Interim Results
Gleeson(M J)Group PLC
27 March 2002
M J GLEESON GROUP PLC - INTERIM RESULTS
Gleeson, the Construction Services, Homes and Property Group, today announces
its Interim Results for the 6 months to 31 December 2001. Whilst turnover for
the period has risen by 26%, pre-tax profits have fallen by £2m to £3.3m, as
cautioned at the time of the AGM on 9 January 2002. The Board now believes that
for the year to 30 June 2002 pre-tax profits will fall below current market
expectations.
• After six successive annual increases, the likelihood is that the pre-tax
profit for the current year will be less than last year's £18.9m.
• This deterioration reflects a further downgrading of expectations for
Gleeson Homes as a result of a review undertaken by Terry Massingham
following his appointment as Managing Director of Gleeson Homes at the end
of October 2001.
• In what is traditionally the less active part of the year, turnover
increased by 26.3% to £233.0 m but pre-tax profit declined to £3.3m from
£5.3m.
• Net assets per share increased to £14.34 (2000/01: £13.60).
• The Group's other operations, in particular Construction Services which
increased turnover by 38.5% to £186.1m and has an order book of over £900m,
continued to perform satisfactorily.
• Reflecting their confidence in a strong recovery in 2002/03, the Directors
have declared an interim dividend per share of 6.5p, up 8.3%.
Dermot Gleeson, Executive Chairman, stated 'Whilst the outcome for the current
year is likely to disappoint, a substantial profit is still expected. The
problems at Gleeson Homes are being vigorously addressed by new management.
Next year, a strong recovery is expected, as Construction Services continues to
prosper and Gleeson Homes reaps the benefit of its change of direction.'
Enquiries:
M J Gleeson Group plc 020-8644 4321
Dermot Gleeson (Executive Chairman)
Colin McLellan (Group Finance Director)
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166
CHAIRMAN'S STATEMENT
I am disappointed to announce not only a decrease in the interim pre-tax profit,
as forewarned in my AGM statement in January, but also the Board's belief that
it will no longer be possible to achieve a pre-tax profit for the year ending 30
June 2002 in line with market expectations. After six successive annual
increases, the likelihood is that the figure will be below last year's £18.9m.
This deterioration reflects a further downgrading of expectations for Gleeson
Homes as a result of the review undertaken by Terry Massingham following his
appointment as Managing Director of Gleeson Homes at the end of October 2001.
The Group's other operations, in particular Construction Services, continue to
perform satisfactorily.
FINANCIAL OVERVIEW
In what is traditionally the less active half of the year, turnover increased by
26.3% to £233.0m (2000/01: £184.5m), but profit before interest and tax
decreased to £4.9m (2000/01: £7.4m) and pre-tax profit declined to £3.3m (2000/
01: £5.3m). Earnings per share were 23.0p (2000/01: 36.7p).
Reflecting lower averages of both indebtedness and interest rates, net interest
payable fell to £1.6m (2000/01: £2.1m). Gearing was 47.8% (2000/01: 51.4%).
Net assets per share increased to £14.34 (2000/01: £13.60).
DIVIDEND
Reflecting their confidence in a strong recovery in 2002/03, the Directors have
declared an interim dividend per share of 6.5p, up 8.3% on 2000/01's 6.0p, which
will be paid on 28 June 2002 to Shareholders on the register at the close of
business on 31 May 2002.
OPERATING REVIEW
Construction Services
Construction Services increased turnover by 38.5% to £186.1m (2000/01: £134.4m)
and operating profit to £4.3m (2000/01: £2.9m), reflecting an operating margin
of 2.3% (2000/01: 2.1%). Once again, over 80% of work was on a PFI or
partnering basis.
Civil and Process Engineering
The Engineering Division's turnover increased by 8.7% to £77.9m (2000/01:
£71.7m). The water sector, which is one of the busiest sectors in the UK
construction market and in which Gleeson is the leading UK contractor, continued
to provide the bulk of the Division's turnover.
Building
The Building Divisions' turnover increased by 75.6% to £97.1m (2000/01:
£55.3m). A substantial proportion of the work undertaken reflected increased
Government expenditure on hospitals and schools. Work for residential property
developers increased but that for commercial property developers declined. All
three UK regions - Southern, Northern and Scottish - performed well.
Specialist subsidiaries
The total turnover of the Group's specialist Construction Services subsidiaries,
Powerminster Limited and Concrete Repairs Limited, was little changed at £16.7m
(2000/01: £16.6m).
Homes
On turnover 8.5% lower at £45.3m (2000/01: £50.1m), Gleeson Homes made an
operating loss of £1.5m (2000/01 profit: £3.2m). The Division's poor
performance reflects substantial cost overruns which have been identified in
Terry Massingham's review and the need to provide for the consequences of a
refocused policy. This will concentrate on new build on brownfield land, rather
than the refurbishment of existing buildings, and has necessitated the writing
off of costs on a number of aborted projects.
In the half year, 240 units were sold at an average selling price of £171,000;
this compares with 232 and £181,000, respectively, in the first half of 2000/01.
Property
Gleeson Properties contributed an operating profit of £3.5m (2000/01: £2.4m).
Property Investment
The portfolio, whose book value increased to £61.5m (2000/01: £50.4m), remains
concentrated on the office and industrial warehouse sectors. The increase in
value reflects the acquisition in the half year, for a total of £15.2m, of an
office building in Paris and of industrial premises in Nuneaton and Romford -
all of which are fully let with sound covenants. During the period, a portfolio
of seven properties were disposed of at the book value of £6.1m as part of the
restructuring programme.
Gross rents fell by £0.6m to £2.4m following the disposal of income producing
properties in 2000/01.
Property Development for Sale
In the half year, profits were generated from the sale of Joint Venture
developments and an industrial warehouse in Banbury.
BOARD
Three executives of the Group were appointed to the Board during or subsequent
to the half year: Tony Collins, 45, Managing Director of the Engineering
Division; Terry Massingham, 49, Managing Director of Gleeson Homes; and Andrew
Muncey, 45, Managing Director of the Southern Construction Division.
In addition, Noel Adams, formerly of Bellway Homes, has been appointed Managing
Director of Gleeson Regeneration, a new division of the Group specialising in
urban regeneration, including social housing PFI projects.
PROSPECTS
Construction Services
The order book currently exceeds £900m (more than £550m of which is water
related) and is over 50% higher than at this time last year. In addition,
Construction Services remain in receipt of a high level of enquiries and margins
are holding up well.
The Southern Building Division will benefit from the order, announced last week,
for the £60m 140 bed state-of-the-art Evelina Children's Hospital at St Thomas'
Hospital, London SE1.
Gleeson MCL (formerly Mabey Construction Co. Ltd), which was acquired in January
2000 to strengthen the Group's presence in the railway sector, is well
positioned to take advantage of the rapid growth of expenditure on the London
Underground.
Homes
Gleeson Homes' financial prospects are expected to benefit from the new
management team's stronger controls, and the switch in emphasis towards new
build projects will ensure that development costs become more predictable.
The landbank is of increasingly good quality and 95% of the plots with planning
consent required to meet next year's sales target are already secured - a best
ever figure at this stage.
With no exposure to Central London, Gleeson Homes' market remains strong, and is
likely to be sustained by the historically low proportion of income required to
service mortgage interest.
Accordingly, the Division remains on track to achieve a substantially higher
operating margin next year.
Property
The property sector has been experiencing softer tenant and institutional
demand. However, any further deterioration is unlikely to be dramatic: in
contrast to the late 1980s, there is no significant 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.
The Board hopes to achieve a significantly higher level of development property
disposals in the second half than the first.
Overall
Whilst the outcome for the current year is likely to disappoint, a substantial
profit is still expected. The problems at Gleeson Homes are being vigorously
addressed by new management. Next year, a strong recovery is expected, as
Construction Services continues to prosper and Gleeson Homes reaps the benefit
of its change of direction.
Dermot Gleeson
Executive Chairman 27 March 2002
CONSOLIDATED PROFIT AND LOSS ACCOUNT
6 months 6 months Year ended
ended 31 December ended 31 December 30 June
2001 2000 2001
Unaudited Unaudited Audited
£000 £000 £000 £000 £000 £000
Turnover: group and share of joint venture
Existing operations 233,016 184,547 428,455
Less: share of joint ventures' turnover - - (5,985)
______ ______ ______
Group turnover 233,016 184,547 422,470
Cost of sales (214,555) (165,874) (378,002)
______ ______ ______
Gross profit 18,461 18,673 44,468
Investment property income 2,376 3,005 6,168
Net operating expenses (15,927) (14,391) (29,050)
______ ______ ______
Operating profit 4,910 7,287 21,586
Share of results of joint ventures (100) 72 291
Profit on sale of investment properties 134 - 900
Profit on sale of investment - - 709
______ ______ ______
Profit on ordinary activities before interest 4,944 7,359 23,486
Interest receivable 143 76 191
Less: Interest payable (1,791) (2,135) (4,814)
_____ _____ _____
(1,648) (2,059) (4,623)
_____ _____ _____
Profit on ordinary activities before taxation 3,296 5,300 18,863
Taxation on profit on ordinary activities (989) (1,590) (5,398)
_____ _____ _____
Profit after taxation 2,307 3,710 13,465
Dividends (656) (607) (3,101)
_____ _____ _____
Retained profit for the period 1,651 3,103 10,364
_____ _____ _____
Earnings per share 22.96p 36.66p 134.41p
Earnings per share - fully diluted 22.85p 36.67p 134.02p
Interim dividend per share 6.50p 6.00p
SUMMARISED CONSOLIDATED BALANCE SHEET
As at As at As at
31 December 31 December 30 June
2001 2000 2001
Unaudited Unaudited Audited
£000 £000 £000
Fixed assets
Intangible assets 5,563 5,871 5,717
Tangible assets 87,315 85,877 75,059
Investments 5,785 6,038 5,709
______ ______ ______
98,663 97,786 86,485
Current assets
Stocks 151,061 155,734 144,065
Debtors 89,382 48,900 87,632
Cash at bank and in hand 322 1,606 436
______ ______ ______
240,765 206,240 232,133
Creditors: Amounts falling due within one year (191,343) (165,338) (172,490)
______ ______ ______
Net current assets 49,422 40,902 59,643
Total assets less current liabilities 148,085 138,688 146,128
Provisions for liabilities and charges 262 305 262
______ ______ ______
Net assets 148,347 138,993 146,390
______ ______ ______
Capital and reserves
Called up share capital 1,035 1,022 1,031
Share premium account 2,729 1,657 2,427
Capital redemption reserve fund 100 100 100
Revaluation reserve 15,038 20,442 16,284
Profit and loss account 129,445 115,772 126,548
______ ______ ______
Total shareholders' funds 148,347 138,993 146,390
______ ______ ______
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year
31 December 31 December ended
2001 2000 30 June
Unaudited Unaudited 2001
Audited
£000 £000 £000
Net cash outflow from operating activities (26) (29,212) (8,681)
Returns on investments and servicing of finance 653 1,143 1,492
Taxation (3,787) (1,992) (5,517)
Capital expenditure and financial investment (17,283) (1,804) 3,677
Acquisition and disposals (176) - (61)
Equity dividends paid - - (2,758)
Financing 306 - 779
______ ______ ______
Increase in net debt (20,313) (31,865) (11,069)
====== ====== ======
NOTES
1. Segmental analysis
6 months ended 6 months ended Year
December December ended
2001 2000 June
Unaudited Unaudited 2001
Audited
£000 £000 £000
Analysis of turnover on continuing operations:
Construction
United Kingdom 184,315 133,243 291,562
Africa - - 500
Jersey 1,804 1,155 3,003
______ ______ ______
186,119 134,398 295,065
Homes - United Kingdom 45,297 50,149 123,419
Property - United Kingdom 1,600 - 3,986
______ ______ ______
233,016 184,547 422,470
====== ====== ======
Operating profit on continuing activities:
Construction 4,285 2,851 7,826
Homes (1,517) 3,153 10,208
Property 3,514 2,417 5,874
Central costs (1,372) (1,134) (2,322)
______ ______ ______
4,910 7,287 21,586
====== ====== ======
2. The interim statement was approved by the Board of Directors on 26 March 2002.
3. The interim accounts have been prepared in accordance with the accounting
policies adopted in the preparation of the accounts for the year ended 30
June 2001 which are set out in the Company's Annual Report.
4. The abridged results for the year ended 30 June 2001 do not constitute
Statutory Accounts within the meaning of S240 of the Companies Act 1985.
The Auditors' Report on these Accounts was unqualified and did not contain
any statement under S237 of the Companies Act 1985.
5. The interim dividend will be paid on 28 June 2002 to shareholders on the
register on 31 May 2002.
6. In accordance with FRS 14, the earnings per share figure is based on a
weighted average number of shares which excludes 284,400 shares on which
dividends have been waived.
7. Copies of this interim announcement will be circulated to shareholders
and will also be available from the Company Secretary at Haredon House,
London Road, North Cheam, Surrey SM3 9BS.
This information is provided by RNS
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