REG - KCR Residential REIT - Final Results
23/10/2025 07:00
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RNS Number : 4737E KCR Residential REIT PLC 23 October 2025
23 October 2025
KCR Residential REIT Plc
("KCR" or the "Company")
Final Results
KCR Residential REIT Plc is pleased to announce its annual results for the
year ended 30 June 2025.
The Annual Report will shortly be available on the Company's website,
www.kcrreit.com (http://www.kcrreit.com) and will be distributed to
shareholders in the coming days.
The 2025 financial year has seen continued implementation of the strategy
applied since 2020 to deliver further growth of the business in an environment
that has remained challenging.
Operational highlights -
§ Revenue for the financial year increased by 5% (to £1.89 million up from
£1.80 million in 2024) - slowing in growth in core rental income primarily as
a result of a softer December quarter at the Deanery Court property, some
vacancies at Ladbroke Grove whilst repairs and maintenance were completed and
refurbishment work completed on two of the flats at Heathside during the March
and June quarters.
.
§ Portfolio level occupancy has remained strong over the financial year with
rental increases continuing to be achieved at renewals / re-lettings. The
introduction of the Cristal Apartments operating model has resulted in more
volatility in occupancy levels within properties operated on this basis,
however this is offset by substantially improved overall rental income being
generated.
§ Active focus on cost management resulted in administrative expenses
increasing by just 2.7% to £1.36 million (up from £1.33 million in 2024).
Given the ongoing cost pressure across the business as a whole this is a
particularly pleasing result. Costs continued to be tightly controlled and
whilst the current underlying inflationary environment continues to present
challenges, a number of areas for cost savings have been identified and
implementation commenced.
§ Cash used in operations increased to £117k (from £75k in 2024) which has
increased due to the refurbishment costs of £203k and costs associated with
refinancing of £74k. Excluding the impact of separately disclosed items,
operating activity generated positive cashflow of £160k (compared to a
deficiency of £7k in 2024). After allowing for financing charges, net cash
used in operating activities was £800k (up from £659k in 2024).
The ongoing focus on improving operational performance and control of costs
continues to minimise the cash burn from operating activities. Further
improvements in operational performance over the 2026 financial year are
expected to be sufficient to offset by the higher finance costs that are being
incurred following the expiry of the prior Hodge Bank facilities. Whilst the
increased finance costs has made achieving a cash neutral position more
challenging, with continued improvement in operational performance and
successfully achieving targeted cost savings, we consider this objective
remains achievable.
Deanery Court in particular is well positioned to deliver strong improvements
in operational performance, both with revenue growth and reduced operating
overheads which is expected to be a primary contributor to reducing the cash
burn from operating activities over the course of the 2026 financial year.
Core focus to drive value over the next financial year is:
§ optimising performance from existing assets by continuing to improve
average occupancy under the Cristal Apartments operating model and ongoing
focus on repricing rents as tenancies expire;
§ reducing operating costs associated with Deanery Court to further enhance
the net contribution from this asset;
§ continuing to progress planning outcomes within the portfolio;
§ control of core running costs with targeted programme to achieve reductions
in core costs where possible; and
§ acquisitions to increase scale (subject to pricing / value drivers).
KCR continues to make progress towards becoming cashflow positive and creating
a stable platform that can be successfully scaled up. We look forward to
delivering further improved performance from the existing portfolio over the
course of the 2026 financial year.
The financial information set out below does not constitute the Company's
statutory financial statements for the period ended 30 June 2025. The
financial information for 2024 is derived from the statutory accounts for that
period. The auditors, Grant Thornton Limited, have audited the 2024 and 2025
financial statements. Their reports were unqualified.
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect",
''will'' or the negative of those, variations or comparable expressions,
including references to assumptions. These forward-looking statements are not
based on historical facts but rather on the Directors' current expectations
and assumptions regarding the Company's future growth, results of operations,
performance, future capital and other expenditures (including the amount,
nature and sources of funding thereof), competitive advantages, business
prospects and opportunities. Such forward looking statements reflect the
Directors' current beliefs and assumptions and are based on information
currently available to the Directors.
Notes to Editors:
KCR's objective is to build a substantial residential property portfolio that
generates secure income flow for shareholders. The Directors intend that the
group will acquire, develop and manage residential property assets in a number
of jurisdictions including the UK.
For further information please contact:
KCR Residential REIT plc info@kcrreit.com (mailto:info@kcrreit.com)
Russell Naylor, Executive Director Tel: +44 (0)7749 963 033
Cairn Financial Advisers LLP (Nomad) Tel: +44 (0)20 7213 0880
Emily Staples / Louise O'Driscoll
Zeus Capital Limited (Broker) Tel: +44 (0)20 7614 5000
Louisa Waddell
CHAIRMAN'S LETTER
Dear Shareholder
This year we have continued to implement the strategy we have applied since
2020 to deliver further growth of the business in an environment that has
remained challenging. Sustained higher interest rates, cost of living pressure
and underlying cost escalation have presented ongoing challenges for the
business. Following expiry of the Hodge Bank fixed rate facilities and
refinance during the 2025 financial year, interest costs for the Group have
increased by around £200k.
The impact of ongoing cost pressure and increased finance costs has kept the
business cash constrained and made the objective of achieving a cash neutral
position more challenging.
Growth in core rental revenue over the 2025 financial year slowed to 5%, this
financial year, primarily as a result of a softer December quarter at the
Deanery Court property, some vacancies within the Ladbroke Grove portfolio
whilst repairs and maintenance works were completed and refurbishment works
completed on two of the flats at Heathside during the March and June quarters.
As at the balance sheet date all planned works have been completed and 100%
occupancy achieved for all flats not operated on a walk-in-walk out basis.
Pleasingly, notwithstanding the impact of the increased finance charges
following expiry of the Hodge Bank fixed rates, continued improvement in
operating performance resulted in further progress in reducing the cash burn
within the business (before separately disclosed items).
Our ongoing focus on improving the operational performance at a property level
resulted in a positive (non-cash) fair value movement of £1.162m. Whilst
interest rates have started to fall, yields continued to ease in the property
valuations which offset part of the gains from the improved performance.
Pleasingly, however, notwithstanding the further easing in yields, positive
revaluation movements unwound the impairment in the prior year and positively
impacted both the profit and loss and the balance sheet.
Market conditions are improving and if interest rates continue to reduce
over the medium term, we reasonably expect this will result in a tightening of
yields which will have a further positive impact on future valuations.
Strategy and Operations
During the financial year, and as reported at the half year, we have been
continuing to focus on optimising the performance of the existing assets
whilst continuing to control costs aiming to achieve a cash neutral position.
Solid progress has been made in this regard over the 2025 financial year and
the strategy remains to:
• improve the rental revenue from the existing
properties;
• progressively upgrade the overall portfolio quality;
• explore the development opportunities within the
portfolio; and
• focus on controlling and reducing costs where
possible.
Revenue growth for the 2025 financial year has been driven by the work completed over the last couple of years to modernise and improve the standard of the property portfolio. As works have been completed and the apartments let up, enhanced operating performance has been achieved. Costs continue to be tightly controlled and a number of areas where further reductions can be achieved over the next 12 - 18 months have been identified and implementation has commenced. Where possible, purchasing is being aggregated to leverage scale and volume to reduce costs for the Group. Bulk contracts are being entered into for electricity, gas and internet which will deliver material cost savings as current contracts roll off.
Deanery Court has continued to perform well and is expected to be a key driver
of additional growth in the current financial year.
Development opportunities within the existing portfolio continue to be
explored, with costs associated with this being closely managed. Planning
submission was made for two of the Ladbroke Grove properties during the
financial year. Once planning outcomes are known we will formulate our
approach with this asset.
Capital
The Hodge Bank facilities were refinanced during the financial year into a new
5-year, Sharia law compliant facility of £7.85m with Al Rayan Bank Plc. This
facility has the equivalent of a fixed interest rate of 6.10% per annum.
Details of this facility are set out in note 18 to the financial statements.
As announced and set out in the half year report, the current market interest
rates are substantially higher than the legacy 3.50% fixed interest rate that
was previously in place.
All group debt facilities are now on a fixed rate basis with no near-term
repricing events. Market forecasts remain for interest rates to continue to
reduce over the medium term, which, if accurate, should create a more
favorable environment for future refinancing activity.
Market Conditions and Outlook for the Group
From a macro-economic perspective, sustained higher interest rates and cost of
living pressures have continued to present ongoing challenges for the Group.
Group operating performance has however, materially improved over the last 5
years. This has been driven by a combination of active management of the
assets to improve revenue performance and a focus on operational efficiency to
reduce costs. The Group is well positioned to deliver continued improvement in
operational performance over the 2026 financial year.
Softer residential property market conditions flowing from the impact of
sustained higher interest rates and tighter debt markets has seen continued
expansion in yields. Positively, improved operational performance outstripped
the impact of yield expansion with a positive impact on carrying values still
being achieved.
Yield expansion is seen as cyclical however any tightening is expected to lag
an improvement in property market conditions.
The rental market remains tight and we reasonably expect rents to continue to
increase over the current financial year reflecting restricted supply and
underlying cost pressure for landlords more generally.
Following completion of the first phase of the capital works programme at
Heathside, the balance of the external works are planned to be completed
during the current financial year. This will bring forward completion of all
capital works for this site (balance of external works originally not planned
to be completed until 2027). This works programme will be funded via the
sinking fund and ongoing special levies. No major works outside of this are
planned for the current financial year. Our focus is on optimising performance
from the existing Group assets whilst controlling costs. Selective
acquisitions at Heathside will also be considered given their accretive nature
and strong market demand.
Existing portfolio performance remains strong, with continued growth being
delivered over the 2025 financial year, and into the first quarter of 2026.
Increased focus on the Cristal Apartments walk in walk out model has increased
tenancy churn with more void periods. This is however compensated for via the
substantially higher rentals being achieved overall. Nominal rental arrears
have been experienced with no write offs incurred over the 2025 financial
year.
KCR continues to look for acquisitions on a disciplined basis and whilst
softer market conditions are presenting better opportunities, tightness in
debt markets and the higher cost of debt have made it challenging to support
both the investment and the capital raising that would be required to complete
a transaction.
The Group's overall long-standing objective remains to grow the size of its
residential portfolio to deliver an increase in revenue and profitability
against its central overhead base and achieve an ability to pay dividends. At
present, while we continue to focus on growing net asset value per share, we
anticipate that with improving cash characteristics and the potential for
yield compression, we will be able to achieve this in the coming periods.
On behalf of the Board and our shareholders, I would like to thank everyone at
KCR for their hard work and dedication over the past year.
James Thornton
Chairman
21 October 2025
CHIEF EXECUTIVE'S LETTER
Dear Shareholder
I have pleasure in reporting to you on the progress of the Group for the year
to 30 June 2025.
Our efforts over the last few years to restructure the balance sheet and to
modernise and improve the standard of the property portfolio together with the
introduction of the Cristal Apartments operating model, has resulted in the
Group being well positioned to continue to drive growth from its existing
assets.
Operational highlights -
§ Revenue for the financial year increased by 5% (to £1.89 million up from
£1.80 million in 2024) - slowing in growth in core rental income primarily as
a result of a softer December quarter at the Deanery Court property, some
vacancies at Ladbroke Grove whilst repairs and maintenance were completed and
refurbishment work completed on two of the flats at Heathside during the March
and June quarters.
.
§ Portfolio level occupancy has remained strong over the financial year with
rental increases continuing to be achieved at renewals / re-lettings. The
introduction of the Cristal Apartments operating model has resulted in more
volatility in occupancy levels within properties operated on this basis,
however this is offset by substantially improved overall rental income being
generated.
§ Active focus on cost management resulted in administrative expenses
increasing by just 2.7% to £1.36 million (up from £1.33 million in 2024).
Given the ongoing cost pressure across the business as a whole this is a
particularly pleasing result. Costs continued to be tightly controlled and
whilst the current underlying inflationary environment continues to present
challenges, a number of areas for cost savings have been identified and
implementation commenced.
§ Cash used in operations increased to £117k (from £75k in 2024) which has
increased due to the refurbishment costs of £203k and costs associated with
refinancing of £74k. Excluding the impact of separately disclosed items,
operating activity generated positive cashflow of £160k (compared to a
deficiency of £7k in 2024). After allowing for financing charges, net cash
used in operating activities was £800k (up from £659k in 2024).
The ongoing focus on improving operational performance and control of costs
continues to minimise the cash burn from operating activities. Further
improvements in operational performance over the 2026 financial year are
expected to be sufficient to offset by the higher finance costs that are being
incurred following the expiry of the prior Hodge Bank facilities. Whilst the
increased finance costs has made achieving a cash neutral position more
challenging, with continued improvement in operational performance and
successfully achieving targeted cost savings, we consider this objective
remains achievable.
Deanery Court in particular is well positioned to deliver strong improvements
in operational performance, both with revenue growth and reduced operating
overheads which is expected to be a primary contributor to reducing the cash
burn from operating activities over the course of the 2026 financial year.
Core focus to drive value over the next financial year is:
§ optimising performance from existing assets by continuing to improve
average occupancy under the Cristal Apartments operating model and ongoing
focus on repricing rents as tenancies expire;
§ reducing operating costs associated with Deanery Court to further enhance
the net contribution from this asset;
§ continuing to progress planning outcomes within the portfolio;
§ control of core running costs with targeted programme to achieve reductions
in core costs where possible; and
§ acquisitions to increase scale (subject to pricing / value drivers).
Progress continues to be made to create a stable platform that can be
successfully scaled-up.
Property portfolio
Property transactions during the year
An additional flat was acquired within Heathside during the financial year.
Full refurbishment of this flat was completed during the March quarter and it
has since been let on an Assured Shorthold Tenancy ("AST") basis. The ongoing
strategy of acquiring, refurbishing and letting flats within Heathside
continues to deliver value to the Group.
One of the legacy un-refurbished flats at Heathside was also fully refurbished
during the second half and has since been let on an AST basis.
As was the case last year, acquisition opportunities were considered during
the year, however, none were progressed. We continue to maintain a disciplined
approach to acquisitions and will only pursue those that we believe will offer
compelling value to shareholders. As outlined above, higher debt costs and
tighter terms and conditions have made it challenging to support both the
investment and capital raising that would be required to support any
substantive acquisitions.
Existing portfolio
KCR continues to focus on improving performance from its existing portfolio.
The investment over recent years in improving the quality of the portfolio has
continued to deliver revenue growth and we reasonably expect to continue to
drive further growth from the existing assets over the course of the current
financial year.
The conversion of Deanery Court to the Cristal Apartments operating model
during the 2023 financial year has resulted in improved performance from this
asset which is well positioned to continue to deliver further improvements in
operational performance during the current financial year.
We have submitted our preferred planning application for the Ladbroke Grove
properties and are awaiting an outcome. Once planning outcomes are known we
will formulate our strategy for this asset.
As outlined in prior annual reports, KCR has created two operating lines,
clearly identifiable by brand, property quality and letting strategy.
1. Cristal Apartments. Residential apartments, finished to a high modern
specification, furnished and let on a Walk-In-Walk-Out (WIWO) basis (utilities
subject to fair usage caps, internet, furniture, and TV licence included in
the rental agreement) for a frictionless and flexible letting experience.
Rental contracts either via standard AST or casual contract may be from a week
to multi-year.
2. Osprey Retirement Living. 4* retirement living property rented on
flexible letting packages customised to suit tenant needs. All rentals are on
an AST basis for a minimum period of six months.
1. Cristal Apartments (WIWO letting strategy)
The Coleherne Road and Deanery Court properties are both branded and operated
under the Cristal Apartments brand. Both have delivered substantially improved
performance following the repositioning of the rental product offered and
conversion to the WIWO operating model.
· The property at Coleherne Road, held within K&C (Coleherne)
Limited, comprises ten studio and one-bedroom flats. Following completion of
a whole-building refurbishment of the property to a significantly higher
standard, this property has been successfully repositioned in the market.
Since completion of the refurbishment works this property has produced strong
rental uplifts and occupancy levels. The property has been operated with a mix
of short let and traditional AST tenancies and is in the process of being
transitioned to a minimum tenancy period of six months, solely on an AST
basis. There has been strong market acceptance for this property on a WIWO
basis and we believe the reduced operating costs associated with a minimum
tenancy period of six months will deliver an improved net contribution from
this asset for the current financial year.
· The Ladbroke Grove portfolio (owned by KCR (Kite) Limited) consists
of 16 studio, one and two-bedroom flats in three buildings which remain 100%
occupied. Units are being lightly refurbished as tenants leave and are then
re-let in the private market. A planning submission for our preferred
outcome was submitted during the financial year. Outcome has yet to be
determined. Once the planning outcome is known we will finalise the approach
with this property (progressive holistic works programme or refurbishment on a
flat-by-flat basis).
· The Southampton block of 27 residential units at Deanery Court,
Chapel Riverside (owned by KCR (Southampton) Limited) has been converted to
the WIWO operating model and we believe this asset will continue to be a key
driver of growth over the current financial year as we focus on continuing to
optimise performance of this asset.
2. Osprey Retirement Living (4* retirement apartments)
The Osprey portfolio (K&C (Osprey) Limited) consists of 153 flats and 13
houses let on long leases in six locations, together with an estate consisting
of 30 freehold cottages in Marlborough, where Osprey delivers estate
management and sales services.
Whilst there remains some uncertainty over the future value of ground rents,
this makes up a minor part of the overall portfolio valuation. Heathside at
Golders Green remains the most substantive asset within the portfolio and the
Company's strategy remains to continue to acquire flats within this property.
The eleven flats now owned within Heathside are delivering strong rental
returns on cost and have assisted in supporting Group revenue growth. We
continue to focus on unlocking value via completion of lease extensions on the
shorter dated long leasehold flats.
Heathside, situated at Golders Green, represents 77% of the Osprey portfolio
value, where 26 of the 37 residential units are held on a long leasehold
basis. The strategy continues to be to selectively acquire (subject to
pricing) long-leasehold units in the block, refurbish them to a high standard
and let them in the open market on an AST basis. This strategy continues to
provide strong rental returns for the Group. Since successfully taking back
management of this property from the RTM Co in 2022, a substantive upgrade to
all of the interior common parts and a large component of the exterior has
been completed. Completion of the balance of the exterior works has been
brought forward and is now underway and will be completed this year. The works
programme has enhanced both the aesthetics and liveability of the property for
the benefit of residents and is considered positive for both future capital
values and achievable rentals for the apartments owned within the freehold.
Financial
The current financial year reflects continued growth in gross revenue and
further improved operating performance. following the refurbishment works
and asset repositioning programme that has been implemented together with the
ongoing focus on cost control of core operating overheads.
The increased cost of sales over the 2025 financial year was driven primarily
by increased costs associated with energy and cleaning costs. We have
implemented a bulk contract purchasing arrangement for electricity and gas
which is expected to deliver a substantial reduction in energy costs as the
existing contracts expire and new contracts are entered into.
Administration expenses include approximately £50k of abnormal legal and
associated costs flowing from engagement with minority shareholders, including
costs associated with the holding of a General Meeting requisitioned by them
during the financial year. It is disappointing that the Group has had to incur
unnecessary costs of this nature. This is the primary driver of the increase
in administration expenses. Controllable costs continue to be tightly managed.
Revenue for the financial year increased by 5% to £1.89m (2024: £1.80m).
Gross profit as a percentage of revenue reduced to 77.78% (2024: 80.73%)
reflecting primarily the increased energy and cleaning costs associated with
the Cristal Apartments operating model. In absolute terms overall gross profit
increased by 1.12% to £1.47m (2024: £1.45m).
Operating profit before separately disclosed items increased to £1,267k
(2024: £555k loss). Positive revaluation movement of £1,162k unwound the
impairment charge of £679k in the prior year.
Operating profit increased to £990k (2024; £623k loss) after separately
disclosed items. Improvement primarily flowed from the non-cash positive
impact of revaluation outcomes (reversing the prior year impairment and
reflecting ongoing underlying improved operational performance).
Total comprehensive profit for the 2025 year was £328k (2024: £1.19m loss)
and profit per share was 0.79p (2024: 2.85p loss).
Net assets per share increased to 30.36p (2024: 29.57p)
Whilst we have some way still to go to achieve our objective of achieving a
cash positive position, it is worth noting that 2025 is the first year since
KCR commenced operation that a profit before tax has been recorded.
Net cash from operations, adjusted for separately disclosed items, also
improved strongly to £160k (compared to a deficiency of £7k in 2024).
Refurbishment costs included as separately disclosed are those costs
considered discretionary and relating to the ongoing focus on repositioning
the underlying portfolio.
This expenditure is expected to support ongoing rental growth in the current
financial year and will assist in continuing to improve underlying operational
performance.
As at the year end the Group had total current assets of £691k (2024;
£1.39m) including approximately £174k in cash and cash equivalents (2024:
£932k). The Secure Trust funding has been increased by £425k during October
2025. Details are included in Note 23. Further details regarding the financial
performance of the Group can be found in the Strategic Report on the following
pages.
Prospects
KCR continues to make progress towards becoming cashflow positive. Whilst
the increased finance costs has made achieving a cash neutral position more
challenging, with continued improvement in operational performance and the
successful achievement of targeted cost savings, we consider this objective
remains achievable. We look forward to delivering further improved performance
from the existing portfolio over the current financial year.
I am pleased by the ongoing progress made this year in continuing to improve
Group financial performance and the position of the Group to continue to
deliver further improved performance over the course of the current financial
year.
Residential property market conditions are expected to continue to fluctuate
over time, however there remains a structural undersupply across the United
Kingdom which is viewed as positive for both future rental levels and capital
values. The positive improvement in operational performance of the portfolio
over the last few years has largely been offset by expansion in yields over
the same period. Tightening in yields over the cycle is expected to underpin
potential for future potential positive valuation outcomes
Russell Naylor
Executive Director
21 October 2025
GROUP STRATEGIC REPORT
The Directors present the strategic report of KCR Residential REIT plc ('KCR'
or the 'Company') and its subsidiaries (together, the 'Group') for the year
ended 30 June 2025.
PRINCIPAL ACTIVITY
The Group carries on the business of acquiring, developing and managing
residential property predominantly for letting to third parties on long and
short leases. At the year-end, the Group consisted of the Company, which is
a public company limited by shares, and its wholly owned subsidiaries:
1. K&C (Coleherne) Limited owns a freehold residential
property in Chelsea, London containing ten studio and one-bedroom flats;
2. K&C (Osprey) Limited owns eleven freehold
apartments and the freehold of several retirement properties let on long
leases to residents and provides management services in respect of these
properties and to third-party landlords;
3. KCR (Kite) Limited owns three freehold residential
properties in Ladbroke Grove, London (16 flats);
4. KCR (Southampton) Limited owns a long leasehold block
of 27 two-bedroom apartments at Chapel Riverside, Southampton. The lease is a
999 lease for which the Company pays a peppercorn rent; and
5. K&C (Newbury) Limited owns no property and is now
effectively dormant.
Throughout the year the Company remained a REIT and has complied with REIT
rules throughout the period and since the balance sheet date.
GROUP STRATEGY
The Directors intend to build a significant presence in the residential
letting market, primarily through the acquisition of existing residential
property. Consideration will also be given to the acquisition of land with
planning permission that will be developed into residential property. Assets
are predominantly acquired with the purpose of letting to third parties.
RESULTS
The Group reports a consolidated profit of £327,641 for the year to 30 June
2025 (2024: £1,186,075).
REVIEW OF BUSINESS AND FINANCIAL PERFORMANCE
The Board has reviewed whether the Annual Report, taken as a whole, presents a
fair, balanced and understandable summary of the Group's position and
prospects, and believes that it provides the information necessary for
shareholders to assess the Group's position, performance, and strategy.
In reporting financial information, KCR presents alternative performance
measures, "APMs", which are not defined or specified under the requirements of
IFRS. For example, portfolio occupancy and percentage of rent arrears. The
Company believes that these APMs, which are not considered to be a substitute
for or superior to IFRS measures, provide stakeholders with additional helpful
information on the performance of the business. The Board reminds readers
that these APMs are not GAAP measures, are not intended as a substitute for
those measures, and that other companies may use different measures.
Revenue in this financial year increased by 5% to £1,885,144 (2024:
£1,796,106). Core portfolio revenue (relating to rentals) was the primary
contributor to revenue growth with the Deanery Court property being a key
driver.
The Group recorded an operating profit before separately disclosed items of
£1,266,836 (compared to an operating loss of £554,677 in 2024). Improvement
against the prior year was due to valuation gains with a revaluation movement
of £1,162,000 (compared to a negative revaluation movement of £679,000 in
2024). After allowing for separately disclosed items and finance costs, the
profit before taxation was £327,641 (2024: £1,186,075 loss). The Group
reports the operating result both before and after separately disclosed items
as the costs associated with refinancing and refurbishment works are expected
to vary significantly year-on-year.
Total assets at 30 June 2025 increased to £27,310,839 (2024: £26,711,116).
This increase was mainly due to the acquisition of an additional apartment at
Heathside and an increase in the valuation of the investment properties
Net assets increased to £12,650,767 (2024: £12,323,126) and net asset value
per share increased to 30.36p (2024: 29.57p).
KEY PERFORMANCE INDICATORS
The Directors and management team monitor key performance indicators relevant
to each of the subsidiaries to improve Group performance. Management reports
to the Board if data shows significant variances against expected outcomes and
proposes mitigation action as necessary.
Examples of the KPIs used to monitor aspects of performance include:
1. At property level:
1.1. Vacancy rate in terms of number of units available and
potential rental income
Target occupancy of at least 90% achieved for apartments let on an AST basis
(including those let on a walk in walk out basis); and
1.2. Outstanding rents as a percentage of rental income
Target debtor balance of less than 10% of rental revenue achieved.
Deanery Court is being operated under the Cristal Apartments operating model
on a non-AST basis, and as a result has the highest level of variability in
terms of both occupancy and rent outstanding within the portfolio. This
property achieved an average occupancy of 67% over the 2025 financial year, up
from 61% in the prior year. We are focussing on continuing to improve both the
achieved average per night revenue and average occupancy over the course of
the current financial year.
2. At Group level:
The ongoing focus continues to be on reducing costs, enhancing revenue and
growing the business to achieve a cash break-even position (before separately
disclosed capital expenditure), to provide a stable base from which to grow.
Good progress in this respect continues to be made. In order to achieve this,
the Group is focusing on optimising performance from the existing assets and
incremental acquisitions where they make sense.
RISKS AND UNCERTAINTIES
The Board regularly reviews the risks to which the Group is exposed and
ensures through its meetings and its regular reporting that these risks are
minimised as far as possible.
The principal risks and uncertainties facing the Group at this stage in its
development are:
· Financing and liquidity risk
The Company has an ongoing requirement to fund its activities through the
equity markets and in the future to obtain finance for property acquisition
and development. Although there is no certainty that such funds will be
available when needed, the Company believes it would be able to access further
funding for the Directors to continue to focus on selectively growing the
Group's asset base;
· Financial instruments
Details of risks associated with the Group's financial instruments are given
in note 20 to the financial statements. The Directors seek to mitigate these
risks in manners appropriate to the risk; and
· Valuations
The valuation of the investment property portfolio is inherently subjective as
it is made on the basis of assumptions made by the valuers or the Directors,
that may not prove to be accurate. The outcome of this judgment is significant
to the Group in terms of its investment decisions and results. The Directors,
who have long experience of property and valuation principles, seek to
mitigate this risk by employing independent valuation experts to complete
periodic valuations of the assets in the portfolio. Valuation assumptions are
reviewed and considered by the Directors for reasonableness.
Directors' duty to promote the success of
the Company under Section 172 Companies Act 2006
Section 172 (1) of the Companies Act 2006 requires Directors to act in the way
they consider, in good faith, would be most likely to promote the success of
the Company for the benefit of shareholders as a whole, and in doing so having
regard to a diverse group of stakeholders.
The Directors continue to have regard to the impact of decisions made on all
stakeholders and are aware of their responsibilities to promote the success of
the Company, in accordance with section 172 of the Companies Act 2006.
We aim to work responsibly with our stakeholders and outline below the key
Board decisions made during the 2025 financial year:
Key Decision Stakeholders Action and Impact
Governance Policies Regulators / The Board periodically reviews governance policies for the Company and terms
of reference for established committees to ensure they remain appropriate for
Shareholders the Group.
A robust governance framework is an integral part of how the Company operates
and ensures compliance with its AIM quotation and regulatory requirements,
including compliance with REIT regulations.
The Company considers that the confidence provided to all stakeholders from a
robust governance framework is an important component for ongoing stakeholder
support of the Company.
Strategy Implementation Tenants / Shareholders The Company continued to take actions to implement the strategy outlined in
last year's Annual Report.
Primary focus was -
§ Optimising revenue from Deanery Court.
§ Progressing incremental refurbishment works to enhance the quality of the
rental product provided.
§ Progressing planning works to enhance value within the existing portfolio.
§ Successful implementation of strategy is expected to result in continued
improved financial performance of the Company.
Improving the quality of the standard of rental accommodation provides tenants
with an enhanced and hassle-free rental experience. For shareholders, the
investment in improving the quality and standard of the rental product is a
primary driver of improved financial performance for the Company.
FORWARD-LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements which have been
made by the Directors in good faith, based on the information available at the
time of the approval of the Annual Report and financial statements. By their
nature, such forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that will or may
occur in the future. Actual results may differ from those expressed in such
statements.
OUTLOOK
Whilst the near-term focus remains on improving the operational performance of
the existing assets and containing or reducing costs, the Group is continuing
to investigate the purchase of residential property assets that are capable of
supporting an increasing income yield. It may be necessary for the Group to
raise more capital in order to achieve this objective.
ON BEHALF OF THE BOARD:
Russell Naylor
Executive Director
21 October 2025
CORPORATE GOVERNANCE STATEMENT
Compliance with the QCA code
During the year to 30 June 2025 KCR Residential REIT plc, while an AIM quoted
Company, was operating with four directors and three employees. In September
2018, it adopted the QCA Code 2018 as a basis for reporting. Following the
update of the QCA Code in November 2023, the Company is now adopting the
revised QCA Code as a basis for reporting. The Board reviews the Company's
Financial Position and Prospects Procedures at least annually and stays
abreast of developments in regulations and recognised standards of corporate
governance, implementing recommended practices where practicable in order to
support the Company's medium to long-term success. As an example, during the
2024 financial year, an additional Independent Non-Executive Director was
appointed to the Board, bringing the total to two independent non-executive
directors, representing half of the Board, in accordance with the QCA Code.
Given the size of the Company and its tightly controlled operational and risk
environment, the Company does not, in all areas, fully comply with the QCA
Code principles. Whilst the Directors will continue to work towards
compliance, it is considered unlikely that this will be achieved, while the
Company remains at its current size, given the small scope of Company
operations. The Company will endeavour to comply with the 2023 QCA Code as far
as practical and will update the website on an annual basis with commentary on
the 2023 QCA Code Principles, including explanations where the Company is
departing from the application of a Principle.
The Directors believe that the Company's approach to governance, taking into
account its size, ensures continued effective operation of the board, its
committees and their oversight.
Principle 1: Establish a purpose, strategy and business model which promotes
long-term value for shareholders
The Company's strategy is shaped by the Board of Directors and is set out in
its Annual Reports and on the 'About Us' section of the Company's website.
The Company's objective is to build a substantial property portfolio,
predominantly in the residential sector, that generates both secure income
flow from rents and increases net asset value for shareholders. The Company
acquires or develops blocks of studio, one, two and three-bed apartments that
are close to transport links, shopping and leisure facilities, predominantly
in London, its surrounds and the South-East.
The Company looks to acquire properties at below market value to improve yield
on cost and enhance net asset value. It aims to achieve this through
acquisition strategies including:
· using the REIT's inherent tax advantages; acquiring properties in
corporate structures, with embedded capital appreciation and deferred tax
liabilities, which are reduced to zero as the corporate becomes part of the
REIT group;
· identifying and acquiring poorly presented properties in our
preferred locations that can be repositioned by completing a capital works
programme to materially improve the standard of rental product offered; and
· acquiring permitted land, funding the development process and
retaining the developer's profit.
Over the medium to long term, the Company expects rental and property values
to increase in line with inflation. These increases, coupled with new
acquisitions, are designed to enable the Company, once it has reached
sufficient scale, to pay dividends from cash flow generated by rents and to
deliver net asset value increases through positive property revaluations.
Active asset management of the properties may also deliver value increases.
The Company, as a REIT, is required to distribute 90 per cent of its rental
profits.
It is the Company's paramount intention to conduct its activities in a
professional and responsible manner for the benefit of its shareholders, its
employees, and the communities in which it operates.
Further detail on purpose, strategy and business model (including any key
challenges and how these will be addressed) is set out in the Strategic
Report.
Principle 2: Promote a corporate culture that is based on ethical values and
behaviours
The Board strives to promote a corporate culture based on sound ethical values
and behaviours. Given the small number of employees and limited scope of
Company activities, the Executive Director is primarily responsible for
ensuring Group activities are consistent with the culture promoted by the
Board.
The Board leads by ensuring that decisions taken at a Board level are
consistent with sound ethical values and behaviour and supports the ability of
the Group to successfully achieve its corporate objectives.
The Company has adopted a code for Directors' and employees' dealings in
securities, which is appropriate for a company whose securities are traded on
AIM. The code is also in accordance with the requirements of the Market Abuse
Regulation that came into effect in 2016.
The Board is also aware that the tone and culture it sets will greatly impact
all aspects of the Company and the way that employees behave. A significant
part of the Company's activities is centred upon an open dialogue with
shareholders, employees and other stakeholders.
Sound ethical values and behaviours will support the reputation of the Company
as a trusted and reputable supplier of rental accommodation and as a manager
and operator of retirement accommodation, which is essential in achieving its
corporate objectives.
The Board encourages open communication within the Company from staff at all
levels. Given the small number of employees and the current size of the
Company, the Directors observe culture in their ad hoc interactions with staff
and where staff behaviour is inconsistent with the desired corporate culture,
support line management implementation of performance management.
Principle 3: Seek to understand and meet shareholder needs and expectations
The Company remains committed to engaging with its shareholders to ensure its
strategy and performance are clearly understood. Engagement is also designed
in order that the Company develops a good understanding of the needs and
expectations of its shareholder base. Feedback from investors is obtained
through direct interaction between the Executive Director and shareholders
following the Company's full and half year results and certain other ad hoc
meetings between executive management and shareholders that take place during
the year. The Company's Annual General Meeting in particular offers
shareholders the opportunity to meet with the Board and ask any questions they
might have.
The Company seeks to communicate with its shareholders on a proactive, timely
and transparent basis at all times. Announcements through RNS are as
comprehensive as possible. As part of the Company's repositioning, the speed
of reporting of the interim and full year results to shareholders has
substantially improved.
It is apparent from shareholder interaction that shareholders have several
concerns, including:
· How do the Directors propose to expand operations without dilution to
existing shareholdings?
Since property companies are capital-intensive, the Company will raise equity
over time to fund the acquisition of new properties. Torchlight Fund LP
exercising its option rights, as accepted and approved by shareholders was
dilutive to existing shareholders. Going forward, the Board will aim to
maximise the issuance price of any additional equity offerings such that
issuances are accretive or, if that is not possible, they will aim to offer
all shareholders the opportunity to participate in the offering on a
pre-emptive basis.
· When will the Company become profitable?
Historically the Company has advised that the Company may become profitable
and cash flow positive once it has approximately £50m of investments
generating satisfactory rental income. In view of the improved operational
performance and cost reductions, it is now considered likely that the Company
may become profitable with less than £50m of income generating investments.
Executive management is focused on achieving this objective as soon as
possible. This is naturally dependent on the availability of suitable
transactions and the ability to complete the acquisitions either via raising
additional equity capital or debt.
Shareholder liaison is managed though Russell Naylor -
russell.naylor@kcrreit.com (mailto:russell.naylor@kcrreit.com) .
Given the limited scope of the Company's activity and small number of
shareholders the Board does not include granular disclosure on shareholder
engagement in the Annual Report.
The Company has a relationship agreement in place with its controlling
shareholder.
The Company does not provide quantitative and qualitative reporting on
environmental and social matters given the limited scope of the Company's
activity.
Principle 4: Take into account wider stakeholder interests, including social
and environmental responsibilities, and their implications for long-term
success
The Company currently operates in the UK. Given the relatively simple business
model and strategy, the Company is able to easily identify its main
stakeholders in the UK as being investors, tenants, and suppliers of services
(accountant, nominated adviser, broker, lawyers), employees, directors,
third-party property managers, banks and other debt providers and property
agents introducing investment opportunities. It is important to the Board that
they fully understand their key stakeholders' needs, interests and
expectations. This is achieved through providing various platforms for
investor interaction, such as the AGM where shareholders can provide feedback.
The Board interacts regularly with its key external advisers - accountants,
lawyers and its nominated adviser consulting on regulatory and shareholder
matters. It is also open to receiving feedback from other stakeholders
throughout the year.
The Company is keen to provide its workforce with a safe environment where
they can raise concerns in confidence. As such the Company has a
whistleblowing policy which can be followed in the event of any concern and
which clearly sets out the processes which will be followed and actions which
may be taken if a concern is raised.
The Company has an important social responsibility in its role as a landlord
of residential housing. We commit to delivering a high standard of service to
our tenants, which includes providing safe and high-quality residential units,
at market prices, managed in a professional way.
Treating all our stakeholders well, and in particular our key customers - our
tenants, is key to growing a sustainable business that will have long-term
success.
Quantitative and qualitative reporting on environmental and social matters is
not included in the Annual Report given the limited scope of the Company's
activity. For the same reason, the Board does not have (and does not intend
to introduce) KPI's relating to environmental or social issues.
The Company's KPI's are based on key measures relative to operating
performance and the Board considers these to be appropriate for the size and
scale of the business.
Stakeholder engagement is primarily managed through the Executive Director,
Russell Naylor although individual board members are also available to discuss
feedback or concerns of internal and external stakeholders. Any feedback
provided is discussed at board meetings and changes to procedures made as
appropriate.
Principle 5: Embed effective risk management, internal controls and assurance
activities, considering both opportunities and threats, throughout the
organisation
The Board is responsible for setting the risk framework within which the
Company operates and ensuring that suitable risk-management controls and
reporting structures are in place throughout the Group.
The Board seeks to minimise risk in the management of its operations by
identifying and mitigating controllable risks and implementing strategies to
minimise the impact of known risks beyond the direct control of management.
The Company uses third-party advisers to address specific issues that arise
during operations where they bring complementary expertise and experience.
The Board has a risk register which identifies and assesses current and
potential future risks to the Company. Each risk is considered by the Board on
a proportionate and material basis. Consideration of climate change risks are
included in the risk assessment process.
The Board monitors financial controls through the setting and approval of
annual budgets and the regular review of management reports.
Key risks and uncertainties are set out in the Strategic Report.
The Audit and Risk Committee has responsibility for maintaining the risk
register and reviewing both the risks and the Company's attitude to and
appetite for risk and its future risk strategy.
The Audit and Risk Committee reports to and makes recommendations to the Board
on risk on a periodic basis. It attends an annual audit review meeting with
the Company's auditors to discuss the auditors' findings, including their
review of risks/potential risks which could affect the Company.
The Board also completes a formal review and assessment of the risk framework
on an annual basis.
The Board is of the view that its internal controls with regard to risk
identification and assessment are sufficiently robust to manage the identified
risks adequately.
The Audit and Risk Committee also considers auditor independence and makes
recommendations to the Board, to be put to shareholders for approval at the
Company's AGM on the appointment, re-appointment or removal of the Company's
external auditor.
In considering auditor independence, the Audit and Risk Committee assesses
factors that might impact audit objectivity and or give rise to conflicts of
interest, such as -
· Financial Relationships - whether the auditor or the audit firm
has any direct or indirect financial interest in the company; and
· Non-audit services - what services (if any) are provided by the
same audit firm and what is the materiality of the value of any non-audit
services provided and whether this could compromise auditor independence.
The auditor also confirms their independence as part of the audit opinion
which is included in this Annual Report.
Principle 6: Establish and maintain the board as a well-functioning, balanced
team led by the chair
The Board currently comprises four directors of which one is an executive and
the other three are non-executives. The Board comprises a balance of
independent and non-independent Directors with collective, specific and
complementary skills that enable the Company to manage and direct its affairs
in a professional manner, with embedded corporate governance procedures that
are fit for purpose.
The Board is balanced with independent non-executive directors comprising half
of the Board. The Directors who are considered to be independent are Gordon
Robinson, and James Thornton. Given half of the Board are independent and
there is only one executive director, the Board does not consider it necessary
to appoint a senior independent director.
In considering director independence, the Board assesses factors such as Legal
and regulatory standards, personal relationships and potential for conflict of
interest, financial interests, business ties, tenure and participation in key
governance roles.
None of the independent Directors receive any remuneration or performance
incentives other than their directors' fee.
James Thornton has a de-minimis shareholding in the company of an immaterial
value which is not considered to impact his independence.
All Directors are required to disclose any conflicts at each board meeting.
Ultimate responsibility for the quality and effectiveness of the Board lies
with the chair.
Composition of the Board and consideration of the mix of skill sets is
considered periodically to ensure the Board remains well functioning.
Full Board meetings are generally held on a quarterly basis and all necessary
documentation is provided to the Board in advance, so that they can understand
the issues under review and make well-considered decisions. During the year,
between full Board meetings, the Board convenes whenever necessary to consider
and, if appropriate, approve the execution and completion by executive
management of key matters that fall within the Board's defined remit as set
out below.
The Board key sub-committees for audit and remuneration are comprised of a
majority of independent non-executive Directors and chaired by non-executive
Directors.
All of the Directors devote such time to the Company's affairs as is required.
The Company departs from 2023 QCA Code recommendations for all directors to be
subject to re-election at the AGM. Size and scale of Company operations
together with the existence of a controlling shareholder do not warrant all
Directors being put up for re-election each year.
The Company adopts a rotation policy for Directors, and shareholders have the
ability to provide feedback on this policy. The Board considers the existing
rotation policy adequately allows for Board renewal should shareholders wish
this to occur.
The Board contains the necessary mix of experience, skills, and capabilities
to adequately inform and oversee the execution of the Company's strategy for
the benefit of the shareholders over the medium to long-term.
Principle 7: Maintain appropriate governance structures and ensure that
individually and collectively the directors have the necessary up to date
experience, skills and capabilities.
The Board maintains up-to-date skills, knowledge and experience to enable it
to direct and manage the Company's operations, finances and its interface with
investors, the public markets and its other stakeholders.
The Board takes great care to appoint managers and staff with the appropriate
skills and experience, and is aware of the importance of encouraging diversity
among its workforce.
The Board works as a team and regularly reviews its procedures and
composition.
The relevant experience and skills of the current Directors are set out under
'About Us / The Board' on the Company's website. Each Director is involved in
other organisations which keep their professional skills sharpened and up to
date. The Company also receives updates from its nominated adviser on
regulatory matters, from its legal advisers on legal matters and from its
auditors on matters pertaining to accounting regulations.
The Board is committed to high standards of corporate governance that are
aligned with and are supportive of the Company's business purpose. No system
of internal control can completely eliminate the risk of process or individual
failures. To an extent, the corporate governance structures which the Company
is able to operate are limited by the size of the executive management team
and the small number of executive Directors, which is itself dictated by the
current size of the Company's operations. Within this limitation necessitated
by the current small size of the business, the Board is dedicated to having
strong internal control systems in place to enable it to maintain the highest
possible standards of governance and probity.
The Chairman, James Thornton:
• leads the Board and is primarily responsible for the effective
working of the Board;
• in consultation with the Board, ensures good corporate
governance and sets clear expectations with regards to Company culture, values
and behaviour;
• sets the Board's agenda and ensures that all Directors are
encouraged to participate fully in the activities and decision-making process
of the Board; and
• takes responsibility for relationships with the Company's
professional advisers and major shareholders.
The Executive Director, Russell Naylor:
• is primarily responsible for developing the Company's strategy
in consultation with the Board, for its implementation and for the operational
management of the business;
• is primarily responsible for new projects and expansion;
• runs the Company on a day-to-day basis;
• implements the decisions of the Board;
• monitors, reviews and manages key risks;
• is the Company's primary spokesperson, communicating with
external audiences, such as investors, analysts and the media;
• is primarily responsible for the systems of financial controls
in operation for the Company and each of its subsidiaries;
• is primarily responsible for all financial management and
financial planning matters;
• monitors, reviews and manages key risks as they relate to
financial impact; and
• implements the financial and internal control decisions of the
Board.
The Remuneration Committee is comprised of a majority of independent,
non-executive Directors and is chaired by Gordon Robinson, Independent
Non-Executive Director, and comprises Richard Boon, Gordon Robinson and James
Thornton. The Remuneration Committee meets on an ad hoc basis when required.
The Audit and Risk Committee is comprised of a majority of independent,
non-executive directors and is chaired by James Thornton, Chairman and
Independent Non-Executive Director, and comprises James Thornton, Gordon
Robinson, and Richard Boon. Russell Naylor is invited to attend as
appropriate. It meets generally quarterly each financial year to consider
matters outlined in its Terms of Reference including (but not limited to) -
· Financial Reporting
· Risk management systems and internal controls
· External auditors
· Whistleblowing
· Fraud
· Compliance
The external auditors attend the Audit and Risk Committee meeting to approve
the annual accounts and the meeting considers and takes action on any matters
raised or recommended by the auditors arising from their audit.
The chair of each of the Committees may invite executive management and Board
members to attend any meeting.
Matters reserved for the Board include (but are not limited to):
• vision and strategy;
• review of budgets, asset plans and trading results;
• approving financial statements;
• financing strategy, including debt strategy;
• business planning relating to acquisitions, divestments and
major refurbishments not already agreed in the strategy and asset plans;
• capital expenditure in excess of agreed budgets;
• corporate governance and compliance;
• risk management and internal controls;
• appointments and succession plans at senior management level;
and
• Directors' remuneration.
Principle 8: Evaluate Board performance based on clear and relevant
objectives, seeking continual improvement.
The Board of KCR comprises:
Name
Role
Appointed Status
Russell Naylor Chief
Executive 06 August
2019 Non-independent
James Thornton Non-Executive
Director 06 August 2019* Independent
Richard Boon Non-Executive
Director 06 August 2019
Non-independent
Gordon Robinson Non-Executive
Director 01 April 2024
Independent
* appointed Chairman 3 November 2020
In accordance with its obligations under the 2023 QCA Code, the Board reviews
internally on an annual basis its collective performance, and the performance
of its committees and Board members. In reviewing performance, the Board
considers factors such as -
· How well the Board works together, the diversity of skills and
experiences and areas that could be improved.
· Director attendance and participation in both board and committee
meetings.
· Leadership provided by the Chair in managing meetings,
encouraging open discussion and feedback from all directors.
· Composition of the committees and skill mix of the members to
ensure committees are operating efficiently and complying with the charters
established.
· Audit Committee contribution to input and review of financial
statements, engagement with external auditor and timeliness of financial
reporting.
The Company departs from the 2023 QCA Code Principle 8 as in view of the size
of the Company and its Board, the Directors do not believe that it is
practical to undertake an external or a wide-ranging evaluation of the
performance of Board members.
The primary tasks of the Executive Director, Russell Naylor, have been and
will continue to be to grow the Company's asset base and revenue through
improving the performance of the existing assets and the delivery of
additional assets to the portfolio. This has included developing capital and
asset partnerships and finding ways to raise appropriately priced and
structured debt finance to support transactions and equity capital in an
uncertain equity market. He is a key point of contact for the capital markets.
In these tasks, Russell Naylor will be supported by the Non-Executive
Directors advising on matters such as internal financial controls, financial
management, capital planning and overseeing the preparation of financial
reports to shareholders.
The primary task of the Chairman, James Thornton, is to ensure that the Board
has performed its role correctly, that governance is adhered to, and that the
Company works towards delivering value to shareholders in accordance with the
Company's strategy. He is also a point of contact with many of the Company's
shareholders and professional advisers.
Succession planning remains an important issue for the Board, and in
particular the Chairman. There are no plans to replace any existing Directors
or appoint any new Directors in the next 12 months.
Principle 9: Establish a remuneration policy which is supportive of long-term
value creation and the company's purpose, strategy and culture.
The Company departs from 2023 QCA Code Principle 9 insofar as the annual
remuneration report is not put to shareholders for an advisory vote and it
does not envisage adopting this principle in the foreseeable future. The
Company does not consider that the size and scale of its operations and
overall remuneration levels warrant adopting this principle.
The Remuneration Committee meets as required to consider remuneration.
Remuneration of the Executive Director (Russell Naylor) includes a pre-agreed
deferred consideration payable if or when the Company achieves a cash positive
operating position. The Board considers the deferred consideration component
is an appropriate incentive at the Company's current size and stage of
development.
If or when the Company achieves a cash positive operating position the
Remuneration Committee will review the remuneration of the Executive Director.
No performance-based share schemes are in existence or proposed to be
introduced at this stage of the Company's development.
Total remuneration costs have reduced substantially over the last 5 years as
head count has reduced in line with the continuing Company focus on achieving
a cash positive operating position.
Principle 10: Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other key stakeholders
The Company's website sets out the principal approach of the Company to
governance. It contains all relevant documents and information for
shareholders, including all RNS announcements, financial reports, shareholder
circulars (including notices of meetings), and the Company's articles.
Following a general meeting, the Company will disclose the outcome of all
votes in an RNS announcement.
The Company's report on its Audit and Risk Committee and on its Remuneration
Committee can be found in the Company's Annual Report and Accounts.
The Board believes that the Company's Annual Report and Interim Report provide
shareholders and key stakeholders with the information necessary for them to
make an informed assessment of the Company's financial position and prospects
including any risks known to the Company. Additionally, shareholders are
encouraged to participate at the AGM, to ensure that there is a high level of
accountability and identification with the Group's strategy and goals.
Audit & Risk Committee Report
The Audit & Risk Committee is a Board committee delegated with
responsibility to oversee and review financial and internal controls in
accordance with its Terms of Reference. The Committee also makes
recommendations to the Board on payment of dividends or otherwise. The
Committee is also responsible for setting and agreeing audit fees and
overseeing the process for auditor appointment.
The Audit & Risk Committee is chaired by Independent Non-Executive
Chairman, James Thornton, with a quorum of a minimum of two Non-Executive
Directors. There are three Non-Executive Director members; James Thornton,
Gordon Robinson and Richard Boon.
During the 2025 financial year the Audit & Risk Committee met 4 times to
review and recommend the interim and year-end financial statements and
separately in 2024 and 2025 to review risk issues and regulatory and
governance matters.
Remuneration Committee Report
The Remuneration Committee is a Board committee of Non-Executive Directors
acting within its terms of reference to execute its responsibility for the
review and approval of salary and bonuses of Board members and senior
management personnel and related employment matters.
During 2025, the Remuneration Committee met to review and approve senior
management salaries and bonus structure for staff.
It is the Company's policy that the remuneration of Directors should be
commensurate with the services provided by them to the Company and should take
account of published data on reasonable market comparable groups, where
available. Details of the Directors' remuneration are set out in the Report of
the Directors.
REPORT OF THE DIRECTORS
The Directors present their report with the financial statements of the
Company and the Group for the year ended 30 June 2025.
A review of the business, risks and uncertainties and future developments is
included in the Chairman's Letter, the Chief Executive's Letter, the Group
Strategic Report, and in note 20 to the financial statements.
DIVIDENDS
The Directors do not recommend payment of a dividend for the year (2024:
£nil).
POLITICAL DONATIONS
The Group made no political donations during the year (2024: £nil).
DIRECTORS
The following Directors served during the year to 30 June 2025 and up to the
date of approval of this Annual Report:
Name
James Thornton
Russell Naylor
Richard Boon
Gordon Robinson
The beneficial interests of the Directors holding office at 30 June 2025 in
the issued share capital of the Company were as follows:
Ordinary
Shares
Issued in the
At 30 June 2024 year At 30 June 2025
Name No. No. No.
James Thornton 22,222 -- 22,222
The beneficial interests of the directors holding office at 21 October 2025 in
the issued share capital of the Company were as follows:
At 30 June 2025 Issued in the period At 21 October 2025
Name No. No. No.
James Thornton 22,222 - 22,222
SUBSTANTIAL SHAREHOLDINGS
As at 21 October 2025, the Directors had been notified that the following
shareholders owned a disclosable interest of three percent or more in the
Ordinary Shares of the Company:
Name Interest
%
Torchlight Fund LP 55.44%
Acuity RM Group Plc 5.85%
Moore House Holding Ltd 5.66%
Greenwood rC Ltd 4.32%
Venaglass Ltd 3.80%
DIRECTORS' REMUNERATION
The Directors received the following remuneration for their services during
the year:
2025 2024
Name Remuneration Remuneration
£
£
Russell Naylor* 115,000 115,000
James Thornton 30,000 30,000
Richard Boon 30,000 30,000
Gordon Robinson 19,000 4,500
Dominic White - 13,500
194,000 193,000
* The remuneration paid to Russell Naylor included fees of £48,000 charged by
Naylor Partners, a business in which Russell Naylor is a director (2024:
£48,000).
INTERNAL CONTROLS AND RISK MANAGEMENT
The Directors are responsible for the Group's system of internal control.
Although no system of internal control can provide absolute assurance against
material misstatement or loss, the Group's system is designed to provide
reasonable assurance that problems are identified on a timely basis and dealt
with appropriately.
In carrying out their responsibilities, the Directors have put in place a
framework of controls to ensure as far as possible that: (i) ongoing financial
performance is monitored in a timely manner; (ii) where required, corrective
action is taken; and (iii) risk is identified as early as practically
possible. The Directors have reviewed the effectiveness of internal controls.
The Board, subject to delegated authority, reviews, among other things,
capital investment, property sales and purchases, additional borrowing
facilities, guarantees and insurance arrangements.
Details of financial risk management are included within the Risks and
Uncertainties section of the Group Strategic Report.
BRIBERY RISK
The Group has adopted an anti-corruption policy and whistle-blowing policy
under the Bribery Act 2010. Notwithstanding this, the Group may be held liable
for offences under that Act committed by its employees or subcontractors,
whether or not the Group or the Directors had knowledge of the commission of
such offences.
OTHER MATTERS
i. Environmental
The Group understands the importance of operating its business in a manner
that minimises any risks to the environment. Its policies seek to ensure that
it achieves this goal.
ii. Group employees
The Group considers its employees to be its most valuable assets and ensures
that it deals with them fairly and constructively at all times.
iii. Social matters
The Group is aware that it has a responsibility to the communities in which it
operates and seeks to respect them at all times.
iv. Respect for human rights
The Group always respects the human rights of its stakeholders.
v. Contributions to pension schemes
No pension scheme benefits are being accrued by the Directors.
DIRECTORS' INDEMNITIES AND INSURANCE
The Company has made qualifying third-party indemnity provisions for the
benefit of its Directors during the year and they remain in force at the date
of approval of this Annual Report.
GOING CONCERN
The Directors have adopted the going concern basis in preparing the financial
statements.
The Directors consider, as at the date of approving the financial statements,
that there is reasonable expectation that the Group has adequate financial
resources to continue to operate, and to meet its liabilities as they fall due
for payment, for at least twelve months following the approval of the
financial statements.
The Company has undertaken procedures to ensure that the Company has
sufficient cash resources and bank facilities and sufficient covenant margin
to manage its business under going concern principles.
See note 2 to the financial statements for further details.
POST BALANCE SHEET EVENTS
Post balance sheet events are detailed further in the Chief Executive's letter
and note 23 of the financial statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. Under company law,
the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Company and the Group and of the profit or loss of the Company and the Group
for that period. In preparing these financial statements, the Directors are
required to:
· select suitable accounting policies and then apply
them consistently;
· make judgments and accounting estimates that are
reasonable and prudent;
· state whether applicable accounting standards have
been followed subject to any material departures disclosed and explained in
the financial statements; and
· assess the Group's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and use
the going concern basis of accounting unless they either intend to liquidate
the Group, cease operations or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's and the Group's transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
So far as the Directors are aware, there is no relevant audit information (as
defined by Section 418 of the Companies Act 2006) of which the Group's auditor
is unaware, and each Director has taken all the steps that he ought to have
taken as a Director in order to make himself aware of any relevant audit
information and to establish that the Group's auditor is aware of that
information.
AUDITOR
In accordance with section 489 of the Companies Act 2006, a resolution to
reappoint Grant Thornton Limited as auditor will be proposed at the
forthcoming annual general meeting.
ON BEHALF OF THE BOARD
Russell Naylor
Executive Director
21 October 2025
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KCR RESIDENTIAL REIT PLC
Opinion
We have audited the financial statements of KCR Residential REIT Plc (the
'Parent Company') and its Subsidiaries (the 'Group') for the year ended 30
June 2025 which comprise the Consolidated Statement of Comprehensive Income,
the Consolidated and Company Statements of Financial Position, the
Consolidated and Company Statements of Changes in Equity, the Consolidated and
Company Statements of Cash Flows and notes to the financial statements,
including material accounting policy information. The financial reporting
framework that has been applied in their preparation is applicable law and UK
Adopted International Accounting Standards ("UK Adopted IASs").
In our opinion, the financial statements:
· give a true and fair view of the state of the Group's and of the
Parent Company's affairs as at 30 June 2025 and of the Group's profit for the
year then ended;
· are in accordance with UK Adopted IASs; and
· have been prepared in accordance with the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the 'Auditor's responsibilities for the
audit of the financial statements' section of our report. We are independent
of the Group and the Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in
Guernsey, including the FRC's Ethical Standard as applied to listed entities/
public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors' use
of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group's and the Parent
Company's ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our report
to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify the auditor's opinion. Our conclusions are based on
the audit evidence obtained up to the date of our report. However, future
events or conditions may cause the Group or the Parent Company to cease to
continue as a going concern.
Our evaluation of the directors' assessment of the Group and the Parent
Company's ability to continue to adopt the going concern basis of accounting
included:
· Obtaining the 18-month going concern assessment as at yearend
performed by management, including the assumptions and sensitivities prepared
by management;
· Challenging the appropriateness of management's forecasts by:
o checking the mathematical accuracy of the cash flow forecast;
o assessing the key assumptions used in the going concern assessment based
on our knowledge of the Group and the current economic climate; and
o assessing whether management has taken into account the risks and
uncertainties noted in the annual report.
· We determined whether there is a material uncertainty which casts
significant doubt over the ability of the Group and the Parent Company to
continue as a going concern; and
· We assessed the disclosures in the financial statements relating
to going concern, to ensure they were in compliance with IAS 1.
In our evaluation of the directors' conclusions, we considered the inherent
risks associated with the Group's and the Parent Company's business model, we
assessed and challenged the reasonableness of estimates made by the directors
and the related disclosures and analysed how those risks might affect the
Group's and the Parent Company's financial resources or ability to continue
operations over the going concern period.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and the Parent
Company's ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Our approach to the audit
Overview of our audit approach
Overall materiality:
Group: £245,000, which represents 2% of the Group's net assets.
Parent Company: £144,000, which represents 2% of the Parent Company's net
assets.
Key audit matters were identified as:
Valuation of Investment Properties (same as previous year)
Our audit approach was a risk-based substantive audit focused on the
investment activities of the Group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those that had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
In the graph below, we have presented the key audit matters, significant risks
and other risks relevant to the audit.
Key audit matter Significant risk Other risk
Key Audit Matter - Group How our scope addressed the matter - Group
Valuation of Investment Properties (2025: £26.5m and 2024: £25.2m) In responding to the key audit matter, we performed the following audit
procedures:
The Group holds investment properties which comprise properties owned by the
Group held for rental income and capital appreciation. o Updated our understanding of the processes, policies and methodologies,
including the use of industry specific measures, and policies for valuing
Investment properties are measured at fair value with reference to full and investment properties held and performed test of design and implementation of
desktop valuation reports being prepared by the management experts and relevant controls;
directors' valuation specifically for the Osprey portfolio.
o Obtained a copy of the valuation reports prepared by the management experts
They made various assumptions based on market approach which provides an and directors' valuations and confirmed that these reports are reviewed and
indicative value by comparing the property with other similar properties for approved by management through the review of board minutes;
which price information are publicly available and other relevant factors.
Hence, there is an opportunity to manipulate the fair values and related o Assessed the independence, competence and objectivity of the management
assumptions. experts;
The valuation of investment properties requires significant judgement in o Assessed and corroborated market related judgements and valuation inputs
determining the appropriate inputs to be used in the model and there is a risk (i.e., gross yield, rate per square foot) by reference to comparable
that the properties are incorrectly valued. transactions, and independent databases/indices;
o Determined whether the methodologies used to value the investment properties
were consistent with methods usually used by market participants for similar
types of properties; and
o Assessed the adequacy of the financial statement disclosures in relation to
the use of estimates and judgements regarding the fair value of the investment
properties.
Our results
Our testing did not identify material misstatements in relation to the
valuation of investment properties.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit,
and in evaluating the effect of identified misstatements on the audit and of
uncorrected misstatements, if any, on the financial statements and in forming
the opinion in the auditor's report.
Materiality was determined as follows:
Materiality measure Group Parent Company
Materiality for financial statements as a whole We define materiality as the magnitude of misstatement in the financial
statements that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of these financial
statements. We use materiality in determining the nature, timing and extent of
our audit work.
Planning materiality threshold £245,000 which represents 2% of net assets as at 31 May 2025. £144,000 which represents 2% of net assets as at 31 May 2025.
Significant judgements made by auditor in determining the materiality In determining materiality, we made the following significant judgements:
o Net assets, as a benchmark, is considered the most appropriate because the
investors would usually assess the performance of the Group and the Company by
looking at the net asset value.
Due to the Company being listed and considering that investors or potential
investors would be sensitive to changes in the net asset value, it was deemed
that 2% would be the most appropriate percentage.
Significant revision(s) of materiality threshold There was no significant revision of our materiality threshold as the audit
progressed.
Performance materiality used to drive the extent of our testing We set performance materiality at an amount less than materiality for the
financial statements as a whole to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
Performance materiality threshold £184,000 which is 75% of financial statement materiality. £108,000 which is 75% of financial statement materiality.
Significant judgements made by auditor in determining the performance In determining performance materiality, we made the following significant
materiality judgements:
o Our risk assessment, including our assessment of the Group and the Parent
Company's overall control environment.
Significant revision(s) of performance materiality threshold There was no significant revision of our performance materiality threshold as
the audit progressed.
Communication of misstatements to the audit committee We determine a threshold for reporting unadjusted differences to the audit
committee.
Threshold for communication £12,300 and misstatements below that threshold that, in our view, warrant £7,200 and misstatements below that threshold that, in our view, warrant
reporting on qualitative grounds. reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our
overall materiality and the tolerance for potential uncorrected misstatements.
Overall materiality - Group Overall materiality - Parent Company
FSM: Financial statements materiality, PM: Performance materiality, TFPUM:
Tolerance for potential uncorrected misstatements
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the Group's
and the Parent Company's business and in particular matters related to:
Understanding the Group, its components, and their environments, including
Group-wide controls
(https://gtuksp.gtukint.com/audit/aop/Pages/AE%207-9-3%20Risk%20assessment%20and%20planning%20in%20group%20audits.aspx#AE-7-9-3-3)
· We obtained an understanding of the Group and its environment,
including Group-wide controls, and assessed the risks of material misstatement
at the Group level;
Identifying significant components
· We evaluated the identified components to assess their
significance and determined the planned audit response based on a measure of
materiality. The measure of materiality used was based upon net assets or
total assets as appropriate.
Type of work to be performed on financial information of parent and other
components (including how it addressed the key audit matters)
· We undertook substantive testing on significant transactions,
balances and disclosures, the extent of which was based on various factors
such as our overall assessment of the control environment, the effectiveness
of controls over individual systems and the management of specific risks; and
· For subjective estimates made by management on the valuation of
the investment properties, we performed independent searches to confirm the
appropriateness of the valuation methodology used in consideration of the
comparable properties, market assumptions and other inputs used.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report set out on pages 1 to
26, other than the financial statements and our auditor's report thereon. Our
opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements, or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement of the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in
accordance with the applicable legal requirements.
Matters on which we are required to report by under the Companies Act 2006
In light of the knowledge and understanding of the Parent Company and the
Group and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to
which The Companies Act 2006 requires us to report to you if, in our opinion:
· proper accounting records have not been kept; or
· the financial statements are not in agreement with the accounting
records; or
· we have not obtained all the information and explanations, which to
the best of our knowledge and belief, are necessary for the purposes of our
audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors' responsibilities statement set out
on page 26 of the financial statements, the directors are responsible for the
preparation of the financial statements which give a true and fair view in
accordance with IFRSs, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and the Parent Company'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 the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor's report.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. Owing to the inherent limitations of an audit, there is an
unavoidable risk that material misstatements in the financial statements may
not be detected, even though the audit is properly planned and performed in
accordance with the ISAs (UK).
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and regulations,
our procedures included the following:
· We obtained an understanding of the legal and regulatory
frameworks applicable to the Group and the Parent Company in which it
operates. We determined that the following laws and regulations were most
significant: the Companies Act 2006, and the Real Estate Investment Trust
(REIT) status section 1158 of the Corporation Tax Act 2010.
· We understood how the Group and the Parent Company are complying
with those legal and regulatory frameworks by making inquiries to management
including those responsible for compliance procedures. We corroborated our
inquiries through our review of board meetings and review of key regulatory
requirements. We identified areas of the above laws and regulations that could
reasonably be expected to have a material effect on the financial statements
from our sector experience and through discussion with management.
· We assessed the susceptibility of the Group and the Parent
Company's financial statements to material misstatement, including how fraud
might occur, by evaluating management's incentives and opportunities for
manipulation of the financial statements. This included the evaluation of the
risk of management override of controls. We determined that the principal
risks were in relation to valuation of investment properties and revenue
transactions.
· In assessing the potential risks of material misstatement, we
obtained an understanding of:
- the entity's operation, including the nature of its revenue sources
and of its objectives and strategies to understand the classes of
transactions, account balances, expected financial statement disclosures and
business risks that may result in risks of material misstatement.
- the applicable statutory provisions
- the entity's control environment.
Our audit procedures involved:
- identifying and assessing the design and implementation of controls
management has in place to prevent and detect fraud.
- understanding how those charged with governance considered and
addressed the potential for override of controls or other inappropriate
influence over the financial reporting process; and
- identifying and testing journal entries, in particular any journal
entries in respect of valuation of investment properties.
· We communicated relevant laws and regulations and potential fraud
risks to all engagement team members, and remained alert to any indications of
fraud or non-compliance with laws and regulations throughout the audit;
· The Engagement Leader assessed the appropriateness of the
collective competence and capabilities of the engagement team including
consideration of the engagement teams:
- Understanding of, and practical experience with audit engagements of
a similar nature and complexity through appropriate training and
participation.
- Knowledge of industry in which the client operates; and
- Understanding of the legal and regulatory requirements specific to
the entity including the provisions of the Companies Act 2006 and the Real
Estate Investment Trust (REIT) status section 1158 of the Corporation Tax Act
2010.
These audit procedures were designed to provide reasonable assurance that the
consolidated financial statements were free from fraud or error. The risk of
not detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error and detecting irregularities that
result from fraud is inherently more difficult than detecting those that
result from error, as fraud may involve collusion, deliberate concealment,
forgery or intentional misrepresentations. Also, the further removed
non-compliance with laws and regulations from events and transactions
reflected in the consolidated financial statements, the less likely we would
become aware of it.
Use of our report
This report is made solely to the Parent Company's members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the Parent Company's members
those matters we are required to state to them in an auditor's report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent Company and the Parent
Company's members as a body, for our audit work, for this report, or for the
opinions we have formed.
Jeremy Ellis
Senior Statutory Auditor
for and on behalf of Grant Thornton Limited
Statutory Auditor, Chartered Accountants
St Peter Port,
Guernsey
Dated: 22 October 2025
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 30 June 30 June
2025
2024
FOR THE YEAR ENDED 30 JUNE 2025
Notes £ £
CONTINUING OPERATIONS
Revenue 3 1,885,144 1,796,106
Cost of sales (419,046) (346,194)
GROSS PROFIT 1,466,098 1,449,912
Administrative expenses (1,361,262) (1,325,589)
Fair value through profit and loss - revaluation of investment properties
12 1,162,000 (679,000)
OPERATING PROFIT/(LOSS) BEFORE SEPARATELY DISCLOSED ITEMS 1,266,836 (554,677)
Separately disclosed items
Costs associated with refinancing 6 (73,694) -
Costs associated with refurbishment of investment properties 6 (203,129) (67,867)
OPERATING PROFIT/(LOSS) 990,013 (622,544)
Finance costs 5 (683,567) (584,840)
Finance income 5 21,195 21,309
PROFIT/(LOSS) BEFORE TAXATION 6 327,641 (1,186,075)
Taxation 7 - -
PROFIT/(LOSS) FOR THE YEAR 327,641 (1,186,075)
TOTAL COMPREHENSIVE PROFIT/(LOSS) FOR THE YEAR 327,641 (1,186,075)
Profit/(loss) attributable to owners of the parent 327,641 (1,186,075)
Profit/(loss) per share expressed in pence per share 8
Basic 0.79 (2.85)
Diluted 0.79 (2.85)
The notes form part of the financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 June 30 June
2025
2024
30 JUNE 2025
Notes £ £
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11 91,303 167,676
Investment properties 12 26,528,300 25,156,300
26,619,603 25,323,976
CURRENT ASSETS
Trade and other receivables 14 516,924 455,545
Cash and cash equivalents 15 174,312 931,595
691,236 1,387,140
TOTAL ASSETS 27,310,839 26,711,116
EQUITY
SHAREHOLDERS' EQUITY
Share capital 16 4,166,963 4,166,963
Share premium 14,941,898 14,941,898
Capital redemption reserve 344,424 344,424
Accumulated deficit (6,802,518) (7,130,159)
TOTAL EQUITY 12,650,767 12,323,126
LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing loans and borrowings 18 14,135,965 13,904,324
CURRENT LIABILITIES
Trade and other payables 17 524,107 483,666
524,107 483,666
TOTAL LIABILITIES 14,660,072 14,387,990
TOTAL EQUITY AND LIABILITIES 27,310,839 26,711,116
Net asset value per share (pence) 8 30.36 29.57
The financial statements were approved and authorised for issue by the Board
of Directors on 21 October 2025 and were signed on its behalf by:
Russell Naylor
Executive Director
The notes form part of the financial statements
COMPANY STATEMENT OF FINANCIAL POSITION 30 June 30 June
2025
2024
30 JUNE 2025
Notes £ £
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11 - -
Investments 13 10,706,081 10,706,081
10,706,081 10,706,081
CURRENT ASSETS
Trade and other receivables 14 3,492,563 3,325,316
Cash and cash equivalents 15 35,221 814,409
3,527,784 4,139,725
TOTAL ASSETS 14,233,865 14,845,806
EQUITY
SHAREHOLDERS' EQUITY
Share capital 16 4,166,963 4,166,963
Share premium 14,941,898 14,941,898
Capital redemption reserve 344,424 344,424
Accumulated deficit (12,291,358) (11,733,079)
TOTAL EQUITY 7,161,927 7,720,206
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 17 7,071,938 7,125,600
7,071,938 7,125,600
TOTAL LIABILITIES 7,071,938 7,125,600
TOTAL EQUITY AND LIABILITIES 14,233,865 14,845,806
As permitted by Section 408 of the Companies Act 2006, the income statement of
the Company is not presented as part of these financial statements. The
Company's loss for the financial year was £558,279 (2024: £560,362 loss).
The financial statements were approved and authorised for issue by the Board
of Directors on 21 October 2025 and were signed on its behalf by:
Russell Naylor
Executive Director
The notes form part of the financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital Share Capital redemption reserve Accumulated deficit Total equity
FOR THE YEAR ENDED 30 JUNE 2025 premium
£ £ £ £ £
Balance at 1 July 2023 4,166,963 14,941,898 344,424 (5,944,084) 13,509,201
Changes in equity
Total comprehensive loss - - - (1,186,075) (1,186,075)
Balance at 30 June 2024 4,166,963 14,941,898 344,424 (7,130,159) 12,323,126
Changes in equity
Total comprehensive profit - - - 327,641 327,641
Balance at 30 June 2025 4,166,963 14,941,898 344,424 (6,802,518) 12,650,767
The notes form part of the financial statements
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2025 Share capital Share Capital redemption reserve Accumulated deficit Total equity
premium
£ £ £ £ £
Balance at 1 July 2023 4,166,963 14,941,898 344,424 (11,172,717) 8,280,568
Changes in equity
Total comprehensive loss - - - (560,362) (560,362)
Balance at 30 June 2024 4,166,963 14,941,898 344,424 (11,733,079) 7,720,206
Changes in equity
Total comprehensive loss - - - (558,279) (558,279)
Balance at 30 June 2025 4,166,963 14,941,898 344,424 (12,291,358) 7,161,927
CONSOLIDATED STATEMENT OF CASH FLOWS 2025 2024
FOR THE YEAR ENDED 30 JUNE 2025
Note £ £
Cash flows from operating activities
Cash used in operations 1 (116,552) (74,580)
Interest paid (683,567) (584,840)
Net cash used in operating activities (800,119) (659,420)
Cash flows from investing activities
Purchase of property, plant & equipment - (40,892)
Purchase of investment properties (210,000) -
Interest received 21,195 21,309
Net cash used in investing activities (188,805) (19,583)
Cash flows from financing activities
Loan repayments in year (7,618,359) (2,375,000)
Proceeds from new loans in year 7,850,000 3,004,750
Net cash generated from financing activities 231,641 629,750
Decrease in cash and cash equivalents (757,283) (49,253)
Cash and cash equivalents at beginning of year 931,595 980,848
Cash and cash equivalents at end of year 174,312 931,595
The notes form part of the financial statements
COMPANY STATEMENT OF CASH FLOWS 2025 2024
FOR THE YEAR ENDED 30 JUNE 2025
Note £ £
Cash flows from operating activities
Cash used in operations 1 (553,333) (524,841)
Interest paid - (143)
Net cash used in operating activities (553,333) (524,984)
Cash flows from investing activities
Interest received 3,610 15,906
Decrease in loans to group companies - 476,616
(Repayments of)/increase in loans from group companies (229,465) 75,000
Net cash (used in)/generated from investing activities (225,855) 567,522
(Decrease)/increase in cash and cash equivalents (779,188) 42,538
Cash and cash equivalents at beginning of year 814,409 771,871
Cash and cash equivalents at end of year 35,221 814,409
NOTES TO THE STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2025
1) RECONCILIATION OF LOSS BEFORE TAXATION TO CASH USED
IN OPERATIONS
Group 2025 2024
£ £
Profit/(loss) before taxation 327,641 (1,186,075)
Depreciation charges 76,373 76,435
Revaluation of investment properties (1,162,000) 679,000
Finance costs 683,567 584,840
Finance income (21,195) (21,309)
(95,614) 132,891
Increase in trade and other receivables (61,378) (234,975)
Increase in trade and other payables 40,440 27,504
Cash used in operations (116,552) (74,580)
Company 2025 2024
£ £
Loss before taxation (558,279) (560,362)
Depreciation charges - 61
Finance costs - 143
Finance income (3,610) (15,906)
(561,889) (576,064)
Increase in trade and other receivables 140 2,266
Decrease in trade and other payables 8,416 48,957
Cash used in operations (553,333) (524,841)
1) PRESENTATION OF FINANCIAL STATEMENTS
General information
KCR Residential REIT plc is a public company limited by shares incorporated in
the United Kingdom and registered in England and Wales. The address of the
registered office and company registration number is given in the Company
Information on page 1 of the financial statements. The nature of the Group's
principal activities are given in the Group Strategic Report on page 8 of the
financial statements.
Statement of compliance
The consolidated financial statements have been prepared in accordance with UK
Adopted IASs.
Functional and presentation currency
These consolidated financial statements are presented in Pounds Sterling
('£'), which is considered by the Directors to be the functional currency of
the Group and rounded to the nearest £.
Changes in accounting policies
Adoption of new and revised standards
The following accounting pronouncements and standards became effective from 1
January 2024 and have been adopted but did not have a significant impact on
the Company's financial results or position:
· Amendments to IFRS 16 - Leases on sale and leaseback
· Amendments to IAS 1 - Non-current liabilities with covenants
· Amendments to IAS 1 - Classification of liabilities as current or
non-current
· Amendments to IFRS 7 and IAS 7 - Supplier finance arrangements
New standards in issue but not yet effective
As at 30 June 2025, the Company has not applied the following new and revised
standards that have been issued but are not effective until accounting periods
beginning on or after 1 January 2025:
· Lack of exchangeability - Amendments to IAS 21 The Effects of
Changes in Foreign Exchange Rates
· Amendments to the Classification and Measurement of Financial
Instruments - Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial
Instruments: Disclosures
· Annual Improvements to IFRS Accounting Standards - Amendments to
IFRS 1, IFRS 7, IFRS 9, IFRS 10 and IAS7
· Contracts Referencing Nature-dependent Electricity - Amendments
to IFRS 9 and IFRS 7
· IFRS 18 Presentation and Disclosure in Financial Statements
· IFRS 19 Subsidiaries without Public Accountability: Disclosures
The Directors do not anticipate that the adoption of the above amendments will
have a significant impact on the financial statements of the Company in future
periods.
2) ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements have been prepared on the historical
cost basis other than as set out in the following policies.
Going concern
The financial statements have been prepared on a going concern basis. This
requires the Directors to consider, as at the date of approving the financial
statements, that there is reasonable expectation that the Group has adequate
financial resources to continue to operate, and to meet its liabilities as
they fall due for payment, for at least twelve months following the approval
of the financial statements.
The Group has undertaken procedures to ensure that the Group has sufficient
cash resources and bank facilities and with sufficient covenant margin to
manage the business under going concern principles. These procedures included
the following:
· reviewing and establishing that cash balances and bank facilities are
sufficient to cover at least twelve months of operations;
· review of financial covenant ratios and the Group's ability to meet
the covenants for a period of at least twelve months of operation; and
· reviewing cash flow forecast scenarios. Any decision on property
acquisitions and developments in the next twelve months will be taken
following review of revised cash flow forecasts.
Having reviewed the Company's current position and cash flow projections,
including the confirmation that the Company's subsidiaries, which are also
creditors as at the year-end will provide such financial support as is
required for a period of at least 12 months from the date of signing of these
financial statements, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing these financial statements.
The Company has also provided an undertaking to its subsidiaries that no
intra-group amounts owed to the Company will be called for repayment for a
period of at least 12 months from the date of approval of these financial
statements unless the subsidiary is in a position to make payments without
adversely affecting their ability to continue to trade and settle any future
obligations.
Basis of consolidation
Where the Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the statement of financial
position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained.
They are deconsolidated from the date on which control ceases.
The subsidiaries included in the consolidated financial statements, from the
effective date of acquisition, are K&C (Newbury) Limited, K&C
(Coleherne) Limited, K&C (Osprey) Limited, KCR (Kite) Limited and KCR
(Southampton) Limited.
The consolidated financial statements present the results of the Company and
its subsidiaries ("the Group") as if they formed a single entity. Intercompany
transactions and balances between group companies are therefore eliminated in
full.
Transaction costs, other than those of a capital nature and those associated
with the issue of debt or equity securities that the Group incurs in
connection with a business combination are expensed as incurred.
Investments
Investments in subsidiaries are held at cost less provision for impairment.
Revenue recognition
Revenue of the Group for the year was derived mainly from its principal
activity, being the letting to third parties of, and management of, property
assets owned by the Group. This income includes rental income, management fees
and sales commissions.
Revenue from contracts with customers is recognised when control of the
services are transferred to the customer at an amount that reflects the
consideration to which the Group expects to be entitled in exchange for those
services net of discounts, VAT and other sales-related taxes. The Group
concludes that it is the principal in its revenue arrangements, because it
typically controls the services before transferring them to the customer.
Contracts with customers do not contain a financing component or any element
of variable consideration.
In accordance with IFRS 16, rental income from operating leases is recognised
periodically in line with the time for which the property is rented. Rental
income received in advance is recognised in deferred income.
Management fees derived from the management of property assets owned by third
parties are recognised as the services are provided.
Revenue from sales commissions is recognised at the point in time when control
of the asset is transferred from the vendor to the buyer.
Revenue derived from management fees and sales commissions are recognised in
accordance with the 5 step approach in IFRS 15.
Separately disclosed items
Separately disclosed items are those that are deemed to be exceptional by size
or nature in relation to the activities of the Group. Further information can
be found in note 6 of the financial statements.
Finance costs
Finance costs comprise interest expense on borrowings.
Borrowing costs that are not directly attributable to the acquisition,
construction or production of a qualifying asset are recognised in profit or
loss as incurred.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation.
Depreciation is provided at the following annual rates in order to write off
each asset over its estimated useful life.
Fixtures and fittings - 5% and 25% on cost
Computer equipment - 25% on cost
Investment properties
Investment properties comprise properties owned by the Group which are held
for capital appreciation, rental income or both. Investment properties are
initially measured at transaction price, including expenditure that is
directly attributable to the acquisition of the asset. Investment properties
are revalued on acquisition by independent external valuers and then by the
directors or independent valuers annually thereafter. Acquisitions and
disposals are recognised on completion. Any gain or loss arising from a change
in fair value is recognised in profit or loss.
Further details of the investment property valuation methodology are contained
in note 12 of the financial statements.
Subsequent expenditure is capitalised only when it is probable that the future
economic benefits associated with the expenditure will flow to the Group.
Ongoing repairs and maintenance are expensed as incurred.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and balances held with
banking institutions.
Financial assets
Recognition and derecognition
Financial assets are recognised initially on the date that the Group becomes a
party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially all the risks
and rewards of ownership of the financial assets are transferred.
Financial assets and liabilities are offset and the net amount presented in
the statement of financial position only when the Group has a legal right to
offset the amounts and intends either to settle on a net basis or to realise
the asset and settle the liability simultaneously.
Classification and initial recognition of financial assets
Except for investment properties, which are measured at fair value through
profit or loss, and trade receivables that do not contain a significant
financing component, which are measured at the transaction price in accordance
with IFRS 9, all financial assets are initially measured at amortised cost.
Financial assets are classified into the following categories:
- Amortised cost
- Fair value through profit or loss (FVTPL)
- Fair value through other comprehensive income (FVOCI)
The classification is determined by both:
- The entity's business model for managing the asset
- The contractual cash flow characteristics of the financial asset
All income and expenses relating to financial assets that are recognised in
profit or loss are presented within finance costs, finance income or other
financial items, except for impairment of trade receivables which is presented
within administrative expenses.
Subsequent measurement of financial assets
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
- they are held within a business model whose objective is to hold
the financial assets and collect its contractual cash flows; and
- the contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on the principal
amount outstanding.
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where its effect is
immaterial. The Group's cash and cash equivalents, trade and most other
receivables fall into this category.
Investment
properties are designated as FVTPL.
Financial assets which are designated as FVTPL are measured at fair value with
gains or losses recognised in profit or loss. The fair values of financial
assets in this category are determined with reference to active market
transactions or using a valuation technique where no active market exists.
The Group do not have any financial assets which are designated as FVOCI.
Impairment of financial assets
IFRS 9's impairment requirements use forward looking information to recognise
expected credit losses - the 'expected credit loss (ECL) method'. Recognition
of credit losses is no longer dependent on first identifying a credit loss
event, but considers a broader range of information in assessing credit risk
and credit losses including past events, current conditions, reasonable and
supportable forecasts that affect the expected collectability of the future
cash flows of the instrument.
In applying this forward looking approach, a distinction is made between:
- Financial instruments that have not deteriorated significantly
in credit quality since initial recognition or that have low credit risk
('stage 1') and
- Financial instruments that have deteriorated significantly in
credit quality since initial recognition and whose credit risk is not low
('stage 2').
Stage 3 would cover financial assets that have objective evidence of
impairment at the reporting date.
12 month expected credit losses are recognised for the first category while
lifetime expected credit losses are recognised for the second category.
Measurement of the expected credit losses is determined by a
probability-weighted estimate of credit losses over the expected life of the
financial asset.
The Group makes use of a simplified approach in accounting for trade and other
debtors and records the loss allowance as lifetime expected credit losses.
These are the expected shortfalls in contractual cash flows, considering the
potential for default at any point during the life of the financial
instrument. In calculating, the Group uses its historical experience, external
indicators and forward-looking information to calculate the expected credit
losses.
Financial liabilities
Financial liabilities are recognised initially on the date that the Group
becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations
are discharged, cancelled or expire.
Financial liabilities are recognised initially at fair value adjusted for
directly attributable transaction costs. Subsequent to initial recognition,
these financial liabilities are measured at amortised cost using the effective
interest method.
'Other financial liabilities' comprise trade and other payables and other
short-term monetary liabilities.
Bank and other borrowings are initially recognised at the fair value of the
amount advanced net of any transaction costs directly attributable to the
issue of the instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost using the effective interest method. Interest
expense in this context includes initial transaction costs and premium payable
on redemption, as well as any interest or coupon payable while the liability
is outstanding.
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
Discounting is not applied if the impact is not material.
Share capital
Ordinary Shares are classified as equity. Costs directly attributable to the
issue of Ordinary Shares are recognised as a deduction from equity.
Leasing
The Group applies IFRS 16 Leases.
The Group has an operating lease concerning office premises. IFRS 16 provides
an exemption for short term operating leases and leases of low value. The
Company has taken advantage of the exemptions rather than establishing a right
to use asset.
The costs of leases of low value items and those with a short term at
inception are recognised as incurred.
The Group has no finance leases.
Taxation
Tax expense comprises current and deferred tax. Current and deferred tax is
recognised in profit or loss except to the extent that it relates to a
business combination, or items recognised directly in equity or in other
comprehensive income. As a REIT, the Group is generally not liable to
corporation tax.
Deferred tax would be recognised in respect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is
recognised for:
· temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and that
affects neither the accounting nor taxable profit or loss;
· temporary differences related to investments in subsidiaries and
jointly controlled entities to the extent that it is probable that they will
not reverse in the foreseeable future; and
· taxable temporary differences arising on the initial recognition
of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
A deferred tax asset is recognised for unused tax losses, tax credits and
deductible temporary differences to the extent that it is probable that future
taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be
realised.
Provisions
A provision is recognised if, as a result of a past event, the Group has a
present legal or constructive obligation that can be estimated reliably, and
it is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. The unwinding of
the discount is recognised as finance cost.
Critical accounting estimates and judgments
The preparation of the consolidated financial statements in conformity with UK
adopted IASs requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported amount of
assets, liabilities, income, and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future years affected.
Information about critical estimates and assumptions that have the most
significant effect on the amounts recognised in the consolidated financial
statements and/or have a significant risk of resulting in a material
adjustment within the next financial year is as follows:
§ Determination of fair values
The Group's accounting policies and disclosures require the determination of
fair value for both financial and non-financial assets and liabilities. Fair
values have been determined for measurement and/or disclosure purposes based
on the following methods.
When applicable, further information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or liability.
Investment properties
The Group's investment properties are valued on the basis of market value. The
fair value of investment properties is based either on independent
professional valuations in accordance with the Royal Institution of Chartered
Surveyors' Appraisal and Valuation Standards or by the directors based on
market prices for comparable properties and current market conditions. The
Group's investment properties were valued at 30 June 2025 at £26,528,300. See
note 12 for further details.
The Directors are of the opinion that the estimates and assumptions that they
have used in the valuation of investment properties are appropriate. Further
details of the valuation methodology are contained in note 12 of the financial
statements.
3) REVENUE
The Group is involved in UK property ownership, management and letting and is
considered to operate in a single geographical and business segment.
The total revenue of the Group for the year was derived from its principal
activities, being the letting to third parties of, and management of, property
assets owned by the Group, and, in certain cases, the management of property
assets owned by third parties.
The Group's investment property consists of residential housing for the
private rented sector and therefore has multiple tenants and as a result does
not have any significant customers.
2025 2024
£ £
Revenue analysed by class of business
Rental income 1,646,669 1,568,175
Management fees 120,868 113,792
Resale commission 77,140 42,740
Ground rents 12,725 12,895
Leasehold extension income 19,662 51,935
Other income 8,080 6,569
1,885,144 1,796,106
4) EMPLOYEES AND DIRECTORS
Group
2025 2024
£ £
Wages and salaries 314,610 308,391
Social security costs 21,452 28,061
Pension costs 4,663 4,572
340,725 341,024
The average monthly number of employees during the year was as follows:
2025 2024
Directors and management 5 4
Administration 3 4
8 8
2025 2024
£ £
Directors' remuneration (as per Report of the Directors) 194,000 193,000
Remuneration of the highest-paid director 115,000 115,000
The Group Directors are considered to be key management personnel.
Company
2025 2024
£ £
Wages and salaries 234,469 238,282
Social security costs 13,923 22,378
248,392 260,660
The average monthly number of employees during the year was as follows
Directors and management 4 4
5) FINANCE COSTS AND INCOME
2025 2024
£ £
Finance costs
Loan interest 683,567 584,840
Finance income
Interest 21,195 21,309
6) LOSS BEFORE TAXATION
The loss before taxation is stated after charging:
2025 2024
£ £
Hire of plant and machinery - low value leases - 2,090
Other short term operating leases 13,140 13,140
Depreciation - owned assets 76,373 76,435
Auditors' remuneration for the Group 72,000 72,000
Separately disclosed items
The Group undertook substantial refurbishment work to investment properties
owned by K&C (Coleherne) Limited and K&C (Osprey) Limited. The costs
incurred in the 2025 financial year amounted to £184,244 (2024: £67,867).
Also during the year, KCR (Kite) Limited began the process of applying for
planning permission in respect of intended works to take please, these costs
amounted to £18,885 (2024: £nil).
Also, during the year, the Group obtained new financing from Al Rayan Bank, in
order to repay the loans held with Hodge Bank. The costs of refinancing the
loans, borrowed by K&C (Coleherne) Limited and KCR (Kite) Limited totalled
£73,694 (2024: £nil).
It is considered that the size and nature of these costs are such that they
should be disclosed on the face of the Consolidated Statement of Comprehensive
Income.
7) TAXATION
Analysis of tax
2025 2024
Current tax £ £
UK corporation tax - -
Deferred tax - -
Total tax - -
Factors affecting the tax expense
The tax assessed for the year is different to the standard rate of corporation
tax in the UK. The difference is explained below:
2025 2024
£ £
Profit/(loss) on ordinary activities before taxation 327,641 (1,186,075)
Profit/(loss) on ordinary activities multiplied by the standard rate of
corporation tax in the UK of 25% (2024: 19%)
81,910 (225,354)
Effects of
Income and expenses not taxable (81,910) 225,354
Tax credit - -
In April 2023, the UK government increased the standard corporate tax rate
from 19% to 25% for companies with profits in excess of £250,000. As the
Group made less than £50,000 taxable profit in 2024, the small profits rate
of 19% was used in the above reconciliation.
The Group has remained under the REIT regime throughout the year and since the
statement of financial position date.
8) LOSS PER SHARE AND NET ASSET VALUE
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of Ordinary Shares
outstanding during the year.
Fully diluted earnings per share is
calculated using the weighted average number of shares adjusted to assume the
conversion of all dilutive potential Ordinary Shares.
2025
Profit Weighted average number of shares Per share amount
£ No Pence
Profit attributable to ordinary shareholders 327,641 41,669,631 0.79
2024
Loss Weighted average number of shares Per share amount
£ No Pence
Loss attributable to ordinary shareholders (1,186,075) 41,669,631 (2.85)
Diluted loss per share
2025
Profit Weighted average number of shares Per share amount
£ No Pence
Profit attributable to ordinary shareholders 327,641 41,669,631 0.79
2024
Loss Weighted average number of shares Per share amount
£ No Pence
Loss attributable to ordinary shareholders (1,186,075) 41,669,631 (2.85)
The weighted average number of shares used to calculate the diluted
profit/(loss) per share includes share options in issue during the financial
year. No share options were in issue during the 2024 or 2025 financial year.
The net asset value is calculated by dividing the equity attributable to
ordinary shareholders by the number of Ordinary Shares in issue at the
statement of financial position date.
2025
Equity Number of shares Per share amount
£ No Pence
Net asset value 12,650,767 41,669,631 30.36
2024
Equity Number of shares Per share amount
£ No Pence
Net asset value 12,323,126 41,669,631 29.57
9) OPERATING LEASES RECEIVABLE
The Group leases residential units within certain of its investment properties
under operating leases. The future minimum lease payments receivable under
non-cancellable leases are as follows:
30 June 30 June
2025
2024
£ £
Within one year 638,770 440,629
Between one and five years 130,680 150,564
More than 5 years 5,352 15,912
Total 774,802 607,105
Lease revenue is generated from properties owned by K&C (Coleherne)
Limited, KCR (Southampton) Limited and KCR (Kite) Limited that are let on
short-term tenancy agreements.
10) LEASING AGREEMENTS
Minimum lease payments, under non-cancellable operating leases, fall due as
follows:
30 June 30 June
2025
2024
£ £
Within one year 13,140 13,140
Between one and five years 3,285 3,285
Total 16,425 16,425
11) PROPERTY, PLANT AND EQUIPMENT
GROUP Fixtures, fittings & computer equipment
£
COST
At 1 July 2023 362,344
Additions 40,892
At 30 June 2024 and 30 June 2025 403,236
DEPRECIATION
At 1 July 2023 159,125
Charge for year 76,435
At 30 June 2024 235,560
Charge for year 76,373
At 30 June 2025 311,933
NET BOOK VALUE
At 30 June 2025 91,303
At 30 June 2024 167,676
COMPANY Fixtures, fittings & computer equipment
£
COST
At 1 July 2023, 30 June 2024 and 30 June 2025 7,516
DEPRECIATION
At 1 July 2023 7,455
Charge for year 61
At 30 June 2024 and 30 June 2025 7,516
NET BOOK VALUE
At 30 June 2025 -
At 30 June 2024 -
12) INVESTMENT PROPERTIES
GROUP Total
£
COST OR VALUATION
At 1 July 2023 25,835,300
Revaluations (679,000)
At 30 June 2024 25,156,300
Additions 210,000
Revaluations 1,162,000
At 30 June 2025 26,528,300
At 30 June 2024 25,156,300
The investment properties at Coleherne Road and Ladbroke Grove were valued by
independent external valuers in March 2025. The properties were subject to
full valuations. The property at Deanery Court was valued by independent
external valuers in July 2025 with valuation date being 30 June 2025. The
property was subject to a desktop valuation. The external valuations were
carried out in accordance with the Royal Institution of Chartered Surveyors'
Valuation - Global Standards (Red Book).
The majority of the Osprey investment properties were valued by the Directors
at 30 June 2025 with reference to independent external valuations performed in
March, June and September 2025. Properties at Heathside were subject to a full
valuation in September 2025. The external valuations were carried out in
accordance with the Royal Institution of Chartered Surveyors' Valuation -
Global Standards (Red Book).
A number of low value properties (less than 8% of the total investment
property value) within the Osprey portfolio were valued by the Directors with
reference to independent valuations completed in August 2023 and the market
commentary contained within the independent external valuations performed in
March, June and September 2025.
The Directors determined that there were no material factors that would give
rise to there being a material variance between the latest external valuations
and the fair value as at 30 June 2025. The valuation of the investment
properties was £26,528,300, which was included in the financial statements.
Fair value is based on current prices in an active market for similar
properties in the same location and condition. The current price is the
estimated amount for which a property could be exchanged between a willing
buyer and willing seller in an arm's length transaction after proper marketing
wherein the parties had each acted knowledgeably, prudently and without
compulsion.
Valuations are based on a market approach which provides an indicative value
by comparing the property with other similar properties for which price
information is available. Comparisons have been adjusted to reflect
differences in age, size, condition, location and any other relevant factors.
The fair value for investment properties has been categorised as Level 3
inputs under IFRS 13. The valuer visited all material properties where full
valuations were carried out in the current and previous year and these
valuations were based on both internal and external site visits.
The valuation technique used in measuring the fair value, as well as the
significant inputs and significant unobservable inputs are summarised in the
table below:
Fair Value Hierarchy Valuation Technique Significant Inputs Used Significant Unobservable Inputs
Level 3 Income capitalisation and or capital value on a per square foot basis Adopted gross yield 4.00% to 7.87%
Adopted rate per square foot £265 - £1,464
The fair value would increase if market rents were higher and/or the rates per
square foot were higher and/or capitalisation rates were lower. If the gross
yield of the investment properties decreased by 1% but rental income remained
consistent, then the fair value of the properties would increase by
approximately £4,985,775.
The fair values would decrease if market rents were lower and/or the rates per
square foot were lower and/or capitalisation rates were higher. If the gross
yield of the investment properties increased by 1% but rental income remained
consistent, then the fair value of the properties would decrease by
approximately £3,497,638.
If properties had been included on a historical cost basis, the cost of the
properties at 30 June 2025 would have been £23,061,113 (2024: £22,851,113).
The revenue earned by the Group from its investment properties and all direct
operating expenses incurred on its investment properties are recorded in the
Consolidated Statement of Comprehensive Income.
The total rental income in relation to investment properties for the Group
equated to £1,646,669 (2024: £1,568,175). The total rental expenses in
relation to investment properties for the Group equated to £419,046 (2024:
£346,194).
Included within Investment Properties are leasehold properties valued at
£5,965,000 and freehold properties valued at £20,563,300 (2024: £5,965,000
and £19,191,300 respectively).
13) INVESTMENTS
Company Shares in group undertakings
£
COST
At 1 July 2023 and 30 June 2024 10,706,081
Impairment -
At 30 June 2025 10,706,081
As at 30 June 2025, the Company's investments comprise the following:
Subsidiaries Holding (%)
K&C (Coleherne) Limited Registered office: UK
Nature of business: Property letting Class of shares: Ordinary 100.00
K&C (Osprey) Limited Registered office: UK
Nature of business: Property letting Class of shares: Ordinary 100.00
KCR (Kite) Limited Registered office: UK
Nature of business: Property letting Class of shares: Ordinary 100.00
KCR (Southampton) Limited Registered office: UK
Nature of business: Property letting Class of shares: Ordinary 100.00
K&C (Newbury) Limited Registered office: UK
Nature of business: Dormant Class of shares: Ordinary 100.00
All of the above companies are registered at Gladstone House, 77-79 High
Street, Egham, Surrey, TW20 9HY.
14) TRADE AND OTHER RECEIVABLES
Group Company
2025 2024 2025 2024
£ £ £ £
Trade debtors 31,854 20,081 - -
Amounts owed by group undertakings - - 3,481,250 3,313,863
Other debtors 201,661 180,266 - -
Accrued income 88,961 146,167 - -
Prepayments 194,448 109,031 11,313 11,453
516,924 455,545 3,492,563 3,325,316
The Group and Company's exposure to credit risk is disclosed in note 20.
There is no material difference between the fair value of trade and other
receivables and their book value.
All receivables are due within 12 months of 30 June 2025. None of those
receivables has been subject to a significant increase in credit risk since
initial recognition and, consequently, no expected credit losses have been
recognised.
15) CASH AND CASH EQUIVALENTS
Group Company
2025 2024 2025 2024
£ £ £ £
Cash in hand 42 44 - -
Bank accounts 174,270 931,551 35,221 814,409
174,312 931,595 35,221 814,409
16) SHARE CAPITAL
Allotted, issued and fully paid
Number Class Nominal value 30 June 30 June
2025
2024
£ £
41,669,631 Ordinary £0.10 4,166,963 4,166,963
4,166,963 4,166,963
2025 2025 2024 Number 2024
Number £ £
Ordinary shares of £0.10 each
At 1 July 41,669,631 4,166,963 41,669,631 4,166,963
Shares issued - - - -
At 30 June 41,669,631 4,166,963 41,669,631 4,166,963
17) TRADE AND OTHER PAYABLES
Group Company
2025 2024 2025 2024
Current £ £ £ £
Trade creditors 149,679 78,353 39,972 5,563
Amounts owed to group undertakings - - 6,794,535 6,856,613
Other taxes and social security 18,234 51,851 5,031 36,716
Other creditors 6,763 14,258 - 13,719
Accruals and deferred income 349,431 339,204 232,400 212,989
524,107 483,666 7,071,938 7,125,600
The Group and Company exposure to liquidity risk related to trade and other
payables is disclosed in note 20.
There is no material difference between the fair value of trade and other
payables and their book value.
Amounts owed to group undertakings are repayable on demand.
18) FINANCIAL LIABILITIES - BORROWINGS
Group Company
2025 2024 2025 2024
£ £ £ £
Non-current
Bank loans 10,854,750 10,623,109 - -
Other loans 3,281,215 3,281,215 - -
14,135,965 13,904,324 - -
Terms and debt repayment schedule (including interest)
2025
1 year or less More than 1-2 years More than 2-5 years More than 5 years Totals
Group £ £ £ £ £
Bank loans 663,642 663,642 12,581,076 - 13,908,360
Other loans 116,483 116,483 3,436,526 - 3,669,492
780,125 780,125 16,017,602 - 17,577,852
2024
1 year or less More than 1-2 years More than 2-5 years More than 5 years Totals
Group £ £ £ £ £
Bank loans 556,187 565,710 4,701,880 13,363,871 19,187,648
Other loans 116,483 116,483 3,553,009 - 3,785,975
672,670 682,193 8,254,889 13,363,871 22,973,623
Details of the principal loans are as follows:
a) In 2024 financial year the K&C (Osprey)
Limited entered into a new 5 year fixed rate facility of £3,004,750 with
Secure Trust Bank Plc. The borrowing was used to refinance the existing
facility and provide additional capital to support activities. The facility is
repayable by 60 monthly interest-only instalments and a final instalment of
£3,004,750. The fixed rate of interest on the loan is 6.15%. The loan is
secured by a charge and debenture over all the property and assets of the
Company, including the property known as Heathside, 562 Finchley Road.
b) On 4 December 2018, KCR (Southampton) Limited took
out a loan of £3,184,250, with Lendco Limited. The term of the loan was 10
years. The monthly instalments were interest payments and did not include any
capital repayments. Interest was charged at 3.19% for the first 24 months.
Interest for the remainder of the term was charged at 4.79% above LIBOR. The
loan was refinanced in October 2021 at an amount of £3,281,215. Following the
refinancing, the term of the loan was 7 years. The monthly instalments remain
interest payments and do not include any capital repayments. Interest is
charged at 3.55%. The loan is secured by a first legal mortgage and a first
fixed charge over the land at Block B, Chapel Riverside, Endle Street,
Southampton. The balance outstanding at 30 June 2025 was £3,281,215.
c) On 10 February 2020, K&C (Coleherne) Limited
took out a loan of £2,743,359 with Hodge Bank. The term of the loan was 25
years. The monthly instalments were interest payments and did not include any
capital repayments. Interest was charged at 3.5 per cent. for the first 60
months. After this period the interest rate charged was a standard variable
rate. The loan was secured by a freehold charge over 25 Coleherne Road. During
the 2025 financial year, the loan was repaid in full upon refinancing with Al
Rayan (see point e below).
d) On 10 February 2020, KCR (Kite) Limited took out a
loan of £5,124,810 with Hodge Bank. The term of the loan was 25 years. The
monthly instalments were interest payments and did not include any capital
repayments. Interest was charged at 3.5 per cent. for the first 60 months.
After this period the interest rate charged was a standard variable rate. In
August 2021, the Company made a repayment of £249,810, following the sale of
9 Lomond Court. During the 2025 financial year, the loan was repaid in full
upon refinancing with Al Rayan (see point e below).
e) On 16 April 2025, K&C (Coleherne) Limited and
KCR (Kite) Limited entered a Commodity Murabaha Agreement with Al Rayan Bank
plc. The companies drew down £7,850,000 from this facility which was used to
settle the loans with Hodge Bank. The balance of £7,850,000 is repayable by
16 April 2031. The loan is secured by debenture over all assets and property
of the company, and a cross guarantee with K&C (Coleherne) Limited and KCR
(Kite) Limited. The charges payable on the agreement are charged at a fixed
rate of 6.1% per annum.
Reconciliation of net movement in financial instruments
Group
Loans received in year Other non-cash movement Net cash
Net cash at 1 July 2024 Cash flow Repayments in year at 30 June 2025
£ £ £ £ £
Cash at bank and in hand 931,595 (757,283) - - - 174,312
Borrowings (13,904,324) - (7,850,000) 7,618,359 - (14,135,965)
Total financial liabilities
(12,972,729) (757,283) (7,850,000) 7,618,359 - (13,961,653)
Loans received in year Other Net cash
Net cash at 1 July 2023 Cash flow Repayments in year non-cash movement at 30 June 2024
£ £ £ £ £
Cash at bank and in hand 980,848 (49,253) - - - 931,595
Borrowings (13,274,574) - (3,004,750) 2,375,000 - (13,904,324)
Total financial liabilities
(12,293,726) (49,253) (3,004,750) 2,375,000 - (12,972,729)
Company
Other
Net cash at 1 July 2024 Repayments in year non-cash movement Net cash
Cash flow at 30 June 2025
£ £ £ £ £
Cash at bank and in hand 814,409 (779,188) - - 35,221
Total financial liabilities 814,409 (779,188) - - 35,221
Other
Net cash at 1 July 2023 Repayments in year non-cash movement Net cash
Cash flow at 30 June 2024
£ £ £ £ £
Cash at bank and in hand 771,871 42,538 - - 814,409
Total financial liabilities 771,871 42,538 - - 814,409
19) FINANCIAL INSTRUMENTS
The Group's financial assets, as defined under IFRS 9, and their estimated
carrying amount are as follows:
Group Company
2025 2024 2025 2024
£ £ £ £
Carrying amount of financial assets at amortised cost
Trade and other receivables 322,476 346,514 3,481,250 3,313,863
Cash at bank and in hand 174,312 931,595 35,221 814,409
The Group's financial liabilities, as defined under IFRS 9, and their
estimated carrying amount are as follows:
Group Company
2025 2024 2025 2024
£ £ £ £
Carrying amount of financial liabilities at amortised cost
Trade and other payables 524,107 483,666 7,107,170 7,125,600
Borrowings 14,135,965 13,904,324 - -
20) FINANCIAL RISK MANAGEMENT
The Company's Directors have overall responsibility for the establishment and
oversight of the Group's risk management framework.
The Company's and Group's risk management policies are established to identify
and analyse the risks faced by the Company and Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect the changes
in market conditions and the Group's activities. The Company and Group,
through its training and management standards and procedures, aims to develop
a disciplined and constructive control environment in which all employees
understand their roles and obligations.
The Company and Group has exposure to the following risks arising from
financial instruments:
o credit risk
o liquidity risk
o market risk
Capital risk management
The Company and Group's objective when managing capital is to safeguard its
accumulated capital in order to provide an adequate return to shareholders by
maintaining a sufficient level of funds, in order to support continued
operations.
The Company and Group considers its capital to comprise equity capital less
accumulated losses.
The share premium reserve includes premiums received on the issue of share
capital during the year.
K&C (Osprey) Limited refinanced their loan portfolio in the 2024 financial
year. As a result, the Group entered into a new loan agreement with Secure
Trust. The total loans with Secure Trust at 30 June 2025 totalled £3,004,750.
The loan agreement contains the following covenants:
o interest cover in respect of any interest period shall not be less than
1.40:1; and
o the loan to value will not at any time exceed 60%.
K&C (Coleherne) Limited and KCR (Kite) Limited refinanced their loan
portfolio in the 2025 financial year. As a result, the Group entered into a
new Commodity Murabaha agreement with Al-Rayan Bank plc. The total borrowings
with Al Rayan Bank plc at 30 June 2025 totalled £7,850,000. The agreement
contains the following covenants:
o finance cover ratio shall not be less than 1.25:1; and
o the borrowings to value will not at any time exceed 70%.
There have been no breaches of covenants during the financial year or since
the balance sheet date.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations.
The Group has no significant concentration of credit risk, with exposure
spread over a large number of counterparties and customers.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk is as reported in the statement
of financial position.
The Group undertakes credit checks on prospective new tenants to assess and
mitigate credit risk. The checks include verification of income levels and
capacity to pay, as well as checks of rental references. Any arrears are
actively managed. The Group mitigates credit risk with regard to cash and cash
equivalents by using banks with a credit rating of B or above.
Liquidity risk
Liquidity risk is the risk that the Company and Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset.
The Company's and Group's approach to managing liquidity is to ensure, as far
as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Company's and Group's
reputation.
The contractual maturities of financial liabilities are disclosed in note 18.
Liquidity risk is not deemed to be significant as the company has a
significant amount of current assets, including a balance owed by the parent
company, which they can draw against as and when funds are required.
Market risk
Market risk is the risk that changes in market prices, such as interest rate
and equity prices will affect the Group and the Company's income or the value
of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposure within acceptable
parameters, while optimising the return.
The Group is exposed to interest rate risk in respect of its borrowings. The
Group mitigates this risk by, securing facilities at a fixed interest rate
where considered appropriate to do so.
Sensitivity
Interest rate sensitivity:
At 30 June 2025, if interest rates had been 0.5 of a percentage point higher
and all other variables were held constant, it is estimated that the Group's
profit before tax would decrease to £260,793 (2024: loss of £1,251,917).
This is attributable to the Group's exposure on its borrowings and is based
on the change taking place at the beginning of the financial year and held
constant throughout the reporting period.
21) RELATED PARTY TRANSACTIONS
During the year, remuneration paid to Russell Naylor consisted of fees of
£48,000 charged by Naylor Partners, a business in which Russell Naylor is a
director (2024: £48,000). A provision of £12,000 (2024: £12,000) for a
catch-up payment incentive which will be due when the business achieves
cash-flow break-even is also included in the financial statements.
Further details of total Director remuneration is contained with the Report of
the Directors. Christopher James is also considered as key management
personnel. His remuneration in the period totalled £100,000 (2024:
£100,000), which includes a provision of £7,500 (2024: £5,000) a catch-up
payment incentive which will be due when the business achieves cash-flow
break-even.
22) ULTIMATE CONTROLLING PARTY
The parent company of Torchlight Fund LP, and the ultimate parent company of
KCR Residential REIT plc, is Pyne Gould Corporation Limited. The results of
the Group are consolidated in the financial statements of Pyne Gould
Corporation Limited. The financial statements are available at
http://www.pgc.co.nz/
(https://protect-eu.mimecast.com/s/q1eXCp88QU5RAkWiPOl3a?domain=pgc.co.nz/) .
The ultimate controlling party of Pyne Gould Corporation Limited is George
Kerr.
23) POST-BALANCE SHEET EVENTS
On 15 October 2025 the Secure Trust funding was increased by £425k to support
ongoing Group activities including incremental acquisitions within the
Heathside property. Increased funding has been provided on the same terms
and conditions as the existing facility with no extension to maturity of the
facility.
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