REG - Fletcher King PLC - Final Results
14/09/2020 07:00
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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 (910) (1,218)
Share based payment expense (68) -
(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 4 0.39p 2.50p
Diluted 4 0.39p 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 Share Retained TOTAL
capital premium Earnings 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 68 -
Include: Fair value gain on financial assets through OCI 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 69 69
(2018: 0.75p)
Interim dividend for the year ended 30 April 2020: 1.00p per share (2019: 92 92
1.00p)
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 2019
No No
Weighted average number of shares for basic earnings per share 9,209,779 9,209,779
Share options - -
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 0.39p 2.50p
Diluted 0.39p 2.50p
Adjusted earnings per share
Basic 2.20p 2.50p
Diluted 2.20p 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 17 895
Discounted using incremental borrowing rate at 1 May 2019 (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.
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