TIDMSMAP
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 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. 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 GBP117,442 (2017:GBP383,738). 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 GBP5.87m (2017: GBP5.79m).
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 GBP3.465m gross. The Directors
are delighted with the success of the bond raising.
NEX Exchange Listing
The market mid-price on 30 May 2019 of GBP0.875 represents a discount of 33% to
the net asset value of GBP1.30 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 GBP35,258 (2017: GBP46,316) and project management fees of GBPnil (2017: GBP
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 GBP7,643 (2017: GBP123,520 profit) and project
management fees of GBP43,200 (2017: GBP43,200) 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 GBP
134,703 (2017: GBP119,895) and project management fees of GBP43,200 (2017: GBP43,200)
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 GBP208,000
were recognised during 2018 (2017: GBP16,000).
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 the - - - - - 323,174 323,174
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 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
________ ________ _______ ______ ________ ________ ________
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 GBP102,069
(2017: GBP323,174).
2018 2017
GBP GBP
Numerator
Earnings used as the calculation of basic and diluted 102,069 323,174
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
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