St Mark Homes Plc - Final Results PR Newswire

31 May 2018

St Mark Homes Plc

(''SMH'' or “the Company'')

Final results

St Mark Homes (NEX: SMAP), the housebuilder operating mainly in London and the South East of England, today announces its Final Results for the year ended 31 December 2017.

Strategic report

The directors present their strategic report for the year ended 31 December 2017.

The Group continues to develop residential led projects located in London and the Southern regions of the United Kingdom. We primarily target the sub £1,000 per square foot residential sales market with a particular emphasis on developing schemes which consist of units that can be made available for sale under the £600,000 London Help to buy limit.

The Group typically undertakes its business within special purpose vehicles and on a joint venture /profit sharing basis with other house builders. This strategy has helped the company to generate profits and increase distributions to shareholders in recent years. The group profits before tax for the current year amount to £383,738 and dividend distributions to shareholders increased by 10% to 5.5p per share.

Our strategic priorities

Following the merger with St Mark Contracts Limited and successful bond raising in late 2017 / early 2018, the board is keen to grow the Group into a significant regional house builder. We have an established and profitable method of operation and with an expanded capital base we intend to participate in additional projects in the coming years.

We believe the key Group assets are its people, capital base and market listing. Our primary aim is to maximise shareholder value by utilising each of these assets to best effect. We also are committed to the highest standards of sustainability.

People and partnering

We have an intentionally small but experienced team with demonstrable competency in the areas of finance, property development, project appraisal and project delivery. Our strategy is to match those core skills and our capital with partners who can assist with project design, construction and sales.  Our people are motivated through a management incentive scheme which aligns their interests with that of the shareholders and only rewards performance after attainment of profit targets linked to the return on shareholders funds.

Capital 

The Group commenced 2017 with a capital base just short of £5.8m (2016: £3.9m). We have previously set a performance target to grow that base by a minimum of 5% on opening shareholders funds per annum through organic growth.  In 2017 we achieved a pre-tax profit of 6.6% (2016: 16.5 %) on opening shareholders funds.

The Group successfully launched a corporate bond with the assistance of Crowdstacker Limited in September 2017.   The 30 month, 6% bond raised £2.342m at the year end closing in February 2018 having raised £3.465m.   The Directors are delighted with the success of the bond raising which has bolstered the capital base of the group and has already deployed a significant proportion of these funds into new project investments.

NEX Exchange Listing

The market mid-price on 17 May 2018 of £0.95 represents a discount of 29% to the net asset value of £1.34 per share reported at 31 December 2017.  The 2017 dividend yield based on this market mid price is 5.8%.

We will continue to monitor the effectiveness of the market and as the company grows we may in future consider a move to AIM. In the interim the Board believe the continued expansion of the capital base and the continuation of profit and dividend growth are steps that can broaden investor appeal.

Sustainability

We recognise that there are financial and operational benefits of working sustainably and we are committed to the highest standards of sustainability. While many environmental requirements are embedded within the planning process, sustainability is a broader issue than that and encompasses both Health & Safety and the supply chain.

Health & Safety continues to remain the Group’s first priority and we work with our joint venture partners to attain best practice standards. We are happy to report that there were no reportable incidents on any of our projects during 2017 and we remain committed to the highest standards of Health & Safety.

Having the right supply chain is also crucial to sustainability. We do have long term working relationships with our main suppliers but continue to carefully monitor the financial health of our design teams and main contractors. We aim to pay suppliers to agreed timescales and to work collaboratively with them for the benefit of all.

Project Portfolio

At present we have live joint venture projects on sites in St Margarets, Sutton, Hounslow, Battersea and Wembley which we anticipate will deliver profits in 2018, 2019 & 2020. As these projects are completed we will seek replacement schemes.

Completed Developments

St Margarets Waterside, Richmond, London:

The Company continues to market the final two residential properties on this project. In accordance with our revenue recognition policy we have recognised profits of £ 46,316 (2016: £233,232) and Project Management fees of £13,500 (2016: £54,000) during 2017.

Continuing Development

Sutton High Street, Sutton:

The Company retains a 40% interest in a development site at Sutton High Street. Our joint venture partner submitted an application for a comprehensive redevelopment of the site with a mixed use (ie residential and commercial) with ground floor commercial element of the proposed project pre-let (subject to planning). Planning permission was refused in April 2018. The joint venture partners intend to appeal that decision and remain confident that consent will be obtained late in 2018.

Gwynne Road London SW11:

St Mark has a joint venture interest of 40% in the redevelopment of this site with its development partners.   The development is well underway to provide a mixed use development of commercial/retail at ground and mezzanine levels and 33 residential flats above.

Sale contracts have been exchanged on affordable housing element of the scheme. In accordance with our revenue recognition policy we have recognised profits of £123,520 (2016: £nil) and Project Management fees of £43,200 (2016: 10,800) during 2017.   Marketing of the development is planned to commence in the third quarter of 2018.

London Road, Hounslow, TW3:

St Mark holds a joint venture interest of 40% in the development of 34 flats in Hounslow with its development partners. Marketing of the scheme is now underway with construction due to be completed in July 2018.   Seven residential units have exchanged contracts at 31 December 2017. In accordance with our revenue recognition policy we have recognised profits of £119,895 (2016: £nil) Project Management fees of £43,200 were also charged during 2017 (2016: £7,200).

Heron House, Wembley

St Mark has taken a joint venture interest of up to 40% in the development of 40 flats and commercial space in Wembley.    Project Management fees of £24,000 were charged during 2017 (2016: £nil).

Future Developments

As capital and profits are released from the current project portfolio the board will seek out further opportunities with similar risk profiles. The group’s schemes have largely been in the outer London Boroughs and it is intended that the group will continue to focus on this geographic area.

Principal risks and uncertainties

The Company is exposed to the usual risks of companies constructing and developing residential property, including construction budget overruns, delays in programme, insolvency of clients, general economic conditions, project availability, uninsured calamities and other factors. 

Investments are made in sterling and therefore the Company is not subject to foreign exchange risks. The Company’s credit risk is primarily attributable to its trade debtors.  Credit risk is managed by monitoring payments against contractual agreements.  The Company also reviews the financial standings of its debtors prior to entering into significant contracts.

Key Performance Indicators

The Company’s long term performance target has been to generate a minimum average annual return on shareholders funds of 5%. During 2017 the annual pre-tax return on shareholders’ funds was 6.6% (2016:  16.5%). Whilst the Company continued to exceed its minimum target returns for shareholders, the Company’s decision to delay the marketing of both the Hounslow and Battersea projects until the projects are further advanced and more marketable in 2018, resulted in a lower return on shareholders’ funds for 2017 as compared to 2016.

The Company also seeks protection from market downturns by committing no more than 50% of its capital to any one project and by requiring projects in which it is a stakeholder to show a minimum return on cost of 15%.  During 2017 the maximum exposure of capital to any one project was less than 40% of the Company capital. 

Treasury policy

Operations have been financed by the issue of shares in the past and retained profits, the cash from which has been invested in short term cash deposits. In addition, various financial instruments such as trade debtors and trade creditors arise directly from the group's operations. The loan notes have been funded by the cash income from previous development projects. Further information on financial instruments is contained in note 22 of the financial statements.

On behalf of the Board

Barry Tansey

Chief Executive

Date 31 May 2018

The Directors of St Mark Homes PLC accept responsibility for this announcement.

For further information, please contact:


St Mark Homes Plc

Sean Ryan, Finance Director                      Tel: +44 (0) 20 7903 6777

                                                  seanryan@stmarkhomes.com

Alfred Henry Corporate Finance Ltd, NEX Exchange
Corporate Adviser

Jon Isaacs / Nick Michaels                       Tel: +44 (0) 20 7251 3762

                                                       www.alfredhenry.com



Consolidated statement of comprehensive income
for the year ended 31 December 2017


                                              2017      2016

                                              £         £

Group turnover                                120,400   1,336,839

Cost of sales                                 (22,738)  (1,255,224)

                                              ________  ________

Gross profit                                  97,662    81,615

Administrative expenses                       (323,058) (410,751)

Negative goodwill release                     99,256    149,876

                                              ________  ________

Operating (loss)                              (126,140) (179,260)

Share of operating profit of joint venture    289,731   610,672

Interest receivable and similar income        249,434   221,147

Interest payable and similar charges          (20,287)  (175)

                                              ________  ________

Profit on ordinary activities before taxation 383,738   652,384

Taxation on ordinary activities               (60,564)  (100,503)

                                              ________  ________

Profit on ordinary activities after taxation  323,174   551,881

Other comprehensive income                    -         -

                                              ________  ________

Total comprehensive income                    323,174   551,881

                                              ________  ________

Earnings per share – basic and diluted

Ordinary shares                               7.32p     16.6p



Consolidated Balance sheet
at 31 December 2017


                                      2017      2017        2016      2016

                                      £         £           £         £

Non Current assets

Tangible assets                                 1,052                 1,403

Intangible assets                               (37,993)              (137,249)

Investments in joint ventures                   728,779               439,048

                                                ________              ________

                                                691,838               303,202

Current assets

Debtors                               7,195,865             5,520,143

Cash at bank and in hand              513,667               346,327

                                      ________              ________

                                      7,709,532             5,866,470

Creditors: amounts falling
due within one year                   (179,043)             (370,281)

                                      ________              ________

Net current assets                              7,530,489             5,496,189

                                                ________              ________

Total assets less current liabilities           8,222,327             5,799,391

Creditors amounts falling due more
than one year                                   (2,342,477)           -

                                                ________              ________

Net Assets                                      5,879,850             5,799,391

                                                ________              ________

Capital and reserves

Called up share capital                         2,206,501             2,206,501

Capital redemption reserve                      1,009,560             1,009,560

Other reserve                                   211,822               211,822

Merger reserve                                  327,060               327,060

Share premium account                           375,246               375,246

Profit and loss account                         1,749,661             1,669,202

                                                ________              ________

Shareholders’ funds                             5,879,850             5,799,391

                                                ________              ________



Statement of changes in equity
For the year ended 31 December 2017


                  Share    Capital   Other  Merger   Share Profit and     Total
                Capital Redemption Reserve Reserve Premium       loss
                           Reserve                           reserves

                      £          £       £       £       £          £         £

Period ended  1,478,748 1,009,560  211,822 -       -       1,246,713  3,946,843
31 December
2015

Profit for    -         -          -       -       -       551,881    551,881
the year

Shares issued
during the    727,753   -          -       327,060 375,246 18,484     1,448,543
year

              ________  ________   _______ _______ _______ ________   ________


Total
comprehensive 2,206,501 1,009,560  211,822 327,060 375,246 1,817,078  5,947,267
income for
the year

Dividend      -         -          -       -       -       (147,876)  (147,876)

              ________  ________   _______ _______ _______ ________   ________

Period ended
31 December   2,206,501 1,009,560  211,822 327,060 375,246 1,669,202  5,799,391
2016

Profit for    -         -          -       -       -       323,174    323,174
the year

              ________  ________   _______ _______ _______ ________   ________


Total
comprehensive 2,206,501 1,009,560  211,822 327,060 375,246 1,992,376  6,122,565
income for
the year


Dividend      -         -          -       -       -       (242,715)  (242,715)

              ________  ________   _______ _______ _______ ________   _________

Balance at 31 2,205,501 1,009,560  211,822 327,060 375,246 1,749,661  5,879,850
December 2017

              ________  ________   _______ ______  _______ ________   ________



Consolidated statement of cashflows
for the year ended 31 December 2017


                                    2017      2017        2016      2016

                                    £         £           £         £

Cash flows from

Operating activities

Cash expended from operations                 (2,035,718)           (425,563)

Interest paid                                 (20,287)              (175)

Corporation tax                               (116,851)             (137,187)

                                              ________              ________

Net cash outflow from
Operating activities                          (2,172,856)           (562,925)

Investing activities

Interest received                   240,434               221,147

                                    ________              ________

Net cash generated from investing
activities                                    240,434               221,147

Financing activities

Shares issued                       -                     689,726

Increase in loans                   2,342,477             -

Dividends paid                      (242,715)             (147,876)

                                    ________              ________

Net cash generated from
Financing activities                          2,099,762             541,850

                                              ________              ________

Net increase in cash and cash                 167,340               200,072
equivalents

Cash and cash equivalents at
beginning of year                             346,327               146,255

                                              ________              ________

Cash and cash equivalents at end of
year                                          513,667               346,327

                                              ________              ________

Relating to:

Cash at Bank and in hand                      513,667               346,327

                                              ________              ________



Notes to Preliminary Results for the Period Ended 31 December 2017

1.   The financial information set out above does not constitute statutory accounts for the purpose of Section 434 of the Companies Act 2006.   The financial information has been extracted from the statutory accounts of St Mark Homes plc and is presented using the same accounting policies, which have not yet been filed with the Registrar of companies, but on which the auditors gave an unqualified report on  31 May 2018.

      The preliminary announcement of the results for the year ended 31 December 2017 was approved by the board of directors on 31 May 2018.

2.   Earnings per share

      Earnings per ordinary share has been calculated using the weighted average number of shares in issue during the financial year. The weighted average number of Ordinary shares in issue was 4,413,002 (2016: 3,324,677) and the earnings being profit after tax attributable to ordinary shares was £323,174 (2016: £551,881).


                                                             2017      2016

                                                             £         £

Numerator

Earnings used as the calculation of basic and diluted EPS    323,174   551,881

                                                             ________  ________

Denominator

Weighted average number of ordinary shares used in basic and 4,413,002 3,324,677
diluted EPS

                                                             ________  ________



        There are no share options in issue than can dilute the earnings per share.