Latest Results

Interim Results for the period ended 31 December 2016

K&C REIT plc (AIM: KCR), the residential real estate investment trust group, is pleased to announce its interim results for the six months to 31 December 2016. A copy of the interim report and accounts will be posted to shareholders shortly.  A copy will also be available from the Company's website, www.kandc-reit.co.uk.

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The full results are available to
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Highlights:

  • NAV per share of 8.75p at 31 December 2016
  • Revenue up 210% to £233,179 (2015: £75,227)
  • Gross profit up 274% to 173,593 (2015: £46,361)
  • Share subscription for £500,000 by Gravity Investment Group at 10p per share
  • Post-period share subscription for £50,000 by Ms Qing Xiao at 10.5p per share

Commenting on the results, Michael Davies, Chairman of K&C REIT, said:

"It has been an active period for the business which culminated with the recent strategic investments by Gravity Investment Group and Ms Qing Xiao, with both share subscriptions done at a significant premium to the share price. Operationally, our assets are performing well, with rents and occupancy rates up as a result of asset management initiatives and improved marketing activities. The residential market remains robust and the Group is assessing a number of opportunities that fit its investment criteria, including owning assets in the retirement residential space.

"K&C has decided to reduce the membership of its board from eight to six directors.  On 31 March 2017, Tim Oakley and Christopher James will resign as directors of K&C and Patricia Farley will step down as a non-executive director.  Tim and Christopher will continue to provide their expertise and skill as members of the executive board of subsidiary companies in the Group.  K&C looks forward to using Patricia's unrivalled market knowledge in a consultancy capacity over the coming years.  We are immensely grateful to all three of them for the dedication that they have given to the board of K&C since the formation of the Group.

"I am pleased to announce that, with effect from 1 April 2017, Chris Bateman, who owns and controls Gravity Investment Group, will join the board as a non-executive director.  I look forward to working with him."

Board changes

With effect from 31 March 2017, Tim Oakley and Christopher James will step down as directors of K&C but will remain members of the executive board of subsidiary companies in the Group. Patricia Farley will step down as a non-executive director but will continue to provide consultancy services to the Group. Chris Bateman from Gravity Investment Group will join the board as a non-executive director.

Chris Bateman, aged 43, has worked in property investment and development for 20 years and is currently CEO of Gravity Investment Group, which targets investments opportunities in property, leisure and technology. Mr Bateman is also the founder and acting CEO of Primus Care, a provider of social care and healthcare for children and adults. Mr Bateman is also founder and CEO of Imperial World Resorts, which is focused on developing luxury hotels and resorts in emerging markets.

Present directorships / partnerships Former directorships / partnerships held over past five years


Broome Park Estate Ltd Primus Childcare Ltd
Broome Park Golf Resort Ltd Primus Elderly Care Ltd
Broome Park Leisure Resort Ltd Shelf Co 100 Ltd
GCH SPV1 Ltd Shelf Co 101 Plc
GCH SPV2 Ltd Shelf Co 010 Ltd
Gloucestershire Care Homes Ltd
Gloucester Care Homes Ltd
Gravity Resort Group Tambaba Ltd
Imperial World Resorts Plc
Industry Travel Ltd
IWR Caribbean Ltd
IWR Europe Ltd
Look Find Book Ltd
Primus Care Plc
Primus RE SPV1 Ltd
Primus RE SPV2 Ltd
Primus RE SPV3 Ltd
Primus RE SPV4 Ltd
Primus RE SPV5 Ltd
Primus Real Estate Ltd
Primus Reality Ltd

Including through his holding in Gravity Investment Group, Chris holds 2,500,000 Ordinary Shares in the Company and has agreed to subscribe to 15,000,000 Restricted Preference Shares, as previously announced by the Company on 27 January 2017.

Save as disclosed, there are no other disclosures required in relation to Rule 17 or paragraph (g) of Schedule 2 of the AIM Rules for Companies.

Chairman's Statement for the six months ended 31 December 2016

Dear shareholder

I have pleasure in reporting to you on the progress of the Group in the period since the year-end.

Market and strategy

K&C REIT plc ("K&C") and its subsidiaries (together the "Group") operates in the UK residential investment market. Since admission to AIM in July 2015, K&C has acquired assets in the Private Rented Sector. K&C is now broadening its activities in the residential sector to include retirement residential, which includes assisted living and residential care. The directors consider that investments in real estate associated with these sub-sectors are increasingly in demand from operators and users, given the fundamental demographic change towards an ageing population in the UK. On average, these sub-sectors deliver higher net income yields than pure residential, which should assist K&C in achieving its target of providing a sustainable, and growing, dividend yield.

As well as aiming to provide income to investors, K&C seeks to acquire residential property assets to which it can add value through asset management activities (quality improvements, rental increases, physical extensions and repositioning, small-scale development) that will increase net asset value per share. In particular, the directors search out residential blocks of apartments held within UK- incorporated companies. These provide an opportunity for K&C, by capitalising on the advantages afforded to REITs, to provide an efficient exit route for vendors that is also accretive to net asset value.

Corporate activity

On 22 December 2016 and 6 January 2017, Gravity Investment Group Limited subscribed for a total of 5.25 million ordinary shares at 10.0p per share. On 1 March 2017, Ms Qing Xiao subscribed for 476,190 ordinary shares at 10.5p per share. We consider both these to be strategic investments and we welcome these important new shareholders.

On 1 January 2017, Dominic White was appointed chief executive. Dominic comes from a real estate investment and private equity environment, having operated in both private and public real estate markets for the last 24 years. We have already benefited from his expertise in both capital and real estate markets.

K&C has decided to reduce the membership of its board from eight to six directors. With effect from 31 March 2017, Tim Oakley and Christopher James will resign as directors of K&C and Patricia Farley will step down as a non-executive director. Tim and Christopher will continue to provide their expertise and skill as members of the executive board of subsidiary companies in the Group. K&C looks forward to working with Patricia in a consultancy capacity over the coming years. We are immensely grateful to all three of them for the dedication that they have given to the board of K&C since the formation of the Group. I am pleased to announce that, with effect from 1 April 2017, Chris Bateman, who owns and controls Gravity Investment Group, will join the board as a non-executive director.

Operations

The Group has not made any acquisitions since 30 June 2016. During the period, our active subsidiaries have traded well:

K&C (Coleherne) Limited has increased rents and occupancy rates as a result of asset management initiatives.

K&C (Osprey) Limited continues to exceed our expectations, with revenue significantly improved compared to the same period last year under its previous ownership, as the company has improved its marketing activities and redesigned and relaunched its website.

Financial

The financial results for the six months to 31 December 2016 show a consolidated loss of £415,841. Income for the period was £233,179 compared to £75,227 in the comparable six months to 31 December 2015.

Net asset value per share declined to 8.75 pence, combining the accretive impact of new capital raised at 10p per share and the negative effect of the loss for the period.

Future prospects

The Group's objective is to build a portfolio of high-quality assets in the residential sector that combine growing rental income and improving property valuation. This combination would support a sustainable dividend and a growth in net asset value per share. K&C's investments last year were the start of building such a portfolio. The widened strategy that now includes owning assets (but not operating businesses) in the retirement residential sub-sector - assisted living and residential care - ought to assist further progress towards that objective. K&C is reviewing several interesting opportunities in the residential sector that fit its rigorous acquisition criteria. I hope to report further developments to you in the near future.

Michael Davies
Chairman
29 March 2017

 

Consolidated statements of comprehensive income
for the six months ended 31 December 2016 (unaudited)

 

    SIX MONTHS
ENDED
31 DECEMBER 2016
SIX MONTHS
ENDED
31 DECEMBER
2015
YEAR ENDED
30 JUNE
2016
(audited)
         
  Notes £ £ £
Revenue   233,179 75,227 151,417
Cost of sales   (59,586) (28,866) (60,240)
         
GROSS PROFIT   173,593 46,361 91,177
Profit on disposal of investment properties   - 17,736 -
         
Total profit before expenses   173,593 64,097 91,177
Administrative expenses   (348,876) (323,043) (513,367)
Share-based payment charge   (74,644) (126,561) (212,655)
Revaluation of investment properties   - - 250,000
         
Operating loss before exceptional items   (249,927) (385,507) (384,845)
Gain on bargain purchase   - 364,783 1,541,829
AIM admission costs   - (780,728) (786,578)
Costs of acquisition of subsidiaries   (8,463) (100,202) (469,848)
Costs associated with third party fundraising   (61,110) - -
         
Operating loss 3 (319,500) (901,654) (99,442)
Finance costs   (96,347) (36,975) (73,009)
Finance income   6 - 3,138
         
Loss before taxation   (415,841) (938,629) (169,313)
Taxation   - - 104,942
Loss for the period/year   (415,841) (938,629) (64,371)
         
Total comprehensive expense for the period/year   (415,841) (938,629) (64,371)
Basic and diluted loss per share (pence) 4 (0.89) (2.20) (0.15)
         

 

Consolidated statements of financial position
for the six months ended 31 December 2016 (unaudited)

 

    31 DECEMBER 2016 31 DECEMBER 2015 30 JUNE 2016
        (audited)
  Notes £ £ £
Non current assets        
Property, plant and equipment   2,287 1,453 2,730
Investment properties 5 7,126,000 4,473,198 7,126,000
         
    7,128,287 4,474,651 7,128,730
Current assets        
Trade and other receivables   49,115 13,676 24,262
Cash and cash equivalents   50,231 486,054 250,650
         
    99,346 499,730 274,912
         
Total assets   7,227,633 4,974,381 7,403,642
Equity        
Shareholders' equity        
Share capital 6 492,856 437,856 467,856
Share premium   4,345,984 3,850,984 4,120,984
Capital redemption reserve   67,500 67,500 67,500
Retained deficit   (592,124) (1,211,279) (250,927)
         
Total equity   4,314,216 3,145,061 4,405,413
Non-current liabilities        
Financial liabilities - borrowings        
Interest bearing loans and borrowings   2,674,368 1,429,522 2,690,108
         
Current liabilities        
Trade and other payables   208,318 107,832 277,960
Current portion of borrowings   30,731 60,228 30,161
Taxation payable   - 3,738 -
Loan notes   - 228,000 -
         
    239,049 399,798 308,121
Total liabilities   2,913,417 1,829,319 2,998,229
Total equity and liabilities   7,227,633 4,974,381 7,403,642
Net asset value per share (pence)   8.75 7.20 9.42
         

 

Consolidated statements of changes in equity
for the six months ended 31 December 2016 (unaudited)

 

  Share capital
£
Share premium
£
Capital redemption reserve
£
Retained deficit
£
Total equity
£
Balance at 1 July 2015 7,500 - 67,500 (399,211) (324,211)
Changes in equity          
Issue of share capital 430,356 3,850,984 - - 4,281,340
Total comprehensive expenses - - - (938,629) (938,629)
Share-based payment charge - - - 126,561 126,561
Balance at 31 December 2015 437,856 3,850,984 67,500 (1,211,279) 3,145,061
Changes in equity          
Issue of share capital 30,000 270,000 - - 300,000
Total comprehensive income - - - 874,258 874,258
Share-based payment charge - - - 86,094 86,094
Balance at 30 June 2016 467,856 4,120,984 67,500 (250,927) 4,405,413
Changes in equity          
Issue of share capital 25,000 225,000 - - 250,000
Total comprehensive income - - - (415,841) (415,841)
Share-based payment charge - - - 74,644 74,644
Balance at 31 December 2016 492,856 4,345,984 67,500 (592,124) 4,314,216

 

Consolidated statements of cash flows
for the six months ended 31 December 2016 (unaudited)

 

    SIX MONTHS
31 DECEMBER 2016
SIX MONTHS
31 DECEMBER
2015
YEAR ENDED
30 JUNE
2016
        (audited)
  Notes £ £ £
Cash flows from operating activities
Loss for the period
Adjustments for
Depreciation charges
Profit on disposal of investment properties
Increase in taxation payable
Share-based payment charge
Revaluation of investment properties
Gain on bargain purchase
Finance income
(increase)/decrease in trade & other receivables
Decrease in trade and other payables
 

(415,841)
443
-
-
74,644
-
-
(6)
(24,853)
(69,642)


(938,629)
-
(17,736
3,738
126,561
-
(364,783)
-
232,294
(286,854)


(169,313)
686
(23,698)
-
212,655
(250,000)
-
(1,544,967)
221,708
(110,738)
Net cash used in operating activities   (435,255) (1,245,409) (1,663,667)
Cash flows from investing activities
Purchase of tangible fixed assets
Sale of investment property
Acquisition of subsidiaries
Interest received
 
-
-
-
6

(1,453)
236,094
(3,330,000)
-

(3,416)
715,254
(4,630,000)
3,138
Net cash from/(used in) investing activities   6 (3,095,359) (3,905,024)
Cash flows from financing activities
Loan repayments in year
Increase in borrowings
Share issues
 
(15,170)
-
250,000

(231,000)
1,489,750
3,566,340

(874,000)
2,720,269
3,981,340
Net cash from financing activities   234,830 4,825,090 5,827,609
         
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
 
(200,419)
250,650

484,322
1,732

248,918
1,732
Cash and cash equivalents at end of period   50,231 486,054 250,650
         

 

Notes

The notes to the financial statement are available in the PDF download.

 

Page last updated: 30 March 2017