Final Results
Fletcher King PLC
11 July 2006
PRESS RELEASE
Not for release before 0700, 11 July 2006
FLETCHER KING PLC
INCREASES PRE TAX PROFITS AND ANNOUNCES INCREASED DIVIDEND
Fletcher King, the London based property fund managers, asset managers and
chartered surveyors, announces today its preliminary results for the year ended
30 April 2006.
Financial highlights:
• Profit before tax up 10% to £600,000 (2005: £546,000)
• Final ordinary dividends up 25% to 2.5 pence per share (2005: 2.0 pence
per share)
• Earnings per share (EPS) up 14% to 5.09 pence (2005: 4.46 pence)
• Net assets up 13% to £3,263,000 (2005: £2,896,000)
Operational highlights:
• Fund Management and Investment department carried out approximately £100
million worth of transactions
• Second Stratton House Investment Property Syndicate now 75% invested, and
currently outperforming target returns
• Asset Management department saw improvement in profitability
• Volume of valuation instructions increased by 20% over last year, and
average fee per client increased by 25%
• Fletcher King Howard, Fletcher King's wholly owned construction services
subsidiary, increased profitability in line with expectations
Commenting, David Fletcher, Chairman of Fletcher King, said:
'These results represent a solid year for Fletcher King, with profits before tax
up 10%, and I am delighted to recommend the payment of a significantly increased
dividend. I look forward to an exciting year for the Group and anticipate that
we will continue to take full advantage of the growth opportunities that we have
identified for the coming year.'
For further information:
David Fletcher, Fletcher King 020 7493 8400
Tim McCall, MJ2 Business Communications 020 7491 7776
CHAIRMAN'S STATEMENT
RESULTS
Turnover for the year was £6.117m (2005: £6.093m) with profit before tax of
£600,000 (2005: £546,000). The Board is proposing a final dividend of 2.5p per
share (2005: 2.0p). The final dividend is subject to shareholders' approval at
the Annual General Meeting and will be paid on 27 September 2006 to shareholders
on the register at the close of business on 1 September 2006. With the interim
dividend of 0.63p per share (2005: 0.5p) already paid, the total ordinary
dividend for the year will amount to 3.13p per share (2005: 2.5p plus a special
dividend of 1.0p per share).
Our head office lease expired in March 2006. A new lease has been taken for 18
months after which time the landlords are obtaining vacant possession of the
building for refurbishment. The statutory compensation received of £237,000 will
be retained to help fund the move to new premises.
INTERNATIONAL ACCOUNTING STANDARDS
For the year ended 30 April 2006, the Group has prepared its financial
statements in accordance with International Financial Reporting Standards
('IFRS'). The comparative information in these financial statements has
therefore been restated under IFRS.
THE COMMERCIAL PROPERTY MARKET
The commercial property market has generally continued the trend of the last few
years. Letting markets have been relatively positive throughout the country,
with the previously slow office letting markets of Mid Town, the City and
Docklands also showing positive trends in the last 12 months. Demand for offices
in the Thames Valley and the Western Approaches have also seen more positive
activity.
The industrial market remains active and the trend for owner occupation of
smaller units continues. Out of town retail remains buoyant and there is still
competition for prime units in most High Streets even though profit levels for
retailers are under pressure.
The strength of the investment market is undiminished and although many in the
industry continue to call the top of the market, we believe there is still a
likelihood of a further 25 basis points compression in yields in the coming
year. The volume of money seeking a home in the commercial investment market is
measured in billions and this continued weight of money will maintain extensive
liquidity in the market for some time to come. Fluctuation in the 5 year swap
rate has cooled some debt financed purchasing but any slack has been taken up by
other sectors of the market. The introduction of REITs early next year is likely
to create further demand for investment property.
Property investment returns for the year to the end of March were 20.1% as
measured by IPD and are likely to be around 12% for the coming year. At this
level property will again produce an excellent return.
Our second Stratton House Investment Property Syndicate is now 75% invested and
is currently outperforming its target returns. We anticipate being fully
invested within the next few months and plan to launch a third fund in the
autumn.
THE OUTLOOK FOR 2006/2007
Flowing from the stronger letting markets, I anticipate there will be modest
rental growth across most sectors in the coming year which will further underpin
the strength of the investment market. The increasing weight of money in the
market will lead to a further contraction in yields and property will again be a
strong performer in the coming year.
I believe that we are well placed to capitalise on these opportunities and, with
some excellent business in the pipeline, I look forward to a year of growth.
David Fletcher
Chairman
11 July 2006
DIVISIONAL REVIEW
FLETCHER KING
Fund Management and Investment
The return on property during the year was excellent and there was an increase
in funds allocated to the sector by UK institutions, private investors and
overseas investors. UK institutions were net buyers in the year although
overseas investors were the single largest investor with a net commitment of
£6.2b. Yields continued to harden and the IPD equivalent yield fell during the
first three months of 2006, taking it down to an historical low of 5.84%. It is
likely that UK institutions will be the biggest force in the market over the
next 12 months, with overseas investors still fairly active and debt financed
buyers likely to be quieter.
The department had an active year, carrying out approximately £100m worth of
transactions, 70% of which were purchases. Fund management also increased and
now represents 40% of the fee income of the department.
All of our major clients were active and investments were handled across all of
the use classes. Significant purchases included two central London office
buildings for £7.5m and £5m, warehouse fundings in Maidstone and Orpington of
£15m, Dundee retail units £6m, units on Business Parks at Brooklands and Ascot
of £7.5m and £10.5m, and a £4m office purchase in Queen Square, Bristol.
The coming year is likely to be very active and already we have a prospective
£60m of transactions in the pipeline, some of which did not complete prior to 30
April 2006 and have therefore rolled over into the new financial year
Asset Management
As reported at the half year, the department underwent some restructuring and
relinquished an unprofitable client which accounted for in excess of £200,000 of
turnover. Continued attention is being devoted to streamlining our
administrative processes to improve profitability in what is recognised in the
industry as a low margin sector of the business.
House clients who use the department's services are budgeting to acquire at
least £50m of additional property in the coming year, all of which will be
managed by the department.
The facilities management structure, mentioned in my report last year, is now
working efficiently and has improved service to our clients and their tenants.
It has enhanced the speed of response and reduced central administration.
The profitability of the department has improved this year and we anticipate
this will continue in the coming year.
Rating and Valuation
The volume of valuation instructions increased by 20% over last year and the
average fee per client increased by 25%. Clydesdale Bank Plc and Coutts & Co
were among those added to the department's list of valuation clients.
Another steady year is predicted for valuation work with the department aiming
to continue to increase the size of individual valuation instructions and thus
the average fee. Rating fee income was down by 9% over the previous year as the
last of the 2000 Rating List appeals were concluded.
Notable reductions were achieved for Avis and Computacenter on their Thames
corridor offices where we successfully argued that over-supply in the area was a
material change of circumstances and should be taken into account by the
Valuation Officer. A highly successful 9% reduction was also achieved in the
City of London for Standard Bank on their headquarters on Cannon Bridge.
The 2005 Rating List appeals are being targeted by the Valuation Office far more
rapidly than had been anticipated and thus the department is likely to have a
heavy workload in the coming 12 months.
Landlord & Tenant
The department enjoyed another successful year with increased turnover and
profitability and in excess of 60 rent reviews and lease renewals completed
throughout the country. The department is cross-selling its services to clients
of other parts of our business and anticipates an increase in turnover and
profitability in the coming year.
FLETCHER KING HOWARD
Our wholly-owned Construction Services subsidiary again performed well during
the year, increasing its profitability in line with expectations.
The business continues to work on a diverse range of projects and, during the
year, completed the Empress Grandstand at Towcester Racecourse and the £10.5m
Malcolm Arnold House for St. Andrew's Hospital, which won the National
Healthcare Design Award for 2006. Headquarters' office buildings were completed
for Allied Irish Bank and Lambert Smith Hampton.
Activity continues on the £11m Conference Centre for Hayley Conferences at
Windsor and the £9.4m re-modelling of the Northampton School for Boys. This
education theme continues with a £9.6m commission on PFI Schools in Northampton.
Work has started on two mental healthcare projects for St. Andrew's Hospital and
a logistics unit for Monarch Airlines at Luton Airport. A £30m Agri-Processing
Plant is underway in Lincolnshire and a £4m Design Centre for Berkhamsted
Collegiate School has started on site.
The forward order book shows healthy signs with a 124-bed Travelodge Hotel for
Blackpool Football Club, another large mental healthcare commission from St
Andrew's Hospital, and a 4-year rolling programme for the Vehicle and Operator
Services Agency (VOSA) to refurbish all their existing depots throughout the UK.
CONSOLIDATED INCOME STATEMENT
Year ended 30 April 2006 2005
£000 £000
Revenue 6,117 6,093
Employee benefits expense (4,019) (3,864)
Depreciation expense (86) (74)
Other operating expenses (1,747) (1,808)
------- -------
Operating profit 265 347
Other income 237 -
Income from investments 34 30
Finance income 66 66
Finance costs (2) (2)
Profit on disposal of interest
in associated undertaking - 105
------- -------
Profit before taxation 600 546
Taxation (136) (153)
------- -------
Profit for the year after taxation
attributable to equity shareholders 464 393
------- -------
Basic earnings per share 5.09p 4.46p
Diluted earnings per share 5.06p 4.41p
Dividends:
Year ended 30 April 2006 2005
£000 £000
Equity dividends on ordinary shares:
Declared and paid during year
Ordinary final dividend for the year ended
30 April 2005: 2.0p per share (2004: 1.0p) 184 88
Special final dividend for the year ended
30 April 2005: 1.0p per share (2004: 1.0p) 92 88
Interim dividend for the six months ended
31 October 2005: 0.63p per share (2004: 0.50p) 58 44
------- -------
334 220
------- -------
Proposed ordinary final dividend for the year
ended 30 April 2006: 2.5p per share 230
-------
CONSOLIDATED BALANCE SHEET
As at 30 April 2006 2005
£000 £000
Assets
Non-current assets
Property, plant and equipment 144 162
Available-for-sale investments 597 797
------- -------
741 959
------- -------
Current assets
Trade and other receivables 1,485 1,630
Amounts recoverable on contracts 202 199
Cash and cash equivalents 2,143 1,917
------- -------
3,830 3,746
------- -------
Non-current assets classified as held for sale 393 -
------- -------
Total assets 4,964 4,705
------- -------
Liabilities
Current liabilities
Trade and other payables 359 400
Current taxation liabilities 135 153
Other creditors and provisions 1,085 1,192
------- -------
1,579 1,745
------- -------
Non-current liabilities
Deferred taxation liabilities 122 64
------- -------
Total liabilities 1,701 1,809
------- -------
Shareholders' equity
Share capital 921 881
Share premium 140 76
Reserves 2,202 1,939
------- -------
Total shareholders' equity 3,263 2,896
------- -------
Total equity and liabilities 4,964 4,705
------- -------
CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 April 2006 2005
£000 £000
Cash flows from operating activities
Profit before taxation 600 546
Adjustments for:
Depreciation expense 86 74
Income from fixed asset investments (34) (30)
Interest expense 2 2
Interest income (66) (66)
Profit on disposal of interest in associated
undertaking - (105)
------- -------
Cash flows from operating activities before
movement in working capital 588 421
Decrease / (increase) in trade and other
receivables 145 (176)
(Decrease) / increase in trade and other
payables (148) 301
Increase in work in progress (3) (32)
------- -------
Cash generated from operations 582 514
Interest paid (2) (2)
Taxation paid (156) (114)
------- -------
Net cash flows from operating activities 424 398
------- -------
Cash flows from investing activities
Purchases of equipment (68) (74)
Proceeds from sale of equipment - 16
Proceeds from sale of interest in associated
undertaking - 132
Purchase of investments - (250)
Interest received 66 66
Income from non-current asset investments 34 30
------- -------
Net cash flows from investing activities 32 (80)
------- -------
Cash flows from financing activities
Capital element of finance lease payments - (17)
Proceeds from the issue of equity shares 104 -
Dividends paid to shareholders (334) (220)
------- -------
Net cash flows from financing activities (230) (237)
------- -------
Net increase in cash and cash equivalents 226 81
Cash and cash equivalents at start of year 1,917 1,836
------- -------
Cash and cash equivalents at end of year 2,143 1,917
------- -------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Profit Fair
Share Share and value Total TOTAL
capital premium loss reserve reserves EQUITY
£000 £000 £000 £000 £000 £000
Balance as at 1 May 2004 881 76 1,559 228 1,787 2,744
Net profit for the year - - 393 - 393 393
Fair value loss on investments - - - (32) (32) (32)
Deferred taxation adjustment - - - 11 11 11
------------------------------------------------------
Total income and expense for the year - - 393 (21) 372 372
Equity dividends paid - - (220) - (220) (220)
------------------------------------------------------
Balance as at 30 April 2005
and at 1 May 2005 881 76 1,732 207 1,939 2,896
Net profit for the year - - 464 - 464 464
Fair value gain on investments - - - 193 193 193
Deferred taxation adjustment - - - (60) (60) (60)
------------------------------------------------------
Total income and expense for the year - - 464 133 597 597
Issue of ordinary shares 40 64 - - - 104
Equity dividends paid - - (334) - (334) (334)
------------------------------------------------------
Balance as at 30 April 2006 921 140 1,862 340 2,202 3,263
------------------------------------------------------
Basis of preparation
The financial information set out above, which has been prepared in accordance
with International Financial Reporting Standards, does not comprise the
company's statutory financial statements. Statutory financial statements for the
previous financial year ended 30 April 2005 have been delivered to the Registrar
of Companies. The auditors' report on those financial statements was unqualified
and did not contain any statement under section 237(2) or (3) of the Companies
Act 1985. The auditors have not yet reported on financial statements for the
year ended 30 April 2006, nor have any such financial statements been delivered
to the Registrar of Companies.
This information is provided by RNS
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