Half-year Report

Fletcher King

18/12/2020 07:00

RNS Number : 0830J

Fletcher King PLC

18 December 2020

 

FLETCHER KING PLC

 

Interim Results for the 6 months ended 31 October 2020

 

 

Financial Highlights

 

                  Turnover:                    £869,000                          (2019: £1,331,000)

                 

                  Earnings before tax:  £447,000 loss                   (2019: £108,000 profit)

 

                  Basic EPS:                  (4.47p) per share             (2019: 0.90p per share)

 

                  Dividend proposed:    nil                                    (2019: 1.00p per share)

 

 

Operational Highlights

·    As announced on 2 November 2020, performance was significantly lower than the comparative period last year, reflecting the economic impact of the Covid-19 pandemic on the markets in which the Company operates.

·    Steady and predictable revenue from asset management and fund management clients provided support for the business. However, transaction-based fees from investment deals, bank valuations and rating appeals were materially lower than would otherwise be expected.

·    The Company remains in a good position to withstand the current economic crisis and is well supported by a strong balance sheet. Our high quality team continues to enjoy excellent relationships with our clients and this provides a sound platform for any return to more normal market conditions.

Commenting on the results David Fletcher, Chairman of Fletcher King said:

"The Covid-19 pandemic has had a significant adverse impact on the markets in which we operate and this is reflected in our financial performance for the period. The recent approval of a vaccine offers hope of a route back towards normality although our performance will be highly dependent on the pace and extent to which markets recover. Our strong balance sheet provides good support in these turbulent times".

 

 

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

 

ENQUIRIES:

 

Fletcher King Plc

David Fletcher

Tel: 020 7493 8400

 

Cairn Financial Advisers LLP (Nomad)

James Caithie / Liam Murray

Tel: 020 7213 0880

 

The interim results are available on the Company's website: www.fletcherking.co.uk

 

CHAIRMAN'S STATEMENT

 

Results

 

Turnover for the period was £869,000 (2019: £1,331,000) with a loss before tax of £447,000 (2019: profit of £108,000).

 

Dividend

 

In view of financial performance for the first half, and the continued uncertainty from the impact of Covid-19 over the coming months, the Board is not declaring an interim dividend (2019: 1.0p per share). We remain focused on long term shareholder returns and will look to restart distributions as soon as it is prudently appropriate to do so.

 

The Commercial Property Market

 

Little has changed in the commercial property market since my Chairman's Statement in the accounts for the year to 30 April 20 (announced on 14 September 2020).

 

The commercial property market continues to be dominated by the uncertainties created by Covid-19 and to a lesser extent the Brexit negotiations.

 

These uncertainties have created an environment where many organisations have deferred decisions on either renting space or purchasing investment property. The volume of transactions across the board is substantially down on previous years.

 

The good news is the programme of vaccinating the population has commenced and will be rolled out over the coming months. We hope this will be the game changer we have all been waiting for and will start the journey back to the new normality.

 

Against the above scenario, the segment of the commercial property market which has continued its upward spiral is Industrial, which has been fuelled by the growth in on-line sales. However, this very growth has further accelerated the decline in traditional High Street retailing and it is unlikely to ever return to its former level. Offices have also suffered during this period and it has accelerated the change in how offices are occupied by probably at least five years. However offices have a very important part to play in most organisations and we expect this sector to recover.

 

Business Overview

 

As highlighted in the announcements of 20 August and 14 September 2020, and confirmed in the Trading Update of 2 November 2020, the huge uncertainty and commercial property market dislocation caused by the Covid-19 pandemic has had a material adverse impact on transaction-based fees such as investment deals, bank valuations and agreement of rating appeals. This is reflected in the financial performance for the first half of the financial year with revenue down on the same period last year.

 

Whilst revenue has been materially reduced in the period, it has been supported by our property management and fund management clients who are, in the main, focused on the office and industrial sectors with relatively low exposure to the hard-hit retail, leisure and hospitality sectors. The property management team has been successful during the period in collecting 80% of rents within 7 days of the due date, a good result in difficult circumstances.

 

Investment business suffered significantly during the period, with Covid-19 related restrictions on viewings, and buyers and sellers adopting a wait-and-see approach.

 

The volume of valuation instructions from banks was also significantly reduced and reflected the quiet investment markets. There was slower than normal progression of Ratings appeals at the Valuation Office with a consequential reduction in fee income.

 

Whilst it is disappointing to report a loss for the period, our primary concern during the pandemic has been the well-being of our staff and all employees have been able to work from home from the outset, continuing to deliver the high quality service that our clients expect. With a significant part of our business focussed on Property and Asset Management, we have also been particularly concerned with the wellbeing of occupiers of the portfolios under our management, helping landlords and tenants to overcome specific issues and enabling a return to work.

 

The Company has reduced discretionary expenditure where possible. However, the Company has been impacted by a severe contraction in the Professional Indemnity insurance market, particularly with regard to property valuation work. As previously announced, the renewal premium has more than doubled, increasing by just over £200,000 for the financial year.

 

 

Outlook

 

The economic environment remains highly uncertain and it is unclear how significantly the longer term economic impact of Covid-19 will weigh on corporate and investor sentiment. The recent positive news on vaccine development offers hope that the commercial property market may start to improve in 2021, but the pace and extent at which this materialises is very difficult to predict. It is likely that the remainder of the financial year will continue to be affected by the Covid-19 pandemic with transaction-based fees materially lower than would otherwise be expected. We therefore expect to report a loss for the full financial year.

 

When the economic environment improves, the Company has an encouraging pipeline of potential investment business to transact. The sheer number of rating appeals outstanding also gives hope that at least a few of them will provide material returns, although timing of agreement with the Valuation Office is very difficult to predict.

 

We expect Fund and Property Management mandates to continue to provide stable and recurring fee income. Valuation work is also likely to pick up in the second half with annual assets valuations for clients traditionally falling in this period.

 

The Company remains in a good position to withstand the current economic crisis and is well supported by a strong balance sheet.

 

 

DAVID FLETCHER

CHAIRMAN

18 December 2020

 

Fletcher King Plc

 

Consolidated Interim Statement of Comprehensive Income

 for the 6 months ended 31 October 2020

 

6 months ended
6 months ended
Year ended
31 October
31 October
30 April
2020
(Unaudited)
2019
(Unaudited)
2020 (Audited)
£000
£000
£000
Revenue
869
1,331
2,616
Employee benefits expense
(637)
(664)
(1,441)
Depreciation expense
(140)
(138)
(278)
Other operating expenses
(544)
(447)
(910)
Share based payment expense
-
-
(68)
Other operating income
12
36
57
Operating (loss)/profit
(440)
118
(24)
Investment income
-
-
113
Finance income
2
5
14
Finance expense
(9)
(15)
(27)
(Loss)/profit before taxation
(447)
108
76
Taxation
35
(25)
(40)
(Loss)/profit for the period
(412)
83
36
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Fair value gain on financial assets through other comprehensive income
-
95
99
Total comprehensive income for the period
(412)
178
135
Earnings per share (note 4)
- Basic
(4.47p)
0.90p
0.39p
- Diluted
(4.47p)
0.90p
0.39p
Dividends per share
Interim dividend proposed
-
1.00p
-
Dividends paid
0.50p
0.75p
1.75p

 

Fletcher King Plc

 

Consolidated Interim Statement of Financial Position

as at 31 October 2020

 

31 October
31 October
30 April
2020
(Unaudited)
2019
(Unaudited)
2020
(Audited)
£000
£000
£000
Assets
Non-current assets
Property, plant and equipment
16
7
21
Right-of-use asset
408
680
544
Financial assets
630
1,698
630
Deferred tax assets
-
16
-
1,054
2,401
1,195
Current Assets
Trade and other receivables
501
963
680
Cash and cash equivalents
3,113
2,149
3,624
3,614
3,112
4,304
Total assets
4,668
5,513
5,499
Liabilities
Current liabilities
Trade and other payables
499
477
689
Current taxation liabilities
-
49
35
Lease liabilities
299
314
299
Total current liabilities
798
840
1,023
Non current liabilities
Lease liabilities
114
392
262
Shareholders' equity
Share capital
921
921
921
Share premium
140
140
140
Investment revaluation reserve
-
95
-
Reserves
2,695
3,125
3,153
Total shareholders' equity
3,756
4,281
4,214
Total equity and liabilities
4,668
5,513
5,499


 

Fletcher King Plc

 

Consolidated Interim Statement of Changes in Equity

for the 6 months ended 31 October 2020

 

Investment
Profit
Share
Share
revaluation
and
TOTAL
capital
premium
reserve
loss
EQUITY
£000
£000
£000
£000
£000
Balance at 1 May 2020
921
140
-
3,153
4,214
Loss for the period
-
-
-
(412)
(412)
Equity dividends paid
-
-
-
(46)
(46)
Balance at 31 October 2020 (Unaudited)
921
140
-
2,695
3,756
Balance at 1 May 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
Profit for the period
-
-
-
83
83
Fair value gain on financial assets
through other comprehensive income
-
-
95
-
95
Equity dividends paid
-
-
-
(69)
(69)
Balance at 31 October 2019 (Unaudited)
921
140
95
3,125
4,281
Balance at 1 May 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 period
-
-
-
135
135
Equity dividends paid
-
-
-
(161)
(161)
Share based payment expense
-
-
-
68
68
Balance at 30 April 2020 (Audited)
921
140
-
3,153
4,214


 

Fletcher King Plc

 

Consolidated Interim Statement of Cash Flows

for the 6 months ended 31 October 2020

 

6 months ended
6 months ended
Year ended
31 October
31 October
30 April
2020 (Unaudited)
2019 (Unaudited)
2020
(Audited)
£000
£000
£000
Cash flows from operating activities
(Loss)/Profit before taxation from continuing operations
(447)
108
76
Adjustments for:
Depreciation expense
140
138
278
Investment income
-
-
(113)
Finance income
(2)
(5)
(14)
Finance expense
9
15
27
Share based payment expense
-
-
68
Cash flows from operating activities
before movement in working capital
(300)
256
322
Decrease in trade and other receivables
179
794
1,077
Decrease in trade and other payables
(190)
(680)
(468)
Cash (absorbed by)/generated from operations
(311)
(370)
931
Taxation paid
-
-
(14)
Net cash flows (used in)/generated from operating activities
(311)
(370)
917
Cash flows from investing activities
Sale of financial assets
-
-
1,072
Purchase of fixed assets
-
-
(18)
Investment income
-
-
113
Finance income
2
5
14
Net cash flows from investing activities
2
5
1,181
Cash flows from financing activities
Lease payments
(156)
(158)
(314)
Dividends paid to shareholders
(46)
(69)
(161)
Net cash flows from financing activities
(202)
(227)
(475)
Net (decrease)/increase in cash and cash equivalents
(511)
(148)
1,623
Cash and cash equivalents at start of period
3,624
2,001
2,001
Cash and cash equivalents at end of period
3,113
2,149
3,624


 

 

Fletcher King Plc

 

Explanatory Notes

 

1.     General information

 

The Company is a public limited company incorporated and domiciled in England and Wales. The address of its registered office is 61 Conduit Street, London W1S 2GB.

 

These interim financial statements were approved by the Board of Directors on 17 December 2020.

 

2.     Basis of preparation

 

The interim financial information in this report has been prepared using accounting policies consistent with IFRS as adopted by the European Union.  IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the International Financial Reporting Standards Interpretations Committee and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the Directors expect to apply for the year ended 30 April 2021.

 

The accounting policies applied by the Group in this interim report are the same as those applied by the Group in the consolidated financial statements for the year ended 30 April 2020. There are no new standards, interpretations and amendments, effective for the first time from 1 May 2020, that have had a material effect on the financial statements of the Group.

 

 

3.     Non Statutory Accounts

 

The financial information for the period ended 31 October 2020 set out in this interim report does not constitute the Group's statutory accounts for that period. Whilst the financial figures included in this interim report have been computed in accordance with IFRS, this interim report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS34. The statutory accounts for the year ended 30 April 2020 have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, 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 financial information for the 6 months ended 31 October 2020 and 31 October 2019 is unaudited.

 

 

Fletcher King Plc

 

Explanatory Notes

 

 

4.     Earnings per share

6 months to 31 October 2020
Number
6 months to 31 October 2019
Number
Year ended 30 April 2020
Number
Weighted average number of shares for basic earnings per share
9,209,779
9,209,779
9,209,779
Share options
-
-
-
Weighted average number of shares for diluted earnings per share
9,209,779
9,209,779
9,209,779
£000
£000
£000
Earnings for basic and diluted earnings per share:
(412)
83
36
Basic earnings per share
(4.47p)
0.90p
0.39p
Diluted earnings per share
(4.47p)
0.90p
0.39p

 

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