23rd Jan 2007 07:01
Humberts Group PLC23 January 2007 Under embargo until 0700, 23 January 2007 Humberts Group PLC ("Humberts" or "the Group") Full year results show growth across all divisions Announcement of additional acquisitions Humberts (AIM: HUM), the highly acquisitive national group of full service estate agents and valuers, announces preliminary results for the year ended 30 September 2006. The Group also announces today that, following the announcement of 6 August 2006,it has bought Harvey's, the Truro based residential and rural agency and the remaining 70 per cent. interest in the Humberts franchise in Chichester. In addition, it has reached an agreement and is close to completing the documentation for the acquisition of Humberts East Midlands Ltd, a group of six franchise offices: Grantham, Lincoln, Melton Mowbray, Newark, Nottingham and Stamford. The acquisition of these businesses will add revenue to all three of our key Group disciplines - residential, rural and commercial. Financial Highlights:• Turnover increased 447% to £13.58 million (2005:£2.48 million)• Profit before taxation grew 319% to £1.63 million (2005:£0.39 million)• Underlying* profit before tax £2.02 million (2005: £0.48 million)• Fully diluted earnings per share of 3.14 pence (2005:1.27 pence per share)• Underlying fully diluted earnings per share of 3.92 pence (2005:1.79 pence per share)• Proposed dividend increase of 27% to 1.4 pence per share (2005:1.1 pence per share), demonstrating the Board's confidence in the business. Operational Highlights:• Max Ziff and Nigel Cartwright joined the Board as chief executive officer and chief financial officer respectively• Humberts has grown from a single office in London to a leading UK group of property agents with over 60 offices nationwide• Humberts is now one of the market's leading consolidators• All country offices trade under the Humberts brand• November 2005 - £8 million (gross) raised by a placing of ordinary shares at 60 pence per share• Full office refurbishment programme has commenced, with 16 offices upgraded to date• Continued focus on building and diversifying balance of activities. Post Period Events• Group name changed to Humberts Group PLC from Farley Group PLC• November 2006 - £11.4 million (gross) raised by a placing of ordinary shares at 80 pence per share• Further acquisitions bring total number of offices to 63 nationwide. *Underlying figures adjusted for exceptional items and amortisation of goodwill. Max Ziff, chief executive, commented, "The past year has been one of significantchange for Humberts. We have grown from a single office in South Kensington to a nationwide group of over 60 offices and are now considered as a prime consolidator in our market. From a financial standpoint, we have delivered a strong set of results and look forward to delivering organic growth as we complete the integration of the new businesses. At the same time, we have a strong balance sheet which we will leverage to continue our policy of growth through earnings enhancing acquisitions. I look to the future with confidence." Humberts Group plc: Tavistock Communications:Max Ziff, chief executive officer Richard SunderlandNigel Cartwright, chief financial officer Rachel Drysdale020 7318 1273 020 7920 3150On 23 January: 020 7920 3150 [email protected] Chairman's statementThe past year has been one of significant change for the Group. Humberts has been highly active in pursuing its strategy for growth by acquisition, positioning itself firmly as a leading industry consolidator within its marketsand also achieving solid organic growth from the existing business. During the period, the Group welcomed Max Ziff and Nigel Cartwright to the Board as chief executive officer and chief financial officer respectively. Under their guidance, Humberts has grown from being a single office operation in London to a leading UK group of property agents with over 60 offices nationwide. With the exception of the single Farleys office in South Kensington,all offices will trade under the Humberts name, fully leveraging its 150 year heritage and establishing and developing it as a national brand. In line with this strategy, the Group's name was changed to Humberts Group plc from Farley Group plc, following approval at an EGM on 11 December 2006. Financial resultsI am delighted to be able to report a strong set of results for the year to 30 September 2006, during which Humberts performed ahead of market expectations. The Group's profit before taxation grew 319% to £1.63 million (2005:£0.39 million)on a turnover which increased 447% to £13.58 million (2005: £2.48 million). Basic earnings per share were 3.19 pence (2005: 1.30 pence). Whilst it is difficult to make a comparison with last year's figures due to the number of acquisitions in the period, we are extremely pleased with the financial performance of the Group. Before central operating costs of £0.98 million (2005: £0.08 million), continuing operations show an operating profit of £0.51 million (2005: £0.35 million). Acquisitions have contributed £1.60 million to the Group's operating profit. Moreover, on an Underlying basis (before exceptional items and amortisation of goodwill), the Group's results are more encouraging, showing a profit before tax of £2.02 million, and Underlying fully diluted earnings per share of 3.92 pence. Within the Group's turnover, residential sales accounted for 58%, lettings 8%, rural 12%, commercial 16% and other activities 6%. DividendThe Board is proposing to increase the dividend 27% to 1.4 pence per share (2005: 1.1 pence) underlining management's continued confidence in the prospectsfor the business. Subject to shareholders' approval this will be paid on 9 March 2007 to shareholders on the register at 9 February 2007. FundraisingsIn November 2005, the Group raised £8 million (gross) through a Placing of 13,333,334 Ordinary Shares at 60 pence per share. This was in part to finance the acquisition of Humberts and to provide capital for expansion. On 15 November 2006 following the end of the financial year, the Group announced proposals to raise a further £11.4 million (gross) by way of a Placing of 14,213,310 new Ordinary Shares at 80 pence per share. Shareholders subsequently approved this Placing and the new Ordinary Shares were issued and commenced trading on 12 December 2006. This fundraising was critical to the future growth of the Group, introducing some high quality institutional shareholders and giving it acash balance of £14.8 million to continue its growth strategy in 2007. AcquisitionsWithin our industry there are a number of acquisition opportunities and the Group is firmly positioned as a key industry consolidator. Our intention is to establish Humberts as a brand specialising in the mid to upper end of the market on a national, regional and local level and providing a high quality of service across all sectors. When considering an acquisition, the ideal target is a profitable business, which will enhance Group earnings in the first year and with a strong existing management team who will 'buy in' to the Group's strategy. Targeted acquisitionswill also operate in specific catchment areas that will complement the Group's existing network of offices. The consideration for these acquisitions usually comprises a mixture of cash and shares and includes a deferred earn-out element. Acquired businesses are being re-branded as "Humberts" and integrated into the business in a way which will preserve their local approach to business generation.These offices then benefit from a number of the Group's centralised functions, including its sophisticated technology platform, marketing and media purchasing,procurement, accounts and administration and the roll-out of its refurbishment programme. At the same time the Group benefits from an increase in the revenue stream, enhanced earnings and a direct entry into new geographical markets whichprovides a platform for future growth.Since the last Annual Report & Accounts, the Group has completed 15 acquisitions for a total consideration of around £20.5 million, details of these including subsequent post-period acquisitions are outlined below: November 2005 the Humberts Partnership trading out of 39 offices across the south of England of which 17 were owned and 22 were franchisedDecember 2005 the lettings business of London and Overseas Properties operating in the Royal Borough of Kensington and ChelseaApril 2006 the business of Burrough & Co with two offices in Hungerford and NewburyJune 2006 Iwood Management Limited and Westchurch Lettings Limited, all of which traded as CJ Hole Country out of 12 offices in north SomersetAugust 2006 the Humberts franchise in PetersfieldSeptember 2006 Wright Todd Property Services Limited, previously a Humberts franchise in Wadhurst and TenterdenSeptember 2006 the business and certain assets of Geoffrey Fitch and Co, an independent land and estate agent in CirencesterOctober 2006 Blenheim Bishop Limited in Mayfair, a London residential, land and new homes development businessOctober 2006 BTF Lister, a Kent based rural and commercial practise with a residential lettings business in Canterbury and BenendenOctober 2006 the Humberts franchise in Worcester and MalvernOctober 2006 Calcutt Maclean Standen West Kent, a residential estate agency business operating in Cranbrook and RyeNovember 2006 Calcutt Maclean Standen East Kent, a residential estate agency business operating in Canterbury and WyeNovember 2006 Calcutt Maclean Standen Fine Art Limited, a fine art auction house operating in Kent and the surrounding areasNovember 2006 CMS Lettings Limited, a residential lettings business incorporating Mulberry Cottages Limited, specialising in holiday cottage lettingsJanuary 2007 Harveys Chartered Surveyors and Estate Agents, a residential and rural business operating from Truro in Cornwall. Humberts has further delivered on this strategy by today announcing theacquisition of the remaining interest of the Humberts franchise in Chichester.In addition, it has reached an agreement and is close to completing thedocumentation for the acquisition of the Humberts East Midlands Ltd, a group ofsix franchise offices: Grantham, Lincoln, Melton Mowbray, Newark, Nottingham &Stamford. The acquisition of these businesses will add revenues to all three ofour key Group disciplines - residential, rural and commercial. Operating review and prospectsIn addition to the acquisition strategy detailed above, the Group also believesthat there is significant scope for organic growth within the business. Thisgrowth will be derived in the main from substantial new investment in the brand,new systems and procedures that are being put in place and the synergies thatarise from merging the acquired businesses into our existing platform. Whilst inthe short term there are inevitably increased costs associated with establishinga scaleable business model, these will result in improved revenue opportunitiesand cost savings going forward. The Group has also commenced an office refurbishment programme and to date 16offices have been upgraded, with the remainder expected to be refurbished during2007. Within the Group's core market of quality residential properties in the £300,000- £2 million price bracket, Humberts is gaining market share and we expect thisto continue throughout 2007 as we strengthen the brand and expand nationalcoverage. The Group is focussed on diversifying the balance of activities in which itoperates, reducing dependence on the sale of second hand properties and growingits land and new homes, residential lettings, property management, financialservices, rural and commercial divisions. Key performance indicators 2006 2005========================================================================Revenue (£'000) 13,580 2,484*Underlying operating profit (£'000) 1,672 359**Operating cash flow (£'000) 1,380 541------------------------------------------------------------------------Staff numbers 204 29======================================================================== *Underlying operating profit comprises operating profit on a statutory basis,before exceptional operating costs and goodwill amortisation. **Operating cash flow is the net cash inflow from the Group's operatingactivities. Our primary key performance indicators ("KPIs") are revenue, Underlyingoperating profit and operating cash flow. These reflect the amount of work wehave undertaken, its profitability and how successful we have been in convertingprofits into cash. Staff numbers show the growth of the business in terms of ourprincipal resource. The Group is developing a number of other performance measures to monitor andmanage the business. Some of these will be particularly important in monitoringthe Group's progress and will therefore be regarded as KPIs. Given the growth inthe business in the year and management's development of its internal reportingframework, the Group does not yet have a sufficient history of these KPIs toinclude them within this year's annual report. In particular, there are limitedhistoric comparatives that can be provided. These KPIs will be disclosed infuture reporting periods. Principal risks and uncertaintiesThe management of the business and the execution of the Company's strategy aresubject to a number of risks. Risks are reviewed by the Board and appropriate processes put in place tomonitor and mitigate them. If more than one event occurs, it is possible thatthe overall effect of such events would compound the possible adverse effects onthe Group. The key business risks affecting the Group are set out below: • EmployeesHumberts' performance depends largely on its regional managers and local staff.The resignation of key individuals and the inability to recruit people with theright experience and skills from the local community could adversely impact theGroup's results. To mitigate these issues the Group has introduced a trainingprogramme for all employees and have implemented a number of incentive schemeslinked to the Group's results that are designed to retain key individuals. • PipelineThe Group is reliant on a steady availability of residential properties. Atpresent, residential property sales represent 58% of the Group's overallbusiness. However, as previously mentioned the Group is focused on diversifyingthe balance of activities in which it operates, reducing the dependence on thesale of second hand properties and growing its land and new homes, residentiallettings, property management, financial services, rural and commercialdivisions. • Service levelsIt is critical that our service levels are maintained to the highest standard.Any significant dip in the perceived level of service and professionalism thatwe routinely offer would adversely affect our ability to compete in the market.To mitigate this risk, we regularly monitor the performance of our salesnegotiators and offer a focused training program. In addition, we subscribe to anumber of industry regulatory bodies, including the National Association ofEstate Agents (NAEA), the Royal Institution of Chartered Surveyors (RICS), theAssociation of Residential Letting Agents (ARLA) and the Ombudsman for EstateAgents. Employee share option trust ("ESOT")In April 2006 the Group set up an ESOT to hedge various employee share optionsand deferred share grant awards. During the course of the year the ESOTpurchased 300,000 shares at an average price of 67 pence per share. Financial policies and risk managementThe Group maintains a centralised treasury operation which is managed inaccordance with policies and procedures approved by the Board. The Group currently has no borrowings or borrowing facilities and post therecent fundraising we go into 2007 with cash balances of £14.8 million (afterthe post year end placing and acquisitions), which is sufficient for all theGroup's foreseeable financing requirements in the current financial year. Board and employeesAs already mentioned, during the course of the year Max Ziff joined the Board aschief executive officer and Nigel Cartwright joined the Board as chief financialofficer. Max and Nigel have been responsible for driving and managing the growthof the Group over the last year and we are all grateful for their ongoingefforts and the results which have been achieved. I am also most grateful toPatricia Farley for her support and guidance which was demonstrated by yetanother strong performance from our flagship Farleys office in Old BromptonRoad, South Kensington, London. The continued development and growth of the Group is, however, testament to theongoing commitment and dedication of our experienced staff throughout thecountry. It is their passion and professionalism that is at the heart of what weare doing at Humberts and I would like to take this opportunity to thank themfor their continued hard work. Progress in the current financial year has been strong both in terms ofacquisitions and the performance of the Underlying businesses and I look forwardto the future with confidence. Timothy JamesChairman22 January 2007 Group profit and loss account (unaudited) for year ended 30 September 2006 Total Note Continuing (restated) operations Acquisitions Total 2005 2006 2006 2006 Audited £'000 £'000 £'000 £'000=================================================================================Turnover 2 3,010 10,570 13,580 2,484Staff costs (1,876) (5,105) (6,981) (1,259)Administrative and establishment expenses (1,006) (3,709) (4,715) (827)Exceptional operating costs 3 (344) (84) (428) -Depreciation of tangible fixed assets (157) (55) (212) (39)Amortisation of goodwill (96) (13) (109) (96)----------------------------------------------------------------------------------Total operating costs (3,479) (8,966) (12,445) (2,221)----------------------------------------------------------------------------------Operating (loss)/ profit (469) 1,604 1,135 263Profit on sale of fixed asset investment 4 144 - 144 -Net interest receivable and similar items 326 21 347 125----------------------------------------------------------------------------------Profit on ordinary activitiesbefore tax 1 1,625 1,626 388Tax on profit on ordinary activities (46) (418) (464) (147)----------------------------------------------------------------------------------Profit for the financial year (45) 1,207 1,162 241==================================================================================Earnings per share -basic 5 3.19p 1.30p--------------------------------------------------------------------------------- -diluted 5 3.14p 1.27p================================================================================== Reconciliation of movements in Group shareholders' funds for the year ended 30September 2006 2005 2006 (restated) Unaudited Audited £'000 £'000================================================================================Profit for the financial year 1,162 241Dividends (259) (175)Proceeds of ordinary shares issued for cash(net of issue expenses) 7,533 1,959Purchase of own shares (200) -Nominal value of ordinary shares issued on acquisitions 196 -Premium on ordinary shares issued on acquisitions (net of issue expenses) 2,260 -Warrants issued on acquisitions 60 -Loan notes issued on acquisitions 60 --------------------------------------------------------------------------------Net change in shareholders' funds 10,812 2,025Shareholders' funds as at 1 October 2005 (previously £6,456,000 before prior year adjustment of £259,000). 6,715 4,690-------------------------------------------------------------------------------Shareholders' funds at 30 September 2006 17,527 6,715=============================================================================== Group balance sheet (unaudited) as at 30 September 2006 2005 (restated) 2006 Audited £'000 £'000===============================================================================Fixed assetsIntangible fixed assets 13,550 1,756Tangible fixed assets 1,227 504Investments - 25------------------------------------------------------------------------------- 14,777 2,285-------------------------------------------------------------------------------Current assetsDebtors 4,063 317Cash at bank and in hand 7,584 4,687------------------------------------------------------------------------------- 11,647 5,004Creditors: amounts falling due within one year (4,394) (508)--------------------------------------------------------------------------------Net current assets 7,253 4,496-------------------------------------------------------------------------------Total assets less current liabilities 22,030 6,781Creditors: amounts falling due after more than one year (301) (24)Provisions for liabilities and charges (4,202) (42)--------------------------------------------------------------------------------Net assets 17,527 6,715===============================================================================Capital and reservesCalled up share capital 2,953 2,116Share premium account 8,051 4,324Other reserves 595 50Profit and loss account 5,928 225-------------------------------------------------------------------------------Total shareholders' funds 17,527 6,715=============================================================================== Group cash flow statement (unaudited) for the year ended 30 September 2006 Note 2005 Audited 2006 (restated) £'000 £'000===============================================================================Net cash inflow from operating activities 1,380 541-------------------------------------------------------------------------------Returns on investments and servicing of financeInterest received 359 127Interest paid (12) (2)-------------------------------------------------------------------------------- 347 125------------------------------------------------------------------------------- Taxation (217) (80) Capital expenditure and financial investmentPurchase of tangible fixed assets (355) (12)Sale of tangible fixed assets 4 5------------------------------------------------------------------------------- (351) (7)--------------------------------------------------------------------------------Acquisitions and disposalsPurchase of subsidiary undertakings (5,570) -Net cash acquired with subsidiaries 168 -Sale of fixed asset investment 4 169 -------------------------------------------------------------------------------- (5,233) --------------------------------------------------------------------------------Dividends paid (259) (175)--------------------------------------------------------------------------------Net cash (outflow) /inflow before use of liquid resources and financing (4,333) 404=============================================================================== Management of liquid resources 26 - FinancingIssue of share capital 7,533 1,959Purchase of own shares (200) -Capital element of finance lease payments (103) (4)-------------------------------------------------------------------------------- 7,230 1,955------------------------------------------------------------------------------- -------------------------------------------------------------------------------Increase in cash in the year 2,923 2,359=============================================================================== Notes to the preliminary financial statements for the year ended 30 September 2006 1. Accounting policies a) Basis of accounting The preliminary results have been prepared under the historical cost convention,as modified by the revaluation of certain investments, in accordance with applicable Accounting Standards in the United Kingdom and with the Group's accounting policies as set out in the financial statements for the year ended 30 September 2005 other than as described below. The preliminary results were approved by the board on 22 January 2007 and are unaudited. The financial information contained in this unaudited preliminary announcementdoes not constitute accounts as defined by Section 240 of the Companies Act 1985. The financial information for the year ended 30 September 2005 is derived from the statutory accounts for that period which have been delivered to the Registrar of Companies, amended for the changes in accounting policies mentioned above. The auditors reported on those accounts; their report was unqualified and 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 30 September 2006 will be finalised based on the information in this preliminary announcement and will be delivered to the Registrar of Companies following the annual general meeting to be called for 28 February 2007. b) Changes in accounting policy and presentation The Group has adopted FRS 21, 'Events after the balance sheet date' and FRS 25,'Financial instruments: Disclosure and presentation', in this preliminary announcement. The adoption of each of these standards represents a change inaccounting policy and the comparative figures have been restated accordinglyexcept where the exemption to restate comparatives has been taken. Certain items have also been represented in the financial statements in order tocomply with best practice. None of these reclassifications have impacted profitsfor the year or retained reserves. • Investment properties are now shown as tangible fixed assets instead of fixed asset investments; • Provisions for letting refunds are now included within provisions, having been reclassified from accruals; • On joint agency contracts, fees paid out to a third party agent are not now recognised within turnover and cost of sales. This has reduced turnover and costs by £345,000 (2005: £129,000); • Client account bank interest is now shown within turnover instead of interest receivable; and • The calculation of the number of dilutive shares has been recalculated for the prior year and as a result the 2005 diluted earnings per share has been restated to 1.27 pence (previously 1.25 pence). 2. Segmental reporting All turnover arose in the United Kingdom. Turnover was generated on a divisionalbasis as follows: 2006 2005 Unaudited Audited £'000 % £'000 %=============================================================================Residential sales 7,898 58 1,294 52Professional & commercial services 2,211 16 - -Rural services 1,571 12 - -Lettings services 1,083 8 758 31Other services 817 6 432 17----------------------------------------------------------------------------- 13,580 100 2,484 100============================================================================= 3. Exceptional items During the year, old furniture and IT equipment was disposed for nil proceeds.The write off required was £95,000. In addition, there was a £28,000 chargerelating to the accelerated depreciation of old furniture. New network links were set up at each office as part of the new ITinfrastructure. Connection fees of £102,000 were incurred during the year. There was an £82,000 cost associated with the rebranding of the Group. Settlement of an ongoing dispute relating to the rental of office equipmentresulted in a one off fee of £75,000. The Group incurred aborted acquisition costs of £46,000. 4. Profit on sale of fixed asset investment On 11 January 2006, the Group sold its investment in Fastcrop plc for £169,000in cash resulting in a gain of £144,000. Tax of £43,000 arose on the disposal. 5. Earnings per share The calculation of basic earnings per ordinary share is based on the profit onordinary activities after tax and on the weighted average number of ordinaryshares in issue during the year. (Included in the calculation is the deferrednon-contingent issue of 644,000 shares relating to the purchase of the C J HoleGroup). For dilutive 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, convertible loan notes, and contingentlyissuable deferred shares. 6. Copies of the report and accounts will be available from Humberts'registered office at 17 Hanover Square, London, W1S 1HU United Kingdom on 5 February 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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