11 Aug 2017 07:00
The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
Safeland plc
("Safeland", the "Company" or the "Group")
Final Results for the Year Ended 31 March 2017
Managing Director's Statement
Key Achievements
I am pleased to report on another successful year for the Company, albeit that the year to 31 March 2017 saw lower levels of turnover and profitability than the preceding year.
In the year to 31 March 2016, we were able to pay an interim dividend of 1.5p per share, and although there was no interim dividend this year, we are pleased to continue the trend of distributing a share of profits to our shareholders by recommending a final dividend of 1p per share (2016: nil) to be paid on 29 September 2017 to shareholders on the register on 25 August 2017.
Having sold 31 residential units in Wimbledon during the preceding year, the Company subsequently sold the long leasehold ground rents of the development in the year to 31 March 2017, exiting a successful transaction at the site.
We completed the refurbishment of a substantial detached freehold house in London N2, the acquisition of which was announced in my statement last year, and I am delighted that the sale of the house was completed profitably.
Last year's statement announced the planning permission obtained for the conversion into apartments of a hotel in Muswell Hill, London N10 which had been owned and operated by the Group. Trading at the hotel ceased in August 2016 and in September 2016 we commenced construction work to provide basement car parking and 8 one-bed flats, 8 two-bed flats and 2 three-bed flats. We remain on course to complete the building work towards the end of 2017, as announced in our interim results to 30 September 2016. Revenue from the hotel in 2017 has been shown as discontinued operations in the income statement.
Other property transactions completed by the Company in the year to 31 March 2017 included the purchase and sale of properties in New Barnet, Herts; East Finchley, London N2; Wembley, Middlesex; and on a site near our head office in Hampstead Garden Suburb, London N2.
Continuing the theme of purchasing our own shares - in the prior financial year there had been two such transactions totalling 1,290,800 shares - this financial year we made a further two buy-backs, totalling 193,000 shares. The directors continued to consider that the acquisition and cancellation of these shares would enhance the value of the remaining shares in issue.
Since the balance sheet date, the Company has taken advantage of opportunities to acquire for cancellation several further tranches of shares, totalling another 275,000 shares.
Financial Results
Group revenue for the year to 31 March 2017 of £12.9 million comprised sales of development properties, rental income, management fees and (for part of the year) revenue from the Muswell Hill hotel, but was below the £21.1 million reported for the preceding year, in which there was more activity.
Gross profit of £2.46 million was below the £7.1 million for the year to 31 March 2016, and operating profit declined too, from £5.8 million to £1.9 million, reflecting my statement at the half-year that we are extremely selective on transactions until the outlook on the economy in general and the property sector specifically, show signs of strengthening.
Further indicating our cautious views and reduced activity, trading stock has decreased in value from £14.8 million at 31 March 2016 to £9.3 million at 31 March 2017. The Statement of Financial Position shows gearing at 31 March 2017 of 12%, reduced from 45% at 31 March 2016.
I am pleased to report that our net asset value (NAV) rose from £17.7 million (equivalent to 114 pence per share) at 31 March 2016, to £19.9 million (equivalent to 129 pence per share) at 31 March 2017. This is a 13% increase, albeit that for the second consecutive year there were fewer shares in issue at the year-end than 12 months previously, as a result of the buybacks and cancellation referred to above.
Due to the fall in the share price over the course of the financial year, total shareholder returns for the year decreased by 2.7% (2016: 16% increase).
Outlook
I repeat the statement in the most recent interims and 2016's full-year results, that the market appears to us to be constrained by an economic outlook which in turn is affected by political conditions in the UK, in the EU, and worldwide, which I believe have combined to create a more cautious environment.
This is not stopping us from adding value to the Company's existing stock through planning or development, and we remain confident that our skills will enable us to make selective acquisitions and profitable disposals.
Larry Lipman
Managing Director
10 August 2017
Enquiries
Safeland plc | +44 (0) 20 8815 1600 |
Larry Lipman, Managing Director |
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Stockdale Securities (Nominated Adviser and Broker) |
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Tom Griffiths | +44 (0) 20 7601 6139 |
For more information visit: www.safeland.co.uk
Condensed Consolidated Income Statement
Year Ended 31 March 2017
| Note |
| 2017 £'000 | 2016 £'000 |
Revenue |
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Continuing | 3 |
| 12,695 | 20,268 |
Discontinued | 3 |
| 277 | 848 |
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| 12,972 | 21,116 |
Cost of sales |
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| (10,517) | (14,003) |
Gross profit |
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| 2,455 | 7,113 |
Administrative expenses |
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| (1,721) | (1,287) |
Gain on revaluation of investment properties |
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| 459 | 42 |
Profit/(loss) on disposal of investment property |
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| 694 | (33) |
Dividend from investment |
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| 5 | 9 |
Share of results of associate |
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| 31 | 27 |
Operating profit |
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| 1,923 | 5,871 |
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Operating profit - continuing |
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| 1,877 | 5,800 |
Operating profit - discontinued |
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| 46 | 71 |
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| 1,923 | 5,871 |
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Finance income |
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| 554 | 520 |
Finance costs |
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| (448) | (334) |
Profit before tax |
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| 2,029 | 6,057 |
Tax |
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| 293 | (1,522) |
Profit for the financial year attributable to owners of the parent company |
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2,322 |
4,535 |
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Basic earnings per share | 4 |
| 14.93p | 27.95p |
Diluted earnings per share | 4 |
| 11.69p | 15.45p |
Earnings per share - discontinued activities | 4 |
| 0.03p | 0.04p |
Condensed Consolidated Statement of Comprehensive Income
Year ended 31 March 2017
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| 2017 £'000 | 2016 £'000 |
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Profit for the year |
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| 2,322 | 4,535 |
Other comprehensive income |
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Fair value losses on available-for-sale financial assets |
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| (30) | (139) |
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Other comprehensive income for the year, net of tax |
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| (30) | (139) | |
Total comprehensive income for the year attributable to owners of the parent company |
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| 2,292 | 4,396 |
Condensed Consolidated Statement of Financial Position
31 March 2017
| Note | 2017 £'000 | 2016 £'000 |
Non-current assets |
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Property, plant and equipment |
| 1,885 | 1,904 |
Investment properties | 6 | 1,182 | 1,123 |
Investment in associate |
| 127 | 121 |
Available-for-sale investments |
| 802 | 832 |
Trade and other receivables | 8 | - | 8,503 |
Total non-current assets |
| 3,996 | 12,483 |
Current assets |
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Trading properties | 7 | 9,348 | 14,838 |
Trade and other receivables | 8 | 9,209 | 381 |
Cash and cash equivalents |
| 5,280 | 2,988 |
Total current assets |
| 23,837 | 18,207 |
Total assets |
| 27,833 | 30,690 |
Current liabilities |
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Bank loans and overdrafts | 9 | 7,639 | - |
Trade and other payables |
| 232 | 495 |
Corporation tax payable |
| - | 1,450 |
Total current liabilities |
| 7,871 | 1,945 |
Non-current liabilities |
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Bank loans | 9 | - | 10,927 |
Deferred income tax liabilities |
| 32 | 72 |
Total non-current liabilities |
| 32 | 10,999 |
Total liabilities |
| 7,903 | 12,944 |
Net assets |
| 19,930 | 17,746 |
Equity |
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Share capital |
| 768 | 778 |
Share-based payment reserve |
| 354 | 354 |
Investment revaluation reserve |
| (82) | (52) |
Capital redemption reserve |
| 75 | 65 |
Retained earnings |
| 18,815 | 16,601 |
Total equity attributable to owners of the parent company |
| 19,930 | 17,746 |
Condensed Consolidated Statement of Changes in Equity
31 March 2017
| Share Capital
£'000 | Capital redemption reserve £'000 | Share-based payment reserve £'000 | Investment revaluation reserve £'000 | Retained earnings
£'000 | Total equity
£'000 |
Balance at 1 April 2015 | 843 | - | 486 | 87 | 13,338 | 14,754 |
Comprehensive income |
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Profit for the year | - | - | - | - | 4,535 | 4,535 |
Revaluation of available-for-sale investments | - | - | - | (139) | - | (139) |
Total comprehensive income | - | - | - | (139) | 4,535 | 4,396 |
Transactions with owners |
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Share-based payment charge for the year | - | - | (132) | - | - | (132) |
Dividend paid | - | - | - | - | (529) | (529) |
Purchase of own shares | (65) | 65 | - | - | (743) | (743) |
Total transactions with owners | (65) | 65 | (132) | - | (1,272) | (1,404) |
Balance at 31 March 2016 | 778 | 65 | 354 | (52) | 16,601 | 17,746 |
Comprehensive income |
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Profit for the year | - | - | - | - | 2,322 | 2,322 |
Revaluation of available-for-sale investments | - | - | - | (30) | - | (30) |
Total comprehensive income | - | - | - | - | 2,322 | 2,292 |
Transactions with owners |
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Share-based payment charge for the year | - | - | - | - | - | - |
Purchase of own shares | (10) | 10 | - | - | (108) | (108) |
Total transactions with owners | (10) | 10 | - | - | (108) | (108) |
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Balance at 31 March 2017 | 768 | 75 | 354 | (82) | 18,815 | 19,930 |
Condensed Consolidated Statement of Cash Flows
Year ended 31 March 2017
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| 2017 £'000 | 2016 £'000 |
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Operating activities |
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Cash inflow from operations |
| 6,523 | 2,321 |
Interest paid |
| (406) | (292) |
Corporation tax paid |
| (1,464) | (1,695) |
Net cash inflow from operating activities |
| 4,653 | 334 |
Investing activities |
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Interest received |
| 1 | 1 |
Purchase of property, plant and equipment |
| (143) | (105) |
Purchase of available-for-sale investments |
| - | (664) |
Distributions from associate |
| 25 | 33 |
Other dividends received |
| 6 | 5 |
Proceeds from sale of investment properties |
| 1,094 | 1,637 |
Proceeds from sale of property, plant and equipment |
| 94 | 82 |
Net cash generated from investing activities |
| 1,077 | 989 |
Financing activities |
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Purchase of own share capital |
| (108) | (743) |
Dividends paid to equity shareholders |
| - | (529) |
New loans |
| 2,001 | 3,742 |
Loan repayments |
| (5,331) | (1,259) |
Net cash (used in)/generated from financing activities |
| (3,438) | 1,211 |
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Net increase in cash and cash equivalents |
| 2,292 | 2,534 |
Cash and cash equivalents at beginning of year |
| 2,988 | 454 |
Cash and cash equivalents at end of year |
| 5,280 | 2,988 |
Notes
31 March 2017
1. Basis of preparation
On 10 August 2017, the Directors approved this announcement for publication. Copies of this announcement are available from the Company's registered office at 1a Kingsley Way, London, N2 0FW and on its website, www.safeland.co.uk. The Annual Report and Accounts will be sent to shareholders in due course and will be available on the Company's website, www.safeland.co.uk. The financial information presented above does not constitute statutory financial statements as defined by section 435 of the Companies Act 2006 for the year ended 31 March 2017. The financial information for the year ended 31 March 2016 has been derived from the Group's statutory accounts for that year, as filed with the Registrar of Companies.
The financial information for the year ended 31 March 2017 is derived from the statutory financial statements for that year, prepared under IFRS, upon which the auditors have reported. The audit report was unqualified, did not include references to matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory financial statements for the year ended 31 March 2017 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
The accounting policies applied in this announcement are consistent with those of the annual financial statements for the year ended 31 March 2016, as described in those annual financial statements.
2. Significant Accounting Policies
Revenue
Revenue is stated net of VAT and comprises rental income, proceeds from sales of trading properties, fees, commissions and other income.
Sales of trading properties are recognised on completion of a contract. This reflects the point of transfer of risk and rewards when trading property is sold.
Rental income from investment and trading properties leased out under operating leases is recognised in the Income Statement on a straight-line basis over the term of the lease. Contingent rents which comprise turnover rents are recognised as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants. Lease incentives are recognised as an integral part of the net consideration for the use of the property and amortised on a straight-line basis over term of lease, or the period to the first tenant break, if shorter.
Hotel revenue comprised revenues from overnight hotel accommodation, banqueting facility hire and sales of food and beverages. All revenue was recognised when the service was provided. The hotel closed and ceased to trade on 3 August 2016.
Other fees in relation to property management are recognised on a straight-line basis over the term of management contracts.
Investment properties
Investment properties are those properties that are held either to earn rental income or for capital appreciation or both. Investment properties are measured and stated at fair value in the statement of financial position. Valuation surpluses and deficits arising in the year are included in profit or loss.
The gain or loss arising on the disposal of a property is determined as the difference between the sales proceeds and the fair value of the asset at the beginning of the period and is recognised in the income statement.
Investment properties may be freehold properties or leasehold properties. For leasehold properties that are classified as investment properties, the associated leasehold obligations, if material, are accounted for as finance lease obligations.
Trading properties
Properties held for development and resale are classified as trading properties and are shown at the lower of cost and net realisable value. Cost comprises purchase price, acquisition costs and direct expenditure.
3. Operational Segments
All activities are based in the United Kingdom.
The segmental information of the Group's results for the year ended 31 March 2017 was as follows:
| Property trading £'000 | Hotel Operation (1) £'000 | Property Management £'000 | Property investment £'000 |
Total £'000 |
Revenue | 12,480 | 277 | - | 215 | 12,972 |
Cost of sales | (10,286) | (231) | - | - | (10,517) |
Gross profit | 2,194 | 46 | - | 215 | 2,455 |
Profit on disposal of investment properties |
- |
- |
- |
694 |
694 |
Gain on revaluation of investment properties |
- |
- |
- |
459 | 459 |
Share of profit of associate | - | - | 31 | - | 31 |
Operating profit before administration expense |
2,194 |
46 |
31 |
1,368 |
3,639 |
Administrative expenses |
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| (1,721) |
Dividend from investments |
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| 5 |
Finance income |
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| 554 |
Finance costs |
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| (448) |
Profit before tax |
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| 2,029 |
| Property Trading £'000 | Hotel Operation (1) £'000 | Property Management £'000 | Property investment £'000 |
Unallocated £'000 |
Total £'000 |
Segment assets | 18,456 | - | - | 1,182 | 8,195 | 27,833 |
Segment liabilities | (7,639) | - | - | - | (264) | (7,903) |
Net assets | 10,817 | - | - | 1,182 | 7,931 | 19,930 |
Capital expenditure |
- |
- |
- |
- |
5 |
5 |
Depreciation | - | - | - | - | 81 | 81 |
(1) The hotel business ceased to operate with effect from 3 August 2016 and has been closed permanently. The property is currently being refurbished into 18 apartments.
The segmental information of the Group's results for the year ended 31 March 2016 was as follows:
| Property Trading £'000 | Hotel Operation £'000 | Property Management £'000 | Property investment £'000 |
Total £'000 |
Revenue | 20,110 | 848 | 17 | 141 | 21,116 |
Cost of sales | (13,226) | (777) | - | - | (14,003) |
Gross profit | 6,884 | 71 | 17 | 141 | 7,113 |
Dividend from associate | - | - | 13 | - | 13 |
Share of profit of associate | - | - | 23 | - | 23 |
Operating profit before administration expense | 6,884 | 71 | 53 | 141 | 7,158 |
Administrative expenses |
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| (1,287) |
Dividends from investments |
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| 9 |
Finance income |
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| 520 |
Finance costs |
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| (334) |
Profit before tax |
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| 6,057 |
| Property Trading £'000 | Hotel Operations £'000 | Property Management £'000 | Property investment £'000 |
Unallocated £'000 |
Total £'000 |
Segment assets | 23,342 | 496 | - | 1,123 | 5,729 | 30,690 |
Segment liabilities | (10,927) | (219) | - | - | (1,798) | (12,944) |
Net assets | 12,415 | 277 | - | 1,123 | 3,931 | 17,746 |
Capital expenditure |
- |
- |
- |
- |
105 |
105 |
Depreciation | - | - | - | - | 85 | 85 |
4. Earnings per Share
The calculation of the basic and diluted earnings per share is based on the following data:
| 2017 £'000 | 2016 £'000 |
Profit for the year attributable to equity holders of the company | 2,322 | 4,535 |
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| 2017 Number | 2016 Number |
Weighted average number of ordinary shares for the purposes of basic earnings per share (continued and discontinued) |
|
15,555,095 |
16,224,288 |
Effect of dilutive potential ordinary shares |
| 12,042,793 | 13,138,490 |
Weighted average number of ordinary shares for the purposes of diluted earnings per share |
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27,597,888 |
29,362,778 |
5. Dividends
The Directors recommend a final dividend of 1 pence per share (2016: nil). During the year, no interim dividend was paid (2016: 1.5 pence per share).
6. Investment Properties
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| 2017 £'000 | 2016 £'000 |
Fair value |
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At 1 April |
| 1,123 | 2,693 |
Disposal of properties in the year |
| (400) | (1,612) |
Increase in fair value during the year |
| 459 | 42 |
At 31 March |
| 1,182 | 1,123 |
The fair value of the investment properties at 31 March 2017 comprises freehold properties of £725,000 (2016: £665,000) and long leasehold properties of £457,000 (2016: £458,000). The leasehold and freehold investment property have been classified within level 3 of the fair value hierarchy (unobservable inputs).
The investment properties consist of residential property located in North London and have been valued by the Directors. The methodology to value these properties is to compare historical comparable market transactions less a percentage reduction to reflect the limitations of restrictive tenancies. Based on valuations at 31 March 2017, if the percentage reduction was 5% higher or lower and all other variables were held constant, the Group's net profit would increase or decrease immaterially.
The Group has pledged investment properties with a carrying value of £1,182,000 (2016: £1,110,000) to secure banking facilities granted to the Group.
The fair value of the Group's investment properties at 31 March 2017 had been arrived at on the basis of market value as defined in the Apportionment and Valuation Manual of the Royal Institution of Chartered Surveyors.
7. Trading Properties
| 2017 £'000 | 2016 £'000 |
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Properties for resale | 9,348 | 14,838 |
Trading properties are properties acquired or developed and held for sale and are shown at the lower of cost or net realisable value. The cost of trading properties are those costs directly associated with the acquisition and development of a specific site. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs to completion and the estimated costs necessary to make the sale.
8. Trade and Other Receivables
| 2017 £'000 | 2016 £'000 |
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Trade receivables | 80 | 31 |
Other receivables | 9,122 | 8,847 |
Prepayments and accrued income | 7 | 6 |
| 9,209 | 8,884 |
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Current | 9,209 | 381 |
Non-current | - | 8,503 |
| 9,209 | 8,884 |
The directors consider that the carrying amount of trade and other receivables is no less than their fair value. Of the other receivables, £9,058,000 (2016: £8,503,000) is deferred consideration on the sale of the Chandos Tennis Club and no amounts are beyond their due date.
9. Bank Loans
FALLING DUE WITHIN ONE YEAR | 2017 £'000 | 2016 £'000 |
Bank loans | 7,670 | - |
Unamortised borrowing costs | (31) | - |
| 7,639 | - |
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FALLING DUE AFTER MORE THAN ONE YEAR |
2017 £'000 |
2016 £'000 |
Bank loans | - | 11,000 |
Unamortised borrowing costs | - | (73) |
| - | 10,927 |
| 2017 £'000 | 2016 £'000 |
The borrowings are repayable as follows: |
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In the second to fifth years | - | 11,000 |
All of the Group's bank loans and overdrafts disclosed above comprise borrowings in sterling. The bank loans are secured on investment and trading properties owned by the Group totalling £10,288,000 (2016: £15,948,000).
The Group has a £12,500,000 (2016: £12,500,000) revolving credit facility with Lloyds Bank plc ("the Bank"), secured on certain properties owned by the Group, which is due to expire on 9 December 2017. The facility is based on LIBOR plus a fixed margin. The Group has entered into discussions with the Bank to renew the facility and has received a letter of intent from the bank. A notional amount of £5,000,000 (2016: £5,000,000) has been capped at 3%.