SMAP St Mark Homes PLC

 

28 June 2024

 

St Mark Homes Plc

 

(''SMH'' or “the Company'')

 

Final results

 

St Mark Homes Plc (AQSE: SMAP), the housebuilder operating mainly in London and the South of England, today announces its Final Results for the year ended 31 December 2023.

 

Review of the business

 

The Group continues to develop residential led projects located in London and the Southern regions of the United Kingdom. The Group typically undertakes its business within special purpose vehicles and on a joint venture/profit sharing basis with other house builders.

 

2023 has been our most difficult year in business. Sales stagnated and were impacted by rising interest rates and yield compression. Production on unfinished sites was hampered by inflation and contractor failure. The loss by project is detailed within our Project Portfolio update on pages 2-3. The Group made a loss before tax of £2,926,563 (2022 loss: £1,472,180).

 

Given the extent of these losses the Board have evaluated the applicability of the going concern basis for the  business. The Board has conducted an assessment to ensure the company can continue its operations. This evaluation included a detailed analysis of the company’s current financial health, encompassing liquidity levels, cash flow projections, and access to financing. Finance has been provided via a combination of Director Loans and salary deferral. Directors have agreed to reduce remuneration by 50% with effect from 1 July 2024. The board affirmed that the use of the going concern basis is appropriate despite the financial challenges faced.

 

The board will also consult with the shareholders on the future of the business in 2024.

 

Our strategic priorities

 

The current priority is to complete the development of the projects on site at Sutton and Finchley. While there is limited prospect of repayment of our capital invested in these two particular projects we do need to chart an exit that doesn’t expose the group to additional capital calls. Our joint venture at Uxbridge Road Hanwell is complete and we also need to exit from this as soon as practicable. Sales were slow there in 2023 but there has been more interest this Spring and we are working to have our remaining capital there repaid before the end of 2024.

 

Capital and AQSE Listing

 

The losses in our joint ventures have eroded our capital base and the board will bring forward a proposal to the 2024 AGM to delist from AQSE in the second half of the year.

 

Project Portfolio

 

Sutton High Street, Sutton:

 

The Group retains a 40% interest in a development site at Sutton High Street. We have made a provision against our entire investment in the project which has suffered from contractor insolvency, build price inflation, program delays, interest rate rises and yield compression. The return here has been particularly adversely affected by the sale of the commercial unit in December 2023 at approximately £1.5m (c.40%) lower than our appraisal forecast.

 

In accordance with our revenue recognition policy we have recognised a loss of £1,094,771 (2022: £126,624) during 2023.

 

Gwynne Road, London SW11:

 

The Group retains  a 40% interest in the development at Gwynne Road, Battersea  with its joint venture partner. The initial phase of the project was completed in 2019  providing a mixed use development of commercial/retail at ground and mezzanine levels and 33 residential flats above. In 2023 planning permission was  secured to provide an additional two flats at mezzanine level.  We expect the commercial space to be sold in 2024. Our partner had hoped to obtain permission for a penthouse unit on the site but this has not been supported by planners.

 

In accordance with our revenue recognition policy we have recognised a loss of £361,885  (2022: £35,634) during 2023.

 

Uxbridge Road, Hanwell, London W7:

 

The Group has a 50% interest in the redevelopment of this site with full planning permission in place to provide 43 residential units (7 houses and 36 apartments) and ground floor retail fronting Uxbridge Road, Hanwell, West London. The development is located just 200m from the new Crossrail station at Hanwell. Construction of the project was delayed until December 2023 as our main contractor entered a CVA.

 

This rising interest rate environment has increased pressure on sales prices and has also impacted our sales program.

 

In accordance with our revenue recognition policy we have recognised a loss of £835,428 (2022: £585,000) during 2023.

 

Twyford Avenue, Muswell Hill, London, N2: 

 

The Group invested  in a 50% joint venture stake in a new build housing scheme in Muswell Hill, North London in 2020. This development involved  the construction of seven new houses with off street parking which was completed in June 2023.  Six of the seven houses sold during the 2022 with the sale of final unit completing during the year. We have recognised a profit of £ 71,176 (2022 £434,757) from this project during the year.

 

553 – 563 High Road, Finchley, N12:

 

The Company has a 50% joint venture stake in a new build housing scheme in Finchley, North London. This development will see the construction of five houses. Construction work has been extremely delayed and is now projected to complete in July 2024.

 

In accordance with our revenue recognition policy, we have provided for a loss of £304,934 (2022 - £118,921) on this project during 2023.

 

Board Decision Making: Section 172 Statement

 

The Board regularly considers the impact of their decision making on the key stakeholders of the business. For this purpose the Board have identified the following groups of stakeholders with details of how they have engaged with those stakeholders and the effect this has had on St Mark Homes’ decisions and strategies during the year.

 

Stakeholder group	Their interests	How management and/or Directors engage
Investors	Comprehensive review of financial performance of the business Business sustainability High standard of governance Awareness of long-term strategy and direction	Annual and interim reports Company website Shareholder circulations Company announcements AGM AQSE growth exchange announcements
Employees	Job satisfaction and fulfilment Health and safety on site Training and development Career progression Inclusion	Formal policies and procedures Regular dialogue with key management Company culture which promotes inclusion and sharing of ideas Management Incentive Scheme
Joint Venture Partners	Mutually rewarding outcomes	Formal development agreements Learning from joint experiences to seek continual improvement Pre commitment project due diligence Project Monitoring
Community and the environment	Sustainability Energy usage Recycling and waste management	Products promote energy reduction Corporate and social responsibility policy Environmental policy

Principal risks and uncertainties

 

The Group is exposed to the usual risks of companies constructing and developing residential property, including construction budget overruns, delays in programme, insolvency of clients, general economic conditions, project availability, uninsured calamities and other factors. 

 

Investments are made in sterling and therefore the Group is not subject to foreign exchange risks. The Group’s credit risk is primarily attributable to its trade debtors.  Credit risk is managed by monitoring payments against contractual agreements.  The Group also reviews the financial standings of its debtors prior to entering into significant contracts.

 

Key Performance Indicators

 

The Group’s long term performance target had been to generate a minimum average annual return on shareholders’ funds of 5%. Given the difficult environment we revised this to 2% for 2022 and 2023. During 2023 the annual pre-tax return on shareholders’ funds was -78%  (2022:  -28%).

 

Treasury policy

 

Operations have been financed by the issue of shares in the past and retained profits, the cash from which has been invested in short term cash deposits. In addition, various financial instruments such as trade debtors and trade creditors arise directly from the Group's operations. Loans have been funded by the cash income from previous development projects. 

 

On behalf of the Board

 

 

Bernard Tansey

Chairman

27 June 2024

 

 

The Directors of St Mark Homes PLC accept responsibility for this announcement.

 

For further information, please contact:

St Mark Homes Plc
Sean Ryan, Finance Director	Tel: +44 (0) 20 8903 2442
	seanryan@stmarkhomes.com
Alfred Henry Corporate Finance Ltd, AQSE Growth Market Corporate Adviser
Nick Michaels/Maya Klein Wassink	Tel: +44 (0) 20 7309 2203
	www.alfredhenry.com

 

 

Consolidated statement of comprehensive income

for the year ended 31 December 2023

 

			2023		2022
			£		£
Turnover			-		559,200
Cost of sales			(28,800)		(29,197)
			________		________
Gross profit			(28,800)		530,003
Administrative expenses			(369,306)		(1,316,897)
			________		________
Operating loss			(398,106)		(786,894)
Share of operating loss of joint ventures			(2,525,843)		(731,422)
Interest receivable and similar income			193		51,349
Interest payable and similar charges			(2,807)		(5,213)
			________		________
Loss on ordinary activities before taxation			(2,926,563)		(1,472,180)
Taxation on ordinary activities			125		(16,900)
			________		________
Loss on ordinary activities after taxation			(2,926,438)		(1,489,080)
Other comprehensive income			-		-
			________		________
Total comprehensive income			(2,926,438)		(1,489,080)
			________		________
Earnings per share – basic and diluted
Ordinary shares			(66.30)p		(33.74)p

                                         

                           

 

Consolidated Balance sheet
at 31 December 2023

 

 

			2023		2023		2022		2022
			£		£		£		£
Non Current assets
Tangible fixed assets					490				653
Investments in joint ventures					-				159,396
					________				________
					490				160,049
Current assets
Debtors			1,206,900				3,490,184
Cash at bank and in hand			1,132				169,043
			________				________
			1,208,032				3,659,227
Creditors: amounts falling
due within one year			( 381,905)				(55,573)
			________				________
Net current assets					826,127				3,603,654
					________				________
Total assets less current liabilities					826,617				3,763,703
Creditors: amounts falling  due in more than one year					(11,843)				(22,491)
					________				________
Net assets					814,774				3,741,212
					________				________
Capital and reserves
Called up share capital					2,206,501				2,206,501
Capital redemption reserve					1,009,560				1,009,560
Other reserve					211,822				211,822
Merger reserve					327,060				327,060
Share premium account					375,246				375,246
Profit and loss account					(3,315,415)				(388,977)
					________				________
Shareholders’ funds					814,774				3,741,212
					________				________

 

 

Consolidated Statement of Changes in Equity
For the year ended 31 December 2023

 

		Share Capital		Capital Redemption Reserve		Other Reserve		Merger Reserve		Share Premium		Profit and loss reserves		Total
		£		£		£		£		£		£		£
Balance at 31 December 2021		2,206,501		1,009,560		211,822		327,060		375,246		1,100,103		5,230,292
Loss for the year		-		-		-		-		-		(1,489,080)		(1,489,080)
		________		________		_______		_______		________		________		________
Total comprehensive income for the year		-		-		-		-		-		(1,489,080)		(1,489,080)
		________		________		_______		_______		________		________		________
Balance at 31 December 2022		2,206,501		1,009,560		211,822		327,060		375,246		(388,977)		3,741,212
Loss for the year		-		-		-		-		-		(2,926,438)		(2,926,438)
		________		________		_______		_______		________		________		________
Total comprehensive income for the year		-		-		-		-		-		(2,926,438)		(2,926,438)
		________		________		_______		_______		________		________		_________
Balance at 31 December 2023		2,206,501		1,009,560		211,822		327,060		375,246		( 3,315,415)		814,774
		________		________		_______		______		________		________		________

 

 

Consolidated statement of cashflows
for the year ended 31 December 2023

 

 

				2023		2023		2022		2022
				£		£		£		£
Cash flows from
operating activities
Cash (used in)/generated from operations						(154,774)				32,973
Interest paid						(2,807)				(5,213)
Corporation tax						125				(30,560)
						________				________
Net cash outflow from
operating activities						(157,456)				(2,800)
Investing activities
Interest received				193				51,349
				________				________
Net cash generated from investing
activities						193				51,349
Financing activities
Repayment of Bank Loan				(10,648)				(10,648)
				________				________
Net cash used in
financing activities						(10,648)				(10,648)
						________				________
Net (decrease)/increase in cash and cash equivalents						(167,911)				37,901
Cash and cash equivalents at
beginning of year						169,043				131,142
						________				________
Cash and cash equivalents at
end of year						1,132				169,043
						________				________
Relating to:
Cash at bank and in hand						1,132				169,043
						________				________

 

 

Notes to Preliminary Results for the Period Ended 31 December 2023

 

 

1.   The financial information set out above does not constitute statutory accounts for the purpose of Section 434 of the Companies Act 2006.   The financial information has been extracted from the statutory accounts of St Mark Homes plc and is presented using the same accounting policies, which have not yet been filed with the Registrar of companies, but on which the auditors gave an unqualified report on 27 June 2024.

 

 The preliminary announcement of the results for the year ended 31 December 2023 was approved by the board of directors on 27 June 2024.

 

3. Accounting policies

 

Company information

 

St Mark Homes Plc is a public limited company domiciled and incorporated in England and Wales. The registered office is No 1 Railshead Road, St Margarets, Isleworth, Middlesex TW7 7EP.

 

Accounting convention

 

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

 

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest pound.

 

Going concern

 

These financial statements are prepared on the going concern basis. The directors have assessed the Group’s projected business activities and available financial resources together with detailed forecasts for cash flow for a projected period of at least 12 months from the approval of the financial statements. Given the difficulties with our joint ventures the assessment of going concern needs careful consideration.  The directors have considered the impact of the current economic factors including cost inflation, longer sales cycles, residential and commercial market trends. They believe that 2024 will continue to be challenging for operations and cashflow but that the company will continue in business and meet its liabilities as they fall due. While  there remains  a fundamental uncertainty the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly the directors continue to adopt the going concern basis in preparing the annual report and financial statements.

 

The financial statements have been prepared on the historical cost convention. The principal accounting policies adopted are set out below.

 

Basis of consolidation

 

The consolidated financial statements incorporate the results of St Mark Homes Plc and its subsidiary undertaking, St Mark Contracts Limited as at 31 December 2023 using the acquisition method of accounting. Under this method the results of subsidiary undertakings are included from the date of acquisition. 

 

Jointly controlled operations and interests in joint ventures are accounted for using the equity method of accounting. A jointly controlled operation is an entity that is a joint venture that involves the establishment of a corporation, partnership, or other entity in which each venture has an interest. A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to benefit from its activities.

 

Turnover 

 

Turnover represents the amounts recoverable on contracts with developers including project management fees arising under development agreements.

 

Turnover arising from developments is recognised on exchanged sale contracts:

 

• when costs and revenues associated with the transaction can be reliably measured; and
• where the probability of non-performance is considered negligible such that the risks and rewards of ownership have passed to the buyer.

 

The return on loans provided for the development of residential property is shown under interest receivable and similar income.

 

Investments in subsidiaries

 

Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in the profit or loss account. A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

 

Property development loans

 

Interest receivable on property loans is recognised in the period in which it accrues.  Profit share returns are only recognised when there is sufficient evidence and the project is sufficiently progressed to assess the likely profitability with a reasonable level of accuracy.

 

Depreciation

 

Depreciation is provided to write off the cost, less estimated residual values, of all tangible fixed assets on a reducing balance basis over their expected useful lives.  It is calculated at the following rates:

 

Office equipment  - 25% per annum

 

Taxation

 

The tax expense represents the sum of the tax currently payable and deferred tax.

 

Current tax

 

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

 

Deferred tax

 

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

 

Leased assets

 

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

 

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.

 

Liquid resources

 

For the purposes of the cash flow statement, liquid resources are defined as short term bank deposits.

 

Cash and cash equivalents

 

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

 

Financial assets

 

The Company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments. Financial assets are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

 

Financial assets are classified into specified categories. The classification depends on the nature and purpose of the financial assets and is determined at the time of recognition. Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.

 

Financial liabilities and equity

 

Financial liabilities and equity are classified according to the substance of the financial instrument’s contractual obligations, rather than the financial instrument’s legal form.  Basic financial liabilities are initially measured at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Other financial liabilities are initially recognised at fair value and are subsequently re-measured at their fair value with changes recognised through the profit and loss account.

 

Equity instruments

 

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

 

Dividends

 

Equity dividends are recognised when they become legally payable.  Interim equity dividends are recognised when paid.  Final equity dividends are recognised when approved by the shareholders at an annual general meeting. Dividends on shares wholly recognised as liabilities are recognised as expenses and classified within interest payable.

 

4. Earnings per share

 

Earnings per ordinary share has been calculated using the weighted average number of shares in issue during the financial year. The weighted average number of Ordinary shares in issue was 4,413,002 (2022: 4,413,002) and the loss after tax attributable to ordinary shares was £2,926,438 loss (2022: £1,489,080 loss).

 

	2023	2022
	£	£
Numerator
Earnings used as the calculation of basic and diluted EPS	(2,926,438)	(1,489,080)
	________	________

 

 

	Number	Number
Denominator
Weighted average number of ordinary shares used in basic and diluted EPS	4,413,002	4,413,002
	________	________

 

There are no share options or other potentially dilutive equity instruments in issue than can dilute the earnings per share.