Final Results

RNS Number : 2188U

Artisan (UK) PLC

12 October 2010

 



FOR IMMEDIATE RELEASE                                                                                   

12 October 2010

ARTISAN (UK) plc

PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2010

Artisan (UK) plc ("the Group"), the AiM listed house builder, business park developer and property investor announces its preliminary results for the year to 30 June 2010.

Key Points:

·      Group turnover for the year reduced to £9.4m (2009: £10.9m)

·      Operating loss contained at £1.5m (2009: loss £6.8m)

·      Loss before tax reduced to £1.9m (2009: loss £8.1m)

·      Residential division: volumes have stabilised due to moderate recovery in residential customer confidence

·      Commercial division: signs of forward sales returning despite difficult market conditions

·      Board negotiating revised banking agreements for post 1 July 2011

Michael W Stevens, Non-executive Chairman, commented:

"Although there are signs that sentiment is beginning to improve in our core markets, confidence is fragile.  Whilst the Group should benefit from a genuine economic recovery, currently conditions are not in place with factors such as lack of availability of mortgage funding and the hiatus in planning approvals remaining a drag on progress."

Enquiries:

Artisan (UK) plc                                                                                                                01480  436666

Chris Musselle, Chief Executive                                                                                                                                                            

Bankside Consultants                                                                                                    020 7367 8888

Simon Rothschild/Louise Mason                                                                    Mobile: [phone]

Altium Capital Limited                                                                                                    0845 505 4343

Adrian Reed                                                                                                                                                                                           

CHAIRMAN'S STATEMENT

In 2009 the Group faced some of the toughest trading conditions in its history in respect of the residential market and these tough trading conditions continued into 2010.  In early 2010 there was a limited recovery in residential customer confidence despite the restricted availability of mortgage funds to potential house-buyers.  However during the summer months up to our year end of 30 June 2010 we returned to a very low level of activity, as the general election influenced a number of customers to hold on purchases, until the economic and political outlook became clearer. Such transactions as could be agreed were often curtailed by harsh valuation assessments, which in our view were unreasonable, provided by valuers to mortgage providers. 

In our commercial division, customers for our stock items started to re-emerge in a modest manner towards the end of the period under review.  Encouragingly, we have commenced discussions with parties wishing to procure a new office on a forward sale or let basis.  This is reassuring and demonstrates that there are sections of the economy that are able to trade successfully and with confidence for the future.

Group Results

Our Group results were much as expected: Group turnover for the year reduced to £9.4m (2009 - £10.9m). The commercial business generated turnover of £1.5m (2009: £2.9m) and the residential business turnover of £7.6m (2009 - £7.8m). This reduced level of sales has resulted in an Operating loss of £1.3m (2009: loss £2.5m) before exceptional items and an Operating loss of £1.5m (2009: loss £6.8m) after exceptional items.  The results benefit from some modest recovery in the investment market and include a surplus £0.3m compared to a revaluation writedown of £0.8m in the 30 June 2009 results.  This reflects a moderate return in investor confidence which is welcome and bodes well for future investment yields.

Overview

This year has seen a continuance of the same problems that created the trading difficulties in the market last year. 

On the residential side of the business, we have responded to this by considering at length the product we offer.  The most feasible customers are those that have accrued equity in their existing properties, which usually excludes buyers of smaller properties. Additionally there are customers trading down, having accepted the worth of their existing property in the current market and have equity.  We have therefore concentrated production on our four bedroom units and bungalows.  We have been very successful in marketing bungalows and generating a good return from these products.  We have also been seeking to vary planning permission on existing sites to improve the product mix. 

Until customer confidence returns and mortgage funding is more broadly available the market will continue to be difficult.  Central government must take the lead in creating a more stable environment in which consumers can look forward with a greater degree of certainty, and the terms which lenders need to adhere are clear and so can lend with greater confidence.  Further support and funding availability needs to be given to those who through relationship break-ups find themselves re-entering the market at lower price points, as well as first time buyers.

Artisan (UK) Developments has found the market for stock properties difficult as customers lack the confidence to commit to purchases.  Market prices have stabilized and we have managed to complete a restricted number of sales at discounted prices. After a period of inactivity we are seeing some return to forward sale and forward let negotiations.  These are being carefully negotiated and we are seeing that where there is a good tenant covenant, investors can be keen to support a new development.

Land purchases have concentrated on seeking out option and joint venture structures rather than outright acquisitions. This limits financial exposure and works within our banking terms.

The inherent quality of our product is of assistance in this market and we have had buyers that preferred Artisan and Rippon Homes products to cheaper competition.

Marketing

Our development divisions continue to provide innovative ways to promote our products and will negotiate keenly on pricing.  Last year we offered to help overcome the lack of mortgage availability to those with restricted funds, by embarking on a programme of selling some of our lower value properties on a shared equity basis.  This has been successful and will continue on a modest basis into the new financial year.

Stock values

We have again carefully considered the pricing of all stock plots on an individual basis at both the half year and year end.  Last year there was a requirement to write down the carrying value of some residential property stock.  Following the same exercise this year a much smaller writing down of stock was required.  It was apparent that whilst some stock items varied from estimate, the provision required was materially accurate.

Investment Division

The tenants in our investment buildings have continued to adhere to the lease terms without apparent difficulty and the buildings have performed well.

The Board has considered the carrying values of the properties. Following the reduction in carrying values last year in response to the increase in investment yields, we have seen the market stabilise and modestly improve in the current year.  This has resulted in a £0.3m surplus in the income statement compared with the charge of £0.8m recognised in 2009. During the year we have not sought to increase our investment in long term property holdings, concentrating our funds on the trading activities. 

Dividend

The Board believes that it is sensible to retain funds within the business whilst we await a return to normal trading conditions and better results.  We believe shareholders will recognise this approach as prudent.  Accordingly, no dividend is recommended for the year.

Outlook

The markets for both residential and commercial property remain fragile and, as indicated, an improvement in mortgage funding and consumer confidence is necessary before we can expect any significant improvement in trading results.  However there is now better clarity as to which segments of the market can consider property purchase in both the residential and commercial arenas.  Mature buyers with funds and equity available lead the residential market and certain industry groups, particularly those in finance and insurance sectors are active in the commercial sector.

Artisan (UK) Developments have suffered from leasehold competition where landlords fearful of the punitive empty business rate costs have led a downward spiral in short term rental values.  However some customers have, correctly in our opinion, seen this squeeze as a short term phenomenon and a better opportunity being to acquire high quality business premises at very commercial prices.

It is our view that the development pipeline will lead to stock shortages in the future.  To compound this we also believe that the planning system has gone from bad to worse at present.  The reduction in staff numbers in planning departments and the central government's cancellation of planning number targets has led to a hiatus in planning approvals, causing in some regions significant delay in obtaining planning for new schemes.  This in our view is likely to lead to the next pricing bubble when the market returns, as the demand demographics suggest customer demand for product will not abate.

Based on the current market conditions and difficult outlook, it is the Group's intention to review the existing operations and assess what is the best structure for the Group going forward.  Combined with the need to maintain banking covenants and renew banking facilities, shareholders should be aware that additional debt or equity funding may be required which could lead to future shareholder dilution, the restructuring of the Group's subsidiary operations or possible mergers.  The board has given careful consideration to the going concern basis upon which these accounts are prepared as explained in greater detail in the operational and financial review, directors' report and note 1 of the accounting policies. 

It is the Board's belief that the fundamental characteristics of property development remain strong and that given time the Group can benefit from any long term recovery in the economy.

Michael W Stevens

Chairman

12 October 2010

OPERATIONAL AND FINANCIAL REVIEW

Residential Division

Following two difficult years to 30 June 2009, 2010 has continued to challenge Rippon Homes. Financially feasible customers have been hard to find whilst difficulties in completing mortgage financing and the very cautious approach of valuers has reduced the number of firm reservations and sales achievable.  Sales of 44 units at an average value of £173,500 (2009 - 41 units at an average value of £189,650) reflects the market conditions across the housebuilding sector.  The decrease in average price reflects the sales of shared equity units and the requirement to account for the finance income implicit in the deferred payment arrangement.  Adjusting for this, the average sales value is £176,075 per unit.  The product mix has varied mainly in two complementary ways:  at the lower end of the price scale we have sold 8 units under shared equity which has been the most successful way to stimulate sales activity for the smaller properties;  at the other end of the scale we have seen demand for our four bedroom units and bungalows - a re-introduced product.  More bungalow sales will follow in 2010.  Bungalows have not been popular with developers for a while because of the relatively high build cost and less efficient use of land, however, Rippon Homes has successfully found sites suitable for bungalows which have proved popular with customers.

Rippon Homes continues to use a wide variety of sales incentives.  Much of the promotion has focused on the availability of homes at prices at a discount from list price and the availability of part exchange properties.  The ability to deal in part exchange properties has been very useful in maintaining sales.  Part exchange stocks have been carefully managed to avoid creating an overstock of these properties, though there remains a cost in managing the part exchange scheme.  The management team look to ensure that the cost of trading a part exchange property is reflected in the deal to sell the original property.  At the year end Rippon Homes had a stock of 11 units (2009: 14 units), which was below the management allowance for part exchange stocks.  Last year because of the time lag between agreeing a part exchange deal on a new house and the eventual sale, losses were incurred.  This year we have no exceptional provision against the closing stock at 30 June 2010 (2009: exceptional provision of £175,000).

As indicated above we have been selling houses on a shared equity basis to assist customers who cannot raise the equity required to secure a mortgage.  By 30 June 2010 we had completed 6 units (2009: 2 units) on this basis.  The Group therefore has an interest in a total of 8 and more are expected to follow in the next financial year.  The accounting treatment requires that the estimated implied interest cost of deferring part of the sale value is deducted from turnover and recognised as interest receivable over the term. 

Encouragingly, after severely reducing production in 2009, Rippon Homes has restarted some production to deliver product for sale.  The level of production is monitored against sales progress, although some anticipation is needed due to production taking the usual 5 to 9 months to deliver units for sale.  Finished good stocks are now at a level required to maintain current sales levels.

Commercial Division

The commercial division continues to suffer from the realities of the current market.  Towards the end of the financial year there has been increased interest in our stock units resulting in two freehold sales of previously let units and a freehold sale in June.  We achieved a further sale of an office unit shortly after the year end.  Sales interest remains slow with potential customers reluctant to rush towards commitment.  Although we are achieving lower sale prices on stock units than hitherto, the financial performance of the sites indicates that no carrying value provisions are required.  Potential forward sale discussions are at indicative prices above those we can achieve for stock units.  The commercial division will not enter into a forward sale contract unless it can anticipate a reasonable margin. 

Therefore new build remains suspended and will only be re-started once the Board sees more progress in realising existing stock and better prices, or on the strength of a forward sale or let contract.  The significantly reduced construction team has been working on a short time basis, providing technical support for sales enquiries and cost benefit guidance and feasibility for energy saving schemes.

The commercial business sold 9,700 ft² of commercial property (2009: 11,700ft²), all consisting of completed stock units as in 2009. 

Investment Properties

The investment properties continue to be occupied by the tenants and Artisan itself.  The property investment market has reflected the current economic conditions and seen an improvement in investment yields.  Therefore, as at the half year, the Board has considered the carrying value of the properties and after informal consultation with valuers, we have decided to increase the carrying value by a further £301,000 which together with the amortisation of lease incentives resulted in an increase of £313,000 at 31 December 2009 culminating in a total surplus of £326,000 for the year to 30 June 2010 (2009: charge £750,000).

Whilst we are concentrating on maintaining cash balances through the Group, we have not invested in any further long term investment properties.  Any lettings achieved by the trading divisions have been regarded as short term steps prior to achieving a sale of the investment. 

The investment company also holds approximately 43 acres of horticultural land, for which we have actively been working on a project to gain planning permission, perhaps initially only on part of the site.  Good progress had been made but this has been thrown into disarray and uncertainty by the measures adopted by the new government in abolishing local housing targets, with the region's planning team reluctant to consider any applications positively whilst awaiting further guidance from central government.

Land stocks

We have made two small land purchases for Rippon Homes to develop in the short term.  One was an opportunistic purchase at auction for a medium sized site offering a 'chocolate box' selection of different properties to enhance the site and allow a wide selection for potential customers.  Another is a small bungalow site to capitalise on our success during and since the year end selling this product. 

The land stock of owned or secured plots at Rippon Homes is 239 plots (2009: 260).  All of these plots have the benefit of detailed planning permission or planning permission to be granted shortly.

The commercial operation currently holds freehold amounting to 17,400m² (2009: 18,500m²).    All of this land has planning permission, most of it detailed.  Control of land is a key requirement for generating forward sales and lets and it is the intention of management to secure forward sales as an integral part of achieving future growth.   

Writing down values in accordance with financial accounting standards, combined with some cost increase, has resulted in the exceptional losses we have disclosed in the accounts.  The basis of providing these writedowns has been to reduce the carrying value to a position whereby our stock will breakeven at gross margin level where there are no future profits expected on a site.

Results

	Residential £m	Commercial £m	Investment £m	Central & Other £m	Total £m
Revenue 2010	7.6	1.5	0.3	-	9.4
2009	7.8	2.9	0.3	(0.1)	10.9
Operating (Loss)/Profit before group management charges and exceptional items
2010	(0.9)	(0.5)	0.6	(0.5)	(1.3)
2009	(1.1)	-	(0.5)	(0.9)	(2.5)

The divisional analysis of operating (loss)/profit is before Group management charges and exceptional costs.  The Central and Other column deducts from turnover any inter segment trading.

The tax credit for the year is £90,142 (2009: £27,425) resulting in an effective tax rate credit of 4.69% (2009: 0.3%). The reduction to standard rate is primarily a result of unrelieved trading losses carried forward for which no deferred tax asset has been recognised.

The exceptional items may be analysed as follows:

	2010	2009
	£m	£m
Goodwill impairment	-	2.5
Staff reduction costs	-	0.1
Land contract withdrawal	-	0.1
Residential land and WIP provisions	0.2	1.4
Residential land and WIP provisions reversals	(0.1)	-
Part exchange stock write downs	-	0.2
Total	0.1	4.3

The net assets have reduced from £15.3m to £13.5m as a result of the trading losses for the year and exceptional items. 

Share capital has not increased in the year following last year's increase as a result of the conversion of the convertible loan note of £1.75m issued to Aspen Finance Limited in August 2008 creating 5,128,205 new shares. 

Debt and Banking

The Group has net borrowings of £18.5m (2009: £20.8m).  The Group has drawn bank debt of £22.7m (2009: £29.9m) resulting in cash balances which, although reduced, provide funds for continuing trading and debt reduction.  The development facility extends until 1 July 2011.  The terms of the investment property loan were as expected varied in November 2009.  The interest margin was increased to 2.25% from 1.25% and the Loan to Value ratio was reduced from 85% to 70% resulting in a repayment of £1.1m.  The bank also cancelled the ability to draw down loans for any valuation increases or new properties.

Our development bank facility is split between a LIBOR based facility and a base rate based facility.  The base rate interest margin is 1% greater than the LIBOR based cost of funding, but this element of the facility allows positive bank balances in the Group to be offset against drawdown funds for the purposes of interest calculation allowing for an effective management of funding.  The current margins are Base Rate plus 3.25% and LIBOR plus 2.25% for the respective sub-divisions of the development loan.  Our two principal covenants are a cash covenant requiring that Artisan maintain, on a 1 year rolling quarterly basis, a minimum 1 to 1 ratio in respect of cash receipts to payments (excluding loan repayments) and also a minimum Net Asset covenant of £12.5m ignoring any revaluation gains after 30 June 2008.  The gearing ratio is now 137.2% (2009: 135.6%).

Work in Progress

Work-in-progress has reduced from £33.7m to £28.4m, reflecting a reduction in finished stocks and some reduction in land bank.  The key management issue is to maintain sufficient but not excessive stocks of product available for purchase.  The nature of the residential market is that most customers are able to choose from available competing product, and therefore a reasonable and varied selection of product across sites is required.  This is also true of many commercial customers, particularly for our smaller premises. 

Going Concern

The report of the directors refers to the considerations addressed when making the assessment of the Group's ability to continue as a going concern and note 1 of the accounting policies refers to the going concern basis upon which these accounts are prepared.  Our current banking facilities expire at 1 July 2011 and therefore renegotiating these to allow the Group to continue to develop new sites is crucial to the ongoing operations of the business.  We have been negotiating these for sometime, with our current lender looking to reduce loan to value ratios and restructure facilities.  These negotiations are ongoing and may require new equity and/or other restructuring activities, however the Group's board is confident that a consensual and positive way forward can be agreed.

Chris Musselle

Chief Executive

12 October 2010

ARTISAN (UK) PLC

GROUP INCOME STATEMENT

For The Year Ended 30 June 2010

	Note	Year ended 30 June 2010	Year ended 30 June 2009
		£	£
REVENUE		9,403,279	10,926,592
COST OF SALES
Before exceptional items		(9,394,169)	(10,172,288)
Exceptional items	3	(138,499)	(1,684,184)
Cost of sales		(9,532,668)	(11,856,472)
		__________	__________
GROSS PROFIT/(LOSS)
Before exceptional items		9,110	754,304
Exceptional items	3	(138,499)	(1,684,184)
GROSS LOSS		(129,389)	(929,880)
Other operating income		321,589	343,345
Administrative expenses
Before exceptional items		(1,988,906)	(2,846,302)
Exceptional items	3	-	(2,610,124)
Administrative expenses		(1,988,906)	(5,456,426)
		__________	__________
		(1,796,706)	(6,042,961)
Revaluation surplus/(deficit) on investment properties	6	325,754	(750,412)
		__________	__________
OPERATING LOSS
Before exceptional items		(1,332,453)	(2,499,065)
Exceptional items	3	(138,499)	(4,294,308)
OPERATING LOSS		(1,470,952)	(6,793,373)
Finance income		22,855	29,279
Finance expense		(474,507)	(1,301,189)
		__________	__________
LOSS BEFORE TAXATION
Before exceptional items		(1,784,105)	(3,770,975)
Exceptional items	3	(138,499)	(4,294,308)
LOSS BEFORE TAXATION		(1,922,604)	(8,065,283)
Tax credit
Before exceptional items		90,142	12,823
Exceptional items	3	-	14,602
Tax credit		90,142	27,425
		__________	__________
LOSS FOR THE YEAR ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT
Before exceptional items		(1,693,963)	(3,758,152)
Exceptional items	3	(138,499)	(4,279,706)
LOSS FOR THE YEAR ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT		(1,832,462)	(8,037,858)
		__________	__________
Basic and diluted loss per share	5	(13.75)p	(97.21)p
		__________	__________

ARTISAN (UK) PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

For The Year Ended 30 June 2010

		Year ended 30 June 2010	Year ended 30 June 2009
		£	£
Loss for the year		(1,832,462)	(8,037,858)
Other comprehensive expense for the year
Revaluation of Group occupied property		-	(46,796)
		__________	__________
Other comprehensive expense for the year		-	(46,796)
		__________	__________
Total comprehensive expense for the period attributable to the equity holders of the parent		(1,832,462)	(8,084,654)
		__________	__________

ARTISAN (UK) PLC

GROUP STATEMENT OF CHANGES IN EQUITY

			Share				Capital						Own
	Share		premium		Merger		redemption		Revaluation		Retained		shares
	capital		account		reserve		reserve		reserve		earnings		held		Total
	£		£		£		£		£		£		£		£
At 1 July 2008	1,642,650		10,356,683		515,569		91,750		74,840		8,773,061		(19,065)		21,435,488
Revaluation of owner occupied   property and net income recognised   directly in equity	-		-		-		-		(46,796)		-		-		(46,796)
Loss for the year	-		-		-		-		-		(8,037,858)		-		(8,037,858)
Total recognised income and expense   for the year	-		-		-		-		(46,796)		(8,037,858)		-		(8,084,654)
Dividends paid	-		-		-		-		-		(61,490)		-		(61,490)
Issue of shares	1,025,641		1,000,000		-		-		-		-		-		2,025,641
Credit in respect of employee   share schemes	-		-		-		-		-		10,188		-		10,188
At 30 June 2009	2,668,291		11,356,683		515,569		91,750		28,044		683,901		(19,065)		15,325,173
Loss for the year	-		-		-		-		-		(1,832,462)		-		(1,832,462)
Total recognised income and expense   for the year	-		-		-		-		-		(1,832,462)		-		(1,832,462)
Credit in respect of employee   share schemes	-		-		-		-		-		601		-		601
At 30 June 2010	2,668,291		11,356,683		515,569		91,750		28,044		(1,147,960)		(19,065)		13,493,312

ARTISAN (UK) PLC

GROUP STATEMENT OF FINANCIAL POSITION

As at 30 June 2010

Company Number : 3630998		30 June 2010	30 June 2009
		£	£
ASSETS
Non-current assets
Investment properties	6	3,723,192	3,397,438
Property, plant and equipment		801,522	833,517
Other receivables		479,793	393,245
		__________	__________
		5,004,507	4,624,200
		__________	__________
CURRENT ASSETS
Inventories		28,397,947	33,724,507
Trade and other receivables		490,700	678,405
Current tax recoverable		33,872	19,118
Cash and cash equivalents		403,874	1,396
		__________	__________
		29,326,393	34,423,426
		__________	__________
Total assets		34,330,900	39,047,626
		__________	__________
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings		(18,920,431)	(19,441,807)
		__________	__________
Current liabilities
Trade and other payables		(1,686,705)	(2,502,802)
Interest bearing loans and borrowings		-	(1,333,772)
Provisions		(230,452)	(444,072)
		__________	__________
		(1,917,157)	(4,280,646)
		__________	__________
Total liabilities		(20,837,588)	(23,722,453)
		__________	__________
NET ASSETS		13,493,312	15,325,173
		___ __ ____	___ __ ____
EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT COMPANY
Called up share capital		2,668,291	2,668,291
Share premium account		11,356,683	11,356,683
Merger reserve		515,569	515,569
Capital redemption reserve		91,750	91,750
Revaluation reserve		28,044	28,044
Retained earnings		(1,147,960)	683,901
Own shares		(19,065)	(19,065)
		__________	__________
TOTAL EQUITY		13,493,312	15,325,173
		___ __ ____	___ __ ____

ARTISAN (UK) PLC

GROUP STATEMENT OF CASH FLOWS

For The Year Ended 30 June 2010

		Year ended 30 June 2010	Year ended 30 June 2009
		£	£
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before taxation		(1,922,604)	(8,065,283)
Goodwill impairment charge		-	2,454,760
Depreciation		52,102	64,145
Finance income		(22,855)	(29,279)
Finance expense		474,507	1,301,189
Share based payments charge		601	10,188
Loss on disposal of property, plant and equipment		-	2,267
Revaluation (surplus)/deficit on investment properties		(325,754)	750,412
		__________	__________
Operating loss before changes in working capital and provisions		(1,744,003)	(3,511,601)
Decrease in inventories		5,326,560	5,376,920
Decrease in trade and other receivables		101,157	441,438
Decrease in trade and other payables		(1,067,014)	(4,050,322)
		__________	__________
Cash from/(used by) operations		2,616,700	(1,743,565)
Finance income received		22,855	29,279
Finance costs paid		(437,210)	(1,161,697)
Tax received		75,388	108,040
		__________	__________
Net cash from/(used in) operating activities		2,277,733	(2,767,943)
		__________	__________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(20,107)	(4,186)
Proceeds from sale of property, plant and equipment		-	12,500
		__________	__________
Net cash (used in)/from investing activities		(20,107)	8,314
		__________	__________
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		-	(61,490)
Proceeds from the issue of ordinary share capital		-	1,750,000
Movement on borrowings		(1,855,148)	1,071,018
		__________	__________
Net cash (used in)/from financing activities		(1,855,148)	2,759,528
		__________	__________
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		402,478	(101)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR		1,396	1,497
		__________	__________
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		403,874	1,396
		___ __ ____	___ __ ____

Notes

1       Basis of preparation

The financial statements included in this preliminary announcement have been prepared using recognition and measurement principles consistent with those of International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board as endorsed by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  Accounting policies have been applied consistently to all periods presented in the consolidated financial statements.

The financial statements are presented in pounds sterling and on the going concern basis (see below).

Going concern

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

The financial performance of the Group is dependent upon both the wider economic environment in which the Group operates and upon the continued availability of banking facilities enabling it to operate as a going concern for the foreseeable future.

At 30 June 2010 the Group has drawn £15.7 million of bank borrowings, net of offset credit balances, against its revolving credit facility of £25m.  These borrowings are secured by fixed and floating charges over the assets of the Group and are due for repayment in full on 1 July 2011.  Whilst the bank borrowings fall due after one year from the Group's balance sheet date, the Directors are required to consider the renewal or repayment of the bank borrowings as part of their going concern assessment.

The Directors are in the process of renegotiating the banking facilities to ensure that facilities remain in place after 1 July 2011.  Negotiations have been ongoing for some time.  Whilst the Directors believe that facilities will be available beyond 1 July 2011 we recognise that our bank is seeking to reduce loan to value ratios and restructure the facility towards a development by development basis of lending whilst at the same time increasing the costs associated with borrowing and moving away from speculative commercial property lending.  Our bank is also very keen to see new equity introduced into the Group.  If appropriate terms cannot be agreed the Group would need to secure alternative facilities elsewhere. Because of uncertainties in the banking market, the lessening in the loan to value multiples available and anticipated increased borrowing costs, there is no certainty that acceptable alternative facilities would be readily available.

Given the above factors the Directors recognise that without a binding agreement to extend the Group's facilities on acceptable terms that a material uncertainty exists that may cast significant doubt over the Group's ability to continue as a going concern. 

The Directors however consider it appropriate to prepare the Group financial statements on the going concern basis given their belief that sufficient funding will be made available beyond 1 July 2011 and that based upon their current forecasts an adequate level of headroom will be achieved over the minimum covenant levels throughout the period of the current facility.

2       Status of financial information

The financial information contained in this preliminary announcement does not constitute the Company's consolidated statutory financial statements for the years ended 30 June 2010 and 2009, but is derived from those financial statements.  The financial statements for the year ended 30 June 2009 have been delivered to the Registrar of Companies.  The financial statements for the year ended 30 June 2010 will be delivered following the Company's Annual General Meeting.  The auditors have reported on those financial statements; their reports were unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.  However, whilst their audit report was not qualified, it included an emphasis of matter statement regarding going concern which is reproduced as follows:

"In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in note 1 concerning the Group's ability to continue as a going concern.  The Group's loan facility of £25 million, of which £15.7 million (net of offset credit balances) has been drawn, expires on 1 July 2011 and whilst the Group expects to be able to agree continuing loan facilities on acceptable terms there is an inevitable uncertainty that adequate facilities will continue to be made available after 1 July 2011 until such time as an agreement has been reached.

These conditions indicate the existence of a material uncertainty which may cast a significant doubt over the ability of the Group to be able to continue as a going concern. The financial statements do not include the adjustments that would be necessary if the Group was unable to continue as a going concern."

The annual report and financial statements will be posted to shareholders who have elected to receive a printed copy on 12 October 2010.  Copies of the annual report and financial statements will also be available from the Company's website at www.artisan-plc.co.uk or the Company Secretary, Artisan (UK) plc, Vantage House, Vantage Park, Washingley Road, Huntingdon, Cambridgeshire, PE29 6SR.

3       Exceptional items

	2010		2009
	£		£
Costs charged to cost of sales
Inventory impairment charge	138,499		1,594,012
Withdrawal from land purchase contracts	-		90,172
Total costs charged to cost of sales	138,499		1,684,184
Costs charged to administrative expenses
Goodwill impairment charge	-		2,454,760
Redundancy costs	-		147,683
Costs of liquidating group undertaking	-		7,681
Total costs charged to administrative expenses	-		2,610,124
Total exceptional costs	138,499		4,294,308

In the year ended 30 June 2009 the Group recognised inventory impairment charges of £1,594,012.  During the year ended 30 June 2010 the Group conducted further reviews of the net realisable value of inventories which resulted in a net additional charge of £138,499.

4       Dividends

Amounts paid to equity holders in the year:	2010		2009
	£		£
Final dividend for the year ended 30 June 2009 of Nil p (2009 - 0.75p) per share	-		61,490
Interim dividend for the year ended 30 June 2010 of Nil p (2009 - Nil p) per share	-		-
	-		61,490

The Directors do not propose to pay a final dividend for the year (2009 - Nil p per ordinary share).

5       Earnings per share

The basic earnings per share is calculated by dividing the profit/(loss) after taxation by the weighted average number of shares (excluding treasury shares) in issue.

The weighted average number of shares (excluding treasury shares) were:

	2010		2009
	Number		Number
Basic weighted average number of shares (excluding treasury shares)	13,341,455		8,268,907

There were no dilutive potential ordinary shares in 2010 or 2009.

6       Investment property

              Fair value

	Year ended		Year ended
	30 June 2010		30 June 2009
	£		£
At beginning of year	3,397,438		4,147,850
Revaluations included in income statement	325,754		(750,412)
At end of year	3,723,192		3,397,438

As at 30 June 2010, the historical cost of investment property owned by the Group was £2,779,931 (2009 ‑ £2,779,931).

The fair values of the Group's investment properties at 30 June 2010 have been arrived at on the basis of open market value by the directors, who are suitably experienced and having regard to professional advice.

During the year £294,334 (2009 - £294,334) was recognised in the income statement as revenue in respect of rental income from investment properties.  Direct operating expenses arising from investment properties amounted to £4,163 (2009 - £15,106).

7       The Annual General Meeting will be held at the offices of Altium Capital Limited, 30 St James's Square, London, SW1Y 4AL on 7 December 2010 at 12.00 pm.

Copies of this announcement will be available to the public, free of charge, from the offices of Altium Capital Limited, 30 St James's Square, London SW1Y 4AL during normal office hours, with the exception of Saturdays, Sundays and bank holidays, for 14 days from today.

 

END

 

 

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