HML HOLDINGS PLC

STRATEGIC REPORT

REVIEW OF BUSINESS

We are pleased to report a 25% increase in revenue to £12.7m over the equivalent period last year and a 10% increase in earnings before interest, share-based payments, amortisation and tax to £1.0m (2016: £0.9m). As we continue to invest in the business, additional one-off costs primarily relating to the integration of acquisitions and associated investments in infrastructure have impacted operating costs during the first half, which is reflected in the reduced earnings per share for the period of 1.9p (2016: 2.1p).

Insurance brokerage revenue rose by 16% as the process of assimilating clients from our acquisitions gathered pace during the first half of the year. Professional fees increased 45% with a significant additional contribution from our new Central London operation; Faraday Property Management Limited which was acquired on 1 April 2017. Legal and professional fees arising from pre-contract enquiries and the administration of property sales and alterations were proportionately lower than last year as the volume of transactions, particularly in Central London reduced in line with market sentiment. Although there have been only modest improvements in revenues arising from health and safety inspections and concierge staff management, we have invested further in improving the capacity of both departments and anticipate greater contributions in the second half of the year.

Market sentiment surrounding the demand for new building development remains positive, although delivery and completion remains frustratingly slow. HML has record levels of confirmed instructions with a pipeline of over 17,000 units. We anticipate the rate at which this pipeline becomes operational will improve with the government's stated preparedness to support the home building industry.

Apart from the ongoing development of our property management systems, we have made further improvement to our information technology infrastructure, both in terms of greater cyber security and digitised transaction processing and filing systems. We have also made a significant investment in the creation of a back office in new offices in West Croydon, which has impacted costs in the short term but provides us with the opportunity for standardising and streamlining many of our support functions in a lower cost environment.

I have commented in several industry reports on the growing divide of service and regulatory compliance between the managing agents that choose to comply with the professional standards of the Royal Institution of Chartered Surveyors and the Association of Residential Managing Agents and those that operate entirely independently of their strictures. There is no doubt that the freedom offered to unregulated players has not only created an unfair competitive advantage for them but has fuelled the perception of impropriety for a property management service that is frequently misunderstood. We are therefore extremely pleased to hear the Secretary of State for Communities and Local Government's announcement that the activities of lettings and managing agents will be regulated.

HML has made a significant investment in ensuring that we comply with the codes of conduct of all our regulatory bodies and we believe that this investment will yield a significant advantage when all managing agents are obliged to comply with what we anticipate will be specific regulatory requirements.

Robert Plumb                                                                                                 

Chief Executive Officer                                                                                               

29 November 2017