TIDMHUNT
RNS Number : 0583V
Hunters Property PLC
04 April 2019
Embargoed 7.00a.m. - 4 April 2019
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
Hunters Property Plc
Notice of Results
For the year ended 31 December 2018
Hunters Property Plc ("Hunters" or the "Company" or the
"Group"), one of the UK's largest franchised sales and lettings
agency businesses, is pleased to announce its results for the year
ended 31 December 2018.
Financial highlights
-- Network Income rose 1% to GBP39.4m (2017: GBP38.9m);
-- EBITDA increased by 2% to GBP2.28m (2017: GBP2.23m);
-- Adjusted Profit Before Tax (*adjusted to exclude
amortisation, profit/loss on disposal of intangibles, acquisition
costs, share-based payments, other gains and losses, investment
income and notional finance costs) increased by 5% to GBP2.01m
(2017: GBP1.92m);
-- Adjusted EPS increased by 3% to 5.91p (2017: 5.76p);
-- Net Assets stood at GBP7.7m (2017: GBP7.6m);
-- Proposed 7% increase in Final dividend to 1.60p, increasing
full year then by 9% to 2.40p (2017: 2.20p) for the year.
Operational highlights
-- 201 branches as at 28 February 2019 (31 December 2017: 213)
-- 124 new franchisee branches in the last five years. Average
Network Income per converting branch has risen to GBP186,000 (2017:
GBP173,000)
-- Independent agents that have converted to Hunters, during the
four years to 2017, have increased their revenue by 21%. Average
Network Income per branch has risen 10% to GBP200,000 (2017:
GBP182,000)
-- Customer satisfaction rating 96% (2017: 95%)
Kevin Hollinrake, Chairman, commented:
"We are delighted to report another strong set of results in
what has been a challenging market. In 2018, we increased Network
Income, Income per branch, Customer Service Rating and adjusted
both profit before tax and earnings per share under our strategy to
attract and improve businesses. For 2019 we expect activity levels
to remain subdued and the impact of the tenant fee ban disruptive
in the short term. We see the developments in the sector as
providing further opportunities and it remains our intention to
invest in our technology to keep us in the best place to benefit
for the longer term. We have opened seven branches already this
year and I am pleased that we are seeing an increasing number of
high quality independent businesses. I look forward to updating you
further during the year."
For further details, please contact:
Hunters Property Plc Tel: 01904 756 197
Kevin Hollinrake, Chairman
Glynis Frew, Chief Executive Officer
Ed Jones, Chief Financial Officer
SPARK Advisory Partners Limited Tel: 020 3368 3551
Mark Brady and Andrew Emmott (Nominated
Adviser)
Dowgate Capital Stockbrokers Tel: 020 3903 7715
James Sergeant (Corporate Broking)
Chairman's statement
We are pleased to report that the Group has delivered another
set of strong results in 2018. Average branch income has increased
by 10% despite subdued market conditions resulting in overall
Network Income increasing by 1.4%.
The Group continued its expansion and progress towards becoming
the nation's favourite estate agent. Organically, we believe we are
the fastest growing listed business in our sector having opened 124
branches, including converting 92 independent agency businesses
over the last five years and a further 46 branches through
acquisition in that period. Our total branch network numbers 201
branches (28th Feb 2019).
We have had a positive response from the network to our lettings
book acquisition fund, which to the year-end had completed on
thirteen lettings agency portfolios including four in the second
half of last year. This assisted acquisition strategy as well as
our focus and systems helped the lettings side of the network grow
by 13% last year. The average combined income per independent
business converting to the Hunters brand has risen by 22% to
GBP186,000 from GBP153,000 in 2016. We continue to attract good
quality independent businesses who see the benefits of a national
brand, marketing and best-in-class training, business support,
purchasing power, reduced operating costs and opportunities to grow
their income.
Gross revenue for the Group's network ("Network Income") reached
GBP39.4 million in 2018 (2017: GBP38.9 million) a 1.4% increase on
the previous year. Our average branch revenue reached GBP200,000
(2017: GBP182,000). This was an impressive achievement against the
background of national activity having reduced by 7% for the
year1.
The Group's network has out-performed the market each year over
the last four years by on average of 12%. Our EBITDA reached
GBP2.28 million (2017: GBP2.23 million) an increase of 2% on the
previous year, whilst Adjusted EPS is 5.91p (2017: 5.76p
restated).
Our business model focuses on supporting independent agents and
our success is measured by both the number we retain and the
underlying performance of those branches. We invest a great deal of
time and resource helping to improve each branch's revenue. Our
out-performance against the market per branch reflects that
investment. This is not just a short-term success but a long-term
strategy. Independent agents that converted to the Hunters brand
during the four years to December 2017 have grown their revenue by
21%; confirmation of our ability to improve revenue for our network
partners even in a challenging market. Our economies of scale and
purchasing power, particularly network deals with Rightmove, Zoopla
and OnTheMarket with discounts of around 60% from list prices, can
also significantly reduce key operating costs.
Customer satisfaction remains high with a 96% customer
satisfaction rating over the year (2017: 95%), our seventh year in
a row over 90%, which remains significantly higher than the
industry average of 73%2. Our business and our network partners
commit to delivering for our customers. This understanding
underpins our belief that business owners paid on results will work
harder and deliver better results than a network of employees,
self-employed operatives on short-term contracts or those engaged
to simply list a home rather than actually selling or letting a
property.
On behalf of the Board, I would like to thank everyone in the
network who has worked so hard to deliver these excellent results
and in what has been a challenging market and also thank our
customer support and service teams for working with our clients to
help us 'get them there'. We are also, of course, very grateful to
our record numbers of loyal customers, our sellers, landlords,
buyers and renters right across the network.
CURRENT TRADING & OUTLOOK
We expect the current subdued levels of transactions to continue
in 2019. Hunters' 2019 performance to date is in line with the
Board's expectations. Given our limited London exposure we are not
expecting to be as affected as our competitors, some of whom have
reported already3. We are pleased to report that the impact of the
tenant fee ban is likely to be less than we had expected and have
workable and working plans in place to minimise its impact. We
expect this market, the newly-implemented regulatory changes and
the Government plans to effectively license all sales and letting
agencies to provide us with even more opportunities to expand our
branch network further and strengthen our brand. We are seeing an
improved level of enquiries from high quality independent
businesses. Our robust balance sheet and relatively low level of
gearing will enable us to both expand our network and look to
reward shareholders with an attractive dividend.
During the first two months of the year we have already opened 7
branches. Our pipeline of new outlets remains healthy and I look
forward to updating you as the year progresses.
DIVID
The Company is committed to a progressive dividend policy and
proposes an increased final dividend of 1.60p per share, making
2.40p for the year, an increase of 9%.
On behalf of the Board
Kevin Hollinrake
Chairman
3 April 2019
1 Source: Price Paid Data to November 2018, Land Registry.
2 Source: 2015 survey by The Property Academy.
3 Source: CW - RNS 7th March 2019, Foxtons - RNS 28th February 2019, LSL - RNS 5th March 2019.
Chief Executive's statement
We're delighted to report that despite a challenging market, our
strategy has delivered an improved performance with an increase in
branch performance and a strong set of results.
The Group has grown its market share of homes sold and let in
2018. So, despite market transaction volumes having reduced by 7%,
Network Income, EBITDA, adjusted pre-tax profitability and adjusted
EPS have each increased. This was aided by a number of factors. Our
limited exposure to the London market, a 13% increase in Network
Income from Lettings, including that from our branch assisted
acquisition programme and by the additional branches added to the
network. 2018 was also our first full year with the Besley Hill
network.
We have started the year with uncertain customer demand and a
Government seeking a viable solution with regards to Brexit. This
factor, coupled with the tenant fee ban, will be disruptive but
against that backdrop we are looking set to deliver another
successful year.
Delivering outstanding customer service is at the heart of our
operation. At exchange of a property or at the let of a property a
vendor or landlord is contacted by a member of our customer service
team. In 2018, 6,032 (2017: 4,155) customers provided feedback
resulting in a 96% (2017: 95%) customer satisfaction rating. Our
customer satisfaction ratio has been over 90% since 2011.
Maintenance in the quality of the network is key to our success.
We started the year with 213 branch locations. We received 215
(2017: 228) enquiries resulting in 10 (2017: 21) new openings under
the Hunters brand. These openings consisted of 10 (2017: 15)
conversions of existing independent estate agency businesses. We
were delighted that we have converted some stronger independents
this year with the average of their incomes before conversion at
GBP186,000 (2017: GBP173,000) being a 22% increase on the
GBP153,000 average in 2016, a sign of our increasing strength
attracting increasingly stronger businesses.
The Group implements a rigorous franchisee selection process.
This ensures, as far as possible, that new franchisees are
committed to the Group's high standards. Approximately 80% are
rejected at an early stage.
We continue to invest in our people and our technology,
marketing and networks. We have devoted over GBP500,000 this year
in training and have provided 107 courses, resulting in 74% of the
network completing training courses through the Hunters Vocational
Qualification, endorsed by Propertymark. We intend to continue to
develop and invest in our in-house, market leading software to
enhance the digital side of the business, for example we launched
our customer portals in October 2018 to further enhance the
customer experience. This complements our online valuation booking
capability which has already directed over GBP13m of property to
the network. Just as importantly we retain the levels of service
that our customers require so as to secure and safeguard a
long-term future. We are working on the next stage in developing
our technology to make the entire process more efficient and
effective for our customers. In terms of marketing we augmented our
national campaign around both our brand promise 'Here to get you
there' and local ownership and local expertise. This will continue
to be our message in the year ahead.
I am pleased to report that a number of our franchisees have
consolidated branches this year, a pattern we expect to continue as
franchisees look to gain efficiencies. I am also delighted to
report that we have already opened an additional 7 branches with
new franchisees since the 1 January 2019, bringing our branch
number to 201 as at the end of February. Numbers themselves only
tell part of the story. The number must be taken in context with
both average branch performance and improvement or otherwise
against previous years and as against the market's level of
activities. Against a market down 7% in 2018 (2017: down 15%) I am
delighted to be able to announce that the average revenue per
branch has increased by 10% to GBP200,000 (2017: GBP182,000).
Branches that joined in the four years to December 2017 are up, on
average, by 21%. Improvement is not just short-term, those who have
been converted for 7 years are up, on average, by 91%. All in the
Network Income has increased over the last ten-year period 2008 to
2018 on average at a Compound Annualised Growth Rate ("CAGR") of
21%.
Franchise prospects for 2019 have started well, in part
reflecting the wider market sentiment. We retain a proceeding
pipeline of 32 (2017: 27) new branches being processed and enquiry
levels on target to exceed those of 2018. We have expanded the team
further to improve the process and allow more ongoing support. Our
franchise marketing plan is heavily weighted on direct marketing to
suitable independent businesses, this along with increased online
presence are integral elements of this growth.
It is expected that 2019 will see continued network growth,
especially through conversions of existing businesses which we
expect to account for an increasing portion of branch growth. We
see the uncertainty and impact of the proposed tenant fee ban,
Client Money Protection and increased regulation as driving both
consolidation and enquiries towards Hunters' market leading
conversion package. This is designed to allow independent agencies
to join with minimal cost, whilst benefiting from both a full
estate agency package and retention of the key parts of their
independence. We offer the ability to market on all three major
portals at a significant discount to independent market rates. This
arrangement enhances the services branches can offer to vendors and
landlords with the branch being able to market properties to the
widest possible audience for buyers and tenants. The scale of the
discount means, as is increasingly important, branches receive help
to keep on top of their costs. We are delighted to have been one of
the first in the industry to offer this service.
We have an outstanding and experienced team who are committed to
Hunters and our quest to become the Nation's Favourite Estate
Agent. This could not be achieved without their sterling efforts.
We believe that we have some truly outstanding industry
professionals associated with the business and are grateful to them
for their dedication to Hunters.
Glynis Frew
Chief Executive
Financial review
REVENUE
Group revenue for the financial year ended 31 December 2018
decreased by 1.3% to GBP14.0 million (2017: GBP14.2 million). This
included the following factors:
-- Revenue from franchisees increased due to the 37 new
franchisee branches that joined the Group in 2017 and a further 10
new franchisee branches that joined the Group in 2018;
-- Lettings revenue grew as we introduced lettings to new
franchisees and continued to grow our existing lettings offices.
Network Income for Lettings grew 13% (2017: 16%); and
-- Residential Sales revenue reduced against the backdrop of a market down 7% during the year.
EBITDA (Operating profit before depreciation, amortisation,
impairments and profit/loss on disposal of non-current assets,
acquisition & share-based
payment expenses)
EBITDA provides a key measure of progress made. EBITDA for the
year to December 2018 was GBP2.28 million, an increase of 2.3% on
the same period last year (2017: GBP2.23 million).
Administrative expenses decreased by GBP0.2 million during the
year. Lower costs in 2018 were in part due to integration
activities completed during the year.
ADJUSTED EARNINGS (Profit after tax adjusted to exclude
amortisation and profit/loss on disposal of intangibles, time-value
interest costs, business combination acquisition expenses,
share-based payments, other gains and losses and finance
income)
Adjusted earnings was GBP1.25 million, an increase of 4% over
the prior period (2017: GBP1.79 million). Amortisation and disposal
costs increased significantly during the period, including a full
year regarding Besley Hill, as the Group continued to accelerate
its growth through the build and improve elements of its
strategy.
2018 2017
Adjusted earnings GBPm GBPm
Profit before tax 0.84 0.89
Time-value interest
costs - 0.01
Amortisation and disposal
of intangibles 0.95 0.73
Business combination
expenses 0.01 0.05
Interest income (0.01) (0.02)
Share-based payments 0.06 0.12
Other gains 0.02 -
------ ------
Adjusted earnings 1.88 1.79
Tax 0.13 0.13
------ ------
Adjusted profit before
tax 2.01 1.92
EARNINGS PER SHARE
Basic earnings per share for the year ended 31 December 2018 was
2.65p (2017: 2.89p) based on a weighted average of 31,822,604
shares (2017: 31,022,076) in issue during the year.
ADJUSTED EARNINGS PER SHARE
Adjusted earnings per share was 5.91p (2017: 5.76p) an increase
of 3%.
2018 2017
Income Summary GBPm GBPm Movement
Network Income 39.4 38.9 +1.3%
Turnover 14.0 14.2 -1.4%
EBITDA 2.28 2.23 +2.2%
Adjusted profit
before tax 2.01 1.92 +4.7%
Adjusted earnings 1.88 1.79 +5.0%
EPS 2.65p 2.89p -8.3%
Adjusted EPS (aEPS) 5.91p 5.76p +2.6%
DPS 2.40p 2.20p +9.1%
Dividend cover
(aEPS/DPS) 2.5x 2.6x
DIVIDS
The Board is proposing a final dividend of 1.60p per share for
2018, which subject to shareholder approval at the AGM on the 17
May 2019, will be paid to shareholders by 22 May 2019 based on the
register of shareholders as at 26 April 2019. Taking this together
with the interim dividend of 0.8p (2017: 0.7p) paid to shareholders
on 19 October 2018, this equates to a total dividend for the year
of 2.40p an increase of 9% and providing dividend cover of 2.4
times. The Company intends to pay a progressive dividend going
forwards.
2018 2017
Balance Sheet Summary GBPm GBPm
Cash 1.7 1.6
Net Assets 7.7 7.6
Net Debt 2.4 2.3
Net Debt / EBITDA 1.0x 1.0x
LIQUIDITY
The Group had cash balances of GBP1.7 million at 31 December
2018 (2017: GBP1.6 million). The Group retains a GBP6 million
facility to support its plans. The facility includes quarterly
repayments of GBP22,500. Total bank facilities available to the
Group at 31 December 2018 stood at GBP5.8 million (2017: GBP6
million) of which GBP4.1 million (2017: GBP3.8 million) is
drawn.
FINANCIAL POSITION
The Group has generated strong cashflow from operations of
GBP1.7m (2017: GBP1.6m) which are expected ordinarily to continue.
These cashflows, together with undrawn facilities available, ensure
the Group is in a strong financial position from which to carry out
its strategy to grow the franchise business both organically and
through acquisition in the coming year.
Ed Jones
Chief Financial Officer
Consolidated statement of comprehensive income
For the year ended 31 December 2018
2018 2017
Notes GBP000s GBP000s
Revenue 3 13,982 14,169
Administrative expenses (11,698) (11,938)
-------- --------
Operating profit before depreciation, amortisation,
impairments and profit/loss on disposal
of non-current assets, acquisition & share-based
payment expenses 2,284 2,231
Depreciation and profit on disposal 4 (80) (137)
Amortisation, impairments and loss on disposal 4 (949) (731)
Business combination acquisition expenses 15 (13) (50)
Share-based payment expense 25 (62) (118)
-------- --------
Operating profit 4 1,180 1,195
Finance income 7 13 18
Finance costs 8 (201) (185)
Other gains and losses (23) -
-------- --------
Profit before taxation 969 1,028
Taxation 9 (127) (133)
-------- --------
Profit for the financial year 842 895
Other comprehensive income - -
-------- --------
Total comprehensive income for the year 842 895
======== ========
Profit and total comprehensive income for
the financial year attributable to:
Equity holders of the parent 842 895
-------- --------
842 806
======== ========
Earnings per share
Basic (pence per share) 11 2.65 2.89
======== ========
Diluted (pence per share) 11 2.55 2.77
======== ========
Consolidated statement of financial position
As at 31 December 2018
2018 2017
Notes GBP000s GBP000s
Non-current assets
Goodwill 12 4,626 4,626
Other intangible assets 12 6,588 6,548
Property, plant and equipment 13 282 344
Investments 14 28 1
Deferred tax assets 23 90 87
-------- --------
11,614 11,606
-------- --------
Current assets
Trade and other receivables 16 1,608 1,645
Cash and cash equivalents 1,718 1,582
-------- --------
3,326 3,227
-------- --------
Total assets 14,940 14,833
======== ========
Current liabilities
Borrowings 17 (80) (77)
Obligations under finance leases 18 (21) (19)
Current tax liabilities (129) (163)
Trade and other payables 19 (2,068) (2,291)
-------- --------
(2,298) (2,550)
-------- --------
Non-current liabilities
Borrowings 17 (4,001) (3,783)
Obligations under finance leases 18 (42) (62)
Other payables 20 (19) (19)
-------- --------
(4,062) (3,864)
-------- --------
Provisions for liabilities
Provisions 22 (65) (55)
Deferred tax liability 23 (758) (768)
-------- --------
(823) (823)
-------- --------
Net assets 7,757 7,596
======== ========
Equity
Attributable to the owners of the parent:
Share capital 26 1,273 1,272
Share premium account 27 4,107 4,105
Merger reserve 1.11 899 899
Retained earnings 1,478 1,320
-------- --------
7,757 7,596
-------- --------
Total equity 7,757 7,596
======== ========
The financial statements were approved by the Board of Directors
and authorised for issue on 3 April 2019 and are signed on its
behalf by:
Mr E A Jones
Director
Company Registration No. 09448465
Company statement of financial position
As at 31 December 2018
2018 2017
Notes GBP000s GBP000s
Non-current assets
Investments 14 1,251 1,189
Current assets
Trade and other receivables 16 6,010 5,482
-------- --------
Total assets 7,261 6,671
======== ========
Current liabilities
Current tax liabilities (34) (22)
Trade and other payables 19 (31) (26)
-------- --------
(65) (48)
-------- --------
Net assets 7,196 6,623
======== ========
Equity
Share capital 26 1,273 1,272
Share premium account 4,107 4,105
Share option reserve 1.11 379 317
Retained earnings 1,437 929
-------- --------
Total equity 7,196 6,623
======== ========
As permitted by s408 Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income. The Company's
profit for the year was GBP1.240 million.
The financial statements were approved by the Board of Directors
and authorised for issue on 3 April 2019 and are signed on its
behalf by:
Mr E A Jones
Director
Company Registration No. 09448465
Consolidated statement of changes in equity
For the year ended 31 December 2018
Total equity
Share attributable
Share premium Merger Retained to owners
capital account reserve earnings of the parent
Notes GBP000s GBP000s GBP000s GBP000s GBP000s
Balance at 1 January 2017 1,145 2,633 899 971 5,648
Year ended 31 December 2017:
Profit and total comprehensive
income for the year - - - 895 895
Issue of share capital 26 127 1,544 - - 1,671
Dividends 10 - - - (634) (634)
Credit to equity for equity
settled share-based payments 25 - - - 118 118
Deferred tax on share-based
payment transactions - - - (26) (26)
Costs of raising equity - (76) - - (76)
Exercise of share options - 4 - (4) -
-------- -------- -------- --------- --------------
Balance at 31 December 2017 1,272 4,105 899 1,320 7,596
Year ended 31 December 2018:
Profit and total comprehensive
income for the year - - - 842 842
Issue of share capital 26 1 2 - - 3
Dividends 10 - - - (732) (732)
Credit to equity for equity
settled share-based payments 25 - - - 62 62
Deferred tax on share-based
payment transactions - - - (14) (14)
Balance at 31 December 2018 1,273 4,107 899 1,478 7,757
======== ======== ======== ========= ==============
Company Statement of Changes in Equity
For the year ended 31 December 2018
Share Share
Share premium option Retained
capital account reserve earnings Total
Notes GBP000s GBP000s GBP000s GBP000s GBP000s
Balance at 1 January 2017 1,145 2,633 203 163 4,144
Year ended 31 December 2017:
Profit and total comprehensive
income for the year - - - 1,400 1,400
Issue of share capital 26 127 1,544 - - 1,671
Dividends 10 - - - (634) (634)
Share based payment expense of
subsidiary 14 - - 118 - 118
Exercise of share options - 4 (4) - -
-------- -------- -------- --------- --------
Balance at 31 December 2017 1,272 4,105 317 929 6,623
Year ended 31 December 2018:
Profit and total comprehensive
income for the year - - - 1,240 1,240
Issue of share capital 26 1 2 - - 3
Dividends 10 - - - (732) (732)
Share based payment expense of
subsidiary 14 - - 62 - 62
Balance at 31 December 2018 1,273 4,107 379 1,437 7,196
======== ======== ======== ========= ========
Consolidated statement of cash flows
For the year ended 31 December 2018
2018 2017
Notes GBP000s GBP000s
Cash flows from operating activities
Operating profit 1,180 1,195
Adjustments for:
Share-based payment expense 25 62 118
Depreciation of property, plant and equipment 13 107 137
Gain on disposal of property, plant and
equipment 4 (27) -
Amortisation and impairment of intangible
assets 12 836 755
Impairment of intangible assets 12 42 -
Loss/(gain) on disposal of intangible
assets 4 71 (24)
Increase/(release) of provisions 22 10 (16)
Costs of acquisition 15 - 50
Share exchange transactions 14 (50) -
Changes in working capital:
Decrease/(increase) in trade and other
receivables 16 37 (193)
Decrease in trade and other payables 19 (223) (64)
-------- --------
Cash generated from operations 2,045 1,958
Interest paid (173) (147)
Income taxes paid (260) (246)
-------- --------
Net cash inflow from operating activities 1,612 1,565
-------- --------
Investing activities
Purchase of intangible assets 12 (850) (868)
Proceeds on disposal of intangibles 283 114
Purchase of property, plant and equipment 13 (46) (52)
Proceeds on disposal of property, plant
and equipment 28 -
Business acquisitions, net of cash acquired 15 (350) (2,460)
Payment of deferred considerations - (52)
Interest received 7 13 18
-------- --------
Net cash used in investing activities (922) (3,300)
-------- --------
Financing activities
Proceeds from issue of own shares 2 1,345
Repayment of deferred consideration debentures 17 - (295)
Proceeds of new bank loans 564 1,851
Repayment of bank loans and borrowings 17 (370) (90)
Payment of finance leases obligations 18 (18) (47)
Dividends paid 10 (732) (634)
-------- --------
Net cash generated from/(used in) financing
activities (554) 2,130
-------- --------
Net increase/(decrease) in cash and cash
equivalents 136 395
Cash and cash equivalents at beginning
of year 1,582 1,187
-------- --------
Cash and cash equivalents at end of year 1,718 1,582
-------- --------
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's Consolidated Statement of Cash Flows as cash flows
from financing activities.
At At
1 January Financing Other 31 December
2018 cash flows changes 2018
Bank loans 3,860 194 27 4,081
Finance lease liabilities 81 (18) - 63
Total liabilities from financing
activities 3,941 176 27 4,144
========== =========== ======== ============
Major non-cash transactions
During the year the Group entered into a number of non-cash
transactions as follows:
The Group was issued 30,303 shares in a listed entity as part of
an ongoing negotiation with a third party property portal entity
whom the Group use as part of their trading, as disclosed more
fully in note 14.
Company Statement of Cash Flows
The Company has not held any cash and cash-equivalents during
the year or the comparative year. During the prior year the Company
entered into a number of equity transactions which were enacted via
intercompany accounts. Accordingly, the Directors have not
presented a Company Statement of Cash Flow
RESTRICTED CASH BALANCES
Included within cash and cash equivalents are cash balances
which the Group consider to be restricted due to delegation of
control totalling GBP69,000 (2017 - GBP47,000). The balance can be
contractually withheld from the Group for a period of up to 5
years
Notes to the financial statements
For the year ended 31 December 2018
1 Accounting policies
Company information
Hunters Property Plc ("the Company") is a public limited company
domiciled and incorporated in England and Wales. The registered
office is Apollo House, Eboracum Way, York, North Yorkshire, YO31
7RE. The consolidated financial information (or "financial
statements") incorporate the financial information 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.
1.1 Accounting convention
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2018
or 2017, but is derived from those accounts. Statutory accounts for
2017 have been delivered to the Registrar of Companies and those
for 2018 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts: their
reports were unqualified, did not draw attention to any matters by
way of emphasis and did not contain a statement under Sections
498(2) or (3) of the Companies Act 2006.
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and the Companies Act 2006
applicable to companies reporting under IFRS. The consolidated
financial statements have been prepared under the historical cost
convention, modified to include the revaluation of certain
financial instruments at fair value.
1.2 Basis of consolidation
The Group financial information consolidates those of the
Company and the subsidiaries that the Company has control of.
Control is established when the Company 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 undertaking, or unincorporated business, is
acquired/disposed of during the year, 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.
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 in note 1.11. The consideration transferred by the Group to
obtain control of a subsidiary or unincorporated business 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 an acquired subsidiary's
(or unincorporated business'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 or
unincorporated business, without a loss of control, is accounted
for as an equity transaction.
If the Group loses control over a subsidiary or unincorporated
business, 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.
1.3 Going concern
As at the year end the Group has net current assets. The nature
of the Group's trade is that there exist intangibles which generate
significant cashflows, and are expected to continue doing so. The
Group has sufficient unused facilities available in its bank
financing as disclosed in note 17.
The Directors have considered 12 month cashflow forecasts from
the date of approval of the financial statements, and do not
foresee any cashflow issues arising. Taking these factors into
account, as at the time of approving the financial statements, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Thus Directors continue to adopt the going concern basis of
accounting in preparing the financial statements.
1.4 Revenue
The Group has applied IFRS 15 'Revenue from contracts with
customers' for the first time in the current reporting period.
Under IFRS 15, the Group applies the 5-step method to identify
contracts with its customers, determine performance obligations
arising under those contracts, set an expected transaction price,
allocate that price to the performance obligations, and then
recognises revenues as and when those obligations are satisfied.
Under the previous standard (IAS 18) the Group recognised revenue
when the risks and rewards of the service were transferred to the
customer.
The Group has reviewed its contracts with customers and the
performance obligations within those contracts and has concluded
that no change is required to previously reported revenue. However,
the Group has revised its accounting policies compared to those
disclosed in the prior year Financial Statements to reflect the
differences between IFRS 15 and IAS 18. The policies below reflect
these revisions.
Revenue from residential, commercial and land sales
This represents revenue from the sale of residential property,
sale of commercial property or the sale of land. The revenue is
recognised at the point the Group has performed its performance
obligation to see the transaction through to the exchange of
contracts between a buyer and a vendor. This results in revenue
recognition consistent with the previous accounting policy.
Lettings revenue
This represents revenue from commission earned as letting
agents. The Group's performance obligations under these contracts
are to provide services to manage the letting of properties. Where
the performance obligation relates to letting of a property the
revenue is recognised at the point the property has been let. Where
the performance obligation relates to the management of a lettings
property, revenue is recognised over the period the property is
managed. This results in revenue recognition consistent with the
previous accounting policy.
Franchise revenue
Upfront fees - This represents revenue at the inception of a
franchisee contract. The Group's performance obligation is to
provide time, knowledge and expertise required to be able to set up
a functioning franchised branch. This involves but is not limited
to; finding and assessing suitable premises, providing support and
training to the new franchisee prior to launching the new office,
providing branding services and marketing materials. This results
in revenue recognition consistent with the previous accounting
policy.
Management service fees - This represents revenue from
franchisee management service fees charged for operating a Group's
franchise. Revenue is recognised monthly in arrears, calculated by
reference to the terms of the contract and the value of sales
attributable to each franchisee. This results in revenue
recognition consistent with the previous accounting policy.
Central marketing fund - This represents revenue earned from
franchisees for providing marketing services. The Group's
performance obligation is to arrange for the provision of services
to promote the franchisees businesses through national marketing
campaigns. The Group does not control the specified service
provided to the franchisees so is considered an agent under IFRS
15. As such the revenue is recognised net of the cost of the
services provided.
Other
Financial services revenue represents commission receivable from
partner customers from the sale financial products associated with
the sale or let of a property. The Group's performance obligation
under the contract is to provide an introduction of prospective
policyholders to partners. The performance obligation has been
satisfied at the point of successful placement or renewal of a
financial product. This results in revenue recognition consistent
with the previous accounting policy.
Software sales represents revenue from the provision of estate
agency software. The Group's obligation is to provide the
franchisees with access to the software throughout the term of the
agreement. Revenue is recognised in the month the service is
provided and is consistent with the previous revenue recognition
accounting policy.
Survey revenue represents fees earned from Survey and Valuation
work. The Group's obligation is to provide a professional survey or
valuation by a surveyor. Revenue is recognised when the
professional survey or valuation has been completed. This results
in revenue recognition consistent with the previous accounting
policy.
Rental income represents rent received from short term licensing
arrangements, entered into to make use of vacant office space. The
Group's obligation is to provide office accommodation throughout
the period of the contract. Revenue is recognised over the period
of the licence. This results in revenue recognition consistent with
the previous accounting policy.
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.
Where the Group identifies rights to the economic benefits of
other sources of income through fulfilment of certain performance
criteria, the income is recognised in the relevant accounting
period when those conditions are fulfilled, net of VAT.
1.5 Intangible fixed assets Ð 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. See note 1.9 for a description of impairment
testing procedures.
1.6 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 as disclosed further in note 15. 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 year-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 3-7 years or over the life of the license
Franchise development grants Over the life of the franchise
contract (typically 10-15 years)
Brands 10 years
Customer lists 5-15 years
1.7 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 cost 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 life of the
lease
Plant and machinery 25% Reducing balance
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 year-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.
1.8 Non-current investments
A subsidiary is an entity controlled by the Group. Control is
the power to govern the financial and operating policies of the
entity so as to obtain benefits from its activities.
Other investments in equity instruments that have a quoted
market price in an active market and other equity instruments whose
fair value can be reliably measured are measured at fair value.
1.9 Impairment of non-current assets
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.
1.10 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.
Financial assets are initially recognised at fair value plus
directly attributable transaction costs.
After initial recognition, financial assets are measured at
amortised cost using the effective interest method. Discounting is
omitted where the effect of discounting is immaterial.
Impairment losses on trade receivables are measured based on
estimated expected credit losses.
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 assets held for trading
Financial assets at fair value through profit or loss include
financial assets held for trading and financial assets designated
upon initial recognition at fair value through profit or loss.
Financial assets are classified as held for trading if they are
acquired for the purpose of selling in the near term. This category
includes derivative financial instruments entered into by the
Company that are not designated as hedging instruments in hedge
relationships as defined by IFRS 9. The Company has not designated
any financial assets upon initial recognition as at fair value
through profit or loss.
Derivatives, including separated embedded derivatives, are also
classified as held for trading unless they are designated as
effective hedging instruments.
Financial assets at fair value through profit and loss are
carried in the Statement of Financial Position at fair value with
changes in fair value recognised in finance revenue or finance
expense in the Statement of Comprehensive Income.
Impairment of financial assets
Financial assets, other than those held at fair value through
profit and loss, are assessed for indicators of impairment at each
reporting end date.
Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future
cash flows have been affected. If an asset is impaired, the
impairment loss is the difference between the carrying amount and
the present value of the estimated cash flows discounted at the
asset's original effective interest rate. The impairment loss is
recognised in profit or loss.
If there is a decrease in the impairment loss arising from an
event occurring after the impairment was recognised, the impairment
is reversed. The reversal is such that the current carrying amount
does not exceed what the carrying amount would have been, had the
impairment not previously been recognised. The impairment reversal
is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual
rights to the cash flows from the asset expire or are settled, or
when the Group transfers the financial asset and substantially all
the risks and rewards of ownership to another entity, or if some
significant risks and rewards of ownership are retained but control
of the asset has transferred to another party that is able to sell
the asset in its entirety to an unrelated third party.
Classification of 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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the Group's
contractual obligations expire or are discharged or cancelled.
1.11 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.
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs. Dividends payable on
equity instruments are recognised as liabilities once they are no
longer at the discretion of the Group.
Within the Company, the share option reserve is recognised in
respect of the cumulative fair value of share options recognised,
net of issues made, where the benefit of the services received
under the share option are recognised within subsidiaries of the
Company. Once the share option is exercised, the element included
within this reserve for fair values expensed is transferred to the
share premium account. Full details on share options existing as at
the year end is given in note 25.
The Group 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, as a result of this merger accounting a
merger reserve is recognised within equity which represents the
difference between the net assets of the Group and the retained
profits recognised by the Group as at 27 March 2015.
1.12 Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the reporting end
date.
Deferred tax
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.
1.13 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 end 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 in measured at
present value the unwinding of the discount is recognised as a
finance cost in profit or loss in the period it arises.
1.14 Employee benefits
The costs 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.
1.15 Retirement benefits
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
1.16 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. Full
disclosure of the calculation models is given in note 25.
1.17 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.
Rentals payable under operating leases, including any lease
incentives received, are charged to income on a straight line basis
over the term of the relevant lease except where another more
systematic basis is more representative of the time pattern in
which economic benefits from the lease asset are consumed.
1.18 Standards, amendments and interpretations adopted in the
year
The current standards, amendments and interpretations have been
adopted in the year and have not had a material impact on the
reported results in the Group's financial statements:
-- Amendments to IAS 40 'Investment Property' for transfers of investment property
-- IFRS 15 'Revenue from Contracts with Customers', including
clarifications made to the standard since initial release
-- IFRS 9 'Financial Instruments'
-- IFRIC 22 'Foreign Currency Transactions and Advance Consideration'
-- Amendments to IFRS 2 'Share-based Payment' for classification
and measurement of share-based payment transactions
-- Amendments to IFRS 4 'Insurance Contracts' around interaction with IFRS 9
The disclosure requirements of the Group have been revised to
comply with the updated requirements of IFRS 9 'Financial
Instruments' but the Group has not otherwise adjusted the carrying
value of its assets or liabilities at any reporting date.
1.19 Standards, amendments and interpretations in issue but not
yet effective
The adoption of the following mentioned standards, amendments
and interpretations in future years:
EU effective
date Ð
period beginning
on or after
1 January
IFRS 16 'Leases' 2019
1 January
Annual improvements to IFRS's (2015 - 2017) 2019*
IFRS 17 'Insurance Contracts' and subsequent withdrawal 1 January
of IFRS 4 'Insurance Contracts' 2021*
Amendments to IFRS 9 'Financial Instruments' for prepayment 1 January
features with negative compensation 2019
Amendments to IAS 28 'Investments in Associates and Joint
Ventures' for long term interests in associates and joint 1 January
ventures 2019
Amendments to IAS 19 'Employee benefits' for plan amendments, 1 January
curtailments and settlements 2019
Amendments to IFRS 3 'Business combinations' for previously 1 January
held interests in a joint operation 2019
Amendments to IFRS 11 'Joint arrangements' for previously 1 January
held interests in a joint operation 2019
Amendments to IAS 12 'Income taxes' for the income tax
consequences of payments on financial instruments classified 1 January
as equity 2019
Amendments to IAS 23 'Borrowing costs' around borrowing 1 January
costs eligible for capitalisation 2019
1 January
IFRIC 23 'Uncertainty over Income Tax Treatments' 2019
Amendments to IFRS 3 'Business combinations' around the 1 January
definition of a business 2020
Amendments to IAS 1 'Presentation of financial statements'
and IAS 8 'Accounting policies, changes in accounting 1 January
estimates and errors' for the definition of material 2020
1 January
The Conceptual Framework for Financial Reporting 2020
1 January
IFRS 17 'Insurance Contracts' 2021
The directors have reviewed the impact of IFRS 16 'Leases' and
expect this to have a material impact on the financial statements.
As at the current period end, it is expected that the
implementation of IFRS 16 will create right of use assets with
carrying value GBP2,506,248 and associated lease liabilities of
GBP2,823,798, with current period reported profits being increased
by GBP2,597 for adjustments in respect of derecognising operating
lease rentals, and recognising depreciation on right of use assets
and finance costs on the lease.
The directors have also reviewed Apollo House in relation to
IFRS 16 and are to recognise the elements under sublet as an
investment property. The directors anticipate that this will be
recognised at historical cost based on the present value of the
lease commitment, although are yet to finalise this accounting
policy choice.
The amendments to IFRS 3 have altered the definition of a
business combination, which the directors already consider to be a
key judgement as disclosed more fully in note 2. The directors are
of the opinion that the updated definition remains broadly
consistent when reviewing from the perspective of business
combinations enacted during the current and comparative year;
further, on more marginal business combinations there has been no
goodwill recognised which would make the treatment substantially
equivalent if such a business combination was judged to be simply
an acquisition of assets. As such, the directors do not expect that
the future adoption of this standard would have a material impact
on the financial statements.
2 Judgements and key sources of estimation uncertainty
The preparation of the financial statements in conformity with
IFRS requires management to make judgements, 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 judgements 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.
Critical judgements
The following judgements (apart from those involving estimates)
have had the most significant effect on amounts recognised in the
financial statements:
Basis of consolidation
The Group was formed on 27 March 2015 when Hunters Property Plc
acquired shares in its subsidiaries through a share-for-share
exchange. This type of common control transaction falls outside the
scope of IFRS 3 and therefore UK GAAP has been referred to for best
practice guidance. The result is that the Group adopted merger
accounting as a basis for the Group consolidation.
Franchisee revenue & intangible assets
Franchisee sign up fees are recognised upfront at the inception
of a franchisee contract, which in the Directors' opinion matches
to the estimated cost of time and knowledge to create the
franchiser-franchisee contractual arrangement.
Franchisee Development Grants ("FDG's") are recognised at the
inception of certain contracts with franchisees, and are provided
in order to assist with the transition of franchisees to the
Hunters brand name. These intangibles are amortised over the life
of the franchise contract, typically 10-15 years.
Accounting for acquired lettings books
The Group has acquired lettings books in the current and
comparative year. Although each of these books are subsumed within
the overall trade of the Group, the originally acquired book is
separable and tradable in its own right, although following
acquisition is managed by existing Company staff and systems. The
directors consider that recognition under IFRS 3 'Business
Combinations' is the most suitable accounting treatment.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities are as follows:
Provisions
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
reporting date. Each period the Directors assess the risks and
uncertainties surrounding the obligation and review the discount
rates applied when calculating the present value. When reviewing
the discount rates the Directors refer to the Group weighted
average cost of capital. Further details on the assumptions made
for specific provisions are disclosed in note 22.
Business combinations and goodwill
The Group has made acquisitions during the year and comparative
year. Judgements and estimations are made in respect of the
recognition of the acquisition as a separable business, and of
measurement of the provisional fair values of assets and
liabilities acquired and the consideration transferred.
Furthermore, estimation techniques have been used to value the
intangibles acquired.
The Directors test annually for impairment of the Group's
intangible assets and goodwill, details of which are given in note
12.
3 Revenue
IFRS 8, Operating Segments, requires operating segments to be
identified on the basis of internal reports of the Group that are
regularly reviewed by the Group's chief operating decision maker.
The chief operating decision maker of the Group is considered to be
the Board
of Directors.
The Group has three principal operating segments: Residential
Sales, Lettings, and Franchising. The operating segments are
monitored by the Group's chief operating decision maker and
strategic decisions are made on the basis of adjusted segment
operating results. All assets, liabilities and revenues are located
in, or derived in, the United Kingdom.
The Group does not have any major customers which account for
10% or more of revenues.
Segmental analysis of revenue
2018 2017
GBP000s GBP000s
Residential sales - recognised at a point in time 3,941 4,609
Lettings sales - recognised over time* 3,319 3,210
Franchisee sales - recognised at a point in time 4,871 4,648
Other - recognised at a point in time 1,851 1,702
-------- --------
13,982 14,169
-------- --------
Revenue analysed by geographical market
2018 2017
GBP000s GBP000s
United Kingdom 13,982 14,169
======== ========
Further disclosure of the segmental analysis of goodwill is made
in note 12. Due to the nature of operations, the Directors, as the
chief operating decision-making body, review financial information
for the Group's overall business and have identified a single
operating segment at cost and asset/liability levels. Accordingly,
further disclosure has not been made of these elements.
All of the above revenue has arisen from contracts with
customers. The revenue presented above has been disaggregated to
provide revenue amounts for material categories of services
provided by the Group in accordance with the disclosure
requirements of IFRS 15 'Revenue from Contracts with
Customers'.
* A small element of Lettings sales is recognised at a point in
time, which relates to upfront fees.
A small element of Other sales is recognised over time, which
relates to rental income.
4 Operating profit
2018 2017
GBP000s GBP000s
Operating profit for the year is stated after charging/(crediting):
Depreciation of owned property, plant and equipment 78 107
Depreciation of property, plant and equipment held
under finance leases 29 30
Gain on disposal of property, plant and equipment (27) -
Amortisation of intangible assets 836 755
Impairment of intangible assets 42 -
Loss/(gain) on disposal of intangible assets 71 (24)
Share-based payments (note 25) 62 118
Operating lease charges (including property rent) 708 668
======== ========
The Group's subsidiary Realcube Limited has undertaken Research
& Development activities on which tax credits were received
totalling GBP48,000 (2017 - GBP22,000). Expenses in relation to
this are included within employment costs.
5 Auditor's remuneration
2018 2017
GBP000s GBP000s
Fees payable to the Company's auditor and its associates:
For audit services
Audit of the financial statements of the Group and
Company 20 15
Audit of the Company's subsidiaries 26 27
-------- --------
46 42
======== ========
In addition to the above, there were GBP1,000 of non-audit fees
paid to the Group's auditors for a review of compliance with
financing covenants in each of the current and comparative
years.
6 Employees
The average monthly number of persons (including Directors)
employed by the Group during the year was:
Group Company
2018 2017 2018 2017
Number Number Number Number
Directors 5 5 5 5
Sales and administration 191 184 - -
------- ------- ------- -------
196 189 5 5
======= ======= ======= =======
Their aggregate remuneration comprised:
Group Company
2018 2017 2018 2017
GBP000s GBP000s GBP000s GBP000s
Wages and salaries 5,316 5,530 - -
Social security costs 426 522 - -
Pension costs 111 128 - -
-------- -------- -------- --------
5,853 6,180 - -
-------- -------- -------- --------
Details of Directors' remuneration is provided in note 30.
7 Finance income
2018 2017
GBP000s GBP000s
Interest income
Interest on bank & similar deposits 13 18
-------- --------
Total income 13 18
Interest income includes the following:
Interest on financial assets not measured at
fair value through profit or loss 13 18
======== ========
8 Finance costs
2018 2017
GBP000s GBP000s
Interest on financial liabilities measured at
amortised cost:
Interest on bank overdrafts and loans 189 163
Interest on finance leases 7 11
-------- --------
196 174
-------- --------
Other finance costs:
Unwinding of discount on loans and borrowings - 6
Unwinding of discount on provisions 5 5
-------- --------
5 11
-------- --------
Total finance costs 201 185
======== ========
9 Taxation
2018 2017
GBP000s GBP000s
Current tax
UK corporation tax on profits for the current
period 274 314
Adjustments in respect of prior periods (48) (22)
-------- --------
Total current tax 226 292
-------- --------
Deferred tax
Origination and reversal of temporary differences (86) (84)
Changes in tax rates - (45)
Deferred tax on share-based payments charge (13) (30)
-------- --------
Total deferred tax (99) (159)
-------- --------
Total tax charge 127 133
======== ========
The charge for the year can be reconciled to the profit per the
Consolidated Statement of Comprehensive Income as follows:
2018 2017
GBP000s GBP000s
Profit before taxation 969 1,028
======== ========
Expected tax charge based on a corporation tax
rate of 19% (2017 - 19.25%) 184 198
Tax effect of expenses that are not deductible
in determining taxable profit 18 4
Tax effect of utilisation of tax losses not previously
recognised (17) -
Effect of change in corporation tax rate - (45)
Depreciation on assets not qualifying for tax
allowances 3 3
Amortisation on assets not qualifying for tax
allowances 14 17
Share based payment charge (14) (25)
Over-provided in prior years (in respect of R&D) (48) (22)
Other adjustments (13) 3
-------- --------
Total tax charge 127 133
======== ========
In addition to the amount charged to the Consolidated Statement
of Comprehensive Income, the following amounts relating to tax have
been recognised directly in equity:
2018 2017
GBP000s GBP000s
Deferred tax:
Change in estimated excess tax deductions related
to share based payments 14 26
-------- --------
The UK corporation tax rate was 19% throughout the year.
A reduction in the UK corporation tax rate from 19% to 17%
(effective from 1 April 2020) was enacted in March 2017. These
rates have therefore been considered when calculating deferred tax
at the reporting date. Deferred tax balances at the reporting date
are measured at 17% (2017: 17%) except when the timing difference
is expected to be substantially unwound before 1 April 2020, in
which case a rate of 19% has been used to measure the balance.
10 Dividends
2018 2017 2018 2017
per share per share GBP000s GBP000s
Amounts recognised as distributions
to equity holders:
Final paid (pence per share) 1.50 1.30 477 412
Interim paid (pence per share) 0.80 0.70 255 222
---------- ---------- -------- --------
2.30 2.00 732 634
---------- ---------- -------- --------
The proposed final dividend for the year ended 31 December 2018
is:
2018 2017
Per share Per share
GBP000s Total GBP000s Total
Ordinary shares (pence per share) 1.60 509 1.50 477
========= ===== ========= =====
The proposed final dividend is subject to approval by
shareholders and has not been included as a liability in these
financial statements.
The full year dividend for 2018 is 2.40 pence per share, made up
of the interim dividend of 0.80 pence per share and a final
proposed dividend of 1.60 pence per share.
11 Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2018 2017
GBP000s GBP000s
Earnings
Earnings for the purpose of basic earnings per
share being net profit attributable to owners
of the parent 842 895
Effects of dilutive potential ordinary shares - -
-------- --------
Earnings for the purposes of diluted earnings
per share 842 895
======== ========
2018 2017
No. No.
Number of shares
Weighted average number of ordinary shares for
the purposes of basic earnings per share 31,822,604 31,022,076
Net weighted average number of dilutive potential
ordinary shares for the purposes of dilutive
earnings per share 1,175,658 1,282,143
---------- ----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 32,998,262 32,304,219
========== ==========
Basic earnings per share (pence per share) 2.65 2.89
========== ==========
Diluted earnings per share (pence per share) 2.55 2.77
========== ==========
In each period there were share options outstanding. As at 31
December 2018, 89% of these options were in the money, and are due
to expire at various stages over the next 8 years.
The Directors use adjusted earnings before time-value interest,
interest income, amortisation, impairments and loss on disposal of
intangible assets, costs of acquisition, and share-based payment
expenses ("Adjusted Earnings") as a measure of ongoing
profitability and performance. The calculation of these Adjusted
Earnings now takes into account the impact of profits and losses on
the disposal of intangible assets; this is to better reflect the
non-cash impact of the consumption of intangible assets, which the
Directors feel provides more useful and relevant financial
information to shareholders. The previously reported Adjusted
Earnings for the year ended 31 December 2017 were GBP1.811 million,
and reported Basic Adjusted Earnings per Share was 5.84p.
The calculated Adjusted Earnings for the current period is as
follows:
2017
2018 Restated
GBP000s GBP000s
Profit after taxation attributable to equity
owners of the parent 842 895
Adjusted for:
Time-value interest costs 5 11
Interest income (13) (18)
Amortisation, impairments and loss on disposal
of intangible assets 949 731
Costs of acquisition 13 50
Share-based payment expense 62 118
Other gains and losses 23 -
-------- ---------
Adjusted Earnings 1,881 1,787
======== =========
Basic Adjusted Earnings per share (pence per
share) 5.91 5.76
======== =========
12 Goodwill and other intangible assets
Customer
Goodwill Software FDG's & rebrands Brands lists Total
Group GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Cost
At 1 January 2017 4,008 620 1,939 637 2,040 9,244
Additions - separately
acquired - 138 730 - - 868
Additions - business combinations 653 - - - 2,447 3,100
Disposals - - (106) - - (106)
-------- -------- ---------------- -------- -------- --------
At 31 December 2017 4,661 758 2,563 637 4,487 13,106
Additions - separately
acquired - 74 768 - 8 850
Additions - business combinations - - - - 422 422
Disposals - (5) (454) - - (459)
-------- -------- ---------------- -------- -------- --------
At 31 December 2018 4,661 827 2,877 637 4,917 13,919
-------- -------- ---------------- -------- -------- --------
Amortisation and impairment
At 1 January 2017 35 125 253 141 639 1,193
Amortisation charged for
the year - 90 209 65 391 755
Disposals - - (16) - - (16)
-------- -------- ---------------- -------- -------- --------
At 31 December 2017 35 215 446 206 1,030 1,932
Amortisation charged for
the year - 136 210 65 425 836
Impairment losses - - 42 - - 42
Disposals - (6) (99) - - (105)
-------- -------- ---------------- -------- -------- --------
At 31 December 2018 35 345 599 271 1,455 2,705
-------- -------- ---------------- -------- -------- --------
Carrying amount
At 31 December 2018 4,626 482 2,278 366 3,462 11,214
======== ======== ================ ======== ======== ========
At 31 December 2017 4,626 543 2,117 431 3,457 11,174
======== ======== ================ ======== ======== ========
The Company had no intangible assets as at 31 December 2018 or
31 December 2017.
Franchise Development Grants ("FDG's") and rebrand costs are
expenses incurred 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. The Group recognises an impairment as provision against
impairment losses arising from the risk of early terminations of
franchise agreements.
The Group tests goodwill annually for impairment, or more
frequently if events or changes in circumstances indicate that the
asset might be impaired. Goodwill is assessed for impairment by
comparing the carrying values with the value-in-use calculation,
which is determined by calculating the net present value (NPV) of
future cash flows arising from the original acquired business.
The NPV of future cash flows is based on budgets and forecasts
for the next 5 years to 2023, using growth rates of 0% - 3% based
on past experience and outlook. Thereafter growth is assumed to be
0-3% in to perpetuity based on long term housing sector growth
rates and current housing transaction volumes. A discount rate of
between 10% and 11% has been used based on the Group's estimated
cost of capital, and varied based on the risk profile of the
underlying asset.
The key sensitivities in assessing the value in use of goodwill
are forecast cashflows and the discount rate applied as
follows:
-- A 1% reduction in long term growth rates would have no impact on carrying values; and
-- A 2% increase in the discount applied would have no impact on carrying values.
Given the political uncertainties around Brexit, the Group has
applied further sensitivities in assessing the value in use in the
short to medium term. 5% reduction compared to the base case
revenues over each year of the 5 year forecast horizon period, have
no impact on the assessment of impairment.
The carrying amounts of goodwill have been assigned to the
following cash-generating units:
2018 2017
Group GBP000s GBP000s
Residential sales 1,330 1,330
Lettings 561 561
Franchising 2,701 2,701
Other 34 34
-------- --------
4,626 4,626
======== ========
13 Property, plant and equipment
Leasehold Fixtures,
land and Plant and fittings Motor
Group buildings machinery and equipment vehicles
GBP000s GBP000s GBP000s GBP000s GBP000s Total
Cost
At 1 January 2017 16 497 211 40 764
Additions - 51 1 - 52
---------- ---------- -------------- --------- -----
At 31 December 2017 16 548 212 40 816
Additions - 42 4 - 46
Disposals - (95) (7) (31) (133)
---------- ---------- -------------- --------- -----
At 31 December 2018 16 495 209 9 729
---------- ---------- -------------- --------- -----
Depreciation and impairment
At 1 January 2017 11 276 33 15 335
Depreciation charged in the year 1 78 42 16 137
Eliminated in respect of disposals - - - - -
---------- ---------- -------------- --------- -----
At 31 December 2017 12 354 75 31 472
Depreciation charged in the year 1 60 41 5 107
Eliminated in respect of disposals - (95) (6) (31) (132)
---------- ---------- -------------- --------- -----
At 31 December 2018 13 319 110 5 447
---------- ---------- -------------- --------- -----
Carrying amount
At 31 December 2018 3 176 99 4 282
========== ========== ============== ========= =====
At 31 December 2017 4 194 137 9 344
========== ========== ============== ========= =====
The Company had no property, plant and equipment assets at 31
December 2018 or 31 December 2017.
The net carrying value of property, plant and equipment includes
the following in respect of assets held under finance leases or
hire purchase contracts, which are secured by the lessors' title to
the assets. The depreciation charge in respect of such assets
amounted to GBP28,672 (2017 - GBP40,901) for the year.
2018 2017
Group GBP000s GBP000s
Fixtures, fittings and equipment 52 81
-------- --------
52 81
======== ========
Bank borrowings are secured by a fixed and floating charge over
the current and future assets of the Group that include the
property plant and equipment, as disclosed further in note 17.
14 Investments
Group Company
2018 2017 2018 2017
Notes GBP000s GBP000s GBP000s GBP000s
Investments in subsidiaries 32 - - 867 867
Other investments in subsidiaries 32 - - 384 322
Listed investments 27 - - -
Unlisted investments 1 1 - -
-------- -------- -------- --------
28 1 1,251 1,189
======== ======== ======== ========
The movement in Group investments represents a non-cash
acquisition via a gift of shares in return for continued service
with a property portal. As at the year end, the investment is held
at fair value as determined using market price.
An impairment review has been carried out however not considered
necessary in the current year.
Movements in non-current investments
Shares
Group GBP000s
Cost or valuation
At 1 January 2017 and 31 December 2017 1
Additions 50
Movement in fair value (23)
--------
At 31 December 2018 28
Carrying amount
--------
At 31 December 2018 28
========
At 31 December 2017 1
========
Movements in non-current investments
Equity investments Other investments
in subsidiaries in subsidiaries Total
Company GBP000s GBP000s GBP000s
Cost
At 1 January 2017 867 204 1,071
Additions through share based payment expense - 118 118
------------------ ----------------- --------
At 31 December 2017 867 322 1,189
Additions through share based payment expense - 62 62
------------------ ----------------- --------
At 31 December 2018 867 384 1,251
Impairment
At 1 January 2018 - - -
------------------ ----------------- --------
At 31 December 2018 - - -
Carrying amount
At 31 December 2018 867 384 1,251
================== ================= ========
At 31 December 2017 867 322 1,189
================== ================= ========
15 Business combinations
Acquisition of a lettings book
During 2018 the Group acquired a lettings book providing
landlords with residential letting agency services. The
consideration paid totalled GBP350,000, being settled in cash. In
addition there were directly attributable costs of GBP11,255.
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 a 10% discount rate (reduced to reflect the
relatively low risk profile of a lettings book acquisition) and an
assumption of a useful life of 12 years for the lettings book to
estimate the fair value of this intangible.
Fair value
Carrying Fair value recognised
value adjustments on acquisition
GBP000s GBP000s GBP000s
Assets
Intangible assets - customer lists - 422 422
-------- ------------ ---------------
Total assets - 422 422
Liabilities -
Deferred tax liabilities - (72) (72)
-------- ------------ ---------------
Total liabilities - (72) (72)
-------- ------------ ---------------
Total identifiable net assets - 350 350
======== ============ ===============
Goodwill arising on acquisition -
---------------
Purchase consideration transferred 350
===============
The analysis of the cash flows on acquisition is:
GBP000s
Business combination and acquisition expenses (11)
Cash and cash equivalents paid for the lettings book (350)
-------
Net cash flow on acquisition (361)
=======
The lettings book was acquired for a consideration of GBP350,000
on 31 December 2018 and its operations began from 1 January 2019;
accordingly, it contributed GBPnil revenue and profit in the
current financial year. Had the acquisition taken place at the
start of the year, the directors estimate that the acquisition
would have contributed GBP215,000 of revenue and GBP101,000 of
profit before tax.
In addition to the above, the business combination and
acquisition expenses disclosed on the face of the Consolidated
Statement of Comprehensive Income includes GBP2,000 of costs,
relating to an aborted acquisition.
16 Trade and other receivables
Group Company
2018 2017 2018 2017
GBP000s GBP000s GBP000s GBP000s
Amounts falling due within one year:
Trade receivables 1,034 1,103 - -
Amounts due from subsidiary undertakings - - 5,989 5,482
Other receivables 156 78 21 -
Prepayments and accrued income 418 464 - -
-------- -------- -------- --------
1,608 1,645 6,010 5,482
======== ======== ======== ========
Trade receivables at the reporting date are shown above net of
provisions. Expected credit losses for the following 12 months have
been estimated in accordance with IFRS 9, taking into account that
there has been no significant increase in credit risk. Given the
straightforward nature of the Group's receivables, the directors
consider that the Group qualifies for Stage 1 impairment models
which permits the simplified recognition of credit losses arising
from default events that are possible within the next 12 months
only.
Trade receivables are stated net of impairment for estimated
irrecoverable amounts of GBP143,805 (2017: GBP76,361). This
impairment has been determined by reference to past default
experience and known issues. Write offs are made when the
irrecoverable amount becomes certain. The Directors consider that
the carrying amount of trade and other receivables approximates to
their fair value.
Included within prepayments and accrued income is an amount of
GBP35,904 (2017 - GBPnil) relating to accrued revenues, calculated
in accordance with IFRS 15.
Movement on the allowance for irrecoverable amounts on trade
receivables are as follows:
2018 2017
GBP000s GBP000s
Beginning of the year 76 93
Provision for bad receivables 77 2
Released during the year (9) (19)
-------- --------
End of the year 144 76
======== ========
An analysis of the trade receivables:
2018 2017
GBP000s GBP000s
Less than 60 days 885 1,021
60 to 120 days 89 86
More than 120 days 204 72
Less provision against receivables more than 120
days (144) (76)
-------- --------
Total trade receivables 1,034 1,103
======== ========
The Directors consider the credit quality of trade and other
receivables that are neither past due nor impaired to be good.
17 Borrowings
2018 2017
Group GBP000s GBP000s
Bank loans 4,081 3,860
-------- --------
4,081 3,860
======== ========
Payable within one year 80 77
Payable after one year 4,001 3,783
======== ========
The Group holds two flexible loan facilities.
The first loan has a maximum facility amounting to GBP5,550,000;
at the year end GBP3,895,336 had been drawn down and is disclosed
as payable after one year. The loan has 5 year repayment terms and
bears interest at 2.80% above Libor.
The second loan had an amount of GBP248,084 outstanding at the
year end. The loan is repayable at GBP90,000 per annum and bears
interest at 2.80% above Libor.
Included within the above are establishment fees of GBP61,575
(2017 - GBP85,000) which are netted off the total liability
presented. The fees are expensed to the Income Statement on a
straight line basis over the term of the loan.
Both the above bank loans are secured by a fixed and floating
charge over the current and future assets of the Group. All of the
Group's borrowings are due for repayment within five years.
18 Obligations under finance leases
Future minimum lease payments due under finance leases:
2018 2017
Group GBP000s GBP000s
Within one year 26 26
In one to five years 46 71
-------- --------
72 97
Less: future finance charges (9) (16)
-------- --------
63 81
======== ========
The finance leases relate to office equipment included within
non-current assets. There are no lease incentives or contingent
elements attaching to the leases.
19 Current trade and other payables
Group Company
2018 2017 2018 2017
GBP000s GBP000s GBP000s GBP000s
Other taxation and social security 564 575 - -
Trade payables 569 752 - -
Other payables 208 249 - -
Accruals and deferred income 727 715 31 26
-------- -------- -------- --------
2,068 2,291 31 26
-------- -------- -------- --------
Included within accruals and deferred income is an amount of
GBP73,255 (2017 - GBP35,000) relating to deferred revenues,
calculated in accordance with IFRS 15. The amount of deferred
income relating to the prior year has been fully released in the
current financial year.
20 Non-current trade and other payables
Group Company
2018 2017 2018 2017
GBP000s GBP000s GBP000s GBP000s
Other payables 19 19 - -
======== ======== ======== ========
21 Financial instruments
Market and liquidity risks
The Group trades entirely within the UK property market, and
accordingly there is a risk relating to the underlying performance
of that market; this creates an exposure to the risk of large-scale
failure in the property trading market which would have a
corresponding impact on the results of the Group. The Directors
monitor this risk closely with the intention to foresee downturns
in trade.
Within the Group there exists a sizeable lettings division which
generates a fixed percentage income based on the letting and
management of properties owned by third parties, and the Directors
consider this to be a more secure income stream and a suitable
diversification of the trade and corresponding risk, based on
historic performance where typically a downturn in the property
trading market creates more buoyancy within the lettings market,
and vice versa. As such, the Directors believe that the Group
maintains sufficient liquidity and flexibility to continue trading
through a potential downturn in the UK property market.
The Group has a bank loan and loan facility upon which interest
is charged at 2.8% over the Bank of England base rate. The
outstanding value of these bank loans at the year end are GBP4.172
million (2017 - GBP3.945 million). The directors do not consider
that the Group is exposed to a material risk from fluctuations in
these interest rates; had the base rate been 2.0% higher throughout
the increased interest costs would have been approximately
GBP108,000 (2017 - GBP88,000).
The Group makes use of structured loans to finance its
acquisitions and ongoing trading activities as an alternative to
overdraft financing, due to the certainty of repayment timings and
predictable lower interest rates which attract to this.
Accordingly, the Directors consider that the market risks arising
from these interest-bearing loans are acceptable and minimal on a
risk-reward profile compared to overdraft finance.
Similarly, fixed rate finance lease agreements are used to
acquire property, plant and equipment; this ensures that the Group
maintains its existing working capital and ensures certainty of
costs at the point of acquisition of those assets.
The Group does not trade in overseas markets and has no
financial instruments denominated in non-Sterling currencies, and
accordingly it has no exposure to currency risks.
Credit risk
The Group does not make sales under the traditional credit term
agreement model, with cash typically being recognised at the
completion date of property or upon receipt of regular rent from
tenants; credit is, however, granted to franchisees, financial
services partners and survey & valuation partners.
The highest risk exposure is in relation to loans and
franchisees. The Group closely monitors the performance of its
franchisees, on a frequent and ongoing basis. Operationally the
Group are actively involved in the running of the franchising
businesses, including frequent exchange of financial and key
performance data, and are able to manage their own credit risk by
using this knowledge to minimise exposure to potential bad debt.
Additionally, franchisees are encouraged to remit via Direct Debit
arrangements, which helps to maintain the Group's working capital
whilst mitigating against long-term credit risk exposure.
Only reputable and accredited partners are used, and ledger
balances are carefully monitored to minimise exposure to material
credit risk. The Group's maximum exposure is represented by the
carrying amounts in the financial statements, which are shown in
the table below.
Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and other stakeholders. The Group
manages the capital structure, being cash and cash equivalents,
availability of longer term bank funding, and reinvestment of a
proportion of profits generated, and makes changes in light of
movements in economic conditions. In order to maintain or adjust
the capital structure, the Group may adjust its borrowings and
investment decisions, as evidenced when bank borrowing arrangements
were replaced during the comparative year.
Group Company
2018 2017 2018 2017
GBP000s GBP000s GBP000s GBP000s
Carrying amount of financial assets
Debt instruments measured at amortised
cost 2,908 2,762 6,010 5,483
Equity instruments measured at cost
less impairment 1 1 1,250 1,188
Equity instruments held at fair value
through profit or loss 27 - - -
-------- -------- -------- --------
2,936 2,763 7,260 6,671
======== ======== ======== ========
Carrying amount of financial liabilities
Measured at amortised cost 4,714 4,962 31 26
-------- -------- -------- --------
The undiscounted contractual maturity analysis for Group
financial instruments is shown below. The maturity analysis
reflects the contractual undiscounted cashflows, including future
interest charges, which may differ from the carrying value of the
liabilities as at the reporting date.
Demand From
and less 12 months
than From 3 to to From 2 to
Financial assets 3 months 12 months 2 years 5 years Total
Trade and other receivables 1,181 - - - 1,181
Cash and cash equivalents 1,582 - - - 1,582
--------- ---------- ---------- --------- -----
As at 31 December 2017 2,763 - - - 2,763
========= ========== ========== ========= =====
Trade and other receivables 1,190 - - - 1,190
Cash and cash equivalents 1,718 - - - 1,718
--------- ---------- ---------- --------- -----
As at 31 December 2018 2,908 - - - 2,908
========= ========== ========== ========= =====
Demand From
and less 12 months
than From 3 to to From 2 to
Financial liabilities 3 months 12 months 2 years 5 years Total
Trade and other payables 1,001 - - - 1,001
Bank loans and overdrafts 23 55 90 3,693 3,861
Other loans - 19 - - 19
Finance leases 4 14 21 42 81
--------- ---------- ---------- --------- -----
As at 31 December 2017 1,028 88 111 3,735 4,962
========= ========== ========== ========= =====
Trade and other payables 777 - - - 777
Bank loans and overdrafts 66 68 90 3,948 4,172
Other loans - 19 - - 19
Finance leases 6 19 26 21 72
--------- ---------- ---------- --------- -----
As at 31 December 2018 849 106 116 3,969 5,040
========= ========== ========== ========= =====
22 Provisions for liabilities
Group
2018 2017
Notes GBP000s GBP000s
Office dilapidations provision 65 55
-------- --------
65 55
Deferred tax liabilities 23 758 768
-------- --------
823 823
======== ========
Movements on provisions apart from deferred tax liabilities:
Contingent
acquisition Office dilapidations
costs provision Total
Group GBP000s GBP000s GBP000s
At 1 January 2017 20 46 66
Additional provisions in the year - 4 4
Utilisation of provision (20) - (20)
Unwinding of discount - 5 5
------------ -------------------- --------
At 31 December 2017 - 55 55
Additional provisions in the year - 5 5
Unwinding of discount - 5 5
------------ -------------------- --------
At 31 December 2018 - 65 65
============ ==================== ========
The contingent acquisition costs relate to amounts provided in
respect of contingent payments due arising from the acquisition of
Hunters Group Limited during the year to 31 December 2014. The
provision is discounted to present value, and was cleared in July
2017 when the amount was ultimately found to not be due.
The office dilapidations provision has been created in respect
of restoration costs anticipated for an office leased by the Group.
The provision is anticipated to result in an ultimate cash outflow
of GBP75,000 by the end of 2019.
23 Deferred taxation
The following is the analysis of the deferred tax balances for
financial reporting purposes:
Liabilities Assets
2018 2017 2018 2017
Group GBP000s GBP000s GBP000s GBP000s
Accelerated capital allowances 52 36 - -
Fair value adjustments to intangible
assets on business combinations 692 716 - -
Share based payments - - 67 68
Dilapidations provision - - 12 10
Financial instrument spreading 14 16 - -
Other provisions and accruals - - 11 9
-------- -------- -------- --------
758 768 90 87
======== ======== ======== ========
The Company did not have any deferred tax balances as at 31
December 2018 or 31 December 2017.
2018 2017
Group GBP000s GBP000s
Movements in the year:
Net liability at 1 January 2018 681 374
Credit to profit and loss (99) (114)
Charge to equity 14 26
Effect of change in tax rate - income statement - (45)
Acquired on business combinations 72 440
-------- --------
Net liability at 31 December 2018 668 681
======== ========
Movements by category of deferred tax are as follows:
Liability/
(asset) (Credit)/ Acquired Liability/
at charge to Effect of on business (asset) at
1 January profit and change in combinations 31 December
2018 loss tax rate & other 2018
GBP000s GBP000s GBP000s GBP000s GBP000s
Accelerated capital allowances 36 15 - - 51
Fair value adjustments to intangible
assets on business combinations 716 (95) - 72 693
Dilapidations provision (10) (2) - - (12)
Share based payments (68) (13) - 14 (67)
Financial instrument spreading 16 (2) - - 14
Other provisions and accruals (9) (2) - - (11)
---------- ----------- ---------- ------------- ------------
Net deferred tax movement 681 (99) - 86 668
========== =========== ========== ============= ============
Liability/
(asset) (Credit)/ Acquired Liability/
at charge to Effect of on business (asset) at
1 January profit and change in combinations 31 December
2017 loss tax rate & other 2017
GBP000s GBP000s GBP000s GBP000s GBP000s
Accelerated capital allowances 46 (7) (3) - 36
Fair value adjustments to intangible
assets on business combinations 410 (92) (42) 440 716
Dilapidations provision (8) (2) - - (10)
Share based payments (64) (30) - 26 (68)
Financial instrument spreading - 16 - - 16
Other provisions and accruals (10) 1 - - (9)
---------- ----------- ---------- ------------- ------------
Net deferred tax movement 374 (114) (45) 466 681
========== =========== ========== ============= ============
Within RealCube Limited there exists tax losses totalling
GBP359,076 (2017 - GBP449,657) on which no deferred tax asset is
recognised, due to restrictions on the use of these losses and
uncertainty on timing of potential utilisation.
24 Retirement benefit schemes
2018 2017
GBP000s GBP000s
Defined contribution schemes
Charge to profit and loss in respect of defined contribution
schemes 111 128
======== ========
A defined contribution pension scheme is operated for all
qualifying employees. The assets of the scheme are held separately
from those of the Group in an independently administered fund.
At the year end, an amount of GBP15,748 (2017 - GBP6,589) was
held in other creditors, in respect of accrued pension
contributions.
25 Share-based payment transactions
Weighted average exercise
Number of share options price
2018 2017 2018 2017
Group Number Number GBP GBP
Outstanding at 1 January 2018 1,983,000 2,492,060 0.22 0.23
Exercised (12,500) (356,363) 0.16 0.28
Expired (100,500) (152,697) 0.48 0.42
------------ ----------- ------------- ------------
Outstanding at 31 December 2018 1,870,000 1,983,000 0.23 0.22
============ =========== ============= ============
Exercisable at 31 December 2018 1,545,000 972,750 0.28 0.10
============ =========== ============= ============
The options exercised during the year had a weighted average
share price on the date of exercise of GBP0.16.
The options outstanding at 31 December 2018 had an exercise
price ranging from GBP0.04 to GBP0.73, and a remaining contractual
life ranging between January 2019 and January 2026.
The options exist at 31 December 2018 across the following share
option schemes:
Exercise
Number of price per Fair value Vesting
shares share (GBP) of scheme period
Option name & date of issue
Employee share options 562,500 0.16 - 3 years
Director share options 425,000 0.16 - 3 years
Options issued January 2015 75,000 0.40 4,727 3 years
Options issued December 2015 132,500 0.73 460 3 years
Options issued January 2016 - 1 175,000 0.04 99,371 1 year
Options issued January 2016 - 2 175,000 0.04 97,429 2 years
Options issued January 2016 - 3 175,000 0.04 95,524 3 years
Up to 3.25
Options issued January 2016 - 4 150,000 0.04 81,681 years
--------- ----------
1,870,000 379,192
========= ==========
The fair value of the schemes are being expensed over the
vesting period. All share options expire 10 years after the date of
issue.
Group Company
2018 2017 2018 2018
GBP000s GBP000s GBP000s GBP000s
Expenses recognised in the year
Arising from equity settled share
based payment transactions 62 118 - -
======== ======== ======== ========
26 Share capital
2018 2017
Group and Company GBP000s GBP000s
Ordinary share capital
Issued and fully paid
31,827,088 (2017 - 31,814,588) Ordinary shares of
4p each 1,273 1,272
======== ========
The Company's sole class of equity shares carry one vote per
share, and rank pari-passu in respect of dividend and capital
distribution rights.
Ordinary
Number
Reconciliation of movements during the year:
At 1 January 2018 31,814,588
Issue of fully paid shares 12,500
----------
At 31 December 2018 31,827,088
==========
During the year, 12,500 (2017 - 3,177,941) ordinary shares of 4p
each were issued for a total cash consideration of GBP2,000 (2017 -
GBP1,675,360); accordingly, a premium of GBP1,500 (2017 -
GBP1,543,805) has been recognised on this issue which represents
proceeds received in excess of the nominal value of these
shares.
27 Share premium account
Group Company
2018 2017 2018 2017
GBP000s GBP000s GBP000s GBP000s
At beginning of year 4,105 2,633 4,105 2,633
Issue of new shares - 1,544 - 1,544
Share issue expenses - (76) - (76)
Exercise of share options 2 4 2 4
-------- -------- -------- --------
At end of year 4,107 4,105 4,107 4,105
-------- -------- -------- --------
During the year, 12,500 ordinary shares of 4p each were issued
for a total cash consideration of GBP2,000; accordingly, a premium
of GBP1,500 has been recognised on this issue which represents
proceeds received in excess of the nominal value of these
shares.
28 Guarantees and contingent liabilities
At 31 December 2018 the Group held client monies in approved
client accounts amounting to GBP4,802,186 (2017: GBP4,768,610).
Neither the cash asset nor any corresponding obligation has been
recognised by the Group.
The Company had no contingent liabilities as at 31 December 2018
(2017: none).
29 Operating lease commitments
Lessee
Operating leases relating to land and buildings are on normal
commercial terms with no rent-free periods or other incentives, and
include requirements to restore sites at the end of the agreements
for which amounts have been provided for. Other agreements relate
to motor vehicles on terms of one to three years, with no lease
incentives.
At the reporting end date the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
2018 2017
Group GBP000s GBP000s
Land and buildings
Within one year 464 526
Between two and five years 1,638 1,674
In over five years 1,402 1,696
-------- --------
3,504 3,896
-------- --------
Other
Within one year 44 63
Between two and five years 17 56
-------- --------
61 119
-------- --------
3,565 4,015
======== ========
In light of the above operating lease commitments, the adoption
of IFRS 16 'Leases' in the next accounting period is expected to
have a material impact on the Statement of Financial Position, as
disclosed more fully in note 1.19.
The Group also receives rental income from short term licensing
arrangements, entered into to make use of vacant office space.
30 Directors' remuneration and transactions
2018 2017
GBP000s GBP000s
Remuneration for qualifying services 473 463
Company pension contributions to defined contribution
schemes 36 28
-------- --------
509 491
======== ========
The number of Directors for whom retirement benefits are
accruing under defined contribution schemes amounted to 3 (2017 -
3).
During the year to 31 December 2018 the Directors received
remuneration as follows:
Benefits
Salary Bonus in kind Pension Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Director
Ms G Frew 121 45 2 21 189
Mr H Hill 50 - - - 50
Mr K Hollinrake 59 - 2 5 66
Mr E Jones 115 38 1 10 164
Mr D Fielding 40 - - - 40
-------- -------- -------- -------- --------
Total 385 83 5 36 509
======== ======== ======== ======== ========
During the year to 31 December 2017 the Directors received
remuneration as follows:
Benefits
Salary Bonus in kind Pension Total
GBP000s GBP000s GBP000s GBP000s GBP000s
Director
Ms G Frew 118 49 3 11 181
Mr H Hill 50 - - - 50
Mr K Hollinrake 59 - 2 5 66
Mr E Jones 109 42 1 12 164
Mr D Fielding 30 - - - 30
-------- -------- -------- -------- --------
Total 366 91 6 28 491
======== ======== ======== ======== ========
Share options
No Directors exercised share options during the current or prior
year.
During the year the Directors of the Group received dividends as
follows:
2018 2017
GBP000s GBP000s
Director
Ms G Frew 41 35
Mr H Hill 2 2
Mr K Hollinrake 97 84
Mr E Jones 87 74
Mr D Fielding 1 1
-------- --------
228 196
======== ========
31 Related party transactions
Remuneration of key management personnel
The key management personnel are considered to be the Board of
Directors and members. Refer to note 30 for details of key
management personnel remuneration.
32 Subsidiaries
Details of the Company's subsidiaries at 31 December 2018 are as
follows:
% Held
Name of undertaking Class
and country of incorporation of
or residency Nature of business shareholding Direct Indirect
Hunters Property Group England &
Limited Wales Estate agents Ordinary 100.00
Greenrose Network (Franchise) England & Franchising of estate
Limited Wales agents Ordinary 100.00
England & Lettings and management
Hapollo Limited Wales of office spaces Ordinary 100.00
England &
Herriot Cottages Limited Wales Dormant Ordinary 100.00
Hunters (Midlands) England &
Limited Wales Estate agents Ordinary 100.00
Hunters Financial Services England &
Limited Wales Financial services Ordinary 100.00
Hunters Franchising England & Franchising of estate
Limited Wales agents Ordinary 100.00
England & Intermediate holding
Hunters Group Limited Wales company Ordinary 100.00
Hunters Land & New England &
Homes Limited Wales Dormant Ordinary 100.00
England & Franchising of estate
Hunters Partners Limited Wales agents Ordinary 100.00
Hunters Survey & Valuation England &
Limited Wales Dormant Ordinary 100.00
England &
Maddison James Limited Wales Dormant Ordinary 100.00
England &
RealCube Limited Wales Software Ordinary 100.00
RealCube Technology England & Intermediate holding
Limited Wales company Ordinary 100.00
The registered office of Hunters Group Limited, Hunters
Financial Services Limited, and Hunters Survey & Valuation
Limited is 1626 High Street, Knowle, Solihull, West Midlands, B93
0JU. All other subsidiaries have the same registered office as the
Parent Company.
The investments in subsidiaries are all stated at cost less
impairment in the financial statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SSAFMDFUSEDL
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April 04, 2019 02:00 ET (06:00 GMT)
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