MAR Mar City

TIDMMAR

RNS Number : 5168F

Mar City PLC

20 February 2015

MAR CITY PLC

("Mar City", the "Group" or the "Company")

Update on debtor position and proposed property acquisitions

Trading update

Mar City (AIM: MAR.L) the London and Midlands focused housebuilder today provides an update on the repayment of the net debtor balance owed to Mar City by Mar City Developments Limited ("MCDL") (a related party controlled by Tony and Maggie Ryan, both directors of the Company), a number of proposed property acquisitions and an update on profit guidance for the year to 31 December 2014.

Update on debtor position and proposed property acquisitions

The Company announced in its interim results statement released on 16 September 2014, that the net debtor balance (excluding the unchanged GBB funding liability) owing from MCDL was GBP31.2 million as at 30 June 2014 (the "MCDL Debt"), mainly comprising of balances owed in respect of the JCT contract for the development of the 103 apartment development site at Colindale, North London.

The latest MCDL Debt balance (following cash repayments of GBP10.0 million expected to be received next week) is approximately GBP19.5 million. This balance is expected to be reduced by way of set off by approximately GBP14.5 million, being the consideration the Group will pay, through the acquisition of property assets from MCDL (the "Proposed Property Acquisition"). The consideration (and therefore the reduction in the MCDL Debt) will be adjusted subject to current planning applications being applied for and liabilities attaching to the properties. Independent valuations are currently being undertaken on the properties to be acquired to establish fair value.

It has been further agreed, that any remaining MCDL Debt balance (excluding the GBB funding liability), post completion of the Proposed Property Acquisition, will be eliminated by 31 December 2015.

The Proposed Property Acquisition is expected to comprise (a) two development sites, and (b) several Colindale assets including a number of residential units, the food retail space and the freehold interest which will all be acquired by Mar City for re-sale on the open market. The Colindale site is expected to reach practical completion by June 2015, including the 79 units pre sold to Sanctuary Housing Association and a further 24 open market units. The Proposed Property Acquisition will constitute a related party transaction pursuant to AIM Rule 13 and the Companies Act 2006. As a result, the independent directors of Mar City will consult with the Company's Nominated Adviser regarding the fairness and reasonableness of the terms of the transaction. In addition, a circular must be sent to shareholders seeking their approval for the transaction. The circular, which is expected to be sent to shareholders in March 2015, will convene a general meeting seeking independent shareholder approval for the Proposed Property Acquisition.

Trading update

Following an internal review conducted by the board of Mar City of the application of the Company's accounting policies, it is now expected that the Group's profit before tax for the year ended 31 December 2014, will be approximately GBP6.3 million. The full year results will therefore be substantially below market expectations and not in line with market expectations as announced on 28 January 2015.

The adjustment to the expected profit before tax result is due to a review of profit recognition associated with the following:

-- the holding value of completed residential properties, built by the Company, in a Private Rental Sector ("PRS") portfolio. These properties (a portfolio of 83 residential units) were to be retained by the Company and therefore recognised and revalued as investment properties, with a total revaluation profit of GBP3.5 million in the year to 31 December 2014. The board has now decided that the benefit of retaining these units is not likely to be as significant as the benefit from selling the PRS portfolio for cash and has decided to market the units for sale. As a result, the benefit to 31 December 2014 results from the revaluation as investment properties will not be received, and any profit from their sale will be recognised only on legal completion of sales in the future. The board is confident that the majority of these units to be sold in the financial year to 31 December 2015; and

-- the treatment of contractual income to be received by the Company from forward sale agreements on two housing sites upon which the Company is currently contracted to develop. The review the board conducted has concluded that given the progress on each of these sites to date, the profit recognised on these contracts should be reduced to be in line with the build and delivery status of both sites, which had been inappropriately reflected in the profit guidance provided in the 28 January 2015 Trading Update. The board expects the profit from these sites to be recognised during the financial year to 31 December 2015 and onwards.

In light of the above adjustments following the internal review, the board of Mar City will be conducting a full assessment of the Company's procedures regarding announcements and their verification which is currently being arranged.

Notwithstanding the above adjustments, the Company is operating within its banking covenants and has sufficient headroom to fund its development pipeline. Given market conditions and the high demand for its affordable housing product the board remains confident of growth and progress for the coming year. The Directors believe that net asset value of the Company as at 31 December 2014 will be at least as high as the net asset value reported for the period ended 30 June 2014 being GBP68.3 million. The board will update shareholders on this progress, as well as the results of its internal assessment on procedures when the Company releases its final results, which will now be announced in late April 2015.

Ends.

 
 Enquiries: 
 
 Mar City PLC                        www.marcityplc.com   www.marcityhomes.com 
 Tony Ryan, Chief Executive                               +44 (0) 20 7408 1102 
 
   Shore Capital, NOMAD and Joint                           www.shorecap.co.uk 
   Broker 
 Pascal Keane / Jamie Cameron                              +44 (0)20 7408 4090 
 
 WH Ireland Limited, Joint Broker                         www.wh-ireland.co.uk 
 Mike Coe                                                 +44 (0) 117 945 3470 
 
 Gable Communications                          marcity@gablecommunications.com 
  John Bick                                               +44 (0) 20 7193 7463 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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