RNS Number:5327H
Hercules Property Services PLC
17 February 2003
Hercules Property Services PLC
17 February 2003
HERCULES PROPERTY SERVICES PLC
Interim Report for the six months ended 31 December 2002
Hercules Property Services Plc, the property management, consultancy and
insurances group, today announces its interim results for the six months ended
31 December 2002.
Highlights:
- All divisions continue to be profitable
- Turnover on continuing operations up 25% to #18.1m (2000: #14.5m)
- Operating profit #1.7m (2001: #2.8m)
- Interim dividend 1.5p (2.3p)
- Adjusted basic eps 11.7p (2001: 22.7p). Basic eps (1.1p) (2001: 6.7p)
- Deacon's margins have stabilised and retention rates are improving. Farr
and D.O.R. performing well, and growing new business.
- New residential management offices opened in South London and Manchester.
Larry Lipman, Chairman of Hercules commented:
'Hercules is founded on a strategy of diversity within the property services
sector, the value of which has been firmly demonstrated in these difficult
markets. We believe that the recovery in those businesses that have been under
performing is now under way. Despite the current uncertain economic
environment, the board remains optimistic about the group's prospects.'
There will be a meeting for analysts at 9.30am today at GCI Financial, 30-34
New Bridge Street, EC4.
For further information:
Rob Plumb, Managing Director
Nigel Davis, Finance Director
Hercules Property Services Plc 020 8420 7600
Roger Leboff/Caroline Massey, GCI Financial 020 7072 4200
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.
Chairman's Statement
Despite market conditions remaining difficult for the period ending 31 December
2002 all our divisions continued to be profitable. However, the strength of
earnings in some businesses supported the temporary weaknesses in others.
RESULTS
For the six months period ended 31 December 2002, operating profit was #1.7m
(2001 #2.8m). During that period, group turnover grew 17% from #15.7m to
#18.4m.
Profit before tax, amortisation, and LTIP was #3.0m (2001 #4.3m) and adjusted
earnings per share was 11.7p (2001 22.7p).
The board is recommending an interim dividend of 1.5p (2001 2.3p) this will be
payable on 7 July 2003 to all shareholders on the register at close of business
on 6 June 2003.
The interim 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
The group's insurance division has continued to be adversely affected by the
challenging conditions in the property insurance markets. Insurers hit by falls
in investment values and reduced capacity have taken a more tentative
underwriting approach and substantially increased insurance prices. As a
result, customers have become much more price sensitive and all intermediaries
have experienced reduced margins. This has particularly affected Deacon, our
blocks of flats insurance intermediary, as their insurers have made substantial
changes to prices and underwriting criteria.
In contrast, Farr and D.O.R., which specialise in property insurance for the
Housing Association market, and Cadogan our commercial property insurance
broker, have fared much better. Although underwriting capacity has been
challenging, their high degree of specialisation and very focused client service
has kept customer retention high and facilitated growth in new business.
Although these conditions have kept Deacon's retention rates and margins below
those anticipated at the beginning of the financial year, I am pleased to report
that real progress is being made. Assisted by improvements in the underwriting
facilities negotiated by Deacon, margins have stabilised and retention rates
have improved. Additionally, new business, particularly with the residential
management company market has exceeded earlier management projections. We
expect it to maintain this performance, as our service and product offering
continues to be enhanced.
We are pleased to report that Dunlop Heywood Lorenz, our commercial property
consultancy business produced an excellent result during the period under
review. The strengths in our professional and property management departments
have balanced the agency side which, in common with the market generally, is
experiencing lower tenant demand.
During the period under review a new management team was recruited for our
commercial auctioneer Harman Healy. The team, which has been relocated in the
West End offices of Dunlop Heywood Lorenz, is making significant progress in
building its client base. Earnings from the auction group have however felt the
short-term effects of both the managerial and location changes. Winkworth, our
residential auction business, continues to perform ahead of our original
expectations.
Our residential management division has benefited from the development of the
synergies between the various businesses and their differing products. Gross
Fine has enjoyed a growth in management instructions, particularly in the new
construction market. We are pleased to report the geographical expansion of
our service offering, with new residential management offices in the South
London and Manchester areas. We have maintained our strategy to develop new
client relationships with resident management companies.
PROSPECTS:
Hercules is founded on a strategy of diversity within the property services
sector, the value of which has been firmly demonstrated in these difficult
markets. We believe that the recovery in those businesses that have been under
performing is now under way. Despite the current uncertain economic
environment, the board remains optimistic about the group's prospects.
Larry Lipman
Chairman
17 February 2003
Restated Restated
CONSOLIDATED PROFIT AND LOSS ACCOUNT Note 6 months (see note 1) (see note 1)
ended 6 months 12 months
31 December ended ended
2002 31 December 30 June
#'000 2001 2002
#'000 #'000
TURNOVER: acquisitions 330 1,189 5,576
Continuing operations 18,108 14,547 31,370
18,438 15,736 36,946
Cost of sales: (88) (260) (337)
GROSS PROFIT 18,350 15,476 36,609
Administrative expenses - recurring (14,352) (9,802) (24,226)
Administrative expenses - non-recurring 2 - (1,006) (1,215)
Amortisation of goodwill (2,006) (1,548) (3,465)
Long Term Incentive Plan (LTIP) (300) (300) (600)
Total administrative expenses (16,658) (12,656) (29,506)
OPERATING (LOSS)/PROFIT: acquisitions (29) 312 2,324
Continuing operations 1,721 2,508 4,779
1,692 2,820 7,103
Profit on sale of assets in continuing activities - - 900
Interest receivable and similar income 800 733 1,423
Interest payable and similar charges (1,777) (1,046) (2,309)
Profit on ordinary activities before taxation 715 2,507 7,117
Tax on profit on ordinary activities (906) (1,306) (3,147)
(Loss)/Profit on ordinary activities after (191) 1,201 3,970
taxation
Equity dividends (272) (449) (2,167)
Retained (loss)/profit for the financial period (463) 752 1,803
Basic (loss)/earnings per share (1.1p) 6.7p 22.1p
Adjustment for goodwill, LTIP and non-recurring 12.8p 16.0p 22.7p
costs
Adjusted earnings per share 11.7p 22.7p 44.8p
Diluted (loss)/earnings per share (1.1p) 6.5p 21.6p
Adjusted diluted earnings per share 11.8p 21.9p 43.7p
Taxation has been calculated using an estimated annual effective rate before amortisation of goodwill of 30% (six
months to 31 December 2001 - 30%, year ended 30 June 2002 - 30%).
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 2002 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 7
July 2003 to members on the register on 6 June 2003.
Restated
CONSOLIDATED BALANCE SHEET 31 December (see note 1) 30 June
2002 31 December 2002
#'000 2001 #'000
#'000
FIXED ASSETS
Intangible fixed assets 72,419 57,968 73,354
Tangible fixed assets 10,519 5,702 10,326
82,938 63,670 83,680
CURRENT ASSETS
Stock and work in progress 4,781 4,476 4,760
Debtors 15,469 14,418 20,397
Investments 7 - 7
Cash at bank and in hand 11,221 29,517 37,226
31,478 48,411 62,390
CREDITORS: amounts falling due within one year (21,126) (23,654) (33,031)
NET CURRENT ASSETS 10,352 24,757 29,359
TOTAL ASSETS LESS CURRENT 93,290 88,427 113,039
LIABILITIES
CREDITORS: amounts falling due after more than one year (36,113) (32,866) (55,774)
PROVISIONS FOR LIABILITIES AND CHARGES (591) (601) (606)
NET ASSETS 56,586 54,960 56,659
CAPITAL AND RESERVES
Called up equity share capital 906 898 903
Shares to be issued 1,254 654 954
Share premium account 58,058 57,826 57,971
Profit and loss account (2,293) (3,079) (1,830)
Merger reserve (1,339) (1,339) (1,339)
EQUITY SHAREHOLDERS' FUNDS 56,586 54,960 56,659
CONSOLIDATED CASH FLOW STATEMENT Note 6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2002 2001 2002
#'000 #'000 #'000
Net cash (outflow)/inflow from operating activities 3 (19,654) 3,637 14,806
Returns on investments and servicing of finance (977) (313) (886)
Taxation (1,555) (3,049) (4,553)
Capital expenditure and financial investment (675) (1,080) (5,383)
Acquisitions and disposals (1,116) (3,793) (20,303)
Equity dividends paid (416) (294) (1,900)
Cash outflow before financing (24,393) (4,892) (18,219)
Financing (1,612) 1,887 22,923
(Decrease)/Increase in cash in the period (26,005) (3,005) 4,704
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
2002 2001 2002
#'000 #'000 #'000
(Decrease)/Increase in cash in the period (26,005) (3,005) 4,704
Cash inflow/(outflow) from increase/(decrease) in 1,702 (1,511) (22,397)
debt and lease financing
Change in net debt resulting from cash flows (24,303) (4,516) (17,693)
Loans acquired with subsidiaries - - (15)
(24,303) (4,516) (17,708)
Net (debt)/funds brought forward (868) 16,840 16,840
Net (debt)/funds carried forward 4 (25,171) 12,324 (868)
1. RESTATEMENT OF COMPARATIVE FIGURES
In order to disclose as cost of sales only the actual cost of ground rent stocks
sold, the comparative figures for cost of sales and administrative expenses have
been restated to reclassify other costs, such as professional staff costs, to
administrative expenses. This restatement has no impact on the result for the
year, or upon the results of the comparative periods. The restatements are as
follows:
6 months 12 months
ended ended
31 December 30 June
2001 2002
#'000 #'000
Cost of sales as previously reported (3,868) (7,124)
Restatement of non-stock costs 3,608 6,787
Cost of sales as restated (260) (337)
Total administrative expenses as previously reported (9,048) (22,719)
Restatement of non-stock costs (3,608) (6,787)
Administrative expenses as restated (12,656) (29,506)
The provision for the long term incentive plan has been reclassified as shares
to be issued for the comparative period of 31 December 2001, in order to be
consistent with the treatment adopted at 30 June 2002. The adjustment has the
effect of increasing net assets by #654,000 at 31 December 2001. There is no
impact upon the profit for the comparative period.
31 December
2001
#'000
Provisions for liabilities and charges as previously reported (1,255)
Reclassification of LTIP provision 654
Provisions for liabilities and charges as restated (601)
Shares to be issued as previously reported -
Reclassification of LTIP provision 654
Shares to be issued as restated 654
2. NON-RECURRING ADMINISTRATIVE EXPENSES
Administrative expenses for the 6 months ended 31 December 2001 includes an
exceptional cost of #1,006,000 (12 months ended 30 June 2002 - #1,215,000) in
relation to the payment made to one of Deacon Insurance Services Limited's
former insurance suppliers in settlement of claims against Deacon Insurance
Services Limited connected with business written in previous years which
crystallised in November 2001.
3. RECONCILIATION OF OPERATING PROFIT FOR THE PERIOD TO NET CASH
INFLOW FROM OPERATING ACTIVITIES
6 months Restated 12 months
ended 6 months ended
31 December ended 30 June
2002 31 December 2002
#'000 2001 #'000
#'000
Operating profit 1,692 2,820 7,103
Shares to be issued 300 300 600
Depreciation charge 507 290 654
(Decrease)/increase in provision (15) 201 (94)
Amortisation of goodwill 2,006 1,548 3,465
Profit on sale of tangible fixed assets - (22) -
Increase in stocks and work in progress (21) (8) (74)
Decrease/(increase) in debtors 4,721 2,957 (1,452)
(Decrease)/increase in creditors (28,844) (4,449) 4,604
Net cash (outflow)/inflow from operating activities (19,654) 3,637 14,806
In the current period, the decrease in creditors includes #24,234,680 in respect
of vendor loan notes redeemed.
As described in note 1, the provision for the long term incentive plan has been
reclassified as shares to be issued as at 31 December 2001. A corresponding
restatement has been reflected in the above table for the movement on this
balance during the six months ended on that date.
4. ANALYSIS OF NET DEBT
At Cash Acquisition of At
1 July flow Subsidiaries 31 December
2002 #'000 #'000 2002
#'000 #'000
Cash at bank and in hand 37,226 (26,101) 96 11,221
Debt due within one year (7,515) 4,105 - (3,410)
Debt due after one year (30,568) (2,408) - (32,976)
Finance leases (11) 5 - (6)
(868) (24,399) 96 (25,171)
In the current period cash at bank has reduced by #24,234,680 in respect of
vendor loan notes redeemed, as explained in note 3 above. Cash at bank at 31
December 2002 includes #2,180,050 held in escrow accounts to settle the loan
notes issued as part of the consideration for DOR (Northern) Ltd and Gross Fine
(Holdings) Ltd.
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR NKQKPPBKDFBD