Half-year Report

RNS Number : 6261I

Smart(J.)&Co(Contractors) PLC

19 April 2022

 

J. SMART & CO. (CONTRACTORS) PLC

INTERIM REPORT

FOR THE SIX MONTHS TO

31st JANUARY 2022

J. SMART & CO. (CONTRACTORS) PLC

CHAIRMAN'S REVIEW

INTERIM REPORT

Unaudited Group profit for the six months to 31st January 2022 on continuing and discontinued operations amounted to £6,334,000 compared with £829,000 for the corresponding period last year.  This increase in profit was largely due to the completion of the sale of the industrial estates: Bilston Glen Industrial Estate, Loanhead, Inchwood Park, Bathgate and West Edinburgh Business Park, South Gyle, Edinburgh.

In accordance with our normal practice, there has been no revaluation of our investment properties at the end of the half year.  If a half year revaluation had taken place, we believe that the valuation would have been no worse than last year, with no detrimental effect on the headline figures.

The small private housing development at Winchburgh, The Courtyard, completed with all sales concluded.

The larger private housing development at Winchburgh, Canal Quarter, is progressing well and reservations are currently encouraging.  The majority of the completions will be after the end of the current financial year, albeit we may have a limited number of completions prior to then.

The second phase of Gartcosh Industrial Park, developed through the joint venture company, Gartcosh Estates LLP, is now complete.  Interest in both units at the second phase is promising.

Whilst the restrictions covering the coronavirus pandemic are nearly at an end, we continue to see delays in the supply chain and rises in the price of construction materials.  This has continued to affect the viability of all types of potential projects and eroded the profits of recently completed and soon to be completed projects.  As such, the delays in procuring contracting work and commencing new private housing work continue.

INTERIM DIVIDEND

The Board announces an interim dividend of 0.96p per share (2021, 0.95p) to be paid on 6th June 2022 to shareholders on the register at the close of business on 6th May 2022.  The interim dividend will cost the Company no more than £400,000.

FUTURE PROSPECTS

We are hopeful that our residential development at Clovenstone Gardens, Edinburgh will start prior to the end of the financial year, which will provide a mixture of private housing for sale and affordable housing.

As mentioned above, there may be some limited further private housing sales this financial year.

Commercial property valuation levels have continued to improve since last year in the industrial sector, but to a lesser extent in the office sector.  Lettings of both our industrial and office stock remain robust, albeit we have recently experienced a slowing in the take up of space in both sectors.  However, it seems likely that the inexorable rise in investment yields, especially in the industrial sector, will plateau and may fall.

We intend to start the second phase at Belgrave Point, Bellshill in the near future, with a large speculative single user industrial unit, but it remains to be seen if this will commence prior to the end of the financial year.

Construction costs continue to rise.  This, coupled with inflation, rising utility prices and the general cost of living increases, may have an impact on the demand in the property sectors we trade in.

At this stage, it is difficult to make an accurate forecast for the year end figures.  It is unlikely that the headline profit will increase this financial year, and it remains to be seen what the underlying profit will be.

19th April 2022

D.W. SMART Chairman

CONSOLIDATED INCOME STATEMENT

	Notes	6 Months ended 31.1.22 (Unaudited)	6 Months ended 31.1.21 (Unaudited)	Year ended 31.7.21 (Audited)
		£000	£000	£000
CONTINUING OPERATIONS
Group construction activities		6,231	7,272	12,308
Less:  Own construction work capitalised		(1,072)	(1,518)	(1,901)
REVENUE		5,159	5,754	10,407
Cost of sales		(4,712)	(5,270)	(8,977)
GROSS PROFIT		447	484	1,430
Other operating income		3,592	3,554	7,446
Net operating expenses		(3,792)	(3,333)	(6,745)
OPERATING PROFIT BEFORE PROFIT ON SALE AND NET SURPLUS ON VALUATION OF INVESTMENT PROPERTIES		247	705	2,131
Profit on sale of investment properties		6,055	-	37
Net surplus on valuation of investment properties		-	-	12,105
OPERATING PROFIT		6,302	705	14,273
Share of profits in Joint Ventures		27	4	264
Income from financial assets		31	11	36
Profit on sale of financial assets		4	1	1
Net (deficit)/surplus on valuation of financial assets		(8)	173	312
Finance income		1	2	4
Finance costs		(6)	(6)	(25)
PROFIT BEFORE TAX		6,351	890	14,865
Taxation	5	(1,271)	(133)	(3,802)
PROFIT FROM CONTINUING OPERATIONS		5,080	757	11,063
DISCONTINUED OPERATIONS
Loss from discontinued operations	6	(14)	(49)	(93)
PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS		5,066	708	10,970
EARNINGS/(LOSS) PER SHARE	8
From continuing operations - basic and diluted		12.15p	1.78p	26.16p
From discontinued operations - basic and diluted		(0.03)p	(0.11)p	(0.22)p
From continuing and discontinued operations - basic and diluted		12.12p	1.67p	25.94p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		6 Months ended 31.1.22 (Unaudited)	6 Months ended 31.1.21 (Unaudited)	Year ended 31.7.21 (Audited)
		£000	£000	£000
PROFIT FOR THE PERIOD		5,066	708	10,970
OTHER COMPREHENSIVE INCOME
Items that will not be subsequently reclassified to Income Statement:
Remeasurement gains on defined benefit pension scheme		-	-	5,988
Deferred taxation on remeasurement gains on defined benefit pension scheme		-	-	(691)
TOTAL ITEMS THAT WILL NOT BE SUBSEQUENTLY RECLASSIFED TO INCOME STATEMENT		-	-	5,297
TOTAL OTHER COMPREHENSIVE INCOME		-	-	5,297
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX		5,066	708	16,267
ATTRIBUTABLE TO EQUITY SHAREHOLDERS		5,066	708	16,267

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Notes	Share Capital	Capital Redemption Reserve	Retained Earnings	Total
				£000	£000	£000	£000
As at 1st August 2021				840	168	112,376	113,384
Profit for the period				-	-	5,066	5,066
Other comprehensive income				-	-	-	-
Total comprehensive income for period				-	-	5,066	5,066
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(4)	-	(260)	(264)
Transfer to Capital Redemption Reserve				-	4	(4)	-
Dividends			7	-	-	(948)	(948)
Total transactions with owners				(4)	4	(1,212)	(1,212)
As at 31st January 2022				836	172	116,230	117,238

As at 1st August 2020				853	155	98,252	99,260
Profit for the period				-	-	708	708
Other comprehensive income				-	-	-	-
Total comprehensive income for period				-	-	708	708
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(6)	-	(364)	(370)
Transfer to Capital Redemption Reserve				-	6	(6)	-
Dividends			7	-	-	-	-
Total transactions with owners				(6)	6	(370)	(370)
As at 31st January 2021				847	161	98,590	99,598

As at 1st August 2020				853	155	98,252	99,260
Profit for the period				-	-	10,970	10,970
Other comprehensive income				-	-	5,297	5,297
Total comprehensive income for period				-	-	16,267	16,267
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(13)	-	(769)	(782)
Transfer to Capital Redemption Reserve				-	13	(13)	-
Dividends			7	-	-	(1,361)	(1,361)
Total transactions with owners				(13)	13	(2,143)	(2,143)
As at 31st July 2021				840	168	112,376	113,384

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		6 Months ended 31.1.22 (Unaudited)	6 Months ended 31.1.21 (Unaudited)	Year ended 31.7.21 (Audited)
		£000	£000	£000
NON-CURRENT ASSETS
Property, plant and equipment		1,256	1,203	1,245
Investment properties		76,175	80,246	93,060
Investments in Joint Ventures		1,294	905	1,267
Financial assets		1,183	1,045	1,184
Trade and other receivables		3,010	250	1,570
Retirement benefit surplus		4,725	-	4,725
Deferred tax assets		179	313	179
		87,822	83,962	103,230
CURRENT ASSETS
Inventories		7,999	6,383	7,531
Contract assets		52	273	246
Corporation tax asset		-	178	35
Trade and other receivables		2,925	2,867	2,945
Monies held on deposit		48	48	48
Cash and cash equivalents		38,907	23,685	19,355
		49,931	33,434	30,160
TOTAL ASSETS		137,753	117,396	133,390
NON-CURRENT LIABILITIES
Deferred tax liabilities		5,171	1,265	5,171
Lease liabilities		213	212	213
Retirement benefit deficit		-	1,076	-
		5,384	2,553	5,384
CURRENT LIABILITIES
Trade and other payables		2,839	2,715	3,050
Lease liabilities		-	-	-
Corporation tax liability		983	-	-
Bank overdraft		11,309	12,530	11,572
		15,131	15,245	14,622
TOTAL LIABILITIES		20,515	17,798	20,006
NET ASSETS		117,238	99,598	113,384
EQUITY
Called up share capital		836	847	840
Capital redemption reserve		172	161	168
Retained earnings		116,230	98,590	112,376
TOTAL EQUITY		117,238	99,598	113,384

 

CONSOLIDATED STATEMENT OF CASH FLOWS

		6 Months ended 31.1.22 (Unaudited)	6 Months ended 31.1.21 (Unaudited)	Year ended 31.7.21 (Audited)
		£000	£000	£000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax - continuing and discontinued operations		6,334	829	14,784
Share of profits from Joint Ventures		(27)	(4)	(264)
Depreciation		169	151	349
Unrealised valuation surplus on investment properties		-	-	(12,105)
Unrealised valuation deficit/(surplus) on financial assets		8	(173)	(312)
Profit on sale of property, plant and equipment		(5)	(31)	(35)
Profit on sale of investment property		(6,055)	-	(37)
Profit on sale of financial assets		(4)	(1)	(1)
Change in retirement benefits		-	-	187
Interest received		(1)	(2)	(4)
Interest paid		6	6	12
Change in inventories		(468)	(202)	(1,350)
Change in contract assets		194	150	177
Change in receivables - current		20	(44)	(122)
Change in payables		(211)	(357)	(22)
		(40)	322	1,257
Tax paid		(250)	(160)	(361)
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES		(290)	162	896
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment		(184)	(88)	(336)
Additions to investment properties		(20)	(89)	(439)
Expenditure on own work capitalised - investment properties		(1,072)	(1,518)	(1,901)
Proceeds of sale of property, plant and equipment		9	33	45
Proceeds of sale of investment property		24,032	-	62
Purchase of financial assets		(47)	-	-
Proceeds of sale of financial assets		44	15	15
Interest received		1	2	4
Loan to Joint Venture		(1,440)	-	(1,320)
Investment in Joint Ventures		-	-	(133)
Dividend received from Joint Ventures		-	-	31
NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES		21,323	(1,645)	(3,972)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest costs on leases		(6)	(6)	(12)
Purchase of own shares		(264)	(370)	(782)
Dividends paid		(948)	-	(1,361)
NET CASH OUTFLOW FROM FINANCING ACTIVITIES		(1,218)	(376)	(2,155)
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		19,815	(1,859)	(5,231)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		7,783	13,014	13,014
CASH AND CASH EQUIVALENTS AT END OF PERIOD		27,598	11,155	7,783

NOTES TO INTERIM FINANCIAL STATEMENTS

1.  BASIS OF PREPARATION

J. Smart & Co. (Contractors) PLC is a company domiciled in the United Kingdom.  The condensed consolidated interim financial statements of the Company for the six months ended 31st January 2022 comprise the Company and its Subsidiaries, together referred to as the Group, and the Group's interest in jointly controlled entities.

The condensed consolidated interim financial statements for the six months to 31st January 2022 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34: Interim Financial Reporting adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. 

The condensed consolidated interim financial statements for the six months to 31st January 2022 do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year to 31st July 2021, which have been prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The statutory financial statements for the year to 31st July 2021 have been filed with the Registrar of Companies and a copy may be obtained from Companies House.  These have been audited and contain an unqualified audit opinion, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements have not been audited or reviewed by the Company's auditor.  A copy of the interim financial statements will be available on the Company's website www.jsmart.co.uk.

2.  ACCOUNTING POLICIES

The condensed consolidated interim financial statements have been prepared under the historical cost convention except where the measurement of balances at fair value is required for investment properties, financial assets and assets held by defined benefit pension scheme.

The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31st July 2021, with the exception of the policies regarding the accounting for pension scheme obligations and investment properties revaluations. 

For the condensed consolidated interim financial statements, the assets and liabilities of the pension scheme are estimated to be unchanged from the values included at the previous year end.  Also, in accordance with long standing practice, the Group's investment properties are revalued annually on 31st July each year and therefore, no revaluation adjustment is made in the condensed consolidated interim financial statements.

Standards, Amendments to Standards and Interpretations effective in period

The following new standards, amendments to standards and interpretations, which are relevant to the Group, were issued by the International Accounting Standards Board and are mandatory for the Group for the first time in the financial year to 31st July 2022:

· IAS 39 (amended): Financial Instruments: Recognition and Measurement.

· IFRS 7 (amended): Financial Instruments: Disclosures.

· IFRS 9 (amended): Financial Instruments.

· IFRS 16 (amended): Leases.

· IAS 37 (amended): Provisions, Contingent Liabilities and Contingent Assets.

The Directors anticipate that there will be no material impact of these amendments to standards on the financial statements.

Estimates and assumptions

The preparation of the condensed consolidated interim financial statements requires management to make estimates and assumptions concerning the future that may affect the application of accounting policies and the reported amounts of assets, liabilities and income and expenses.  Management believes that the estimates and assumptions used in the preparation of these accounts are reasonable.  However, actual outcomes may differ from those anticipated.

Going concern

The financial statements have been prepared on a going concern basis. The Directors have prepared a number of cashflows scenarios taking account of trading activities around construction projects in hand and anticipated projects, land acquisitions, rental income, investment property acquisitions and disposals and other capital expenditure.  The Directors also have taken account of the continuing impact of the coronavirus on the construction and investment activities of the Group.  In each scenario reviewed by the Directors the Group remains cash positive with no reliance on external funding and therefore remains net debt free. The net assets of the Group are £117,238,000 at 31st January 2022 and the Group's net current assets amount to £34,800,000.  Taking all of the information the Directors currently have they are of the opinion that the Company and Group are well placed to manage its financial and business risks and have a reasonable expectation that the Company and Group have adequate financial resources to continue in operational existence for a period of at least twelve months from the date of approval of these financial statements and therefore consider the adoption of the going concern basis as appropriate for the preparation of these financial statements.

3.  PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties which could have a material impact on the Group's performance for the remainder of the current financial year remain the same as those detailed in the Group's Annual Report and Financial Statements for the year to 31st July 2021, including the ongoing situation relating to the coronavirus pandemic.  The Directors are closely monitoring the situation as it develops and the impact it is having on the trading performance of the Group and will continue to do so.  The Directors will take appropriate actions to help mitigate the impact of the situation on the Group's performance and future prospects.

4.  SEGMENTAL INFORMATION

IFRS 8: Operating Segments requires operating segments to be identified on the basis of internal reporting about components of the Group and they are regularly reviewed by the chief operating decision maker to allow the allocation of resources to the segments and to assess their performance.  The chief operating decision maker has been identified as the Board of Directors.  The chief operating decision maker has identified two distant areas of activities in the Group being construction activities and investment property activities.

All revenue and investment property income arises from activities within the UK and therefore the Board of Directors does not consider the business from a geographical perspective.  The operating segments are based on activity and performance of an operating segment is based on a measure of operating results.

	External Revenue	Internal Revenue	Total Revenue	Other Operating Income	Operating Profit/(Loss)
					31.1.22	31.1.21			31.7.21
	£000	£000	£000	£000	£000	£000			£000
31st JANUARY 2022 (Unaudited)
Construction - continuing operations	5,159	1,072	6,231	-	(1,611)	-			-
Construction - discontinued operations	-	-	-	-	(17)	-			-
Investment property  - continuing operations	-	-	-	3,587	7,913	-			-
Investment property  - discontinued operations	-	-	-	4	-	-			-
	5,159	1,072	6,231	3,591	6,285	-			-
31st JANUARY 2021 (Unaudited)
Construction - continuing operations	5,754	1,518	7,272	-	-	(1,345)			-
Construction - discontinued operations	-	-	-	-	-	(61)			-
Investment property  - continuing operations	-	-	-	3,554	-	2,050			-
Investment property  - discontinued operations	-	-	-	4	-	-			-
	5,754	1,518	7,272	3,558	-	644			-
31st JULY 2021 (Audited)
Construction - continuing operations	10,407	1,901	12,308	-	-	-			(2,305)
Construction - discontinued operations	-	-	-	-	-	-			(81)
Investment property  - continuing operations	-	-	-	7,411	-	-			16,578
Investment property  - discontinued operations	-	-	-	7	-	-			-
	10,407	1,901	12,308	7,418	-	-			14,192
OPERATING PROFIT (continuing and discontinued activities)					6,285	644			14,192
Share of results of Joint Ventures					27	4			264
Finance and investment income					36	187			353
Finance and investment costs					(14)	(6)			(25)
PROFIT BEFORE TAX ON ORDINARY ACTIVITIES					6,334	829			14,784
(continuing and discontinued activities)

5.  TAXATION

The tax charge for the six months to 31st January 2022 is based on the corporation tax rate at 19.00% (2021, 19.00%).

6.  DISCONTINUED OPERATIONS

In the year to 31st July 2019 Concrete Products (Kirkcaldy) Limited ceased trading.

The results of the discontinued operation, which have been included in the profit, were as follows:

	6 Months Ended 31.1.22 (Unaudited)	6 Months Ended 31.1.21 (Unaudited)	Year Ended 31.7.21 (Audited)
	£000	£000	£000
Other operating income	4	4	7
Net operating expenses	(21)	(65)	(88)
Loss before tax	(17)	(61)	(81)
Taxation
Corporation tax	3	12	(12)
Net loss attributable to discontinued operations	(14)	(49)	(93)
The company had cashflows amounting to:
Operating activities	(40)	(57)	(64)
Investing activities	-	-	-

7.  DIVIDENDS

	6 Months Ended 31.1.22 (Unaudited)	6 Months Ended 31.1.21 (Unaudited)	Year Ended 31.7.21 (Audited)
	£000	£000	£000
ORDINARY DIVIDENDS
2020 Final Dividend of 2.27p per share	-	-	961
2021 Interim Dividend of 0.95p per share	-	-	400
2021 Final Dividend of 2.27p per share	948	-	-
	948	-	1,361

The interim dividend of 0.96p per share for the year to 31st July 2022 will be paid on 6th June 2022 to shareholders on the register at 6th May 2022.  The interim dividend will cost the Company no more than £400,000.

8.  EARNINGS/(LOSS) PER SHARE

	6 Months Ended 31.1.22 (Unaudited)	6 Months Ended 31.1.21 (Unaudited)	Year Ended 31.7.21 (Audited)
CONTINUING OPERATIONS
Profit attributable to Equity Shareholders  £000	5,080	757	11,063
Basic and diluted Earnings per share	12.15p	1.78p	26.16p
DISCONTINUED OPERATIONS
Loss attributable to Equity Shareholders  £000	(14)	(49)	(93)
Basic and diluted Loss per share	(0.03)p	(0.11)p	(0.22)p
CONTINUING AND DISCONTINUED OPERATIONS
Profit attributable to Equity Shareholders  £000	5,066	708	10,970
Basic and diluted Earnings per share	12.12p	1.67p	25.94p
Weighted average number of shares	41,810,610	42,452,302	42,284,057

Basic earnings/(loss) per share are calculated by dividing the profit/(loss) attributable to equity shareholders by the weighted average number of shares in issue during the period.

During the six months to 31st January 2022 the Company purchased for immediate cancellation 198,000 Ordinary Shares of 2p.

There is no difference between basic and diluted earnings per share.

9.  FAIR VALUE ASSETS

The Group's investment properties, financial assets and assets held by defined benefit pension scheme are measured at fair value after initial recognition.

Investment properties are only valued annually by the Directors at the year end and not for the purposes of the interim financial statements.  The Group considers all of its investment properties fall within 'Level 3' of the fair value hierarchy as described by IFRS 13: Fair Value Measurement.  Level 3 valuations are those using inputs for the asset or liability that are not based on observable market data.  The main unobservable inputs relate to estimated rental value and equivalent yield.

The Group's financial assets consisted entirely of equities of companies listed on quoted markets which fall within 'Level 1' of the fair value hierarchy.  Assets held by defined benefit pension scheme consist of equities and bond of companies listed on quoted markets and cash which all fall within 'Level 1' of the fair value hierarchy.  Level 1 valuations are those using inputs which are quoted prices (unadjusted) in active markets for identical assets or liabilities the Group can access at the period end date.

10.  RELATED PARTY TRANSACTION

Related parties are consistent with those disclosed in the Group's Annual Report and Statement of Accounts for the year to 31st July 2021.

Related party transactions, including salary and benefits provided to Directors and key management, were not material to the financial position or performance of the Group for the period.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors named below, confirm on behalf of the Board of Directors that to the best of their knowledge that the condensed consolidated interim financial statements for the six months to 31st January 2022 have been prepared in accordance with IAS 34: Interim Financial Reporting adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.  The condensed consolidated interim financial statements include a fair review of the information required by Disclosure and Transparency Rules 4.2.7 and 4.2.8, being:

· an indication of important events that have occurred during the six months to 31st January 2022 and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year, and

· material related party transactions in the six months to 31st January 2022 and any material changes in the related party transactions described in the last annual report.

The Directors of the Company are listed in the Annual Report and Statement of Accounts for the year to 31st July 2021. 

By order of the Board
D.W. SMART, Director	J.R. SMART, Director
19th April 2022

 

END

 

 

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