REG - MJ Gleeson Plc - Final Results
15/09/2022 07:01
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RNS Number : 5049Z MJ Gleeson PLC 15 September 2022
MJ GLEESON PLC
15
September 2022
("Gleeson" or "the Group" or "the
Company")
Audited results for the year ended 30 June 2022
Gleeson, the high-quality affordable housebuilder and land promotion
specialist, announces audited results which reflect strong underlying demand.
· Delivered record revenue and profit performances - PBT(1) up
33.1%
· Achieved medium-term strategic objective of delivering 2,000
homes p.a.
· Affordability continuing to underpin strong ongoing demand and
reservation levels
· Board expects further profitable growth in FY2023
Gleeson Homes:
· 2,000 homes sold, a 10.4% increase (2021: 1,812)
· Average selling price up 14.7% to £167,300 (2021: £145,800) -
underlying increase 11.8%
· Gross profit margin(1) on homes sold increased to 29.0% (2021:
28.5%)
· Operating profit(1) up 36.9% to £51.2m (2021: £37.4m)
· 23 new sites opened (2021: 27)
· Land pipeline up by 951 plots to 16,814 plots (2021: 15,863
plots)
Gleeson Land:
· Operating profit of £11.1m (2021: £11.1m)
· Six land sales completed during the year (2021: eight)
· Portfolio: 71 sites (2021: 71 sites) with the potential to
deliver 20,241 plots (2021: 22,315 plots)
Group:
· Revenue up 29.4% to £373.4m (2021: £288.6m)
· Profit before tax(1) up 33.1% to £55.5m (2021: £41.7m)
· Exceptional building safety cost provision of £12.9m
· EPS(1) up 34.2% to 78.1p (2021: 58.2p)
· Cash and cash equivalents £33.8m (2021: £34.3m)
· Proposed final dividend of 12p, making total dividend for the
year of 18p (2021: 15p)
2022 2021 Change
Revenue
Gleeson Homes £334.6m £265.8m 25.9%
Gleeson Land £38.8m £22.8m 70.2%
Total £373.4m £288.6m 29.4%
Operating profit by division
Gleeson Homes(1) £51.2m £37.4m 36.9%
Gleeson Land £11.1m £11.1m -
Profit before tax and exceptional items £55.5m £41.7m 33.1%
Exceptional items - building safety provision (£12.9m) - -
Cash and cash equivalents £33.8m £34.3m (£0.5m)
EPS(1) 78.1p 58.2p 34.2%
ROCE(2) 25.4% 21.4% +400bps
Dividend per share (total) 18.0p 15.0p 20%
1 Stated before exceptional building safety provision
(2) Return on capital employed is calculated based on earnings before
interest, tax and exceptional items ("EBIT"), expressed as a percentage of the
average of opening and closing net assets after deducting deferred tax and
cash and cash equivalents net of borrowings
Dermot Gleeson, Chairman, commented:
"This is another excellent performance which reflects not only the strong
operational capability of our business but also the continuing structural
under-supply of affordable homes for first time buyers on low incomes.
As well as being affordable, our high-quality homes are also very energy
efficient, costing significantly less to run than most houses in the UK,
particularly in the rented sector. As a result, our homes are much sought
after, and demand remains resilient.
Gleeson Land's market remained robust throughout the year and the business
delivered a strong result. Demand in the South of England for quality sites
with sustainable and implementable residential planning permission remains
strong and the division is well-placed to drive further sustainable growth.
The Board has reviewed a range of macroeconomic forecasts and, notwithstanding
the current outlook for the broader economy, remains confident that the Group,
with its defensive qualities and unique position within the wider house
building sector, is well-positioned to deliver further profitable growth in
the current financial year."
A presentation by James Thomson, CEO, and Stefan Allanson, CFO, will be held
at 09:30 this morning. To attend:
· by webcast, visit the company website:
www.mjgleesonplc.com/investors (http://www.mjgleesonplc.com/investors) or
access via the following link:
https://stream.brrmedia.co.uk/broadcast/62e7b10704182f363ba98987
(https://stream.brrmedia.co.uk/broadcast/62e7b10704182f363ba98987)
· by telephone, please dial-in using the below details:
o Number: +44 (0)330 165 4012
o Code: 9128592
Enquiries:
MJ Gleeson plc +44 1142 612900
James Thomson Chief Executive Officer
Stefan Allanson Chief Financial Officer
Hudson Sandler +44 2077 964133
Mark Garraway +44 7771 860938
Charlotte Cobb +44 7795 422131
Singer Capital Markets
Shaun Dobson +44 2074 963000
Rachel Hayes
Liberum
Neil Patel +44 2031 002222
This announcement contains inside information. The person responsible for
arranging the release of this announcement on behalf of the Company is Stefan
Allanson, Chief Financial Officer.
LEI: 21380064K7N2W7FD6434
Chairman's Statement
Introduction
I am delighted to report that the Group has delivered a record level of
revenue and profit.
This is testimony to the Group's robust operational capability and also to the
strong demand for our affordable homes in the North of England and the
Midlands, and for our consented residential sites in the South.
The continuing demand for affordable homes enabled us to deliver our
medium-term target of doubling our annual homes sales to 2,000 homes by 2022.
We are not complacent about the risks in the wider macroeconomic environment.
However, we believe that the affordability and energy-efficiency of our homes
will continue to make them highly attractive to young, first time buyers who
wish to escape the "rent trap" or who live with their parents and want to get
onto the property ladder.
Performance and dividend
Group revenue increased by 29.4% to £373.4m (2021: £288.6m), whilst profit
before tax and exceptional items was up 33.1% to £55.5m (2021: £41.7m).
In April 2022, the Company signed the Department for Levelling Up, Housing
and Communities' ("DLUHC") pledge in respect of remediating buildings with
life-critical fire-safety issues on buildings over 11 metres in which the
Group had, over the last 30 years, some involvement in developing. Based on
the work undertaken on buildings covered under the pledge, the Group has
recorded an exceptional provision this year of £12.9m. As a result, Group
profit before tax after exceptional items was £42.6m (2021: £41.7m).
The Group continues to maintain a strong financial position with a
well-capitalised balance sheet, ending the year with cash and cash equivalents
of £33.8m (2021: £34.3m). It also continues to have a £105m borrowing
facility available, provided by Lloyds Bank plc and Santander UK plc, which
was undrawn at year end.
Subject to shareholder approval at the 2022 Annual General Meeting ("AGM"),
the Board proposes to pay a final dividend of 12.0p per share on 25 November
2022, to shareholders on the register at the close of business on 28 October
2022. The total dividend for the year to 30 June 2022 will be 18.0p. The Board
intends to maintain an earnings to ordinary dividend cover ratio of between
three and five times and expects to pay a final dividend representing
two-thirds of the total dividend each year.
Strategy
Gleeson Homes is one of the UK's fastest-growing housebuilders. Our rate of
growth is attributable to the fact that the business is focused on a segment
of the market where there is both strong current demand and a structural
shortage of supply.
There are nine million rented households in England, of which just under half
are in the North of England and Midlands, the areas in which we operate.
Meanwhile, 74% of the homes that we sold in the financial year were to first
time buyers either living at home or in rented accommodation. According to
Rightmove, the cost of renting in the UK increased by 12% in the last 12
months and, in our regions, annual rental costs were 16% higher last year than
the annual cost of buying a comparable 2-bed Gleeson home. Moreover, Gleeson
homeowners see significant savings on their energy bills which are, based on
current energy prices, £700 lower per year on a typical 2-bed home compared
to older housing. This saving will continue to rise as the cost of energy
increases.
During the year Gleeson Homes continued to open more sites than it closed and
the division is confident that its strong land pipeline and the country's
severe shortage of affordable, energy-efficient homes will enable it to
deliver further sustainable and profitable growth over the medium and longer
term.
We have invested significantly over recent years in our systems, operating
structure and central services in order to provide ourselves with the ability
to grow and to expand our geographical reach in a controlled manner.
Gleeson Land will also benefit from the continuing demand from the major
housebuilders for high-quality consented sites in the South of England. The
congestion in the planning system has exacerbated the shortage of development
land and Gleeson Land is well-placed to benefit from this over the next three
to five years.
Board
James Thomson will step down as Chief Executive Officer on 31 December 2022
and will be succeeded on 1 January 2023 by Graham Prothero, currently Chief
Operating Officer at Vistry Group plc.
James has played a pivotal role in achieving the 2,000 homes target for
Gleeson Homes and in embedding the cultural and structural changes needed to
ensure that the Group continues to achieve high levels of sustainable growth.
We are delighted that he has agreed to remain on the Board as a Non-Executive
Director.
Andrew Coppel resigned in March 2022. Fiona Goldsmith was subsequently
appointed Senior Independent Director and Elaine Bailey was appointed Interim
Chair of the Remuneration Committee, with both appointments effective 24 March
2022.
The Board has initiated a search process to appoint a further Non-Executive
Director to the Board this year.
The Gleeson team
It is a great source of satisfaction that Gleeson has been recognised by the
independent consultant People Insight as one of the best companies in the UK
to work for.
Our vision - Building Homes. Changing Lives. - has been enthusiastically
embraced by our workforce at every level. It was the commitment and hard work
of the entire team that enabled us to deliver our milestone target of 2,000
sales during the year. I wish to express the Board's deep gratitude to all of
our staff and operatives for their contribution to this remarkable
achievement.
Summary and outlook
This is another excellent performance which reflects not only the strong
operational capability of our business but also the continuing structural
under-supply of affordable homes for first time buyers on low incomes.
As well as being affordable, our high-quality homes are also very energy
efficient, costing significantly less to run than most houses in the UK,
particularly in the rented sector. As a result, our homes are much sought
after, and demand remains resilient.
Gleeson Land's market remained robust throughout the year and the business
delivered a strong result. Demand in the South of England for quality sites
with sustainable and implementable residential planning permission remains
strong and the division is well-placed to drive further sustainable growth.
The Board has reviewed a range of macroeconomic forecasts and, notwithstanding
the current outlook for the broader economy, remains confident that the Group,
with its defensive qualities and unique position within the wider house
building sector, is well-positioned to deliver further profitable growth in
the current financial year.
Dermot Gleeson
Chairman
14 September 2022
Chief Executive's Statement
Overview
The result for the year was an outstanding performance, reflecting the
inherent resilience of our business model. Gleeson Homes builds high-quality,
low-cost homes for first time buyers and people on low to average incomes, a
part of the housing market that has been chronically underserved and where
demand will continue to outstrip supply for the foreseeable future.
Five years ago, we set an ambitious target to double the size of Gleeson Homes
with the aim of delivering 2,000 new homes in 2022. Reaching this target has
been a great achievement and everyone at Gleeson should feel proud of the part
they have played.
Whilst we are delighted to have delivered 2,000 new homes this year, we know
that we are barely making a dent in demand. This drives our ambition and our
resolve to change even more lives than we do today by building affordable,
quality homes, where they are needed for those who need them most.
Results
Group
Profit before tax and exceptional items increased by 33.1% to £55.5m (2021:
£41.7m).
The Group ended the year with cash and cash equivalents of £33.8m (2021:
£34.3m) and continues to have a strong balance sheet and significant
liquidity to invest in new sites and future growth.
In signing the Department for Levelling Up, Housing and Communities'
("DLUHC") pledge in April 2022, the Group gave its commitment to investigate
and remediate any life-critical fire-safety issues on buildings over 11 metres
in which the Group had some involvement in developing over the last 30 years.
Following a detailed assessment of the buildings covered by the pledge, an
exceptional provision of £12.9m has been recorded this year. This estimate of
the life-critical fire-safety remediation costs for these buildings is based
on reviews and surveys completed to date. We are in the process of undertaking
a programme of intrusive inspections and fire risk assessments, where
permitted by the building owners.
Like all housebuilders, we have also been subject to the additional 4%
residential property developers tax ("RPDT") from April 2022, which was
designed to raise at least £2bn over a 10-year period towards the
government's cost of dealing with defective cladding. This comes on top of the
planned rise in corporation tax from April 2023 from 19% to 25%.
Gleeson Homes
As a result of a strong performance in both volume and selling price, Gleeson
Homes delivered a record operating profit pre-exceptional items of £51.2m, up
36.9% on the previous year (2021: £37.4m).
The delivery of 2,000 homes this year represented a 10.4% increase on the
previous year (2021: 1,812 homes), which had been flattered by delayed
completions carried over from the first Covid-19 lockdown. Growth in the
second half of the year was notably strong with volumes up 24% following the
opening of a record 27 sites in the previous year and a planned step-up in
build rate to pre-Covid levels.
The average selling price of homes sold during the year increased by 14.7% to
£167,300 due to underlying selling prices increasing 11.8% and changes in the
mix of homes sold.
Whilst ensuring that our homes remain affordable, we were able to increase
selling prices at a rate which ensured that we offset increases in material
and labour costs. This enabled us to increase gross margin by 0.5% to 29.0%
(2021: 28.5%).
We successfully increased our operational footprint, opening 23 new Gleeson
Homes sites and are now building on 87 sites across the North of England and
Midlands (30 June 2021: 81 build sites). A further 73 sites, which are
progressing through a congested planning system, will allow us to continue
growing our footprint over the coming years.
Gleeson Homes established a new regional office in West Yorkshire in July 2022
as a result of the growing pipeline of sites and strong customer demand across
Yorkshire. This is the division's newest office and brings the business to a
total of nine regions.
We started the new financial year with a forward order book of 618 plots
(2021: 841 plots) reflecting our intentional management of sales releases to
optimise both prices and the customer journey.
Gleeson Land
Gleeson Land delivered a gross profit for the year of £13.8m (2021: £13.7m)
and operating profit of £11.1m (2021: £11.1m). The division sold six sites
during the year with the potential to deliver 1,443 plots for housing
development (2021: eight sites, 1,978 plots).
The pipeline of sites is strong and demand from medium and large housebuilders
for well-located, consented sites continues unabated.
Market
The fundamentals of the housing market, driven by the structural under-supply
of homes in the UK and new household formation, continue to ensure strong
demand.
In our core segment of the market, where the lack of supply is felt most
keenly, we expect this to continue, reinforced by cost of living pressures
which will further enhance the attractiveness of a Gleeson home even after
factoring in future interest rate rises.
The average selling price of a new build home in our geographic regions is
£266,000, 59% higher than the average selling price of a Gleeson home at
£167,300. Gleeson Homes is therefore uniquely positioned to serve customers
who might previously have been considering a more expensive property but who,
in the current environment, will look at more affordable price points. We are
already seeing interest from these value-driven customers.
Employment levels remain high and mortgage availability, supported by the
recent relaxation of lending rules, is robust. Whilst the withdrawal of the
Help to Buy scheme, which closes for new applications in October 2022, means
no government support for homebuyers for the first time in over 20 years, it
is not expected to impact the affordability of, or demand for, a Gleeson home.
The market served by Gleeson Land for consented residential development land
has also benefitted from strong demand from housebuilders looking to re-stock
their immediate and short-term land pipelines. As the issues in the planning
system show no signs of being resolved quickly, the demand for attractive,
well-located sites with residential planning permission is expected to remain
robust.
Following recent corporate transactions in the sector, Gleeson Land is now one
of only two large land promoters whose interests are aligned with landowners.
Most other large land promoters are owned by a major developer promoting land
for their own development purposes.
Investing in the future
In 2020 we put in place a number of medium-term initiatives to reinforce the
operational resilience and performance of the business.
This was underpinned by significant investment across our systems, operating
structure and central services. We have completed a major review of our senior
management and regional teams. We are now seeing significant benefits from the
investment across our Commercial, Customer Care, Marketing, HR, H&S and IT
functions. In addition, we have transformed the look and feel of our sites,
and have improved the customer journey.
We can always do more but, for now, we have significantly strengthened the
business and ensured that it is well-positioned to grow at pace, sustainably.
Sustainability
Home ownership
Our vision of "Building Homes. Changing Lives." and our mission of "Changing
lives by building affordable, quality homes. Where they are needed, for the
people who need them most." supports UN Sustainable Development Goal 11
("Sustainable cities and communities") to provide access for all to "safe and
affordable housing". I am proud that a young working couple on the National
Living Wage can afford to buy a high-quality home on any one of our
developments. This year 82% of the homes that we sold were either in the most
deprived areas of the country or on brownfield land in need of regeneration.
Climate and the environment
We have made good progress this year in further reducing the carbon emissions
in our direct operations by 9%, down to 1.86 tonnes per home sold. This comes
on top of the 18% reduction we achieved the previous year. The embodied carbon
in the homes that we build, including from our supply chain and our homes in
use, remains a key area of focus and we have significantly increased the
accuracy and our understanding of this "scope 3" measure this year. We are
already taking steps to switch to lower carbon materials, where viable, such
as using concrete bricks or reconstituted stone rather than kiln-fired clay
bricks.
Government policy continues to have a significant impact on the design,
construction and materials used in our homes, brought about through the Future
Homes Standard and changes in building regulations. These requirements are
built into our plans, most notably the changeover from gas boilers to air
source heat pumps and installation of EV charging points. Whilst these
technologies increase the cost and embodied carbon of each home we build, they
will ultimately have a long-term benefit in reducing the carbon emissions of
our homes in use over their lifetime.
We are supportive of the measures to improve energy efficiency and our homes
already have better energy performance ratings than most other homes, with 97%
of our homes having an EPC "B" rating or above. Customers also benefit from
living in an energy-efficient and well-insulated home. The average Gleeson
home requires 49% less energy to heat and power than existing housing, and the
average Gleeson buyer of a 2-bed home currently save over £700 per year on
their energy bills based on actual usage data. The saving will continue to
rise as the cost of energy increases.
The increasing push towards nationally described space standards ("NDSS") has
the unintended consequences of making homes larger and more expensive despite
it being clear that this is not what many customers want, and will play a part
in increasing the embodied carbon emissions of building our homes.
People and health and safety
We could not have achieved our 2,000 homes target without the hard work,
commitment, focus and passion of every single colleague as well as the support
of our subcontractors, supply chain and other professionals. I am hugely
proud of the contribution that everyone has made in helping us deliver our
target.
Our independently-assessed people engagement score increased from 89% to 90%
this year with a higher response rate across the Group, placing us amongst the
top 10% of all companies surveyed across the country. As a result, we were
recognised by People Insight and awarded the "Outstanding Workplace" award.
This is an important recognition of the progress that we have made in
developing the culture, values and people experience across the Group.
On health and safety performance, the number of reportable incidents fell from
10 last year to one this year, but we remain ever vigilant. Health and safety
has been an area of significant investment with a focus on training, safe
working practices, site inspections and reporting. Every development site
receives a monthly visit by independent health and safety inspectors, which is
an important control to ensure we benchmark ourselves against best-practice in
the industry.
Build quality and customer service
Build quality remains a priority and for many customers buying a Gleeson home
represents the single largest financial commitment of their lives. For this
reason, we have to get it right and meet their expectations in terms of
quality and customer experience.
Putting the customer at the heart of what we do means understanding what our
customers want as part of their home-buying experience. We have invested in
our "Customer First" campaign this year and it is pleasing to see that this
has helped us to maintain our customer recommendation score at 90.7% (2021:
90.6%), which keeps us in line with the Home Builders Federation 5-star
rating.
Gleeson is already registered under the New Homes Quality Code ("NHQC") and we
fully support its principles. Whilst we are already compliant with many of the
NHQC's obligations, some of our processes are being updated to meet these new
requirements.
Land
Our pipeline of owned and conditionally purchased sites increased by 6.0% to
16,814 plots on 160 sites. We continue to target brownfield land and sites in
areas of deprivation and 78% of our pipeline plots are located on brownfield
land or in the most deprived areas. This is land most in need of regeneration
across the North of England and Midlands.
Gleeson Land added a further seven sites to its portfolio and has a healthy
pipeline of 71 sites, with the potential to deliver 20,241 plots and 25 acres
of commercial land. Increasingly, to progress these sites successfully,
Gleeson Land has to strike the right balance in delivering housing numbers
with protecting land, ecosystems and biodiversity. Ultimately, developers are
looking for well-planned, well-located, sustainable sites and getting the
balance right helps us to achieve best value.
Trading and outlook
We have had a good start to the current financial year. First time buyer
demand, driven by the shortage of new homes, remains strong. Moreover, the
cost of living challenges faced by many home buyers means the affordability of
our homes is leading to additional interest from customers who might not
previously have considered a Gleeson home.
Gleeson Land is also benefitting from the shortage of high-quality consented
land, exacerbated by congestion in the planning system. The delays and
complexities in the planning system serve only to fuel demand and maintain
land prices as developers bid for consented land.
Importantly, we are now seeing the benefits of a significant investment
programme across our systems, operating structure and central services which
collectively will ensure that the Group has the ability to grow and expand its
geographical reach in a controlled manner.
As a result, I believe Gleeson is well-positioned to deliver further
profitable growth in the financial year.
James Thomson
Chief Executive Officer
14 September 2022
Gleeson Homes - Business Review
Market context and position
· Home ownership remains below aspirational levels
· Gleeson Homes is distinct by focusing on quality, low-cost homes
· Gleeson Homes' growth reflects strong market demand, which is
expected to continue
· Affordable housing is a large, resilient and underserved segment
of the market
The housing market remained strong throughout the year with house prices in
the UK growing by 12.8% over the year to May 2022(1). Whilst house price
increases are widely expected to cool in the short to medium term, the
under-supply of high-quality, energy-efficient housing is expected to continue
to drive house building activity.
Gleeson Homes is one of the fastest-growing housebuilders in the sector,
having doubled the number of homes sold over the last five years. We are
focused on a distinctly underserved segment of the market - young, first time
buyers on low to average incomes - where demand is expected to continue
unabated.
Competitive advantages
· Affordability is the most important factor for our customers
· It is cheaper to buy a Gleeson home than rent - with lower energy
costs than existing housing
· Large and high-quality land pipeline - over eight years' supply
· Well-designed homes that meet our customers' needs and
expectations
Gleeson Homes' buyers are motivated to move by need. The average cost of a new
build home in our geographic areas, the North of England and Midlands, is 59%
higher than the average cost of a Gleeson home, at £167,300, and it remains
cheaper to buy than to rent.
As the cost of energy continues to rise, buyers are increasingly focused on
energy efficiency, and the average Gleeson home uses 49% less energy than
existing housing. Whilst the cost of living crisis may restrict the ability of
some first time buyers to buy from other housebuilders, Gleeson Homes is well
positioned to serve these customers as well as benefit from home movers who
gravitate to our lower price point.
2022 2021
Homes sold 2,000 1,812
Average selling price £167,300 £145,800
Operating profit* £51.2m £37.4m
Operating margin* 15.3% 14.1%
*Stated before exceptional items
2022 2021
Plots owned 8,478 7,930
Plots conditionally purchased 8,336 7,933
Total plots in pipeline 16,814 15,863
2022 2021
Plots on brownfield land or areas of deprivation 13,189 12,953
Plots on greenfield land or more affluent areas 3,625 2,910
Total plots in pipeline 16,814 15,863
Results
Gleeson Homes delivered its medium-term strategic objective of doubling home
sales within five years by completing the sale of 2,000 homes during the year
(2021: 1,812 homes). This was an increase of 10.4% on the previous year, which
had been flattered by delayed completions carried over from the first Covid-19
lockdown.
Revenue increased by 25.9% to £334.6m (2021: £265.8m), exclusively from home
sales (2021: included £1.5m from land sales). The average selling price of
homes sold during the year increased by 14.7% to £167,300 (2021: £145,800),
driven by higher underlying selling prices up 11.8% and changes in the mix of
site locations and house types.
Strong selling price increases more than offset significant material and
labour cost increases, albeit the issues with materials availability eased in
the second half of the year. As a result, gross profit margin on homes sold
increased to 29.0% (2021: 28.5%).
The increase in the volume of homes sold, average selling price and gross
profit margin resulted in gross profit increasing by 28.0% to £96.9m (2021:
£75.7m, including £0.4m from land sales). Operating costs were well
controlled after the significant investment made in the business structure,
operations and headcount in recent years. Administrative expenses as a
proportion of turnover reduced from 14.5% to 13.8% which helped underlying
operating profit increase by 36.9% to £51.2m (2021: £37.4m, including £0.4m
land sales) and operating margin increased from 14.1% to 15.3%.
Building safety
The Group has established an exceptional provision of £12.9m for the
estimated costs to remediate life-critical fire-safety issues on buildings
over 11 metres in which the Group had some involvement in developing over the
last 30 years.
Sites
Gleeson Homes opened 23 new build sites during the year and started the new
financial year with 87 active build sites (2021: 81), of which 61 were
actively selling (2021: 61). This has been achieved despite the ongoing
congestion in the planning system which continues to impact the time taken to
obtain planning consent, agree pre-start conditions and acquire new sites. Our
average active build sites and sales sites were 83 and 63 respectively (2021:
78 and 64).
Gleeson Homes' developments are located across the North of England and the
Midlands, with plans to continue expanding in existing areas and into
neighbouring regions. The business expects to open a further 22 sites during
the new financial year and be building on approximately 90 sites by 30 June
2023.
Pipeline
Land continues to be available at sensible prices. The pipeline of owned and
conditionally purchased sites increased by 6.0% to 16,814 plots on 160 sites
at 30 June 2022, representing over eight years of sales (2021: 15,863 plots on
152 sites). Of the total plots, 8,478 plots are owned (2021: 7,930 plots) and
8,336 plots have been conditionally purchased subject to receiving planning
permission (2021: 7,933).
During the year, 33 new sites were added to the pipeline, whilst 25 sites were
completed or did not proceed to purchase. In addition to owned and
conditionally purchased plots, there are a further 336 plots (2021: 205 plots)
which are being actively considered for acquisition but will only proceed if
they meet our strict criteria.
Help to Buy
The number of customers using the government's Help to Buy scheme, which will
close to new applications in October 2022, reduced as expected to 53% (2021:
69%). The withdrawal of the scheme is not expected to impact demand and we
continue to provide a range of other bespoke packages to assist potential
customers. These include our Key Worker Priority Programme and Forces Property
Direct programme, which provide priority access and vouchers toward optional
extras for key workers and military personnel.
Outlook
Strong first time buyer demand, driven by the acute shortage of new homes, is
expected to continue, albeit with more modest house price growth widely
expected in the short term. Crucially, the affordability of our homes will
help to mitigate the impact of both inflationary pressures and higher interest
rates for first time buyers and home movers, which will continue to drive
demand.
(1)Gov.uk UK House price index, May 2022
Gleeson Land - Business Review
Market context and position
· Gleeson Land is one of the largest residential land promoters in
England
· Land promoters deliver two out of every five consented sites to
housebuilders
· Planning delays are slowing the residential planning process
· Increasing demand for consented land is leading to higher land
values
The market for consented land remains strong, with demand being seen from
housebuilders of all sizes. We are receiving a high number of bids on the
sites we bring to market and bidders are seeking to be more competitive on
their offers.
At the same time, the supply of consented land has been adversely impacted by
planning delays which are affecting both developers and land promoters alike.
The planning process has been slowed by staff shortages in local councils and
local authorities holding back on reviewing their Local Plans whilst potential
changes in planning policy are uncertain. Natural England's guidance on
nutrient neutrality, together with phosphate and nitrate mitigation
requirements, has also caused further delays across the industry and Gleeson
Land is currently unable to progress planning on nine sites until a resolution
is agreed. These factors have led to pressure on land supply, which in turn
has increased land values, with annual growth of UK greenfield residential
development land values up 9.9% to June 2022(1).
(1) Savills Residential Development Land Q2 2022
Competitive advantages
· High planning success rate, including through appeal
· Strong relationships with all major housebuilders
· Strong pipeline of sites held under promotion or option
agreements
· High cash conversion
Gleeson Land specialises in sourcing high-quality land opportunities to
promote for residential development. We have a dedicated and highly-skilled
team who navigate the complexities of the planning system, plus an in-house
technical team experienced in dealing with drainage, flooding, landscaping and
other physical site constraints. We have an outstanding planning success rate
of over 90% and bring high-quality, "technically solved" sites to market.
The business operates a low capital intensity model, securing land interests
either through option or promotional agreements rather than taking freehold
land ownership, therefore avoiding the speculative risk on land value. Gleeson
Land generates a high cash return which enables continuous investment in the
portfolio and sites. Our reputation, experience and relationships with
landowners, agents, local authorities and other stakeholders set us apart.
2022 2021
Sites sold 6 8
Plots sold 1,443 1,978
Portfolio 71 sites 71 sites
Operating profit £11.1m £11.1m
2022 2021 2020
Sites with planning consent or resolution to grant 3 6 11
Sites with planning submitted 16 15 7
2022 2021
Plots held under option 6,188 6,953
Plots held under promotion agreement 13,564 14,583
Plots held freehold 489 779
Total plots in pipeline 20,241 22,315
Results
During the year, the business sold six sites with residential planning
permission for 1,443 plots (2021: eight sites, 1,978 plots) at an average of
£9,550 gross profit per plot (2021: £6,910 per plot). These were sold to a
range of housebuilders, and increasingly we are seeing housing associations
and smaller private housebuilders bidding on equally competitive terms to
major housebuilders. Total gross profit for the year was £13.8m (2021:
£13.7m).
Revenue from land sales increased to £38.8m (2021: £22.8m), driven by the
mix of option and planning promotion sites sold (which have different
accounting treatments for revenue recognised on sale). Included within revenue
is £2.5m relating to further phases of a legacy site sold in 2019. The sites
sold in the year totalled 221 gross acres.
Overheads for the business continue to be well controlled at £2.7m (2021:
£2.6m). As a result, operating profit remained in line with the prior year at
£11.1m (2021: £11.1m).
Portfolio
This year Gleeson Land added seven sites (904 plots) to its portfolio secured
under option and promotion agreements, and split two existing sites. Three
legacy sites which were no longer viable to promote were aborted.
At 30 June 2022, the business had a portfolio totalling 71 sites (2021: 71
sites) with the potential to deliver 20,241 plots (2021: 22,315 plots) plus 25
acres of commercial land (2021: 44 acres).
The portfolio is expected to realise value over the short, medium and long
term, driven by the planning context of each site. It continues to have a
geographic bias towards the South of England where land values are highest.
We continue to see opportunities to add well-located, attractive sites to the
portfolio both through our strong relationships with land agents and through
proactive in-house land sourcing. We carefully select sites where we see the
potential for development and where we can unlock maximum value for
landowners.
Planning
This year Gleeson Land submitted planning applications for 10 sites with the
potential to deliver 1,428 plots (2021: 10 sites, 1,281 plots). Whilst in the
prior year the slowdown in the planning system was attributable to the impact
of Covid-19, other factors are now delaying applications in certain local
authorities including potential changes to planning policy and environmental
issues such as nitrate and phosphate mitigation and nutrient neutrality.
Whilst the planning system remains extremely congested, our team is
experienced in navigating these challenges and we have a record number of
sites being promoted through the planning system.
Outlook
Although the shortage of consented land in the market is having a positive
increase in land values, a cautious approach is maintained for the future
outlook. Land value growth is expected to slow as developers contend with more
modest house price growth and supply chain pressures. However, Gleeson Land is
well positioned to deal with the market dynamics with an agile, low capital
intensity model and resources to invest in its portfolio. It has a strong
pipeline of sites at different stages in the planning process that will
continue to support profit delivery and growth.
Financial Review
The Group delivered a strong performance for the year with revenue up 29.4%
and underlying profit before tax and exceptional items up 33.1%.
Strong trading results - pre-exceptional items
Group revenue increased by 29.4% to £373.4m (2021: £288.6m) as a result of
significant growth in Gleeson Homes and the mix of sites sold by Gleeson Land.
Gleeson Homes' revenue increased by 25.9% to £334.6m (2021: £265.8m) driven
by a 10.4% increase in the number of homes sold to 2,000 (2021: 1,812) and a
14.7% increase in the average selling price ("ASP") to £167,300 (2021:
£145,800), driven by underlying selling prices up 11.8% and changes in the
mix of sites and house types.
Gleeson Land sold six sites in the year (2021: eight sites). Revenue increased
by 70.2% to £38.8m (2021: £22.8m), driven by the mix of sites sold under
option and promotion agreements.
Underlying gross profit for the Group increased by 24.0% to £110.7m (2021:
£89.3m), with gross profit in Gleeson Homes increasing by 28.0% to £96.9m
(2021: £75.7m). The gross profit margin for Gleeson Homes increased to 29.0%
(2021: 28.5%) as increases in selling prices more than offset cost inflation.
Gross profit for Gleeson Land remained relatively flat at £13.8m (2021:
£13.7m) due to continued congestion in the planning system slowing the
progress of sites in the pipeline.
Administrative expenses increased by £7.3m (15.5%) in the year to £54.5m
(2021: £47.2m) as investment to support the future growth of the business
continued.
Underlying Group operating profit was £56.8m, a 31.8% increase (2021:
£43.1m) on the prior year. This growth was driven by the 36.9% increase in
operating profit in Gleeson Homes to £51.2m (2021: £37.4m) with Gleeson Land
operating profit remaining flat at £11.1m (2021: £11.1m). Group overheads
were £5.5m (2021: £5.4m).
Net finance expenses of £1.3m (2021: £1.4m) consisted of finance expenses of
£1.5m (2021: £1.7m) being interest payable on bank facilities, bank charges
and the unwinding of discounts on deferred payables, partly offset by finance
income of £0.2m (2021: £0.3m) consisting of the unwinding of discounts on
deferred receivables on land sales and shared equity receivables.
As a result, the Group delivered underlying profit before tax and exceptional
items of £55.5m (2021: £41.7m).
Exceptional items - building safety provision
In April 2022, MJ Gleeson plc signed the Department for Levelling Up, Housing
and Communities' ("DLUHC") pledge, taking responsibility for performing or
funding mitigation works to address life-critical fire-safety issues on
buildings over 11 metres in which the Group had, over the last 30 years, some
involvement in developing and to secure withdrawal of those buildings from the
Building Safety Fund and ACM Funds.
Following the detailed assessment of the buildings covered by the pledge, an
exceptional provision of £12.9m was recorded. This is management's best
estimate of the life-critical fire-safety remediation costs for these
buildings based on reviews and surveys completed to date. We are in the
process of undertaking a programme of intrusive inspections and fire risk
assessments, where permitted by the building owners.
Tax
The pre-exceptional tax charge was £10.0m, which represents an effective tax
rate of 18.0%. Included in the tax charge is £0.1m related to the
newly-enacted residential property developers tax ("RPDT"), which was
effective from 1 April 2022 and applies to profit from residential development
activity.
A tax credit of £2.5m was recognised in respect of the exceptional provision.
This resulted in a total tax charge for the year of £7.5m (2021: £7.8m),
reflecting an effective tax rate of 17.7% (2021: 18.8%).
The effective tax rate will increase from next year as a result of a full year
of RPDT and the planned increase in the standard rate of corporation tax to
25% from April 2023.
Profit for the year
Underlying profit after tax for the year increased 34.2% to £45.5m, while
reported profit, net of the exceptional charge, increased 3.5% to £35.1m
(2021: £33.9m).
Earnings per share
Underlying basic earnings per share increased by 34.2% to 78.1 pence (2021:
58.2 pence). Reported basic earnings per share increased to 60.2 pence (2021:
58.2 pence).
Improved return on capital employed
Pre-exceptional return on capital employed increased 400 basis points to 25.4%
(2021: 21.4%) driven by the strong returns in Gleeson Homes.
Strong balance sheet
During the year to 30 June 2022, shareholders' funds increased by 11.1% to
£272.2m (2021: £244.9m). Net assets per share increased to 467 pence, an
increase of 11.2% year on year (2021: 420 pence).
Non-current assets increased during the year by 11.9% to £14.1m (2021:
£12.6m). This was primarily due to an increase in property, plant and
equipment of £1.4m, being mostly the cost of sales offices, show homes and
site compounds.
Current assets increased by 17.6% to £353.5m (2021: £300.5m), with
inventories increasing by £46.9m to £286.9m, mostly as a result of
investment in Gleeson Homes land and build activity, and trade and other
receivables increasing by £6.8m to £29.2m (2021: £22.4m). Cash and cash
equivalents reduced marginally from £34.3m to £33.8m. Corporation tax
receivable decreased by £0.3m to £3.6m.
Total liabilities increased by £27.2m to £95.4m (2021: £68.2m). This
includes the £12.9m building safety provision made in the year, as well as a
£10.9m increase in accruals and deferred income to £37.9m (2021: £27.0m),
and a £2.1m increase in trade payables to £36.5m (2021: £34.4m). Land
creditors remained low at £10.7m (2021: £7.8m).
Cash and bank facilities
The Group generated cash before financing activities of £9.7m (2021:
£21.2m). After dividend payments of £9.3m, lease payments of £0.5m and the
purchase of own shares of £0.4m, the Group had a net cash outflow of £0.5m
(2021: £42.5m outflow, reflecting the repayment of borrowings of £60.0m in
November 2020).
At 30 June 2022, the Group had cash and cash equivalents of £33.8m (2021:
£34.3m).
The Group continues to have a £105m borrowing facility available, provided by
Lloyds Bank plc and Santander UK plc.
Dividends
As a result of the strong financial performance in the year and our confidence
in our future growth, the Board proposes a final dividend of 12.0p per share,
which equates to £7.0m. The dividend will be paid on 25 November 2022 to
shareholders on the register at the close of business on 28 October 2022.
Combined with the interim dividend of 6.0p per share paid in April 2022, the
total dividend for the year will be 18.0p, representing an increase of 20% on
the prior year (2021: total dividend of 15.0p per share).
The Board intends to maintain an earnings to ordinary dividend cover ratio of
between three and five times and expects to continue paying a final dividend
representing two-thirds of the total dividend each year.
Stefan Allanson
Chief Financial Officer
14 September 2022
AUDITED CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2022
2022
2022 2022 2021
Pre-exceptional items Exceptional items (note 3) Total
£000 £000 £000 £000
Revenue 373,409 - 373,409 288,575
Cost of sales (262,753) (12,867) (275,620) (199,230)
Gross profit 110,656 (12,867) 97,789 89,345
Administrative expenses (54,543) - (54,543) (47,185)
Other operating income 684 - 684 923
Operating profit 56,797 (12,867) 43,930 43,083
Finance income 172 - 172 377
Finance expenses (1,482) - (1,482) (1,749)
Profit before tax 55,487 (12,867) 42,620 41,711
Tax (9,976) 2,445 (7,531) (7,839)
Profit for the year attributable to the equity holders of the parent 45,511 (10,422) 35,089 33,872
Earnings per share
Basic 78.12 p 60.23 p 58.16 p
Diluted 77.92 p 60.08 p 58.07 p
AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2022
2022
2022 2022 Total 2021
Pre-exceptional items Exceptional items (note 3)
£000 £000 £000 £000
Profit for the year 45,511 (10,422) 35,089 33,872
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Change in value of shared equity receivables at fair value 120 33
120 -
Movement in tax on share-based payments taken directly to equity - 302
- -
Other comprehensive income for the year (net of tax) 120 335
120 -
Total comprehensive income for the year 45,631 (10,422) 35,209 34,207
AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2022
2022 2021
£000 £000
Non-current assets
Property, plant and equipment 8,112 6,684
Trade and other receivables 5,051 4,672
Deferred tax assets 941 1,233
14,104 12,589
Current assets
Inventories 286,882 239,961
Trade and other receivables 29,243 22,378
UK corporation tax 3,565 3,875
Cash and cash equivalents 33,764 34,331
353,454 300,545
Total assets 367,558 313,134
Non-current liabilities
Trade and other payables (9,703) (6,917)
Provisions (12,049) (236)
(21,752) (7,153)
Current liabilities
Trade and other payables (72,291) (61,027)
Provisions (1,339) (23)
(73,630) (61,050)
Total liabilities (95,382) (68,203)
Net assets 272,176 244,931
Equity
Share capital 1,166 1,165
Share premium 15,843 15,843
Own shares (471) -
Retained earnings 255,638 227,923
Total equity 272,176 244,931
AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2022
Share capital Share premium Own Retained earnings Total
shares
equity
£000 £000 £000 £000 £000
At 1 July 2020 1,161 15,843 - 195,601 212,605
Profit for the year - - - 33,872 33,872
Other comprehensive income - - - 335 335
Total comprehensive income for the year - - - 34,207 34,207
Share issue 4 - - - 4
Purchase of own shares - - - (61) (61)
Share-based payments - - - 1,089 1,089
Dividends - - - (2,913) (2,913)
Transactions with owners, recorded directly in equity 4 - (1,885) (1,881)
-
At 30 June 2021 1,165 15,843 - 227,923 244,931
Profit for the year - - - 35,089 35,089
Other comprehensive income - - - 120 120
Total comprehensive income for the year - - - 35,209 35,209
Share issue 1 - - - 1
Transfer of own shares - - (136) 136 -
Purchase of own shares - - (403) - (403)
Utilisation of own shares - - 68 268 336
Share-based payments - - - 1,568 1,568
Movement in tax on share-based payments taken directly to equity - - - (128) (128)
Dividends - - - (9,338) (9,338)
Transactions with owners, recorded directly in equity 1 - (471) (7,494) (7,964)
At 30 June 2022 1,166 15,843 (471) 255,638 272,176
AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2022
2022 2021
£000 £000
Operating activities
Profit before tax 42,620 41,711
Depreciation of property, plant and equipment 3,124 2,772
Share-based payments 1,568 1,089
Profit on redemption of shared equity receivables (375) (230)
Increase in provisions including exceptional items 13,129 -
Loss on disposal of property, plant and equipment 403 200
Disposal of right-of-use assets - 50
Finance income (172) (377)
Finance expenses 1,482 1,749
Operating cash flows before movements in working capital 61,779 46,964
Increase in inventories (46,921) (23,626)
Increase in receivables (8,165) (6,709)
Increase in payables 13,244 19,706
Cash generated from operating activities 19,937 36,335
Tax paid (7,059) (10,216)
Finance costs paid (1,043) (1,934)
Net cash flow surplus from operating activities 11,835 24,185
Investing activities
Proceeds from disposal of shared equity receivables 1,566 858
Proceeds from disposal of property, plant and equipment - 7
Interest received 20 6
Purchase of property, plant and equipment (3,684) (3,839)
Net cash flow deficit from investing activities (2,098) (2,968)
Financing activities
Repayment of loans and borrowings - (60,000)
Net proceeds from issue of shares 1 4
Purchase of own shares (403) (61)
Dividends paid (9,338) (2,913)
Principal element of lease payments (564) (723)
Net cash flow deficit from financing activities (10,304) (63,693)
Net decrease in cash and cash equivalents (567) (42,476)
Cash and cash equivalents at beginning of year 34,331 76,807
Cash and cash equivalents at end of year 33,764 34,331
NOTES TO THE FINANCIAL INFORMATION
for the year ended 30 June 2022
1. Accounting policies
Statement of compliance
The Group Financial Statements have been prepared and approved by the
directors in accordance with UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
Notes on the preliminary statement
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 30 June 2022 or 2021, but is derived
from those accounts. Statutory accounts for 2021 have been delivered to the
Registrar of Companies, and those for 2022 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 Annual Report and Accounts for the year
ended 30 June 2021, with the exception of the below.
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK Endorsement Board.
The Group and Company transitioned to UK-adopted International Accounting
Standards in its consolidated Group and Company financial statements on 1 July
2021. This change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the period reported
as a result of the change in framework.
Going concern
In the prior year to 30 June 2021, the Group negotiated a committed club
facility with Lloyds Bank plc and Santander UK plc. The facility has a limit
of £105m (previously £70m with Lloyds Bank plc), which expires in October
2024 and provides the Group with additional liquidity and investment funding.
The Group has maintained its strong financial position and ended the year with
cash and cash equivalents of £33.8m (2021: £34.3m).
Current forecasts are based on the latest three-year budget approved by the
Board in May 2022. This reflected a cautious view on the trading outlook based
on the current market and the degree of macroeconomic risk.
These forecasts were then subject to a range of sensitivities including a
severe but plausible scenario together with the likely effectiveness of
mitigating actions. The assessment considered the combined 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:
· reduction in Gleeson Homes volumes of approximately 20%;
· reduction in Gleeson Homes selling prices by 5% recovering over a
medium term of five years;
· material build cost increases of 10% over and above the levels
forecast; and
· a delay on the timing of Gleeson Land transactions and land
selling values.
Under these sensitivities, after taking certain 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 Company and the Group have 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 financial statements for the Company and the Group have 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
All of the Group's operations are carried out entirely within the United
Kingdom. Segmental information about the Group's operations is presented
below:
2022 2022
Pre-exceptional items Exceptional items 2022 2021
Total
(note 3)
£000 £000 £000 £000
Revenue
Gleeson Homes 334,571 - 334,571 265,770
Gleeson Land 38,838 - 38,838 22,805
Total revenue 373,409 - 373,409 288,575
Divisional operating profit
Gleeson Homes 51,227 (12,867) 38,360 37,437
Gleeson Land 11,061 - 11,061 11,080
62,288 (12,867) 49,421 48,517
Group administrative expenses (5,491) - (5,491) (5,434)
Finance income 172 - 172 377
Finance expenses (1,482) - (1,482) (1,749)
Profit before tax 55,487 (12,867) 42,620 41,711
Tax (9,976) 2,445 (7,531) (7,839)
Profit for the year 45,511 (10,422) 35,089 33,872
The revenue in the Gleeson Homes segment primarily relates to the sale of
residential properties. In addition, within revenue for Gleeson Homes is £nil
relating to land sales (2021: £1,521,000). All revenue for the Gleeson Land
segment is in relation to the sale of land interests. There is no revenue
relating to Group activities.
No single customer accounts for more than 10% of revenue (2021: no single
customer).
Balance sheet analysis of business segments:
2022 2021
Assets Liabilities Net assets/ (liabilities) Assets Liabilities Net assets
£000 £000 £000 £000 £000 £000
Gleeson Homes 280,481 (85,170) 195,311 223,328 (54,892) 168,436
Gleeson Land 49,230 (5,869) 43,361 50,487 (9,106) 41,381
Group activities 4,083 (4,343) (260) 4,988 (4,205) 783
Net cash/(debt) 33,764 - 33,764 34,331 - 34,331
367,558 (95,382) 272,176 313,134 (68,203) 244,931
3. Exceptional items and building safety provision
In April 2022, MJ Gleeson plc signed the Department for Levelling Up, Housing
and Communities ("DLUHC") pledge, which confirms that the Group takes
responsibility for performing or funding mitigation works to address
life-critical fire-safety issues on buildings over 11 metres in which the
Group had, over the last 30 years, some involvement in developing and to
secure withdrawal of those buildings from the Building Safety Fund and ACM
Funds.
The Group was involved in the development of 14 buildings over 11 metres, none
of which were over 18 metres. The Group originally notified DLUHC of 15
buildings in total, but one building has subsequently been identified as
having not been developed by Gleeson. The remaining buildings were developed
before the Group exited from its legacy businesses and dedicated itself to
low-cost house building and land promotion.
During the year, the Group completed an extensive exercise to locate the
records of all buildings affected in which, over the last 30 years, the Group
had some involvement in developing. A third-party firm of surveyors was then
engaged to examine the 14 buildings covered under the DLUHC pledge and desktop
surveys were undertaken. A programme of intrusive inspections and fire risk
assessments has commenced, where permitted by the building owners.
As a result of the work performed, a provision of £12,867,000 has been
recognised which represents the Board's best estimate of the life-critical
fire-safety remediation costs for these 14 buildings. The Group has provided
for the cost of remediation where there is a liability, where build issues
have been identified or it is considered that such build issues are likely to
exist. The cost of the building safety provision has been recognised as an
exceptional item within cost of sales.
The Group will review the building safety provision at each reporting date
and, where necessary, adjust it to reflect the current best estimate of these
costs.
Exceptional items for the year relate solely to building safety.
4. Tax
2022 2021
£000 £000
Current tax:
Current year expense 7,571 7,261
Adjustment in respect of prior years (165) (533)
Current tax expense for the year 7,406 6,728
Deferred tax:
Current year expense 253 674
Adjustment in respect of prior years (165) 589
Impact of rate change 37 (152)
Deferred tax expense for the year 125 1,111
Total tax charge 7,531 7,839
Corporation tax has been calculated at 17.7% of assessable profit for the year
(2021: 18.8%). The applicable UK corporation tax rate is 19%, which has been
effective from 1 April 2017.
The charge for the year can be reconciled to the profit per the consolidated
income statement as follows:
2022 2021
£000 £000
Profit before tax 42,620 41,711
Profit before tax multiplied by the standard rate of UK corporation tax 19% 8,098 7,925
(2021: 19%)
Tax effect of:
Expenses not deductible for tax purposes 13 3
Non-qualifying depreciation 82 64
Relief for share-based payments 84 (6)
Capital allowances super deduction (161) (51)
Land remediation relief (412) -
Impact of rate differences 37 (152)
Adjustments in respect of prior years - current tax (165) (533)
Adjustments in respect of prior years - deferred tax (165) 589
Residential property developers tax 120 -
Total tax charge for the year 7,531 7,839
Tax recognised on equity-settled share-based payments 2022 2021
£000 £000
Current tax related to equity-settled share-based payments (39) (134)
Deferred tax related to equity-settled share-based payments 167 (168)
Total tax recognised on equity-settled share-based payments 128 (302)
In accordance with IAS 12 "Income taxes", the tax relating to items recognised
directly in equity should also be recognised directly in equity. In the prior
year, the tax relating to equity-settled share-based payments was recognised
in other comprehensive income.
5. Dividends
2022 2021
£000 £000
Amounts recognised as distributions to equity holders in the year:
Interim dividend for the year ended 30 June 2022 of 6.0p (2021: 5.0p) per 3,507 2,913
share
Final dividend for the year ended 30 June 2021 of 10.0p (2020: nil) per share 5,831 -
9,338 2,913
A final dividend of 12.0 pence per share has been proposed for the year ended
30 June 2022, equating to £6,999,000 (2021: £5,831,000). This is subject to
approval by shareholders at the AGM on 18 November 2022 and has not been
recognised in these financial statements.
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2022 2021
Earnings £000 £000
Profit for the year 35,089 33,872
Exceptional items (note 3) 12,867 -
Tax on exceptional items (2,445) -
Profit for the year - pre-exceptional items 45,511 33,872
2022 2021
No. 000 No. 000
Number of shares
Weighted average number of ordinary shares for the purposes of 58,259 58,235
basic earnings per share
Effect of dilutive potential ordinary shares:
- - share-based payments 145 97
Weighted average number of ordinary shares for the purposes of 58,404 58,332
diluted earnings per share
2022 2021
p p
Basic earnings per share 60.23 58.16
Diluted earnings per share 60.08 58.07
Basic earnings per share - pre-exceptional items 78.12 58.16
Diluted earnings per share - pre-exceptional items 77.92 58.07
7. Financial instruments
The fair values of the Group's financial assets and liabilities are not
materially different from the carrying values. Shared equity receivables are
measured at fair value through other comprehensive income ("FVOCI"). The
following summarises the major methods and assumptions used in estimating the
fair values of financial instruments.
Shared equity receivables at FVOCI
2022 2021
£000 £000
Balance at 1 July 2,522 3,668
Redemptions (1,071) (594)
Shared equity provision - (600)
Unwind of discount (finance income) 35 49
Fair value movement recognised in other comprehensive income (1) (1)
Balance at 30 June 1,485 2,522
Shared equity receivables represent shared equity loans advanced to customers
and secured by way of a second charge on the property sold. They are carried
at fair value which is determined by discounting forecast cash flows for the
residual period of the contract. The difference between the nominal value and
the initial fair value is credited over the deferred term to finance income,
with the financial asset increasing to its full cash settlement value on the
anticipated receipt date.
Redemptions in the year of shared equity loans carried at fair value of
£1,071,000 (2021: £594,000) generated a profit on redemption of £375,000
(2021: £230,000), which has been recognised in other operating income in the
consolidated income statement.
In addition, a net change in the value of shared equity receivables of
£120,000 (2021: £33,000) has been recognised in other comprehensive income.
This is made up as follows:
2022 2021
£000 £000
Fair value movement recognised in other comprehensive income (1) (1)
Fair value recycled through profit and loss 121 34
Total movement recognised in other comprehensive income 120 33
Forecast cash flows are determined using inputs based on current market
conditions and the Group's historic experience of actual cash flows resulting
from such arrangements. These inputs are by nature estimates and as such the
fair value has been classified as Level 3 under the fair value hierarchy laid
out in IFRS 13 "Fair value measurement". There have been no transfers between
fair value levels in the financial year.
Significant unobservable inputs into the fair value measurement calculation
include regional house price movements based on the Group's actual experience
of regional house pricing and management forecasts of future movements, the
anticipated period to redemption of loans which remain outstanding and a
discount rate based on current observed market interest rates offered to
private individuals on secured second loans.
The key assumptions applied in calculating fair value as at the balance sheet
date were:
· Forecast regional house price inflation: 2%
· Average period to redemption: 5 years
· Discount rate: 8%
The sensitivity analysis of changes to each of the key assumptions applied in
calculating fair value, whilst holding all other assumptions constant, is as
follows:
2022 2021
Change in assumption Increase/(decrease) Increase/(decrease)
in fair value in fair value
£000 £000
Forecast regional house price inflation - increase by 1% 107 156
Average period to redemption - increase by 1 year (116) (173)
Discount rate - decrease by 1% 102 149
8. Related party transactions
During the previous year, the Group exchanged contracts on a conditional
agreement to purchase an area of land from Hampton Investment Properties Ltd
("HIPL") for £1,050,000. HIPL is a company in which North Atlantic Smaller
Companies Investment Trust plc ("NASCIT"), a substantial holder in the
company, holds a majority investment. In addition, Christopher Mills, a
Non-Executive Director of the Company, is considered a related party by virtue
of his interest in and directorship of NASCIT and his position as a Director
of HIPL. The land, if purchased, will form part of a new Gleeson Homes site
being developed in the ordinary course of business. Approval of this purchase
was granted by the majority of shareholders at the AGM in December 2019.
Other than disclosed above, there were no other transactions with key
management personnel in either the current or prior year.
Statements of Directors' Responsibilities
The full Statement of Directors' Responsibilities is made in respect of the
Annual Report and Accounts and the financial statements, not the extracts from
the financial statements as set out in this announcement.
The 2022 Annual Report and Accounts comply with the United Kingdom's Financial
Conduct Authority Disclosure Guidance and Transparency Rules in respect of the
requirement to produce an annual financial report.
We confirm that to the best of our knowledge:
· the Group and Company financial statements, contained in the 2022
Annual Report and Accounts, which have been prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006, give a true and fair view of the assets, liabilities,
financial position and profit of the Group and loss of the Company; and
· the Strategic Report, contained in the 2022 Annual Report and
Accounts, includes a fair review of the development and performance of the
business and the position of the Group and Company, together with a
description of the principal risks and uncertainties that it faces.
The Directors consider that the 2022 Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group and Company's position and
performance, business model and strategy.
By order of the Board
James Thomson
Stefan Allanson
Chief Executive Officer
Chief Financial Officer
14 September 2022
The 2022 Annual Report and Accounts is to be published on the Company's
website, mjgleesonplc.com, in due course and sent out to those shareholders
who have elected to continue to receive paper communications. Copies will be
available from The Company Secretary, 6 Europa Court, Sheffield Business Park,
Sheffield, S9 1XE.
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