Business review, results and dividends

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, presented on the basis of accounting, are shown below. The Consolidated loss for the year amounted to £298,397 (2016: Profit £204,877).

Principal risks & uncertainties

Set out below are certain risk factors which could have an impact on the Group's long-term performance. The factors discussed below should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties facing the Group.

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.

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-house professionals of a high unproductive overhead at times when activity is slack.

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 of staff enabling adequate cover when needed.

Operations review

A summary of the results for the year is as follows:-

Group turnover for the year amounted to only £30,000, representing the sale of three parking spaces at the Borough Green site which were pending at the last year end and which were finalised during the year under review.

There were no house sales recorded during the year and, after taking into account the overheads of the Group, there was a loss recorded for the year of £298,397.

There will be no tax charge and the Company now has tax losses being carried forward of £ 2,223,878

(2016: losses £ 1,926,708).

The loss per share is (0.12p) compared to the earnings per share of 0.09p recorded for the year ended 31 March 2016.

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.

Development Pipeline

At the end of the year ended 31st March 2016, the Group had contractors on sites at Burnside, Tunbridge Wells, Kent (6 luxury apartments); High Street, Edenbridge, Kent (terrace of three houses); and Vines Lane, Hildenborough, Kent (two executive detached houses).

In addition, the Group reported that we had commenced work at the site at Sheerness, Kent for six houses which had been owned by the Group for some time and that we had acquired a further site for development, being the site in Speldhurst, Tunbridge Wells, Kent with the benefit of planning permission for the demolition of the existing property and the erection of a substantial new build detached house on the site.

I can confirm that, as at the date of this report, we have completed the construction work of the terrace of three houses at Edenbridge, Kent and they are being marketed for sale.

Work on the six apartments at Burnside, Tunbridge Wells, Kent are substantially complete, with us dealing only with snagging items at the present time, to achieve Building Control sign-off before fully marketing the site for sale (it is pleasing to note that we already have a reservation on the penthouse at a figure very close to the asking price of £600,000 which, in turn, is greater than we anticipated at the outset).

The detached house at Speldhurst, Tunbridge Wells is 70% complete and our contractor has confirmed to us that the house will be finished and ready for occupation by the end of September 2017.

I am able, therefore, to confirm that twelve units, involving a mix of detached houses/apartments/terraced houses, for which we are aiming to achieve a gross development value on sale of circa £7 million, will all be complete and ready for marketing for sale during September. Hence, I anticipate a sale of most of these units prior to the 31st March 2018 year end.

In addition, the development of the site at Sheerness, Kent continues and we anticipate completion of the construction work on the site before the end of the current financial year and it is hoped sales of some of the units would have been achieved by 31st March 2018.

The Directors are confident that the current financial period will show an upturn in the fortunes of the Group.

The site at Staplehurst, Kent

Last year I reported on the refusal of the Planning Application we submitted for residential development on this site. Having taken advice and considered the position, we propose to continue seeking planning permission for development of this site. We are fortified by the advice received that this site should be able to accommodate an Assisted Living (Extra Care) Scheme which could provide up to 30 units on the front half of the site (for which we have been seeking planning permission for residential development) together with ancillary support buildings, to provide an Extra Care Assisted Living facility which is so sorely needed at the present time, not only in the area in which we operate, but in the country as a whole.

Your Group is taking advantage of the fact that the 'Extra Care' and 'Very Sheltered/Assisted Living' sectors are expected to grow significantly as the population of older people in the UK is expected to increase from 10.3 million in 2010 to 28 million by 2035. The proposed development at Staplehurst 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-specialised homes.

It is believed that our application, when submitted, will find favour with the Planners and that Planning Permission will be granted accordingly.

Future Development

The Company is not short of opportunities to acquire sites for residential development in its chosen area of operation. However, it is not prepared to pay prices for land which are unrealistic and which would severely erode margins. Hence, the Group will be selective in its choice of offers to be made on sites that present themselves.

Currently it has an offer accepted for a nine unit site in the South of England, comprising two/three and four bedroom houses and is investigating various sites in Kent and East Sussex, to purchase during the current financial year, which should contribute to revenue for the year ended 31st March 2019.

Outlook

The Company is confident that the development programme, referred to above, will deliver improved results for the Group for the year ended 31st March 2018.

Looking ahead and during the current year, the Company 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 for the year ended 31st March 2019 and beyond.

As has been mentioned before, Trafalgar New Homes, remains focused on growing the Group, both through site acquisition and development and corporate acquisitions, to enable value to be created for the shareholders and for a dividend to be paid by the Group when appropriate.

Banking

The Group continues to utilise banking sources for the financing of its developments, together with loans from third party investors, to ensure that there is sufficient money available for the Group to undertake and complete its various developments.

We do not operate an overdraft facility but borrow on a site specific basis from our various bankers, with a mix of loans from outside investors geared to some of the development properties and otherwise loaned on a general basis to the Group.

The Board is comfortable with the structure of its bank finance, which usually involves the bank lending a modest sum towards the land purchase, with the Group putting the rest of the funds required to acquire the site and the costs associated with the acquisition and then for the Bank to provide 100% of the build finance. These are the arrangements that have been entered into with Coutts and Lloyds who lend to the Group at very competitive rates.

The Group have also used RateSetter as a funder who, again, provided 100% of the build finance on the Burnside, Tunbridge Wells site, the Group having paid off the borrowing on the land prior to entering into the arrangement with RateSetter for the development of that site.

Investor loans that are not related to specific sites are long term loans with repayment dates extending beyond the year end and have, in the past, been renewed when they come up for repayment.

Hence, in general terms, the Group is happy with its financial support afforded to it by its banks and investors, enabling it to trade without a general overdraft facility.

I will continue to support the Group, leaving my own loan to the Group outstanding and taking no interest on it for the year to 31 March 2017.

Financial Instruments

The Group's principal financial instruments comprise cash at bank, bank loans, other loans and various items within current assets and current liabilities that arise directly from its operations. The Directors consider that the key financial risk is liquidity. This risk is explained in the Section headed 'Principal risks and uncertainties in the Annual Report and Accounts'.

Christopher Johnson

Director

6 September 2017