22 May 2019
ENERGISER
INVESTMENTS PLC
(‘Energiser’ or
the ‘Group)
FINAL RESULTS FOR
THE YEAR ENDED 31 DECEMBER 2018
Chairman’s statement
Introduction
I am pleased to present the accounts for Energiser for the year
ended 31 December 2018.
Energiser is an Investing Company whose strategy is to invest in
quoted and unquoted companies to achieve capital growth. Much
activity has taken place over the last few years which endorses the
focus in property particularly in the residential sector.
In February 2018, Energiser
invested £494,100 in a short-term loan secured on a
21,900 sq. ft office property in Croydon with planning
permission to convert into 71 residential units. The loan
represented 30% of the estimated value of the property and the
interest was covered by rental income at a ratio of 4:1 (rent:
interest). The gross interest paid on the loan was 7.5%
p.a. The loan was novated as part of our investment in
KCR.
In March 2018, Energiser acquired
2,435,710 new KCR ordinary shares at £0.70 a share for a total of
£1,704,997. The investment, made by participation in a
subscription alongside other investors, was made at a 9% discount
to net asset value per share of KCR as reported by KCR on 19 March
2018. The subscription was funded with cash of £1,210,897 and
the novation of the rights to its short-term loan investment of
£494,100 described above. The Group’s holding represents
15.42% of KCR’s ordinary share capital.
KCR is an AIM quoted Real Estate Investment Trust (“REIT”) and
its objective is to acquire and manage a substantial rented
residential property portfolio in the UK that generates both income
flow and capital appreciation for its shareholders. It
intends to prioritise the acquisition of special purpose vehicles
containing one or more residential properties as this structure has
inherent benefits for the REIT. KCR’s focus is to invest in
more affordable rental properties for private tenants.
KCR’s share price closed at £0.54p on 31
December 2018 and our investment has therefore been written
down by £390,000 to £1,315,000.
KCR’s portfolio of properties was valued at £24.6m at
31 December 2018 and its net asset
value per share was 70.97p (30 June
2018: 88.17p). There is strong demand and a shortage
of supply of good quality affordably priced housing in the
UK. Residential dwellings at this level should deliver
attractive rental and capital value performance over the medium
term. KCR targets low to mid-price blocks of apartments for
rent, aimed at new entrants and young professionals.
Energiser has found this to be a resilient segment of the rental
market and has experienced positive rental growth at every rented
asset in its portfolio.
Results
The Group had no revenues during the period (2017: £138,000) as
it had sold its revenue generating investments in the previous
year. Administrative expenses have reduced by 61% principally
due to a significant reduction in salary costs. The Group
made a loss before tax of £498,000 (2017: profit £604,000) which
included a provision against the investment in KCR of £390,000.
The Group’s net assets had decreased from £1.77m to £1.28m and
now equate to 1.03p per share (2017: 1.43p).
Outlook
Our investment in KCR represents a substantial part of our asset
base and we will continue to watch its progress whilst searching
for other investment opportunities to achieve capital
growth.
Stephen
Wicks
Group Strategic Report
for the year ended 31 December
2018
The Directors present their Strategic Report on the Group for
the year ended 31 December 2018.
Review of the business
Energiser is registered as a Public Limited Company (plc). Its
shares of 0.1p each are listed on AIM, part of the London Stock
Exchange.
The Group subscribed for 2,435,710 of Ordinary shares in KCR
Residential REIT plc at 70p per share. The chairman’s
statement provides further details on KCR’s activities.
Results and performance
The results of the Group for the year show a loss on ordinary
activities before and after taxation of £498,000 (2017: profit of
£604,000 and £572,000). The shareholders’ funds were £1,276,000
(2017: £1,774,000).
Investment properties were sold during the year ended
31 December 2017 and thus there was
no rental income during the year. The Group’s cash was used
predominantly to acquire the investment in KCR.
Strategy
Energiser’s strategy as an Investing Company is to invest,
directly or indirectly, in quoted and unquoted companies and in the
property sector to achieve capital growth in the medium term.
Key performance indicators
(“KPIs”)
The Group’s KPIs are the return on project investment and the
net assets position of the Group including net assets per share.
These indicators are monitored by the Board and the details of
performance against these are given below.
|
2018 |
2017 |
Return on project
investment |
— |
£104,000 |
Net assets |
£1,276,000 |
£1,774,000 |
Net assets per
ordinary share |
1.03p |
1.43p |
Principal risks and uncertainties
The management of the business and the nature of the Group’s
strategy are subject to a number of risks. The Directors have set
out below the principal risks facing the business. Where possible,
processes are in place to monitor and mitigate such risks. The
Group operates a system of internal control and risk management in
order to provide assurance that the Board is managing risk whilst
achieving its business objectives. No system can fully eliminate
risk and, therefore, the understanding of operational risk is
central to the management process.
To enable shareholders to appreciate what the business considers
are the main operational risks, they are briefly outlined
below:
|
Risk |
Potential impact |
Strategy |
Housing
market |
A fall in the housing
market in the regions in which the Group operates |
Inability
to realise maximum value in a timely fashion
Adverse effect on the timing of sales |
The Group seeks to
ensure that investment is made either directly or indirectly into
the residential property sector with a view to preserving
capital. |
Interest
rates |
Significant upward
changes in interest rates |
Increased borrowing
costs and a detrimental effect on profit |
The Group mitigates any
adverse exposure to interest rate changes by controlling its
gearing |
|
|
|
|
Future developments
The Group will continue to focus on direct and indirect
investment in the property sector. It will continue to invest in
property operating companies in the residential market.
By order of the Board
Stephen Wicks
Non-executive Chairman
Group statement of comprehensive
income
for the year ended 31 December
2018
|
|
2018
£’000 |
2017
£’000 |
Continuing
operations |
|
|
|
Revenue arising in the
course of ordinary activities |
|
— |
138 |
Cost of sales |
|
(1) |
(34) |
Gross
(loss)/profit |
|
(1) |
104 |
Administrative
expenses |
|
(92) |
(235) |
Operating
loss |
|
(93) |
(131) |
Finance costs |
|
— |
(54) |
Finance income |
|
6 |
— |
(Loss)/Gain on
investments |
|
(411) |
16 |
Gain on financial
instrument |
|
— |
773 |
(Loss)/profit
before taxation |
|
(498) |
604 |
Taxation |
|
— |
(32) |
(Loss)/profit for
the year attributable to shareholders of the Group |
|
(498) |
572 |
Total comprehensive
(loss)/profit for the year attributable to shareholders of the
Group |
|
(498) |
572 |
(Loss)/profit per
share |
|
|
|
Basic and diluted
(loss)/profit per share from total and continuing operations |
|
(0.40)p |
0.46p |
Diluted (loss)/profit per share is taken as equal to the basic
(loss)/profit per share as Energiser’s average share price during
the period is lower than the exercise price of the share options
and therefore the effect of including share options is
anti-dilutive.
Group statement of financial
position
as at 31 December 2018
|
|
2018
£’000 |
2017
£’000 |
ASSETS |
|
|
|
Non-current
assets |
|
|
|
Investments |
|
1,315 |
— |
|
|
1,315 |
— |
Current
assets |
|
|
|
Trade and other
receivables |
|
8 |
33 |
Cash and cash
equivalents |
|
177 |
1,959 |
|
|
185 |
1,992 |
Total
assets |
|
185 |
1,992 |
LIABILITIES |
|
|
|
Current
liabilities |
|
|
|
Trade and other
payables |
|
190 |
185 |
Tax and social
security |
|
34 |
33 |
|
|
224 |
218 |
Total
liabilities |
|
224 |
218 |
Net assets |
|
1,276 |
1,774 |
EQUITY |
|
|
|
Share capital |
|
2,392 |
2,392 |
Share premium
account |
|
7,189 |
7,189 |
Convertible loan |
|
88 |
88 |
Merger reserve |
|
1,012 |
1,012 |
Retained earnings |
|
(9,405) |
(8,907) |
Total
equity |
|
1,276 |
1,774 |
Group statement of changes in
equity
for the year ended 31 December
2018
|
Share
capital
£’000 |
Share
premium account
£’000 |
Convertible loan
£’000 |
Merger
reserve
£’000 |
Revaluation reserve
£’000 |
Retained earnings
£’000 |
Total
equity
£’000 |
At 1 January 2017 |
2,392 |
7,198 |
88 |
1,012 |
537 |
(9,479) |
1,748 |
Total comprehensive
loss |
— |
— |
— |
— |
(537) |
572 |
35 |
Issue of equity |
— |
(9) |
— |
— |
— |
— |
(9) |
Balance at 31
December 2017 |
2,392 |
7,189 |
88 |
1,012 |
— |
(8,907) |
1,774 |
Total comprehensive
loss |
— |
— |
— |
— |
— |
(498) |
(498) |
Balance at 31
December 2018 |
2,392 |
7,189 |
88 |
1,012 |
— |
(9,405) |
1,276 |
Group statement of cash flows
for the year ended 31 December
2018
|
2018
£’000 |
2017
£’000 |
Cash flows from
operating activities |
|
|
(Loss)/Profit before
taxation |
(498) |
604 |
Adjustments for: |
|
|
Loss on sale of investment properties |
23 |
(16) |
Fair value adjustment for listed
investments |
390 |
— |
Interest expense |
— |
54 |
Interest income |
(6) |
— |
Decrease in trade and other
receivables |
3 |
51 |
Increase/(Decrease) in trade and other
payables |
5 |
(641) |
Net cash generated
(used in)/by operating activities |
(83) |
52 |
Cash flows from
investing activities |
|
|
Interest received |
6 |
— |
Purchase of
Investments |
(1,705) |
— |
Mezzanine finance
facility repaid |
— |
16 |
Sale of investment
properties |
— |
2,816 |
Net cash generated
(used in)/by investing activities |
(1,699) |
2,832 |
Cash flows from
financing activities |
|
|
Net proceeds on the
issue of ordinary shares |
— |
(9) |
Repayment of
borrowings |
— |
(1,982) |
Interest paid |
— |
(54) |
Net cash used in
financing activities |
— |
(2,045) |
Net
(decrease)/increase in cash and cash equivalents |
(1,782) |
839 |
Cash and cash
equivalents at beginning of financial year |
1,959 |
1,120 |
Cash and cash
equivalents at end of financial year |
177 |
1,959 |
Note:
The financial information set out above does not constitute
the Group's statutory accounts for the years ended 31
December 2018 or 2017 but is derived from those
accounts. Statutory accounts for 2017 have been delivered to the
registrar of companies, and those for 2018 will be delivered in due
course. The auditors have reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies
Act 2006 in respect of the accounts for 2018 or 2017.
The Group’s statutory accounts have been prepared under the
historical cost convention, except as modified by the fair value of
investment property and financial assets and liabilities (including
derivatives). They have also been prepared in accordance with the
Companies Act 2006 applicable to companies reporting under IFRS and
in accordance with the accounting policies set out in the Group’s
statutory accounts and International Financial Reporting Standards
(IFRS) as adopted by the European Union and that were effective at
31 December 2018.
Those financial statements have been prepared on the going
concern basis, the Directors having considered the cash forecasts
for the next twelve months from the date of the approval of
those financial statements. In doing so they have given due regard
to the risks and uncertainties affecting the business, the
liquidity of investments and the liquidity risk. The Group
and Company make investments for the long term. Accordingly, the
Group and Company rarely trade investments in the short term. The
Group currently has investments in KCR Residential REIT plc. As
this is a traded investment it is deemed liquid. On this basis, the
Directors have a reasonable expectation that the funds available to
the Group are sufficient to meet the requirements indicated by
those forecasts.
During the year, new accounting standards were adopted including
IAS7 (amended) – Statement of Cash Flows and IFRS 9 Financial
Instruments. The latter applies to classification and
measurement of financial assets and financial liabilities,
impairment provisioning and hedge accounting. The Group does not
presently hold any complex financial instruments. Given that
inter Group balances are eliminated on consolidation and does not
affect Group results, no material impairment allowance adjustments
are expected. It is considered that the introduction of IFRS
9 is not expected to have a material impact on the results or cash
flows of either the Group or the Company.
The AGM will be held at Burnham Yard, London End, Beaconsfield,
HP9 2JH at 11.00 am on 20 June 2019.
Energiser’s Annual Report and Accounts along with the Notice of
Annual General Meeting will be posted to shareholders shortly and
will be available to view and download on Energiser’s website at
www.energiserinvestments.co.uk.
For further information contact:
Energiser Investments plc
John
Depasquale
+44 (0) 1494 762450
Nishith
Malde
+44 (0) 1494 762450
Cairn Financial Advisers LLP
Jo
Turner
+44 (0) 20 7213 0880
Sandy Jamieson