Final Results

Artisan (UK) PLC 26 September 2007 26 September 2007 ARTISAN (UK) plc (AIM) (House builder & business park developer) PRELIMINARY RESULTS FOR THE 15 MONTHS TO 30 JUNE 2007 HIGHLIGHTS Key points: • Turnover for 15 months up significantly to £41.0m (2006: £28.7m*) • Operating profits have remained steady at £3.7m (2006: £3.7m*), largely due to margin pressure in residential sales • Business park development division performing strongly, with turnover at £15.6m (2006: £9.7m) and operating profit before central charges at £2.4m (2006: £1.6m*) • Final dividend of 1.5p per Ordinary Share recommended (2006: nil): total dividend for the period under review at 2.7p (2006: nil*) • Board to continue investment in land stocks to provide future growth • Profit before tax falls as expected to £2.8m (2006: £3.4m*), reflecting the impact of IFRS on income recognition and increased interest charge as a result of investment in inventories • Maiden contribution from property investment division established during the period *The comparatives for 2006 are based on the 12 months to 31 March 2006, restated to reflect the adoption of International Reporting Standards and changes in accounting policies Michael W Stevens commented: 'The results demonstrate another period of growth with the commercial business park operations reaching record levels of turnover and profit. The combination of residential and commercial operations has successfully balanced profitability in the face of challenging residential market conditions.' 'Recent events indicate that we may be entering a period of more stormy waters that present opportunities as well as challenges, and we expect that we have at least neared the top of the interest rate cycle.' Enquiries: Artisan (UK) plc 01480 436666 Chris Musselle, Chief Executive Mobile: 07879 412779 Bankside Consultants 020 7367 8888 Simon Rothschild/Louise Mason Mobile: 07703 167065 Brewin Dolphin Securities Ifor Williams 0121 236 7000 CHAIRMAN'S STATEMENT I am very pleased to report another period of strong results. Turnover for 15 months has grown significantly to £41.0m (2006: £28.7m) largely as a result of growth in the commercial business park activities from £9.7m in 2006 to £15.6m in 2007. Turnover for Rippon Homes, the Group's residential house builder rose to £26.9m in comparison with £19.0m in 2006 in the face of a difficult residential market in our core area the East Midlands. Your Board has recognised the need to report under International Financial Report Standards ('IFRS'). The adoption of IFRS has, as previously announced, resulted in a change in our revenue recognition basis to accounting on completion of sales transactions and we have adopted an accounting reference date of 30 June which better aligns Artisan with other companies in the sector. As this is the first time we have accounted to 30 June, this report and accounts is for a 15 month period to 30 June 2007. The comparative figures for the 12 months to 31 March 2006 have been re-stated to reflect the adoption of IFRS and change in accounting policies. The effects of IFRS on these results has been to inflate 2006's turnover and profit before tax, largely as a result of changes in income recognition, disguising the improved trading performance achieved during the period under review. Operating profits have remained steady at £3.7m (2006: £3.7m) although this is for a longer period. Whilst profits derived from the business park activities have remained strong, margin levels for residential sales have suffered. This is due to a difficult market requiring use of incentives with a lack of sales value increase. At the same time the supply of land, particularly residential, has remained constrained and land values have not decreased. The scarcity of land with planning permission is the prime reason for land values and the consequential price of new homes remaining at high levels. If Government targets are to be met, improvements in the whole planning process will need to be implemented. Your Board is looking forward to 2008 with cautious optimism. We are very confident that the delivery and quality of our product more than meets customer expectations and this allows us to remain competitive in securing sales against competitors. However, the extended series of interest rate rises has long since succeeded in dampening the East Midlands residential market and both the continued policy as regards interest rates and the availability of consumer finance as a consequence of the volatile global financial markets currently seen, has the potential for a significant impact on our achievements for the financial year to 30 June 2008. We believe that these conditions will affect many in our sector. The background to the commercial division has been much more buoyant, and it is clear that the extended business cycle that the UK has been experiencing has brought about a need for both established companies to seek new premises and greater demand from smaller companies and start ups. Our results show that we can meet customer requirements in a flexible and efficient way. There is scope to expand our brand name further in a dynamic and fast moving area of the country. The strategy of your Board is to maintain investment in land stocks to provide for future growth. We have good and improved banking facilities that we expect to utilise increasingly as land is acquired. Whilst this approach may increase short term financing costs, we believe that it is essential for the continued growth of the Group. Earlier this year the Board decided the business had matured sufficiently to be able to consider retaining some of our let properties rather than disposing of them immediately as investment sales. As previously announced, the first two properties falling into this category are premises for Black Teknigas and Speymill Group plc. Further property investment opportunities will be assessed as they arise out of the normal course of trading. We also recognise the interest of our shareholders in a dividend stream and I was particularly pleased to announce in January 2007 the restoration of a dividend with an interim dividend of 1.2p. I am also pleased that your Board has decided to recommend a final dividend of 1.5p bringing total dividends payable for the 15 months to 30 June 2007 to 2.7p. The investment the Group has made in its two core divisions over the last 3 years, and the re-establishment of the investment property division has created a much more soundly based company than it was formerly. Recent events indicate that we may be entering a period of more stormy waters that present opportunities as well as challenges, and we expect that we have at least neared the top of the interest rate cycle. The continued success of Artisan is dependent on the team approach; and the loyalty and hard work of our employees is what drives the business forward. I thank them greatly. Michael W Stevens Chairman 26 September 2007 OPERATIONAL REVIEW The 15 months to 30 June 2007 has seen the commercial business park operations reach record levels of turnover and profit. Turnover has grown to £15.6m (2006: £9.7m) including inter group sales of £1.5m (2006: £nil). The inter group sales are in respect of the investment property activity. The increased turnover has been achieved because built stock and land has been available to meet demand. In addition a record level of forward sales was achieved which has provided turnover not only in the period but also for the year to 30 June 2008. The commercial stock has been utilised in providing sales and investment land for Artisan (UK) Properties. During the 15 month period the acquisition of sites at Peterborough and King's Lynn were completed and a site at Ipswich since contracted in line with the Board's plans. Consequently land stocks stand at 21,000m(2) of net developable floor space (2006: 16,550m(2)). Since the period end further sites have been agreed and, if these all complete, Artisan (UK) Developments will be well placed for sales outlets. Residential has faced more challenging conditions. Whilst an improved spread of product offered across sites over a broader geographic region has enabled an improved turnover to be achieved, 160 units contributing £26.9m of turnover (2006: 107 units contributing £19.0m turnover), the sales have been more difficult to achieve at target prices. The increased use of incentives and less sales price growth has resulted in profit before central charges of £2.6m (2006: £3.0m). Land supply is important to both businesses and Rippon Homes has 337 plots owned or contracted at 30 June 2007 (2006: 279). Further sites are subject to agreed bids. Artisan (UK) Properties has, as an extension to the Artisan (UK) Development activities, secured its first two investment agreements during the period. The first is a 36,500 sq ft industrial unit for Black Teknigas Ltd, a subsidiary of Watts Industries. The agreement for this investment includes a five-year option for an extension of 18,500 sq ft to the property. The second investment property is for a 5,000 sq ft new office for Speymill Group plc, a group that has recently established new areas of activity and grown existing ones. We believe that each investment holds the potential for appreciation in value over the next few years and we will look for similar opportunities. As the lease on the current Artisan Huntingdon office expires, Artisan will be moving to new offices of 3,000 sq ft alongside Speymill Group's new offices. The 15 months to 30 June 2007 has shown that the combination of residential and commercial operations has successfully balanced profitability in the face of challenging residential market conditions. Chris Musselle Chief Executive 26 September 2007 FINANCIAL REVIEW Results The adoption of IFRS has impacted on the results for this period and for the comparative year. A consequence of the adoption of IFRS has been the change to recognising sales at the point of legal completion rather than exchange of contracts. Details of the effects of the adoption of IFRS were set out in our announcement of 19 October 2006. This announcement shows that, principally due to the change of revenue recognition basis, the 2006 results were significantly improved by one particular sale that having been exchanged in March 2005, completed in April 2005 moving the revenue recognition into the year ended 31 March 2006. An accounting reference date of 30 June has also been adopted which brings Artisan's half yearly reporting more into line with many businesses in the housing development sector. Operating profit of £3.7m for the 15 months to 30 June 2007 (2006: £3.7m) on greater levels of turnover reflects a reduction in residential margins whilst commercial business park margins have remained robust. However the 2006 operating profit included a net benefit of £0.1m arising from non-recurring income and expenditure in that year. Finance expense has increased to £0.9m (2006: £0.4m) reflecting the increased investment in land and work-in-progress in accordance with the Group's strategy to increase outlets. The notes to the accounts include a more detailed segmental analysis. However this can be summarised as below:- Residential Commercial Investment Central Total £m £m £m £m £m Turnover 2007 (15 months) 26.9 15.6 - (1.5) 41.0 2006 (12 months) 19.0 9.7 - - 28.7 Operating profit before group management charges 2007 (15 months) 2.6 2.4 0.3 (1.6) 3.7 2006 (12 months) 3.0 1.6 - (0.9) 3.7 The analysis of profit is before Group management charges. The Central column deducts from turnover the inter segment trading. The 2006 central costs were reduced by net non-recurring recovery of £0.1m. The tax charge for the period is £0.7m resulting in an effective tax rate of 24.1% (2006: 16.9%). The reduction to standard rate is primarily due to the use of brought forward tax losses and a claim for land remediation tax relief. The net assets have grown 11.2% from £18.8m to £20.9m as a result of the retained profit for the period. There have been no significant changes to share capital during the period other than the share consolidation in January 2007. The Group has net borrowings of £10.8m (2006: £6.6m) resulting from increased investment in land and work-in-progress. The Group has drawn bank debt of £24.1m (2006: £20.0m) resulting in substantial cash balances being available. We anticipate further drawing on our bank facilities and utilising funds from our cash balances to further invest in new sites. Our bank 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 gearing ratio is now 51.5% (2006: 34.9%). Work in Progress Work-in-progress has increased from £30.2m to £34.8m reflecting continued investment in both residential and commercial stocks. As indicated in the segmental analysis within the notes to the accounts, the larger part of the Group assets is invested in the residential activities reflecting the greater level of trade and the greater cost of residential land. In addition the commercial operations are able to negotiate some of their sales on a forward basis, which can reduce the level of investment required. Capital Reorganisation In January 2007, a successful capital reorganisation was undertaken. This had the net effect of consolidating Artisan shares on a 1 for 40 basis. The effect of this was to reduce the number of registered shareholders from over 10,000 to under 5,000. The consolidation exercise provided shareholders that held only a few shares with a cost effective way of realising their interest and will secure significant savings to the Group in managing the shareholder base. Chris Musselle Chief Executive 26 September 2007 ARTISAN (UK) PLC GROUP INCOME STATEMENT For The Period Ended 30 June 2007 15 month period 1 April 2006 to Year ended Note 30 June 2007 31 Mar 2006 __________ __________ £ £ REVENUE 41,032,156 28,664,400 COST OF SALES (35,093,001) (23,503,665) __________ __________ GROSS PROFIT 5,939,155 5,160,735 Other operating income 410,264 741,459 Administrative expenses (2,913,381) (2,218,052) __________ __________ 3,436,038 3,684,142 Revaluation surplus on investment properties 261,684 - __________ __________ Operating profit 3,697,722 3,684,142 Finance income 18,829 119,425 Finance expense (933,642) (448,686) __________ __________ PROFIT BEFORE TAXATION 2,782,909 3,354,881 Tax expense (671,032) (567,405) __________ __________ PROFIT FOR THE PERIOD 2,111,877 2,787,476 __________ __________ Basic earnings per share 4 25.71p 38.24p Diluted earnings per share 4 25.71p 38.24p ARTISAN (UK) PLC GROUP STATEMENT OF CHANGES IN EQUITY Share Capital Own Share premium Merger redemption Retained shares capital account reserve reserve earnings held Total £ £ £ £ £ £ £ At 1 April 1,442,647 9,456,668 515,569 91,750 3,376,299 - 14,882,933 2005 Profit and total income and expense recognised for - - - - 2,787,476 - 2,787,476 the year Issue of 200,000 900,000 - - - - 1,100,000 shares Credit in respect of employee share - - - - 43,373 - 43,373 schemes _________ _________ _________ _________ _________ _________ _________ At 31 March 1,642,647 10,356,668 515,569 91,750 6,207,148 - 18,813,782 2006 Profit and total income and expense recognised for - - - - 2,111,877 - 2,111,877 the period Dividends - - - - (98,384) - (98,384) paid Issue of 3 15 - - - - 18 shares Purchase of - - - - - (19,065) (19,065) own shares Credit in respect of employee share - - - - 51,957 - 51,957 schemes _________ _________ _________ _________ _________ _________ _________ At 30 June 1,642,650 10,356,683 515,569 91,750 8,272,598 (19,065) 20,860,185 2007 _________ _________ _________ _________ _________ _________ _________ ARTISAN (UK) PLC GROUP BALANCE SHEET As at 30 June 2007 30 June 2007 31 Mar 2006 __________ __________ £ £ ASSETS Non-current assets Intangible assets 2,454,760 2,454,760 Investment properties 1,515,897 - Property, plant and equipment 437,058 352,779 Deferred tax assets - 171,180 __________ __________ 4,407,715 2,978,719 __________ __________ CURRENT ASSETS Inventories 34,792,561 30,167,798 Current asset investment - 1,000 Trade and other receivables 1,478,042 1,242,085 Cash and cash equivalents 1,126 3,350 __________ __________ 36,271,729 31,414,233 __________ __________ Total assets 40,679,444 34,392,952 __________ __________ LIABILITIES Non-current liabilities Interest bearing loans and borrowings (10,752,945) (6,563,065) __________ __________ Current liabilities Trade and other payables (8,098,715) (8,058,660) Current tax provision (523,527) (509,700) Provisions (444,072) (447,745) __________ __________ (9,066,314) (9,016,105) __________ __________ Total liabilities (19,819,259) (15,579,170) __________ __________ NET ASSETS 20,860,185 18,813,782 ___________ __________ EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT COMPANY Called up share capital 1,642,650 1,642,647 Share premium account 10,356,683 10,356,668 Merger reserve 515,569 515,569 Capital redemption reserve 91,750 91,750 Retained earnings 8,272,598 6,207,148 Own shares (19,065) - __________ __________ TOTAL EQUITY 20,860,185 18,813,782 __________ __________ ARTISAN (UK) PLC GROUP CASH FLOW STATEMENT For The Period Ended 30 June 2007 Period 1 April 2006 to Year ended Note 30 June 2007 31 Mar 2006 __________ __________ £ £ CASH FLOWS FROM OPERATING ACTIVITIES Cash (used by)/generated from 5 (2,330,514) 445,423 operations Finance income received 18,829 119,425 Finance costs paid (898,818) (447,680) Tax paid (486,025) (683,012) __________ ________ Net cash used in operations (3,696,528) (565,844) __________ ________ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and (145,850) (44,947) equipment Capital expenditure on investment properties (238,767) - Proceeds from sale of property, plant and 5,163 8,935 equipment Proceeds from sale of current asset investments 1,309 - __________ ________ Net cash used in investing activities (378,145) (36,012) __________ ________ CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (98,384) - Proceeds from the issue of ordinary share 18 1,100,000 capital Purchase of own shares (19,065) - Movement on borrowings 4,189,880 (497,681) Capital element of hire purchase - (2,320) payments __________ __________ Net cash flow from financing activities 4,072,449 599,999 __________ __________ NET DECREASE IN CASH AND CASH (2,224) (1,857) EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING 3,350 5,207 OF THE PERIOD __________ __________ CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 1,126 3,350 __________ __________ 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 1985 applicable to companies reporting under IFRS. Full details of IFRS policies applied and reconciliations of comparative figures between UK GAAP and IFRS are available in our Interim Statement, a copy of which is available from our website www.artisan-plc.co.uk. 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 15 month period ended 30 June 2007 and the year ended 31 March 2006, but is derived from those financial statements. The financial statements for the year ended 31 March 2006, which were prepared under UK GAAP, have been delivered to the Registrar of Companies. The financial statements for the 15 month period ended 30 June 2007 prepared under IFRS 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 237 (2) or (3) of the Companies Act 1985. The annual report and financial statements will be posted to shareholders on 27 September 2007, copies of which will also be available from the Company Secretary, Artisan (UK) plc, Mace House, Sovereign Court, Ermine Business Park, Huntingdon, Cambridgeshire, PE29 6XU. 3 Dividends Amounts paid to equity holders in the period: Period 1 April 2006 to Year ended 30 June 2007 31 March 2006 £ £ Interim dividend for the period ended 30 June 2007 of 1.2p per share 98,384 - _________ _________ The Directors have proposed a final dividend for the period of 1.5p (2006 - £Nil) per ordinary share amounting to £122,980 (2006 - £Nil). This dividend has not been accrued at the balance sheet date. 4 Earnings per share The basic earnings per share is calculated by dividing the profit after taxation by the weighted average number of shares in issue. The basic earnings per share is calculated by dividing the profit after taxation by the weighted average number of shares in issue. 2007 2006 Number Number The weighted average number of shares were: Basic weighted average number of shares 8,213,242 7,289,948 __________ __________ The comparative figure has been restated to reflect the capital reorganisation which occurred on 19 January 2007. The restated weighted average number of shares has been calculated as if the consolidation had occurred at the start of the comparative period. There were no dilutive potential ordinary shares in 2007 or 2006. 5 Cash (used by)/generated from operations Period 1 April 2006 to Year ended 30 June 31 March 2007 2006 £ £ Profit before taxation 2,782,909 3,354,881 Provision arising on current asset investment - 4,000 Profit on disposal of current asset investment (309) - Depreciation 59,598 32,367 Share based payments charge 51,957 43,373 Profit on disposal of property, plant and equipment (3,190) (8,935) Increase in inventories (5,428,981) (3,509,210) Increase in trade and other receivables (235,957) (488,302) (Decrease)/increase in trade and other payables (205,997) 769,086 Decrease in provisions (3,673) (81,098) Revaluation surplus on investment properties (261,684) - Finance income (18,829) (119,425) Finance expense 933,642 448,686 _________ _________ Cash (used by)/generated from operations (2,330,514) 445,423 _________ _________ 6 The Annual General Meeting will be held at the offices of Brewin Dolphin Securities Limited, 12 Smithfield Street, London, EC1A 9BD on 6 November 2007 at 11am. Copies of this announcement will be available to the public, free of charge, from the offices of Brewin Dolphin Securities, Edmund House, 12-22 Newhall Street, Birmingham, B3 3DB during normal office hours, with the exception of Saturdays, Sundays and bank holidays, for 14 days from today. This information is provided by RNS The company news service from the London Stock Exchange

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