TIDMHCFT
RNS Number : 2877D
Highcroft Investments PLC
27 March 2014
Highcroft Investments PLC
Preliminary results for the year ended 31 December 2013
KEY HIGHLIGHTS
-- Gross property income increased by 16% to GBP2,731,000
-- Total profit for the year up 35% to GBP4,856,000
-- Unadjusted earnings per share up 35% to 94.0p
-- Net asset value per share up 8% to 821p (2012 759p)
-- Total property income distribution up 6.1% to 33.75p per share
-- Medium term debt GBP4,000,000 (2012 nil)
-- Cash and liquid equity investments GBP8,355,000 (2012 GBP8,987,000)
Dear Shareholder,
I am pleased to announce our preliminary results for the year
ended 31 December 2013 and to invite you to our Annual General
Meeting on 16 May 2014.
Results for the year
I am delighted to report that we have made further progress both
in operating profits from our property portfolio, and through
returns from the sale of property assets and realisations from our
equity portfolio.
Property: Our gross property rental income rose 16% to
GBP2,731,000 (2012 GBP2,351,000), with all of this increase being
due to the performance of our commercial portfolio. This growth
includes the effect of a full year's income from the warehouse unit
in Bedford purchased in August 2012 and from our warehouse unit in
Milton Keynes purchased in November 2012. In addition, two new
units were purchased in the year. The first was a retail warehouse
property in Bicester let to Wickes Building Supplies Limited and
the second a modern office investment in Cardiff let to Arriva
Trains Limited. We have been very pleased with the performance of
the portfolio with the only void, arising at the year end, being a
single floor of our office building in Bristol. There were no bad
debts in the period. The sale of two of our smaller assets at
auction in December 2013 yielded total gross proceeds of
GBP2,370,000 that were 31% in excess of the June 2013 valuations.
The intention is to reinvest these funds into a mixture of both
secure income assets and assets which offer the opportunity for
further enhancement thus providing both capital and income growth.
We have been successful at identifying property investments at
attractive yields that sit between private investors and larger
corporate property investors and intend to continue taking
advantage of our strong financial position and ability to move fast
to exploit such opportunities. The property portfolio showed a net
valuation gain of GBP1,243,000 for the year. Since the year end we
have sold one of our residential properties at its year end
valuation.
Equities: Our income of GBP234,000, coupled with a realised net
gain of GBP146,000 and an unrealised net gain of GBP623,000, are a
result of the strength of our portfolio, and we have outperformed
the Wealth Managers Association balanced index by 3%. We released
GBP1,175,000 in net cash from this portfolio during the year.
Administrative expenses: Our ongoingadministrative expenses
increased by 11% in 2013, due primarily to the cost of a handover
period for our incoming chief executive. Our costs remain tightly
controlled as evidenced by their average increase of only 1.5% pa
over the last three years.
Financial highlights: Our total profit for the year showed a 35%
improvement on 2012, driven particularly by the capital performance
of our property and equity investment portfolios. Our profit on
revenue activities reduced to GBP2,921,000 (2012 GBP3,720,000) as
the 2012 performance was significantly affected by the realised
gains on investment property of GBP1,552,000. Excluding these
realised gains on investment property, the underlying profit on
revenue activities rose by 16%. Our year end net asset value per
share increased to 821p (2012 759p). Our year end cash position was
GBP3,128,000 (2012 GBP3,274,000), whilst readily realisable equity
investments totalled GBP5,227,000 (2012 GBP5,713,000). During the
year we took out two medium term loans and the year end balance was
GBP4,000,000 (2012 nil)
Dividend
We are recommending a final dividend of 21.25p per share (2012
19.80p) to be paid on 30 May 2014 to shareholders registered on 2
May 2014, making a total of 33.75p for the year (2012 31.80p). This
increase of 6% for the year continues our recent record of dividend
increases well in excess of inflation.
Board
As you are aware Jonathan Kingerlee retired from the Board on 31
July 2013 after 18 years. We are very grateful to Jonathan for his
loyal service and contribution to the group. Simon Gill joined the
board on 1 April 2013 as property director, bringing with him a
wealth of experience in the property sector. Simon also assumed the
role of chief executive upon Jonathan's retirement and has been
instrumental in driving the group's recent active acquisition
strategy.
Outlook
We are very pleased with the results for the year and remain
optimistic that we start 2014 from a position of strength upon
which we hope to build through further attractive acquisitions. We
have set ourselves some challenging objectives for 2014 and we
expect that our actions will continue to improve shareholder value
via increased dividends and asset values.
J HEWITT
Chairman
26 March 2014
Enquiries:
Highcroft Investments PLC
John Hewitt / Roberta Miles 01865 840023
Charles Stanley Securities
Dugald J. Carlean / Karri Vuori 0207 149 6000
Consolidated statement of comprehensive income
for the year ended 31 December 2013
Note 2013 2012
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross rental revenue 2,731 - 2,731 2,351 - 2,351
Property operating
expenses (151) - (151) (184) - (184)
-------- -------- -------- -------- -------- --------
Net rental income 2,580 - 2,580 2,167 - 2,167
-------- -------- -------- -------- -------- --------
Realised gains on
investment property 415 - 415 1,552 - 1,552
Realised losses - - - - - -
on investment property
-------- -------- -------- -------- -------- --------
Net gains on investment
property 1,552 - 1,552 1,552 - 1,552
-------- -------- -------- -------- -------- --------
Valuation gains
on investment property - 1,833 1,833 - 1,769 1,769
Valuation losses
on investment property - (590) (590) - (2,355) (2,355)
-------- -------- -------- -------- -------- --------
Net valuation gains/(losses)
on investment property - 1,243 1,243 - (586) (586)
-------- -------- -------- -------- -------- --------
Dividend revenue 234 - 234 251 - 251
Gains on equity
investments - 832 832 - 677 677
Losses on equity
investments - (63) (63) - (179) (179)
-------- -------- -------- -------- -------- --------
Net investment income/(expense) 234 769 1,003 251 498 749
-------- -------- -------- -------- -------- --------
Administration expenses (345) - (345) (311) - (311)
-------- -------- -------- -------- -------- --------
Net operating profit
before net finance
income 2.884 2,012 4,896 3,659 (88) 3,571
-------- -------- -------- -------- -------- --------
Finance income 7 - 7 8 - 8
Finance expense (61) - (61) 8 - 8
Net finance (expense)/income (54) - (54) 8 - 8
-------- -------- -------- -------- -------- --------
Profit/(loss) before
tax 2,830 2,012 4,842 3,667 (88) 3,579
Income tax credit/(expense) 1 91 (77) 14 53 (38) 15
Total profit and
comprehensive income
for the year 2,921 1,935 4,856 3,720 (126) 3,594
-------- -------- -------- -------- -------- --------
Basic and diluted
earnings per share 3 56.5p 37.5p 94.0p 72.0p (2.5p) 69.6p
Consolidated statement of financial position
at 31 December 2013
Note 2013 2012
GBP'000 GBP'000
Assets
Non-current assets
Investment property 4 39,415 31,609
Equity investments 5 5,227 5,713
-------- --------
Total non-current assets 44,642 37,322
-------- --------
Current assets
Trade and other receivables 422 254
Cash and cash equivalents 3,128 3,274
--------
Total current assets 3,550 3,528
Total assets 48,192 40,850
-------- --------
Liabilities
Current liabilities
Current income tax - -
Trade and other payables 1,160 1,000
-------- --------
Total current liabilities 1,160 1,000
-------- --------
Non-current liabilities
Interest bearing loan 6 4,000 -
Deferred tax liabilities 604 609
-------- --------
Total non-current liabilities 4,604 609
-------- --------
Total liabilities 5,764 1,609
-------- --------
Net assets 42,428 39,241
--------
Equity
Issued share capital 1,292 1,292
Revaluation reserve
- property 7,353 7,050
- other 1,972 1,746
Capital redemption reserve 95 95
Realised capital reserve 24,220 22,366
Retained earnings 7,496 6,692
--------
Total equity 42,428 39,241
--------
Consolidated statement of changes in equity
2013 Issued Revaluation Capital Realised Retained
reserves
share Property Other redemption capital earnings Total
capital reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2013 1,292 7,050 1,746 95 22,366 6,692 39,241
-------- --------- -------- ----------- --------- --------- --------
Dividends - - - - - (1,669) (1,669)
Reserve transfers:
Non-distributable
items recognised
in income
statement:
Revaluation
gains - 1,243 610 - - (1,853) -
Tax on revaluation
gains/(losses) - - (43) - - 43 -
Realised gains - - - - 527 (527) -
Surplus attributable
to assets
sold in the
year - (986) (341) - 1,327 - -
Excess of
cost over
revalued amount
taken to retained
earnings - 46 - - - (46) -
-------- --------- -------- ----------- --------- --------- --------
Transactions
with owners - 303 226 - 1,854 (4,052) (1,669)
-------- --------- -------- ----------- --------- --------- --------
Profit and
total comprehensive
income for
the year - - - - - 4,856 4,856
-------- --------- -------- ----------- --------- --------- --------
At 31 December
2013 1,292 7,353 1,972 95 24,220 7,496 42,428
======== ========= ======== =========== ========= ========= ========
2012 Issued Revaluation Capital Realised Retained
reserves
share Property Other redemption capital earnings Total
capital reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2012 1,292 4,904 1,592 95 21,428 7,912 37,223
-------- --------- -------- ----------- --------- --------- --------
Dividends - - - - - (1,576) (1,576)
Reserve transfers:
Non-distributable
items recognised
in income
statement:
Revaluation
losses - (586) 416 - - 170 -
Tax on revaluation
gains/(losses) - - (20) - - 20 -
Realised gains - - - - 1,608 (1,608) -
Surplus attributable
to assets
sold in the
year - 912 (242) - (670) - -
Excess of
cost over
revalued amount
taken to retained
earnings - 1,820 - - - (1,820) -
Transactions
with owners - 2,146 154 - 938 (4,814) (1,576)
-------- --------- -------- ----------- --------- --------- --------
Profit and
total comprehensive
income for
the year - - - - - 3,594 3,594
-------- --------- -------- ----------- --------- --------- --------
At 31 December
2012 1,292 7,050 1,746 95 22,366 6,692 39,241
======== ========= ======== =========== ========= ========= ========
Consolidated statement of cash flows
for the year ended 31 December 2013
2013 2012
GBP'000 GBP'000
Operating activities
Profit for the year 4,856 3,594
Adjustments for:
Net valuation (gains)/losses
on investment property (1,243) 586
Gain on disposal of investment
property (415) (1,552)
(Gain)/loss on investments (769) (498)
Finance income (7) (8)
Finance expense 61 -
Income tax credit (14) (15)
-------- --------
Operating cash flow before
changes in working capital
and provisions 2,469 2,107
Increase in trade and other
receivables (168) (37)
Increase/(decrease) in trade
and other payables 126 319
-------- --------
Cash generated from operations 2,427 2,389
Finance income 7 8
Finance expense (27) -
Income taxes received 7 -
-------- --------
Net cash flows from operating
activities 2,414 2,397
-------- --------
Investing activities
Purchase of non-current
assets - investment property (8,488) (4,827)
- equity investments (125) (540)
Sale of non-current assets
- investment property 2,340 4,972
- equity investments 1,382 922
-------- --------
Net cash flows from investing
activities (4,891) 527
-------- --------
Financing activities
Dividends paid (1,669) (1,576)
New bank borrowings 4,000 -
-------- --------
Net cash flows from financing
activities 2,331 (1,576)
-------- --------
Net (decrease)/increase
in cash and cash equivalents (146) 1,348
Cash and cash equivalents
at 1 January 2012 3,274 1,926
-------- --------
Cash and cash equivalents
at 31 December 2012 3,128 3,274
-------- --------
Notes
for the year ended 31 December 2013
1 Income tax credit
2013 2012
GBP'000 GBP'000
Current tax:
On revenue profits (82) (53)
On capital profits 34 18
Prior year overprovision (9) -
-------- --------
(57) (35)
Deferred tax 43 20
-------- --------
Income tax credit (14) (15)
-------- --------
The tax assessed for the year differs from the standard rate of
corporation tax in the UK of 23.25% (2012 24.5%).
The differences are explained as follows:
2013 2012
GBP'000 GBP'000
Profit before tax 4,842 3,579
-------- --------
Profit before tax multiplied
by the standard rate of corporation
tax in the UK of 23.25% (2012
24.5%) 1,126 877
Effect of:
Tax exempt revenues (199) (62)
Profit not taxable as a result
of REIT status (985) (768)
Chargeable gains/losses less/(more)
than accounting profit 48 10
Losses carried forward 12 (22)
Effect of change in tax rate
on deferred tax liability (7) (50)
Adjustments to tax charge (9) -
in respect of prior periods
Income tax credit (14) (15)
-------- --------
2 Dividends
In 2013 the following dividends have been paid by the
company:
2013 2012
GBP'000 GBP'000
2012 Final: 19.8p per ordinary
share (2011 18.5p) 1,023 956
2013 Interim: 12.5p per ordinary
share (2012 12.0p) 646 620
----------- -----------
1,669 1,576
----------- -----------
On 26 March 2014 the directors declared a property income
distribution of GBP1,098,000, 21.25p per share (2012 GBP1,023000,
19.80p per share) payable on 30 May 2014 to shareholders registered
at 2 May 2014.
3 Earnings per share
The calculation of earnings per share is based on the total
profit for the year of GBP4,856,000 (2012 GBP3,594,000) and on
5,167,240 shares (2012 5,167,240) which is the weighted average
number of shares in issue during the year ended 31 December 2013
and throughout the period since 1 January 2013. There are no
dilutive instruments.
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 GBP2,921,000 (2012 GBP3,720,000) has been
calculated.
2013 2012
GBP'000 GBP'000
Earnings:
Basic profit for the year 4,856 3,594
Adjustments for:
Net valuation (gains)/losses
on investment property (1,243) 586
Gains on investments (769) (498)
Income tax on gains/(losses) 77 38
------------------- -------------------
Adjusted earnings 2,921 3,720
------------------- -------------------
Per share amount:
Earnings per share (unadjusted) 94.0p 69.6p
Adjustments for:
Net valuation (gains)/losses
on investment property (24.1p) 11.3p
Gains on investments (14.9p) (9.6p)
Income tax on gains 1.5p 0.7p
------------------- -------------------
Adjusted earnings per share 56.5p 72.0p
------------------- -------------------
4 Investment property
2013 2012
GBP'000 GBP'000
Valuation at 1 January 31,609 30,787
Additions 8,488 4,827
Disposals (1,925) (3,419)
Revaluation (losses)/gains 1,243 (586)
----------- -----------
Valuation at 31 December 39,415 31,609
----------- -----------
In accordance with IAS 40 the carrying value of investment
properties is their fair value as determined by external valuers.
This valuation has been conducted by Knight Frank LLP, as external
valuers, and has been prepared as at 31 December 2013, in
accordance with the Appraisal & Valuation Standards of the
Royal Institution of Chartered Surveyors, on the basis of market
value. This value has been incorporated into the financial
statements.
The independent valuation of all property assets uses market
evidence and also includes assumptions regarding income
expectations and yields that investors would expect to achieve on
those assets over time. Many external economic and market factors,
such as interest rate expectations, bond yields, the availability
and cost of finance and the relative attraction of property against
other asset classes, could lead to a reappraisal of the assumptions
used to arrive at current valuations. In adverse conditions, this
reappraisal can lead to a reduction in property values and a loss
in net asset value.
5 Equity investments
2013 2012
GBP'000 GBP'000
Valuation at 1 January 5,713 5,598
Additions 127 540
Disposals (1,236) (849)
Surplus/(deficit) on revaluation
in excess of cost 610 416
Revaluation decrease below cost (4) (17)
Revaluation increase still less
than cost 17 25
-------- --------
Valuation at 31 December 5,227 5,713
-------- --------
6 Interest bearing loan
2013 2012
GBP'000 GBP'000
Medium term bank loans 4,000 -
-------- --------
The medium term bank loans
comprise amounts falling
due as follows:
Between one and two years - -
Between two and five years - -
Over five years 4,000 -
-------- --------
4,000 -
-------- --------
7 Basis of preparation
The preliminary announcement has been prepared in accordance
with applicable accounting standards as stated in the financial
statements for the year ended 31 December 2012. The accounting
policies remain unchanged.
8 Annual General Meeting
The Annual General Meeting will be held on 16 May 2014.
9 Publication of non-statutory accounts
The above does not constitute statutory accounts within the
meaning of the Companies Act 2006. It is an extract from the full
accounts for the year ended 31 December 2013 on which the auditor
has expressed an unqualified opinion and does not include any
statement under section 498 of the Companies Act 2006. The accounts
will be posted to shareholders on or before 17 April 2014 and
subsequently filed at Companies House.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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