RNS Number:1343J
Gleeson(M J)Group PLC
25 March 2003
M J GLEESON GROUP plc - INTERIM ANNOUNCEMENT
* Gleeson, the construction services, homes and property group,
announces that, in what is traditionally the weaker half of the year, turnover
increased by 22.6% to #285.7m, but pre-tax profit was lower at #0.3m (2001/02:
#3.3m) and earnings per share reduced to 3.4p (2001/02: 23.0p).
* Net assets per share totalled #14.52 (2001/02: #14.34), providing
substantial backing for the recent share price.
* Reflecting their belief in the underlying strength of the Group's
business, the Directors have declared an increased interim dividend per share of
6.75p, up 3.9%.
* Construction Services increased turnover by 32.2% to #246.1m but
generated an operating loss of #0.2m (2001/02: profit #4.3m). Whilst there will
be a significant improvement in the Division's operating margin in the second
half, a disappointing outcome for the year is likely following the further #5.0m
provision which has been made against the Buxton cement contract (as announced
on 14 March 2003). The Engineering Division will henceforth tender for
traditionally procured work only in exceptional circumstances; this will
substantially reduce the Group's exposure to construction risk.
* On turnover 12.4% lower at #39.7m, Gleeson Homes made an operating
profit of #1.8m (2001/02: loss of #1.5m). Gleeson Homes will make a
substantially increased contribution to Group profits in the second half.
* Gleeson Properties made an operating profit of #1.9m (2001/02: #3.5m),
with no developments being sold in the period (2001/02: #1.6m). Gleeson
continues to examine the possibility, referred to at the AGM on 8 January 2003,
of transferring the Group's property investment portfolio, together with the
related debt, into a non-recourse vehicle, in conjunction with a financial
partner.
* Dermot Gleeson, Executive Chairman, stated with regard to prospects "
But for the additional Buxton provision and, possibly, a small level of slippage
in property sales, prospects for the current year are overall substantially
unchanged since the time of the preliminary announcement in October 2002. A
considerable improvement continues to be expected in 2003/04."
Enquiries:
M J Gleeson Group plc 020-8644 4321
Dermot Gleeson (Executive Chairman)
David Eyre (Group Managing Director)
Colin McLellan (Finance Director)
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166 / 07789-202 312
CHAIRMAN'S INTERIM STATEMENT
In my AGM address on 8 January 2003, I said that the prospects for the current
year were substantially as indicated in my Statement in the Report & Accounts:
a much improved performance by Gleeson Homes and buoyant trading by the Building
Divisions were likely to be significantly offset by the softening of the
commercial property market, by temporary difficulties in the Engineering
Division and by the impact of higher insurance costs.
This assessment remains broadly valid except that, as announced on 14 March
2003, the prudent decision to make an additional #5m provision for loss on the
Buxton cement works engineering contract means that it is no longer likely that
the result for the current year will match last year's.
Accordingly, six successive years of profits increases up to 2000/01 will be
followed by two successive years of decreases - a disappointment that we believe
we will put behind us in 2003/04.
FINANCIAL OVERVIEW
In what is traditionally the weaker half of the year, turnover increased by
22.6% to #285.7m (2001/02: #233.0m), but profit before interest and tax
decreased to #1.3m (2001/02: #4.9m) and pre-tax profit was lower at #0.3m (2001/
02: #3.3m). Earnings per share were 3.4p (2001/02: 23.0p).
Reflecting lower averages of both indebtedness and interest rates, net interest
payable fell to #1.1m (2001/02: #1.6m). Gearing at the period end, a seasonally
high point, was 49.4% (2001/02: 47.8%).
On 17 December 2002, the Board purchased for cancellation 200,000 of the
Company's shares (1.92% of its issued share capital) at a price of #7.80 per
share, increasing both net assets per share and prospective earnings per share,
while having an only marginally adverse effect on the Group's gearing.
Net assets per share totalled #14.52 (2001/02: #14.34), providing substantial
backing to the recent share price.
DIVIDENDS
Reflecting their belief in the underlying strength of the Group's business, the
Directors have declared an interim dividend per share of 6.75p, up 3.9% on 2001
/02's 6.5p, which will be paid on 30 June 2003 to shareholders on the register
at the close of business on 30 May 2003.
OPERATING REVIEW
Construction Services
Construction Services increased turnover by 32.2% to #246.1m (2001/02: #186.1m)
but generated an operating loss of #0.2m (2001/02: profit #4.3m). Once again,
over 80% of work was on a PFI or partnering basis.
Building
The Building Divisions' turnover increased by 22.9% to #119.3m (2001/02:
#97.1m). A significant proportion of the work undertaken related to the
Government's substantial capital expenditure programme for hospitals and
schools. The Southern Construction Division was the best performing of the
three Divisions.
Civil and Process Engineering
The Engineering Division's turnover increased by 31.5% to #89.4m (2001/02:
#68.0m). The water sector, which is one of the busiest markets of the UK
construction industry and in which Gleeson is the leading contractor, continued
to provide the bulk of the Division's turnover.
Specialist Subsidiaries
The total turnover of the Group's specialist Construction Services subsidiaries,
Powerminster Limited, Concrete Repairs Limited, Gleeson MCL Limited and
Hesselberg Hydro (1991) Limited, increased to #38.5m (2001/02: #28.7m).
Homes
On turnover 12.4% lower at #39.7m (2001/02: #45.3m), Gleeson Homes made an
operating profit of #1.8m (2001/02: loss of #1.5m). In the half year, 191 units
were sold at an average selling price of #207,000; this compares with 240 and
#171,000, respectively, in the first half of 2001/02.
Property
Gleeson Properties made an operating profit of #1.9m (2001/02: #3.5m). No
developments were sold in the period (2001/02: #1.6m).
The Property Investment portfolio, whose book value, in the absence, as usual,
of an interim valuation, increased to #59.8m (2001/02: #59.1m), remains
concentrated on the office and industrial warehouse sectors. During the half
year, there were neither acquisitions nor disposals.
Gross rental income fell marginally to #2.3m (2001/02 #2.4m).
BOARD
As was announced on 3 February 2003, Andrew Muncey has been appointed Group
Managing Director with effect from 1 May 2003, on the retirement of David Eyre.
Andrew Muncey, 46, joined Gleeson as Deputy Managing Director of the Southern
Construction Division in 1997, became Managing Director of that Division in May
1999 and was promoted to the Group Board in October 2001. He has a First Class
Honours Degree in Civil Engineering from the University of Wales and was
previously Construction Director of Walter Llewellyn & Sons Ltd. His
appointment, against external and internal competition, reflects, amongst other
things, his considerable success in substantially increasing the turnover and
transforming the profitability of the Southern Construction Division.
David Eyre, who will be 65 in June 2003, joined the Group in 1965, was appointed
to the Board in 1995 and became Group Managing Director in 1998. David has
played an indispensable role in the conversion of the Group into one of the
United Kingdom's leading construction companies. His fellow Directors are
conscious that they, and the Group as a whole, owe a deep debt of gratitude to a
remarkable, able and very congenial colleague.
PROSPECTS
Construction Services
The Construction Services order book at 1 March 2003 totalled #703m, of which
#452m related to relatively low risk four to seven year partnering agreements.
In addition, the Group expects to carry out in the order of #200m of business as
a result of its membership of the Stirling Water Consortium, one of the two
preferred bidders for Scottish Water's #1.5 billion Asset Delivery Programme to
be undertaken over four years.
The Group continues to anticipate that the present buoyant trading conditions
enjoyed by its Building Divisions, in particular by the Southern and Northern
Construction Divisions, will be sustained for some time, not least by Government
expenditure plans.
Against the background of its continuing success in securing work on a
partnering basis, the Engineering Division will no longer bid for traditionally
procured work unless there is an exceptionally compelling reason to do so. This
important strategic decision will substantially reduce the Division's exposure
to construction risk.
Gleeson MCL, the railway contractor, has a record level of work in hand,
including a seven year partnering agreement, worth over #100m, with the
Tubelines Consortium for the modernisation of 36 stations on London
Underground's Piccadilly Line.
Whilst there will be a significant improvement in the Construction Services'
operating margin in the second half, a disappointing outcome for the year is
likely, following the further provision which has been made against the Buxton
contract.
Gleeson Homes
The new management team remains confident that the current year will be a
considerably better one for Gleeson Homes.
A slight increase on last year's 477 unit sales is expected, with average
selling prices in excess of #205,000 compared with #181,000 in 2001/02.
Accordingly, Gleeson Homes will make a substantially increased contribution to
Group profits in the second half of the financial year.
The land bank is of increasingly good quality and 85% of the plots with planning
consent required to meet next year's sales target are already secured.
Gleeson Properties
If, as is possible, a proportion of Gleeson Properties' very modest current
sales programme slips into next year, the Division's profits in the second half
will be broadly similar to the figure for the first half.
We continue to examine the possibility, to which I referred at the AGM on 8
January 2003, of transferring the Group's property investment portfolio into a
non-recourse vehicle, in conjunction with a financial partner.
Gleeson Regeneration
Gleeson Regeneration was formed in February 2002 to enable the Group to focus
more closely on social housing and urban regeneration schemes. As part of a
consortium, it is currently working on the #60m Grove Village, Manchester, PFI
project, the first substantial PFI project for social housing in the United
Kingdom, which is anticipated to achieve commercial close today.
Summary
But for the additional Buxton provision, and, possibly, a small level of
slippage in property sales, prospects for the current year are overall
substantially unchanged since the time of the preliminary announcement in
October 2002. A considerable improvement continues to be expected in 2003/04.
Dermot Gleeson
Executive Chairman 25 March 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
6 months 6 months
ended 31 ended 31 December Year ended
December 2001 30 June
2002 Unaudited 2002
Unaudited Audited
#000 #000 #000 #000 #000 #000
Turnover: group and share of joint
venture
Existing operations 285,723 233,016 580,634
Less: share of joint ventures' turnover - - (7,792)
______ ______ ______
Group turnover 285,723 233,016 572,842
Cost of sales (266,959) (214,555) (525,797)
______ ______ ______
Gross profit 18,764 18,461 47,045
Investment property income 2,318 2,376 7,133
Net operating expenses (19,233) (15,927) (35,905)
______ ______ ______
Operating profit 1,849 4,910 18,273
Share of results of joint ventures (584) (100) (619)
Profit on sale of investment properties 78 134 457
______ ______ ______
Profit on ordinary activities before 1,343 4,944 18,111
interest
Interest receivable 186 143 523
Less: interest payable (1,274) (1,791) (3,557)
_____ _____ _____
(1,088) (1,648) (3,034)
_____ _____ _____
Profit on ordinary activities before 255 3,296 15,077
taxation
Taxation on profit on ordinary activities 83 (989) (4,864)
_____ _____ _____
Profit after taxation 338 2,307 10,213
Dividends (670) (656) (3,288)
_____ _____ _____
Retained (loss)/profit for the period (332) 1,651 6,925
_____ _____ _____
Earnings per share 3.35p 22.96p 101.50p
Earnings per share - fully diluted 3.33p 22.85p 100.78p
Interim dividend per share 6.75p 6.50p
SUMMARISED CONSOLIDATED BALANCE SHEET
As at As at As at
31 December 31 December 30 June
2002 2001 2002
Unaudited Unaudited Audited
#000 #000 #000
Fixed assets
Intangible assets 5,256 5,563 5,409
Tangible assets 88,518 87,315 87,169
Investments 6,059 5,785 5,810
______ ______ ______
99,833 98,663 98,388
Current assets
Stocks 138,285 151,061 119,152
Debtors 116,896 89,382 110,691
Cash at bank and in hand 144 322 308
______ ______ ______
255,325 240,765 230,151
Creditors: amounts falling due within one year (207,312) (191,343) (178,905)
______ ______ ______
Net current assets 48,013 49,422 51,246
Total assets less current liabilities 147,846 148,085 149,634
Provisions for liabilities and charges 360 262 360
______ ______ ______
Net assets 148,206 148,347 149,994
______ ______ ______
Capital and reserves
Called up share capital 1,021 1,035 1,040
Share premium account 1,689 2,729 3,127
Capital redemption reserve fund 100 100 100
Revaluation reserve 10,685 15,038 10,676
Profit and loss account 134,711 129,445 135,051
______ ______ ______
Total shareholders' funds 148,206 148,347 149,994
______ ______ ______
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year
31 December 31 December ended
2002 2001 30 June
Unaudited Unaudited 2002
Audited
#000 #000 #000
Net cash (outflow)/inflow from operating (27,936) (26) 37,208
activities
Returns on investments and servicing of finance 1,251 653 4,271
Taxation (3,144) (3,787) (6,148)
Capital expenditure and financial investment (4,746) (17,283) (19,518)
Acquisition and disposals - (176) -
Equity dividends paid - - (3,160)
Financing (1,457) 306 709
______ ______ ______
(Increase)/decrease in net debt (36,032) (20,313) 13,362
====== ====== ======
NOTES
1. Segmental analysis
6 months ended 6 months ended Year
December December ended
2002 2001 June
Unaudited Unaudited 2002
Audited
#000 #000 #000
Analysis of turnover on continuing operations:
Construction
United Kingdom 244,726 184,315 424,813
Jersey 1,326 1,804 3,417
______ ______ ______
246,052 186,119 428,230
Homes - United Kingdom 39,671 45,297 112,970
Property - United Kingdom - 1,600 31,642
______ ______ ______
285,723 233,016 572,842
====== ====== ======
Operating profit on continuing activities:
Construction (226) 4,285 10,053
Homes 1,841 (1,517) 575
Property 1,867 3,514 10,730
Central costs (1,633) (1,372) (3,085)
______ ______ ______
1,849 4,910 18,273
====== ====== ======
2. The interim statement was approved by the Board of Directors on 24 March
2003.
3. The interim accounts have been prepared in accordance with the
accounting policies adopted in the preparation of the accounts for the year
ended 30 June 2002 which are set out in the Company's Annual Report.
4. The abridged results for the year ended 30 June 2002 do not constitute
Statutory Accounts within the meaning of S240 of the Companies Act 1985. The
Auditors' Report on these Accounts was unqualified and did not contain any
statement under S237 of the Companies Act 1985.
5. In accordance with FRS 14, the earnings per share figure is based on a
weighted average number of shares which excludes 277,400 shares on which
dividends have been waived.
6. Copies of this interim announcement will be circulated to shareholders
and will also be available from the Company Secretary at Haredon House, London
Road, North Cheam, Surrey SM3 9BS.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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