Panther Securities PLC 14 September 2005 INTRODUCTION I am delighted to report the interim figures for the six months to 30th June 2005. Pre-tax profits amount to £2,768,000, compared to £1,726,000 (restated) for the same period last year. Rental income receivable amounted to £4,505,000 as against £4,650,000 for the comparable half year. The figure is lower due to the sales last year of Eurocity (Crawley) Ltd and the Grays Inn Road properties, and of Copthall House, Coventry, early this year. DISPOSALS Coventry The major disposal during this first half year was the sale (in February 2005) of our shops and office complex, Copthall House Coventry at a price of £9,250,000. This property was producing a gross income of approximately £760,000 p.a. and after all expenses a net income of £480,000 p.a. This property was purchased in July 1996 for £3,245,000 and proved to be a good investment which always produced a high return. The December 2003 independent valuation was £5,250,000, but this figure was increased to £8,500,000 for December 2004 accounts after conditional agreements for its sale were in place. Stirling, Scotland In February the freehold shop investment at 14-18 King Street, Stirling was sold for £525,000, this figure being approximately 10% in excess of its book value. This property was one of the Scottish portfolio of Eurocity Properties PLC which has performed better than expected. Abraxus PLC The 29% shareholding in this company acquired in November 2004 for £312,000 was sold in January for a £90,000 profit before costs. Ramsgate We disposed of a small property in High Street Ramsgate which was held for many years as trading stock. This was sold at auction for £400,000, a figure well in excess of its original cost and £160,000 in excess of the last valuation in December 2003. We still hold another property in High Street Ramsgate, for which we are attempting to obtain planning permission for residential development. If successful there should be substantial added value. QUOTED INVESTMENTS Hawtin PLC In June 2004 Panther acquired approximately 15% of Hawtin PLC ("Hawtin"), an AIM listed company at a cost of £1,488,000, one of my private companies having one week previously purchased 14.5% at the same price of 13p per share. I was shortly thereafter invited to and did join its board. In June 2005 Hawtin announced that it was in discussions with Panther which might or might not lead to an offer for Hawtin. Hawtin owns two substantial factory investments and 35 acres of virgin land in Blackwood/Gwent South Wales, the smaller part of which is zoned for residential use and the larger part for industrial use, this use having a much lower value than the residential use. We are currently still in talks and hope to be able to report back with further news in due course. Real Estate Investors PLC We are pleased with the performance of our holding of 8.8% in this property investment company and expect this to prove a profitable investment. Elektron PLC Our holding is approximately 11.5% of this company which is performing extremely well. Its profits have increased substantially and the company has recommenced paying dividends after three years of being unable to do so. FINANCE In the annual report & accounts for the year ending 31st December 2004 I mentioned the arrangements for our new £75,000,000 seven year loan facility with HSBC PLC of which only £43,000,000 is currently drawn down and we have the ability to draw an additional £7,000,000 without providing extra security. Our cash balances are currently over £12,000,000. We thus have considerable ability to make acquisitions. DIVIDENDS Following the sale of Copthall House, a special interim dividend of 10p per share was paid on 28th June 2005. We will be paying a second interim dividend of 5p per share on 28th October 2005 to shareholders on the register at close of business on 30th September 2005. The Board's intention is also to recommend a final dividend of not less than 4.5p per share for the year ended 31st December 2005. THE ACCOUNTS These figures are the first required to be produced under the "new" international financial reporting standards. The main differences so far as they relate to us are twofold: (I) the deferred tax provision is now provided for on the balance sheet as a liability, rather than disclosed by way of a note to the accounts. This provision reduces the net asset value per share by 31p in these interim accounts. In many cases our property sales have been sufficiently above the last book value so as to substantially absorb this deferred tax liability. (2) any surplus on revaluation of property investments will now go directly through the income statement (even though it is unrealised) as opposed to being credited to revaluation reserve on the Balance Sheet. REVALUATION To address this change in presentation, your Directors are proposing to commission an independent revaluation of our entire property portfolio, the result of which will be included in our December 2005 accounts. Our last independent revaluation was carried out over 18 months ago. THE SHAMBLES CONTINUES In my last Annual Report I reported at length on the many problems imposed upon the business community. I briefly mentioned that I expected a new land tax to "help provide extra residential development". It now transpires that the Treasury is considering the inclusion of commercial development in their proposed Development Land Tax. The free market system is already sorting out the perceived problem of the residential market. I would anticipate that a tax on commercial development would cause a substantial drop in new development and thus existing space would increase in value and the massive government bureaucracy which is the major user of space would have to pay a huge amount in extra rents. This would, of course then be passed on to the taxpayer - "plus ca change, plus c'est la meme chose". Some of you may have read that photos for passport applications should no longer show one smiling. Why would any one want to? OUTLOOK Whilst we are noticing an increase in small business failures our widespread portfolio both by way of type of use, i.e. factory/shop/office and residential and location from Elgin to Plymouth, shields us from any severe downturn in one or other particular sector or location. Our finances are currently the strongest they have ever been and with our current liquidity I sometimes feel the hardest thing to do is NOT invest, but I have no doubt that, in due course, suitable attractive opportunities will come our way fully justifying our patience. ANDREW S. PERLOFF Chairman CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2005 Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Sales revenue 4,905 4,648 9,194 Cost of sales (1,216) (765) (1,487) ------- ----- ------- Gross profit 3,689 3,883 7,707 Other income 52 31 98 Administrative expenses (870) (539) (1,988) ----- ----- ------- 2,871 3,375 5,817 Profit on the disposal of investment 662 0 527 properties Movement in fair value of investment 0 0 4,714 properties Finance costs (1,072) (1,879) (3,633) Investment income 7 31 45 Profit on the disposal of available for 87 0 43 sale investments (shares) Profit on sale of subsidiary 66 149 82 Income from associate 147 50 37 ----- ----- ----- Profit before tax 2,768 1,726 7,632 Income tax expense (512) (453) (1,541) ----- ----- ------- Profit for the period 2,256 1,273 6,091 ===== ===== ===== Attributable to: Equity holders of the parent 2,256 1,271 6,087 Minority interest 0 2 4 ----- ----- ----- Net profit for the period 2,256 1,273 6,091 ===== ===== ===== Earnings per share Basic and diluted 13.3 p 7.5 p 35.8 p ------- ------ ------ CONSOLIDATED BALANCE SHEET As at 30 June 2005 30 June 30 June 31 December 2005 2004 2004 ASSETS £'000 £'000 £'000 Non-current assets Property, plant and equipment 7 16 9 Investment property 79,119 93,004 87,812 Interests in associate 407 273 260 Available for sale investments (shares) 3,078 2,115 3,419 ------ ------ ------ 82,611 95,408 91,500 Current assets Stock properties 9,525 8,828 9,755 Available for sale investments (shares) 423 1,600 323 Trade and other receivables 3,424 3,186 4,263 Cash and cash equivalents 13,715 2,094 15,337 ------- ------ ------ 27,087 15,708 29,678 ------- ------ ------- Total assets 109,698 111,116 121,178 ======= ======= ======= EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Capital and reserves Share capital 4,250 4,250 4,250 Share premium account 2,886 2,886 2,886 Capital redemption reserve 571 571 571 Retained earnings 42,460 37,242 42,164 ------ ------ ------ 50,167 44,949 49,871 Minority interest 0 92 94 ------ ------- ------ Total equity 50,167 45,041 49,965 ====== ====== ====== Non-current liabilities Long-term borrowings 47,635 53,362 58,925 Deferred tax liabilities 5,566 7,218 7,154 ------ ------ ------ 53,201 60,580 66,079 Current liabilities Trade and other payables 3,703 3,744 3,845 Short-term borrowings 224 750 210 Current tax payable 2,403 1,001 1,079 ------- ------- ------ 6,330 5,495 5,134 -------- ------- ------ Total liabilities 59,531 66,075 71,213 -------- ------- ------- Total equity and liabilities 109,698 111,116 121,178 ======== ======== ======= CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2005 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Cash flows from operating activities Operating profit before interest, 2,871 3,375 5,817 investment income and tax Add: Depreciation charges for the period 3 7 14 Less: Profit on disposal of 0 28 0 available for sale investments (shares) ------ ------ ------ Operating profit before working 2,874 3,410 5,831 capital change (Increase) / decrease in stock 230 (38) (967) properties (Increase) / decrease in receivables 839 47 1,416 Increase / (decrease) in payables 25 2,334 1,080 ------ ------ ----- Cash generated from operations 3,968 5,753 7,360 Interest paid (1,754) (1,940) (3,999) Income tax paid (765) (171) (1,353) ------- ------- ------- Net cash from operating activities 1,499 3,642 2,008 ======= ======= ====== Cash from investing activities Purchase of plant and equipment (1) 0 0 Purchase of investment properties (282) (1,056) (1,087) Purchase of available for sale (7) (1,465) (1,798) investments (shares) - current assets Purchase of available for sale (100) (832) 0 investments (shares) - non current assets Investment in subsidiaries (76) 0 0 Proceeds from disposal of 66 26 (42) subsidiary Proceeds from sale of investment 9,637 0 9,490 property Proceeds from the disposal of 399 500 830 available for sale investments (shares) - non current assets Dividend income received 7 31 45 Interest income received 516 61 360 ------- ------ ----- 10,159 (2,735) 7,798 Cash from financing activities New loans net of repayments (11,276) (577) 4,447 Dividends paid (1,954) (680) (1,360) -------- ------- ------- (13,230) (1,257) 3,087 --------- ------- ------ Net increase / (decrease) in cash (1,622) (350) 12,893 and cash equivalents Cash and cash equivalents at the 15,337 2,444 2,444 beginning of period ------- ------ ------ Cash and cash equivalents at the 13,715 2,094 15,337 end of period ======= ====== ====== EXPLANATION OF TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS for the six months ended 30 June 2005 Reconciliation of equity and statement of recognised income and expenses Share Share Revaluation Capital Retained Total capital premium reserves Redemption earnings £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2005 4,250 2,886 27,515 783 19,554 54,988 (under UK GAAP) Change in accounting policy 0 0 0 (212) 783 571 - Negative goodwill Change in accounting policy 0 0 0 0 (7,154) (7,154) - Deferred tax Change in accounting policy 0 0 0 0 680 680 - Accrued dividend Change in accounting policy 0 0 0 0 786 786 - shares carried at fair value Change in accounting policy 0 0 (27,515) 0 27,515 0 ----- ------ -------- ----- ------ ------ - Revaluation reserve Balance at 1 January 2005 4,250 2,886 0 571 42,164 49,871 (under IFRS) Addition of negative goodwill 0 0 0 0 17 17 Movement in fair value of 0 0 0 0 (35) (35) available for sale investments (shares) Deferred tax relating to 0 0 0 0 12 12 movement on fair value of available for sale investments (shares) Net profit for the period 0 0 0 0 2,256 2,256 Dividends paid 0 0 0 0 (1,954) (1,954) ----- ------ ------ ------ -------- ------- Balance at 30 June 2005 4,250 2,886 0 571 42,460 50,167 ====== ====== ====== ====== ======== ====== (under IFRS) Notes to the reconciliation of equity at 30 June 2005 Under International Financial Reporting Standards (IFRS), any negative goodwill arising is required to be taken directly to reserves, this has resulted in an increase in retained earnings by £783,000 under IFRS compared to UK GAAP. Under IFRS, deferred taxation is required to be recognised on revaluation gains arising on investment properties. This has resulted in an increase in the deferred taxation provision for £7,154,000 under IFRS compared to UK GAAP. Under IFRS, dividends declared after the balance sheet date should not be recognised as a liability at the balance sheet date. This has resulted in an increase in retained earnings by £680,000 under IFRS compared to UK GAAP. Under IFRS, gains and losses arising on revaluations of available for sale investments (shares) are taken directly to reserves as part of retained earnings. This has had an effect of increasing retained earnings by £786,000 under IFRS compared to UK GAAP. Under IFRS, gains and losses arising on revaluations of investment properties are taken directly through the income statement as part of retained earnings. This has had an effect of increasing retained earnings by £27,515,000 under IFRS compared to UK GAAP. At 1 January At 30 June Reconciliation of equity 2004 2004 £'000 £'000 Shareholders equity (under UK GAAP) 50,104 50,916 Adjustments: Negative goodwill taken to reserves 571 571 Deferred taxation provision (7,189) (7,218) Accrued dividend 680 680 ------ ------ Shareholders equity (under IFRS) 44,166 44,949 ======= ====== Reconciliation of profit 30 June 30 December 2004 2004 £'000 £'000 Profit on ordinary activities after tax 1,494 1,534 (under UK GAAP) Adjustments: Negative goodwill released in period (221) (221) Revaluation of properties through Income statement 0 4,714 Deferred tax (charge) / release 0 64 ------- ------ Profit for the period (under IFRS) 1,273 6,091 ====== ====== Notes to the reconciliation of profit The treatment of negative goodwill under IFRS has had the effect to decrease the reported profit by £221,000 under IFRS compared to UK GAAP at both 31 December 2004 and 30 June 2004. The treatment of revaluation gains under IFRS has had the effect of increasing profit in the period to 31 December 2004 by £4,714,000 compared to UK GAAP. The treatment of deferred taxation under IFRS has had the effect of increasing profit in the period to 31 December 2004 by £64,000 compared to UK GAAP. Explanation of material adjustments to the cash flow statement The treatment of items in the cash flow statement has had no material effect on the overall cash flow position of the group. 1. General information The results for the year ended 31 December 2004 have been audited whilst the results for the six months ended 30 June 2004 and 30 June 2005 are un-audited. The interim report is un-audited and does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The statutory accounts for that year, which were prepared under UK Generally Accepted Accounting Principles (GAAP), have been delivered to the Registrar of Companies. The auditors' opinion on these accounts was unqualified and did not contain a statement made under s237(2) or s237(3) of the Companies Act 1985. There is no material seasonality associated with the group's activities. To the best of the Directors' knowledge, the half yearly interim financial report gives a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and were approved by the board on 8 September 2005. 2. Accounting policies The interim financial report has been prepared in accordance with International Financial Reporting Standards (IFRS's), including IAS34 "Interim financial reporting". In the current year, the group has adopted all of the new and revised standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 January 2005. The adoption of these new and revised standards and Interpretations has resulted in significant changes to the group's accounting policies in the following areas and comparative information has been restated accordingly: a. Excess of fair value of acquired assets and liabilities over purchase consideration (IFRS3 - Business combinations) Where the fair value of the assets and liabilities acquired in a business combination exceeds the purchase consideration, the excess is taken directly to income. Under UK GAAP such amounts are treated as negative goodwill and held on the balance sheet - amounts which arose on past acquisitions have been adjusted within reserves as part of the transition to IFRS. b. Taxation (IAS12) Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation and the Group intends to settle its current assets and liabilities on a net basis. Corporation tax for the interim period is charged at 30% (2004 - 30%), representing the best estimate of the weighted average annual corporation tax rate expected for the full financial year. Under UK GAAP, deferred tax liabilities relating to potential property surpluses were not required to be provided in the accounts unless there was an intention to sell. c. Events after the balance sheet date (IAS10) IAS10 requires that a liability should not be recognised in respect of a dividend until the paying company has an obligation to make the payment. This would normally be when it was declared or approved at the Annual General Meeting in the case of the final dividend for the year. As a result the 2004 proposed final dividend is excluded from the IFRS balance sheet and written back to retained earnings. IFRS also requires that dividends and distributions are presented in a different way to current UK GAAP. Under IFRS, dividends are not considered to be an expense of the paying company so they are not included in the income statement and are instead treated as a reserve item. d. Investment Properties (IAS40) Investment properties, which are properties held to earn rentals and/or capital appreciation are accounted for as follows: i. investment properties are revalued annually by the directors and by independent professional valuers at intervals of not more than three years at fair value at the balance sheet date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise. ii. no depreciation is provided in respect of leasehold investment properties with over 20 years to run. Under UK GAAP, revaluation gains and losses were taken to a revaluation reserve. Accumulated revaluation surpluses relating to investment properties as at the transition date have been reallocated to retained earnings. This treatment does not, however, have any impact on the distributable profits. e. Available for sale investments Under UK GAAP, the group accounted for its available for sale investments at the lower of cost and net realisable value. Under IAS 39, these investments are carried at fair value and classified in the balance sheet as available for sale investments. Movements in fair value are taken directly to equity and recycled through the income statement when the investments are realised. Fair values of these investments are based on quoted market prices where available. 3. Taxation The charge for taxation comprises the following: 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Current UK corporation tax 2,060 453 1,693 Prior year UK corporation tax 29 0 (88) Current year deferred tax (1,577) 0 (64) ------- ------ ------ 512 453 1,541 ======= ====== ====== 4. Dividends Amounts recognised as distributions to equity holders in the period: 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Final dividend for the year 680 - 680 ended 31 December 2004 of 4p (2003 - 4p) per share Special Interim dividend for 1,274 - - the year ended 31 December 2005 of 10p (2004 - 0p) per share * Interim dividend for the year ended 31 December 2004 of 4p per share - 680 680 ---- ----- ------ 1,954 680 1,360 ===== ===== ====== * A S Perloff waived his personal entitlement to the special 10p dividend. 5. Earnings per share Earnings per ordinary share have been calculated on profit attributable to members from continuing activities of the parent company and on 16,998,151 30 June 2004 - 16,998,151) ordinary shares being the weighted average number of ordinary shares in issue throughout the six months ended 30 June 2005. 6. Net assets per share 30 June 30 June 31 December 2005 2004 2004 Net assets per share 295p 264p 293p ----- ----- ---- 7. Copies of this report are to be sent to all shareholders and are available from the Company's registered office at Panther House, 38 Mount Pleasant, London WC1X 0AP. This information is provided by RNS The company news service from the London Stock Exchange