HCFT.L Regulatory News (HCFT)

8 Aug 2007 16:47

Highcroft Investments PLC08 August 2007 Highcroft Investments PLC Interim results for the six months ended 30 June 2007 Highlights • Profit before taxation excluding capital activities, down by 10.6% to £906,000 (2006 £1,013,000) • Profit before taxation including capital activities, down by 50.4% to £1,650,000 (2006 £3,329,000) • Interim dividend increased by 6.4% to 5.00p per share from 4.70p in 2006 • Net assets per share up to 847p (June 2006 800p and December 2006 830p) Enquiries: David Bowman 01865 840 023Highcroft Investments plc Philip DaviesCharles Stanley Securities 020 7149 6000 Chairman's statement Dear Shareholder I am writing to you to introduce our Interim Report, for the half year to 30June 2007, and to update you on converting to a Real Estate Investment Trust(REIT). As far as the half year is concerned, we are pleased to report an increase inasset value per share to 847p (800p June 2006, 830p December 2006). This is aresult of retained profits and rises in both our investment and propertyportfolios. The Consolidated Income Statement shows a decline in profit before taxationincluding capital activities to £1,650,000 from £3,329,000 in the first half of2006. The principal item affecting this reduction is the net valuation gains oninvestment property which were £2,016,000 in 2006 and only £347,000 in 2007.Realised profit on disposal of investment property fell from £236,000 in 2006 to£103,000 in 2007. In contrast, net valuation gains and profit on disposal ofinvestments increased from £64,000 in 2006 to £294,000 in 2007. Profit before taxation excluding capital activities reduced from £1,013,000 in2006 to £906,000 in the first half of 2007 - principally as a result of theabsence of special dividends/cash distributions from our equity portfolio andhigher financing costs. We believe that property and equity purchases made now(when income might not cover short term interest charges) will enhance the assetbase of the company in the medium term. Despite a decline in distributable profit for the period, we are paying aninterim dividend of 5.00p - an increase of 6.4%. Shareholders will be aware of the debate about property values in view of risinginterest rates. If the market as a whole continues to weaken in the comingmonths our own portfolio will be affected. However, we believe that ourportfolio of property is strong as it is designed for the medium term withquality properties, in good locations, a spread of rent reviews/renewals andgood covenants. Following the AGM discussion and announcement about REITs, I am pleased to saythat the programme for conversion is progressing well. The two principal issueswith which we are dealing are, first, the fact we have a substantial shareholderand, second, that we will be required to manage our property and equity assetsso that property assets are always three times the value of equity assets. Weexpect to be writing to shareholders in November regarding an EGM to be held inmid-December. If the motion to amend our Articles of Association were carried,conversion would be effective on 1 January 2008 J Hewitt8 August 2007 Condensed consolidated income statement (Unaudited)for the six months ended 30 June 2007 First Half First Half Full Year 2007 2006 2006 Note £'000 £'000 £'000 Gross rental income 1,055 1,041 2,038Property operating expenses (46) (49) (136)Net rental income 1,009 992 1,902 Realised gains on investment property 109 243 320Realised losses on investment property (6) (7) (33)Profit on disposal of investment property 103 236 287 Valuation gains on investment property 428 2,230 2,732Valuation losses on investment property (81) (214) (398)Net valuation gains on investment property 347 2,016 2,334 Dividend income 168 237 489Gains on investments 869 352 1,455Losses on investments (575) (288) (309)Net investment income 462 301 1,635 Administrative expenses (136) (141) (247) Operating profit before net financing costs 1,785 3,404 5,911 Finance income 9 5 13Finance expenses (144) (80) (201)Net financing costs (135) (75) (188) Profit before tax 1,650 3,329 5,723 Income tax expense 4 (275) (722) (1,340)Profit for the financial period 1,375 2,607 4,383 Earnings per share 6 26.6p 50.5p 84.8p Condensed consolidated balance sheet (Unaudited)as at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 Note £'000 £'000 £'000AssetsInvestment property 7 39,324 37,818 41,487Equity investments 8 11,840 10,645 11,794Total non-current assets 51,164 48,463 53,281 Current assetsTrade and other receivables 407 578 489Cash at bank and in hand 433 157 281Total current assets 840 735 770 Total assets 52,004 49,198 54,051 LiabilitiesCurrent liabilitiesInterest-bearing loans and borrowings 178 137 246Current corporation tax 405 422 196Trade and other payables 879 711 838Total current liabilities 1,462 1,270 1,280 Non-current liabilitiesInterest-bearing loans and borrowings 10 2,760 2,917 5,685Deferred tax liabilities 3,997 3,669 4,211Total non-current liabilities 6,757 6,586 9,896 Total liabilities 8,219 7,856 11,176 Net assets 43,785 41,342 42,875 EquityIssued share capital 9 1,292 1,292 1,292Revaluation reserve - property 9 9,723 10,016 10,169Revaluation reserve - other 9 4,635 3,865 4,601Capital redemption reserve 9 95 95 95Realised capital reserve 9 17,152 15,892 16,055Retained earnings 9 10,888 10,182 10,663Total equity 43,785 41,342 42,875 Condensed consolidated statement of cash flow (Unaudited)for the six months ended 30 June 2007 30 June 30 June 31 December 2007 2006 2006 £'000 £'000 £'000Operating activitiesProfit for the period 1,375 2,607 4,383Adjustments for:Net valuation gains on investment property (347) (2,016) (2,334)Profit on disposal of investment property (103) (236) (287)Net gains on investments (294) (64) (1,146)Finance income (9) (5) (13)Finance expense 144 80 201Income tax expense 275 722 1,340Operating profit before changes in working 1,041 1,088 2,144capital and provisionsDecrease/(increase) in trade and other receivables 82 (277) (188)Increase/(decrease) in trade and other payables 40 (14) 113Cash generated from operations 1,163 797 2,069 Finance income 9 5 13Finance expense (144) (80) (201)Income tax paid (282) (350) (650)Cash flows from operating activities 746 372 1,231 Investing activitiesPurchase of fixed assets - investment property (6) (3,054) (7,437)- equity investments (703) (616) (1,029)Sale of fixed assets - investment property 2,621 950 2,032- equity investments 952 655 1,000Cash flows from investing activities 2,864 (2,065) (5,434) Financing activitiesNew medium term loans - 1,602 4,470Loan repayments (2,993) (48) (39)Dividends paid (465) (429) (672)Cash flows from investing activities (3,458) 1,125 3,759 Net increase in cash and cash equivalents 152 (568) (444)Cash and cash equivalents at 1 January 2007 281 725 725Cash and cash equivalents at 30 June 2007 433 157 281 Notes 1. Interim report The results for the six months ended 30 June 2007 are unaudited. This interimreport will not appear as an advertisement in any newspaper but copies are beingsent to all shareholders and are available at the company's registered office.The interim report does not constitute full accounts as defined by the CompaniesAct 1985 but should be read in conjunction with the most recent financialstatements. Full accounts for 2006 have been delivered to the Registrar ofCompanies, bearing an unqualified audit opinion. 2. Significant accounting policies Highcroft Investments PLC is a company domiciled in the United Kingdom. Theinterim financial statements of the company for the six months ended 30 June2007 comprise the company and its subsidiary, together referred to as the group. a. Statement of compliance These interim financial statements have been prepared in accordance with IAS 34on Interim Financial Reporting. b. Basis of preparation The financial statements are presented in pounds sterling, rounded to thenearest thousand. They are prepared on the historical cost basis except thatinvestment property and equity investments are stated at their fair value. Theaccounting policies have been consistently applied to the results, other gainsand losses, assets, liabilities and cash flows of entities included in theconsolidated interim financial statements and are consistent with those used inthe previous year. 3. Segmental reporting Segmental information is presented in the interim financial statements inrespect of the group's business segments. The business segment reporting formatreflects the group's management and internal reporting structure. Segmentresults include items directly attributable to a segment as well as those thatcan be allocated on a reasonable basis. 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. First Half First Half Full Year 2007 2006 2006 £'000 £'000 £'000Commercial propertyGross income 1,026 967 1,933Profit for the period 610 1,824 2,288Assets 37,576 35,825 39,312Liabilities 5,697 5,559 8,559Residential propertyGross income 29 74 105Profit for the period 348 507 813Assets 2,475 2,630 2,874Liabilities 592 643 736Financial assetsGross income 168 237 489Profit for the period 417 276 1,282Assets 11,953 10,743 11,865Liabilities 1,930 1,654 1,881TotalGross income 1,223 1,278 2,527Profit for the period 1,375 2,607 4,383Assets 52,004 49,198 54,051Liabilities 8,219 7,856 11,176 4. Taxation First Half First Half Full Year 2007 2006 2006 £'000 £'000 £'000Current tax:On revenue profits 216 238 363On capital profits 12 60 83Prior year overprovision - - (11)Deferred tax 47 424 905 275 722 1,340 The taxation charge has been based on the estimated effective tax rate for thefull year. 5. Dividends On 8 August 2007, the directors declared an ordinary interim dividend of 5.00pper share (2006 4.70p) payable on 31 October 2007 to shareholders registered at5 October 2007. The following dividends have been paid by the company. First Half First Half Full Year 2007 2006 2006 £'000 £'000 £'0009.00p per ordinary share (2006 8.30p) 465 429 4292006 interim 4.70p per ordinary share - - 243 465 429 672 6. Earnings per share The calculation of earnings per share is based on the profit for the period of£1,375,000 (2006 £2,607,000) and on 5,167,240 shares (2006 5,167,240) which isthe weighted average number of shares in issue during the period ended 30 June2007 and throughout the period since 1 January 2006. In order to draw attention to the impact of valuation gains and losses which areincluded in the income statement but not available for distribution under thecompany's articles of association, an adjusted earnings per share based on theprofit available for distribution of £690,000 (2006 £775,000) has beencalculated. First Half First Half Full Year 2007 2006 2006 £'000 £'000 £'000Earnings:Basic earnings 1,375 2,607 4,383Adjustments for:Net valuation gains on investment property (450) (2,252) (2,621)Gains and losses on investments (294) (64) (1,146)Income tax on gains and losses 59 484 884Adjusted earnings 690 775 1,500 Per share amount:Basic earnings per share 26.6p 50.5p 84.8pAdjustments for:Net valuation gains on investment property (8.7)p (43.6)p (50.7)pGains and losses on investments (5.7)p (1.2)p (22.2)pIncome tax on gains and losses 1.1p 9.4p 17.1pAdjusted earnings per share 13.3p 15.1p 29.0p 7. Investment property First Half First Half Full Year 2007 2006 2006 Valuation at 1 January 2007 41,487 33,461 33,461Additions 6 3,054 7,437Disposals (2,516) (713) (1,745)Surplus on revaluation 347 2,016 2,334Valuation at 30 June 2007 39,324 37,818 41,487 The directors have used an external independent valuation of properties at 30June 2007. 8. Equity investments Listed and unlisted First Half First Half Full Year 2007 2006 2006 £'000 £'000 £'000 Valuation at 1 January 2007 11,794 10,620 10,620Additions 703 614 1,029Disposals (962) (740) (1,087)Surplus on revaluation 305 151 1,232Valuation at 30 June 2007 11,840 10,645 11,794 9. Total equity a) First half 2007 Revaluation Equity reserves Capital Realised Retained Property Other Redemption Capital Earnings £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2007 1,292 10,169 4,601 95 16,055 10,663Total recognised gain and expense - - - - - 1,375Dividends to shareholders - - - - - (465)Non-distributable items recognised inincome statement:Revaluation gains - 347 305 - - (652)Tax on valuation gains and losses - (22) (25) - - 47Realised gains - - - - 80 (80)Surplus attributable to assets sold - (972) (306) - 1,278 -Tax on gains attributable to assets sold - 201 60 - (261) -At 30 June 2007 1,292 9,723 4,635 95 17,152 10,888 b) First half 2006 Revaluation Equity reserves Capital Realised Retained Property Other Redemption Capital Earnings £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 1,292 8,734 3,902 95 15,306 9,835Total recognised gain and expense - - - - - 2,607Dividends to shareholders - - - - - (429)Non-distributable items recognised inincome statement:Revaluation gains - 2,016 151 - - (2,167)Tax on valuation gains and losses - (419) (6) - - 425Realised gains - - - - 89 (89)Surplus attributable to assets sold - (400) (213) - 613 -Tax on gains attributable to assets sold - 85 31 - (116) -At 30 June 2006 1,292 10,016 3,865 95 15,892 10,182 c) Full year 2006 Revaluation Equity reserves Capital Realised Retained Property Other Redemption Capital Earnings £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 1,292 8,734 3,902 95 15,306 9,835Total recognised gain and expense - - - - - 4,383Dividends to shareholders - - - - - (672)Non-distributable items recognised inincome statement:Revaluation gains - 2,334 1,232 - - (3,566)Tax on valuation gains and losses - (498) (303) - - 801Realised gains - - - - 118 (118)Surplus attributable to assets sold - (512) (276) - 788 -Tax on gains attributable to assets sold - 111 46 - (157) -At 31 December 2006 1,292 10,169 4,601 95 16,055 10,663 10. Interest-bearing loans and borrowings First Half First Half Full Year 2007 2006 2006 £'000 £'000 £'000 Medium term bank loan 2,760 2,917 5,685 The medium term bank loan comprises amounts falling due as follows:Between one and two years 202 71 288Between two and five years 708 238 1,002Over five years 1,850 2,608 4,395 2,760 2,917 5,685 11. Related party transactions Kingerlee Holdings Limited owns 25.3% (2006 24.5%) of the company's shares and DH Kingerlee and J C Kingerlee are directors and shareholders of both the companyand Kingerlee Holdings Limited. During the period, the group made purchasesfrom Kingerlee Holdings Limited or its subsidiaries, being repairs to propertieswhich were nil in 2007 (2006 £3,000) and a service charge in relation toservices at Thomas House, Kidlington of £7,000 (2006 £7,000). The amount owedat 30 June 2007 was nil (2006 Nil). All transactions were undertaken on anarm's length basis. This information is provided by RNS The company news service from the London Stock Exchange