Final Results
Gleeson(M J)Group PLC
16 October 2001
16th October 2001
MJ GLEESON GROUP PLC - PRELIMINARY ANNOUNCEMENT
* Gleeson, the construction services, homes and property group, announces
a sixth successive year of increased profits:
Year ended 30th June 2001 2000 Increase
Turnover £422.5m £349.6m 20.8%
Pre-tax profit £18.9m £16.1m 17.1%
Earnings per share 134.4p 114.7p 17.2%
Dividends per share 31.0p 26.5p 17.0%
Net assets per share £14.20 £13.30 6.8%
* Construction services turnover increased by 22.4% to £295.1m and
operating profit increased by 2.4 times to £7.8m. Most of the engineering
work undertaken was for the water industry, one of the busiest sectors in
the UK construction market, in which Gleeson is the leading UK contractor.
Building turnover benefited from increased levels of spending on
education, health and social housing.
* Gleeson Homes increased turnover by 15.4% to £123.4m and operating
profit by 24.8% to £10.2m, reflecting an improved operating margin of
8.3%. The planned reduction in sales to 571 units (1999/00: 720 units) was
more than offset by an increase in average selling price to £182,000 from
£125,000.
* Gleeson Properties made an operating profit of £5.9m (1999/00: £6.5m).
Additionally, a profit of £0.9m arose on the sale of investment properties
(1999/00: £1.9m).
* The construction services order book totals a record £995m - 80% up on
the comparable figure at this time last year.
* Dermot Gleeson, Executive Chairman, stated 'Despite concern about the
prospects for the UK economy as a whole, the Board believes that the
outlook for the construction and housing sectors remains encouraging.
Moreover, although the commercial property market has weakened in recent
months, any further deterioration is unlikely to be dramatic. In contrast
to the late 80s, there is not a great over supply of space, and low
borrowing rates, which are further below rental yields than at any time in
the last 50 years, are encouraging non-institutional buyers.'
A presentation will be made to stockbroker's analysts at Bankside Consultants,
123 Cannon Street, EC4 from 12:00pm until 12:50pm today.
Enquiries:
M J Gleeson Group plc 020-8644 4321
Dermot Gleeson (Executive Chairman)
David Eyre (Group Managing Director)
Colin McLellan (Group Finance Director)
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166
CHAIRMAN'S STATEMENT
It is a pleasure to report not only a sixth successive year of increased
profits and net assets but, also, promising prospects.
FINANCIAL OVERVIEW
In the year ended 30th June 2001, on turnover 20.8% higher at £422.5m (1999/
00: £349.6m), profit before interest and tax improved by 25.2% to £23.5m (1999
/00: £18.8m) and pre-tax profit increased by 17.1% to £18.9m (1999/00: £
16.1m). Earnings per share were 17.2.% up at 134.4p (1999/00: 114.7p),
reflecting an effective tax rate of 28.6% (1999/00: 27.9%).
Year end shareholders' funds increased by 7.7% to £146.4m (1999/00: £135.9m),
generating Net Asset Value per share 6.8% higher at £14.20 (1999/00: £13.30).
Year end net debt totalled £50.5m (1999/00: £39.5m), representing gearing of
35% (1999/00: 29%).
Net interest payable increased to £4.6m (1999/00: £2.7m) as a result of the
increased investment in homes under construction and properties under
development. Interest cover remained at a comfortable level, 5.0x (1999/00:
7.1x).
DIVIDENDS
If approved at the AGM on 9th January 2002, a final dividend of 25.0p per
share (1999/00: 21.35p), up by 17%, will be paid immediately thereafter to
shareholders on the register at close of business on 7th December 2001.
Together with the interim dividend per share of 6.0p (1999/00: 5.15p) paid on
29th June 2001, dividends for the year will total 31.0p (1999/00: 26.5p), also
a 17% increase. Dividends are well covered by earnings at 4.3x (1999/00:
4.3x). The dividend increase reflects the Group's performance, prospects and
balance sheet strength.
OPERATING REVIEW
Construction Services
The construction divisions and subsidiaries increased their turnover by 22% to
£295.1m (1999/00: £241.1m) and operating profit increased by 2.4 times to £
7.8m (1999/00: £3.3m). Margins improved to 2.65% (1999/00: 1.38%). Some 80%
of work executed was on a partnering or PFI basis.
Civil and Process Engineering
Engineering Division turnover was unchanged at £122m.
Most of the work undertaken was for the water industry, one of the busiest
sectors in the UK construction market, in which Gleeson is the leading UK
contractor. During the year, the £100m PFI Waste Water Treatment scheme for
East of Scotland Water Authority at Seafield/Almond Valley and Esk was
completed on time and within budget. Gleeson is an equity partner in the PFI
consortium which will be responsible for operating the works over the next 30
years.
The Engineering Division has partnering agreements with most of the other
leading water service providers in the UK, from South West Water to North of
Scotland Water Authority. Amongst the biggest is the Trident agreement with
Thames Water, for which the Division undertook £25m of work during the year,
including several projects at Beckton Sewage Treatment Works in East London,
the largest in Europe.
Outside the water utility sector, the Division completed the widening and
refurbishment of Kingston Bridge, for the Royal Borough of Kingston upon
Thames, and secured the contract for the construction of the Ribble Link, near
Preston, the first new canal to be built in the United Kingdom for a hundred
years.
Earlier this month, the Division won the 'Civil Engineering Contractor of the
Year 2001' Award.
Building
The Building Divisions reported a turnover of £129m (1999/00: £108m),
supported by increased levels of Government spending on education, health and
social housing.
The largest contract progressed during the year was the £46m project to design
and build a new wing at St George's Hospital, Tooting. The most substantial
building project won in the private sector in the year was the £35m West One
luxury mixed residential, retail and leisure development in Sheffield, the
largest construction project in that city for 10 years.
Specialist Subsidiaries
The total turnover of the Group's specialist construction subsidiaries was £
61m (1999/00: £40m).
Powerminster Limited, the Group's mechanical and electrical service provider,
once again achieved record turnover and broadened its range, both
geographically and technically. 60% of its current order book consists of
work secured through negotiation or long term contracts.
Concrete Repairs Limited, the UK market leader in the repair of concrete
structures, also increased its turnover to record levels and laid the basis
for further expansion by opening an office in Scotland at Falkirk.
In its first full year as a member of the Group, Gleeson MCL Limited (formerly
Mabey Construction Limited), which specialises in construction work for the
railway sector, achieved its highest ever turnover and profits. A number of
major projects were completed - and others progressed - for London Underground
and for Docklands Light Railway.
Homes
Gleeson Homes increased turnover by 15.4% to £123.4m (1999/00: £107m) and
operating profit by 24.4% to £10.2m (1999/00: £8.2m), reflecting an improved
operating margin of 8.3% (1999/00: 7.7%).
The planned reduction in sales to 571 units (1999/00: 720 units) was more
than offset by an increase in average selling price to £182,000 from £125,000.
The Division continued to concentrate primarily on distinctively designed '
concept' schemes built to a high specification and once again won a remarkable
number of major awards, including a Sunday Times 'What House' Gold Award and
The Evening Standard 'Award for Best New Conversion'.
The Division's biggest development, the £100m new village being created over a
seven year period on the 175 acre former hospital site at Netherne-on-the-Hill
in Coulsdon, Surrey, continued to make good progress.
The Division's land bank at the year end comprised 2,063 plots (1999/00: 1,926
plots) with planning permission, of which 87% were on brownfield land. A
further 1,700 acres are controlled through options exercisable on receipt of
planning permission.
Property
Gleeson Properties made an operating profit of £5.9m (1999/00: £6.5m).
Additionally, a profit of £0.9m arose on the sale of investment properties
(1999/00: £1.9m).
Property Investment
The Group remains committed to increasing the value of its property portfolio
and rent roll. However, an excess of property sales over purchases during the
period led to a temporary decrease in the value of the commercial property
portfolio which was professionally revalued as at 30th June 2001. Year end
property assets, including owner occupied and rental residential properties,
totalled £62.2m (1999/00: £72.9m) Gross rental income totalled £6.2m (1999/
00: £6.0m).
At the year end, 59% (1999/00: 66%) by value of the portfolio was located in
London and the South East of England.
Property Development for Sale
The Division's current programme of developments for sale has an anticipated
value of £70m and comprises offices in Glasgow, industrial/warehouse projects
in Banbury, Long Crendon, Peterborough and Thame, and retail/leisure schemes
in Grantham, Hamilton, Kirkaldy and Milton Keynes. A softening of the letting
market in the second half of the year, mainly in consequence of the
difficulties experienced by the telecoms, media and technology sectors, led to
slower than anticipated progress in securing tenants for some of these
schemes. However, a 40,000 sq ft industrial scheme in Banbury was sold to an
owner occupier.
BOARD AND SENIOR PERSONNEL
Tony Collins, 45, Managing Director of the Engineering Division, and Andrew
Muncey, 45, Managing Director of the Southern Construction Division, are today
appointed to the Board as Executive Directors. Terry Massingham, 49, formerly
Managing Director of Alfred McAlpine Southern Limited, becomes Managing
Director of Gleeson Homes, with effect from 29th October 2001.
Two Executive Directors, Bob Jukes, 63, and David Kay, 63, and one
Non-executive Director, Win Bruce, 77, retire, with thanks for their
considerable contribution over an aggregate 132 years with the Group.
STRATEGY
A sixth consecutive year of record profits reflects the continuing success of
the Group's strategy. This is based on four key policies:
i) to maintain a very broad range of services in the construction and
property sectors, so as to spread risk, create valuable internal synergies and
enable the Group to respond to its customers' needs throughout the entire life
cycle of their infrastructure and property assets;
ii) to pursue significant overall growth in the Group's trading operations;
ii) to ensure that a very high proportion of our construction work load
continues to be undertaken on a partnering or similar basis, so as to reduce
risk; and
iv) to generate a sizeable and growing stream of additional income by
investing in rent producing commercial properties and in a portfolio of PFI
equity stakes.
PROSPECTS
General
Despite concern about the prospects for the UK economy as a whole, the Board
believes that the outlook for the construction and housing sectors remains
encouraging. Moreover, although the commercial property market has weakened
in recent months, any further deterioration is unlikely to be dramatic. In
contrast to the late eighties, there is not a great oversupply of space and
low borrowing rates, which are further below rental yields than at any time in
the last 50 years, are encouraging non-institutional buyers.
Construction Services
The Construction Services order book at 30th June 2001 totalled £990m, of
which £670m related to relatively low risk 4 to 7 year partnering contracts.
This represents the highest ever level of work in hand and is 80% up on the
comparable figure at this time last year.
Gleeson should also benefit substantially over the next few years from
increased Government spending on health, education, social housing, and
transport and also from its very strong track record in the PFI market.
Homes
Following the events of 11th September 2001, there has been a lull in the
housing market. However, against the background of the lowest mortgage rates
for 35 years, the Board believes that demand may well recover swiftly. It
seems likely, though, that the rate of house price inflation will slow
significantly in the course of the next 12 months.
Gleeson Homes' success in establishing itself as a leading brownfield
developer, particularly at the upper end of the market, continues to provide
the opportunity to take advantage of the growing market for distinctively
designed, high quality urban homes.
A very fast rate of growth in recent years has not, in some geographical
areas, been accompanied by sufficiently rigorous cost control. In the current
year, however, the Division should benefit from the extensive management
changes that have been made in the last 12 months. In this context, Gleeson
Homes' relatively low operating margins of 8.3% in 2000/01 represents an
opportunity.
Property
A number of sales of completed commercial developments are budgeted for the
current year. As regards new commitments, however, Gleeson Properties is
responding to the changed property market conditions referred to above by
concentrating primarily upon the search for attractive investments.
Dermot Gleeson 16th October 2001
Executive Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 June 2001
2000/01 1999/00
£000 £000
Turnover:
Continuing Operations 422,470 339,987
Acquisitions - 9,620
--------- --------
Group Turnover 422,470 349,607
Cost of sales (378,002) (316,915)
--------- --------
Gross profit 44,468 32,692
Investment Property Income 6,168 5,968
Net operating expenses (28,742) (22,556)
-------- --------
Operating profit on continuing activities:
Continuing operations 21,894 15,742
Acquisitions - 362
-------- -------
21,894 16,104
Share of results of joint ventures 291 872
Profit on sale of investment properties 900 1,912
Profit on sale of investments 709 -
Goodwill amortisation (308) (128)
-------- --------
Profit on ordinary activities before 23,486 18,760
interest
Interest receivable 191 215
Less: Interest payable (4,814) (2,868)
-------- -------
(4,623) (2,653)
------- --------
Profit on ordinary activities before
taxation
18,863 16,107
Taxation on profit on ordinary activities (5,398) (4,497)
------- --------
Profit after taxation 13,465 11,610
Dividends (3,101) (2,682)
-------- --------
Retained profit 10,364 8,928
===== =====
Earnings per share 134.41p 114.71p
===== =====
Earnings per share - fully diluted 134.02p 114.62p
===== =====
Interim dividend - paid 6.00p 5.15p
Final dividend - proposed 25.00p 21.35p
------- -------
Total dividends per share 31.00p 26.50p
===== =====
CONSOLIDATED BALANCE SHEET
As at As at
30 June 2001 30 June 2000
£000 £000
Capital employed
Share Capital 1,031 1,022
Share premium 2,427 1,657
Capital redemption reserve 100 100
Capital reserve 16,284 20,471
--------- 19,842 ---------- 23,250
Profit and loss reserve 126,548 112,640
---------- --------
Total capital employed 146,390 135,890
====== =====
Employment of capital
Fixed assets:
Goodwill 5,717 6,025
Owner occupied properties 11,736 11,520
Investment property 50,432 61,351
Plant 8,744 6,088
Transport 899 845
Motor cars 3,372 3,102
--------- 80,900 --------- 88,931
Investments 5,709 5,745
--------- --------
86,609 94,676
Current assets:
Stock and work in progress 142,231 129,564
Amounts recoverable on contracts 54.686 47,609
Debtors 28.490 13,244
Cash and bank balances 436 1,609
--------- 225,843 --------- 192,026
Current liabilities:
Bank overdraft (51,024) (41,128)
Creditors (85,094) (86,242)
Payments on account (24,424) (17,815)
Corporation tax (3,278) (3,771)
Proposed dividends (2,504) (2,161)
--------- (166,324) ---------- 151,117
---------- --------
Net current assets 59,519 40,909
Total assets less current 146,128 135,585
liabilities
Provisions for liabilities and 262 305
charges
---------- --------
Net assets 146,390 135,890
====== =====
CONSOLIDATED CASHFLOW STATEMENT
year ended 30 June 2001
Notes 2000/01 1999/00
£000 £000 £000 £000
Operating activities
Net cash (outflow) from operating
activities 1 (7,338) (7,026)
Dividends from joint ventures - -
Returns on investments and servicing
of finance
Interest received 191 215
Interest Paid (4,867) (2,877)
Rents received 6,168 5,968
------- --------
Net cash inflow from returns on
investments and servicing of finance 1,492 3,306
Taxation
UK corporation tax paid (6,736) (4,055)
Capital expenditure
Purchase of tangible fixed assets (10,861) (12,268)
Sale of tangible fixed assets 973 786
Sale of investment properties 12,392 14,126
Purchase of investments (456) (2,152)
Sale of investments 1,538 625
Net investment loans (33) -
------- -------
Net cash outflow from capital
expenditure 3,553 1,117
Acquisitions and disposals
Purchase of investment in joint (61) (500)
ventures
Purchase of subsidiary undertakings - (6,383)
Net cash acquired with subsidiary
undertakings - 1,769
------- (61) ------- (5,114)
Equity dividends paid (2,758) (2,282)
------- --------
Net cash outflow before financing (11,848) (14,054)
Management of liquid resources - 282
Financing
Proceeds from issue of shares 779 -
------- -------
Net cash outflow from financing 779 -
------- -------
Decrease in cash 2 (11,069) (13,772)
==== =====
Reconciliation of net cash flow to movement in net
debt
Decrease in cash in the year (11,069) (13,772)
Cash outflows from increase in liquid resources - (282)
-------- --------
Movement in net debt during the year (11,069) (14,054)
Net (debt) as 1st July (39,519) (25,465)
--------- --------
Net (debt) at 30th June (50,588) (39,519)
===== =====
CONSOLIDATED CASH FLOW STATEMENT
year ended 30 June 2001
1 Reconciliation of operating profit to net cash
inflow from operating activities
2000/01 1999/00
£000 £000
Operating profit 21,586 15,976
Investment property income (6,168) (5,968)
Depreciation Charges 5,163 4,489
Amortisation of goodwill 308 128
Profit on sale of tangible fixed assets (674) (550)
Increase in stock and work in progress (12,667) (35,062)
(Increase) in debtors (21,283) (14,632)
Increase in creditors 6,397 28,593
-------- ---------
(7,338) (7,026)
===== =====
2 Analysis of net debt As at 1 July 2000 Cashflow Non cash As at 30
Changes June 2001
£000 £000 £000 £000
Cash at bank and in hand 1,609 (1,173) - 436
Overdrafts (41,128) (9,896) - (51,024)
-------- -------- -------- ---------
(39,519) (11,069) - (50,588)
===== ===== ===== =====
SEGMENTAL ANALYSIS
2000/01 1999/00
£000 £000
Analysis of turnover on continuing operations:
Construction
United Kingdom 291,562 237,198
Africa 500 494
Jersey 3,003 3,423
---------- ---------
295,065 241,115
Homes - United Kingdom 123,419 106,969
Property - United Kingdom 3,986 1,523
--------- ---------
422,470 349,607
--------- ---------
Operating profit on continuing activities:
Construction 7,826 3,333
Homes 10,208 8,178
Property 5,874 6,456
Central Costs (2,322) (1,991)
Goodwill 308 128
--------- ---------
21,894 16,104
--------- ---------
Net assets:
Construction 14,509 3,338
Homes 82,730 77,288
Property 88,900 83,249
Joint venture investments 3,594 3,312
Centre 12,765 13,432
--------- ---------
202,498 180,619
Tax (3,016) (3,466)
Dividends (2,504) (2,161)
--------- ---------
196,978 174,992
Net Debt (50,588) (39,102)
-------- ---------
146,390 135,890
-------- ---------
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