Preliminary Announcement

RNS Number : 5720Z

Gleeson(M J)Group PLC

24 September 2009

Thursday 24 September 2009

MJ GLEESON GROUP PLC - PRELIMINARY ANNOUNCEMENT

Gleeson (GLE.L), the urban regeneration and strategic land specialist, announces its results for the year to 30 June 2009.

During the year, market conditions in the housebuilding sector continued to deteriorate, as indicated in the Interim Announcement of 25 February 2009 and the Interim Management Statement of 15 May 2009. Since the year end, however, there have been some signs of improvement in buyer interest.

Key Points - Financial

Revenue from continuing operations decreased by 42% to £55.0m (2008: £94.6m), mainly reflecting substantial reductions in both units sold and average selling price.
Excluding exceptionals, the pre-tax loss was £8.3m (2008: £3.4m).
Exceptional charges totalled £46.0m (2008: £17.4m), of which £44.6m (2008: £12.3m) was non-cash and related to downward asset revaluations.
The loss before tax from continuing operations was £54.3m (2008: £20.8m), equating to a loss per share of 109.3p (2008: 39.9p).
Year end total shareholders' equity decreased by 35% to £103.4m (2008: £159.2m), representing net assets per share of 197p (2008: 304p), also down 35%.
Year end net cash totalled £10.9m, which compares with £7.1m at 31 December 2008 and £21.9m at 30 June 2008. Since the year end, net cash has risen to £16.0m.

Key Points - Commercial

Gleeson Regeneration & Homes and Gleeson Strategic Land made an operating loss of £ 43.7m (2008: £16.3m) on revenue of £34.2m (2008: £64.0m); excluding exceptionals, the loss was £6.3m (2008: £1.2m).
Gleeson Regeneration & Homes sold 317 (2008: 436) units, down 27%, at an average selling price of £102,000 (2008: £149,000), down 32%, reflecting a higher proportion of sales to registered social landlords.
Gleeson Strategic Land made no land sales, but increased its portfolio of options to 3,755 (2008: 3,621) acres
Powerminster Gleeson Services (social housing maintenance) traded well, making an operating profit of £1.0m (2008: £1.1m) on revenue of £18.7m (2008: £19.5m), and increased its already substantial order book to £169.5m (2008: £158.8m).
Gleeson Commercial Property Development (in run-off) now has only three sites remaining.
The central overhead reduced by 41% to £3.6m (2008: £6.1m), of which £0.6m (2008: £0.7m) was exceptional.

Current Trading and Prospects

Dermot Gleeson, Chairman, stated 'Although conditions in the housing market remain very difficult, particularly in respect of regeneration areas in the North of England, recent months have seen some signs of improvement in buyer interest. Visitor levels have increased, selling prices appear to be stabilising, at least for the time being, and reservations in the current financial year are ahead of prior year comparables.

It is too early, however, to call an end to the downturn. Mortgage availability remains very restricted and a high proportion of sales at the lower end of the market are only possible on a shared equity basis. Moreover, it remains to be seen how severely the continuing rise in unemployment will affect housing demand.

Against this background, the Group's main focus will continue to be on rigorous cost control and cash generation. This will enable it to lay the solid foundations on which sustained growth can be achieved once more normal conditions return.'

Enquiries:

M J Gleeson Group plc 01252-360 300

Chris Holt (GCEO)

Alan Martin (GFD)

Bankside Consultants

Charles Ponsonby 020-7367 8851

CHAIRMAN'S STATEMENT

During the year, market conditions in the housebuilding sector continued to deteriorate, as indicated in the Interim Announcement of 25 February 2009 and the Interim Management Statement of 15 May 2009. As a result, there has been a further substantial decrease in revenue and a more than doubling of the pre-tax loss. Since the year end, however, there have been some signs of improvement in buyer interest.

Financial Overview

Revenue from continuing operations decreased by 42% to £55.0m (2008: £94.6m). £29.8m of this £39.6m decrease resulted from the combined impact of a 27% reduction in housing unit sales, from 436 to 317, and a 32% decrease in average selling price ('ASP'), from £149,000 to £102,000.

A loss before tax from continuing operations of £54.3m (2008: £20.8m) was recorded. This included exceptional charges of £46.0m (2008: £17.4m), of which £44.6m (2008: £12.3m) was non-cash and related to downward asset revaluations.

Discontinued operations generated a post-tax profit of £0.9m (2008: £1.0m).

The year end total equity attributable to equity holders of the parent company decreased by 35% to £103.4m (2008: £159.2m), representing net assets per share of 197p (2008: 304p). Net cash at 30 June 2009 was £10.9m (2008: £21.9m), an increase of £3.8m since 31 December 2008.

Business Review

The Group's continuing operations comprise ongoing business units and business units in run-off.

The Group's ongoing business units - Gleeson Regeneration & Homes and Gleeson Strategic Land, Gleeson Capital Solutions and Powerminster Gleeson Services - had differing result profiles, which are set out in detail below.

Gleeson Regeneration & Homes and Gleeson Strategic Land continued to trade poorly due to weak market conditions. Unit sales were low and there were no strategic land sales. Gleeson Strategic Land has, however, added to its portfolio of options and now has 3,755 acres (2008: 3,621 acres) under option. Exceptional charges of £37.4m (2008: £15.1m) were incurred within these businesses, of which £0.3m related to shrinking the business and £37.1m related to a reduction in value of land, amounts recoverable on contracts and work in progress.

Gleeson Capital Solutions recorded a loss of £0.1m (2008: £2.3m), before exceptional costs to restructure the business of £0.5m (2008: £nil). In the year, no PFI investments were sold and no new PFI projects reached financial close.

Powerminster Gleeson Services made a pre-tax profit of £1.0m (2008: £1.1m) and increased its already substantial long term order book to £169.5m (2008: £158.8m).

The Group's business units in run-off comprise Gleeson Commercial Property Developments and Gleeson Building Contracting Division within Gleeson Construction Services Limited.

Gleeson Commercial Property Developments has been in run-off, starting no new schemes and liquidating its portfolio, since March 2007. In the year, four sites were sold out, with five (two of them small) remaining at the year end; two of these (one small) have subsequently been sold. The weak market conditions have not only prolonged this run-off but have also resulted in an exceptional charge of £7.5m relating to the reduction in the value of the portfolio. At 30 June 2009, the net asset value of the portfolio was £11.5m (2008: £19.7m).

Gleeson Building Contracting Division recorded a loss of £0.1m (2008: £4.1m).

Group Activities (the central overhead) reduced by 41% to £3.6m (2008: £6.1m), which included exceptional charges of £0.6m (2008: £0.7m).

Board

Paul Wallwork resigned as Group Chief Executive with effect from 31 December 2008. Paul was appointed Group Finance Director in January 2006, Interim Group Chief Executive in July 2006 and Group Chief Executive in January 2007. I would like to thank Paul for his strong and energetic leadership through an extremely challenging period.

Chris Holt was appointed Group Chief Executive with effect from 1 January 2009. Chris had been Group Finance Director since May 2007 and prior to that held the position of Interim Group Finance Director from August 2006.

Alan Martin was appointed Group Finance Director with effect from 1 January 2009. Alan had been Group Financial Controller since November 2006.

Christopher Mills was appointed a non-executive Director with effect from 1 January 2009. Christopher is Chief Investment Officer of North Atlantic Value LLP, which has been a substantial shareholder since March 2005 and currently has a shareholding of 18.1% in the Company.

Since 1 January 2009, the Board has comprised two Executive Directors, four Non-Executive Directors (three of whom are considered to be independent) and myself as Non-Executive Chairman.

Employees

The average number of employees reduced in the year to 311 (2008: 394), and the number at the year end was 286 (2008: 382), of which 196 (2008: 188) are employed in Powerminster Gleeson Services.

The Board would like to thank all employees for their commitment and continuing dedication during the year, especially given the difficult and uncertain market conditions with which the Group has had to contend.

Current Trading and Prospects

Although conditions in the housing market remain very difficult, particularly in respect of regeneration areas in the North of England, recent months have seen some signs of improvement in buyer interest. Visitor levels have increased, selling prices appear to be stabilising, at least for the time being, and reservations in the current financial year are ahead of prior year comparables.

Dividends

No dividend is proposed for the year to 30 June 2009.

Dermot Gleeson

Chairman

BUSINESS REVIEW

Management has reacted to the worst housing market in generations by reducing costs and conserving cash. Actions have been taken to ensure that the Group is well positioned to grow once economic conditions improve.

Group Businesses and Strategy

Gleeson is predominantly a housebuilder, focused on the regeneration sector and with particular emphasis on creating sustainable communities.

The Group comprises ongoing businesses and businesses in run-off:

Ongoing Businesses

Gleeson Regeneration & Homes and Gleeson Strategic Land - Gleeson Regeneration & Homes focuses on estate regeneration and housing development on brownfield land in the north of England. Its current strategy, in response to very weak market conditions, has been to minimise build and labour spend on sites and maximise cash flow by selling stock plots.

Gleeson Strategic Land focuses on the selective identification and purchase of options over land in the south of England, with the objective of successfully expediting these land options through the planning process.

Powerminster Gleeson Services - focuses on both planned and emergency response work on third party property assets and on long-term maintenance programmes supporting Gleeson PFI projects which include lifecycle replacements. Its current strategy is to continue to focus on social housing maintenance, both within the estates that the Group regenerates and from the wider social housing market.

Gleeson Capital Solutions - manages the Group's PFI investments in social housing and takes the lead in developing and investing in new PFI opportunities that bring work to both Gleeson Regeneration & Homes and Powerminster Gleeson Services together with equity returns on the investments. Its strategy is to grow its portfolio of investments.

Group Activities - comprises the Board, Company Secretary and Group Finance.

Businesses in Run-off

Gleeson Commercial Property Developments - previously engaged in commercial property development, mainly in the south of England, and has been in run-off since March 2007.

Engineering and Building Contracting - the Group sold certain contracts, assets and liabilities of the Engineering Division in October 2006 to Black & Veatch Limited and of the Building Contracting Division in August 2005 to Gleeson Building Limited (now GB Building Solutions Limited), a management buy-out vehicle. The run-off activity of the former is reported as a discontinued operation, whilst that of the latter is reported as a continuing operation.

Operating Risk Statement

The Group has established risk management procedures, involving the identification, control and monitoring of risks at various levels within the organisation. However, there are other significant risks out of the Group's control which could affect its business, which include but are not limited to the following:

Risks common to the Group

Funding - The Group must have sufficient cash resources and facilities to finance its operations.

Health & Safety - The Group must have adequate systems and procedures in place to mitigate, as far as possible, the dangers inherent in the execution of work in the Group's continuing businesses.

People - The Group must attract and retain the right people to ensure the Group's long-term success.

Insurance - The Group must maintain suitable insurance arrangements to underpin and support the many areas in which the Group is exposed to risk or loss.

Information Technology - The Group must have suitable systems to ensure that a reliable flow of information operates throughout the Group and that the risk of system loss is mitigated by appropriate contingency plans.

Risks specific to Gleeson Regeneration & Homes and Gleeson Strategic Land

National and Regional Economic Conditions - The housebuilding industry is sensitive to availability of mortgage finance, employment levels, private and buy-to-let housing demand, interest rates, and consumer confidence. A continuation of the current poor conditions overall will have a negative impact on these business units.

Planning - There is a risk of unanticipated delays in planning approvals and the imposition of onerous conditions.

Valuations - There is no certainty that asset values have reached a low point.

Risks specific to Powerminster Gleeson Services

Pricing - Managing the cost of delivering the required services and service levels against the price that can be obtained for those services is a key metric within this business unit.

Execution - To recruit and retain quality personnel to ensure that contracted service levels are consistently delivered or exceeded in order to achieve customer satisfaction, thereby enhancing the opportunity for repeat business and avoiding contract penalties.

Risks specific to Gleeson Capital Solutions

Government Policy - The business unit is dependent upon the Government's continued commitment to PFI procurement as a means of funding regeneration.

Bid Costs - Substantial bid costs can be incurred, without recovery, in seeking to procure new investments.

Risks specific to Businesses in Run-off

Gleeson Commercial Property Developments

Market conditions - The business' ability to sell off the remaining development sites profitably depends upon there being no further deterioration in the commercial property market.

Engineering and Building Contracting

Completion of retained projects - These businesses must complete outstanding work on retained projects within the provisions made by management.

Latent defects - The Group did not dispose of all of its historical contracts, which means that it is exposed to any latent defects that may arise within 12 years of completion of a project.

Performance

Gleeson Regeneration & Homes and Gleeson Strategic Land

The business segment's results for the year, which included exceptional charges of £37.4m (2008: £15.1m), were as follows -:

	2009	2008
Revenue	£34.2m	£64.0m
Operating Loss	£(43.7)m	£(16.3)m

The exceptional items are detailed as follows -:

	2009	2008
Non-cash valuation write down of land and work in progress	£37.1m	£10.7m
Restructuring costs	£0.3m	£4.4m
	£37.4m	£15.1m

Gleeson Regeneration & Homes

Colin Rossiter was appointed Managing Director of this business unit with effect from March 2009. Colin has eight years of experience with the Group and combines this appointment with his role as Managing Director of Gleeson Capital Solutions.

In response to the continuing very low level of customer demand and the generally poor market conditions seen across the sector, the business unit maintained an emphasis on conserving cash by halting speculative building and selling stock units.

With the reduced activity levels, it has been necessary to reduce office and site staff numbers and these decreased during the year by more than one-half, from 136 to 58.

The business unit has nine regeneration sites, all of which - apart from Ashford, Kent - are in the North. In addition, the business unit has two non-regeneration sites.

During the year, 317 (2008: 436) units were sold, of which private sales totalled 160 (2008: 268) and sales to Registered Social Landlords ('RSLs') totalled 157 (2008: 168). ASP for private sales was £107,000 (2008: £175,000) and for sales to RSLs was £97,000 (2008: £109,000).

Gleeson Regeneration & Homes

Unit sales as recognised in Revenue

	2009	2009	2009	2008	2008	2008
			ASP			ASP
	Units	%	£'000	Units	%	£'000
Private Sales*	160	51	107	268	61	175
RSL Sales	157	49	97	168	39	109
Total	317	100	102	436	100	149

* Includes equivalent units for sites which are treated as long-term contracts

Unit sales as Handed Over

	2009	2009	2009	2008	2008	2008
			ASP			ASP
	Units	%	£'000	Units	%	£'000
Private Sales	156	41	130	224	67	176
RSL Sales	221	59	99	110	33	104
Total	377	100	112	334	100	152

Market sector analysis

	2009	2009	2009	2008	2008	2008
			ASP			ASP
	Units	%	£'000	Units	%	£'000
Private Sales - 1 & 2 beds	63	17	96	86	26	141
Private Sales - 3 beds	57	15	142	101	30	168
Private Sales - 4 beds	30	8	154	33	10	248
Private Sales - 5 or more beds	6	2	264	4	1	530
RSL Sales	221	58	99	110	33	104
Total	377	100	112	334	100	152

Product mix analysis

	2009	2009	2009	2008	2008	2008
			ASP			ASP
	Units	%	£'000	Units	%	£'000
Apartments	52	14	88	88	26	140
Three storey	40	11	141	30	9	171
Room in roof	10	3	267	23	7	289
Traditional - other	54	14	138	83	25	186
RSL Sales	221	58	99	110	33	104
Total	377	100	112	334	100	152

	2009	2008
% brownfield land units	100	95

Gleeson Strategic Land

As a supplier of consented development land to the market, the problems currently experienced by the housebuilding sector have resulted in poor market conditions. Land values have fallen substantially and the Board anticipates that any sales receipts will be spread over a longer period as housebuilders will look to balance cash inflows with land purchase costs. Despite this, the Group is positioning itself to bring sites to the market during the current financial year.

During the year, Gleeson Strategic Land has reacted to market conditions by concentrating on securing planning approvals. In addition and in accordance with Group policy on cash conservation, Gleeson Strategic Land has restricted the number of new opportunities pursued. During the year, four new opportunities were secured (235 acres, including one site that is allocated for 100 units)

At the year end, the portfolio totalled 3,755 (2008: 3,621) acres, most of which is in Southern England (Buckinghamshire, Dorset, Hampshire, Kent, Oxfordshire, Surrey, Sussex and Wiltshire).

Regional Planning Policy - The Government's Regional Planning Policy is embodied in policy documents known as the South West, South East, East of England and West Midlands Regional Spatial Strategies (RSS). These advanced through their legislative process during the year, with the South East RSS now adopted. Gleeson Strategic Land controls some 900 acres of land identified specifically within growth areas identified in these policy documents.

The Group's landholdings are predominately in locations where the Government wishes to see an increase in housing delivery and this is reflected within the district-wide housing provision set out in each RSS. This will assist in the future promotion of the Group's land opportunities.

Local Development Frameworks (LDFs) - At the district council level, planning policy is contained within LDFs. These frameworks contain the local policy endorsed by each district to guide development, usually over the next 10 years. They seek to implement the policy of the RSSs and identify specific site allocations.

Gleeson Strategic Land is engaged in promoting the Group's landholdings through the LDF process to secure allocations. In total, the Group holds 430 acres allocated in adopted or emerging LDFs or Local Plans.

Planning Applications - Gleeson Strategic Land has planning applications lodged awaiting consent on 3 sites equating to 22 acres of residential land and 6 acres of commercial land. During the year, one of these sites (100 units) was purchased in anticipation of consent, to maximise future profit.

Planning Consents - During the year, planning consent was secured on 2 sites, which means that the Group currently holds in excess of 1,700 plots of consented residential land.

Gleeson Capital Solutions

Gleeson Capital Solutions holds investments in four PFI projects, namely Grove Village, an estate regeneration project in Manchester; Stanhope, an estate regeneration project in Ashford, Kent; Avantage, an extra care homes project in Cheshire; and Leeds Independent Living, a social housing project in Leeds.

Two of the PFI projects recently won prestigious national awards. Stanhope won an award for the Development/Maintenance/Regeneration Team of the Year at the Inside Housing, Housing Heroes Awards and the Leeds Independent Living scheme won an award for Best Community/User Involvement in a project at the Public Private Finance Awards.

	2009	2008
Revenue	-	£1.2m
Operating (Loss)/Profit	(£0.6)m	£2.3m

During the year, no projects achieved financial close (2008: two, generating fee income of £1.2m).

The last remaining non-core investment, in Stirling Water Seafield Limited, was disposed of during the year for a profit of £nil (2008: two, for a profit of £1.2m).

The business unit remains active in the market and is currently bidding for a regeneration project. In the year, it incurred £0.3m (2008: £0.4m) of speculative bid costs which were expensed.

Powerminster Gleeson Services

	2009	2008
Revenue	£18.7m	£19.5m
Operating Profit	£1.0m	£1.1m
Operating Margin	5.3%	5.6%

Keith Shivers was appointed Managing Director of this business unit in April 2009. Keith was previously Group Operations Director and has 25 years of experience with the Group.

Powerminster Gleeson Services had another successful year, with the following notable contract awards: the In Communities gas servicing and repair contract in Bradford, which was secured for a further four years; electrical installation works as part of the Leeds Independent Living PFI; and several estate management contracts in Manchester. In addition, the business expanded its geographical reach with new contracts in South Derbyshire, Staffordshire and Cheshire. The confirmed order book at 30 June 2009 was £169.5m (2008: £158.8m).

The business was awarded the ROSPA President's Award for safety, having secured a ROSPA Gold Award for the tenth consecutive year.

Gleeson Commercial Property Developments

Although the results of this business are included within continuing operations, the business is in run-off, as announced on 30 March 2007.

The poor market conditions of 2008 continued into 2009, necessitating valuation write-downs, included within exceptional charges, of £7.5m.

As of 30 June 2009, the business had five (2008: nine) sites remaining, all of which were build complete. These developments had a net book value of £11.5m (2008: £19.7m). Since 30 June 2009, the business has sold out of two sites. The pre-sold development described in last year's Report & Accounts did not complete, resulting in the purchaser forfeiting the deposit of £0.6m. The remaining developments comprise a trade park at Luton, a retail and flat development in Barnes, South West London, and a single unit at an office development in Petersfield, Hampshire.

Gleeson Construction Services

CONTINUING OPERATIONS

	2009	2008
Revenue	£0.0m	£1.6m
Operating Loss	£(0.1)m	£(4.1)m

The Group retained sufficient assets and liabilities after the disposal of its Gleeson Building Contracting Division in August 2005 for the results of these retained assets and liabilities to be classified as continuing.

The business unit continued to resolve outstanding matters during the year, with the loss recorded being the running costs of the unit.

DISCONTINUED OPERATIONS

	2009	2008
Revenue	£3.8m	£12.4m
Operating Loss	£(0.2)m	£(1.0)m

The Group disposed of sufficient assets and liabilities of its Gleeson Engineering Division in October 2006 such that the results of these retained assets are classified as discontinued.

The retained element of the Gleeson Engineering Division recorded an operating loss for the year of £0.2m (2008: £1.0m), which represented the running costs of the business unit.

Group Activities

These consist of the Board, Company Secretary and Group Finance. The charge for the year was £3.6m (2008: £6.1m), of which £0.6m (2008: £0.7m) was exceptional.

FINANCE REVIEW

Overview

The financial results for the year reflected the continuing difficult trading environment in which the Group operated.

The loss before tax from continuing operations of £54.3m (2008: £20.8m) included exceptional charges of £46.0m (2008: £17.4m). The exceptional charges comprise:

a £44.6m non-cash charge for asset valuation write-downs;
a £1.4m provision for surplus office space, over the balance of their leases, and redundancies;

Key Performance Indicators

	2009	2008
Continuing Operations
Revenue	£55.0m	£94.6m
Operating Loss	£(55.2)m	£(24.3)m

Continuing Operations

Gleeson Regeneration & Homes and Gleeson Strategic Land recorded an operating loss of £43.7m (2008: £16.3m) on revenue of £34.2m (2008: £64.0m). Included within the operating loss is an exceptional charge of £37.4m (2008: £15.1m), detailed as follows:

a £37.1m non-cash charge for asset valuation write-downs;
a £0.3m provision for surplus office space, over the balance of their leases, and redundancies.

Gleeson Capital Solutions recorded an operating loss of £0.6m (2008: profit £2.3m) on revenue of £nil (2008: £1.2m). Included within the operating loss are exceptional charges totalling £0.5m (2008: £nil) to provide for surplus office space and redundancies. No projects for which Gleeson Capital Solutions is bidding achieved financial close during the year. The last non-core PFI project was sold during the year for £nil profit.

Powerminster Gleeson Services recorded a profit of £1.0m (2008: £1.1m) on revenue of £18.7m (2008: £19.5m). As expected, operating margin declined, to 5.3% (2008: 5.6%), as the prior year had been aided by certain non-recurring events. The confirmed order book as at 30 June 2009 was £169.5m (2008: £158.8m).

Gleeson Commercial Property Developments made an operating loss of £8.0m (2008: £1.2m) on revenue of £2.1m (2008: £8.3m). Included within the operating loss are non-cash exceptional charges totalling £7.5m (2008: £1.6m), with £1.5m to write down asset valuations and £6.0m for the impairment of the joint venture loans. At 30 June 2009, the five remaining development sites had a net book value of £11.5m (2008: nine sites with a net book value of £19.7m).

Gleeson Construction Services, the continuing element of which comprises the run-off of the Gleeson Building Contracting Division, recorded revenue of £nil (2008: £1.6m), on which an operating loss of £0.1m (2008: £4.1m) was recorded.

Discontinued Operations

Discontinued operations comprise those assets and liabilities of the Gleeson Engineering Division which were not sold to Black & Veatch in October 2006. During the year, revenue of £3.8m (2008: £12.4m) was recorded. A profit after tax of £0.9m (2008: £1.0m) was generated, reflecting a tax credit of £0.9m arising from adjustments to prior year tax calculations.

Interest

Net interest income of £0.9m (2008: £3.5m) was lower due to the decreased level of net cash balances maintained by the Group throughout the year, along with significantly reduced interest rates.

Tax

A net tax charge for continuing operations, excluding tax for joint ventures, of £2.7m (2008: £nil) has been recorded in the Income Statement. The tax charge includes the write-off of deferred tax assets of £2.8m relating to tax losses, as usage of the losses cannot be forecast with certainty. The Group now has £88.1m (2008: £39.1m) of tax losses which can be carried forward indefinitely.

The total tax charge, including tax on discontinued operations and tax attributable to joint ventures, was £1.9m (2008: credit £1.9m). The net deferred tax asset has decreased to £0.6m (2008: £3.6m), largely due to the write-off noted above.

Earnings per Share

Basic and diluted loss per share was 107.5p (2008: basic and diluted loss of 38.0p). For continuing operations only, the basic and diluted loss per share was 109.3p (2008: basic and diluted loss of 39.9p).

Balance Sheet

At 30 June 2009, shareholders' funds totalled £103.4m (2008: £159.2m). Non-current assets decreased to £22.1m (2008: £45.6m) due to trade receivables becoming a current asset, the write-down of the deferred tax asset and impairment of loans to a number of joint ventures. Net current assets decreased to £85.4m (2008: £118.3m), predominately due to the impairment of inventories.

Cash Flow, Treasury Risk Management and Bank Facilities

The Group experienced a cash outflow for the year of £11.0m (2008: £16.2m), resulting in a net cash balance at 30 June 2009 of £10.9m (2008: £21.9m).

Operating cash flows, including working capital movements, utilised £20.4m (2008: £24.0m). Net taxes refunded totalled £3.4m (2008: net payment £1.5m) and cash inflows from investing activities were £6.4m (2008: £14.2m). Net cash flows from financing activities generated £nil (2008: outflow £4.8m). No dividends were paid during the year.

The Group's cash balances are centrally pooled and invested, ensuring the best available returns are achieved consistent with retaining sufficient liquidity for the Group's operations. The Group only deposits funds with financial institutions which have a minimum credit rating of AA.

As the Group operates wholly within the UK, there is no requirement for currency risk management.

In June 2007, a three year £50m revolving credit facility was signed with a consortium of banks comprising HSBC Bank (the Group's principal banker), Barclays Bank and Allied Irish Bank.

Pension

The Group operates a defined contribution pension scheme. A charge of £0.7m (2008: £0.9m) was recorded in the Income Statement for pension contributions. The Group has no exposure to defined benefit pension plans.

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above. In addition, the notes to the financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The Group meets its day-to-day working capital requirements through its current cash resources. The current economic conditions create uncertainty, particularly over the level of demand for the Group's goods and services and the availability of bank finance in the foreseeable future.

The Group has a committed £50m bank facility which expires in June 2010. The Group's forecasts and projections, even utilising pessimistic assumptions as to trading performance, show that the Group is able to operate without this bank facility for the foreseeable future. The Group will shortly be reducing this facility to £15m.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual Report and Accounts.

CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2009

	2009	2009	2009	2008	2008	2008
	Before Exceptional Items	Exceptional Items		Before Exceptional Items	Exceptional Items
		Note 4			Note 4
	£000	£000	£000	£000	£000	£000
Continuing operations
Revenue	59,740	(4,741)	54,999	97,969	(3,376)	94,593
Cost of sales	(55,635)	(33,917)	(89,552)	(87,318)	(8,884)	(96,202)
Gross profit/(loss)	4,105	(38,658)	(34,553)	10,651	(12,260)	(1,609)

Administrative expenses	(14,103)	(7,341)	(21,444)	(22,100)	(5,180)	(27,280)
Profit on sale of investments in PFI projects	-	-	-	1,194	-	1,194
Profit on sale of investment and owner-occupied properties	340	-	340	1,868	-	1,868
Valuation gains on investment properties	-	-	-	1,290	-	1,290
Share of profit of joint ventures (net of tax)	498	-	498	218	-	218
Operating loss	(9,160)	(45,999)	(55,159)	(6,879)	(17,440)	(24,319)

Financial income	1,444	-	1,444	4,044	-	4,044
Financial expenses	(576)	-	(576)	(551)	-	(551)
Loss before tax	(8,292)	(45,999)	(54,291)	(3,386)	(17,440)	(20,826)

Tax	(2,652)	-	(2,652)	1	-	1
Loss for the year from continuing operations	(10,944)	(45,999)	(56,943)	(3,385)	(17,440)	(20,825)

Discontinued operations
Profit for the year from discontinued operations (net of tax)	920	-	920	975	-	975
Loss for the year attributable to
equity holders of the parent company	(10,024)	(45,999)	(56,023)	(2,410)	(17,440)	(19,850)


Loss per share attributable to equity holders of parent company
Basic and diluted			(107.48)			(38.03)

Loss per share from continuing operations
Basic and diluted			(109.25)			(39.90)

CONSOLIDATED BALANCE SHEET
at 30 June 2009

	2009	2008
	£000	£000
		Restated
Non-current assets
Property, plant and equipment	1,650	1,875
Investment properties	1,140	3,278
Investments in joint ventures	1,888	3,050
Loans and other investments	14,582	21,860
Trade and other receivables	1,962	11,674
Deferred tax assets	862	3,889
	22,084	45,626
Current assets
Inventories	50,080	81,667
Trade and other receivables	57,911	67,225
UK corporation tax	2	2,130
Cash and cash equivalents	10,926	21,875
	118,919	172,897

Total assets	141,003	218,523

Non-current liabilities
Provisions	(3,803)	(4,364)
Deferred tax liabilities	(271)	(328)
	(4,094)	(4,692)
Current liabilities
Trade and other payables	(31,914)	(51,326)
Provisions	(1,624)	(3,266)
UK corporation tax	(5)	-
	(33,543)	(54,592)

Total liabilities	(37,674)	(59,284)

Net assets	103,366	159,239

Equity
Share capital	1,052	1,047
Share premium account	5,861	5,611
Capital redemption reserve	120	120
Retained earnings	96,333	152,461
Total equity	103,366	159,239

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 30 June 2009

	2009	2008
	£000	£000

Loss for the year attributable to equity
holders of the parent company	(56,023)	(19,850)

Deferred tax on owner-occupied property	-	90
Net income recognised directly in equity	-	90

Total recognised loss for the year attributable
to equity holders of the parent company	(56,023)	(19,760)

CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2009

	2009	2008
	£000	£000

Operating activities
Loss before tax from continuing operations	(54,291)	(20,826)
Loss before tax from discontinued operations	(4)	(955)
	(54,295)	(21,781)

Depreciation of property, plant and equipment	289	1,016
Impairment of loans to joint ventures	5,950	-
Share-based payments	56	492
Profit on sale of investment and owner-occupied properties	(340)	(1,868)
Profit on sale of other property, plant and equipment	(22)	(30)
Profit on sale of investments in PFI projects	-	(1,194)
Valuation gains on investment properties	-	(1,290)
Share of profit of joint ventures (net of tax)	(498)	(218)
New ground rents capitalised	(3)	(25)
Financial income	(1,628)	(4,044)
Financial expenses	576	551

Operating cash flows before movements in working capital	(49,915)	(28,391)

Decrease in inventories	31,587	215
Decrease in receivables	19,753	21,230
Decrease in payables	(21,798)	(17,092)

Cash utilised in operating activities	(20,373)	(24,038)

Tax received	3,398	1,139
Tax paid	-	(2,594)
Interest paid	(490)	(98)

Net cash flows from operating activities	(17,465)	(25,591)

Investing activities
Proceeds from disposal of net assets held for sale	-	3,743
Proceeds from disposal of investments in joint ventures	1,659	-
Proceeds from disposal of assets and liabilities - Engineering Division	-	3,100
Proceeds from disposal of investment and owner-occupied properties	2,492	3,075
Proceeds from disposal of other property, plant and equipment	42	160
Proceeds from disposal of investments in PFI projects	-	1,898
Interest received	910	2,511
Purchase of property, plant and equipment	(84)	(861)
Net decrease in loans to joint ventures and other investments	1,403	613

Net cash flows from investing activities	6,422	14,239


Financing activities
Proceeds from issue of shares	255	149
Purchase of own shares	(161)	(109)
Dividends paid	-	(4,855)

Net cash flows from financing activities	94	(4,815)


Net decrease in cash and cash equivalents	(10,949)	(16,167)

Cash and cash equivalents at beginning of year	21,875	38,042

Cash and cash equivalents at end of year	10,926	21,875

NOTES

1. Accounting policies

Statement of Compliance

Both the Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ('IFRSs').

Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2009 or 2008 but is derived from those accounts. Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports (i) were 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 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2009.

Assets and liabilities in the financial statements have been valued at historic cost except where otherwise indicated in these accounting policies.

Judgements made by management in the application of IFRSs that have significant effect on the financial statements and estimates include the carrying value of land held for development, work in progress, investment in subsidiaries, loans to joint ventures, amounts recoverable on contracts and trade receivables.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The following restatements have been made:

- reclassification of £1,535,000 in the prior year from Freehold investment properties to Available for sale financial assets within Trade and other receivables.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiary undertakings. Joint ventures are accounted for using the equity method of accounting.

Revenue recognition

Revenue represents the fair value of work done on contracts performed during the year on behalf of customers or the value of goods and services delivered to customers. Revenue is recognised as follows:

Revenue from Construction Services activities represents the value of work carried out during the year, including amounts not invoiced.
Revenue from Property sales is recognised at the earlier of when contracts to sell are completed and title has passed or when unconditional contracts to sell are exchanged.
Revenue from Homes sales, other than construction contracts, is recognised when contracts to sell are completed and title has passed.
Revenue from rental income from investment properties is recognised as the Group becomes entitled to the income.

Revenue and margin on construction contracts are recognised by reference to the stage of completion of the contract at the accounts date. The stage of completion is determined by valuing the cost of the work completed at the accounts date and comparing this to the total forecasted cost of the contract. Full provision is made for all forecasted losses. Variations in contract work, claims and incentive payments are included to the extent that it is probable that they will result in revenue and that they are capable of being reliably measured.

Prudent provision against claims from customers or third parties is made in the year in which the Group becomes aware that a claim may arise.

Exceptional items

Items that are both material in size and unusual or infrequent in nature are presented as exceptional items in the income statement. The Directors are of the opinion that the separate recording of exceptional items provides helpful information about the Group's underlying business performance. Examples of events that may give rise to the classification of items as exceptional are the restructuring of existing and newly-acquired businesses, gains or losses on the disposal of businesses or individual assets and asset impairments, including land, work in progress and amounts recoverable on construction contracts.

Restructuring costs

Restructuring costs are recognised as exceptional items in the income statement when the Group has a detailed plan that has been communicated to the affected parties. A liability is accrued for unpaid restructuring costs.

Leasing

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

Amounts due from construction contract customers

Amounts due from construction contract customers represent the value of work carried out at the balance sheet date, less a provision for foreseeable losses less progress billings (see revenue recognition accounting policy).

2. Segmental analysis

For management purposes, the Group is organised into five operating divisions, Gleeson Regeneration & Homes and Gleeson Strategic Land, Gleeson Capital Solutions, Powerminster Gleeson Services, Gleeson Commercial Property Developments and Gleeson Construction Services. The divisions are the basis on which the Group reports its primary segment information.

Segment information about the Group's continuing operations, including joint ventures, is presented below:

		2009	2008
		£000	£000
Revenue
	Continuing activities:
	Gleeson Regeneration & Homes and Gleeson Strategic Land	34,169	64,015
	Gleeson Capital Solutions	30	1,200
	Powerminster Gleeson Services	18,681	19,538
	Gleeson Commercial Property Developments	2,086	8,250
	Gleeson Construction Services	33	1,590
		54,999	94,593

	Discontinued activities:
	Gleeson Construction Services	3,828	12,385
	Total revenue	58,827	106,978

(Loss)/profit on activities
	Gleeson Regeneration & Homes and Gleeson Strategic Land	(43,728)	(16,296)
	Gleeson Capital Solutions	(614)	2,338
	Powerminster Gleeson Services	967	1,088
	Gleeson Commercial Property Developments	(8,028)	(1,196)
	Gleeson Construction Services	(142)	(4,130)
		(51,545)	(18,196)
	Group Activities	(3,614)	(6,123)
	Financial income	1,444	4,044
	Financial expenses	(576)	(551)
	Loss before tax	(54,291)	(20,826)
	Tax	(2,652)	1
	Loss for the year from continuing operations	(56,943)	(20,825)

	Profit for the year from discontinued operations net of tax)	920	975

	Loss for the period attributable to equity holders of the parent company	(56,023)	(19,850)

All rental incomes totalling £84,000 (2008: £399,000), are reported within the Gleeson Commercial Property Developments segment, with the balance of the Gleeson Commercial Property Developments segment revenue being sale of commercial properties. All revenue for the Gleeson Construction Services segment is in relation to long term contracts. In addition, £(2,308,000) (2008: £22,194,000) of long term contract revenue is reported within the Gleeson Regeneration & Homes and Gleeson Strategic Land segment. The reassessment of revenue forecasts on the long term contract, where revenues are not fixed, generated negative revenue in the current year. The balance of revenue in the Gleeson Regeneration & Homes and Gleeson Strategic Land segment relates to the sale of residential properties and land. Service revenues are reported by Gleeson Capital Solutions and Powerminster Gleeson Services.

3. Discontinued operations

The Group disposed of certain assets and liabilities of the Gleeson Engineering Division of Gleeson Construction Services to Black and Veatch Limited ('B&V') in a prior period and treated this as a Discontinued Operation. A small number of contracts were legally retained but the operations were taken over by B&V on the Group's behalf on a cost plus basis. Consequently, the Group has no involvement in the day-to-day running of these contracts and acts as an intermediary. At the time of the sale, the remaining costs to complete the contracts were considered insignificant in relation to the separately identifiable division as a whole.

	2009	2008
	£000	£000

Revenue	3,828	12,385
Cost of sales	(3,795)	(12,877)
Gross profit/(loss)	33	(492)

Staff costs	-	-
Other expenses	(221)	(463)
Operating loss	(188)	(955)

Financial income	184	-
Loss before tax	(4)	(955)
Tax	924	1,930
Profit for the period from discontinued operations	920	975

4. Exceptional costs

Impairment of inventories and contract provisions

At 30 June 2009, the Group conducted a review of the net realisable value of its land and work in progress carrying values of its sites in the light of the condition of in the UK housing market.

Where the estimated net present realisable value of the site is less than its carrying value within the balance sheet, the Group has impaired the land and work in progress value.

Impairment of amounts due from construction contracts

At 30 June 2009, the Group conducted a review of the net realisable value of amounts due from construction contracts in the light of the condition of the UK housing market. Where the estimated net present realisable value is less than its carrying value within the balance sheet, the Group has impaired the carrying value.

Onerous contract

At 30 June 2009, the Group accrued £nil (2008: £1.6m) to cover lease guarantees that are expected to be claimed on a vacant investment property.

Impairment of loans to joint ventures

At 30 June 2009, the Group conducted a review of the net realisable value of loans to joint ventures in the light of the condition of the UK commercial property market. Where the estimated net present realisable value is less than its carrying value within the balance sheet, the Group has impaired the carrying value.

Restructuring costs

During the year, the Group incurred £1.4m (2008: £5.2m) of costs in relation to reorganising and restructuring the business, including redundancy costs of £0.9m (2008: £2.2m) where existing employees could not be retained within the Group.

These exceptional costs may be summarised as follows:

	2009	2008
	£000	£000
Impairment of inventories and contract provisions	33,917	7,284
Impairment of amounts due from construction contracts	4,741	3,376
Onerous contract	-	1,600
Impairment of loans to joint ventures	5,950	-
Restructuring costs	1,391	5,180
	45,999	17,440


	2009	2008
	£000	£000
Gleeson Regeneration & Homes and Gleeson Strategic Land	37,443	15,140
Gleeson Capital Solutions	469	-
Gleeson Commercial Property Developments	7,513	1,600
Group Activities	574	700
	45,999	17,440

5. Tax

	Continuing operations		Discontinued operations		Total
	2009	2008	2009	2008	2009	2008
	£000	£000	£000	£000	£000	£000
Current tax:
Corporation tax	-	-	-	-	-	-
Adjustment in respect of prior years	(338)	251	(924)	(1,930)	(1,262)	(1,679)

	(338)	251	(924)	(1,930)	(1,262)	(1,679)

Deferred tax:
Current year expense/(credit)	2,990	(252)	-	-	2,990	(252)

Corporation tax expense/(credit) for the year	2,652	(1)	(924)	(1,930)	1,728	(1,931)

Joint ventures tax expense for the year	189	49	-	-	189	49

Total tax	2,841	48	(924)	(1,930)	1,917	(1,882)

Corporation tax was reduced from 30% to 28% on 1 April 2008. The weighted average tax is calculated at 28% (2008: 29.5%) of the estimated assessable profit for the year.

The charge for the year can be reconciled to the profit per the income statement as follows:

	2009	2008
	£000	£000


Loss before tax on continuing operations	(54,291)	(20,826)
Add joint venture tax for the year	189	49
	(54,102)	(20,777)
Loss before tax from discontinued operations	(4)	(955)
Loss before tax	(54,106)	(21,732)

Tax charge at standard rate	(15,150)	(6,411)
Tax effect of:
Non-taxable profits on disposal of discontinued operations	-	(352)
Expenses that are not deductible in determining taxable profits	(18)	356
Tax reliefs not recognised in the income statement	(35)	(301)
Losses arising in the year carried forward	13,908	4,917
Utilisation of tax losses not previously recognised	(3)	-
Non-taxable profits on property sales	-	(321)
Changes in tax rates	-	(21)
Losses from prior years no longer recognised	2,812	-
Adjustments in respect of prior years	403	251
Tax charge/(credit) and effective tax rate for the year	1,917	(1,882)

6. Dividends

	2009	2008
	£000	£000
Amounts recognised as distributions to equity holders in the period:

Final dividend for the year ended 30 June 2008 of nil p (2007: 7.30p) per share	-	3,811
Interim dividend for the year ended 30 June 2009 of nil p (2008: 2.00p) per share	-	1,044
	-	4,855

There is no final dividend proposed for the year ended 30 June 2009 (2008: nil p per share)	-	-

7. Loss per share

From continuing and discontinued operations

The calculation of the basic and diluted earnings per share is based on the following data:

From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the following data:

Earnings
	2009	2008
	£000	£000

Earnings for the purposes of basic earnings per share, being net profit or loss
attributable to equity holders of the parent company
Loss from continuing operations	(56,943)	(20,825)
Profit from discontinued operations	920	975
Loss for the purposes of basic and diluted earnings per share	(56,023)	(19,850)

Number of shares
	2009	2008
	No. 000	No. 000

Weighted average number of ordinary shares for the purposes of basic earnings per share	52,126	52,197
Effect of dilutive potential ordinary shares:
Share options	-	574
Weighted average number of ordinary shares for the purposes of diluted earnings per share	52,126	52,771

From continuing operations
	2009	2008
	p	p

Basic and diluted	(109.25)	(39.90)

From discontinued operations
	2009	2008
	p	p

Basic	1.76	1.87

Diluted	1.76	1.85

From continuing and discontinued operations
	2009	2008
	p	p

Basic and diluted	(107.48)	(38.03)