TIDMHMLH
RNS Number : 1031E
HML Holdings PLC
02 July 2019
HML Holdings plc
("HML", the "Company" or the "Group")
Preliminary Results for the Year Ended 31 March 2019
HML Holdings plc (AIM: HMLH), the property management services
group, is pleased to announce its preliminary results for the year
ended 31 March 2019.
Financial and Operational Highlights:
-- Revenues up 8% to GBP28.1m (2018: GBP26.0m)
-- EBITDA up 8% to GBP2.8m (2018: GBP2.6m)**
-- Adjusted operating profit up 9% to GBP2.4m (2018:
GBP2.2m)*
-- Cash generated from operations increased to GBP3.6m
(2018: GBP2.7m)
-- Adjusted basic earnings per share up 10% to 4.6p
(2018: 4.2p)***
-- Dividend per share proposed of 0.47p (2018: 0.42p)
*before interest, share based payment charges, amortisation and
tax (see note 1)
**before interest, share based payment charges, depreciation,
amortisation and tax
***before interest, share based payment charges, amortisation
and tax (see note 4)
Commenting on the results, Robert Plumb, Chief Executive of HML
said:
"It has been a good year for HML growing adjusted EBITDA by 8%
while significantly improving our service coverage with the
addition of four acquired offices in key locations for our growing
client base. We are confident in our ability to maintain this
momentum while we continue to build our network and our central
support divisions."
For further information: www.hmlgroup.com
HML Holdings Plc: 020 8439 8529
Robert Plumb, Chief Executive Officer
James Howgego, Chief Financial Officer
Alec Guthrie, Chief Operating Officer
Tavistock Communications Group: 020 7920 3150
James Verstringhe, Jeremy Carey
finnCap: 020 7220 0500
Ed Frisby/Giles Rolls - corporate finance
Camille Gochez/Tim Harper - corporate
broking
Mia Gardner, corporate broking
REVIEW OF BUSINESS
We are pleased to report revenue growth of 8% to GBP28.11m
(2018: GBP25.97m). Earnings before interest, share-based payments,
amortisation and tax improved by 9% to GBP2.41m (2018:
GBP2.21m).
We enjoyed revenue and earnings growth from virtually all the
Group's business segments and revenue lines. The only exception to
this positive trend was in the pre-contract enquiry fees segment
where we incurred a 7% fall in revenues as a result of the lower
number of property sales. Surveying fees remained steady with a
reduction in freehold valuation and consultancy fees being offset
by stronger buildings reinstatement valuations and to a lesser
extent building surveying work. We experienced strong growth in
concierge (site staff) management fees where we have consolidated
and improved our service offering. Other areas such as health and
safety and fire risk inspections, company secretarial fees and
insurance brokerage grew strongly as the continued integration of
acquisitions made in previous years contributed to greater cross
referral sales opportunities. We recorded further growth in new
business volumes with notable improvements in the counties south
and east of London. We are particularly pleased with improvements
to our new business pipeline resulting from increased contact and
relationships with new build developers and the implementation of a
more centralised approach to lead processing.
We remain confident in our strategy to deliver a local and
personal service through our distributed network of offices while
maintaining our adherence to the increasing standards of compliance
required of our profession. Although frustrated somewhat by
governmental attention to areas other than leasehold, we continue
to anticipate legislative changes to our market. In addition to
restrictions on freehold and ground rent, higher levels of
compliance are expected through future regulation of managing
agents. However, while client compliance awareness has
significantly improved in the area of health and safety,
particularly with regard to fire regulation requirements, a general
lack of enforcement of all these regulations can lead to lower
standards and consequently create a competitive advantage for those
managing agents willing to exploit the lack of enforcement and
oversight. Our examination of the reasons behind business lost to
unregulated managing agents indicate that this is a significant
contributory factor.
The Group continues to centralise areas of non-client facing
process from our network of offices to our centralised back office,
the majority of which is based in Croydon. This has inevitably
incurred reorganisation costs but the benefits in productivity have
begun to show. In addition to streamlining our processes, the
systems development team in conjunction with user representatives
have completed a major exercise to facilitate the uniform
application of our property management software to operate on a
single database. This is another area in which the group sees
significant opportunities for operational efficiencies in the
future.
Towards the end of the financial year, the Company completed a
number of key acquisitions, which have expanded the Group's
network. In November, Dauntons Soar Management Limited (DSML)
joined our Central London operations. The business represents an
excellent opportunity for HML to manage high end smaller London
apartment blocks with a bespoke service methodology. The Group
anticipates being able to harness the benefits of DSML's service
provision while benefitting from the advantages of economies
resulting from HML's back office services. In February, HML
acquired Residential Block Management Services Limited (RBMS) in
Blackheath. The south eastern quartile of greater London is a
region in which HML has been previously under represented. RBMS
whose strengths, like ours, have been in serving the Residents
Management Company (RMC) market, provides us with greater presence
in this area and an opportunity to consolidate our position.
Similarly, we acquired Francis Butson based in St Neots,
Cambridgeshire, shortly after the year end with a view to
establishing ourselves in an area where it had previously been
difficult to provide a local and personal service.
In April 2019, as part of our ongoing strategy of developing our
lettings management service, we purchased a Birmingham-based
lettings management company called Prima Property Services Limited.
Our offices in the centre of the city not only facilitate the
expansion of our block management services to this geographical
region but enable the further development of this complementary
property service with a business with whom we have already
established a working relationship.
All acquisitions have been funded by the cash generated from
operations, which rose to GBP3.6m (2018: GBP2.7m). We are pleased
to have further reduced borrowings by GBP0.5m to a total of
GBP1.2m, thus reducing our debt to equity ratio from 9.4% to
5.9%.
After the recent acquisitions, the Group now manages more than
82,000 property units in 3,000 estates and blocks of flats from 24
offices. Our strategy to focus on owner-occupied and controlled
blocks of flats and housing estates sits comfortably with our view
of the structural changes ahead for the leasehold market.
Improvements to our intragroup products and service offering ensure
that they continue to grow as a proportion of our revenues. We
anticipate this proportion continuing to grow as we refine our
service and add technological efficiency to our systems. While
there remains an inevitable degree of uncertainty as to the pace of
leasehold reform, the market for our services grows, as does the
relevance of scale and efficiency in providing a competitive
quality service.
We are in the second year of operating as a single operational
management structure under one HML brand and are confident that the
benefits of the changes we have made in this area are now beginning
to manifest themselves across the business, both financially and in
enabling a more engaged employee base. Our management team
continues to invest in the development and retention of employees
knowing what a significant role morale and the quality of training
plays in the provision of our services. On behalf of the board, I
would like to express our thanks to our employees whose hard work
in these changing and challenging times have enabled the group to
continue to grow successfully.
HML HOLDINGS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2019
Notes 2019 2018
GBP'000 GBP'000
CONTINUING OPERATIONS
REVENUE 28,110 25,968
------------------------ ------------------
Direct operating expenses (24,332) (22,509)
Central operating overheads (1,365) (1,248)
Share based payment charge (37) (30)
Amortisation of intangibles (640) (660)
------------------------ ------------------
Total central operating overheads (2,042) (1,938)
------------------------ ------------------
Operating expenses (26,374) (24,447)
------------------------ ------------------
PROFIT FROM OPERATIONS 2 1,736 1,521
------------------------ ------------------
Finance costs (50) (57)
------------------------ ------------------
PROFIT BEFORE TAXATION 1,686 1,464
Income tax charge 3 (305) (302)
------------------------ ------------------
PROFIT AND COMPREHENSIVE INCOME
FOR THE YEAR ATTRIBUTABLE TO THE
OWNERS OF THE PARENT 1,381 1,162
------------------------ ------------------
EARNINGS PER SHARE
Basic 4 3.0p 2.6p
------------------------ ------------------
Diluted 4 3.0p 2.5p
------------------------ ------------------
ADJUSTED EARNINGS PER SHARE
Basic 4 4.6p 4.2p
------------------------ ------------------
Diluted 4 4.6p 4.1p
------------------------ ------------------
HML HOLDINGS PLC
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
For the year ended 31 March 2019
ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE GROUP
Share Share Other Merger Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------- ------------ ------------ ------------- ------------
Balance at 31 March
2017 671 2,251 (70) (15) 10,058 12,895
---------------- ------------- ------------ ------------ ------------- ------------
Profit for the year - - - - 1,162 1,162
Other comprehensive - - - - - -
income
Transactions with owners
Share based payment
charge - - - - 30 30
Share capital issued 11 199 - - - 210
Shares purchased by
EBT - - (18) - - (18)
Dividend - - - - (168) (168)
--------------- --------------- ----------- ----------- ----------- ------------
Balance at 31 March
2018 682 2,450 (88) (15) 11,082 14,111
--------------- --------------- ----------- ----------- ----------- ------------
Profit for the year - - - - 1,381 1,381
Other comprehensive - - - - - -
income
Transactions with owners
Share based payment
charge - - - - 37 37
Share capital issued 5 48 - - - 53
Shares sold by EBT - - 1 - - 1
Dividend - - - - (192) (192)
--------------- --------------- ----------- ----------- ----------- ------------
Balance at 31 March
2019 687 2,498 (87) (15) 12,308 15,391
--------------- --------------- ----------- ----------- ----------- ------------
HML HOLDINGS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 March 2019
COMPANY NUMBER: 5728008
2019 2018
ASSETS Notes GBP'000 GBP'000
NON-CURRENT ASSETS
Goodwill 11,384 10,510
Other intangible assets 8,373 7,937
Property, plant and equipment 1,030 786
----------------------- ----------------------
20,787 19,233
----------------------- ----------------------
CURRENT ASSETS
Trade and other receivables 3,804 3,930
Cash at bank 235 269
----------------------- ----------------------
4,039 4,199
----------------------- ----------------------
TOTAL ASSETS 24,826 23,432
----------------------- ----------------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 6,602 6,112
Borrowings 529 529
Current tax liabilities 357 349
----------------------- ----------------------
7,488 6,990
----------------------- ----------------------
NON-CURRENT LIABILITIES
Deferred tax liability 1,268 1,124
Borrowings 679 1,207
----------------------- ----------------------
1,947 2,331
----------------------- ----------------------
TOTAL LIABILITIES 9,435 9,321
----------------------- ----------------------
NET ASSETS 15,391 14,111
----------------------- ----------------------
EQUITY
Called up share capital 6 687 682
Share premium 2,498 2,450
Other reserve (87) (88)
Merger reserve (15) (15)
Retained earnings 12,308 11,082
----------------------- ----------------------
ATTRIBUTABLE TO THE EQUITY HOLDERS OF
THE PARENT 15,391 14,111
----------------------- ----------------------
HML HOLDINGS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2019
Notes 2019 2018
GBP'000 GBP'000
OPERATING ACTIVITIES
Cash generated from operations 3,606 2,674
Income taxes paid (297) (238)
Interest paid (50) (57)
---------------- ----------------
NET CASH FROM OPERATING ACTIVITIES 3,259 2,379
---------------- ----------------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (629) (410)
Sales/acquisition of own shares 1 (18)
Purchase of software (245) (235)
Purchase of client relationships - (36)
Purchases of businesses (994) 77
Payments of deferred/contingent consideration (759) (337)
NET CASH USED IN INVESTING ACTIVITIES (2,626) (959)
---------------- ----------------
FINANCING ACTIVITIES
Repayment of loans (528) (414)
Net movement in overdraft - (648)
Share issue 53 79
Dividend payment (192) (168)
NET CASH USED IN FINANCING ACTIVITIES (667) (1,151)
---------------- ----------------
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS (34) 269
CASH AND CASH EQUIVALENTS AT BEGINNING 269 -
OF YEAR
---------------- ----------------
CASH AND CASH EQUIVALENTS AT OF YEAR 235 269
---------------- ----------------
HML HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
GENERAL INFORMATION
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs) as adopted by the European Union, this
announcement does not itself contain sufficient information to
comply with IFRSs.
The financial information is presented in pounds sterling,
prepared on a historical cost basis, except for the revaluation of
contingent considerations and rounded to the nearest thousand. The
financial information set out in this announcement does not
comprise the Group's statutory accounts for the years ended 31
March 2019 or 31 March 2018.
The financial information for the year ended 31 March 2018 is
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The auditors reported on
those accounts; their report was unqualified and did not contain a
statement under either Section 498 (2) or Section 498 (3) of the
Companies Act 2006 and did not include references to any matters to
which the auditor drew attention by way of emphasis.
The statutory accounts for the year ended 31 March 2019 have not
yet been delivered to the Registrar of Companies, nor have the
auditors yet reported on them. This preliminary announcement does
not constitute statutory accounts under section 435 of the
Companies Act 2006.
HML Holdings plc and its subsidiaries specifically focus on
residential property management. The Group operates in the UK. The
Company is a public limited company incorporated and domiciled in
the United Kingdom. The address of its registered office is 9-11
The Quadrant, Richmond, Surrey, TW9 1BP. The Company is listed on
the AIM market of the London Stock Exchange.
The preliminary results were authorised for issue by the board
of directors on 1 July 2019.
1. PROFIT RECONCILIATION
The reconciliation set out below provides additional information
to enable the reader to reconcile to the numbers discussed in the
Review of Business.
2019 2018
GBP'000 GBP'000
Revenue 28,110 25,968
Direct operating expenses (24,332) (22,509)
---------------------- ----------------------
Profit contribution from businesses 3,778 3,459
Central operating overheads (1,365) (1,248)
---------------------- ----------------------
Profit before interest, tax, amortisation
and share based payments 2,413 2,211
Finance costs (50) (57)
---------------------- ----------------------
Profit before share based payment
charges, amortisation and taxation 2,363 2,154
Amortisation of other intangible assets (640) (660)
Share based payment charge (37) (30)
---------------------- ----------------------
Profit before taxation 1,686 1,464
====================== ======================
Direct operating expenses and central operating overheads
include depreciation and staff costs.
2. PROFIT FROM OPERATIONS 2019 2018
GBP'000 GBP'000
Profit from operations is stated after
charging:
Depreciation and amounts written off property,
plant and equipment:
- charge for the year on owned assets 385 372
Amortisation of intangible assets 640 660
Operating lease rentals:
- land and buildings 970 1,056
Set out below is an analysis of other operating expenses:
2019 2018
GBP'000 GBP'000
Employee salaries and staff related expenses 19,807 17,863
Management costs 377 347
Travel costs 287 268
Advertising costs 95 86
Premises costs 2,046 1,988
Office costs 745 791
Insurance brokerage 761 692
Professional fees 440 531
IT costs 730 756
Depreciation 385 372
Amortisation 640 660
Share based payment charges 37 30
Other expenses 24 63
--------------------- ---------------------------------
Total operating expenses 26,374 24,447
--------------------- ---------------------------------
Amounts payable to the auditor and its related entities in
respect of both audit and non-audit services are set out below:
2019 2018
GBP'000 GBP'000
Fees payable for the statutory audit of
the Company's annual
accounts 23 19
Fees payable to auditor for other services:
Statutory audit of the Company's subsidiaries 49 41
------------------------ ---------------------
Total fees payable to the auditor 72 60
------------------------ ---------------------
3. INCOME TAX 2019 2018
GBP'000 GBP'000
UK Corporation tax:
Current tax on profits of the year 326 307
Over provision of tax in previous year (21) (5)
---------- ----------
Tax attributable to the company and its
subsidiaries 305 302
---------- ----------
Factors affecting tax charge for the
year
The tax assessed for the period is lower than (2018: higher
than) the standard rate of corporation tax in the UK of 19% (2018:
19%). The differences are explained below:
2019 2018
GBP'000 GBP'000
Profit before tax 1,686 1,464
---------- ----------
Profit before tax multiplied by the standard
rate of corporation tax in the UK of
19% (2018: 19%). 320 278
Effects of:
Amortisation and non-deductible expenses
adjustment 6 29
Over provision in previous year (21) (5)
Tax charge for the year 305 302
========== ==========
Future tax charges may be affected by the fact that no deferred
tax asset is recognised in respect of losses. Deferred tax assets
are not recognised until the utilisation of the losses is
probable.
The Group has losses carried forward in its subsidiary, HML PM
Limited which can be recovered against future profits arising from
the same trade. The total tax losses carried forward to future
years are GBP1,243,000 (2018: GBP1,243,000). Consequently, the
unprovided deferred tax asset in respect of these losses is
GBP211,000 (2018: GBP211,00).
4. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is
based on the following data
2019 2018
GBP'000 GBP'000
Earnings
Profit after tax for the period 1,381 1,162
(used to calculate the basic and diluted
earnings per share)
Add back:
Share based payment charge 37 30
Amortisation of intangible assets 640 660
Interest costs 50 57
Adjusted profit after the tax for the
period 2,108 1,909
---------- ----------
The adjusted profit after tax has been used to calculate
the basic and diluted adjusted earnings per share.
Number of shares 2019 2018
'000 '000
Weighted average number of ordinary shares
for the purposes of basic earnings per
share 45,630 45,269
Effect of dilutive potential ordinary
shares:
- share options 494 857
---------- ----------
Weighted average number of ordinary shares
for the purposes of diluted earnings
per share 46,124 46,126
---------- ----------
Earnings per share
Basic 3.0p 2.6p
Diluted 3.0p 2.5p
Adjusted earnings per share
Basic 4.6p 4.2p
Diluted 4.6p 4.1p
The diluted earnings per share are the basic earnings per share
adjusted for the dilutive effect of the conversion into fully paid
shares of the outstanding share options.
5. BUSINESS COMBINATIONS (ACQUISITIONS)
On 1 December 2018, HML PM Limited purchased 100% of the share
capital of Dauntons Soar Management Limited, a business based in
Victoria, London. The acquisition will not only strengthen the
Group's position in Central London but also gives the Group
critical mass that will assist in growing the Group's ancillary
revenues.
The estimated fair value of net assets transferred is set out
below:
GBP'000
Consideration 918
Stamp duty 2
---------
Total cost of investment 920
Less:
Trade and other receivables (158)
Cash at bank (210)
Tangible fixed assets (5)
Trade and other payables 99
Client relationships (336)
---------
Goodwill 310
---------
The residual difference between the total consideration paid and
the net value of the recognised assets acquired has been
capitalised as goodwill. The goodwill recognised on the acquisition
is mainly attributable to the skills and knowledge within the
business.
GBP'000
Satisfied by:
Cash on completion 467
Deferred and contingent consideration 451
-----------------
918
-----------------
Net cash flow arising on the acquisition was GBP259,000 which
represents the consideration and stamp duty paid less cash at bank
acquired.
The contingent consideration of GBP451,000 is due within two
years. The contingent consideration is made up of two components,
firstly the payment relating to the excess working capital in the
business on acquisition and secondly another payment that is
adjustable depending on the retention of clients and the arrival of
contracted new clients. The payment for working excess capital will
be GBP249,000. The range of potential payments of contingent
consideration could vary from GBP0 to GBP202,000, however the more
likely outcome would be to pay GBP202,000. Contingent consideration
has not been discounted as the discounting is immaterial to the
Group.
The business contributed GBP196,000 to the Group's revenue and
increased the Group's profit by GBP1,000 from the date of the
acquisition to the year-end date.
On 18 February 2019, HML PM Limited purchased 100% of the share
capital of Residential Block Management Services Limited, a
property management business based in Blackheath, London. The
acquisition will strengthen the Group's position in South East
London.
The estimated fair value of net assets transferred is set out
below:
GBP'000
Consideration 794
Less:
Tangible fixed assets (4)
Trade and other receivables (94)
Cash at bank (2)
Trade and other payables 146
Client relationships (420)
Goodwill 420
---------
The residual difference between the total consideration paid and
the net value of the recognised assets acquired has been
capitalised as goodwill. The goodwill recognised on the acquisition
is mainly attributable to the skills and knowledge within the
business.
GBP'000
Satisfied by:
Cash on completion 675
Deferred and contingent consideration 119
---------
794
---------
Net cash flow arising on the acquisition was GBP673,000 which
represents the consideration and transaction costs, less cash at
bank.
The contingent consideration of GBP119,000 is due within one
year. The contingent consideration is made up of two components,
firstly the payment relating to the excess working capital in the
business on acquisition and secondly another payment that is
adjustable depending on the reduction of clients. The range of
potential payments of contingent consideration could vary from GBP0
to GBP119,000, however the more likely outcome would be to pay
GBP119,000. Contingent consideration has not been discounted as the
discount would be immaterial to the Group.
The business contributed GBP168,000 to the Group's revenue and
increased the Group's profit
by GBP80,000, from the date of the acquisition to the year-end
date.
On 28 February 2019, HML PM Limited purchased a small portfolio
of block management instructions from Grillo LLP Chartered
Surveyors, a business in Surrey. An initial payment of GBP51,000
was made with contingent consideration of GBP11,000 due within one
year.
If all business combinations arising in the year had occurred on
1 April 2018, the consolidated revenue and profit for the Group for
the year ended 31 March 2019 would have increased to GBP1,269,000
and GBP157,000 respectively
6. SHARE CAPITAL
Group and Company
2019 2018
Authorised: GBP'000 GBP'000
163,733,200 ordinary shares of 1.5p each 2,456 2,456
----------------- --------------
2,456 2,456
----------------- --------------
Group and Company
2019 2018
Allotted, issued and fully paid ordinary GBP'000 GBP'000
shares of 1.5p:
1 April 682 671
Issued during the year - 341,500 (2018:730,539)
shares 5 11
----------------- --------------
31 March 687 682
----------------- --------------
No. of shares in issue at year end 45,830,135 45,488,635
================= ==============
Shares issued during the year ended 31 March 2019 relate to the
exercising of share options by HML staff in August 2018 and
February 2019.
7. DIVIDENDS
The Directors have proposed paying a dividend of 0.47p per share
in relation to the current year (2018: 0.42p per share).
If approved the final dividend will be paid on 18 October to
shareholder on the register at 4 October 2019. The corresponding
ex-dividend date is 3 October 2019.
8. ADOPTION OF IFRS 9 AND IFRS 15
IFRS 9 "Financial instruments" and IFRS 15 "Revenue from
contracts with customers" were both adopted with effect from 1
April 2018 in line with the transitional provisions provided in the
new standards. The standards have been adopted using the modified
retrospective approach where the prior period amounts have not been
restated but any difference between amounts recognised under IFRS 9
and IFRS 15 and those previously recognised under IAS 39, IAS 11
and IAS 18 has been recognized in the opening retained earnings at
1 April 2018.
The adoption of IFRS 15 and IFRS 9 has resulted in no material
adjustments to the financial statements.
This information is provided by RNS, the news service of the
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END
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