TIDMKCR
RNS Number : 6306S
K&C REIT PLC
22 December 2016
22 December 2016
K&C REIT plc
("K&C" or the "Company")
Annual Results for year ended 30 June 2016
Annual results show an NAV per share of 9.4p at 30 June 2016.
Also announced today are a share subscription for GBP500,000 by
Gravity Investment Group at 10p per share and the appointment of a
chief executive
This announcement contains inside information
K&C REIT plc (AIM: KCR), the residential real estate
investment trust group, announces that the Board: will be
appointing a new director, has accepted a share subscription, has
published its annual results and has made other related
changes.
Highlights:
-- NAV per share of 9.4p at 30 June 2016.
-- Both corporate entities acquired in the year have integrated
well and are trading satisfactorily.
-- The appointment on 1 January 2017 of Mr Dominic White as a
director, and to the role of chief executive of the Group,
conditional on the admission to trading on AIM of the 2,500,000 new
ordinary shares of GBP0.01 issued at 10p per share ("Admission"),
as referred to below.
-- Share subscription for GBP500,000 for a holding of approximately 9.66 per cent:
o Gravity Investment Group Limited ("Gravity") has agreed to
subscribe for a total of 5,000,000 ordinary shares in the Company
(the "Subscription") at 10p per share, which will be issued in two
separate tranches of 2,500,000 shares each.
o Upon Admission (which is expected to take place on 23 December
2016), the Company will receive a total of GBP250,000, which is
currently held in escrow.
o Gravity will acquire the second tranche of 2,500,000 ordinary
shares in the Company, also at 10p per share, on or before 6
January 2017.
o After the Subscription, Gravity will hold approximately 9.66
per cent. of the enlarged share capital.
1. Appointment of chief executive
The Board has agreed that Mr Dominic White will be appointed
chief executive of the Group, effective from 1 January 2017,
conditional upon Admission. He will receive a salary of GBP75,000
per annum with effect from 1 January 2017.
In addition, on 21 December 2016, the Company has entered into
an agreement (the "WAL Agreement") with White Amba Limited ("WAL").
Mr White is an appointed representative of Vicarage Capital Limited
(which is authorised and regulated in the United Kingdom by the
Financial Conduct Authority) and he operates through WAL, which is
a company that he owns and controls. The WAL Agreement provides
that the Company will pay WAL a fee of GBP25,000 (representing five
per cent of the amount to be subscribed by Gravity pursuant to the
Subscription). In addition, the Company will pay WAL a further fee
of five per cent (up to a maximum of a further GBP50,000) in
respect of further subscriptions for shares in the Company, in
exchange for cash, properties or other assets, where the
subscribers for such shares have been introduced by WAL provided
that (i) the shares are issued at the higher of (a) 10p per share
and (b) the average middle-market closing price in the 15 dealing
days prior to the date of issue of such shares; and (ii) such
shares are issued prior to the first anniversary of the date of the
WAL Agreement. The WAL Agreement also provides that the Company
shall pay a fee of GBP25,000 (plus VAT if applicable) for advice
given relating to the negotiating and structuring of the
Subscription. It is expressly agreed that if it is proposed that
WAL provides services/advice to the Company pursuant to the WAL
Agreement, Mr White should (i) declare his interest; and (ii) not
take part in any consideration or decision of the board of
directors of the Company in relation to the provision of such
services.
2. Details about Dominic White
Dominic Andrew White (age 44) is a member of the Institute of
Chartered Financial Analysts and is a Chartered Surveyor who has
more than 24 years' experience in the investment sector, working in
private equity, real estate investment fund management and real
estate advisory businesses in both the private and listed markets.
During his career, he has held senior investment positions at
international institutions such as Security Capital European
Realty, Henderson Global Investors and Cordea Savills Investment
Management. In addition, he has held chief executive and
non-executive roles at public companies, including Limitless Earth
plc and, currently, as chief executive of Energiser Investments plc
(AIM:ENGI) ("Energiser").
Former directorships
Present directorships / partnerships held
/ partnerships over past five years
Energiser Investments Limitless Earth plc
plc
eMed Pharma Group Limited Silverhawk Investments
Limited
Beet Plus Limited White Panther Capital
Limited
Ovio Wellness Limited Clear Leisure plc
White Amba Investments Lakestar Capital LLP
LLP
White Amba Limited
-------------------------- -----------------------
The directors of K&C have considered Dominic White's role as
chief executive of Energiser. The directors do not consider that
his involvement with Energiser will significantly affect Mr White's
ability fully to perform his duties as chief executive of K&C,
nor does the board consider the operations of Energiser and K&C
to be in conflict.
No further information relating to Mr White is required to be
disclosed pursuant to Schedule 2 paragraph (g) of the AIM
Rules.
3. General meeting to receive the accounts to 30 June 2016,
adopt new Articles of Association and to approve the issue of
Restricted Preference Shares to certain persons
It is proposed to create a new long-term executive share
incentive scheme based upon restrictive preference shares
("Restricted Preference Shares"). Implementing this new share
incentive scheme will require the Company to convene a general
meeting, which will be held prior to 31 January 2017. The meeting
will receive the audited accounts of the Company to 30 June 2016
and to adopt new Articles of Association to create and set out the
rights of the Restricted Preference Shares, which are intended to
be fully paid up at their par value of GBP0.01. It will be proposed
that an aggregate of sixty million Restricted Preference Shares at
a subscription price of GBP0.01 per share will be created,
generating proceeds for the Company (if all issued) of GBP600,000,
although the current holders of executive share options in K&C
will not be offered the opportunity to subscribe for these shares
while their options remain outstanding.
The Restricted Preference Shares would vest as (i) the gross
assets under management (AUM) of the Group (i.e. the gross value of
the investment properties of the Group) exceed certain values and
(ii) the Net Asset Value (NAV) per share of the Group exceeds
certain values. These vested Restricted Preference Shares will be
convertible into ordinary shares of the Company on a one-for-one
basis. Further details of this proposal, which will require the
approval of a special resolution of the Company's shareholders,
will be announced in due course.
4. Payments made to executive directors and others
Except for James Cane and Christopher James, the executive
directors have not received any salary or fees since the Company
was admitted to trading on AIM.
Following Admission, certain executive directors and an employee
of the Company will each become entitled to GBP25,000 (of which
GBP15,000 will be dependent on the Company receiving further equity
funding of at least GBP500,000) in satisfaction of all funds due to
them from the Company and all remuneration up to 31 December 2016,
including, in some cases, the reimbursement of various
out-of-pocket expenses incurred by those individuals since 2014
that have not been reimbursed to date. The total of these payments
(including the contingent element) will be GBP150,000, excluding
any employer's national insurance contributions and/or value added
tax that are payable.
The Board announces its intention to make salary payments, at
rates equal to or less than the amounts stated in their service
contracts, to all existing executive directors and an employee of
the Company with effect from 1 January 2017.
Commenting on the results, Michael Davies, Chairman of K&C
REIT, commented:
"In a year that has so far been dominated by political and
economic uncertainty, K&C REIT has delivered good performance
via its acquisitions of two special purpose vehicles, which
integrated well and traded satisfactorily in the year under review,
with NAV per share at year-end of 9.4p. K&C's progress has been
further supported by today's announcement of a share subscription
of GBP500,000 at 10p per share and the appointment of Dominic White
as our new chief executive, which we believe will lead to a strong
and exciting pipeline of opportunities. We are looking forward to
2017 with confidence."
Contacts:
K&C REIT info@kandc-reit.co.uk
Tim James, Managing director +44 (0) 7768 833
029
www.kandc-reit.co.uk
Stockdale Securities
Robert Finlay +44 (0) 20 7601 6115
Yellow Jersey PR
Charles Goodwin/Clare Glynn +44 (0) 7747 788 221
Notes to Editors:
K&C's objective is to build a substantial residential
property portfolio that generates secure income flow for
shareholders through the acquisition of SPVs (Special Purpose
Vehicles) with inherent historical capital gains. The Directors
intend that the group will acquire, develop and manage residential
property assets in Central London and other key residential areas
in the UK.
K&C REIT PLC
CHAIRMAN'S STATEMENT FOR THE YEARED 30 JUNE 2016
This is K&C REIT plc's second Annual Report since its
admission to AIM.
Market and strategy
The Group operates in the residential letting market, with an
emphasis on Central London. The Group seeks to acquire property
assets held within UK-incorporated companies, where there is an
opportunity to capitalise on the advantages afforded to REITs to
provide an efficient exit route for vendors.
AIM admission
The Company's shares were admitted to trading on AIM on 3 July
2015. Shortly following admission, at which the Company issued
43,035,622 ordinary shares at 10 pence per share, including
35,663,400 shares issued pursuant to a fundraising that generated
gross cash proceeds of GBP3,566,340, the Group acquired the entire
share capital of Silcott Properties Limited ("Silcott") for a
consideration of GBP3,630,000, of which GBP300,000 was satisfied by
the issuance of 3,000,000 ordinary shares in K&C REIT plc, and
4,372,222 ordinary shares in K&C were issued to satisfy
liabilities of the Company. Silcott, which has since been renamed
K&C (Coleherne) Limited ("Coleherne"), is a special purpose
vehicle that owns a freehold property in Central London with ten
apartments for rent.
Board changes
Nigel Payne and George Rolls both left the board, and I was
appointed chairman at the Annual General Meeting on 30 December
2015.
Operations
The Group has made two significant acquisitions during the year:
Coleherne, as mentioned above, and, on 27 May 2016, The Osprey
Management Company Limited, which was subsequently renamed K&C
(Osprey) Limited ("Osprey"). Both companies have traded well since
acquisition, and Osprey has exceeded our expectations in the five
weeks to the year-end and the subsequent five months. The
transition to our ownership was, in each case, very smooth, and I
would like to thank all those involved in the management and
operations of both companies.
Financial
The Group reports a consolidated loss from operating activities
for the year of GBP99,442. The total comprehensive expense for the
year was GBP64,371. The financial results in the Annual Report
cover the twelve months since the Group's admission to AIM,
including the results of Coleherne and Osprey from the date of
acquisition, which is referred to in more detail in note 5. The
investment properties were revalued on acquisition in line with
current market conditions. The costs attributable to the
acquisitions of both Coleherne and Osprey were significant, and
have been identified separately, because both transactions were
complex. However, we believe that the long-term prospects for
growth in each company make these valuable investments.
Future prospects
As my predecessor said last year, the Group needs to build a
strong business with high quality assets that will be able to
support an increasing income yield. We have taken the first steps
towards achieving this through our acquisition strategy.
We have also sought to raise equity and loan capital to enable
this strategy. On the debt side, we raised GBP1.1 million in May to
complete the acquisition of Osprey, and believe that our debt is at
a manageable level, given our asset base and the opportunities that
the Group has for income generation.
The Board continues to find and be shown interesting acquisition
opportunities and I hope that I will be able to report new
developments to you before too long.
M D M Davies
Chairman
21 December 2016
GROUP STRATEGIC REPORT FOR THE YEARED 30 JUNE 2016
The directors present the strategic report of K&C REIT plc
('K&C' or the 'Company') and its subsidiaries (together, the
'Group') for the year ended 30 June 2016. The Company was
incorporated in England and Wales on 10 June 2014.
Principal activity
The Group carries on the business of acquiring and managing
residential property in the UK for letting to third parties on long
and short leases. At the year-end, the Group consisted of the
Company and three operating subsidiaries.
1. K&C (Newbury) Limited (formerly Kensington & Chelsea
REIT Limited), a company registered in England & Wales with
company number 08654998. This company owns no property and is now
effectively dormant.
2. K&C (Coleherne) Limited (formerly Silcott Properties
Limited), owns a freehold residential property in Chelsea, London.
The company changed its name on 26 June 2016.
3. K&C (Osprey) Limited (formerly The Osprey Management
Company), owns the freehold of several retirement properties let on
long leases to residents. The company also provides management
services in respect of these properties and to third party
landlords. The company changed its name on 8 June 2016.
GROUP STRATEGY
The directors intend to build a significant presence in the
residential letting market, primarily through the acquisition of
UK-registered special purpose vehicles that own residential
property for letting to third parties.
RESULTS
The Group reports a loss from operating activities of GBP99,442
for the year to 30 June 2016. This is after charging the
acquisition costs of Osprey and Coleherne, as set out in the notes
to these financial statements.
FUTURE DEVELOPMENT OF THE GROUP
The acquisitions of Coleherne and Osprey, referred to above, are
examples of the type of transaction envisaged for the future
development of the group. It is anticipated that future
acquisitions will be financed by a combination of debt, equity and
the Group's own resources, and the Group expects to return to the
capital markets again in the near future.
SIGNIFICANT EVENTS
On 3 July 2015, the Company's shares were admitted to trading on
AIM when the Group became a REIT. On admission, the Group issued
43,035,622 ordinary shares at 10p, including 35,663,400 shares
issued pursuant to a fundraising, generating gross cash proceeds of
GBP3,566,340.
Shortly after admission, the Company acquired the entire share
capital of Silcott for a consideration of GBP3,630,000, of which
GBP300,000 was satisfied by the issuance of 3,000,000 ordinary
shares in K&C to the vendor.
On 27 May 2016, K&C acquired The Osprey Management Company
Limited for GBP1.6 million, of which GBP300,000 was satisfied by
the issuance of 3,000,000 ordinary shares in K&C to the
vendor.
REVIEW OF BUSINESS AND FINANCIAL PERFORMANCE
The Board has reviewed whether the Annual Report, taken as a
whole, presents a fair, balanced and comprehensive summary of the
Group's position and prospects, and believes that it provides the
information necessary for shareholders to assess the Group's
position, performance and strategy.
Information on the financial position and development of the
Group is set out in the Chairman's Statement, the Directors' Report
and the annexed financial statements.
FINANCIAL KEY PERFORMANCE INDICATORS
The directors use a variety of key performance indicators to
monitor and improve Group performance, including:
A. At property level
i. Rent per ft(2) compared with market comparables and with other units in the asset
ii. Vacancy rate in terms of number of units available and potential rental income
iii. Management costs as a percentage of rental income
(including repairs and maintenance, insurance, cleaning, agents'
fees, legal fees, utilities and council tax)
iv. Gross and net yield compared with target levels
v. Marginal increase in income as a percentage of capital expenditure
vi. Outstanding rents as a percentage of rental income
vii. Implementation of property plans compared with target.
B. At Group level
i. Assets under management compared with target
ii. Overheads as a percentage of gross/net rental income compared with target.
No analysis of performance compared to these KPIs has been
provided due to the infancy of the Group and the diverse nature of
the assets owned by the companies that it has acquired.
RISKS AND UNCERTAINTIES
The Board regularly reviews the risks to which the Group is
exposed and ensures through its meetings and regular reporting that
these risks are minimised as far as possible.
The principal risks and uncertainties facing the Group at this
stage in its development are:
-- Financing and liquidity risk
The Company has an ongoing requirement to fund its activities
through the equity markets and in future to obtain finance for
property acquisition and management. There is no certainty that
such funds will be available when needed.
-- Financial instruments
Details of risks associated with the Group's financial
instruments are given in the notes to the financial statements.
-- Valuations
The valuation of the investment property portfolio is inherently
subjective as it is made on the basis of assumptions made by the
valuer that may not prove to be accurate. The outcome of this
judgment is significant to the Group in terms of its investment
decisions and results.
INTERNAL CONTROLS AND RISK MANAGEMENT
The directors are responsible for the Group's system of internal
control. Although no system of internal control can provide
absolute assurance against material misstatement or loss, the
Group's system is designed to provide reasonable assurance that
problems are identified on a timely basis and dealt with
appropriately.
In carrying out their responsibilities, the directors have put
in place a framework of controls to ensure as far as possible that
ongoing financial performance is monitored in a timely manner,
that, where required, corrective action is taken and that risk is
identified as early as practically possible. The directors have
reviewed the effectiveness of internal control.
The Board, subject to delegated authority, reviews, among other
things, capital investment, property sales and purchases,
additional borrowing facilities, guarantees and insurance
arrangements.
BRIBERY RISK
The Group has adopted an anti-corruption policy and
whistle-blowing policy under the Bribery Act 2010. Notwithstanding
this, the Group may be held liable for offences under that Act
committed by its employees or subcontractors whether or not the
Group or the directors have knowledge of the commission of such
offences.
FORWARD-LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements
that have been made by the directors in good faith based on the
information available at the time of the approval of the annual
report and financial statements. By their nature, such
forward-looking statements involve risks and uncertainties because
they relate to events and depend on circumstances that will or may
occur in the future. Actual results may differ from those expressed
in such statements.
OUTLOOK
The Group has taken significant steps forward through its
admission to AIM, achieving REIT status and making its first two
acquisitions. It now needs to build on these achievements through
further purchases of high quality assets that will be able to
support an increasing income yield. The Group is currently
investigating several potential acquisitions. To make further
acquisitions, the Group will be required to raise more capital and
it is working closely with funding sources, both equity and debt
providers, to achieve this objective.
ON BEHALF OF THE BOARD:
James Cane
Director
22 December 2016
REPORT OF THE DIRECTORS FOR THE YEARED 30 JUNE 2016
The directors present their report with the financial statements
of the Company and the Group for the year ended 30 June 2016.
A review of the business and risks and uncertainties is included
in the Chairman's Statement, the Strategic Report and in the notes
to the financial statements.
DIVIDS
The directors do not recommend payment of a dividend for the
year (2015 - GBPnil).
Political donations
The Group made no political donations during the year (2015 -
GBPnil).
Corporate governance statement
The Board is committed to maintaining high standards of
corporate governance. The UK Corporate Governance Code, published
by the Financial Reporting Council, sets out standards of good
practice in relation to board leadership and effectiveness,
remuneration, accountability and relations with shareholders,
providing principles of good governance and a code of best practice
for listed companies. The UK Corporate Governance Code does not
apply to AIM companies. However, shareholders expect companies in
which they invest to be properly governed.
The Company's corporate governance procedures take due regard of
the principles of good governance set out in the UK Corporate
Governance Code having regard to the size and the stage of
development of the Company. Nonetheless, the Company has not
formally adopted any specific corporate governance code.
The Company has established audit, AIM compliance and
remuneration committees, with formally delegated duties and
responsibilities.
Audit committee
The audit committee comprises Patricia Farley and Michael
Davies, who was appointed chairman. The committee is responsible
for ensuring the financial performance, position and prospects of
the Group are properly monitored and reported on, and for meeting
the auditor and reviewing their reports relating to accounts and
internal controls.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 30
JUNE 2016
2016 2015
Notes GBP GBP
------ ---------- ----------
CONTINUING OPERATIONS 151,417 34,380
Revenue (60,240) (4,839)
Cost of sales 91,177 29,541
---------- ----------
GROSS PROFIT (513,367) (174,043)
Administrative expenses
Revaluation on investment
properties 4 250,000 -
---------- ----------
OPERATING LOSS BEFORE
EXCEPTIONAL ITEMS (172,190) (144,502)
Exceptional items
Gain on bargain purchase 5 1,541,829 -
Share-based payments 9 (212,655) -
AIM admission costs 2 (786,578) -
Costs of acquisition (469,848) -
of subsidiaries
---------- ----------
OPERATING LOSS (99,442) (144,502)
Finance costs (73,009) (98,116)
Finance income 3,138 -
---------- ----------
LOSS BEFORE TAXATION (169,313) (242,618)
Taxation 104,942 -
---------- ----------
LOSS FOR THE YEAR (64,371) (242,618)
---------- ----------
Loss attributable to
owners of the parent (64,371 (242,618)
---------- ----------
Loss per share expressed
in pence per share
Basic (0.15) (32.35)
Diluted (0.15) (32.35)
--------------------------- ------ ---------- ----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND OTHER
COMPREHENSIVE INCOME FOR THE YEARED 30 JUNE 2016
2016 2015
GBP GBP
--------- ----------
LOSS FOR THE YEAR (64,371) (242,618)
OTHER COMPREHENSIVE INCOME - -
--------- ----------
OTHER COMPREHENSIVE INCOME - -
FOR THE YEAR, NET OF INCOME
TAX
TOTAL COMPREHENSIVE EXPENSE
FOR THE YEAR (64,371) (242,648)
--------- ----------
Total comprehensive expense
attributable to:
Owners of the parent (64,371) (242,648)
------------------------------ --------- ----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2016
2016 2015
Notes GBP GBP
------ ---------- ----------
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 2,730 -
Investment properties 4 7,126,000 691,556
---------- ----------
CURRENT ASSETS 7,128,730 691,556
Trade and other receivables 24,262 245,970
Cash and cash equivalents 250,650 1,732
---------- ----------
274,912 247,702
---------- ----------
TOTAL ASSETS 7,403,642 939,258
---------- ----------
EQUITY
SHAREHOLDERS' EQUITY
Share capital 6 467,856 7,500
Share premium 4,120,984 -
Capital redemption reserve 67,500 67,500
Retained earnings (250,927) (399,211)
---------- ----------
TOTAL EQUITY 4,405,413 (324,211)
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities
- borrowings
Interest-bearing loans
and borrowings 7 2,690,108 -
---------- ----------
CURRENT LIABILITIES
Trade and other payables 7 277,960 389,469
Financial liabilities
- borrowings
Interest-bearing loans
and borrowings 7 30,161 874,000
---------- ----------
308,121 1,263,469
---------- ----------
TOTAL LIABILITIES 2,998,229 1,263,469
---------- ----------
TOTAL EQUITY AND LIABILITIES 7,403,642 939,258
---------- ----------
Net asset value per share
(pence) 9.42 (43.23)
------------------------------- ------ ---------- ----------
The financial statements were approved and authorised for issue
by the Board of Directors on 21 December 2016 and were signed on
its behalf by:
James Cane
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30
JUNE 2016
Share capital Share premium Capital
redemption
reserve
GBP GBP GBP
-------------- -------------- -------------------------
Balance at 1 July 75,000 - -
2014
Changes in equity
Buyback of deferred
shares (67,500) - 67,500
Total comprehensive - - -
expense
-------------- -------------- -------------------------
Balance at 30 June
2015 7,500 - 67,500
-------------- -------------- -------------------------
Changes in equity
Issue of share
capital 460,356 4,120,984 -
Share-based payments - - -
Total comprehensive - - -
expense
-------------- -------------- -------------------------
Balance at 30 June
2016 467,856 4,120,984 67,500
-------------- -------------- -------------------------
Retained Total equity
earnings
GBP GBP
-------------- -------------------------
Balance at 1 July
2014 (156,593) (81,593)
Changes in equity
Buyback of deferred - -
shares
Total comprehensive
expense (242,618) (242,618)
-------------- -------------------------
Balance at 30 June
2015 (399,211) (324,211)
-------------- -------------------------
Changes in equity
Issue of share
capital - 4,581,340
Share-based payments 212,655 212,655
Total comprehensive
expense (64,371) (64,371)
Balance at 30 June
2016 (250,927) 4,405,413
---------------------- -------------- -------------- -------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARED 30 JUNE
2016
2016 2015
Notes GBP GBP
------- ------------ ----------
Cash flows from operating
activities
Cash generated from operations (1,590,658) (108,243)
Interest paid (73,009) (98,116)
------------ ----------
Net cash used in operating
activities (1,663,667) (206,359)
------------ ----------
Cash flows from investing
activities
Purchase of tangible fixed (3,416) -
assets
Sale of investment properties 715,254 -
Acquisition of subsidiaries (4,630,000) -
Interest received 3,138 -
------------ ----------
Net cash used in investing (3,915,024) --
activities
------------ ----------
Cash flows from financing
activities
Loan notes issued - 200,000
Loan repayments in year (874,000) -
New loans in year 2,720,269 -
Shares issued 3,981,340 -
------------ ----------
Net cash generated from
financing activities 5,827,609 200,000
------------ ----------
Increase/(decrease) in
cash and cash equivalents 248,918 (6,359
Cash and cash equivalents
at beginning of year 1,732 8,091
------------ ----------
Cash and cash equivalents
at end of year 250,650 1,732
----------------------------------------- ------------ ----------
NOTES TO THE STATEMENT OF CASH FLOWS FOR THE YEARED 30 JUNE
2016
1. RECONCILIATION OF LOSS BEFORE TAXATION TO
CASH GENERATED FROM OPERATIONS
2016 2015
Group Notes GBP GBP
-------------------------------- ------ ------------ ----------
Loss before taxation (169,313) (242,618)
Depreciation charges 686 -
Profit on disposal of (23,698) -
investment properties
Gain on bargain purchase 5 (1,541,829) -
Revaluation of investment
properties 4 (250,000) -
Share-based payment charge 9 212,655 -
Finance costs 73,009 98,116
Finance income (3,138) -
------------ ----------
(1,701,628) (144,502)
Decrease/(increase) in trade
and other receivables 221,708 (239,508)
(Decrease)/increase in
trade and other payables (110,738) 275,767
------------ ----------
Cash generated from operations (1,590,658) (108,243)
-------------------------------- ------ ------------ ----------
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARED 30 JUNE
2016
The notes form part of these financial statements.
1. EMPLOYEES AND DIRECTORS
2016 2015
GBP GBP
-------- -----
Wages and salaries 264,971 -
Social security costs 2,332 -
-------- -----
267,303 -
---------------------- -------- -----
2. EXCEPTIONAL ITEMS
On 3 July 2015, the Group was admitted to AIM. The costs
involved totalled GBP786,578. It is considered that the size and
nature of these costs are such that they should be disclosed on the
face of the Consolidated Statement of Comprehensive Income.
On 3 July 2015, the Group acquired K&C (Coleherne) Limited
and on 27 May 2016 the Group acquired K&C (Osprey) Limited. The
costs to the Group of acquiring these entities totalled GBP469,848.
It is considered that the size and nature of these costs are such
that they should be disclosed on the face of the Consolidated
Statement of Comprehensive Income.
Further information on the gain on bargain purchase and the
share-based payments which are shown on the face of the
Consolidated Statement of Comprehensive Income can be found in note
5 and note 9 respectively.
3. LOSS BEFORE TAXATION
The loss before taxation is stated
after charging/ (crediting): 2016 2015
GBP GBP
--------- -------
Hire of plant and machinery 1,487
Other operating leases 2,493
Depreciation - owned assets 686
Profit on disposal of investment
properties (23,698)
Auditors' remuneration for the
Group - audit services 27,500 30,000
Auditors' remuneration for the
Group - taxation advisory services 5,000 6,500
Auditors' remuneration for the
Group - other non-audit services 80,000
------------------------------------------------ --------- -------
4. INVESTMENT PROPERTIES
Group Total
COST OR VALUATION GBP
----------
At 1 July 2015 691,556
Additions 6,876,000
Disposals (691,556)
Revaluations 250,000
----------
At 30 June 2016 7,126,000
----------
NET BOOK VALUE
At 30 June 2016 7,126,000
----------
At 30 June 2015 691,556
------------------- ----------
The investment properties purchased in the year were procured
upon acquisition of subsidiaries.
The properties were valued by professionally qualified
independent external valuers at the date of acquisition and are
recorded at the values that were attributed to the properties at
acquisition date. The Group acquired properties valued at
GBP4,000,000 on 3 July 2015 upon the acquisition of K&C
(Coleherne) Limited and properties valued at GBP2,876,000 on 27 May
2016 upon the acquisition of K&C (Osprey) Limited.
The directors consider that the carrying value of the investment
properties at 30 June 2016 is not materially different from their
market value.
The revenue earned by the Group from its investment properties
and all direct operating expenses incurred on its investment
properties are recorded in the Consolidated Statement of
Comprehensive Income.
The total rental income in relation to investment properties for
the Group equated to GBP133,114 (2015: GBP78,539). The total rental
expenses in relation to investment properties for the Group equated
to GBP52,673 (2015: GBP29,424).
5. INVESTMENTS
Company Shares
in Group
undertakings
COST GBP
--------------
At 1 July 2015 75,000
Additions 5,230,000
At 30 June 2016 5,305,000
--------------
NET BOOK VALUE
At 30 June 2016 5,305,000
At 30 June 2015 75,000
----------------- --------------
Acquisition of K&C (Coleherne) Limited
On 3 July 2015, the Company acquired the entire issued share
capital of K&C (Coleherne) Limited (formerly Silcott Properties
Limited) for GBP3,630,000, satisfied by cash of GBP3,330,000 and
the issuance of ordinary shares to the value of GBP300,000. In the
director's opinion, the net assets of K&C (Coleherne) Limited,
consisting solely of an investment property in London that was
independently valued on 22 July 2015 at GBP4 million, are worth in
excess of the amount paid and hence gave rise to negative
goodwill.
Net assets acquired were as follows:
GBP
----------------------------------------- -----------
Investment property 4,000,000
Trade and other receivables 366,118
Cash and cash equivalents 8,339
Trade and other payables (10,767)
Financial liabilities - borrowings (489,200)
Taxation payable (9,944)
Net assets 3,864,546
Gain on bargain purchase - taken to
Statement of Comprehensive Income (364,784)
-----------
Total Consideration (includes deduction
of GBP130,238 loan repayment) 3,499,762
-----------
Satisfied by cash 3,199,762
-----------
Net cash outflow arising on acquisition:
Cash consideration (3,199,762)
Bank and cash balances acquired 8,339
-----------
(3,191,423)
----------------------------------------- -----------
Acquisition of K&C (Osprey) Limited
On 27 May 2016, the Company acquired the entire issued share
capital of K&C (Osprey) Limited (formerly The Osprey Management
Company Limited) satisfied by cash of GBP1,300,000 and the issuance
of ordinary shares to the value of GBP300,000. In the director's
opinion, the net assets of K&C (Osprey) Limited, consisting of
various developments in England that have been valued
(independently or by the directors) at GBP2,876,000, are worth in
excess of the amount paid and hence gave rise to negative
goodwill.
Net assets acquired were as follows:
GBP
------------------------------------------- -----------
Investment property 2,876,000
Non-current assets - Equipment 311
Investment in subsidiary 1
Trade and other receivables 25,615
Cash and cash equivalents 19,526
Trade and other payables (36,678)
Provisions (80)
Net assets 2,884,695
Fair value adjustment to deferred taxation (107,650
Gain on bargain purchase - taken to
Statement of Comprehensive Income (1,177,045)
-----------
Total Consideration 1,600,000
-----------
Satisfied by cash 1,300,000
-----------
Net cash outflow arising on acquisition:
Cash consideration (1,300,000)
Bank and cash balances acquired 19,526
-----------
(1,280,474)
------------------------------------------- -----------
K&C (Osprey) Limited contributed GBP8,759 of revenue and a
loss of GBP916 before taxation for the period between the date of
acquisition and the balance sheet date.
Reasons for gains on bargain purchase
K&C is on occasions able to acquire assets at a favourable
price because it can take advantage of the tax advantages available
to a REIT and to the vendor of a special purpose vehicle that is
sold to a REIT, especially when the transaction involves K&C
equity being issued to the vendor. This was the case with the
acquisitions of both K&C (Coleherne) Limited and K&C
(Osprey) Limited. The vendor of K&C (Osprey) Limited not only
retained an interest in K&C post-sale but also understood that
the K&C team had the necessary skills and experience to create
a stronger business in the future.
6. SHARE CAPITAL
Allotted, issued and fully
paid:
Number: Class: Nominal 2016 2015
value: GBP GBP
----------- --------- -------- -------- ------
46,785,623 Ordinary GBP0.01 467,856 7,500
----------- --------- -------- -------- ------
At 1 July 2015, the Company had 750,001 Ordinary shares of
GBP0.01 in issue.
On 3 July 2015, the Company issued 43,035,622 Ordinary shares of
GBP0.01 each. 40,813,400 of the shares were issued at a premium of
GBP0.09 per share and 2,222,222 were issued at a premium of GBP0.08
per share.
On 27 May 2016, the Company issued 3,000,000 Ordinary shares of
GBP0.01 each. The shares were issued at a premium of GBP0.09 per
share.
The Company has one class of ordinary share, which carry no
rights to fixed income.
7. FINANCIAL LIABILITIES - BORROWINGS
The Group has two principal loans:
1) A 25-year bank loan of GBP1,625,000 (2015 - GBPnil) repayable
by 300 monthly instalments of GBP7,527 and a final instalment of
GBP418,811. All repayments include both capital repayments and
interest at 3.25% above Base Rate. The loan is secured by a first
debenture over all assets and undertakings of the Company, a cross
guarantee from K&C (Coleherne) Limited over the freehold
property known as 25 Coleherne Road and a debenture over the assets
and undertakings of K&C (Coleherne) Limited. It is also secured
by a pledge of shares of K&C (Coleherne) Limited.
2) A loan of GBP1,100,000, commencing on 27 May 2016 which is
repayable in full no later than 27 May 2018 and is secured on the
assets of the Company and the assets of K&C (Osprey) Limited.
Interest is charged at 12% per annum and is payable quarterly in
arrears.
8. EVENTS AFTER THE REPORTING PERIOD
On 11 July 2016, the company issued share options to George
Rolls, a former director of the Company. The options issued were to
purchase 460,000 ordinary shares in the company at an exercise
price of 10p per share within the period ending five years from the
date of grant.
On 21 December 2016, Gravity Investment Group Limited has
subscribed for 5,000,000 ordinary shares in the company at 10p per
share, to be allotted in two tranches: 2,500,000 ordinary shares on
23 December 2016 and 2,500,000 ordinary shares no later than 6
January 2017. The company will receive total cash proceeds of
GBP500,000.
9. SHARE-BASED PAYMENT TRANSACTIONS
During the year ended 30 June 2016, the Company had five
share-based payment arrangements in place, which are described
below:
Executive Non-executive Founder Allenby Warrants
share share options warrants warrants
options
--------------- --------- -------------- --------- --------- ---------
Outstanding
at 30 June
2015 - - 750,000 - -
Granted during
the year 3,000,000 582,349 - 437,856 1,500,000
Forfeited
during the
year (437,856)
Outstanding
at 30 June
2016 3,000,000 144,493 750,000 437,856 1,500,000
--------------- --------- -------------- --------- --------- ---------
Executive share options
Executive share options have been granted to directors and other
staff members on admission to trading on AIM at GBP0.01 per share.
The share options vest if and when the Group's gross assets under
management reach GBP25million and the Group's net asset value per
share reaches GBP0.105 and the participant remains employed on such
date. The share options will not vest if the performance targets
are not met and expire on the date immediately preceding the date
of the fifth anniversary of the date of vesting. The contractual
term of each share option is estimated to be five years. There are
no cash settlement alternatives.
Non-executive share options
Non-executive share options have been granted to certain
non-executive directors and others on admission to trading on AIM
or subsequently at GBP0.10 per share. There are no vesting
conditions. The non-executive share options do not have any
performance criteria attached to them and may be exercised at any
time during the period commencing one year from the date of
admission to trading on AIM and ending on the date immediately
preceding the date of the tenth anniversary of the date of
admission to trading on AIM.
Founder warrants
On 8 September 2014, 750,000 warrants were issued to
shareholders to subscribe for one ordinary share at GBP0.10 per
share at any time before 31 December 2018.
Allenby warrants
On admission to trading on AIM, the Company granted to Allenby
Capital Limited a warrant to acquire 437,856 ordinary shares at
GBP0.10 per share, within five years of admission, namely by 3 July
2020.
Warrants
On 24 May 2016, 1,500,000 warrants were issued to a number of
potential lenders to the Company to subscribe for one ordinary
share at GBP0.10 per share at any time before 24 May 2021.
10. RELATED PARTIES
During the year, the Group repaid a loan totalling GBP215,000
which was received from C D James, a director, in the previous
period. The loan was subject to an interest charge for the period
from receipt to redemption of 17.5% of the principal amount,
payable in full at the earlier of admission to AIM or 31 July 2016.
The loan was repaid by converting the loan into ordinary shares of
the Company at par. Following admission to AIM on 3 July 2015,
gross interest of GBP37,625 was paid to C D James.
During the year, the Group repaid a loan totalling GBP125,000
which was received from O J Vaughan, a director, in the previous
period. The loan was subject to an interest charge for the period
from receipt to redemption of 17.5% of the principal amount,
payable in full at the earlier of admission to AIM or 31 July 2016.
The loan was repaid in full during the year. Gross interest of
GBP23,523 was paid to O J Vaughan.
11. FINANCIAL INFORMATION
The financial information contained within this preliminary
announcement for the year ended 30 June 2016 is derived from but
does not comprise statutory financial statements within the meaning
of section 434 of the Companies Act 2006. Statutory accounts for
the year ended 30 June 2015 have been filed with the Registrar of
Companies and those for the year ended 30 June 2016 will be filed
before the Company's annual general meeting. The auditor's report
on the statutory accounts for the years ended 30 June 2015 and 30
June 2016 are unqualified, do not draw attention to any matters by
way of emphasis, and do not contain any statements under section
498 of the Companies Act 2006.
12. ANNUAL REPORT AND ACCOUNTS
Copies of the annual report and accounts for the year ended 30
June 2016, together with the notice of the general meeting to be
held in January 2017, will be posted to shareholders shortly and
will be available to view and download from the Company's website
at www.kandc-reit.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFLFFVLFFIR
(END) Dow Jones Newswires
December 22, 2016 07:18 ET (12:18 GMT)
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