TIDMHCFT
RNS Number : 5149D
Highcroft Investments PLC
24 March 2011
Highcroft Investments PLC
Preliminary results for the year ended 31 December 2010
KEY HIGHLIGHTS
-- Gross property income increased by 5.7% to GBP2,053,000
-- Profit for the year on revenue activities up 17.7% to
GBP1,965,000
-- Adjusted earnings per share (on revenue activities) up 17.6%
to 38p
-- Net asset value per share up 7.5% to 716p
-- Total property income distribution up 10% to 28.6p per
share
-- Cash and liquid equity investments GBP8,080,000 (2009:
GBP8,343,000)
Enquiries:
Highcroft Investments PLC
John Hewitt / Roberta Miles 01865 840023
Charles Stanley Securities
Dugald J. Carlean / Karri Vuori 0207 149 6000
I am pleased to introduce our Preliminary Results for the year
ended 31 December 2010 - a year which saw us making modest progress
in a number of areas against a continuing difficult background. The
highlights were a recovery in our gross property income and in our
net asset value and a further advance in distributions to
shareholders.
The background remained very muted in terms of the national
economy with action to reduce the Government deficit and the still
delicate position of much of the Banking industry impacting on
consumer confidence, borrowing and general property activity and
values. As far as the latter is concerned, the recovery seen in the
first half of 2010 tended to tail away in the second part of the
year and, as I write, market forecasts for 2011 and beyond continue
to be guarded.
In such circumstances, we have benefited from the above average
quality of our portfolio (which is focused on the relatively
prosperous areas in South East England) and some good asset
management therein. The latter includes successful rent reviews,
lease extensions, progress on voids and continued close attention
to the financial health of our current and prospective tenants. The
latter is an important point given the latest statistics showing
that nationally there is a 14% void rate in High Street shops and
challenges facing retailers. I am pleased to report that we have no
significant rent arrears and that the credit score across our
portfolio is 84 - a very respectable rating and some seven points
higher than a year ago.
If there is an area of disappointment, it is that we have been
unable to make more than a modest addition to our property
portfolio - a freehold industrial unit at Leamington Spa which we
acquired at the end of the year. The lease length, 6.5% yield, and
the financial strength of the tenant means this acquisition fits
well into our portfolio strategy. Some of the work done in 2010
will, hopefully, benefit the current year in terms of potential
acquisitions during 2011. I am pleased to confirm that we have, in
2011, exchanged an agreement to lease on our Yeovil property and
completed the sale of two of our residential properties.
Financial results - revenue activities
Gross income, being gross rental and dividend revenue for the
year ended 31 December 2010 was GBP2,287,000 (2009
GBP2,235,000).
Underlying commercial property income has risen in 2010 because
the Warrington property that was void for the majority of 2009 is
now fully let, and there was the benefit of higher income from rent
reviews. Since the year end an agreement for lease has been signed
for our Yeovil property.
Residential property income reduced in 2010 relative to 2009
because of the sale of one property in the first quarter of 2010,
one property being void throughout 2010, and two others becoming
empty during the year. Of these three empty properties the sales of
two have completed in January 2011.
The 2010 income from equity investments fell primarily because
of the reduced weighting of equities in our portfolio of
assets.
Financial results - capital activities
Our commercial property values held up well and we experienced a
lower level of voids than did the market at large. There was a net
valuation gain on the property portfolio of GBP1,577,000 and, after
one acquisition and one residential disposal, the value of the
portfolio was GBP30.7 million (2009 GBP27.8 million). We generated
GBP2,298,000 net cashflow from the equity portfolio and used this
to fund a new property purchase and to enhance our cash reserves.
At the year end our remaining equities were valued at GBP5.6m
representing 15% (2009 21%) of total investments. The board will
continue to monitor the condition of the equity and property
markets in 2011 and would consider making a further transfer of
funds out of the equity investment portfolio and into the property
portfolio, consistent with maintaining a lower risk profile.
Summary
The net asset value per share rose by 7.5% to 716p (2009 666p).
Total shareholders' funds were GBP37,002,000 (2009
GBP34,435,000).
The profit for the year after tax on revenue activities
increased to GBP1,965,000 (2009 GBP1,670,000) and this enables us
to increase the total property income distribution to 28.6p per
share (2009 26.0p), of which 11p (2009 10p) was paid in October
2010 and 17.6p (2009 16p) will be paid on 2 June 2011. The basic
earnings per share, which take account of capital activities, was
76.7p (2009 76.2p) and the adjusted earnings per share, adjusted to
take out the effect of capital activities, increased 17.6% to 38.0p
per share (2009 32.3p per share).
Current trading and prospects
We hope that our sound year-end financial position with no
gearing, and cash and liquid equity investments of GBP8,080,000
will enable us to take advantage of the increasing number of
properties which seem likely to be coming to the market in the
coming months.
J HEWITT
Chairman
23 March 2011
Consolidated statement of comprehensive income
for the year ended 31 December 2010
Note 2010 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross rental
revenue 2,053 - 2,053 1,943 - 1,943
Property
operating
expenses (245) - (245) (253) - (253)
-------- -------- -------- -------- -------- --------
Net rental
revenue 1,808 - 1,808 1,690 - 1,690
-------- -------- -------- -------- -------- --------
Realised gains on
investment
property 108 - 108 - - -
Realised losses
on investment
property (8) - (8) - - -
-------- -------- -------- -------- -------- --------
Net gains on
investment
property 100 - 100 - - -
-------- -------- -------- -------- -------- --------
Valuation gains
on investment
property - 1,735 1,735 - 1,616 1,616
Valuation losses
on investment
property - (158) (158) - (416) (416)
-------- -------- -------- -------- -------- --------
Net valuation
gains on
investment
property - 1,577 1,577 - 1,200 1,200
-------- -------- -------- -------- -------- --------
Dividend revenue 234 - 234 292 - 292
Gains on equity
investments - 718 718 - 1,679 1,679
Losses on equity
investments - (209) (209) - (234) (234)
-------- -------- -------- -------- -------- --------
Net investment
income 234 509 743 292 1,445 1,737
-------- -------- -------- -------- -------- --------
Administration
expenses (330) - (330) (283) - (283)
-------- -------- -------- -------- -------- --------
Net operating
profit before
net finance
income/(expense) 1,812 2,086 3,898 1,699 2,645 4,344
-------- -------- -------- -------- -------- --------
Finance income 10 - 10 2 - 2
Finance expenses (1) - (1) (20) - (20)
-------- -------- -------- -------- -------- --------
Net finance
income/(expense) 9 - 9 (18) - (18)
-------- -------- -------- -------- -------- --------
Profit before tax 1,821 2,086 3,907 1,681 2,645 4,326
Income tax
credit/(expense) 1 144 (89) 55 (11) (377) (388)
Total profit and
comprehensive
income for the
year 1,965 1,997 3,962 1,670 2,268 3,938
-------- -------- -------- -------- -------- --------
Basic and diluted 3 38.0p 38.7p 76.7p 32.3p 43.9p 76.2p
earnings per
share
Consolidated statement of financial position
at 31 December 2010
Note 2010 2009
GBP'000 GBP'000
Assets
Non-current assets
Investment property 4 30,705 27,825
Equity investments 5 5,608 7,397
-------- --------
Total non-current assets 36,313 35,222
-------- --------
Current assets
Trade and other receivables 93 103
Cash and cash equivalents 2,472 946
Total current assets 2,565 1,049
Total assets 38,878 36,271
-------- --------
Liabilities
Current liabilities
Current income tax 215 90
Trade and other payables 897 777
-------- --------
Total current liabilities 1,112 867
-------- --------
Non-current liabilities
Deferred tax liabilities 764 969
-------- --------
Total non-current liabilities 764 969
-------- --------
Total liabilities 1,876 1,836
-------- --------
Net assets 37,002 34,435
Equity
Issued share capital 1,292 1,292
Revaluation reserve - property 6,670 5,696
- other 1,750 2,656
Capital redemption reserve 95 95
Realised capital reserve 19,810 18,229
Retained earnings 7,385 6,467
Total equity 37,002 34,435
Consolidated statement of changes in equity
Revaluation
2010 reserves Capital Realised Retained
Equity Property Other redemption capital earnings Total
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2010 1,292 5,696 2,656 95 18,229 6,467 34,435
Dividends - - - - - (1,395) (1,395)
-------- --------- -------- ----------- --------- --------- --------
Transactions with
owners - - - - - (1,395) (1,395)
-------- --------- -------- ----------- --------- --------- --------
Profit for the
year - - - - - 3,962 3,962
Reserve transfers:
Non-distributable
items recognised
in income
statement:
Revaluation gains - 1,577 572 - - (2,149) -
Tax on revaluation
gains/(losses) - - (93) - - 93 -
Realised gains - - - - (58) 58 -
Surplus
attributable to
assets sold in
the year - (254) (1,385) - 1,639 - -
Excess of cost
over revalued
amount taken to
retained earnings - (349) - - - 349 -
-------- --------- -------- ----------- --------- --------- --------
Total
comprehensive
income for the
year - 974 (906) - 1,581 2,313 3,962
-------- --------- -------- ----------- --------- --------- --------
At 31 December
2010 1,292 6,670 1,750 95 19,810 7,385 37,002
======== ========= ======== =========== ========= ========= ========
Revaluation
2009 reserves Capital Realised Retained
Equity Property Other redemption capital earnings Total
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2009 1,292 4,080 2,137 95 17,773 6,227 31,604
Dividends - - - - - (1,107) (1,107)
Transactions with
owners - - - - - (1,107) (1,107)
-------- --------- -------- ----------- --------- --------- --------
Loss for the year - - - - - 3,938 3,938
Reserve transfers:
Non-distributable
items recognised
in income
statement:
Revaluation gains - 1,200 1,230 - - (2,430) -
Tax on revaluation
(losses)/gains - - (343) - - 343 -
Realised gains - - - - 88 (88) -
Surplus
attributable to
assets sold in
the year - - (368) - 368 - -
Excess of cost
over revalued
amount taken to
retained earnings - 416 - - - (416) -
Total
comprehensive
income for the
year - 1,616 519 - 456 1,347 3,938
-------- --------- -------- ----------- --------- --------- --------
At 31 December
2009 1,292 5,696 2,656 95 18,229 6,467 34,435
======== ========= ======== =========== ========= ========= ========
Consolidated statement of cash flows
for the year ended 31 December 2010
2010 2009
GBP'000 GBP'000
Operating activities
Profit for the year 3,962 3,938
Adjustments for:
Net valuation gains on investment
property (1,577) (1,200)
Gain on disposal of investment property (100) -
Gain on investments (509) (1,445)
Finance income (10) (2)
Finance expense 1 20
Income tax (credit)/expense (55) 388
-------- --------
Operating cash flow before changes
in working capital and provisions 1,712 1,699
Decrease in trade and other receivables 10 120
Increase/(decrease) in trade and
other payables 120 (49)
-------- --------
Cash generated from operations 1,842 1,770
Finance income 10 2
Finance expenses (1) (20)
Income taxes paid (25) (457)
-------- --------
Net cash flows from operating activities 1,826 1,295
-------- --------
Investing activities
Purchase of non-current assets -
investment property (1,558) (281)
- equity investments (1,028) (515)
Sale of non-current assets - investment
property 355 -
- equity investments 3,326 1,845
-------- --------
Net cash flows from investing activities 1,095 1,049
-------- --------
Financing activities
Loan repayments - (1,254)
Dividends paid (1,395) (1,107)
-------- --------
Net cash flows from financing activities (1,395) (2,361)
-------- --------
Net increase/(decrease) in cash
and cash equivalents 1,526 (17)
Cash and cash equivalents at 1 January
2010 946 963
-------- --------
Cash and cash equivalents at 31
December 2010 2,472 946
-------- --------
Notes
for the year ended 31 December 2010
1 Income tax (credit)/expense
2010 2009
GBP'000 GBP'000
Current tax:
On revenue profits (60) -
On capital profits (19) 34
Prior year (over)/underprovision (69) 11
-------- --------
(148) 45
Deferred tax 93 343
-------- --------
Income tax (credit)/expense (55) 388
-------- --------
The tax assessed for the year differs from the standard rate of
corporation tax in the UK of 28% (2009 28%). The differences are
explained as follows:
2010 2009
GBP'000 GBP'000
Profit before tax 3,907 4,326
----------- -----------
Profit before tax multiplied by standard
rate of corporation tax in the UK
of 28% (2009 28%). 1,094 1,211
Effect of:
Tax exempt revenues (66) (66)
Profit not taxable as a result of
REIT conversion (976) (809)
Chargeable gains/losses (more)/less
than accounting profit (38) 41
Adjustments to tax charge in respect
of prior periods (69) 11
Income tax (credit)/expense (55) 388
----------- -----------
2 Dividends
In 2010 the following dividends have been paid by the
company.
2010 2009
GBP'000 GBP'000
2009 Final: 16.0p per ordinary share
(2008 11.4p) 827 589
2010 Interim: 11.0p per ordinary
share (2009 10.0p) 568 518
----------- -----------
1,395 1,107
----------- -----------
On 23 March 2011 the directors declared a property income
distribution of 17.6p per share (2009 16.0p) payable on 2 June 2011
to shareholders registered at 6 May 2011.
3 Earnings per share
The calculation of earnings per share is based on the total
profit for the year of GBP3,962,000 (2009 GBP3,938,000) and on
5,167,240 shares (2009 5,167,240) which is the weighted average
number of shares in issue during the year ended 31 December 2010
and throughout the period since 1 January 2010. There are no
dilutive instruments.
In order to draw attention to the impact of valuation gains and
losses which are included in the income statement but not available
for distribution under the company's articles of association, an
adjusted earnings per share based on the profit available for
distribution of GBP1,965,000 (2009 GBP1,670,000) has been
calculated.
2010 2009
GBP'000 GBP'000
Earnings:
Basic profit for the year 3,962 3,938
Adjustments for:
Net valuation gains on investment
property (1,577) (1,200)
Gains on investments (509) (1,445)
Income tax on gains 89 377
----------- -----------
Adjusted earnings 1,965 1,670
----------- -----------
Per share amount:
Profit per share 76.7p 76.2p
Adjustments for:
Net valuation gains on investment
property (30.5p) (23.2p)
Gains on investments (9.9p) (28.0p)
Income tax on gains 1.7p 7.3p
----------- -----------
Adjusted earnings per share 38.0p 32.3p
----------- -----------
4 Investment property
2010 2009
GBP'000 GBP'000
Valuation at 1 January 27,825 26,344
Additions 1,558 281
Disposals (255) -
Revaluation gains 1,577 1,200
----------- -----------
Valuation at 31 December 30,705 27,825
----------- -----------
In accordance with IAS 40 the carrying value of investment
properties is the fair value of the property as determined by Jones
Lang LaSalle. The valuation has been conducted by them as external
valuers and has been prepared as at 31 December 2010, in accordance
with the Appraisal & Valuation Standards of the Royal
Institution of Chartered Surveyors, on the basis of market value.
This value has been incorporated into the financial statements.
The independent valuation of all property assets includes
assumptions regarding income expectations and yields that investors
would expect to achieve on those assets over time. Many external
economic and market factors, such as interest rate expectations,
bond yields, the availability and cost of finance and the relative
attraction of property against other asset classes, could lead to a
reappraisal of the assumptions used to arrive at current
valuations. In adverse conditions, this reappraisal can lead to a
reduction in property values and a loss in net asset value.
5 Equity investments
2010 2009
GBP'000 GBP'000
Valuation at 1 January 7,397 7,282
Additions 1,028 515
Disposals (3,393) (1,723)
Surplus on revaluation in excess
of cost 572 1,230
Revaluation decrease below cost (6) (18)
Revaluation increase still less than
cost 10 111
----------- -----------
Valuation at 31 December 5,608 7,397
----------- -----------
6 Basis of preparation
The preliminary announcement has been prepared in accordance
with applicable accounting standards as stated in the financial
statements for the year ended 31 December 2009, The accounting
policies remain unchanged except in respect of the new amended
standards IFRS 3 and IAS 27 which have no impact on this
announcement.
7 Annual General Meeting
The Annual General Meeting will be held on 11 May 2011.
8 Publication of non-statutory accounts
The above does not constitute statutory accounts within the
meaning of the Companies Act 2006. It is an extract from the full
accounts for the year ended 31 December 2010 on which the auditor
has expressed an unqualified opinion and does not include any
statement under section 498 of the Companies Act 2006. The accounts
will be posted to shareholders on or before 18 April 2011 and
subsequently filed at Companies House.
This information is provided by RNS
The company news service from the London Stock Exchange
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