Christie Regulatory News (CTG)

31 March 2015

Christie Group plcPreliminary results for the 12 months ended 31 December 2014

Christie Group plc ('Christie Group' or the 'Group'), the leading provider of Professional Business Services and Stock & Inventory Systems & Services to the leisure, retail and care markets, is pleased to announce its preliminary results for the 12 months ended 31 December 2014.

Key points:

· Revenue growth of 12.7% to £61.0m (2013: £54.2m)

· Operating profit more than doubled to £3.7m (2013: £1.6m)

· Earnings per share increased to 9.34p per share (2013: 0.82p per share)

· Proposed final dividend up 50% to 1.5p per share (2013: 1.0p per share). Total dividend 2.25p per share (2013: 1.5p per share)

· Retail stocktaking market has experienced strong pricing pressure

· Buoyant corporate transactional activity driving growth in Professional Business Services

· Double-digit asset value growth in most of our market sectors

· Christie + Co awarded 'UK's most active agent' in the Leisure and Hotels category by the Estates Gazette for the fifth year in succession

Commenting on the results, David Rugg, Chief Executive of Christie Group said:

"We have worked hard to benefit from the economic recovery. Our adaptability has been key. We are growing revenue, have increased profitability and strengthened earnings. We continue our European expansion."

Enquiries:

Notes to Editors:

Christie Group plc (CTG.L), quoted on AIM, is a leading professional business services group with 44 offices across the UK, Europe and Canada, catering to its specialist markets in the leisure, retail and care sectors.

Christie Group operates in two complementary business divisions: Professional Business Services (PBS) and Stock & Inventory Systems & Services (SISS). These divisions trade under the brand names: PBS - Christie + Co, Pinders, Christie Finance and Christie Insurance: SISS - Orridge, Venners and Vennersys.

Tracing its origins back to 1846, the Group has a long established reputation for offering essential services to client companies in agency, valuation services, investment, consultancy, project management, multi-functional trading systems and online ticketing services, stock audit and inventory management. The diversity of these services provides a natural balance to the Group's core agency business.

For more information, please go to www.christiegroup.com.

CHAIRMAN'S STATEMENT

I am delighted to report an operating profit before exceptional items of £3.7m for the year ended 31 December 2014 (2013: £1.6m), achieved from revenue of £61.0m (2013: £54.2m), an increase of 12.7%. This was primarily due to a resurgence in corporate transactional activity and related advice - our third year-on-year increase in operating profit before exceptional items. As a result, the Group generated cash in the year of £2.1m.

Stock & Inventory Systems & Services

Revenue for the division increased by 7.4% to £27.8m (2013: £25.9m). £0.8m of this increase in revenue was attributable to a full year's revenue from our German-based stocktaking operation, which we acquired in September 2013.Having incurred the effects of reorganising our German business - a significant factor in reporting divisional operating profit of £0.2m (2013: £1.1m) - we now have the capacity to undertake double the current volumes there, positioning us to take advantage of growth opportunities in the central and eastern European region.

The UK retail stocktaking market supply has gone through a period of strong pricing pressure. We have not been immune from the consequences. We believe we have the lowest cost base of any national operator, whilst also delivering a high level of accuracy.

Our hospitality stocktaking business continued its growth. We also enjoyed further take-up of other services such as Health & Safety and Compliance Audits, and growth in consultancy, particularly in the food area.

Professional Business Services

The PBS division had an excellent year, with revenue of £33.2m representing growth of 17.5% on the previous year (£28.3m). The result was operating profit of £3.3m (2013: £0.9m before exceptional items).

For the fifth year in succession, Christie + Co has been voted the UK's most active hotel and leisure agent by the Estates Gazette. Our corporate hotel transactions in 2014 have been well reported. Encouragingly, our private client derived profits grew in proportion. As average business values increased, so too did our commission income. We have increased staff numbers to take advantage of the upturn. New staff are not instantly productive and increased income should materialise from H2 onwards.

Our medical sector work grows apace. We have built a pipeline of dental practice sales for completion this year.

Strong demand for business valuations and a relative shortage of skilled practitioners saw a sustained rise in fees at both Pinders and Christie + Co.

With commercial building activity strong, our building surveying team were very busy throughout the year.

Our Germanic and Scandinavian markets are sound. We are seeing recovery in Spain. France continues to be a more difficult economy. The relative weakness of the euro is likely to encourage further international investment into eurozone assets in the period ahead. We should benefit from such activity.

Outlook

The results for 2014 were ahead of expectations. For this I thank your management and staff and our loyal and growing client base.

We look forward to continued growth for 2015. Inevitably the election will disrupt the markets in some way. Thereafter activity should resume in what are fundamentally attractive markets into which we provide essential demand driven services.

Your board recommend a final dividend of 1.5p per share (2013: 1.0p), a total of 2.25p for the year (2013: 1.5p) and a 50% increase above the prior year. If approved the dividend will be paid on 3 July 2015 to those shareholders on the register on 5 June 2015.

Philip Gwyn

Chairman

CHIEF EXECUTIVE'S REVIEW

The Group has emerged from the economic downturn in a stronger market position. We are growing revenue, have increased profitability and strengthened earnings.

Fitter, leaner, stronger

With the UK back on a path to growth Christie Group's market position this year is stronger than ever. We have increased revenue, are generating strong earnings and, importantly, play an increasingly pivotal role in the sectors we serve.

This is no accident.

Our adaptability has been key. We work hard to keep the business aligned with changing customer priorities.

The wisdom in this Group has been hard earned over several macro-economic cycles. Our philosophy has always been to make the most of difficult economic periods. Rather than marking time we have invested in our future.

In the most recent downturn we focused on operational efficiency. We delivered cost improvements through incremental steps and transformational leaps. We found ways to improve our scalability. We adopted technological solutions that have changed the way we worked. We initiated organisational changes.

At the same time, we made sure we retained our core capabilities. We therefore held back from some cost-cutting measures despite the impact on short-term profitability.

As a result, we are now extremely well placed to benefit from the upturn in market activity.

In-depth market insight

Christie Group services relate to the entire lifecycle of a business - from initial acquisition, through day-to-day operations, all the way to an eventual sale. We provide specialist business intelligence in the retail, care, leisure and hospitality sectors. The range of our operations keeps us close to our customers and helps us understand their changing requirements over time. 

Our organisational structure targets stable earnings from services that enhance operational efficiency with transaction-related services that tend to be more market-sensitive.

We aim to steer away from purely commoditised services in order to deliver bespoke solutions that add value for our clients and cannot be undercut by our competitors.

Our competitive edge is based on knowledge. We have always made it a priority to understand the sectors we serve in great detail. We act as problem solvers and aim to develop products, services and advice rooted in the specifics of customers' experiences.

In-depth expertise and service excellence are the common threads that link all our companies.

In tough times, high quality expertise comes into its own. Those customers who have worked with us before have direct experience of the value we can add to their businesses. We have forged strong links with banks and private equity houses.

Performance across the year

Christie Group companies worked very hard through the recession, widening our client base, increasing our network, growing our service lines, developing our systems and nurturing talent.

We are now benefitting in the UK's economic recovery. Our clients' businesses are in discretionary sectors, seeing revenue and profits rise. The value of their businesses is growing. The funders supporting our clients' growth want more regular information on their recipient businesses, relative performances, market value and potential value.  

Professional Business Services

Property valuations improved as confidence flowed back into the market. Valuations in our specialist sectors benefitted from healthier trading conditions. There was double-digit growth in many of our sectors with some improving by as much as 20 per cent. Volumes also increased although they still remain some distance below their pre-crisis levels. 

Both fees and advisory income were boosted by buoyant market conditions but there is still scope for improvement. Transaction volumes are currently at just half the level we saw before the financial crisis. Volumes are likely to increase and we will benefit accordingly.

Our ancillary services also moved forward this year. The finance and the insurance businesses are valuable profit centres in their own right, but they also extend our connectivity with our clients. They allow us to forge more connections with our transactional customers and develop better insights into their businesses. Indeed, the quality of our finance business was recently recognised by a commendation in the Commercial Mortgage Introducer of the Year category at The 2015 Business Moneyfacts Awards.

Pinders, our appraisal and survey business, is growing in scale and returning solid profits. We are finding that growing numbers of, particularly, institutional clients are commissioning surveys to smooth the selling process. Buyers often make use of these reports in their purchasing decisions. Increasingly, following successful conclusion of the transactions, the buyers return to Pinders to commission technical reports that complement the original surveys.

Regional structures support business objectives

We regionalised the business last year to align it more closely with our customers. The new structure helps bridge the gap between small-scale local and top-tier corporate clients. It has made it easier to forge connections with the many mid-tier clients who are so important to the Group. 

A year on, it is evident that the new structure has improved the way the business is managed and enhanced our profitability.

Stock & Inventory Systems & Services

Some five years ago now, we devised and adopted an internal strategy to target food retailers as customers. They hold a large number of product lines which they turn over rapidly. To date, the nature and value of most items they sell are not suitable for RFID tagging and require manual scanning.

This strategy continues to pay off as our expertise in the supermarket and convenience store sector is acknowledged both in the UK with the likes of Morrison and Co-op Food, and on the continent through franchises like Carrefour.

The growth in bricks and clicks retailing is driving demand for stocktaking at more points in the supply chain. Increasingly, retailers' business models are built on cohesive, well-controlled supply chains. They need to identify best-selling lines in real time and monitor the ebbs and flows in the delivery chain. For these reasons, we have established a separate Supply Chain Optimisation Division.

Overall, this is a very margin-led business so it is vital to build a sound organisational structure that can operate cost-effectively. Orridge has been transforming systems and processes to make its new German business competitive in the Germanic region.

Our food consultancy service expanded to include advice on allergen content as part of menu planning and margin control. Every food business needs a set of controls. Many are discovering that external supervision and enforcement of controls can be more effective and consistent.

Operating in the digital space

With information more readily available, knowledge is the true market differentiator. Being able to codify and share that knowledge creates a powerful asset for the business going forward.

We are centralising all our data repositories and are becoming much more rigorous about compiling data, while respecting client confidentiality and data protection laws. We are also developing specialist software, in healthcare for instance, to mine and present this data.

Our database contains highly detailed, in-depth information. It has a range of applications. For instance, we can analyse the precise cost structure for specific business categories in each of our trade sectors. For private equity clients this could be used to benchmark performance, identify best practice or determine profitability for valuation purposes. For banks we can reference our data to establish whether a potential borrower has a viable business model.

Digital first and omni-channel distributionOnline distribution has long since moved into the mainstream. The issue today is ensuring that we are on the right platforms to reach our audiences. 

We estimate that 50 per cent of our transactional business is initiated via mobile. The web remains very important for us, but traditional media marketing is no longer a major driver.

However, it is still very important to build brand awareness. We invest significantly in digital marketing and allocate substantial resources to brand building on the internet.

Collaboration and client-centric operations

Our research indicates that our clients want us to listen to their needs and build offerings to suit their specific requirements. We are therefore repositioning all our businesses to make them more customer-centric.

We aim to move towards a way of working that recognises no fixed boundaries between specialisms, geographies or businesses. Instead, all our people work together to further client interests.

Already we are using the internet to deploy human capital more efficiently. Rather than having spare capacity sitting idle in every jurisdiction, we allocate team members depending to each client's requirements. In some cases, this also allows us to tailor personnel to the client's needs.

We are increasingly taking on business that combines specialisms. We are often asked to marry up, say, a financial investor with an operator. In creating these combinations we place ourselves at the centre of the transaction. These kinds of interventions allow us to differentiate ourselves and add additional value to our clients.

Looking ahead

Christie Group has emerged stronger from the recession. We have broadened the scope of our services. We are better able to operate internationally and at scale. Our expertise and operational capabilities are widely recognised in an increasingly professionalised market.

We have extended our client base and are now advising on much bigger portfolios. Our international presence and expertise has paid dividends. We have numerous pan-European clients.

Christie Group is a strong, sustainable business founded on knowledge, exceptional service and operational excellence. We shall continue to meet customer priorities and build on our strengths.

David RuggChief Executive

Consolidated Income Statement For the year ended 31 December 2014

* Exceptional costs for the year to 31 December 2013 relate to the restructuring of operations. There are no such costs in 2014.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2014

Consolidated Statement of Changes in Shareholders' Equity

As at 31 December 2014

Consolidated Statement of Financial Position

At 31 December 2014

Consolidated Statement of Cash Flows

For the year ended 31 December 2014

Notes to the Consolidated Financial Statements

1. BASIS OF PREPARATION

While 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), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in April 2015.

The accounting policies adopted are consistent with those applied in the 2013 financial statements.

New and amended standards adopted by the Group

Several new standards and amendments apply for the first time in 2014. However, they do not materially impact the annual consolidated financial statements of the Group.

Standards, interpretations and amendments to published standards that are not yet effective

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group or Company's accounting periods beginning after 1 January 2015 or later periods and have not been early adopted. It is anticipated that none of these new standards, interpretations and amendmentscurrently in issue at the time of preparing the financial statements will have a material effect on the consolidated financial statements of the Group or Company.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

2.1 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Estimated impairment of goodwill

Goodwill is subject to an impairment review both annually and when there are indications that the carrying value may not be recoverable. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates.

(b) Retirement benefit obligations

The assumptions used to measure the expense and liabilities related to the Group's two defined benefit pension plans are reviewed annually by professionally qualified, independent actuaries, trustees and management as appropriate. Management base their assumptions on their understanding and interpretation of applicable scheme rules which prevail at the statement of financial position date. The measurement of the expense for a period requires judgement with respect to the following matters, among others:

- the probable long-term rate of increase in pensionable pay;

- the discount rate; and

- the estimated life expectancy of participating members.

The assumptions used by the Group, may differ materially from actual results, and these differences may result in a significant impact on the amount of pension expense recorded in future periods. In accordance with IAS 19, the Group recognises all actuarial gains and losses immediately in other comprehensive income.

(c) Deferred taxation

Deferred tax assets are recognised to the extent that the Group believes it is probable that future taxable profit will be available against which temporary timing differences and losses from previous periods can be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

3. SEGMENT INFORMATION

The Group is organised into two main operating segments: Professional Business Services and Stock & Inventory Systems & Services.

The segment results for continuing operations for the year ended 31 December 2014 are as follows:

The segment results for continuing operations for the year ended 31 December 2013 are as follows:

Other segment items included in the income statements for continuing operations for the years ended 31 December 2014 and 2013 are as follows:

The segment assets and liabilities at 31 December 2014 and capital expenditure for the year then ended are as follows:

The segment assets and liabilities at 31 December 2013 and capital expenditure for the year are as follows:

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash. They exclude taxation.

Segment liabilities comprise operating liabilities. They exclude items such as taxation and corporate borrowings.

Capital expenditure comprises additions to property, plant and equipment and intangible assets.

The Group manages its operating segments on a global basis. The UK is the home country of the parent. The Group's revenue is mainly generated in Europe.

Revenue for continuing operations is allocated below based on the entity's country of domicile.

Capital expenditure is allocated based on where the assets are located.

4. FINANCE COSTS

5. TAXATION

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the standard rate of corporation tax in the UK of 20.0% as follows:

Tax on profit on ordinary activities

During the year, as a result of the change in the UK corporation tax rate, the opening deferred tax balances have been re-measured. Deferred tax assets recognised at 1 January 2014 which had been measured at 21% at 31 December 2013 have been re-measured using the enacted rate that applied at 31 December 2014 (20%).

6.DIVIDENDS

A final dividend in respect of the year ended 31 December 2014 of 1.5p per share, amounting to a total dividend of £398,000 is to be proposed at the Annual General Meeting on 16 June 2015. These financial statements do not reflect this proposed dividend.

7. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, which excludes the shares held in the Employee Share Ownership Plan (ESOP) trust.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares: share options.

The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

8. RETIREMENT BENEFIT OBLIGATIONS

At 31 December 2014 the actuarial assumptions adopted by the Board to value defined benefit pension obligations included the following principal assumptions:

The changes in these assumptions - principally the decrease in the discount rate applied in calculating the present value of long term retirement benefit obligations due to the deterioration in corporate bond yields over the period - resulted in an actuarial loss on defined benefit plans of £9,726,000 (2013: £4,839,000 gain), which has been recognised within Other Comprehensive Income. The effect on the Consolidated Statement of Financial Position has been an increase in retirement benefit obligations of £9,726,000 and a corresponding decrease in retained earnings of £7,864,000 after the recognition of related deferred tax assets.

9. NOTES TO THE CASH FLOW STATEMENT

Cash generated from/(used in) operations

10. RECONCILIATION OF MOVEMENT IN NET DEBT

Financial information

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 2013, but is derived from those accounts. Statutory accounts for 2013 have been delivered to the Registrar of Companies and those for 2014 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under either Section 498(2) or (3) of the Companies Act 2006.

Report and Accounts

Copies of the 2014 Annual Report and Accounts will be posted to shareholders in early May. Further copies may be obtained by contacting the Company Secretary at the registered office. Alternatively, the 2014 Annual Report and Accounts will be available to download from the investor relations section on the Company's website www.christiegroup.com 

Key dates

The Annual General Meeting of the Company is scheduled to take place at 10.30am on Tuesday 16th June 2015 at Whitefriars House, 6 Carmelite Street, London, EC4Y 0BS.

Professional Business Services

Christie + Co is the leading specialist firm providing business intelligence in the hospitality, leisure, retail and care sectors. With offices across the UK, it focuses on agency, valuation services, investment and consultancy activity in its key sectors. Internationally, it operates from offices in the UK, Austria, Finland, France, Germany, Ireland and Spain.

www.christie.com

www.christiecorporate.com

Christie Finance has over 30 years' experience in financing businesses in the hospitality, leisure, care and retail sectors. Its excellent relationships with the clearing banks, centralised lenders, finance houses and building societies make it the market leader in providing finance solutions for purchase or re-financing in its specialist sectors.

www.christiefinance.com

With over 30 years' experience arranging business insurance in the hospitality, leisure, care and retail sectors, Christie Insurance is a leading company in its markets. Its excellent contacts with the UK's leading insurers enable it to provide a premier service including tailored insurance schemes.

www.christieinsurance.com

Pinders is the UK's leading specialist business appraisal, valuation and consultancy company, providing professional services to the licensed leisure, retail and care sectors, and also the commercial and corporate business sectors. Its Building Consultancy Division offers a full range of project management, building monitoring and building surveying services.

www.pinders.co.uk

www.pinderpack.com

Europe's longest established stocktaking business specialising in all fields of retail stocktaking including high street, warehousing and factory. It also has a specialised pharmacy division providing valuation and stocktaking services. A full range of stocktaking and inventory management solutions is provided for a wide range of clients in the UK and Europe.

www.orridge.co.uk

VennersThe leading supplier of stocktaking, inventory, consultancy services and related stock management systems to the hospitality sector. Consultancy services include control audits, 'live' event stocktaking and Health & Safety implementation and control. Bespoke software and systems enable real-time management reporting to customers using the best available technologies.

www.venners.com

VennersysVennersys operates in the UK and North America and delivers turnkey EPoS and ticketing systems to visitor attractions such as historic houses and estates, museums, zoos, safari parks, aquaria and cinemas.

www.vennersys.com