Palace Capital Reports Interim Results: NAV Falls 14% as New Board Takes Action

Palace Capital interim results explained – NAV down 14% but the new board is moving fast

Palace Capital’s latest interim results are a bit of a bruising read, but they are not a simple disaster story. The headline damage is clear enough: net asset value, or NAV, fell 14% to 210p per share, the portfolio valuation dropped 16% on a like-for-like basis, and the company reported an IFRS loss before tax of £5.4 million.

That said, there is a second story running alongside the pain. Palace Capital is debt free, had £12.8 million of cash at 31 March 2026, sold Halifax above book value, and the new board is plainly trying to reset strategy, cut costs and prioritise buybacks over dividends.

Key Palace Capital numbers from the March 2026 half year results

Metric	Six months to 31 March 2026	Six months to 31 March 2025
Adjusted profit/(loss) before tax	£(0.1) million	£1.5 million
IFRS profit/(loss) before tax	£(5.4) million	£2.3 million
Adjusted EPS	(0.3)p	5.1p
Basic EPS	(26.7)p	8.2p
NAV per share	210p	244p at 30 September 2025
Net asset value	£42.5 million	£49.4 million at 30 September 2025
Like-for-like portfolio valuation change	(16.0)%	0.8%
Cash	£12.8 million	£4.6 million at 30 September 2025
Dividend paid in the period	7.5p	7.5p

The short version is this: Palace has more cash, but its properties are worth less. For a property company, that mix matters a lot because falling valuations hit NAV directly, while cash gives the board options.

Why Palace Capital swung to a loss – weaker rental income and heavy valuation falls

There are two layers to these results. First, the underlying business weakened. Adjusted loss before tax was £0.1 million, against a £1.5 million profit a year earlier, mainly because Palace has sold assets and therefore has less rent coming in.

Gross rental income fell by £0.7 million, and there was no dilapidations income this time versus £0.4 million in the prior period. Dilapidations are payments from tenants to cover wear, tear or reinstatement costs at lease end. Finance income also dropped by £0.3 million because average cash balances were lower during the half year.

Adjusted loss versus IFRS loss – what is the difference?

Adjusted numbers strip out big non-cash swings and one-off items, so they give a cleaner view of the operating business. IFRS numbers include property revaluations and impairments, which can be brutal in a falling market.

That is exactly what happened here. Palace took a fair value loss on investment properties of £5.5 million and an impairment loss on trading properties of £0.5 million, which pushed IFRS loss before tax to £5.4 million.

That matters because it was not just accounting noise on the edges. Those valuation falls were large enough to knock NAV per share down by 34.2p in six months, with 29.6p of that coming from investment property and trading property markdowns.

Palace Capital property portfolio valuation fall – Northampton and Newcastle did most of the damage

At 31 March 2026, the independently valued portfolio stood at £31.3 million across five properties, down from six at September 2025. By value, the mix is 59% office, 30% leisure and 11% residential.

The big problem areas were leisure in Northampton and offices in Newcastle. That tells you this is not a broad and balanced portfolio anymore – individual assets now carry a lot of weight in the story.

Sol, Northampton – the sharpest valuation hit

Sol, Northampton fell 25% from £12.8 million at 30 September 2025 to £9.6 million at 31 March 2026. The company says valuers pushed yields out sharply, with the initial yield rising to 16.2% from 11.4% and the equivalent yield to 17.5% from 12.7%.

In plain English, investors now demand a much higher return to own this type of asset, so the valuation comes down. That is negative, full stop. The more encouraging part is that two units were let during the period and a cost audit identified savings of more than £50,000 a year.

St James’s Gate, Newcastle – better building, but still work to do

The office market in Newcastle is described as highly competitive, with occupiers showing a clear “flight to quality”. That means tenants prefer newer, greener and higher-spec offices, leaving older buildings struggling.

Palace has now completed a £1.49 million refurbishment of two vacant floors at 2 St James’s Gate, taking the EPC rating to B. That is positive, but the company is honest that a successful letting is needed before a sale makes sense, and Orega occupancy at 70% in May 2026 is still not enough to deliver the base rent envisaged under the management agreement.

Hudson Quarter, York and Exeter – some progress, but not clean exits yet

The remaining eight residential properties at Hudson Quarter, York were valued at £2.95 million, down 13% like-for-like. Three apartments were under offer at the valuation date, and two of those sales have since completed, broadly in line with valuation.

That is decent evidence the York pricing may be realistic. But the market is still tough, with higher mortgage rates making buyers cautious, and the council’s “long term empty premium” on council tax adds extra pressure to shift unsold flats.

At The Forum, Exeter, the asset is under offer, but completion carries a high degree of risk because the sale depends on vacant possession and planning approval. So yes, there is progress, but it is not money in the bank yet.

Palace Capital buyback versus dividend – why the board is changing tack

This is one of the most important bits for private investors. Palace says it has distributable reserves of £6.9 million, and that limits how much cash it can legally return to shareholders.

The board has decided the best use of those reserves is to prioritise share buybacks, not another dividend for now. It has not declared a dividend at this time and says using the existing buyback authority in full will likely consume most of the remaining distributable reserves, if approved at the General Meeting on 29 June 2026.

The logic is understandable. The company had already paid dividends that exceeded its unaudited property rental business profits for the 12 months ended 31 March 2026 and were also above adjusted earnings for this period. In other words, the dividend was not covered.

For income investors, that is the obvious negative. For total return investors, buybacks can make sense if management believes the shares are undervalued versus what can be realised from the assets.

What the new Palace Capital board is changing – costs, capital returns and governance

The tone from the new board is strikingly sharper than usual. Christian Kappelhoff-Wulff says the March valuation was “painful and disappointing”, but also more realistic, and says the board is examining the conduct of the previous board after shareholder requests.

That is unusual language in an interim statement and suggests governance will remain part of the Palace story. It does not prove wrongdoing, and no outcome is disclosed, but it does tell you the new leadership wants shareholders to know it is digging around.

On costs, there is at least some genuine progress. Administrative expenses in the half year were £1.1 million, including £0.3 million related to former directors and staff, while recurring administrative expenditure came down to £0.8 million from £1.0 million. The current run rate is now said to be below £0.8 million annualised.

My view on Palace Capital after these interim results

My read is that this is a messy but more credible update. The bad news has not been hidden: property values have been marked down hard, earnings have weakened, and the dividend has effectively been paused in favour of buybacks.

The positive case rests on three points. Palace is debt free, it has £12.8 million of cash, and the new board looks far more ruthless on costs and capital allocation than what came before. Selling Halifax for £9.9 million, which was 8.7% above its prior valuation, also shows not every asset is a write-down waiting to happen.

The risk is that the remaining portfolio is concentrated and still exposed to weak office and secondary leisure markets. So this now looks less like a steady income REIT and more like a realisation and capital return story.

That shift matters. If the board can keep selling sensibly, protect cash and buy back shares at attractive levels, shareholders could still do well. But for now, the headline is simple enough: Palace Capital is in repair mode, not cruise mode.