RNS Number:6930J
Hercules Property Services PLC
10 September 2001
10 September 2001
HERCULES REPORTS ANOTHER YEAR OF RECORD PROFITS
Recurring Income Rises to 78% of Total
Hercules Property Services Plc, the property management, consultancy and
insurances group, today announces its preliminary results for the year ended
30 June 2001.
Highlights:
- Turnover for the year increases to #41.2m +31%
- Substantial rise in pre-tax profits to #9.6m* +63%
- Adjusted EPS advances to 51.0p* (undiluted) +16%
- Final dividend of 9p per share recommended +29%
- Total dividend for the year will be 11p per share +26%
- Recurring income from insurance commissions and management fees
accounted for 78% of total Group income
*(before the costs of goodwill amortisation and Long Term
Incentive Plan contribution)
Larry Lipman, Chairman of Hercules said:
"I am very pleased with the preliminary results we announced today, and with
the tremendous progress we've made over the past year. The results are a
testament to the strength of our businesses and endorse our strategy of
growth, both organically and by acquisition. Over the past year, we carried
out a number of strategic acquisitions to broaden the scope of our service
platform to maximise our opportunity for cross-selling and we took steps to
strengthen the management team to ensure future success."
For further information:
Larry Lipman, Chairman Hercules Property Services Plc T: 020 8202 7276
Rupert Ashe GCI Financial T: 020 7398 0800
Kate O' Sullivan T: 020 7398 0828
Caroline Massey T: 020 7398 0817
Notes to Editors:
Hercules Property Services PLC (HPS.L) is a leading property insurance,
management and consultancy group. It provides a comprehensive range of
specialised services, including: insurance to the commercial and residential
property sectors; property management; and advice on commercial developments.
More information can be found on the internet at www.hercules-group.co.uk.
HERCULES PROPERTY SERVICES PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 30 June 2001
Note 2001 2001 2001 2000
(continuing (acquisitions) (total) (total)
operations)
#'000 #'000 #'000 #'000
Turnover 2 36,772 4,431 41,203 31,512
Cost of sales (20,587) - (20,587) (18,839)
Gross profit 16,185 4,431 20,616 12,673
Administrative expenses (8,550) (1,496) (10,046) (5,887)
Amortisation of goodwill (1,102) (518) (1,620) (688)
Long Term Incentive Plan (354) - (354) -
(LTIP)
Total administrative expenses (10,006) (2,014) (12,020) (6,575)
Operating profit 6,179 2,417 8,596 6,098
Interest receivable and 828 262
similar income
Interest payable and similar (1,794) (1,159)
charges
Profit on ordinary activities 2 7,630 5,201
before taxation
Tax on profit on ordinary (2,985) (1,775)
activities
Profit on ordinary activities 4,645 3,426
after taxation
Equity dividends 3 (1,900) (853)
Retained profit for the 2,745 2,573
financial year
Basic earnings per share 4 35.8p 36.6p
Adjustment for goodwill and 4 15.2p 7.4p
LTIP
Adjusted earnings per share 51.0p 44.0p
Diluted earnings per share 4 34.2p 35.3p
Adjusted diluted earnings per 4 48.8p 42.4p
share
There have been no recognised gains or losses attributable to shareholders
other than the profit for the current and preceding financial year and,
accordingly no statement of total recognised gains and losses is shown.
There are no discontinued operations.
HERCULES PROPERTY SERVICES PLC
CONSOLIDATED BALANCE SHEET
30 June 2001
Note 2001 2000
#'000 #'000
FIXED ASSETS
Intangible fixed assets 55,130 19,776
Tangible fixed assets 4,399 875
59,529 20,651
CURRENT ASSETS
Stock and work in progress 4,468 4,028
Debtors 16,460 10,790
Cash at bank and in hand 32,558 6,414
53,486 21,232
CREDITORS: amounts falling due (27,354) (15,089)
within one year
NET CURRENT ASSETS 26,132 6,143
TOTAL ASSETS LESS CURRENT 85,661 26,794
LIABILITIES
CREDITORS: amounts falling due (31,429) (14,271)
after more than one year
PROVISIONS FOR LIABILITIES (1,054) (1,204)
AND CHARGES
NET ASSETS 53,178 11,319
CAPITAL AND RESERVES
Called up equity share capital 892 488
Share premium account 57,456 18,684
Profit and loss account (3,831) (6,514)
Merger reserve (1,339) (1,339)
EQUITY SHAREHOLDERS' FUNDS 5 53,178 11,319
HERCULES PROPERTY SERVICES PLC
CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 June 2001
Note 2001 2000
#'000 #'000
Cash inflow from operating activities 7 32,771 3,835
Returns on investments and servicing of finance 8 (966) (897)
Taxation (2,320) (1,126)
Capital expenditure and financial investment 8 (3,574) (142)
Acquisitions and disposals 8 (33,414) (8,008)
Equity dividends paid (853) (576)
Cash outflow before financing (8,356) (6,914)
Financing 8 34,464 10,499
Increase in cash in the year 26,108 3,585
HERCULES PROPERTY SERVICES PLC
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 June 2001
1. BASIS OF PREPARATION
The financial information set out in the announcement does not constitute
the Company's statutory accounts for the years ended 30 June 2001 or 2000.
The financial information for the year ended 30 June 2000 is derived from
the statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditors reported on those accounts; their
report was unqualified and did not contain a statement under s237(2) or
(3) Companies Act 1985. The statutory accounts for the year ended 30 June
2001 will be finalised on the basis of the financial information presented
by the directors in this preliminary announcement and will be delivered to
the Registrar of Companies following the Company's annual general meeting.
2. SEGMENTAL INFORMATION
The analysis of turnover, profit on ordinary activities before taxation
and net assets attributable to the different classes of the Group's
business all of which were carried out in the United Kingdom, after
consolidation adjustments were as follows:
2001 2000
#'000 #'000
Turnover
Management services 4,090 3,754
Insurance 28,222 19,077
Auctions 1,540 1,675
Surveying 6,372 6,007
Other 979 999
41,203 31,512
Profit on ordinary activities before
taxation
Management services 794 1,092
Insurance 8,964 4,352
Auctions 415 554
Surveying 956 934
Other (3,499) (1,731)
7,630 5,201
Net assets
Management services 6,538 (756)
Insurance 41,635 7,816
Auctions 817 649
Surveying 636 605
Other 3,552 3,005
53,178 11,319
3. EQUITY DIVIDENDS
2001 2000
#'000 #'000
Interim equity dividend paid of
2p per share (2000 - 1.75p) 294 169
Final equity dividend proposed of
9p per share (2000 - 7p) 1,606 684
1,900 853
4. EARNINGS PER SHARE
The calculation of basic earnings per share is based on profits after tax
of #4,644,743 (2000 - #3,426,000) and on a weighted average number of
ordinary shares of 12,979,592 (2000 - 9,346,945) in issue during the year.
The calculation of diluted earnings per share is based on basic earnings
as defined above and on 13,563,763 ordinary shares (2000 - 9,695,802)
calculated as follows:
2001 2000
No. No.
Basic weighted average number of shares 12,979,592 9,346,945
Weighted average number of dilutive 1,222,262 853,626
shares under option
Number of shares that would have been (638,091) (504,769)
issued at fair value
Diluted weighted average number of 13,563,763 9,695,802
shares
Diluted earnings per share 34.2p 35.3p
The Directors consider the earnings per share excluding goodwill
amortisation and the charge for the LTIP better reflects the commercial
operating of the Group and have therefore disclosed an additional earnings
per share figure for this.
The calculation of the adjusted diluted earnings per share is therefore
based on profits after tax, excluding goodwill amortisation and LTIP
charge, of #6,619,000 (2000 - #4,114,000) and on the diluted weighted
average number of shares of 13,563,763 (2000 - 9,695,802).
5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2001 2000
#'000 #'000
Profit for the financial year 4,645 3,426
Dividends (1,900) (853)
2,745 2,573
Issue of shares 40,399 2,238
Acquisition/demerger expenses (1,223) -
written off
Goodwill written off (62) (37)
Net addition to shareholders' 41,859 4,774
funds
Opening shareholders' funds 11,319 6,545
Closing shareholders' funds 53,178 11,319
6. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2001 2000
#'000 #'000
Increase in cash in the year 26,108 3,585
Cash inflow/(outflow) from increase/ 4,712 (10,457)
(decrease) in debt and lease financing
Change in net debt resulting from cash 30,820 (6,872)
flows
Loans acquired with subsidiary (2,556) (2,600)
28,264 (9,472)
Net debt at 1 July 2000 (11,424) (1,952)
Net debt at 30 June 2001 16,840 (11,424)
7. RECONCILIATION OF OPERATING PROFIT FOR THE YEAR TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
2001 2000
#'000 #'000
Operating profit 8,596 6,098
Depreciation 214 223
Decrease in provision (150) (86)
Amortisation of goodwill 1,620 688
Loss on sale of tangible fixed assets 8 -
Increase in stocks and work in (440) (1,566)
progress
Increase in debtors (1,532) (5,635)
Increase in creditors 24,455 4,113
Net cash inflow from operating 32,771 3,835
activities
8. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
2001 2000
#'000 #'000
Returns on investments
and servicing of finance
Interest received 828 262
Interest paid (1,794) (1,159)
Net cash outflow from (966) (897)
returns on investments
and servicing of finance
Capital expenditure and
financial investment
Purchase of tangible (3,593) (156)
fixed assets
Disposal of plant and 19 14
machinery
Net cash outflow from (3,574) (142)
capital expenditure and
financial investment
Acquisitions and
disposals
Purchase of subsidiary (35,810) (10,179)
undertaking
Net cash acquired with 2,396 2,171
subsidiary
Net cash outflow from (33,414) (8,008)
acquisitions and
disposals
Financing
Issue of ordinary share 39,176 13,099
capital
Repayment of loans (2,156) (2,600)
Repayment of acquired (2,556) -
subsidiary loan
Net cash inflow from 34,464 10,499
financing
9. ANALYSIS OF NET Debt
At Cash Acquisition At
1 July Flow of 30 June
2000 subsidiary 2001
#'000 #'000 #'000 #'000
Cash at bank and 6,414 23,748 2,396 32,558
in hand
Overdraft - (36) - (36)
6,414 23,712 2,396 32,522
Debt due after (14,271) 2,334 - (11,937)
one year
Debt due within (3,567) 2,378 (2,556) (3,745)
one year
Total (11,424) 28,424 (160) 16,840
Cash includes #18,890,997 held in a escrow account to settle the loan
notes issued as part of the consideration for Farr.
CHAIRMAN'S STATEMENT
In a year that has seen Hercules make tremendous progress, I am pleased yet
again to report record profits.
Results
In the year ended June 30 2001, profits were #9.6m compared to #5.9m in the
previous year, representing an increase of 63%. The profit figure as stated is
pre-tax and pre-amortisation write off and also excludes a charge to the
profit and loss account in connection with the long term incentive plan
approved by shareholders in December 2000, of #354,000. Turnover also rose
from #31.5m to #41.2m, an increase of 31%. While a sizeable amount of the
increase is attributable to our continuing acquisition policy, it is important
to note that the Board continues to concentrate on organic growth, which is
running at approximately 15%, alongside our aggressive acquisition policy.
The acquisitions during the year of Farr and Cadogan will require a change in
accounting policy concerning the turnover and cost of sales of the existing
insurance intermediaries, from premiums received to net commission, to allow
for harmonisation. Had this change been made for the years ended June 30 2000
and June 30 2001 there would have been a reduction in both turnover and cost
of sales of #8.9m in 2000 and #10.1m in 2001, respectively. However, there
would have been no effect on profits in either period.
The basic earnings per share comparisons are 35.8p for the year to June 30
2001, compared to 36.6p for the prior year. However, based on the profit as
detailed above the adjusted earnings per share comparisons are 51p for the
current year against 44p for 2000, an increase of 16%.
Dividend
I am delighted to report to you that the Board is recommending a final
dividend of 9p, taking the total dividend for the year to 11p, an increase of
26%. The final dividend will be payable on January 3 2002 to shareholders on
the register at the close of business at December 7, 2001.
Business Development
This has been a significant year for Hercules. The Company has exceeded the #
100m market capitalisation threshold, carried out a number of strategic
acquisitions and made a significant appointment to the main Board, of Robert
Plumb, as Managing Director, thus strengthening the platform on which to build
on the growth that has been achieved.
A most satisfying aspect of our growth is that in excess of 78% of both
turnover and profit emanates from quality recurring income in the insurance
and property management arena. Whilst markets have been uncertain, I am
pleased that our business model has proved itself so resilient.
We made a number of significant acquisitions in the last financial year. In
December 2000 we bought Farr for a net consideration of #20m. Farr specialises
in the insurance of housing association property and dominates its market.
Since acquisition it has performed in line with the Board's expectations and
has been successful in approximately 75% of all tenders that it has pursued.
In April and May 2001 we made three acquisitions, the first of which was a
partnership called Baker Lorenz, a commercial property consultancy which has
been fully integrated into Dunlop Heywood under the new name of Dunlop Heywood
Lorenz.
We also acquired Cadogan Insurance Services, a property insurance broker
specialising in the higher value commercial property which is very much geared
to the clientele of Dunlop Heywood Lorenz. Our expectations at the time of
purchase for cross selling were high, and we are pleased with the initial
results in the first four months of operation.
Finally, we bought Kounnis Brokers a niche property insurance intermediary
which specialises in smaller properties. It has been successfully combined
with Deacon Insurance Services in Bournemouth. The business continues to grow
under the guidance of the Kounnis staff.
The Group as a whole has continued to expand in all areas, including
successful smaller scale acquisitions predominantly in the residential
property management area which have been fully integrated into DGA and
Simmonds & Partners
Management Team and Staff
As already mentioned above we continue to strengthen our management team and
in October 2000 we welcomed Robert Plumb as Group Managing Director with
day-to-day responsibility for overseeing the management of the entire Hercules
operation.
I want to take this opportunity to thank the staff and our professional
advisors for their dedication and hard work during this particularly active
year. We recognise that without their efforts, our record results would not
have been possible.
Prospects
The activity that we have shown within Hercules over the last year has been
impressive and we expect future developments to enable the Group to
continue to prosper.
The current year has started well and we will also benefit from a full
12-month contribution from our recent acquisitions. As I have already stated,
the level of quality recurring income that Hercules enjoys enables me to look
to the future with confidence notwithstanding more challenging market
conditions.
Larry Lipman
Chairman
10 September 2001
MANAGING DIRECTOR'S REVIEW
I am delighted to update you with my first operational review since joining
the Group in October last year. It has been a tremendous year for Hercules and
I am particularly pleased to report the progress we have made over the past
financial year.
Along with four significant acquisitions during the year, the business has
continued to grow across all three main operating divisions, namely Commercial
Property Services, Residential Property Services and Insurance Services.
In the year to June 30 2001, the level of recurring income across the Group's
operating companies represented approximately 78% of the total revenue
(2000 - 72%). This comprises income from insurance and property management.
Commercial Property Services
During the year this division took significant strides to consolidate its
position as a leader in commercial property sales, consulting, professional
advice and commercial property management.
Dunlop Heywood, our northern-based national surveying practice, produced
record profits for the second successive year. In May, following the
acquisition of Baker Lorenz, Dunlop Heywood was renamed as Dunlop Heywood
Lorenz.
The acquisition of Baker Lorenz in early May has significantly strengthened
our position in London. We are already extremely pleased with the
complementary strategic fit that this business has provided.
The new enlarged entity has further consolidated its position as a major
service provider to the London Boroughs by recently winning a new four-year
contract for the management of Lambeth's property portfolio. This success when
added to the existing contracts with Westminster and Wandsworth remains the
cornerstone of our strength in this market, where experience gives us a
growing competitive advantage.
We are also pleased with the performance of Harman Healy, our commercial
property auctioneer, which was a significant contributor to our Group
cross-selling programme, as well as a strong performer in the auction room,
despite lower activity in the commercial auction market.
The division recorded a 9% increase in revenue and we remain optimistic for
further growth in the current financial year, when it will benefit from a full
year of revenues from Baker Lorenz.
Residential Property Services
During early 2001 the businesses of Simmonds and Partners and DGA (formerly
David Glass Associates) relocated to new premises in Stanmore. This move has
enabled us to combine the strengths of the individual businesses into one
cohesive unit and to amalgamate computer and administrative systems under one
roof.
The combined businesses have acquired a number of new portfolio instructions
and continue to enjoy much success with existing and new clients. The division
completed a number of small portfolio acquisitions that have been rapidly
integrated into our existing infrastructure.
One of the particular strengths of residential management operations is their
ability to cross sell the products of other Group companies. The division has
delivered significant improvements in fee generation including building,
surveying and valuations as well as property insurance.
DGA and Simmonds are dominant in the residential property management market
and are well placed to meet the growing service challenge of this industry.
I am also delighted with the post year-end acquisition of Mainguild Limited,
the company that owns the franchise for Winkworth Residential Auctions.
This latest addition will add to the services the Group is currently able to
offer and will also contribute to the Group's cross-selling programme.
Insurance Services Division
This division remains the largest contributor to both turnover and profits
within the Group. Its earnings potential has been further enhanced during the
year by a number of acquisitions, the full benefits of which will only be felt
in the current financial year.
In early December 2000 we acquired Farr, the U.K's leading housing association
property insurance broker. The focus and attention that the business provides
to that specific market now gives the Group significant expertise in the
social housing sector.
In April 2001 we acquired a London based commercial insurance brokerage named
Cadogan Insurance Services Limited. This business specialises in providing
insurance services for medium to large property companies. The addition of
Cadogan to the Hercules insurance division, with their specific commercial
property knowledge, complements well the professional services we offer
through Dunlop Heywood Lorenz, and we are already reaping the benefits of the
cross selling between the two entities. We continue to be optimistic about the
opportunity to expand our insurance brokerage within our chosen commercial
property markets.
In May 2001 we purchased the business of Kounnis Brokers, a provider of
property insurance to a number of specialist markets within the UK. This
operation enables the insurance division to further penetrate a number of
niche areas of the property insurance market.
In addition to the acquisitions referred to above, the division made
significant strides forward in terms of organic growth. We are, however, aware
of the hardening of rates across the industry and recognise that our business
is not immune to this trend.
It has been a significant year for Hercules overall. We have taken major
strides in terms of consolidating our strategy and competitive advantages
within our market place.
The strength of our business is in the outstanding team of employees who have
contributed so energetically to our success. I would like to thank them for
that contribution and encourage them to continue striving for success in the
year to come.
Robert Plumb
Managing Director
10 September 2001
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