RNS Number:8823F
Hercules Property Services PLC
21 February 2000
HERCULES PROPERTY SERVICES PLC:
INTERIM RESULTS FOR SIX MONTHS TO 31ST DECEMBER 1999
H I G H L I G H T S
Hercules Property Services plc is a fully listed company specialising in the
provision of a range of property industry support services including property
insurance, commercial property consultancy, property management and
auctioneering.
* Turnover almost doubled to #9.72m + 90%
* Record pre-tax profits of #2.03m + 37%
* Interim dividend of 1.75p a share declared + 46%
* Basic earnings per share advances to 15.8p + 22%
* Adjusted earnings per share advance to 18.1p + 39%
* Full first half contribution from Dunlop Heywood
* Second half to benefit from full contribution from Deacon Insurance
* Insurance division now providing cover for #10bn worth of buildings
* Online insurance service to be launched - Heritage Online
* Harman Healy auction sales total over #48m + 68%
"The second half of the year has started extremely well and we will benefit
from a full six months contribution from Deacon. Against this background I look
forward to the remainder of the year with confidence," Larry Lipman, Chairman.
CHAIRMAN'S STATEMENT
It gives me great pleasure to report on the most successful period in the
group's history with both turnover and profits hitting record levels as the
businesses within the Hercules group continue to enjoy high levels of activity
in all areas. All the divisions within the group, including our latest
acquisition Deacon Insurance Services, have witnessed a substantial increase
in business.
As a result pre-tax profits for the six months to 31st December 1999 were 37%
higher at a record #2.03m, which includes #200,000 of goodwill write-off
(1998: nil) against #1.48m for the comparable period a year ago, turnover more
than 90% higher at #9.73m compared to #5.1m last time. Basic earnings per share
increased by 22% to 15.8p with earnings per share after adjusting for goodwill
increasing by 39% to 18.1p, up from 13.0p.
In recognition of these higher profits and the cash generative nature of the
business the Board is declaring an interim dividend of 1.75p a share, 46%
higher than last year's 1.2p. The dividend will be paid on 6th July 2000 to
shareholders on the register at 9th June 2000.
The substantial increase in turnover during the period reflects a full
half-year contribution from our commercial property consultancy Dunlop Heywood
which we acquired mid way through the comparable period last year. However, I
would point out that all the businesses within the Hercules group have performed
well reflecting both each company's organic growth as well its
ability to cross-sell services through the group.
In November we announced the #14.25m acquisition of Deacon Insurance Services
Ltd (less an adjustment for net liabilities) financed by a #11.8m bank loan
and an issue of 718,495 new ordinary shares at 278.36p each and the balance
from existing resources. As stated at the time of the acquisition the impact
of Deacon would be to take the annualised turnover of our insurance
intermediary business to more than #11m and raises the level of quality
recurring income across the group to over 75%. The full impact of the Deacon
business will be felt in the second six months as the first half only reflects
one month's contribution.
The importance of the Deacon acquisition cannot be underestimated. Apart from
the obvious synergistic savings from consolidating our enlarged insurance
business under the Deacon banner we have become one of the country's leading
providers of insurance for blocks of flats.
Today we estimate that Deacon has around 10% of the total market for this type
of insurance and the combined group now provides cover for approximately #10bn
buildings. This is a significant expansion of our involvement in this
insurance sector as this time last year I reported that we provided cover for
around #2.3bn of property. At these new higher levels we have considerably
greater purchasing power and therefore are able to offer clients extremely
competitive rates.
Deacon has also expanded our range of insurance services particularly into the
domestic market, an area which we believe represents an extremely exciting
opportunity for us. To this end I am pleased to be able to report the
imminent launch of Heritage Online which enables consumers to simply click
onto our Website for instant buildings and contents insurance cover. With
backing from a leading insurer we believe there is an opportunity of securing
a meaningful share of this multi-billion pound market through an easy access
on-line service that provides an instant quote and a credit card payment
facility. Our existing exposure to the residential property market means we
can offer extremely competitive rates enabling us to compete very effectively
with the more established players.
Apart from the major addition of Deacon to our insurance activities we have
made a number of smaller acquisitions particularly in the property management
sector where we have strengthened both the David Glass Associates and the
Simmonds & Partners brands. In both cases the acquisitions have been quickly
and effectively integrated into the group with the consequent expansion of
business but with reduced operating costs.
Another contributor to the half-year results was our auctioneering and
commercial property management company Harman Healy. During the six months to
the end of December the auctioneering business witnessed a record first half
with total sales of over #48m, an increase of some 68% over the same period a
year ago.
It is also worth noting that during the 1999 calendar year Harman Healy
chalked up record sales of more than #100m for the first time in its history.
The record sales reflect an extremely buoyant auction market over the past 12
months which has continued to strengthen despite rising interest rates with
increasing demand from both property dealers and owner-occupiers.
Simultaneously Harman Healy has expanded its commercial property management
and professional services activities undertaking a higher level of rent
reviews over the period. At the balance sheet date the firm managed a total
of 1,500 properties. Revenue was also enhanced through the greater
cross-selling opportunities with other group companies particularly in the
areas of insurance and property management.
Last year's acquisition, Dunlop Heywood, is now fully integrated into the
group and is making a full contribution to profits. It is benefiting from a
number of exciting instructions one of which is the appointment by AMEC as the
letting agents for the retail and leisure space to be developed alongside the
Commonwealth Games Arena, Manchester, known as Sports City.
The second half of the year has started extremely well and we will benefit
from a full six months contribution from Deacon. Against this background I
look forward to the remainder of the year with great confidence.
Larry Lipman 21st February 2000
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
1999 1998 1999
#'000 #'000 #'000
TURNOVER: acquisitions 529 1,510 4,514
continuing operations 9,197 3,591 11,047
_______ _______ _______
9,726 5,101 15,561
Cost of sales (4,653) (1,359) (7,122)
_______ _______ _______
GROSS PROFIT 5,073 3,742 8,439
Administrative expenses (2,834) (2,096) (4,466)
_______ _______ _______
OPERATING PROFIT: acquisitions 244 379 937
continuing operations 1,995 1,267 3,036
_______ _______ _______
2,239 1,646 3,973
Interest receivable and similar income 86 27 156
Interest payable and similar charges (297) (198) (475)
_______ _______ _______
Profit on ordinary activities before taxation 2,028 1,475 3,654
Tax on profit on ordinary activities (608) (457) (1,125)
_______ _______ _______
Profit on ordinary activities after taxation 1,420 1,018 2,529
Equity dividends (169) (105) (576)
_______ _______ _______
Retained profit for the financial period 1,251 913 1,953
======= ======= =======
Basic earnings per share 15.8p 13.0p 30.0p
Adjustment for goodwill 2.3p - 2.3p
_______ _______ _______
Adjusted earnings per share 18.1p 13.0p 32.3p
======= ======= =======
Diluted earnings per share 15.5p 12.8p 29.7p
======= ======= =======
Adjusted diluted earnings per share 17.8p 12.8p 32.1p
======= ======= =======
Taxation has been calculated using an estimated annual effective rate of 30%
(six months to 31 December 1998 - 31%, year ended 30 June 1999 - 31%).
The interim financial information has neither been audited nor reviewed and
does not constitute statutory accounts within the meaning of section 240 of
the Companies Act 1985.
The accounts for the year to 30 June 1999 set out above are abridged from the
Company's statutory accounts. The full accounts incorporating an unqualified
auditors' report and containing no statement under section 237 (2) and (3) of
the Companies Act 1985, have been filed with the Registrar of Companies. The
interim dividend will be payable on 6 July 2000 to members on the register on
9 June 2000.
CONSOLIDATED BALANCE SHEET
31 December 31 December 30 June
1999 1998 1999
#'000 #'000 #'000
FIXED ASSETS
Intangible assets 20,364 5,123 5,105
Tangible assets 963 3,173 828
_______ _______ _______
21,327 8,296 5,933
CURRENT ASSETS
Stocks and work in progress 3,771 243 2,462
Debtors 6,845 4,734 4,398
Cash at bank and in hand 5,589 1,417 2,916
_______ _______ _______
16,205 6,394 9,776
CREDITORS: amounts falling due
within one year (10,048) (4,487) (4,600)
_______ _______ _______
NET CURRENT ASSETS 6,157 1,907 5,176
_______ _______ _______
TOTAL ASSETS LESS CURRENT LIABILITIES 27,484 10,203 11,109
CREDITORS: amounts falling due after
more than one year (16,186) (4,542) (3,964)
PROVISIONS FOR LIABILITIES AND CHARGES (1,501) (310) (600)
Equity minority interests - (186) -
_______ _______ _______
NET ASSETS 9,797 5,165 6,545
======= ======= =======
CAPITAL AND RESERVES
Called up equity share capital 482 445 445
Share premium account 18,453 16,484 16,489
Merger reserve (1,339) (1,339) (1,339)
Profit and loss account (7,799) (10,425) (9,050)
_______ _______ _______
EQUITY SHAREHOLDERS' FUNDS 9,797 5,165 6,545
======= ======= =======
CONSOLIDATED CASH FLOW STATEMENT
Note 6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
1999 1998 1999
#'000 #'000 #'000
Net cash inflow/(outflow) from
operating activities 1 712 (78) 3,173
Returns on investments and
servicing of finance (211) (171) (319)
Taxation paid (150) - (938)
Capital expenditure and financial investment (15) (209) (124)
Acquisitions and disposals (10,944) (6,010) (5,837)
Equity dividends paid (105) - (272)
_______ _______ _______
Cash outflow before financing (10,713) (6,468) (4,317)
Financing 13,473 6,144 5,405
_______ _______ _______
Increase/(decrease) in cash in the period 2,760 (324) 1,088
======= ======= =======
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Note 6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
1999 1998 1999
#'000 #'000 #'000
Increase/(decrease) in cash in the period 2,760 (324) 1,088
Cash (inflow)/outflow from (increase)/decrease
in debt and lease financing (13,473) 378 946
_______ _______ _______
Change in net debt resulting from cash flows (10,713) 54 2,034
Net debt brought forward (1,952) (3,986) (3,986)
_______ _______ _______
Net debt carried forward 2 (12,665) (3,932) (1,952)
======= ======= =======
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
1. RECONCILIATION OF OPERATING PROFIT FOR THE PERIOD TO NET CASH
INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
1999 1998 1999
#'000 #'000 #'000
Operating profit 2,239 1,646 3,973
Depreciation charges 207 48 157
Profit on sale of tangible fixed assets - - 199
(Increase)/decrease in stocks and
work in progress (1,309) (243) 31
Increase in debtors (1,640) (855) (343)
Increase/(decrease) in creditors 1,215 (674) (369)
Increase in minority interest and provisions - - (475)
_______ _______ _______
Net cash inflow/(outflow) from
operating activities 712 (78) 3,173
======= ======= =======
2. ANALYSIS OF NET DEBT
At At
1 July Cash 31 December
1999 flow 1999
#'000 #'000 #'000
Cash at bank and in hand 2,916 2,673 5,589
Bank overdraft (87) 87 -
Debt and lease financing due within one year (817) (1,251) (2,068)
Debt and lease financing due after one year (3,964) (12,222) (16,186)
_______ _______ _______
(1,952) (10,713) (12,665)
======= ======= =======
Contact: Hercules Property Services plc Tel: 020-8203 9099
Larry Lipman, Chairman or
Paul Davis, Finance Director
Bankside Consultants Ltd. Tel: 020-7220 7477
Baron Phillips
END
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