St Mark Homes Plc - Final Results

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 Their interests How management and/or Directors group engage Investors · Comprehensive review of · Annual and interim reports financial performance of the · Company website business · Shareholder circulations · Business sustainability · Company announcements · High standard of governance · AGM · Awareness of long-term · AQSE growth exchange strategy and direction announcements Employees · Job satisfaction and · Formal policies and fulfilment procedures · Health and safety on site · Regular dialogue with key · Training and development management · Career progression · Company culture which · Inclusion 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 · Sustainability · Products promote energy environment · Energy usage reduction · Recycling and waste · Corporate and social management 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 490 653 assets Investments in - 159,396 joint ventures ________ ________ 490 160,049 Current assets Debtors 1,206,900 3,490,184 Cash at bank and        1,132 169,043 in hand ________ ________ 1,208,032 3,659,227 Creditors: amounts falling due within one ( 381,905) (55,573) year ________ ________ Net current assets 826,127 3,603,654 ________ ________ Total assets less 826,617 3,763,703 current liabilities (11,843) (22,491) Creditors: amounts falling due in more than one year ________ ________ Net assets 814,774 3,741,212 ________ ________ Capital and reserves Called up share 2,206,501 2,206,501 capital Capital redemption 1,009,560 1,009,560 reserve Other reserve 211,822 211,822 Merger reserve 327,060 327,060 Share premium 375,246 375,246 account Profit and loss (3,315,415) (388,977) account ________ ________ Shareholders' 814,774 3,741,212 funds ________ ________ Consolidated Statement of Changes in Equity For the year ended 31 December 2023 Share Capital Other Merger Share Profit and Total Capital Redemption loss Reserve Reserve Reserve Premium reserves £ £ £ £ £ £ £ Balance at 2,206,501 1,009,560 211,822 327,060 375,246 1,100,103 5,230,292 31 December 2021 Loss for the - - - - - (1,489,080) (1,489,080) year ________ ________ _______ _______ ________ ________    ________ Total - - - - - (1,489,080) (1,489,080) comprehensive income for the year ________ ________ _______ _______ ________ ________ ________ Balance at 2,206,501 1,009,560 211,822 327,060 375,246 (388,977) 3,741,212 31 December 2022 Loss for the - - - - - (2,926,438) (2,926,438) year ________ ________ _______ _______ ________ ________ ________ Total - - - - - (2,926,438) (2,926,438) comprehensive income for the year ________ ________ _______ _______ ________ ________ _________ Balance at 2,206,501 1,009,560 211,822 327,060 375,246 ( 3,315,415) 814,774 31 December 2023 ________ ________ _______    ________ ________ ________ ______ Consolidated statement of cashflows for the year ended 31 December 2023 2023 2023 2022 2022 £ £ £ £ Cash flows from operating activities Cash (used in)/generated (154,774) 32,973 from operations 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 (167,911) 37,901 cash and cash equivalents 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. 2. 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. 3. 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 (2,926,438) (1,489,080) calculation of basic and diluted EPS ________ ________ Number Number Denominator Weighted average number of ordinary 4,413,002 4,413,002 shares used in basic and diluted EPS ________ ________ There are no share options or other potentially dilutive equity instruments in issue than can dilute the earnings per share. This information was brought to you by Cision http://news.cision.com

St Mark Homes Plc