TIDMKCR
RNS Number : 6638B
KCR Residential REIT PLC
03 February 2020
3 February 2020
KCR Residential REIT plc
("KCR" or the "Company")
Annual Results for the year ended 30 June 2019
KCR Residential REIT plc (AIM: KCR), the residential real estate
investment company, is pleased to announce its annual results for
the year ended 30 June 2019.
The Annual Report will shortly be available from the Company's
website, www.kcrreit.com, and will be posted to shareholders in the
coming days.
With publication of the Annual Report, in accordance with the
AIM Rules for Companies, the temporary suspension of the Company's
ordinary shares under AIM Rule 40, which took effect at 7.30am on 2
January 2020, can now been lifted. Trading in the Company's
ordinary shares is expected to recommence today.
On 31 January 2020 the Company's largest shareholder, Torchlight
Fund LP ("Torchlight"), confirmed that, if necessary, it would
exercise its Option (the Option Agreement announced in the RNS of
12 July 2019) sufficient to ensure that the Company's liabilities
would be satisfied as they fall due. Torchlight's broader intent
remains, as announced in July 2019, to grow significantly its
investment in residential property through its partnership with
KCR.
Market Abuse Regulation (MAR) Disclosure
The information contained within this announcement is deemed by
the Company to constitute inside information for the purposes of
the Market Abuse Regulation (EU) No. 596/2014. Upon the publication
of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public
domain.
Contacts:
KCR Residential REIT plc info@kcrreit.com
Dominic White, Chief Executive +44 20 3793 5236
Arden Partners plc
Richard Johnson / Benjamin Cryer +44 20 7614 5900
Notes to editors:
KCR'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 residential areas in the UK.
CHAIRMAN'S LETTER
Dear shareholder
I am pleased to introduce the 2019 Annual Report for KCR
Residential REIT plc ("KCR" or the "Company").
During the financial year under review, we carried out ongoing
property operations that generated an improvement in revenue, and,
in particular in the second half of the year, focused on delivering
the corporate transaction with the Torchlight Fund LP ("Torchlight"
and the "Transaction") that was announced in July (RNS 12 July 2019
- Subscription and Strategic Agreement) and closed on 6 August
2019.
KCR maintained high levels of occupancy at all its sites and
achieved further rental growth across the portfolio, including
achieving full occupancy at its new-build property at Deanery
Court, Southampton. There was one material property transaction: in
December, KCR sold the Cygnet special purpose vehicle that owned
two supermarkets. The supermarkets were acquired from Inland Homes
at the same time as the Southampton property and were considered
non-core. Following an inability to raise additional equity capital
to assist with completing this transaction the supermarkets were
sold back to Inland Homes.
As I mention above, the second half of the year focused on
delivering the Transaction, which we completed shortly after the
year end. The introduction of a significant new shareholder,
Torchlight, able to advance the Company is a major step forward for
KCR and for its ability to create shareholder value. It has
delivered both immediate access to equity capital and new
relationships with significant global investors. The Transaction
has enabled repayment of certain outstanding loans and assisted in
the ability to pursue refinancing of the portfolio debt on more
favourable terms. The investor and the business relationships that
Torchlight brings to the partnership will, the directors believe,
enable the Company to grow more rapidly in the short to medium
term. The ability to access additional equity capital via the
Torchlight Option will also support the ability to make ongoing
acquisitions.
KCR has historically employed a "Buy-to-Rent" model, acquiring
existing residential properties at below market value while
implementing asset-management strategies to improve rental and
capital value. Looking forward, to reduce acquisition cost and to
control quality, KCR intends to include in its strategy a
"Build-to-Rent" approach to portfolio construction where it will
directly and indirectly develop residential units to rent out.
Direct development is where KCR itself acquires and develops
appropriately permitted 'raw land' into completed residential
units. This approach lowers the acquisition cost per unit and
allows KCR to achieve a higher yield on those assets that it
develops. KCR intends to grow its investment in build-to-rent
assets through strategic partnerships with homebuilders. KCR may
also increase and strengthen its role in development by taking
direct equity positions in residential homebuilders. This would be
expected to provide value by sharing in the development margin and
security of the pipeline through part-ownership of key producers of
completed properties.
While the focus is currently on rearranging and then building
the UK residential portfolio, over time the strategy is expected to
extend to international markets.
The Transaction saw a reshaping of the board of directors, and I
was delighted to welcome Russell Naylor, James Thornton and Richard
Boon to the board. The board comprises investment professionals
with a long experience of investing into and managing several
billion pounds of real estate internationally. They have a strong
background in real estate, finance and money management in global
institutions such as Morgan Stanley, Henderson Global Investors,
UBS and Merrill Lynch Investment Management, and have successfully
executed multiple M&A and corporate finance activities in real
estate, in both private and public equity markets.
I would like to place on record my sincere thanks to retiring
directors Tim James, Oliver Vaughan and James Cane, who have been
directors since 2014 and were key to the IPO in 2015.
We look forward to updating you as we reinforce the financial
position of the Company and reposition it for growth.
Michael Davies
Chairman
CHIEF EXECUTIVE'S LETTER
Dear shareholder
I have pleasure in reporting to you on the progress of the Group
for the year to 30 June 2019.
In my previous annual statement, I noted that KCR's objective
was to grow the size of its rented portfolio to deliver an increase
in revenue that resulted over time in both profitability and an
ability to pay dividends. At the same time, we would focus on
growing net asset value per share.
Although it has been a difficult year in the UK with strong
headwinds, the recently completed transaction with Torchlight has
proved to be a significant positive step forward for KCR and its
ability to deliver on these objectives.
Property portfolio
Property transactions during the year
KCR did not make any property acquisitions during the year.
As reported in the interims, two supermarkets that formed part
of two newly built residential buildings in Leighton Buzzard and
West Drayton (held in KCR (Cygnet) Limited) were sold to Inland
Homes on 12 December 2018. The sale proceeds were used to reduce
the Company's indebtedness. Although the Cygnet transaction was
below acquisition value, the combined transaction with Inland
Homes, which also included the acquisition of Deanery Court,
Southampton by KCR (Southampton) Limited, was positive in terms of
generating significant levels of new rental income and adding to
KCR's net asset value.
Existing portfolio
The existing portfolio continues to perform in line with
expectations.
-- The Ladbroke Grove portfolio (owned by KCR (Kite) Limited)
that consists of 16 one- and two-bedroom flats in three buildings,
and one stand-alone flat in Harrow Road, has increased its annual
rental income from GBP256,780 at acquisition in June 2018 to
GBP283,790 at 30 June 2019, an increase of 10.5 per cent. Units
have been refurbished when tenants leave and are then let at higher
levels in the private market.
-- A block of 27 units at Deanery Court, Chapel Riverside (owned
by KCR (Southampton) Limited) was acquired for GBP5.8 million in
June 2018. At 30 June 2019, the block was valued at GBP6.4 million,
an increase of 10.3 per cent. The property was vacant at
acquisition and now delivers GBP345,000 of annual rental
income.
-- The block at Coleherne Road, held within K&C (Coleherne)
Limited, which comprises ten studio and one-bedroom flats,
continues to be in strong demand for letting. Occupancy has been
maintained at close to 100 per cent; where there have been
renewals, rents have continued to increase at least in line with
inflation.
-- The Osprey portfolio (K&C (Osprey) Limited) consists of
159 flats and 13 houses let on long leases in six locations
together with an estate consisting of 30 freehold cottages in
Marlborough where Osprey delivers estate management and sales
services. The portfolio generated higher income from sales
commissions from leaseholders' sales, management fees and
lease-renewal premium income than in the previous year. The
portfolio has held its value and is expected to provide a
medium-term value-adding opportunity as the terms of the
long-leasehold flats shorten. The Company is also investigating the
potential to enhance value through redevelopment and roof
extensions at three of the seven sites.
Financial
Revenue in this financial year increased to GBP777,827 (2018 -
GBP265,936) as Deanery Court completed its let-up phase. Further
increases at Southampton will be delivered in the next financial
year as the full impact of the property achieving 100 per cent
occupancy in April 2019 flows into the income statement. Run-rate
revenue is now considerably higher across the Company's
portfolio.
The Group reports an operating loss before non-cash and
separately disclosed items of GBP878,213 (2018 - GBP1,875,266
profit as restated). The operating loss was GBP3,014,023 (2018 -
GBP251,079 operating profit). The loss before taxation was
GBP3,737,372 (2018 - GBP67,574). A large part of the operating loss
(GBP1,387,441) is attributable to a non-cash accounting item
relating to KCR's preference-share structure (share-based payment
charge); the restricted preference share scheme was cancelled post
year-end as part of the Transaction.
The focus in the second half of the year was on maximising
revenue from the existing portfolio and the successful execution of
the corporate transaction with Torchlight, both which have been
achieved.
Total assets at 30 June 2019 decreased to GBP24.1 million (2018
- GBP27.4 million) following the disposal of the Cygnet SPV. Net
assets decreased to GBP9.58 million (2018 - GBP9.95 million as
restated), predominantly due to several creditors converting their
debt into equity, and new shares being issued to settle an asset
acquisition made in the previous financial year. Net asset value
per share decreased to 60.67p (2018 - 100.95p as restated).
Post balance sheet events
Torchlight transaction
On 12 July 2019, KCR announced the subscription from, and
strategic agreement with, Torchlight. The key ingredients of the
Transaction, which were subsequently implemented, are in summary as
follows (detail is included in the Notes to these Accounts and in
the announcement dated 12 July 2019):
-- Torchlight subscribed for 9,000,000 Ordinary Shares at 45
pence per share. The GBP4.05 million of capital raised was mainly
used to reduce leverage from 65 per cent of property assets to 41
per cent, reduce portfolio interest cost and for working
capital.
-- The company granted Torchlight an Option to subscribe for up
to an additional 50,000,000 Shares at a price per share of:
-- for any notice of exercise served on the Company on any date
up to and including 31 December 2019,the Issue Price; and
-- for any notice of exercise served on the Company from 1
January 2020 until the end of the Option Period, the higher of (i)
the price per Option Share which is equivalent to 95 per cent. of
the 30-Day VWAP for the Ordinary Shares and (ii) the par value of
each Ordinary Share.
-- The Option is only exercisable by Torchlight during the
Option Period and if the Option is not exercised prior to the
expiry of the Option Period, it will lapse. Any exercise of the
Option by Torchlight shall be for not less than 2,000,000 Option
Shares.
-- Exercise of the option in full by Torchlight will deliver a
further GBP22.5 million of equity to the Company.
-- To simplify the Company's share structure, the Company
unwound its preference share scheme through the cancellation of all
Restricted Preference shares in exchange for the issue of a
significantly smaller number of Ordinary shares to Restricted
Preference shareholders.
-- All convertible loan notes held by management and related
parties were converted into equity.
On 2 January 2020, trading of the shares of KCR Residential REIT
plc was temporarily suspended pending publication of the 2019
annual audited accounts.
Further details on post balance sheet events are contained
within note 24 of the financial statements.
Prospects
The Transaction with Torchlight that completed in August 2019
is, we believe, the most significant event for KCR since the IPO.
It enabled the restructuring of the balance sheet, provides a solid
base for refinancing the portfolio, and opens up numerous channels
to further equity for portfolio expansion.
We expect to update shareholders further in the coming months as
the restructuring and positive refinancing processes complete post
year end.
We are excited about the potential for the Company to grow as it
works with Torchlight and its representative directors to
capitalise on its new opportunities.
Dominic White
Chief executive
STRATEGIC REPORT
The directors present the strategic report of KCR Residential
REIT plc ('KCR' or the 'Company') and its subsidiaries (together,
the 'Group') for the year ended 30 June 2019.
PRINCIPAL ACTIVITY
The Group carries on the business of acquiring, developing and
managing residential property predominantly for letting to third
parties on long and short leases. At the year-end, the Group
consisted of the Company, which is a public company limited by
shares, and its wholly owned subsidiaries.
1. K&C (Coleherne) Limited owns a freehold residential
property in Chelsea, London containing ten studio flats
2. K&C (Osprey) Limited owns the freehold of several
retirement properties let on long leases to residents and provides
management services in respect of these properties and to
third-party landlords
3. KCR (Kite) Limited owns three freehold residential properties
in Ladbroke Grove, London (16 flats) and a flat on Harrow Road
4. KCR (Southampton) Limited owns a long leasehold block of 27
two-bedroom apartments at Chapel Riverside, Southampton
5. K&C REIT Limited (dormant, dissolved 9 July 2019)
6. K&C (Newbury) Limited owns no property and is now
effectively dormant. The valuation of the company has been written
down to nil via an impairment provision set out in note 13.
GROUP STRATEGY
The directors intend to build a significant presence in the
residential letting market, primarily through the acquisition of
land with planning permission that will be developed into
residential property and the acquisition of existing residential
property. Assets are predominantly acquired with the purpose of
letting to third parties.
RESULTS
The Group reports a consolidated operating loss of GBP3,014,023
for the year to 30 June 2019 (2018 - profit GBP251,079).
REVIEW OF BUSINESS AND FINANCIAL PERFORMANCE
The Board has reviewed whether the Annual Report, taken as a
whole, presents a fair, balanced and understandable 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.
As reported in the Chief Executive's letter, revenue in this
financial year increased to GBP777,827 (2018 - GBP265,936) as the
Deanery Court property completed its let-up phase. Further
increases at Southampton will be delivered in the next financial
year as the full impact of the property achieving 100 per cent
occupancy in April 2019 flow into the income statement. Run-rate
revenue is now considerably higher across the Company's
portfolio.
The Group reports an operating loss before separately disclosed
items of GBP878,213 (2018 - GBP1,875,266 profit as restated).
Operating loss was GBP3,014,023 (2018 - profit GBP251,079). Loss
before taxation was GBP3,737,372 (2018 - loss GBP67,574). A large
part of the loss (GBP1,387,441) is attributable to a non-cash
accounting item relating to KCR's preference-share structure; the
Restricted Preference shares were cancelled post-year-end as part
of the Transaction.
Total assets at 30 June 2019 decreased to GBP24.1 million (2018
- GBP27.4 million) following the disposal of the Cygnet SPV. Net
assets decreased to GBP9.58 million (2018 - GBP9.95 million as
restated), predominantly due to several creditors converting their
debt into equity, and new shares being issued to settle an asset
acquisition made in the previous financial year. Net asset value
per share decreased to 60.67p as shown on the face of balance sheet
(2018 - 100.95p as restated).
KEY PERFORMANCE INDICATORS
The directors and management team monitor key performance
indicators relevant to each of the subsidiaries to improve Group
performance. Management reports to the board if data show
significant variances against expected outcomes and proposes
mitigation action as necessary.
Examples of the KPIs used to monitor aspects of performance
include:
1. At property level
1.1. Vacancy rate in terms of number of units available and potential rental income
Target occupancy of at least 90 per cent achieved
1.2. Outstanding rents as a percentage of rental income
Target debtor balance of less than 10 per cent of rental revenue
achieved.
2. At Group level
2.1. Gross assets under management
The target of GBP40 million of gross assets by 30 June 2019 was
not achieved. However, the restructuring of the business following
an investment by Torchlight Fund LP, which started in August 2019,
has significantly improved the prospects of profitable growth for
the Company over the next 12 months.
Near term focus is on reducing costs, enhancing revenue and
growing the business to achieve a cash break even position to
provide a stable base to grow from.
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 development. Although there is no
certainty that such funds will be available when needed, the
Company has plans in place with KCR's new Capital Partner regarding
ongoing funding, and, the directors continue to focus on developing
the Group's capital structure.
-- Financial instruments
Details of risks associated with the Group's financial
instruments are given in note 22 to the financial statements. The
directors seek to mitigate these risks in manners appropriate to
the risk.
-- 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. The directors, who have long experience of
property, seek to mitigate this risk by employing independent
valuation experts such as Lambert Smith Hampton to review values of
the assets in the portfolio.
-- Brexit
The negative impact arising from the uncertainty about Brexit
which has been impacting the UK property market is expected to
improve following the election outcome. The board believes that the
Company operates in a sector of the market, and with the advantage
of REIT status, such that it will be able to build market share,
income and net asset per share value over the coming years.
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 continued to investigate the purchase of
residential property assets that will be able to support an
increasing income yield. As last year, the Group is currently
investigating several potential acquisitions. To achieve these, the
Group may 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:
Dominic White
Director
REPORT OF THE DIRECTORS
The directors present their report with the financial statements
of the Company and the Group for the year ended 30 June 2019.
A review of the business, risks and uncertainties and future
developments is included in the Chairman's Letter, the Chief
Executive's Letter, the Group Strategic Report, and in note 22 to
the financial statements.
DIVIDS
The directors do not recommend payment of a dividend for the
year (2018 - GBPnil).
Political donations
The Group made no political donations during the year (2018 -
GBPnil).
Corporate governance statement
During the year to 30 June 2019 KCR Residential REIT plc, while
an AIM Listed company, was a Family Office operating with five
directors and three employees. In September 2018 it adopted the QCA
code but with such a tightly controlled operational and risk
environment was not able to, in all areas, fully comply with the
principles. During the current year the directors will continue to
update the website to comply as far as possible with the following
QCA code principles, noting areas where the small scope of
operations limit their ability to fully comply.
Establish a strategy and business model which promote long-term
value for shareholders
The Company's objective is to build a substantial property
portfolio predominantly in the residential sector that generates
both secure income flow from rents and increasing net asset value
for shareholders. The Company acquires or develops blocks of
studio, one-and two-bed apartments that are close to transport
links, shopping and leisure, mostly in London, its surrounds and
the South East. These blocks are focused on attracting tenants
seeking affordable rental accommodation.
The Company brings its property corporate finance expertise to
the identification and execution of these acquisitions.
The Company looks to acquire properties at below market value to
improve yield on cost and enhance net asset value. It aims to
achieve this through acquisition strategies including:
-- using the REIT's inherent tax advantages; acquiring
properties in corporate structures with embedded capital
appreciation and deferred tax liabilities which are reduced to zero
as the corporate becomes part of the REIT group, and
-- acquiring permitted land, funding the development process and
retaining the developer's profit.
Over the medium to long term, the Company expects rental and
property values to increase in line with inflation. These increases
coupled with new acquisitions are designed to enable the Company,
once it has reached scale, to pay dividends from cash flow
generated by rents and deliver net asset value increases through
positive property revaluations. Active asset management of the
properties may also deliver value increases. The Company as a REIT
is required to distribute 90 per cent of its rental profits.
It is the Company's paramount intention to conduct its
activities in a professional and responsible manner for the benefit
of its shareholders, its employees, and the communities where it
operates.
Further detail on the key challenges that the Board addresses
are set out under Risks and Uncertainties in the Strategic
Report.
Seek to understand and meet shareholder needs and
expectations
On 31 July 2019, a major equity re-capitalisation brought in
GBP4.05m of capital and a substantial new shareholder, Torchlight
Fund LP. This transaction was designed to stabilise and re-position
the Company so that it can move forward in a way that all existing
and new shareholders may benefit from future uplifts to
profitability and increases in net asset value.
The Company remains committed to engaging with its shareholders
to ensure its strategy and performance are clearly understood.
Feedback from investors is obtained through direct interaction
between the CEO and Executive Director and shareholders following
the Company's full and half year results and certain other ad hoc
meetings between executive management and shareholders that take
place during the year.
The Company seeks to communicate with its shareholders on a
timely and transparent basis at all times. Announcements through
RNS are as comprehensive as possible. Digital communications
platforms such as Vox Markets are used from time to time to
communicate via video and podcast. Use of these platforms is
limited to senior executives such as the CEO and only once
appropriate media training has been completed. As part of the
Company's repositioning, the intention is to improve the speed of
reporting of the interim and full year results to shareholders.
The chief executive, Dominic White, attends and presents at
investor forums from time to time, as well as holding discussions
with analysts, shareholders and investment managers.
It is apparent from such interaction that shareholders have
several concerns, including:
-- How do the directors propose to expand operations without
dilution to existing shareholdings?
Since property companies are capital-intensive, the Company will
raise equity over time to fund the acquisition of new properties.
Torchlight Fund LP exercising its option rights as approved by
shareholders will be dilutive to existing shareholders with this
dilution having already being accepted and approved by
shareholders. The board will aim to maximise the issuance price of
any additional equity offerings such that issuances are accretive
or, if that is not possible, offer all shareholders the opportunity
to participate in the offering on an equal access.
-- When will the Company become profitable?
Based on current overheads and interest forecasts, the Company
may become profitable and cash flow positive once it has
approximately GBP50m of investments generating satisfactory rental
income. Executive management is focused on achieving this objective
as soon as possible. This is naturally dependent on the
availability of suitable transactions and the ability to complete
the acquisitions either via raising additional equity capital or
debt.
Shareholder liaison is managed by Dominic White
(info@kcrreit.com).
Take into account wider stakeholder and social responsibilities
and their implications for long-term success
The Company currently operates in the UK. It identifies the main
stakeholders in the UK as being investors, tenants, and suppliers
of services (accountant, nomad, broker, lawyers), employees,
directors, third-party property managers, banks and other debt
providers and property agents introducing investment
opportunities).
The Company has an important social responsibility in its role
as a landlord of residential housing. We commit to delivering great
service to our tenants, which includes providing safe and
high-quality residential units, at market prices, managed in a
professional way.
Treating all our stakeholders well, and in particular our key
customers - our tenants, is key to growing a sustainable business
that will have long-term success.
Embed effective risk management, considering both opportunities
and threats, throughout the organisation
The board is responsible for setting the risk framework within
which the Company operates and ensuring that suitable
risk-management controls and reporting structures are in place
throughout the group.
The board seeks to minimise risk in the management of its
operations. The Company uses third- party advisors to address
specific issues that arise during operations where they bring
complementary expertise and experience.
Maintain the board as a well-functioning, balanced team led by
the chair
The board comprises a balance of independent and non-independent
directors with collective, specific and complementary skills that
enable the Company to manage and direct its affairs in a
professional manner, with embedded corporate governance procedures
that are fit for purpose.
Full Board meetings are held on a quarterly basis and all
necessary documentation is provided to the board in advance, so
that they can understand the issues under review and make well-
considered decisions. During the year, between full Board meetings,
the Board convenes whenever necessary to consider and if
appropriate approve the execution and completion by executive
management of key matters that fall within the Board's defined
remit as set out below.
The board has audit and remuneration sub-committees that are
chaired by non-executive directors.
All of the directors devote such time to the Company's affairs
as the board considers appropriate.
During the 2019 year, the sole non-executive director was
Michael Davies who was regarded as Independent by the Board and
shareholders.
During the 2020 year, following the Torchlight Transaction
completed on 6 August 2019, two Torchlight directors Russell Naylor
(executive director in charge of finance) and Richard Boon joined
the Board. Richard Boon is regarded as a non-independent non-
executive Director. James Thornton also joined the Board at that
time as an independent non-executive director.
During 2019, each of Michael Davies, Dominic White, James Cane,
Timothy James, Oliver Vaughan attended all 6 Board meetings in
person or by conference call as permitted by the company's
articles.
During 2020, one Board meeting has been held, attended by all
current directors.
The involvement of non-executive directors varies month by month
but is estimated at 3-10 days a month.
Ensure that between them the directors have the necessary
up-to-date experience, skills and capabilities
The board maintains up-to-date skills, knowledge and experience
to enable it to direct and manage the Company's operations,
finances and its interface with investors, the public markets and
its other stakeholders.
It takes great care to appoint managers and staff with the
appropriate skills and experience, and is aware of the importance
of encouraging diversity among its workforce.
The board works as a team and regularly reviews its procedures
and composition.
During 2019, the directors consisted of highly experienced
property professionals working tightly together in a family office.
For 2020, the relevant experience and skills of the current
directors is set out in detail in the Circular relating to the
Torchlight Transaction. Each director is involved in other
organisations which keep their professional skills sharpened and up
to date. In due course the details as they pertain to the directors
will be added to the website but is included in the Circular of 12
July 2019.
Evaluate Board performance based on clear and relevant
objectives, seeking continual improvement
Following the transaction approved by the directors of KCR as at
31 July 2019, the Board of KCR now comprises:
Name Role Appointed Status
Michael Davies Non-executive chairman 12 November 2015 Independent
Dominic White CEO 1 January 2017 Non-independent
Russell James Naylor Executive director 06 August 2019 Non-independent
Richard James Boon Non-Executive director 06 August 2019 Non-independent
James Thornton Non-Executive director 06 August 2019 Independent
In accordance with its obligations under the QCA code the Board
will review internally its collective performance, and the
performance of its committees and Board members. At this stage of
its evolution and in view of the size of the Board, the Directors
do not believe that it is practical to undertake an external or a
wide-ranging evaluation of the performance of Board members.
The primary tasks of the chief executive, Dominic White, have
been and will continue to be to grow the Company's asset base and
revenue through the delivery of additional assets to the portfolio.
This has included developing capital and asset partnerships and
finding ways to raise appropriately priced and structured debt
finance to support transactions and equity capital in an uncertain
equity market. He is a key point of contact for the capital
markets.
In these tasks he will be supported by Russell Naylor, Executive
Director, who is additionally responsible for internal financial
controls, financial management, capital planning and overseeing the
preparation of financial reports to shareholders.
The primary task of the Chairman, Michael Davies, has been to
ensure that the Board has performed its role correctly, that
governance is adhered to, and that the Company works towards
delivering value to shareholders in accordance with the Company's
strategy. He is also a point of contact with many of the Company's
shareholders and professional advisers.
Succession planning remains an important issue for the Board,
and in particular the chairman.
Promote a corporate culture that is based on ethical values and
behaviours
The Board strives to promote a corporate culture based on sound
ethical values and behaviours.
The Company has adopted a code for directors' and employees'
dealings in securities, which is appropriate for a company whose
securities are traded on AIM. The code is in accordance with the
requirements of the Market Abuse Regulation that came into effect
in 2016.
The Board is also aware that the tone and culture it sets will
greatly impact all aspects of the Company and the way that
employees behave, as well as the achievement of corporate
objectives. A significant part of the Company's activities is
centred upon an open dialogue with shareholders, employees and
other stakeholders. Therefore, the importance of sound ethical
values and behaviours is crucial to the ability of the Company to
successfully achieve its corporate objectives.
Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board
The board is committed to high standards of corporate
governance. No system of internal control can completely eliminate
the risk of process or individual failures. To an extent the
corporate governance structures which the Company is able to
operate are limited by the size of the executive management team
and the small number of executive directors, which is itself
dictated by the current size of the Company's operations. Within
this limitation necessitated by the current small size of the
business, the Board is dedicated to having strong internal control
systems in place to enable it to maintain the highest possible
standards of governance and probity.
The chairman, Michael Davies:
-- leads the Board and is primarily responsible for the
effective working of the Board;
-- in consultation with the Board, ensures good corporate
governance and sets clear expectations with regards to Company
culture, values and behaviour;
-- sets the Board's agenda and ensures that all Directors are
encouraged to participate fully in the activities and
decision-making process of the Board;
-- takes responsibility for relationships with the Company's
professional advisers and major shareholders.
The chief executive, Dominic White:
-- is primarily responsible for developing the Company's
strategy in consultation with the Executive Director and the Board,
for its implementation and for the operational management of the
business;
-- is primarily responsible for new projects and expansion;
-- runs the Company on a day-to-day basis;
-- implements the decisions of the Board;
-- monitors, reviews and manages key risks;
-- is the Company's primary spokesperson, communicating with
external audiences, such as investors, analysts and the media.
The executive director, Russell Naylor:
-- works with the CEO to develop and execute the Company's strategy;
-- is primarily responsible for the systems of financial
controls in operation for the Company and each of its
subsidiaries;
-- is primarily responsible for all financial management and
financial planning matters;
-- monitors, reviews and manages key risks as they relate to financial impact;
-- implements the financial and internal control decisions of the Board.
On 28 October 2019 the Group established a Remuneration
Committee chaired by Michael Davies, Chairman and comprises Michael
Davies and Richard Boon, Non-Independent Non-Executive Director,
which meets on an ad hoc basis when necessary.
During the year to 30 June 2019, the audit committee comprised
Michael Davies, the chairman. From 28 October 2019 the audit and
risk committee is chaired by James Thornton, independent
non-executive director and comprises James Thornton and Michael
Davies. Russell Naylor is invited to attend as appropriate. The
audit and risk committee is comprised of independent non-executive
directors. It normally meets twice each financial year to consider
the interim and final results. In the latter case, the auditors are
present and the meeting considers and takes action on any matters
raised by the auditors arising from their audit.
The chair of each of the Committee may invite executive
management and Board members to attend any meeting.
Matters reserved for the Board include:
-- Vision and strategy
-- Review of budgets, asset plans and trading results
-- Approving financial statements
-- Financing strategy, including debt strategy
-- Business planning relating to acquisitions, divestments and
major refurbishments not already agreed in the strategy and asset
plans
-- Capital expenditure in excess of agreed budgets
-- Corporate governance and compliance
-- Risk management and internal controls
-- Appointments and succession plans at senior management level
-- Directors' remuneration.
Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant
stakeholders
The company website sets out the principal approach of the
Company to governance. It contains all relevant documents and
information for shareholders, including all RNS announcements,
Financial Reports, Shareholder Circulars, and the Company's
articles.
Shareholders are additionally encouraged to participate at the
AGM, to ensure that there is a high level of accountability and
identification with the Group's strategy and goals.
During 2019, the Audit Committee reviewed and recommended to the
Board the sign off of the 30 June 2018 and interim 31 December 2018
financial statements. During 2020 the new Audit Committee met to
review and recommend to the Board the sign of the 30 June 2019
financial statements.
During 2019, the Remuneration Committee met to review salaries
and restricted preference share grants.
DIRECTORS
The following directors served during the year to 30 June 2019
and up to the date of approval of this Annual Report:
Name
=============== ========================
Michael Davies
Dominic White
James Cane resigned 6 August 2019
Timothy James resigned 6 August 2019
Oliver Vaughan resigned 6 August 2019
Russell Naylor appointed 6 August 2019
Richard Boon appointed 6 August 2019
James Thornton appointed 6 August 2019
The beneficial interests of the directors holding office at 30
June 2019 in the issued share capital of the Company were as
follows:
Ordinary
Shares
----------------
Restricted
Preference
Shares
Issued in converted
At 30 June the in At 30 June
2018 year year 2019
Name No. No. No.
Michael Davies 195,428 - - 195,428
Dominic White - 57,143 500,000 557,143
Timothy James 475,921 28,571 320,000 824,492
Oliver Vaughan 73,065 - 270,000 343,065
James Cane 1,318 - 10,000 11,318
---------------- ---------- --------- ----------- ----------
Restricted Preference
Shares
----------------
Converted to
Shares issued ordinary shares
At 30 June in in the year At 30 June
2018 year 2019
Name No. No No. No.
Michael Davies - - -
Dominic White 1,500,000 265,357 (500,000) 1,265,357
Timothy James 960,000 265,357 (320,000) 905,357
Oliver Vaughan 810,000 265,357 (270,000) 805,357
James Cane 30,000 10,000 (10,000) 30,000
---------------- ------------ --------------- ---------------- ------------
The beneficial interests of the directors holding office at 31
January 2020 in the issued share capital of the Company were as
follows:
Ordinary Shares
---------------
Restricted Preference
At 30 June Issued in Shares converted At 31 January
2019 the period in period 2020
Name No. No. No.
Michael Davies 195,428 - - 195,428
Dominic White 557,143 96,558 486,675 1,140,376
Russell Naylor - - - -
James Thornton - 22,222 - 22,222
Richard Boon - - - -
---------- ----------- --------------------- -------------
Restricted Preference Shares
----------------
Converted
to
At 30 June ordinary At 31 January
2019 shares Gifted to Company 2020
Name No. No. No. No.
Michael Davies - - - -
Dominic White 1,265,357 (486,675) (778,682) -
---------------- ---------- --------- ----------------- -------------
Further information regarding the post year end movements on
restricted preference shares is contained within note 24 of the
financial statements.
SUBSTANTIAL SHAREHOLDINGS
As at 31 January 2020, the directors had been notified that the
following shareholders owned a disclosable interest of three per
cent or more in the Ordinary shares of the Company:
Name Interest
%
------------------------------ --------
Torchlight Fund LP 32.64%
Energiser Investments Limited 8.83%
Moore House Holdings Limited 8.56%
Poole Investments Limited 6.53%
Venaglass Limited 5.74%
Timothy James 4.36%
Dominic White & White Amba
Pension Scheme 4.34%
Oliver Vaughan 3.35%
DIRECTORS' REMUNERATION
The directors have received the following remuneration for their
services during the year:
2019 2018
------------------------------ ------------------------------
Name Remuneration Benefits-in-kind Remuneration Benefits-in-kind
GBP GBP GBP GBP
------------ ---------------- ------------ ----------------
Michael Davies - - - -
Dominic White 278,200 - 151,000 -
James Cane 87,700 - 60,000 -
Timothy James 90,200 - 80,000 -
Oliver Vaughan 30,200 - 30,000 -
------------ ---------------- ------------ ----------------
486,300 - 321,000 -
============ ================ ============ ================
In addition, during the year, the Group paid DGS Capital
Partners LLP, a limited liability partnership of which Michael
Davies is a member, fees of GBP43,200 (2018 - GBP43,200) (including
irrecoverable VAT).
During the year, a number of directors converted restricted
preference shares into ordinary shares. The total gain made by the
directors was GBP484,000 (2018 - GBPnil).
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 (i) ongoing financial performance is monitored in a
timely manner, (ii) where required, corrective action is taken and
(iii) risk is identified as early as practically possible. The
directors have reviewed the effectiveness of internal controls.
The Board, subject to delegated authority, reviews, among other
things, capital investment, property sales and purchases,
additional borrowing facilities, guarantees and insurance
arrangements.
Details of financial risk management are included within the
Risks and Uncertainties section of the Group strategic report on
page 8.
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 had knowledge of the commission of such
offences.
OTHER MATTERS
i. Environmental
The Group understands the importance of operating its business
in a manner that minimises any risks to the environment. Its
policies seek to ensure that it achieves this goal.
ii. Group employees
The Group considers its employees to be its most valuable assets
and ensures that it deals with them fairly and constructively at
all times.
iii. Social matters
The Group is aware that it has a responsibility to the
communities where it operates and seeks to respect them at all
times.
iv. Respect for human rights
The Group always respects the human rights of its
stakeholders.
v. Contributions to pension schemes
No pension scheme benefits are being accrued by the
directors.
DIRECTORS' INDEMNITIES AND INSURANCE
The Company has made qualifying third-party indemnity provisions
for the benefit of its directors during the year and they remain in
force at the date of approval of this Annual Report.
GOING CONCERN
The directors have adopted the going-concern basis in preparing
the financial statements.
Since the balance sheet date, Torchlight Fund LP has entered
into an legally binding agreement with KCR Residential REIT plc, to
the extent that it may become necessary, to exercise their option
sufficiently to ensure that the company's liabilities will be
satisfied as they fall due during the next 12 months.
POST BALANCE SHEET EVENTS
Post balance sheet events are detailed further in the Chief
Executive's letter and note 24 of the financial statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law, the directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union ("IFRS"). Under company law, the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and the Group and of the profit or loss of the Group for
that period. In preparing these financial statements, the directors
are required to:
* select suitable accounting policies and then apply
them consistently;
* make judgments and accounting estimates that are
reasonable and prudent;
* state that the financial statements comply with IFRS;
* prepare the financial statements on the going-concern
basis unless it is inappropriate to presume that the
Group will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's and
the Group's transactions and disclose with reasonable accuracy at
any time the financial position of the Company and the Group and
enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
So far as the directors are aware, there is no relevant audit
information (as defined by Section 418 of the Companies Act 2006)
of which the Group's auditor is unaware, and each director has
taken all the steps that he ought to have taken as a director in
order to make himself aware of any relevant audit information and
to establish that the Group's auditor is aware of that
information.
AUDITOR
On 1 February 2019, Moore Stephens LLP merged its business with
BDO LLP. As a result, Moore Stephens LLP resigned as auditor and
the directors appointed BDO LLP as auditor in their place.
ON BEHALF OF THE BOARD
Dominic White
Director
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
30 June 30 June
2019 2018
(as restated
*)
GBP GBP
CONTINUING OPERATIONS
Revenue 777,827 265,936
Cost of sales (212,743) (191,420)
----------- -------------
GROSS PROFIT 565,084 74,516
Administrative expenses (1,446,565) (1,317,971)
Fair value through profit and loss
- Revaluation of investment properties 3,268 3,118,721
----------- -------------
OPERATING (LOSS)/PROFIT BEFORE SEPARATELY
DISCLOSED ITEMS (878,213) 1,875,266
Separately disclosed administrative
items
Share-based payment charge (1,387,441) (950,188)
Costs associated with third-party
fundraising and issue of shares (407,616) (47,173)
Costs associated with aborted fundraising - (626,826)
Loss on disposal of property SPV (340,753) -
----------- -------------
OPERATING (LOSS) / PROFIT (3,014,023) 251,079
Finance costs (732,984) (325,688)
Finance income 9,635 7,035
----------- -------------
LOSS BEFORE TAXATION (3,737,372) (67,574)
Taxation - -
----------- -------------
LOSS FOR THE YEAR (3,737,372) (67,574)
=========== =============
TOTAL COMPREHENSIVE EXPENSE FOR THE
YEAR (3,737,372) (67,574)
=========== =============
Loss attributable to owners of the
parent (3,737,372) (67,574)
=========== =============
Loss per share expressed in pence
per share
Basic (24.66) (1.02)
Diluted (24.66) (1.02)
=========== =============
*The acquisitions of KCR (Kite) Limited and KCR (Cygnet) Limited
in the prior period were previously accounted for as business
combinations resulting in a gain on bargain purchase and costs of
acquisition being recognised separately within operating profit.
These acquisitions have been restated as asset acquisitions. The
gain on bargain purchase and the costs of acquisition previously
recognised have consequently been reclassified to Revaluation of
investment properties. Further details can be found in note 13.
Costs relating to aborted fundraising in 2018 were previously
classified as Costs associated with third party fundraising. The
costs have now been presented separately to more accurately
describe their nature.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 30 June
2019 2018
(as restated
*)
GBP GBP
----------- -------------
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 61,370 38,993
Investment properties 23,923,000 26,695,000
----------- -------------
23,984,370 26,733,993
----------- -------------
CURRENT ASSETS
Trade and other receivables 77,078 703,427
Cash and cash equivalents 29,298 6,425
----------- -------------
106,376 709,852
----------- -------------
TOTAL ASSETS 24,090,746 27,443,845
=========== =============
EQUITY
SHAREHOLDERS' EQUITY
Share capital 2,029,178 1,435,721
Share premium 10,018,986 7,358,244
Unissued share capital - 1,260,299
Capital redemption reserve 67,500 67,500
Other reserves 14,930 29,862
Retained earnings (2,550,496) (200,565)
----------- -------------
TOTAL EQUITY 9,580,098 9,951,061
----------- -------------
LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing loans and borrowings 9,881,344 8,749,702
----------- -------------
CURRENT LIABILITIES
Trade and other payables 2,737,010 7,072,249
Interest-bearing loans and borrowings 1,892,294 1,670,833
4,629,304 8,743,082
----------- -------------
TOTAL LIABILITIES 14,510,648 17,492,784
----------- -------------
TOTAL EQUITY AND LIABILITIES 24,090,746 27,443,845
=========== =============
Net asset value per share (pence) 60.67 100.95
=========== =============
The financial statements were approved and authorised for issue
by the Board of Directors on 31 January 2020 and were signed on its
behalf by:
Dominic White
Director
*In the prior period unissued share capital was presented within
current liabilities. This has been restated in the current period
to re-classify the balance to equity. Further details can be found
in note 17.
CONSOLIDATED STATEMENT OF CASH 2019 2018
FLOWS
GBP GBP
(as restated*)
------------ ----------------
Cash flows from operating activities
Cash used in operations (4,960,666) (1,776,564)
Interest paid (732,984) (325,688)
Net cash used in operating activities (5,693,650) (2,102,252)
------------ ----------------
Cash flows from investing activities
Purchase of property, plant & equipment (40,451) (43,515)
Purchase of investment properties (24,732) (2,046,594)
Acquisition of property assets - (5,596,459)
Disposal of property SPV 1,140,000 -
Interest received 9,635 7,035
------------ ----------------
Net cash generated from/(used in)
investing activities 1,084,452 (7,679,533)
------------ ----------------
Cash flows from financing activities
Loan repayments in year (796,079) (1,131,525)
New loans in year 3,434,250 7,739,858
Shares issued 1,993,900 2,156,125
------------ ----------------
Net cash generated from financing
activities 4,632,071 8,764,458
------------ ----------------
Increase/(decrease) in cash and
cash equivalents 22,873 (1,017,327)
Cash and cash equivalents at beginning
of year 6,425 1,023,752
------------ ----------------
Cash and cash equivalents at end
of year 29,298 6,425
============ ================
* The prior period cash used in operations and cash flows from
acquisition of subsidiaries have been restated due to a
reclassification of costs upon acquisition of subsidiaries. Further
details can be found in note 13 of the financial statements
RECONCILIATION OF LOSS BEFORE TAXATION TO CASH USED IN
OPERATIONS
Group 2019 2018
GBP GBP (as
restated)
----------- -----------
Loss before taxation (3,737,372) (67,574)
Depreciation charges 18,074 6,365
Revaluation of investment properties (3,268) (3,118,721)
Loss on disposal of property SPV 340,753 -
Share-based payment charge 1,387,441 950,188
Finance costs 732,984 325,688
Finance income (9,635) (7,035)
----------- -----------
(1,271,023) (1,911,089)
Decrease/(increase) in trade and other receivables 626,349 (590,502)
(Decrease)/increase in trade and other payables (4,315,992) 725,027
----------- -----------
Cash used in operations (4,960,666) (1,776,564)
=========== ===========
Company 2019 2018
GBP GBP
----------- -----------
Loss before taxation (3,548,447) (3,089,541)
Depreciation charges 1,636 1,211
Impairment of investments - 75,000
Loss on disposal of property SPV 241,585 -
Share-based payment charge 1,387,441 950,188
Finance costs 428,185 316,544
Finance income (9,619) (7,019)
----------- -----------
(1,499,219) (1,753,617)
Increase in trade and other receivables (894,340) (891,568)
Increase in trade and other payables 227,561 740,862
----------- -----------
Cash used in operations (2,165,998) (1,904,323)
----------- -----------
1) REVENUE
The Group is involved in UK property ownership, management and
letting and is considered to operate in a single geographical and
business segment.
The total revenue of the Group for the year was derived from its
principal activities, being the letting to third parties of, and
management of, property assets owned by the Group, and, in certain
cases, the management of property assets owned by third
parties.
The Group's investment property consists of residential housing
for the private rented sector and therefore has multiple tenants
and as a result does not have any significant customers.
2) EMPLOYEES AND DIRECTORS
Group
2019 2018
GBP GBP
------- -------
Wages and salaries 657,793 455,118
Social security costs 86,735 45,681
Pension costs (506) 106,157
------- -------
744,022 606,956
======= =======
The average monthly number of employees during
the year was as follows
Directors and management 5 7
Administration 3 2
8 9
2019 2018
GBP GBP
Directors' remuneration (as per Report of
the Directors) 486,300 321,000
Share-based payment charge relating to directors 974,199 686,953
Remuneration of the highest-paid director 278,200 151,000
Amounts paid into a pension scheme of the
highest-paid director - 100,000
======== ========
The Group directors are considered to be key management
personnel.
Certain directors and others have received Restricted Preference
shares in the Company, further details of which are contained in
note 20 and note 23 of the financial statements.
Company
2019 2018
GBP GBP
------- -------
Wages and salaries 597,700 395,000
Social security costs 78,320 43,492
Pension costs (2,630) 104,880
------- -------
673,390 543,372
======= =======
The average monthly number of employees during
the year was as follows
Directors and management 5 5
Administration 1 1
---- ------
6 6
==== ======
3) FINANCE INCOME AND COSTS
2019 2018
GBP GBP
--------- ---------
Finance costs
Loan interest 732,984 325,688
========= =========
Finance income
Bank interest 9,635 7,035
========= =========
4) LOSS BEFORE TAXATION
The loss before taxation is stated after charging:
2019 2018
GBP GBP
====== =======
Hire of plant and machinery 8,230 2,034
Other operating leases 23,052 13,140
Depreciation - owned assets 18,074 6,365
Auditors' remuneration for the Group - audit
services for parent company 38,000 44,100
- audit services for subsidiaries 10,000 15,000
- taxation advisory services 29,675 13,560
- abortive corporate finance services - 150,106
------ -------
Separately disclosed items
During the year, the Group incurred significant costs relating
to third-party fundraising and issue of shares. The costs to the
Group totalled GBP407,616. In 2018 the company incurred costs
relating to third-party fundraising and issue of shares of
GBP47,173 and incurred costs of GBP626,826 relating to an aborted
fundraising transaction. 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 share-based payments, which are shown
on the face of the Consolidated Statement of Comprehensive Income,
can be found in note 20.
5) LOSS PER SHARE AND NET ASSET VALUE
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of Ordinary shares outstanding during the year.
Fully diluted earnings per share is calculated using the
weighted average number of shares adjusted to assume the conversion
of all dilutive potential Ordinary shares.
In the opinion of the directors, all of the outstanding share
options are anti-dilutive and, hence, basic and fully diluted loss
per share are the same.
2019
Weighted average
number of Per share
Loss shares amount
------------ ----------------- ----------
GBP No Pence
Loss attributable to ordinary
shareholders (3,737,372) 15,156,059 (24.66)
Effect of dilutive securities - - -
============ ================= ==========
2018
Weighted average
number of Per share
Loss shares amount
------------ ----------------- ----------
GBP No Pence
Loss attributable to ordinary
shareholders (67,574) 6,598,018 (1.02)
Effect of dilutive securities - - -
============ ================= ==========
The net asset value is calculated by dividing the equity
attributable to ordinary shareholders by the number of Ordinary
shares in issue at the balance sheet date.
2019
Number of Per share
Equity shares amount
---------- ----------- ----------
GBP No Pence
Net asset value 9,580,098 15,791,777 60.67
2018
Number of Per share
Equity shares amount
---------- ----------- ----------
GBP No Pence
Net asset value 9,951,061 9,857,207 100.95
========== =========== ==========
6) INVESTMENT PROPERTIES
Group Total
GBP
(as restated)
---------------
COST
At 1 July 2017 7,242,000
Additions 16,334,279
Revaluations 3,118,721
---------------
At 30 June 2018 and 1 July 2018 26,695,000
Additions 24,732
Disposals (2,800,000)
Revaluations 3,268
---------------
At 30 June 2019 23,923,000
===============
NET BOOK VALUE
At 30 June 2019 23,923,000
===============
At 30 June 2018 26,695,000
===============
The investment properties disposed of in the year arose from the
sale of a property SPV (KCR Cygnet).
In August 2019, and updated again in November 2019, all material
properties were valued again by professionally qualified
independent external valuers in accordance with the Royal
Institution of Chartered Surveyors' Appraisal and Valuation
Standards 2014 as amended. The Group has included a valuation of
GBP23,923,000 in the financial statements.
Fair value is based on current prices in an active market for
similar properties in the same location and condition. The current
price is the estimated amount for which a property could be
exchanged between a willing buyer and willing seller in an arm's
length transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently and without compulsion.
Valuations are based on a market approach which provides an
indicative value by comparing the property with other similar
properties for which price information is available. Comparisons
have been adjusted to reflect differences in age, size, condition,
location and any other relevant factors.
The fair value for investment properties has been categorised as
a Level 3 inputs under IFRS 13. The valuer visited all material
properties and his valuations were based on both internal and
external site visits.
The valuation technique used in measuring the fair value, as
well as the significant inputs and significant unobservable inputs
are summarised in the following table -
Significant
Fair Value Significant Inputs Unobservable
Hierarchy Valuation Technique Used Inputs
Level Income capitalisation Adopted gross yield 3.29% - 5.39%
3 and or capital value
on a per square foot
basis
Adopted rate per
square foot GBP332 - GBP825
The fair value would increase if market rents were higher and/or
the rates per square foot were higher and/or capitalisation rates
were lower.
The fair values would decrease if market rents were lower and/or
the rates per square foot were lower and/or capitalisation rates
were higher.
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 GBP619,906 (2018 - GBP133,001). The total
rental expenses in relation to investment properties for the Group
equated to GBP183,977 (2018 - GBP50,122).
7) INVESTMENTS
Shares in
group undertakings
GBP
Company (as restated*)
--------------------
COST
At 1 July 2017 5,305,000
Additions 6,856,858
Impairments (75,000)
--------------------
At 30 June 2018 and 1 July 2018 12,086,858
Disposals (1,380,777)
At 30 June 2019 10,706,081
====================
NET BOOK VALUE
At 30 June 2019 10,706,081
====================
At 30 June 2018 12,086,858
====================
As at 31 January 2020, the Company's investments comprise the
following:
Holding
Subsidiaries %
============================================================== ========
Registered
K&C (Coleherne) Limited office: UK 100.00
Nature of business Class of shares
Property letting Ordinary
Registered
K&C (Osprey) Limited office: UK 100.00
Nature of business Class of shares
Property letting and property management Ordinary
Registered
KCR (Kite) Limited office: UK 100.00
Nature of business Class of shares
Property letting Ordinary
Registered
KCR (Southampton) Limited office: UK 100.00
Nature of business Class of shares
Property letting Ordinary
Registered
K&C (Newbury) Limited office: UK 100.00
Nature of business Class of shares
Dormant Ordinary
Acquisition of KCR (Kite) Limited
On 28 June 2018, the Company acquired the entire issued share
capital of a property SPV, KCR (Kite) Limited, for GBP5,475,981,
satisfied by cash.
Net assets acquired were as follows:
GBP
---------
Investment property 5,535,879
Trade and other receivables 22,148
Trade and other payables (33,686)
Taxation payable (48,360)
---------
Net assets 5,475,981
---------
Total Consideration 5,475,981
Satisfied by cash 5,475,981
=========
Net cash outflow arising on acquisition:
Cash consideration (5,475,981)
Bank and cash balances acquired -
------------
(5,475,981)
============
Acquisition of KCR (Cygnet) Limited
On 28 June 2018, the Company acquired the entire issued share
capital of a property SPV, KCR (Cygnet) Limited, for total
consideration of GBP1,380,777 satisfied by cash of GBP120,478 and
the issuance of Ordinary shares to the value of GBP1,260,299.
Net assets acquired were as follows:
GBP
-----------
Investment property 2,680,777
Bank loans (1,300,000)
-----------
Net assets 1,380,777
===========
Total consideration 1,380,777
===========
Satisfied by cash 1,380,777
===========
Net cash outflow arising on acquisition:
Cash consideration (120,478)
(120,478)
===========
The acquisition of KCR (Kite) Limited and KCR (Cygnet) Limited
were accounted for as business combinations in the 2018 financial
statements. In 2019, the Directors' reconsidered the nature of the
acquisitions and concluded the limited processes within the
acquired entities meant they should have been accounted for as
asset acquisitions.
This has led to a restatement of a number of comparative
figures. As the values of the investment properties acquired, upon
acquisition of the subsidiaries, exceeded the cost to the Group,
under the original accounting treatment, the Group recognised a
gain on bargain purchase of GBP2,201,639 in the Statement of
Comprehensive Income. The group also recognised costs relating to
the acquisition of GBP318,295 as an expense in the Statement of
Comprehensive Income.
Under the restated accounting treatment, the properties have
been included as additions to investment property at cost including
directly attributable costs, with an increase in fair value of
GBP1,883,344 being included within Revaluation of Investment
Properties in the Statement of Comprehensive Income.
KCR (Southampton) Limited
KCR (Southampton) Limited was incorporated on 26 June 2018 and,
in the 2018 financial year, entered into an agreement to acquire a
999 year-long leasehold interest in Block B, Chapel Riverside, a
new build block of flats in Southampton. The total consideration
for the transaction was GBP5.8 million, which was owed to the
vendor and included in other creditors at 30 June 2018. During
2019, the Company settled GBP4.2 million of the amount owed to the
vendor. At 30 June 2019, GBP1.6 million was outstanding and this
was settled post year end.
Disposal of KCR (Cygnet) Limited
On 20 December 2018, the Company sold the entire issued share
capital of KCR (Cygnet) Limited for total consideration of
GBP1,140,000, satisfied by cash of GBP1,140,000. The assets and
liabilities of the subsidiary at the date of disposal were:
GBP
Investment property 2,800,000
Debtors 43,427
Bank loan (1,293,286)
Other creditors (69,388)
-----------
Net assets disposed of 1,480,753
===========
Loss on disposal of property (340,753)
-----------
Total consideration 1,140,000
===========
Satisfied by cash 1,140,000
===========
8) TRADE AND OTHER RECEIVABLES
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Trade debtors 3,000 70 - -
Amounts owed by group
undertakings - - 1,787,239 263,980
Other debtors 34,773 634,045 7,500 594,293
VAT 12,271 1,336 - -
Prepayments 27,034 67,976 18,665 60,791
77,078 703,427 1,813,404 919,064
======= ======== ========== ========
The Group and Company's exposure to credit risk is disclosed in
note 22.
There is no material difference between the fair value of trade
and other receivables and their book value.
Amounts owed by group undertakings are repayable on demand and
are considered fully recoverable based on property assets that
could be realised.
9) CASH AND CASH EQUIVALENTS
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Cash in hand 40 40 - -
Bank accounts 29,258 6,385 3,334 77
29,298 6,425 3,334 77
======= ====== ====== =====
10) SHARE CAPITAL
Allotted, issued and fully paid
30 June 30 June
Number Class Nominal value 2019 2018
---------- --------- ---------
GBP GBP
--------- ---------
15,791,777 Ordinary GBP0.10 1,579,178 985,721
4,500,000 Restricted Preference GBP0.10 450,000 450,000
--------- ---------
2,029,178 1,435,721
========= =========
At 1 July 2018, the Company had 9,857,207 Ordinary shares of
GBP0.10 each in issue.
On 31 July 2018, the Company issued 4,434,570 Ordinary shares of
GBP0.10 each. The shares were issued at premium of GBP0.60 per
share.
On 5 September 2018, the Company issued 1,500,000 Restricted
Preference shares of GBP0.10 each. The shares were issued at par.
During the year 1,500,000 Restricted Preference shares of GBP0.10
each were converted to Ordinary shares.
The Restricted Preference shares carry no voting or dividend
rights. On a winding-up or a return of capital, the holders of the
Restricted Preference shares shall rank pari passu with the holders
of the Ordinary shares save that, on a distribution of assets, the
amount to be paid to the holder shall be limited to the nominal
capital paid up or credited as paid up.
11) UNISSUED SHARE CAPITAL
Unissued share capital related to shares which were to be issued
as partial consideration for the purchase of KCR (Cygnet) Limited.
The purchase of KCR (Cygnet) Limited took place in the 2018
financial year and the aforementioned shares were issued on 31 July
2018.
In the prior year, the unissued share capital (GBP1,260,299) was
presented within current liabilities. This has been corrected
retrospectively in the current year to present the balance within
equity. There is no impact on the Statement of Comprehensive
Income.
12) TRADE AND OTHER PAYABLES
Group Company
2019 2018 2019 2018
(as restated) (as restated)
GBP GBP GBP GBP
Trade creditors 358,567 618,321 351,060 618,321
Amounts owed to group
undertakings - - 423,840 197,330
Corporation tax - 48,360 - -
Other taxes and social
security 45,253 47,901 33,291 45,231
Other creditors 1,779,710 6,126,929 8,063 52,588
Accruals and deferred
income 553,480 230,738 521,990 196,405
---------- --------------- ---------- ---------------
2,737,010 7,072,249 1,338,244 1,109,875
========== =============== ========== ===============
Other creditors include GBP1,738,076 (2018 - GBP6,038,317) owed
on the purchase of the investment property within KCR (Southampton)
Limited.
The Group's and Company's exposure to liquidity risk related to
trade and other payables is disclosed in note 22.
There is no material difference between the fair value of trade
and other payables and their book value.
Amounts owed to group undertakings are repayable on demand.
13) FINANCIAL LIABILITIES - BORROWINGS
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Current
Bank overdraft - 55,259 - 55,259
Bank loans 82,224 140,574 82,224 91,368
Other loans 1,810,070 1,475,000 1,810,070 1,475,000
---------- ---------- ---------- ----------
1,892,294 1,670,833 1,892,294 1,621,627
========== ========== ========== ==========
Non-current
Bank loans 4,756,956 6,089,426 4,756,956 4,838,632
Other loans 5,124,388 2,660,276 - 720,138
9,881,344 8,749,702 4,756,956 5,558,770
========== ========== ========== ==========
Terms and debt repayment schedule
1 year More than
or less 1-2 years 2-5 years 5 years Totals
---------- ---------- ---------- ---------- -----------
Group GBP GBP GBP GBP GBP
Bank loans 82,224 97,642 314,689 4,344,625 4,839,180
Other loans 1,810,070 - 1,940,138 3,184,250 6,934,458
---------- ---------- ---------- ---------- -----------
1,892,294 97,642 2,254,827 7,528,875 11,773,638
========== ========== ========== ========== ===========
Company
Bank loans 82,224 97,642 314,689 4,344,625 4,839,180
Other loans 1,810,070 - - - 1,810,070
---------- ---------- ---------- ---------- -----------
1,892,294 97,642 314,689 4,344,625 6,649,250
========== ========== ========== ========== ===========
Details of the principal loans are as follows:
a) On 28 June 2018, the Company took out a new loan of
GBP4,930,000, with Metro Bank plc, repayable by 300 instalments of
GBP22,145 and a final instalment of GBP1,239,328. The loan was
secured by a first debenture over all assets and undertakings of
the Company, a first legal charge over the freehold properties
known as 272 Ladbroke Grove, 282 Ladbroke Grove and 284 Ladbroke
Grove and the leasehold premises known as Flat 9 Lomond Court, and
a cross-guarantee over the aforementioned properties. It was also
secured by 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.
The loan was also secured by a pledge of shares of K&C
(Coleherne) Limited and KCR (Kite) Limited. The balance outstanding
as at 30 June 2019 was GBP4,839,180.
b) A three-year loan of GBP1,995,000 was entered into during the
previous year. The loan is repayable by 36 monthly instalments of
GBP9,144 and a final instalment of GBP1,940,138. The monthly
instalments are interest payments and do not include any capital
repayments. Interest is charged at 5.50 per cent per annum. The
loan is secured by a fixed and floating charge over all the
property and assets of K&C (Osprey) Limited, including the
property known as Heathside, 562 Finchley Road. The balance
outstanding at 30 June 2019 was GBP1,940,138.
c) On 24 June 2018, the Company entered into a new loan
agreement arranged by DGS Capital Partners LLP, a limited liability
partnership in which Michael Davies is a member, with certain
investors. The loan was for GBP1,475,000 and was subject to an
interest rate of 12 per cent per annum. The loan was to be repaid
within 300 days of the initial drawdown date of 29 June 2018.
During the financial year, the lenders agreed to extend the loan by
a further 300 days. The loan was repaid on 22 August 2019. Fees of
GBP17,250 were charged by the lender to the Company for the
extension and are included in accruals at the year end. At the date
of extension, the interest rate was increased to 14 per cent per
annum. The balance outstanding at 30 June 2019 was
GBP1,475,000.
d) At the year-end, the Company had issued several convertible
loan notes, totalling GBP200,000, the debt element of which
totalled GBP185,070. The convertible loan notes have a redemption
date of 30 June 2020. The debt balance outstanding at 30 June 2019
was GBP185,070. GBP100,000 of the convertible loan notes was
converted to Ordinary shares at GBP0.10 per share on 6 August
2019.
e) During the year, Oliver Vaughan, a director of the Company,
loaned the Company GBP150,000. The loan was unsecured and was due
for repayment on 15 May 2019. The loan was extended in June 2019.
Upon extension of the loan, the lender charged the Company a fee of
GBP10,000, which is included in accruals at the year end. The total
liability at 30 June 2019 totalled GBP160,000. The loan was
interest free. GBP110,000 of the loan was repaid via the issue of
Ordinary shares in the Company on 6 August 2019. The remaining
GBP50,000 was repaid on 8 August 2019.
f) On 4 December 2018, KCR (Southampton) Limited took out a new
loan of GBP3,184,250, with Lendco Limited. The term of the loan was
10 years. The monthly instalments are interest payments and do not
include any capital repayments. Interest is charged at 3.19 per
cent for the first 24 months. Interest for the remainder of the
term will be charged at 4.79 per cent above LIBOR. The loan was
secured by a first legal mortgage and a first fixed charge over the
land at Block B, Chapel Riverside, Endle Street, Southampton. The
balance outstanding as at 30 June 2019 was GBP3,184,250.
Reconciliation of net movement in cash
Net cash Loans Net cash
at 1 July Cash received Repayments Other non-cash at 30 June
2018 flow in year in year movements 2019
GBP GBP GBP GBP GBP GBP
Cash at bank
and in hand 22,873 6,425 - - - 29,298
Borrowings (10,420,535) - (3,434,250) 796,079 1,285,068 (11,773,638)
------------- ------ ------------ ----------- --------------- -------------
Total financial
liabilities (10,397,662) 6,425 (3,434,250) 796,079 1,285,068 (11,744,340)
============= ====== ============ =========== =============== =============
14) SHARE-BASED PAYMENT TRANSACTIONS
During the year ended 30 June 2019, the Company had one
share-based payment arrangement in place, which is described
below:
Restricted Preference
shares
---------------------
Outstanding at 1
July 2018 4,500,000
Exercised during
the year (1,500,000)
Granted during the
year 1,500,000
Outstanding at 30
June 2019 4,500,000
=====================
Restricted Preference shares:
Restricted Preference shares have been acquired by certain
directors and other senior managers. Details of the Restricted
Preference shares held by the directors, along with movements in
the year, can be found further in this note and also in the Report
of the Directors. Upon the achievement by the Group of certain
defined milestones, the Restricted Preference shares were able to
be converted into Ordinary shares at GBP0.10 each. The following
table shows the shares held at the year end, along with movements
in the year:
Restricted Preference Shares
----------------
At 30 June Shares issued Converted to ordinary
2018 in shares in the year At 30 June
year 2019
Name No. No No. No.
Dominic White 1,500,000 265,357 (500,000) 1,265,357
Timothy James 960,000 265,357 (320,000) 905,357
Oliver Vaughan 810,000 265,357 (270,000) 805,357
James Cane 30,000 10,000 (10,000) 30,000
Timothy Oakley 300,000 265,357 (100,000) 465,357
Christopher
James 600,000 214,286 (200,000) 614,286
Employees 300,000 214,286 (100,000) 414,286
---------- ------------- --------------------- ------------
Total 4,500,000 1,500,000 (1,500,000) 4,500,000
---------------- ---------- ------------- --------------------- ------------
The estimated fair value of each Restricted Preference share
acquired is as follows:
Restricted Preference
shares
---------------------
Fair value of share
option/warrant (GBP) 0.688-0.787
The fair values were estimated using the Black-Scholes valuation
model. The following table lists the inputs to the model used:
Restricted Preference
shares
---------------------
Share price at
grant date (GBP) 0.8-0.9
Exercise price
(GBP) 0.1
Dividend yield
(%) 0.00
Expected volatility 51.86-63.79
(%)
Risk-free interest 0.88-1.57
rate (%)
Expected life of
share options/warrants
(years) 1.3-8.8
The expected lives of the Restricted Preference shares were
based on historical data and then-current expectations and are not
indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility
of comparator companies over the period similar to the life of the
Restricted Preference shares is indicative of future trends, which
may not necessarily be the actual outcome.
On 6 August 2019, 1,730,765 of the Restricted Preference shares
were converted into Ordinary shares. The remaining 2,769,235
Restricted Preference shares were gifted back to the Company for no
consideration. Further details can be found in note 24 of the
financial statements.
The expense recognised during the year is shown in the following
table:
30 June 30 June
2019 2018
GBP GBP
Expense arising from share options - 10,325
Expenses arising from Restricted Preference
shares 1,387,441 903,756
Expense arising from warrants - 36,107
--------- -------
Total expense from share-based payments 1,387,441 950,188
========= =======
15) FINANCIAL INSTRUMENTS
The Group's financial assets, as defined under IFRS 9, and their
estimated carrying amount are as follows:
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Carrying amount of financial
assets at amortised cost
Trade and other receivables 77,078 703,427 1,813,404 919,064
Cash at bank and in hand 29,298 6,425 3,334 77
16) FINANCIAL RISK MANAGEMENT
The Company's directors have overall responsibility for the
establishment and oversight of the Group's risk management
framework.
The Company's and Group's risk management policies are
established to identify and analyse the risks faced by the Company
and Group, to set appropriate risk limits and controls, and to
monitor risks and adherence to limits. Risk management policies and
systems are reviewed regularly to reflect the changes in market
conditions and the Group's activities. The Company and Group,
through its training and management standards and procedures, aims
to develop a disciplined and constructive control environment in
which all employees understand their roles and obligations.
The Company and Group has exposure to the following risks
arising from financial instruments:
o credit risk
o liquidity risk
o market risk
Capital risk management
The Company and Group's objective when managing capital is to
safeguard its accumulated capital in order to provide an adequate
return to shareholders by maintaining a sufficient level of funds,
in order to support continued operations.
The Company and Group considers its capital to comprise equity
capital less accumulated losses.
The share premium reserve includes premiums received on the
issue of share capital during the year.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations.
The Group has no significant concentration of credit risk, with
exposure spread over a large number of counterparties and
customers.
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk is as reported
in the statement of financial position.
Liquidity risk
Liquidity risk is the risk that the Company and Group will
encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or
another financial asset. The Company's and Group's approach to
managing liquidity is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Company's and Group's
reputation.
The contractual maturities of financial liabilities are
disclosed in note 19.
Market risk
Market risk is the risk that changes in market prices, such as
interest rate and equity prices will affect the Group and the
Company's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposure within acceptable parameters,
while optimising the return.
Sensitivity
Interest rate sensitivity:
At 30 June 2019, if interest rates had been 0.5 percentage point
higher and all other variables were held constant, it is estimated
that the Group's loss before tax would increase to GBP3,803,492
(2018 - GBP157,775). This is attributable to the Group's exposure
on its borrowings and is based on the change taking place at the
beginning of the financial year and held constant throughout the
reporting period.
17) RELATED PARTIES
On 24 June 2018, the Company entered into a loan agreement
arranged by DGS Capital Partners LLP, a limited liability
partnership in which Michael Davies is a member, with certain
investors. The loan was for GBP1,475,000 and was subject to an
interest rate of 12 per cent per annum. The loan was to be repaid
within 300 days of the initial drawdown date of 29 June 2018. The
loan was extended during the financial year and from 10 April 2019,
the interest rate was increased to 14 per cent per annum. The
balance outstanding at 30 June 2019 was GBP1,475,000. Interest of
GBP179,506 was charged to the Company in the year, of which
GBP45,826 was outstanding and included in accruals at the year end.
The loan and outstanding interest were repaid on 22 August 2019.
The repayment consisted of GBP1,425,000 cash and GBP95,826 of
Ordinary shares.
During the year, the Group paid DGS Capital Partners LLP, a
limited liability partnership in which Michael Davies is a member,
fees of GBP36,000 plus VAT of GBP7,200 (2018 - GBP36,000 and VAT of
GBP7,200). At the year end, GBP14,400 was outstanding and included
in accruals.
During the year, Oliver Vaughan, a director of the Company,
loaned the Company GBP150,000. The loan was unsecured and was due
for repayment on 15 May 2019. The loan was extended in June 2019.
Upon extension of the loan, the lender charged the Company a fee of
GBP10,000. The total liability at 30 June 2019 totalled GBP160,000.
The loan was interest free. GBP110,000 of the loan was repaid via
the issue of Ordinary shares in the Company on 6 August 2019. The
remaining GBP50,000 was repaid on 8 August 2019.
During the year, the Company issued GBP50,000 of convertible
loan notes to Kimono Investments Limited, an entity in which Oliver
Vaughan's children have a financial interest. The Company was
charged GBP2,616 interest in the year. At the year end the total
loan notes and interest outstanding totaled GBP52,616. The
principal loan was repaid on 22 August 2019. The repayment
consisted of GBP50,000 of Ordinary shares.
During the year, the Company issued convertible loan notes to
the White Amba Pension Scheme of GBP25,000. The Company was charged
GBP1,050 interest in the year. At the year end the total loan notes
and interest outstanding totaled GBP26,050. The principal loan was
repaid on 22 August 2019. The repayment consisted of GBP25,000 of
Ordinary shares.
During the year, the Company issued convertible loan notes to
Katie James, relative of Timothy James of GBP25,000. The Company
was charged GBP1,050 interest in the year. At the year end the
total loan notes and interest outstanding totaled GBP26,050. The
principal loan was repaid on 22 August 2019. The repayment
consisted of GBP25,000 of Ordinary shares.
During the year, Timothy Oakley, a director of a number of
subsidiary companies, received remuneration of GBP30,200 (2018 -
GBP30,000). GBP15,000 of this remuneration was included in accruals
at the year-end. During the year Timothy Oakley also loaned the
Company GBP50,000 as part of the loan arranged by DGS Capital
Partners LLP, as detailed above. Interest of GBP6,247 was charged
to the Company in the year. The loan was repaid on 22 August 2019.
The repayment consisted of GBP50,000 of Ordinary shares.
During the year, Christopher James, a director of a number of
subsidiary companies, received remuneration of GBP51,200 (2018 -
GBP14,000). GBP44,000 of this remuneration was included in accruals
at the year-end.
18) POST-BALANCE SHEET EVENTS
The following events have taken place since 1 July 2019:
-- A flat at Heathside was sold for GBP538,000 in line with
carrying value and GBP353,950 was applied for part repayment of the
GBP1,940,138 Proplend loan.
-- Loans of GBP1,475,000 from DGS Capital LLP were repaid on 22
August 2019. The repayment consisted of GBP1,425,000 cash repayment
and GBP50,000 Ordinary shares in the Company. The GBP50,000
Ordinary shares were issued to Timothy Oakley. Further details are
contained further in this note.
On 6 August 2019, the Transaction was completed to enable the
Torchlight Fund LP to become a significant shareholder in the
Company pursuant to Rule 9 of the Takeover Code following a poll of
shareholders on 29 July 2019. The following describes the principal
elements of the Transaction (announced on 12 July 2019 and detailed
on the Company's website) which are also included where appropriate
in these Financial Statements:
Torchlight Fund LP subscribed in cash of GBP4.05 million for
9,000,000 ordinary shares of 10p each at the issue price per share
of 45p ("the Issue Price").
The company granted Torchlight an Option to subscribe for up to
an additional 50,000,000 Shares at a price per share of:
-- for any notice of exercise served on the Company on any date
up to and including 31 December 2019, the Issue Price; and
-- for any notice of exercise served on the Company from 1
January 2020 until the end of the Option Period, the higher of (i)
the price per Option Share which is equivalent to 95 per cent. of
the 30-Day VWAP for the Ordinary Shares and (ii) the par value of
each Ordinary Share.
The Option is only exercisable by Torchlight during the Option
Period and if the Option is not exercised prior to the expiry of
the Option Period, it will lapse. Any exercise of the Option by
Torchlight shall be for not less than 2,000,000 Option Shares.
Restricted Preference shares of 10p each held by the directors,
other management and related parties totaling 4,500,000 shares
outstanding were redesignated as Ordinary shares in part and the
balance gifted back to the Company for nil consideration. This
resulted in the conversion in aggregate of 1,730,765 Restricted
Preference shares into 1,730,765 Ordinary shares.
Outstanding loans and fees of GBP160,000 to Oliver Vaughan were
satisfied by issuing 244,444 Ordinary shares at the Issue Price and
a cash repayment of GBP50,000.
Outstanding Convertible Loan Notes of GBP100,000 loan principal
to Kimono Investment Holdings, Katie James and White Amba were
converted into 222,222 Ordinary shares at the Issue Price.
Outstanding remuneration due in respect of salary and bonuses to
directors and employees of the Company were settled by the issue of
243,342 Ordinary shares at the Issue Price.
Settlement amount payable in respect of the resignation on 12
July 2019 of Timothy Oakley in an amount due of GBP22,500 in part
in cash and in part by the issue of 27,500 Ordinary shares of 10p
at the Issue Price.
In respect of a loan from an investment group of which Timothy
Oakley was a member, GBP50,000 was repaid at par by the issue of
111,111 Ordinary shares. The shares were issued to Timothy Oakley.
The remaining lenders were allotted 176,247 Ordinary shares of 10p
in respect of the loan outstanding due to them plus unpaid interest
outstanding.
The issue of 22,222 Ordinary shares of 10p at the Issue Price
for cash to James Thornton, an independent non-executive
director.
Following the Transaction, the Allotted, Issued and Fully Paid
Ordinary Share Capital of the Company was 27,569,931 shares of
10p.
On 2 January 2020, trading of the shares of KCR Residential REIT
plc was temporarily suspended pending publication of the 2019
annual audited accounts.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SSMEEEESSEIE
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