RNS Number:7717B
Highcroft Investments PLC
08 August 2007
Highcroft Investments PLC
Interim results for the six months ended 30 June 2007
Highlights
* Profit before taxation excluding capital activities, down by 10.6% to
#906,000 (2006 #1,013,000)
* Profit before taxation including capital activities, down by 50.4% to
#1,650,000 (2006 #3,329,000)
* Interim dividend increased by 6.4% to 5.00p per share from 4.70p in 2006
* Net assets per share up to 847p (June 2006 800p and December 2006 830p)
Enquiries:
David Bowman 01865 840 023
Highcroft Investments plc
Philip Davies
Charles Stanley Securities 020 7149 6000
Chairman's statement
Dear Shareholder
I am writing to you to introduce our Interim Report, for the half year to 30
June 2007, and to update you on converting to a Real Estate Investment Trust
(REIT).
As far as the half year is concerned, we are pleased to report an increase in
asset value per share to 847p (800p June 2006, 830p December 2006). This is a
result of retained profits and rises in both our investment and property
portfolios.
The Consolidated Income Statement shows a decline in profit before taxation
including capital activities to #1,650,000 from #3,329,000 in the first half of
2006. The principal item affecting this reduction is the net valuation gains on
investment property which were #2,016,000 in 2006 and only #347,000 in 2007.
Realised profit on disposal of investment property fell from #236,000 in 2006 to
#103,000 in 2007. In contrast, net valuation gains and profit on disposal of
investments increased from #64,000 in 2006 to #294,000 in 2007.
Profit before taxation excluding capital activities reduced from #1,013,000 in
2006 to #906,000 in the first half of 2007 - principally as a result of the
absence of special dividends/cash distributions from our equity portfolio and
higher financing costs. We believe that property and equity purchases made now
(when income might not cover short term interest charges) will enhance the asset
base of the company in the medium term.
Despite a decline in distributable profit for the period, we are paying an
interim dividend of 5.00p - an increase of 6.4%.
Shareholders will be aware of the debate about property values in view of rising
interest rates. If the market as a whole continues to weaken in the coming
months our own portfolio will be affected. However, we believe that our
portfolio of property is strong as it is designed for the medium term with
quality properties, in good locations, a spread of rent reviews/renewals and
good covenants.
Following the AGM discussion and announcement about REITs, I am pleased to say
that the programme for conversion is progressing well. The two principal issues
with which we are dealing are, first, the fact we have a substantial shareholder
and, second, that we will be required to manage our property and equity assets
so that property assets are always three times the value of equity assets. We
expect to be writing to shareholders in November regarding an EGM to be held in
mid-December. If the motion to amend our Articles of Association were carried,
conversion would be effective on 1 January 2008
J Hewitt
8 August 2007
Condensed consolidated income statement (Unaudited)
for the six months ended 30 June 2007
First Half First Half Full Year
2007 2006 2006
Note #'000 #'000 #'000
Gross rental income 1,055 1,041 2,038
Property operating expenses (46) (49) (136)
Net rental income 1,009 992 1,902
Realised gains on investment property 109 243 320
Realised losses on investment property (6) (7) (33)
Profit on disposal of investment property 103 236 287
Valuation gains on investment property 428 2,230 2,732
Valuation losses on investment property (81) (214) (398)
Net valuation gains on investment property 347 2,016 2,334
Dividend income 168 237 489
Gains on investments 869 352 1,455
Losses on investments (575) (288) (309)
Net investment income 462 301 1,635
Administrative expenses (136) (141) (247)
Operating profit before net financing costs 1,785 3,404 5,911
Finance income 9 5 13
Finance expenses (144) (80) (201)
Net financing costs (135) (75) (188)
Profit before tax 1,650 3,329 5,723
Income tax expense 4 (275) (722) (1,340)
Profit for the financial period 1,375 2,607 4,383
Earnings per share 6 26.6p 50.5p 84.8p
Condensed consolidated balance sheet (Unaudited)
as at 30 June 2007
30 June 30 June 31 December
2007 2006 2006
Note #'000 #'000 #'000
Assets
Investment property 7 39,324 37,818 41,487
Equity investments 8 11,840 10,645 11,794
Total non-current assets 51,164 48,463 53,281
Current assets
Trade and other receivables 407 578 489
Cash at bank and in hand 433 157 281
Total current assets 840 735 770
Total assets 52,004 49,198 54,051
Liabilities
Current liabilities
Interest-bearing loans and borrowings 178 137 246
Current corporation tax 405 422 196
Trade and other payables 879 711 838
Total current liabilities 1,462 1,270 1,280
Non-current liabilities
Interest-bearing loans and borrowings 10 2,760 2,917 5,685
Deferred tax liabilities 3,997 3,669 4,211
Total non-current liabilities 6,757 6,586 9,896
Total liabilities 8,219 7,856 11,176
Net assets 43,785 41,342 42,875
Equity
Issued share capital 9 1,292 1,292 1,292
Revaluation reserve - property 9 9,723 10,016 10,169
Revaluation reserve - other 9 4,635 3,865 4,601
Capital redemption reserve 9 95 95 95
Realised capital reserve 9 17,152 15,892 16,055
Retained earnings 9 10,888 10,182 10,663
Total equity 43,785 41,342 42,875
Condensed consolidated statement of cash flow (Unaudited)
for the six months ended 30 June 2007
30 June 30 June 31 December
2007 2006 2006
#'000 #'000 #'000
Operating activities
Profit for the period 1,375 2,607 4,383
Adjustments for:
Net valuation gains on investment property (347) (2,016) (2,334)
Profit on disposal of investment property (103) (236) (287)
Net gains on investments (294) (64) (1,146)
Finance income (9) (5) (13)
Finance expense 144 80 201
Income tax expense 275 722 1,340
Operating profit before changes in working 1,041 1,088 2,144
capital and provisions
Decrease/(increase) in trade and other receivables 82 (277) (188)
Increase/(decrease) in trade and other payables 40 (14) 113
Cash generated from operations 1,163 797 2,069
Finance income 9 5 13
Finance expense (144) (80) (201)
Income tax paid (282) (350) (650)
Cash flows from operating activities 746 372 1,231
Investing activities
Purchase of fixed assets - investment property (6) (3,054) (7,437)
- equity investments (703) (616) (1,029)
Sale of fixed assets - investment property 2,621 950 2,032
- equity investments 952 655 1,000
Cash flows from investing activities 2,864 (2,065) (5,434)
Financing activities
New medium term loans - 1,602 4,470
Loan repayments (2,993) (48) (39)
Dividends paid (465) (429) (672)
Cash flows from investing activities (3,458) 1,125 3,759
Net increase in cash and cash equivalents 152 (568) (444)
Cash and cash equivalents at 1 January 2007 281 725 725
Cash and cash equivalents at 30 June 2007 433 157 281
Notes
1. Interim report
The results for the six months ended 30 June 2007 are unaudited. This interim
report will not appear as an advertisement in any newspaper but copies are being
sent to all shareholders and are available at the company's registered office.
The interim report does not constitute full accounts as defined by the Companies
Act 1985 but should be read in conjunction with the most recent financial
statements. Full accounts for 2006 have been delivered to the Registrar of
Companies, bearing an unqualified audit opinion.
2. Significant accounting policies
Highcroft Investments PLC is a company domiciled in the United Kingdom. The
interim financial statements of the company for the six months ended 30 June
2007 comprise the company and its subsidiary, together referred to as the group.
a. Statement of compliance
These interim financial statements have been prepared in accordance with IAS 34
on Interim Financial Reporting.
b. Basis of preparation
The financial statements are presented in pounds sterling, rounded to the
nearest thousand. They are prepared on the historical cost basis except that
investment property and equity investments are stated at their fair value. The
accounting policies have been consistently applied to the results, other gains
and losses, assets, liabilities and cash flows of entities included in the
consolidated interim financial statements and are consistent with those used in
the previous year.
3. Segmental reporting
Segmental information is presented in the interim financial statements in
respect of the group's business segments. The business segment reporting format
reflects the group's management and internal reporting structure. Segment
results include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis.
The group is comprised of the following main business segments:
* Commercial property comprising retail outlets, offices and warehouses.
* Residential property comprising mainly single-let houses.
* Financial assets comprising exchange-traded equity investments.
First Half First Half Full Year
2007 2006 2006
#'000 #'000 #'000
Commercial property
Gross income 1,026 967 1,933
Profit for the period 610 1,824 2,288
Assets 37,576 35,825 39,312
Liabilities 5,697 5,559 8,559
Residential property
Gross income 29 74 105
Profit for the period 348 507 813
Assets 2,475 2,630 2,874
Liabilities 592 643 736
Financial assets
Gross income 168 237 489
Profit for the period 417 276 1,282
Assets 11,953 10,743 11,865
Liabilities 1,930 1,654 1,881
Total
Gross income 1,223 1,278 2,527
Profit for the period 1,375 2,607 4,383
Assets 52,004 49,198 54,051
Liabilities 8,219 7,856 11,176
4. Taxation
First Half First Half Full Year
2007 2006 2006
#'000 #'000 #'000
Current tax:
On revenue profits 216 238 363
On capital profits 12 60 83
Prior year overprovision - - (11)
Deferred tax 47 424 905
275 722 1,340
The taxation charge has been based on the estimated effective tax rate for the
full year.
5. Dividends
On 8 August 2007, the directors declared an ordinary interim dividend of 5.00p
per share (2006 4.70p) payable on 31 October 2007 to shareholders registered at
5 October 2007.
The following dividends have been paid by the company.
First Half First Half Full Year
2007 2006 2006
#'000 #'000 #'000
9.00p per ordinary share (2006 8.30p) 465 429 429
2006 interim 4.70p per ordinary share - - 243
465 429 672
6. Earnings per share
The calculation of earnings per share is based on the profit for the period of
#1,375,000 (2006 #2,607,000) and on 5,167,240 shares (2006 5,167,240) which is
the weighted average number of shares in issue during the period ended 30 June
2007 and throughout the period since 1 January 2006.
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 #690,000 (2006 #775,000) has been
calculated.
First Half First Half Full Year
2007 2006 2006
#'000 #'000 #'000
Earnings:
Basic earnings 1,375 2,607 4,383
Adjustments for:
Net valuation gains on investment property (450) (2,252) (2,621)
Gains and losses on investments (294) (64) (1,146)
Income tax on gains and losses 59 484 884
Adjusted earnings 690 775 1,500
Per share amount:
Basic earnings per share 26.6p 50.5p 84.8p
Adjustments for:
Net valuation gains on investment property (8.7)p (43.6)p (50.7)p
Gains and losses on investments (5.7)p (1.2)p (22.2)p
Income tax on gains and losses 1.1p 9.4p 17.1p
Adjusted earnings per share 13.3p 15.1p 29.0p
7. Investment property
First Half First Half Full Year
2007 2006 2006
Valuation at 1 January 2007 41,487 33,461 33,461
Additions 6 3,054 7,437
Disposals (2,516) (713) (1,745)
Surplus on revaluation 347 2,016 2,334
Valuation at 30 June 2007 39,324 37,818 41,487
The directors have used an external independent valuation of properties at 30
June 2007.
8. Equity investments
Listed and unlisted First Half First Half Full Year
2007 2006 2006
#'000 #'000 #'000
Valuation at 1 January 2007 11,794 10,620 10,620
Additions 703 614 1,029
Disposals (962) (740) (1,087)
Surplus on revaluation 305 151 1,232
Valuation at 30 June 2007 11,840 10,645 11,794
9. Total equity
a) First half 2007
Revaluation
Equity reserves Capital Realised Retained
Property Other Redemption Capital Earnings
#'000 #'000 #'000 #'000 #'000 #'000
At 1 January 2007 1,292 10,169 4,601 95 16,055 10,663
Total recognised gain and expense - - - - - 1,375
Dividends to shareholders - - - - - (465)
Non-distributable items recognised in
income statement:
Revaluation gains - 347 305 - - (652)
Tax on valuation gains and losses - (22) (25) - - 47
Realised gains - - - - 80 (80)
Surplus attributable to assets sold - (972) (306) - 1,278 -
Tax on gains attributable to assets sold - 201 60 - (261) -
At 30 June 2007 1,292 9,723 4,635 95 17,152 10,888
b) First half 2006
Revaluation
Equity reserves Capital Realised Retained
Property Other Redemption Capital Earnings
#'000 #'000 #'000 #'000 #'000 #'000
At 1 January 2006 1,292 8,734 3,902 95 15,306 9,835
Total recognised gain and expense - - - - - 2,607
Dividends to shareholders - - - - - (429)
Non-distributable items recognised in
income statement:
Revaluation gains - 2,016 151 - - (2,167)
Tax on valuation gains and losses - (419) (6) - - 425
Realised gains - - - - 89 (89)
Surplus attributable to assets sold - (400) (213) - 613 -
Tax on gains attributable to assets sold - 85 31 - (116) -
At 30 June 2006 1,292 10,016 3,865 95 15,892 10,182
c) Full year 2006
Revaluation
Equity reserves Capital Realised Retained
Property Other Redemption Capital Earnings
#'000 #'000 #'000 #'000 #'000 #'000
At 1 January 2006 1,292 8,734 3,902 95 15,306 9,835
Total recognised gain and expense - - - - - 4,383
Dividends to shareholders - - - - - (672)
Non-distributable items recognised in
income statement:
Revaluation gains - 2,334 1,232 - - (3,566)
Tax on valuation gains and losses - (498) (303) - - 801
Realised gains - - - - 118 (118)
Surplus attributable to assets sold - (512) (276) - 788 -
Tax on gains attributable to assets sold - 111 46 - (157) -
At 31 December 2006 1,292 10,169 4,601 95 16,055 10,663
10. Interest-bearing loans and borrowings
First Half First Half Full Year
2007 2006 2006
#'000 #'000 #'000
Medium term bank loan 2,760 2,917 5,685
The medium term bank loan comprises amounts falling due as follows:
Between one and two years 202 71 288
Between two and five years 708 238 1,002
Over five years 1,850 2,608 4,395
2,760 2,917 5,685
11. Related party transactions
Kingerlee Holdings Limited owns 25.3% (2006 24.5%) of the company's shares and D
H Kingerlee and J C Kingerlee are directors and shareholders of both the company
and Kingerlee Holdings Limited. During the period, the group made purchases
from Kingerlee Holdings Limited or its subsidiaries, being repairs to properties
which were nil in 2007 (2006 #3,000) and a service charge in relation to
services at Thomas House, Kidlington of #7,000 (2006 #7,000). The amount owed
at 30 June 2007 was nil (2006 Nil). All transactions were undertaken on an
arm's length basis.
This information is provided by RNS
The company news service from the London Stock Exchange
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