LONDON (Alliance News) - London- and Midlands-focused house builder Mar City PLC said Friday that it now expects its pretax profit for 2014 to be "substantially below market expectations" at about GBP6.3 million, not in line with expectations as it had previously guided in January.
In the previous year the company had posted a pretax profit of GBP3.2 million. According to information provided by Morningstar, W H Ireland expected Mar City to post a pretax profit of GBP11.6 million for 2014, and Shore Capital expected it to post a pretax profit of GBP11.9 million.
The company said the adjustment to its pretax profit is due to an internal review of its accounting policies, specifically profit recognition associated with the holding value of completed residential properties in a private rental sector portfolio, and the treatment of contractual income from forward sales agreements on two housing sites.
The company said the properties in the private rental sector portfolio were to be retained and therefore recognised and revalued as investment properties. However, it has now decided the benefit of retaining the units is not likely to be as significant as selling the portfolio for cash, and has instead decided to market the units for sale. It is confident the majority of these units will be sold in 2015.
As for the forward sales agreements on the two sites, the company said that following its review it has concluded that given the progress on the sites to date profit recognised should be reduced to be in line with the build and delivery status of both sites. It expects profit from these sites to recognised in 2015 and beyond.
Mar City said as a result of these adjustments it will now conduct a full assessment of its procedures regarding announcements and their verification.
It expressed confidence for growth and progress in the coming year due to market conditions and high demand for its affordable housing product.
The company said that the net debt balance owed to it by Mar City Developments Ltd is GBP19.5 million, but this is expected to be reduced by around GBP14.5 million as a result of the consideration it will pay for the acquisition of property assets from Mar City Developments. The remaining debt after the proposed acquisition will be eliminated by the end of 2015.
Mar City expects to acquire two development sites and several Colindale assets including a number of residential units, a food retail space and freehold interest, which will be acquired for re-sale on the open market.
Shares in Mar City are trading down 29% at 69.90 pence Friday afternoon.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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