22nd Feb 2008 07:00
Humberts Group PLC22 February 2008 22 February 2008 Humberts Group plc ('Humberts' or the 'Group') Preliminary Results Humberts (AIM: HUM), the national group of full service estate agents, charteredsurveyors and valuers, announces preliminary results for the year ended 30September 2007. CHAIRMAN'S STATEMENT During the year to 30 September 2007 the Group continued its strategy ofconsolidation and established itself as a market leading brand with 80 officesand 714 staff, predominantly based across the Southern half of England. Thisstrategy allowed the business to further diversify away from its reliance on thesales of residential homes, which for the year ended 30 September 2007 accountedfor only 55% of total turnover, against 58% in 2006, with rural, commercial,land, new homes, fine arts and professional services divisions and anarchitectural practice making up the balance. Since the year end, this balanceis now reduced further to 46%. Trading performance during the first half of the year to 31 March 2007, wasahead of expectations and contributed well to underlying earnings of the Group.The second half of the year started more slowly with the subsequent statisticsfor the year pointing to the end of June as being a decisive tipping point inthe market cycle, with activity levels turning downwards. This trend wasfurther compounded by uncertainty surrounding interest rates, concerns over theeffect of the collapse in the US sub-prime mortgage market, the introduction ofHome Information Packs (HIPs) and finally, in September, the advent of theNorthern Rock crisis. With the deteriorating market conditions and the general uncertainty in thesector, the Group subsequently took the decision to put its acquisitionstrategy on hold so that it could start to focus on the integration of theacquisitions already made. This became more of an imperative in a fallingmarket, the impact of which became truly apparent at the end of December and thebeginning of the New Year. On a positive note, in the year to 30 September 2007, Group turnover grew 135%as a result of acquisitions and some organic growth. However, against thebackground of the current performance of the business in today's market, theGroup has reviewed each of the acquired companies' business plans. The Grouphas reduced the amortisation period of goodwill to seven years. As a result ofcurrent market conditions and the requirements of the accounting standards, agoodwill impairment write-down of £18.4 million has been made. Following thesewrite-downs Humberts made a loss after tax of £17 million (2006: profit of£1million). Without goodwill write offs and other exceptional charges (see note 3) the Groupmade an underlying profit before tax of £4.1 million, an increase of 125% overthe same period last year (2006: £1.8 million). On the same basis, underlyingfully diluted EPS increased 41% from 3.4 pence per share to 4.8 pence per share.Including all exceptional charges, the Group has made a basic loss per shareof 31.4 pence (2006: earnings per share of 2.8 pence). The Company has shareholder's funds of £16.7 million, as of 30 September 2007(2006: £17.6 million) representing 31 pence per share (2006: 48 pence pershare). Dividends The Group paid an interim dividend of 0.7p per share in August 2007 and giventhe current uncertainty in the market and the fact that we are streamlining ourcosts as far as possible, the Board believes that it is not prudent orappropriate to pay a final dividend in the current year. Current trading conditions On 21 January 2008 the Group announced that trading in the core residentialagency business had been disappointing, with volumes materially below theBoard's expectations and that the Group expected to make a loss in the firstquarter of its financial year. Whilst December and January are traditionallythe slowest months for our sector, the current uncertainty in our marketcontinues to have a negative effect on the volumes of house sales actually beingexchanged, current indications are that there is little improvement in thesecond quarter. Accordingly, the Group expects to make a loss in the first halfof the 2008 financial year. The Board During the period we announced the resignation of Stephen Russell, who left totake up a post overseas and I would like to once again thank him for hiscontribution to the Group. In January the Group also announced that Tim James,the Group's executive chairman and Max Ziff, the Group's chief executive officerhad stepped down from the Board and left the Group. At the same time I took over the day-to-day running of the Group as executivechairman following my appointment to the Board on 21 December 2007. On 14February 2008 I was delighted to welcome Michael Nower to the Board as interimchief executive. His 20 years' experience as a FTSE 250 finance director, mostrecently with Countrywide plc, one of the UK's largest property services group,will be of great value to the Group in these current challenging times. Current trading Following the changes to the Board, we are in the process of assessing theGroup's strategy and are preparing fresh internal plans through which we aim tosecure the future of the business in the best interests of our shareholders,employees and other stakeholders. On 30 January 2008 we announced that we had received a preliminary approach froma third party regarding a possible offer for the business. Negotiations in thisrespect continue and since then we have received a number of further approachesand entered into preliminary discussions with those parties, who are attractedby the underlying scale and diversity of the business. Following the acquisitions made to date, there were outstanding deferred cashconsiderations at 30 September 2007 of £6 million (which was in addition to the£4 million in respect of new shares), payable over a period of four years. Ofthis, £3 million relates to the deferred cash consideration in respect of the2008 financial year. As at the date of this report, the balance outstanding isapproximately £1.7 million. In addition, the Group needs to rationalise its costbase and fully integrate its acquisitions during a period where adverse tradingconditions will have a proportionately larger effect on the Group's cash flow.Consequently, following our internal review we will be approaching shareholdersin due course to seek further funds, the details of which will be announced whenappropriate. In addition, the Group will be raising funds internally through the sale ofnon-core assets and, potentially, some of its current businesses which do notwholly meet the brand strategy of the Group. Based on the above, the preliminary statement has been drawn up on a goingconcern basis, further details of which are contained in the notes below. Outlook We believe that inherently Humberts is a good operating business with arespected brand and is of a scale that has significant potential. We see theissues referred to above taking up to twelve months and that, once resolved,will leave the Group in a position to move forward with a degree of confidence.I would like to thank all of our staff for their hard work over the past yearand for their continued support during these current challenging times,particularly since my appointment; their efforts are much appreciated. John McLeanExecutive Chairman21 February 2008 For further information, please contact;Humberts Group PLC 020 7431 8888John McLean, Executive Chairman Panmure Gordon (UK) Limited 020 7459 3600Grant Harrison/ Mark Lander Financial DynamicsRichard Sunderland 020 7831 3113 GROUP PROFIT AND LOSS ACCOUNT (UNAUDITED)FOR YEAR ENDED 30 SEPTEMBER 2007 Restated (note 1) Continuing operations Acquisitions Total Total 2007 2007 2007 2006 Notes £'000 £'000 £'000 £'000Turnover 2 19,851 12,019 31,870 13,580Staff costs (11,225) (5,809) (17,034) (7,160)Other operating charges (7,755) (3,734) (11,489) (5,143)Depreciation and other amounts written (5,529) (15,613) (21,142) (321)off tangible and intangible fixedassetsOperating (loss)/ profit (4,658) (13,137) (17,795) 956Profit on sale of fixed asset - - - 144investmentsNet interest receivable and similar 259 32 291 347items *Underlying profit before tax 1,608 2,536 4,144 1,840Exceptional operating costs 3 (945) - (945) (428)Amortisation of goodwill (978) (1,092) (2,070) (109)Impairment of goodwill (4,009) (14,430) (18,439) -Profit on sale of fixed asset - - - 144investmentsNotional interest payable (75) (119) (194) -(Loss)/ profit on ordinary activities (4,399) (13,105) (17,504) 1,447before taxTax on profit on ordinary activities 575 (112) 463 (410)(Loss)/ profit for the financial year (3,824) (13,217) (17,041) 1,037(Loss)/ earnings per share - 4 (31.4)p 2.8pbasic (pence per share) - diluted 4 (31.4)p 2.7p *Underlying profit before tax is shown separately as the directors believe thatthis provides a clearer view as to the ongoing profitability of the business. STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES (UNAUDITED)FOR YEAR ENDED 30 SEPTEMBER 2007 2007 (Restated) 2006 £'000 £'000(Loss)/ profit for the financial year (17,041) 1,037Unrealised surplus on revaluation of properties 50 -Total recognised (losses)/ gains for the year (16,991) 1,037Prior year adjustment- FRS 20 125Total losses recognised since last annual report (16,866) RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS (UNAUDITED)FOR YEAR ENDED 30 SEPTEMBER 2007 (Restated) 2007 2006 £'000 £'000(Loss)/ profit for the financial year (17,041) 1,037Dividends (1,195) (259)Unrealised surplus on revaluation of properties (shown in STRGL) 50 -Proceeds of ordinary shares issued for cash (net of issue 10,956 7,533expenses)Purchase of own shares (130) (200)Nominal value of ordinary shares issued on acquisitions 331 196Premium on ordinary shares issued on acquisitions 4,925 2,260(net of issue expenses)Warrants issued on acquisitions - 60Loan notes issued on acquisitions (60) 60Deferred shares to be issued on acquisitions 791 -Adjustment in respect of employee share schemes 460 179Net change in shareholders' funds (913) 10,866Opening shareholders' funds 17,581 6,715(previously £17,527,000 before prior year adjustment of £54,000)Closing shareholders' funds 16,668 17,581 GROUP BALANCE SHEET (UNAUDITED)AS AT 30 SEPTEMBER 2007 (Restated) 2007 2006 £'000 £'000Fixed assetsIntangible fixed assets 16,717 13,550Tangible fixed assets 3,592 1,227 20,309 14,777Current assetsDebtors 10,025 4,117Cash at bank and in hand 4,841 7,584 14,866 11,701Creditors: amounts falling due within one year (10,742) (4,394)Net current assets 4,124 7,307Total assets less current liabilities 24,433 22,084Creditors: amounts falling due after more than one year (1,697) (301)Provisions for liabilities and charges (6,068) (4,202)Net assets 16,668 17,581Capital and reservesCalled up share capital 3,100 2,953Share premium account 20,028 8,051Other reserves 5,301 595Profit and loss account (11,761) 5,982Total shareholders' funds 16,668 17,581 GROUP CASH FLOW STATEMENT (UNAUDITED)FOR YEAR ENDED 30 SEPTEMBER 2007 2007 2006 £'000 £'000Net cash inflow from operating activities 3,382 1,380Returns on investments and servicing of financeInterest received 509 359Interest paid (19) (12) 490 347Taxation (938) (217)Capital expenditure and financial investmentPurchase of tangible fixed assets (1,859) (355)Sale of tangible fixed assets 52 4 (1,807) (351)Acquisitions and disposalsPurchase of subsidiary undertakings (16,037) (5,570)Net cash acquired with subsidiaries 2,310 168Sale of fixed asset investment - 169 (13,727) (5,233)Dividends paid (1,190) (259)Net cash (outflow) before use of liquid resources and (13,790) (4,333)financingManagement of liquid resources 1,579 26FinancingIssue of share capital 10,956 7,533Purchase of own shares (130) (200)Capital element of finance lease payments (189) (103) 10,637 7,230(Decrease)/ increase in cash in the year (1,574) 2,923 NOTES TO THE PRELIMINARY RESULTSFOR YEAR ENDED 30 SEPTEMBER 2007 1. BASIS OF ACCOUNTING The preliminary results have been prepared under the historical cost convention,as modified by the revaluation of certain investments, in accordance withapplicable Accounting Standards in the United Kingdom and with the Group'saccounting policies as set out in the financial statements for the year ended 30September 2006 other than as described below. The preliminary results wereapproved by the board on 21 February 2008 and are unaudited. The financial information contained in this unaudited preliminary announcementdoes not constitute accounts as defined by Section 240 of the Companies Act1985. The financial information for the year ended 30 September 2006 is derived fromthe statutory accounts for that period which have been delivered to theRegistrar of Companies, amended for the changes in accounting policies mentionedabove. The auditors reported on those accounts; their report was unqualifiedand did not contain a statement under either Section 237 (2) or Section 237 (3)of the Companies Act 1985. The statutory accounts for the 12 months ended 30September 2007 will be finalised based on the information in this preliminaryannouncement and will be delivered to the Registrar of Companies following theannual general meeting. Going concern This preliminary announcement has been prepared on a going concern basis. TheGroup's ability to continue to trade is dependent upon the raising of sufficientfunds to meet its working capital requirements as they fall due and thisindicates a material uncertainty which may cast significant doubt on the Group'sability to continue as a going concern. However the directors have a reasonable expectation that the Group will havesufficient working capital for the foreseeable future and consequently believethat it is appropriate for the preliminary announcement to be prepared on agoing concern basis. The directors are in discussions with providers of financeto secure additional funding for the Group. The preliminary announcement does not contain any adjustments that would ariseif it was not drawn up on a going concern basis. If required these adjustmentswould be made to the balance sheets of the company and the group to increase orreduce the balance sheet values of assets to their recoverable amounts, toprovide for further liabilities that might arise and to reclassify fixed assetsand long term liabilities as current assets and liabilities. If the funding is not agreed prior to the finalisation and signing of the annualreport and financial statements, the companies auditors have indicated thattheir audit report will contain an emphasis of the matter paragraph drawingattention to the material uncertainty around going concern. Changes in accounting policy The Group has adopted FRS 20, 'Share-based payments', in these financialstatements. This represents a change in accounting policy and the comparativefigures have been restated accordingly: • Staff costs have increased by £179,000; • Taxation has decreased by £54,000 resulting in a prior yearadjustment to reserves; • Basic earnings per share has been restated to 2.8 pence (previously3.2 pence); • Diluted earnings per share has been restated to 2.7 pence(previously 3.1 pence). In order to comply with best practice, the number of dilutive shares has alsobeen restated for the prior year (see note 4). Intangible assets and goodwill The period of amortisation for goodwill capitalised during prior years has beenchanged to 7 years due to the uncertain nature of their respective local marketsand has now been systematically amortised over that life. This is in line withFRS 10 'Intangible fixed assets' and represents a change in accounting estimate.This has resulted in an additional amortisation charge of £1,956,000. Impairment reviews were conducted at 30 September 2007 to compare the book valuewith the recoverable amount for all capitalised goodwill. Recoverable amountswere based on value-in-use calculations discounted at the company's cost ofcapital rate of 10%. This resulted in an impairment charge of £18,439,000. 2. SEGMENTAL REPORTING All turnover arose in the UK. Turnover was generated on a divisional basis asfollows: 2007 2006 £'000 % £'000 %Residential sales 17,551 55 7,898 58Professional and commercial services 3,742 12 2,211 16Rural services 2,814 9 1,571 12New homes and land services 2,063 6 - -Lettings services 3,615 11 1,083 8Fine arts 286 1 - -Architectural 588 2 - -Other services 1,211 4 817 6 31,870 100 13,580 100 3. EXCEPTIONAL OPERATING COSTS 2007 2006 £'000 £'000Exceptional operating costs 945 284Taxation 130 85 The Group incurred one off costs of £160,000 (2006: £nil) in relation todevelopment of the new Humberts Group website. The Group incurred integration costs of £221,000 (2006: £184,000) including£96,000 re-branding costs (2006: £82,000) and £125,000 of network installationcosts (2006: £102,000). Costs of £423,000 were incurred in relation to a claim in respect of the EMIshare options There were £141,000 of aborted acquisition costs (2006: £46,000). 4. (LOSS)/ EARNINGS PER SHARE The calculation of basic (loss)/ earnings per ordinary share is based on the(loss)/ profit on ordinary activities after tax and on the weighted averagenumber of ordinary shares in issue during the year. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. The Group has two main classes of dilutive potential ordinary shares:share options granted to employees and other instruments issued in respect ofacquisitions, including warrants and deferred shares. 2007 2006 (Restated) (Restated) (Restated) Weighted Weighted average average number number (Loss)/ of shares (Loss)/ Earnings of shares Earnings earnings earnings £'000 ('000) per share £'000 ('000) per shareBasic (loss)/ earnings per share (17,041) 54,288 (31.4)p 1,037 36,463 2.8pAmortisation of goodwill 2,070 109Impairment of goodwill 18,439 -Exceptional items 945 284Notional interest 194 -Tax effect (1,811) (112)*Underlying earnings attributable 2,796 54,288 5.2p 1,318 36,463 3.6pto ordinary shareholdersEffect of dilutive securitiesShare options - 1,467 - - 549 -Warrants - 310 - - 46 -Deferred shares - 1,797 - - 1,986 - *Underlying diluted earnings per 2,796 57,862 4.8p 1,318 39,044 3.4pshare *Underlying is stated before amortisation and impairment of goodwill,exceptional items and notional interest on discounted deferred consideration. Due to the current year losses there is no dilutive impact of the contingentlyissuable shares. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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