RNS Number:9672C
Hercules Property Services PLC
15 September 2004
15 SEPTEMBER 2004
HERCULES PROPERTY SERVICES PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2004
Hercules Property Services plc ('Hercules', 'the Company' or 'the Group'), the
property management, insurance and services group, announces preliminary results
for the year ended 30 June 2004.
Key points financial:
* Profit before tax and amortisation increased 13% to #9.6m (2003:#8.4m)
(note 3)
* Profit before tax increased 27% to #5.4m (2003: #4.3m)
* Basic earnings per share increased 38% to 13.4p (2003: 9.7p)
* Adjusted basic earnings per share 35.7p (2003: 32.6p)
* Final dividend of 6.8p bringing the total full-year dividend to 8.4p (2003:
8.0p)
* Loans reduced by #7.9m (2003: #4.5m)
Key points operational:
*Successful year of business consolidation
*Organic revenue growth in insurance and surveying divisions
*Major restructuring of residential management accomplished
Commenting on the results, Larry Lipman, Chairman, said:
"The improving performance of the Group is the direct result of the successful
efforts made by your management team. Having focused on our operational
strengths, the team looks forward to the exciting challenges of further real
revenue and profit growth."
"The Company also announces today that it is in talks in relation to a potential
offer being made for the entire issued and to be issued share capital of the
Company. The offer under consideration would be at a premium to the current
share price and would be predominantly in shares. A further announcement in
relation to these talks will be made in due course."
For further information:
Hercules Property Services plc: 020 8420 7600
Robert Plumb, Managing Director, and Nigel Davis, Finance Director.
mj2 ltd: 020 7491 7776
Richard Sunderland, Tim McCall, Clare Stephens
CHAIRMAN'S STATEMENT
We are pleased to report that profit before tax for the full year rose by 27% to
#5.4m (2003: #4.3m). Profit before tax and amortisation was #9.6m, 13.4% higher
than the previous year (2003: #8.4m). This result comes from a strong
improvement throughout the Group and establishes excellent promise for the
future. Group turnover rose by 4% to #43.3m (2003: #41.7m). There were no
material acquisitions during the course of the year.
Basic earnings per share for the financial year were 13.4p compared to 9.7p in
the previous year, a 38% increase. Adjusted earnings per share, excluding
amortisation, are 35.7p for the current year (2003: 32.6p), a 10% improvement on
the previous year.
Dividend
The Board is recommending a final dividend of 6.8p per share, making the total
dividend 8.4p per share for the year, which represents a measured increase on
the 8p per share awarded in 2003. The final dividend, subject to shareholders'
approval, will be payable on 5 January 2005 to shareholders on the shareholder
register on 12 November 2004.
The final dividend will also be subject to the scrip dividend mandate, which was
sent out in December 2002. Shareholders will be advised of their rights and the
election price at the appropriate time.
Operations
This has been a year in which the management team have progressed the
consolidation and integration of the businesses within the Hercules Group. We
are extremely pleased to report that these changes have taken place at a time
when the businesses themselves have continued to show valuable organic growth in
earnings and revenues.
Within the commercial property service division we have successfully integrated
Michael Courcier & Partners into Dunlop Heywood Lorenz. In October 2003 we
changed the name of our residential auction business to Harman Healy
Residential, which has benefited both of our auction houses, providing them with
a more integrated and complete service offering. D.O.R. has been successfully
integrated within the Farr business, maximising service and efficiency to our
Housing Association clients. Deacon, now fully recovered from all the effects of
the post-September 11th 2001 insurance market, has come under the management of
Cadogan Insurance Services to create a highly competitive single commercial
insurance brokerage.
The residential management division has taken a major step in combining the
management of David Glass Associates, Simmonds & Partners and Wood Management
under the umbrella of one management team at our Stanmore location. Now using
the same service infrastructure, this business is well set for prosperous growth
in the future.
Cash Flow
Operating cash flow was #9.6m (2003: #13.7m). The Group remains well ahead of
its bank loan repayment programme. Growth in operating profit, which contributed
to this position, was helped by a further debt repayment in March of this year
when the Board took the opportunity to issue 900,000 ordinary shares to widen
our shareholder base.
Management Team
The improving performance of the Group is the direct result of the successful
efforts made by our management team. Having focused on our operational
strengths, the team looks forward to the exciting challenges of further real
revenue and profit growth. Once again, my thanks go to the management team and
employees throughout the Group, who have contributed so successfully to our
performance.
The Company also announces today that it is in talks in relation to a potential
offer being made for the entire issued and to be issued share capital of the
Company. The offer under consideration would be at a premium to the current
share price and would be predominantly in shares. A further announcement in
relation to these talks will be made in due course.
Larry Lipman
Chairman
Date: 15 September 2004
MANAGING DIRECTOR'S OPERATIONAL REVIEW
The year ended 30 June 2004 demonstrates an operating performance that
underlines the truly sustainable profit growth that our businesses are capable
of delivering. It was a year in which we implemented a significant amount of
organisational change and at the same time strengthened the quality of our
management teams and our service delivery.
Commercial Property Services
While tenant demand in the commercial property market has remained moderate, our
teams have delivered excellent fee growth in the professional and asset
management departments. Of particular note, our growth in valuation work in both
the North West and South East of England markets has been significant. We have
also taken major strides in developing our property management business,
renewing and winning significant new management clients. Dunlop Heywood Lorenz
(now incorporating Michael Courcier & Partners) has also developed its human
resources systems, which has significantly improved employee morale and
productivity. These foundations are already reaping the fruits of the revenue
and margin growth that the group aspires to in the future.
We are extremely pleased with the new level of co-operation and efficiency that
has influenced the results of our two auction houses, now trading as Harman
Healy Residential and Harman Healy Commercial. We are able to offer a complete
service to the property-owning community, holding 18 auctions throughout the
year. Auction houses remain a growing and necessary service to the property
industry.
Residential Management
During the course of this year Gross Fine, our prestigious blocks of flats
manager, achieved further growth in the quality of its earnings.
The sustainable professional service offering that this business provides
continues to make it attractive to an increasingly demanding residential client
base.
The re-positioning of our other property management business, based at Stanmore,
was significantly advanced. We have reset the goals of this combined business,
which will operate as Wood Management, in terms of its service standard, its
margins and its geographical coverage. While there have been significant one-off
costs in achieving this position, it has provided us with the infrastructure for
a significantly improved performance in the year to come.
Insurance
With a more stable market, our insurance intermediary subsidiaries have
succeeded in significantly improving their earnings and further establishing
their competitive advantages in their market places. Deacon, whose management
team was integrated into Cadogan towards the end of this financial year,
comfortably exceeded the targets we had set for it. With the broadening and
strengthening insurance relationships, some of which will come from the Cadogan
integration, the business is establishing itself again as a leader in the blocks
of flats insurance market. The commercial brokerage, Cadogan, had an excellent
year, further enhancing its reputation as a premier brokerage for the property
market. The combined new business, now operating as Cadogan and located in both
London and Bournemouth, is well positioned to take full advantage of the
economies and efficiencies that merged businesses can provide.
Our social housing intermediary, now operating only in the name of Farr,
reported another year of record earnings. The business continues to deliver the
professional service which is so critically sought after by this market.
Returning insurer confidence has further enabled this business to offer a wider
range of competitively priced products to the market.
Overall, Hercules businesses have matured significantly during the course of
this year. We have taken major steps towards maximising the effect of our
competitive advantages, whilst reducing our exposure to negative market trends.
There has been a noticeable improvement in the collegiate spirit of our
management teams, which bodes well for the ongoing support the businesses have
given one-another. My thanks, as ever, to all the employees of the Group who
have worked so tirelessly to help deliver this improvement in our earnings.
R H C Plumb
Managing Director
Date: 15 September 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year Ended 30 June 2004
Note 2004 2003
#'000 #'000
Turnover 2 43,283 41,680
Cost of sales (176) (707)
Gross profit 43,107 40,973
Administrative expenses (32,064) (30,847)
Amortisation (4,118) (4,152)
Administrative expenses - total (36,182) (34,999)
Operating profit 6,925 5,974
Interest receivable and similar income 552 1,164
Interest payable and similar charges (2,032) (2,858)
Profit on ordinary activities before taxation 2,3 5,445 4,280
Tax on profit on ordinary activities (2,961) (2,529)
Profit on ordinary activities after taxation 2,484 1,751
Equity dividends 4 (1,616) (1,450)
Retained profit for the financial year 868 301
Basic earnings per share 5 13.4p 9.7p
Adjustment for goodwill and LTIP 22.3p 22.9p
Adjusted earnings per share 35.7p 32.6p
Diluted earnings per share 5 12.9p 9.6p
Adjusted diluted earnings per share 34.4p 32.5p
All results derive from continuing operations.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year ended 30 June 2004
Note 2004 2003
#'000 #'000
Profit for the financial year 868 301
Total recognised gains and losses relating to the year 868 301
Prior year adjustment 1 (360) -
Total recognised gains and losses since last annual
report 508 301
and financial statements
CONSOLIDATED BALANCE SHEET
30 June 2004
Note 2004 Restated
#'000 (note 1)
2003
#'000
FIXED ASSETS
Intangible fixed assets 66,388 70,586
Tangible fixed assets 10,482 10,757
76,870 81,343
CURRENT ASSETS
Stock 4,394 4,183
Debtors 21,522 26,028
Investments 5 5
Cash at bank and in hand 12,350 15,630
38,271 45,846
CREDITORS: amounts falling due within one year (31,674) (38,739)
NET CURRENT ASSETS 6,597 7,107
TOTAL ASSETS LESS CURRENT LIABILITIES 83,467 88,450
CREDITORS: amounts falling due after more than one (22,734) (31,185)
year
PROVISIONS FOR LIABILITIES AND CHARGES (487) (575)
NET ASSETS 60,246 56,690
CAPITAL AND RESERVES
Called up equity share capital 960 906
Shares to be issued 954 954
Share premium account 60,692 58,058
Profit and loss account (1,021) (1,889)
Merger reserve (1,339) (1,339)
EQUITY SHAREHOLDERS' FUNDS 6 60,246 56,690
CONSOLIDATED CASH FLOW STATEMENT
Year Ended 30 June 2004
Note 2004 2003
#'000 #'000
Net cash inflow from operating activities 7 9,578 13,709
Returns on investments and servicing of finance 9 (1,480) (1,694)
Taxation (3,299) (2,887)
Capital expenditure and financial investment 9 (444) (1,378)
Acquisitions and disposals 9 (970) (25,930)
Equity dividends paid (1,450) (2,167)
Cash inflow/(outflow) before financing 1,935 (20,347)
Financing 9 (5,215) (1,249)
Decrease in cash in the year (3,280) (21,596)
NOTES (FORMING PART OF THE PRELIMINARY RESULTS)
Year ended 30 June 2004
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 2004 or 2003,
but is derived from those accounts. Statutory accounts for the year ended
30 June 2003 have been delivered to the Registrar of Companies and those
for the year ended 30 June 2004 will be delivered following the Company's
Annual General Meeting. The auditors have reported on those accounts; their
reports were unqualified and did not contain statements under s237(2) or
(3) Companies Act 1985. Change in accounting policy
In accordance with FRS 5 Application Note G, the insurance intermediaries
within the Group have revised their revenue recognition policies with
regards to post-placement contractual obligations. An element of income has
been deferred to account for obligations continuing in the post-placement
period.
The impact of the change in accounting policy upon the 30 June 2003 figures
as previously reported has been an increase in accruals and deferred income
of #360,000, and a reduction in the profit and loss reserve, and hence, net
assets, of #360,000. The directors have considered the burden of
post-placement obligations, specifically claims handling, upon the results
of the current and prior financial year, and have concluded that there is a
negligible impact upon the results.
2. SEGMENTAL INFORMATION
All of the Group's business activities were carried out in the United
Kingdom. Detailed below is the analysis of turnover and profit on ordinary
activities before taxation attributable to the different classes of the
Group's business activities, after consolidation adjustments:
2004 2003
#'000 #'000
Turnover
Management services 6,197 6,610
Insurance 18,003 17,052
Auctions 2,844 2,961
Surveying 15,571 13,721
Other 668 1,336
43,283 41,680
Profit on ordinary activities before taxation
Management services 97 398
Insurance 9,240 7,777
Auctions 727 848
Surveying 2,292 2,406
Other (6,911) (7,149)
5,445 4,280
NOTES (FORMING PART OF THE PRELIMINARY RESULTS)
Year ended 30 June 2004
3. RECONCILIATION OF PROFIT BEFORE TAX AND AMORTISATION
2004 2003
#'000 #'000
Profit on ordinary activities before taxation 5,445 4,280
Amortisation 4,118 4,152
Profit reported in chairman's statement 9,563 8,432
4. EQUITY DIVIDENDS
2004 2003
#'000 #'000
Interim equity dividend proposed (2003: paid) of 1.6p per
share (2003: 1.5p) 290 272
Final equity dividend proposed of 6.8p per share (2003: 6.5p) 1,326 1,178
1,616 1,450
5. EARNINGS PER SHARE
The calculation of basic earnings per share is based on profit after tax of
#2,484,189 (2003: #1,751,627) and on a weighted average number of ordinary
shares of 18,506,416 (2003: 18,098,066) in issue during the year.
The calculation of diluted earnings per share is based on basic earnings as
defined above and on 19,210,563 ordinary shares (2003 - 18,188,568)
calculated as follows:
2004 2003
No. No.
Basic weighted average number of shares 18,506,416 18,098,066
Weighted average number of dilutive shares under
option 1,918,873 1,274,188
Number of shares that would have been issued at fair
value (1,214,726) (1,183,686)
Diluted weighted average number of shares 19,210,563 18,188,568
Diluted earnings per share 12.9p 9.6p
The total number of options granted but not exercised at 30 June 2004 was
4,469,717 (2003: 3,251,052).
The directors consider the earnings per share excluding goodwill amortisation of
#4,118,000 (2003: #4,152,000) better reflects the commercial performance of the
Group and have therefore disclosed an additional earnings per share figure for
this.
It has come to the attention of the directors that there has been a breach of
the rules of the Unapproved Share Option Scheme, whereby more share options have
been granted than the rules provided. Advice has been sought from leading
counsel, and the options granted have been confirmed as being valid.
Had the directors been aware that there was no capacity to grant options at the
time, the Company would have implemented alternative means to reward employee
loyalty and performance, for example, a 'phantom' share option scheme. In
consequence, the directors believe that neither the Company nor the shareholders
have suffered any loss as a result of the breach, and have concluded that no
further action is required.
NOTES (FORMING PART OF THE PRELIMINARY RESULTS)
Year ended 30 June 2004
6. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
Group Group
2004 2003
#'000 #'000
Profit for the financial year 2,484 1,751
Dividends (1,616) (1,450)
868 301
Issue of shares 2,688 90
Net addition to shareholders' funds 3,556 391
Opening shareholders' funds as previously reported 57,050 56,659
Prior year adjustment (note 1) (360) -
Opening shareholders' funds as restated 56,690 56,659
Closing shareholders' funds 60,246 57,050
7. RECONCILIATION OF OPERATING PROFIT FOR THE YEAR TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
2004 2003
#'000 #'000
Operating profit 6,925 5,974
Depreciation 714 658
Decrease in provision (88) (31)
Loss on sale of fixed assets 6 -
Amortisation of goodwill 4,118 4,152
(Increase)/decrease in stocks (91) 577
Decrease/(increase) in debtors 4,506 (5,491)
(Decrease)/increase in creditors (6,488) 7,716
Loan issue costs (147) -
Amortisation of loan issue costs 123 154
Net cash inflow from operating activities 9,578 13,709
NOTES (FORMING PART OF THE PRELIMINARY RESULTS)
Year ended 30 June 2004
8. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2004 2003
#'000 #'000
Decrease in cash in the year (3,280) (21,596)
Cashflow from decrease in debt and lease financing 8,899 1,339
Change in net debt resulting from cash flows 5,619 (20,257)
Loan issue costs 147 -
Amortisation of loan issue costs (123) (154)
5,643 (20,411)
Net debt at 1 July 2003 (21,279) (868)
Net debt at 30 June 2004 (15,636) (21,279)
9. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
2004 2003
#'000 #'000
Returns on investments and servicing of finance
Interest received 552 1,164
Interest paid (2,032) (2,858)
Net cash outflow from returns on investments
and (1,480) (1,694)
servicing of finance
Capital expenditure and financial investment
Purchase of tangible fixed assets (580) (1,567)
Receipts from sale of tangible fixed assets 136 187
Receipts from sale of Fixed Assets Investments - 2
Net cash outflow from capital expenditure and
financial investment (444) (1,378)
Acquisitions and disposals
Purchase of subsidiary undertaking and goodwill (212) (1,208)
Deferred consideration paid on prior (996) (24,818)
acquisitions
Net cash acquired with subsidiary - 96
Cash proceeds on disposal of subsidiary 238 -
Net cash outflow from acquisitions and (970) (25,930)
disposals
Financing
Issue of ordinary share capital 2,688 90
New borrowings - 3,157
Repayment of loans (7,903) (4,485)
Capital element of finance lease rental - (11)
payments
Net cash outflow from financing (5,215) (1,249)
NOTES (FORMING PART OF THE PRELIMINARY RESULTS)
Year ended 30 June 2004
10. ANALYSIS OF NET DEBT
Loan issue
At Cash costs At
1 July flow #'000 30 June
2003 #'000 2004
#'000 #'000
IBA cash balances 10,533 (1,745) - 8,788
Cash at bank and in hand 5,097 (1,535) - 3,562
Cash - total 15,630 (3,280) - 12,350
Debt due within one year (5,724) 472 - (5,252)
Debt due after one year (31,185) 8,427 24 (22,734)
Total (21,279) 5,619 24 (15,636)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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