Interim Results

Fletcher King PLC 24 January 2006 PRESS RELEASE Not for release before 0700, 24 January 2006 FLETCHER KING PLC INTERIM RESULTS Fletcher King sees strong results for the half year Fletcher King, the London based property fund managers, asset managers and chartered surveyors, announces today its interim results for the 6 months to 31 October 2005. The results show an improvement in performance on the adjusted results for the same 6 month period of 2004. Financial highlights: - Profit before tax up 20% to £213,000 after adjustments for 2004 non-recurring items (2004: £177,000 adjusted) - Turnover for the half year up 19% at £3.104m (2004: £2.587m) - Proposed interim dividend up 26% to 0.63p (2004: 0.5p) which will be paid on 17 February 2006 Operational highlights: - The second fund of the Stratton House Investment Property Syndicate is 60% invested with returns currently ahead of target - The property asset management department remains on track to meet full-year targets despite some restructuring, with the majority of clients seeking to increase their portfolios over the next 12 months Valuation and Rating has shown a significant increase in the number of valuation instructions compared to the same period last year Commenting, David Fletcher, Chairman of Fletcher King said: 'I am pleased to announce a strong first 6 months of trading, with a profit increase of 20% when allowing for the 2004 sale of our interest in Fletcher King Manchester. All departments remain on track to achieve full year targets. I look forward to the next six months and hope to able to announce an increase in the final dividend.' For further information: David Fletcher, Fletcher King 020 7493 8400 Christopher Joll / Tim McCall, MJ2 Business Communications 020 7491 7776 FLETCHER KING PLC CHAIRMAN'S STATEMENT The interim results for the six months to 31 October 2005 show an improvement over the same period last year, adjusted for the profit on disposal of the Group's minority interest in Fletcher King Manchester. Profit before tax was £213,000 (2004: £282,000, adjusted for profit on disposal £177,000) on turnover of £3.1 million (2004: £2.6 million) with earnings per share of 1.57p (2004: 1.99p, adjusted for profit on disposal 1.25p). Your Directors have declared an interim dividend of 0.63p (2004: 0.5p) to be paid on 17 February 2006 to shareholders on the register at the close of business on 3 February 2006. For the year ended 30 April 2005 and previous financial years, the Group has prepared its financial statements under UK Generally Accepted Accounting Principles ('UK GAAP'). Going forward, for the first accounting period beginning after 1 January 2005 the Group is required, along with all European Union listed companies, to prepare its consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS'). The Group's date of transition to IFRS was 1 May 2004 and the first results to be published under IFRS are these interim results. The Group's first annual report under IFRS will be for the year ending 30 April 2006. The comparative information in these interim financial statements has therefore been restated under IFRS, and the information included in these interim financial statements includes the adjustments between the audited UK GAAP figures and the unaudited restated IFRS results for the same periods. The impact of IFRS on the Group's profit before tax for both the six months ended 31 October 2005 and the six months ended 31 October 2004 is to increase profit before tax by £40,000, representing adjustments in respect of holiday accrued but not taken. The impact of IFRS on the Group's balance sheets is an increase in net assets due primarily to a change in the basis of accruing dividends under IFRS and the recording of certain investments at market value under IFRS instead of at historic cost. The transition to IFRS has had no impact on the Group's cash flows. Further details on the transition to IFRS are set out in the notes to these interim financial statements. THE COMMERCIAL PROPERTY MARKET London Occupational demand for offices in London and the South-East continues to be patchy. Although there have been a number of high profile lettings in Mid-Town and the City there is still an oversupply of space in these areas and there is unlikely to be any substantial rental growth in the near future. Docklands and the Western Approaches are quiet but the West End and St James's are active and rents are growing. Outside London Very little has changed in the last year with occupational demand for all types of space generally stronger than in London and the South East. Owner occupiers remain particularly active in the industrial market. Investment You will recall from my past statements that I have disagreed with those in the industry who have been calling the top of the market over the last couple of years. I predicted that yields would continue to compress and indeed they have. For good quality stock I continue to believe that yields will compress a further 25 - 50 basis points over the coming twelve months. Property remains an attractive investment and continues to encourage cash inflows into the sector. While this has a value-increasing impact on the market, it is not sustainable in the long term and I believe the market will begin to stabilise in the latter half of this calendar year. DIVISIONAL TRADING Investment and Fund Management The department has seen an increase in activity compared with the same period last year and buying for in-house clients and brokerage has been extremely active. There is a strong pipeline of work for the remainder of the year and we anticipate continued growth in the second half. Property Asset Management Despite some restructuring taking place during the first half, turnover and profitability remain on target. The majority of the department's clients are seeking to increase their portfolios over the next 12 months. The facilities management arm of the department has completed its first year of operation and has achieved its targets and improved service to clients and tenants alike. Valuation and Rating The department has seen an increase in the number of valuation instructions compared to the same period last year. Rating has been active with most of the 2000 appeals being agreed. The department anticipates a busy period during the second half of the year as 2005 Rating List appeals are targeted for discussion. Rent Reviews The department has increased its turnover compared to the corresponding period last year and this is anticipated to continue during the second half. There is a good pipeline of work and there is success in winning new business. Fletcher King Howard Our construction services division continues to increase its profitability over the corresponding period last year and is anticipating continued progress in the second half. Stratton House Investment Property Syndicate Our second fund is now 60% invested. In an extremely competitive market we are still able to acquire properties that meet the Fund's criteria and returns are currently ahead of target. We hope to invest the remainder of the Fund by the second quarter of next year. OUTLOOK We believe the investment market will remain very strong and that rental growth generally will be subdued. We anticipate that activity during the second half will be at a satisfactory level and prospects for the full year look good. D. J. R. FLETCHER Chairman 24 January 2006 Registered Office: Stratton House Stratton Street London W1J 8LA Fletcher King Plc Consolidated Interim Income Statement (unaudited) for the 6 months ending 31 October 2005 6 months ended 6 months ended Year ended 31 October 31 October 30 April 2005 2004 2005 £000 £000 £000 Revenue 3,104 2,587 6,093 Employee benefits expense (1,960) (1,538) (3,864) Depreciation expense (33) (35) (74) Other operating expenses (952) (884) (1,808) --------------------------------------- Operating profit 159 130 347 Income from investments 22 17 30 Interest income 32 30 66 Interest expense - - (2) Profit on disposal of interest in associated undertaking - 105 105 --------------------------------------- Profit before taxation 213 282 546 Taxation (71) (107) (153) --------------------------------------- Profit for the period after taxation attributable to equity shareholders 142 175 393 --------------------------------------- Basic earnings per share (note 6) 1.57p 1.99p 4.46p Diluted earnings per share (note 6) 1.56p 1.97p 4.41p Equity dividends on ordinary shares: Declared and paid during period Ordinary final dividend for the year ended 30 April 2005: 2.0p per share (2004: 1.0p) 184 88 88 Special final dividend for the year ended 30 April 2005: 1.0p per share (2004: 1.0p) 92 88 88 Interim dividend for the six months ended 31 October 2004 (see below) - - 44 --------------------------------------- 276 176 220 --------------------------------------- Proposed but not yet paid Interim dividend for the six months ended 31 October 2005: 0.63p per share (2004: 0.50p) 58 44 - Ordinary final dividend for 2005 (see above) - - 184 Special final dividend for 2005 (see above) - - 92 --------------------------------------- 58 44 276 --------------------------------------- Fletcher King Plc Consolidated Interim Balance Sheet (unaudited) as at 31 October 2005 31 October 31 October 30 April 2005 2004 2005 £000 £000 £000 Assets Non-current assets Property, plant and equipment 151 203 162 Available for sale investments 861 476 797 --------------------------------------- 1,012 679 959 Current assets Trade and other receivables 1,692 1,414 1,630 Amounts recoverable on contracts 177 180 199 Cash and cash equivalents 1,337 1,236 1,917 --------------------------------------- 3,206 2,830 3,746 --------------------------------------- Total assets 4,218 3,509 4,705 Liabilities Current liabilities Trade and other payables 40 82 158 Current taxation liabilities 214 197 153 Other creditors and provisions 961 503 1,434 --------------------------------------- 1,215 782 1,745 Non-current liabilities Deferred taxation liabilities 95 55 64 --------------------------------------- Total liabilities 1,310 837 1,809 Shareholders' equity Share capital 920 881 881 Share premium 138 76 76 Reserves (note 7) 1,850 1,715 1,939 --------------------------------------- Total shareholders' equity 2,908 2,672 2,896 --------------------------------------- Total equity and liabilities 4,218 3,509 4,705 Fletcher King Plc Consolidated Interim Statement of Changes in Equity (unaudited) for the 6 months ending 31 October 2005 Share Share Capital Premium Reserves £000 £000 £000 Balance at 1 May 2004 as reported 881 76 1,440 Effect of transition to IFRS - - 347 --------------------------------------- Restated balance at 1 May 2004 881 76 1,787 Net profit for the period - - 175 Fair value loss on investments - - (71) --------------------------------------- Total income and expense for the period - - 104 --------------------------------------- Equity dividends paid - - (176) --------------------------------------- Restated balance at 31 October 2004 881 76 1,715 Net profit for the period - - 218 Fair value gain on investments - - 50 --------------------------------------- Total income and expense for the period - - 268 --------------------------------------- Equity dividends paid - - (44) --------------------------------------- Restated balance at 30 April 2005 881 76 1,939 Net profit for the period - - 142 Fair value gain on investments - - 45 --------------------------------------- Total income and expense for the period - - 187 --------------------------------------- Issue of ordinary shares 39 62 - Equity dividends paid - - (276) --------------------------------------- Balance at 31 October 2005 920 138 1,850 --------------------------------------- During the period 390,000 new ordinary shares were issued pursuant to the exercise of share options. Further information on Reserves is given in note 7. Fletcher King Plc Consolidated Interim Cash Flow Statement (unaudited) for the 6 months ending 31 October 2005 6 months ended 6 months ended Year ended 31 October 31 October 30 April 2005 2004 2005 £000 £000 £000 Cash flows from operating activities Profit before taxation 213 282 546 Adjustments for: Depreciation expense 33 35 74 Income from fixed asset investments (22) (17) (30) Interest expense - - 2 Interest income (32) (30) (66) Profit on disposal of interest in associated undertaking - (105) (105) --------------------------------------- Cash flows from operating activities before movement in working capital 192 165 421 (Increase) / decrease in trade and other receivables (62) 29 (176) (Decrease) / increase in trade and other payables (589) (709) 301 Decrease / (increase) in work in progress 22 (13) (32) --------------------------------------- Cash (absorbed by) / generated from operations (437) (528) 514 Interest paid - - (2) Taxation paid - - (114) --------------------------------------- Net cash flows from operating activities (437) (528) 398 --------------------------------------- Cash flows from investing activities Purchases of equipment (22) (62) (74) Proceeds from sale of equipment - - 16 Proceeds from sale of interest in associated undertaking - 132 132 Purchase of investments - - (250) Interest received 32 30 66 Income from fixed asset investments 22 17 30 --------------------------------------- Net cash flows from investing activities 32 117 (80) --------------------------------------- Cash flows from financing activities Capital element of finance lease payments - (13) (17) Proceeds from the issue of equity shares 101 - - Dividends paid to shareholders (276) (176) (220) --------------------------------------- Net cash flows from financing activities (175) (189) (237) --------------------------------------- Net (decrease) / increase in cash and cash equivalents (580) (600) 81 Cash and cash equivalents at start of period 1,917 1,836 1,836 --------------------------------------- Cash and cash equivalents at end of period 1,337 1,236 1,917 --------------------------------------- Fletcher King Plc Explanatory Notes 1. Basis of preparation These consolidated interim financial statements, which comprise the unaudited results for the six months to 31 October 2005 and 31 October 2004, together with the audited results for the twelve months ended 30 April 2005, have been prepared under the historical cost convention as modified by the revaluation of available for sale financial assets. In common with other European listed companies, the Group is required to prepare its consolidated financial statements for the year ending 30 April 2006 in accordance with International Financial Reporting Standards (IFRS) endorsed by the European Union. Consequently, these interim consolidated financial statements have been prepared in accordance with the accounting policies that are anticipated to be used in preparation of the Group's annual financial statements. Changes to accounting policies previously used by the Group, as set out in the Report and Accounts for the year ended 30 April 2005, are summarised below. The IFRS and associated interpretations that will be applicable and adopted for use in the European Union at 30 April 2006 are not known with certainty at the time of preparing this interim financial information. Therefore there is a possibility that the directors may determine that changes are necessary when preparing the full audited annual financial statements for the first time in accordance with IFRS. The Group has restated its previously reported UK GAAP consolidated results and financial position. The effects of the transition to IFRS and the adoption of new or revised accounting policies which materially affect the financial statements are set out below. The restated comparative information has not been audited. 2. Changes to accounting policies Goodwill Under previous UK GAAP, goodwill was recognized as a deduction from equity. In accordance with IFRS, this goodwill remains written off and has not been recognized in the opening IFRS balance sheet. Furthermore, this goodwill will not be transferred to the income statement on any subsequent impairment in value or disposal of the business to which it relates. Amount recoverable on contracts Under UK GAAP, it is acceptable for the valuation of work in progress to include attributable overheads. Under IAS 11, the valuation of work in progress is restricted to direct costs incurred. Deferred taxation Deferred taxation is recognised under UK GAAP on timing differences, whereas under IFRS it is recognised on temporary differences. A temporary difference is the difference between the carrying value of an asset or liability in the balance sheet, and its corresponding tax base. UK GAAP does not permit deferred tax to be recognised where a business is not obliged to pay more tax at a future date, whereas IFRS requires provision for all taxable and deductible differences between book values for tax purposes and accounting book values that are not 'permanent' timing differences. Financial assets Under previous UK GAAP, financial assets were carried at cost. In accordance with IFRS, on initial recognition of a financial asset, it is categorised as either an available-for-sale financial asset, or within loans and receivables. The classification depends on the purpose for which the investment was acquired. The directors determine the classification at initial recognition and re-evaluate this designation at each reporting date. All investments are initially recognised as cost, being the fair value of the consideration given and including associated acquisition costs. On subsequent measurement, available-for-sale investments are measured at either fair value or at cost, where fair value is not readily ascertainable. Changes in fair value are recognised in equity, together with the related deferred tax asset or liability. Loans and receivables are carried at cost. All financial assets are reviewed annually for impairment, and permanent impairment losses are reflected in the income statement. Investment income is recognised in the income statement. Available-for-sale financial assets are included in non-current assets unless management intends to dispose of the investment within twelve months of the balance sheet date. Associated undertakings Both UK GAAP and IFRS require interests in associated undertakings to be equity accounted. There is a difference in presentation in the income statement, in that IFRS requires the Group's share of post-tax profits or losses to be included in the income statement on a single line, whereas under UK GAAP it is allocated across a number of lines. Dividends Under UK GAAP, all dividends relating to an accounting period that are proposed up to the date of the approval of the financial statements by the Board of Directors are accrued in that accounting period. Under IFRS, only dividends approved during the year are accrued. 3. First time adoption of IFRS and reconciliations between IFRS and UK GAAP The Group has applied IFRS 1, First Time Adoption of International Financial Reporting Standards, in preparing these interim consolidated financial statements. The Group's transition date is 1 May 2004 and an opening IFRS balance sheet has been prepared at that date, although it is not included in this interim financial information. Consequently, comparative information has been restated under these new accounting standards. In order to make the transition to IFRS easier, IFRS 1 allows some exemptions from full retrospective application of certain standards. In preparing these interim condensed consolidated financial statements in accordance with IFRS 1, the Group has applied the mandatory exceptions and the following optional exemptions from full retrospective application of IFRS. Business combinations exemption The Group has applied the business combinations exemption in IFRS 1 and has not restated business combinations that took place prior to the transition date. Share-based payment transactions The Group has elected not to apply IFRS 2 to the granting of share options before 7 November 2002. Designation of financial assets and financial liabilities exemption The Group has reclassified its investment in listed securities as an available-for-sale investment, with fair value movements recognised in equity. Property, plant and equipment The Group has decided that property, plant and equipment are to continue to be recorded at historical cost rather than being restated to fair value. 4. Reconciliations between IFRS and UK GAAP The following reconciliations provide a quantification of the effect of the transition to IFRS from UK GAAP on both the income statement and the balance sheet. Explanations of the adjustments are also set out below. Profit for the 6 months ended 31 October 2004 and for the year ended 30 April 2005 6 months ended Year ended 31 October 30 April 2004 2005 Note £000 £000 Profit for the period as reported under UK GAAP 103 85 Adjusted for: Amounts recoverable on contracts A - - Deferred tax B (12) - Dividends C 44 308 Holiday pay D 40 - ------------------- Profit for the period as reported under IFRS 175 393 ------------------- Equity as at 1 May 2004, 31 October 2004 and 30 April 2005 1 May 31 October 30 April 2004 2004 2005 Note £000 £000 £000 Total equity and reserves as reported under UK GAAP 2,397 2,500 2,482 Adjusted for: Amounts recoverable on contracts A (30) (30) (30) Deferred tax B (75) (55) (64) Dividends C 176 44 264 Holiday pay D (50) (10) (50) Available-for-sale investments E 326 223 294 ------------------------------ Total equity and reserves as reported under IFRS 2,744 2,672 2,896 ------------------------------ Explanations A. Amounts recoverable on contracts An adjustment of £30,000 was made on transition to transfer the attributable overheads included in work in progress as at 1 May 2004 to retained earnings. Due to the relatively stable level of work in progress since transition, no additional adjustment to transfer the attributable overheads at the relevant period end to operating expenses in the income statement is required for any subsequent period included in these consolidated interim financial statements. B. Deferred tax The adjustments relate to the deferred tax impact of IFRS adjustments made that affect the financial statements for the relevant period. The deferred tax impact of IFRS adjustments affecting the income statement are recorded in the income statement, while the deferred tax impact of IFRS adjustments affecting retained earnings are recorded in retained earnings. C. Dividends The adjustment reflects the impact of reversing proposed dividends. D. Holiday pay Under IAS 19, all accumulating employee compensated absences that are unused at the balance sheet date must be recognised as a liability. There is no similar requirement under UK GAAP. E. Available-for-sale investments The adjustment reflects the movement in fair value of the Group's available-for-sale investments. Changes in fair value are recognised in equity, together with the related deferred tax liability. 5. Cash flow The Group's consolidated cash flow statements are presented in accordance with IAS 7. The statements present substantially the same information as that required under UK GAAP, with the following principal exceptions: 1. The cash flows reported in accordance with IAS 7 relate to movements in cash and cash equivalents, which include cash and short term liquid investments. Under UK GAAP, cash comprises cash in hand and deposits repayable on demand. 2. Under UK GAAP, cash flows are presented under nine standard headings, whereas IFRS requires the classification of cash flows as resulting from operating, investing and financing activities only. 3. IAS 7 does not require a reconciliation of movements in cash flows to the movement in net debt. There are no material differences between the Group's cash flow statement presented under IFRS and the cash flow statement presented under UK GAAP. 6. Earnings per share Basic earnings per share is calculated by reference to the result attributable to equity shareholders of £142,000 (2004: £175,000) and the weighted average of 9,041,763 shares (2004: 8,807,279) in issue during the period. Diluted earnings per share is calculated by reference to the result attributable to equity shareholders of £142,000 (2004: £175,000) and the adjusted weighted average of 9,126,982 shares (2004: 8,892,302) in issue during the period. The impact of the transition to IFRS on previously reported basic and diluted earnings per share for the 6 months ended 31 October 2004 is an increase of £28,000 in the result attributable to equity shareholders leading to an increase of 0.32p in both basic earnings per share and diluted earnings per share. There is no impact on previously reported basic and diluted earnings per share for the year ended 30 April 2005. 7. Reserves Profit and Fair value Total loss reserve reserves £000 £000 £000 Balance at 1 May 2004 as reported 1,440 - 1,440 Restated balance at 1 May 2004 1,559 228 1,787 Restated balance at 31 October 2004 1,558 157 1,715 Restated balance at 30 April 2005 1,732 207 1,939 Balance at 31 October 2005 1,598 252 1,850 8. Results for 2005 The results for the year ended 30 April 2005 and the balance sheet at that date, which have been included in these interim consolidated financial statements, are not statutory accounts. The Group's statutory financial statements for the year ended 30 April 2005 have been delivered to the Registrar of Companies. The independent auditors' report on those financial statements is unqualified and does not contain a statement under Section 237(2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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