A solid asset base and sustainable dividends Annual report and accounts for the year ended 31 December 2024 Who we are Highcroft Investments PLC is an internally managed Real Estate Investment Trust (REIT), which invests in commercial property in England and Wales. Our culture Our culture is open and supportive. Integrity is a value that defines our culture and underpins the way that we do business. Our purpose Highcroft’s purpose is to provide our tenants with quality properties, in good locations, enabling them to succeed, and our stakeholders to benefit on a long-term, sustainable basis. Our values Our values are reputation, integrity and good governance built on long-term relationships, and on sustainability and responsibility. Our vision Our vision is to ensure every opportunity has a positive impact on others. Our strategy Highcroft aims to deliver sustainable long-term income and capital growth for its shareholders through accretive asset management initiatives and recycling of capital in its regionally based property portfolio. An EXPERIENCED team STRONG balance sheet GOOD-QUALITY property assets MODERATE gearing View more online at: www.highcroftplc.com Our competitive strengths Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Highcroft Investments PLC Overview Contents OVERVIEW REPORT Highlights IFC Chairman’s and chief executive’s statement 02 Our business model 02 Strategic pillars 05 STRATEGIC REPORT Our key performance indicators (KPIs) 06 Case study on St Austell 07 Our portfolio 08 Financial review 11 Our risk 13 Stakeholder engagement 17 Sustainability 18 GOVERNANCE REPORT Governance report 19 Board of directors 22 Audit committee report 23 Directors’ remuneration report 25 Report of the directors 27 Statement of directors’ responsibilities 29 FINANCIAL STATEMENTS Independent auditor’s report 30 Consolidated statement of comprehensive income 35 Consolidated statement of financial position 36 Consolidated statement of changes in equity 37 Consolidated statement of cashflows 38 Notes to the consolidated financial statements 39 Company statement of financial position 53 Company statement of changes in equity 54 Notes to the company financial statements 55 List of definitions 59 Group five-year summary (unaudited) 60 Directors and advisers IBC 1. Dividends payable 2. Net asset value per share 3. Gross rental revenue 58p 1,075p £6.4m +4% +5% +10% 2024 2023 2022 2021 56p 55p 58p 56p 2024 2023 2022 2021 1,081p 1,275p 1,075p 1,022p 2024 2023 2022 2021 £5.6m £5.9m £6.4m £5.8m 4. Net rental income 5. Adjusted earnings per share 6. Total earnings per share £5.4m 69.0p 108.9p +4% +10% 2024 2023 2022 2021 £5.3m £5.3m £5.4m £5.2m 2024 2023 2022 2021 62.9p 56.7p 69.0p 62.8p 2024 2023 2022 2021 (137.0)p 230.5p 108.9p (3.7)p 7. Value of property assets 8. Net debt 9. Occupancy £82.6m £25.4m 94% +5% 2024 2023 2022 2021 £77.9m £87.6m £82.6m £78.3m 2024 2023 2022 2021 £20.0m £21.5m £25.4m £23.0m 2024 2023 2022 2021 93% 94% 94% 94% 01 01 Stock code: HCFT highcroftplc.com We are pleased to report the full year results of the group for the year ended 31 December 2024. Results for the year The results are positive and show a growth in earnings to £5,668,000 from a 2023 loss of £193,000 and an increase in net asset value per share of 5% to 1,075p. The two key highlights of the group during the year were the finalisation of the transfer of the listing from the London Stock Exchange (LSE) to The International Stock Exchange (TISE) and the completion of the construction of the property in St Austell, now let to DHL on a 15-year lease. Both have had, and will continue to have, a positive impact on the group – the TISE listing helping to reduce and keep overhead costs contained and the DHL lease adding a secure long-term income producing asset to our portfolio. Board of directors As reported, Douglas Conn joined the board on 1 May 2024 as a non-executive director and Simon Costa resigned as a non-executive director on 31 August 2024. We would like to thank all board members for their input and support throughout the year. In October 2024, we also said goodbye to Anne-Marie Palmer our company secretary, and thank her for her service, and welcomed Kerry Round as our new company secretary. Governance To help reduce the cost burden but still ensure a high standard of corporate governance, we have adopted the principles of the QCA Corporate Governance Code insofar as they are practical and cost effective for a business of our size and this is explained further in the governance report. Balance sheet As noted above, we were very pleased to complete the construction of the St Austell property, in October 2024, at a total cost of £4.9m. At the year end the independent valuation on this asset was £5.2m, a positive uplift against the cost. The build was funded out of existing cash resources and means the group’s balance sheet is now fully invested. We would like to thank our asset managers, Cube, for managing and delivering this project which was, at times, very challenging. 01 Strong balance sheet and cash generative Our £82.6m, 892,000 sq ft of assets underpin our balance sheet and financial strength. 02 Strong dividend returns Our dividends performance and yield remains good and we are pleased to report an increase this year. Strong performance resulting in an increased dividend.” Charles Butler Chairman Paul Leaf-Wright Chief executive Why invest in Highcroft? 02 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Chairman’s and Chief executive’s statement Overview In November we sold one of our smaller retail assets, the Norwich property, for £625,000. The decision to sell was based on a need to bolster cash resources – given that much of our cash had been utilised on the St Austell asset – and the view that this property offered limited long-term upside. The remainder of the portfolio continued to perform in line with expectations and was stable, as is reflected in the overall portfolio performance where the total value increased by 2.7% for the full year on a like-for-like basis. The retail warehouse assets performed well during the year and the industrial assets within our portfolio produced mostly positive uplifts in valuation, whereas the market around leisure, office and high street retail assets remained subdued to weak. We have struggled to either sell or find a tenant for our asset in Cardiff and this has seen the valuation on this asset decline further. We will continue to focus on assets that provide long-term secure income and are supported by a strong underlying intrinsic asset value. Gearing The current debt at £27.2m represents gearing of 33% of the value of the investment property portfolio. The interest rates on the debt were fixed at historically low rates and the group is seeing material benefit from those low rates on our cost of debt. Current market rates are significantly higher. Our rates are fixed for periods expiring in 2026 through to 2030. We do face a potential risk that when these deals expire the cost to replace the debt will be higher and will therefore place pressure on our net income at that time; however, this is a risk which the board are monitoring and making plans to mitigate against. Leasing activity During the year there were three rent reviews documented, one lease renewal and two reversionary leases agreed in addition to the commencement of the lease at our newly developed site in St Austell. Our occupancy level for the year averaged 94%, with the Cardiff office property and office space above our Oxford High Street retail assets being void for the entire year. In January 2025 we signed a new tenant for the Oxford High Street space which will see a positive uplift for this building. Income statement Net rental income grew by 4%, due to several factors explained on page 11 and is a positive outcome for the year. Costs were well controlled and, notwithstanding the one- off professional fees associated with the move to TISE, we are starting to see the savings and benefits. We should see further savings in 2025 where the full year of lower costs will be in place and there are no one-off fees. We should also be sheltered from the ever-increasing costs of the compliance and regulatory burdens that a group listed on the Main Market of the LSE has to bear. A combination of the income growth and cost savings saw an increase in our revenue profit before tax of 8.8% for the year which is a most pleasing result. Dividends The company’s interim dividend was maintained at 23 pence per share. The directors, on 27 March 2025, have voted an additional interim dividend of 35 pence per share, an increase of 2 pence per share (6%) over the 2023 final dividend declared on 25 March 2024. This additional interim dividend is payable on 16 May 2025 to shareholders on the register on 25 April 2025 and is in lieu of a final dividend. Outlook I would like to draw your attention to the announcement, on 27 March 2025, of a recommended all-share acquisition of Highcroft Investments PLC by LondonMetric Property PLC, to be effected by means of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 (the “Potential Transaction”). I would recommend that all shareholders read this document carefully. The announcement highlights, inter alia, the background to and reasons for the Potential Transaction and that we have received irrevocable undertakings from shareholders holding 60.2% of the company’s issued share capital to vote in favour of this acquisition at the relevant meetings. A scheme document containing further information about the Potential Transaction and the notices of a Court Meeting and General Meeting will be published within 28 days and it is expected that, if approved by the Court and the shareholders at the Court Meeting and General Meeting, the scheme will become effective on 21 May 2025. Charles Butler Paul Leaf-Wright Chairman Chief executive 27 March 2025 27 March 2025 03 Diversified and sustainable income from the UK property market We have 22 assets spread across five sectors all geographically focused in the south of the UK with a WAULT of six years. 04 Experienced team Our experienced executive and advisory team have consistently delivered on our strategy. 05 Growing occupier demand In certain sectors there is increasing demand for the right property in the right places for good tenant covenants. 03 Stock code: HCFT highcroftplc.com People We are a small team with diverse skill sets. Our knowledge and understanding of the marketplace informs decisions. As a source of competitive advantage, the talent of our staff is integral in prudent decision making, ensuring that our performance is in line with our objectives. Financial strength We have a moderate level of gearing for a group investing in property. Our conservative capital structure and track record of delivering strong returns make us a lower risk investment than others. Our tenants Our tenants are diverse companies with wide-ranging requirements. As shown on pages 8 to 10, they are mainly large commercial companies requiring property on long-term leases. Our key relationships Our key relationships are those with all our stakeholders. See page 17 for details of our stakeholder engagement. We aim to deliver sustainable and long-term income and capital growth for shareholders We endeavour to operate a cyclical model, buying when the market is low, generating rental income and selling, if appropriate, when the market is high in order to maximise cash to reinvest. We use a combination of our key resources to select the best opportunities within our chosen market sectors. We then redevelop and refurbish these in order to increase the value of the property, which allows us to secure higher rental incomes. We let our properties out on long leases, guaranteeing consistent income for our shareholders. Our key resources Strategic priorities Key activities 1 We buy We research, identify and react quickly to market opportunities, creating competitive advantage. Using our property management skills, we create opportunities within our portfolio to create value and/or yield. We look for: ■Location ■Potential for development ■Growth markets We look to increase our average lot size, to uphold the quality of our tenants, grow the portfolio and navigate market uncertainty. 2 We generate We use a combination of our key resources in order to select the best opportunities within our chosen market segments, to asset manage, redevelop or refurbish to increase the value, sustainability and income- producing capability of our assets. 3 We maximise potential We maximise the value of our portfolio through redeveloping and refurbishing properties to meet tenant demands and maintain relationships to increase lease length and rental income. This also enables us to make our properties more sustainable – see page 18 for our sustainability journey and future plans. 4 We sell To ensure long-term success we strategically sell smaller properties in under-performing markets or properties where the risk of ownership is high. We have reviewed our strategic priorities in the year, considering our strategy, the external environment, and the interests of our stakeholders. Our priorities are set out below. Risks are discussed in detail on pages 13 to 16. Strategic priorities How this priority will help us Progress/opportunities Risk* A Continue to grow a sustainable commercial property portfolio with a bias towards the south of England and Wales. Commercial assets, with good sustainability credentials, in these geographical areas are regarded by the directors as being best placed to outperform the market in any cycle. These locations are also considered relatively low risk and fit our risk profile. We have completed a development on vacant land at our St Austell site and a fifteen-year lease to DHL commenced in October 2024. This asset has an EPC A rating and is on track to achieve a BREEAM rating. 1 2 3 B Use modest gearing with medium-term maturity. The use of keenly priced debt to expand our property portfolio should increase our property profits available for distribution. Our debt remains at £27.2m, with a weighted average interest rate of 3.06% and the first facility expiring in August 2026. This has provided us stability during the recent period of high interest rates and will continue to do so in the short term. 5 6 C Provide a good dividend return. Maintaining a good property income distribution stream remains a fundamental priority. Dividends payable for 2024 are £3,020,000, 58p per share. As a REIT we are required to distribute 90% of our net property profits. All Our business model *Please see pages 14 to 15 04 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Overview Value we generate to our stakeholders Our values Strategic pillars A Building a portfolio of high-quality commercial properties in the right places occupied under good lease fundamentals by the right tenants We use our core strengths to identify under-performing or high-risk assets for disposal and to identify good replacement assets in our target geographical areas. B Using available capital, including debt, efficiently and effectively We will invest cash as fully as is practicable, whilst maintaining an adequate headroom of working capital. We will continue to maintain modest gearing levels. C Delivering a sustainable income return to our investors Whilst having regard to the constraints imposed by two concert parties, we aim to manage our asset base effectively and cost efficiently and to deliver a good dividend return for all our investors on a sustainable basis. Introduction to our strategy Highcroft aims to deliver sustainable long-term income and capital growth for its shareholders through accretive asset management initiatives and recycling of capital in its regionally-based property portfolio. Reputation Our reputation is important to us and has been gained by the efforts of many over several years. Maintaining a strong reputation is critical and we recognise the value this plays in our relationships with our stakeholders. Retaining our reputation relies on us doing the right thing and is, therefore, only achievable with us acting in accordance with all our values and maintaining a sustainable business. Integrity Integrity is a core value in how we conduct our business and an established part of our strategy. We gain trust by acting honestly at all times, by being open and candid in all our business relationships and, most importantly, in every one of our actions. When engaging with our stakeholders, we act with openness, honesty and integrity and the board and employees take responsibility to ensure that all our business processes are run with integrity. Good governance The board maintains good governance at the centre of its decisions and discussions. Our framework supports the effective delivery of our strategy, the sustainability of our business and the creation of value for all our stakeholders continues to be supported by our governance structures and processes. Following our move to TISE in February 2024 good governance remains a key value and the board endeavours to follow the appropriate guidance and rules. Shareholders We endeavour to maintain dividends for our shareholders, enhancing shareholder value through sustained capital and income growth resulting from our low-risk business strategy. Tenants Through supportive landlord/asset manager/ tenant relationships, we improve environments by identifying and implementing opportunities to enhance our properties. We aim to create high-quality environments that contribute to our tenants’ success in executing their business strategies. Local communities In addition to charitable donations to support the terminally ill and disadvantaged in the community, we contribute to economic prosperity by supporting the provision of suitable spaces in strategic locations. We foster employment and enable businesses to thrive in conducive environments. Environment We make a positive contribution to the environment through our existing properties and development project. Strategic pillars 05 Stock code: HCFT highcroftplc.com Our key performance indicators (KPIs) Financial KPIs Movement in value of property assets Movement in net rental income £82.6m £5.4m +2.7% like-for-like +3.6% 2024 2023 2022 2021 £77.9m £87.6m £82.6m £78.3m 2024 2023 2022 2021 £5.3m £5.3m £5.4m £5.2m Link to strategy A B C Link to risks* 1 3 4 6 Link to strategy A B C Link to risks* 1 3 4 6 8 The value of our assets has increased by £4.3m which represents an increase of 2.7% on a like-for-like* basis, which is ahead of the all-property market increase of 1.9% For further information see page 12. * like-for-like defined on page 59 As a REIT, we are required to distribute 90% of our relevant property profits. Increasing net rental income contributes towards an increase in our dividend. Net rental income increased by £185,000. Movement in net asset value per share Achieve an adjusted EPS per share that is in line with the market 1,075p 6.8% +5.2% Adjusted EPS % return Weighted % market return 2024 6.8 5.9 2023 5.8 5.0 2022 4.9 4.5 2021 5.1 6.6 2024 2023 2022 2021 1,081p 1,275p 1,075p 1,022p Link to strategy A B C Link to risks* 1 3 4 6 8 Link to strategy C Link to risks* 1 3 4 6 8 Net asset value per share increased by 5.5% in 2024, as a result of the increase in our property valuation and also the net increase arising from our revenue profits net of dividends paid in the year. This KPI measures our adjusted earnings per share and compares it to the income return for the year. The 2024 performance was 14% above the market income return for the year and 18% higher than 2023. The following key performance indicators are considered to be the most appropriate for measuring how successful the group has been in meeting its strategic objectives. 1 3 4 2 *Please see pages 14 to 15 06 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Strategic report Elevating assets value This 1.9-acre development plot of over-grown and steeply sloped land without planning consent, but within a permitted development area, formed part of an existing asset, in Roche, St Austell, that was purchased by the group in June 2017. It is a very well-located site, and close to the A30. The whole asset was, when acquired, let to Walstead Roche and includes 250,000 sq ft of buildings used as print works. As part of asset management initiatives in 2021 the development plot was carved out of the new lease arrangements with our existing tenant. During 2021 and 2022 viability studies were carried out and heads of terms agreed with DHL for a 30,000sq ft parcel hub on a 15-year lease. Planning permission was applied for and received in 2022 and preliminary work on site commenced at the end of that year. The agreement for lease and construction contract was signed in early 2023 and building work commenced. After a hiatus in late 2023 caused by the liquidation of the main contractor, new contractors were appointed, and the building achieved practical completion in October 2024 and the lease commenced in December 2024. This was a complex project, managing many works teams to get the best result for our shareholders and meet our objective of providing a high quality building that met all our tenant’s requirements. Total build costs were £4.9m, the December 2024 year- end valuation was £5.2m and the annual rent is £308,263, a 6.3% yield on cost. This has provided a good uplift in net asset value for our shareholder. The project has delivered a prime logistics building with good environmental credentials being an EPC A and an anticipated BREEAM rating. Case study 07 Stock code: HCFT highcroftplc.com 2 7 1 3 6 8 17 12 10 11 14 16 18 9 20 4 13 5 15 22 19 21 Introduction The portfolio balance has moved in the year with the finalisation of the development of our new warehouse asset, the sale of one of our high street retail assets and the transformation of one of our void high street retail units into a small office unit. Warehouse Retail warehouse Leisure Office High street retail Key Warehouse (Freehold) LET TO LET TO ABERDARE KIDLINGTON ASH VALE MILTON KEYNES BEDFORD NOTTINGHAM IPSWICH ST AUSTELL ST AUSTELL 12 11 4 10 14 7 5 6 8 Our portfolio The numbering represents the relative values of the properties 08 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Strategic report Retail warehouse (Freehold) LET TO LET TO BICESTER GRANTHAM 3 2 CRAWLEY WISBECH 16 1 Leisure (Freehold) LET TO LET TO COVENTRY RUBERY 18 9 IPSWICH 13 09 Stock code: HCFT highcroftplc.com Our portfolio continued High street retail (Freehold) LET TO LET TO LEAMINGTON SPA OXFORD HIGH STREET 20 Sabre Retail Limited t/a Mint Velvet 21 Sunzg Ltd t/a Endorphins OXFORD HIGH STREET 19 Robinson Webster Office (Freehold) LET TO LET TO CARDIFF OXFORD 17 VOID 15 OXFORD (PART LEASEHOLD/PART FREEHOLD) 22 VOID (Let in January 2025 to Interactive Industries Ltd) For more details of our property portfolio, please visit our website at https://www.highcroftplc.com/properties Warehouse Retail warehouse Leisure Office High street retail Key The numbering represents the relative values of the properties 10 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Strategic report Financial review Overview 2024 2023 Profitability Net rental revenue £5,359,000 £5,174,000 Adjusted earnings per share 69.0p 62.8p Profit/(loss) for the year £5,668,000 £(193,000) Revenue profit before tax £3,659,000 £3,364,000 Net admin expenses to gross rent 14.7% 20.2% Investment returns Net asset value per share 1,075p 1,022p Dividend payable per share 58p 56p Total shareholder return (25)% 0.6% Return on equity 10.4% -0.4% Financing Net debt 25,392,000 22,971,000 Net debt to property value 31% 29% Average cost of debt at the year end 3.06% 3.06% 2024 has been a successful year for the group. Gross and net rental revenue, asset valuations and net asset value have all increased whilst administration costs have fallen, and finance expense has remained the same. Our underlying adjusted revenue profit before tax (excluding revaluation gains and loss on disposal) increased by a very pleasing 10% to £3,592,000 (2023 £3,266,000). Net assets have increased by 5% to £55,955,000 and we have a low net debt to property value of 31%. The average cost of debt at the year-end remains at 3.06% with no facilities expiring until August 2026. Our investment properties increased in value by £4,300,000 arising from additions of £2,833,000 to complete our development asset, disposals of £685,000 and a net valuation uplift of £2,152,000. The like- for-like valuation uplift was 2.7%, ahead of the all property market return of 1.8%. The directors, on 27 March 2025, voted an additional interim dividend of 35p per share giving a total dividend for 2024 of 58p per share, an increase of 3.6%, which reflects a 9.7% yield on year-end share price. Net rental revenue We are pleased to report that our contracted annual rent at the year-end increased 5% to £6.1m (2023 £5.8m) and our minimum lease payments receivable increased 16% to £34.1m (2023 £29.5m). These arose from a combination of the completion of our development asset in St Austell, net of the disposal of our Norwich asset, together with the benefits of several asset management initiatives. Our occupancy remained at 94%. One additional small unit was vacated by the tenant in Q3. One void property has been re-let in Q1 and we hope to also re-let the vacant property in Q1. This year our gross rental revenue and property costs include income and costs related to tenants’ extra works as shown below. 2024 £’000 2023 £’000 Gross rental revenue Rental income from leases 5,699 5,511 Recharged costs 156 227 Income from tenants’ extra works 522 – Licence fees – 52 6,377 5,790 Property costs Property asset manager fees 249 231 Other property costs 329 450 Bad debts recovered (42) (65) Costs in respect of tenants’ extra works 482 – 1,018 616 The 3% increase in rental revenue from leases arises primarily from a full year of income from our 2023 acquisitions and the commencement of the lease at our completed development asset, offset by one-off backdated rent reviews in 2023. The decrease in other property costs to £329k is due to the lower costs incurred for recharge to tenants in the year. Administration and other expenses 2024 £’000 2023 £’000 Directors’ remuneration 539 743 Auditor’s remuneration including other services 70 81 Other expenses 329 348 Administration expenses 938 1,172 Net finance expense 833 833 Total expenses 1,771 2,005 Directors’ remuneration fell by 27% (£204,000). There were no board base-salary increases in the year. The reduction is primarily due to a one-off charge of £150,000 in 2023 relating to the vesting of historic options issued under the Highcroft Incentive Plan, £55,000 of salary and bonus related to the previous CEO during his handover period in 2023 with a further £12,000 reduction in the finance director’s bonus plan award in 2024 and reduced national insurance costs. These reductions were offset by cost increases related to the exit of one non-executive director, the cost of our new non-executive director, and to our CEO totalling £21,000. More detail can be found in the remuneration report on pages 25 to 26. Other expenses have reduced by £19,000 whilst including non- recurring delisting/listing fees of £79,000 (2023 £73,000) and £21,000 of non-recurring Q1 fees related to our LSE listing. 11 Stock code: HCFT highcroftplc.com Summary of profit before tax and income tax charge on revenue activities 2024 £’000 2023 £’000 Revenue profit before tax 3,659 3,364 Income tax charge (67) (98) Revenue profit for the year 3,592 3,266 The increase in the revenue profit for the year in 2024 of £326,000 arose from an increase in net rental income of £185,000 and a decrease in administration expenses of £234,000 and in tax charge of £31,000 offset by a reduction in finance income of £124,000. As a REIT whilst property profits are not chargeable to tax both external and intra- group interest, net of certain costs, is chargeable to tax. There was a capital profit before and after tax of £2,076,000 (2023 loss £3,459,000). Investments Investment property1 2024 £’000 2023 £’000 At 1 January 78,275 77,910 Acquisitions at cost – 11,588 Cost of additions to assets under development 2,833 Proceeds from disposals (609) (7,764) Realised (losses)/gains from disposals (76) 1,014 Revaluation gains on investment property 3,142 540 Revaluation losses on investment property (990) (5,013) Net revaluation gains/(losses) 2,152 (4,473) At 31 December: total property 82,575 78,275 less investment property under development – (1,625) Total investment property 82,575 76,650 1 Includes assets development. Overall, our property portfolio increased in value during the year by £4,300,000. We sold our high street retail asset in Norwich in November and spent £2,833,000 on our development asset in St Austell. Our net gain on revaluation of £2,152,000 represents 2.7% on a like-for-like basis compared to an all-property capital market return of 1.8%. Our most significant revaluation gain, of 16.6%, related to our development asset which was completed in Q4 and is now included as investment property. Financing and cashflow Net cash generated from operating activities was £867,000 lower than 2023 at £3,568,000, primarily due to increases in trade and other receivables and decreases in trade and other payables, particularly as a result of the relative position of the DHL development at the two year-ends. All significant trade debtors were received in January. During the year we have invested surplus cash, and the proceeds of the sale of one of our smaller assets, into the completion of our new industrial asset at St Austell. 2024 £’000 2023 £’000 Opening cash 4,229 7,206 Net cash from operating activities 2,719 3,778 Investment acquisitions – property (2,833) (11,588) Investment disposals – property 609 7,764 Dividend paid (2,916) (2,916) Share issue costs – (15) Closing cash 1,808 4,229 Analysis of borrowing 2024 £’000 2023 £’000 Handelsbanken term loans 2030 5,000 5,000 Handelsbanken term loans 2029 14,300 14,300 Handelsbanken term loan 2027 4,500 4,500 Handelsbanken term loan 2026 3,400 3,400 Total debt 27,200 27,200 Cash (1,808) (4,229) Net debt 25,392 22,971 Net assets 55,955 53,203 Gearing 49% 51% Our weighted average cost of total debt is 3.06% (2023 3.06%). All our loans are fixed term, fixed interest, non-amortising facilities. Outlook We believe that the quality of our assets, our ongoing asset management programme and spread of sector risk, all combined with our concentration of assets in the south of England and Wales, and our low fixed interest rate debt means that we are in a strong position to deliver a secure dividend return to our shareholders. We remain optimistic about the prospects for the group and its ability to meet its strategic objectives in the medium term. Roberta Miles Finance director 27 March 2025 Financial review continued 12 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Strategic report Our risk Risk framework The group has a well-established risk management and internal control framework. The board has overall responsibility for risk management with a focus on determining the nature and extent of exposure to principal risks the group is willing to take in achieving its strategic objectives. The amount of risk is assessed in the context of the core strengths of our business and the external environment in which we operate. The board believes that effective risk management is integral to our strategy of delivering long-term sustainable income and capital growth. Strategic risk management reporting Board of directors Overall responsibility for risk management Regular review of effectiveness of system of internal control Regular assessment of emerging and principal risks Audit committee Assurance of risk management process Executive committee Day-to-day risk management Ongoing identification, assessment and mitigation of risk Design implementation and evaluation of system of internal control Ensuring operational effectiveness of control systems Our approach to risk management is to identify the financial, operational and compliance risks that may prevent the attainment of our strategic objectives, or impact our future performance, solvency or liquidity. We evaluate the risks and take any appropriate action to reduce or remove the likelihood of these having a material impact. This process is regularly monitored and reviewed. At the point any key strategic decision is taken, the potential risks are considered. Effective risk management is an important part of our board decision-making process. All directors are kept up to date with key issues as they arise. The small size of the management team and regular consideration of risk areas means we can respond quickly to changes in the risk environment. The principal risks that have been identified, and the management and/or mitigation of these, are set out on pages 14 to 15. The board has identified that emerging risks are likely to be linked to our existing principal risks and these are outlined below. Against the backdrop of economic and political challenges due to the continued impacts of the conflicts in the Middle East and Ukraine, high interest rates, and increasing business costs in the UK, we have continued to actively manage our risk exposure by maintaining a high occupancy across our portfolio and an efficient capital structure and liquidity position. Risk appetite Whilst risk is an integral part of our business, the general appetite of the group for risk is low. Principal risks We define a principal risk as one that is currently impacting on the group or could impact the group over the next 12 months. These principal risks are not a complete list of all risks facing the group but are a snapshot of the group’s risk profile as at the date of this report. There were no changes to our principal risks in the year. New factors affecting existing principal risks The ongoing high interest rate pressures in the UK and the recent rise in business costs affecting the macro-economic outlook Whilst there were two 0.25% cuts in base rates in the second half of 2024 base rate remained high at 4.75% at the year end. Corporation tax remains at 25%.The recently announced significant rise in the employers’ national insurance burden and the cost of implementing the national minimum wage increases coupled with the anticipated rise in business rates all increase risk for our tenants. The group is currently sheltered from interest rate rises as its debt is long term and on fixed rates with the next maturity in 2026. It is also partially sheltered from the high corporation tax rate due to its REIT status. The major effect of these changes is on all our stakeholders – particularly our tenants and their customers. The board continues to pay close attention to the evolving situation and to mitigating the risks for our business and all our stakeholders. 13 Stock code: HCFT highcroftplc.com Our risk continued Strategic priorities The objective of the group is to enhance shareholder value via a combination of increasing net asset value, profits and dividends and we set clear strategic objectives against which we measure our performance. 1 2 3 4 External risks Macro-economic and political outlook Regulatory and compliance burden Occupier demand and tenant default Commercial property investor demand The UK economic climate, the conflicts in the Middle East and Ukraine, the high UK interest rates and the impact of higher business costs for our tenants could impact the delivery of our planned revenue and capital strategy. How we manage/mitigate the risk We monitor macro-economic data and, with our advisers, the detailed data from the UK property sector. Our activities are restricted solely to the UK, although our tenants are largely global businesses. Commentary During 2024, the economic environment continued to be challenging. UK interest rates fell by 0.5% but employer taxation and other business costs will rise in 2025. There remains a level of uncertainty regarding the future outlook. We executed our strategy of completing our development asset and disposing of one smaller high street retail asset in the year. There is an ever-increasing regulatory burden both as a listed entity, a property group and as a REIT. How we manage/mitigate the risk We use our company secretary and our advisory team to ensure that the board remains up to date with the evolving regulatory requirements for a listed real estate group. We use a team of advisers to enhance the skills of our experienced, but small, internal team. Commentary In February 2024 we delisted from the LSE and listed on TISE. On TISE the current and future regulatory burden is lower and has reduced our risk assessment in 2024. Further weakening in the UK economy, reduced consumer confidence, business activity and investment could result in tenant administration/ CVA and reduce income, rental growth and capital performance. How we manage/mitigate the risk We review market data and industry trends with our advisers, to assess whether any risk-mitigating steps need to be taken. We invest in the lower-risk areas of the south of England and Wales and across different sectors reducing our exposure to an individual sector or tenant. Commentary At March 2025 we have 22 properties with 29 tenants and 28 individual covenants. At the year end, two of our properties were void representing 6% of the annual rent roll. One has been let since the year end. One tenant went into CVA in the year. Any drop in, amongst other things, the health of the UK economy, or in the availability of finance, or the attractiveness of sterling, may result in a reduction in investor demand for UK property, which may result in a fall in our asset valuations. How we manage/mitigate the risk We review market data together with industry trends with our advisers, to assess whether any risk-mitigating steps need to be taken. Commentary In Q4 2024, the impact of slightly lower interest rates led to an increase in demand by commercial property investors. Our asset valuations, particularly in the industrial and retail warehouse sectors benefitted from this change. Change in risk assessment in the year Change in risk assessment in the year Change in risk assessment in the year Change in risk assessment in the year Link to strategic priority A C Link to strategic priority A C Link to strategic priority A C Link to strategic priority C 14 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Strategic report Our strategic priorities are set out on page 04 and can be summarised as: A Continue to grow a sustainable commercial property portfolio with a bias towards the south of England and Wales B Use medium-term gearing at a modest level C Provide a good dividend return Internal risks Availability and cost of finance and debt covenant requirements Business strategy Key personnel Sustainability Increased costs of borrowing and reduced availability of appropriately priced finance would affect our ability to refinance debt and/or increase cost. Breach of debt covenants could trigger loan defaults and require repayment of facilities. How we manage/mitigate the risk The board aims to only assume a moderate level of gearing, thereby increasing the likelihood of being seen as an attractive banking proposition for lenders. Our preference is for fixed-interest, non-amortising debt with a spread of maturity dates. We monitor our LTV and debt requirements and maintain a good long-term relationship with our bank. Commentary All our debt is fixed interest non-amortising debt and our next loan maturity is in August 2026. If we wish to draw additional debt, we have pre- agreed headroom of £7.8m, subject to terms and security, and this includes a £1.2m overdraft facility. If the group has the wrong strategy for the current stage of the property cycle and the macro-economic climate, there will be reduced profitability and capital values. How we manage/mitigate the risk Our strategy is determined to be consistent with our stated risk appetite of low and is based on our evaluation of the macro-economic environment. Individual investment or divestment decisions are made by the board and subject to a risk evaluation. Commentary During 2024, a year still dominated by negative conditions, our capital performance was above the market and our rent collection was 100%. A number of critical business processes lie in the hands of a few people. Failure to recruit, develop and retain staff and directors with the right skills and experience, may result in significant underperformance, or impact the effectiveness of operations and decision making, in turn impacting business performance. How we manage/mitigate the risk Remuneration packages are reviewed periodically to ensure that the group can retain, motivate and incentivise key staff. We outsource a number of key routine processes to minimise the risk of business interruption. The board reviews the key advisers, at least annually. Commentary In 2025 the remuneration policy will be reviewed further. If the group fails to address climate-related risks in the short, medium and long term, the group’s assets and its ability to let its investment properties could be compromised. How we manage/mitigate the risk Sustainability is considered as part of our risk discussions. Commentary Our EPC assessment and improvement strategy continued and other activities have been undertaken. Further details are available on page 18. Change in risk assessment in the year Change in risk assessment in the year Change in risk assessment in the year Change in risk assessment in the year Link to strategic priority B C Link to strategic priority A B C Link to strategic priority A B C Link to strategic priority A B C 5 6 7 8 15 Stock code: HCFT highcroftplc.com Going concern statement Assessment of going concern The directors have assessed the group’s ability to continue as a going concern. This includes a review of the continuing uncertainties created by the conflicts in the Middle East and Ukraine and the ongoing high interest-rate environment and nervous market sentiments in the UK, driven by higher business costs. They have paid particular attention to how these may impact rental income, the group’s cash resources, borrowing facilities and dividend distributions. They have also considered the effects of the Potential Transaction. The group’s business activities, together with the factors likely to affect its future development, performance and financial position are set out in the strategic report. The financial performance of the group for 2024, including its cashflows, liquidity and borrowing facilities, are set out in the financial statements with additional information in the financial review on pages 11 to 12. Note 19 to the consolidated financial statements includes information on the group’s financial instruments and on its approach to credit and liquidity risk. At 31 December 2024, the group had £1.8m of cash and cash equivalents and fixed-term, fixed-interest, non-amortising borrowing of £27.2m, which expires during the period August 2026 to July 2030 and additional headroom of £7.8m. The group has a moderate gearing of 49% and its net debt to investment property valuation is 32% at the year end. During March 2025 the group finalised its annual review with Handelsbanken plc. The group has approved headroom limits of £35m of which £27.2m are currently drawn. To assist with the management of our cashflow we have a £1.2m overdraft facility in place until 31 March 2025 when it reduces to £0.8m. This facility has not been used. The £7.8m of undrawn headroom limits can be used, subject to terms and security, for short-term or longer-term funding requirements. Our primary debt covenants relate to interest cover and the loan-to-value ratio. They are tested annually, and the LTV covenant is based on the valuations addressed to the bank (which may not be the same as the current valuations). The group has eight unsecured properties with a total value of £27,650,000 that could be added to the secured property pool to maintain the income and LTV covenants if necessary. The group has a secure property income stream from 29 tenants with no undue reliance on any one tenant. We have been unable to secure a new tenant for our refurbished and improved Cardiff property, for which the lease ended in June 2021, and our small upper floors unit at High Street Oxford that became void in 2023 had been re-let in January 2025. Based on this experience, the board has carefully reviewed its forecast assumptions regarding potential void periods and lease incentives at break dates and lease ends. Our debtor position remains good with 100% of our 2024 rent collected and 99% of our Q1 2025 rent collected. Our assets are all in England and Wales and therefore our tenants and their stakeholders are shielded to some extent from the direct impact of global conflicts and supply chain shortages. However there do remain uncertainties arising from supply chain issues arising from the conflicts and also pressures arising from the high interest rate environment in the UK. These uncertainties may affect our tenants’ ability to carry on their normal business and generate cash to pay their rent. We have taken this into account in our sensitivity analyses. The group’s most significant outflows are its PID and bank interest payments, which made up 51% and 15% of the 2024, non-capital, cashflow outflows respectively. There are no current significant capital projects at any of our properties although the directors have included the anticipated costs of carrying out the ESG and sustainability actions that have been identified as necessary in the period under review. The directors have reviewed the projected cashflows of the group and its compliance with debt covenants. They have also overlaid their best estimates of the impact of global impact of the conflicts in the Middle East and Ukraine and the high interest rates in the UK on to their forecasting and considered scenarios, including: ■Rent collections reducing in the forecast period, affecting cash generation and covenant compliance. ■Void properties and those that may become void at lease end and/or break dates remaining void for a longer than usual period, thereby reducing income and increasing costs. ■Property valuations reducing, adversely affecting the related debt covenants. The directors also have stress-tested the forecasts, considering the level of fall in income and valuations that would cause the business to be unable to pay its liabilities as they fall due, see page 39 and have concluded that the possibility of these scenarios occurring is remote. The audit committee reviewed the analysis supporting the going concern basis of preparation of the accounts. This review included the forecast 12-month cashflows, from the date of approval of the financial statements, headroom on debt covenants, the value of unsecured assets and undrawn loan facilities. They also reviewed the quality and parameters of the stress testing. Having completed their review, the committee recommended to the board that it was appropriate to adopt a going concern basis. Going concern statement The directors are not aware of any material uncertainties that may cast significant doubt upon the group’s ability to continue as a going concern. They have considered the audit committee’s recommendation and concluded that there is a reasonable expectation that the group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of the annual report and accounts. Our risk continued 16 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Strategic report Stakeholder engagement Section 172(1) statement The board of directors confirms that it has, during the year, acted to promote the long-term success of the company for all of its stakeholders, including its shareholders, whilst having due regard to the matters set out in section 172 (1) (a) to (f) of the Companies Act 2006. The table below summarises the company’s key stakeholders, highlights the issues which matter most to them and the board engagement during the year. Stakeholder group What matters to this stakeholder group How the board engages Board activity and/or key decisions Our shareholders ■Smooth transition to TISE ■Growth strategy ■Healthy returns ■Long-term sustainability ■Risk management and internal control ■Governance Trading updates Annual Report and Accounts TISE exchange announcements General meetings Direct shareholder engagement as required Corporate website ■Appointment of Ravenscroft (CI) Limited as our broker and market-maker on TISE ■Access to the board via company secretary and email ■Shareholder response to the move to TISE monitored at board meetings Our tenants ■Fit-for-purpose spaces that are able to evolve with their business and meet their future needs ■Appropriate rent levels ■Appropriate lease conditions The company’s asset managers, Cube Asset Management Ltd (“Cube”), attend part of every board meeting and present a report including any tenant issues Periodic direct engagement with tenants ■Board member visits to St Austell site Our employees ■Wellbeing ■Health and safety ■Financial stability of the company ■Learning and development opportunities ■Diversity and equality ■Culture A small employee base ensures regular communication by the board Employee policies and processes ■Approval of the revised Speak Up (whistleblowing) policy Our service providers ■Responsible payment terms ■Open dialogue and clear communication ■Fair contract terms ■Compliance with legislation and regulation ■Business conduct ■Reliability The board receives regular updates in relation to service provider activities ■Annual review of service providers by the board Our local communities and the environment ■That the company makes a positive contribution to communities and the environment through existing properties and future developments ■Reduce carbon emissions ■Reduce environmental impact Quarterly meetings with asset managers always include environmental matters Ongoing review of EPC assessments and upgrading properties and assessments on a cyclical basis ■Approval of charitable donations in the year ■New asset developed has achieved an EPC A rating and is on track to achieve a BREEAM rating 17 Stock code: HCFT highcroftplc.com Sustainability The environment and climate change As a group our aim is to minimise our environmental impact. We seek to understand the environmental performance of our portfolio and to implement improvement policies where possible. In 2024, we carried out Energy Performance Certificate (EPC) assessments on eight properties, representing 16% of our portfolio by area. Our newly developed property achieved an EPC A rating. This brings our cumulative assessments to 21 units representing 64% of our portfolio. All properties assessed in 2023 and 2024 meet the current standards. At the year-end our portfolio’s EPC ratings varied, with 4% rated as A, 8% as B, 55% as C, and 27% as D. The remaining 6% fell into the E category. To improve these ratings, to enhance and future-proof these properties, we are collaborating with external energy performance consultants to understand capital costs and liaising with tenants to determine the most valuable and cost-effective solutions. Further assessments will be conducted on a rolling basis, ensuring alignment with the Minimum Energy Efficiency Standards (MEES) target of achieving EPC ratings of C or above by 1 April 2027. Other environmental initiatives In addition to our EPC assessments, we are actively pursuing various environmental activities to promote sustainability across our portfolio as set out below. Green leases: We have prioritised the inclusion of green clauses in all new lease renewals and lease re-gears, encouraging tenants to adopt environmentally responsible practices. These clauses require tenants to provide energy consumption data, enabling us to better understand their operational requirements and identify opportunities to optimise energy usage. Solar implementation: We are currently engaged in discussions regarding the implementation of solar panels across selected properties within our portfolio. By harnessing solar energy, our aim is to not only decrease our carbon footprint but also drive cost savings and increase energy resilience. We have installed solar panels on our new asset at St Austell. Electric vehicle (EV) infrastructure: We have installed EV charging points at our new asset at St Austell and are exploring the feasibility of installing EV charging infrastructure at select retail parks. Completed development property: The completed development at St Austell has achieved an EPC A rating in respect of its energy efficiency due to various design features including photovoltaics and electric vehicle charging. The group is also targeting a BREEAM Rating with respect to the site’s wider sustainability credentials including the construction process and its environmental impact. Given the group’s wider adjacent ownership of the Walstead Roche printing facility a biodiversity net gain of over 10% is being achieved by accretive planting and wildlife management of both the development site and adjacent landscaping. The warehouse design included measures to mitigate solar gain whilst utilising natural light by inclusion of windows and brise soleil. Paul Leaf-Wright Chief executive 27 March 2025 18 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Governance report Governance report Chairman’s Statement of Governance 2024 Corporate governance is essential to ensuring our business is run in the right way for effective decision making for the benefit of all our stakeholders. Our governance arrangements continue to support the development and delivery of strategy by facilitating the sharing of information to inform decisions, enabling engagement with key stakeholders, maintaining a sound system of risk management and internal controls, providing insight and knowledge from the non-executive directors and facilitating the development and monitoring of key performance indicators. The board was pleased to welcome Douglas Conn as a new non-executive director in May. Douglas brings a wealth of property investment and directorship experience to the board and the board welcomes his input and guidance on future strategic decisions. During the year, the group successfully transitioned its listing from the LSE to TISE. Achieving a high standard of corporate governance remains important to us and therefore we have adopted the principles of the QCA Corporate Governance Code 2023 insofar as is practical and cost effective for a group of our size and nature. A summary explanation of the group’s application against each key principle of the Code is on page 20 and this should be read in conjunction with the S172(1) Statement on page 17. We continue to operate with a small board and executive team and recognise the difficulties this poses in relation to any separation of duties. Whilst we continue to be mindful of this risk, our governance structure was reviewed by the external auditor and the audit committee as part of its review of internal control, and both found our structure to be adequate, given the group’s size, complexity and purpose. With the move to TISE and the application of a new governance code, this year has been a year of transition and adjustment for the company in relation to its corporate governance and reporting. We have embraced this change and look forward to cementing our approach in 2025. Charles Butler Chairman Governance framework The board Composition: Two executive and three non-executive directors (at year end) Board committees Executive committee Audit committee Remuneration committee Attendance at board and committee meetings 2024 Board Audit committee Remuneration committee Nomination committee1 Charles Butler 6/6 2/2 1/1 1/1 David Warlow2 6/6 1/1 – – Douglas Conn3 3/3 – – – Paul Leaf-Wright 6/6 – – – Roberta Miles 6/6 – – – Simon Costa4 4/4 1/1 1/1 1/1 1 Following the recommendation by the nomination committee to appoint Douglas Conn as a member of the board and following the move to TISE, taking into account the group’s size and lack of complexity, the decision was made to disband the nomination committee, with the responsibilities being assumed by the board. 2 David Warlow was appointed to be a member of the audit committee, following the resignation of Simon Costa. 3 Douglas Conn was appointed to the board with effect from 1 May 2024. 4 Simon Costa resigned from the board with effect from 31 August 2024. View more online at: www.highcroftplc.com 19 Stock code: HCFT highcroftplc.com Board composition All directors receive an induction on joining the board which involves meeting with key stakeholders and is designed to assist them with understanding the group and its operations. During the year, the board considers the skills, experience and tenure of its current members. The board reflects on how this skillset enables it to deliver strategy and meet future business challenges as well as reflecting on future succession plans and any identifying any training needs. For more information on the board directors, see page 22. Directors core areas of skill and expertise as at 31 December 2024: 80% 40% 60% 100% Property 100% Corporate Governance 40% Finance 80% M&A 60% It was agreed by the board that all members be proposed for re-election at the annual general meeting. The board considered and agreed that the chairman remains independent. Governance activities at a glance ■Annual general meeting held on 15 May 2024 ■Overseeing the de-listing from LSE and listing on TISE ■Approval to adhere, where reasonable, to the QCA Corporate Governance Code 2023 ■Appointment of new non-executive director ■Appointment of new company secretary ■Approval of a change in registered office ■Review and approval of an updated schedule of matters reserved for the board Compliance with the QCA Corporate Governance Code 2023 Principle Compliant How this was applied Where to find further information Principle 1. Establish a purpose, strategy and business model which promote long-term value for shareholders The group’s purpose is ‘to provide our tenants with quality properties in good locations, enabling them to succeed, and our stakeholders to benefit on a long-term, sustainable basis’. This purpose is supported by the group’s strategy to deliver sustainable long-term income and capital growth for its shareholders through accretive asset management initiatives and recycling of capital in its regionally based property portfolio. The board’s annual schedule of agenda items ensures that the business plan is reviewed at least once every year. ■Overview (page IFC) ■Our business model (page 04) ■Strategic pillars (page 05) ■Our key performance indicators (page 06) ■Stakeholder engagement (page 17) Principle 2. Promote a corporate culture that is based on ethical values and behaviours Our culture is defined as being open and supportive. Integrity is a value that defines our culture and underpins the way that we do business. ■S172(1) Statement and Stakeholder engagement (page 17) ■Sustainability (page 18) Principle 3. Seek to understand and meet shareholder needs and expectations The relationship with the controlling shareholder and how minority shareholders are protected is set out in the Report of the Directors on page 27. ■S172(1) Statement and Stakeholder engagement (page 17) ■Report of the Directors (page 27) ■For more information on shareholders and the information provided to them, please see: www.highcroftplc. com/investor/ investor-centre/ Principle 4. Take into account wider stakeholder interests, including social and environmental responsibilities, and their implications for long-term success Quarterly meetings with asset managers include environmental matters. EPC assessments undertaken and updated to ensure the company continues to operate responsibly. ■S172(1) Statement and Stakeholder engagement (page 17) ■Sustainability (page 18) Governance report continued 20 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Governance report Principle Compliant How this was applied Where to find further information Principle 5. Embed effective risk management, internal controls and assurance activities, considering both opportunities and threats, throughout the organisation The board is responsible for establishing and maintaining the group’s system of risk management and internal controls. The board meets regularly and business and financial risks are discussed as part of the property and financial updates. The audit committee is responsible for monitoring compliance with accounting and legal requirements and for reviewing the annual and interim financial statements prior to their submissions to the board for approval. The independence of the auditor is confirmed and approved by the board on an annual basis. ■Our risks (page 13) ■Audit committee report (page 23) ■Audit committee terms of reference can be found at www.highcroftplc.com Principle 6. Establish and maintain the board as a well functioning, balanced team led by the Chair Board members are proposed for re-election at the annual general meeting on an annual basis. The board’s responsibilities are documented in a schedule of matters reserved for the board and an annual agenda schedule. Following changes to the board composition during the second-half of the year, there is only one independent non-executive director. To mitigate this change, the group has continued to follow its procedures in relation to conflicts of interest and will remain open to opportunities with regards to recruiting an additional independent member. ■Board of Directors (page 22) ■More information on board members, can be found at online at www.highcroftplc.com Principle 7. Maintain appropriate governance structures and ensure that individually and collectively the directors have the necessary up-to-date experience, skills and capabilities The company has a governance framework appropriate for its size and complexity. The board reflects on its composition including diversity, experience and skills, when considering recruitment and succession plans. The board continues to be supported by the audit and remuneration committees, as well as the external company secretary and other professional advisers. ■Board of Directors (page 22) ■More information on board members and Terms of Reference for the committees, can be found at online at www.highcroftplc.com Principle 8. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement The board undertook an internal board evaluation in December 2023. In recognition that 2024 was a year of considerable change and transition, the board agreed to defer the next internal review until 2025. The board has not undertaken an externally facilitated board performance review. Given the lack of size and complexity of the company, the board feel incurring this cost would not be in the best interests of the shareholders. Following the move to TISE and taking into account the group’s size and lack of complexity, the decision was made to disband the nomination committee, with the responsibilities being assumed by the board. ■Overview (page IFC) ■Our key performance indicators (page 06) Principle 9. Establish a remuneration policy which is supportive of long-term value creation and the company’s purpose, strategy and culture The current remuneration policy and practice explain how this supports the delivery and attainment of the company’s purpose, business model and strategy. Approval of the remuneration report is included as a resolution to the annual general meeting. ■Directors’ remuneration report (page 25) Principle 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The group has a governance framework consisting of the board, supported by the executive committee, audit committee and remuneration committee. ■Introduction to corporate governance (page 19) ■S172(1) Statement and Stakeholder engagement (page 17) 21 Stock code: HCFT highcroftplc.com Key Chairman Executive committee Audit committee Remuneration committee Member Charles Butler Non-executive chairman Appointed: 2018 Skills & Experience: Charles was considered to be independent upon appointment and is considered, by the board, to have remained independent throughout the year. Charles qualified as a chartered accountant and, prior to joining the board, was the CEO of Market Tech Holdings PLC, where he transformed a small group of central London real estate assets into a profitable, listed company with a £1.3bn portfolio. Charles is also non-executive chairman of Best of the Best plc and non-executive director of Essensys plc. Douglas Conn Non-independent non-executive director Appointed: 2024 Skills & Experience: Douglas brings a wealth of experience to the board having been a director of Stewart & Wight Ltd, a property investment company, since 1991. Douglas is a member of the D G & M B Conn and associates concert party which has an aggregate beneficial interest of 25.35% in the share capital of the company. Paul Leaf-Wright Executive director: Chief executive Appointed: 2023 Skills & Experience: Paul has over 40 years of property and financial services experience. He established Leaf Capital in 2004 and, in 2013, co-founded and was CEO of Atlantic Leaf Properties a UK Real Estate Investment Trust which was listed on the JSE (South Africa) and SEM (Mauritius) markets. David Warlow Non-independent non-executive director Appointed: 2022 Skills & Experience: David is a director of Kingerlee Holdings Limited, a construction and property development group of companies. David represents the interests of Kingerlee Holdings Limited which, together with its subsidiaries, has an aggregate beneficial interest of 27.3% in the share capital of the company and forms part of the Kingerlee Concert Party. Roberta Miles Executive director: Finance director Appointed: 2010 Skills & Experience: Roberta has over 30 years business experience as a chartered accountant and board director. She has been involved in fundraising and M&A activities for technology companies and has contributed to the growth and performance of Highcroft over the last 15 years. Board of directors View more online at: www.highcroftplc.com 22 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Governance report Monitoring quality and integrity I am pleased to introduce the audit committee report for the year ended 31 December 2024. We set out below a summary of our main responsibilities and key activities during the year. As a committee, we are responsible for monitoring the quality and integrity of the group’s reporting, and for continuing to develop and maintain a sound system of risk management and internal control. Main responsibilities In line with the authority delegated by the board, the audit committee has the following main responsibilities: Risk management and internal controls reviewing the system of internal controls and risk management. Financial reporting monitoring the quality and integrity of the company’s financial statements and any formal announcements relating to financial performance, and considering significant financial reporting issues, judgements and estimates. Property valuations considering the process and outcome and the effectiveness and independence of the external valuer. External audit oversight and remuneration of the external auditor, and review of the policy for non-audit services provided by the external auditor. Composition of the committee and attendance at meetings 1 January 2024 to 31 August 2024 From 31 August 2024 Committee chairman Simon Costa1 Charles Butler2 Member committee Charles Butler2 David Warlow3 1 Independent non-executive director. 2 Independent non-executive chairman of the board. 3 Non-independent non-executive director. The board is satisfied that the members of the committee during the year have sufficient financial experience, commercial acumen and real estate sector knowledge and experience to carry out their duties effectively. Attendance at committee meetings is set out on page 19. The terms of reference were reviewed during the year end are available on the group’s website at: www.highcroftplc.com. External Auditor Forvis Mazars LLP were appointed as auditors to the group in 2017. The group’s audit partner is Nargis Shaheen Yunis who rotated onto this role, in line with regulation. The audit committee ensures that the external auditor is independent, by reviewing the terms of engagement. It also reviews the level of fees for non-audit services and ensures that this is not material. Financial reporting and fair, balanced and understandable reporting The committee continues to review the content and tone of the preliminary results, annual report and interim results prior to their publication, the application of the group’s accounting policies and the detail of any changes to the financial reporting requirements, particularly having regard to the change of listing from the LSE to TISE during the year. The committee reviewed the key messaging included in the annual report and interim results, paying particular attention to those matters considered to be important to the group by virtue of their size, complexity, level of judgement required or potential impact on their financial statements. The committee also considered the annual report and accounts, as a whole, on behalf of the board and made a recommendation to the board that it resolve that they were fair, balanced and understandable and provided the information necessary for stakeholders to assess the group’s position, performance, business model and strategy. The committee ensured that the board continued to present a balanced and understandable assessment of the group’s position and prospects in all interim and other price- sensitive public reports to regulators. The responsibilities of the directors with regard to the financial statements are described on page 29, and that of the auditor on pages 30 to 34. Risk management and internal controls The board is responsible for an ongoing process to identify, evaluate and manage the risks facing the business, establishing and maintaining a sound system of internal control and for reviewing its effectiveness. The committee considered the group’s risk appetite and concluded that it remains set at an appropriate level and is in line with the group’s strategy. The audit committee is responsible for overseeing the adequacy and effectiveness of the risk management and internal control systems. The system of internal control is designed to meet the needs of the group and the risks to which it is exposed, and by its very nature provides reasonable, but not absolute, assurance against material misstatement or loss. Highcroft is very small when considering the number of people working directly in the business. Our group structure is simple and transparent and our internal control procedures and policies are well established, reviewed annually internally, and subject to review during the external audit. The internal financial control system was in place for the period under review up to the date of approving the accounts. The committee has considered the internal control and risk management systems in relation to the financial reporting process and concluded that they are adequate. The audit committee reports on each of its meetings at the subsequent board meeting. 2024 key achievements Consideration of 2024 financial reporting following the February 2024 delisting from the LSE and listing on TISE Further consideration of valuer appointment for 2024 and 2025 given the change in the RICS regulations in 2023 Audit committee report Audit, risk and internal control 23 Stock code: HCFT highcroftplc.com Audit committee report continued Audit, risk and internal control Principal responsibilities of the committee and its related activities Financial reporting The committee is responsible for monitoring the integrity of the group’s financial statements and any formal announcements relating to performance. It paid particular attention to those matters that were considered to be important to the group due to their subjectivity, the level of judgement involved or their effect on the financial statements. In 2024, the key issues relating to our financial statements that were considered are set out below: Significant issues considered Potential risk How those issues were addressed Conclusion Valuation of property portfolio The valuation of our investment property portfolio is inherently subjective as it is undertaken on the basis of assumptions made by valuers, which may not prove to be accurate. The outcome of the valuation is significant in terms of our results, future investment decisions and remuneration. The external valuers carried out a valuation at 30 June 2024 and 31 December 2024. They also provided an overview of the UK property market and the detailed performance of the group’s assets. The valuer attended a meeting with the board and the auditor after the year end, where the agenda included the process adopted by the valuer, data provision by management, comparable market data and assumptions used by the valuer including estimated rental values and yields. It also reviewed a commentary on the relevant qualifications of the valuer and on their independence. The committee was satisfied with the valuation process, the independence and effectiveness of the group’s external valuer and the valuation disclosures included in the annual report. The committee recommended to the board that the group consider appointing a new valuer for 2026 in line with recent changes in RICS regulations. Revenue recognition Revenue may be recorded in the incorrect accounting period, or fail to be recorded at all, or fictitious revenues may be recorded. The committee considered the appropriateness of the controls in place in the revenue cycle, having particular regard to the use of external agents and the controls in place over their work including the reconciliations performed and reviewed internally. The committee concluded that the revenue recognition policies and controls were appropriate. REIT status The group loses its REIT status The committee considered the controls in place to ensure compliance with REIT tests. In particular, they reviewed the compliance with the distribution requirement and the impact of forecasted results and trends on this criterion. They further reviewed the non-statutory clearance application process that had been undertaken regarding the delisting from the LSE and listing on TISE. The committee concluded that the group’s REIT status had been maintained during the year. Going concern statement If this basis was inappropriate then there could be material misstatements in the financial statements. The committee reviewed the analysis supporting the preparation of the financial statements on a going concern basis. This review included forecast cashflows, loan maturities, headroom on our debt covenants and undrawn debt facilities. The committee concluded that the going concern method of preparation remained appropriate. The going concern statement is set out on page 16. In addition, the committee consider the additional risks that may arise related to Highcroft’s status as an associated undertaking of Kingerlee Holdings Limited which commenced on 10 December 2020. Charles Butler Chair of the audit committee 27 March 2025 24 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Governance report Directors’ remuneration report Policy, practices, supporting strategy Main responsibilities In line with the authority delegated by the board, the remuneration committee has the following main responsibilities: ■assist the board to fulfil its responsibility to shareholders to ensure that executive remuneration is designed to support strategy and promote sustainable success and is aligned to company purpose and linked to delivery of the company’s long-term strategy. ■determine and agree with the board the policy for the remuneration of the executive directors to ensure that they are appropriately incentivised to enhance the group’s performance and are rewarded for their contribution to the success of the business. Design, monitor and assess incentive arrangements and assess performance and outcomes against them. ■maintenance of active dialogue with shareholders, ensuring their views are sought and considered when setting and implementing remuneration policy. Members of the committee 1 January 2024 to 31 August 2024 From 31 August 2024 Committee chairman Simon Costa1 Charles Butler2 Member committee Charles Butler2 David Warlow3 1 Independent non-executive director. 2 Independent non-executive chairman of the board. 3 Non-independent non-executive director. The attendance at committee meetings during the year is set out on page 19. Major decisions made during the year During the year, the remuneration committee met to: review the remuneration policy approved at the 2023 AGM and agree that no changes were required. agree the bonus plan criteria and awards for executive directors for 2023. agree that there should be no salary rises for directors in 2024. agree the fees for Douglas Conn (appointed 1 May 2024). refer to the board the agreement of the exit package for Simon Costa (resigned 31 August 2024). Remuneration philosophy The board’s stated objective is to enhance shareholder value through a combination of increasing asset value, profits and dividends. To achieve this objective, the board must focus its efforts on the strategic priorities that it believes will maximise the likelihood of success. The committee welcomes engagement with shareholders and welcomes feedback on the form and content of this report. Remuneration policy The current remuneration policy was revised in 2023 and approved by 99.2% of the shareholders voting at the 2023 AGM. A copy of the policy can be found on the company’s website www.highcroftplc.com. The objective of the group’s remuneration policy is to embed a clear, transparent remuneration structure, which helps drive the group’s strategy by properly rewarding performance. The board’s policy is that the remuneration of all directors should reflect their experience and expertise, and the particular value that they add to the group. In addition, the packages should be sufficient to attract and retain individuals of an appropriate calibre and capability and should reflect the duties and responsibilities of the directors and the value and amount of time committed to the group’s affairs. The packages should continue to be aligned with our remuneration philosophy with at least one element of performance-related pay for each executive director. Directors’ service contracts Executive directors have service contracts, within which there is a notice period by either party of six months. Non-executive directors have a formal appointment document for a period of up to three years subject, at any time, to termination on six months’ notice by either party. All directors retire and are subject to election at the first AGM after their appointment. The board follows the QCA Code recommendations in that all directors offer themselves for re-election at each AGM and intends to follow this recommendation in 2025. A summary of the directors’ contracts is set out below: Non-executive directors Date of appointment as director Effective date of current appointment letter Expiry of term Notice period Charles Butler 2 January 2018 2 January 2024 1 January 2027 Six months Douglas Conn1 1 May 2024 1 May 2024 30 April 2027 Six months David Warlow 1 August 2022 1 August 2022 1 August 2025 Six months 1 Appointed 1 May 2024. Executive directors Date of appointment as director Date of contract Notice period Paul Leaf-Wright 1 January 2023 3 January 2023 Six months Roberta Miles 1 July 2010 7 December 2017 Six months 25 Stock code: HCFT highcroftplc.com Directors’ remuneration report continued Policy, practices, supporting strategy Audit The law requires the group’s auditor to report on whether certain disclosures of directors’ remuneration specified by law are not made. The auditor’s opinion is included in the independent auditor’s report on page 33. Annual report on remuneration for the year Directors’ remuneration 2024 excluding employer’s NIC 2024 2023 Base Salary £ Pension/ Pension Allowance Bonus plan cash award Total Base Salary £ Pension/ Pension Allowance Bonus plan cash award Benefits Total Charles Butler 58,000 – – 58,000 58,000 – – – 58,000 Douglas Conn 7,333 – – 7,333 – – – – – Simon Costa 51,333 – – 51,333 44,000 – – – 44,000 Simon Gill – – – – 38,125 1,144 15,250 763 55,282 Paul Leaf-Wright 75,000 2,250 30,000 107,250 68,750 2,063 30,000 – 100,813 Roberta Miles 180,000 5,400 60,000 245,400 180,000 5,400 72,000 – 257,400 David Warlow 11,000 – – 11,000 11,000 – – – 11,000 382,666 7,650 90,000 480,316 399,875 8,607 117,250 763 526,495 During 2023, as a consequence of the introduction of the new remuneration policy, all the existing unvested share awards relating to 2019, 2020, 2021, and 2022 vested and the associated expense of £149,909 was charged against profits in 2023. These costs are not included in the above table as the awards were included in that table for the year to which the award related. Highcroft Bonus Plan 2024 The maximum opportunity under the 2024 Bonus Plan was 40% of salary for the chief executive and 100% of salary for the finance director. The awards were based on the performance of the company in the year and strategic non- financial metrics. The remuneration committee used their judgement in considering financial performance measures and applied discretion in arriving at the final awards. The awards for 2024 were: % of maximum Amount awarded Paul Leaf-Wright 100% £30,000 Roberta Miles 33% £60,000 Professional advice During the year the committee took remuneration and employment advice from Weightmans LLP at a cost of £1,851. Statement of implementation of remuneration policy in the next financial year Salaries 2025 A decision to review the salaries of the board has been deferred to Q2 2025 and they remain unchanged from those agreed with effect from 1 January 2023. Highcroft Bonus Plan 2025 The maximum opportunity under the Highcroft Bonus Plan for 2025 will be as defined in the remuneration policy and will be calculated by remuneration committee exercising their judgement and if appropriate their discretion. Directors’ shareholding guideline Under the remuneration policy introduced in May 2023 executive directors are encouraged, but not required, to build up a shareholding in the company. Interests of the directors in the shares of the company The interests of the directors in office at 31 December 2024, and their connected persons, in the shares of the company at 31 December 2024 and at 31 December 2023, were as follows: 31 December 2024 31 December 2023 Charles Butler – – Douglas Conn (appointed 1 May 2024) 857,999 n/a Paul Leaf-Wright – – Roberta Miles 24,181 24,181 David Warlow – – Statement of shareholder voting At the AGM in 2024 the resolution to approve the directors’ remuneration report received the following voting from shareholders: Votes cast in favour 2,507,972 99.1% Votes cast against 23,172 0.9% Total votes cast 2,531,144 100.0% Votes withheld – – Charles Butler Chair of the remuneration committee 27 March 2025 26 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Governance report Report of the directors View more online at: www.highcroftplc.com The directors present their report together with the audited financial statements for the year ended 31 December 2024. This report has been prepared under S415 Companies Act 2006 and The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 and should be read in conjunction with the Governance report on pages 19 to 29, the Financial statements on pages 35 to 58 and the Report of the auditor on pages 30 to 34. Highcroft Investments PLC is an internally managed Real Estate Investment Trust (REIT) which invests in commercial property in England and Wales. The company is listed on The International Stock Exchange, having previously been listed on the premium segment of the main market of the London Stock Exchange. The principal activity of the group continues to be property investment. Directors The directors, who served throughout the year, are listed below: Charles Butler Non-executive chairman Douglas Conn (appointed 1 May 2024) Non-executive director Simon Costa (resigned 31 August 2024) Senior independent non-executive director Paul Leaf Wright Chief executive Roberta Miles Finance director David Warlow Non-executive director In accordance with good practice, all continuing directors will retire and offer themselves for election or re-election at the forthcoming 2025 AGM. The board confirms that the performance of each director continues to be effective and that they demonstrate commitment to their role. The board believes that it is in the best interest of shareholders that these directors be re-elected. Appointment of company secretary Following the resignation of Anne-Marie Palmer as company secretary, the board resolved by way of written resolution dated 14 October 2024, to appoint Kerry Round as company secretary with effect from 1 November 2024. The board also approved that company secretarial support would be provided by Round Governance Services Limited. Structure of share capital and rights and obligations attaching to shares The company’s allotted and issued share capital, as at 31 December 2024, was £1,301,665 (2023 £1,301,665) divided into 5,206,659 (2023 5,206,659) ordinary shares of 25p each, each of which was called up and fully paid. There have been no changes to the share capital since the year end. Substantial shareholders The company had been notified of the following direct or indirect interests amounting to 3% or more of its issued share capital as at the end of the financial year and at 27 March 2025: Beneficial Number of shares D G & M B Conn and associates 25.35% 1,320,047 Controlling shareholder – Kingerlee Concert Party comprising − the wholly owned subsidiaries of Kingerlee Holdings Limited: − Kingerlee Limited 9.89% 515,000 − Kingerlee Homes Limited 7.90% 411,293 − T H Kingerlee & Sons Limited 9.50% 494,770 Total – Kingerlee Holdings Limited 27.29% 1,421,063 – other associates 13.07% 680,997 Total – Kingerlee Concert Party 40.36% 2,101,660 Controlling shareholder A controlling shareholder is defined by the FCA as ‘any person who exercises or controls, on their own or together with any other person with whom they are acting in concert, 30% or more of the votes able to be cast on all or substantially all matters at general meetings of the company’. The directors are aware that the shareholdings of Kingerlee Holdings Limited and its subsidiaries referred to in the previous table, together with their connected parties and associates, form the Kingerlee Concert Party, which, as at 27 March 2025, held 2,101,660 ordinary shares, representing 40.36% of the company’s issued share capital. The Kingerlee Concert Party is, therefore, a controlling shareholder. The persons comprising the Kingerlee Concert Party were confirmed by the Takeover Panel in 1999. During the year, the controlling shareholder agreement that had been in place with the Kingerlee Concert Party since 2014 lapsed due to the de-list from the LSE. The company considered whether a new controlling shareholder agreement was required to provide ongoing transparency on the relationship and to protect minority shareholders. After careful review the board decided that the costs involved outweighed any benefit as the safeguards already in place, and disclosed, offered sufficient protection. The directors have put in place measures to ensure that the election or re-election by the shareholders of any independent non-executive director should be approved by an ordinary resolution of the shareholders and separately approved by those shareholders who are not controlling shareholders, the independent shareholders. 27 Stock code: HCFT highcroftplc.com Report of the directors continued Directors’ indemnification and insurance The company’s articles of association provide for the directors and officers of the company to be appropriately indemnified, subject to the provisions of the Companies Act 2006. The company purchases and maintains insurance for the directors and officers of the company in performing their duties, as permitted by section 233 Companies Act 2006. Auditor Forvis Mazars LLP have expressed their willingness to continue in office as auditors and a resolution to appoint them will be proposed at the forthcoming AGM. Political and charitable donations During the year, the group made charitable donations of £9,900. No political contributions were made. Employment of people with disabilities During the year, the company has maintained its policy of providing equal opportunities for the appropriate employment, training and development of people with disabilities. If any employee should become disabled during the course of their employment, our policy is to oversee the continuation of their employment. Disclosure of information to the auditor So far as the directors who held office at the date of approval of this directors’ report are aware there is no relevant audit information of which the auditor is unaware, and each director has taken steps that they ought to have taken as a director to make themselves aware of any audit information and to establish that the auditor is aware of that information. Post balance sheet events On 27 March 2025, a recommended all-share acquisition of Highcroft Investments PLC by LondonMetric Property PLC, to be effected by means of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 (the “Potential Transaction”) was announced. A scheme document containing further information about the acquisition and the notices of a Court Meeting and General Meeting will be published within 28 days and it is expected that, if approved by the Court and the shareholders at the Court Meeting and General Meeting the scheme will become effective on 21 May 2025. It is not possible to estimate the effect of this Potential Transaction on the group. Additional statutory information Requirement Location in Annual Report Page Number Interests of the directors in the shares of the company Directors’ remuneration report 25 Financial instruments: The groups exposure to, and management of, capital risk and liquidity risk Note 19 to the consolidated financial statements 50 Dividends Note 6 of the consolidated financial statements 43 Likely future developments in the business of the company Strategic report – Business model 06-18 This report was approved by the board and signed on its behalf by: Roberta Miles Finance director 27 March 2025 28 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Governance report Statement of directors’ responsibilities In respect of the annual report, remuneration report and the financial statements The directors are responsible for preparing the annual report, remuneration 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 the Companies Act 2006 and International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom for the group, 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 IFRS and UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. 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: there is no relevant audit information of which the company’s auditor is unaware; and the directors have taken 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 this information. Under applicable law and regulations, the directors are also responsible for preparing a strategic report, directors’ report, directors’ remuneration report and corporate governance statement that comply with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website: www.highcroftplc.com. Visitors to the website should be aware that legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement of directors in respect of the annual financial report We confirm that to the best of our knowledge: the financial statements have been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom 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; the annual report, including the strategic 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; and the report and accounts, taken as a whole, are fair, balanced, and understandable and provide the necessary information for shareholders to assess the group’s performance, business model and strategy. On behalf of the board. Charles Butler Chairman 27 March 2025 29 Stock code: HCFT highcroftplc.com Independent auditor’s report to the members of Highcroft Investments plc Opinion We have audited the financial statements of Highcroft Investments plc (the ‘Parent Company’; the ‘Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2024 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 Cashflows and the notes 1 to 22 to the consolidated financial statements, including material accounting policy information, the Company Statement of Financial Position, the Company Statement of Changes in Equity and notes 1 to 13 to the financial statements, including material accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and, as regards the parent company financial statements, as applied in accordance with United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice) and the provisions of the Companies Act 2006. 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 2024 and of the Group’s profit for the year then ended; have been properly prepared in accordance with UK- adopted international accounting standards and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006; and have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities and public interest entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our audit procedures to evaluate the Directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the going concern basis of accounting included but were not limited to: Undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern; Evaluating the Directors’ method to assess the Group’s and the Parent Company’s ability to continue as a going concern as approved by the board of Directors on 27th March 2025; Making enquiries of Directors to understand the period of assessment considered by them, the assumptions they considered and the implication of those when assessing the Group’s and the Parent Company’s future financial performance. This included examining the minimum cash inflow and committed outgoings under the cash flow forecasts, continued access to borrowing facilities, the ability to continue operate the Group’s and the Company’s borrowings within its financial covenants and evaluating whether the Directors’ conclusion that liquidity headroom remained in all events was reasonable; Challenging the appropriateness of the Directors’ key assumptions in their cash flow forecasts, as described in Note 1 of the material accounting policy information, by reviewing supporting evidence in relation to these key assumptions and assessing the Directors’ consideration of severe but plausible scenarios. This included assessing the viability of mitigating actions within the Directors’ control; Evaluating the key assumptions used and judgments applied by the Directors in forming their conclusions on going concern; Testing the accuracy information used to prepare the Directors’ forecasts; and Reviewing the appropriateness of the Directors’ disclosures in the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. 30 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We summarise below the key audit matter in forming our opinion above, together with an overview of the principal audit procedures performed to address this matter and our key observations arising from those procedures. The matter, together with our findings, were communicated to those charged with governance through our Audit Completion Report. Key Audit Matter How our scope addressed this matter Investment property valuation (Group) Refer to page 23 (Report of the Audit Committee), page 39 (Note 1 Material accounting policy information, accounting estimates and judgments and investment property) and pages 44 to 47 (Note 8 Investment property). The Group has a portfolio of investment properties consisting of warehouse/industrial, retail warehouse, high street retail, office and leisure in England and Wales. The Group’s investment properties were carried at £82.6m as at 31 December 2024 (2023: £78.3m). The valuations were carried out by the third party valuer Knight Frank (the ‘valuer’). The valuer was engaged by the Directors and performed their work in accordance with the Royal Institute of Chartered Surveyors (“RICS”) Valuation – Professional Standards and the requirements of IAS 40 ‘Investment property’. Investment properties make up 95.9% (2023: 93.5%) of total assets by value and is considered to be the key driver of commercial property return for the Group and involves significant level of judgment in ascertaining the fair value under IFRS 13. The valuation of the investment properties is inherently subjective due to, among other factors, the individual nature of each property, its location and the expected future rentals for that particular property. The wider challenges currently facing the real estate sector, as a result of regional and macroeconomic factors, further contributed to the subjectivity in establishing valuations at 31 December 2024. As a result, the valuation of investment properties is considered to be a Key Audit Matter. Our audit work included but was not limited to: Understanding Management’s review controls on the third-party valuation report by discussing with Management and performing a walkthrough to evaluate the design and implementation of review controls; Evaluating the valuer’s, independence competence, capabilities and objectivity; Obtaining the valuation reports and evaluating that valuation approach was in accordance with the RICS standards; For all properties, testing of completeness and accuracy of data used in the valuation models and engaging our own valuation specialist to review the appropriateness of the valuation approaches, methods and techniques to ensure they are reasonable across the portfolio of assets; On a sample basis, engaging our valuation specialist to critically assess reasonableness and suitability of the key valuation assumptions and compare the property valuations to publicly available recent comparable property transactions; Evaluating the adequacy of the disclosure in the financial statements, including the valuation methodology, assumptions and fair value hierarchy used under IFRS13; and To address the risk of management override, testing all journal entries and other adjustments made in the preparation of the financial statements relating to investment property valuation. Our observations Based on the work performed and evidence obtained, we consider the methodology and assumptions used to value the investment properties to be appropriate. 31 Stock code: HCFT highcroftplc.com Independent auditor’s report to the members of Highcroft Investments plc Our application of materiality and an overview of the scope of our audit The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our professional judgment, we determined materiality for the financial statements as a whole as follows: Group materiality Overall materiality £860,900 (2023: £837,300) How we determined it The overall Group statutory materiality has been calculated with reference to the Group’s total assets, of which it represents 1% (2023: 1% of the Group’s total assets). Rationale for benchmark applied Total assets have been identified as the principal benchmark within the financial statements as it is considered to be the focus of the shareholders. 1% has been chosen to reflect the level of understanding of the stakeholders of the Group in relation to the inherent uncertainties around accounting estimates and judgments. Performance materiality Performance materiality is set to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole. On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, we set performance materiality at £602,600 (2023: £586,110) which is approximately 70% (2023: 70%) of overall Group materiality. Reporting threshold We agreed with the Directors that we would report to them misstatements identified during our audit above £25,800 (2023: £25,119) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Parent company materiality Overall materiality £519,730 (2023: £540,150) How we determined it The Parent Company’s statutory materiality has been calculated with reference to the Parent Company’s total assets, of which it represents 1% (2023: 1% of the Parent Company’s total assets). For the purposes of the Group audit, we capped the overall materiality for the company to be 62% (2023: 65%) of the Group overall materiality. Rationale for benchmark applied Total assets have been identified as the principal benchmark within the financial statements as it is considered to be the focus of the shareholders. 1% has been chosen to reflect the level of understanding of the stakeholders of the Group in relation to the inherent uncertainties around accounting estimates and judgments. Performance materiality Performance materiality is set to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole. On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, we set performance materiality at £363,800 (2023: £378,105) which is approximately 70% (2023: 70%) of overall Company materiality. Reporting threshold We agreed with the Directors that we would report to them misstatements identified during our audit above £15,600 (2023: £16,205) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. 32 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked at where the Directors made subjective judgments, such as assumptions on significant accounting estimates. We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole. We used the outputs of our risk assessment, our understanding of the group and the parent company, their environment, controls, and critical business processes, to consider qualitative factors to ensure that we obtained sufficient coverage across all financial statement line items. Our group audit scope included an audit of the Group and the Parent Company financial statements. Based on our risk assessment, all components of the Group, including the Parent Company, were subject to full scope audit performed by the Group audit team. For each component in the scope of the Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £73,500 and £771,500. For all components across the Group performance materiality was set at 70%. At the parent company level, the group audit team also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information. Other information The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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 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. Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement set out on page 29, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Based on our understanding of the group and the parent company and their industry, we considered that non- compliance with the following laws and regulations might have a material effect on the financial statements: compliance with the Real Estate Investment Trust (REIT) status. 33 Stock code: HCFT highcroftplc.com Independent auditor’s report to the members of Highcroft Investments plc To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to: Gaining an understanding of the legal and regulatory framework applicable to the group and the parent company, the industry in which they operate, and the structure of the group, and considering the risk of acts by the group and the parent company which were contrary to the applicable laws and regulations, including fraud; Inquiring of the Directors, Management and, where appropriate, those charged with governance, as to whether the group and the parent company is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and regulations; Inspecting correspondence with relevant licensing or regulatory authorities; Reviewing minutes of directors’ meetings in the year and up until the authorisation of the financial statement; and Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any indications of non-compliance. We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as the Quoted Companies Alliance Corporate Governance Code, Disclosure Guidance and Transparency Rules, UK Tax legislation and Companies Act 2006. In addition, we evaluated the Directors’ and Management’s incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to manipulate financial performance, management bias through judgments and assumptions in significant accounting estimates, in particular in relation to revenue recognition, valuation of investment property, and significant one-off or unusual transactions. Our procedures in relation to fraud included but were not limited to: Making enquiries of the Directors and Management on whether they had knowledge of any actual, suspected or alleged fraud; Gaining an understanding of the internal controls established to mitigate risks related to fraud; Discussing amongst the engagement team the risks of fraud; and Addressing the risks of fraud through management override of controls by performing journal entry testing. The primary responsibility for the prevention and detection of irregularities, including fraud, rests with both those charged with governance and Management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls. The risks of material misstatement that had the greatest effect on our audit are discussed in the “Key audit matters” section of this report. A further description of our responsibilities is available on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Other matters which we are required to address Following the recommendation of the audit committee, we were appointed by the audit committee on 12 May 2017 to audit the financial statements for the year ending 31 December 2017 and subsequent financial periods. The period of total uninterrupted engagement is eight years, covering the years ending 31 December 2017 to 31 December 2024. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit. Our audit opinion is consistent with our additional report to the audit committee. Use of the audit report 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. Nargis Shaheen Yunis (Senior Statutory Auditor) for and on behalf of Forvis Mazars LLP Chartered Accountants and Statutory Auditor 30 Old Bailey London EC4M 7AU 27 March 2025 34 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements Consolidated statement of comprehensive income for the year ended 31 December 2024 2024 2023 Note Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Gross rental revenue 6,377 – 6,377 5,790 – 5,790 Property operating expenses 8 (1,018) – (1,018) (616) – (616) Net rental income 5,359 – 5,359 5,174 – 5,174 (Loss)/profit on disposal of investment property – (76) (76) – 1,014 1,014 Valuation gains on investment property 8 – 3,142 3,142 – 540 540 Valuation losses on investment property under development 9 – – – – (145) (145) Valuation losses on investment property 8 – (990) (990) – (4,868) (4,868) Net valuation gains/(losses) on investment property – 2,152 2,152 – (4,473) (4,473) Administration expenses 3 (938) – (938) (1,172) – (1,172) Net operating profit/(loss) before net finance expense 4,421 2,076 6,497 4,002 (3,459) 543 Finance income 71 – 71 195 – 195 Finance expense (833) – (833) (833) – (833) Net finance expense (762) – (762) (638) – (638) Profit/(loss) before tax 3,659 2,076 5,735 3,364 (3,459) (95) Income tax charge 5 (67) – (67) (98) – (98) Profit/(loss) for the year after tax 3,592 2,076 5,668 3,266 (3,459) (193) Total profit/(loss) and comprehensive income/(loss) for the year attributable to the owners of the parent 3,592 2,076 5,668 3,266 (3,459) (193) Basic and diluted profit/(loss) per share 7 108.9p (3.7)p The total column represents the statement of total comprehensive income as defined in IAS 1. The accompanying Notes form an integral part of these financial statements. 35 Stock code: HCFT highcroftplc.com Consolidated statement of financial position at 31 December 2024 Note 2024 £’000 2023 £’000 Assets Non-current assets Investment property 8 82,575 76,650 Investment property under development 9 – 1,625 Total non-current assets 82,575 78,275 Current assets Trade and other receivables 11 1,701 1,226 Cash and cash equivalents 1,808 4,229 Total current assets 3,509 5,455 Total assets 86,084 83,730 Liabilities Current liabilities Trade and other payables 12 2,929 3,327 Total current liabilities 2,929 3,327 Non-current liabilities Interest bearing loan 13 27,200 27,200 Total non-current liabilities 27,200 27,200 Total liabilities 30,129 30,527 Net assets 55,955 53,203 Equity Issued share capital 14 1,302 1,302 Share premium 312 312 Share-based payment reserve – – Revaluation reserve – property 10,652 9,955 Other equity reserve – – Capital redemption reserve 95 95 Realised capital reserve 29,450 30,437 Retained earnings 14,144 11,102 Total equity attributable to the owners of the parent 55,955 53,203 These financial statements were approved by the board of directors on 27 March 2025 and signed on its behalf by: Paul Leaf-Wright Charles Butler Director Director Company number: 00224271 The accompanying Notes form an integral part of these financial statements. 36 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements Consolidated statement of changes in equity 2024 Issued share capital £’000 Share premium £’000 Revaluation reserve – property £’000 Capital redemption reserve £’000 Realised capital reserve £’000 Retained earnings £’000 Total £’000 At 1 January 2024 1,302 312 9,955 95 30,437 11,102 53,203 Transactions with owners: Dividends – – – – – (2,916) (2,916) – – – – – (2,916) (2,916) Reserve transfers: Non-distributable items recognised in income statement: Revaluation gains – – 2,152 – – (2,152) – Realised loss – – – – (76) 76 – Deficit attributable to asset sold in the year – – 911 – (911) – – Change in excess of cost over fair value through retained earnings – – ( 2,366) – – 2,366 – – – 697 – (987) 290 – Total comprehensive profit for the year – – – – – 5,668 5,668 At 31 December 2024 1,302 312 10,652 95 29,450 14,144 55,955 2023 Issued share capital £’000 Share premium £’000 Share- based payment reserve £’000 Revaluation reserve – property £’000 Other equity reserve £’000 Capital redemption reserve £’000 Realised capital reserve £’000 Retained earnings £’000 Total £’000 At 1 January 2023 1,299 226 160 11,499 (207) 95 29,623 13,481 56,176 Transactions with owners: Issue of shares 3 101 – – (104) – – – – Share issue costs – (15) – – – – – – (15) Dividends – – – – – – – (2,916) (2,916) 3 86 – – (104) – – (2,916) (2,931) Reserve transfers: Non-distributable items recognised in income statement: Revaluation losses – – – (4,473) – – – 4,473 – Realised gains – – – – – – 1,014 (1,014) – Deficit attributable to assets sold in the year – – – 200 – – (200) – – Change in excess of cost over fair value through retained earnings – – – 2,729 – – – (2,729) – Share award vested – – (311) – 311 – – – – – – (311) (1,544) 311 – 814 730 – Share award expensed – – 151 – – – – – 151 Total comprehensive loss for the year – – – – – – – (193) (193) At 31 December 2023 1,302 312 – 9,955 – 95 30,437 11,102 53,203 37 Stock code: HCFT highcroftplc.com Consolidated statement of cashflows at 31 December 2024 Note 2024 £’000 2023 £’000 Operating activities Profit/(loss) before tax 5,735 (95) Adjustments for: Net valuation (gains)/losses on investment property (2,152) 4,473 Net loss/(gain) on disposal of investment property 76 (1,014) Share-based payment expense – 150 Finance income (71) (195) Finance expense 833 833 Operating cashflow before changes in working capital and provisions 4,421 4,152 Increase in trade and other receivables (475) (83) (Decrease)/increase in trade and other payables (378) 366 Cash generated from operations 3,568 4,435 Finance income received 71 195 Finance expense paid (833) (833) Income taxes paid (87) (19) Net cashflows from operating activities 2,719 3,778 Investing activities Sale of current assets – investment property 609 7,764 Purchase of non-current assets – investment property under development 9 (2,833) (1,770) Purchase of non-current assets – investment property 8 – (9,818) Net cashflows from investing activities (2,224) (3,824) Financing activities Dividends paid (2,916) (2,916) Share issue costs – (15) Net cashflows from financing activities (2,916) (2,931) Net decrease in cash and cash equivalents (2,421) (2,977) Cash and cash equivalents at 1 January 4,229 7,206 Cash and cash equivalents at 31 December 1,808 4,229 38 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements Notes to the consolidated financial statements for the year ended 31 December 2024 1 Material accounting policy information Highcroft Investments PLC is a company domiciled in the United Kingdom. The consolidated financial statements of the company for the year ended 31 December 2024 comprise the company and its subsidiaries, together referred to as the group. The principal activity of the group is investment in commercial property in England and Wales. The accounting policies remain unchanged. Basis of preparation The financial statements have been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom. In light of the ongoing conflicts in the Middle East and Ukraine, and with the effect of the high levels of interest rates and inflation on the UK economy, and the sectors in which the group and company operates, the directors have placed a particular focus on the appropriateness of adopting the going concern basis in preparing the group’s and company’s financial statements for the year ended 31 December 2024. They have also considered the effects of the Potential Transaction. The group’s and company’s going concern assessment considers the group’s and company’s principal risks, identified on pages 14 to 15 of this document, and is dependent on a number of factors, including cashflow and liquidity, continued access to borrowing facilities, and the ability to continue to operate the group’s and company’s borrowings within its financial covenants. The debt has a number of financial covenants that the group is required to comply with including an LTV covenant, a 12-month historical interest cover ratio, and the facility agreements have cure provisions in the event of a breach. The going concern assessment is based on a 12-month outlook from the date of the approval of these financial statements, using the group’s five-year forecast. This forecast is based on a reasonable scenario, which includes the following key sensitivities: ■10% reduction in net income from our portfolio. ■An increase in the assumed inflation rates by 5%. Under each scenario, the group and company are forecast to maintain sufficient cash and liquidity resources and remain compliant with their financial covenants. The directors have also stress tested the forecasts considering the level of fall in income and valuations that would cause the business to be unable to pay its liabilities as they fall due and have concluded that the possibility of these scenarios occurring is remote. Based on the consideration above, the board believes that the group and company have the ability to continue in business for at least 12 months from the date of approval of the financial statements for the year ended 31 December 2024, and, therefore, have adopted the going concern basis in the preparation of this financial information. These financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties. Analysis of statement of comprehensive income The profit or loss section of the statement of comprehensive income is analysed into two columns, being revenue and capital. The capital column comprises valuation gains and losses on property, profits and losses on disposal of property, and the related tax impact. The revenue column includes all other items. 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 statement of comprehensive income 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 constitutes the principal area of estimate and judgement exercised by the directors in the preparation of these financial statements (Note 8). The valuation of investment properties at fair value is carried out by external advisers who the directors consider to be suitably qualified to carry out such valuations. The fair value of the property portfolio is calculated using an income capitalisation technique whereby contracted and market rental values are capitalised with a market capitalisation rate. 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, and the net initial yield. Estimates and judgements are continually evaluated and are based on historical information of the group, the best judgement of the directors, and are adjusted for current market conditions. In the process of applying the group’s accounting policies, management is of the opinion that any instances of the application of judgements did not have a significant effect on the amounts recognised in the financial statements. A sensitivity analysis has been performed on key inputs, methods and assumptions used in the estimation process (Note 8). 39 Stock code: HCFT highcroftplc.com Notes to the consolidated financial statements continued for the year ended 31 December 2024 1 Material accounting policy information continued New accounting standards and interpretations There are no new accounting standards or interpretations issued during the year that would materially affect the group. There are no amendments to, or interpretations of, existing standards that are relevant to the group but are not yet effective and have not been adopted other than IFRS 18, a new standard which replaces IAS1, effective for accounting periods commencing on or after 1 January 2026, which requires improved presentation and disclosure of information in the financial statements. The impacts of this new standard are still being addressed. Basis of consolidation The group financial statements consolidate the financial statements of the company and its 100% subsidiaries: Rodenhurst Estates Limited, BL (Wisbech) Limited and Belgrave Land (Wisbech) Limited, which are all made up to 31 December 2024, 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 statement of comprehensive income 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. Dilapidations’ income is recognised in the statement of comprehensive income when the amount is receivable from the tenant. Income related to tenants’ extra works is recognised on an accrual basis. Finance costs Interest is recognised using the effective interest method, which calculates the amortised cost of a financial liability and allocates the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount of the financial liability. Property costs and expenses All property costs and expenses are recognised in the statement of comprehensive income on an accrual basis. 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 or 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 substantively 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 substantively enacted at the date of the statement of financial position. Investment property Investment property is that which is held either to earn rental income or for capital appreciation or for both. Investment property, including assets under development, 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 properties 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 statement of comprehensive income. 40 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements 1 Material accounting policy information continued Assets classified as held for sale Where a board decision has been made to dispose of an investment property in its present condition prior to the year end, and the following conditions are met; an active programme to locate a buyer has been initiated, the asset is being actively marketed at a reasonable price, it is unlikely that there will be any significant changes to the plan to sell the asset and it is regarded as highly probable that a sale will complete within one year, the property is included within current assets and stated at fair value. Trade and other receivables Trade and other receivables, which are generally due for settlement, in advance, prior to the relevant quarter or month, are recognised and carried at the original invoice amount less an allowance for any uncollectable amounts. The group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected impairment provision for all applicable trade receivables. In determining the expected credit losses, the group takes into account any recent payment behaviours and future expectations of likely default events such as 90 days past due. Trade and other receivables are written off once all avenues to recover the balances are exhausted. Receivables written off are no longer subject to any enforcement activity. Cash and cash equivalents Cash and cash equivalents comprise cash available with an original maturity of less than three months. Financial liabilities The group’s financial liabilities include trade and other payables and borrowings. Trade payables and borrowings are recognised initially at fair value less transaction costs and subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the statement of comprehensive income. Loans and borrowings are classified as current liabilities unless the group has an unconditional right to defer the settlement of the liability for at least 12 months after the balance sheet date. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. 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. Share-based payment reserve The share-based payment reserve included the unissued element of the Highcroft Incentive Plan (HIP) award that had been recorded in the comprehensive income statement. The HIP was closed in 2023. Revaluation reserve – property This revaluation reserve includes annual revaluation gains and losses less applicable deferred taxation and is non-distributable. Unrealised revaluation losses during the year are transferred to retained earnings. Other equity reserve The other equity reserve is debited with the value of the shares issued under the Highcroft Incentive Plan (HIP) and credited with the value of the shares as they vest. The HIP was closed in 2023. Share premium Share premium represents the excess over nominal value of the fair value consideration for equity shares net of expenses of the share issue. Capital redemption reserve The capital redemption reserve is a statutory non-distributable reserve into which amounts are transferred following the redemption or purchase of issued share capital. Realised capital reserve The realised capital reserve includes realised revaluation gains and losses less attributable income tax and is non-distributable in line with the company’s articles of association. Retained earnings Retained earnings include total comprehensive income less revaluation gains on properties and any applicable taxation less dividends paid. 41 Stock code: HCFT highcroftplc.com Notes to the consolidated financial statements continued for the year ended 31 December 2024 1 Material accounting policy information continued Segment reporting The group has one main operating segment – commercial property – and, therefore, no additional segmental information is required. A segment is a distinguishable component of the group whose operating results are regularly reviewed by the group’s chief operating decision maker, who is the chief executive. For management purposes, the group uses the same measurement policies as those used in its financial statements. 2 Segment reporting The group is comprised of one main operating segment. All of the revenue is received from England and Wales. In 2024, the rent from one tenant represented £668,000, 10.5% of the gross rental revenue of £6,377,000. In 2023, £648,000, 11.2% of gross rental revenue of £5,790,000. 3 Administrative expenses 2024 £’000 2023 £’000 Directors (Note 4) 539 743 Auditor’s fees – Fees payable to the company’s auditor for the audit of the company’s accounts – current year1 70 65 – Fees payable to the company’s auditor for other services – 16 Staff costs (excluding directors’ remuneration): – remuneration 72 81 – social security costs 8 9 – pension costs 1 1 Other expenses2 248 257 938 1,172 1 The audit fee for 2024 includes £17,232 (2023 £12,300) related to the completion of a group reporting questionnaire for the Kingerlee Holdings Limited’s auditor. This amount is recoverable in full from Kingerlee Holdings Limited and has been netted off other expenses. 2 Other expenses for 2024 includes £79,000 (2023 £73,000) of costs relating to costs incurred in the year relating to the listing on TISE and the de-listing from the London Stock Exchange, both in February 2024. 4 Directors 2024 £’000 2023 £’000 Remuneration in respect of directors was as follows: Remuneration 480 677 Social security costs 59 66 539 743 The average number of employees was seven (2023 seven), all of whom, other than a part-time management accountant and a part-time company secretary (resigned 31 October 2024), were directors of the group. All directors are considered to be key managers of the company. More detailed information concerning directors’ remuneration, including the disclosure of the highest paid director, is shown in the directors’ remuneration report. 42 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements 5 Income tax charge 2024 £’000 2023 £’000 Current tax: On revenue profits – current year – prior year 70 (3) 90 8 Income tax charge 67 98 The tax assessed for the year differs from the standard rate of corporation tax in the UK of 25% (2023 23.5%). The differences are explained as follows: 2024 £’000 2023 £’000 Profit/(loss) before tax 5,735 (95) Profit/(loss) before tax multiplied by the standard rate of corporation tax in the UK of 25% (2023 23.5%) 1,434 (22) Effect of: Profit not taxable as a result of REIT status (1,364) 112 Adjustment in respect of prior year (3) 8 Income tax charge 67 98 6 Dividends In 2024, the following dividends have been paid by the company: 2024 £’000 2023 £’000 2023 Final: 33p per ordinary share (2022 33p) 1,718 1,718 2024 Interim: 23p per ordinary share (2023 23p) 1,198 1,198 2,916 2,916 On 27 March 2025, the directors declared an interim property income distribution of £1,822,000, 35p per share, (2023 final property income distribution of £1,718,000, 33p per share), payable on 16 May 2025 to shareholders registered on 26 April 2025. 43 Stock code: HCFT highcroftplc.com Notes to the consolidated financial statements continued for the year ended 31 December 2024 7 Earnings per share The calculation of earnings per share is based on the total profit after tax for the year of £5,668,000 (2023 loss £193,000) and on 5,206,659 shares (2023 5,203,775), which is the weighted average number of shares in issue during the year ended 31 December 2024. There are no dilutive instruments. In order to draw attention to the profit that is not due to the impact of valuation gains and losses that are included in the statement of comprehensive income, but not available for distribution under the company’s articles of association, an adjusted earnings per share, a non GAAP measure, based on the profit available for distribution of £3,592,000 (2023 £3,266,000) has been calculated. 2024 £’000 2023 £’000 Earnings: Basic profit/(loss) for the year 5,668 (193) Adjustments for: Loss/(profit) on disposal of investment property 76 (1,014) Net valuation (gains)/losses on investment property (2,152) 4,473 Adjusted earnings 3,592 3,266 Per share amount: Profit/(loss) per share (unadjusted) 108.9p (3.7p) Adjustments for: Loss/(profit) on disposal of investment property 1.4p (19.5p) Net valuation (profit)losses on investment property (41.3)p 86.0p Adjusted earnings per share 69.0p 62.8p 8 Investment property 2024 £’000 2023 £’000 Total valuation at 1 January 76,650 71,160 Additions – 9,818 Disposals (685) – *Transfer of opening valuation from investment properties under development (Note 9) 1,625 – *Transfer of additions from investment properties under development (Note 9) 2,833 – *Transfer of cost to investment properties under development (Note 9) – (281) *Transfer of revaluation loss to investment properties under development (Note 9) – 281 Revaluation gains 3,142 540 Revaluation losses (990) (4,868) Valuation at 31 December 82,575 76,650 * These transfers relate to the development site at St Austell which was classified as an asset development from the commencement of build in Q2 2022 until practical completion in Q4 2024 In accordance with IAS 40, the carrying value of investment properties, including investment property under development (Note 9) is their fair value as determined by independent external valuers. This valuation has been conducted by Knight Frank LLP, as external valuers, and has been prepared as at 31 December 2024, in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors, on the basis of market value. The historical cost of the group’s investment property is £80,561,000 (2023 £77,273,000). 44 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements 8 Investment property continued Valuation process The valuation reports produced by the independent external valuers are based on information provided by the group such as current rents, terms and conditions of lease agreements, service charges and capital expenditure (if any). This information is derived from the group’s property management and financial information systems and is subject to the group’s overall control environment. In addition, the valuation reports are based on assumptions and models used by the independent valuer. The assumptions are typically market related such as yields and discount rates and are based on their professional judgement and market observation. Each property is considered a separate asset class based on the unique nature, characteristics and risks of the property. The executive director responsible for the valuation process verifies all major inputs to the external valuation reports, assesses the individual property valuation changes from the prior year valuation report and holds discussions with the independent valuer. When this process is complete, the whole board then meet the valuer in the presence of the auditor. The valuation report is recommended to the audit committee, which considers it as part of its overall responsibilities. Valuation technique The fair value of the property portfolio has been determined using an income capitalisation technique whereby contracted and market rental values are capitalised with a market capitalisation rate. The resulting valuations are cross-checked against the initial and equivalent yields and the fair market values per square foot derived from comparable recent market transactions on arm’s-length terms. These techniques are consistent with the principles in IFRS 13 Fair Value Measurement and use significant unobservable inputs such that the fair value measurement of each property within the portfolio has been classified as level 3 in the fair value hierarchy. Significant unobservable inputs 31 December 2024 Warehouse Retail warehouse Leisure Office High street retail Total Valuation technique Income capitalisation Fair value of property portfolio £’000 42,690 22,225 9,425 5,215 3,020 82,575 Area sq ft 631,006 133,543 88,145 30,835 8,005 891,534 Gross estimated rental value (ERV) £’000 3,409 1,742 812 659 246 6,868 ERV per sq ft Minimum £ 2.40 11.57 7.32 12.42 28.64 Maximum £ 11.28 25.00 26.16 24.38 32.76 Weighted average £ 7.38 14.08 11.52 21.73 30.88 Net initial yield Minimum % 5.31 4.75 7.14 0.00 5.34 Maximum % 11.56 6.74 9.26 6.66 11.25 Weighted average % 7.15 5.82 8.34 2.90 7.68 45 Stock code: HCFT highcroftplc.com Notes to the consolidated financial statements continued for the year ended 31 December 2024 8 Investment property continued 31 December 2023 Warehouse Retail warehouse Leisure Office High street retail Total Valuation technique Income capitalisation Fair value of property portfolio £’000 36,950 21,175 9,650 4,900 3,975 76,650 Area sq ft 602,673 133,543 88,145 29,567 12,622 866,550 Gross estimated rental value (ERV) £’000 2,988 1,693 812 610 359 6,462 ERV per sq ft Minimum £ 2.40 10.87 7.32 20.00 19.41 Maximum £ 10.56 24.42 26.16 21.60 34.70 Weighted average £ 6.62 13.75 11.52 20.67 29.55 Net initial yield Minimum % 3.01 6.24 6.99 0.00 0.00 Maximum % 10.77 7.28 8.99 7.11 10.40 Weighted average % 6.90 6.89 8.15 2.96 7.00 Sensitivities of measurement of significant unobservable inputs As set out on page 39, the valuation of the group’s property portfolio is open to judgements that are inherently subjective by nature. Unobservable input Impact on the fair value measurement of a significant increase in input Impact on the fair value measurement of a significant decrease in input Estimated rental value (ERV) Increase Decrease Net initial yield Decrease Increase There is no inter-relationship between these two inputs. Information about the impact of changes in unobservable inputs on the fair value of the group’s property portfolio Sensitivities for changes in assumptions have been set out below at +/- 5% for ERV and +/- 50bps for IY, which are deemed to be the levels that give a reasonable worst-case scenario given the like-for-like valuation increase of 2.7% already recognised in the year. 31 December 2024 Warehouse £’000 Retail warehouse £’000 Leisure £’000 Office £’000 High street retail £’000 Total £’000 Fair value of property portfolio 42,690 22,225 9,425 5,215 3,020 82,575 Impact on valuation of: +5% on ERV 1,871 1,106 470 260 150 3,857 -5% on ERV (1,871) (1,106) (470) (263) (150) (3,860) -50bps on IY 285 160 58 27 22 552 +50bps on IY (281) (157) (58) (33) (22) (551) 46 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements 8 Investment property continued 31 December 2023 Warehouse £’000 Retail warehouse £’000 Leisure £’000 Office £’000 High street retail £’000 Total £’000 Fair value of property portfolio 36,950 21,175 9,650 4,900 3,975 76,650 Impact on valuation of: +5% on ERV 1,844 1,057 481 244 196 3,822 -5% on ERV (1,844) (1,057) (481) (247) (196) (3,825) -50bps on IY 322 156 61 24 25 588 +50bps on IY (316) (153) (60) (29) (25) (583) Additional property disclosures including property covenant information At 31 December 2024 14 investment properties with a carrying amount of £54,925,000 (2023 14 properties with a valuation of £53,340,000) are charged to Handelsbanken plc to secure the group’s short-term and medium-term loans. The group leases out its commercial investment property under operating leases. The future minimum lease payments receivable under non-cancellable leases are as follows: 2024 £’000 2023 £’000 Less than one year 5,914 5,575 Between one and five years 15,031 13,894 More than five years 13,132 10,006 34,077 29,475 £482,000 of property operating expenses relate to the completion of tenant’s fit-out works at our development site. This generated £522,000 of associated income. All other property operating expenses are analysed as arising from generating rental income and include the movement in the bad debt provision. 9 Investment property under development 2024 £’000 2023 £’000 Valuation at 1 January 1,625 – Additions 2,833 1,770 *Transfer opening valuation to investment properties at valuation (Note 8) (1,625) – *Transfer of additions to investment properties at valuation (Note 8) (2,833) – Revaluation losses – (145) Valuation at 31 December – 1,625 Investment property under development has been valued by Knight Frank LLP using the same process and techniques as for Investment property (Note 8). In 2023 Knight Frank considered the stage reached in construction and the costs remaining to be spent at the date of valuation. 10 Assets classified as held for sale There were no assets held for sale at either 31 December 2023 or at 31 December 2024. 47 Stock code: HCFT highcroftplc.com Notes to the consolidated financial statements continued for the year ended 31 December 2024 11 Trade and other receivables 2024 £’000 2023 £’000 Trade receivables 659 228 Accrued rent receivable 914 729 Other receivables 128 269 1,701 1,226 Included in trade receivables are amounts due from tenants at each year end and include amounts invoiced on 25 December 2024 in respect of rents in advance for the period 25 December 2024 to 27 March 2025. At 31 December 2024, amounts due from tenants that were more than 90 days overdue, which related to rents for 2024 or earlier, totalled £44,000 (2023 £60,000), of this amount £nil related to 2023 or earlier. Trade receivables are shown after deducting a provision for bad and doubtful debts, which excludes VAT, of £37,000 (2023 £50,000). The provision for doubtful debts is calculated as an expected credit loss on trade and other receivables in accordance with IFRS 9 (see Note 1). The credit to the income statement in relation to write offs and provisions made against doubtful debts was £14,000 (2023 credit £49,000). The expected credit loss is recognised on initial recognition of a debtor and is reassessed at each reporting period. In order to calculate the expected credit loss, the group applies a forward-looking outlook to historic default rates. In the current reporting period, the forward-looking outlook has considered the impacts of the conflict in Ukraine and the Middle East, and the effect of the high inflation and interest rates in the UK. The historic default rates used are specific to receivables that are 90 days past due. Specific provisions are also made in excess of the expected credit loss where information is available to suggest that a higher provision than the expected credit loss is required. In the current reporting period, an additional review of tenant debtors was undertaken to assess recoverability in light of the difficult macro-economic climate and other factors. The directors consider that the carrying amount of trade and other receivables is approximate to their fair value. There is no concentration of credit risk with respect to trade and other receivables as all of the group’s tenants have terms that require them to pay their rent in advance. 12 Trade and other payables 2024 £’000 2023 £’000 Deferred income 1,060 1,025 Social security and other taxes 533 592 Accruals 449 978 Other payables 887 732 2,929 3,327 The directors consider that the carrying value of trade and other payables approximates to their fair value. 13 Interest-bearing loans 2024 £’000 2023 £’000 Medium-term bank loan 27,200 27,200 The medium-term bank loans comprise amounts falling due as follows: Between one and two years 3,400 – Between two and five years 18,800 7,900 Over five years 5,000 19,300 27,200 27,200 Further analysis of the short-term and medium-term bank loans is set out on page 12. The two key loan covenants relate to interest cover and security cover. They are tested on 31 December each year. The relevant documentation has been provided and the covenants adhered to at 31 December 2024. The weighted average effective interest rate is 3.06% (2023 3.06%). 48 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements 14 Share capital The movement in the number of 25p ordinary shares in issue is shown below: 2024 2023 Number £’000 Number £’000 At 1 January 5,206,659 1,302 5,194,963 1,299 Issued under the Highcroft Incentive Plan – – 11,696 3 At 31 December 5,206,659 1,302 5,206,659 1,302 The directors monitor capital on the basis of total equity and operate within the requirements of the articles of association. There was £nil of short-term debt and £27,200,000 of medium-term debt at 31 December 2024 (2023 £nil short-term debt and £27,200,000 of medium-term debt). 15 Share premium 2024 £’000 2023 £’000 At 1 January 312 226 Share issue costs – (15) Issued under the Highcroft Incentive Plan – 101 At 31 December 312 312 16 Capital commitments At 31 December 2024 there were capital commitments of £nil (31 December 2023 £77,000). Due to the liquidation, in November 2023, of the main contractor at the development site at St Austell there was no significant capital commitment at that year end as the replacement contractor was not appointed until March 2024. 17 Contingent liabilities There were no contingent liabilities at 31 December 2024 or at 31 December 2023. 18 Related party transactions Kingerlee Holdings Limited owns, through its subsidiaries, 27.3% (2023 27.3%) of the company’s shares. David Warlow is both a director and shareholder of Kingerlee Holdings Limited. The transactions between the group and Kingerlee Holdings Limited or its subsidiaries were as follows: 2024 £’000 2023 £’000 Transactions by the company: Property income distribution paid to related party 796 796 Recharge of Forvis Mazars LLP’s fee for completion of group audit questionnaire (including VAT) 21 15 Recharge of sundry costs (£160, 2023 £nil) paid to related party – – 49 Stock code: HCFT highcroftplc.com Notes to the consolidated financial statements continued for the year ended 31 December 2024 18 Related party transactions continued Paul Leaf-Wright, appointed as a director of the company on 1 January 2023 is also a consultant to Cube Management Limited trading as Cube Asset Management who were appointed as property asset managers on 1 January 2023. The transactions between the group and Cube Asset Management were as follows: 2024 £’000 2023 £’000 Transactions by the company: Fees and expenses paid to related party 179 161 Incentive payable to related party 70 70 The company owns 100% of Rodenhurst Estates Limited and BL (Wisbech) Limited and Belgrave Land (Wisbech) Limited. The transactions between these companies have been eliminated on consolidation. Details of the net assets and profit for the financial year of these companies are set out on page 57 of this annual report. 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 their period of office, during the year in respect of their shareholdings: 2024 £’000 2023 £’000 Douglas Conn (appointed 1 May 2024) 82 – Roberta Miles 14 14 In addition to the above dividends the related parties, as defined by IAS 24, of Douglas Conn received dividends of £196,000 from 1 May 2024 to 31 December 2024. 19 Financial instruments and financial risk Categories of financial instruments 2024 2023 Carrying amount £’000 Gains/ (losses) £’000 Carrying amount £’000 Gains/ (losses) £’000 Financial assets measured at amortised cost: Trade and other receivables 1,701 – 1,226 – Cash and cash equivalents 1,808 – 4,229 – 3,509 – 5,455 – Financial liabilities measured at amortised cost: Interest-bearing loans 27,200 – 27,200 – Trade and other payables 1,336 – 1,710 – 28,536 – 28,910 – 50 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements 19 Financial instruments and financial risk continued 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 2024, the group had £27,200,000 of medium-term borrowing (2023 £27,200,000 of medium-term borrowing), of which £3,400,000 is repayable in 2026, £4,500,000 in 2027, £14,300,000 in 2029 and £5,000,000 in 2030 at fixed interest rates with a weighted average of 3.06% (2023 3.06%). The fair values of loans and receivables and financial liabilities held at amortised cost were not materially different from book values. A maturity analysis, based on contractual, undiscounted payments is set out below: 2024 Carrying amount £’000 Total contractual undiscounted cashflow £’000 Due within 1 year £’000 Due in more than 1 but less than 2 years £’000 Due in more than 2 but less than 5 years £’000 Due in more than 5 years £’000 Bank loans 27,200 30,418 833 4,198 20,331 5,056 Other payables and accruals 1,336 1,336 1,336 – – – 2023 Carrying amount £’000 Total contractual undiscounted cashflow £’000 Due within 1 year £’000 Due in more than 1 but less than 2 years £’000 Due in more than 2 but less than 5 years £’000 Due in more than 5 years £’000 Bank loans 27,200 31,254 833 833 9,953 19,635 Other payables and accruals 1,710 1,710 1,710 – – – Credit risk The group’s credit risk, that is 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 and rent deposits may be requested in certain circumstances. The amount of trade receivables presented in the balance sheet is calculated after any allowances for credit losses, estimated by the directors. The allowance as at 31 December 2024 was £44,000 (2023 £60,000). The group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at 31 December 2024 as summarised in the table above. 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 Handelsbanken plc. Cash is also held by the group’s property managers, lawyers and registrars acting as agents, though not, other than for tenant deposits, for long periods of time. The group only places cash holdings with major financial institutions that satisfy specific criteria. Capital risk 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 policy is principally carried out by the use of surplus cash. In the medium term, the directors may use additional medium-term debt to finance future commercial property acquisitions in line with its long-term strategy. Liquidity risk The group’s liquidity risk, i.e. the risk that it might encounter difficulty in meeting its obligations as they fall due, applies to its trade payables and any short and 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. The objective of the group in managing liquidity risk is to ensure that it can meet its financial obligations as and when they fall due. The group expects to meet its financial obligations through operating cash flows. 51 Stock code: HCFT highcroftplc.com Notes to the consolidated financial statements continued for the year ended 31 December 2024 19 Financial instruments and financial risk continued Interest rate risk The group finances its operations through retained profits and medium-term borrowings at an interest rate that is fixed over the term of the loan. Interest rate swaps have not been used. The group places any cash balances on deposit at rates that may be fixed in the short term but for sufficiently short periods that there is no need to hedge against the implied risk. Currency exchange risk The group is not directly exposed to currency risk. Market risk The group is not directly exposed to market risk. Borrowing facilities The group has no undrawn committed borrowing facilities. 20 Changes in liabilities arising from financing activities Bank loans (Note 13) 2024 £’000 2023 £’000 At 1 January 27,200 27,200 Interest charged 833 833 Interest paid (833) (833) At 31 December 27,200 27,200 21 Net assets per share 2024 2023 Net assets £55,955,000 £53,203,000 Ordinary shares in issue 5,206,659 5,206,659 Basic net assets per share 1,075p 1,022p 22 Post balance sheet events On 27 March 2025, the directors declared an interim property income distribution of £1,822,000, 35p per share. On 27 March 2025, a recommended all-share acquisition of Highcroft Investments PLC by LondonMetric Property PLC, to be effected by means of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 (the “Potential Transaction”) was announced. A scheme document containing further information about the acquisition and the notices of a Court Meeting and General Meeting will be published within 28 days and it is expected that, if approved by the Court and the shareholders at the Court Meeting and General Meeting the scheme will become effective on 21 May 2025. It is not possible to estimate the effect of this Potential Transaction on the group. 52 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements Company statement of financial position at 31 December 2024 Note 2024 2023 £’000 £’000 £’000 £’000 Fixed assets Investments 5 51,827 47,847 Current assets Debtors 6 3,895 3,515 Cash at bank 994 2,653 4,889 6,168 Creditors – amounts falling due within one year 7 761 812 Net current assets 4,128 5,356 Total assets less current liabilities 55,955 53,203 Net assets 55,955 53,203 Capital and reserves Called-up share capital 8 1,302 1,302 Reserves – Share-based payment – – – Realised capital 8,728 8,728 – Other equity – – – Share premium 312 312 – Capital redemption 95 95 – Revaluation 41,564 37,584 – Retained earnings 3,954 5,182 54,653 51,901 Shareholders’ funds 55,955 53,203 The company reported a total consolidated profit and comprehensive income for the financial year ended 31 December 2024 of £5,668,000 (2023 loss £193,000). These financial statements were approved by the board of directors on 27 March 2025. Paul Leaf-Wright Charles Butler Director Director Company number: 00224271 The accompanying Notes form an integral part of these financial statements. 53 Stock code: HCFT highcroftplc.com Company statement of changes in equity for the year ended 31 December 2024 Note Share capital £’000 Realised capital reserve £’000 Share premium £’000 Capital redemption reserve £’000 Revaluation reserve £’000 Retained earnings £’000 Total £’000 At 1 January 2024 1,302 8,728 312 95 37,584 5,182 53,203 Profit for the year 2 – – – – – 1,688 1,688 Other comprehensive income for the year 2 – – – – – 3,980 3,980 Dividends paid – – – – – (2,916) (2,916) Revaluation gain of subsidiaries – – – – 3,980 (3,980) – At 31 December 2024 1,302 8,728 312 95 41,564 3,954 55,955 Note Share capital £’000 Share- based payment reserve £’000 Realised capital reserve £’000 Other equity reserve £’000 Share premium £’000 Capital redemption reserve £’000 Revaluation reserve £’000 Retained earnings £’000 Total £’000 At 1 January 2023 1,299 160 8,728 (207) 226 95 40,399 5,476 56,176 Profit for the year 2 – – – – – – – 2,622 2,622 Other comprehensive income for the year 2 – – – – – – – (2,815) (2,815) Dividends paid – – – – – – – (2,916) (2,916) Revaluation loss of subsidiaries – – – – – – (2,815) 2,815 – Issue of shares 3 – – (104) 101 – – – – Share issue costs – – – – (15) – – – (15) Share award expensed – 151 – – – – – – 151 Share award vested – (311) – 311 – – – – – At 31 December 2023 1,302 – 8,728 – 312 95 37,584 5,182 53,203 54 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements Notes to the company financial statements for the year ended 31 December 2024 1 Accounting policies Basis of preparation The financial statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 the Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland (FRS 102) and with the Companies Act 2006. The financial statements have been prepared under the historical cost convention except for the modification to a fair value basis for certain financial instruments as specified in the accounting policies below. The principal accounting policies of the company have remained unchanged from the previous year. These financial statements have been prepared on a going concern basis and in adopting the going concern basis the directors have, based on the information available at the date of this report, considered the financial implications of the conflicts in the Middle East and Ukraine and the effects of the high levels of interest rates and inflation in the UK and the effect of all of these on our stakeholders. For further information see page 16. In preparing these financial statements, the following disclosure exemptions have been taken: ■The requirement to present a cashflow and related notes ■Financial instrument disclosures including: − Categories of financial instruments; − Items of income, expenses, gains or losses relating to financial instruments; and − Exposure to, and management of, financial risks. Accounting estimates and judgements The valuation of investments in subsidiary undertakings at market value, calculated as the net assets of the undertaking is the key estimate used in the preparation of the accounts. The key asset of the subsidiaries is their investment property and as disclosed on page 39 the key assumptions which are also the major sources of estimation uncertainty in arriving at the market valuation are the value of future rental income and net initial yield (Note 5). Dividend revenue Dividend revenue is recognised in the statement of comprehensive income when the right to receive the payment is established. Share-based employee remuneration Share-based employee remuneration is determined with reference to the fair value of the cash award that is used to purchase the newly issued shares at the date at which the award is agreed and charged to the income statement over the service and vesting period on a straight-line basis. The Highcroft Incentive Plan, under which share based remuneration was awarded, terminated in 2023. Interest income Interest is recognised under the effective interest method. 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. Investments Investments, being shares in subsidiary undertakings, are included at market value (net assets as shown by their financial statements are taken as a reasonable estimate of market value as their assets and liabilities are carried at fair value). The directors manage and evaluate performance on a fair value basis and, therefore, have designated qualifying financial assets including shares in subsidiary undertakings at fair value through the profit and loss account. Receivables Trade receivables and other receivables that have fixed or determinable payments are categorised as basic financial assets and measured at cost. Deferred tax Deferred tax is recognised in respect of all timing differences at the reporting date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted by the reporting date. Deferred tax liabilities are presented within provisions for liabilities. Financial liabilities The company’s financial liabilities include trade and other payables. Trade payables are recognised initially at fair value less transaction costs and subsequently measured at amortised cost. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. 55 Stock code: HCFT highcroftplc.com 1 Accounting policies continued 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 loss 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 £5,668,000 (2023 loss £193,000). Information regarding directors’ remuneration appears on pages 25 to 26 of this annual report. 3 Auditor’s fees 2024 £’000 2023 £’000 Fees payable to the company’s auditor for the audit of the group’s annual accounts1 70 65 Fees payable to the company’s auditor for other services: Audit-related assurance services – 16 70 81 1 The audit fee for 2024 includes £17,232 (2023 £12,300) related to the completion of a group audit questionnaire for the Kingerlee Holdings Limited’s auditor. This amount is recoverable in full from Kingerlee Holdings Limited and has been netted off other expenses. 4 Dividends In 2024, the following dividends have been paid by the company: 2024 £’000 2023 £’000 2023 Final: 33p per ordinary share (2022 33p) 1,718 1,718 2024 Interim: 23p per ordinary share (2023 23p) 1,198 1,198 2,916 2,916 On 24 March 2025, the directors declared an interim property income distribution of £1,822,000, 35p per share (2023 final property income distribution of £1,714,000, 33p per share), payable on 16 May 2025 to shareholders registered on 26 April 2025. 5 Investments Shares in subsidiary undertaking 2024 £’000 2023 £’000 Valuation at 1 January 2024 47,847 50,663 Gain/(loss) on revaluation in excess of cost 3,980 (2,816) Valuation at 31 December 2024 51,827 47,847 At 31 December 2024, the company held 100% of the following companies, which are all registered in England and Wales and that all have the same registered office address as the company: Lambourne House, 311-321 Banbury Road, Oxford, OX2 7JH. Subsidiary Primary activity Immediate parent company Ownership Rodenhurst Estates Limited Property investment Highcroft Investments PLC 100% BL (Wisbech) Limited Holding company Rodenhurst Estates Limited 100% Belgrave Land (Wisbech) Limited Property investment BL (Wisbech) Limited 100% Notes to the company financial statements continued for the year ended 31 December 2024 56 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements 5 Investments continued At 31 December 2024, the net assets and the profit/(loss) for the financial year of these subsidiaries were: 2024 2023 Net assets £’000 Profit for the financial year £’000 Net assets £’000 Profit for the financial year £’000 Rodenhurst Estates Limited 51,827 5,980 47,847 184 BL (Wisbech) Limited1 – – – – Belgrave Land (Wisbech) Limited 4,988 725 4,262 476 1 BL (Wisbech) Limited is a dormant intermediate holding company between Belgrave Land (Wisbech) Limited and Rodenhurst Estates Limited. It holds the shares in Belgrave Land (Wisbech) Limited at cost. 6 Debtors 2024 £’000 2023 £’000 Owed by subsidiary undertakings 3,858 3,479 Other debtors 37 36 3,895 3,515 7 Creditors – amounts falling due within one year 2024 £’000 2023 £’000 Other taxes and social security 262 274 Other creditors 499 538 761 812 8 Share capital The movement in the number of 25p ordinary shares in issue is shown below: 2024 2023 Number £’000 Number £’000 At 1 January 5,206,659 1,302 5,194,963 1,299 Issued under the Highcroft Incentive Plan – – 11,696 3 At 31 December 5,206,659 1,302 5,206,659 1,302 9 Share premium 2024 £’000 2023 £’000 At 1 January 312 226 Share issue costs – (15) Issued under the Highcroft Incentive Plan – 101 At 31 December 312 312 57 Stock code: HCFT highcroftplc.com 10 Capital commitments There were no capital commitments at 31 December 2024 or at 31 December 2023. 11 Contingent liabilities There were no contingent liabilities at 31 December 2024 or at 31 December 2023. 12 Related party transactions Kingerlee Holdings Limited owns, through its subsidiaries, 27.3% (2023 27.3%) of the company’s shares, and David Warlow is a director and shareholder of Kingerlee Holdings Limited. The transactions between the group and Kingerlee Holdings Limited or its subsidiaries were as: 2024 £’000 2023 £’000 Property income distribution paid to related party 796 796 Recharge of Forvis Mazars LLP’s fee for completion of group audit questionnaire (including VAT) 21 15 Recharge of sundry costs (£160, 2023 £nil) paid to related party – – Paul Leaf-Wright, appointed as a director of the company on 1 January 2023 is also a consultant to Cube Management Limited trading as Cube Asset Management who were appointed as property asset managers on 1 January 2023. The transactions between the group and Cube Asset Management were as follows: 2024 £’000 2023 £’000 Transactions by the company: Fees and expenses paid to related party 179 161 Bonus payable to related party 70 70 Under the provisions of section 33 FRS 102, transactions between Highcroft Investments PLC and its subsidiaries Rodenhurst Estates Limited, BL (Wisbech) Limited and Belgrave Land (Wisbech) Limited are exempt from these disclosure requirements as they are all wholly owned subsidiaries. 13 Employees The employees of the group are all employees of the company and all their costs are incurred by the company as follows: 2024 £’000 2023 £’000 Remuneration 552 758 Pension costs 1 1 Social security costs 67 75 620 834 Information regarding directors’ remuneration is included in Note 4 to the consolidated financial statements. Notes to the company financial statements continued for the year ended 31 December 2024 58 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 Financial statements List of definitions Adjusted EPS % return: The earnings per share, adjusted for the impact of valuation gains and losses, as a percentage of the opening net asset value per weighted average share in issue in the year. Contracted rental revenue: The annualised rent due from tenants. Company voluntary arrangement (CVA): A procedure that allows a company to settle debts by paying only a proportion of the amount that it owes to creditors. Energy performance certificate (EPC): An energy performance certificate is a standardised document prepared by an energy assessor that measures the energy efficiency of a building. Environmental, social and governance factors (ESG): Environmental criteria include the energy the company uses, the waste it discharges, the resources it needs and the consequences for the world. They encompass greenhouse gas emissions and climate change. Social criteria include the relationships that the company has with its broad range of stakeholders. Governance is the internal system of controls, policies and procedures used to govern itself, make effective decisions, comply with regulation and meet the needs of external stakeholders. Estimated rental value (ERV): The rent at which the space could be let out in the market conditions prevailing at the date of valuation. Fully repairing and insuring (FRI): An FRI lease is where the tenant has responsibility for all external and internal maintenance, decorations and repairs as well as liability for insuring the building. Gearing: Total debt divided by total equity. General Meeting (GM): A general meeting of the shareholders of the company. Interest cover ratio (ICR): The number of times net interest payable is covered by rental income of the secured properties. Like-for-like basis: The movement in a value adjusted to exclude the effect of purchases and sales. Loan-to-value (LTV): Drawn debt divided by the fair value of the property portfolio. For bank facility purposes, the ‘fair value of the property portfolio’ is replaced by the valuation included on valuation reports addressed to the bank. Minimum Energy Efficiency Standards (MEES): The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 require certain steps to be taken by landlords to comply with the Minimum Energy Efficiency Standards therein. The initial requirement in 2023 was for non-domestic properties to have a valid EPC to allow them to be let or to continue to be let. Net debt: Borrowings plus bank overdraft less cash and cash equivalents. Net initial yield (IY): The valuer’s net income as a percentage of the market value plus standard costs of purchase. Property income distribution (PID): Dividends from profits of the group’s tax-exempt property rental business under the REIT regulations. Quoted Companies Alliance Corporate Governance Code (QCA Code): The QCA Corporate Governance Code published by the Quoted Companies Alliance in 2023, as amended from time to time. Real Estate Investment Trust (REIT): The UK REIT regime was launched on 1 January 2007. On 1 April 2008, Highcroft elected to convert to REIT status. The REIT legislation was introduced to provide a structure that closely mirrors the tax outcomes of direct ownership in property and removes tax inequalities between different real estate investors. It provides a liquid and publicly available vehicle that opens the property market to a wide range of investors. A REIT is exempt from corporation tax on qualifying income and gains of its property rental business providing various conditions are met. It remains subject to corporation tax on non-exempt income and gains. Subject to concessions granted during the Covid-19 pandemic, REITs must distribute at least 90% of their income profits from their tax-exempt property rental business, by way of dividend, known as a property income distribution (PID). These distributions can be subject to withholding tax at 20%. If the REIT distributes profits from the non-tax-exempt business, the distribution will be taxed as an ordinary dividend in the hands of the investors (non-PID). Return on equity: Total profit and comprehensive income divided by average total equity. Reversionary yield: The yield that would be achieved if the passing rent adjusts to the level of the ERV. TISE: The International Stock Exchange. Total shareholder return: The growth in the ordinary share price as quoted on the stock exchange where the ordinary shares are listed plus dividends per share received for the year, expressed as a percentage of the share price at the beginning of the year. Weighted average unexpired lease term (WAULT): The average lease term remaining to the first to occur on each lease of a tenant break option, or lease expiry, across the portfolio, weighted by rental income. 59 Stock code: HCFT highcroftplc.com Group five-year summary (unaudited) 2024 £’000 2023 £’000 2022 £’000 2021 £’000 2020 £’000 Investment properties – at annual valuation 82,575 78,275 77,910 87,565 82,060 Total net assets 55,955 53,203 56,176 66,117 57,121 Net asset value per share in issue at end of each year 1,075p 1,022p 1,081p 1,275p 1,104p Revenue (excluding gains/losses on disposals of assets) Gross income from property 6,377 5,790 5,608 5,928 6,084 Net admin expenses to gross rent 14.7% 20.2% 21.2% 19.6% 17.6% Profit available for distribution 3,592 3,266 3,265 2,939 3,503 Share capital Weighted average number in issue (000s) 5,207 5,204 5,192 5,184 5,172 Basic earnings per share 108.9p (3.7p) (137.0p) 230.5p (22.2p) Adjusted earnings per share 69.0p 62.8p 62.9p 56.7p 67.7p Dividends payable per share 58p 56p 56p 55p 57p Highcroft year end share price 600p 880p 930p 875p 720p 60 Highcroft Investments PLC Annual report and accounts for the year ended 31 December 2024 The production of this report supports the work of the Woodland Trust, the UK’s leading woodland conservation charity. Each tree planted will grow into a vital carbon store, helping to reduce environmental impact as well as creating natural havens for wildlife and people. Directors and advisers Company number 00224271 Directors Charles Butler, BSc ACA (Non-executive chairman) Douglas Conn, BSc appointed 1 May 2024 (Non-executive) Simon Costa, BSSc MA MPhil resigned 31 August 2024 (Non-executive) Paul Leaf-Wright, B Compt (Hons) SA (Chief executive) Roberta Miles, MA FCA (Finance director) David Warlow, BA MBA FCA (Non-executive) Company secretary Kerry Round, FCG Registered office and business address Lambourne House 311-321 Banbury Road Oxford OX2 7JH United Kingdom Independent auditor Forvis Mazars LLP Statutory Auditor Chartered Accountants 30 Old Bailey London EC4M 7AU Independent valuer Knight Frank LLP 55 Baker Street London W1U 8AN Bankers Handelsbanken plc Latimer House Langford Locks Kidlington Oxon OX5 1GG Solicitors (as to English law) Clarkslegal LLP 5th Floor Thames Tower Station Road Reading RG1 1LX Walker Morris LLP 33 Wellington Street Leeds LS1 4DL Bryan Cave Leighton Paisner LLP Governor’s House 5 Laurence Pountney Hill London EC4R 0BR Property managing agent Workman LLP Alliance House 12 Caxton Street London SW1H 0QS Corporate finance advisers (until 20 February 2024) Singer Capital Markets Advisory LLP One Bartholomew Lane London EC2N 2AX Corporate finance advisers Shore Capital and Corporate Limited Cassini House 57 St James’s Street London SW1A 1LD Registrars MUFG Corporate Markets Central Square PXS 1 29 Wellington Street Leeds LS1 4DL Tax advisers Grant Thornton UK LLP 30 Finsbury Square London EC2A 1AG Property asset managers Cube Management Limited 113a Jermyn Street London SW1Y 6HJ TISE Listing Agent Appleby (Jersey) LLP 13-14 Esplanade St Helier JE1 1BD Jersey Broker and market-maker Ravenscroft (CI) Limited PO Box 222 20 New Street St. Peter Port Guernsey GY1 4JG Lambourne House 311-321 Banbury Road Oxford OX2 7JH