Final Results

RNS Number : 8310O

Energiser Investments PLC

03 June 2020

 

3 June 2020

Energiser Investments plc

("Energiser", the "Company" or the "Group")

FINAL RESULTS FOR YEAR ENDED 31 DECEMBER 2019

Chairman's Statement

I am pleased to report to the members of Energiser Investments plc ("Energiser" or "the Group") for the year ended 31 December 2019.

Energiser Investments plc is an investment company whose strategy is to invest in quoted and unquoted companies to achieve capital growth. The Group continues to look for opportunities and as reported in the interim results the Group is currently invested in an AIM listed company, KCR Residential REIT plc ("KCR").

Results

The Group generated revenues of £2,000 during the period (2018: Nil) from continuing operations. It reduced its administrative expenses from £92,000 to £76,000 and made a loss before tax of £72,000 (2018: loss £498,000) after reversing accrued remuneration due to a former director of £117,000. The loss included a write down of the investment in KCR by £134,000 to £1,181,000. The loss per share was 0.06p (2018: loss per share 0.40p).

The Group's net assets decreased to £1.20m (2018: £1.28m) translating into net asset value per share of 0.97p per share (2018:1.03p).

Investments

In March 2018, Energiser acquired 2,435,710 new KCR ordinary shares at 70p a share for a total of £1,704,997. As at 31 December 2019, the share price of KCR had dropped to 48.5p per share resulting in the Company's investment to be written down to £1,181,000.

KCR is an AIM quoted Real Estate Investment Trust ("REIT") operating in the private rented residential investment market. KCR acquires whole blocks of studio, one and two-bedroom apartments that are rented to private tenants and currently focuses on the UK residential sector. 

On 27 March 2020, KCR released their Interim Results for the six months ended 31 December 2019.  As at 31 December 2019, KCR's investment properties were valued at £23.4m and its net assets were £13.2m. KCR's net asset value per share was 47.84p per share which reflected the conversion of 1,730,765 Restricted Preference Shares to Ordinary Shares and the issue of 10,047,089 new ordinary shares on 6 August 2019.

The directors of KCR commented as follows:

"The Coronavirus has had a global negative impact on demand, supply chains, stock markets and consumer and business confidence.  Whilst the full impact is yet to be seen it is expected that travel restrictions and reduced leisure travel in the near term will have a negative impact on demand for short let accommodation in the United Kingdom. This has potential to negatively impact the occupancy profile and rentals that can be achieved by KCR's portfolio if stock that is currently used predominantly for short let leisure travel is repositioned for longer term lease.

On 12 February 2020, the group completed a £7.9m refinancing of its Coleherne Road, Ladbroke Grove and Lomond Court assets.  The refinancing has a term of 25 years, a five year fixed interest rate and is secured on the assets concerned.  The interest rates relating to these properties reduces from 3.75% per annum to 3.5% per annum.  This transaction delivered £2.9m of free capital to KCR post repayment of the existing bank facility providing KCR with a strong liquidity position.

Due to the rapid development of COVID-19, the degree of uncertainty involved and the unprecedented nature of the challenges posed by the coronavirus situation, the directors are of the opinion that it is too soon to quantify what financial impact that the COVID-19 pandemic will cause but are monitoring the situation closely."

Outlook

The Group will continue to manage its investment in KCR and will pursue other investment opportunities to achieve capital growth. Despite the uncertainty, the directors are satisfied that the Group is in a sound position to face the challenges ahead.

Group Strategic Report

The Directors present their Strategic Report on the Group for the year ended 31 December 2019.

Review of the business

The Company is registered as a Public Limited Company (plc). The Company's shares of 0.1p each are listed on AIM, part of the London Stock Exchange.

The Group continues to hold its investment in KCR Residential REIT plc. The chairman's statement provides further details on KCR's activities.

Results and performance

The results of the Group for the year show a loss on ordinary activities before and after taxation of £72,000 (2018: £498,000). The shareholders' funds were £1,204,000 (2018: £1,276,000).

Strategy

Energiser's strategy as an investing company is to invest, directly or indirectly, in quoted and unquoted companies and in the property sector to achieve capital growth in the medium term.

Key performance indicators ("KPIs")

The Group's KPIs are the return on project investment and the net assets position of the Group including net assets per share. These indicators are monitored by the Board and the details of performance against these are given below.

	2019	2018
Net assets	£1,204,000	£1,276,000
Net assets per ordinary share	0.97p	1.03p

Principal risks and uncertainties

The management of the business and the nature of the Group's strategy are subject to a number of risks. The Directors have set out below the principal risks facing the business. Where possible, processes are in place to monitor and mitigate such risks. The Group operates a system of internal control and risk management in order to provide assurance that the Board is managing risk while achieving its business objectives. No system can fully eliminate risk and, therefore, the understanding of operational risk is central to the management process.

To enable shareholders to appreciate what the business considers are the main operational risks, they are briefly outlined below:

	Risk	Potential impact	Strategy
Housing market	A fall in the housing market in the regions in which the Group operates	· Inability to realise maximum value in a timely fashion · Adverse effect on the timing of sales	The Group seeks to ensure that investment is made either directly or indirectly into the residential property sector with a view to preserving capital
Interest rates COVID-19	Significant upward changes in interest rates The effect of the uncertainties caused by COVID-19 and how long the crisis will continue for	Increased borrowing costs and a detrimental effect on profit The impact of COVID-19 on the carrying value of the Group's investment	The Group mitigates any adverse exposure to interest rate changes by controlling its gearing The Group will liaise with the management of its investee company to assess its underlying net asset and liquidity position

Financial risk management objectives and policies

The Group's policy in respect of financial instruments and risk profile is set out in the Directors' Report on pages 5 to 7 and in Note 15 to the accounts.

Future developments

The Group will continue to focus on direct and indirect investment in quoted and unquoted companies including those in the property sector.

Group statement of comprehensive income

for the year ended 31 December 2019

	Notes	2019 £'000	2018 £'000
Continuing operations
Revenue arising in the course of ordinary activities		2	-
Cost of sales		-	(1)
Gross profit / (loss)		2	(1)
Reversal of accrued remuneration for former director		117	-
Administrative expenses		(76)	(92)
Operating profit/(loss)		43	(93)
Finance income		-	6
Loss on investments		(134)	(411)
Recovery of bad debt written off in previous periods		19	-
Loss before taxation		(72)	(498)
Taxation		-	-
Loss for the year attributable to shareholders of the Group		(72)	(498)
Total comprehensive loss for the year attributable to shareholders of the Group		(72)	(498)
Loss per share
Basic and diluted loss per share from total and continuing operations		(0.06)p	(0.40)p

Diluted loss per share is taken as equal to the basic loss per share as the Company's average share price during the period is lower than the exercise price of the share options and therefore the effect of including share options is anti-dilutive.

Group statement of financial position

as at 31 December 2019

	Notes	2019 £'000	2018 £'000
ASSETS
Non-current assets
Investments		1,181	1,315
		1,181	1,315
Current assets
Trade and other receivables		5	8
Cash and cash equivalents		96	177
		101	185
Total assets		1,282	1,500
LIABILITIES
Current liabilities
Trade and other payables		78	190
Tax and social security		-	34
		78	224
Total liabilities		78	224
Net assets		1,204	1,276
EQUITY
Share capital		2,392	2,392
Share premium account		7,189	7,189
Convertible loan		88	88
Merger reserve		1,012	1,012
Retained earnings		(9,477)	(9,405)
Total equity		1,204	1,276

Group statement of changes in equity

for the year ended 31 December 2019

	Share  capital £'000	Share premium account  '000	Convertible loan £'000	Merger reserve £'000	Retained earnings £'000	Total equity £'000
At 1 January 2018	2,392	7,189	88	1,012	(8,907)	1,774
Total comprehensive loss	-	-	-	-	(498)	(498)
Balance at 31 December 2018	2,392	7,189	88	1,012	(9,405)	1,276
Total comprehensive loss	-	-	-	-	(72)	(72)
Balance at 31 December 2019	2,392	7,189	88	1,012	(9,477)	1,204

Group statement of cash flows

for the year ended 31 December 2019

	2019 £'000	2018 £'000
Cash flows from operating activities
Loss before taxation	(72)	(498)
Adjustments for:
Loss on sale of investment properties	-	23
Fair value adjustment for listed investments	134	390
Interest expense	-	-
Interest income	-	(6)
Decrease in trade and other receivables	3	3
(Decrease)/ increase  in trade and other payables	(146)	5
Net cash used in operating activities	(81)	(83)
Cash flows from investing activities
Interest received	-	6
Purchase of investments	-	(1,705)
Net cash used in investing activities	-	(1,699)
Net decrease in cash and cash equivalents	(81)	(1,782)
Cash and cash equivalents at beginning of financial year	177	1,959
Cash and cash equivalents at end of financial year	96	177

Notes to the financial statements

for the year ended 31 December 2019

1. Income and segmental analysis

The Group generates income by way of profits or losses on investments. It also generated rental and other related income from letting properties and has provided a loan to a housebuilder under a mezzanine funding arrangement. The investment properties were sold in 2017 and whilst some residual income has accrued, this activity has now ceased. These operating segments are monitored by the Executive Directors and strategic decisions are made on the basis of segment operating results. The segmental analysis of operations is as follows:

Segmental analysis by activity

	2019        '000	2018        '000
Segment result
Investment activities:
Reversal of accrued remuneration for former director	117	-
Administrative expenses	(76)	(105)
	(41)	(105)
Rental activities:
Net rental income	2	(1)
Administrative expenses	-	13
	-	12
Operating loss	(43)	(93)
Finance income	-	6
Finance costs	-	-
Other gains and losses	(115)	(411)
Loss before tax	(72)	(498)

 

	2019        '000	2019        '000
Segment assets
	-	-
Investment activities:
Non-current assets - investment	1,181	1,315
Other	101	185
Rental activities:
Current assets - other	-	-
Total assets	1,282	1,500

 

	2019        '000	2019        '000
Segment liabilities
Investment activities:
Current liabilities	78	224
	78	224
Rental activities:
Current liabilities	-	-
	-	-
Total liabilities	78	224
Total assets less total liabilities	1,204	1,276

The activity of investments arose wholly in the United Kingdom.

2. Investments

	2019 £'000	2018 £'000
Investments listed on a recognised stock exchange	1,181	1,315

In accordance with IFRS 7, financial instruments are measured by level of the following fair value measurement hierarchy:

• Level 1: quoted prices in an active market for identical assets or liabilities. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm's-length basis. The quoted market price used for financial assets held by the Group is the closing price on the last day of the financial year of the Group. These instruments are included in level 1 and comprise FTSE and AIM-listed investments classified as held at fair value through profit or loss.

• Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

• Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in unquoted companies) is determined by using valuation techniques such as earnings multiples. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

There have been no transfers between these classifications in the period (2018: none). The change in fair value for the current and previous years is recognised through profit or loss.

All assets held at fair value through profit or loss were designated as such upon initial recognition. Movements in investments held at fair value through profit or loss are summarised as follows:

		Level 1 Equity investments £'000	Total investments £'000
Cost
At 1 January 2019		1,705	1,705
At 31 December 2019		1,705	1,705
Fair value losses
At 1 January 2019		(390)	(390)
Fair value adjustment		(134)	(134)
At 31 December 2019		(524)	(524)
Fair value
At 31 December 2019		1,181	1,181
At 31 December 2018		1,315	1,315

3. Fair Value through profit and loss assets

	Investment £'000
Cost
At 1 January 2019	1,705
At 31 December 2019	1,705
Fair value movements
At 1 January 2019	(390)
Fair value adjustment	(134)
At 31 December 2019	(524)
Fair value
At 31 December 2019	1,181
At 31 December 2019	1,315

Energiser Investments plc acquired shares in KCR Residential REIT plc at a price of £0.70 per share. The investment was classed as fair value through profit and loss in accordance with IFRS 9. The investment was valued downwards at the year-end in accordance with IFRS 13. The closing value at 31 December 2019 was £1,181m.

Note:

The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 December 2019 or 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the registrar of companies, and those for 2019 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2019 or 2018.

The Group's statutory accounts have been prepared under the historical cost convention, except as modified by the fair value of investment property and financial assets and liabilities (including derivatives). They have also been prepared in accordance with the Companies Act 2006 applicable to companies reporting under IFRS and in accordance with the accounting policies set out in the Group's statutory accounts and International Financial Reporting Standards (IFRS) as adopted by the European Union and that were effective at 31 December 2019.

Those financial statements have been prepared on the going concern basis, the Directors having considered the cash forecasts for the next 18 months from the date of the approval of these financial statements. In doing so they have given due regard to the risks and uncertainties affecting the business as set out in the Strategic Report and the Directors' Report, the liquidity of investments and the liquidity risk. The uncertainties as a result of COVID-19 will potentially adversely impact the occupancy profile and rentals that can be achieved in KCR's portfolio if properties that are currently used predominantly for short let leisure travel are repositioned for longer term lease.  This may have an impact on KCR's net asset value and thus on its share price if the uncertainty lasts for a long period of time.  The Group's forecasts indicate that it may need to realise a small amount of its investment in KCR in the absence of any further equity injection during the next 18 months which should not present any difficulties.  On this basis, the Directors have a reasonable expectation that the funds available to the Group are sufficient to meet the requirements indicated by those forecasts.  

The AGM will be held at Burnham Yard, London End, Beaconsfield, HP9 2JH at 10.00 am on 30 June 2020.

Energiser's Annual Report and Accounts along with the Notice of Annual General Meeting will be posted to shareholders shortly and will be available to view and download on Energiser's website at www.energiserinvestments.co.uk .

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For further information please contact:
Energiser Investments Plc
John Depasquale	[phone]
Nishith Malde	[phone]
WH Ireland (NOMAD & Broker)	www.whirelandcb.com
Mike Coe / Chris Savidge	0207 220 1666

 

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