. Specific materiality for each component, was calculated on the same basis as outlined above for the Parent Company specific materiality. Specific materiality for the components ranged from £6,080 to £120,000 (2021: £1,000 to £140,000). For each specific materiality set, we applied a performance materiality level of 65% (2021: 65%). ### Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £11,250 (2021: £10,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. ### OTHER INFORMATION The directors are responsible for the other information. The other information comprises the information included in the annual report and accounts other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. ### CORPORATE GOVERNANCE STATEMENT The Listing Rules require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the parent company's compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. #### GOING CONCERN AND LONGER-TERM VIABILITY - The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified; and - The Directors' explanation as to their assessment of the Group's prospects, the period this assessment covers and why the period is appropriate. #### OTHER CODE PROVISIONS - Directors' statement on fair, balanced and understandable; - Board's confirmation that it has carried out a robust assessment of the emerging and principal risks; - The section of the annual report that describes the review of effectiveness of risk management and internal control systems; and - The section describing the work of the audit committee. | 89 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Independent auditor’s report continued ### to the members of Town Centre Securities Plc ### OTHER COMPANIES ACT 2006 REPORTING Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. STRATEGIC REPORT In our opinion, based on the work undertaken in the course of the audit: AND DIRECTORS’ • the information given in the Strategic report and the Directors’ report for the financial year for which REPORT the financial statements are prepared is consistent with the financial statements; and • the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report. DIRECTORS’ In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in REMUNERATION accordance with the Companies Act 2006. CORPORATE In our opinion, based on the work undertaken in the course of the audit the information about internal control GOVERNANCE and risk management systems in relation to financial reporting processes and about share capital structures, STATEMENT given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in this information. In our opinion, based on the work undertaken in the course of the audit information about the Parent Company’s corporate governance code and practices and about its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules. We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by the Parent Company. MATTERS ON We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 WHICH WE ARE requires us to report to you if, in our opinion: REQUIRED TO • adequate accounting records have not been kept by the Parent Company, or returns adequate for our REPORT BY audit have not been received from branches not visited by us; or EXCEPTION • the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. ### RESPONSIBILITIES OF DIRECTORS As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. 90 | ## 03 | FINANCIAL STATEMENTS ### AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. ### Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: • We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates and considered the risk of acts by the Group that were contrary to applicable laws and regulations, including fraud. • We considered the Group’s compliance with laws and regulations that have a direct impact on the financial statements including, but not limited to, relevant accounting standards, UK company law, tax legislation (including the UK REIT regime requirements and the Listing Rules, and we considered the extent to which non-compliance might have a material effect on the Group financial statements. • We designed audit procedures to identify instances of non-compliance with such laws and regulations. Our procedures included reviewing the financial statement disclosures against the requirements of the accounting standards and company law and agreeing those disclosures to underlying supporting documentation where necessary. We reviewed minutes of all Board and Committee meetings held during and subsequent to the year for any indicators of non-compliance and made enquiries of management and of the Directors as to the risks of non-compliance and any instances thereof. • There is also a risk of fraud in relation to the valuation of the property portfolio where the Directors may influence the significant judgements and estimates in respect of property valuations in order to achieve property valuation and other performance targets. Procedures conducted in relation to the valuation of investment properties are documented in the key audit matters section of thisreport. • We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. • We addressed the risk of management override of internal controls, including testing journal entries processed during and subsequent to the year and evaluating whether there was evidence of bias by management or the Directors that represented a risk of material misstatement due to fraud. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. ### USE OF OUR REPORT This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Christopher Young (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, UK 13 October 2022 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). | 91 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Consolidated income statement for the year ended 30 June 2022 | | Notes | 2022 £'000 | 2021 £'000 | | --- | --- | --- | --- | | Gross revenue (excl service charge income) | 3 | **25,383** | 18,703 | | Service charge income | 3 | **2,758** | 2,726 | | Gross revenue | 3 | **28,141** | 21,429 | | Release of provision for impairment of debtors | 3 | **49** | 788 | | Service charge expenses | 3 | **(3,666)** | (3,656) | | Property expenses | 3 | **(10,000)** | (7,489) | | **Net revenue** | | **14,524** | 11,072 | | Administrative expenses | 4 | **(6,531)** | (5,585) | | Other income | 7 | **1,612** | 1,989 | | Valuation movement on investment properties | 12 | **3,489** | 63 | | Impairment of car parking assets | 12 | **(384)** | (111) | | Loss on disposal of investments | | **(89)** | – | | Profit/(loss) on disposal of investment properties | | **4,563** | (2,320) | | Share of post-tax profits from joint ventures | 14 | **1,315** | 2,461 | | **Operating profit** | | **18,499** | 7,569 | | Finance costs | 8 | **(8,063)** | (8,145) | | Finance income | 8 | **576** | – | | **Profit/(loss) before taxation** | | **11,012** | (576) | | Taxation | 9 | – | – | | **Profit/(loss) for the year attributable to owners of the Parent** | | **11,012** | (576) | | **Earnings per share** | | | | | Basic and diluted | 11 | **20.9p** | (1.1)p | | EPRA (non-GAAP measure) | 11 | **6.2p** | 0.6p | | **Dividends per share** | | | | | Paid during the year | 10 | **4.25p** | 3.5p | | Proposed | 10 | **2.5p** | 1.75p | ## Consolidated statement of comprehensive income for the year ended 30 June 2022 | | Notes | 2022 £'000 | 2021 £'000 | | --- | --- | --- | --- | | Profit/(loss) for the year | | **11,012** | (576) | | **Items that will not be subsequently reclassified to profit or loss** | | | | | Revaluation gains on hotel assets | 12 | **713** | – | | Revaluation gains on other investments | 15 | **15,306** | 2,795 | | Total other comprehensive income | | **16,019** | 2,795 | | **Total comprehensive income for the year** | | **27,031** | 2,219 | All profit and total comprehensive income for the year is attributable to owners of the Parent. The notes on pages 96 to 125 are an integral part of these Consolidated Financial Statements. 92 | 03 | FINANCIAL STATEMENTS ## Consolidated balance sheet as at 30 June 2022 | | Notes | 2022 £'000 | 2021 £'000 | | --- | --- | --- | --- | | **Non-current assets** | | | | | **Property rental** | | | | | Investment properties | 12 | **201,106** | 218,909 | | Investments in joint ventures | 14 | **18,016** | 16,212 | | | | **219,122** | 235,121 | | **Car park activities** | | | | | Freehold and leasehold properties | 12 | **72,226** | 74,502 | | Goodwill and intangible assets | 13 | **4,912** | 4,841 | | | | **77,138** | 79,343 | | **Hotel operations** | | | | | Freehold and leasehold properties | 12 | **9,100** | 8,630 | | | | **9,100** | 8,630 | | Fixtures, equipment and motor vehicles | 12 | **976** | 955 | | Investments | 15 | **4,506** | 9,217 | | **Total non-current assets** | | **310,842** | 333,266 | | **Current assets** | | | | | Trade and other receivables | 16 | **21,708** | 5,311 | | Cash and cash equivalents | | **22,150** | 21,670 | | | | **43,858** | 26,981 | | Assets held for sale | 12,15 | **20,368** | 3,850 | | **Total current assets** | | **64,226** | 30,831 | | **Total assets** | | **375,068** | 364,097 | | **Current liabilities** | | | | | Trade and other payables | 17 | **(9,828)** | (11,499) | | Bank overdrafts | | **(23,414)** | (21,113) | | Financial liabilities | 18 | **(34,655)** | (42,260) | | **Total current liabilities** | | **(67,897)** | (74,872) | | **Non-current liabilities** | | | | | Financial liabilities | 18 | **(127,867)** | (133,830) | | **Total liabilities** | | **(195,764)** | (208,702) | | **Net assets** | | **179,304** | 155,395 | | **Equity attributable to the owners of the Parent** | | | | | Called up share capital | 23 | **13,132** | 13,282 | | Share premium account | | **200** | 200 | | Capital redemption reserve | | **717** | 567 | | Revaluation reserve | | **1,213** | 500 | | Retained earnings | | **164,042** | 140,846 | | **Total equity** | | **179,304** | 155,395 | | **Net asset value per share** | 21 | **341p** | 292p | Company number: 00623364 The financial statements on pages 92 to 125 were approved by the Board of Directors on 13 October 2022 and signed on its behalf by Chairman & Chief Executive | 93 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Consolidated statement of changes in equity ### for the year ended 30 June 2022 | Called | | Share | | Capital | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | up share | premium | | redemption | | Revaluation | | Retained | | | | | capital | account | | | reserve | | reserve | earnings | | Total equity | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | Balance at 30 June 2020 13,29 0 20 0 559 500 1 40,5 29 15 5,078 Comprehensive income for the year Loss for the year – – – – (576) (576) Other comprehensive income – – – – 2 ,7 9 5 2 ,7 9 5 Total comprehensive income for the year – – – – 2,219 2,2 19 Contributions by and distributions to owners Arising on purchase and cancellation of own shares (8) – 8 – (4 2) (4 2) Final dividend relating to the year ended 30 June 2020 – – – – (93 0) (93 0) Interim dividend relating to the year ended 30 June 2021 – – – – (9 3 0) (9 3 0) Balance at 30 June 2021 13,282 200 567 500 140, 8 4 6 155, 39 5 Comprehensive income for the year Profit for the year – – – – 11,0 1 2 11,0 12 Other comprehensive income – – – 7 13 15,3 0 6 16,0 1 9 Total comprehensive loss for the year – – – 713 26,318 27, 0 3 1 Contributions by and distributions to owners Arising on purchase and cancellation of own shares (1 50) – 150 – (8 8 5) (8 8 5) Final dividend relating to the year ended 30 June 2021 – – – – (9 24) (9 24) Interim dividend relating to the year ended 30 June 2022 – – – – (1, 3 13) (1, 3 13) Balance at 30 June 2022 13, 132 20 0 717 1, 213 1 6 4 ,0 42 1 79 ,304 94 | 03 | FINANCIAL STATEMENTS ## Consolidated cash flow statement | | Notes | 2022 | | 2021 | | | --- | --- | --- | --- | --- | --- | | | | £'000 | £'000 | £'000 | £'000 | | **Cash flows from operating activities** | | | | | | | Cash generated from operations | 24 | **11,688** | | 4,644 | | | Interest paid | | **(6,839)** | | (6,920) | | | Net cash generated from/(absorbed by) operating activities | | | **4,849** | | (2,276) | | **Cash flows from investing activities** | | | | | | | Purchase and construction of investment properties | | **(7,433)** | | – | | | Refurbishment of investment properties | | **(1,617)** | | (2,637) | | | Purchases of fixtures, equipment and motor vehicles | | **(283)** | | (198) | | | Proceeds from sale of investment properties | | **20,608** | | 48,049 | | | Proceeds from sale of investments | | **68** | | – | | | Payments for business acquisitions | | **(293)** | | (874) | | | Payments for acquisition of non-listed investments | | – | | (258) | | | Investments in joint ventures | | **(326)** | | – | | | Net cash generated from investing activities | | | **10,724** | | 44,082 | | **Cash flows from financing activities** | | | | | | | Proceeds from non-current borrowings | | **6,399** | | 4,000 | | | Repayment of non-current borrowings | | **(18,643)** | | (44,091) | | | Arrangement fees paid | | **(380)** | | – | | | Principal element of lease payments | | **(1,648)** | | (1,659) | | | Dividends paid to shareholders | | **(2,237)** | | (1,860) | | | Purchase of own shares | | **(885)** | | – | | | Net cash used in financing activities | | | **(17,394)** | | (43,610) | | **Net decrease in cash and cash equivalents** | | | **(1,821)** | | (1,804) | | Cash and cash equivalents at beginning of the year | | | **557** | | 2,361 | | **Cash and cash equivalents at end of the year** | | | **(1,264)** | | 557 | | Cash and cash equivalents at the year end are comprised of the following: | | | | | | | Cash balances | | | **22,150** | | 21,670 | | Overdrawn balances | | | **(23,414)** | | (21,113) | | | | | **(1,264)** | | 557 | The Consolidated Cash Flow Statement should be read in conjunction with note 24. | 95 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements ### 1. ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Town Centre Securities PLC (the ‘Company’) is a public limited company domiciled in the United Kingdom. Its shares are listed on the London Stock Exchange. The Consolidated Financial Statements of the Company for the year ended 30 June 2022 comprise the Company and its subsidiaries (together referred to as the ‘Group’). The address of its registered office is Town Centre House, The Merrion Centre, Leeds, LS2 8LY. ### Basis of preparation ### Statement of compliance The Consolidated Financial Statements of Town Centre Securities PLC have been prepared in accordance with UK adopted international accounting standards. ### Income and cash flow statements The Group presents its Income Statement by nature of expense. The Group reports cash flows from operating activities using the indirect method. The acquisitions of investment properties are disclosed as cash flows from investing activities because this most appropriately reflects the Group’s business activities. Cash flows from investing and financing activities are determined using the direct method. ### Preparation of the Consolidated Financial Statements The Consolidated Financial Statements have been prepared under the historical cost convention as modified by the revaluation of the Group’s property interests and other investments. The preparation of financial statements in conformity with International Financial Reporting Standards (‘IFRS’) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions are changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements, are disclosed in note 2. ### Adoption of new and revised standards In the current financial year, the Group has adopted a number of minor amendments to standards effective in the year issued by the IASB, none of which have had a material impact on the Group. The Interest Rate Benchmark Reform – IBOR ‘phase 2’ amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 provide a practical expedient to account for changes in the basis for determining contractual cash flows of financial assets and financial liabilities as a result of IBOR reform. Under the practical expedient, entities will account for these changes by updating the effective interest rate using the guidance in paragraph B5.4.5 of IFRS 9 without the recognition of an immediate gain or loss. This practical expedient applies only to such a change and only to the extent that it is necessary as a direct consequence of interest rate benchmark reform, and the new basis is economically equivalent to the previous basis. There was no material effect from the adoption of other amendments to IFRS effective in the year. They have no significant impact on the Group as they are either not relevant to the Group’s activities or require accounting which is consistent with the Group’s current accounting policies. ### Standards and interpretations in issue not yet adopted The following are new standards, interpretations and amendments, which are not yet effective, and have not been early adopted in this financial information, that will or may have an effect on the Group’s future financial statements: • Amendments to IAS 1 which are intended to clarify the requirements that an entity applies in determining whether a liability is classified as current or non-current. The amendments are intended to be narrow-scope in nature and are meant to clarify the requirements in IAS 1 rather than modify the underlying principles. The Group will review the further amendments when they are issued (expected November 2022); at this stage, based on communications from the IASB to date there is not expected to be a material impact on the classification of liabilities as current or non-current on the Statement of Financial Position. The amendments include clarifications relating to: i. How events after the end of the reporting period affect liability classification. ii. What the rights of an entity must be in order to classify a liability as non-current. iii. How an entity assesses compliance with conditions of a liability (e.g. bank covenants). iv. How conversion features in liabilities affect their classification. The amendments were originally effective for periods beginning on or after 1 January 2022 which was then deferred to 1 January 2023. 96 | 03 |^{}[] FINANCIAL STATEMENTS The IASB has proposed further amendments in an exposure draft that was issued in November 2021, as part of these further amendments the effective date is proposed to be deferred to 1 January 2024. The Group will review the further amendments when they are issued (expected November 2022); at this stage, based on communications from the IASB to date there is not expected to be a material impact on the classification of liabilities as current or non-current on the Statement of Financial Position. - Amendments to IFRS 3 Business Combinations and IAS 8 Accounting policies (effective for periods beginning on or after 1 January 2022). There are other new standards and amendments to standards and interpretations which have been issued that are effective in future accounting periods, and which the Group has decided not to adopt early. None of these are expected to have a material impact on the condensed consolidated financial statements of the Group. ## Going concern In making their assessment of the ability of the Group to continue as a going concern the Directors have considered the impact of an economic downturn on the Group's forecasts including the effect on liquidity and compliance with bank loan and debenture covenants. The Group owns a portfolio of multi-let regional property assets located throughout the UK, and operates car parking and hotel businesses. The Group is funded in part by a £96.1m debenture which is due for repayment in 2031. In addition the business has three bilateral Revolving Credit Facilities ('RCF') totalling £85m which, as at the year end, were due for repayment or renewal between June 2023 and September 2024. Each of the debt facilities is ring-fenced within security sub pools of assets charged to the respective lender. The Group has two bank facilities falling due for repayment and renewal on 29 June 2023 within the going concern period, and the Group is in the process of agreeing terms with both banks to renew these facilities for new three-year (plus two one-year extensions) facilities on terms similar to the current ones. As at the date of this report, the Group has drawn in aggregate under all three facilities total borrowings of £23.1m. This figure is expected to reduce significantly following completion of the two development land sales expected in the first half of the year ending 30 June 2023. In the unlikely event that both sales do not complete, and the Group is not able to secure new bank facilities, either with its existing two lenders that have facilities expiring in June 2023 or with a new debt provider, then there is sufficient headroom within the remaining £25m NatWest facility to substitute properties into its security group and to repay the other facilities in full. The NatWest facility does not expire until September 2024 and then there are options in place to extend this facility by a further two years. One of the most critical judgements for the Board is the Loan-to-Value ('LTV') headroom in the Group's debt facilities. This is calculated as the maximum amount that could be borrowed, taking into account the properties secured to the funders and the facilities in place. These covenants range from 60% to 66.7% LTV. The total LTV headroom at 30 June 2022 was £18.5m (2021: £12.1m). Overall, the properties secured under the Group's debt facilities would need to fall 21.2% in value before this LTV headroom level was breached. As at the date of this report the headroom metrics and percentage fall have increased to £24.7m and 28.3% respectively following the post balance sheet transactions highlighted in this financial report. In addition to the LTV covenants, the Group's debt facilities include income cover covenants of between 100% for the debenture and 175% on the three revolving credit facilities. At the year end the actual income cover levels ranged from 187% (for the 100% debenture covenant) up to 513% on the Lloyds facility. In order to assess the potential impact of a future economic downturn on the Group and its ability to continue as a going concern, management have analysed the portfolio's tenant base, car parking and hotel operations and produced forecasts to 31 December 2023. These forecasts reflect management's view of a worst case scenario including assumptions that rent receipts are materially lower than normally experienced and that the car park and hotel businesses recover over the forecast period to a materially lower level than was experienced before the COVID-19 pandemic. These scenarios include a base case, downside case and then a more extreme significant downside case to show the effect a more significant downturn in the Group's performance would have on its funding cash headroom and any of its financial covenants. In addition the Company has performed a reverse stress exercise whereby it has looked at each individual facility and at how much of a downturn (compared to the conservative base case cash flows prepared by the Company) there would need to be before any the financial covenants are breached. The Group's forecasts, including the various scenarios, show that the cash headroom figure is resilient whilst the financial covenant tests are more sensitive. Under the base case the minimum cash headroom is expected to be £24.0m, which compares to a minimum of £19.0m under the downside scenario. The significant downside case applied a total discount of 13% to rental income receipts and a 37% discount to pre COVID-19 car park income levels. The cash headroom in the Group did not go negative in the period to June 2025 and none of the other financial covenants were breached. The reverse stress test shows that the financial covenants are not breached until either of the discounts applied in the significant downside case are pushed even further. This breach is forecast to occur in Q4 of FY24 and under the reverse stress test the position then improves. Over the entire COVID-19 period the Group has collected or agreed to defer 95.7% of rent and service charge income invoiced, and for the first two months of FY22 the car park and hotel businesses are trading significantly ahead of expectation and this is expected to continue. The forecasts show that the Group has sufficient resources to continue to operate as a going concern for at least the period to 31 December 2023. Based on the forecasts, including the mitigating options available to the Group in the event of the occurrence of the downside scenarios, the Directors consider it appropriate to prepare these financial statements on the going concern basis. | 97 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 1. ACCOUNTING POLICIES CONTINUED ### Consolidation ### (a) Subsidiaries Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The consolidated financial statements present the results of the Company and its subsidiaries (the ‘Group’) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. ### (b) Joint arrangements A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control. Investments in joint ventures are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s share of its joint ventures post-acquisition profits or losses is recognised in the Income Statement. Investments in joint ventures are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of net assets of the joint ventures less any impairment in the value of the investment. Any impairment is initially recognised against the equity value, or if nil, against any outstanding loan balances. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint venture. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. ### Segmental reporting An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Group operates in three business segments comprising property rental, car park operations and hotel operations. The Group’s operations are performed wholly in the United Kingdom. The chief operating decision-maker has been identified as the Board. The Board reviews the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. ### Non-current assets ### (a) Investment properties Investment property comprises freehold land and buildings and long-leasehold/right-of-use land and buildings that are held to earn rental income and/or for capital appreciation, rather than for sale in the ordinary course of business or for use in production or administrative functions. This comprises mainly retail units and offices. Investment property is recognised when it is probable that the future economic benefits that are associated with the investment property will flow to the Group and the cost of the investment property can be measured reliably. Typically these criteria are met on unconditional exchange. Investment property is measured initially at cost including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and other costs incurred in order to bring the property to the condition necessary for it to be capable of operating. After initial recognition investment property is carried at fair value as determined by an independent external RICS-qualified valuer or, if considered appropriate, as determined by the Directors. The fair value of investment properties take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rents or business profitability, incentives offered to tenants, forecast growth rates, market yields and discount rates and selling costs including stamp duty. The gains or losses arising from these valuations are included in the Consolidated Income Statement. When an existing investment property is redeveloped for continued future use as an investment property, it remains an investment property whilst in development. Subsequent expenditure is added to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the Consolidated Income Statement during the financial period in which they are incurred. 98 | ## 03 | FINANCIAL STATEMENTS Borrowing costs associated with direct expenditure on properties undergoing major refurbishment are capitalised. The amount is calculated using the Group’s weighted average cost of borrowing unless borrowings are specifically taken out for redevelopment of the asset in which case the specific borrowing rate is used. Investment property is de-recognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The date of disposal is the date the purchaser obtains control of the property. The gain or loss arising on the disposal of investment properties is determined as the difference between the net sale proceeds and the carrying value of the asset and is recognised in the Consolidated Income Statement. ### (b) Freehold and right-of-use properties (Property, Plant and Equipment) Freehold properties are initially recognised at cost and are subsequently carried at fair value, based on periodic valuations by a professionally qualified valuer. The fair value of freehold properties take into account tenure, lease terms and structural condition. Theinputs underlying the valuations include business profitability and market rents, forecast growth rates, market yields and discount rates and selling costs including stamp duty. Changes in fair value are recognised in other comprehensive income and accumulated in the revaluation reserve except to the extent that any decrease in value in excess of the credit balance on the revaluation reserve, orreversal of such a transaction, is recognised in the Consolidated Income Statement. At the date of revaluation, the accumulated depreciation on the revalued freehold property is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. On disposal of the asset the balance of the revaluation reserve is transferred to retained earnings. Leasehold properties held under leases, where a right-of-use asset is recognised, are initially valued at the present value of minimum lease payments payable over the term of the lease. See leased assets (where Group acts as lessee) policy below for further details. Freehold land is not depreciated. Depreciation on assets under construction does not commence until they are complete and available for use. Depreciation is provided on all other items within this category so as to write off their carrying value over their expected useful economic lives, or over the lease term if shorter. ### (c) Fixtures, equipment and motor vehicles (Property, Plant and Equipment) Fixtures, equipment and motor vehicles are carried at historical cost less depreciation and provision for impairment. Historic cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis at rates appropriate to write off individual assets over their estimated useful lives of between three and ten years. The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverableamount. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the Consolidated Income Statement. ### Fair value Fair value estimation under IFRS 13 requires the Group to classify for disclosure purposes fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements on its financial assets. The fair value hierarchy has the following levels: • Level (1) quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level (2) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and • Level (3) inputs for the asset or liability that are not based on observable market data (unobservable inputs). The fair value of assets held for sale, other financial assets and investment property are determined by using valuation techniques. See note 2 for further details of the judgements and assumptions made in relation to investment properties. ### Goodwill Goodwill represents the excess of the cost of a business combination over the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued. Direct costs of acquisition are recognised immediately as an expense. Goodwill is not subject to amortisation and is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it may be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount may not be recoverable. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets. Any impairment recognised is charged to the Consolidated Income Statement. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the Consolidated Income Statement on the acquisition date. | 99 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 1. ACCOUNTING POLICIES CONTINUED ### Intangible assets – car park activities Intangible assets are recognised where the Group controls the asset, it is probable that future economic benefits attributable to the asset will flow to the Group and we can reliably measure the cost of the asset. Intangible assets are amortised using the straight-line method over their useful economic life. The amortisation is charged to the Consolidated Income Statement as a direct car park property cost. ### Investments The Group’s investments comprise of investments in quoted and unquoted equity. Other than where the Group has taken an irrevocable election to recognise investments as fair value through other comprehensive income, the Group treats all investments as fair value through profit and loss. Purchases and sales of investments are recognised on the trade date, which is the date the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus, where the investment is not subsequently measured at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Equity instruments are valued at fair value at each reporting date. The fair values of listed investments are based on current bid prices. Any fair value gains and losses arising on equity instruments classified as fair value through profit and loss are recognised in the income statement. However, an assessment for each individual equity instrument not held for trading is considered, to establish whether an irrevocable election under IFRS 9 should be made to classify the instrument at fair value through other comprehensive income. Where this election has been made, fair value gains are recognised through other comprehensive income. To date, this election has been made for all listed investments held. Dividends on equity instruments are recognised in the Consolidated Income Statement when the Group’s right to receive payment is established. ### Assets held for sale Assets held for sale represent investment properties and investments that are available for immediate sale in their present condition and where the future sale is highly probable. The reclassification to assets held for sale occurs when the future sale becomes highly probable. The fair value of property assets held for sale is calculated applying the same process as that applied to the Group’s investment properties. The fair value of investment assets held for sale is calculated based on the underlying cash consideration expected to arise on the sale. Where amounts are deferred, these are discounted back to the balance sheet date at a suitable discount rate. ### Trade and related party receivables Trade and related party receivables (such as loans to joint ventures or loans to investments) are recognised initially at fair value and are subsequently measured at amortised cost less provision for impairment. The amount of the provision is recognised in the Consolidated Income Statement. Impairment provisions for current and non-current lease and trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non- payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. Impairment provisions are recognised within cost of sales in the Consolidated Income Statement, unless material in which case will be presented as a separate line item in Consolidated Income Statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, 12-month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit). This is in respect of non- substantial modifications only. 100 | ## 03 | FINANCIAL STATEMENTS ### Cash and cash equivalents Cash and cash equivalents carried in the Consolidated Balance Sheet are held at amortised cost. Cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-term, highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are included within current liabilities on the Consolidated Balance Sheet. ### Share capital Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. ### Borrowings Borrowings are held at amortised cost and recognised net of transaction costs incurred. Debt finance costs are amortised based on the effective interest rate. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. ### Bank Overdrafts In the prior year bank overdrafts were presented within trade and other payables. Given the significance of the balance in the context of current liabilities the Directors have taken the decision to present the bank overdraft of £23,414k (30 June 2021: £21,113k and 1 July 2020: £10,282k) as a separate line item on the face of the balance sheet. The Group’s banking facility has an agreement which allows the right of off-set between fellow group companies. Interest payments and covenant tests are conducted on a net basis across the accounts within the banking facility. Whilst management monitors cash on a net basis, the fact that accounts were not actually swept and netted off at 30 June 2022 (and 30 June 2021 respectively) has meant that the cash and overdraft balances have been presented on a gross basis. ### Leased (right-of-use) assets (where Group acts as a lessee) All leases are accounted for by recognising a right-of-use asset and a lease liability except for: • leases of low value assets; and • leases with a duration of 12 months or less. IFRS 16 was adopted 1 July 2019 without restatement of comparative figures. The following policies apply subsequent to the date of initial application, 1 July 2019. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group’s lease specific incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: • amounts expected to be payable under any residual value guarantee; • the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option; and • any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: • lease payments made at or before commencement of the lease; • initial direct costs incurred; and • the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset. Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining(revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss. | 101 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 1. ACCOUNTING POLICIES CONTINUED When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification: • if the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease in accordance with the above policy; • in all other cases where the renegotiated increases the scope of the lease (whether that is an extension to the lease term, or one or more additional assets being leased), the lease liability is re-measured using the discount rate applicable on the modification date, with the right-of-use asset being adjusted by the same amount; • if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right- of-use asset is adjusted by the same amount. ### Operating leases (Group acts as lessor) Leases are classified as operating leases unless the risks and rewards incidental to ownership of the asset pass to the lessee. In the case of properties where the Group has a leasehold interest, this assessment is made by reference to the Group’s right-of-use assets arising under the headlease rather than by reference to the underlying asset. Where an investment property is held under a leasehold interest, the headlease is initially recognised as an asset at cost plus the present value of minimum lease payments. The corresponding lease liability on the head lease is included in the balance sheet as a finance lease obligation. ### Unamortised tenant lease incentives Leasehold incentives given to tenants on entering property leases are recognised as unamortised lease incentives. The operating lease incentives are spread over the non-cancellable life of the lease. Where this ends with a clean break clause the incentives are spread to this date unless management is reasonably certain that the break will not be exercised. ### Taxation The tax charge in the Consolidated Income Statement comprises tax currently payable. Town Centre Securities PLC elected for group Real Estate Investment Trust (REIT) status with effect from 2 October 2007. As a result the Group no longer pays United Kingdom corporation tax on the profits and gains from its qualifying rental business in the United Kingdom provided it meets certain conditions. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal. On entering the REIT regime an entry charge equal to 2% of the aggregate market value of the properties associated with the qualifying rental business was payable. Deferred tax accrued at the date of conversion in respect of the assets and liabilities of the qualifying rental business was released to the Consolidated Income Statement as the relevant temporary differences are no longer taxable on reversal. In respect of non-qualifying activities and related profits, gains and losses: ### (a) Deferred income tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, no provision for deferred tax is made for temporary differences arising on the initial recognition of assets or liabilities that affect neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group is entitled to settle its current tax assets and liabilities on a net basis. ### (b) Current tax The charge for current tax is based on the results for the period as adjusted for items which are non-assessable or disallowed. It is calculated using rates of tax that have been enacted by the balance sheet date. ### Employee benefits The Group operates defined contribution arrangements for all eligible Directors and employees. A defined contribution plan is a pension plan under which the Group pays contributions into a private or publicly administered pension insurance plan. Pension costs are charged to the Consolidated Income Statement in the period when they fall due. Pre-paid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. 102 | ## 03 | FINANCIAL STATEMENTS ### Revenue recognition ### (a) Rental income Revenue includes rental income net of VAT. Most of the Group’s rental income is billed either monthly or quarterly in advance. A receivable and deferred income is recognised at the date payment is due providing the Directors consider the amount to be collectible. The COVID-19 pandemic has increased the level of uncertainty as to whether amounts will be collectible for some leases and as such no receivable (or a reduced receivable) has been recognised in the current and prior year where amounts have been billed and are due for payment if payment is not considered probable. If the Directors consider an unrecognised amount is collectible subsequent to its due date, then the receivable is recognised at that date. Rent receivables recognised are subject to impairment (refer to the Trade and Other Related Party receivables policy above). Any lease incentives are spread on a straight-line basis across the period of the lease. Rental income is recognised as revenue (to the extent it is considered collectible) as follows: i) Fixed rental income is recognised on a straight-line basis over the term of the lease. ii) Turnover rents are based on underlying turnover and are recognised in the period to which the turnover relates. iii) Rent reviews are recognised in the period to which they relate providing they have been agreed or otherwise on agreement. iv) Where rent concessions have been granted that reduce the payments due under a lease in future periods the total revised consideration (plus any prepaid or accrued lease payments) is spread over the remaining lease term from the date the concession is granted. ### (b) Car park income Contract car park income is recognised on a straight-line basis over the relevant period, in accordance with the contract to which it relates. Daily car park and car parking enforcement income is recognised when received. Where the Group is employed under a car parking management agreement and acts as agent, the Group only recognises the management fee income (on a straight-line basis) and if applicable its share of any operating profits of the car parks managed. ### (c) Hotel income Room revenue is recognised on a daily basis in accordance with the date of the overnight stay. Food and beverage revenue is recognised at the point of sale. ### (d) Interest income Interest income on any short-term deposits is recognised in the Consolidated Income Statement as it accrues. ### (e) Other income Other income includes dividend income, which is recognised when the right to payment is established and surrender premiums or lease assignments received from outgoing tenants prior to the termination of their lease. ### (f) Service charge income Many of the Group’s leases also include the provision of services (e.g. for security, cleaning, etc). Revenue from the provision of services is recognised in accordance with the provisions of IFRS 15 as the services are provided to the tenant. Services are typically provided evenly over the lease term. The transaction price is generally specified in the lease contract to reflect the market value of providing the services. ### Dividend distribution Dividend distributions to the Company’s shareholders are recognised in the Consolidated Financial Statements as follows: i) interim dividends are recognised in the period they are paid; and ii) final dividends are recognised in the period in which the dividends are approved by the Company’s shareholders. ### Share buy-backs Where shares are redeemed or purchased wholly out of profits available for distribution, a sum equal to the total amount paid by the Company’s share is deducted from the Company’s retained earnings. Where shares are redeemed or purchased wholly out of profits available for distribution, a sum equal to the amount by which the Company’s share capital is diminished on cancellation of the shares (the nominal value of the shares) is transferred to the capital redemption reserve. | 103 Town Centre Securities PLC | Annual Report and Accounts 2022 | # Notes to the consolidated financial statements continued ## 1. ACCOUNTING POLICIES CONTINUED ### Reserves Reserves are analysed in the following categories: - Share capital represents the nominal value of issued share capital. - Share premium represents any consideration received in excess of nominal value of the shares issued. - Capital redemption reserve represents the nominal value of the Company's own shares that have been repurchased and cancelled. - Revaluation reserve represents the surplus valuation movement upon revaluation of freehold property relating to car park activities and hotel operations. - Retained earnings represents the cumulative profit or loss position less dividend distributions. ### Financial risk management The Group's activities expose it to a variety of financial risks: credit risk, liquidity risk, cash flow and fair value interest rate risk, capital risk and price risk. #### (a) Credit risk As noted in the Group's rental income policy above, receivables are only recognised for rental income when the amount due is considered collectable at the time of billing. Management continue to assess the collectability of unpaid amounts that are billed and due, if it becomes probable that the amount will be paid then the receivable will be recognised at that date, along with the related income. Whether an amount is considered to be collectable requires judgement. In making that judgement management consider (on a lease by lease basis) payment history and changes in the credit risk of the tenant. The Group's accounting policy means that no impairment loss is separately recognised in the Consolidated Income Statement for these amounts as no financial asset was recognised at the date of the transaction. These amounts are considered not collectable and remain unpaid. The material financial assets to which the expected credit loss impairment model is applied are set out below: - Cash and cash equivalents (£22,150,000 at 30 June 2022 and £21,670,000 at 30 June 2021) – all cash and cash equivalents are held with high-quality financial institutions for which there is considered to be no significant credit risk, as such no ECL is recognised in respect of this balance. - Loan to JV (£6,325,000 at 30 June 2022 and £5,836,000 at 30 June 2021) – the general impairment approach has been applied to the loan receivable. Management have considered the cash flow forecasts of the JV and on this basis have concluded that the loan will be capable of settlement when called although this is not expected in the near future. - Loan to third party (£1,948,000 at 30 June 2022 and £1,535,000 at 30 June 2021) – the general impairment approach has been applied to the loan receivable. Management have considered the cash flow forecasts of the JV and on this basis have concluded that the loan will be capable of settlement when called. - Trade receivables (£1,701,000 at 30 June 2022 and £2,278,000 at 30 June 2021) – the Directors have applied the simplified approach to trade receivables. Trade receivables have been grouped together based on shared credit risk characteristics and days past due. Loss rates have then been applied to each group based on historical payment profiles adjusted to reflect current and forward-looking information. In particular, in the prior year this resulted in a material impairment loss being recognised because of the anticipated effects of COVID-19 on some creditors (for example, lease receivables for retailers who had closed their businesses at the prior year end). #### (b) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group treasury policy aims to maintain flexibility in funding by keeping committed credit lines available. The maturity profile and details of undrawn banking facilities are set out in note 18. #### (c) Cash flow and fair value interest rate risk The Group has no significant interest-bearing assets. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest costs may increase as a result of such changes. They may reduce profits or create losses in the event that unexpected movements arise. The Group continually reviews interest rates and interest rate risk and has a policy of monitoring the costs and benefits of interest rate fixing instruments with a view to hedging exposure to interest rate risk on a regular basis. At 30 June 2022, 71.6% (2021: 68.0%) of the Group's borrowings were under long-term fixed rate agreements and therefore were protected against future interest rate volatility. 104 | 03 | FINANCIAL STATEMENTS **(d) Capital risk** The Group's objective in managing capital is to maintain a strong capital base to support current operations and planned growth and to provide for an appropriate level of dividend payments to shareholders. The Group is not subject to external regulatory capital requirements. **(e) Price risk** Current asset investments are subject to price risk as a result of fluctuations in the market. The Group limits the amount of exposure by continually assessing the performance of these investments. **(f) Compliance with covenants** The Group's bank facilities and the mortgage debenture stock include a number of covenants principally relating to income and capital cover. The Directors monitor performance against these covenants on a regular basis. **2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS** The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The only estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value amounts of assets and liabilities within the next financial year are as follows: i. Group's property investments – the basis for valuation is set out in note 12. ii. Revenue recognition – the Group's accounting policy around the recognition of revenue includes an assessment of what rental income is deemed collectible. During the year ended 30 June 2022 this fair value assessment estimated that none of the rental income invoiced was not recognised in the year. iii. Accounting for YPS investment – assessing the level of influence over this investment where the Group has a 21.1% equity shareholding (albeit only 19.9% of the voting rights) and a seat at the Board. Under IFRS 20% is a threshold that is an indicator of significant influence. The Group is the fourth largest shareholder in YPS, and under the terms of the YPS Investment Agreement, and Articles of Association the Group does not have as much influence as the three larger investors. The judgement made is that even though the Group's ownership is around the 20% threshold, it does not have significant influence and therefore the investment is not to be equity accounted. An estimate has been made of the future net revenue of YPS. This estimate which feeds into the calculation of the 'earn out' consideration (see note 26 – Post Balance Sheet Events). This estimate has been based on the future earnings of YPS, assuming the current growth in the business is maintained over the 14-month period from 14 July 2022. This is an estimate prepared by the Company; following completion of the sale its investment in YPS, the Company does not have access to any current management information. **3. SEGMENTAL INFORMATION** The chief operating decision-maker has been identified as the Board. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. **(A) Segmental assets** | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Property rental | **263,598** | 266,444 | | Car park activities | **77,496** | 79,658 | | Hotel operations | **9,100** | 8,778 | | Investments | **24,874** | 9,217 | | | **375,068** | 364,097 | | 105 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 3. SEGMENTAL INFORMATION CONTINUED ### (B) Segmental results 2022 2021 | Property | | Car park | | Hotel | | | | Property | | Car park | | Hotel | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | rental | activities | operations | | Investments | | Total | | rental | activities | operations | | Total | | | £’000 | £’000 | | £’000 | | £’000 | £’000 | | £’000 | £’000 | | £’000 | £’000 | Gross revenue (excl service charge income) 11,138 11,417 2,828 – 25,383 11,358 6,719 626 18,703 Service charge income 2,758 – – – 2,758 2,726 – – 2,726 Gross revenue 13,896 11,417 2,828 – 28,141 14,084 6,719 626 21,429 Release of provision for impairment of debtors 49 – – – 49 788 – – 788 Service charge expenses (3,666) – – – (3,666) (3,656) – – (3,656) Property expenses (1,091) (6,574) (2,335) – (10,000) (1,020) (5,666) (803) (7,489) Net revenue 9,188 4,843 493 – 14,524 10,196 1,053 (177) 11,072 Administrative expenses (5,213) (1,318) – – (6,531) (4,687) (898) – (5,585) Other income 1,577 – – 35 1,612 1,989 – – 1,989 Share of post-tax profits from joint ventures 885 – – – 885 973 – – 973 Operating profit/(loss) before valuation movements 6,437 3,525 493 35 10,490 8,471 155 (177) 8,449 Valuation movement on investment properties 3,489 – – – 3,489 63 – – 63 Impairment of car parking assets – (384) – – (384) – (111) – (111) Loss on disposal of investments – – – (89) (89) – – – – Profit/(loss) on disposal of investment properties 4,563 – – – 4,563 (2,320) – – (2,320) Valuation movement on joint venture properties 430 – – – 430 1,488 – – 1,488 Operating profit/(loss) 14,919 3,141 493 (54) 18,499 7,702 44 (177) 7,569 Finance costs (8,063) (8,145) Finance income 576 – Profit/(loss) before taxation 11,012 (576) Taxation – – Profit/(loss) for the year 11,012 (576) All results are derived from activities conducted in the United Kingdom. The car park results include car park income from sites that are held for future development. The value of these sites has been determined based on their development value and therefore the total value of these assets has been included within the assets of the property rental business. The net revenue at the development sites for the year ended 30 June 2022, arising from car park operations, was £2,125,000. After allowing for an allocation of administrative expenses, the operating profit at these sites was £1,563,000. Revenue received within the car park and hotel segments is the only revenue recognised on a contract basis under IFRS 15. All other revenue within the Property segment comes from rental lease agreements. 106 | 03 |^{}[] FINANCIAL STATEMENTS #### 4. ADMINISTRATIVE EXPENSES | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Employee benefits | **4,281** | 3,444 | | Depreciation | **129** | 163 | | Charitable donations | **35** | 7 | | Other | **2,086** | 1,971 | | | **6,531** | 5,585 | Depreciation charged to the Consolidated Income Statement as an administrative expense relates to depreciation on central office equipment, including fixtures and fittings, computer equipment and motor vehicles. Depreciation on operational equipment and right-of-use assets within both the car park and hotel businesses are charged as direct property expenses within the Consolidated Income Statement. #### 5. SERVICES PROVIDED BY THE GROUP'S EXTERNAL AUDITORS During the year the Group obtained the following services from the Group's auditors at costs as detailed below: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Audit services: | | | | – Fees payable to the Group's auditors for the audit of the Consolidated Financial Statements | **145** | 135 | | – Audit of the Company's subsidiaries pursuant to legislation | **10** | 10 | | – Other audit-related services | **28** | 15 | | **Total audit services** | **183** | 160 | | Non-audit services: | | | | – Other non-audit services | **3** | 2 | | **Total other services** | **3** | 2 | | **Total auditors' remuneration** | **186** | 162 | #### 6. EMPLOYEE BENEFITS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Wages and salaries (including Directors' emoluments) | **5,029** | 4,317 | | Social security costs | **556** | 453 | | Other pension costs | **222** | 179 | | Loss of office | – | 370 | | | **5,807** | 5,319 | Employee benefits detailed above are charged to the Consolidated Income Statement through administrative expenses and property expenses. These are presented gross of furlough claims received from HMRC under the Coronavirus Job Retention Scheme. The total value of furlough claims during the year was £9,000 (2021: £431,000). Disclosures required by the Companies Act 2006 on Directors' remuneration, including salaries, share options, pension contributions and pension entitlement are included on pages 74 to 80 in the Directors' Remuneration Report and form part of these Consolidated Financial Statements. The average monthly number of staff employed during the year was 124 (2021: 110). The Group operates pension arrangements for the benefit of all eligible Directors and employees, which are defined contribution arrangements. The assets of the arrangements are held separately from those of the Group in independently administered funds. All of the pension costs in the table above relate to defined contribution schemes. | 107 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 7. OTHER INCOME | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Commission received | **139** | 166 | | Dividends received | **35** | 34 | | Management fees receivable | **235** | 245 | | Dilapidations receipts and income relating to surrender premiums | **1,145** | 1,103 | | Other | **58** | 441 | | | **1,612** | 1,989 | ### 8. FINANCE COSTS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Interest payable on debenture loan stock | **5,303** | 5,575 | | Loss on repurchase of debenture stock | **272** | – | | Interest payable on bank borrowings | **1,265** | 1,345 | | Amortisation of arrangement fees | **252** | 212 | | Interest expense on lease liabilities | **971** | 1,013 | | **Total finance costs** | **8,063** | 8,145 | | Interest receivable on loans to joint ventures | **(163)** | – | | Other interest receivable | **(413)** | – | | **Total finance income** | **(576)** | – | | **Net finance costs** | **7,487** | 8,145 | ### 9. TAXATION There was no current or deferred tax charge for both of the years presented. Taxation for the year is lower (2021: higher) than the standard rate of corporation tax in the United Kingdom of 19% (2021: 19%). The differences are explained below: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Profit/(loss) before taxation | **11,012** | (576) | | Profit/(loss) on ordinary activities multiplied by rate of corporation tax in the United Kingdom of 19% (2021: 19%) | **2,092** | (109) | | Effects of: | | | | – Utilisation of brought forward trading losses | **(36)** | – | | – United Kingdom REIT tax exemption on net income before revaluations | **(471)** | (58) | | – United Kingdom REIT tax exemption on revaluations | **(1,585)** | 167 | | **Total taxation** | **–** | **–** | 108 | ## 03 | FINANCIAL STATEMENTS ### Factors affecting current and future tax charges Town Centre Securities PLC elected for Group REIT status with effect from 2 October 2007. As a result the Group no longer pays United Kingdom corporation tax on the profits and gains from its qualifying rental business in the United Kingdom provided it meets certain conditions. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal. Finance Act No.2 2015 included provisions to reduce corporate tax to 19% (effective from 1 April 2017) and Finance Act 2016 introduced a further reduction to 17% (effective 1 April 2020). The UK government subsequently passed a Budget Resolution on 17 March 2020 to retain the 19% corporation tax rate from 1 April 2020. Accordingly, the 19% rate has been applied when calculating deferred tax assets and liabilities as at 20 June 2021. In the 3 March 2021 Budget it was announced that the UK tax rate will increase to 25% from 1 April 2023. This will have a consequential effect on the Company’s future tax charge. At the date of signing of the balance sheet this has now been substantially enacted. The Group has unrecognised deferred tax assets of £3.3m (2021: £3.9m). Whilst the Group does not pay tax on the REIT business, the Group is liable to corporation tax on the non-REIT side of the business. The deferred tax assets have not been recognised as there is insufficient evidence to support that there will be future taxable profits in the Group. ### 10. DIVIDENDS 2022 2021 £’000 £’000 2020 final paid: 1.75p per share – 930 2021 interim paid: 1.75p per share – 930 2021 final paid: 1.75p per share 924 – 2022 interim paid: 2.5p per share 1,313 – 2,237 1,860 An interim dividend in respect of the year ended 30 June 2022 of 2.5p per share was paid to shareholders on 24 June 2022. This dividend was paid entirely as a PID. A final dividend in respect of the year ended 30 June 2022 of 2.5p per share is proposed. This dividend, based on the shares in issue at 12 October 2022, amounts to £1.2m which has not been reflected in these accounts and will be paid on 6 January 2023 to shareholders on the register on 9 December 2022. The entire dividend will be paid as an ordinary dividend. ### 11. EARNINGS PER SHARE The calculation of basic earnings per share has been based on the profit for the year, divided by the weighted average number of shares in issue. The weighted average number of shares in issue during the year was 52,755,750 (2021: 53,161,220). | | 2022 | | | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Earnings | | | | | Earnings | | | Earnings | | per share | | Earnings | | | per share | | | £’000 | | | p | | £’000 | | | p | Profit/(loss) for the year and earnings per share 11,012 20.9 (576) (1.1) Valuation movement on investment properties (3,489) (6.6) (63) (0.1) Impairment of car parking assets 384 0.7 111 0.2 Valuation movement on properties held in joint ventures (430) (0.8) (1,488) (2.8) Profit/(loss) on disposal of investment and development properties (4,563) (8.7) 2,320 4.4 Loss on disposal of investments 89 0.2 – – Loss on repurchase of debenture stock 272 0.5 – – EPRA earnings and earnings per share 3,275 6.2 304 0.6 There is no difference between basic and diluted earnings per share. There is no difference between basic and diluted EPRA earnings per share. | 109 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 12. NON-CURRENT ASSETS #### (A) Investment properties | | Freehold £'000 | Right-of-use asset £'000 | Development £'000 | Total £'000 | | --- | --- | --- | --- | --- | | Valuation at 30 June 2020 | 210,125 | 6,138 | 37,751 | 254,014 | | Capital expenditure | 2,146 | – | 22 | 2,168 | | Disposals | (26,319) | – | – | (26,319) | | Transfer to hotel operations | (8,630) | – | – | (8,630) | | Transfer to assets held for sale | – | (3,850) | – | (3,850) | | Valuation movement | (4,095) | 480 | 3,678 | 63 | | Movement in tenant lease incentives | 1,463 | – | – | 1,463 | | Valuation at 30 June 2021 | 174,690 | 2,768 | 41,451 | 218,909 | | Additions at cost | 7,433 | – | – | 7,433 | | Other capital expenditure | 1,053 | 22 | 542 | 1,617 | | Disposals | (29,680) | (518) | – | (30,198) | | Valuation movement | 2,878 | (22) | 633 | 3,489 | | Movement in tenant lease incentives | (144) | – | – | (144) | | **Valuation at 30 June 2022** | **156,230** | **2,250** | **42,626** | **201,106** | At 30 June 2022, investment property valued at £198,630,000 (2021: £213,720,000) was held as security against the Group's borrowings. Right-of-use investment property assets include long-leasehold property interests. #### (B) Freehold and leasehold properties – car park activities | | Freehold £'000 | Right-of-use asset £'000 | Total £'000 | | --- | --- | --- | --- | | Valuation at 30 June 2020 | 30,650 | 45,863 | 76,513 | | IFRS 16 adjustment | – | (95) | (95) | | Depreciation | (329) | (1,476) | (1,805) | | (Impairment)/reversal of impairment | (421) | 310 | (111) | | Valuation at 30 June 2021 | 29,900 | 44,602 | 74,502 | | IFRS 16 adjustment | – | (96) | (96) | | Depreciation | (316) | (1,480) | (1,796) | | (Impairment)/reversal of impairment | (384) | – | (384) | | **Valuation at 30 June 2022** | **29,200** | **43,026** | **72,226** | The historical cost of freehold properties and right-of-use assets relating to car park activities is £30,153,000 (2021: £30,153,000). At 30 June 2022, freehold properties and right-of-use assets relating to car park activities, held as security against the Group's borrowings are held at £42,170,000 (2021: £43,650,000). The Company occupies an office suite in part of the Merrion Centre. The Directors do not consider this element to be material. 110 | 03 |^{}[] FINANCIAL STATEMENTS # **(C) Freehold and leasehold properties – hotel operations** | | Freehold £'000 | | --- | --- | | Valuation at 30 June 2021 | 8,630 | | Depreciation | (243) | | Valuation movement | 713 | | **Valuation at 30 June 2022** | **9,100** | At 30 June 2022, freehold and leasehold property relating to hotel operations valued at £9,100,000 (2021: £8,630,000) was held as security against the Group's borrowings. The Group owns and operates a hotel that has previously accounted for within Investment Property, on the basis that it was marketing the property for a letting to a hotel operator. The hotel was closed between January and April 2021 due to the COVID-19 pandemic. Since re-opening, trading at the hotel has been strong and given there was no firm interest for a third-party letting the Directors have decided to continue to operate the hotel, therefore this property has been transferred to freehold and leasehold properties with effect from 30 June 2021. The fair value of the Group's investment and development properties, freehold car parks, hotel operations and assets held for sale have been determined principally by independent, appropriately qualified external valuers CBRE and Jones Lang LaSalle. The external valuation reports for June 2020 explicitly mentioned material valuation uncertainty due to Novel Coronavirus (COVID-19) in their portfolio valuation reports to management for certain properties within the TCS portfolios. This reference has not been considered necessary in the valuation reports for June 2022 and June 2021. The remainder of the portfolio has been valued by the Property Director. Valuations are performed bi-annually and are performed consistently across the Group's whole portfolio of properties. At each reporting date appropriately qualified employees verify all significant inputs and review computational outputs. The external valuers submit and present summary reports to the Property Director and the Board on the outcome of each valuation round. Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market rents or business profitability, incentives offered to tenants, forecast growth rates, market yields and discount rates and selling costs including stamp duty. The development properties principally comprise land in Leeds and Manchester. These have also been valued by appropriately qualified external valuers Jones Lang LaSalle, taking into account an assessment of their realisable value in their existing state and condition based on market evidence of comparable transactions and residual value calculations. Property income, values and yields have been set out by category as at 30 June 2022 in the table below. | | Passing rent £'000 | ERV £'000 | Value £'000 | Initial yield % | Reversionary yield % | | --- | --- | --- | --- | --- | --- | | Retail and Leisure | 1,122 | 1,709 | 22,125 | 4.3% | 6.8% | | Merrion Centre (excluding offices) | 4,874 | 5,234 | 58,818 | 7.8% | 8.4% | | Offices | 2,862 | 4,801 | 55,262 | 4.9% | 8.2% | | Hotels | 500 | 950 | 9,100 | 5.2% | 9.9% | | Out-of-town retail | 1,006 | 1,155 | 14,500 | 6.6% | 7.5% | | Residential | 428 | 428 | 7,775 | 5.1% | 5.1% | | | **10,792** | **14,277** | **167,580** | **6.0%** | **8.0%** | | Development property | | | 42,626 | | | | Car parks | | | 45,527 | | | | IFRS 16 Adjustment – Right-of-use assets | | | 26,699 | | | | | | | **282,432** | | | | 111 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 12. NON-CURRENT ASSETS CONTINUED Property income, values and yields have been set out by category as at 30 June 2021 in the table below. Reversionary Passing rent ERV Value Initial yield yield £’000 £’000 £’000 % % Retail and Leisure 1,589 1,947 23,445 6.4% 7.9% Merrion Centre (excluding offices) 4,630 4,857 56,654 7.7% 8.1% Offices 2,872 4,568 55,546 4.9% 7.8% Hotels 1,180 1,630 23,630 4.7% 6.5% Out-of-town retail 1,205 1,155 14,500 7.9% 7.5% Distribution 411 463 6,470 6.0% 6.8% Residential 504 492 9,175 5.2% 5.1% 12,391 15,112 189,420 6.2% 7.5% Development property 41,451 Car parks 74,502 IFRS 16 Adjustment – Right-of-use assets held within investment property 518 305,891 ### Investment properties (freehold and right-of-use), freehold properties (PPE), hotel operations and assets ### held for sale The effect on the total valuation (excluding development property and car parks) of £167.6m of applying a different yield and a different ERV would be as follows: Valuation in the Consolidated Financial Statements at an initial yield of 7.0% – £143.7m, Valuation at 5.0% – £201.0m. Valuation in the Consolidated Financial Statements at a reversionary yield of 9.0% – £148.9m, Valuation at 7.0% – £191.6m. ### Investment properties (development properties) The key unobservable inputs in the valuation of one of the Group’s development properties of £27.6m is the assumed per acre or per unit land value. The effect on the development property valuation of applying a different assumed per acre or per unit land value would be as follows: Valuation in the Consolidated Financial Statements if a 5% increase in the per acre or per unit value – £29.0m, 5% decrease in the per acre or per unit value – £26.2m. The other key development property in the Group is valued on a per acre development land value basis, the effect on the development property valuation of applying reasonable sensitivities would not create a material impact. ### Freehold car park activities The effect on the total valuation of the Group’s freehold car park properties of £29.2m in applying a different yield/discount rate would be as follows: Valuation in the Consolidated Financial Statements based on a 1% decrease in the yield/discount rate – £34.4m, 1% increase in the yield/ discount rate – £25.4m Property valuations can be reconciled to the carrying value of the properties in the balance sheet as follows: | Investment | | | Freehold and | | | Hotel | | | --- | --- | --- | --- | --- | --- | --- | --- | | properties | | leasehold properties | | | operations | | Total | | | £’000 | | | £’000 | | £’000 | £’000 | Externally valued by CBRE 104,250 23,800 9,100 137,150 Externally valued by Jones Lang LaSalle 96,805 5,400 – 102,205 Investment properties valued by the Directors 51 – – 51 Properties held at valuation 201,106 29,200 9,100 239,406 IFRS 16 right-of-use assets held at depreciated cost – 43,026 – 43,026 201,106 72,226 9,100 282,432 112 | 03 |^{}[] FINANCIAL STATEMENTS ### Valuation of investment properties (freehold and right-of-use), freehold properties (PPE), hotel operations and assets held for sale at fair value All investment properties, freehold properties held in property, plant and equipment, hotel operations and assets held for sale are measured at fair value in the consolidated balance sheet and are categorised as level 3 in the fair value hierarchy as defined in IFRS13 as one or more inputs to the valuation are partly based on unobservable market data. In arriving at their valuation for each property (as in prior years) both the independent external valuers and the Directors have used the actual rent passing and have also formed an opinion as to the two significant unobservable inputs being the market rental for that property and the yield (i.e. the discount rate) which a potential purchaser would apply in arriving at the market value. Both these inputs are arrived at using market comparables for the type, location and condition of the property. #### Assets held for sale As at 30 June 2021, one property with a value of £3,850,000 was in the process of being sold and was therefore classified within current assets as Assets held for sale. The valuation surplus recognised through the Income Statement in relation to this property for the year ended 30 June 2021: surplus was £230,000. #### (D) Fixtures, equipment and motor vehicles | | Cost £'000 | Accumulated depreciation £'000 | | --- | --- | --- | | At 1 July 2020 | 4,483 | 3,370 | | Additions | 198 | – | | On acquisition of subsidiaries | 30 | – | | Depreciation | – | 386 | | At 30 June 2021 | 4,711 | 3,756 | | Net book value at 30 June 2021 | | 955 | | At 1 July 2021 | 4,711 | 3,756 | | Additions | 283 | – | | Depreciation | – | 262 | | **At 30 June 2022** | **4,994** | **4,018** | | **Net book value at 30 June 2022** | | **976** | ### 13. GOODWILL AND INTANGIBLE ASSETS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | **Goodwill** | | | | At the start of the year | **4,436** | 4,024 | | On acquisition of subsidiaries | – | 412 | | **At the end of the year** | **4,436** | 4,436 | | **Intangible assets** | | | | At the start of the year | **405** | – | | On acquisition of subsidiaries | **293** | 442 | | Amortisation | **(222)** | (37) | | **At the end of the year** | **476** | 405 | | **Total goodwill and intangible assets** | **4,912** | 4,841 | Goodwill primarily represents the difference between the fair value of the consideration paid on the acquisitions of car park businesses and the fair value of the assets and liabilities acquired as part of these business combinations. The transactions prior to 30 June 2020 relate to businesses that held car parks under operating leases with a net asset value of £nil. Goodwill for these acquisitions therefore represents the full consideration paid. During the year ended 30 June 2022 there was one acquisition of a car park enforcement business. The entire purchase consideration of £293,000 relates to short-term customer contracts and has been allocated to intangible assets. | 113 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 13. GOODWILL AND INTANGIBLE ASSETS CONTINUED During the year ended 30 June 2021 there were two acquisitions of car park enforcement businesses for a total consideration of £880,000. Of the purchase price, £442,000 which relates to short-term customer contracts has been allocated to intangible assets, £26,000 to tangible assets and the remaining balance of £412,000 has been accounted for as goodwill. The remaining period of amortisation of the Group's intangible assets is just under three years. A review of the year-end carrying value has been performed to identify any potential impairment to the carrying value of goodwill. This has been based on the discounted future cash flows that are expected to be generated by the assets acquired over the remaining lease length, after taking account of the impact of COVID-19. The cash-generating units are the individual car parks acquired. The key assumptions used in preparing these cash flow forecasts are an underlying revenue growth rate of 1% (2021: 1%) and a discount rate of 6% (2021: 6%). The assumptions used in the cash flow are based on the Group's historical experience of the sector and expectation of future growth rate for the industry. As the discounted future cash flows are in excess of the year-end carrying value, no impairment of the carrying value is required. ### 14. INVESTMENTS IN JOINT VENTURES | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | At the start of the year | **16,212** | 13,751 | | Investments in joint ventures | **326** | – | | Loan interest | **163** | 110 | | Valuation movement on investment properties | **430** | 1,488 | | Share of profits after tax | **885** | 863 | | **At the end of the year** | **18,016** | 16,212 | Investments in joint ventures are broken down as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Equity | **11,691** | 10,376 | | Loans | **6,325** | 5,836 | | | **18,016** | 16,212 | Investments in joint ventures primarily relate to the Group's interest in the partnership capital of Merrion House LLP and share capital of Belgravia Living Group Limited. Also within investments in joint ventures exist loan balances due from joint ventures as they are considered to form part of the net investment in the joint ventures. Repayment of the loans is neither planned nor likely to occur in the foreseeable future. These loan balances are held at amortised cost and are assessed for impairment on an annual basis using an expected credit loss model, in accordance with IFRS 9. Where a joint venture is loss making and the losses exceed the equity investment in the joint venture, any excess losses are allocated to the loan balance which reduces the loan receivable's carrying amount. If the joint venture becomes profitable the profits are allocated first to the loan to reverse previous losses allocated and are subsequently allocated to the equity investment. Merrion House LLP owns a long leasehold interest over a property that is let to the Group's joint venture partner, Leeds City Council ('LCC'). The interest in the joint venture for each partner is an equal 50% share, regardless of the level of overall contributions from each partner. The investment property held within this partnership has been externally valued by CBRE at each reporting date. The assets and liabilities of Merrion House LLP for the current and previous year are as stated below: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Non-current assets | **71,850** | 71,650 | | Cash and cash equivalents | **278** | 263 | | Debtors and prepayments | **295** | 401 | | Trade and other payables | **(616)** | (704) | | Current financial liabilities | **(1,659)** | (1,603) | | Non-current financial liabilities | **(47,270)** | (48,929) | | **Net assets** | **22,878** | 21,078 | 114 | **03 |** FINANCIAL STATEMENTS A reconciliation of the net assets to carrying value is set out as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Proportional interest in net assets | **11,439** | 10,539 | | Unutilised provisions | – | (192) | | **Carrying value** | **11,439** | 10,347 | The profits of Merrion House LLP for the current and previous year are as stated below: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Revenue | **3,328** | 3,328 | | Expenses | **(2)** | (8) | | Finance costs | **(1,725)** | (1,780) | | Valuation movement on investment properties | **200** | 2,250 | | **Net profit** | **1,801** | 3,790 | Belgravia Living Group Limited completed construction of a block of residential apartments in Manchester in 2019. These apartments have been let to residential tenants during the year. The Group's financial interest in this joint venture is primarily in the form of a loan with a value as at 30 June 2022 of £6.3m (2021: £5.7m). The net assets of Belgravia Living Group for the current and previous year are as stated below: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Non-current assets | **24,586** | 22,783 | | Cash and cash equivalents | **2,048** | 1,998 | | Debtors and prepayments | **664** | 1,170 | | Trade and other payables | **(434)** | (140) | | Current financial liabilities | **(11,453)** | (11,146) | | Non-current financial liabilities | **(14,541)** | (14,634) | | **Net assets** | **870** | 31 | A reconciliation of the net assets to carrying value is set out as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Proportional interest in net assets | **435** | 16 | | Valuation adjustment | **(183)** | 13 | | **Carrying value** | **252** | 29 | The income and expenses of Belgravia Living Group Limited for the current and previous year are as stated below: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Revenue | **1,339** | 1,262 | | Expenses | **(420)** | (364) | | Depreciation | **(151)** | (150) | | Finance costs | **(603)** | (571) | | Valuation movement on investment properties | **714** | 726 | | Corporation tax | **(175)** | – | | **Net profit** | **704** | 903 | | 115 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 14. INVESTMENTS IN JOINT VENTURES CONTINUED The Group's interest in other joint ventures are not considered to be material. The book value of the Group's investment in Bay Sentry Limited is £nil (2021: £nil). The joint ventures have no significant contingent liabilities to which the Group is exposed nor has the Group any significant contingent liabilities in relation to its interest in the joint ventures. A full list of the Group's joint ventures, which are all registered in England and operate in the United Kingdom, is set out as follows: | | Beneficial interest % | Activity | | --- | --- | --- | | Merrion House LLP | 50 | Property investment | | Belgravia Living Group Limited | 50 | Property investment | | Bay Sentry Limited | 50 | Software development | ### 15. INVESTMENTS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Listed investments | **4,096** | 5,802 | | Non-listed investments | **410** | 3,415 | | | **4,506** | 9,217 | #### Listed investments | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | At the start of the year | **5,802** | 3,508 | | Disposals | **(62)** | – | | (Decrease)/increase in value of investments | **(1,644)** | 2,294 | | **At the end of the year** | **4,096** | 5,802 | Listed investments relate to an equity shareholding in a company listed on the London Stock Exchange. This is stated at market value in the table above and has a historic cost of £882,300 (2021: £889,130). Listed investments are measured at fair value in the consolidated balance sheet and are categorised as level 1 in the fair value hierarchy as defined in IFRS13 as the inputs to the valuation are based on quoted market prices. The maximum risk exposure at the reporting date is the fair value of the other investments. #### Non-listed investments | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | At the start of the year | **3,415** | 2,656 | | Additions | – | 258 | | Loan interest | **413** | – | | Increase in value of investments | **16,950** | 501 | | Transferred to assets held for sale | **(20,368)** | – | | **At the end of the year** | **410** | 3,415 | 116 | **03 |** FINANCIAL STATEMENTS Non-listed investments are broken down as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Equity investments | **410** | 1,880 | | Loans | – | 1,535 | | | **410** | 3,415 | ### Non-listed investments – assets held for sale Assets held for sale are broken down as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Equity investments | **18,420** | – | | Loans | **1,948** | – | | | **20,368** | – | Assets held for sale relate to an equity shareholding and loans advanced to YPS, a privately owned Company incorporated in the United Kingdom. The Company has completed the sale of these assets in July 2022 as set out in note 26. As at 30 June 2022, the loans are held at amortised cost and are assessed for impairment under the IFRS9 expected credit loss model. The assets are categorised as level 3 in the fair value hierarchy as defined in IFRS 13 as the inputs to the valuation are based on unobservable inputs. The key unobservable inputs in the valuation of the Group's asset held for sale at 30 June 2022 of £20.4m is the estimated performance of YPS in the 14-month period following completion of the sale and the effect it has on the earn-out element of consideration. The effect on the valuation of applying a different assumed net revenue figure is as follows: Valuation in the Consolidated Financial Statements if a 10% increase in the net revenue – £20.7m, 10% decrease in the net revenue – £20.1m. ## 16. TRADE AND OTHER RECEIVABLES | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Trade receivables | **1,978** | 2,951 | | Less: provision for impairment of receivables | **(277)** | (673) | | | **1,701** | 2,278 | | Other receivables and prepayments | **20,007** | 3,033 | | | **21,708** | 5,311 | The Directors consider that the carrying amount of net trade receivables approximates their fair value. The credit risk in respect of trade receivables is not concentrated as the Group has many tenants spread across a number of industry sectors. In addition, the tenants' rents are payable in advance. The provision for impairment of receivables has been calculated after taking into account the impact of COVID-19 on the economy and the financial position of tenants. Due to the nature of income, debts are generally recovered in advance and full provision has been made for income recognised but not recovered during the year. As such, the credit risk relating to trade and other receivables is considered to be low and any expected credit loss would be immaterial. Included within other debtors is £18,705,000 of cash that was temporarily held as collateral at the year end against the Company's debenture stock. This cash was released in July 2022 as disclosed in note 26. | 117 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 16. TRADE AND OTHER RECEIVABLES CONTINUED As at 30 June 2022, trade receivables which had not been impaired can be analysed as follows: Outside credit terms | | Within credit | | Less than one | | One to two | | Older than two | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Total | | terms | | month | | months | | months | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | 2022 1,701 1,701 – – – 2021 2,278 2,278 – – – Movements in the Group provision for impairment of trade receivables are as follows: 2022 2021 £’000 £’000 At the start of the year 673 1,766 Provision for receivables impairment – – Receivables written off as uncollectible (347) (305) Unused amounts reversed (49) (788) At the end of the year 277 673 The ageing of the provision is as follows: | | Less than one | | One to two | | Older than two | | | --- | --- | --- | --- | --- | --- | --- | | Total | | month | | months | | months | | £’000 | | £’000 | | £’000 | | £’000 | 2022 277 – – 277 2021 673 – – 673 The only class within trade receivables is rent receivable. Other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables as mentioned above. The Group does not hold any material collateral as security. In assessing whether trade receivables are impaired, each debt is considered on an individual basis and provision is made based on specific knowledge of each tenant, together with the consideration of appropriate economic market indicators. ### 17. TRADE AND OTHER PAYABLES 2022 2021 £’000 £’000 Trade payables 575 193 Social security and other taxes 408 913 Other payables and accruals 8,845 10,393 9,828 11,499 118 | 03 |^{}[] FINANCIAL STATEMENTS ## 18. FINANCIAL LIABILITIES All the Group's borrowings are either at floating or fixed rates of interest. The Group takes on exposure to fluctuations in interest rates on its financial position and its cash flows. Interest costs may increase or decrease as a result of such changes. | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | **Current** | | | | Bank borrowings | **32,999** | 40,601 | | Lease liabilities | **1,656** | 1,659 | | | **34,655** | 42,260 | | **Non-current** | | | | Bank borrowings | **4,792** | 6,170 | | Lease liabilities | **27,080** | 28,273 | | 5.375% First mortgage debenture stock | **95,995** | 99,387 | | | **127,867** | 133,830 | | **Total borrowings** | **162,522** | 176,090 | The movement in financial liabilities during the year can be summarised as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | At the start of the year | **176,090** | 216,575 | | **Cash items** | | | | Borrowings repaid | **(18,643)** | (44,091) | | Borrowings drawn down | **6,399** | 4,000 | | Arrangement fees paid | **(380)** | – | | **Total cash items** | **(12,624)** | (40,091) | | **Non-cash items** | | | | Amortisation of arrangement fees relating to banking facilities | **252** | 212 | | Movement in other arrangement fees | – | 39 | | Movement in finance leases | **(1,196)** | (645) | | **Total non-cash items** | **(944)** | (394) | | **At the end of the year** | **162,522** | 176,090 | The debenture, bank loans and overdrafts are secured by fixed charges on properties and restricted cash, valued at £268,785,000 (2021: £271,905,000) owned by the Company and its subsidiary undertakings. | 119 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 18. FINANCIAL LIABILITIES CONTINUED The gross cash and overdraft balances on the individual accounts are summarised as follows: 2022 2021 £’000 £’000 Cash balances 22,150 21,670 Overdrawn balances (23,414) (21,113) Cash and cash equivalents (1,264) 557 The Group’s remaining contractual non-discounted cash flows for financial liabilities are set out below: 2022 | | Trade and | | | Bank | Debenture | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | other creditors | | | borrowings | | | stock | Lease liabilities | | Total | | | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Within one year 575 34,208 5,165 1,656 41,604 One to two years – 5,039 5,165 1,665 11,869 Two to three years – – 5,165 1,674 6,839 Three to four years – – 5,165 1,682 6,847 Four to five years – – 5,165 1,691 6,856 Five to ten years – – 118,825 8,595 127,420 Ten to fifteen years – – – 8,845 8,845 In more than fifteen years – – – 25,372 25,372 575 39,247 144,650 51,180 235,652 2021 | | Trade and | | | Bank | Debenture | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | other creditors | | | borrowings | | | stock | Lease liabilities | | Total | | | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Within one year 114 41,416 5,348 1,667 48,545 One to two years – 6,429 5,348 1,675 13,452 Two to three years – – 5,348 1,683 7,031 Three to four years – – 5,348 1,692 7,040 Four to five years – – 5,349 1,700 7,049 Five to ten years – – 128,381 8,637 137,018 Ten to fifteen years – – – 8,882 8,882 In more than fifteen years – – – 28,782 28,782 114 47,845 155,122 54,718 257,799 The debenture issue premium is net of issue costs and is amortised over the life of the debt agreement. The amounts disclosed in the maturity profile above have been calculated to include notional interest payments, using the interest rates prevailing at the balance sheet date. The calculation is based on the assumption that the level of borrowing remains unchanged until maturity. The Group had undrawn committed floating rate bank facilities as follows: 2022 2021 £’000 £’000 Expiring in one year or less 26,933 27,399 Expiring in more than one year 20,000 28,693 46,933 56,092 The availability of undrawn funds is subject to compliance with banking covenants. Performance against covenants is monitored continually and calculations are formally prepared at the end of each quarter. There have been no instances of non-compliance during the year. 120 | ## 03 | FINANCIAL STATEMENTS ### 19. FINANCIAL INSTRUMENTS The Group finances its operations through a combination of retained cash flows, debentures, finance leases and bank borrowings. Procedures are in place to monitor interest rate risk as considered appropriate by management. Numerical financial instruments’ disclosures are set out below. Additional disclosures are set out in the accounting policies relating to financial risk management. The carrying value of short-term receivables and payables approximate to their fair values. All financial liabilities are denominated in Sterling. Under the terms of the Group’s bank borrowing facilities, the Group is required to comply with the following financial covenants on the properties secured under each facility: • the Loan-to-Value percentage must not exceed 65% on two of the Group’s facilities and 60% on the other facility; • the ratio of rental income and net car park income (where applicable) must not be less than 175% of the interest charge under the facility; and • in addition, under one of the facilities, both of the above tests are performed on a Group-wide basis and the consolidated Loan-to- Value percentage must not exceed 60% and the ratio of rental income and net car park income must not be less than 175% of the interest charged under the three bank facilities and the debenture. Under the terms of the Group’s debenture, the Group is required to comply with the following financial covenants: • the Asset Cover percentage must not be less than 150%; and • the ratio of rental income and net car park income (where applicable) must not be less than 100% of the debenture interest. The Group has met all of these financial covenants during the year. ### Interest rate risk The interest rate risk of the Group’s financial liabilities is as follows: As at 30 June 2022 As at 30 June 2021 | | | | Weighted | | | Weighted | | | | | Weighted | | | Weighted | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Nominal value | | average rate | | | average period | | | Nominal value | | average rate | | | average period | | | | | £’000 | | | % | | | Years | | £’000 | | | % | | | Years | Debenture stock 96,098 5.375 9 99,501 5.375 10 Bank floating rate liabilities 38,067 3.00 1 46,908 1.78 1 Lease liabilities 28,736 3.50 36 29,932 3.5 37 162,901 176,341 The above amounts represent the monetary liabilities and are therefore different to the book values set out in note 18 as a result of unamortised arrangement fees at 30 June 2022 of £379,000 (2021: £251,000). Floating rate financial liabilities bear interest at rates for term loans based on LIBOR plus an average margin of 1.75% and for the overdraft of 2.00% above base rate. Facilities provided by banks and other investors are a mixture of fixed rates and floating charge funding. Floating rate borrowings are exposed to the risk of rising interest rates which the Group manages where necessary by the use of appropriate financial hedging instruments, primarily interest rate swaps. An increase in LIBOR by one percentage point would have reduced profit for the year by approximately £443,000 (2021: £598,000). ### Financial instruments held for trading purposes It is, and has been throughout the year under review, the Group’s policy not to trade in financial instruments. ### Foreign currency exposure The Group has no exposure to foreign currency as it has no overseas operations and all sales and purchases are made in Sterling. ### Effective interest rates The effective interest rates at the balance sheet date were as follows: 2022 2021 Bank overdraft facility 3.25% 2.1% Bank borrowings 3.00% 1.78% Debenture loan 5.375% 5.375% Lease liabilities 3.5% 3.5% | 121 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 19. FINANCIAL INSTRUMENTS CONTINUED ### Fair value of current borrowings The fair value of bank borrowings and overdrafts approximates to their carrying value. ### Fair value of non-current borrowings 2022 2021 Book value Fair value Book value Fair value £’000 £’000 £’000 £’000 Debenture stock 95,995 94,694 99,387 109,574 Non-current bank borrowings 4,792 4,792 6,170 6,170 The above debenture stock has been valued as at 30 June 2022 (and 30 June 2021 respectively) by J C Rathbone Associates on the basis of open market value. The fair valuation of debenture stock is categorised as level 1 in the fair value hierarchy as defined in IFRS13 as inputs are quoted in active markets. All financing liabilities are held at amortised cost. ### Capital management The Group manages its capital to ensure that entities in the Group will each be able to continue to operate as a going concern while maximising the return to stakeholders through the optimisation of debt and equity. The capital structure of the Group consists of financial liabilities as per note 18 and equity as per the consolidated statement of changes in equity. The Group’s capital structure is reviewed regularly by the Directors. ### 20. LEASE LIABILITIES At 30 June 2022, the Group has a long leasehold interest in six (30 June 2021: seven) properties that are accounted for under IFRS16. Future lease payments are as follows: 2022 2021 | Minimum lease | | | | | | Minimum lease | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | payments | | Interest | Present value | | | payments | | Interest | Present value | | | | | £’000 | £’000 | | £’000 | | | £’000 | £’000 | | £’000 | Within one year 1,656 947 709 1,666 989 677 One to two years 1,665 923 742 1,675 965 710 Two to three years 1,674 897 777 1,683 940 743 Three to four years 1,682 869 813 1,692 914 778 Four to five years 1,691 840 851 1,700 886 814 Five to ten years 8,595 3,721 4,874 8,637 3,972 4,665 Ten to fifteen years 8,845 2,779 6,066 8,882 3,070 5,812 In more than fifteen years 25,372 11,468 13,904 28,782 13,050 15,732 51,180 22,444 28,736 54,717 24,786 29,931 122 | **03 |** FINANCIAL STATEMENTS ## 21. NET ASSET VALUE PER SHARE The Basic and diluted net asset values are the same, as set out in the table below. | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Net assets at 30 June | **179,304** | 155,395 | | Shares in issue (000) | **52,531** | 53,131 | | Basic and diluted net asset value per share | **341p** | 292p | ## 22. COMMITMENTS The Group has no capital commitments (2021: Enil) in respect of capital expenditure contracted for at the balance sheet date but not yet incurred, for investment and development property. | Minimum total future lease payments receivable: | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Within one year | **9,569** | 11,001 | | One to two years | **8,740** | 10,080 | | Two to three years | **8,095** | 8,876 | | Three to four years | **7,484** | 8,015 | | Four to five years | **6,021** | 7,251 | | Five to ten years | **21,840** | 25,199 | | Ten to fifteen years | **10,956** | 14,824 | | In more than fifteen years | **22,055** | 24,519 | The Group has a wide range of leases in place with tenants across a broad range of properties, sectors, tenures and rental values. ## 23. CALLED UP SHARE CAPITAL ### Authorised The authorised share capital of the Company is 164,879,000 (2021: 164,879,000) Ordinary Shares of 25p each. The nominal value of authorised share capital is £41,219,750 (2021: £41,219,750). ### Issued and fully paid up | | Number of shares 000 | Nominal value £'000 | | --- | --- | --- | | At 30 June 2021 | 53,131 | 13,282 | | Purchase and cancellation of own shares | (600) | (150) | | **At 30 June 2022** | **52,531** | **13,132** | The Company has only one type of Ordinary Share class in issue. All shares have equal entitlement to voting rights and dividend distributions. At the year end the Company had authority to buy-back for cancellation a further 7,943,377 Ordinary Shares. | 123 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the consolidated financial statements continued ### 24. CASH FLOWS FROM OPERATING ACTIVITIES | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Profit/(loss) for the financial year | **11,012** | (576) | | Adjustments for: | | | | Depreciation | **2,301** | 2,191 | | Amortisation | **222** | 37 | | (Profit)/loss on disposal of investment properties | **(4,563)** | 2,320 | | Loss on sale of investments | **89** | – | | Finance costs | **8,063** | 8,145 | | Finance income | **(576)** | – | | Share of post-tax profits from joint ventures | **(1,315)** | (2,461) | | Movement in valuation of investment properties | **(3,489)** | (63) | | Movement in lease incentives | **144** | (1,463) | | Impairment of car parking assets | **384** | 111 | | Decrease/(increase) in receivables | **1,083** | (2,675) | | Decrease in payables | **(1,667)** | (922) | | Cash generated from operations | **11,688** | 4,644 | ### 25. RELATED PARTY TRANSACTIONS The only related party transactions that have taken place during the year relate to the remuneration of the Executive Directors, who are the key management personnel of the Group, and any dividends paid to the Directors and their family members. Further information about the remuneration of individual Directors is provided in the audited part of the Directors' Remuneration Report on page 77. | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Short-term employee benefits | **1,758** | 1,697 | | Post-employment benefits | **52** | 72 | | Dividends paid to the Ziff Concert Party | **1,161** | 955 | | | **2,971** | 2,724 | The Ziff Concert Party includes Edward Ziff, Ben Ziff (Executive Directors) and Michael Ziff (Non-Executive Director) together with their immediate family members, Edward Ziff and Michael Ziff's mother and sister and a number of trusts that Edward Ziff and Michael Ziff are not beneficiaries of but they do control. 124 | 03 | FINANCIAL STATEMENTS ## 26. POST BALANCE SHEET EVENTS On 14 July 2022, the Company sold its equity investment in YPS for total cash consideration (net of fees and associated deal costs) of up to £20.7m. The consideration for the sale comprises the following: - Initial net cash consideration for the Company's equity shareholding of £9.6m. - Unconditional deferred consideration of £7.5m in aggregate, due in two instalments: £4.4m 12 months after completion of the sale, and £3.1m after 24 months. - A final contingent element of cash consideration, based on the trading performance of YPS in the 14-month period following completion of the sale, of up to £3.6m. As disclosed in note 15, the Company's equity investment in YPS was valued at £18.4m at 30 June 2022. In addition, the Company received repayment in full (including all accrued interest) of the amounts loaned to YPS, comprising a gross cash receipt of £1.95m. On 15 July 2022, £18.7m of cash that was generated from the sale of two of the Company's investment properties, which was temporarily held as collateral under the Company's debenture, was released. On 16 July 2022, the Company announced a tender offer to acquire up to 4,000,000 of its own shares for cancellation at 185p per shares. The tender offer closed on 8 August 2022 and was fully taken up. The tender offer reduced the issued Ordinary Share capital of the Company from 52,530,599 Ordinary Shares to 48,530,599 Ordinary Shares. On 5 September 2022, the Company acquired a freehold investment property in London for £7.1m. This acquisition was funded entirely out of the cash reserves of the Company. | 125 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Company balance sheet as at 30 June 2022 | | Notes | 2022 £'000 | 2021 £'000 | | --- | --- | --- | --- | | **Fixed assets** | | | | | Investment properties | 4 | **105,146** | 107,151 | | Property, plant and equipment | 4 | **592** | 641 | | Investments | 5 | **269,433** | 254,432 | | | | **375,171** | 362,224 | | **Current assets** | | | | | Debtors | 6 | **116,544** | 93,761 | | Cash | | **14** | 22 | | | | **116,558** | 93,783 | | **Creditors: amounts falling due within one year** | | | | | Financial liabilities – borrowings | 8 | **(56,413)** | (56,520) | | Other creditors | 7 | **(202,478)** | (175,762) | | | | **(258,891)** | (232,282) | | **Net current liabilities** | | **(142,333)** | (138,499) | | **Total assets less current liabilities** | | **232,838** | 223,725 | | Financial liabilities – borrowings | 8 | **(100,787)** | (105,557) | | **Net assets** | | **132,051** | 118,168 | | **Equity attributable to the owners of the Parent** | | | | | Called up share capital | 9 | **13,132** | 13,282 | | Share premium account | | **200** | 200 | | Capital redemption reserve | | **717** | 567 | | Other reserve | | **63,313** | 63,313 | | Retained earnings | | **54,689** | 40,806 | | **Total shareholders' funds** | | **132,051** | 118,168 | Company number: 00623364 As permitted by Section 408 of the Companies Act 2006, the Parent Company's Profit and Loss Account has not been included in these financial statements. The profit shown in the financial statements of the Parent Company was £17,005,000 (2021: profit of £10,141,000). The financial statements on pages 126 to 136 were approved by the Board of Directors on 13 October 2022 and signed on its behalf by **Edward Ziff OBE DL** Chairman & Chief Executive 126 | ## 03 | FINANCIAL STATEMENTS ## Statement of changes in equity ### for the year ended 30 June 2022 Unrealised | | | | | Share | | Capital | | | | | non- | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Called up | | premium | | redemption | | | | distributable | | | Retained | | | | | share capital | | | account | | | reserve | Other reserve | | | reserve | | earnings | | Total equity | | | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | | | £’000 | | £’000 | Balance at 30 June 2020 13,290 200 559 63,642 3,000 29,238 109,929 Comprehensive income for the year Profit – – – – – 10,141 10,141 Total comprehensive income for theyear – – – 10,141 10,141 Reserve transfer – impairment of investments in subsidiaries – – – (329) – 329 – Reserve transfer – realisation of gain on disposal of property – – – – (3,000) 3,000 – Contributions by and distributions to owners Arising on purchase and cancellation of own shares (8) – 8 – – (42) (42) Final dividend relating to the year ended 30 June 2020 – – – – – (930) (930) Interim dividend relating to the year ended 30 June 2021 – – – – – (930) (930) Balance at 30 June 2021 13,282 200 567 63,313 – 40,806 118,168 Comprehensive income for the year Profit – – – – – 17,005 17,005 Total comprehensive income for the year – – – – – 17,005 17,005 Contributions by and distributions to owners Arising on purchase and cancellation of own shares (150) – 150 – – (885) (885) Final dividend relating to the year ended 30 June 2021 – – – – – (924) (924) Interim dividend relating to the year ended 30 June 2022 – – – – – (1,313) (1,313) Balance at 30 June 2022 13,132 200 717 63,313 – 54,689 132,051 | 127 Town Centre Securities PLC | Annual Report and Accounts 2022 | # Notes to the Company financial statements ## 1. ACCOUNTING POLICIES ### Basis of preparation The Company Financial Statements have been prepared in accordance with FRS 102, (The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland), the going concern basis, the historical cost convention as modified by the revaluation of investment properties and certain investments and in accordance with the Companies Act 2006 and applicable law. The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 2). The principal accounting policies, which have been applied consistently, are as set out below: ### Financial reporting standard 102 – reduced disclosure exemptions The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland': - the requirements of Section 4 Statement of Financial Position paragraph 4.12(a)(iv); - the requirements of Section 7 Statement of Cash Flows; - the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d); - the requirements of Section 11 Financial Instruments paragraphs 11.41(b), 11.41(c), 11.41(e), 11.41(f), 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c); - the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A; and - the requirements of Section 33 Related Party Disclosures paragraph 33.7. This information is included in the consolidated financial statements of Town Centre Securities Plc as at 30 June 2012 and these financial statements may be obtained from Companies House, Cardiff CF4 3UZ. ### Deferred taxation Town Centre Securities PLC elected for Group REIT status with effect from 2 October 2007. As a result the Company no longer pays United Kingdom corporation tax on the profits and gains from qualifying rental business in the United Kingdom provided it meets certain conditions. Non-qualifying profits and gains of the Company continue to be subject to corporation tax as normal. On entering the REIT regime an entry charge equal to 2% of the aggregate market value of the properties associated with the qualifying rental business was payable. Deferred tax accrued at the date of conversion in respect of the assets and liabilities of the qualifying rental business was released to the income statement as the relevant temporary differences are no longer taxable on reversal. From 17 July 2012 there is no REIT entry charge payable where the Company makes acquisitions of companies owning qualifying properties. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on an undiscounted basis. ### Investment properties Investment properties are included in the accounts at open market values based on an independent external valuation, as at 30 June each year, or held at Directors' valuation. Movements in fair value are taken through the income statement. ### Investments Investments are held on the balance sheet at fair value. Any fair value gains and losses are taken to the income statement. ### Investment income Income from investments is accounted for on the payment date of the dividends. 128 | ## 03 | FINANCIAL STATEMENTS ### Investment in subsidiary undertakings Prior to the adoption of FRS 102, investments in subsidiaries were revalued with any gains arising recognised in the other reserve. Onadoption of FRS 102 on 1 July 2015, the Directors of the Company elected to measure the fixed asset investments at deemed cost being the carrying amount at the date of transition as determined under the entity’s previous financial reporting framework. Investments are assessed at each reporting date to determine whether there is any indication that an investment is impaired. Where there is an indication, the carrying value of the investment is tested for impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment losses are recognised in the Company’s profit/loss for the year and a transfer is made from the other reserve to retained earnings within the Statement of Changes in Equity (where the impairment is less than the amount of other reserve related to that investment). On disposal of an investment, any gain/loss on disposal is recognised in the profit/loss for the year of the Company and any other reserve related to the investment disposed of is transferred from the other reserve to retained earnings within the Statement of Changes in Equity. The unrealised non-distributable reserve represents distributions made by subsidiaries in prior years in the form of non-qualifying consideration which have given rise to a non-distributable gain. Amounts sitting in the reserve are transferred to retained earnings within the Statement of Changes in Equity when the gain becomes realised. ### Trade receivables Trade receivables are recognised initially at fair value and are subsequently measured at cost less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables concerned. The amount of the provision is recognised in the Consolidated Income Statement. ### Cash and cash equivalents Cash and cash equivalents are carried in the Balance Sheet at cost. Cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-term, highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the Balance Sheet. Where there is a formal legal arrangement with a right to offset the net position of the individual accounts will be presented in cash or current liabilities as appropriate. ### Joint ventures A joint venture is a contractual arrangement whereby the Company and other parties undertake an economic activity that is subject to joint control. Investments in jointly controlled entities are valued at cost less impairment. ### Turnover Turnover, which excludes value added tax, represents the invoiced value of rent and services supplied to customers. Rental income is accounted for as it falls due in accordance with the lease to which it relates. ### Unamortised tenant lease incentives Leasehold incentives given to tenants on entering property leases are recognised as unamortised lease incentives. The operating lease incentives are spread over the non-cancellable life of the lease. Where this ends with a clean break clause the incentives are spread to this date unless management is reasonably certain that the break will not be exercised. ### Reserves Reserves are analysed in the following categories: • Share capital represents the nominal value of issued share capital. • Share premium represents any consideration received in excess of nominal value of the shares issued. • Capital redemption reserve represents the nominal value of the Company’s own shares that have been repurchased and cancelled. • Other reserves relate to the revaluation of the Company’s investments. • Retained earnings represents the cumulative profit or loss position less dividend distributions. | 129 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the Company financial statements continued ### 2. JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND KEY SOURCES OF ESTIMATION UNCERTAINTY The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The only estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value amounts of assets and liabilities within the next financial year are investment properties (note 4). ### 3. EMPLOYEE BENEFITS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Wages and salaries (including Directors' emoluments) | **3,434** | 2,443 | | Social security costs | **422** | 297 | | Other pension costs | **180** | 91 | | | **4,036** | 2,831 | Employee benefits are charged to the Profit and Loss account through administrative expenses. All of the pension costs in the table above relate to defined contribution schemes. The aggregate remuneration of the Directors of the Company was £1,810,000 (2021: £1,769,000). The average monthly number of staff employed during the year was 45 (2021: 45). Disclosures required by the Companies Act 2006 on Directors' remuneration, including salaries, share options, pension contributions and pension entitlement, are included on page 77 in the Remuneration Report and form part of the Consolidated Financial Statements. The remuneration paid to the Parent Company auditors in respect of the audit of the Parent Company Financial Statements for the year ended 30 June 2022 is included in note 5 to the Consolidated Financial Statements. ### 4. TANGIBLE ASSETS | Investment properties | Freehold £'000 | Long leasehold £'000 | Development £'000 | Total £'000 | | --- | --- | --- | --- | --- | | Valuation at 30 June 2021 | 59,261 | 6,490 | 41,400 | 107,151 | | Additions | 7,922 | 22 | 542 | 8,486 | | Disposals | (7,610) | (3,850) | – | (11,460) | | Valuation movement | 467 | (22) | 633 | 1,078 | | Movement in tenant lease incentives | (109) | – | – | (109) | | **Valuation at 30 June 2022** | **59,931** | **2,640** | **42,575** | **105,146** | The above freehold and long leasehold properties have been independently externally valued as at 30 June 2022 and 30 June 2021 on the basis of open market value by Jones Long LaSalle and CBRE in accordance with the Royal Institution of Chartered Surveyors Appraisal and Investment Manual. | Fixtures, equipment and motor vehicles | Cost £'000 | Accumulated depreciation £'000 | | --- | --- | --- | | Balance at 30 June 2021 | 2,250 | 1,609 | | Additions | 42 | – | | Depreciation | – | 91 | | **Balance at 30 June 2022** | **2,292** | **1,700** | | **Net book value at 30 June 2022** | | **592** | | Net book value at 30 June 2021 | | 641 | | **Total tangible assets** | | | | **At 30 June 2022** | | **105,738** | | At 30 June 2021 | | 107,792 | 130 | 03 |^{}[] FINANCIAL STATEMENTS ## 5. FIXED ASSET INVESTMENTS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | **Shares in Group undertakings** | | | | At 1 July | **239,351** | 239,847 | | Impairment | – | (496) | | **At 30 June** | **239,351** | 239,351 | | **Listed investments** | | | | At 1 July | **5,801** | 3,508 | | Disposals | **(61)** | – | | Revaluation | **(1,644)** | 2,293 | | | **4,096** | 5,801 | | **Other investments** | | | | At 1 July | **3,415** | 2,656 | | Additions | – | 258 | | Loan interest | **413** | – | | Revaluation | **15,833** | 501 | | **At 30 June** | **19,661** | 3,415 | | **Interest in joint ventures** | | | | At 1 July | **5,865** | 5,299 | | Loans advanced | **326** | – | | Share of profit after tax | **134** | 566 | | **At 30 June** | **6,325** | 5,865 | | **Total fixed asset investments** | **269,433** | 254,432 | As permitted by Section 615 of the Companies Act 2006, where the relief afforded under Section 612 of the Companies Act 2006 applies, cost is the aggregate of the nominal value of shares issued plus the fair value of any other consideration given to acquire the share capital of the subsidiary undertakings. Listed investments, all of which are listed on a recognised stock exchange, are stated at market value in the table above and have a historic cost of £882,300 (2021: £889,130). ## 6. DEBTORS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Trade debtors | **464** | 1,079 | | Less: provision for impairment of debtors | **(288)** | (662) | | | **176** | 417 | | Amounts owed by subsidiary undertakings | **96,973** | 91,659 | | Other debtors and prepayments | **19,395** | 1,685 | | | **116,544** | 93,761 | The Directors consider that the carrying amount of net trade receivables approximates their fair value. The credit risk in respect of trade receivables is not concentrated as the Company has many tenants spread across a number of industry sectors. In addition, the tenants' rents are payable in advance. The provision for impairment of receivables has been calculated after taking into account the impact of COVID-19 on the economy and the financial position of tenants. Due to the nature of income, debts are generally recovered in advance and full provision has been made for income recognised but not recovered during the year. As such, the credit risk relating to trade and other receivables is considered to be low and any expected credit loss would be immaterial. The expense recognised in relation to the impairment of debtors for the year ended 30 June 2022 was £254,000 (2021: £377,000). Amounts owed by subsidiary undertakings are unsecured, interest-free and repayable on demand. | 131 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the Company financial statements continued ### 7. OTHER CREDITORS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Trade payables | **179** | 47 | | Taxation and social security | – | 323 | | Amounts owed to subsidiary undertakings | **198,650** | 171,275 | | Other payables and accruals | **3,649** | 4,117 | | | **202,478** | 175,762 | Amounts owed to subsidiary undertakings are unsecured, interest-free and repayable on demand. ### 8. FINANCIAL INSTRUMENTS The Company's borrowings are at both floating and fixed rates of interest. The Company takes on exposure to fluctuations in interest rates on its financial position and cash flows. Interest costs may increase or decrease as a result of such changes. | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | **Non-current** | | | | Bank borrowings | **4,792** | 6,170 | | 5.375% First mortgage debenture stock | **95,995** | 99,387 | | | **100,787** | 105,557 | | **Current** | | | | Bank borrowings | **56,413** | 56,520 | | **Total borrowings** | **157,200** | 162,077 | The debenture, bank loans and overdrafts are secured by fixed charges on properties and restricted cash, valued at £268,785,000 (2021: £271,905,000) owned by the Company and its subsidiary undertakings. The debenture issue premium is net of issue costs and is amortised over the life of the debt agreement. The Company had undrawn committed floating rate bank facilities as set out below: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Expiring in one year or less | **26,933** | 27,399 | | Expiring in more than one year | **20,000** | 28,693 | | | **46,933** | 56,092 | The availability of undrawn funds is subject to compliance with banking covenants. Included within facilities expiring in one year or less are overdraft facilities subject to annual review. There are net cash balances of £22,150,000 held by other Group companies which offset the Company's overdraft on consolidation. The total overdraft facility is based on the Group's right of set off. Other facilities are available to provide funding for future investments. The Company finances its operations through a combination of retained cash flows, debentures and bank borrowings. Procedures are in place to monitor interest rate risk as considered appropriate by management. Numerical financial instruments' disclosures are set out overleaf. All financial liabilities are denominated in Sterling. 132 | ## 03 | FINANCIAL STATEMENTS ### Interest rate risk The interest rate risk of the Company’s financial liabilities is as follows: As at 30 June 2022 As at 30 June 2021 | | | | Weighted | | | Weighted | | | | | Weighted | | | Weighted | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Nominal value | | average rate | | | average period | | | Nominal value | | average rate | | | average period | | | | | £’000 | | | % | | | Years | | £’000 | | | % | | | Years | Debenture stock 96,098 5.375 9 99,501 5.375 10 Bank floating rate liabilities 38,067 3.00 1 62,789 1.78 1 134,165 162,290 The above amounts represent the monetary liabilities and are therefore different to the book value as set out in this note as a result of unamortised arrangement fees at 30 June 2022 of £379,000 (2021: £213,000). Floating rate financial liabilities bear interest at rates for term loans based on LIBOR plus an average margin of 1.75% and for the overdraft of 2.00% above base rate. ### Financial instruments held for trading purposes It is, and has been throughout the year under review, the Company’s policy not to trade in financial instruments. ### Foreign currency exposure The Group has no exposure to foreign currency as it has no overseas operations and all sales and purchases are made in Sterling. ### Effective interest rates The effective interest rates at the balance sheet date were as follows: 2022 2021 Bank overdraft facility 3.25% 2.1% Bank borrowings 3.00% 1.78% Debenture loan 5.375% 5.375% ### Fair values of current borrowings Where market values are not available, fair values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing interest rates and by applying year-end exchange rates. The carrying amounts of short-term borrowings approximate to book value. ### Fair value of non-current borrowings 2022 2021 Book value Fair value Book value Fair value £’000 £’000 £’000 £’000 Debenture stock 95,995 94,694 99,387 109,574 Long-term bank borrowings 4,792 4,792 6,170 6,170 | 133 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the Company financial statements continued ### 9. CALLED UP SHARE CAPITAL #### Authorised 164,879,000 (2021: 164,879,000) Ordinary Shares of 25p each. #### Issued and fully paid up | | Number of shares 000 | Nominal value £'000 | | --- | --- | --- | | At 30 June 2021 | 53,131 | 13,282 | | Purchase and cancellation of own shares | (600) | (150) | | **At 30 June 2022** | **52,531** | **13,132** | The Company has only one type of Ordinary Share class in issue. All shares have equal entitlement to voting rights and dividend distributions. ### 10. SUBSIDIARY COMPANIES The Company's wholly owned active subsidiary undertakings at 30 June 2022, registered in England or Scotland and operating in the United Kingdom, are as follows: | | Company number | Activity | | --- | --- | --- | | **Held directly** | | | | TCS Holdings Limited | 2271353 | Property investment | | Dundonald Property Investments Limited | 3672365 | Property investment | | Buckley Properties (Leeds) Limited^{1} | 647309 | Property investment | | CitiPark plc^{1} | 8837214 | Car park operations | | TCS (Residential Conversions) Limited^{1} | 3946495 | Property investment | | TCS (Property Management) Limited^{1} | 5281225 | Management company | | TCS Trustees Limited^{1} | 3112933 | Trustee for employee benefit plans | | TCS Properties Limited^{1} | 2831154 | Property investment | | TCS (Whitehall Plaza) Limited | 9922032 | Property investment | | TCS (9 Cheapside) Limited^{1} | 10139127 | Property investment | | TCS (Brownfield Mill) Limited^{1} | 10291290 | Property investment | | TCS (Merrion Hotel) Limited^{1} | 10380988 | Hotel operator | | Bay Sentry Solutions Limited^{1} | 12133595 | Car park operations | | TCS (Tariff Street) Limited | 09929851 | Dormant | | TCS Development Management (Merrion) Limited | 8696141 | Dormant | | Citicharge Limited | 13322988 | Dormant | | Apperley Bridge Limited | 6879596 | Dormant | | TCS Park Row Limited | 8077103 | Dormant | | CitiPark Management Limited | 8837203 | Dormant | | TCS (Merrion House JVC02) Limited | 8561356 | Dormant | | Tassgander Limited | 4077297 | Dormant | | Blackpool Markets Limited | 2740190 | Dormant | | Emett Exhibitions Limited | 1544918 | Dormant | | Milngavie East Limited | SC464805 | Dormant | 134 | ## 03 | FINANCIAL STATEMENTS Company number Activity No 29 Management Co (Eastgate) Limited 3873683 Dormant T Herbert Kaye’s Estates Limited 0226678 Dormant TCS (Bolton) Limited 4104688 Dormant TCS Piccadilly Limited 4317396 Dormant TCS Whitehall Riverside Limited 4329860 Dormant TCS (Rochdale JV) Limited 7712764 Dormant TCS (Rochdale Management) Limited 7712123 Dormant TCS Car Parks Limited 4847697 Dormant TCS Eastgate Limited 6554827 Dormant TCS Finance Limited 3108777 Dormant TCS Trading Limited 3060862 Dormant The Merrion Centre Limited 0814845 Dormant Town Centre Enterprises Limited 0221003 Dormant Town Centre Securities (Developments) Limited 3946549 Dormant Town Centre Securities (Manchester) Limited 0129485 Dormant Town Centre Securities (Scotland) Limited 0748937 Dormant Town Centre Services Limited 2285764 Dormant TCS plc 4329979 Dormant Citiflex plc 3385312 Dormant Held indirectly TCS Freehold Investments Limited 3684812 Property investment TCS Leasehold Investments Limited 3684827 Property investment Town Centre Car Parks Limited 5494592 Car park operations TCCP (Clarence Dock) Limited 6219875 Car park operations 1 TCS (Milngavie) Limited 6391627 Property investment 1 TCS (Merrion House JVC01) Limited 8561354 Property investment 1 KBT Cornwall Limited 8087077 Car park operations Parking Ticketing Limited 7818341 Dormant Dundonald (Cumbernauld) Limited 5983938 Dormant TCS (Bothwell Street) Limited 4240551 Dormant Dundonald Property Developments Limited 6430444 Dormant Riverside (Leeds) Limited 4569350 Dormant TCS (Greenhithe) Limited 4413344 Dormant TCS (Isleworth) Limited 4413343 Dormant TCS (Parliament Street 1) Limited 4768830 Dormant TCS (Parliament Street 2) Limited 4768845 Dormant TCS Energy Limited 4414144 Dormant TCS (Mill Hill) Limited 4413341 Dormant TCS (Residential) Limited 4249007 Dormant TCS Solar Limited 5113915 Dormant 1 The subsidiaries marked with an asterisk above are exempt from preparing audited statutory accounts under section 479a of the Companies Act 2006. | 135 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notes to the Company financial statements continued ### 11. SUBSIDIARY COMPANIES CONTINUED The registered office of all subsidiaries is at the following address: Town Centre House The Merrion Centre Leeds LS2 8LY The Company’s directly owned joint ventures, which are all registered in England and operate in the United Kingdom, are as follows: Proportion of Ordinary Shares held % Activity Belgravia Living Group Limited 50 Property investment Bay Sentry Limited 50 Software development The registered offices of joint ventures are as follows: Belgravia Living Group Limited Bay Sentry Limited Middleton House Town Centre House Westland Road The Merrion Centre Leeds Leeds LS11 5UH LS2 8LY The Company also has an indirect 50% interest in Merrion House LLP, which has the same registered office as the Company. 136 | 04 | SHAREHOLDER INFORMATION # Notice of Annual General Meeting Notice is hereby given that the 2022 Annual General Meeting (the 'AGM') of Town Centre Securities Plc (the 'Company') will be held at Town Centre House, The Merrion Centre on Tuesday, 22 November 2022 at 10:00am. You will be asked to consider and if thought fit pass the Resolutions below. Resolutions 1 to 15 will be proposed as ordinary resolutions. For an ordinary resolution to be passed, a simple majority of the votes cast must vote in favour of the resolution. Resolutions 16 to 19 will be proposed as special resolutions. For a special resolution to be passed, at least 75% of the votes cast must vote in favour of the resolution. Shareholders will be able to attend the AGM in person this year. **We encourage all shareholders to vote via proxy in advance of the AGM. Your vote is important, and you are encouraged to use it. Shareholders should vote by way of proxy in advance of the Meeting. To ensure your vote is counted, you should appoint the 'Chairman of the Meeting' as your proxy.** **This notice includes the resolutions ('Resolutions') to be discussed at the AGM. You are requested to complete and submit a Form of Proxy as soon as possible whether you intend to attend the AGM or not. In any event, the Proxy instruction should reach the Company's Registrar by 10:00am on Friday, 18 November 2022.** Completion of a Form of Proxy will not preclude you from attending the AGM physically. ## ORDINARY RESOLUTIONS ### Resolution 1: Annual Financial Statements and Directors' Report 1. To receive the Company's Annual Financial Statements (together with the Directors' Report and the auditors' report) for the financial year ended 30 June 2022. ### Resolution 2: Directors' Remuneration Report 2. To approve the Directors' Remuneration Report set out on pages 76 to 81 of the Company's 2022 Annual Report for the year ended 30 June 2022 (excluding the Directors' Remuneration Policy included in the report). ### Resolution 3: Directors' Remuneration Policy 3. To approve the Amended Directors' Remuneration Policy, which can be found on pages 75 and 76. ### Resolution 4: Final dividend 4. To declare a final cash dividend recommended by the Board for the year ended 30 June 2022 of 2.5 pence per Ordinary Share, to be paid on 6 January 2023 to shareholders whose names appear on the register at close of business on 9 December 2022. ### Resolutions 5 to 11: Re-election of Directors 5. To re-elect Michael Ziff as a Non-Executive Director of the Company. 6. To re-elect Ian Marcus as a Non-Executive Director of the Company. 7. To re-elect Paul Huberman as a Non-Executive Director of the Company. 8. To re-elect Jeremy Collins as a Non-Executive Director of the Company. 9. To re-elect Edward Ziff as an Executive Director of the Company. 10. To re-elect Benjamin Ziff as an Executive Director of the Company. 11. To re-elect Stewart MacNeill as an Executive Director of the Company. ### Resolution 12: Re-appointment of auditors 12. To re-appoint BDO LLP as the auditors of the Company, to hold office from the conclusion of this Meeting until the conclusion of the next general meeting at which Annual Financial Statements are laid before the Company's shareholders. ### Resolution 13: Remuneration of auditors 13. To authorise the Directors to determine the remuneration of the Company's auditors. ### Resolution 14: Authority to make political donations 14. To authorise, in accordance with Part 14 of the UK Companies Act 2006 (the 'Act'), the Company and all companies that are subsidiaries of the Company at the date on which this resolution is passed, or at any time when this resolution has effect to: (a) make political donations to political parties and/or independent election candidates; (b) make political donations to political organisations other than political parties; and (c) incur political expenditure, (as such terms are defined in the Act), up to an aggregate amount of £50,000, and the amount authorised under each of paragraphs (a) to (c) above shall also be limited to such amount, during the period beginning on the date of the passing of this resolution and ending at the conclusion of the next Annual General Meeting of the Company to be held in 2023. Upon the passing of this resolution, all existing authorisations and approvals relating to political donations or expenditure under Part 14 of the Act shall be revoked without prejudice to any donation made, or expenditure incurred, prior to the passing of this resolution pursuant to such authorisation or approval. For the purpose of this resolution, the terms 'political donation', 'political parties', 'independent election candidates', 'political organisation' and 'political expenditure' shall have the meanings given by sections 363 to 365 of the Act. | 137 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notice of Annual General Meeting continued ### Resolution 15: Authority to allot Ordinary Shares and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary 15. To generally and unconditionally authorise the Board, in or appropriate to deal with treasury shares, fractional substitution for any existing authority, but without prejudice entitlements, record dates, legal, regulatory or practical to the exercise of any such authority prior to the date of the problems in, or under the laws of, any territory or any other passing of this resolution, pursuant to and in accordance matter; and with section 551 of the Act to exercise all the powers of the Company to allot shares in the Company or grant rights (b) in the case of the authority granted under paragraph (a) to subscribe for or to convert any security into shares in of resolution 16 and/or in the case of any sale of treasury theCompany: shares, to the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (a) above) (a) up to an aggregate nominal amount of £4,044,216.50 up to a nominal amount of £606,632.50, (representing 16,176,866 Ordinary Shares) (such amount to be reduced by any allotments or grants made under such power to apply until the end of the next Annual General paragraph (b) below in excess of such sum); and Meeting to be held in 2023, or 22 February 2024, whichever is earlier, but, in each case, during this period the Company may (b) comprising equity securities (as defined in the Act) up make offers and enter into agreements, which would, or might, to a nominal amount of £8,088,433.25 (representing require equity securities to be allotted (and treasury shares to 32,353,733 Ordinary Shares) (such amount to be reduced be sold) after the power ends and the Board may allot equity by any allotments or grants made under paragraph (a) securities (and sell treasury shares) under any such offer or above) in connection with an offer by way of a rights issue: agreement as if the power had not ended. (i) to ordinary shareholders in proportion (as nearly as ### may be practicable) to their existing holdings; and Resolution 17: Additional authority to disapply pre- ### emption rights for purposes of acquisitions (ii) to holders of other equity securities as required by the ### or capital investments rights of those securities or as the Board otherwise considers necessary, 17. That, if resolution 15 above is passed, the Board be given the power, in addition to any power granted under resolution 16 and so that the Board may impose any limits or restrictions above, to allot equity securities (as defined in the Act) for cash and make any arrangements which it considers necessary, under the authority granted under paragraph (a) of resolution expedient or appropriate to deal with treasury shares, 15 and/or to sell Ordinary Shares held by the Company as fractional entitlements, record dates, legal, regulatory or treasury shares for cash as if section 561 of the Act did not practical problems in, or under the laws of, any territory or apply to any such allotment or sale, such power to be: any other matter, (a) limited to the allotment of equity securities or sale of treasury provided that this authority shall expire at the conclusion of shares up to a nominal amount of £606,632.50; and the next Annual General Meeting of the Company, to be held (b) used only for the purposes of financing a transaction in 2023, or 22 February 2024, whichever is earlier, save that which the Board determines to be an acquisition or the Company may, before such expiry, make an offer or enter other capital investment of a kind contemplated by the into an agreement which would or might require shares to Statement of Principles on Disapplying Pre-Emption Rights be allotted, or rights to subscribe for or to convert securities most recently published by the Pre-Emption Group prior to into shares to be granted, after such expiry; and the Board the date of this notice, or for the purposes of refinancing may allot shares or grant such rights in pursuance of such an such a transaction within six months of it taking place, offer or agreement as if the authority conferred hereby had notexpired. such power to apply until the end of the next Annual General Meeting to be held in 2023, or 22 February 2024, whichever is ### SPECIAL RESOLUTIONS earlier, but, in each case, during this period the Company may make offers and enter into agreements, which would, or might, ### Resolution 16: Authority to disapply require equity securities to be allotted (and treasury shares to ### pre-emption rights be sold) after the power ends and the Board may allot equity 16. That, if resolution 15 above is passed, the Board be given securities (and sell treasury shares) under any such offer or power to allot equity securities (as defined in the Act) for agreement as if the power had not ended. cash under the authority given by that resolution and/or to sell Ordinary Shares held by the Company as treasury shares for cash as if section 561 of the Act did not apply to any such allotment or sale, such power to be limited: (a) to the allotment of equity securities and sale of treasury shares in connection with an offer of, or invitation to apply for, equity securities (but in the case of the authority granted under paragraph (b) of resolution 15, by way of a rights issue only): (i) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and (ii) to holders of other equity securities, as required by the rights of those securities, or as the Board otherwise considers necessary, 138 | ## 04 | SHAREHOLDER INFORMATION ### Resolution 18: Authority to purchase Company’s ### own shares 18. That the Company be generally and unconditionally authorised for the purpose of Section 701 of the Act to make market purchases (within the meaning of Section 693(4) of the Act) of Ordinary Shares of £0.25 each in the capital of the Company, provided that: (a) the maximum number of Ordinary Shares which may be purchased is 7,279,590; (b) the minimum price, exclusive of any expenses, which may be paid for each Ordinary Share is £0.25; (c) the maximum price, exclusive of any expenses, which may be paid for each Ordinary Share is an amount equal to the higher of: (i) 105% of the average mid-market value of an Ordinary Share, as derived from the London Stock Exchange Daily Official List for the five business days prior to the day on which the purchase is made; and (ii) an amount equal to the higher of the price of the last independent trade of an Ordinary Share and the highest current independent bid for an Ordinary Share. (d) this authority shall expire on the date of the next Annual General Meeting of the Company or on 22 February 2024, whichever is the earlier, but, in each case, provided that the Company may, before such expiry, enter into a contract or contracts to purchase shares which will or may be executed wholly or partly after the expiry of such authority and the Company may make a purchase of shares under such contract or contracts as if the authority had not expired. ### Resolution 19: Notice of General Meetings, other ### than Annual General Meetings 19. That a general meeting (other than an Annual General Meeting) of the Company may be called on not less than 14 clear days’ notice. By order of the Board Dr Edward Ziff OBE DL Chairman & Chief Executive 13 October 2022 Registered Office: Town Centre House, The Merrion Centre, Leeds LS2 8LY Registered in England and Wales No. 00623364 | 139 Town Centre Securities PLC | Annual Report and Accounts 2022 | # Notice of Annual General Meeting continued ## EXPLANATORY NOTES ### ORDINARY RESOLUTIONS #### Resolution 1: To receive the Annual Financial Statements and Directors' Report Under the Company's Act 2006, the Directors are required to present the Strategic Report, Directors' Report, auditor's report and Annual Financial Statements of the Company to the Meeting. These are contained in the Company's 2022 Annual Report and Financial Statements for the year ended 30 June 2022 (the 'Annual Report'), which was circulated at the time of this Notice and is also available on the Company's website at www.tcs-plc.co.uk. #### Resolution 2: Directors' Remuneration Report (excluding the Directors' Remuneration Policy) for the year ended 30 June 2022. Under the Companies Act 2006 (the 'Act'), the Directors must prepare an Annual Report detailing the remuneration of the Directors and a statement by the Chairman of the Remuneration Committee (together, the 'Directors' Remuneration Report'). The Act also requires that a resolution be put to shareholders each year for their approval of that report. The Directors' Remuneration Report can be found on pages 74 to 80 of the Annual Report. Resolution 2 is an advisory vote only and the Directors' entitlement to remuneration is not conditional on it. #### Resolution 3: Directors' Remuneration Policy The Act also requires that a resolution be put to shareholders, at intervals of not more than three years, to approve the Directors' Remuneration Policy, which can be found on pages 75 and 76 of the Annual Report. This is a binding policy and, after it takes effect, the Directors will not be entitled to remuneration unless that payment is consistent with the approved policy or has been approved by a resolution of the shareholders of the Company. The Company is proposing a single change to the existing remuneration policy at the 2023 Annual General Meeting. It is proposed that, for FY23 and onwards, the Remuneration Committee are able to award exceptional bonuses (on top of the approved annual bonus opportunity of up to 100% of base salary), that are no more than 10% of the profits generated from any significant transactions that are outside of the ordinary course of business for the Company, subject to a maximum of £3m in any one financial year. Attached to these exceptional bonuses will be a service condition that will enable the Company to recover these amounts if the Director were to leave within twelve months of receipt. The purpose of this is to encourage relatively small but ultimately value enhancing strategic and innovative technological investments that are complementary to the existing core businesses of TCS and to act as a long-term incentive scheme for the Executive Directors. Assuming this amendment to the policy is approved at the AGM, it is expected that the Remuneration Committee will consider the payment of exceptional bonuses to the Executive Directors in connection with the profits crystallised from the sale of the Company's investment in YourParkingSpace Limited. If Resolution 3 is approved, the policy will take effect from the date of the AGM. #### Resolution 4: Final dividend The Board proposes a final dividend of 2.5p per share in respect of the year ended 30 June 2022. If approved, the recommended final dividend will be paid on 6 January 2023 to all ordinary shareholders who are on the register of members on 9 December 2022. #### Resolutions 5 – 11: Re-election and election of Directors The Board has agreed a policy whereby all Directors will seek annual re-election at the AGM, in accordance with the FRC Code of Corporate Governance. The Board believes that each Director seeking re-election continues to have the requisite skills and experience, and demonstrates the necessary commitment, to contribute effectively to the Board. In addition, the Board confirms that each Non-Executive Director is able to commit sufficient time to meet their Board responsibilities. The biographical details of the Directors seeking re-election at the Meeting are set out on page 65 to 68 of the Annual Report. None of the Non-Executive Directors seeking re-election at the Meeting has any existing or previous relationship, transaction or arrangement with the Company, nor with any controlling shareholder of the Company or any associate of a controlling shareholder of the Company, within the meaning of Listing Rule 13.8.17R(1). In considering the independence of the Non-Executive Directors, the Board has taken into account guidance from the UK Corporate Governance Code. #### Resolution 12: Re-appointment of auditor At each general meeting at which the Company's Annual Financial Statements are presented to its members, the Company is required to appoint an auditor to serve until the next such meeting. The Board, on the recommendation of the Audit Committee, recommends the re-appointment of BDO LLP as auditors of the Company. #### Resolution 13: Remuneration of auditor The remuneration of the Company's auditor must be fixed by the Company in a general meeting or in such manner as the Company may determine in a general meeting. This resolution gives authority to the Directors to approve the terms of engagement and determine the remuneration of the Company's auditors. #### Resolution 14: Authority to make political donations Under the Act, political donations to any political parties, independent election candidates or political organisations other than political parties, or the incurring of political expenditure, are prohibited unless authorised by shareholders in advance. As the legislation is capable of wide interpretation, the terms 'political donation', a 'political party', a 'political organisation' or 'political expenditure' are not easy to define. For example, sponsorship, subscriptions, payment of expenses, paid leave for employees fulfilling public duties, and support for bodies representing the business community in policy review or reform, may fall within the scope of these matters. Therefore, notwithstanding that the Company has not made a political donation in the past, and has no intention, either now or in the future, of making any political donation or incurring any political expenditure, the Board has decided to propose Resolution 15 to avoid running the risk of the Company or its subsidiaries inadvertently breaching the Act through the undertaking of routine activities. As permitted under the Act, this resolution also covers any political donations made or political expenditure incurred by any subsidiaries of the Company. This resolution caps the amount of all forms of political donations and expenditure that the Company and its subsidiaries would be permitted to make at an aggregate of £50,000. 140 | 04 | SHAREHOLDER INFORMATION ## Resolution 15: Authority to allot Ordinary Shares The purpose of this resolution is to give the Directors authority to allot shares in place of the existing authority approved at the Annual General Meeting of the Company held on 29 December 2021, which expires at the end of the 2022 Annual General Meeting. The authority in paragraph (a) of the resolution will allow the Directors to allot new shares and grant rights to subscribe for, or convert other securities into, shares up to a nominal value of £4,044,216.50 (representing 16,176,866 Ordinary Shares), which is equivalent to approximately one third of the total issued Ordinary Share capital of the Company as at 13 October 2022, which is the latest practicable date prior to publication of this Notice. In accordance with institutional guidelines issued by the Investment Association, paragraph (b) of Resolution 15 will allow Directors to allot, including the Ordinary Shares referred to in paragraph (a) of Resolution 15, further of the Company's Ordinary Shares in connection with a pre-emptive offer by way of a rights issue to ordinary shareholders up to a maximum nominal amount of £8,088,433.25 representing approximately two thirds (66.67%) of the Company's existing issued Ordinary Share capital and calculated as at 13 October 2022 (being the latest practicable date prior to publication of this document). The Company does not currently hold any shares in treasury. The Board believes it is in the best interests of the Company to have these authorities so that the Board can allot securities at short notice and without the need to hold a general meeting if the need arises. The authorities sought in paragraphs (a) and (b) of resolution 15 are without prejudice to previous allotments made under such existing authorities. The authorities will only be valid until the conclusion of the next Annual General Meeting of the Company to be held in 2022 or 29 March 2023, whichever is earlier. ## SPECIAL RESOLUTIONS ### Resolution 16: Authority to disapply pre-emption rights At the Annual General Meeting held on 29 December 2021, the Directors were given the authority to issue equity securities of the Company and sell treasury shares in exchange for cash until the 2022 Annual General Meeting. Resolution 16 renews this authority allowing Directors to issue equity securities and to sell treasury shares for cash on a non-pre-emptive basis: (i) to ordinary shareholders in proportion to their existing shareholdings and to holders of other equity securities as required by the rights of those securities, or as the Directors consider necessary, and to deal with, among other things, treasury shares, fractional entitlements and legal and practical problems in any territory, for example, in the case of a rights issue or other similar share issue; and (ii) otherwise, up to an aggregate nominal amount of £606,632.50 (representing 2,426,530 Ordinary Shares). This number represents approximately 5% of the issued share capital as at 13 October 2022 the latest practicable date prior to publication of this Notice. The Directors believe that this resolution will assist them in taking advantage of business opportunities as they arise. The Company does not currently hold any shares in treasury. These authorities are without prejudice to allotments made under previous authorities and will only be valid until the conclusion of the next Annual General Meeting to be held in 2023 or 22 February 2024, whichever is earlier. ### Resolution 17: Additional authority to disapply pre-emption rights for purposes of acquisitions or capital investments On 5 May 2016, the Pre-Emption Group published a monitoring report on the implementation of its 2015 Statement of Principles for Disapplying Pre-emption Rights and a recommended template resolution for disapplying pre-emption rights. The template recommends companies request authority to disapply pre-emption rights in respect of the additional 5% to be used when the Board considers the use to be for an acquisition or specified capital investment in accordance with the 2015 Statement of Principles as a separate resolution to the disapplication to issue shares on an unrestricted basis. Resolution 17 seeks this separate authority. Where the authority granted under resolution 17 is used, the Company will disclose this in the announcement regarding the issue, the circumstances that have led to its use and the consultation process undertaken. In accordance with the section of the Statement of Principles regarding cumulative usage of authorities within a rolling three-year period, the Directors also confirm their intention that (except in relation to an issue pursuant to resolution 17 in respect of the additional 5% referred to above) no more than 7.5% of the issued Ordinary Share capital will be issued for cash on a non-pre-emptive basis during any rolling three-year period, without prior consultation with shareholders. The Directors believe that this resolution will assist them in taking advantage of business opportunities as they arise. These authorities are without prejudice to allotments made under previous authorities and will only be valid until the conclusion of the next Annual General Meeting to be held in 2023, or 22 February 2024, whichever is earlier. ### Resolution 18: Authority to purchase Company's own shares Resolution 18 is a special resolution that will grant the Company authority to make market purchases of up to 7,279,590 Ordinary Shares, representing 15% of the Ordinary Shares in issue as at the date of the Notice. The Directors have no present intention to exercise the authority granted by this resolution, but the authority provides the flexibility to allow them to do so in future. The Directors would not exercise the authority unless they believed that the expected effect would promote the success of the Company for the benefit of its shareholders as a whole. Any shares bought back will either be cancelled or placed into treasury at the determination of the Directors. The maximum price which may be paid for each Ordinary Share must not be more than the higher of (i) 105% above the average of the mid-market values of the Ordinary Shares for the five business days before the purchase is made or (ii) the higher of the price of the last independent trade and the highest current independent bid for the Ordinary Shares. The minimum price which may be paid for each Ordinary Share is £0.25. | 141 Town Centre Securities PLC | Annual Report and Accounts 2022 | # Notice of Annual General Meeting continued This authority shall expire at the Annual General Meeting to be held in 2023 or on 22 February 2024, whichever is the earlier, when a resolution to renew the authority will be proposed. ### Resolution 19: Notice of general meetings other than Annual General Meetings Under the Act, the notice period required for all general meetings of the Company is 21 clear days. Annual General Meetings will always be held on at least 21 clear days' notice, but shareholders can approve a shorter notice period for other general meetings. At last year's Annual General Meeting shareholders authorised the calling of general meetings (other than an Annual General Meeting) on not less than 14 clear days' notice, and it is proposed that this authority be renewed. ### Resolutions and important notes The formal notice convening the Meeting (the 'Notice') is set out on pages 144 to 151 of this document and includes explanatory notes to each of the resolutions to be proposed at the Meeting. There will be an opportunity for you to raise questions at the Meeting about the resolutions set out in the Notice and about the business of the Company. ### Further information Further information relating to the Company and its financial information can be found in the Company's Annual Report and Financial Statements for the year ended 30 June 2022, which was circulated at the same time as this Notice and is also available on the Company's website at www.tcs-plc.co.uk ### Recommendation The Board considers that Resolutions 1 to 19 are in the best interests of the Company and its shareholders as a whole and recommends that you vote in favour of such resolutions, as the Directors intend to do in respect of their own beneficial holdings. ### IMPORTANT NOTES The following notes explain your general rights as a shareholder and your right to attend and vote at this Annual General Meeting or to appoint someone else to vote on your behalf. 1. The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the register of members of the Company as at close of business on Friday, 18 November 2022 (or, in the event that the meeting is adjourned, in the register of members at close of business on the date which is two days before the date of any adjourned meeting) shall be entitled to attend or vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the meeting. 2. In order to gain admittance to the meeting, members may be asked to prove their identity. 3. A shareholder is entitled to appoint one or more persons as proxies to exercise all or any of his or her rights to attend, speak and vote at the meeting. A proxy need not be a shareholder of the Company. A shareholder may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him/her. To appoint more than one proxy, you will need to complete a separate Form of Proxy in relation to each appointment. Additional proxy forms may be obtained by contacting the Company's registrar on 0371 664 0300 (Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 and 17:30, Monday to Friday excluding public holidays in England and Wales) or you may photocopy the proxy form. You will need to state clearly on each proxy form the number of shares in relation to which the proxy is appointed. A failure to specify the number of shares each proxy appointment relates to or specifying a number which when taken together with the number of shares set out in the other proxy appointments is in excess of the number of shares held by the shareholder may result in the proxy appointment being invalid. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. The appointment of a proxy will not preclude a member from attending and voting in person at the meeting if he or she so wishes. 4. You can vote either: - by logging on to www.signalshares.com where full instructions can be found; - by requesting a hard copy form of proxy directly from the registrar, Link Group, on tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 and 17:30, Monday to Friday excluding public holidays in England and Wales; or - in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below. For an electronic proxy appointment to be valid, the appointment must be received by the Company's registrar by no later than 10.00am on Friday, 18 November 2022 (or in the event that the meeting is adjourned, no later than 48 hours (excluding any part of a day that is not a working day) before the time of any adjourned meeting). For a hard copy form of proxy to be valid, it must be completed, signed and sent to the offices of the Company's registrars, Link Group, PXS, Central Square, 29 Wellington Street, Leeds, LS1 4DL, so as to arrive no later than 10.00am on Friday, 18 November 2022 (or, in the event that the meeting is adjourned, no later than 48 hours (excluding any part of a day that is not a working day) before the time of any adjourned meeting). Any electronic communication sent by a member to the Company or the Company's registrar which is found to contain a virus will not be accepted by the Company but every effort will be made by the Company to inform said member of the rejected communication. 142 | 04 | SHAREHOLDER INFORMATION 5. If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last by the registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them will not be disadvantaged. 6. The return of a completed proxy form, electronic filing or any CREST Proxy Instructions will not prevent a shareholder from attending the Meeting and voting in person if he/she wishes to do so. 7. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST manual (available from www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 8. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications, and must contain the information required for such instructions, as described in the CREST manual. The message must be transmitted to be received by the issuer's agent (ID RA10) by 10:00 on Friday, 18 November 2022. For this purpose, the time of receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. 9. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 10. A shareholder or shareholders having a right to vote at the meeting and holding at least 5% of the total voting rights of the Company (see note 12 below), or at least 100 shareholders having a right to vote at the meeting and holding, on average, at least £100 of paid share capital, may require the Company to publish on its website a statement setting out any matter that such shareholder(s) propose to raise at the meeting relating to either the audit of the Company's accounts (including the auditor's report and the conduct of the audit) that are to be laid before the meeting or any circumstances connected with an auditor of the Company ceasing to hold office since the last Annual General Meeting of the Company in accordance with Section 527 of the Act. Any such request must: 10.1 identify the statement to which it relates, by either setting out the statement in full or, if supporting a statement requested by another shareholder, clearly identifying the statement which is being supported; 10.2 comply with the requirements set out in note 7 below; and 10.3 be received by the Company at least one week before the meeting. Where the Company is required to publish such a statement on its website: 10.4 it may not require the shareholder(s) making the request to pay any expenses incurred by the Company in complying with the request; 10.5 it must forward the statement to the Company's auditors no later than the time when it makes the statement available on the website; and 6.6 the statement may be dealt with as part of the business of the meeting. 11. Any request by a shareholder or shareholders to require the Company to publish audit concerns as set out in note 6 above: 11.1 may be made either: 11.1.1 in hard copy, by sending it to the Company Secretary, Town Centre House, The Merrion Centre, Leeds LS2 8LY; or 11.1.2 in electronic form, by sending it to 0113 234 0442, marked for the attention of the Company Secretary, or to info@tcs-plc.co.uk (please state 'TCS: AGM' in the subject line of the email); 11.2 must state the full name(s) and address(es) of the shareholder(s); and 11.3 (where the request is made in hard copy from or by fax) must be signed by the shareholder(s). 12. As at 13 October 2022 (being the last practicable date prior to the publication of this notice) the Company's issued share capital consists of 48,530,599 Ordinary Shares of 25p each, carrying one vote each. The Company does not hold any Ordinary Shares in treasury. Therefore, the total voting rights in the Company as at 13 October 2022 are 48,530,599. | 143 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Notice of Annual General Meeting continued 13. Shareholders have the right to ask questions at the meeting relating to the business being dealt with at the meeting in accordance with Section 319A of the Act. The Company must answer any such questions unless: 13.1 to do so would interfere unduly with the preparation for the meeting or would involve the disclosure of confidential information; 13.2 the answer has already been given on a website in the form of an answer to a question; or 13.3 it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. 14. Where a copy of this notice is being received by a person who has been nominated to enjoy information rights under Section 146 of the Act ('Nominee'): 14.1 the Nominee may have a right under an agreement between the Nominee and the shareholder by whom he/she was appointed, to be appointed, or to have someone else appointed, as a proxy for the meeting; or 14.2 if the Nominee does not have any such right or does not wish to exercise such right, the Nominee may have a right under any such agreement to give instructions to the shareholder as to the exercise of voting rights. The statement of the rights of shareholders in relation to the appointment of proxies in notes 3 to 5 above does not apply to a Nominee. The rights described in such notes can only be exercised by shareholders of the Company. 15. Biographical details of all those Directors who are offering themselves for appointment or re-appointment at the meeting are set out on page 60 and 61 of the Annual Report and Accounts. 16. A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual shareholder, provided that (where there is more than one representative, and the vote is otherwise than on a show of hands) they do not do so in relation to the same shares. 17. The following documents will be available for inspection during normal business hours at the registered office of the Company from the date of this notice until the time of the meeting: 17.1 copies of the service contracts of the Executive Directors; and 17.2 copies of the letters of appointment of the Non-Executive Directors. 18. The information required by Section 311A of the Act to be published in advance of the meeting, which includes the matters set out in this notice and information relating to the voting rights of shareholders is available at www.tcs-plc.co.uk. 144 | 04 | SHAREHOLDER INFORMATION # Investor information ## Registrar All general enquiries concerning shareholdings in Town Centre Securities PLC should be addressed to: Link Group PXS Central Square 29 Wellington Street Leeds LS1 4DL **Telephone:** +44 (0) 371 664 0300 (Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open from 9.00am–5.30pm, Monday to Friday excluding public holidays in England and Wales.) **Telephone outside United Kingdom:** +44 (0) 371 664 0300 **Email:** shareholderenquiries@linkgroup.co.uk **Website:** linkassetservices.com ## Dividends Interim dividend: 2.5p per share paid on 24 June 2022 to shareholders on the register on 20 May 2022. Final dividend: 2.5p per share to be paid on 6 January 2023 to shareholders on the register on 9 December 2022. ## Payment of dividends Shareholders whose dividends are not currently paid to mandated accounts may wish to consider having their dividends paid directly into their bank or building society account. This has a number of advantages, including the crediting of cleared funds into the nominated account on the dividend payment date. If shareholders would like their future dividends to be paid in this way, they should complete a mandate instruction available from the registrars. Under this arrangement tax vouchers are sent to the shareholder's registered address. ## Advisors ### Independent Auditor BDO LLP ### Brokers Liberum Peel Hunt ### Bankers Lloyds Banking Group Plc The Royal Bank of Scotland Plc Svenska Handelsbanken AB (Publ) ### Solicitors DLA Piper UK LLP Bond Dickinson LLP TLT LLP ### Principal Valuers Jones Lang LaSalle CBRE ### Corporate public relations MHP Communications ## Contact information ### Registered office Town Centre House The Merrion Centre Leeds LS2 8LY ### Registered number 623364 England ### Email info@tcs-plc.co.uk ### Website tcs-plc.co.uk ### Company Secretary Tom Evans Town Centre House The Merrion Centre Leeds LS2 8LY ### Registrar and transfer office Link Group ### Trustees to mortgage debenture holders Link Market Services Trustees Limited c/o Apex Corporate Trustees (UK) Limited 6th Floor 125 Wood Street London EC2V 7AN | 145 Town Centre Securities PLC | Annual Report and Accounts 2022 | ## Glossary AGM Annual General Meeting CVA Company Voluntary Arrangement, a process under UK insolvency law which allowsa Company to reschedule its debts with the consent of a specified majority of its creditors EPC Energy Performance Certificate EPRA European Public Real Estate Association EPRA EPS A measure of EPS designed by EPRA to present underlying earnings from core operating activities EPRA Guidance The EPRA Best Practices Recommendations Guidelines October 2019 EPRA NTA A measure of NAV designed by EPRA to present the fair value of a Company on a long- term basis. For these purposes, the Group uses EPRA Net Tangible Assets as defined in the EPRA Guidance EPS Earnings per share calculated as the profit or loss for the period after tax attributable to shareholders of the Company divided by the weighted average number of shares in issue in the period ERV Estimated Rental Value: the independent valuers’ opinion of the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property GDV Gross Development Value IFRS International Financial Reporting Standards LTV Loan to Value: • Facility specific – the outstanding amount of a loan as a percentage of property value • Group LTV – the amount of financial liabilities less cash and cash equivalents (incl. overdrawn balances) as a percentage of the Group’s total assets less cash and cash equivalents NAV Net asset value Net Borrowings Total financial liabilities less IFRS 16 lease liabilities and cash equivalents Net Initial Yield Annualised net rents on an investment property as a percentage of the investment property valuation less purchaser’s costs Post Investment Yield Annualised net rents on a property as a percentage of the total development costs of a property REIT Real Estate Investment Trust Reversionary Yield ERV on an investment property as a percentage of the investment property valuation less purchaser’s costs Total Property Return Calculated as the net operating profit and gains/losses from property sales and valuations as a percentage of the opening portfolio carrying value Total Shareholder Return The movement in share price over a period plus dividends paid in the period expressed as a percentage of the share price at the start of the period Weighted Average Unexpired Lease Term The term to the first tenant break or expiry of the leases in the portfolio weighted by rental value before rent concessions, also referred to as WAULT 146 | Contents_GEN_Page Contents_GEN_PageL2Contents Generation – Section Printed by a CarbonNeutral® Company certified to ISO 14001 environmental management system. This product is made using recycled materials limiting the impact on our precious forest resources, helping reduce the need to harvest more trees. 100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets the chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled and the remaining 1% used to generate energy. The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released. CBP00019082504183028 Contents_GEN_Page Contents_GEN_PageL2Contents Generation – Section Town Centre Securities PLC Annual Report and Accounts 2022 ### Town Centre Securities PLC Town Centre House The Merrion Centre Leeds LS2 8LY +44 (0)113 222 1234 info@tcs-plc.co.uk tcs-plc.co.uk