NTA.L Regulatory News (NTA)

21 Aug 2007 07:00

Northacre PLC21 August 2007 NORTHACRE PLC (the "Company" or "Group") Results for the year ending 28 February 2007 Northacre Plc today announces its' results for the year ended 28 February 2007. • Group turnover increased to £8.1m (2006: £7.9m) with pre-tax profit before goodwill amortisation improving by 12% to £2.6m (2006 : Profit £2.3m). • Completion of Park Street achieved in the financial year resulting in a performance bonus fee of c. £2.6m of which an on account payment of £2.4m has been received in April 2007. • Planning consent granted for The Lancasters in May 2007. Works are due to commence on site in September 2007. • Favourable decision for Vicarage Gate at the High Court hearing in April 2007 enhancing prospects of an early solution to this long outstanding planning dispute. • Planning to be determined on The Kensington (Odeon) before the end of 2007 with works due to commence on site in the Spring of 2008. • Group subsidiaries continue to generate improved levels of fee income as a result of an increase in the volume of activity. • Senior Management further strengthened with new appointments in Marketing, Design and Construction. • Anticipate further growth with improved performance in the short to medium term. "Northacre has had another year of significant progress. Following thesuccessful marketing of our Mayfair scheme at 44-46 Park Street, the Groupsecured the bulk of its bonus fee entitlement during the period. These monieshave impacted on the Group's balance sheet position. Further positive progress has been achieved with all three of our currentdevelopments. The Lancasters was granted planning consent in May 2007. A HighCourt judgement determined that the previous planning refusal by The RoyalBorough of Kensington & Chelsea on Vicarage Gate should be quashed and on TheKensington (Odeon) a prolonged campaign for a new cinema and residential schemeis making good progress. The position of the company at the end of the year under review demonstrates asubstantial recovery in comparison with the period 2003-2005. Furthermore theresults for the year confirm that our company is once again at the forefront ofthe prime residential market. The principal risks or uncertainties in ourbusiness continue to be planning and procurement based. In relation to themarket, there are at least no current signs of a downturn in the global appealfor Central London prime residential property." Copies of the Annual Report and Accounts will be available at the office ofNorthacre Plc at 48 Old Church Street, London SW3 5BY and are being posted toshareholders. 21st August 2007 ENQUIRIES: NORTHACRE PLC 020 7349 8000 John Hunter Chief ExecutiveManish Santilale Finance Director KBC PEEL HUNT 020 7418 8900 Capel IrwinNicholas Marren CHIEF EXECUTIVE REVIEW OVERVIEW Northacre has completed its recovery phase and is now re-establishing itself asthe leading brand with the most acclaimed track record in the business of primeresidential property development in Central London. To meet the increasingdemands of this niche sector, the Group has strengthened its team of developmentmanagers, architects and interior designers. With three major schemes on theproduction line, these landmark developments will without a doubt become some ofthe finest addresses in Central London. Further growth and improved performanceis anticipated in the short to medium term. FINANCIAL RESULTS Turnover for the period was £8,087,325 (2006 £7,875,054) with gross profit of£6,588,707 (2006 £5,749,558). Pre-tax profit was £2,597,861 (2006 £2,301,360)before amortisation of goodwill with a basic earnings per share of 5.64 pence(2006 4.58 pence). The Board do not recommend a dividend payment as thecompany's funds are fully employed. In light of these results and theanticipated future growth prospects, the Board of Directors are committed toreview the Company's long term finances with a view to implementing a dividendpolicy. Completion of the Mayfair scheme at 44-46 Park Street has had a positive impacton these results with an anticipated final bonus fee entitlement of £2.6m ofwhich £2.4m has been received since the year end. This has enabled the Group tofurther reduce its debt position. Improved fee income from the subsidiaries hasalso contributed to the results providing further evidence of sustained growth. BOARD CHANGES The Board is delighted to welcome Malcolm Williams as Non-Executive Directoreffective from 17th April 2007. Malcolm brings to the Board a wealth offinancial knowledge and experience after spending 38 years with DresdnerKleinwort Wassertein Limited (formerly Kleinwort Benson Limited). OPERATING SUBSIDIARIES The operating subsidiaries have seen an increase in fee income following thestrong performance of their improved development and private client business. Inparticular the interior design company has seen excellent progress throughoutthe year with the launch of two show apartments at Park Street and the wideningof its client base to include projects in Dubai and Saudi Arabia. Thearchitectural practice has also risen to the challenge with full designproduction in progress on The Lancasters as well as additional private clientwork. OPERATIONAL REVIEW The Phillimores The remaining two apartments at The Phillimores have been sold and the finalamount, due under the overage entitlement, has now been received. Havingcompleted this scheme the Group can now focus on the current projects in hand. Park Street Our Agents described Northacre's Park Street as "The development that sets newstandards for Mayfair", indeed following a successful marketing campaign, allapartment sales were exchanged prior to practical completion of the works. Fromcommencement of this scheme, less than two years ago, the anticipated finalbonus fee of £2.6 million demonstrates a healthy return for the Group. Vicarage Gate Following a favourable outcome at the High Court hearing in April 2007, it isthe Group's intention to seek an early settlement of this difficult planningstruggle at Vicarage Gate. Although our planning application is due to return toanother Public Inquiry, we plan in the meantime to explore whether an earlymutually satisfactory solution can be reached with the Royal Borough ofKensington and Chelsea (RBK&C). The Kensington Following extensive and detailed public consultation with local residents andthe Planning Department of RBK&C a revised application has been submitted on TheKensington. This application is due to be determined by the Planning Committeebefore the end of 2007. The Group is confident of a positive outcome and looksforward to commencing the works on site in the spring of 2008. The Lancasters Planning consent for The Lancasters was secured in May 2007. The consentedscheme is designed to create 193,000 square feet of residential accommodationcomprising 92 apartments of which 11 units are to provide for affordablehousing. The joint venture plans to explore the prospects of identifying a donorsite with the capacity to provide a larger number of affordable units elsewherein the local vicinity. Works are programmed to commence on site in September2007 with the first phase of completed apartments available for occupation in2010. Financial Review Evaluating Performance As noted in our previous year's annual report it is the Board's intention toimplement a more transparent method of recognising the significant value addedduring the life of the development of our schemes. In previous years the amountsdue under the contracts have only been recognised when they have been finallydetermined which is usually at the end of the project. However it is the Board'sview that when certain critical milestone events are achieved through theduration of each project, significant value is, theoretically, added to thevalue of our equity investment in that project. Accordingly, in the future, wefeel that this value should be noted in the results each year. We are in theprocess of agreeing suitable terminology with our auditors. Review of Results Headlines Net Assets per share increased to 41.3 pence (2006 : 35.7 pence). Net profit forthe year is £1.3m (2006 : £1.0m) with an earnings per share of 5.64 pence (2006: 4.58 pence). Profit and Loss Account Operating profit before tax and amortisation of goodwill for the year is £2.6m(2006 : £2.3m. Although the Group's turnover has only increased slightly to £8.1m (2006 :£7.9m) it can be noted, compared to the previous year, that a larger proportionof the turnover is fees receivable to the Group rather than profit shares orbonus fees. The Group fee income in the year increased to £5.5m (2006 : £3.5m)reflecting the greater volume of work in progress in the year. In particular theGroup's subsidiaries have all seen very significant increases to their feeincome this year and are now at a level which we feel is commensurate with ourexpectations. The interior design company saw an increase of fee income to £2.0m(2006 : £1.2m) and the architectural design company saw an increase to £1.6m(2006 : £0.7m). Administration costs for the year increased to £5.2m (2006 : £4.8m) partly dueto additional staff and partly due to additional general expenses as a result ofthe increase in business. After including the above items the Group recorded a net profit before tax of£1.3m (2006 : £1.0m). Balance Sheet The investment in joint ventures represents the cash equity invested in each ofour development schemes. The investment in the year increased to £2.4m (2006 :£1.6m) representing the additional equity invested in The Lancasters scheme. Debtors at the year end include the anticipated final performance bonus fee of£2.6m (2006 : £nil) due on the completion of Park Street of which a payment of£2.4m has been received in April 2007. This amount has been fully utilised inreducing the Group's debt position and in funding the additional equityinvestment in The Lancasters. Financing The Group's activities are financed through a mixture of equity, cash and bankborrowings. The Group aims to gear property acquisitions with appropriate structured bankdebt allowing the Group to maximise its return from the equity invested. TheGroup has secured, together with its partners, a total of £296m of committedfacilities to finance the development of the three principal developments inhand. Since the year end, The Lancasters joint venture has completed a refinancing ofthe senior debt loan facility. The new £215m facility for the joint venture hasallowed the Group's equity investment to date to be returned. This has beenplaced with selected financial institutions to provide security, liquidity andflexibility for investment in future opportunities. The priority of the Group's finances continue to be invested in schemes that candeliver strong and sustainable shareholder returns whilst ensuring there is asound capital and leverage discipline. OUTLOOK The completion of Park Street is itself another fine example of a Northacreprime residential development. Since the year end, the receipt of our bonus feeentitlement has enabled the Group to reduce its debt position. The performanceof our operating subsidiaries has also contributed to these good results. Following receipt of our new planning consent for The Lancasters, it is clearthat a substantial uplift in value has been created for the joint venture. Themain works for procuring this high quality scheme will commence in September. Bybuilding out this 'Revival' development we plan to exploit the full potentialfor further enhanced value from our branded marketing campaign on this Hyde Parkproject. After a period of extensive consultation in the public arena, a new mixed-usecinema and residential scheme for The Kensington (Odeon) site has emerged withgood prospect of success at planning for a decision later this year. We plan tocommence the works immediately thereafter and hence anticipate a start dateearly 2008. It is our fervent hope that an early solution can be reached to resolve theVicarage Gate planning struggle without the need to re-run a Public Inquiry.This may well involve revisiting the original proposal for transferring theexisting use, for elderly persons accommodation, elsewhere in the localcommunity. Despite rising interest rates there continues to be an almost insatiable globalappetite for high quality residential schemes in Central London. With thedevelopments in hand and under consideration, Northacre is once again in astrong position to provide for this growing demand with a branded product ofexceptional design and quality. Based on its skills for generating added value through the development process,the Group continues to seek further opportunities to acquire an equity position,together with a structured performance related entitlement to profits. In thismanner, we anticipate achieving further improvement in fee income and growth forenhanced shareholder value. Consolidated Profit and Loss AccountFor the year ended 28th February 2007 Note 2007 2006 £ £Group Turnover - continuing activities 2 8,087,325 7,875,054 Cost of sales (1,498,618) (2,125,496) --------- --------- Gross Profit 6,588,707 5,749,558 Administrative expenses (5,243,275) (4,799,714)Other operating income 3 62,239 67,085 --------- ---------Group Operating Profit -continuing activities 1,407,671 1,016,929 Share of profit of associate 11(a) 23,359 12,823 --------- ---------Operating Profit including share of associatesand joint ventures 1,431,030 1,029,752 --------- ---------Profit on Ordinary Activities before Interestand Investment Income 1,431,030 1,029,752 Income from investments 60,000 70,000Interest receivable 8,983 7,481Interest payable and similar charges 4 (163,360) (67,081) --------- ---------Profit on Ordinary Activities before Taxation 5 1,336,653 1,040,152 Taxation 7 (55,906) - --------- --------- Retained Profit for the Year 19 1,280,747 1,040,152 ========= ========= Basic earnings per ordinary share 18 5.64p 4.58p ======= ======= There are no recognised gains or losses other than as stated above. Consolidated Balance Sheetat 28th February 2007 Note 2007 2007 2006 2006 £ £ £ £Fixed AssetsIntangible fixed assets 9 7,567,252 8,828,460Tangible fixed assets 10 21,075 20,748Investments in associates 11(a) 66,238 47,317Investments in joint ventures 11(b) 2,412,830 1,596,225 -------- -------- 10,067,395 10,492,750Current AssetsWork in progress 12 113,682 24,267Debtors 13 3,924,886 884,075Cash at bank and in hand 32,952 427,443 -------- -------- 4,071,520 1,335,785Creditors: Amounts falling duewithin one year 14 (3,209,412) (2,179,779) -------- -------- Net Current Assets / (Liabilities) 862,108 (843,994) -------- --------Total Assets less Current Liabilities 10,929,503 9,648,756 Creditors: Amounts falling dueafter more than one year 15 (1,550,000) (1,550,000) -------- --------Net Assets 9,379,503 8,098,756 ======== ======== Capital and ReservesCalled up share capital - equityinterests 19 567,841 567,841Share premium account 19 17,449,610 17,449,610Profit and loss account 19 (8,637,948) (9,918,695) -------- --------Shareholders' Funds 19 9,379,503 8,098,756 ======== ======== Consolidated Cash Flow StatementFor the year ended 28th February 2007 Note 2007 2007 2006 2006 £ £ £ £ Net Cash (Outflow) / Inflow 1 (564,799) 457,559from Operating Activities Returns on Investments and Servicingof FinanceInterest received 8,983 7,481Interest paid (47,619) (67,081)Dividends received 60,000 70,000 -------- -------- 21,364 10,400 TaxationCorporation tax - - Capital Expenditure and Financial InvestmentPurchase of other tangible assets (12,237) (9,274) -------- -------- Net cash (outflow)/inflow for capital expenditureand financial investment (12,237) (9,274) Acquisitions and disposalsInvestment in joint venture (816,605) (631,000) -------- -------- Net cash (outflow) for acquisitionsand disposals (816,605) (631,000) FinancingDecrease in debt due within one year - (1,060,000)Increase in debt due in more than one year - 1,550,000 -------- -------- Net cash inflow from financing - 490,000 -------- -------- (Decrease) / Increase in Cash in the Year 2 (1,372,277) 317,685 ======== ======== Notes to the Financial Statements For the year ended 28th February 2007 1 Principal Accounting Policies The principal accounting policies, which are unchanged from the previous year, are as follows: Accounting basis and standards The financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), which have been applied consistently. The company and group currently meet their day to day working capital requirements partly through monies loaned from the Northacre PLC Directors Retirement and Death Benefits Scheme, partly from the group's bankers and partly from other loans. The directors expect the facilities currently agreed to remain in place for the foreseeable future and to be renewed on equally favourable terms in due course. In particular: (i) One of the loans due to Northacre PLC Directors Retirement and Death Benefit Scheme of £1 million is not due for repayment until 31st July 2008. (ii) Two further loans of £275,000 each, from the Northacre PLC Directors Retirement and Death Benefit Scheme and from a third party are not repayable until the return of equity and/or realisation of profit share from one specific project, which is not expected to occur before August 2007. (iii) The group's bankers have recently agreed revised facilities until July 2008. The directors have prepared detailed cash flow projections for the period ended 28th February 2009 making reasonable assumptions about the levels and timings of income and expenditure, and in particular the timing of receipt of certain fees due from major developments. These projections show that the group can operate within the available facilities. On this basis the directors consider it appropriate to prepare the financial statements on a going concern basis. Basis of Consolidation The group accounts include the accounts of the company and its subsidiary undertakings, together with the group's share of the results of joint ventures and associates. Depreciation Depreciation on fixed assets is provided at rates estimated to write off the cost or revalued amounts, less estimated residual value, of each asset over its expected useful life as follows: Fixtures, fittings and office equipment 25% straight line Computer equipment 33 1/3% straight line Work in Progress Work in progress is valued at the lower of cost and net realisable value. Cost of work in progress includes overheads appropriate to the stage of development. Net realisable value is based upon estimated selling price less further costs expected to be incurred to completion and disposal. Turnover Turnover represents amounts earned by the group in respect of services rendered during the period net of value added tax. Shares in development profits and bonus fees are recognised when the amounts involved have been finally determined. Fees in respect of project management and interior and architectural design are recognised in accordance with the stage of completion of the contract. Deferred Taxation In accordance with FRS19, deferred tax is recognised as a liability or asset if transactions or events that give the group the obligation to pay more tax in future or a right to pay less tax in future have occurred by the balance sheet date. Northacre PLC Notes to the Financial Statements For the year ended 28th February 2007 (Continued) 1 Principal Accounting Policies (Continued) Leased Assets Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over their expected useful lives. The interest element of the rental obligations is charged to the profit and loss account over the period of the lease on a straight-line basis. Rentals under operating leases are charged to income on a straight-line basis over the lease term. Investments Fixed asset investments are stated at cost less amounts written off. Goodwill Goodwill is determined by comparing the amount paid on the acquisition of a business and the aggregate fair value of its separable net assets and is written off over its estimated useful life of 10 years. Pension Scheme Arrangements The group operates a money purchase scheme on behalf of two of its directors. It also contributes to certain directors' and employees' personal pension schemes. Pension costs charged represent the amounts payable to the schemes in respect of the period. 2 Turnover The group's turnover was derived from its principal activities. Sales were made in the following geographical markets: 2007 2006 £ £ United Kingdom 8,087,325 7,875,054 ======== ======== 2007 2006 £ £ Principal activities: Profit shares and bonus fees - property development 2,619,385 4,305,017 Development management 1,870,815 1,646,455 Interior design 1,985,474 1,214,134 Architectural design 1,611,651 709,448 -------- -------- 8,087,325 7,875,054 ======== ======== This information is provided by RNS The company news service from the London Stock Exchange