Final Results

RNS Number : 3522Y

Safeland PLC

21 August 2018

 

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").  

Safeland plc

("Safeland", the "Company" or the "Group")

Final Results for the Year Ended 31 March 2018

Managing Director's Statement

Key Achievements

I am pleased to report on another successful year, albeit that the year to 31 March 2018 saw lower levels of turnover and profit after tax, but higher operating profit and profit before tax, than the preceding year.

We paid a final dividend of 1p per share in respect of the year ended 31 March 2017, which was paid during this financial year. We are pleased to continue the trend of distributing a share of profits to our shareholders by recommending the payment of a final dividend of 1p per share which, subject to shareholders' approval at the Company's Annual General Meeting, will be payable on 28 September 2018 to shareholders on the register of members at close of business on 24 August 2018.

During the year, the Group sold its residual interest in two properties in London and purchased and sold a mixed-use property asset in London NW9. These disposals generated total revenues of £2.8m. Towards the end of the year, work completed on two projects - the redevelopment of a former hotel in Muswell Hill into 18 apartments and the construction of 3 residential properties near our head office in London N2; both projects were fully let within the first quarter of this financial year.

Planning permission was obtained for the building of a mixed residential and commercial development in London N2, and work commenced on a conversion to apartments of a property in London N10.

Financial Results

Group revenue for the year to 31 March 2018 of £2.9 million comprised sales of properties, rental income and management fees. However, it was below the £13.0 million reported for the preceding year, in which there was more activity.

Gross profit of £0.3 million was below the £2.5 million for the year to 31 March 2017, but operating profit increased from £1.9 million to £2.7 million, reflecting the gain on revaluation of investment properties, including those transferred this year from trading stock. However, it is worth noting that we are extremely selective on transactions until the outlook on the economy in general and the property sector specifically, show signs of strengthening.

As a result of the completion of the two projects mentioned above, both properties were transferred from stock into investment properties and were valued at a gain to the Group of £3.8 million. As a result, trading stock has decreased in value from £9.3 million at 31 March 2017 to £5.0 million at 31 March 2018. The Statement of Financial Position shows gearing at 31 March 2018 of 45%, which is consistent with the long term gearing ratio of the Group (31 March 2017: 12%).

I am pleased to report that our net asset value (NAV) rose from £19.9 million (equivalent to 129 pence per share) at 31 March 2017, to £21.6 million (equivalent to 145 pence per share) at 31 March 2018. This is an 11.6% increase, albeit that for the third consecutive year there were fewer shares in issue at the year-end than 12 months previously, as a result of buybacks and cancellation of shares.

Continuing the theme of purchasing our own shares - in the prior year, there had been two transactions totalling 193,000 shares - in the year to 31 March 2018, we made 8 buy-backs, totalling 460,000 shares. The directors continue to consider that the acquisition and cancellation of these shares as appropriate if it enhances the value of the remaining shares in issue.

Due to the small increase in the share price over the year, total shareholder returns for the year increased by 6.4% (2017: 2.7% decrease).

After the year end, we successfully negotiated a new £16.5 million revolving credit facility with Lloyds Bank, secured on certain assets owned by the Group.

Outlook

I repeat the statement in 2017's full-year results that the market appears to us to be constrained by an economic outlook which in turn is affected by political conditions at home, in the EU, and worldwide. I believe that this has created a cautious environment, verging on stagnation which may continue for some time.

Whilst we will continue to seek out value adding opportunities, the generally negative environment with little current opportunity suggests that it would be prudent for the Board to review the Company's cost base, including the value of maintaining the Company's AIM quotation. A further announcement will be made in due course.

Larry Lipman

Managing Director

20 August 2018

Enquiries

Safeland plc	[phone]
Larry Lipman, Managing Director
Stockdale Securities (Nominated Adviser and Broker)
Tom Griffiths	[phone]

For more information visit: www.safeland.co.uk

 

Condensed Consolidated Income Statement

Year Ended 31 March 2018

	Note		2018 £'000	2017 £'000
Revenue
Continuing	3		2,900	12,695
Discontinued	3		-	277
			2,900	12,972
Cost of sales			(2,595)	(10,517)
Gross profit			305	2,455
Administrative expenses			(1,577)	(1,721)
Gain on revaluation of investment properties			3,833	459
Profit on disposal of investment property			74	694
Dividend from investment			11	5
Share of results of associate			25	31
Operating profit			2,671	1,923
Operating profit - continuing			2,671	1,877
Operating profit - discontinued			-	46
			2,671	1,923
Finance income			148	554
Finance costs			(426)	(448)
Profit before tax			2,393	2,029
Tax			(247)	293
Profit for the financial year attributable to owners of the parent company			2,146	2,322
Basic earnings per share	4		14.25p	15.27p
Diluted earnings per share	4		7.88p	8.35p

Condensed Consolidated Statement of Comprehensive Income

Year ended 31 March 2018

					2018 £'000	2017 £'000
Profit for the year					2,146	2,322
Other comprehensive income
Fair value losses on available-for-sale financial assets					(104)	(30)
Other comprehensive income for the year, net of tax					(104)	(30)
Total comprehensive income for the year attributable to owners of the parent company					2,042	2,292

Condensed Consolidated Statement of Financial Position

31 March 2018                                                                                                  

	Note	2018 £'000	2017 £'000
Non-current assets
Property, plant and equipment		1,789	1,885
Investment properties	6	14,762	1,182
Investment in associate		127	127
Available-for-sale investments		698	802
Total non-current assets		17,376	3,996
Current assets
Trading properties	7	5,018	9,348
Trade and other receivables	8	9,238	9,209
Cash and cash equivalents		1,066	5,280
Total current assets		15,322	23,837
Total assets		32,698	27,833
Current liabilities
Bank loans and overdrafts	9	10,455	7,639
Trade and other payables		470	232
Corporation tax payable		140	-
Total current liabilities		11,065	7,871
Non-current liabilities
Bank loans		-	-
Deferred income tax liabilities		74	32
Total non-current liabilities		74	32
Total liabilities		11,139	7,903
Net assets		21,559	19,930
Equity
Share capital		745	768
Share-based payment reserve		354	354
Investment revaluation reserve		(186)	(82)
Capital redemption reserve		98	75
Retained earnings		20,548	18,815
Total equity attributable to owners of the parent company		21,559	19,930

Condensed Consolidated Statement of Changes in Equity

31 March 2018

	Share Capital £'000	Capital redemption reserve £'000	Share-based payment reserve £'000	Investment revaluation reserve £'000	Retained earnings £'000	Total equity £'000
Balance at 1 April 2016	778	65	354	(52)	16,601	17,746
Comprehensive income
Profit for the year	-	-	-	-	2,322	2,322
Revaluation of available-for-sale investments	-	-	-	(30)	-	(30)
Total comprehensive income	-	-	-	(82)	2,322	2,292
Transactions with owners
Purchase of own shares	(10)	10	-	-	(108)	(108)
Total transactions with owners	(10)	10	-	-	(108)	(108)
Balance at 31 March 2017	768	75	354	(82)	18,815	19,930

Comprehensive income
Profit for the year	-	-	-	-	2,146	2,146
Revaluation of available-for-sale investments	-	-	-	(104)	-	(104)
Total comprehensive income	-	-	-	(104)	2,146	2,042
Transactions with owners
Dividend paid	-	-	-	-	(151)	(151)
Purchase of own shares	(23)	23	-	-	(262)	(262)
Total transactions with owners	(23)	23	-	-	(413)	(413)
Balance at 31 March 2018	745	98	354	(186)	20,548	21,559

 

Condensed Consolidated Statement of Cash Flows

Year ended 31 March 2018

		2018 £'000	2017 £'000
Operating activities
Cash (outflow)/inflow from operations		(6,274)	6,523
Interest paid		(395)	(406)
Corporation tax paid		(65)	(1,464)
Net cash (outflow)/inflow from operating activities		(6,734)	4,653
Investing activities
Interest received		5	1
Purchase of property, plant and equipment		(44)	(143)
Other dividends received		36	31
Proceeds from sale of investment properties		72	1,094
Proceeds from sale of property, plant and equipment		79	94
Net cash generated from investing activities		148	1,077
Financing activities
Purchase of own share capital		(262)	(108)
Dividends paid to equity shareholders		(151)	-
New loans		2,785	2.001
Loan repayments		-	(5,331)
Net cash from/(used in) financing activities		2,372	(3,438)
Net (decrease)/increase in cash and cash equivalents		(4,214)	2,292
Cash and cash equivalents at beginning of year		5,280	2,988
Cash and cash equivalents at end of year		1,066	5,280

Notes

31 March 2018

1.    Basis of preparation

On 20 August 2018, the Directors approved this announcement for publication. Copies of this announcement are available from the Company's registered office at 1a Kingsley Way, London, N2 0FW and on its website, www.safeland.co.uk. The Annual Report and Accounts will be sent to shareholders in due course and will be available on the Company's website, www.safeland.co.uk. The financial information presented above does not constitute statutory financial statements as defined by section 435 of the Companies Act 2006 for the year ended 31 March 2018. The financial information for the year ended 31 March 2017 has been derived from the Group's statutory accounts for that year, as filed with the Registrar of Companies.

The financial information for the year ended 31 March 2018 is derived from the statutory financial statements for that year, prepared under IFRS, upon which the auditors have reported. The audit report was unqualified, did not include references to matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.  The statutory financial statements for the year ended 31 March 2018 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The accounting policies applied in this announcement are consistent with those of the annual financial statements for the year ended 31 March 2017, as described in those annual financial statements.

2.    Significant Accounting Policies

Revenue

Revenue is stated net of VAT and comprises rental income, proceeds from sales of trading properties, fees, commissions and other income.

Sales of trading properties are recognised on completion of a contract. This reflects the point of transfer of risk and rewards when trading property is sold.

Rental income from investment and trading properties leased out under operating leases is recognised in the Income Statement on a straight-line basis over the term of the lease. Contingent rents which comprise turnover rents are recognised as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants. Lease incentives are recognised as an integral part of the net consideration for the use of the property and amortised on a straight-line basis over the term of lease, or the period to the first tenant break, if shorter.

Hotel revenue comprised revenues from overnight hotel accommodation, banqueting facility hire and sales of food and beverages. All revenue was recognised when the service was provided. The hotel closed and ceased to trade in the prior year on 3 August 2016.

Other fees in relation to property management are recognised on a straight-line basis over the term of management contracts.

Investment properties

Investment properties are those properties that are held either to earn rental income or for capital appreciation or both. Investment properties are measured and stated at fair value in the statement of financial position. Valuation surpluses and deficits arising in the year are included in the consolidated income statement.

The gain or loss arising on the disposal of a property is determined as the difference between the sales proceeds and the fair value of the asset at the beginning of the period and is recognised in the consolidated income statement.

Investment properties developed by the Group are transferred from current assets at cost with the gain or loss on valuation being recorded in the consolidated income statement.

Investment properties may be freehold properties or leasehold properties. For leasehold properties that are classified as investment properties, the associated leasehold obligations, if material, are accounted for as finance lease obligations.

Trading properties

Properties held for development and resale are classified as trading properties and are shown at the lower of cost and net realisable value. Cost comprises purchase price, acquisition costs and direct expenditure.

 

3.    Operational Segments

All activities are based in the United Kingdom.

The segmental information of the Group's results for the year ended 31 March 2018 was as follows:

	Property trading & management £'000	Property investment £'000	Unallocated £'000	Total £'000
Revenue	2,850	50	-	2,900
Cost of sales	(2,595)	-	-	(2,595)
Gross profit	255	50	-	305
Profit on disposal of investment properties	-	74	-	74
Gain on revaluation of investment properties	-	3,833	-	3,833
Share of profit of associate	25	-	-	25
Operating profit before administration expense	280	3,957	-	4,237
Administrative expenses	-	-	(1,577)	(1,577)
Dividend from investments	-	-	11	11
Finance income	-	-	148	148
Finance costs	-	-	(426)	(426)
Profit before tax	280	3,957	(1,844)	2,393

		Property trading & management £'000	Property investment £'000	Unallocated £'000	Total £'000
Segment assets		15,081	14,762	2,855	32,698
Segment liabilities		(3,072)	(6,649)	(1,418)	(11,139)
Net assets		12,009	8,113	1,437	21,559
Capital expenditure		-	-	44	44
Depreciation		-	-	79	79

 

The segmental information of the Group's results for the year ended 31 March 2017 was as follows:

		Property trading & management £'000		Property investment £'000		Unallocated1 £'000		Total £'000
Revenue		12,480		215		277		12,972
Cost of sales		(10,286)		-		(231)		(10,517)
Gross profit		2,194		215		46		2,455
Profit on disposal of investment properties		-		694		-		694
Gain on revaluation of investment properties		-		459		-		459
Share of profit of associate		31				-		31
Operating profit before administration expense		2,225		1,368		46		3,639
Administrative expenses		-		-		(1,721)		(1721)
Dividends from investments		-		-		5		5
Finance income		-		-		554		554
Finance costs		-		-		(448)		(448)
Profit before tax		2,225		1,368		(1,564)		2,029
			Property trading & management £'000		Property investment £'000		Unallocated1 £'000		Total £'000
Segment assets			18,583		1,182		8,068		27,833
Segment liabilities			(7,639)		-		(264)		(7,903)
Net assets			10,944		1,182		7,804		19,930
Capital expenditure			-		-		5		5
Depreciation			-		-		81		81

(1)  The hotel business ceased to operate in the year ended 31 March 2017 with effect from 3 August 2016 and has been closed permanently. Its results for 2017 have been included within unallocated.

4.    Earnings per Share

The calculation of the basic and diluted earnings per share is based on the following data:

		2018          £'000	2017          £'000
Profit for the year attributable to equity holders of the Company		2,146	2,322

		2018         Number	2017          Number
Weighted average number of ordinary shares for the purposes of basic earnings per share (continued and discontinued)		15,042,243	15,555,095
Effect of dilutive potential ordinary shares		12,148,658	12,042,793
Weighted average number of ordinary shares for the purposes of diluted earnings per share		27,190,901	27,597,888

5.    Dividends

The Directors recommend the payment of a final dividend of 1 penny per share (2017: 1p), which, subject to shareholders' approval at the Company's Annual General Meeting, will be payable on 28 September 2018 to shareholders on the Company's register of members at the close of business on 24 August 2018.  During the year, no interim dividend was paid (2017: nil pence per share).

6.    Investment Properties

		2018        £'000	2017       £'000
Fair value
At 1 April		1,182	1,123
Transfer from current properties		9,747	-
Disposal of properties in the year		-	(400)
Increase in fair value during the year		3,833	459
At 31 March		14,762	1,182

The fair value of the investment properties at 31 March 2018 comprises freehold properties of £13,832,000 (2017: £457,000) and long leasehold properties of £930,000 (2017: £725,000). The leasehold and freehold investment property have been classified within level 3 of the fair value hierarchy (unobservable inputs). The transfer from current properties developed by the group was at cost.

The investment properties consist of residential property located in North London and have been valued by the Directors. The methodology to value these properties is to compare historical comparable market transactions less a percentage reduction to reflect the limitations of restrictive tenancies where appropriate. Based on valuations at 31 March 2018, if the percentage reduction was 5% higher or lower and all other variables were held constant, the Group's profit before tax would increase or decrease by 8.5%.

The Group has pledged investment properties with a carrying value of £14,762,000 (2017: £1,182,000) to secure banking facilities granted to the Group.

The fair value of the Group's investment properties at 31 March 2018 had been arrived at on the basis of market value as defined in the Apportionment and Valuation Manual of the Royal Institution of Chartered Surveyors.

The historical cost of investment properties included in the financial statements at 31 March 2018 is £10,578,000 (2017: £831,000) of which £10,035,000 (2017: £288,000) are freehold and £543,000 (2017: £543,000) are long leasehold properties.

7.    Trading Properties

	2018         £'000	2017       £'000
Properties for resale	5,018	9,348

The Group has pledged properties for resale with carrying value of £5,012,000 (2017: £9,113,000) to secure banking facilities granted to the Group.

Properties for resale were reviewed for impairment as at 31 March 2018; the Directors are satisfied that no impairment is necessary.

Trading properties are properties acquired or developed and held for sale and are shown at the lower of cost or net realisable value. The cost of trading properties are those costs directly associated with the acquisition and development of a specific site. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs to completion and the estimated costs necessary to make the sale.

8.    Trade and Other Receivables

	2018         £'000	2017       £'000
Trade receivables	5	80
Other receivables	9,208	9,122
Prepayments and accrued income	25	7
	9,238	9,209

The directors consider that the carrying amount of trade and other receivables is no less than their fair value. Of the other receivables, £9,200,000 (2017: £9,058,000) is deferred consideration on the sale of the Chandos Tennis Club. Although this was past due at the balance sheet date, this amount has not been impaired as the Group took possession of the properties after the year end (see note 10)

9.    Bank Loans

	2018     £'000	2017       £'000
Bank loans	10,455	7,670
Unamortised borrowing costs	-	(31)
	10,455	7,639

There were no breaches of bank loan covenants as at 31 March 2018 or 31 March 2017.

All of the Group's bank loans and overdrafts disclosed above comprise borrowings in sterling. 

The bank loans are secured on investment and trading properties owned by the Group totalling £19,744,000 (2017: £10,295,000).

The Group had undrawn committed borrowing facilities as at 31 March 2018 of £2,045,000 (2017: £4,830,000).

At 31 March 2018, the Group had a £12,500,000 (2017: £12,500,000) revolving credit facility with Lloyds Bank plc, secured on certain properties owned by the Group. The facility was based on LIBOR plus a fixed margin. The Group renewed the facility during April 2018 under similar terms as the original facility, but with a limit of £16,500,000.  At 31 March 2018, a notional amount of the loan of £5,000,000 (2017: £5,000,000) was capped at 3%.

10.  Post balance-sheet events

In April 2018 the Group negotiated a renewal of the Group's revolving credit facilities with its principal lender. This will provide the Group with a £16,500,000 facility through to December 2020.

During May 2018, four investment properties valued at £1,455,000 at 31 March 2018, were disposed of for a small profit.

During June 2018, the Group took possession of the four houses as part and final consideration on sale of the Chandos Tennis Club. The consideration payable for the sale in 2014 comprised £4.0 million in cash (which was received in 2014) and the balance was to be satisfied by way of transfer to Safeland of four detached houses (valued at the time by the Company's directors in aggregate at £9.2 million) in the completed development. 

During the three months to June 2018, all 3 houses in the Edeleny Close development and all 18 apartments in the Raglan Hall development were let to third parties at a total annual rental of £525,000.

 

END

 

 

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