Final Results
Gleeson(M J)Group PLC
14 October 2003
Tuesday 14th October 2003
M J GLEESON GROUP PLC
Construction - Homes - Property
PRELIMINARY ANNOUNCEMENT
• As disclosed in the March 2003 Interim Statement, the first half of
the year was disappointing. However, a significantly improved trading
performance has been achieved in the six months ended 30th June 2003 and the
results for the year are in line with the Board's expectations.
• The prospects in all of the Group's areas of activity in the current
year are encouraging.
• On turnover 9.0% higher at £624.6m (2001/02: £572.8m), pre-tax profit was
37.1% lower at £9.5m (2001/02: £15.1m) and EPS were 58.03p (2001/02: 101.5p).
• A final dividend per share of 28.25p (2001/02: 26.0p), up by 8.7%, is
proposed, making a total for the year of 35p (2001/02: 32.5p), a 7.7%
increase.
• Year end NAV per share totalled £14.67 (2001/02: £14.43).
• Construction Services operating profit decreased to £4.6m (2001/02:
£10.0m) as a result of the further provision on the Buxton cement works
contract, disclosed in March 2003. The Construction Services order book at
1st October 2003 totalled £760m, of which over 60% related to relatively low
risk partnership agreements and some £340m is water related.
• Gleeson Homes increased its operating profit to £9.1m (2001/02: £0.6m) as
the Division benefited from a return to traditional forms of new build
housing and a strengthening of procedures. Unit sales are expected to
increase from 489 in 2002/03 to over 600 in 2003/04.
• Gleeson Properties made a reduced operating profit of £2.6m (2001/02:
£10.7m), as a result of no developments being sold during the year,
reflecting soft market conditions, which had been substantially anticipated.
In the current year, Gleeson Properties is expected to make an increased
contribution as a result of a modest level of development sales and
increased rents.
• Dermot Gleeson, Executive Chairman, stated 'It is disappointing that, for
well advertised reasons, our centenary year saw a reduction in Group
profits. However, the Board believes that the current year should mark a
return to significant and sustained annual profit growth.'
Presentation:
A presentation will be held between 11.00 a.m. and 12.00 noon today at Bankside
Consultants, 123 Cannon Street, London EC4.
Enquiries:
M J Gleeson Group plc 020-8644 4321
Dermot Gleeson (Executive Chairman)
Andrew Muncey (Group Managing Director)
Colin McLellan (Finance Director)
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166
CHAIRMAN'S STATEMENT
As I disclosed in the March 2003 Interim Statement, the first half of the year
was disappointing. However, a significantly improved trading performance has
been achieved in the 6 months ended 30th June 2003 and the results for the year
are in line with the Board's expectations.
Gleeson Construction Services' strong market position did not translate into
significant profit mainly in consequence of serious difficulties relating to the
construction of a new cement works at Buxton. In addition, Gleeson Properties
experienced more difficult market conditions. Gleeson Homes, however, made good
progress under its new management team.
The prospects in all of the Group's areas of activity in the current year are
encouraging.
FINANCIAL OVERVIEW
In the year ended 30th June 2003, on turnover 9.0% higher at £624.6m (2001/02:
£572.8m), profit before interest and tax reduced by 33.5% to £12.0m (2001/02:
£18.1m), whilst pre-tax profit was 37.1% lower at £9.5m (2001/02: £15.1m).
Earnings per share were 58.03p (2001/02: 101.5p), reflecting an effective tax
rate of 38.7% (2001/02: 32.2%).
Year end shareholders' funds totalled £150.3m (2001/02: £150.0m) equivalent to
NAV per share of £14.67 (2001/02: £14.43). Year end net debt totalled £54.2m
(2001/02: £37.2m), representing gearing of 35% (2001/02: 25%).
Net interest payable decreased to £2.6m (2001/02: £3.0m), reflecting lower
averages of both interest rates and indebtedness, whilst interest cover
decreased to 4.7 x (2001/02: 6.0 x).
As previously reported, 200,000 of the Company's shares (representing 1.9% of
the issued share capital) were purchased in December 2002 at a price of £7.80
per share and cancelled.
In March, the Company's shares were admitted to the FTSE4Good Index, the FTSE's
socially responsible investment index.
DIVIDENDS
If approved at the AGM on 14th January 2004, a final dividend of 28.25p per
share (2001/02: 26.0p), up by 8.7%, will be paid immediately thereafter to
shareholders on the register at close of business on 19th December 2003.
Together with the interim dividend per share of 6.75p (2001/02: 6.5p), paid on
30th June 2003, dividends for the year will total 35p (2001/02: 32.5p), a 7.7%
increase.
OPERATING REVIEW
Gleeson Construction Services Limited
Construction Services and its Subsidiaries increased their turnover by 22% to
£521.3m (2001/02: £428.2m), but operating profit decreased to £4.6m (2001/02:
£10.0m).
Building
The Building Divisions' turnover increased by 29% to £274m (2001/02: £213m). A
significant proportion of the work undertaken related to the Government's
substantial capital expenditure programme for hospitals and schools. The three
principal contributors to turnover in the year were a mixed residential/
commercial development at Tally Ho Corner in North London, a residential project
in Devonshire Green, Sheffield and the St. George's Hospital, Tooting PFI
contract which was completed in August 2003. Significant contracts won included
a residential development at City Island in Leeds, Lambeth City Academy and a
Secure Training Centre PFI project in Milton Keynes with Securicor.
Against the background of very competitive market conditions, the Board has
decided to withdraw from building contracting in Scotland. A significant
proportion of the staff concerned have been offered the opportunity to transfer
to the Engineering Division's rapidly growing Scottish business unit.
Civil and Process Engineering
The Engineering Division's turnover was 6% higher at £165m (2001/02: £154m). A
high proportion of the work undertaken was again for the water industry. The
Division has partnering agreements with most of the leading water providers in
the UK, including Scottish Water, Thames Water, Yorkshire Water, Wessex Water
and South West Water.
Following the serious difficulties encountered in the first half of the
financial year - which resulted in the additional £5 million provision announced
in March 2003 - better progress has subsequently been achieved at Buxton. As
already reported, this project - which is virtually complete - will be the
subject of a significant claim.
Specialist Subsidiaries
The total turnover of the Construction Services specialist subsidiaries was £87m
(2001/02: £69m).
Much of the work undertaken by Gleeson MCL Limited, which specialises in
construction work in the rail sector, was for London Underground's recently
formed infrastructure companies. The Company enjoyed a very successful year as
did Concrete Repairs Limited, one of the UK market leaders in the repair of
concrete structures, whose largest contract was the refurbishment of the
external fabric of eight blocks of flats on the Ferdinand Estate in North
London. Powerminster Limited, the Group's mechanical and electrical services
provider, had a more difficult, although profitable, year and has continued to
enjoy long-term relationships within the maintenance and facilities management
markets.
Gleeson Homes Limited
Although Gleeson Homes reported a 9% reduction in turnover to £103.3m (2001/02:
£112.9m), its operating profit was much higher at £9.1m (2001/02: £0.6m). The
Division's results include provision for the start up costs incurred by Gleeson
Regeneration, which is not yet producing significant income.
This improved performance reflects the restructuring of the Division which has
benefited from a return to traditional forms of new-build housing, a
strengthening of procedures, and a reduction in regional offices to two from
four.
489 (2001/02: 479) units were sold during the year, at an average selling price
of £195,000 (2001/02: £182,000).
Gleeson Properties Limited
Gleeson Properties made an operating profit of £2.6m (2001/02: £10.7m).
Against a background of considerable uncertainty in the property sector, the
possibility, to which I referred at the AGM on 8th January 2003, of transferring
the Group's property investment portfolio into a non-recourse vehicle, in
conjunction with a financial partner, is currently on hold.
Gross income from Investment Properties totalled £4.6m (2001/02: £7.1m,
including a £2.0m premium on the surrender of a commercial lease).
The Group's owner-occupied properties and its commercial property investment
portfolio, which comprises offices and industrial warehouses, were
professionally valued at 30th June 2003 at £11.7m and £57.6m, respectively, and
a net deficit of £0.7m (2001/02: £4.0m deficit) arising on these revaluations
has been transferred to capital reserves.
Gleeson Properties, which anticipated the current weakening of the property
market by sharply curtailing its development programme in 2001/02, sold no
developments during the year.
BOARD
As previously reported, David Eyre retired as Group Managing Director on his
65th birthday after a total of 38 years with the Group. He has been succeeded by
Andrew Muncey, aged 47, who joined the Group in 1997 and became Managing
Director of the Southern Construction Division in 1999. He was elected to the
Board in October 2001.
STRATEGY
This continued to be based on four key policies, to:
i maintain a 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 through the entire life
cycle of their infrastructure and property assets;
ii pursue significant overall growth across the Group's trading operations;
iii ensure that a very high proportion of the construction workload continues
to be undertaken on a partnering or similar basis, so as to reduce risk;
and
iv generate a sizeable additional income by investing in rent producing
commercial properties and in a portfolio of PFI equity stakes.
PROSPECTS
Gleeson Construction Services Limited
The Construction Services order book at 1st October 2003 totalled £760m, of
which over 60% related to relatively low risk partnering agreements. About 75%
is for either the utilities or clients in the public sector.
The Board believes that the present buoyant trading conditions enjoyed by both
its building divisions and the Engineering Division will be sustained for some
time, largely as a result of the Government's continuing commitment to high
capital spending on public services.
Against the background of its continuing success in securing work on a
partnering basis - most recently for Scottish Water - the Engineering Division
will no longer bid for traditionally procured work unless there is an
exceptionally compelling reason to do so. This important strategic decision will
substantially reduce the Division's exposure to construction risk. The Division
is, however, seeking opportunities in a number of areas outside the water
sector, including road construction, where partnering is becoming an
increasingly favoured procurement route.
Gleeson MCL has a healthy level of work in hand, including a substantial
partnership agreement with Tube Lines for the Piccadilly Line station
modernisation programme and a number of work packages with Metronet Rail.
Gleeson Homes Limited
The management team is confident that further progress will be made in the
current year.
The land bank at the year end comprised 1,761 (2001/02: 1,300) plots with
planning permission, and the Division had exchanged conditional contracts on a
further 23 (2001/02: 351) plots. An additional 1,085 (2001/02: 750) acres are
held under options exercisable on receipt of planning permission.
In the current year, unit sales are expected to exceed 600 (2002/03: 489), at an
increased average selling price. Reservations in the first quarter were ahead of
budget and no weakening of the market has been detected. Gleeson Homes has no
exposure to central London.
Sites secured with planning permission cover 100% of the Division's requirements
for 2003/04 and 55% for 2004/05, during which some 800 unit sales are currently
envisaged.
Gleeson Properties Limited
Gleeson Properties is expected to make an increased contribution as a result of
a modest level of development sales (as against none last year) and increased
rents.
To date, capital values have held up reasonably well despite weak occupational
demand and falling rents, but this cannot be guaranteed to continue throughout
the year, especially if there is an increase in interest rates.
Gleeson Regeneration Limited
Gleeson Regeneration was formed in February 2002 to enable the Group to focus
more closely on low cost housing and regeneration schemes. As part of a
consortium, it is the Development Partner on the £60m Grove Village, Manchester,
scheme, the first substantial PFI project for social housing in the UK, which
achieved financial close on 29th September 2003. However, Gleeson Regeneration
will not contribute materially to Group profit in the current year. Including
Grove Village, Regeneration's land bank at the year end comprised 729 plots with
planning permission, and the Division had exchanged conditional contracts on a
further 999 plots.
Summary
Against the background described above, the Board believes that the current year
should mark a return to significant and sustained annual profit growth.
Dermot Gleeson
Executive Chairman 14 October 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 June 2003
Year ended Year ended
30 30
June June
2003 2002
Audited Audited
£000 £000
Turnover: group and share of joint
ventures
Existing operations 633,030 580,634
Less: share of joint ventures' (8,466) (7,792)
turnover ------- -------
Group turnover 624,564 572,842
Cost of sales (575,906) (525,797)
------- -------
Gross profit 48,658 47,045
Investment property income 4,613 7,133
Net operating expenses (40,045) (35,905)
------- -------
Operating profit 13,226 18,273
Share of results of joint ventures (1,275) (619)
Profit on sale of investment 95 457
properties ------- -------
Profit on ordinary activities before 12,046 18,111
interest
Interest receivable 493 523
Less: interest payable (3,054) (3,557)
------- -------
(2,561) (3,034)
------- -------
Profit on ordinary activities before 9,485 15,077
taxation
Taxation on profit on ordinary (3,666) (4,864)
activities ------- -------
Profit after taxation 5,819 10,213
Dividends (3,519) (3,288)
------- -------
Retained profit for the financial year 2,300 6,925
------- -------
Earnings per share 58.03p 101.50p
------- -------
Earnings per share - fully diluted 57.83p 100.78p
------- -------
Dividend per share
Interim - paid 6.75p 6.50p
Final - proposed 28.25p 26.00p
------- -------
35.00p 32.50p
------- -------
CONSOLIDATED BALANCE SHEET
As At As At
30 June 2003 30 June 2002
CAPITAL EMPLOYED
Share capital 1,024 1,040
Share premium 3,450 3,127
Capital redemption 120 100
reserve
Capital reserve 9,627 10,676
----- ------
14,221 14,943
Profit and loss reserve 136,101 135,051
------ ------
TOTAL CAPITAL EMPLOYED 150,322 149,994
------ ------
EMPLOYMENT OF CAPITAL
Fixed assets
Goodwill 5,102 5,409
Owner occupied 11,840 11,619
properties
Investment property 64,341 59,102
Plant 12,874 11,021
Transport 1,125 1,143
Motor cars 3,410 4,284
------ ------
98,692 92,578
Investments 4,478 5,810
------ ------
103,170 98,388
Current assets
Stock and work in 130,327 119,152
progress
Amounts recoverable on 83,472 75,673
contracts
Debtors 24,222 35,018
Cash and bank balances 150 308
------ ------
238,171 230,151
Current liabilities
Bank overdraft (54,336) (37,534)
Creditors (120,744) (123,712)
Payments on account (13,041) (11,536)
Corporation tax (175) (3,491)
Proposed dividends (2,855) (2,632)
------ ------
(191,151) (178,905)
------ ------
Net current assets 47,020 51,246
Total assets less current 150,190 149,634
liabilities
Provisions for liabilities 132 360
and charges
------ ------
NET ASSETS 150,322 149,994
------ ------
CONSOLIDATED CASHFLOW STATEMENT
year ended 30 June 2003
Notes 2002/2003 2001/2002
£000 £000 £000 £000
Cash flow from 1 8,357 37,208
operating activities
Returns on investments
and servicing of
finance
Interest received 493 523
Interest paid (3,084) (3,385)
Rents received 4,613 7,133
------- -------
Net cash inflow from 2,022 4,271
returns on investments
and servicing of
finance
Taxation
UK corporation tax (6,257) (6,148)
paid
Capital expenditure and
financial investment
Purchase of tangible (16,341) (30,437)
fixed assets
Sale of tangible fixed 366 1,085
assets
Sale of investment 776 10,374
properties
Sale of investments 809 -
Net investment loans (1,293) (540)
______ ______
(15,683) (19,518)
Acquisitions and
disposals
Purchase of investment (37) -
in joint ventures
Purchase of subsidiary (825) -
undertaking
_____ _____
(862) -
Equity dividends paid (3,296) (3,160)
______ ______
Net cash outflow before (15,719) 12,653
use of liquid resources
and financing
Management of liquid - -
resources
Financing
Purchase of own (1,564) -
shares
Proceeds from issue of 323 709
shares
______ ______
Net cash inflow from (1,241) 709
financing ------ -------
Increase/(decrease) in 2 (16,960) 13,362
cash in the year ------ -------
CONSOLIDATED CASHFLOW STATEMENT
year ended 30 June 2003
2002/2003 2001/2002
£ £
1 Reconciliation of
operating profit to net
cash
inflow from operating
activities
Operating profit 13,321 18,273
Investment property (4,613) (7,133)
income
Depreciation charges 6,872 5,820
Amortisation of 308 308
goodwill
Profit on sale of (95) (725)
tangible fixed assets
(Increase)/decrease in (10,350) 24,913
stock and work in
progress
Decrease/(Increase) in 4,377 (25,031)
debtors
(Decrease)/Increase in (1,463) 20,783
creditors
-------- --------
8,357 37,208
-------- --------
2 Analysis of net debt As at 1 Cashflow Non cash As at 30
July 2002 Changes June 2003
£000 £000 £000 £000
Cash at bank and in 308 (158) - 150
hand
Overdrafts (37,534) (16,802) - (54,336)
------- ------ -------- --------
Cash (37,226) (16,960) - (54,186)
------- ------ -------- --------
NOTES
1. Segmental analysis
Year ended Year ended
30 30
June June
2003 2002
Audited Audited
£000 £000
Analysis of turnover on continuing operations:
Construction
United Kingdom 517,165 424,813
Jersey 4,128 3,417
-------- -------
521,293 428,230
Homes - United Kingdom 103,271 112,970
Property - United Kingdom - 31,642
-------- -------
624,564 572,842
-------- -------
Operating profit on continuing activities:
Construction 4,634 10,053
Homes 9,053 575
Property 2,639 10,730
Central costs (3,100) (3,085)
-------- -------
13,226 18,273
-------- -------
This information is provided by RNS
The company news service from the London Stock Exchange
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