(''SMH'' or “the Company'')
The directors present their strategic report for the year ended
Review of the business
The Group continues to develop residential led projects located in
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
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.
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
NEX Exchange Listing
The market mid-price on
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.
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.
At present we have live joint venture projects on sites in
St Margarets Waterside, Richmond,
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.
The Group retains a 40% interest in a development site at
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.
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
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).
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
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.
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
The Directors of
For further information, please contact:
St Mark Homes Plc Sean Ryan, Finance Director Tel: +44 (0) 20 8903 2442 firstname.lastname@example.org Alfred Henry Corporate Finance Ltd, NEX Exchange Corporate Adviser Jon Isaacs/ Nick MichaelsTel: +44 (0) 20 3772 0021 www.alfredhenry.com
Consolidated statement of comprehensive income
for the year ended
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
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
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
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
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
The preliminary announcement of the results for the year ended
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.