J. SMART & CO. (CONTRACTORS) PLC

INTERIM REPORT

FOR THE SIX MONTHS TO

31st JANUARY 2021

INTERIM REPORT

Unaudited Group profit for the six months to 31st January 2021 amounted to £829,000 compared with £250,000 for the corresponding period last year.

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 remaining private housing sales at West Bowling Green Street completed in this half year. There will be no further private housing sales this financial year as completions at the small development, The Courtyard at Winchburgh, will be after the end of the financial year.

The build contract at Ferrymuir completed in this half year. Margins were unsatisfactory.

The third and final phase of industrial development at West Edinburgh Business Park has now completed and a letting to one tenant for the whole phase concluded. Letting activity in both our industrial and office properties remained robust in the half year.

The coronavirus pandemic has continued to impact on trading activities. Whilst our construction sites have remained open, the majority of office-based staff have been working from home since January 2021 in line with legislation and guidance. Moreover, the coronavirus crisis has caused delays in the progress of site acquisitions, negotiated tender work in the Housing Association sector and our own projects. Also, the crisis has impacted on the supply chain with prolonged lead in times for basic construction materials. In this half year there has been a marked increase in the prices of these materials which has hampered negotiations for tender work.

This lull in contracting work and new private housing work continues and will result in an erosion of profit due to lack of recovery of overhead costs.

INTERIM DIVIDEND

The Board announces an interim dividend of 0.95p per share (2020, 0.95p) to be paid on 7th June 2021 to shareholders on the register at the close of business on 7th May 2021.  The interim dividend will cost the Company no more than £401,000.

FUTURE PROSPECTS

We have substantially less work in hand in contracting than the same time last year. It is by no means certain that new contracting work will be secured this financial year due to general delays caused by the coronavirus pandemic.

As mentioned above, there will be no further private housing sales this financial year. We are hopeful that the private housing development at Canal Quarter, Winchburgh will commence this financial year but that is by no means guaranteed.

Commercial property valuation levels have continued to improve since last year in the industrial sector but have remained static in the office sector.  Also, as mentioned above, lettings of both our industrial and office stock remain robust, albeit we expect to see some voids in our office properties due to consolidation by tenants. The third and final phase of speculative industrial development at Inchwood Park, Bathgate is due for completion imminently with interest at a promising level. Construction has commenced at the second phase of our joint venture industrial development at Gartcosh Business Park.

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

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 2021 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 2021 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34: Interim Financial Reporting as adopted by the European Union. 

The condensed consolidated interim financial statements for the six months to 31st January 2021 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 2020, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

The statutory financial statements for the year to 31st July 2020 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, available for sale 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 2020, 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 2021:

·    IAS 1 (amended): Presentation of financial statements.

·    IAS 8 (amended): Accounting Policies, Changes in Accounting Estimates and Errors.

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 reviewed their forecasts and cashflows taking into account current available information. They have considered future trading expectations and opportunities under various scenarios and in light of the ongoing coronavirus pandemic. Based on the review the Group is expected to remain net debt free. Taking the above information into account the Directors are of the opinion 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 considers the adoption of the going concern basis as appropriate for the preparation of these Accounts.

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 2020, 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

The Group has identified operating segments on the basis of internal reporting components that are regularly reviewed by the chief operating decision maker to allow the allocation of resources to segments and assess their performance.  The Board of Directors has been recognised as the chief operating decision maker.

All revenue 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 2021 is based on the corporation tax rate at 19.00% (2020, 18.67%).

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 final dividend of 2.27p per share for the year to 31st July 2020 amounting to £961,000 was paid on 8th February 2021.

The interim dividend of 0.95p per share for the year to 31st July 2021 will be paid on 7th June 2021 to shareholders on the register at 7th May 2021.  The interim dividend will cost the Company no more than £401,000.

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 2021 the Company purchased for immediate cancellation 321,276 Ordinary Shares of 2p.

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

9.         FAIR VALUE ASSETS

The Group's investment properties, available for sale 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 available for sale 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.       RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOWS FROM

            OPERATING ACTIVITIES

11.       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 2020.

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 2021 have been prepared in accordance with IAS 34: Interim Financial Reporting as adopted by 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 2021 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 2021 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 2020.