Latest Results

Interim Results for the period ended 31 December 2016

This announcement contains inside information

KCR Residential 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 2017. 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.kcrrreit.com.

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Commenting on the results, Michael Davies, chairman of KCR, said: "KCR is both an income and capital growth opportunity for its shareholders. It seeks to deliver income return from the collection of rents from tenants and generates capital returns through investment in under-valued property assets that are generally marked to market at acquisition. The Group is currently scaling-up its activities such that it can generate a profit and pay a dividend to shareholders."

Dominic White, the chief executive of KCR, said: "The portfolio at 31 December 2017 was valued at £9.45 million, an increase of £2.2 million compared to 30 June 2017. The Group has grown the portfolio by £1.75 million through investment and crystallised value of more than £0.45 million through asset management during the six-month period.

KCR's net asset value per share at 31 December 2017 was 77.1p (83.7p - 30 June 2017)."

This announcement contains information which, prior to its disclosure, was inside information for the purpose of the Market Abuse Regulation.

 

 

The information set out below is provided in accordance with the requirements of Article 19(3) of the EU Market Abuse Regulation No 596/2014.

CHAIRMAN'S STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2017

Dear Shareholder

KCR Residential REIT plc ("KCR" or the "Company") and its subsidiaries (together the "Group") operate in the UK private rented residential investment market. We acquire whole blocks of studio, one and two-bed apartments that are rented to private tenants.

KCR is both an income and capital growth opportunity for its shareholders. It seeks to deliver income return from the collection of rents from tenants and generates capital returns through investment in under-valued property assets that are generally marked to market at acquisition. The Group is currently scaling-up its activities such that it can generate a profit and pay a dividend to shareholders.

The team adds value through asset-management activities (including property improvements, rental increases, physical extensions and repositioning, small-scale development) that increase net asset value. In particular, the directors search out residential blocks of apartments held within UK incorporated companies. These provide an opportunity for KCR to capitalise on the tax advantages afforded to UK REITs and, in many cases, can generate an immediate boost to net asset value per share on acquisition.

Across the UK as a whole, house prices and rental values continue to rise, especially in the types of properties that KCR targets. Our target market is a very resilient segment of the residential rental market. While higher price-band homes, particularly in Central London, have declined in value, it is important to note that these types of property do not fall within KCR's investment strategy.

The positive economic fundamentals in the residential sector - strong demand and shortage of supply - in particular in studio, one and two-bed flats will, in our view, deliver attractive rental and capital value performance across the UK over the medium term.

 

Michael Davies
16 March 2018

 

 

CHIEF EXECUTIVE'S REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2017

We have pleasure in reporting to you on the progress of the Group in the six-month period since the year-end on 30 June 2017.

Property portfolio

KCR's short-term objective is to increase revenue and reduce costs to achieve profitability and pay dividends. A minimum portfolio size of approximately £40 million should deliver the revenue required to achieve this goal. Significant activity is underway to build such a portfolio.
In the six months to 31 December 2017, the Group accepted the surrender by leaseholders of five 67-year residential leasehold interests at its freehold Heathside property in Hampstead. The Company continues to implement its value-adding asset-management plan at this property of creating ‘marriage value' through the surrender of leasehold units.

The block of Coleherne Road apartments has continued to perform well. The size of the units (one- and two-bed flats) continue to be exactly what the rental market is looking for. This has meant that occupancy has been maintained at 100 per cent throughout the period. Where there have been renewals, rents have increased at least in line with inflation.

The portfolio at 31 December 2017 was valued at £9.45 million, an increase of £2.2 million compared to 30 June 2017. The Group has grown the portfolio by £1.75 million through investment and crystallised value of more than £0.45 million through asset management during the six-month period.

Financial

Revenue declined to £142,114 (£233,179 to 31 December 2016) as lease sales and commission income, which follow no seasonal pattern, declined considerably.

The Group reports a consolidated operating loss before separately disclosed items of £661,666 (£249,927 to December 2016), which includes a non-cash share-based payment charge due to KCR's preference share scheme of £679,625 and a revaluation credit of £559,864.

In addition, KCR incurred costs of over £0.5 million associated with its deferred capital raising programme, which I refer to in more detail below.

On 12 December 2017, KCR issued a further tranche of 6% Loan Notes in the sum of £0.5 million, taking the total outstanding to £1.85 million, which are convertible into ordinary shares at £1.20. The loan notes are redeemable on 30 June 2020.

In January 2018, the Company renewed the 12% syndicated loan note for a further 12 months until December 2018 and increased its size by £0.8 million to £1.9 million.

The additional capital raised through the convertible and syndicated loans has been used primarily to acquire and refurbish the five Heathside units referred to above.

KCR's net asset value per share at 31 December 2017 was 77.1p (83.7p - 30 June 2017).

Capital structure and name change

During the six months, the Company issued no ordinary shares. In March 2018, £0.1 million of restricted preference shares were issued, subject to the vesting criteria that are laid out in the Circular dated 27 January 2017.

To align KCR's shares with its REIT peer group, the Company's 52,751,820 ordinary shares of 1p each were consolidated 10:1 on 24 November 2017 and the consolidated shares started trading on AIM on 27 November. Following a share issue in February 2018, when various existing share options and warrants were exchanged for ordinary shares at an independently confirmed value, the Company now has 5,350,071 ordinary shares of 10p each in issue.

The Company changed its name to KCR Residential REIT plc in November 2017.

Institutional capital raise

As reported in KCR's announcement of 23 November 2017, we held marketing meetings with over 80 institutional investors and wealth managers in early November and received very positive feedback regarding its residential acquisition and rental strategy, and its management team. Although several material offers of investment were received, the majority view from potential investors was for KCR to complete one or more acquisitions from its strong pipeline alongside the closing of the proposed placing.

As a result, the board took the decision to defer the proposed placing until further progress had been made relating to the acquisitions. KCR intends to return to the equity markets in the near future following the development of several specific investment opportunities.

I look forward to providing you with further updates as we execute our business strategy.

 

Dominic White
16 March 2018

 

Consolidated statement of comprehensive income
for the six months ended 31 December 2017 (unaudited)


    Six months ended
31 December
2017
  Six months ended
31 December
2016
  Year ended
30 June 2017
(audited)
  Notes £   £   £
             
Revenue   142,114   233,179   514,746
Cost of sales   (44,292)   (59,586)   (110,544)
             
Gross Profit   97,822   173,593   404,202
             
Administrative expenses   (639,727)   (348,876)   (1,157,098)
Share-based payment charge 7 (679,625)   (74,644)   (392,319)
Revaluation of investment properties 5 559,864   -   116,000
             
Operating loss before exceptional items   (661,666)   (249,927)   (1,029,215)
             
Costs of acquisition of subsidiaries   -   (8,463)   -
Costs associated with third party fundraising   (509,839)   (61,110)   -
             
Operating loss   (1,171,505)   (319,500)   (1,029,215)
             
Finance costs   (130,398)   (96,347)   (195,361)
Finance income   181   6   5
             
Loss before taxation   (1,301,722)   (415,841)   (1,224,571)
             
Taxation   -   -   -
             
Loss for the period/year   (1,301,722)   (415,841)   (1,224,571)
             
Total comprehensive expense for the period/year   (1,301,722)   (415,841)   (1,224,571)
Basic and diluted loss per ordinary share (pence) - post-consolidation of ordinary shares 4 (24.7)   (8.9)   (24.8)

 

Consolidated statement of financial position
at 31 December 2017 (unaudited)


    31 December 2017   31 December 2016   30 June 2017 (audited)
  Notes £   £   £
Non-current assets            
Property, plant and equipment   2,753   2,287   1,843
Investment properties 5 9,452,000   7,126,000   7,242,000
             
    9,454,753   7,128,287   7,243,843
             
Current assets            
Trade and other receivables   71,375   49,115   90,777
Cash and cash equivalents   334,169   50,231   1,023,752
             
    405,544   99,346   1,114,529
             
Total assets   9,860,297   7,227,633   8,358,372
             
Equity            
Shareholders' equity            
Share capital   877,518   492,856   877,518
Share premium   4,660,322   4,345,984   4,660,322
Capital redemption reserve   67,500   67,500   67,500
Other reserves 8 168,493   -   -
Retained deficit   (1,705,276)   (592,124)   (1,083,179)
             
Total equity   4,068,557   4,314,216   4,522,161
             
Non-current liabilities            
Financial liabilities - borrowings            
Interest-bearing loans and borrowings 8 3,225,624   2,674,368   1,560,756
             
Current liabilities            
Trade and other payables   1,108,182   208,318   194,147
Current portion of borrowings   32,934   30,731   31,308
Other loans   1,425,000   -   2,050,000
             
    2,566,116   239,049   2,275,455
             
Total liabilities   5,791,740   2,913,417   3,836,211
             
Total equity and liabilities   9,860,297   7,227,633   8,358,372
             
Net asset value per share (pence) - post-consolidation of ordinary shares   77.1   87.5   85.7

 

Consolidated statement of changes in equity
for the six months ended 31 December 2017 (unaudited)


  Share
capital

£
Share
premium

£
Capital
redemption reserve

£
Retained deficit
£
Other reserves
£
Total
£
Balance at 1 July 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 expense - - - (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
             
Changes in equity            
Issue of share capital 384,662 314,338 - - - 699,000
Total comprehensive expense - - - (808,730) - (808,730)
Share-based payment charge - - - 317,675 - 317,675
             
Balance at 30 June 2017 877,518 4,660,322 67,500 (1,083,179) - 4,522,161
             
Changes in equity            
Issue of share capital - - - - - -
Total comprehensive expense - - - (1,301,722) - (1,301,722)
Share-based payment charge - - - 679,625 - 679,625
Equity component of convertible loan notes - - - - 168,493 168,493
             
Balance at 31 December 2017 877,518 4,660,322 67,500 (1,705,276) 168,493 4,068,557

 

Consolidated statement of cash flows
for the six months ended 31 December 2017 (unaudited)


    Six months
ended
31 December 2017
  Six months
ended
31 December
2016
  Year
ended
30 June 2017
(audited)
    £   £   £
Cash flows from operating activities            
Loss for the period/year   (1,301,722)   (415,841)   (1,224,571)
Adjustments for            
Depreciation charges   601   443   887
Share-based payment charge   679,625   74,644   392,319
Revaluation of investment properties   (559,864)   -   (116,000)
Finance costs   130,398   96,347   195,361
Finance income   (181)   (6)   (5)
(Increase)/decrease in trade and other receivables   19,402   (24,853)   (66,516)
Increase/(decrease) in trade and other payables   914,038   (69,642)   (83,813)
             
Cash used in operations   (117,703)   (338,908)   (902,338)
             
Interest paid   (130,398)   (96,347)   (195,361)
             
             
Net cash used in operating activities   (248,101)   (435,255)   (1,097,699)
             
Cash flows from investing activities            
Purchase of tangible fixed assets   (1,513)   -   -
Purchase of investment properties   (1,650,136)   -   -
Interest received   181   6   5
             
             
Net cash from/(used in) investing activities   (1,651,468)   6   5
             
Cash flows from financing activities            
Loan repayments in period/year   (15,014)   (15,170)   (28,204)
Increase in borrowings   1,225,000   -   950,000
Share issues   -   250,000   949,000
             
Net cash from financing activities   1,209,986   234,830   1,870,796
             
(Decrease)/increase in cash and cash equivalents   (689,583)   (200,419)   773,102
             
Cash and cash equivalents at beginning of period/year   1,023,752   250,650   250,650
             
Cash and cash equivalents at end of period/year   334,169   50,231   1,023,752

 

Notes

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

 

Page last updated: 16 March 2018