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1 Aug 2008 09:47
ARTISAN (UK) PLC
TRADING UPDATE
Artisan (UK) plc ("Artisan" or "the Group"), the AIM listed housebuilder, commercial property developer and property investor, today provides an update covering the 12 month trading period to 30 June 2008.
Against the backdrop of the worst trading conditions in the residential market that Artisan has known, the Directors are pleased with the trading performance for the Group at the year end, achieving a trading result only slightly below expectations. However, a review of the carrying value of the Group's land bank and investment property portfolio is being undertaken, and the Directors believe that, following the completion of this review, the Group will deliver a result that is substantially below current market expectations.
Residential Homes
Trading for the Group's residential division, Rippon Homes Limited ("Rippon Homes"), remains challenging. It has completed units at a run rate of 6.7 per month (2007:10.7) totalling 80 units for the 12 months (15 months to 30 June 2007: 160 units or 128 units pro rata for 12 months). Local intelligence suggests that the Rippon Homes product is performing well against competitors' product in the region. We believe that this is as a result of the strong product quality and the appealing site layout which has generally avoided excessive density, apartments and three storey product.
The sites from which we are currently selling homes are profitable and these are not expected to attract any write-down and, in the context of the WIP as a whole, we are not expecting any significant issues. However, Rippon holds one site which currently has planning permission only for apartment development and in the current market, particularly for that style of home, the Board expects a provision against the holding value of this site to be appropriate. We are also, as required, undertaking an impairment review of the goodwill which is held in respect of Rippon Homes.
In common with other developers, we do not expect residential market conditions to improve until relative normality returns to the residential mortgage market.
Commercial Division
The commercial division, Artisan (UK) Developments, has performed well during the year despite the commercial market being affected by the lack of confidence in the general economic conditions. However, unlike the residential market, our potential customers are more varied and there are still individual businesses willing and able to contemplate new commercial property.
Property Investment Division
The property investment division has made significant progress and in the second half of the financial year has delivered its largest investment property to date. The construction team performed very well and completed a high quality building under budget. However the market dip in the last quarter has caused us to reappraise the investment value of these properties and we now expect a reduction of 0.25% in the previously estimated investment yield which will impact on valuation.
The Directors believe that the combined effect of these reviews of carrying values is likely to result in a materially adverse effect on the Group's profit before tax for the year ending 30 June 2008.
Liquidity in these difficult market conditions is of paramount importance. Recognising this, Artisan's management started taking steps in 2007 to structure the business to ensure a good cash headroom - this is currently serving the Group well. New land buying has been largely deferred, build programmes slowed or suspended as needed and the overhead structure reduced to meet present market conditions. The cost base is being constantly kept under review and adjusted in response to sales progress.
At the same time, we have negotiated the extension of the revolving credit facility provided to the Group by its bankers from 30th June 2009 to 1st July 2010. The revolving credit facility provides the funding for the group's development activities. As a result of current conditions in the credit market, the interest rate payable by the Group has been re-based on LIBOR rather than base rate and so as long as the current credit conditions prevail, this will increase the cost of Artisan's borrowings.
The Group expects to announce its preliminary results in early October 2008.
Artisan (UK) plc
Chris Musselle
Chief Executive 01480 436666 email@artisan-plc.co.uk
Brewin Dolphin Limited
Nominated advisers
Andrew Kitchingman 0845 270 8613
Sean Wyndham-Quin 0845 270 9518
Bankside Consultants
Financial PR advisers
Simon Rothschild 020 7367 8888
Louise Mason 07703 167065
Company website: www.artisan-plc.co.uk
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