Final Results
Highcroft Investments PLC
01 April 2008
Highcroft Investments PLC
Preliminary results for the year ended 31 December 2007
Key highlights
• Gross property income up 4.3% to £2,126,000
• Profit for the year on revenue activities up 4.1% to £1,562,000
• Basic loss per share on all activities 8.5p
• Adjusted earnings per share (on revenue activities) up 4.1% to 30.2p
• Net asset value per share down 2.8% to 807p
• Total dividends up 4.0% to 14.25p per share
• Final dividend of 9.25p payable on 4 June 2008
• The group converts to a REIT on 1 April 2008
Enquiries:
John Hewitt, Chairman 01865 840 023
Highcroft Investments plc
Adam Sumner 020 7149 6000
Charles Stanley Securities
Chairman's Statement
Financial results - revenue activities
Profit before taxation on revenue activities decreased to £1,833,000 from
£1,956,000 in 2006, a fall of 6.3% which was after incurring costs of £147,000
in respect of the potential conversion to a REIT. Gross income was £2,532,000
as compared with £2,527,000 in 2006. Gross property income rose from £2,038,000
to £2,126,000, an increase of 4.3%.
Financial results - capital activities
During 2007, there were no property acquisitions (2006 £7,437,000) and £6,000
was spent on one property. New investments in equities totalled £1,164,000
(2006 £1,029,000). The proceeds from property disposals during the year
amounted to £2,619,000 (2006 £2,032,000) while equity disposals generated
£2,429,000 (2006 £1,000,000).
The net gains on these disposals amounted to £128,000 (2006 £201,000),
comprising £101,000 of net gains on property disposals and £27,000 of net gains
on disposal of equity investments. The net gain after taxation of £91,000 (2006
£118,000) was transferred to realised capital reserve.
Property
There was a valuation deficit on the property portfolio of £3,431,000 and, after
disposals, the value of the portfolio was £35.5 million (2006 £41.5 million).
During the year, £1,865,000 was realised by the sale of one commercial office
which had, effectively, already been replaced by our office acquisition in
Victoria in 2006.
Listed investments
The All Share Index rose by 2% during 2007 and we made several disposals from
the equity investment portfolio which gave a net gain of £27,000 in the income
statement. During the course of 2007 there was a net divestment from the equity
investment portfolio of £1,265,000.
Summary
Despite difficult markets, the net asset value per share fell by only 2.8% to
807p (2006 830p). Total shareholders funds were £41,713,000 (2006 £42,875,000).
The continuing increase in income and operating profits enables us to increase
dividends in line with the rate of inflation. Proposed dividends for 2007 are
up 4.0% on 2006. The basic earnings per share, which take account of capital
activities, are negative and show a loss per share of 8.5p per share but
adjusted earnings per share, adjusted to take out the effect of capital
activities, are up 4.1% to 30.2p per share.
Current trading and prospects
The property market fell sharply in the second half of 2007 in what has been
regarded by many as a long awaited correction. We are still looking at
potential investments and will not be averse to making acquisitions which we
believe will give financial return in the medium term.
Equity markets were turbulent in the second half of 2007 and this has continued
into 2008. We do not expect markets to be very different in 2008. Our
activities in these markets are able to be more short term than those in the
property market but we do still predominantly seek return in the medium term.
Our AGM is always a forum for the expression of views and comment on our
performance and I suspect that this year will be no different. My fellow
directors (to whom go my thanks on behalf of shareholders for their hard work
and deliberations in a difficult year) and I look forward to seeing you at this
year's meeting on 21 May 2008.
J HEWITT
Chairman
01 April 2008
Consolidated income statement
for the year ended 31 December 2007
Note 2007 2006
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gross rental revenue 2,126 - 2,126 2,038 - 2,038
Property operating expenses (99) - (99) (136) - (136)
Net rental revenue 2,027 - 2,027 1,902 - 1,902
Realised gains on investment property - 107 107 - 320 320
Realised losses on investment property - (6) (6) - (33) (33)
Net realised gain on investment property - 101 101 - 287 287
Valuation gains on investment property - 388 388 - 2,732 2,732
Valuation losses on investment property - (3,819) (3,819) - (398) (398)
Net valuation (losses)/gains on investment - (3,431) (3,431) - 2,334 2,334
property
Dividend revenue 406 - 406 489 - 489
Gains on equity investments - 1,592 1,592 - 1,455 1,455
Losses on equity investments - (1,290) (1,290) - (309) (309)
Net investment income 406 302 708 489 1,146 1,635
Administration expenses (391) - (391) (247) - (247)
Net operating profit/(loss) before net finance 2,042 (3,028) (986) 2,144 3,767 5,911
expenses
Finance income 28 - 28 13 - 13
Finance expenses (237) - (237) (201) - (201)
Net finance expenses (209) - (209) (188) - (188)
Profit/(loss) before tax 1,833 (3,028) (1,195) 1,956 3,767 5,723
Income tax (expense)/credit 1 (271) 1,027 756 (456) (884) (1,340)
Profit/(loss) for the year 1,562 (2,001) (439) 1,500 2,883 4,383
Basic and diluted earnings/(loss) per share 3 30.2p (38.7p) (8.5p) 29.0p 55.8p 84.8p
The total column represents the income statement as defined in IAS1.
Consolidated balance sheet
at 31 December 2007
Note 2007 2006
£'000 £'000
Assets
Non-current assets
Investment property 4 35,545 41,487
Equity investments 5 10,830 11,794
Total non-current assets 46,375 53,281
Current assets
Trade and other receivables 326 489
Cash 813 281
Total current assets 1,139 770
Total assets 47,514 54,051
Liabilities
Current liabilities
Interest-bearing loans and borrowings 18 246
Current income tax 426 196
Trade and other payables 743 838
Total current liabilities 1,187 1,280
Non-current liabilities
Interest-bearing loans and borrowings 1,909 5,685
Deferred tax liabilities 2,705 4,211
Total non-current liabilities 4,614 9,896
Total liabilities 5,801 11,176
Net assets 41,713 42,875
Equity
Issued share capital 1,292 1,292
Revaluation reserve - property 7,094 10,169
- other 4,203 4,601
Capital redemption reserve 95 95
Realised capital reserve 17,527 16,055
Retained earnings 11,502 10,663
Total equity 41,713 42,875
Consolidated statement of cash flows
for the year ended 31 December 2007
2007 2006
£'000 £'000
Operating activities
(Loss)/profit for the year (439) 4,383
Adjustments for:
Net valuation losses/(gains) on investment 3,431 (2,334)
property
Profit on disposal of investment property (101) (287)
Gains on investments (302) (1,146)
Finance income (28) (13)
Finance expense 237 201
Income tax (credit)/expense (756) 1,340
Operating cash flow before changes in working 2,042 2,144
capital and provisions
Decrease/(increase) in trade and other receivables 163 (188)
(Decrease)/increase in trade and other payables (94) 113
Cash generated from operations 2,111 2,069
Finance income 28 13
Finance expenses (237) (201)
Income taxes paid (521) (650)
Net cash flows from operating activities 1,381 1,231
Investing activities
Purchase of non-current assets - investment (6) (7,437)
property
- (1,164) (1,029)
equity investments
Sale of non-current assets - investment 2,619 2,032
property
- 2,429 1,000
equity investments
Net cash flows from investing activities 3,878 (5,434)
Financing activities
New medium term loans - 4,470
Loan repayments (4,004) (39)
Dividends paid (723) (672)
Net cash flows from financing activities (4,727) 3,759
Net increase in cash 532 (444)
Cash at 1 January 2007 281 725
Cash at 31 December 2007 813 281
Notes
for the year ended 31 December 2007
1 Taxation
2007 2006
£'000 £'000
Current tax:
On revenue profits 341 363
On capital profits 37 83
Prior year overprovision (31) (11)
347 435
Deferred tax (1,103) 905
(756) 1,340
The tax assessed for the year differs from the standard rate of corporation tax
in the UK of 30% (2006 30%). The differences are explained as follows:
2007 2006
£'000 £'000
(Loss)/profit before tax (1,195) 5,723
(Loss)/profit before tax multiplied by standard rate of (358) 1,716
corporation tax in the UK of 30% (2006 30%).
Effect of:
Tax exempt revenues (93) (119)
Deferred taxation now at 28% (281) -
Chargeable gains more than accounting profit 7 (246)
Adjustments to tax charge in respect of prior periods (31) (11)
Income tax (credit)/expense (756) 1,340
2 Dividends
On 1 April 2008, the directors declared an ordinary dividend of 9.25p per share
(2006 9.0p) payable on 4 June 2008 to shareholders registered at 9 May 2008.
The following dividends have been paid by the group.
2007 2006
£'000 £'000
2006 Final: 9.00p per ordinary share (2005 8.30p) 465 429
2007 Interim: 5.00p per ordinary share (2006 4.70p) 258 243
723 672
3 (Loss)/earnings per share
The calculation of earnings per share is based on the total loss for the year of
£439,000 (2006 £4,383,000 profit) and on 5,167,240 shares (2006 5,167,240) which
is the weighted average number of shares in issue during the year ended 31
December 2007 and throughout the period since 1 January 2006. There are no
dilutive instruments.
In order to draw attention to the impact of valuation gains and losses which are
included in the income statement but not available for distribution under the
company's articles of association, an adjusted earnings per share based on the
profit available for distribution of £1,562,000 (2006 £1,500,000) has been
calculated.
2007 2006
£'000 £'000
Earnings:
Basic earnings ((loss)/profit for the year (439) 4,383
Adjustments for:
Net valuation losses/(gains) on investment property 3,330 (2,621)
Gains and losses on investments (302) (1,146)
Income tax on gains and losses (1,027) 884
Adjusted earnings (operating profit) 1,562 1,500
Per share amount:
Basic (loss)/earnings per share (8.5p) 84.8p
Adjustments for:
Net valuation losses and gains on investment property 64.4p (50.7p)
Gains and losses on investments (5.8p) (22.2p)
Income tax on gains and losses (19.9p) 17.1p
Adjusted earnings per share 30.2p 29.0p
4 Investment property
2007 2006
£'000 £'000
Valuation at 1 January 2007 41,487 33,461
Additions 6 7,437
Disposals (2,517) (1,745)
Revaluation (losses)/gains (3,431) 2,334
Valuation at 31 December 2007 35,545 41,487
In accordance with IAS 40, the carrying value of investment properties is the
fair value of the property as determined by Jones Lang LaSalle. The valuation
has been conducted by them as external valuers and has been prepared as at 31
December 2007, in accordance with the Appraisal & Valuation Standards of the
Royal Institution of Chartered Surveyors, on the basis of market value. This
value has been incorporated into the financial statements.
5 Equity investments
2007 2006
£'000 £'000
Valuation at 1 January 2007 11,794 10,620
Additions 1,164 1,029
Disposals (2,403) (1,087)
Revaluation gains 275 1,232
Valuation at 31 December 2007 10,830 11,794
6 Basis of preparation
The preliminary announcement has been prepared in accordance with applicable
accounting standards as stated in the financial statements for the year ended 31
December 2006.
7 Annual General Meeting
The Annual General Meeting will be held on 21 May 2008.
8 Final ordinary dividend
A final ordinary dividend of 9.25p per share will be paid on 4 June 2008 to
shareholders registered at the close of business on 9 May 2008.
9 Publication of non-statutory accounts
The above does not constitute statutory accounts within the meaning of section
240 of the Companies Act 1985. It is an extract from the full accounts for the
year ended 31 December 2007 on which the auditor has expressed an unqualified
opinion. The accounts will be posted to shareholders on or before 21 April 2008
and subsequently filed at Companies House.
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