TRAFALGAR PROPERTY GROUP PLC

Annual Report • Sep 6, 2017

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RNS Number : 0210Q

Trafalgar New Homes PLC

06 September 2017

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

6 September 2017

TRAFALGAR NEW HOMES PLC

("Trafalgar", the "Company" or "Group")

Final Results for the year ended 31 March 2017 and notice of Annual General Meeting

Trafalgar (AIM: TRAF), the AIM quoted residential property developer operating in southeast England, announces its final results for the twelve months ended 31 March 2017.

The Company's Annual Report is being posted to shareholders today and contains notice of the Annual General Meeting of the Company to be held at the Company's offices at Chequers Barn, Bough Beech, Edenbridge, Kent TN8 7PD at 11.00 a.m. on 29 September 2017.

Chairman's Statement

On behalf of the Board, I present herewith Trafalgar New Homes' results for the year ended 31 March 2017 which show that no house sales were recorded in the year. In previous years we have sold properties off plan or recorded sales prior to legal completion but for the last three years we only record sales on legal completion rather than on exchange.  We have therefore concentrated on constructing the properties with a view to marketing them in the following trading year.  The Board remains confident that with our current level of construction activity that the Company is well placed to deliver significantly improved results for future trading years. 

We will continue to explore the potential for acquiring new sites that should produce increased turnover and a significant improvement in the future profit levels.

Financials

The year under review saw Group turnover at £30,000 (2016: £2,235,000), with a loss after tax of £298,397 (2016: Profit £204,877). The cash on the balance sheet at the end of the year was £100,808 (2016: £278,406) and the Group continues to have sufficient capital for all planned activities.

Business Environment and Outlook

Following the Brexit vote, the housing sector has seen patchy changes in demand depending on geographical area and price levels. However, the property price levels at which the Company operates have been largely unaffected so the Board does not consider this to be a major risk. We are currently marketing our completed units and continue with our construction programme.

While accepting that results to date have been disappointing, we feel that we are now in a strong position to deliver on sales and profits. In the meantime, we have been continuing to investigate new opportunities for developments and our site at Staplehurst in Kent is a prime example of this.

The Group remains confident about its prospects. Trafalgar New Homes is in a stronger position now than ever, and has secured several banking facilities to fund its development pipeline. The Executive Directors collectively have many years of residential development experience, which enables the Group to negotiate land and property purchases and construction contracts efficiently and quickly. This, in turn, enables the Group to adapt to changing market conditions and exploit opportunities.

As can be seen in Chris Johnson's Strategic Report, we believe the outlook for the Company is promising.

James Dubois

Chairman

6 September 2017

Operations review

A summary of the results for the year is as follows:-

	2017	2016
	£	£
Revenue for the year	30,000	2,235,000
Gross (loss)/profit	(17,269)	484,127
(Loss)/profit after taxation	(298,397)	204,877

Group turnover for the year amounted to only £30,000, representing the sale of three parking spaces at the Borough Green site which were pending at the last year end and which were finalised during the year under review.

There were no house sales recorded during the year and, after taking into account the overheads of the Group, there was a loss recorded for the year of £298,397.

There will be no tax charge and the Company now has tax losses being carried forward of £ 2,223,878

(2016: losses £ 1,926,708).

The loss per share is (0.12p) compared to the earnings per share of 0.09p recorded for the year ended 31st March 2016.

Key performance indicators (KPIs)

Management are closely involved in the day to day operations of the Group and are very aware of cashflows and expenditure.   However, Management believe that the key indicators of performance for the group are the revenue and profitability achieved during the period.   These measures are disclosed above in the operations review.

Development Pipeline

At the end of the year ended 31st March 2016, the Group had contractors on sites at Burnside, Tunbridge Wells, Kent (6 luxury apartments); High Street, Edenbridge, Kent (terrace of three houses); and Vines Lane, Hildenborough, Kent (two executive detached houses).

In addition, the Group reported that we had commenced work at the site at Sheerness, Kent for six houses which had been owned by the Group for some time and that we had acquired a further site for development, being the site in Speldhurst, Tunbridge Wells, Kent with the benefit of planning permission for the demolition of the existing property and the erection of a substantial new build detached house on the site.

I can confirm that, as at the date of this report, we have completed the construction work of the terrace of three houses at Edenbridge, Kent and they are being marketed for sale.   

Work on the six apartments at Burnside, Tunbridge Wells, Kent are substantially complete, with us dealing only with snagging items at the present time, to achieve Building Control sign-off before fully marketing the site for sale (it is pleasing to note that we already have a reservation on the penthouse at a figure very close to the asking price of £600,000 which, in turn, is greater than we anticipated at the outset).

The detached house at Speldhurst, Tunbridge Wells is 70% complete and our contractor has confirmed to us that the house will be finished and ready for occupation by the end of September 2017.  

I am able, therefore, to confirm that twelve units, involving a mix of detached houses/apartments/terraced houses, for which we are aiming to achieve a gross development value on sale of circa £7 million, will all be complete and ready for marketing for sale during September.   Hence, I anticipate a sale of most of these units prior to the 31st March 2018 year end.

In addition, the development of the site at Sheerness, Kent continues and we anticipate completion of the construction work on the site before the end of the current financial year and it is hoped sales of some of the units would have been achieved by 31st March 2018.

The Directors are confident that the current financial period will show an upturn in the fortunes of the Group.

The site at Staplehurst, Kent

Last year I reported on the refusal of the Planning Application we submitted for residential development on this site.   Having taken advice and considered the position, we propose to continue seeking planning permission for development of this site.   We are fortified by the advice received that this site should be able to accommodate an Assisted Living (Extra Care) Scheme which could provide up to 30 units on the front half of the site (for which we have been seeking planning permission for residential development) together with ancillary support buildings, to provide an Extra Care Assisted Living facility which is so sorely needed at the present time, not only in the area in which we operate, but in the country as a whole.

Your Group is taking advantage of the fact that the 'Extra Care' and 'Very Sheltered/Assisted Living' sectors are expected to grow significantly as the population of older people in the UK is expected to increase from 10.3 million in 2010 to 28 million by 2035.   The proposed development at Staplehurst will come with communal areas and a range of social and recreational activities to promote health and happiness.   These are key attributes compared to non-specialised homes.

It is believed that our application, when submitted, will find favour with the Planners and that Planning Permission will be granted accordingly.

Future Development

The Company is not short of opportunities to acquire sites for residential development in its chosen area of operation.   However, it is not prepared to pay prices for land which are unrealistic and which would severely erode margins.   Hence, the Group will be selective in its choice of offers to be made on sites that present themselves.

Currently it has an offer accepted for a nine unit site in the South of England, comprising two/three and four bedroom houses and is investigating various sites in Kent and East Sussex, to purchase during the current financial year, which should contribute to revenue for the year ended 31st March 2019.

Outlook

The Company is confident that the development programme, referred to above, will deliver improved results for the Group for the year ended 31st March 2018.

Looking ahead and during the current year, the Company will continue its negotiations for the purchase of other sites in the South of England, its chosen area of operation, which will contribute to turnover for the Group for the year ended 31st March 2019 and beyond.

As has been mentioned before, Trafalgar New Homes, remains focused on growing the Group, both through site acquisition and development and corporate acquisitions, to enable value to be created for the shareholders and for a dividend to be paid by the Group when appropriate.

Banking

The Group continues to utilise banking sources for the financing of its developments, together with loans from third party investors, to ensure that there is sufficient money available for the Group to undertake and complete its various developments.

We do not operate an overdraft facility but borrow on a site specific basis from our various bankers, with a mix of loans from outside investors geared to some of the development properties and otherwise loaned on a general basis to the Group.

The Board is comfortable with the structure of its bank finance, which usually involves the bank lending a modest sum towards the land purchase, with the Group putting the rest of the funds required to acquire the site and the costs associated with the acquisition and then for the Bank to provide 100% of the build finance.   These are the arrangements that have been entered into with Coutts and Lloyds who lend to the Group at very competitive rates.

The Group have also used RateSetter as a funder who, again, provided 100% of the build finance on the Burnside, Tunbridge Wells site, the Group having paid off the borrowing on the land prior to entering into the arrangement with RateSetter for the development of that site.  

Investor loans that are not related to specific sites are long term loans with repayment dates extending beyond the year end and have, in the past, been renewed when they come up for repayment.

Hence, in general terms, the Group is happy with its financial support afforded to it by its banks and investors, enabling it to trade without a general overdraft facility.

I will continue to support the Group, leaving my own loan to the Group outstanding and taking no interest on it for the year to 31 March 2017.

Financial Instruments

The Group's principal financial instruments comprise cash at bank, bank loans, other loans and various items within current assets and current liabilities that arise directly from its operations.    The Directors consider that the key financial risk is liquidity.   This risk is explained in the Section headed 'Principal risks and uncertainties in the Annual Report and Accounts'.

Christopher Johnson

Director

6 September 2017

Enquiries:

Trafalgar New Homes plc Christopher Johnson	+44 (0)1732 700 000
Allenby Capital Ltd - Nominated Adviser and Broker Jeremy Porter/James Reeve	+44 (0)20 3328 5656
Yellow Jersey PR Limited Felicity Winkles/Henry Wilkinson	+44 (0)7748 843 871

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2017

		Year  ended 31 March	Year  ended 31 March
	Note	2017	2016
		£	£
Revenue		30,000	2,235,000
Cost of sales		(48,070)	(1,758,393)
Gross (loss)/profit		(18,070)	476,607
Administrative expenses		(270,263)	(279,250)
Operating (loss)/profit		(288,333)	197,357
(Loss)/profit before interest		(288,333)	197,357
Other interest receivable and similar income	2	801	7,520
Interest payable and similar charges	5	-	-
(Loss)/profit before taxation		(287,532)	204,877
Tax payable on (loss)/profit on ordinary activities	6	(10,865)	-
(Loss)/profit after taxation for the year attributable to equity holders of the parent		(298,397)	204,877
Other comprehensive income attributable to equity holders of the parent		-	-
Total comprehensive (loss)/income for the year		(298,397)	204,877
(Loss)/profit attributable to:
Equity holders of the Parent		(298,397)	204,877
Total comprehensive (loss)/income for the year attributable to:
Equity holders of the Parent		(298,397)	204,877
(LOSS)/PROFIT PER ORDINARY SHARE: Basic/diluted	7	(0.12)p	0.09p

All results in the current and preceding financial year derive from continuing operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 March 2017

		31 March	31 March
	Note	2017	2016
TOTAL ASSETS		£	£
Non-current assets
Property, plant and equipment	8	1,788	2,384
		1,788	2,384
Current assets
Inventory	11	5,399,198	2,275,546
Trade and other receivables	9	96,985	436,604
Cash at bank and in hand	10	100,808	278,406
		5,596,991	2,990,556
Total assets		5,598,779	2,992,940
EQUITIES & LIABILITIES
Current liabilities
Trade and other payables	12	178,675	152,149
Borrowings	13	2,150,643	741,266
		2,,329,318	893,415
Non-current liabilities
Borrowings	13	4,690,257	3,221,924
Total liabilities		7,019,575	4,115,339
Equity attributable to equity holders of the Company
Called up share capital	14	2,383,752	2,383,752
Share premium account	15	1,165,463	1,165,463
Reverse acquisition reserve		(2,817,633)	(2,817,633)
Profit & loss account		(2,152,378)	(1,853,981)
Total Equity		(1,420,796)	(1,122,399)
Total Equity & Liabilities		5,598,779	2,992,940

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2017

	Share capital	Share premium	Reverse acquisition  reserve	Retained  profits  /(losses)	Total equity
	£	£	£	£	£
At 1 April 2015	2,383,752	1,165,463	(2,817,633)	(2,058,858)	(1,327,276)
Profit for the year	-	-	-	204,877	204,877
Total comprehensive income for the year	-	-	-	204,877	204,877
Issue of shares	-	-	-	-	-
Share issue costs	-	-	-	-	-
At 31 March 2016	2,383,752	1,165,463	(2,817,633)	(1,853,981)	(1,122,399)
At 31 March 2016	2,383,752	1,165,463	(2,817,633)	(1,853,981)	(1,122,399)
(Loss) for year	-	-	-	(298,397)	(298,397)
Total comprehensive (loss) for the year	-	-	-	(298,397)	(298,397)
At 31 March 2017	2,383,752	1,165,463	(2,817,633)	(2,152,378)	(1,420,796)

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 March 2017

		2017	2016
		£	£
Cash flow from operating activities
Operating (loss)/profit		(288,333)	197,357
Depreciation		596	795
Increase in stocks		(3,123,652)	(391,296)
Decrease/(increase) in debtors		339,619	(355,360)
Increase in creditors		5,026	81,372
Interest received		1	60
Interest paid		296,126	166,869
Rental income received		800	7,460
Net cash outflow from operating activities		(2,769,817)	(292,743)
Investing activities
Purchase of tangible fixed assets		-	(2,531)
Net cash used in investing activities		-	(2,531)
Taxation		10,635	-
Financing activities
New loans in year		2,309,377	694,816
Director loan cash injected/(repaid)		568,333	(445,037)
Interest paid		(296,126)	(166,869)
Net cash inflow from financing		2,581,584	82,910
Decrease in cash and cash equivalents in the year		(177,598)	(212,364)
Cash and cash equivalents at the beginning of the year		278,406	490,770
Cash and cash equivalents at the end of the year		100,808	278,406

GOING CONCERN

The Directors have reviewed forecasts and budgets for the coming year, which have been drawn up with appropriate regard for the current economic environment and the particular circumstances in which the Group operates. These were prepared with reference to historical and current industry knowledge, taking into account future strategy of the Group.

The Group continues to utilise banking sources for the financing of its developments, together with loans from third party investors, to ensure that there is sufficient money available for the Group to undertake and complete its various developments.

The Group do not operate an overdraft facility but borrow on a site specific basis from various bankers, with a mix of loans from outside investors geared to some of the development properties and otherwise loaned on a general basis to the Group.

The Board is comfortable with the structure of its bank finance, which usually involves the bank lending a modest sum towards the land purchase, with the Group putting the rest of the funds required to acquire the site and the costs associated with the acquisition and then for the bank to provide 100% of the build finance.  

Investor loans that are not related to specific sites are long term loans with repayment dates extending beyond the year end and have, in the past, been renewed when they come up for repayment.

The existing operations have been generating funds to meet short-term operating cash requirements and management are confident that the expected sales will allow the Group to meet loan repayments due within the next twelve months.  As a result of these considerations, at the time of approving the financial statements, the Directors consider that the Company and the Group have sufficient resources to continue in operational existence for the foreseeable future. It is appropriate to adopt the going concern basis in the preparation of the financial statements. 

Mr C Johnson confirms that if necessary he will continue to support the Group for its anticipated needs and will not recall the balances owed to him, for at least twelve months from the date of signing.  As with all business forecasts, the Directors' statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events.

NOTES

1.    SEGMENTAL REPORTING

For the purpose of IFRS 8, the chief operating decision maker ("CODM") takes the form of the Board of Directors.  The Directors' opinion of the business of the Group is as follows.

The principal activity of the Group was property development.  All the Group's non-current assets are located in the UK.

Based on the above considerations, there is considered to be one reportable segment.  The internal and external reporting is on a consolidated basis with transactions between Group companies eliminated on consolidation.  Therefore the financial information of the single segment is the same as that set out in the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of financial position and cashflows.

Geographical segments

The following tables present revenue regarding the Group's geographical segments for the year ended 31 March 2017.

Year ended 31 March 2017	United Kingdom	Total
	£	£
Property development - sales	30,000	30,000
	30,000	30,000

Year ended 31 March 2016	United Kingdom	Total
	£	£
Property development - sales	2,235,000	2,235,000
	2,235,000	2,235,000

2.    OTHER INTEREST RECEIVABLE AND SIMILAR INCOME

	2017	2016
	£	£
Bank interest received	1	60
Rental income & ground rent	800	7,460
	801	7,520

3.    LOSS FOR THE YEAR

The Group's loss for the year is stated after charging the following:

	2017	2016
	£	£
Depreciation of tangible fixed assets	596	795
Auditor's remuneration:
Audit of these financial statements	10,000	10,000
Amounts receivable by the auditor in respect of the audit of the financial statements of subsidiary undertakings pursuant to legislation	7,000	6,000

Amounts payable to Crowe Clark Whitehill LLP and its related entities in respect of audit and non-audit services are disclosed in the table above.        

4.  EMPLOYEES AND DIRECTORS' REMUNERATION

Staff costs during the year were as follows:

	2017	2016
	£	£
Directors' remuneration	50,000	15,000
Wages and salaries	38,000	43,500
Social security costs	5,336	4,061
Other pension costs	18,100	18,000
	111,436	80,561

The average number of employees of the company during the year was:

	2017	2016
	Number	Number
Directors and management	4	4

Key management are the Group's Directors.  Remuneration in respect of key management was as follows:

	2017	2016
	£	£
Short-term employee benefits:
- Emoluments for qualifying services C C Johnson	-	-
- Emoluments for qualifying services A Johnson	35,000	-
- Emoluments for qualifying services J Dubois	15,000	15,000
	50,000	15,000

There are retirement benefits accruing to Mr C C Johnson for whom a company contribution was paid during the year of £18,000 (2016: £18,000) and Mr A Johnson £100 (2016: nil).       

Consultancy fees of £4,994 (2016: £4,994) were paid to Mr N Lott during the year.

5.    INTEREST PAYABLE AND SIMILAR CHARGES

During the year all interest paid on borrowings was capitalised as part of inventory £ 296,126 (2016: £166,869) with the interest capitalised on properties sold in the period forming part of cost of sales. All interest was capitalised.

6.    TAXATION

	2017	2016
	£	£
Current tax	10,635	-
Tax charge	10,635	-

		2017		2016
		£		£
(Loss)/profit on ordinary activities before tax		(287,532)		204,877
Based on (loss)/profit for the year:
Tax at 20% (2016: 20%)	(57,506)		40,975
Unrelieved tax losses	57,506		-
Prior year tax adjustment	17,555		-
Tax refund - carry back losses to prior year	(6,920)		-
Effect of:
Losses utilised/group relief claimed	-		(40,975)
Tax charge for the year	10,635		-

No deferred tax asset has been recognised in respect of historical losses due to the uncertainty in future profits against which to offset these losses. As at the 31 March 2017 the group had cumulative tax losses of £2,223,878 (2016: £1,837,724) that are available to offset against future taxable profits.

7.    (LOSS)/PROFIT PER ORDINARY SHARE

The calculation of (loss)/profit per ordinary share is based on the following profits/(losses) and number of shares:

	2017	2016
	£	£
(Loss)/profit for the year	(298,397)	204,877

Weighted average number of shares for basic profit /(loss) per share	238,735,200	238,735,200
Weighted average number of shares for diluted profit /(loss) per share	238,735,200	238,735,200
(LOSS)/PROFIT PER ORDINARY SHARE: Basic	(0.12)p	0.09p
Diluted	(0.12)p	0.09p

8.    PROPERTY, PLANT AND EQUIPMENT

Fixtures and fittings			2017	2016
			£	£
Cost
At 1 April			5,467	2,936
Additions			-	2,531
At 31 March			5,467	5,467

Depreciation
At 1 April			3,083	2,288
Charge for the year			596	795
At 31 March			3,679	3,083

Net book value at 31 March			1,788	2,384

9.    TRADE AND OTHER RECEIVABLES

			2017	2016
			£	£
Other receivables			75,322	425,515
Other taxes			11,005	4,786
Prepayment			10,658	6,303
			96,985	436,604

There are no receivables that are past due but not impaired at the year-end. There are no provisions for irrecoverable debt included in the balances above.

10.  CASH AND CASH EQUIVALENTS

All of the Group's cash and cash equivalents at 31 March 2017 are in sterling and held at floating interest rates.

	2017	2016
	£	£
Cash and cash equivalents	100,808	278,406

The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

11.   INVENTORY

	2017	2016
	£	£
Work in progress	5,399,198	2,275,546

See note 5 for details of interest capitalised as part of the value of inventory.

12.   TRADE AND OTHER PAYABLES

			2017	2016
			£	£
Trade payables			10,400	93,328
Accruals			151,722	54,513
PAYE & Corporation  Tax			14,091	2,050
Other payables			2,462	2,258
			178,675	152,149

13.   BORROWINGS

			2017	2016
			£	£
Directors' loans			2,990,257	2,121,924
Other loans			1,700,000	1,100,000
Bank and other loans (less than 1 year)			2,150,643	741,266
			6,840,900	3,963,190

Included in Directors' loans is the sum of £300,000 (2016: £300,000) advanced by the DFM Pension Scheme of which Mr J Dubois is the principal beneficiary. This loan bears interest at 12% per annum (2016: 12% per annum).

Included in Directors' loans is the sum of £521,455 drawn down from a £835,000 loan facility advanced by Lloyds Bank and which is linked to the Speldhurst development.  The loan was made in the name of A Johnson as the Speldhurst property is held in his name, and bears interest at 5.2% above base rate per annum.

The remaining balance of Directors' loans is due to C Johnson (see note 16).

Included in other loans is £1,100,000 (2016: £800,000) advanced by Mr. G Howard (son-in-law of Mr. C C Johnson) to the company at a rate of 10% per annum (2016: 10% pa). The remaining balance of £600,000 (£2016: £nil) has been advanced by Christine Rowe, an employee of the group, at a rate of 10% per annum.

C C Johnson is a named guarantor on the loan included within bank loans.

The bank borrowings are repayable as follows:

			2017	2016
			£	£
On demand or within one year			2,150,643	741,266
In the second year			-	-
In the third to fifth years inclusive			-	-
After five years			-	-
			2,150,643	741,266
Less amount due for settlement within 12 months (included in current liabilities)			2,150,643	741,266
Amount due for settlement after 12 months			-	-

The weighted average interest rates paid on the bank loans were as follows:

Bank loans: - 4.39% (2016: 5.33%)

All of the directors' loans are repayable after more than 1 year. All loans are interest bearing and charged accordingly.  However Mr C C Johnson has waived his right to interest in the year and as a result interest of £nil (2016: £ nil) was paid to Mr C C Johnson. The rate of interest on the loan is 5% pa (2016: 5% pa). Interest of £36,000 (2016: £36,000) was paid to Mr J Dubois at the rate of 12 % pa (2016: 12% pa).

14.   Share capital

Authorised Share Capital

			2017		2016
			Number		Number
Ordinary shares of 1p each - 1April 2016				238,375,200	238,375,200
Additional shares issued for cash in year				-	-
				238,375,200	238,375,200

Issued, allotted and fully paid

	2017	2016
	£	£
Ordinary shares of 1p each	2,383,752	2,383,752

15.   Share PREMIUM ACCOUNT

			2017	2016
			£	£
Balance brought forward			1,165,463	1,165,463
Premium on issue of new shares			-	-
Share issue costs			-	-
Balance carried forward			1,165,463	1,165,463

16.   RELATED PARTY TRANSACTIONS

Mr C C Johnson holds 78.4% (2016: 78.4%) of the total issued share capital of the Group.

The following working capital loans have been provided by the Directors:

			2017	2016
			£	£
C C Johnson
Opening balances			2,121,924	2,566,961
Loan repayments			-	(421,255)
Personal drawings			(98,122)	(23,782)
Capital injected			145,000	-
Interest payable			-	-
Balance carried forward			2,168,802	2,121,924

J Dubois           -                                                                                      £300,000        £300,000

Mr Johnson's Loan bore interest during the year at 5% (2016: 5% pa), but he has chosen to forego the interest in the year.   Mr Dubois's Loan, which is from his Pension Fund of which he is the sole beneficiary, was at 12% pa interest (2016: 12% pa).

The development at Speldhurst was acquired in the name of A Johnson (Director) and is held in trust by him on behalf of the Group, together with a Lloyds Bank loan facility for up to £835,000 connected to this development which has been drawn down through A Johnson as to £521,455, the details of which are disclosed in Note 13.

17.   SHARE OPTIONS AND WARRANTS

There are no share options or warrants.

18.   CATEGORIES OF Financial instruments

The Group's financial assets are divided as cash and cash equivalents.  The Group's financial liabilities are divided as Directors loans, bank loans and other loans.

	Loans and receivables		Financial liabilities measured at amortised cost
	2017	2016	2017	2016
	£	£	£	£
Financial assets
Cash and cash equivalents	100,808	278,406	-	-
Other receivables	86,327	430,301	-	-
Financial liabilities
Trade payables	-	-	178,675	152,149
Borrowings - Directors' loans	-	-	2,168,802	2,121,924
Borrowings - Bank loan	-	-	2,672,098	741,266
Borrowings - Other loans	-	-	2,000,000	1,100,000
Total	187,135	708,707	7,019,575	4,115,339

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and it sets policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.  Further details regarding these policies are set out below:

Capital risk management

The Group considers its capital to comprise its share capital and share premium.  The Group's capital management objectives are to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

Significant Accounting Policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed on pages 16 to 21 to these financial statements.

Foreign currency risk

The Group has minimal exposure to the differing types of foreign currency risk.  It has no foreign currency denominated monetary assets or liabilities and does not make sales or purchases from overseas countries.

Interest rate risk

The Group is sensitive to changes in interest rates principally on the loans from banks.  £ 2,000,000 of the loans from Mr Johnson bears interest at 5% pa (2016: 5% pa), although Mr Johnson has waived his right to receive interest in the year.   Mr Dubois' loan of £300,000 within other loans, from his Pension Fund attracts interest at 12% pa (2016: 12%). Additional loans of £1,700,000 (2016: £800,000) included in other loans attract interest at 10% pa (2016: 10% pa).

The impact of a 100 basis point increase in interest rates would result in additional interest cost for the year of £ 26,721 (2016: £7,280).

Credit risk management

Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the Group.

Liquidity risk management

This is the risk of the Company not being able to continue to operate as a going concern.

The Directors have, after careful consideration of the factors set out above, concluded that it is appropriate to adopt the going concern basis for the preparation of the financial statements and the financial statements do not include any adjustments that would result if the going concern basis was not appropriate.

Mr Johnson confirms that he will continue to support the Group for its anticipated needs for the next two years.  As with all business forecasts, the Directors' statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about the future events.

Derivative financial instruments

The Group does not currently use derivative financial instruments as hedging is not considered necessary.  Should the Group identify a requirement for the future use of such financial instruments, a comprehensive set of policies and systems as approved by the Directors will be implemented.

In accordance with IAS 39, "Financial instruments: recognition and measurement", the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet specific requirements set out in the standard.  No material embedded derivatives have been identified.

This information is provided by RNS

The company news service from the London Stock Exchange

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