TIDMHCFT
RNS Number : 7482U
Highcroft Investments PLC
08 April 2021
Highcroft Investments PLC ("Highcroft" or the "Company")
Final results for the year ended 31 December 2020
KEY HIGHLIGHTS
-- 3.4% decrease in net property income to GBP5,464,000 (2019 GBP5,656,000)
-- 5.4% decrease in investment property valuation to GBP82,060,000 (2019 GBP86,710,000)
-- No property acquisitions or property disposals in the period
-- 6.0% decrease in net asset value per share to 1104p (2019 1175p)
-- 13.8% decrease in adjusted earnings per share to 67.7p (2019 78.5p)
-- A loss per share of 22.2p (2019 earnings 22.3p)
-- Total debt increased by GBP1,000,000 to GBP27,200,000; LTV 33% (2019 30%)
-- Cash GBP3,295,000 (2019 GBP1,559,000)
-- 11.1% increase in final dividend to 30p per share (2019
27.00p per share) and an additional special dividend of 6p per
share
-- 18.7% increase in total dividend payable for 2020 (including
the special dividend) to 57.00p per share (2019 48.00p per
share)
Dear Shareholder,
Introduction
While 2020 will go down in history as one of the most difficult
post war periods we have experienced I am pleased to report that in
the circumstances Highcroft have delivered a commendable
performance with net rent after bad debt provisions falling just
3.4% to GBP5.46m.
Property portfolio
Over the last few years we have purposefully repositioned the
portfolio significantly, moving away from high street retail and
into warehouses and onto well located out of town retail parks, to
reflect the changing patterns of consumer behaviour. Whilst all
retail locations were hit hard by lockdowns throughout 2020 it is
fair to say that high street retail took the worst of it with
retail parks fairing slightly better due to their ability to adhere
more easily to social distancing rules and work as click and
collect locations for online orders. At the year end, high street
retail represented just 7% of the total portfolio with retail
warehouses at 26% and warehouses at 46%. The positive trends on
warehouse demand and values during the year partially offset the
decline in capital values for retail assets, meaning that the
valuation of the Highcroft portfolio fell by only 5.4% to GBP82.1m
by the year-end. This compares favourably to the MSCI UK all
property index which fell by 6.2% over the same period.
Due to the levels of uncertainty created by the COVID-19
pandemic we chose not to buy or sell any assets during the year and
instead concentrated on working closely with our tenants to ensure
we minimised rental voids and empty units. Our rental collection
for 2020 is 94% of the contractual rent due. We also kept our debt
levels conservative and manageable with our ratio of net debt to
property value at 29% and an LTV of 33%. The overall impact on the
company's net assets for the year was a reduction of just 6%.
People
When times are tough like they were in 2020 it is far too easy
to just focus on the fact that returns for the year have been
negative. Whilst not what we had hoped to deliver, it is easy to
forget that in exceptional years like this the team have to go
above and beyond their normal duties to protect shareholder value.
To that end, I would like to thank the team at Highcroft for all
their hard work and dedication during the year.
On 10 December 2020 David Kingerlee announced that he would be
representing the interests of our largest shareholder, Kingerlee
Holdings Limited, on the board and, with effect from 7 April 2021
(the date of signing of the year end accounts), would change his
status from an executive director to a non-independent
non-executive director. I would like to thank David for his
contribution to the business over the many years he has worked as
an executive director.
Dividend
Whilst we recognise the importance of dividends to our
shareholders, we must balance this with ensuring we keep sufficient
cash available to take account of unforeseen circumstances in what
continue to be unpredictable times.
The Company's interim dividend was held at 21p as a result of
good rent collection levels, and we are proposing a final dividend
of 30p per ordinary share taking the total ordinary dividend for
the year to 51p. When deciding on the final dividend for 2019 and
interim dividend for 2020 we took certain rent collection
projections into account. As actual rent collection have been
strong we are also declaring a special dividend of 6p per ordinary
share for 2020, making the total dividend payable in May 2021 36p
per ordinary share.
Outlook
This time last year when we released our 2019 full year results,
we were aware of the COVID-19 outbreak and the first 3-month UK
wide lockdown had commenced. I certainly didn't think that a full
year later we would only just be starting to see signs of the
country getting back to some resemblance of normality.
Whilst we have a well-diversified portfolio, a relatively low
level of gearing and a healthy cash balance, as a board we will
continue to take a cautious approach to managing our portfolio and
the group to ensure we can weather any further market volatility
and continue to deliver long term shareholder value.
Charles Butler
Chairman
7 April 2021
Enquiries:
Highcroft Investments PLC
Charles Butler / Roberta Miles 01869 352766
N+1 Singer
Peter Steel / Amanda Gray - Corporate Finance
Tom Salvesen - Corporate Broking 020 7496 3000
This announcement contains inside information for the purpose of
Article 7 of Regulation (EU) No 596/2014.
Consolidated statement of comprehensive income
for the year ended 31 December 2020
Note 2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross rental revenue 6,084 - 6,084 5,840 - 5,840
Property operating expenses (620) - (620) (184) - (184)
-------- -------- -------- -------- -------- --------
Net rental income 5,464 - 5,464 5,656 - 5,656
-------- -------- -------- -------- -------- --------
Net gains on investment - - - - - -
property
--------
Valuation gains on investment
property - 2,525 2,525 - 739 739
Valuation losses on investment
property - (7,175) (7,175) - (3,627) (3,627)
-------- -------- -------- -------- -------- --------
Net valuation losses on
investment property - (4,650) (4,650) - (2,888) (2,888)
-------- -------- -------- -------- -------- --------
Dividend revenue - - - 3 - 3
Gains on equity investments - - - - 53 53
Losses on equity investments - - - - - -
-------- -------- -------- -------- -------- --------
Net investment income - - - 3 53 56
-------- -------- -------- -------- -------- --------
Administration expenses (1,069) - (1,069) (826) - (826)
-------- -------- -------- -------- -------- --------
Net operating (loss)/profit
before net finance expense 4,395 (4,650) (255) 4,833 (2,835) 1,998
-------- -------- -------- -------- -------- --------
Finance income 4 - 4 6 - 6
Finance expense (896) - (896) (856) - (856)
Net finance expense (892) - (892) (850) - (850)
--------
(Loss)/profit before tax 3,503 (4,650) (1,147) 3,983 (2,835) 1,148
Income tax (charge)/credit 1 - - - 72 (66) 6
(Loss) /profit for the
year after tax 3,503 (4,650) (1,147) 4,055 (2,901) 1,154
-------- -------- -------- -------- -------- --------
Total (loss)/profit and
comprehensive (loss)/income
for the year attributable
to the owners of the parent 3,503 (4,650) (1,147) 4,055 (2,901) 1,154
-------- -------- -------- -------- -------- --------
Basic and diluted earnings
per share (22.2p) 22.3p
Consolidated statement of financial position
at 31 December 2020
Note 2020 2019
GBP'000 GBP'000
Assets
Non-current assets
Investment property 4 78,810 86,710
Equity investments at fair 5 - -
value through profit or loss
-------- --------
Total non-current assets 78,810 86,710
-------- --------
Current assets
Trade and other receivables 1,692 1,147
Cash and cash equivalents 3,295 1,559
--------
4,987 2,706
Assets classified as held 3,250 -
for sale
-------- --------
Total current assets 8,237 2,706
-------- --------
Total assets 87,047 89,416
-------- --------
Liabilities
Current liabilities
Interest bearing loan - 4,000
Trade and other payables 2,726 2,495
-------- --------
Total current liabilities 2,726 6,495
-------- --------
Non-current liabilities
Interest bearing loan 7 27,200 22,200
Deferred tax liabilities - -
-------- --------
Total non-current liabilities 27,200 22,200
-------- --------
Total liabilities 29,926 28,695
-------- --------
Net assets 57,121 60,721
--------
Equity
Issued share capital 1,294 1,292
Share-based payment reserve 43 12
Revaluation reserve - property 12,814 12,931
Other equity reserve (53) -
Share premium 51 -
Capital redemption reserve 95 95
Realised capital reserve 28,995 28,995
Retained earnings 13,882 17,396
--------
Total equity attributable
to the owners of the parent 57,121 60,721
--------
Consolidated statement of changes in equity
2020 Issued Share-based Revaluation Other Share Capital Realised Retained
reserve-
share payment property equity premium redemption capital earnings Total
capital reserve reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 1,292 12 12,931 - - 95 28,995 17,396 60,721
-------- ------------ ------------ -------- -------- ----------- --------- ---------- --------
Transactions with
owners:
Issue of shares 2 - - (53) 51 - - - -
Dividends - - - - - - - (2,484) (2,484)
-------- ------------ ------------ -------- -------- ----------- --------- ---------- --------
2 - - (53) 51 - - (2,484) (2,484)
Reserve transfers:
Non-distributable
items
recognised in
income statement:
Revaluation losses - - (4,650) - - - - 4,650 -
Change in excess
of cost
over fair value
through
retained earnings - - 4,533 - - - - (4,533) -
-------- ------------ ------------ -------- -------- ----------- --------- ---------- --------
- - (117) - - - - 117 -
-------- ------------ ------------ -------- -------- ----------- --------- ---------- --------
Share award
expensed - 31 - - - - - - 31
-------- ------------ ------------ -------- -------- ----------- --------- ---------- --------
Total
comprehensive
income
for the year - - - - - - - (1,147) (1,147)
-------- ------------ ------------ -------- -------- ----------- --------- ---------- --------
At 31 December
2020 1,294 43 12,814 (53) 51 95 28,995 13,882 57,121
======== ============ ============ ======== ======== =========== ========= ========== ========
Consolidated statement of changes in equity continued
2019 Issued Share Revaluation reserves Capital Realised Retained
share Based payment Property Other redemption capital earnings Total
capital reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2019 1,292 - 18,770 574 95 28,378 13,275 62,384
-------- -------------- -------------- -------- ----------- --------- --------- --------
Transactions with
owners:
Dividends - - - - - - (2,829) (2,829)
-------- -------------- -------------- -------- ----------- --------- --------- --------
Reserve transfers:
Non-distributable
items
recognised in income
statement:
Revaluation losses - - (2,888) - - - 2,888 -
Realised
gains/(losses) - - - - - 43 (43) -
Movement in deferred
tax
on realisation of
equities - - - 29 - (29) - -
Surplus attributable
to
assets sold in the
year - - - (603) - 603 - -
Reassessment of
carrying
value of reserves - - (4,168) - - - 4,168 -
Change in excess of
cost
over fair value
through
retained earnings - - 1,217 - - - (1,217) -
-------- -------------- -------------- -------- ----------- --------- --------- --------
- - (5,839) (574) - 617 5,796 -
-------- -------------- -------------- -------- ----------- --------- --------- --------
Share award expensed - 12 - - - - - 12
Total comprehensive
income
for the year - - - - - - 1,154 1,154
-------- -------------- -------------- -------- ----------- --------- --------- --------
At 31 December 2019 1,292 12 12,931 - 95 28,995 17,396 60,721
======== ============== ============== ======== =========== ========= ========= ========
Consolidated statement of cash flows
for the year ended 31 December 2020
2020 2019
GBP'000 GBP'000
Operating activities
Profit before tax on ordinary activities (1,147) 1,148
Adjustments for:
Net valuation losses/(gains) on investment
property 4,650 2,888
Net gain on disposal of investment property - -
Net (gain)/loss on investments - (53)
Share-based payment expense 31 12
Finance income (4) (6)
Finance expense 896 856
---------
Operating cashflow before changes in working
capital and provisions 4,426 4,845
(Increase)/decrease in trade and other receivables (545) (667)
Increase in trade and other payables 252 325
-------- ---------
Cash generated from operations 4,133 4,503
Finance income 4 6
Finance expense (896) (856)
Income taxes paid (21) (93)
-------- ---------
Net cashflows from operating activities 3,220 3,560
-------- ---------
Investing activities
Purchase of non-current assets - investment
property - (11,898)
Sale of non-current assets - investment - -
property
- equity investments - 724
-------- ---------
Net cashflows from investing activities - (11,174)
-------- ---------
Financing activities
Dividends paid (2,484) (2,829)
Repayment of bank borrowings (4,000) -
New bank borrowings 5,000 6,800
-------- ---------
Net cashflows from financing activities (1,484) 3,971
-------- ---------
Net increase/(decrease) in cash and cash
equivalents 1,736 (3,643)
Cash and cash equivalents at 1 January 1,559 5,202
-------- ---------
Cash and cash equivalents at 31 December 3,295 1,559
-------- ---------
Notes
for the year ended 31 December 2020
1 Income tax credit
2020 2019
GBP'000 GBP'000
Current tax:
On revenue profits - current year (8) 72
- prior year 8 -
On capital profits - (99)
- (27)
Deferred tax - 33
--------------------- --------
Income tax credit - 6
--------------------- --------
The tax assessed for the year differs from the standard rate of
corporation tax in the UK of 19% (2019 19%).
The differences are explained as follows:
2020 2019
GBP'000 GBP'000
Profit before tax (1,147) 1,148
-------- --------
Profit before tax multiplied by the
standard rate of corporation tax
in the UK of 19% (2019 19%) (218) 218
Effect of:
Tax exempt revenues - (11)
Profit not taxable as a result of
REIT status 220 (216)
Chargeable gains more than accounting
profit - 103
Use of management expenses - (67)
Change in deferred tax liability - (33)
Adjustment in respect of previous (2) -
years
Income tax credit - (6)
-------- --------
2 Dividends
In 2020 the following dividends have been paid by the
company:
2020 2019
GBP'000 GBP'000
2019 Final: 27.00p per ordinary share
(2018 33.75p) 1,397 1,744
2020 Interim: 21.00p per ordinary
share (2019 21.00p) 1,087 1,085
----------- -----------
2,484 2,829
----------- -----------
On 7 April 2021 the directors declared a final property income
distribution for 2020 of GBP1,553,000, 30.00p per share, together
with a special property income distribution for 2020 of GBP311,000,
6.00p per share, (2019 final property income distribution of
GBP1,397,000, 27.00p per share) both payable on 27 May 2021 to
shareholders registered on 23 April 2021.
3 Earnings per share
The calculation of earnings per share is based on the total loss
after tax for the year of GBP1,147,000 (2019 profit GBP1,154,000)
and on 5,172,465 shares (2019 5,167,240) which is the weighted
average number of shares in issue during the year ended 31 December
2020. There are no dilutive instruments.
In order to draw attention to the profit that is not due 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 GBP3,503,000 (2019 GBP4,055,000) has been
calculated.
2020 2019
GBP'000 GBP'000
Earnings:
Basic profit for the year (1,147) 1,154
Adjustments for:
Net valuation losses on investment
property 4,650 2,888
Gains on investments - (53)
Income tax on profit - 66
------------------ -----------------
Adjusted earnings 3,503 4,055
------------------ -----------------
Per share amount:
Earnings per share (unadjusted) (22.2p) 22.3p
Adjustments for:
Net valuation losses/(gains) on investment
property 89.9p 55.9p
Gains on investments - (1.0p)
Income tax on profits - 1.3p
------------------ -----------------
Adjusted earnings per share 67.7p 78.5p
------------------ -----------------
4 Investment property
2020 2019
GBP'000 GBP'000
Total valuation at 1 January 86,710 77,700
Additions - 11,898
Revaluation losses (4,650) (2,888)
----------- -----------
Valuation at 31 December 82,060 86,710
Less property held for sale categorised (3,250) -
as current asset
----------- -----------
78,810 86,710
----------- -----------
In accordance with IAS 40 the carrying value of investment
properties is their fair value as determined by independent
external valuers. This valuation has been conducted by Knight Frank
LLP, as external valuers, and has been prepared as at 31 December
2020, in accordance with the Appraisal & Valuation Standards of
the Royal Institution of Chartered Surveyors, on the basis of
market value.
The historical cost of the group's investment properties is
GBP76,832,000 (2019 GBP76,832,000).
Valuation process
The valuation reports produced by the independent external
valuers are based on information provided by the group such as
current rents, terms and conditions of lease agreements, service
charges and capital expenditure (if any). This information is
derived from the group's property management and financial
information systems and is subject to the group's overall control
environment.
In addition, the valuation reports are based on assumptions and
models used by the independent valuer. The assumptions are
typically market related such as yields and discount rates and are
based on their professional judgement and market observation. Each
property is considered a separate asset class based on the unique
nature, characteristics, and risks of the property.
During 2020, many valuations were reported with material
valuation uncertainty clauses on certain classes of assets.
However, valuation markets are mostly functioning again, with
transaction volumes and other relevant evidence at levels where an
adequate quantum of market evidence exists upon which to base
opinions of value. Accordingly, our independent valuers have
confirmed that the valuation at 31 December 2020 is not reported as
being subject to material valuation uncertainty.
The executive director responsible for the valuation process
verifies all major inputs to the external valuation reports,
assesses the individual property valuation changes from the prior
year valuation report and holds discussion with the independent
valuer. When this process is complete, the whole board then meet
the valuer in the presence of the auditor. The valuation report is
recommended to the audit committee, which considers it as part of
its overall responsibilities.
Valuation technique
The fair value of the property portfolio has been determined
using an income capitalisation technique whereby contracted and
market rental values are capitalised with a market capitalisation
rate. The resulting valuations are cross checked against the
equivalent yields and the fair market values per square foot
derived from comparable recent market transactions on an arm's
length terms.
These techniques are consistent with the principles in IFRS 13
Fair Value Measurement and use significant unobservable inputs such
that the fair value measurement of each property within the
portfolio has been classified as level 3 in the fair value
hierarchy. In 2019, all investment properties were classified were
with level 2 inputs. The change to the classification to level 3 is
to comply with best practice and for comparison purposes.
5 Equity investments
2020 2019
GBP'000 GBP'000
Valuation at 1 January - 679
Disposals - (670)
Valuation at 31 December - 9
Unlisted investments transferred
to other receivables - (9)
--------- --------
Equity investments at 31 December - -
--------- --------
6 Assets classified as held for sale
2020 2019
GBP'000 GBP'000
Investment property held for sale 3,250 -
-------- --------
In December 2020, the directors decided to sell our Andover
investment property in early 2021 to take advantage of prevailing
market sentiment. There were several interested parties, and , at
the date of this report, contracts have been exchanged for the
disposal with a conditional completion arrangement.
7 Interest bearing loans
2020 2019
GBP'000 GBP'000
Short-term bank loans due within one year - 4,000
Medium-term bank loans 27,200 22,200
-------- --------
The medium-term bank loans comprise amounts
falling due as follows:
Between one and two years 7,500 -
Between two and five years - 7,500
Over five years 19,700 14,700
-------- --------
27,200 22,200
-------- --------
8 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 2020. The accounting
policies remain unchanged.
9 Annual General Meeting
The Annual General Meeting will be held on 20 May 2021.
10 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 2020 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 22 April 2021 and
subsequently filed at Companies House.
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