HCFT.L Regulatory News (HCFT)

Highcroft Investments PLC

Preliminary results for the year ended 31 December 2017

KEY HIGHLIGHTS

· 22.0% increase in gross property income to £4,765,000 (2016 £3,906,000)

· 16.8% increase in investment property valuation to £77,113,000 (2016 £65,997,000)

· Property acquisitions of £9,480,000 (net of costs) and disposal proceeds of £2,292,000

· 8.4% increase in net asset value per share to 1161p (2016 1071p)

· 57.5% increase in earnings per share to 132.3p (2016 84.0p)

· Medium term debt £19,400,000 (2016 £14,900,000); net gearing 29% (2016 21%)

· Cash and liquid equity investments £4,035,000 (2016 £5,838,000)

· 15.4% increase in final dividend to 30.0p per share (2016 26.0p per share)

· 12.8% increase in total dividend to 46.25p per share (2016 41.0p per share)

Dear Shareholder,

I am pleased to announce our preliminary results for the year ended 31 December 2017 and to invite you to our Annual General Meeting on 17 May 2018 which will be held at Thomas House, Langford Locks, Kidlington, Oxfordshire, OX5 1HR at 12 noon.

Introduction

I am very pleased to be writing my first chairman's statement and reporting such a strong set of results. Before I do so however I must thank John Hewitt for his contribution to Highcroft through the last 18 years of which 11 were as non-executive chairman.

There is no doubt that 2017 has been a year of political events both inside and outside the UK and with that came a year of market uncertainty. Even with this challenging backdrop I am pleased to report that the company has reported excellent property income growth of 22%, an earnings per share increase of 57.5% to 132.3p and a 13% increase in total dividend to 46.25p per share.

Property portfolio

Under the guidance and leadership of Simon Gill we purchased two warehouses during the year which were financed by a combination of existing cashflow, recycled cash from a property sale and a new debt facility which in turn reduced the average cost of debt to 3.64% and left gearing at a modest 29%. At the year end the portfolio stood at 74% warehouses and retail warehouses with a small amount of residual residential and the remainder split between well let retail and offices.

Property rental growth of 22% for the year is the strongest performance over the last 5 years and with contracted rent at the year end being 21% up on the previous year end this shows the increase in rental income continuing into 2018.

We have stringent criteria for new tenant acceptance and at the year end all properties were fully let to a strong tenant base. Through a combination of stable income yields and active asset management I am pleased to report an 8.4% increase in net asset value and 11.9% return on equity for the year (2016 8.0%).

People

I have only been in situ as chairman for a short period however I would like to thank and congratulate the team for their hard work throughout the year. We have a small but dedicated and experienced team at Highcroft and this sets us in good stead for the year ahead.

Dividend

The company's interim dividend was increased by 8.3% and as a result of strong revenue growth, efficient use of debt and administration costs falling as a percentage of revenue we have increased the final dividend to 30.0p per share leading to a total dividend of 46.25p per share - an increase of 12.8%. Our stated strategy is to increase dividends in excess of inflation every year and I am pleased to say we have delivered an inflation busting 45.4% increase over the last 5 years.

Outlook

Highcroft is well positioned with a high quality income producing portfolio. We go into 2018 with positive momentum gained in 2017 and well positioned to continue our portfolio growth. We are however in a very competitive landscape with continuing political uncertainty so we remain cautious and diligent in our approach in ensuring we select the right properties to deliver long term shareholder value.

This announcement contains inside information for the purpose of Article 7 of Regulation (EU) No 596/2014.

Charles Butler

Chairman

23 March 2018

Enquiries:

Highcroft Investments PLC

Charles Butler / Roberta Miles

01865 840023

Panmure Gordon (UK) Limited

Fabien Holler / Andrew Potts

0207 886 2500

Consolidated statement of comprehensive income

Consolidated statement of financial position

at 31 December 2017

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes

for the year ended 31 December 2017

1 Income tax credit

The tax assessed for the year differs from the standard rate of corporation tax in the UK of 19% (2016 20%). 

The differences are explained as follows:

2 Dividends

In 2017 the following dividends have been paid by the company:

The directors recommend a property income distribution of £1,550,000, 30.0p per share (2016 £1,343,000, 26.0p per share) payable on 1 June 2018 to shareholders registered at 4 May 2018.

3 Earnings per share

The calculation of earnings per share is based on the total profit for the year of £6,835,000 (2016 £4,343,000) and on 5,167,240 shares (2016 5,167,240) which is the weighted average number of shares in issue during the year ended 31 December 2017 and throughout the period since 1 January 2016. There are no dilutive instruments.

In order to draw attention 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 £3,348,000 (2015 £2,912,000) has been calculated.

4 Investment property

In accordance with IAS 40 the carrying value of investment properties is their fair value as determined by external valuers. This valuation has been conducted by Knight Frank LLP, as external valuers, and has been prepared as at 31 December 2017, 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 uses market evidence and also 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

6 Interest bearing loans

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 2016. The accounting policies remain unchanged.

8 Annual General Meeting

The Annual General Meeting will be held on 17 May 2018.

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 2017 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 23 April 2017 and subsequently filed at Companies House.