RNS No 6097w
HERCULES PROPERTY SERVICES PLC
15th February 1999
HERCULES PROPERTY SERVICES PLC:
INTERIM RESULTS FOR SIX MONTHS TO
31 DECEMBER 1998
H I G H L I G H T S
* Turnover increases to #5.1m reflecting a 57% rise
* Pre-tax profits advance by 35% to #1.47m from #1.09m
* Interim dividend of 1.2p per share declared - an increase of 20%
* Earnings per share at 13p following an increase in share capital
* 60% of Group income derived from quality sustainable business
* #5m acquisition of commercial property consultancy Dunlop Heywood
completed during period but only made three months contribution
to earnings
* Group completed move from AIM to Official List and to Support
Services sector
* Insurance subsidiary now provides cover for #2.3bn of commercial
property
"Traditionally the second six months has always produced a higher
level of profits than during the first. I believe the second half
of this financial year will be underpinned by greater confidence in
the property market that will generate a higher level of sales at
Harman Healy's auctions. At the same time it is in the period to the
end of June that Heritage experiences its highest insurance renewals
and I should stress that 98% of our insurance business is renewed
each year. In addition, there will be a full six months contribution
from Dunlop Heywood.
"Against this background of improving market conditions, underpinned
by our growing level of quality core income, I view the remainder of
the year with confidence," Larry Lipman, Chairman.
CHAIRMAN'S STATEMENT
It is with great satisfaction that I can report on further substantial
progress at Hercules Property Services where profits have continued to
advance despite the economic backdrop of the last six months.
I believe it is worth noting that not only did most of the group companies
perform exceedingly well in a difficult property market but also the
results for the six months to 31 December 1998 reflect two important
features that enable Hercules to continue its profits growth: the quality
of its income stream and the synergistic nature of the group.
Against this background I am pleased to announce that pre-tax profits for
the first half of the year have risen by 35 per cent to #1.475m against
#1.093m for the same period a year ago. The EPS has fallen from 14.5p to
13p reflecting the issue of shares during the year, the full benefit of
which has yet to come through. Like-for-like earnings were also affected
by additional costs arising from a strengthened management team that
included the appointment of an operations manager and a financial
controller at an annual cost of #100,000.
We are declaring a dividend of 1.2p per ordinary share, a rise of 20% over
last year's interim payment, payable on 6 July 1999 to those shareholders
on the register as at 11 June 1999.
Today as much as 60% of Hercules' income derives from recurring business
such as insurance commissions and management and professional fees. In our
view this high-quality core income will continue to grow as our latest
acquisition, Dunlop Heywood, makes a full contribution in the second half
of the year.
In addition the level of cross-referred business between group companies
enables us to take full advantage of both the resources and expertise
within the Group and to maximise the profit potential of each business.
The period under review has seen a high level of corporate activity
culminating in three important developments. As shareholders are aware
we announced the acquisition of the established and well-respected
Manchester-based surveyor and property consultancy Dunlop Heywood for
#5m in September 1998. The acquisition has not only extended our
geographical coverage, with offices in London, Manchester, Leeds and
Bradford, but also expanded the range of services we can offer clients,
whether they be individuals, private investors, companies or major
institutions.
The second important event was the move from the Alternative Investment
Market, where the shares have been listed since flotation in May 1996, to
the Official List. This move, which resulted in a one-off cost of #50,000
being incurred, was effected on 22 October 1998 and reflected Hercules'
growing status as a fast expanding company appealing to a wider investment
audience.
Finally, in October 1998 Hercules was re-classified into the "Support
Services" sector having previously been in the "Property" sector. The
Board believes that this classification better reflects the service
orientated and earnings based nature of the business.
We do, of course, rely on the health and vitality of the property market
for performance and the six months under review have been difficult in
some areas of the sector.
Harman Healy, which covers commercial property auctions, property
management, valuing and surveying, maintained its market share in
spite of lower confidence among part of the property investment community.
During the period the firm conducted four successful auctions which saw a
marginally lower level of lots coming under the hammer. But since December
we have seen confidence returning in Harman Healy's traditional market
area and we expect to see a much greater level of auction activity in
the second half of the year.
I should also state that the firm's property management activities have
experienced a number of new instructions and there has been an increase
in insurance referrals to Heritage over the period.
Our property insurance intermediary, Heritage Insurance Services, has
continued to grow in line with expectation and at the end of December
1998 properties valued at approximately #2.3bn were under cover, a 35%
increase over the amount at December 1997. This equates to an average
monthly increase of #50m, a rate we expect to continue as Dunlop Heywood
begins to introduce business to Heritage together with the continued
level of organic growth and referrals from within the group.
Simmonds & Partners, our chartered surveyors, valuers and managing agents
practice, also highlights the importance of intra group referrals. Here,
the impact of these referrals is making a real difference to the firm's
level of profitability which has been further enhanced, over the last six
months, by new management contracts on eight apartment buildings.
At David Glass Associates, our residential ground rents manager, we have
invested in the strengthening of the management structure and enhanced
computer systems, which has facilitated the integration of PCL, the
property management business acquired in February 1998. The business
is running more efficiently than ever before and is, therefore, well
placed to increase its level of activity over the coming months.
Finally, I am pleased to report on the progress of our latest acquisition,
Dunlop Heywood. This purchase only completed in October and, therefore,
has made less than three months contribution to the half-year results.
However the business is already performing ahead of our expectations and
the benefits of being part of a property services group are beginning to
be felt. As integration into Hercules is completed I believe we shall see
the full impact of the synergy between Dunlop Heywood and the other
companies in the group.
Historically the second six months has always produced a higher level of
profits than the first. I believe the second half of this financial year
will be underpinned by greater confidence in the property market which
will, in particular, generate a higher level of sales at Harman Healy's
auctions. At the same time it is in the period to the end of June that
Heritage experiences its highest insurance renewals and I should stress
that approximately 98% of our insurance business is renewed each year.
In addition, there will be a full six months contribution from Dunlop
Heywood.
Against a background of improving market conditions, and underpinned by
our growing level of core quality income, I view the remainder of year
with confidence.
Larry Lipman 15 February 1999
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months Six months 12 months
ended ended ended
31 December 31 December 30 June
1998 1997 1998
#'000 #'000 #'000
TURNOVER: acquisitions 1,510 662 2,404
continuing operations 3,591 2,578 4,691
_______ _______ _______
5,101 3,240 7,095
Cost of sales (1,359) (1,015) (2,011)
_______ _______ _______
GROSS PROFIT 3,742 2,225 5,084
Administrative expenses (2,096) (1,169) (2,368)
_______ _______ _______
OPERATING PROFIT: acquisitions 379 280 1,290
continuing operations 1,267 776 1,426
_______ _______ _______
1,646 1,056 2,716
Interest receivable and similar income 27 53 153
Interest payable and similar charges (198) (16) (219)
_______ _______ _______
Profit on ordinary activities
before taxation 1,475 1,093 2,650
Tax on profit on ordinary activities (457) (362) (886)
_______ _______ _______
Profit on ordinary activities
after taxation 1,018 731 1,764
Equity minority interest - (61) (19)
_______ _______ _______
Profit for the financial period 1,018 670 1,745
Equity dividends (105) (66) (338)
_______ _______ _______
Retained profit for the financial period 913 604 1,407
======= ======= =======
Earnings per ordinary share 13.0p 14.5p 29.3p
Diluted earnings per ordinary share 12.8p 14.2p 28.8p
Dividend per share 1.2p 1.0p 5.0p
Taxation has been calculated using an estimated annual effective rate of
31% (six months to 31 December 1997 - 33%, year ended 30 June 1998 - 32%).
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 1998 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 1999 to members on the
register on 11 June 1999.
CONSOLIDATED BALANCE SHEET
Note 31 December 31 December 30 June
1998 1997 1998
(restated) (restated)
#'000 #'000 #'000
FIXED ASSETS
Intangible assets 1 5,123 - -
Tangible assets 3,173 586 2,754
_______ _______ _______
8,296 586 2,754
_______ _______ _______
CURRENT ASSETS
Stocks and work in progress 243 142 -
Debtors 4,734 1,643 2,524
Cash at bank and in hand 1,417 1,586 1,741
_______ _______ _______
6,394 3,371 4,265
CREDITORS: amounts falling due
within one year (4,487) (1,636) (3,702)
_______ _______ _______
NET CURRENT ASSETS 1,907 1,735 563
_______ _______ _______
TOTAL ASSETS LESS CURRENT LIABILITIES 10,203 2,321 3,317
CREDITORS: amounts falling due after
more than one year (4,542) (399) (4,915)
PROVISIONS FOR LIABILITIES AND CHARGES (310) (317) (310)
Equity minority interest (186) (135) (186)
_______ _______ _______
NET ASSETS/(LIABILITIES) 5,165 1,470 (2,094)
======= ======= =======
CAPITAL AND RESERVES
Called up equity share capital 445 329 339
Share premium account 16,484 9,565 10,244
Profit and loss account 1 (10,425) (7,085) (11,338)
Merger reserve (1,339) (1,339) (1,339)
_______ _______ _______
EQUITY SHAREHOLDERS' FUNDS 5,165 1,470 (2,094)
======= ======= =======
NOTE 1
Following the introduction of FRS10 "Goodwill and intangible assets",
the profit and loss account now includes goodwill previously written off
to reserves of #13,750,000 (period to 31 December 1997 - #8,194,000, year
ended 30 June 1998 - #13,750,000). The comparative figures have been
restated. Goodwill arising on the acquisition in the period has been
capitalised as intangible fixed assets.
CONSOLIDATED CASH FLOW STATEMENT
Note Six months Six months 12 months
ended ended ended
31 December 31 December 30 June
1998 1997 1998
#'000 #'000 #'000
Net cash (outflow)/inflow from
operating activities 1 (78) 403 2,292
Returns on investments and
servicing of finance (171) 37 (66)
Taxation paid - (19) (245)
Capital expenditure and
financial investment (209) (38) (165)
Acquisitions and disposals (6,010) (7,366) (4,166)
Equity dividends paid - - (165)
_______ _______ _______
Cash outflow before financing (6,468) (6,983) (2,515)
Financing 6,144 8,108 3,760
_______ _______ _______
(Decrease)/increase in cash in the period (324) 1,125 1,245
======= ======= =======
Six months Six months 12 months
ended ended ended
31 December 31 December 30 June
1998 1997 1998
#'000 #'000 #'000
(Decrease)/increase in cash in the period (324) 1,125 1,245
Cash outflow/(inflow from decrease/
(increase) in debt and lease financing 378 - (3,760)
_______ _______ _______
Change in net debt resulting
from cash flows 54 1,125 (2,515)
Loans acquired with subsidiary - - (1,700)
_______ _______ _______
54 1,125 (4,215)
_______ _______ _______
Net (debt)/funds brought forward (3,986) 229 229
_______ _______ _______
Net (debt)/funds carried forward (3,932) 1,354 (3,986)
======= ======= =======
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
1. Reconciliation of operating profit for the period to net cash
(outflow)/inflow from operating activities
Six months Six months 12 months
ended ended ended
31 December 31 December 30 June
1998 1997 1998
#'000 #'000 #'000
Operating profit 1,646 1,056 2,716
Depreciation charges 48 23 104
Profit on sale of tangible fixed assets - - (3)
(Increase)/decrease in stocks and
work in progress (243) (1) 34
Increase in debtors (855) (501) (1,391)
(Decrease)/increase in creditors (674) (241) 753
Increase in minority interest and
provisions - 67 79
_______ _______ _______
Net cash (outflow)/inflow from
operating activities (78) 403 2,292
======= ======= =======
2. Analysis of net debt
At At
1 July Cash 31 December
1998 flow Acquisition 1998
#'000 #'000 #'000 #'000
Cash at bank and in hand 1,741 61 (385) 1,417
Debt and lease financing
due within one year (812) - 5 (807)
Debt and lease financing
due after one year (4,915) 373 - (4,542)
_______ _______ _______ _______
(3,986) 434 (380) (3,932)
======= ======= ======= =======
Contact: Paul Davis, Finance Director,
Hercules Property Services PLC. Tel: 0181-203 9099
Baron Phillips,
Baron Phillips Associates. Tel: 0171-224 1302
END
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