TIDMSMAP
22 May 2020
St Mark Homes Plc
("SMH" or "the Company")
Final results
St Mark Homes (AQSE: SMAP), the housebuilder operating mainly in London and the
South of England, today announces its Final Results for the year ended 31
December 2019.
Strategic report
The directors present their strategic report for the year ended 31 December
2019.
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 GBP1,000
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 GBP600,000 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. 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 GBP113,977 (2018:
GBP117,442). 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 GBP5.73m (2018: GBP5.87m).
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 20 May 2020 of GBP0.875 represents a discount of 33% to
the net asset value of GBP1.27 per share reported at 31 December 2019. The 2019
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
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 Sutton, Battersea
and Hanwell which we anticipate will deliver profits in 2020 through to 2022.
As these projects are completed we will seek replacement schemes.
Completed Developments
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 33 residential units had either
legally exchanged or legally completed at 31 December 2019. In accordance with
our revenue recognition policy we have recognised a profit of GBP260,179 (2018: GBP
134,703) and project management fees of GBPnil (2018: GBP43,200) during 2019. The
final remaining unit on the project sold in early 2020.
Heron House, Wembley:
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 GBP216,000
were recognised during 2019 (2018: GBP208,000). The site was sold to a Housing
association in December 2019 and the company capital committed to the project
has been repaid.
Continuing Developments
Sutton High Street, Sutton:
The Group retains a 40% interest in a development site at Sutton High Street.
Planning has been challenging on the project with an appeal failing in July
2019. This did however provide clarity on development that would be acceptable
and following extensive consultation with the local authority our joint venture
partner has submitted a new application for a comprehensive redevelopment of
the site for a mixed use scheme (i.e. residential and commercial) in April 2020
- a decision is expected later in the summer of 2020.
Gwynne Road, London SW11:
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 31 December 2019 sale contracts have been legally exchanged on all
residential units. In accordance with our revenue recognition policy we have
recognised a loss of GBP33,198 (2018: GBP7,643 loss) and project management fees of
GBP18,000 (2018: GBP43,200) during 2019.
Uxbridge Road, Hanwell, London W7:
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 Uxbridge Road, Hanwell, West
London. In accordance with our revenue recognition policy we have recognised
project management fees of GBP90,000 (2018: GBPnil) during 2019.
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.
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 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
Barry Tansey
Chief Executive
Date: 22 May 2020
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, AQSE
Growth Market 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 2019
2019 2018
GBP GBP
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 31 December 2019
2019 2019 2018 2018
GBP GBP GBP GBP
Non Current assets
Tangible fixed assets 592 789
Investments in joint 344,123 374,974
ventures
________ ________
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 31 December 2019
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 1,749,661 5,879,850
31 December
2017
Profit for the - - - - - 102,069 102,069
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 the - - - - - 89,523 89,523
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 31 December 2019
2019 2019 2018 2018
GBP GBP GBP GBP
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 31 December 2019
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 22 May 2020.
The preliminary announcement of the results for the year ended 31
December 2019 was approved by the board of directors on 22 May 2020.
1. Accounting policies
Company information
St Mark Homes Plc is a public limited company domiciled and incorporated in
England and Wales. The registered office is No 1 Railshead Road, St Margarets,
Old Isleworth, Middlesex TW7 7EP.
Accounting convention
These financial statements have been prepared in accordance with FRS 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland"
("FRS 102") and the requirements of the Companies Act 2006.
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 St Mark Homes
Plc and its subsidiary undertaking, St Mark Contracts Limited as at 31 December
2019 using the acquisition method of accounting. Under this method the results
of subsidiary undertakings are included from the date of acquisition.
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 St Mark Contracts Limited by the Company on 10 August
2016. The fair value of consideration paid was calculated based on the bid
price of the shares issued by the Company as consideration for the entire net
assets of St Mark Contracts Limited. The discount in the value of the assets
resulted in negative goodwill of GBP287,125 arising on consolidation. This
negative goodwill was fully amortised by 31 December 2018.
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 GBP89,253
(2018: GBP102,069).
2019 2018
GBP GBP
Numerator
Earnings used as the calculation of basic and diluted 89,523 102,069
EPS
________ ________
Number Number
Denominator
Weighted average number of ordinary shares used in basic 4,413,002 4,413,002
and diluted EPS
________ ________
There are no share options or other potentially dilutive equity
instruments in issue than can dilute the earnings per share.
END
(END) Dow Jones Newswires
May 22, 2020 04:27 ET (08:27 GMT)
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