St Mark Homes Plc - Final Results PR Newswire

15 May 2017

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 2016.

Strategic report

The directors present their strategic report for the year ended 31 December 2016.

The Group continues to develop residential led projects based in London and the South regions of the United Kingdom. We primarily target the sub £1000 per square foot residential sales market and in the immediate future intend to focus on developing schemes which primarily 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 were £652,384 and distributions to shareholders increased by 11% to 5p per share.

Our strategic priorities

As a board we are keen to build on this performance and grow the Group into a significant regional house builder. We now have an established and profitable method of operation which could be scaled up should further capital become available to the Group.  

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 2016 with a capital base of just over £3.9m (2015 -£3.6m). 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 2016 we achieved a pre-tax profit of 16.5 % (2015-15.1%) on opening shareholders funds.

As previously advised we believe that capital availability is a constraining factor for the business and are pleased to report progress in expanding that base during the year. In July 2016 we acquired St Mark Contracts Ltd through an all share offer and in November 2016 raised just over £0.7m through an open offer to existing shareholders. 

The aggregate effect of the acquisition, share offer and retention of profits was to grow the company Balance Sheet to over £5.8m, that is by over 50%, in the year ended 31 December 2016.

NEX Exchange Listing

ISDX was rebranded as NEX recently and there has been improved liquidity in our shares during the period. The market midprice on 9 May 2017 of £0.90 represents a discount of 31% to the net asset value of £1.31 per share reported in the 31 December 2016 Balance Sheet. The 2016 dividend yield based on this market mid price is 5.6%.

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 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 remains 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 2016 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 in 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 and Battersea which we anticipate will deliver profits in 2017 and 2018. As these projects are completed we will seek replacement schemes.

Completed Development

Forsyth House, Richmond, London:

The Company entered a joint venture for the development of 26 residential apartments in Mortlake, Richmond in December 2014.  Construction was completed in March 2016 and all units sold. In accordance with our revenue recognition policy we have recognised profits of £162,468 (2015: £81,897) and Project Management fees of £10,125 (2015: £40,500) during 2016.

St Margarets Waterside, Richmond, London:

Construction was completed on the 21 residential units plus commercial shell and core in October 2016. Sales had completed or exchanged on 60% of the units (by value) as at 31 December 2016 and in accordance with our revenue recognition policy we have recognised profits of £233,232 (2015: £174,020) and Project Management fees of £46,125 (2015: £40,500) during 2016.

Continuing Development

Sutton High Street, Sutton:

The Company also invested in a regeneration property development venture at Sutton High Street. The development (consisting of 40 residential units with ground floor retail space completed in Autumn 2016. Sales have completed on all residential units and in accordance with our revenue recognition policy we have recognised profits of £236,624 (2015 - £204,185) during 2016. The company has a remaining interest in the commercial space and the neighbouring Prince Regent Pub site. An application to replace the pub with 38 residential units and

New Projects  

The Board entered into joint venture agreements during the year on the following projects:

Gwynne Road London SW11:

St Mark has taken a joint venture interest of 40% in the redevelopment of a site to provide mixed use involving commercial/retail at ground and mezzanine levels and 33 residential flats.

The site value and construction developments costs have been independently evaluated. The independent valuer has estimated the total project GDV at £15.615m and developers return on cost at 20%. During the year sale contracts have been exchanged on social housing element of the scheme. Given the relatively early stage of development progress we have not recognised our profit share on this exchanged element. Project Management fees of £10,800 were charged during 2016.

London Road, Hounslow, TW3:

St Mark has taken a joint venture interest of up to 40% in this development of 34 flats in Hounslow. The site has also been independently valued and construction developments costs evaluated. The independent valuer has estimated the GDV at £12.75m and developers return on cost at 20%. Project Management fees of £7,200 were charged during 2016. Marketing on the scheme will commence later in 2017.

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, 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 2016 the annual pre-tax return on opening shareholders’ funds was 16.5% (2015:  15.1%).  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 2016 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:  12 May 2017

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 2016


                                                     2016        2015

                                                      GBP         GBP

Group turnover                                  1,336,839   3,097,000

Cost of sales                                 (1,255,224) (2,803,992)

                                                 ________    ________

Gross profit                                       81,615     293,008

Administrative expenses                         (410,751)   (416,177)

Negative goodwill release                         149,876           -

                                                 ________    ________

Operating (loss)                                (179,260)   (123,169)

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

Interest receivable and similar income            221,147     221,147

Interest payable and similar charges                (175)    (40,331)

                                                 ________    ________

Profit on ordinary activities before taxation     652,384     548,887

Taxation on ordinary activities                 (100,503)   (110,428)

                                                 ________    ________

Profit on ordinary activities after taxation      551,881     438,459

Other comprehensive income                              -           -

                                                 ________    ________

Total comprehensive income                        551,881     438,459

                                                 ________    ________

Earnings per share – basic and diluted

Ordinary shares                                    16.60p      14.83p



Consolidated Balance sheet
at 31 December 2016


                                           2016      2016        2015      2015

                                            GBP       GBP         GBP       GBP

Non Current assets

Tangible assets                                     1,403                 1,872

Intangible assets                               (137,249)                     -

Investments in joint ventures                     439,048               379,102

                                                 ________             _________

                                                  303,202               380,974

Current assets

Stock and Work In Progress                    -             1,095,084

Debtors                               5,520,143             3,761,851

Cash at bank and in hand                346,327               146,255

                                      _________              ________

                                      5,866,470             5,003,190

Creditors: amounts falling
due within one year                   (370,281)           (1,437,321)

                                      _________              ________

Net current assets                              5,496,189             3,565,869

                                                 ________             _________

Total assets less current liabilities           5,799,391             3,946,843

                                                 ________             _________

Net Assets                                      5,799,391             3,946,843

                                                 ________              ________

Capital and reserves

Called up share capital                         2,206,501             1,478,748

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

Other reserve                                     211,822               211,822

Merger reserve                                    327,060                     -

Share premium account                             375,246                     -

Profit and loss account                         1,669,200             1,246,713

                                                 ________             _________

Shareholders’ funds                             5,799,391             3,946,843

                                                 ________              ________



Statement of changes in equity
For the year ended 31 December 2016


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


                    GBP        GBP      GBP     GBP      GBP       GBP       GBP

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   727,753          -        - 327,060  375,246    18,482 1,449,178
during the
year

               ________   ________  _______ _______ ________  ________  ________


Total         2,206,501  1,009,560  211,822 327,060  375,246 1,817,076 5,947,265
comprehensive
income for
the year


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

               ________   ________ ________ _______ ________  ________ _________

Balance at 31 2,206,501  1,009,560  211,822 327,060  375,246 1,669,200 5,799,391
December 2016

               ________   ________  _______  ______ ________  ________  ________



   


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


                          GBP        GBP      GBP             GBP       GBP

Period ended 31     1,478,748  1,009,560  211,822         941,341 3,641,471
December 2014

Profit for the              -          -        -         438,459   438,459
year

                     ________   ________ ________        ________  ________


Total               1,478,748  1,009,560  211,822       1,379,800 4,079,930
comprehensive
income for the
year


Dividend                    -          -        -       (133,087) (133,087)

                    _________   ________ ________       _________ _________

Balance at 31       1,478,748  1,009,560  211,822       1,246,713 3,946,843
December 2015

                     ________   ________ ________        ________  ________



Consolidated statement of cashflows
for the year ended 31 December 2016


                                          2016      2016        2015        2015

                                           GBP       GBP         GBP         GBP

Cash flows from
operating activities

Cash generated/(expended) from                 (425,563)               3,405,016
operations

Interest paid                                      (175)                (40,331)

Corporation Tax                                (137,187)                (41,989)

                                                ________                ________

Net cash inflow/(outflow) from
operating activities                           (562,925)               3,322,696

Investing activities

Purchase of tangible fixed assets            -                 (541)

Interest received                      221,147               226,921

                                      ________              ________

Net cash generated from/(used in)
investing activities                             221,147                 226,380

Financing activities

Shares issued                          689,726                     -

(Decrease)/Increase in bank loans            -           (1,212,830)

(Decrease)/ Increase in subordinated         -           (2,171,177)
loans

Dividend paid                        (147,875)             (133,087)

                                      ________              ________

Net cash generated from/(used)
in financing activities                          541,851             (3,517,094)

                                                ________                ________

                                                ________                ________

Net increase in cash and cash                    200,072                  31,982
equivalents

Cash and cash equivalents at
beginning of year                                146,255                 114,273

                                                ________                ________

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

                                                ________                ________

Relating to:

Cash at Bank and in hand
                                                 346,327                 146,255

                                                ________                ________



Notes to Preliminary Results for the Period Ended 31 December 2016

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 12th May 2017.

The preliminary announcement of the results for the year ended 31 December 2016 was approved by the board of directors on 12th May 2017.

2.   Earnings per share


                                                                  2016      2015

                                                                   GBP       GBP

Numerator

Earnings used as the calculation of basic and diluted EPS      551,881   438,459

                                                              ________  ________

Denominator

Weighted average number of ordinary shares used in basic and 3,324,677 2,957,495
diluted EPS

                                                              ________  ________



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