REG - Highcroft Invs PLC - Final Results
Highcroft Investments PLC
Preliminary results for the year ended 31 December 2017
KEY HIGHLIGHTS
· 22.0% increase in gross property income to £4,765,000 (2016 £3,906,000)
· 16.8% increase in investment property valuation to £77,113,000 (2016 £65,997,000)
· Property acquisitions of £9,480,000 (net of costs) and disposal proceeds of £2,292,000
· 8.4% increase in net asset value per share to 1161p (2016 1071p)
· 57.5% increase in earnings per share to 132.3p (2016 84.0p)
· Medium term debt £19,400,000 (2016 £14,900,000); net gearing 29% (2016 21%)
· Cash and liquid equity investments £4,035,000 (2016 £5,838,000)
· 15.4% increase in final dividend to 30.0p per share (2016 26.0p per share)
· 12.8% increase in total dividend to 46.25p per share (2016 41.0p per share)
Dear Shareholder,
I am pleased to announce our preliminary results for the year ended 31 December 2017 and to invite you to our Annual General Meeting on 17 May 2018 which will be held at Thomas House, Langford Locks, Kidlington, Oxfordshire, OX5 1HR at 12 noon.
Introduction
I am very pleased to be writing my first chairman's statement and reporting such a strong set of results. Before I do so however I must thank John Hewitt for his contribution to Highcroft through the last 18 years of which 11 were as non-executive chairman.
There is no doubt that 2017 has been a year of political events both inside and outside the UK and with that came a year of market uncertainty. Even with this challenging backdrop I am pleased to report that the company has reported excellent property income growth of 22%, an earnings per share increase of 57.5% to 132.3p and a 13% increase in total dividend to 46.25p per share.
Property portfolio
Under the guidance and leadership of Simon Gill we purchased two warehouses during the year which were financed by a combination of existing cashflow, recycled cash from a property sale and a new debt facility which in turn reduced the average cost of debt to 3.64% and left gearing at a modest 29%. At the year end the portfolio stood at 74% warehouses and retail warehouses with a small amount of residual residential and the remainder split between well let retail and offices.
Property rental growth of 22% for the year is the strongest performance over the last 5 years and with contracted rent at the year end being 21% up on the previous year end this shows the increase in rental income continuing into 2018.
We have stringent criteria for new tenant acceptance and at the year end all properties were fully let to a strong tenant base. Through a combination of stable income yields and active asset management I am pleased to report an 8.4% increase in net asset value and 11.9% return on equity for the year (2016 8.0%).
People
I have only been in situ as chairman for a short period however I would like to thank and congratulate the team for their hard work throughout the year. We have a small but dedicated and experienced team at Highcroft and this sets us in good stead for the year ahead.
Dividend
The company's interim dividend was increased by 8.3% and as a result of strong revenue growth, efficient use of debt and administration costs falling as a percentage of revenue we have increased the final dividend to 30.0p per share leading to a total dividend of 46.25p per share - an increase of 12.8%. Our stated strategy is to increase dividends in excess of inflation every year and I am pleased to say we have delivered an inflation busting 45.4% increase over the last 5 years.
Outlook
Highcroft is well positioned with a high quality income producing portfolio. We go into 2018 with positive momentum gained in 2017 and well positioned to continue our portfolio growth. We are however in a very competitive landscape with continuing political uncertainty so we remain cautious and diligent in our approach in ensuring we select the right properties to deliver long term shareholder value.
This announcement contains inside information for the purpose of Article 7 of Regulation (EU) No 596/2014.
Charles Butler
Chairman
23 March 2018
Enquiries:
Highcroft Investments PLC
Charles Butler / Roberta Miles
01865 840023
Panmure Gordon (UK) Limited
Fabien Holler / Andrew Potts
0207 886 2500
Consolidated statement of comprehensive income
for the year ended 31 December 2017
Note
2017
2016
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Gross rental revenue
4,765
-
4,765
3,906
-
3,906
Property operating expenses
(259)
-
(259)
(198)
-
(198)
Net rental income
4,506
-
4,506
3,708
-
3,708
Net gains on disposal of investment property
1
-
1
134
-
134
Valuation gains on investment property
-
3,365
3,365
-
2,509
2,509
Valuation losses on investment property
-
(77)
(77)
-
(1,536)
(1,536)
Net valuation gains on investment property
-
3,288
3,288
-
973
973
Dividend revenue
92
-
92
144
-
144
Gains on equity investments
-
230
230
-
546
546
Losses on equity investments
-
(91)
(91)
-
(58)
(58)
Net investment income
92
139
231
144
488
632
Administration expenses
(663)
-
(663)
(651)
-
(651)
Net operating profit before net finance income
3,936
3,427
7,363
3,335
1,461
4,796
Finance income
2
-
2
11
-
11
Finance expense
(651)
-
(651)
(506)
-
(506)
Net finance expense
(649)
-
(649)
(495)
-
(495)
Profit before tax
3,287
3,427
6,714
2,840
1,461
4,301
Income tax credit
1
61
60
121
72
(30)
42
Total profit and comprehensive income for the year attributable to the owners of the parent
3,348
3,487
6,835
2,912
1,431
4,343
Basic and diluted earnings per share
132.3p
84.0p
Consolidated statement of financial position
at 31 December 2017
Restated
Note
2017
2016
£'000
£'000
Assets
Non-current assets
Investment property
4
76,315
63,739
Equity investments
5
2,131
2,469
Total non-current assets
68,466
68,466
Current assets
Investment property
798
2,258
Trade and other receivables
537
631
Cash and cash equivalents
1,904
3,369
Total current assets
3,239
4,000
Total assets
81,685
72,466
Liabilities
Current liabilities
Trade and other payables
2,054
1,866
Total current liabilities
1,866
1,866
Non-current liabilities
Interest bearing loan
6
19,400
14,900
Deferred tax liabilities
254
375
Total non-current liabilities
19,654
15,275
Total liabilities
21,708
17,141
Net assets
59,977
55,325
Equity
Issued share capital
1,292
1,292
Revaluation reserve - property
18,015
14,276
- other
538
659
Capital redemption reserve
95
95
Realised capital reserve
26,611
27,020
Retained earnings
13,426
11,983
Total equity attributable to the owners of the parent
59,977
55,325
Consolidated statement of changes in equity
2017
Issued
Revaluation reserves
Capital
Realised
Retained
share
Property
Other
redemption
capital
earnings
Total
capital
reserve
reserve
£'000
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2017
1,292
14,276
659
95
27,020
11,983
55,325
Transactions with owners:
Dividends
-
-
-
-
-
(2,183)
(2,183)
Reserve transfers:
Non-distributable items recognised in statement of
comprehensive income:
Revaluation gains
-
3,288
124
-
-
(3,412)
-
Tax on revaluation gains/(losses)
-
-
64
-
-
(64)
-
Realised gains
-
-
-
-
16
(16)
-
(Surplus)/loss attributable to assets sold in the year
-
734
(309)
-
(425)
-
-
Excess of cost over revalued amount taken to retained earnings
-
(283)
-
-
-
283
-
-
3,739
(121)
-
(409)
(3,209)
-
Profit and total comprehensive income for the year
-
-
-
-
-
6,835
6,835
At 31 December 2017
1,292
18,015
538
95
26,611
13,426
59,977
2016
Issued
Revaluation reserves
Capital
Realised
Retained
share
Property
Other
redemption
capital
earnings
Total
capital
reserve
reserve
£'000
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2016
1,292
14,764
667
95
25,586
10,619
53,023
Transactions with owners:
Dividends
-
-
-
-
-
(2,041)
(2,041)
Reserve transfers:
Non-distributable items recognised in statement of
comprehensive income:
Revaluation losses
-
973
467
-
-
(1,440)
-
Tax on revaluation gains/(losses)
-
-
(26)
-
-
26
-
Realised gains
-
-
-
-
149
(149)
-
Surplus attributable to assets sold in the year
-
(836)
(449)
-
1,285
-
-
Excess of cost over revalued amount taken to retained earnings
-
(625)
-
-
-
625
-
-
(488)
(8)
-
1,434
(2,979)
(2,041)
Profit and total comprehensive income for the year
-
-
-
-
-
4,343
4,343
At 31 December 2016
1,292
14,276
659
95
27,020
11,983
55,325
Consolidated statement of cash flows
for the year ended 31 December 2017
2017
2016
£'000
£'000
Operating activities
Profit before tax on ordinary activities
6,714
4,301
Adjustments for:
Net valuation gains on investment property
(3,288)
(973)
Net gain on disposal of investment property
(1)
(134)
Net loss on investments
(139)
(488)
Finance income
(2)
(11)
Finance expense
651
506
Operating cash flow before changes in working capital and provisions
3,935
3,201
Decrease/(increase) in trade and other receivables
94
10
Increase in trade and other payables
196
193
Cash generated from operations
4,225
3,404
Finance income
2
11
Finance expense
(651)
(506)
Income taxes paid
(8)
-
Net cash flows from operating activities
3,568
2,909
Investing activities
Purchase of non-current assets - investment property
(10,086)
(9,896)
- equity investments
-
(3)
Sale of non-current assets - investment property
2,259
2,972
- equity investments
477
1,176
Net cash flows from investing activities
(7,350)
(5,751)
Financing activities
Dividends paid
(2,183)
(2,041)
New bank borrowings
4,500
3,400
Net cash flows from financing activities
1,359
1,359
Net decrease in cash and cash equivalents
(1,483)
(1,483)
Cash and cash equivalents at 1 January 2017
3,369
4,852
Cash and cash equivalents at 31 December 2017
1,904
3,369
Notes
for the year ended 31 December 2017
1 Income tax credit
2017
2016
£'000
£'000
Current tax:
On revenue profits
(61)
12
On capital profits
3
(80)
(58)
(68)
Deferred tax
(63)
26
Income tax credit
(121)
(42)
The tax assessed for the year differs from the standard rate of corporation tax in the UK of 19% (2016 20%).
The differences are explained as follows:
2017
2016
£'000
£'000
Profit before tax
6,714
4,301
Profit before tax multiplied by the standard rate of corporation tax in the UK of 20% (2015 20%)
1,276
860
Effect of:
Tax exempt revenues
(40)
(123)
Profit not taxable as a result of REIT status
(1,481)
(963)
Chargeable gains less than accounting profit
55
59
Use of management expenses
82
125
Effect of change in tax rate on deferred tax liability
13
-
Income tax credit
(121)
(42)
2 Dividends
In 2017 the following dividends have been paid by the company:
2017
2016
£'000
£'000
2016 Final: 26.0p per ordinary share (2015 24.50p)
1,343
1,266
2017 Interim: 16.25p per ordinary share (2016 15.0p)
840
775
2,183
2,041
The directors recommend a property income distribution of £1,550,000, 30.0p per share (2016 £1,343,000, 26.0p per share) payable on 1 June 2018 to shareholders registered at 4 May 2018.
3 Earnings per share
The calculation of earnings per share is based on the total profit for the year of £6,835,000 (2016 £4,343,000) and on 5,167,240 shares (2016 5,167,240) which is the weighted average number of shares in issue during the year ended 31 December 2017 and throughout the period since 1 January 2016. There are no dilutive instruments.
In order to draw attention 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 £3,348,000 (2015 £2,912,000) has been calculated.
2017
2016
£'000
£'000
Earnings:
Basic profit for the year
6,835
4,343
Adjustments for:
Net valuation gains on investment property
(3,288)
(974)
Gains/(losses) on investments
(139)
(488)
Income tax on (profits)/losses
(60)
30
Adjusted earnings
3,348
2,912
Per share amount:
Earnings per share (unadjusted)
132.3p
84.0p
Adjustments for:
Net valuation gains on investment property
(63.6p)
(18.9p)
Gains/(losses) on investments
(2.7p)
(9.4p)
Income tax on losses
(1.2p)
0.6p
Adjusted earnings per share
64.8p
56.3p
4 Investment property
2017
2016
£'000
£'000
Valuation at 1 January
65,997
57,964
Additions
10,086
9,896
Disposals
(2,258)
(2,836)
Revaluation gains/(losses)
3,288
973
Valuation at 31 December
77,113
65,997
Less property categorised as current asset
(798)
(2,258)
Property categorised as fixed asset
76,315
63,739
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 2017, 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
2017
2016
£'000
£'000
Valuation at 1 January
2,469
3,155
Additions
-
3
Disposals
(459)
(1,159)
Surplus/(deficit) on revaluation in excess of cost
124
467
Revaluation decrease below cost
(3)
(11)
Revaluation increase still less than cost
-
14
Valuation at 31 December
2,131
2,469
6 Interest bearing loans
2017
2016
£'000
£'000
Medium term bank loans
19,400
14,900
The medium term bank loans comprise amounts falling due as follows:
Between one and two years
-
-
Between two and five years
4,000
4,000
Over five years
15,400
10,900
19,400
14,900
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 2016. The accounting policies remain unchanged.
8 Annual General Meeting
The Annual General Meeting will be held on 17 May 2018.
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 2017 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 23 April 2017 and subsequently filed at Companies House.
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR UUUBRWAAOUAR
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