Highcroft Investments PLC 24 March 2005 Highcroft Investments PLC Preliminary results for the year ended 31 December 2004 Highlights • Gross property income up 6.2% to £1,667,000 • Operating profit up 4.8% to £1,624,000 • Basic earnings per share down 3.6% to 24.2p • Adjusted earnings per share up 6.3% to 23.5p • Two attractive additions to the property portfolio • Net asset value per share up 7.8% to 707p, another new high • Total dividends up 6.3% to 11.7p per share • Final dividend of 7.65p payable on 8 June 2005 • Annual General Meeting on Wednesday 25 May 2005 Mr Gavin Kingerlee, Chairman of Highcroft Investments plc, commented: "Our trading performance in 2004 has improved further by comparison with 2003. Dividends for 2004 are up 6.3%, while net asset value has risen 7.8% to 707p; this is a continuation of a pleasing trend and we look forward to further success in 2005." Enquiries: Gavin Kingerlee, Chairman 01865 840 023 Highcroft Investments plc Freddy Crossley 020 7739 8200 Charles Stanley & Co Ltd Financial results - operating activities Operating profit rose to £1,624,000 from £1,549,000 in 2003, an increase of 4.8%. Total income was £1,829,000 as compared with £1,758,000 in 2003. Net property income rose from £1,457,000 to £1,540,000, an increase of 5.7%. Gross rents receivable were up 6.2% on 2003 reflecting the impact of the new investments and of rent reviews in both 2003 and 2004. Property income represented 84.2% of total income compared with 82.9% in 2003. Residential repair costs were relatively high in 2004 and so property expenses rose from £112,000 in 2003 to £127,000 in 2004. Financial results - capital activities As we anticipated last year, the cash reserves of £1,079,000 which were held on 31 December 2003 were used on fresh property acquisitions and on 31 December 2004 the group had a medium term loan of £1,568,000 plus a short term overdraft of £146,000. Net cash inflow from operations was at £1,851,000 in 2004 (2003 £1,977,000), because of the lower decrease in debtors for 2004, and the higher capital expenditure and financial investment in 2004 led to a decrease in cash of £1,225,000. Net assets increased by 7.8% during the year from £33.9 million to £36.6 million. The increase was a steady one throughout the year and stemmed from both our property and listed investment portfolios. During the course of the year, the group invested £4,089,000 in property assets (2003 £1,596,000) and invested £1,016,000 (2003 £624,000) in stock markets. The net proceeds from property disposals during the year amounted to £246,000 (2003 £660,000) while investment disposals raised £1,249,000 (2003 £1,334,000). The net gains on these disposals amounted to £48,000 (2003 £158,000), comprising £9,000 of gains on property disposals and £39,000 of gains on disposal of investments. The net gain after taxation of £42,000 (2003 £158,000) was transferred to realised capital reserve. Property The property valuation showed a rise from £25.4 million to £30.5 million. Those properties that remained in the portfolio throughout the period show a rise in value equivalent to 5.8% (2003 6.1%). There are 20 (2003 18) commercial properties in the portfolio with an average value of £1,376,000 (2003 £1,244,000). There are 14 residential properties in the portfolio (2003 15). The average value of these residential investments is £215,000 (2003 £203,000). Listed investments 2004 was again a better year for equity markets and the FTSE 100 was up from 4,477 to 4,814 a rise of 7.5%. Those listed investments that remained in our portfolio throughout the period showed a rise in value of 12.0% (2003 12.8% fall). We continued to review the portfolio in order to make tax efficient disposals while protecting our dividend income stream. Summary Our equity portfolio valuation has risen by 8.3%, having realised net cash of £233,000. The property portfolio valuation has risen 20.0%, having invested a net £3,852,000. As a result we are pleased to report that the net asset value per share has risen by 7.8% to 707p (2003 656p), a record level. Total shareholders funds were £36,557,000 (2003 £33,901,000). The increase in income and operating profits enables us to propose an increase in dividends which is well above the rate of inflation. Proposed dividends for 2004 are up 6.3% on 2003, with dividend cover very much the same. Basic earnings per share, which take account of asset disposals, are down 3.6% to 24.2p per share and adjusted earnings per share, adjusted to take out the effect of asset disposals, are up 6.3% to 23.5p per share. Current trading and prospects In 2005, we are continuing to look for good quality property acquisitions which will fit well with our present property portfolio, helping us to secure the group's long term income and capital prospects. In the early part of 2005, a vacant residential property has been sold. Our position on the listed investments portfolio is likely to be neutral but we continue to try to take advantage of opportunities and the progress of the market so that the combined portfolio has a good balance of risk and reward. While both property and listed investment markets are never entirely predictable, the business remains well placed to pursue its strategies and has a solid balance sheet. We look forward to continuing success in 2005 and to meeting with shareholders at our AGM on 25 May 2005. G J KINGERLEE Chairman 23 March 2005 Group Profit and Loss Account for the year ended 31 December 2004 2004 2003 £'000 £'000 Income from fixed asset investments and other interest receivable 1,829 1,758 Administrative expenses 205 209 Operating profit 1,624 1,549 Gains on disposals of assets 1 48 158 Profit on ordinary activities before taxation 1,672 1,707 Taxation 2 419 409 Profit for the financial year 1,253 1,298 Gain on disposals of assets after taxation transferred to realised capital reserve 1 42 158 Profit available for distribution 1,211 1,140 Dividends 3 604 568 Profit retained 607 572 Earnings per share: 4 Basic 24.2p 25.1p Adjusted 23.5p 22.1p All operations are continuing. Balance Sheet at 31 December 2004 The Group Note 2004 2003 £'000 £'000 Fixed assets Tangible assets 5 30,523 25,436 Investments 6 8,731 8,062 39,254 33,498 Current assets Debtors 369 532 Cash at bank - 1,079 369 1,611 Creditors Amounts falling due within one year 1,567 1,208 Net current (liabilities)/assets (1,198) 403 Total assets less total liabilities 38,056 33,901 Creditors Amounts falling due after more than one year 1,499 - Net assets 36,557 33,901 Capital and reserves Called up share capital 1,292 1,292 Revaluation reserve - property 7,538 6,560 - other 4,172 3,542 Capital redemption reserve 95 95 Realised capital reserve 14,766 14,325 Profit and loss account 8,694 8,087 Shareholders' funds - equity 36,557 33,901 Group Cash Flow Statement for the year ended 31 December 2004 Note 2004 2003 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 7 1,851 1,977 Taxation (451) (530) Capital expenditure and financial investment Purchase of fixed assets - properties (4,089) (1,596) - listed (1,016) (624) investments Sale of fixed assets - properties 246 660 - listed 1,249 1,334 investments Net cash outflow from capital expenditure and financial investment (3,610) (226) Equity dividends paid (583) (537) Cash (outflow)/inflow before financing 8 (2,793) 684 Financing New medium term loan 1,568 - (Decrease)/increase in cash 8 (1,225) 684 Total Recognised Gains and Losses and Historical Cost Profits and Losses for the year ended 31 December 2004 Statement of total recognised gains and losses 2004 2003 £'000 £'000 Profit for the financial year 1,253 1,298 Unrealised surplus on revaluation of investment properties 1,235 1,320 Unrealised surplus on revaluation of listed and unlisted investments 864 996 Tax on valuation surplus arising in prior years attributable to properties sold in year (92) - Total recognised gains and losses for the year 3,260 3,614 Note of historical cost profits and losses 2004 2003 £'000 £'000 Profit on ordinary activities before taxation 1,672 1,707 Realisation of revaluation gains of previous years -attributable to investment properties 257 202 -attributable to listed and unlisted investments 234 (445) Historical cost profit on ordinary activities before taxation 2,163 1,464 Historical cost profits retained 1,140 487 Notes for the year ended 31 December 2004 1 Gains on disposals of assets 2004 2003 Gains on disposals of assets arising on sales of: £'000 £'000 Properties 9 82 Investments 39 76 Net gain on disposals of assets 48 158 Corporation tax on disposals of assets 6 - Net gain on disposals of assets after taxation 42 158 2 Taxation The taxation charge at 30% (2003 30%) is based on the profit for the year and is made up as follows: 2004 2003 £'000 £'000 Corporation tax on operating profit 414 399 Corporation tax on disposals of assets 6 - Prior year overprovision (1) 10 419 409 3 Dividends 2004 2003 Ordinary shares £'000 £'000 Interim dividend of 4.05p per share paid (2003 3.75p) 209 194 Proposed final dividend of 7.65p per share (2003 7.25p) 395 374 604 568 4 Earnings per share The calculation of earnings per share is based on the profit for the financial year of £1,253,000 (2003 £1,298,000) and on 5,167,240 (2003 5,167,240) ordinary shares of 25p each which is the weighted average number of shares in issue during the year ended 31 December 2004. In view of the uneven nature of capital disposals, an adjusted earnings per share has also been presented, based on the profit available for distribution of £1,212,000 (2003 £1,140,000). The effect of the adjustment is as follows: 2004 2003 Earnings Weighted Per share Earnings Weighted Per share average amount pence average amount pence number of number of shares shares £'000 £'000 Basic earnings per share 1,253 5,167,240 24.2 1,298 5,167,240 25.1 Adjustment for gains on disposals of assets (42) - (0.7) (158) - (3.0) Adjusted earnings per share 1,211 5,167,240 23.5 1,140 5,167,240 22.1 5 Tangible assets Land and buildings (Investment properties) Total Freeholds Long leaseholds £'000 £'000 £'000 Valuation at 1 January 2004 25,436 23,081 2,355 Additions 4,089 4,089 - Disposals (237) (237) - Surplus on revaluation 1,235 1,080 155 Valuation at 31 December 2004 30,523 28,013 2,510 6 Investments Total Listed Unlisted £'000 £'000 £'000 Valuation at 1 January 2004 8,062 8,058 4 Additions at cost 1,016 1,016 - Disposals (1,211) (1,211) - Surplus on revaluation 864 864 - Valuation at 31 December 2004 8,731 8,727 4 7 Reconciliation of operating profit to net cash flow from operating activities 2004 2003 £'000 £'000 Operating profit 1,624 1,549 Decrease in debtors 163 384 Increase in creditors 64 44 Net cash inflow from operating activities 1,851 1,977 8 Analysis of changes in net funds/ (debt) 1 January Cash flow 31 December 2004 2004 £'000 £'000 £'000 Cash at bank 1,079 (1,079) - Overdraft - (146) (146) 1,079 (1,225) (146) Debt: Loans falling due within one year - (69) (69) Loans falling due after more than one year - (1,499) (1,499) Total 1,079 (2,793) (1,714) 9 Accounting convention The preliminary announcement has been prepared in accordance with applicable accounting standards as stated in the financial statements for the year ended 31 December 2004 and under the historical cost convention except for the revaluation of fixed assets. The principal accounting policies of the group have remained unchanged from the previous year. 10 Annual General Meeting The Annual General Meeting will be held on 25 May 2005. 11 Final ordinary dividend A final ordinary dividend of 7.65p per share will be paid on 8 June 2005 to shareholders registered at the close of business on 6 May 2005. 12 Limitation The above does not constitute full accounts within the meaning of section 240 of the Companies Act 1985. It is an extract from the full accounts for the year ended 31 December 2004 on which the auditors have expressed an unqualified opinion. The accounts will be posted to shareholders on or before 26 April 2005 and subsequently filed at Companies House. This information is provided by RNS The company news service from the London Stock Exchange