Final Results

RNS Number : 7301G

Trafalgar New Homes PLC

10 August 2016

 

10 August 2016

 TRAFALGAR NEW HOMES PLC

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

Final Results for the year ended 31 March 2016

Trafalgar New Homes plc (AIM: TRAF), the AIM quoted residential property developer operating in South East England, announces its final results for the 12 months ended 31 March 2016. A copy of the annual report and accounts, along with notice of the Company's annual general meeting, to be held at the Company's offices at Chequers Bank, Bough Beech, Edenbridge, Kent TN8 9PD at 11.00 a.m. on 8 September 2016, will be posted to shareholders shortly and made available on the Company's website, www.trafalgar-new-homes.co.uk.

Financial Highlights:

·     Turnover for the Period was £2,235,000 (2015: £3,898,250); 

·     Profit before and after tax of £204,877 (2015: Loss £619,106);

·     EPS of 0.09p (2015: loss per share of 0.26p); and

·     Cash on the balance sheet at the end of the year was £278,406 (2015: £490,770).

Operational Highlights:

·     Construction work continues at Tunbridge Wells, Kent for six luxury apartments;

·     Work commenced at: 1) High Street, Edenbridge, Kent for three terraced houses; 2) Vines Lane, Hildenborough, Kent for two detached houses; and 3) Sheerness, Kent for six terraced houses; and

·     Completed the purchase of a development site in Speldhurst, Tunbridge Wells, Kent.

Commenting on today's Results, CEO, Chris Johnson, said: 

"I am delighted to report that the Group has returned to profitability. We are confident that the Company has a strong development pipeline and that we are well positioned to improve financial performance for FY2017 and beyond. Despite Brexit, we believe the market fundamentals remain strong and that huge demand still remains for homes as a result of the chronic lack of supply. We remain committed to building new homes in the South East where we believe there is still high demand, to growing the Group's profitability and, in time, rewarding our shareholders through dividend payments. We believe the outlook for the Company is exciting."

Enquiries:

Trafalgar New Homes plc                                                                   [phone]
Christopher Johnson

Allenby Capital Ltd - Nominated Adviser and Broker                     [phone]

Jeremy Porter/James Reeve

Yellow Jersey PR Limited                                                                 [phone] 

Dominic Barretto/Alistair de Kare-Silver

Notes to Editors:

Trafalgar New Homes is the holding company of Combe Bank Homes, a successful residential property developer operating in the southeast of England.  The founders of Combe Bank homes have a long track record of developing new and refurbished homes, principally in Kent.

The Company's focus is on the select situation of land for residential property development.  The Company outsources all development activities, for example the obtaining of planning permission, design and construction and uses fixed price build contracts.   This enables the Company to tightly control its development and overhead costs.

The Company focuses on the regions of Kent, Surrey, Sussex and the M25 ring south of London and targets development sites of up to 20 homes, with sales prices typically ranging from £250,000 to £1,500,000 per unit.

Trafalgar New Homes Plc

CHAIRMAN'S STATEMENT
for the year ended 31 March 2016

On behalf of the Board, I am pleased to present Trafalgar New Homes' results for the year ended 31 March 2016 which saw the Group return to profitability.  The Board is confident that it has a strong development pipeline and that the Company is well positioned to deliver profitability for FY2017 and onwards. 

Our driving focus is now on acquiring new sites that should produce increased turnover and a significant improvement in the financial performance for FY2017. In addition, we have been progressing with the preparation of a revised planning application for our Staplehurst site, which, if successful, should make a significant contribution to our bottom line and address the chronic shortage in the area of good quality housing stock.

Financials

The year under review saw Group turnover at £2,235,000 (2015: £3,898,250), with a profit before and after tax of £204,877 (2015: Loss £619,106). The cash on the balance sheet at the end of the year was £278,406 (2015: £490,770) and the Group continues to have sufficient capital for all planned activities.

Business Environment and Outlook

The decision to exit the European Union at the end of June 2016 was unprecedented. It led to an immediate drop in the value of sterling and a sell-off in house building stocks. Following the initial market panic the stock market has rebounded in anticipation of improved macro-economic conditions. However, it is too soon to predict the long-term impact of Brexit on the UK homes market.

The market fundamentals remain strong with robust demand for homes as a result of chronic undersupply. A recent report by the Resolution Foundation showed that home ownership in the UK had dropped to its lowest levels in 30 years, with outer London seeing the second biggest drop of 13.5% to just under 58%. Further, the Bank of England's decision on 4th August 2016 to reduce interest rates to a record low of 0.25% should reduce the cost of financing and may also provide potential buyers with cheaper mortgages. Nevertheless, we strongly believe that as long as planning restrictions remain obstructive there will continue to be a considerable shortage of housing supply in the South East.

These fundamentals provide attractive opportunities for house builders with the right strategic focus and access to finance. We are confident that our focus on traditional housing for a wide range of buyers in the South East, along with the price of our current housing stock, will keep sale prices stable and we will continue to attract customers. The recent increases in Stamp Duty Tax are mainly applicable to the luxury end of the market and do not adversely affect our operations. The Group remains committed to building new homes in the South East that are in such high demand.

The Group remains confident about its prospects for FY2017 and beyond. Trafalgar New Homes is in a stronger position now than ever, having returned to profitability and having secured several banking facilities to fund its strong development pipeline. The Executive Directors collectively have many years of residential development experience, which enables the Group to negotiate land and property purchases and construction contracts efficiently and quickly. This, in turn, enables the Group to adapt to changing market conditions and exploit opportunities. We are committed to growing the Group's profitability and to rewarding our shareholders through dividend payments when appropriate. We believe the outlook for the Company is exciting.

James Dubois

Chairman
9 August 2016 

Operations review

A summary of the Results for the year is as follows:-

	2016	2015
	£	£
Revenue for the year	2,235,000	3,898,250
Gross profit/(loss)	476,607	(290,791)
Profit after taxation	204,877	(619,106)
Earnings per share	0.09p	(0.26)p

Group turnover for the year related to the sale of the final house at Oakhurst Park Gardens, Hildenborough, and the completion and sale of the houses on the sites at The Bell Inn, Ticehurst, East Sussex and the land at Station Road, Borough Green, Kent. The revenue from these sales totalled £2,235,000, generating a gross profit of £476,607.  After deducting overhead costs of £279,250 for the year the Company recorded a pre-tax profit of £204,877.

As the Company has approved tax losses brought forward of a sum in excess of the profitability, there will be no tax charge and, therefore, the post-tax profit amounts to £204,877 and with 238,375,190 shares in issue, (no change from the previous year) the Company achieved earnings per share of 0.09p, which compares favourably to the earnings per share loss of 0.26p recorded for the year ended 31^st March 2015.

Key performance indicators (KPIs)

Management are closely involved in the day to day operations of the group and are very aware of cashflows and expenditure. However management believe that the key indicators of performance for the group are the revenue and profitability achieved during the period. These measures are disclosed above in the operations review.

Management do not use any non-financial KPIs.

Development Pipeline

Construction work continues on our site at Tunbridge Wells, Kent for six luxury apartments. Work has also commenced on sites at High Street, Edenbridge, Kent for three terraced houses and at Vines Lane, Hildenborough, Kent for two detached houses. Construction work on all three sites is expected to be completed during the current calendar year and most of these eleven units should be sold before 31^st March 2017, which will contribute to the profitability of the Group for the year ending 31^st March 2017.

The funding for the sites at Edenbridge and Hildenborough is being provided by Coutts, with RateSetter financing the Tunbridge Wells site. The Company's arrangements with its funders now provide Trafalgar New Homes with 100% of the finance required to build on all three sites, having committed its own funds at the time of the acquisition of the sites and for the initial construction costs.

The Company has also commenced work on the site at Sheerness, Kent, which has been owned by the Group for some time. Trafalgar New Homes has secured funding from Lloyds Bank for the construction of the development on this site, which, after an initial payment by the Group, will result in 100% of the finance required being provided by the Bank.

Since the year-end the Company has completed the purchase of a development site in Speldhurst, Tunbridge Wells, Kent, with the benefit of receiving planning permission for the demolition of the existing house and the erection of a substantial new build detached house. Funding for the acquisition and development is being provided by Lloyds Bank and construction work should commence shortly. It is anticipated that the build work will be completed in the spring of 2017 with a sale hopefully being achieved during the summer of 2017.

Trafalgar New Homes believes that all the funding it has secured for these developments are on competitive commercial terms.

The site at Staplehurst, Kent

The Company has been refused planning permission on its most recent planning application for its site at Staplehurst, Kent. This was received post year-end. Under the guidance of its planning consultants, the Company felt it had addressed the requirements and concerns set out by the authorities to the fullest. The Company is now preparing a further application for planning permission, having received advice from its planning consultants stating that: "In formulating the emerging Local Plan, the Council's planning policy team have clearly concluded (in writing and on public record) that this is a site that is suitable to accommodate residential development. In this context it is impossible to comprehend how an 'in principle' objection to housing development can be justified and maintained".

Outlook          

The Company is confident that its current development programme will deliver profits for the Group for the year ended March 2017 and will enable it to meet market expectations. Looking ahead, the Company is negotiating the purchase of other sites in the South East of England, its chosen area of operation, which will contribute to turnover and anticipated profitability for the Group for the year ended 31^st March 2018 and beyond.

The Board of Trafalgar New Homes remains focused on growing the Group, both through site acquisition and development and corporate acquisition, should any opportunities present themselves. The Company is committed to creating value for its shareholders and although it will not be paying a dividend this year Trafalgar New Homes intends to declare and pay a dividend when circumstances permit.

Christopher Johnson

Director

9th August, 2016

Trafalgar New Homes Plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2016

		Year  ended 31 March	Year  ended 31 March
	Note	2016	2015
		£	£
Revenue		2,235,000	3,898,250
Cost of sales		(1,758,393)	(4,189,041)
Gross  profit/ (loss)		476,607	(290,791)
Administrative expenses		(279,250)	(329,850)
Operating profit/(loss)		197,357	(620,641)
Profit /(loss) before interest		197,357	(620,641)
Other interest receivable and similar income	2	7,520	1,535
Interest payable and similar charges	5	-	-
Profit/(loss) before taxation		204,877	(619,106)
Tax payable on profit/(loss) on ordinary activities	6	-	-
Profit/(loss) after taxation for the year attributable to equity holders of the parent		204,877	(619,106)
Other comprehensive income attributable to equity holders of the parent			-
Total comprehensive income for the year		204,877	(619,106)
Profit/(loss) attributable to:
Equity holders of the Parent		204,877	(619,106)
Total comprehensive income/(loss) for the year attributable to:
Equity holders of the Parent		204,877	(619,106)
PROFIT/(LOSS) PER ORDINARY SHARE; Basic/diluted	7	0.09p	(0.26p)

All results in the current and preceding financial year derive from continuing operations.

Trafalgar New Homes Plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended 31 March 2016

		31 March	31 March
	Note	2016	2015
		£	£
Non-current assets
Property, plant and equipment	8	2,384	648
		2,384	648
Current assets
Inventory	11	2,275,546	1,884,250
Trade and other receivables	9	436,604	81,244
Cash at bank and in hand	10	278,406	490,770
		2,990,556	2,456,264
Total assets		2,992,940	2,456,912
Liabilities: amounts falling due within one year
Trade and other payables	12	(152,149)	(70,777)
Borrowings	13	(741,266)	(381,450)
Net current assets		2,099,525	2,004,685
Non-current liabilities
Borrowings	13	(3,221,924)	(3,331,961)
Net liabilities		(1,122,399)	(1,327,276)
Capital and reserves
Called up share capital	14	2,383,752	2,383,752
Share premium account	15	1,165,463	1,165,463
Reverse acquisition reserve		(2,817,633)	(2,817,633)
Profit & loss account		(1,853,981)	(2,058,858)
Equity - attributable to the owners of the Parent		(1,122,399)	(1,327,276)

Trafalgar New Homes Plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2016

Re

	Share capital	Share premium	Reverse acquisition  reserve	Retained  profits  /(losses)	Total equity
	£	£	£	£	£
At 1 April 2014	2,283,752	1,075,513	(2,817,633)	(1,439,752)	(898,120)
Loss for the year	-	-	-	(619,106)	(619,106)
Total comprehensive income for the year	-	-	-	(619,106)	(619,106)
Issue of shares	100,000	100,000	-	-	200,000
Share issue costs	-	(10,050)	-	-	(10,050)
At 31 March 2015	2,383,752	1,165,463	(2,817,633)	(2,058,858)	(1,327,276)
At 31 March 2015	2,383,752	1,165,463	(2,817,633)	(2,058,858)	(1,327,276)
Profit for year	-	-	-	204,877	204,877
Total comprehensive income for the year	-	-	-	204,877	204,877
At 31 March 2016	2,383,752	1,165,463	(2,817,633)	(1,853,981)	(1,122,399)

For the purpose of preparing the consolidated financial statement of the Group, the share capital represents the nominal value of the issued share capital of 1p per share. Share premium represents the excess over nominal value of the fair value consideration received for equity shares net of expenses of the share issue.

Trafalgar New Homes Plc

CONSOLIDATED STATEMENT OF CASH FLOWS 
For the year ended 31 March 2016

	Note	2016	2015
		£	£
Cash flow from operating activities
Operating profit/(loss)		197,357	(620,641)
Depreciation		795	215
(Increase)/decrease in stocks		(391,296)	3,186,204
(Increase)/decrease in debtors		(355,360)	2,344,241
Increase/(decrease) in creditors		81,372	(670,542)
Interest received		60	174
Interest paid		166,869	272,483
Rental income received		7,460	1,361
Net cash (outflow) / inflow from operating activities		(292,743)	4,513,495
Investing activities
Purchase of tangible fixed assets		(2,531)	-
Net cash used in investing activities		(2,531)	-
Taxation		-	-
Financing activities
New loans in year (net)/(loan repayments)		694,816	(4,092,216)
Issue of shares (net of direct costs)		-	189,950
Director loan repayments		(445,037)	(1,064,447)
Interest paid		(166,869)	(272,483)
Net cash inflow/(outflow) from financing		82,910	(5,239,196)
(Decrease) in cash and cash equivalents in the year		(212,364)	(725,701)
Cash and cash equivalents at the beginning of the year		490,770	1,216,471
Cash and cash equivalents at the end of the year		278,406	490,770

BASIS OF PREPARATION 

The financial information set out in this announcement is abridged and does not constitute the Company's statutory financial statements for the year ended 31 March 2016. The financial information has been extracted from the financial statements for the year ended 31 March 2016, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations adopted by the European Union ("EU") and as applied in accordance with the provisions of the Companies Act 2006 and were approved by the Board on 9 August 2016 and on which the auditors have reported without qualification.

 The statutory financial statements for the year ended 31 March 2016 will be posted to shareholders next week and, once approved, will be delivered to the Registrar of Companies following the Annual General Meeting on 8 September 2016.

Trafalgar New Homes Plc

NOTES TO THE FINAL RESULTS 
For the year ended 31 March 2016

1          SEGMENTAL REPORTING

For the purpose of IFRS 8, the chief operating decision maker ("CODM") takes the form of the Board of Directors.  The Directors' opinion of the business of the Group is as follows.

The principal activity of the Group was property development.  All the Group's non-current assets are located in the UK.

Based on the above considerations, there is considered to be one reportable segment.  The internal and external reporting is on a consolidated basis with transactions between Group companies eliminated on consolidation.  Therefore the financial information of the single segment is the same as that set out in the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of financial position and cashflows.

Geographical segments

The following tables present revenue regarding the Group's geographical segments for the year ended 31 March 2016.

Year ended 31 March 2016	United Kingdom	Total
	£	£
Property development - sales	2,235,000	2,235,000
	2,235,000	2,235,000

Year ended 31 March 2015	United Kingdom	Total
	£	£
Property development - sales	3,898,250	3,898,250
	3,898,250	3,898,250

2          OTHER INTEREST RECEIVABLE AND SIMILAR INCOME

	2016	2015
	£	£
Bank interest received	60	174
Rental income & ground rent	7,460	1,361
	7,520	1,535

3           PROFIT FOR THE YEAR

The Group's profit for the year is stated after charging the following:

	2016	2015
	£	£
Depreciation of tangible fixed assets	795	215
Auditor's remuneration:
Audit of these financial statements	10,000	10,000
Amounts receivable by the auditor in respect of the audit of the financial statements of subsidiary undertakings pursuant to legislation	6,000	5,124

Amounts payable to Crowe Clark Whitehill LLP and its related entities in respect of audit and non-audit services are disclosed in the table above.

4          EMPLOYEES AND DIRECTORS' REMUNERATION

Staff costs during the year were as follows:

	2016	2015
	£	£
Directors remuneration	15,000	36,250
Wages and salaries	43,500	66,000
Social security costs	4,061	8,454
Other pension costs	18,000	18,000
	80,561	128,704

The average number of employees of the company during the year was:

	2016	2015
	Number	Number
Directors and management	4	4

Key management are the Group's Directors.  Remuneration in respect of key management was as follows:

	2016	2015
	£	£
Short-term employee benefits:
- Emoluments for qualifying services C C Johnson	-	-
- Emoluments for qualifying services A Johnson	-	10,000
- Emoluments for qualifying services J Dubois	15,000	26,250
	15,000	36,250

There are retirement benefits accruing to Mr C C Johnson for whom a company contribution was paid during the year of £18,000 (2015: £18,000).

Consultancy fees of £ 4,994 (2015: £8,748) were paid to Mr N Lott during the year.

5          INTEREST PAYABLE AND SIMILAR CHARGES

During the year all interest paid on borrowings was capitalised as part of work in progress (£166,869) with the interest capitalised on properties sold in the period forming part of cost of sales. All interest was capitalised with the exception of:-

	2016	2015
	£	£
Director's loan interest paid	-	-
	-	-

6          TAXATION

	2016	2015
	£	£
Current tax	-	-
Tax charge	-	-

		2016		2015
		£		£
Profit/(loss) on ordinary activities before tax		204,877		(619,106)
Based on profit/(loss) for the year:
Tax at 20% (2015: 21%)	40,975		-
Effect of:
Losses utilised/group relief claimed	(40,975)		-
Tax charge for the year	-		-

No deferred tax asset has been recognised in respect of historical losses due to the uncertainty in future profits against which to offset these losses. As at the 31 March 2016 the group had cumulative tax losses of £1,837,724 (2015: £2,056,907) that are available to offset against future taxable profits.

7          PROFIT/(LOSS) PER ORDINARY SHARE

The calculation of  profit/(loss) per ordinary share is based on the following profits/(losses) and number of shares:

	2016	2015
	£	£
Profit/(loss) for the year	204,877	(619,106)

Weighted average number of shares for basic profit /(loss) per share	238,735,200	236,708,533
Weighted average number of shares for diluted profit /(loss) per share	238,735,200	236,708,533
PROFIT/(LOSS) PER ORDINARY SHARE: Basic	0.09p	(0.26p)
Diluted	0.09p	(0.26p)

8          PROPERTY, PLANT AND EQUIPMENT

Fixtures and fittings			2016	2015
			£	£
Cost
At 1 April			2,936	2,936
Additions			2,531	-
At 31 March			5,467	2,936

Depreciation
At 1 April			2,288	2,073
Charge for the year			795	215
At 31 March			3,083	2,288

Net book value at 31 March 2016 (2015)			2,384	648

9          TRADE AND OTHER RECEIVABLES

			2016	2015
			£	£
Other receivables			425,515	59,268
Other taxes			4,786	18,532
Prepayment			6,303	3,444
			436,604	81,244

There are no receivables that are past due but not impaired at the year-end. There are no provisions for irrecoverable debt included in the balances above.

10        CASH AND CASH EQUIVALENTS

All of the Group's cash and cash equivalents at 31 March 2016 are in sterling and held at floating interest rates.

	2016	2015
	£	£
Cash and cash equivalents	278,406	490,770

The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

11        INVENTORY

				2016		2015
				£		£
Work in progress			2,275,546		1,884,250

12        TRADE AND OTHER PAYABLES

			2016	2015
			£	£
Trade payables			93,328	24,579
Accruals			54,513	20,848
Tax			2,050	2,015
Other payables			2,258	23,335
			152,149	70,777

13        BORROWINGS

			2016	2015
			£	£
Director's loans			2,121,924	2,566,961
Other loans			1,100,000	765,000
Bank and other loans			741,266	381,450
			3,963,190	3,713,411

Included in other loans is the sum of £300,000 (2015: £300,000) advanced by the DFM Pension Scheme of which Mr J Dubois is the principal beneficiary. This loan bears interest at 12% per annum (2015: 12% per annum).

C C Johnson is a named guarantor on the loan included within bank loans.

The bank borrowings are repayable as follows:

			2016	2015
			£	£
On demand or within one year			741,266	381,450
In the second year			-	-
In the third to fifth years inclusive			-	-
After five years			741,266	381,450
Less amount due for settlement within 12 months (included in current liabilities)			741,266	381,450
Amount due for settlement after 12 months			-	-

The weighted average interest rates paid on the bank loans were as follows:

Bank Loans -5.33% (2015: 4.73%)

All of the Directors' loans are repayable after more than 1 year. All loans are interest bearing and charged accordingly.  However Mr C C Johnson has waived his right to interest in the year and as a result interest of £Nil  (2015: £ Nil) was paid to Mr C C Johnson. The rate of interest on the loan is 5% pa (2015: 5% pa). Interest of £36,000 (2015: £36,000) was paid to Mr J Dubois at the rate of 12 % pa (2015: 12% pa).

14        Share capital

Authorised Share Capital

				2016		2015
				Number		Number
Ordinary shares of 1p each - 1April 2015			238,375,190		228,375,190
Additional shares issued for cash in year			-		10,000,000
			238,375,190		238,375,190

Issued, allotted and fully paid

	2016	2015
	£	£
Ordinary shares of 1p each	2,383,752	2,383,752

15        Share PREMIUM ACCOUNT

			2016	2015
			£	£
Balance brought forward			1,165,463	1,075,513
Premium on issue of new shares			-	100,000
Share issue costs			-	(10,050)
Balance carried forward			1,165,463	1,165,463

16        RELATED PARTY TRANSACTIONS

Mr C C Johnson holds 78.4% (2015: 78.4%) of the total issued share capital of the Group.

The following working capital loans have been provided by the Directors:

			2016	2015
			£	£
C C Johnson
Opening balances			2,566,961	3,631,410
Loan repayments			(421,255)	(1,000,000)
Personal drawings			(23,782)	(64,449)
Interest payable			-	-
Balance carried forward			2,121,924	2,566,961

J Dubois                -                                                                                                                        £300,000            £300,000

Mr Johnson's Loan bore interest during the year at 5% (2015: 5% pa), but he has chosen to forego the interest in the year.   Mr Dubois's Loan, which is from his Pension Fund of which he is the sole beneficiary, was at 12% pa interest (2015: 12% pa).

Mrs L C Howard (daughter of Mr C C Johnson) has provided a loan to the company at a rate of 10% per annum of £nil (2015: £100,000).

Mr G Howard (son-in-law of Mr C C Johnson) has provided a loan to the company at a rate of 10% per annum of £800,000 (2015: nil).

During the year, the Directors agreed to sell 11 Oakhurst Park Gardens, Hildenborough Kent to Mr C C Johnson for a consideration of £ 525,000 (2015: £ nil) being the market value.

17        SHARE OPTIONS AND WARRANTS

There are no share options or warrants.

18        CATEGORIES OF Financial instruments

The Group's financial assets are divided as cash and cash equivalents.  The Group's financial liabilities are divided as Directors loans, bank loans and other loans.

	Loans and receivables		Financial liabilities measured at amortised cost
	2016	2015	2016	2015
	£	£	£	£
Financial assets
Cash and cash equivalents	278,406	490,770		-
Trade receivables	436,604	81,244
Financial liabilities
Trade payables			152,149	70,777
Borrowings - Directors' loans	-	-	2,121,924	2,566,961
Borrowings - Bank loan	-	-	741,266	381,450
Borrowings - Other loans	-	-	1,100,000	765,000
Total	715,010	572,014	4,115,339	3,784,188

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and it sets policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.  Further details regarding these policies are set out below:

Capital risk management

The Group considers its capital to comprise its share capital and share premium.  The Group's capital management objectives are to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

Significant Accounting Policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in the Company's annual report and accounts for the year ended 31 March 2016.

Foreign currency risk

The Group has minimal exposure to the differing types of foreign currency risk.  It has no foreign currency denominated monetary assets or liabilities and does not make sales or purchases from overseas countries.

Interest rate risk

The Group is sensitive to changes in interest rates principally on the loans from banks.  £ 2,000,000 of the loans from Mr Johnson  bears interest at 5% pa (2015: 5% pa), although Mr Johnson has waived his right to receive interest in the year.   Mr Dubois' loan of £300,000 within other loans, from his Pension Fund attracts interest at 12% pa (2015: 12%). Additional loans of £800,000 included in other loans attract interest at 10%pa (2015: 10% pa).

The impact of a 100 basis point increase in interest rates would result in additional interest cost for the year of £ 7,280 (2015: £24,325).

Credit risk management

Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the Group.

Liquidity risk management

This is the risk of the Company not being able to continue to operate as a going concern.

The Directors have, after careful consideration of the factors set out above, concluded that it is appropriate to adopt the going concern basis for the preparation of the financial statements and the financial statements do not include any adjustments that would result if the going concern basis was not appropriate.

Mr Johnson confirms that he will continue to support the Group for its anticipated needs for the next two years.  As with all business forecasts, the Directors' statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about the future events.

Derivative financial instruments

The Group does not currently use derivative financial instruments as hedging is not considered necessary.  Should the Group identify a requirement for the future use of such financial instruments, a comprehensive set of policies and systems as approved by the Directors will be implemented.

In accordance with IAS 39, "Financial instruments: recognition and measurement", the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet specific requirements set out in the standard.  No material embedded derivatives have been identified.

 

END

 

 

FR AKCDDOBKDPFK