Energiser Investments Plc - Half-year Report

 27 September 2018

Energiser Investments plc 

('Energiser' or the 'Company')

Posting of Interim Results to 30 June 2018

Energiser announces that it has posted its Interim accounts for the six months to 30 June 2018                           

Chairman’s statement

I am pleased to present the interim results for Energiser Investments plc (“Energiser” or “the Group”) for the half year ended 30 June 2018. 

Energiser Investments plc is an Investing Company whose strategy is to invest in quoted and unquoted companies to achieve capital growth. The Group has seen a significant amount of change over the last few years and has one key investment at 30 June 2018. The focus continues to be in property particularly in the residential sector.

In February 2018, Energiser invested £494,100 in a short-term loan secured on a 21,900 sq. ft office property in Croydon with planning permission to convert into 71 residential units. The loan represented 30% of the estimated value of the property and the interest was covered by rental income at a ratio of 4:1 (rent: interest). The gross interest paid on the loan was 7.5% p.a. The loan was novated as part of our investment in KCR Residential REIT plc (“KCR”) as set out below.

In March 2018, Energiser acquired 2,435,710 new KCR ordinary shares at £0.70 a share for a total of £1,704,997. The investment, made by participation in a subscription alongside other investors, was made at a 9% discount to net asset value per share of KCR as reported in its half-yearly report announced on 16 March 2018. This investment represented a 24.7% shareholding in KCR.  The subscription was funded with cash of £1,210,897 and the novation of the rights to its short term loan investment of £494,100 described above.

KCR is an AIM quoted Real Estate Investment Trust (“REIT”) focused on investment in the UK residential Private Rented Sector (“PRS”). KCR invests in whole apartment blocks of studio, one and two-bedroom flats, in city centres, close to railway stations and shopping facilities. It focuses on more affordable rental properties for private tenants. 

With KCR, Energiser has established a strategic shareholding in a growth company with a strong management team in a very large, under-managed sector. KCR issued 4,434,570 new ordinary shares at 70p per share in 30 July 2018 and as a result our holding has been diluted to 17.0%.

Our holding in KCR was valued at £0.88p per share on 30 June 2018 resulting in a fair value adjustment of £438,000 and a related deferred tax charge of £82,000.

The Company has received a few approaches for investment in other sectors including a digital property lending opportunity in partnership with a respected technology developer interested in combining their market leading technology with Energiser’s property expertise. The Board did not conclude an investment in this opportunity and will continue to look for other investments.

Results

The Group had no revenues during the period (2017: £82,000) as it had sold its revenue generating investments. It made a loss of £58,000 (2017: £81,000) and had other comprehensive income of £438,000 relating to the revaluation gain on the investment in KCR.  Administrative expenses decreased from £109,000 to £63,000. Finance costs reduced to Nil (2017: £38,000) as the loan relating to the Wellingborough portfolio had been repaid in full in the year to 31 December 2017.

The Group’s net assets increased to £2.07m (2017: £1.80m) translating into net asset value per share of 1.67p per share (2017: 1.46p).

Outlook

We will continue to manage our investment in KCR and will also look for other investment opportunities to achieve capital growth. 

Stephen Wicks

Chairman

27 September 2018

Group statement of comprehensive income

		Unaudited 6 months to 30 June 2018	Unaudited 6 months to 30 June 2017	Audited year to 31 December 2017
	Note	£’000	£’000	£’000
Continuing operations
Revenue arising in the course of ordinary activities		—	82	138
Cost of sales		—	(16)	(34)
Gross profit		—	66	104
Administrative expenses		(63)	(109)	(235)
Operating loss	5	(63)	(43)	(131)
Finance costs		—	(38)	(54)
Finance income Gain on sale of investment properties Gain on financial instrument		5 — —	— — —	— 16 773
(Loss)/profit before taxation	5	(58)	(81)	604
Taxation		—	—	(32)
(Loss)/profit for the period attributable to shareholders of the Company		(58)	(81)	572
Other comprehensive income: fair value adjustments		438	103	—
Related taxation/deferred taxation		(82)	42	—
Other comprehensive income for the period, net of tax		356	145	—
Total comprehensive income		298	64	572
(Loss)/earnings per share
Basic and diluted (loss)/earnings per share from total and continuing operations	4	(0.11)p	(0.07)p	0.46p

Diluted earnings per share is taken as equal to basic earnings per share as the Group’s average share price during the period is lower than the exercise price and therefore the effect of including share options is anti-dilutive.

Group statement of financial position

		Unaudited as at 30 June 2018	Unaudited as at 30 June 2017	Audited as at 31 December 2017
	Note	£’000	£’000	£’000
ASSETS
Non-current assets
Investments	6	2,143	—	—
Investment property	7	—	2,844	—
		2,143	2,844	—
Current assets
Trade and other receivables		44	16	33
Cash and cash equivalents		237	588	1,959
		281	604	1,992
Total assets		2,424	3,448	1,992
LIABILITIES
Current liabilities
Trade and other payables		270	332	218
Short term borrowings		—	80	—
Deferred tax		82	—	—
		352	412	218
Non-current liabilities
Long term borrowings		—	1,232	—
		—	1,232	—
Total liabilities		352	1,644	218
Net assets		2,072	1,804	1,774
EQUITY
Share capital		2,392	2,392	2,392
Share premium account		7,189	7,190	7,189
Convertible loan		88	88	88
Merger reserve		1,012	1,012	1,012
Available for sale reserve		356	—	—
Retained earnings		(8,965)	(8,878)	(8,907)
Total equity		2,072	1,804	1,774

Group statement of changes in equity

		Share				Available
	Share	premium	Convertible	Merger	Revaluation	for sale	Retained	Total
	capital	account	loan	reserve	reserve	reserve	earnings	equity
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Balance at 1 January 2017	2,392	7,198	88	1,012	537	—	(9,479)	1,748
Legal fees on issue of equity		(8)	—	—	—	—	—	(8)
Realisation of available for sale financial asset	—	—	—	—	(537)	—	537	—
Total comprehensive income	—	—	—	—	—		64	64
Balance at 30 June 2017	2,392	7,190	88	1,012	—	—	(8,878)	1,804
Legal fees on issue of equity	—	(1)	—	—	—	—	—	(1)
Total comprehensive loss	—	—	—	—	—	—	(29)	(29)
Balance at 31 December 2017	2,392	7,189	88	1,012	—	—	(8,907)	1,774
Available for sale reserve	—	—	—	—	—	356	—	356
Total comprehensive loss	—	—	—	—	—	—	(58)	(58)
Balance at 30 June 2018	2,392	7,189	88	1,012	—	356	(8,965)	2,072

Group statement of cash flows

	Unaudited 6 months to 30 June 2018	Unaudited 6 months to 30 June 2017	Audited year to 31 December 2017
	£’000	£’000	£’000
Cash flows from operating activities
(Loss)/profit before taxation	(58)	(81)	604
Adjustments for: Profit on sale of investment properties	—	—	(16)
Fair value adjustment for investments	—	—	—
Interest expense	—	38	54
Interest income	(5)	—	—
Changes in working capital:
- (Increase)/decrease in trade and other receivables	(11)	755	51
- Increase/(decrease) in trade payables	52	16	(641)
Net cash (used in)/generated by operating activities	(22)	728	52
Cash flows from investing activities
Mezzanine finance facility repaid Purchase of investments	—       (1,705)	— —	16 —
Sale of investment properties	—	—	2,816
Net cash (used in)/generated by investing activities	(1,705)	—	2,832
Cash flows from financing activities
Repayment of borrowings	—	(670)	(1,982)
Net proceeds on issue of ordinary shares	—	(8)	(9)
Interest received	5
Interest paid	—	(582)	(54)
Net cash used in financing activities	5	(1,260)	(2,045)
Net (decrease)/increase in cash and cash equivalents	(1,722)	(532)	839
Cash and cash equivalents at beginning of period	1,959	1,120	1,120
Cash and cash equivalents at end of period	237	588	1,959

1. Nature of operations and general information

The principal activity of the Group is as an investing company investing in quoted and unquoted companies to achieve capital growth.

Energiser Investments plc is the Group’s ultimate parent company. It is incorporated and domiciled in Great Britain. The address of Energiser Investments plc’s registered office, which is also its principal place of business, is Decimal Place, Chiltern Avenue, Amersham, Buckinghamshire, HP6 5FG.

Energiser Investments plc’s shares are quoted on AIM, a market operated by the London Stock Exchange. The consolidated half-yearly financial report has been approved for issue by the Board of Directors on 27 September 2018.

The financial information set out in this half-yearly financial report does not constitute statutory accounts as defined in Sections 434(3) and 435(3) of the Companies Act 2006. The Group’s statutory financial statements for the year ended 31 December 2017 have been filed with the Registrar of Companies and are available at www.energiserinvestments.co.uk. The auditor’s report on those financial statements was unqualified and did not contain any statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

2. Basis of preparation

This consolidated half-yearly financial report has been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting.

The consolidated half-yearly financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2017, which have been prepared in accordance with IFRS as adopted by the European Union.

3. Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2017.

4. (Loss)/earnings per ordinary share

The (loss)/earnings per ordinary share is based on the weighted average number of ordinary shares in issue during the period of 123,912,957 ordinary shares of 0.1p (2017: 123,912,957 ordinary shares of 0.1p) and the following figures:

	Unaudited 6 months to 30 June 2018	Unaudited 6 months to 30 June 2017	Audited year to 31 December 2017
(Loss)/profit attributable to equity shareholders £’000	(58)	(81)	572
(Loss)/earnings per ordinary share	(0.11)p	(0.07)p	0.46p

Diluted earnings per share is taken as equal to basic earnings per share as the Group’s average share price during the period is lower than the exercise price and therefore the effect of including share options is anti-dilutive.

5. Income and segmental analysis

	Unaudited 6 months to 30 June 2018	Unaudited 6 months to 30 June 2017	Audited year to 31 December 2017
	£’000	£’000	£’000
Segment result
Investment activities:
Administrative expenses	(75)	(108)	(232)
	(75)	(108)	(232)
Rental activities:
Rental income	—	66	104
Administrative expenses	12	(1)	(3)
Fair value adjustment on investment property	—	—	—
	12	65	101
Operating (loss)	(63)	(43)	(131)
Finance income	5	—	—
Finance costs	—	(38)	(54)
Other gains	—	—	789
(Loss)/profit before tax	(58)	(81)	604

   

	Unaudited as at 30 June 2018	Unaudited as at 30 June 2017	Audited as at 31 December 2017
	£’000	£’000	£’000
Segment assets
Investment activities:
Non-current assets	2,143	—	—
Current assets	237	595	—
	2,380	595	—
Rental activites:
Non - current assets – investment property	—	2,844	—
Current assets – other	44	9	1,992
	44	2,853	1,992
Total assets	2,424	3,448	1,992
Segment liabilities
Investment activities:
Current liabilities	234	170	184
	234	170	184
Rental:
Current liabilities	2	158	34
Non-current liabilities	—	1,232	—
	2	1,390	34
Current liabilities – corporation tax	34	84	—
Current liabilities – deferred tax on fair value adjustment	82	—	—
	116	84	—
Total liabilities	352	1,644	218
Total assets less total liabilities	2,072	1,804	1,774

The activity of both the investments and rentals arose wholly in the United Kingdom. No single customer accounts for more than 10% of revenue.

6. Investments

During the period to 30 June 2018 the group acquired 2,435,710 shares in KCR Residential Reit PLC, an AIM listed real estate investment trust who specialise in the acquisition and management of rented residential portfolios in the UK.

Investments

£’000

Cost or fair value
At 1 July 2017 and 31 December 2017	—
Additions	1,705
Change in fair value recognised in other comprehensive income	438
At 30 June 2018	2,143

7. Investment property

	Investment Property £’000
Cost or fair value
At 1 July 2017	2,844
Disposal	(2,844)
At 31 December 2017 and 30 June 2018	—

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