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RNS
HML Holdings PLC   -  HMLH   

Final Results

Released 07:00 02-Jul-2019

RNS Number : 1031E
HML Holdings PLC
02 July 2019
 

 

HML Holdings plc

("HML", the "Company" or the "Group")

 

Preliminary Results for the Year Ended 31 March 2019

 

 

HML Holdings plc (AIM: HMLH), the property management services group, is pleased to announce its preliminary results for the year ended 31 March 2019.

 

Financial and Operational Highlights:

 

 

  • Revenues up 8% to £28.1m (2018: £26.0m)

 

  • EBITDA up 8% to £2.8m (2018: £2.6m)**

 

  • Adjusted operating profit up 9% to £2.4m (2018: £2.2m)*

 

  • Cash generated from operations increased to £3.6m (2018: £2.7m)

 

  • Adjusted basic earnings per share up 10% to 4.6p (2018: 4.2p)***

 

  • Dividend per share proposed of 0.47p (2018: 0.42p)

 

 

*before interest, share based payment charges, amortisation and tax (see note 1)

**before interest, share based payment charges, depreciation, amortisation and tax

***before interest, share based payment charges, amortisation and tax (see note 4)

 

Commenting on the results, Robert Plumb, Chief Executive of HML said:

 

"It has been a good year for HML growing adjusted EBITDA by 8% while significantly improving our service coverage with the addition of four acquired offices in key locations for our growing client base.  We are confident in our ability to maintain this momentum while we continue to build our network and our central support divisions."

 

 

For further information:       www.hmlgroup.com

               

 

HML Holdings Plc:

020 8439 8529

Robert Plumb, Chief Executive Officer

 

James Howgego, Chief Financial Officer

 

Alec Guthrie, Chief Operating Officer

 

Tavistock Communications Group:

020 7920 3150

James Verstringhe, Jeremy Carey

 

finnCap:

020 7220 0500

Ed Frisby/Giles Rolls - corporate finance

 

 

Camille Gochez/Tim Harper - corporate broking

Mia Gardner, corporate broking

 

 

 

 

REVIEW OF BUSINESS

 

We are pleased to report revenue growth of 8% to £28.11m (2018: £25.97m). Earnings before interest, share-based payments, amortisation and tax improved by 9% to £2.41m (2018: £2.21m).

 

We enjoyed revenue and earnings growth from virtually all the Group's business segments and revenue lines. The only exception to this positive trend was in the pre-contract enquiry fees segment where we incurred a 7% fall in revenues as a result of the lower number of property sales. Surveying fees remained steady with a reduction in freehold valuation and consultancy fees being offset by stronger buildings reinstatement valuations and to a lesser extent building surveying work. We experienced strong growth in concierge (site staff) management fees where we have consolidated and improved our service offering. Other areas such as health and safety and fire risk inspections, company secretarial fees and insurance brokerage grew strongly as the continued integration of acquisitions made in previous years contributed to greater cross referral sales opportunities. We recorded further growth in new business volumes with notable improvements in the counties south and east of London.  We are particularly pleased with improvements to our new business pipeline resulting from increased contact and relationships with new build developers and the implementation of a more centralised approach to lead processing.

 

We remain confident in our strategy to deliver a local and personal service through our distributed network of offices while maintaining our adherence to the increasing standards of compliance required of our profession. Although frustrated somewhat by governmental attention to areas other than leasehold, we continue to anticipate legislative changes to our market. In addition to restrictions on freehold and ground rent, higher levels of compliance are expected through future regulation of managing agents. However, while client compliance awareness has significantly improved in the area of health and safety, particularly with regard to fire regulation requirements, a general lack of enforcement of all these regulations can lead to lower standards and consequently create a competitive advantage for those managing agents willing to exploit the lack of enforcement and oversight. Our examination of the reasons behind business lost to unregulated managing agents indicate that this is a significant contributory factor.

 

The Group continues to centralise areas of non-client facing process from our network of offices to our centralised back office, the majority of which is based in Croydon. This has inevitably incurred reorganisation costs but the benefits in productivity have begun to show. In addition to streamlining our processes, the systems development team in conjunction with user representatives have completed a major exercise to facilitate the uniform application of our property management software to operate on a single database. This is another area in which the group sees significant opportunities for operational efficiencies in the future.

 

Towards the end of the financial year, the Company completed a number of key acquisitions, which have expanded the Group's network. In November, Dauntons Soar Management Limited (DSML) joined our Central London operations. The business represents an excellent opportunity for HML to manage high end smaller London apartment blocks with a bespoke service methodology. The Group anticipates being able to harness the benefits of DSML's service provision while benefitting from the advantages of economies resulting from HML's back office services. In February, HML acquired Residential Block Management Services Limited (RBMS) in Blackheath. The south eastern quartile of greater London is a region in which HML has been previously under represented. RBMS whose strengths, like ours, have been in serving the Residents Management Company (RMC) market, provides us with greater presence in this area and an opportunity to consolidate our position.  Similarly, we acquired Francis Butson based in St Neots, Cambridgeshire, shortly after the year end with a view to establishing ourselves in an area where it had previously been difficult to provide a local and personal service.

 

In April 2019, as part of our ongoing strategy of developing our lettings management service, we purchased a Birmingham-based lettings management company called Prima Property Services Limited. Our offices in the centre of the city not only facilitate the expansion of our block management services to this geographical region but enable the further development of this complementary property service with a business with whom we have already established a working relationship.

 

 

All acquisitions have been funded by the cash generated from operations, which rose to £3.6m (2018: £2.7m). We are pleased to have further reduced borrowings by £0.5m to a total of £1.2m, thus reducing our debt to equity ratio from 9.4% to 5.9%.

 

After the recent acquisitions, the Group now manages more than 82,000 property units in 3,000 estates and blocks of flats from 24 offices. Our strategy to focus on owner-occupied and controlled blocks of flats and housing estates sits comfortably with our view of the structural changes ahead for the leasehold market. Improvements to our intragroup products and service offering ensure that they continue to grow as a proportion of our revenues. We anticipate this proportion continuing to grow as we refine our service and add technological efficiency to our systems. While there remains an inevitable degree of uncertainty as to the pace of leasehold reform, the market for our services grows, as does the relevance of scale and efficiency in providing a competitive quality service.

 

We are in the second year of operating as a single operational management structure under one HML brand and are confident that the benefits of the changes we have made in this area are now beginning to manifest themselves across the business, both financially and in enabling a more engaged employee base. Our management team continues to invest in the development and retention of employees knowing what a significant role morale and the quality of training plays in the provision of our services.  On behalf of the board, I would like to express our thanks to our employees whose hard work in these changing and challenging times have enabled the group to continue to grow successfully.

 

HML HOLDINGS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2019

 

 

 

Notes

2019

£'000

 

2018

£'000

CONTINUING OPERATIONS

 

 

 

 

REVENUE

 

 

 

28,110

 

25,968

 

Direct operating expenses

 

 

(24,332)

 

(22,509)

 

Central operating overheads

 

 

(1,365)

 

(1,248)

Share based payment charge

 

(37)

(30)

Amortisation of intangibles

 

(640)

(660)

 

Total central operating overheads

 

 

(2,042)

 

(1,938)

 

Operating expenses

 

 

 

(26,374)

 

(24,447)

 

PROFIT FROM OPERATIONS

 

2

 

1,736

 

1,521

 

Finance costs

 

 

 

(50)

 

(57)

 

PROFIT BEFORE TAXATION

 

 

1,686

 

1,464

Income tax charge

3

(305)

(302)

 

PROFIT AND COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO THE OWNERS OF THE PARENT

 

 

 

1,381

 

 

1,162

 

 

EARNINGS PER SHARE

 

 

 

Basic

4

3.0p

2.6p

 

Diluted

 

4

 

3.0p

 

2.5p

 

ADJUSTED EARNINGS PER SHARE

 

 

 

 

Basic

 

4

 

4.6p

 

4.2p

 

Diluted

 

4

 

4.6p

 

4.1p

 

  

HML HOLDINGS PLC

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY

For the year ended 31 March 2019

 

 

ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE GROUP

 

 

Share

Share

Other

Merger

Retained

Total

 

capital

premium

reserve

reserve

earnings

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

 

Balance at 31 March 2017

 

671

 

2,251

 

 (70)

 

 (15)

 

10,058

 

12,895

 

Profit for the year

-

-

 -

-

1,162

1,162

Other comprehensive income

-

-

 -

-

-

-

Transactions with owners

 

 

 

 

 

 

Share based payment charge

-

-

 -

-

30

30

Share capital issued

11

199

 -

-

-

210

Shares purchased by EBT

-

-

 (18)

-

-

(18)

Dividend

-

 -

-

(168)

(168)

 

Balance at 31 March 2018

 

682

 

2,450

 

 (88)

 

(15)

 

11,082

 

14,111

 

Profit for the year

 

-

 

-

 

 -

 

-

 

1,381

 

1,381

Other comprehensive income

-

-

 -

-

-

-

Transactions with owners

 

 

 

 

 

 

Share based payment charge

-

-

 -

-

37

37

Share capital issued

  5

  48

 -

-

-

  53

Shares sold by EBT

-

-

    1

-

-

   1

Dividend

-

 -

-

(192)

(192)

 

Balance at 31 March 2019

 

687

 

2,498

 

(87)

 

(15)

 

12,308

 

15,391

 

HML HOLDINGS PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 March 2019

COMPANY NUMBER: 5728008

 

 

 

 

ASSETS

 

Notes

2019

£'000

2018

       £'000

NON-CURRENT ASSETS

 

 

 

Goodwill

 

11,384

10,510

Other intangible assets

 

8,373

7,937

Property, plant and equipment

 

1,030

786

 

 

 

20,787

 

19,233

CURRENT ASSETS

 

 

 

Trade and other receivables

 

3,804

3,930

Cash at bank

 

235

269

 

 

4,039

4,199

 

TOTAL ASSETS

 

 

  24,826

 

  23,432

 

LIABILITIES

 

 

 

CURRENT LIABILITIES

 

 

 

Trade and other payables

 

6,602

6,112

Borrowings

 

529

529

Current tax liabilities

 

357

349

 

 

 

 

7,488

 

6,990

NON-CURRENT LIABILITIES

 

 

 

Deferred tax liability

 

1,268

1,124

Borrowings

 

   679

1,207

 

 

 

 

1,947

 

2,331

 

TOTAL LIABILITIES

 

 

9,435

 

9,321

 

NET ASSETS

 

 

15,391

 

14,111

 

EQUITY

 

 

 

Called up share capital

6

687

682

Share premium

 

2,498

2,450

Other reserve

 

(87)

(88)

Merger reserve

 

(15)

(15)

Retained earnings

 

12,308

11,082

 

ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT

 

 

15,391

 

14,111

 

HML HOLDINGS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2019

 

Notes

2019

£'000

2018

£'000

OPERATING ACTIVITIES

 

 

 

Cash generated from operations

 

3,606

2,674

Income taxes paid

 

(297)

(238)

Interest paid

 

(50)

(57)

 

NET CASH FROM OPERATING ACTIVITIES

 

3,259

2,379

 

INVESTING ACTIVITIES

 

 

 

Purchase of property, plant and equipment

 

(629)

(410)

Sales/acquisition of own shares

 

1

(18)

Purchase of software

 

(245)

(235)

Purchase of client relationships

 

-

(36)

Purchases of businesses

 

(994)

77

Payments of deferred/contingent consideration

 

(759)

(337)

 

NET CASH USED IN INVESTING ACTIVITIES

 

(2,626)

(959)

 

FINANCING ACTIVITIES

 

 

 

Repayment of loans

 

(528)

(414)

Net movement in overdraft

 

-

(648)

Share issue

 

53

79

Dividend payment

 

(192)

(168)

 

NET CASH USED IN FINANCING ACTIVITIES

 

(667)

(1,151)

 

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS

 

(34)

269

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 

269

-

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

 

 

235

269

 

 

 

 

 

 

HML HOLDINGS PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

 

 

GENERAL INFORMATION

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRSs.

 

The financial information is presented in pounds sterling, prepared on a historical cost basis, except for the revaluation of contingent considerations and rounded to the nearest thousand. The financial information set out in this announcement does not comprise the Group's statutory accounts for the years ended 31 March 2019 or 31 March  2018.

 

The financial information for the year ended 31 March 2018 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

 

The statutory accounts for the year ended 31 March 2019 have not yet been delivered to the Registrar of Companies, nor have the auditors yet reported on them. This preliminary announcement does not constitute statutory accounts under section 435 of the Companies Act 2006.

 

HML Holdings plc and its subsidiaries specifically focus on residential property management. The Group operates in the UK. The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is 9-11 The Quadrant, Richmond, Surrey, TW9 1BP. The Company is listed on the AIM market of the London Stock Exchange.

 

The preliminary results were authorised for issue by the board of directors on 1 July 2019.

 

 

 

 

 

 

 

 

1.         PROFIT RECONCILIATION

The reconciliation set out below provides additional information to enable the reader to reconcile to the numbers discussed in the Review of Business.

 

 

2019

      £'000

2018

      £'000

 

Revenue

28,110

 

25,968

Direct operating expenses

(24,332)

(22,509)

 

Profit contribution from businesses

 

3,778

 

3,459

Central operating overheads

(1,365)

(1,248)

Profit before interest, tax, amortisation and share based payments

 

2,413

 

2,211

Finance costs

(50)

(57)

Profit before share based payment charges, amortisation and taxation

 

2,363

 

2,154

Amortisation of other intangible assets

(640)

(660)

Share based payment charge

(37)

(30)

 

Profit before taxation

 

1,686

 

1,464

 

Direct operating expenses and central operating overheads include depreciation and staff costs.

 

 

 

 

 

 

 

 

2.

PROFIT FROM OPERATIONS

2019

£'000

2018

£'000

 

Profit from operations is stated after charging:

 

 

 

Depreciation and amounts written off property, plant and equipment:

 

 

 

- charge for the year on owned assets

385

372

 

Amortisation of intangible assets

640

660

 

Operating lease rentals:

 

 

 

- land and buildings

  970

1,056

 

 

Set out below is an analysis of other operating expenses:

 

 

2019

£'000

2018

£'000

 

Employee salaries and staff related expenses

 

19,807

 

17,863

Management costs

377

347

287

268

95

  86

2,046

               1,988 

 

745

 791

Insurance brokerage

 

761

    692

Professional fees

440

    531

IT costs                                                  

730

  756

385

  372

640

  660

37

    30

24

  63

 

Total operating expenses

     26,374

 24,447

 

Amounts payable to the auditor and its related entities in respect of both audit and non-audit services are set out below:

 

 

2019

£'000

2018

£'000

Fees payable for the statutory audit of the Company's annual

accounts

23

19

Fees payable to auditor for other services:

 

 

Statutory audit of the Company's subsidiaries

49

41

 

Total fees payable to the auditor

     72

60

 

 

 

 

 

 

 

3.

INCOME TAX

2019

£'000

2018

£'000

 

UK Corporation tax:

 

 

 

Current tax on profits of the year

326

307

 

Over provision of tax in previous year

(21)

(5)

 

Tax attributable to the company and its subsidiaries

305

302

 

 

 

 

 

Factors affecting tax charge for the year

 

 

 

 

The tax assessed for the period is lower than (2018: higher than) the standard rate of corporation tax in the UK of 19% (2018: 19%). The differences are explained below:

 

 

 

2019

£'000

2018

£'000

 

Profit before tax

1,686

1,464

 

 

 

 

 

Profit before tax multiplied by the standard rate of corporation tax in the UK of 19% (2018: 19%).

320

278

 

Effects of:

 

 

 

 

 

 

Amortisation and non-deductible expenses adjustment

6

29

 

Over provision in previous year

(21)

(5)

 

Tax charge for the year

305

302

         

 

 

Future tax charges may be affected by the fact that no deferred tax asset is recognised in respect of losses.  Deferred tax assets are not recognised until the utilisation of the losses is probable.

 

The Group has losses carried forward in its subsidiary, HML PM Limited which can be recovered against future profits arising from the same trade. The total tax losses carried forward to future years are £1,243,000 (2018: £1,243,000). Consequently, the unprovided deferred tax asset in respect of these losses is £211,000 (2018: £211,00).

 

4.         EARNINGS PER SHARE

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

 

 

2019

£'000

2018

£'000

 

Earnings

 

 

 

Profit after tax for the period

1,381

1,162

 

(used to calculate the basic and diluted earnings per share)

 

 

 

Add back:

 

 

 

Share based payment charge

 37

30

 

Amortisation of intangible assets

 640

660

 

Interest costs

50

57

 

 

 

 

 

Adjusted profit after the tax for the period

2,108

1,909

 

 

The adjusted profit after tax has been used to calculate the basic and diluted adjusted earnings per share.

 

 

 

 

 

Number of shares

2019

'000

2018

'000

 

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

45,630

45,269

 

Effect of dilutive potential ordinary shares:

 

 

 

- share options

494

857

 

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

46,124

46,126

 

 

Earnings per share

 

 

 

Basic

3.0p

2.6p

 

Diluted

3.0p

2.5p

 

Adjusted earnings per share

 

 

 

Basic

4.6p

4.2p

 

Diluted

4.6p

4.1p

 

The diluted earnings per share are the basic earnings per share adjusted for the dilutive effect of the conversion into fully paid shares of the outstanding share options. 

 

 

 

 

 

 

 

 

5.      BUSINESS COMBINATIONS (ACQUISITIONS)

 

On 1 December 2018, HML PM Limited purchased 100% of the share capital of Dauntons Soar Management Limited, a business based in Victoria, London. The acquisition will not only strengthen the Group's position in Central London but also gives the Group critical mass that will assist in growing the Group's ancillary revenues.

 

The estimated fair value of net assets transferred is set out below:

 

 

 

£'000

Consideration

 

918

Stamp duty

 

2

 

 

Total cost of investment

 

 

920

Less:

 

 

Trade and other receivables

 

(158)

Cash at bank

 

(210)

Tangible fixed assets

 

(5)

Trade and other payables

 

99

Client relationships

 

(336)

 

Goodwill

 

310

 

The residual difference between the total consideration paid and the net value of the recognised assets acquired has been capitalised as goodwill. The goodwill recognised on the acquisition is mainly attributable to the skills and knowledge within the business.

 

 

£'000

Satisfied by:

 

Cash on completion

467

Deferred and contingent consideration

451

 

918

 

Net cash flow arising on the acquisition was £259,000 which represents the consideration and stamp duty paid less cash at bank acquired.

 

The contingent consideration of £451,000 is due within two years. The contingent consideration is made up of two components, firstly the payment relating to the excess working capital in the business on acquisition and secondly another payment that is adjustable depending on the retention of clients and the arrival of contracted new clients. The payment for working excess capital will be £249,000. The range of potential payments of contingent consideration could vary from £0 to £202,000, however the more likely outcome would be to pay £202,000.  Contingent consideration has not been discounted as the discounting is immaterial to the Group.

 

The business contributed £196,000 to the Group's revenue and increased the Group's profit by £1,000 from the date of the acquisition to the year-end date.

 

 

 

On 18 February 2019, HML PM Limited purchased 100% of the share capital of Residential Block Management Services Limited, a property management business based in Blackheath, London. The acquisition will strengthen the Group's position in South East London. 

                                                                                                       

The estimated fair value of net assets transferred is set out below:

 

 

 

£'000

Consideration

 

794

 

Less:

Tangible fixed assets

 

 

(4)

Trade and other receivables

Cash at bank

Trade and other payables

Client relationships

 

 

(94)

(2)

         146

(420)

 

 

 

Goodwill

 

420

 

The residual difference between the total consideration paid and the net value of the recognised assets acquired has been capitalised as goodwill. The goodwill recognised on the acquisition is mainly attributable to the skills and knowledge within the business.

 

 

 

£'000

Satisfied by:

 

 

Cash on completion

 

675

Deferred and contingent consideration

 

119

 

 

 

794

 

Net cash flow arising on the acquisition was £673,000 which represents the consideration and transaction costs, less cash at bank.

 

The contingent consideration of £119,000 is due within one year. The contingent consideration is made up of two components, firstly the payment relating to the excess working capital in the business on acquisition and secondly another payment that is adjustable depending on the reduction of clients. The range of potential payments of contingent consideration could vary from £0 to £119,000, however the more likely outcome would be to pay £119,000. Contingent consideration has not been discounted as the discount would be immaterial to the Group.

 

The business contributed £168,000 to the Group's revenue and increased the Group's profit

by £80,000, from the date of the acquisition to the year-end date.

 

On 28 February 2019, HML PM Limited purchased a small portfolio of block management instructions from Grillo LLP Chartered Surveyors, a business in Surrey. An initial payment of £51,000 was made with contingent consideration of £11,000 due within one year.

 

If all business combinations arising in the year had occurred on 1 April 2018, the consolidated revenue and profit for the Group for the year ended 31 March 2019 would have increased to £1,269,000 and £157,000 respectively

 

6.

SHARE CAPITAL

 

 

             Group and Company  

 

 

Authorised:

2019

£'000

2018

£'000

 

163,733,200 ordinary shares of 1.5p each

2,456

2,456

 

 

2,456

2,456

 

 

 

 

 

         Group and Company    

 

 

Allotted, issued and fully paid ordinary shares of 1.5p:

2019

£'000

2018

£'000

 

 

1 April

Issued during the year - 341,500 (2018:730,539) shares

 

682

5

 

671

11

 

31 March

687

682

 

 

 

No. of shares in issue at year end

 

    

    45,830,135

 

     45,488,635

         

 

Shares issued during the year ended 31 March 2019 relate to the exercising of share options by HML staff in August 2018 and February 2019.

 

 

7.

DIVIDENDS

 

The Directors have proposed paying a dividend of 0.47p per share in relation to the current year (2018: 0.42p per share).

 

If approved the final dividend will be paid on 18 October to shareholder on the register at 4 October 2019. The corresponding ex-dividend date is 3 October 2019.

 

 

8.         ADOPTION OF IFRS 9 AND IFRS 15

 

            IFRS 9 "Financial instruments" and IFRS 15 "Revenue from contracts with customers" were both adopted with effect from 1 April 2018 in line with the transitional provisions provided in the new standards. The standards have been adopted using the modified retrospective approach where the prior period amounts have not been restated but any difference between amounts recognised under IFRS 9 and IFRS 15 and those previously recognised under IAS 39, IAS 11 and IAS 18 has been recognized in the opening retained earnings at 1 April 2018.

 

            The adoption of IFRS 15 and IFRS 9 has resulted in no material adjustments to the financial statements.

 


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