HCFT.L Regulatory News (HCFT)

30 July 2015

Highcroft Investments PLC

Interim Report for the six months ended 30 June 2015

Key Highlights:

*Gross rental income increased 7% to £1,585,000 (2014 £1,482,000)

*Net rental income reduced 1% to £1,394,000 (2014 £1,412,000)

\* Total earnings per share of 64.2p (2014 85.7p)

*Net assets per share of 965p (June 2014 886p, December 2014 923p)

*Interim property income distribution up 8% to 14.30p (2014 13.25p)

*Post period-end property sales in excess of period-end valuation.

Dear Shareholder

I am pleased to report that in the 6 months ended 30 June 2015, despite short-term profits being lower, the group has been strengthened by further re-shaping of its property portfolio. Our confidence in the near and medium term is reflected by a proposed interim property income distribution of 14.30p per share - an increase of 8% on 2014. This continues our policy of raising our dividend ahead of inflation.

 Results for the period

Property

Gross rental income has risen by 7%. This increase arises primarily from the rental income from our Ash Vale and Crawley properties purchased in the second half of 2014 and our recent acquisition at Wisbech, net of the rental income forgone from the sale of our Bristol property in April 2014 and our Beckenham property in July 2014. In addition we have benefitted from two positive rent reviews. However, three properties in our portfolio have been vacant for part of this period, resulting in a reduced rental income. I am pleased to report that two new leases were completed in the period and the third was completed after the period-end. Our property expenses for the six month period increased to £191,000 (2014 £70,000). The increase arose from significant one-off works, including asbestos removal, which had to be carried out at our Norwich and Leamington Spa retail units. The majority of the works have been completed in the period ended 30 June 2015.

The external, independent valuation of our property portfolio at 30 June 2015 showed a gain of 3.4% on a like-for-like basis arising from positive lease events and an improving market, and is a reflection of the strength and quality of our portfolio. As announced on 6 July 2015, after the period-end, we sold our Warrington unit at auction for a gross consideration of £1,100,000. We also exchanged contracts in July on one residential property yielding £835,000 gross. Both transactions, which were in excess of their year-end valuations, are expected to complete during August 2015 and we intend to invest these funds back into the commercial portfolio as and when a sound investment is identified.

The upgrading of the property portfolio continues with the aim of improving the weighted unexpired lease term, strengthening covenants and increasing the average lot-size. On 15 May 2015 we announced the purchase of our largest property asset, a multi-let retail park in Wisbech for £8.5 million. This was an unusually complex transaction as the purchase was of a corporate entity which resulted in higher than usual professional fees and a lengthy acquisition timetable. We are optimistic that this asset will perform well within our portfolio.

Our property portfolio is now valued at £57.0 million (2014 £40.0 million).

Equities

Equity markets have undergone considerable volatility in the period, and we took advantage of this to reduce our portfolio a little further in line with our stated long-term strategy. In keeping with this approach, dividend income from our equity portfolio reduced to £87,000 (2014 £154,000) due to a scaling back of our exposure to equities since 1 January 2014, and also the fact that the 2014 result was augmented by the Vodafone de-merger. We raised £622,000 from the sale of equities at a loss of £12,000 to the year-end valuation and made a small purchase, as a result of a de-merger, costing £7,000. The net loss on valuation of £210,000 in the half year is a reflection of the challenging market conditions, with only seven of our twenty-six holdings showing gains.

Financial

Earnings per share on revenue activities reduced to 21.8p (2014 39.9p) as 2014 was enhanced by the disposal of our Bristol property. In addition the company benefited from a gain on the property valuations of £2,329,000 net of the reduction in the equity portfolio valuation of £210,000. The more volatile measure of total earnings per share which includes capital profits and valuation gains was 64.2p (2014 85.7p).

The cash position at 30 June 2015 was £2,010,000 (2014 £5,863,000). This will be augmented by the proceeds of the property disposals, referred to above, of £1,935,000 during August. We have taken £7,500,000 of new borrowing in the period and our medium term loans total £11,500,000 at 30 June 2015, a gearing level of 19%.

Dividend

I am pleased to report that we will be paying an interim property income distribution of 14.30p (2014 13.25p) per share, payable on 16 October 2015 to shareholders registered on 18 September 2015.

Outlook

As a consequence of our property acquisition and lease events during the period, we expect to be able to report an increase in gross rental income in the second half of our financial year. However, profits on capital activities are likely to moderate in the second half of the year as the pace of growth in the commercial market eases.

Whilst we remain cautious about the outlook for medium-term interest rates, suitable investment opportunities may lead us to further alter the equity/property balance and to increase gearing. We continue to look for suitable commercial properties to enhance our portfolio and enable us to continue our policy of increasing dividends above the level of inflation.

John HewittChairman29 July 2015

For further information, contact:

Highcroft Investments PLC

John Hewitt/Roberta Miles 01865 840023

Charles Stanley Securities

Dugald Carlean / Karri Vuori 020 7149 6000

Condensed consolidated interim statement of comprehensive income (unaudited) 

for the six months ended 30 June 2015

Condensed consolidated interim statement of financial position (unaudited) 

as at 30 June 2015

Condensed consolidated interim statement of changes in equity

for the six months ended 30 June 2015

a) First half 2015 - Unaudited

b) First half 2014 - Unaudited

Condensed consolidated interim statement ofchanges in equity continued

for the six months ended 30 June 2015

c) Full year 2014 - Audited

Condensed consolidated interim statement of cash flows

for the six months ended 30 June 2015

Notes (Unaudited)

for the six months ended 30 June 2015

1. Nature of operations and general information

Highcroft Investments PLC ('Highcroft') and its subsidiaries' (together 'the group') principal activity is 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 29 July 2015. The financial information for the period ended 30 June 2015 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 2014 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 2015. 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 2014.

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 2014.

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

In accordance with IAS 40 'Investment Property', management have assessed whether the acquisition of B L (Wisbech) Limited and its subsidiary Belgrave Land (Wisbech) Limited during the period represented an asset purchase or a business combination within the scope of IFRS 3. Management have determined that the acquisition represented an asset purchase since it did not meet the IFRS 3 definition of a business, specifically since the related services transferred are considered to be administrative functions rather than processes as defined by IFRS 3.

The financial statements are drawn up on a going concern basis. The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future, and consider that there are no material uncertainties that lead to significant doubt upon the group's ability to continue as a going concern. Cash flow forecasts are prepared annually as part of the planning and budgeting process and are monitored and reworked regularly. The group has fixed term non amortising borrowing and has additional headroom available. In addition the group has relatively liquid assets in the form of listed equity investments on which it can draw if necessary.

3. Segment 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, warehouses and retail warehouses in England and Wales

Residential property comprising single-let houses and flats in England

Financial assets comprising exchange-traded equity investments.

3. Segment reporting continued

In 2015 the largest tenant represented 12% (2014 13%) and the second largest tenant represented 11% (2014 11%) of gross commercial property income for the period.

4. Income tax (credit)/expense

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 29 July 2015, the directors declared a property income dividend of 14.30p per share (2014 13.25p interim dividend) payable on 16 October 2015 to shareholders registered at 18 September 2015.

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

6. Earnings per share

The calculation of earnings per share is based on the profit for the period of £3,315,000 (2014 £4,428,000) and on 5,167,240 shares (2014 5,167,240) which is the weighted average number of shares in issue during the period ended30 June 2015 and throughout the period since 1 January 2014.

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 £1,123,000 (2014 £2,061,000) has been calculated.

7. Investment property

The directors have used an external independent valuation of properties at 30 June 2015 which has been carried out consistently with the annual valuation.

8. Equity investments

9. Interest bearing loans

During the period £7,500,000 of new non-amortising fixed-term debt was drawn. The debt is secured on certain assets within the group's property portfolio.

10. Related party transactions

Kingerlee Holdings Limited owns, through its wholly owned subsidiaries, 27.2% (2014 25.5%) of the company's shares and D H Kingerlee is a director of both 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 (2014 £7,000). The amount owed at 30 June 2015 was nil (2014 nil). All transactions were undertaken on an arm's length basis.

11. Events after the reporting date

On 6 July 2015 the group exchanged contracts for the sale of its Warrington property for £1,100,000, an uplift of £150,000 on the year-end valuation. The transaction is expected to complete during August 2015. On 8 July 2015 the group exchanged contracts for the sale of one of its remaining two residential single-let units for £835,000, an uplift of £265,000 on the year-end valuation. This unit had previously been occupied under a regulated tenancy.

12. Net assets per share

Statement of directors' responsibilities

The directors confirm that, to the best of their knowledge, this condensed consolidated set of half-year financial statements has been prepared in accordance with IAS 34. The half-year management report includes a fair review of the information required by 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority, namely:

· an indication of the important events that have occurred during the first six months of the financial year ending 31 December 2015 and their impact on the condensed consolidated set of half-year financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· disclosure of material related party transactions in the first six months of the financial year, and any material changes in the related party transactions described in the last Annual Report.

 A list of current directors is maintained on the Highcroft Investments PLC website: www.highcroftplc.com.

By order of the board

John HewittChairman29 July 2015