St Mark Homes Plc - Annual Financial Report PR Newswire

31 May 2019

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 2018.

Strategic report

The directors present their strategic report for the year ended 31 December 2018.

Review of the business

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 Group to generate profits and increase distributions to shareholders in recent years. 2018 has however been difficult with customers being slower to commit to sales and an element of profit on the completed Hounslow scheme therefore deferred into 2019. The Group profit before tax for the current year amounted to £117,442 (2017:£383,738). In spite of a challenging environment for residential developers in our geographic niche dividend distributions to shareholders were maintained at 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 are 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 2018 with a capital base just over £5.87m (2017: £5.79m). 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 2018 we achieved a pre-tax profit of 2% (2017: 6.6 %) on opening shareholders funds.

The Group successfully launched a corporate bond with the assistance of Crowdstacker Limited in September 2017.   The 30 month bond (which carries a 6% coupon) closed in February 2019 having raised £3.465m gross.   The Directors are delighted with the success of the bond raising.

NEX Exchange Listing

The market mid-price on 30 May 2019 of £0.875 represents a discount of 33% to the net asset value of £1.30 per share reported at 31 December 2018.  The 2018 dividend yield based on this market mid price is 6.28%.

We will continue to monitor the effectiveness of the market and as the Group 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 2018 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 Sutton, Hounslow, Battersea and Wembley which we anticipate will deliver profits in 2019 and 2020. As these projects are completed we will seek replacement schemes.

Completed Developments

St Margarets Waterside, Richmond, London:

The Group has completed sale of the final two residential properties on this project. In accordance with our revenue recognition policy we have recognised profits of £35,258 (2017: £46,316) and project management fees of £nil (2017: £13,500) during 2018.

Continuing Developments

Sutton High Street, Sutton:

The Group 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 for a mixed use scheme (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 have appealed that decision to the Planning Inspectorate and a two day hearing is scheduled to commence on 18 June 2019 with a formal decision expected during summer 2019.

Gwynne Road, London SW11:

The Group has a 40% interest in the redevelopment of this site with its joint venture partner.   The project was completed after the year end providing a mixed use development of commercial/retail at ground and mezzanine levels and 33 residential flats above.

At 31st December sale contracts have been legally exchanged on the affordable housing element of the scheme.   In accordance with our revenue recognition policy we have recognised a loss of £7,643 (2017: £123,520 profit) and project management fees of £43,200 (2017: £43,200) during 2018.   Since the year end the entire private residential housing sector of the project has been legally completed and sold.

London Road, Hounslow TW3:

The Group holds a joint venture interest of 40% in the development of 34 flats in Hounslow with its development partners.   The construction works on site were completed at the end of July 2018. A total of 15 residential units had   either legally exchanged or legally completed at 31 December 2018.  In accordance with our revenue recognition policy we have recognised a profit of £134,703 (2017: £119,895) and project management fees of £43,200 (2017: £43,200) during 2018.   Sales progress has been strong since the year end with a further 10 units legally completed with the remaining 9 units all now sale agreed.

Heron House, Wembley

The Group has a joint venture interest of up to 40% in the development of 40 flats and commercial space in Wembley.  Project management fees of £208,000 were recognised during 2018 (2017: £16,000).

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

Key Performance Indicators

The Group’s long term performance target has been to generate a minimum average annual return on shareholders funds of 5%. During 2018 the annual pre-tax return on shareholders’ funds was 2% (2017:  6.6%). The sales market has been challenging in 2018 and extended sales periods have impacted profit recognition in 2018. More positively sales progress has been good since the year end with Hounslow and Gwynne Road both generating profit in the first half of 2019.

The Group 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 2018 the maximum exposure of capital to any one project was less than 40% of the Group 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. Loans have been funded by the cash income from previous development projects.  In 2017 and 2018 the 6% bond has also funded the loans to joint venture partners. Further information on financial instruments is contained in note 22 of the financial statements.

On behalf of the Board

Barry Tansey
Chief Executive
Date: 30 May 2019

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 8903 2442

                                                  seanryan@stmarkhomes.com

Alfred Henry Corporate Finance Ltd, NEX Exchange
Corporate Adviser

Jon Isaacs / Nick Michaels                       Tel: +44 (0) 20 3772 0021

                                                       www.alfredhenry.com





Consolidated statement of comprehensive income
for the year ended 31 December 2018


                                                     2018       2017

                                                      GBP        GBP

Turnover                                          294,400    120,400

Cost of sales                                    (27,079)   (22,738)

                                                 ________   ________

Gross profit                                      267,321     97,662

Administrative expenses                         (412,937)  (323,058)

Negative goodwill release                          37,993     99,256

                                                 ________   ________

Operating loss                                  (107,623)  (126,140)

Share of operating profit of joint ventures       162,318    289,731

Interest receivable and similar income            266,471    240,434

Interest payable and similar charges            (203,724)   (20,287)

                                                 ________   ________

Profit on ordinary activities before taxation     117,442    383,738

Taxation on ordinary activities                  (15,373)   (60,564)

                                                 ________   ________

Profit on ordinary activities after taxation      102,069    323,174

Other comprehensive income                              -          -

                                                 ________   ________

Total comprehensive income                        102,069    323,174

                                                 ________   ________

Earnings per share – basic and diluted

Ordinary shares                                     2.31p      7.32p





Consolidated Balance sheet
at 31 December 2018


                                     2018         2018       2017         2017

                                      GBP          GBP        GBP          GBP

Non Current assets

Tangible fixed assets                              789                   1,052

Intangible fixed assets                              -                (37,993)

Investments in joint ventures                  374,974                 728,779

                                              ________                ________

                                               375,763                 691,838

Current assets

Debtors                         7,881,758               7,195,865

Cash at bank and in hand        1,023,754                 513,667

                                 ________                ________

                                8,905,512               7,709,532

Creditors: amounts falling

due within one year              (76,914)               (179,043)

                                 ________                ________

Net current assets                           8,828,598               7,530,489

                                              ________                ________

Total assets less current                    9,204,361               8,222,327
liabilities

Creditors: amounts falling

due in more than one year                  (3,465,157)             (2,342,477)

                                              ________                ________

Net assets                                   5,793,204               5,879,850

                                              ________                ________

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                      1,609,015               1,749,661

                                              ________                ________

Shareholders’ funds                          5,793,204               5,879,850

                                              ________                ________




Statement of changes in equity
For the year ended 31 December 2018


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

                     GBP         GBP      GBP      GBP       GBP        GBP        GBP

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

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

                ________    ________  _______  _______  ________   ________     ______

Total                  -           -        -        -         -    323,174    323,174
comprehensive
income for
the year

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

                ________    ________  _______  _______  ________   ________   ________

Balance at     2,206,501   1,009,560  211,822  327,060   375,246  1,749,661  5,879,850
31 December
2017

Profit for             -           -        -        -         -    102,069    102,069
the year

                ________    ________  _______  _______  ________   ________   ________

Total                  -           -        -        -         -    102,069    102,069
comprehensive
income for
the year

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

                ________    ________  _______  _______  ________   ________  _________

Balance at     2,206,501   1,009,560  211,822  327,060   375,246  1,609,015  5,739,204
31 December
2018

                ________    ________  _______   ______  ________   ________   ________




Consolidated statement of cashflows
for the year ended 31 December 2018


                                      2018       2018       2017         2017

                                       GBP        GBP        GBP          GBP

Cash flows from

operating activities

Cash expended from operations               (378,124)             (2,035,718)

Interest paid                               (203,724)                (20,287)

Corporation tax                              (54,501)               (116,851)

                                             ________                ________

Net cash outflow from

operating activities                        (636,349)             (2,172,856)

Investing activities

Interest received                  266,471               240,434

                                  ________              ________

Net cash generated from
investing

activities                                    266,471                 240,434

Financing activities

Increase in loans                1,122,680             2,342,477

Dividend paid                    (242,715)             (242,715)

                                  ________              ________

Net cash generated from

financing activities                          879,965               2,099,762

                                             ________                ________

Net increase in cash and cash                 510,087                 167,340
equivalents

Cash and cash equivalents at

beginning of year                             513,667                 346,327

                                             ________                ________

Cash and cash equivalents at

end of year                                 1,023,754                 513,667

                                             ________                ________

Relating to:

Cash at bank and in hand                    1,023,754                 513,667

                                             ________                ________



Notes to Preliminary Results for the Period Ended 31 December 2018

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 2019.

      The preliminary announcement of the results for the year ended 31 December 2018 was approved by the board of directors on 31 May 2019.

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 (2017: 4,413,002) and the earnings being profit after tax attributable to ordinary shares was £102,069 (2017: £323,174).


                                                              2018     2017

                                                               GBP      GBP

Numerator

Earnings used as the calculation of basic and diluted EPS  102,069  323,174

                                                          ________ ________



   


                                                                Number    Number

Denominator

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

                                                              ________  ________



There are no share options or other potentially dilutive equity instruments in issue than can dilute the earnings per share.