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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Highcroft Investments Plc    HCFT   GB0004254875

HIGHCROFT INVESTMENTS PLC

(HCFT)
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Highcroft Investments : Interim Report for the six months ended 30 June 2020

09/21/2020 | 10:40am EST

Interim report

For the six months ended 30 June 2020

Stock Code: HCFT www.highcroftplc.com

3 September 2020

Highcroft Investments PLC

Interim Report for the six months ended 30 June 2020

Key Highlights:

*Gross rental income increased 11.74% to £3,044,000 (2019 £2,726,000)

*Net rental income increased 3.7% to £2,777,000 (2019 £2,678,000)

*99% occupancy in the property portfolio (2019 100%)

*100% of Q1 rent, 77% of Q2 rent and 81% of Q3 rent, due to date, collected

*Adjusted earnings per share reduced 3.5% to 35.9p (2019 37.2p)

*Total earnings per share reduced to 51.4p loss (2019 21.9p profit)

*Net investment into property £nil (2019 net investment £11,897,000)

*Property valuation decreased by 5.2% to £82,195,000 (December 2019 £86,710,000)

*Net assets per share decreased 6.8% to 1095p (December 2019 1175p, June 2019 1195p)

*Loan to value 31.9% (December 2019 30.2%, June 2019 29.5%)

Dear Shareholder

I am writing to report our half year 2020 results. It has been an extremely difficult period which has been unduly impacted by the COVID-19 pandemic. Whilst the business has demonstrated resilience under the circumstances in the 6 months to 30 June 2020, the Board is mindful that there remains a significant amount of risk and uncertainty surrounding the outlook for the remainder of the financial year. Taking all of this into account, and given our focus on active asset management, I feel we have performed well in the first half and, having collected 100% of our Q1 rent, we collected a respectable 77% of Q2 rent and 81% of Q3 rent (due to date) so far. We continue to have a conservative view on debt which stood at 31.9% loan to value at the half year with cash on the balance sheet of £1.8m. In addition, all bank loans due for repayment in 2020 have been refinanced with no further debt maturing until 2022, and we have agreed to draw an additional £1m of our agreed facility later this year as additional working capital.

The group has not made any new property acquisitions during the period although gross rent has increased by 11.4% as a result of our 2019 acquisitions and rent reviews carried out in the last 12 months. As a result of the COVID-19 pandemic, we have provided for £195,000 of bad debts primarily arising from the effect of a small number of CVAs and new lease arrangements. Our external independent property valuation fell by 5.2% during the period with some softening pre COVID which was then further accelerated by the onset of the pandemic. This compares favourably to the All Property index decrease of 6.1% in the same period.

More specifically, our high street retail and leisure asset values, which represent only 20.4% of our overall portfolio, have fallen by 10.9% and 8.5% respectively; however, in-line with our strategy to diversify our exposure and buy quality assets, our office and industrial properties have held up better with both falling by just 2.7%.

Dividend

Whilst the business has performed robustly during the first half of 2020 against a difficult backdrop, we remain mindful of the increased risk brought about by the COVID-19 pandemic and the potential knock-on effect to our tenants. Highcroft has been a public company for several decades and has always prided itself on paying an increased dividend each year. The group is, however, operating in very unusual and unpredictable times and is, as a result, taking a cautious approach to working capital management to ensure that it is able to continue to deliver long term shareholder value post COVID-19. We have therefore decided to defer our decision in relation to the interim dividend until October when we will have the initial indications of our Q4 rent collection and more information as to the anticipated impact of the pandemic during the remainder of this financial year and in to 2021.

Outlook

The group has always taken a prudent approach to its operating model to ensure long term value creation for all stakeholders. I would like to thank my colleagues and our business partners for their pro-active approach which has resulted in a robust performance in the period and we continue to monitor the evolving situation closely. The outlook for the group is likely to be overshadowed by the effects of COVID- 19 for some time; however, we continue to work closely with our tenants and all other stakeholders to ensure we protect occupancy levels and limit the short-term impact.

We have a well-balanced portfolio with low gearing, a healthy positive cash position, and strong balance sheet which should position us well to withstand a potentially protracted period of economic weakness.

Charles Butler

Chairman

2 September 2020

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

For further information, contact:

Highcroft Investments PLC

Charles Butler/Roberta Miles

+44 (0)1865 840023

N+1 Singer

Peter Steel / Amanda Gray - Corporate Finance Tom Salvesen - Corporate Broking

+44 (0)20 7496 3000

Condensed consolidated interim statement of comprehensive income (unaudited)

for the six months ended 30 June 2020

Unaudited

Unaudited

Audited

First half 2020

First half 2019

Full year 2019

Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total

Note

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Continuing operations

Gross rental income

3,044

-

3,044

2,726

-

2,726

5,840

-

5,840

Bad debt provision

(195)

-

(195)

-

-

-

-

-

-

Property operating expenses

(72)

-

(72)

(48)

-

(48)

(184)

-

(184)

Net rental income

2,777

-

2,777

2,678

-

2,678

5,656

-

5,656

Valuation gains on investment

property

-

600

600

-

-

-

-

739

739

Valuation losses on

investment property

-

(5,115)

(5,115)

-

(792)

(792)

-

(3,627)

(3,627)

Net valuation (losses)/gains

on investment property

-

(4,515)

(4,515)

-

(792)

(792)

-

(2,888)

(2,888)

Dividend income

-

-

-

3

-

3

3

-

3

Gains on investments

-

-

-

53

-

53

-

53

53

Losses on investments

-

-

-

-

-

-

-

-

-

Net investment income

-

-

-

56

-

56

3

53

56

Administrative expenses

(471)

-

(471)

(411)

-

(411)

(826)

-

(826)

Operating profit before net

financing costs

2,306

(4,515)

(2,209)

2,323

(792)

1,531

4,833

(2,835)

1,998

Finance income

2

-

2

5

-

5

6

-

6

Finance expenses

(458)

-

(458)

(396)

-

(396)

(856)

-

(856)

Net finance costs

(456)

-

(456)

(391)

-

(391)

(850)

-

(850)

Profit before tax

1,850

(4,515)

(2,665)

1,932

(792)

1,140

3,983

(2,835)

1,148

Income tax (charge)/credit

4

8

-

8

(11)

-

(11)

72

(66)

6

Total profit and

comprehensive income for

the financial period

1,858

(4,515)

(2,657)

1,921

(792)

1,129

4,055

(2,901)

1,154

Basic and diluted earnings

per share

6

(51.4p)

21.9p

22.3p

Condensed consolidated interim statement of financial position (unaudited)

as at 30 June 2020

Unaudited

Unaudited

Audited

30 June

30 June

31 December

2020

2019

2019

Note

£'000

£'000

£'000

Assets

Investment property

7

82,195

88,805

86,710

Equity investments

8

-

9

-

Total non-current assets

82,195

88,814

86,710

Current assets

Trade and other receivables

1,526

668

1,147

Cash at bank and in hand

1,779

610

1,559

Total current assets

3,305

1,278

2,706

Total assets

85,500

90,092

89,416

Liabilities

Current liabilities

Interest bearing loan

4,000

-

4,000

Trade and other payables

2,626

2,123

2,495

Total current liabilities

6,626

2,123

6,495

Non-current liabilities

Interest-bearing loans and borrowings

9

22,200

26,200

22,200

Total non-current liabilities

22,200

26,200

22,200

Total liabilities

28,826

28,323

28,695

Net assets

56,674

61,769

60,721

Equity

Issued share capital

1,294

1,292

1,292

Share premium

51

-

-

Share based payment

19

-

12

Other equity reserve

(53)

-

-

Revaluation reserve - property

9,514

17,456

12,931

Revaluation reserve - other

0

5

-

Capital redemption reserve

95

95

95

Realised capital reserve

28,995

28,990

28,995

Retained earnings

16,759

13,931

17,396

Total equity

56,674

61,769

60,721

Condensed consolidated interim statement of changes in equity

for the six months ended 30 June 2020

Issued

Share

Share

Other

Revaluation

Capital

Realised

Retained

Total

share

premium

based

equity

reserve

redemption

Capital

earnings

capital

payment

reserve

property

(note 10)

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2020

1,292

-

12

-

12,931

95

28,995

17,396

60,721

Transactions with owners:

Dividends

-

-

-

-

-

-

(1,397)

(1,397)

Issue of shares

2

51

-

(53)

-

-

-

-

-

2

51

-

(53)

-

-

-

(1,397)

(1,397)

Reserve transfers:

Non-distributable items

recognised in income

statement:

Revaluation losses

-

-

-

(4,515)

-

-

4,515

-

Realised gains

-

-

-

-

-

-

-

-

Excess of cost over revalued

amount taken to retained

earnings

-

-

-

-

1,098

-

-

(1,098)

-

-

-

-

-

(3,417)

-

-

3,417

-

Share award expensed

-

-

7

-

-

-

-

-

7

Loss and total comprehensive

-

income for the period

-

-

-

-

-

-

(2,657)

(2,657)

At 30 June 2020

1,294

51

19

(53)

9,514

95

28,995

16,759

56,674

First half 2019

Issued

Revaluation

Unaudited

reserves

share

Capital

Realised

Retained

capital

Property

Other

redemption

capital

earnings

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2019

1,292

18,770

574

95

28,378

13,275

62,384

Transactions with owners:

Dividends

-

-

-

-

-

(1,744)

(1,744)

Reserve transfers:

Non-distributable items recognised

in income statement:

Revaluation losses

-

(792)

-

-

-

792

-

Movement in deferred tax on

realisation of equities

-

-

34

-

(34)

-

-

Realised gains

-

-

-

-

43

(43)

-

Surplus attributable to assets sold

-

-

(603)

-

603

-

-

Excess of cost over revalued

amount taken to retained earnings

-

(522)

-

-

-

522

-

-

(1,314)

(569)

-

612

1,271

-

Profit and total comprehensive

income for the period

-

-

-

-

-

1,129

1,129

At 30 June 2019

1,292

17,456

5

95

28,990

13,931

61,769

Condensed consolidated interim statement of changes in equity (continued)

for the six months ended 30 June 2020

Full year 2019

Share

Revaluation

Audited

Issued

Based

reserves

share

payment

Capital

Realised

Retained

capital

reserve

Property

Other

redemption

capital

earnings

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2019

1,292

-

18,770

574

95

28,378

13,275

62,384

Transactions with owners:

Dividends

-

-

-

-

-

-

(2,829)

(2,829)

Reserve transfers:

Non-distributable items

recognised in income

statement:

Revaluation (losses)

-

-

(2,888)

-

-

-

2,888

-

Realised gains/(losses)

-

-

-

-

-

43

(43)

-

Movement in deferred tax

on realisation of equities

-

-

-

29

-

(29)

-

-

Surplus attributable to

assets sold in the year

-

-

-

(603)

-

603

-

-

Reassessment of carrying

value of reserves

-

-

(4,168)

4,168

Excess of cost over

revalued amount taken to

retained earnings

-

-

1,217

-

-

-

(1,217)

-

-

-

(5,839)

(574)

-

617

5,796

-

Share award expenses

12

12

Profit and total

comprehensive income for

the period

-

-

-

-

-

-

1,154

1,154

At 31 December 2019

1,292

12

12,931

-

95

28,995

17,396

60,721

Condensed consolidated interim statement of cashflows

for the six months ended 30 June 2020

Unaudited

Unaudited

Audited

First half

First half

Full year

2020

2019

2019

£'000

£'000

£'000

Operating activities

Profit before tax for the period

(2,665)

1,140

1,148

Adjustments for:

Net valuation losses on investment property

4,515

792

2,888

Net gains on investments

-

(53)

(53)

Share based payment expense

7

-

12

Finance income

(2)

(5)

(6)

Finance expense

458

396

856

Operating cash flow before changes in working capital and provisions

2,313

2,270

4,845

(Increase)/decrease in trade and other receivables

(393)

(197)

(667)

Increase/(decrease) in trade and other payables

131

(156)

325

Cash generated from operations

2,051

1,917

4,503

Finance income

2

5

6

Finance expense

(458)

(396)

(856)

Income tax received/(paid)

22

-

(93)

Net cash flows from operating activities

1,617

1,526

3,560

Investing activities

Purchase of fixed assets - investment property

-

(11,897)

(11,898)

Sale of fixed assets - equity investments

-

723

724

Net cash flows from investing activities

-

(11,174)

(11,174)

Financing activities

Dividends paid

(1,397)

(1,744)

(2,829)

New bank borrowings

-

6,800

6,800

Net cash flows from financing activities

(1,397)

5,056

3,971

Net (decrease)/increase in cash and cash equivalents

220

(4,592)

(3,643)

Cash and cash equivalents at 1 January

1,559

5,202

5,202

Cash and cash equivalents at period end

1,779

610

1,559

Notes (Unaudited)

for the six months ended 30 June 2020

1. Nature of operations and general information

Highcroft Investments PLC ('Highcroft' or 'company') and its subsidiaries' (together 'the group') principal activity is investment in property. It is incorporated and domiciled in Great Britain. The address of Highcroft's registered office, which is also its principal place of business, is Thomas House, Langford Locks, Kidlington, OX5 1HR. Highcroft's condensed consolidated interim financial statements are presented in Pounds Sterling (£), which is also the functional currency of the group. These condensed consolidated interim financial statements have been approved for issue by the directors on 2 September 2020. The financial information for the period ended 30 June 2020 set out in this interim report does not constitute statutory accounts as defined in Section 404 of the Companies Act 2006. The group's statutory financial statements for the year ended 31 December 2019 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(5) of the Companies Act 2006.

2. Basis of preparation

These condensed consolidated interim financial statements are for the six months ended 30 June 2020. They have been prepared in accordance with IAS 34, Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 December 2019.

These condensed consolidated interim financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties and the measurement of equity investments at fair value. These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2019.

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

The financial statements are drawn up on a going concern basis. The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future and consider that there are no material uncertainties that lead to significant doubt upon the group's ability to continue as a going concern. Cash flow forecasts are prepared annually as part of the planning and budgeting process and are monitored and reworked regularly. The group has fixed-termnon-amortising borrowing and has additional headroom available.

3. Segment reporting

The group has one main business segment - property.

In 2020 the largest tenant represented 11% (2019 9%) and the second largest tenant represented 7% (2019 7%) of gross commercial property income for the period.

4. Income tax credit/(charge)

First half

First half

Full year

2020

2019

2019

£'000

£'000

£'000

Current tax:

On revenue profits

8

-

72

On capital profits

-

(11)

(99)

8

(11)

(27)

Deferred tax

-

-

33

Total tax

8

(11)

6

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

Notes (Unaudited) (continued)

for the six months ended 30 June 2020

5. Dividends

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

First half

First half

Full year

2020

2019

2019

£'000

£'000

£'000

2019 final: 27.00p per ordinary share (2018 final 33.75p)

1,397

1,744

1,744

2019 interim: 21.00p per ordinary share

-

-

1,085

1,397

1,744

2,829

6. Earnings per share

The calculation of earnings per share is based on the loss for the period of £2,657,000 (2019 profit £1,129,000) and on 5,169,695 shares which is the weighted average number of shares in issue during the period ended 30 June 2020, (2019 5,167,240) .

In order to draw attention to the impact of valuation gains and losses which are included in the income statement but not available for distribution under the company's articles of association, an adjusted earnings per share based on the profit available for distribution of £1,858,000 (2019 £1,921,000) has been calculated.

First half

First half

Full year

2020

2019

2019

£'000

£'000

£'000

Earnings:

Basic earnings

(2,657)

1,129

1,154

Adjustments for:

Net valuation losses on investment property

4,515

792

2,888

Gains/(losses) on investments

-

-

(53)

Income tax on profits

-

-

66

Adjusted earnings

1,858

1,921

4,055

Per share amount:

Earnings per share (unadjusted)

(51.4p)

21.9p

22.3p

Adjustments for:

Net valuation losses on investment property

87.3p

15.3p

55.9p

(Gains) / losses on investments

-

-

(1.0p)

Income tax on profits

-

-

1.3p

Adjusted earnings per share

35.9p

37.2p

78.5p

Notes (Unaudited) (continued)

for the six months ended 30 June 2020

7. Investment property

First half

First half

Full year

2020

2019

2019

£'000

£'000

£'000

Valuation at 1 January

86,710

77,700

77,700

Additions

-

11,897

11,898

Disposals

-

-

-

(Loss)/gain on revaluation

(4,515)

(792)

(2,888)

Valuation at period end

82,195

88,805

86,710

The directors have used an external independent valuation of properties at 30 June 2020 which has been carried out consistently with the annual valuation. The independent valuer, Knight Frank LLP, included a material uncertainty clause in their valuation reports relating to assets valued at £52,820,000, 64%, of the total valuation. This clause indicates that, due to the impact of COVID-19, less certainty, and a higher degree of caution, should be attached to the valuations of those assets to which the clause applies than would otherwise be the case.

8. Equity investments

First half

First half

Full year

2020

2019

2019

£'000

£'000

£'000

Valuation at 1 January

-

679

679

Additions

-

-

-

Disposals

-

(670)

(670)

-

-

9

Unlisted investments transferred to other receivables

-

-

(9)

Valuation at period end

-

9

0

9. Interest bearing loans

First half

First half

Full year

2020

2019

2019

£'000

£'000

£'000

Short-term bank loans due within one year

4,000

-

4,000

Medium-term loans

22,200

26,200

22,200

The medium-term bank loans comprise amounts falling due as follows:

Between one and two years

7,500

4,000

-

Between two and five years

-

7,500

7,500

Over five years

14,700

14,700

14,700

The debt is secured on certain assets within the group's property portfolio. £2,500,000 of the amounts falling due within one year were re-financed on 3 July 2020 and a facility letter is in place to re-finance the remaining £1,500,000 on the maturity date in November 2020.

Notes (Unaudited) (continued)

for the six months ended 30 June 2020

10. Share capital

First half

First half

Full year

2020

2019

2019

Allotted, called up and fully paid ordinary shares of 25p each

At I January

5,167,240

5,167,240

5,167,240

Issued in the year in connection with Highcroft incentive plan

7,935

-

-

At period end

5,175,175

5,167,240

5,167,240

11. Related party transactions

Kingerlee Holdings Limited owns, through its wholly owned subsidiaries, 27.2% (2019 27.2%) of the company's shares and D H Kingerlee is a director of both the company and Kingerlee Holdings Limited.

During the period, the group made purchases from Kingerlee Limited, a subsidiary of Kingerlee Holdings Limited, being a service charge in relation to services at Thomas House, Kidlington of £7,000 (2019 £7,000) and a recharge of computer and courier costs totalling £nil (2019 £530). The amount owed at 30 June 2020 was £nil (2019 £nil). All transactions were undertaken on an arm's length basis.

12. Net assets per share

First half

First half

Full year

2020

2019

2019

Net assets

£56,674,000

£61,769,000

£60,721,000

Ordinary shares in issue

5,175,175

5,167,240

5,167,240

Basic net assets per share

1095p

1195p

1175p

Statement of directors' responsibilities

The directors confirm that, to the best of their knowledge, this condensed consolidated set of half-year financial statements has been prepared in accordance with IAS 34. The half-year management report includes a fair review of the information required by 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority, namely:

  • an indication of the important events that have occurred during the first six months of the financial year ending 31 December 2020 and their impact on the condensed consolidated set of half-year financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
  • disclosure of material related party transactions in the first six months of the financial year, and any material changes in the related party transactions described in the last annual report.

A list of current directors is maintained on the Highcroft Investments PLC website: www.highcroftplc.com.

By order of the board.

Charles Butler

Chairman

2 September 2020

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Highcroft Investments plc published this content on 03 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 September 2020 14:39:02 UTC


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2018HIGHCROFT INVESTMENTS PLC : Ex-dividend day for final dividend
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2018HIGHCROFT INVESTMENTS : Director/PDMR Shareholding 15 January 2018
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2017HIGHCROFT INVESTMENTS : Appointment of Chairman 15 December 2017
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Financials
Sales 2019 5,84 M 8,02 M 8,02 M
Net income 2019 1,15 M 1,58 M 1,58 M
Net Debt 2019 24,6 M 33,8 M 33,8 M
P/E ratio 2019 42,2x
Yield 2019 5,09%
Capitalization 36,0 M 49,4 M 49,4 M
EV / Sales 2018 11,9x
EV / Sales 2019 12,6x
Nbr of Employees -
Free-Float 9,60%
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Managers and Directors
NameTitle
Simon Timothy Gill Chief Executive Officer & Director
Charles Alistair Neilson Butler Non-Executive Chairman
Roberta Caroline Miles Finance Director, Secretary & Executive Director
David Henry Kingerlee Executive Director
Simon Costa Senior Independent Non-Executive Director
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