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| 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% | 496.00 | 485.50 | 499.50 | 9,911 | 08:26:59 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Gen Contractor-oth Residentl | 328.32M | 24.17M | 0.4140 | 11.98 | 289.57M |
From Apr 2019 to Apr 2024
TIDMGLE
RNS Number : 8951A
MJ Gleeson PLC
17 September 2018
MJ GLEESON PLC
Audited results for the year ended 30 June 2018
MJ Gleeson plc, the low-cost housebuilder and strategic land specialist, is pleased to announce another strong performance with profit before tax up 12%, operating cash flow before dividends up 10% and a proposed final dividend of 23 pence per share, resulting in a total dividend for the year of 32 pence per share, an increase of 33%.
Hot Features
Premium
2018 2017 Change
GBPm GBPm
Revenue 196.7 160.4 +23%
Operating profit 36.9 33.0 +12%
Profit before tax 37.0 33.0 +12%
EPS 55.6 48.5 +15%
Operating cash flow before dividends 21.6 19.7 +10%
ROCE 26.6% 25.4% +120bps
Dividend per share 32.0p 24.0p +33%
Cash and cash equivalents 41.3 34.1 +21%
Another strong performance and a confident outlook
Gleeson Homes:
-- Volumes up 21% to 1,225 units sold (2017: 1,013 units) -- Operating profit on unit sales up 20% to GBP26.2m (2017: GBP21.8m) -- Operating profit on land sales GBPnil (2017: GBP1.0m from two land sales) -- Average Selling Price GBP125,200 (2017: GBP122,700) due to higher selling prices and mix
-- Land pipeline, including conditionally purchased sites, of 12,852 plots (2017: 11,588 plots)
-- Substantial investment in new office locations and central support services -- On track to double sales to 2,000 units p.a. by 2022
Gleeson Strategic Land:
-- Operating profit of GBP12.6m (2017: GBP12.0m) driven by increase in transactions
-- Ten land sales completed during the year with the potential to deliver 1,970 residential plots
-- Nine sites with planning consent or resolution to grant with the potential to deliver 2,089 plots
-- Portfolio: 61 sites with the potential to deliver 22,838 plots
Final dividend proposed of 23.0 pence per share (2017: 17.5 pence per share), resulting in an increase in the total dividend for the year of 33.3% to 32.0 pence per share (2017: 24.0 pence per share).
Dermot Gleeson, Chairman of MJ Gleeson plc, said:
"Our twin track strategy - the development of low-cost homes for open market sale in the North of England and the Midlands and strategic land sales in the South - delivered another excellent year of increased volumes, profit and cash.
Gleeson Strategic Land had a record year and continues to benefit from high levels of demand for consented land in prime locations from both large and medium-sized housebuilders. The division has a strong portfolio of sites and anticipates that it will continue to maintain its very successful track record in promoting potentially high value developments through the planning system.
Gleeson Homes is on track to deliver its next milestone target of doubling annual completions of low-cost homes between 2017 and 2022 to 2,000 units. Led by a strong and highly experienced management team, who have created a very attractive land pipeline, the division's scope for expansion continues to be underpinned by strong demand from our customers who aspire to home ownership but who are ill-served by the majority of housebuilders.
Against this background, the Board is confident that the Group's unique business model will continue to 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
Chief Executive
Jolyon Harrison Officer
Chief Financial
Stefan Allanson Officer
Instinctif Tel: +44 20 7457 2020
Mark Garraway
James Gray
Rosie Driscoll
N+1 Singer
Shaun Dobson Tel: +44 20 7496 3000
Rachel Hayes
Liberum
Neil Patel Tel: +44 20 3100 2222
Richard Bootle
Chairman's Statement
I am pleased to report another year of strong growth in profits and cash.
Following further investment in new office locations and the strengthening of our central support services, we are comfortably on track to achieve our target of doubling Gleeson Homes volumes to 2,000 units p.a. in the five years from 2017 to 2022.
Gleeson Homes grew sales by 20.9% to 1,225 units (2017: 1,013 units). Operating profit on unit sales increased by 20.2% and the operating profit for the division was GBP26.2m (2017: GBP22.8m including GBP1.0m from land sales). The continued availability of low-cost land in the North of England allowed the division to increase its land pipeline by 1,264 plots. The proportion of the pipeline that is owned increased from 46% to over 50%.
Gleeson Strategic Land increased operating profit by 5.0% to GBP12.6m (2017: GBP12.0m) by continuing to secure attractive residential planning consents and by taking advantage of the strong demand from both medium-sized and large housebuilders for development sites in prime locations.
Group profit before tax increased by 12.1% to GBP37.0m (2017: GBP33.0m). Profit for the year attributable to equity holders of the parent company was GBP30.2m (2017: GBP26.2m).
Earnings per share grew by 14.6% to 55.6p (2017: 48.5p).
Return on capital employed increased by 120 basis points to 26.6% (2017: 25.4%).
Market context
Demand for low-cost homes among Gleeson Homes' traditional customers, hard-working families on low incomes, who dream of owning their own homes, remains strong.
Mortgages for such families remain very affordable. The current wide range of mortgage products continues to be supportive of the young first time buyers who make up the vast majority of Gleeson Homes' purchasers.
The Government's recent adjustments to The National Planning Policy Framework (NPPF) should make it easier for Gleeson Homes to secure planning permissions. We are supporters of the Government's Help to Buy scheme. However, we believe that there is a strong case for amending the scheme so that it provides assistance primarily for those who need it most, young people on low incomes.
Gleeson Strategic Land continues to attract multiple bidders for its sales of land in the South of England where demand for greenfield sites remains strong from both medium-sized and large housebuilders.
Land
For Gleeson Homes the land market remains favourable. The division is one of the few developers building affordable homes on brownfield sites in challenging communities where such sites continue to be available at relatively low cost. Gleeson Homes' land pipeline grew by 1,264 plots and 8 sites to a record high of 149 sites (2017: 141), comprising 12,852 plots owned or conditionally purchased (2017: 11,588). The division will continue to commence building on sites as soon as a fully implementable and satisfactory planning permission is obtained.
Gleeson Strategic Land continues to source highly attractive sites with development potential in the South of England. During the year it obtained planning consent on 7 sites and entered into agreements to promote 4 new sites, potentially providing development opportunities on an additional 3,570 plots. Demand from a wide range of housebuilders for prime sites with planning consent in the South of England remains strong.
Employees
The average number of employees during the year increased to 480 (2017: 370). The actual number of employees at the year end was 509 (2017: 405).
The Group's strong performance during the year would not have been possible without the expertise and commitment of our employees. On behalf of the Board, I would like to congratulate and thank them very sincerely and very warmly.
Dividends
Reflecting the Group's strong financial performance and our confidence in the prospects for the current year and beyond, the Board is recommending a final dividend for the year of 23.0 pence per share (2017: 17.5 pence per share). Combined with the interim dividend, this will give a total dividend for the year of 32.0 pence per share (2017: 24.0 pence per share), an increase compared to the previous year of 33.3%.
Subject to shareholder approval at the Annual General Meeting ("AGM"), the final dividend will be paid on 14 December 2018 to shareholders on the register at close of business on 16 November 2018. The ex-dividend date is 15 November 2018. The Board aims to maintain ordinary dividend cover between one and three quarter and two and three quarter times for the foreseeable future.
Summary
We are on track to achieve our target of doubling Gleeson Homes' sales to 2,000 units p.a. over the five years from 2017 to 2022. We continue to maintain a vigorous approach to cost control, land continues to be available at sensible prices and demand for our low-cost homes remains strong. Meanwhile, Gleeson Strategic Land continues to experience high levels of demand for consented greenfield sites. Against this background, the Board is confident that our unique business model will continue to deliver significant growth in both revenue and profits in the current year and beyond.
Dermot Gleeson
Chairman
14 September 2018
STRATEGIC REPORT
Chief Executive's Statement
Our unique and resilient business model, combined with our land pipeline and experienced management team, gives me great confidence in continued profitable growth for many years to come.
Operational performance
Gleeson Homes grew sales volumes by 20.9% to 1,225 units and operating profit by 14.9% to GBP26.2m. The land pipeline increased by 10.9% to the equivalent of 10.5 years sales at current build rates and active outlets increased by 10.2% to 65 sites. Gleeson Homes always applies for planning permission at the earliest possible date and starts building as soon as implementable permission is received.
Gleeson Strategic Land completed the sale of 10 sites leading to operating profit growing by 5.0% to GBP12.6m.
A strong cash result for the year saw the Group's cash balance increase by GBP7.2m to GBP41.3m and our disciplined approach to investment led to a 120 basis points increase in return on capital employed to 26.6%.
Gleeson Homes
Demand for low-cost homes in the North of England remains strong, build costs remain under control and land continues to be available at sensible prices.
Two thirds of our customers use the Government's Help to Buy scheme and the highest priced home that used the scheme, at GBP187,995, is significantly below the current Help to Buy limit of GBP600,000. The average priced house purchased with Help to Buy was GBP125,610.
Typical Gleeson Homes buyers are blue collar workers aged between 18 and 33. This year we sold 85 homes to people aged 21 or under. The real Living Wage, of which we are great supporters, has helped the working class young to qualify for a mortgage and their ability to earn paid overtime enables them to save a deposit.
Our chosen segment of the market is large, mostly untapped and generally unaffected by the vagaries of politics or the general economy. This is because the outgoings relating to the purchase of one of our homes are often significantly less than renting a council or housing association house. If a young couple want to reduce their outgoings they should buy a Gleeson home.
We have completed the first year of our 5 year plan to double unit sales to 2,000 units p.a. and we are on track to meet this target. To achieve this, we are:
-- Growing the pipeline of owned and conditionally purchased sites by acquiring land at attractive hurdle rates in existing and new areas; we now have 149 sites in the pipeline.
-- Investing in new office locations; we now have 8 area offices in the North and Midlands and 2 pilot offices in Northumberland (opened during the year) and Cumbria.
-- Developing our management team across all levels including Build Managers and Site Managers. We recently promoted two directors to Managing Director and Chief Operations Officer.
-- Developing our employee and key subcontractor processes for finding and retaining key people.
-- Continuing our unrelenting focus on cost reduction to offset material and employment cost pressures.
-- Continuing to listen to our customers to ensure we provide what they need to buy a Gleeson home.
We will continue expanding in an orderly manner and will continue to put the right people in the right places to deliver that expansion.
Large & resilient market
Gleeson Homes operates in the fastest growing and most resilient part of the housing market, selling new homes to people on low incomes in the North of England and the Midlands.
Our typical buyers are first time buyers presently renting or living with family. More than 4 million homes are currently rented in Gleeson's target geographic market. The vast majority of tenants want to escape the poverty trap of renting and begin wealth creation through home ownership. Gleeson is the only listed housebuilder dedicated to this market and we continue to see high demand when we open new sites.
Unlike other housebuilders, Gleeson Homes is unique, selling 6 out of every 7 homes to first time buyers and therefore without the same exposure to secondary market risks.
Our buyers want to satisfy their dream of home ownership, often buying a home for life. They have a strong work ethic, will always be in work and will buy a Gleeson home if it is well built, located in their desired area and the cost of ownership is less than, or similar to, renting.
Ownership costs for a typical Gleeson home are significantly less than the cost of renting and mortgage availability continues to increase. Mortgage payments for our average buyer take up less than 20% of take-home pay.
Our young buyers are not typically burdened with student debt and can earn overtime so saving for a deposit can be achieved whilst their Gleeson home is being built.
Help to Buy, operated by Homes England, has supported a recovery in the housing market and may soon be amended by the Government. We think it appropriate that changes to Help to Buy should be targeted towards the people who need it most, specifically people on low incomes. We welcome any changes that reduce the ceiling, restrict it to first time buyers, restrict it to people on low incomes, or all three.
There is a great deal of land available in areas in which other housebuilders don't want to build but where potential Gleeson buyers want to live. We are skilled at building high quality homes for sale at affordable prices. Gleeson Homes is uniquely focused on this large segment of the market, with other housebuilders offering a higher priced product that does not meet the needs of lower income customers.
Gleeson Homes' unique differences
Our house prices are affordable and we sell to people who need a home rather than to those that already own a home. We buy land that other housebuilders do not want, at low cost, and build good quality homes that low income families can afford in areas that they want to live in.
We don't sell to registered social landlords or private landlords because renting traps people in housing poverty. We don't build flats, we build traditional 2, 3 and 4 bedroom houses with a front garden, back garden and a driveway. We don't sell to landlords because we believe a development of homeowners creates a stronger community and we don't do part-exchange sales and therefore are not exposed to the resale market.
The Gleeson Homes operating model is highly developed to meet the specific needs of a large and under-served market. We challenge many norms of the traditional house building industry and are not afraid to be different as illustrated by a selection of metrics below:
Challenging industry norms Gleeson Homes Other listed housebuilders
(Lowest - Highest)
Average selling price GBP125,200 GBP234,000 - GBP880,000
(Private sales)
-------------- ---------------------------
First time buyers
(% of private sales) 87% 35 - 50%
-------------- ---------------------------
Renting or living with family 88% 40%
(% of total sales) (estimated average)
-------------- ---------------------------
Buy-to-let sales
(% of total sales) 0% 3% - 9%
-------------- ---------------------------
Part-exchange sales
(% of private sales) 0% 8% - 38%
-------------- ---------------------------
Flats v houses
(Flats as % of total sales) 0% 6% - 24%
-------------- ---------------------------
Sales rate 20 p.a. 30 - 40 p.a.
(Sales per site p.a.)
-------------- ---------------------------
Average land cost GBP9,000 GBP28,000 - GBP71,000
(Per plot)
-------------- ---------------------------
Annual growth
(3 year average p.a. growth
in volumes) 18% 0% - 14%
-------------- ---------------------------
We deliver amongst the highest gross margins and highest volume growth rates of any listed housebuilder.
Our unique model will continue to create thriving communities and to drive our business forward to our 2,000 units p.a. target and beyond.
Strategic Land
Operating profit grew 5.0% to GBP12.6m from 10 transactions completed in the year.
Gleeson Strategic Land is in a strong position with a healthy pipeline of 61 sites which could deliver 22,838 residential plots.
Although most major housebuilders have strong land banks there is always a healthy demand for good quality land from either the large national or mid-range housebuilders looking for replacement sites.
We do not take the risk of purchasing land outright, preferring instead to take out options or similar agreements. This low-risk and low-cost approach has enabled us to invest intelligently in the promotion of sites through the planning process and build up a strong portfolio.
The number and blend of sites already allocated for housing, sites with planning applications submitted and sites with planning consent gives us confidence that the year-on-year flow of transactions will generate financial consistency.
Current trading & outlook
Demand for low-cost homes in the North is strong. Our traditional buyers are hard-working families on low incomes who just want to get on with their lives and own their own home.
Our homes continue to remain highly affordable despite the recent increase in bank rates and mortgage finance remains readily available.
We have plenty of land on which to build homes, people to build them and a strong management team that can grow the business in a disciplined and profitable way.
The Gleeson Strategic Land portfolio is in a strong position with continuing strong demand from other housebuilders.
The uplift in dividend signals our confidence in continued cash generative growth. We are well on track to meet our target of doubling Gleeson Homes sales volumes to 2,000 units p.a. by 2022.
We are confident the current financial year will be another excellent year for the Group.
Jolyon Harrison
Chief Executive Officer
14 September 2018
Gleeson Homes - Business Performance
Gleeson Homes' results for the year were as follows:
2018 2017 % Change
Units sold 1,225 1,013 20.9%
--------- --------- ---------
Operating profit* GBP26.2m GBP22.8m 14.9%
--------- --------- ---------
Land pipeline (units) 12,852 11,588 10.9%
--------- --------- ---------
*2018 includes GBPnil profit on land sales (2017: GBP1.0m of which GBP0.4m related to the sale of a legacy property)
1,225 homes were sold during the year, an increase of 20.9% on the prior year's total of 1,013. During the year Gleeson Homes opened 17 new sites and had on average 61 selling outlets open compared to 50 during the prior year. The outlets are located across the North of England(1) . The number of outlets at the end of the year increased to 65 compared to 59 at the prior year end and is expected to increase to over 70 during the course of the current financial year.
The average selling price ("ASP") for the homes sold in the year was GBP125,200 (2017: GBP122,700). The increase was influenced by a combination of factors: house price inflation, the mix of site locations and the mix of 2, 3 and 4 bed homes sold. Our aim is to keep ASP increases modest to ensure that our homes remain affordable to our customers.
Gross profit margin on units sold decreased marginally to 32.7% (2017: 33.0%) due to development mix.
The increase in the volume of homes sold and higher ASP has resulted in gross profit on units sold increasing by 22.2% to GBP50.1m (2017: GBP41.0m). Gross profit on land sales was GBPnil (2017: GBP1.0m) resulting in total gross profit of GBP50.1m (2017: GBP42.1m).
Operating profit on unit sales increased 20.2% to GBP26.2m (2017: GBP21.8m). Operating profit on land sales was GBPnil (2017: GBP1.0m). Gleeson Homes reported total operating profit of GBP26.2m (2017: GBP22.8m). Operating margin on units sold decreased from 17.5% to 17.1% as a result of development mix and investment in overheads to support the business' growth plans.
Gleeson Homes 2014 2015 2016 2017 2018
Unit volumes 561 751 904 1,013 1,225
-------- --------- --------- --------- ---------
Operating profit on unit GBP9.1m GBP14.7m GBP19.5m GBP21.8m GBP26.2m
sales
-------- --------- --------- --------- ---------
Gleeson Homes has a large range of bespoke packages to assist customers to become homeowners, including "Save and Build", "First Rung", "Advance to Buy", "Parents Invest" and "Aspire to Own". The Government's Help to Buy Scheme remains popular amongst many of our customers, with 66% of the homes sold in the year utilising this scheme (2017: 66%).
Mortgage availability and affordability continued to be strong during the year as the bank base rate remained at historically low levels. As a result, the ongoing cost of buying a Gleeson home continued to be more affordable than renting and will remain so even in the event of modest increases in borrowing costs.
We are supportive of the revised National Planning Policy Framework published in July 2018 and the definition of Affordable Homes which is consistent with our business model. This will make it easier for planning authorities to provide consent for Gleeson developments.
Gleeson Homes was able to continue to acquire land in the North of England at relatively low cost. This was another busy year of land acquisition which saw the land pipeline grow by 8 sites to a total of 149 at year end; 35 new sites were added to the pipeline, while 27 sites were completed or we did not proceed to purchase. The pipeline grew by 1,264 to stand at 12,852 plots at 30 June 2018. Of these plots 6,475 are owned (2017: 5,320) and 6,377 plots are conditionally purchased (2017: 6,268). In addition to owned and conditionally purchased plots, there are a further 354 (2017: 465) plots which are being actively considered for acquisition but will only proceed to purchase if they meet our strict returns criteria.
(1) Outlets located in Cleveland, County Durham, Derbyshire, East Yorkshire, Lancashire, Lincolnshire, Greater Manchester, Merseyside, Northumberland, North Yorkshire, Nottinghamshire, South Yorkshire, Tyne and Wear and West Yorkshire.
Gleeson Strategic Land - Business Performance
2018 2017 Change
Land sales (no.
of sites) 10 8 2 sites
--------- --------- --------
Land portfolio
(plots) 22,838 21,505 6.2%
--------- --------- --------
Operating profit GBP12.6m GBP12.0m 5.0%
--------- --------- --------
Revenue from Gleeson Strategic Land grew by 44.8% to GBP43.3m (2017: GBP29.9m) as the number of successful land transactions increased to 10 (2017: 8). The sites sold, which totalled 335 acres, have the potential to deliver 1,970 plots (2017: 841 plots) for new housing development plus a 60 bed care home.
Operating profit reflects the value added by Gleeson Strategic Land on land transactions through securing attractive residential planning consents and managing the onward sale to developers. Operating profit increased by 5.0% to GBP12.6m (2017: GBP12.0m). This was driven by the increase in the number of transactions during the year.
Gleeson Strategic Land 2014 2015 2016 2017 2018
Operating profit GBP4.8m GBP8.1m GBP10.2m GBP12.0m GBP12.6m
-------- -------- --------- --------- ---------
Number of sites sold 7 5 7 8 10
-------- -------- --------- --------- ---------
We continue to see strong demand from a wide range of developers looking to acquire well-located land including both large national and mid-sized housebuilders. The land market, particularly for sites in prime locations in the South of England, remains strong despite the uncertainties caused by Brexit.
At the year end, we had a portfolio totalling 61 sites (2017: 65 sites) with the potential to deliver 22,838 plots (2017: 21,505 plots) plus 67 acres of commercial land (2017: 67 acres). The portfolio comprises 1,552 plots (2017: 1,454 plots) that were wholly or part owned by the Group, 8,754 plots (2017: 10,020 plots) that were held under option, and 12,532 plots (2017: 10,031 plots) that were the subject of promotion agreements.
The portfolio is at varying stages through the planning system and, at 30 June 2018, we had 9 sites (2,089 plots) which were consented or had a resolution to grant; 8 sites which had a planning application submitted and awaiting decision, and 11 sites with applications being worked up prior to submission. The balance of the portfolio consists of sites which are being promoted through the development plan process.
During the year, we secured planning consents for 7 sites, acquired interest in 4 new sites and we split 2 existing sites prior to sale. These activities contributed a further 3,570 plots to the portfolio.
Our Strategic Land team is based in Fleet, Hampshire and the portfolio continues to have a geographic bias towards the South of England(1) . Sites in the portfolio are expected to realise value for stakeholders over the short, medium and long term.
The division continues to be strongly cash generative. We replenish the portfolio with high quality new sites and continue to advance existing sites in the portfolio through the planning process. Opportunities for new land readily come forward and we use our knowledge and expertise to select and promote those sites where we see the potential for sustainable future development and where we can deliver maximum value for stakeholders.
(1) Sites are located predominantly in Buckinghamshire, Devon, Dorset, Essex, Hampshire, Hertfordshire, Kent, Oxfordshire, Somerset, Surrey, Sussex and Wiltshire.
Financial Review
The Group delivered another year of strong growth with operating profit up 11.8%, operating cash flow before dividends up 9.6% and return on capital employed rising to 26.6%.
Highlights
-- Revenue increased by 22.6% to GBP196.7m -- Profit before tax increased by 12.1% to GBP37.0m -- Earnings per share increased by 14.6% to 55.6 pence -- Operating cash flow before dividends increased by 9.6% to GBP21.6m -- Cash balances increased by 21.1% to GBP41.3m -- Return on capital employed (ROCE) increased by 120 basis points to 26.6% -- Total dividend for the year increased by 33.3% to 32.0 pence per share
Consolidated Income Statement
2014 2015 2016 2017 2018
Group profit before tax GBP12.2m GBP17.3m GBP28.2m GBP33.0m GBP37.0m
--------- --------- --------- --------- ---------
Group revenue increased by 22.6% in the year to GBP196.7m (2017: GBP160.4m). The revenue of Gleeson Homes increased by 17.5% to GBP153.4m (2017: GBP130.5m) due to an increase in the number of homes sold to 1,225 (2017: 1,013) and an increase in average selling price ("ASP") to GBP125,200 (2017: GBP122,700). ASP increased due to higher selling prices, the mix of site locations and the mix of 2, 3 and 4 bed homes sold.
Revenue for Gleeson Strategic Land increased by GBP13.4m to GBP43.3m due to the increased sales activity and the mix of transaction types during the year.
Gross profit for the Group increased by 15.2% to GBP65.3m (2017: GBP56.7m). The gross profit of Gleeson Homes increased by 19.0% to GBP50.1m (2017: GBP42.1m includes profit on land sales of GBP1.0m) due to the increase in both volume and selling prices. The gross profit of Gleeson Strategic Land increased by 3.4% to GBP15.2m (2017: GBP14.7m) primarily due to the increase in sites sold during the year.
Administrative expenses increased by GBP4.6m (19.1%) as a result of significant further investment for growth in Gleeson Homes and wages and salary increases. This included investment in a new pilot office that opened during the year in Northumberland, the pilot office in Scunthorpe which became a fully staffed area office and full year costs for the regional office near Nottingham, which opened during the previous year.
In addition, the number of active sales outlets increased to a total of 65 from 59 at the end of the prior year.
Operating profit from continuing operations was GBP36.9m (2017: GBP33.0m), an increase of 11.8% over the previous year. Growth in operating profit was driven by strong trading results in both Gleeson Homes and Gleeson Strategic Land.
Operating profit by division
Divisional operating 2014 2015 2016 2017 2018
profit*
Gleeson Homes GBP9.4m GBP17.4m GBP19.5m GBP22.8m GBP26.2m
-------- --------- --------- --------- ---------
Gleeson Strategic Land GBP4.8m GBP8.1m GBP10.2m GBP12.0m GBP12.6m
-------- --------- --------- --------- ---------
* Gleeson Homes operating profit includes profit on land sales of GBPnil in 2018; GBP1.0m in 2017; GBPnil in 2016; GBP2.7m in 2015; and GBP0.3m in 2014
Operating profit for Gleeson Homes increased by 14.9% to GBP26.2m (2017: GBP22.8m). Excluding land sales, operating profit for Gleeson Homes increased by 20.2%.
Operating profit for Gleeson Strategic Land increased by 5.0% to GBP12.6m as a result of the increase in transactions during the year to 10 (2017: 8).
Discontinued operations incurred a loss of GBP0.3m during the year (2017: GBP0.3m). This related to the costs of Gleeson Construction Services Limited, whose only activity is limited to resolving claims from the legacy businesses that were sold in 2005 and 2006. The level of claims has now reduced to an insignificant level.
Return on capital employed
Return on capital employed increased by 120 basis points to 26.6% (2017: 25.4%) reflecting stronger earnings and disciplined investment in capital employed, which increased from GBP132.3m to GBP143.1m.
2014 2015 2016 2017 2018
Return on capital employed 13.7% 21.1% 23.2% 25.4% 26.6%
------ ------ ------ ------ ------
Financing
Finance income of GBP0.4m (2017: GBP0.3m) consists primarily of the unwinding of discounts on deferred receivables on land sales and shared equity receivables. Interest earned on unwinding of discounts was higher than the prior year as a result of carrying more deferred receivables during the year.
Finance expenses of GBP0.3m (2017: GBP0.2m) consist of interest payable on bank loans and overdrafts, bank charges and interest and unwinding of discounts relating to deferred payables on land purchases.
Tax
A tax charge for continuing operations of GBP6.5m (2017: GBP6.5m) has been recorded reflecting a reduced effective rate of tax of 17.8% (2017: 20.0%) driven largely by the tax benefit on vesting of share awards during the year.
Deferred tax assets relating to unused tax losses have been recognised to the extent that it is probable that taxable profits will be available against which the asset can be utilised. The Group now has GBP21.2m (2017: GBP26.7m) of gross tax losses, of which GBP12.3m (2017: GBP17.8m) are recognised in calculating the deferred tax asset.
The deferred tax asset recorded within the consolidated statement of financial position totals GBP3.7m (2017: GBP5.0m).
Profit for the year
The profit for the year attributable to equity holders was GBP30.2m (2017: GBP26.2m).
Earnings per share
Reported basic earnings per share increased by 14.6% to 55.6 pence (2017: 48.5 pence).
Final dividend
Reflecting the financial strength of the Company as well as our confidence in the short-term outlook, the Board has proposed a final dividend of 23.0 pence per share (2017: 17.5 pence per share).
Combined with the interim dividend, the dividend for the full year totals 32.0 pence representing an increase of 33.3% on the prior year (2017: 24.0 pence per share).
The Board aims to maintain ordinary dividend cover between 1.75 times and 2.75 times in line with the policy set at the half year.
Total dividend 2014 2015 2016 2017 2018
Interim and final dividend 6.0p 10.0p 14.5p 24.0p 32.0p
----- ------ ------ ------ ------
Statement of Financial Position
During the year to 30 June 2018, shareholders' funds increased by 9.7% to GBP188.1m (2017: GBP171.4m). Net assets per share increased to 345 pence, an increase of 8.8% year on year (2017: 317 pence).
In the year, non-current assets increased by 43.4% to GBP30.4m (2017: GBP21.2m). The main reason for the change is the increase in deferred receivables of GBP10.9m offset by a GBP0.7m reduction of share equity receivables and a decrease in deferred tax asset of GBP1.3m.
Current assets increased by 9.2% to GBP212.4m (2017: GBP194.5m), with inventories increasing by GBP17.9m to GBP160.5m, trade and other receivables decreasing by GBP7.3m to GBP10.6m and cash balances increasing by GBP7.2m to GBP41.3m.
Total liabilities increased by 23.2% to GBP54.7m (2017: GBP44.4m). This was mainly due to trade and other payables of GBP51.6m (2017: GBP41.6m) being GBP10.0m higher due to an increase in deferred land payables in Gleeson Strategic Land.
Cash flow
The Group generated GBP21.6m (2017: GBP19.7m) of cash in the year before the payment of dividends of GBP14.4m (2017: GBP8.9m), resulting in a net cash balance at 30 June 2018 of GBP41.3m (2017: GBP34.1m).
Operating cash flows before working capital movements, generated GBP38.6m (2017: GBP34.1m). Investment in working capital of GBP11.4m (2017: GBP10.0m) resulted in cash generated from operating activities of GBP27.2m (2017: GBP24.1m).
Tax and interest payments amounted to GBP5.3m (2017: GBP4.6m).
Cash outflows from investing activities totalled GBP0.3m (2017: GBP0.2m inflow). Net cash outflows from financing activities totalled GBP14.4m (2017: GBP8.9m), including GBP14.4m (2017: GBP8.9m) on dividend payments.
2014 2015 2016 2017 2018
Cash balance GBP13.7m GBP15.8m GBP23.2m GBP34.1m GBP41.3m
--------- --------- --------- --------- ---------
Treasury risk management
The Group's cash balances are centrally pooled and invested, ensuring the best available returns are achieved whilst retaining sufficient liquidity for the Group's operations. The Group deposits funds only with financial institutions which have a minimum credit rating of A. As the Group operates wholly within the UK, there is no requirement for currency risk management.
Bank facilities
During the year, the Group extended its GBP20m bank borrowing facility with Lloyds Bank plc for a further three years to 18 March 2021. The facility includes an uncommitted accordion option that could increase the facility limit to GBP40.0m. The facility provides the Group with additional flexibility and was undrawn throughout the year and at the balance sheet date.
Pension
The Group contributes to a defined contribution pension scheme. A charge of GBP0.7m (2017: GBP0.6m) was recorded in the consolidated income statement for pension contributions. The Group has no exposure to defined benefit pension plans.
Stefan Allanson
Chief Financial Officer
14 September 2018
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2018
2018 2017
GBP000 GBP000
Continuing operations
Revenue 196,741 160,384
Cost of sales (131,474) (103,674)
---------- ----------
Gross profit 65,267 56,710
Administrative expenses (28,670) (24,051)
Other operating income 257 304
---------- ----------
Operating profit 36,854 32,963
Finance income 418 251
Finance expenses (253) (202)
---------- ----------
Profit before tax 37,019 33,012
Tax (6,526) (6,488)
---------- ----------
Profit for the year from continuing operations 30,493 26,524
Discontinued operations
Loss for the year from discontinued operations
(net of tax) (257) (310)
Profit for the year 30,236 26,214
========== ==========
Earnings per share attributable to equity
holders of parent company
48.49
Basic 55.55 p p
54.69 47.75
Diluted p p
========== ==========
Earnings per share from continuing operations
49.06
Basic 56.02 p p
48.31
Diluted 55.15 p p
========== ==========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2018
2018 2017
GBP000 GBP000
Profit for the year 30,236 26,214
Other comprehensive (expense)/income
Items that may be subsequently reclassified
to profit or loss
Change in value of available for sale financial
assets 31 (104)
Movement in deferred tax on share-based payments
taken directly to equity (237) 665
-------- -------------------
Other comprehensive (expense)/income for the
year, net of tax (206) 561
-------- -------------------
Total comprehensive income for the year attributable
to equity holders of parent company 30,030 26,775
======== ===================
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2018
2018 2017
GBP000 GBP000
Non-current assets
Plant and equipment 1,737 1,484
Investment properties 258 303
Trade and other receivables 24,626 14,427
Deferred tax assets 3,731 5,001
30,352 21,215
========= =========
Current assets
Inventories 160,517 142,550
Trade and other receivables 10,602 17,925
Cash and cash equivalents 41,314 34,052
212,433 194,527
========= =========
Total assets 242,785 215,742
========= =========
Non-current liabilities
Trade and other payables (9,176) (703)
Provisions (110) (110)
--------- ---------
(9,286) (813)
========= =========
Current liabilities
Trade and other payables (42,441) (40,924)
Provisions (49) (101)
UK corporation tax (2,910) (2,533)
(45,400) (43,558)
========= =========
Total liabilities (54,686) (44,371)
========= =========
Net assets 188,099 171,371
========= =========
Equity
Share capital 1,092 1,082
Available for sale reserve (657) (688)
Retained earnings 187,664 170,977
Total equity 188,099 171,371
========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2018
Share Available
Share premium for sale Retained Total
capital account reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 July 2016 1,082 23 (584) 152,384 152,905
Total comprehensive income
for the year
Profit for the year - - - 26,214 26,214
Other comprehensive expense - - (104) 665 561
Total comprehensive income
for the year - - (104) 26,879 26,775
=============== =============== ========== ============ ========
Transactions with owners, recorded
directly in equity
Contributions and distributions
to owners
Adjustment to share premium - (23) - - (23)
Purchase of own shares - - - (22) (22)
Share-based payments - - - 660 660
Dividends - - - (8,924) (8,924)
Transactions with owners, recorded
directly in equity - (23) - (8,286) (8,309)
=============== =============== ========== ============ ========
At 30 June 2017 1,082 - (688) 170,977 171,371
=============== =============== ========== ============ ========
Total comprehensive income
for the year
Profit for the year - - - 30,236 30,236
Other comprehensive income - - 31 (237) (206)
Total comprehensive income
for the year - - 31 29,999 30,030
=============== =============== ====== ============ =========
Transactions with owners, recorded
directly in equity
Contributions and distributions
to owners
Share issue 10 - - - 10
Sale of own shares - - - 95 95
Share-based payments - - - 1,026 1,026
Dividends - - - (14,433) (14,433)
Transactions with owners, recorded
directly in equity 10 - - (13,312) (13,302)
=============== =============== ====== ============ =========
At 30 June 2018 1,092 - (657) 187,664 188,099
=============== =============== ====== ============ =========
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
2018 2017
GBP000 GBP000
Operating activities
Profit before tax from continuing operations 37,019 33,012
Loss before tax from discontinued operations (217) (228)
--------- --------------
36,802 32,784
Depreciation of plant and equipment 971 818
Share-based payments 1,026 660
Profit on sale of available for sale financial
assets (167) (216)
Loss on disposal of plant and equipment 152 147
Loss on sale of investment properties - 9
Finance income (418) (251)
Finance expenses 253 202
Operating cash flows before movements in working
capital 38,619 34,153
Increase in inventories (17,967) (28,312)
(Increase)/decrease in receivables (3,247) 3,650
Increase in payables 9,855 14,633
Cash generated in operating activities 27,260 24,124
Tax paid (5,156) (4,426)
Interest paid (172) (135)
Net cash flows from operating activities 21,932 19,563
========= ==============
Investing activities
Proceeds from disposal of available for sale
financial assets 960 1,154
Proceeds from disposal of investment properties 45 194
Proceeds from disposal of plant and equipment - 5
Interest received 29 18
Purchase of plant and equipment (1,376) (1,180)
Net cash flow (deficit)/surplus from investing
activities (342) 191
========= ==============
Financing activities
Proceeds from issue of shares 10 -
Sale/(purchase) of own shares 95 (22)
Dividends paid (14,433) (8,924)
Net cash flow deficit from financing activities (14,328) (8,946)
========= ==============
Net increase in cash and cash equivalents 7,262 10,808
Cash and cash equivalents at beginning of year 34,052 23,244
Cash and cash equivalents at end of year 41,314 34,052
========= ==============
1. Accounting policies
Statement of compliance
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union ("IFRSs").
Notes on the preliminary statement
The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 June 2018 or 2017, but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies, and those for 2018 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Cautionary statement
This Report contains certain forward looking statements with respect to the financial condition, results, operations and business of MJ Gleeson plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this Report should be construed as a profit forecast.
Directors' liability
Neither the Company nor the Directors accept any liability to any person in relation to this Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.
Basis of preparation
The accounting policies adopted in the preparation of these accounts are consistent with those described in the Annual Report and Accounts for the year ended 30 June 2017. Of the new standards, amendments and interpretations that are in issue and mandatory for the financial year ended 30 June 2018, there is no financial impact on these preliminary results.
2. Segmental analysis
The Group is organised into the following two operating divisions under the control of the Executive Board, which is identified as the Chief Operating Decision Maker as defined under IFRS 8 "Operating Segments":
-- Gleeson Homes
-- Gleeson Strategic Land
All of the Group's operations are carried out entirely within the United Kingdom. Segment information about the Group's operations is presented below:
2018 2017
GBP000 GBP000
Revenue
Continuing activities:
Gleeson Homes 153,397 130,492
Gleeson Strategic Land 43,344 29,892
196,741 160,384
Discontinued activities - -
Total revenue 196,741 160,384
======== =============
Profit on activities
Gleeson Homes 26,165 22,760
Gleeson Strategic Land 12,633 12,040
-------- -------------
38,798 34,800
Administrative expenses (1,944) (1,837)
Finance income 418 251
Finance expenses (253) (202)
-------- -------------
Profit before tax 37,019 33,012
Tax (6,526) (6,488)
-------- -------------
Profit for the year from continuing operations 30,493 26,524
Loss for the year from discontinued operations
(net of tax) (257) (310)
Profit for the year attributable to equity
holders of the parent company 30,236 26,214
======== =============
The revenue in the Gleeson Homes segment relates to the sale of residential properties and land. All revenue for the Gleeson Strategic Land segment is in relation to the sale of land.
Revenue of GBP20,530,000 was derived from a single external customer. This revenue was attributable to the Gleeson Strategic Land segment.
3. Discontinued operations
The activity of Gleeson Construction Services Limited now only relates to remedial works and the division is classified as discontinued.
2018 2017
GBP000 GBP000
Revenue - -
Cost of sales - -
------------ ------------
Gross loss - -
Administrative expenses (217) (228)
------------ ------------
Operating loss (217) (228)
Loss before tax (217) (228)
Tax (40) (82)
------------
Loss for the year from discontinued operations (257) (310)
============ ============
Loss per share - impact of discontinued operations
2018 2017
p p
Basic (0.47) (0.57)
================ ======
The cash flow statement includes the following relating to the operating loss
on discontinued operations:
2018 2017
GBP000 GBP000
Operating activities (321) (441)
================ ======
4. Finance income and expenses
2018 2017
GBP000 GBP000
Finance income
Interest on bank deposits 18 14
Unwinding of discount 396 236
Other interest 4 1
418 251
======= =======
Finance expenses
Bank charges (165) (135)
Unwinding of discount
------- -------
(83) (67)
Other external interest (5) -
------- -------
(253) (202)
======= =======
Net finance income 165 49
======= =======
5. Tax
Continuing Discontinued
operations operations Total
2018 2017 2018 2017 2018 2017
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Current tax:
Current year charge 5,569 6,184 - - 5,569 6,184
Adjustment in respect of
prior years (36) 155 - - (36) 155
5,533 6,339 - - 5,533 6,339
------- ------- ------- ------- ------- -------
Deferred tax:
Current year expense 1,003 88 45 48 1,048 136
Adjustment in respect of
prior years (33) - - - (33) -
Impact of rate change 23 61 (5) 34 18 95
Deferred tax expense for
the year 993 149 40 82 1,033 231
------- ------- ------- ------- ------- -------
Total tax charge 6,526 6,488 40 82 6,566 6,570
======= ======= ======= ======= ======= =======
Reductions in the UK corporation tax rate from 20% to 19%, effective from 1 April 2017, were substantively enacted on 26 October 2015. Corporation tax has been calculated at 17.8% of assessable profit for the year (2017: 20.0%).
The charge for the year can be reconciled to the profit per the consolidated income statement as follows:
2018 2017
GBP000 GBP000
Profit before tax on continuing operations 37,019 33,012
Loss before tax from discontinued operations (217) (228)
Profit before tax 36,802 32,784
======= =======
Profit before taxation multiplied by the standard
rate of UK corporation tax 19% (2017: 19.75%) 6,992 6,475
Tax effect of:
Expenses not deductible for tax purposes 10 37
Relief for share based payments (385) (95)
Land remediation relief - (75)
Impact of rate differences 18 73
Adjustments in respect of prior years - current
tax (36) 155
Adjustments in respect of prior years - deferred
tax (33) -
Total tax charge for the year 6,566 6,570
======= =======
6. Dividends
2018 2017
GBP000 GBP000
Amounts recognised as distributions to equity
holders in the year:
Interim dividend for the year ended 30 June
2018 of 9.0p (2017: 6.5p) per share 4,902 3,516
Final dividend for the year ended 30 June 2017
of 17.5p (2016: 10.0p) per share 9,531 5,408
14,433 8,924
======== =======
The proposed final dividend for the year ended 30 June 2018 of 23.0p per share (2017: 17.5p) brings the total dividend for the year to 32.0p (2017: 24.0p).
The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these financial statements. The total estimated final dividend to be paid is GBP12,619,000.
7. Earnings per share
Continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the following:
2018 2017
Earnings GBP000 GBP000
Earnings for the purposes of basic earnings
per share, being net profit
attributable to equity holders of the parent
company
Profit from continuing operations 30,493 26,524
Loss from discontinued operations (257) (310)
Profit for the purposes of basic and diluted
earnings per share 30,236 26,214
========= =========
2018 2017
No. 000 No. 000
Number of shares
Weighted average number of ordinary shares
for the purposes of
basic earnings per share 54,428 54,066
Effect of dilutive potential ordinary shares:
- share options 862 834
Weighted average number of ordinary shares
for the purposes of
diluted earnings per share 55,290 54,900
========= =========
2018 2017
Continuing operations
Basic earnings per share 56.02p 49.06p
Diluted earnings per share 55.15p 48.31p
========= =========
Discontinued operations
Basic earnings per share (0.47)p (0.57)p
Diluted earnings per share (0.46)p (0.56)p
========= =========
Continuing and discontinued operations
Basic earnings per share 55.55p 48.49p
Diluted earnings per share 54.69p 47.75p
========= =========
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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