REG - Highcroft Invs PLC - Half-year Report
05/09/2023 07:00
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RNS Number : 3284L Highcroft Investments PLC 05 September 2023
Highcroft Investments PLC
Interim Report for the six months ended 30 June 2023
Interim management report and statement of directors' responsibilities
Key Highlights:
*Gross rental income decreased 6% to £2,605,000 (2022 £2,775,000)
*Net rental income decreased 8% to £2,335,000 (2022 £2,538,000)
*93% occupancy in the property portfolio (2022 93%) at period end
*100% of Q1 and Q2 rent, and 96% of Q3 rent, due to date, collected
*Total earnings per share 31.9p (2022 124.2p)
*Adjusted earnings per share (see note 7), decreased 15% to 25.2p (2022
29.5p)
*Property valuation increased by 3.4% to £80,540,000 (December 2022
£77,910,000), a 0.8% decrease on a like-for-like basis
*Net assets per share decreased 0.1% to 1080p (June 2022 1364p, December 2022
1081p)
*Loan to value (see note 11), 33.8% (December 2022 34.9%)
Dear Shareholder
Whilst reporting our half year 2023 results our tenants, their staff and
customers, continue to be affected by global and national issues including the
conflict in Ukraine, high interest rates and high inflation in the UK. In
this context we are pleased that our results have continued to perform
satisfactorily.
Operating environment
The first half of 2023 has seen an economic environment with some of the
highest inflation experienced in recent times in the UK and increasing
interest rates, mainly being used as a tool to try and curb inflation. These
factors have had a negative impact on the overall property market and have led
to very low activity in the sector. Rental growth has been slightly positive
although this has mainly been in the industrial and retail warehouse sectors.
The office market continues to be under pressure as demand has yet to pick up
and yields on these assets are weakening. The next few months are likely to
remain challenging as rates remain high and it is likely that activity will
only gain momentum once there is confidence in the market that inflation is
under control and that interest rates may start to decline.
We are pleased with the first half performance of Highcroft and feel that it
is well protected against the negative market environment with a strong
portfolio, fixed interest rates and no loan facilities expiring before August
2026.
Management
As previously disclosed, Paul Leaf-Wright took over the role of chief
executive from Simon Gill on 1 January 2023 and Simon Gill resigned from the
board on 31 March 2023.
On 1 January 2023 Cube Asset Management Limited were also appointed to focus
on the asset management functions, primarily asset sourcing, rental
negotiations and maintenance together with the development of our new asset at
Roche. To date, this new arrangement is working very well, and we have seen
good results in the overall management of the portfolio.
Balance sheet
During the first half of the year the Company has been active in management of
the asset base. As previously announced to shareholders we completed the
sale of our Llantrisant asset on 13 February 2023. This sale resulted in a net
capital profit on the sale of the asset of £1m (with proceeds 16% above the
December 2022 valuation) although we did have to reverse the IFRS rent free
provision of £138,000, through the income statement, that had been accounted
for as income in the past periods. The net uplift to the company is still
significant and, as previously disclosed, as the tenant had already vacated,
this was an excellent outcome.
In order to ensure that the balance sheet is fully invested, the company has
completed two property acquisitions. On 13 April 2023 we completed on the
Aberdare property with the new Ipswich asset completing on 25 May 2023. Both
these assets are expected to contribute positively to income and asset growth.
We also are pleased to inform shareholders that on our property at Roche, St
Austell where we had a vacant piece of land, we have successfully secured a
new 15-year lease from DHL to occupy a brand-new 28,000 sq ft warehouse,
construction of which commenced in April 2023 and is expected to complete by
30 April 2024. This development, with a total cost of £4.3m will be funded
from existing cash resources, and we expect to see an uplift in the valuation
above cost on completion. Once complete the company will have an optimally
invested balance sheet into a diverse portfolio of assets.
This new warehouse also gives us the opportunity to build a high standard
property with an above average EPC rating which will improve Highcroft's
weighted average EPC position.
The mid-year valuation of the portfolio resulted in a net downward valuation
of £664,000, mainly as a result of the lower valuation of our office assets
and in particular the Cardiff property. The Cardiff asset remains vacant, and
the valuers have marked it down by £1m. We have been actively looking at
solutions for this property both to secure a tenant or to exit the property
but given current market conditions this is proving challenging. The remainder
of the portfolio saw some uplifts especially where new rental terms have been
agreed with occupiers and the generally stable industrial market, offset by
reductions on the retail and office assets. The St Austell development asset
has been included in the portfolio for the first time and the valuation
includes the land value and amounts spent to date. This asset will naturally
increase in value as further capital is spent on construction over the next
twelve months.
Our gearing has remained constant at £27.2m with no loan maturities before
August 2026. This has meant we have been protected against the interest rate
rises that the economy has experienced over the past 18 months. We have
comfortably met all our debt covenants during the reporting period. We
recently completed new property valuations on certain assets held by the bank
as security and are pleased to report that these are all in line with the
lender's requirements.
Whilst we hold some cash at the balance sheet date this is earmarked, as noted
above, for the new development and for dividends. The positive aspect has been
that the group has earned a fair interest rate on its cash holding given the
higher rates on offer at present.
Income statement
Given that we sold a high yielding asset in Llantrisant and replaced this with
two assets a few months later, our total income is lower in the first half
than the 2022 first half. This income is also negatively impacted by the
reversal of the remaining £138,000 rent free provided on the Llantrisant
asset which, in terms of accounting policy, needs to be accounted through the
income statement (as opposed to being offset against the capital profit). We
do believe that income will thus be higher in the second half as the new
assets will contribute for the full 6-month period.
Total expenses have generally been well controlled and are consistent with
both our budgets and the prior year.
With a new management structure in place and some of the functions previously
performed by the CEO being outsourced to Cube Asset management, there are some
expenses now reflecting as property costs as opposed to salaries, which are
included in administration costs.
Following the decision at the 2023 AGM to adopt the new remuneration policy
there has been a, non-cash, adjustment of £114,000 reflecting the immediate
vesting of the remaining shares previously issued under the Highcroft
Incentive Plan.
We earned £134,000 interest on cash deposits, however this, together with any
intra-group interest, is taxable as residual income and hence the
higher-than-normal tax charge.
Dividend
The board is pleased to confirm an interim property income distribution of 23p
(2022 23p) per share, payable on 20 October 2023 to shareholders on the
register at 22 September 2023 (with an ex-dividend date of 21 September 2023).
This dividend is reflective of the steady performance of the company.
Outlook
While the first half performance has been satisfactory, we are optimistic that
the asset management and other initiatives that have taken place in this
period will lead to an improved performance in the second half.
We, as a board, take a prudent view and monitor the macro-economic situation
closely. We will continue to work with our tenants and support them where we
can, whilst at the same time keeping our gearing low and a healthy cash
balance to ensure we are well positioned to assess future opportunities.
Statement of principal risks and uncertainties
The directors review principal risks at each board meeting and carried out a
mid-year review on 4 September 2023. They consider that there have been no
material changes to the group's principal risks as set out in detail on pages
40 to 43 of the annual report and accounts for the year ended 31 December
2022. The current principal risk areas can be summarised as:
External risks Internal risks
Macro-economic and political outlook Business strategy
Regulatory and compliance burden Key personnel
Occupier demand and tenant default Sustainability
Commercial property investor demand
Availability and cost of finance and debt covenant requirements
Related parties and related party transactions
During the period Simon Gill a director and shareholder of the business
resigned, on 31 March 2023. Paul Leaf-Wright was appointed a director of the
business on 1 January 2023. Related party transactions are disclosed in note
12. There have been no material changes in related party transactions in the
period.
Interim management report and statement of directors' responsibilities
(continued)
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the half-year
report and condensed consolidated set of half-year financial statements have
been prepared in accordance with IAS 34. The half-year report and condensed
consolidated set of half-year financial statements give a true and fair view
of the assets, liabilities, financial position and return of the Group. The
half-year report and condensed consolidated set of half-year financial
statements include 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 2023 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
4 September 2023
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 which is part of UK law by virtue of the European
Union (Withdrawal) Act 2018.
For further information, contact:
Highcroft Investments PLC +44 (0)1869 352766
Charles Butler/Roberta Miles
Singer Capital Markets Advisory LLP +44 (0)20 7496 3000
Peter Steel / Alex Emslie - Corporate Finance
Tom Salvesen - Corporate Broking
INDEPENDENT REVIEW REPORT TO HIGHCROFT INVESTMENTS PLC
Conclusion
We have been engaged by Highcroft Investments plc ("the Group") to review the
condensed set of financial statements in the half-yearly financial report for
the six months ended 30 June 2023 which comprises the condensed consolidated
interim statement of comprehensive income, the condensed consolidated interim
statement of financial position, the condensed consolidated interim statement
of changes in equity, the condensed consolidated interim statement of cash
flows and related notes 1 to 16.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 (Revised), "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued for use in the
United Kingdom. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with UK adopted IFRSs. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34, "Interim
Financial Reporting.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410 (Revised), however future events or conditions may cause the
entity to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Group a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Mazars LLP
Chartered Accountants and Statutory Auditor
30 Old Bailey
London
EC4M 7AU
4 September 2023
Notes:
The maintenance and integrity of the Highcroft Investments plc's web site is
the responsibility of the directors; the work carried out by us does not
involve consideration of these matters and, accordingly, we accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information may differ from legislation in other jurisdictions.
Condensed consolidated interim statement of comprehensive income (unaudited)
for the six months ended 30 June 2023
Unaudited
Six months ended 30 June
2023 2022
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Gross rental income 2,605 - 2,605 2,775 - 2,775
Property operating expenses (270) - (270) (237) - (237)
Net rental income 2,335 - 2,335 2,538 - 2,538
Net gain on disposal of investment property - 1,014 1,014 - - -
Valuation gains on investment property - 1,331 1,331 - 5,232 5,232
Valuation losses on investment property - (1,995) (1,995) - (320) (320)
Net valuation (losses)/gains on investment property 8&9 - (664) (664) - 4,912 4,912
Administrative expenses (693) - (693) (583) - (583)
Operating profit before net financing costs 1,642 350 1,955 4,912 6,867
1,992
Finance income 134 - 134 8 - 8
Finance expenses (414) - (414) (422) - (422)
Net finance costs (280) - (280) (414) - (414)
Profit before tax 1,362 350 1,712 1,541 4,912 6,453
Income tax charge 5 (52) - (52) (7) - (7)
Total profit and comprehensive income for the financial period 1,310 350 1,660 1,534 4,912 6,446
Basic and diluted earnings 7 31.9p 124.2p
per share
The total column represents the statement of comprehensive income as defined
in IAS1
Condensed consolidated interim statement of financial position (unaudited)
as at 30 June 2023
Note Unaudited Audited
30 June 31 December
2023 2022
£'000 £'000
Assets
Investment property 8 79,965 71,160
Investment property under development 9 575 -
Total non-current assets 80,540 71,160
Current assets
Trade and other receivables 1,387 1,143
Cash at bank and in hand 4,750 7,206
6,137 8,349
Assets classified as held for sale 10 - 6,750
Total current assets 6,137 15,099
Total assets 86,677 86,259
Liabilities
Current liabilities
Trade and other payables (3,223) (2,883)
Total current liabilities (3,223) (2,883)
Non-current liabilities
Interest-bearing loans and borrowings 11 (27,200) (27,200)
Total non-current liabilities (27,200) (27,200)
Total liabilities (30,423) (30,083)
Net assets 56,254 56,176
Equity
Issued share capital 1,302 1,299
Share premium 312 226
Share based payment reserve - 160
Other equity reserve - (207)
Revaluation reserve - property 11,485 11,499
Capital redemption reserve 95 95
Realised capital reserve 30,437 29,623
Retained earnings 12,623 13,481
Total equity 56,254 56,176
Condensed consolidated interim statement of changes in equity
for the six months ended 30 June 2023
Issued share Share Share Other Revaluation reserve Capital redemption Realised Retained earnings Total
capital premium based equity reserve property Capital
(note 12) payment
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2023 1,299 226 160 (207) 11,499 95 29,623 13,481 56,176
Transactions with owners:
Dividends - - - - (1,718) (1,718)
- -
Issue of shares 3 101 - (104) - - - - -
Share issue fees (15) - - - - - - (15)
3 86 - (104) - - - (1,718) (1,733)
Reserve transfers:
Non-distributable items recognised in income statement:
Revaluation losses - - - - (1,995) - - 1,995 -
Revaluation gains - - - - 1,331 - - (1,331) -
Realised gains - - - - - - 1,014 (1,014) -
Deficit attributable to assets sold in the period - 200 - (200) - -
- - -
Change in excess of cost over fair value through retained earnings - 450 - - (450) -
- - -
Share award vested - - (311) 311 - - - - -
- - (311) 311 (14) - 814 (800) -
Share award expensed - - 151 - - - - - 151
Total profit and comprehensive income for the period - - - - 1,660 1,660
- - -
At 30 June 2023 1,302 312 - - 11,485 95 30,437 12,623 56,254
Condensed consolidated interim statement of changes in equity
for the six months ended 30 June 2022
Issued share Share Share Other Revaluation reserve Capital redemption Realised Retained earnings Total
capital premium based equity reserve property Capital
(note 12) payment
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 1,296 117 102 (121) 19,236 95 29,623 15,769 66,117
Transactions with owners:
Dividends - - - - (1,714) (1,714)
- -
Issue of shares 3 109 - (112) - - - - -
3 109 - (112) - - - (1,714) (1,714)
Reserve transfers:
Non-distributable items recognised in income statement:
Revaluation losses - - - - (320) - - 320 -
Revaluation gains - - - - 5,232 - - (5,232) -
Change in excess of cost over fair value through retained earnings - (1,326) - - 1,326 -
- - -
- - - - 3,856 - - (3,856) -
Share award expensed - - 30 - - - - - 30
Total profit and comprehensive income for the period - - - - 6,446 6,446
- - -
At 30 June 2022 1,299 226 132 (233) 22,822 95 29,623 16,915 70,879
Condensed consolidated interim statement of cashflows
for the six months ended 30 June 2023
Unaudited Unaudited
First half First half
2023 2022
£'000 £'000
Operating activities
Profit before tax for the period 1,712 6,453
Adjustments for:
Net valuation losses/(gains) on investment property 664 (4,912)
Net gain on disposal of investment property (1,014) -
Share based payment expense 151 30
Finance income (134) (8)
Finance expense 414 422
Operating cash flow before changes in working capital and provisions 1,793 1,985
(Increase)/decrease in trade and other receivables (244) 1,128
Increase/(decrease) in trade and other payables 288 (64)
Cash generated from operations 1,837 3,049
Finance income received 134 8
Finance expense paid (414) (422)
Income tax paid - (7)
Net cash flows from operating activities 1,557 2,628
Investing activities
Purchase of fixed assets - investment property (9,820) (428)
Purchase of fixed assets - assets under development (224) -
Sale of fixed assets - investment property 7,764 -
Net cash flows from investing activities (2,280) (428)
Financing activities
Dividends paid (1,718) (1,714)
Share issue fees (15) -
Repayment of bank borrowings - (7,500)
New bank borrowings - 7,500
Net cash flows from financing activities (1,733) (1,714)
Net (decrease)/increase in cash and cash equivalents (2,456) 486
Cash and cash equivalents at 1 January 7,206 5,715
Cash and cash equivalents at period end 4,750 6,201
Notes (Unaudited)
for the six months ended 30 June 2023
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 Park Farm
Technology Centre, Akeman Street, Kirtlington, OX5 3JQ. 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 4 September 2023. The financial information for the period ended
30 June 2023 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 2022 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 unaudited condensed consolidated interim financial statements are for
the six months ended 30 June 2023. They have been prepared in accordance with
IAS 34, Interim Financial Reporting and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority. 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 2022.
At the date of authorisation of these financial statements, the group has
adopted the following new and revised IFRS Standards effective as of 1 January
2023:
· IFRS 17 Insurance contracts including amendments to IFRS 17
· Amendments to IAS 1 and IFRS Practice Statement 2-Disclosure of
accounting policies
· Amendments to IAS 8-Definition of accounting estimates
· Amendment to IAS 12 - International tax reform - pillar two model
rules
· Amendments to IAS 12-Deferred tax related to assets and
liabilities arising from a single transaction
The above effective new and revised IFRS standards have not had a material
impact on the Group's results.
At the date of authorisation of these financial statements, the group has not
applied the following new and revised IFRS Standards that have been issued but
are not yet effective:
· Amendments to IAS 1-Classification of liabilities as current or
non-current including classification of liabilities as current or non-current
· Amendments to IAS 16-Leases on sale and leaseback
· Amendments to IAS 7 and IFRS 7 on supplier finance arrangements
· IFRS S1: General sustainability-related disclosures
· IFRS S2: Climate-related disclosures
None of these standards are anticipated to have a material impact upon the
Group's results.
These unaudited 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 2022 which were prepared in
accordance with the Companies Act 2006 and International Financial Reporting
Standards (IFRS) as adopted for use in the United Kingdom and have been
prepared under the historical cost convention, as modified by the revaluation
of investment properties.
The accounting policies have been applied consistently throughout the group
for the purposes of preparation of these unaudited condensed consolidated
interim financial statements.
In light of the ongoing conflict in Ukraine, the recent issues in the banking
sector, the increasing UK interest rates and the high cost of living and their
combined effects on the UK economy, and the sectors in which the group and
company operates, the directors have placed a particular focus on the
appropriateness of adopting the going concern basis in preparing the group's
and company's financial statements for the period ended 30 June 2023. The
directors have concluded that the impact of Covid-19 as a standalone risk is
no longer a significant threat to the business. The group's and company's
going concern assessment considers the group's and company's principal risks,
and is dependent on a number of factors, including cashflow and liquidity,
continued access to borrowing facilities and the ability to continue to
operate the group's and company's borrowings within its financial covenants.
The debt has a number of financial covenants that the group is required to
comply with including an LTV covenant a 12-month historical interest cover
ratio, and the facility agreements have cure provisions in the event of a
breach. The going concern assessment is based on a 12-month outlook from the
date of the approval of these condensed financial statements, using the
group's five-year forecast. This forecast is based on a plausible scenario,
which includes the following key sensitivities occurring either separately or
together:
− A 10% reduction in net income from our portfolio.
− A 10% increase in the forecast proposed capital expenditure.
− An increase in assumed inflation rates by 8%
Under this scenario, the group and company are forecast to maintain sufficient
cash and liquidity resources and remain compliant with its financial
covenants.
Based on the consideration above, the board believes that the group and
company have the ability to continue in business for at least 12 months from
the date of approval of this interim statement for the period ended 30 June
2023, and therefore have adopted the going concern basis in the preparation of
this financial information.
3. Analysis of statement of comprehensive income
The profit or loss section of the statement of comprehensive income is
analysed into two columns, being revenue and capital. The capital column
comprises valuation gains and losses on property, profits and losses on
disposal of property, and all gains and losses on financial assets and the
related tax impact. The revenue column includes all other items.
4. Segment reporting
The group has one main business segment, property investment which is based in
England and Wales.
In the first six months of 2023 the largest tenant represented 13% (2022 13%)
and the second largest tenant represented 8% (2022 11%) of gross commercial
property income for the period.
5. Income tax charge
First half First half
2023 2022
£'000 £'000
Current tax:
On revenue profits - prior year 8 7
current 44 -
year
Total tax 52
7
The current year 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.
6. Dividends
On 4 September 2023, the directors declared a property income distribution of
23p per share (2022 23p per share) payable on 20 October 2023 to shareholders
registered at 22 September 2023.
The following property income distributions have been paid by the company:
First half First half
2023 2022
£'000 £'000
2022: final 33p per ordinary share (2021 final 33p) 1,718 1,714
7. Earnings per share
Adjusted earnings per share, which is an alternative performance measure*, is
considered by management to provide the best indication of trading profits and
hence the ability of the business to fund dividend payments. The calculation
of earnings per share is based on the profit for the period of £1,660,000
(2022 £6,446,000) and on 5,200,843 shares which is the weighted average
number of shares in issue during the period ended 30 June 2023 (2022
5,189,362).
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 £1,310,000 (2022 £1,534,000) has
been calculated.
*An alternative performance measure is a measure not defined by IFRS or UK
GAAP.
First half First half
2023 2022
£'000 £'000
Earnings:
Basic earnings 1,660 6,446
Adjustments for:
Profit on disposal of investment property (1,014) -
Net valuation losses/(gains) on investment property 664 (4,912)
Adjusted earnings 1,310 1,534
Per share amount:
Earnings per share (unadjusted) 31.9p 124.2p
Adjustments for:
Profit on disposal of investment property (19.5p) -
Net valuation losses/(gains) on investment property 12.8p (94.7p)
Adjusted earnings per share 25.2p 29.5p
8. Investment property
First half Full year
2023 2022
£'000 £'000
Valuation at 1 January 77,910 87,565
Additions 9,820 726
Disposals (6,750) -
Transfers to investment properties under development (note 9) (281) -
Net loss on revaluation (734) (10,381)
Valuation at period end 79,965 77,910
Less property held for sale categorised as current asset (note 10) - (6,750)
Property categorised as fixed asset 79,965 71,160
The directors have used an external independent valuation of properties at 30
June 2023 which has been carried out consistently with the annual valuation.
8. Investment property (continued)
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 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. The following tables analyse quantitative
information about these inputs.
30 June 2023 Warehouse Retail warehouse Leisure Office High street retail Total
Valuation technique Income capitalisation
Fair value of property portfolio* £'000 37,750 21,800 9,925 6,250 4,240 79,965
Area Sq ft 602,717 133,726 88,145 29,567 12,622 866,777
Gross estimated rental value (ERV) £'000 2,881 1,622 812 610 359 6,284
ERV per sq ft
Minimum £ 2.40 10.78 7.32 20.00 19.41
Maximum £ 10.57 24.42 26.16 21.60 34.70
Weighted average £ 5.75 13.02 11.52 20.67 29.55
Net initial yield
Minimum % 4.90 6.03 6.69 0.00 0.00
Maximum % 10.23 8.38 8.52 5.68 9.90
Weighted average % 6.28 7.08 7.37 2.37 6.5
Reversionary yield
Minimum % 5.78 6.13 6.69 6.37 7.15
Maximum % 9.46 8.18 8.62 13.32 10.56
Weighted average % 6.43 7.08 7.80 10.42 8.14
Equivalent yield
Minimum % 5.54 6.13 7.23 6.27 6.99
Maximum % 9.05 7.86 8.70 8.54 8.84
Weighted average % 6.17 6.95 8.01 7.59 7.78
· excluding investment properties under development
8. Investment property (continued)
31 December 2022 Warehouse Retail warehouse Leisure Office High street retail Total
Valuation technique Income capitalisation
Fair value of property portfolio £'000 34,875 21,500 9,875 7,600 4,060 77,910
Area Sq ft 581,386 133,746 87,955 29,323 16,433 848,843
Gross estimated rental value (ERV) £'000 3,457 1,610 812 610 359 6,848
ERV per sq ft
Minimum £ 2.40 10.57 7.35 20.00 13.95
Maximum £ 12.40 24.35 26.26 22.06 28.72
Weighted average £ 8.51 12.95 11.53 20.86 23.14
Net initial yield
Minimum % 4.90 6.03 6.69 0.00 1.98
Maximum % 11.09 8.66 8.52 5.20 9.45
Weighted average % 8.56 7.19 7.41 2.17 5.87
Reversionary yield
Minimum % 5.62 6.31 6.68 5.82 7.17
Maximum % 18.40 8.29 8.75 9.49 10.56
Weighted average % 11.60 7.13 7.85 7.96 8.50
Equivalent yield
Minimum % 5.52 6.27 6.75 5.72 7.00
Maximum % 8.98 7.76 8.78 8.02 8.18
Weighted average % 7.41 6.92 7.85 7.06 7.85
8. Investment property (continued)
Information about the impact of changes in unobservable inputs on the fair
value of the group's investment property portfolio
Sensitivities for changes in assumptions have been set out below at +/- 5% for
ERV and +/- 50bps for EY, which are deemed to be the levels that give a
reasonable worst-case scenario given the like-for-like valuation fall of 0.9%
already recognised in the period.
30 June 2023 Warehouse Retail warehouse Leisure Office High street retail Total
Fair value of property portfolio * £'000 37,750 21,800 9,925 6,250 4,240 79,965
Impact on valuation of:
+5% on ERV 1,903 1,088 495 312 217 4,015
- 5% on ERV (1,898) (1,088) (495) (312) (207) (4,000)
-50bps on IY 293 160 69 43 35 600
+50bps on IY (284) (158) (68) (42) (25) (577)
· excluding investment properties under development
31 December 2022 Warehouse Retail warehouse Leisure Office High street retail Total
Fair value of property portfolio £'000 34,875 21,500 9,875 7,600 4,060 77,910
Impact on valuation of:
+5% on ERV 1,717 1,073 492 380 207 3,869
- 5% on ERV (1,719) (1,073) (492) (380) (197) (3,861)
-50bps on IY 249 157 68 58 53 585
+50bps on IY (245) (154) (67) (57) (41) (564)
9. Investment property under development
First half
2023
£'000
Valuation at 1 January -
Additions 224
Transfers from investment properties (note 8) 281
Gain on valuation 70
Valuation at period end 575
The directors have used an external independent valuation of properties at 30
June 2023.
10. Assets classified as held for sale
30 June 31 December
2023 2022
£'000 £'000
Assets held for sale - 6,750
At 31 December 2022 the directors were in the advanced stages of the potential
sale of our Llantrisant property. The purchaser completed their due
diligence in February 2023 and the sale was exchanged and completed on 8
February 2023. The gross sales proceeds were £7,850,000, £1,100,000 in
excess of the valuation at 31 December 2022 and £899,000 in excess of cost.
11. Interest bearing loans
30 June 31 December
2023 2022
£'000 £'000
Short-term bank loans due within one year - -
Medium-term loans 27,200 27,200
The medium-term bank loans comprise amounts falling due as follows:
Between one and two years - -
Between two and five years 7,900 7,900
Over five years 19,300 19,300
The debt is secured on certain assets within the group's property portfolio.
Loan to value, which stood at 33.8% as at 30 June 2023 (December 2022 34.9%)
is an alternative performance measure. It is defined as drawn debt divided by
the fair value of the property portfolio (see note 8). Loan to value is
considered by management to be a good indicator of the risk in the
indebtedness of the business given the size of the property portfolio.
12. Share capital
First half Full year
2023 2022
Allotted, called up and fully paid ordinary shares of 25p each
At 1 January 5,194,963 5,183,699
Issued in the year in connection with the Highcroft incentive plan 11,696 11,264
At period end 5,206,659 5,194,963
13. Related party transactions
Kingerlee Holdings Limited owns, through its wholly owned subsidiaries, 27.3%
(2022 27.1%) of the company's shares and David Kingerlee (who was a director
of the company until 1 August 2022, and a shareholder of the company
throughout the period) and David Warlow (who was appointed a director of the
company on 1 August 2022) are both directors and shareholders of Kingerlee
Holdings Limited.
The group recharged professional fees of £14,052 to Kingerlee Holdings
Limited in connection with additional fees connected with the group reporting
requirement for the 2022 audit (2022 £13,080). The amount owed at 30 June
2023 was £nil (2022 £nil). All transactions were undertaken on an arm's
length basis.
During the period £469,000 (2022 £465,000) of dividend was paid to the
wholly owned subsidiaries of Kingerlee Holdings Limited in respect of their
shareholdings.
During the period, on 30 March 2023, ordinary shares of 25p each were issued
under the Highcroft Incentive Plan to the following directors of the company:
Simon Gill (resigned 31 March 2023) 6,361 (2022 5,984) and Roberta Miles 5,335
(2022 5,280).
During the period the following dividends were paid to directors of the
company, during their period of directorship, in respect of their
shareholdings:
First half First half
2023 2022
£'000 £'000
Simon Gill (resigned 31 March 2023) - 5
David Kingerlee (resigned 1 August 2022) - 30
Roberta Miles 8 6
14. Net assets per share
First half First half Full year
2023 2022 2022
Net assets £56,254,000 £70,879,000 £56,176,000
Ordinary shares in issue 5,206,659 5,194,963 5,194,963
Basic net assets per share 1080p 1364p 1081p
15. Fair value of financial instruments
The fair values of loans and receivables and financial liabilities held at
amortised cost were not materially different from book values.
16. Capital commitments
There were capital commitments of £158,000 at 30 June 2023 (2022 £19,000).
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