Final Results
21 August 2003 - 5:00PM
UK Regulatory
Not for release before 0700, 21 August 2003
FLETCHER KING PLC
INTERIM RESULTS
Fletcher King, the London based chartered surveyors, fund managers and property asset managers,
announces preliminary results for the year ended 30th April 2003. The results are better than
anticipated at the time of the interim statement and, as a result of cost saving initiatives,
profit before tax improved over the same period last year.
Financial highlights:
____________________
* Profit before tax improved to �83,000 (2002: �25,000)
* Turnover for the year was �4.6m (2002: �5m)
* Basic earnings per share grew to 0.69p (2002: 0.01p)
* Final dividend maintained at 0.75p (2002: 0.75p) for the second half bringing the total
dividend for the year to 1.0p (2002: 1.0p)
Operational highlights:
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* Fund management division appointed as discretionary managers of British Home Stores �30m
pension fund
* Stratton House Investment Property Syndicate launched successfully with �22m available to
invest and has now made its first investment
* Rating and valuation department enjoyed its best year ever reducing the rateable values for
companies including Gucci, Chopard and Tiffany
* The Asset Management team has been appointed to manage a 535,000 sq ft portfolio with a
rent-roll of �6.5m on behalf of Treasury Holdings Properties Limited
* Fletcher King Howard returned to profitability
* Investment & fund management division carried out a number of significant retail transactions
Commenting David Fletcher, chairman of Fletcher King said:
"Despite difficult market conditions we are pleased to have improved profitability and maintained
our dividend. With the exception of our agency business, whose performance has reflected that of
the agency sector as a whole, all of our divisions have performed well and we look forward building
on this over the year ahead."
For further information:
David Fletcher, Fletcher King: 020 7493 8400
Christopher Joll / Richard Sunderland 020 7491 7776
CHAIRMAN'S STATEMENT
Trading in the second half of the year was better than anticipated at the announcement of our
interim results.
Turnover for the year was �4.6m (2002: �5m) with profits before tax �83,000 (2002: �25,000).
The Board is proposing a maintained final dividend of 0.75p (2002: 0.75p) which, subject to shareholders
approval at the Annual General Meeting, will be paid on 22nd September 2003 to shareholders on the
register at the close of business on 5th September 2003.
With an interim dividend already paid the total dividend of the year will amount to 1p per share
(2002 1.0p per share).
The Commercial Property Market
The market this year has been characterised by economic uncertainty, a continuing slowdown in telecoms,
media and financial services, and a lack of decision making by both investors and occupiers, all of which
was aggravated by the conflict in Iraq and the SARS epidemic.
The letting markets have continued to be difficult and the pattern of last year continues with offices in
central London and the western approaches being particularly hard hit by a further reduction in rental
values. Offices in the regions have remained more robust and rental growth has been achieved in many areas.
The industrial market in the regions remains active with lower interest rates making owner occupation more
attractive than renting in many areas.
The investment market remains strong, even though estimates of rental growth have been dramatically cut and
tenant demand is generally weak. This is something of an anomaly, but is easily explained by the higher
income yields on property and its lower volatility compared with equities. Falling interest rates during the
year have sustained the debt financed property investment market, which remains the strongest sector. There
is current evidence however, of some institutions increasing their allocation to direct investment in
property, at the expense of equities, and they are bidding strongly for selected stock.
The Outlook for 2003/04
I am pessimistic about the central London and western approaches office letting markets. I can see little
that is likely to stimulate occupier demand and believe that rents have probably further to fall before
there is a recovery. In my view it could be 3-4 years before there is any significant increase in tenant
interest. This is not an area of the market where we are very active and this dismal prediction is unlikely
to affect our business.
I believe the investment market will remain buoyant throughout the coming year and yields are likely to
fall further with resultant increases in value, particularly for investment property with a secure future
income flow. Interest rates are predicted to remain at low levels and this will continue to fuel the debt
driven market. More institutions are likely to increase their allocation to property and, should that
happen, the weight of money into an undersupplied market will assist in pushing values higher.
We expect to be active in the investment market during the coming year acquiring well let properties for a
variety of clients for whom we have substantial funds.
The Stratton House Investment Property Syndicate, the establishment of which I announced in our Interim
Report, has made its first acquisition and we continue to seek opportunities in a continuingly competitive
market. We would hope to be fully invested by the year end. It is our intention to grow this investment
vehicle in the future as a means by which smaller investors can access the market with a good level of
diversity and risk spread.
I am conscious that the Group's shareholders would welcome an increase in the dividend but you will see
from my foregoing remarks that we continue to operate in a somewhat uncertain climate. However, some
market fundamentals suggest that there should be an increase in our activity and, should this materialise,
we would hope to be in a position to increase the level of dividend in the coming year.
Our directors and staff have worked hard this year under sometimes difficult circumstances and I thank them
all for their efforts.
David Fletcher
Chairman
21st August 2003
DIVISIONAL REVIEW
FLETCHER KING LONDON
Investment and Fund Management
The investment market was active during the last twelve months and largely driven by debt financed purchasers
rather than the institutions. During the year interest rates fell, stimulating even greater interest in the
market, and yields hardened by approximately 0.5% across the board. There were signs at the beginning of the
calendar year that institutions' interest in property was increasing and, in selected instances, they are now
bidding strongly.
Many of Fletcher King's clients remained out of the buying market during the year and the majority of the work
was selling. Significant transactions included the sale of a shopping centre for �12m in East Anglia, two
retail portfolios totalling approximately �29m as well as a large number of individual shop investments. In
addition the department sold a mixed retail and office investment in Wrexham, an industrial estate in Windsor,
and acquired an industrial estate in Corsham.
Fund Management expanded with our appointment as discretionary managers of British Home Stores Pension Fund
with �30m of new money to invest, and the establishment of the Stratton House Investment Property Syndicate
with approximately �22m available.
The department has already acquired the first investment for Stratton House being a multi-let industrial
property in Manchester.
The coming year will be very active and instructions are already in hand to sell two well let office
investments. We have up to �100m available for buying investment properties for existing clients.
Asset Management
The highlight of the year for the department was winning the management of a substantial portfolio on behalf
of Treasury Holdings Properties Limited, comprising approximately 535,000 sq.ft. with a rent roll in excess
of �6.5m per annum. The most prominent building in the portfolio is the Tolworth Tower on the Kingston by-pass
at Surbiton, which in addition to its twenty one storeys of offices, has a large ground floor retail unit let
to Marks & Spencer.
The department has also been successful in winning instructions to continue managing properties that have been
sold out of their portfolios and, during the year, this was achieved on seven buildings let at �2.675m per annum.
Our existing clients continue to expand their portfolios and we hope to add at least �75.0m worth of properties
to management during the current year.
Rating and Valuation
The department enjoyed its best year ever and continued to negotiate successfully rating appeals against the 2000
Rating List. 20% reductions of rateable value were achieved for Tiffany, Chopard and Gucci in Bond Street and
total savings of some �620,000 were negotiated for RS Components in Corby and Nuneaton. Other notable successes
in the year were achieved for Computacenter at Bristol and Reading, The Jamaican High Commission and Schindler
Lifts.
The success of the Rating Department in London's West End has led to a number of instructions from new clients
including the advertising agency J Walter Thompson on their headquarters in Knightsbridge, Mortons in Berkeley
Square and The Greenhouse restaurant in Mayfair.
The number of valuations undertaken by the department continued to increase and Barclays Bank and The Royal Bank
of Scotland have figured prominently in our instructions this year.
The continuing low interest rates will ensure our valuation business is active in the coming financial year and
the department expects to be advising most of the UK Clearing Banks and Building Societies and a number of
significant foreign lenders.
Agency
Letting buildings has been very difficult during the last twelve months, particularly so with offices in London
and the South-East.
In the interim statement it was reported that the department would have a significantly reduced income in the
second half and it has, in fact, sustained losses. In light of the expected outcome, steps were taken to
restructure and reduce the overhead and this is now completed.
Despite difficult market conditions, the department has let four further floors of a client's office development
in Greville Street and acquired a Central London headquarters for a major professional body and a leading
sportswear company. The department also sold two development sites in Westminster and South London, the latter
for well in excess of asking terms and it has also successfully disposed of the lease on Malaysian Airlines'
unit in Piccadilly
Although the market is unlikely to improve in the coming year the department will continue to advise a number of
corporate clients on
acquiring space and expects to be active.
Landlord and Tenant
The decision was made in the second half of the year to separate out the Landlord & Tenant work from the Asset
Management Department and form a separate profit centre under the direction of Ben Glickman, who recently joined
from GVA Grimley.
Approximately 60 rent reviews and lease renewals were handled during the year and overall, because of the
diversity of the managed portfolios, there continued to be rental growth. The department is currently dealing
with 70 commercial and retail instructions with a current rent roll of approximately �4.0m per annum. In
addition the department has been pro-actively looking to negotiate lease extensions and re-gearing opportunities
in order to add value to client portfolios.
With more focus on this part of the business, the department intends to expand activity and generate more cross
selling between all divisions of the Group. There are already early signs of success and this will be built upon
during the current year.
FLETCHER KING HOWARD
Fletcher King's wholly owned construction services subsidiary has now returned to profitability and during the year
undertook a number of significant projects including the completion of a �10m manufacturing facility for Ivax
Pharmaceuticals in Cheshire. The company received its first commission from Sainsbury, for a feasibility study on
a �24m refrigeration storage distribution centre in the Midlands, and has recently been commissioned by a major
international cosmetics group on two buildings totalling 300,000 sq.ft. in Manchester. Construction is shortly due
to commence on a �4m industrial property for UCI Logistics in Derby.
The current order book includes nine motor showrooms for Peugeot, a stable block and new grandstand at Towcester
racecourse and a new �5m extension to the Holland & Barrett depot in Burton-on-Trent.
The order book continues to grow and Fletcher King Howard is budgeting an increase in profitability in the coming
twelve months.
FLETCHER KING BRAITHWAITE
Mark Braithwaite, a founding director of the company in Manchester, has taken a change of course in his career
and has joined one of the office's major clients, Easter Developments, as their director in the North West .
Mark continues to be a shareholder in the company and remains as a consultant. Mark is succeeded by Mike Walker
who joins as a director and shareholder and will be dealing with investment and development work for existing and
new clients. Julian Kenny-Levick, an associate, has been appointed to full director and also becomes a
shareholder. He is responsible for running the agency department.
The company has enjoyed a good year and notable transactions include the letting of a 140,000 sq.ft. warehouse in
Warrington for Clerical Medical and advice continues on nearly 600,000 sq.ft. of new space located in Bolton,
Warrington, Deesside, Trafford Park, Haydock and Earlham.
Fletcher King Braithwaite has recently been appointed by Slough Estates to deal with two of their schemes in
Warrington and continue as one of the principal agents for Green Property on their considerable Trafford Park
holdings.
The company is currently advising a major multi-national on the acquisition of a 250,000 sq.ft. distribution
centre in Manchester and, for the coming year, instructions have already been received to sell a portfolio of
industrial units located throughout the North and also an investment in Warrington.
The market remains strong in the North West and a successful year is anticipated.
CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30 APRIL 2003
2003 2002
�000 �000
TURNOVER 4,614 5,000
______ ______
Staff Costs (2,853) (3,014)
Depreciation (83) (120)
Other operating charges (1,628) (1,904)
_______ _______
OPERATING PROFIT/(LOSS) 50 (38)
Share of results of associated undertakings 7 23
Loss on disposals of shares in associated undertakings - (2)
Interest receivable and similar income 30 47
Interest payable and similar charges (4) (5)
_______ _______
PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION 83 25
Tax charge on profit on ordinary activities (22) (24)
_______ _______
PROFIT FOR THE FINANCIAL YEAR 61 1
Dividends (88) (88)
_______ _______
AMOUNT DEDUCTED FROM RESERVES (27) (87)
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Earnings per share - basic 0.69p 0.01p
- diluted 0.68p 0.01p
The basic earnings per share is based on the profit for the financial year ended 30th April 2003 of �61,000
(2002 : �1,000 ) and on 8,807,279 (2002: 8,807,279) ordinary shares in issue throughout the year. The
diluted earnings per share is based on the profit for the financial year ended 30th April 2003 of �61,000
(2002 : �1,000 ) and on 8,924,433 (2002: 8,926,473) ordinary shares in issue during the year adjusted for
the weighted average number of options outstanding at the end of each period.
CONSOLIDATED BALANCE SHEET as at 30 APRIL 2003
2003 2002
�000 �000
FIXED ASSETS
Tangible Assets 221 294
Investment in associated undertakings 19 39
Other investments 253 3
_______ _______
493 336
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CURRENT ASSETS 1,496 1,946
Debtors 1,318 1,305
_______ _______
Cash at bank and in hand 2,814 3,251
CREDITORS amounts falling due within
one year (907) (1,140)
NET CURRENT ASSETS 1,907 2,111
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TOTAL ASSETS LESS CURRENT LIABILITIES 2,400 2,447
CREDITORS : amounts falling due after one year (17) (38)
PROVISION FOR LIABILITIES AND CHARGES (2) (1)
_______ _______
NET ASSETS 2,381 2,408
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CAPITAL AND RESERVES
Called up share capital 881 881
Share premium account 76 76
Profit and loss account 1,424 1,451
_______ _______
EQUITY SHAREHOLDERS' FUNDS 2,381 2,408
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CASHFLOW STATEMENT for the year ended 30 APRIL 2003
2003 2002
�000 �000
Net cash inflow/(outflow) from operating activities 375 (297)
Dividends received from associated undertakings 26 21
Returns on investments and servicing of finance 26 43
Taxation (41) (163)
Capital expenditure and financial investment (262) 893
Equity dividends paid (88) (242)
_______ _______
Cash inflow before financing 36 255
Financing (23) (16)
_______ _______
Increase in cash in the year 13 239
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