HCFT.L Regulatory News (HCFT)

Highcroft Investments PLC

Preliminary results for the year ended 31 December 2015

KEY HIGHLIGHTS

· Gross property income increased by 12% to £3,435,000 (2014 £3,079,000)

· Total profit for the year up 3% to £7,235,000 (2014 £7,057,000)

· Unadjusted earnings per share up 3% to 140.0p (2014 136.5p)

· Net asset value per share up 11% to 1026p (2014 923p)

· Total property income distribution up 8% to 38.8p per share (2014 36.0p)

· Medium term debt £11,500,000 (2014 £4,000,000)

· Property acquisitions of £8,500,000 (net of costs) and disposal proceeds of £2,361,000

· Investment property valuation up 25% to £57,964,000 (2014 £46,523,000)

· Cash and liquid equity investments £8,007,000 (2014 £6,571,000)

Dear Shareholder,

I am pleased to announce our preliminary results for the year ended 31 December 2015 and to invite you to our Annual General Meeting on 12 May 2016 which will be held at Thomas House, Langford Locks, Kidlington, Oxon, OX5 1HR at 12 noon.

Results for the year

I am delighted to report that, following a successful year in 2014, we have continued to make progress in delivering our strategy. Through targeted acquisitions focused on larger lot sizes, combined with a prudent use of gearing, we have been able to increase operating profits from our property assets. We have made further returns from the sale of property assets and realisations from equities.

Property: Gross property rental income rose 12% to £3,435,000 (2014 £3,079,000), with all of this increase arising from the performance of our commercial properties. This growth includes the effect of a full year's income from the Ash Vale and Crawley properties purchased in July 2014 and August 2014 respectively. It also includes a partial year of income from the new acquisition in Wisbech, and allowing for reduced income from properties which we sold in the year and where we had lease expiries and a tenant in administration. All our properties are currently let and there were no bad debts in the period. Operating expenses increased by £171,000 to £329,000; primarily due to one-off costs at two properties where we undertook programmes of repair and removal of asbestos. We made one acquisition in the year of a freehold multi-let retail park in Wisbech for £8,500,000 in May 2015. The property is let to Currys PC World, Carpetright, Halfords, Dunelm and Pets at Home. We have been very pleased with the performance of our assets, with the combination of one rent review and a fixed increase also helping to increase gross rental income and capital values.

The sale of the Warrington property, together with two residential units, yielded gross proceeds of £2,361,000 that were 23% in excess of the December 2014 valuations. These proceeds will be re-invested in line with our strategy. We have been successful in identifying property investments at attractive yields and positioned, as we are, between private investors and larger corporate property investors. We intend to continue to take advantage of our strong financial position and ability to move fast to exploit such opportunities. An improved credit market combined with the company's strong financial position allows us to increase the return on our investments through a prudent use of debt. Our properties showed a net valuation gain of £4,765,000 for the year, partly due to the strength of the warehouse sector which performed well in 2015, and also due to the strategic corporate acquisition of the Wisbech property which showed a significant valuation gain. Since the year end we have completed on the sale of the Kingston property realising gross proceeds of £1,125,000.

Equities: Income of £182,000, coupled with a realised net loss of £68,000 and an unrealised net loss of £347,000, is a result of the market conditions and the reduction in the level of our holdings. We released £962,000 in net cash from equities during the year and have released a further £493,000 since the year end.

Administrative expenses: Ongoing administrative expenses increased by £101,000 in 2015, due to a combination of step-changes in certain costs, as the complexity of the business increased, including audit and professional fees and directors' remuneration. Finance costs increased by £187,000 due to the effect of increased bank borrowings in the year.

Financial highlights: Total profit for the year showed a 3% improvement on 2014, which was itself an excellent year. This profitability was driven by the capital performance of our property investments. Excluding the realised gains on investment property, the underlying profit on revenue activities showed a 13% fall to £368,000 due to the effect of one-off property costs and increased administration costs, net of the positive effect of the special dividend income of £221,000 received in 2014 as a result of the Vodafone demerger. This underlying decline was caused by one-off factors and timings of asset sales and purchases. The directors make decisions on the balance of our property investments based upon maximising the medium and long-term position for shareholders. The year-end net asset value per share increased to 1026p (2014 923p) and our year-end cash position was £4,852,000 (2014 £2,039,000), whilst readily realisable equity investments totalled £3,155,000 (2014 £4,532,000). Our year end bank loans totalled £11,500,000 (2014 £4,000,000).

Dividend

We are recommending a final property income distribution of 24.50p per share (2014 22.75p) to be paid on 3 June 2016 to shareholders registered on 6 May 2016 (with an ex-dividend date of 5 May 2016) making a total of 38.8p for the year (2014 36.0p). This increase of 8% for the year continues the recent record of increases well in excess of inflation.

Board

We were pleased to welcome our new senior independent director, Simon Costa, to the board on 16 May 2015; his particular breadth of experience provides us with a greater range of market knowledge and skills which are particularly relevant to our growth aspirations.

Outlook

We are very pleased with the results for the year and remain optimistic that we start 2016 from a position of strength upon which we hope to build through further attractive acquisitions. We will continue to reduce our investment in equities in line with our medium term strategy. We have set ourselves some challenging objectives for 2016 and we expect that our actions will continue to improve shareholder value via increased dividends and asset values.

John Hewitt

Chairman

22 March 2016

Enquiries:

Highcroft Investments PLC

John Hewitt / Roberta Miles

01865 840023

Panmure Gordon (UK) Limited

Karri Vuori / Fabien Holler / Jonathan Surr

020 7886 2500

Consolidated statement of comprehensive income

Consolidated statement of financial position

at 31 December 2015

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes

for the year ended 31 December 2015

1 Income tax credit

The tax assessed for the year differs from the standard rate of corporation tax in the UK of 20% (2014 21.5%). 

The differences are explained as follows:

2 Dividends

In 2015 the following dividends have been paid by the company:

On 22 March 2016 the directors declared a property income distribution of £1,266,000, 24.50p per share (2014 £1,176,000, 22.75p per share) payable on 3 June 2016 to shareholders registered at 6 May 2016.

3 Earnings per share

The calculation of earnings per share is based on the total profit for the year of £7,235,000 (2014 £7,057,000) and on 5,167,240 shares (2014 5,167,240) which is the weighted average number of shares in issue during the year ended 31 December 2015 and throughout the period since 1 January 2014. 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 £2,871,000 (2014 £3,758,000) 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 2015, 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 loan

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 2014. The accounting policies remain unchanged.

8 Annual General Meeting

The Annual General Meeting will be held on 12 May 2016.

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 2015 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 18 April 2016 and subsequently filed at Companies House.