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RNS Number : 5760P
Christie Group PLC
27 March 2009
27 March 2009
Christie Group plc
Audited Preliminary Results for the year ended 31 December 2008
Christie Group plc ('Christie' or the 'Group'), the leading provider of
Professional Business Services and Stock & Inventory Systems & Services to the
Leisure, Retail and Care markets, is pleased to announce its final results for
the year ended 31 December 2008.
- Business reorganised to reduce costs
- Refocused to reflect current market conditions
- Timely disposal of loss-making IT business for E4 million
- Group overall debt-free, after repaying all bank loans
- Tax credit expected of approximately £1.0 million
- No final dividend
Commenting on the results, Philip Gwyn, Chairman of Christie Group said:
"2009 will undoubtedly be a difficult year. That said, we are seeing increasing
numbers of buyers returning to the market with cash and low gearing levels who
are in a position to take advantage of favourable asset prices at this stage of
the economic cycle. Pleasingly, our Stock & Inventory Systems & Services
division remains a solid performer, growing in 2008 despite a difficult trading
environment.
"As the Government stimulates the debt markets, we expect an increase in trading
activity to more normalised levels."
Enquiries:
David Rugg 020 7227 0707
Chief Executive
Christie Group plc
Philip Davies 020 7149 6000
Charles Stanley Securities
Nominated Adviser
Tom Cooper 0797 122 1972
Winningtons
Notes to Editors
Christie Group plc (CTG.L), quoted on AIM, is a leading professional business
services group with 37 offices across the UK, Europe and Canada, catering to its
specialist markets in the Leisure, Retail and Care sectors.
Christie Group operates in two complementary business divisions: Professional
Business Services (PBS) and Stock & Inventory Systems & Services (SISS). These
divisions trade under the brand names: PBS - Christie + Co and Pinders: SISS -
Orridge, Venners and Vennersys.
Tracing its origins back to 1846, the Group has a long established reputation
for offering essential services to client companies in agency, valuation
services, investment, consultancy, project management, multi-functional trading
systems and online ticketing services, stock audit and inventory management. The
diversity of these services provides a natural balance to the Group's core
agency business.
For more information, please go to www.christiegroup.com.
Chairman's Statement
Transaction volumes pass the nadir
The challenging and widely reported trading conditions, which affected most
sectors of the economy during 2008, continue in 2009. Christie Group has not
been immune from these conditions and has experienced an exceptionally difficult
year, as detailed in the update released on 5 December 2008. The Board has acted
swiftly to address the challenges faced by the Group, reducing costs and
refocusing the activities of the complementary operating divisions.
Notwithstanding these actions, and a reported profit after tax at the half year
of £0.9 million, I have to report a trading loss on continuing activities,
before exceptional items and after attributable tax of £1.99 million (2007:
profit of £7.7 million). In addition we had £2.0 million of exceptional
reorganisation costs, to tailor the business for current market conditions. The
results reflect the severity of the second half downturn and I would, in
particular, cite the period of the Lehman Brothers' collapse in September as the
point at which confidence in the business sales market showed a dramatic
downturn. The losses should allow us to receive a tax repayment of approximately
£1.0 million. At 31 December 2008, after having repaid all loans, we held net
cash balances of £1.6 million. The Group remains ungeared.
Recognising the signs of a downturn in our property business markets, the Board
decided to dispose of the loss-making IT business to negate the need for further
investment. Despite the very difficult conditions in which to conduct a business
sale, we disposed of it in September 2008 for a consideration of E4 million,
which resulted in a net one-off loss on disposal of £6.2 million.
In order to conserve cash, the Board does not propose to recommend a final
dividend for 2008 (2007: 2.75 pence) per share in addition to the interim
dividend already paid of 0.5 pence (2007:1.5 pence) per share.
Our capital expenditure requirements for 2009 are limited and comfortably
covered by our depreciation charge. We have no outstanding capital commitments.
Professional Business Services
Operating in the leisure, retail and care sectors, our current sources of
revenue are well diversified. We derive income from a variety of different
services including: property acquisition and disposal; portfolio and individual
asset valuation; feasibility studies; operator reviews; operator search and
selection; investment advice; alternative use value options; project management;
building surveying; finance and insurance.
No one client accounts for more than 2% of our revenue. We carry out over 10,000
billable assignments each year on behalf of more than 5,000 clients. In 2008, we
lived through a rapid deceleration and decline in transactional volumes in the
business property market that became even more pronounced in the final quarter
of the year. Values fell as trading prospects declined and activity levels now
mirror those reached in the first quarter of 1991, the low point from which we
recovered in the early 1990s. We believe we have gained market share as
competitors have ceased trading and general practice firms have substantially
reduced their activity in our niche areas of operation.
Christie + Co's newly re-established Bank Support and Business Recovery division
is performing well, servicing an active sector in a market where businesses are
under pressure and banks require specialist advice to reduce risk and maximise
value. Christie Finance is busy as loans are now less freely available and an
intermediary, with the relevant business sector experience, is frequently
required to assist in the process.
Stock & Inventory Systems & Services
The Group has been aided by its stocktaking businesses which remain profitable
and stable, with a large percentage of revenues being of a recurring nature.
As many companies choose to focus on making further improvements to operating
efficiencies in the current climate, the division continues to add new clients.
Some recent additions to the client list include 3D Entertainment, Enterprise
Inns, Johnson & Johnson and Black Leisure Group. Our stock auditors help clients
to discover and eliminate stock losses as well as providing stock control
systems, which can help businesses to improve their margins and increase
profitability. Retail clients are keen to minimise stock holdings, whilst
ensuring continued availability at store level.
The Board
It was with sadness that we announced the death of Lord Lane of Horsell, our
senior Non Executive Director, on 9 January 2009. He was highly respected by his
colleagues and will be sadly missed. We are grateful for his valued counsel
during his 15 years on the Christie Group Board.
2009 Outlook
In the current challenging market conditions, our Group-wide portfolio of
logically related services is appreciated more highly. We coordinate our
services, often at very short notice, to provide one-stop support to our
clients.
We are already receiving significant work from the banks and insolvency
practitioners, acting to support their collateral reviews and refinancing
activities. We expect insolvency and associated reconstruction and advisory work
to keep us busy throughout 2009 and beyond.
The Treasury recently announced the Asset Protection Scheme, which aims to
provide banks with greater confidence to rebuild and restructure their
operations and increase lending in the economy. The Royal Bank of Scotland has
agreed to participate in the scheme, making 2009 lending commitments totalling
£25 billion - £9 billion of which will be mortgage lending and £16 billion of
business lending. Lloyds Banking Group has also agreed to participate in the
scheme, making lending commitments totalling £3 billion of mortgage lending and
£11 billion of business lending over a 12-month period. We believe that this
substantial increase in lending to both homeowners and businesses will have a
positive impact on activity levels in the market for UK business property.
The Government has also offered further support to small businesses. The Small
Firm Loans Guarantee scheme has been replaced by the Enterprise Finance
Guarantee Scheme, securing up to £1.3 billion of additional bank loans to small
firms with a turnover of up to £25 million. Christie Finance is confident that
small businesses will take advantage of this improved government guarantee
scheme to secure the funding they need to respond to the many current
acquisition opportunities.
Trading conditions have put tremendous pressure on all our staff. They have
responded with the professionalism and enthusiasm which both I and our clients
would expect of them, and for which I am very grateful.
The business markets we serve support both a corporate community and also a vast
number of the country's privately owned, property-based businesses. We are
witness to a new generation of entrepreneurs seeking to control both their
future careers and their families' well-being. As we continue to serve both
well, I believe the future for our business is secure.
Philip Gwyn
26 March 2009
Chief Executive's Statement
In a testing year, Christie Group has demonstrated its resilience and
flexibility. We saw a reduction in turnover by 16.3% compared with 2007's
excellent performance. This was partly because of the disposal of our retail
software business, but it was also the inevitable consequence of some of the
most turbulent market conditions seen for at least a generation. In that context
the £1.99 million trading loss before exceptional items and after attributable
tax for 2008 can be seen as a creditable performance and one which would have
been worse without our management team's prompt action.
The speed and severity of the downturn took most people by surprise, but for
those of us with longer memories it followed a familiar pattern. Christie Group
is fortunate that several of its directors have had the experience of navigating
this business through challenging economic landscapes on previous occasions. We
are not taking anything for granted but carefully analysing everything we do and
adapting wherever necessary or desirable. Each time we have been through this
kind of experience, the business has emerged not just unscathed, but
strengthened by it.
Unsurprisingly, given the adverse economic conditions, our Professional Business
Services Division fell short of its revenue target. Divisional revenue fell to
£36.9 million (2007: £51.2 million). This was partially offset by a strong
performance in the Stock & Inventory Systems & Services Division with revenue
increasing to £26.5 million (2007: £24.9 million).
It is never easy to manage a business in a hostile economic climate, but one
thing we have learnt is that by acting swiftly we avert the need to take more
difficult decisions at a later stage.
We have moved rapidly to bring down our cost base. We were quick off the blocks
in eliminating duplication and minimising excess capacity. We have scaled back
non-core operations and initiated an appropriate redundancy programme. We have
restructured our finance and insurance businesses and closed down our corporate
finance operation. Running costs are now reduced in line with lower levels of
activity.
As previously announced, we also disposed of VCSTIMELESS our retail software
business during the year. This aside, we have been careful to maintain our
strong presence through our network of UK and international offices. We know
from experience that regional representation is a key competitive advantage for
us.
One of our greatest assets is our ability to understand our customers, their
businesses and their markets in great depth. This allows us to act quickly to
identify opportunities and respond to market trends. This year, for instance, it
was clear that banks would have more distressed assets on their balance sheets
and would require specialist advice to re-invigorate or replace existing
management or maximise the value of these assets on disposal. We re-established
our Bank Support and Business Recovery Unit to service the banks' needs using
the transferable skills of our corporate, advisory and consultancy teams.
Our expertise and understanding have been hard-won over many years and are
unmatched by any of our competitors. Our strategy seeks to reinforce our
strengths as specialists. We continue to deepen our knowledge and focus our
business on our three core sectors - hospitality, retail and care. We are
already firmly established in several European territories. We aim to grow our
services methodically rather than expanding too swiftly geographically.
Christie Group today is a focused and balanced organisation. Our two divisions,
Professional Business Services and Stock & Inventory Systems & Services, provide
complementary services to businesses in each of our three core sectors.
Our sector focus reduces the Group's cyclical exposure. Earnings in the
hospitality sector are closely correlated to economic performance and these can
be volatile. However, the care sector is needs based; revenues here are more
stable and current demographic trends indicate a growing market need. The retail
sector falls between these two extremes.
In difficult markets the value of our high-quality advice is better appreciated.
We expect to increase the range of our consultancy activities and grow our
market share - especially with banks when dealing with distressed businesses.
They recognise that expert advisers who understand the dynamics of these markets
can best facilitate the process of marketing, managing and disposing of their
assets.
These are challenging times, but we are well placed competitively and are one of
the very few specialist practices with no debt.
We are market leaders in our chosen sectors. Christie + Co is the UK's largest
specialist business valuation and agency business, Pinders is the UK's largest
business appraiser and Orridge provides the UK's largest retail stocktaking
service and Venners is the UK's largest Hospitality stock auditor.
Our income is generated from professional, financial and business services in
niche areas where our leading brands enjoy strong recognition. We have a broad
and loyal client base and a pan-European footprint.
Difficult trading conditions can also bring unexpected benefits, such as the
opportunity to attract additional expertise. During challenging times in the
past, we have strengthened the Group with the addition of companies and teams
that had previously been our competitors. We will remain alert to such
opportunities.
There will be tricky economic terrain to navigate in the coming months. However,
I am confident that, as with previous downturns, our business will negotiate
these challenges and emerge stronger when normal economic conditions begin to
reassert themselves.
Consolidated Income Statement
For the year ended 31 December 2008
Note 2008£'000 2007£'000
Continuing operations
Revenue 3 63,422 76,099
Employee benefit expenses* (45,014) (44,310)
18,408 31,789
Depreciation and amortisation 3 (906) (1,033)
Other operating expenses* (22,140) (19,887)
Operating (loss)/profit 3 (4,638) 10,869
Finance costs 5 (162) (149)
Finance income 5 227 363
Total finance credit 5 65 214
(Loss)/profit before tax (4,573) 11,083
Taxation 6 1,173 (3,361)
(Loss)/profit from continuing operations (3,400) 7,722
Discontinued operations
- Loss from discontinued operations 7 (10,163) (3,074)
(Loss)/profit for the year after tax (13,563) 4,648
Earnings per share - pence
(Loss)/profit attributable to the equity holders of the Company
-Basic 9 (55.39) 19.12
-Fully diluted 9 (55.39) 18.65
(Loss)/profit from continuing operations attributable to the equity holders of the
Company
-Basic 9 (13.88) 31.76
-Fully diluted 9 (13.88) 30.99
* These include £1,964,000 (2007: £nil) of exceptional reorganisation costs.
Consolidated Statement of Changes in Shareholders' Equity
As at 31 December 2008
Attributable to the Equity Holders of the Company
Share capital£'000 Fair value and other reserves£'000 Cumulative translation reserve£'000 Retained earnings£'000 Total equity £'000
Balance at 1 January 2007 504 4,410 (382) 8,001 12,533
Exchange difference on repayment of foreign exchange - - (27) 27 -
loan
Currency translation adjustments - - 546 - 546
Net income recognised directly in equity - - 519 27 546
Profit for the year - - - 4,648 4,648
Total recognised income for the year - - 519 4,675 5,194
Issue of share capital 1 33 - - 34
Movement in respect of employee share scheme - (858) - (30) (888)
Employee share option scheme:
- value of services provided - 121 - - 121
Dividends paid - - - (1,030) (1,030)
Balance at 1 January 2008 505 3,706 137 11,616 15,964
Exchange difference on repayment of foreign exchange - - (758) 758 -
loan
Currency translation adjustments - - 1,102 - 1,102
Net income recognised directly in equity - - 344 758 1,102
Loss for the year - - - (13,563) (13,563)
Total recognised income/(expenses) for the year - - 344 (12,805) (12,461)
Release of merger reserve - (945) - 945 -
Movement in respect of employee share scheme - 72 - (28) 44
Employee share option scheme:
- value of services provided - 98 - - 98
Dividends paid - - - (794) (794)
Balance at 31 December 2008 505 2,931 481 (1,066) 2,851
Consolidated Balance Sheet
As at 31 December 2008
Note 2008£'000 2007£'000
Assets
Non-current assets
Intangible assets - Goodwill 1,011 4,096
Intangible assets - Other 60 4,555
Property, plant and equipment 1,409 1,796
Deferred tax assets 2,063 2,664
Available-for-sale financial assets 300 300
Other receivables 1,108 1,088
5,951 14,499
Current assets
Inventories - 404
Trade and other receivables 9,506 13,248
Current tax assets 596 -
Cash and cash equivalents 2,328 10,593
12,430 24,245
Total assets 18,381 38,744
Equity
Capital and reserves attributable to the Company's equity holders
Share capital 505 505
Fair value and other reserves 2,931 3,706
Cumulative translation reserve 481 137
Retained earnings (1,066) 11,616
Total equity 2,851 15,964
Liabilities
Non-current liabilities
Borrowings - 1,275
Retirement benefit obligations 3,225 4,343
Provisions for other liabilities and charges 1,751 432
4,976 6,050
Current liabilities
Trade and other payables 9,289 15,545
Borrowings 706 468
Current tax liabilities - 700
Provisions for other liabilities and charges 559 17
10,554 16,730
Total liabilities 15,530 22,780
Total equity and liabilities 18,381 38,744
These Consolidated financial statements have been approved for issue by the
Board of Directors
on 26 March 2009.
D B Rugg
Chief Executive
R M Zenker
Finance Director
Consolidated Cash Flow Statement
For the year ended 31 December 2008
Note 2008£'000 2007£'000
Cash flow from operating activities
Cash (used in)/generated from operations 10 (5,254) 7,952
Interest paid (163) (149)
Tax paid (21) (2,036)
Net cash (used in)/generated from operating activities (5,438) 5,767
Cash flow from investing activities
Purchase of property, plant and equipment (PPE) (1,103) (786)
Proceeds from sale of PPE 204 41
Intangible asset expenditure (1,590) (2,485)
Proceeds from sales of Software businesses (net of costs) 1,797 -
Cash included in disposal of Software businesses (749) -
Investment in an available-for-sale asset (19) (9)
Interest received 227 363
Net cash used in investing activities (1,233) (2,876)
Cash flow from financing activities
Proceeds from issue of share capital - 34
Net payments to ESOP (172) (1,976)
Repayment of borrowings (1,735) (477)
Proceeds from invoice discounting 700 -
Payments of finance lease liabilities (2) (9)
Dividends paid (794) (1,030)
Net cash used in financing activities (2,003) (3,458)
Net decrease in net cash (8,674) (567)
Cash and cash equivalents at beginning of year 10,593 11,160
Exchange gains on euro bank accounts 409 -
Cash and cash equivalents at end of year 2,328 10,593
Notes to the Consolidated Financial Statements
1. BASIS OF PREPARATION
The consolidated and Company financial statements of Christie Group plc have
been prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union (IFRSs as adopted by the EU). IFRIC
Interpretations and the Companies Act 2006 applicable to Companies reporting
under IFRS. These consolidated and Company financial statements have been
prepared under the historical cost convention and on a going concern basis.
The financial statements have been prepared in accordance with IFRS and IFRIC
interpretations issued and effective or issued and early adopted as at the time
of preparing these statements (March 2009).
The preparation of financial statements in accordance with IFRS requires the use
of certain critical accounting estimates. It also requires management to
exercise judgement in the process of applying the Company's accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated and parent company
statements are disclosed in Note 2.
Interpretations and amendments to published standards effective in 2008
The following amendments and interpretations to standards are mandatory for the
Group's accounting periods beginning on or after 1 January 2008.
* IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding
requirements and their interaction', provides guidance on assessing the limit in
IAS 19 on the amount of the surplus that can be recognised as an asset. It also
explains how the pension asset or liability may be affected by a statutory or
contractual minimum funding requirement. This interpretation does not have any
impact on the Company's financial statements as the Group has a pension deficit
and is not subject to any minimum funding requirements.
* IFRIC 11, 'IFRS 2 - Group and treasury share transactions', provides guidance
on whether share-based transactions involving treasury shares or involving group
entities (for example options over a parent's shares) should be accounted for as
equity-settled or cash-settled share-based payment transactions in the
stand-alone accounts of the parent and group companies. This interpretation does
not have an impact on the Company's financial statements. The Company's
accounting policy for share based compensation arrangements is already in
compliance with the interpretation.
It is anticipated that mandatory new standards or interpretations, effective for
accounting periods beginning on or after 1 January 2008, not covered
specifically above will have no impact on the Group's financial statements.
Standards, interpretations and amendments to published standards that are not
yet effective
Certain new standards, amendments and interpretations to existing standards have
been published that are mandatory for the Company's accounting periods beginning
on or after 1 January 2009 or later periods and have not been early adopted. It
is anticipated that these new standards, amendments and interpretations,
currently in issue at the time of preparing these financial statements (March
2009) will have no material impact on the Company's financial statements.
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
21 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
(a) Estimated impairment of goodwill
Goodwill is subject to an impairment review both annually and when there are
indications that the carrying value may not be recoverable, in accordance with
the accounting policy. The recoverable amounts of cash-generating units have
been determined based on value-in-use calculations. These calculations require
the use of estimates.
(b) Retirement benefit obligations
The assumptions used to measure the expense and liabilities related to the
Group's two defined benefit pension plans are reviewed annually by
professionally qualified, independent actuaries, trustees and management as
appropriate. The measurement of the expense for a period requires judgement with
respect to the following matters, among others:
- the probable long-term rate of increase in pensionable pay;
- the discount rate;
- the expected return on plan assets; and
- the estimated life expectancy of participating members.
The assumptions used by the Group may differ materially from actual results, and
these differences may result in a significant impact on the amount of pension
expense recorded in future periods. In accordance with IAS 19, the Group
amortises actuarial gains and losses outside the 10% corridor, over the average
future service lives of employees. Under this method, major changes in
assumptions, and variances between assumptions and actual results, may affect
retained earnings over several future periods rather than one period, while more
minor variances and assumption changes may be offset by other changes and have
no direct effect on retained earnings.
3. SEGMENT INFORMATION
a. Primary reporting format - business segments
The Group is organised into two main business segments: Professional Business
Services and Stock & Inventory Systems & Services.
The segment results for the year ended 31 December 2008 are as follows:
Professional Business Services£'000 Stock & Inventory Systems & Services£'000 Other£'000 Total continuing operations£'000 Discontinued operations£'000 Group£'000
Total gross segment sales 37,011 26,515 2,941 66,467 9,691 76,158
Inter-segment sales (104) - (2,941) (3,045) - (3,045)
Revenue 36,907 26,515 - 63,422 9,691 73,113
Operating (loss)/profit before exceptional items (3,396) 564 158 (2,674) (3,162) (5,836)
Exceptional items (1,964) - - (1,964) - (1,964)
Net loss on disposal of Retail Software business - - - - (6,193) (6,193)
Operating (loss)/profit after exceptional items (5,360) 564 158 (4,638) (9,355) (13,993)
Net finance credit/(costs) 65 (1) 64
Loss before tax (4,573) (9,356) (13,929)
Taxation 1,173 (807) 366
Loss for the year after tax (3,400) (10,163) (13,563)
The segment results for the year ended 31 December 2007 are as follows:
Professional Business Services£'000 Stock & Inventory Systems & Services£'000 Other£'000 Total continuing operations£'000 Discontinued operations£'000 Group£'000
Total gross segment sales 51,253 24,946 2,913 79,112 11,273 90,385
Inter-segment sales (100) - (2,913) (3,013) - (3,013)
Revenue 51,153 24,946 - 76,099 11,273 87,372
Operating profit/(loss) 10,261 813 (205) 10,869 (3,868) 7,001
Net finance credit 214 - 214
Profit/(loss) before tax 11,083 (3,868) 7,215
Taxation (3,361) 794 (2,567)
Profit/(loss) for the year after tax 7,722 (3,074) 4,648
Other segment items included in the income statements for the years ended 31
December 2008 and 2007 are as follows:
Professional Business Services£'000 Stock & Inventory Systems & Services£'000 Other£'000 Total continuing operations£'000 Discontinued operations£'000 Group£'000
31 December 2008
Depreciation and amortisation 383 492 31 906 244 1,150
Impairment of trade receivables 856 36 - 892 43 935
31 December 2007
Depreciation, amortisation and impairment 402 554 77 1,033 1,540 2,573
Impairment of trade receivables 469 14 - 483 (121) 362
The segment assets and liabilities at 31 December 2008 and capital expenditure
for the year then ended are as follows:
Professional Business Services£'000 Stock & Inventory Systems & Services£'000 Other£'000 Total continuing operations£'000 Discontinued operations£'000 Group£'000
Assets 6,413 6,135 3,174 15,722 - 15,722
Deferred tax assets 2,063
Current tax assets 596
18,381
Liabilities 8,721 5,144 965 14,830 - 14,830
Borrowings (excluding finance leases) 700
15,530
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