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