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How much less do you think your house is worth now as opposed to a year ago? Five per cent less? Ten per cent? Twenty if you've been very unlucky? But surely not 80 or 90 per cent, or more. Yet that is the scale of the collapse of Humberts, an estate agency chain whose wild expansion drive has unravelled with spectacular speed.
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Humberts used to be called Farley. The Humberts name - and a new management team - came with a reverse takeover in 2005. Farley paid out £1.8m in cash and £0.55m in new shares to acquire Humberts. The deal also brought the Tchenguiz family onto the share register with a 9 per cent stake.
The new management team, headed by Max Ziff, believed that estate agency industry needed to be consolidated. And so a frenzy of deal-making began. The table below summarises it:
| Company | Date acquired | Max. consideration | Initial cash |
|---|---|---|---|
| London Overseas Property Search | Dec 2005 | £175,000 | £150,000 |
| Burrough & Co | Feb 2006 | ||
| Moretons | Feb 2006 | £1m | |
| CJ Hole Country | May 2006 | £2.55m | Not disclosed |
| Petersfield franchise | Aug 2006 | £1.02m | £720,000 |
| Wright Todd | Sep 2006 | £994.289 | £687,859 |
| Geoffrey Fitch | Sep 2006 | £250,000 | £166,667 |
| Blenheim Bishop | Oct 2006 | £2.3m | £1.2m |
| Franchises | Oct 2006 | £2.05m | £938,889 |
| BTF Lister | Oct 2006 | £2.55m | £910,000 |
| CMS West Kent | Oct 2006 | £681,000 | £300,000 |
| Franchised Offices | Feb 2007 | £2.75m | £1.1m |
| Wellingtons | Apr 2007 | £1.6m | £899,168 |
| Spencer Ridley | Apr 2007 | £100,000 | |
| Gale & Dunn | Apr 2007 | £1.75m | £667,667 |
| Richard Harding | Sep 2007 | £2.03m | £1.43m |
| Fox & Manwaring | Sep 2007 | £635,000 | £380,000 |
| Halls | Sep 2007 | £5.55m | £2.4m |
| Thomson Currie | Sep 2007 | £4.2m | £1.6m |
For the most part, the figures in the maximum consideration column include deferred payments, which were generally dependent on future performance. Many were never made (see below). The 'Initial cash' column shows the cash sums that were paid out on completion of various acquisitions - and totals over £14m.
Of course, when property prices were marching steadily higher, the company could do no wrong. Trading updates were bullish, frequently exceeding expectations. We were, at one stage, big fans of the group.
But in late 2007, after the Northern Rock crisis, things started to go wrong. Transaction volumes stalled, and faced with huge potential bills for deferred consideration, the group needed more cash from somewhere. Max Ziff and Tim James, who had masterminded the whole binge, promptly cleared off. John McLean became executive chairman in charge of the rescue mission.
Bid talks came and went, some non-core assets were sold, and some deferred considerations were renegotiated. But while an emergency fund-raising was approved by shareholders, not all of the conditions attached to it were met, so it did not proceed and Humberts shares were suspended in May at 3.25p - down 97 per cent from their peak.
What followed can only be described as a fire sale. Again, a table is needed to summarise the scale of it:
| Business | Total sale price | Cash received | Cash loss |
|---|---|---|---|
| Halls | £1.9m | £850,000 | £1.55m |
| Thomson Currie | £1.85m | £50,000 | £1.55m |
| Richard Harding | £1.06m | £60,000 | £1.37m |
| Blenheim Bishop | £967,000 | £0 | £1.46m |
| BTF Lister | £1 | £1 | £909,999 |
| Everything else | £3.16m | £2.06m |
Most of the businesses were sold back to their original vendors in return for the cancellation of deferred consideration plus some cash. Following the final disposal, Humberts is now a shell company, and will change its name to Pedstowe at a forthcoming general meeting.
Shell companies can only remain so for a certain amount of time. Sooner or later, Pedstowe will have to do a deal. Shareholders with a Humberts hangover should think long and hard before they approve it.
Read more SmallWorld columns, devoted to smaller companies and their managers, on the SmallWorld page
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
