Business review, results and dividends
The Company changed its name from Trafalgar New Homes Plc to Trafalgar Property Group Plc on 16 March 2018.
1. The Group acquired Beaufort Homes Limited (now Trafalgar Retirement + Limited) on 19 March 2018 for £ 1,531,814.
2. Trafalgar Property Group Plc is a holding company owning the entire share capital of Trafalgar New Homes Ltd formerly Combe Bank Homes Limited), a regional property developer based in the South East of England, and Trafalgar Retirement + Limited (formerly Beaufort Homes Limited), a property developer in the assisted living and extra care for the elderly sector.
All trading and property assets of Trafalgar Property Group Plc are held in the name of Trafalgar Property Group Plc or its subsidiaries as follows:
Trafalgar New Homes Limited
Combe Bank Homes (Oakhurst) Limited
Combe Homes (Borough Green) Ltd
All bank and mortgage borrowings are the liability of Trafalgar New Homes Ltd, the wholly owned subsidiary of Trafalgar Property Group Plc. The shares of Trafalgar Property Group Plc are quoted on the London Stock Exchange AIM market.
The principal activity of the Group continues to be that of home building and property development and the consolidated results of the year's trading, are shown below. The consolidated loss for the year amounted to £424,903 (2017: Loss £298,397).
Principal risks & uncertainties
Set out below are certain risk factors which could have an impact on the Group's long-
The principal risks and uncertainties facing the Group are:
1. Any possibility that lending criteria from the Group’s bankers may harden with little prior notice.
2. Construction costs may escalate and eat into gross profit margins.
3. Heavy overheads may be incurred especially when projects have been completed and before others have been commenced.
4. The Group could pay too much for land acquisitions.
5. The Group’s reliance on key members of staff.
6. The market may deteriorate, damaging liquidity of the group and future revenues.
The Group considers that it mitigates these risks with the following policies and actions:
1. The Group affords its bankers and other lenders a strong level of asset and income cover and maintains good relationships with a range of funding sources from which it is able to secure finance on favourable terms.
2. Construction costs are outsourced on a fixed price contract basis, thereby passing on to the contractor all risk of development cost overspend, including from increased material, labour or other costs.
3. Most other professional services are also outsourced, thus providing a known fixed cost before any project is taken forward and avoiding the risk that can arise in employing in-
4. Land buying decisions are taken at board level, after careful research by the Directors personally, who have substantial experience of the house building industry, potential construction issues and the local market.
The Group focuses on a niche market sector of new home developments in the range of 4 to 20 units. Within this unit size, competition to purchase development sites from land buyers is relatively weak, as this size is unattractive to major national and regional house builders who require a larger scale to justify their administration and overheads, whilst being too many units for the smaller independent builder to finance or undertake as a project. Within this market, there are opportunities to negotiate land acquisitions on favourable terms. Many competitors who also focus on this niche have yet to recapitalise and are unable to raise finance.
5. Many of the activities are outsourced and each of the Directors is fully aware of the activities of all members.
6. The Group has a rigorous corporate governance policy appropriate for a publicly quoted company with ambitions substantially to raise its profile within the wider investor community.
A summary of the results for the year is as follows:-
Group turnover for the year amounted to £906,484, representing the sale of two residential properties.
After taking into account the overheads of the Group, there was a loss recorded for the year of £ 424,903.
There will be no tax charge and the Company now has tax losses being carried forward of £ 2,642,077 (2017: losses £ 2,223,878)
The loss per share is (0.10p) compared to the loss per share of (0.12p) recorded for the year ended 31 March 2017.
As can be seen from the above, the Group failed to achieve a profit for the year under review and, as at the year end, only two of the residential units developed during the year have been sold, being the penthouse apartment at the Burnside Tunbridge Wells, Kent development and one of the terraced houses at the Edenbridge, Kent development.
Whilst construction on three of the sites (at Burnside, Edenbridge and Hildenborough Kent) was well advanced at the end of March 2017, the contractor on those sites failed to complete the works outstanding under the JCT Contract and had to be replaced by an alternative contractor. The time taken for the work to be completed took longer than envisaged and additional works needed to be carried out to some of the houses to comply with the requirements of Building Regulations and Building Warranty providers, which further delayed the developments.
These delays in turn prevented the marketing of the properties until later this year resulting in only two of the completed units completing sales at the year end.
Key performance indicators (KPIs)
Management are closely involved in the day to day operations of the Group and are very aware of cashflows and expenditure. However, Management believe that the key indicators of performance for the group are the revenue and profitability achieved during the period. These measures are disclosed above in the operations review.
At the date of this report I am pleased to confirm that sites at Burnside (6 apartments), and Edenbridge (three terraced houses) are all now constructed with Building Regulations signed off and Build Warranties issued.
Indeed, sales have been achieved on all houses at Edenbridge, one of the flats at Burnside (following on from the penthousepre the year end), and one of the detached houses at Hildenborough. There are purchasers interested in the remaining house at Hildenborough and the flats at Burnside, so we are confident that sales will be achieved during the current financial year.
In addition, the substantial detached house being developed at 'Saxons', Speldhurst, Tunbridge Wells is completed and ready to be marketed for sale. We are confident we will achieve a price in excess of that originally anticipated, due to the increase in the square footage by obtaining planning permission for an additional floor, increasing the square footage of the property to some 4,000 square feet. Marketing is due to commence in September.
Work is ongoing at our site in Sheerness Kent (terrace of six houses) and it is anticipated that build work will be complete and the properties marketed for sale by end of November this year. These 'first time buyer' two bedroom houses should attract purchasers able to take advantage of the Government's 'Help to Buy' initiative so we anticipate early sales being achieved.
We expect that the majority of those 16 units will be sold prior to 31 st March, 2019 and therefore make a significant contribution to revenue for the current financial year.
Acquisitions & Future Developments
In previous years I have mentioned that the Group has focused on growth through not only residential developments on sites acquired but also through corporate acquisition.
I am very pleased to report that the Group has acquired a newly established Company engaged in the Extra Care/Assisted Living development market. This exciting acquisition was through a share for share exchange with the Group issuing 186,815,190 new Ordinary Shares to the two shareholder Directors of the Company and the Company has now become a wholly owned subsidiary of Trafalgar Property Group plc (formerly known as Trafalgar New Homes plc) and has changed its name to Trafalgar Retirement + Ltd (TR+) to augment and continue the 'Trafalgar' brand. Further details relating to this acquisition can be found in Note 18 to the accounts.
TR+ will focus on development of Assisted Living schemes in the South East of England, giving a change in strategic focus for the Group with a view to capitalising on the burgeoning demands for retirement properties, in particular in the Assisted Living sector.
Your Group is taking advantage of the fact that the 'Extra Care' and 'Very Sheltered/Assisted Living' sectors will grow significantly as the population of older people in the UK is expected to increase from 10.3m in 2010 to 28m by 2035. Proposed future developments will come with communal areas and a range of social and recreational activities to promote health and happiness. These are key attributes compared to non-
TR+ is focusing on the M25 region, the affluent area of South West London, Kent and Surrey and is securing undeveloped land through Option Agreements.
TR+ will target the development of Extra Care/Assisted Living properties for elderly 70+ owner occupiers and the focus is on the South East of England which has been the lead in the trend for senior tenancy.
Development which can be implemented in both urban and suburban locations is on the 'Assisted Living/Extra Care' operating model, providing independently owned apartments and houses with long leasehold ownership (service charges to cover the cost of domiciliary services) and additional care services being provided through a 24/7 on site care operator.
TR+ has negotiated and entered into a number of Options Agreements to acquire land for development on a Planning C2 Use basis as Extra Care/Assisted Living schemes. The individual sites typically comprise schemes of units of 2/3 bedroom accommodation of between 50 and 80 in number. The operation is based in Esher, Surrey and the land, the subject of the Option Agreements already entered into, is located in Surbiton, Chessington and Woking, Surrey and Maidstone, Kent.
Further negotiations on the acquisitions of other sites by way of Option Agreements are in the process of being finalised.
A Memorandum of Understanding (MOU) has been entered into with a Paris based fund for the potential to provide 100% of the finance for the developments, on a Joint Venture basis, with the fund taking a 10% IRR from the developments and then a profit share of 40% of the first £2m profit and 25% of all profit over £2m thereafter, with the Group taking the remaining 60% and 75% of profit respectively.
The design, planning and construction process is all outsourced on a fixed price basis.
The acquisition of TR+ is regarded as transformational for the Group which will now concentrate on furthering its growth and profitability in the Extra Care/Assisted Living sector through the acquisition of Option Agreements on sites suitable for such developments and the purchase and development of those sites once planning permission is granted.
With the MOU with the fund in place for potential funding and with the interest being shown by other potential funders, your Group is set fair to achieve rapid growth in this exciting sector of the residential development market.
The Group is confident that the development programme, referred to above, can deliver improved results for the Group.
Looking ahead and during the current year, the Group will continue its negotiations for the purchase of other sites in the South of England, its chosen area of operation, which will contribute to turnover for the Group in the future.
As has been mentioned before, the Board of Trafalgar Property Group, remains focused on growing the Group, both through site acquisition and development and corporate acquisitions, to enable value to be created for shareholders and for a dividend to be paid by the Group when appropriate.
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Annual report & consolidated financial statements 2018
Revenue for the year
(Loss)/profit after taxation