Final Results

Highcroft Investments PLC 14 March 2002 Highcroft Investments PLC Preliminary results for the year ended 31 December 2001 â€¢ Gross property income up 4% to Â£1,412,000 â€¢ Operating profit up 1% to Â£1,384,000 â€¢ Earnings per share up 2% to 20.6p â€¢ Further improved quality of the property portfolio â€¢ Net asset value per share down 2% to 620p â€¢ Total dividends up 9% to 9.25p per share â€¢ Final dividend of 6.05p payable on 19 June 2002 â€¢ All of this in the context of a difficult economic setting â€¢ Annual General Meeting on Wednesday 12 June 2002 'The solid performance of the property portfolio, and an investment approach that kept equity portfolio in line with market indices, has meant that our net asset value has stood up well given overall market conditions.' 14 March 2002 Chairman's Statement The details of our financial statements indicate that 2001 was a mixed year. The group's equity investment portfolio performed more or less in line with the markets, with falls in both asset value and gross income. A modest improvement in net income arising from our property portfolio ensures that the group's operating profit is slightly ahead of 2000. However, the slight rise in the value of the property portfolio was not enough to prevent the net assets of the group falling for the first time since 1992. The background to this has been a sustained period when world equity and financial markets have faced a number of significant challenges, and has seen most indices in decline, while recessionary pressures in global markets have significantly dented business confidence and corporate profits. On balance, the directors are pleased with the group's performance. Our broad objectives remain to enhance shareholder value through a combination of rising asset values and increasing profits, intended to sustain long term dividend growth. Summary results - operating activities Operating profit rose to Â£1,384,000 from Â£1,373,000 in 2000, an increase of 1%. Total income, including interest on cash deposits, was Â£1,612,000 as compared with Â£1,568,000 in 2000. Net property income rose from Â£1,218,000 to Â£1,278,000, an increase of 5%. Gross rents receivable were up 4% on 2000 as the purchases made in both 2000 and 2001, along with two particularly successful rent reviews, took effect in 2001. Property income represented 79% of total income compared with 78% in 2000. In part this reflects these factors and also the effects of a steady repositioning within the portfolio towards investments with higher quality tenants. This latter point also contributes to property outgoings continuing to run at relatively low levels, despite some significant repairs to four residential properties. It is expected that these repairs will lead to increased rental income in the future. The structure of the group has been streamlined with the property portfolio being held in one company, Rodenhurst Estates Limited, rather than across four. The three companies which are no longer required are being liquidated. This activity has contributed extra administrative costs in 2001 but there will be clear benefit in the form of lower operational costs from 2002 onwards. Summary results - capital activities Net assets fell back by 2% during the year from Â£32.6 million to Â£32.0 million. Most of this occurred during the first half of the year, having been 631p per share at 31 December 2000, 622p at 30 June 2001 and 620p per share at 31 December 2001. The fall was just under 2% during the year despite a difficult economic setting. During the course of the year, the group spent Â£1,878,000 on property assets (2000 Â£1,688,000) and invested Â£893,000 (2000 Â£1,626,000) in stock markets. The net proceeds from property disposals during the year amounted to Â£1,377,000 (2000 Â£1,667,000) while investment disposals raised Â£1,247,000 (2000 Â£1,261,000). Profits from the gains on these disposals amounted to Â£76,000 (2000 Â£295,000), comprising Â£146,000 of gains on property disposals and Â£70,000 of losses on disposal of investments. Gains before taxation again became losses after taxation. This circumstance occurs as the calculation of gains for accounts purposes is not the basis for calculating capital gains for tax purposes. A transfer from realised capital reserve was required to cover a net loss after taxation of Â£235,000 (2000 Â£57,000). Property The directors have continued to implement a strategy seeking to improve the quality of the property portfolio and our expectations of the type, style and size of additions to the portfolio are also rising. Those properties that are perceived as being of poorer quality now account for a smaller proportion of the portfolio, both by number and value. The property valuation showed a rise from Â£21.4 million to Â£22.7 million. Those properties that remained in the portfolio throughout the period show a rise in value equivalent to 4.6% (2000 8.9%). There are 20 (2000 22) commercial properties in the portfolio with an average value of Â£989,000 (2000 Â£847,000). There are 20 residential properties in the portfolio and ground rent investments (2000 27). The average value of these residential investments is Â£147,000 (2000 Â£103,000). Listed investments 2001 was a disappointing year for equity markets. There was a gradual fall in markets during the first half of the year. This continued until news of the tragic events of 11 September hit us and markets plunged. The recovery was remarkably rapid but the downtrend continued until the year end, with the FTSE100 finishing down from 6,222 to 5,217,a fall of 16.1%. Those listed investments that remained in our portfolio throughout the period showed a fall in value equivalent to 15.3% (2000 0.4% rise). The directors maintained their strategy of looking for long term investments in solid stocks. We have continued to look for opportunities in computer and telecommunications stocks but still remain underweight in this sector. Our gross income from investments shows a fall of 4% compared with last year, as we reduced the amount of money invested in this portfolio. Summary The solid performance of our property portfolio, and an investment approach that kept the equity portfolio in line with market indices, has meant that our net asset value has stood up well given overall market conditions. Income has shown a modest increase and the directors are able to declare a further satisfactory rise in the level of dividends. Dividends for 2001 are up 9% on 2000, albeit with a slightly reduced level of retained profits. Current trading and prospects On the property side, we are always actively looking for investments which will give the group long term income and capital growth but we have not been successful in adding to the portfolio in 2002. One residential property became vacant and is being marketed and an approach has been accepted on one of the smaller commercial properties. The themes of declining market valuations, failing business confidence and a mixed economic outlook that marked out 2001 as a difficult year appear to be persisting in the early months of 2002. Much will depend on how quickly the US economy recovers from recession and how global markets respond to any improvements. Asian and European economies appear to have little enough momentum to do anything but follow America's lead. Low interest rates will assist sentiment in the UK but group profits will come under increasing pressure. For the moment, we are cautious in our investment approach. Highcroft Investments PLC and its subsidiary undertakings Group Profit and Loss Account (audited) for the year ended 31 December 2001 Note 2001 2000 Â£'000 Â£'000 Income from fixed asset investments and other interest receivable 1,612 1,568 Administrative expenses 228 195 ______ ______ Operating profit 1,384 1,373 Gains on disposals of assets 1 76 295 ______ ______ Profit on ordinary activities before taxation 1,460 1,668 Taxation 2 626 674 ______ ______ Profit for the financial year 834 994 Losses on disposals of assets after taxation taken from realised capital reserve 235 57 ______ ______ Profit available for distribution 1,069 1,051 Dividends 3 478 439 ______ ______ Profit retained 591 612 ==== ==== Earnings per share 4 Including losses on disposals of assets 16.1p 19.2p Excluding losses on disposals of assets 20.6p 20.3p The accompanying notes form an integral part of these financial statements. Highcroft Investments PLC and its subsidiary undertakings Balance Sheets (audited) at 31 December 2001 The Group The Company Note 2001 2000 2001 2000 Â£'000 Â£'000 Â£'000 Â£'000 Fixed assets Tangible assets 5 22,727 21,352 - - Investments 6 9,654 11,855 32,682 33,578 _______ _______ _______ ______ 32,381 33,207 32,682 33,578 _______ _______ _______ ______ Current assets Debtors 462 401 347 322 Cash at bank 419 380 419 13 ______ ______ ______ ______ 881 781 766 335 Creditors Amounts falling due within one year 1,244 1,276 1,430 1,301 _______ _______ _______ ______ Net current liabilities (363) (495) (664) (966) _______ _______ ________ ______ Total assets less current liabilities 32,018 32,712 32,018 32,612 Provision for liabilities and charges - 100 - - _______ _______ ________ ______ Net assets 32,018 32,612 32,018 32,612 ===== ===== ====== ===== Capital and reserves Called up share capital 1,292 1,292 1,292 1,292 Revaluation reserve - property 5,713 5,647 - - - other 4,131 6,470 26,831 27,865 Capital redemption reserve 95 95 95 95 Realised capital reserve 13,822 12,734 3,029 2,600 Profit and loss account 6,965 6,374 771 760 _______ _______ _______ ______ Shareholders' funds - equity 32,018 32,612 32,018 32,612 ===== ===== ====== ===== Highcroft Investments PLC and its subsidiary undertakings Group Cash Flow Statement (audited) for the year ended 31 December 2001 Note 2001 2000 Â£'000 Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities 7 1,398 1,387 Taxation Taxation paid (763) (620) Capital expenditure and financial investment Purchase of fixed assets - properties (1,878) (1,688) - listed (893) (1,626) investments Sale of fixed assets - properties 1,377 1,667 - listed 1,247 1,261 investments Net cash outflow from capital expenditure and (147) (386) financial investment Dividends Equity dividends paid (449) (416) _____ _____ Increase/(decrease) in cash 8 39 (35) ==== ===== Highcroft Investments PLC and its subsidiary undertakings Total Recognised Gains and Losses and Historical Cost Profits and Losses for the year ended 31 December 2001 Statement of total recognised gains and losses 2001 2000 Â£'000 Â£'000 Profit for the financial year 834 994 Unrealised surplus on revaluation of investment properties 728 1,520 Unrealised (deficit)/surplus on revaluation of listed and unlisted investments (1,778) 36 Deferred taxation 100 (100) ______ ______ Total recognised gains and losses for the year (116) 2,450 ===== ===== Note of historical cost profits and losses 2001 2000 Â£'000 Â£'000 Profit on ordinary activities before taxation 1,460 1,668 Realisation of revaluation gains of previous years -attributable to investment properties 762 992 -attributable to listed and unlisted investments 561 525 ______ ______ Historical cost profit on ordinary activities before taxation 2,783 3,185 ===== ===== Historical cost profits retained 591 612 ===== ===== Highcroft Investments PLC and its subsidiary undertakings Notes for the year ended 31 December 2001 1 Gains on disposals of assets 2001 2000 Gains on disposals of assets arising on sales of: Â£'000 Â£'000 Properties 146 174 Investments (70) 121 _____ _____ 76 295 ==== ==== 2 Taxation The taxation charge at 30% (2000 30%) is based on the profit for the year and is made up as follows: 2001 2000 Â£'000 Â£'000 Corporation tax 315 322 Corporation tax on disposals of assets 311 352 _____ _____ 626 674 ==== ==== 3 Dividends 2001 2000 Ordinary shares Â£'000 Â£'000 Interim dividend of 3.2p per share paid (2000 3.0p) 165 155 Proposed final dividend of 6.05p per share (2000 5.5p) 313 284 _____ _____ 478 439 ==== ==== 4 Earnings per share The calculation of earnings per share is based on the profit for the financial year of Â£834,000 (2000 Â£994,000) and on 5,167,240 (2000 5,167,240) ordinary shares of 25p each which is the weighted average number of shares in issue during the year ended 31 December 2001. In view of the uneven nature of capital disposals, an adjusted earnings per share has also been presented, based on the profit available for distribution of Â£1,069,000 (2000 Â£1,051,000). The effect of the adjustment is as follows: 2001 2000 Earnings per share Including losses on disposals of assets 16.1p 19.2p Adjustment for losses on disposals of assets 4.5p 1.1p _____ _____ Excluding losses on disposals of assets 20.6p 20.3p ==== ==== 5 Tangible assets The group Land and buildings (Investment properties) Total Freeholds Long leaseholds Â£'000 Â£'000 Â£'000 Valuation at 1 January 2001 21,352 19,062 2,290 Additions 1,878 1,878 - Disposals (1,231) (1,231) - Surplus on revaluation 728 713 15 _________ _________ _________ Valuation at 31 December 2001 22,727 20,422 2,305 ======= ======= ======= 6 Investments Total Listed Unlisted The group Â£'000 Â£'000 Â£'000 Valuation at 1 January 2001 11,855 11,855 - Additions at cost 893 893 - Disposals (1,316) (1,316) - Deficit on revaluation (1,778) (1,778) - ________ _______ _______ Valuation at 31 December 2001 9,654 9,654 - ====== ====== ====== 7 Reconciliation of operating profit to net cash flow from operating activities 2001 2000 Â£'000 Â£'000 Operating profit 1,384 1,373 Increase in debtors (61) (15) Increase in creditors 75 29 _____ _____ Net cash inflow from operating activities 1,398 1,387 _____ _____ 8 Analysis of changes in net funds 2001 2000 Cash at bank Â£'000 Â£'000 At 1 January 2001 380 415 Net cash inflow/(outflow) 39 (35) ___ ___ At 31 December 2001 419 380 ___ ___ 9 Accounting convention: The financial statements have been prepared under the historical cost convention except that freehold and leasehold properties and listed and unlisted investments are revalued annually. 10 Annual General Meeting: The Annual General Meeting will be held on 12 June 2002 11 Final ordinary dividend: A final ordinary dividend of 6.05p per share will be paid on 19 June 2002 to shareholders registered at the close of business on 17 May 2002. 12 Limitation The above does not constitute full 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 2001 on which the auditors have confirmed that they expect to express an unqualified opinion. They will be posted to shareholders on or before 30 April 2002 and filed at Companies House in due course. 14 March 2002 This information is provided by RNS The company news service from the London Stock Exchange

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