REG - MJ Gleeson Plc - Results for the half year ended 31 December 2023
15/02/2024 07:00
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RNS Number : 1945D MJ Gleeson PLC 15 February 2024
15 February 2024
MJ GLEESON PLC
Results for the half year ended 31 December 2023
Graham Prothero, Chief Executive Officer, commented:
"The results for the half year reflect a robust performance given conditions
in the housing market during 2023. Gleeson Homes entered the second half of
the year with a strong forward order book and we are seeing encouraging signs
of recovery in reservation rates.
In common with others within the sector, we experienced margin pressures
arising from increased sales incentives, extended site durations and
multi-unit sales. This has been exacerbated by additional costs on a number of
older sites, which were brought to light by new management teams put in place
following the organisational restructuring implemented last year. We have
substantially tightened and standardised our operating and reporting processes
and cost disciplines. I am pleased with the response from the teams and the
new rigour in these areas as we implement these changes.
Gleeson Land continues to see strong interest from a range of both large and
regional developers although the challenge of achieving planning has increased
in the context of the revised NPPF and political sensitivities in an election
year. We have made good progress in implementing the new structure set out at
our Capital Markets Day in July 2023.
Against the backdrop of improving mortgage rates, we are seeing positive signs
of a recovery in demand. We expect this to continue into the seasonally busier
selling period over the coming weeks and months. Gleeson Homes continues to
negotiate selective multi-unit sales and expects to enter into further
agreements over the coming months for delivery in both the current and next
financial year.
The business has traded well in difficult conditions and is well-placed to
capitalise on a recovery in the market and resume its exciting growth
strategy."
H1 23/24 H1 22/23 Change
Revenue
Gleeson £142.3m £166.7m (14.6%)
Homes
Gleeson Land £9.2m £4.3m 114.0%
Total £151.5m £171.0m (11.4%)
Operating profit by division
Gleeson Homes £10.2m £18.2m (44.0%)
Gleeson Land £1.0m £1.4m (28.6%)
Group operating profit £8.8m £16.8m (47.6%)
Group profit before tax £7.2m £16.1m (55.3%)
Net (debt)/cash (£18.7m) £13.5m (£32.2m)
ROCE(1) 9.0% 20.0% (1,100bp)
EPS (basic) 9.6p 22.0p (56.4%)
Dividend per share 4.0p 5.0p (20.0%)
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:
· 769 homes sold (H1 22/23: 894) reflecting the conditions experienced
across the market
· Underlying net selling prices on open-market sales increased by
1.6% compared to H1 22/23
o Reported average selling prices reduced by 0.8% to £185,000 (H1 22/23:
£186,400) as a result of the discounts on multi-unit sales and changes in mix
· Operating profit £10.2m (H1 22/23: £18.2m)
· Administrative expenses reduced by 11.7% to £24.8m (H1 22/23: £28.1m)
following completion of the organisational restructure in FY23
· Gross margin 24.5% (H1 22/23: 27.7%)
· Three new sites opened (H1 22/23: three sites opened)
· Land pipeline* 18,168 plots (June 2023: 17,375 plots)
* Pipeline refers to plots on sites either purchased or contracted to purchase
subject to planning.
Gleeson Land:
· One land sale completed (H1 22/23: one land sale)
· Completion of the final four phases of a previously sold site
· Four sites being marketed or in a sales process (H1 22/23: five
sites)
· Successfully secured planning permission on four sites (H1 22/23:
four sites)
· One new site added to the portfolio (H1 22/23: one site)
· Portfolio of 70 sites (June 2023: 70 sites)
Current trading and outlook:
· The Group is seeing encouraging signs of a recovery in demand.
· Net reservation rates were 0.50 in the 5 weeks to 9 February 2024
(5 weeks to 10 February 2023: 0.46).
· With our refreshed product range and broader marketing strategy now
widely rolled out, the Company remains confident in delivering results for the
year in line with expectations and reaffirms its medium term targets as
outlined at the 2023 Capital Markets Day.
A presentation by Graham Prothero, CEO, and Stefan Allanson, CFO, which will
also be webcast, will be held at 9:30am today.
To attend virtually by webcast, access via the following link:
https://stream.brrmedia.co.uk/broadcast/65aa4d0fc5ec665c02ed19bf
(https://stream.brrmedia.co.uk/broadcast/65aa4d0fc5ec665c02ed19bf)
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
Harry Griffiths Tel: +44 7860 630 046
Singer Capital Markets Tel: +44 20 7496 3000
Shaun Dobson
Alaina Wong
Liberum Tel: +44 20 3100 2222
Richard Crawley
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 plc comprises two divisions: Gleeson Homes and Gleeson Land.
Gleeson Homes is the leading low-cost, affordable housebuilder. Its
two-bedroom homes start from circa £100,000. Gleeson's vision is "Building
Homes. Changing Lives", prioritising areas where people need affordable
housing the most. Our aim is to ensure that on all of our developments, a
material proportion of the homes are affordable to a couple earning the
National Living Wage. Buying a Gleeson home typically costs less than renting
a similar property. All Gleeson homes are traditional brick built semi or
detached homes. 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://www.mjgleesonplc.com/sustainability/sustainability/)
CHIEF EXECUTIVE'S STATEMENT
The Group's revenue for the first half of this financial year reflects the
challenges experienced by the housing market as well as the wider
macroeconomic conditions over the period.
Net reservations during the half year period remained low at 0.41 per site per
week, compared to 0.36 per site per week in the half year to 31 December 2022.
We are encouraged that early signs of recovery in buyer confidence are
emerging, with net reservations per site over the last five weeks up 9% on the
same period last year.
Net reservations per site per week
Six months to Five weeks to
31 December 9 February
FY24 0.41 0.50
FY23 0.36 0.46
Gleeson Homes entered the second half of the year with a strong forward order
book of 586 plots. Underlying net selling prices on open market sales held
up well, increasing by 1.6% during the period with incentives and discounts at
lower levels than anticipated. Our refreshed product ranges and broader
marketing strategy are now widely rolled out, and position us well to benefit
from returning buyer confidence.
Whilst we expect that the market will improve over the coming months,
supported by reductions in interest rates, the pace of recovery remains
uncertain and we continue to maintain a cautious outlook. It also remains to
be seen what impact the general election will have on the strength of recovery
this year.
As outlined in our recent trading update, additional costs relating to a
number of older sites, along with the impact of current market conditions
including extended site durations, sales incentives and multi-unit sales, have
impacted full year gross margins.
As anticipated, we ended the period with net debt of £18.7m, which reflected
both an increase in build activity on sites and the investment in bringing
forward a higher proportion of home starts before June 2023, with the cash
impact expected to unwind over the next two years.
The restructuring of Gleeson Homes operations completed in June 2023 is
delivering the expected full year cost savings and we continue to tightly
manage overheads whilst ensuring capacity to invest for a return to strong
rates of growth.
Progress in partnerships
We have received considerable interest from a number of potential partners,
attracted by the quality of our homes and developments and the value in our
affordable selling prices. We are looking at several specific opportunities
across all regions.
Quality and affordability
Delivering a high-quality and affordable product is fundamental, and we have
worked hard to prioritise our customers' experience. I am pleased that we have
seen a return to our five star customer recommendation score following the dip
in the year ended 30 June 2023. Our focus in this area has produced an
improvement across all aspects of our customer feedback and we are maintaining
a strong focus on enhancing the critical measures of condition at handover and
remediation of defects, which will embed a continuing positive response.
Buying a Gleeson Home is often the single largest financial commitment of our
customers' lives and we are committed to meeting their expectations.
Mortgage rates have stabilised and have now started to fall whilst rental
costs have continued to increase. The cost of owning a Gleeson home is now
significantly lower than the cost of renting 1 , and the benefits of home
ownership are clear. A Gleeson home continues to be affordable for a couple
earning the National Living Wage (which will increase by 9.8% on 1 April
2024), without requiring additional support.
Gleeson homes are also highly energy efficient, using around half the energy
required to heat and power than existing housing stock and our customers
benefit from the financial savings as well as 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, and have introduced new shared ownership offerings
on selected sites. These products will be important in continuing to help
first time buyers onto the property ladder and will sit alongside other
products to support our customers.
Planning, sites and growth
The planning system continues to be very poor, with under-resourced planning
departments meaning that an average site is now taking more than two years to
achieve planning consent. The government has downgraded local housing targets,
as confirmed in the recently revised NPPF, further weakening the critical
obligation on local authorities to make land available for much-needed new
homes.
Despite these challenges, our land teams, both in Gleeson Homes and Gleeson
Land, have an excellent track record and both businesses boast strong
pipelines.
Gleeson Homes pipeline continues to grow and now includes 101 sites with a
potential for 11,759 plots expected to open over the next few years. Whilst
the number of sales outlets are expected to remain flat next year, following
the pause in committing to new site openings, we thereafter expect a return to
growth by opening more sales outlets each year than we close.
Gleeson Land successfully secured planning permission on four new sites.
Disappointingly, four sites were refused planning, of which three were through
appeal. It is the intention to continue to promote these sites through the
local plan process.
In Gleeson Land, it is encouraging that the investment we made in technology
is beginning to show promise with more leads being identified and secured at
the land bid stage. We will continue to leverage this technology to secure new
sites and grow the pipeline. We are appraising the impact of the NPPF changes
on the portfolio and will adapt our approach and timing on some sites; however
we do not anticipate that this will cause any significant write-downs.
Selling prices, build costs and margin
Gross open market selling prices on reserved homes continued to increase
during the period. In line with the market, we also offered sales incentives
in order to stimulate sales activity, leading to underlying net selling prices
on reservations being unchanged compared with net selling prices on
reservations during the first half last year. As market conditions improve, we
anticipate there will be opportunities to reduce the levels of discounts and
incentives offered, whilst continuing to achieve selected price increases.
The sale of homes under multi-unit agreements, at a discount to market prices,
reduced the Group's average margins on homes sales this period and for the
remainder of the life of those sites, and will therefore continue to affect
the margin on sales in the next financial year.
We have seen an easing of build cost inflation in some areas, but costs have
remained higher than anticipated in other areas. The additional costs on older
sites closing within the next 18 months will affect margins on sales this
financial year and next.
We continue to buy sites that meet our gross margin hurdle at 30% on land bids
and expect to restore margins over the medium term.
A sustainable proposition
I am proud that a working couple on the National Living Wage can afford to buy
a high-quality home on any one of our developments. We use this benchmark of
affordability to deliver on our vision of "Building Homes. Changing Lives" and
our mission of "Changing lives by building affordable, quality homes, where
they are needed, for the people who need them most". This supports UN
Sustainable Development Goal 11 ("Sustainable cities and communities") to
provide access for all to "safe and affordable housing".
In August 2023, we committed to the Science Based Targets initiative (SBTi) to
set both a near-term and a long-term carbon reduction target. This affirms our
ambitions to deliver direct climate action through the decarbonisation of our
operations, supply chain and in-use emissions. We have made significant
progress during the period in developing our plan for carbon reduction and
intend to submit our targets to the SBTi by the end of the calendar year. We
will announce specific targets once we have had these validated, and report
against them in future periods.
We are already taking steps to switch to lower carbon materials, where viable,
such as using concrete bricks or reconstituted stone rather than kiln-fired
clay bricks, installing air source heat pumps, and reducing fuel use on sites
through improved forklift and generator technology.
In response to the Future Homes Standard and changes in Building Regulations,
we are now installing air source heat pumps in all of the homes we commenced
building after 15 June 2023 which means that our homes will be net-zero ready
in preparation for the UK Grid being decarbonised by 2035.
We also continue to make good progress against 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 are well prepared to meet the biodiversity
net gain (BNG) requirements.
Finally, we are proud to have retained our accreditation from the Fair Tax
Foundation again this year. We remain the only listed housebuilder to be
accredited with the Fair Tax Mark, which certifies that we pay our fair share
of tax in the right place, at the right time and are honest and transparent in
our disclosures.
Building safety
In February 2023, the Group entered into the long form agreement with the
Department for Levelling Up, Housing and Communities (DLUHC) self-remediation
terms. In September 2023, the Group also joined the government's Responsible
Actors Scheme, which forms a collective commitment to remediate buildings over
11 metres with life-critical fire safety issues.
The Group remains firmly committed to remediating life-critical fire safety
issues on the 17 buildings over 11 metres in which it was involved in
developing over the last 30 years.
We are actively pursuing investigative work on these buildings, including
intrusive surveys and fire risk assessments. On a number of buildings, we
expect to commence remedial works imminently.
A provision of £12.8m was in place at 30 June 2023 in respect of the 17
buildings which had been identified as requiring remediation works, of which
£0.2m has been utilised during the period, reducing the balance to £12.6m at
31 December 2023. We conduct regular reviews of the provision, taking into
account the most recent inspections and any other relevant information, and
are satisfied that this provision remains appropriate.
Financial Performance
Group results
Revenue decreased 11.4% to £151.5m (H1 22/23: £171.0m) with gross profit
decreasing 23.2% to £37.8m (H1 22/23: £49.2m). The Group's operating profit
decreased 47.6% to £8.8m (H1 22/23: £16.8m). Following a net interest charge
of £1.5m (H1 22/23: £0.7m), profit before tax decreased 55.3% to £7.2m (H1
22/23: £16.1m).
The tax charge for the period was £1.6m (H1 22/23: £3.3m) reflecting an
effective rate of 22.7% (H1 22/23: 20.4%). The profit after tax for the period
was £5.6m (H1 22/23: £12.8m).
Total shareholders' equity was £287.2m at 31 December 2023 compared to
£278.0m at 31 December 2022. This equates to net assets per share of 492.0
pence (31 December 2022: 476.5 pence).
The Group had net debt at 31 December 2023 of £18.7m (30 June 2023: net cash
of £5.2m). This was driven by an increase in build activity on sites and the
significant investment in bringing forward a higher proportion of home starts
before June 2023 and the cash impact of this is expected to unwind over the
next two years.
The Group's £135m borrowing facility was drawn by £18.7m at the period end
(30 June 2023: £nil), split between an overdraft balance of £5.7m and
borrowings of £13.0m.
Gleeson Homes
Revenue decreased 14.6% to £142.3m (H1 22/23: £166.7m), as a result of the
reduced number of homes sold.
The average selling price for homes sold in the period decreased 0.8% to
£185,000 (H1 22/23: £186,400), reflecting underlying selling price increases
of 1.6% offset by the impact of multi-unit sales and changes in site, bed and
garage mix.
Despite the division entering the year with a strong forward order book, the
weaker conditions experienced across the housing market during 2023 impacted
total homes sold. As a result, 14.0% fewer homes were sold in the period, at
769 homes (H1 22/23: 894 homes sold).
Of the 769 homes sold during the half-year, 22% were sold under multi-unit
sale agreements with four carefully selected partners (FY23: 7%, H1 22/23:
nil%).
Gross profit on homes sold decreased 24.3% to £34.9m (H1 22/23: £46.1m),
partly due to the reduction in the number of homes sold and partly due to
lower gross margin. Gross margin on homes sold in the period was 24.5% (H1
22/23: 27.7%) reflecting additional costs relating to a number of sites
closing within the next 18 months, along with the cumulative impact of
extended site durations, sales incentives and multi-unit sales, reflecting
market conditions.
Administrative expenses decreased 11.7% to £24.8m (H1 22/23: £28.1m),
reflecting reduced headcount as a result of the restructuring of Gleeson
Homes' operations undertaken in the previous financial year.
Operating margin on homes sold decreased 370 basis points to 7.2% (H1 22/23:
10.9%), with operating profit falling 44.0% to £10.2m (H1 22/23: £18.2m) as
a result of the gross profit and margin decreases.
The division purchased eight sites during the period (H1 22/23: three sites).
The pipeline of owned plots decreased during the period by a net seven plots
to 7,667. The total pipeline of owned and conditionally purchased plots
increased to 18,168 plots on 177 sites at 31 December 2023 (30 June 2023:
17,375 plots on 173 sites). During the period, 16 new sites were added to the
pipeline (contracted to purchase subject to planning permission), whilst 12
sites were completed or did not proceed to purchase. Our land pipeline
represents over 10 years of home sales.
Site openings were paused between October 2022 and June 2023 in response to
the market slowdown at that time. Whilst we have returned to site acquisition
and site opening, the impact of this pause resulted in a reduction in active
site numbers. Gleeson Homes opened three new sites during the first half and
was building on 76 sites at 31 December 2023 (31 December 2022: 87 sites) and
selling from 64 active sales outlets (31 December 2022: 68 sites).
The division entered the second half with a forward order book of 586 plots
(30 June 2023: 665 plots, 31 December 2022: 319), of which 503 are expected to
complete in the second half.
By the end of this financial year, the division expects to be building on
approximately 80 sites (June 2023: 82) and actively selling on approximately
60 sites (June 2023: 71).
Gleeson Land
The division completed one land sale in the first half (H1 22/23: one). In
addition, completion of the final four phases of a site sold in 2018/19 was
brought forward at the request of the developer. The division reported a gross
profit for the period of £2.9m (H1 22/23: £3.1m).
Overheads of £1.9m (H1 22/23: £1.7m) reflect the investment in executing the
division's growth strategy. As a result, operating profit for the first half
was £1.0m (H1 22/23: £1.4m).
One site was being actively progressed for sale at 31 December 2023, which has
the potential to deliver 87 plots (31 December 2022: three sites being
actively progressed, 1,342 plots). A further three sites were being marketed
with the potential to deliver 300 plots (31 December 2022: two sites being
marketed, 305 plots).
At 31 December 2023, there were nine sites in the portfolio with either
planning permission or a resolution to grant permission for a total of 1,660
plots (30 June 2023: six sites, 1,400 plots).
Planning permission or resolution to grant was achieved on four sites during
the period. Disappointingly, permission was refused on four sites, of which
three were applications through appeal. It is the intention to promote these
sites through the local plan process.
There are a further 11 sites where the division is currently awaiting a
decision on planning applications or appeals (30 June 2023: 18 sites).
We have reviewed the portfolio in respect of the changes to the National
Planning Policy Framework (NPPF). This is likely to delay some planning
strategies, reducing the benefit of the appeal route, but does not imply any
significant write-downs. We are experienced in navigating these complexities
and have extensive expertise in promoting sites through the local plan
process.
We continue to invest in the Gleeson Land portfolio. One high-quality site was
secured in the period, with the potential to deliver 104 plots. Agreements on
a number of other well-located sites are currently being progressed.
At 31 December 2023, the portfolio, in which the Group has a beneficial
interest of 84%, comprised 70 sites with the potential to deliver 17,574 plots
(30 June 2023: 70 sites, 17,831 plots).
Dividends
Considering these results and the immediate outlook, the Board is declaring an
interim dividend of 4.0 pence per share (H1 22/23: 5.0 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 2 April 2024 to shareholders on the
register at close of business on 1 March 2024.
Summary & Outlook
The Group is seeing encouraging signs of a recovery in demand.
Net reservation rates at Gleeson Homes were 0.50 in the 5 weeks to 9 February
2024 (5 weeks to 10 February 2023: 0.46).
The Company remains confident in delivering results for the year in line with
expectations and reaffirms its medium term targets as outlined at the July
2023 Capital Markets Day.
Graham Prothero
Chief Executive
Condensed Consolidated Income Statement
for the six months to 31 December 2023
Note Unaudited Unaudited Audited
Six months to 31 December 2023
Six months to 31 December 2022
Year to
30 June
2023
£000 £000 £000
Revenue 151,463 170,999 328,319
Cost of sales (113,639) (121,832) (238,228)
Gross profit 37,824 49,167 90,091
Administrative expenses (29,230) (32,578) (57,974)
Other operating income 166 232 420
Operating profit 8,760 16,821 32,537
Analysed as: 8,760 16,821 33,559
Underlying operating profit
Exceptional items - - (1,022)
Finance income 90 99 191
Finance expenses (1,622) (846) (2,261)
Profit before tax 7,228 16,074 30,467
Analysed as: 7,228 16,074 31,489
Underlying profit before tax
Exceptional items - - (1,022)
Profit before tax 7,228 16,074 30,467
Tax 3 (1,638) (3,281) (6,298)
Profit for the period 5,590 12,793 24,169
Earnings per share
Basic 5 9.60 p 21.97 p 41.49 p
Diluted 5 9.59 p 21.95 p 41.47 p
Basic - pre-exceptional items 5 9.60 p 21.97 p 42.89 p
Diluted - pre-exceptional items 5 9.59 p 21.95 p 42.86 p
Condensed Consolidated Statement of Comprehensive Income
for the six months to 31 December 2023
Unaudited Unaudited Audited
Six months to 31 December 2023
Six months to 31 December 2022
Year to
30 June
2023
£000 £000 £000
Profit for the period 5,590 12,793 24,169
Other comprehensive income/(expense)
Items that may be subsequently reclassified to profit or loss
Change in value of shared equity receivables at fair value 116 (267) (148)
116 (267) (148)
Other comprehensive income/(expense) for the period, net of tax
5,706 12,526 24,021
Total comprehensive income for the period
Condensed Consolidated Statement of Financial Position
at 31 December 2023
Unaudited Unaudited Audited
31 December 2023
31 December 2022
30 June
2023
Note
£000 £000 £000
Non-current assets
Property, plant and equipment 10,874 9,537 11,206
Trade and other receivables - 141 51
Deferred tax assets 1,127 1,183 797
12,001 10,861 12,054
Current assets
Inventories 6 358,051 326,793 344,626
Trade and other receivables 8,372 22,033 13,947
UK corporation tax 872 512 542
Cash and cash equivalents 7 - 13,485 5,159
367,295 362,823 364,274
Total assets 379,296 373,684 376,328
Non-current liabilities
Trade and other payables 9 (6,634) (10,934) (8,171)
Provisions 8 (5,733) (7,328) (8,206)
(12,367) (18,262) (16,377)
Current liabilities
Loans and borrowings 7 (13,000) - -
Bank overdraft 7 (5,736) - -
Trade and other payables 9 (53,389) (71,481) (68,662)
Provisions 8 (7,558) (5,960) (5,273)
(79,683) (77,441) (73,935)
Total liabilities (92,050) (95,703) (90,312)
Net assets 287,246 277,981 286,016
Equity
Share capital 10 1,167 1,166 1,167
Share premium 15,843 15,843 15,843
Own shares 10 (469) (751) (743)
Retained earnings 270,705 261,723 269,749
Total equity 287,246 277,981 286,016
Condensed Consolidated Statement of Changes in Equity
for the six months to 31 December 2023
Share capital Retained earnings Total
Share premium Own shares equity
Note
£000 £000 £000 £000 £000
At 1 July 2022 (audited) 1,166 255,638 272,176
15,843 (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 - (6,441) (6,721)
- (280)
At 31 December 2022 (unaudited) 1,166 15,843 (751) 261,723 277,981
Profit for the period - - - 11,376 11,376
Other comprehensive income - - - 119 119
Total comprehensive income for the period - - - 11,495 11,495
Share issue 1 - - - 1
Purchase of own shares - - (35) - (35)
Utilisation of own shares - - 43 (43) -
Share-based payments - - - (959) (959)
Movement in tax on share-based payments taken directly to equity - 444 444
- -
Dividends - - - (2,911) (2,911)
Transactions with owners, recorded directly in equity 1 (3,469) (3,460)
- 8
At 30 June 2023 (audited) 1,167 15,843 269,749 286,016
(743)
Profit for the period - - - 5,590 5,590
Other comprehensive income - - - 116 116
Total comprehensive income for the period - - - 5,706 5,706
Purchase of own shares - - (79) - (79)
Utilisation of own shares - - 353 (353) -
Share-based payments - - - 554 554
Movement in tax on share-based payments taken directly to equity - 297 297
- -
Dividends - - - (5,248) (5,248)
Transactions with owners, recorded directly in equity - - 274 (4,750) (4,476)
At 31 December 2023 (unaudited) 1,167 15,843 (469) 270,705 287,246
Condensed Consolidated Statement of Cash Flow
for the six months to 31 December 2023
Unaudited Unaudited Audited
Six months to 31 December 2023
Six months to 31 December 2022
Year to
30 June
2023
£000 £000 £000
Operating activities
Profit before tax 7,228 16,074 30,467
Depreciation of property, plant and equipment 2,354 1,819 3,972
Share-based payments 554 652 (307)
Profit on redemption of shared equity receivables (139) (172) (285)
(Decrease)/increase in provisions including exceptional items (188) (100) 91
Loss on disposal of property, plant and equipment 146 13 305
Finance income (90) (99) (191)
Finance expenses 1,622 853 2,261
Operating cash flows before movements in working capital 11,487 19,040 36,313
Increase in inventories (13,425) (39,911) (57,744)
Decrease in receivables 6,100 11,537 19,337
Decrease in payables (17,185) (750) (7,490)
Cash used in operating activities (13,023) (10,084) (9,584)
Tax paid (2,002) (552) (2,770)
Finance costs paid (2,045) (782) (2,066)
Net cash flow deficit from operating activities (17,070) (11,418) (14,420)
Investing activities
Proceeds from disposal of shared equity receivables 508 582 1,279
Interest received 13 4 7
Purchase of property, plant and equipment (1,479) (1,832) (4,441)
Net cash flow deficit from investing activities (958) (1,246) (3,155)
Financing activities
Increase of loans and borrowings 13,000 - -
Net proceeds from issue of shares - - 1
Purchase of own shares (79) (295) (330)
Dividends paid (5,248) (6,996) (9,907)
Principal element of lease payments (540) (324) (794)
Net cash flow surplus/(deficit) from financing activities 7,133 (7,615) (11,030)
Net decrease in cash and cash equivalents (10,895) (20,279) (28,605)
Cash and cash equivalents at beginning of period 5,159 33,764 33,764
Bank (overdraft)/cash and cash equivalents at end of period (5,736) 13,485 5,159
Notes to the Condensed Consolidated Financial Statements
for the six months to 31 December 2023
1. Basis of preparation and accounting policies
This condensed consolidated interim financial report ("the Interim Report")
for the six months ended 31 December 2023 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 2023 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 2023, 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 2023 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 2023 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 1, IAS 8 and IAS 12.
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 2023.
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 2023.
Going concern
In July 2023, the Group renegotiated its committed facility with Lloyds Bank
plc and Santander UK plc. The facility has a limit of £135m (previously
£105m), which expires in October 2026 with two further optional one-year
extensions. At 31 December 2023, the Group's net debt balance was £18.7m (30
June 2023: net cash of £5.2m).
The Group's financial forecasts reflect a cautious view on the outlook based
on current market conditions and the degree of macro economic risk.
These forecasts have been subject to a range of sensitivities including a
severe but plausible scenario together with the likely effectiveness of
mitigating actions. The assessment considered the combined impact of a number
of realistically possible, but severe and prolonged changes to principal
assumptions from a downturn in the housing and land markets including:
· a reduction in Gleeson Homes volumes of approximately 20%;
· a permanent reduction in Gleeson Homes selling prices of 5%; and
· a delay on the timing of Gleeson Land transactions and a 15% fall
in land values.
1. Basis of preparation and accounting policies (cont.)
Going concern (cont.)
Under these sensitivities, after taking certain mitigating actions, the Group
continues to have a sufficient level of liquidity, operate within its
financial covenants and meet its liabilities as they fall due.
Based on the results of the analysis undertaken, the Directors have a
reasonable expectation that the 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 2023
Six months to 31 December 2022
Year to
30 June
2023
Note £000 £000 £000
Revenue
Gleeson Homes 142,268 166,662 320,848
Gleeson Land 9,195 4,337 7,471
Total revenue 151,463 170,999 328,319
Divisional operating profit
Gleeson Homes 10,197 18,185 35,045
Gleeson Land 986 1,429 1,032
Exceptional items* - - (1,022)
11,183 19,614 35,055
Group administrative expenses (2,423) (2,793) (2,518)
Finance income 90 99 191
Finance expenses (1,622) (846) (2,261)
Profit before tax 7,228 16,074 30,467
Tax 3 (1,638) (3,281) (6,298)
Profit for the period 5,590 12,793 24,169
* Gleeson Homes restructuring expense for the year ended 30 June 2023.
2. Segmental analysis (cont.)
Balance sheet analysis of business segments:
Unaudited 31 December 2023
Assets Liabilities Net assets/ (liabilities)
£000 £000 £000
Gleeson Homes 340,655 (68,437) 272,218
Gleeson Land 35,834 (1,864) 33,970
Group activities 2,807 (3,013) (206)
Net debt - (18,736) (18,736)
379,296 (92,050) 287,246
Unaudited 31 December 2022
Assets Liabilities Net assets/ (liabilities)
£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
Audited 30 June 2023
Assets Liabilities Net assets/ (liabilities)
£000 £000 £000
Gleeson Homes 326,722 (86,033) 240,689
Gleeson Land 43,207 (1,733) 41,474
Group activities 1,240 (2,546) (1,306)
Cash and cash equivalents 5,159 - 5,159
376,328 (90,312) 286,016
3. Tax
The results for the six months to 31 December 2023 include a tax charge of
22.7% of profit before tax (31 December 2022: 20.4%, 30 June 2023: 20.7%),
representing the best estimate of the average annual effective tax rate
expected for the full year, including residential property developer tax,
applied to the pre-tax income for the six month period.
4. Dividends
Unaudited Unaudited Audited
Six months to 31 December 2023
Six months to 31 December 2022
Year to
30 June
2023
£000 £000 £000
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 30 June 2022 of 12.0p - 6,996 6,996
Interim dividend for the year ended 30 June 2023 of 5.0p - - 2,911
Final dividend for the year ended 30 June 2023 of 9.0p 5,248 - -
5,248 6,996 9,907
On 14 February 2024 the Board approved an interim dividend of 4.0 pence per
share at an estimated total cost of £2,332,000. The dividend has not been
included as a liability as at 31 December 2023.
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 2023
Six months to 31 December 2022
Year to
30 June
2023
£000 £000 £000
Profit for the period 5,590 12,793 24,169
Exceptional items - - 1,022
Tax on exceptional items - - (210)
Profit for the period - pre-exceptional items 5,590 12,793 24,981
Number of shares Unaudited Unaudited Audited
31 December 31 December 30 June 2023
2023
2022
No. 000 No. 000 No. 000
Weighted average number of ordinary shares for the purposes of
basic earnings per share 58,246 58,230 58,246
Effect of dilutive potential ordinary shares:
Share-based payments 41 58 41
Weighted average number of ordinary shares for the purposes of
diluted earnings per share 58,287 58,288 58,287
Unaudited Unaudited Audited
Six months to 31 December Six months to 31 December Year to
2023
2022
30 June
2023
pence pence pence
Basic earnings per share 9.60 21.97 41.49
Diluted earnings per share 9.59 21.95 41.47
Basic earnings per share - pre-exceptional items 9.60 21.97 42.89
Diluted earnings per share - pre-exceptional items 9.59 21.95 42.86
( )
6. Inventories
Unaudited Unaudited Audited
31 December 2023 31 December 2022 30 June
2023
£000 £000 £000
Land held for development 112,191 116,720 112,649
Work in progress 245,860 210,073 231,977
358,051 326,793 344,626
Net realisable value provisions held against inventories at 31 December 2023
were £5,696,000
(31 December 2022: £6,462,000, 30 June 2023: £6,980,000). The amount of
inventory write-down recognised as an expense in the period was £909,000 (31
December 2022: £955,000, 30 June 2023: £2,676,000) and the amount of
reversal of previously recognised inventory write-down was £384,000 (31
December 2022: £41,000, 30 June 2023: £391,000). The cost of inventories
recognised as an expense in cost of sales was £113,133,000 (31 December 2022:
£120,673,000, 30 June 2023: £236,074,000).
7. Net (debt)/cash
Unaudited Unaudited Audited
31 December 2023 31 December 2022 30 June
2023
£000 £000 £000
(5,736)
(Bank overdraft)/cash and cash equivalents 13,485 5,159
Bank borrowings (13,000) - -
Net (debt)/cash (18,736) 13,485 5,159
Lease liabilities (5,293) (4,109) (5,144)
Net (debt)/cash including lease liabilities (24,029) 9,376 15
At 31 December 2023, monies held by solicitors on behalf of the Group and
included within cash and cash equivalents were £989,000 (31 December 2022:
£872,000 30 June 2023: £1,150,000).
Unaudited 31 December 2023
Cash and cash equivalents Cash/(debt) net of borrowings Lease liabilities Total
Borrowings
£000 £000 £000 £000 £000
Net cash/(debt) at 1 July 2023 5,159 - 5,159 (5,144) 15
Cash flows (10,895) (13,000) (23,895) 656 (23,239)
New leases - - - (923) (923)
Lease disposals - - - 234 234
Finance expense - - - (116) (116)
Net debt at 31 December 2023 (5,736) (13,000) (18,736) (5,293) (24,029)
8. Provisions
Unaudited 31 December 2023
Dilapidations Building Total
£000 safety Restructuring £000
£000 £000
As at 1 July 2023 699 12,750 30 13,479
Provisions made during the period 2 - - 2
Provisions utilised during the period - (166) (24) (190)
As at 31 December 2023 701 12,584 6 13,291
Unaudited Unaudited Audited
31 December 2023 31 December 2022 30 June
2023
£000 £000 £000
7,558
Current provisions 5,960 5,273
Non-current provisions 5,733 7,328 8,206
13,291 13,288 13,479
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.
8. Provisions (cont.)
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. In February 2023,
the Group entered into the long form agreement of the Department for Levelling
Up, Housing and Communities (DLUHC) self-remediation terms following its
initial pledge in April 2022.
A provision of £12.8m was in place at 30 June 2023 in respect of the 17
buildings which had been identified as requiring remediation works, of which
£0.2m has been utilised during the period, reducing the balance to £12.6m at
31 December 2023. We conduct regular reviews of the provision, taking into
account the most recent inspections and any other relevant information.
On a number of buildings, we expect to reach agreement and commence remedial
works imminently.
9. Trade and other payables
Trade and other payables includes £10,850,000 of deferred payables on the
purchase of land by the Gleeson Homes division (31 December 2022:
£13,353,000), of which £2,787,000 is due in more than one year (31 December
2022: £7,895,000).
10. Share capital and reserves
Unaudited Unaudited Audited
31 December 2023 31 December 2022 30 June
2023
Issued and fully paid 2p ordinary shares: 58,381,973
Number 58,305,506 58,342,360
£000 1,167 1,166 1,167
Own shares reserve
The own shares reserve represents the cost of shares in MJ Gleeson plc
purchased in the market or issued by the Company and held by the Employee
Benefit Trusts ("EBT") on behalf of the Company in order to satisfy
share-based payments and other share awards that have been granted by the
Company.
Unaudited Unaudited Audited
31 December 2023 31 December 2022 30 June
2023
Own shares held by the EBT 115,018
Number 139,999 136,935
£000 469 751 743
11. Contingent liabilities
As set out in note 8, the Group is progressing its review of all of its
historic building contracts for buildings over 11 metres in which, over the
last 30 years, the Group had some involvement in developing. All of these
buildings, including any external wall systems or cladding, were signed off by
approved inspectors as compliant with the relevant building regulations at the
time of their completion.
There are certain legacy activities of the Group where claims arise under
historic contracts in Gleeson Construction Services Limited which were carried
out in the ordinary course of activities.
The interim financial statements have been prepared based on currently
available information and the current best estimate of the extent and future
costs of work required, or in resolving known historic claims.
12. 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 2023.
13. Seasonality
In common with the rest of the UK housebuilding industry, activity occurs all
year round, although the trend of reservations usually means that Gleeson
Homes' completions are higher in the second half of the year. There is no
seasonality in the Gleeson Land division.
14. 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 36 to 41 of the Annual Report and
Accounts for the year ended 30 June 2023.
Statement of Directors' Responsibility
for the six months to 31 December 2023
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 2023 and their respective
responsibilities can be found on pages 104 to 110 of the MJ Gleeson plc Annual
Report and Accounts for the year ended 30 June 2023. There have been no
changes since that date.
By order of the Board
Stefan Allanson
Chief Financial Officer
14 February 2024
1 Based on similar houses with the same number of bedrooms and in the same
regions as a Gleeson Home
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