RNS Number:3776H
Chesterton International PLC
16 March 2000
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 1999
Chesterton International plc ("Chesterton") the international property advisory
and facilities management group, reports its interim results for the 6 months
ended 31 December 1999.
Key Points:
* Profit before tax: #1.5 million (1998: #1.0 million), up 53%
* Earnings per share: 1.2p (1998: 0.7p), up 71%
* Net borrowings of #6.0 million in December 1998 converted to net cash of
#1.6 million in December 1999
* Strong performances from Commercial and Residential Divisions
* Results include #0.5m of costs in start up businesses - Chesterton
Facilities and Property Partnering (CFP2) and Chesterton Structured Finance
Limited (CSFL)
* New opportunities in "Property Partnering"
* Further investment in EGPropertylink, the internet based UK commercial
property listing service
Michael Holmes, Chief Executive of Chesterton, commented:
"This is another encouraging set of results and reflects the significant
progress made across the group.
"Our new businesses complete the skill set needed to provide innovative
solutions to our clients' strategic property needs. This puts us in an
unrivalled position in the emerging property partnering market."
Enquiries:
Chesterton International plc Tel: 020 7495 7282
Michael Holmes, Chief Executive
Ian Fleming, Finance Director
Gavin Anderson & Company Tel: 020 7457 2345
Richard Barton
Lindsey Harrison
CHAIRMAN'S STATEMENT
Results
I am pleased to report that the Group continues to make progress and that
profit before tax for the six months ended 31 December 1999 was up 53% at #1.5m
(1998 - #1.0m). Earnings per share also increased to 1.2p (1998 - 0.7p), a 71%
improvement.
Group net cash has increased from #0.3m at 30 June 1999 to #1.6m at 31 December
1999, thus further strengthening the Group's financial position. This compares
with net borrowings of #6.0m at 31 December 1998.
A number of opportunities have been developed to reinvest the Group's funds in
growing the business. Each proposal is examined to ensure that the financial
commitment is appropriate for the Group. In a rapidly changing world, we must
remain at the forefront of initiatives which could very significantly affect
the way we do business in the future. We are investing to ensure that we take
full advantage of these new technologies and markets. Therefore, the Board
does not propose to pay an interim dividend.
Trading Review
The half year figures reflect encouraging improvements in the Residential and
Commercial businesses, offset in part by the predicted reduction in FM turnover
and profits and the start up cost of new businesses.
Divisional Fee Income and Profit Analysis
Six Months ended 31 December
#m 1999 1998
Commercial 19.0 18.4
Residential 7.5 5.4
Facilities Management 3.7 6.6
Consulting & Other 2.1 1.8
New Businesses - -
------ ------
Net fee income 32.3 32.2
====== ======
Commercial 1.7 1.4
Residential 1.5 0.3
Facilities Management (0.3) 0.4
Consulting & Other (0.1) (0.3)
New Businesses (0.5) -
Central (0.7) (0.5)
------- -------
Total operating profit 1.6 1.3
======= =======
Commercial Division
The division is now benefiting from improved efficiencies resulting from
ongoing management action. It achieved profit growth of 21%. Exciting new
business opportunities have been secured, resulting both from the strong
profile of Chesterton in the market place and a higher number of internal
referrals.
The Property Asset Management activity has been restructured to reduce costs
whilst improving client service. As a result, it has recently won a number of
significant instructions.
Residential Division
In very positive market conditions, the division saw profit increase from #0.3m
to #1.5m in the first half.
There was substantial growth in the residential sales business, particularly
from developments. These included two major Central London schemes. The
lettings management business remains an important factor in the improved
profitability.
Since the half year, the residential development sales activity has been
extended outside London to take advantage of the presence Chesterton already
has in Manchester, Birmingham, Leeds and Bristol. This should lead to further
profitable growth. Other recent initiatives include the opening of a new
Docklands office in January and with it, the progressive rebranding of
Chestertons Residential under the Group's blue flag logo.
Facilities Management
As anticipated, following the loss of the Centrica contract and the
renegotiation of the other British Gas contracts in 1998/99, the division's
turnover and profit were reduced compared to the previous year. This was
offset to an extent by cost reductions and other efficiencies which have made
the division more competitive.
In addition to the new contracts awarded by British Airways and the Driving
Standards Authority, much progress has been made on various PFI and private
sector opportunities.
Consulting and Other
The Consulting Division maintained income at last year's level. It continues
to explore new markets and new approaches to the management and occupation of
property. Besides continuing to build expertise in PFI, property partnering
and performance measurement to assist Chesterton Facilities and Property
Partnering (CFP2) and other Chesterton businesses, it has established important
new markets in Education and in Best Value (the programme adopted by the
Government to ensure value for money in the delivery of public services).
In Planning, the ConsultingDivision has developed leading edge knowledge in
Housing Capacity Studies and in the re-use of difficult, often large, sites and
buildings.
Internationally, the profit contributions from our associates in Hong Kong and
Singapore increased as the economies in those regions continued their recovery
from the uncertainties of the previous year.
New Businesses
The results include costs of #0.5m in respect of our new start-up investments -
CFP2 and Chesterton Structured Finance Limited (CSFL). These operations will
enable Chesterton to achieve substantial further growth once they have
established their positions in the fast developing markets of property
partnering and financial structuring.
Strategy
We continue to drive for improvement in the existing businesses. In addition
certain investment initiatives have been taken which will not only accelerate
growth in new areas but will also bring together the range of services
Chesterton can deliver:
- Property Partnering: From its experience in the ground breaking DSS PRIME
and HM Treasury PFI projects, Chesterton is already engaged in deploying
its skills in the public sector. With the increased pressure on large
private sector companies to outsource their property needs, this has the
potential to be a major new market opportunity. Chesterton, through the
expertise of CFP2, CSFL and its other service businesses is uniquely
placed to identify, arrange and deliver substantial property outsourcing
projects from inception and throughout the contract periods, which will
extend for many years.
- e-commerce: The internet will greatly alter the way we do business and
also opens huge opportunities in which we are participating actively. In
June 1995, Chesterton led a consortium of the five leading agencies and a
property company, forming an internet based listing service for all UK
commercial property. In 1997, Reed Elsevier was invited to become a 50%
partner in this venture and EGPropertylink was created. This is currently
the only major listing site in the UK market. Chesterton and its partners
are continuing to invest in this rapidly expanding company.
A dedicated e-commerce team has been set up and is exploring similar
opportunities in all areas of the business. Products being launched
imminently include an online property portfolio performance measurement
system and an interactive property insurance quotation system.
- Branding: As shown by various market surveys, the Chesterton brand,
together with the blue flag logo, is seen as a market leader. It is
therefore the intention to unite the various Group businesses under this
logo, a process which has already started. This will further enhance
market profile.
Outlook and Prospects
Chesterton has reinforced its commitment to its goal of becoming a pre-eminent
provider of property services, firstly in the UK and then internationally.
Chesterton has delivered another encouraging set of results and achieved
further improvements on the previous year. We are increasingly optimistic
about the future.
Richard A Andrew
Chairman
Unaudited group profit & loss account
for the six months ended 31 December 1999
Unaudited Audited
Six months ended Year ended
31 December 30 June
1999 1998 1999
Notes #'000 #'000 #'000
Turnover 2 69,344 82,896 152,734
Operating costs (67,974) (81,641) (148,060)
--------- ------- -------
Group operating
Profit 1,370 1,255 4,674
Income from
interests in 205 53 105
associated ------- ------- -------
undertakings
Total operating
profit 1,575 1,308 4,779
Net interest (109) (349) (742)
payable ------- ------- -------
Profit on ordinary
activities before 1,466 959 4,037
tax
Tax on profit on
ordinary activities (525) (384) (321)
------- ------- --------
Retained earnings
for 941 575 3,716
the period ------- ------- -------
Earnings per
ordinary
share (pence)
- basic and 3 1.2 0.7 4.4
diluted
Earnings per share
before
non-operating and
tax related
exceptional
items (pence) 3 1.2 0.7 3.3
- basic and diluted
Unaudited group balance sheet
as at 31 December 1999
Unaudited Audited
31 December 30 June
1999 1998 1999
#'000 #'000 #'000
Fixed assets
Intangible fixed 1,764 2,478 2,060
assets
Tangible fixed 4,728 4,692 5,096
assets
Investments 2,817 1,331 1,600
------- ------- --------
9,309 8,501 8,756
------- ------- -------
Current assets
Stock 3,029 4,140 2,863
Debtors 20,901 21,219 20,397
Cash 6,930 64 6,376
------- ------- -------
30,860 25,423 29,636
Creditors: amounts
falling due within
one year (28,748) (24,467) (26,512)
------- ------- -------
Net current assets 2,112 956 3,124
------- ------- -------
Total assets less
current liabilities 11,421 9,457 11,880
Creditors: amounts
falling due after
more (3,917) (5,146) (4,776)
than one year
Provisions for
Liabilities and
charges (3,224) (4,193) (3,745)
------- ------- -------
4,280 118 3,359
======= ======= =======
Capital and
reserves
Called up share 4,229 4,229 4,229
capital
Share premium 6,571 6,571 6,571
account
Profit and loss (6,520) (10,682) (7,441)
account ------- ------- -------
Equity 4,280 118 3,359
shareholders' funds ======= ======= =======
Unaudited group cash flow statement
for the six months ended 31 December 1999
Unaudited Audited
Six months ended Year ended
31 December 30 June
1999 1998 1999
#'000 #'000 #'000
Net cash inflow/
(outflow) from
operating activities 3,350 (113) 8,129
Dividends received
from associates 135 - 49
Returns on
investments (79) (312) (519)
and servicing of
finance
Taxation (259) 5 (1,067)
Capital expenditure
and financial
investment (406) (75) (602)
Purchase of own
shares by employee (1,086) - (214)
benefit trust
Acquisitions and (126) 157 1,087
disposals ------- ------- -------
Net cash inflow/
(outflow) before 1,529 (338) 6,863
financing
Financing (975) (1,792) (2,368)
-------- ------- -------
Increase / (decrease) 554 (2,130) 4,495
in cash ======== ======= =======
Reconciliation of
operating
Profit to net cash
inflow/
(outflow)from
operating activities
for the six months
ended 31 December
1999
Group operating
profit
before associated 1,370 1,255 4,674
undertakings
Depreciation and
amortisation of
fixed assets 1,286 1,415 2,832
Movement in working
capital and 694 (2,783) 623
provisions ------- ------- -------
Net cash inflow /
(outflow) from 3,350 (113) 8,129
operating activities ======= ======= =======
Reconciliation of
net
Cash flow to movement
in net debt
for the six months
ended
31 December 1999
Increase/ (decrease) 554 (2,130) 4,495
in cash
Cash inflow from
increase - (5,000) (5,000)
in loans
Issue cost of loans - 20 20
Repayment of long
term loans 650 6,158 6,158
Repayments of capital
elements of finance
leases 325 614 1,210
and hire purchase -------- ------- -------
contracts
Change in net debt
resulting 1,529 (338) 6,883
From cash flows
New finance leases (209) - (1,017)
Other (2) (88) -
------- ------- -------
Movement in net debt 1,318 (426) 5,866
Net funds /(debt) at 289 (5,577) (5,577)
1 July ------- ------- -------
Net funds /(debt) at
31 December
/ 30 June 1,607 (6,003) 289
======= ======= =======
Statement of total recognised gains and losses
for the six months ended 31 December 1999
Unaudited Audited
Six months ended Year ended
31 December 30 June
1999 1998 1999
#'000 #'000 #'000
Profit attributable to
shareholders 941 575 3,716
Currency translation
differences on foreign
currency net (20) (45) 55
investments ------- ------- -------
Total recognised gains
and losses for the 921 530 3,771
period ====== ====== ========
Reconciliation of
movements in
shareholders' funds
for the six months
ended 31 December 1999
Total recognised gains
and losses for the 921 530 3,771
period
Opening shareholders'
funds as restated 3,359 (412) (412)
------- ------- -------
Closing shareholders' 4,280 118 3,359
funds ======= ======= =======
Notes
1 Basis of preparation of interim financial information
The comparative figures for the year ended 30 June 1999 do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985 but are extracted from the audited statutory accounts. The statutory
accounts for the year ended 30 June 1999, upon which the auditors issued
an unqualified report, have been delivered to the Registrar of Companies.
The interim information for the six months ended 31 December 1999 has been
prepared on a discrete basis with the exception of taxation where an
estimated effective tax rate has been used. The accounting policies
applied are those set out in the annual report and accounts for the year
ended 30 June 1999.
2 Turnover
Turnover comprises commissions and fees receivable and rechargeable costs
incurred as principal on behalf of clients. Turnover is exclusive of
appropriate sales taxes.
Unaudited Audited
Six months ended Year ended
31 December 30 June
Analysis of 1999 1998 1999
turnover
#'000 #'000 #'000
Net fee 32,279 32,238 65,228
income
Costs
recharged to 37,065 50,658 87,506
clients ------- ------- -------
Total 69,344 82,896 152,734
turnover ======= ======= =======
3 Earnings per share
The calculation of basic earnings per share ( EPS) is based on profit on
ordinary activities after tax of #941,000 (1998: #575,000) and the
weighted average number of shares in issue during the period, excluding
shares held by the employee benefit trust, of 79.6 million (1998: 84.6
million). Diluted EPS is calculated based on the same profit after tax
and weighted average number of shares in issue, adjusted for the dilutive
effect of potential ordinary shares.
The year ended 30 June 1999 calculation of the EPS before non-operating
and tax related exceptional items is based on profit on ordinary
activities after tax of #3,716,000 adjusted for the exceptional tax credit
of #928,000. This is disclosed in addition to the disclosures required by
FRS14, since in the opinion of the directors this gives shareholders a
more meaningful measure of performance.
4 Interim results
Copies of the interim results will be sent to all shareholders.
Additional copies will be available from Chesterton International plc, 45
Seymour Street, W1H 5AE.
END
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