REG - MJ Gleeson Plc - Final Results <Origin Href="QuoteRef">GLEG.L</Origin> - Part 1

MJ GLEESONAnnouncement

26/09/2016 07:06

RNS Number : 7799K
MJ Gleeson PLC
26 September 2016
MJ GLEESON PLC 
Audited results for the year ended 30 June 2016
MJ Gleeson plc, the community regeneration housebuilder and strategic land specialist, is pleased to announce another strong performance with revenue up 20.8%, profit before tax up 63.0% and a proposed final dividend of 10.0p per share. 

2016
2015
Change

m
m
%




Revenue
142.1
117.6
+20.8




Pre-exceptional operating profit* 
28.2
23.3
+21.0
Operating profit
28.2
22.0
+28.2




Pre-exceptional profit before tax*
28.2
23.4
+20.5
Profit before tax
28.2
17.3
+63.0




Net cash flow from operating & investing activities
13.9
8.1
+71.6




Cash and cash equivalents
23.2
15.8
+46.8
Net assets 
152.9
136.5
+12.0




Basic earnings per share (normalised) **
42.6
34.2
+24.6
Basic earnings per share
42.6
22.8
+86.8




Dividend per share
14.5p
10.0p
+45.0




Return on capital employed
23.2%
21.1%
+10.0
 
 Notes: There were no exceptional items in 2016. 
* Pre-exceptional operating profit in 2015 excludes the impact of exceptional restructuring costs (1.2m). Pre-exceptional profit before tax in 2015 also excludes (4.9m) provision against investment in GB Group Holding Ltd. 
** Normalised basic earnings per share in 2015 excludes the impact of exceptional restructuring costs (1.2m) and provision against investments (4.9m).
Strong performance across both divisions and confident in outlook
Gleeson Homes:
 904 units sold (2015: 751 units) 
 Operating profit increased to 19.5m (2015: 17.4m)
 Average Selling Price 125,700 (2015: 123,750)
 Land pipeline, including conditionally purchased sites, of 9,284 plots (2015: 7,496 plots)
Gleeson Strategic Land:
 Operating profit of 10.2m (2015: 8.1m) driven by increase in transactions during the year
 Seven land sales completed during the year for 191 acres of residential and commercially developable land 
 Five new sites secured during the year
 Portfolio at year end: 68 sites comprising 3,843 acres
Final dividend of 10.0 pence per share proposed (2015: 7.3 pence per share), resulting in total dividend for the year up 45% to 14.5 pence per share (2015: 10.0 pence per share).


Dermot Gleeson, Chairman of MJ Gleeson plc, said:
"Our twin track strategy - the development of low cost homes for open market sale in the North of England and strategic land sales in the South - goes from strength to strength, delivering increased margins, profits and cash.
"Gleeson Homes continues to see strong customer demand for its low cost homes. The opening of two new regional offices and the increase in its land pipeline to 9,284 plots will enable the division to continue to grow in what remains a strong market for low cost homes in the North of England. We have commenced rolling out our distinctive and highly successful business model across a wider geographic area. The potential number of purchasers of Gleeson Homes in this wider area is three times the comparable figure within our current market.
"Similarly, Gleeson Strategic Land continues to see strong demand for consented land in prime locations from a wide range of housebuilders. The division has a strong pipeline of sites, predominantly in the South of England, covering 3,843 acres (2015 3,936 acres), and expects to continue to enjoy a high level of success in promoting commercially attractive sites through the planning system.
"The Board has every confidence in the Group's outlook in both the short and longer term."
Enquiries:
MJ Gleeson plc

Tel: +44 1142 612900 
Jolyon Harrison  
Chief Executive Officer

Stefan Allanson
Chief Financial Officer




Instinctif

Tel: +44 20 7457 2020
Mark Garraway


Helen Tarbet


James Gray





N+1 Singer


Shaun Dobson

Tel: +44 20 7496 3000
Alex Laughton-Scott





Liberum


Neil Patel

Tel: +44 20 3100 2111
Richard Bootle







Chairman's Statement
I am pleased to report another year of strong growth in margins, profits, and cash. 
Gleeson Homes increased unit sales by 20.4% to 904 units (2015: 751 units). Gross margins continued to improve as a result of a modest increase in selling prices and stringent cost controls. The division increased its land pipeline by 20 sites, comprising 1,788 plots, taking advantage of the relatively low land prices in our target areas in the North of England.
Gleeson Strategic Land increased operating profit by 25.9% to 10.2m. The division continued to secure attractive residential planning consents and to satisfy demand for development sites from both medium sized and volume housebuilders.
Financial Performance
Group revenues increased by 20.8% to 142.1m (2015: 117.6m). The Group recorded an operating profit from continuing operations of 28.2m, an increase compared to the previous year of 28.2% (2015: 22.0m). The post-tax loss from discontinued operations was 0.3m (2015: 0.2m).
Profit before tax increased by 63.0% to 28.2m (2015: 17.3m).Profit for the year attributable to equity holders of the parent company was 23.0m (2015: 12.2m). 
Gross margin on unit sales increased to 31.1% (2015: 29.6%) which helped to improve operating margin on unit sales to 17.1% (2015: 15.8%). 
Net assets increased by 12.0% to 152.9m (2015: 136.5m), representing net assets per share of 283p (2015: 254p). Cash and cash equivalents at 30 June 2016 totalled 23.2m (2015: 15.8m).
Normalised basic earnings per share, excluding the impact of exceptional costs (2016: nil, 2015: 6.1m) grew by 24.6% to 42.6p (2015: 34.2p). 
Market Context
Demand for low cost homes in the North of England remains strong. 
Hard working, low income families remain committed to home ownership and the cost of owning a Gleeson home is, in many cases, cheaper than an equivalent council house rent. The Government's support through the Help to Buy Scheme, which has been extended to 2021, and rigorous control of costs in Gleeson Homes means that our selling prices remain exceptionally affordable. 
Gleeson Homes has not seen any change in customer enquiries or sales due to the "Brexit" vote. Our mortgage advisors and other organisations with whom we work very closely, including on-line property websites, also report that there has been no drop in enquiries or demand for new homes. Gleeson Strategic Land has seen two of the major housebuilders try to renegotiate the terms of purchase, but mid-range housebuilders, who need replacement sites and are more interested in completing deals promptly, continue to bid competitively on all our land sales. 
Overall the "Brexit" vote has not had a material effect on the Group's expectations. It is very much "business as usual". 
Land
For Gleeson Homes, land continues to be available at relatively low cost. The division's land pipeline grew to a record high of 117 sites (2015: 97), comprising 9,284 plots owned or conditionally purchased (2015: 7,496). Gleeson Homes intends to commence building low cost homes on every site as soon as planning permission is obtained.
The division's strategic objective of 1,000 unit completions per annum is within sight and, as set out in the Strategic Report, we are taking advantage of the opportunity for substantial growth beyond this figure by rolling out the division's distinctive and highly successful business model across a wider geographical area. 
Gleeson Strategic Land has a record number of sites in the South of England with planning consent or resolution to grant. Demand for prime sites in the South of England from a wide range of housebuilders remains strong. 
Employees
The Group's strong performance during the year reflects the remarkable dedication and professionalism of our employees. On behalf of the Board, I would like to congratulate and thank them.
The average number of employees during the year increased to 314 (2015: 266). The actual number of employees at the year-end was 333 (2015: 290). 
Dividends 
Reflecting the Group's strong financial performance and our confidence in the prospects for the current year and beyond, the Board is recommending a final dividend for the year of 10.0 pence per share (2015: 7.3 pence per share). Combined with the interim dividend, this will give a total dividend for the year of 14.5 pence per share (2015: 10.0 pence per share), an increase compared to the previous year of 45.0%. Subject to shareholder approval at the Annual General Meeting ("AGM"), the final dividend will be paid on 15 December 2016 to shareholders on the register at close of business on 18 November 2016. The Board aims to maintain dividend cover between two and three times for the foreseeable future.
Summary and Outlook
We are in a strong position to deliver further growth. Market demand remains strong and Gleeson Homes' growing land pipeline provides the opportunity to open new sites in both existing and new regions in the North of England and the Midlands. Demand for consented green field sites in our Strategic Land division also remains strong across a wide range of housebuilders. Against this background, the Board is confident that the Group has significant scope to grow both revenue and profits in the current year and beyond.
Dermot Gleeson
Chairman
23 September 2016


STRATEGIC REPORT
GROUP BUSINESSES
The Group consists of two distinct but complementary businesses: housebuilding on brownfield land in the North of England and strategic land trading, primarily in the South of England.
Gleeson Homes: A housing regeneration specialist, working in challenging communities to provide new homes for sale to people on low incomes in the North of England.
Gleeson Homes continues to build significant value for shareholders as well as delivering a unique social benefit in helping people on lower incomes move from housing poverty caused by the 'rent trap' into home ownership and wealth creation. Our homes are affordable enough to be sold to a couple on the current national living wage and quite often mortgage repayments are less than comparable council house rents. 
The key features of the Gleeson Homes business model are:
 Community regeneration. Over the years, Gleeson Homes has played a key role in regenerating challenging communities. Through establishing strong relationships with local authorities, Gleeson Homes has created a 'virtuous circle' in which it acquires and redevelops legacy sites where there is an obvious need for social and economic regeneration and builds homes at affordable prices, thus enabling home ownership. This 'virtuous circle' will continue to underpin the business and allows for future geographic expansion. 
 Successful land purchase. We partner with local authorities and private land owners to acquire land in socially and economically deprived areas which will benefit from community regeneration. We have a very carefully targeted land buying strategy that has clearly defined and challenging hurdle rates.
 Driving down building costs. We build traditional two, three and four bedroom detached and semi-detached homes. We ensure that our good quality homes are built to the specification that our customers desire.
 Low overheads. We ensure that overhead costs are kept low by having small and similarly structured management teams in each operating region and by continuously measuring their relative performance.
 Enabling the customer. We offer our customers a range of bespoke financial packages, including a deposit saving scheme, to enable them to become homeowners.
Gleeson Strategic Land: A land promotion business that enhances the value of land by securing residential planning consents. The primary focus is on sites in the South of England likely to be attractive to a wide range of developers.
The key features of the Gleeson Strategic Land business model are:
 Achieving mutually beneficial agreements with landowners. We enter into agreements with landowners to promote their land through the planning process. 
 Promotion through the planning process. The business' team of land surveyors and town planners, along with legal and technical experts, steer the land through the planning process towards achieving a commercially attractive residential planning consent.
 Realising value. We strive to ensure that the best value is achieved for all stakeholders by managing the sale of the consented site to a developer.
STRATEGIC DEVELOPMENT AND PRIORITIES
The strategy of the Group is to build a larger and increasingly profitable business by increasing the number of housing regeneration sites in its target markets, increasing its housebuilding land pipeline and improving profitability on the sale of individual units and of land with residential planning permission. 
Gleeson Homes has a proven and successful business model. Working alongside local authorities, Gleeson Homes has played a key role in regenerating whole communities, allowing people to continue living in, or return to, their home neighbourhoods.
We have been growing our regional footprint for some years and we continue to do so. Two new regional offices were opened during the year in Wakefield and St Helens, taking the number of regional offices to six (including established offices in Sheffield, Bury, Wynyard and Chester-le-Street). Gleeson Homes believes its model of providing affordable homes for people on low incomes in areas that are in need of regeneration can also be rolled-out in other areas in the North and Midlands. 
Gleeson Homes is now comfortably in sight of its target of 1,000 unit completions per annum. We expect to reach this target, on an annualised run rate basis, during the financial year ending 30 June 2017. Once this milestone is reached, we will outline new medium term growth targets. 
Based on our estimate of the addressable customer base within the expanded catchment area in which we intend to grow, we believe that this business has the potential to achieve a sales rate of 3,000 units per annum. 
Our strategic priorities are set out below:
Increased housebuilding footprint: We will increase the number of developments throughout our existing and new operating areas and particularly in communities that are in need of regeneration. Our business enables people on lower incomes to become homeowners and regenerates local communities in areas of social deprivation. This strategic benefit is recognised by local authorities and results in more opportunities for us to acquire brownfield land at sensibly low prices, leading to increased sales volumes and profitability whilst keeping average selling prices ("ASPs") low.
Improve margins: We will continue to control development costs and acquire land in line with our defined and challenging hurdle rates.
Build quality, sustainable homes: We will build good quality homes to the specification that our customers desire. We will ensure that our homes are energy efficient and have low running costs. We will use appropriate construction methods to build efficiently.
Increased land pipeline: We will continue to acquire land, at appropriate cost, in socially and economically deprived areas, which would benefit from community regeneration and we will start building as soon as we have an implementable planning approval.
Progress planning applications: We will progress planning applications on Strategic Land sites where we consider there to be strong prospects for residential housing planning permission to be achieved.
Cash generation: We will maintain an appropriate capital structure, minimise financing costs and continue to improve returns to shareholders.
Robust Health & Safety: We will continue to improve our safety culture and will maintain a high level of compliance with health and safety standards.
DISCONTINUED OPERATIONS
Building and Engineering Contracting: The Group sold certain contracts, assets and liabilities of the Building Contracting Division and Engineering Division in 2005 and 2006. The activity of this division is now limited to the resolution of contractual claims.
BUSINESS PERFORMANCE
Gleeson Homes
Gleeson Homes' results for the year were as follows:
 

2016
2015
% change
Units sold
904
751
+20.4%
Operating profit - units sold
19.5m
14.7m*
+32.7%
Land pipeline (units)
9,284
7,496
+23.9%
*2015 excludes 2.7m profit on land sales (2016: nil)
904 homes were sold during the year, an increase of 20.4% on the prior year's total of 751. During the year Gleeson Homes opened 18 new sites and had on average 43 selling outlets open compared to 39 during the prior year. The outlets were located in Cleveland, County Durham, Derbyshire, Lancashire, Greater Manchester, Merseyside, Northumberland, North Yorkshire, Nottinghamshire, Tyne and Wear, South Yorkshire and West Yorkshire. The number of outlets at the end of the year increased to 48 compared to 43 at the prior year end and is expected to increase to over 50 during the course of the current financial year.
The ASP for the homes sold in the year was 125,700 (2015: 123,750). The increase was influenced by the mix of outlets and unit-types. Our aim is to keep ASP increases modest in order to ensure that our homes remain affordable to our customers.
The proportion of homes sold from newer, higher margin sites reduced to 87% reflecting the acceleration of sales on our last remaining legacy site.
Gross profit margin on units sold increased to 31.1% (2015: 29.6%) due to increased average selling prices, lower land costs and the maintenance of a very stringent approach to cost control.
Gleeson Homes margin on unit sales
2012
2013
2014
2015
2016
Gross Profit
20.4%
27.8%
29.8%
29.6%
31.1%
Operating Profit exc. Land
0.9%
8.4%
13.3%
15.8%
17.1%
The increase in the volume of homes sold along with the improved gross profit margin on units sold has resulted in gross profit on units sold increasing by 28.7% to 35.4m (2015: 27.5m). There were no land sales within the Homes division during the year (2015: 2.7m gross profit on one land sale).
Operating profit on unit sales increased 32.7% to 19.5m (2015: 14.7m). Operating profit on land sales was nil (2015: 2.7m). Gleeson Homes reported total operating profit of 19.5m (2015: 17.4m).
Gleeson Homes has a large range of bespoke packages to assist customers to become homeowners, including "Save and Build", "First Rung", "Advance to Buy", and "Aspire to Own". The Government's Help to Buy Scheme remains popular amongst many of our customers, with 61% of the homes sold in the year utilising this scheme. 
Competition amongst mortgage lenders has helped to both reduce borrowing costs and to increase availability. A range of mortgage lenders provide finance to Gleeson home buyers and the number of providers is increasing. The recent reduction in bank base rates has further reduced borrowing costs and increased mortgage affordability.
Gleeson Homes was able to continue to acquire land in the North of England and the Midlands at relatively low cost. This was a busy year of land acquisition which saw the land pipeline grow by 20 sites to a total of 117 at year end; 35 new sites were added to the pipeline, while 15 sites were either completed or we did not proceed to purchase. In terms of units, the pipeline grew by 1,788 units to stand at 9,284 units at June 2016. Of these units 4,357 are owned (2015: 3,680) and 4,927 units are conditionally purchased (2015: 3,816). In addition to owned and conditionally purchased units, there are a further 997 units which are being actively considered for acquisition but will only proceed to purchase if they meet our strict returns criteria.
Gleeson Strategic Land

2016
2015
% change
Revenue
28.4m
21.5m
+32.1%
Operating profit
10.2m
8.1m
+25.9%
Land sales (no. of sites)
7
5
+40.0%
Revenue from Gleeson Strategic Land grew by 32.1% to 28.4m (2015: 21.5m) which reflects an increase in the number of successful land transactions to 7 (2015: 5). Operating profit shows the value added by the Gleeson Strategic Land business on land transactions during the year. Operating profit increased by 25.9% to 10.2m (2015: 8.1m). As with revenue, the profit growth was driven by the increase in transactions during the year. 
We continued to see healthy demand from a wide range of housebuilders looking to acquire well located land with planning consent and received particularly strong interest from mid-sized house builders. 
The sites in Gleeson Strategic Land's portfolio are forecast to realise maximum value over a mix of short, medium and long term periods. Currently 10 sites have planning permission, 4 have a resolution to grant, 15 have a planning application submitted or are being appealed / judicially challenged, and 12 have applications being worked up prior to submission. The balance of the portfolio consists of sites which are being promoted through local plans, local development frameworks and / or emerging neighbourhood plans.
This strong position provides confidence in the division's ability to deliver reasonably consistent annual returns.
At the year end, our Strategic Land business had a portfolio totalling 68 sites (2015: 68 sites). We acquired 5 new sites and sold 7 sites in the year. Two of the sites sold were split prior to sale and one part of each was retained. The portfolio comprises 3,843 acres (2015: 3,936 acres), of which 178 acres (2015: 159 acres) were wholly or part owned by the Group; 2,115 acres (2015: 2,073 acres) were held under option; and 1,550 acres (2015: 1,704 acres) were the subject of promotion agreements. The portfolio of sites continues to have a geographic bias towards the South of England, predominantly in Buckinghamshire, Devon, Dorset, Essex, Hampshire, Hertfordshire, Kent, Oxfordshire, Somerset, Surrey, Sussex and Wiltshire. The 68 sites have the potential to deliver circa 21,111 plots (2015: 21,150 plots).


Financial Review
Highlights
 Revenue increased by 20.8% to 142.1m
 Gross margin on unit sales increased to 31.1% from 29.6%
 Operating margin on unit sales increased to 17.1% from 15.8%
 Profit before tax increased by 63.0% to 28.2m 
 Normalised earnings per share* increased by 24.6% to 42.6 pence
 Cash balances increased by 46.8% to 23.2m
 Net assets per share increased by 11.4% to 283 pence per share
 Dividend for the year increased by 45.0% to 14.5 pence per share
* Normalised earnings per share exclude the impact of exceptional costs (2016: nil, 2015: 6.1m).

2013
2014
2015
2016
Profit before tax (m)
5.8m
12.2m
17.3m
28.2m
Consolidated Statement of Comprehensive Income
Revenue increased by 20.8% in the year to 142.1m (2015: 117.6m). The revenue of Gleeson Homes increased by 18.2% to 113.6m (2015: 96.1m) due to a combination of the 20.4% increase in homes sold to 904 (2015: 751) and a 1.6% increase in the average selling price to 125,700 (2015: 123,750). Revenue for Gleeson Strategic Land increased by 6.9m to 28.4m, due to both the increased sales activity during the year and the mix of sales. 
Gross profit increased by 18.1% to 47.6m (2015: 40.3m). The gross profit of Gleeson Homes increased by 16.8% to 35.4m (2015: 30.3m) due to the increase in volume, lower land costs and higher selling prices. The gross profit of Gleeson Strategic Land increased by 22.0% to 12.2m (2015: 10.0m) primarily due to the increase in sites sold during the year.
Administrative expenses include the sales & marketing costs for Gleeson Homes, along with the administrative overheads for the whole Group. Overall administrative expenses increased by 1.1m (6.0%). Prior year administrative costs included 1.2m exceptional restructuring cost. Underlying administrative costs increased by 2.4m (14.1%) as a result of further investment for growth.
Operating profit from continuing operations was 28.2m (2015: 22.0m) an increase of 28.2% over the previous year. 
Growth in operating profit has been driven by strong trading results in both Gleeson Homes and Gleeson Strategic Land and the lower administrative costs of the Group head office function.
Operating profit by division
Operating Profit excluding group overheads
2013
2014
2015
2016
Gleeson Homes
4.0m
9.4m
17.4m
19.5m
Gleeson Strategic Land
3.5m
4.8m
8.1m
10.2m
Note: Gleeson Homes operating profit in 2015 includes 2.7m from the sale of surplus land. There were no land sales in 2016.
Discontinued operations incurred a loss of 0.3m during the year (2015: loss 0.2m). This related to the costs of Gleeson Construction Services Limited, whose only activity is limited to resolving contractual claims from the businesses that were sold in 2005 and 2006. 
Provision for diminution in value of investment
There were no provisions made during the year. During 2015 the Group fully provided for the 4.9m carrying value of its investment in GB Group Holdings Ltd.
Financing
Financial income of 0.5m (2015: 0.5m) consists primarily of the unwinding of discounts on deferred receipts on land sales. Interest earned on unwinding of deferred receipts was marginally higher than the prior year as a result of a higher level of deferred receipts outstanding. 
Financial expenses of 0.4m (2015: 0.4m) consist of interest payable on bank loans and overdrafts, bank charges and interest and unwinding of discounts relating to deferred payments on land purchases. 
Profit for the year
The profit for the year attributable to equity holders was 23.0m (2015: 12.2m). 
Tax 
A tax charge for continuing operations of 4.9m (2015: 4.8m) has been recorded for the year reflecting the increase in taxable profits for the year.
Deferred tax assets relating to unused tax losses have been recognised to the extent that it is probable that taxable profits will be available against which the asset can be utilised. The Group now has 28.3m (2015: 31.0m) of tax losses, of which 20.1m (2015: 25.8m) is recognised as a deferred asset, which can be carried forward indefinitely.
The tax charge attributable to discontinued operations was 0.0m (2015: nil). 
The net deferred tax asset recorded within the Statement of Financial Position totals 4.6m (2015: 5.7m). 
Earnings per share 
Reported basic earnings per share increased by 86.8% to 42.6p (2015: 22.8p). The normalised basic earnings per share improved by 24.6% to 42.6p (2015: 34.2p). 
Dividend
Reflecting the financial strength of the Company as well as our confidence in the short term outlook, the Board has proposed a final dividend of 10.0 pence per share (2015: 7.3 pence per share). Combined with the interim dividend, the dividend for the full year totals 14.5 pence per share being an increase of 45.0% on the prior year (2015: 10.0 pence per share). The Board aims to maintain dividend cover between two and three times for the foreseeable future.

2013
2014
2015
2016
Total dividend (pence)
2.5p
6.0p
10.0p
14.5p
Statement of Financial Position
During the year to 30 June 2016, shareholders' funds increased by 16.4m to 152.9m (2015: 136.5m). Net assets per share increased to 283 pence, an increase of 11.4% year on year (2015: 254 pence).
In the year, non-current assets decreased by 7.1m to 19.9m (2015: 27.0m). The main reasons for the change are the decrease in trade and other receivables of 6.1m and the 1.1m decrease in the deferred tax asset. 
Current assets increased by 19.2m to 160.8m (2015: 141.6m), with inventories increasing by 6.0m to 114.2m, trade and other receivables increasing by 5.8m to 23.3m and cash balances increasing by 7.4m to 23.2m. 
Total liabilities decreased by 4.4m to 27.7m (2015: 32.1m). This was mainly due to trade and other payables of 26.9m (2015: 31.8m) being 4.9m lower.
Cash Flow 
The Group generated 7.4m (2015: 2.1m) of cash in the year, resulting in a net cash balance at 30 June 2016 of 23.2m (2015: 15.8m).
Operating cash flows before working capital movements, generated 29.1m (2015: 17.9m). Investment in working capital of 11.6m (2015: 14.3m excluding impairment of investment) resulted in cash generated from operating activities of 17.5m (2015: 8.4m). Tax and interest payments amounted to 3.7m (2015: 0.5m). Cash generated from investing activities totalled 0.0m (2015: 0.1m). Net cash out-flows from financing activities totalled 6.4m (2015: 6.0m), including 6.4m (2015: 4.1m) on dividend payments.

2013
2014
2015
2016
Cash balance (m)
9.9m
13.7m
15.8m
23.2m
Treasury Risk Management
The Group's cash balances are centrally pooled and invested, ensuring the best available returns are achieved consistent with retaining sufficient liquidity for the Group's operations. The Group deposits funds only with financial institutions which have a minimum credit rating of A.
As the Group operates wholly within the UK, there is no requirement for currency risk management.
Bank Facilities
The Group extended its 20.0m committed working capital facility with Lloyds Bank plc for a further three years to March 2019 on significantly improved terms. The extended facility includes an un-committed accordion option that could increase the facility size to 40.0m. The facility provides the Group with additional flexibility and capacity for growth. The facility was undrawn at the balance sheet date.
Pension 
The Group contributes to a defined contribution pension scheme. A charge of 0.5m (2015: 0.5m) was recorded in the Income Statement for pension contributions. The Group has no exposure to defined benefit pension plans.
Jolyon Harrison Stefan Allanson
Chief Executive Officer Chief Financial Officer
23 September 2016 23 September 2016


CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2016

2016

2015

000 

000 
Continuing operations



Revenue
142,065 

117,588 
Cost of sales
(94,509)

(77,287)
Gross profit
47,556 

40,301 




Administrative expenses before restructuring costs
(19,390)

(17,019)
Exceptional restructuring costs
- 

(1,236)
Administrative expenses
(19,390)

(18,255)
Operating profit
28,166 

22,046 




Exceptional provision for diminution in value of investments
- 

(4,896)




Financial income
512 

496 
Financial expenses
(440)

(383)
Profit before tax
28,238 

17,263 




Tax
(4,934)

(4,848)
Profit for the year from continuing operations
23,304 

12,415 




Discontinued operations



Loss for the year from discontinued operations (net of tax)
(345)

(207)




Profit for the year
22,959 

12,208 




Earnings per share attributable to equity holders of parent company



 Basic
42.59 p

22.77 p
 Diluted
42.51 p

22.61 p




Earnings per share from continuing operations



 Basic
43.23 p

23.16 p
 Diluted
43.15 p

22.99 p










CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2016

2016
2015

000 
000 



Profit for the year
 22,959 
 12,208 



Other comprehensive income


Items that may be subsequently reclassified to profit or loss


Change in value of available for sale financial assets
 (584)
 - 



Other comprehensive income for the year, net of tax 
 (584)
 - 



Total comprehensive income for the year attributable to equity holders of parent company
 22,375 
 12,208 


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2016



2016
2015

000 
000 



Non-current assets


Plant and equipment
1,274 
1,236 
Investment properties
506 
506 
Investments in joint ventures
- 
15 
Trade and other receivables
13,527 
19,606 
Deferred tax assets
4,567 
5,668 

19,874
27,031 
Current assets


Inventories
114,238 
108,222 
Trade and other receivables
23,284 
17,530 
Cash and cash equivalents
23,244 
15,809 

160,766
141,561 



Total assets
180,640 
168,592 



Non-current liabilities


Provisions
(100)
(59)
Current liabilities


Trade and other payables
(26,904)
(31,790)
Provisions
(111)
(214)
UK corporation tax
(620)
- 

(27,635)
(32,004)



Total liabilities
(27,735)
(32,063)



Net assets
152,905 
136,529 



Equity


Share capital
1,082 
1,074 
Share premium account
23 
23 
Capital redemption reserve
- 
- 
Available for sale reserve
(584)
- 
Retained earnings
152,384 
135,432 
Total equity 
152,905 
136,529 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2016

Share capital
Share premium account
Capital redemption reserve
Available for sale reserve
Retained earnings
Total

000
000
000
000
000
000







At 1 July 2014
 1,063 
 6,436 
 120 
-
 120,472 
128,091







Total comprehensive income for the period






Profit for the period
 - 
 - 
 - 
-
 12,208 
 12,208
Total comprehensive income for the period
 - 
 - 
 - 
-
 12,208 
 12,208







Transactions with owners, recorded directly in equity






Contributions and distributions to owners






Share issue
11
 55
 -
-
 - 
 66
Issue of preference shares
 50
 -
-
-
 - 
 50
Redemption of preference shares
(50)
-
-
-
-
(50)
Scheme of arrangement with shareholders
77,324
 (6,468)
(120)
-
(70,736)
 -
Share reduction 
 ( 77,324)
-
-
-
77,324
-
Purchase of own shares
-
-
-
-
(25)
(25)
Share-based payments
-
-
-
-
266
266
Dividends 
-
-
-
-
(4,077)
(4,077)
Transactions with owners, recorded directly in equity
 11
(6,413)
(120)
-
 2,752 
 (3,770)







At 30 June 2015
 1,074 
 23 
-
-
 135,432 
 136,529 







Total comprehensive income for the period






Profit for the period
 - 
 - 
 - 
-
 22,959 
22,959
Other comprehensive income
-
-
-
(584)
-
(584)
Total comprehensive income for the period
 - 
 - 
 - 
(584)
22,959
22,375







Transactions with owners, recorded directly in equity






Contributions and distributions to owners






Share issue
8
-
 -
-
 - 
8
Purchase of own shares
 - 
 -
-
-
(46)
(46)
Share-based payments
 - 
 -
-
-
420
420
Dividends 
 - 
 -
-
-
(6,381)
(6,381)
Transactions with owners, recorded directly in equity
8
-
-
-
(6,007)
(5,999)







At 30 June 2015
1,082
23 
-
(584)
152,384
152,905

CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 30 June 2016

2016
2015

000 
000 
Operating activities


Profit before tax from continuing operations
28,238
17,263
Loss before tax from discontinued operations
(336)
(207)

27,902
17,056



Depreciation of plant and equipment
763
798
Share-based payments
 420
 266
Profit on sale of available for sale assets
(73)
(171)
Loss on sale of other property, plant and equipment
 129
 104
Profit on sale of assets held for sale
-
(50)
Impairment of investments in joint ventures
15
-
Capitalisation of available for sale assets
-
(22)
Financial income
(512)
(496)
Financial expenses
440
383



Operating cash flows before movements in working capital
 29,084
 17,868



Impairment of investment
 -
 4,896
Increase in inventories
(6,016)
(7,506)
Increase in receivables
(604)
(16,420)
Increase/(decrease) in payables
(4,940)
 9,602



Cash generated in operating activities
 17,524
 8,440



Tax paid
(3,224)
(79)
Interest paid
(440)
(383)



Net cash flows from operating activities
 13,860
 7,978



Investing activities


Proceeds from disposal of available for sale assets
 926
 735
Proceeds from disposal of investment properties
 -
 236
Proceeds from disposal of plant and equipment
 8
 15
Interest (paid)/received
-
(3)
Purchase of plant and equipment
(940)
(870)



Net cash flows from investing activities
 (6)
 113



Financing activities


Repayment of borrowings
-
(1,933)
Proceeds from issue of shares
8
66
Purchase of own shares
(46)
(25)
Dividends paid
(6,381)
(4,077)



Net cash flows from financing activities
(6,419)
(5,969)






Net increase in cash and cash equivalents
7,435
2,122
Cash and cash equivalents at beginning of year 
 15,809
 13,687
Cash and cash equivalents at end of year
 23,244
 15,809


1. Accounting policies
Statement of compliance
Both the Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs"). 
Notes on the preliminary statement
The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Cautionary statement
This Report contains certain forward looking statements with respect to the financial condition, results, operations and business of MJ Gleeson plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this Report should be construed as a profit forecast.
Directors' liability
Neither the Company nor the Directors accept any liability to any person in relation to this Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.
Basis of preparation
The accounting policies adopted in the preparation of these accounts are consistent with those described in the Report and Accounts for the year ended 30 June 2015. Of the new standards, amendments and interpretations that are in issue and mandatory for the financial year ended 30 June 2016, there is no financial impact on these preliminary results.


2. Segmental analysis
For management purposes, the Group is organised into the following two operating divisions:
 Gleeson Homes
 Gleeson Strategic Land
Segment information about the Group's operations, including joint ventures, is presented below:


2016
2015


000 
000 
Revenue



Continuing activities:



Gleeson Homes
113,633
96,078

Gleeson Strategic Land
28,432
21,510


142,065
117,588





Discontinued activities
-
237





Total revenue
142,065
117,825




Profit on activities



Gleeson Homes
19,465
17,384

Gleeson Strategic Land
10,163
8,147


29,628
25,531

Administrative expenses
(1,462)
(2,249)

Exceptional restructuring costs
-
 (1,236)

Exceptional provision for diminution in value of investments
-
 (4,896)

Financial income
 512
 496 

Financial expenses
(440)
(383)

Profit before tax
28,238
17,263

Tax
 (4,934)
 (4,848)

Profit for the year from continuing operations
23,304
12,415





Loss for the year from discontinued operations (net of tax)
(345)
 (207)





Profit for the year attributable to equity holders of the parent company
22,959
12,208
The revenue in the Gleeson Homes segment relates to the sale of residential properties and land. All revenue for Gleeson Strategic Land segment is in relation to the sale of land.


3. Discontinued operations
The Group disposed of certain assets and liabilities of the Gleeson Engineering Division of Gleeson Construction Services to Black and Veatch Limited ("B&V") in a prior period and is treated as a discontinued operation.
The Group disposed of certain assets and liabilities of the Gleeson Building Division of Gleeson Construction Services to GB Building Solutions Ltd, in a prior period and is treated as a discontinued operation.

Gleeson Construction Services
Total
Gleeson Construction Services
Total

2016
2016
2015
2015

000
000
000
000





Revenue
 -
 -
 237 
 237 
Cost of sales
(6)
(6)
(275)
(275)
Gross loss
 (6) 
 (6) 
 (38) 
(38) 





Administrative expenses
(330)
(330)
(169)
(169)
Operating loss
(336)
(336)
(207)
(207)





Loss before tax
(336)
(336)
(207)
(207)





Tax
 (9)
 (9)
 -
 -
Loss for the year from discontinued operations
(345)
(345)
(207)
(207)





Loss per share - impact of discontinued operations




2016

2015


p

p





Basic

(0.64)

(0.39)





The cash flow statement includes the following relating to the operating loss on discontinued operations:







2016

2015


000

000





Operating activities

(47)

(73)


4. Exceptional items





2016
2015





000
000






Restructuring costs
-
(1,236)
Provision for diminution in value of investments
-
(4,896)





-
 (6,132)
No exceptional costs were incurred in the current year.









Restructuring costs







In the prior year reorganisation costs of 1,236,000 were incurred on consultancy and legal costs relating to the Scheme of Arrangement.









Provision for diminution in value of investments




In the prior year the Group made a provision against its investment in GB Building Solutions Limited and GB Group Holdings Limited ("GBGH") which went into administration on 9 March 2015.


5. Financial income and expenses

2015
2015

000
000
Financial income


Interest on bank deposits
4
4
Other interest
-
1
Unwinding of discount 
508
491

512
496



Financial expenses


Bank charges
(440)
(383)

(440)
(383)



Net financial income
72
113


6. Tax

Continuing operations
Discontinued operations
Total

2016
2015
2016
2015
2016
2015

000
000
000
000
000
000
Current tax:






Current year charge
3,797
-
-
-
3,797
-
Adjustment in respect of prior years
45
 3
-
-
45
3








3,842
 3
-
-
3,842
3







Deferred tax:






Current year expense
1,335
 4,959
7
-
1,342
4,959
Adjustment in respect of prior years
(519)
(54)
-
-
(519)
(54)
Impact of rate change
276
(60)
2
-
278
(60)







Deferred tax expense for the year
 1,092
 4,845
9
-
1,101
4,845







Total tax charge
4,934
4,848
9
-
4,943
4,848







Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Corporation tax has been calculated at 17.7% of assessable profit for the year (2015: 28.4%).
The charge for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:

2016
2015

000
000



Profit before tax on continuing operations
28,238 
17,263 
Loss before tax from discontinued operations
(336)
(207)
Profit before tax
27,902 
17,056 






Profit before taxation multiplied by the standard rate of UK corporation tax 20.0% (2015: 20.8%)
5,580
3,539 
Tax effect of:


Expenses not deductible for tax purposes
99
1,313 
Deduction in respect of share options exercised
(417)
-
Land remediation relief
(60)
-
Utilisation of tax losses not previously recognised
-
110
Deferred tax not recognised
(74)
-
Impact of rate changes on deferred tax assets
289
(60)
Adjustments in respect of prior years - current tax
45
-
Adjustments in respect of prior years - deferred tax
(519)
(54)
Tax charge 
4,943
4,848


7. Dividends

2016
2015

000
000
Amounts recognised as distributions to equity holders in the year:





Interim dividend for the year ended 30 June 2016 of 4.5p (2015: 2.7p) per share
2,433
1,448
Final dividend for the year ended 30 June 2015 of 7.3p (2014: 4.9p) per share
 3,948
 2,629

6,381
4,077
The proposed final dividend for the year ended 30 June 2016 of 10.0p per share (2015: 7.3p) makes a total dividend for the year of 14.5p (2015: 10.0p).
The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these Financial Statements. The total estimated dividend to be paid is 5,412,000.

8. Earnings per share
Continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the following:

2016
2015
Earnings
000
000
Earnings for the purposes of basic earnings per share, being net profit


attributable to equity holders of the parent company


Profit from continuing operations
23,304 
12,415 
Loss from discontinued operations
(345)
(207)
Profit for the purposes of basic and diluted earnings per share
22,959 
12,208 



2016
2015

No. 000
No. 000
Number of shares


Weighted average number of ordinary shares for the purposes of 
basic earnings per share
53,907 
53,614 
Effect of dilutive potential ordinary shares:


- - share options
103
383
Weighted average number of ordinary shares for the purposes of 
diluted earnings per share
54,010 
53,997 




2016
2015
From continuing operations


Basic earnings per share
43.23p
23.16p
Diluted earnings per share
43.15p
22.99p



From discontinued operations


Basic earnings per share
(0.64)p
(0.39)p
Diluted earnings per share
(0.64)p
(0.39)p



From continuing and discontinued operations


Basic earnings per share
42.59p
22.77p
Diluted earnings per share
42.51p
22.61p






2016
2015

000
000
Normalised earnings per share from continuing and 
discontinued operations


Profit for the purposes of basic and diluted earnings per share
22,959 
12,208 
Adjust for the impact of exceptional costs/credits
-
6,132



Normalised earnings
22,959
18,340 







2016
2015



Normalised basic earnings per share
42.59p
34.21p
Normalised diluted earnings per share
42.51p
33.96p

This information is provided by RNS
The company news service from the London Stock Exchange
  END
FR ZMGZLKVNGVZG