PRELIMINARY RESULTS

21 November 2023

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

THE CONYGAR INVESTMENT COMPANY PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2023

SUMMARY

·    Net asset value ("NAV") decreased in the year by £29.5 million to £95.1 million (159.4p per share; 2022: 208.9p per share) primarily as a result of a net £21.5 million write down in the carrying value of the Group's investment properties in addition to a £5.2 million write down in the carrying value of the Group's development site in Holyhead, Anglesey.

·    Total cash deposits of £2.7 million (4.5p per share) at the year end and £9.0 million as at 17 November 2023.

·    Cash deposits boosted after the year end by the placing in October 2023 of 5 million zero dividend preference shares of £1 each (the "ZDP shares") and completion in November 2023 of a £12 million loan facility from A.S.K. Partners Limited.  

·    Construction progressing well and on budget for the 693 bed student accommodation development at The Island Quarter, Nottingham planned for completion in May 2024.

·    £47.5 million facility agreement entered into with Barclays Bank PLC ("Barclays") in December 2022, for a maximum term of 3 years, to enable the completion and subsequent letting of the student accommodation development at The Island Quarter, with £18.0 million drawn by 30 September 2023.

·    Detailed planning consent granted in May 2023 for a 249,000 square foot bioscience building at The Island Quarter.

·    Revised masterplan agreed with Nottingham City Council which, subject to investor and occupier appetite, increases the size of The Island Quarter development up to a maximum of 3.5 million square feet.

·    Disposal of the development site at Haverfordwest, Pembrokeshire, for gross proceeds of £9.65 million to realise a profit of £0.1 million.

·    Anglesey Freeport confirmed as one of the two newly established freeports in Wales with our 203 acre brownfield site at Rhosgoch, Anglesey assigned as a special area within that freeport.

·    Conditional contract exchanged, at a cost of £450,000, for the purchase of a 14.7 acre plot at Bristol Fruitmarket site in the St Phillip's Marsh area of Bristol.

Group net asset summary

Robert Ware, Chief executive commented:

"We are acutely aware of the impact that continuing economic and political uncertainty is having on the real estate sector and intend to maintain a disciplined approach to both our cash commitments and financial leverage to ensure our balance sheet remains robust. 

Our results for the year are reflective of the currently subdued market. However, fundamentals for the private built student accommodation, build to rent and life science sectors, remain strong, with supply shortages likely to support improved future pricing. The value from our development projects will be created over the medium-term. Given the progress made, in particular at The Island Quarter, since its acquisition, we remain optimistic about the Group's future prospects."

Enquiries:

The Conygar Investment Company PLC

Liberum Capital Limited (nominated adviser and broker)

Temple Bar Advisory (public relations)

Chairman's and chief executive's statement

Overview and results summary

The past year has been one of continual macroeconomic and geo-political uncertainty. The impact of this on the valuation of UK real estate, in particular from the sharp uplift in interest rates and increasing investor caution as higher inflation became embedded, has been significant. Property valuations in the UK fell across all sectors, as yields increased to reflect the higher interest rate environment.

The value of our investment property portfolio, after allowing for capital expenditure in the year, has declined by £21.5 million (16.3%). In addition, the value of our development site at Holyhead, Anglesey has been written down by £5.2 million. More recently the outlook for the UK economy has improved, with interest rates now at or near their peak and inflationary indicators suggesting further reductions.

The reduced valuations at 30 September 2023 relate primarily to the undeveloped and unconsented plots at both The Island Quarter, Nottingham and Holyhead. These have been partly offset by a valuation surplus from the ongoing student accommodation development to reflect the considerable progress made on site during the year for that asset. While these land price falls are unwelcome, such valuations tend to be volatile and highly sensitive to small changes in the underlying assumptions of key parameters, such as rental levels, net initial yields, construction costs, finance costs and void periods. As the economic situation improves and inflation eases, we expect to see a rebound in land values given the unprecedented recent rental growth in particular across the private built student accommodation ("PBSA") and build to rent ("BTR") sectors.

The Group has incurred net operational and administrative losses, excluding depreciation, of £4.2 million in the year as we seek to continue the transition of our initially consented development plots at The Island Quarter to income-producing assets. This cost increase, required to support both the implementation of our development programme and operations team comes at a point in the cycle when rental income receipts for the Group have reduced.      

However, with the restaurant and events venue at 1 The Island Quarter ("1 TIQ") now established and fully operational and the ongoing student accommodation development in Nottingham planned for completion in May 2024, we anticipate a material uplift in revenues in the medium-term.

The combined valuation and operational losses have been partly offset by the reversal of a £1.7 million deferred tax provision resulting in a total loss for the year of £29.5 million.

Cash deposits and debt financing

Our ambition at the start of the year was to raise significant additional funds to progress, at a pace, the construction of the consented student accommodation development at The Island Quarter and submit further planning applications to better enable investor participation in our development projects.

To that end, the Group entered into a new facilities agreement with Barclays Bank PLC in December 2022 comprising a development facility and an investment facility (together the "facilities") up to £47.5 million in aggregate. The facilities will enable completion of the construction and subsequent letting of the 693 bed student accommodation development.

The cash deposits of the Group were £2.7 million at 30 September 2023.

However, the liquidity of the Group has materially increased since the balance sheet date by way of the placing in October 2023 of 5 million ZDP shares of £1 each in addition to the signing in November 2023 of a £12 million debt facility with A.S.K. Partners Limited ("ASK"), of which £5 million has been drawn at the date of signing these financial statements. In addition to the 5 million of placed ZDP shares, the Company subscribed for a further 10 million ZDP shares which it will look to place, subject to investor sentiment, during the 5-year term of the ZDP to further boost its cash deposits as required.

Bristol and other property assets

On 6 April 2023, the Group, by way of Conygar Bristol Limited, in which it holds an 80% interest, entered into a conditional contract with Wholesale Fruit Centre (Bristol) Limited to acquire the 14.7 acre site at St Philips Marsh where the Bristol Fruit Market is currently located, paying an initial deposit of £450,000.

Completion of the acquisition is conditional on the satisfaction or, where relevant, waiver of the grant of planning permission for a number of development options by 6 June 2025, subject to extension provisions. In addition, all tenants are required to have surrendered their existing leases by 6 April 2024 and the market licence in respect of the site terminated. The contract is capable of termination if the vacant possession condition has not been satisfied or waived by 6 April 2024 or if the vacant possession and planning permission conditions have not both been satisfied by 6 April 2028.  

We intend to utilise part of the net proceeds from the ZDP share placing and ASK loan to further progress both the Bristol and Nottingham planning applications and hope to make announcements in that regard over the next financial year.     

However, in order to progress thereafter our pipeline of development projects, in particular at The Island Quarter, we will need to raise substantial amounts either as debt, through asset sales, or from joint ventures and we are in discussions on a number of fronts in that regard.

Further details of the progress made during the year at The Island Quarter and our other projects are set out in the strategic report.

Dividend

The Board recommends that no dividend is declared in respect of the year ended 30 September 2023. More information on the Group's dividend policy can be found within the strategic report.

Share buy-back authority

The Board will seek to renew the buy-back authority of 14.99% of the issued share capital of the Company at the forthcoming AGM as we consider the buy-back authority to be a useful capital management tool and will continue to use it, as our cash flows allow, when we believe the stock market value differs too widely from our view of the intrinsic value of the Company.

Outlook

We are acutely aware of the impact that continuing economic and political uncertainty is having on the real estate sector and intend to maintain a disciplined approach to both our cash commitments and financial leverage to ensure our balance sheet remains robust. 

Our results for the year are reflective of the currently subdued market. However, fundamentals for the PBSA, BTR and life science sectors, remain strong, with supply shortages likely to support improved future pricing. The value from our development projects will be created over the medium-term. Given the progress made, in particular at The Island Quarter, since its acquisition, we remain optimistic about the Group's future prospects.

N J Hamway                                                                         R T E Ware

Chairman                                                                               Chief executive

Strategic report

The Group's strategic report provides a review of the business for the financial year, discusses the Group's financial position at the year end and explains the principal risks and uncertainties facing the business and how we manage those risks. We also outline the Group's strategy and business model.

Strategy and business model

The Conygar Investment Company PLC ("Conygar") is an AIM quoted property investment and development group dealing in UK property. Our aim is to invest in property assets and companies where we can add significant value using our property management, development and transaction structuring skills.

The business operates two major strands, being property investment and property development where we are prepared to use modest levels of gearing to enhance returns. Assets are recycled to release capital as opportunities present themselves and we will continue to buy-back shares where appropriate. The Group is content to hold cash and adopt a patient strategy unless there is a compelling reason to invest.

Position of the Group at the year end

The Group net assets as at 30 September 2023 may be summarised as follows:

The Group's balance sheet remains both liquid and robust with property assets and cash deposits totalling £115.9 million as at 30 September 2023 and only £17.2 million of net bank borrowings secured against the student accommodation development at The Island Quarter.

The £47.5 million Barclays debt facility will enable the Group to complete the student accommodation development without the need for any further equity input. Furthermore, as set out in the chairman's and chief executive's statement, the net proceeds after the year end from the placing of 5 million ZDP shares in addition to the £12 million loan facility from ASK will facilitate the submission of further detailed planning applications at both The Island Quarter and Bristol sites.

Key performance indicators

The key measures considered when monitoring progress towards the Board's objective of providing attractive shareholder returns include the headway made during the year on its development and investment property portfolio, the movements in net asset value per share, levels of uncommitted cash and its monitoring of and performance against its ESG targets.

The chairman's and chief executive's statement provides a summary on the financial performance and progress made during the year on the Group's property assets, further details of which are set out in this strategic report. Matters considered by the audit committee and remuneration committee are set out in the corporate governance section of the annual report. The Board's approach and responsibilities in connection with environmental, social and governance matters are set out in the ESG section of the annual report. The other key performance measures are considered below.

1 TIQ and investment properties under construction  

The Group's restaurant and events venue and investment properties under construction at The Island Quarter, Nottingham were valued by Knight Frank LLP, in their capacity as external valuers, as set out below:

As set out in the chairman's and chief executive's statement, the impact of a sharp uplift in interest rates and increasing investor caution has resulted in a reduction in property values across all sectors, with yields increased to reflect the higher interest rate environment.

1 TIQ, which has now been operational for just over a year, has been very well received by the local community. For a brand-new venue, it has achieved solid revenues in the year to 30 September 2023 of £4.3 million. However, the delayed completion of the development, due to various material and contracting issues, resulted in the events operation being unable to take advantage of the late summer and Christmas trade in 2022. This delay, when compounded by the phased opening, intentional overstaffing as operations were fully tested and margins being squeezed as a result of continuing inflationary pressures limited the gross profit in the year to £0.3 million and a pre-tax loss of £1.2 million.

Construction of the student accommodation development is now fully funded. The development is progressing on-time and on-budget, with completion planned for May 2024 to enable its letting to the September 2024 Nottingham university intake. The marketing programme for the accommodation has also commenced with net rental income, after operational and administrative costs, expected to be in excess of £5.5 million per annum.    

In May 2023, detailed consent was granted for our 249,000 square foot bioscience application to include both laboratory and office space as well as conference facilities. The consented plot is located to the north of the site directly adjacent to an existing bioscience hub. We are progressing discussions with a potential local tenant seeking significant expansion space as well as an investor to forward fund the development. However, should they not proceed, the demand for bioscience space is such that we feel confident that we would be able to find alternative tenants and investors.

Nottingham City Council have also agreed, in principle, the parameters for a sitewide masterplan that will guide and support the future planning applications at The Island Quarter. This has resulted in a scheme which, subject to the granting of detailed consent and local demand, will enable the overall size of the development to increase up to approximately 3.5 million square feet. Following on from this, we are progressing the detailed application for a second phase of student accommodation comprising approximately 400 beds which is expected to be submitted in the coming months. 

Development and trading properties

We announced, in March 2023, the confirmation of the Anglesey Freeport as one of the two newly established freeports in Wales. Included within this location, as a special area, is our 203 acre brownfield site at Rhosgoch. Our further site at Parc Cybi is also part of the freeport.

These freeports will form special zones with the benefit of simplified customs procedures, relief on customs duties, tax benefits and development flexibility designed to attract major domestic and international investment. The Welsh freeports will also prioritise environmental sustainability and the climate emergency.

In addition, the Company owns a further site in Anglesey at Holyhead Waterfront where we continue to await the determination of our detailed application for 259 townhouses and apartments, a 250 berth marina and associated marine commercial and retail units. We have fully written down the value of Holyhead Waterfront at 30 September 2023 as a result of the combined impact from planning delays, increased finance costs and construction cost price inflation particularly associated with the marine infrastructure works. These factors have detrimentally affected the residual value of the proposed development as has occurred during recent years across many sites in the UK.

In March 2023, we completed the sale of our site at Haverfordwest, Pembrokeshire to The Welsh Minister and POBL Homes and Communities Limited for gross proceeds of £9.65 million to realise a profit in the period of £0.1 million.

Financial review

Net asset value

The net asset value decreased in the year by £29.5 million to £95.1 million at 30 September 2023 which equates to 159.4p per share (2022: 208.9p per share). The primary movements were a net £21.5 million write down in the carrying value of The Island Quarter's investment properties, a £5.2 million write down in the carrying value of Holyhead Waterfront and increased operational and administrative costs of £4.8 million, including depreciation charges of £0.6 million. These were partly offset by the reversal of a £1.7 million provision for deferred tax and a £0.1 million profit from the sale of Haverfordwest.

Cash flow and financing

At 30 September 2023, the Group had cash deposits of £2.7 million and had drawn £18.0 million of the £47.5 million development loan facility from Barclays (2022: cash of £17.4 million and no debt).

During the year, the Group generated £5.0 million of cash from its operating activities, which includes the net proceeds from the sale of Haverfordwest (2022: generated £3.9 million). The other primary cash inflows for the year were net bank borrowings, after debt arrangement and debt servicing costs, of £16.4 million and £0.2 million of interest on cash deposits.

The primary cash outflows in the period were £35.7 million incurred on the Group's development and investment properties, including £31.7 million of construction costs and professional fees to progress The Island Quarter's student accommodation development, £1.0 million of fees in connection with the consented bioscience planning application and £1.6 million of costs to complete the energisation of the electricity substation and project manage the ongoing operations at The Island Quarter. Further costs were incurred to complete the fitting out of 1 TIQ resulting in a net cash outflow in the period of £14.7 million.

Net income from property activities

This has been, and continues to be, a transitional period for the Group where, having sold, over a number of years, the vast majority of our rent-producing investment properties, to lock in, for the benefit of our shareholders, the significant returns generated from those assets, we are now utilising those funds to progress the planning applications for, and construction of, both our owned and targeted development projects. As such, the rental income for the Group during the current and previous years has reduced from that historically achieved. However, with 1 TIQ now more established and fully operational, in addition to the student accommodation development expected to become rent-producing in the late summer of 2024, we would anticipate a material uplift in rental and other income in the medium-term.

Rental income for the year ended 30 September 2022 includes the reversal of a £1.4 million accrued rent debtor following the sales of Cross Hands and Selly Oak. This debtor arose from the even spreading of rental income, derived from operating leases, over each tenant's respective minimum lease term after allowing for rent-free periods.

Administrative expenses

The administrative expenses for the year were £4.8 million (2022: £2.9 million). As set out in the chairman's and chief executive's statement, managing the substantially increased development and operations teams, in particular at 1 TIQ, has required an increase in the Group's overheads. 

Taxation

There is no current tax in the year as the Group is loss-making. However, the results for the year include the reversal of a £1.7m deferred tax provision following the net write down, at 30 September 2023, in the carrying value of The Island Quarter.

Deferred tax is calculated at a rate of 25%, being the rate that has been enacted or substantively enacted by the balance sheet date and which is expected to apply when tax liabilities, resulting from unrealised chargeable gains arising on revaluation of the Group's investment properties, are projected to be settled.

Capital management

Capital risk management

The Board's primary objective when managing capital is to preserve the Group's ability to continue as a going concern, in order to safeguard its equity and provide returns for shareholders and benefits for other stakeholders, whilst maintaining an optimal capital structure to reduce the cost of capital.

While the Group does not have a formally approved gearing ratio, the objective above is actively managed through the direct linkage of borrowings to specific property. The Group seeks to ensure that secured borrowing stays within agreed covenants with external lenders.

Treasury policies

The objective of the Group's treasury policies is to manage the Group's financial risk, secure cost-effective funding for the Group's operations and to minimise the adverse effects of fluctuations in the financial markets on the value of the Group's financial assets and liabilities, reported profitability and cash flows.

The Group finances its activities with a combination of bank loans, cash and short-term deposits. Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group's operations. The Group may also enter into derivative transactions to manage the interest rate risk arising from the Group's operations and its sources of finance. The main risks associated with the Group's financial assets and liabilities are set out below, together with the policies currently applied by the Board for their management.

The management of cash is monitored weekly with summary cash statements produced on a monthly basis and discussed regularly in management and board meetings. The approach is to provide sufficient liquidity to meet the requirements of the business in terms of funding developments and potential acquisitions. Surplus funds are invested with a broad range of institutions. At any point in time, at least half of the Group's cash is held on instant access or short-term deposit of less than 30 days.

Dividend policy

The Board recommends that no dividend is paid in respect of the year ended 30 September 2023 (2022: £nil).

Our dividend policy is consistent with the overall strategy of the business: namely to invest in property assets and companies where we can add significant value using our property management, development and transaction structuring skills.

In previous years we have used the surplus cash flow from the then much larger investment property portfolio to enhance these properties by refurbishment, re-letting and extending tenancies, fund the operations of the business, create a medium-term pipeline of development opportunities, pay a modest dividend and buy-back shares where appropriate.

The Board will continue to review the dividend policy each year. Our focus is, and will primarily continue to be, growth in net asset value per share.

Principal risks and uncertainties

Managing risk is an integral element of the Group's management activities and a considerable amount of time is spent assessing and managing risks to the business. Responsibility for risk management rests with the Board, with external advisers used where necessary.

Strategic risks

Strategic risks are risks arising from an inappropriate strategy or through flawed execution of a strategy that could threaten the future performance, solvency or liquidity of the Group. By definition, strategic risks tend to be longer term than most other risks and, as has been amply demonstrated in the last few years, the economic and wider environment can alter quickly and significantly. Strategic risks identified include global or national events, regulatory and legal changes, market or sector changes and key staff retention.

The Board continually monitors and discusses the potential impact that changes to the environment in which we operate can have upon the Group. We are confident we have sufficiently high-calibre directors and managers to manage strategic risks.

We are content that the Group has the right approach toward strategy and our strong balance sheet is good evidence of that.

Operational risks

Operational risks are essentially those risks that might arise from inadequate internal systems, processes, resources or incorrect decision making. Clearly, it is not possible to eliminate operational risk. However, by ensuring we have the right calibre of staff and external support in place, we look to minimise such risks, as most operational risks arise from people-related issues. Our executive directors are very closely involved in the day-to-day running of the business to ensure sound management judgement is applied.

Market risks

Market risks primarily arise from the possibility that the Group is exposed to fluctuations in the values of, or income from, its cash deposits and other financial instruments along with its investment properties and development projects. This is a key risk to the principal activities of the Group and the exposures are continuously monitored through timely financial and management reporting and analysis of available market intelligence.

Where necessary, management takes appropriate action to mitigate any adverse impact arising from identified risks and market risks continue to be monitored closely.

The Group is not currently party to any derivative transactions to fix the interest rate payable in connection with its loan from Barclays Bank PLC. This is due to the short-term nature of this development loan in addition to the high entry fees which have been payable in connection with such products over the last financial year.

The Group remains compliant with all of its debt covenants.

Estimation and judgement risks

To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and assumptions that affect the asset and liability items and revenue and expense amounts recorded in the accounts. These estimates are based on historical experience and various other assumptions that management and the Board believe are reasonable under the circumstances. The results of these considerations form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other sources.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the following:

Investment properties

The fair values of investment properties are based upon open market value and calculated using a third-party valuation provided by an external valuer.

Development properties

The net realisable value of properties held for development requires an assessment of the value for the underlying assets using property appraisal techniques and other valuation methods. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

Financial assets and liabilities

The interest rate profile of the Group's cash deposits at the balance sheet date was as follows:

The Group's floating rate financial assets comprise cash and short-term performance bond deposits held with banks whose credit ratings are acceptable to the Board.

The interest rate profile of the Group's bank borrowings is set out in note 20.

Credit risk

Credit risk is the risk of financial loss to the Group if a counterparty fails to meet its contractual obligations. The Group's principal financial assets include its financial interest in property assets, cash deposits and trade and other receivables. The carrying amount of financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained.

In the event of default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs. The Directors continually monitor tenant arrears in order to anticipate, and minimise the impact of, defaults by occupational tenants and if necessary, where circumstances allow, will apply rigorous credit control procedures to facilitate the recovery of trade receivables.

Under IFRS 9, the Group is required to provide for any expected credit losses arising from trade receivables. For all assured shorthold tenancies, credit checks are performed prior to acceptance of the tenant. Regulated tenants are incentivised through the benefit of their tenancy agreement to avoid default on their rent and rent deposits are held where applicable.

The Directors have provided for rental and other arrears due from various tenants which amounts to £273,000 at 30 September 2023 (2022: £200,000) and which remain outstanding at the date of signing these financial statements. The impaired receivables are based on a review of expected credit losses. Impaired receivables and receivables not considered to be impaired are not material to the financial statements and, therefore, no further analysis is provided.

The credit risk on cash deposits is managed through the Company's policies of monitoring counterparty exposure and the use of counterparties of good financial standing. At 30 September 2023, the credit exposure from cash held with banks was £2.7 million which represents 2.8% of the Group's net assets. All cash deposits at the balance sheet date are placed with banks, whose credit ratings are acceptable to the Board, on instant access accounts. Should the credit quality or the financial position of the banks currently utilised significantly deteriorate, cash deposits would be moved to alternative banks.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group seeks to manage its liquidity risk by ensuring that sufficient cash is available to meet its foreseeable needs. The Group had cash deposits at the balance sheet date of £2.7 million. However, as set out in the chairman's and chief executive's statement, the cash deposits of the Group have been increased since the balance sheet date by the placing in October 2023 of 5 million ZDP shares of £1 each and the signing in November 2023 of a £12 million debt facility with ASK, of which £5 million has been drawn at the date of signing these financial statements.

Section 172 statement

Directors' duty to promote the success of the Company under Section 172 Companies Act 2006

The strategic report is required to include a statement that describes how the directors have had regard to the matters set out in section 172(1) (a) to (f) of the Companies Act 2006 when performing their duty under section 172. Some of the matters identified in Section 172(1) are already covered by similar provisions in the QCA Code and have thus been previously reported by the Company in the corporate governance statement, the corporate governance report and the QCA statement of compliance on our website. In order to avoid unnecessary duplication, the relevant parts of those documents are identified below and are to be treated as expressly incorporated by reference into this strategic report. Under section 172 (1) of the Companies Act 2006, each individual director must act in the way he considers, in good faith, would be the most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to six matters detailed in the section. In discharging their duties, the directors seek to promote the success of Conygar for the benefit of members as a whole and have regard to all the matters set out in Section 172(1), where applicable and relevant to the business, taking account of its size and structure and the nature and scale of its activities in the commercial property market. The following paragraphs address each of the six matters in Section 172(1) (a) to (f).

(a) The likely consequences of any decision in the long term: The commercial property market is cyclical by nature. Investing in commercial property is a long-term business. The decisions taken must have regard to long-term consequences in terms of success or failure and managing risks and uncertainties. The directors cannot expect that every decision they take will prove, with the benefit of hindsight, to be the best one - external factors may affect the market and thus change conditions in the future, after a decision has been taken. However, the Group's investment decisions are undertaken by a Board with a wide range of experience, over many years, in both the property and finance sectors.

(b) The interests of the Company's and Group's employees: The Company has five full-time employees, including the chief executive, two property directors and the finance director. These executive directors sit on the Board with the non-executive directors. The Group also has a growing workforce to support its operations at The Island Quarter, all of which are employed by a wholly-owned group company. The commitment of the Board to its employees is set out in the ESG section of the annual report.

(c) The need to foster the Company's business relationships with suppliers, customers and others: The directors have regularly reported in the Company's annual reports on the constructive relationships that Conygar seeks to build with its tenants and the mutual benefits that this brings to both parties; and this reporting has been extended over the past two years following Principle 3 of the QCA Code to include suppliers and others. This is therefore addressed under Principle 3 in the QCA compliance statement. In recent years, it has been vital to foster our business relationships with tenants given external factors, such as political and economic uncertainty.                                                      

(d) The impact of the Company's operations on the community and the environment: This is also addressed under Principle 3 of the QCA Code in the QCA compliance statement. Due to its size and structure and the nature and scale of its activities, the Board considers that the impact of Conygar's operations as a landlord on the community and the environment is low. With the exception of 1 TIQ, Conygar's assets are used by its tenants for their own operations rather than by Conygar itself. In the past year, the Company has not been made aware of any tenant operations that have had a significant impact on the community or the environment. In relation to 1 TIQ, as well as ongoing and future planned developments, Conygar seeks to ensure that designs and construction comply with all relevant environmental standards and with local planning requirements and building regulations so as not to adversely affect the community or the environment. Further details of this are set out in the ESG section of the annual report.                                                             

(e) The desirability of the Company maintaining a reputation for high standards of business conduct: This is addressed under Principle 8 of the QCA Code in the corporate governance statement and in the QCA compliance statement. The Board considers that maintaining Conygar's reputation for high standards of business conduct is not just desirable - it is a valuable asset in the competitive commercial property market.

(f) The need to act fairly as between members of the Company: The Company has only one class of shares, thus all shareholders have equal rights and, regardless of the size of their holding, every shareholder is, and always has been, treated equally and fairly. Relations with shareholders are further addressed under Principles 2, 3 and 10 of the QCA Code in the corporate governance report and the QCA compliance statement. We have been reviewing how we communicate with shareholders and are encouraging shareholders to adopt electronic communications and proxy voting in place of paper documents where this suits them, as well as to raise questions in writing if they are unable to attend AGMs.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 September 2023

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

CONSOLIDATED Statement of Changes in Equity

for the year ended 30 September 2023

                                                                    Attributable to the equity holders of the Company

CONSOLIDATED BALANCE SHEET       

at 30 September 2023

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 30 September 2023

NOTES TO THE ACCOUNTS

for the year ended 30 September 2023

1.  The financial information set out in this announcement is abridged and does not constitute statutory accounts for the year ended 30 September 2023 but is derived from the financial statements. The auditors have reported on the statutory accounts for the year ended 30 September 2023, their report was unqualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006, and these will be delivered to the registrar of companies following the Company's annual general meeting. The financial information has been prepared using the recognition and measurement principle of IFRS.

2.   The comparative financial information for the year ended 30 September 2022 was derived from information extracted from the annual report and accounts for that period, which was prepared under IFRS and which has been filed with the UK registrar of companies. The auditors have reported on those accounts, their report was unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

3.   Operating LOSS

* Cost in relation to the ZDP share issue included within trade and other receivables at 30 September 2023.

4.     PARTICULARS OF EMPLOYEES

The weighted average monthly number of persons, including executive directors, employed by the Group during the year was 111 (2022: 22). The increase in the year is a result of the employees that have been recruited to operate and manage the restaurant and events venue at 1 TIQ.

5.     DIRECTORS' EMOLUMENTS

       The Board, being the key management personnel, comprises the only persons having authority and responsibility for planning, directing and controlling the activities of the Group.

6.    FINANCE COSTS AND FINANCE INCOME

Finance costs that are directly attributable to the construction of the student accommodation at The Island Quarter, comprising the bank loan interest, commitment fees, management fees, monitoring fees and amortised loan arrangement fees, are capitalised as incurred into investment properties under construction.

7.     LEASES

        Group as lessor:

       The Group receives income from investment properties and existing tenants located at several development sites. At 30 September 2023, the minimum lease payments receivable under non-cancellable operating leases were as follows:   

        The amounts above represent total rental income up to the next tenant only break date for each lease.

        Group as lessee:

       IFRS 16 requires lessees to record all leases on the balance sheet as liabilities, along with an asset reflecting the right of use of the asset over the lease term, so long as they are not for a low value or less than 12 months whereby the lease could be recognised as an expense on a straight-line basis over the lease term.

       The Group was party to a three-year lease for office premises which terminated on 28 April 2022. On 11 March 2022, the Group entered into a subsequent one-year lease, for the same premises, which terminated on 28 April 2023. On 28 February 2023, a further lease was entered into for a 3-year term expiring on 28 April 2026 which incorporates a break option on 28 April each year throughout the term. All of the leases are for an amount of £99,100 per annum.

       The original 3-year lease was recorded on the balance sheet. However, the subsequent one-year lease along with the further 3-year lease, with its annual break optionality, are considered to be of such a short term that the rent has been recognised as an expense in the statement of comprehensive income on a straight-line basis.

8.      TAX

9.       DIVIDENDS

          No dividend will be paid in respect of the year ended 30 September 2023 (2022: nil). 

10.     LOSS PER SHARE

          Loss per share is calculated as the loss attributable to ordinary shareholders of the Company for the year of £29,532,000 (2022: loss of £53,000) divided by the weighted average number of shares in issue throughout the year of 59,638,588 (2022: 58,015,099). There are no diluting amounts in either the current or prior years.

11.     PROPERTY, PLANT AND EQUIPMENT

Property                                                                                                                                           

As at 1 October 2022, the Group's then operational restaurant, beverage and events venue at 1 TIQ was reclassified, at fair value, from an investment property under construction to property, plant and equipment. The fair value on reclassification was derived from the 30 September 2022 valuation, as provided by Knight Frank LLP.

Land and buildings, are stated at the revalued amounts less any depreciation or impairment losses subsequently accumulated. Land is not depreciated. Depreciation on revalued buildings is recognised using the straight-line basis and results in the carrying amount, less the residual value, being expensed in profit or loss over the estimated useful lives of 50 years.

As at 30 September 2023, 1 TIQ was valued by Knight Frank LLP in their capacity as external valuer. The valuation was prepared on a fixed fee basis, independent of the property value and undertaken in accordance with RICS Valuation - Global Standards on the basis of fair value, supported by reference to market evidence of transaction prices for similar properties. It assumed a willing buyer and a willing seller in an arm's length transaction and reflected usual deductions in respect of purchaser's costs and SDLT as applicable at the valuation date. The independent valuer made various assumptions including future rental income, anticipated void costs and the appropriate discount rate or yield.

Plant and equipment

          During the current and prior year, the Group acquired plant, machinery and office equipment required to operate the restaurant, beverage and events venue at 1 TIQ.

          Depreciation is recognised so as to write off the cost of these assets, over their estimated useful economic lives, using the straight-line method at 25% per annum. As the venue at 1 TIQ was only partly operational from 14 September 2022 no depreciation was recognised in the period to 30 September 2022.

12.     INVESTMENT PROPERTIES

Freehold investment properties                                                                                                                                       

The Group's retail park in Cross Hands, Carmarthenshire was sold in the prior year for net proceeds of £18.3 million. As at 30 September 2021, Cross Hands was valued by Knight Frank LLP in their capacity as external valuer.

For the year ended 30 September 2022, Group revenue included £433,000 derived from investment properties leased out under operating leases. Group revenue for the prior year also includes the reversal of a £1,194,000 rent spreading debtor following the sale of Cross Hands.

13.     INVESTMENT PROPERTIES UNDER CONSTRUCTION

          Freehold land and buildings                                                                                                                             

Investment properties under construction comprise freehold land and buildings at The Island Quarter, Nottingham which are held for current or future development as investment properties and reported in the balance sheet at fair value.

Valuations of the Group's investment properties under construction are inherently subjective as they are based on assumptions which may not prove to be accurate and which, as a result, are subject to material uncertainty. This is particularly true for The Island Quarter given its scale, lack of comparable evidence and the early-stage position of this substantial development. As such, relatively small changes to the underlying assumptions of key parameters, such as rental levels, net initial yields, construction costs, finance costs and void periods can have a significant impact both positively and negatively on the resulting valuation, as has been evidenced in the current year.

In preparing their valuation, Knight Frank have utilised market and site-specific data, their own extensive knowledge of the real estate sector, professional judgement and other market observations as well as information provided by the Company's executive directors. The resulting models and assumptions therein have also been reviewed for overall reasonableness by the Conygar Board. Inevitably in a complex model like this, and as noted above, variations in assumptions can lead to widely differing values.

The valuation was prepared on a fixed fee basis, independent of the property value and undertaken in accordance with RICS Valuation - Global Standards on the basis of fair value, supported by reference to market evidence of transaction prices for similar properties. It assumes a willing buyer and a willing seller in an arm's length transaction and reflects usual deductions in respect of purchaser's costs and SDLT as applicable at the valuation date. The independent valuer makes various assumptions including future rental income, anticipated void costs and the appropriate discount rate or yield.

The fair value of Nottingham has been determined using an income capitalisation technique whereby contracted rent and market rental values are capitalised with a market capitalisation rate. This technique is consistent with the principles in IFRS 13 and uses significant unobservable inputs, such that the fair value has been classified in all periods as Level 3 in the fair value hierarchy as defined in IFRS 13. For Nottingham, the key unobservable inputs are the net initial yields, construction costs, rental income rates, construction financing costs and expiry void periods. Net initial yields have been estimated for the individual units at between 4.5% and 7.0%. and debt financing rates, including arrangement fees, estimated to average 8.0% over the construction period. Principal sensitivities of measurement to variations in the significant unobservable outputs are that decreases in net initial yields, construction costs, financing costs and void periods will increase the fair value whereas reductions to rental income rates would decrease the fair value.

As at 1 October 2022, the Group's then operational restaurant, beverage and events venue at 1 TIQ was reclassified, at fair value, from an investment property under construction to property, plant and equipment. The fair value on reclassification was derived from the 30 September 2022 valuation, as provided by Knight Frank LLP.

The historical cost of the Group's investment properties under construction as at 30 September 2023 was £89,198,000 (2022: £62,566,000). The Group's revenue for the year includes £33,000 derived from properties leased out under operating leases (2022: £271,000).

14.   INVESTMENT IN SUBSIDIARY UNDERTAKINGS

          Listed below are the subsidiary undertakings of the Group at 30 September 2023.

15.   DEVELOPMENT AND TRADING PROPERTIES                                                                                                                                         

1.    The Group's development site at Haverfordwest, Pembrokeshire was sold in March 2023 for gross proceeds of £9.65 million realising a profit in the year of £0.13 million.

2.    As set out in the strategic report, the value of Holyhead Waterfront has been fully written down at 30 September 2023.

Development and trading properties are reported in the balance sheet at the lower of cost and net realisable value. The net realisable value of properties held for development requires an assessment of the underlying assets using property appraisal techniques and other valuation methods. Such estimates are inherently subjective as they are made on assumptions which may not prove to be accurate and which can only be determined in a sales transaction.

16.     INVENTORIES

Inventories recognised as an expense in the year total £1,411,000 (2022: £82,000).

17.   TRADE AND OTHER RECEIVABLES

Trade and other receivables are measured on initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method, less any impairment. Impairment is calculated using an expected credit loss model.

Other receivables, as at 30 September 2023, includes £1.2 million paid to date in connection with the proposed acquisition of the 14.7 acre site in Bristol comprising a conditionally refundable £0.5 million exchange deposit, an introductory fee of £0.4 million plus legal and advisory fees in connection with the contract and initial planning related works.

Prepayments, as at 30 September 2023, include £0.3 million of provisional arrangement fees in connection with the placing of the ZDP shares which completed in October 2023. 

18.  TRADE AND OTHER PAYABLES

Trade and other payables are recognised initially at fair value, and are subsequently measured at amortised cost using the effective interest rate method. 

Trade payables, as at 30 September 2023, primarily comprise costs payable to the contractor and other professionals in connection with the student accommodation development at The Island Quarter. These costs were incurred by 30 September 2023 but not paid until October 2023 with the student accommodation development costs funded by way of a further drawdown from the Barclays loan facility.

19.   PROVISION FOR LIABILITIES AND CHARGES

As at 30 September 2021, the Group was party to a services agreement and introduction fee agreement in connection with its investment property at Nottingham. The fee payable was to be calculated on the earlier of the date of sale of the property or 22 December 2021 with settlement to follow, subject to agreement between each party, 31 business days after the fee calculation has been finalised. In January 2022, the introductory fee, calculated at £2.807 million, was paid and the longstop date for the services agreement calculation extended until 22 December 2023.The provisions at 30 September 2023 and 30 September 2022 have been calculated by reference to the value of the property at each balance sheet date after allowing for a priority return and applicable costs. The reduction in the Group's investment property values in the year has resulted in a full reversal of the other services provision at 30 September 2023.

20.   BORROWINGS - non current

Year ended 30 September 2023

On 23 December 2022, the Group entered into a new facilities agreement with Barclays Bank PLC comprising a development facility and an investment facility (together the "facilities") up to £47.5 million in aggregate. The facilities will enable completion of the construction, targeted by the summer of 2024, and subsequent letting of the 693-bed student accommodation development at The Island Quarter site in Nottingham. Security is provided by way of the student accommodation plot as well as the guarantees from the Company noted below.

The maximum term of the combined facilities is 3 years. This includes the development facility for up to 27 months, which subject to the satisfaction of certain conditions prior to the expiry of the development facility, switches into the investment facility for the remainder of the 3-year term. Interest on the development facility is payable on a Sonia-linked floating rate basis for each interest period plus a margin of 3.25%, and interest is payable on the investment facility at the same Sonia rate plus a margin of 1.90%.

The Company has provided cost overrun and interest shortfall guarantees of up to £5 million in connection with the development facility. A capital guarantee is also in place which could increase the Company's guarantee by £2.5 million if certain covenants are not met in advance of drawing the investment facility or the development facility is not repaid when due.

The Group remained compliant with all covenants throughout the period up to the date of this report.

Reconciliation of liabilities to cash flows from financing activities

1.     In addition to the arrangement fees paid in connection with the Barclays loan the Company has also paid a further £149,000 in the year in connection with provisional arrangement fees for both the ASK loan and ZDP share placing. The funds from these were not received until after the year end.

21.   SHARE CAPITAL

22.   CAPITAL COMMITMENTS

As at 30 September 2023, the Group had contracted capital commitments, not provided for in the financial statements, of £19,795,000 (2022: £32,060,000) in connection with the construction, development or enhancement of the Group's investment and trading properties which are expected to be incurred in the next financial year. £19,627,000 relates to the remaining construction costs anticipated to enable completion of the student accommodation development at The Island Quarter which are to be funded entirely by way of further drawdowns from the Barclays loan facility.

On 6 April 2023, the Group, by way of its 80% interest in the shares of Conygar Bristol Limited, entered into a conditional contract with Wholesale Fruit Centre (Bristol) Limited to acquire the 14.7 acre site at St Philips Marsh where the Bristol Fruit Market is currently located, paying an initial deposit of £450,000. Completion of the acquisition is conditional on the satisfaction or, where relevant, waiver of the grant of planning permission for a number of development options by 6 June 2025, subject to extension provisions. In addition, all tenants are required to have surrendered their existing leases by 6 April 2024 and the market licence in respect of the site terminated. The contract is capable of termination if the vacant possession condition has not been satisfied or waived by 6 April 2024 or if the vacant possession and planning permission conditions have not both been satisfied by 6 April 2028.   

23.  RELATED PARTY TRANSACTIONS

        On 27 September 2023, The Group entered into a subscription and shareholders' agreement, with Urban & City Limited, which sets out the commercial terms and profit-sharing arrangements in connection with the possible, acquisition, redevelopment and sale of the land at St Philips Marsh. Included within the agreement is the requirement to pay an introductory fee of £400,000 to Lavignac Securities Limited for it having introduced this opportunity. Mr G S Miller-Cheevers, who is a director of Conygar Bristol Limited owns the entire issued share capital and is the sole director of both Urban & City Limited and Lavignac Securities Limited. The full introductory fee is accrued in these financial statements and was paid in October 2023.

During the year Lavignac Securities Limited also charged £200,000 of fees to the Group, in connection with services provided to progress The Island Quarter and Bristol projects, of which £33,000 is included within trade payables as at 30 September 2023 and was paid in October 2023.

24.   FINANCIAL INSTRUMENTS

         The following tables set out the Group's financial assets and liabilities, all of which are due within one year. The tables have been drawn up based on the undiscounted cash flows of financial liabilities, based on the earliest date on which the Group can be required to pay.

Group trade payables, as at 30 September 2023, primarily comprise costs payable to the contractor and other professionals in connection with the student accommodation development at The Island Quarter. These costs were incurred by 30 September 2023 but not paid until October 2023 with the student accommodation development costs funded by way of a further drawdown from the Barclays loan facility.

25.   EVENTS AFTER THE BALANCE SHEET DATE

On 3 October 2023, the Group, by way of its wholly-owned subsidiary undertaking Conygar ZDP PLC (the "ZDP Co"), placed 5 million zero dividend preference shares (the "ZDP shares"), at a price of £1 per ZDP share, with a further 10 million ZDP shares subscribed for by the Company (each a "subscription share"). The issue price for the subscription shares is required to be paid by the Company on the earlier of the date of transfer of such shares to a third party or 4 October 2028.    

The ZDP shares have a life of five years and a final capital entitlement of 153.86 pence per ZDP share payable on 4 October 2028 (the "ZDP repayment date"), equivalent to a gross redemption yield of 9.0 per cent. per annum on the issue price.

Pursuant to a contribution agreement, dated 3 October 2023, between the ZDP Co and the Company the funds raised from the placing, net of issue costs, have been lent to the Company. The loan is non-interest bearing and repayable, at the latest, five business days before the ZDP repayment date of 4 October 2028. In return, the Company has undertaken to meet all costs and liabilities of the ZDP Co and enable the ZDP Co to meet all its obligations in respect of the ZDP shares.

On 16 November 2023, the Company announced the completion of a £12 million loan facility with ASK. The loan is for an initial term of two years with interest paid at the Bank of England base rate plus a margin of 5.9 per cent. The funds, of which £5m has been drawn at the date of signing these financial statements, will be utilised primarily to further progress the owned and proposed development projects at The Island Quarter and Bristol.

The report and accounts for the year ended 30 September 2023 will shortly be available via the Company's website www.conygar.com or, as required, posted to shareholders and copies may be obtained free of charge for at least one month following their posting by writing to the company secretary, The Conygar Investment Company PLC, 1 Duchess Street, London W1W 6AN.

The Company's annual general meeting will be held at 11:00am on Tuesday, 19 December 2023 at the offices of The Conygar Investment Company PLC, First Floor, Suite 3, 1 Duchess Street, London W1W 6AN.

The directors of Conygar accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of Conygar (who have taken all reasonable care to ensure that such is the case) the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

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