REG - MJ Gleeson Plc - Results for the half-year ended 31 December 2022
16/02/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230216:nRSP0692Qa&default-theme=true
RNS Number : 0692Q MJ Gleeson PLC 16 February 2023
16 February 2023
MJ GLEESON PLC
Results for the half-year ended 31 December 2022
· Net reservations starting to recover | Demand for consented land
remains strong
· Expect to deliver between 1,650 and 1,850 homes in FY2023,
subject to pace of recovery
· Organisational restructuring under way to reinforce strong
platform for sustainable growth
Graham Prothero, Chief Executive Officer, commented:
"I am delighted to have taken up my role as CEO and, as I continue to embed
myself in the business, am hugely impressed with our talented and committed
colleagues, our excellent product, exciting land pipeline and, above all, our
team's enthusiasm for our ethos of "Building Homes. Changing Lives." We have
an exciting opportunity to take Gleeson to the next level by delivering
sustainable growth over the medium-term, across both our Homes and Land
divisions.
At the same time as managing through the lower levels of current market
demand, I want to ensure that the Group is in the best possible shape to take
advantage of the recovery which we are beginning to see early signs of.
Building on the strong platform I have inherited, my focus is on optimising
our organisational structure and making us more operationally efficient and
fit for further growth. This will also result in significant annualised
savings of circa £4 million.
In terms of guidance: confidence, underpinned by improved mortgage rates, is
slowly returning to the market, evidenced by improving net reservations. With
full-year volumes dependent on the pace of recovery, we now expect to deliver
between 1,650 and 1,850 homes."
H1 22/23 H1 21/22 Change
Revenue
Gleeson £166.7m £150.2m 11.0%
Homes
Gleeson Land £4.3m £23.3m (81.5%)
Total £171.0m £173.5m (1.4%)
Operating profit by division
Gleeson Homes £18.2m £22.5m (19.1%)
Gleeson Land £1.4m £5.5m (74.5%)
Profit before tax £16.1m £24.7m (34.8%)
Cash net of borrowings £13.5m £38.2m (64.7%)
ROCE(1) 20.0% 22.9% (290bp)
EPS (basic) 22.0p 34.4p (36.0%)
Dividend per share 5.0p 6.0p (16.7%)
1 Return on capital employed is calculated based on earnings before
interest and tax and exceptional items (EBIT), expressed as a percentage of
the average of opening and closing net assets for the prior 12 months after
deducting deferred tax and cash and cash equivalents net of borrowings.
Gleeson Homes:
· 894 homes sold (H1 21/22: 932), reflecting the lower forward order
book at the start of the year and weaker sales following the mini-budget
· Average selling price up 15.6% to £186,400 (H1 21/22: £161,200)
o Underlying selling prices up 11.2%
· Operating profit decreased 19.1% to £18.2m (H1 21/22: £22.5m)
· Three new sites opened (H1 21/22: eight sites opened)
· Land pipeline remains strong at 16,561 plots (June 2022: 16,814
plots)
· Site acquisition, site starts and build activity being carefully
managed to maintain growth ambition as market demand recovers
· Restructuring operations to support future growth
Gleeson Land:
· Senior leadership strengthened with appointment of Guy Gusterson
to lead future growth
· One land sale completed (H1 21/22: three land sales)
· Three sites in an active sales process (H1 21/22: no sites in a
sales process) with strong levels of demand and pricing remaining firm
· A further two sites being marketed (H1 21/22: three sites)
· Successfully secured planning permission on four sites (H1 21/22:
none)
· One new site added to the portfolio (H1 21/22: three sites added)
· Portfolio of 71 sites (June 2022: 71 sites)
Current trading and outlook:
· Net reservations in the last four weeks have doubled from the low
levels seen before Christmas but remain below the levels typically seen this
time of the year
· The Company has narrowed its full year completions target to
between 1,650 and 1,850 homes
A presentation by Graham Prothero, CEO and Stefan Allanson, CFO, which will
also be webcast, will be held at 9:00am today. To attend virtually:
· by webcast, access via the following link:
https://stream.brrmedia.co.uk/broadcast/63cab7fb777efd4a8b51386d
(https://stream.brrmedia.co.uk/broadcast/63cab7fb777efd4a8b51386d)
· by telephone, please dial-in using the below details:
o Number: +44 (0) 33 0551 0200
o Code: Gleeson Half Year Results
Enquiries:
MJ Gleeson plc Tel: +44 1142 612900
Graham Prothero Chief Executive Officer
Stefan Allanson Chief Financial Officer
Hudson Sandler Tel: +44 20 7796 4133
Mark Garraway Tel: +44 7771 860 938
Charlotte Cobb Tel: +44 7795 422 131
Singer Capital Markets Tel: +44 20 7496 3000
Shaun Dobson
James Moat
Liberum Tel: +44 20 3100 2222
Richard Crawley
Kate Bannatyne
This announcement is released by MJ Gleeson plc and contains inside
information for the purposes of Article 7 of the Market Abuse Regulation (EU)
596/2014 (MAR), and is disclosed in accordance with the Company's obligations
under Article 17 of MAR. Upon the publication of this announcement, this
information is considered to be in the public domain.
For the purposes of MAR and Article 2 of Commission Implementing Regulation
(EU) 2016/1055, this announcement is being made on behalf of the Company by
Stefan Allanson, Chief Financial Officer.
LEI: 21380064K7N2W7FD6434
About MJ Gleeson:
MJ Gleeson (https://www.mjgleesonplc.com/) plc is the leading low-cost,
affordable housebuilder listed on the London Stock Exchange. Gleeson Homes'
customers are typically young, first-time buyers, with a median income of
£26,000. Its two-bedroom homes start from around £115,000. Gleeson's vision
is "Building Homes. Changing Lives", prioritising areas where people need
affordable housing the most.
Buying a Gleeson Home typically costs less than renting a similar property.
All Gleeson homes are traditional brick built semi or detached homes which
include a driveway and front and rear gardens. Gleeson offers a wide mix of
two, three and four bedroom layouts.
Gleeson Land is the Group's land promotion division, which identifies
development opportunities and works with stakeholders to promote land through
the residential planning system.
As a high-quality, affordable housebuilder, Gleeson has strong and inherent
sustainability credentials. Its social purpose underpins the Company's
strategy, and Gleeson measures itself closely against UN SDGs 5, 8, 11, 12, 13
and 15.
More details on the Company's sustainability approach can be found at:
mjgleesonplc.com/sustainability/
(https://mjgleesongroupplc.sharepoint.com/sites/F/Shared%20Documents/STATS/2022-23%20Interim%20December%202022/Trading%20Update%2013%20Jan%2023/mjgleesonplc.com/sustainability/)
CHIEF EXECUTIVE'S STATEMENT
I was delighted to take up my role as Chief Executive Officer and, as I
continue to visit all our sites and offices, I am even more impressed with our
skilled and committed people, our excellent product, our exciting land
pipeline, and the enthusiasm of the whole team for our ethos of "Building
Homes. Changing Lives."
The Group's result for the first half of this financial year reflects the
challenges posed by the macro-economic environment in the period, in
particular during the second quarter.
Market volatility and the sharp increase in interest rates following the
disastrous mini-budget reduced affordability and severely impacted buyer
confidence, causing a significant slowdown in demand. Meanwhile, supply chain
and inflationary pressures exacerbated by the war in Ukraine continue to put
pressure on costs, although we are seeing some welcome mitigation in
subcontract rates and certain material prices.
As well as tightly controlling recruitment and working capital in the current
environment, we are making some key changes to our operating structure to
ensure that we are well-positioned to grow the business as the market
recovers. I look forward to discussing our medium and longer-term plans and
targets in detail later this year.
We are encouraged that signs of a recovery in buyer confidence are evident,
with reduced cancellations and increased gross reservations in the last four
weeks resulting in net reservations doubling compared to the ten weeks before
Christmas 2022. However, sales rates remain below those typically seen at this
time of year.
Net reservations per site per week
Six weeks to Ten weeks to Four weeks to
mid-September Christmas 10 February
FY23 0.51 0.25 0.50
FY22 0.47 0.43 0.91
Whilst the pace and strength of recovery over the coming months remains
uncertain, having reviewed a number of scenarios, we are narrowing the range
of our full year expectation to between 1,650 and 1,850 homes.
Reviewing our operating structure
In response to the macroeconomic challenges and consequent impact on sales
volumes, the Group has taken a number of defensive measures focused on
managing its working capital and costs. These include slowing build rates on
certain sites in line with demand, delaying the opening of new sites,
maintaining our strong discipline on land buying and freezing recruitment.
More importantly, we are reorganising the operating structure of Gleeson Homes
to ensure that it is strongly positioned to continue its growth trajectory in
a sustainable manner as market demand recovers. Six management teams will
operate nine operating regions following the merging of a number of operating
teams. The existing three division structure will be merged into two
divisions, Northern and Central. Regional teams will be aligned onto a single
operating structure, supported by lean and focused central services.
It is anticipated that these actions will incur a one-off cost of £2 million
in the second half and will result in annualised cost savings of circa £4
million.
Affordability and quality
Whilst the sharp rise in interest rates during the period significantly
increased mortgage costs, a Gleeson home continues to be affordable for a
couple earning the National Living Wage (which will increase by 9.7% on 1
April 2023), without requiring Help to Buy support. Demand continues to be
underpinned by the affordability of our homes and the critically undersupplied
nature of our segment of the market. We are also increasingly selling to
customers who would have previously bought a home from a more expensive
developer, but who are attracted by Gleeson's affordable price points and high
quality.
The cost of owning a Gleeson home remains lower than the cost of renting an
equivalent property, and the advantages of home ownership - both economically
and socially - remain clear. Gleeson homes are also highly energy efficient,
requiring around half the energy to heat and power than existing housing and
our customers therefore benefit from both the financial savings and the health
and wellbeing benefits of living in a modern, well insulated home.
We continue to work with lenders and Homes England to offer affordable
products to our customers, including through First Homes under the
Government's early delivery programme and Deposit Unlock, an industry-led
scheme guaranteeing the top slice of higher loan-to-value mortgages. These
products will be important in continuing to help first time buyers onto the
property ladder and will sit alongside other products, including shared
ownership, to support our customers.
Meanwhile, we continue to support the delivery of a high-quality service to
our customers through the digitisation of quality control on each plot and
bringing enhanced visibility to each stage of the customer journey. In
addition, during the period we invested significantly in our Customer Care
team, moving to a regional model and recruiting 15 new Customer Relations
Advisors and Regional Maintenance Technicians. Delivering a high-quality
product at affordable price points remains a key priority for the business.
Planning
The recently announced consultation on planning reforms by the Department for
Levelling Up, Housing and Communities (DLUHC) has led to further uncertainty
within the planning system. Whilst the potential changes continue to be
debated, the system remains chronically slow and frequently requires an
"appeal led" approach to decision making. The proposed changes to the National
Planning Policy Framework (NPPF) pose serious risks to the effective operation
of the planning system in England and could adversely impact the delivery of
new homes both now and for future generations.
Whilst the planning environment grows ever more challenging, our land teams,
both in Gleeson Homes and Gleeson Land, have an excellent track record of
successfully navigating sites through the process, including via appeal, and
both businesses boast strong pipelines.
Build costs and availability
There have been further supply chain related challenges resulting from
macroeconomic pressures, including those as a result of the war in Ukraine. We
have managed the impact of these through the strong relationships that we have
with our suppliers and subcontractors and through selective procurement.
Nevertheless, build cost inflation over the last 12 months has been high at
10.3%, albeit largely offset in the first half by selling price increases.
Encouragingly, we are now starting to see subcontractor and some material
costs beginning to reduce, as market activity slows down, and this will help
to protect margins.
Building safety
Gleeson strongly agrees with the principle that leaseholders should not bear
the costs or anxiety arising from the national cladding and fire safety
crisis. In April 2022 the Group signed the building safety Pledge to the
Department for Levelling Up, Housing and Communities (DLUHC). In doing so, the
Group gave its commitment to remediate any life-critical fire-safety issues on
buildings over 11 metres which it had any involvement in developing over the
last 30 years. DLUHC published the agreed Self-remediation terms on 30 January
2023. The Company has informed DLUHC that it intends to enter into this
agreement ahead of the deadline of 13 March 2023.
An exceptional provision of £12.9m was established by the Group in the prior
year. As part of this, as previously announced, we are moving quickly to
execute a programme of intrusive inspections and fire risk assessments. No
further exceptional provisions are expected. The costs of the inspections
incurred to date were included in the provision, of which £0.1m has been
utilised, reducing the balance to £12.8m at 31 December 2022. For those
buildings where intrusive inspections and fire risk assessments have been
completed, we are commencing remediation works, with around half of the
provision expected to be utilised over the next year. We conduct regular
reviews of the provision, taking into account the most recent inspections and
any other relevant information.
Along with all housebuilders, we have been subject to the additional 4%
residential property developer tax (RPDT) from April 2022, which was designed
to raise at least £2bn over a 10-year period towards the cost of dealing with
defective cladding installed by other developers. We believe that through the
Pledge and RPDT, housebuilders are contributing very strongly to the
resolution of the cladding and fire-safety crises, and further taxes or levies
on the industry would serve only to be detrimental to housing delivery.
Sustainability
Our mission to build affordable, quality homes where they are most needed and
for the people that need them most continues to create social and economic
value in deprived areas across the North of England and the Midlands. Our
business model fundamentally supports the United Nation's Sustainable
Development Goal (UNSDG) 11 through providing access to safe and affordable
housing, and in January 2023 we became the second UK housebuilder to join the
United Nations Global Compact (UNGC), aligning our business to the 10
principles of the UNGC across human rights, labour, environment and
anti-corruption.
As outlined in our 2021 Annual Report, we increased our scope 1 and 2 CO(2)e
reduction plans to 30% and set a target of no more than 1.75 tonnes per home
sold by 2023. Our actions from the past few years had put us on track to
achieve this intensity target but, as a result of the lower sales volume
expected, we are unlikely to achieve the 1.75 tonnes target this year.
We do, however, continue to make significant progress in reducing total carbon
emissions, including scope 3 in-use emissions for our homes:
· We are installing Air Source Heat Pumps (ASHP's) in all new homes we
commence building from July 2023 which, combined with modern insulation, are
expected to achieve a significant reduction in carbon emissions when occupied.
· 6% of the homes we built in the period used concrete bricks or
reconstituted concrete stone - which contains half the embedded CO(2)e of clay
bricks and reduces the embedded CO(2)e in each home built by 4% - and we aim
to build a quarter of our homes with concrete bricks next year.
· EV charging points were installed in 8% of the homes we sold in the
period - and we aim to install these in 14% of the homes we sell over the next
six months.
Combined with our high build quality and increased standards of insulation we
expect our homes will, within the next few years, achieve a 69% improvement
above the current standards for energy performance. This reflects our
commitment to longer term sustainability goals, and we are targeting this
without compromising quality or affordability.
We continue to make good progress with our biodiversity strategy, which is
focused on improving the local wildlife and ecosystems on and around our
developments. Despite the often highly biodiverse nature of brownfield sites
compared to greenfield, we embrace the spirit of prospective legislation, in
particular the Environment Act 2021, and are examining a range of potential
solutions.
As an inherently sustainable business, we remain committed to upholding the
highest possible environmental standards. During the period, we appointed an
experienced Senior Ecologist to provide ecological advice and guidance on our
land purchases and planning applications. We also partnered with the Supply
Chain Sustainability School, enabling us to upskill colleagues and work
collaboratively with other housebuilders, contractors and suppliers to achieve
common goals on areas such as climate action, resource use and biodiversity.
Finally, we are proud to have retained accreditation from the Fair Tax
Foundation. We remain the only listed housebuilder to be accredited with the
Fair Tax Mark, which certifies we pay our fair share of tax in the right
place, at the right time and are honest and transparent in our disclosures.
Financial Performance
Group results
Revenue decreased 1.4% to £171.0m (H1 21/22: £173.5m) with gross profit
decreasing 3.3% to £49.2m (H1 21/22: £50.9m). The Group's operating profit
decreased 33.3% to £16.8m (H1 21/22: £25.2m). Following a net interest
charge of £0.7m (H1 21/22: £0.5m), profit before tax decreased 34.8% to
£16.1m (H1 21/22: £24.7m).
The tax charge for the period was £3.3m (H1 21/22: £4.7m) reflecting an
effective rate of 20.4% (H1 21/22: 19.0%). The profit after tax for the period
was £12.8m (H1 21/22: £20.0m).
Total shareholders' equity was £278.0m at 31 December 2022 compared to
£259.9m at 31 December 2021. This equates to net assets per share of 476.5
pence (31 December 2021: 445.8 pence).
The Group's net cash balance at 31 December 2022 decreased by £20.3m to
£13.5m (30 June 2022: £33.8m), primarily driven by lower house sales and
higher levels of build inventory.
The Group's £105m borrowing facility was undrawn at the period end.
Gleeson Homes
Revenue increased 11.0% to £166.7m (H1 21/22: £150.2m), with increased
selling prices outweighing a fall in the number of homes sold.
The average selling price for homes sold in the period increased 15.6% to
£186,400 (H1 21/22: £161,200), reflecting underlying selling price increases
of 11.2%, a higher proportion of larger 4-bedroom homes sold, and good levels
of customer extras, which are typically higher margin.
The division entered the year with a significantly lower forward order book
than in prior years, reflecting our intentional management of sales releases
to optimise both prices and the customer journey. Therefore, the slowdown in
demand resulting from the mini-budget in September 2022 had a more pronounced
impact on total homes sold. As a result, 4.1% fewer homes were sold in the
period, at 894 homes (H1 21/22: 932 homes sold).
Of the 894 homes sold during the half-year, 47% were purchased using the
Government's Help to Buy scheme (FY22: 53%, H1 21/22: 55%). Help to Buy closed
for new applications in October 2022, with the final completions to be made in
March 2023 for homes built by 31 January 2023. However, our homes remain
affordable to low income buyers without the use of Help to Buy.
Gross profit on homes sold increased 5.0% to £46.1m (H1 21/22: £43.9m),
driven by the increased revenue from higher selling prices. The gross margin
on homes sold in the period was 27.7% (H1 21/22: 29.2%) reflecting build cost
inflation of 10.3% and increased fixed site costs as site durations extended
due to the slowdown. These costs were largely, albeit not entirely, offset by
selling price increases.
Administrative expenses increased 29.5% to £28.1m (H1 21/22: £21.7m),
reflecting investment in the business' operating structure, headcount and pay
inflation which took place ahead of the market slowdown, including opening a
ninth regional office in West Yorkshire. This office was fully operational
from 1 July 2022.
Operating margin on homes sold decreased 410 basis points to 10.9% (H1 21/22:
15.0%), with operating profit falling 19.1% to £18.2m (H1 21/22: £22.5m) in
line with the increased administrative expenses.
The division purchased three sites during the period (H1 21/22: seven sites).
The pipeline of owned plots decreased during the period by a net 161 plots to
8,317. The total pipeline of owned and conditionally purchased plots was
16,561 plots on 168 sites at 31 December 2022 (30 June 2022: 16,814 plots on
160 sites). During the period, 19 new sites were added to the pipeline. Our
land pipeline represents over eight years of home sales.
Gleeson Homes opened three new sites during the first half, meaning it was
building on 87 sites at 31 December 2022 (31 December 2021: 83 sites) and
selling from 68 active sites (31 December 2021: 60 sites).
The slowdown in demand during the period means that we enter the second half
with a forward order book of 319 plots (30 June 2022: 618 plots, 31 December
2021: 616), of which 296 are expected to complete in the second half. In
addition, as a result of the market slowdown and to preserve working capital
we are pausing new site openings and do not currently anticipate opening any
new build sites until the pace of recovery in demand is clearer.
By the end of the financial year, the division expects to be building on
approximately 77 sites (June 2022: 87) and actively selling on approximately
65 sites (June 2022: 61).
Gleeson Land
The division completed one land sale in the first half (H1 21/22: three). As a
result, operating profit for the first half was £1.4m (H1 21/22: £5.5m).
Three sites were being actively progressed for sale at 31 December 2022, which
have the potential to deliver 1,342 plots (31 December 2021: no sites being
progressed for sale). A further two sites were being marketed with the
potential to deliver 305 plots (31 December 2021: three sites being marketed,
1,384 plots).
At 31 December 2022, there were six sites in the portfolio with either
planning permission or a resolution to grant permission for a total of 1,525
plots (30 June 2022: three sites, 1,206 plots).
There are a further 16 sites where the division is currently awaiting a
decision on planning applications or appeals (30 June 2022: 16 sites). The
challenges in the planning system continue to mean there are a number of
applications that are delayed or progressed via appeal. However, the team is
experienced in navigating these challenges and has an excellent track record
at appeal.
We continue to invest in the Gleeson Land portfolio. One high-quality new site
was secured in the period, with the potential to deliver 450 plots. Agreements
on a number of other well-located sites are currently being progressed.
At 31 December 2022, the portfolio, in which the Group has a beneficial
interest of 83%, comprised 71 sites with the potential to deliver 18,775 plots
(30 June 2022: 71 sites, 20,241 plots).
Dividends
Considering these results and the immediate outlook, the Board is declaring an
interim dividend of 5.0 pence per share (H1 21/22: 6.0 pence per share). The
Company's policy of covering total full year dividends with earnings between
three and five times remains in place.
The interim dividend will be paid on 3 April 2023 to shareholders on the
register at close of business on 3 March 2023.
Board changes
On 31 December 2022, Dermot Gleeson stepped down after 47 years on the Board
and 28 years as Chairman. James Thomson, former CEO, was appointed as
non-executive Chairman and Chair of the Nomination Committee with effect from
1 January 2023.
On behalf of the Board, I would like to express our sincere thanks to Dermot
for his extraordinary contribution to the Company. He leaves the business with
a robust and clear vision, and a highly successful model to drive future
growth.
Summary & Outlook
I could not be more excited to have joined Gleeson. Everything I have seen and
everyone I have met confirms that it is a business with a strong platform and
a great opportunity ahead of it.
We are beginning to see a tentative return of confidence to the market and
expect demand for new homes to slowly recover through the year. Selling prices
remain stable and net reservation rates have continued to improve from 0.25
per site per week for the ten weeks before Christmas to 0.50 per site per week
in the last four weeks.
Whilst full year volumes will depend on the pace of the market's recovery, we
currently expect to deliver between 1,650 and 1,850 homes.
We are implementing a reorganisation to optimise our structure, preparing the
business for the next phase of growth. We are also controlling working
capital and making operational savings to respond to the challenges posed by
the current macroeconomic environment, and are ready to ramp up activity when
required.
Looking beyond the current uncertainty in the market, the prospects for the
Group are exciting and I look forward to discussing our medium and longer-term
plans and targets in detail later this year.
Graham Prothero
Chief Executive
Condensed Consolidated Income Statement
for the six months to 31 December 2022
Note Unaudited Unaudited Audited
Six months to 31 December 2022
Six months to 31 December 2021
Year to
30 June
2022
£000 £000 £000
Revenue 170,999 173,543 373,409
Cost of sales (121,832) (122,659) (275,620)
Gross profit 49,167 50,884 97,789
Administrative expenses (32,578) (25,982) (54,543)
Other operating income 232 310 684
Operating profit 16,821 25,212 43,930
Analysed as: 16,821 25,212 56,797
Underlying operating profit
Exceptional items - - (12,867)
Finance income 99 47 172
Finance expenses (846) (527) (1,482)
Profit before tax 16,074 24,732 42,620
Analysed as: 16,074 24,732 55,487
Underlying profit before tax
Exceptional items - - (12,867)
Profit before tax 16,074 24,732 42,620
Tax 3 (3,281) (4,690) (7,531)
Profit for the period 12,793 20,042 35,089
Earnings per share
Basic 5 21.97 p 34.38 p 60.23 p
Diluted 5 21.95 p 34.38 p 60.08 p
Basic - pre-exceptional items 5 21.97 p 34.38 p 78.12 p
Diluted - pre-exceptional items 5 21.95 p 34.38 p 77.92 p
Condensed Consolidated Statement of Comprehensive Income
for the six months to 31 December 2022
Unaudited Unaudited Audited
Six months to 31 December 2022
Six months to 31 December 2021
Year to
30 June
2022
£000 £000 £000
Profit for the period 12,793 20,042 35,089
Other comprehensive (expense)/income
Items that may be subsequently reclassified to profit or loss
Change in value of shared equity receivables at fair value (267) 32 120
Movement in tax on share-based payments taken directly to equity - 49 -
(267) 81 120
Other comprehensive (expense)/income for the period, net of tax
12,526 20,123 35,209
Total comprehensive income for the period
Condensed Consolidated Statement of Financial Position
at 31 December 2022
Unaudited Unaudited Audited
31 December 2022
31 December 2021
30 June
2022
Note
£000 £000 £000
Non-current assets
Property, plant and equipment 9,537 7,750 8,112
Trade and other receivables 141 8,261 5,051
Deferred tax assets 1,183 1,363 941
10,861 17,374 14,104
Current assets
Inventories 6 326,793 244,724 286,882
Trade and other receivables 22,033 19,808 29,243
UK corporation tax 512 4,941 3,565
Cash and cash equivalents 7 13,485 38,160 33,764
362,823 307,633 353,454
Total assets 373,684 325,007 367,558
Non-current liabilities
Trade and other payables 9 (10,934) (4,248) (9,703)
Provisions 8 (7,328) (264) (12,049)
(18,262) (4,512) (21,752)
Current liabilities
Trade and other payables 9 (71,481) (60,539) (72,291)
Provisions 8 (5,960) (15) (1,339)
(77,441) (60,554) (73,630)
Total liabilities (95,703) (65,066) (95,382)
Net assets 277,981 259,941 272,176
Equity
Share capital 1,166 1,166 1,166
Share premium 15,843 15,843 15,843
Own shares (751) - (471)
Retained earnings 261,723 242,932 255,638
Total equity 277,981 259,941 272,176
Condensed Consolidated Statement of Changes in Equity
for the six months to 31 December 2022
Share capital Retained earnings Total
Share premium Own shares equity
Note
£000 £000 £000 £000 £000
At 1 July 2021 (audited) 1,165 227,923 244,931
15,843 -
Profit for the period - - - 20,042 20,042
Other comprehensive income - - - 81 81
Total comprehensive income for the period - - - 20,123 20,123
Share issue 1 - - - 1
Purchase of own share - - - (30) (30)
Share-based payments - - - 746 746
Dividends - - - (5,830) (5,830)
Transactions with owners, recorded directly in equity 1 (5,114) (5,113)
- -
At 31 December 2021 (unaudited) 1,166 15,843 - 242,932 259,941
Profit for the period - - - 15,047 15,047
Other comprehensive income - - - 39 39
Total comprehensive income for the period - - - 15,086 15,086
Opening adjustment to own shares - - (136) 136 -
(Purchase)/sale of own shares - - (403) 30 (373)
Utilisation of own shares - - 68 268 336
Share-based payments - - - 822 822
Movement in tax on share-based payments taken directly to equity - (128) (128)
- -
Dividends - - - (3,508) (3,508)
Transactions with owners, recorded directly in equity - (2,380) (2,851)
- (471)
At 30 June 2022 (audited) 1,166 15,843 255,638 272,176
(471)
Profit for the period - - - 12,793 12,793
Other comprehensive expense - - - (267) (267)
Total comprehensive income for the period - - - 12,526 12,526
Purchase of own shares - - (295) - (295)
Utilisation of own shares - - 15 (15) -
Share-based payments - - - 652 652
Movement in tax on share-based payments taken directly to equity - (82) (82)
- -
Dividends - - - (6,996) (6,996)
Transactions with owners, recorded directly in equity - - (280) (6,441) (6,721)
At 31 December 2022 (unaudited) 1,166 15,843 (751) 261,723 277,981
Condensed Consolidated Statement of Cash Flow
for the six months to 31 December 2022
Unaudited Unaudited Audited
Six months to 31 December 2022
Six months to 31 December 2021
Year to
30 June
2022
£000 £000 £000
Operating activities
Profit before tax 16,074 24,732 42,620
Depreciation of property, plant and equipment 1,819 1,571 3,124
Share-based payments 652 746 1,568
Profit on redemption of shared equity receivables (172) (246) (375)
(Decrease)/increase in provisions including exceptional items (100) - 13,129
Loss on disposal of property, plant and equipment 13 101 403
Finance income (99) (47) (172)
Finance expenses 853 527 1,482
Operating cash flows before movements in working capital 19,040 27,384 61,779
Increase in inventories (39,911) (4,763) (46,921)
Decrease/(increase) in receivables 11,537 (1,555) (8,165)
(Decrease)/increase in payables (750) (3,907) 13,244
Cash (used in)/generated from operating activities (10,084) 17,159 19,937
Tax paid (552) (5,836) (7,059)
Finance costs paid (782) (505) (1,043)
Net cash flow (deficit)/surplus from operating activities (11,418) 10,818 11,835
Investing activities
Proceeds from disposal of shared equity receivables 582 852 1,566
Interest received 4 3 20
Purchase of property, plant and equipment (1,832) (1,677) (3,684)
Net cash flow deficit from investing activities (1,246) (822) (2,098)
Financing activities
Net proceeds from issue of shares - 1 1
Purchase of own shares (295) (30) (403)
Dividends paid (6,996) (5,830) (9,338)
Principle element of lease payments (324) (308) (564)
Net cash flow deficit from financing activities (7,615) (6,167) (10,304)
Net (decrease)/increase in cash and cash equivalents (20,279) 3,829 (567)
Cash and cash equivalents at beginning of period 33,764 34,331 34,331
Cash and cash equivalents at end of period 13,485 38,160 33,764
Notes to the Condensed Consolidated Financial Statements
for the six months to 31 December 2022
1. Basis of preparation and accounting policies
This condensed consolidated interim financial report ("the Interim Report")
for the six months ended 31 December 2022 has been prepared in accordance with
UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act 2006. The Interim Report has been
prepared on the basis of the policies set out in the Annual Report and
Accounts for the year ended 30 June 2022 and in accordance with Accounting
Standard IAS 34 "Interim Financial Reporting" and the Disclosure Guidance and
Transparency Rules sourcebook of the UK's Financial Conduct Authority. The
Interim Report does not constitute financial statements as defined in Section
434 of the Companies Act 2006 and is neither audited nor reviewed.
The interim financial statements need to be read in conjunction with the
consolidated financial statements for the year ended 30 June 2022, which were
prepared in accordance with UK-adopted International Financial Reporting
Standards. A copy of the Annual Report and Accounts for the year ended 30
June 2022 is available either on request from the Group's registered office, 6
Europa Court, Sheffield Business Park, Sheffield, S9 1XE, or can be downloaded
from the corporate website, www.mjgleesonplc.com.
The comparative figures for the financial year ended 30 June 2022 are not the
Group's statutory accounts for that financial year. Those accounts have been
reported on by the auditors of the Company and the Group and delivered to the
Registrar of Companies. The report of the auditors was (i) unqualified, (ii)
did not include a reference to any matters which the auditor drew attention to
by way of emphasis without qualifying their report and (iii) did not contain
statements under Section 498 (2) or (3) of the Companies Act 2006.
During the period, the Group has adopted the following new and revised
standards and interpretations that have had no material impact on these
condensed consolidated financial statements:
· Amendments to IAS 16, IAS 37 and IFRS 3, and the annual improvements to
IFRS Standards 2019 to 2020.
The preparation of condensed consolidated interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may subsequently differ from
these estimates. In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the consolidated financial statements for
the year ended 30 June 2022.
The accounting policies, method of computation, and presentation adopted are
consistent with those of the Annual Report and Accounts for the year ended 30
June 2022.
Going concern
The Group has maintained its strong financial position and ended the period
with cash balances of £13.5m (30 June 2022: £33.8m). The Group's committed
club facility of £105m was undrawn. The Group's financial forecasts reflect
current trading and outlook, including the impact of the last three months.
These forecasts have been subjected to a range of sensitivities including a
severe but plausible scenario together with the likely effectiveness of
mitigating actions. The assessment considered the impact of a number of
realistically possible, but severe and prolonged changes to principal
assumptions from a downturn in the housing and land markets including:
· a reduction in Gleeson Homes volumes of approximately 15%, reflecting
a fall in net reservations from the current trading position;
· a sustained reduction in Gleeson Homes selling prices of 5%;
· a delay on the timing of Gleeson Land transactions and a reduction
in land selling values.
1. Basis of preparation and accounting policies (cont.)
Under these sensitivities, after taking mitigating actions, the Group
continues to have a sufficient level of liquidity, operate within its
financial covenants and meet its liabilities as they fall due.
Based on the results of the analysis undertaken, the Directors have a
reasonable expectation that the Group has adequate resources available to
continue in operation for the foreseeable future and operate in compliance
with the Group's bank facilities and financial covenants. As such, the Interim
Report for the Group has been prepared on a going concern basis.
2. Segmental analysis
The Group is organised into the following two operating divisions under the
control of the Executive Board, which is identified as the Chief Operating
Decision Maker as defined under IFRS 8 "Operating segments":
• Gleeson
Homes
• Gleeson Land
The revenue in the Gleeson Homes segment relates to the sale of residential
properties and ad hoc land sales. All revenue for the Gleeson Land segment
relates to the sale of land interests. All of the Group's operations are
carried out entirely within the United Kingdom. Segment information about the
Group's operations is presented below:
Unaudited Unaudited Audited
Six months to 31 December 2022
Six months to 31 December 2021
Year to
30 June
2021
Note £000 £000 £000
Revenue
Gleeson Homes 166,662 150,251 334,571
Gleeson Land 4,337 23,292 38,838
Total revenue 170,999 173,543 373,409
Divisional operating profit
Gleeson Homes 18,185 22,504 51,227
Gleeson Land 1,429 5,524 11,061
Exceptional items* - - (12,867)
19,614 28,028 49,421
Group administrative expenses (2,793) (2,816) (5,491)
Finance income 99 47 172
Finance expenses (846) (527) (1,482)
Profit before tax 16,074 24,732 42,620
Tax 3 (3,281) (4,690) (7,531)
Profit for the period 12,793 20,042 35,089
* Gleeson Homes - Building safety provision.
2. Segmental analysis (cont.)
Balance sheet analysis of business segments:
Unaudited 31 December 2022
Assets Liabilities Net assets
£000 £000 £000
Gleeson Homes 309,127 (87,827) 221,300
Gleeson Land 49,334 (3,651) 45,683
Group activities 1,738 (4,225) (2,487)
Cash and cash equivalents 13,485 - 13,485
373,684 (95,703) 277,981
Unaudited 31 December 2021
Assets Liabilities Net assets
£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)
Cash and cash equivalents 38,160 - 38,160
325,007 (65,066) 259,941
Audited 30 June 2022
Assets Liabilities Net assets
£000 £000 £000
Gleeson Homes 280,481 (85,170) 195,311
Gleeson Land 49,230 (5,869) 43,361
Group activities 4,083 (4,343) (260)
Cash and cash equivalents 33,764 - 33,764
367,558 (95,382) 272,176
3. Tax
The results for the six months to 31 December 2022 include a tax charge of
20.4% of profit before tax (31 December 2021: 19.0%, 30 June 2022: 17.7%),
representing the best estimate of the average annual effective tax rate
expected for the full year, applied to the pre-tax income of the six month
period.
4. Dividends
Unaudited Unaudited Audited
Six months to 31 December 2022
Six months to 31 December 2021
Year to
30 June
2022
£000 £000 £000
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 30 June 2021 of 10.0p - 5,830 5,831
Interim dividend for the year ended 30 June 2022 of 6.0p - - 3,507
Final dividend for the year ended 30 June 2022 of 12.0p 6,996 - -
6,996 5,830 9,338
On 15 February 2023 the Board approved an interim dividend of 5.0 pence per
share at an estimated total cost of £2,911,000. The dividend has not been
included as a liability as at 31 December 2022.
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings Unaudited Unaudited Audited
Six months to 31 December 2022
Six months to 31 December 2021
Year to
30 June
2022
£000 £000 £000
Profit for the period 12,793 20,042 35,089
Exceptional items - - 12,867
Tax on exceptional items - - (2,445)
Profit for the year - pre-exceptional items 12,793 20,042 45,511
Number of shares Unaudited Unaudited Audited
31 December 31 December 30 June 2022
2022
2021
No. 000 No. 000 No. 000
Weighted average number of ordinary shares for the purposes of
basic earnings per share 58,230 58,290 58,259
Effect of dilutive potential ordinary shares:
Share-based payments 58 2 145
Weighted average number of ordinary shares for the purposes of
diluted earnings per share 58,288 58,292 58,404
Unaudited Unaudited Audited
Six months to 31 December Six months to 31 December Year to
2022
2021
30 June
2022
pence pence pence
Basic earnings per share 21.97 34.38 60.23
Diluted earnings per share 21.95 34.38 60.08
Basic earnings per share - pre-exceptional items 21.97 34.38 78.12
Diluted earnings per share - pre-exceptional items 21.95 34.38 77.92
( )
6. Inventories
Unaudited Unaudited Audited
31 December 2022 31 December 2021 30 June
2022
£000 £000 £000
Land held for development 116,720 100,482 113,745
Work in progress 210,073 144,242 173,137
326,793 244,724 286,882
Net realisable value provisions held against inventories at 31 December 2022
were £6,462,000
(31 December 2021: £7,690,000, 30 June 2022: £5,933,000). The amount of
inventory write-down recognised as an expense in the period was £955,000 (31
December 2021: £2,553,000, 30 June 2022: £3,341,000) and the amount of
reversal of previously recognised inventory write-down was £41,000 (31
December 2021: £143,000, 30 June 2022: £2,211,000). The cost of inventories
recognised as an expense in cost of sales was £120,673,000 (31 December 2021:
£121,933,000, 30 June 2022: £261,293,000).
7. Net cash/(debt)
Unaudited Unaudited Audited
31 December 2022 31 December 2021 30 June
2022
£000 £000 £000
13,485
Cash and cash equivalents 38,160 33,764
Lease liabilities (4,109) (3,076) (3,009)
Net cash/(debt) 9,376 35,084 30,755
At 31 December 2022, monies held by solicitors on behalf of the Group and
included within cash and cash equivalents were £872,000 (31 December 2021:
£3,033,000, 30 June 2022: £15,417,000).
Unaudited 31 December 2022
Cash and cash equivalents Lease liabilities Total
£000 £000 £000
Net cash/(debt) at 1 July 2022 33,764 (3,009) 30,755
Cash flows (20,279) 394 (19,885)
New leases - (1,425) (1,425)
Finance expense - (69) (69)
Net cash/(debt) at 31 December 2022 13,485 (4,109) 9,376
8. Provisions
Unaudited 31 December 2022
Dilapidations Building Total
£000 safety £000
£000
As at 1 July 2022 521 12,867 13,388
Provisions made during the period - - -
Provisions utilised during the period - (100) (100)
As at 31 December 2022 521 12,767 13,288
Unaudited Unaudited Audited
31 December 2022 31 December 2021 30 June
2022
£000 £000 £000
5,960
Current provisions 15 1,339
Non-current provisions 7,328 264 12,049
13,288 279 13,388
Dilapidations
The dilapidations provision covers the Group's leased property estate. The
expected provision needed at the end of each lease is recognised on a
straight-line basis over the term of the lease. There is no material
uncertainty in either the timing or amount.
Building safety
The building safety provision includes estimated costs to remediate
life-critical fire-safety issues on buildings over 11 metres which the Group
had some involvement in developing over the last 30 years. By signing the
Department for Levelling Up, Housing and Communities' (DLUHC) Pledge, the
Group has committed to put right life-critical fire-safety issues in relation
to these buildings. DLUHC published the agreed Self-remediation terms on 30
January 2023. The Company has informed DLUHC that it intends to enter into
this agreement ahead of the deadline of 13 March 2023.
8. Provisions (cont.)
In the prior year, an exceptional provision of £12,867,000 was established
for remediation works. The Group is in the process of working with building
owners to complete a programme of intrusive inspections and fire risk
assessments and no further exceptional costs have been identified to date.
Further surveys have been carried out in the six months to 31 December 2022
and, as a result, £100,000 of the provision in relation to professional fees
has been utilised, reducing the provision to £12,767,000 at 31 December 2022.
For those buildings where intrusive inspections and fire risk assessments have
been completed, we expect to commence remediation works in the next six months
with around half of the provision expected to be utilised over the next year.
9. Trade and other payables
Trade and other payables includes £13,353,000 of deferred payables on the
purchase of land by the Gleeson Homes division (31 December 2021:
£9,678,000), of which £7,895,000 is due in more than one year (31 December
2021: £3,296,000).
10. Related party transactions
There have been no material changes to the related party arrangements as
reported in note 27 of the Annual Report and Accounts for the year ended 30
June 2022.
11. Seasonality
Reservations in Gleeson Homes are largely unaffected by seasonal variations
and tend to be driven more by the timing of site openings than by seasonality.
There is no seasonality in the Gleeson Land division.
12. Group risks and uncertainties
The Directors consider that the principal risks and uncertainties which could
have a material impact on the Group's performance remain consistent with those
set out in the Strategic Report on pages 34 to 39 of the Annual Report and
Accounts for the year ended 30 June 2022.
13. Subsequent events
Subsequent to 31 December 2022, changes are being made to the operating
structure of the business and the Company has commenced consultation on that
restructuring, which if implemented, is expected to cost around £2 million
and generate annualised savings of circa £4 million.
Statement of Directors' Responsibility
for the six months to 31 December 2022
The Directors confirm that, to the best of our knowledge, these condensed
interim financial statements have been prepared in accordance with UK adopted
IAS 34 "Interim financial reporting" and that the interim management report
includes a fair review of information required by DTR 4.2.7 and DTR 4.28,
namely:
a) an indication of important events that have occurred during the first
six months and their impact on the condensed set of financial statements, and
a description of the principal risks and uncertainties for the remaining six
months of the financial year; and
b) material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
The Board
The Board of Directors of MJ Gleeson plc at 30 June 2022 and their respective
responsibilities can be found on pages 86 to 91 of the MJ Gleeson plc Annual
Report and Accounts for the year ended 30 June 2022. Subsequent to the
publication of the Annual Report and Accounts, the following Board changes
have taken place:
· Dermot Gleeson, non-executive Chairman, retired from the Board on
31 December 2022;
· James Thomson succeeded Dermot Gleeson as non-executive Chairman
with effect from 1 January 2023; and
· Graham Prothero joined the Board as Chief Executive Officer with
effect from 1 January 2023.
By order of the Board
Stefan Allanson
Chief Financial Officer
15 February 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR NKPBBFBKDABDRecent news on MJ GLEESON
See all newsREG - MJ Gleeson Plc - Total Voting Rights
AnnouncementREG - MJ Gleeson Plc - Director/PDMR Shareholding
AnnouncementREG - MJ Gleeson Plc - Director/PDMR Shareholding
AnnouncementREG - MJ Gleeson Plc - Director/PDMR Shareholding
AnnouncementREG - MJ Gleeson Plc - Total Voting Rights
Announcement