TIDMFLK
RNS Number : 8189Y
Fletcher King PLC
14 September 2020
FLETCHER KING PLC
Audited results for the Year Ending 30(th) April 2020
Highlights
-- Revenue for the year of GBP2,616,000 (2019: GBP3,053,000)
-- Statutory profit before tax of GBP76,000 (2019: GBP282,000)
-- Adjusted profit before tax of GBP243,000 (2019: GBP282,000) *
-- Cash generated from operations of GBP917,000 (2019: GBP458,000 absorbed by operations)
-- Adjusted basic earnings per share of 2.20p (2019: 2.50p) *
-- Final dividend of 0.50p per share proposed. An interim
dividend of 1.00p per share was paid and therefore the total
ordinary dividend for the year will be 1.50p per share (2019:
1.75p)
-- Sale of interest in SHIPS 15 Syndicate realising profit of GBP99,000
-- Significant cash reserves: GBP3.6m as at 30 April 2020
-- Well positioned to withstand current crisis
*Adjusted results are before share based payment expenses and
after other comprehensive income (see note 2). All share options
were surrendered in the year. However, the Company is required
under IFRS 2 to recognise a share based payment charge of GBP68,000
(2019: GBPnil). The Company realised a profit of GBP99,000 on
disposal of the SHIPS 15 syndicate investment. However, the Company
is required under IFRS 9 to include this as a fair value gain in
"other comprehensive income".
Commenting on the results, David Fletcher, chairman of Fletcher
King Plc said:
"In a financial year dominated by Brexit and political
uncertainties, it is pleasing to report performance that is only
slightly reduced from last financial year, and also to propose a
final dividend to shareholders.
We have now moved into even more uncertain times and it is
impossible to accurately assess our future trading performance in
current market conditions. However, our strong balance sheet and
significant cash reserves provide good support to help us withstand
the current economic crisis".
This announcement contains inside information for the purposes
of Article 7 of EU regulations 596/2014.
For further information, please call:
David Fletcher/Peter Bailey, Fletcher King 020 7493 8400
James Caithie/Liam Murray, Cairn Financial Advisers LLP 020 7213
0880
CHAIRMAN'S STATEMENT
Results
Revenue for this year was GBP2,616,000 (2019: GBP3,053,000).
Adjusted profit before tax (see note 2) was GBP243,000 (2019:
GBP282,000). Statutory profit before tax was GBP76,000 (2019:
GBP282,000)
The Board considers the adjusted results to be an important
measure of performance and to be more representative of performance
for the year than the statutory results (which have been prepared
in accordance with International Financial Reporting Standards).
Adjusted results include the profit on disposal of the SHIPS 15
syndicate interest for GBP99,000 and exclude a share based payment
expense of GBP68,000 (2019: GBPnil) that is required to be
recognised in the accounts even though all outstanding EMI options
were surrendered in the year.
Dividend
The Board is proposing a final dividend of 0.5p per share. The
final dividend is subject to shareholder approval at the AGM and
will be paid on 30 October 2020 to shareholders on the register at
the close of business on 2 October 2020. With the interim dividend
of 1.00p per share (2019: 1.00p per share) the dividend for this
year will amount to 1.50p per share (2019: 1.75p per share).
The Commercial Property Market
The year to 30 April 2020 was a difficult one in the industry
with both Brexit and political uncertainties adversely affecting
the market.
Generally tenants in all sectors were deferring decisions and
whilst there was reasonable demand for offices and industrials, the
retail sector continued its decline. There were plenty of funds
available for investment but buyers remained cautious.
After the General Election and the return of a Conservative
Government with the largest majority for decades, the market began
to move forward and there was enthusiasm from both investors and
tenants to make decisions and plan for the future. For a few busy
weeks the skies looked blue, and then there was the emergence of
Covid-19 and lockdown.
Since then the commercial property market has been in a state of
flux. Retail continues to suffer with no end in sight yet to its
downward spiral. There is little leasing activity and with an
ever-increasing number of retailers facing the prospect of
bankruptcy, both rental and capital values are continuing to fall.
However, since lock-down, on-line retailing has grown strongly and
now represents over 30% of all purchases but this, of course, is
further hastening the potential demise of the High street.
Within the commercial property market, conversely the industrial
property market is very buoyant, driven in large part by demand
from online sales and a lack of good quality property stock. Both
rental and capital values are continuing to grow and there is
strong demand from institutional investors, property companies and
high net worth individuals.
The office lettings and capital markets remain slow. Even before
Covid many tenants were assessing their future work practices by
implementing more hot desking and reducing their space
requirements. We believe that lockdown has accelerated that process
by as much as five years.
Office workers need to get back to work in the big city centres
for the survival of the infrastructure of shops, restaurants,
coffee shops, dry cleaners etc. However there remains a fear factor
for commuters using public transport and the safety issue may well
not go away until there is a vaccine. We believe the office market
will return strongly but the timing is impossible to predict.
Business Overview
With challenging market conditions, it proved to be a difficult
trading period with revenue lower than the previous financial year.
This was compensated by increased income from SHIPS investments and
overall adjusted profit for the Group was only slightly lower than
last year.
The Investment team transacted a similar number of deals to last
year but the average deal size, and consequential fee, was
significantly lower.
The volume of bank valuations was also down and the Valuation
Office continues to delay settling rating appeals.
The Property Management team strengthened their portfolio of
client instructions with additional Fund Management mandates and
this provides valuable recurring revenue for the Company.
The SHIPS investment in Sekforde Street was sold during the year
realising a profit for investors in the fund. We continue to hold
an investment in the SHIPS property in Botolph Lane where there
remain two vacant floors.
All employees have been working from home since 17 March 2020
and the health and wellbeing of employees is of paramount
importance. The Company has invested in systems and processes to
support remote working and all teams have been functioning well in
the new environment.
Outlook
Whilst there is huge uncertainty caused by the Covid-19 virus,
it seems increasingly likely that the wider economic impact will be
severe and prolonged. The UK government has taken unprecedented
measures to support businesses during the initial lockdown phase,
but as support measures are wound down and businesses are forced to
make tough decisions, the longer-term economic impact will be
brought more sharply into focus.
It is very difficult to accurately assess our future trading
performance in the current market conditions. It will be extremely
challenging to remain profitable and it is very likely that the
Company will make a loss in the first half of its financial
year.
Since the year end, we have renewed our Professional Indemnity
cover and been faced with a severe contraction in the market for
such insurance, particularly with regard to our property valuation
work. The premium has increased by just over GBP200,000 for the
financial year.
We expect Fund and Property management mandates to continue to
provide stable and recurring fee income. We are fortunate that the
majority of the portfolios that we manage are focussed on
industrial and office sectors with much lower exposure to retail,
leisure and hospitality.
Transaction based fees such as investment deals and bank
valuations rely on activity in the market and fees have been
materially lower than normal since the commencement of lockdown.
The investment team has an encouraging pipeline of instructions and
potential deals but there is huge uncertainty around the timing or
likelihood of completions. It remains to be seen how strongly
activity returns to the market but it is likely that transaction
based fees for the year will be materially lower than would
otherwise be expected.
The Company is in a good position to withstand the current
crisis and continues to have a strong balance sheet, with cash
reserves of GBP3.6m as at 30 April 2020. The Company has not drawn
on any of the support measures offered by the government in
response to Covid-19.
Working closely with our loyal clients and experienced
colleagues we have an established and stable partnership to take us
through these difficult and challenging times.
DAVID FLETCHER
CHAIRMAN
14 September 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 April 2020
Note 2020 2019
GBP000 GBP000
Revenue 2,616 3,053
Employee benefits expense (1,441) (1,648)
Depreciation expense 5 (278) (3)
Other operating expenses (910) (1,218)
Share based payment expense (68) -
-------- --------
(2,697) (2,869)
Other operating income 57 91
Investment income 113 -
Finance income 14 7
Finance expense 5 (27) -
-------- --------
Profit before taxation 76 282
Taxation (40) (52)
-------- --------
Profit for the year 36 230
Other comprehensive income
Fair value gain on financial assets 99 -
through
Other comprehensive income
Total comprehensive income for
the year attributable to equity
shareholders 135 230
Earnings per share
Basic 4 0.39p 2.50p
Diluted 4 0.39p 2.50p
Adjusted earnings per share
Basic 4 2.20p 2.50p
Diluted 4 2.20p 2.50p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 April 2020
2020 2019
GBP000 GBP000
Assets
Non-current assets
Property, plant and equipment 21 9
Right-of-use asset (see note 5) 544 -
Financial assets 630 1,603
Deferred tax assets - 16
------- -------
1,195 1,628
------- -------
Current assets
Trade and other receivables 680 1,809
Cash and cash equivalents 3,624 2001
------- -------
4,303 3,810
------- -------
Total assets 5,499 5,438
------- -------
Liabilities
Current liabilities
Trade and other payables 689 1,204
Current taxation liabilities 35 24
Lease liabilities (see note 5) 299 -
1,023 1,228
------- -------
Non current liabilities
------- -------
Lease liabilities (see note 5) 262 -
------- -------
Total liabilities 1,285 1,228
------- -------
Shareholders' equity
Share capital 921 921
Share premium 140 140
Investment revaluation reserve - -
Retained Earnings 3,153 3,149
------- -------
Total shareholders' equity 4,214 4,210
------- -------
Total equity and liabilities 5,499 5,438
------- -------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 April 2020
2020 2019
GBP000 GBP000
Cash flows from operating activities
Profit before taxation from continuing
operations 76 282
Adjustments for:
Depreciation expense 278 3
Investment income (113) -
Finance income (14) (7)
Finance expense 27 -
Share based payment expense 68 -
------- -------
Cash flows from operating activities
before
movement in working capital 322 278
(Increase)/decrease in trade and
other receivables 1,077 (892)
Increase/(decrease) in trade and
other payables (468) 226
------- -------
Cash (absorbed)/generated from
operations 931 (388)
Taxation paid (14) (70)
------- -------
Net cash flows from operating activities 917 (458)
------- -------
Cash flows from investing activities
Purchase of investments - (15)
Sale of investments 1,072 -
Purchase of fixed assets (18) -
Investment income 113 -
Finance income 14 7
Net cash flows from investing activities 1,181 (8)
------- -------
Cash flows from financing activities
Lease payments (314) -
Dividends paid to shareholders (161) (161)
------- -------
Net cash flows from financing activities (475) (161)
------- -------
Net decrease in cash and cash equivalents 1,623 (627)
Cash and cash equivalents at start
of year 2,001 2,628
------- -------
Cash and cash equivalents at end
of year 3,624 2,001
------- -------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 April 2020
Note Share Share Retained TOTAL
capital premium Earnings EQUITY
GBP000 GBP000 GBP000 GBP000
Balance at 1 May 2018 921 140 3,080 4,141
Total comprehensive income
for the year - - 230 230
Equity dividends paid 2 - - (161) (161)
Balance at 30 April 2019 921 140 3,149 4,210
Adjustment on initial application
of
IFRS 16 (net of tax) - - (38) (38)
Adjusted balance as at 1 May
2019 921 140 3,111 4,172
Total comprehensive income
for the year - - 135 135
Equity dividends paid 2 - - (161) (161)
Share based payment expense - - 68 68
Balance at 30 April 2020 921 140 3,153 4,214
---------- ---------- ----------- ---------
NOTES
1. General information
Whilst 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) as adopted by the European Union, this
announcement does not itself contain sufficient information to
comply with IFRSs.
The financial information is presented in pounds sterling,
prepared on a historical cost basis, except for the revaluation of
contingent considerations and rounded to the nearest thousand. The
financial information set out in this announcement does not
comprise the Group's statutory accounts for the years ended 30
April 2020 or 30 April 2019.
The financial information for the year ended 30 April 2019 is
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The auditors reported on
those accounts; their report was unqualified and did not contain a
statement under either Section 498 (2) or Section 498 (3) of the
Companies Act 2006 and did not include references to any matters to
which the auditor drew attention by way of emphasis.
The statutory accounts for the year ended 30 April 2020 have not
yet been delivered to the Registrar of Companies, nor have the
auditors yet reported on them.
2. Alternative performance measures - profit reconciliation
The reconciliation set out below provides additional information
to enable the reader to reconcile to the numbers discussed in the
Chairman's Statement and Highlights section.
Year ended 30 April 2020 2019
GBP000 GBP000
Profit before taxation 76 282
Add back: Share based payment expense 68 -
Include: Fair value gain on financial assets 99 -
through OCI
Adjusted profit before share based payment
expense and taxation 243 282
Taxation (40) (52)
Adjusted profit after tax for the year 203 230
------- -------
The fair value gain on financial assets represents the realised
gain in the year on the disposal of the Group's interest in the
SHIPS 15 syndicate. The profit is shown in the Consolidated
Statement of Comprehensive Income as other comprehensive income.
The Company has accounted for the surrender of options in the year
as a cancellation, in accordance with IFRS 2, resulting in an
acceleration of vesting and a share based payment charge of
GBP68,000 (2019: GBPnil). The charge reflects the amount that
otherwise would have been recognised for services received over the
remainder of the vesting period (all outstanding options were
surrendered in the year).
3. Dividends
Year ended 30 April 2020 2019
GBP000 GBP000
Equity dividends on ordinary shares:
Declared and paid during year
Ordinary final dividend for the year ended
30 April 2019: 0.75p per share (2018: 0.75p) 69 69
Interim dividend for the year ended 30
April 2020: 1.00p per share (2019: 1.00p) 92 92
------- -------
161 161
------- -------
Proposed ordinary final dividend for the
year ended
30 April 2020: 0.50p per share 46
-------
4. Earnings per share
Number of shares 2020 2019
No No
Weighted average number of shares for basic
earnings per share 9,209,779 9,209,779
Share options - -
------------ ------------
Weighted average number of shares for diluted
earnings per share 9,209,779 9,209,779
============ ============
Earnings GBP'000 GBP000
Profit after tax for the year 36 230
(used to calculate the basic and diluted
earnings per share)
Add back: Share based payment expense 68 -
Include: Fair value gain on financial assets 99 -
through OCI
Adjusted profit after tax for the year 203 230
------------ ------------
(used to calculate the adjusted basic and
diluted earnings per share)
Earnings per share
Basic 0.39p 2.50p
Diluted 0.39p 2.50p
Adjusted earnings per share
Basic 2.20p 2.50p
Diluted 2.20p 2.50p
Share options were granted in March 2019 and October 2016. All
share options were surrendered in April 2020. The share options
were non-dilutive for the years ending 30 April 2019 and 2020 and
as a result were not included within the weighted average number of
shares for the diluted earnings per share calculations.
5. Adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
"operating leases" under the principles of IAS 17 Leases. The
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as at 1 May 2019.
The Group has adopted IFRS 16 using the modified retrospective
method (including appropriate practical expedients), with the
effect of initially applying this standard at the date of initial
application. Accordingly, the comparative information presented for
the prior year has not been restated and it is presented, as
previously reported, under IAS 17 and related interpretations.
The Group has reviewed the lease terms of its leases in force at
the date of transition and has identified one relevant lease, being
the lease of the Group's office at Conduit Street, London. The
lease terminates on 3 May 2022.
The Group has concluded that the interest rate implicit in the
lease cannot be readily determined and therefore the lease has been
discounted by the incremental borrowing rate (IBR) of 4.0%, being
the rate of interest that the group would have to pay to borrow
over a similar term, and with a similar security, the funds
necessary to obtain assets of a similar value to the right-of-use
asset in a similar economic environment.
Transition to IFRS 16 requires the right-of-use asset to be
recognised at the carrying amount as if IFRS 16 had been applied
since the lease commencement date, as discounted by the incremental
borrowing rate at the date of initial application. This has led to
a decrease in retained earnings as at 1 May 2019, net of tax, of
GBP38,000.
The table below reconciles the measurement of lease liabilities
upon transition with reference to operating lease commitments at 30
April 2019.
GBP000
Operating lease commitments at 30 April 2019 per
IAS 17 895
Discounted using incremental borrowing rate at 1
May 2019 (47)
---------
Lease liability recognised at 1 May 2019 per IFRS
16 848
---------
The balance sheet shows the following amounts relating to lease
liabilities:
GBP000
As at 1 May 2019 -
Change in accounting policy (adoption of IFRS 16) 848
-------
As at 1 May 2019 (restated) 848
Repayment of lease liabilities (314)
Unwinding of discount 27
-------
Closing amount as at 30 April 2020 561
-------
Current lease liabilities 299
Non-current lease liabilities 262
-------
561
-------
Under IFRS 16, the Company has recognised a combined
depreciation charge and interest expense in the year of GBP299,000.
Under IAS 17, the charge in respect of lease costs would have been
GBP302,000. There has been no impact on cash flows.
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END
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