Final Results

RNS Number : 9574S
Highcroft Investments PLC
23 March 2016
 

Highcroft Investments PLC

 

Preliminary results for the year ended 31 December 2015

 

KEY HIGHLIGHTS

 

·      Gross property income increased by 12% to £3,435,000 (2014 £3,079,000)

·      Total profit for the year up 3% to £7,235,000 (2014 £7,057,000)

·      Unadjusted earnings per share up 3% to 140.0p (2014 136.5p)

·      Net asset value per share up 11% to 1026p (2014 923p)

·      Total property income distribution up 8% to 38.8p per share (2014 36.0p)

·      Medium term debt £11,500,000 (2014 £4,000,000)

·      Property acquisitions of £8,500,000 (net of costs) and disposal proceeds of £2,361,000

·      Investment property valuation up 25% to £57,964,000 (2014 £46,523,000)

·      Cash and liquid equity investments £8,007,000 (2014 £6,571,000)

 

 

Dear Shareholder,

 

I am pleased to announce our preliminary results for the year ended 31 December 2015 and to invite you to our Annual General Meeting on 12 May 2016 which will be held at Thomas House, Langford Locks, Kidlington, Oxon, OX5 1HR at 12 noon.

                     

Results for the year

I am delighted to report that, following a successful year in 2014, we have continued to make progress in delivering our strategy.  Through targeted acquisitions focused on larger lot sizes, combined with a prudent use of gearing, we have been able to increase operating profits from our property assets. We have made further returns from the sale of property assets and realisations from equities.

 

Property:  Gross property rental income rose 12% to £3,435,000 (2014 £3,079,000), with all of this increase arising from the performance of our commercial properties.  This growth includes the effect of a full year's income from the Ash Vale and Crawley properties purchased in July 2014 and August 2014 respectively.  It also includes a partial year of income from the new acquisition in Wisbech, and allowing for reduced income from properties which we sold in the year and where we had lease expiries and a tenant in administration.  All our properties are currently let and there were no bad debts in the period. Operating expenses increased by £171,000 to £329,000; primarily due to one-off costs at two properties where we undertook programmes of repair and removal of asbestos.  We made one acquisition in the year of a freehold multi-let retail park in Wisbech for £8,500,000 in May 2015.  The property is let to Currys PC World, Carpetright, Halfords, Dunelm and Pets at Home. We have been very pleased with the performance of our assets, with the combination of one rent review and a fixed increase also helping to increase gross rental income and capital values. 

The sale of the Warrington property, together with two residential units, yielded gross proceeds of £2,361,000 that were 23% in excess of the December 2014 valuations.  These proceeds will be re-invested in line with our strategy.  We have been successful in identifying property investments at attractive yields and positioned, as we are, between private investors and larger corporate property investors. We intend to continue to take advantage of our strong financial position and ability to move fast to exploit such opportunities.  An improved credit market combined with the company's strong financial position allows us to increase the return on our investments through a prudent use of debt.  Our properties showed a net valuation gain of £4,765,000 for the year, partly due to the strength of the warehouse sector which performed well in 2015, and also due to the strategic corporate acquisition of the Wisbech property which showed a significant valuation gain.  Since the year end we have completed on the sale of the Kingston property realising gross proceeds of £1,125,000.

 

Equities: Income of £182,000, coupled with a realised net loss of £68,000 and an unrealised net loss of £347,000, is a result of the market conditions and the reduction in the level of our holdings.  We released £962,000 in net cash from equities during the year and have released a further £493,000 since the year end.

 

Administrative expenses: Ongoing administrative expenses increased by £101,000 in 2015, due to a combination of step-changes in certain costs, as the complexity of the business increased, including audit and professional fees and directors' remuneration.  Finance costs increased by £187,000 due to the effect of increased bank borrowings in the year.

 

Financial highlights:  Total profit for the year showed a 3% improvement on 2014, which was itself an excellent year. This profitability was driven  by the capital performance of our property investments.  Excluding the realised gains on investment property, the underlying profit on revenue activities showed a 13% fall to £368,000 due to the effect of one-off property costs and increased administration costs, net of the positive effect of the special dividend income of £221,000 received in 2014 as a result of the Vodafone demerger.  This underlying decline was caused by one-off factors and timings of asset sales and purchases.  The directors make decisions on the balance of our property investments based upon maximising the medium and long-term position for shareholders.  The year-end net asset value per share increased to 1026p (2014 923p) and our year-end cash position was £4,852,000 (2014 £2,039,000), whilst readily realisable equity investments totalled £3,155,000 (2014 £4,532,000).  Our year end bank loans totalled £11,500,000 (2014 £4,000,000).

 

Dividend

We are recommending a final property income distribution of 24.50p per share (2014 22.75p) to be paid on 3 June 2016 to shareholders registered on 6 May 2016 (with an ex-dividend date of 5 May 2016) making a total of 38.8p for the year (2014 36.0p).  This increase of 8% for the year continues the recent record of increases well in excess of inflation.

 

 

Board

We were pleased to welcome our new senior independent director, Simon Costa, to the board on 16 May 2015; his particular breadth of experience provides us with a greater range of market knowledge and skills which are particularly relevant to our growth aspirations.

 

Outlook

We are very pleased with the results for the year and remain optimistic that we start 2016 from a position of strength upon which we hope to build through further attractive acquisitions.  We will continue to reduce our investment in equities in line with our medium term strategy.  We have set ourselves some challenging objectives for 2016 and we expect that our actions will continue to improve shareholder value via increased dividends and asset values.

 

 

 

 

 

 

 

 

John Hewitt

Chairman

 

22 March 2016

 

 

 

Enquiries:

 

Highcroft Investments PLC

John Hewitt  / Roberta Miles

01865 840023

 

Panmure Gordon (UK) Limited

Karri Vuori / Fabien Holler / Jonathan Surr

020 7886 2500

 



 

Consolidated statement of comprehensive income

for the year ended 31 December 2015

 

 

 


Note


2015



2014




Revenue

Capital

Total

Revenue

Capital

Total



£'000

£'000

£'000

£'000

£'000

£'000









Gross rental revenue


3,435

-

3,435

3,079

-

3,079

Property operating expenses


(329)

-

(329)

(158)

-

(158)

Net rental income


3,106

-

3,106

2,921

-

2,921









Realised gains on investment property


418

-

418

941

-

941

Realised losses on investment property


-

-

-

(4)

-

(4)

Net gains on investment property


418

-

418

937

-

937









Valuation gains on investment property


-

4,840

4,840

-

3,785

3,785

Valuation losses on investment property


-

(75)

(75)

-

(150)

(150)

Net valuation gains on investment property


-

4,765

4,765

-

3,635

3,635









Dividend revenue


182

-

182

437

-

437

Gains on equity  investments


-

87

87

-

231

231

Losses on equity investments


-

(502)

(502)

-

(606)

(606)

Net investment income/(expense)


182

(415)

(233)

437

(375)

62









Administration expenses


(533)

-

(533)

(432)

-

(432)

Net operating profit before net finance income


3,173

4,350

7,523

3,863

3,260

7,123









Finance income


7

-

7

8

-

8

Finance expense


(365)

-

(365)

(178)

-

(178)

Net finance expense


(358)

-

(358)

(170)

-

(170)









Profit before tax


2,815

 

4,350

7,165

3,693

 

3,260

6,953









Income tax credit

1

56

14

70

65

39

104









Total profit and comprehensive income for the year attributable to the owners of the parent


2,871

4,364

7,235

3,758

3,299

7,057

























Basic and diluted earnings per share


55.6p

84.4p

140.0p

72.7p

63.8p

136.5p

 

 



Consolidated statement of financial position

at 31 December 2015

 


Note

2015

2014



£'000

£'000

Assets




Non-current assets




Investment property

4

57,964

46,523

Equity investments

5

3,155

4,532

Total non-current assets


61,119

51,055





Current assets




Trade and other receivables


641

415

Cash and cash equivalents


4,852

2,039

Total current assets


5,493

2,454





Total assets


66,612

53,509





Liabilities




Current liabilities




Trade and other payables


1,664

1,312

Total current liabilities


1,664

1,312





Non-current liabilities




Interest bearing loan

6

11,500

4,000

Deferred tax liabilities


425

495

Total non-current liabilities


11,925

4,495





Total liabilities


13,589

5,807





Net assets


53,023

47,702





Equity




Issued share capital


1,292

1,292

Revaluation reserve - property


14,764

11,332

                             - other


667

1,335

Capital redemption reserve


95

95

Realised capital reserve


25,586

24,785

Retained earnings


10,619

8,863

Total equity attributable to the owners of the parent


53,023

47,702







Consolidated statement of changes in equity

 

 

 

 

2015

Issued

Revaluation reserves

Capital

Realised

Retained



share

Property

Other

redemption

capital

earnings

Total


capital



reserve

reserve




£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2015

1,292

11,332

1,335

95

24,785

8,863

47,702

Dividends

-

-

-

-

-

(1,914)

(1,914)

Reserve transfers:








Non-distributable items recognised in income statement:








Revaluation gains

-

4,765

(278)

-

-

(4,487)

-

Tax on revaluation gains/(losses)

-

-

14

-

-

(14)

-

Realised gains

-

-

-

-

364

(364)

-

Surplus attributable to assets sold in the year

-

(33)

(404)

-

437

-

-

Excess of cost over revalued amount taken to retained earnings

-

(1,300)

-

-

-

1,300

-

Transactions with owners

-

3,432

(668)

-

801

(5,479)

(1,914)

Profit and total comprehensive income for the year

-

-

-

-

-

7,235

7,235

At 31 December 2015

1,292

14,764

667

95

25,586

10,619

53,023

 

2014

Issued

Revaluation reserves

Capital

Realised

Retained



share

Property

Other

redemption

capital

earnings

Total


capital



reserve

reserve




£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2014

1,292

7,353

1,972

95

24,220

7,496

42,428

Dividends

-

-

-

-

-

(1,783)

(1,783)

Reserve transfers:








Non-distributable items recognised in income statement:








Revaluation losses

-

3,635

(65)

-

-

(3,570)

-

Tax on revaluation gains/(losses)

-

-

(7)

-

-

7

-

Realised gains

-

-

-

-

756

(756)

-

Surplus attributable to assets sold in the year

-

756

(565)

-

(191)

-

-

Excess of cost over revalued amount taken to retained earnings

-

(412)

-

-

-

412

-

Transactions with owners

-

3,979

(637)

-

565

(5,690)

(1,783)

Profit and total comprehensive income for the year

-

-

-

-

-

7,057

7,057

At 31 December 2014

1,292

11,332

1,335

95

24,785

8,863

47,702



Consolidated statement of cash flows

 

for the year ended 31 December 2015

 


2015


2014


£'000


£'000





Operating activities




Profit before tax on ordinary activities

7,165


6,953

Adjustments for:




Net valuation gains on investment property

(4,765)


(3,635)

Net gain on disposal of investment property

(418)


(937)

Net loss on investments

415


375

Finance income

(7)


(8)

Finance expense

365


178

Operating cash flow before changes in working capital and provisions

 

2,755


 

2,926





(Increase)/decrease in trade and other receivables

(226)


7

Increase in trade and other payables

352


152

Cash generated from operations

2,881


3,085





Finance income

7


8

Finance expense

(365)


(178)

Income taxes received

-


(5)

Net cash flows from operating activities

2,523


2,910





Investing activities




Purchase of non-current assets - investment property

(8,590)


(6,084)

                                              - equity investments

(7)


(649)

Sale of non-current assets        - investment property

2,332


3,548

                                              - equity investments

969


969

Net cash flows from investing activities

(5,296)


(2,216)





Financing activities




Dividends paid

(1,914)


(1,783)

New bank borrowings

7,500


-

Net cash flows from financing activities

5,586


(1,783)





Net increase/(decrease) in cash and cash equivalents

2,813


(1,089)

Cash and cash equivalents at 1 January 2015

2,039


3,128

Cash and cash equivalents at 31 December 2015

4,852


2,039

 



Notes

for the year ended 31 December 2015

 

1 Income tax credit

 


2015

2014


£'000

£'000

Current tax:



On revenue profits

(13)

(65)

On capital profits

(43)

(51)

Prior year underprovision/(overprovision) on capital profits

-

5


(56)

(111)

Deferred tax

14

7

Income tax credit

(70)

(104)

 

The tax assessed for the year differs from the standard rate of corporation tax in the UK of 20% (2014 21.5%). 

The differences are explained as follows:


2015

2014


£'000

£'000

Profit before tax

7,165

6,953

Profit before tax multiplied by the standard rate of corporation tax in the UK of 20% (2014 21.5%) 

1,433

1,495

Effect of:



Tax exempt revenues

33

(64)

Profit not taxable as a result of REIT status

(1,635)

(1,611)

Chargeable gains less than accounting profit

56

116

Losses carried forward

57

(36)

Effect of change in tax rate on deferred tax liability

(14)

(9)

Adjustments to tax charge in respect of prior periods

-

5

Income tax credit

(70)

(104)

 

 

2 Dividends

 

In 2015 the following dividends have been paid by the company:

 

 

2015

2014

 

£'000

£'000

 

 

 

2014 Final: 22.75p per ordinary share (2013 22.75p)

1,175

1,098

2015 Interim: 14.3p per ordinary share (2014 13.25p)

739

685

 

1,914

1,783

 

On 22 March 2016 the directors declared a property income distribution of £1,266,000, 24.50p per share (2014 £1,176,000, 22.75p per share) payable on 3 June 2016 to shareholders registered at 6 May 2016.

 

 



3 Earnings per share

 

The calculation of earnings per share is based on the total profit for the year of £7,235,000 (2014 £7,057,000) and on 5,167,240 shares (2014 5,167,240) which is the weighted average number of shares in issue during the year ended 31 December 2015 and throughout the period since 1 January 2014.  There are no dilutive instruments.

 

In order to draw attention to the impact of valuation gains and losses which are included in the statement of comprehensive income 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 £2,871,000 (2014 £3,758,000) has been calculated.

 

 

2015

2014

 

£'000

£'000

Earnings:

 

 

Basic profit for the year

7,235

7,057

Adjustments for:

 

 

Net valuation gains on investment property

(4,765)

(3,635)

Losses/(gains) on investments

415

375

Income tax on (losses)/gains

(14)

(39)

Adjusted earnings

2,871

3,758

Per share amount:

 

 

Earnings per share (unadjusted)

         140.0p

         136.5p

Adjustments for:

 

 

Net valuation gains on investment property

(92.2p)

(70.3p)

Losses/(gains) on investments

8.0p

7.2p

Income tax on (losses)/gains

(0.2p)

(0.7p)

Adjusted earnings per share

55.6p

72.7p

 

4 Investment property

 

2015

2014

 

£'000

£'000

Valuation at 1 January

46,523

39,415

Additions

8,590

6,084

Disposals

(1,914)

(2,611)

Revaluation gains/(losses)

4,765

3,635

Valuation at 31 December

57,964

46,523

 

In accordance with IAS 40 the carrying value of investment properties is their fair value as determined by external valuers.  This valuation has been conducted by Knight Frank LLP, as external valuers, and has been prepared as at 31 December 2015, 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.

 

The independent valuation of all property assets uses market evidence and also includes assumptions regarding income expectations and yields that investors would expect to achieve on those assets over time. Many external economic and market factors, such as interest rate expectations, bond yields, the availability and cost of finance and the relative attraction of property against other asset classes, could lead to a reappraisal of the assumptions used to arrive at current valuations. In adverse conditions, this reappraisal can lead to a reduction in property values and a loss in net asset value.

 

5   Equity investments


2015

2014


£'000

£'000

Valuation at 1 January

4,532

5,227

Additions

7

649

Disposals

(1,038)

(1,205)

Deficit on revaluation in excess of cost

(277)

(65)

Revaluation decrease below cost

(71)

(76)

Revaluation increase still less than cost

2

2

Valuation at 31 December

3,155

4,532

 



6   Interest bearing loan

 


2015

2014


£'000

£'000

Medium term bank loans

11,500

4,000

The medium term bank loans comprise amounts falling due as follows:



Between one and two years

-

-

Between two and five years

4,000

-

Over five years

7,500

4,000


11,500

4,000

 

7   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 2014. The accounting policies remain unchanged.

 

 

8   Annual General Meeting

 

The Annual General Meeting will be held on 12 May 2016.

 

9   Publication of non-statutory accounts

                                                                                                                                                      

The above does not constitute statutory accounts within the meaning of the Companies Act 2006.  It is an extract from the full accounts for the year ended 31 December 2015 on which the auditor has expressed an unmodified opinion and does not include any statement under section 498 of the Companies Act 2006.  The accounts will be posted to shareholders on or before 18 April 2016 and subsequently filed at Companies House.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR UUUBRNAAOUAR
UK 100

Latest directors dealings