Interim Results

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

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