18 September 2023

Christie Group plc

Interim Results for the six months ended 30 June 2023

Challenging H1 performance as PFS division is impacted by decline in transactional volumes

Christie Group plc ('Christie Group' or the 'Group'), the leading provider of Professional & Financial Services (PFS) and Stock & Inventory Systems & Services (SISS) to the hospitality, leisure, healthcare, medical, childcare & education and retail sectors, today announces its Interim Results for the six months ended 30 June 2023.

Overview

As reported in our most recent trading update, the Group experienced a disappointing H1 as a result of delays in transactions brokered by its agency and advisory business, Christie & Co. This slowdown reflected lower activity levels and sentiment in the wider market. While some uncertainty remains as to the precise timing of transactions, the Group continues to expect a more positive H2 trading performance.

Financial Headlines

·      Revenues down by 1.6% to £33.1m (2022: £33.7m), principally due to a decline in transactional volumes in our agency business

·      Operating loss of £1.4m (2022: £2.3m profit), as previously indicated

·      Employee costs up 8.0% to £25.2m (2022: £23.3m)

·      Other operating expenses up 15.8% to £9.4m (2022: £8.1m)

·      PFS revenues down by 8.1% to £20.4m (2022: £22.2m)

·      PFS operating loss of £0.4m compared to a £3.2m profit in H1 2022

·      SISS revenues up 11.1% to £12.8m (2022: £11.5m)

·      SISS operating loss of £1.0m (2022: £0.9m)

·      Borrowings reduced to £1.7m (2022: £5.4m) as CLBILS loan fully repaid

·      Pension liabilities reduced to £0.9m (2022: £8.0m) as both defined benefit schemes remain in surplus

·      Cash and cash equivalents balance of £2.9m (2022: £6.2m)

·      Board declares an interim dividend of 0.5p; H1 2022: 1.25p per share

Operational Headlines

·      Transactional volumes decreased significantly in H1 of 2023 when compared to the previous two years

·      While transaction volumes during H1 have been disappointing, our teams have been busy on a number of significant portfolio assignments in the Dental, Healthcare, Hotels and Pubs sectors with an encouraging number of exchanges having already occurred and more anticipated in H2

·      More positive performances have been seen in the Valuation, Business Appraisal and Finance Brokerage operations

·      Hospitality stocktaking business has continued its positive post-Covid recovery

·      Pharmacy and Supply Chain operations have traded well in H1

·      UK Retail stocktaking and visitor attraction businesses require further revenue growth to achieve profitability

Current trading

·      We anticipate an improvement in transactional volumes by the end of Q3 and into Q4, based on current levels of deal activity and our pipelines of instructed work, but uncertainty remains as to the timing of transactions which will exchange in 2023 as opposed to 2024

·      Early H2 performance in our valuation and appraisal operations and our finance brokerage business have been strong

·      Within our SISS division, our hospitality, pharmacy, supply chain and Benelux operations are all trading positively, while UK retail stocktaking remains challenging

·      H2 has begun more positively for our visitor attraction software business with a number of further new business wins and increasing levels of upsells to existing clients.

Dan Prickett, Chief Executive, commented:

"An undoubtedly disappointing H1 performance which resulted in an operating loss as was previously indicated in our 7^th August trading update. This was borne out of changing economic conditions which have served to frustrate transactional activity. Nonetheless, we have seen encouraging performance so far this year in other parts of the Group, and we are now free of pension deficit repair obligations and term loan repayments, with a positive cash balance. We anticipate more positive transactional activity levels resuming once the market has adjusted to changes in interest rates and inflation."

Enquiries:

Notes to Editors:

Christie Group plc (CTG.L), quoted on AIM, is a leading professional business services group with 38 offices across the UK and Europe, catering to its specialist markets in the hospitality, leisure, healthcare, medical, childcare & education and retail sectors.

Christie Group operates in two complementary business divisions: Professional & Financial Services (PFS) and Stock & Inventory Systems & Services (SISS). These divisions trade under the brand names: PFS - Christie & Co, Pinders, Christie Finance and Christie Insurance: SISS - Orridge, Venners and Vennersys.

Tracing its origins back to 1846, the Group has a long-established reputation for offering valued 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.

The information contained within this announcement is deemed by the Company to constitute inside information for the purposes of Article 7 of the UK Market Abuse Regulation (EU) No. 596/2014 which is part of the UK law by virtue of the European Union (Withdrawal) Act 2018.

For more information, please go to https://www.christiegroup.com     

Chief Executive's review

As reported in our most recent trading update, the Group experienced a disappointing H1 as a result of delays in transactions brokered by its agency and advisory business, Christie & Co. This slowdown in revenue reflected lower activity levels and sentiment in the wider market and was as already reported by a number of competitors. The Group continues to expect a more positive H2 trading performance, as the market begins to adapt to rising costs of debt. Nonetheless, uncertainty remains on the precise timing of transactions reaching contractual exchange and the degree to which transactions currently scheduled for 2023 exchange do reach that stage will be key to our full year outcome and the strength of our H2 performance.

Financial Review

The Group reported revenues of £33.1m (2022: £33.7m) and an operating loss of £1.4m (2022: £2.3m operating profit). The £3.7m deterioration in H1 profitability from a year earlier was attributable almost entirely to the changed performance of the Professional and Financial Services ("PFS") division, which saw revenues fall by 8.1% to £20.4m (2022: £22.2m) and the operating result by £3.6m generating a H1 operating loss of £0.4m (2022: £3.2m profit).

The Stock & Inventory Systems and Services ("SISS") division saw revenues increase by 11.1% to £12.8m (2022: £11.5m) but delivered an operating loss of £1.0m (2022: £0.9m), where cost increases were not matched by the level of revenue growth.

Employee benefit expenses increased by £1.9m to £25.2m from £23.3m reflecting headcount recruitment in those areas seen as medium and long term growth opportunities in our PFS division, while also reflecting strong inflationary pressures on salaries in a competitive marketplace for our talent and the need to retain the sector-leading expertise in our teams. At the same time, increased activity levels in our stocktaking businesses have required additional manning to facilitate that work.

Other operating expenses also increased from £8.1m to £9.4m, with increased expenditure on marketing, PR and insurance cost inflation.

Despite the H1 trading performance, the Group's balance sheet debt position has improved from a year ago. The Group ended H1 having fully repaid the £6.0m Coronavirus Large Business Interruption Loan it borrowed in June 2020 and no longer has any term debt on its balance sheet.

The Group's two defined benefit pension schemes, which moved into surplus during H2 of 2022, remained in significant surplus at 30^th June 2023, meaning the Group has no deficit repair payment obligations to meet. Deficit repair payments have represented a considerable use of Group cash since 2006.

The combination of H1 trading performance and commissions and bonuses payable in relation to 2022's performance, mean that the Group's cash balance had decreased by the end of the period to £3.6m (2022: £8.6m). The Group maintains all of its banking facilities and traditionally experiences a stronger operating cashflow inflow during H2.

In seeking to balance its recognition of a disappointing H1 performance with its current expectation of a more positive H2 trading performance, the Board has declared an interim dividend of 0.5p per share (H1 2022: 1.25p) which will be paid on 3 November 2023 to shareholders on the register on 6 October 2023.

Professional & Financial Services Division.

Transactional volumes decreased significantly in H1 of 2023 compared to the activity levels experienced in the previous two years, as deal times lengthened reflecting the increased complexities of the economic environment, higher financing costs and inflationary pressures on businesses. These factors were experienced across the range of sectors in which Christie & Co operate.

Notwithstanding, Christie & Co's team have been busy on a number of larger portfolio assignments in the Dental, Healthcare, Hotels and Pubs sectors. Exchanges on those portfolio assignments have already occurred with more expected to take place during H2 and potentially into the early part of 2024. As previously indicated, those H2 revenue expectations have already been revised to reflect a change in disposal strategy by certain vendors who have opted to retain a number of assets in the near-term, where previously Christie & Co had been mandated to market the full estate.

Internationally, Christie & Co have been particularly active in France during H1 of 2023 with a number of Hotel sales completed during the period, and the team completed a successful operator search in Venice in relation to the historical Hotel Bonvecchiati.

Towards the end of H1, Christie & Co also signalled its expansion ambitions on the continent by appointing a Head of Healthcare in Germany as part of a wider strategy looking beyond a single-sector focus in mainland Europe.

The Group's UK advisory teams have also been busy and are expected to remain so through H2. Valuation enquiry and instruction levels have remained robust in Christie & Co, and Pinders' own business appraisal activity levels have been very encouraging after a slower start to the year with its own appraisal pipelines reaching record levels in the early part of H2.

The Group's finance brokerage operation, Christie Finance, also experienced a slower start to the year but the uptick in activity levels since then has been very positive. Lender underwriting has involved increased levels of due diligence which has slowed the process for loan offers being advanced. Nonetheless, the aggregate value of loan offers secured during H1 by Christie Finance increased by 16% and the business continued to invest in growing its headcount of brokers, most notably in its growing Unsecured division where the aggregate value of instructions increased year-on-year by 120%.

Christie Finance ended H1 with a total pipeline across its Core, Debt Advisory and Unsecured divisions up by 38% on a year earlier, and up 26% on 31^st December 2022.

Stock & Inventory Systems & Services

The Group's Hospitality stock audit business, Venners, has continued its post-Covid recovery with a positive and encouraging H1 performance. Strong demand for its services has been reflected with continuing high levels of successful new business quotes, and despite a continuing challenging recruitment market, the business has been more successful in growing and retaining its stock auditor headcount than during 2022. Alongside its core stock audit activities, the business has also delivered successful outcomes for clients through its Compliance and Consultancy services, identifying over £0.5m of supply chain errors for one client.

Orridge, the Group's retail stocktaking operation which operates in the UK and Europe, has had a mixed performance during the period. Challenges remain in UK retail stocktaking, where the pipeline of new business opportunities is H2 weighted and a long-standing and significant client entered administration in H2.

Conversely, the Pharmacy and Supply Chain operations within Orridge have both performed ahead of expectations in H1 and further growth opportunities exist in both. On the continent, our Benelux operation delivered a profitable H1 despite pressures on direct costs and productivity from inflationary pressures and stocktaker churn respectively, while our German operation, with a seasonal H2 weighting to its own business, has a positive outlook for the months ahead.

Our visitor attraction software-as-a-service ("SaaS") business, Vennersys, has continued to invest in the development of its functionally-rich product. The volume of new client wins and installations in H1 have been solid and much improved on the same period in 2022, but with lower average revenue per client than anticipated resulting from reduced online purchasing by client's customers, a smaller client hardware profile and fewer visitors. The business has also seen H1 2023 v H1 2022 revenues impacted by some client attrition.

Outlook

The Group has experienced a challenging H1 as a result of market conditions, having taken the strategic decision last year to continue to invest in maintaining and growing its sector specialist teams. The delays in transactional deals seen in H1 have continued into the summer period, and the full year outcome will be determined by the number of deals which can be brought to contractual exchange in the remaining four months of 2023. As vendors and buyers adjust to the changed economic environment, we anticipate more normalised levels of activity resuming.

Transactional pipelines have recovered to levels similar to a year ago. Within these pipelines, at 30^th June the number of deals in solicitors' hands was up markedly on six months earlier.

Distressed activity is showing some signs of being on the increase, but still remains at relatively modest levels when compared historically. Our agency and advisory teams are ideally placed to support owners and operators in our specialist sectors, who are seeking to either expand existing portfolios, or dispose of non-core and underperforming assets. 

In our SISS division we have seen encouraging, profitable H1 performances from our Hospitality, Pharmacy and Supply Chain stocktaking operations. Further growth is required in our Retail stocktaking businesses and our software business, the latter of which has begun in H2 well with a number of new client wins and increased success in upselling to existing clients.

I am grateful to our excellent and committed teams across all of our businesses, who have worked diligently throughout H1 and who will continue to do so to deliver the best possible outcome for the year.

We look forward to the remainder of 2023 and beyond with a continuing confidence in the medium and long term potential of the Group.

Dan Prickett

Chief Executive Officer

Independent Review Report to Christie Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six-month period ended 30 June 2023 which comprises the Interim Consolidated Income Statement, the Interim Consolidated Statement of Comprehensive Income, the Interim Consolidated Statement of Financial Position, the Interim Consolidated Statement of Cash Flows, the Interim Consolidated Statement of Changes in Equity and the related Notes 1 to 16.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2023 is not prepared, in all material respects, in accordance with International Accounting Standard ('IAS') 34 "Interim Financial Reporting", as adopted for use in the United Kingdom and the AIM Rules issued by the London Stock Exchange.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in Note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards adopted for use in the United Kingdom ("UK adopted IFRS"). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard ('IAS') 34 "Interim Financial Reporting", as adopted for use in the United Kingdom.

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of directors

The directors are responsible for preparing the half-yearly financial report in accordance with the with International Accounting Standard ('IAS') 34 "Interim Financial Reporting", as adopted for use in the United Kingdom and the AIM Rules issued by the London Stock Exchange.

In preparing the half-yearly financial report, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

This report is made solely to the Company in accordance with guidance contained in ISRE (UK) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purposes.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

MHA, Statutory Auditor

Milton Keynes, United Kingdom

15 September 2023

MHA is the trading name of MacIntyre Hudson LLP, a limited liability partnership in England and Wales (registered number OC312313)

Consolidated interim income statement

Earnings per share attributable to equity holders - pence

(Loss)/profit for the period after tax is wholly attributable to equity shareholders of the parent.

All amounts derive from continuing operations.

Consolidated interim statement of comprehensive income

Total comprehensive (losses)/income for the period is wholly attributable to equity shareholders of the parent.

Consolidated interim statement of changes in shareholders' equity

Consolidated interim statement of financial position