Half Yearly Report

RNS Number : 6476R

Highcroft Investments PLC

26 August 2010

 



HIGHCROFT INVESTMENTS PLC

Interim report

30 June 2010

Chairman's Statement for the six months ended 30 June 2010

Highlights

·      Net rental income up 6.3% to £926,000 (2009 £871,000).

·      An improved profit before tax of £1,212,000 (2009 loss £489,000).

·      Basic earnings per share on all activities was 25.4p (2009 loss per share 8.8p).

·      Net asset value per share increased to 676p (June 2009 591p and December 2009 666p).

·      Interim property income distribution will be 11.00p per share compared with 10.00p in 2009.

·      No gearing and net cash £3,065,000 (2009 £573,000) equivalent to 59p per share (2009 11p per share).

Dear Shareholder

The results for the six months ended June 2010 continue to reflect the vagaries of the marketplace - both as regards the property and the equity markets.  The property market, having seen something of a bounce in 2009 after the sharp falls of a year earlier, now seems generally to be marking time and this has certainly been our own experience.  Whilst our property portfolio has risen some 11% from the valuation of a year earlier, increases have moderated since December 2009.  Equally, we took the opportunity of equity market volatility to reduce our portfolio albeit at levels lower than the 2009 year end and we have incurred some revaluation losses on our portfolio at 30 June 2010.  Both of these factors help to explain the minimal rise in our net asset value to 676p from a year end figure of 666p but nonetheless this is a 14.4% increase on the June 2009 figure of 591p. 

In revenue terms, net rental income rose by 6.3% - reflecting a small rise in gross rentals and a reduction in property operating expenses.  This rise was offset at the group operating profit level by the fall in equity dividend income as a result of our reduced investment in equities.  The underlying earnings per share (excluding capital and revaluation movements) was 16.7p against 16.6p a year earlier.

Shareholders will remember that, following our move to REIT status, the interim dividend last year rose substantially from 7.0p to 10.0p per share. We are pleased to report a further increase this year to 11.0p.

We have taken the opportunity in the last few months to strengthen our financial position both by working towards having a fully-let property portfolio (which we hope to achieve with the letting of our only vacant property in Yeovil, during the second half) and by reducing our equity portfolio. 

While our cash and borrowing capability give us the capacity to enhance our property portfolio, we are still cautious about the sustainability of many current valuations, especially where rents are under pressure.  We are in a strong financial position and continue to seek ways of ensuring that we lay the foundations of medium term growth and continuing to deliver value to shareholders. 

Yours sincerely

J Hewitt

Chairman

26 August 2010

For further information, contact:

Highcroft Investments PLC

John Hewitt / Roberta Miles                      01865 840 023

Charles Stanley Securities

Dugald Carlean                                        0207 149 6000

Condensed consolidated interim statement of comprehensive income

for the six months ended 30 June 2010

			Unaudited				Unaudited				Audited
			First Half 2010				First Half 2009				Full Year 2009
	Note	Revenue	Capital	Total		Revenue	Capital	Total		Revenue	Capital	Total
		£'000	£'000	£'000		£'000	£'000	£'000		£'000	£'000	£'000
Continuing operations
Gross rental income		1,002	-	1,002		983	-	983		1,943	-	1,943
Property operating expenses		(76)	-	(76)		(112)	-	(112)		(253)	-	(253)
Net rental income		926	-	926		871	-	871		1,690	-	1,690
Realised gains on investment property		-	42	42		-	-	-		-	-	-
Net gain on disposal of investment property		-	42	42		-	-	-		-	-	-
Valuation gains on investment property		-	755	755		-	293	293		-	1,616	1,616
Valuation losses on investment property		-	(25)	(25)		-	(1,460)	(1,460)		-	(416)	(416)
Net valuation gains/(losses) on investment property		-	730	730		-	(1,167)	(1,167)		-	1,200	1,200
Dividend income		101	-	101		142	-	142		292	-	292
Gains on investments		-	105	105		-	494	494		-	1,679	1,679
Losses on investments		-	(527)	(527)		-	(671)	(671)		-	(234)	(234)
Net investment income/(loss)		101	(422)	(321)		142	(177)	(35)		292	1,445	1,737
Administrative expenses		(168)	-	(168)		(148)	-	(148)		(283)	-	(283)

Operating profit/(loss) before net financing costs		859	350	1,209		865	(1,344)	(479)		1,699	2,645	4,344
Finance income		5	-	5		2	-	2		2	-	2
Finance expenses		(2)	-	(2)		(12)	-	(12)		(20)	-	(20)
Net finance costs		3	-	3		(10)	-	(10)		(18)	-	(18)
Profit/(loss) before tax		862	350	1,212		855	(1,344)	(489)		1,681	2,645	4,326
Income tax credit/(expense)	4	-	103	103		-	32	32		(11)	(377)	(388)
Total profit/(loss) and comprehensive		862	453	1,315		855	(1,312)	(457)		1,670	2,268	3,938
income/(expense) for the financial period
Basic and diluted earnings/(loss) per share	6	16.7p	8.7p	25.4p		16.6p	(25.4)p	(8.8)p		32.3p	43.9p	76.2p

Condensed consolidated interim statement of financial position

as at 30 June 2010

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2010		2009		2009
	Note	£'000		£'000		£'000
Assets
Non-current assets
Investment property	7	28,300		25,458		27,825
Equity investments	8	5,221		6,530		7,397
Total non-current assets		33,521		31,988		35,222
Current assets
Trade and other receivables		83		97		103
Cash at bank and in hand		3,065		573		946
Total current assets		3,148		670		1,049
Total assets		36,669		32,658		36,271
Liabilities
Current liabilities
Interest-bearing loans and borrowings		-		14		-
Current income tax		286		100		90
Trade and other payables		792		792		777
Total current liabilities		1,078		906		867
Non-current liabilities
Interest-bearing loans and borrowings	9	-		637		-
Deferred tax liabilities		668		557		969
Total non-current liabilities		668		1,194		969
Total liabilities		1,746		2,100		1,836
Net assets		34,923		30,558		34,435
Equity
Issued share capital		1,292		1,292		1,292
Revaluation reserve - property		6,442		4,277		5,696
Revaluation reserve - other		1,630		1,740		2,656
Capital redemption reserve		95		95		95
Realised capital reserve		19,238		18,174		18,229
Retained earnings		6,226		4,980		6,467
Total equity		34,923		30,558		34,435

Condensed consolidated interim statement of changes in equity

for the six months ended 30 June 2010

a) First half 2010 -Unaudited
	Equity		Revaluation reserves				Capital		Realised		Retained
			Property		Other		Redemption		Capital		Earnings		Total
							Reserve		Reserve
	£'000		£'000		£'000		£'000		£'000		£'000		£'000
At 1 January 2010	1,292		5,696		2,656		95		18,229		6,467		34,435
Dividends	-		-		-		-		-		(827)		(827)
Transactions with owners	-		-		-		-		-		(827)		(827)
Profit for the period	-		-		-		-		-		1,315		1,315
Non-distributable items recognised in income statement:
Revaluation gains/(losses)	-		730		(27)		-		-		(703)		-
Tax on revaluation gains and losses	-		-		69		-		-		(69)		-
Realised losses	-		-		-		-		(95)		95		-
(Surplus)/deficit attributable to assets sold in the period	-		(9)		(1,095)		-		1,104		-		-
Excess of cost over revalued amount taken to retained earnings	-		25		27		-		-		(52)		-
Total comprehensive income/(expense) for the period	-		746		(1,026)		-		1,009		586		1,315
At 30 June 2010	1,292		6,442		1,630		95		19,238		6,226		34,923

b) First half 2009 -Unaudited
	Equity		Revaluation reserves				Capital		Realised		Retained
			Property		Other		Redemption		Capital		Earnings		Total
							Reserve		Reserve
	£'000		£'000		£'000		£'000		£'000		£'000		£'000
At 1 January 2009	1,292		4,080		2,137		95		17,773		6,227		31,604
Dividends	-		-		-		-		-		(589)		(589)
Transactions with owners	-		-		-		-		-		(589)		(589)
Loss for the period	-		-		-		-		-		(457)		(457)
Non-distributable items recognised in income statement:
Revaluation gains/(losses)	-		(1,167)		(254)		-		-		1,421		-
Tax on revaluation gains and losses	-		-		51		-		-		(51)		-
Realised gains	-		-		-		-		59		(59)		-
(Surplus)/deficit attributable to assets sold in the period	-		-		(342)		-		342		-		-
Excess of cost over revalued amount taken to retained earnings	-		1,364		148		-		-		(1,512)		-
Total comprehensive income/(expense) for the period	-		197		(397)		-		401		(658)		(457)
At 30 June 2009	1,292		4,277		1,740		95		18,174		4,980		30,558

c) Full year 2009 -Audited
	Equity		Revaluation reserves				Capital		Realised		Retained
			Property		Other		Redemption		Capital		Earnings		Total
							Reserve		Reserve
	£'000		£'000		£'000		£'000		£'000		£'000		£'000
At 1 January 2009	1,292		4,080		2,137		95		17,773		6,227		31,604
Dividends	-		-		-		-		-		(1,107)		(1,107)
Transactions with owners	-		-		-		-		-		(1,107)		(1,107)
Profit for the period	-		-		-		-		-		3,938		3,938
Non-distributable items recognised in income statement:
Revaluation gains/(losses)	-		1,200		1,230		-		-		(2,430)		-
Tax on revaluation gains and losses	-				(343)		-		-		343		-
Realised gains	-		-		-		-		88		(88)		-
(Surplus)/deficit attributable to assets sold in the period	-		-		(368)		-		368		-		-
Excess of cost over revalued amount taken to retained earnings	-		416		-		-		-		(416)		-
Total comprehensive income for the period	-		1,616		519		-		456		1,347		3,938
At 31 December 2009	1,292		5,696		2,656		95		18,229		6,467		34,435

Condensed consolidated interim statement of cash flows

for the six months ended 30 June 2010

	Unaudited		Unaudited		Audited
	First Half		First Half		Full Year
	2010		2009		2009
	£'000		£'000		£'000
Operating activities
Profit/(loss) for the period	1,315		(457)		3,938
Adjustments for:
Net valuation (gains)/losses on investment property	(730)		1,167		(1,200)
Gain on disposal of investment property	(42)		-		-
Net losses/(gains) on investments	422		177		(1,445)
Finance income	(5)		(2)		(2)
Finance expense	2		12		20
Income tax (expense)/credit	(103)		(32)		388
Operating cash flow before changes in working capital and provisions	859		865		1,699
Decrease in trade and other receivables	20		126		120
Increase/(decrease) in trade and other payables	13		(34)		(49)
Cash generated from operations	892		957		1,770
Finance income	5		2		2
Finance expense	(2)		(12)		(20)
Income tax paid	-		(440)		(457)
Net cash flows from operating activities	895		507		1,295
Investing activities
Purchase of fixed assets   - investment property	-		(281)		(281)
- equity investments	(727)		(161)		(515)
Sale of fixed assets          - investment property	297		-		-
- equity investments	2,481		737		1,845
Net cash flows from investing activities	2,051		295		1,049
Financing activities
Loan repayments	-		(603)		(1,254)
Dividends paid	(827)		(589)		(1,107)
Net cash flows used in financing activities	(827)		(1,192)		(2,361)
Net increase/(decrease) in cash and cash equivalents	2,119		(390)		(17)
Cash and cash equivalents at 1 January 2010	946		963		963
Cash and cash equivalents at 30 June 2010	3,065		573		946

NOTES

1.  Nature of operations and general information

Highcroft Investments PLC ('Highcroft') and its subsidiary (together 'the group') principal activities are investment in property and equities. It is incorporated and domiciled in Great Britain.  The address of Highcroft Investments PLC's registered office, which is also its principal place of business, is Thomas House, Langford Locks, Kidlington, OX5 1HR.  Highcroft's condensed consolidated interim financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company. These condensed consolidated interim financial statements have been approved for issue by the directors on 26 August 2010. The financial information for the year ended 31 December 2009 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 31 December 2009 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(5) of the Companies Act 2006.

2.  Basis of preparation

These condensed consolidated interim financial statements are for the six months ended 30 June 2010.  They have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the European Union.  They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2009.

These condensed consolidated interim financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties and the measurement of equity investments at fair value. These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2009.

The accounting policies have been applied consistently throughout the group for the purposes of preparation of these condensed consolidated interim financial statements.

3.  Segmental reporting

The operating segment reporting format identifies the operating segments, the performance of which is monitored by the group's management using a consistent internal reporting structure. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

The group is comprised of the following main operating segments:

·      Commercial property comprising retail outlets, offices and warehouses.

·      Residential property comprising mainly single-let houses.

·      Financial assets comprising exchange-traded equity investments.

	First Half		First Half		Full Year
	2010		2009		2009
	£'000		£'000		£'000
Commercial property
Gross income	970		950		1,877
Profit/(loss) for the period	1,212		(491)		2,236
Assets	29,024		24,038		26,485
Liabilities	630		1,238		656
Residential property
Gross income	32		33		66
Profit for the period	338		54		375
Assets	2,423		2,077		2,386
Liabilities	10		11		3
Financial assets
Gross income	101		142		292
(Loss)/profit for the period	(235)		(20)		1,327
Assets	5,222		6,543		7,400
Liabilities	1,106		851		1,177
Total
Gross income	1,103		1,125		2,235
Profit/(loss) for the period	1,315		(457)		3,938
Assets	36,669		32,658		36,271
Liabilities	1,746		2,100		1,836

22% of gross commercial property income arises from two tenants each representing more than 10% of income.

4.  Taxation
	First Half		First Half		Full Year
	2010		2009		2009
	£'000		£'000		£'000
Current tax:
On revenue profits	-		-		-
On capital profits	(34)		19		34
Prior year underprovision	-		-		11
	(34)		19		45
Deferred tax	(69)		(51)		343
	(103)		(32)		388

The taxation charge has been based on the estimated effective tax rate for the full year.  As a Real Estate Investment Trust the group does not pay corporation tax on its profits and gains from its commercial and residential property activities.

5.  Dividends

On 26 August 2010, the directors declared a property income dividend of 11.00p per share (2009 10.00p interim dividend) payable on 20 October 2010 to shareholders registered at 24 September 2010.

The following property income distributions have been paid by the company.

	First Half		First Half		Full Year
	2010		2009		2009
	£'000		£'000		£'000
2009 final: 16.00p per ordinary share (2008 final 11.40p )	827		589		589
2009 interim: 10.00p per ordinary share	-		-		518
	827		589		1,107

6.  Earnings per share

The calculation of earnings per share is based on the profit for the period of £1,315,000 (2009 loss £457,000) and on 5,167,240 shares (2009 5,167,240) which is the weighted average number of shares in issue during the period ended 30 June 2010 and throughout the period since 1 January 2009.

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 £862,000 (2009 £855,000) has been calculated.

	First Half		First Half		Full Year
	2010		2009		2009
	£'000		£'000		£'000
Earnings:
Basic earnings	1,315		(457)		3,938
Adjustments for:
Net valuation (profits)/losses on investment property	(772)		1,167		(1,200)
Gains and losses on investments	422		177		(1,445)
Income tax on (gains)/losses	(103)		(32)		377
Adjusted earnings	862		855		1,670
Per share amount:
Basic earnings per share	25.4p		(8.8)p		76.2p
Adjustments for:
Net valuation gains on investment property	(14.9)p		22.6p		(23.2)p
Gains and losses on investments	8.2p		3.4p		(28.0)p
Income tax on gains and losses	(2.0)p		(0.6)p		7.3p
Adjusted earnings per share	16.7p		16.6p		32.3p

7.  Investment property

	First Half		First Half		Full Year
	2010		2009		2009
	£'000		£'000		£'000
Valuation at 1 January 2010	27,825		26,344		26,344
Additions	-		281		281
Disposals	(255)		-		-
Gain/(loss) on revaluation	730		(1,167)		1,200
Valuation at 30 June 2010	28,300		25,458		27,825

The directors have used an external independent valuation of properties at 30 June 2010 which has been carried out consistently with the annual valuation.

8.  Equity Investments

Listed and unlisted	First Half		First Half		Full Year
	2010		2009		2009
	£'000		£'000		£'000
Valuation at 1 January 2010	7,397		7,282		7,282
Additions	727		161		515
Disposals	(2,601)		(659)		(1,723)
(Deficit)/surplus on revaluation in excess of cost	(290)		(161)		1,230
Revaluation decrease below cost	(27)		(160)		(18)
Revaluation increase still below cost	15		67		111
Valuation at 30 June 2010	5,221		6,530		7,397

9.  Interest-bearing loans and borrowings

	First Half		First Half		Full Year
	2010		2009		2009
	£'000		£'000		£'000
Medium term bank loan	-		637		-
The medium term bank loan comprises amounts falling due as follows:
Between one and two years	-		71		-
Between two and five years	-		238		-
Over five years	-		328		-
	-		637		-

10.  Related party transactions

Kingerlee Holdings Limited owns, through its wholly owned subsidiaries, 25.4% (2009 25.4%) of the company's shares and D H Kingerlee and J C Kingerlee are directors of the company, Kingerlee Holdings Limited and its wholly owned subsidiaries and shareholders of the company and Kingerlee Holdings Limited. 

During the period, the group made purchases from Kingerlee Holdings Limited or its subsidiaries, being a service charge in relation to services at Thomas House, Kidlington of £7,000 (2009 £7,000).  The amount owed at 30 June 2010 was nil (2009 nil).  All transactions were undertaken on an arm's length basis.

 

END

 

 

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