TIDMGLE
RNS Number : 0692Q
MJ Gleeson PLC
16 February 2023
16 February 2023
MJ GLEESON PLC
Results for the half-year ended 31 December 2022
-- Net reservations starting to recover | Demand for consented land remains strong
-- Expect to deliver between 1,650 and 1,850 homes in FY2023, subject to pace of recovery
-- Organisational restructuring under way to reinforce strong platform for sustainable growth
Graham Prothero, Chief Executive Officer, commented:
"I am delighted to have taken up my role as CEO and, as I
continue to embed myself in the business, am hugely impressed with
our talented and committed colleagues, our excellent product,
exciting land pipeline and, above all, our team's enthusiasm for
our ethos of "Building Homes. Changing Lives." We have an exciting
opportunity to take Gleeson to the next level by delivering
sustainable growth over the medium-term, across both our Homes and
Land divisions.
At the same time as managing through the lower levels of current
market demand, I want to ensure that the Group is in the best
possible shape to take advantage of the recovery which we are
beginning to see early signs of. Building on the strong platform I
have inherited, my focus is on optimising our organisational
structure and making us more operationally efficient and fit for
further growth. This will also result in significant annualised
savings of circa GBP4 million.
In terms of guidance: confidence, underpinned by improved
mortgage rates, is slowly returning to the market, evidenced by
improving net reservations. With full-year volumes dependent on the
pace of recovery, we now expect to deliver between 1,650 and 1,850
homes."
H1 22/23 H1 21/22 Change
Revenue
Gleeson Homes GBP166.7m GBP150.2m 11.0%
Gleeson Land GBP4.3m GBP23.3m (81.5%)
Total GBP171.0m GBP173.5m (1.4%)
Operating profit by division
Gleeson Homes GBP18.2m GBP22.5m (19.1%)
Gleeson Land GBP1.4m GBP5.5m (74.5%)
Profit before tax GBP16.1m GBP24.7m (34.8%)
Cash net of borrowings GBP13.5m GBP38.2m (64.7%)
ROCE(1) 20.0% 22.9% (290bp)
EPS (basic) 22.0p 34 .4p (36.0%)
Dividend per share 5.0p 6.0p (16.7%)
1 Return on capital employed is calculated based on earnings
before interest and tax and exceptional items (EBIT), expressed as
a percentage of the average of opening and closing net assets for
the prior 12 months after deducting deferred tax and cash and cash
equivalents net of borrowings.
Gleeson Homes:
-- 894 homes sold (H1 21/22: 932), reflecting the lower forward
order book at the start of the year and weaker sales following the
mini-budget
-- Average selling price up 15.6% to GBP186,400 (H1 21/22: GBP161,200)
o Underlying selling prices up 11.2%
-- Operating profit decreased 19.1% to GBP18.2m (H1 21/22: GBP22.5m)
-- Three new sites opened (H1 21/22: eight sites opened)
-- Land pipeline remains strong at 16,561 plots (June 2022: 16,814 plots)
-- Site acquisition, site starts and build activity being
carefully managed to maintain growth ambition as market demand
recovers
-- Restructuring operations to support future growth
Gleeson Land:
-- Senior leadership strengthened with appointment of Guy Gusterson to lead future growth
-- One land sale completed (H1 21/22: three land sales)
-- Three sites in an active sales process (H1 21/22: no sites in
a sales process) with strong levels of demand and pricing remaining
firm
-- A further two sites being marketed (H1 21/22: three sites)
-- Successfully secured planning permission on four sites (H1 21/22: none)
-- One new site added to the portfolio (H1 21/22: three sites added)
-- Portfolio of 71 sites (June 2022: 71 sites)
Current trading and outlook:
-- Net reservations in the last four weeks have doubled from the
low levels seen before Christmas but remain below the levels
typically seen this time of the year
-- The Company has narrowed its full year completions target to between 1,650 and 1,850 homes
A presentation by Graham Prothero, CEO and Stefan Allanson, CFO,
which will also be webcast, will be held at 9:00am today. To attend
virtually:
-- by webcast, access via the following link: https://stream.brrmedia.co.uk/broadcast/63cab7fb777efd4a8b51386d
-- by telephone, please dial-in using the below details:
o Number: +44 (0) 33 0551 0200
o Code: Gleeson Half Year Results
Enquiries:
MJ Gleeson plc Tel: +44 1142 612900
Graham Prothero Chief Executive Officer
Stefan Allanson Chief Financial Officer
Hudson Sandler Tel: +44 20 7796 4133
Mark Garraway Tel: +44 7771 860 938
Charlotte Cobb Tel: +44 7795 422 131
Singer Capital
Markets Tel: +44 20 7496 3000
Shaun Dobson
James Moat
Liberum Tel: +44 20 3100 2222
Richard Crawley
Kate Bannatyne
This announcement is released by MJ Gleeson plc and contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) 596/2014 (MAR), and is disclosed in
accordance with the Company's obligations under Article 17 of MAR.
Upon the publication of this announcement, this information is
considered to be in the public domain.
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055, this announcement is being made on
behalf of the Company by Stefan Allanson, Chief Financial
Officer.
LEI: 21380064K7N2W7FD6434
About MJ Gleeson:
MJ Gleeson plc is the leading low-cost, affordable housebuilder
listed on the London Stock Exchange. Gleeson Homes' customers are
typically young, first-time buyers, with a median income of
GBP26,000. Its two-bedroom homes start from around GBP115,000.
Gleeson's vision is "Building Homes. Changing Lives", prioritising
areas where people need affordable housing the most.
Buying a Gleeson Home typically costs less than renting a
similar property. All Gleeson homes are traditional brick built
semi or detached homes which include a driveway and front and rear
gardens. Gleeson offers a wide mix of two, three and four bedroom
layouts.
Gleeson Land is the Group's land promotion division, which
identifies development opportunities and works with stakeholders to
promote land through the residential planning system.
As a high-quality, affordable housebuilder, Gleeson has strong
and inherent sustainability credentials. Its social purpose
underpins the Company's strategy, and Gleeson measures itself
closely against UN SDGs 5, 8, 11, 12, 13 and 15.
More details on the Company's sustainability approach can be
found at: mjgleesonplc.com/sustainability/
CHIEF EXECUTIVE'S STATEMENT
I was delighted to take up my role as Chief Executive Officer
and, as I continue to visit all our sites and offices, I am even
more impressed with our skilled and committed people, our excellent
product, our exciting land pipeline, and the enthusiasm of the
whole team for our ethos of "Building Homes. Changing Lives."
The Group's result for the first half of this financial year
reflects the challenges posed by the macro-economic environment in
the period, in particular during the second quarter.
Market volatility and the sharp increase in interest rates
following the disastrous mini-budget reduced affordability and
severely impacted buyer confidence, causing a significant slowdown
in demand. Meanwhile, supply chain and inflationary pressures
exacerbated by the war in Ukraine continue to put pressure on
costs, although we are seeing some welcome mitigation in
subcontract rates and certain material prices.
As well as tightly controlling recruitment and working capital
in the current environment, we are making some key changes to our
operating structure to ensure that we are well-positioned to grow
the business as the market recovers . I look forward to discussing
our medium and longer-term plans and targets in detail later this
year.
We are encouraged that signs of a recovery in buyer confidence
are evident, with reduced cancellations and increased gross
reservations in the last four weeks resulting in net reservations
doubling compared to the ten weeks before Christmas 2022. However,
sales rates remain below those typically seen at this time of
year.
Net reservations per site per week
Six weeks to Ten weeks to Four weeks to
mid-September Christmas 10 February
--------------- ------------- --------------
FY23 0.51 0.25 0.50
--------------- ------------- --------------
FY22 0.47 0.43 0.91
--------------- ------------- --------------
Whilst the pace and strength of recovery over the coming months
remains uncertain, having reviewed a number of scenarios, we are
narrowing the range of our full year expectation to between 1,650
and 1,850 homes.
Reviewing our operating structure
In response to the macroeconomic challenges and consequent
impact on sales volumes, the Group has taken a number of defensive
measures focused on managing its working capital and costs. These
include slowing build rates on certain sites in line with demand,
delaying the opening of new sites, maintaining our strong
discipline on land buying and freezing recruitment.
More importantly, we are reorganising the operating structure of
Gleeson Homes to ensure that it is strongly positioned to continue
its growth trajectory in a sustainable manner as market demand
recovers. Six management teams will operate nine operating regions
following the merging of a number of operating teams. The existing
three division structure will be merged into two divisions,
Northern and Central. Regional teams will be aligned onto a single
operating structure, supported by lean and focused central
services.
It is anticipated that these actions will incur a one-off cost
of GBP2 million in the second half and will result in annualised
cost savings of circa GBP4 million.
Affordability and quality
Whilst the sharp rise in interest rates during the period
significantly increased mortgage costs, a Gleeson home continues to
be affordable for a couple earning the National Living Wage (which
will increase by 9.7% on 1 April 2023), without requiring Help to
Buy support. Demand continues to be underpinned by the
affordability of our homes and the critically undersupplied nature
of our segment of the market. We are also increasingly selling to
customers who would have previously bought a home from a more
expensive developer, but who are attracted by Gleeson's affordable
price points and high quality.
The cost of owning a Gleeson home remains lower than the cost of
renting an equivalent property, and the advantages of home
ownership - both economically and socially - remain clear. Gleeson
homes are also highly energy efficient, requiring around half the
energy to heat and power than existing housing and our customers
therefore benefit from both the financial savings and the health
and wellbeing benefits of living in a modern, well insulated
home.
We continue to work with lenders and Homes England to offer
affordable products to our customers, including through First Homes
under the Government's early delivery programme and Deposit Unlock,
an industry-led scheme guaranteeing the top slice of higher
loan-to-value mortgages. These products will be important in
continuing to help first time buyers onto the property ladder and
will sit alongside other products, including shared ownership, to
support our customers.
Meanwhile, we continue to support the delivery of a high-quality
service to our customers through the digitisation of quality
control on each plot and bringing enhanced visibility to each stage
of the customer journey. In addition, during the period we invested
significantly in our Customer Care team, moving to a regional model
and recruiting 15 new Customer Relations Advisors and Regional
Maintenance Technicians. Delivering a high-quality product at
affordable price points remains a key priority for the
business.
Planning
The recently announced consultation on planning reforms by the
Department for Levelling Up, Housing and Communities (DLUHC) has
led to further uncertainty within the planning system. Whilst the
potential changes continue to be debated, the system remains
chronically slow and frequently requires an "appeal led" approach
to decision making. The proposed changes to the National Planning
Policy Framework (NPPF) pose serious risks to the effective
operation of the planning system in England and could adversely
impact the delivery of new homes both now and for future
generations.
Whilst the planning environment grows ever more challenging, our
land teams, both in Gleeson Homes and Gleeson Land, have an
excellent track record of successfully navigating sites through the
process, including via appeal, and both businesses boast strong
pipelines.
Build costs and availability
There have been further supply chain related challenges
resulting from macroeconomic pressures, including those as a result
of the war in Ukraine. We have managed the impact of these through
the strong relationships that we have with our suppliers and
subcontractors and through selective procurement. Nevertheless,
build cost inflation over the last 12 months has been high at
10.3%, albeit largely offset in the first half by selling price
increases.
Encouragingly, we are now starting to see subcontractor and some
material costs beginning to reduce, as market activity slows down,
and this will help to protect margins.
Building safety
Gleeson strongly agrees with the principle that leaseholders
should not bear the costs or anxiety arising from the national
cladding and fire safety crisis. In April 2022 the Group signed the
building safety Pledge to the Department for Levelling Up, Housing
and Communities (DLUHC). In doing so, the Group gave its commitment
to remediate any life-critical fire-safety issues on buildings over
11 metres which it had any involvement in developing over the last
30 years. DLUHC published the agreed Self-remediation terms on 30
January 2023. The Company has informed DLUHC that it intends to
enter into this agreement ahead of the deadline of 13 March
2023.
An exceptional provision of GBP12.9m was established by the
Group in the prior year. As part of this, as previously announced,
we are moving quickly to execute a programme of intrusive
inspections and fire risk assessments. No further exceptional
provisions are expected. The costs of the inspections incurred to
date were included in the provision, of which GBP0.1m has been
utilised, reducing the balance to GBP12.8m at 31 December 2022. For
those buildings where intrusive inspections and fire risk
assessments have been completed, we are commencing remediation
works, with around half of the provision expected to be utilised
over the next year. We conduct regular reviews of the provision,
taking into account the most recent inspections and any other
relevant information.
Along with all housebuilders, we have been subject to the
additional 4% residential property developer tax (RPDT) from April
2022, which was designed to raise at least GBP2bn over a 10-year
period towards the cost of dealing with defective cladding
installed by other developers. We believe that through the Pledge
and RPDT, housebuilders are contributing very strongly to the
resolution of the cladding and fire-safety crises, and further
taxes or levies on the industry would serve only to be detrimental
to housing delivery.
Sustainability
Our mission to build affordable, quality homes where they are
most needed and for the people that need them most continues to
create social and economic value in deprived areas across the North
of England and the Midlands. Our business model fundamentally
supports the United Nation's Sustainable Development Goal (UNSDG)
11 through providing access to safe and affordable housing, and in
January 2023 we became the second UK housebuilder to join the
United Nations Global Compact (UNGC), aligning our business to the
10 principles of the UNGC across human rights, labour, environment
and anti-corruption.
As outlined in our 2021 Annual Report, we increased our scope 1
and 2 CO(2) e reduction plans to 30% and set a target of no more
than 1.75 tonnes per home sold by 2023. Our actions from the past
few years had put us on track to achieve this intensity target but,
as a result of the lower sales volume expected, we are unlikely to
achieve the 1.75 tonnes target this year.
We do, however, continue to make significant progress in
reducing total carbon emissions, including scope 3 in-use emissions
for our homes:
-- We are installing Air Source Heat Pumps (ASHP's) in all new
homes we commence building from July 2023 which, combined with
modern insulation, are expected to achieve a significant reduction
in carbon emissions when occupied.
-- 6% of the homes we built in the period used concrete bricks
or reconstituted concrete stone - which contains half the embedded
CO(2) e of clay bricks and reduces the embedded CO(2) e in each
home built by 4% - and we aim to build a quarter of our homes with
concrete bricks next year.
-- EV charging points were installed in 8% of the homes we sold
in the period - and we aim to install these in 14% of the homes we
sell over the next six months.
Combined with our high build quality and increased standards of
insulation we expect our homes will, within the next few years,
achieve a 69% improvement above the current standards for energy
performance. This reflects our commitment to longer term
sustainability goals, and we are targeting this without
compromising quality or affordability.
We continue to make good progress with our biodiversity
strategy, which is focused on improving the local wildlife and
ecosystems on and around our developments. Despite the often highly
biodiverse nature of brownfield sites compared to greenfield, we
embrace the spirit of prospective legislation, in particular the
Environment Act 2021, and are examining a range of potential
solutions.
As an inherently sustainable business, we remain committed to
upholding the highest possible environmental standards. During the
period, we appointed an experienced Senior Ecologist to provide
ecological advice and guidance on our land purchases and planning
applications. We also partnered with the Supply Chain
Sustainability School, enabling us to upskill colleagues and work
collaboratively with other housebuilders, contractors and suppliers
to achieve common goals on areas such as climate action, resource
use and biodiversity.
Finally, we are proud to have retained accreditation from the
Fair Tax Foundation. We remain the only listed housebuilder to be
accredited with the Fair Tax Mark, which certifies we pay our fair
share of tax in the right place, at the right time and are honest
and transparent in our disclosures.
Financial Performance
Group results
Revenue decreased 1.4% to GBP171.0m (H1 21/22: GBP173.5m) with
gross profit decreasing 3.3% to GBP49.2m (H1 21/22: GBP50.9m). The
Group's operating profit decreased 33.3% to GBP16.8m (H1 21/22:
GBP25.2m). Following a net interest charge of GBP0.7m (H1 21/22:
GBP0.5m), profit before tax decreased 34.8% to GBP16.1m (H1 21/22:
GBP24.7m).
The tax charge for the period was GBP3.3m (H1 21/22: GBP4.7m)
reflecting an effective rate of 20.4% (H1 21/22: 19.0%). The profit
after tax for the period was GBP12.8m (H1 21/22: GBP20.0m).
Total shareholders' equity was GBP278.0m at 31 December 2022
compared to GBP259.9m at 31 December 2021. This equates to net
assets per share of 476.5 pence (31 December 2021: 445.8
pence).
The Group's net cash balance at 31 December 2022 decreased by
GBP20.3m to GBP13.5m (30 June 2022: GBP33.8m), primarily driven by
lower house sales and higher levels of build inventory.
The Group's GBP105m borrowing facility was undrawn at the period
end.
Gleeson Homes
Revenue increased 11.0% to GBP166.7m (H1 21/22: GBP150.2m), with
increased selling prices outweighing a fall in the number of homes
sold.
The average selling price for homes sold in the period increased
15.6% to GBP186,400 (H1 21/22: GBP161,200), reflecting underlying
selling price increases of 11.2%, a higher proportion of larger
4-bedroom homes sold, and good levels of customer extras, which are
typically higher margin.
The division entered the year with a significantly lower forward
order book than in prior years, reflecting our intentional
management of sales releases to optimise both prices and the
customer journey. Therefore, the slowdown in demand resulting from
the mini-budget in September 2022 had a more pronounced impact on
total homes sold. As a result, 4.1% fewer homes were sold in the
period, at 894 homes (H1 21/22: 932 homes sold).
Of the 894 homes sold during the half-year, 47% were purchased
using the Government's Help to Buy scheme (FY22: 53%, H1 21/22:
55%). Help to Buy closed for new applications in October 2022, with
the final completions to be made in March 2023 for homes built by
31 January 2023. However, our homes remain affordable to low income
buyers without the use of Help to Buy.
Gross profit on homes sold increased 5.0% to GBP46.1m (H1 21/22:
GBP43.9m), driven by the increased revenue from higher selling
prices. The gross margin on homes sold in the period was 27.7% (H1
21/22: 29.2%) reflecting build cost inflation of 10.3% and
increased fixed site costs as site durations extended due to the
slowdown. These costs were largely, albeit not entirely, offset by
selling price increases.
Administrative expenses increased 29.5% to GBP28.1m (H1 21/22:
GBP21.7m), reflecting investment in the business' operating
structure, headcount and pay inflation which took place ahead of
the market slowdown, including opening a ninth regional office in
West Yorkshire. This office was fully operational from 1 July
2022.
Operating margin on homes sold decreased 410 basis points to
10.9% (H1 21/22: 15.0%), with operating profit falling 19.1% to
GBP18.2m (H1 21/22: GBP22.5m) in line with the increased
administrative expenses.
The division purchased three sites during the period (H1 21/22:
seven sites). The pipeline of owned plots decreased during the
period by a net 161 plots to 8,317. The total pipeline of owned and
conditionally purchased plots was 16,561 plots on 168 sites at 31
December 2022 (30 June 2022: 16,814 plots on 160 sites). During the
period, 19 new sites were added to the pipeline. Our land pipeline
represents over eight years of home sales.
Gleeson Homes opened three new sites during the first half,
meaning it was building on 87 sites at 31 December 2022 (31
December 2021: 83 sites) and selling from 68 active sites (31
December 2021: 60 sites).
The slowdown in demand during the period means that we enter the
second half with a forward order book of 319 plots (30 June 2022:
618 plots, 31 December 2021: 616), of which 296 are expected to
complete in the second half. In addition, as a result of the market
slowdown and to preserve working capital we are pausing new site
openings and do not currently anticipate opening any new build
sites until the pace of recovery in demand is clearer.
By the end of the financial year, the division expects to be
building on approximately 77 sites (June 2022: 87) and actively
selling on approximately 65 sites (June 2022: 61).
Gleeson Land
The division completed one land sale in the first half (H1
21/22: three). As a result, operating profit for the first half was
GBP1.4m (H1 21/22: GBP5.5m).
Three sites were being actively progressed for sale at 31
December 2022, which have the potential to deliver 1,342 plots (31
December 2021: no sites being progressed for sale). A further two
sites were being marketed with the potential to deliver 305 plots
(31 December 2021: three sites being marketed, 1,384 plots).
At 31 December 2022, there were six sites in the portfolio with
either planning permission or a resolution to grant permission for
a total of 1,525 plots (30 June 2022: three sites, 1,206
plots).
There are a further 16 sites where the division is currently
awaiting a decision on planning applications or appeals (30 June
2022: 16 sites). The challenges in the planning system continue to
mean there are a number of applications that are delayed or
progressed via appeal. However, the team is experienced in
navigating these challenges and has an excellent track record at
appeal.
We continue to invest in the Gleeson Land portfolio. One
high-quality new site was secured in the period, with the potential
to deliver 450 plots. Agreements on a number of other well-located
sites are currently being progressed.
At 31 December 2022, the portfolio, in which the Group has a
beneficial interest of 83%, comprised 71 sites with the potential
to deliver 18,775 plots (30 June 2022: 71 sites, 20,241 plots).
Dividends
Considering these results and the immediate outlook, the Board
is declaring an interim dividend of 5.0 pence per share (H1 21/22:
6.0 pence per share). The Company's policy of covering total full
year dividends with earnings between three and five times remains
in place.
The interim dividend will be paid on 3 April 2023 to
shareholders on the register at close of business on 3 March
2023.
Board changes
On 31 December 2022, Dermot Gleeson stepped down after 47 years
on the Board and 28 years as Chairman. James Thomson, former CEO,
was appointed as non-executive Chairman and Chair of the Nomination
Committee with effect from 1 January 2023.
On behalf of the Board, I would like to express our sincere
thanks to Dermot for his extraordinary contribution to the Company.
He leaves the business with a robust and clear vision, and a highly
successful model to drive future growth.
Summary & Outlook
I could not be more excited to have joined Gleeson. Everything I
have seen and everyone I have met confirms that it is a business
with a strong platform and a great opportunity ahead of it.
We are beginning to see a tentative return of confidence to the
market and expect demand for new homes to slowly recover through
the year. Selling prices remain stable and net reservation rates
have continued to improve from 0.25 per site per week for the ten
weeks before Christmas to 0.50 per site per week in the last four
weeks.
Whilst full year volumes will depend on the pace of the market's
recovery, we currently expect to deliver between 1,650 and 1,850
homes.
We are implementing a reorganisation to optimise our structure,
preparing the business for the next phase of growth. We are also
controlling working capital and making operational savings to
respond to the challenges posed by the current macroeconomic
environment, and are ready to ramp up activity when required.
Looking beyond the current uncertainty in the market, the
prospects for the Group are exciting and I look forward to
discussing our medium and longer-term plans and targets in detail
later this year.
Graham Prothero
Chief Executive
Condensed Consolidated Income Statement
for the six months to 31 December 2022
Audited
Unaudited Unaudited Year
Six months Six months to
to 31 December to 31 December 30 June
Note 2022 2021 2022
GBP000 GBP000 GBP000
Revenue 170,999 173,543 373,409
Cost of sales (121,832) (122,659) (275,620)
----------------- ----------------- ----------
Gross profit 49,167 50,884 97,789
Administrative expenses (32,578) (25,982) (54,543)
Other operating income 232 310 684
----------------- ----------------- ----------
Operating profit 16,821 25,212 43,930
Analysed as:
Underlying operating profit 16,821 25,212 56,797
Exceptional items - - (12,867)
--------------------------------- ----- ----------------- ----------------- ----------
Finance income 99 47 172
Finance expenses (846) (527) (1,482)
----------------- ----------------- ----------
Profit before tax 16,074 24,732 42,620
Analysed as:
Underlying profit before tax 16,074 24,732 55,487
Exceptional items - - (12,867)
--------------------------------- ----- ----------------- ----------------- ----------
Profit before tax 16,074 24,732 42,620
Tax 3 (3,281) (4,690) (7,531)
Profit for the period 12,793 20,042 35,089
================= ================= ==========
Earnings per share
Basic 5 21.97 p 34.38 p 60.23 p
Diluted 5 21.95 p 34.38 p 60.08 p
Basic - pre-exceptional items 5 21.97 p 34.38 p 78.12 p
Diluted - pre-exceptional items 5 21.95 p 34.38 p 77.92 p
======== ======== ========
Condensed Consolidated Statement of Comprehensive Income
for the six months to 31 December 2022
Audited
Unaudited Unaudited Year
Six months Six months to
to 31 December to 31 December 30 June
2022 2021 2022
GBP000 GBP000 GBP000
Profit for the period 12,793 20,042 35,089
Other comprehensive (expense)/income
Items that may be subsequently
reclassified to profit or loss
Change in value of shared equity
receivables at fair value (267) 32 120
Movement in tax on share-based
payments taken directly to equity - 49 -
----------------- ----------------- ---------
Other comprehensive (expense)/income
for the period, net of tax (267) 81 120
----------------- ----------------- ---------
Total comprehensive income for
the period 12,526 20,123 35,209
================= ================= =========
Condensed Consolidated Statement of Financial Position
at 31 December 2022
Unaudited Unaudited Audited
31 December 31 December 30 June
Note 2022 2021 2022
GBP000 GBP000 GBP000
Non-current assets
Property, plant and
equipment 9,537 7,750 8,112
Trade and other receivables 141 8,261 5,051
Deferred tax assets 1,183 1,363 941
10,861 17,374 14,104
============== ============== =========
Current assets
Inventories 6 326,793 244,724 286,882
Trade and other receivables 22,033 19,808 29,243
UK corporation tax 512 4,941 3,565
Cash and cash equivalents 7 13,485 38,160 33,764
362,823 307,633 353,454
============== ============== =========
Total assets 373,684 325,007 367,558
============== ============== =========
Non-current liabilities
Trade and other payables 9 (10,934) (4,248) (9,703)
Provisions 8 (7,328) (264) (12,049)
-------------- -------------- ---------
(18,262) (4,512) (21,752)
============== ============== =========
Current liabilities
Trade and other payables 9 (71,481) (60,539) (72,291)
Provisions 8 (5,960) (15) (1,339)
(77,441) (60,554) (73,630)
============== ============== =========
Total liabilities (95,703) (65,066) (95,382)
============== ============== =========
Net assets 277,981 259,941 272,176
============== ============== =========
Equity
Share capital 1,166 1,166 1,166
Share premium 15,843 15,843 15,843
Own shares (751) - (471)
Retained earnings 261,723 242,932 255,638
Total equity 277,981 259,941 272,176
============== ============== =========
Condensed Consolidated Statement of Changes in Equity
for the six months to 31 December 2022
Share Share Own Retained Total
Note capital premium shares earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 July 2021 (audited) 1,165 15,843 - 227,923 244,931
Profit for the period - - - 20,042 20,042
Other comprehensive income - - - 81 81
Total comprehensive income
for the period - - - 20,123 20,123
=============== ========== ========= ===================== ===============
Share issue 1 - - - 1
Purchase of own share - - - (30) (30)
Share-based payments - - - 746 746
Dividends - - - (5,830) (5,830)
Transactions with owners,
recorded directly in equity 1 - - (5,114) (5,113)
=============== ========== ========= ===================== ===============
At 31 December 2021 (unaudited) 1,166 15,843 - 242,932 259,941
=============== ========== ========= ===================== ===============
Profit for the period - - - 15,047 15,047
Other comprehensive income - - - 39 39
--------------- ---------- --------- --------------------- ---------------
Total comprehensive income
for the period - - - 15,086 15,086
=============== ========== ========= ===================== ===============
Opening adjustment to own
shares - - (136) 136 -
(Purchase)/sale of own shares - - (403) 30 (373)
Utilisation of own shares - - 68 268 336
Share-based payments - - - 822 822
Movement in tax on share-based
payments taken directly to
equity - - - (128) (128)
Dividends - - - (3,508) (3,508)
Transactions with owners,
recorded directly in equity - - (471) (2,380) (2,851)
=============== ========== ========= ===================== ===============
At 30 June 2022 (audited) 1,166 15,843 (471) 255,638 272,176
=============== ========== ========= ===================== ===============
Profit for the period - - - 12,793 12,793
Other comprehensive expense - - - (267) (267)
--------------- ---------- --------- --------------------- ---------------
Total comprehensive income
for the period - - - 12,526 12,526
=============== ========== ========= ===================== ===============
Purchase of own shares - - (295) - (295)
Utilisation of own shares - - 15 (15) -
Share-based payments - - - 652 652
Movement in tax on share-based
payments taken directly to
equity - - - (82) (82)
Dividends - - - (6,996) (6,996)
Transactions with owners,
recorded directly in equity - - (280) (6,441) (6,721)
=============== ========== ========= ===================== ===============
At 31 December 2022 (unaudited) 1,166 15,843 (751) 261,723 277,981
=============== ========== ========= ===================== ===============
Condensed Consolidated Statement of Cash Flow
for the six months to 31 December 2022
Audited
Unaudited Unaudited Year
Six months Six months to
to 31 December to 31 December 30 June
2022 2021 2022
GBP000 GBP000 GBP000
Operating activities
Profit before tax 16,074 24,732 42,620
Depreciation of property, plant and
equipment 1,819 1,571 3,124
Share-based payments 652 746 1,568
Profit on redemption of shared equity
receivables (172) (246) (375)
(Decrease)/increase in provisions including
exceptional items (100) - 13,129
Loss on disposal of property, plant
and equipment 13 101 403
Finance income (99) (47) (172)
Finance expenses 853 527 1,482
----------------- ----------------- ---------
Operating cash flows before movements
in working capital 19,040 27,384 61,779
Increase in inventories (39,911) (4,763) (46,921)
Decrease/(increase) in receivables 11,537 (1,555) (8,165)
(Decrease)/increase in payables (750) (3,907) 13,244
----------------- ----------------- ---------
Cash (used in)/generated from operating
activities (10,084) 17,159 19,937
Tax paid (552) (5,836) (7,059)
Finance costs paid (782) (505) (1,043)
----------------- ----------------- ---------
Net cash flow (deficit)/surplus from
operating activities (11,418) 10,818 11,835
================= ================= =========
Investing activities
Proceeds from disposal of shared equity
receivables 582 852 1,566
Interest received 4 3 20
Purchase of property, plant and equipment (1,832) (1,677) (3,684)
----------------- ----------------- ---------
Net cash flow deficit from investing
activities (1,246) (822) (2,098)
================= ================= =========
Financing activities
Net proceeds from issue of shares - 1 1
Purchase of own shares (295) (30) (403)
Dividends paid (6,996) (5,830) (9,338)
Principle element of lease payments (324) (308) (564)
Net cash flow deficit from financing
activities (7,615) (6,167) (10,304)
================= ================= =========
Net (decrease)/increase in cash and
cash equivalents (20,279) 3,829 (567)
Cash and cash equivalents at beginning
of period 33,764 34,331 34,331
Cash and cash equivalents at end of
period 13,485 38,160 33,764
================= ================= =========
Notes to the Condensed Consolidated Financial Statements
for the six months to 31 December 2022
1. Basis of preparation and accounting policies
This condensed consolidated interim financial report ("the
Interim Report") for the six months ended 31 December 2022 has been
prepared in accordance with UK-adopted International Accounting
Standards in conformity with the requirements of the Companies Act
2006. The Interim Report has been prepared on the basis of the
policies set out in the Annual Report and Accounts for the year
ended 30 June 2022 and in accordance with Accounting Standard IAS
34 "Interim Financial Reporting" and the Disclosure Guidance and
Transparency Rules sourcebook of the UK's Financial Conduct
Authority. The Interim Report does not constitute financial
statements as defined in Section 434 of the Companies Act 2006 and
is neither audited nor reviewed.
The interim financial statements need to be read in conjunction
with the consolidated financial statements for the year ended 30
June 2022, which were prepared in accordance with UK-adopted
International Financial Reporting Standards. A copy of the Annual
Report and Accounts for the year ended 30 June 2022 is available
either on request from the Group's registered office, 6 Europa
Court, Sheffield Business Park, Sheffield, S9 1XE, or can be
downloaded from the corporate website, www.mjgleesonplc.com.
The comparative figures for the financial year ended 30 June
2022 are not the Group's statutory accounts for that financial
year. Those accounts have been reported on by the auditors of the
Company and the Group and delivered to the Registrar of Companies.
The report of the auditors was (i) unqualified, (ii) did not
include a reference to any matters which the auditor drew attention
to by way of emphasis without qualifying their report and (iii) did
not contain statements under Section 498 (2) or (3) of the
Companies Act 2006.
During the period, the Group has adopted the following new and
revised standards and interpretations that have had no material
impact on these condensed consolidated financial statements:
-- Amendments to IAS 16, IAS 37 and IFRS 3, and the annual
improvements to IFRS Standards 2019 to 2020.
The preparation of condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may subsequently differ from these estimates. In
preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 30 June
2022.
The accounting policies, method of computation, and presentation
adopted are consistent with those of the Annual Report and Accounts
for the year ended 30 June 2022.
Going concern
The Group has maintained its strong financial position and ended
the period with cash balances of GBP13.5m (30 June 2022: GBP33.8m).
The Group's committed club facility of GBP105m was undrawn. The
Group's financial forecasts reflect current trading and outlook,
including the impact of the last three months.
These forecasts have been subjected to a range of sensitivities
including a severe but plausible scenario together with the likely
effectiveness of mitigating actions. The assessment considered the
impact of a number of realistically possible, but severe and
prolonged changes to principal assumptions from a downturn in the
housing and land markets including:
-- a reduction in Gleeson Homes volumes of approximately 15%,
reflecting a fall in net reservations from the current trading
position;
-- a sustained reduction in Gleeson Homes selling prices of 5%;
-- a delay on the timing of Gleeson Land transactions and a reduction in land selling values.
1. Basis of preparation and accounting policies (cont.)
Under these sensitivities, after taking mitigating actions, the
Group continues to have a sufficient level of liquidity, operate
within its financial covenants and meet its liabilities as they
fall due.
Based on the results of the analysis undertaken, the Directors
have a reasonable expectation that the Group has adequate resources
available to continue in operation for the foreseeable future and
operate in compliance with the Group's bank facilities and
financial covenants. As such, the Interim Report for the Group has
been prepared on a going concern basis.
2. Segmental analysis
The Group is organised into the following two operating
divisions under the control of the Executive Board, which is
identified as the Chief Operating Decision Maker as defined under
IFRS 8 "Operating segments":
-- Gleeson Homes
-- Gleeson Land
The revenue in the Gleeson Homes segment relates to the sale of
residential properties and ad hoc land sales. All revenue for the
Gleeson Land segment relates to the sale of land interests. All of
the Group's operations are carried out entirely within the United
Kingdom. Segment information about the Group's operations is
presented below:
Audited
Unaudited Unaudited Year
Six months Six months to
to 31 December to 31 December 30 June
2022 2021 2021
Note GBP000 GBP000 GBP000
Revenue
Gleeson Homes 166,662 150,251 334,571
Gleeson Land 4,337 23,292 38,838
----------------- ----------------- ---------
Total revenue 170,999 173,543 373,409
================= ================= =========
Divisional operating profit
Gleeson Homes 18,185 22,504 51,227
Gleeson Land 1,429 5,524 11,061
Exceptional items* - - (12,867)
----------------- ----------------- ---------
19,614 28,028 49,421
Group administrative expenses (2,793) (2,816) (5,491)
Finance income 99 47 172
Finance expenses (846) (527) (1,482)
----------------- ----------------- ---------
Profit before tax 16,074 24,732 42,620
Tax 3 (3,281) (4,690) (7,531)
Profit for the period 12,793 20,042 35,089
================= ================= =========
* Gleeson Homes - Building safety provision.
2. Segmental analysis (cont.)
Balance sheet analysis of business segments:
Unaudited 31 December 2022
Assets Liabilities Net assets
GBP000 GBP000 GBP000
Gleeson Homes 309,127 (87,827) 221,300
Gleeson Land 49,334 (3,651) 45,683
Group activities 1,738 (4,225) (2,487)
Cash and cash equivalents 13,485 - 13,485
---------- -------------- -------------
373,684 (95,703) 277,981
========== ============== =============
Unaudited 31 December 2021
Assets Liabilities Net assets
GBP000 GBP000 GBP000
Gleeson Homes 232,823 (54,747) 178,076
Gleeson Land 51,995 (6,858) 45,137
Group activities 2,029 (3,461) (1,432)
Cash and cash equivalents 38,160 - 38,160
---------- -------------- -------------
325,007 (65,066) 259,941
========== ============== =============
Audited 30 June 2022
Assets Liabilities Net assets
GBP000 GBP000 GBP000
Gleeson Homes 280,481 (85,170) 195,311
Gleeson Land 49,230 (5,869) 43,361
Group activities 4,083 (4,343) (260)
Cash and cash equivalents 33,764 - 33,764
-------- ------------ -----------
367,558 (95,382) 272,176
======== ============ ===========
3. Tax
The results for the six months to 31 December 2022 include a tax
charge of 20.4% of profit before tax (31 December 2021: 19.0%, 30
June 2022: 17.7%), representing the best estimate of the average
annual effective tax rate expected for the full year, applied to
the pre-tax income of the six month period.
4. Dividends
Unaudited Unaudited Audited
Six months Six months Year to
to 31 December to 31 December 30 June
2022 2021 2022
GBP000 GBP000 GBP000
Amounts recognised as distributions
to equity holders:
Final dividend for the year ended 30
June 2021 of 10.0p - 5,830 5,831
Interim dividend for the year ended
30 June 2022 of 6.0p - - 3,507
Final dividend for the year ended 30
June 2022 of 12.0p 6,996 - -
6,996 5,830 9,338
================ ================= =========
On 15 February 2023 the Board approved an interim dividend of
5.0 pence per share at an estimated total cost of GBP2,911,000. The
dividend has not been included as a liability as at 31 December
2022 .
5. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings Unaudited Unaudited Audited
Six months Six months Year to
to 31 December to 31 December 30 June
2022 2021 2022
GBP000 GBP000 GBP000
Profit for the period 12,793 20,042 35,089
Exceptional items - - 12,867
Tax on exceptional items - - (2,445)
----------------- ----------------- ----------
Profit for the year - pre-exceptional
items 12,793 20,042 45,511
================= ================= ==========
Number of shares Unaudited Unaudited Audited
31 December 31 December 30 June
2022 2021 2022
No. 000 No. 000 No. 000
Weighted average number of ordinary
shares for the purposes of
basic earnings per share 58,230 58,290 58,259
Effect of dilutive potential ordinary
shares:
Share-based payments 58 2 145
Weighted average number of ordinary
shares for the purposes of
diluted earnings per share 58,288 58,292 58,404
================= ================= ==========
Unaudited Unaudited Audited
Six months Six months Year to
to 31 December to 31 December 30 June
2022 2021 2022
pence pence pence
Basic earnings per share 21.97 34.38 60.23
Diluted earnings per share 21.95 34.38 60.08
Basic earnings per share - pre-exceptional
items 21.97 34.38 78.12
Diluted earnings per share - pre-exceptional
items 21.95 34.38 77.92
================= ================= ==========
6. Inventories
Unaudited Unaudited Audited
31 December 31 December 30 June
2022 2021 2022
GBP000 GBP000 GBP000
Land held for development 116,720 100,482 113,745
Work in progress 210,073 144,242 173,137
------------- ------------- ---------
326,793 244,724 286,882
============= ============= =========
Net realisable value provisions held against inventories at 31
December 2022 were GBP6,462,000
(31 December 2021: GBP7,690,000, 30 June 2022: GBP5,933,000).
The amount of inventory write-down recognised as an expense in the
period was GBP955,000 (31 December 2021: GBP2,553,000, 30 June
2022: GBP3,341,000) and the amount of reversal of previously
recognised inventory write-down was GBP41,000 (31 December 2021:
GBP143,000, 30 June 2022: GBP2,211,000). The cost of inventories
recognised as an expense in cost of sales was GBP120,673,000 (31
December 2021: GBP121,933,000, 30 June 2022: GBP261,293,000).
7. Net cash/(debt)
Unaudited Unaudited Audited
31 December 31 December 30 June
2022 2021 2022
GBP000 GBP000 GBP000
Cash and cash equivalents 13,485 38,160 33,764
Lease liabilities (4,109) (3,076) (3,009)
------------- ------------- ---------
Net cash/(debt) 9,376 35,084 30,755
============= ============= =========
At 31 December 2022, monies held by solicitors on behalf of the
Group and included within cash and cash equivalents were GBP872,000
(31 December 2021: GBP3,033,000, 30 June 2022: GBP15,417,000).
Unaudited 31 December 2022
Cash and
cash equivalents Lease liabilities Total
GBP000 GBP000 GBP000
Net cash/(debt) at 1 July 2022 33,764 (3,009) 30,755
Cash flows (20,279) 394 (19,885)
New leases - (1,425) (1,425)
Finance expense - (69) (69)
------------------ ------------------ ---------
Net cash/(debt) at 31 December 2022 13,485 (4,109) 9,376
================== ================== =========
8. Provisions
Unaudited 31 December 2022
Building
Dilapidations safety Total
GBP000 GBP000 GBP000
As at 1 July 2022 521 12,867 13,388
Provisions made during the period - - -
Provisions utilised during the period - (100) (100)
As at 31 December 2022 521 12,767 13,288
========================== ============= =========
Unaudited Unaudited Audited
31 December 31 December 30 June
2022 2021 2022
GBP000 GBP000 GBP000
Current provisions 5,960 15 1,339
Non-current provisions 7,328 264 12,049
-------------------------- ------------- ---------
13,288 279 13,388
========================== ============= =========
Dilapidations
The dilapidations provision covers the Group's leased property
estate. The expected provision needed at the end of each lease is
recognised on a straight-line basis over the term of the lease.
There is no material uncertainty in either the timing or
amount.
Building safety
The building safety provision includes estimated costs to
remediate life-critical fire-safety issues on buildings over 11
metres which the Group had some involvement in developing over the
last 30 years. By signing the Department for Levelling Up, Housing
and Communities' (DLUHC) Pledge, the Group has committed to put
right life-critical fire-safety issues in relation to these
buildings. DLUHC published the agreed Self-remediation terms on 30
January 2023. The Company has informed DLUHC that it intends to
enter into this agreement ahead of the deadline of 13 March
2023.
8. Provisions (cont.)
In the prior year, an exceptional provision of GBP12,867,000 was
established for remediation works. The Group is in the process of
working with building owners to complete a programme of intrusive
inspections and fire risk assessments and no further exceptional
costs have been identified to date.
Further surveys have been carried out in the six months to 31
December 2022 and, as a result, GBP100,000 of the provision in
relation to professional fees has been utilised, reducing the
provision to GBP12,767,000 at 31 December 2022. For those buildings
where intrusive inspections and fire risk assessments have been
completed, we expect to commence remediation works in the next six
months with around half of the provision expected to be utilised
over the next year.
9. Trade and other payables
Trade and other payables includes GBP13,353,000 of deferred
payables on the purchase of land by the Gleeson Homes division (31
December 2021: GBP9,678,000), of which GBP7,895,000 is due in more
than one year (31 December 2021: GBP3,296,000).
10. Related party transactions
There have been no material changes to the related party
arrangements as reported in note 27 of the Annual Report and
Accounts for the year ended 30 June 2022.
11. Seasonality
Reservations in Gleeson Homes are largely unaffected by seasonal
variations and tend to be driven more by the timing of site
openings than by seasonality. There is no seasonality in the
Gleeson Land division.
12. Group risks and uncertainties
The Directors consider that the principal risks and
uncertainties which could have a material impact on the Group's
performance remain consistent with those set out in the Strategic
Report on pages 34 to 39 of the Annual Report and Accounts for the
year ended 30 June 2022.
13. Subsequent events
Subsequent to 31 December 2022, changes are being made to the
operating structure of the business and the Company has commenced
consultation on that restructuring, which if implemented, is
expected to cost around GBP2 million and generate annualised
savings of circa GBP4 million.
Statement of Directors' Responsibility
for the six months to 31 December 2022
The Directors confirm that, to the best of our knowledge, these
condensed interim financial statements have been prepared in
accordance with UK adopted IAS 34 "Interim financial reporting" and
that the interim management report includes a fair review of
information required by DTR 4.2.7 and DTR 4.28, namely:
a) an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
b) material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The Board
The Board of Directors of MJ Gleeson plc at 30 June 2022 and
their respective responsibilities can be found on pages 86 to 91 of
the MJ Gleeson plc Annual Report and Accounts for the year ended 30
June 2022. Subsequent to the publication of the Annual Report and
Accounts, the following Board changes have taken place:
-- Dermot Gleeson, non-executive Chairman, retired from the Board on 31 December 2022;
-- James Thomson succeeded Dermot Gleeson as non-executive
Chairman with effect from 1 January 2023; and
-- Graham Prothero joined the Board as Chief Executive Officer
with effect from 1 January 2023.
By order of the Board
Stefan Allanson
Chief Financial Officer
15 February 2023
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END
IR NKPBBFBKDABD
(END) Dow Jones Newswires
February 16, 2023 02:00 ET (07:00 GMT)
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