22144.04 2 April 2013 10:36 AM Proof 6Annual Report & Financial Statements 31 December 2012STOCK CODE: HCFTHighcroft Investments PLCHighcroft Investments AR_2012.indd 24/2/2013 10:39:12 AM 22144.04 2 April 2013 10:36 AM Proof 6Highcroft Investments PLC is a Real Estate Investment Trust (REIT) that has a portfolio of property and equity investments.The broad objecTives of The group are To enhance shareholder value via a combinaTion of increasing asseT value, increasing profiTs and increasing dividends.The strategy by which the board of Highcroft seeks to achieve these objectives is: ❱To continue to focus on the commercial property portfolio; creating opportunities to enhance valuations and income ❱To have such a proportion of funds in equity investments which maintains a lower risk profile than would attach to a portfolio that was 100% invested in propertyThe report of the directors on pages 7 to 12 and the directors’ remuneration report on pages 13 and 14 have each been drawn up in accordance with the requirements of English law and liability in respect thereof is also governed by English law. In particular, the responsibility of the directors for these reports is owed solely to Highcroft Investments PLC.The directors submit to the members their report and accounts of the group for the year ended 31 December 2012. Pages 1 to 14, including the chairman’s introduction, corporate governance statement, report of the directors and directors’ remuneration report form part of the report of the directors.Key highlights ❱Gross property income increased by 10% to £2,351,000 ❱Net profit for the year on revenue activities up 80% to £3,720,000 ❱Adjusted earnings per share (on revenue activities) up 80% to 72.0p ❱Net asset value per share up from 720p to 759p ❱Total property income distribution up 6% to 31.8p per share ❱Cash and liquid equity investments of £8,987,000 (2011 £7,524,000) ❱Nil gearing (2011 nil).Dividends PayableNet asset value per shareNet asset value per share is calculated as the net assets divided by the total number of issued shares2011 2010 2009 2008 2012 30.0p31.8p28.6p26.0p18.4p2011 2010 2009 2008 2012 £7.20£7.59£7.16£6.66£6.12For more information on our investments go to page2For more information on our financials go to page15contents01 Chairman’s introduction02 Our investments04 Corporate governance07 Report of the directors13 Directors’ remuneration report15 Consolidated statement of comprehensive income16 Consolidated statement of financial position17 Consolidated statement of changes in equity18 Consolidated statement of cash flows19 Notes to the financial statements29 Report of the independent auditor 30 Company balance sheet31 Notes to the company’s financial statements (prepared under UK GAAP)35 Five year summary37 Directors and advisersHighcroft Investments AR_2012.indd 34/2/2013 10:39:12 AM 22144.04 2 April 2013 10:36 AM Proof 6Highcroft Investments PLC Annual Report 201141www.highcroftplc.com chairman’s introductionDear Shareholder,I am pleased to introduce our annual report and accounts for the year ended 31 December 2012 and to invite you to our Annual General Meeting on 17 May 2013.Results for the yearI am delighted to report that we have made further progress both in operating profits from our property portfolio and through returns from the sale of both property assets and from realisations from our equity portfolio. Property: Our gross property rental income rose 10% to £2,351,000 (2011 £2,129,000), with all this increase being due to the performance of our commercial portfolio. This growth includes the effect of a full year’s income from the industrial unit in Andover purchased in November 2011, coupled with the swift re-investment of monies released by the sale of Willow House, Victoria into two industrial units let to good covenants with higher yields and longer unexpired terms. These units are in Bedford, let to Booker and in Milton Keynes, let to Ikea. Performance of the portfolio has been excellent with the only void being a two month period on the ground floor of our Willow House property, and no bad debts in the period. The sale of Willow House was particularly pleasing as it had been purchased with a view to the potential redevelopment opportunities that might enhance its value and the sale proceeds reflected the realisation of this plan. The sales proceeds were £1,490,000 in excess of the value at 31 December 2011 and also above the purchase price in 2006. During the second half of the year we also concluded our negotiations for new leases on two of our Oxford High Street properties which have resulted in increased rental income in 2012 and increased valuations.Equities: Our average income yield of 4.4% on the portfolio, coupled with a realised net gain of £74,000 and an unrealised net gain of £424,000, are a result of the strength of our portfolio and we have outperformed the FTSE 100 and the All Share indices.Administrative expenses: Our ongoing administrative expenses reduced by 7% and our costs remain tightly controlled.Financial highlights: Profit on revenue activities showed an 80% improvement on 2011, driven particularly by the profit arising on the sale of Willow House. Turning to our capital performance, the property portfolio showed a net valuation loss for the year, although the strength of the underlying assets and the new leases in Oxford meant that the loss was lower than the market as a whole. Our year end net asset value per share increased to 759p (2011 720p). Our year end cash position was £3,274,000 (2011 £1,926,000), whilst readily realisable equity investments totalled £5,713,000 (2011 £5,598,000). DividendWe are recommending a final dividend of 19.8p per share (2011 18.5p) to be paid on 31 May 2013 to shareholders registered at 3 May 2013, making a total of 31.8p for the year (2011 30p). This increase of 6% for the year continues our recent record of dividend increases well in excess of inflation.BoardAs you are aware, Chris Clark retired from the Board on 31 May 2012. We have not replaced him as we believe that we have enough existing board expertise in our equities business, which was an area in which he provided much counsel. The Board will continue to monitor the need for a third non-executive director having particular regard to the requirements of the UK Corporate Governance Code.OutlookWe continue to regard our position as strong and are determined to take advantage of weak markets so as to enhance yield and strengthen covenants. Our success in achieving the group’s objectives and commensurately growing asset values and your dividend will, to a large extent, depend upon the flow of suitable properties coming to market and our own management actions. We will continue to adopt a cautious stance whilst continuing our proactive approach with our property advisers to step up the pace of acquisitions to take advantage of market opportunities. We have a number of lease events taking place over the coming two years and we will endeavour to conclude these in a manner that enhances both income and valuation, but recognise that downwards pressure on rental levels, particularly for High Street Retail units, may continue for some time. We will carefully consider a modest level of gearing if we feel that suitable opportunities present themselves that cannot be financed from our own resources. We believe that the company is well placed to take actions which will secure medium term growth for its shareholders.John HewittChairman19 March 201301Highcroft Investments AR_2012.indd 14/2/2013 10:39:12 AM Highcroft Investments PLC Annual Report 2012 Stock Code: HCFT22144.04 2 April 2013 10:36 AM Proof 6property portfolio valuationCommercial£’0001. Retail units in Oxford, let to Jigsaw3,3002. Industrial unit in Milton Keynes, let to Ikea2,7003. Radio station and office building in Oxford, let to the BBC2,5504. Industrial unit in Andover, let to Jewsons2,5005. Distribution centre in Kidlington, Oxfordshire, let to Parcelforce2,2506. Industrial unit in Bedford, let to Booker2,0007. Office building in central Bristol, let to Royal & Sun Alliance1,6508. Distribution centre in Southampton, let to Metabo1,4509. Multi-let retail units in Staines, with offices above 1,45010. Industrial unit in Warwick, let to Nationwide Crash Repair1,37511. Retail unit in Leamington Spa, let to Thorntons1,35012. Multi-let retail units in Cirencester, with residential above1,35013. Retail unit in Oxford, let to Britannia Building Society1,15014. Retail unit in Norwich, let to Austin Reed1,10015. Bank premises in Petersfield, let to Barclays1,02516. Licensed leisure and retail property in Warrington, let to Wetherspoons and Cash Converters91017. Bank premises in Reigate, let to Lloyds Banking Group90018. Retail unit in Beckenham, let to Superdrug76019. Retail unit in Kingston, let to Kaleido575Total Commercial30,345Residential1,264Total31,609Highcroft’s investment portfolio comprise 85% freehold and long leasehold properties and15% blue chip equities.our investments127264815919141718161, 3,5, 1310, 11127264815919141718161, 3,5, 1310, 11Geographical splitEquity investmentsSplit by sector2012 2011 PortfolioValuationAdditionsGainsDisposalsLosses540(849)598(174)5,5985,713Equity portfolio value£’000 Asia Pacific 2% Australia 11% Canada 6% UK 66% Netherlands 5% Other Markets 5% USA 5% Banks 22% Beverages 6% Gas, Water & Multiutilities 3% Mining 7% Mobile Telecommunications 7% Oil & Gas 9% Pharmaceuticals & Biotechnology 9% Unit Trusts & OEIC’s 6% Other 31%02Highcroft Investments AR_2012.indd 24/2/2013 10:39:13 AM 22144.04 2 April 2013 10:36 AM Proof 6Highcroft Investments PLC Annual Report 201141www.highcroftplc.com Property investmentsSplit by sector Retail Property 41% Warehouse 39% Office Property 13% Residential 4% Leisure 3%Our properties are located primarily in London and the South East and our commercial tenants are chosen for their strong covenants and sector diversity.Property portfolio value£’0002012 2011 PortfolioValuationAdditionsGainsDisposalsLosses30,78731,6094827(3419)1769(2355)127264815919141718161, 3,5, 1310, 11127264815919141718161, 3,5, 1310, 1103Highcroft Investments AR_2012.indd 34/2/2013 10:39:13 AM 04
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
corporate governance
Application of principles
The company has applied the principles of good governance
contained in the UK Corporate Governance Code (June 2010)
(formerly the Combined Code) hereafter referred to as “the Code”
except as noted in the Compliance Statement below.
Compliance
The company has complied throughout the year with the Code
provisions other than in two areas:
❱ no performance related payments were made to directors, which
is not in accordance with Code provision D1.1. The remuneration
committee and board believe that the directors do not need to have
performance related payments in order to be motivated to give
their best in serving the interests of shareholders. The remuneration
committee reviews salaries and relevant benchmarks each year to
ensure that the directors are appropriately remunerated.
❱ The audit committee does not have a member with recent and
relevant financial experience which is not in accordance with
Code provision C3.1. The audit committee and board believe
that given the size of the group and the lack of complexity of
the group’s financial and reporting requirements it is more
appropriate to contract in this particular skill-set where a
particular need is identified.
Board effectiveness
The board is responsible for leading and controlling the group
activities and, in particular:
❱ approving objectives, strategy and policies
❱ business planning
❱ review of performance
❱ risk assessment
❱ dividends
❱ appointments
The board meets at least six times a year and has a schedule of
matters specifically reserved for its decision including the matters
referred to above. Executive directors are responsible for the
implementation of strategy and policies and the day-to-day decision
making and administration.
During 2012 the number of board and committee meetings and
individual participation was as follows:
Board
Audit Remuneration Nomination
Number of Meetings
J Hewitt
R N Stansfield
C J Clark
(retired 31 May 2012)
J C Kingerlee
R Miles
D H Kingerlee
7
7
7
3
7
7
7
3
3
3
1
N/A
3 (part)
N/A
1
1
1
1
N/A
N/A
N/A
2
2
2
N/A
N/A
N/A
N/A
The board receives appropriate and timely information and the
directors are free to seek any further information they consider
necessary. All directors have access to advice from the company
secretary and independent professionals at the company’s expense.
The chairman reviews directors’ training needs annually and
appropriate training is available for new directors and other directors
as identified by that plan.
The board has five directors of which three are executive directors and
two are non-executive directors. The chairman is John Hewitt, the senior
independent director is Richard Stansfield and the chief executive is
Jonathan Kingerlee. The board members’ biographies are on page 7.
The independent non-executive directors bring additional experience
and knowledge and are independent of management and any
business or other relationship that could interfere with the exercise
of their independent judgement. This provides a balance whereby
an individual or small group cannot dominate the board’s decision-
making.
All directors are subject to re-election every three years and, on
appointment, at the first AGM after appointment. The board has
a separate nomination committee, comprising the non-executive
directors, responsible for making recommendations for appointments
to the board.
Formal procedures appropriate to the size of the business are in
use for performance evaluation of the board and its committees.
They include objective-setting and review with the use of an external
facilitator on a periodic basis.
Directors’ remuneration
The directors’ remuneration report is on page 13 and 14. It sets
out the company’s policy and the full details of all elements of the
remuneration package of each individual director.
Relations with shareholders
The board values the views of its shareholders and recognises
their interest in the company’s strategy and performance, board
membership and quality of management. The AGM is used to
communicate with investors and documents are sent to shareholders
at least 20 working days before the meeting. The chairman and
chairmen of the audit and remuneration committees are available to
answer relevant questions. Separate resolutions are proposed on
each substantial issue so that they can be given proper consideration
and there is a resolution to receive and consider the annual report
and financial statements. The company counts all proxy votes and
will indicate the level of proxies lodged on each resolution, after
it has been dealt with by a show of hands. The proxy votes are
included on the company’s website. The company has no institutional
shareholders but has commenced a programme of meetings with key
shareholders, subject to regulatory constraints. The board is provided
with feedback from these meetings.
Accountability and audit
The board presents a balanced and understandable assessment
of the company’s position and prospects in all interim and other
price-sensitive public reports, reports to regulators and information
required to be presented by statute. The responsibilities of the
directors as regards the financial statements are described on page
6, and that of the auditor on page 29. A statement on going concern
appears on page 5.
The audit committee of the board comprises both non-executive
directors and is chaired by Richard Stansfield. It does not include
a member who has recent and relevant financial experience but,
in situations where these skills are considered necessary, the
committee will appoint advisers to assist them. The committee meets
not less than three times a year to review the scope and findings
of the auditor’s work on audit and non-audit issues, the interim
and annual reports prior to their publication, the application of the
company’s accounting policies and any changes to the financial
reporting requirements. The audit committee also plays an important
part in reviewing the company’s systems of internal control which
are described below. The audit committee reports on each of its
meetings at the next board meeting.
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22144.04 2 April 2013 10:36 AM Proof 6Highcroft Investments PLC Annual Report 201141www.highcroftplc.com Sluglinewww.highcroftplc.com The audit committee reviews the terms of engagement with the external auditor and ensures that the external auditor is independent via the segregation of audit-related work from other accounting functions. They have also received and reviewed written disclosures from the auditor regarding independence. The audit committee has referenced audit fees with similar auditors and decides how frequently the audit should be put out to tender. The audit committee reviews the appointment of the external auditor on an annual basis and makes a recommendation to the board for their reappointment to be approved at the AGM.Internal controlThe board is responsible for establishing and maintaining a sound system of internal control and for reviewing its effectiveness. The system of internal control is designed to meet the particular needs of the group and the risks to which it is exposed, and by its very nature provide reasonable, but not absolute assurance against material misstatement or loss. The internal control system was in place for the period under review up to the date of approving the accounts. There is an ongoing process to identify, evaluate and manage the risks facing the business. The entire system of internal control was reviewed during the year and the conclusion was that the systems are adequate for a group of this size and complexity. This review has been undertaken in accordance with guidance published by The Institute of Chartered Accountants in England and Wales.The key procedures, which exist to provide effective internal control, are as follows: ❱clear limits of authority ❱annual revenue, cash flow and capital forecasts, reviewed regularly during the year, monthly monitoring of cash flow and capital expenditure reported to the board, quarterly and half year revenue comparisons with forecast ❱financial controls and procedures ❱clear guidelines for capital expenditure and disposals, including defined levels of authority ❱meetings of the executive directors to authorise share purchases and sales on a regular basis ❱an audit committee, which approves audit plans and published financial information and reviews reports from the external auditor arising from the audit and dealing with significant control matters raised ❱regular board meetings to monitor areas of concern ❱annual review of risks and internal controls ❱annual review of compliance with the Code.The board has considered the need for an internal audit function but has decided that the size of the group does not justify it at present. However, it does review the position annually.The directors have reviewed the operation and effectiveness of the group’s system of internal control, including financial, operational and compliance controls and risk management for the financial year ended 31 December 2012 and the period up to the date of approval of the financial statements.The board also has a nomination committee comprising the non-executive directors whose key objective is to ensure that the board comprises individuals with the requisite skills, knowledge and experience to ensure that it is effective in discharging its responsibilities.Going concernThe 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. For this reason, the directors continue to adopt the going concern basis in preparing the financial statements. Given the continuing economic uncertainties, the directors are aware of the general concern affecting the assessment of the going concern basis for all businesses and have therefore taken particular care in reviewing the going concern basis this year. The group has no borrowing. The group does not currently have an overdraft facility or a loan facility. However, contact is maintained with a number of banks which regard the group as an attractive lending opportunity. The group carefully monitors its forecast cash balances in order to ensure an overdraft is not required and it has relatively liquid assets, in the form of listed equity investments, which it can draw on if necessary. Structure of share capital and rights and obligations attaching to sharesThe company’s authorised ordinary share capital as at 31 December 2012 was £2,000,000 divided into 8,000,000 ordinary shares of 25 pence each of which 5,167,240 shares of 25p each were allotted, called up and fully paid.22144.04 26/02/2013 Proof 205Highcroft Investments AR_2012.indd 54/2/2013 10:39:13 AM 06
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
corporate governance continued
Subject to the Companies Act for the time being in force (the Act)
the company’s articles of association confer on holders the following
principal rights:
❱ To receive a dividend
The profits of the company available for dividend and resolved
to be distributed shall be applied in the payment of dividends
to the members and to persons becoming entitled to shares
by transmission, in accordance with their respective rights and
priorities. The company in general meeting may declare
dividends accordingly.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements and the remuneration report comply with
the Companies Act 2006 and Article 4 of the IAS Regulation. They
are also responsible for safeguarding the assets of the company and
group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
In so far as each of the directors is aware:
❱ To a return of capital or assets, if available, on liquidation
❱ there is no relevant audit information of which the company’s
auditor is unaware; and
❱ the directors have taken all steps that they ought to have taken to
make themselves aware of any relevant audit information and to
establish that the auditor is aware of that information.
The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
To the best of my knowledge:
❱ the financial statements, prepared in accordance with IFRSs
as adopted by the European Union for the group and United
Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable laws) for the parent
company.
❱ Give a true and fair view of the assets, liabilities, financial position
and profit or loss of the company and the undertakings included in
the consolidation taken as a whole; and
❱ the management report includes a fair review of the development
and performance of the business and the position of the company
and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
By the order of the board
R MILES
Company Secretary
Upon any winding up of the company, the liquidator may, with
the sanction of a special resolution of the company and any other
sanction required by the statutes, divide among the members in
specie the whole or any part of the assets of the company and
may, for that purpose, value any assets and determine how the
division shall be carried out as between the members of different
classes of members.
❱ To receive notice of, attend and vote at an AGM
At each AGM upon a show of hands every member present in
person or by proxy shall have one vote, and upon a poll every
member present in person or by proxy shall have one vote for
every share of which he or she is the holder.
❱ To have, in the case of certificated shares, rights in respect of share
certificates and share transfers
Every person whose name is entered as a member in the register
as the holder of any certificated share shall be entitled without
payment to one certificate for all he shares of each class held by
him or, upon payment of such reasonable out-of-pocket expenses
for every certificate after the first as the board shall from time to
time determine, several certificates each for one or more of
his shares.
On any transfer of shares, the transferor shall be deemed to remain
the holder of the share until the name of the transferee is entered in
the register in respect thereof.
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors have prepared the
group financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRSs) and
have elected to prepare the parent company financial statements
in accordance with United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice). Under company
law, the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of
affairs and of the profit or loss of the company and group for that
period. In preparing these financial statements, the directors are
required to:
❱ select suitable accounting policies and then apply them
consistently
❱ make judgements and estimates that are reasonable and prudent
❱ state whether applicable IFRSs and UK accounting standards have
been followed, subject to any material departures disclosed and
explained in the financial statements
❱ prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
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07
report of the directors
Principal activities
Highcroft Investments PLC is a group that invests in property and equity investments.
Directors
The directors are as follows:
John Hewitt
Richard Stansfield
Jonathan Kingerlee
John Hewitt, 67, worked in the City of London in stockbroking for over 20 years where he became managing
director of Scrimgeour Vickers. He is currently campaign adviser to Wadham College Oxford and a trustee of the
Oxfordshire Association for the Blind. He also advises a number of other local and international businesses and
organisations. He was appointed as an independent non-executive director in 1999.
Highcroft Investments PLC
Annual Report 2011
41
Richard Stansfield, 55, is a chartered surveyor and formerly a director of Savills commercial department based in
Oxford where he advised a number of institutional clients on their commercial property portfolios throughout the
UK. He is now Property Director of Jesus College Oxford and responsible for a fund of commercial, residential and
rural properties located in England and Wales. He was appointed as an independent non-executive director
in 2002.
Jonathan Kingerlee, 52, became an executive director in 1995 and chief executive in 2001. He is chief executive
of the Kingerlee Group of companies, which trades principally in construction and property development and has
various investment interests. Other interests include companies developing and selling environmental building
materials, and he is also a founder member of the Good Homes Alliance which is a trade association open to
property developers and housing associations committed to improving the performance of newly constructed
homes.
David Kingerlee
David Kingerlee, 51, became an executive director in 1996. He is also an executive director and company secretary
of the Kingerlee Group of companies, which trades principally in construction and property development and has
various investment interests.
Roberta Miles
Roberta Miles, 50, was appointed finance director and company secretary in 2010. She is also a director of MCD
Ventures Limited and acts as company secretary or chief financial officer for a number of other companies.
In accordance with the company’s articles of association Roberta Miles and David Kingerlee retire by rotation and, being eligible, offer
themselves for re-election.
John Hewitt, having served more than nine years on the board, submits himself for re-election. Before recommending John for re-election
the other directors have conducted a rigorous appraisal of performance and consider him to be independent, effective and to demonstrate
commitment to the role.
Richard Stansfield, having also served more than nine years on the board, submits himself for re-election. Before recommending Richard
for re-election the other directors have conducted a rigorous appraisal of performance and consider him to be independent, effective and to
demonstrate commitment to the role.
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08
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
report of the directors continued
Interests of the directors in the shares of the company
The beneficial and other interests of the directors, and their families, in the shares of the company at 1 January 2012 and at 31 December
2012 were as follows:
J Hewitt
C J Clark (retired 31 May 2012)
R N Stansfield
J C Kingerlee
R Miles
D H Kingerlee
31 December 2012
Non-
1 January 2012
Beneficial
beneficial Beneficial
10,485
4,950
–
130,986
–
–
–
–
–
–
10,000
4,950
–
130,986
–
Non-
beneficial
–
–
–
–
–
88,470
77,780
88,470
77,780
There is no duplication of directors’ shareholdings, except in respect of 38,890 of the beneficial holding of Jonathan Kingerlee and 38,890 of
the non–beneficial holding of David Kingerlee.
Substantial shareholders
As at 19 March 2013 the following notifications of interests in three per cent or more of the company’s ordinary share capital in issue at the
date of this report had been received:
D G & M B Conn and associates
The wholly owned subsidiaries of Kingerlee Holdings Limited, total 25.40%:
Kingerlee Limited
Kingerlee Homes Limited
T H Kingerlee & Sons Limited
Number of shares
Non-
beneficial
Beneficial
20.23% 1,045,067
9.97%
7.70%
7.73%
515,000
397,673
399,674
–
–
–
–
Strategy
The broad objectives of the group are unchanged. These are to enhance shareholder value via a combination of increasing asset value,
increasing profits and increasing dividends. The strategy by which the board of Highcroft seeks to achieve these objectives and our comments
in respect of 2012, including relevant key performance indicators follow. The directors are well aware that the current economic circumstances
are ones which increase the risks for all organisations but continue to believe that the strategy remains appropriate.
To continue to focus on the commercial property portfolio
Allocation of total investments
Commercial property
Residential property
Equity investments
Total
2012
%
82
3
15
100
2011
%
82
3
15
100
2010
%
78
7
15
100
2009
%
72
7
21
100
2008
%
72
6
22
100
During the year we sold one freehold office block and invested the majority of the proceeds in two industrial units in Bedford and Milton
Keynes that provide an increased yield and have a longer unexpired term than the property disposed of.
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09
To continue to reduce the residential property portfolio when opportunities arise
Number of residential disposals
Per annum
2012
0
2011
4
2010
1
2009
0
2008
1
The group had historically planned for two residential disposals per year but as we sell only with vacant possession the annual rate is not
within our control. We now have only 4 residential units with regulated tenancies therefore whilst the group still plans to dispose of them on an
opportunistic basis it is recognised that this is not possible to plan for. There was 1 lease extension during the year.
Highcroft Investments PLC
Annual Report 2011
41
To have such a proportion of funds in equity investments which maintains a lower risk profile than would attach to a portfolio which was
100% invested in property.
We intend that equity investments will represent 15–25% of total investments and the upper limit is a condition of our REIT status.
At 31 December 2012 equity investments represented 15% (2011 15%) of total investments.
We withdrew a net £382,000 of cash from our equity portfolio in 2012. The board will continue to monitor the condition of the equity and
property markets in 2013 and would consider making a transfer of funds out of the equity investment portfolio and into the property portfolio,
consistent with maintaining a lower risk profile.
To seek property development opportunities from within our own property portfolio.
We are continuing to explore potential development opportunities within our portfolio and during the year the opportunities that had been
anticipated at Willow House were leveraged at sale.
To seek, though not exclusively, new property acquisitions with development opportunities where the development risks can be counter–
balanced by income from the same investment.
This continues to be one of the potential attractions which we seek from new acquisitions, although there were again no suitable properties
with potential development opportunities identified in 2012. Our acquisition of two additional industrial units during 2012
is a result of a positive effort to diversify the property portfolio.
To use medium–term gearing, but to a level which would be perceived as cautious by comparison with other real estate businesses.
We maintained contact with a number of banks, to which we are an attractive lending proposition, and we may use those contacts to expand
the property portfolio in the future when we feel that the timing is appropriate to make significant new acquisitions.
Business review
Results and dividends
The trading results for the year and the group’s financial position at the end of the year are shown in the financial statements, and are
discussed further in the business review below.
The board is proposing a final property income distribution on the ordinary shares in respect of 2012 of 19.8p (2011 18.5p) per share. The total
property income distributions for the year will be 31.8p per share (2011 30.0p per share).
The dividends paid to shareholders during 2012 were as follows:
2011 Final: 18.5p per ordinary share (2010 17.6p)
2012 Interim: 12.0p per ordinary share (2011 11.5p)
2012
£’000
956
620
2011
£’000
909
594
1,576
1,503
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10
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
report of the directors continued
Although we have an ambition to increase distributions to shareholders each year, adherence to the REIT obligations may cause a less even
pattern than has historically been the case.
Financial performance – revenue activities
Gross income for the year ended 31 December 2012 was £2,602,000 (2011 £2,390,000).
Analysis of gross income
Commercial property income
Residential property income
Gross income from property
Income from equity investments
Total income
2012
£’000
2,308
43
2,351
251
2,602
2011
£’000
2,086
43
2,129
261
2,390
2010
£’000
1,995
58
2,053
234
2,287
2009
£’000
1,877
66
1,943
292
2,235
2008
£’000
2,050
74
2,124
450
2,574
Underlying commercial property income has risen in 2012 because the industrial unit in Andover bought at the end of 2011 generated income
all year, and the funds released from the sale of Willow House were quickly invested into properties generating higher yields. Additionally we
had one void unit throughout 2011 which was let in Q1 2012.
Residential property income is generated from four regulated tenancies, two flats above commercial units and ground rents and remained
steady in 2012.
The 2012 income from equity investments has dropped slightly, as the 2011 figure was enhanced by one special dividend of £48,000. The
underlying increase after taking this into account reflects a general improvement in the yields on our equity portfolio and is also a positive
result of the transactions undertaken during the year.
Analysis of administrative and net finance expenses
Directors’ remuneration
Auditor’s remuneration including other services
Fees in respect of conversion to a REIT
Other expenses
Administrative expenses
Net finance (income)/expense
Total expenses
2012
£’000
2011
£’000
2010
£’000
2009
£’000
156
20
–
135
311
(8)
303
162
21
–
152
335
(15)
320
156
20
–
154
330
(9)
321
139
22
–
122
283
18
301
2008
£’000
166
34
47
77
324
61
385
The ongoing running costs of the business remain well controlled.
Donations
Donations to charitable organisations amounted to £12,000 (2011 £11,000). There were no political donations.
Summary of profit before tax and income tax credit/(expense) on revenue
activities
Profit before tax
Income tax credit/(expense)
Profit for the year
Financial performance – capital activities
A summary of our investments is laid out on pages 2 and 3.
Analysis of gains and losses on property
Realised gains on investment property
Realised losses on investment property
Revaluation gains on investment property
Revaluation losses on investment property
2012
£’000
3,667
53
3,720
2012
£’000
1,552
–
1,552
1,769
2011
£’000
2,045
21
2,066
2010
£’000
1,821
144
1,965
2009
£’000
1,681
(11)
1,670
2008
£’000
1,889
33
1,922
2011
£’000
360
(82)
278
801
2010
£’000
108
(8)
100
1,735
(158)
2009
£’000
2008
£’000
–
–
–
1,616
(416)
1,200
–
(5)
(5)
59
(8,985)
(8,926)
(2,355)
(1,072)
(586)
(271)
1,577
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Financial performance – capital activities continued
Analysis of gains and losses on equities – capital activities
Realised gains on equity investments
Realised losses on equity investments
Revaluation gains on equity investments
Highcroft Investments PLC
Annual Report 2011
Revaluation losses on equity investments
41
Summary of investment activities
Purchase of property
Purchase of equity investments
www.highcroftplc.com
11
2012
£’000
2011
£’000
2010
£’000
79
(5)
74
598
(174)
(424)
2012
£’000
4,827
540
5,367
81
(24)
57
316
(563)
(247)
2011
£’000
2,871
423
3,294
69
(136)
(67)
649
(73)
576
2010
£’000
1,558
1,028
2,586
2009
£’000
263
(141)
122
1,416
(93)
1,323
2009
£’000
281
515
796
2008
£’000
5
(446)
(441)
90
(3,089)
(2,999)
2008
£’000
–
750
750
Summary of other key performance indicators
The directors have monitored the progress of the group’s strategy and the individual strategic elements by reference to certain financial and
non-financial key performance indicators.
Growth in gross income
Commercial property income
Residential property income
Total property income
Income from equity investments
Total revenue income
Costs of voids and bad debts
Voids
Bad debts
2012
11%
0%
10%
(4%)
9%
2012
£’000
2
–
2011
5%
(26%)
4%
12%
5%
2011
£’000
63
–
2010
6%
(12%)
6%
(20%)
2%
2010
£’000
87
2
2009
(8%)
(10%)
(9%)
(35%)
(13%)
2009
£’000
108
26
2008
(1%)
16%
0%
11%
2%
2008
£’000
136
42
The retail property in Yeovil was vacant until July 2011 and once let was disposed of in 2011 and the ground floor of our offices in Victoria was
vacant throughout 2011 and part of the first quarter of 2012. At 31 December 2012 there were no voids.
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12
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
report of the directors continued
Future developments for the business/Future outlook
The group is in a very sound financial position with no gearing, and
cash and liquid equity investments of over £8.9m. The directors
anticipate that there will be an increasing number of properties being
marketed in the coming months and that the group is well placed
to take advantage of the right opportunities. The board is also
considering complementary ways of enhancing the property portfolio
(joint ventures, for instance) which it hopes to progress during 2013.
Principal risks and uncertainties
Operational and financial risks facing the business are monitored
through a process of regular assessment by the executive directors
and by reporting and discussion at meetings of the audit committee
and the board.
The directors are of the opinion that a thorough risk management
process is adopted which includes the formal review of all the six
risks identified below. Where possible, processes are in place to
monitor and mitigate such risks.
1. Adverse economic environment
The economic uncertainties which remain globally and in the
UK are a current concern for all businesses. We expect this to
continue to impact on consumer spending and on the financial
health of businesses in which we are investors and businesses
who are our tenants. We assess the credit worthiness of our
current and potential tenants and review any rental arrears on a
regular basis.
The independent valuation of all property assets 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.
2. Balance of income and assets
Highcroft’s status as a REIT is conditional upon a number of
factors, the most critical of which is maintaining a correct balance
of income and assets such that the property side is greater than
75% at the year end. Failure to maintain these balances can lead
to exclusion from the REIT regime. The directors are aware of this
risk and it is a key principle underlying our investment decision-
making.
3. Business strategy
The success of Highcroft is dependent upon establishing the
right business strategy to fulfil shareholder expectations. We are
explicit about our strategy and assess our performance against
that strategy in our annual report. In response to this risk, the
directors use planning and forecasting of the business to help to
ensure that outcomes are satisfactory for shareholders. As noted
above, we continue to believe that our strategy is the right one.
4.
Insolvency of a tenant
Rent collections are continuously reviewed by our property
managers and regularly reviewed internally. Tenants’ financial
status is carefully reviewed when a new lease is entered into and
when a property is acquired. The present economic environment
has increased the risk of tenant insolvency which leads to bad
debts and voids.
The group has 25 commercial tenants, so that the risks
associated with the default of individual tenants are quite well
spread. Our five largest tenants by current passing rent provide
43% (2011 42%) of current income. The weighted average
credit score of these five tenants is presently 84 (2011 92). The
weighted average credit score of the whole portfolio is currently
85 (2011 85).
5. Potential for unsatisfactory relationship with property advisers
and managers
The performance of the property portfolio is key to our overall
success and the professional advice we receive is critical.
We work closely with our advisers to review regularly the
performance of the portfolio and also that of the advisers
themselves. As with all our advisers, the work is periodically put
out to tender.
6.
Internal controls become ineffective, irrelevant or incomplete
Potential issues affecting internal control are a continuous part of
our thinking. Risks and their controls are reviewed annually by the
audit committee and by the whole board.
Corporate environmental and social responsibility policies
In the conduct of the group’s business, the directors aim to act with
honesty, integrity and openness and to conduct operations to the
highest standards. We seek to minimise the risk of our activities
having any adverse effect on the environment.
Policy on the payment of suppliers
The group and company normally agree payment terms with
suppliers as part of the establishment of a contract. It is the group’s
and company’s normal practice to pay its suppliers before the end of
the month following the month of supply. This policy applies at the
present time and applied in 2012 when average creditor days were 30
(2011 30).
Financial instruments
Information on financial instruments is included in note 17.
Auditor
Grant Thornton UK LLP have expressed willingness to continue in
office. In accordance with section 489(4) of the Companies Act 2006
a resolution to reappoint Grant Thornton UK LLP will be proposed at
the Annual General Meeting to be held on 17 May 2013.
By the Order of the Board
R MILES
Company Secretary
19 March 2013
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directors’ remuneration report
Information contained in this report is not subject to audit except where specified.
www.highcroftplc.com
13
Composition of the remuneration committee
The members of the committee are Richard Stansfield (chairman) and John Hewitt. Neither of the committee has any personal financial interest
in the matters to be decided (other than as shareholders), potential conflicts of interest arising from cross-directorships nor any day-to-day
involvement in running the business.
Terms of reference
The approved terms of reference of the remuneration committee are as follows:
41
Highcroft Investments PLC
Annual Report 2011
The remuneration committee is established in order to determine the company’s policy on executive directors’ remuneration and the specific
remuneration packages for each of the executive directors, including any pension rights and any compensation payments.
The remuneration committee consults the chief executive about their proposals relating to the remuneration of other executive directors but
he is not present for the discussion of his own remuneration. The committee has access to advice from independent professionals at the
company’s expense.
Policy
Executive directors’ remuneration is reviewed annually having regard to the work done and the profits of the business but without a fixed
relationship between profits and any element of pay. One third of the directors are subject to retirement at each Annual General Meeting.
Executive directors are given service contracts within which there is a notice period by either party of six months, and with no provision for
compensation payments on termination. Each non-executive director has a formal appointment document for a period of three years, subject,
at any time to termination on six months’ notice by either party.
If any director agrees to waive any element of their remuneration the board will consider making an additional donation to charity.
The remuneration of the non-executive directors is determined by the whole board.
Director’s service contracts
Non-executive directors
John Hewitt
Richard Stansfield
Executive directors
Jonathan Kingerlee
David Kingerlee
Roberta Miles
Date of appointment
as director
Date of current
appointment letter
1 August 1999
1 December 2002
1 July 2010
1 July 2011
Expiry of term
30 June 2013
30 June 2014
Date of appointment
as director
Date of current
contract
2 February 1995
12 September 1996
1 July 2010
1 July 2011
1 July 2012
1 July 2010
Notice period
Six months
Six months
Six months
Directors’ interests
Directors’ interests are shown in the report of the directors on page 8. They are taken from the company’s register of directors’ interests which
is open to inspection, by appointment, at the registered office.
Highcroft Investments AR_2012.indd 13
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14
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
directors’ remuneration report continued
Performance graph
The graph below shows the company’s Total Shareholder Return (TSR) compared to the FTSE 350 Real Estate index over the last ten years.
TSR over the last ten years is defined as share price growth plus reinvested dividends.
350
300
250
200
150
100
50
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
highcroft investments plc — Total return index
— fTse 350 ss real estate £ — Total return index
source: Thomson reuters database
Directors’ remuneration (audited)
John Hewitt
Christopher Clark (resigned 31 May 2012)
Richard Stansfield
Jonathan Kingerlee
David Kingerlee
Roberta Miles
2012
£
13,500
5,417
14,000
34,750
21,000
52,800
2011
£
10,500
11,000
11,000
34,750
21,000
60,250
141,467
148,500
There were no benefits in kind and no performance related payments were made. The group does not have a pension scheme for directors
nor an executive share option scheme or other long term incentive plan for directors.
R N STANSFIELD
Chairman of the remuneration committee
19 March 2013
Highcroft Investments AR_2012.indd 14
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consolidated statement of comprehensive income
for the year ended 31 December 2012
www.highcroftplc.com
15
Revenue
£’000
Note
2012
Capital
£’000
Revenue
£’000
2011
Capital
£’000
Gross rental revenue
Property operating expenses
Net rental income
Realised gains on investment property
Highcroft Investments PLC
Annual Report 2011
Realised losses on investment property
Net gains on investment property
Valuation gains on investment property
Valuation losses on investment property
41
Net valuation (losses)/gains on investment property
Dividend revenue
Gains on equity investments
Losses on equity investments
Net investment income/(expense)
Administration expenses
Net operating profit before net finance income
Finance income
Net finance income
Profit/(loss) before tax
Income tax credit/(expense)
Total profit and comprehensive income for the year
Basic and diluted earnings per share
2,351
(184)
2,167
1,552
–
1,552
–
–
–
251
–
–
251
(311)
3,659
8
8
3,667
53
3,720
72.0p
8
8
9
9
3
5
7
–
–
–
–
–
–
1,769
(586)
–
677
(179)
498
–
(88)
–
–
(88)
(38)
(126)
(2.5p)
(2,355)
(2,355)
Total
£’000
2,351
(184)
2,167
1,552
–
1,552
1,769
(586)
251
677
(179)
749
(311)
Total
£’000
2,129
(303)
1,826
360
(82)
278
801
–
–
–
–
–
–
801
(1,072)
(1,072)
(271)
–
397
(587)
(190)
–
(271)
261
397
(587)
71
(335)
2,129
(303)
1,826
360
(82)
278
–
–
–
261
–
–
261
(335)
3,571
2,030
(461)
1,569
8
8
3,579
15
3,594
69.6p
15
15
2,045
21
2,066
40.1p
–
–
(461)
119
(342)
(6.7p)
15
15
1,584
140
1,724
33.4p
The total column represents the income statement as defined in IAS1.
The accompanying notes form an integral part of these financial statements.
Highcroft Investments AR_2012.indd 15
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16
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
consolidated statement of financial position
at 31 December 2012
Note
2012
£’000
2011
£’000
2010
£’000
8
9
10
11
12
13
31,609
5,713
37,322
254
3,274
3,528
30,787
30,705
5,598
5,608
36,385
36,313
217
1,926
2,143
93
2,472
2,565
40,850
38,528
38,878
–
1,000
1,000
609
609
1,609
39,241
1,292
7,050
1,746
95
22,366
6,692
39,241
–
681
681
624
624
215
897
1,112
764
764
1,305
1,876
37,223
37,002
1,292
4,904
1,592
95
1,292
6,670
1,750
95
21,428
19,810
7,912
7,385
37,223
37,002
Assets
Non–current assets
Investment property
Equity investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Current income tax
Trade and other payables
Total current liabilities
Non–current liabilities
Deferred tax liabilities
Total non–current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Revaluation reserve — property
— other
Capital redemption reserve
Realised capital reserve
Retained earnings
Total equity
These financial statements were approved by the board of directors on 19 March 2013.
J Hewitt
Director
J C Kingerlee
Director
Company number — 224271
The accompanying notes form an integral part of these financial statements.
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consolidated statement of changes in equity
www.highcroftplc.com
17
2012
At 1 January 2012
Dividends
Reserve transfers:
Highcroft Investments PLC
Annual Report 2011
Non-distributable items recognised in income statement:
41
Revaluation losses
Tax on revaluation gains/(losses)
Realised gains
Surplus attributable to assets sold in the year
Excess of cost over revalued amount taken to retained
earnings
Transactions with owners
Profit and total comprehensive income for the year
Issued
share
capital
£’000
1,292
Revaluation reserves
Property
£’000
4,904
–
Other
£’000
1,592
–
(586)
–
–
912
1,820
2,146
–
416
(20)
–
(242)
–
154
–
Capital
redemption
reserve
£’000
95
–
–
–
–
–
–
–
–
Realised
capital
reserve
£’000
21,428
–
–
–
1,608
(670)
–
938
–
–
–
–
–
–
–
–
–
At 31 December 2012
1,292
7,050
1,746
95
22,366
2011
At 1 January 2011
Dividends
Reserve transfers:
Non-distributable items recognised in income statement:
Revaluation gains
Tax on revaluation gains/(losses)
Realised gains
Surplus attributable to assets sold in the year
Excess of cost over revalued amount taken to retained
earnings
Transactions with owners
Profit and total comprehensive income for the year
Issued
share
capital
£’000
1,292
–
–
–
–
–
–
–
–
Revaluation reserves
Property
£’000
6,670
–
Other
£’000
1,750
–
(271)
–
–
(1,629)
134
(1,766)
–
(238)
109
–
(29)
–
(158)
–
Capital
redemption
reserve
£’000
95
–
–
–
–
–
–
–
–
Realised
capital
reserve
£’000
19,810
–
–
–
(40)
1,658
–
1,618
–
At 31 December 2011
1,292
4,904
1,592
95
21,428
Retained
earnings
£’000
7,912
(1,576)
Total
£’000
37,223
(1,576)
170
20
(1,608)
–
(1,820)
(4,814)
3,594
6,692
–
–
–
–
–
(1,576)
3,594
39,241
Retained
earnings
£’000
7,385
(1,503)
Total
£’000
37,002
(1,503)
509
(109)
40
–
(134)
(1,197)
1,724
7,912
–
–
–
–
–
(1,503)
1,724
37,223
Revaluation reserves include annual revaluation gains and losses, less attributable deferred taxation. The realised capital reserve includes
realised revaluation gains and losses, less attributable income tax. In accordance with the articles of association the revaluation and realised
capital reserves are not distributable.
Highcroft Investments AR_2012.indd 17
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18
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
consolidated statement of cash flows
for the year ended 31 December 2012
Operating activities
Profit for the year
Adjustments for:
Net valuation losses/(gains) on investment property
Gain on disposal of investment property
(Gain)/loss on investments
Finance income
Income tax credit
Operating cash flow before changes in working capital and provisions
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
Finance income
Income taxes paid
Net cash flows from operating activities
Investing activities
Purchase of non-current assets — investment property
— equity investments
Sale of non-current assets
— investment property
— equity investments
Net cash flows from investing activities
Financing activities
Dividends paid
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January 2012
Cash and cash equivalents at 31 December 2012
2012
£’000
2011
£’000
3,594
1,724
586
(1,552)
(498)
(8)
(15)
271
(278)
190
(15)
(140)
2,107
1,752
(37)
319
(124)
(215)
2,389
1,413
8
–
15
(216)
2,397
1,212
(4,827)
(2,871)
(540)
4,972
922
527
(1,576)
(1,576)
1,348
1,926
3,274
(423)
2,796
243
(255)
(1,503)
(1,503)
(546)
2,472
1,926
Highcroft Investments AR_2012.indd 18
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www.highcroftplc.com
19
notes to the financial statements
for the year ended 31 December 2012
1 Significant accounting policies
Highcroft Investments PLC is a company domiciled in the United Kingdom. The consolidated financial statements of the company for
the year ended 31 December 2012 comprise the company and its subsidiary, together referred to as the group. The accounting policies
remain unchanged.
Basis of preparation
These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting
Standards, as adopted by the European Union (IFRS) and those parts of the Companies Act 2006 applicable to companies reporting
under IFRS. These 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.
Highcroft Investments PLC
Annual Report 2011
41
Accounting estimates and judgements
The preparation of financial statements requires management to make judgements, assumptions and estimates that affect the application
of accounting policies and amounts reported in the consolidated income statement and consolidated statement of financial position.
Such decisions are made at the time the financial statements are prepared and adopted based on historical experience and other factors
that are believed to be reasonable at the time. Actual outcomes may be different from initial estimates and are reflected in the financial
statements as soon as they become apparent. The measurement of fair value and carrying investments at fair value through profit and loss
constitutes the principal areas of judgement exercised by the directors in the preparation of these financial statements. The valuations of
investment properties and equity investments at fair value are carried out by external advisers who the directors consider to be suitably
qualified to carry out such valuations. The primary source of evidence for property valuations is recent, comparable market transactions on
arm’s–length terms. However the valuation of the group’s property portfolio is inherently subjective, which may not prove to be accurate,
particularly where there are few comparable transactions. Key assumptions, which are also the major sources of estimation uncertainty
used in the valuation, include the value of future rental income, the outcome of future rent reviews, the rate of voids and the length of such
voids. These assumptions were formed on the basis of historical information of the group and the best judgement of the directors.
New accounting standards and interpretations
The group’s approach to new accounting standards and interpretations issued during the year is set out below.
Standards amendments and interpretations effective in the year ended 31 December 2012 and adopted for the first time with no
impact on these financial statements
❱ none
Amendments to and interpretations of existing standards that are relevant to the group but are not yet effective and have not been
adopted early
The following amendments to, or interpretations of, existing standards that have been published and are mandatory for the group’s future
accounting periods beginning on or after 1 January 2013 are:
❱ IFRS 9 Financial Instruments (effective 1 January 2015)
❱ IFRS 10 Consolidated Financial Statements (effective 1 January 2014)
❱ IFRS 13 Fair Value Measurement (effective 1 January 2013)
Management do not expect to implement the above standards until all of their chapters have been published and they can
comprehensively asses the impact of all the changes.
Basis of consolidation
The group financial statements consolidate the financial statements of the company and its 100% subsidiary, Rodenhurst Estates Limited,
which are both made up to 31 December 2012, also following consistent accounting policies. Unrealised profits or losses on intra–group
transactions are eliminated in full.
Rental revenue as a lessor
Investment properties are leased to tenants under operating leases. The rental income receivable under these leases is recognised in the
income statement on a straight line basis over the term of the lease. Any rent free period is spread over the period of the lease. Since the
risks and rewards of ownership have not been transferred to the lessee, the assets held under these leases continue to be recognised in
the group’s accounts.
Dividend revenue
Dividend revenue relating to exchange–traded equity investments is recognised in the income statement on the dividend payment date.
In some cases, the group may receive dividends in the form of shares rather than cash. In such cases, the group recognises the dividend
income for the amount of cash dividend alternative with a corresponding increase in cost of investments.
Interest income and expense
Interest income and expense are recognised in the income statement under the effective interest method as they accrue. Interest income
is recognised on a gross basis, including withholding tax, if any.
Expenses
All expenses are recognised in the income statement on an accrual basis.
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Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
notes to the financial statements continued
1 Significant accounting policies continued
Realised gains and losses
Realised gains and losses are calculated as the difference between the proceeds, less expenses, and the value of the asset at the
beginning of the financial year. The related revaluation gains or losses of previous years are transferred from revaluation reserve to realised
capital reserve when the asset is disposed of.
Income tax
Income tax on the profit and loss for the periods presented comprises current and deferred tax, except where it relates to items charged
directly to equity in which case the related deferred tax is also charged or credited to equity. Income tax is recognised in the income
statement. As a REIT, tax is not payable on the income and gains generated in the tax exempt property business.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance
sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of equity
investments, using tax rates enacted or substantially enacted at the balance sheet date.
Investment property
Investment property is that which is held either to earn rental income or for capital appreciation or for both. Investment property is
stated at fair value. An external, independent valuation company, having an appropriate recognised professional qualification and recent
experience in the location and category of property being valued, values the portfolio every six months. The fair values are based on
market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and
a willing seller in an arm’s–length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and
without compulsion.
In accordance with IAS 40, a property interest under an operating lease is classified and accounted for as an investment property on a
property–by–property basis when the group holds it to earn rentals or for capital appreciation or both. Any such property interest under an
operating lease classified as an investment property is carried at fair value.
Acquisitions and disposals are recognised on the date of completion. Any unrealised gain or loss arising from a change in fair value is
recognised in the income statement.
Equity investments
The directors have designated the group’s qualifying financial assets at fair value through profit and loss on the basis that to do so is in
accordance with its documented investment strategy. Over 99.8% of the group’s equity investments are quoted and are valued at market
price.
Trade and other receivables
Trade and other receivables are recognised at fair value on initial recognition and subsequently at amortised cost. An impairment loss
is recognised for the amount by which the receivable’s carrying amount is believed to exceed its recoverable amount. To estimate the
recoverable amount, management considers the payment history of the tenant and takes into account the most recent credit rating of the
tenant.
Cash and cash equivalents
Cash and cash equivalents comprise cash available at less than three months’ notice.
Trade and other payables
Trade and other payables are recognised at fair value on initial recognition and subsequently at amortised cost.
Issued share capital
Ordinary shares are classified as equity because they do not contain an obligation to transfer cash or another financial asset. Dividends
are recognised as a liability in the period in which they are payable.
Segment reporting
The group has three main operating segments. In identifying these operating segments, management follows the group’s distribution of
assets in accordance with its investment strategy. Segment results, assets and liabilities include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis. A segment is a distinguishable component of the group whose operating
results are regularly reviewed by the group’s chief operating decision maker. For management purposes, the group uses the same
measurement policies as those used in its financial statements.
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21
2 Segment reporting
The operating segment reporting format identifies the operating segments the performance of which is monitored by the group’s
management using a consistent internal reporting structure. Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
The group is comprised of the following main operating segments:
❱ commercial property comprising retail outlets, offices and warehouses
Highcroft Investments PLC
❱ residential property comprising single–let houses and flats
Annual Report 2011
❱ financial assets comprising exchange–traded equity investments
41
Commercial property
Gross income
Profit for the year
Assets
Liabilities
Residential property
Gross income
Profit for the year
Assets
Liabilities
Financial assets
Gross income
Profit for the year
Assets
Liabilities
Total
Gross rental and dividend income
Profit for the year
Assets
Liabilities
In 2012 and in 2011 the largest tenant represented less than 10% of gross commercial property income.
3 Administrative expenses
Directors (note 4)
Auditor’s fees
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor for other services:
Other services pursuant to legislation
Other expenses
2012
£’000
2,308
2,650
2011
£’000
2,086
1,070
33,369
31,714
856
43
214
549
43
503
1,266
1,149
2
1
251
731
6,215
751
2,602
3,594
40,850
1,609
261
151
5,665
755
2,390
1,724
38,528
1,305
2012
£’000
156
2011
£’000
162
19
1
135
311
19
2
152
335
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Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
notes to the financial statements continued
4 Directors
Remuneration in respect of directors was as follows:
Remuneration
Social security costs
2012
£’000
2011
£’000
141
15
156
149
13
162
The average number of employees, all of whom were directors, of the group during the year was 5 (2011 6). All directors are considered to
be key managers of the company. More detailed information concerning directors’ remuneration is shown in the directors’ remuneration
report.
5
Income tax credit
Current tax:
On revenue profits
On capital profits
Prior year overprovision
Deferred tax (note 12)
Income tax credit
The tax assessed for the year differs from the standard rate of corporation tax in the UK of 24.5% (2011 26.25%).
The differences are explained as follows:
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax in the UK of 24.5% (2011 26.25%)
Effect of:
Tax exempt revenues
Profit not taxable as a result of REIT status
Chargeable gains/losses less/(more) than accounting profit
Losses carried forward
Effect of change in tax rate on deferred tax liability
Adjustments to tax charge in respect of prior periods
Income tax credit
6 Dividends
In 2012 the following dividends have been paid by the company:
2011 Final: 18.5p per ordinary share (2010 17.6p)
2012 Interim: 12.0p per ordinary share (2011 11.5p)
2012
£’000
2011
£’000
(53)
18
–
(35)
20
(15)
2012
£’000
3,579
877
(62)
(768)
10
(22)
(50)
–
(15)
(20)
15
(1)
(6)
(134)
(140)
2011
£’000
1,584
416
(69)
(431)
20
(25)
(50)
(1)
(140)
2012
£’000
956
620
2011
£’000
909
594
1,576
1,503
On 19 March 2013 the directors declared a property income distribution of £1,023,000, 19.8p per share (2011 £956,000, 18.5p per share)
payable on 31 May 2013 to shareholders registered at 3 May 2013.
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23
7 Earnings per share
The calculation of earnings per share is based on the total profit for the year of £3,594,000 (2011 £1,724,000) and on 5,167,240 shares
(2011 5,167,240) which is the weighted average number of shares in issue during the year ended 31 December 2012 and throughout the
period since 1 January 2012. There are no dilutive instruments.
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
£3,720,000 (2011 £2,066,000) has been calculated.
Highcroft Investments PLC
Annual Report 2011
41
Earnings:
Basic profit for the year
Adjustments for:
Net valuation losses on investment property
(Gains)/losses on investments
Income tax on gains/(losses)
Adjusted earnings
Per share amount:
Earnings per share (unadjusted)
Adjustments for:
Net valuation losses on investment property
Losses/(gains) on investments
Income tax on (losses)/gains
Adjusted earnings per share
8
Investment property
Valuation at 1 January
Additions
Disposals
Revaluation (losses)/gains
Valuation at 31 December
2012
£’000
2011
£’000
3,594
1,724
586
(498)
38
3,720
271
190
(119)
2,066
69.6p 33.4p
11.3p
(9.6p)
0.7p
72.0p
5.3p
3.7p
(2.3p)
40.1p
2012
£’000
30,787
4,827
(3,419)
(586)
2011
£’000
2010
£’000
30,705
27,825
2,871
(2,518)
(271)
1,558
(255)
1,577
31,609
30,787
30,705
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 2012, 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.
At 31 December 2012 investment property with a carrying amount of £1,450,000 is charged to Lloyds TSB Bank PLC to provide security
for any future borrowings.
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24
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
notes to the financial statements continued
8
Investment property continued
The group leases out its commercial investment property under operating leases. The future minimum lease payments receivable under
non–cancellable leases are as follows:
Less than one year
Between one and five years
More than five years
Property operating expenses are analysed as follows:
Arising from generating rental income
Not arising from generating rental income
9 Equity investments
Valuation at 1 January
Additions
Disposals
Surplus/(deficit) on revaluation in excess of cost
Revaluation decrease below cost
Revaluation increase still less than cost
Valuation at 31 December
The analysis of gains and losses on equity investments shown in the income statement is as follows:
Realised gains on equity investments
Revaluation gains on equity investments
Realised losses on equity investments
Revaluation losses on equity investments
10 Trade and other receivables
Trade receivables
Bad debt provision
Net trade receivables
Other receivables
2012
£’000
2,251
7,231
11,235
20,717
2012
£’000
181
3
184
2012
£’000
5,598
540
(849)
416
(17)
25
2011
£’000
2,091
5,730
8,881
2010
£’000
2,001
6,025
6,332
16,702
14,358
2011
£’000
221
82
303
2011
£’000
5,608
423
(186)
(238)
(15)
6
2010
£’000
159
86
245
2010
£’000
7,397
1,028
(3,393)
572
(6)
10
5,713
5,598
5,608
2012
£’000
79
598
677
2012
£’000
5
174
179
2011
£’000
81
316
397
2011
£’000
24
563
587
2010
£’000
69
649
718
2010
£’000
136
73
209
2012
£’000
2011
£’000
2010
£’000
182
(2)
180
74
254
240
(41)
199
18
217
124
(44)
80
13
93
Amounts due from tenants at each year end include amounts invoiced on 25 December in respect of rents in advance for the period
25 December to 24 March. At 31 December 2012 amounts due from tenants which were more than 90 days overdue, which related to
rents for 2012 or earlier, totalled £2,000 (2011 £48,000). Provisions against these overdue amounts totalled £41,000 at the beginning of
the year, of which £39,000 was released, to give a provision of £2,000 at 31 December 2012.
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11 Trade and other payables
Deferred income
Social security and other taxes
Other payables
Highcroft Investments PLC
Annual Report 2011
41
www.highcroftplc.com
25
2012
£’000
556
226
218
1,000
2011
£’000
438
26
217
681
2010
£’000
485
138
274
897
The directors consider that the carrying value of trade and other payables approximates to their fair value.
12 Deferred tax liabilities
Deferred taxation, arising from revaluation gains on equity investments, provided for in the financial statements is set out below and is
calculated using a tax rate of 23% (2011 25%).
At 1 January
Realised in the year
Provided/(released) in the year
At 31 December
13 Share capital
Authorised 8,000,000 ordinary shares of 25p each
Allotted, called up and fully paid 5,167,240 (2011 5,167,240) ordinary shares of 25p each
2012
£’000
624
(35)
20
609
2012
£’000
2,000
1,292
2011
£’000
764
(6)
(134)
624
2011
£’000
2,000
1,292
2010
£’000
969
(298)
93
764
2010
£’000
2,000
1,292
The directors monitor capital on the basis of total equity and operate within the requirements of the articles of association. There was no
medium–term debt at 31 December 2012 (2011 nil and 2010 nil). The directors manage the group’s working capital to take advantage of
suitable commercial opportunities as they arise whilst maintaining a relatively low cost capital base. This capital management is principally
carried out by the realisation of liquid equity investments, the sale of vacant residential properties and the use of surplus cash. In the
medium term the directors may again use medium–term debt to finance future commercial property acquisitions in line with its long term
strategy.
14 Capital commitments
There were no capital commitments at 31 December 2012 or at 31 December 2011.
15 Contingent liabilities
There were no contingent liabilities at 31 December 2012 or 31 December 2011.
16 Related party transactions
Kingerlee Holdings Limited owns, through its subsidiaries, 25.40% (2011 25.36%) of the company’s shares and D H Kingerlee and
J C Kingerlee are directors and shareholders of both the company and Kingerlee Holdings Limited. The transactions between the group
and Kingerlee Holdings Limited or its subsidiaries were as follows:
Property income distribution
Service charge in relation to services provided at Thomas House, Kidlington
Repairs to properties
Amounts outstanding at the end of the year
2012
£’000
400
14
–
–
2011
£’000
381
14
–
–
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26
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
notes to the financial statements continued
16 Related party transactions continued
The company owns 100% of Rodenhurst Estates Limited. The transactions between the company and Rodenhurst Estates Limited were
as follows:
Dividend received
Management charge receivable
Interest receivable on intercompany loan
Amounts outstanding at the end of the year
2012
£’000
2,000
133
54
2011
£’000
3,500
134
18
4,427
3,912
The key management personnel are the directors of the group. Their remuneration is set out in note 4. In addition, the following directors
received dividends during the year (or period of office if shorter) in respect of their shareholdings:
J Hewitt
D H Kingerlee
J C Kingerlee
C J Clark (retired 31 May 2012)
2012
£’000
2011
£’000
3
27
40
–
3
26
38
1
17 Financial instruments and financial risk
The following table presents financial instruments measured at fair value in the statement of financial position in accordance with fair value
hierarchy. This hierarchy groups financial instruments into three levels based on the significance of issues used in measuring the fair value
of the financial instruments. The fair value hierarchy has the following levels:
❱ Level 1: quoted prices in active markets for identical assets or liabilities. The fair value of financial instruments traded in active markets
is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly
available, and those prices represent actual and regularly occurring market transactions on an arm’s-length basis.
❱ Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices)
or indirectly (ie derived from prices).
❱ Level 3: the fair value of financial instruments that are not traded in an active market, for example, investments in unquoted companies,
is determined by reference to the last known price at which shares were traded.
There have been no transfers between these classifications in the year (2011 none). The change in fair value for the current and previous
years is recognised through the consolidated statement of comprehensive income.
IFRS 7 measurement classification — 2012
Opening cost
Opening unrealised gain
Opening fair value at 1 January 2012
Additions at cost
Disposal proceeds
Net gain realised on disposal
Change in fair value in the year on assets held at 31 December 2012
Closing fair value at 31 December 2012
Closing cost
Closing unrealised gain
At 31 December 2012
Level 3
Unquoted
equity
investments
£’000
Level 1
Quoted
equity
investments
£’000
Total
Quoted
and
unquoted
£’000
4
5
9
–
–
–
–
9
4
5
9
2,655
2,934
5,589
540
(924)
75
424
5,704
2,591
3,113
5,704
2,659
2,939
5,598
540
(924)
75
424
5,713
2,595
3,118
5,713
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17 Financial instruments and financial risk continued
IFRS 7 measurement classification — 2011
Highcroft Investments PLC
Annual Report 2011
41
Opening cost
Opening unrealised gain
Opening fair value at 1 January 2011
Additions at cost
Disposal proceeds
Net gain realised on disposal
Change in fair value in the year on assets held at 31 December 2011
Closing fair value at 31 December 2011
Closing cost
Closing unrealised gain
At 31 December 2011
Categories of financial instruments
Financial assets designated at fair value through the income statement
Equity investments
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Financial liabilities measured at amortised cost
Trade and other payables
www.highcroftplc.com
27
Level 3
Unquoted
equity
investments
£’000
Level 1
Quoted
equity
investments
£’000
Total
Quoted
and
unquoted
£’000
4
5
9
–
–
–
–
9
4
5
9
2,390
3,209
5,599
423
(243)
57
(247)
5,589
2,655
2,934
5,589
2,394
3,214
5,608
423
(243)
57
(247)
5,598
2,659
2,939
5,598
2012
2011
Carrying
amount
£’000
Income/
(expense)
£’000
Carrying
amount
£’000
Income/
(expense)
£’000
5,713
424
5,598
(247)
254
3,274
3,528
218
218
–
–
–
–
–
217
1,926
2,143
217
217
–
–
–
–
–
Fair value and maturity of financial instruments
The group has no derivative financial instruments. Exposure to credit, liquidity and market risks, arises in the normal course of the group’s
business. At 31 December 2012 the group had no borrowings and fair values of loans and receivables and financial liabilities held at
amortised cost were not materially different from book values.
Market risk
Market risk arises from that portion of the group’s activities relating to investment in equities. This risk relates to the effect of market
conditions on the pricing of the equities which forms the key component of their year–end valuation. This risk is mitigated by the equity
portfolio being spread by both geography and sector.
Credit risk
The group’s credit risk, ie the risk of financial loss due to a third–party failing to discharge its obligation, primarily affects its trade
receivables. Creditworthiness of potential tenants is assessed before entering into contractual arrangements. The amount of trade
receivables presented in the balance sheet is calculated after any allowances for doubtful receivables, estimated by the directors. The
allowance as at 31 December 2012 was £2,000 (2011 £41,000).
The group has no significant concentration of credit risk, with exposure spread over a number of tenants. The credit status of tenants
is continuously monitored and particularly reviewed before properties are acquired, before properties are let and before new leases are
granted.
The group’s cash holdings are mainly in Lloyds TSB Bank PLC and cash is also held by the group’s property managers, lawyers and
brokers acting as agents, though not for long periods of time.
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28
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
notes to the financial statements continued
17 Financial instruments and financial risk continued
Liquidity risk
The group’s liquidity risk, ie the risk that it might encounter difficulty in meeting its obligations, applies to its trade payables and any
medium–term borrowings that the group takes out from time to time. The group has not encountered any difficulty in paying its trade
payables in good time.
Interest rate risk
The group finances its operations through retained profits and also, from time to time, medium–term borrowings. Neither fixed rate
instruments nor interest rate swaps have been used. The group places any cash balances on deposit at rates which are fixed in the short
term but for sufficiently short periods that there is no need to hedge against the implied risk.
When medium–term borrowings are used variable rates of interest apply. There were no borrowings in 2012.
Currency exchange risk
The group is not directly exposed to currency risk as it does not trade in foreign currencies. However, most of the group’s equity
investments are held in international companies and 25.9% (2011 23.8%) of the equity investment portfolio comprises overseas holdings.
The inherent currency risk affecting those holdings is an indistinguishable factor in determining their market value and is taken into
consideration as part of the overall assessment of investment risk.
Maturity of group financial liabilities
At 31 December 2012 there were no group financial liabilities at variable rates (2011 £nil).
Borrowing facilities
The group has no undrawn committed borrowing facilities.
18 Net assets per share
Net assets
Ordinary shares in issue
Basic net assets per share
2012
£’000
2011
£’000
39,241
37,223
5,167,240 5,167,240
759p
720p
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29
report of the independent auditor
to the members of Highcroft Investments PLC
We have audited the financial statements of Highcroft Investments PLC for the year ended 31 December 2012 which comprise the
consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes
in equity, the consolidated statement of cash flows, the notes to the financial statements, the company balance sheet and the notes to
the company financial statements. The financial reporting framework that has been applied in the preparation of the consolidated financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial
reporting framework that has been applied in the preparation of the company financial statements is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
41
Highcroft Investments PLC
Annual Report 2011
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities set out on page 6, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
❱ the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2012 and
of the group’s profit for the year then ended;
❱ the group financial statements have been properly prepared in accordance with IFRSs, as adopted by the European Union;
❱ the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; and
❱ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group
financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
❱ the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006;
❱ the information given in the report of the directors for the financial year for which the financial statements are prepared is consistent with the
financial statements; and
❱ the information given in the corporate governance statement set out on pages 4 to 6 with respect to internal control and risk management
systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
❱ adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
❱ the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
❱ certain disclosures of directors’ remuneration specified by law are not made; or
❱ we have not received all the information and explanations we require for our audit; or
❱ a corporate governance statement has not been prepared by the company.
Under the Listing Rules, we are required to review:
❱ the directors’ statement, set out on page 5, in relation to going concern;
❱ the part of the corporate governance statement relating to the company’s compliance with the nine provisions of the UK Corporate
Governance Code specified for our review; and
❱ certain elements of the report to shareholders by the board on directors’ remuneration.
Nicholas Watson
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
19 March 2013
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30
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
company balance sheet
at 31 December 2012
Fixed assets
Investments
Current assets
Debtors
Cash at bank
Creditors – amounts falling due within one year
Net current assets
Total assets less current liabilities
Capital and reserves
Called up share capital
Reserves
— Realised capital
— Capital redemption
— Revaluation
— Retained earnings
Shareholders’ funds
These financial statements were approved by the board of directors on 19 March 2013.
J Hewitt
Director
J C Kingerlee
Director
Company number — 224271
The accompanying notes form an integral part of these financial statements.
2012
2011
Note
£’000
£’000
£’000
£’000
5
6
7
8
9
9
9
11
4,447
501
4,948
151
6,047
95
28,327
4,041
35,005
33,974
4,797
39,802
1,292
3,936
61
3,997
144
5,783
95
27,229
3,428
3,853
37,827
1,292
38,510
39,802
36,535
37,827
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www.highcroftplc.com
31
notes to the company financial statements
for the year ended 31 December 2012
1 Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with applicable UK GAAP accounting standards and under the historical cost
convention except for the revaluation of investments. The principal accounting policies of the company have remained unchanged from
the previous year.
Income from fixed asset investments
Income from fixed asset investments includes dividends received in the year and interest receivable for the year.
Highcroft Investments PLC
Annual Report 2011
Dividends payable
Dividend payments are dealt with when paid as a change of equity in retained earnings. Final dividends proposed are not recognised as a
liability.
41
Investments
Investments are included at the following valuations:
❱ shares in subsidiary undertaking – at market value (net assets as shown by its financial statements are taken as a reasonable estimate
of market value)
❱ equity investments (99.8% are listed on a recognised investment exchange) – at market value
❱ unlisted investments – at market value estimated by the directors
The directors manage and evaluate performance on a fair value basis and therefore have designated qualifying financial assets at fair
value through the profit and loss account. Other movements are recognised directly in equity.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or events that give the company an obligation to pay more tax
in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when
it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Unprovided deferred taxation would crystallise on the sale of assets at their balance sheet value.
Gains on disposals of assets
Gains on disposals of assets are the excess of net proceeds over the valuation at the beginning of the year. They are not available for
distribution under the company’s articles of association and are taken to realised capital reserve.
2 Company profit for the year after tax
The company has not presented its own profit and loss account as permitted under section 408 of the Companies Act 2006. The profit
after tax for the year was £2,191,000 (2011 £3,370,000). Information regarding directors’ remuneration appears on pages 13 and 14 of the
consolidated financial statements.
3 Auditor’s fees
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor for other services:
Other services pursuant to legislation
2012
£’000
2011
£’000
19
1
20
19
2
21
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32
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
notes to the company financial statements continued
4 Dividends
In 2012 the following dividends have been paid by the company:
2011 Final: 18.5p per ordinary share (2010 17.6p)
2012 Interim: 12.0p per ordinary share (2011 11.5p)
2012
£’000
956
620
2011
£’000
909
594
1,576
1,503
On 19 March 2013 the directors declared a property income distribution of 19.8p per share (2011 18.5p) payable on 31 May 2013 to
shareholders registered at 3 May 2013.
5
Investments
Valuation at 1 January 2012
Additions at cost
Disposals
Surplus on revaluation in excess of cost
Revaluation decrease below cost
Revaluation increase still less than cost
Valuation at 31 December 2012
Shares in
subsidiary
undertaking
£’000
Total
£’000
Other investments
Unlisted
£’000
Listed
£’000
33,974
28,376
5,589
540
(849)
1,332
(17)
25
–
–
916
–
–
540
(849)
416
(17)
25
35,005
29,292
5,704
9
–
–
–
–
–
9
Equity investments are included at their market value. If investments had not been revalued they would have been included on the
historical cost basis at the following amounts:
Cost at 31 December 2012
Cost at 31 December 2011
Shares in
subsidiary
undertaking
£’000
Other investments
Unlisted
£’000
Listed
£’000
3,754
3,754
3,189
2,655
4
4
Total
£’000
6,947
6,413
At 31 December 2012, the company held 100% of the allotted ordinary share capital and voting rights of Rodenhurst Estates Limited
which is a property owning company, registered in England and Wales and operating in England.
At 31 December 2012 the net assets of Rodenhurst Estates Limited were £29,293,000 (2011 £28,375,000) and the profit for the financial
year was £3,503,000 (2011 £1,936,000).
6 Debtors
Owed by subsidiary undertaking
Other debtors
2012
£’000
4,427
20
4,447
2011
£’000
3,912
24
3,936
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7 Creditors — amounts falling due within one year
Other taxes and social security
Other creditors
8 Share capital
Highcroft Investments PLC
Annual Report 2011
41
Authorised 8,000,000 ordinary shares of 25p each
Allotted, called up and fully paid 5,167,240 (2011 5,167,240) ordinary shares of 25p each
9 Reserves
At 1 January 2012
Profit retained
Dividends paid
Revaluation gain — equities
Revaluation gain — Rodenhurst Estates Limited
Realised gains
Tax on realised gains
Surplus attributable to assets sold in the year
At 31 December 2012
www.highcroftplc.com
33
2012
£’000
9
142
151
2012
£’000
2,000
1,292
2011
£’000
7
137
144
2011
£’000
2,000
1,292
Revaluation
£’000
Realised
capital
£’000
Retained
earnings
£’000
27,229
5,783
–
–
424
916
–
–
(242)
–
–
–
–
57
(35)
242
3,428
2,613
(1,576)
(424)
–
–
–
–
28,327
6,047
4,041
The revaluation reserve includes annual revaluation gains and losses, less attributable taxation. The realised capital reserve includes
realised revaluation gains and losses, less attributable taxation. In accordance with the articles of association the revaluation and realised
capital reserves are not distributable.
10 Deferred taxation
Deferred taxation provided and unprovided for in the financial statements is set out below and is calculated using a tax rate of 23% (2011
25%). Unprovided deferred taxation would crystallise if equity investments were sold at their balance sheet value.
Unrealised capital gains
11 Reconciliation of movements in shareholders’ funds
2012
£’000
–
Profit for the financial year
Dividends
Other recognised gains and losses:
Surplus/(loss) on revaluation of assets
Realised gains
Tax on prior year’s surplus now realised
Net increase in shareholders’ funds
Shareholders’ funds at 1 January
Shareholders’ funds at 31 December
Provided
2011
£’000
Unprovided
2012
£’000
2011
£’000
–
5,357
5,622
2012
£’000
2,613
(1,576)
1,037
916
57
(35)
1,975
37,827
39,802
2011
£’000
3,370
(1,503)
1,867
(1,835)
42
(5)
69
37,758
37,827
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34
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
notes to the company financial statements continued
12 Capital commitments
There were no capital commitments at 31 December 2012 or at 31 December 2011.
13 Contingent liabilities
There were no contingent liabilities at 31 December 2012 or at 31 December 2011.
14 Related party transactions
Kingerlee Holdings Limited, through its subsidiaries, owns 25.40% (2011 25.36%) of the company’s shares and D H Kingerlee and J C
Kingerlee are directors and shareholders of both the company and Kingerlee Holdings Limited. The transactions between the company
and Kingerlee Holdings Limited or its subsidiaries, all of which were undertaken on an arm’s–length basis, were as follows:
Property income distribution or dividend
Service charge in relation to services provided at Thomas House, Kidlington
Amounts outstanding at the end of the year
2012
£’000
400
14
–
2011
£’000
381
14
–
Under the provision of FRS 8, transactions between Highcroft Investments PLC and Rodenhurst Estates Limited are exempt from these
disclosure requirements as Rodenhurst is a wholly-owned subsidiary.
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group five Year summary (unaudited)
Investment properties — at annual valuation
Equity investments — at market value
Total net assets
Net asset value per share in issue at end of each year
Highcroft Investments PLC
Annual Report 2011
Revenue (excluding gains/losses on disposals of assets)
41
Gross income from property
Dividend income
Profit available for distribution
Share capital
Average number in issue (000’s)
Basic earnings/(loss) per ordinary share
Adjusted earnings per ordinary share
Dividends payable per ordinary share
FTSE 350 Real Estate Index
Highcroft year end share price
www.highcroftplc.com
35
2012
£’000
31,609
5,713
39,241
759p
£’000
2,351
251
3,720
5,167
69.6p
72.0p
31.8p
394
590p
2011
£’000
2010
£’000
2009
£’000
2008
£’000
30,787
30,705
27,825
26,344
5,598
5,608
7,397
7,282
37,223
37,002
34,435
31,604
720p
716p
666p
612p
£’000
2,129
261
2,066
5,167
33.4p
40.1p
30.0p
314
465p
£’000
2,053
234
1,965
5,167
76.7p
38.0p
28.6p
354
495p
£’000
1,943
292
1,670
5,167
76.2p
32.3p
26.0p
347
445p
£’000
2,124
450
1,922
5,167
(179.3p)
37.3p
18.4p
322
305p
Highcroft Investments AR_2012.indd 35
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36
Highcroft Investments PLC Annual Report 2012
Stock Code: HCFT
shareholder notes
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www.highcroftplc.com
37
directors and advisers
Company number
224271
Directors
John Hewitt, MA (Non–executive Chairman)
Richard Stansfield, BSc FRICS (Non–executive)
Jonathan Kingerlee (Chief Executive)
Roberta Miles, MA FCA (Finance)
David Kingerlee (Executive)
Company secretary
Roberta Miles, MA FCA
Independent auditor
Grant Thornton UK LLP
Statutory Auditor
Chartered Accountants
3140 Rowan Place
John Smith Drive
Oxford Business Park South
Oxford OX4 2WB
Bankers
Lloyds TSB Bank PLC
The Atrium
Davidson House
Forbury Square
Reading RG1 3EU
Corporate finance advisers Charles Stanley Securities
131 Finsbury Pavement
London EC2A 1NT
Property advisers
Jones Lang LaSalle Limited
30 Warwick Street
London W1B 5NH
Independent valuers
Knight Frank LLP
Registrars
Solicitors
Registered office
55 Baker Street
London W1U 8AN
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Clarkslegal LLP
One Forbury Square
The Forbury
Reading RG1 3EB
Thomas House
Langford Locks
Kidlington
Oxon OX5 1HR
www.highcroftplc.com
and
Charles Russell LLP
5 Fleet Place
London EC4M 7RD
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22144.04 2 April 2013 10:36 AM Proof 6Annual Report & Financial Statements 31 December 2012STOCK CODE: HCFTHighcroft Investments PLCThomas House, Langford LocksKidlington, Oxon OX5 1HRT: 01865 840023E: office@highcroftplc.comW: www.highcroftplc.comHighcroft Investments PLCHighcroft Investments AR_2012.indd 14/2/2013 10:39:16 AM