1.    Corporate information

Hunters Property Plc is a Company incorporated in the United Kingdom on 19 February 2015. The registered address of the Company is Apollo House, Eboracum Way, York, YO31 7RE. The consolidated interim financial statements (or "financial statements") incorporate the financial statements of the Company and entities (its subsidiaries) controlled by the Company (collectively comprising the "Group").

The principal activity of the Group is the provision of property services to consumers and businesses which include sales, lettings, franchising and related services.

2.    Accounting policies

2.1. Basis of preparation

Basis of measurement

The financial statements have been prepared on the historical cost basis, except for the following:

• Investments - measured at fair value; and
• Assets and liabilities associated with business combinations - measured at their acquisition-date fair value.

Functional and presentational currency

The financial statements are presented in Pounds Sterling ("Sterling"), being the Group's functional currency.

Use of estimates and judgments

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Basis of preparation

The financial information set out in these consolidated interim financial statements for the six months ended 30 June 2015 and the comparative income statement and statement of cashflow figures are unaudited. The financial information presented are not statutory accounts prepared in accordance with the Companies Act 2006, and are prepared only to comply with AIM requirements for interim reporting.

Other than the transactions set out in the notes to these interim financial statements, the Directors do not consider that the Group has entered into any other significant transaction in the period.

 

Basis of consolidation

On 27 March 2015, Hunter Property Plc undertook a share-for-share exchange in order to obtain control of Hunters Property Group.  This transaction has been accounted for as a group reorganisation and the merger accounting principles set out in UK GAAP have been applied in the absence of relevant IFRS accounting requirements.  Merger accounting requires that the results of the Group are presented as if the Group has always been in its present form, and does not require a re-evaluation of fair values as at the point of achieving control. Accordingly, for the comparative statement of financial position as at 31 December 2014, a merger reserve has been created which represents the difference between the net assets of the Group as at that date, and the retained profits recognised by the Group as at that date.

 

The Group financial information consolidates those of the Parent Company and the subsidiaries that the Parent has control of. Control is established when the Parent is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

Where a subsidiary is acquired/disposed of during the period, the consolidated profits or losses are recognised from/until the effective date of the acquisition/disposal.

All inter-company balances and transactions between group companies have been eliminated on consolidation.

Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those used by the Group.

Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that are not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interest based on their respective ownership interests.

 

2.2. Business combinations

The Group applies the acquisition method of accounting for business combinations other than as outlined in note 2.1 in respect of the Group merger. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair value of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquired subsidiary's financial information prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the fair value of consideration transferred, over the Group's share of the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

 

2.3. Revenue

Revenue represents the amount receivable for the provision of services and the sale of goods during the period, excluding VAT and trade discounts. Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be measured reliably.

Revenue from residential, commercial, land sales and financial services is recognised on the basis of completion of contract.

Revenue from commission earned as letting agents is recognised in the period to which the services relate.

At inception of a franchisee contract where an initial fee is payable by the franchisee, revenue is recognised upfront which matches to the estimated cost of time and knowledge to create the franchiser-franchisee contractual arrangement. No amounts are deferred as the directors are of the opinion that virtually all inception costs are incurred at the outset, and hence although contracts run for several years this policy is considered to be the fairest presentation to comply with the matching and accruals concepts.

Revenue from franchisee management service fees are recognised in the month of completion but are invoiced in arrears, calculated by reference to the terms of the contract and the value of sales attributable to each franchisee. Unbilled franchisee fees are recognised as accrued income.

Deferred income arises where services are invoiced in advance of performance. The amount is released to the profit or loss in subsequent periods in reference to the stage of completion of the transaction at the reporting date.

 

2.4. Income tax

Current income tax assets and/or liabilities comprise obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid/due at the reporting date. Current tax is payable on taxable profits, which may differ from profit or loss in the financial statements. Calculation of current tax is based on the tax rates and tax laws that have been enacted or substantively enacted at the reporting period.

Deferred taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). However, for deductible temporary differences associated with investments in subsidiaries a deferred tax asset is recognised when the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

 

2.5. Goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identifiable and separately recognised. After initial recognition, goodwill is measured at cost less accumulated impairment losses.

 

2.6.   Other intangible assets

Intangible assets are initially measured at cost. Where intangible assets are acquired as part of a business combination, cost is determined by reference to a fair value estimation technique. After initial recognition, intangible assets are recognised at cost or fair value less any accumulated amortisation and any accumulated impairment losses.

The depreciable amount of an intangible asset with a finite useful life is allocated on a systematic basis over its useful life. Amortisation begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

The amortisation period and the amortisation method for intangible assets with a finite useful life is reviewed each financial period-end. If the expected useful life of the asset is different from previous estimates, the amortisation period is changed accordingly.  Amortisation is currently provided on the following basis:

 

Franchise development grants	Straight line over the period of the contract
Brand value	Straight line basis over 10 years
MSF contracts	Straight line over the period of the contract
Software development	Straight line basis over 7 years.

 

 

2.7.   Property plant and equipment

Property, plant and equipment are recognised as an asset only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

An item of property, plant and equipment that qualifies for recognition as an asset is measured at its cost. Cost of an item of property, plant and equipment comprises the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

After recognition, all property, plant and equipment are carried at costs less any accumulated depreciation and any accumulated impairment losses.

Depreciation is provided at rates calculated to write down the cost of assets, less estimated residual value, over their expected useful lives on the following basis:

 

Leasehold land and buildings	Straight line over the period of the lease
Plant and machinery	25% reducing balance
Computer equipment	33% straight line
Fixtures, fittings and equipment	25% reducing balance or 10-33% straight line
Motor vehicles	25% straight line

 

The residual value and the useful life of an asset are reviewed at least at each financial period-end and if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying value of the asset and are recognised in profit or loss.

 

2.8.   Impairment of goodwill, other intangible assets and property, plant and equipment

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash flows. As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill.

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An asset or cash-generating unit is impaired when its carrying amount exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost of disposal and value in use. The value in use is calculated as being net projected cash flows based on financial forecasts discounted back to present value.

The impairment loss is allocated to reduce the carrying amount of the asset, first against the carrying amount of any goodwill allocated to the cash-generating unit, and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.

 

2.9.   Investments

Investments in equity instruments that have a quoted market price in an active market and whose fair value can be reliably measured are measured at fair value; otherwise investments in equity instruments are measured at cost.

 

2.10. Financial instruments

Financial assets

Financial assets are recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.

All financial assets excluding investments are classified as loans and receivables; these comprise trade and other receivables and cash and cash equivalents. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

 

Financial assets are initially recognised at fair value plus directly attributable transaction costs.

After initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.

If there is objective evidence that there is an impairment loss on loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account.

A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred.

Financial liabilities

Financial liabilities include borrowings and trade and other payables.

Financial liabilities are obligations to pay cash or other financial assets and are recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.

Financial liabilities are initially recognised at fair value adjusted for any directly attributable transaction costs.

After initial recognition, financial liabilities are measured at amortised cost using the effective interest method, with the effective interest recognised as an expense in finance costs. Discounting is omitted where the effect of discounting is immaterial.

A financial liability is derecognised only when the contractual obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.

 

2.11. Leased assets

Finance leases

The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any. A corresponding amount is recognised as a finance lease liability.

This liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant proportion of the outstanding capital balance and is charged to profit or loss, as finance costs over the period of the lease.

Operating leases

All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred.

 

2.12. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.

 

2.13. Equity and reserves

Share capital represents the nominal value of shares that have been issued. Share premium represents the excess consideration received over share capital upon the sale of shares, less any incidental costs of issue.

Retained earnings include all current and prior period retained profits.

The non-controlling interest reserve is the portion of equity ownership in subsidiaries which is not attributable to the owners of the Parent Company.

Included within equity is a merger reserve, which represents the difference between the nominal value of the equity instruments of Hunters Property Plc in issue at the period end date and the net asset valuation net of retained profits. The reserve has arisen as the Group has applied merger accounting to consolidate its entities as detailed in note 2.2.

 

3.   Business combinations

 

Acquisition of Greenrose Network (Franchise) Limited & Greenrose Network Marketing Association:

 

On 1 May 2015 the Group acquired 100% of the voting shares of Greenrose Network (Franchise) Limited and Greenrose Network Marketing Association (together, "Greenrose"), with the latter being a company limited by guarantee. Both are unlisted companies based in England and specialising in the UK property market. The consideration paid totalled £1,200,000, being settled by cash of £1,000,000 payable at the point of sale to the vendors, and the issue of 333,333 4p shares in Hunters Property Plc at a premium of 56p per share, with the total value of the issue being £200,000. In addition there were directly attributable costs of £39,399 inclusive of stamp duty payable on the shares.

As part of the acquisition, the Directors have identified intangible assets included within the premium paid for the acquisition, being MSF contracts in place and the Greenrose brand. Historical data and forecasts have been used, together with the 10% group discount rate and an assumption of a useful life of 10 years for the brand, to estimate the fair value of these intangibles.

As the acquisition gave immediate access to an enhanced franchising network, which represents a key part of the Group's business model, an additional premium was paid over these fair values. The directors have not quantified any other elements of this goodwill and do not believe there to be any further fair value adjustments.

 

 

Acquisition of Greenrose	Carrying value		Fair value adjustments		Fair value recognised on acquisition
	£		£		£
Assets
Intangible assets	-		1,119,637		1,119,637
Property, plant and equipment	4,243		-		4,243
Deferred tax asset	-		17,437		17,437
Trade and other receivables	120,463		(87,184)		33,279
Cash and cash equivalents	2,251		-		2,251
Total assets	126,957		1,049,890		1,176,847
Liabilities
Trade and other payables Deferred tax liability	(68,723) (848)		3,116 (224,550)		(65,607) (225,398)
Total liabilities	(69,571)		(221,434)		(291,005)
Total identifiable net assets	57,386		828,456		885,842
Goodwill arising on acquisition					314,158
Purchase consideration transferred					1,200,000

 

From the date of acquisition, Greenrose contributed £43,761 of revenue and £19,075 of profit before tax and amortisation from continuing operations of the Group.

 

In addition, there were costs of acquisition of £39,399 relating to the acquisition which have been disclosed separately in the Income Statement.

 

 

Acquisition of Realcube Technology Limited & Realcube Limited:

 

On 16 June 2015 the Group acquired the remaining 80.2% of Realcube Technology Limited and its wholly-owned subsidiary Realcube Limited (together, "Realcube"). The Group had previously owned the 19.8% minority interest of Realcube. Both are unlisted companies based in England and have developed specialist software which is used by the Group to maintain its networks and provide services to franchisees. The consideration paid totalled £323,613, being £95 of existing minority share capital, the issue of 122,533 shares in the Group at a premium of 56p per share, the issue of 277,467 shares in the Group at a premium of 56p per share in exchange for the waiving of loans made by exiting shareholders to Realcube, and the representation of an existing loan with present value of £83,518 (net of provision for recoverability of £80,000) made by the Group to Realcube. In addition there were directly attributable costs of £405 inclusive of stamp duty payable on the shares.

As part of the acquisition, the Directors have identified intangible assets included within the premium paid for the acquisition, the software developed by Realcube. Historical data and forecasts have been used, together with the 10% group discount rate and an assumption of a useful life of 7 years for the software based on technological industry standards, to estimate the fair value of these intangibles.

The acquisition was made to provide greater security and control over the internal systems used by the Group and its franchisees, however Realcube had a net liability position and significant levels of funding as at the point of acquisition. Accordingly, the total paid for the group has been estimated as being equivalent to the modelled fair value of the software intangible, and accordingly no goodwill has arisen on the acquisition.

A number of the shares in Realcube were acquired from Directors of the Group, on an arm's length basis.

 

Acquisition of Realcube	Carrying value		Fair value adjustments		Fair value recognised on acquisition
	£		£		£
Assets
Intangible assets	-		498,731		498,731
Property, plant and equipment	1,537		-		1,537
Trade and other receivables	2,190		-		2,190
Cash and cash equivalents	14,668		-		14,668
Total assets	18,395		498,731		517,126
Liabilities
Trade and other payables Borrowings Deferred tax liability	(43,313) (50,454) -		- - (99,746)		(43,313) (50,454) (99,746)
Total liabilities	(93,767)		(99,746)		(193,513)
Total identifiable net (liabilities)/assets	(75,372)		398,985		323,613
Goodwill arising on acquisition					-
Purchase consideration transferred					323,613

 

 

No revenue or profits have been recognised since the date of acquisition due to the proximity of the acquisition to the reporting date.

 

 

4.    Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

 

Earnings			30 June 2015
			£
Earnings for the purpose of basic earnings per share being net profit attributable to owners of the parent			170,020
Effects of dilutive potential ordinary shares
			-
Earnings for the purposes of diluted earnings per share			170,020

 

 

Number of shares			30 June 2015
Weighted average number of ordinary shares for the purposes of basic earnings per share			24,228,666
Effects of dilutive potential ordinary shares			1,175,763
Weighted average number of ordinary shares for the purposes of diluted earnings per share			25,404,429

 

Earnings per share

 

Basic earnings per share		0.70p
Diluted earnings per share		0.67p

 

No comparative is presented as the Group in its present format did not have shares in issue at 30 June 2014.

 

The Directors use adjusted earnings before time-value interest, investment revenue, amortisation, and costs of acquisition ("Adjusted Earnings") as a measure of ongoing profitability and performance. The calculated Adjusted Earnings for the current period of accounts is £275,510 (2014: £242,730) therefore the Adjusted Earnings per share is 1.14p.

 

There exists a number of share options at the period end, which have a trivial in the money value. On the basis of this, no amounts are provided for in the financial statements.

 

5.    Dividends

 

No dividends have been paid by the Group in the period.