Trident Estates plc - Full-Year Results
On 13 May 2020, Trident Estates plc published its Annual Report & Financial Statements for the year ended 31 January 2020.
Performance Overview
During the period under review, Trident Estates generated €1.15 million in revenues representing an increase of just over 7% over the previous comparable period. On the expenditure side, operating costs contracted by 15.2% to €0.79 million largely reflecting the reclassification of lease expenses as finance costs upon the adoption of accounting rule ‘IFRS 16 – Leases’. In fact, net finance costs for the year amounted to €0.16 million (FY2018/19: nil). Meanwhile, Trident Estates did not recognise any fair value gains on investment property compared to an upward revision of €0.8 million recorded in the 2018/19 financial year. This led to a significant drop in pre-tax profits to €0.33 million (FY2018/19: €1.09 million) and a net profit of €0.07 million (FY2018/19: €0.78 million).
The Statement of Financial Position shows that total assets surged by almost 50% to €63.9 million reflecting the higher value of investment property under development – namely Trident Park – to €22.7 million against a value of €15.2 million as at the end of January 2019; the increase of almost €10 million in the cash balance to €13.9 million; as well as recognition of right-of-use assets amounting to €3.75 million.
Similarly, total liabilities also increased considerably to €11.4 million (31 January 2019: €4.92 million) on the back of new bank borrowings taken on by the company (€2.21 million) as well as the recognition of lease liabilities amounting to €3.77 million.
Overall, shareholders’ funds increased by nearly 39% to €52.5 million which, in turn, translates into a net asset value per share of €1.2509 (31 January 2019: €0.9007).
Dividend
In view of the prevailing situation related to the ‘COVID-19’ pandemic, the Directors of Trident Estates resolved not to recommend the payment of a dividend. However, they noted that the situation will be kept under careful review and that dividend distributions will be resumed immediately once it would be appropriate to do so.
Outlook
In their commentary, the Directors explained that until the outbreak of the ‘COVID-19’ pandemic, works on the development of Trident Park were progressing largely in line with the projected completion timelines and in accordance with allocated budgets. Since then, construction progress on site has continued to be generally satisfactory. However, there are signs emerging of a tighter supply of experienced workers (including those from overseas due to travel restrictions or self-quarantine measures) and certain suppliers have already given notice of potential delivery and logistical delays. Whilst Trident Estates is constantly revising the work plans in order to contain certain delays, should these delays persist they would have the impact of causing a delay in the completion date of the project. Accordingly, delays in completion dates and rescheduling of works may result in claims being submitted for an extension of time on the part of contractors involved on the project.
At this stage, and based on the best information available, the company’s revised project plan is that Trident Park will now be completed by the first half of 2021 instead of Q1 2021. However, this estimate is dependent on no further material deterioration in the situation insofar as the availability of labour, raw materials and equipment delivery dates are concerned, or as a result of any further restrictive measures that may be imposed by Government. The company added that it has sufficient funding in place to enable the completion of the project by the new target date.
Trident Estates also noted that once completed, the financial outcome of the development will be dependent on two key factors: (i) the rate at which the property will be let; and (ii) the rental rates (and related charges) achieved on the leases. Given the outbreak of the pandemic, and the consequential impact on economic activity in Malta and on business confidence in general, Trident Estates has been reassessing the business plans for the Trident Park project by applying different assumptions and scenarios. The current expectation is that the take up of space will be slower and the rental rates will be subject to downward pressure on those parameters originally anticipated. However, much will depend on the duration of the current restrictions both in Malta and elsewhere, and the shape of the eventual economic recovery. Moreover, the market rental rates and the economic climate prevailing at any particular time may have an influence on the carrying value of Trident Park.
Meanwhile, Trident Estates reiterated its belief that the quality of the design of the Trident Park project, not least its outstanding environmental credentials and the unique campus style offering, will result in the finished development having competitive advantage as and when the market recovers. For these reasons, the Board of Directors has elected to proceed with the expeditious completion of the development.
With respect to the company’s leased properties, Trident Estates noted that it has been approached by its tenants seeking a period of rental reductions and/or deferral. Trident Estates approved concessions up to the end of May in the interest of retaining good tenants, and, depending on circumstances, it may be necessary to extend the period of such concessions. Whereas the company does not believe that any such rental abatements will have a material effect on its financial position (with particular reference to the value of the current rental property portfolio amounting to €12.4 million), it will nonetheless result in temporary reductions in rental income.