REGISTERED NUMBER: 09080097 (England and Wales)
KCR RESIDENTIAL REIT plc
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
KCR RESIDENTIAL REIT plc
CONTENTS OF THE ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Company Information
Chairman's Letter
Chief Executive’s Letter
Group Strategic Report
Corporate Governance Statement
Report of the Directors
Report of the Independent Auditor
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Statements of Cash Flows
Notes to the Financial Statements
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KCR RESIDENTIAL REIT plc
COMPANY INFORMATION
FOR THE YEAR ENDED 30 JUNE 2020
DIRECTORS
Michael D M Davies
Dominic A White
Russell J Naylor (appointed 6 August 2019)
Non-executive chairman
Chief executive
Executive director
(responsible for finance)
James F Thornton (appointed 6 August 2019) Non-executive director
Non-executive director
Richard J Boon (appointed 6 August 2019)
SECRETARY
R J Roberts
REGISTERED OFFICE
BUSINESS ADDRESS
Gladstone House, 77-79 High Street
Egham
Surrey TW20 9HY
c/o Gladstone House, 77-79 High Street
Egham
Surrey TW20 9HY
REGISTERED NUMBER
09080097 (England and Wales)
INDEPENDENT AUDITOR
BDO LLP
55 Baker Street
London W1U 7EU
SOLICITORS
Bryan Cave Leighton Paisner LLP
Governor’s House
5 Laurence Pountney Hill
London EC4R 0BR
NOMINATED ADVISER
AND BROKER
REGISTRARS
Blake Morgan LLP
6 New Street Square
London EC4A 3DJ
Arden Partners Plc
125 Old Broad Street
London EC2N 1AR
Share Registrars Limited
The Courtyard
17 West Street, Farnham
Surrey GU19 7DR
WEBSITE
www.kcrreit.com
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KCR RESIDENTIAL REIT plc
CHAIRMAN’S LETTER
FOR THE YEAR ENDED 30 JUNE 2020
Dear Shareholder
I am pleased to introduce the 2020 Annual Report for KCR Residential REIT plc (“KCR” or the “Company”).
During the financial year under review we have been transitioning the business by reducing management and
operating costs and modernising and lifting the standard of the property portfolio.
The year started with the completion, following overwhelming support from shareholders, of the corporate
transaction with Torchlight Fund LP (“Torchlight”) that was announced in July (RNS 12 July 2019 - Subscription and
Strategic Agreement) and closed on 6 August 2019. The introduction of a significant new shareholder, Torchlight, was
a major step forward for KCR and its ability to create shareholder value. It delivered immediate access to equity
capital to restructure the balance sheet through the repayment of a number of expensive outstanding loans and
assisted in the ability to pursue refinancing of the portfolio debt on more favourable terms.
The transaction has given strength and support to the balance sheet enabling the Company to focus attention on
maximising the performance of the existing portfolio, while systems and processes are upgraded, to establish a strong
operating base ready to support portfolio growth.
The Coronavirus has had a global negative impact on demand, supply chains, stock markets and consumer and
business confidence. The economic impact is now being felt by companies and families. This has the potential to
negatively impact the occupancy level and rentals that can be achieved in KCR’s portfolio. However, at the accounts
issue date, KCR has maintained a high occupancy and rental collection level of more than 95% and rents overall have
continued to increase.
There is greater supply of studio, one- and two- bed flats in the letting market which has increased letting times from
less than one week to up to three weeks in our London portfolio. However, there continues to be strong tenant
demand in all the Company’s locations. UK residential rented property remains fundamentally under-supplied and
KCR continues to target studio, one and two- bed units, that are in high demand and relatively short supply.
While it was envisaged that the Torchlight transaction would result in a move into international residential property
markets, given global economic conditions, this expansion has been postponed. The geographic strategy is to focus
for the time being on the UK market and the opportunities that are certain to arise in the coming year.
KCR’s objective continues to be to grow the size of its residential portfolio to deliver an increase in revenue that results
over time in both profitability and an ability to pay dividends. At the same time, we focus on growing net asset value
per share.
Michael Davies
Chairman
17 September 2020
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KCR RESIDENTIAL REIT plc
CHIEF EXECUTIVE’S LETTER
FOR THE YEAR ENDED 30 JUNE 2020
Dear Shareholder
I have pleasure in reporting to you on the progress of the Group for the year to 30 June 2020.
This has been a difficult year in the UK with COVID-19 clearly being the major challenge in the second half to June
2020. Fortunately, we were well prepared for the challenge following the balance sheet restructuring delivered by
the transaction with Torchlight, portfolio refinancing with Hodge Bank, and the major efforts made to reduce
operating costs within the business. The business remains cash negative however focus is on achieving a break even
position over the next 18 months from a combination of ongoing cost management and enhanced operational
performance from the existing assets.
This has been the first year of transition for KCR whereby the team size and costs have been reduced to better align
with the size of the portfolio. The balance sheet has been restructured and debt costs have been reduced. The focus
now is on the existing portfolio to improve its overall quality, thereby increasing rental and capital values and reducing
running costs. Overall, we are part way through the transition process to create a stable platform that can be
successfully scaled-up.
A detailed review of existing assets has been completed and we have taken significant steps to “right size” the cost
base. Solid progress has been made, with substantial further improvements expected during the current full year to
June 2021. The majority of the restructuring costs have been incurred and expensed during the current financial year
and first half of the current year will reflect the reductions made to date.
Property portfolio
Property transactions during the year
KCR acquired two one-bed apartments at its Heathside, Golders Green retirement property during the year. This is
explained in more detail below (see 4* retirement living property).
Existing portfolio
A bottom-up review of the existing portfolio has been completed. KCR now has a performance enhancement focus
whereby it is committing to more substantive capital expenditure (capex) to positively reposition its portfolio. Whilst
this will result in a higher spend per flat in the near term than has been undertaken in the past, much of the historical
capex has been deferred maintenance expenditure resulting from underinvestment by previous owners. These
improvements will have a positive impact on rental and capital values. KCR is focused on modernising and lifting the
property standard so that minimal maintenance spend is required over the next five years. Repositioned, better
quality assets will move into a higher rental bracket with better quality tenant profiles, which we expect will enhance
rental and capital returns.
KCR is in the process of creating two operating lines which will be clearly identified by a) operating brands and b)
letting strategies.
1. Residential apartments, developed to a high modern specification, furnished and let on a Walk-In-Walk-Out
(WIWO) basis (utilities, internet, furniture, council tax included in the rental payment) for a frictionless and
flexible letting experience. Rental contracts may be from a week to multi-year.
2. 4* retirement living property rented on the same basis as above, with optionality on furniture. Rental
contracts to be assured shorthold tenancies (six months and up).
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KCR RESIDENTIAL REIT plc
CHIEF EXECUTIVE’S LETTER
FOR THE YEAR ENDED 30 JUNE 2020
1. Residential property (WIWO letting strategy)
• The property at Coleherne Road, held within K&C (Coleherne) Limited, which comprises ten studio and one-
bedroom flats, continues to be in demand for letting given its prime location. As part of the investment into the
current portfolio, KCR has started a whole-building refurbishment of the property including double-glazing, air
conditioning, digital lock systems, modern interior designed apartments and furniture, to bring the property to a
significantly higher standard. Works are expected to complete in Q1 2021 with the property being fully income
producing by 30 June 2021. We expect a significant increase in gross rental income and significantly reduced
operating and maintenance costs on an ongoing basis.
• The Ladbroke Grove portfolio (owned by KCR (Kite) Limited) that consists of 16 one- and two-bedroom flats in
three buildings, and one stand-alone flat in Harrow Road, continues to be fully let. Units have been lightly
refurbished as tenants leave and are relet in the private market. The Company’s intention is to undertake a whole
building refurbishment of the Ladbroke Grove assets once the Coleherne Road property works have completed
and it is fully let.
• The Southampton block of 27 residential units at Deanery Court, Chapel Riverside (owned by KCR (Southampton)
Limited) continues to be fully occupied. Rental demand has remained strong, particularly from potential
occupiers requesting a WIWO strategy. Since the property was constructed in 2018 there is no capital investment
required at the property. The letting strategy will be adjusted to implement the WIWO strategy.
2. 4* retirement living property
The Osprey portfolio (K&C (Osprey) Limited) consists of 159 flats and 13 houses let on long leases in six locations,
together with an estate consisting of 30 freehold cottages in Marlborough where Osprey delivers estate management
and sales services.
For a second year, the portfolio generated higher income from sales commissions from leaseholders’ sales, management
fees and lease-renewal premium income than in the previous year. The portfolio has held its value and is expected to
provide a medium-term value boost opportunity as the terms of the long-leasehold flats shorten and positive asset
management initiatives continue.
The key asset in the portfolio representing 68% of the Osprey portfolio value is the freehold block at Heathside, Golders
Green, where 29 of the 37 residential units are held long leasehold. The strategy continues to be selectively acquire
long-leasehold units in the block, subject to pricing, refurbish the units to a high level and let them in the open market
subject to assured shorthold tenancies. This strategy is having good success; six of the eight acquired units are let,
each at higher rental levels than the previous letting. The remaining two units are expected to be let by the end of
September shortly after refurbishment works are complete.
The Company has been investigating the potential to enhance value through redevelopment and roof extensions at four
of the seven sites. Following discussions with planning authorities, the proposals are likely to be positively received.
KCR is proceeding with building structure and economic viability analysis before moving to the planning application
stage. Until a planning approval has been received, any increase in value from these planning gains will not be included
in the Company’s accounts.
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KCR RESIDENTIAL REIT plc
CHIEF EXECUTIVE’S LETTER
FOR THE YEAR ENDED 30 JUNE 2020
Financial
Following completion of the capital raise with Torchlight in August last year the balance sheet has been stabilised. The
corporate operating costs have been significantly reduced with the executive and operations team having reduced from
seven to three. Non-essential services have been cancelled. The post-Torchlight transaction restructuring costs have
been expensed in the profit and loss statement to June 2020. The first half of the current financial year is expected to
reflect the outcomes flowing from the significant cost savings made to date with further improvement targeted during
the course of the current financial year.
This year’s financial statements are impacted by a number of one-off costs relating to the Torchlight transaction,
cancellation of the preference shares scheme, restructuring the balance sheet, portfolio debt refinancing, and personnel
costs relating to restructure of the business. Following this investment of time and capital, the recurring corporate and
property operating costs are now significantly lower than they have been at any time in KCR’s history.
Further details regarding the financial performance of the Group can be found in the Strategic Report.
Refinancing
On 12 February 2020 KCR successfully completed a £7.9m refinancing of its Coleherne Road, Ladbroke Grove and Lomond
Court portfolios, all assets in London. The refinancing, which has a 25-year term and a five year fixed rate, is interest only
and is secured on the refinanced assets. The interest rate on loans relating to these properties moved from 3.75% p.a. to
3.5% p.a. This transaction delivered £2.9m of free capital to KCR post repayment of the existing bank facility.
This refinancing delivered liquidity to the Company that has enabled the first phase of the refurbishment investment
programme to be initiated and the acquisition of more units at Heathside to be completed. It also provided working capital
to the Group.
Prospects
Although the business continues to be cashflow negative, it is so at a significantly reduced rate and the gap to break-even
is the smallest since KCR’s admission to AIM.
The transaction with Torchlight that completed in August 2019 is, we believe, the most significant event for KCR since the
IPO. It enabled the restructuring of the balance sheet, provided a solid base for refinancing the portfolio with Hodge Bank,
and has helped to refocus the Group on optimising its existing portfolio and its systems and processes at a greatly reduced
cost level. The Company will soon be ready to scale its portfolio.
We continue to be excited about the potential for the Company to grow from a solid operating base, and in particular are
pleased by the significant progress made this year towards Group profitability.
Dominic White
Chief executive
17 September 2020
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KCR RESIDENTIAL REIT plc
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2020
The directors present the strategic report of KCR Residential REIT plc ('KCR' or the 'Company') and its subsidiaries
(together, the 'Group') for the year ended 30 June 2020.
PRINCIPAL ACTIVITY
The Group carries on the business of acquiring, developing and managing residential property predominantly for
letting to third parties on long and short leases. At the year-end, the Group consisted of the Company, which is a
public company limited by shares, and its wholly owned subsidiaries:
1.
2.
3.
4.
5.
K&C (Coleherne) Limited owns a freehold residential property in Chelsea, London containing ten studio flats
K&C (Osprey) Limited owns eight freehold apartments and the freehold of several retirement properties let
on long leases to residents and provides management services in respect of these properties and to third-
party landlords
KCR (Kite) Limited owns three freehold residential properties in Ladbroke Grove, London (16 flats) and a flat
on Harrow Road
KCR (Southampton) Limited owns a long leasehold block of 27 two-bedroom apartments at Chapel Riverside,
Southampton. The lease is a 999 lease for which the company pays a peppercorn rent
K&C (Newbury) Limited owns no property and is now effectively dormant. The valuation of the company
has been written down to nil.
GROUP STRATEGY
The directors intend to build a significant presence in the residential letting market, primarily through the acquisition
of land with planning permission that will be developed into residential property and the acquisition of existing
residential property. Assets are predominantly acquired with the purpose of letting to third parties.
RESULTS
The Group reports a consolidated operating loss of £3,079,531 for the year to 30 June 2020 (2019 – £3,014,023).
REVIEW OF BUSINESS AND FINANCIAL PERFORMANCE
The Board has reviewed whether the Annual Report, taken as a whole, presents a fair, balanced and understandable
summary of the Group's position and prospects, and believes that it provides the information necessary for
shareholders to assess the Group's position, performance, and strategy.
In reporting financial information, KCR presents alternative performance measures, “APMs”, which are not defined
or specified under the requirements of IFRS. For example, portfolio occupancy and rent collection percentage.
The Company believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures,
provide stakeholders with additional helpful information on the performance of the business. The Board reminds
readers that these APMs are not GAAP measures, are not intended as a substitute for those measures, and that other
companies may use different measures.
Revenue in this financial year increased to £1,035,816 (2019 – £777,827). Portfolio occupancy and rent collection
remained above 95% for the whole period and in the majority of cases rental levels increased as units were re-let.
Overall revenue was increased despite the Coleherne Road property being progressively vacated in the last quarter
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KCR RESIDENTIAL REIT plc
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2020
in preparation for refurbishment works.
A large part of the year’s operating loss (£2,054,883) is attributable to transition and refinancing costs and non-cash
items relating to share-based payment charges. The Group therefore reports the operating loss both before and after
non-cash and separately disclosed items. The Group’s operating loss before non-cash and separately disclosed items
was £1,024,648 (2019 – £878,213 loss). The operating loss was £3,079,531 (2019 – £3,014,023 loss). The loss before
taxation was £3,560,818 (2019 – £3,737,372 loss).
Total assets at 30 June 2020 increased to £25.2 million (2019 – £24.1 million). Investments valuations fell slightly
overall (£331,000) mainly following a reduction in the Southampton property valuation from £6.40 million to £5.83
million due to a change in the building’s holding strategy. The prior valuation methodology assumed an
incremental sell-down of the building on a flat by flat and vacant possession basis. The current strategy is, as outlined
above, to hold the property for the long term on a rental basis.
Net assets increased to £12.14 million (2019 – £9.58 million) and net asset value per share decreased to 44.03p
(2019 – 60.67p), predominantly due to the capital raised and new shares issued in August 2019.
Upon completion of the Torchlight transaction, the Group entered into an option agreement to grant Torchlight an
option to subscribe for a further 50,000,000 new Ordinary Shares during the Option Period (up to 6 August 2022).
Torchlight could subscribe for the shares at a price per share of:
•
•
for any notice of exercise served on the Company on any date up to and including 31 December 2019, the
Issue Price; and
for any notice of exercise served on the Company from 1 January 2020 until the end of the Option Period,
the higher of (i) the price per Option Share which is equivalent to 95 per cent. of the 30-Day VWAP for the
Ordinary Shares and (ii) the par value of each Ordinary Share.
The Option is only exercisable by Torchlight during the Option Period and if the Option is not exercised prior to the
expiry of the Option Period, it will lapse. Any exercise of the Option by Torchlight shall be for not less than 2,000,000
Option Shares.
KEY PERFORMANCE INDICATORS
The directors and management team monitor key performance indicators relevant to each of the subsidiaries to
improve Group performance. Management reports to the board if data show significant variances against
expected outcomes and proposes mitigation action as necessary.
Examples of the KPIs used to monitor aspects of performance include:
1. At property level
1.1. Vacancy rate in terms of number of units available and potential rental income
Target occupancy of at least 90 per cent achieved
1.2. Outstanding rents as a percentage of rental income
Target debtor balance of less than 10 per cent of rental revenue achieved.
2. At Group level
2.1. Gross assets under management
The target of £40 million of gross assets by 30 June 2020 was not achieved. However, the restructuring of
the business following an investment by Torchlight Fund LP, which started in August 2019, has significantly
improved the prospects of profitable growth for the Company over the next 12 months.
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KCR RESIDENTIAL REIT plc
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Near term focus is on reducing costs, enhancing revenue and growing the business to achieve a cash break
even position to provide a stable base to grow from. Solid progress in this respect is being made.
RISKS AND UNCERTAINTIES
The Board regularly reviews the risks to which the Group is exposed and ensures through its meetings and regular
reporting that these risks are minimised as far as possible.
The principal risks and uncertainties facing the Group at this stage in its development are:
•
•
•
•
Financing and liquidity risk
The Company has an ongoing requirement to fund its activities through the equity markets and in future to
obtain finance for property acquisition and development. Although there is no certainty that such funds will
be available when needed, the Company has plans in place with KCR’s new Capital Partner regarding ongoing
funding, and, the directors continue to focus on developing the Group’s capital structure.
Financial instruments
Details of risks associated with the Group's financial instruments are given in note 21 to the financial
statements. The directors seek to mitigate these risks in manners appropriate to the risk.
Valuations
The valuation of the investment property portfolio is inherently subjective as it is made on the basis of
assumptions made by the valuer that may not prove to be accurate. The outcome of this judgment is
significant to the Group in terms of its investment decisions and results. The directors, who have long
experience of property, seek to mitigate this risk by employing independent valuation experts such as
Lambert Smith Hampton to review values of the assets in the portfolio.
Brexit
The negative impact arising from the uncertainty about Brexit which has been impacting the UK property
market has improved following the election outcome. The board believes that the Company operates in a
sector of the market, and with the advantage of REIT status, such that it will be able to build market share,
income and net asset per share value over the coming years.
•
COVID-19
In January 2020, an outbreak of a novel coronavirus, now classified as COVID-19, was detected in China’s
Hubei province. During the following months, COVID-19 has spread steadily throughout the World and on 11
March 2020, The World Health Organisation (“WHO”) declared the outbreak a global pandemic. The impact
of COVID-19 is widespread and continues to cause economic disruption. Governments in the UK and
elsewhere around the world have taken drastic and unprecedented measures which include compulsory
business closures and tight restrictions on movement of people and on their activities.
Whilst it is too early to assess the impact of the COVID-19 pandemic and the UK Government’s lockdown and
other measures on the Group, to date COVID-19 has not materially impacted Group operations, with minimal
impact on rent collections during the lockdown period. Only a minimal number of tenants were in rent arrears
at the balance sheet date and up to the date of this report.
The main risks that the Board have identified in relation to the pandemic are the potential income reduction
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KCR RESIDENTIAL REIT plc
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2020
and bad debts as tenants have difficulty in maintaining rent payments and potential voids within the portfolio
arising from tenant failures.
The actions taken to mitigate the risks are summarised below:
•
•
The Group undertakes credit checks on prospective new tenants to assess credit risk. The checks
include verification of income levels and capacity to pay, as well as checks of rental references. Any
arrears are actively managed.
The Group has completed periodic monitoring of apartment usage for short let operators.
Monitoring included car park usage (Southampton), power, water and gas readings as a proxy for
occupancy. The purpose of this was to enable the directors to form a view as to the underlying
occupancy profile of the short let operators as a proxy for their ability to continue to meet rent. Our
sampling / testing has suggested an implied underlying occupancy rate of 80% or better which
suggests adequate capacity for the short let operators to meet rent.
• Recent re-lettings in both Ladbroke Grove and Southampton suggests there is also solid underlying
demand in both catchments for rental properties so we would reasonably expect to be able to re-
let in the event that a short let operator failed and defaulted on their rental obligations.
Due to the uncertainty and unprecedented nature of the challenges posed by COVID-19 the Directors
continue to monitor this situation closely.
DIRECTORS’ DUTY TO PROMOTE THE SUCCESS OF THE COMPANY UNDER SECTION 172 COMPANIES ACT 2006
Section 172 (1) of the Companies Act 2006 requires Directors to act in the way they consider, in good faith, would
be most likely to promote the success of the Company for the benefit of shareholders as a whole, and in doing so
having regard to a diverse group of stakeholders.
The Directors continue to have regard to the impact of decisions made on all stakeholders and are aware of their
responsibilities to promote the success of the Company, in accordance with section 172 of the Companies Act 2006.
We aim to work responsibly with our stakeholders and outline below the key Board decisions made during the 2020
financial year:
Key Decision
Torchlight transaction
Stakeholders
Shareholders
Employees
Action and Impact
During the year the Company entered
into a transaction with Torchlight to
raise working capital and provide
support
additional
for potential
issuing 9,000,000
acquisitions by
granting
Ordinary
Torchlight an option to subscribe for a
further 50,000,000 new Ordinary
shares during the option period.
shares
and
The transaction was dilutive to existing
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GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2020
shareholders however was strategically
important to provide the Company with
the financial support required.
Shareholder consultation took place and
the transaction was put to shareholders
to ensure there was wide support for
the transaction.
As part of the transaction the Company
also simplified its share structure by
entering into the Redesignation and Gift
Agreement with
Restricted
the
Preference Shareholders.
term
in acceleration of the
This resulted
share-based charge negatively impacting
near
financial performance,
however removing the ongoing negative
impact
the
Restricted Preference Shares continued.
shareholders had
for
Restructure of funding
arrangements
Creditors
Shareholders
The company consulted extensively with
the Restricted Preference Shareholders
as part of this process to agree mutually
acceptable terms.
The Company also consulted with
shareholders and put this matter to
shareholders to vote on as well.
Following completion of the Torchlight
transaction and the strengthening of the
balance sheet the Company entered into
refinancing arrangements in respect of
the existing funding arrangements.
This refinancing, whilst increasing overall
leverage, provided
additional
working capital required to support
implementation of the current asset
performance enhancement programme.
the
profile
Improved working
strengthens the position of the company
capital
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KCR RESIDENTIAL REIT plc
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2020
overall.
considered
raising
The Directors
additional equity from shareholders and
the potential costs and dilution for non-
participating shareholders and formed
interests of all
the view that the
stakeholders were best served by
optimising financing arrangements.
FORWARD-LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements that have been made by the directors in good faith
based on the information available at the time of the approval of the Annual Report and financial statements. By
their nature, such forward-looking statements involve risks and uncertainties because they relate to events and
depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in
such statements.
OUTLOOK
Whilst the near-term focus remains on reducing costs and improving the operations performance of the existing
assets, the Group is continuing to investigate the purchase of residential property assets that will be able to support
an increasing income yield. To achieve these, the Group may be required to raise more capital and it is working closely
with funding sources, both equity and debt providers, to achieve this objective.
ON BEHALF OF THE BOARD:
Dominic White
Director
17 September 2020
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KCR RESIDENTIAL REIT plc
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2020
Introduction
During the year to 30 June 2020 KCR Residential REIT plc, while an AIM Listed company, was a Family Office operating
with five directors and three employees. In September 2018 it adopted the QCA code but with such a tightly
controlled operational and risk environment was not able to, in all areas, fully comply with the principles. During the
current year the directors will continue to update the website to comply as far as possible with the following QCA
code principles, noting areas where the small scope of operations limits their ability to fully comply:
Principle 1: Establish a strategy and business model which promote long-term value for shareholders
The Company's objective is to build a substantial property portfolio predominantly in the residential sector that
generates both secure income flow from rents and increasing net asset value for shareholders. The Company
acquires or develops blocks of studio, one-and two-bed apartments that are close to transport links, shopping and
leisure, mostly in London, its surrounds and the South East. These blocks are focused on attracting tenants seeking
affordable rental accommodation.
The Company brings its property corporate finance expertise to the identification and execution of these
acquisitions.
The Company looks to acquire properties at below market value to improve yield on cost and enhance net asset
value. It aims to achieve this through acquisition strategies including:
•
•
using the REIT's inherent tax advantages; acquiring properties in corporate structures with embedded
capital appreciation and deferred tax liabilities which are reduced to zero as the corporate becomes
part of the REIT group, and
acquiring permitted land, funding the development process and retaining the developer's profit.
Over the medium to long term, the Company expects rental and property values to increase in line with inflation.
These increases coupled with new acquisitions are designed to enable the Company, once it has reached scale, to
pay dividends from cash flow generated by rents and deliver net asset value increases through positive property
revaluations. Active asset management of the properties may also deliver value increases. The Company as a REIT
is required to distribute 90 per cent of its rental profits.
It is the Company’s paramount intention to conduct its activities in a professional and responsible manner for the
benefit of its shareholders, its employees, and the communities where it operates.
Further detail on the key challenges that the Board addresses are set out under Risks and Uncertainties in the
Strategic Report.
Principle 2: Seek to understand and meet shareholder needs and expectations
In August 2019, a major equity re-capitalisation brought in £4.05m of capital and a substantial new shareholder,
Torchlight Fund LP. This transaction was designed to stabilise and re-position the Company so that it can move
forward in a way that all existing and new shareholders may benefit from future uplifts to profitability and increases
in net asset value.
The Company remains committed to engaging with its shareholders to ensure its strategy and performance are
clearly understood. Feedback from investors is obtained through direct interaction between the CEO and Executive
Director and shareholders following the Company's full and half year results and certain other ad hoc meetings
between executive management and shareholders that take place during the year.
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KCR RESIDENTIAL REIT plc
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2020
The Company seeks to communicate with its shareholders on a timely and transparent basis at all times.
Announcements through RNS are as comprehensive as possible. Digital communications platforms such as Vox
Markets are used from time to time to communicate via video and podcast. Use of these platforms is limited to
senior executives such as the CEO and only once appropriate media training has been completed. As part of the
Company's repositioning, the intention is to improve the speed of reporting of the interim and full year results to
shareholders.
The chief executive, Dominic White, attends and presents at investor forums from time to time, as well as holding
discussions with analysts, shareholders and investment managers.
It is apparent from such interaction that shareholders have several concerns, including:
•
•
How do the directors propose to expand operations without dilution to existing shareholdings?
Since property companies are capital-intensive, the Company will raise equity over time to fund the
acquisition of new properties. Torchlight Fund LP exercising its option rights as approved by shareholders will
be dilutive to existing shareholders with this dilution having already being accepted and approved by
shareholders. The board will aim to maximise the issuance price of any additional equity offerings such that
issuances are accretive or, if that is not possible, offer all shareholders the opportunity to participate in the
offering on an equal access.
When will the Company become profitable?
Based on current overheads and interest forecasts, the Company may become profitable and cash flow
positive once it has approximately £50m of investments generating satisfactory rental income. Executive
management is focused on achieving this objective as soon as possible. This is naturally dependent on the
availability of suitable transactions and the ability to complete the acquisitions either via raising additional
equity capital or debt.
Shareholder liaison is managed by Dominic White (info@kcrreit.com).
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term
success
The Company currently operates in the UK. It identifies the main stakeholders in the UK as being investors, tenants,
and suppliers of services (accountant, nomad, broker, lawyers), employees, directors, third-party property
managers, banks and other debt providers and property agents introducing investment opportunities.
The Company has an important social responsibility in its role as a landlord of residential housing. We commit to
delivering great service to our tenants, which includes providing safe and high-quality residential units, at market
prices, managed in a professional way.
Treating all our stakeholders well, and in particular our key customers - our tenants, is key to growing a sustainable
business that will have long-term success.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The board is responsible for setting the risk framework within which the Company operates and ensuring that
suitable risk-management controls and reporting structures are in place throughout the group.
The board seeks to minimise risk in the management of its operations. The Company uses third- party advisors to
address specific issues that arise during operations where they bring complementary expertise and experience.
13 | P a g e
KCR RESIDENTIAL REIT plc
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2020
Principle 5: Maintain the board as a well-functioning, balanced team led by the chair
The Board comprises a balance of independent and non-independent directors with collective, specific and
complementary skills that enable the Company to manage and direct its affairs in a professional manner, with
embedded corporate governance procedures that are fit for purpose.
Full Board meetings are generally held on a quarterly basis and all necessary documentation is provided to the board
in advance, so that they can understand the issues under review and make well- considered decisions. During the
year, between full Board meetings, the Board convenes whenever necessary to consider and if appropriate approve
the execution and completion by executive management of key matters that fall within the Board's defined remit as
set out below.
The Board has audit and remuneration sub-committees that are chaired by non-executive directors.
All of the directors devote such time to the Company's affairs as the board considers appropriate.
Throughout the 2019 year, the sole non-executive director was Michael Davies who was regarded as Independent
by the Board and shareholders. Following the Torchlight Transaction, which completed on 6 August 2019, two
Torchlight directors Russell Naylor (executive director in charge of finance) and Richard Boon joined the Board.
Richard Boon is regarded as a non-independent non-executive director. James Thornton also joined the Board at
that time as an independent non-executive director.
During 2019, each of Michael Davies, Dominic White, James Cane, Timothy James, Oliver Vaughan attended all 6
Board meetings in person or by conference call as permitted by the company’s articles.
During 2020, 7 Board meetings were held, attended by all current directors.
The involvement of non-executive directors varies month by month but is estimated at 3-10 days a month.
Principle 6: Ensure that between them the directors have the necessary up-to-date experience, skills and
capabilities
The Board maintains up-to-date skills, knowledge and experience to enable it to direct and manage the Company's
operations, finances and its interface with investors, the public markets and its other stakeholders.
The Board takes great care to appoint managers and staff with the appropriate skills and experience, and is aware
of the importance of encouraging diversity among its workforce.
The Board works as a team and regularly reviews its procedures and composition.
The relevant experience and skills of the current directors is set out in detail in the Circular relating to the Torchlight
Transaction. Each director is involved in other organisations which keep their professional skills sharpened and up
to date. In due course the details as they pertain to the directors will be added to the website but is included in the
Circular of 12 July 2019.
14 | P a g e
KCR RESIDENTIAL REIT plc
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2020
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continual improvement
Following the transaction approved by the directors of KCR as at 31 July 2019, the Board of KCR now comprises:
Name
Appointed
Status
Role
Michael Davies
Dominic White
Russell Naylor
Richard Boon
Non-Executive chairman
12 November 2015
Independent
CEO
Executive director
1 January 2017
06 August 2019
Non-independent
Non-independent
Non-Executive director
06 August 2019
Non-independent
James Thornton
Non-Executive director
06 August 2019
Independent
In accordance with its obligations under the QCA code the Board will review internally its collective performance,
and the performance of its committees and Board members. At this stage of its evolution and in view of the size of
the Board, the Directors do not believe that it is practical to undertake an external or a wide-ranging evaluation of
the performance of Board members.
The primary tasks of the chief executive, Dominic White, have been and will continue to be to grow the Company's
asset base and revenue through the delivery of additional assets to the portfolio. This has included developing capital
and asset partnerships and finding ways to raise appropriately priced and structured debt finance to support
transactions and equity capital in an uncertain equity market. He is a key point of contact for the capital markets.
In these tasks he will be supported by Russell Naylor, Executive Director, who is additionally responsible for internal
financial controls, financial management, capital planning and overseeing the preparation of financial reports to
shareholders.
The primary task of the Chairman, Michael Davies, has been to ensure that the Board has performed its role
correctly, that governance is adhered to, and that the Company works towards delivering value to shareholders in
accordance with the Company's strategy. He is also a point of contact with many of the Company's shareholders and
professional advisers.
Succession planning remains an important issue for the Board, and in particular the Chairman.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
The Board strives to promote a corporate culture based on sound ethical values and behaviours.
The Company has adopted a code for directors' and employees' dealings in securities, which is appropriate for a
company whose securities are traded on AIM. The code is in accordance with the requirements of the Market Abuse
Regulation that came into effect in 2016.
The Board is also aware that the tone and culture it sets will greatly impact all aspects of the Company and the way
that employees behave, as well as the achievement of corporate objectives. A significant part of the Company's
activities is centred upon an open dialogue with shareholders, employees and other stakeholders. Therefore, the
importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its
corporate objectives.
15 | P a g e
KCR RESIDENTIAL REIT plc
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2020
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-
making by the Board
The Board is committed to high standards of corporate governance. No system of internal control can completely
eliminate the risk of process or individual failures. To an extent the corporate governance structures which the
Company is able to operate are limited by the size of the executive management team and the small number of
executive directors, which is itself dictated by the current size of the Company's operations. Within this limitation
necessitated by the current small size of the business, the Board is dedicated to having strong internal control systems
in place to enable it to maintain the highest possible standards of governance and probity.
The chairman, Michael Davies:
•
•
leads the Board and is primarily responsible for the effective working of the Board;
in consultation with the Board, ensures good corporate governance and sets clear expectations with regards
to Company culture, values and behaviour;
sets the Board's agenda and ensures that all Directors are encouraged to participate fully in the activities and
decision-making process of the Board;
takes responsibility for relationships with the Company's professional advisers and major shareholders.
The chief executive, Dominic White:
•
is primarily responsible for developing the Company's strategy in consultation with the Executive Director
and the Board, for its implementation and for the operational management of the business;
is primarily responsible for new projects and expansion;
runs the Company on a day-to-day basis;
implements the decisions of the Board;
monitors, reviews and manages key risks;
is the Company's primary spokesperson, communicating with external audiences, such as investors, analysts
and the media.
The executive director, Russell Naylor:
•
•
works with the CEO to develop and execute the Company's strategy;
is primarily responsible for the systems of financial controls in operation for the Company and each of its
subsidiaries;
is primarily responsible for all financial management and financial planning matters;
monitors, reviews and manages key risks as they relate to financial impact;
implements the financial and internal control decisions of the Board.
•
•
•
•
•
•
•
•
•
•
On 28 October 2019 the Group established a Remuneration Committee chaired by Michael Davies, Chairman and
Independent Director, and comprises Michael Davies and Richard Boon, Non-Independent Non-Executive Director,
which meets on an ad hoc basis when required.
Until 28 October 2019 the Audit committee comprised Michael Davies, the Chairman. From 28 October 2019 the Audit
and Risk Committee is chaired by James Thornton, Independent Non-Executive Director and comprises James
Thornton and Michael Davies. Russell Naylor is invited to attend as appropriate. The Audit and Risk committee is
comprised of independent directors. It normally meets twice each financial year to consider the interim and final
results. In the latter case, the auditors are present and the meeting considers and takes action on any matters raised
by the auditors arising from their audit.
The chair of each of the Committees may invite executive management and Board members to attend any meeting.
16 | P a g e
KCR RESIDENTIAL REIT plc
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2020
Matters reserved for the Board include:
•
•
•
•
•
•
•
•
•
•
Vision and strategy
Review of budgets, asset plans and trading results
Approving financial statements
Financing strategy, including debt strategy
Business planning relating to acquisitions, divestments and major refurbishments not already agreed in the
strategy and asset plans
Capital expenditure in excess of agreed budgets
Corporate governance and compliance
Risk management and internal controls
Appointments and succession plans at senior management level
Directors' remuneration
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
The company website sets out the principal approach of the Company to governance. It contains all relevant
documents and information for shareholders, including all RNS announcements, Financial Reports, Shareholder
Circulars, and the Company's articles.
Shareholders are additionally encouraged to participate at the AGM, to ensure that there is a high level of
accountability and identification with the Group's strategy and goals.
Audit Committee Report
The Executive Director Finance and the Chair of the Audit Committee met to plan the audit with the external auditor
and to discuss the materiality to be used in the audit and the expected key issues to be covered. Progress of the audit
was discussed with the external auditor before the year-end Audit Committee.
At the completion of the audit, the auditor presented its Planning document and the Audit Completion Report to the
Audit Committee before the Financial Statements were presented for Board approval.
The discussions enabled the auditor to explain the proposed work and its outcome and the Non-Executive Directors
to raise any issues. It is considered that the process worked well and the audit did not raise any material issues
therefore the auditors were able to issue their audit report in the usual form.
Remuneration Committee Report
During 2020, the Remuneration Committee met to review salaries and restricted preference share grants.
It is the Company’s policy that the remuneration of Directors should be commensurate with the services provided by
them to the Company and should take account of published data on reasonable market comparables, where available.
During the financial year, the Directors accepted reduced remuneration in line with the Company’s strategy to control
costs. Details of the Directors’ remuneration are set out in the Directors’ Report on page 20.
RPS were all cancelled in conjunction with the Torchlight transaction.
17 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 30 JUNE 2020
The directors present their report with the financial statements of the Company and the Group for the year ended 30
June 2020.
A review of the business, risks and uncertainties and future developments is included in the Chairman's Letter, the
Chief Executive’s Letter, the Group Strategic Report, and in note 21 to the financial statements.
DIVIDENDS
The directors do not recommend payment of a dividend for the year (2019 - £nil).
Political donations
The Group made no political donations during the year (2019 - £nil).
DIRECTORS
The following directors served during the year to 30 June 2020 and up to the date of approval of this Annual Report:
Name
Michael Davies
Dominic White
James Cane
Timothy James
Oliver Vaughan
Russell Naylor
Richard Boon
resigned 6 August 2019
resigned 6 August 2019
resigned 6 August 2019
appointed 6 August 2019
appointed 6 August 2019
James Thornton
appointed 6 August 2019
The beneficial interests of the directors holding office at 30 June 2020 in the issued share capital of the Company were
as follows:
Ordinary
Shares
At 30 June 2019
Issued in the
year
No.
195,428
557,143
--
--
--
No.
--
152,114
--
22,222
--
Restricted
Preference
Shares
converted in
year
No.
--
486,675
--
--
--
At 30 June 2020
No.
195,428
1,195,932
--
22,222
--
Name
Michael Davies
Dominic White
Russell Naylor
James Thornton
Richard Boon
18 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 30 JUNE 2020
Restricted Preference
Shares
Converted to
At 30 June 2019
Gifted to
Company
Ordinary Shares
in the year
At 30 June 2020
No.
--
No
--
No.
--
1,265,357
(778,682)
(486,675)
--
--
--
--
--
--
--
--
--
No.
--
--
--
--
--
Name
Michael Davies
Dominic White
Russell Naylor
James Thornton
Richard Boon
The beneficial interests of the directors holding office at 17 September 2020 in the issued share capital of the
Company were as follows:
Name
Michael Davies
Dominic White
Russell Naylor
James Thornton
Richard Boon
At 30 June 2020
Issued in the period
At 17 September 2020
No.
195,428
1,195,932
-
22,222
-
No.
-
-
-
-
-
No.
195,428
1,195,932
-
22,222
-
SUBSTANTIAL SHAREHOLDINGS
As at 17 September 2020, the directors had been notified that the following shareholders owned a disclosable
interest of three per cent or more in the Ordinary shares of the Company:
Name
Torchlight Fund LP
Energiser Investments Limited
Moore House Holdings Limited
Poole Investments Limited
Venaglass Limited
Timothy James
Dominic White & White Amba Pension Scheme
Oliver Vaughan
Interest
%
32.64%
8.83%
8.56%
6.53%
5.74%
4.36%
4.34%
3.35%
19 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 30 JUNE 2020
DIRECTORS’ REMUNERATION
The directors have received the following remuneration for their services during the year:
Name
Michael Davies
Dominic White
Russell Naylor*
James Thornton
Richard Boon*
James Cane
Timothy James
Oliver Vaughan
2020
2019
Remuneration
£
Benefits-in-kind
£
Remuneration
£
Benefits-in-kind
£
--
145,853
44,000
27,192
18,130
7,603
5,068
10,541
258,387
--
--
--
--
--
--
--
--
--
-
278,200
-
-
-
87,700
90,200
30,200
486,300
-
-
-
-
-
-
-
-
-
In addition, during the year, the Group were charged fees of £43,200 by DGS Capital Partners LLP, a limited liability
partnership of which Michael Davies is a member (2019 - £43,200) (including irrecoverable VAT) for making available
the services of Michael Davies to the Group.
* The remuneration paid to Russell Naylor consisted of fees of £44,000 charged by Naylor Partners, a business in
which Russell Naylor is a Director (2019 - £nil) and the remuneration paid to Richard Boon consisted of fees of £18,130
(2019 - £nil) charged by Artefact Partners, a business in which Richard Boon is a Director.
During the year, the capital structure of the company was reviewed and the decision was taken to terminate the
Restricted Preference shares. As a result, a number of Restricted Preference shares were converted to Ordinary
shares and the remaining Restricted Preference shares were gifted to the Company and subsequently cancelled. A
number of directors held Restricted Preference shares. The total gain made by the directors upon the conversion of
Restricted Preference shares to Ordinary shares was £450,910 (2019 - £484,000). The gain has been calculated as the
market value of the Ordinary shares at the date of conversion, less the nominal value of the Restricted Preference
shares. However, the loss made by the directors as a result of gifting a number of Restricted Preference shares to the
Company was £721,493 (2019 - £nil).
INTERNAL CONTROLS AND RISK MANAGEMENT
The directors are responsible for the Group's system of internal control. Although no system of internal control can
provide absolute assurance against material misstatement or loss, the Group's system is designed to provide
reasonable assurance that problems are identified on a timely basis and dealt with appropriately.
In carrying out their responsibilities, the directors have put in place a framework of controls to ensure as far as
possible that (i) ongoing financial performance is monitored in a timely manner, (ii) where required, corrective action
is taken and (iii) risk is identified as early as practically possible. The directors have reviewed the effectiveness of
internal controls.
The Board, subject to delegated authority, reviews, among other things, capital investment, property sales and
purchases, additional borrowing facilities, guarantees and insurance arrangements.
Details of financial risk management are included within the Risks and Uncertainties section of the Group Strategic
Report.
20 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 30 JUNE 2020
BRIBERY RISK
The Group has adopted an anti-corruption policy and whistle-blowing policy under the Bribery Act 2010.
Notwithstanding this, the Group may be held liable for offences under that Act committed by its employees or
subcontractors, whether or not the Group or the directors had knowledge of the commission of such offences.
OTHER MATTERS
i.
Environmental
The Group understands the importance of operating its business in a manner that minimises any risks to the
environment. Its policies seek to ensure that it achieves this goal.
ii.
iii.
iv.
v.
Group employees
The Group considers its employees to be its most valuable assets and ensures that it deals with them fairly
and constructively at all times.
Social matters
The Group is aware that it has a responsibility to the communities where it operates and seeks to respect
them at all times.
Respect for human rights
The Group always respects the human rights of its stakeholders.
Contributions to pension schemes
No pension scheme benefits are being accrued by the directors.
DIRECTORS' INDEMNITIES AND INSURANCE
The Company has made qualifying third-party indemnity provisions for the benefit of its directors during the year
and they remain in force at the date of approval of this Annual Report.
GOING CONCERN
The directors have adopted the going-concern basis in preparing the financial statements.
The directors consider, as at the date of approving the financial statements, that there is reasonable expectation that
the Group has adequate financial resources to continue to operate, and to meet its liabilities as they fall due for
payment, for at least twelve months following the approval of the financial statements.
Following the declaration by the World Health Organisation of Covid-19 as a global pandemic, governments in the
UK and elsewhere have taken drastic and unprecedented lockdown and other measures which include compulsory
business closures and tight restrictions on movement of people and on their activities. This event has the potential
to impact the Group and its business and is considered further in the Strategic Report on pages 8 and 9.
The Company has undertaken procedures to ensure that the Company has sufficient cash resources and bank
facilities and sufficient covenant margin to manage the potential financial impact of the Covid-19 pandemic on its
business under going concern principles.
See note 2 to the financial statements for further details of the procedures undertaken.
POST BALANCE SHEET EVENTS
Post balance sheet events are detailed further in the Chief Executive’s letter and note 23 of the financial statements.
21 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 30 JUNE 2020
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law, the
directors have elected to prepare the financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union (“IFRS”). 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 of the Company
and the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the
directors are required to:
•
•
•
•
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state that the financial statements comply with IFRS;
prepare the financial statements on the going-concern basis unless it is inappropriate to
presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company's and the Group's transactions and disclose with reasonable accuracy at any time the financial position of
the Company and the Group and enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies
Act 2006) of which the Group's auditor is unaware, and each director has taken all the steps that he ought to have
taken as a director in order to make himself aware of any relevant audit information and to establish that the Group's
auditor is aware of that information.
AUDITOR
In accordance with section 489 of the Companies Act 2006, a resolution to reappoint BDO LLP as auditor will be proposed
at the forthcoming annual general meeting.
ON BEHALF OF THE BOARD
Dominic White
Director
17 September 2020
22 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KCR RESIDENTIAL REIT PLC
Opinion
We have audited the financial statements of KCR Residential REIT Plc (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 30 June 2020 which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Changes in
Equity, the Consolidated and Company Statements of Cash Flows and notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial
statements, as applied in accordance with 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 30 June 2020 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements 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 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
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to
you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group or the Parent Company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are authorised for
issue.
23 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KCR RESIDENTIAL REIT PLC
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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. This matter was 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 this matter.
Key audit matter
How we addressed the key audit matter in the audit
Valuation of investment properties
In this area our audit procedures included:
investment properties
The Group holds
which comprise properties owned by the
Group held for rental income. Investment
properties are valued by
independent
external valuers and the valuation approach
is disclosed in Note 12. The valuation of
investment properties requires significant
judgement in determining the appropriate
inputs to be used in the model and there is
therefore a risk that the properties are
incorrectly valued. We have therefore
determined the valuation of
investment
properties to be a key audit matter. The
accounting policies relating to investment
properties are disclosed in Note 2.
• We compared the key valuation assumptions, which we consider
relate to the market yields appropriate to the sector and location
of the properties, against our independently formed market
expectations. Variances were evaluated through challenge of the
valuers and accumulated to determine whether they supported
the overall valuation.
• We tested the accuracy of key observable valuation inputs,
lease terms, to the
primarily passing rental
information provided to the valuers for use in their valuation for
a sample of properties.
income and
• We met with the external valuer to discuss and challenge the
valuation methodology and key assumptions, and to determine
whether there were any indicators of undue management
influence on the valuations.
• We assessed the competency, qualifications, independence and
objectivity of the external valuers engaged by the company and
reviewed
for
completeness, unusual arrangements and to check that there was
no evidence of management bias.
instructions provided
the valuer
the
to
• We reviewed the property valuation reports and through
discussions with the valuer we assessed the impact of Covid-19
on the valuation of the investment properties.
Key observations:
We did not identify any indicators to suggest that the valuation of
the Group’s investment properties is inappropriate.
24 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KCR RESIDENTIAL REIT PLC
Our application of materiality
We set certain thresholds for materiality. These help us to determine the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below
these levels will not necessarily be evaluated as immaterial as we also take into account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
We determined the materiality for the financial statements as a whole to be £306,000 (2019 - £301,000), calculated with
reference to a benchmark of the Company’s gross assets, which is a typical primary measure for users of the financial
statements of investment property companies, of which it represents 1.2% (2019: 1.25%).
Performance materiality is the application of materiality at the individual account or balance level set at an amount to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole. The Group’s performance materiality was set at £214,000
(2019 - £210,000) which represents 70% of the above materiality levels.
We also determined that for items within pre-tax profit, a misstatement of less than materiality for the financial
statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined
materiality for these items at £161,000 (2019 – £187,000) which represents 5% of loss before tax adjusted for fair value
movements on capital items. The Parent Company’s materiality was calculated at £192,000 (2019: £154,000) based on
the same as group basis.
Whilst materiality for the financial statements of a whole was £306,000 (2019: £301,700), each component of the Group
was audited to a lower level of materiality. Significant component materiality ranged from £74,000 to £192,000.
We reported to the Audit Committee all potential adjustments in excess of £15,000 (2019: £15,000). We also agreed to
report differences below these thresholds that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of the
valuation of unlisted investments which have a high level of estimation uncertainty involved.
We considered the risk of the financial statements being misstated or not prepared in accordance with the underlying
legislation or standards. We then directed our work toward areas of the financial statements which we assessed as having
the highest risk of containing material misstatements, including those set out above.
There are five significant components in the Group, which are all registered and operate in the UK. All significant
components of the group, and the consolidation were subject to full scope audits by BDO LLP. There were no significant
changes to this approach during the year compared to the previous year’s audit.
25 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KCR RESIDENTIAL REIT PLC
Other information
The Directors are responsible for the other information. The other information comprises the information included in
the Annual Report, other than the financial statements and our auditor’s report thereon. 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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. 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 Report of the Directors for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the
Directors.
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 Statement of Directors' Responsibilities, 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.
26 | P a g e
KCR RESIDENTIAL REIT plc
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
KCR RESIDENTIAL REIT PLC
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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Paul Fenner (Senior Statutory Auditor)
for and on behalf of BDO LLP
Statutory Auditor
Birmingham, UK
18 September 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
27 | P a g e
KCR RESIDENTIAL REIT plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
CONTINUING OPERATIONS
Revenue
Cost of sales
GROSS PROFIT
Administrative expenses
Other operating income
Notes
3
30 June
2020
£
30 June
2019
£
1,035,816
(152,605)
883,211
777,827
(212,743)
565,084
(1,610,547)
(1,446,565)
14,576
-
Fair value through profit and loss - Revaluation of
investment properties
12
(311,888)
3,268
OPERATING LOSS BEFORE SEPARATELY DISCLOSED ITEMS
(1,024,648)
(878,213)
Separately disclosed administrative items
Share-based payment charge
Costs associated with third-party fundraising and issue of shares
Costs associated with refinancing
Loss on disposal of property SPV
OPERATING LOSS
Finance costs
Finance income
LOSS BEFORE TAXATION
Taxation
LOSS FOR THE YEAR
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR
Loss attributable to owners of the parent
Loss per share expressed in pence per share
Basic
Diluted
19
6
6
13
5
5
6
7
8
(1,599,681)
(1,387,441)
(317,875)
(137,327)
(407,616)
-
-
(340,753)
(3,079,531)
(3,014,023)
(483,932)
(732,984)
2,645
9,635
(3,560,818)
(3,737,372)
-
-
(3,560,818)
(3,737,372)
(3,560,818)
(3,737,372)
(3,560,818)
(3,737,372)
(13.48)
(4.98)
(24.66)
(24.66)
The notes on pages 36 to 62 form part of the financial statements 28 | P a g e
KCR RESIDENTIAL REIT plc (REGISTERED NUMBER: 09080097)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 JUNE 2020
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Investment properties
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
SHAREHOLDERS' EQUITY
Share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
TOTAL EQUITY
LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing loans and borrowings
CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Net asset value per share (pence)
Notes
11
12
14
15
30 June
2020
£
30 June
2019
£
46,410
61,370
23,592,000
23,923,000
23,638,410
23,984,370
63,889
1,535,946
1,599,835
77,078
29,298
106,376
25,238,245
24,090,746
16
2,756,963
2,029,178
13,535,468
10,018,986
344,424
14,930
67,500
14,930
(4,511,633)
(2,550,496)
12,140,152
9,580,098
18
17
18
11,052,419
9,881,344
374,416
1,671,258
2,045,674
2,737,010
1,892,294
4,629,304
13,098,093
14,510,648
25,238,245
24,090,746
8
44.03
60.67
The financial statements were approved and authorised for issue by the Board of Directors on 17 September 2020 and
were signed on its behalf by:
Dominic White
Director
The notes on pages 36 to 62 form part of the financial statements 29 | P a g e
KCR RESIDENTIAL REIT plc (REGISTERED NUMBER: 09080097)
COMPANY STATEMENT OF FINANCIAL POSITION
30 JUNE 2020
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Investments
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
SHAREHOLDERS' EQUITY
Share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
TOTAL EQUITY
LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing loans and borrowings
CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
11
13
14
15
30 June
2020
£
30 June
2019
£
2,099
2,348
10,706,081
10,706,081
10,708,180
10,708,429
3,828,071
1,476,379
5,304,450
1,813,404
3,334
1,816,738
16,012,630
12,525,167
16
2,756,963
2,029,178
13,535,468
10,018,986
344,424
14,930
67,500
14,930
(9,147,860)
(7,592,921)
7,503,925
4,537,673
18
17
18
-
-
4,756,956
4,756,956
8,423,635
85,070
8,508,705
8,508,705
1,338,244
1,892,294
3,230,538
7,987,494
16,012,630
12,525,167
As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of
these financial statements. The Company’s loss for the financial year was £(3,154,620) (2019 - £(3,548,447)).
The financial statements were approved and authorised for issue by the Board of Directors on 17 September 2020 and were
signed on its behalf by:
Dominic White
Director
The notes on pages 36 to 62 form part of the financial statements 30 | P a g e
KCR RESIDENTIAL REIT plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Share
capital
Share
premium
Unissued
share
capital
Capital
redemption
reserve
Other
reserve
Retained
earnings Total equity
£
£
£
£
£
£
£
Balance at 1 July 2018
1,435,721
7,358,244
1,260,299
67,500
29,862
(200,565)
9,951,061
Changes in equity
Transactions with owners:
Issue of share capital
593,457
2,660,742
(1,260,299)
Share-based payments
-
-
-
Total transactions with owners
593,457
2,660,742
(1,260,299)
Equity element of loan finance
Total comprehensive expense
-
-
-
-
Balance at 30 June 2019
2,029,178 10,018,986
Changes in equity
Transactions with owners:
Issue of share capital
727,785
3,516,482
Share-based payments
-
-
Total transactions with owners
727,785
3,516,482
Total comprehensive expense
-
-
Balance at 30 June 2020
2,756,963 13,535,468
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,993,900
1,387,441
1,387,441
1,387,441
3,381,341
(14,932)
-
(14,932)
-
(3,737,372)
(3,737,372)
67,500
14,930
(2,550,496)
9,580,098
276,924
-
276,924
-
-
-
-
-
-
4,521,191
1,599,681
1,599,681
1,599,681
6,120,872
(3,560,818)
(3,560,818)
344,424
14,930
(4,511,633)
12,140,152
The notes on pages 36 to 62 form part of the financial statements 31 | P a g e
KCR RESIDENTIAL REIT plc
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Share
capital
Share
premium
Unissued
share capital
Capital
redemption
reserve
Other
reserve
Retained
earnings
Total equity
£
£
£
£
£
£
£
Balance at 1 July 2018
1,435,721
7,358,244
1,260,299
67,500
29,862
(5,431,915)
4,719,711
Changes in equity
Transactions with owners:
Issue of share capital
593,457
2,660,742
(1,260,299)
Share-based payments
-
-
-
Total transactions with
owners
Equity element of loan
finance
Total comprehensive
expense
593,457
2,660,742
(1,260,299)
-
-
-
-
Balance at 30 June 2019
2,029,178 10,018,986
Changes in equity
Transactions with owners:
Issue of share capital
727,785
3,516,482
Share-based payments
-
-
Total transactions with
owners
Total comprehensive
expense
727,785
3,516,482
-
-
Balance at 30 June 2020
2,756,963 13,535,468
-
-
-
-
-
-
-
-
-
1,993,900
1,387,441
1,387,441
1,387,441
3,381,341
(14,932)
-
(14,932)
-
(3,548,447)
(3,548,447)
67,500
14,930
(7,592,921)
4,537,673
276,924
-
276,924
-
-
-
-
-
-
4,521,191
1,599,681
1,599,681
1,599,681
6,120,872
(3,154,620)
(3,154,620)
344,424
14,930
(9,147,860)
7,503,925
-
-
-
-
-
-
-
-
The notes on pages 36 to 62 form part of these financial statements
32 | P a g e
KCR RESIDENTIAL REIT plc
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Cash flows from operating activities
Cash used in operations
Interest paid
Net cash used in operating activities
Cash flows from investing activities
Purchase of property, plant & equipment
Repayment of other borrowings
Purchase of investment properties
Disposal of investment properties
Disposal of property SPV
Interest received
Note
2020
£
2019
£
1
(1,554,962)
(4,960,666)
(483,932)
(732,984)
(2,038,894)
(5,693,650)
(8,178)
(40,451)
(1,738,076)
(518,888)
538,000
-
2,645
-
(24,732)
-
1,140,000
9,635
Net cash generated from investing activities
(1,724,497)
1,084,452
Cash flows from financing activities
Loan repayments in year
New loans in year
Shares issued
Net cash generated from financing activities
(6,658,130)
7,868,169
4,060,000
5,270,039
(796,079)
3,434,250
1,993,900
4,632,071
Increase in cash and cash equivalents
1,506,648
22,873
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
29,298
1,535,946
6,425
29,298
The notes on pages 36 to 62 form part of these financial statements
33 | P a g e
KCR RESIDENTIAL REIT plc
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Cash flows from operating activities
Cash used in operations
Interest paid
Note
1
2020
£
2019
£
(1,868,397)
(178,040)
(2,165,998)
(428,185)
Net cash generated from/(used in) operating activities
(2,046,437)
(2,594,183)
Cash flows from investing activities
Purchase of property, plant & equipment
Disposal of property SPV
Interest received
Net cash generated from investing activities
Cash flows from financing activities
Increase in loans from group companies
Increase in loans to group companies
Loan repayments in year
Shares issued
Net cash (used in)/generated from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(980)
-
2,569
1,589
7,787,070
(2,024,997)
(6,304,180)
4,060,000
3,517,893
1,473,045
3,334
1,476,379
-
1,140,000
9,619
1,149,619
-
-
(546,079)
1,993,900
1,447,821
3,257
77
3,334
The notes on pages 36 to 62 form part of these financial statements
34 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
1)
RECONCILIATION OF LOSS BEFORE TAXATION TO CASH USED IN OPERATIONS
Group
Loss before taxation
Depreciation charges
Revaluation of investment properties
Loss on disposal of property SPV
Share-based payment charge
Finance costs
Finance income
Decrease in trade and other receivables
Decrease in trade and other payables
Cash used in operations
Company
Loss before taxation
Depreciation charges
Loss on disposal of property SPV
Share-based payment charge
Finance costs
Finance income
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash used in operations
2020
£
2019
£
(3,560,818)
(3,737,372)
23,138
311,888
-
18,074
(3,268)
340,753
1,599,681
1,387,441
483,932
(2,645)
732,984
(9,635)
(1,144,824)
(1,271,023)
13,189
626,349
(423,327)
(4,315,992)
(1,554,962)
(4,960,666)
2020
£
2019
£
(3,154,620)
(3,548,447)
1,229
-
1,636
241,585
1,599,681
1,387,441
178,040
(2,569)
428,185
(9,619)
(1,378,239)
(1,499,219)
10,330
(894,340)
(500,488)
227,561
(1,868,397)
(2,165,998)
The notes form part of these financial statements
35 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
1)
PRESENTATION OF FINANCIAL STATEMENTS
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and as adopted by
the European Union.
Functional and presentation currency
These consolidated financial statements are presented in Pounds Sterling ('GBP'), which is considered by the
directors to be the functional currency of the Group.
Changes in accounting policies
Adoption of new and revised standards
The Group has applied the following accounting standards that are mandatorily effective for accounting
periods commencing on or after 1 January 2019:
IFRS 16
Leases
The application of this standard has not had a material impact on the amounts reported in these financial
statements.
Changes in accounting policies for standards implemented in the year are as follows:
IFRS 16 Leases
IFRS 16 was adopted on 1 January 2019 without restatement of comparative figures. No transitional
adjustments were required upon adoption.
The standard makes substantial changes to the recognition and measurement of leases by lessees. On
adoption of the standard, lessees, with certain exceptions for short term or low value leases, are required to
recognise all leased assets on their Statement of Financial Position as ‘right-of-use assets’ with a
corresponding lease liability.
The requirements for lessors are substantially unchanged.
The Group has a small number of operating leases concerning office premises and plant and equipment. IFRS
16 provides an exemption for short term operating leases and leases of low value. The company has taken
advantage of the exemptions rather than establishing a right to use asset.
New standards in issue but not yet effective
As at 30 June 2020, the Group has not applied the following new and revised standards that have been issued
but are not yet effective:
•
•
•
•
•
Amendments to References to the Conceptual Framework in IFRS Standards (effective 1 January 2020)
Amendments to IFRS 3: Business Combinations - Definition of a business (effective 1 January 2020)
Amendments to IAS 1 and IAS 8: Definition of Material (effective 1 January 2020)
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (effective 1 January 2020)
Amendments to IAS 1: Classification of Liabilities as Current or Non-current (effective 1 January 2022).
The directors do not anticipate that the adoption of the above new and revised standards will have a
significant impact on the financial statements of the Group in future periods.
The notes form part of these financial statements
36 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2)
ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis other than as set out
in the following policies.
Going concern
The financial statements have been prepared on a going concern basis. This requires the directors to consider,
as at the date of approving the financial statements, that there is reasonable expectation that the Group has
adequate financial resources to continue to operate, and to meet its liabilities as they fall due for payment,
for at least twelve months following the approval of the financial statements. This includes considering the
borrowings of £1,586,188 which fall due for repayment during that period. It is the intention of the company
to refinance which would potentially also provide further capital which the Group could use for future
property acquisitions.
The Company has undertaken procedures to ensure that the Company has sufficient cash resources and bank
facilities and with sufficient covenant margin to manage the potential financial impact of the Covid-19
pandemic on its business under going concern principles. These procedures included the following:
• Reviewing and establishing that cash balances and bank facilities are sufficient to cover at least twelve
months of operations;
• Review of financial covenant ratios and the Group’s ability to meet the covenants for a period of at least
twelve months of operation; and
• Reviewing cash flow forecast scenarios. Any decision on property acquisitions and developments in the
next twelve months will be taken following review of revised cash flow forecasts.
In the light of the results of the procedures described above, the directors consider that the adoption of the
going concern basis is reasonable and appropriate.
Basis of consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an
investee if all three of the following elements are present: power over the investee, exposure to variable
returns from the investee, and the ability of the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these
elements of control.
The consolidated financial statements incorporate the results of business combinations using the acquisition
method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations
are included in the consolidated statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control ceases.
The subsidiaries included in the consolidated financial statements, from the effective date of acquisition, are
K&C (Newbury) Limited, K&C (Coleherne) Limited, K&C (Osprey) Limited, KCR (Kite) Limited, KCR (Cygnet)
Limited and KCR (Southampton) Limited.
The consolidated financial statements present the results of the company and its subsidiaries ("the Group")
as if they formed a single entity. Intercompany transactions and balances between group companies are
therefore eliminated in full.
The notes form part of these financial statements
37 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2) ACCOUNTING POLICIES (continued)
Transaction costs, other than those of a capital nature and those associated with the issue of debt or equity
securities that the Group incurs in connection with a business combination are expensed as incurred.
KCR (Cygnet) Limited was disposed of by the Group in December 2018. Details can be found in note 13.
Investments
Investments in subsidiaries are held at cost less provision for impairment.
Revenue recognition
Revenue of the Group for the year was derived mainly from its principal activity, being the letting to third
parties of, and management of, property assets owned by the Group. This income includes rental income,
management fees and sales commissions.
Revenue from contracts with customers is recognised when control of the services are transferred to the
customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange
for those services net of discounts, VAT and other sales-related taxes. The Group concludes that it is the
principal in its revenue arrangements, because it typically controls the goods or services before transferring
them to the customer. Contracts with customers do not contain a financing component or any element of
variable consideration.
Rental income from operating leases is recognised periodically in line with the time for which the property is
rented. Rental income received in advance is recognised in deferred income.
Management fees derived from the management of property assets owned by third parties are recognised as
the services are provided.
Revenue from sales commissions is recognised at the point in time when control of the asset is transferred
from the vendor to the buyer.
Separately disclosed administrative items
Separately disclosed items are those that are deemed to be exceptional by size or nature in relation to the
activities of the Group. In the case of share-based payment charges, these are included as a separately
disclosed administrative item as a significant non-cash item.
Finance costs
Finance costs comprise interest expense on borrowings.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying
asset are recognised in profit or loss using the effective interest method.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful
life.
Fixtures and fittings
Computer equipment
- 5% and 25% on cost
- 25% on cost
The notes form part of these financial statements
38 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2)
ACCOUNTING POLICIES (continued)
Investment properties
Investment properties comprise properties owned by the Group which are held for capital appreciation, rental
income or both. Investment properties are initially measured at cost, including expenditure that is directly
attributable to the acquisition of the asset. Investment properties are revalued on acquisition by independent
external valuers and then by the directors or independent valuers annually thereafter. Acquisitions and
disposals are recognised on exchange of contracts. Any gain or loss arising from a change in fair value is
recognised in profit or loss.
Further details of the investment property valuation methodology are contained in note 12 of the financial
statements.
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated
with the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and balances held with banking institutions.
Financial assets
Recognition and derecognition
Financial assets are recognised initially on the date that the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the
risks and rewards of ownership of the financial assets are transferred.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
only when the Group has a legal right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
Classification and initial recognition of financial assets
Except for trade receivables that do not contain a significant financing component and are measured at the
transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value plus
adjusted for any directly attributable transaction costs.
Financial assets are classified into the following categories:
-
-
-
Amortised cost
Fair value through profit or loss (FVTPL)
Fair value through other comprehensive income (FVOCI)
The classification is determined by both:
-
-
The entity’s business model for managing the asset
The contractual cash flow characteristics of the financial asset
All income and expenses relating to financial assets that are recognised in profit or loss are presented within
finance costs, finance income or other financial items, except for impairment of trade receivables which is
presented within administrative expenses.
The notes form part of these financial statements
39 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2)
ACCOUNTING POLICIES (continued)
Subsequent measurement of financial assets
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not
designated as FVTPL):
-
-
They are held within a business model whose objective is to hold the financial assets and collect its
contractual cash flows;
The contractual terms of the financial assets give rise to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method.
Discounting is omitted where its effect is immaterial. The Group’s cash and cash equivalents, trade and most
other receivables fall into this category.
Financial assets which are designated as FVTPL are measured at fair value with gains or losses recognised in
profit or loss. The fair values of financial assets in this category are determined with reference to active
market transactions or using a valuation technique where no active market exists. The Group’s investment
properties are designated as FVTPL assets.
Impairment of financial assets
IFRS 9’s impairment requirements use forward looking information to recognise expected credit losses – the
‘expected credit loss (ECL) method’. Recognition of credit losses is no longer dependent on first identifying a
credit loss event, but considers a broader range of information in assessing credit risk and credit losses
including past events, current conditions, reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
The group makes use of a simplified approach in accounting for trade and other receivables and records the
loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows,
considering the potential for default at any point during the life of the financial instrument. In calculating, the
Group uses its historical experience, external indicators and forward-looking information to calculate the
expected credit losses.
Financial liabilities
Financial liabilities are recognised initially on the date that the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or
expire.
The Group classifies non-derivative financial liabilities into the ‘other financial liabilities’ category. Such
financial liabilities are recognised initially at fair value adjusted for directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective
interest method.
‘Other financial liabilities’ comprise trade and other payables and other short-term monetary liabilities.
Bank and other borrowings are initially recognised at the fair value of the amount advanced net of any
transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are
subsequently measured at amortised cost using the effective interest method. Interest expense in this
context includes initial transaction costs and premium payable on redemption, as well as any interest or
coupon payable while the liability is outstanding.
The notes form part of these financial statements
40 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2)
ACCOUNTING POLICIES (continued)
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities.
Share capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of Ordinary shares are
recognised as a deduction from equity.
Leasing
The company applies IFRS 16 Leases. The costs of leases of low value items and those with a short term at
inception are recognised as incurred.
Taxation
Tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss
except to the extent that it relates to a business combination, or items recognised directly in equity or in
other comprehensive income. As a REIT, the Group is generally not liable to corporation tax.
Deferred tax would be recognised in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
tax is recognised for:
•
•
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither the accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, using tax rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to
the extent that it is probable that future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time value of money and the risks specific to the liability.
The unwinding of the discount is recognised as finance cost.
The notes form part of these financial statements
41 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
2)
ACCOUNTING POLICIES (continued)
Share-based payments
The Group allowed certain directors and other individuals to acquire shares in the parent company until the
scheme was disbanded on 6 August 2019. The grant date fair value of share-based payment awards granted
is recognised as an employee expense with a corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. The fair value of the options granted is measured
using an option pricing model, taking into account the terms and conditions upon which the options were
granted. The fair value was charged as an expense in the income statement over the vesting period and the
charge adjusted each year to reflect the expected and actual level of vesting. No adjustment is made to the
charge after the vesting date.
Further details regarding the conversion and cancellation of the share-based payment awards are included
in Note 19.
Critical accounting estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions that affect the application of accounting policies and the
reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are revised and in any future years affected.
Information about critical estimates and assumptions that have the most significant effect on the amounts
recognised in the consolidated financial statements and/or have a significant risk of resulting in a material
adjustment within the next financial year is as follows:
▪
▪
Share-based payments
The total amount to be expensed is determined by reference to the fair value of the options granted.
The fair values were estimated using the Black-Scholes valuation model. In arriving at the charge for the
period, assumptions are made on the number of options likely to be exercised, the current market value
of the shares and the volatility of the market value of the shares. Further details regarding share-based
payments are contained in note 19 of the financial statements.
Determination of fair values
A number of the Group's accounting policies and disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities. Fair values have been determined for
measurement and/or disclosure purposes based on the following methods.
When applicable, further information about the assumptions made in determining fair values is
disclosed in the notes specific to that asset or liability.
Investment properties
The Group's investment properties are valued, on the basis of market value. The fair value of investment
properties is based either on independent professional valuations in accordance with the Royal
Institution of Chartered Surveyors’ Appraisal and Valuation Standards 2014 as amended or by the
directors, based on market prices for similar items. The Group's investment properties were all valued
independently at 30 June 2020 at £23,592,000
The directors are of the opinion that the estimates and assumptions that they have used in the valuation
of investment properties are appropriate. Further details of the valuation methodology are contained
in note 12 of the financial statements.
The notes form part of these financial statements
42 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
3)
REVENUE
The Group is involved in UK property ownership, management and letting and is considered to operate in a
single geographical and business segment.
The total revenue of the Group for the year was derived from its principal activities, being the letting to third
parties of, and management of, property assets owned by the Group, and, in certain cases, the management
of property assets owned by third parties.
The Group’s investment property consists of residential housing for the private rented sector and therefore
has multiple tenants and as a result does not have any significant customers.
Revenue analysed by class of business
Rental income
Management fees
Resale commission
Ground rents
Leasehold extension income
Other income
4)
EMPLOYEES AND DIRECTORS
Group
Wages and salaries
Social security costs
Pension costs
The average monthly number of employees during the year was as follows:
Directors and management
Administration
2020
£
2019
£
727,859
619,906
74,218
39,043
13,655
168,916
12,125
74,887
62,490
16,649
-
3,895
1,035,816
777,827
2020
£
2019
£
635,023
657,793
69,628
12,732
86,735
(506)
717,383
744,022
2020
2019
7
3
10
5
3
8
The notes form part of these financial statements
43 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
4)
EMPLOYEES AND DIRECTORS (continued)
Directors' remuneration (as per Report of the Directors)
Share-based payment charge relating to directors (see Note 19)
Remuneration of the highest-paid director
Amounts paid into a pension scheme of the highest-paid director
2020
£
258,387
1,055,755
145,853
-
2019
£
486,300
974,199
278,200
-
The Group directors are considered to be key management personnel. Certain directors and others held
Restricted Preference shares in the Company until 6 August 2019, further details of which are contained in
note 19 of the financial statements.
Company
Wages and salaries
Social security costs
Pension costs
The average monthly number of employees during the year was as follows
Directors and management
Administration
5)
FINANCE COSTS AND INCOME
Finance costs
Loan interest
Finance income
Bank interest
2020
£
2019
£
573,637
597,700
60,631
10,110
78,320
(2,630)
644,378
673,390
7
1
8
5
1
6
2020
£
2019
£
483,932
732,984
2,645
9,635
The notes form part of these financial statements
44 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
6)
LOSS BEFORE TAXATION
The loss before taxation is stated after charging:
Hire of plant and machinery
Other operating leases
Depreciation - owned assets
Auditors' remuneration for the Group - audit services for parent company
- audit services for subsidiaries
- taxation advisory services
2020
£
10,437
20,639
23,138
40,000
20,000
-
2019
£
8,230
23,052
18,074
38,000
10,000
29,675
Separately disclosed items
At the start of the year the Group incurred significant costs relating to third-party fundraising and issue of
shares. The costs to the Group totalled £317,875 (2019 - £407,616). The Group also incurred significant
costs relating to refinancing during the second half of the year, these totalled £137,327 (2019 - £nil). It is
considered that the size and nature of these costs are such that they should be disclosed on the face of the
Consolidated Statement of Comprehensive Income.
Further information on the share-based payments, which are shown on the face of the Consolidated
Statement of Comprehensive Income, can be found in note 19.
Also during the year, the Group has commenced substantial refurbishment work at investment properties
owned by K&C (Coleherne) Limited and K&C (Osprey) Limited. The costs incurred in the 2020 financial year
amounted to £41,602. The refurbishment costs will continue in the 2021 financial year.
7)
TAXATION
Analysis of tax
Current tax
UK corporation tax
Deferred tax
Total tax
2020
£
-
-
-
2019
£
-
-
-
The notes form part of these financial statements
45 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
7)
TAXATION (continued)
Factors affecting the tax expense
The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is
explained below:
Loss on ordinary activities before taxation
2020
£
2019
£
(3,560,818)
(3,737,372)
Loss on ordinary activities multiplied by the standard rate of corporation tax
in the UK of 19% (2019 – 19%)
(676,555)
(710,101)
Effects of
Expenses not deductible
Income not taxable
Capital losses
Losses not recognised in deferred tax
Tax credit
8)
LOSS PER SHARE AND NET ASSET VALUE
481,229
(66,141)
-
261,467
444,191
(64,455)
23,238
307,127
-
-
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted
average number of Ordinary shares outstanding during the year.
Fully diluted earnings per share is calculated using the weighted average number of shares adjusted to assume
the conversion of all dilutive potential Ordinary shares.
Basic loss per share
Loss attributable to ordinary shareholders
(3,560,818)
26,411,154
Effect of dilutive securities
-
-
2020
Weighted average
number of shares
Per share
amount
Pence
(13.48)
-
2019
Weighted average
number of shares
Per share
amount
No
No
Loss
£
Loss
£
Loss attributable to ordinary shareholders
(3,737,372)
15,156,059
Effect of dilutive securities
-
-
The notes form part of these financial statements
Pence
(24.66)
-
46 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
8)
LOSS PER SHARE AND NET ASSET VALUE (continued)
Diluted loss per share
Loss attributable to ordinary shareholders
(3,560,818)
71,493,121
Effect of dilutive securities
-
-
Loss
£
Loss
£
2020
Weighted average
number of shares
Per share
amount
2019
Weighted average
number of shares
Per share
amount
No
No
Pence
(4.98)
-
Pence
(24.66)
-
Loss attributable to ordinary shareholders
(3,737,372)
15,156,059
Effect of dilutive securities
-
-
The net asset value is calculated by dividing the equity attributable to ordinary shareholders by the number
of Ordinary shares in issue at the balance sheet date.
2020
Equity
Number of shares
£
No
Net asset value
12,140,152
27,569,631
2019
Equity
Number of shares
£
No
Net asset value
9,580,098
15,791,777
Per share
amount
Pence
44.03
Per share
amount
Pence
60.67
The notes form part of these financial statements
47 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
9)
OPERATING LEASES RECEIVABLE
The Group leases residential units within certain of its investment properties under operating leases. The
future minimum lease payments receivable under non-cancellable leases are as follows:
Within one year
Between one and five years
More than 5 years
Total
30 June
2020
£
507,513
239,355
45,531
792,399
30 June
2019
£
508,096
469,846
53,969
1,031,911
Lease revenue is generated from properties owned by K&C (Coleherne) Limited, KCR (Southampton) Limited and
KCR (Kite) Limited that are let on short-term tenancy agreements.
10)
LEASING AGREEMENTS
Minimum lease payments, under non-cancellable operating leases, fall due as follows:
Within one year
Between one and five years
Total
30 June
2020
£
24,784
18,809
43,593
30 June
2019
£
29,784
27,167
56,951
The notes form part of these financial statements
48 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
11)
PROPERTY, PLANT AND EQUIPMENT
GROUP
COST
At 1 July 2018
Additions
At 30 June 2019
Additions
At 30 June 2020
DEPRECIATION
At 1 July 2018
Charge for year
At 30 June 2019
Charge for year
At 30 June 2020
NET BOOK VALUE
At 30 June 2020
At 30 June 2019
COMPANY
COST
At 1 July 2018 and 30 June 2019
Additions
At 30 June 2020
DEPRECIATION
At 1 July 2018
Charge for year
At 30 June 2019
Charge for year
At 30 June 2020
NET BOOK VALUE
At 30 June 2020
At 30 June 2019
Fixtures, fittings &
computer equipment
£
49,111
40,451
89,562
8,178
97,740
10,118
18,074
28,192
23,138
51,330
46,410
61,370
Fixtures, fittings &
computer equipment
£
6,536
980
7,516
2,552
1,636
4,188
1,229
5,417
2,099
2,348
The notes form part of these financial statements
49 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
12)
INVESTMENT PROPERTIES
Group
COST
At 1 July 2018
Additions
Disposals
Revaluations
At 30 June 2019
Additions
Disposals
Revaluations
At 30 June 2020
NET BOOK VALUE
At 30 June 2020
At 30 June 2019
Total
£
26,695,000
24,732
(2,800,000)
3,268
23,923,000
518,888
(538,000)
(311,888)
23,592,000
23,592,000
23,923,000
The investment properties disposed of in the prior year arose from the sale of a property SPV (KCR Cygnet).
In July 2020, all properties were valued by professionally qualified independent external valuers in accordance
with the Royal Institution of Chartered Surveyors’ Appraisal and Valuation Standards 2014 as amended. The
valuation of the investment properties was £23,592,000, which has been included in the financial statements.
Fair value is based on current prices in an active market for similar properties in the same location and
condition. The current price is the estimated amount for which a property could be exchanged between a
willing buyer and willing seller in an arm’s length transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently and without compulsion.
Valuations are based on a market approach which provides an indicative value by comparing the property
with other similar properties for which price information is available. Comparisons have been adjusted to
reflect differences in age, size, condition, location and any other relevant factors.
The fair value for investment properties has been categorised as Level 3 inputs under IFRS 13. The valuer
visited all material properties and his valuations were based on both internal and external site visits.
The valuation technique used in measuring the fair value, as well as the significant inputs and significant
unobservable inputs are summarised in the table below:
Fair Value
Hierarchy
Level 3
Valuation Technique
Significant Inputs Used
Significant
Unobservable Inputs
Income capitalisation and or capital
value on a per square foot basis
Adopted gross yield
3.00% - 5.60%
Adopted rate per
square foot
£303 - £1,018
The notes form part of these financial statements
50 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
12)
INVESTMENT PROPERTIES (continued)
The fair value would increase if market rents were higher and/or the rates per square foot were higher and/or
capitalisation rates were lower.
The fair values would decrease if market rents were lower and/or the rates per square foot were lower and/or
capitalisation rates were higher.
The revenue earned by the Group from its investment properties and all direct operating expenses incurred
on its investment properties are recorded in the Consolidated Statement of Comprehensive Income.
The total rental income in relation to investment properties for the Group equated to £727,859 (2019 -
£619,906). The total rental expenses in relation to investment properties for the Group equated to £152,605
(2019 - £183,977).
13) INVESTMENTS
Company
COST
At 1 July 2018
Disposals
At 30 June 2019 and 30 June 2020
NET BOOK VALUE
At 30 June 2020
At 30 June 2019
As at 17 September 2020, the Company's investments comprise the following:
Subsidiaries
K&C (Coleherne) Limited
Nature of business
Property letting
Registered office: UK
Class of shares
Ordinary
Shares in group
undertakings
£
12,086,858
(1,380,777)
10,706,081
10,706,081
10,706,081
Holding
%
100.00
K&C (Osprey) Limited
Registered office: UK
100.00
Nature of business
Property letting and property management
Class of shares
Ordinary
KCR (Kite) Limited
Nature of business
Property letting
Registered office: UK
100.00
Class of shares
Ordinary
The notes form part of these financial statements
51 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
13)
INVESTMENTS (continued)
KCR (Southampton) Limited
Registered office: UK
100.00
Nature of business
Property letting
K&C (Newbury) Limited
Nature of business
Dormant
Disposal of KCR (Cygnet) Limited
Class of shares
Ordinary
Registered office: UK
100.00
Class of shares
Ordinary
On 20 December 2018, the Company sold the entire issued share capital of KCR (Cygnet) Limited for total
consideration of £1,140,000, satisfied by cash of £1,140,000. The assets and liabilities of the subsidiary at the
date of disposal were:
Investment property
Debtors
Bank loan
Other creditors
Net assets disposed of
Loss on disposal of property
Total consideration
Satisfied by cash
14)
TRADE AND OTHER RECEIVABLES
£
2,800,000
43,427
(1,293,286)
(69,388)
1,480,753
(340,753)
1,140,000
1,140,000
Trade debtors
Amounts owed by group undertakings
Other debtors
VAT
Prepayments
Group
Company
2020
£
23,460
-
19,403
604
20,422
63,889
2019
£
3,000
2020
2019
£
-
£
-
-
3,812,236
1,787,239
34,773
12,271
27,034
77,078
748
-
15,087
7,500
-
18,665
3,828,071
1,813,404
The Group and Company's exposure to credit risk is disclosed in note 21.
There is no material difference between the fair value of trade and other receivables and their book value.
All receivables are due within 12 months of 30 June 2020. None of those receivables has been subject to a
significant increase in credit risk since initial recognition and, consequently, no expected credit losses have
been recognised.
The notes form part of these financial statements
52 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
15)
CASH AND CASH EQUIVALENTS
Cash in hand
Bank accounts
16)
SHARE CAPITAL
Allotted, issued and fully paid
Group
Company
2020
£
40
1,535,906
1,535,946
2019
£
40
29,258
29,298
2020
2019
£
-
1,476,379
1,476,379
£
-
3,334
3,334
Number
Class
Nominal value
27,569,631
Ordinary
-
Restricted Preference
£0.10
£0.10
30 June
2020
£
30 June
2019
£
2,756,963
1,579,178
-
450,000
2,756,963
2,029,178
2020
Number
2020
£
2019
Number
2019
£
Ordinary shares of £0.10 each
At 1 July
15,791,777
1,579,178
9,857,207
985,721
Conversion of Restricted Preference Shares
1,730,765
173,077
1,500,000
150,000
Shares issued as loan repayments
Shares issued as creditor payments
577,778
447,089
57,778
44,708
946,286
94,629
2,200,427
220,042
Shares issued for cash
9,022,222
902,222
1,287,857
128,786
At 30 June
27,569,631
2,756,963
15,791,777
1,579,178
The Ordinary shares issued during the year, with the exception of the 1,730,765 issued upon conversion of
Restricted Preference shares, were issued at £0.45 per share. The Ordinary shares issued upon conversion of
Restricted Preference shares were issued at £0.10 per share.
2020
Number
2020
£
2019
Number
2019
£
Restricted Preference shares of £0.10 each
At 1 July
Shares issued for cash
4,500,000
450,000
4,500,000
450,000
-
-
1,500,000
150,000
Conversion to Ordinary shares
(1,730,765)
(173,077)
(1,500,000
(150,000)
Gifted back to company (and
subsequently cancelled)
At 30 June
(2,769,235)
(276,923)
-
-
-
-
4,500,000
450,000
The notes form part of these financial statements
53 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
17)
TRADE AND OTHER PAYABLES
Current
Trade creditors
Amounts owed to group undertakings
Other taxes and social security
Other creditors
Accruals and deferred income
Group
Company
2020
£
2019
£
112,690
358,567
2020
£
80,870
-
36,043
28,436
197,247
374,416
-
8,210,910
45,253
1,779,710
553,480
24,819
6,131
100,905
2,737,010
8,423,635
1,338,244
2019
£
351,060
423,840
33,291
8,063
521,990
Other creditors include £nil (2019 - £1,738,076) owed to the vendor on the purchase of the investment
property within KCR (Southampton) Limited.
The Group and Company exposure to liquidity risk related to trade and other payables is disclosed in note 21.
There is no material difference between the fair value of trade and other payables and their book value.
Amounts owed to group undertakings are repayable on demand.
18)
FINANCIAL LIABILITIES - BORROWINGS
Current
Bank loans
Other loans
Non-current
Bank loans
Other loans
Group
Company
2020
£
-
1,671,258
1,671,258
2019
£
82,224
1,810,070
1,892,294
2020
£
-
85,070
85,070
2019
£
82,224
1,810,070
1,892,294
7,868,169
3,184,250
11,052,419
4,756,956
5,124,388
9,881,344
-
-
-
4,756,956
-
4,756,956
The notes form part of these financial statements
54 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
18)
FINANCIAL LIABILITIES – BORROWINGS (continued)
Terms and debt repayment schedule
Group
1 year or less
£
1-2 years
£
2-5 years
£
More than 5 years
£
Totals
£
2020
Bank loans
275,386
Other loans
1,891,423
Company
Other loans
2,166,809
85,070
85,070
275,386
175,134
450,520
825,195
525,401
1,350,596
15,375,714
16,751,681
3,782,624
6,374,582
19,158,338
23,126,263
-
-
-
-
-
-
85,070
85,070
2019
Group
1 year or less
£
Bank loans
265,740
1-2 years
£
265,740
Other loans
2,191,102
2,176,063
2-5 years
£
797,220
525,401
More than 5
years
£
6,288,388
3,957,757
Totals
£
7,617,088
8,850,323
2,456,842
2,441,803
1,322,621
10,246,145
16,467,411
Company
Bank loans
265,740
265,740
797,220
6,288,388
Other loans
1,979,796
-
-
-
7,617,088
1,979,796
2,245,536
265,740
797,220
6,288,388
9,596,884
Details of the principal loans are as follows:
a)
b)
On 28 June 2018, the Company took out a new loan of £4,930,000, with Metro Bank plc, repayable
by 300 instalments of £22,145 and a final instalment of £1,239,328. The loan was secured by a first
debenture over all assets and undertakings of the Company, a first legal charge over the freehold
properties known as 272 Ladbroke Grove, 282 Ladbroke Grove and 284 Ladbroke Grove and the
leasehold premises known as Flat 9 Lomond Court, and a cross-guarantee over the aforementioned
properties. It was also secured by a cross-guarantee from K&C (Coleherne) Limited over the freehold
property known as 25 Coleherne Road and a debenture over the assets and undertakings of K&C
(Coleherne) Limited. The loan was also secured by a pledge of shares of K&C (Coleherne) Limited
and KCR (Kite) Limited. The loan was repaid in full during the 2020 financial year when the Group
refinanced with Hodge Bank.
A three-year loan of £1,995,000 was entered into during the 2018 financial year. The loan was
repayable by 36 monthly instalments of £9,144 and a final instalment of £1,940,138. On 5
September 2019, the company repaid £353,950. The balance outstanding at 30 June 2020 was
£1,586,188. The monthly repayments from that date reduced to £7,568. The monthly instalments
are interest payments and do not include any capital repayments. Interest is charged at 5.50 per
cent per annum. The loan is secured by a fixed and floating charge over all the property and assets
of K&C (Osprey) Limited, including the property known as Heathside, 562 Finchley Road.
The notes form part of these financial statements
55 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
18)
FINANCIAL LIABILITIES – BORROWINGS (continued)
c)
d)
e)
f)
g)
h)
On 24 June 2018, the Company entered into a loan agreement arranged by DGS Capital Partners
LLP, a limited liability partnership in which Michael Davies is a member, with certain investors. The
loan was for £1,475,000 and was subject to an interest rate of 12 per cent per annum. The loan
was to be repaid within 300 days of the initial drawdown date of 29 June 2018. The loan was
extended during the previous financial year and from 10 April 2019, the interest rate was increased
to 14 per cent per annum. In the 2020 financial year, the company incurred interest of £30,196 on
the loan. On 6 August 2019 the loan and all outstanding interest and fees were repaid. The
repayment consisted of £1,425,000 cash and £129,311 of Ordinary shares.
During the previous financial year, the Company issued several convertible loan notes, totalling
£200,000, the debt element of which totalled £185,070. The convertible loan notes had a
redemption date of 30 June 2020. £100,000 of the convertible loan notes was converted to Ordinary
shares on 6 August 2019. At 30 June 2020 the debt element outstanding was £85,070. The loan was
settled in full in July 2020.
During the previous year, Oliver Vaughan, a director of the Company, loaned the Company
£150,000. The loan was unsecured and was due for repayment on 15 May 2019. The loan was
extended in June 2019. Upon extension of the loan, the lender charged the Company a fee of
£10,000. The loan was interest free. £110,000 of the loan was repaid via the issue of Ordinary
shares in the Company on 6 August 2019. The remaining £50,000 was repaid on 8 August 2019.
On 4 December 2018, KCR (Southampton) Limited took out a new loan of £3,184,250, with Lendco
Limited. The term of the loan was 10 years. The monthly instalments are interest payments and do
not include any capital repayments. Interest is charged at 3.19 per cent for the first 24 months.
Interest for the remainder of the term will be charged at 4.79 per cent above LIBOR. The loan was
secured by a first legal mortgage and a first fixed charge over the land at Block B, Chapel Riverside,
Endle Street, Southampton. The balance outstanding as at 30 June 2020 was £3,184,250.
On 10 February 2020, K&C (Coleherne) Limited took out a new loan of £2,743,359 with Hodge Bank.
The term of the loan is 25 years. The monthly instalments are interest payments and do not include
any capital repayments. Interest is charged at 3.5 per cent for the first 60 months. After this period
the interest rate charged will be a standard variable rate. The loan is secured by a freehold charge
over 25 Coleherne Road. The balance outstanding at 30 June 2020 was £2,743,359.
On 10 February 2020, KCR (Kite) Limited took out a new loan of £5,124,810 with Hodge Bank. The
term of the loan is 25 years. The monthly instalments are interest payments and do not include any
capital repayments. Interest is charged at 3.5 per cent for the first 60 months. After this period the
interest rate charged will be a standard variable rate. The loan is secured by a freehold charge over
25 Coleherne Road. The balance outstanding at 30 June 2020 was £5,124,810.
The notes form part of these financial statements
56 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
18)
FINANCIAL LIABILITIES – BORROWINGS (continued)
Reconciliation of net movement in cash
Group
Net cash at 1
July 2019
£
Cash flow
£
Cash at bank and
in hand
29,298
1,506,648
Loans
received in
year
£
-
Repayments
in year
£
Other non-
cash
movements
Net cash
at 30 June
2020
£
-
-
1,535,946
Borrowings
(11,773,638)
-
(7,868,169)
6,658,130
260,000
(12,723,677)
Total financial
liabilities
(11,744,340)
1,506,648
(7,868,169)
6,658,130
260,000
(11,187,731)
Net cash at 1
July 2018
£
Cash flow
£
Cash at bank and
in hand
6,425
22,873
Loans
received in
year
£
-
Repayments
in year
£
Other
non-cash
movements
Net cash
at 30 June
2019
£
-
-
29,298
Borrowings
(10,420,535)
-
(3,434,250)
796,079
1,285,068
(11,773,638)
(10,414,110)
22,873
(3,434,250)
796,079
1,285,068
(11,744,340)
Total financial
liabilities
Company
Other
Repayments
in year
non-cash
movements
Net cash at
1 July 2019
£
Cash flow
£
Cash at bank and in hand
3,334
1,473,045
£
-
Borrowings
(6,649,250)
-
6,304,180
Total financial liabilities
(6,645,916)
1,473,045
6,304,180
Net cash
at 30 June 2020
£
1,476,379
(85,070)
1,391,309
£
-
260,000
260,000
Net cash at
1 July 2018
£
77
Cash at bank and in hand
Borrowings
(7,180,397)
Cash flow
£
3,257
-
Total financial liabilities
(7,180,320)
3,257
Other
Repayments
in year
non-cash
movements
£
-
£
-
546,079
546,079
(14,932)
(14,932)
Net cash
at 30 June 2019
£
3,334
(6,649,250)
(6,645,916)
The notes form part of these financial statements
57 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
19)
SHARE-BASED PAYMENT TRANSACTIONS
During the year ended 30 June 2020, the Company had one share-based payment arrangement in place, which
is described below:
Outstanding at 1 July 2019
Exercised during the year
Gifted to the company during the year
Outstanding at 30 June 2020
Restricted Preference shares
4,500,000
(1,730,765)
(2,769,235)
-
Restricted Preference shares:
Restricted Preference shares had been acquired by certain directors and other senior managers. The
Restricted Preference shares were purchased at nominal value. Details of the Restricted Preference shares
held by the directors, along with movements in the year, can be found further in this note and also in the
Report of the Directors. Upon the achievement by the Group of certain defined milestones, related to the
NAV of the Group, the Restricted Preference shares of £0.10 were able to be converted into Ordinary shares
of £0.10, for no further consideration. The following table shows the shares held at the year end, along with
movements in the year:
Restricted Preference Shares
Converted to ordinary
shares in the year
Gifted to
company in year
At 30 June 2019
No.
1,265,357
905,357
805,357
30,000
465,357
614,286
414,286
No
(486,675)
(348,214)
(309,752)
(11,538)
(178,983)
(236,263)
(159,340)
No.
(778,682)
(557,143)
(495,605)
(18,462)
(286,374)
(378,023)
(254,946)
4,500,000
(1,730,765)
(2,769,235)
At 30 June 2020
No.
-
-
-
-
-
-
-
-
Name
Dominic White
Timothy James
Oliver Vaughan
James Cane
Timothy Oakley
Christopher James
Employees
Total
The estimated fair value of each Restricted Preference share acquired is as follows:
Fair value of share
option/warrant (£)
Restricted Preference
shares
0.688-0.787
The notes form part of these financial statements
58 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
19)
SHARE-BASED PAYMENT TRANSACTIONS (continued)
The fair values were estimated using the Black-Scholes valuation model. The following table lists the inputs
to the model used:
Share price at grant date (£)
Exercise price (£)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of share
options/warrants (years)
Restricted Preference
shares
0.8-0.9
0.1
0.00
51.86-63.79
0.88-1.57
1.3-8.8
The expected lives of the Restricted Preference shares were based on historical data and then-current
expectations and were not indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility of comparator companies over the period similar to the life of the
Restricted Preference shares is indicative of future trends, which may not necessarily be the actual outcome.
On 6 August 2019, 1,730,765 of the Restricted Preference shares were converted into Ordinary shares. The
remaining 2,769,235 Restricted Preference shares were gifted back to the Company for no consideration as
part of the Torchlight transaction. The restricted preference shares gifted back to the company were
subsequently cancelled.
The conversion and cancellation of the restricted preference shares has been treated as an acceleration of
vesting and therefore the amount that would have been recognised for services received over the remainder
of the vesting period have been recognised immediately, in the 2020 financial year. The expense recognised
during the year is shown in the following table:
Expenses arising from Restricted Preference shares
Total expense from share-based payments
20)
FINANCIAL INSTRUMENTS
30 June 2020
£
30 June 2019
£
1,599,681
1,387,441
1,599,681
1,387,441
The Group’s financial assets, as defined under IFRS 9, and their estimated carrying amount are as follows:
Group
Company
2020
£
2019
£
2020
£
2019
£
Carrying amount of financial assets at
amortised cost
Trade and other receivables
Cash at bank and in hand
63,889
1,535,946
77,078
29,298
3,828,071
1,813,404
1,476,379
3,334
The notes form part of these financial statements
59 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
21)
FINANCIAL RISK MANAGEMENT
The Company's directors have overall responsibility for the establishment and oversight of the Group's risk
management framework.
The Company’s and Group's risk management policies are established to identify and analyse the risks faced
by the Company and Group, to set appropriate risk limits and controls, and to monitor risks and adherence to
limits. Risk management policies and systems are reviewed regularly to reflect the changes in market
conditions and the Group's activities. The Company and Group, through its training and management
standards and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Company and Group has exposure to the following risks arising from financial instruments:
o
o
o
credit risk
liquidity risk
market risk
Capital risk management
The Company and Group's objective when managing capital is to safeguard its accumulated capital in order
to provide an adequate return to shareholders by maintaining a sufficient level of funds, in order to support
continued operations.
The Company and Group considers its capital to comprise equity capital less accumulated losses.
The share premium reserve includes premiums received on the issue of share capital during the year.
The Group refinanced their loan portfolio in the 2020 financial year. As a result, the Group entered into new
loan agreements with Hodge Bank. The total loans with Hodge Bank at 30 June 2020 totalled £7,868,169.
The loan agreements contain the following covenants:
o The maximum available loan amount relative to the value of the properties will not be, at any time,
during the term of the loan, more than 75% of the market value of the properties (as determined
from time to time in accordance with the lenders requirements by a valuer appointed by the
lender) ; and
o The aggregate of all rental income from the properties shall not, in any twelve month period, be
less than 125% of the aggregate of all scheduled interest instalments or other payments due under
the loan in that period.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations.
The Group has no significant concentration of credit risk, with exposure spread over a large number of
counterparties and customers.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure
to credit risk is as reported in the statement of financial position.
The notes form part of these financial statements
60 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
21)
FINANCIAL RISK MANAGEMENT (continued)
Liquidity risk
Liquidity risk is the risk that the Company and Group will encounter difficulty in meeting the obligations
associated with its financial liabilities that are settled by delivering cash or another financial asset. The
Company’s and Group's approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Company’s and Group's reputation.
The contractual maturities of financial liabilities are disclosed in note 18.
Market risk
Market risk is the risk that changes in market prices, such as interest rate and equity prices will affect the
Group and the Company's income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposure within acceptable parameters,
while optimising the return.
Sensitivity
Interest rate sensitivity:
At 30 June 2020, if interest rates had been 0.5 percentage point higher and all other variables were held
constant, it is estimated that the Group's loss before tax would increase to £3,604,930 (2019 - £3,803,492).
This is attributable to the Group’s exposure on its borrowings and is based on the change taking place at
the beginning of the financial year and held constant throughout the reporting period.
22)
RELATED PARTIES
On 24 June 2018, the Company entered into a loan agreement arranged by DGS Capital Partners LLP, a
limited liability partnership in which Michael Davies is a member, with certain investors. The loan was for
£1,475,000 and was subject to an interest rate of 12 per cent per annum. The loan was to be repaid within
300 days of the initial drawdown date of 29 June 2018. The loan was extended during the previous financial
year and from 10 April 2019, the interest rate was increased to 14 per cent per annum. In the 2020 financial
year, the company incurred interest of £30,196 on the loan. On 6 August 2019 the loan and all outstanding
interest and fees were repaid. The repayment consisted of £1,425,000 cash and £129,311 of Ordinary shares.
During the year, the Group paid DGS Capital Partners LLP, a limited liability partnership in which Michael
Davies is a member, fees of £36,000 plus VAT of £7,200 (2019 - £36,000 and VAT of £7,200). At the year end,
£7,200 was outstanding and included in trade and other payables.
During the previous year, Oliver Vaughan, a director of the Company, loaned the Company £150,000. The
loan was unsecured and was due for repayment on 15 May 2019. The loan was extended in June 2019. Upon
extension of the loan, the lender charged the Company a fee of £10,000. The loan was interest free. £110,000
of the loan was repaid via the issue of Ordinary shares in the Company on 6 August 2019. The remaining
£50,000 was repaid on 8 August 2019.
During the previous year, the Company issued £50,000 of convertible loan notes to Kimono Investments
Limited, an entity in which Oliver Vaughan’s children have a financial interest. The Company was charged
£340 interest in the year. The principal loan was repaid on 22 August 2019. The repayment consisted of
£50,000 of Ordinary shares.
The notes form part of these financial statements
61 | P a g e
KCR RESIDENTIAL REIT plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
22)
RELATED PARTIES (continued)
During the previous year, the Company issued convertible loan notes to the White Amba Pension Scheme of
£25,000. The Company was charged £170 interest in the year. The principal loan was repaid on 22 August
2019. The repayment consisted of £25,000 of Ordinary shares.
During the previous year, the Company issued convertible loan notes to Katie James, relative of Timothy
James of £25,000. The Company was charged £170 interest in the year. The principal loan was repaid on 22
August 2019. The repayment consisted of £25,000 of Ordinary shares.
During the year, Timothy Oakley, a director of a number of subsidiary companies, received remuneration of
£10,541 (2019 - £30,200). During the previous year Timothy Oakley also loaned the Company £50,000 as part
of the loan arranged by DGS Capital Partners LLP, as detailed above. Interest of £595 was charged to the
Company in the year. The loan was repaid on 22 August 2019. The repayment consisted of £50,000 of
Ordinary shares.
During the year, Christopher James, a director of a number of subsidiary companies, received remuneration
of £70,881 (2019 - £51,200).
23)
POST-BALANCE SHEET EVENTS
In July 2020, the remaining convertible loan notes of £100,000 that were outstanding at 30 June 2020 were
repaid in full.
On 13 July 2020, following an internal strategic and legal review, the Group determined that it was no longer
necessary for it to maintain its AIFM status. The Group has now deregistered as an AIFM.
The notes form part of these financial statements
62 | P a g e