26th Sep 2007 07:00
Artisan (UK) PLC26 September 2007 26 September 2007 ARTISAN (UK) plc (AIM) (House builder & business park developer) PRELIMINARY RESULTS FOR THE 15 MONTHS TO 30 JUNE 2007 HIGHLIGHTS Key points: • Turnover for 15 months up significantly to £41.0m (2006: £28.7m*) • Operating profits have remained steady at £3.7m (2006: £3.7m*), largely due to margin pressure in residential sales • Business park development division performing strongly, with turnover at £15.6m (2006: £9.7m) and operating profit before central charges at £2.4m (2006: £1.6m*) • Final dividend of 1.5p per Ordinary Share recommended (2006: nil): total dividend for the period under review at 2.7p (2006: nil*) • Board to continue investment in land stocks to provide future growth • Profit before tax falls as expected to £2.8m (2006: £3.4m*), reflecting the impact of IFRS on income recognition and increased interest charge as a result of investment in inventories • Maiden contribution from property investment division established during the period \* The comparatives for 2006 are based on the 12 months to 31 March 2006, restatedto reflect the adoption of International Reporting Standards and changes inaccounting policies Michael W Stevens commented: "The results demonstrate another period of growth with the commercial businesspark operations reaching record levels of turnover and profit. The combinationof residential and commercial operations has successfully balanced profitabilityin the face of challenging residential market conditions." "Recent events indicate that we may be entering a period of more stormy watersthat present opportunities as well as challenges, and we expect that we have atleast neared the top of the interest rate cycle." Enquiries: Artisan (UK) plc 01480 436666Chris Musselle, Chief Executive Mobile: 07879 412779 Bankside Consultants 020 7367 8888Simon Rothschild/Louise Mason Mobile: 07703 167065 Brewin Dolphin SecuritiesIfor Williams 0121 236 7000 CHAIRMAN'S STATEMENT I am very pleased to report another period of strong results. Turnover for 15months has grown significantly to £41.0m (2006: £28.7m) largely as a result ofgrowth in the commercial business park activities from £9.7m in 2006 to £15.6min 2007. Turnover for Rippon Homes, the Group's residential house builder roseto £26.9m in comparison with £19.0m in 2006 in the face of a difficultresidential market in our core area the East Midlands. Your Board has recognised the need to report under International FinancialReport Standards ("IFRS"). The adoption of IFRS has, as previously announced,resulted in a change in our revenue recognition basis to accounting oncompletion of sales transactions and we have adopted an accounting referencedate of 30 June which better aligns Artisan with other companies in the sector.As this is the first time we have accounted to 30 June, this report and accountsis for a 15 month period to 30 June 2007. The comparative figures for the 12months to 31 March 2006 have been re-stated to reflect the adoption of IFRS andchange in accounting policies. The effects of IFRS on these results has been toinflate 2006's turnover and profit before tax, largely as a result of changes inincome recognition, disguising the improved trading performance achieved duringthe period under review. Operating profits have remained steady at £3.7m (2006: £3.7m) although this isfor a longer period. Whilst profits derived from the business park activitieshave remained strong, margin levels for residential sales have suffered. This isdue to a difficult market requiring use of incentives with a lack of sales valueincrease. At the same time the supply of land, particularly residential, hasremained constrained and land values have not decreased. The scarcity of land with planning permission is the prime reason for landvalues and the consequential price of new homes remaining at high levels. IfGovernment targets are to be met, improvements in the whole planning processwill need to be implemented. Your Board is looking forward to 2008 with cautious optimism. We are veryconfident that the delivery and quality of our product more than meets customerexpectations and this allows us to remain competitive in securing sales againstcompetitors. However, the extended series of interest rate rises has long sincesucceeded in dampening the East Midlands residential market and both thecontinued policy as regards interest rates and the availability of consumerfinance as a consequence of the volatile global financial markets currentlyseen, has the potential for a significant impact on our achievements for thefinancial year to 30 June 2008. We believe that these conditions will affectmany in our sector. The background to the commercial division has been much more buoyant, and it isclear that the extended business cycle that the UK has been experiencing hasbrought about a need for both established companies to seek new premises andgreater demand from smaller companies and start ups. Our results show that wecan meet customer requirements in a flexible and efficient way. There is scopeto expand our brand name further in a dynamic and fast moving area of thecountry. The strategy of your Board is to maintain investment in land stocks to providefor future growth. We have good and improved banking facilities that we expectto utilise increasingly as land is acquired. Whilst this approach may increaseshort term financing costs, we believe that it is essential for the continuedgrowth of the Group. Earlier this year the Board decided the business had matured sufficiently to beable to consider retaining some of our let properties rather than disposing ofthem immediately as investment sales. As previously announced, the first twoproperties falling into this category are premises for Black Teknigas andSpeymill Group plc. Further property investment opportunities will be assessedas they arise out of the normal course of trading. We also recognise the interest of our shareholders in a dividend stream and Iwas particularly pleased to announce in January 2007 the restoration of adividend with an interim dividend of 1.2p. I am also pleased that your Board hasdecided to recommend a final dividend of 1.5p bringing total dividends payablefor the 15 months to 30 June 2007 to 2.7p. The investment the Group has made in its two core divisions over the last 3years, and the re-establishment of the investment property division has createda much more soundly based company than it was formerly. Recent events indicatethat we may be entering a period of more stormy waters that presentopportunities as well as challenges, and we expect that we have at least nearedthe top of the interest rate cycle. The continued success of Artisan is dependent on the team approach; and theloyalty and hard work of our employees is what drives the business forward. Ithank them greatly. Michael W Stevens Chairman 26 September 2007 OPERATIONAL REVIEW The 15 months to 30 June 2007 has seen the commercial business park operationsreach record levels of turnover and profit. Turnover has grown to £15.6m (2006:£9.7m) including inter group sales of £1.5m (2006: £nil). The inter group salesare in respect of the investment property activity. The increased turnover hasbeen achieved because built stock and land has been available to meet demand. Inaddition a record level of forward sales was achieved which has providedturnover not only in the period but also for the year to 30 June 2008. The commercial stock has been utilised in providing sales and investment landfor Artisan (UK) Properties. During the 15 month period the acquisition of sitesat Peterborough and King's Lynn were completed and a site at Ipswich sincecontracted in line with the Board's plans. Consequently land stocks stand at21,000m(2) of net developable floor space (2006: 16,550m(2)). Since the periodend further sites have been agreed and, if these all complete, Artisan (UK)Developments will be well placed for sales outlets. Residential has faced more challenging conditions. Whilst an improved spread ofproduct offered across sites over a broader geographic region has enabled animproved turnover to be achieved, 160 units contributing £26.9m of turnover(2006: 107 units contributing £19.0m turnover), the sales have been moredifficult to achieve at target prices. The increased use of incentives and lesssales price growth has resulted in profit before central charges of £2.6m (2006:£3.0m). Land supply is important to both businesses and Rippon Homes has 337 plots ownedor contracted at 30 June 2007 (2006: 279). Further sites are subject to agreedbids. Artisan (UK) Properties has, as an extension to the Artisan (UK) Developmentactivities, secured its first two investment agreements during the period. Thefirst is a 36,500 sq ft industrial unit for Black Teknigas Ltd, a subsidiary ofWatts Industries. The agreement for this investment includes a five-year optionfor an extension of 18,500 sq ft to the property. The second investment property is for a 5,000 sq ft new office for SpeymillGroup plc, a group that has recently established new areas of activity and grownexisting ones. We believe that each investment holds the potential for appreciation in valueover the next few years and we will look for similar opportunities. As the lease on the current Artisan Huntingdon office expires, Artisan will bemoving to new offices of 3,000 sq ft alongside Speymill Group's new offices. The 15 months to 30 June 2007 has shown that the combination of residential andcommercial operations has successfully balanced profitability in the face ofchallenging residential market conditions. Chris Musselle Chief Executive 26 September 2007 FINANCIAL REVIEW Results The adoption of IFRS has impacted on the results for this period and for thecomparative year. A consequence of the adoption of IFRS has been the change torecognising sales at the point of legal completion rather than exchange ofcontracts. Details of the effects of the adoption of IFRS were set out in ourannouncement of 19 October 2006. This announcement shows that, principally dueto the change of revenue recognition basis, the 2006 results were significantlyimproved by one particular sale that having been exchanged in March 2005,completed in April 2005 moving the revenue recognition into the year ended 31March 2006. An accounting reference date of 30 June has also been adopted whichbrings Artisan's half yearly reporting more into line with many businesses inthe housing development sector. Operating profit of £3.7m for the 15 months to 30 June 2007 (2006: £3.7m) ongreater levels of turnover reflects a reduction in residential margins whilstcommercial business park margins have remained robust. However the 2006operating profit included a net benefit of £0.1m arising from non-recurringincome and expenditure in that year. Finance expense has increased to £0.9m (2006: £0.4m) reflecting the increasedinvestment in land and work-in-progress in accordance with the Group's strategyto increase outlets. The notes to the accounts include a more detailed segmental analysis. Howeverthis can be summarised as below:- Residential Commercial Investment Central Total £m £m £m £m £mTurnover2007 (15 months) 26.9 15.6 - (1.5) 41.02006 (12 months) 19.0 9.7 - - 28.7Operating profitbefore groupmanagement charges2007 (15 months) 2.6 2.4 0.3 (1.6) 3.72006 (12 months) 3.0 1.6 - (0.9) 3.7 The analysis of profit is before Group management charges. The Central columndeducts from turnover the inter segment trading. The 2006 central costs werereduced by net non-recurring recovery of £0.1m. The tax charge for the period is £0.7m resulting in an effective tax rate of24.1% (2006: 16.9%). The reduction to standard rate is primarily due to the useof brought forward tax losses and a claim for land remediation tax relief. The net assets have grown 11.2% from £18.8m to £20.9m as a result of theretained profit for the period. There have been no significant changes to sharecapital during the period other than the share consolidation in January 2007. The Group has net borrowings of £10.8m (2006: £6.6m) resulting from increasedinvestment in land and work-in-progress. The Group has drawn bank debt of £24.1m(2006: £20.0m) resulting in substantial cash balances being available. Weanticipate further drawing on our bank facilities and utilising funds from ourcash balances to further invest in new sites. Our bank facility allows positivebank balances in the Group to be offset against drawdown funds for the purposesof interest calculation allowing for an effective management of funding. Thegearing ratio is now 51.5% (2006: 34.9%). Work in Progress Work-in-progress has increased from £30.2m to £34.8m reflecting continuedinvestment in both residential and commercial stocks. As indicated in thesegmental analysis within the notes to the accounts, the larger part of theGroup assets is invested in the residential activities reflecting the greaterlevel of trade and the greater cost of residential land. In addition thecommercial operations are able to negotiate some of their sales on a forwardbasis, which can reduce the level of investment required. Capital Reorganisation In January 2007, a successful capital reorganisation was undertaken. This hadthe net effect of consolidating Artisan shares on a 1 for 40 basis. The effectof this was to reduce the number of registered shareholders from over 10,000 tounder 5,000. The consolidation exercise provided shareholders that held only afew shares with a cost effective way of realising their interest and will securesignificant savings to the Group in managing the shareholder base. Chris Musselle Chief Executive 26 September 2007 ARTISAN (UK) PLC GROUP INCOME STATEMENT For The Period Ended 30 June 2007 15 month period 1 April 2006 to Year ended Note 30 June 2007 31 Mar 2006 __________ __________ £ £ REVENUE 41,032,156 28,664,400 COST OF SALES (35,093,001) (23,503,665) __________ __________GROSS PROFIT 5,939,155 5,160,735 Other operating income 410,264 741,459Administrative expenses (2,913,381) (2,218,052) __________ __________ 3,436,038 3,684,142Revaluation surplus oninvestment properties 261,684 - __________ __________Operating profit 3,697,722 3,684,142 Finance income 18,829 119,425Finance expense (933,642) (448,686) __________ __________PROFIT BEFORE TAXATION 2,782,909 3,354,881Tax expense (671,032) (567,405) __________ __________PROFIT FOR THE PERIOD 2,111,877 2,787,476 __________ __________ Basic earnings per share 4 25.71p 38.24pDiluted earnings pershare 4 25.71p 38.24p ARTISAN (UK) PLC GROUP STATEMENT OF CHANGES IN EQUITY Share Capital Own Share premium Merger redemption Retained shares capital account reserve reserve earnings held Total £ £ £ £ £ £ £ At 1 April 1,442,647 9,456,668 515,569 91,750 3,376,299 - 14,882,9332005Profit andtotalincome andexpenserecognisedfor - - - - 2,787,476 - 2,787,476the yearIssue of 200,000 900,000 - - - - 1,100,000sharesCredit inrespect ofemployeeshare - - - - 43,373 - 43,373schemes _________ _________ _________ _________ _________ _________ _________ At 31March 1,642,647 10,356,668 515,569 91,750 6,207,148 - 18,813,7822006 Profit andtotalincome andexpenserecognisedfor - - - - 2,111,877 - 2,111,877the periodDividends - - - - (98,384) - (98,384)paidIssue of 3 15 - - - - 18sharesPurchaseof - - - - - (19,065) (19,065)own sharesCredit inrespect ofemployeeshare - - - - 51,957 - 51,957schemes _________ _________ _________ _________ _________ _________ _________ At 30 June 1,642,650 10,356,683 515,569 91,750 8,272,598 (19,065) 20,860,1852007 _________ _________ _________ _________ _________ _________ _________ ARTISAN (UK) PLC GROUP BALANCE SHEET As at 30 June 2007 30 June 2007 31 Mar 2006 __________ __________ £ £ASSETS Non-current assetsIntangible assets 2,454,760 2,454,760Investment properties 1,515,897 -Property, plant and equipment 437,058 352,779Deferred tax assets - 171,180 __________ __________ 4,407,715 2,978,719 __________ __________CURRENT ASSETS Inventories 34,792,561 30,167,798Current asset investment - 1,000Trade and other receivables 1,478,042 1,242,085Cash and cash equivalents 1,126 3,350 __________ __________ 36,271,729 31,414,233 __________ __________Total assets 40,679,444 34,392,952 __________ __________ LIABILITIESNon-current liabilitiesInterest bearing loans and borrowings (10,752,945) (6,563,065) __________ __________Current liabilities Trade and other payables (8,098,715) (8,058,660) Current tax provision (523,527) (509,700) Provisions (444,072) (447,745) __________ __________ (9,066,314) (9,016,105) __________ __________Total liabilities (19,819,259) (15,579,170) __________ __________NET ASSETS 20,860,185 18,813,782 ___________ __________EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT COMPANY Called up share capital 1,642,650 1,642,647Share premium account 10,356,683 10,356,668Merger reserve 515,569 515,569Capital redemption reserve 91,750 91,750Retained earnings 8,272,598 6,207,148Own shares (19,065) - __________ __________TOTAL EQUITY 20,860,185 18,813,782 __________ __________ ARTISAN (UK) PLC GROUP CASH FLOW STATEMENT For The Period Ended 30 June 2007 Period 1 April 2006 to Year ended Note 30 June 2007 31 Mar 2006 __________ __________ £ £CASH FLOWS FROM OPERATING ACTIVITIESCash (used by)/generated from 5 (2,330,514) 445,423operationsFinance income received 18,829 119,425Finance costs paid (898,818) (447,680)Tax paid (486,025) (683,012) __________ ________Net cash used in operations (3,696,528) (565,844) __________ ________ CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and (145,850) (44,947)equipmentCapital expenditure on investmentproperties (238,767) -Proceeds from sale of property, plantand 5,163 8,935equipmentProceeds from sale of current assetinvestments 1,309 - __________ ________Net cash used in investing activities (378,145) (36,012) __________ ________ CASH FLOWS FROM FINANCING ACTIVITIESDividends paid (98,384) -Proceeds from the issue of ordinaryshare 18 1,100,000capitalPurchase of own shares (19,065) -Movement on borrowings 4,189,880 (497,681)Capital element of hire purchase - (2,320)payments __________ __________Net cash flow from financing activities 4,072,449 599,999 __________ __________ NET DECREASE IN CASH AND CASH (2,224) (1,857)EQUIVALENTS CASH AND CASH EQUIVALENTS AT THEBEGINNING 3,350 5,207OF THE PERIOD __________ __________CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 1,126 3,350 __________ __________ Notes 1 Basis of preparation The financial statements included in this preliminary announcement have beenprepared using recognition and measurement principles consistent with those ofInternational Financial Reporting Standards ("IFRS") issued by the InternationalAccounting Standards Board as endorsed by the European Union, and with thoseparts of the Companies Act 1985 applicable to companies reporting under IFRS. Full details of IFRS policies applied and reconciliations of comparative figuresbetween UK GAAP and IFRS are available in our Interim Statement, a copy of whichis available from our website www.artisan-plc.co.uk. 2 Status of financial information The financial information contained in this preliminary announcement does notconstitute the company's consolidated statutory financial statements for the 15month period ended 30 June 2007 and the year ended 31 March 2006, but is derivedfrom those financial statements. The financial statements for the year ended 31March 2006, which were prepared under UK GAAP, have been delivered to theRegistrar of Companies. The financial statements for the 15 month period ended30 June 2007 prepared under IFRS will be delivered following the company'sAnnual General Meeting. The auditors have reported on those financialstatements; their reports were unqualified and did not contain statements undersection 237 (2) or (3) of the Companies Act 1985. The annual report and financial statements will be posted to shareholders on 27 September 2007, copies of which will also be available from the CompanySecretary, Artisan (UK) plc, Mace House, Sovereign Court, Ermine Business Park,Huntingdon, Cambridgeshire, PE29 6XU. 3 Dividends Amounts paid to equity holders in the period: Period 1 April 2006 to Year ended 30 June 2007 31 March 2006 £ £ Interim dividend for the period ended 30 June 2007of 1.2p per share 98,384 - _________ _________ The Directors have proposed a final dividend for the period of 1.5p (2006 -£Nil) per ordinary share amounting to £122,980 (2006 - £Nil). This dividend hasnot been accrued at the balance sheet date. 4 Earnings per share The basic earnings per share is calculated by dividing the profit after taxationby the weighted average number of shares in issue. The basic earnings per share is calculated by dividing the profit after taxationby the weighted average number of shares in issue. 2007 2006 Number NumberThe weighted average number of shares were: Basic weighted average number of shares 8,213,242 7,289,948 __________ __________ The comparative figure has been restated to reflect the capital reorganisationwhich occurred on 19 January 2007. The restated weighted average number ofshares has been calculated as if the consolidation had occurred at the start ofthe comparative period. There were no dilutive potential ordinary shares in 2007 or 2006. 5 Cash (used by)/generated from operations Period 1 April 2006 to Year ended 30 June 31 March 2007 2006 £ £ Profit before taxation 2,782,909 3,354,881Provision arising on current asset investment - 4,000Profit on disposal of current asset investment (309) -Depreciation 59,598 32,367Share based payments charge 51,957 43,373Profit on disposal of property, plant andequipment (3,190) (8,935)Increase in inventories (5,428,981) (3,509,210)Increase in trade and other receivables (235,957) (488,302)(Decrease)/increase in trade and other payables (205,997) 769,086Decrease in provisions (3,673) (81,098)Revaluation surplus on investment properties (261,684) -Finance income (18,829) (119,425)Finance expense 933,642 448,686 _________ _________ Cash (used by)/generated from operations (2,330,514) 445,423 _________ _________ 6 The Annual General Meeting will be held at the offices of Brewin DolphinSecurities Limited, 12 Smithfield Street, London, EC1A 9BD on 6 November 2007 at11am. Copies of this announcement will be available to the public, free of charge,from the offices of Brewin Dolphin Securities, Edmund House, 12-22 NewhallStreet, Birmingham, B3 3DB during normal office hours, with the exception ofSaturdays, Sundays and bank holidays, for 14 days from today. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Artisanal Sp.co