REG - MJ Gleeson Plc - Half-year Report <Origin Href="QuoteRef">GLEG.L</Origin> - Part 1

MJ GLEESONAnnouncement

27/02/2017 07:06

RNS Number : 8495X
MJ Gleeson PLC
27 February 2017
27 February 2017
MJ GLEESON PLC
Interim results for the half-year ended 31 December 2016
Gleeson (GLE.L), the urban regeneration and strategic land specialist, announces another strong performance for the six months to 31 December 2016, with a 12.8% increase in plot completions, record reservations, strong cash generation and a 44.4% increase in interim dividend.
H1 16/17
H1 15/16
Change
Volume - Homes (plots)
451
400
12.8%
 - Strategic Land (land sales)
3
4
(1 sale)
m
m
Operating profit - Homes
8.5
7.7
10.4%
 - Strategic Land
4.0
4.2
(4.8%)
Profit before tax
11.5
11.3
1.8%
Net cash flow from operating & investing activities
8.6
(2.2)
+10.8m
Cash and cash equivalents
26.4
9.6
175.0%
Net assets 
156.7
141.6
10.7%
Pence
Pence
Basic earnings per share
16.8
16.6
1.2%
Dividend per share
6.5p
4.5p
44.4%
Net assets per share
290
262
10.7%
A strong start to the year
 A strong first half performance, as expected
 Gleeson Homes:
o Unit sales increased 12.8% to 451 units (H1 15/16: 400)
o Revenue increased 9.4% to 54.7m (H1 15/16: 50.0m)
o ASP down 2.9% to 121,400 (H1 15/16: 125,000) due to development mix
o Gross margin improved to 31.9% (H1 15/16: 30.6%)
o Operating profit increased by 10.4% to 8.5m (H1 15/16: 7.7m)
o Operating margin increased to 15.5% (H1 15/16: 15.4%)
o Land pipeline, including conditionally purchased sites, of 10,454 plots (June 2016: 9,284 plots)
o Geographic expansion continues, with more site openings planned in existing and new areas
 Gleeson Strategic Land:
o Completed 3 land sales (H1 15/16: 4 land sales) and generated turnover of 8.3m (H1 15/16: 14.7m)
o Operating profit decreased by 4.8% to 4.0m (H1 15/16: 4.2m) due to phasing in the prior half year, as expected
o 13 sites in the portfolio have either planning permission or a resolution to grant permission (H1 14/15: 10 sites)
o Full year Strategic Land result expected to be broadly in line with last year
 Operating & investing cash flows increased to 8.6m (H1 15/16: 2.2m outflow)
 Interim dividend increased 44.4% to 6.5 pence per share (H1 15/16: 4.5 pence)
Dermot Gleeson, Chairman of MJ Gleeson, commented:
"The Group has delivered a strong performance in both divisions.
"Gleeson Homes is on track with its ambitious growth plans. It continues to experience strong demand both in its established operating areas and in the new areas into which it is expanding. Reservations are at record levels.
"The division opened a new office in Nottinghamshire earlier this month, bringing the total number of area offices to seven. Land continues to be available at sensible prices.
"Gleeson Strategic Land completed the sale of an additional greenfield site in the South of England during the first week of January and is very well placed to secure further sales during the remaining months of the year.
"Against this background, the Board is confident of delivering a result for the full year in line with expectations."
Enquiries:
MJ Gleeson plc
Tel: +44 1142 612900
Jolyon Harrison
Chief Executive Officer
Stefan Allanson
Chief Financial Officer
Instinctif Partners
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 delighted to report another strong first half performance.
Group operating profit increased by 1.8% to 11.5m (H1 15/16: 11.3m) following strong performances in both Gleeson Homes and Gleeson Strategic Land. Strong cash generation resulted in cash balances increasing by 16.8m to 26.4m.
Gleeson Homes increased unit sales by 12.8% to 451 units (H1 15/16: 400 units), grew active sites to 51 (31 December 2015: 45 active sites) and acquired a further 1,621 plots during the first half of the year, increasing the pipeline to 10,454 plots at 31 December 2016.
Demand is strong. Reservations taken during the period are more than 30% higher than H1 15/16.
We are encouraged by the recent Housing White Paper, in particular the definition of Affordable Homes which we believe now formalises our product as Affordable Housing and opens up new commercial opportunities.
Gleeson Homes
Gleeson Homes is a housing regeneration specialist working in challenging communities to build new homes for sale to people on low incomes in the North of England. During the period the division achieved strong growth in volume, margin and profit.
Revenue increased 9.4% to 54.7m (H1 15/16: 50.0m), reflecting a 12.8% rise in the total number of units sold from 400 to 451.
The average selling price ("ASP") for the units sold in the period decreased by 2.9% to 121,400 (H1 15/16: 125,000) reflecting the effect of development mix and final legacy sites sales partly offset by modest price increases. A more typical development mix is expected in H2 16/17 which should result in ASPs returning to more typical levels.
Gross margin on units sold in the period increased by 130 basis points to 31.9% (H1 15/16: 30.6%).
Operating margin increased by 10 basis points to 15.5% (H1 15/16: 15.4%) and operating profit increased by 10.4% to 8.5m (H1 15/16: 7.7m).
66% of unit sales during the period benefitted from the Government's Help to Buy scheme. In addition, our own bespoke purchaser assistance packages continued to prove attractive.
At 31 December 2016, we were selling from 51 sites, an increase of six sites on the corresponding period last year. We expect to be busy with site openings during the coming months and anticipate the number of active selling sites to be significantly higher by June 2017. We continue to see significant scope for expanding our proven model beyond our existing areas of operation.
The pipeline of owned sites increased during the period by 288 plots to 4,645 plots and conditionally purchased plots increased by 882 to 5,809 plots, bringing the total pipeline of owned and conditionally purchased plots to 10,454 plots on 122 sites at December 2016 (June 2016: 9,284 plots). 20 new sites were added to the pipeline during the period, while 15 sites were either completed or we did not proceed to purchase.
Gleeson Strategic Land
Gleeson Strategic Land, the land promotion business, continued to see strong demand from medium and large housebuilders for good quality greenfield residential sites in the South of England.
The division recorded the sale of three sites (H1 15/16: four sites), covering combined residential development totalling 265 plots. A further site sale was completed during the first week of January that is not included in the interim results.
Revenue decreased by 6.4m to 8.3m (H1 15/16: 14.7m), reflecting lower sales activity, as expected, due to the timing of site sales.
Gross profit decreased by 0.7m to 4.8m (H1 15/16: 5.5m). Operating profit decreased by 0.2m to 4.0m (H1 15/16: 4.2m).
There are currently 13 sites in the portfolio with planning permission or a resolution to grant permission (H1 15/16: 10 sites). Seven of these sites, which will deliver 1,055 plots, are currently being progressed for sale (H1 15/16: four sites, 470 plots).
In total, there are 14 sites where the division is currently awaiting either the determination of a planning application or the outcome of a planning appeal.
The strategic land portfolio continues to be replenished with one further agreement, involving a total of 96 acres and with the potential to deliver 400 plots, having been secured in the period.
At 31 December 2016 Gleeson Strategic Land had a portfolio of 66 sites (30 June 2016: 68 sites) having sold 3 sites and acquired 1 site during the period. The portfolio, in which the Group has an overall 71% beneficial interest, has the potential to develop in excess of 21,200 plots.
Dividend and Dividend timetable
The Board aims to maintain a progressive dividend policy with payments covered between two and three times by full year earnings and with a one third / two thirds interim / final split.
In light of these strong results and of our confidence in the future, the Board is declaring an interim dividend of 6.5 pence per share, an increase of 44.4% over the prior year (H1 15/16: 4.5 pence per share).
The interim dividend will be paid on 7 April 2017 to shareholders on the register at close of business on 10 March 2017 and with an ex-entitlement date of 9 March 2017.
Summary & Outlook
The Group has delivered a strong performance in both divisions.
Gleeson Homes is on track with its ambitious growth plans. It continues to experience strong demand both in its established operating areas and in the new areas into which it is expanding. Reservations are at record levels.
The division opened a new office in Nottinghamshire earlier this month, bringing the total number of area offices to seven. Land continues to be available at sensible prices.
Gleeson Strategic Land completed the sale of an additional greenfield site in the South of England during the first week of January and is very well placed to secure further sales during the remaining months of the year.
Against this background, the Board is confident of delivering a result for the full year in line with expectations.
Financial Overview
Income Statement
Group revenue fell by 2.8% to 63.0m (H1 15/16: 64.8m), as expected, with revenue growth in Gleeson Homes and fewer site sales in Gleeson Strategic Land.
Group gross profit increased 6.7% to 22.2m (H1 15/16: 20.8m) and gross margin increased to 35.3% (H1 15/16: 32.1%).
The Group's operating profit increased by 1.8% to 11.5m (H1 15/16: 11.3m). Net interest expense of nil (H1 15/16: nil) resulted in profit before tax also increasing by 1.8% to 11.5m (H1 15/16: 11.3m).
The tax charge for the period was 2.3m (H1 15/16: 2.3m) reflecting an effective rate of 19.6% (H1 15/16: 20.1%). The profit after tax from continuing operations totalled 9.3m (H1 15/16: 9.0m). Discontinued operations recorded a post-tax loss of 0.2m (H1 15/16: 0.1m loss) and so the profit for the period attributable to equity holders totalled 9.1m (H1 15/16: 8.9m).
Balance Sheet and Cash Flow
Total shareholders' equity stood at 156.7m at 31 December 2016 compared to 141.6m at 31 December 2015. This equates to net assets per share of 289.6 pence (31 December 2015: 261.6 pence).
Cash flows from operating and investing activities increased by 10.8m to 8.6m (H1 15/16: 2.2m outflow).
The Group's net cash balance at 31 December 2016 was 26.4m (31 December 2015: 9.6m) and reflects net cash inflow of 3.2m in the period (H1 15/16: 6.2m outflow).
Risks and Uncertainties
The Group is subject to a number of risks and uncertainties as part of its activities. The Board regularly considers these and seeks to ensure that appropriate processes are in place to identify, control, and monitor these risks. The directors consider that the principal risks and uncertainties facing the Group are those outlined on pages 18 to 19 of the Report and Accounts for the year ended 30 June 2016.
Dermot Gleeson
Chairman
Condensed Consolidated Income Statement
for the six months to 31 December 2016
Unaudited
Six months to 31 December 2016 
Unaudited
Six months to 31 December 2015 
Audited
Year to
30 June
2016
Note
000
000
000
Continuing operations
Revenue
63,005
64,789
142,065
Cost of sales
(40,776)
(44,014)
(94,509)
Gross profit
22,229
20,775
47,556
Administrative expenses
(10,692)
(9,490)
(19,390)
Operating profit
11,537
11,285
28,166
Financial income
96
208
512
Financial expenses
(113)
(178)
(440)
Profit before tax
11,520
11,315
28,238
Tax
4
(2,258)
(2,270)
(4,934)
Profit for the period from continuing operations
9,262
9,045
23,304
Discontinued operations
Loss for the period from discontinued operations (net of tax)
3
(158)
(120)
(345)
Profit for the period
9,104
8,925
22,959
Earnings per share attributable to equity holders of the parent company
 Basic
6
16.84p
16.67p
16.60 p
16.53 p
42.59p
42.51p
 Diluted
6
Earnings per share from continuing operations
 Basic
6
17.13p
16.96p
16.83p
16.76p
43.23p
43.15p
 Diluted
6
Condensed Consolidated Statement of Comprehensive Income
for the six months to 31 December 2016
Unaudited
Six months to 31 December 2016 
Unaudited
Six months to 31 December 2015 
Audited
Year to
30 June
2016
000
000
000
Profit for the period
9,104
8,925
22,959
Other Comprehensive Income
Items that may be subsequently reclassified to profit or loss
Change in value of available for sale financial assets
(106)
-
(584)
Other comprehensive income for the period, net of tax
(106)
-
(584)
Total comprehensive income for the period attributable to equity holders of the parent company
8,998
8,925
22,375
Condensed Consolidated Statement of Financial Position
at 31 December 2016
Unaudited 
Unaudited 
Audited 
31 December 2016 
31 December 2015 
30 June
2016 
000 
000 
000 
Non-current assets
Plant and equipment
1,437
1,300
1,274
Investment property
506
506
506
Investments in joint ventures 
-
15
-
Trade and other receivables
8,175
7,493
13,527
Deferred tax assets
4,409
4,544
4,567
14,527
13,858
19,874
Current assets
Inventories
126,586
112,958
114,238
Trade and other receivables
15,811
36,079
23,284
UK corporation tax
751
-
-
Cash and cash equivalents
26,414
9,638
23,244
169,562
158,675
160,766
Total assets
184,089
172,533
180,640
Non-current liabilities
Provisions
(100)
(51)
(100)
(100)
(51)
(100)
Current liabilities
Trade and other payables
(27,210)
(28,421)
(26,904)
Provisions
(54)
(1,145)
(111)
UK corporation tax
-
(1,314)
(620)
(27,264)
(30,880)
(27,635)
Total liabilities
(27,364)
(30,931)
(27,735)
Net assets
156,725
141,602
152,905
Equity
Share capital
1,082
1,082
1,082
Share premium account
23
23
23
Available for sale reserve
(690)
-
(584)
Retained earnings
156,310
140,497
152,384
Total equity
156,725
141,602
152,905
Condensed Consolidated Statement of Changes in Equity
for the six months to 31 December 2016
Share capital
Share premium account
Available for sale reserve
Retained earnings
Total
000
000
000
000
000
At 1 July 2015 (audited)
1,074
23
- 
135,432
136,529
Total comprehensive income for the period
Profit for the period
-
-
-
8,925
8,925
Total comprehensive income for the period
- 
- 
- 
8,925
8,925
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Share issue
8
- 
- 
- 
8
Purchase of own shares
- 
- 
- 
(75)
(75)
Share-based payments
- 
-
-
162
162
Dividends
- 
-
-
(3,948)
(3,948)
Transactions with owners, recorded directly in equity
8
- 
- 
(3,861)
(3,853)
At 31 December 2015 (unaudited)
1,082
23
- 
140,496
141,601
Total comprehensive income for the period
Profit for the period
- 
- 
- 
14,034
14,034
Other comprehensive income
-
-
(584)
-
(584)
Total comprehensive income for the period
- 
- 
(584)
14,034
13,450
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Purchase of own shares
-
-
-
29
29
Share-based payments
- 
- 
- 
258
258
Dividends
- 
- 
- 
(2,433)
(2,433)
Transactions with owners, recorded directly in equity
-
-
-
(2,146)
(2,146)
At 30 June 2016 (audited)
1,082
23
(584)
152,384
152,905
Total comprehensive income for the period
Profit for the period
-
-
-
9,104
9,104
Other comprehensive income
-
-
(106)
-
(106)
Total comprehensive income for the period
- 
- 
(106)
9,104
8,998
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Purchase of own shares
- 
- 
- 
(23)
(23)
Share-based payments
- 
-
-
254
254
Dividends
- 
-
-
(5,409)
(5,409)
Transactions with owners, recorded directly in equity
-
- 
- 
(5,178)
(5,178)
At 31 December 2016 (unaudited)
1,082
23
(690)
156,310
156,725
Condensed Consolidated Statement of Cash Flow
for the six months to 31 December 2016
Unaudited 
Unaudited 
Audited 
Six months to 31 December 2016
Six months to
31 December
2015 
Year to
30 June
2016 
000 
000 
000 
Operating activities
Profit before tax from continuing operations
11,520
11,315
28,238
Loss before tax from discontinued operations
(158)
(120)
(336)
11,362
11,195
27,902
Depreciation of plant and equipment
376
392
763
Share-based payments
254
162
420
Profit on sale of available for sale assets
(30)
-
(73)
Loss on sale of plant and equipment
11
32
129
Profit from the sale of assets held for sale
-
(44)
-
Impairment of investments in joint ventures
- 
- 
15
Financial income
(96)
(208)
(512)
Financial expenses
113
178
440
Operating cash flows before movements in working capital
11,990
11,707
29,084
Increase in inventories
(12,349)
(4,736)
(6,016)
Decrease / (increase) in receivables
12,380
(6,733)
(604)
Increase / (decrease) in payables
220
(2,274)
(4,940)
Cash generated from / (utilised by) operating activities
12,241
(2,036)
17,524
Tax paid
(3,472)
- 
(3,224)
Interest paid
(85)
(178)
(440)
Net cash flow surplus / (deficit) from operating activities
8,684
(2,214)
13,860
Investing activities
Proceeds from disposal of available for sale assets
453
546
926
Proceeds from disposal of plant and equipment 
-
10
8
Interest received
15
-
-
Purchase of plant and equipment
(550)
(498)
(940)
Net cash flow (deficit) / surplus from investing activities
(82)
58
(6)
Financing activities
Proceeds from issue of shares
-
8
8
Purchase of own shares
(23)
(75)
(46)
Dividends paid
(5,409)
(3,948)
(6,381)
Net cash flow deficit from financing activities
(5,432)
(4,015)
(6,419)
Net increase / (decrease) in cash and cash equivalents
3,170
(6,171)
7,435
Cash and cash equivalents at beginning of period 
23,244
15,809
15,809
Cash and cash equivalents at end of period
26,414
9,638
23,244
Notes to the Condensed Consolidated Financial Statements
for the six months to 31 December 2016
1. Basis of preparation and accounting policies
The Interim Report of the Group for the six months ended 31 December 2016 has been prepared in accordance with IAS 34 "Interim Financial Reporting" and International Financial Reporting Standards ("IFRS") as adopted for use in the European Union ("EU") and in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority.
The Interim Report does not constitute financial statements as defined in Section 434 of the Companies Act 2006 and is neither audited nor reviewed. It should be read in conjunction with the Report and Accounts for the year ended 30 June 2016, which is available either on request from the Group's registered office, 6 Europa Court, Sheffield Business Park, Sheffield, S9 1XE, or can be downloaded from the corporate website www.mjgleeson.com.
The comparative figures for the financial year ended 30 June 2016 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters which the auditor drew attention to by way of emphasis without qualifying their report and (iii) did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.
The accounting policies, method of computation, and presentation adopted are consistent with those of the Report and Accounts for the year ended 30 June 2016, as described in those financial statements. There have been no new accounting standards adopted or issued but not yet adopted by the Group other than those disclosed in the Report and Accounts for the year ended 30 June 2016.
In applying the accounting policies, management has made appropriate estimates in many areas, and the actual outcome may differ from those calculated. The key sources of estimation uncertainty at the balance sheet date were the same as those that applied to the consolidated financial statements of the Group for the year ended 30 June 2016.
Going concern
The Directors have, at the time of approving the interim accounts, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least twelve months from the date of approval of the Interim Report. Thus they continue to adopt the going concern basis of accounting in preparing the Interim Report.
2. Segmental analysis
 
For management purposes, the Group is organised into the following two operating divisions:
 
  Gleeson Homes 
  Gleeson Strategic Land
2. Segmental analysis (cont.)
Segment information about the Group's operations is presented below:
Unaudited
Unaudited
Audited
Six months to
31 December
2016
Six months to
31 December
2015
Year to
30 June
2016
Note
000 
000 
000 
Revenue
Continuing activities:
Gleeson Homes
54,747
50,048
113,633
Gleeson Strategic Land
8,258
14,741
28,432
Total revenue
63,005
64,789
142,065
Profit on activities
Gleeson Homes
8,466
7,713
19,465
Gleeson Strategic Land
3,952
4,207
10,163
12,418
11,920
29,628
Group activities
(881)
(635)
(1,462)
Financial income
96
208
512
Financial expenses
(113)
(178)
(440)
Profit before tax
11,520
11,315
28,238
Tax
(2,258)
(2,270)
(4,934)
Profit for the period from continuing operations
9,262
9,045
23,304
Loss for the period from discontinued operations (net of tax)
3
(158)
(120)
(345)
Profit for the period
9,104
8,925
22,959
The revenue in the Gleeson Homes segment relates to the sale of residential properties and land. All revenue for the Gleeson Strategic Land segment is in relation to the sale of land interests.
Balance sheet analysis of business segments:
 Unaudited 31 December 2016
Assets
Liabilities
Net assets
000
000
000
Gleeson Homes
114,181
(19,739)
94,442
Gleeson Strategic Land
41,774
(5,983)
35,791
Group activities / discontinued operations
1,720
(1,642)
78
Net cash
26,414
- 
26,414
184,089
(27,364)
156,725
 Unaudited 31 December 2015
Assets
Liabilities
Net assets
000
000
000
Gleeson Homes
103,294
(15,619)
87,675
Gleeson Strategic Land
54,463
(10,827)
43,636
Group activities / discontinued operations
5,138
(4,485)
653
Net cash
9,638
- 
9,638
172,533
(30,931)
141,602
2. Segmental analysis (cont.)
 Audited 30 June 2016
Assets
Liabilities
Net assets
000
000
000
Gleeson Homes
106,440
(20,195)
86,245
Gleeson Strategic Land
50,633
(7,323)
43,310
Group activities / discontinued operations
323
(217)
106
Net cash
23,244
-
23,244
180,640
(27,735)
152,905
3. Discontinued operations
 
The trading of Gleeson Construction Services now only relates to remedial works and the division is classified as discontinued. 
Unaudited 
Six months to 31 December 2016
Unaudited 
Six months to 31 December 2015
Audited Year ended 30 June 2016
000
000
000
Revenue
 - 
- 
-
Cost of sales
-
(45)
(6)
Gross loss
-
(45)
(6)
Administrative expenses
(158)
(75)
(330)
Operating loss
(158)
(120)
(336)
Loss before tax
(158)
(120)
(336)
Tax
- 
- 
(9)
Loss for the period from discontinued operations
(158)
(120)
(345)
4. Tax
The results for the six months to 31 December 2016 include a tax charge of 19.6% of profit before tax (31 December 2015: 20.1%; 30 June 2016: 17.7%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six month period.
Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 17% (effective 1 April 2020) were substantively enacted into law before the balance sheet date.
5. Dividends
Unaudited
Unaudited
Audited
Six months to
31 December
2016
Six months to
31 December
2015
Year to
30 June
2016
000 
000 
000 
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 30 June 2015 of 7.3p per share
-
3,948
3,948
Interim dividend for the year ended 30 June 2016 of 4.5p per share
-
-
2,433
Final dividend for the year ended 30 June 2016 of 10.0p per share
5,409
- 
-
5,409
3,948
6,381
On 24 February 2017 the Board approved an interim dividend of 6.5 pence per share at an estimated total cost of 3,518,000. The dividend has not been included as a liability as at 31 December 2016 and there are no tax consequences for the Group.
6. Earnings per share
From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Unaudited 
Unaudited 
Audited 
Six months to
31 December
2016
Six months to
31 December
2015 
Year to
30 June
2016
000
000
000
Earnings for the purposes of basic earnings per share, being net 
profit/(loss) attributable to equity holders of the parent company
Profit from continuing operations
9,262
9,045
23,304
Loss from discontinued operations
(158)
(120)
(345)
Earnings for the purposes of basic and diluted earnings per share
9,104
8,925
22,959
Number of shares
31December
2016
31December
2015
30June
2016
No.000
No.000
No.000
Weighted average number of ordinary shares for the purposes of
basic earnings per share
54,065
53,756
53,907
Effect of dilutive potential ordinary shares:
Share options
542
224
103
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
54,607
53,980
54,010
From continuing operations
Six months to 31 December
2016 
Six months to 31 December
2015 
Year to 
30 June
2016 
pence
pence
pence
Basic
17.13
16.83
43.23
Diluted
16.96
16.76
43.15
From discontinued operations
Six months to 31 December
2016 
Six months to 31 December
2015 
Year to
30 June
2016 
pence
pence
pence
Basic
(0.29)
(0.22)
(0.64)
Diluted
(0.29)
(0.22)
(0.64)
From continuing and discontinued operations
Six months to 31 December
2016 
Six months to 31 December
2015 
Year to
30 June
2016 
pence
pence
pence
Basic
16.84
16.60
42.59
Diluted
16.67
16.53
42.51
6. Earnings per share (cont.)
Six months to 31 December
2016 
Six months to 31 December
2015 
Year to
30 June
2016 
Normalised Earnings per share
000 
000 
000 
From continuing and discontinued operations
Profit for the purposes of basic and diluted earnings per share
9,104
8,925
22,959
Adjusted for the impact of exceptional costs in the period
-
-
-
Normalised earnings
9,104
8,925
22,959
Six months to 31 December
2016 
Six months to 31 December
2015 
Year to 
30 June
2016 
pence
pence
pence
Basic
16.84
16.60
42.59
Diluted
16.67
16.53
42.51
The directors are of the opinion that the publication of normalised earnings per share is useful because the exclusion of exceptional costs allows users to assess the performance of the underlying business. There were no exceptional costs in the current or comparative period, therefore normalised earnings per share are the same as reported earnings per share.
7. Financial instruments
The fair value of the Group's financial assets and liabilities are not materially different from the carrying values. The following summarises the major methods and assumptions used in estimating the fair values of financial instruments.
Available for sale financial assets
Unaudited 
31 December
2016 
Level 3
Unaudited
31 December
2015 
Level 3
Audited
30 June
2016
Level 3 
000 
000 
000 
Balance at start of period
6,611
7,938
7,938
Additions
-
-
-
Redemptions
(393)
(502)
(853)
Unwind of discount (financial income)
53
57
110
Fair value movement recognised in Other Comprehensive Income
(136)
-
(584)
Balance at end of period
6,135
7,493
6,611
Available for sale financial assets 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 financial income, with the financial asset increasing to its full cash settlement value on the anticipated receipt date.
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 period.
7. Financial instruments (cont.)
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: 2.0% - 3.5%
 Average period to redemption: 5.5 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:
Change in assumption
Increase / (decrease) in fair value 
'000
Forecast regional house price inflation - increase by 1%
326
Average period to redemption - increase by 1 year
(316)
Discount rate - decrease by 1%
311
Redemptions in the period of shared equity loans carried at 423,000 generated a profit on redemption of 30,000 which has been recognised within Administrative expenses in the Consolidated Income Statement.
In addition, a change in value of available for sale assets of 106,000 has been recognised in Other Comprehensive Income. This is made up as follows:
Unaudited 
31 December
2016
Unaudited
31 December
2015
Audited
30 June
2016
000 
000 
000 
Fair value movement recognised in Other Comprehensive Income
(136)
-
(584)
Fair value recycled through profit and loss
30
-
-
Total movement recognised in Other Comprehensive Income
(106)
-
(584)
8. Group pension scheme 
 
The Group operates a defined contribution pension plan. The assets of the pension plan are held separately from those of the Group in funds under the control of the trustees.
 
The total pension cost charged to the Consolidated Income Statement in the six months to 31 December 2016 of 302,000 (six months to 31 December 2015: 275,000; year to 30 June 2016: 545,000) represents contributions payable to the defined contribution pension plan by the Group at rates specified in the plan rules. At 31 December 2016, contributions of 75,000 (31 December 2015: 42,000; 30 June 2016: 67,000) due in respect of the current reporting period had not been paid over to the pension plan. Since the period end, this amount has been paid. 
9. Related party transactions
 
There have been no material transactions with related parties during the period.
There have been no material changes to the related party arrangements as reported in note 31 of the Report and Accounts for the year ended 30 June 2016.
9. Related party transactions (cont.)
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
10. Seasonality
Reservations in Gleeson Homes are largely unaffected by seasonal variations and tend to be driven more by the timing of site openings than by seasonality. However, completions in the second half of the financial year tend to be higher than the first half.
There is no seasonality in the Gleeson Strategic Land division. 
Statement of Directors' responsibility
for the six months to 31 December 2016
The Directors confirm that, to the best of our knowledge:
a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;
b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
The Board
The Board of Directors of MJ Gleeson plc at 30 June 2016 and their respective responsibilities can be found on pages 30 to 31 of the MJ Gleeson plc Report and Accounts 2016. There have been no changes since that date.
By order of the Board,
Stefan Allanson
Chief Financial Officer
24 February 2017

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