Interim Report for the 6 months ended 30 June 2019

Condensed consolidated interim statement of comprehensive income (unaudited)

for the six months ended 30 June 2019

		Unaudited			Unaudited			Audited
		First half 2019			First half 2018			Full year 2018
	Note	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Continuing operations
Gross rental income		2,726	-	2,726	2,442	-	2,442	5,043	-	5,043
Property operating expenses		(48)	-	(48)	(77)	-	(77)	(184)	-	(184)
Net rental income		2,678	-	2,678	2,365	-	2,365	4,859	-	4,859
Net (loss)/gain on disposal of investment property		-	-	-	(42)	-	(42)	967	-	967
Valuation gains on investment property		-	-	-	-	1,865	1,865	-	2,600	2,600
Valuation losses on investment property		-	(792)	(792)	-	(700)	(700)	-	(2,116)	(2,116)
Net valuation (losses)/gains on investment property		-	(792)	(792)	-	1,165	1,165	-	484	484
Dividend income		3	-	3	27	-	27	54	-	54
Gains on investments		53	-	53	6	85	91	-	48	48
Losses on investments		-	-	-	(12)	(46)	(58)	-	(166)	(166)
Net investment income/ (loss)		56	-	56	21	39	60	54	(118)	(64)
Administrative expenses		(411)	-	(411)	(368)	-	(368)	(736)	-	(736)
Operating profit before net financing costs		2,323	(792)	1,531	1,976	1,204	3,180	5,144	366	5,510
Finance income		5	-	5	3	-	3	6	-	6
Finance expenses		(396)	-	(396)	(350)	-	(350)	(705)	-	(705)
Net finance costs		(391)	-	(391)	(347)	-	(347)	(699)	-	(699)
Profit before tax		1,932	(792)	1,140	1,629	1,204	2,833	4,445	366	4,811
Income tax (charge)/credit	4	(11)	-	(11)	52	-	52	67	48	115
Total profit and comprehensive income for the financial period		1,921	(792)	1,129	1,681	1,204	2,885	4,512	414	4,926
Basic and diluted earnings per share	6			21.9p			55.8p			95.3p

Condensed consolidated interim statement of financial position (unaudited)

as at 30 June 2019

	Note	Unaudited 30 June 2019 £'000	Unaudited 30 June 2018 £'000	Audited 31 December 2018 £'000
Assets
Investment property	7	88,805	75,805	77,700
Equity investments	8	9	1,651	679
Total non-current assets		88,814	77,456	78,379
Current assets
Trade and other receivables		668	441	471
Cash at bank and in hand		610	5,057	5,202
Total current assets		1,278	5,498	5,673
Total assets		90,092	82,954	84,052
Liabilities
Current liabilities
Trade and other payables		2,123	2,055	2,235
Total current liabilities		2,123	2,055	2,235
Non-current liabilities
Interest-bearing loans and borrowings	9	26,200	19,400	19,400
Deferred tax liabilities		-	187	33
Total non-current liabilities		26,200	19,587	19,433
Total liabilities		28,323	21,642	21,668
Net assets		61,769	61,312	62,384
Equity
Issued share capital		1,292	1,292	1,292
Revaluation reserve - property		17,456	19,690	18,770
Revaluation reserve - other		5	209	574
Capital redemption reserve		95	95	95
Realised capital reserve		28,990	26,188	28,378
Retained earnings		13,931	13,838	13,275
Total equity		61,769	61,312	62,384

Condensed consolidated interim statement of changes in equity

for the six months ended 30 June 2019

First half 2019 Unaudited	Equity £'000	Revaluation reserves		Capital redemption £'000	Realised capital £'000	Retained earnings £'000	Total £'000
First half 2019 Unaudited	Equity £'000	Property £'000	Other £'000	Capital redemption £'000	Realised capital £'000	Retained earnings £'000	Total £'000
At 1 January 2019	1,292	18,770	574	95	28,378	13,275	62,384
Transactions with owners: Dividends	-	-	-	-	-	(1,744)	(1,744)
Reserve transfers:
Non-distributable items recognised in income statement:
Revaluation losses	-	(792)	-	-	-	792	-
Tax on revaluation gains/(losses)	-	-	-	-	-	-	-
Realised gains	-	-	-	-	43	(43)	-
Movement in deferred tax on realisation of equities	-	-	34	-	(34)	-	-
Surplus attributable to assets sold	-	-	(603)	-	603	-	-
Excess of cost over revalued amount taken to retained earnings	-	(522)	-	-	-	522	-
	-	(1,314)	(569)	-	612	1,271	-
Profit and total comprehensive income for the period	-	-	-	-	-	1,129	1,129
At 30 June 2019	1,292	17,456	5	95	28,990	13,931	61,769

First half 2018 Unaudited	Equity £'000	Revaluation reserves		Capital redemption £'000	Realised capital £'000	Retained earnings £'000	Total £'000
First half 2018 Unaudited	Equity £'000	Property £'000	Other £'000	Capital redemption £'000	Realised capital £'000	Retained earnings £'000	Total £'000
At 1 January 2018	1,292	18,015	538	95	26,611	13,426	59,977
Transactions with owners: Dividends	-	-	-	-	-	(1,550)	(1,550)
Reserve transfers:
Non-distributable items recognised in income statement:
Revaluation gains	-	1,165	39	-	-	(1,204)	-
Tax on revaluation gains	-	-	-	-	-	-	-
Realised losses	-	-	-	-	(46)	46	-
Surplus attributable to assets sold	-	745	(368)	-	(377)	-	-
Excess of cost over revalued amount taken to retained earnings	-	(235)	-	-	-	235	-
	-	1,675	(329)	-	(423)	(923)	-
Profit and total comprehensive income for the period	-	-	-	-	-	2,885	2,885
At 30 June 2018	1,292	19,690	209	95	26,188	13,838	61,312

Condensed consolidated interim statement of changes in equity (continued)

for the six months ended 30 June 2019

Full year 2018 Audited	Equity £'000	Revaluation reserves		Capital redemption £'000	Realised capital £'000	Retained earnings £'000	Total £'000
Full year 2018 Audited	Equity £'000	Property £'000	Other £'000	Capital redemption £'000	Realised capital £'000	Retained earnings £'000	Total £'000
At 1 January 2018	1,292	18,015	538	95	26,611	13,426	59,977
Transactions with owners: Dividends	-	-	-	-	-	(2,519)	(2,519)
Reserve transfers:
Non-distributable items recognised in income statement:
Revaluation gains/(losses)	-	484	(121)	-	-	(363)	-
Tax on revaluation gains	-	-	48	-	-	(48)	-
Realised gains	-	-	-	-	969	(969)	-
Movement in deferred tax on realisation of equities	-	-	1,161	-	(1,161)	-	-
Surplus attributable to assets sold	-	(907)	(1,052)	-	1,959	-	-
Excess of cost over revalued amount taken to retained earnings	-	1,178	-	-	-	(1,178)	-
	-	755	36	-	1,767	(2,558)	-
Profit and total comprehensive income for the period	-	-	-	-	-	4,926	4,926
At 31 December 2018	1,292	18,770	574	95	28,378	13,275	62,384

Condensed consolidated interim statement of cashflows

for the six months ended 30 June 2019

	Unaudited First half 2019 £'000	Unaudited First half 2018 £'000	Audited Full year 2018 £'000
Operating activities
Profit before tax for the period	1,140	2,833	4,811
Adjustments for:
Net valuation losses/(gains) on investment property	792	(1,165)	(484)
Net loss/(gain) on disposal of investment property	-	42	(967)
Net gains on investments	(53)	(33)	118
Finance income	(5)	(3)	(6)
Finance expense	396	350	705
Operating cash flow before changes in working capital and provisions	2,270	2,024	4,177
(Increase)/decrease in trade and other receivables	(197)	96	66
Increase/(decrease) in trade and other payables	(156)	(14)	89
Cash generated from operations	1,917	2,106	4,332
Finance income	5	3	6
Finance expense	(396)	(350)	(705)
Income tax paid	-	-	(13)
Net cash flows from operating activities	1,526	1,759	3,620
Investing activities
Purchase of fixed assets - investment property	(11,897)	-	(5,226)
Sale of fixed assets - investment property	-	2,431	6,090
- equity investments	723	513	1,333
Net cash flows from investing activities	(11,174)	2,944	2,197
Financing activities
Dividends paid	(1,744)	(1,550)	(2,519)
New bank borrowings	6,800	-	-
Net cash flows from financing activities	5,056	(1,550)	(2,519)
Net (decrease)/increase in cash and cash equivalents	(4,592)	3,153	3,298
Cash and cash equivalents at 1 January	5,202	1,904	1,904
Cash and cash equivalents at period end	610	5,057	5,202

Notes (Unaudited)

for the six months ended 30 June 2019

1. Nature of operations and general information

Highcroft Investments PLC ('Highcroft' or 'company') and its subsidiaries' (together 'the group') principal activity is investment in property. It is incorporated and domiciled in Great Britain. The address of Highcroft'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 19 July 2019. The financial information for the period ended 30 June 2019 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 2018 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 2019. 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 2018.

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 2018.

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

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.

3. Segment reporting

The group has one main business segment - property.

In 2019 the largest tenant represented 9% (2018 10%) and the second largest tenant represented 7% (2018 8%) of gross commercial property income for the period.

4. Income tax (charge)/credit

	First half 2019 £'000	First half 2018 £'000	Full year 2018 £'000
Current tax:
On revenue profits	-	52	67
On capital profits	(11)	-	-
	(11)	52	67
Deferred tax	-	-	48
Total tax	(11)	52	115

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 property activities.

Notes (Unaudited) (continued)

for the six months ended 30 June 2019

5. Dividends

On 19 July 2019, the directors declared a property income distribution of 21.00p per share (2018 18.75p per share) payable on 11 October 2019 to shareholders registered at 13 September 2019.

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

	First half 2019 £'000	First half 2018 £'000	Full year 2018 £'000
2018 final: 33.75 per ordinary share (2017 final 30.0p)	1,744	1,550	1,550
2018 interim: 18.75p per ordinary share	-	-	969
	1,744	1,550	2,519

6. Earnings per share

The calculation of earnings per share is based on the profit for the period of £1,129,000 (2018 £2,885,000) and on 5,167,240 shares (2018 5,167,240) which is the weighted average number of shares in issue during the period ended 30 June 2019 and throughout the period since 1 January 2018.

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 £1,921,000 (2018 £1,681,000) has been calculated.

	First half 2019 £'000	First half 2018 £'000	Full year 2018 £'000
Earnings:
Basic earnings	1,129	2,885	4,926
Adjustments for:
Net valuation losses/(gains) on investment property	792	(1,165)	(484)
Gains/(losses) on investments	-	(39)	118
Income tax on gains and losses	-	-	(48)
Adjusted earnings	1,921	1,681	4,512
Per share amount:
Basic earnings per share	21.9p	55.8p	95.3p
Adjustments for:
Net valuation gains on investment property	15.3p	(22.5p)	(9.4p)
Gains and losses on investments	-	(0.8p)	2.3p
Income tax on gains and losses	-	-	(0.9p)
Adjusted earnings per share	37.2p	32.5p	87.3p

Notes (Unaudited) (continued)

for the six months ended 30 June 2019

7. Investment property

	First half 2019 £'000	First half 2018 £'000	Full year 2018 £'000
Valuation at 1 January	77,700	77,113	77,113
Additions	11,897	-	5,226
Disposals	-	(2,473)	(5,123)
(Loss)/gain on revaluation	(792)	1,165	484
Valuation at period end	88,805	75,805	77,700

The directors have used an external independent valuation of properties at 30 June 2019 which has been carried out consistently with the annual valuation.

8. Equity investments

	First half 2019 £'000	First half 2018 £'000	Full year 2018 £'000
Valuation at 1 January	679	2,131	2,131
Additions	-	-	-
Disposals	(670)	(519)	(1,331)
Surplus on revaluation in excess of cost	-	39	(121)
Valuation at period end	9	1,651	679

9. Interest bearing loans

	First half 2019 £'000	First half 2018 £'000	Full year 2018 £'000
Medium-term loans	26,200	19,400	19,400
The medium-term bank loans comprise amounts falling due as follows:
Between one and two years	4,000	-	4,000
Between two and five years	7,500	11,500	7,500
Over five years	14,700	7,900	7,900

The debt is secured on certain assets within the group's property portfolio.

Notes (Unaudited) (continued)

for the six months ended 30 June 2019

10. Related party transactions

Kingerlee Holdings Limited owns, through its wholly owned subsidiaries, 27.2% (2018 27.2%) 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 Limited, a subsidiary of Kingerlee Holdings Limited, being a service charge in relation to services at Thomas House, Kidlington of £7,000 (2018 £7,000) and a recharge of computer and courier costs totalling £530 (2018 £nil). The amount owed at 30 June 2019 was £nil (2018 £nil). All transactions were undertaken on an arm's length basis.

11. Net assets per share

	First half 2019	First half 2018	Full year 2018
Net assets	£61,769,000	£61,312,000	£62,384,000
Ordinary shares in issue	5,167,240	5,167,240	5,167,240
Basic net assets per share	1195p	1187p	1207p

12. Events after the balance sheet date

On 15 July 2019 the company completed on a lease renewal at its Cardiff office property, valued at £3,200,000 at 30 June 2019.

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 2019 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.

Charles Butler

Chairman
19 July 2019