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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kcr Residential Reit Plc | LSE:KCR | London | Ordinary Share | GB00BYWK1Q82 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 9.00 | 8.00 | 10.00 | 10.10 | 9.00 | 9.50 | 0.00 | 08:00:04 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 1.58M | -166k | -0.0040 | -22.50 | 3.75M |
From Apr 2019 to Apr 2024
TIDMKCR
RNS Number : 9081G
KCR Residential REIT PLC
09 November 2018
9 November 2018
KCR Residential REIT plc
("KCR" or the "Company")
Annual Results for the year ended 30 June 2018
KCR Residential REIT plc (AIM: KCR), the residential real estate investment trust group, is pleased to announce its annual results for the year ended 30 June 2018. A copy of the annual report and accounts will be posted to shareholders shortly, when it will also be available from the Company's website, www.kcrreit.com.
Financial Highlights:
-- Assets under management increased 228 per cent to GBP27.4 million (2017 - GBP8.4 million) -- Year-end NAV per share of 88.17p, up three per cent since FY 2017 (85.7p) -- Corporate acquisitions during the period totalled GBP16 million -- Consolidated operating profit up to GBP251,079 (2017 loss - GBP1.03 million)
-- Revenue lower at GBP265,936 (2017 - GBP514,746) but income from recent acquisitions will significantly increase revenue in FY19.
Acquisitions during the period
-- Purchase of the Ladbroke Grove portfolio (KCR (Kite) Limited) completed on 29 June with a fair value of investment property at acquisition of GBP7.3 million. The building is fully let and rental income is up 6.16 per cent in the four months since acquisition;
-- Purchase of the 27 flat Deanery Court, Chapel Riverside (Southampton) development completed on 29 June with a fair value of investment property at acquisition of GBP5.8 million. Final handover took place on 15 October and over 60 per cent of the building is already let or reserved;
-- Via a strategic partnership with Inland Homes, two supermarkets that form part of significant newly-built residential developments in Leighton Buzzard and West Drayton were purchased at a fair value of investment property at acquisition of GBP2.6 million.
Post-period-end, KCR raised GBP3.1 million through a placing of GBP901,500 in cash, conversion of GBP650,000 of convertible loan notes into equity, conversion of a creditor into equity and the payment in shares for a property acquisition from Inland Homes plc (GBP1.26 million). KCR issued 4,434,570 shares at 70p.
Dominic White, Chief Executive of KCR said: "The Company has made solid progress in scaling the business in 2018, whilst also adding both rental and capital value to its portfolio. The strategic partnership with Inland Homes is also bearing fruit, with two acquisitions completed since joining forces in May and further opportunities through Inland being analysed.
"We continue to examine potential acquisitions that will build value and revenue, with one currently in the latter stages of negotiation. At the same time, we will augment rental income significantly during 2019, having increased the number of rental units and upgraded properties. The Board is encouraged by the recent achievements and looks forward to reporting on further positive developments in the coming months."
Market Abuse Regulation (MAR) Disclosure
The information contained within this announcement is deemed by the Company to constitute inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
Contacts:
KCR Residential REIT plc info@kcrreit.com Dominic White, Chief Executive +44 20 3793 5236 Arden Partners plc Steve Douglas / Tom Price / Ben Cryer +44 20 7614 5917 Yellow Jersey PR Charles Goodwin +44 7747 788 221
Notes to Editors:
KCR's objective is to build a substantial residential property portfolio that generates secure income flow for shareholders through the acquisition of SPVs (Special Purpose Vehicles) with inherent historical capital gains. The Directors intend that the group will acquire, develop and manage residential property assets in Central London and other key residential areas in the UK.
CHAIRMAN'S STATEMENT
Dear shareholder
I am delighted to introduce the fourth Annual Report that KCR Residential REIT plc ("KCR" or the "Company") has presented since its admission to AIM in July 2015.
We have made good strides in building the business, especially with the three transactions completed right at the end of the year. We have further transactions planned that should give us the size necessary to start generating profits from our rental activity. Dominic White has written about our achievements and plans in more detail in his letter.
What we do
As I mentioned last year, and it is worth repeating, KCR and its subsidiaries (together the "Group") operate primarily in the UK private rented residential investment market. We acquire whole blocks of studio, one-and two-bed apartments in major UK cities, close to transport links, that are rented to private tenants.
KCR is both an income and capital growth opportunity for its shareholders. It delivers income return from the collection of rents from tenants and capital return through investment in under-valued property assets that are marked to market value at acquisition.
The team grows income and asset value through building quality improvements, rental increases, physical extensions and repositioning, and where appropriate small-scale refurbishments. In particular, the directors search out residential blocks of apartments held within UK incorporated companies since these provide an opportunity for KCR to capitalise on the tax advantages afforded to UK REITs; in many cases, they generate immediate boosts to net asset value per share on acquisition.
The market in which we operate
The impact on the UK economy of Brexit, and the potential impact for the housing market, is a topic of much debate. Despite uncertainty around Brexit compounding the overall market slowdown, analysis of household income available to buy property indicates that there is further scope for value growth in the most affordable cities. Research from Hometrack reports that, despite the uncertainty, annual UK city house price inflation to the end of August 2018 is running at 3.9 per cent. Combining this with an average UK rental yield of 4.0 per cent reported by PropertyData implies a current average annual total return of 7.9 per cent for rented residential property.
KCR targets a specific segment of residential property. We buy low to mid-price blocks of flats aimed at new entrants and early-stage professionals. This continues to be a very resilient segment of the residential rental market. In general, house prices and rental values continue to rise in that segment. Higher price-band homes, particularly in Central London, which attract much of the press comment, have declined in value - these properties do not fall within KCR's investment strategy.
There continue to be positive economic fundamentals in the residential sector - strong demand and shortage of supply, in particular in the targeted low- to mid-price bands. This type of housing will, in our view, deliver attractive rental and capital value performance across the UK over the medium term.
Financial result
We have had several successes this year, including a series of accretive acquisitions, improvements in portfolio valuations and maintaining high levels of occupancy across the portfolio. To an extent, we have been held back by our planned November 2017 equity raise and move to the Main Market of the London Stock Exchange. Our pitch to investors, to take advantage of the huge residential market opportunity across the major conurbations in the UK, remains the right strategy for the future. Although we attracted interest from several key institutional investors, we, along with other investment vehicles sponsored by managers such as Aviva and Aberdeen Management, did not achieve our goals. This had a material but one-off effect on our finances.
KCR relies on raising capital (both equity and debt) to invest in the residential housing market. While equity markets remain volatile, we have chosen to raise smaller amounts of capital around specific property acquisitions. We have succeeded in this strategy, having raised capital from well-resourced and enthusiastic providers in March 2018 and July 2018. We continue to present an attractive equity opportunity to potential investors. We have a strong pipeline, an experienced and energetic management team, access to transformational deals and a network of enthusiastic supporters.
I look forward to updating you further as we continue to scale up our activities such that KCR generates a profit and can then deliver on its goal of paying regular dividends to shareholders.
M D M Davies
Chairman
CHIEF EXECUTIVE'S LETTER
Dear shareholder
I have pleasure in reporting to you on the progress of the Group for the year to 30 June 2018.
KCR's short-term objective is to grow the size of its rented portfolio to deliver an increase in revenue that, together with value increases over time, result in profitability and an ability to pay dividends. At the same time, we focus on growing net asset value per share, another key indicator of a successful property company.
In the period under review, the value of the assets managed has increased by 228 per cent to GBP27.4 million, the Group reported an operating profit of GBP251,079, and net asset value per share increased by three per cent to 88.17p.
Property portfolio
Acquisitions during the year
KCR completed three acquisitions (two company purchases and one investment property), with a total value of GBP16 million, during the period, all on 29 June 2018. Two of the acquisitions, sites at Southampton and Leighton Buzzard/West Drayton, were the first transactions closed after forming a strategic relationship with Inland Homes Plc, which we announced on 31 May 2018. The acquisitions were:
-- The purchase of the Ladbroke Grove portfolio (KCR (Kite) Limited) with a fair value of investment property at acquisition of GBP7.3 million. The portfolio consists of 16 one- and two-bedroom apartments in three buildings, and one stand-alone flat in Harrow Road. Since its acquisition, units have been refurbished as tenants leave and then rented back to the private market. There have been average increases of 10.1 per cent for both renewals and new tenancies. Four newly refurbished units have achieved an average increase in rent of 16.2 per cent.
-- The purchase of Deanery Court, Chapel Riverside (Southampton) with a fair value of investment property at acquisition of GBP5.8 million. The block consists of 27 new-build two-bedroom apartments, each with a view over the River Itchen and a parking space, situated a short walk from the centre of the city. The property has been well received by the rental market. Within two weeks of handover of the building from the developer, nearly two-thirds of the building had been let at rents above our internal forecasts. We expect the remainder of the property to be let in the coming months and for the property value to improve in the short term as the surrounding area continues to be developed.
-- Two supermarkets that form part of significant newly built residential buildings in Leighton Buzzard and West Drayton at a fair value of investment property at acquisition of GBP2.8m (KCR (Cygnet) Limited). The properties are let on 15-year leases, index-linked to inflation, to Sainsbury's and the Co-op respectively, and will deliver a 4.9 per cent net annual income to KCR.
Existing portfolio
In addition, KCR acquired six flats in its freehold Heathside property in North London. KCR now owns seven flats in the block and intends to let these out on assured short-hold tenancies (ASTs) during the year. We benefit from the marriage value in such transactions and the property itself provides high-quality living accommodation for those over the age of 60 who need comfort and convenience but not care. We intend to continue to improve the building and our offer to tenants and leaseholders.
The existing portfolio continues to perform well.
-- The block at Coleherne Road (K&C (Coleherne) Limited) has small-sized units (studio and one -bed flats), which continue to be exactly what the rental market is looking for. Occupancy has been maintained at 100 per cent and where there have been renewals, rents have increased at least in line with inflation.
-- The Osprey portfolio (K&C (Osprey) Limited) consists of 159 flats and 13 houses / long-leasehold units in seven locations. The portfolio generated lower income from leaseholders' sales, management fees and lease-renewal premium income than in the previous year; however, these income streams are largely outside our control. However, the portfolio continues to grow in value and be a significant medium-term value-adding opportunity as the terms of the long-leasehold apartments shorten. More than one-third of the long leases have durations of 67 years or less.
Development opportunities
Following a Government consultation on delivering more homes by increasing densities on brownfield land, the current administration has expressed an intention to take forward a policy of permitted development for extensions, both upward (adding new floors) and outward (development onto under-utilised areas of existing sites). The Housing White Paper proposes a package of measures in support of this policy. If enacted, this policy change would give KCR the potential to add numerous residential units to its existing buildings and create significant value across its portfolio, particularly on the buildings located in Ladbroke Grove and on the Osprey portfolio.
Financial
Since most of the acquisition activity completed on the last business day of the financial year, it had no impact on revenue in this year's results. Since the year-end, the revenue benefit of these acquisitions is already beginning to be seen.
Revenue in this financial period continued to be driven by the Coleherne and Osprey portfolio assets. Revenue decreased to GBP265,936 (2017 - GBP514,746) due to lower income from the Osprey portfolio, as explained above. Run-rate revenue is now significantly greater and will increase further once Southampton has been fully let and our next pipeline acquisition completes.
The Group reports an improved consolidated operating profit of GBP251,079 (2017 - loss GBP1,029,215) and a significantly smaller loss before taxation of GBP67,574 (2017 - loss GBP1,224,571). As the chairman has reported in his letter, the financial impact of the unsuccessful fundraising damaged our ability to grow in the way that we had anticipated and hoped, but we nevertheless made valuable acquisitions during the year and are planning more during the current financial year.
Total assets at 30 June 2018 increased by 228 per cent to GBP27.4 million (2017 - GBP8.4 million). Net assets increased by 92 per cent to GBP8.69 million (2017 - GBP4.52 million) and net asset value per share increased by three per cent from to 88.17p (2017 - 85.7p (as adjusted for the 10:1 share consolidation announced in October 2017).
Subsequent events
On 13 July 2018, KCR announced that it had raised GBP3.1 million through a placing of GBP901,500 in cash, conversion of GBP650,000 of convertible loan notes into equity, conversion of a creditor into equity and the payment in shares for a property acquisition from Inland Homes plc (GBP1.26 million). KCR issued 4,434,570 shares at 70p. Full details of the transaction are reported in the Investors section of the Company's website www.kcrreit.com in the announcement dated 13 July 2018.
On 15 October 2018, the block at Southampton was handed over to KCR. As reported above, we have made rapid strides in letting these most attractive apartments, with 63 per cent either let or reserved as at the date of this report.
Future prospects
During the year, the Group increased the size of its portfolio significantly and continued to add both rental and capital value to its properties. The acquisition of GBP16 million of property on the last day of the financial year will lead to considerable growth in revenue during the year to 30 June 2019.
The team continues to source investment opportunities that would add significantly to revenue and net asset value per share. KCR is currently in advanced negotiations on one such investment that could increase the portfolio size by more than 55 per cent.
We hope to be able to report further positive developments to you in the coming months.
Dominic A White
Chief executive
STRATEGIC REPORT
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 2018.
PRINCIPAL ACTIVITY
The Group carries on the business of acquiring and managing residential property in the UK 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 seven subsidiaries.
1. K&C (Coleherne) Limited owns a freehold residential property in Chelsea, London containing ten studio apartments
2. K&C (Osprey) Limited owns 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
3. K&C (Newbury) Limited owns no property and is now effectively dormant. The valuation of the company has been written down to nil via an impairment provision
4. KCR (Kite) Limited owns three freehold residential properties in Ladbroke Grove, London and a flat on Harrow Road
5. KCR (Southampton) Limited owns a freehold block of 27 one- and two-bedroom apartments In Ocean Village, Southampton
6. KCR (Cygnet) Limited owns long leaseholds on two supermarket sites rented out to the Co-op and Sainsbury's
7. K&C REIT Limited (dormant).
GROUP STRATEGY
The directors intend to build a significant presence in the residential letting market, primarily through the acquisition of UK-registered special purpose vehicles that own residential property for letting to third parties.
RESULTS
The Group reports a consolidated operating profit of GBP251,079 for the year to 30 June 2018 (2017 - loss GBP1,029,215).
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.
As reported in the Chief Executive's letter, most of the acquisition activity was completed on the last business day of the financial year and had no impact on revenue in this year's results. Since the year-end, run-rate revenue has significantly increased and will grow further once Southampton has been fully let and our next pipeline acquisition completes.
Revenue in this financial period continued to be driven by the Coleherne and Osprey portfolio assets. Revenue decreased to GBP265,936 (2017 - GBP514,746) due to lower income from the Osprey portfolio.
The Group reports an improved consolidated operating profit of GBP251,079 (2017 - loss GBP1,029,215) and a significantly smaller loss before taxation of GBP67,574 (2017 - loss GBP1,224,571). The financial impact of the unsuccessful fundraising damaged our ability to grow but we nevertheless made valuable acquisitions during the year and are planning more during the current financial year.
Total assets at 30 June 2018 increased by 228 per cent to GBP27.4 million. Net assets increased by 92 per cent to GBP8.69 million and net asset value per share increased by three per cent from to 88.17p.
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
Target of GBP20 million of gross assets by 30 June 2018 achieved.
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 management. Although there is no certainty that such funds will be available when needed, the directors regularly focus on developing the Group's capital structure.
-- Financial instruments
Details of risks associated with the Group's financial instruments are given in the notes 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 and Harding Green to review values of the material assets in the portfolio.
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.
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. 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.
iii. 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.
iv. Respect for human rights
The Group always respects the human rights of its stakeholders.
v. Contributions to pension schemes
During the year, the Group made contributions totalling GBP100,000 to the personal pension scheme of Dominic White. No pension scheme benefits are being accrued by the directors.
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
The Group has continued to purchase high-quality assets that will be able to support an increasing income yield. As last year, the Group is currently investigating several potential acquisitions. To achieve these, the Group will 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:
James Cane
Director
DIRECTORS' REPORT
The directors present their report with the financial statements of the Company and the Group for the year ended 30 June 2018.
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 the notes to the financial statements.
DIVIDS
The directors do not recommend payment of a dividend for the year (2017 - GBPnil).
Political donations
The Group made no political donations during the year (2017 - GBPnil).
Corporate governance statement
The Board is committed to maintaining high standards of corporate governance.
To the extent applicable, and to the extent able (given the current size and structure of KCR and the board of directors), the Company has adopted the Quoted Companies Alliance Corporate Governance Code. Details of how KCR complies with the Code, the reasons for any non-compliance, and the principles contained in the Code, are set out in the table included on the Company's website, www.kcrreit.com/content/investors/governance.asp.
Audit committee
The audit committee currently comprises Michael Davies, the chairman and James Cane. The committee is responsible for ensuring the financial performance, position and prospects of the Group are properly monitored and reported on, and for meeting the auditor and reviewing their reports relating to accounts and internal controls.
DIRECTORS
The following directors served during the year to 30 June 2018 and up to the date of approval of this Annual Report:
Name --------------- Michael Davies Dominic White James Cane Timothy James Oliver Vaughan
The beneficial interests of the directors holding office at 30 June 2018 in the issued share capital of the Company were as follows:
Hot Features
Premium
Restricted
Ordinary Preference
Shares Shares
Name No. No.
--------------- ---------- -----------
Michael Davies 195,428 -
Dominic White - 1,500,000
James Cane 1,318 30,000
Timothy James 475,921 960,000
Oliver Vaughan 73,065 810,000
--------------- ---------- -----------
Included in the total of Oliver Vaughan's Ordinary shares above are 66,500 shares held in the name of Grosmont Investments Limited, a company that he controls.
Included in the total of Dominic White's holdings above are 1,000,000 Restricted Preference shares held in the name of his pension fund, White Amba Pension Scheme.
The beneficial interests of the directors holding office at 9 November 2018 in the issued share capital of the Company were as follows:
Restricted
Ordinary Preference
Shares Shares
Name No. No.
--------------- ---------- -----------
Michael Davies 195,428 -
Dominic White 57,143 1,765,357
James Cane 1,318 40,000
Timothy James 504,492 1,225,357
Oliver Vaughan 73,065 1,075,357
--------------- ---------- -----------
SUBSTANTIAL SHAREHOLDINGS
As at 9 November 2018, the directors had been notified that the following shareholders own a disclosable interest of three per cent or more in the Ordinary shares of the Company:
Name Interest -------------------------- -------- Energiser Investments plc 17.04% Consumer Refund Service Limited 14.01% Poole Investments Limited 12.59% Venaglass Limited 11.08% Timothy James 3.53%
DIRECTORS' REMUNERATION
The directors received the following remuneration during the year:
2018 2017
------------------------------ ------------------------------
Name Remuneration Benefits-in-kind Remuneration Benefits-in-kind
GBP GBP GBP GBP
------------ ---------------- ------------ ----------------
Michael Davies - - - -
Dominic White 151,000 - 12,500 -
James Cane 60,000 - 44,500 -
Timothy James 80,000 - 15,000 -
Oliver Vaughan 30,000 - 15,000 -
Timothy Oakley (1) - - 32,500 -
Christopher James (1) - - 9,375 -
Patricia Farley (1) - - 3,500 -
321,000 - 132,375 -
============ ================ ============ ================
(1) Timothy Oakley, Christopher James and Patricia Farley resigned from the board of directors on 31 March 2017.
During the previous year, fees of GBP50,000 plus irrecoverable VAT were paid to White Amba Limited, a company controlled by Dominic White.
During the year, the Group paid DGS Capital Partners LLP, a limited liability partnership of which Michael Davies is a member, fees of GBP36,000 (net of irrecoverable VAT) (2017 - GBP36,000).
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.
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 transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable the directors 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 or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Group's auditor is aware of that information.
AUDITOR
The auditor, Moore Stephens LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.
ON BEHALF OF THE BOARD
Dominic White
Director
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
30 June 30 June
2018 2017
GBP GBP
----------- -----------
CONTINUING OPERATIONS
Revenue 265,936 514,746
Cost of sales (191,420) (110,544)
----------- -----------
GROSS PROFIT 74,516 404,202
Administrative expenses (1,317,971) (1,157,098)
Revaluation of investment properties 1,235,377 116,000
----------- -----------
OPERATING LOSS BEFORE SEPARATELY DISCLOSED
ITEMS (8,078) (636,896)
Separately disclosed administrative
items
Gain on bargain purchase 2,201,639 -
Share-based payment charge (950,188) (392,319)
Costs of acquisition of subsidiaries (318,295) -
Costs associated with third-party
fundraising (673,999) -
OPERATING PROFIT/(LOSS) 251,079 (1,029,215)
Finance costs (325,688) (195,361)
Finance income 7,035 5
----------- -----------
LOSS BEFORE TAXATION (67,574) (1,224,571)
Taxation - -
----------- -----------
LOSS FOR THE YEAR (67,574) (1,224,571)
=========== ===========
TOTAL COMPREHENSIVE EXPENSE FOR THE
YEAR (67,574) (1,224,571)
=========== ===========
Loss attributable to owners of the
Parent company (67,574) (1,224,571)
=========== ===========
Loss per share expressed in pence
per share
Basic (1.02) (24.76)
Diluted (1.02) (24.76)
=========== ===========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 30 June
2018 2017
GBP GBP
---------- -----------
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 38,993 1,843
Investment properties 26,695,000 7,242,000
---------- -----------
26,733,993 7,243,843
---------- -----------
CURRENT ASSETS
Trade and other receivables 703,427 90,777
Cash and cash equivalents 6,425 1,023,752
---------- -----------
709,852 1,114,529
---------- -----------
TOTAL ASSETS 27,443,845 8,358,372
========== ===========
EQUITY
SHAREHOLDERS' EQUITY
Share capital 1,435,721 877,518
Share premium 7,358,244 4,660,322
Capital redemption reserve 67,500 67,500
Other reserves 29,862 -
Retained earnings (200,565) (1,083,179)
---------- -----------
TOTAL EQUITY 8,690,762 4,522,161
---------- -----------
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Interest-bearing loans and borrowings 8,749,702 1,560,756
---------- -----------
CURRENT LIABILITIES
Trade and other payables 8,332,548 194,147
Financial liabilities - borrowings
Interest-bearing loans and borrowings 1,670,833 31,308
Other loans - 2,050,000
---------- -----------
10,003,381 2,275,455
---------- -----------
TOTAL LIABILITIES 18,753,083 3,836,211
---------- -----------
TOTAL EQUITY AND LIABILITIES 27,443,845 8,358,372
========== ===========
Net asset value per share (pence) 88.17 85.73
========== ===========
The financial statements were approved and authorised for issue by the Board of Directors on 9 November 2018 and were signed on its behalf by:
James Cane
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
2018 2017
GBP GBP
------------ ------------
Cash flows from operating activities
Cash generated used in operations (2,094,859) (902,338)
Interest paid (325,688) (195,361)
Net cash used in operating activities (2,420,547) (1,097,699)
------------ ------------
Cash flows from investing activities
Acquisition of subsidiaries (5,278,164) -
Purchase of tangible fixed assets (43,515) -
Purchase of investment properties (2,046,594) -
Interest received 7,035 5
------------ ------------
Net cash (used in) / generated
from investing activities (7,361,238) 5
------------ ------------
Cash flows from financing activities
Loan repayments in year (1,131,525) (28,204)
New loans in year 7,739,858 950,000
Shares issued 2,156,125 949,000
------------ ------------
Net cash generated from financing
activities 8,764,458 1,870,796
------------ ------------
(Decrease)/increase in cash and
cash equivalents (1,017,327) 773,102
Cash and cash equivalents at beginning
of year 1,023,752 250,650
------------ ------------
Cash and cash equivalents at end
of year 6,425 1,023,752
============ ============
RECONCILIATION OF LOSS BEFORE TAXATION TO CASH GENERATED FROM / (USED IN) OPERATIONS
Group 2018 2017
GBP GBP
----------- -----------
Loss before taxation (67,574) (1,224,571)
Depreciation charges 6,365 887
Revaluation of investment properties (1,235,377) (116,000)
Gain on bargain purchase (2,201,639) -
Share-based payment charge 950,188 392,319
Finance costs 325,688 195,361
Finance income (7,035) (5)
----------- -----------
(2,229,384) (752,009)
Increase in trade and other receivables (590,502) (66,516)
Increase/(decrease) in trade and other payables 725,027 (83,813)
----------- -----------
Cash generated from / (used in) operations (2,094,859) (902,338)
=========== ===========
Company 2018 2017
GBP GBP
----------- -----------
Loss before taxation (3,407,836) (1,591,032)
Depreciation charges 1,211 754
Impairment of investments 75,000 -
Share-based payment charge 950,188 392,319
Finance costs 316,544 194,149
Finance income (7,019) -
----------- -----------
(2,071,912) (1,003,810)
Increase in trade and other receivables (891,568) (24,741)
Increase in trade and other payables 740,862 107,993
----------- -----------
Cash used in operations (2,222,618) (920,558)
----------- -----------
NOTES TO THE FINANCIAL STATEMENTS
1) REVENUE
The Group is involved in UK property ownership, management and letting. The directors consider that the Group operates 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.
2) EMPLOYEES AND DIRECTORS
2018 2017
GBP GBP
--------- -------
Wages and salaries 455,118 276,538
Social security costs 45,681 17,431
Pension costs 106,157 599
--------- -------
606,956 294,568
========= =======
The average monthly number of employees during
the year was as follows
Directors and management 7 7
Administration 2 2
--------- -------
9 9
========= =======
GBP GBP
Directors' remuneration 321,000 132,375
Remuneration of the highest-paid director 151,000 44,500
Amount paid into a pension scheme of the highest-paid
director 100,000 -
Number of directors accruing benefits under - -
money-purchase schemes
========= =======
The directors are considered to be key management personnel.
Certain directors and others have also subscribed for Restricted Preference shares in the Company, further details of which are contained in the notes to the financial statements
3) FINANCE INCOME AND COSTS
2018 2017
GBP GBP
--------- ---------
Finance costs
Loan interest 325,688 195,361
========= =========
Finance income
Bank interest 7,035 5
========= =========
4) LOSS BEFORE TAXATION
The loss before taxation is stated after charging:
2018 2017
GBP GBP
======= ======
Hire of plant and machinery 2,034 2,018
Other operating leases 13,140 12,840
Depreciation - owned assets 6,365 887
Auditors' remuneration - audit services for parent
for the Group company 44,100 24,000
(inclusive of irrecoverable
VAT) - audit services for subsidiaries 15,000 18,000
- taxation advisory services 13,560 14,200
- abortive corporate finance
- services 150,106 -
------- ------
Separately disclosed items
During the year, the Group incurred significant costs relating to third-party fundraising, which totalled GBP673,999. 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.
On 29 June 2018, the Group acquired KCR (Kite) Limited and KCR (Cygnet) Limited. The costs to the Group of acquiring these entities totalled GBP318,295. 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 gain on bargain purchase and the share-based payments, which are shown on the face of the Consolidated Statement of Comprehensive Income, can be found in the notes to the financial statements.
5) LOSS PER SHARE
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.
In the opinion of the directors, all the outstanding share options are anti-dilutive and, hence, basic and fully diluted loss per share are the same.
2018
Weighted average
number of Per share
Loss shares amount
------------ ----------------- ----------
GBP No Pence
Loss attributable to ordinary
shareholders (67,574) 6,598,018 (1.02)
2017
Weighted average
number of Per share
Loss shares amount
------------ ----------------- ----------
GBP No Pence
Loss attributable to ordinary
shareholders (1,224,571) 49,455,237 (2.48)
============ ================= ==========
During the year, the Ordinary Shares each of nominal value 1p were consolidated into Ordinary Shares each of nominal value 10p. If the share consolidation had taken place at 30 June 2017, the loss per share would have been GBP0.25.
2017
(as if the share consolidation
had taken place at 30 June 2017)
Weighted
average number Per share
Loss of shares amount
------------ ---------------- ----------
GBP No Pence
Loss attributable to ordinary
shareholders (1,224,571) 4,945,523 (24.76)
============ ================ ==========
The net asset value per share of 88.17 pence (2017 - 85.73 pence) is calculated based on the number of Ordinary shares in issue at the year-end. At the year-end, there were 9,857,207 Ordinary shares in issue (2017 - 5,275,181 (52,751,813 pre-consolidation)).
6) INVESTMENT PROPERTIES
Group Total
GBP
-----------
COST
At 1 July 2017 7,242,000
Additions 18,217,623
Revaluations 1,235,377
-----------
At 30 June 2018 26,695,000
===========
NET BOOK VALUE
At 30 June 2018 26,695,000
===========
At 30 June 2017 7,242,000
===========
The investment properties acquired in the year that are owned by KCR (Kite) Limited and KCR (Cygnet) Limited were procured upon acquisition of subsidiaries. These properties were valued by professionally qualified independent external valuers (Lambert Smith Hampton) at the date of acquisition and were recorded at the values that were attributed to the properties at acquisition date. These properties are included in the financial statements at amounts based upon these valuations.
In July 2018, certain properties were valued again by professionally qualified independent external valuers (Lambert Smith Hampton and Harding Green) in accordance with the Royal Institution of Chartered Surveyors' Appraisal and Valuation Standards 2014 as amended.
In total, 77 per cent by value of the investment properties were independently valued at, or within, three months of the year-end. The remaining properties were valued by the directors at the same valuations as at 30 June 2017. The total valuation of the Group's portfolio was GBP26,695,000. The fair values used are considered to be level 3 inputs under IFRS13.
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 GBP133,001 (2017 - GBP154,903). The total rental expenses in relation to investment properties for the Group equated to GBP50,122 (2017 - GBP53,101).
7) INVESTMENTS
Shares in
group undertakings
Company GBP
--------------------
COST
At 1 July 2017 5,305,000
Additions 6,538,563
Impairment (75,000)
--------------------
At 30 June 2018 11,768,563
====================
NET BOOK VALUE
At 30 June 2018 11, 768,563
====================
At 30 June 2017 5,305,000
====================
The Company's investments comprise the following:
Holding
Subsidiaries %
================================================================= ========
Registered office:
K&C (Coleherne) Limited UK 100.00
Nature of business Class of shares
Property letting Ordinary
Registered office:
K&C (Osprey) Limited UK 100.00
Nature of business Class of shares
Property letting and property management Ordinary
Registered office:
K&C (Newbury) Limited UK 100.00
Nature of business Class of shares
Property letting (the company currently Ordinary
owns no property assets), dormant (the
valuation of the company was reduced
to nil during the year)
K&C REIT Limited, previously known as
Newton Horner Property Limited and then Registered office:
KCR Residential REIT Limited UK 100.00
(subsidiary of K&C (Osprey) Limited)
Nature of business Class of shares
Dormant Ordinary
Registered office:
KCR (Kite) Limited UK 100.00
Nature of business Class of shares
Property letting Ordinary
Registered office:
KCR (Cygnet) Limited UK 100.00
Nature of business Class of shares
Property letting Ordinary
Registered office:
KCR (Southampton) Limited UK 100.00
Nature of business Class of shares
Property letting Ordinary
------------------------------------------- --------------------- --------
Acquisition of KCR (Kite) Limited
On 29 June 2018, the Company acquired the entire issued share capital of KCR (Kite) Limited for GBP5,276,964, satisfied by cash. In the director's opinion, reinforced by an independent valuation of the properties acquired by Lambert Smith Hampton, the net assets of KCR (Kite) Limited were worth in excess of the amount paid and hence gave rise to gain on bargain purchase.
As the company was acquired on the last business day of the financial year, the Group earned no revenue from it during the financial year to 30 June 2018.
Net assets acquired were as follows:
GBP
-----------
Investment property 7,300,000
Trade and other receivables 22,148
Trade and other payables (33,686)
Taxation payable (48,360)
Net assets 7,240,102
Gain on bargain purchase - taken to Statement of
Comprehensive Income (1,963,138)
Total Consideration 5,276,964
Satisfied by cash 5,276,964
Net cash outflow arising on acquisition:
Cash consideration (5,276,964)
(5,276,964)
===========
Acquisition of KCR (Cygnet) Limited
On 29 June 2018, the Company acquired the entire issued share capital of KCR (Cygnet) Limited for total consideration of GBP1,261,499, satisfied by cash of GBP1,200 and the issuance of ordinary shares to the value of GBP1,260,299 on 30 July 2018. In the director's opinion, reinforced by an independent valuation of the properties acquired by Lambert Smith Hampton, the net assets of KCR (Cygnet) Limited were worth in excess of the amount paid and hence gave rise to gain on bargain purchase.
Net assets acquired were as follows:
GBP
-----------
Investment property 2,800,000
Bank loans (1,300,000)
-----------
Net assets 1,500,000
Gain on bargain purchase - taken to Statement of
Comprehensive Income (238,501)
-----------
Total consideration 1,261,499
===========
Satisfied by cash 1,200
===========
Net cash outflow arising on acquisition:
Cash consideration (1,200)
(1,200)
===========
As the company was acquired on the last business day of the financial year, the Group earned no revenue from it during the financial year to 30 June 2018.
Full-year impact of acquisitions
If these two companies had been acquired by the Group on 1 July 2017 (as opposed to 29 June 2018), the directors estimate, using several assumptions, that the revenue of the Group would have increased to GBP596,201 (actual - GBP265,936) and the operating profit to GBP398,350 (actual - GBP181,353).
8) TRADE AND OTHER RECEIVABLES
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Trade receivables 70 960 - -
Amounts owed by group - - 263,980 -
undertakings
Other receivables 634,045 63,334 594,293 5,918
VAT 1,336 427 - -
Prepayments 67,976 26,056 60,791 21,578
-------- ------- -------- -------
703,427 90,777 919,064 27,496
======== ======= ======== =======
There is no material difference between the fair value of trade and other receivables and their book value.
Amounts owed by group undertakings are repayable on demand.
Other receivables include a loan to a third party of GBP494,100 carrying interest at 7.5 per cent, which was repaid on 12 September 2018.
9) CASH AND CASH EQUIVALENTS
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Cash in hand 40 40 - -
Bank accounts 6,385 1,023,712 77 989,583
6,425 1,023,752 77 989,583
====== ========== ===== ========
10) SHARE CAPITAL
Allotted, issued and fully paid
30 June 30 June
Number Class Nominal value 2018 2017
---------- --------- -------
GBP GBP
--------- -------
9,857,207 Ordinary GBP0.10 985,721
52,751,813 Ordinary GBP0.01 527,518
4,500,000 Restricted Preference GBP0.10 450,000
35,000,000 Restricted Preference GBP0.01 350,000
--------- -------
1,435,721 877,518
========= =======
At 1 July 2017, the Company had 52,751,813 Ordinary shares of GBP0.01 in issue and 35,000,000 Restricted preference shares of GBP0.01 in issue. On 24 October 2017, the Company consolidated the shares into 5,275,182 Ordinary shares of GBP0.10 each and 3,500,000 Restricted Preference shares of GBP0.10 each.
On 23 February 2018, the Company issued 74,889 Ordinary shares of GBP0.10 each. The shares were issued at par.
On 18 March 2018, the Company issued
1) 4,507,136 Ordinary shares of GBP0.10 each. The shares were issued at a premium of GBP0.60 per share.
2) 1,000,000 Restricted Preference shares of GBP0.10 each. The shares were issued at par.
The Restricted Preference shares carry no voting or dividend rights.
1,571,427 of the Ordinary shares issued on 18 March 2018 were issued upon the conversion of convertible loan notes. The effect of the conversion was to increase share capital by GBP157,143 and increase share premium by GBP942,856. No loan notes were converted in the prior year.
On a winding up or a return of capital, the holders of the Restricted Preference shares shall rank pari passu with the holders of the Ordinary shares save that, on a distribution of assets, the amount to be paid to the holder shall be limited to the nominal capital paid up or credited as paid up.
11) TRADE AND OTHER PAYABLES
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Trade creditors 618,321 76,006 618,321 74,770
Amounts owed to group
undertakings - - 197,330 224,640
Corporation tax 48,360 - - -
Other taxes and social
security 47,901 10,138 45,231 9,898
Other creditors 6,126,929 16,756 52,588 -
Unissued share capital 1,260,299 - 1,260,299 -
Accruals and deferred
income 230,738 91,247 196,405 59,605
---------- -------- ---------- --------
8,332,548 194,147 2,370,174 368,913
========== ======== ========== ========
The Group's and Company's exposure to liquidity risk related to trade and other payables is disclosed in the notes to the financial statements.
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.
Other creditors include GBP6,038,317 owed on the purchase of the investment property within KCR (Southampton) Limited.
12) FINANCIAL LIABILITIES - BORROWINGS
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Current
Bank overdraft 55,259 - 55,259 -
Bank loans 140,574 31,308 91,368 31,308
Other loans 1,475,000 2,050,000 1,475,000 2,050,000
---------- ---------- ---------- ----------
1,670,833 2,081,308 1,621,627 2,081,308
========== ========== ========== ==========
Non-current
Bank loans 6,089,426 1,560,756 4,838,632 1,560,756
Other loans 2,660,276 - 720,138 -
8,749,702 1,560,756 5,558,770 1,560,756
========== ========== ========== ==========
Terms and debt repayment schedule
1 year More than
30 June 2018 or less 1-2 years 2-5 years 5 years Totals
---------- ---------- ---------- ---------- -----------
Group GBP GBP GBP GBP GBP
Bank overdraft 55,259 - - - 55,259
Bank loans 140,574 145,469 1,505,150 4,438,807 6,230,000
Other loans 1,475,000 720,138 1,940,138 - 4,135,276
---------- ---------- ---------- ---------- -----------
1,670,833 865,607 3,445,288 4,438,807 10,420,535
========== ========== ========== ========== ===========
Company
Bank overdraft 55,259 - - - 55,259
Bank loans 91,368 94,681 305,144 4,438,807 4,930,000
Other loans 1,475,000 720,138 - - 2,195,138
---------- ---------- ---------- ---------- -----------
1,621,627 814,819 305,144 4,438,807 7,180,397
========== ========== ========== ========== ===========
1 year More than
30 June 2017 or less 1-2 years 2-5 years 5 years Totals
---------- ---------- ---------- ---------- ----------
Group GBP GBP GBP GBP GBP
Bank loans 90,336 90,336 271,008 2,052,387 2,504,067
Other loans 2,050,000 - - - 2,050,000
---------- ---------- ---------- ---------- ----------
2,140,336 90,336 271,008 2,052,387 4,554,067
========== ========== ========== ========== ==========
Company
---------- ---------- ---------- ----------
Bank loans 90,336 90,336 271,008 2,052,387 2,504,067
Other loans 2,050,000 - - - 2,050,000
---------- ---------- ---------- ---------- ----------
2,140,336 90,336 271,008 2,052,387 4,554,067
========== ========== ========== ========== ==========
Details of the principal loans are as follows:
1) At the start of the year, the Company had a 25-year bank loan of GBP1,592,064 repayable by 300 monthly instalments of GBP7,528 and a final instalment of GBP418,811. The loan was secured by a first debenture over all assets and undertakings of the Company, 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. On 29 June 2018, the Company carried out a refinancing and this loan was repaid.
2) On 29 June 2018, the Company took out a new 25-year bank loan of GBP4,930,000, repayable by 300 monthly instalments of GBP22,145 and a final instalment of GBP1,239,328. 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. The loan 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 rate of interest applicable to the loan is three percentage points above the bank's base rate.
3) A three-year loan of GBP1,995,000 was entered into during the year. GBP54,862 of the loan was retained by the lender. The loan is repayable by 36 monthly instalments of GBP9,144 and a final instalment of GBP1,940,138. The monthly instalments are interest payments and do not include any capital repayments. Interest is charged at 5.50 per cent. 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.
4) On 29 June 2018, the Group acquired KCR (Cygnet) Limited. On acquisition, the Group took over various assets and liabilities of the subsidiary, which included a loan of GBP1,300,000 from Metro Bank plc. The loan is repayable in 59 monthly instalments of GBP7,591 and a final instalment of GBP1,095,126. The loan is subject to an interest rate of 2.9 per cent above the base lending rate of Metro Bank plc. The loan is secured by a first debenture over the assets and undertakings of KCR (Cygnet) Limited and a first legal charge over the properties known as 400 Stanbridge Road, Leighton Buzzard and Sainsbury's, Drayton Garden Village.
5) On 24 June 2018, the Company entered into a new loan agreement with DGS Capital Partners LLP and others. The loan was for GBP1,475,000 and is subject to an interest rate of 12 per cent per annum. The loan is to be repaid within 300 days of the initial drawdown date of 29 June 2018, namely on or before 24 April 2019.
6) At the year-end, the Company had issued several six per cent convertible loan notes, the debt element of which totalled GBP720,138. The convertible loan notes have a redemption date of 30 June 2020. GBP650,000 (at nominal value) of the convertible loan notes were converted to Ordinary Shares at GBP0.70 per share on 30 July 2018.
13) SHARE-BASED PAYMENT TRANSACTIONS
During the year ended 30 June 2018, the Company had several share-based payment arrangements in place, which are described below:
Non- executive Restricted
share Preference White Amba Founder Allenby
options shares share options warrants warrants Warrants
-------------- ------------ -------------- --------- --------- -----------
Outstanding at
1 July 2017 460,000 35,000,000 10,000,000 750,000 437,856 1,500,000
Effect of consolidation
of shares (414,000) (31,500,000) (9,000,000) (675,000) (394,070) (1,350,000)
(Exercised) and
granted during
the year - 1,000,000 (1,000,000) - - -
Cancelled during
the year (46,000) - - (75,000) (43,786) (150,000)
-------------- ------------ -------------- --------- --------- -----------
Outstanding at
30 June 2018 - 4,500,000 - - - -
============== ============ ============== ========= ========= ===========
Non-executive share options:
Non-executive share options were granted to certain non-executive directors and others on admission to trading on AIM, or subsequently, at GBP0.10 per share. During the year, the Company made the decision to simplify its share-incentive structure. On 22 February 2018, the Company cancelled the Non-executive share options. The holders of the options were compensated via the issue of 16,652 Ordinary shares.
Restricted Preference shares:
Restricted Preference shares have been granted to certain directors and other senior managers. Upon the achievement by the Group of certain milestones, the Restricted Preference shares may be converted into Ordinary shares at GBP0.10 each. The milestones and certain terms were amended after the year subsequent to the passing of a resolution at a general meeting held on 30 July 2018. The changes, which are described in full in the circular dated 13 July 2018 on the Company's website, include:
i. An extension of the expiry date from 30 June 2022 to 30 June 2027;
ii. Restricted Preference shares unvested at 30 June 2027 will automatically vest and convert on 1 July 2027 into Ordinary shares;
iii. The 'NAV per share' milestone became an 'NAV per share plus distributions paid' milestone
iv. The achievement of any milestone will result in one-sixth of the total number of Restricted Preference shares held by the individual, and
v. The NAV per share element of each of the six milestones will be rebased to GBP0.77, GBP0.85, GBP0.93, GBP1.01, GBP1.09 and GBP1.17 respectively.
White Amba share options:
Share options had been granted to a company owned by a director of KRC Residential REIT plc, to acquire 10,000,000 Restricted Preference shares at GBP0.01 per share (post-share consolidation, 1,000,000 Restricted Preference shares at GBP0.10 per share). The share options did not have any performance criteria attached to them and were available to be exercised at any time from the date of grant to 30 June 2018. The options were exercised during the year.
Founder warrants
On 8 September 2014, warrants were issued to shareholders to subscribe for one Ordinary share at GBP0.10 per share at any time before 31 December 2018. During the year, the Company made the decision to simplify its share incentive structure. On 22 February 2018, the Company cancelled the Founder warrants. The holders of the warrants were compensated via the issue of 23,850 Ordinary shares.
Allenby warrants
On admission to trading on AIM, the Company granted to Allenby Capital Limited a warrant to acquire Ordinary shares at GBP0.10 per share, within five years of admission, namely by 3 July 2020. During the year, the Company made the decision to simplify its share incentive structure. On 22 February 2018, the Company cancelled the Allenby warrants. The holders of the warrants were compensated via the issue of 14,887 Ordinary shares.
Warrants
On 24 May 2016, warrants were issued to several potential lenders to the Company to subscribe for one Ordinary share at GBP0.10 per share at any time before 24 May 2021. During the year, the Company made the decision to simplify its share incentive structure. On 22 February 2018, the Company cancelled the warrants. The holders of the warrants were compensated via the issue of 19,500 Ordinary shares.
The estimated fair value of each share option in issue at 1 July 2017 is as follows:
Non-
executive Restricted
share Preference White Amba Founder Allenby
options shares share options warrants warrant Warrants
----------- -------------- -------------- ---------- --------- ----------
Fair value of
share option/warrant 0.0340
(GBP) - 0.0385 0.0691-0.0787 0.0767 0.0318 0.0340 0.013
The fair values were estimated using the Black-Scholes valuation model. The Non-executive share options, Founder warrants, Allenby warrant and Warrants were cancelled in the year. During the year, the White Amba share options were exercised and the holder received 1,000,000 Restricted Preference shares.
The following table lists the inputs to the Black-Scholes model that was used to value the Restricted Preference shares, both those in issue at 1 July 2017 and those issued in the year:
Restricted
Preference
shares
-----------
Share price at
grant date (GBP) 0.08-0.09
Exercise price
(GBP) 0.01
Dividend yield
(%) 0.00
Expected volatility 61.75 -
(%) 63.79
Risk-free interest
rate (%) 0.88
Expected life
of share options/warrants
(years) 1.33 - 5.30
The expected lives of the share options and warrants are based on historical data and current expectations and are 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 share options is indicative of future trends, which may not necessarily be the actual outcome.
The expense recognised during the year is shown in the following table:
30 June 30 June
2018 2017
GBP GBP
Expense arising from share options 10,325 198,482
Expenses arising from restricted preference
shares 903,756 193,837
Expense arising from warrants 36,107 -
------- -------
Total expense from share-based payments 950,188 392,319
======= =======
The interests of directors and past directors in Non-Executive share options are as follows:
Balance at Balance at
30 June Consolidation Cancelled 30 June
2017 of shares in the year 2018
No. No. No. No.
---------- ------------- ------------ ----------
George Rolls 460,000 (414,000) (46,000) -
---------- ------------- ------------ ----------
The directors' interests in Restricted Preference shares at the year-end can be seen in the notes to the financial statements.
14) RELATED PARTIES
During the previous year, fees of GBP50,000 plus VAT were paid to White Amba Limited, a company controlled by the director, Dominic White.
At 30 June 2017, current liabilities included GBP100,000 received from a director, Timothy James, and his wife. These monies were reclassified into convertible loan notes and then into Ordinary shares during the year.
During the year, the Group paid DGS Capital Partners LLP, a limited liability partnership in which Michael Davies is a member, fees of GBP36,000 excluding irrecoverable VAT (2017 - GBP36,000).
At the date of the statement of financial position, the following directors held Restricted Preference shares:
Restricted Preference
shares
=====================
Name No.
Dominic White 1,500,000
Timothy James 960,000
James Cane 30,000
Oliver Vaughan 810,000
=====================
Included in the total of Mr White's holdings above are 1,000,000 Restricted Preference shares held in the name of his pension fund, White Amba Pension Scheme.
At 9 November 2018, the following directors held Restricted Preference shares:
Restricted Preference
shares
--------------------------
Name No.
Dominic White 1,765,357
Timothy James 1,225,357
James Cane 40,000
Oliver Vaughan 1,075,357
---------------- ---------
15) SUBSEQUENT EVENTS
On 30 July 2018, the Group raised GBP3.1 million through a placing of GBP901,500 in cash, conversion of GBP650,000 of convertible loan notes into equity, conversion of a creditor into equity and the payment in shares for a property acquisition from Inland Homes plc (GBP1.26 million). KCR issued 4,434,570 shares at 70p. Full details of the transaction are reported in the 'Investors' section of the Company's website www.kcrreit.com in the announcement dated 13 July 2018.
On 15 October 2018, the block at Southampton was handed over to KCR. As reported above, the Company has made rapid strides in letting these most attractive apartments, with 63 per cent either let or reserved as at the date of this report.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR GCBDBCGGBGIC
(END) Dow Jones Newswires
November 09, 2018 04:12 ET (09:12 GMT)
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