Last checked at 30 Jun 2008 16:09
Humberts Group plc
("the Company")
Interim Report
for the six months ended 31 March 2008
Chairman's statement
On 21 January 2008 the Group announced that trading in the core residential agency business had been disappointing, with volumes significantly below the Board's expectations. Accordingly, the Group had expected to make a loss in the first quarter of 2008 with little improvement expected over the second quarter.
The Group loss before tax for the six months ended 31 March 2008 was £15.88 million (2007: Profit £1.60 million) on sales of £15.03 million (2007: £13.62 million). This loss includes a £13.95 million charge for goodwill impairment and winding down provision, arising from the disposal of the majority of the Group's operating businesses after 31 March 2008, following the non-completion of the £2.25 million refinancing in May 2008. The underlying loss before interest, depreciation and amortisation was £0.46 million (2007: profit of £1.87 million).
The operating cash outflow for the six month period was £2.7 million (2007: cash inflow of £0.6 million). However, the cash position was further compounded by the payment of £1.6 million of deferred consideration in respect of 2006 and 2007 acquisitions. The Group had a total cash outflow of £5.0 million (2007: cash inflow of £3.1 million) for the six month period. Taking into account the above, together with the negative cash flow generation for the 12 months ended 30 September 2007 of £3.1 million, the Group had inadequate financial resources to weather the current economic downturn. As a result, the Board took the actions which are outlined below.
Current trading
Trading in the core residential agency business has continued to be disappointing, with transaction volumes running at approximately 50% below the previous year. This is due to the ongoing effect of the credit squeeze and a growing erosion of confidence in Humberts.
Non-completion of £2.25 million Secured Convertible Loan Notes
On 25 April 2008, the Board announced a refinancing of the Company by way of a £2.25 million Secured Convertible Loan Note ("the Placing"). This refinancing was necessary to provide the Group with sufficient funds to meet its working capital requirement. At the general meeting of the Company held on 14 May 2008, shareholders approved this Placing, the adjustments to deferred consideration due to certain sellers of businesses purchased during 2006 and 2007 ("the Deferred Consideration Adjustment"), and other associated matters as set out in the shareholders' circular dated 25 April 2008.
However, it was not possible to complete the Placing as it was impossible to satisfy certain key conditions, principally because:
On careful evaluation of these and other relevant issues and following detailed discussions with the Company's advisers, the Board concluded that the Placing could not be completed.
Disposals since 31 March 2008
As soon as the conditions attached to the £2.25 million Placing could not be fulfilled, the Group was unsustainable in its current structure due to insufficient working capital and the poor trading prospects presented by the current weak housing and property markets.
Farley Management Company Limited and the management business of Farleys Estate Agents had already been sold in April 2008. The Board then commenced an orderly disposal programme of the remainder of the Group's operating businesses. The operating businesses disposed of since 31 March 2008 comprised:
2 April 2008: Farley Management Company Limited sold for a total consideration of £315,000 payable in cash.
2 April 2008: Management business of Farleys Estate Agents sold for a total consideration of £424,500 payable in cash.
30 May 2008: Halls Participations Limited sold for a total consideration of £1.90 million, of which £850,000 was paid in cash and the balance represented the cancellation of the outstanding deferred consideration of £1.05 million.
30 May 2008: Thomson Currie sold for a total consideration of £1.85 million, of which £50,000 was paid in cash and the balance represents the cancellation of the outstanding deferred consideration of £1.80 million.
06 June 2008: Richard Harding Estate Agents sold for a total consideration of £1.06 million, of which £60,000 was paid in cash and the balance represents the cancellation of the outstanding deferred consideration of £1.0 million.
9 June 2008: Blenheim Bishop Estate Agents sold for a total consideration of £967,000, representing the cancellation of the outstanding deferred consideration.
9 June 2008: BTFL, incorporating Weald Property Management sold for a consideration of £1 and the waiver of £945,000 of deferred consideration.
Administration of Humberts Limited
On 11 June 2008, the directors of Humberts Limited, one of the Company's trading subsidiaries, appointed Smith & Williamson, the accountancy and financial advisory group, to act in the restructuring and administration of Humberts Limited (and certain subsidiaries of Humberts Limited) which were placed into administration.
The Company and the Administrators agreed the sale of the assets of Humberts Limited (including the Humberts name) and certain subsidiaries of Humberts Limited, and the assets of the Company's London-based subsidiaries of Wellingtons Estate Agents Limited, Wellingtons Estate Agents (Battersea) Limited and Farleys Limited to Mercantile Group for a total net consideration of £3.16 million, which will be satisfied by the payment of cash and by the cancellation of outstanding deferred consideration amounting to £1.10 million. Of the cash consideration, payment of £600,000 will be deferred pending the successful transfer of the Humberts name to Mercantile Group. The names of the Company's subsidiaries have already been changed from a name that includes the word "Humberts" to a name that includes the word "Pedstowe". A general meeting of the Company has been convened for 3 July 2008 to change the name of the Company to Pedstowe plc.
In total, 66 branches (including 10 franchises) out of a total of 80 were sold. This preserved employment for 84% of the staff. The remaining branches have now all been closed as both the Company and the Administrators were unable to find buyers.
Following the disposals after 31 March 2008 and the Administration of Humberts Limited, the Company will have no trading subsidiaries.
Contingent liabilities
A provision has been made for certain of the Company's contingent liabilities as, due to the uncertainty of parent company guarantees, the full extent of these liabilities have not yet been determined.
Directors
There have been a number of changes to the Board since 30 September 2007:
James Lugg was appointed to the Board as a non-executive director on 23 October 2007;
John McLean was appointed to the Board as non-executive deputy chairman on 21 December 2007, and assumed the role of executive chairman on 21 January 2008;
On January 21 2008, Tim James, the Group's executive chairman, and Max Ziff, the Group's chief executive officer stepped down from the Board and left the Group with immediate effect;
Michael Nower was appointed to the Board as interim chief executive office on 13 February 2008, and assumed the role of non-executive director on 13 June 2008;
Simon Wharmby and Patricia Farley stepped down from the Board at the Group's AGM on 25 April 2008.
The Group was substantially built up through acquisitions in 2006 and 2007, prior to the appointment of myself as Chairman, James Lugg as Non-Executive Director and Michael Nower as Non-Executive Director (formerly Interim Chief Executive Officer). I would like to thank the current Board of Directors, including Nigel Cartwright the Finance Director, who have all worked tirelessly in recent months in achieving an orderly divestment of the Company's operating businesses.
Staff
I would also like to express my gratitude to all of Humberts' staff for their continued loyalty and support since my appointment. Without this commitment, it would have been impossible to achieve the orderly divestment of the Company's businesses since 31 March 2008.
Nominated advisor
The resignation of our Nominated Advisor, Panmure Gordon (UK) Ltd, on 2 June 2008, means that the admission of the Company's shares to trading on AIM will be cancelled on 2 July 2008. In order to further minimise costs, the Company has taken the decision not to seek to appoint a further nominated advisor and therefore to accept the cancellation of trading on AIM in the Company's shares.
Winding down progress
The Company now has a skeleton staff who will be carrying out an orderly winding down of the Company over the coming months ahead. The Board will make further announcements on the progress of the winding down in due course.
John McLean
Chairman
27 June 2008
Consolidated profit and loss account
For the six months ended 31 March 2008
| 6 months to | 6 months to | Year to | |
| 31 March | 31 March | 30 September | |
| 2008 | 2007 | 2007 | |
| Unaudited | Unaudited | Audited | |
| £000 | £000 | £000 | |
| Turnover | 15,033 | 13,619 | 31,870 |
| Staff costs | (9,281) | (7,320) | (17,034) |
| Other operating charges | (21,702) | (4,847) | (32,631) |
| Underlying (loss)/earnings before interest, depreciation and amortisation | (462) | 1,866 | 4,292 |
| Exceptional operating costs | (308) | (96) | (945) |
| Depreciation and amortisation | (1,231) | (318) | (2,703) |
| Impairment of goodwill and winding down provision | (13,949) | - | (18,439) |
| Operating (loss)/profit | (15,950) | 1,452 | (17,795) |
| Interest receivable (net) | 71 | 147 | 291 |
| (Loss)/profit before taxation | (15,879) | 1,599 | (17,504) |
| Taxation | - | (487) | 463 |
| (Loss)/profit for the financial period | (15,879) | 1,112 | (17,041) |
| (Loss)/earnings per share: | Pence | Pence | Pence |
| Basic | (25.55) | 2.20 | (31.39) |
| Diluted | (25.55) | 2.11 | (31.39) |
Following the disposal of all of the Group's operating businesses after 31 March 2008, the Company now has no trading subsidiaries.
Consolidated balance sheet
At 31 March 2008
| 31 March | 31 March | 30 September | |
| 2008 | 2007 | 2007 | |
| Unaudited | Unaudited | Audited | |
| £000 | £000 | £000 | |
| Fixed assets | |||
| Goodwill | 8,257 | 24,688 | 16,717 |
| Tangible fixed assets | 3,382 | 2,600 | 3,592 |
| 11,639 | 27,288 | 20,309 | |
| Current assets | |||
| Trade and other debtors | 8,631 | 6,349 | 10,061 |
| Cash | - | 10,693 | 4,841 |
| 8,631 | 17,042 | 14,902 | |
| Creditors: amounts falling due within one year | (6,792) | (6,833) | (10,742) |
| Net current assets | 1,839 | 10,209 | 4,160 |
| Total assets less current liabilities | 13,478 | 37,497 | 24,469 |
| Creditors: amounts falling due after more than one year | (1,380) | (1,553) | (1,697) |
| Provisions for liabilities and charges | (11,948) | (4,061) | (6,104) |
| Net assets | 150 | 31,883 | 16,668 |
| Capital and reserves | |||
| Share capital | 3,110 | 2,848 | 3,100 |
| Share premium account | 20,173 | 18,011 | 20,028 |
| Other reserves | 5,146 | 4,474 | 5,301 |
| Retained earnings | (28,279) | 6,550 | (11,761) |
| Shareholders' funds | 150 | 31,883 | 16,668 |
Statement of Group total recognised gains and losses
| 31 March | 31 March | 30 September | |
| 2008 | 2007 | 2007 | |
| Unaudited | Unaudited | Audited | |
| £000 | £000 | £000 | |
| (Loss)/profit for the period | (15,879) | 1,112 | (17,041) |
| Unrealised surplus on revaluation of properties | - | 50 | 50 |
| Total recognised (losses)/gains for the period | (15,879) | 1,162 | (16,991) |
Reconciliation of movements in Group shareholders' funds
| 31 March | 31 March | 30 September | |
| 2008 | 2007 | 2007 | |
| Unaudited | Unaudited | Audited | |
| £000 | £000 | £000 | |
| (Loss)/profit for the period | (15,879) | 1,112 | (17,041) |
| Dividends | - | (788) | (1,195) |
| Employee share schemes | (639) | 238 | 460 |
| Share capital issued for cash | - | 10,935 | 10,956 |
| Purchase of own shares | - | (94) | (130) |
| Arising on acquisitions | - | 2,849 | 5,987 |
| Revaluation | - | 50 | 50 |
| Net change in shareholders' funds | (16,518) | 14,302 | (913) |
| Opening shareholders' funds | 16,668 | 17,581 | 17,581 |
| Closing shareholders' funds | 150 | 31,883 | 16,668 |
Consolidated cash flow statement
For the six months ended 31 March 2008
| 6 months to 31 March 2008 Unaudited £000 | 6 months to 31 March 2007 Unaudited £000 | Year to 30 September 2007 Audited £000 | ||
| Reconciliation of operating loss to net cash flow from operating activities | ||||
| Operating (loss)/profit | (15,950) | 1,452 | (17,795) | |
| Depreciation and amortisation | 1,231 | 318 | 2,694 | |
| Goodwill impairment and winding down provision | 13,949 | - | 18,439 | |
| Employee share scheme | (639) | 238 | 460 | |
| (1,409) | 2,008 | 3,798 | ||
| Decrease/(increase) in debtors | 1,430 | (690) | (2,200) | |
| (Decrease)/increase in creditors | (2,712) | (694) | 1,785 | |
| Net cash (outflow)/inflow from operating activities | (2,691) | 624 | 3,383 | |
| Returns on investments and servicing of finance | 71 | 221 | 490 | |
| Tax paid | (343) | (207) | (938) | |
| Capital expenditure and financial investment | ||||
| Purchase of tangible fixed assets | (259) | (941) | (1,807) |
|
| Acquisitions | ||||
| Purchase of subsidiary undertakings including deferred consideration | (1,648) | (6,517) | (13,727) | |
| Dividends | - | (788) | (1,190) | |
| Financing | ||||
| Issue of share capital | - | 10,935 | 10,956 | |
| Purchase of own shares | - | (95) | (130) | |
| Capital element of finance lease payments | (95) | (123) | (189) | |
| (95) | 10,717 | 10,637 | ||
| (Reduction)/increase in cash | (4,965) | 3,109 | (3,152) | |
| Cash at beginning of period | 4,432 | 7,584 | 7,584 | |
| Cash/(overdraft) at end of period | (533) | 10,693 | 4,432 |
Segmental analysis
For the six months ended 31 March 2008
| 6 months to | 6 months to | Year to | |
| 31 March | 31 March | 30 September | |
| 2008 | 2007 | 2007 | |
| Unaudited | Unaudited | Audited | |
| £000 | £000 | £000 | |
| Revenue | |||
| Residential sales | 6,876 | 7,598 | 17,551 |
| Professional and commercial services | 1,991 | 1,791 | 3,742 |
| Rural services | 2,396 | 1,389 | 2,814 |
| New homes and land services | 902 | 989 | 2,063 |
| Lettings services | 2,055 | 1,351 | 3,615 |
| Fine arts | 278 | 95 | 286 |
| Other services | 535 | 406 | 1,799 |
| 15,033 | 13,619 | 31,870 |
Operating costs and assets and liabilities are monitored on a combined basis and it is therefore not possible to analyse these by business division.
Notes to the consolidated interim report
For the six months ended 31 March 2008
1. GENERAL INFORMATION
Humberts Group plc is a public limited company ("the Company") incorporated in the United Kingdom under the Companies Act 1985 (registration number 4058708). The Company is domiciled in the United Kingdom and its registered address is 17 Hanover Square, London W1S 1HU. The Company's Ordinary Shares are traded on the AIM market of the London Stack Exchange plc ("AIM"). However, as indicated in the Chairman's statement, the trading of the Company's Ordinary Shares on AIM will be cancelled as from 2 July 2008.
2. BASIS OF PREPARATION
This interim report, which has been neither audited nor reviewed by the Company's auditors, was approved by the Board of Directors on the 23 June 2008. It has been prepared generally following the accounting policies set out in the Group 2007 Annual Report and Accounts, but amended as appropriate to include the basis of preparation on a break up basis, following the disposal of all the Group's operating businesses since 31 March 2008, as set out in the Chairman's Statement.
Whilst the accounts at 31 March 2008 include the assets and liabilities of the Group as it existed on that date, they also include a partial impairment charge for goodwill and a provision to wind down the Company in an orderly basis. Following certain agreements reached after 31 March 2008, the full year accounts to 30 September 2008 will bear an additional charge for goodwill impairment of approximately £7.0 million, with a corresponding reduction in amounts owed to the vendors of certain of the businesses acquired in 2006 and 2007.
3. (LOSS)/EARNINGS PER SHARE
The (loss)/earnings per share calculations have been arrived at by reference to the following earnings and weighted average number of shares in issue during the period.
| 6 months to | 6 months to | Year to | |
| 31 March | 31 March | 30 September | |
| 2008 | 2007 | 2007 | |
| Unaudited | Unaudited | Audited | |
| £000 | £000 | £000 | |
| Basic | |||
| (Loss)/profit for the financial period after taxation | (15,879) | 1,112 | (17,041) |
| '000 | '000 | '000 | |
| Weighted average number of shares in issue | 62,155 | 50,656 | 54,288 |
| Weighted average number of shares on a diluted basis | 62,155 | 52,802 | 54,288 |
4. OTHER INFORMATION
The interim financial statements have not been prepared in accordance with IFRS, because the Directors do not consider it is appropriate to incur unnecessary costs for this transition, given that all of the Company's operating businesses have been disposed of since 31 March 2008.
The interim financial statements do not constitute statutory accounts as defined by Section 240 of the Companies Act 1985. The financial information for the year ended 30 September 2007 has been extracted from the statutory accounts for the Group for that period. These published accounts in a form consistent with UK GAAP were reported on by the auditors without qualification but included an emphasis of matter relating to the uncertainty of the Company's ability to continue as a going concern. The published accounts did not include a statement under Section 237(2) or (3) of the Companies Act 1985 and have been delivered to the Registrar of Companies.
5. PUBLISHING THE INTERIM ACCOUNTS ON THE RNS ONLY
In an effort to further reduce costs and in accordance with the AIM rules, this Interim Report will be announced on the Regulatory News Service and published on the Company's website, www.humbertsgroup.co.uk, but it will not be posted to shareholders.