REG - MJ Gleeson Plc - Half-year Report
10/02/2022 07:00
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RNS Number : 2230B MJ Gleeson PLC 10 February 2022
10 February 2022
MJ GLEESON PLC
Results for the half-year ended 31 December 2021
On track for 2,000 homes this financial year | Strong demand for consented
land
Full year results set to be ahead of current market expectations
Group:
· Revenue up 21.7% to £173.5m (H1 20/21: £142.6m)
· Profit before tax up 21.7% to £24.7m (H1 20/21: £20.3m)
· EPS(1) up 22.0% to 34.4p (H1 20/21: 28.2p)
· 6p interim dividend (H1 20/21: 5p)
Gleeson Homes:
· 932 homes sold
o Up 14.9% on the pre-Covid half-year to 31 December 2019 (H1 19/20: 811
homes)
o Down 2.0% on prior half-year which was flattered by delayed completions
carried over from the first Covid-19 lockdown (H1 20/21: 951 homes)
o 55% bought through Help to Buy, down from 69% last year
· Average selling price up 14.7% to £161,200 (H1 20/21: £140,600)
· Operating profit increased 9.8% to £22.5m (H1 20/21: £20.5m)
· Eight new sites opened (H1 20/21: 17 sites opened) - 17 new sites
expected to open in H2
· Land pipeline of 16,242 plots (June 2021: 15,863 plots)
Gleeson Land:
· Three land sales completed in H1 (H1 20/21: four land sales)
· A further three sites currently being marketed
· Strong demand for consented sites
· Three new sites added to the portfolio (H1 20/21: five sites
added)
· Portfolio of 71 sites (June 2021: 71 sites)
H1 21/22 H1 20/21 Change (H1 21/22 v H1 20/21) H1 19/20 Change
(H1 21/22 v H1 19/20)
Revenue
Gleeson £150.2m £134.4m 11.8% £105.0m 43.0%
Homes
Gleeson Land £23.3m £8.2m 184% - n/a
Total £173.5m £142.6m 21.7% £105.0m 65.2%
Operating profit/(loss) by division
Gleeson Homes £22.5m £20.5m 9.8% £15.9m 41.5%
Gleeson Land £5.5m £2.6m 112% (£0.7m) n/a
Profit before tax(1) £24.7m £20.3m 21.7% £13.3m 85.7%
Cash net of borrowings £38.2m £31.6m 20.9% £30.6m 24.8%
ROCE(2) 22.9% 7.2% 1,570bp 19.1% 380bp
EPS (basic)(1) 34.4p 28.2p 22.0% 19.6p 75.5%
Dividend per share 6.0p 5.0p 20.0% - n/a
(1 )All results classified as continuing for the half-year ended 31 December
2021
(2 )Return on capital employed is calculated based on earnings before
interest and tax from continuing and discontinued operations, expressed as a
percentage of the average of opening and closing net assets for the prior 12
months after deducting deferred tax balances and cash net of borrowings.
James Thomson, Chief Executive of MJ Gleeson plc, commented:
"The Group performed strongly during the first half and this result, and
indeed our performance throughout the pandemic, is evidence of the underlying
strength of the business. We expect Gleeson Homes to deliver 2,000 homes this
financial year and Gleeson Land to complete further sales in the second half
of the financial year. Consequently, in the absence of any further Covid-19 or
supply chain related disruption, the Board is confident that results for the
full year to 30 June 2022 will be ahead of market expectations.
Demand for our much-needed affordable homes continues unabated. Meanwhile, a
focus on investing in our people, organisational structure, training and
processes means that the business, supported by a robust financial position,
is operationally and structurally very well positioned to achieve further
controlled growth. We expect to announce our next medium-term strategic
targets at the time of the full-year results.
Working in cooperation with local and national government to ensure the
continued delivery of low-cost affordable homes for first time buyers, we can
look to the next stage of the Group's development with confidence."
A presentation by James Thomson, CEO and Stefan Allanson, CFO, which will also
be webcast, will be held at 11:00am today. To attend:
· by webcast, visit the company website:
https://www.mjgleesonplc.com/investors
(https://www.mjgleesonplc.com/investors) or access via the following link:
https://webcasting.brrmedia.co.uk/broadcast/61e69ef87eb59509ae2f84c5
(https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwebcasting.brrmedia.co.uk%2Fbroadcast%2F61e69ef87eb59509ae2f84c5&data=04%7C01%7Chgriffiths%40hudsonsandler.com%7C040ebd4a27c34de2d19208d9e181a9b4%7Ca33bdb157e25438ab1fd5c523a8866f9%7C0%7C0%7C637788769272570749%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000&sdata=2tbyeX7tlbTYMz3VaClAl9RANTVDiRfZQrAt6L36xYE%3D&reserved=0)
· by telephone, please dial-in using the below details:
o Number: +44 (0)330 336 9601
o Code: 9557159
Enquiries:
MJ Gleeson plc Tel: +44 1142 612900
James Thomson Chief Executive Officer
Stefan Allanson Chief Financial Officer
Hudson Sandler Tel: +44 20 7796 4133
Mark Garraway Tel: +44 7771 860 938
Charlotte Cobb Tel: +44 7795 422 131
Singer Capital Markets Tel: +44 20 7496 3000
Shaun Dobson
Rachel Hayes
Liberum Tel: +44 20 3100 2222
Neil Patel
This announcement is released by MJ Gleeson plc and contains inside
information for the purposes of Article 7 of the Market Abuse Regulation (EU)
596/2014 (MAR), and is disclosed in accordance with the Company's obligations
under Article 17 of MAR. Upon the publication of this announcement, this
information is considered to be in the public domain.
For the purposes of MAR and Article 2 of Commission Implementing Regulation
(EU) 2016/1055, this announcement is being made on behalf of the Company by
Stefan Allanson, Chief Financial Officer.
LEI: 21380064K7N2W7FD6434
CHIEF EXECUTIVE'S STATEMENT
I am pleased to report a strong set of results for the first half of this
financial year. We are particularly pleased with this performance given the
wider economic and sector pressures that we are seeing in the UK and which I
refer to in more detail further on.
As planned, we are on track to deliver our milestone target of 2,000 homes in
this financial year. The Board is assessing a range of metrics to support and
define our fresh medium-term strategic ambition, and guidance, which we expect
to announce at the time of the full-year results.
The continued strong demand for our homes - which shows no sign of abating -
demonstrates that our commitment to building high-quality, low-cost homes is
more relevant today than ever. By building high-quality, low-cost homes,
Gleeson is truly changing people's lives by offering young first time buyers a
way out of the renting trap and into first time home ownership. Three out of
four of our customers are first time buyers and more than half of our buyers
are key workers.
Industry Environment
The industry in which we operate is facing a number of well-documented
challenges, ranging from the macro-economic to the regulatory. Gleeson is a
resilient business and is very well positioned to manage its way through these
challenges.
Affordability
Demand for our homes is underpinned by the affordability of the houses we
build for a market that has been chronically underserved for decades. Although
interest rates are widely expected to rise over the course of this year, they
are expected to remain historically low. Moreover, mortgage availability
continues to improve as lenders offer more high loan to value products. In
consequence, a Gleeson home will continue to remain within the reach of a
couple earning the National Living Wage and without any need for Help to Buy
support. The cost of owning a Gleeson home is significantly lower than the
cost of renting and will remain so even with modest interest rate rises.
We have secured funding for First Homes under the Government's early delivery
programme. First Homes will provide discounted affordable homes across our
developments specifically for first time buyers - something we have done for
many years. Deposit Unlock, an industry led scheme, is also important in
helping first time buyers onto the property ladder and will sit alongside
other products, including shared ownership, to support our customers.
Planning
The planning system remains an area of concern, as highlighted in the recent
report from the Built Environment Committee, "Meeting housing demand". The
report calls for urgent reform including better resourced local planning
authorities, and clear and transparent local plans. These views are widely
shared by the industry and, without some level of investment, delays in the
planning system will continue to limit the supply of consented land and risks
holding back housing delivery.
Supply Chain
Supply chain pressures, including labour and material prices and availability
remain, but are starting to show signs of easing on certain materials. The
impact of these has been managed through the strong relationships that we have
with our suppliers and subcontractors, and the unprecedented cost increases
that have been offset by selling price inflation. Government figures show that
skills shortages accounted for 36% of all construction vacancies. This skills
shortage combined with wage inflation remains a challenge for the wider
industry.
Regulation
The Future Homes Standard continues to drive changes in housing design,
construction and use, and we are supportive of the Government's desire to make
homes "zero carbon ready". We are working with our supply chain to trial a
number of materials that will help to reduce the carbon footprint of our
homes, including concrete bricks and reconstituted stone. In addition, we are
continuing to install and trial air source heat pumps and electric vehicle
charging points as part of changes to building regulations.
Given how vital affordable homes are, we are concerned that the Government is
not taking a more considered approach to ensuring there are no unintended
consequences to changes in building regulation, legislation or planning that
will impact delivery of much-needed affordable and low-cost homes for young
people where they are needed the most, including areas of regeneration. These
unintended impacts have a disproportionate impact on difficult and brownfield
sites, and on smaller and medium-sized housebuilders.
Building Safety
The Government's recent proposal, in its draft Building Safety Bill, to extend
statutory liability from 6 to 30 years, and the request for information on all
buildings over 11 metres developed in the last 30 years, means that Gleeson
has had to review its legacy activities, which it exited in 2005 to
concentrate on two, three and four-bedroom houses. We have identified 50
buildings, the majority of which are medium-rise, where we were the developer
or contractor. As all of these buildings fully met building regulations, and
were signed-off as compliant by approved inspectors, we do not believe we have
any liability arising from these legacy developments and consequently have not
made any material provisions in respect of any remedial works.
There is universal agreement that a solution to legacy building safety issues
is urgently needed and that leaseholders should not have to bear any related
costs. We have therefore been advocating with the Government an industry-wide,
fiscal-based solution involving participation from all stakeholders -
including architects, specifiers, insurers, materials producers, suppliers and
developers - and which would therefore be both proportionate and pragmatic.
We continue to monitor developments and any potential changes in legislation.
However, it should be noted that the Residential Property Developers Tax will
already levy an additional tax on major housebuilders from April 2022,
irrespective of whether they engaged in any high-rise construction. This is in
addition to the 6% increase in Corporation Tax from the current 19% to 25%
from April 2023.
Financial Performance
Group results
Revenue increased 21.7% to £173.5m (H1 20/21: £142.6m) with gross profit
increasing 22.7% to £50.9m (H1 20/21: £41.5m). The Group's operating profit
increased 20.6% to £25.2m (H1 20/21: £20.9m). Following a net interest
charge of £0.5m (H1 20/21: £0.6m), profit before tax increased 21.7% to
£24.7m (H1 20/21: £20.3m).
The tax charge for the period was £4.7m (H1 20/21: £3.7m) reflecting an
effective rate of 19.0% (H1 20/21: 18.4%). The profit after tax for the period
was £20.0m (H1 20/21: £16.4m).
Total shareholders' equity was £259.9m at 31 December 2021 compared to
£229.5m at 31 December 2020. This equates to net assets per share of 445.8
pence (31 December 2020: 394.0 pence).
The Group's net cash balance at 31 December 2021 increased by £3.8m to
£38.2m (30 June 2021: £34.3m), driven by strong home sales and the phasing
of site openings during the period.
Gleeson Homes
Revenue increased 11.8% to £150.2m (H1 20/21: £134.4m), reflecting increased
selling prices despite a 2.0% fall in the number of homes sold from 951 to 932
and no land sales (H1 20/21: £0.7m). The previous first half-year was
flattered by the carry-over of delayed completions from the first Covid-19
lockdown and, when compared to the pre-Covid half-year to 31 December 2019,
the number of homes sold was up 14.9% (H1 19/20: 811 homes).
The average selling price for homes sold in the period increased 14.7% to
£161,200 (H1 20/21: £140,600) reflecting strong underlying selling price
increases of 12.8% and development mix. There continues to be opportunities
for selling price increases, however, the rate of house price growth across
the industry is expected to slow.
Of the 932 homes sold this half-year, 55% were purchased using Help to Buy (H1
20/21: 69%). The reduction in the use of Help to Buy has been driven by the
restriction of the scheme to first time buyers and by an increase in home
movers buying a Gleeson home as a result of a shortage of stock in this
buoyant housing market.
Gross profit on homes sold increased 16.8% to £43.9m (H1 20/21: £37.6m). The
gross margin on homes sold in the period was 29.2% (H1 20/21: 28.1%),
reflecting effective cost management and increases in selling prices in the
period.
Administrative expenses increased 24.7% to £21.7m (H1 20/21: £17.4m)
reflecting increased investment in the operating structure of the business,
the opening of additional sites and pay inflation.
Operating margin on homes sold decreased 20 basis points to 15.0% (H1 20/21:
15.2%), reflecting the increased investment in the business. Operating profit
increased 9.8% to £22.5m (H1 20/21: £20.5m).
The division opened eight new sites during the first half-year, was building
on 83 sites at 31 December 2021 (31 December 2020: 80 sites) and was selling
from 60 active sites (31 December 2020: 65 sites). By the end of the financial
year the division expects to be building on approximately 85 sites and
actively selling on approximately 65 sites.
Despite the continued congestion in the planning system, we expect to open a
further 17 sites during the second half of this financial year and we continue
to grow our pipeline of sites at sensible prices. Our land pipeline represents
over nine years of home sales. We expect demand to remain strong, despite the
threat of higher interest rates, and are planning to continue our strong
growth trajectory beyond the 2,000 homes we expect to deliver this financial
year. To support our growth, we are opening a ninth regional office in West
Yorkshire and which will be fully operational from 1 July 2022.
The pipeline of owned plots increased during the period by a net 285 plots to
7,757 plots. The total pipeline of owned and conditionally purchased plots was
16,242 plots on 158 sites at December 2021 (30 June 2021: 15,863 plots on 152
sites). During the period 16 new sites were added to the pipeline, while 10
sites were either merged, completed or did not proceed to purchase.
Demand for our high-quality, low-cost homes remains strong and we enter the
second half with a forward order book of 616 plots (30 June 2021: 841 plots),
of which 614 are expected to complete in the second half. In order to reduce
the time between reservation and completion, and thus improve the customer
journey, we have delayed the release of a large number of plots. These are
being made available for sale during the first few months of the calendar
year.
In July 2017, we announced our intention to double completions to 2,000 homes
per annum within five years. Despite the impact of the Covid-19 pandemic, we
remain firmly on track to achieve this target this financial year.
Gleeson Land
Gleeson Land saw strong demand from medium and large housebuilders for high
quality residential sites in the South of England.
The division completed three land sales in the first half-year (H1 20/21:
four). As a result, the operating profit for the first half was £5.5m (H1
20/21: £2.6m).
A further three sites are currently being marketed, which have the potential
to deliver 1,384 plots (31 December 2020: four sites being progressed for
sale, 1,708 plots).
At 31 December 2021, there were three sites in the portfolio with either
planning permission or a resolution to grant permission for a total of 1,234
plots (30 June 2021: six sites, 2,210 plots).
There are a further 15 sites where the division is currently awaiting the
determination of a planning application (30 June 2021: 15 sites).
We continue to invest in the Gleeson Land portfolio. Three new sites with the
potential to deliver 300 plots were secured in the period, with a number of
other high-quality, well-located sites currently being progressed.
At 31 December 2021 the portfolio, in which the Group has a beneficial
interest of 80%, comprised 71 sites with the potential to deliver 21,155 plots
(30 June 2021: 71 sites, 22,315 plots).
Sustainability
Our mission of building affordable, quality homes where they are needed and
for the people that need them most continues to create social value in
economically deprived areas across the North of England and Midlands. Our
business model is fundamentally sustainable and fully supports target one of
UN SDG 11 by providing access for all to safe and affordable housing.
The safety of our colleagues, subcontractors and visitors remains paramount. I
am pleased with the progress we have made this half-year on health and safety
and this remains a key area of focus. We have significantly increased the
number of independent site based health and safety inspections. All our active
sites receive a minimum of one unannounced inspection per month and the
findings are used as part of our health and safety performance management.
We have retained our focus on build quality and our customer satisfaction
score has been maintained above 90%, which is equivalent to a 5-star rating.
In our 2021 Annual Report, we increased our previous target of reducing scope
1 and 2 carbon emissions by 20% within 3 years (to 2.0 tonnes per home sold)
by 2023 to 30% (to 1.75 tonnes per home sold) by 2023. With a number of carbon
reduction initiatives now being well progressed, including the changeover to
more efficient forklift trucks on sites, we are on track to meet this target.
Trials of biodiesel and eco-welfare units have also been completed during the
period and we are currently assessing the results. We continue to procure all
our site electricity from renewable, REGO certified, sources.
We have made substantial progress this half-year in refining our scope 3
emissions and working with our supply chain to obtain Environmental Product
Declarations for the materials that we use in building our homes.
We are committed to improving biodiversity on our developments. Despite the
highly biodiverse nature of brownfield sites compared to greenfield sites, we
are already adopting the requirements set out in the Environment Act 2021,
where possible, on new sites.
We are also proud to have retained our accreditation under the Fair Tax
Foundation. We remain the only housebuilder to be accredited with the Fair Tax
Mark, which certifies that a business is paying its fair share of tax in the
right place and at the right time. This reflects our determination to conduct
our business in an ethical and sustainable way.
Dividends
Considering these results and our confidence in the full year outlook, the
Board is declaring an interim dividend of 6.0 pence per share (H1 20/21: 5.0
pence per share). It is expected that the interim dividend will represent one
third of the total dividend for the year.
The interim dividend will be paid on 4 April 2022 to shareholders on the
register at close of business on 4 March 2022.
Summary & Outlook
The Group performed strongly during the first half and this result, and indeed
our performance throughout the pandemic, is evidence of the underlying
strength of the business. We expect Gleeson Homes to deliver 2,000 homes this
financial year and Gleeson Land to complete further sales in the second half
of the financial year. Consequently, in the absence of any further Covid-19 or
supply chain related disruption, the Board is confident that results for the
full year to 30 June 2022 will be ahead of market expectations.
Demand for our much-needed affordable homes continues unabated. Meanwhile, a
focus on investing in our people, organisational structure, training and
processes means that the business, supported by a robust financial position,
is operationally and structurally very well positioned to achieve further
controlled growth. We expect to announce our next medium-term strategic
targets at the time of the full-year results.
Working in cooperation with local and national government to ensure the
continued delivery of low-cost affordable homes for first time buyers, we can
look to the next stage of the Group's development with confidence.
James Thomson
Chief Executive
Condensed Consolidated Income Statement
for the six months to 31 December 2021
Note Unaudited Unaudited Audited
Six months to 31 December 2021
Six months to 31 December 2020
Year to
30 June
2021
£000 £000 £000
Continuing operations*
Revenue 173,543 142,646 288,575
Cost of sales (122,659) (101,148) (199,230)
Gross profit 50,884 41,498 89,345
Administrative expenses (25,982) (20,761) (47,185)
Other operating income 310 141 923
Operating profit 25,212 20,878 43,083
Finance income 47 220 377
Finance expenses (527) (787) (1,749)
Profit before tax 24,732 20,311 41,711
Tax 3 (4,690) (3,710) (7,839)
Profit for the period from continuing operations 20,042 16,601 33,872
Discontinued operations*
Loss for the period from discontinued operations (net of tax) - (188) -
Profit for the period 20,042 16,413 33,872
Earnings per share from continuing and discontinued operations*
Basic 5 n/a 28.19 p n/a
n/a 28.18 p n/a
Diluted 5
Earnings per share from continuing operations
Basic 5 34.38 p 28.51 p 58.16 p
Diluted 5 34.38 p 28.50 p 58.07 p
* All results classified as continuing for the year ended 30 June 2021 and six
months to 31 December 2021
Condensed Consolidated Statement of Comprehensive Income
for the six months to 31 December 2021
Unaudited Unaudited Audited
Six months to 31 December 2021
Six months to 31 December 2020
Year to
30 June
2021
£000 £000 £000
Profit for the period 20,042 16,413 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 32 9 33
Movement in tax on share-based payments taken directly to equity 49 34 302
81 43 335
Other comprehensive income for the period, net of tax
20,123 16,456 34,207
Total comprehensive income for the period
Condensed Consolidated Statement of Financial Position
at 31 December 2021
Unaudited Unaudited Audited
31 December 2021
31 December 2020
30 June
2021
Note
£000 £000 £000
Non-current assets
Property, plant and equipment 7,750 6,182 6,684
Trade and other receivables 8,261 4,987 4,672
Deferred tax assets 1,363 1,893 1,233
17,374 13,062 12,589
Current assets
Inventories 6 244,724 221,378 239,961
Trade and other receivables 19,808 19,947 22,378
UK corporation tax 4,941 1,208 3,875
Cash and cash equivalents 7 38,160 31,616 34,331
307,633 274,149 300,545
Total assets 325,007 287,211 313,134
Non-current liabilities
Trade and other payables 9 (4,248) (4,710) (6,917)
Provisions (264) (243) (236)
(4,512) (4,953) (7,153)
Current liabilities
Trade and other payables 9 (60,539) (52,720) (61,027)
Provisions (15) (16) (23)
(60,554) (52,736) (61,050)
Total liabilities (65,066) (57,689) (68,203)
Net assets 259,941 229,522 244,931
Equity
Share capital 1,166 1,165 1,165
Share premium 15,843 15,843 15,843
Retained earnings 242,932 212,514 227,923
Total equity 259,941 229,522 244,931
Condensed Consolidated Statement of Changes in Equity
for the six months to 31 December 2021
Share capital Retained earnings Total
Share premium equity
Note
£000 £000 £000 £000
At 1 July 2020 (audited) 1,161 195,601 212,605
15,843
Total comprehensive income for the period
Profit for the period - - 16,413 16,413
Other comprehensive income - - 43 43
Total comprehensive income for the period - - 16,456 16,456
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Share issue 4 - - 4
Purchase of own share - - (30) (30)
Share-based payments - - 487 487
Transactions with owners, recorded directly in equity 4 - 457 461
At 31 December 2020 (unaudited) 1,165 15,843 212,514 229,522
Total comprehensive income for the period
Profit for the period - - 17,459 17,459
Other comprehensive income - - 292 292
Total comprehensive income for the period - - 17,751 17,751
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Purchase of own shares - - (31) (31)
Share-based payments - - 602 602
Dividends - - (2,913) (2,913)
Transactions with owners, recorded directly in equity - - (2,342) (2,342)
At 30 June 2021 (audited) 1,165 15,843 227,923 244,931
Total comprehensive income for the period
Profit for the period - - 20,042 20,042
Other comprehensive income - - 81 81
Total comprehensive income for the period - - 20,123 20,123
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Share issue 1 - - 1
Purchase of own shares - - (30) (30)
Share-based payments - - 746 746
Dividends - - (5,830) (5,830)
Transactions with owners, recorded directly in equity 1 - (5,114) (5,113)
At 31 December 2021 (unaudited) 1,166 15,843 242,932 259,941
Condensed Consolidated Statement of Cash Flow
for the six months to 31 December 2021
Unaudited Unaudited Audited
Six months to 31 December 2021
Six months to 31 December 2020
Year to
30 June
2021
£000 £000 £000
Operating activities*
Profit before tax from continuing operations 24,732 20,311 41,711
Loss before tax from discontinued operations - (188) -
24,732 20,123 41,711
Depreciation of property, plant and equipment 1,571 1,301 2,772
Share-based payments 746 487 1,089
Profit on redemption of shared equity receivables (246) (93) (230)
Loss on disposal of property, plant and equipment 101 27 200
Disposal of right-of-use assets - - 50
Finance income (47) (220) (377)
Finance expenses 527 787 1,749
Operating cash flows before movements in working capital 27,384 22,412 46,964
Increase in inventories (4,763) (5,042) (23,626)
Increase in receivables (1,555) (4,353) (6,709)
(Decrease)/increase in payables (3,907) 9,077 19,706
Cash generated from operating activities 17,159 22,094 36,335
Tax paid (5,836) (4,348) (10,216)
Finance costs paid (505) (1,001) (1,934)
Net cash flow surplus/(deficit) from operating activities 10,818 16,745 (24,185)
Investing activities
Proceeds from disposal of shared equity receivables 852 327 858
Proceeds from disposal of property, plant and equipment - - 7
Interest received 3 3 6
Purchase of property, plant and equipment (1,677) (1,802) (3,839)
Net cash flow deficit from investing activities (822) (1,472) (2,968)
Financing activities
Repayment of loans and borrowings - (60,000) (60,000)
Net proceeds from issue of shares 1 4 4
Purchase of own shares (30) (30) (61)
Dividends paid (5,830) - (2,913)
Principle element of lease payments (308) (438) (723)
Net cash flow deficit from financing activities (6,167) (60,464) (63,693)
Net increase/(decrease) in cash and cash equivalents 3,829 (45,191) (42,476)
Cash and cash equivalents at beginning of period 34,331 76,807 76,807
Cash and cash equivalents at end of period 38,160 31,616 34,331
* All results classified as continuing for the year ended 30 June 2021 and six
months to 31 December 2021
Notes to the Condensed Consolidated Financial Statements
for the six months to 31 December 2021
1. Basis of preparation and accounting policies
This condensed consolidated interim financial report ("the Interim Report")
for the six months ended 31 December 2021 has been prepared in accordance with
International Accounting Standards in conformity with the requirements of the
Companies Act 2006. The Interim Report has been prepared on the basis of the
policies set out in the Annual Report and Accounts for the year ended 30 June
2021 and in accordance with Accounting Standard IAS 34 "Interim Financial
Reporting" and the Disclosure Guidance and Transparency Rules sourcebook of
the UK's Financial Conduct Authority. The Interim Report does not constitute
financial statements as defined in Section 434 of the Companies Act 2006 and
is neither audited nor reviewed.
The interim financial statements need to be read in conjunction with the
consolidated financial statements for the year ended 30 June 2021, which were
prepared in accordance with IFRS in conformity with the requirements of the
Companies Act 2006 and IFRS adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union. A copy of the Annual Report and Accounts
for the year ended 30 June 2021 is available either on request from the
Group's registered office, 6 Europa Court, Sheffield Business Park, Sheffield,
S9 1XE, or can be downloaded from the corporate website,
www.mjgleesonplc.com.
For the year to 30 June 2022, the annual financial statements will be
prepared in accordance with IFRS as adopted by the UK Endorsement Board; this
change in basis of preparation is required by UK Company Law for the purpose
of financial reporting as a result of the UK's exit from the EU on 31 January
2020 and cessation of the transition period on 31 December 2020. This change
does not constitute a change in accounting policy but rather a change in
framework, which is required to ground the use of IFRS in company law. There
is no impact on recognition, measurement or disclosure between the two
frameworks in the period reported.
The comparative figures for the financial year ended 30 June 2021 are not the
Group's statutory accounts for that financial year. Those accounts have been
reported on by the auditors of the Company and the Group and delivered to the
Registrar of Companies. The report of the auditors was (i) unqualified, (ii)
did not include a reference to any matters which the auditor drew attention to
by way of emphasis without qualifying their report and (iii) did not contain
statements under Section 498 (2) or (3) of the Companies Act 2006.
During the period, the Group has adopted the following new and revised
standards and interpretations that have had no material impact on these
condensed consolidated financial statements:
· Amendments to IFRS 9, IAS 39, and IFRS 7 under "Interest Rate
Benchmark Reform"
The preparation of condensed consolidated interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may subsequently differ from
these estimates. In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the annual consolidated financial statements
for the year ended 30 June 2021.
The accounting policies, method of computation, and presentation adopted are
consistent with those of the Annual Report and Accounts for the year ended 30
June 2021, as described in those financial statements.
Going concern
The Group has maintained its strong financial position and ended the period
with cash balances of £38.2m (30 June 2021: £34.3m). The Group's committed
club facility of £105m remained undrawn. Latest forecasts are based on the
three-year budget approved by the Board in May 2021, adjusted for current
trading and outlook.
1. Basis of preparation and accounting policies (cont.)
These forecasts have been subjected to a range of sensitivities including a
severe but plausible scenario together with the likely effectiveness of
mitigating actions. The assessment considered the impact of a number of
realistically possible, but severe and prolonged changes to principal
assumptions from a downturn in the housing and land markets consistent with
those presented in the 2021 Annual Report.
Under these sensitivities, after taking mitigating actions, the Group
continues to have a sufficient level of liquidity, operate within its
financial covenants and meet its liabilities as they fall due.
Based on the results of the analysis undertaken, the Directors have a
reasonable expectation that the Group has adequate resources available to
continue in operation for the foreseeable future and operate in compliance
with the Group's bank facilities and financial covenants. As such, the Interim
Report for the Group has been prepared on a going concern basis.
2. Segmental analysis
The Group is organised into the following two operating divisions under the
control of the Executive Board, which is identified as the Chief Operating
Decision Maker as defined under IFRS 8 "Operating segments":
• Gleeson
Homes
• Gleeson Land
The revenue in the Gleeson Homes segment relates to the sale of residential
properties and ad hoc land sales. All revenue for the Gleeson Land segment is
in relation to the sale of land interests. All of the Group's operations are
carried out entirely within the United Kingdom. Segment information about the
Group's operations is presented below:
Unaudited Unaudited Audited
Six months to 31 December 2021
Six months to 31 December 2020
Year to
30 June
2021
Note £000 £000 £000
Revenue
Continuing activities*:
Gleeson Homes 150,251 134,396 265,770
Gleeson Land 23,292 8,250 22,805
Total revenue 173,543 142,646 288,575
Divisional operating profit
Gleeson Homes 22,504 20,549 37,437
Gleeson Land 5,524 2,600 11,080
28,028 23,149 48,517
Group administrative expenses* (2,816) (2,271) (5,434)
Finance income 47 220 377
Finance expenses (527) (787) (1,749)
Profit before tax 24,732 20,311 41,711
Tax 3 (4,690) (3,710) (7,839)
Profit for the period from continuing operations* 20,042 16,601 33,872
Loss for the period from discontinued operations (net of tax) - (188) -
Profit for the period 20,042 16,413 33,872
* The activities of Gleeson Construction Services Limited were previously
disclosed as discontinued operations but are now considered wholly immaterial
to the Group and are presented within continuing operations in the year ended
30 June 2021 and six months to 31 December 2021.
2. Segmental analysis (cont.)
Balance sheet analysis of business segments:
Unaudited 31 December 2021
Assets Liabilities Net assets
£000 £000 £000
Gleeson Homes 232,823 (54,747) 178,076
Gleeson Land 51,995 (6,858) 45,137
Group activities 2,029 (3,461) (1,432)
Net cash 38,160 - 38,160
325,007 (65,066) 259,941
Unaudited 31 December 2020
Assets Liabilities Net assets
£000 £000 £000
Gleeson Homes 204,827 (44,667) 160,160
Gleeson Land 49,028 (10,443) 38,585
Group activities 1,740 (2,579) (839)
Net cash 31,616 - 31,616
287,211 (57,689) 229,522
Audited 30 June 2021
Assets Liabilities Net assets
£000 £000 £000
Gleeson Homes 223,328 (54,892) 168,436
Gleeson Land 50,487 (9,106) 41,381
Group activities 4,988 (4,205) 783
Net cash 34,331 - 34,331
313,134 (68,203) 244,931
3. Tax
The results for the six months to 31 December 2021 include a tax charge of
19.0% of profit before tax (31 December 2020: 18.4%, 30 June 2021: 18.8%),
representing the best estimate of the average annual effective tax rate
expected for the full year, applied to the pre-tax income of the six month
period.
4. Dividends
Unaudited Unaudited Audited
Six months to 31 December 2021
Six months to 31 December 2020
Year to
30 June
2021
£000 £000 £000
Amounts recognised as distributions to equity holders:
Interim dividend for the year ended 30 June 2021 of 5.0p - - 2,913
Final dividend for the year ended 30 June 2021 of 10.0p 5,830 - -
5,830 - 2,913
On 9 February 2022 the Board approved an interim dividend of 6.0 pence per
share at an estimated total cost of £3,498,000. The dividend has not been
included as a liability as at 31 December 2021.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings Unaudited Unaudited Audited
Six months to 31 December 2021
Six months to 31 December 2020
Year to
30 June
2021
£000 £000 £000
Profit from continuing operations 20,042 16,601 33,872
Loss from discontinued operations* - (188) -
Profit for the purposes of basic and diluted earnings per share 20,042 16,413 33,872
Number of shares 31 December 31 December 30 June 2021
2021
2020
No. 000 No. 000 No. 000
Weighted average number of ordinary shares for the purposes of
basic earnings per share 58,290 58,231 58,235
Effect of dilutive potential ordinary shares:
Share-based payments 2 17 97
Weighted average number of ordinary shares for the purposes of
diluted earnings per share 58,292 58,248 58,332
Continuing operations Six months to 31 December Six months to 31 December Year to
2021
2020
30 June
2021
pence pence pence
Basic 34.38 28.51 58.16
Diluted 34.38 28.50 58.07
Continuing and discontinued operations*
Basic n/a 28.19 n/a
Diluted n/a 28.18 n/a
( )
(* )All results classified as continuing for the year ended 30 June 2021 and
six months to 31 December 2021.
6. Inventories
Unaudited Unaudited Audited
31 December 2021 31 December 2020 30 June
2021
£000 £000 £000
Land held for development 100,482 88,134 97,550
Work in progress 144,242 133,244 142,411
244,724 221,378 239,961
6. Inventories (cont.)
Net realisable value provisions held against inventories at 31 December 2021
were £7,690,000
(31 December 2020: £5,148,000, 30 June 2021: £5,470,000). The amount of
inventory write-down recognised as an expense in the period was £2,553,000
(31 December 2020: £613,000, 30 June 2021: £1,216,000) and the amount of
reversal of previously recognised inventory write-down was £143,000 (31
December 2020: £315,000, 30 June 2021: £859,000). The cost of inventories
recognised as an expense in cost of sales was £121,933,000 (31 December 2020:
£100,997,000, 30 June 2021: £197,533,000).
7. Net cash/(debt)
Unaudited Unaudited Audited
31 December 2021 31 December 2020 30 June
2021
£000 £000 £000
Cash and cash equivalents 38,160 31,616 34,331
Lease liabilities (3,076) (2,469) (2,322)
Net cash/(debt) 35,084 29,147 32,009
At 31 December 2021, monies held by solicitors on behalf of the Group and
included within cash and cash equivalents were £3,033,000 (31 December 2020:
£877,000, 30 June 2021: £4,870,000).
Cash and cash equivalents Lease liabilities Total
£000 £000 £000
Net cash/(debt) at 1 July 2021 34,331 (2,322) 32,009
Cash flows 3,829 353 4,182
New leases - (1,089) (1,089)
Lease disposals - 28 28
Finance expense - (46) (46)
Net cash/(debt) at 31 December 2021 38,160 (3,076) 35,084
8. 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
Unaudited Unaudited Audited
31 December 31 December 30 June
2021
2020
2021
£000 £000 £000
Balance at start of period 2,522 3,668 3,668
Redemptions (573) (225) (594)
Shared equity provision - - (600)
Unwind of discount (finance income) 19 25 49
Fair value movement recognised in other comprehensive income (1) 1 (1)
Balance at end of period 1,967 3,469 2,522
8. Financial Instruments (cont.)
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 period of shared equity receivables carried at fair value
of £573,000 (H1 20/21: £225,000) generated a profit on redemption of
£246,000 (H1 20/21: £93,000) which has been recognised in other operating
income in the consolidated income statement.
In addition, a net change in value of shared equity receivables of £32,000
(H1 20/21: £9,000) has been recognised in other comprehensive income. This is
made up as follows:
Unaudited Unaudited Audited
31 December 31 December 30 June
2021
2020
2021
£000 £000 £000
Fair value movement recognised in other comprehensive income (1) 1 (1)
Fair value recycled through profit and loss 33 8 34
Total movement recognised in other comprehensive income 32 9 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 period.
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:
Change in assumption Increase / (decrease) in fair value
£000
Forecast regional house price inflation - increase by 1% 133
Average period to redemption - increase by 1 year (143)
Discount rate - decrease by 1% 127
9. Trade and other payables
Trade and other payables includes £9,678,000 of deferred payables on the
purchase of land by the Gleeson Homes division (31 December 2020:
£10,064,000), of which £3,296,000 is due in more than one year (31 December
2020: £2,671,000).
10. Related party transactions
There have been no material changes to the related party arrangements as
reported in note 26 of the Annual Report and Accounts for the year ended 30
June 2021.
11. Seasonality
Reservations in Gleeson Homes are largely unaffected by seasonal variations
and tend to be driven more by the timing of site openings than by seasonality.
There is no seasonality in the Gleeson Land division.
12. Group risks and uncertainties
The Directors consider that the principal risks and uncertainties which could
have a material impact on the Group's performance remain consistent with those
set out in the Strategic Report on pages 69 to 73 of the Group's Annual Report
and Financial Statements.
The Covid-19 pandemic was previously considered when assessing our principal
risks rather than identified as a specific risk item. Our assessment of the
impact of Covid-19 on our principal risks remains unchanged.
The recent announcement from the Department for Levelling Up, Housing &
Communities to find a solution to the building safety and combustible cladding
crises, is directed at the construction industry. As a result, the principal
risk around changes to government policy and regulation remains high (30 June
2021: high). We continue to monitor these developments and any impact they
have on the Group.
13. Subsequent events
There were no material subsequent events affecting the Group between 31
December 2021 and the date of this announcement that need to be disclosed.
Statement of Directors' Responsibility
for the six months to 31 December 2021
The Directors confirm that, to the best of our knowledge, these condensed
interim financial statements have been prepared in accordance with UK adopted
IAS 34 "Interim financial reporting" and that the interim management report
includes a fair review of information required by DTR 4.2.7 and DTR 4.28,
namely:
a) an indication of important events that have occurred during the first
six months and their impact on the condensed set of financial statements, and
a description of the principal risks and uncertainties for the remaining six
months of the financial year; and
b) material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
The Board
The Board of Directors of MJ Gleeson plc at 30 June 2021 and their respective
responsibilities can be found on pages 84 to 89 of the MJ Gleeson plc Annual
Report and Accounts 2021. There have been no changes since that date.
By order of the Board
Stefan Allanson
Chief Financial Officer
9 February 2022
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