(''SMH'' or “the Company'')
Final results
Strategic report
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. With customers being slower to commit to property purchases and property prices and volumes under pressure 2019 has been a testing year. Notwithstanding these market challenges the directors are pleased to report a profit before tax for the current year amounted of £113,977 (2018: £117,442). Dividend distributions to shareholders were maintained at 5.5p per share.
Our strategic priorities
The Board remain keen to grow the Group into a significant regional house builder. We have an established and profitable method of operation and 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 2019 with a capital base just over £5.73m (2018: £5.87m). 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 2019 we achieved a pre-tax profit of 2% (2018: 2%) on opening shareholders’ funds during testing market conditions .
The Group will be repaying the 30 month bond (which carries a 6% coupon) in 2020. .
AQSE Growth Market 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.
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 2019 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
Completed Developments
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 had a joint venture interest of up to 40% in the development of 40 flats and commercial space in Wembley. Project management fees of £216,000 were recognised during 2019 (2018: £208,000). The site was sold to a Housing association in
Continuing Developments
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 initial phase of the project was completed in 2019 providing a mixed use development of commercial/retail at ground and mezzanine levels and 33 residential flats above. The next planned phase of development is to obtain D1 planning consent on the ground floor and as well as consent for an additional penthouse on the top of the building.
At
The Group has a 50% interest in the redevelopment of this site with full planning permission in place to provide 43 residential units (7 Houses and 36 Apartments) and ground floor retail fronting
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 2019 the annual pre-tax return on shareholders’ funds was 2% (2018: 2%). The sales market remained challenging in 2019 and extended sales periods have impacted profit recognition in 2019 and our ability to reutilise capital. The early part of 2020 remains challenging for different reasons and in the current environment the board believe a return of 2% on capital is an acceptable return.
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 2019 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 2018 and 2019 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
Chief Executive
Date:
The Directors of
For further information, please contact:
St Mark Homes Plc Sean Ryan , Finance Director Tel: +44 (0) 20 8903 2442 seanryan@stmarkhomes.comAlfred Henry Corporate Finance Ltd , AQSE Growth Market Corporate AdviserJon Isaacs /Nick Michaels Tel: +44 (0) 20 3772 0021 www.alfredhenry.com
Consolidated statement of comprehensive income
for the year ended
2019 2018
£ £
Turnover 324,000 294,400
Cost of sales (28,945) (27,079)
________ ________
Gross profit 295,055 267,321
Administrative expenses (447,756) (412,937)
Negative goodwill release - 37,993
________ ________
Operating loss (152,701) (107,623)
Share of operating profit of joint ventures 188,708 162,318
Interest receivable and similar income 286,626 266,471
Interest payable and similar charges (208,656) (203,724)
________ ________
Profit on ordinary activities before taxation 113,977 117,442
Taxation on ordinary activities (24,454) (15,373)
________ ________
Profit on ordinary activities after taxation 89,523 102,069
Other comprehensive income -
________ ________
Total comprehensive income 89,523 102,069
________ ________
Earnings per share – basic and diluted
Ordinary shares 2.03p 2.31p
Consolidated Balance sheet
at
2019 2019 2018 2018
£ £ £ £
Non Current assets
Tangible fixed assets 592 789
Investments in joint ventures 344,123 374,974
________ ________
344,715 375,763
Current assets
Debtors 3,991,840 7,881,758
Cash at bank and in hand 4,799,690 1,023,754
________ ________
8,791,530 8,905,512
Creditors: amounts falling
due within one year (3,550,233) (76,914)
________ ________
Net current assets 5,241,297 8,828,598
________ ________
Total assets less current 5,586,012 9,204,361
liabilities
Creditors: amounts falling
due in more than one year - (3,465,157)
________ ________
Net assets 5,586,012 5,793,204
________ ________
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 1,455,823 1,609,015
________ ________
Shareholders’ funds 5,586,012 5,793,204
________ ________
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
£ £ £ £ £ £ £
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
Profit for - - - - - 89,523 89,523
the year
________ ________ _______ _______ ________ ________ ________
Total - - - - - 89,523 89,523
comprehensive
income for
the year
Dividend - - - - - (242,715) (242,715)
________ ________ _______ _______ ________ ________ _________
Balance at 2,206,501 1,009,560 211,822 327,060 375,246 1,455,823 5,586,012
31 December
2019
________ ________ _______ ______ ________ ________ ________
Consolidated statement of cashflows
for the year ended
2019 2019 2018 2018
£ £ £ £
Cash flows from
operating activities
Cash expended from operations 3,965,135 (378,124)
Interest paid (208,656) (203,724)
Corporation tax (24,454) (54,501)
________ ________
Net cash outflow from
operating activities 3,732,025 (636,349)
Investing activities
Interest received 286,626 266,471
________ ________
Net cash generated from investing
activities 286,626 266,471
Financing activities
Increase in loans - 1,122,680
Dividend paid (242,715) (242,715)
________ ________
Net cash generated from
financing activities (242,715) 879,965
________ ________
Net increase in cash and cash 3,775,936 510,087
equivalents
Cash and cash equivalents at
beginning of year 1,023,754 513,667
________ ________
Cash and cash equivalents at
end of year 4,799,690 1,023,754
________ ________
Relating to:
Cash at bank and in hand 4,799,690 1,023,754
________ ________
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
1. Accounting policies
Company information
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest pound.
Going concern
The financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the Group and Company will continue in operational existence for the foreseeable future.
The directors have considered the impact of the COVID-19 pandemic, and the measures taken to contain it, on the Group and because of the nature of the Group’s activities they do not consider that there will be any significant effect on the ability of the Group to continue in business and meet its liabilities as they fall due. Thus they continue to adopt the going concern basis of accounting in preparing these financial statements.
The financial statements have been prepared on the historical cost convention. The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the results of
Jointly controlled operations and interests in joint ventures are accounted for using the equity method of accounting. A jointly controlled operation is an entity that is a joint venture that involves the establishment of a corporation, partnership or other entity in which each venture has an interest. A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to benefit from its activities.
Turnover
Turnover represents the amounts recoverable on contracts with developers.
Turnover arising from developments is recognised on exchanged sale contracts:
-- when costs and revenues associated with the transaction can be reliably
measured; and
-- where the probability of non-performance is considered negligible such
that the risks and rewards of ownership have passed to the buyer.
The return on loans provided for the development of residential property is shown under interest receivable and similar income.
Investments in subsidiaries
Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in the profit or loss account. A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
Intangible fixed assets – goodwill
Negative goodwill represents the discount on the cost of acquisition over the fair value of assets acquired. It is initially recognised as a liability and is subsequently measured at cost less accumulated amortisation. Negative goodwill is being amortised over the useful life of the assets acquired on a systematic basis which is expected to be no more than two years. Negative goodwill arose on the acquisition of
Property development loans
Interest receivable on property loans is recognised in the period in which it accrues. Profit share returns are only recognised when there is sufficient evidence and the project is sufficiently progressed to assess the likely profitability with a reasonable level of accuracy.
Depreciation
Depreciation is provided to write off the cost, less estimated residual values, of all tangible fixed assets on a reducing balance basis over their expected useful lives. It is calculated at the following rates:
Office equipment - 25% per annum
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Leased assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Liquid resources
For the purposes of the cash flow statement, liquid resources are defined as short term bank deposits.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
Financial assets
The Company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments. Financial assets are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets are classified into specified categories. The classification depends on the nature and purpose of the financial assets and is determined at the time of recognition. Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Financial liabilities and equity
Financial liabilities and equity are classified according to the substance of the financial instrument’s contractual obligations, rather than the financial instrument’s legal form. Basic financial liabilities are initially measured at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Other financial liabilities are initially recognised at fair value and are subsequently re-measured at their fair value with changes recognised through the profit and loss account.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
Dividends
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting. Dividends on shares wholly recognised as liabilities are recognised as expenses and classified within interest payable.
3. 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 (2018: 4,413,002) and the earnings being profit after tax attributable to ordinary shares was £89,253 (2018: £102,069).
2019 2018
£ £
Numerator
Earnings used as the calculation of basic and diluted EPS 89,523 102,069
________ ________
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.
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