TIDMSMJ
RNS Number : 6334G
Smart(J.)&Co(Contractors) PLC
26 November 2020
J SMART & CO (CONTRACTORS) PLC AND SUBSIDIARY COMPANIES
ACCOUNTS FOR THE YEARED 31st JULY 2020
PRELIMINARY STATEMENT
ACCOUNTS
Headline Group profit for the year before tax, including an
unrealised surplus in revalued property and a deficit in revalued
available for sale financial assets, was GBP4,083,000 compared with
GBP6,643,000.
Underlying profit before tax for the year of GBP1,283,000 was
less than last year's figure of GBP2,600,000. As before, our view
is that discounting the increase in the revaluation of the
commercial property portfolio and adjusting for the revaluation
movement on available for sale financial assets provides a truer
reflection of Group performance.
The Board is recommending a Final Dividend of 2.27p making a
total of 3.22p which compares with 3.19p for the previous year. The
Final Dividend will cost the Company no more than GBP963,000.
TRADING ACTIVITIES
Group construction activities including private residential
sales on continuing operations increased by 19%. Headline Group
profit before tax on continuing operations decreased by 43% and
underlying profit before tax on continuing operations decreased by
58%.
Trading activities in the second half of the financial year were
impacted by the coronavirus crisis. All construction sites, head
office and operational premises were closed from the end of March
2020 until the middle of June 2020, in line with Scottish
Government guidance. Whilst construction activities ceased, home
working ensured that all other facets of the business were able to
progress during this period. Our site operatives were put on
furlough and note must be made of the efficiency of HMRC in
processing furlough payments. All necessary measures were put in
place at our construction sites, head office, operational premises
and the relevant areas of our commercial property portfolio to
ensure coronavirus compliance in line with legislation and
guidance.
The build contract for the Affordable Housing at West Bowling
Green Street completed in October 2019. The completion of the
social housing build contract at Ferrymuir was delayed due to the
lockdown in March 2020 and will now not be completed until the end
of 2020. Margins in these types of build contract and those in the
build contracts of our subsidiary company, Thomas Menzies
(Builders) Limited, continue to be poor. Measures have been put in
place to respectively correct these poor margins.
The vast majority of the sales in the private housing at West
Bowling Green Street were completed prior to the lockdown in March
2020. Post lockdown, there were only six private housing units left
to be sold at West Bowling Green Street and these sales have now
completed, albeit delayed until after the end of the financial
year.
Further sites for private housing were acquired in the financial
year, notably two sites in Winchburgh, West Lothian. The first
small detached housing site called The Courtyard started in
September 2020. The second, named Canal Quarter, a much larger site
providing approximately sixty flats and terraced houses, will start
in April 2021.
Our commercial property portfolio has been remarkably resilient
during the coronavirus pandemic. The majority of the portfolio is
in multi-let industrial with the remainder in multi-let offices,
and this has fared well in the past year. Rental growth and
occupancy levels have continued to improve, as have property
valuation levels. Concerns were raised regarding payment of rent,
but rent collection levels at the last rent quarter payment date
prior to the financial year end, currently sit at 96%. Regrettably,
we have lost some tenants whose businesses have been affected by
the coronavirus crisis. However, we have been able to fill these
vacancies with new tenants.
The first unit at Gartcosh Business Park, developed through the
joint venture company, Gartcosh Estates LLP, has now been
successfully let. The second phase of development at this estate,
providing two medium sized industrial units, will commence in early
2021.
Construction at the third and final phases at West Edinburgh
Business Park, South Gyle and Inchwood Park, Bathgate is
progressing well, with respective completions due in the year to
31st July 2021. Interest in these final phases at both estates is
promising.
A site for future industrial development was acquired at
Whitehill Industrial Estate, Bathgate in the reporting year.
FUTURE PROSPECTS
Work in hand in contracting is again less than last year. Over
and above the usual delays in the development process, progress in
site acquisitions and negotiated tender work in the Housing
Association sector has been hampered by the first lockdown and the
coronavirus crisis. There was no new contracting work in the past
financial year and those build contracts programmed for the current
financial year may well be delayed until the next financial
year.
As mentioned above, all the sales at West Bowling Green Street
have now been completed. There will only be a small amount of
private housing sales in the year to 31st July 2021. There are a
number of substantial future private housing sites where we have
just commenced the planning process but, due to general delays
caused by the coronavirus crisis, it remains to be seen when
development will commence on these sites.
Commercial property valuation levels have improved again, as
mentioned above, and we expect letting and positive rental growth
to continue in our industrial properties. We have not yet seen any
significant negative impact on our office properties due to the
coronavirus crisis but that is no guarantee that there may be some
in the future.
At this stage, with uncertainty due to the coronavirus crisis,
it is difficult to make an informed forecast for the outcome of the
year to 31st July 2021. The lull in contracting work and reduced
private housing work this financial year makes it unlikely that the
headline profit and underlying profit will improve.
I would like to make special mention of French Duncan LLP, who
has served as auditor to your company for 45 years. This is the
last set of accounts that French Duncan will audit due to company
law and will unfortunately end a long-standing relationship. A new
auditor will be appointed shortly. I would like to offer my sincere
gratitude to all at French Duncan, past and present, for all their
hard work over many years.
Finally, I would like to pay tribute to all employees at J.
Smart & Co. and the subsidiary companies in what has been and
continues to be a turbulent time due to the coronavirus crisis. The
dedication, skill and hard work of all was no better demonstrated
in the considerable effort to shut down all operations in less than
a twenty-four hour period in March of this year prior to the first
lockdown.
DAVID W. SMART
Chairman
CONSOLIDATED INCOME STATEMENT
for the year ended 31st JULY 2020
2020 2019
Unaudited Audited
Note GBP000 GBP000
CONTINUING OPERATIONS
Group construction activities 19,223 16,182
Less: Own construction work capitalised (2,410) (147)
---------- ---------
REVENUE 16,813 16,035
Cost of sales (16,764) (14,416)
---------- ---------
GROSS PROFIT 49 1,619
Other operating income 7,198 7,560
Net operating expenses (6,078) (6,264)
---------- ---------
OPERATING PROFIT BEFORE NET SURPLUS ON VALUATION
OF INVESTMENT PROPERTIES 1,169 2,915
Net surplus on valuation of investment properties 3,179 4,052
OPERATING PROFIT 4,348 6,967
Share of (losses)/profits in Joint Ventures (13) 48
Income from available for sale financial assets 50 53
Profit on sale of available for sale financial
assets 16 26
Net deficit on valuation of available for
sale financial assets (379) (9)
Finance income 130 185
Finance costs (12) -
PROFIT BEFORE TAX 4,140 7,270
Taxation (508) (529)
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 3,632 6,741
DISCONTINUED OPERATIONS
Loss for the year from discontinued operations 2 (47) (505)
---------- ---------
PROFIT FOR YEAR ATTRIBUTABLE TO EQUITY SHAREHOLDERS 3,585 6,236
---------- ---------
EARNINGS/(LOSS) PER SHARE
From continuing operations - basic and diluted 8.46p 15.47p
---------- ---------
From discontinued operations - basic and diluted (0.11)p (1.16)p
---------- ---------
From continuing and discontinued operations
- basic and diluted 8.35p 14.31p
---------- ---------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st JULY 2020
2020 2019
Unaudited Audited
GBP000 GBP000
PROFIT FOR THE YEAR 3,585 6,236
OTHER COMPREHENSIVE LOSS
Items that will not be subsequently reclassified
to the Income Statement:
Actuarial loss recognised in defined benefit pension
scheme (3,961) (1,118)
Deferred taxation on actuarial loss 942 190
---------- --------
TOTAL ITEMS THAT WILL NOT BE SUBSEQUENTLY RECLASSIFIED
TO INCOME STATEMENT (3,019) (928)
---------- --------
TOTAL OTHER COMPREHENSIVE LOSS (3,019) (928)
---------- --------
TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF
TAX 566 5,308
---------- --------
ATTRIBUTABLE TO EQUITY SHAREHOLDERS 566 5,308
---------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 31st July 2020
Capital
Share Redemption Retained
Capital Reserve Earnings Total
GBP000 GBP000 GBP000 GBP000
At 1st August 2018 (audited) 880 128 95,585 96,593
Profit for the year - - 6,236 6,236
Other comprehensive loss - - (928) (928)
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR - - 5,308 5,308
--------- ------------ ---------- --------
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled (14) - (792) (806)
Transfer to capital redemption
reserve - 14 (14) -
Dividends - - (813) (813)
--------- ------------ ---------- --------
TOTAL TRANSACTIONS WITH OWNERS (14) 14 (1,619) (1,619)
--------- ------------ ---------- --------
At 31st July 2019 (audited) 866 142 99,274 100,282
--------- ------------ ---------- --------
Profit for the year - - 3,585 3,585
Other comprehensive loss - - (3,019) (3,019)
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR - - 566 566
--------- ------------ ---------- --------
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled (13) - (780) (793)
Transfer to capital redemption
reserve - 13 (13) -
Dividends - - (795) (795)
--------- ------------ ---------- --------
TOTAL TRANSACTIONS WITH OWNERS (13) 13 (1,588) (1,588)
At 31st July 2020 (unaudited) 853 155 98,252 99,260
--------- ------------ ---------- --------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31st JULY 2020
2020 2019
Unaudited Audited
GBP000 GBP000
NON-CURRENT ASSETS
Property, plant and equipment 1,268 1,304
Investment properties 78,632 73,874
Investments in Joint Ventures 901 914
Available for sale financial assets 886 1,309
Trade and other receivables 250 250
Retirement benefit surplus - 2,899
Deferred tax asset 313 101
---------- --------
82,250 80,651
---------- --------
CURRENT ASSETS
Inventories 6,181 8,643
Contract assets 423 549
Trade and other receivables 2,823 2,835
Corporation tax asset 139 -
Monies held on deposit 48 48
Cash and cash equivalents 23,118 25,699
---------- --------
32,732 37,774
---------- --------
TOTAL ASSETS 114,982 118,425
---------- --------
NON-CURRENT LIABILITIES
Deferred tax liabilities 1,265 1,735
Lease liability 205 -
Retirement benefit deficit 1,076 -
---------- --------
2,546 1,735
---------- --------
CURRENT LIABILITIES
Trade and other payables 3,072 3,394
Current tax liability - 154
Bank overdraft 10,104 12,860
13,176 16,408
TOTAL LIABILITIES 15,722 18,143
---------- --------
NET ASSETS 99,260 100,282
---------- --------
EQUITY
Called up share capital 853 866
Capital redemption reserve 155 142
Retained earnings 98,252 99,274
---------- --------
TOTAL EQUITY 99,260 100,282
---------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31st JULY 2020
2020 2019
Unaudited Audited
GBP000 GBP000
Profit before tax 4,083 6,643
Share of losses/(profits) from Joint Ventures 13 (48)
Depreciation 380 376
Unrealised valuation surplus on investment properties (3,179) (4,052)
Unrealised valuation deficit on available for
sale financial assets 379 9
Profit on sale of property, plant and equipment (18) (141)
Profit on sale of available for sale financial
assets (16) (26)
Change in retirement benefits 14 188
Interest received (78) (71)
Interest paid 12 -
Change in inventories 3,981 164
Change in contract assets 126 221
Change in receivables - non-current - (250)
Change in receivables - current 12 935
Change in payables (322) (186)
---------- --------
5,387 3,762
Tax paid (531) (448)
---------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 4,856 3,314
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (355) (424)
Additions to investment properties (483) (143)
Expenditure on own work capitalised - investment
properties (2,410) (147)
Sale of property, plant and equipment 29 193
Purchase of available for sale financial assets - (380)
Proceeds of sale of available for sale financial
assets 60 187
Decrease on monies held on deposit - -
Interest received 78 71
Interest paid (12) -
Dividend from Joint Ventures - 59
NET CASH FLOWS FROM INVESTING ACTIVITIES (3,093) (584)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares (793) (806)
Dividends paid (795) (813)
---------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES (1,588) (1,619)
---------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 175 1,111
---------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,839 11,728
---------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR 13,014 12,839
---------- --------
NOTES TO THE PRELIMINARY STATEMENT
1. BASIS OF PREPARATION
The financial information set out in this unaudited preliminary
statement does not constitute the Group's statutory financial
statements. The financial statements for the year to 31st July 2020
have not yet been filed with the Registrar of Companies and have
not yet been reported on by the Company's auditor.
Due to the coronavirus pandemic and the shortage of comparable
market evidence, the investment properties are subject to material
valuation uncertainty in accordance with RICS valuation standards.
Consequently less certainty can be attached to the valuation than
would normally be the case. It is likely that the audit report on
the accounts for the year to 31st July 2020 will draw attention to
this material uncertainty by way of emphasis without modifying the
audit opinion.
The unaudited financial information included in this preliminary
statement does not include all of the disclosures required by
International Financial Reporting Standards (IFRS) or the Companies
Act 2006 and accordingly does not itself comply with IFRS or the
Companies Act 2006.
The Group prepares its annual consolidated financial statements
in accordance with IFRS and its interpretations issued by the
International Accounting Standards Board as adopted by the European
Union. There are no differences in the accounting policies applied
in the preparation of the unaudited consolidated financial
statements for the year to 31st July 2020 and the unaudited
financial information included in this preliminary statement and
the accounting policies disclosed in the 2019 Annual Report and
Statement of Accounts, with the exception of the policy regarding
leases resulting from the application of IFRS 16: Leases. The
impact of this standard is detailed below.
The following standards, amendments to standards and
interpretations became mandatory for the first time for the
financial year to 31st July 2020:
-- IFRS 16: Leases.
-- IAS 12 (amended): Income Taxes.
-- IAS 19 (amended): Employee Benefits.
-- IFRIC 23: Uncertainty over Income Tax Treatments.
Other than IFRS 16: Leases none of the above amendments to
standards or the new interpretation had a significant impact on the
Group's financial statements. Details of the impact of IFRS 16 are
given below.
IFRS 16: Leases became effective as from 1st August 2019 for the
Group. IFRS 16: Leases replaced IAS 17: Leases and requires the
Group to incorporate a right-of-use asset and corresponding lease
liability in the Statement of Financial Position for those assets
held under leases for which the new standard applies. This standard
will impact on ground leases on which the Group has built
investment properties and which the rent payable to the lessor
under the leases is not contingent on the rents received by the
Group from its tenants. The standard requires the current operating
lease charges, which were disclosed in Operating Profit to be
replaced by a depreciation charge on the right-of-use asset. As our
leases relate to land there will be no depreciation charge but
there will be an impact relating to the revaluation movement on the
land. There will also be interest costs in relation to the lease
liability which will be recognised in Finance Costs. The standard
does not have an impact on the Group where the Group is the Lessor
in respect of leases granted to tenants in our investment
properties.
IFRS 16 outlines several options for the initial recognition on
adoption of the standard. The Group chose to apply the modified
retrospective approach which allowed the Group to incorporate the
right-of-use assets and the lease liability as at the transition
date of 1st August 2019 without the requirement to restate prior
periods. The lease liability is calculated as the discounted
present value of the outstanding rental payments and the
right-of-use asset is set as being equal to the liability therefore
there is no impact on the net assets of the Group on adoption of
this standard. On the transition date the lease liability and
right-of-use assets recognised amounted to GBP205,000.
The unaudited consolidated financial statements are prepared on
a going concern basis and under the historical cost convention
except where the measurement of balances at fair value is required
for investment properties, available for sale financial assets and
assets held by the defined benefit pension scheme.
The financial information for the year to 31st July 2019 is
derived from the statutory accounts for that year which were
submitted to the Registrar of Companies and upon which the
Company's auditor provided an unqualified audit report. The audit
report did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying its
report and did not contain a statement under S498 (2) or S498 (3)
of the Companies Act 2006.
2. DISCONTINUED OPERATIONS
In the year to 31st July 2019 the Group Directors took the
decision that the subsidiary company, Concrete Products (Kirkcaldy)
Limited should cease trading.
The results of the discontinued operation, which have been
included in the profit for the year, were as follows:
2020 2019
Unaudited Audited
GBP000 GBP000
Revenue 1 645
Cost of sales (18) (817)
---------- --------
Gross Loss (17) (172)
Other operating income 9 6
Net operating expenses (49) (461)
---------- --------
Loss before tax (57) (627)
Taxation 10 122
---------- --------
Net loss attributable to discontinued operations
(attributable to owners of the Company) (47) (505)
---------- --------
3. DIVIDENDS
Ordinary dividends
2018 Final dividend of 2.21p per share, after
waivers - 402
2019 Interim dividend of 0.95p per share - 411
2019 Final dividend of 2.24p per share, after 390 -
waivers
2020 Interim dividend of 0.95p per share 405 -
---- ----
795 813
---- ----
The Company is proposing a final dividend of 2.27p per share for
the year to 31st July 2020 which will cost the Company no more than
GBP963,000.
The dividend if approved will be paid on 8th February 2021 to
shareholders on the Register at the close of business on 15th
January 2021.
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