TIDMHCFT
RNS Number : 3057G
Highcroft Investments PLC
29 March 2022
Highcroft Investments PLC ("Highcroft" or the "Company")
Final results for the year ended 31 December 2021
KEY HIGHLIGHTS
-- 6.7% increase in investment property valuation to GBP87,565,000 (2020 GBP82,060,000)
-- 11.1% increase in property valuation on a like-for-like basis (2020 5.4% decrease)
-- 3.8% decrease in net property income to GBP5,258,000 (2020 GBP5,464,000)
-- 2021 rent collection 97% (2020 94%)
-- One property disposal in the year at a 9% uplift to opening valuation
-- 15.5% increase in net asset value per share to 1275p (2020 1104p)
-- Earnings per share of 230.5p (2020 loss 22.2p)
-- Revenue profit before tax decreased by 7.4% to GBP3,243,000 (2020 GBP3,503,000)
-- Total debt remained at GBP27,200,000; LTV 31% (2020 33%)
-- Cash GBP5,715,000 (2020 GBP3,295,000)
-- 10% increase in final dividend to 33p per share (2020 30p per
share with an additional special dividend of 6p per share)
-- 3.5% decrease in total dividend payable for 2021 to 55p per
share (2020 57p per share including the special dividend of 6p per
share)
Dear Shareholder,
Introduction
At the time of writing to you last year, I don't think we would
have believed that 2021 would be primarily dominated by continuing
to deal with the effects of the pandemic. Whilst the effects of
Covid-19 continued to be felt across the world, we took a cautious
approach in how we managed the portfolio, keeping a relatively low
LTV, a healthy level of cash and taking no unnecessary risks. Our
portfolio proved to be very resilient throughout 2021, and I am
pleased to report a very solid set of results for the year.
Property portfolio
The focus of our asset management has been on warehouses and
retail warehouses for several years (making up 73% of our portfolio
by asset value). This has proven to be a successful strategy with a
strong sector performance in 2021. Notwithstanding the volatile
macro environment, we expect this to see this positive momentum
continue into 2022.
We did not acquire any properties during the year and we sold
one property at an increase of 9% over its 31 December 2020
valuation. Notwithstanding the ongoing pandemic, we continued to
achieve a high level of rent collection for the year of 97% (2020
94%). Our gross rental revenue decreased by 2.6% (2020 4%
increase), due primarily to the negative effects of CVAs and voids
offset by the progress that we have made with our asset management
initiatives and one-off income.
When taken together with a very positive like-for-like property
revaluation of 11.1%, this led to an overall increase in net assets
of 15.5%.
Dividend
The company's interim dividend was 22p, a 4.8% increase on 2020,
and we are proposing a final dividend for 2021 of 33p per share
taking the total dividend for 2021 to 55p per share. This
represents an increase of 8% from the 2020 dividend of 51p per
share (excluding the 2020 special dividend of 6p per share).
Sustainability
Highcroft has a clear purpose of providing our tenants with
excellent properties in optimal locations, enabling them to succeed
and our stakeholders to benefit on a long-term sustainable basis.
As a board we consider climate-related risks and opportunities and
over the year have evaluated how any future developments will be
approached, and the most appropriate strategy for reducing our
impact within the existing portfolio. We are in a process of
identifying the levers that we can operate and influence to ensure
the sustainability of our business.
People
As for many companies, the ongoing impacts of the Covid-19
pandemic have presented challenges to the Board, the tenants we
serve, and the communities we operate in. During the year the
business has continued to perform commendably, and I would like to
thank my fellow directors and the employees for the continued
commitment and considerable efforts over the last year.
During the year, we welcomed Anne-Marie Palmer as Company
Secretary. Anne-Marie has 20 years' experience as a chartered
secretary advising listed companies and as reported last year,
recognising both the increase in governance and reporting
requirements, we welcome her addition to the team.
Outlook
2021 was a strong year for Highcroft despite the world still
being seriously affected by Covid-19. We now face new macro
challenges with the tragic events in Ukraine. While there is no
doubt the effects of this will be severe and long lasting, we are
confident that with the cautious approach we take to managing the
portfolio along with relatively low levels of gearing we can
continue to deliver robust shareholder returns against a continuing
volatile global backdrop.
We are planning that our AGM this year will be back to normal as
an open meeting, and I look forward to meeting those of you who can
make it.
Charles Butler
Chairman
28 March 2022
Enquiries:
Highcroft Investments PLC
Charles Butler / Roberta Miles
01869 352766
Singer Capital Markets
Peter Steel / Amanda Gray - Corporate Finance
Tom Salvesen - Corporate Broking
020 7496 3000
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under
retained EU law version of the Market Abuse Regulations (EU No.
596/2014) (the "UK MAR"),
which is part of UK law by virtue of the European Union (withdrawal) Act 2018 .
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Note 2021 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross rental revenue 5,928 - 5,928 6,084 - 6,084
Property operating expenses (670) - (670) (620) - (620)
-------- -------- -------- -------- -------- --------
Net rental income 5,258 - 5,258 5,464 - 5,464
-------- -------- -------- -------- -------- --------
Profit on disposal of
investment property - 250 250 - - -
--------
Valuation gains on investment
property - 9,925 9,925 - 2,525 2,525
Valuation losses on investment
property - (1,170) (1,170) - (7,175) (7,175)
-------- -------- -------- -------- -------- --------
Net valuation gains/(losses)
on investment property - 8,755 8,755 - (4,650) (4,650)
-------- -------- -------- -------- -------- --------
Administration expenses (1,164) - (1,164) (1,069) - (1,069)
-------- -------- -------- -------- -------- --------
Net operating profit/(loss)
before net finance expense 4,094 9,005 13,099 4,395 (4,650) (255)
-------- -------- -------- -------- -------- --------
Finance income 4 - 4 4 - 4
Finance expense (855) - (855) (896) - (896)
Net finance expense (851) - (851) (892) - (892)
--------
Profit/(loss) before tax 3,243 9,005 12,248 3,503 (4,650) (1,147)
Income tax (charge)/credit 1 (304) - (304) - - -
Profit/(loss) for the
year after tax 2,939 9,005 11,944 3,503 (4,650) (1,147)
-------- -------- -------- -------- -------- --------
Total profit/(loss) and
comprehensive income/(loss)
for the year attributable
to the owners of the parent 2,939 9,005 11,944 3,503 (4,650) (1,147)
-------- -------- -------- -------- -------- --------
Basic and diluted earnings/(loss)
per share 230.5p (22.2p)
Consolidated statement of financial position
at 31 December 2021
Note 2021 2020
GBP'000 GBP'000
Assets
Non-current assets
Investment property 4 87,565 78,810
Total non-current assets 87,565 78,810
-------- --------
Current assets
Trade and other receivables 2,876 1,692
Cash and cash equivalents 5,715 3,295
Assets classified as held
for sale - 3,250
-------- --------
Total current assets 8,591 8,237
-------- --------
Total assets 96,156 87,047
-------- --------
Liabilities
Current liabilities
Interest bearing loan 7,500 -
Trade and other payables 2,839 2,726
-------- --------
Total current liabilities 10,339 2,726
-------- --------
Non-current liabilities
Interest bearing loan 6 19,700 27,200
Total non-current liabilities 19,700 27,200
-------- --------
Total liabilities 30,039 29,926
-------- --------
Net assets 66,117 57,121
--------
Equity
Issued share capital 1,296 1,294
Share-based payment reserve 102 43
Revaluation reserve - property 19,236 12,814
Other equity reserve (121) (53)
Share premium 117 51
Capital redemption reserve 95 95
Realised capital reserve 29,623 28,995
Retained earnings 15,769 13,882
--------
Total equity attributable
to the owners of the parent 66,117 57,121
--------
Consolidated statement of changes in equity
2021
Issued Share-based Revaluation Other Share Capital Realised Retained Total
share payment reserve-property equity premium redemption capital earnings
capital reserve reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2021 1,294 43 12,814 (53) 51 95 28,995 13,882 57,121
-------- ------------ ----------------- -------- -------- ----------- --------- --------- -------------------
Transactions with
owners:
Issue of shares 2 - - (68) 66 - - - -
Dividends - - - - - - - (3,007) (3,007)
-------- ------------ ----------------- -------- -------- ----------- --------- --------- -------------------
2 - - (68) 66 - - (3,007) (3,007)
Reserve transfers:
Non-distributable
items
recognised in
income statement:
Revaluation gains - - 8,755 - - - - (8,755) -
Realised gains - - - - - - 250 (250) -
Surplus
attributable to
assets sold in
year - - (378) - - - 378 - -
Change in excess
of cost
over fair value
through
retained earnings - - (1,955) - - - - 1,955 -
-------- ------------ ----------------- -------- -------- ----------- --------- --------- -------------------
- - 6,422 - - - 628 (7,050) -
-------- ------------ ----------------- -------- -------- ----------- --------- --------- -------------------
Share award
expensed - 59 - - - - - - 59
-------- ------------ ----------------- -------- -------- ----------- --------- --------- -------------------
Total
comprehensive
income
for the year - - - - - - - 11,944 11,944
-------- ------------ ----------------- -------- -------- ----------- --------- --------- -------------------
At 31 December
2021 1,296 102 19,236 (121) 117 95 29,623 15,769 66,117
======== ============ ================= ======== ======== =========== ========= ========= ===================
Consolidated
statement
of changes in
equity continued
2020
Issued Share-based Revaluation Other Share Capital Realised Retained Total
share payment reserve-property equity premium redemption capital earnings
capital reserve reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 1,292 12 12,931 - - 95 28,995 17,396 60,721
-------- ------------ ----------------- -------- -------- ----------- --------- ---------- ------------
Transactions with
owners:
Issue of shares 2 - - (53) 51 - - - -
Dividends - - - - - - - (2,484) (2,484)
-------- ------------ ----------------- -------- -------- ----------- --------- ---------- ------------
2 - - (53) 51 - - (2,484) (2,484)
Reserve transfers:
Non-distributable
items
recognised in
income statement:
Revaluation losses - - (4,650) - - - - 4,650 -
Change in excess
of cost
over fair value
through
retained earnings - - 4,533 - - - - (4,533) -
-------- ------------ ----------------- -------- -------- ----------- --------- ---------- ------------
- - (117) - - - - 117 -
-------- ------------ ----------------- -------- -------- ----------- --------- ---------- ------------
Share award
expensed - 31 - - - - - - 31
-------- ------------ ----------------- -------- -------- ----------- --------- ---------- ------------
Total
comprehensive
income
for the year - - - - - - - (1,147) (1,147)
-------- ------------ ----------------- -------- -------- ----------- --------- ---------- ------------
At 31 December
2020 1,294 43 12,814 (53) 51 95 28,995 13,882 57,121
======== ============ ================= ======== ======== =========== ========= ========== ============
Consolidated statement of cash flows
for the year ended 31 December 2021
2021 2020
GBP'000 GBP'000
Operating activities
Profit/(loss) before tax 12,248 (1,147)
Adjustments for:
Net valuation (gains)/losses on investment
property (8,755) 4,650
Net gain on disposal of investment property (250) -
Share-based payment expense 59 31
Finance income (4) (4)
Finance expense 855 896
--------
Operating cashflow before changes in working
capital and provisions 4,153 4,426
Decrease/(increase) in trade and other
receivables 391 (545)
Increase in trade and other payables 120 252
-------- --------
Cash generated from operations 4,664 4,133
Finance income 4 4
Finance expense (855) (896)
Income taxes paid (311) (21)
-------- --------
Net cashflows from operating activities 3,502 3,220
-------- --------
Investing activities
Sale of non-current assets - investment 1,925 -
property
Net cashflows from investing activities 1,925 -
-------- --------
Financing activities
Dividends paid (3,007) (2,484)
Repayment of bank borrowings - (4,000)
New bank borrowings - 5,000
-------- --------
Net cashflows from financing activities (3,007) (1,484)
-------- --------
Net increase/(decrease) in cash and cash
equivalents 2,420 1,736
Cash and cash equivalents at 1 January 3,295 1,559
-------- --------
Cash and cash equivalents at 31 December 5,715 3,295
-------- --------
Notes
for the year ended 31 December 2021
1 Income tax charge/(credit)
2021 2020
GBP'000 GBP'000
Current tax:
On revenue profits - current year - 8
- prior year - (8)
On write-off of part of PID pool 304 -
Income tax charge 304 -
---------------------- --------
The tax assessed for the year differs from the standard rate of
corporation tax in the UK of 19% (2020 19%).
The differences are explained as follows:
2021 2020
GBP'000 GBP'000
Profit before tax 12,248 (1,147)
-------- --------
Profit before tax multiplied by the
standard rate of corporation tax
in the UK of 19% (2019 19%) 2,327 (218)
Effect of:
Profit not taxable as a result of
REIT status (2,327) 220
Tax due on non-payment of part of 304 -
PID pool
Adjustment in respect of previous
years - (2)
Income tax credit 304 -
-------- --------
2 Dividends
In 2021 the following dividends have been paid by the
company:
2021 2020
GBP'000 GBP'000
2020 Final: 30.00p per ordinary share
(2019 27.00p) 1,555 1,397
2020 Special: 6.00p per ordinary
share (2019 nil) 311 -
2021 Interim: 22.00p per ordinary
share (2020 21.00p) 1,141 1,087
----------- -----------
3,007 2,484
----------- -----------
On 28 March 2022 the directors declared a final property income
distribution for 2021 of GBP1,711,000, 33.00p per share, (2020
final property income distribution of GBP1,555,000, 30.00p per
share and special property income distribution for 2020 of
GBP311,000, 6.00p per share) payable on 7 June 2022 to shareholders
registered on 22 April 2022 .
3 Earnings per share
The calculation of earnings per share is based on the total
profit after tax for the year of GBP11,944,000 (2020 loss
GBP1,147,000) and on 5,181,317 shares (2020 5,172,465) which is the
weighted average number of shares in issue during the year ended 31
December 2021. There are no dilutive instruments.
In order to draw attention to the profit that is not due to the
impact of valuation gains and losses, which are included in the
statement of comprehensive income but not available for
distribution under the company's articles of association, an
adjusted earnings per share based on the profit available for
distribution of GBP2,939,000 (2020 GBP3,503,000) has been
calculated.
2021 2020
GBP'000 GBP'000
Earnings:
Basic profit/(loss) for the year 11,944 (1,147)
Adjustments for:
Profit on disposal of investment (250) -
property
Net valuation (gains)/losses on investment
property (8,755) 4,650
Adjusted earnings 2,939 3,503
----------------- ------------------
Per share amount:
Earnings/(loss) per share (unadjusted) 230.5p (22.2p)
Adjustments for:
Profit on disposal of investment (4.8p) -
property
Net valuation (gains)/losses on investment
property (169.0p) 89.9p
Adjusted earnings per share 56.7p 67.7p
----------------- ------------------
4 Investment property
2021 2020
GBP'000 GBP'000
Total valuation at 1 January 82,060 86,710
Disposals (3,250) -
Revaluation gains/(losses) 8,755 (4,650)
----------- -----------
Valuation at 31 December 87,565 82,060
Less property held for sale categorised
as current asset - (3,250)
----------- -----------
87,565 78,810
----------- -----------
In accordance with IAS 40 the carrying value of investment
properties is their fair value as determined by independent
external valuers. This valuation has been conducted by Knight Frank
LLP, as external valuers, and has been prepared as at 31 December
2021, in accordance with the Appraisal & Valuation Standards of
the Royal Institution of Chartered Surveyors, on the basis of
market value.
The historical cost of the group's investment properties is
GBP73,961,000 (2020 GBP76,832,000).
Valuation process
The valuation reports produced by the independent external
valuers are based on information provided by the group such as
current rents, terms and conditions of lease agreements, service
charges and capital expenditure (if any). This information is
derived from the group's property management and financial
information systems and is subject to the group's overall control
environment.
In addition, the valuation reports are based on assumptions and
models used by the independent valuer. The assumptions are
typically market related such as yields and discount rates and are
based on their professional judgement and market observation. Each
property is considered a separate asset class based on the unique
nature, characteristics, and risks of the property.
During 2020, many valuations were reported with material
valuation uncertainty clauses on certain classes of assets.
However, valuation markets are mostly functioning again, with
transaction volumes and other relevant evidence at levels where an
adequate quantum of market evidence exists upon which to base
opinions of value. Accordingly, our independent valuers have
confirmed that the valuations at 31 December 2021 and 31 December
2020 were not reported as being subject to material valuation
uncertainty.
The executive director responsible for the valuation process
verifies all major inputs to the external valuation reports,
assesses the individual property valuation changes from the prior
year valuation report and holds discussion with the independent
valuer. When this process is complete, the whole board then meet
the valuer in the presence of the auditor. The valuation report is
recommended to the audit committee, which considers it as part of
its overall responsibilities.
Valuation technique
The fair value of the property portfolio has been determined
using an income capitalisation technique whereby contracted and
market rental values are capitalised with a market capitalisation
rate. The resulting valuations are cross checked against the
equivalent yields and the fair market values per square foot
derived from comparable recent market transactions on an arm's
length terms.
These techniques are consistent with the principles in IFRS 13
Fair Value Measurement and use significant unobservable inputs such
that the fair value measurement of each property within the
portfolio has been classified as level 3 in the fair value
hierarchy.
5 Assets classified as held for sale
2021 2020
GBP'000 GBP'000
Investment property held for sale - 3,250
--------- --------
The asset held for sale at 31 December 2020, our Andover
property, was sold in August 2021.
6 Interest bearing loans
2021 2020
GBP'000 GBP'000
Short-term bank loans due within one year 7,500 -
Medium-term bank loans 19,700 27,200
-------- --------
The medium-term bank loans comprise amounts
falling due as follows:
Between one and two years - 7,500
Between two and five years 3,400 -
Over five years 16,300 19,700
-------- --------
19,700 27,200
-------- --------
There is an agreed facility letter in place to replace the
GBP7,500,000 of short-term bank loans with a new medium-term bank
loan upon maturity.
7 Basis of preparation
The preliminary announcement has been prepared in accordance
with applicable accounting standards as stated in the financial
statements for the year ended 31 December 2021. The accounting
policies remain unchanged.
8 Annual General Meeting
The Annual General Meeting will be held on 18 May 2022.
9 Publication of non-statutory accounts
The above does not constitute statutory accounts within the
meaning of the Companies Act 2006. It is an extract from the full
accounts for the year ended 31 December 2021 on which the auditor
has expressed an unmodified opinion and does not include any
statement under section 498 of the Companies Act 2006. The accounts
will be posted to shareholders on or before 14 April 2022 and
subsequently filed at Companies House.
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