TIDMHCFT
RNS Number : 5419U
Highcroft Investments PLC
29 March 2023
Highcroft Investments PLC ("Highcroft" or the "Company")
Final results for the year ended 31 December 2022
The following announcement is being re-issued to correct the
record date for the dividend which should be 21 April 2023. No
other changes have been made and the full amended announcement is
set out below.
KEY HIGHLIGHTS
-- 2022 rent collection 100% (2021 97%)
-- 0.3% increase in net property income to GBP5,275,000 (2021 GBP5,258,000)
-- 1.2% increase in revenue profit before tax to GBP3,283,000 (2021 GBP3,243,000)
-- 11.8% decrease in property valuation on a like-for-like basis
to GBP77.9m, reflecting the volatile macro-economic backdrop, (2021
11.1% increase to GBP87.6m)
-- GBP0.7m of additions to existing properties during the year
-- 15.2% decrease in net asset value per share to 1081p (2021 15.5% increase to 1275p)
-- Total debt remained at GBP27,200,000; LTV 35% (2021 31%)
-- Next debt maturity 2026
-- Cash GBP7,206,000 (2021 GBP5,715,000)
-- Loss per share of 137.0p (2021 profit 230.5p)
-- Final dividend 33p per share (2021 33p per share)
-- 1.8% increase in total dividend payable for 2022 to 56p per share (2021 55p per share)
Dear Shareholder,
Highcroft has not been immune to the macro-economic factors
affecting the UK and the wider global economy during 2022. Just as
the economy started to recover from the Covid-19 pandemic, we were
hit by the effects of the Russian invasion of Ukraine, which
contributed to a year of soaring inflation, significant rises in
interest rates and political instability. However, while the gains
in net asset value of 2021 were reversed in 2022, I am pleased to
say that due to our diversified portfolio, strong balance sheet,
low levels of gearing, and low fixed borrowing costs, our profit
before tax increased during the year leading to a 1.8% increase in
the total annual dividend. I believe we are well positioned to
weather the current economic challenges and to continue to deliver
an attractive, secure, and long-term dividend to our
shareholders.
Property portfolio
During 2022, our portfolio remained unchanged. It remained
focussed on warehouses and retail warehouses, which made up 72% of
our portfolio by asset value at the yearend. These sectors
performed well in the first half of 2022, but were affected by the
significant adverse market movements in the second half of the
year. On a like-for-like basis, our total portfolio reduced by
11.8% (GBP10.4m), which was better than the all-property market
negative movement of 14.2%.
We did not acquire any properties during the year, although we
carried out improvement work at our Cardiff property and gained
planning permission for the development of an industrial unit at
our property in St Austell, resulting in additions of GBP0.7m to
property carrying value. After the year end, in February 2023, we
sold our Llantrisant asset for GBP7.85m, GBP1.1m above the 2022
year-end valuation and GBP0.9m above cost. As this asset had been
vacated by the tenant during 2022, and the lease expired in Q1
2024, this disposal, at this price, in the current market protects
shareholder value in the medium-term. We intend to invest our
available cash back into property that meets our strict selection
criteria in a timely manner. Despite the macro-economic challenges
affecting our tenants in 2022, we collected 100% of the rent due
for the year (2021 97%) and we let one of the two properties that
were void at the start of the year, leaving one void unit, our
Cardiff asset, representing 6% of our rental income. At the year
end contracted rental revenue was 0.2% higher than at 31 December
2021, whilst net rental income remained constant at GBP5.3m
compared to 2021.
Our net assets have fallen by GBP9.9m,15.0%, (2021 rise of
GBP9.0m, 15.7%), primarily because of the movements in property
valuation.
We have kept our debt levels low at 35% LTV with a weighted
average cost of debt of 3.06% and have no debt maturing before
2026.
Dividend
The company's interim dividend was 23p, a 4.5% increase on 2021,
and we are proposing a final dividend for 2022 of 33p per share,
taking the total dividend for 2022 to 56p per share. This
represents an increase of 1.8% from the 2021 dividend of 55p per
share.
Continued focus on ESG
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 have maintained our focus on sustainability,
particularly during the refurbishment of our Cardiff asset and the
design of a new building at our St Austell site. We continue to
develop the most appropriate strategy for reducing our
environmental impact within the existing portfolio and consider ESG
matters in the selection of new assets.
People
Our strategy is focussed on our competitive strength and our
people, including our advisory teams, who are critical to this. In
September 2022, Simon Gill indicated his intention to stand down as
executive director on 31 March 2023 and I would like to thank him
for his valuable contribution to the board over the past decade,
which has been a period of significant growth for the group. He
leaves behind a strong and well-positioned property portfolio.
In January 2023, we were pleased to announce the appointment of
Paul Leaf-Wright as chief executive with effect from 1 January
2023. He brings with him a wealth of experience of property
companies and of delivering shareholder value. As part of this
change, we have also appointed new property advisers to the board
and both they and Paul have completed their handover from Simon
Gill.
Outlook
Highcroft's performance in 2022 was resilient, notwithstanding
global and UK events causing repercussions in our marketplace.
Since the year end, as mentioned, we have successfully sold one of
our properties for GBP7.85m, an increase of 16% over the 31
December 2022 valuation. With our well-positioned portfolio, low
level of well-priced debt and cash in the bank for reinvestment, we
are well placed to continue to deliver long-term secure returns for
our shareholders.
Our AGM this year will, as last year, be an open meeting, and I
look forward to meeting those of you who can attend.
Charles Butler
Chairman
27 March 2023
Enquiries:
Highcroft Investments PLC
Charles Butler / Roberta Miles
01869 352766
Singer Capital Markets Advisory LLP
Peter Steel / Alex Emslie - 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 2022
Note 2022 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross rental revenue 5,608 - 5,928 5,928 - 5,928
Property operating expenses (333) - (670) (670) - (670)
-------- ----------- --------- -------- -------- --------
Net rental income 5,275 - 5,258 5,258 - 5,258
-------- ----------- --------- -------- -------- --------
Profit on disposal of
investment property - - - - 250 250
--------
Valuation gains on investment
property - 605 605 - 9,925 9,925
Valuation losses on investment
property - (10,986) (10,986) - (1,170) (1,170)
-------- ----------- --------- -------- -------- --------
Net valuation (losses)/gains
on investment property - (10,381) (10,381) - 8,755 8,755
-------- ----------- --------- -------- -------- --------
Administration expenses (1,191) - (1,191) (1,164) - (1,164)
-------- ----------- --------- -------- -------- --------
Net operating profit/(loss)
before net finance expense 4,084 (10,381) (6,297) 4,094 9,005 13,099
-------- ----------- --------- -------- -------- --------
Finance income 39 - 39 4 - 4
Finance expense (840) - (840) (855) - (855)
Net finance expense (801) - (801) (851) - (851)
--------
Profit/(loss) before
tax 3,283 (10,381) (7,098) 3,243 9,005 12,248
Income tax charge 1 (18) - (18) (304) - (304)
Profit/(loss) for the
year after tax 3,265 (10,381) (7,116) 2,939 9,005 11,944
-------- ----------- --------- -------- -------- --------
Total profit/(loss) and
comprehensive income/(loss)
for the year attributable
to the owners of the parent 3,265 (10,381) (7,116) 2,939 9,005 11,944
-------- ----------- --------- -------- -------- --------
Basic and diluted (loss)/earnings
per share (137.0p) 230.5p
Consolidated statement of financial position
at 31 December 2022
Note 2022 2021
GBP'000 GBP'000
Assets
Non-current assets
Investment property 4 71,160 87,565
Total non-current assets 71,160 87,565
-------- --------
Current assets
Trade and other receivables 1,143 2,876
Cash and cash equivalents 7,206 5,715
Assets classified as held 6,750 -
for sale
-------- --------
Total current assets 15,099 8,591
-------- --------
Total assets 86,259 96,156
-------- --------
Liabilities
Current liabilities
Interest bearing loan - 7,500
Trade and other payables 2,883 2,839
-------- --------
Total current liabilities 2,883 10,339
-------- --------
Non-current liabilities
Interest bearing loan 6 27,200 19,700
Total non-current liabilities 27,200 19,700
-------- --------
Total liabilities 30,083 30,039
-------- --------
Net assets 56,176 66,117
--------
Equity
Issued share capital 1,299 1,296
Share premium 226 117
Share-based payment reserve 160 102
Revaluation reserve - property 11,499 19,236
Other equity reserve (207) (121)
Capital redemption reserve 95 95
Realised capital reserve 29,623 29,623
Retained earnings 13,481 15,769
--------
Total equity attributable
to the owners of the parent 56,176 66,117
--------
Consolidated statement of changes in equity
2022
Issued Share Share-based Revaluation Other Capital Realised Retained Total
share premium payment reserve-property equity 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 2022 1,296 117 102 19,236 (121) 95 28,623 15,769 66,117
-------- -------- ------------ ----------------- -------- ----------- --------- ---------- -------------------
Transactions with
owners:
Issue of shares 3 109 - - (112) - - - -
Dividends - - - - - - - (2,909) (2,909)
-------- -------- ------------ ----------------- -------- ----------- --------- ---------- -------------------
3 109 - - (112) - - (2,909) (2,909)
Reserve
transfers:
Non-distributable
items
recognised in
income statement:
Revaluation
losses - - - (10,381) - - - 10,381 -
Change in excess
of cost
over fair value
through
retained earnings - - - 2,644 - - - (2,644) -
Share award
vested - - (26) - 26 - - - -
-------- -------- ------------ ----------------- -------- ----------- --------- ---------- -------------------
- - (26) (7,737) 26 - - 7,737 -
-------- -------- ------------ ----------------- -------- ----------- --------- ---------- -------------------
Share award
expensed - - 84 - - - - - 84
Total
comprehensive
income
for the year - - - - - - - (7,116) (7,116)
-------- -------- ------------ ----------------- -------- ----------- --------- ---------- -------------------
At 31 December
2022 1,299 226 160 11,499 (207) 95 29,623 13,481 56,176
======== ======== ============ ================= ======== =========== ========= ========== ===================
Consolidated
statement
of changes in
equity continued
2021
Issued Share Share-based Revaluation Other Capital Realised Retained Total
share premium payment reserve-property equity 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 51 43 12,814 (53) 95 28,995 13,882 57,121
-------- -------- ------------ ----------------- -------- ----------- --------- --------- --------
Transactions with
owners:
Issue of shares 2 66 - - (68) - - - -
Dividends - - - - - - - (3,007) (3,007)
-------- -------- ------------ ----------------- -------- ----------- --------- --------- --------
2 66 - - (68) - - (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
the 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 1,296 117 102 19,236 (121) 95 29,623 15,769 66,117
======== ======== ============ ================= ======== =========== ========= ========= ========
Consolidated statement of cash flows
for the year ended 31 December 2022
2022 2021
GBP'000 GBP'000
Operating activities
(Loss)/profit before tax (7,098) 12,248
Adjustments for:
Net valuation losses/(gains) on investment
property 10,381 (8,755)
Net gain on disposal of investment property - (250)
Share-based payment expense 84 159
Finance income (39) (4)
Finance expense 840 855
--------
Operating cashflow before changes in
working capital and provisions 4,168 4,153
Decrease in trade and other receivables 1,732 391
Increase in trade and other payables 34 120
-------- --------
Cash generated from operations 5,934 4,664
Finance income 39 4
Finance expense (840) (855)
Income taxes paid (7) (311)
-------- --------
Net cashflows from operating activities 5,126 3,502
-------- --------
Investing activities
Sale of non-current assets - investment
property - 1,925
Purchase of non-current assets - investment (726) -
property
Net cashflows from investing activities (726) 1,925
-------- --------
Financing activities
Dividends paid (2,909) (3,007)
Repayment of bank borrowings (7,500) -
New bank borrowings 7,500 -
-------- --------
Net cashflows from financing activities (2,909) (3,007)
-------- --------
Net increase in cash and cash equivalents 1,491 2,420
Cash and cash equivalents at 1 January 5,715 3,295
-------- --------
Cash and cash equivalents at 31 December 7,206 5,715
-------- --------
Notes
for the year ended 31 December 2022
1 Income tax charge
2022 2021
GBP'000 GBP'000
Current tax:
On revenue profits - current year 11 -
- prior year 7 -
On write-off of part of PID pool - 304
Income tax charge 18 304
---------------------- --------
The tax assessed for the year differs from the standard rate of
corporation tax in the UK of 19% (2021 19%).
The differences are explained as follows:
2022 2021
GBP'000 GBP'000
Profit before tax (7,098) 12,248
-------- --------
Profit before tax multiplied by the
standard rate of corporation tax
in the UK of 19% (2019 19%) (1,349) 2,327
Effect of:
Profit not taxable as a result of
REIT status (1,360) (2,327)
Tax due on non-payment of part of
PID pool - 304
Adjustment in respect of prior year 7 -
Income tax charge 18 304
-------- --------
2 Dividends
In 2022 the following dividends have been paid by the
company:
2022 2021
GBP'000 GBP'000
2021 Final: 33p per ordinary share
(2020 30p) 1,714 1,555
2021 Special: nil per ordinary share
(2020 6p) - 311
2022 Interim: 23p per ordinary share
(2021 22p) 1,195 1,141
----------- -----------
2,909 3,007
----------- -----------
On 27 March 2023 the directors declared a final property income
distribution for 2022 of GBP1,714,000, 33p per share, (2021 final
property income distribution of GBP1,714,000, 33p per share)
payable on 2 June 2023 to shareholders registered on 21 April 2023
.
3 Earnings per share
The calculation of earnings per share is based on the total loss
after tax for the year of GBP7,116,000 (2021 profit GBP11,944,000)
and on 5,192,186 shares (2021 5,181,317) which is the weighted
average number of shares in issue during the year ended 31 December
2022. 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 GBP3,265,000 (2021 GBP2,939,000) has been
calculated.
2022 2021
GBP'000 GBP'000
Earnings:
Basic (loss)/profit for the year (7,116) 11,944
Adjustments for:
Profit on disposal of investment
property - (250)
Net valuation losses/(gains) on investment
property 10,381 (8,755)
Adjusted earnings 3,265 2,939
------------------- -----------------
Per share amount:
Earnings/(loss) per share (unadjusted) (137.0p) 230.5p
Adjustments for:
Profit on disposal of investment
property - (4.8p)
Net valuation (gains)/losses on investment
property 199.9p) (169.0p)
Adjusted earnings per share 62.9p 56.7p
------------------- -----------------
4 Investment property
2022 2021
GBP'000 GBP'000
Total valuation at 1 January 87,565 82,060
Additions 726 -
Disposals - (3,250)
Revaluation (losses)/gains (10,381) 8,755
------------ -----------
Valuation at 31 December 77,910 87,565
Less property held for sale categorised (6,750) -
as current asset
------------ -----------
71,160 87,565
------------ -----------
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
2022, 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
GBP74,686,000 (2021 GBP73,961,000).
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.
Our independent valuers have provided an explanatory note on the
market conditions at 31 December 2022: "Following the government's
'mini-budget' of 23 September 2022 and subsequent financial
turmoil, we draw the group's attention to a recent combination of
global inflationary pressures, significant currency movements and
higher borrowing costs, which may produce greater volatility in
property markets over the short-to-medium term. It is apparent that
consumer and investor behaviour can change quickly during periods
of such heightened volatility. Our opinions set out in this report
are only valid as at the valuation date"
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
2022 2021
GBP'000 GBP'000
Investment property held for sale 6,750 -
-------- --------
At 31 December 2022 the directors were in the advanced stages of
the potential sale of our Llantrisant property. The purchaser
completed their due diligence in February 2023 and the sale was
exchanged and completed on 8 February 2023. The gross sales
proceeds were GBP7,850,000, GBP1,100,000 in excess of the valuation
at 31 December 2022 and GBP899,000 in excess of cost.
6 Interest bearing loans
2022 2021
GBP'000 GBP'000
Short-term bank loans due within one year - 7,500
Medium-term bank loans 27,200 19,700
-------- --------
The medium-term bank loans comprise amounts
falling due as follows:
Between one and two years - -
Between two and five years 7,900 3,400
Over five years 19,300 16,300
-------- --------
27,200 19,700
-------- --------
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 2022. The accounting
policies remain unchanged.
8 Annual General Meeting
The Annual General Meeting will be held on 17 May 2023.
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 2022 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 17 April 2023 and
subsequently filed at Companies House.
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