Fletcher King Regulatory News (FLK)

24 Jan 2006 07:01

Fletcher King PLC24 January 2006 PRESS RELEASENot for release before 0700, 24 January 2006 FLETCHER KING PLC INTERIM RESULTS Fletcher King sees strong results for the half year Fletcher King, the London based property fund managers, asset managers andchartered surveyors, announces today its interim results for the 6 months to 31October 2005. The results show an improvement in performance on the adjustedresults for the same 6 month period of 2004. Financial highlights: - Profit before tax up 20% to £213,000 after adjustments for 2004 non-recurring items (2004: £177,000 adjusted) - Turnover for the half year up 19% at £3.104m (2004: £2.587m) - Proposed interim dividend up 26% to 0.63p (2004: 0.5p) which will be paid on 17 February 2006 Operational highlights: - The second fund of the Stratton House Investment Property Syndicate is 60% invested with returns currently ahead of target - The property asset management department remains on track to meet full-year targets despite some restructuring, with the majority of clients seeking to increase their portfolios over the next 12 months Valuation and Rating has shown a significant increase in the number of valuation instructions compared to the same period last year Commenting, David Fletcher, Chairman of Fletcher King said: "I am pleased to announce a strong first 6 months of trading, with a profitincrease of 20% when allowing for the 2004 sale of our interest in Fletcher KingManchester. All departments remain on track to achieve full year targets. I look forward to the next six months and hope to able to announce an increasein the final dividend." For further information:David Fletcher, Fletcher King 020 7493 8400Christopher Joll / Tim McCall, MJ2 Business Communications 020 7491 7776 FLETCHER KING PLCCHAIRMAN'S STATEMENT The interim results for the six months to 31 October 2005 show an improvementover the same period last year, adjusted for the profit on disposal of theGroup's minority interest in Fletcher King Manchester. Profit before tax was £213,000 (2004: £282,000, adjusted for profit on disposal£177,000) on turnover of £3.1 million (2004: £2.6 million) with earnings pershare of 1.57p (2004: 1.99p, adjusted for profit on disposal 1.25p). YourDirectors have declared an interim dividend of 0.63p (2004: 0.5p) to be paid on17 February 2006 to shareholders on the register at the close of business on 3February 2006. For the year ended 30 April 2005 and previous financial years, the Group hasprepared its financial statements under UK Generally Accepted AccountingPrinciples ("UK GAAP"). Going forward, for the first accounting period beginningafter 1 January 2005 the Group is required, along with all European Union listedcompanies, to prepare its consolidated financial statements in accordance withInternational Financial Reporting Standards ("IFRS"). The Group's date oftransition to IFRS was 1 May 2004 and the first results to be published underIFRS are these interim results. The Group's first annual report under IFRS willbe for the year ending 30 April 2006. The comparative information in these interim financial statements has thereforebeen restated under IFRS, and the information included in these interimfinancial statements includes the adjustments between the audited UK GAAPfigures and the unaudited restated IFRS results for the same periods. The impact of IFRS on the Group's profit before tax for both the six monthsended 31 October 2005 and the six months ended 31 October 2004 is to increaseprofit before tax by £40,000, representing adjustments in respect of holidayaccrued but not taken. The impact of IFRS on the Group's balance sheets is anincrease in net assets due primarily to a change in the basis of accruingdividends under IFRS and the recording of certain investments at market valueunder IFRS instead of at historic cost. The transition to IFRS has had no impacton the Group's cash flows. Further details on the transition to IFRS are set out in the notes to theseinterim financial statements. THE COMMERCIAL PROPERTY MARKET London Occupational demand for offices in London and the South-East continues to bepatchy. Although there have been a number of high profile lettings in Mid-Townand the City there is still an oversupply of space in these areas and there isunlikely to be any substantial rental growth in the near future. Docklands andthe Western Approaches are quiet but the West End and St James's are active andrents are growing. Outside London Very little has changed in the last year with occupational demand for all typesof space generally stronger than in London and the South East. Owner occupiersremain particularly active in the industrial market. Investment You will recall from my past statements that I have disagreed with those in theindustry who have been calling the top of the market over the last couple ofyears. I predicted that yields would continue to compress and indeed they have.For good quality stock I continue to believe that yields will compress a further25 - 50 basis points over the coming twelve months. Property remains an attractive investment and continues to encourage cashinflows into the sector. While this has a value-increasing impact on the market,it is not sustainable in the long term and I believe the market will begin tostabilise in the latter half of this calendar year. DIVISIONAL TRADING Investment and Fund Management The department has seen an increase in activity compared with the same periodlast year and buying for in-house clients and brokerage has been extremelyactive. There is a strong pipeline of work for the remainder of the year and weanticipate continued growth in the second half. Property Asset Management Despite some restructuring taking place during the first half, turnover andprofitability remain on target. The majority of the department's clients areseeking to increase their portfolios over the next 12 months. The facilities management arm of the department has completed its first year ofoperation and has achieved its targets and improved service to clients andtenants alike. Valuation and Rating The department has seen an increase in the number of valuation instructionscompared to the same period last year. Rating has been active with most of the 2000 appeals being agreed. Thedepartment anticipates a busy period during the second half of the year as 2005Rating List appeals are targeted for discussion. Rent Reviews The department has increased its turnover compared to the corresponding periodlast year and this is anticipated to continue during the second half. There is agood pipeline of work and there is success in winning new business. Fletcher King Howard Our construction services division continues to increase its profitability overthe corresponding period last year and is anticipating continued progress in thesecond half. Stratton House Investment Property Syndicate Our second fund is now 60% invested. In an extremely competitive market we arestill able to acquire properties that meet the Fund's criteria and returns arecurrently ahead of target. We hope to invest the remainder of the Fund by thesecond quarter of next year. OUTLOOK We believe the investment market will remain very strong and that rental growthgenerally will be subdued. We anticipate that activity during the second halfwill be at a satisfactory level and prospects for the full year look good. D. J. R. FLETCHERChairman24 January 2006 Registered Office:Stratton HouseStratton StreetLondonW1J 8LA Fletcher King Plc Consolidated Interim Income Statement (unaudited) for the 6 months ending 31October 2005 6 months ended 6 months ended Year ended 31 October 31 October 30 April 2005 2004 2005 £000 £000 £000 Revenue 3,104 2,587 6,093Employee benefits expense (1,960) (1,538) (3,864)Depreciation expense (33) (35) (74)Other operating expenses (952) (884) (1,808) --------------------------------------- Operating profit 159 130 347Income from investments 22 17 30Interest income 32 30 66Interest expense - - (2)Profit on disposal of interestin associated undertaking - 105 105 --------------------------------------- Profit before taxation 213 282 546Taxation (71) (107) (153) ---------------------------------------Profit for the period aftertaxation attributable to equity shareholders 142 175 393 --------------------------------------- Basic earnings per share (note 6) 1.57p 1.99p 4.46pDiluted earnings per share (note 6) 1.56p 1.97p 4.41p Equity dividends on ordinary shares:Declared and paid during periodOrdinary final dividend for theyear ended 30 April 2005:2.0p per share (2004: 1.0p) 184 88 88Special final dividend for theyear ended 30 April 2005:1.0p per share (2004: 1.0p) 92 88 88Interim dividend for the six monthsended 31 October 2004 (see below) - - 44 --------------------------------------- 276 176 220 --------------------------------------- Proposed but not yet paidInterim dividend for the six monthsended 31 October 2005:0.63p per share (2004: 0.50p) 58 44 -Ordinary final dividend for 2005 (see above) - - 184Special final dividend for 2005 (see above) - - 92 --------------------------------------- 58 44 276 --------------------------------------- Fletcher King Plc Consolidated Interim Balance Sheet (unaudited) as at 31 October 2005 31 October 31 October 30 April 2005 2004 2005 £000 £000 £000 AssetsNon-current assetsProperty, plant and equipment 151 203 162Available for sale investments 861 476 797 --------------------------------------- 1,012 679 959Current assetsTrade and other receivables 1,692 1,414 1,630Amounts recoverable oncontracts 177 180 199Cash and cash equivalents 1,337 1,236 1,917 --------------------------------------- 3,206 2,830 3,746 --------------------------------------- Total assets 4,218 3,509 4,705 LiabilitiesCurrent liabilitiesTrade and other payables 40 82 158Current taxation liabilities 214 197 153Other creditors and provisions 961 503 1,434 --------------------------------------- 1,215 782 1,745 Non-current liabilitiesDeferred taxation liabilities 95 55 64 --------------------------------------- Total liabilities 1,310 837 1,809 Shareholders' equityShare capital 920 881 881Share premium 138 76 76Reserves (note 7) 1,850 1,715 1,939 --------------------------------------- Total shareholders' equity 2,908 2,672 2,896 --------------------------------------- Total equity and liabilities 4,218 3,509 4,705 Fletcher King Plc Consolidated Interim Statement of Changes in Equity (unaudited) for the 6 monthsending 31 October 2005 Share Share Capital Premium Reserves £000 £000 £000 Balance at 1 May 2004 as reported 881 76 1,440Effect of transition to IFRS - - 347 --------------------------------------- Restated balance at 1 May 2004 881 76 1,787 Net profit for the period - - 175Fair value loss on investments - - (71) ---------------------------------------Total income and expense for the period - - 104 --------------------------------------- Equity dividends paid - - (176) --------------------------------------- Restated balance at 31 October 2004 881 76 1,715 Net profit for the period - - 218Fair value gain on investments - - 50 ---------------------------------------Total income and expense for the period - - 268 --------------------------------------- Equity dividends paid - - (44) --------------------------------------- Restated balance at 30 April 2005 881 76 1,939 Net profit for the period - - 142Fair value gain on investments - - 45 ---------------------------------------Total income and expense for the period - - 187 --------------------------------------- Issue of ordinary shares 39 62 -Equity dividends paid - - (276) --------------------------------------- Balance at 31 October 2005 920 138 1,850 --------------------------------------- During the period 390,000 new ordinary shares were issued pursuant to theexercise of share options. Further information on Reserves is given in note 7. Fletcher King Plc Consolidated Interim Cash Flow Statement (unaudited) for the 6 months ending 31October 2005 6 months ended 6 months ended Year ended 31 October 31 October 30 April 2005 2004 2005 £000 £000 £000 Cash flows from operating activitiesProfit before taxation 213 282 546Adjustments for:Depreciation expense 33 35 74Income from fixed asset investments (22) (17) (30)Interest expense - - 2Interest income (32) (30) (66)Profit on disposal of interest in associated undertaking - (105) (105) --------------------------------------- Cash flows from operating activities before movement in working capital 192 165 421(Increase) / decrease in trade and other receivables (62) 29 (176)(Decrease) / increase in trade and other payables (589) (709) 301Decrease / (increase) in work in progress 22 (13) (32) --------------------------------------- Cash (absorbed by) / generatedfrom operations (437) (528) 514Interest paid - - (2)Taxation paid - - (114) --------------------------------------- Net cash flows from operating activities (437) (528) 398 --------------------------------------- Cash flows from investing activitiesPurchases of equipment (22) (62) (74)Proceeds from sale of equipment - - 16Proceeds from sale of interest in associated undertaking - 132 132Purchase of investments - - (250)Interest received 32 30 66Income from fixed asset investments 22 17 30 --------------------------------------- Net cash flows from investing activities 32 117 (80) --------------------------------------- Cash flows from financing activitiesCapital element of finance lease payments - (13) (17)Proceeds from the issue of equity shares 101 - -Dividends paid to shareholders (276) (176) (220) --------------------------------------- Net cash flows from financing activities (175) (189) (237) --------------------------------------- Net (decrease) / increase in cash and cash equivalents (580) (600) 81Cash and cash equivalents at start of period 1,917 1,836 1,836 ---------------------------------------Cash and cash equivalents at end of period 1,337 1,236 1,917 --------------------------------------- Fletcher King Plc Explanatory Notes 1. Basis of preparation These consolidated interim financial statements, which comprise the unauditedresults for the six months to 31 October 2005 and 31 October 2004, together withthe audited results for the twelve months ended 30 April 2005, have beenprepared under the historical cost convention as modified by the revaluation ofavailable for sale financial assets. In common with other European listed companies, the Group is required to prepareits consolidated financial statements for the year ending 30 April 2006 inaccordance with International Financial Reporting Standards (IFRS) endorsed bythe European Union. Consequently, these interim consolidated financialstatements have been prepared in accordance with the accounting policies thatare anticipated to be used in preparation of the Group's annual financialstatements. Changes to accounting policies previously used by the Group, as setout in the Report and Accounts for the year ended 30 April 2005, are summarisedbelow. The IFRS and associated interpretations that will be applicable and adopted foruse in the European Union at 30 April 2006 are not known with certainty at thetime of preparing this interim financial information. Therefore there is apossibility that the directors may determine that changes are necessary whenpreparing the full audited annual financial statements for the first time inaccordance with IFRS. The Group has restated its previously reported UK GAAPconsolidated results and financial position. The effects of the transition toIFRS and the adoption of new or revised accounting policies which materiallyaffect the financial statements are set out below. The restated comparativeinformation has not been audited. 2. Changes to accounting policies GoodwillUnder previous UK GAAP, goodwill was recognized as a deduction from equity. Inaccordance with IFRS, this goodwill remains written off and has not beenrecognized in the opening IFRS balance sheet. Furthermore, this goodwill willnot be transferred to the income statement on any subsequent impairment in valueor disposal of the business to which it relates. Amount recoverable on contractsUnder UK GAAP, it is acceptable for the valuation of work in progress to includeattributable overheads. Under IAS 11, the valuation of work in progress isrestricted to direct costs incurred. Deferred taxationDeferred taxation is recognised under UK GAAP on timing differences, whereasunder IFRS it is recognised on temporary differences. A temporary difference isthe difference between the carrying value of an asset or liability in thebalance sheet, and its corresponding tax base. UK GAAP does not permit deferredtax to be recognised where a business is not obliged to pay more tax at a futuredate, whereas IFRS requires provision for all taxable and deductible differencesbetween book values for tax purposes and accounting book values that are not'permanent' timing differences. Financial assetsUnder previous UK GAAP, financial assets were carried at cost. In accordancewith IFRS, on initial recognition of a financial asset, it is categorised aseither an available-for-sale financial asset, or within loans and receivables.The classification depends on the purpose for which the investment was acquired.The directors determine the classification at initial recognition andre-evaluate this designation at each reporting date. All investments are initially recognised as cost, being the fair value of theconsideration given and including associated acquisition costs. On subsequentmeasurement, available-for-sale investments are measured at either fair value orat cost, where fair value is not readily ascertainable. Changes in fair valueare recognised in equity, together with the related deferred tax asset orliability. Loans and receivables are carried at cost. All financial assets are reviewed annually for impairment, and permanentimpairment losses are reflected in the income statement. Investment income isrecognised in the income statement. Available-for-sale financial assets are included in non-current assets unlessmanagement intends to dispose of the investment within twelve months of thebalance sheet date. Associated undertakingsBoth UK GAAP and IFRS require interests in associated undertakings to be equityaccounted. There is a difference in presentation in the income statement, inthat IFRS requires the Group's share of post-tax profits or losses to beincluded in the income statement on a single line, whereas under UK GAAP it isallocated across a number of lines. DividendsUnder UK GAAP, all dividends relating to an accounting period that are proposedup to the date of the approval of the financial statements by the Board ofDirectors are accrued in that accounting period. Under IFRS, only dividendsapproved during the year are accrued. 3. First time adoption of IFRS and reconciliations between IFRS and UK GAAP The Group has applied IFRS 1, First Time Adoption of International FinancialReporting Standards, in preparing these interim consolidated financialstatements. The Group's transition date is 1 May 2004 and an opening IFRSbalance sheet has been prepared at that date, although it is not included inthis interim financial information. Consequently, comparative information hasbeen restated under these new accounting standards. In order to make the transition to IFRS easier, IFRS 1 allows some exemptionsfrom full retrospective application of certain standards. In preparing theseinterim condensed consolidated financial statements in accordance with IFRS 1,the Group has applied the mandatory exceptions and the following optionalexemptions from full retrospective application of IFRS. Business combinations exemptionThe Group has applied the business combinations exemption in IFRS 1 and has notrestated business combinations that took place prior to the transition date. Share-based payment transactionsThe Group has elected not to apply IFRS 2 to the granting of share optionsbefore 7 November 2002. Designation of financial assets and financial liabilities exemptionThe Group has reclassified its investment in listed securities as anavailable-for-sale investment, with fair value movements recognised in equity. Property, plant and equipmentThe Group has decided that property, plant and equipment are to continue to berecorded at historical cost rather than being restated to fair value. 4. Reconciliations between IFRS and UK GAAP The following reconciliations provide a quantification of the effect of thetransition to IFRS from UK GAAP on both the income statement and the balancesheet. Explanations of the adjustments are also set out below. Profit for the 6 months ended 31 October 2004 and for the year ended 30 April2005 6 months ended Year ended 31 October 30 April 2004 2005 Note £000 £000 Profit for the period as reportedunder UK GAAP 103 85Adjusted for:Amounts recoverable on contracts A - -Deferred tax B (12) -Dividends C 44 308Holiday pay D 40 - -------------------Profit for the period as reportedunder IFRS 175 393 ------------------- Equity as at 1 May 2004, 31 October 2004 and 30 April 2005 1 May 31 October 30 April 2004 2004 2005 Note £000 £000 £000 Total equity and reserves as reportedunder UK GAAP 2,397 2,500 2,482Adjusted for:Amounts recoverable on contracts A (30) (30) (30)Deferred tax B (75) (55) (64)Dividends C 176 44 264Holiday pay D (50) (10) (50)Available-for-sale investments E 326 223 294 ------------------------------Total equity and reserves as reportedunder IFRS 2,744 2,672 2,896 ------------------------------ Explanations A. Amounts recoverable on contractsAn adjustment of £30,000 was made on transition to transfer the attributableoverheads included in work in progress as at 1 May 2004 to retained earnings.Due to the relatively stable level of work in progress since transition, noadditional adjustment to transfer the attributable overheads at the relevantperiod end to operating expenses in the income statement is required for anysubsequent period included in these consolidated interim financial statements. B. Deferred taxThe adjustments relate to the deferred tax impact of IFRS adjustments made thataffect the financial statements for the relevant period. The deferred tax impactof IFRS adjustments affecting the income statement are recorded in the incomestatement, while the deferred tax impact of IFRS adjustments affecting retainedearnings are recorded in retained earnings. C. DividendsThe adjustment reflects the impact of reversing proposed dividends. D. Holiday payUnder IAS 19, all accumulating employee compensated absences that are unused atthe balance sheet date must be recognised as a liability. There is no similarrequirement under UK GAAP. E. Available-for-sale investmentsThe adjustment reflects the movement in fair value of the Group'savailable-for-sale investments. Changes in fair value are recognised in equity, together with the relateddeferred tax liability. 5. Cash flow The Group's consolidated cash flow statements are presented in accordance withIAS 7. The statements present substantially the same information as thatrequired under UK GAAP, with the following principal exceptions: 1. The cash flows reported in accordance with IAS 7 relate to movements in cashand cash equivalents, which include cash and short term liquid investments.Under UK GAAP, cash comprises cash in hand and deposits repayable on demand. 2. Under UK GAAP, cash flows are presented under nine standard headings, whereasIFRS requires the classification of cash flows as resulting from operating,investing and financing activities only. 3. IAS 7 does not require a reconciliation of movements in cash flows to themovement in net debt. There are no material differences between the Group's cashflow statement presented under IFRS and the cash flow statement presented underUK GAAP. 6. Earnings per share Basic earnings per share is calculated by reference to the result attributableto equity shareholders of £142,000 (2004: £175,000) and the weighted average of9,041,763 shares (2004: 8,807,279) in issue during the period. Diluted earnings per share is calculated by reference to the result attributableto equity shareholders of £142,000 (2004: £175,000) and the adjusted weightedaverage of 9,126,982 shares (2004: 8,892,302) in issue during the period. The impact of the transition to IFRS on previously reported basic and dilutedearnings per share for the 6 months ended 31 October 2004 is an increase of£28,000 in the result attributable to equity shareholders leading to an increaseof 0.32p in both basic earnings per share and diluted earnings per share. Thereis no impact on previously reported basic and diluted earnings per share for theyear ended 30 April 2005. 7. Reserves Profit and Fair value Total loss reserve reserves £000 £000 £000 Balance at 1 May 2004 as reported 1,440 - 1,440 Restated balance at 1 May 2004 1,559 228 1,787 Restated balance at 31 October 2004 1,558 157 1,715 Restated balance at 30 April 2005 1,732 207 1,939 Balance at 31 October 2005 1,598 252 1,850 8. Results for 2005 The results for the year ended 30 April 2005 and the balance sheet at that date,which have been included in these interim consolidated financial statements, arenot statutory accounts. The Group's statutory financial statements for the yearended 30 April 2005 have been delivered to the Registrar of Companies. Theindependent auditors' report on those financial statements is unqualified anddoes not contain a statement under Section 237(2) or (3) of the Companies Act1985. This information is provided by RNS The company news service from the London Stock Exchange