Alina Holdings PLC: Interim Report (30 June 2023)

Alina Holdings PLC

Alina Holdings PLC

(Reuters: ALNA.L, Bloomberg: ALNA:LN)

("Alina" or the "Company")

Interim Results for the period ended 30 June 2023

The Company is pleased to announce its results for the six months ended 30 June 2023. The interim results have been submitted to the FCA and will shortly be available on the Company’s website: www.alina-holdings.com

Highlights for the 6 months ended 30 June 2023

GROUP RESULTS 1H 2023 versus 1H 2022

• Gross Rental Income declined by 16% due to the sale of Shaw in April 2023 and increased vacancy rates at Hastings.
• Hastings is currently being refurbished following the departure of Argos (now part of J Sainsbury PLC). The refurbishment process has been delayed due to the need for Asbestos Treatment. During remediation further incidence of Asbestos was identified, resulting in further delays as well as significantly more work and higher costs than originally foreseen. Notwithstanding these delays, the Board is confident that gross rental income of the property should be substantially increased once works are completed in H2 2023.
• At Brislington, advanced stage architectural designs have been completed for the re-development of the site into a mix of commercial units and residential apartments. The Board believes that the project has good potential for planning consent as it will assist the local council in achieving their need for a substantial increase in Social Housing.
• Shares in investment holding HEIQ Plc were down 63% over the H1 2023 period. Subsequently, the Company failed to post its accounts on a timely basis, which has resulted in the suspension of its shares.
• During the period under review Book Value per share declined 14.5% from 26.9p as at 31 December 2022 to £23p per share.

Chairman’s Statement

Trading update

First Half 2023 results were disappointing due to the negative impact of refurbishment delays at the Hastings property and the decline in HEIQ shares. I am confident that once the refurbishment in Hastings is completed that the Company will find a solid tenant for the vacant unit at market rates, above what the previous tenant was paying. Notwithstanding the cyclical nature of all chemical companies, HEIQ’s performance has been more than disappointing, and the suspension of the Company’s shares, due to delayed Audit, is clearly very concerning.

Macro Background/Outlook

Western economies are in the eye of the storm, with stock market bulls and bears reacting (read over reacting!) to every snippet of economic news and comment from the FED and the ECB. China’s growth has stalled and the World waits to see what the impact will be on Western inflation and economic growth. Worryingly, inflation in Europe having shown signs of abating, now appears to be on the rise again.

Niall Fergusson, Bloomberg columnist and the Milbank Family Senior Fellow at the Hoover Institution at Stanford University recently wrote…As Humpty Dumpty says to Alice: “When I use a word, it means just what I choose it to mean — neither more nor less.” Inflation has been above target for nearly two and a half years. Whenever it returns to 2%, we’ll be told: “That’s what we meant by transitory!”

The Company’s Board is still in the “Markets are overvalued camp”, and believe that Central Bank fiddling and tinkering will eventually result in the likelihood of stagflation in the UK and Europe and, if they get lucky, only recession in US.

Recessions have a habit of creeping up on one and then falling off a cliff. Past downturns have taken longer than expected to manifest themselves, but when they arrive they invariable bring pain and a dose of sanity back to markets as they adjust to the new “normal”.

Given that the FED and ECB are still way behind the curve, their efforts to curb inflation are, in my opinion, ironically adding to inflation rather than killing it. The outcome will be a slow and painful death probably resulting in a longer recession, rather than the desired short sharp recessions which characterised the past couple of corrections. In our opinion, the current increase in interest rates will severely damage property prices in the US, UK and Europe (the greatest store of personal value for most families), which will ultimately result in a substantial stock market correction … that I and other (older!) participants have alluded to for some time.

Operations

Real Estate

Hastings: the detection of asbestos in Hastings has delayed the letting of the largest area of the property (nearly 50%). Remediation is, however, now nearing completion and the unit will shortly be available to rent, which should have the dual positive impact of reducing costs (the Company is currently paying rates) whilst also substantially increasing revenues. With regard to the upper floors, planning permission has been applied for, and we are currently awaiting consent from the local council for conversion to mixed residential and commercial use.

Bristol: the local council is currently carrying out recladding to the residential tower, which abuts our retail units.  Unfortunately, refurbishment of the adjoining property has been substantially delayed due to the scarcity of replacement cladding.

Staffordshire: the refurbishment of the last unlet unit at Company’s small residential property in Staffordshire is now nearing completion and the property will be put into auction in Q4 2023.

Holdings

1. DCI Advisors Ltd (DCI LN)

https://www.dciadvisorsltd.com/index.html

As at June 30 2023, ALNA owned ~3.2% of DCI Advisors Ltd., which is focused on the development of luxury leisure properties in the Eastern Mediterranean Greece, Cyprus and Croatia).

The company has had a torrid life and has unsuccessfully been trying to wind down its property portfolio and return capital to shareholders for a number of years.

DCI shares are up +15% YTD, in anticipation of the potential sale of Company assets, whilst the share price movement is welcome we are disappointed with the Board’s decision to use debt to fund working capital, which it can neither service nor repay unless the sale of property assets is successfully concluded…in an environment of increasing interest rates.

2. HEIQ plc (HEIQ LN)

https://www.heiq.com/investors/

We are decidedly annoyed with the situation at HEIQ. The company’s shares have been suspended since 2 May 2023 due to the company’s inability to file audited accounts for 2022, “as a result of the acquisition and implementation of new systems as well as changes to processes within the organisation. This has impacted the timing of the audit work, in this first year for the company's new auditor, Deloitte”.

In both HEIQ’s RNSs of 27 April 2023 and 2 May 2023 the company stated, “The Directors anticipate that the Company will be in a position to publish the audited report and accounts in the coming weeks.” In its RNS of 2 May 2023, the company stated that “The company will provide further market updates around the expected timing of the annual results publication once its financial reporting and the audit work is sufficiently progressed”. The coming weeks have come and gone, and it is now more than 4 months since HEIQ’s shares were suspended and no further announcements have, to the best of our knowledge, been made which, given the number of acquisitions that the Company has made in the past 18 months, gives us substantial cause for concern.

Conclusion

The most recent inflation data might seem to suggest that warnings of a reprise of the 1970s were wrong. The optimists have been in the ascendancy since last spring’s mini-banking crisis. Now, the consensus, with the exception of a few older, maybe wiser heads(?), suggest that the economy can return to the Fed's target of 2% rate of inflation without a recession. Lest we forget, pain-free disinflation was a recurring delusion of the 1970s which suffered painful (Central Bank induced) recessions in 1970, 1974-75 and 1980.  
 

As a reminder for those too young to know, or too old to remember, monetary policy acts with long and variable time-lags. The time it takes from the moment the yield curve inverts (as happened in July 2022) to the start of a recession has historically ranged between 4 and 16 months. Higher interest rates impact an economy in multiple complex ways, but ultimately they are bad news for all indebted companies or individuals who need to refinance their liabilities in an environment of rising interest rates.

The idea that the West can recover from the fiscal and monetary excesses of the past twenty years without economic pain seems like wishful thinking…unless, that is, you believe in miracles or fairy tales…which brings us back to Humpty Dumpty and Alice in Wonderland.


Duncan Soukup
Chairman
Thalassa Holdings Ltd
28 September 2028

Responsibility Statement

We confirm that to the best of our knowledge:

1. the condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation as a whole as required by DTR 4.2.4 R;
2. the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
3. the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein).

Cautionary statement

This Interim Management Report (IMR) has been prepared solely to provide additional information to shareholders to assess the Company’s strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

Duncan Soukup

Chairman

Thalassa Holdings Ltd

28 September 2023

Interim Condensed Consolidated Statement of Income

For the six months ended 30 June 2023