Final Results
Swan Hill Group PLC
18 March 2003
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2002
HIGHLIGHTS 2002 2001 % increase
• Group profit before tax £5.9 m £4.9 m + 20%
• Housing division
- Turnover £75.7 m £50.6 m + 50%
- Operating profits £8.5 m £6.1 m + 39%
• Housing sales
- Units 267 229 +17%
- Average selling price £258,000 £204,000 + 26%
• Earnings per share 7.6p 6.1p + 25%
• Dividends per share 4.4p 4.0p + 10%
• Net assets per share 130p 127p + 2%
• Estimated future sales value of current housing sites in excess of £175 million.
• Continued progress towards withdrawal from commercial property.
Commenting on today's announcement, George Duncan, the Chairman said:
'The improved results achieved since the adoption of the strategy of concentrating on specialist
housebuilding in the south of England confirms the validity of this policy and gives us confidence for
the future of the Group in the longer term. Currently, however, there is some evidence that activity in
our areas of operation is slowing with buyers becoming more cautious. It is too early to judge the
impact of these factors on the remainder of the year although the continuation of low interest rates and
shortage of new homes should serve to underpin demand.'
Enquiries to: 18 March 2003
Swan Hill Group PLC
John Theakston, Group Chief Executive 01784 464351 from 10.00 am
Colin Archer, Group Finance Director to 5.30 pm
Weber Shandwick Square Mile
Ben Padovan 020 7067 0700
CHAIRMAN'S STATEMENT
Results
The Group made further good progress in its strategy of becoming a leading
specialist housebuilder at the premium end of the market operating in the
southern part of the country. During the year, the Group benefited from a strong
market in its operating area and, as a consequence of this and investment made
in previous years, the Housing division achieved strong growth with turnover
rising from £50.6 million to £75.7 million. As expected, the turnover of the
Property division fell to just £1.6 million, leaving Group turnover at similar
levels to last year.
Profits before tax were well ahead at £5.9 million (2001 : £4.9 million). The
Housing division increased its operating profits from £6.1 million to £8.5
million, an increase of 39%. The Property division made a small loss with
future performance dependent on the disposal of its two residual schemes. These
figures incorporate the accounting policy changes adopted at the half-year and
as set out in Note 1 of the consolidated results.
Earnings per share rose from 6.1p to 7.6p, and the Board is recommending a final
dividend of 2.65p (2001 : 2.4p) giving a total for the year of 4.4p (2001 :
4.0p).
Net assets were £77.4 million at the end of 2002 or 130p per share. Net
borrowings decreased from £25.1 million to £11.4 million. The gearing level was
15% providing considerable flexibility to invest further within the Housing
division.
Housing Activities
With a rising housing market, the Housing division performed strongly with
turnover increasing to £75.7 million. The division sold 267 units (2001 : 229)
at an average selling price of £258,000 (2001 : £204,000). This substantial
increase in average selling price reflects the focus of the business on the
premium end of the market.
Operating margins reduced from 12.1% to 11.2%, with the timing of site openings
in the Horsham region affecting performance in the second six months. Both the
Staines and Bristol regions performed strongly throughout the year.
The Housing division is currently selling from 13 sites. Overall, sites with an
estimated sales value in excess of £175 million underpin future activity - this
includes two schemes near Peterborough for around 300 units in total, which have
been recently allocated within the Local Plan and have been held for many years
within the long term land bank. A further 5 sites were acquired during the
year. Having regard to the timing of site openings, the performance of the
Housing division in 2003 will be weighted towards the second half. Overall our
performance is likely to be less even than the larger volume housebuilders who
have more sites under development at any time.
Property Activities
The Property division is concentrating on its two remaining principal
developments. Progress has been made with further lettings (now totalling 69%
of the available space achieved) at the city centre retail development at
Stockton-on-Tees. Given continued progress on the lettings we would expect the
Stockton scheme to be marketed for sale in late 2003. Active negotiations are
also continuing for the sale of the Cagnes business and retail park in the south
of France.
Pensions
In common with many other public companies, the deficit in respect of the
funding of the final salary scheme increased during 2002. Under Financial
Reporting Standard 17 'Retirement Benefits' the deficit had increased to £8.8
million at the end of 2002 principally due to the poor performance of world
stock markets and improving mortality rates. This deficit would reduce if stock
markets recovered. Following the recent triennial actuarial valuation, we have
increased contribution rates to the scheme by around £0.8 million per annum.
Board Changes
Following the retirement of Sir Idris Pearce, Tony Graham, who has long
experience in both residential and commercial property development, joined the
Board as a non-executive director in September 2002.
Maurice Dixson, a non-executive director for the past 10 years, is intending to
retire at the AGM in May 2003. He has provided sound advice and made a very
valuable contribution for which we are most grateful. We have started the
process of finding a successor.
After 10 years as Chairman it is my intention to retire from the Board at the
AGM. I am delighted that Ian Maclellan, one of our non-executive directors, will
succeed me in this role.
Prospects
The improved results achieved since the adoption of the strategy of
concentrating on specialist housebuilding in the south of England confirms the
validity of this policy and gives us confidence for the future of the Group in
the longer term. Currently, however, there is some evidence that activity in
our areas of operation is slowing with buyers becoming more cautious. It is too
early to judge the impact of these factors on the remainder of the year although
the continuation of low interest rates and shortage of new homes should serve to
underpin demand.
George Duncan
Chairman
18 March 2003
OPERATING AND FINANCIAL
REVIEW FOR 2002
HOUSING ACTIVITIES
Operating Results 2002
The Housing division increased turnover from £50.6 million to £75.7 million,
with average selling prices rising as a result of the focus on building higher
value houses. Operating profits also rose from £6.1 million to £8.5 million.
Operating margins reduced from 12.1% to 11.2%, principally due to reduced levels
of activity in the Horsham region in the second half.
Capital employed within the Housing division was £79.4 million at the year end
but is expected to rise with further investment to support the continued
expansion of the business. The Group has the financial capacity to acquire more
sites, particularly if land prices soften in a weaker market.
Principal sites
The Housing division has three regional offices at Staines, Horsham and Bristol
providing a balanced geographical spread across the south of England. Its
principal sites open for sale or under construction in the first half of this
year are located as follows:
Staines Horsham Bristol
Open for sale Open for sale Open for sale
Andover Horsham Bristol
Weston on the Green Ifold Cheltenham
Weybridge Watersfield Clifton flats - phase 1
Fleet Portishead
Rode
Tetbury
Under construction Under construction Under construction
Sibford Ferris Ardingly Clifton flats - phase 2
Woking Chislehurst Clifton
Eastergate
Kenley
Selsey
Wadhurst
There were a further 5 schemes at the year end at earlier stages of development.
Our objective remains to be a leading specialist housebuilder in the south of
England with a high quality product that is design led and at the premium end of
the market. Developments are usually designed for a particular location rather
than imposing standard house formats.
Staines Region
The Staines region had a successful year with the completion of schemes at
Staines, Chineham, Froxfield and Yateley. The Staines site was particularly
important with 41 exchanges achieved during the year.
The schemes at Andover (67 units) and Weybridge (24 units) will be critical to
the region's performance for 2003. The Weybridge site opened in September 2002
and 3 of the high value homes were sold by the end of the year. The higher
value sector is suffering in current markets but we believe that we have an
attractive and highly competitive product at Weybridge. We also sold 15 units
at Andover which opened in May 2002, a performance ahead of our expectations.
The region is well advanced with the construction of two schemes in Oxfordshire,
both of which involve substantial refurbishment work. The development at
Weston-on-the-Green is close to completion with the site at Sibford Ferris due
to be marketed from the early summer.
We are progressing two sites near Peterborough through the planning process.
These schemes, with around 300 units for development, have been included within
the adopted Local Plan. We are awaiting the outcome of detailed planning
applications and are hopeful of being on site in the second half of this year.
Horsham Region
Following the completion of five sites during the year, the Horsham region is in
the process of opening a number of new sites. Regional performance should,
therefore, improve as new site openings gain momentum. In particular, the
region has started taking sales from the substantial urban development in
Horsham (61 units), a scheme for 5 units at Ifold, and a development for 7
apartments in Chislehurst. Later in the year the region is anticipating a
further 5 sites opening including 45 units at Selsey, 18 units at Eastergate in
Sussex, and 7 large houses at Wadhurst in Kent.
Bristol Region
The Bristol region had another successful year with the principal contributors
being the first phase of the apartment scheme at Clifton (37 units) as well as
the mature schemes at Pershore (20 units) and Tetbury (20 units). At Clifton
phase 1, 22 of the 37 units had been sold by the end of the year with a further
4 exchanges carried forward into 2003.
Substantial new sites have been opened at Rode (42 units), Portishead (43 units)
and Cheltenham (15 units) which, with a housing development in Clifton, will
underpin activity within the region for this year. A further 3 sites in
Bristol, Gloucestershire and Cheltenham are also in the pipeline.
The region has commenced the demolition works for the next phase of the Clifton
phase 2 flats development (70 units) and will start construction in the summer.
PROPERTY ACTIVITIES
Main Features of 2002
The Property division is concentrating on the development and disposal of its
residual schemes, being the retail development in Stockton-on-Tees and the mixed
use scheme at Cagnes in the South of France. Overall the Property division made
a small loss for the year with future performance being dependent on the
disposal of these schemes.
The major city centre retail development at Stockton-on-Tees is being progressed
within a joint venture company, Wellington Square Development Company. The
scheme comprises 180,000 sq ft of retail space and 800 car parking spaces with
lettings of 69% of the available space achieved to date. Principal tenants
include Debenhams, Dixons, Lidl, WH Smith and Superdrug, as well as River Island
and Au Naturale which opened during the course of 2002. The timing of marketing
the investment sale of this scheme depends on the successful conclusion of the
letting programme but is likely to be in late 2003 or early 2004.
Negotiations continue for the sale of the Cagnes business and retail park in the
south of France. These are likely to be protracted due to the size and
complexity of the scheme which is in joint venture with the local authority.
Nonetheless, positive progress has been made in 2002 towards the disposal of
this scheme.
During the course of the year our former offices in Staines were sold realising
a small profit. The sale proceeds, together with the reduced funding required
from each partner in respect of the Stockton-on-Tees scheme, resulted in a
further reduction to capital employed which since 1998 has fallen from £61
million to £11.7 million.
FINANCIAL REVIEW
Shareholders' funds increased by £1.9 million during the year with net assets
per share at 130p (2001 : 127p) at the year end. Cash flows remained positive
through the year with net borrowings reducing from £25.1 million to £11.4
million.
As explained in the half-year statement, the Company changed its accounting
policies for the recognition of income on the sale of houses and land sales.
The revised policy is in accordance with changes in industry practice and brings
the point of income recognition closer to legal completion. Shareholders' funds
at the beginning of the year were reduced by £1.6 million as a result both of
this change and applying the new deferred tax accounting standard. The
operating profits for 2002 of the Housing division rose by £1.4 million due to
the high number of exchanges previously taken into the 2001 results but now
accounted for in 2002.
Net borrowings of £11.4 million represented a gearing level of 15%, with net
interest payable (excluding joint ventures) falling to £639,000 (2001 :
£943,000). This reduction reflected lower average borrowings during the year but
also lower interest rates. The level of committed facilities from our bankers
was maintained at £25 million which, together with £15 million of overdraft,
provided total bank facilities of £40 million. Our funding objectives and
strategy are to maintain flexibility using unsecured facilities with drawings of
limited duration. The Group has extended euro borrowings of £5.5 million in
order to provide a hedge against the net assets invested in France and to
benefit from lower interest rates.
The Group's loans to Wellington Square Development Company, the joint venture
company developing the retail scheme in Stockton-on-Tees, have been further
reduced to £5.3 million as the funding required from each partner is related to
the level of lettings achieved. The remainder of the funding of this joint
venture is provided by bank debt.
Pensions
The triennial actuarial valuation of the final salary pension scheme as at 5
April 2002 has been completed and shows a deterioration since 1999, principally
due to the allowance by the scheme's actuary for improved mortality rates. The
impact of improving mortality rates has been felt widely across UK pensions
schemes. The actuary has recommended an additional annual contribution of
£780,000 in order to fund this deterioration over the next six years.
Under SSAP24 criteria, the market value of the assets of £50.1 million at 5
April 2002 represented 96% of the value of accrued benefits of £52.1 million.
The pension cost charged to the profit and loss account under SSAP 24 will rise
from £0.7 million previously to around £1.0 million for succeeding years.
Under Financial Reporting Standard 17 'Retirement Benefits', the deficit
disclosed in respect of the final salary pension scheme has increased from £0.7
million to £8.8 million as at the end of 2002. The increased deficit has
resulted from two principal factors. The first is the very poor performance of
world stock markets during the year. The scheme is protected to some extent by
having around 60% of its assets invested in fixed interest or similar
securities. The second factor is the improvement in mortality rates referred to
above.
Under FRS 17, the total market value of the pension scheme's assets as at 31
December 2002 was £45.1 million and the present value of its liabilities was
£53.9 million. The scheme is large relative to the size of the company, because
of the high number of pensioners and deferred members of the scheme who were
employed by the construction business prior to its disposal in 1997.
The Group introduced a new pension scheme based on defined contributions in
2001. New staff are typically invited to join this scheme whilst existing staff
at that time remain within the final salary scheme.
SWAN HILL GROUP PLC
CONSOLIDATED RESULTS
The unaudited results for the full year ended 31 December 2002 are shown below:
2002 2001
(Restated)
Notes £'000 £'000
Turnover including share of joint ventures 77,278 72,289
Less: share of turnover of joint ventures - continuing (778) (301)
Group turnover - continuing 76,500 71,988
Group operating profit - continuing 6,613 5,212
Share of operating profit in joint ventures 539 1,218
Total operating profit : group and share of joint ventures 7,152 6,430
Profit on disposal of property and other fixed assets 145 53
Loss on disposal of discontinued operations 2 (72) (234)
Profit on ordinary activities before interest 7,225 6,249
Net interest payable and amounts written-off - Group 3 (751) (1,007)
investments
- Joint ventures 3 (558) (318)
Profit on ordinary activities before taxation 5,916 4,924
Tax on ordinary activities 4 (1,425) (1,311)
Profit on ordinary activities after taxation 4,491 3,613
Dividends 5 (2,605) (2,364)
Retained profit for the financial year 1,886 1,249
Basic earnings per Ordinary share 7 7.6p 6.1p
Diluted earnings per Ordinary share 7 7.6p 6.1p
Basic earnings per Ordinary share excluding discontinued operations 7 7.7p 6.5p
Dividends per Ordinary share
Interim 1.75p 1.6p
Final (recommended) 2.65p 2.4p
4.40p 4.0p
Net assets per Ordinary share 130p 127p
31 Dec 2002 31 Dec 2001
(Restated)
£'000 £'000
Summarised Consolidated Balance Sheet
Notes
Fixed assets
Tangible assets 784 1,978
Investments in joint ventures: 6
Share of gross assets 0 17,963
Less: Share of gross liabilities 0 (17,937)
0 26
Own shares 292 454
1,076 2,458
Current assets
Stocks 79,415 94,232
Debtors: Amounts falling due within one year 19,804 10,266
Debtors: Amounts falling due after one year 6 5,655 8,037
Cash at bank 397 199
105,271 112,734
Current liabilities (28,507) (39,179)
Net current assets 76,764 73,555
Total assets less current liabilities 77,840 76,013
Provision for joint venture deficit:
Share of gross assets 18,390 0
Less: Share of gross liabilities (18,470) 0
6 (80) 0
Provisions for liabilities and charges (381) (545)
Net assets 77,379 75,468
Capital and reserves
Called up share capital 14,912 14,910
Share premium account 42,887 43,085
Capital redemption reserve 2,432 2,432
Other reserves 220 21
Profit and loss account 16,928 15,020
Equity shareholders' funds 77,379 75,468
2002 2001
(Restated)
£'000 £'000
Summarised Consolidated Cash Flow Statement
Operating profit 7,152 6,430
Share of the results of associated undertakings (539) (1,218)
Depreciation charge 269 302
Loss on sale of tangible fixed assets 0 1
Working capital movements 10,508 (4,710)
Net cash inflow from operating activities 17,390 805
Amounts received from joint ventures and associates 0 1,020
Returns on investments and servicing of finance (729) (1,008)
Taxation (1,136) (892)
Capital expenditure and financial investment 1,105 (347)
Acquisitions and disposals (129) (221)
Equity dividends paid to shareholders (2,455) (2,245)
Cash inflow/(outflow) before financing 14,046 (2,888)
Issue of shares 3 0
(Decrease)/increase in debt due within one year (4,286) 5,102
Increase in net cash 9,763 2,214
Opening net overdraft (16,478) (18,692)
Closing overdraft (6,715) (16,478)
Net overdraft (6,715) (16,478)
Debt due within one year (4,668) (8,630)
Total net borrowings (11,383) (25,108)
Segmental Analysis of turnover and trading profit by principal activity
2002 2001
(Restated)
£'000 £'000
Notes
Turnover - by principal activity
Housing 75,695 50,582
Property 1,583 21,707
Continuing operations 77,278 72,289
- by geographical area
United Kingdom 77,058 72,112
Rest of European Union 220 177
Continuing operations 77,278 72,289
Operating profit - by principal activity
Housing 8,487 6,100
Property including share of joint ventures (332) 1,310
Group costs (1,003) (980)
Total operating profit : Group and share of joint ventures 7,152 6,430
Profit on disposal of property and other fixed assets 145 53
Continuing operations 7,297 6,483
Loss on disposal of discontinued operations 2 (72) (234)
Profit on ordinary activities before interest 7,225 6,249
- by geographical area
United Kingdom 8,287 7,349
Rest of European Union (59) (120)
8,228 7,229
Group costs (1,003) (980)
Profit on ordinary activities before interest 7,225 6,249
2002 2001
£'000 £'000
(Restated)
Net Assets - by principal activity
Housing 79,380 88,064
Property 11,680 13,896
Group (2,298) (1,384)
88,762 100,576
Net bank borrowings (11,383) (25,108)
77,379 75,468
- by geographical area
United Kingdom 83,075 94,976
Rest of European Union 5,687 5,600
88,762 100,576
Net bank borrowings (11,383) (25,108)
77,379 75,468
The geographical analysis of turnover by destination is not materially different from the analysis by
geographical origin shown above.
Reconciliation of movements in shareholders' funds
2002 2001
£'000 £'000
(Restated)
Profit on ordinary activities after taxation 4,491 3,613
Dividends (2,605) (2,364)
Retained profit 1,886 1,249
Proceeds from the issue of new shares 3 0
Translation difference on foreign currency investments 22 (27)
Net addition to shareholders' funds 1,911 1,222
Opening shareholders' funds as previously reported 77,095 74,727
Prior period adjustments (1,627) (481)
Closing shareholders' funds 77,379 75,468
Prior year adjustments
2001 £'000
Profit on ordinary activities after taxation as previously reported 4,759
Change in policy for income recognition (net of tax) (818)
FRS 19 deferred tax adjustments (328)
Profit after tax for the period as reported above 3,613
NOTES
1 The results for the year have been prepared on a basis consistent with the accounting policies
adopted for the year ended 31 December 2001, except for the following changes which have been
reflected by means of a prior period adjustment with the 2001 figures restated accordingly.
Income and profit recognition: The sale of houses is now recognised when contracts are exchanged
and building has been completed prior to final decorating and finishing, as opposed to the
previous policy when contracts were exchanged and the building was roofed and watertight. With
respect to land sales, income is recognised on completion, as opposed to the previous policy of
recognising income on the unconditional exchange of contracts.
Operating profit for the year ended 31 December 2001 for the Housing division is reduced by £1.2
million to £6.1 million as a result of this change to accounting policy. This is due to the
substantial growth in activity during the second half of 2001 and the high number of exchanges
during the last months of that year which were then completed in early 2002. A high proportion
of these are now accounted for in 2002 so that operating profit for the year ended 31 December
2002 for the Housing division is increased by £1.4 million to £8.5 million.
Deferred Taxation: Financial Reporting Standard 19 'Deferred tax' has been adopted. This
standard requires deferred taxation to be recognised as a liability or asset if transactions
have occurred at the balance sheet date that give rise to an obligation to pay more taxation in
the future, or a right to pay less taxation in the future. An asset is not recognised to the
extent that the transfer of economic benefits in the future is uncertain. Deferred tax assets
and liabilities are not discounted.
2 The losses on disposal of discontinued operations relate to residual costs in respect of the
disposal of the Group's construction activities.
3 Net interest payable and amounts written-off investments are as follows:
2002 £'000 2001 £'000
Group
Interest payable (667) (984)
Interest receivable 28 41
Net interest payable (639) (943)
Unwinding of discount in lease provision (48) (64)
Amounts written off own shares held (64) 0
(751) (1,007)
Joint ventures
Interest payable (610) (326)
Interest receivable 52 8
(558) (318)
4 The taxation charge on profit on ordinary activities
comprises:
2002 2001
£'000 £'000
(Restated)
Current Tax
UK corporation tax at the rate of 30% based on (738) (1,434)
the taxable result for the year
In respect of prior years 92 125
Tax recoverable/(payable) on profits of joint 14 (21)
ventures
(632) (1,330)
Overseas taxation - current (11) (8)
- relief for overseas tax 11 5
(632) (1,333)
Deferred Tax
(Reversal)/origination of timing differences (793) 22
(1,425) (1,311)
5 The charge for dividends on equity Ordinary shares is as follows:
2002 2001
£'000 £'000
Interim paid 1.75p per share (1.6p) (1,035) (946)
Final proposed 2.65p per share (2.4p) (1,570) (1,418)
(2,605) (2,364)
6 The joint venture relates to the development of the retail town centre scheme in
Stockton-on-Tees which is being funded by loans from the partners and bank debt. The loans
from each partner amounted to £5.3 million at the end of 2002 which is included within
debtors falling due after one year.
7 The weighted average number of shares in issue excluding those owned by the Employee Share
Trust used in the calculation of basic earnings per share was 59.2 million (2001 - 59.1
million). The calculation of diluted earnings per share is based on a weighted average of
59.3 million shares (2001 - 59.3 million).
8 The final dividend will be paid on 23 May 2003 to those shareholders whose names appear on
the Register of Members on 4 April 2003.
9 The financial information set out above does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31
December 2002 will be presented to shareholders for approval at the Annual General Meeting
convened for 14 May 2003.
Statutory accounts for the year ended 31 December 2001 have been delivered to the Registrar
of Companies. These accounts received an unqualified audit opinion.
This information is provided by RNS
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