MJ Gleeson PLC Audited results for the year ended 30 June 2021 (6354L)

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Mj Gleeson Plc	LSE:GLE	London	Ordinary Share	GB00BRKD9Z53	ORD 2P

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	503.00	486.50	502.00				1,520	09:59:05

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
Gen Contractor-oth Residentl	328.32M	24.17M	0.4140	12.15	293.66M

TIDMGLE

RNS Number : 6354L

MJ Gleeson PLC

14 September 2021

   MJ GLEESON PLC                                                 14 September 2021

("Gleeson" or "the Group" or "the Company")

Audited results for the year ended 30 June 2021

Record performance despite industry-wide headwinds.

Homes sold, revenue and profit before tax above pre-Covid levels.

Gleeson, the low-cost housebuilder and land promotion specialist, announces audited results for the year ended 30 June 2021 ("2021").

 
                                 2021        2020          Change         2019          Change 
                                                        (2020 v 2021)                (2019 v 2021) 
 
 Revenue                       GBP288.6m   GBP147.2m        +96%        GBP249.9m       +15.5% 
 
 Operating profit              GBP43.1m     GBP5.9m        +631%        GBP41.0m        +5.1% 
 
 Profit before tax*            GBP41.7m     GBP5.6m        +645%        GBP41.2m        +1.2% 
 
 EPS                             58.2p       8.1p          +619%          61.0p         -4.6% 
 
 Cash net of borrowings        GBP34.3m    GBP16.8m      +GBP17.5m      GBP30.3m       +GBP4.0m 
 
 ROCE                            21.4%       3.1%        +1,830bps        25.9%        -450bps 
 
 Dividend per share (total)      15.0p         -            n/a           34.5p         -19.5p

*All results classified as continuing for the year ended 30 June 2021

Sustainable business model

Gleeson Homes:

   --      Volumes up 69% to 1,812 homes sold (2020: 1,072, 2019: 1,529) 
   --      ASP up 11.4% to GBP145,800 (2020: GBP130,900) - underlying increase 9.3% 
   --      On track to deliver 2,000 homes sold in year ending 30 June 2022 
   --      Gross profit margin on homes sold 28.5% (2020: 27.8%, 2019: 30.1%) 
   --      Operating profit up 316% to GBP37.4m (2020: GBP9.0m, 2019: GBP30.1m) 
   --      27 new sites opened (2020: 12, 2019: 19) 
   --      Land pipeline up 2,062 plots to 15,863 plots (2020: 13,801 plots)

Gleeson Land:

   --      Operating profit of GBP11.1m (2020: GBP0.2m, 2019: GBP13.0m) 
   --      Eight land sales completed during the year (2020: two, 2019: nine)

-- Six sites with planning consent or resolution to grant with the potential to deliver 2,210 plots

-- Portfolio: 71 sites (2020: 68 sites) with the potential to deliver 22,315 plots (2020: 23,314 plots)

   --      Demand expected to remain strong

Resilient financial position

   --      Cash net of borrowings GBP34.3m (2020: GBP16.8m) 
   --      Capital allocation policy to support growth agenda

o 10p final dividend (2020: nil)

o 15p total dividend (2020: nil)

o Earnings to cover dividends between 3 times and 5 times

o Interim dividend to represent 1/3(rd) of expected dividend

Dermot Gleeson, Chairman, commented:

"These are an excellent set of results. Our profits, revenue and volumes all exceeded pre-Covid levels, which represents a record performance for the Group. This was achieved thanks to the resilience of our business model and the talent within the business. Our strategy of building low-cost, high-quality homes in the North of England and the Midlands and unlocking value by promoting land through the planning system in the South of England, ensured the business recovered strongly through what was a tough year.

We are managing industry-wide supply chain pressures well and remain confident of delivering Gleeson Homes' interim target of 2,000 homes sold in the current financial year. Demand remains robust, we have a growing pipeline of sites, an experienced management team and a strong platform for continued growth. We continue to operate in a market underserved by other housebuilders, and as a result our homes are as needed and in demand as ever.

The market for consented sites has recovered and Gleeson Land's pipeline continues to grow. The division's experienced management team remains focussed on delivering sites with sustainable and implementable residential planning permission to other developers in the South of England and is well placed to drive sustainable growth over the medium term.

Against this background, the Board is cautiously confident that the Group will deliver significant growth in both revenue and profits in the current year and beyond."

This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of the company is Stefan Allanson, Chief Financial Officer.

LEI: 21380064K7N2W7FD6434

Enquiries:

 
 MJ Gleeson 
  plc                                        Tel: +44 1142 612900 
 James Thomson     Chief Executive Officer 
 Stefan Allanson   Chief Financial Officer 
 
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 Tim Linacre                                 Tel: +44 20 7457 2045 
 
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 Shaun Dobson                                Tel: +44 20 7496 3000 
 Hannah Woodley 
  James Moat 
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 Neil Patel                                  Tel: +44 20 3100 2222

Chairman's Statement

I am pleased to report a strong set of results for the financial year to June 2021, with revenue and profit ahead of pre-Covid levels.

Gleeson Homes completed a record 1,812 new homes and remains on track to meet its target of delivering 2,000 new homes in 2022.

Gleeson Land sold eight sites with the potential to deliver 1,978 plots. Demand for consented sites has returned to pre-Covid levels and in the current financial year the division has already completed the sale of one substantial site.

Market

The demand for Gleeson Homes' high-quality, low-cost homes remains very strong. Mortgage finance continues to be available to our purchasers on favourable terms and the government's two new initiatives to help first time buyers - the First Homes scheme and the 95% mortgage guarantee scheme - will also help to support demand in the market in which Gleeson operates. Due to the low, affordable selling price of our homes and the typical backgrounds of our customers, most purchases of a Gleeson home are not subject to stamp duty and, as a result, the first tapering of the stamp duty holiday in June has had little impact on our performance. We do not expect the end of the stamp duty holiday in September to have any impact either on demand or revenue.

As has been widely publicised, the construction sector as a whole is currently experiencing availability and cost pressures with respect to labour and materials. So far, however, due to its long-term, trusted relationships with suppliers and subcontractors, Gleeson Homes has been able to maintain both its build programmes and its gross margins. We are cautiously confident it will continue to do so.

Gleeson Land has seen a strong increase in demand from major housebuilders for high-quality, consented sites. Despite the disruptive impact of the pandemic on local authority planning departments, the division is continuing to secure new and commercially attractive planning consents. It has also added a number of new, high-quality sites to its portfolio.

Sustainability

In last year's Annual Report, we set out our commitment to being a sustainable housebuilder aligned with UN Sustainable Development Goals ("SDGs"), in particular target 1 of SDG 11, "Sustainable cities and communities", which is to provide "access for all to safe and affordable housing". A young working couple can afford to buy a high-quality home on any one of Gleeson Homes' development sites.

The UK housing market as a whole is heavily skewed towards the needs of middle and upper-income buyers who already own a home. The average selling price of houses in England is now over GBP325,000. In consequence, and despite the rise in the number of new homes being built, housing inequality in the UK remains a very significant problem. I am proud of the contribution we are making, both in practice and by our example, to resolving that problem.

Our customers are young, first time buyers and people on low incomes who would like to own their home but, in many cases, believe themselves to be "priced out" of the market. Gleeson's high-quality, affordable homes enable them to achieve their dream. What is more, by choosing to live in a new, energy efficient home on a carefully planned and designed Gleeson development, young first time buyers give themselves the opportunity to become active members of a strong and sustainable community.

Our people

The last 18 months have been challenging. I wish to express my very deep sense of gratitude to all our employees for their remarkable resilience in what have been very difficult circumstances and for their continuing commitment to the Company's success.

I have been particularly impressed by the progress made during the year with respect to employee development and engagement. The most recent independently assessed engagement scores show a further rise, placing Gleeson in the top quartile of UK companies. We continue to strive to be, and to be recognised as, one of the best companies to work for in the UK.

Dividends

Following the suspension of dividend payments in 2020, the Board resumed payments in April 2021, paying an interim dividend of 5.0p per share.

Subject to shareholder approval at the 2021 Annual General Meeting ("AGM"), the Board proposes to pay a final dividend of 10.0p per share on 22 November 2021, to shareholders on the register at the close of business on 29 October 2021. The total dividend for the year to 30 June 2021 will, on that basis, be 15.0p.

The Board has also reviewed the Company's capital allocation policy, assessing the capital needs of both shareholders and the Company as it continues to invest for growth. The Board intends to maintain an earnings to ordinary dividend cover ratio of between three and five times and expects to pay a final dividend representing two-thirds of the total dividend each year. This policy will be reviewed periodically to ensure that it remains appropriate.

Financial stability

The Group retains its strong financial position and ended the year with cash balances of GBP34.3m and no debt (30 June 2020: GBP16.8m net cash). In April this year, the Group entered into a new borrowing facility shared between Lloyds Bank plc and Santander UK plc. This has a limit of GBP105m (previously GBP70m with Lloyds) and gives the Group additional liquidity to invest in growth.

I am pleased to confirm that the Company has repaid all financial support received by the Group from the government's Coronavirus Job Retention Scheme and retail grant and rebates schemes.

Corporate governance

I was very pleased in March this year to welcome Elaine Bailey to the Board, who has been appointed as a Non-Executive Director. Elaine, a former Chief Executive of Hyde Housing Group, brings to our deliberations an exceptional breadth of construction and housing-related experience.

Elaine has been appointed as Chair of the new Sustainability Committee and as a member of the Nomination, Audit, and Remuneration Committees.

In December 2020, we established the Sustainability Committee of the Board to oversee the Group's approach to sustainability and to environmental, social and governance ("ESG") issues. Its first report, including a summary of the work undertaken by the Committee this year, is integrated into our Annual Report.

Summary and outlook

Despite the pressures currently affecting the supply of materials and labour within the construction industry, the prospects for Gleeson Homes are very encouraging.

Mortgage rates and conditions for first time buyers on low incomes are unprecedented and very favourable. As a result, there is scope for further, controlled increases in selling prices, while ensuring that young working couples on low incomes can continue to afford to buy a high quality home on any one of Gleeson Homes' development sites - an objective which, for Gleeson, has become a point of pride.

Gleeson Land is experiencing strongly rising levels of interest from housebuilders, many of which are urgently seeking to fill the gaps in their own land banks in the South of England.

Against this backdrop, the Board believes that the Group will be able to continue its pre-pandemic growth trajectory, both in the near term and beyond.

Dermot Gleeson

Chairman

13 September 2021

Chief Executive's Statement

After the unprecedented challenges the country has faced over the last 18 months, I am pleased to report a strong set of results this year. The delivery of 1,812 new homes was a record result for Gleeson Homes and 18.5% ahead of pre-pandemic levels, an outstanding performance and further proof of the resilience of Gleeson's business model.

Gleeson Homes opened 27 new sites this year, which was another record for the business, and we closed the year with 81 build sites, of which 61 were actively selling. This provides us with an excellent platform for sustainable growth.

The newly rebranded Gleeson Land, previously Gleeson Strategic Land, also had a successful year, selling eight sites. Whilst this was below pre-pandemic levels, the division completed the sale of a further site at the start of this financial year, which represents a strong start to the new financial year.

Key performance indicators

 
                          2021         2020         2019 
 Number of homes 
  sold                   1,812        1,072        1,529 
                      -----------  -----------  ----------- 
 Average selling       GBP145,800   GBP130,900   GBP128,900 
  price 
                      -----------  -----------  ----------- 
 Active build sites        81           71           69 
                      -----------  -----------  ----------- 
 Gleeson Land site 
  sales                    8            2            9 
                      -----------  -----------  -----------

Market

The demand for low-cost, high-quality homes from first time buyers remains as robust as ever and the broader housing market has been strong. The main challenges have been, and continue to be, around the price and availability of materials and labour. This is an issue for the industry as a whole and, so far, our strong supply chain relationships and controlled selling price increases have allowed us to trade through these issues. I expect this to be a short-term challenge and one that will, in time, return to normal levels.

Government policy is playing an important role in our planning for the future. New building regulations, namely Part L and Part F Building Regulations, are incorporated into our plans and we are trialling air source heat pumps on a number of developments. These will be the first of many climate-focused changes as the government progresses their vision of zero carbon ready homes. We are supportive of these measures and our homes already have better energy performance ratings than most other new build homes, with over 98% of our homes having an EPC rating of A or B.

Financial performance

Gleeson Homes delivered 1,812 new homes this year, an increase of 69% on the prior year (2020: 1,072). The average selling price of GBP145,800 was 11.4% higher, reflecting an underlying increase of 9.3% and the impact of site mix, and reflects the strong housing demand that we are seeing across all our regions. We expect that house price inflation will ease and that, combined with the favourable mortgage market, will help ensure our homes remain affordable. As a result of this strong performance, Gleeson Homes delivered an operating profit of GBP37.4m (2020: GBP9.0m).

Gleeson Land sold eight sites this year, with the potential to deliver 1,978 plots. This generated an operating profit of GBP11.1m (2020: GBP0.2m).

As a result, Group profit before tax was GBP41.7m (2020: GBP5.6m).

During the year, the Group repaid GBP60.0m of loans drawn on its revolving credit at the start of the pandemic. The Group ended the year with a strong cash balance of GBP34.3m and no debt (30 June 2020: GBP16.8m net cash). Our balance sheet remains strong and will support our future growth ambitions.

Sustainability

Our mission of building affordable, quality homes where they are needed and for the people that need them most aligns fully with the UN SDG 11. Our customers tell us that they buy a Gleeson home for their value and affordability, their location and their good design. I am proud that we are making it possible for young people, key workers and people on low to middle-incomes to buy a home that they want to live in, where they want to live and to help them get onto the housing ladder with all the wealth, health and wellbeing benefits that home ownership brings. A young working couple on the National Living Wage can afford to buy a Gleeson home on any of our development sites.

We publish our first sustainable business strategy this year. In formulating this strategy, the Board sought the views of stakeholders on the material sustainability issues relevant to the Group. Growth, affordability, build quality, health and safety, land regeneration and the reduction of carbon emissions underpin our sustainable strategy. With clear targets and actions, aligned with the issues of importance to our stakeholders, this strategy will see the Group continue to deliver sustainable growth for our stakeholders and society.

People and health and safety

We have continued to invest in the business, as well as ensuring that we have the right people in the right roles and that colleagues are properly trained and supported to do their jobs. Our focus on investing in our colleagues is reflected in Gleeson receiving accreditation from Investors In People during the year. I am also pleased to report that employee engagement increased still further and our independently assessed people engagement score puts us once again very firmly in the top quartile of all UK companies.

Health and safety has been an area of significant focus and investment over the last two years so it was disappointing to see the number of reportable incidents increase to ten this year. We are addressing the issues that led to these incidents and are increasing our investment in training, safe working practices, inspections and reporting and I expect to see this improve significantly.

Investment in site set-up with new compounds and enhanced welfare facilities continued during the year. We greatly value the relationships that we have with our suppliers and subcontractors and I want Gleeson to be their preferred choice of housebuilder to work with. We are committed to paying fairly and on-time for quality workmanship and materials.

We have also invested in our Commercial, IT, HR and Finance functions to make sure these can continue to support the business as it grows.

Build quality and customer service

Our customers are at the heart of our business. This is the most significant purchase many of our customers will ever make and that's why we want to get it right first time - every time.

I am pleased to report that we achieved a customer satisfaction score of 90.6% this year (equivalent to a 5-star rating). We will not hand over a new home that we are not absolutely proud of. We have listened to our customers and worked hard to make sure their buying experience from us is positive from start to finish. We will continue to push our performance as a strong 5-star housebuilder on every site in every region. This work is supported by our Customer First initiative which focuses on ensuring every colleague across the business puts the customer first.

As part of delivering a quality product and service, we have also invested in our Customer Care team and this year launched a fleet of new vans for our customer care technicians. These technicians are dedicated to quickly resolving any defects for our customers.

Land regeneration

Our Land and Planning team have had a record year opening new sites and are central to supporting our strategy of controlled growth. The land pipeline increased by 14.9% to 15,863 plots on 152 sites and this will underpin our future growth. Our land strategy continues to target areas in need of regeneration. The majority of our sites are located in the most deprived areas of England. We deliver affordable, quality homes to this vastly underserved sector of the market, often where no other housebuilders want to build.

We transform land, often blighted by neglect, into areas where people want to live. Many of our customers are from the local area and want to remain close to friends and family. They buy a Gleeson home because they get a high-quality product that is affordable and cheaper to run than the older housing stock in the surrounding areas.

Climate and the environment

Climate change is the most important global issue we face. Gleeson is committed to reducing the impact our operations have on the environment and are reducing our emissions by setting short and medium-term targets for every home sold.

Last year, we announced an ambitious target to reduce our direct emissions (scope 1 and 2) by 20% over three years. I am pleased to report that, in our first year, we are already close to achieving this target. Therefore, we are increasing our three-year target to a 30% reduction by 2023.

This year, we are also reporting our scope 3 emissions for the first time, showing the total carbon emissions from our supply chain and over the life of our homes. This is an important first step to fundamentally assessing our wider impact and taking action to reduce emissions throughout our value chain, not just the emissions we produce directly. Over the coming year we will be developing a strategy to reduce our scope 3 emissions for every home built.

Trading and outlook

In our Gleeson Homes division, demand remains robust and it entered the new financial year in a strong position, with a forward order book of GBP134.1m on 841 homes. Whilst there are some challenges on material costs and availability, I expect these to be short term and manageable.

Gleeson Land starts the new financial year in a strong position and with a pipeline of 71 sites, a record for the division. These sites will deliver sustainable value and we will continue to invest in new sites and in progressing existing sites through the complex planning system. The demand for consented land is expected to remain robust, with land promoters playing an important role in the land supply chain.

As a result, I believe we will continue to grow in a sustainable and controlled manner and we remain firmly on track to meet our near-term target of delivering 2,000 new homes in the coming financial year.

James Thomson

Chief Executive Officer

13 September 2021

Gleeson Homes - Business Review

Gleeson Homes delivered a record number of homes sold, sites opened and operating profit with all three metrics exceeding pre-Covid levels. We also saw significant growth in the land pipeline and we enter the new financial year with a strong forward order book.

 
                        2021         2020         2019 
 Homes sold            1,812        1,072        1,529 
                    -----------  -----------  ----------- 
 Average selling     GBP145,800   GBP130,900   GBP128,900 
  price 
                    -----------  -----------  ----------- 
 Operating profit     GBP37.4m     GBP9.0m      GBP30.1m 
                    -----------  -----------  -----------

Gleeson Homes completed the sale of 1,812 homes during the year, an increase of 69% compared to the prior year (2020: 1,072 homes) and 18.5% more than the pre-Covid year to June 2019 (2019: 1,529 homes). Revenue increased by 88.6% to GBP265.8m (2020: GBP140.9m) of which GBP1.5m related to land sales (2020: GBP0.5m land sales).

We entered the new financial year with a strong forward sales position of GBP134.1m on 841 units (2020: GBP145.3m on 1,033 units). The reduction in the forward order book compared to the prior year was due to the successful completion of home sales which had been delayed by the Covid-19 pandemic in the final quarter of the previous year.

We opened a record 27 new build sites during the year and start the new financial year with 81 active build sites (2020: 71), of which 61 were actively selling (2020: 65). Our average active build and sales sites were 78 and 64 respectively (2020: 68 and 65). Our sales outlets are located across the North of England and the Midlands, with plans to continue expanding our geographical reach. The business plans to open a further 25 sites during the new financial year and expects to be building on approximately 90 sites by 30 June 2022.

The average selling price for homes sold in the year was GBP145,800 (2020: GBP130,900), an increase of 11.4%. The increase was influenced by a combination of factors: house price inflation of 9.3%, mix of site locations and the mix of two, three and four-bed homes sold. Buying a Gleeson home remains highly affordable and a young working couple on the National Living Wage can afford to buy a Gleeson home on any one of our development sites.

Gross profit margin on homes sold increased to 28.5% (2020: 27.8%) as increases in selling prices more than offset cost inflation, including the costs of operating under Covid-safe working practices.

The increase in the volume of homes sold and gross profit margin resulted in gross profit increasing by 93.6% to GBP75.7m, which included GBP0.4m in relation to land sales (2020: GBP39.1m, GBP0.1m land sales), and operating profit increasing by 315.6% to GBP37.4m, including GBP0.4m in relation to land sales (2020: GBP9.0m, GBP0.1m land sales). Operating margin increased from 6.4% to 14.1%.

We had a successful year in land acquisitions and continued to acquire land at sensible prices. The pipeline grew by 2,062 plots to stand at 15,863 plots at 30 June 2021. Of these plots 7,930 are owned (2020: 6,849) and 7,933 plots are conditionally purchased (2020: 6,952). The number of sites in the land pipeline totalled 152 at year end, being three sites higher than the prior year end; 34 new sites were added to the pipeline, while 31 sites were completed or did not proceed to purchase. In addition to owned and conditionally purchased plots, there are a further 205 (2020: 798) plots which are being actively considered for acquisition but will only proceed if they meet our strict criteria.

The government's Help to Buy scheme remains popular with many of our customers, with 69% of the homes sold during the year utilising the scheme (2020: 66%). We also continue to provide a range of bespoke packages to assist potential customers to become homeowners, including our Key Worker Priority Programme and Forces Property Direct, which provide priority access and vouchers toward optional extras for key workers and British military personnel looking to purchase a new home.

Gleeson Land - Business Review

The market for consented land recovered during the year leading to the sale of eight sites.

 
                       2021      2020       2019 
 Plots sold           1,978       195      1,755 
                    ---------  --------  --------- 
 Land portfolio 
  (sites)               71        68         60 
                    ---------  --------  --------- 
 Operating profit    GBP11.1m   GBP0.2m   GBP13.0m 
                    ---------  --------  ---------

Revenue from Gleeson Land increased to GBP22.8m (2020: GBP6.3m), generated from the sale of eight sites in the year. The sites sold totalled 276 acres with the potential to deliver 1,978 plots.

As a result, operating profit increased to GBP11.1m (2020: GBP0.2m). Planning delays caused by the pandemic during the year resulted in fewer sites achieving planning consents and fewer site sales than hoped for.

The business has completed the sale of a further site since the beginning of the new financial year and the outlook for the year remains promising.

The business continued to invest selectively in its land portfolio. This year we added a further ten sites (1,594 plots) secured under option and promotion agreements and split one existing site prior to sale.

At 30 June 2021, we had a portfolio totalling 71 sites (2020: 68 sites) with the potential to deliver 22,315 plots (2020: 23,314 plots) plus 44 acres of commercial land (2020: 44 acres). This portfolio is expected to realise value over the short, medium and long term, driven by the planning context of each site. Our Gleeson Land team is based in Fleet, Hampshire and the portfolio continues to have a geographic bias towards the South of England.

This year we submitted planning applications for ten sites with the potential to deliver 1,281 units. Like other promoters and developers, we saw a marked slow-down in the planning system due to Covid-19. Whilst this system is, in some ways, now more challenging than it has ever been, our highly experienced team of people and advisors are skilled in navigating these complexities to achieve attractive residential planning permissions.

We continue to see opportunities to add well-located sites to the portfolio. We carefully select sites where we see the potential for sustainable development and where we can unlock maximum value for stakeholders. We aim to be the promoter of choice for landowners and our track record is testament to our success.

Financial Review

The Group returned to strong growth this year with revenue and profit ahead of pre-Covid levels. The balance sheet remains well capitalised with net cash at 30 June 2021 of GBP34.3m. The refinancing undertaken this year provides the Group with additional liquidity to invest in growth.

Key performance indicators

 
                             2017       2018       2019       2020       2021 
 Group operating profit    GBP33.0m   GBP36.9m   GBP41.0m   GBP5.9m    GBP43.1m 
                          ---------  ---------  ---------  ---------  --------- 
 Profit before tax         GBP33.0m   GBP37.0m   GBP41.2m   GBP5.6m    GBP41.7m 
                          ---------  ---------  ---------  ---------  --------- 
 Earnings per share 
  (basic)(1)                48.5p      55.6p      61.0p       8.1p      58.2p 
                          ---------  ---------  ---------  ---------  --------- 
 Dividends per share        24.0p      32.0p      34.5p       nil       15.0p 
                          ---------  ---------  ---------  ---------  --------- 
 Cash net of borrowings    GBP34.1m   GBP41.3m   GBP30.3m   GBP16.8m   GBP34.3m 
                          ---------  ---------  ---------  ---------  --------- 
 Return on capital 
  employed(2)               25.4%      26.6%      25.9%       3.1%      21.4% 
                          ---------  ---------  ---------  ---------  ---------

(1) Continuing and discontinued operations 2017-2020. In 2021, discontinued operations have been presented within continuing operations.

(2) Return on capital employed is calculated based on earnings before interest and tax ("EBIT") from continuing and discontinued operations, expressed as a percentage of the average of opening and closing net assets after deducting deferred tax and cash net of borrowings.

Strong revenue and profit growth

The Group returned to growth with revenue increasing by 96.1% to GBP288.6m (2020: GBP147.2m) which was 15.5% higher than the pre-Covid year to June 2019 of GBP249.9m.

Gleeson Homes revenue increased by 88.6% to GBP265.8m (2020: GBP140.9m) and was 34.9% higher than the pre-Covid year to June 2019 (GBP197.0m). This was due to an increase in the number of homes sold to 1,812 (2020: 1,072) - a 69.0% increase and an 18.5% increase when compared to 2019 and higher selling prices.

Selling prices were higher with average selling prices ("ASP") in the year being GBP145,800 (2020: GBP130,900, 2019: GBP128,900). Whilst selling prices have risen, these remain well below the average new build selling prices across the North of England and Midlands and remain affordable for young, first time buyers.

Gleeson Land increased revenues by 261.9% to GBP22.8m (2020: GBP6.3m, 2019: GBP52.9m) having sold eight sites this year in comparison to two small sites in the prior year and nine sites in 2019. Demand for consented land has returned following the disruption caused by the pandemic, albeit some challenges remain with delays in the planning system.

As a result, gross profit for the Group increased by 121.0% to GBP89.3m (2020: GBP40.4m), with the gross profit of Gleeson Homes increasing by 93.6% to GBP75.7m (2020: GBP39.1m, 2019: GBP59.3m). The gross profit margin for Gleeson Homes increased to 28.5% (2020: 27.8%, 2019: 30.1%) as increases in selling prices more than offset cost inflation. In part, gross margin in the prior year was also impacted by Covid-19-related costs and provisions of GBP2.9m.

Administrative expenses increased by GBP12.7m or 36.8% in the year to GBP47.2m (2020: GBP34.5m) as investment to support the underlying growth of the business continued. All government furlough grants claimed under the Job Retention Scheme, totalling GBP1.3m, were repaid during the year of which GBP0.7m was included in cost of sales and GBP0.6m was included in administrative expenses.

Group operating profit was GBP43.1m, a significant increase on the previous year operating profit of GBP5.9m and 5.1% higher than the pre-Covid operating profit of GBP41.0m in 2019. Of this, Gleeson Homes contributed GBP37.4m (2020: GBP9.0m, 2019: GBP30.1m) and Gleeson Land contributed GBP11.1m (2020: GBP0.2m, 2019: GBP13.0m). Group overheads were GBP5.4m (2020: GBP3.3m, 2019: GBP2.1m).

Net finance expenses of GBP1.4m (2020: GBP0.4m expense) consisted of finance expenses of GBP1.7m (2020: GBP1.1m) being interest payable on bank facilities, bank charges and the unwinding of discounts on deferred payables, partly offset by finance income of GBP0.3m (2020: GBP0.7m) consisting of the unwinding of discounts on deferred receivables on land sales and shared equity receivables. Finance expenses includes GBP0.4m of arrangement fees on the previous bank facility that were written off upon completing the new club facility in April 2021.

As a result, the Group delivered profit before tax of GBP41.7m (2020: GBP5.6m, 2019; GBP41.2m).

Tax

The total tax charge for the year was GBP7.8m (2020: GBP0.7m), reflecting an effective rate of tax of 18.8% (2020: 14.1%).

Deferred tax assets relating to tax losses have been utilised in full this year, such that the remaining deferred tax asset recognised in relation to tax losses is now GBPnil. The remaining deferred tax asset of GBP1.2m recognised in the statement of financial position, comprises capital allowances, short-term timing difference and future relief on share-based payments.

Discontinued operations

The costs of Gleeson Construction Services Limited, whose activity is limited to resolving claims from the legacy businesses that were sold in 2005 and 2006, were disclosed in previous years as a discontinued operation. As the level of claims has now reduced to an insignificant level and no longer warrants separate disclosure, the costs associated with this activity of GBP0.4m (2020: GBP0.3m) have been classified within continuing operations this year, under Group overheads.

Profit for the year

The profit after tax for the year was GBP33.9m (2020: GBP4.5m).

Earnings per share

Basic earnings per share significantly increased to 58.2 pence (2020: 8.1 pence, 2019: 61.0 pence, both from continuing and discontinued operations as previously reported).

Return on capital employed

Return on capital employed increased to 21.4% (2020: 3.1%, 2019: 25.9%) reflecting the significant increase in earnings compared to the prior year. This is lower than the return on capital employed pre-Covid in 2019 of 25.9%, driven by investment in working capital and inventory due to a higher number of new sites that are only at build stage but not yet contributing to sales, with net assets having increased by 20.1% since June 2019.

Dividends

Following the suspension of dividend payments in 2020, the Board resumed payments in April 2021 paying an interim dividend of 5.0p per share, which totalled GBP2.9m.

As a result of the strong financial performance to June 2021, and subject to shareholder approval, the Board proposes to pay a final dividend of 10.0p per share, which equates to GBP5.8m.

The Board is committed to making dividend payments on a progressive basis. Following a review of the Company's capital allocation policy this year, the Board intends to maintain an earnings-to-ordinary-dividend cover ratio of between three and five times and to pay an interim dividend representing one-third of the total dividend each year.

Statement of financial position

During the year to 30 June 2021, shareholders' funds increased by 15.2% to GBP244.9m (2020: GBP212.6m). Net assets per share increased to 420 pence, an increase of 14.8% year on year (2020: 366 pence).

Non-current assets reduced during the year by 37.9% to GBP12.6m (2020: GBP20.3m). This was primarily due to a reduction in Gleeson Land's deferred land sale receipts from GBP8.6m at June 2020 to GBP2.1m at June 2021.

Current assets remained similar to June 2020 at GBP300.5m (2020: GBP301.7m), with inventories increasing by GBP23.7m to GBP240.0m and trade and other receivables increasing by GBP14.1m to GBP22.4m (2020: GBP8.3m). Gross cash balances reduced from GBP76.8m to GBP34.3m following repayment of the GBP60.0m borrowings on the Group's revolving credit facility that was drawn at the end of 2020. Corporation tax receivables increased by GBP3.6m to GBP3.9m.

Total liabilities reduced by GBP41.2m to GBP68.2m (2020: GBP109.4m). This reflects the repayment of the GBP60.0m borrowing in November 2020, partly offset by an increase in trade payables of GBP9.0m to GBP34.4m (2020: GBP25.4m) and other payables of GBP9.4m to GBP27.0m (2020: GBP17.6m), reflecting the return to pre-Covid activity levels.

Cash flow

The Group generated cash before financing activities of GBP21.2m, compared to a cash outflow of GBP15.9m in 2020. After payment of interim dividends of GBP2.9m, lease payments of GBP0.8m and the repayment of borrowings of GBP60.0m in November 2020, the Group had a net cash outflow of GBP42.5m (2020: net cash inflow of GBP46.5m reflecting the draw down of GBP60.0m in March 2020).

Bank facilities

At 30 June 2021, the Group had cash and cash equivalents balances of GBP34.3m and no debt (30 June 2020: GBP16.8m net cash being GBP76.8m gross cash net of GBP60.0m borrowings drawn on the Group's committed facility).

In April 2021, the Group negotiated a committed club facility with Lloyds Bank plc and Santander UK plc. The facility has a limit of GBP105m (previously GBP70m with Lloyds Bank plc), expires in October 2024 and provides the Group with additional funding to finance growth.

Pension

The Group contributes to a defined contribution pension scheme. A charge of GBP1.2m (2020: GBP1.0m) was recorded in the Consolidated Income Statement for pension contributions. The Group has no exposure to defined benefit pension plans.

Gleeson Homes pre-Covid 2019 to 2021

Gleeson Homes operating profit increased from GBP30.1m in 2019 to GBP37.4m in 2021. Higher sales volumes of 1,812 homes (2019: 1,529) contributed GBP10.9m additional gross profit. Higher average selling prices ("ASP") of GBP145,800 (2019: GBP128,900) contributed GBP9.2m additional profit. This additional gross profit was partly offset by lower gross margin of 28.5% (2019: 30.1%), accounting for GBP4.2m of lower profit and higher overhead costs of GBP9.0m due to inflation and investment in the business structure, operations and headcount.

Gleeson Homes operating profit 2019 to 2021 (GBPm)

 
                        GBPm 
 Operating profit 
  2019                  30.1 
                       ------ 
 Homes sold             10.9 
                       ------ 
 Selling prices          9.2 
                       ------ 
 Gross profit margin    (4.2) 
                       ------ 
 Overheads              (9.0) 
                       ------ 
 Land sales              0.4 
                       ------ 
 Operating profit 
  2021                  37.4 
                       ------

NOTE 1: Gleeson Homes operating profit in 2019 included certain Group costs that have been classified in Group administrative expenses since 2020.

 
                                    2021         2020         2019 
 Homes sold                        1,812        1,072        1,529 
                                -----------  -----------  ----------- 
 Average number of homes sold 
  per sales site                    28.3         16.5         23.5 
                                -----------  -----------  ----------- 
 Build sites opened                  27           12           19 
                                -----------  -----------  ----------- 
 Average selling price           GBP145,800   GBP130,900   GBP128,900 
                                -----------  -----------  ----------- 
 Gross profit per home sold      GBP41,600    GBP36,400    GBP38,800 
                                -----------  -----------  ----------- 
 Gross profit margin per home 
  sold                             28.5%        27.8%        30.1% 
                                -----------  -----------  ----------- 
 Overheads per home sold         GBP21,300    GBP28,200    GBP19,300 
                                -----------  -----------  -----------

The Covid-19 shutdown before the end of the previous financial year resulted in higher numbers of built, part-built and forward sold homes being carried forward into the year. It also led to the purchase and opening of sites that had been expected to achieve planning before 30 June 2020 to be acquired and opened during the financial year.

The average selling price of homes sold increased by 11.4% from 2020 reflecting strong underlying price increases of 9.3% and the effect of site mix. Gross profit margin of 28.5% reflects some recovery from the Covid-impacted gross margin of 27.8% in the previous year, but was lower than the pre-Covid gross margin of 30.1% reported in the year to June 2019. Nevertheless, gross profit per home sold of GBP41,600 was GBP2,800 per home (7.2%) higher than the gross profit per home sold in the pre-Covid year to June 2019. Note the repayment of furlough monies this year through cost of sales, reduced gross profit per home sold by approximately GBP375 per home.

Overhead costs per home sold were GBP21,300 which was GBP2,000 per home (10.4%) higher than the pre-Covid year to June 2019 reflecting higher average employment costs and investment in customer care, health and safety and information management systems. This also included the repayment of furlough monies through overheads, which increased overheads by approximately GBP300 per unit sold.

Stefan Allanson

Chief Financial Officer

13 September 2021

AUDITED CONSOLIDATED INCOME STATEMENT