Preliminary Statement of Results

30th Jan 2009 11:37



Wren Homes Group Plc (WHG/L)

("Wren" or "the Group"), 

Preliminary Statement of results 

For Year Ended 31 July 2008

Wren Homes Group Plc, the AIM listed provider of retirement living, through a range of Extra Care and other services for the independent elderly, announces preliminary results for 

the year ended 31 July 2008.

Highlights

Market conditions continue to be very difficult and Wren has not been immune to these conditions. Although sales of remaining retirement units continue, the pace of sales has slowed

Turnover of £84,000 (2007: £2,218,000) and loss for the year of £910,137 (2007: profit £535,134), reflecting the adverse conditions encountered in the housing market during the year and the Board's decision 18 months ago to curtail new building work into the downturn and thereby to reduce potential exposure to unsold units across portfolio

Continued focus on the Extra Care sector - growing demographic and government imperative to offer Extra Care to an ageing UK population 

Building work commenced at the first 54 unit Extra Care development at the second site in Warlingham, Surrey - already 110 people have registered an interest

Planning permission granted for further 53 Extra Care units at Crowborough; other planning consents expected in near future

£4m investment into Wren by Dominic Wainford in October 2008

Company is taking opportunity to review and strengthen a number of its business practices and to reduce its cost base

Part-exchange packages and letting of unsold retirement units will be considered where appropriate; unsold houses have all been let

These measures will generate further revenues and produce a cost base more in line with activity

The Group's Bank has confirmed that at the time of writing, it sees no reason why existing loans cannot be renegotiated and extended, with sufficient facilities made available to support the company

To preserve cash, Directors have decided not to pay a dividend (2007: £121,267)

Brian Nathan, Non-Executive Chairman of Wren Homes Group Plc, commented:

"At the time of writing, we are faced by a very difficult and challenging market which is constantly changing and evolving. Despite this, Wren is making steady progress and is positioning itself so that it can most effectively weather the storm and also capitalise on any improvements in market conditions when they arise. "

"The Board is confident that the new revenue generation and cost saving measures outlined below, together with planned developments, will substantially improve the company's outlook and prospects."

"In addition, Wren has continued to acquire sites under option and the Group has a substantial and growing "virtual" land bank, which underpins the confidence your Directors have in Wren's future as an Extra Care developer."

 

"Wren has an intentionally lean, dedicated and effective team of staff and I thank them for their loyalty and conscientious work during these difficult times, which will undoubtedly have its rewards for the company in the coming years."

Enquiries: 

Wren Homes Group plc
Paul Treadaway CEO	Tel: 01372 742 244 www.wrenhomesplc.co.uk
Shore Capital
Pascal Keane	Tel: 020 7408 4090
Adventis Financial PR
Tarquin Edwards / Chris Steele	Tel: 020 7034 4758/59 - 07879 458 364 / 07979 604 687

The financial information set out in this preliminary announcement does not constitute the Group's financial statements (as defined by s240 of the companies Act 1985) for the year ended 31 July 2008. 

  Wren Homes Group Plc

Chairman's Statement 

Year ended 31 July 2008

Trading Results

When I wrote my Chairman's statement in April 2008 for our interim results for the six months ending 31 January 2008, I emphasised the difficult trading conditions. As shareholders will be acutely aware, the economic situation in the UK has deteriorated considerably since the spring of 2008 and has driven the housing market into a severe crisis which is considered comparable with some of the worst on record.

Fortunately, the Board adopted a prudent approach to planned developments 18 months ago when market conditions began to deteriorate and postponed new building works. The company therefore has a smaller inventory of unsold housing units than might otherwise have been the case and by comparison with some of its competitors.

That said, we have not been immune from the difficult market conditions and sales of the remainder of our retirement units at our first site at Warlingham, have slowed. Although the purchasers of our retirement homes are generally mortgage free, they are likely to have to sell their existing homes first, which causes a considerable delay to the purchase of their retirement home. The company is, however, still seeing continued sales, albeit at a slower pace. 

It is with these challenges in mind, that I report a disappointing loss for the year of £910,137 (2007: profit - £535,134) on turnover of £84,000 (2007: £2,218,000).

In light of the difficult market conditions, the company is taking the opportunity to review and strengthen a number of its business practices and to reduce its cost base. The company has a manageable debt position and is in the process of renegotiating some outstanding loans that have come up for renewal. The Board believes that these measures will generate further revenues and produce a cost base which is more in line with the level of activity in the company. Further information is included below.

Dividend

Preserving cash is paramount in the current economic climate and although the company has sufficient funds to pay a dividend, your Directors have taken the decision not to pay one until property market activity returns to more normal levels.

Measures to Strengthen the Company 

In a renewed focus on revenue generation and cash flow, the Board has already undertaken or has identified a number of measures to improve the company's performance. 

I have already mentioned that there remains interest in our original development of retirement homes at Warlingham, but that the conversion of interest to sales has been hampered by the inability of our potential clients to sell their existing homes, brought on by difficulties in the mortgage market. 

To address this delay, we have decided to offer potential buyers a part-exchange package, where appropriate. The properties to be assumed by Wren will be independently valued and will be good properties in the South East and typically two to three bedroom houses which will be readily saleable in a normal market. Wren will sell these properties immediately or rent them out until conditions improve and it is already in the process of letting a number of those homes that come into its possession through part-exchange. As a result, we are confident of selling the few remaining retirement homes at Warlingham during the coming months either directly or through part-exchange and receiving new rental income to offset interest payments where a part-exchange takes place. 

Where there are offers to rent existing units at Warlingham, rather than to purchase them outright, Wren will consider any letting opportunities and plan to sell them when markets improve.

For our completed house stock, we have already taken the opportunity to secure rental income and have let nearly all our empty, unsold homes. This has nullified the effect of interest payable on financing associated with the development of those homes and will allow for the sale of those houses when conditions improve.

The company has already reviewed its cost base in detail and has identified significant cost savings throughout the company. It has started the process for reducing costs so that they are more in line with the levels of company activity and the Board believes that with these savings in place, Wren will be better positioned until market conditions improve and new developments are ready for sale.

As mentioned above, in order to improve cash flow the company will not be paying a dividend (2007: £121,267)

With these and other measures as necessary in place, the Board believes that the company will be in a much stronger position going forward.

Repositioning Wren in the Marketplace

In my statement for our interim results dated 30 April 2008, I explained the importance of our focus on the second generation of retirement living, "Extra Care" (defined by the Government as being positioned between traditional retirement homes and nursing homes), as a step closer towards the provision of a wider range of services to support the independent elderly so that they may continue to live for longer in the comfort of their own homes. This sector is now at the forefront of Government thinking because of the benefits it offers to those people who require increasing support but are still able to live an independent life.

Wren's Extra Care developments will enable residents to receive extra care in accordance with changing needs over time and will support them with additional facilities such as 24/7 on-site staffing and care lines, a restaurant, a lounge/conservatory, a coffee bar, activities room, salon and treatment room, a laundry and other complementary support facilities.

Work in Progress 

Wren has recently commenced the building works of its first Extra Care development at its second site at Warlingham in Surrey which will comprise 54 units. This building will be completed in Spring 2010. It is encouraging that since building commenced in early November 2008, 110 people have registered their interest in buying a unit in this development. Wren hopes to have a register of 500 interested parties by the time the building is completed.

I am also pleased to report that planning permission for a development of 53 Extra Care units has been granted at our site at Crowborough and it is our intention to commence construction there as soon as possible. Other planning consents are expected in the near future.

Capital Investment

Towards the end of October 2008, a successful property developer, Dominic Wainford, confirmed the inherent potential of Wren by investing £4m in the company, in accordance with the terms of the agreement ratified by the EGM on 31 October 2008. It gives me great pleasure to welcome Mr Wainford to our Board and his experience will be invaluable as Wren expands its activities in the coming months and years.

Bank support

The Group's Bank has confirmed that it intends to continue its banking and financing relationship with Wren Homes and at the time of writing sees no reason why existing loans cannot be renegotiated and extended, with sufficient facilities made available to support the company. As per the normal course of business, the Banking facilities will be subject to approval by the Bank's Credit Committee.

Going Concern 

As set out in the notes to the consolidated financial statements, the group's working capital facility and loan agreements are currently being renegotiated with the bankers. The Directors, after making appropriate enquiries, as described in note 2 to the preliminary announcement, believe that the Group, with the renegotiated loans and facilities, has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in the preparation of the Financial Statements.

Outlook and Prospects

At the time of writing, we are faced by a very difficult and challenging market which is in a constant state of change. Notwithstanding this, Wren is making steady progress and is positioning itself so that it can most effectively weather the storm and also capitalise on any improvements in market conditions when they arise. 

The Board is confident that the new business strengthening measures outlined above, together with planned developments, will substantially improve the company's outlook and prospects.

In addition, Wren has continued to acquire sites under option and the Group has a substantial and growing "virtual" land bank, which underpins the confidence your Directors have in Wren's future as an Extra Care developer.

 

Wren has an intentionally lean, dedicated and effective team of staff and I thank them for their loyalty and conscientious work during these difficult times, which will undoubtedly have its rewards for the company in the coming years.

B Nathan

Chairman

30 January 2009

 

Wren Homes Group Plc

Consolidated Income Statement (unaudited)

For the year ended 31 July 2008

		Year ended 31 July 2008	Year ended 31 July 2007
	Note	£	£
Revenue		84,000	2,218,000
Cost of sales		(141,255)	(872,312)
Gross(loss)/profit		(57,255)	1,345,688
Administrative expenses		(1,178,471)	(851,502)
(Loss)/profit from operations		(1,235,726)	494,186
Net loss from fair value adjustment	4	(10,000)	-
Investment income		161,253	322,889
Finance cost		(38,578)	(57,941)
(Loss)/profit before tax		(1,123,051)	759,134
Income tax charge		212,914	(224,000)
(Loss)/profit for the year from continuing operations		(910,137)	535,134
All attributable to equity holders of the parent
(Loss)/earnings per share
Basic	3	(2.23)p	1.42p
Diluted	3	(2.23)p	1.42p

Wren Homes Group Plc

Consolidated Balance Sheet as at 31 July 2008 (unaudited)

			31 July 2008	31 July 2007
	Note		£	£
Non-current assets
Goodwill	6		3,135,203	3,135,203
Investment property	4		230,000	240,000
Property plant & equipment			194,214	75,248
Trade & other receivables			2,675,000	2,675,000
Total non-current assets			6,234,417	6,125,451
Current Assets
Inventories			6,932,160	2,435,571
Trade & other receivables			1,035,384	2,315,489
Cash & cash equivalents			80	902,665
Total current assets			7,967,624	5,653,725
Total Assets			14,202,041	11,779,176
Current Liabilities
Trade payables			365,474	262,507
Tax liabilities			122,327	866,393
Obligations under finance leases			35,497	53,361
Other payables			286,639	77,073
Bank overdrafts and loans			5,352,340	1,577,415
Total current liabilities			6,162,277	2,836,749
Non-current liabilities
Obligations under finance leases			128,741	-
Total liabilities			6,291,018	2,836,749
			7,911,023	8,942,427
Equity
Issued share capital			4,042,238	4,042,238
Share premium account			3,751,365	3,751,365
Capital redemption reserve			98,028	98,028
Retained earnings Total equity attributable to equity holders of the parent			19,392 7,911,023	1,050,796 8,942,427

 

Wren Homes Group Plc

Consolidated Statement of Changes in Equity (unaudited)

For the year ended 31 July 2008 

	Share Capital £	Share Premium £	Capital Redemption Reserve £	Retained Reserves £	Total £
Balance at 1 August 2007	4,042,238	3,751,365	98,028	1,050,796	8,942,427
(Loss) for the year	-	-	-	(910,137)	(910,137)
Payment of dividends	-	-	-	(121,267)	(121,267)
Balance at 31 July 2008	4,042,238	3,751,365	98,028	19,392	7,911,023

	Share Capital £	Share Premium £	Capital Redemption Reserve £	Retained Reserves £	Total £
Balance at 1 August 2006	3,306,933	2,104,763	-	616,738	6,028,434
Profit for the year	-	-	-	535,134	535,134
Issue of shares	833,333	2,166,667	-	-	3,000,000
Share costs	-	(504,999)	-	-	(504,999)
Capital reduction	(98,028)	-	98,028	-	-
Capital reduction cost	-	(15,066)	-	-	(15,066)
Payment of dividends	-	-	-	(101,076)	(101,076)
Balance at 31 July 2007	4,042,238	3,751,365	98,028	1,050,796	8,942,427

Wren Homes Group Plc

Consolidated Cash Flow Statement (unaudited)

For the year ended 31 July 2008

		2008		2007
	Note	£		£
Cash flows from operating activities	5	(4,659,725)		(1,343,360)
Investing activities
Interest received		161,255		322,889
Interest paid on loans and bank overdrafts		(42,362)		(20,357)
Interest paid on development loans		(8,606)		(44,228)
Other interest paid		12,390		(37,584)
Purchase of tangible assets		(153,431)		(20,800)
Cash flows from investing activities		(30,755)		199,920
Financing activities
New bank loans		3,209,364		519,985
New hire purchase agreements		136,853		-
Directors loan		23,360
Other loans  repaid		-		(501,737)
Bank loans repaid		(235,974)		(269,088)
Hire purchase repayments		(25,976)		(10,535)
Share issue		-		2,479,935
Dividends paid		(121,267)		(101,076)
Cash flows from financing activities		2,986,360		2,117,484
Net increase/(decrease) in cash and cash equivalents		(1,704,120)		974,044
Cash and cash equivalents brought forward		741,044		(233,000)
Cash and cash equivalents carried forward		(963,076)		741,044

   

Wren Homes Group Plc

Notes to the Consolidated Financial Statement

For the year ended 31 July 2008 

1. Financial information

The financial information set out in this announcement does not constitute the Group's statutory accounts for the years ended 31 July 2008 and 2007. 

The accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use by the European Union.  Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, it does not include sufficient information to comply with IFRS. The Group expects to publish full financial statements which comply with IFRS on 30 January 2009.

The financial information has been prepared under the same accounting policies as the Group's interim announcement for the period ended 31 January 2008 and which can be viewed on the Group's website at www. wrenhomesplc.co.uk.

The comparative financial information for the year ended 31 July 2007 is derived from the statutory accounts for the year ended 31 July 2007. The statutory accounts for the year ended 31 July 2007 have been delivered to the Registrar of Companies. The auditors have reported on the 2007 accounts; their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 

The auditors have yet to sign their report on the 2008 accounts. The auditors opinion on the consolidated financial statements for the year ended 31 July 2008 will include two emphases of matter, The first relates to Wren's ability to continue as a going concern as detailed in note 2 below. The second relates to the uncertainty of the forecasts prepared for the goodwill annual impairment test as disclosed in note 6 below. The statutory accounts for the year ended 31 July 2008 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and on events which take place between the date of this preliminary announcement and the date of finalising the statutory accounts and will be delivered to the Registrar of Companies following the company's Annual General Meeting. The financial information set out in this announcement was approved by the Board of Directors on 30 January 2009.

2. Going concern

The Directors have projected cash flow information for the period to April 2010. In preparing these cash flows, the Directors are assessing on a regular basis the sales activity and costs of the business. On the basis of this cash flow information, the Directors are of the opinion that a working capital facility and development bank loans are required to fund new developments and running costs. In addition, there are loans and overdraft facilities of £5,383,658 which are due for renewal during the ensuing year. The group is currently renegotiating the facility and loans with the bank and has correspondence from the bank indicating that the bank is expecting to continue its banking and financing relationship with the Group and that at the time of writing, saw no reason why existing loans could not be renegotiated and extended, with sufficient facilities made available to support the company, subject to approval by the Bank's Credit Committee.

The financial statements have been prepared on the going concern basis. This basis of preparation relies on the successful outcome of the renewal of the working capital facility and loans. The directors are confident of a successful outcome. Accordingly the directors consider that the going concern basis for the preparation of the consolidated financial statements is appropriate.

Wren Homes Group Plc

Notes to the Consolidated Financial Statement

For the year ended 31 July 2008 

3

Earnings per Share

			Basic (loss)/earnings per share
			The calculation of basic (loss)/earnings per share for the years ended 31 July 2008 and 31 July 2007 have been determined as the net profit after tax divided by the weighted average number of equity shares in issue in the year.
						2008	2007
			Net profit attributable to ordinary shareholders			(910,137)	535,134
			Number of ordinary shares
			Issued ordinary shares at the beginning of the year			40,422,387	32,089,054
			Issue of shares in the year			-	8,333,333
			Issued ordinary shares at the end of the year			40,422,387	40,422,387
			Weighted average number of ordinary shares
			Issued ordinary shares at the beginning of the year			40,422,387	32,089,054
			Issue of shares part way through the year			-	5,570,776
			Weighted average number of ordinary shares during the year			40,422,387	37,659,830
			Basic (loss)/earnings per share			(2.23)p	1.42p
		Diluted (loss)/earnings per share				(2.23)p	1.42p
	Earnings per share requires presentation of diluted loss per share when a company could be called upon to issue shares that would decrease net profits or increase net loss per share. For a loss making company with outstanding share options, net loss per share would only be decreased by the exercise of out-of-the-money share options. No adjustment has been made to diluted loss per share for out-of-the-money share options and there are no other diluting future share issues, therefore diluted loss per share is identical to the basic loss per share.

Wren Homes Group Plc

Notes to the Consolidated Financial Statements

For the year ended 31 July 2008

4 Investment Property
Fair value	£
Balance at 1 August 2006 and 2007	240,000
Impairment charge	(10,000)
Balance at 31 July 2008	230,000
Investment properties have been valued on 31 July 2008 at fair value at an open market value basis. An impairment charge has been made in the year of £10,000 to reflect the decrease in the value of the property.  The property rental income earned by the group from its investment property, which is leased out under an operating lease, amounted to £10,992 (2007: £10,250). Direct operating expenses arising on the investment property in the period amounted to £10,392 (2007: £26,449).

5 Cash flow statement
Reconciliation of operating (loss)/profit to cash flows from operating activities
		31 July 2008	31 July 2007
		£	£
(Loss)/profit from operations		(1,235,726)	494,186
Depreciation of tangible assets		34,465	17,782
Development loan interest included in cost of sales		-	44,228
(Increase)/decrease in work in progress		(4,496,589)	(1,202,631)
Decrease/(increase) in receivables		1,294,055	(958,017)
Increase/(decrease) in payables		269,099	261,092
Net cash (outflow)/inflow from operating activities		(4,134,696)	(1,343,360)
Income tax paid		(525,029)	-
Cash flows from operating activities		(4,659,725)	(1,343,360)

6	Wren Homes Group Plc Notes to the Consolidated Financial Statements For the year ended 31 July 2008 Goodwill	£
	Cost
	At 1 August 2007	3,420,221
	At 31 July 2008	3,420,221
	Accumulated amortisation:
	At 1 August 2007	285,018
	At 1 July 2008	285,018
	Net book Values
	At 31 July 2008	3,135,203
	At 31 July 2007	3,135,203
	The group conducts annual impairment tests of the carrying value of goodwill, based on the recoverable amount of the cash generating unit (CGU), of which the Group only has one.  The recoverable amounts for the cash-generating units are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect the current market assessments of the time value of money and the risks specific to the cash-generating unit. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. The group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next five years and extrapolates cash flows for the following five years based on the development of the company's property portfolio. This rate does not exceed the average long term growth rate for the relevant markets. The approved cash flow projections in the three financial years following this year reflect management's expectation of the performance of the CGU and growth prospects in the Extra Care retirement sector.  Whilst these cash flows do show the value in use is in excess of the carrying value of the goodwill, there are uncertainties as to the assumption used in the calculation and to the performance of the business and developments due to the current economic environment. Amortisation charge In accordance with IFRS, the goodwill arising on consolidation has not been amortised since the opening balance sheet date for IFRS implementation of 1 August 2005.

 

Wren Homes Group Plc

Notes to the Consolidated Financial Statements

For the year ended 31 July 2008

 

7	Post balance sheet events
	The following events have taken place since the balance sheet date
a)	Issue of 10p ordinary share
	Date	Number	Issue price	Proceeds
	31 August 2008	1,500,000	10p	150,000
	31 October 2008	10,000,000	10p	1,000,000
	03 November 2008	500,000	11p	55,000
b)	Convertible loan note
	On 31 October 2008 a £3,000,000 convertible loan note was issued. The loan is for five years and bears interest at 5 % and can be converted at any time prior to repayment by the holder.
c)	Share options
	On 7 August 2008 share options were granted to the directors and certain key employees to subscribe for a total 3,000,000 shares at a price of 15p. The share price at the date of the grant was 15p The options are exercisable between 7 August 2008 and 7 August 2018. The 10,000,000 shares granted on 31 October 2008 were granted to D Wainford and the 500,000 shares granted on the 3 November 2008 were a share conversion by P Treadaway.  The convertible loan note of £3,000,000 was issued to D Wainford.

 

 

  

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