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Highcroft Invs PLC (HCFT)

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Thursday 25 August, 2011

Highcroft Invs PLC

Half Yearly Report

RNS Number : 9785M
Highcroft Investments PLC
25 August 2011
 



HIGHCROFT INVESTMENTS PLC

 

Interim report

30 June 2011

 

 

Chairman's Statement for the six months ended 30 June 2011

 

Highlights

 

·      Rental income up 3.7% to £1,040,000 (2010 £1,002,000).

 

·      Profit before tax increased by 7.2% to £1,299,000 (2010 £1,212,000).

 

·      Basic earnings per share on all activities was 25.1p (2010 25.4p).

 

·      Net asset value per share increased to 724p (June 2010 676p and December 2010 716p).

 

·      Interim property income distribution increased 4.5% to 11.5p per share compared with 11.0p in 2010.

 

·      Net cash £3,306,000 (2010 £3,065,000) equivalent to 64p per share (2010 59p per share).

 

·      During the period three residential properties were disposed of and one lease extended yielding a total of £1,300,000 (2010 £297,000).

 

·      Contracts now exchanged for one further residential disposal and one commercial acquisition.

 

Dear Shareholder

 

The results for the 6 months ended 30 June 2011 are, in the circumstances of significant economic uncertainty, solid and reassuring.  They show a steady income position and a slight increase in net asset value.

 

Gross rental income rose a little compared with 2010, reflecting improved commercial rental revenue - including that from our new property in Warwick - offset to a degree by the decline in rent from residential properties as they become vacant and are sold.  Net rental income fell as a result of necessary expenditure - particularly in Yeovil - associated with new leases.  Dividend income from our equity portfolio was helped by a special one off dividend resulting in an increase to £126k (2010: £101k). The net effect of this was that the revenue account profits reduced to £832k (2010: £862k) resulting in earnings per share of 16.1p (2010: 16.7p).  I can also report that, notwithstanding the £19k costs associated with the general meeting requisitioned by certain shareholders, our administrative expenses have reduced slightly to £165k (2010: £168k).

 

In capital terms, a mixture of net valuation gains on our investment properties and a small valuation loss on our equity portfolio produced a capital profit of £467k (2010: £453k), resulting in earnings per share of 9.0p (2010: 8.7p).

 

Importantly, given the economic uncertainties with which the world is faced, our balance sheet remains very strong with cash at the half year end of £3.3m, no borrowings, and net assets per share of 724p (June 2010: 676p, December 2010: 716p).  We still believe that it is right to take a cautious view but continue to look at properties that fit our criteria for the medium term.  We have recently exchanged contracts for the purchase of an industrial unit in Andover and this purchase is expected to be completed in November 2011. The initial yield is 6.4% with an unexpired lease term of 23 years let to a strong covenant and is representative of the sort of purchases that we seek. In the first half of 2011 we have also completed on the sale of three of our residential properties and completed one lease extension.  This has resulted in net proceeds of £1.3m being received.  A further residential property became vacant in February on which we exchanged contracts for the sale in July and this sale is expected to complete next month. We have not disposed of any equities in the 6 months and have made a modest further investment into the market of £378k.

 

We believe that shareholders can take comfort in these difficult economic times from the quality of our property portfolio.  Our confidence in the medium term is reflected in our decision to declare an interim dividend of 11.5p per share (2010 11p per share) payable on 20 October 2011.

 

Yours sincerely

 

J Hewitt

Chairman

25 August 2011

 

 

 

For further information, contact:

 

Highcroft Investments PLC

John Hewitt / Roberta Miles                      01865 840 023

 

Charles Stanley Securities

Dugald Carlean / Karri Vuori                     0207 149 6000

 


Condensed consolidated interim statement of comprehensive income (unaudited)

for the six months ended 30 June 2011

 




First Half 2011




First Half 2010




Full Year 2010



Note

Revenue

Capital

Total


Revenue

Capital

Total


Revenue

Capital

Total



£'000

£'000

£'000


£'000

£'000

£'000


£'000

£'000

£'000

Continuing operations













Gross rental income


1,040

-

1,040


1,002

-

1,002


2,053

-

2,053

Property operating expenses


(173)

-

(173)


(76)

-

(76)


(245)

0

(245)

Net rental income


867

-

867


926

-

926


1,808

-

1,808














Realised gains on investment property


-

58

58


-

42

42


-

108

108

Realised losses on investment property


-

(23)

(23)


-

-

-


-

(8)

(8)

Net gain on disposal of investment property


-

35

35


-

42

42


-

100

100














Valuation gains on investment property


-

563

563


-

755

755


-

1,735

1,735

Valuation losses on investment property


-

(100)

(100)


-

(25)

(25)


-

(158)

(158)

Net valuation gains/(losses) on investment property


-

463

463


-

730

730


-

1,577

1,577














Dividend income


126

-

126


101

-

101


234

-

234

Gains on investments


-

195

195


-

105

105


-

718

718

Losses on investments


-

(226)

(226)


-

(527)

(527)


-

(209)

(209)

Net investment income/(loss)


126

(31)

95


101

(422)

(321)


234

509

743














Administrative expenses


(165)

-

(165)


(168)

-

(168)


(330)

-

(330)



 

Operating profit/(loss) before net financing costs


828

467

1,295


859

350

1,209


1,712

2,186

3,898














Finance income


7

-

7


5

-

5


10

-

10

Finance expenses


(3)

0

(3)


(2)

-

(2)


(1)

-

(1)

Net finance costs


4

-

4


3

-

3


9

-

9














Profit/(loss) before tax


832

467

1,299


862

350

1,212


1,721

2,186

3,907














Income tax credit/(expense)

4

-

-

-


-

103

103


144

(89)

55

Total profit/(loss) and comprehensive


832

467

1,299


862

453

1,315


1,865

2,097

3,962

income/(expense) for the financial period













Basic and diluted earnings/(loss) per share

6

16.1p

9.0p

25.1p


16.7p

8.7p

25.4p


36.0p

40.7p

76.7p

 


Condensed consolidated interim statement of financial position (unaudited)

as at 30 June 2011

 



30 June


30 June


31 December



2011


2010


2010


Note

£'000


£'000


£'000

Assets







Non-current assets







Investment property

7

29,902


28,300


30,705

Equity investments

8

5,954


5,221


5,608

Total non-current assets


35,856


33,521


36,313








Current assets







Trade and other receivables


101


83


93

Cash at bank and in hand


3,306


3,065


2,472

Total current assets


3,407


3,148


2,565








Total assets


39,263


36,669


38,878








Liabilities







Current liabilities







Interest-bearing loans and borrowings


-


-


-

Current income tax


213


286


215

Trade and other payables


894


792


897

Total current liabilities


1,107


1,078


1,112








Non-current liabilities







Interest-bearing loans and borrowings


-


-


-

Deferred tax liabilities


764


668


764

Total non-current liabilities


764


668


764








Total liabilities


1,871


1,746


1,876








Net assets


37,392


34,923


37,002








Equity







Issued share capital


1,292


1,292


1,292

Revaluation reserve - property


5,904


6,442


6,670

Revaluation reserve - other


1,720


1,630


1,750

Capital redemption reserve


95


95


95

Realised capital reserve


21,099


19,238


19,810

Retained earnings


7,282


6,226


7,385

Total equity


37,392


34,923


37,002

 


Condensed consolidated interim statement of changes in equity

for the six months ended 30 June 2011

 

a) First half 2011 -Unaudited















Equity


Revaluation reserves


Capital


Realised


Retained






Property


Other


Redemption


Capital


Earnings


Total








Reserve


Reserve






£'000


£'000


£'000


£'000


£'000


£'000


£'000

At 1 January 2011

1,292


6,670


1,750


95


19,810


7,385


37,002

Dividends

-


-


-


-


-


(909)


(909)

Transactions with owners

-


-


-


-


-


(909)


(909)

Total comprehensive profit for the period

-


-


-


-


-


1,299


1,299

Identification of non-distributable items recognised in income statement:














Revaluation gains/(losses)

-


463


(30)


-


-


(433)


-

Tax on revaluation gains and losses

-


-


-


-


-


-


-

Realised gains

-


-


-


-


35


(35)


-

(Surplus)/deficit attributable to assets sold

-


(1,254)


-


-


1,254


-


-

Excess of cost over revalued amount taken to retained earnings

-


25


-


-


-


(25)


-

Total comprehensive income for the period

-


(766)


(30)


-


1,289


806


1,299

At 30 June 2011

1,292


5,904


1,720


95


21,099


7,282


37,392



 

b) First half 2010 - Unaudited















Equity


Revaluation reserves


Capital


Realised


Retained






Property


Other


Redemption


Capital


Earnings


Total








Reserve


Reserve






£'000


£'000


£'000


£'000


£'000


£'000


£'000

At 1 January 2010

1,292


5,696


2,656


95


18,229


6,467


34,435

Dividends

-


-


-


-


-


(827)


(827)

Transactions with owners

-


-


-


-


-


(827)


(827)

Total comprehensive profit for the period

-


-


-


-


-


1,315


1,315

Identification of non-distributable items recognised in income statement:














Revaluation gains/(losses)

-


730


(27)


-


-


(703)


-

Tax on revaluation gains and losses

-


-


69


-


-


(69)


-

Realised losses

-


-


-


-


(95)


95


-

(Surplus)/deficit attributable to assets sold

-


(9)


(1,095)


-


1,104


-


-

Excess of cost over revalued amount taken to retained earnings

-


25


27


-


-


(52)


-

Total comprehensive income for the period

-


746


(1,026)


-


1,009


586


1,315

At 30 June 2010

1,292


6,442


1,630


95


19,238


6,226


34,923



 

c) Full year 2010 - Audited















Equity


Revaluation reserves


Capital


Realised


Retained






Property


Other


Redemption


Capital


Earnings


Total








Reserve


Reserve






£'000


£'000


£'000


£'000


£'000


£'000


£'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)

Total comprehensive profit for the period

-


-


-


-


-


3,962


3,962

Identification of non-distributable items recognised in income statement:














Revaluation gains/(losses)

-


1,577


572


-


-


(2,149)


-

Tax on revaluation gains and losses

-


-


(93)


-


-


93


-

Realised gains

-


-


-


-


(58)


58


-

(Surplus)/deficit attributable to assets sold

-


(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

 

 

 


Condensed consolidated interim statement of cash flows (Unaudited)

for the six months ended 30 June 2011

 

 


 First Half


 First Half


 Full Year


 2011


 2010


 2010


 £'000


 £'000


 £'000

Operating activities






Profit/(loss) for the period

1,299


1,315


3,962

Adjustments for:






Net valuation (gains)/losses on investment property

(463)


(730)


(1,577)

Gain on disposal of investment property

(35)


(42)


(100)

Net losses/(gains) on investments

31


422


(509)

Finance income

(7)


(5)


(10)

Finance expense

3


2


1

Income tax (expense)/credit

-


(103)


(55)

Operating cash flow before changes in working capital and provisions

828


859


1,712







(Increase)/decrease in trade and other receivables

(8)


20


10

(Decrease)/increase in trade and other payables

(3)


13


120

Cash generated from operations

817


892


1,842







Finance income

7


5


10

Finance expense

(3)


(2)


(1)

Income tax paid

-


-


(25)

Cash flows from operating activities

821


895


1,826







Investing activities






Purchase of fixed assets   - investment property

-


-


(1,558)

                                       - equity investments

(378)


(727)


(1,028)

Sale of fixed assets          - investment property

1,300


297


355

                                       - equity investments

-


2,481


3,326

Cash flows from investing activities

922


2,051


1,095







Financing activities






Loan repayments

-


-


-

Dividends paid

(909)


(827)


(1,395)

Cash flows used in financing activities

(909)


(827)


(1,395)







Net increase in cash and cash equivalents

834


2,119


1,526

Cash and cash equivalents at 1 January 2011

2,472


946


946

Cash and cash equivalents at 30 June 2011

3,306


3,065


2,472

 



NOTES (unaudited)

 

1.  Nature of operations and general information

Highcroft Investments PLC ('Highcroft') and its subsidiary (together 'the group') principal activities are investment in property and equities. It is incorporated and domiciled in Great Britain.  The address of Highcroft Investments PLC's registered office, which is also its principal place of business, is Thomas House, Langford Locks, Kidlington, OX5 1HR.  Highcroft's condensed consolidated interim financial statements are presented in Pounds Sterling (£), which is also the functional currency of the group. These condensed consolidated interim financial statements have been approved for issue by the directors on 25 August 2011. The financial information for the year ended 31 December 2010 set out in this interim report does not constitute statutory accounts as defined in Section 404 of the Companies Act 2006.  The group's statutory financial statements for the year ended 31 December 2010 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(5) of the Companies Act 2006.

 

2.  Basis of preparation

These condensed consolidated interim financial statements are for the six months ended 30 June 2011.  They have been prepared in accordance with IAS 34, Interim Financial Reporting.  They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2010. 

 

These condensed consolidated interim financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties and the measurement of equity investments at fair value. These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2010. 

 

The accounting policies have been applied consistently throughout the group for the purposes of preparation of these condensed consolidated interim financial statements.

 

3.  Segmental reporting

Segmental information is presented in the condensed consolidated interim financial statements in respect of the group's business segments.  The business segment reporting format reflects the group's management and internal reporting structure. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.  All gross income is from external tenants or external investments.

 

The group is comprised of the following main business segments:

*      Commercial property comprising retail outlets, offices and warehouses.

*      Residential property comprising mainly single-let houses.

*      Financial assets comprising exchange-traded equity investments.



3.  Segmental reporting (continued)

 


 First Half


 First Half


 Full Year


 2011


 2010


2010


 £'000


 £'000


 £'000

Commercial property






Gross income

1,020


970


1,995

Profit/(loss) for the period

859


1,212


2,690

Assets

31,560


29,024


28,655

Liabilities

713


630


743

Residential property






Gross income

20


32


58

Profit for the period

365


338


654

Assets

1,742


2,423


2,695

Liabilities

10


10


23

Financial assets






Gross income

126


101


234

Profit/(loss) for the period

75


(235)


618

Assets

5,961


5,222


7,528

Liabilities

1,148


1,106


1,110

Total






Gross income

1,166


1,103


2,287

Profit for the period

1,299


1,315


3,962

Assets

39,263


36,669


38,878

Liabilities

1,871


1,746


1,876

 

The largest tenant represents 10% of gross commercial property income.

 

4.  Income tax (credit) / expense







First Half


First Half


Full Year


 2011


 2010


2010


£'000


£'000


£'000

Current tax:






On revenue profits

-


-


(60)

On capital profits

-


(34)


(19)

Prior year underprovision

-


-


(69)


-


(34)


(148)

Deferred tax

-


(69)


93


-


(103)


(55)

 

The taxation charge has been based on the estimated effective tax rate for the full year.  As a Real Estate Investment Trust the group does not pay corporation tax on its profits and gains from its commercial and residential property activities.



 

5.  Dividends

 

On 25 August 2011, the directors declared a property income dividend of 11.50p per share (2010 11.00p interim dividend) payable on 20 October 2011 to shareholders registered at 23 September 2011.

 

The following property income distributions have been paid by the company.

 


 First Half


 First Half


 Full Year


 2011


 2010


2010


 £'000


 £'000


 £'000







2010 final: 17.60p per ordinary share (2009 final 16.00p )

909


827


827

2010 interim: 11.00p per ordinary share

-


-


568


909


827


1,395

 

6.  Earnings per share

 

The calculation of earnings per share is based on the profit for the period of £1,295,000 (2010 £1,315,000)  and on 5,167,240 shares (2009 5,167,240) which is the weighted average number of shares in issue during the period ended 30 June 2011 and throughout the period since 1 January 2010.

 

The allocation differs to that disclosed in the year end published accounts to better reflect the designation of realised investment gains as capital in nature and to ensure consistency with prior years. There is no impact on the total year end results.

 

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 £828,000 (2010 £862,000) has been calculated.

 


First Half


First Half


Full Year


 2011


 2010


2010


£'000


£'000


£'000

Earnings:






Basic earnings

1,299


1,315


3,962

Adjustments for:






Net valuation (profits)/losses on investment property

(498)


(772)


(1,677)

Gains and losses on investments

31


422


(509)

Income tax on (gains)/losses

-


(103)


89

Adjusted earnings

832


862


1,865







Per share amount:






Basic earnings per share

25.1p


25.4p


76.7p

Adjustments for:






Net valuation gains on investment property

(9.6)p


(14.9)p


(32.5)p

Gains and losses on investments

0.6p


8.2p


(9.9)p

Income tax on gains and losses

0.0p


(2.0)p


1.7p

Adjusted earnings per share

16.1p


16.7p


36.0p

 

 

 

7.  Investment property

 


First Half


First Half


Full Year


 2011


 2010


2010


£'000


£'000


£'000







Valuation at 1 January 2011

30,705


27,825


27,825

Additions

-


-


1,558

Disposals

(1,266)


(255)


(255)

Gain on revaluation

463


730


1,577

Valuation at 30 June 2011

29,902


28,300


30,705

 

The directors have used an external independent valuation of properties at 30 June 2011 which has been carried out consistently with the annual valuation.

 

8.  Equity Investments

 

Listed and unlisted

First Half


First Half


Full Year


 2011


 2010


2010


£'000


£'000


£'000

Valuation at 1 January 2011

5,608


7,397


7,397

Additions

378


727


1,028

Disposals

-


(2,601)


(3,393)

(Deficit)/surplus on revaluation in excess of cost

(30)


(290)


572

Revaluation decrease below cost

(11)


(27)


(6)

Revaluation increase still below cost

9


15


10

Valuation at 30 June 2011

5,954


5,221


5,608







 

9.  Related party transactions

 

Kingerlee Holdings Limited owns, through its wholly owned subsidiaries, 25.4% (2010: 25.4%) of the company's shares and D H Kingerlee and J C Kingerlee are directors of the company, Kingerlee Holdings Limited and its wholly owned subsidiaries and shareholders of the company and Kingerlee Holdings Limited. 

 

During the period, the group made purchases from Kingerlee Holdings Limited or its subsidiaries, being a service charge in relation to services at Thomas House, Kidlington of £7,000 (2010: £7,000).  The amount owed at 30 June 2011 was nil (2010: nil).  All transactions were undertaken on an arm's length basis.

 

 


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