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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hunters Property Plc | LSE:HUNT | London | Ordinary Share | GB00BYMW5L71 | ORD 4P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 70.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMHUNT
RNS Number : 2404J
Hunters Property PLC
08 September 2016
Hunters Property Plc
Interim Financial Statements
For the period ended 30 June 2016
Hunters Property Plc ("Hunters" or the "Company" or the "Group"), one of the UK's largest national sales and lettings estate agency and franchise businesses, is pleased to announce its interim results for the six months ended 30 June 2016.
Financial Highlights:
-- Network Income up 42% to GBP16.9m (6 months to June 2015: GBP12.0m); -- Revenue up 26% to GBP6.6m (2015: GBP5.2m);
-- Adjusted operating profit (operating profit before depreciation, interest, amortisation and acquisition costs and share based payments) increased by 107% to GBP923,000 (2015: GBP445,000);
-- Adjusted profit before tax (excluding amortisation and acquisition costs, share based payments, investment income and notional financial costs) up 134% to GBP807,000 (6 months to June 2015: GBP345,000);
-- Adjusted earnings per share up 61% to 2.52p (2015: 1.57p); -- Interim dividend up 20% to 0.6p per share (2015: 0.5p per share).
Operational Highlights:
-- Opened 17 new branches, including the conversions of 10 existing businesses expanding the branch network to 180 (June 2015: 161);
-- Grown lettings income across the network by 18%; -- Expanded the marketing campaign and increased web visits by 40% over the last two years;
-- Further investment has been made in the Company's proprietary software, facilitating an enhancement to the customer experience including the launch of booking valuation appointments online;
-- Acquired two further lettings books in the Manchester area and integrated those into our owned offices.
Trading update
-- The second half of 2016 has started strongly;
-- Robust pipeline and the continuance of a strong level of enquiries from potential franchisees looking to join Hunters in H2 and into 2017;
-- Post the EU referendum, potential uncertainty is mitigated by the franchise strategy of the business;
-- Enhanced the Group's existing facilities with a new five year, GBP5m, credit facility;
-- The Board is confident the Company is well positioned, with a strong net asset position and facilities available to continue our growth.
Glynis Frew, Managing Director of Hunters Property Plc, commented:
"We have delivered strong results in the six months to June 2016 bolstered by growth in the franchise network and we are encouraged by the robust pipeline of future franchisees interested in joining the network.
The EU referendum has reduced some activity levels in the market, particularly in London and the South East. However in the wider UK market, which mirrors our national structure, activity is more encouraging and there has been less or little evidence of a downturn. Branch performance has improved on average and in lettings in particular.
The first half included a full contribution from Country Properties. The second half of 2016 has started strongly. We are delighted that our lenders, HSBC, see the exciting potential and growth in our business and have made a new line of credit available to the Group to deliver on its growth strategy and we are confident of our growth prospects and meeting our expectations for the full year.
The work and support that has been displayed by the staff and the franchise network is a credit to the Group. I offer, on behalf of the Board, our thanks and gratitude to everyone that has been involved."
For further details:
Hunters Property Plc Tel: 01904 756 197
Kevin Hollinrake, Chairman
Harry Hill, Chief Executive Officer
Glynis Frew, Managing Director
Ed Jones, Chief Financial Officer
Smithfield Consultants Limited Tel: 020 7360 4900
Alex Simmons
Numis Securities Limited Tel: 020 7260 1000
Stuart Skinner, Paul Gillam (Nomad)
Tom Ballard (Corporate Broker)
Chairman's Statement
Overview
On behalf of the board I am delighted to comment on Hunters' half year results for 2016. The first six months have seen the Group build successfully on the track record built up over the last 24 years; Network Income grew by 42% to GBP16.9m in the six months to June (6 months to June 2015: GBP12.0m), 17 new branches joined the network, and revenue per branch increased by 26%.
The first half of 2016 for Hunters has seen the Group deliver profit, network and revenue growth, all substantially ahead of last year. Turnover increased in the first six months by 26% to GBP6.6m (2015: GBP5.2m) culminating in EBITDA increasing by 107% to GBP923,000 (2015: GBP445,000).
The Group's strategy is to grow a predominantly franchise network and during the first half of 2016 added a further 17 branches (2015: 19), all franchised, of which 10 were existing businesses converting to Hunters. As at the end of June, the network stood at 180 (June 2015: 161) branches of which 169 (2015: 150) are franchised.
This first half included a full contribution from the 23 branches of Country Properties, acquired by Hunters in 2015, and which I am pleased to report, outperformed the same period last year by +34%.
We expanded, this half year, our TV and marketing campaigns based on Here to Get You There. In the last two years we have increased web visits by 40%. The TV campaign started again this August and runs also during September.
Our Customer Service Rating to June stood at 95% (2015: 96%) both hitting our target of 95%, and being significantly ahead of the 2015 Property Academy Survey putting the national average at 73%.
Outlook
The business is well placed for the remainder of the year, with a good pipeline.
The Board expects the strong growth of the network in the first half of 2016 to continue in the second half as a consequence of the new network branches, stronger enquiries from other existing businesses and our recently extended facilities. Availability of capital should mitigate against the short-term impact of any uncertainty created by the EU Referendum. In this economic environment independent businesses benefit even more from joining the Hunters network. We continue to look for strategic acquisitions should they become available and we are delighted to have secured additional funding in this regard.
The Company has a strong net asset position and relatively low levels of debt, combined with extended facilities to draw which means the Board is confident the Company is well positioned for further growth.
The Board aims to pay a progressive dividend, whilst maintaining dividend cover of at least two times. In this regard we announce a 20% increase in the interim dividend to 0.6p (2015: 0.5p) per share, payable on 19 October 2016 to shareholders on the Register on 23 September 2016.
I look forward to updating you further in due course.
Kevin Hollinrake
Chairman
Financial Report
Hot Features
Premium
H1 2016 H1 2015
Sales GBP6,598,000 GBP5,233,000 +26%
EBITDA GBP923,000 GBP445,000 +107%
Profit before tax, adjusted GBP807,000 GBP345,000 +134%
Profit before tax GBP390,000 GBP205,000 +90%
Cash generated (GBP315,000) GBP433,000
Net debt GBP1,748,000 GBP1,112,000 (Dec-15)
Shareholders' funds GBP5,082,000 GBP4,984,000 (Dec-15)
Shares in issue 28,286,992 28,156,775
Weighted average number of
shares 28,286,992 24,228,666
Earnings after tax GBP294,000 GBP170,000 +73%
Earnings after tax, adjusted
(excluding amortisation, share-based
payments, acquisition costs,
finance timing and investment
income) GBP711,000 GBP381,000 +87%
EPS 1.04p 0.70p +49%
Adjusted EPS 2.52p 1.57p +61%
Dividend 0.60p 0.5p +20%
Revenue
Network income, from sales and lettings across the network, rose by 42% to GBP16.9m, compared to GBP12.0m for the first half of 2015. The source of this revenue was split 54% South, 46% North; during the last full year the split was 50:50.
The Company's turnover increased by 26% to GBP6.6m (2015: GBP5.2m), driven by growth of the network, including the addition of Country Properties to the Group part-way through 2015.
In the six month period to June 2016 the Group opened 17 (2015: 19) new franchise branches. Average Revenue per Branch increased by 26% in the six months to June 2016, compared to the same period last year.
Profit before tax, adjusted to exclude amortisation, amortised finance costs, acquisition costs, share-based payments and other finance income
Adjusted profit before tax for the six months ended June 2016 was GBP807,000, an increase of 134% on the equivalent period last year (2015: GBP345,000).
Adj. EBITDA, earnings before interest, tax and depreciation/amortisation
Adj. EBITDA provides a key measure of progress made. Adj. EBITDA for the six months to June 2015 was GBP923,000, an increase of 107% on the same period last year (2015: GBP445,000).
Earnings per share
Basic earnings per share for the six months ended 30 June 2016 was 1.04p (2015: GBP0.70p). Adjusted earnings per share, excluding amortisation and acquisition costs, finance timing, investment income and share-based payment expenses for the six months to June 2016 was 2.52p (2015: 1.57p) an increase of 61%.
Dividend
The Board declares an interim dividend of 0.60p (Interim 2015: 0.5p) per share, an increase of 20%, payable on 19 October 2016 to shareholders on the Register on 23 September 2016.
Cash flow
The Company generated net cash from operations of GBP411,000 during the six months to June 2016, of which GBP325,000 was used to fund the acquisition of two new lettings books. There were further debt drawdowns in the six months to June 2016 totalling GBP570,000, which was used to fund the franchised branches opened towards the end of 2015 and new branches opened during the first six months of 2016.
Liquidity and capital reserves
As at 30 June 2016, the Group's cash balance was GBP896,000 (December 2015: GBP1,211,000) with net debt of GBP1.75m (December 2015: GBP1.11m) including vendor Loan Notes, repayable by July 2017, GBP0.64m (December 2015: GBP0.62m).
Risks
The primary risk to the business continues to be the health of the UK property market. Uncertainty has crept into the marketplace since the EU referendum result, as individuals and businesses take stock and assess the impact. Our balance between franchising, sales and lettings and geographical mix allows us to mitigate against this risk.
Ed Jones
Chief Financial Officer
8 September 2016
Consolidated Statement of Comprehensive Income
For the period ended 30 June 2016
Notes 6 months 6 months Year
ended ended ended
30 June 2016 30 June 31 December
2015 2015
GBP'000s GBP'000s GBP'000s
Revenue 6,598 5,233 12,045
Ongoing administrative
expenses (5,675) (4,788) (10,471)
-------------- ---------
Operating profit before
depreciation, amortisation,
costs of business combinations
& share-based payments 923 445 1,574
Depreciation & adjustments
on disposal (71) (68) (162)
Amortisation & adjustments
on disposal 4 (287) (129) (368)
Costs of business combinations (15) (40) (57)
Share-based payment expense (87) - (12)
-------------- --------- --------------
Operating profit 463 208 975
Investment revenues 3 84 88
Finance costs (77) (87) (183)
Profit before taxation 389 205 880
Taxation (95) (35) (158)
Profit for the period 294 170 722
-------------- --------- --------------
Other comprehensive income - - -
Total comprehensive income
for the period 294 170 722
-------------- --------- --------------
Profit and total comprehensive
income for the period,
attributable to:
Equity owners of the
parent 294 174 726
Non-controlling interests - (4) (4)
-------------- --------- --------------
294 170 722
-------------- --------- --------------
Basic earnings per share 5 1.04p 0.70p 2.76p
------ ------ ------
Diluted earnings per
share 5 0.99p 0.70p 2.66p
------ ------ ------
Consolidated Statement of Financial Position
As at 30 June 2016
Notes 30 June 2016 31 December 30 June
2015 2015
GBP'000s GBP'000s GBP'000s
ASSETS
Non-current assets
Intangible assets 4 7,872 7,412 6,654
Property, plant and equipment 286 340 471
Investments 1 1 269
Deferred tax assets 31 43 34
-------------------
8,190 7,796 7,428
------------------- ------------ ---------
Current assets
Trade and other receivables 1,678 1,629 1,889
Current tax receivable - - 11
Cash and cash equivalents 896 1,211 1,579
------------------- ------------ ---------
2,574 2,840 3,479
------------------- ------------ ---------
Total assets 10,764 10,636 10,907
------------------- ------------ ---------
LIABILITIES
Current liabilities
Trade and other payables 2,102 2,492 2,518
Current tax liabilities 276 162 211
Finance lease liabilities 39 37 39
Borrowings 1,027 1,014 793
-------------------
3,444 3,705 3,561
------------------- ------------ ---------
Non-current liabilities
Other payables 60 68 -
Finance lease liabilities 10 30 47
Borrowings 1,617 1,309 1,887
Provisions 79 75 -
Deferred tax liabilities 472 465 421
------------------- ------------ ---------
2,238 1,947 2,355
------------------- ------------ ---------
Total liabilities 5,682 5,652 5,916
------------------- ------------ ---------
Net assets 5,082 4,984 4,991
------------------- ------------ ---------
EQUITY
Attributable to owners
of the parent:
Share capital 1,131 1,131 1,126
Retained earnings 473 375 (52)
Share premium 2,579 2,579 3,018
Merger reserve 899 899 899
-------------------
Total equity attributable
to owners of the parent 5,082 4,984 4,991
Non-controlling interests - - -
Total equity 5,082 4,984 4,991
------------------- ------------ ---------
Consolidated Statement of Changes in Equity
For the period ended 30 June 2016
Equity attributable to owners of the parent
---------------------------------------------
Share Share Merger Retained Total equity Non-controlling Total
capital premium reserve earnings attributable interests equity
to owners
of the
parent
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
At 1 January
2015 - - 1,662 (226) 1,436 8 1,444
Profit and
total
comprehensive
income
for the year - - - 174 174 (4) 170
Share for
share
exchange - - (867) - (867) (4) (871)
Issue of share
capital 1,126 3,018 104 - 4,248 - 4,248
At 30 June
2015 1,126 3,018 899 (52) 4,991 - 4,991
---------- --------- ---------- ---------- ------------- ---------------- ---------
Profit and
total
comprehensive
income
for the year - - - 556 556 - 556
Dividends paid - - - (141) (141) - (141)
Credit to
equity
for equity
settled
share-based
payments
Share for
share
exchange - - - 12 12 - 12
Issue of share
capital 5 (439) - - (434) - (434)
At 31 December
2015 1,131 2,579 899 375 4,984 - 4,984
---------- --------- ---------- ---------- ------------- ---------------- ---------
Profit and
total
comprehensive
income
for the year - - - 294 294 - 294
Dividends paid - - - (283) (283) - (283)
Credit to
equity
for equity
settled
share-based
payments - - - 87 87 - 87
At 30 June
2016 1,131 2,579 899 473 5,082 - 5,082
---------- --------- ---------- ---------- ------------- ---------------- ---------
Consolidated Statement of Cashflows
For the period ended 30 June 2016
6 months 6 months Year ended
ended ended 30 December
30 June 2016 30 June 2015
2015
GBP'000s GBP'000s GBP'000s
Cash flow from operating activities
Operating profit 463 208 974
Adjustment for:
Depreciation of property, plant
and equipment 70 85 162
Amortisation of intangible assets 294 129 368
(Gain)/Loss on disposal of property,
plant and equipment 1 (17) (30)
Profit on disposal of intangible (7) - -
assets
Share options fair value write down 87 - 12
Expensed/ (Released) element of
provisions 2 - (5)
Costs of acquisitions 15 40 57
Changes in working capital:
Increase in trade and other receivables (49) (500) (392)
Decrease in trade and other payables (390) 38 3
--------------- --------------- ---------------
Cash generated from/(used in) operations 486 (17) 1,149
Interest paid (45) (32) (85)
Income tax paid (30) - (180)
--------------- --------------- ---------------
Net cash from/(used in) operating
activities 411 (49) 884
--------------- --------------- ---------------
Cash flow from investing activities
Capital expenditure (tangible &
intangible) (411) (640) (942)
Proceeds from sale of tangible &
intangible assets 26 32 32
Business combinations, net of cash
acquired (325) (1,023) (1,390)
Acquisition of investments - (192) (192)
Proceeds on disposal of investments - - 263
Repayments for deferred consideration (11) (84) (89)
Interest received 3 1 5
Net cash used in investing activities (718) (1,906) (2,313)
--------------- --------------- ---------------
Cash flow from financing activities
Dividends paid to shareholders (283) - (141)
Repayment of borrowings (275) (178) (965)
Issue of borrowings 570 - 380
Issue of share capital - 2,583 2,246
Repayment of capital element of
finance lease contracts (20) (17) (26)
Net cash (used in) / from investing
activities (8) 2,388 1,494
--------------- --------------- ---------------
Increase/(decrease) in cash and
cash equivalents (315) 433 65
Net cash and cash equivalents at
beginning of the period 1,211 1,146 1,146
--------------- --------------- ---------------
Net cash and cash equivalents at
end of period 896 1,579 1,211
--------------- --------------- ---------------
Comprised of:
Cash and cash equivalents 896 1,579 1,211
Bank overdraft - - -
Notes to the Interim Financial Statements
For the period ended 30 June 2016
1. Corporate information
Hunters Property Plc is a Company incorporated in the United Kingdom. The registered address of the Company is Apollo House, Eboracum Way, York, YO31 7RE. The consolidated financial statements (or "financial statements") incorporate the financial statements of the Company and entities (its subsidiaries) controlled by the Company (collectively comprising the "Group").
The principal activity of the Group is the provision of property services to consumers and businesses which include sales, lettings, franchising and related services.
2. Accounting policies
2.1. Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
Basis of measurement
The financial statements have been prepared on the historical cost basis, modified to include the revaluation of certain financial instruments at fair value.
Functional and presentational currency
The financial statements are presented in sterling, which is the functional currency of the Parent Company. Monetary amounts in these financial statements are rounded to the nearest GBP1,000.
Use of estimates and judgments
The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Basis of preparation
The financial information set out in these condensed consolidated financial statements for the six months ended 30 June 2016 and the comparative income statement and statement of cashflow figures are unaudited. The financial information presented are not statutory accounts prepared in accordance with the Companies Act 2006, and are prepared only to comply with AIM requirements for interim reporting.
Basis of consolidation
The Group financial information consolidates those of the Parent Company and the subsidiaries that the Parent has control of. Control is established when the Parent is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.
Where a subsidiary is acquired/disposed of during the period, the consolidated profits or losses are recognised from/until the effective date of the acquisition/disposal.
All inter-company balances and transactions between group companies have been eliminated on consolidation.
Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those used by the Group.
Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that are not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interest based on their respective ownership interests.
2.2. Business combinations
The Group applies the acquisition method of accounting for business combinations enacted after the date of creation of the Group following incorporation of Hunters Property Plc, as detailed further below. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair value of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree, and the equity interest issued by the Group. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquired subsidiary's financial information prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values.
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the fair value of consideration transferred, over the Group's share of the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.
The Group has applied the principles of merger accounting in consolidating the results, as control was only acquired by Hunters Property Plc via a share-for-share exchange on 27 March 2015. Merger accounting requires that the results of the Group are presented as if the Group has always been in its present form, and does not require a re-evaluation of fair values as at the point of acquisition. Accordingly, for the Group's comparative statement of financial position as at 30 June 2015, a merger reserve has been created which represents the difference between the net assets of the Group as at that date, and the retained profits recognised by the Group as at that date.
2.3. Revenue
Revenue represents the amount receivable for the provision of services and the sale of goods during the period, excluding VAT and trade discounts. Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be measured reliably.
Revenue from residential, commercial, and land sales is recognised on the basis of exchange of contract. Financial services revenue is recognised at the later of the policy inception date or confirmation of entitlement to the commission.
Revenue from commission earned as letting agents is recognised in the month in which the income is received and when there is fulfilment of all but inconsequential or perfunctory actions.
At inception of a franchisee contract, revenue is recognised upfront which matches to the estimated cost of time and knowledge to create the franchiser-franchisee contractual arrangement. No amounts are deferred as the directors are of the opinion that virtually all inception costs are incurred at the outset, and hence although contracts run for several years this policy is considered to be the fairest presentation to comply with the matching and accruals concepts.
Revenue from franchisee management service fees are recognised monthly in arrears, calculated by reference to the terms of the contract and the value of sales attributable to each franchisee.
Deferred income arises where services are invoiced in advance of performance. The amount is released to the profit or loss in subsequent periods in reference to the stage of completion of the transaction at the reporting date.
2.4. Goodwill
Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identifiable and separately recognised. After initial recognition, goodwill is measured at cost less accumulated impairment losses.
2.5. Intangible fixed assets other than goodwill
Intangible assets are initially measured at cost. Where intangible assets are acquired as part of a business combination, cost is determined by reference to a fair value estimation technique. After initial recognition, intangible assets are recognised at cost less any accumulated amortisation and any accumulated impairment losses.
The depreciable amount of an intangible asset with a finite useful life is allocated on a systematic basis over its useful life. Amortisation begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.
The amortisation period and the amortisation method for intangible assets with a finite useful life is reviewed each financial period-end. If the expected useful life of the asset is different from previous estimates, the amortisation period is changed accordingly.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Software 3 years or over the life of the license
Franchise development costs Over the life of the franchise contract (typically 10-15 years)
Brands 10 years Customer lists 2-12 years 2.6. Property plant and equipment
Property, plant and equipment are recognised as an asset only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
An item of property, plant and equipment that qualifies for recognition as an asset is measured at its cost. Cost of an item of property, plant and equipment comprises the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
After recognition, all property, plant and equipment are carried at costs less any accumulated depreciation and any accumulated impairment losses.
Depreciation is provided at rates calculated to write down the cost of assets, less estimated residual value, over their expected useful lives on the following basis:
Leasehold land and buildings Straight line over the period of the lease Plant and machinery 25% reducing balance Computer equipment 33% straight line Fixtures, fittings and equipment 25% reducing balance or 10-33% straight line Motor vehicles 25% straight line
The residual value and the useful life of an asset are reviewed at least at each financial period-end and if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying value of the asset and are recognised in profit or loss.
2.7. Impairment of goodwill, other intangible assets and property, plant and equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash flows. As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill.
Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An asset or cash-generating unit is impaired when its carrying amount exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost of disposal and value in use. The value in use is calculated as being net projected cash flows based on financial forecasts discounted back to present value.
The impairment loss is allocated to reduce the carrying amount of the asset, first against the carrying amount of any goodwill allocated to the cash-generating unit, and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.
2.8. Investments
Investments in equity instruments that have a quoted market price in an active market and whose fair value can be reliably measured are measured at fair value; otherwise investments in equity instruments are measured at cost.
2.9. Financial instruments
Financial assets
Financial assets are recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.
All financial assets excluding investments are classified as loans and receivables; these comprise trade and other receivables and cash and cash equivalents. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Financial assets are initially recognised at fair value plus directly attributable transaction costs.
After initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
If there is objective evidence that there is an impairment loss on loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account.
A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred.
Financial liabilities
Financial liabilities include borrowings and trade and other payables.
Financial liabilities are obligations to pay cash or other financial assets and are recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially recognised at fair value adjusted for any directly attributable transaction costs.
After initial recognition, financial liabilities are measured at amortised cost using the effective interest method, with the effective interest recognised as an expense in finance costs. Discounting is omitted where the effect of discounting is immaterial.
A financial liability is derecognised only when the contractual obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.
2.10. Provisions
Provisions are recognised when the Group has a legal or constructive present obligation as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value the unwinding of the discount is recognised as a finance cost in profit or loss in the period it arises.
2.11. Employee benefits
The cost of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.
Termination benefits are recognised immediately as an expense when the Company is demonstrably committed to terminate the employment of an employee, or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
2.12. Leased assets
Finance leases
The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any. A corresponding amount is recognised as a finance lease liability.
This liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant proportion of the outstanding capital balance and is charged to profit or loss, as finance costs over the period of the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred.
2.13. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
2.14. Income tax
Current income tax assets and/or liabilities comprise obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid/due at the reporting date. Current tax is payable on taxable profits, which may differ from profit or loss in the financial statements. Calculation of current tax is based on the tax rates and tax laws that have been enacted or substantively enacted at the reporting period.
Deferred taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.
A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). However, for deductible temporary differences associated with investments in subsidiaries a deferred tax asset is recognised when the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
2.15. Share-based payments
The fair value of equity settled share based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period based on the Group's estimate of shares or options that will eventually vest.
2.16. Equity instruments
Share capital represents the nominal value of shares that have been issued. Share premium represents the excess consideration received over share capital upon the sale of shares, less any incidental costs of issue.
Retained earnings include all current and prior period retained profits.
The non-controlling interest reserve is the portion of equity ownership in subsidiaries which is not attributable to the owners of the Parent Company.
The merger reserve has arisen as described in note 2.2.
3. Business combinations
Acquisition of a Manchester lettings book:
In January 2016 the Group acquired a Manchester lettings book. The consideration paid totalled GBP190,000, being settled in cash.
As part of the acquisition, the Directors have identified an intangible asset, being the lettings book. This was determined to be equal to the amount paid for the book, after adjustment for deferred tax. Historical data and forecasts have been used, together with the 10% group discount rate and an assumption of a useful life of 12 years for the lettings book to estimate the fair value of this intangible.
Acquisition of lettings book Carrying Fair value Fair value
value adjustments recognised
on acquisition
GBP'000s GBP'000s GBP'000s
Assets
Intangible assets - 232 232
Total assets - 232 232
----------- ------------- ----------------
Liabilities
Deferred tax liability - 42 42
Total liabilities - 42 42
----------- ------------- ----------------
Total identifiable net assets - - 190
----------- ------------- ----------------
Goodwill arising on acquisition -
Purchase consideration transferred 190
----------------
Following acquisition the lettings book was merged into existing operations, and as such the Directors have been unable to accurately quantify the contribution made to the Group's results since acquisition.
In addition, there were costs of acquisition of GBP7,524 which have been included within the Income Statement.
Acquisition of a second Manchester lettings book:
In June 2016 the Group acquired a second Manchester lettings book. The consideration paid totalled GBP120,000, being settled in cash.
Acquisition of lettings Carrying Fair value Fair value
book: value adjustments recognised
on acquisition
GBP'000s GBP'000s GBP'000s
Assets
Intangible assets - 146 146
Total assets - 146 146
----------- ------------- ----------------
Liabilities
Deferred tax liability - 26 26
Total liabilities - 26 26
----------- ------------- ----------------
Total identifiable net (assets - - 120
----------- ------------- ----------------
Goodwill arising on acquisition -
Purchase consideration transferred 120
----------------
Given the timing of the acquisition, the impact of the revenues and profits have materially only been recognised from July 2016 onwards.
In addition, there were costs of acquisition of GBP7,811 which have been included within the Income Statement.
4. Intangible Fixed Assets
Goodwill Software FDG's Brands Customer Total
& Rebrands Lists
GBP'000s
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Cost
At 1 January 2016 4,008 593 1,119 633 1,662 8,015
Additions - Separately
acquired - 16 379 - 378 773
Additions - business - - - - - -
combinations
Disposals - - (23) - - (23)
---------- --------- ---------
At 30 June 2016 4,008 609 1,475 633 2,040 8,765
--------- --------- ------------ ---------- --------- ---------
Amortisations and
Impairment
At 1 January 2016 35 40 129 77 322 603
Amortisation charged
for the year - 42 64 32 157 293
Amortisation on disposal - - (5) - - (5)
--------- --------- ------------ ---------- --------- ---------
At 30 June 2016 35 82 188 109 479 893
--------- --------- ------------ ---------- --------- ---------
Carrying amount
At 30 June 2016 3,973 527 1,287 524 1,561 7,872
--------- --------- ------------ ---------- --------- ---------
At 31 December 2015 3,973 553 990 556 1,340 7,412
--------- --------- ------------ ---------- --------- ---------
Franchise Development Grants (FDG's") and rebrand costs are externally incurred expenses at the inception of certain contracts with franchisees in order to assist with the transition to using the Hunters brand name. The amounts invested are amortised over the minimum life of the underlying franchise contract, typically 10 to 15 years.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings 30 June 2016 30 June 2015
GBP'000s GBP'000s
Earnings for the purpose of basic earnings
per share being net profit attributable
to owners of the parent 294 170
Effects of dilutive potential ordinary - -
shares
Earnings for the purposes
of diluted earnings per
share 294 170
------------- -------------
Number of shares 30 June 2016 30 June 2015
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 28,286,992 24,228,666
Effects of dilutive potential ordinary 1,475,988 -
shares
Weighted average number
of ordinary shares for the
purposes of diluted earnings
per share 29,762,980 24,228,666
------------- -------------
Earnings per share
Pence per weighted average shares 1.04p 0.70p
------ ------
Pence per weighted average diluted
shares 0.99p 0.70p
------ ------
The Directors use adjusted earnings before time-value interest, investment revenue, amortisation, share-based payments and costs of acquisition ("Adjusted Earnings") as a measure of ongoing profitability and performance. The calculated Adjusted Earnings for the current period of accounts is as follows:
Adjusted Earnings per Share 30 June 2016 30 June 2015
GBP'000s GBP'000s
Profit after taxation 294 170
Adjusted for:
Time-value interest costs 31 50
Investment revenues (3) (8)
Amortisation 287 129
Costs of acquisition 15 40
Share-based payment expense 87 -
Adjusted Earnings 711 381
------------- -------------
Adjusted Earnings per share
Pence per weighted average shares 2.52p 1.57p
------ ------
Pence per weighted average diluted
shares 2.39p 1.57p
------ ------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BUGDCCSGBGLR
(END) Dow Jones Newswires
September 08, 2016 02:00 ET (06:00 GMT)
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