Christie Regulatory News (CTG)

3 April 2017

Christie Group plcPreliminary results for the 12 months ended 31 December 2016

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 2016.

Key points:

· Revenue growth of 1.2% to £64.5m (2015: £63.7m)

· Operating profit before exceptional items of £1.0m (2015: £3.8m)

· Operating profit after exceptional items of £2.3m (2015: £3.8m)

· Earnings per share of 5.35p per share (2015: 9.73p per share)

· Proposed final dividend at 1.5p per share (2015: 1.5p per share) maintains total dividend for the year at 2.50p per share (2015: 2.50p per share)

· Significant improvement in trading in second-half of the year, following a subdued first half which was impacted by EU Referendum

· Second-half operating profit before exceptional items of £1.9m (2015: £2.0m)

· PBS division delivers second-half operating profit before exceptional items of £1.8m after first-half operating loss of £0.4m

· Progress across all businesses in the division sees SISS division reduce operating losses before exceptional items to £0.2m (2015: £1.0m)

· Christie Finance wins 'Commercial Mortgage Introducer of the Year' for the second year running at the Business MoneyFacts Awards

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

"The pick-up in sales towards the end of 2016 continued into the new year. We entered 2017 with a strong pipeline from which we are poised to benefit. We anticipate improved performance in 2017."

Enquiries:

Notes to Editors:

Christie Group plc (CTG.L), quoted on AIM, is a leading professional business services group with 45 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.

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.

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

CHAIRMAN'S STATEMENT

After a subdued first half, which - as previously reported - was caused by the inertia leading up to the EU referendum, I am pleased to advise that our trading environment recovered following the summer holiday period.

We achieved full year revenue of £64.5m, and in doing so delivered a small increase on the prior year (2015: £63.7m). Our first-half operating loss before exceptionals of £0.9m was eradicated in the second half and an operating profit before exceptional items of £1.0m (2015: £3.8m) was generated for the year as a whole.

In addition, we recorded an exceptional operating profit of £1.3m (2015: £nil) as a result of introducing further inflation capping to our final salary pension schemes, both of which remain closed to new members.As a result of all of the above, operating profit after exceptionals totalled £2.3m (2015: £3.8m). Earnings per share stood at 5.35p per share (2015: 9.73p per share). While this amounted to a decrease on the prior year, it was nonetheless reflective of an encouraging recovery in the second half after a challenging first half.

Cash flow in the year reflected capital expenditure investment in the business for the longer term of £1.3m as well as a £1.2m increase in trade receivables due to the positive second half trading. Our working capital control and bad debt experience both remain excellent and our available cash and facilities support our aspirations for the year ahead.

Professional Business Services

As alluded to above, it was the Corporate M & A activity which saw a lack of activity. Whilst we deliberately strive to keep a healthy balance between transactional and advisory services, it is of course a fact that most advisory work, valuations, revaluations, due diligence and consultancy work revolve around either current transactions or plans for future transactions.

Agency activity was dispersed across our trade sectors. The star sector during the year was Children's Day Care, which delivered several highlights during the year with this momentum continuing into 2017 as highlighted by its sale of Magic Nurseries to Les Petits Chaperons Rouge in January.

Helpfully, we saw an increase in transaction activity in the lesser regulated sectors such as Retail and Hospitality. This will lead to our 'deal agreed' pipeline throughput accelerating, where deals tend to conclude more quickly in these sectors so that the conversion of pipeline to recognised revenue is swifter.

Our International transactional and advisory business, combined with international trade from our UK base, ensured that these activities returned an operating profit. We did, however, experience a post-Brexit slowdown in continental Europe which we hope will be short-lived. Our Asia desk was successful in assisting sales in Europe to Chinese buyers. This activity continues, subject to the more stringent close capital constraints.

Our consultancy activities have been successfully expanded into both the dental and pharmacy sectors. Briefs included "whole of market" reviews in order to place specific portfolio acquisition and development opportunities in context.

Valuation instructions increased by 12%. Additionally, we received instructions to assist lenders to comply with the European banking regulation which requires triennial review of the values of assets which support existing bank loans. We also assisted clients to access actual and consequential losses in instances where it is accepted that they had been wrongly deprived of trading assets.

Christie Finance enjoyed another good year with increasing involvement in higher value loans. Indeed, further to the launch of Christie Finance Corporate, the business is now mandated on a number of sizeable lending projects, illustrating its increasing ability to serve a diverse range of corporate clients, including private equity houses. Affirming its growing stature, the business won the Commercial Mortgage Introducer of the Year award at the Business MoneyFacts awards for the second successive year.

As ever, our insurance business Christie Insurance enjoyed some challenging assignments. The end product of insurance is claims and for Christie Insurance this is the acid test of the products and insurers they recommend. During the year one client suffered water damage to one of their buildings and the client had inadvertently failed to advise their insurers the buildings were unoccupied, resulting in an exclusion of the required water damage cover. Despite this, Christie Insurance was successful in persuading the insurer to pay out on a large part of the costs their client incurred.

Pinders, our business appraisal and building services business, has covered some interesting assignments in addition to its normal business valuation work. Most notably these included an Insurance Reinstatement Assessment for a thirteenth century Grade I Listed Castle and Building and Services Condition Surveys for a tranche of ten Hilton Hotels. Alongside these successes, Pinders' renowned database and depth of knowledge has brought expert witness work where Pinders is required to establish the historic values of business when a dispute arises.

Stock & Inventory Systems and Services

As previously reported, the introduction of the National Living Wage meant that at a stroke, our retail counters were rewarded at a higher level. As a result, we increased prices, but there was a small drag effect due to timing of contractual review dates. Whilst turnover was flat in our Retail division, we have adjusted the work specification or value of counts in order to retain our margin. In fact, we are now seeing "win backs" where customers had previously chased price over competence and have now come back to Christie.

Our supply chain service is active in growing its "good faith receiving" audits which are becoming increasingly established practice in retail supply.

Internationally, our operations in Benelux and France have already secured sufficient assignments to underpin profitability there in 2017, whilst current work trials in Germany hold out a similar prospect for later in the year.

Our licensed trade business, Venners, continued to grow market share and existing clients awarded us work for further brands. Venners new Brand Reputation offering has been enthusiastically received by those which have or wish to franchise hospitality brands. Venners ensures that the operator conforms to the brand service standards throughout each trading outlet through an agreed schedule of visits and, on occasion, unannounced.

Vennersys has achieved the goal of readying its SAAS ('Software As A Service' model) for "go lives" in 2017. We remain in a period of intense activity as many visitor attractions are seasonal and open at either Easter or for the summer months. Once over the "hump" of these existing Client conversions, we will be able to accommodate our new business pipeline on a more rapid basis. We anticipate, with minor exceptions, being able to switch off our legacy systems at this year end. This will reduce duplicated helpdesk traffic.

Outlook

The year for both our divisions has started more strongly than in 2016. We have some inflationary costs to absorb which our budgets allow for. Your management and staff alike strive to always deliver a service that is second to none, and on your behalf I thank them. We plan for continued growth in 2017. Your board's enthusiasm for the unique and logically related Group of companies that constitute your business continues unabated.

Reflecting this optimism, your directors recommend a final dividend of 1.5p per share (2015: 1.5p), maintaining a total of 2.5p for the year (2015: 2.5p). If approved the dividend will be paid on 7 July 2017 to those shareholders on the register on 9 June 2017.

Philip GwynChairman

CHIEF EXECUTIVE'S REVIEW

Stability and long-term growth

Continuing geopolitical uncertainty, not least Brexit, made professional investors more cautious in 2016 and this limited liquidity in our markets. Despite these constraints, the Group managed to grow revenue slightly to £64.5m (2015: £63.7m). Operating profit before exceptional items was lower, at £1.0m (2015: £3.8m). However, our second half held up with an operating profit before exceptionals in the second six months of the year of £1.9m (2015: £2.0m).

Especially in the corporate segment, both buyers and sellers marked time in the run-up to the June referendum. In the immediate aftermath, the surprise nature of the result acted as a short-term brake, but investors adapted swiftly and soon re-engaged. Transaction volumes rebounded in the last four months of the year.

The pause in market activity in the run-up to Brexit could be anticipated; it resulted in a revenue shortfall in the first half of 2016. The board took the view that our long-term interests were better served by continuing to invest in our businesses and brands. This meant the Group operated with surplus capacity for much of the year. The resulting higher overheads had an impact on our overall profitability.

Historically, our business has prospered by focusing decision-making on medium-term outcomes and the fundamentals in our chosen sectors. The stability of our shareholder base has played a key role in this, helping to ensure we are not deflected from our core purpose of achieving sustainable, long-term growth.

Focus, flexibility and resilience

There are Christie Group services at every stage of the business lifecycle. We value businesses for prospective buyers and support acquisitions by arranging debt finance and insurance cover. Our inventory and stock planning services enhance operational efficiency. We provide expert advice and services to help those selling businesses maximise their value.

Our organisational structure underpins our resilience across the economic cycle. We derive more predictable earnings from services that enhance operational efficiency. Our transaction-related services tend to be more profitable in active markets.

Our transaction-linked business is well diversified. We engage right across our sectors, from smallest to largest, serving both private clients and the corporate market. So when professional markets were subdued in the first half of 2016 we continued to conclude transactions with private clients. It demonstrates once again the merits of a balanced group structure with a wide-ranging portfolio of interests.

Understanding our sectors in depth is key. We acquire detailed business intelligence by focusing on four broad economic sectors: retail, care/medical, and leisure. We store and share sector-specific knowledge across the Group to optimise our services.

Business intelligence has always been at the foundation of our offering. We aim to deliver high-quality service and advice that commands premium pricing and is less likely to be undercut by cost-driven competitors. It is an approach that suits clients' needs in the knowledge economy.

Our business is built around our clients. As sector specialists, we understand the dynamics of their markets and their businesses. We can propose precisely targeted, practical solutions.

Professional Business Services

One recent market dynamic is the emergence of service businesses as a popular class of alternative asset.

Alternative assets have moved into the mainstream in recent years as investors have realised that certain financial risks cannot be properly addressed using traditional assets. Institutional investors are including business assets and sector holdings in their portfolios.

In the manufacturing sector opportunities are limited. New technologies, like Artificial Intelligence, robotics and 3D printing, are radically reducing fixed costs. Smart manufacturers can grow their businesses without major capital infusions. This is freeing up capital to be invested elsewhere.

Investors are targeting businesses in our sectors. Fund managers, private equity houses and management companies are constructing sector-based portfolios. They are buying care homes, hotels, pubs and restaurants as income-generating assets with built-in inflation protection.

Take children's day care. Christie & Co has been growing its presence here for more than a decade. The sector was once dominated by family-led start-ups. Through government funding of childcare provision, it is now approaching critical mass. There is an influx of new capital: private equity houses are building regional and national networks.

Christie & Co has the experience, scale and capabilities to support corporate investors in this and other sectors. Our professional guidance and sector-specific expertise can add considerable value for buyers with limited operational experience. We can call on detailed knowledge to build valuations, develop acquisition strategies and launch sales campaigns. We tailor our services to each client.

We are also reaching out to private clients. First-time buyers, by definition, are less likely to have had dealings with us in the past. We are finding new ways to connect with them so we can address their requirements more effectively.

We raised our visibility in the private client market this year by listing business properties on a leading consumer-facing property search engine. We now have more business listings on rightmove.co.uk than any other agency. This generates a steady stream of enquiries.

Building sector knowledge

Knowledge is a key differentiator across the Group. We have been formalising our processes for amassing and harvesting this knowledge. Our consultancy division conducts research, prepares sector-based strategic reviews and publishes thought-leadership pieces to assist clients, shine a light on our sectors and inform our own positioning.

In 2016, it followed up an earlier report on the UK nursing workforce by examining funding for care services. This analysed the funding needs for elderly and specialist care at over 200 leading operators and every local council in the UK. It also produced strategic reports identifying trends and market dynamics for hotels, pubs, restaurants and the convenience sector.

Another 2016 consultancy assignment surveyed the dental sector for a prospective investor. Its detailed intelligence on the size, dynamics and structure of the sector gave this client a solid base for assessing acquisitions.

We make use of data analytics to mine for industry-specific and wider economic data. A market-leading data analytics tool was used extensively in 2016. It yielded valuable insights into the hotel, pub and restaurant, and medical sectors.

Pinders is a hub of expertise. Its views are frequently sought out by banks, operators, developers and investors. It is regularly called on in dispute resolution cases and as an expert witness. Actual and potential lenders and owners consult it on what revenues to expect and how to develop their business.

Clients receive detailed sector and business appraisals. They can get informed, in-depth advice for all kinds of business situations, including, in 2016, managing a crematorium and maximising the use and value of an indoor bowling centre.

Christie Finance has been gaining traction as a specialist broker. Its strong sector expertise attracts independent enquiries as well as introductions through Christie & Co. Private equity houses in particular appreciate its intermediation skills. It is increasingly involved in larger transactions. Christie Insurance continues to work closely with partner companies to forge profitable client connections and deliver bespoke insurance cover.

Internationalisation

Christie & Co has won an international reputation for its professionalism and high-quality services. It supports international transactions through its branches across Europe in 16 cities and through the Asia desk, based in London and Shanghai. Our long-term objective is to become the leading pan-European advisor in our chosen sectors.

The post-Brexit fall in sterling has made UK companies more attractive for overseas investors. The Asia desk has been working very successfully alongside our corporate teams in advising Asian investors who want to take advantage of current preferential currency rates.

There is a two-way flow of business in the educational sector. Investors are looking at British educational institutions not just as assets, but as potential international brands. British education has a strong reputation globally. There are receptive markets in parts of the Middle East and Asia for UK educational brands and expertise.

Stock and Inventory Systems and Services

The fallout from the Brexit vote may raise challenges for our stock and inventory businesses.

No one yet knows how the UK's immigration controls will operate in future. We currently enjoy the support of colleagues from 23 nations. We anticipate more help from non-EU countries in future.

Our stock taking businesses employ the latest technology, but they also rely heavily on the people in the field. We strive to both train and incentivise our colleagues to create a culture of excellence, enthusiasm and respect.

Flexible hours contracts are sometimes criticised, but in our experience these kinds of arrangements can often be very successful. Low staff turnover at Venners and Orridge suggests that this pattern of working suits people's lifestyles. Indeed, some casual counters have stayed with Orridge for more than two decades.

Counter costs rose again with the introduction of the national living wage in April. This followed minimum wage and pension legislation in previous years. We have increased our UK charge-out rates correspondingly.

The market dynamics in the retail sector present clear growth opportunities for Orridge's supply chain division. More and more physical retailers are turning themselves into bricks-and-clicks businesses. These depend on cohesive, well-ordered supply chains. To manage that effectively they need real-time information on stock availability and replenishment. Because physical checks need to be conducted on a continuous basis and the counters can be based full-time at a warehouse or supplier distribution centre, there are savings in travel time and resource management.

Equally, we are pursuing with vigour our Pharmacy stocktaking services. We have received a record of excellence since 1846, but still see growth potential.

Venners has successfully changed its culture to reflect shifting market dynamics. The big brewers are no longer dominant. The Pubs Code regulations which came into force in May have tilted the balance of power away from the Pubcos. The sector has more diverse players and increased participation by private equity.

Venners has developed strong sales and marketing capabilities to meet the new challenges posed by this changed landscape. It has developed a broader range of services. It is no longer seen as a loss reducer, but as a business partner capable of adding value and enhancing profitability.

Brand reputation is an example of an area its activities add value. Brand owners want to be sure that franchisees are meeting their standards and guidelines. Venners compliance audits check activity against contractual requirements and brand recommendations.

Operational consultancy services at both Orridge and Venners contribute to client profitability. They prepare stock plans for retailers, licence owners and others that highlight demand for certain stock categories. They propose what should be in stock, when, where and at what price point. Invariably, businesses adopting their recommendations see measurable improvements in trading results.

Vennersys remains on track in its development of a highly scalable attractions system with global potential. Venpos Cloud went online for new users during 2016. It is now migrating major existing users to the Cloud in a programmed way to ensure all existing functionality is on the new platform. We provide an integrated on-site and online solution for the user. Our own return is based upon an attractive recurrent revenue model.

Responding to change

Technology and competitive forces are changing market dynamics in many of our sectors. We respond to that by stressing light-touch management that retains control but encourages responsibility and self-reliance across the Group. We also need to bring new people in and get them up to speed quickly. To that end, we have enhanced our online training capabilities right across the Group. This is helping to build up our knowledge base in a more controlled fashion and in a way that recent intakes find more convenient.

Looking ahead

The pick-up in sales towards the end of 2016 continued into the new year. We entered 2017 with a strong pipeline across our business.

As underlying market trends re-establish themselves we are poised to benefit. With capacity already in place we can take on more business without incurring significant extra costs. It means further revenue growth is likely to result in higher operating profit returns as we benefit from our operational gearing.

Yet geopolitical uncertainties remain. The UK and Europe are entering a very complex period. There will be bumps on the road. With that caveat, we anticipate improved performance in 2017.

David RuggChief Executive

Consolidated Income Statement For the year ended 31 December 2016

All amounts derive from continuing activities.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

Total comprehensive income/(losses) attributable to:

Consolidated Statement of Changes in Shareholders' Equity

As at 31 December 2016

Consolidated Statement of Financial Position

At 31 December 2016

Consolidated Statement of Cash Flows

For the year ended 31 December 2016

Notes to the Preliminary Announcement

1.BASIS OF PREPARATION

The financial information set out in this announcement does not comprise the Company's statutory accounts for the years ended 31 December 2016 or 31 December 2015.

The financial information has been extracted from the statutory accounts of the Company for the years ended 31 December 2016 and 31 December 2015. The auditors reported on those accounts; their reports were unqualified and did not contain a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 December 2015 have been delivered to the Registrar of Companies, whereas those for the year ended 31 December 2016 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

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 2017.

The accounting policies adopted are consistent with those applied in the 2015 financial statements.

2. EXCEPTIONAL ITEMS

In relation to both of its defined benefit pension schemes the Group has completed consultations relating to the indexation increases which may be applied to future increases in pensionable salary for active members of both schemes. The result is a reduction in aggregated scheme liabilities of £1,328,000.

3. SEGMENT INFORMATION

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

The segment results for the year ended 31 December 2016 are as follows:

The segment results for the year ended 31 December 2015 are as follows:

Other segment items included in the income statements for the years ended 31 December 2016 and 2015 are as follows:

The segment assets and liabilities at 31 December 2016 and capital expenditure for the year then ended are as follows:

The segment assets and liabilities at 31 December 2015 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 is allocated below based on the entity's country of domicile.

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

4. DIVIDENDS

A dividend in respect of the year ended 31 December 2016 of 1.5p per share, amounting to a total dividend of £398,000 is to be proposed at the Annual General Meeting on 14 June 2017. These financial statements do not reflect this proposed dividend.

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.

6. NOTES TO THE CASH FLOW STATEMENT

Cash generated from/(used in) operations

Report and Accounts

Copies of the 2016 Annual Report and Accounts will be posted to shareholders in May. Further copies may be obtained by contacting the Company Secretary at the registered office. Alternatively, the 2016 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 Wednesday 14th June 2017 at Whitefriars House, 6 Carmelite Street, London, EC4Y 0BS.

Group Companies

Professional Business Services

Christie & Co is the leading specialist firm providing business intelligence in the hospitality, leisure, retail, care and medical 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 35 years' experience in financing businesses in the hospitality, leisure, care, retail and medical 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 35 years' experience arranging business insurance in the hospitality, leisure, care, retail and medical 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

Orridge is Europe's longest established stocktaking business and specialises in all fields of retail stocktaking including high street, warehousing and factory operations, as well as supply chain services. Orridge prides itself on the speed with which it supplies high-quality management information to its clients.

www.orridge.co.uk

VennersVenners is the leading supplier of stocktaking, inventory, consultancy services and related stock management systems to the hospitality industry. Venners is the largest and longest established stock audit company in the sector in the UK.

www.venners.com

VennersysVennersys operates in the UK and North America and delivers online Cloud-based ticketing sales and admission Systems to visitor attractions such as historic houses and estates, museums, zoos, safari parks, aquaria and cinemas. It has over 20 years' experience delivering purpose-designed solutions for clients' ticketing, admissions, EPoS and food and beverage sales requirements.

www.vennersys.com www.vennersys.ca