Smart (J) & Co Regulatory News (SMJ)

J. SMART & CO. (CONTRACTORS) PLC

INTERIM REPORT

FOR THE SIX MONTHS TO

31st JANUARY 2022

INTERIM REPORT

Unaudited Group profit for the six months to 31st January 2022 on continuing and discontinued operations amounted to £6,334,000 compared with £829,000 for the corresponding period last year. This increase in profit was largely due to the completion of the sale of the industrial estates: Bilston Glen Industrial Estate, Loanhead, Inchwood Park, Bathgate and West Edinburgh Business Park, South Gyle, Edinburgh.

In accordance with our normal practice, there has been no revaluation of our investment properties at the end of the half year. If a half year revaluation had taken place, we believe that the valuation would have been no worse than last year, with no detrimental effect on the headline figures.

The small private housing development at Winchburgh, The Courtyard, completed with all sales concluded.

The larger private housing development at Winchburgh, Canal Quarter, is progressing well and reservations are currently encouraging. The majority of the completions will be after the end of the current financial year, albeit we may have a limited number of completions prior to then.

The second phase of Gartcosh Industrial Park, developed through the joint venture company, Gartcosh Estates LLP, is now complete. Interest in both units at the second phase is promising.

Whilst the restrictions covering the coronavirus pandemic are nearly at an end, we continue to see delays in the supply chain and rises in the price of construction materials. This has continued to affect the viability of all types of potential projects and eroded the profits of recently completed and soon to be completed projects. As such, the delays in procuring contracting work and commencing new private housing work continue.

INTERIM DIVIDEND

The Board announces an interim dividend of 0.96p per share (2021, 0.95p) to be paid on 6th June 2022 to shareholders on the register at the close of business on 6th May 2022. The interim dividend will cost the Company no more than £400,000.

FUTURE PROSPECTS

We are hopeful that our residential development at Clovenstone Gardens, Edinburgh will start prior to the end of the financial year, which will provide a mixture of private housing for sale and affordable housing.

As mentioned above, there may be some limited further private housing sales this financial year.

Commercial property valuation levels have continued to improve since last year in the industrial sector, but to a lesser extent in the office sector. Lettings of both our industrial and office stock remain robust, albeit we have recently experienced a slowing in the take up of space in both sectors. However, it seems likely that the inexorable rise in investment yields, especially in the industrial sector, will plateau and may fall.

We intend to start the second phase at Belgrave Point, Bellshill in the near future, with a large speculative single user industrial unit, but it remains to be seen if this will commence prior to the end of the financial year.

Construction costs continue to rise. This, coupled with inflation, rising utility prices and the general cost of living increases, may have an impact on the demand in the property sectors we trade in.

At this stage, it is difficult to make an accurate forecast for the year end figures. It is unlikely that the headline profit will increase this financial year, and it remains to be seen what the underlying profit will be.

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO INTERIM FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

J. Smart & Co. (Contractors) PLC is a company domiciled in the United Kingdom. The condensed consolidated interim financial statements of the Company for the six months ended 31st January 2022 comprise the Company and its Subsidiaries, together referred to as the Group, and the Group's interest in jointly controlled entities.

The condensed consolidated interim financial statements for the six months to 31st January 2022 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34: Interim Financial Reporting adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The condensed consolidated interim financial statements for the six months to 31st January 2022 do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year to 31st July 2021, which have been prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The statutory financial statements for the year to 31st July 2021 have been filed with the Registrar of Companies and a copy may be obtained from Companies House. These have been audited and contain an unqualified audit opinion, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements have not been audited or reviewed by the Company's auditor. A copy of the interim financial statements will be available on the Company's website www.jsmart.co.uk.

2. ACCOUNTING POLICIES

The condensed consolidated interim financial statements have been prepared under the historical cost convention except where the measurement of balances at fair value is required for investment properties, financial assets and assets held by defined benefit pension scheme.

The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31st July 2021, with the exception of the policies regarding the accounting for pension scheme obligations and investment properties revaluations.

For the condensed consolidated interim financial statements, the assets and liabilities of the pension scheme are estimated to be unchanged from the values included at the previous year end. Also, in accordance with long standing practice, the Group's investment properties are revalued annually on 31st July each year and therefore, no revaluation adjustment is made in the condensed consolidated interim financial statements.

Standards, Amendments to Standards and Interpretations effective in period

The following new standards, amendments to standards and interpretations, which are relevant to the Group, were issued by the International Accounting Standards Board and are mandatory for the Group for the first time in the financial year to 31st July 2022:

· IAS 39 (amended): Financial Instruments: Recognition and Measurement.

· IFRS 7 (amended): Financial Instruments: Disclosures.

· IFRS 9 (amended): Financial Instruments.

· IFRS 16 (amended): Leases.

· IAS 37 (amended): Provisions, Contingent Liabilities and Contingent Assets.

The Directors anticipate that there will be no material impact of these amendments to standards on the financial statements.

Estimates and assumptions

The preparation of the condensed consolidated interim financial statements requires management to make estimates and assumptions concerning the future that may affect the application of accounting policies and the reported amounts of assets, liabilities and income and expenses. Management believes that the estimates and assumptions used in the preparation of these accounts are reasonable. However, actual outcomes may differ from those anticipated.

Going concern

The financial statements have been prepared on a going concern basis. The Directors have prepared a number of cashflows scenarios taking account of trading activities around construction projects in hand and anticipated projects, land acquisitions, rental income, investment property acquisitions and disposals and other capital expenditure. The Directors also have taken account of the continuing impact of the coronavirus on the construction and investment activities of the Group. In each scenario reviewed by the Directors the Group remains cash positive with no reliance on external funding and therefore remains net debt free. The net assets of the Group are £117,238,000 at 31st January 2022 and the Group's net current assets amount to £34,800,000. Taking all of the information the Directors currently have they are of the opinion that the Company and Group are well placed to manage its financial and business risks and have a reasonable expectation that the Company and Group have adequate financial resources to continue in operational existence for a period of at least twelve months from the date of approval of these financial statements and therefore consider the adoption of the going concern basis as appropriate for the preparation of these financial statements.

3. PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties which could have a material impact on the Group's performance for the remainder of the current financial year remain the same as those detailed in the Group's Annual Report and Financial Statements for the year to 31st July 2021, including the ongoing situation relating to the coronavirus pandemic. The Directors are closely monitoring the situation as it develops and the impact it is having on the trading performance of the Group and will continue to do so. The Directors will take appropriate actions to help mitigate the impact of the situation on the Group's performance and future prospects.

4. SEGMENTAL INFORMATION

IFRS 8: Operating Segments requires operating segments to be identified on the basis of internal reporting about components of the Group and they are regularly reviewed by the chief operating decision maker to allow the allocation of resources to the segments and to assess their performance. The chief operating decision maker has been identified as the Board of Directors. The chief operating decision maker has identified two distant areas of activities in the Group being construction activities and investment property activities.

All revenue and investment property income arises from activities within the UK and therefore the Board of Directors does not consider the business from a geographical perspective. The operating segments are based on activity and performance of an operating segment is based on a measure of operating results.

5. TAXATION

The tax charge for the six months to 31st January 2022 is based on the corporation tax rate at 19.00% (2021, 19.00%).

6. DISCONTINUED OPERATIONS

In the year to 31st July 2019 Concrete Products (Kirkcaldy) Limited ceased trading.

The results of the discontinued operation, which have been included in the profit, were as follows:

7. DIVIDENDS

The interim dividend of 0.96p per share for the year to 31st July 2022 will be paid on 6th June 2022 to shareholders on the register at 6th May 2022. The interim dividend will cost the Company no more than £400,000.

8. EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share are calculated by dividing the profit/(loss) attributable to equity shareholders by the weighted average number of shares in issue during the period.

During the six months to 31st January 2022 the Company purchased for immediate cancellation 198,000 Ordinary Shares of 2p.

There is no difference between basic and diluted earnings per share.

9. FAIR VALUE ASSETS

The Group's investment properties, financial assets and assets held by defined benefit pension scheme are measured at fair value after initial recognition.

Investment properties are only valued annually by the Directors at the year end and not for the purposes of the interim financial statements. The Group considers all of its investment properties fall within 'Level 3' of the fair value hierarchy as described by IFRS 13: Fair Value Measurement. Level 3 valuations are those using inputs for the asset or liability that are not based on observable market data. The main unobservable inputs relate to estimated rental value and equivalent yield.

The Group's financial assets consisted entirely of equities of companies listed on quoted markets which fall within 'Level 1' of the fair value hierarchy. Assets held by defined benefit pension scheme consist of equities and bond of companies listed on quoted markets and cash which all fall within 'Level 1' of the fair value hierarchy. Level 1 valuations are those using inputs which are quoted prices (unadjusted) in active markets for identical assets or liabilities the Group can access at the period end date.

10. RELATED PARTY TRANSACTION

Related parties are consistent with those disclosed in the Group's Annual Report and Statement of Accounts for the year to 31st July 2021.

Related party transactions, including salary and benefits provided to Directors and key management, were not material to the financial position or performance of the Group for the period.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors named below, confirm on behalf of the Board of Directors that to the best of their knowledge that the condensed consolidated interim financial statements for the six months to 31st January 2022 have been prepared in accordance with IAS 34: Interim Financial Reporting adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The condensed consolidated interim financial statements include a fair review of the information required by Disclosure and Transparency Rules 4.2.7 and 4.2.8, being:

· an indication of important events that have occurred during the six months to 31st January 2022 and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year, and

· material related party transactions in the six months to 31st January 2022 and any material changes in the related party transactions described in the last annual report.

The Directors of the Company are listed in the Annual Report and Statement of Accounts for the year to 31st July 2021.