SMART (J.) & CO. (CONTRACTORS) PLC

Interim / Quarterly Report • Apr 20, 2021

National Storage Mechanism | Additional information

RNS Number : 0289W

Smart(J.)&Co(Contractors) PLC

20 April 2021

J. SMART & CO. (CONTRACTORS) PLC

INTERIM REPORT

FOR THE SIX MONTHS TO

31st JANUARY 2021

J. SMART & CO. (CONTRACTORS) PLC

CHAIRMAN'S REVIEW

INTERIM REPORT

Unaudited Group profit for the six months to 31st January 2021 amounted to £829,000 compared with £250,000 for the corresponding period last year.

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 the valuation would have been no worse than last year, with no detrimental effect on the headline figures.

The remaining private housing sales at West Bowling Green Street completed in this half year. There will be no further private housing sales this financial year as completions at the small development, The Courtyard at Winchburgh, will be after the end of the financial year.

The build contract at Ferrymuir completed in this half year. Margins were unsatisfactory.

The third and final phase of industrial development at West Edinburgh Business Park has now completed and a letting to one tenant for the whole phase concluded. Letting activity in both our industrial and office properties remained robust in the half year.

The coronavirus pandemic has continued to impact on trading activities. Whilst our construction sites have remained open, the majority of office-based staff have been working from home since January 2021 in line with legislation and guidance. Moreover, the coronavirus crisis has caused delays in the progress of site acquisitions, negotiated tender work in the Housing Association sector and our own projects. Also, the crisis has impacted on the supply chain with prolonged lead in times for basic construction materials. In this half year there has been a marked increase in the prices of these materials which has hampered negotiations for tender work.

This lull in contracting work and new private housing work continues and will result in an erosion of profit due to lack of recovery of overhead costs.

INTERIM DIVIDEND

The Board announces an interim dividend of 0.95p per share (2020, 0.95p) to be paid on 7th June 2021 to shareholders on the register at the close of business on 7th May 2021.  The interim dividend will cost the Company no more than £401,000.

FUTURE PROSPECTS

We have substantially less work in hand in contracting than the same time last year. It is by no means certain that new contracting work will be secured this financial year due to general delays caused by the coronavirus pandemic.

As mentioned above, there will be no further private housing sales this financial year. We are hopeful that the private housing development at Canal Quarter, Winchburgh will commence this financial year but that is by no means guaranteed.

Commercial property valuation levels have continued to improve since last year in the industrial sector but have remained static in the office sector.  Also, as mentioned above, lettings of both our industrial and office stock remain robust, albeit we expect to see some voids in our office properties due to consolidation by tenants. The third and final phase of speculative industrial development at Inchwood Park, Bathgate is due for completion imminently with interest at a promising level. Construction has commenced at the second phase of our joint venture industrial development at Gartcosh Business Park.

Therefore, at this stage it is difficult to make an accurate forecast of the year end figures. It remains to be seen what the headline profit will be but it is unlikely that the underlying profit will increase this financial year.

20th April 2021	D.W. SMART Chairman

CONSOLIDATED INCOME STATEMENT

	Notes	6 Months ended 31.1.21 (Unaudited)	6 Months ended 31.1.20 (Unaudited)	Year ended 31.7.20 (Audited)
		£000	£000	£000
CONTINUING OPERATIONS
Group construction activities		7,272	10,473	19,223
Less:  Own construction work capitalised		(1,518)	(1,219)	(2,410)
REVENUE		5,754	9,254	16,813
Cost of sales		(5,270)	(9,972)	(16,764)
GROSS PROFIT/(LOSS)		484	(718)	49
Other operating income		3,554	3,915	7,198
Net operating expenses		(3,333)	(2,967)	(6,078)
OPERATING PROFIT BEFORE NET SURPLUS ON VALUATION OF INVESTMENT PROPERTIES		705	230	1,169
Net surplus on valuation of investment properties		-	-	3,179
OPERATING PROFIT		705	230	4,348
Share of profits/(losses) in Joint Ventures		4	(5)	(13)
Income from available for sale financial assets		11	28	50
Profit on sale of available for sale financial assets		1	16	16
Net surplus/(deficit) on valuation of available for sale financial assets		173	(47)	(379)
Finance income		2	49	130
Finance costs		(6)	(6)	(12)
PROFIT BEFORE TAX		890	265	4,140
Taxation	5	(133)	(64)	(508)
PROFIT FROM CONTINUING OPERATIONS		757	201	3,632
DISCONTINUED OPERATIONS
Loss from discontinued operations	6	(49)	(12)	(47)
PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS		708	189	3,585
EARNINGS/(LOSS) PER SHARE	8
From continuing operations - basic and diluted		1.78p	0.47p	8.46p
From discontinued operations - basic and diluted		(0.11)p	(0.03)p	(0.11)p
From continuing and discontinued operations - basic and diluted		1.67p	0.44p	8.35p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		6 Months ended 31.1.21 (Unaudited)	6 Months ended 31.1.20 (Unaudited)	Year ended 31.7.20 (Audited)
		£000	£000	£000
PROFIT FOR THE PERIOD		708	189	3,585
OTHER COMPREHENSIVE LOSS
Items that will not be subsequently reclassified to Income Statement:
Actuarial loss recognised in defined benefit pension scheme		-	-	(3,961)
Deferred taxation on actuarial loss		-	-	942
TOTAL ITEMS THAT WILL NOT BE SUBSEQUENTLY RECLASSIFED TO INCOME STATEMENT		-	-	(3,019)
TOTAL OTHER COMPREHENSIVE LOSS		-	-	(3,019)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX		708	189	566
ATTRIBUTABLE TO EQUITY SHAREHOLDERS		708	189	566

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Notes	Share Capital	Capital Redemption Reserve	Retained Earnings	Total
				£000	£000	£000	£000
As at 1st August 2020				853	155	98,252	99,260
Profit for the period				-	-	708	708
Other comprehensive income				-	-	-	-
Total comprehensive income for period				-	-	708	708
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(6)	-	(364)	(370)
Transfer to Capital Redemption Reserve				-	6	(6)	-
Dividends			7	-	-	-	-
Total transactions with owners				(6)	6	(370)	(370)
As at 31st January 2021				847	161	98,590	99,598

As at 1st August 2019				866	142	99,274	100,282
Profit for the period				-	-	189	189
Other comprehensive income				-	-	-	-
Total comprehensive income for period				-	-	189	189
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(3)	-	(170)	(173)
Transfer to Capital Redemption Reserve				-	3	(3)	-
Dividends			7	-	-	(390)	(390)
Total transactions with owners				(3)	3	(563)	(563)
As at 31st January 2020				863	145	98,900	99,908

As at 1st August 2019				866	142	99,274	100,282
Profit for the period				-	-	3,585	3,585
Other comprehensive loss				-	-	(3,019)	(3,019)
Total comprehensive income for period				-	-	566	566
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled				(13)	-	(780)	(793)
Transfer to Capital Redemption Reserve				-	13	(13)	-
Dividends			7	-	-	(795)	(795)
Total transactions with owners				(13)	13	(1,588)	(1,588)
As at 31st July 2020				853	155	98,252	99,260

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		6 Months ended 31.1.21 (Unaudited)	6 Months ended 31.1.20 (Unaudited)	Year ended 31.7.20 (Audited)
		£000	£000	£000
NON-CURRENT ASSETS
Property, plant and equipment		1,203	1,300	1,268
Investment properties		80,246	75,311	78,632
Investments in Joint Ventures		905	909	901
Available for sale financial assets		1,045	1,218	886
Trade and other receivables		250	250	250
Retirement benefit surplus		-	2,899	-
Deferred tax assets		313	101	313
		83,962	81,988	82,250
CURRENT ASSETS
Inventories		6,383	6,161	6,181
Contract assets		273	751	423
Corporation tax asset		178	-	139
Trade and other receivables		2,867	2,913	2,823
Monies held on deposit		48	48	48
Cash and cash equivalents		23,685	26,565	23,118
		33,434	36,438	32,732
TOTAL ASSETS		117,396	118,426	114,982
NON-CURRENT LIABILITIES
Deferred tax liabilities		1,265	1,731	1,265
Lease liabilities		212	205	205
Retirement benefit deficit		1,076	-	1,076
		2,553	1,936	2,546
CURRENT LIABILITIES
Trade and other payables		2,715	3,740	3,072
Lease liabilities		-	-	-
Corporation tax liability		-	7	-
Bank overdraft		12,530	12,835	10,104
		15,245	16,582	13,176
TOTAL LIABILITIES		17,798	18,518	15,722
NET ASSETS		99,598	99,908	99,260
EQUITY
Called up share capital		847	863	853
Capital redemption reserve		161	145	155
Retained earnings		98,590	98,900	98,252
TOTAL EQUITY		99,598	99,908	99,260

CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	6 Months ended 31.1.21 (Unaudited)	6 Months ended 31.1.20 (Unaudited)	Year ended 31.7.20 (Audited)
		£000	£000	£000
CASH FLOWS FROM OPERATING ACTIVITIES	10	322	2,932	5,387
Tax paid		(160)	(212)	(531)
NET CASH FLOWS FROM OPERATING ACTIVITIES		162	2,720	4,856
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment		(88)	(161)	(355)
Additions to investment properties		(89)	(13)	(483)
Expenditure on own work capitalised - investment properties		(1,518)	(1,219)	(2,410)
Proceeds of sale of property, plant and equipment		33	24	29
Purchase of available for sale financial assets		-	-	-
Proceeds of sale of available for sale financial assets		15	60	60
Interest received		2	49	78
Interest paid		(6)	(6)	(12)
NET CASH FLOWS FROM INVESTING ACTIVITIES		(1,651)	(1,266)	(3,093)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares		(370)	(173)	(793)
Dividends paid		-	(390)	(795)
NET CASH FLOWS FROM FINANCING ACTIVITIES		(370)	(563)	(1,588)
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(1,859)	891	175
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		13,014	12,839	12,839
CASH AND CASH EQUIVALENTS AT END OF PERIOD		11,155	13,730	13,014

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 2021 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 2021 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 2021 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 2020, 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 2020 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 2020, with the exception of the policies regarding the accounting for pension scheme obligations and investment properties revaluations.  

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 and therefore, no revaluation adjustment is made in the condensed consolidated interim financial statements.

Standards, Amendments to Standards and Interpretations effective in period

The following new standards, amendments to standards and interpretations, which are 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 2021:

·    IAS 1 (amended): Presentation of financial statements.

·    IAS 8 (amended): Accounting Policies, Changes in Accounting Estimates and Errors.

The Directors anticipate that there will be no material impact of these amendments to standards on the financial statements.

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 financial statements have been prepared on a going concern basis. The Directors have reviewed their forecasts and cashflows taking into account current available information. They have considered future trading expectations and opportunities under various scenarios and in light of the ongoing coronavirus pandemic. Based on the review the Group is expected to remain net debt free. Taking the above information into account the Directors are of the opinion that the Company and Group have adequate financial resources to continue in operational existence for a period of at least twelve months from the date of approval of these financial statements and therefore considers the adoption of the going concern basis as appropriate for the preparation of these Accounts.

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 2020, including the ongoing situation relating to the coronavirus pandemic.  The Directors are closely monitoring the situation as it develops and the impact it is having on the trading performance of the Group and will continue to do so.  The Directors will take appropriate actions to help mitigate the impact of the situation on the Group's performance and future prospects.

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)
31.1.21	31.1.20	31.7.20
	£000	£000	£000	£000	£000	£000
31st JANUARY 2021 (Unaudited)
Construction activities -     continuing operations	5,754	1,518	7,272	(1,345)	-	-
Construction activities - discontinued operations	-	-	-	(61)	-	-
Investment activities - continuing operations	3,554	-	3,554	2,050	-	-
Investment activities - discontinued operations	4	-	4	-	-	-
	9,312	1,518	10,830	644	-	-
31st JANUARY 2020 (Unaudited)
Construction activities -     continuing operations	9,254	1,219	10,473	-	(2,387)	-
Construction activities - discontinued operations	1	-	1	-	(15)	-
Investment activities - continuing operations	3,915	-	3,915	-	2,617	-
Investment activities - discontinued operations	4	-	4	-	-	-
	13,174	1,219	14,393	-	215	-
31st JULY 2020 (Audited)
Construction activities - continuing operations	16,813	2,410	19,223	-	-	(3,472)
Construction activities - discontinued operations	1	-	1	-	-	(57)
Investment activities - continuing operations	7,198	-	7,198	-	-	7,820
Investment activities - discontinued operations	9	-	9	-	-	-
	24,021	2,410	26,431	-	-	4,291
OPERATING PROFIT				644	215	4,291
Share of results of Joint Ventures				4	(5)	(13)
Finance and investment income				187	93	196
Finance and investment costs				(6)	(53)	(391)
PROFIT BEFORE TAX ON ORDINARY ACTIVITIES				829	250	4,083

5.         TAXATION

The tax charge for the six months to 31st January 2021 is based on the corporation tax rate at 19.00% (2020, 18.67%).

6.         DISCONTINUED OPERATIONS

In the year to 31st July 2019 Concrete Products (Kirkcaldy) Limited ceased trading.

The results of the discontinued operation, which have been included in the profit, were as follows:

	6 Months Ended 31.1.21 (Unaudited)	6 Months Ended 31.1.20 (Unaudited)	Year Ended 31.7.20 (Audited)
	£000	£000	£000
Revenue	-	1	1
Cost of sales	-	(11)	(18)
Gross loss	-	(10)	(17)
Other operating income	4	4	9
Net operating expenses	(65)	(9)	(49)
Loss before tax	(61)	(15)	(57)
Taxation
Corporation tax	12	3	10
Net loss attributable to discontinued operations	(49)	(12)	(47)
The company had cashflows amounting to:
Operating activities	(57)	(433)	(417)
Investing activities	-	-	-

7.         DIVIDENDS

	6 Months Ended 31.1.21 (Unaudited)	6 Months Ended 31.1.20 (Unaudited)	Year Ended 31.7.20 (Audited)
	£000	£000	£000
ORDINARY DIVIDENDS
2020 Interim dividend of 0.95p	-	-	405
2019 Final dividend of 2.24p, after waivers	-	390	390
	-	390	795

The final dividend of 2.27p per share for the year to 31st July 2020 amounting to £961,000 was paid on 8th February 2021.

The interim dividend of 0.95p per share for the year to 31st July 2021 will be paid on 7th June 2021 to shareholders on the register at 7th May 2021.  The interim dividend will cost the Company no more than £401,000.

8.         EARNINGS/(LOSS) PER SHARE

	6 Months Ended 31.1.21 (Unaudited)	6 Months Ended 31.1.20 (Unaudited)	Year Ended 31.7.20 (Audited)
CONTINUING OPERATIONS
Profit attributable to Equity Shareholders    £000	757	201	3,632
Basic and diluted Earnings per share	1.78p	0.47p	8.46p
DISCONTINUED OPERATIONS
Loss attributable to Equity Shareholders    £000	(49)	(12)	(47)
Basic and diluted Loss per share	(0.11)p	(0.03)p	(0.11)p
CONTINUING AND DISCONTINUED OPERATIONS
Profit attributable to Equity Shareholders    £000	708	189	3,585
Basic and diluted Earnings per share	1.67p	0.44p	8.35p
Weighted average number of shares	42,452,302	43,151,502	42,947,806

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

During the six months to 31st January 2021 the Company purchased for immediate cancellation 321,276 Ordinary Shares of 2p.

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

9.         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 Group can access at the period end date.

10.       RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOWS FROM

OPERATING ACTIVITIES

	6 Months ended 31.1.21 (Unaudited)	6 Months ended 31.1.20 (Unaudited)	Year ended 31.7.20 (Audited)
	£000	£000	£000
Profit before tax	829	250	4,083
Share of (profits)/ losses from Joint Ventures	(4)	5	13
Depreciation	151	159	380
Unrealised valuation surplus on investment properties	-	-	(3,179)
Unrealised valuation (surplus)/deficit on available for sale financial assets	(173)	47	379
Profit on sale of property, plant and equipment	(31)	(18)	(18)
Profit on sale of available for sale financial assets	(1)	(16)	(16)
Change in retirement benefits	-	-	14
Interest received	(2)	(49)	(78)
Interest paid	6	6	12
Change in inventories	(202)	2,482	3,981
Change in contract assets	150	(202)	126
Change in receivables - non-current	-	-	-
Change in receivables - current	(44)	(78)	12
Change in payables	(357)	346	(322)
CASH FLOWS FROM OPERATING ACTIVITIES	322	2,932	5,387

11.       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 2020.

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 2021 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 2021 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 2021 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 2020. 

By order of the Board
D.W. SMART, Director	J.R. SMART, Director
20th April 2021

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