Final Results

RNS Number : 7063U

Smart(J.)&Co(Contractors) PLC

26 October 2017

J SMART & CO (CONTRACTORS) PLC AND SUBSIDIARY COMPANIES

ACCOUNTS FOR THE YEAR ENDED 31st JULY 2017

PRELIMINARY STATEMENT

ACCOUNTS

Headline Group profit for the year before tax, including an unrealised surplus in revalued property and a profit on the unforeseen sale of property, was £4,037,000 compared with £3,752,000 last year.

As forecast underlying profit before tax for the year of £3,423,000 (including £613,000 profit from property sales) was less than last year's figure of £3,616,000 (including £186,000 profit from property sales). In our view discounting the increase in the revaluation of the commercial property portfolio provides a truer reflection of Group performance.

The Board is recommending a Final Dividend of 2.17p making a total of 3.12p which compares with 3.07p for the previous year. The Final Dividend will cost the Company no more than £973,000.

TRADING ACTIVITIES

Group construction activities including private residential sales decreased by 17%. Own work capitalised increased by 55% and headline Group profit increased by 8%. If you disregard the unexpected property sale headline Group profit would have decreased by 9%. Underlying Group profit decreased by 5%.

Turnover in contracting was less than last year and the loss was increased. As forecast private residential sales were less than the previous year. Sales in precast concrete manufacture have increased marginally, but profit has decreased.

The two large mixed social housing and private residential developments at Seafield Street and Pilton Drive, Edinburgh are now complete. The social housing contracts at Fleming Place, Edinburgh continue to make progress, but will be fully complete by April 2018. A further social housing contract at Ferrymuir, South Queensferry is to commence by April 2018, but this is by no means certain due to the continuing and unwelcome drawn out statutory approval process.

A mixed private housing and affordable housing development at West Bowling Green Street, Edinburgh, started after the financial year end, will provide 98 residential units and 4 commercial units. First completions will not be achieved during the current financial year.

The occupancy levels at our industrial estates, especially in the smaller size bracket, continue to be robust. We have finally encountered rental growth across all sizes of industrial units. This has partly been caused by a dearth of new build industrial development exacerbated in the Edinburgh area by a lack of industrial land supply.

The second phases at Inchwood Park, Bathgate and West Edinburgh Business Park, South Gyle, Edinburgh are progressing well and letting prospects are encouraging. The joint venture industrial development at Gartcosh, near Glasgow, has been delayed, but is still likely to proceed.

The voids in our office properties were reduced by the sale of CityWest, Robertson Avenue, Edinburgh. We launched a serviced office centre at our multi-let office building at Links Place, Leith, Edinburgh with our new subsidiary company, Smart Serviced Offices Limited. This has taken time to let but has assisted in attracting tenants to other vacant suites in the building.

FUTURE PROSPECTS

Work in hand in contracting, as alluded to above, is considerably less than last year. All of our contracting work, in the Housing Association sector, in the past five years has been site acquisition led and due to increasing land values opportunities in this regard have decreased. This, coupled with a highly competitive tender market, means the likelihood of future contracting work in this sector does not look promising at present.

There will be no private housing sales this year. Property valuation levels have improved since last year, but it remains to be seen if this trend will continue. Planning applications will be submitted this year for a residential development at Rosyth and a third phase of industrial development at West Edinburgh Business Park.

Due to reduced turnover, which will impact on the recovery of fixed overhead costs, and the cost of redundancies it is likely that underlying profit will be less than this year's underlying profit.

	DAVID W. SMART
	Chairman

CONSOLIDATED INCOME STATEMENT

for the year ended 31st JULY 2017

	2017	2016
	Unaudited	Audited
	£000	£000

Group construction activities	25,419	30,682
Less: Own construction work capitalised	(2,559)	(1,655)

REVENUE	22,860	29,027

Cost of sales	(19,406)	(25,260)


GROSS PROFIT	3,454	3,767

Other operating income	6,090	5,520
Net operating expenses	(6,925)	(6,095)


OPERATING PROFIT BEFORE PROFIT ON SALE AND NET SURPLUS ON VALUATION OF INVESTMENT PROPERTIES	2,619	3,192

Profit on sale of investment properties	613	186
Net surplus on valuation of investment properties	614	136


OPERATING PROFIT	3,846	3,514

Share of profits in Joint Ventures	42	33
Income from available for sale financial assets	32	14
Profit on sale of available for sale financial assets	22	-
Finance income	95	191

PROFIT BEFORE TAX	4,037	3,752

Taxation	(310)	(264)


PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS	3,727	3,488



EARNINGS PER SHARE - BASIC AND DILUTED	8.26p	7.61p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31st JULY 2017


	2017	2016
	Unaudited	Audited
	£000	£000

PROFIT FOR THE YEAR	3,727	3,488

OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be subsequently reclassified to the Income Statement:
Fair value adjustment of available for sale financial assets	65	(10)

TOTAL ITEMS WHICH MAY BE SUBSEQUENTLY RECLASSIFIED TO INCOME STATEMENT	65	(10)

Items that will not be subsequently reclassified to the Income Statement:
Actuarial gain/(loss) recognised in defined benefit pension scheme	3,306	(2,256)
Deferred taxation on actuarial (gain)/loss	(680)	215

TOTAL ITEMS THAT WILL NOT BE SUBSEQUENTLY RECLASSIFIED TO INCOME STATEMENT	2,626	(2,041)

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)	2,691	(2,051)


TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX	6,418	1,437


ATTRIBUTABLE TO EQUITY SHAREHOLDERS	6,418	1,437

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

as at 31st July 2017

	Share Capital	Capital Redemption Reserve	Fair Value Reserve	Retained Earnings	Total
	£000	£000	£000	£000	£000

At 1st August 2015	919	89	(46)	87,987	88,949

Profit for the year	-	-	-	3,488	3,488
Other comprehensive loss	-	-	(10)	(2,041)	(2,051)
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR	-	-	(10)	1,447	1,437

TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled	(13)	-	-	(691)	(704)
Transfer to capital redemption reserve	-	13	-	(13)	-
Dividends	-	-	-	(846)	(846)
TOTAL TRANSACTIONS WITH OWNERS	(13)	13	-	(1,550)	(1,550)

At 31st July 2016	906	102	(56)	87,884	88,836

Profit for the year	-	-	-	3,727	3,727
Other comprehensive income	-	-	65	2,626	2,691
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	-	-	65	6,353	6,418

TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled	(10)	-	-	(540)	(550)
Transfer to capital redemption reserve	-	10	-	(10)	-
Dividends	-	-	-	(846)	(846)
TOTAL TRANSACTIONS WITH OWNERS	(10)	10	-	(1,396)	(1,396)

At 31st July 2017 (unaudited)	896	112	9	92,841	93,858

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31st JULY 2017

	2017	2016
	Unaudited	Audited
	£000	£000
NON-CURRENT ASSETS
Property, plant and equipment	1,431	1,382
Investment properties	64,799	64,728
Investments in Joint Ventures	305	263
Available for sale financial assets	1,000	326
Retirement benefit surplus	3,862	33
Deferred tax asset	58	41

	71,455	66,773


CURRENT ASSETS
Inventories	2,881	2,684
Trade and other receivables	5,723	6,369
Monies held on deposit	2,536	5,519
Cash and cash equivalents	26,524	26,785

	37,664	41,357


TOTAL ASSETS	109,119	108,130



NON-CURRENT LIABILITIES
Deferred tax liabilities	1,923	1,389


CURRENT LIABILITIES
Trade and other payables	4,385	5,134
Current tax liability	162	143
Bank overdraft	8,791	12,628

	13,338	17,905


TOTAL LIABILITIES	15,261	19,294



NET ASSETS	93,858	88,836




EQUITY
Called up share capital	896	906
Capital redemption reserve	112	102
Fair value reserve	9	(56)
Retained earnings	92,841	87,884

TOTAL EQUITY	93,858	88,836

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31st JULY 2017

	2017	2016
	Unaudited	Audited
	£000	£000

Profit before tax	4,037	3,752
Share of profits from Joint Ventures	(42)	(33)
Depreciation	407	465
Unrealised valuation surplus on investment properties	(614)	(136)
Profit on sale of property, plant and equipment	(39)	(47)
Profit on sale of investment properties	(613)	(186)
Profit on sale of available for sale financial assets	(22)	-
Change in retirement benefits	(523)	(817)
Interest received	(86)	(125)
Change in inventories	(197)	3,051
Change in receivables	646	(1,861)
Change in payables	(749)	1,134

	2,205	5,197
Tax (paid)/received	(454)	634

NET CASH FLOWS FROM OPERATING ACTIVITIES	1,751	5,831


CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment	(487)	(488)
Additions to investment properties	(20)	(45)
Expenditure on own work capitalised - investment properties	(2,559)	(1,655)
Sale of property, plant and equipment	70	70
Sale of investment properties	3,735	525
Purchase of available for sale financial assets	(674)	-
Proceeds of sale of available for sale financial assets	87	1
Decrease/(increase) on monies held on deposit	2,983	(2,017)
Interest received	86	125
Dividend from Joint Ventures	-	37

NET CASH FLOWS FROM INVESTING ACTIVITIES	3,221	(3,447)


CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares	(550)	(704)
Dividends paid	(846)	(846)

NET CASH FLOWS FROM FINANCING ACTIVITIES	(1,396)	(1,550)


INCREASE IN CASH AND CASH EQUIVALENTS	3,576	834


CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	14,157	13,323


CASH AND CASH EQUIVALENTS AT END OF YEAR	17,733	14,157

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 2017 have not yet been filed with the Registrar of Companies and have not yet been reported on by the Company's auditors.

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 2017 and the unaudited financial information included in this preliminary statement and the accounting policies disclosed in the 2016 Annual Report and Statement of Accounts. The following standards, amendments to standards and interpretations became mandatory for the first time for the financial year to 31st July 2017 but these have had no material impact on the financial statements:

· IAS 1 (amended): Presentation of financial statements.

· IAS 19 (amended): Employee Benefits.

The unaudited consolidated financial statements are prepared under the historical cost convention with the exception of investment properties and available for sale financial assets which are recognised at fair value and are prepared on a going concern basis.

The financial information for the year to 31st July 2016 is derived from the statutory accounts for that year which were submitted to the Registrar of Companies and upon which the Company's auditors 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. DIVIDENDS

	2017	2016
	£000	£000
	Unaudited	Audited
Ordinary dividends
2015 Final dividend of 2.10p per share, after waivers	-	425
2016 Interim dividend of 0.92p per share	-	421
2016 Final dividend of 2.15p per share, after waivers	418	-
2017 Interim dividend of 0.95p per share	428	-

	846	846