Final Results

RNS Number : 8189Y

Fletcher King PLC

14 September 2020

 

FLETCHER KING PLC

Audited results for the Year Ending 30^th April 2020

Highlights

· Revenue for the year of £2,616,000 (2019: £3,053,000)

· Statutory profit before tax of £76,000 (2019: £282,000)

· Adjusted profit before tax of £243,000 (2019: £282,000) *

· Cash generated from operations of £917,000 (2019: £458,000 absorbed by operations)

· Adjusted basic earnings per share of 2.20p (2019: 2.50p) *

· Final dividend of 0.50p per share proposed. An interim dividend of 1.00p per share was paid and therefore the total ordinary dividend for the year will be 1.50p per share (2019: 1.75p)

· Sale of interest in SHIPS 15 Syndicate realising profit of £99,000

· Significant cash reserves: £3.6m as at 30 April 2020

· Well positioned to withstand current crisis

*Adjusted results are before share based payment expenses and after other comprehensive income (see note 2). All share options were surrendered in the year. However, the Company is required under IFRS 2 to recognise a share based payment charge of £68,000 (2019: £nil). The Company realised a profit of £99,000 on disposal of the SHIPS 15 syndicate investment. However, the Company is required under IFRS 9 to include this as a fair value gain in "other comprehensive income".

Commenting on the results, David Fletcher, chairman of Fletcher King Plc said:

"In a financial year dominated by Brexit and political uncertainties, it is pleasing to report performance that is only slightly reduced from last financial year, and also to propose a final dividend to shareholders.

We have now moved into even more uncertain times and it is impossible to accurately assess our future trading performance in current market conditions. However, our strong balance sheet and significant cash reserves provide good support to help us withstand the current economic crisis".

This announcement contains inside information for the purposes of Article 7 of EU regulations 596/2014.

END

For further information, please call:

David Fletcher/Peter Bailey, Fletcher King      020 7493 8400

James Caithie/Liam Murray, Cairn Financial Advisers LLP 020 7213 0880

CHAIRMAN'S STATEMENT

Results

Revenue for this year was £2,616,000 (2019: £3,053,000). Adjusted profit before tax (see note 2) was £243,000 (2019: £282,000). Statutory profit before tax was £76,000 (2019: £282,000)

The Board considers the adjusted results to be an important measure of performance and to be more representative of performance for the year than the statutory results (which have been prepared in accordance with International Financial Reporting Standards). Adjusted results include the profit on disposal of the SHIPS 15 syndicate interest for £99,000 and exclude a share based payment expense of £68,000 (2019: £nil) that is required to be recognised in the accounts even though all outstanding EMI options were surrendered in the year.

Dividend

The Board is proposing a final dividend of 0.5p per share. The final dividend is subject to shareholder approval at the AGM and will be paid on 30 October 2020 to shareholders on the register at the close of business on 2 October 2020. With the interim dividend of 1.00p per share (2019: 1.00p per share) the dividend for this year will amount to 1.50p per share (2019: 1.75p per share).

The Commercial Property Market

The year to 30 April 2020 was a difficult one in the industry with both Brexit and political uncertainties adversely affecting the market.

Generally tenants in all sectors were deferring decisions and whilst there was reasonable demand for offices and industrials, the retail sector continued its decline. There were plenty of funds available for investment but buyers remained cautious.

After the General Election and the return of a Conservative Government with the largest majority for decades, the market began to move forward and there was enthusiasm from both investors and tenants to make decisions and plan for the future. For a few busy weeks the skies looked blue, and then there was the emergence of Covid-19 and lockdown.

Since then the commercial property market has been in a state of flux. Retail continues to suffer with no end in sight yet to its downward spiral. There is little leasing activity and with an ever-increasing number of retailers facing the prospect of bankruptcy, both rental and capital values are continuing to fall. However, since lock-down, on-line retailing has grown strongly and now represents over 30% of all purchases but this, of course, is further hastening the potential demise of the High street.

Within the commercial property market, conversely the industrial property market is very buoyant, driven in large part by demand from online sales and a lack of good quality property stock. Both rental and capital values are continuing to grow and there is strong demand from institutional investors, property companies and high net worth individuals.

The office lettings and capital markets remain slow. Even before Covid many tenants were assessing their future work practices by implementing more hot desking and reducing their space requirements. We believe that lockdown has accelerated that process by as much as five years.

Office workers need to get back to work in the big city centres for the survival of the infrastructure of shops, restaurants, coffee shops, dry cleaners etc. However there remains a fear factor for commuters using public transport and the safety issue may well not go away until there is a vaccine. We believe the office market will return strongly but the timing is impossible to predict.

Business Overview

With challenging market conditions, it proved to be a difficult trading period with revenue lower than the previous financial year. This was compensated by increased income from SHIPS investments and overall adjusted profit for the Group was only slightly lower than last year.

The Investment team transacted a similar number of deals to last year but the average deal size, and consequential fee, was significantly lower.

The volume of bank valuations was also down and the Valuation Office continues to delay settling rating appeals.

The Property Management team strengthened their portfolio of client instructions with additional Fund Management mandates and this provides valuable recurring revenue for the Company.

The SHIPS investment in Sekforde Street was sold during the year realising a profit for investors in the fund. We continue to hold an investment in the SHIPS property in Botolph Lane where there remain two vacant floors.

All employees have been working from home since 17 March 2020 and the health and wellbeing of employees is of paramount importance. The Company has invested in systems and processes to support remote working and all teams have been functioning well in the new environment.

Outlook

Whilst there is huge uncertainty caused by the Covid-19 virus, it seems increasingly likely that the wider economic impact will be severe and prolonged. The UK government has taken unprecedented measures to support businesses during the initial lockdown phase, but as support measures are wound down and businesses are forced to make tough decisions, the longer-term economic impact will be brought more sharply into focus.

It is very difficult to accurately assess our future trading performance in the current market conditions. It will be extremely challenging to remain profitable and it is very likely that the Company will make a loss in the first half of its financial year.

Since the year end, we have renewed our Professional Indemnity cover and been faced with a severe contraction in the market for such insurance, particularly with regard to our property valuation work. The premium has increased by just over £200,000 for the financial year.

We expect Fund and Property management mandates to continue to provide stable and recurring fee income. We are fortunate that the majority of the portfolios that we manage are focussed on industrial and office sectors with much lower exposure to retail, leisure and hospitality.

Transaction based fees such as investment deals and bank valuations rely on activity in the market and fees have been materially lower than normal since the commencement of lockdown. The investment team has an encouraging pipeline of instructions and potential deals but there is huge uncertainty around the timing or likelihood of completions. It remains to be seen how strongly activity returns to the market but it is likely that transaction based fees for the year will be materially lower than would otherwise be expected.

The Company is in a good position to withstand the current crisis and continues to have a strong balance sheet, with cash reserves of £3.6m as at 30 April 2020. The Company has not drawn on any of the support measures offered by the government in response to Covid-19.

Working closely with our loyal clients and experienced colleagues we have an established and stable partnership to take us through these difficult and challenging times.

DAVID FLETCHER

CHAIRMAN

14 September 2020

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 April 2020

	Note	2020	2019
		£000	£000
Revenue		2,616	3,053
Employee benefits expense		(1,441)	(1,648)
Depreciation expense	5	(278)	(3)
Other operating expenses Share based payment expense		(910) (68)	(1,218) -
		(2,697)	(2,869)
Other operating income		57	91
Investment income		113	-
Finance income		14	7
Finance expense	5	(27)	-
Profit before taxation		76	282
Taxation		(40)	(52)
Profit for the year		36	230
Other comprehensive income
Fair value gain on financial assets through		99	-
Other comprehensive income
Total comprehensive income for the year attributable to equity shareholders		135	230
Earnings per share
Basic Diluted	4 4	0.39p 0.39p	2.50p 2.50p
Adjusted earnings per share
Basic	4	2.20p	2.50p
Diluted	4	2.20p	2.50p

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 April 2020

	2020	2019
	£000	£000
Assets
Non-current assets
Property, plant and equipment	21	9
Right-of-use asset (see note 5)	544	-
Financial assets	630	1,603
Deferred tax assets	-	16
	1,195	1,628
Current assets
Trade and other receivables	680	1,809
Cash and cash equivalents	3,624	2001
	4,303	3,810
Total assets	5,499	5,438
Liabilities
Current liabilities
Trade and other payables	689	1,204
Current taxation liabilities	35	24
Lease liabilities (see note 5)	299	-
	1,023	1,228
Non current liabilities
Lease liabilities (see note 5)	262	-
Total liabilities	1,285	1,228
Shareholders' equity
Share capital	921	921
Share premium	140	140
Investment revaluation reserve	-	-
Retained Earnings	3,153	3,149
Total shareholders' equity	4,214	4,210
Total equity and liabilities	5,499	5,438

 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 30 April 2020

	2020	2019
	£000	£000
Cash flows from operating activities
Profit before taxation from continuing operations	76	282
Adjustments for:
Depreciation expense	278	3
Investment income	(113)	-
Finance income	(14)	(7)
Finance expense	27	-
Share based payment expense	68	-
Cash flows from operating activities before movement in working capital
	322	278
(Increase)/decrease in trade and other receivables	1,077	(892)
Increase/(decrease) in trade and other payables	(468)	226
Cash (absorbed)/generated from operations	931	(388)
Taxation paid	(14)	(70)
Net cash flows from operating activities	917	(458)
Cash flows from investing activities
Purchase of investments	-	(15)
Sale of investments	1,072	-
Purchase of fixed assets	(18)	-
Investment income	113	-
Finance income	14	7
Net cash flows from investing activities	1,181	(8)
Cash flows from financing activities
Lease payments	(314)	-
Dividends paid to shareholders	(161)	(161)
Net cash flows from financing activities	(475)	(161)
Net decrease in cash and cash equivalents	1,623	(627)
Cash and cash equivalents at start of year	2,001	2,628
Cash and cash equivalents at end of year	3,624	2,001

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 April 2020

	Note	Share capital	Share premium	Retained Earnings	TOTAL EQUITY
		£000	£000	£000	£000
Balance at 1 May 2018		921	140	3,080	4,141
Total comprehensive income for the year		-	-	230	230
Equity dividends paid	2	-	-	(161)	(161)
Balance at 30 April 2019		921	140	3,149	4,210
Adjustment on initial application of
IFRS 16 (net of tax)		-	-	(38)	(38)
Adjusted balance as at 1 May 2019		921	140	3,111	4,172
Total comprehensive income for the year		-	-	135	135
Equity dividends paid	2	-	-	(161)	(161)
Share based payment expense		-	-	68	68
Balance at 30 April 2020		921	140	3,153	4,214

 

 NOTES

1. 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 30 April 2020 or 30 April  2019.

The financial information for the year ended 30 April 2019 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 30 April 2020 have not yet been delivered to the Registrar of Companies, nor have the auditors yet reported on them.

2. Alternative performance measures - profit reconciliation

The reconciliation set out below provides additional information to enable the reader to reconcile to the numbers discussed in the Chairman's Statement and Highlights section.

Year ended 30 April	2020	2019
	£000	£000
Profit before taxation	76	282
Add back: Share based payment expense Include: Fair value gain on financial assets through OCI	68 99	- -
Adjusted profit before share based payment expense and taxation	243	282
Taxation	(40)	(52)
Adjusted profit after tax for the year	203	230

The fair value gain on financial assets represents the realised gain in the year on the disposal of the Group's interest in the SHIPS 15 syndicate. The profit is shown in the Consolidated Statement of Comprehensive Income as other comprehensive income. The Company has accounted for the surrender of options in the year as a cancellation, in accordance with IFRS 2, resulting in an acceleration of vesting and a share based payment charge of £68,000 (2019: £nil).  The charge reflects the amount that otherwise would have been recognised for services received over the remainder of the vesting period (all outstanding options were surrendered in the year).

3.  Dividends

Year ended 30 April	2020	2019
	£000	£000
Equity dividends on ordinary shares:
Declared and paid during year
Ordinary final dividend for the year ended 30 April 2019: 0.75p per share (2018:  0.75p)	69	69
Interim dividend for the year ended 30 April 2020: 1.00p per share (2019: 1.00p)	92	92
	161	161
Proposed ordinary final dividend for the year ended 30 April 2020: 0.50p per share	46

4. Earnings per share

Number of shares	2020 No	2019 No
Weighted average number of shares for basic earnings per share Share options	9,209,779 -	9,209,779 -
Weighted average number of shares for diluted earnings per share	9,209,779	9,209,779
Earnings	£'000	£000
Profit after tax for the year	36	230
(used to calculate the basic and diluted earnings per share)
Add back: Share based payment expense	68	-
Include: Fair value gain on financial assets through OCI	99	-
Adjusted profit after tax for the year	203	230
(used to calculate the adjusted basic and diluted earnings per share)
Earnings per share
Basic Diluted	0.39p 0.39p	2.50p 2.50p
Adjusted earnings per share Basic Diluted	2.20p 2.20p	2.50p 2.50p

Share options were granted in March 2019 and October 2016. All share options were surrendered in April 2020. The share options were non-dilutive for the years ending 30 April 2019 and 2020 and as a result were not included within the weighted average number of shares for the diluted earnings per share calculations.

5. Adoption of IFRS 16

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as "operating leases" under the principles of IAS 17 Leases. The liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as at 1 May 2019.

The Group has adopted IFRS 16 using the modified retrospective method (including appropriate practical expedients), with the effect of initially applying this standard at the date of initial application. Accordingly, the comparative information presented for the prior year has not been restated and it is presented, as previously reported, under IAS 17 and related interpretations.

The Group has reviewed the lease terms of its leases in force at the date of transition and has identified one relevant lease, being the lease of the Group's office at Conduit Street, London. The lease terminates on 3 May 2022.

The Group has concluded that the interest rate implicit in the lease cannot be readily determined and therefore the lease has been discounted by the incremental borrowing rate (IBR) of 4.0%, being the rate of interest that the group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain assets of a similar value to the right-of-use asset in a similar economic environment.

Transition to IFRS 16 requires the right-of-use asset to be recognised at the carrying amount as if IFRS 16 had been applied since the lease commencement date, as discounted by the incremental borrowing rate at the date of initial application. This has led to a decrease in retained earnings as at 1 May 2019, net of tax, of £38,000.

The table below reconciles the measurement of lease liabilities upon transition with reference to operating lease commitments at 30 April 2019.

	£000
Operating lease commitments at 30 April 2019 per IAS 17 Discounted using incremental borrowing rate at 1 May 2019	895 (47)
Lease liability recognised at 1 May 2019 per IFRS 16	848

The balance sheet shows the following amounts relating to lease liabilities:

	£000
As at 1 May 2019 Change in accounting policy (adoption of IFRS 16)	- 848
As at 1 May 2019 (restated)	848
Repayment of lease liabilities	(314)
Unwinding of discount	27
Closing amount as at 30 April 2020	561
Current lease liabilities	299
Non-current lease liabilities	262
	561

Under IFRS 16, the Company has recognised a combined depreciation charge and interest expense in the year of £299,000. Under IAS 17, the charge in respect of lease costs would have been £302,000. There has been no impact on cash flows.

 

END

 

 

FR UOUWRRAUKARR