Half-year Report

RNS Number : 7867W

Smart(J.)&Co(Contractors) PLC

23 April 2019

 

J. SMART & CO. (CONTRACTORS) PLC

INTERIM REPORT

FOR THE SIX MONTHS TO

31st JANUARY 2019

 

J SMART & CO. (CONTRACTORS) PLC

CHAIRMAN'S REVIEW

INTERIM REPORT

Unaudited Group profit for the six months to 31st January 2019 amounted to £639,000 compared with £962,000 for the corresponding period last year.  Group turnover decreased by 39%.

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

There were no private residential sales this half year, but the first sales at our current private housing development at West Bowling Green Street, Edinburgh have just concluded.

The first unit at our joint venture development at Gartcosh has now been completed.

Our serviced office company, Smart Serviced Offices Limited, has refurbished a third suite at Links Place, Leith, Edinburgh, to provide further serviced office space.

The current site progress in contracting is satisfactory.

As reported in post balance sheet events in the last report, due to a substantial loss in that financial year and losses in previous years, the decision was taken to cease trading in the subsidiary company, Concrete Products (Kirkcaldy) Limited.  Trading has now ceased at Concrete Products and I will report further at the year end when the financial cost of cessation will be clearer.

INTERIM DIVIDEND

The Board announces an interim dividend of 0.95p per share (2018, 0.95p) to be paid on 3rd June 2019 to shareholders on the register at the close of business on 10th May 2019.  The interim dividend will cost the Company no more than £412,000.

FUTURE PROSPECTS

We have substantially less work in hand in contracting than the same time last year.  Margins remain no better than last year.  Both our social housing contracts at West Bowling Green Street and Ferrymuir are progressing well.  However, as previously reported, it is by no means certain that new contracting work will be secured this financial year.

As mentioned above, sales at our private housing development at West Bowling Green Street have commenced and will continue into the next financial year.  Reservations remain at an encouraging level.

Commercial property valuation levels have improved since last year.  Also, lettings of both our industrial and office stock are still robust.

The third phase of speculative industrial development at West Edinburgh Business Park may commence this financial year.

Both our private housing sales and our commercial property activity have prospered in spite of the seemingly never ending political uncertainty, but it remains to be seen when the cyclical nature of the property markets may take effect.

At this stage it is difficult to make an accurate forecast of the year end figures, but due to our reduced turnover and cost of cessation of trading at Concrete Products, our underlying profit for the financial year may be less than the previous year.

23rd April 2019

D.W. SMART Chairman

CONSOLIDATED INCOME STATEMENT

	Notes	6 Months ended 31.1.19 (Unaudited)	6 Months ended 31.1.18 (Unaudited)	Year ended 31.7.18 (Audited)
			Restated (Note 2)	Restated (Note 2)
		£000	£000	£000
Group construction activities		5,100	8,390	12,502
Less:  Own construction work capitalised		(46)	(1,623)	(1,847)
REVENUE		5,054	6,767	10,655
Cost of sales		(4,719)	(5,246)	(8,118)
GROSS PROFIT		335	1,521	2,537
Other operating income		3,644	2,898	6,352
Net operating expenses		(3,418)	(3,569)	(7,185)
OPERATING PROFIT BEFORE PROFIT ON SALE AND NET SURPLUS ON VALUATION OF INVESTMENT PROPERTIES		561	850	1,704
Profit arising on sale of investment properties		-	-	-
Net surplus on valuation of investment properties		-	-	2,859
OPERATING PROFIT		561	850	4,563
Share of profits in Joint Ventures		61	14	463
Income from available for sale financial assets		23	16	43
Profit on sale of available for sale financial assets		10	-	2
Net (deficit)/surplus on valuation of available for sale financial assets		(48)	41	106
Finance income		32	41	180
PROFIT BEFORE TAX		639	962	5,357
Taxation	5	(140)	(183)	(415)
PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS		499	779	4,942
EARNINGS PER SHARE - BASIC AND DILUTED	7	1.14p	1.75p	11.11p

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		6 Months ended 31.1.19 (Unaudited)	6 Months ended 31.1.18 (Unaudited)	Year ended 31.7.18 (Audited)
			Restated (Note 2)	Restated (Note 2)
		£000	£000	£000
Profit for the period		499	779	4,942
Items that will not be subsequently reclassified to Income Statement:
Actuarial gain recognised in defined benefit pension scheme		-	-	111
Deferred taxation on actuarial gain		-	-	(19)
Total items that will not be subsequently reclassified to Income Statement		-	-	92
Total other comprehensive income		-	-	92
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX		499	779	5,034
ATTRIBUTABLE TO EQUITY SHAREHOLDERS		499	779	5,034

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Notes	Share Capital	Capital Redemption Reserve	Retained Earnings	Total
				£000	£000	£000	£000
As at 1st August 2018 (Restated)			2	880	128	95,585	96,593
Profit for the period				-	-	499	499
Other comprehensive income				-	-	-	-
Total comprehensive income for period				-	-	499	499
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(8)	-	(451)	(459)
Transfer to Capital Redemption Reserve				-	8	(8)	-
Dividends			6	-	-	(402)	(402)
Total transactions with owners				(8)	8	(861)	(861)
As at 31st January 2019				872	136	95,223	96,231

			Notes	Share Capital	Capital Redemption Reserve	Retained Earnings	Total
				£000	£000	£000	£000
As at 1st August 2017 (Restated)			2	896	112	92,850	93,858
Profit for the period				-	-	779	779
Other comprehensive income				-	-	-	-
Total comprehensive income for period				-	-	779	779
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(5)	-	(255)	(260)
Transfer to Capital Redemption Reserve				-	5	(5)	-
Dividends			6	-	-	(968)	(968)
Total transactions with owners				(5)	5	(1,228)	(1,228)
As at 31st January 2018 (Restated)				891	117	92,401	93,409

 

			Notes	Share Capital	Capital Redemption Reserve	Retained Earnings	Total
				£000	£000	£000	£000
As at 1st August 2017 (Restated)			2	896	112	92,850	93,858
Profit for the period				-	-	4,942	4,942
Other comprehensive income				-	-	92	92
Total comprehensive income for period				-	-	5,034	5,034
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(16)	-	(892)	(908)
Transfer to Capital Redemption Reserve				-	16	(16)	-
Dividends			6	-	-	(1,391)	(1,391)
Total transactions with owners				(16)	16	(2,299)	(2,299)
As at 31st July 2018 (Restated)				880	128	95,585	96,593

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		6 Months ended 31.1.19 (Unaudited)	6 Months ended 31.1.18 (Unaudited)	Year ended 31.7.18 (Audited)
			Restated (Note 2)	Restated (Note 2)
		£000	£000	£000
NON-CURRENT ASSETS
Property, plant and equipment		1,393	1,406	1,308
Investment properties		69,594	66,435	69,532
Investments in Joint Ventures		70	319	68
Available for sale financial assets		951	1,041	1,099
Trade and other receivables		857	-	857
Retirement benefit surplus		4,205	3,862	4,205
Deferred tax assets		94	58	94
		77,164	73,121	77,163
CURRENT ASSETS
Inventories		11,805	5,241	8,807
Trade and other receivables		4,448	5,500	4,540
Monies held on deposit		48	4,045	48
Cash and cash equivalents		22,247	24,734	23,586
		38,548	39,520	36,981
TOTAL ASSETS		115,712	112,641	114,144
NON-CURRENT LIABILITIES
Deferred tax liabilities		1,995	1,926	1,995
CURRENT LIABILITIES
Trade and other payables		4,629	4,297	3,580
Corporation tax liability		110	151	118
Bank overdraft		12,747	12,858	11,858
		17,486	17,306	15,556
TOTAL LIABILITIES		19,481	19,232	17,551
NET ASSETS		96,231	93,409	96,593
EQUITY
Called up share capital		872	891	880
Capital redemption reserve		136	117	128
Retained earnings		95,223	92,401	95,585
TOTAL EQUITY		96,231	93,409	96,593

 

CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	6 Months ended 31.1.19 (Unaudited)	6 Months ended 31.1.18 (Unaudited)	Year ended 31.7.18 (Audited)
		£000	£000	£000
CASH FLOWS FROM OPERATING ACTIVITIES	9	(1,101)	(1,208)	(4,306)
Tax paid		(148)	(191)	(442)
NET CASH FLOWS FROM OPERATING ACTIVITIES		(1,249)	(1,399)	(4,748)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment		(254)	(183)	(454)
Additions to investment properties		(16)	(13)	(27)
Expenditure on own work capitalised - investment properties		(46)	(1,623)	(1,847)
Sale of property, plant and equipment		-	57	93
Proceeds of sale of available for sale financial assets		110	-	9
Increase/(decrease) in monies held on deposit		-	(1,509)	2,488
Interest received		29	41	80
Dividend received from Joint Ventures		59	-	700
NET CASH FLOWS FROM INVESTING ACTIVITIES		(118)	(3,230)	1,042
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares		(459)	(260)	(908)
Dividends paid		(402)	(968)	(1,391)
NET CASH FLOWS FROM FINANCING ACTIVITIES		(861)	(1,228)	(2,299)
DECREASE IN CASH AND CASH EQUIVALENTS		(2,228)	(5,857)	(6,005)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		11,728	17,733	17,733
CASH AND CASH EQUIVALENTS AT END OF PERIOD		9,500	11,876	11,728

 

NOTES TO INTERIM FINANCIAL STATEMENTS

1.         BASIS OF PREPARATION

J. Smart & Co. (Contractors) PLC is a company domiciled in the United Kingdom.  The condensed consolidated interim financial statements of the Company for the six months ended 31st January 2019 comprise the Company and its Subsidiaries, together referred to as the Group, and the Group's interest in jointly controlled entities.

The condensed consolidated interim financial statements for the six months to 31st January 2019 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34: Interim Financial Reporting as adopted by the European Union. 

The condensed consolidated interim financial statements for the six months to 31st January 2019 do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year to 31st July 2018, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

The statutory financial statements for the year to 31st July 2018 have been filed with the Registrar of Companies and a copy may be obtained from Companies House.  These have been audited and contain an unqualified audit opinion, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498 of the Companies Act 2006.

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

2.         ACCOUNTING POLICIES

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

The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31st July 2018, with the exception of the policies regarding the accounting for pension scheme obligations and investment properties revaluations and the adoption of IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers, details of which are given below.  

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

IFRS 9: Financial Instruments became effective as from 1st August 2018.  This standard impacts for the Group on the accounting for revaluation surpluses or deficits on its available for sale financial assets.  Previously these surpluses or deficits were accounted for in the Consolidated Statement of Comprehensive Income together with the taxation impact of these surpluses or deficits.  Under IFRS 9 these surpluses or deficits are accounted for in the Consolidated Income Statement together with taxation impact.  There is no impact on the valuation of the available for sale financial assets or the deferred tax provision in relation to their valuation in the Consolidated Statement of Financial Position.  Within the Equity section of the Consolidated Statement of Financial Position the Fair value reserve no long exists and the Retained earnings have increased by the balance previously disclosed as Fair value reserve.

 

The application of IFRS 9: Financial Instruments has been applied retrospectively and accordingly the comparative figures have been restated for the six months to 31st January 2018 and for the year to 31st July 2018. 

The table below details the impact of the application of IFRS 9: Financial Instruments on the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income for the six months to 31st January 2018 and the year to 31st July 2018:

CONSOLIDATED INCOME STATEMENT
			6 Months ended 31.1.18 (Unaudited)	Year ended 31.7.18 (Audited)
			£000	£000
PROFIT BEFORE TAX (as previously reported)			921	5,253
Impact of net surplus on valuation of available for sale financial assets			41	104
			962	5,357
TAX (as previously reported)			(180)	(402)
Impact of deferred tax adjustment on fair value reserve			(3)	(13)
			(183)	(415)
PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS - REVISED			779	4,942
Impact on profit for the period - increase			38	91

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD (as previously reported)			779	5,034
Impact on profit for the period - increase (as above)			38	91
			817	5,125
Other comprehensive income relating to fair value of available for sale financial assets - no longer accounted for in Statement of Comprehensive Income			(38)	(91)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD - REVISED			779	5,034
PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS - REVISED			779	5,034

 

IFRS 15: Revenue from Contracts with Customers became effective as from 1st August 2018 and it replaces IAS 11: Construction Contracts and IAS 18: Revenue and sets out the criteria for revenue recognition with regards to performance obligations.  In respect of construction contracts this standard will have no impact on revenue from customers as the standard allows for the recognition of revenue over time which is the Group's practice.  The recognition of revenue from private house sales or sales of land will not be impacted on by the new standard.  This standard does not apply to rental income from our investment properties but does apply to service charge income and other property related income and income from sale of investment properties. The new standard does not impact on the Group's current practice of recognition of these income types. 

Interpretations effective in period

The following new standards, amendments to standards and interpretations relevant to the Group were issued by the International Accounting Standards Board and are mandatory for the Group for the first time in the financial year to 31st July 2019:

·     IFRS 9: Financial Instruments.

·     IFRS 15: Revenue from Contracts with Customers.

·     IAS 40 (Amended): Investment Property

The impact of the implementation of IFRS 9 and IFRS 15 are detailed above.  With regards to IAS 40: Investments Properties the amendment relates to transfers to and from investment properties and had no impact on the financial statements for the period to 31st January 2019.

Estimates and assumptions

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

Going concern

The Directors have a reasonable expectation that the Company and Group as a whole have adequate resources to continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of these accounts.  For this reason, the Directors continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

3.         PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties which could have a material impact on the Group's performance for the remainder of the current financial year remain the same as those detailed in the Group's Annual Report and Financial Statements for the year to 31st July 2018.

 4.         SEGMENTAL INFORMATION

The Group has identified operating segments on the basis of internal reporting components that are regularly reviewed by the chief operating decision maker to allow the allocation of resources to segments and assess their performance.  The Board of Directors has been recognised as the chief operating decision maker.

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

	External Revenue	Internal Revenue	Total Revenue	Operating Profit/(Loss)
				31.1.19	31.1.18	31.7.18
					Restated (Note 2)	Restated (Note 2)
	£000	£000	£000	£000	£000	£000
31st JANUARY 2019 (Unaudited)
Construction activities	5,054	46	5,100	(1,748)	-	-
Investment activities	3,644	-	3,644	2,309	-	-
	8,698	46	8,744	561	-	-
31st JANUARY 2018 (Unaudited) (Restated Note 2)
Construction activities	6,767	1,623	8,390	-	(632)	-
Investment activities	2,898	-	2,898	-	1,482	-
	9,665	1,623	11,288	-	850	-
31st JULY 2018 (Audited) (Restated Note 2)
Construction activities	10,655	1,847	12,502	-	-	(1,854)
Investment activities	6,352	-	6,352	-	-	6,417
	17,007	1,847	18,854	-	-	4,563
OPERATING PROFIT				561	850	4,563
Share of results of Joint Ventures				61	14	463
Finance and investment income and profit on sale and net (deficit)/surplus on valuation of available for sale financial assets				17	98	331
PROFIT BEFORE TAX ON ORDINARY ACTIVITIES				639	962	5,357

5.         TAXATION

The tax charge for the 6 months to 31st January 2019 is based on the corporation tax rate at 19.00% (2018, 19.00%).

 6.         DIVIDENDS

	6 Months Ended 31.1.19 (Unaudited)	6 Months Ended 31.1.18 (Unaudited)	Year Ended 31.7.18 (Audited)
	£000	£000	£000
ORDINARY DIVIDENDS
2018 Final dividend of 2.21p, after waivers	402	-	-
2018 Interim dividend of 0.95p	-	-	423
2017 Final dividend of 2.17p	-	968	968
	402	968	1,391

The interim dividend of 0.95p per share for the year to 31st July 2019 will be paid on 3rd June 2019 to shareholders on the register at 10th May 2019.  The interim dividend will cost the Company no more than £412,000.

7.         EARNINGS PER SHARE

	6 Months Ended 31.1.19 (Unaudited)	6 Months Ended 31.1.18 (Unaudited)	Year Ended 31.7.18 (Audited)
		Restated (Note 2)	Restated (Note 2)
Profit attributable to equity shareholders (£000)	499	779	4,942
Basic earnings per share	1.14p	1.75p	11.11p
Weighted average number of shares	43,827,404	44,624,268	44,495,116

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

During the 6 months to 31st January 2019 the Company purchased for immediate cancellation 410,000 Ordinary Shares of 2p.

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

8.         FAIR VALUE ASSETS

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

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

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

 

9.         RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOWS FROM

            OPERATING ACTIVITIES

	6 Months ended 31.1.19 (Unaudited)	6 Months ended 31.1.18 (Unaudited)	Year ended 31.7.18 (Audited)
		Restated (Note 2)	Restated (Note 2)
	£000	£000	£000
Profit before tax	639	962	5,357
Share of profits from Joint Ventures	(61)	(14)	(463)
Depreciation	163	188	427
Impairment of assets	-	-	116
Unrealised valuation surplus on investment properties	-	-	(2,859)
Loss/(profit) on sale of property, plant and equipment	6	(37)	(59)
Profit on sale of available for sale financial assets	(10)	-	(2)
Unrealised valuation deficit/(surplus) on available for sale financial assets	48	(41)	(106)
Change in retirement benefits	-	-	(232)
Interest received	(29)	(41)	(80)
Change in inventories	(2,998)	(2,360)	(5,926)
Change in receivables  - non-current	-	-	(857)
Change in receivables  - current	92	223	1,183
Change in payables	1,049	(88)	(805)
CASH FLOWS FROM OPERATING ACTIVITIES	(1,101)	(1,208)	(4,306)

10.       RELATED PARTY TRANSACTION

Related parties are consistent with those disclosed in the Group's Annual Report and Statement of Accounts for the year to 31st July 2018.

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

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors named below, confirm on behalf of the Board of Directors that to the best of their knowledge that the condensed consolidated interim financial statements for the six months to 31st January 2019 have been prepared in accordance with IAS 34: Interim Financial Reporting as adopted by the European Union.  The condensed consolidated interim financial statements include a fair review of the information required by Disclosure and Transparency Rules 4.2.7 and 4.2.8, being:

·     an indication of important events that have occurred during the six months to 31st January 2019 and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year, and

·     material related party transactions in the six months to 31st January 2019 and any material changes in the related party transactions described in the last annual report.

The Directors of the Company are listed in the Annual Report and Statement of Accounts for the year to 31st July 2018. 

By order of the Board
D.W. SMART, Director	J.R. SMART, Director
23rd April 2019

 

END

 

 

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