KCR RESIDENTIAL REIT PLC

Earnings Release • Oct 17, 2017

National Storage Mechanism | Additional information

You don't have Javascript enabled. For full functionality this page requires javascript to be enabled.

RNS Number : 7550T

K&C REIT PLC

17 October 2017

17 October 2017

K&C REIT plc

("K&C" or the "Company")

Annual Results for year ended 30 June 2017

K&C REIT plc (AIM: KCR), the residential real estate investment trust group, is pleased to announce its annual results for year ended 30 June 2017. A copy of the annual 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.

Highlights:

·           Revenue up 240% to £514,746 (2016: £151,417)

·           Gross profit up 343% to £404,202 (2016: £91,177)

·           NAV per share of 8.57p at 30 June 2017 (2016: 9.42p)

·           Year-end portfolio valuation of £7.24 million (2016: £7.13 million)

·           Company issued £599,000 of new equity and £350,000 of restricted preference shares in the year

·           £1.35 million 6% loan note 2020 issued after the year-end, partly to finance acquisition of three residential units at Company's freehold Heathside property for £935,000.

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

"K&C continued to make progress during the period despite the wider residential property market having to contend with a number of political and economic events. The Company successfully raised capital and made further investment in the portfolio to improve performance. As such, revenue has grown through ground rents, sales commissions and lease extensions and occupancy levels remain close to 100 per cent.  Post year-end, the Company completed the acquisition of three residential units at its freehold Heathside property in Hampstead for £935,000, with refurbishing and improvements underway.

"The Board continues to find and be shown interesting acquisition opportunities and looks forward to updating the market in due course on further progress and asset developments."

K&C REIT plc Dominic White, Chief executive	info@kandc-reit.co.uk +44 20 3793 5236
Arden Partners plc (nominated adviser and broker) William Vandyk Steve Douglas	+44 20 7614 5917
Yellow Jersey PR Charles Goodwin Abena Affum	+44 7747 788 221

Notes to Editors:

K&C'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

This is K&C REIT plc's third Annual Report since its admission to AIM.

Market and strategy

The Group operates in the UK residential private rented sector (PRS).  It seeks to acquire:

·           under-managed rented property assets and portfolios

The team's considerable PRS expertise enables them to improve portfolios and, importantly, tenant experience at under-managed properties, through asset and property management activity.  This has resulted in higher rental and property values. 

·           in lower price segments

The focus on lower price segments ensures that the portfolio is directed towards the highest area of tenant and buyer demand.  This is defensive in a downturn and shows strong growth in an upturn.

·           held within UK-incorporated companies

The REIT structure itself provides K&C with the opportunity to capitalise on the advantages afforded to REITs to provide an efficient exit route for vendors of SPVs, in particular, managing deferred capital gains tax liabilities.

The residential sales market has slowed over the last year, particularly in higher price-band properties in Central London.  The impact of the Brexit vote, a more difficult economy, an inconclusive general election result and significant tax changes, particularly for 'buy-to-let' landlords, all taking place within a relatively short period of time, have been difficult for the market to digest. 

It is important to note that, across the UK as a whole, prices and rental values continue to rise, albeit at slower rates.  Indeed, the Group's assets, which, on a unit basis, are all in the lower price bands (studio, one and two beds), have performed well.

The positive overall economic fundamentals in the residential sector - strong demand and shortage of supply - will, in our view, deliver attractive rental and capital value performance across the UK over the medium term

Investment and operations

Osprey has exceeded expectations, having significantly increased revenue from ground rents, sales commissions, lease extensions and other management income.  We have invested in the operations of the business and believe that Osprey is well positioned to continue its strong performance in the future.

The Coleherne Road apartments have continued to perform well.  The small size of the units (studio, one- and two-bed flats) is exactly what the market is looking for.  This has meant that occupancy has been maintained at close to 100 per cent and rents have increased by eight per cent since acquisition in July 2015. 

The Group considered a number of UK residential investment opportunities during the year.  Post the year-end, the Group completed the acquisition of three residential units at its freehold Heathside property in Hampstead for £935,000 (accepting the surrender of 67-year leasehold interests) using funds raised from the issue of convertible loan notes.  The Company continues to implement its value-adding asset-management plan at this property of creating 'marriage value' through the buy-in of leasehold units.

Financial

Income increased from £151,417 to £514,746 in the financial year.  The Group reports a consolidated operating loss before separately disclosed administrative items of £636,896, which includes abortive and ongoing acquisition costs of approximately £200,000.  The operating loss of £1,029,215 includes a non-cash share-based payment charge of £392,319.

During the year, the Company issued £599,000 of new ordinary shares at just over 10 pence per share and £350,000 of restricted preference shares at 1p per share.  The funds raised have been used to maintain the Group's property assets and cover working capital requirements.

On 9 July 2017, the Company issued 6% Loan Notes in the total sum of £1.35 million, a proportion of which are convertible into ordinary shares.  £950,000 had been received in advance at the year-end.  The loan notes are redeemable by the Company on 30 June 2020.  This capital injection has been used primarily to acquire and refurbish the three Heathside units referred to above.

The net asset value per share at 30 June 2017 is 8.57p.  The post-balance sheet active asset management, acquisitions and light refurbishment in the Osprey portfolio has crystallised further value in the portfolio of more than £400,000. 

Portfolio valuation

The portfolio at year-end was valued at £7.24 million, an increase of £0.1 million compared to 30 June 2016.

Board changes

We were delighted that Dominic White joined the Board as chief executive in January 2017.  His long background in property investment has already proved of great value to the Company.

Christopher James, Tim Oakley and Patricia Farley stepped down from the board at the end of March.  Christopher and Tim continue to play important roles as members of the senior management team while Patricia's property expertise and experience remains available to the business.  Oliver Vaughan became a non-executive director of the Company in May 2017. 

Future prospects

During the year, the Group has raised capital, restructured its Board, and, since year-end, acquired valuable assets.  It has continued to build the positive momentum from the previous year. 

The Company aims to deliver a strong and growing covered dividend from rental streams and net asset value growth through the professional management of residential assets and the acquisition and management of SPVs with attractive and undervalued portfolios.  We have built a significant pipeline of potential UK residential investments that, if acquired, would deliver this outcome.

The Board continues to find and be shown interesting acquisition opportunities and I hope that I will be able to report further positive developments to you before too long.

STRATEGIC REPORT

The directors present the strategic report of K&C REIT plc ('K&C' or the 'Company') and its subsidiaries (together, the 'Group') for the year ended 30 June 2017.  The Company was incorporated in England and Wales on 10 June 2014.

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 and three subsidiaries.

1.        K&C (Coleherne) Limited owns a freehold residential property in Chelsea, London

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.

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 an operating loss from operating activities of £1,029,215 for the year to 30 June 2017. 

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.

Information on the financial position and development of the Group is set out in the Chairman's Statement, the report of the directors and the annexed financial statements.

FINANCIAL KEY PERFORMANCE INDICATORS

The directors and management team review a variety of key performance indicators to monitor and improve Group performance, including:

A.       At property level

i.          Rent per ft2 compared with comparable market data and with other units in the asset

ii.         Vacancy rate in terms of number of units available and potential rental income

iii.         Management costs as a percentage of rental income (including repairs and maintenance, insurance, cleaning, agents' fees, legal fees, utilities and council tax)

iv.         Gross and net yield compared with target levels

v.          Marginal increase in income as a percentage of capital expenditure

vi.         Outstanding rents as a percentage of rental income

vii.        Implementation of property plans compared with target.

B.       At Group level

i.          Assets under management compared with target

ii.         Overheads as a percentage of gross/net rental income compared with target.

No analysis of performance compared to these KPIs has been provided because the diverse nature of the assets owned by the subsidiary companies, and the changes to the operating models initiated by the Group, make such analyses at this stage of their ownership potentially misleading.

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. There is no certainty that such funds will be available when needed.

·           Financial instruments

Details of risks associated with the Group's financial instruments are given in the notes to the financial statements.

·           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.

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 ongoing financial performance is monitored in a timely manner, that, where required, corrective action is taken and that risk is identified as early as practically possible. The directors have reviewed the effectiveness of internal control.

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 have knowledge of the commission of such offences.

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 took significant steps forward through its admission to AIM, achieving REIT status and enhancing the performance of its first two acquisitions.  It now intends to build on these achievements through further purchases of high quality assets that will be able to support an increasing income yield.  The Group is currently investigating several potential acquisitions.  To make further acquisitions, 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.

REPORT OF THE DIRECTORS

The directors present their report with the financial statements of the Company and the Group for the year ended 30 June 2017.

A review of the business, risks and uncertainties and future developments is included in the Chairman's Statement, the Strategic Report and the notes to the financial statements.

DIVIDENDS

The directors do not recommend payment of a dividend for the year (2016 - £nil).

Political donations

The Group made no political donations during the year (2016 - £nil).

Corporate governance statement

The Board is committed to maintaining high standards of corporate governance.  The UK Corporate Governance Code, published by the Financial Reporting Council, sets out standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders, providing principles of good governance and a code of best practice for listed companies.  The UK Corporate Governance Code does not apply to AIM companies. However, shareholders expect companies in which they invest to be properly governed.

The Company's corporate governance procedures take due regard of the principles of good governance set out in the UK Corporate Governance Code, having regard to the size and the stage of development of the Company.  Nonetheless, the Company has not formally adopted any specific corporate governance code.

The Company has established audit, AIM compliance and remuneration committees, with formally delegated duties and responsibilities.

Audit committee

The audit committee currently comprises James Cane and Michael Davies, the chairman.  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.

SUBSTANTIAL SHAREHOLDINGS

As at 11 October 2017, 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
Venaglass Limited		18.96%
Michael Wellesley-Wesley		7.85%
Christopher James		6.35%
Timothy James		6.21%
Susan Hards		5.69%
5XM Finance		5.21%
Forbes Ventures		4.74%
Xiao Min		4.21%
Simon Wharmby		3.83%

GOING CONCERN

The directors have adopted the going concern basis in preparing the financial statements.  This is further explained in the notes to the financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017
				30 June 2017		30 June 2016
				£		£
CONTINUING OPERATIONS
Revenue				514,746		151,417
Cost of sales				(110,544)		(60,240)
GROSS PROFIT				404,202		91,177
Administrative expenses				(1,157,098)		(513,367)
Revaluation on investment properties				116,000		250,000
OPERATING LOSS BEFORE SEPARATELY DISCLOSED ITEMS				(636,896)		(172,190)
Separately disclosed administrative items
Gain on bargain purchase				-		1,541,829
Share-based payments				(392,319)		(212,655)
AIM admission costs				-		(786,578)
Costs of acquisition of subsidiaries				-		(469,848)
OPERATING LOSS				(1,029,215)		(99,442)
Finance costs				(195,361)		(73,009)
Finance income				5		3,138
LOSS BEFORE TAXATION				(1,224,571)		(169,313)
Taxation				-		104,942
LOSS FOR THE YEAR				(1,224,571)		(64,371)
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR				(1,224,571)		(64,371)
Loss attributable to owners of the parent				(1,224,571)		(64,371)
Loss per share expressed in pence per share
Basic				(2.48)		(0.15)
Diluted				(2.48)		(0.15)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
				30 June 2017		30 June 2016
				£		£
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment				1,843		2,730
Investment properties				7,242,000		7,126,000
				7,243,843		7,128,730
CURRENT ASSETS
Trade and other receivables				90,777		24,262
Cash and cash equivalents				1,023,752		250,650
				1,114,529		274,912
TOTAL ASSETS				8,358,372		7,403,642
EQUITY
SHAREHOLDERS' EQUITY
Share capital				877,518		467,856
Share premium				4,660,322		4,120,984
Capital redemption reserve				67,500		67,500
Retained earnings				(1,083,179)		(250,927)
TOTAL EQUITY				4,522,161		4,405,413
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Interest bearing loans and borrowings				1,560,756		2,690,108
CURRENT LIABILITIES
Trade and other payables				194,147		277,960
Financial liabilities - borrowings
Interest-bearing loans and borrowings				31,308		30,161
Other loans				2,050,000		-
				2,275,455		308,121
TOTAL LIABILITIES				3,836,211		2,998,229
TOTAL EQUITY AND LIABILITIES				8,358,372		7,403,642
Net asset value per share (pence)				8.57		9.42

CONSOLIDATED STATEMENT OF CASH FLOWS
		2017		2016
		£		£
Cash flows from operating activities
Cash used in operations		(902,338)		(1,590,658)
Interest paid		(195,361)		(73,009)
Net cash used in operating activities		(1,097,699)		(1,663,667)
Cash flows from investing activities
Purchase of tangible fixed assets		-		(3,416)
Sale of investment properties		-		715,254
Acquisition of subsidiaries		-		(4,630,000)
Interest received		5		3,138
Net cash generated from/(used in) investing activities		5		(3,915,024)
Cash flows from financing activities
Loan repayments in year		(28,204)		(874,000)
New loans in year		950,000		2,720,269
Shares issued		949,000		3,981,340
Net cash generated from financing activities		1,870,796		5,827,609
Increase in cash and cash equivalents		773,102		248,918
Cash and cash equivalents at beginning of year		250,650		1,732
Cash and cash equivalents at end of year		1,023,752		250,650

RECONCILIATION OF LOSS BEFORE TAXATION TO CASH USED IN OPERATIONS
Group	2017		2016
	£		£
Loss before taxation	(1,224,571)		(169,313)
Depreciation charges	887		686
Profit on disposal of investment properties	-		(23,698)
Gain on bargain purchase	-		(1,541,829)
Revaluation of investment properties	(116,000)		(250,000)
Share-based payment charge	392,319		212,655
Finance costs	195,361		73,009
Finance income	(5)		(3,138)
	(752,009)		(1,701,628)
(Increase)/decrease in trade and other receivables	(66,516)		221,708
Decrease in trade and other payables	(83,813)		(110,738)
Cash used in operations	(902,338)		(1,590,658)
Company	2017		2016
	£		£
Loss before taxation	(1,591,032)		(1,978,502)
Depreciation charges	754		587
Profit on disposal of investment properties	-		(17,874)
Share-based payment charge	392,319		212,655
Finance costs	194,149		65,271
Finance income	-		(3,086)
	(1,003,810)		(1,720,949)
(Increase)/decrease in trade and other receivables	(24,741)		228,540
Increase/(decrease) in trade and other payables	107,993		(101,764)
Cash used in operations	(920,558)		(1,594,173)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017

1)         REVENUE

The Group is involved in UK property ownership, management and letting and is considered to operate 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

	2017		2016
	£		£
Wages and salaries	276,538		264,971
Social security costs	17,431		2,332
Pension costs	599		-
	294,568		267,303
The average monthly number of employees during the year was as follows	2017		2016
Directors and management	7		8
Administration	2		1
	9		9
	2017		2016
	£		£
Directors' remuneration (as per Report of the Directors)	132,375		23,000

The directors are considered to be key management personnel.

Certain directors and others have also received share options in the Company, further details of which are contained in the notes to the financial statements

3)         SEPARATELY DISCLOSED ITEMS

On 3 July 2015, the Group was admitted to AIM.  The costs involved totalled £786,578.  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 3 July 2015, the Group acquired K&C (Coleherne) Limited and on 27 May 2016, the Group acquired K&C (Osprey) Limited. The costs to the Group of acquiring these entities totalled £469,848.  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.

4)         LOSS BEFORE TAXATION

The loss before taxation is stated after charging/(crediting):

	2017		2016
	£		£
Hire of plant and machinery	2,018		1,487
Other operating leases	12,840		2,493
Depreciation - owned assets	887		686
Profit on disposal of investment properties	-		(23,698)
Auditors' remuneration for the Group - audit services for parent company	20,000		15,000
- audit services for subsidiaries	15,000		12,500
- taxation advisory services	12,000		5,000
- other non-audit services	-		80,000

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 of the outstanding share options and warrants are anti-dilutive and, hence, basic and fully diluted loss per share are the same.

	2017
	Loss		Weighted average number of shares		Per share amount
	£		No		pence
Loss attributable to ordinary shareholders	(1,224,571)		49,455,237		(2.48)
Effect of dilutive securities	-		-		-
	2016
	Loss		Weighted average number of shares		Per share amount
	£		No		pence
Loss attributable to ordinary shareholders	(64,371)		43,711,358		(0.15)
Effect of dilutive securities	-		-		-

6)         INVESTMENT PROPERTIES

Group	Total £
COST
At 1 July 2016	7,126,000
Revaluations	116,000
At 30 June 2017	7,242,000
NET BOOK VALUE
At 30 June 2017	7,242,000
At 30 June 2016	7,126,000

The investment properties were procured upon acquisition of subsidiaries.

The properties were valued by professionally qualified independent external valuers at the date of acquisition and were recorded at the values that were attributed to the properties at acquisition date.  In September 2017, certain properties were valued again by professionally qualified independent external valuers in accordance with the Royal Institution of Chartered Surveyors' Appraisal and Valuation Standards 2014 as amended, resulting in a revaluation to £6,612,000.  The remaining properties were valued at £630,000 by the directors as at 30 June 2017.  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 £154,903 (2016 - £133,113). The total rental expenses in relation to investment properties for the Group equated to £53,101 (2016 - £52,673).

7)         INVESTMENTS

Company	Shares in group undertakings £
COST
At 1 July 2016	5,305,000
At 30 June 2017	5,305,000
NET BOOK VALUE
At 30 June 2017	5,305,000
At 30 June 2016	5,305,000

The Company's investments comprise the following:

Acquisition of K&C (Coleherne) Limited

On 3 July 2015, the Company acquired the entire issued share capital of K&C (Coleherne) Limited (formerly Silcott Properties Limited) for £3,630,000, satisfied by cash of £3,330,000 and the issuance of ordinary shares to the value of £300,000. In the director's opinion, the net assets of K&C (Coleherne) Limited, consisting solely of an investment property in London that was independently valued on 22 July 2015 at £4 million, were worth in excess of the amount paid and hence gave rise to negative goodwill.

Net assets acquired were as follows:

	£
Investment property	4,000,000
Trade and other receivables	366,118
Cash and cash equivalents	8,339
Trade and other payables	(10,767)
Financial liabilities - borrowings	(489,200)
Taxation payable	(9,944)
Net assets	3,864,546
Gain on bargain purchase - taken to Statement of Comprehensive Income	(364,784)
Total Consideration (includes deduction of £130,238 loan repayment)	3,499,762
Satisfied by cash	3,199,762
Net cash outflow arising on acquisition:
Cash consideration	(3,199,762)
Bank and cash balances acquired	8,339
	(3,191,423)

Acquisition of K&C (Osprey) Limited

On 27 May 2016, the Company acquired the entire issued share capital of K&C (Osprey) Limited (formerly The Osprey Management Company Limited) satisfied by cash of £1,300,000 and the issuance of ordinary shares to the value of £300,000. In the director's opinion, the net assets of K&C (Osprey) Limited, consisting of various developments in England that have been valued (independently or by the directors) at £2,876,000, were worth in excess of the amount paid and hence gave rise to negative goodwill.

Net assets acquired were as follows:

	£
Investment property	2,876,000
Non-current assets - Equipment	311
Investment in subsidiary	1
Trade and other receivables	25,615
Cash and cash equivalents	19,526
Trade and other payables	(36,678)
Provisions	(80)
Net assets	2,884,695
Fair value adjustment to deferred taxation	(107,650)
Gain on bargain purchase - taken to Statement of Comprehensive Income	(1,177,045)
Total consideration	1,600,000
Total consideration	1,600,000
Satisfied by cash	1,300,000
Net cash outflow arising on acquisition:
Cash consideration	(1,300,000)
Bank and cash balances acquired	19,526
	(1,280,474)

8)         TRADE AND OTHER RECEIVABLES

	Group				Company
	2017		2016		2017		2016
	£		£		£		£
Trade debtors	960		-		-
Other debtors	63,334		16,976		5,918
VAT	427		-		-
Prepayments	26,056		7,286		21,578		2,756
	90,777		24,262		27,496		2,756

There is no material difference between the fair value of trade and other receivables and their book value.

9)         SHARE CAPITAL

Allotted, issued and fully paid
Number	Class	Nominal value		30 June 2017		30 June 2016
				£		£
52,751,813	Ordinary	£0.01		527,518		467,856
35,000,000	Restricted preference	£0.01		350,000		-
				877,518		467,856

At 1 July 2016, the Company had 46,785,623 Ordinary shares of £0.01 in issue.

On 23 December 2016, the Company issued 2,500,000 Ordinary shares of £0.01 each. The shares were issued at a premium of £0.09 per share.

Between 6 January and 30 January 2017, the Company issued 2,750,000 Ordinary shares of £0.01 each.  The shares were issued at a premium of £0.09 per share.

Between 22 February and 1 March 2017, the Company issued 716,190 Ordinary shares of £0.01 each, 240,000 of which were issued as payment for professional services by Peterhouse Corporate Finance.  476,190 of the shares were issued at a premium of £0.095 per share and 240,000 of the shares were issued at a premium of £0.09 per share.

Between 22 February and 1 March 2017, the Company issued 16,400,000 Restricted Preference shares of £0.01 each at par.

On 26 April 2017, the Company issued 18,600,000 Restricted Preference shares of £0.01 each at par.

The restricted preference shares carry no voting or dividend rights.

On a winding up or a return of capital the holders of the 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.

10)        FINANCIAL LIABILITIES - BORROWINGS

	Group				Company
	2017		2016		2017		2016
	£		£		£		£
Current
Bank loans	31,308		30,161		31,308		30,161
Other loans	2,050,000		-		2,050,000		-
	2,081,308		30,161		2,081,308		30,161
Non-current
Bank loans	1,560,756		1,590,108		1,560,756		1,590,108
Other loans	-		1,100,000		-		1,100,000
	1,560,756		2,690,108		1,560,756		2,690,108

Terms and debt repayment schedule

	1 year or less		1-2 years		2-5 years		More than  5 years		Totals
Group	£		£		£		£		£
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)       A 25-year bank loan of £1,592,064 (2016 - £1,620,269) repayable by 300 monthly instalments of £7,528 and a final instalment of £418,811.  All the payments itemised above include both capital repayments and interest at 3.25 per cent above Base Rate.  The loan is 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 is also secured by a pledge of shares of K&C (Coleherne) Limited.

2)       A loan of £1,100,000, commencing on 27 May 2016, which is repayable in full no later than 27 May 2018 and is secured on the assets of the Company and the assets of K&C (Osprey) Limited.  Interest is charged at 12 per cent per annum and is payable quarterly in arrears.

3)       A loan of £950,000 was received on 29 June 2017, with no payment terms or interest. Following the year end these loans were reclassified as convertible loan notes.  These loan notes attract interest at a rate of six per cent per annum, payable quarterly, and will be redeemed on 30 June 2020.

11)        RELATED PARTIES

During the previous year, the Group repaid a loan totalling £215,000 which was received from Christopher James, a director, in the previous period. The loan was subject to an interest charge for the period from receipt to redemption of 17.5 per cent of the principal amount, payable in full at the earlier of admission to AIM or 31 July 2016. The loan was repaid by converting the loan into ordinary shares of the Company at par. Following admission to AIM on 3 July 2015, gross interest of £37,625 was paid to Christopher James.

During the previous year, the Group repaid a loan totalling £125,000 which was received from Oliver Vaughan, a director, in the previous period. The loan was subject to an interest charge for the period from receipt to redemption of 17.5 per cent of the principal amount, payable in full at the earlier of admission to AIM or 31 July 2016. The loan was repaid in full during the year. Gross interest of £23,523 was paid to Mr Vaughan.

During the year, fees of £50,000 plus VAT were paid to White Amba Limited, a company controlled by the director, Dominic White.

At the balance sheet date, current liabilities included £100,000 received from a director, Timothy James, and his wife. These monies were reclassified into convertible loan notes after the balance sheet date.

During the year, the Group paid (i) Perry, Cane, a consultancy business owned by James Cane, fees of £25,000 excluding VAT, (ii) CD James (Property Consultants) Limited, a company owned by Christopher James, fees of £26,000 and (iii) DGS Capital Partners LLP, an LLP in which Michael Davies is a member, fees of £38,000 excluding VAT.

At the balance sheet date, the following directors held restricted preference shares:

	Restricted Preference Shares
Name	No.
Timothy James	9,600,000
Oliver Vaughan	8,100,000
James Cane	300,000
Dominic White	5,000,000

Included in the total of Mr Vaughan's holdings above are 665,000 shares and 165,000 warrants held in the name of Grosmont Investments Limited, a company that he controls.

Included in the total of Mr White's holdings above are 5,000,000 restricted preference shares held in the name of White Amba Limited, a company that he controls.

Since the year-end, the holdings of directors have remained unchanged.

12)       POST BALANCE SHEET EVENTS

On 7 July 2017, monies disclosed as Other loans of £950,000 at the balance sheet date were reclassified to convertible loan notes when the Company issued £1,350,000 6% convertible loan notes.

Post year-end, the Group purchased three properties for £935,000, excluding costs, within its freehold development at Heathside, London, using part of the proceeds from the issuance of the convertible loan notes.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR LIFLIISLDLID