REG - Highcroft Invs PLC - Final results for the year ended 31 December 2021
29/03/2022 07:00
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RNS Number : 3057G Highcroft Investments PLC 29 March 2022
Highcroft Investments PLC ("Highcroft" or the "Company")
Final results for the year ended 31 December 2021
KEY HIGHLIGHTS
· 6.7% increase in investment property valuation to £87,565,000
(2020 £82,060,000)
· 11.1% increase in property valuation on a like-for-like basis
(2020 5.4% decrease)
· 3.8% decrease in net property income to £5,258,000 (2020
£5,464,000)
· 2021 rent collection 97% (2020 94%)
· One property disposal in the year at a 9% uplift to opening
valuation
· 15.5% increase in net asset value per share to 1275p (2020 1104p)
· Earnings per share of 230.5p (2020 loss 22.2p)
· Revenue profit before tax decreased by 7.4% to £3,243,000 (2020
£3,503,000)
· Total debt remained at £27,200,000; LTV 31% (2020 33%)
· Cash £5,715,000 (2020 £3,295,000)
· 10% increase in final dividend to 33p per share (2020 30p per
share with an additional special dividend of 6p per share)
· 3.5% decrease in total dividend payable for 2021 to 55p per share
(2020 57p per share including the special dividend of 6p per share)
Dear Shareholder,
Introduction
At the time of writing to you last year, I don't think we would have believed
that 2021 would be primarily dominated by continuing to deal with the effects
of the pandemic. Whilst the effects of Covid-19 continued to be felt across
the world, we took a cautious approach in how we managed the portfolio,
keeping a relatively low LTV, a healthy level of cash and taking no
unnecessary risks. Our portfolio proved to be very resilient throughout 2021,
and I am pleased to report a very solid set of results for the year.
Property portfolio
The focus of our asset management has been on warehouses and retail warehouses
for several years (making up 73% of our portfolio by asset value). This has
proven to be a successful strategy with a strong sector performance in 2021.
Notwithstanding the volatile macro environment, we expect this to see this
positive momentum continue into 2022.
We did not acquire any properties during the year and we sold one property at
an increase of 9% over its 31 December 2020 valuation. Notwithstanding the
ongoing pandemic, we continued to achieve a high level of rent collection for
the year of 97% (2020 94%). Our gross rental revenue decreased by 2.6% (2020
4% increase), due primarily to the negative effects of CVAs and voids offset
by the progress that we have made with our asset management initiatives and
one-off income.
When taken together with a very positive like-for-like property revaluation of
11.1%, this led to an overall increase in net assets of 15.5%.
Dividend
The company's interim dividend was 22p, a 4.8% increase on 2020, and we are
proposing a final dividend for 2021 of 33p per share taking the total dividend
for 2021 to 55p per share. This represents an increase of 8% from the 2020
dividend of 51p per share (excluding the 2020 special dividend of 6p per
share).
Sustainability
Highcroft has a clear purpose of providing our tenants with excellent
properties in optimal locations, enabling them to succeed and our stakeholders
to benefit on a long-term sustainable basis. As a board we consider
climate-related risks and opportunities and over the year have evaluated how
any future developments will be approached, and the most appropriate strategy
for reducing our impact within the existing portfolio. We are in a process of
identifying the levers that we can operate and influence to ensure the
sustainability of our business.
People
As for many companies, the ongoing impacts of the Covid-19 pandemic have
presented challenges to the Board, the tenants we serve, and the communities
we operate in. During the year the business has continued to perform
commendably, and I would like to thank my fellow directors and the employees
for the continued commitment and considerable efforts over the last year.
During the year, we welcomed Anne-Marie Palmer as Company Secretary.
Anne-Marie has 20 years' experience as a chartered secretary advising listed
companies and as reported last year, recognising both the increase in
governance and reporting requirements, we welcome her addition to the team.
Outlook
2021 was a strong year for Highcroft despite the world still being seriously
affected by Covid-19. We now face new macro challenges with the tragic events
in Ukraine. While there is no doubt the effects of this will be severe and
long lasting, we are confident that with the cautious approach we take to
managing the portfolio along with relatively low levels of gearing we can
continue to deliver robust shareholder returns against a continuing volatile
global backdrop.
We are planning that our AGM this year will be back to normal as an open
meeting, and I look forward to meeting those of you who can make it.
Charles Butler
Chairman
28 March 2022
Enquiries:
Highcroft Investments PLC
Charles Butler / Roberta Miles
01869 352766
Singer Capital Markets
Peter Steel / Amanda Gray - Corporate Finance
Tom Salvesen - Corporate Broking
020 7496 3000
The information contained within this announcement is deemed by the Company to
constitute inside information stipulated under retained EU law version of the
Market Abuse Regulations (EU No. 596/2014) (the "UK MAR"), which is part of UK
law by virtue of the European Union (withdrawal) Act 2018 .
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Note 2021 2020
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gross rental revenue 5,928 - 5,928 6,084 - 6,084
Property operating expenses (670) - (670) (620) - (620)
Net rental income 5,258 - 5,258 5,464 - 5,464
Profit on disposal of investment property - 250 250 - - -
Valuation gains on investment property - 9,925 9,925 - 2,525 2,525
Valuation losses on investment property - (1,170) (1,170) - (7,175) (7,175)
Net valuation gains/(losses) on investment property - 8,755 8,755 - (4,650) (4,650)
Administration expenses (1,164) - (1,164) (1,069) - (1,069)
Net operating profit/(loss) before net finance expense 4,094 9,005 13,099 4,395 (4,650) (255)
Finance income 4 - 4 4 - 4
Finance expense (855) - (855) (896) - (896)
Net finance expense (851) - (851) (892) - (892)
Profit/(loss) before tax 3,243 9,005 12,248 3,503 (4,650) (1,147)
Income tax (charge)/credit 1 (304) - (304) - - -
Profit/(loss) for the year after tax 2,939 9,005 11,944 3,503 (4,650) (1,147)
2,939 11,944 3,503 (4,650) (1,147)
Total profit/(loss) and comprehensive income/(loss) for the year attributable
to the owners of the parent
9,005
Basic and diluted earnings/(loss) per share 230.5p (22.2p)
Consolidated statement of financial position
at 31 December 2021
Note 2021 2020
£'000 £'000
Assets
Non-current assets
Investment property 4 87,565 78,810
Total non-current assets 87,565 78,810
Current assets
Trade and other receivables 2,876 1,692
Cash and cash equivalents 5,715 3,295
Assets classified as held for sale - 3,250
Total current assets 8,591 8,237
Total assets 96,156 87,047
Liabilities
Current liabilities
Interest bearing loan 7,500 -
Trade and other payables 2,839 2,726
Total current liabilities 10,339 2,726
Non-current liabilities
Interest bearing loan 6 19,700 27,200
Total non-current liabilities 19,700 27,200
Total liabilities 30,039 29,926
Net assets 66,117 57,121
Equity
Issued share capital 1,296 1,294
Share-based payment reserve 102 43
Revaluation reserve - property 19,236 12,814
Other equity reserve (121) (53)
Share premium 117 51
Capital redemption reserve 95 95
Realised capital reserve 29,623 28,995
Retained earnings 15,769 13,882
Total equity attributable to the owners of the parent 66,117 57,121
Consolidated statement of changes in equity
2021
Issued share capital Share-based payment reserve Revaluation reserve-property Other equity reserve Share premium Capital redemption reserve Realised capital reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 1,294 43 12,814 (53) 51 95 28,995 13,882 57,121
Transactions with owners:
Issue of shares 2 - - (68) 66 - - - -
Dividends - - - - - - - (3,007) (3,007)
2 - - (68) 66 - - (3,007) (3,007)
Reserve transfers:
Non-distributable items recognised in income statement:
Revaluation gains - - 8,755 - - - - (8,755) -
Realised gains - - - - - - 250 (250) -
Surplus attributable to assets sold in year - - (378) - - - 378 - -
Change in excess of cost over fair value through retained earnings
- - (1,955) - - - - 1,955 -
- - 6,422 - - - 628 (7,050) -
Share award expensed - 59 - - - - - - 59
Total comprehensive income for the year - - - - - - - 11,944 11,944
At 31 December 2021 1,296 102 19,236 (121) 117 95 29,623 15,769 66,117
Consolidated statement of changes in equity continued
2020
Issued share capital Share-based payment reserve Revaluation reserve-property Other equity reserve Share premium Capital redemption reserve Realised capital reserve Retained earnings Total
£'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:
Issue of shares 2 - - (53) 51 - - - -
Dividends - - - - - - - (2,484) (2,484)
2 - - (53) 51 - - (2,484) (2,484)
Reserve transfers:
Non-distributable items recognised in income statement:
Revaluation losses - - (4,650) - - - - 4,650 -
Change in excess of cost over fair value through retained earnings
- - 4,533 - - - - (4,533) -
- - (117) - - - - 117 -
Share award expensed - 31 - - - - - - 31
Total comprehensive income for the year - - - - - - - (1,147) (1,147)
At 31 December 2020 1,294 43 12,814 (53) 51 95 28,995 13,882 57,121
Consolidated statement of cash flows
for the year ended 31 December 2021
2021 2020
£'000 £'000
Operating activities
Profit/(loss) before tax 12,248 (1,147)
Adjustments for:
Net valuation (gains)/losses on investment property (8,755) 4,650
Net gain on disposal of investment property (250) -
Share-based payment expense 59 31
Finance income (4) (4)
Finance expense 855 896
Operating cashflow before changes in working capital and provisions
4,153 4,426
Decrease/(increase) in trade and other receivables 391 (545)
Increase in trade and other payables 120 252
Cash generated from operations 4,664 4,133
Finance income 4 4
Finance expense (855) (896)
Income taxes paid (311) (21)
Net cashflows from operating activities 3,502 3,220
Investing activities
Sale of non-current assets - investment property 1,925 -
Net cashflows from investing activities 1,925 -
Financing activities
Dividends paid (3,007) (2,484)
Repayment of bank borrowings - (4,000)
New bank borrowings - 5,000
Net cashflows from financing activities (3,007) (1,484)
Net increase/(decrease) in cash and cash equivalents 2,420 1,736
Cash and cash equivalents at 1 January 3,295 1,559
Cash and cash equivalents at 31 December 5,715 3,295
Notes
for the year ended 31 December 2021
1 Income tax charge/(credit)
2021 2020
£'000 £'000
Current tax:
On revenue profits - current year - 8
- prior year - (8)
On write-off of part of PID pool 304 -
Income tax charge 304 -
The tax assessed for the year differs from the standard rate of corporation
tax in the UK of 19% (2020 19%).
The differences are explained as follows:
2021 2020
£'000 £'000
Profit before tax 12,248 (1,147)
Profit before tax multiplied by the standard rate of corporation tax in the UK 2,327 (218)
of 19% (2019 19%)
Effect of:
Profit not taxable as a result of REIT status (2,327) 220
Tax due on non-payment of part of PID pool 304 -
Adjustment in respect of previous years - (2)
Income tax credit 304 -
2 Dividends
In 2021 the following dividends have been paid by the company:
2021 2020
£'000 £'000
2020 Final: 30.00p per ordinary share (2019 27.00p) 1,555 1,397
2020 Special: 6.00p per ordinary share (2019 nil) 311 -
2021 Interim: 22.00p per ordinary share (2020 21.00p) 1,141 1,087
3,007 2,484
On 28 March 2022 the directors declared a final property income distribution
for 2021 of £1,711,000, 33.00p per share, (2020 final property income
distribution of £1,555,000, 30.00p per share and special property income
distribution for 2020 of £311,000, 6.00p per share) payable on 7 June 2022 to
shareholders registered on 22 April 2022.
3 Earnings per share
The calculation of earnings per share is based on the total profit after tax
for the year of £11,944,000 (2020 loss £1,147,000) and on 5,181,317 shares
(2020 5,172,465) which is the weighted average number of shares in issue
during the year ended 31 December 2021. There are no dilutive instruments.
In order to draw attention to the profit that is not due to the impact of
valuation gains and losses, which are included in the statement of
comprehensive income 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 £2,939,000 (2020 £3,503,000) has been
calculated.
2021 2020
£'000 £'000
Earnings:
Basic profit/(loss) for the year 11,944 (1,147)
Adjustments for:
Profit on disposal of investment property (250) -
Net valuation (gains)/losses on investment property (8,755) 4,650
Adjusted earnings 2,939 3,503
Per share amount:
Earnings/(loss) per share (unadjusted) 230.5p (22.2p)
Adjustments for:
Profit on disposal of investment property (4.8p) -
Net valuation (gains)/losses on investment property (169.0p) 89.9p
Adjusted earnings per share 56.7p 67.7p
4 Investment property
2021 2020
£'000 £'000
Total valuation at 1 January 82,060 86,710
Disposals (3,250) -
Revaluation gains/(losses) 8,755 (4,650)
Valuation at 31 December 87,565 82,060
Less property held for sale categorised as current asset - (3,250)
87,565 78,810
In accordance with IAS 40 the carrying value of investment properties is their
fair value as determined by independent external valuers. This valuation has
been conducted by Knight Frank LLP, as external valuers, and has been prepared
as at 31 December 2021, in accordance with the Appraisal & Valuation
Standards of the Royal Institution of Chartered Surveyors, on the basis of
market value.
The historical cost of the group's investment properties is £73,961,000 (2020
£76,832,000).
Valuation process
The valuation reports produced by the independent external valuers are based
on information provided by the group such as current rents, terms and
conditions of lease agreements, service charges and capital expenditure (if
any). This information is derived from the group's property management and
financial information systems and is subject to the group's overall control
environment.
In addition, the valuation reports are based on assumptions and models used by
the independent valuer. The assumptions are typically market related such as
yields and discount rates and are based on their professional judgement and
market observation. Each property is considered a separate asset class based
on the unique nature, characteristics, and risks of the property.
During 2020, many valuations were reported with material valuation uncertainty
clauses on certain classes of assets. However, valuation markets are mostly
functioning again, with transaction volumes and other relevant evidence at
levels where an adequate quantum of market evidence exists upon which to base
opinions of value. Accordingly, our independent valuers have confirmed that
the valuations at 31 December 2021 and 31 December 2020 were not reported as
being subject to material valuation uncertainty.
The executive director responsible for the valuation process verifies all
major inputs to the external valuation reports, assesses the individual
property valuation changes from the prior year valuation report and holds
discussion with the independent valuer. When this process is complete, the
whole board then meet the valuer in the presence of the auditor. The valuation
report is recommended to the audit committee, which considers it as part of
its overall responsibilities.
Valuation technique
The fair value of the property portfolio has been determined using an income
capitalisation technique whereby contracted and market rental values are
capitalised with a market capitalisation rate. The resulting valuations are
cross checked against the equivalent yields and the fair market values per
square foot derived from comparable recent market transactions on an arm's
length terms.
These techniques are consistent with the principles in IFRS 13 Fair Value
Measurement and use significant unobservable inputs such that the fair value
measurement of each property within the portfolio has been classified as level
3 in the fair value hierarchy.
5 Assets classified as held for sale
2021 2020
£'000 £'000
Investment property held for sale - 3,250
The asset held for sale at 31 December 2020, our Andover property, was sold in
August 2021.
6 Interest bearing loans
2021 2020
£'000 £'000
Short-term bank loans due within one year 7,500 -
Medium-term bank loans 19,700 27,200
The medium-term bank loans comprise amounts falling due as follows:
Between one and two years - 7,500
Between two and five years 3,400 -
Over five years 16,300 19,700
19,700 27,200
There is an agreed facility letter in place to replace the £7,500,000 of
short-term bank loans with a new medium-term bank loan upon maturity.
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 2021. The accounting policies remain unchanged.
8 Annual General Meeting
The Annual General Meeting will be held on 18 May 2022.
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 2021 on which the auditor has expressed an unmodified
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 14 April
2022 and subsequently filed at Companies House.
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