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RNS
Hunters Property PLC  -  HUNT   

Interim Results

Released 07:00 07-Sep-2017

RNS Number : 0466Q
Hunters Property PLC
07 September 2017
 



Embargoed: 7.00a.m.

7 September 2017

 

 

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

 

 

Interim Results for the period ended 30 June 2017

 

Highlights:

 

Hunters Property Plc ("Hunters" or the "Company" or the "Group"), one of the UK's largest national sales and lettings estate agency and franchise businesses, is pleased to announce its interim results for the six months ended 30 June 2017.

 

'Confident of meeting expectations for the full year'

 

Financial Highlights:

 

·    Network Income up 4% to £17.6m (six months to June 2016: £16.9m);

·    Revenue up 1% to £6.7m (2016: £6.6m);

·    Adjusted operating profit (operating profit before depreciation, interest, amortisation and acquisition costs and share based payments) £800,000 (2016: 923,000);

·    Adjusted earnings per share 2.09p (2016: 2.52p); and

·    Interim dividend up 17% to 0.7p per share (2016: 0.6p per share).

 

Operational Highlights:

 

·    Acquired the Besley Hill network of 15 branches, in and around the Bristol area;

·    Opened a total of 24 new branches in this period, including the conversions of six existing businesses expanding our branch network to 206 (June 2016: 180);

·    Grown lettings income across the network by 16%; and

·    Developed our Online capability and launched a 24/7 vendor portal. This facilitates customer online tracking and compliments our online booking and online valuation capability.

 

Trading update

·    With a full second half contribution from Besley Hill and a robust pipeline the Board has confidence in the full year outcome;

·    Independent Businesses continue to join the Hunters network to mitigate the current uncertainty and challenging backdrop; and

·    Strong net asset position and facilities available to continue our growth.

 

 

Glynis Frew, Chief Executive of Hunters Property Plc, commented:

 

"We have delivered robust results in the six months to June 2017 against a backdrop of markets that contracted in terms of new instructions during this period by 9.5% as against the same period last year.  We are bolstered in part with our strategy to grow and develop the franchise network and we are encouraged by the pipeline of future franchisees interested in joining the network.  We are delighted at the increase in strength of prospects we have registered reinforcing our view, especially in this environment, of the comparative benefits of joining the Hunters network.

The first half year includes a part contribution from Besley Hill. We are confident of meeting our expectations for the full year.  The continuing work and support displayed by our staff and the franchise network is a credit to the Group.  I offer, on behalf of the Board, our gratitude to everyone that has been involved."

 

For further details:

Hunters Property Plc

Tel:  01904 756 197

Kevin Hollinrake, Chairman

 

Glynis Frew, Chief Executive Officer

 

Ed Jones, Chief Financial Officer

 

 

 

Dowgate Capital Stockbrokers

Tel: 020 3903 7715

James Sergeant (Corporate Broking)

 

 

 

SPARK Advisory Partners Limited

Tel: 020 3368 3551

Mark Brady and Neil Baldwin (Nominated Adviser)

 

 

 

Smithfield Consultants Limited 

Tel: 020 7360 4900

Alex Simmons

 

 

 

Chairman's Statement

 

Overview

 

On behalf of the Board I am delighted to comment on Hunters' half year results for 2017.  The first six months have seen the Group build successfully on the track record built up over the last 25 years; Network Income in the six months to June grew by 4% to £17.6m (six months to June 2016: £16.9m), 24 new branches joined the network including Besley Hill, a 15 office network in and around Bristol.

 

The Company has delivered robust results in what has been a challenging market.   The comparative period was aided last year by the increase in sales due to the changes to Stamp Duty legislation.  Turnover has increased by 1% to £6.7m (2015: £6.6m) culminating in EBITDA of £800,000 (2016: £923,000).  The Group's strategy is to grow a predominantly franchise network and during this period opened 24 branches (2016: 17), including 15 relating to Besley Hill and six that were existing businesses converting to Hunters.  As at the end of June, the network stood at 206 (June 2016: 180) branches, of which 195 (2016: 169) are franchised.

 

This half year we are pleased to report our continued development of online capabilities, including online booking of valuations and our vendor portals, allowing customers to track their property transactions 24/7.  Our strategy combines leading online technologies with genuine local area expertise.  We continue to drive professional standards with over 500 delegates engaging with the Hunters Training Academy which has now received authorisation as an approved trainer under RentSmart Wales.  Our web users increased by 21% in the period to July against the same period last year and our Customer Service Rating to June rose to 96% (to June 2016: 95%) keeping us significantly ahead of the 2015 Property Academy Survey which puts the national average at 73%.

 

Outlook

 

With a full second half contribution from Besley Hill and a robust pipeline the Board has confidence in the full year outcome. Economic uncertainty provides one more reason why good quality independent businesses see the benefit of joining the Hunters network and so it is proving from the number and calibre of enquiries we are receiving.  We continue to look for further strategic earnings enhancing acquisitions should they become available.

 

The Board declares an interim dividend of 0.7p (2016: 0.6p) per share, an increase of 17% as part of its policy to pay a progressive dividend whilst maintaining dividend cover of at least two times.  The dividend will be paid on 20 October 2017 to shareholders on the Register on 22 September 2017.

 

I look forward to updating you further in due course.

 

 

Kevin Hollinrake

Chairman

 

Financial Report for the six months ended 30 June 2017

 

 

H1 2017

H1 2016

 

Network Income

£17.61m

£16.99m

+4%

 

 

 

 

Turnover

£6,688,000

£6,598,000

+1%

EBITDA

£800,000

£923,000

(13%)

Profit before tax, adjusted

£663,000

£808,000

(18%)

Profit before tax

£191,000

£389,000

(51%)

Cash generated

(£301,000)

(£315,000)

+4%

Net debt

£3,047,000

Dec-16 £1,172,000

 

Shareholders' funds

£6,985,000

Dec-16 £5,648,000

+24%

 

 

 

 

Shares in issue

31,691,138

28,286,992

 

Weighted average number of shares

30,241,422

28,286,992

 

Earnings after tax

£157,000

£294,000

(47%)

Earnings after tax, adjusted(excluding amortisation, acquisition costs, finance timing and investment income)

£629,000

£711,000

(12%)

 

 

 

 

EPS

0.52p

1.04p

(50%)

Adjusted EPS

2.09p

2.52p

(17%)

 

 

 

 

Dividend

0.7p

0.6p

+17%

 

 

 

 

Branches

206

180

+14%

 

Revenue

 

Gross revenue for sales and lettings from the Group's network ("Network income") rose by 4% to £17.6m as against £16.9m for the same first half period last year.  Turnover rose by 1% to £6.7m (2016: £6.6m) in part due to the effect of Besley Hill joining the group at the end of March 2017. 

 

Profit before tax, adjusted to exclude amortisation, amortised finance costs, acquisition costs and other finance income

 

Adjusted profit before tax for the six months ended June 2017 was £663,000, a decrease of 18% on the equivalent period last year (2016: £808,000) due to the surge in sales in the comparative period as a result of the stamp duty increase skewing the normal seasonality of the business last year. 

 

Adj. EBITDA, earnings before interest, tax and depreciation/amortisation

 

Adj. EBITDA for the six months to June 2017 was £800,000, a decrease of 13% on the same period last year (2016: £923,000).

 

Earnings per share

 

Basic earnings per share for the six months ended 30 June 2016 was 0.52p (2016: 1.04p).  Adjusted earnings per share, excluding amortisation and acquisition costs, finance timing investment income and share-based payment expenses for the six months to June 2017 was 2.09p (2016: 2.52p) a decrease of 17% due in part to the issue of shares around the Besley Hill acquisition part way through the period.

 

Dividend

 

The Board declares an interim dividend of 0.7p (Interim 2016: 0.6p) per share, an increase of 17%, payable on 20 October 2017 to shareholders on the Register on 22 September 2017.

 

Cash flow

 

The Company generated net cash from operations of £23,000 during the six months to June 2017.  There were further debt drawdowns in the six months to June 2017 totalling £1,617,000 and a further £1,305,000 raised in issued capital by way of a placing.  £2,250,000 was used to fund the acquisition of Besley Hill, with the remaining funds being used to open more franchisee offices and acquire another lettings book. Following the period end the Company made its final deferred payment of £295,000 for the Hunters Midlands acquisition.

 

Liquidity and capital reserves

 

As at 30 June 2017, the Group's cash balance was £886,000 (June 2016: £896,000) with net debt of £3.05m (December 2016: £1.17m) including vendor Loan Notes, repayable by July 2017, £0.29m (December 2016: £0.29m).

 

Risks

 

The primary risk to the business continues to be the state of the UK property market.  Caution has crept into the market place since the triggering of Article 50 and an element of expected uncertainty as a result of the Brexit negotiations, as well as the proposal to ban unfair tenant fees.  We do not expect either of these events to conclude this year and our balance between franchising, sales and lettings and geographical mix allows us to mitigate against these risks.

 

Ed Jones

Chief Financial Officer

 

 

Consolidated Statement of Comprehensive Income as at 30 June 2017

 

 

Notes

6 months

 ended

30 June 2017

6 months ended

30 June 2016

Year

ended

31 December 2016

 

 

£'000s

£'000s

£'000s

 

 

 

 

 

 Revenue

 

6,688 

6,598 

13,833 

 

 

 

 

 

Ongoing administrative expenses 

 

  (5,888)

(5,675)

(11,772)

 

 

 

 

 

 

Operating profit before depreciation, amortisation, costs of business combinations & share-based payments

 

800

923

2,061

 

 

 

 

 

Depreciation & adjustments on disposal

 

(63)

(71)

(104)

Amortisation & adjustments on disposal

 

(349)

(287)

(584)

Business combination acquisition expenses

 

(49)

(15)

(30)

Share-based payment expense 

 

(63)

(87)

(192)

 

Operating profit

 

276

463

1,151

 

 

 

 

 

Investment revenues

 

-

3

4

Finance costs

 

(85)

(77)

(168)

 

 

 

 

 

Profit before taxation

 

191

389

987

 

 

 

 

 

Taxation

 

(34)

(95)

(181)

 

 

 

 

 

 Profit for the period

 

157

 

294

 

806

 

Other comprehensive income

 

-

-

-

 

 

 

 

 

Total comprehensive income for the period attributable to equity owners of the parent

 

157

294

806

 

 

 

 

 

 Basic earnings per share

0.52p 

1.04p 

2.84p 

 

 

 

 

 

Diluted earnings per share

5

0.50p

0.99p

2.72p

 

Consolidated Statement of Financial Position as at 30 June 2017

           

Notes

30 June 2017

 

31 December 2016

 

30 June

2016

 

 

£'000s

 

£'000s

 

£'000s

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Goodwill

3

4,626

 

3,973

 

3,973

Intangible assets

3

6,449

 

4,078

 

3,899

Property, plant and equipment

 

383

 

429

 

286

Investments

 

1

 

1

 

1

Deferred tax assets

 

62

 

82

 

31

 

 

11,521

 

8,563

 

8,190

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Trade and other receivables

 

1,687

 

1,452

 

1,678

Cash and cash equivalents

 

886

 

1,187

 

896

 

 

2,573

 

2,639

 

2,574

 

 

 

 

 

 

 

Total assets

 

14,094

 

11,202

 

10,764

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Borrowings

 

373

 

366

 

1,027

Finance lease liabilities

 

28

 

47

 

39

Current tax liabilities

 

134

 

117

 

276

Trade and other payables

 

2,000

 

2,376

 

2,102

 

 

2,535

 

2,906

 

3,444

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Borrowings

 

3,560

 

1,993

 

1,617

Finance lease liabilities

 

72

 

81

 

10

Other payables

 

43

 

52

 

60

 

 

3,675

 

2,126

 

1,687

 

 

 

 

 

 

 

Provisions for liabilities

 

 

 

 

 

 

Provisions

 

50

 

66

 

79

Deferred tax liabilities

 

849

 

456

 

472

 

 

 

 

 

 

 

 

 

899

 

522

 

551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

6,985

 

5,648

 

5,082

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Share capital

 

1,268

 

1,145

 

1,131

Share premium

 

4,068

 

2,633

 

2,579

Merger reserve

 

899

 

899

 

899

Retained earnings

 

750

 

971

 

473

 

 

 

 

 

 

 

Total equity attributable to owners of the parent

 

6,985

 

5,648

 

5,082


 

Consolidated Statement of Changes in Equity for the Period ended 30 June 2017


Share

capital


Share

premium


Merger reserve


Retained earnings


Total equity attributable to owners of the parent


£'000s


£'000s


£'000s


£'000s


£'000s











At 1 January 2016

1,131


2,579


899


375


4,984

Profit and total comprehensive income

-


-


-


294


294

Credit to equity for equity settled share-based payments

-


-


-


87


87

Dividends paid

-


-


-


(283)


(283)











At 30 June 2016

1,131


2,579


899


473


5,082











Profit and total comprehensive income

-


-


-


512


512

Dividends paid

-


-


-


(170)


(170)

Credit to equity for equity settled share-based payments

-


-


-


105


105

Issue of share capital

14


53


-


-


67

Deferred tax on share-based payment transactions

-


-


-

52


52

Exercise of share options

-


1


-

(1)


-










At 31 December 2016

1,145


2,633


899


971


5,648











Profit and total comprehensive income

-


-


-


157


157

Dividends paid

-


-


-


(412)


(412)

Credit to equity for equity settled share-based payments

-


-


-


 63


63

Issue of share capital

123


1,432


-


-


1,555

Deferred tax on share-based payment transactions

-


-


-


(26)


(26)

Exercise of share options

-


3


-


(3)


-

At 30 June 2017

 

1,268


 

4,068


 

899


750


6,985



 


Consolidated Statement of Cashflows for the Period ended 30June 2017

           

6 months

ended

30 June 2017

6 months

ended

30 June 2016

Year ended

30 December 2016


£'000s

£'000s

£'000s

Cash flow from operating activities

 

 

 

Operating profit

276

463

1,151

Adjustment for:

 

 

 

Depreciation of property, plant and equipment

71

70

134

Amortisation of intangible assets

350

294

597

(Gain)/Loss on disposal of property, plant and equipment

(1)

1

 

(17)

Profit on disposal of intangible assets

(8)

(7)

(13)

Share options fair value expense

63

87

192

(Released)/expensed element of provisions

(17)

2

(16)

Costs of acquisitions

49

15

30

Changes in working capital:

 

 

 

(Increase)/Decrease in trade and other receivables

(235)

(49)

177

Decrease in trade and other payables

(374)

(390)

(130)

Cash generated from/(used in) operations

174

486

2,105

Interest paid

(83)

(45)

(111)

Income tax paid

(68)

(30)

(292)

Net cash from operating activities

23

411

1,702

 

 

 

 

Cash flow from investing activities

 

 

 

Capital expenditure (tangible & intangible)

(311)

(411)

(1,011)

Proceeds from sale of tangible & intangible assets

20

26

62

Business combinations, net of cash acquired

(2,459)

(325)

(325)

Repayments for deferred consideration

(11)

(11)

(23)

Interest received

-

3

4

Net cash used in investing activities

(2,761)

(718)

(1,293)

 

 

 

 

Cash flow from financing activities

 

 

 

Dividends paid to shareholders

(412)

(283)

(453)

Repayment of borrowings

(45)

(275)

(1,807)

Issue of borrowings

1,617

570

2,175

Issue of share capital

1,305

-

68

Repayments for deferred consideration debentures

-

-

(375)

Repayment of capital element of finance lease contracts

(28)

(20)

(41)

Net cash from / (used in) investing activities

2,437

(8)

(433)

 

 

 

 

(Decrease) in cash and cash equivalents

(301)

(315)

(24)

Net cash and cash equivalents at beginning of the period

1,187

1,211

1,211

Net cash and cash equivalents at end of period

886

896

1,187

 

 

 

 

 

 

 

 





Notes to the Financial Statements for the Period ended 30 June 2017 

1.      Corporate information

 

Hunters Property Plc is a Company incorporated in the United Kingdom. The registered address of the Company is Apollo House, Eboracum Way, York, YO31 7RE. The consolidated financial statements (or "financial statements") incorporate the financial statements of the Company and entities (its subsidiaries) controlled by the Company (collectively comprising the "Group").

 

The principal activity of the Group is the provision of property services to consumers and businesses which include sales, lettings, franchising and related services.

 

2.      Accounting policies

 

2.1.   Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

 

Basis of measurement

The financial statements have been prepared on the historical cost basis, modified to include the revaluation of certain financial instruments at fair value.

 

Functional and presentational currency

The financial statements are presented in sterling, which is the functional currency of the Parent Company. Monetary amounts in these financial statements are rounded to the nearest £1,000.

 

Use of estimates and judgments

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

 

Basis of preparation

The financial information set out in these interim consolidated financial statements for the six months ended 30 June 2017 is unaudited. The financial information presented are not statutory accounts prepared in accordance with the Companies Act 2006, and are prepared only to comply with AIM requirements for interim reporting.

 

Basis of consolidation

The Group financial information consolidates those of the Parent Company and the subsidiaries that the Parent has control of. Control is established when the Parent is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

 

Where a subsidiary is acquired/disposed of during the period, the consolidated profits or losses are recognised from/until the effective date of the acquisition/disposal.

 

All inter-company balances and transactions between group companies have been eliminated on consolidation.

 

Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those used by the Group.

 

 

2.2.   Business combinations

The Group applies the acquisition method of accounting for business combinations enacted after the date of creation of the Group following incorporation of Hunters Property Plc, as detailed further below. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair value of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree, and the equity interest issued by the Group. Acquisition costs are expensed as incurred.

 

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquired subsidiary's financial information prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values.

 

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the fair value of consideration transferred, over the Group's share of the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.

 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

 

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

 

The Group has applied the principles of merger accounting in consolidating the results, as control was only acquired by Hunters Property Plc via a share-for-share exchange on 27 March 2015. Merger accounting requires that the results of the Group are presented as if the Group has always been in its present form, and does not require a re-evaluation of fair values as at the point of acquisition. Accordingly, for the Group's comparative statement of financial position as at 30 June 2015, a merger reserve has been created which represents the difference between the net assets of the Group as at that date, and the retained profits recognised by the Group as at that date.

 

2.3.   Revenue

Revenue represents the amount receivable for the provision of services and the sale of goods during the period, excluding VAT and trade discounts. Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be measured reliably.

 

Revenue from residential, commercial, and land sales is recognised on the basis of exchange of contract. Financial services revenue is recognised at the later of the policy inception date or confirmation of entitlement to the commission.

 

Revenue from commission earned as letting agents is recognised in the month in which the income is received and when there is fulfilment of all but inconsequential or perfunctory actions.

 

At inception of a franchisee contract, revenue is recognised upfront which matches to the estimated cost of time and knowledge to create the franchiser-franchisee contractual arrangement. No amounts are deferred as the directors are of the opinion that virtually all inception costs are incurred at the outset, and hence although contracts run for several years this policy is considered to be the fairest presentation to comply with the matching and accruals concepts.

 

Revenue from franchisee management service fees are recognised monthly in arrears, calculated by reference to the terms of the contract and the value of sales attributable to each franchisee.

 

Deferred income arises where services are invoiced in advance of performance. The amount is released to the profit or loss in subsequent periods in reference to the stage of completion of the transaction at the reporting date.

 

2.4.   Goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identifiable and separately recognised. After initial recognition, goodwill is measured at cost less accumulated impairment losses.

 

2.5.   Intangible fixed assets other than goodwill

Intangible assets are initially measured at cost. Where intangible assets are acquired as part of a business combination, cost is determined by reference to a fair value estimation technique. After initial recognition, intangible assets are recognised at cost less any accumulated amortisation and any accumulated impairment losses.

 

The depreciable amount of an intangible asset with a finite useful life is allocated on a systematic basis over its useful life. Amortisation begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

 

The amortisation period and the amortisation method for intangible assets with a finite useful life is reviewed each financial period-end. If the expected useful life of the asset is different from previous estimates, the amortisation period is changed accordingly.

 

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

 

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

 

Software

3 - 7 years or over the life of the licence

Franchise development costs

Over the life of the franchise contract (typically 10-15 years)

Brands

10 years

Customer lists 

2-12 years

 

2.6.   Property plant and equipment

Property, plant and equipment are recognised as an asset only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

 

An item of property, plant and equipment that qualifies for recognition as an asset is measured at its cost. Cost of an item of property, plant and equipment comprises the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

 

After recognition, all property, plant and equipment are carried at costs less any accumulated depreciation and any accumulated impairment losses.

 

Depreciation is provided at rates calculated to write down the cost of assets, less estimated residual value, over their expected useful lives on the following basis:

 

Leasehold land and buildings

Straight line over the period of the lease

Plant and machinery

25% reducing balance

Fixtures, fittings and equipment

25% reducing balance or 10-33% straight line

Motor vehicles

25% straight line

 

The residual value and the useful life of an asset are reviewed at least at each financial period-end and if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

 

Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying value of the asset and are recognised in profit or loss.

 

2.7.   Impairment of goodwill, other intangible assets and property, plant and equipment

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash flows. As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill.

 

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

An asset or cash-generating unit is impaired when its carrying amount exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost of disposal and value in use. The value in use is calculated as being net projected cash flows based on financial forecasts discounted back to present value.

 

The impairment loss is allocated to reduce the carrying amount of the asset, first against the carrying amount of any goodwill allocated to the cash-generating unit, and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.

 

2.8.   Investments

Investments in equity instruments that have a quoted market price in an active market and whose fair value can be reliably measured are measured at fair value; otherwise investments in equity instruments are measured at cost.

 

2.9.   Financial instruments

 

Financial assets

Financial assets are recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.

 

All financial assets excluding investments are classified as loans and receivables; these comprise trade and other receivables and cash and cash equivalents. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

 

Financial assets are initially recognised at fair value plus directly attributable transaction costs.

 

After initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.

 

If there is objective evidence that there is an impairment loss on loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account.

 

A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred.

 

Financial liabilities

Financial liabilities include borrowings and trade and other payables.

 

Financial liabilities are obligations to pay cash or other financial assets and are recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.

 

Financial liabilities are initially recognised at fair value adjusted for any directly attributable transaction costs.

 

After initial recognition, financial liabilities are measured at amortised cost using the effective interest method, with the effective interest recognised as an expense in finance costs. Discounting is omitted where the effect of discounting is immaterial.

 

A financial liability is derecognised only when the contractual obligation is extinguished, that is, when the obligation is discharged, cancelled or expires. 

 

2.10.   Provisions

Provisions are recognised when the Group has a legal or constructive present obligation as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.

 

Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value the unwinding of the discount is recognised as a finance cost in profit or loss in the period it arises.

 

2.11.   Employee benefits

The cost of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or non-current assets.

 

The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.

 

Termination benefits are recognised immediately as an expense when the Company is demonstrably committed to terminate the employment of an employee, or to provide termination benefits.

 

Payments to defined contribution retirement benefit schemes are expensed as they fall due.

 

2.12.   Leased assets

 

Finance leases

The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any. A corresponding amount is recognised as a finance lease liability.

 

This liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant proportion of the outstanding capital balance and is charged to profit or loss, as finance costs over the period of the lease.

 

Operating leases

All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred.

 

2.13.   Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.

 

2.14.   Income tax

Current income tax assets and/or liabilities comprise obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid/due at the reporting date. Current tax is payable on taxable profits, which may differ from profit or loss in the financial statements. Calculation of current tax is based on the tax rates and tax laws that have been enacted or substantively enacted at the reporting period.

 

Deferred taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.

 

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). However, for deductible temporary differences associated with investments in subsidiaries a deferred tax asset is recognised when the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

 

2.15.   Share-based payments

The fair value of equity settled share based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period based on the Group's estimate of shares or options that will eventually vest.

 

2.16.   Equity instruments

Share capital represents the nominal value of shares that have been issued. Share premium represents the excess consideration received over share capital upon the sale of shares, less any incidental costs of issue.

 

Retained earnings include all current and prior period retained profits.

 

The non-controlling interest reserve is the portion of equity ownership in subsidiaries which is not attributable to the owners of the Parent Company.

 

The merger reserve has arisen as described in note 2.2.

 3.    Intangible Fixed Assets

  

Goodwill

 

Software

 

 

FDG's & Rebrands

 

           Brands

 

Customer Lists

   

Total


£'000s

 

£'000s

 

£'000s

 

£'000s

 

£'000s

 

£'000s

Cost

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017

4,008

 

620

 

1,939

 

637

 

2,040

 

9,244

Additions - separately acquired

-

 

28

 

257

 

-

 

-

 

285

Additions - business combinations

653

 

-

 

-

 

-

 

2,447

 

3,100

Disposals

-

 

-

 

(17)

 

-

 

-

 

(17)

At 30 June 2017

4,661

 

648

 

2,179

 

637

 

4,487

 

12,612

 

 

 

 

 

 

 

 

 

 

 

 

Amortisations and Impairment

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017

35

 

125

 

253

 

141

 

639

 

1,193

Amortisation charged for the year

-

 

47

 

87

 

64

 

152

 

350

Amortisation on disposal

-

 

-

 

(6)

 

-

 

-

 

(6)

At 30 June 2017

35

 

172

 

334

 

205

 

791

 

1,537

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2017

4,626

 

476

 

1,845

 

432

 

3,696

 

11,075

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

3,973

 

495

 

1,686

 

496

 

1,401

 

8,051

 

Franchise Development Grants ("FDG's") and rebrand costs are externally incurred expenses at the inception of certain contracts with franchisees in order to assist with the transition to using the Hunters brand name. The amounts invested are amortised over the minimum life of the underlying franchise contract, typically 10 to 15 years.

 

4.    Business combinations

 

Acquisition of Besley Hill:

On 24 March 2017 the Group acquired Besley Hill. The consideration paid totalled £2,500,000, being settled by £2,250,000 paid in cash, and an issue of £250,000 worth of Ordinary shares in Hunters Property Plc.

 

As part of the acquisition, the Directors have identified an intangible asset, being the franchisee contracts, including a renewal expectation, being determined by using the average value of the contracts, growing at 2% per annum and discounted at 12% per annum to determine the present value.

 

From the date of acquisition Besley Hill has contributed £105,090 of revenue and £70,335 of profit before tax and amortisation.

 

Acquisition of Besley Hill:

 

Carrying value

 

Fair value adjustments

 

Fair value recognised on acquisition

 

£'000s

 

£'000s

 

£'000s

Assets

 

 

 

 

 

Intangible assets

-

 

2,253

 

2,253

Total assets

-

 

2,253

 

2,253

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Deferred tax liability

-

 

(406)

 

(406)

Total liabilities

-

 

(406)

 

(406)

 

 

 

 

 

 

Total identifiable net assets

-

 

1,847

 

1,847

 

 

 

 

 

 

Goodwill arising on acquisition

 

 

 

 

653

 

 

 

 

 

 

Purchase consideration transferred

 

 

 

 

2,500

 

In addition, there were costs of acquisition of £44,818 relating to the acquisition which have been included on the face of the Consolidated Statement of Comprehensive Income, and costs of acquisition of £15,000 were recognised in the year to 31 December 2016 in respect of the pre-completion expenses incurred on this combination.

 

Acquisition of a lettings book:

In March 2017 the Group acquired a lettings book. The consideration paid totalled £160,000, being settled in cash.

 

As part of the acquisition, the Directors have identified an intangible asset, being the lettings book. This was determined to be equal to the amount paid for the book, after adjustment for deferred tax. Historical data and forecasts have been used, together with the 10% group discount rate and an assumption of a useful life of 12 years for the lettings book to estimate the fair value of this intangible. Due to the small size of the lettings book, the Directors have been unable to quantify the direct impact on results arising from this acquisition.

 

Acquisition of a lettings book:

 

Carrying value

 

Fair value adjustments

 

Fair value recognised on acquisition

 

£'000s

 

£'000s

 

£'000s

Assets

 

 

 

 

 

Intangible assets

-

 

194

 

194

Total assets

-

 

194

 

194

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Deferred tax liability

-

 

(34)

 

(34)

Total liabilities

-

 

(34)

 

(34)

 

 

 

 

 

 

Total identifiable net (assets)

-

 

-

 

160

 

 

 

 

 

 

Goodwill arising on acquisition

 

 

 

 

-

 

 

 

 

 

 

Purchase consideration transferred

 

 

 

 

160

In addition, there were costs of acquisition of £4,660 relating to the acquisition which have been included on the face of the Consolidated Statement of Comprehensive Income.

5.      Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

 

Earnings

 

 

30 June 2017

 

30 June    2016

 

 

 

£'000s

 

£'000s

Earnings for the purpose of basic earnings per share being net profit attributable to owners of the parent

 

157

 

294

Effects of dilutive potential ordinary shares

 

-

 

-

 

 

 

 

 

 

Earnings for the purposes of diluted earnings per share

 

157

 

294

 

 

Number of shares

 

 

30 June 2017

 

30 June    2016

 

 

 

£

 

£

Weighted average number of ordinary shares for the purposes of basic earnings per share

 

 

30,241,422

 

 

28,286,992

 

 

 

 

 

 

Effects of dilutive potential ordinary shares

 

1,076,661

 

1,475,988

 

 

 

 

 

 

Weighted average number of ordinary shares for the purposes of diluted earnings per share

 

 

 

31,318,083

 

 

29,762,980

 

Earnings per share

 

Pence per weighted average shares

 

0.52p

 

1.04p

 

 

 

 

 

Pence per weighted average diluted shares

 

0.50p

 

0.99p

 

The Directors use adjusted earnings before time-value interest, investment revenue, amortisation, and costs of acquisition ("Adjusted Earnings") as a measure of ongoing profitability and performance. The calculated Adjusted Earnings for the current period of accounts is as follows:

 

 

Adjusted Earnings per Share

 

 

30 June 2017

 

30 June 2016

 

 

 

£'000s

 

£'000s

Profit after taxation

 

157

 

294

Adjusted for:

 

 

 

 

 

Time-value interest costs

 

13

 

31

Investment revenues

 

 

-

 

(3)

Amortisation

 

 

349

 

287

Costs of acquisition

 

 

49

 

15

Share-based payment expense

 

 

63

 

87

 

 

 

 

 

 

Adjusted Earnings

 

 

631

 

711

 

 

Adjusted Earnings per share

 

Pence per weighted average shares

 

2.09p

 

2.52p

 

 

 

 

 

Pence per weighted average diluted shares

 

2.02p

 

2.39p

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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