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MJ Gleeson plc
Annual Report and Accounts
2018
BUILDING HOMES
CHANGING LIVES
Contents
Strategic Report
Financial Highlights
At a Glance
Chairman’s Statement
Business Model
Strategy
Market Overview
Key Performance Indicators
Chief Executive’s Statement
Business Performance
Corporate Social Responsibility Report
Financial Review
Operating Risk Statement
Governance Report
Board of Directors
Chairman’s Introduction
Governance Report
Directors’ Report
Audit Committee Report
Remuneration Committee Report
Remuneration Policy Report
Annual Report on Remuneration
Financial Statements
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Other Information
Five Year Review
Further Information
Corporate Directory
Shareholder Information
Financial Calendar
Information Regarding Our Websites
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106
Barnburgh View, Goldthorpe, South Yorkshire
Strategic Report
Governance Report
Financial Statements
Other Information
FINANCIAL HIGHLIGHTS
Profit before tax
+12.1%
2018: £37.0m, 2017: £33.0m
Cash & cash equivalents
+21.1%
2018: £41.3m, 2017: £34.1m
Dividend for the year
+33.3%
2018: 32.0p, 2017: 24.0p
Operating margin
18.7%
2017: 20.6%
Return on capital employed
26.6%
2017: 25.4%
Earnings per share
55.6p
2017: 48.5p
Cover: Oliver, Fretson Park, Sheffield
MJ Gleeson plc Annual Report and Accounts 2018 / 1
AT A GLANCE
MJ Gleeson plc specialises in low-cost house building
and strategic land promotion. We have two distinct
but complementary businesses: house building on
brownfield land in the North of England and strategic
land promotion in the South of England.
Homes sold (units)
2017: 1,013
1,225
HOUSE
BUILDING
Gleeson Homes
We build and sell low-cost homes to people
on low incomes in areas of industrial decline
and social and economic deprivation.
Through establishing strong
relationships with local
authorities, Gleeson Homes
acquires and redevelops sites
where there is an obvious need
for social and economic
regeneration and builds new
homes at affordable prices.
We deliver a unique social
benefit in helping people to
escape from housing poverty
caused by the “rent trap” into
home ownership and wealth
creation. Our homes are
affordable enough to be sold
to a couple on the current
National Living Wage and
mortgage repayments are
often less than local council
house rents.
We invest in the areas in which
we build, ensuring that we
leave a thriving community
once our developments are
complete.
Our operating areas
2 / MJ Gleeson plc Annual Report and Accounts 2018
¢ Gleeson Homes
¢ Gleeson Strategic Land
Strategic Report
Governance Report
Financial Statements
Other Information
Strategic Land portfolio (plots)
2017: 21,505
22,838
LAND
PROMOTION
Gleeson Strategic Land
We are a specialist land promoter that enhances
the value of land by securing mainly residential
planning consents. We focus on sites in the
South of England that are appealing to a wide
range of developers.
Gleeson Strategic Land is a
team of highly skilled planning,
technical and land specialists
who identify development
opportunities and work with
stakeholders to promote
the land through the
planning system.
We invest intelligently in our
land portfolio and work closely
with landowners, land agents,
local authorities and
communities to secure
residential planning consents
that are sustainable and
sensitive to local needs.
£43.3m
Revenue by division
£43.3m
£12.6m
£153.4m
£26.2m
Operating profit by division
£12.6m
We have a long history of
delivering value through
securing planning consents
that not only achieve best
value but ultimately help to
deliver attractive residential
development in areas where
housing shortage is
often acute.
£153.4m
£26.2m
¢ Gleeson Homes
¢ Gleeson Strategic Land
MJ Gleeson plc Annual Report and Accounts 2018 / 3
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.”
Dermot Gleeson
Chairman
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 £26.2m
(2017: £22.8m including £1.0m 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%.
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 increased operating profit by 5.0%
to £12.6m (2017: £12.0m) 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.
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.
Group profit before tax increased by 12.1% to £37.0m
(2017: £33.0m). Profit for the year attributable to equity holders
of the parent company was £30.2m (2017: £26.2m).
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.
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.
4 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Carlisle Park, Swinton, South Yorkshire
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
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.
MJ Gleeson plc Annual Report and Accounts 2018 / 5
BUSINESS MODEL
Our unique business model delivers value for
shareholders, customers, communities and our
employees. Our business model has two distinct
divisions which are complementary in generating
long term sustainable value.
Core activities
Land acquisition
Planning
HOUSE
BUILDING
Gleeson Homes
Successful land buying
We partner with local authorities
and private landowners to acquire
land in socially and economically
deprived areas which will benefit
from regeneration and investment.
We have a carefully targeted land
buying strategy that has clearly
defined and challenging hurdle
rates. This ensures that we buy land
at sensible prices so that our homes
remain affordable.
Attractive developments
Our developments are designed
to transform areas that are often
blighted by urban neglect and
dilapidation. Our sites are
landscaped in a way that is
attractive, environmentally friendly
and sustainable.
We build a range of two, three and
four bedroom detached and
semi-detached homes that are
planned around a well-established
specification.
We work with local communities,
local authorities and councils
to ensure that our planned
developments balance the needs of
stakeholders, whilst ensuring our
homes remain affordable.
Land pipeline
12,852 plots
2017: 11,588 plots
LAND
PROMOTION
Gleeson Strategic Land
Land opportunities
We enter into contractual
agreements with landowners to
promote their land through the
planning process where we see
an opportunity for sustainable
residential or other development
in the future.
Land promotion
Our team of specialist land surveyors
and town planners, along with legal
and technical experts, steer the land
through the planning system
towards achieving a viable and
attractive planning consent.
We invest intelligently in the
promotion of our sites, a process
which can sometimes be long and
complex.
Strategic Land portfolio
Planning consents obtained
22,838 plots
2017: 21,505 plots
7 sites
2017: 8 sites
6 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Build
Customers
Output
Tightly controlled costs
We maintain tight control over build
and material costs.
We partner with local suppliers and
subcontractors wherever possible.
By using suppliers and
subcontractors that are local
to our sites, we provide jobs and
investment to areas that are often
most in need.
We ensure that our overhead
costs are low by having small and
similarly structured management
teams in each area and by
continuously measuring their
relative performance.
Providing affordable homes
We ensure that our homes are
affordable and built to the
specification that our customers
expect. Our average selling price
is £125,200 (2017: £122,700).
We offer our customers a range
of bespoke financial packages,
including a deposit saving scheme,
to enable them to become
homeowners.
Our developments provide new
homes that are affordable to
people from the local area. Our
buyers are often young, motivated
individuals and couples on low
incomes who can afford to buy one
of our homes and want to escape
the burden of renting.
Community regeneration
Over the years, Gleeson Homes has played
a key role in regenerating many challenging
urban areas across the North of England.
We have helped to re-establish local
communities and invested in a wide range
of projects near to our sites, transforming
community facilities and sponsoring over
100 local junior sports teams.
Shareholder value
Gleeson Homes generated an operating
profit of £26.2m (2017: £22.8m).
Average selling price
£125,200
2017: £122,700
Homes sold
1,225 units
2017: 1,013 units
Shareholder value
Gleeson Strategic Land generated an
operating profit of £12.6m (2017: £12.0m).
Stakeholder management
We have a long history of working
with a range of mid-tier and large
housebuilders to manage the sale of
consented land.
By achieving best value for
landowners and other stakeholders
we ensure that we generate
significant returns for ourselves.
Through careful promotion and sale,
we provide high quality consented
land to developers who ultimately
deliver attractive and sustainable
residential development in areas
where there is a housing need.
MJ Gleeson plc Annual Report and Accounts 2018 / 7
STRATEGY
Our strategy is to create sustainable value growth for
our stakeholders by delivering an increasing number of
affordable homes to people across the North of
England and by unlocking the potential of land in the
South of England for residential or other development.
Gleeson Strategic Land
The supply of new homes in the South
of England continues to suffer due to a
fragmented planning landscape and
underlying inertia to new development
in many areas.
Gleeson Strategic Land works to
obtain planning consent on sites by
navigating the complexities of the
planning system. This enables us to
supply high quality consented land to
developers, who can start to deliver
new homes for sale typically within 12
to 24 months of a planning consent.
Where residential consent is not a
viable option we may seek other types
of planning permission such as for
commercial use to provide much
needed employment land, or care
home development to help support
the growing elderly population.
Gleeson Homes
Britain has a well publicised housing
crisis. The housing shortage is not
being met by the supply of new
homes. This is particularly the case for
young, first time buyers and people on
low incomes who are caught in the
“rent trap” and feel increasingly
disillusioned by a lack of supply at the
lower end of the housing market.
Gleeson Homes has a proven and
successful track record in delivering
new homes at affordable prices across
the North of England. Working
alongside local authorities, Gleeson
Homes has led the regeneration of
many urban communities, enabling
people to buy their own home to live
and work in their local area. Through
careful cost control across our
business and targeted land buying,
we remain committed to keeping our
homes affordable to the sector of the
housing market that we serve.
Targeted growth
In 2017, we set a target of 2,000 unit
completions per annum within 5
years. In 2018, we delivered our
largest annual volume growth selling
1,225 homes during the year, an
increase of 212 units (20.9%)
compared with the previous year’s
total of 1,013 units.
Demand remains extremely strong and
we are comfortably on track towards
achieving our 2017 stated target.
8 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic priorities
Progress in 2017/18
Priorities for 2018/19
Increase house building footprint
We will increase the number of active developments
across the North of England, targeting urban areas
that are in need of regeneration.
Gleeson Homes was active on 65 sites at 30 June 2018 having
We will continue to open new sites and anticipate an increase to
opened 17 new sites during the year and completed
more than 70 sites during the coming year.
We will remain on track towards achieving our 2017 stated
target of 2,000 unit completions per annum within 5 years.
Build quality affordable homes
We will build good quality homes to the
specification that our customers require. We will
ensure that our homes are energy efficient and have
low running costs. We will use appropriate
construction methods to build efficiently.
We will tightly control build costs and acquire land
in line with our defined hurdle rates. Our focus on
costs enables us to maintain profitability whilst
keeping our average selling prices (“ASPs”) low.
Increase land pipeline
We will continue to acquire land to support the
growth of Gleeson Homes. We will start building as
soon as we have an acceptable planning approval.
Strategic Land promotion
Gleeson Strategic Land will continue to invest in its
portfolio of land interests and promote existing and
new sites through the planning system to deliver
maximum value to its stakeholders.
At 30 June 2018, Gleeson Strategic Land had a land portfolio
of 61 sites, which can deliver 22,838 plots and 67 acres of
commercial land.
We will continue to invest in advancing our Strategic Land
portfolio through the planning system to ensure the delivery of
sustainable profits and cash flows for 2018/19 and beyond.
During the year, we achieved planning consents on 7 sites and
acquired interests in 4 new sites.
development on 11 sites.
A new pilot office was opened during the year in
Northumberland and our pilot office in Scunthorpe became a
fully staffed area office. At 30 June 2018, there were 8 area
offices and 2 pilot offices.
Volume growth of 212 units (20.9%) to 1,225 units sold during
the year led to revenue growth of £22.9m in Gleeson Homes.
In March 2018, MJ Gleeson plc was voted the most sustainable
business in the UK at the national PLC Awards. This recognised
our sustainable business model and approach to building
affordable homes in areas that are most in need of regeneration
using cost-effective and environmentally friendly materials.
Our focus on cost control enabled us to broadly maintain
operating margin on unit sales at 17.1% (2017: 17.5%) with
ASPs remaining sensibly low at £125,200 (2017: £122,700).
We will continue to use efficient building techniques in order
to keep costs low, selling prices affordable and to maintain
strong margins.
We will continue to use materials such as gravel on driveways,
which are environmentally friendly, cost-effective and aid
surface water drainage.
Our land pipeline of owned and conditionally purchased plots
at 30 June 2018 increased by 10.9%, totalling 12,852 plots, of
which 6,377 plots have been purchased subject to planning
permission.
On average, we completed the sale of the first house within 15
months of legally completing the purchase of a new site with an
acceptable planning permission.
We will continue to buy land at sensible prices to support the
growth of the business in 2018/19 and beyond.
We will continue to seek planning permissions for attractive
residential developments and will start on sites as soon as we
have an acceptable planning permission.
Strategic Report
Governance Report
Financial Statements
Other Information
Key goal:
Double Gleeson Homes
volumes
2017 – 2022
In 2017 we announced that we will increase
the number of unit completions to 2,000
per annum within 5 years.
2017: 1,013 units
By 2022: 2,000 units
Strategic priorities
Progress in 2017/18
Priorities for 2018/19
Increase house building footprint
We will increase the number of active developments
across the North of England, targeting urban areas
that are in need of regeneration.
Build quality affordable homes
We will build good quality homes to the
specification that our customers require. We will
ensure that our homes are energy efficient and have
low running costs. We will use appropriate
construction methods to build efficiently.
We will tightly control build costs and acquire land
in line with our defined hurdle rates. Our focus on
costs enables us to maintain profitability whilst
keeping our average selling prices (“ASPs”) low.
Increase land pipeline
We will continue to acquire land to support the
growth of Gleeson Homes. We will start building as
soon as we have an acceptable planning approval.
Gleeson Homes was active on 65 sites at 30 June 2018 having
opened 17 new sites during the year and completed
development on 11 sites.
A new pilot office was opened during the year in
Northumberland and our pilot office in Scunthorpe became a
fully staffed area office. At 30 June 2018, there were 8 area
offices and 2 pilot offices.
Volume growth of 212 units (20.9%) to 1,225 units sold during
the year led to revenue growth of £22.9m in Gleeson Homes.
In March 2018, MJ Gleeson plc was voted the most sustainable
business in the UK at the national PLC Awards. This recognised
our sustainable business model and approach to building
affordable homes in areas that are most in need of regeneration
using cost-effective and environmentally friendly materials.
Our focus on cost control enabled us to broadly maintain
operating margin on unit sales at 17.1% (2017: 17.5%) with
ASPs remaining sensibly low at £125,200 (2017: £122,700).
We will continue to open new sites and anticipate an increase to
more than 70 sites during the coming year.
We will remain on track towards achieving our 2017 stated
target of 2,000 unit completions per annum within 5 years.
We will continue to use efficient building techniques in order
to keep costs low, selling prices affordable and to maintain
strong margins.
We will continue to use materials such as gravel on driveways,
which are environmentally friendly, cost-effective and aid
surface water drainage.
Our land pipeline of owned and conditionally purchased plots
at 30 June 2018 increased by 10.9%, totalling 12,852 plots, of
which 6,377 plots have been purchased subject to planning
permission.
On average, we completed the sale of the first house within 15
months of legally completing the purchase of a new site with an
acceptable planning permission.
We will continue to buy land at sensible prices to support the
growth of the business in 2018/19 and beyond.
We will continue to seek planning permissions for attractive
residential developments and will start on sites as soon as we
have an acceptable planning permission.
Strategic Land promotion
Gleeson Strategic Land will continue to invest in its
portfolio of land interests and promote existing and
new sites through the planning system to deliver
maximum value to its stakeholders.
At 30 June 2018, Gleeson Strategic Land had a land portfolio
of 61 sites, which can deliver 22,838 plots and 67 acres of
commercial land.
We will continue to invest in advancing our Strategic Land
portfolio through the planning system to ensure the delivery of
sustainable profits and cash flows for 2018/19 and beyond.
During the year, we achieved planning consents on 7 sites and
acquired interests in 4 new sites.
MJ Gleeson plc Annual Report and Accounts 2018 / 9
MARKET OVERVIEW
The housing market in the UK is “broken”. Over the
last 10 years home ownership has fallen steadily
from a peak of around 73% in 2008 to just over 63%
in 2017.
At the same time the proportion of households privately
renting in England has increased by 121%. This figure is
greater in the North and Midlands, with an increase of 212%
in the North East1.
The desire to own remains strong
Most people still want to own their own home. Home
ownership provides people with stability, financial security
and security for their children’s future, with 86% of the
population preferring to buy than rent2. Owning a property
remains the most important milestone in life for many people.
UK home ownership rate
%
74
72
70
68
66
64
62
60
2007
2009
2011
2013
2015
2017
The age gap is widening
The demographic split of home ownership rates shows that
the market is failing younger people, with 16 to 34 year olds
becoming less likely to own their home, and over-65 year olds
more likely1. This gap continues to widen as more young
people are forced into a lifetime of renting.
The majority of those renting want to own their own home but
are prevented from doing so by rising house prices and the
failing supply of new homes.
1 in 3 homes are now rented
There are 24 million homes in England. More than half, around
12.4 million, are in the North, Midlands and East of England
and around 11.5 million are in London and the South.
One third (8.5 million) of homes across England are now
rented with 4.3 million homes rented in the North, Midlands
and East and 4.2 million rented in London and the South.
Half of rented homes are owned by Councils or Housing
Associations. In the North, Midlands and East of England
2.1 million homes are rented privately and 2.2 million are
rented from Councils or Housing Associations.
10 / MJ Gleeson plc Annual Report and Accounts 2018
2006
Home ownership by age group
2010
2008
2012
2014
2016
35
30
25
%
20
15
10
5
1996
2001
2006
2011
2016
16-34
65 and over
Source: Labour Force Survey, Q4 various years
North, East
& Midlands
8.1m
4.3m
London
& South
7.3m
4.2m
OwnedRented Strategic Report
Governance Report
Financial Statements
Other Information
Too few homes are being built
The house building industry in England built 160,000 new
homes last year. The Ministry of Housing, Communities and
Local Government estimate between 222,000 and 244,000
new homes per year are needed until 2031. The supply of new
homes in the UK is falling a long way short of Government
targets and required housing numbers.
New homes are built for those that already own
Most of the house building industry builds homes for people
who already own a home. The average selling price of a home
built by listed housebuilders exceeded £300,000 last year, a
price unaffordable to many first time buyers and certainly to
those on lower incomes.
House building
Newbuild completions in England 1970 to 2018
350
300
250
200
150
100
50
s
d
n
a
s
u
o
h
T
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2018
All
Private enterprise
Source: Ministry of Housing, Communities & Local Government
Average price of newbuild homes
Selection of other listed housebuilders 2017
500
400
300
200
100
0
0
0
0
£
Gleeson
Homes
A
B
880
H
I
D
C
E
G
Other listed housebuilders
F
Too few homes built below £150,000
As a whole, the industry is not building enough homes for sale
below £150,000. This is where there is large, under-served
market demand.
Housing transaction volumes in the North,
Midlands & East of England
Below £150,000
Above £150,000
In the North, Midlands and East of England only 6% of homes
sold below £150,000 were newbuild compared with 20%
of homes over £150,000. This striking ratio highlights the
under-supply of affordable homes being built in the North,
Midlands and East of England.
Whilst there are many cheaper terraced houses in the North,
Midlands and East of England, lenders often require higher
deposits than for newbuild homes, which makes older terraced
houses less affordable for many people.
)
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a
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o
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(
s
n
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i
t
c
a
s
n
a
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t
f
o
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e
b
m
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N
1 in15
newbuild
203
14
)
s
d
n
a
s
u
o
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t
(
s
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t
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a
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o
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e
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m
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N
1 in 5
newbuild
254
64
Newbuild
Resale
Newbuild
Resale
1 Parliamentary Briefing Paper CBP 7706 June 2017
2 Redfern Review November 2016, British Social Attitudes Survey
MJ Gleeson plc Annual Report and Accounts 2018 / 11
KEY PERFORMANCE INDICATORS
Gleeson Homes volumes
Units (homes) sold continued
a strong growth trajectory.
+20.9%
2018: 1,225 units
2017: 1,013 units
Units sold
561
751
904
1,013
1,225
2014
2015
2016
2017
2018
Group revenue
Average Selling Prices (“ASP”)
grew by a modest amount from
£122,700 to £125,200.
+22.6%
2018: £196.7m
2017: £160.4m
Group operating
profit margin
Group operating margin
was impacted by the mix
of transaction types in
Gleeson Strategic Land.
–190bps
2018: 18.7%
2017: 20.6%
Group profit before tax
Group profit before tax has
more than doubled in the
past three years.
+12.1%
2018: £37.0m
2017: £33.0m
Group cash balance
Both divisions contributed
to strong cash generation.
+21.1%
2018: £41.3m
2017: £34.1m
12 / MJ Gleeson plc Annual Report and Accounts 2018
£m
%
81.4
117.6
142.1
160.4
196.7
2014
2015
2016
2017
2018
18.7%
19.8%
20.6%
18.7%
14.8%
2014
2015
2016
2017
2018
£m
£m
33.0
37.0
28.2
12.2
17.3
2014
2015
2016
2017
2018
41.3
34.1
13.7
2014
15.8
23.2
2015
2016
2017
2018
Strategic Report
Governance Report
Financial Statements
Other Information
Group return on
capital employed1
Strong earnings growth is
delivering an increase in the
return on capital employed.
+120bps
2018: 26.6%
2017: 25.4%
%
13.7%
21.1%
23.2%
25.4%
26.6%
Gleeson Homes
land pipeline
Land continues to be available
to buy at sensible prices.
+10.9%
2018: 12,852 plots
2017: 11,588 plots
2014
2015
2016
2017
2018
Plots
7,496
9,284
5,065
11,588
12,852
2014
2015
2016
2017
2018
Gleeson Homes active sites
Sites
Gleeson Homes opened
17 sites, completed 11 sites
and increased net active sites
by 6 sites during the year.
+10.2%
2018: 65 sites
2017: 59 sites
Gleeson Strategic
Land portfolio
Land interests represent over
20 years of sales2.
22,838
2018: 22,838 plots
2017: 21,505 plots
1 Return on capital employed is calculated based on earnings before interest and
tax (EBIT) from continuing and discontinued operations before exceptional items
expressed as a percentage of the average of opening and closing net assets after
deducting deferred tax balances and cash.
2 Based on an average of the number of plots on sites sold over the last 5 years.
35
43
48
59
65
2014
2015
2016
2017
2018
Plots
21,500
21,150
21,111
21,505
22,838
2014
2015
2016
2017
2018
MJ Gleeson plc Annual Report and Accounts 2018 / 13
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.”
Jolyon Harrison
Chief Executive Officer
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.
Operational performance
Gleeson Homes grew sales volumes by 20.9% to 1,225 units and
operating profit by 14.9% to £26.2m. 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 £12.6m.
A strong cash result for the year saw the Group’s cash balance
increase by £7.2m to £41.3m 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
£187,995, is significantly below the current Help to Buy limit of
£600,000. The average priced house purchased with Help to Buy
was £125,610.
First time buyers
87%
14 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
“Helping young people out of
housing poverty and the rent
trap is very rewarding in every
way and our responsible
business model endeavours
to work with our customers
and engage with them to
our mutual benefit.”
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 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 do not 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.
MJ Gleeson plc Annual Report and Accounts 2018 / 15
Stephenson Court, Peterlee, County Durham CHIEF EXECUTIVE’S STATEMENT continued
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
£125,200
Other listed
housebuilders
(Lowest-Highest)
£234,000–
£880,000
87%
35%–50%
Average selling price
(Private sales)
First time buyers
(% of private sales)
Renting or living with family
(% of total sales)
88%
40% (estimated
average)
Buy-to-let sales
(% of total sales)
Part-exchange sales
(% of private sales)
Flats v houses
(Flats as % of total sales)
Sales rate
(Sales per site p.a.)
Average land cost
(per plot)
Annual growth
(3 year average p.a. growth in volumes)
0%
0%
0%
3%–9%
8%–38%
6%–24%
20 p.a.
30–40 p.a.
£9,000
£28,000–
£71,000
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 £12.6m 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
16 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Responsible house building
Our business model is founded on a close engagement with our customers and their communities,
productive cooperation with local landowners, empowerment of our people and fair treatment of
our supply chain to ensure that we are building a “best in class” product.
Our model is unique and is driving growth which mutually benefits our customers, our
communities and our shareholders.
Our commitment to freehold
We believe that wherever possible home ownership should
include the land on which it is built. Where this is not possible
the homeowner should not be penalised.
Wherever possible we sell our homes as freehold. We only sell
homes as leasehold when we do not own the land and this
applies to our two developments in Burnley where the Local
Authority is still the freeholder and a peppercorn ground rent is
payable on these homes.
Sustainable builders
Our unique approach to business was recognised in March 2018
when we were voted the most sustainable PLC in the UK at the
prestigious PLC Awards. The judges valued the responsible
approach that we take to building low-cost homes including our
use of environmentally friendly materials, such as gravel
driveways which have a lower carbon footprint than bonded
materials and aid surface water drainage.
Making it easy for our customers
We make it our priority to make the house buying process fully
transparent to our customers:
• We charge a fee of £200 for covering our costs for vetting
architects’ drawings and giving permissions for extensions
and conservatories but we do not charge for minor
permissions.
• Householders on certain sites pay third parties to maintain
open space areas. These charges are generally around £100
per year per house and are challengeable by residents.
• There are no other “hidden” costs or charges.
We ask our Mortgage Consultants to stay in contact with our
customers for at least two years after purchase in order to help
them manage their new financial environment.
Living Wage Foundation
We are the only major housebuilder accredited to
the Living Wage Foundation paying our employees
the real Living Wage, or higher. The only exception to
this is for apprentices, where we pay above the Government’s
guidance for apprentices.
The Gleeson Apprenticeship Scheme
Since 2010 the Gleeson Apprenticeship Scheme has trained
over 100 young people and we have a record 46 apprentices
starting in September this year. The national lack of skilled
people such as bricklayers and joiners is adding to the housing
crisis. We are recruiting apprentices to help fill the skills
shortage through our Apprenticeship Scheme. When they
qualify a large number continue to work for us or go on to a
third year of their NVQ which can lead to becoming a trainee
Site Manager. Our office in Sheffield is a registered CITB
training centre which shows that we take training seriously.
YourWatch®
Our trademarked YourWatch® scheme provides
our residents with the anonymity to report their
concerns without repercussion via the YourWatch® website. We
share information with local police and residents. We work in
partnership with local police in many areas to reduce crime and
antisocial behaviour. Many of our customers are young single
people and YourWatch® is a place where they can air their
concerns and receive reassurance that someone is looking out
for them.
The Gleeson Community Sports Foundation
Since the inception of the Foundation six years ago, we have
sponsored over 100 junior sports teams by providing brand
new kit and funding for teams in and around our developments.
MJ Gleeson plc Annual Report and Accounts 2018 / 17
BUSINESS PERFORMANCE
Gleeson Homes
Units sold
+20.9%
2018: 1,225 units
2017: 1,013 units
Land pipeline
+10.9%
2018: 12,852 plots
2017: 11,588 plots
Operating profit*
+14.9%
2018: £26.2m
2017: £22.8m
*
2018 includes £nil profit on land sales
(2017: £1.0m of which £0.4m 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 England1. 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 £125,200
(2017: £122,700). 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
£50.1m (2017: £41.0m). Gross profit on
land sales was £nil (2017: £1.0m) resulting
in total gross profit of £50.1m (2017:
£42.1m).
Operating profit on unit sales increased
20.2% to £26.2m (2017: £21.8m).
Operating profit on land sales was £nil
(2017: £1.0m). Gleeson Homes reported
total operating profit of £26.2m (2017:
£22.8m). 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 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.
Unit volumes
751
561
1,225
1,013
904
Operating profit on unit sales*
(£m)
26.2
21.8
19.5
14.7
9.1
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
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.
18 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
19
Carlisle Park, Swinton, South Yorkshire BUSINESS PERFORMANCE
Gleeson Strategic Land
Sites sold
+2 sites
2018: 10 sites
2017: 8 sites
Land portfolio
+6.2%
2018: 22,838 plots
2017: 21,505 plots
Operating profit
+5.0%
2018: £12.6m
2017: £12.0m
Revenue from Gleeson Strategic Land grew
by 44.8% to £43.3m (2017: £29.9m) 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
£12.6m (2017: £12.0m). This was driven by
the increase in the number of transactions
during the year.
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 interests
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 England1. 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.
Site sales
(number of sites)
7
5
10
8
7
Operating profit
(£m)
10.2
8.1
4.8
12.0
12.6
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
1 Sites are located predominantly in
Buckinghamshire, Devon, Dorset, Essex,
Hampshire, Hertfordshire, Kent, Oxfordshire,
Somerset, Surrey, Sussex and Wiltshire.
20 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
MJ Gleeson plc Annual Report and Accounts 2018 / 21
CORPORATE SOCIAL RESPONSIBILITY REPORT
We are now recognised as a leading UK
housebuilder of affordable new homes,
enabling young first time buyers and people on
low incomes to become private homeowners.
We are also recognised for our ethical approach
to business which carefully considers our role
in the community and the environment
throughout our business activities.
Local jobs for local people
As an example of our commitment to the areas
in which we work, we give priority to the
employment of local people. For example, we
have worked together with Nottingham City
Council to employ and train local people. After
advertising site-based positions through the
Council’s job portals we filled key vacancies,
and, thanks to Council funding, were able to
offer further training so that staff could obtain
a qualification.
This local employment initiative was, in part,
coordinated by Ghulam Jafferi, a Site Manager
on Gleeson Homes’ first development in
Nottingham. Ghulam grew up and still lives in
the local area and understands the importance
of providing opportunities to local people.
The most sustainable PLC in the UK
Our unique approach to business was recognised in March 2018 when we
were voted the most sustainable PLC in the UK at the prestigious PLC Awards,
winning the accolade over some of the largest companies in the country.
There was no application process for the awards; a nomination panel selected
suitable candidates from all public companies in the UK and a voting panel
decided the winner.
The judges valued the way that we work with our communities and
particularly liked our Community Matters programme including the
innovative YourWatch® online neighbourhood alert system. This works
more effectively than a traditional Neighbourhood Watch scheme in
more socially challenging areas.
The judges were also impressed with our use of sustainable materials such as
environmentally friendly gravel on driveways plus our commitment to paying
the real Living Wage. We remain the only major UK housebuilder who is
accredited by the Living Wage foundation.
22 / MJ Gleeson plc Annual Report and Accounts 2018
“We recognise the importance of
providing work opportunities to
local people.”
Strategic Report
Governance Report
Financial Statements
Other Information
The Gleeson Apprenticeship Scheme
Our Apprenticeship Scheme continued to grow this
year, with 46 apprentices being taken on in site and
office based roles.
The national shortage of skilled trades such as
bricklayers and joiners is adding to the housing crisis.
We are recruiting apprentices to help fill the skills
shortage through our Apprenticeship Scheme.
A large number of these continue to work for us or go
on to a third year of their NVQ which can lead to
becoming a trainee Site Manager with us. Our office in
Sheffield is a registered CITB training centre.
Our office based apprenticeships have also been
expanded this year, both across our area offices and at
our head office in Sheffield. Local school leavers are
invited to join our technical, quantity surveying, land
buying or finance departments.
Our Apprenticeship Scheme offers a fantastic
opportunity for school leavers or those looking to start
a new career in the house building industry. In
September 2018, 34 site and 12 office apprentices will
start their first year of the apprenticeship programme,
12 site and 5 office apprentices will start their second
year and 3 site and 6 office apprentices will start their
third year.
The Bloomin’ Great Gleeson Garden Competition
Now in its third year this competition engages with Gleeson
homeowners by inviting them to nominate their front garden for a panel
of Gleeson staff to choose the winners from the large number of
entrants.
The competition encourages buyers to maintain front gardens,
enhances street scenes and helps to bring communities together.
This year we have paid over £2,000 in prize money to homeowners
as part of this competition.
The owner of the garden below
at Burnham Walk, Bradford came
third in the West Yorkshire area.
North East based apprentice Alex Rioch is “flying the flag”
for Gleeson Homes after impressing the judges with his
bricklaying skills and winning the Northern Guild of
Bricklayers annual competition. Alex’s competition journey
continued to the national finals where he was placed 4th in
the country.
MJ Gleeson plc Annual Report and Accounts 2018 / 23
CORPORATE SOCIAL RESPONSIBILITY REPORT continued
The Gleeson Community Sports Foundation
This year we celebrated the sponsorship of our 100th junior sports team through
the Gleeson Community Sports Foundation. Over the last six years we have
provided community-led sports teams with over £50,000 worth of sports kit.
This funding is essential to grassroots teams who are coordinated by volunteers
and provide support and out of school activities to children at the heart of our
communities. From angling to table tennis, the money supplied by the Foundation
provides junior sports teams with a brand new kit and enhances team spirit.
Over the past six years we have provided kit for young people participating in all
different kinds of activities including:
YourWatch®
Our unique YourWatch® online
neighbourhood alert system continues
to grow with over 4,000 homeowners
now subscribed.
• Football
• Tennis
• Athletics
• Cricket
• Rugby
• Table tennis
• Angling
• Boxing
• Basketball
• Field hockey
• Roller hockey
Ice hockey
•
“Our grassroots club is run solely by volunteers and gives
girls of all backgrounds and ages a chance to get involved.”
Academy Juniors, Bolton
We continue to keep residents updated
on how to keep their homes and
communities safe and also send out
alerts when we receive information
about incidents occurring on their
developments.
When residents on one of our
developments sent us reports of youths
congregating in the area we worked
directly with the police, which led to
them adding additional patrols in the
area and disbanding the groups
causing antisocial behaviour. We also
worked with the local schools in the
vicinity arranging for our Health and
Safety team to visit the pupils and talk
about the dangers of playing near to
construction sites.
We recognise that transforming
difficult and socially challenging areas
is not a straightforward matter. We
continue to work with local residents,
communities and local authorities on
creating safe and attractive places to
live that transform the lives of
residents and build community spirit.
“We continue to work
with local residents,
communities and local
authorities on creating
safe and attractive
places to live that
transform the lives
of residents.”
24 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
“The centre had been transferred to asset management and
without the help from Gleeson Homes to create the café we
could have been facing demolition. Virgo’s Pantry now offers
parents the chance to sit and have coffee or lunch whilst
being able to watch their children play in a safe and secure
environment.”
Michael Keightley, Facilities Manager at Hemlington Lake & Recreation Centre
The Gleeson Community Challenge
The Gleeson Community Challenge continues to benefit local communities. The
competition, which ran across the Yorkshire and Teesside areas this year invited
not-for-profit groups to apply for a makeover of their facilities worth up to £20,000.
Before
This year we completed several makeovers that were started in 2017 including the
transformation of Hemlington Lake and Recreation Centre. The centre, located in an
area of social deprivation, lost most of its funding following Local Authority
spending cuts and only remains open thanks to the hard work of the local
community. The Community Challenge Makeover renovated a vacant storeroom into
a community café offering reasonably priced food and drinks to the centre’s visitors.
A local resident now leases the café, providing additional revenue to the centre and
the creation of jobs for local people.
“Thanks to Gleeson Homes I have been given
the opportunity to fulfil my lifelong dream of
opening a café. To be able to do this working
alongside my daughter-in-law and
granddaughter is just fantastic!”
Sue, Proprietor of Virgo’s Pantry
After
MJ Gleeson plc Annual Report and Accounts 2018 / 25
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%.”
Consolidated income statement
Group profit before tax (£m)
33.0
28.2
37.0
12.2
2014
17.3
2015
2016
2017
2018
Group revenue increased by 22.6% in the year to £196.7m
(2017: £160.4m). The revenue of Gleeson Homes increased by
17.5% to £153.4m (2017: £130.5m) 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 £125,200 (2017: £122,700).
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 £13.4m to
£43.3m 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 £65.3m
(2017: £56.7m). The gross profit of Gleeson Homes increased by
19.0% to £50.1m (2017: £42.1m includes profit on land sales of
£1.0m) due to the increase in both volume and selling prices.
The gross profit of Gleeson Strategic Land increased by 3.4% to
£15.2m (2017: £14.7m) primarily due to the increase in sites sold
during the year.
Administrative expenses increased by £4.6m (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 £36.9m
(2017: £33.0m), 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.
Stefan Allanson
Chief Financial Officer
Highlights
• Revenue increased by 22.6% to £196.7m
• Profit before tax increased by 12.1% to
£37.0m
• Earnings per share increased by 14.6% to
55.6 pence
• Operating cash flow before dividends
increased by 9.6% to £21.6m
• Cash balances increased by 21.1% to
£41.3m
• 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
26 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Operating profit by division
Divisional operating profit* (£m)
Gleeson Homes
Gleeson Strategic Land
17.4
8.1
2015
9.4
4.8
2014
19.5
10.2
2016
22.8
26.2
12.0
2017
12.6
2018
* Gleeson Homes operating profit includes profit on land sales of £nil in 2018;
£1.0m in 2017; £nil in 2016; £2.7m in 2015; and £0.3m in 2014
Operating profit for Gleeson Homes increased by 14.9% to
£26.2m (2017: £22.8m). Excluding land sales, operating profit for
Gleeson Homes increased by 20.2%.
Operating profit for Gleeson Strategic Land increased by 5.0% to
£12.6m as a result of the increase in transactions during the year
to 10 (2017: 8).
Discontinued operations incurred a loss of £0.3m during the
year (2017: £0.3m). 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 £132.3m
to £143.1m.
Return on capital employed (%)
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 £0.3m (2017: £0.2m) 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 £6.5m (2017: £6.5m)
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 £21.2m (2017: £26.7m) of gross tax losses, of
which £12.3m (2017: £17.8m) are recognised in calculating the
deferred tax asset.
The deferred tax asset recorded within the consolidated
statement of financial position totals £3.7m (2017: £5.0m).
Profit for the year
The profit for the year attributable to equity holders was £30.2m
(2017: £26.2m).
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 dividends (pence)
21.1%
23.2%
13.7%
25.4%
26.6%
2014
2015
2016
2017
2018
Financing
Finance income of £0.4m (2017: £0.3m) consists primarily of the
unwinding of discounts on deferred receivables on land sales
6.0
2014
32.0
24.0
14.5
10.0
2015
2016
2017
2018
MJ Gleeson plc Annual Report and Accounts 2018 / 27
FINANCIAL REVIEW continued
Statement of financial position
During the year to 30 June 2018, shareholders’ funds increased
by 9.7% to £188.1m (2017: £171.4m). 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 £30.4m
(2017: £21.2m). The main reason for the change is the increase
in deferred receivables of £10.9m offset by a £0.7m reduction
in shared equity receivables and a decrease in deferred tax
assets of £1.3m.
Current assets increased by 9.2% to £212.4m (2017: £194.5m),
with inventories increasing by £17.9m to £160.5m, trade and
other receivables decreasing by £7.3m to £10.6m and cash
balances increasing by £7.2m to £41.3m.
Total liabilities increased by 23.2% to £54.7m (2017: £44.4m).
This was mainly due to trade and other payables of £51.6m
(2017: £41.6m) being £10.0m higher due to an increase in
deferred land payables in Gleeson Strategic Land.
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 £20m 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 £40.0m. 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 £0.7m (2017: £0.6m) was recorded in the
consolidated income statement for pension contributions. The
Group has no exposure to defined benefit pension plans.
Cash flow
The Group generated £21.6m (2017: £19.7m) of cash in the
year before the payment of dividends of £14.4m (2017: £8.9m),
resulting in a net cash balance at 30 June 2018 of £41.3m
(2017: £34.1m).
Stefan Allanson
Chief Financial Officer
14 September 2018
Operating cash flows before working capital movements,
generated £38.6m (2017: £34.1m). Investment in working capital
of £11.4m (2017: £10.0m) resulted in cash generated from
operating activities of £27.2m (2017: £24.1m).
Tax and interest payments amounted to £5.3m (2017: £4.6m).
Cash outflows from investing activities totalled £0.3m
(2017: £0.2m inflow). Net cash outflows from financing activities
totalled £14.4m (2017: £8.9m), including £14.4m (2017: £8.9m)
on dividend payments.
Cash balance (£m)
41.3
34.1
13.7
2014
23.2
15.8
2015
2016
2017
2018
28 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
29
Paul, Lindsey, Norah – Carrwood Park, Tyersal, West Yorkshire OPERATING RISK STATEMENT
The Group operates a system of internal control and risk management
procedures in order to identify, monitor and control the Group’s material risks.
These risks include but are not limited to the following:
Risk
Description of risk
Mitigation
Economic environment
The impact of economic fragility
and uncertainty in the market.
The risk has increased with
uncertainty around the terms of UK
exit from the EU as the deadline for
withdrawal approaches. Demand
for low-cost homes remains strong.
Mortgage availability
The limited availability of
mortgages for house buyers.
The risk has not changed during
the year.
Land
An inability to source sufficient
land at an acceptable cost to meet
the Group’s business needs.
The risk has not changed during the
year. Land in the North, Midlands
and East of England remains
available at relatively low cost. The
Group has strengthened its land
buying team during the year.
Planning policy and regulations
The potentially damaging
uncertainties in the planning
regime may affect the Group’s
ability to secure planning consents
on a timely basis.
The risk has not changed during
the year.
People
An inability to attract, develop or
retain good people.
The development of management
capabilities as the Gleeson Homes
business continues to expand.
The lack of senior level succession
plans.
The risk has not changed during the
year. The Group has strengthened
its Human Resources team during
the year.
Build costs
An inability to secure materials and
skilled labour on a timely basis at
suitable prices.
The risk has increased with raw
material cost inflation and rising
labour costs, together with
shortages of certain subcontractors
becoming more of a factor for all UK
housebuilders.
Any uncertainty in the wider economy,
including interest rate rises, could
affect buyer confidence and the
demand for new houses. This could
have a negative impact on revenues,
profits, cash generation and the carrying
value of the Group’s assets.
• Sites are selected to meet the needs of the local community.
• Prices and incentives are regularly reviewed.
• Lead indicators of the housing market, such as visitors to
sites and reservation rates are closely monitored.
• A cautious approach to funding is maintained.
• Gleeson Strategic Land sites are actively marketed to a wide
range of housebuilders.
The availability of mortgage finance,
particularly the deposit requirements for
first time buyers, is crucial to customer
demand. Restrictions on mortgages
granted could reduce demand for new
homes and strategic land and impact the
Group’s revenues and profits.
• Gleeson Homes provides a range of customer assistance
packages.
• We continually innovate to find additional ways to assist
customers to buy a home.
• We work with key lenders to ensure products are appropriate
and available.
• Help to Buy continues to provide support to new buyers.
Gleeson Homes needs to acquire
consented land at sensible prices and in
appropriate areas in the North, Midlands
and East of England in order to construct
and sell homes to deliver profit. Gleeson
Strategic Land needs to acquire interests
in land in the South of England so that it
can promote the land through the
planning system and subsequently sell
it in order to deliver profit.
Increased complexity in some aspects
of the planning process may slow down,
or increase the cost of, the delivery of
consented land for development or sale
and so impact on the Group’s revenues
and profits.
• We have a clearly defined strategy and geographic focus.
• There is a formal appraisal process and rigorous adherence
to margin requirements and rates of return.
• We have a very high level of in-house expertise devoted to
monitoring and complying with planning regulations and to
achieving implementable planning consents.
• We consult with central government, parliament and local
authorities, both directly and via industry bodies, in order to
understand proposed changes to regulations and to
highlight potential issues.
• The new National Planning Policy Framework (NPPF)
supports our business model and should assist the planning
application process.
The loss of key staff or the failure to
attract, develop and retain people with
the right skills may have a detrimental
impact on the business.
The lack of development of Gleeson
Homes management could restrict
profitable and sustainable growth.
The lack of leadership arising from the
sudden loss of senior management.
• We have established a leadership development programme
covering senior and mid-level management.
• We have established an ongoing succession planning
process.
• We have programmes that appropriately reward the
achievement of performance targets.
• The Group encourages employee share ownership.
• Our Apprenticeship Scheme enables us to identify and
secure the loyalty of talented individuals at an early age.
• We perform regular performance and development reviews.
• We monitor staff turnover and benchmark remuneration
against competitors.
Shortages or increased cost of materials
or skilled labour, the failure of key
suppliers, or the inability to secure
supplies upon appropriate credit terms
could increase costs and delay
construction.
• The Group has multiple suppliers for both labour contracts
and material supplies.
• The Group seeks to partner with the supply chain and has
systems in place to monitor and control their performance.
• Where appropriate, Group purchasing arrangements are in
place to ensure the supply of materials at competitive prices.
• A dedicated subcontractor procurement programme is
employed to optimise the sourcing of scarce subcontractor
resource.
30 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Risk
Description of risk
Mitigation
Health & Safety
A failure to prevent unsafe
practices within our construction
activities, causing injury or death.
The risk has not changed during
the year.
Health & Safety breaches can result in
injuries to employees, subcontractors or
site visitors, delays in construction,
additional cost, reputational damage,
criminal prosecution or civil litigation.
• Our documented policies and procedures are regularly
reviewed and modified in order to ensure continuous
improvement.
• Dedicated Health & Safety personnel ensure implementation
and adherence to these policies and procedures.
• Performance is reviewed both by local management and
the Board.
Latent defects / uninsured loss
Financial losses may arise from
latent defects that may arise on
completed projects during the
liability period.
The risk has not changed during
the year.
Corporate liquidity
The Group needs appropriate
banking facilities for its short-term
liquidity and long-term funding
needs.
The risk has not changed during
the year.
Financial irregularity /
non-compliance
The Group could suffer loss from
significant fraud, the
misrepresentation of financial
results or non-compliance with
laws and regulations. This includes
the failure to operate appropriate
controls to ensure compliance with
relevant tax legislation.
The risk has not changed during
the year.
Credit risk
The Group could suffer loss as a
result of default from customers.
The risk has not changed during
the year.
Information technology
Failure of information
management systems, loss of data
or cyber attack.
The risk has not changed during
the year.
The Group may be exposed to latent
defects which occur during the liability
period on completed construction
contracts that have not been transferred
to the purchaser of the relevant
construction business. Although
subcontractors will normally resolve such
defects, the Group will become liable if
the subcontractor is no longer trading,
potentially resulting in additional cost.
• We have experienced personnel, dedicated to dealing with
•
such claims.
Insurance policies are in place to minimise Group liabilities,
wherever possible.
• The provisions relating to completed contracts are reviewed
on a regular basis.
• The Company has segregated the continuing businesses of
the Group from the Group’s legacy building contracting and
engineering businesses.
The Group may be unable to meet
short-term liabilities as a result of failure
to manage liquidity.
• The Group maintains strong financial disciplines.
• Cash generation is controlled by robust budgeting,
forecasting and cash management disciplines.
Lack of liquidity may also limit the
Group’s ability to take advantage of
business opportunities as they become
available and consequently a possible
impediment to future growth.
• The Executive Directors maintain regular contact with
investors and lenders to ensure adequate bank facilities are
in place with appropriate covenants and headroom.
• The Group has extended its borrowing facilities for a further
three years to March 2021.
Negative publicity could have an adverse
effect on the Group’s reputation and the
Group could experience lower confidence
levels from customers and suppliers.
Failure to comply with legislation could
result in penalties and interest being
levied on the Group.
• The Group has financial and management controls designed
to segregate duties and minimise opportunities for fraud.
• Financial reporting processes are the subject of rigorous and
timely management reviews.
• Staff training is conducted on compliance with laws and
regulations including relevant tax legislation.
The Group has exposure to receivables
on deferred payment terms, particularly
on certain land sales.
• Credit risk assessments are performed on all customers
buying land on deferred terms.
• The Group maintains security over the majority of land sold
on deferred terms.
The Group could suffer operational
inefficiencies or penalties as a result of
a loss of data or system failure or as a
result of cyber attack.
•
Industry standard systems are managed by a central IT team
with outsourced support.
• Contingency plans are in place and regularly tested.
• The majority of data is held in secure externally managed
servers.
STRATEGIC REPORT APPROVAL STATEMENT
The Strategic Report, contained in pages 4 to 31 has been approved by the Board of Directors and is signed on its behalf by:
Jolyon Harrison
Chief Executive Officer
14 September 2018
MJ Gleeson plc Annual Report and Accounts 2018 / 31
GOVERNANCE REPORT
Homelands Park, Crook, County Durham
32
Strategic Report
Governance Report
Financial Statements
Other Information
Governance Report
34 Board of Directors
36 Governance Report
43 Directors’ Report
48 Audit Committee Report
54 Remuneration Committee Report
33
BOARD OF DIRECTORS
Colin Dearlove
BA, FCMA, CGMA
Non-Executive Director
Stefan Allanson
ACMA, FCT
Chief Financial Officer and
Company Secretary
Jolyon Harrison
FCIOB, FIoD, FCMI
Chief Executive Officer
Appointed to the Board in December 2007.
Colin held a number of senior finance
positions at Barratt Developments plc with
the most recent being Group Finance
Director from 1992 until his retirement in
2006. He is the Senior Independent
Director, Chairman of the Audit Committee
and member of the Remuneration and
Nomination Committees.
Appointed to the Board in July 2015.
Stefan joined the Group in June 2015 as
Chief Financial Officer designate from
Keepmoat Limited where he held the
Deputy Chief Financial Officer role. Stefan
qualified as an accountant in 1994,
following which he held senior finance
roles at Honda Motor Co Limited, BTP plc,
TheSkillsMarket Limited, The Vita Group
Limited and Tianhe Chemicals.
Appointed to the Board in July 2010 and
appointed Chief Executive Officer on 1 July
2012. Jolyon has more than 50 years of
house building experience, most recently
as founder and Chairman of Pelham
Construction/North Country Homes Group
and prior to that as Managing Director of
Shepherd Homes and Chairman of York
Housing Association. Currently Chairman
of JDP Rooflines Limited and MSP
Technologies Limited. He has been
Chairman of the Yorkshire region of the
Home Builders Federation for 25 years.
Formerly a member of the North East
Housing Board and a Council member of
the National House Building Council.
Committee membership
Audit Committee
Remuneration Committee
Nomination Committee
Disclosure Committee
Committee Chairman
34 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Dermot Gleeson
MA (Cantab)
Chairman
Christopher Mills
Non-Executive Director
Ross Ancell
FCA(ANZ)
Non-Executive Director
Joined the Board in 1975. Dermot was
appointed Chief Executive in 1988 and
Chairman in 1994. He relinquished the
post of Chief Executive in 1998. Previously
employed in the Conservative Party
Research Department, the European
Commission and Midland Bank
International Limited. Formerly a Trustee
of the British Broadcasting Corporation,
Chairman of the Major Contractors Group,
a Board Member of the Housing
Corporation, a Director of the Construction
Industry Training Board and a Trustee of
the Institute of Cancer Research. He is
Chairman of the Nomination Committee.
Appointed to the Board in January 2009.
Founder of Harwood Capital Management
Group and formerly Chief Investment
Officer of J O Hambro Capital Management
Limited from 1993 to 2011. He is also
Chief Executive and Investment Manager
of North Atlantic Smaller Companies
Investment Trust PLC, a UK listed
investment trust. Christopher is a director
of several publicly quoted companies,
including Catalyst Media Group plc,
Bioquell plc and Goals Soccer Centres plc.
Appointed to the Board in October 2006.
Ross is Chairman of Churngold
Construction Holdings Limited and
Independent Non-Executive Director of
Galaxy Entertainment Group Limited
(listed in Hong Kong). Ross is a Fellow of
Chartered Accountants Australia and New
Zealand. He is Chairman of the
Remuneration Committee and a member of
the Audit and Nomination Committees.
MJ Gleeson plc Annual Report and Accounts 2018 / 35
CHAIRMAN’S INTRODUCTION
“I am pleased to introduce this report
which describes how the Group
manages its approach to governance
and the evolving requirements of
the Code.”
36 / MJ Gleeson plc Annual Report and Accounts 2018
Dermot Gleeson
Chairman
As a premium listed company on the London Stock Exchange, the
Group is subject to the 2016 revision of the UK Corporate
Governance Code (the “Code”). The Board believes that
compliance with the Code assists it to provide the Group with
effective leadership and to embed good governance into the
values, ethics and culture of the business.
The Board continues to take governance very seriously and,
amongst its other actions during the year, has evaluated the
impact of the revisions to the Code, which will apply to the
Company’s financial year commencing 1 July 2019. The Board
recognises that this will require us to make changes, particularly
with respect to the Board’s composition and the roles of
individual Directors. The Nomination Committee is currently
considering how best to progress this process. Although there
have been no changes to the Board in the year to 30 June 2018,
we will be taking steps over the coming year to address the
requirements of the new Code.
As Chairman, I am responsible for the leadership of the Board and
for ensuring that it fulfils its responsibilities to all of the Group’s
stakeholders. The Board remains committed to ensuring that its
dialogue continues to be robust and challenging. The Board also
seeks to have constructive dialogue with external stakeholders
and take account of shareholder feedback.
This report contains further details of the Group’s governance
arrangements, together with the narrative reporting variously
required by the Code, the Listing Rules and the Disclosure and
Transparency Rules.
Dermot Gleeson
Chairman
14 September 2018
Strategic Report
Governance Report
Financial Statements
Other Information
GOVERNANCE REPORT
Governance statement
During the period under review, the Company, as a premium listed
company, was subject to the 2016 edition of the UK Corporate
Governance Code issued by the Financial Reporting Council (FRC).
The Code recognises that not all of its provisions are necessarily
relevant to smaller listed companies and the Code states that
departures from its provisions should not be automatically
treated as breaches of the Code. The Directors believe that the
Code is correctly applied as and where relevant to the Company
and are satisfied that in areas of departure from the Code the
departure is for good reason.
Further explanations of how the main principles and the
supporting principles have been applied are set out on page 40.
Board composition
At the date of this report, the Board comprises six Directors, four
of whom are Non-Executive. All Directors served throughout the
year to 30 June 2018. The Directors’ biographies are set out on
pages 34 and 35.
The Board believes it maintains an appropriate balance of
Executive and independent Non-Executive Directors given the
size and nature of the business. In addition, the Board considers
that it has a suitable balance of skills, knowledge and experience
in order for it to discharge its duties and responsibilities
effectively. This includes a combination of backgrounds and
experiences which enable it to function effectively and have
dialogue that is both constructive and challenging.
All of the Directors have access to the advice and services of the
Company Secretary and may, in furtherance of their duties, take
independent advice at the Company’s expense. Training is
arranged as required to update and refresh their skills
and knowledge.
On joining the Board, arrangements are made for all new Directors
to meet their colleagues and other senior management, to ensure
an adequate induction to the Group. On resignation, any concerns
raised by an outgoing Director are circulated by the Chairman to
the remaining members of the Board.
Board effectiveness
The roles of the Chairman, Dermot Gleeson, and the Chief
Executive Officer, Jolyon Harrison, are clearly defined and they act
in accordance with the main and supporting principles of the Code.
The Chairman is responsible for leadership of the Board and
ensuring its effectiveness. This role includes ensuring that the
Directors receive accurate, timely and clear information;
facilitating the contribution of the Non-Executive Directors; and
ensuring constructive relations between the Executive and
Non-Executive Directors.
The Chairman is in regular contact with the Chief Executive Officer
to discuss current matters and has visited Group operations
outside the Board meeting calendar to meet divisional directors
and managers.
Board independence
During the year, Ross Ancell and Colin Dearlove were the Board’s
independent Non-Executive Directors and fulfilled the
requirement that a “smaller company”, as defined by the Code,
should have two such directors. Colin Dearlove is the Senior
Independent Non-Executive Director.
Ross Ancell will have completed twelve years of service and Colin
Dearlove eleven years of service on the Board at the date of the
2018 AGM on 6 December 2018. The Board greatly values both
Ross Ancell’s and Colin Dearlove’s expertise and understanding
of the Group’s operations and strategy. Whilst we recognise that
their period of service could call into question their
independence, the Executive Board remains strongly convinced
that both Ross Ancell and Colin Dearlove are independent of
character and judgement, and their reappointment is in the
interests of the Group and its shareholders.
Both Ross Ancell and Colin Dearlove have provided assurances to
the Board of their continued independence and that there are no
circumstances which are likely to affect, or could appear to affect,
their judgement. We have talked extensively to our largest
shareholders and they are supportive of the Board’s assessment
that Ross Ancell and Colin Dearlove should continue to be
regarded as independent Non-Executive Directors.
Neither Dermot Gleeson, Chairman, who has previously been
Executive Chairman and, prior to that, has held the post of
Chairman and Chief Executive, nor Christopher Mills, who
represents a major shareholder, Harwood Capital LLP, are
considered to be “independent” within the definition of that term
contained in the Code.
Dermot Gleeson has been connected with the Company for a long
period and the Board greatly values his experience of the Group.
The Board remains fully satisfied that he continues to perform
effectively as a Non-Executive Director and as Chairman.
Board diversity
We believe that it is in the interests of our shareholders that
appointments to the Board are made on the basis of merit. We are
unreservedly opposed to discrimination on the grounds of race,
gender, sexual orientation, disability, age, religion or beliefs.
We also believe that there are substantial benefits to be had from
having a Board composed of a diverse range of individuals, who
are able to contribute to our deliberations from different
perspectives. This is a matter to which the Nomination Committee
gives consideration in its annual review of the Board’s
composition.
For vacant board positions, the Nomination Committee agrees a
role description and a detailed specification of the kind of person
for whom it is looking. The latter sets out the objective criteria
against which the suitability of candidates will be assessed,
including knowledge, experience, measurable skills and personal
qualities. Care is taken to ensure that the criteria effectively
prevent all forms of unfair discrimination influencing the
selection process.
MJ Gleeson plc Annual Report and Accounts 2018 / 37
GOVERNANCE REPORT continued
Vacancies are extensively advertised. In addition, the Board
normally appoints an executive search firm to help it to reach the
widest possible pool of eligible candidates and to identify the
individuals best qualified for the role.
The Board selects at least three of its directors to act as a panel
for the purpose of overseeing the selection process and it is
committed to ensuring that everyone involved in the selection of
candidates is fully aware of the UK’s equality legislation and the
Board’s diversity policy.
Key actions of the Board
The Board is responsible to shareholders for the success of the
Group. Its role is to set the strategic and financial framework within
which the Group operates, to monitor and review the performance
of each of the divisions and to ensure that the risks faced by the
Group are effectively managed. To facilitate this, the Board and its
Committees are provided with relevant and timely information in
advance of all meetings and when otherwise required.
Due to the size and structure of the Group, all significant
decisions are taken at Board level. There is a formal schedule of
matters that are reserved for a decision of the Board or its
Committees; these include the approval of:
• strategy and financial policy;
• banking arrangements and any changes to them;
•
interim and annual financial statements;
• risk management and internal control policy;
• major capital expenditure;
• acquisition of land;
• acquisitions and disposals;
• Board structure and composition;
• terms of reference of the Board’s sub-committees;
• entering into or amending pension arrangements;
• approval of contractual arrangements which fall outside
authority delegated to Executive Directors;
• dividend policy; and
• pledging security over assets and providing parent
company guarantees.
All these matters were reviewed by the Board at various times
during the year. In addition, the Board receives updates on
governance, regulatory and legal matters at various points in the
year to assist the Board in maintaining compliance with the
legislative requirements and best practice.
During the year, the Board reviewed the proposed revisions to the
UK Corporate Governance Code, which was subsequently
published by the FRC in July 2018 and will apply to the Company’s
financial year commencing 1 July 2019.
The new 2018 Code focuses on principles and how these are
applied by the Company so that it articulates what actions have
been taken by the Board and the resulting outcomes. The Board
has carefully considered the requirements of the new Code and
recognises that it may require a number of actions to be taken in
order to comply fully with the principles set out.
This would include, but is not limited to:
• the appointment of a director from the workforce, a formal
workforce advisory panel or a designated non-executive
director;
• a review of Board member independence, in particular given
that a non-executive director would not be considered
independent if that director is or has been; an employee of the
Company or Group within the last five years, represents a
significant shareholder, or has served on the Board for more
than nine years;
• a review of the Nomination and Remuneration Committees’
composition; terms of reference, and both the activities
undertaken and the reporting of such activities to
shareholders; and
• an annual evaluation of the performance of the Board, the
Chairman and individual directors which is externally
facilitated at least every three years.
Given the timing of issue of the new 2018 Code and extent of the
requirements, the Board has not taken any final decisions as to
its application but will be taking steps over the coming year in
response to the new Code.
Board and Committee meetings
During the year, the Board met on six occasions. Board packs,
which include a formal agenda, are circulated in advance of such
meetings. Attendance by individual Directors at scheduled Board
meetings and by members at scheduled Committee meetings was
as set out adjacent.
The main purpose of these meetings is to permit the Board to
receive regular reports on the performance of the Group and
address a wide range of key issues, including health and safety,
operational performance, risk management and corporate
strategy. Additional Board meetings may be convened from time
to time in response to specific circumstances.
During the course of the year, the Non-Executive Directors met
without the Executive Directors present, both with and without
the Chairman being present.
The minutes of all meetings of the Board and of each of its
Committees are recorded by the Company Secretary. As well as
recording the decisions taken, the minutes reflect any queries
raised by the Directors and record any unresolved concerns.
38 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Attendance by individual Directors at scheduled Board meetings
Number of scheduled meetings^
Attendance
Dermot Gleeson
Ross Ancell
Colin Dearlove
Christopher Mills
Jolyon Harrison
Stefan Allanson
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Disclosure
Committee
6
6
6
6
5
6
6
4
n
4
4
n
4v
4v
2
n
2
2
n
2v
2v
2
2
2
2
n
2v
2v
2
n
n
n
n
2
2
Includes the scheduled Board and Committee meetings that were held on 3 July 2018 in respect of the year ended 30 June 2018
^
n Not a member of this Committee
v Whilst not a member of this Committee, the Director was in attendance at meetings
Board evaluation
During the year, under the leadership of the Chairman, the Board
undertook an evaluation of its own performance. This was based
on completion of a detailed questionnaire and individual
discussions between the Chairman and the Directors. Being a
smaller listed company, it was not considered necessary to have
this year’s Board evaluation externally facilitated. Colin Dearlove,
as the Senior Independent Director, conducted an evaluation of
the Chairman’s performance in conjunction with his Non-
Executive Director colleagues and with input from the Executive
Directors. The outcome and conclusions reached from the
conduct of these evaluations were discussed by the Board at its
Board Meeting in September 2018. It was concluded that the
Board, its Committees and the Chairman continued to
perform effectively.
During the year being reported, and in making this statement, the
Board carried out a robust assessment of the principal risks and
uncertainties facing the Group, including those that would
threaten the Group’s business model, future performance,
solvency and/or liquidity.
The Board is of the view that there is an adequate ongoing
process for identifying, evaluating and managing the Group’s
significant risks, which satisfies the internal control guidance for
Directors detailed in provision C.2.1 of the Code. This process
takes the form of a formal risk management policy supported by
financial and management controls that are operated Group-wide
and which are subject to both internal review by the Chief
Financial Officer and internal auditor and external review as part
of the statutory audit carried out by the auditors.
Risk management and internal control
The Directors acknowledge their responsibility for the Group’s
risk management procedures and systems of internal controls
and for reviewing their effectiveness. Further details on the
Group’s risk management procedures and systems of internal
controls and how the Board and Audit Committee review their
effectiveness are included in the Audit Committee Report on
pages 48 to 52.
It should be recognised that all such systems and procedures are
designed to manage rather than eliminate the risk of failure to
achieve business objectives, and can only provide reasonable,
rather than absolute, assurance against material misstatement or
loss. Risk management and internal control within the Group’s
operating units is delegated to the management responsible for the
operating unit, with the Board retaining ultimate responsibility.
The Group operates internal controls that ensure that the Group’s
financial statements are reconciled to the underlying financial
ledgers. A review of the consolidated accounts and financial
statements is completed by management to ensure that the
financial performance and position of the Group are
appropriately reflected.
Shareholder relations
There is ongoing dialogue with institutional shareholders,
including presentations following the publication of the interim
and year end results and, as appropriate, at other times during
the year. Feedback from these meetings is provided to the Board.
The Board also welcomes the interest of private investors and
believes that, in addition to the Annual Report and the Company’s
website, the AGM is an ideal forum at which to communicate with
investors and encourage their participation. At the AGM, the
Chairman, together with the Chairmen of the Audit, Remuneration,
Disclosure and Nomination Committees, will be available to answer
any relevant questions.
For investor relations the Company uses the MJ Gleeson plc
website at www.mjgleesonplc.com. Our website includes
statutory documents and communications to shareholders, such
as the Annual Report and financial statements, and the
interim report.
MJ Gleeson plc Annual Report and Accounts 2018 / 39
GOVERNANCE REPORT continued
Compliance statement
The Company has complied with the main principles of the 2016
edition of the UK Corporate Governance Code applicable to all
premium listed companies. The following provisions are those
where the Company is not strictly in compliance with the Code but
where the Directors believe that it remains appropriate and
justified, and which do not compromise the standards of good
governance applied by the Board.
A.3.1, B.1.1
As covered under “Board independence”; the Chairman, Dermot
Gleeson, has previously been Executive Chairman and, prior to
that, held the post of Chairman and Chief Executive. The Board
has considered the guidance set out in the Code and believes that
it is in the Company’s best interests that Dermot Gleeson be
retained as Chairman.
B.1.1
As covered under “Board independence”; Ross Ancell and Colin
Dearlove have both served on the board for more than nine years
from the date of their first election. The Board is satisfied that
they remain independent in character and judgement and there
are no relationships or circumstances which otherwise affect, or
could appear to affect, their independence.
Christopher Mills represents a major shareholder, Harwood
Capital LLP and is, therefore, not considered to be “independent”
within the definition of that term contained in the Code.
B.6.3
As covered under “Board evaluation”; the performance of the
Chairman is appraised by both the Non-Executive and Executive
Directors. As MJ Gleeson plc is a smaller listed company, it is felt
that this is the most appropriate approach.
Nomination Committee
The Nomination Committee is a Board sub-committee consisting
entirely of Non-Executive Directors. The members of the
Nomination Committee are Dermot Gleeson (Chairman), Ross
Ancell and Colin Dearlove.
The principal responsibility of the Nomination Committee is to
consider succession planning and appropriate appointments to
the Board and to senior management, so as to maintain an
appropriate balance of skills, knowledge and experience within
the Company. The Nomination Committee’s formal terms of
reference, which are reviewed annually, are available on the
Company’s website and require it to:
• regularly review the structure, size and composition of the
Board and to make recommendations regarding any
adjustments that are considered to be necessary;
•
identify and nominate for consideration candidates for any
Board vacancies that may arise;
All Board appointments and reappointments are considered by
the Nomination Committee.
The Nomination Committee met on two scheduled occasions
during the year to 30 June 2018. The main activities undertaken
by the Nomination Committee during the year included:
• reviewing the structure, size and composition of the Board
including the skills that may be required in an additional
independent non-executive director;
• reviewing leadership development and succession planning in
the Group including scrutinising the development plans of
individuals who have been identified as potential CEO
successors or candidates for the role of MD of the
Homes division;
• reviewing and approving the Group’s diversity policy for
publication; and
• reviewing the terms of reference of the Nomination Committee
such that these remain appropriate.
Remuneration Committee
The Remuneration Committee is responsible for setting the
remuneration of the Chairman and the Executive Directors. The
members of the Remuneration Committee are Ross Ancell
(Chairman) and Colin Dearlove.
The Remuneration Committee met on a number of occasions
during the year to 30 June 2018, including two scheduled
meetings, to consider and approve the remuneration of the
Chairman and the Executive Directors.
Further details of the remuneration policy and the package for
each Director serving during the year to 30 June 2018 are set out
in the Remuneration Report on pages 54 to 69.
Disclosure Committee
The Disclosure Committee was set up by the Board in September
2016 to comply with the requirements of the Market Abuse
Regulation (MAR), which came into effect on 3 July 2016.
The members of the Disclosure Committee are Jolyon Harrison
(Chairman) and Stefan Allanson. Other Directors, executives and
external advisers may attend by invitation as appropriate. The
Disclosure Committee’s formal terms of reference, which are
reviewed annually, are available on the Company’s website and
require it to:
• draw up and maintain procedures, systems and controls for
the identification, treatment and disclosure of inside
information and to comply with other disclosure obligations
falling on the Company under the Listing Rules and MAR;
•
implement, monitor compliance and review the adequacy of
the Company’s disclosure policy, including where appropriate
arranging for the dissemination of guidelines and training; and
• put in place plans for succession, in particular to the Chairman
• ensure that all regulatory announcements, shareholder
and Chief Executive Officer; and
• make recommendations regarding the continued service (or
not) of the Executive and Non-Executive Directors.
circulars, prospectuses and other documents issued by the
Company under any legal or regulatory requirement are
scrutinised in order to ensure that they comply with
applicable requirements.
40 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
The Disclosure Committee met on two occasions during the year
to 30 June 2018. The main activities undertaken by the Disclosure
Committee during the year included:
• reviewing the regulatory announcements of the Group to
ensure that these complied with the Company’s
disclosure policy;
• reviewing the list of insiders and any significant changes
together with agreeing dates for closed trading periods;
• confirming that there have no instances of actual or potential
inside information not being disclosed or being disclosed late
to the market;
• reviewing the Company’s disclosure and media policy;
• reviewing disclosure items, the advice received and
conclusions around any items of non-disclosure; and
• reviewing the terms of reference of the Disclosure Committee
such that these remain appropriate.
The majority of risks in Gleeson Homes are operational in nature,
and hence these risks are already taken into account in the
individual site cash flow forecasts. The Directors have considered
sensitivities to the individual site cash flow forecasts prepared
based on realistically possible changes to principal assumptions
such as forecast selling prices, build costs, the number of
completions, and gross margins. Additionally the Directors have
considered further measures which may need to be taken to
mitigate the impact of macroeconomic and industry wide risks,
including the ability of the Group to curtail investment
expenditure in new land purchases and defer new site starts.
For Gleeson Strategic Land, the Directors have considered the
impact of delays to the completion of land sales and reduction in
land selling prices. The business model is such that it has the
flexibility to reduce expenditure on progressing new and existing
sites and to continue to realise cash from consented land albeit at
lower levels of profitability.
Furthermore, a core principle of the Group is to maintain a
cautious approach to debt funding, reflecting the inherent
cyclical nature of the UK property market.
Based on the results of this assessment, the Directors have a
reasonable expectation that the Company and the Group will be
able to continue in operation and meet its liabilities as they fall
due over the three year period of their assessment.
Audit Committee
The Audit Committee is a Board sub-committee consisting
entirely of Non-Executive Directors. The members of the
Committee are Colin Dearlove (Chairman) and Ross Ancell.
The Chairman invites the Chief Executive Officer and the Chief
Financial Officer and other senior management to attend, along
with the Group’s internal and external auditors, when required.
The Audit Committee met on a number of occasions during the
year to 30 June 2018, including four scheduled meetings, with
both members being in attendance for all meetings.
A full report from the Audit Committee is presented separately on
pages 48 to 52 and forms part of the Governance Report.
Viability statement
In accordance with provision C2.2 of the 2016 revision of the UK
Corporate Governance Code, the Directors have assessed the longer
term viability of the Company and the Group over a longer period
than the 12 months required by the “going concern” principle.
The Directors conducted their assessment over a period of three
years to 30 June 2021, which is in line with the Group’s financial
budget review period and the operational period of a number of
the Group’s housing developments. This has enabled a
meaningful assessment of viability to be undertaken, utilising
detailed financial budgets which incorporate individual site cash
flow forecasts.
In making its assessment, the Directors have considered the
business risks facing the Group and how the Group mitigates
such risks, which are summarised on pages 30 and 31 of the
Strategic Report.
MJ Gleeson plc Annual Report and Accounts 2018 / 41
42
Jessica, Simba, Avery – Fretson Park, Sheffield Strategic Report
Governance Report
Financial Statements
Other Information
DIRECTORS’ REPORT
The Directors have the pleasure of presenting
the Annual Report and the audited financial
statements for the year ended 30 June 2018.
Strategic report
We present a review of the business during the year to 30 June
2018 and of the position of the Group at the end of the financial
year together with a description of the principal risks and
uncertainties faced by the Group in the Strategic Report on pages
4 to 31.
Governance statement
The Disclosure Guidance and Transparency Rules require certain
information to be included in a governance statement in the
Directors’ Report. Information that fulfils the requirements of the
governance statement can be found in the Governance Report on
pages 36 to 41.
This report is also discussed with the external auditors. Based
on this analysis and an assessment of potential cash risks, the
Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future and for at least twelve months from the date of
the financial statements. Accordingly, the Directors continue to
adopt the going concern basis of accounting in preparing the
financial statements.
Political and charitable donations
The Company made no political donations in the year or in the
previous year. Charitable donations during the year totalled
£2,000 (2017: £2,000).
Results and dividends
The results of the Group are set out in the consolidated income
statement on page 78. The subsidiary companies affecting the
profit or net assets of the Group in the year are listed in note 13 to
the financial statements.
Directors and Directors’ interests
The Directors of the Company and their biographical details are
shown on pages 34 and 35. There have been no changes to
Directors of the Company during the year.
An interim dividend of 9.0 pence per share was paid to
shareholders on 6 April 2018 (2016: 6.5 pence). The Board
proposes to pay, subject to shareholder approval at the 2018
AGM, a final dividend of 23.0 pence per share (2017: 17.5 pence)
in respect of the 2018 financial year on 14 December 2018 to
shareholders on the register at the close of business on
16 November 2018. On this basis, the total dividend for the year
will be 32.0 pence per share (2017: 24.0 pence).
Business review
The review of the development and performance of the business
of the Group during the year and the future outlook of the Group is
set out in the Chairman’s Statement on pages 4 and 5, the Chief
Executive’s Statement on pages 14 to 16 and the Business
Performance reviews on pages 18 to 21.
The key performance indicators are set out in the Strategic Report
on pages 12 and 13. The Group’s policy in respect of financial
instruments is set out within the Accounting Policies on pages 83
to 86 and details of credit risk, capital risk management, liquidity
risk and interest rate risk are given in note 16 to the financial
statements.
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 Strategic Report on pages 4 to 31. The financial
position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Financial Review on
pages 26 to 28.
The Group meets its day-to-day working capital requirements
through its own cash resources and a bank borrowing facility,
which was entered into in March 2016 and extended during the
year to March 2021. At 30 June 2018, the Group had a cash
balance of £41.3m (2017: £34.1m) and the bank borrowing facility
was undrawn (2017: undrawn).
As part of their regular going concern review the Directors
specifically address all of the risk areas that they consider
material to the assessment of liquidity and going concern.
Details of any related party transactions with Directors of the
Company are shown in note 27 to the financial statements.
The beneficial and non-beneficial interests of the Directors and
their connected persons in the shares of the Company at 30 June
2018 and as at the date of this report are disclosed in the
Remuneration Report on page 65. Details of the interests of the
Executive Directors in share options and awards of shares can be
found on page 65 within the same report.
Appointment and replacement of Directors
The Company’s Articles of Association (the “Articles”) provide
that at each AGM at least one third of the Directors shall retire
from office and shall be eligible for reappointment. However, the
Board has determined that all Directors will be subject to annual
re-election by shareholders and will do so at the next AGM of the
Company to be held on 6 December 2018. Of the Directors
standing for re-election, Jolyon Harrison and Stefan Allanson hold
service contracts that may be terminated by the Group with a
notice period of one year.
Directors’ indemnity
Directors risk personal liability under civil and criminal law for
many aspects of the Company’s main business decisions. As a
consequence the Directors could face a range of penalties
including fines and/or imprisonment. In keeping with normal
market practice, the Company believes that it is prudent and in
the best interests of the Company to protect the individuals
concerned from the consequences of innocent error or omission.
The Company obtains Directors and Officers’ liability insurance in
order to indemnify Directors and other senior officers of the
Company and its subsidiaries. This insurance policy does not
provide cover where the Director or officer has acted fraudulently
or dishonestly.
In addition, subject to the provisions of and to the extent
permitted by relevant statutes, under the Articles, the Directors
and other officers throughout the year, and at the date of approval
of these financial statements, were indemnified out of the assets
of the Company against liabilities incurred by them in the course
of carrying out their duties or the exercise of their powers.
MJ Gleeson plc Annual Report and Accounts 2018 / 43
Every effort is made by the Group to retain and support
employees who become disabled whilst in the employment of
the Group.
At 30 June 2018 the Group employed the following number of
people (excluding Non-Executive Directors):
Executive team
Senior management
Other employees
Total
Female
Male
Number
% Number
%
0
3
150
153
0%
14%
31%
30%
2 100%
86%
69%
18
336
356
70%
Total
Number
2
21
486
509
Employee involvement
The Group regularly provides its employees with information on
matters of concern to them. We consult with our employees in
order to ensure that their views can be taken into account when
making decisions. We use our internal website “Gleegle” to
disseminate information and engage with our employees via
manager briefings.
Health & Safety
The health and safety of our employees and others is paramount.
There were seven reportable injuries in the year and no dangerous
occurrences under the Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations (“RIDDOR”).
The overall Accident Incidence Rate (“AIR”) was 248 (2017: 203).
These trends are constantly reviewed and a number of steps have
been taken to address the increase in the AIR as the level of the
construction activity grows significantly.
Greenhouse gas emissions
Our greenhouse gas emissions for the year ended 30 June 2018
are calculated in accordance with the requirements of the
Greenhouse Gas Protocol – A Corporate Accounting and Reporting
Standard. Emissions have been calculated using the UK
Government’s CHG Conversion Factors for Company Reporting:
2018 and 2017 respectively.
Scope 1: Emissions from combustion
of fuel
Scope 2: Electricity, heat, steam and
cooling purchased for own use
Total emissions
Emissions per £m revenue
Tonnes CO2e
2018
Tonnes CO2e
2017
2,910
2,147
264
3,174
16.13
481
2,628
16.39
DIRECTORS’ REPORT continued
Share capital
The Company has one class of share in issue, being ordinary
shares with a nominal value of 2 pence each, with no right to
fixed income.
The Company has issued share capital of 54,587,753 ordinary
shares, with a nominal value of £1.1m. Further details are given in
note 24 to the financial statements.
Substantial shareholdings
At 31 August 2018, the shareholdings noted below, representing
3% or more of the issued share capital, had been notified to
the Company.
Name of Shareholder
Number of
shares
Proportion
of total
Funds managed by Harwood Capital LLP
Schroder Investment Management Limited 4,815,781
2,744,314
Royal London Asset Management
2,352,315
Mrs J C Cooper & spouse*
2,238,029
Standard Life Aberdeen plc
1,998,400
JP Morgan Asset Management
1,968,021
BlackRock Investment Management (UK)
1,895,985
Jolyon Harrison (CEO)
6,109,640 11.19%
8.82%
5.03%
4.31%
4.10%
3.66%
3.61%
3.47%
* of which 542,800 shares are held in discretionary trusts of which Mrs J C Cooper
is a Trustee.
Employees
We are committed to ensuring that all employees, potential
recruits and other stakeholders are treated fairly and equitably.
The principles of equality and diversity are important to us and
advancement is based upon individual skills and aptitude
irrespective of race, gender, sexual orientation, disability, age,
religion or beliefs. Full consideration is given to the diverse needs
of our employees and potential recruits and we are fully compliant
with all current legislation.
The Group is committed to upholding basic human rights within
its business. The Group generates all its revenue from operations
within the United Kingdom and its supply chain is sourced from
within the United Kingdom. Our supplier acceptance processes
ensure we comply with national regulations and legislation. Our
culture is aimed at ensuring that employees can grow to their full
potential. We seek to improve employee retention by providing
benefits that employees want including a Group stakeholder
pension (including life assurance arrangements), private medical
insurance, childcare vouchers and income replacement (PHI)
arrangements. Employee share ownership continues to be
encouraged through participation in the Group Share
Purchase Plan.
We are committed to developing our employees in order that they
can maximise their career potential and our aim is to provide
rewarding career opportunities in an environment where equality
of opportunity is paramount. Our policy for selection and
promotion is based on an assessment of an individual’s ability
and experiences; we consider all applicants on their merits and
have processes and procedures in place to ensure that
individuals with disabilities are given fair consideration.
44 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Shareholder additional information
Under Section 992 of the Companies Act 2006, the Company is
required to disclose certain additional information where not
covered elsewhere in this Annual Report:
Rights and obligations attaching to shares
Subject to the Companies Act 2006 and other shareholders’
rights, any share may be issued with such rights and restrictions
as the Company may by ordinary resolution decide or, if no such
resolution has been passed or so far as the resolution does not
make specific provision, as the Board of Directors (“the Board”)
for the time being of the Company may decide. Subject to the
Companies Act 2006, the Articles and any resolution of the
Company, the Board may deal with any unissued shares as it
may decide.
Amendment to the Articles of Association
Any amendments to the Articles may be made in accordance with
the provisions of the Companies Act 2006 by way of special
resolution.
Voting
Under and subject to the provisions of the Articles and subject to
any special rights or restrictions as to voting attached to any
shares, on a show of hands, every shareholder present in person
shall have one vote and on a poll every shareholder who was
present in person or by proxy shall have one vote for every share
of which they are the holder. Under the Companies Act 2006,
shareholders are entitled to appoint a proxy to exercise all or any
of their rights to attend and to speak and vote on their behalf at a
general meeting or class meeting.
Variation of rights
The Articles specify that the special rights attached to any class
of shares may, either with the consent in writing of holders of
three fourths of the issued shares of that class or with the
sanction of a special resolution passed at a separate meeting of
such holders (but not otherwise), be modified or abrogated.
Transfer of shares
Under and subject to the restrictions in the Articles, any
shareholder may transfer all or any of their shares in certificated
form by transfer in writing in any usual form or in any other form
which the Board may approve. The Board may, save in certain
circumstances, refuse to register any transfer of a certificated
share not fully paid up. The Board may also refuse to register any
transfer of certificated shares unless it is:
•
•
in respect of only one class of shares;
in favour of no more than four transferees;
• duly stamped or exempt from stamp duty;
• delivered to the office or at such other place as the Board may
decide for registration; and
• accompanied by the certificate for the shares to be transferred
and such other evidence (if any) as the Board may reasonably
require to show the right of the intending transferor to transfer
the shares.
Repurchase of shares
Subject to the provisions of the Companies Acts and to any rights
conferred on the holders of any class of shares, the Company may
purchase all or any of its shares of any class, including any
redeemable shares.
Restrictions on voting
A shareholder shall not be entitled to vote at any general meeting
or class meeting in respect of any shares held by them unless all
calls and other sums presently payable by them in respect of that
share have been paid.
Appointment and replacement of Directors
The Directors shall not, unless otherwise determined by an
ordinary resolution of the Company, be less than three or more
than fifteen in number. Directors may be appointed by the
Company by ordinary resolution or by the Board.
Deadlines for voting rights
Full details of the deadlines for exercising voting rights in respect
of the resolutions to be considered at the AGM to be held on
6 December 2018 are set out in the Notice of the AGM.
Dividends and distributions
The Company may, by ordinary resolution, declare a dividend to
be paid to the shareholders but no dividend shall exceed the
amount recommended by the Board. The Board may pay interim
dividends and also any fixed rate dividend whenever the financial
position of the Company justifies its payment in the opinion of
the Board.
Winding up
Under the Articles, if the Company is in liquidation, the liquidator
may, with the sanction of a special resolution of the Company and
any other authority required by law:
• divide among the shareholders in specie the whole or any part
of the assets of the Company and, for that purpose, value
any assets and determine how the division shall be carried
out as between the shareholders or different classes of
shareholders; or
• vest the whole or any part of the assets in trustees upon such
trusts for the benefit of shareholders as the liquidator with the
like sanction shall think fit.
A Director appointed by the Board shall retire from office at the
next AGM of the Company but shall then be eligible for
reappointment. The Board may appoint one or more Directors to
hold any office or employment with the Company for such period
(subject to the Companies Act requirements) and on such terms
as it may decide and may revoke or terminate any such
appointment. At each AGM any Director who has been appointed
by the Board since the previous AGM and any Director selected to
retire by rotation shall retire from office. At each AGM, one third
of the Directors are required to retire by rotation or, if the number
is not an integral multiple of three, the number nearest to one
third but not exceeding one-third. In addition, any Director who
has been a Director at the preceding two AGMs is required to
retire by rotation, provided that they were not appointed or
reappointed at either such AGM or ceased to be a Director and
been reappointed since either such AGM. Notwithstanding this,
the Board has determined that all Directors will be subject to
annual re-election by shareholders at each AGM.
The Company may, by ordinary resolution of which special notice
has been given in accordance with the Companies Act, remove
any Director before their period of office has expired
notwithstanding anything in the Articles or in any agreement
between that Director and the Company.
MJ Gleeson plc Annual Report and Accounts 2018 / 45
DIRECTORS’ REPORT continued
A Director may also be removed from office by the service of a
notice to that effect signed by or on behalf of all the other
Directors, being not less than three in number.
Powers of the Directors
The business of the Company shall be managed by the Board
which may exercise all the powers of the Company, subject to the
provisions of the Articles and any ordinary resolution of the
Company. The Articles specify that the Board may exercise all the
powers of the Company to borrow money and to mortgage or
charge all or any part of its undertakings, property and assets
and uncalled capital and to issue debentures and other
securities, subject to the provisions of the Articles.
Takeovers and significant agreements
The Company is party to the following significant agreements that
take effect, alter or terminate on a change of control of the
Company following a takeover bid:
• the Company’s share schemes and plans;
• the Company’s payment guarantee bonds except with prior
written consent from the bond provider; and
• the revolving credit facility whereby upon a “change of
control” all amounts become due and payable.
Auditor
The auditors, PricewaterhouseCoopers LLP, have indicated their
willingness to continue in office, and a resolution that they be
reappointed will be proposed at the next AGM on
6 December 2018.
Disclosure of information to Auditor
The Directors who held office at the date of approval of this
Directors’ Report confirm that, so far as they are each aware,
there is no relevant audit information of which the
Company’s auditor is unaware, and the Directors have taken all
the steps that they ought to have taken as Directors to make
themselves aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information.
Annual General Meeting
The Notice of the AGM to be held on 6 December 2018, together
with details of the Resolutions to be considered, will be sent out
in a separate circular.
Deadlines for voting rights
Full details of the deadlines for exercising voting rights in respect
of the resolutions to be considered at the AGM will be set out in
the Notice of the AGM.
Information rights
Beneficial owners of shares who have been nominated by the
registered holder of those shares to enjoy information rights
under Section 146 of the Companies Act 2006 are required to
direct all communications to the registered holder of their shares,
rather than to the Company’s registrars, Link Asset Services, or to
the Company directly.
By order of the Board
Stefan Allanson
Company Secretary
14 September 2018
46 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
47
Forge Court, Pallion, Sunderland AUDIT COMMITTEE REPORT
“I am pleased to introduce the Audit
Committee report which describes the
work of the Committee this year in
supporting the Board to fulfil its
responsibilities.”
48 / MJ Gleeson plc Annual Report and Accounts 2018
Colin Dearlove
Chairman of the Audit Committee
Statement from the Chairman of the Audit Committee
I am pleased to introduce the Audit Committee report for the
financial year ended 30 June 2018 which has been another busy
year for the Committee. The Committee continues to play an
important role in supporting the Board in a wide range of areas
including corporate governance, risk management, financial
reporting and control.
During the year, the Committee undertook all of its regular
activities including receiving and reviewing the Annual Report
and regulatory announcements made by the Company, examining
going concern and viability, internal and external audit findings,
internal controls and their effectiveness and the impact of new
accounting standards on the Group.
In addition, the Committee completed a number of other actions
during the year including reviewing progress of the Group with
regards to compliance with the General Data Protection
Regulation (“GDPR”) and the new Data Protection Act, which
became law in May 2018. The Committee also undertook reviews
of how gross margin is applied on a site-by-site basis, assessed
Group credit risk, inventory recovery, legacy matters, and
reviewed and approved an updated version of the Group
accounting policies manual.
The Committee serves to ensure that the relevant codes and
regulations are adhered to and that the business continues to
operate in a well-controlled and financially responsible manner.
Colin Dearlove
Chairman, Audit Committee
14 September 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Audit Committee membership
The Audit Committee is a Board sub-committee consisting
entirely of Non-Executive Directors. The members of the
Committee are Colin Dearlove (Chairman) and Ross Ancell.
Colin Dearlove, as Chairman of the Committee, has relevant
financial experience as, formerly, Group Finance Director of
Barratt Developments plc. Ross Ancell also has recent relevant
financial experience as Chairman of Churngold Construction
Holdings Limited. The biographies and qualifications of
the members are shown on pages 34 and 35. The Board has
determined that the Audit Committee has competence relevant to
the sector in which the Company operates.
The Chairman routinely invites the CEO and the CFO and other
senior management to attend meetings of the Committee, along
with the Group’s internal and external auditors, when required.
The Committee also meets with the Group’s internal and external
auditors without the presence of the Company’s management.
Responsibilities & terms of reference
The role of the Committee is to:
• monitor the integrity of the financial statements of the
Company and any formal announcements relating to its
financial performance, including any significant financial
reporting judgements;
• review and monitor the effectiveness of the Company’s
internal controls and risk management systems;
• review and monitor the effectiveness of the Company’s
internal audit function including approval of the annual
internal audit plan;
• review the Company’s procedures for detecting fraud,
preventing bribery and ensuring there are appropriate
whistleblowing procedures in place;
• oversee the relationship with the external auditor including
their appointment, independence and objectivity and the
effectiveness of the external audit process;
• develop the policy on the supply of external audit services
by the external auditor, taking into account relevant ethical
guidance.
Following a review by the Committee at its meeting in July 2018
the terms of reference of the Committee were updated to include
clarification of the Committee’s responsibility regarding
reviewing the effectiveness of internal controls and risk
management in relation to the Group’s tax affairs and other
minor amendments.
The Committee’s updated terms of reference can be found at
www.mjgleesonplc.com
Activities during the year
The Committee met on four occasions during the year to
30 June 2018, with both members being in attendance for all
meetings. Scheduled Committee meetings generally take place
prior to Board meetings and the Committee Chairman provides
the Board with a report on the activity of the Committee and the
matters of particular relevance to the Board in the conduct of their
work. The key activities undertaken by the Committee during
the year were:
Financial reporting
The Committee reviewed the integrity of the Annual Report and
formal announcements relating to the Group’s financial
performance. Since the date of the last annual report, the
Committee has reviewed:
• the draft interim results for the 6 months to December 2017
which were reviewed by the Committee at its meeting in
February 2018; and
• the draft 2018 Annual Report and preliminary announcement
which were reviewed by the Committee at its meeting in
September 2018.
At the request of the Board, the Committee considered whether
the 2018 Annual Report taken as a whole is fair, balanced and
understandable and whether it provides the necessary
information for shareholders to assess the Company’s
performance, business model and strategy. In doing so, the
Committee received comments from management and the
external auditors at its meeting in September 2018. It also
reviewed the annual compliance procedures and management
returns that support the Group’s financial reporting governance
framework and risk management process for the financial year
ended 30 June 2018.
The Committee was satisfied that, taken as a whole, the 2018
Annual Report is fair, balanced and understandable and provides
sufficient information for shareholders to assess the Company’s
performance, business model and strategy. The Committee
recommended as such to the Board.
Going concern and viability reporting
The Committee examined the financial forecasts for the Group
including scenarios to model the impact of potential downturns in
the housing and strategic land markets. These were examined by
the Committee in conjunction with both its review of the Annual
Report and interim announcement. The Committee satisfied
itself, and subsequently the Board, that the going concern basis
of preparation continues to be appropriate in the context of the
Group’s funding and liquidity position.
In accordance with the provisions of the Code, the Committee
considered the time period over which it could reasonably assess
the Group’s ability to continue to trade, taking into account the
Group’s financial budget review period and operational forecasts.
It concluded that this should remain a three-year period as
explained on page 41. The Committee received detailed financial
analysis based on the Group’s latest budgets with sensitivities
applied over a three-year period and determined that there was a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due. The Committee
recommended statements to this effect to the Board to approve
for inclusion in the Annual Report.
The viability statement is shown on page 41 of the Governance
Report with further explanation of the timespan and variables
considered.
MJ Gleeson plc Annual Report and Accounts 2018 / 49
AUDIT COMMITTEE REPORT continued
Credit risk monitoring
The Group carries a number of deferred receivables in relation to
land sales. At each of the meetings where the Committee
considered going concern and viability, the Committee also
separately examined the significant balances due, the level of
security held and the performance of the counterparty to date.
The Committee satisfied itself that the level of credit risk faced by
the Group remains low overall.
Profit recognition
At its meetings in September 2017 and February 2018, the
Committee reviewed the processes, controls and assumptions for
recognising margin on development sites including three
particular areas: cost inflation, selling prices and contingencies.
As described under “Significant issues considered during the
year”, the Committee satisfied itself that the associated
processes and controls have continued to operate effectively
across the Group and the assumptions applied by management in
relation to profit recognition are appropriate.
Work in progress
At each of its meetings during the year, the Committee reviewed
reports from the Group’s internal auditor on the carrying value
and recoverability of land and work in progress on selected
Gleeson Homes sites. The Committee also received reports on the
recoverability and carrying value of work in progress in Gleeson
Strategic Land.
As described under “Significant issues considered during the
year”, the Committee satisfied itself that the carrying value of
land and work in progress remained appropriate.
General data protection regulation (“GDPR”)
At its meeting in November 2017, the Committee examined the
impact and readiness of the Group for GDPR which became
effective in May 2018. The findings were based on a significant
audit of data held by the Group that was conducted by
management with support from a specialist third party GDPR
adviser. The Committee was then updated on the measures taken
by the Group to address the requirements of GDPR, including
publishing of new privacy notices on the Company’s website.
Tax affairs of the Group
At its meeting in November 2017, the Committee received
guidance from the Group’s tax advisers on the Senior Accounting
Officer (“SAO”) regime which applies when the Group’s aggregate
annual turnover exceeds £200m. Management have begun
preparations including the assessment of tax risks across the
Group, which form part of the Group’s risk register, and examining
the effectiveness of controls relating specifically to the tax affairs
of the Group.
Corporate criminal offence (“CCO”)
At the Board meeting in May 2018, the Board reviewed the
Group’s CCO risk register and policy. The Board delegated
responsibility for ongoing review and monitoring of CCO risks to
the Audit Committee. The CCO risk register and actions undertaken
by the Group will be reviewed by the Committee every six months
at its meetings in February and September.
Review of legacy matters
The Committee received and reviewed reports on claims
associated with the legacy business, being the contracting and
engineering businesses sold more than 10 years ago. Whilst the
level of claims has reduced to an insignificant level, the
Committee, in conjunction with the CFO, continues to monitor the
status of claims and any liabilities.
Group accounting policies manual
At its meeting in February 2018, the Committee reviewed and
approved an updated version of the Group accounting policies
manual. This included accounting treatments in relation to new
standards, principally IFRS 9 “Financial instruments”, IFRS 15
“Revenue from contracts with customers” and IFRS 16 “Leases”.
Other than these updates, there were no material changes to the
accounting policies being applied by the Group.
Review of the Group’s risk register
The Committee reviewed the Group’s risk register at each of its
meetings during the year such that, as the operational, political
and economic environment changes, the Committee understands
the risks faced by the Group and how these are addressed. This
enables the Committee and the Board to ensure that the major
risks facing the Group are monitored and that appropriate
controls and mitigations are in place. As a result, the Committee
and the Board understand and manage the balance of risks in
the business.
IT risk review
At its meeting in November 2017, the Committee reviewed the
results of a Group IT risk assessment which included third party
testing of its IT infrastructure, network security, and vulnerability
to potential cyber attack. The Group maintains its IT systems and
infrastructure in line with industry standards and continues to
take action to address any vulnerabilities identified as its IT
environment evolves.
Internal audit plan and findings
The Committee set the internal audit plan for the year ended 30
June 2018 at its meeting in June 2017. As covered under “Internal
audit”, the Committee received and reviewed reports from the
internal auditor throughout the year on internal audits conducted
across the business.
Other activities
During the year, the Committee also reviewed reports on site
overages in Gleeson Homes, the subcontractor administration
process and the format of key control questionnaires and
compliance returns that divisional management are required to
complete annually.
Significant issues considered during the year
The significant issues considered by the Committee during the
year are those that present a risk of material misstatement to the
Group’s financial statements being:
Carrying value of land and work in progress
The most significant asset carried by the Group is inventory,
which includes work in progress and land. The Group carries
inventories at the lower of cost and net realisable value, which is
dependent on estimates of total build or land promotion costs
and future selling prices. There is, therefore, a risk that land and
work in progress is held at a value in excess of the lower of cost
and net realisable value.
50 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
In addition, the allocation of inventories to cost of sales on the
sale of individual homes is dependent on the estimates of total
build costs and future selling prices for each site as a whole.
These estimates, therefore, impact on the timing and amount of
profit margin recognised on sales of individual homes.
The Committee monitors the effectiveness of internal controls
exercised over the key processes employed by the Group in site
development activities and the forecasting of future costs,
revenues and profits.
The Committee receives regular reports regarding sales of homes
and the costs and possible future costs relating to individual
sites. As covered under “Activities during the year”, the
Committee reviewed the assumptions applied by management
supporting the profit margin to be recognised on the sale of
individual homes and concluded that they remain appropriate.
As covered under “Activities during the year”, the Committee also
receives regular reports on the carrying value of land and work in
progress in Gleeson Homes and Gleeson Strategic Land. The
Committee reviewed these reports and debated them with the
internal auditor and with management. The Committee satisfied
itself that the carrying value of land and work in progress across
the Group remained appropriate.
Effectiveness of internal controls and risk
management systems
The Committee is responsible for reviewing and monitoring the
effectiveness of internal controls and risk management systems
on behalf of the Board. The Group’s system of internal control
includes the following processes:
• The Board and management committees meet regularly to
monitor performance against key performance indicators
which include cash management and financial and operational
measures. A variety of financial and non-financial reports are
produced to facilitate this review process.
• The Board has established defined lines of authority to ensure
that significant decisions are taken at an appropriate level.
• The Group employs individuals of appropriate calibre and
provides any training that is necessary to enable them to
perform their role effectively. Key objectives and opportunities
for improvement are identified through annual performance
and development reviews.
• Each division has defined procedures and controls to identify
and minimise business, operational and financial risks. These
procedures include segregation of duties, provision of regular
performance information and exception reports, approval
procedures for key transactions and the maintenance of proper
records. Compliance with these procedures and controls is
certified annually by management to the Committee.
• The Group’s programme of insurance covers the major risks to
the Group’s assets and business and is reviewed annually.
• Authorities are in place that require divisional management to
refer all investment and divestment decisions that exceed
prescribed limits to either the Group Capital Committee or the
Board for approval.
Regular reviews are undertaken in order to identify any changes
in procedure that may be required in the light of changing
circumstances.
The effectiveness of the overall internal control framework and
risk management process is monitored by both the Audit
Committee and the Board. As part of this, the Committee reviews
the annual compliance returns completed by each divisional
management team which confirm that key financial controls have
been in operation throughout the year and that an effective
control environment has been maintained.
Each divisional management team also completes an annual
risk assessment. The results of this are reviewed by the
Committee and risks identified are incorporated into the Group
risk register. The Operating Risk Statement on pages 30 and 31
sets out details of various risks that the business may face and
how it mitigates them.
The Committee has satisfied itself that an appropriate system of
internal controls and risk management processes have been
maintained throughout the year to safeguard shareholder
interests as well as the Group’s assets in accordance with the
requirements of the Code.
Whistleblowing arrangements
The Company has operated a whistleblowing arrangement
throughout the year whereby all employees of the Group are able,
via an independent external third party, to confidentially report
any malpractice or matters of concern they have regarding the
actions of employees, management and Directors and any
breaches of the Company’s anti-bribery and corruption policy.
The Committee reviews the output of malpractice reporting every
six months at its meetings in February and September.
Anti-bribery and corruption policy
The Company values its long-standing reputation for ethical
behaviour and integrity. Conducting its business with a zero
tolerance approach to all forms of corruption is central to these
values, the Group’s image and reputation. The Company policy
sets out the standards expected of all Group employees in
relation to anti-bribery and corruption and the Board has overall
responsibility for ensuring this policy complies with the Group’s
legal and ethical obligations and that everyone in the
organisation complies with it.
This policy is also relevant for third parties who perform services
for or on behalf of the Group. The Group expects those persons to
adhere to this policy or have in place equivalent policies and
procedures to combat bribery and corruption.
The Committee reviews a report on the registers of gifts and
hospitality given or received by Directors and employees of the
Group every six months at its meetings in February and September.
Internal audit
The Committee is responsible for reviewing and approving the
annual internal audit plan. This continues to cover a broad scope
of activities across the Group focused on areas of risk and
management judgement.
During the year, the Committee received eighteen reports from
the internal auditor on the findings of internal audits conducted
throughout the business, together with proposed recommendations
to rectify any issues identified. The findings of these reports
were actively debated by the Committee with the internal auditor
and with management.
MJ Gleeson plc Annual Report and Accounts 2018 / 51
AUDIT COMMITTEE REPORT continued
The Committee reviewed the effectiveness of the internal audit
function and concluded that it has operated effectively and
provided a suitable level of independent scrutiny across the
operations of the Group.
External audit
PricewaterhouseCoopers LLP were reappointed as the
Company’s auditor following approval by shareholders at the
AGM on 7 December 2017.
At its meeting in February 2018, PricewaterhouseCoopers LLP
provided their audit strategy memorandum for the Committee,
identifying their assessment of key risks in the Group’s financial
reporting. For the 2018 financial year, as in prior years, the
primary risk identified was in relation to the carrying value of land
and work in progress.
The Committee formulates and oversees the Group’s policy on
monitoring external auditor objectivity and independence in
relation to non-audit services. As a result of the EU Audit Reforms
Regulations (as amended 11 June 2016) the auditor is excluded
from undertaking a range of work on behalf of the Group to ensure
that the nature of non-audit services performed or fee income
earned relative to the audit fees does not compromise and is not
seen to compromise the auditor’s independence, objectivity
or integrity.
For the year to 30 June 2018, there were no non-audit fees paid
to the external auditor, PricewaterhouseCoopers LLP. Details
of the audit fees incurred are disclosed in note 4 to the
financial statements.
The Committee assesses the effectiveness of the external
audit process annually with the auditor and with management.
The Committee holds private meetings with the auditor on
an annual basis. Matters discussed include the auditor’s
assessment of business risks and management activity thereon,
the transparency and openness of interactions with management
and confirmation that there has been no restriction in scope
placed on them by management.
The Committee ensures that the auditor has exercised its
professional scepticism. The Committee has reviewed and is
satisfied with the performance of PricewaterhouseCoopers LLP.
The auditors, PricewaterhouseCoopers LLP, have indicated their
willingness to continue in office, and a resolution that they be
reappointed will be proposed at the next AGM of the Company on
6 December 2018.
52 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
53
Carlisle Park, Swinton, South Yorkſhire REMUNERATION COMMITTEE REPORT
Annual bonus
The Group continued to perform well during the year to 30 June
2018. The performance condition for two thirds of the CEO’s
annual bonus and the whole of the CFO’s annual bonus was the
achievement of Group profit before tax for both continuing and
discontinued operations of between £33.5m and £36.5m. The
Group achieved profit before tax for both continuing and
discontinued operations of £36.8m, which is an increase of
12.2% against the previous year.
The performance condition for one third of the CEO’s annual
bonus was the achievement of strategic performance targets set
by the Committee at its meeting in September 2017. These targets
were focused on succession planning with specific actions to be
undertaken by the CEO during the year.
The Committee reviewed the performance of the CEO against
these strategic performance targets at its meeting in September
2018 and agreed that the targets set for the year to 30 June 2018
had been met.
Accordingly, annual bonus payments for 2018 will be made at
100% of the base salary for the CEO and 100% of base salary for
the CFO, both to be paid in cash.
Long term incentive plans (LTIP)
Vesting of the September 2014 long term incentive plan award for
the CEO, which matured in September 2017, was based upon a
three year performance condition which ended on 30 June 2017.
The performance condition was the total shareholder return
(“TSR” defined as the average share price measured over the
three months prior to the end of the performance period plus
cumulative dividends over the measurement period) achieving
£6.00 per share by 30 June 2017. The performance condition was
met in full and accordingly 100% of the award, being 290,769
shares, vested to the CEO on 1 October 2017.
The September 2015 long term incentive award for the CEO and
CFO achieved the three year performance condition which ended
on 30 June 2018. The performance condition was based on the
TSR achieving £6.15 per share by 30 June 2018. The performance
condition was met in full and accordingly 100% of the award,
being 250,737 shares to the CEO and 28,421 shares to the CFO,
will vest in full on 30 September 2018.
The Committee granted further conditional share awards on 26
September 2017. These were based on 300% of base salary for
the CEO, being 221,538 share awards, and 150% of base salary
for the CFO, being 69,231 share awards. These will vest in whole
or in part on 30 June 2020 if the performance conditions have
been met and are subject to a two-year holding period following
the performance period. The performance condition is based on
the TSR achieving £8.00 per share by 30 June 2020.
2019 Executive remuneration decisions
The focus of the remuneration policy for the Executive Directors
continues to have a significant proportion of remuneration be
performance-related and linked closely to the Group’s long term
strategy.
“I am pleased to have the opportunity
to set out the Group’s remuneration
strategy and the way it has been
implemented during the year.”
Ross Ancell
Chairman of the Remuneration Committee
Statement from the Chairman of the Remuneration Committee
Dear Shareholder,
I am pleased to introduce this report and set out how the Group’s
Remuneration Policy has been applied during the year. There
have been no changes to the Remuneration Policy since it was
approved by shareholders at the December 2016 AGM, however,
details of the policy are included in this report.
Our Remuneration Report is split into three parts:
• this letter, which provides an introduction to the
remuneration report;
• a copy of the Group’s Remuneration Policy that was approved
by shareholders at the December 2016 AGM; and
• the Annual Report on Remuneration, which describes how the
policy was implemented in the year to June 2018 and the plans
for the year to June 2019.
Context to the Committee decisions
The Group delivered another set of strong results during the year
with profit before tax from continuing operations increasing by
12.1% to £37.0m. Cash generation has been strong with cash flow
before dividends increasing by 9.6% to £21.6m enabling total
dividends to increase by 33.3% to 32 pence per share.
2018 Executive remuneration outcomes
During the financial year the Committee undertook its annual
review of the Executive Directors’ base salaries and agreed the
performance targets for the annual bonus for 2018.
Reflecting investor feedback on our previous approach to
retrospectively disclose LTIP targets, the Committee has taken
the decision to disclose these targets if they have been set by the
date of publishing the Annual Report. This approach has been
54 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
adopted immediately and the targets for the 2018 LTIP awards are
disclosed in the following sections. Greater clarity has also been
provided in respect of the non-financial measures of the CEO’s
annual bonus in response to investor feedback.
Consequently, the one-off CEO award is in its final year of
measurement in the year to 30 June 2019. At the date of this
report, no amounts have been accrued in respect of the one-off
CEO award.
Base salary
In line with the average base salary increase to salaried
employees and in recognition of the strong performance of the
Group and progress towards its long term strategy, the Committee
increased the base salary of the CEO by 5.2% to £505,000 from 1
July 2018. This increase follows an increase of 20% in the
previous year.
Gender pay gap
Gender pay has been extensively reported on in the press
recently and, during the year, the Committee reviewed and
debated the gender pay statistics for the Group. This shows that
the Group’s median gender pay gap is around 0.7% versus the
national average of 18.4%.
Whilst this shows that the Group is performing better than the
national average and most other housebuilders, the Committee is
committed to making sure that the Group continues to reduce its
gender pay gap. The Group is currently looking at different ways
to recruit more females into apprenticeship roles and to develop
and promote existing female staff into roles that have
traditionally been male occupied.
The Group’s gender pay report is published on its website and can
be found at www.mjgleesonplc.com
Real Living Wage
The Group is proud to be the only major housebuilder to be
accredited by the Living Wage Foundation. It pays all of its
employees the real Living Wage or higher with the only exception
being for apprentices, where it pays above the Government’s
guidelines for apprentices.
The Committee looks closely at market data when it comes to
approving employee pay and rewards to ensure that these remain
competitive and enable the Group to attract and retain good
quality staff.
Ross Ancell
Chairman, Remuneration Committee
14 September 2018
Similarly, the Committee increased the base salary of the CFO by
5.0% to £315,000 from 1 July 2018. This increase follows an
increase of 20% in the previous year.
Annual bonus
The maximum amount payable under the annual bonus scheme
will be 110% of base salary for the CEO and 100% of base salary
for the CFO. For the CEO, two thirds of the award will be based on
profit targets and one third on personal or strategic performance
targets. For the CFO, the performance condition remains wholly
linked to profit targets.
At its meeting in September 2018, the Committee agreed that the
performance condition for two thirds of the CEO’s annual bonus
and the whole of the CFO’s annual bonus is set on the
achievement of Group profit before tax. The Committee is
satisfied that this has been set at a level that presents a very
stretching target.
The performance condition for one third of the CEO’s annual
bonus is based on progress against strategic performance
targets. At its meeting in September 2018, the Committee agreed
these targets will again focus on succession planning with
specific actions to be undertaken by the CEO during the current
financial year.
Long term incentive plans (LTIP)
The Committee intends to grant further conditional share awards
at 150% of base salary for the CFO. As in previous years the
award will be conditional on the TSR measured over a period of
three financial years and will be subject to a two-year holding
period following the performance period. The performance
condition is based on the TSR achieving a target of £10.00 per
share by 30 June 2021.
In line with the letter from the Remuneration Committee that
accompanied the 2016 AGM resolutions, there will be no grant of
share awards to the CEO in the financial year to 30 June 2019. This
was to reflect the adoption of the one-off CEO award.
One-off CEO award
As approved by shareholders at the December 2016 AGM, the
one-off CEO award of £3.0m is payable on achievement of the
earlier of:
• achieving a total shareholder return of £10.00 per share at
30 June 2019 or cessation if earlier, measured over an average
of 180 days up to 30 June 2019; or
• a change of control or substantial exit prior to 30 June 2019
provided that the event is deemed by the Committee to have
delivered value to shareholders.
MJ Gleeson plc Annual Report and Accounts 2018 / 55
REMUNERATION POLICY REPORT
This part of the report sets out the remuneration policy for the
Group and has been prepared in accordance with The Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. The policy has been developed
taking into account the principles of the UK Corporate
Governance Code and the views of our major shareholders and
describes the policy that was approved by shareholders at the
AGM on 8 December 2016.
Policy overview
In setting the remuneration policy for the Executive Directors, the
Committee takes into account the following general principles:
• to attract, retain and motivate the best possible person for
each position, while aligning remuneration with
shareholder interests;
• to ensure that the remuneration packages are simple and fair
in design so that they are valued by participants;
• to ensure that the fixed element of remuneration (salary,
pension and other benefits) is determined in line with market
rates, taking account of individual performance and
experience, and that a significant proportion of the total
remuneration package is determined by performance;
• to recognise the importance of rewarding exceptional
performance (but not under-performance) in both the short
and long term;
• to set carefully all targets and associated sliding scale ranges
to ensure that performance is incrementally rewarded and that
executives are not inadvertently motivated to take
inappropriate business risks (including environmental, social,
health, safety and governance risks); and
• to provide a significant proportion of performance linked pay
in shares allowing executives to build significant shareholdings
in the business, thereby, aligning the executive’s interests with
those of the Company’s shareholders.
Components of Directors’ remuneration
The key elements of the remuneration package for each Director are set out in the table below:
Element
BASE SALARY
Purpose and link
to strategy
Provides a base level of remuneration to support recruitment and retention of Executive Directors with the
necessary experience and expertise to deliver the Group’s strategy.
Operation
Salaries are normally reviewed annually.
Salary levels are set with reference to:
• personal performance
• Company performance
•
•
inflation and earnings forecasts
• state of the marketplace generally
increases elsewhere in the Group
• similar roles in the workforce generally
The Committee may on occasion recognise a change in circumstances such as assumed additional responsibility or
an increase in the scale or scope of the role.
Individuals who are recruited or promoted to the Board may, on occasion, have their salaries set below the targeted
policy level until they become established in their role. In such cases subsequent increases in salary may be higher
than the general rises for employees until the target positioning is achieved.
There are no provisions for recovery or withholding of payment.
Maximum
opportunity
The Committee ensures that maximum salary levels are positioned in line with companies of a similar size and
complexity.
Salary increases for Executive Directors will take into account the increase in salaries for all employees.
The Company will set out in the section headed Annual Report on Remuneration, in the following financial year, the
salaries for that year for each of the Executive Directors.
Performance
targets
N/A
56 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Element
BENEFITS
Purpose and link
to strategy
Provides a benefits package in line with practice relative to comparators to enable the Company to recruit and
retain Executive Directors with the experience and expertise to deliver the Group’s strategy.
Operation
The Company provides cash benefits and benefits in kind to Executive Directors. These include but are not limited
to:
• Company car or cash equivalent
• private fuel
• private medical insurance – family cover
•
• permanent health insurance
• annual health check
• holiday and sick pay
• professional subscriptions
• reimbursement of expenses incurred on Group matters
life insurance
The Committee recognises the need to maintain suitable flexibility in the benefits provided to ensure it is able to
support the objective of attracting and retaining personnel in order to deliver the Group strategy. Additional
benefits may therefore be offered such as relocation allowances on recruitment.
There are no provisions for recovery or withholding of payment.
Maximum
opportunity
The value of benefits is based on the underlying cost to the Group and individual circumstances.
There is no prescribed maximum but benefits are in line with market practice.
Performance
targets
N/A
Element
PENSION
Purpose and link
to strategy
Provides a pension provision in line with practice relative to comparators to enable the Company to recruit and
retain Executive Directors with the experience and expertise to deliver the Group’s strategy.
Operation
The Company will contribute to the Group’s defined contribution pension scheme, or to personal pension
arrangements at the request of the individual. The Company contributes at an agreed percentage of salary.
The Company may also consider a cash alternative (e.g. where a Director has reached the HMRC’s lifetime or annual
allowance limit).
Other than basic salary, no element of the Directors’ remuneration is pensionable. Salary supplements are not
included in base salary to calculate other benefits and incentive opportunities.
Maximum
opportunity
There are no provisions for recovery or withholding of payment.
The maximum Company contribution or pension allowance is 25% of salary.
Directors who are members of the pension scheme may elect to exchange part of their salary in return for pension
contributions.
Performance
targets
N/A
MJ Gleeson plc Annual Report and Accounts 2018 / 57
REMUNERATION POLICY REPORT continued
Element
ANNUAL BONUS
Purpose and link
to strategy
To incentivise the achievement of key financial and strategic targets for the forthcoming year without encouraging
excessive risk taking.
Operation
The Committee will determine the bonus to be delivered following the end of the relevant financial year.
The Company will set out in the section headed Annual Report on Remuneration the nature of the targets and
details of the performance conditions, weightings and their level of satisfaction for the year being reported.
Normally payable in cash, but Executive Directors may elect to have their bonus payable in shares.
Performance targets are reviewed annually by the Committee and can include financial and non-financial targets.
The Committee has the discretion to override the formulaic outturn of the bonus to determine the appropriate level
of bonus payable where it believes the outcome is not truly reflective of performance and to ensure fairness to both
shareholders and participants.
Malus and Clawback provisions apply.
The circumstances in which the Malus clause may apply include: material errors or misstatements in the audited
financial statements of the Group or any Group company; discovery of errors, inaccuracies or misleading
information used to achieve targets, conditions, bonus or share awards; fraud or gross misconduct; and events or
behaviour leading to censure by a regulatory authority or leading to significant reputational damage.
Clawback trigger events include: material errors or misstatements in the audited financial statements of the Group
or any Group company; discovery of errors, inaccuracies or misleading information used to achieve targets,
conditions, bonus or share awards; fraud or gross misconduct; and events or behaviour leading to censure by a
regulatory authority or leading to significant reputational damage.
Maximum
opportunity
Maximum opportunity of 150% of base salary.
Percentage of bonus maximum earned for levels of performance:
Threshold: 0%
Maximum: 100%
Performance
targets
An award under the annual bonus is subject to satisfying financial and strategic/operational performance/personal
performance conditions and targets measured over a period of one financial year.
A minimum of two thirds of the bonus shall be based on financial performance measures.
The Committee will determine the bonus to be delivered following the end of the relevant financial year.
The Company will set out in the section headed Annual Report on Remuneration, the performance targets for that
year for each of the Executive Directors.
In exceptional circumstances the Committee retains the discretion to:
• change the performance measures and targets and the weighting attached to the performance measures and
targets part-way through a performance year if there is a significant and material event which causes the
Committee to believe the original measures, weightings and targets are no longer appropriate; and
• make downward or upward adjustments to the amount of bonus earned resulting from the application of the
performance measures, if the Committee believe that the bonus outcomes are not a fair and accurate reflection
of business performance.
Any adjustments or discretion applied by the Committee will be fully disclosed in the Annual Report on
Remuneration.
The financial targets incorporate an appropriate sliding scale range around a challenging target.
58 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Element
LONG TERM INCENTIVE PLAN (“LTIP”)
Purpose and link
to strategy
The purpose of the LTIP is to incentivise and reward Executive Directors in relation to long term performance and
achievement of Company strategy.
This will better align Executive Directors’ interests with the long-term interests of the Company and act as a
retention mechanism.
The award is designed to incentivise Executive Directors to maximise Total Shareholder Return (“TSR”) by
successfully delivering the Company’s strategy and to share in the resulting increase in total shareholder value.
Operation
Awards are granted to Executive Directors in the form of a conditional share award, nil cost option or restricted
share award.
These will vest at the end of a measurement period subject to:
• the Executive Director’s continued employment at the date of vesting; and
• satisfaction of the performance conditions.
Performance targets are reviewed by the Committee for each new award.
Details of the performance conditions for grants made in the year are set out in the Annual Report on Remuneration.
Amounts equivalent to any dividends or shareholder distributions may be made in respect of awards at vesting, if
the Committee so determines.
Vested shares will be subject to a two-year holding period, during which participants cannot sell their vested LTIP
awards (other than to cover Income Tax and NIC).
Malus and Clawback provisions apply.
The circumstances in which the Malus clause may apply include: material errors or misstatements in the audited
financial statements of the Group or any Group company; discovery of errors, inaccuracies or misleading
information used to achieve targets, conditions, bonus or share awards; fraud or gross misconduct; and events or
behaviour leading to censure by a regulatory authority or leading to significant reputational damage.
Clawback trigger events include: material errors or misstatements in the audited financial statements of the Group
or any Group company; discovery of errors, inaccuracies or misleading information used to achieve targets,
conditions, bonus or share awards; fraud or gross misconduct; and events or behaviour leading to censure by a
regulatory authority or leading to significant reputational damage.
Awards of up to 300% of base salary for the Chief Executive Officer and 200% for other Directors.
20% of the award will vest for threshold performance.
100% of the award will vest for maximum performance. There is straight line vesting between these points.
The performance condition for LTIP awards is absolute TSR and a fairness test, which would consider the underlying
financial performance of the Company, including, but not limited to, the profitability of the Company and
shareholder value creation including the ability of shareholders to access this value creation through the liquidity of
the shares.
The Committee may change the balance of the measures, or use different measures for subsequent awards, as
appropriate.
No material change will be made to the type of performance conditions without prior major shareholder
consultation.
In exceptional circumstances the Committee retains the discretion to:
• vary, substitute or waive the performance conditions applying to LTIP Awards if the Board considers it
appropriate and that the new performance conditions are deemed reasonable and are not materially less
difficult to satisfy than the original conditions; and
• make downward or upward adjustments to the amount vesting under the LTIP resulting from the application of
the performance measures if they believe that the outcomes are not a fair and accurate reflection of business
performance.
Maximum
opportunity
Performance
targets
MJ Gleeson plc Annual Report and Accounts 2018 / 59
REMUNERATION POLICY REPORT continued
Element
HMRC APPROVED ALL-EMPLOYEE SCHEME
Purpose and link
to strategy
The HMRC approved all-employee scheme has been designed to encourage all employees to become shareholders
in the Company and thereby align their interests with shareholders.
Operation
The Company operates an all employee scheme in which the Executive Directors are eligible to participate (which is
in line with HMRC legislation and is open to all eligible staff).
Maximum
opportunity
The maximums set by legislation from time to time.
Performance
targets
N/A
Remuneration policy for Non-Executive Directors
Element
FEES FOR NON-EXECUTIVE DIRECTORS
Purpose and link
to strategy
Provides a level of fees to support recruitment and retention of Non-Executive Directors and a Chairman with the
necessary experience to advise and assist with establishing and monitoring the Group’s strategic objectives.
Operation
Fees for Non-Executive Directors are determined by the Chairman and the Executive Directors.
Fees for the Chairman are set by the Remuneration Committee. Fees are set at levels with reference to sector, FTSE
Small Cap and general Non-Executive Director benchmarking data as appropriate.
Fees are paid in cash and are not performance related. Non-Executive Directors are paid an annual fee and
additional fees are paid to the Chairmen of the Audit, Remuneration and Nomination Committees to reflect the
additional responsibilities.
The Chairman is part of the Group private health scheme. There are no other benefits or incentive schemes for
Non-Executive Directors.
Maximum
opportunity
There is no prescribed maximum annual increase. In general the level of fee increase for the Non-Executive
Directors and the Chairman will be set taking account of any change in responsibility and will take into account the
general rise in salaries across the UK workforce.
The Company will set out in the section headed Annual Report on Remuneration the fees for that year.
The Company will pay reasonable expenses incurred by the Non-Executive Directors and Chairman and may settle
any tax incurred in relation to these.
Performance
targets
N/A
60 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Selection of performance measures and target setting
In the selection of performance measures the Committee takes
into account the Group’s strategic objectives and short and
long-term business priorities. The performance measures
selected reward the delivery of stretching financial performance
and the creation of shareholder value.
The performance targets chosen are set in accordance with the
Group’s operating plan and are reviewed annually to ensure they
are sufficiently stretching. In selecting the targets the Committee
also takes into account analysts’ forecasts, economic conditions
and the Committee’s expectation of performance over the
relevant period.
Remuneration policy for the broader employee population
The executive remuneration framework set out in this report
follows similar principles as that applied to the Group’s senior
leadership team to ensure our senior management team is
rewarded on a consistent basis. Any differences that exist arise
either because of the Remuneration Committee’s assessment of
business need or commercial necessity. The principles that
underpin our executive remuneration philosophy also cascade
throughout the organisation, although quantum will vary by level
and the provision of certain components of remuneration (such as
benefits, allowances and long-term incentives) will vary by
seniority.
How the Committee will use its discretion
Incentive plans, including annual bonus and LTIP, will be operated
in line with the rules of each scheme or plan together with any
relevant laws and regulations. However, it is important that the
Committee retains appropriate discretion (as is customary) over
the administration and operation of the incentive plans.
Discretion will include, but is not limited to, the following in
relation to incentive schemes:
• who is invited to participate or receive grants of awards;
Legacy arrangements
For the avoidance of doubt, in approving the Policy report,
authority is given to the Company to honour any commitments
entered into with current and former Directors that have been
disclosed previously to shareholders. It is also part of this policy
that we will honour payments or awards crystallising after the
effective date of this policy but arising from commitments
entered into prior to the effective date of the new policy, or at a
time when the relevant individual was not a Director of the
Company. The Company will also have the authority to meet any
claims against the Company arising as a result of a Director’s
termination.
Illustration of the application of Remuneration Policy
The charts below illustrate how the policy will be applied for
the CEO and CFO for the year to 30 June 2019 onwards for three
indicative levels of performance – minimum, expected and
maximum:
Chief Executive Officer
LTIP
Annual bonus
Fixed
600,750
100%
878,500
26%
32%
68%
1,156,250
48%
52%
Minimum
Expected
Maximun
• the size and timing of award grants or payments;
Chief Financial Officer
• discretion required when changes or adjustments are required
in special circumstances (e.g. change of control, rights issues,
special corporate or dividend events, or change in
business strategy);
• the annual review of performance measures and targets for the
annual bonus and incentive schemes (including LTIP) from year
to year;
• the determination of vesting (or payment), and the treatment
of leavers and vesting for leavers;
• the annual review of performance measures and weighting,
and targets for incentive plans over time; and
• as permitted by HMRC and other regulations, in respect of
Sharesave and any Share Incentive Plans.
In relation to incentive schemes including annual bonus and LTIP,
the Committee may adjust performance measures and/or targets
if these have ceased to be appropriate provided that such
adjusted measures or targets will not be materially less difficult
to satisfy. Any use of the above discretions would, where
relevant, be explained in future Remuneration Reports and may,
as appropriate, be the subject of consultation with the Company’s
major shareholders.
LTIP
LTIP
Annual bonus
Annual bonus
Fixed
Fixed
379,250
100%
631,250
15%
25%
60%
1,166,750
40%
27%
33%
Minimum
Expected
Maximun
Note: The chart illustrating the future remuneration packages of the CEO excludes
the one-off CEO award of £3.0m granted in 2016 as it is a one-off award and does not
form part of the recurring remuneration.
MJ Gleeson plc Annual Report and Accounts 2018 / 61
REMUNERATION POLICY REPORT continued
For the purpose of this analysis, the following assumptions have
been made:
• fixed elements comprise base salary, pension and other
benefits. As an example, for the Chief Executive Officer, fixed
elements comprise salary of £505,000, pension of £75,750
and benefits of £20,000;
• base salary levels applying on 1 July 2018;
• benefit levels are assumed to be similar to the year ended
30 June 2018;
• there will be no grant of LTIP awards for the CEO in the year to
30 June 2019;
• minimum performance assumes no award under the annual
bonus and no vesting is achieved under the LTIP for the CFO;
• expected performance assumes 50% of the potential
maximum annual bonus is earned and threshold vesting at
20% of the award for the LTIP for the CFO;
• maximum performance assumes full bonus pay out and full
vesting under the LTIP for the CFO;
• share price movement has been excluded from the above
analysis.
Note the one-off CEO award of £3.0m granted in 2016 and
conditional on achieving significant shareholder value has not
been included in the CEO’s scenario chart as it is a one-off award
and does not form part of the recurring remuneration. This will
vest on 30 June 2019 subject to the performance conditions
being met.
Service agreements and policy in respect of loss of office
All Executive Directors’ service agreements are terminable on
12 months notice. In circumstances of termination on notice, the
Committee will determine an equitable compensation package,
having regard to the particular circumstances of the case. The
Committee has discretion to require notice to be worked or to
make payment in lieu of notice or to place the Director on garden
leave for the notice period.
The dates of the Executive Directors’ service agreements who
served during the year are:
Executive Director
Jolyon Harrison
Stefan Allanson
Date of service agreement
01/07/12
29/06/15
Base salary, pension and benefits
In case of payment in lieu of notice or garden leave, base salary,
employer pension contributions and employee benefits will be
paid for the period of notice served on garden leave or paid in lieu
of notice.
Annual bonus
Where an Executive Director’s employment is terminated after the
end of a financial year but before the bonus payment is made, the
Executive Director may be eligible for a bonus award for that
financial year subject to an assessment based on financial and
personal performance achieved over the period.
Where an Executive Director’s employment is terminated during a
financial year, a pro-rata bonus award for the period worked in
that financial year may be payable subject to an assessment
based on financial and personal performance.
There is no payment in the event of gross misconduct, wilful
neglect or certain other specified circumstances.
Long Term Incentive Plan
Awards under the Long Term Incentive Plan will be determined by
the Plan rules which contain discretionary “good” leaver
provisions for designated reasons (i.e. participants who leave
early on account of injury, disability, death, a sale of their
employer or business in which they were employed, statutory
redundancy, retirement or any other reason at the discretion of
the Committee). In these circumstances a participant’s awards
will not be forfeited on cessation of employment and instead will
vest on the normal vesting date. In exceptional circumstances,
the Committee may decide that the participant’s awards will vest
early on the date of cessation of employment. In either case, the
extent to which the awards will vest depends on the extent to
which the performance conditions have been satisfied and a pro
rata reduction of the awards will be applied by reference to the
time of cessation (although the Committee has discretion to
dis-apply time pro rating if the circumstances warrant it). A
two-year holding period will apply in respect of shares that vest in
the event of cessation of employment. “Bad” leavers forfeit their
awards on cessation of employment.
In the event of a change of control or substantial exit awards will
be tested against the relevant performance targets at the date of
relevant event. If deemed appropriate, the Committee has
discretion to determine whether or not vesting of an award shall
be reduced on a pro rata basis to take account of the period of
time that has elapsed from the grant date to the date of the
relevant event.
One-off CEO award
For a “good” leaver, the award will be tested against the relevant
performance targets on cessation of employment and the level of
vesting determined. A “bad” leaver will forfeit their award on
cessation of employment.
In the event of change of control or substantial exit within 3 years
of grant which is deemed by the Committee to have delivered
value to shareholders, the award will vest in full. If the Committee
deems that a change of control or substantial event has not
delivered value to shareholders, then the award will be forfeited.
62 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Statement of consideration of employment conditions
elsewhere in the Group
The Committee does not consult with employees on Directors’
remuneration but regularly reviews the remuneration of staff
throughout the Group to ensure that it is attuned to general pay
and conditions when considering the remuneration of Executive
pay. For example, in determining salary increases for the
Executive Directors the Committee looks at salary increases
across the Group.
The Committee is proud of its commitment that all employees are
paid no less than the real Living Wage set by the Living Wage
Foundation and to disclose the number of higher paid employees
in the Group:
Employees (excluding Board Directors) by pay category
Pay category (base salary)
Exceeding £200,000 p.a.
Exceeding £100,000 p.a.
Above the real Living Wage, below £100,000 p.a.
At the real Living Wage
Above the Government’s guidance for apprentices,
but below the real Living Wage
Below the real Living Wage
Total employees
No. of
employees at
30 June 2018
0
11
400
54
42
0
507
Statement of consideration of shareholder views
The Committee consults with major shareholders and their
representative bodies on remuneration matters, particularly if
any material changes are proposed to the remuneration policy. In
these instances the Committee seeks feedback from investors
and develops and considers its proposals in light of this
feedback.
Chairman and other Non-Executive Directors’ terms
of engagement
The Chairman and the Non-Executive Directors are not
employees; they have letters of appointment which set out their
duties and responsibilities. The dates of each Non-Executive
Directors’ original appointment are as follows:
Non-Executive Director
Date of original appointment
Expiry of current term
Dermot Gleeson
Ross Ancell
Colin Dearlove
Christopher Mills
27/11/75
01/10/06
03/12/07
01/01/09
30/09/18
30/09/18
30/09/18
30/09/18
All Non-Executive Directors have specific terms of engagement
being an initial period of three years which thereafter may be
extended on an annual basis, subject to re-election at each AGM.
The appointment of the Chairman may be terminated on six
months’ notice and the appointment of the other Non-Executive
Directors may be terminated on one month’s notice.
Recruitment policy
The remuneration of a new Executive Director will include salary,
benefits, pension and participation in the annual bonus and LTIP
schemes normally in accordance with the policy for Executive
Directors’ remuneration. Salaries for new hires will be set to
reflect their skills and experience and the market rate for the role.
If it is considered appropriate to appoint a new Director on a
below market salary (for example, to allow them to gain
experience in the role) their salary may be increased to a market
level by way of a series of above inflation increases over two to
three years.
Although it is not the Company’s policy to provide buy-outs as a
matter of course, the Committee may offer additional cash and/or
share-based elements (on a one-time basis or ongoing) when it
considers these to be in the best interests of the Group (and
therefore shareholders). Any such payments would be based
solely on remuneration lost when leaving the former employer
and would reflect the delivery mechanism, time horizons and
performance requirement attaching to that remuneration. The
Committee may then grant up to the equivalent value as the
lapsed value, where possible, under the Company’s incentive
plans. To the extent that it was not possible or practical to provide
the buy-out within the terms of the Company’s existing incentive
plans, a bespoke arrangement would be used.
In the case of an internal appointment, any variable pay element
awarded in respect of the prior role may be allowed to pay out
according to its terms on grant, adjusted as relevant to take into
account the appointment. In addition, any other ongoing
remuneration obligations existing prior to appointment may
continue, provided that they are put to shareholders for approval
at the first AGM following their appointment.
The Committee may also agree that the Company will compensate
Executives, both internal and external, for certain relocation
expenses as appropriate.
MJ Gleeson plc Annual Report and Accounts 2018 / 63
ANNUAL REPORT ON REMUNERATION
The Remuneration Committee’s Annual Report on Remuneration for the year ended 30 June 2018 is
set out below, including remuneration for the year ended 30 June 2018 and the proposed
implementation of the approved Remuneration Policy for 2019.
The auditor is required to report on the following information up to and including the table on Directors’ interest in shares under the
Long Term Incentive Plan.
Single total figure of remuneration for each Director for the year ended 30 June 2018
Salary
& fees
£000
Benefits
£000
2018
Annual
bonus
£000
Value of
LTIP award
vesting1
£000
Pension
£000
Total
£000
Salary
& fees
£000
Benefits
£000
2017
Annual
bonus
£000
Value of
LTIP award
vesting1
£000
Pension
£000
Total
£000
120
1
–
–
–
121
110
1
–
–
–
111
480
300
18
17
480
300
1,873
212
72
45
2,923
874
400
250
19
16
400
250
1,937
–
60
37
2,816
553
56
56
45
–
–
–
–
–
–
–
–
–
–
–
–
56
56
45
50
50
40
–
–
–
–
–
–
–
–
–
–
–
–
50
50
40
1,057
36
780
2,085
117
4,075
900
36
650
1,937
97
3,620
Chairman
Dermot Gleeson
Executive Directors
Jolyon Harrison
Stefan Allanson
Non-Executive Directors
Ross Ancell
Colin Dearlove
Christopher Mills
1
LTIP represents the value of the LTIP awards which vest in respect of a performance period ending in the relevant financial year. The 2017 column has been restated to
show the value of 2014 LTIP awards that met the performance conditions at the measurement date of 30 June 2017, rather than those which had vested during the year as
previously disclosed. The 2018 column includes the value of the 2015 LTIP awards which will vest in full in September 2018, and has been calculated using the average
share price over the last three months of the financial year.
During the year no Director waived his entitlement to any emoluments.
Notes to the single total figure of remuneration
Taxable benefits provided to Executive Directors
The main benefits available to the Executive Directors during the year to 30 June 2018 (and their associated values) were: car
allowance of £13,000 for Jolyon Harrison and £13,000 for Stefan Allanson; car fuel of £3,523 for Jolyon Harrison and £3,137 for
Stefan Allanson; and private medical insurance of £1,436 for Jolyon Harrison and £748 for Stefan Allanson. This package of benefits is
unchanged from 2017.
Determination of annual bonus
The CEO’s annual performance-related bonus for the year to 30 June 2018 was based two-thirds upon achieving a profit related target
and one third upon achieving a strategic performance target. The CFO’s annual performance-related bonus for the year to 30 June 2018
was based wholly upon achieving a profit related target.
The profit related target for both the CEO and CFO was the Group’s profit before tax, for both continuing and discontinued operations in
the year to 30 June 2018, with the following target figures and straight line vesting between the relevant target figures.
Target
Threshold
Target
Profit measure
£m
Bonus
achievable
as percentage
of salary
33.5
36.5
0%
100%
The profit measure achieved for the year to 30 June 2018 was £36.8m, as per the basis of calculation above. Accordingly, the profit
target was met for the year.
The performance condition for one third of the CEO’s annual bonus was the achievement of strategic performance targets set by the
Committee at its meeting in September 2017. These strategic performance targets were centred on succession planning with specific
actions to be undertaken by the CEO during the year.
64 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
The Group is now in its second successful year of a leadership development programme that is being externally led and, in July 2018, a
new MD for the Homes division and a COO for the Homes division were internally appointed.
The Committee reviewed the performance of the CEO against the strategic performance targets at its meeting in September 2018 and
agreed that the targets set for the year to 30 June 2018 had been met.
As a result, the annual bonus payments for 2018 will be made, in cash, at 100% of base salary for the CEO and 100% of base salary for
the CFO.
Long Term Incentive Plan
The LTIP delivers shares to the Executive Directors subject to performance targets being reached. The performance target is based on
total shareholder return (“TSR”) which is defined as the average share price measured over the three months prior to the end of the
performance period plus cumulative dividends over the measurement period.
At 30 June 2017, the September 2014 long term incentive plan award for the CEO achieved the three year performance condition. The
performance condition was the TSR achieving £6.00 per share by 30 June 2017. The performance condition was met in full and
accordingly 100% of the award, being 290,769 shares, vested to the CEO on 1 October 2017.
At 30 June 2018, the September 2015 long term incentive award for the CEO and CFO achieved the three year performance condition.
The performance condition was based on the TSR achieving £6.15 per share by 30 June 2018. The performance condition was met in
full and accordingly 100% of the award, being 250,737 shares to the CEO and 28,421 shares to the CFO, will vest in full on
30 September 2018.
Pension
The Executive Directors are eligible to participate in the MJ Gleeson Group Pension Plan, a defined contribution arrangement and
both Executive Directors are members of the Plan. The CEO received pension contributions of 15% of salary (2018: £72,000) and the
CFO received pension contributions of 15% of salary (2018: £45,000).
Directors’ shareholdings and share interests
The share interests of the Directors serving during the year and of their connected persons in the ordinary share capital of the Company
are as shown below:
Director
Dermot Gleeson
Jolyon Harrison
Stefan Allanson
Ross Ancell
Colin Dearlove
Christopher Mills1
30 June 2018
30 June 2017
1,086,821
1,086,821
1,895,933
1,734,126
16,453
16,073
–
–
–
–
6,109,6401
10,055,0001
1 Shares are held by funds managed by Harwood Capital LLP of which Christopher Mills is a Member/Director.
None of the shares held are subject to performance conditions. There are no share ownership requirements for the Directors.
Directors’ interest in shares under the Long Term Incentive Plan
Director
J Harrison
S Allanson
Scheme
PSP 2014
PSP 2015
LTIP 2016
LTIP 2017
PSP 2015
LTIP 2016
LTIP 2017
30 June
2017
290,769
250,737
210,526
–
28,421
65,789
–
Granted
during year
–
–
–
221,538
–
–
69,231
Exercised
during year
290,769
–
–
–
–
–
–
Lapsed in
year
–
–
–
–
–
–
–
Share price
at date of
grant of
award
£3.90
£4.82
£5.70
£6.50
£4.82
£5.70
£6.50
Total
interests
outstanding
at 30 June
2018
–
250,737
210,526
221,538
28,421
65,789
69,231
Shares
vested
but not
exercised
–
–
–
–
–
–
–
Date from
which share
may be
exercised
N/A
30/09/18
30/06/19
30/06/20
30/09/18
30/06/19
30/06/20
The middle market price on 30 June 2018 was £7.94 and the range during the year to 30 June 2018 was between £6.05 and £8.10.
MJ Gleeson plc Annual Report and Accounts 2018 / 65
ANNUAL REPORT ON REMUNERATION continued
The Committee granted further conditional share awards on 26 September 2017. These were based on 300% of base salary for the
CEO, being 221,538 share awards, and 150% of base salary for the CFO, being 69,231 share awards. These will vest in whole or in part
on 30 June 2020 if the performance conditions have been met and are subject to a two-year holding period following the performance
period. The performance condition is based on the TSR as shown below:
September 2017 LTIP awards
Jolyon Harrison
Stefan Allanson
Number
of shares
awarded
221,538
69,231
Threshold
award at
£7.20, 20% of
award made
£
Maximum
award at
£8.00, 100% of
award made
£
319,015
1,772,304
99,693
553,848
Total Shareholder Return performance
We have compared the Company’s total shareholder return performance over the last nine years with the total shareholder return for
the FTSE Small Cap Index, of which the Company is a member, and a comparator index of listed housebuilders. The comparator group
consists of a group of listed housebuilders comprising Barratt Developments, Bellway, Bovis Homes, Crest Nicholson, Persimmon,
Redrow, Taylor Wimpey and Telford Homes.
MJ Gleeson plc Total Shareholder Return (“TSR”) comparison to peer group and index 30 June 2009 to 30 June 2018
MJ Gleeson plc
Housebuilders
FTSE Small Cap
1600
1400
1200
1000
800
600
400
200
0
Jun 2009
Jun 2010
Jun 2011
Jun 2012
Jun 2013
Jun 2014
Jun 2015
Jun 2016
Jun 2017
Jun 2018
Chief Executive Officer’s remuneration 2011 to 2018
Year
2018
20173
20163
20153
2014
20133
2012
2011
Chief Executive Officer
Jolyon Harrison
Jolyon Harrison
Jolyon Harrison
Jolyon Harrison
Jolyon Harrison
Jolyon Harrison2
N/A4
Chris Holt
Single figure of
total remuneration
£
Annual bonus paid against
maximum opportunity
LTIP awards vesting against
maximum opportunity
2,922,759
2,815,860
873,174
2,917,271
793,107
1,614,646
–
416,608
100%
100%
100%
100%
100%
81%
–
0%
100%
100%
–1
100%
–1
100%
–
–1
1 No LTIP met their performance conditions for vesting.
2
3
Jolyon Harrison appointed Chief Executive Officer from 1 July 2012.
The single figure of total remuneration has been restated to show the value of LTIP awards that had met their performance conditions at each year end measurement date,
rather than the value of awards vesting during each year as previously reported.
4 No Chief Executive Officer held office during 2012.
66 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Chief Executive Officer’s change in remuneration
Set out below is a comparison of the change in remuneration of the CEO from 30 June 2017 to 30 June 2018, compared to the change in
remuneration of the Group’s salaried employees, excluding Executive Directors.
Chief Executive Officer
Average of salaried employees
Percentage change from 2017 to 2018
Annual salary
Bonus
Value of taxable benefits
20.0%
4.3%
20.0%
(3.0)%
(6.4)%
(7.5)%
Relative importance of spend on pay
Set out below is the amount spent on remuneration for all employees of the Group (including Executive Directors) and the total
amounts paid in distributions to shareholders over the year.
Remuneration for all employees
Total distributions paid
2018
£m
26.2
14.4
2017
£m
20.3
8.9
Difference in spend
£m
5.9
5.5
Difference as
percentage
29.1%
61.8%
Implementation of the Policy for the year to 30 June 2019
Executive Directors
Base salaries
After taking into consideration the increases to Group employees’ salaries on 1 July 2018 (monthly paid employees received an average
5.2% base salary increase), the Committee has awarded salary increases of 5.2% to the CEO and 5% to the CFO from 1 July 2018.
Jolyon Harrison
Stefan Allanson
Base salary from
1 July 2018
£
Base salary for the year to
30 June 2018
£
505,000
315,000
480,000
300,000
Annual bonus
The maximum bonus that can be earned in the year will be 110% of base salary for the CEO and 100% of base salary for the CFO. This is
in line with last year for the CFO and an increase of 10% for the CEO. This was agreed by the Committee at its meeting in September
2018 following a review of external benchmarking data.
At its meeting in September 2018, the Committee agreed that the performance condition for two thirds of the CEO’s annual bonus and
the whole of the CFO’s annual bonus is set on the achievement of Group profit before tax for both continuing and discontinued
operations for the year to 30 June 2019. Whilst disclosure of the target is considered to be commercially sensitive, the Committee are
satisfied this has been set at a level that presents a very stretching target. It is the intention that the target will be disclosed in the
2019 Annual Report on Remuneration.
The performance condition for one third of the CEO’s annual bonus is based on progress against strategic performance targets. At its
meeting in September 2018, the Committee agreed these targets will again focus on succession planning with specific actions to be
undertaken by the CEO during the current financial year.
Long Term Incentive Plan (LTIP)
The Committee proposes to make an award to the CFO in the year to 30 June 2019, in line with the policy approved by shareholders at
the 2016 AGM. This award is expected to be at 150% of salary for the CFO.
The performance measures will include an absolute TSR target and a fairness test which would consider the underlying financial
performance of the Company, including, but not limited to, the profitability of the Company and shareholder value creation including
the ability of shareholders to access this value creation through the liquidity of the shares. The performance condition is based on the
TSR achieving a target of £10.00 per share by 30 June 2021.
In line with the letter from the Remuneration Committee that accompanied the 2016 AGM resolutions, there will be no grant of share
awards to the CEO in the financial year to 30 June 2019. This was to reflect the adoption of the one-off CEO award.
Pension
There are no changes to pension benefits for 2019 other than to increase in line with salary; current arrangements are set out on
page 65. Executive Directors may opt to receive a cash allowance in lieu of pension payments in line with the policy approved by
shareholders at the 2016 AGM.
MJ Gleeson plc Annual Report and Accounts 2018 / 67
ANNUAL REPORT ON REMUNERATION continued
Chairman and Non-Executive Directors fees
The Committee has agreed that the Chairman’s fee for 2019 should increase by £5,000, to £125,000 with effect from 1 July 2018 which
includes the additional fee of £10,500 for chairing the Nomination Committee. This increase was made to reflect the increase in
workload as the Group grows and as governance requirements develop. An external benchmarking exercise was also performed.
The Board as a whole determine the fees for the Non-Executive Directors. The fees for the Non-Executive Directors increased by £2,250
to £47,250 plus an additional, unchanged, fee of £10,500 for chairing a Board Committee. The increase was made again to reflect the
increasing workload as the Group grows and following an external benchmarking exercise.
The Remuneration Committee
During the year under review the Committee was chaired by Ross Ancell. The other committee member is Colin Dearlove. Both of the
Directors are independent Non-Executive Directors and they have no personal financial interest in matters to be decided, no potential
conflicts of interest arising from cross directorships and no day-to-day involvement in running the business.
Biographical details of the members of the Committee are shown on pages 34 and 35, and details of their attendance at the meetings
of the Committee during the year ended 30 June 2018 are shown on page 39.
Role and responsibilities of the Remuneration Committee
The Committee’s primary purpose is to make recommendations to the Board on the Group’s framework for executive remuneration. The
Board has also delegated responsibility to the Committee for determining the remuneration, benefits and contractual arrangements of
the Chairman and the Executive Directors. No individual is involved in deciding their own remuneration.
The Committee has written terms of reference, which are available on the MJ Gleeson plc section of its website at www.mjgleesonplc.com,
and its responsibilities include:
• recommending to the Board the policy for Executive and senior management remuneration;
• agreeing the terms and conditions of employment for Executive Directors, including their annual remuneration and pension
arrangements, and reviewing such provisions for senior management;
• agreeing the measures and targets for any performance related bonus and share schemes;
• agreeing the remuneration of the Chairman of the Board;
• ensuring that, on termination, contractual terms and payments made are fair both to the Company and the individual so that failure
is not rewarded; and
• agreeing the terms of reference of any remuneration consultants that it appoints.
Activities during the year
The Committee met on three occasions during the year, two of which were scheduled meetings. Papers were circulated in advance of
each meeting for all matters considered. The main activities undertaken by the Committee during the year included:
• reviewing and approving the remuneration outcomes of the Executive Directors and senior management for the year ended 30 June
2017 and assessing the fairness of these remuneration outcomes;
• agreeing performance targets for the remuneration of the Executive Directors and senior management for the financial year ended
30 June 2018 and monitoring progress against these targets during the year;
• agreeing proposals for remuneration of the Executive and Non-Executive Directors and application of the Remuneration policy for
the year ending 30 June 2019;
• reviewing share awards vesting under the 2014 LTIP grant including the application of discretion to amend the outturn of these
awards where appropriate;
• reviewing and approving proposals for staff pay and bonuses including examining benchmarking data and market information from
third party advisers;
• reviewing and approving gender pay reporting for the Group;
• appointing remuneration consultants, Ernst & Young LLP who were appointed by the Committee after the year end to advise on
technical remuneration and reporting matters; and
• reviewing the terms of reference of the Committee such that these remain appropriate.
Remuneration Committee – Support and Advice
The Committee is supported by the Human Resources Director, Beth Broughton, and the Company Secretary, Stefan Allanson. The
Company also took advice from Ernst & Young LLP who were appointed after the year end. The Committee is satisfied that the
appointment of Ernst & Young LLP is in accordance with the Company’s policy on the provision of non-audit services to the Group and
the external advice received is independent.
68 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Statement of voting at the Annual General Meeting
At the Annual General Meeting held on 7 December 2017, votes cast by proxy and at the meetings in respect of the Remuneration
Report are shown in the table below.
The Board and Remuneration Committee have taken into account shareholder feedback both before and after the AGM. In respect of
votes cast against the Remuneration Report, the Committee has actively engaged with shareholders and taken their views into account
in preparing the 2018 Remuneration Report. This includes disclosing the measurement targets for the LTIP awards in the year in which
the awards are made, rather than retrospectively, and providing greater clarity in respect of the non-financial measures of the CEO’s
annual bonus.
The Committee has also taken the views of shareholders into account when implementing the remuneration policy for the year to 30
June 2019, in particular in setting the base salaries for the Executive Directors. The Committee has sought to balance the expectations
of shareholders with the need to motivate and incentivise the Executive Directors to deliver the Group’s strategy, with due
consideration to the base salary increases of the wider workforce.
2017 AGM: Approval of the Directors’
Remuneration Report
30,875,696
77.05%
9,197,719
22.95% 40,073,415
6,385
Votes in favour
Votes against
No.
%
No.
%
Total
votes cast
Votes
withheld
MJ Gleeson plc Annual Report and Accounts 2018 / 69
FINANCIAL STATEMENTS
70
Homelands Park, Crook, County Durham Strategic Report
Governance Report
Financial Statements
Other Information
Financial Statements
72
73
78
78
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Comprehensive
Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
79
80
82
83 Notes to the Financial Statements
71
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF
THE ANNUAL REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and Company financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. Under company law
the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the
Group and Company for that period. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable IFRSs as adopted by the European
Union have been followed for the Group financial statements
and IFRSs as adopted by the European Union have been
followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial
statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Group and Company and
enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies
Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and financial
statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Group and Company’s performance,
business model and strategy.
Each of the Directors, whose names and functions are listed in
Board of Directors confirm that, to the best of their knowledge:
• the Company financial statements, which have been prepared
in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and loss of the Company;
• the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give
a true and fair view of the assets, liabilities, financial position
and profit of the Group; and
• the Strategic Report includes a fair review of the development
and performance of the business and the position of the Group
and Company, together with a description of the principal risks
and uncertainties that it faces.
By order of the Board
Jolyon Harrison
Director
Stefan Allanson
Director
14 September 2018
72 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
MJ GLEESON PLC
Report on the audit of the financial statements
Our audit approach
Overview
Opinion
In our opinion, MJ Gleeson plc’s Group financial statements and
Company financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the
Materiality
Company’s affairs as at 30 June 2018 and of the Group’s profit
and the Group’s and the Company’s cash flows for the year
then ended;
• have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the Company’s financial
statements, as applied in accordance with the provisions of
the Companies Act 2006; and
• have been prepared in accordance with the requirements of
the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the
Report and Accounts (the “Annual Report”), which comprise: the
consolidated income statement; the consolidated statement of
comprehensive income; the statement of financial position; the
statement of changes in equity; the statement of cash flows; and
the notes to the financial statements, which include a description
of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard,
as applicable to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
To the best of our knowledge and belief, we declare that non-
audit services prohibited by the FRC’s Ethical Standard were not
provided to the Group or the Company.
We have provided no non-audit services to the Group or the
Company in the period from 1 July 2017 to 30 June 2018.
• Overall Group materiality: £1,850,900
(2017: £1,650,000), based on 5% of
profit before tax.
• Overall Company materiality:
£1,503,000 (2017: £1,567,500), based
on 1% of total assets.
• The reporting units where we
performed audit work accounted for
100% of the Group’s profit before tax
and 100% of the Group’s total assets.
• Carrying value of land and work in
progress.
Audit scope
Key audit
matters
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made
subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
We gained an understanding of the legal and regulatory
framework applicable to the Group and the industry in which it
operates, and considered the risk of acts by the Group which were
contrary to applicable laws and regulations, including fraud. We
designed audit procedures at Group and significant component
level to respond to the risk, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. We focused
on laws and regulations that could give rise to a material
misstatement in the Group and Company financial statements,
including, but not limited to, the Companies Act 2006, the Listing
Rules and UK tax legislation. Our tests included, but were not
limited to, review of the financial statement disclosures to
underlying supporting documentation, and enquiries of
management. There are inherent limitations in the audit
procedures described above and the further removed non-
compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely
we would become aware of it.
We did not identify any key audit matters relating to irregularities,
including fraud. As in all of our audits we also addressed the risk
of management override of internal controls, including testing
journals and evaluating whether there was evidence of bias by
the Directors that represented a risk of material misstatement
due to fraud.
MJ Gleeson plc Annual Report and Accounts 2018 / 73
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
MJ GLEESON PLC continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of
our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Carrying value of land and work in
progress
We focused upon this area because the
value of the Group’s land and work in
progress represent a significant
proportion of assets in the Group
statement of financial position.
Further, determining the carrying value
of land and work in progress requires a
high degree of judgement.
For work in progress in Gleeson
Homes, the key judgements include
forecasting future costs to complete
and selling prices which can be
affected by market conditions and
unexpected events, whilst land
valuations in the segment require
provision assessments to take place to
ensure that net realisable values are
not below cost.
In Gleeson Strategic Land, the
valuation of work in progress requires
judgement regarding the future
viability of each project. Based upon
this assessment, it may be necessary
to record provisions to determine the
final carrying value of work in progress
for each site.
For land and work in progress in Gleeson Homes, we:
• Assessed the adequacy of controls over site valuations, including costs to complete,
sales prices and the authorisation and recording of costs, including testing of controls
over the allocation of costs to the correct sites.
• Visited a sample of sites to confirm the existence and condition of the work in progress,
and also to evaluate the reasonableness of the assessment of stage of completion.
• Sample tested and agreed certain costs incurred during the year included within land
and work in progress to supporting evidence as well as reviewing the proportion of that
expenditure recognised as a cost of sale in the year in respect of units sold.
• Tested the percentage completion of units across a sample of sites and checked that
forecasts have been appropriately updated for expected costs and selling prices to
completion. We also assessed the level of gross margins achieved against those
recorded previously and future forecasts.
• Assessed the historical accuracy of management’s forecasting.
• Discussed a sample of sites with management in order to assess the reasonableness of
net realisable values and corroborated the explanations received back to supporting
documentation.
• Performed an independent assessment of cost accruals and build contingency via
enquiry and corroboration to supporting evidence.
For work in progress in Gleeson Strategic Land, we:
• Tested a sample of costs incurred during the year.
• Tested the transfer from work in progress to cost of sales for those sites sold during
the year.
• Discussed and challenged the status of a sample of projects with management and
corroborated explanations received.
• Recalculated the provision made by management against year-end work in progress by
applying the Group’s provisioning methodology.
Based on the procedures performed we did not identify any material adjustments to the
carrying value of the Group’s land and work in progress at year end.
We determined that there were no key audit matters applicable to the Company to communicate in our report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry
in which they operate.
The Group is organised into two main operating divisions being Gleeson Homes and Gleeson Strategic Land.
The Group financial statements are a consolidation of the 8 reporting units within these two business lines and the Group’s
centralised functions.
Of the Group’s 8 reporting units, we identified 8 which, in our view, required an audit of their complete financial information, either due
to their size or their risk characteristics.
This, together with additional procedures performed on the Group’s centralised functions, gave us the evidence we needed for our
opinion on the Group financial statements as a whole.
All work was performed by the Group audit team.
74 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£1,850,900 (2017: £1,650,000).
Group financial statements
Parent company financial statements
£1,503,000 (2017: £1,567,500).
How we determined it
5% of profit before tax.
1% of total assets.
Rationale for
benchmark applied
The key objective of the Group is to deliver profitable
growth to increase long-term shareholder value. As a
result, we believe profit before tax is the primary
measure used by the shareholders in assessing the
performance of the Group and is therefore the
appropriate benchmark to use in setting materiality.
The key objective of the Parent Company is to hold
investments in the various Group companies. As a
result, we believe total assets is the primary
measure used by the shareholders in assessing the
performance of the Parent Company and is therefore
the appropriate benchmark to use in
setting materiality.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was between £67,500 and £1,308,000. Certain components were audited to a local
statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £92,545
(Group audit) (2017: £82,500) and £75,150 (Parent Company audit) (2017: £82,500) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw
attention to in respect of the Directors’ statement in the financial statements
about whether the Directors considered it appropriate to adopt the going
concern basis of accounting in preparing the financial statements and the
Directors’ identification of any material uncertainties to the Group’s and the
Company’s ability to continue as a going concern over a period of at least
twelve months from the date of approval of the financial statements.
We are required to report if the Directors’ statement relating to Going
Concern in accordance with Listing Rule 9.8.6R(3) is materially inconsistent
with our knowledge obtained in the audit.
We have nothing material to add or to draw attention
to. However, because not all future events or
conditions can be predicted, this statement is not a
guarantee as to the Group’s and Company’s ability to
continue as a going concern.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06),
ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as
described below (required by ISAs (UK) unless otherwise stated).
MJ Gleeson plc Annual Report and Accounts 2018 / 75
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
MJ GLEESON PLC continued
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’
Report for the year ended 30 June 2018 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we
did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of
the Group
We have nothing material to add or draw attention to regarding:
• The Directors’ confirmation on page 39 of the Annual Report that they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on page 41 of the Annual Report as to how they have assessed the prospects of the Group, over what
period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust assessment of
the principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially
less in scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their
statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the
“Code”); and considering whether the statements are consistent with the knowledge and understanding of the Group and Company
and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 72, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Company’s position and
performance, business model and strategy, is materially inconsistent with our knowledge of the Group and Company obtained in
the course of performing our audit.
• The section of the Annual Report on pages 48 to 52 describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
• The Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a
relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the Companies Act 2006. (CA06)
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities in respect of the Annual Report and the financial statements set
out on page 72, the Directors are responsible for the preparation of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair view. The Directors are also responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
76 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the Directors on 14 November 2016 to audit the financial
statements for the year ended 30 June 2017 and subsequent financial periods. The period of total uninterrupted engagement is
2 years, covering the years ended 30 June 2017 to 30 June 2018.
Ian Marsden (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
14 September 2018
MJ Gleeson plc Annual Report and Accounts 2018 / 77
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2018
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
Finance income
Finance expenses
Profit before tax
Tax
Profit for the year from continuing operations
Discontinued operations
Loss for the year from discontinued operations (net of tax)
Profit for the year
Earnings per share from continuing and discontinued operations
Basic
Diluted
Earnings per share from continuing operations
Basic
Diluted
Note
2018
£000
2017
£000
2
5
7
7
8
3
10
10
10
10
196,741
(131,474)
160,384
(103,674)
65,267
(28,670)
257
36,854
418
(253)
37,019
(6,526)
30,493
56,710
(24,051)
304
32,963
251
(202)
33,012
(6,488)
26,524
(257)
(310)
30,236
26,214
55.55 p
54.69 p
48.49 p
47.75 p
56.02 p
55.15 p
49.06 p
48.31 p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2018
Profit for the year
Other comprehensive (expense)/income
Items that may be subsequently reclassified to profit or loss
Change in value of available for sale financial assets
Movement in deferred tax on share-based payments taken directly to equity
Other comprehensive (expense)/income for the year, net of tax
Total comprehensive income for the year
The notes on pages 83 to 103 form part of these financial statements.
Note
2018
£000
2017
£000
30,236
26,214
16
20
31
(237)
(104)
665
(206)
561
30,030
26,775
78 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
STATEMENT OF FINANCIAL POSITION
at 30 June 2018
Non-current assets
Plant and equipment
Investment properties
Investments in subsidiaries
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
UK corporation tax
Total assets
Non-current liabilities
Trade and other payables
Provisions
Current liabilities
Trade and other payables
Provisions
UK corporation tax
Total liabilities
Net assets
Equity
Share capital
Available for sale reserve
Retained earnings
Total equity
Note
11
12
13
15
20
14
15
22
17
18
17
18
24
Group
2018
£000
2017
£000
Company
2018
£000
2017
£000
1,737
258
–
24,626
3,731
30,352
160,517
10,602
41,314
–
212,433
242,785
1,484
303
–
14,427
5,001
21,215
142,550
17,925
34,052
–
194,527
215,742
–
–
100,800
–
127
100,927
–
38,291
8,474
2,625
49,390
1
–
100,800
–
202
101,003
–
46,154
17,247
3,858
67,259
150,317
168,262
(9,176)
(110)
(9,286)
(703)
(110)
(813)
–
–
–
–
–
–
(42,441)
(49)
(2,910)
(40,924)
(101)
(2,533)
(66,707)
–
–
(69,145)
–
–
(45,400)
(43,558)
(66,707)
(69,145)
(54,686)
(44,371)
(66,707)
(69,145)
188,099
171,371
83,610
99,117
1,092
(657)
187,664
1,082
(688)
170,977
188,099
171,371
1,092
–
82,518
83,610
1,082
–
98,035
99,117
Retained earnings of the Company
The loss of the Company in the financial year amounted to £2,090,000 (2017: £675,000).
The financial statements on pages 78 to 103 were approved by the Board of Directors on 14 September 2018 and signed on its behalf by:
Jolyon Harrison
Director
Stefan Allanson
Director
Registration number: 9268016
The notes on pages 83 to 103 form part of these financial statements.
MJ Gleeson plc Annual Report and Accounts 2018 / 79
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2018
Group
At 1 July 2016
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Adjustment to share premium
Purchase of own shares
Share-based payments
Dividends
Transactions with owners, recorded directly in equity
At 30 June 2017
Total comprehensive income for the year
Profit for the year
Other comprehensive expense
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Share issue
Sale of own shares
Share-based payments
Dividends
Transactions with owners, recorded directly in equity
Share
capital
£000
Note
Share
premium
account
£000
Available
for sale
reserve
£000
Retained
earnings
£000
Total
equity
£000
1,082
23
(584)
152,384
152,905
–
–
–
–
–
–
–
–
1,082
–
–
–
10
–
–
–
10
25
9
24
25
9
–
–
–
(23)
–
–
–
(23)
–
–
–
–
–
–
–
–
–
–
–
(104)
(104)
26,214
665
26,879
26,214
561
26,775
–
–
–
–
–
–
(22)
660
(8,924)
(23)
(22)
660
(8,924)
(8,286)
(8,309)
(688)
170,977
171,371
–
31
31
–
–
–
–
–
30,236
(237)
29,999
30,236
(206)
30,030
–
95
1,026
(14,433)
10
95
1,026
(14,433)
(13,312)
(13,302)
(657)
187,664
188,099
At 30 June 2018
1,092
80 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
Share
capital
£000
Note
Share
premium
account
£000
Available
for sale
reserve
£000
Retained
earnings
£000
Total
equity
£000
1,082
23
Company
At 1 July 2016
Total comprehensive expense for the year
Loss for the year
Other comprehensive income
Total comprehensive expense for the year
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Adjustment to share premium
Purchase of own shares
Share-based payments
Dividends
Transactions with owners, recorded directly in equity
At 30 June 2017
Total comprehensive expense for the year
Loss for the year
Other comprehensive income
Total comprehensive expense for the year
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Share issue
Purchase of own shares
Share-based payments
Dividends
Transactions with owners, recorded directly in equity
–
–
–
–
–
–
–
–
1,082
–
–
–
10
–
–
–
10
25
9
24
25
9
–
–
–
(23)
–
–
–
(23)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
106,947
108,052
(675)
55
(620)
(675)
55
(620)
–
(28)
660
(8,924)
(23)
(28)
660
(8,924)
(8,292)
(8,315)
98,035
99,117
(2,090)
3
(2,087)
(2,090)
3
(2,087)
–
(23)
1,026
(14,433)
10
(23)
1,026
(14,433)
(13,430)
(13,420)
82,518
83,610
At 30 June 2018
1,092
MJ Gleeson plc Annual Report and Accounts 2018 / 81
STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
Operating activities
Profit/(loss) before tax from continuing operations
Loss before tax from discontinued operations
Depreciation of plant and equipment
Share-based payments
Profit on sale of available for sale financial assets
Loss on disposal of plant and equipment
Loss on sale of investment properties
Finance income
Finance expenses
Note
3
11
11
7
7
Group
2018
£000
2017
£000
Company
2018
£000
37,019
(217)
36,802
971
1,026
(167)
152
–
(418)
253
33,012
(228)
32,784
818
660
(216)
147
9
(251)
202
Operating cash flows before movements in working capital
38,619
34,153
Increase in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Decrease in amounts due from subsidiary undertakings
Increase in amounts due to subsidiary undertakings
(17,967)
(3,247)
9,855
–
–
(28,312)
3,650
14,633
–
–
Cash generated in operating activities
27,260
24,124
10,800
Tax paid
Interest paid
Net cash flow surplus from operating activities
(5,156)
(172)
(4,426)
(135)
21,932
19,563
(5,156)
(165)
5,479
Investing activities
Proceeds from disposal of available for sale financial assets
Proceeds from disposal of investment properties
Proceeds from disposal of plant and equipment
Interest received
Purchase of plant and equipment
Investments in subsidiaries
Net cash flow (deficit)/surplus from investing activities
Financing activities
Proceeds from issue of shares
Sale/(purchase) of own shares
Dividends paid
Net cash flow deficit from financing activities
960
45
–
29
(1,376)
–
(342)
10
95
(14,433)
(14,328)
1,154
194
5
18
(1,180)
–
191
–
(22)
(8,924)
(8,946)
11
9
2017
£000
(857)
–
(857)
4
660
–
–
–
(445)
135
(503)
–
(126)
(753)
23,555
46,797
68,970
(4,426)
(135)
64,409
–
–
–
431
–
(40,000)
(39,569)
(2,012)
–
(2,012)
1
1,026
–
–
–
(97)
165
(917)
–
140
(65)
7,722
3,920
–
–
–
194
–
–
194
10
(23)
(14,433)
(14,446)
–
(28)
(8,924)
(8,952)
Net increase/(decrease) in cash and cash equivalents
7,262
10,808
(8,773)
15,888
Cash and cash equivalents at beginning of year
34,052
23,244
17,247
1,359
Cash and cash equivalents at end of year
22
41,314
34,052
8,474
17,247
82 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2018
1 Accounting policies
MJ Gleeson plc (the “Company”) is a public limited company which is listed on the London Stock Exchange and is incorporated and
domiciled in the United Kingdom. The address of the registered office is 6 Europa Court, Sheffield Business Park, Sheffield, S9 1XE.
Basis of preparation
The consolidated financial statements of the Company and the Group have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) and IFRS Interpretations Committee (“IFRS IC”) interpretations as adopted by the European Union and
the Companies Act 2006 applicable to companies reporting under IFRS.
The principal accounting policies set out below have been applied consistently to all periods presented in these financial statements.
Assets and liabilities in the financial statements have been valued at historic cost except where otherwise indicated in these
accounting policies.
The Company has taken advantage of section 408 of the Companies Act 2006 and consequently a statement of comprehensive income
of the Company is not presented as part of these financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and all of its subsidiary undertakings
(together referred to as the “Group”). Joint ventures are accounted for using the equity method of accounting.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for at least 12 months from the date of the financial statements. Thus they
continue to adopt the going concern basis of accounting in preparing the financial statements.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that
are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
Revenue recognition
Revenue represents the fair value received and receivable in respect of the sale of homes and land net of VAT and discounts. Revenue
is recognised as follows:
• Revenue from homes sales is recognised when contracts to sell are completed and title has passed.
• Revenue from land 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.
Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, and for which
discrete financial information is available. All operating segments’ operating results are reviewed regularly by the Executive Directors
to make decisions about resources to be allocated to the segment and to assess its performance. Segment results, assets and
liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment
capital expenditure is the total cost incurred during the period to acquire plant and equipment.
Impairment: Financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after
the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that
can be estimated reliably.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or
no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined if no impairment loss had been recognised.
Impairment: Non-financial assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
MJ Gleeson plc Annual Report and Accounts 2018 / 83
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
1 Accounting policies continued
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are
recognised in the consolidated income statement.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or
no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined if no impairment loss had been recognised.
Finance income and expenses
Finance income comprises interest income on bank deposits and the unwinding of discounts on deferred receipts. Interest income is
recognised as it accrues, using the effective interest method.
Finance expenses comprise interest and fees on bank facilities, and the unwinding of discounts on deferred payments. Interest
expense is recognised in the consolidated income statement using the effective interest method.
Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so
as to write off the cost of assets over their estimated useful lives, using the straight line method, on the following basis:
Plant and equipment: between 3 and 6 years
Depreciation of these assets is charged to the consolidated income statement.
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 consolidated income
statement on a straight line basis over the period of the lease.
Investments
Investments are stated at cost less impairment.
Investment properties
Investment properties, which are ground rent properties held to earn rentals and/or for capital appreciation, are stated at fair value.
Gains or losses arising from changes in the fair values of investment properties are included in the consolidated income statement in
the period in which they arise.
Inventories
Inventories are valued at the lower of cost and net realisable value and are subject to regular impairment reviews. Inventories comprise
all direct costs incurred in bringing the individual inventories to their present state at the reporting date, including direct materials,
direct labour costs and related overheads, less the value of any impairment losses.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale. Deferred land purchases are included in inventories at their net present value.
Available for sale financial assets
Available for sale financial assets due after more than one year, which represent receivables in respect of shared equity properties, are
recorded at fair value, being the amount receivable by the Group discounted to present day values. The difference between the amount
receivable by the Group and the initial fair value is credited over the deferred term to finance income, with the financial asset
increasing to its full cash settlement value on the anticipated receipt date. Credit risk is accounted for in determining fair values and
appropriate discount factors are applied. The Group holds a second charge over property sold under shared equity schemes. Changes
in the fair value of available for sale financial assets are recognised in other comprehensive income. Interest calculated using the
effective interest method, dividends, and impairment losses on available for sale financial assets are recognised in the consolidated
income statement.
Trade receivables
Trade receivables are measured at initial recognition at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Appropriate allowances for estimated irrecoverable amounts are recognised in the consolidated income statement when there is
objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and are subject to an insignificant risk of changes in value.
84 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
1 Accounting policies continued
Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business that has been
disposed of or has been abandoned. Discontinued operations are presented in the consolidated income statement (including the
comparative period) as a single line entry recording the gain or loss of the discontinued operation.
Trade and other payables
Trade and other payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective
interest rate method.
Tax
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the consolidated income statement except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying values of assets and liabilities for financial reporting purposes
and the values used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised.
Employee benefits
Defined contribution pension plans
Obligations for contributions to defined contribution pension schemes are charged to the consolidated income statement in the period
to which the contributions relate.
Share options
Share option schemes allow employees to acquire shares in the ultimate Parent Company. The fair value of options granted is
recognised as an employee expense, with a corresponding increase in equity. The fair value is measured at grant date and spread over
the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is
measured using generally accepted option pricing models, taking into account the terms and conditions upon which the options were
granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest, except where
forfeiture is due only to share prices not achieving the threshold for vesting. These awards are granted by the ultimate Parent Company
and the cost of the share-based award relating to each subsidiary is calculated, based on an appropriate apportionment, at the date of
grant and recharged through intercompany.
Own shares held by Employee Benefit Trusts
The Group has elected to treat the Employee Benefit Trusts (“EBT") as separate legal entities and as subsidiaries of the Company. Any
loan made to the EBT is accounted for as an intercompany loan with the Company. These shares are not treasury shares as defined by
the London Stock Exchange.
Dividends
Dividends are recorded in the financial statements when paid. Final dividends are recorded in the financial statements in the period in
which they receive shareholder approval.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and
future periods.
The key judgement and sources of estimation uncertainty at the balance sheet date are:
Inventories (land and work in progress)
Inventories are stated at the lower of cost and net realisable value. The assessment of net realisable value is performed on a site-by-
site basis taking into account an estimation of costs to complete and remaining revenues. These are carried out at regular intervals
throughout the year, during which site development costs are allocated between units built in the current year and those to be built in
future years. These assessments include a degree of inherent uncertainty when estimating the profitability of a site and in assessing
any impairment provisions which may be required.
MJ Gleeson plc Annual Report and Accounts 2018 / 85
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
1 Accounting policies continued
Available for sale financial assets (shared equity)
The valuation of available for sale financial assets is made in the light of current market conditions, expected house price inflation,
cost of money and the expected time to realisation of the assets and is therefore subject to a degree of inherent uncertainty.
Deferred tax
Deferred tax is only recognised on tax losses when it is probable the losses will be utilised in full in future years. The judgement to
recognise the deferred tax asset is dependent upon taxable profits arising in the same company as the losses originally arose and the
Group’s expectations regarding future profitability including site revenue and cost forecasts for future years which contain a degree of
inherent uncertainty.
Adoption of new and revised standards
For the year ended 30 June 2018, the Group has applied the following new and revised standards that were mandatorily effective for an
accounting period beginning on or after 1 January 2017. Their adoption has not had any material impact on the disclosures or the
amounts reported in these financial statements.
IAS 7 (Amended)
IAS 12 (Amended)
Annual improvements
“Statement on cash flows”
“Income taxes”
Annual improvements 2014 – 2016 – IFRS 12
Standards not yet applied
There are a number of standards and interpretations issued by the International Accounting Standards Board that are effective for
financial statements after this reporting period. The following have not been adopted by the Company in preparing the financial
statements for the year ended 30 June 2018:
Standard
Annual improvements
IFRS 2 (Amended)
IFRS 9
IFRS 15
IFRS 15 (Amended)
IFRS 16
IFRS 9 (Amended)
Annual improvements
* Not yet endorsed by the EU
Issued 2014 – 2016
“Share-based payments” (issued June 2016)
“Financial instruments” (issued July 2014)
“Revenue from contracts with customers” (issued May 2014)
“Revenue from contracts with customers” (issued April 2016)
“Leases” (issued January 2016)
“Financial instruments” (issued October 2017)
Issued 2015 – 2017 (issued December 2017)*
Effective for periods
beginning on or after
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2019
1 January 2019
1 January 2019
IFRS 9 introduces new requirements on the classification and measurement of financial assets and liabilities. The new standard will
not have a material impact on the Group; the new Standard will require the available for sale reserve that is currently classified
separately in equity to be reclassified as part of retained earnings with changes in fair value recognised through other comprehensive
income. There will be no impact on the Company as a result of the new Standard.
IFRS 15 sets out new revenue recognition criteria with particular regard to performance obligations and, whilst this may have an
impact on the timing of revenue recognition of certain non-core revenue items, it will not materially impact the results of the Company
and Group. If the new Standard was to be applied at the balance sheet date, it would have £nil impact on the results of the Group and
the Company for the year.
IFRS 16 will introduce a “right-of-use asset” and a lease liability representing future lease payments to the statement of financial
position in respect of leases to which the Company and the Group is a party. This will not have a material net impact on the reported
equity of the Company and the Group. If the new Standard was to be applied at the balance sheet date, the total assets of the Group
would increase by £2.6m and total liabilities would increase by £2.7m. Consequently, the net impact would be a decrease in net assets
of £0.1m. There would be £nil impact on the Company’s statement of financial position. There will be no impact on cash flows of the
Group and the Company as a result of the new Standard.
Enhanced disclosures will be required for both IFRS 15 and IFRS 16 and these will be included in the relevant financial statements to
which the Standards are effective.
The application of the remaining standards and interpretations not yet applied is not expected to have a material impact on the
Company and Group’s financial performance or position, or give rise to additional disclosures in the financial statements.
86 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
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:
Revenue
Continuing activities:
Gleeson Homes
Gleeson Strategic Land
Discontinued activities
Total revenue
Profit on activities
Gleeson Homes
Gleeson Strategic Land
Administrative expenses
Finance income
Finance expenses
Profit before tax
Tax
Profit for the year from continuing operations
Loss for the year from discontinued operations (net of tax)
Profit for the year
Note
2018
£000
2017
£000
153,397
43,344
196,741
130,492
29,892
160,384
3
–
–
196,741
160,384
26,165
12,633
38,798
(1,944)
418
(253)
37,019
(6,526)
30,493
22,760
12,040
34,800
(1,837)
251
(202)
33,012
(6,488)
26,524
3
(257)
(310)
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 £20,530,000 was derived from a single external customer. This revenue was attributable to the Gleeson Strategic Land segment.
Balance sheet analysis of business segments:
Gleeson Homes
Gleeson Strategic Land
Group activities/discontinued operations
Net cash
Assets
£000
147,634
53,391
446
41,314
242,785
2018
Liabilities
£000
(33,895)
(18,412)
(2,379)
–
Net assets
£000
113,739
34,979
(1,933)
41,314
(54,686)
188,099
Assets
£000
133,785
47,085
820
34,052
215,742
2017
Liabilities
£000
(34,482)
(7,217)
(2,672)
–
Net assets
£000
99,303
39,868
(1,852)
34,052
(44,371)
171,371
Other information:
Continuing operations:
Gleeson Homes
Gleeson Strategic Land
Group activities
2018
2017
Capital
additions
£000
1,367
9
–
1,376
Depreciation
£000
965
5
1
971
Capital
additions
£000
1,175
5
–
1,180
Depreciation
£000
811
3
4
818
MJ Gleeson plc Annual Report and Accounts 2018 / 87
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
3 Discontinued operations
The activity of Gleeson Construction Services Limited now only relates to remedial works and the division is classified as discontinued.
Revenue
Cost of sales
Gross loss
Administrative expenses
Operating loss
Loss before tax
Tax
Loss for the year from discontinued operations
The cash flow statement includes the following relating to the operating loss on discontinued operations:
Operating activities
4 Expenses and auditors’ remuneration
Profit for the year is stated after charging:
Staff costs
Depreciation of plant and equipment
Loss on sale of investment properties
Loss on disposal of plant and equipment
Operating lease expenses
Auditors’ remuneration:
Audit of these financial statements
Audit of financial statements of subsidiaries pursuant to legislation
Other services
5 Other operating income
Profit on sale of available for sale financial assets
Other operating income
Note 16 discloses further information in relation to available for sale financial assets, which are receivables in respect of shared
equity properties.
88 / MJ Gleeson plc Annual Report and Accounts 2018
2018
£000
–
–
–
(217)
(217)
(217)
(40)
(257)
2018
£000
(321)
2017
£000
–
–
–
(228)
(228)
(228)
(82)
(310)
2017
£000
(441)
Note
6
11
11
21
Note
16
2018
£000
26,182
971
–
152
543
2017
£000
20,294
818
9
147
717
69
14
–
2018
£000
167
90
257
66
13
50
2017
£000
216
88
304
Strategic Report
Governance Report
Financial Statements
Other Information
6 Staff costs
Wages and salaries
Share-based payments
Social security costs
Other pension costs
Group
Company
Note
25
19
2018
£000
21,255
1,026
3,160
741
26,182
2017
£000
16,584
660
2,426
624
20,294
2018
£000
1,102
165
230
62
1,559
The monthly average number of employees (including Directors) during the year was:
Gleeson Homes
Gleeson Strategic Land
Group activities
Group
2018
No.
463
11
6
480
The monthly average number of Company employees (including Directors) during the year was 6 (2017: 6).
Directors’ remuneration
Full details of the Directors’ remuneration is provided in the audited part of the Remuneration Report on pages 54 to 69.
7 Finance income and expenses
Finance income
Interest on bank deposits
Unwinding of discount on long-term receivables
Other interest
Finance expenses
Bank charges
Unwinding of discount on long-term payables
Other external interest
2018
£000
18
396
4
418
(165)
(83)
(5)
(253)
2017
£000
1,880
76
295
53
2,304
2017
No.
355
9
6
370
2017
£000
14
236
1
251
(135)
(67)
–
(202)
Net finance income
165
49
MJ Gleeson plc Annual Report and Accounts 2018 / 89
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
8 Tax
Current tax
Current year expense
Adjustment in respect of prior years
Current tax expense for the year
Deferred tax
Current year expense
Adjustment in respect of prior years
Impact of rate change
Deferred tax expense for the year
Continuing operations
Discontinued operations
Group
Note
20
20
20
2018
£000
5,569
(36)
5,533
1,003
(33)
23
993
2017
£000
6,184
155
6,339
88
–
61
149
2018
£000
2017
£000
–
–
–
45
–
(5)
40
40
–
–
–
48
–
34
82
82
Total
2018
£000
5,569
(36)
5,533
1,048
(33)
18
1,033
2017
£000
6,184
155
6,339
136
–
95
231
6,566
6,570
Total tax charge
6,526
6,488
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:
Profit before tax from continuing operations
Loss before tax from discontinued operations
Profit before tax
Profit before tax multiplied by the standard rate of UK corporation
tax 19% (2017: 19.75%)
Tax effect of:
Expenses not deductible for tax purposes
Relief for share-based payments
Land remediation relief
Impact of rate differences
Adjustments in respect of prior years – current tax
Adjustments in respect of prior years – deferred tax
Total tax charge and effective tax rate for the year
Note
£000
%
£000
%
2018
2017
3
37,019
(217)
36,802
33,012
(228)
32,784
6,992
19.0
6,475
10
(385)
–
18
(36)
(33)
6,566
0.0
(1.0)
–
0.0
(0.1)
(0.1)
17.8
37
(95)
(75)
73
155
–
6,570
19.7
0.1
(0.3)
(0.2)
0.2
0.5
–
20.0
20
90 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
9 Dividends
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
Final dividend for the year ended 30 June 2017 of 17.5p (2016: 10.0p) per share
2018
£000
4,902
9,531
14,433
2017
£000
3,516
5,408
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 £12,619,000.
10 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Profit from continuing operations
Loss from discontinued operations
Profit for the purposes of basic and diluted earnings per share
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
Effect of dilutive potential ordinary shares:
Share-based payments
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Continuing operations
Basic earnings per share
Diluted earnings per share
Discontinued operations
Basic loss per share
Diluted loss per share
Continuing and discontinued operations
Basic earnings per share
Diluted earnings per share
2018
£000
30,493
(257)
30,236
2017
£000
26,524
(310)
26,214
2018
No. 000
2017
No. 000
54,428
54,066
862
834
55,290
54,900
2018
p
56.02
55.15
2018
p
(0.47)
(0.46)
2018
p
55.55
54.69
2017
p
49.06
48.31
2017
p
(0.57)
(0.56)
2017
p
48.49
47.75
MJ Gleeson plc Annual Report and Accounts 2018 / 91
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
11 Plant and equipment
Cost or valuation
At 1 July 2016
Additions
Disposals
At 30 June 2017
Additions
Disposals
At 30 June 2018
Accumulated depreciation
At 1 July 2016
Charge for the year
Disposals
At 30 June 2017
Charge for the year
Disposals
At 30 June 2018
Net book value
At 30 June 2016
At 30 June 2017
At 30 June 2018
Group
Plant and
equipment
£000
Company
Plant and
equipment
£000
4,106
1,180
(332)
4,954
1,376
(938)
5,392
2,832
818
(180)
3,470
971
(786)
3,655
1,274
1,484
1,737
14
–
–
14
–
–
14
9
4
–
13
1
–
14
5
1
–
The Group has recorded a depreciation charge of £971,000 (2017: £818,000), of which £231,000 (2017: £136,000) has been charged
in cost of sales and £740,000 (2017: £682,000) in administrative expenses.
The Company has recorded a depreciation charge of £1,000 (2017: £4,000), which has been charged in administrative expenses.
12 Investment properties
At 1 July 2016
Disposals
At 30 June 2017
Disposals
At 30 June 2018
Group
£000
506
(203)
303
(45)
258
Investment properties, which comprise a legacy portfolio of ground rent properties, are stated at fair value based on valuation by
the Directors.
92 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
13 Investments in subsidiaries
Cost
At 1 July 2016
Additions
At 30 June 2017
Additions
At 30 June 2018
Company
£000
60,800
40,000
100,800
–
100,800
On 28 April 2017, the Group completed an internal reorganisation and the entire issued share capital of Gleeson Strategic Land Limited
was transferred to MJ Gleeson plc from Gleeson Developments Limited in consideration of £20,000,000. On the same date, a further
investment of £20,000,000 was made by the Company in Gleeson Strategic Land Limited and certain trade and assets were transferred
from Gleeson Developments Limited to Gleeson Strategic Land Limited at book value. No gains or losses arose on these transactions.
Principal subsidiary undertakings
The following are the principal subsidiary undertakings of MJ Gleeson plc. MJ Gleeson plc owns 100% of the ordinary share capital of
the subsidiaries, all of which are incorporated in England. The registered address for all subsidiary undertakings of MJ Gleeson plc is
6 Europa Court, Sheffield Business Park, Sheffield, S9 1XE.
All subsidiaries are registered in England and Wales and operate in the United Kingdom.
Gleeson Developments Limited
Gleeson Regeneration Limited
Gleeson Developments (North East) Limited
Gleeson Strategic Land Limited
Gleeson Strategic Land (Fleet) Limited1
1 Shares held by Gleeson Strategic Land Limited.
Principal activity
House building
House building
House building
Strategic land trading
Strategic land trading
The following are the other subsidiary companies of MJ Gleeson plc:
MJ Gleeson Group Limited
Gleeson Construction Services Limited2
Colroy Limited3
Haredon Developments Limited3
Gleeson Capital Solutions Limited
Gleeson Classic Homes Limited1
Gleeson Homes (Southern) Limited1
Gleeson Housing Developments Limited1
Gleeson PFI Investments Limited
Gleeson Properties Limited
Gleeson Properties (Kingley) Limited3
Gleeson Properties (Petersfield) Limited3
Gleeson Services Limited
KW Cannock Properties Limited
MJ Gleeson (International) Limited
MJG (Management) Limited
Oakmill Properties Limited3
Sindale Properties Limited1
1 Shares held by Gleeson Developments Limited.
2 Shares held by MJ Gleeson Group Limited.
3 Shares held by Gleeson Properties Limited.
Principal activity
Intermediate holding company
In run off – Construction services
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
MJ Gleeson plc Annual Report and Accounts 2018 / 93
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
14 Inventories
Land held for development
Work in progress
Group
2018
£000
72,329
88,188
2017
£000
64,064
78,486
160,517
142,550
Net realisable value provisions held against inventories at 30 June 2018 were £2,325,000 (2017: £2,421,000).
The cost of inventories recognised as an expense in cost of sales was £132,278,000 (2017: £103,813,000).
Company
The Company held no inventories at 30 June 2018 (2017: £nil).
15 Trade and other receivables
Trade receivables
VAT recoverable
Prepayments and accrued income
Available for sale financial assets
Amount due from subsidiary undertakings
Non-current
Current
Group
Company
2018
£000
29,631
–
600
4,997
–
35,228
24,626
10,602
35,228
2017
£000
24,590
1,535
558
5,669
–
32,352
14,427
17,925
32,352
2018
£000
4
15
5
–
38,267
38,291
–
38,291
38,291
2017
£000
2
43
120
–
45,989
46,154
–
46,154
46,154
The Directors consider that the carrying amount of trade and other receivables approximates their fair value and includes an allowance
for impairment of trade receivables estimated by the Group’s management based on prior experience and their assessment of specific
circumstances.
Available for sale financial assets due after more than one year represent receivables in respect of shared equity properties.
See note 16 for reference to credit risk associated with trade receivables and further disclosures in respect of available for sale
financial assets.
Amounts due from subsidiary undertakings are unsecured, repayable on demand, and incur interest of 0% to 1% plus Bank of England
base rate.
16 Financial instruments
Risk exposure
The Company operates a central treasury function providing services to the Group. The treasury function arranges loans and funding,
invests any surplus liquidity and manages financial risk. The treasury function is not a profit centre and no speculative trades are
permitted or executed. It operates within specific policies, agreed by the Board, to control and monitor financial risk within the Group.
Prudent and controlled use of financial instruments is permitted where appropriate.
Cash and cash equivalents
Cash and cash equivalents comprises cash and demand deposits held by the Group and the Company. The carrying amount of these
assets equals their fair value.
Credit risk
The Group’s principal financial assets are trade and other receivables and investments.
The Group’s and Company’s credit risk is primarily attributable to its trade and other receivables. The amounts presented in the
statement of financial position are net of allowance for doubtful debts, estimated by the Group’s management based on prior
experience and their assessment of specific circumstances.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit
rating agencies.
94 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
16 Financial instruments continued
At 30 June 2018, the Group’s most significant credit risk was to a listed housebuilder and amounted to £23,471,000 (2017:
£11,186,000) of the trade and other receivables carrying amount, with the deferred receivables secured by way of first legal charge
over the land. The Group’s remaining credit risk is spread over a large number of counterparties and customers.
Trade receivables ageing
The ageing of gross trade receivables at the reporting date was:
Not past due
Past due 0–30 days
Past due 31–120 days
Past due 121–365 days
Past due more than one year
All trade receivables are from UK customers.
Group
2018
£000
25,732
1,060
–
2,784
123
29,699
2017
£000
24,513
–
8
29
108
24,658
Company
2018
£000
2017
£000
4
–
–
–
–
4
2
–
–
–
–
2
Trade receivables past due more than one year are largely retentions within the Gleeson Homes division. The amounts due are included
at expected realisable value.
Included in trade receivables not past due are £19,629,000 (2017: £8,758,000) receivables due in more than one year.
In addition to the above, the Company has intercompany receivables which are repayable on demand.
The movement in the allowance for impairment of trade receivables during the year was as follows:
Balance at 1 July
Impairment loss recognised
Balance at 30 June
Market risk
The Group has no significant exposure to currency risk or equity risk.
Group
Company
2018
£000
68
–
68
2017
£000
19
49
68
2018
£000
–
–
–
2017
£000
–
–
–
Interest rate risk
The Group closely monitors its exposure to variations in interest rates but has limited exposure. At the year end, the Group had no debt
or other material interest bearing financial liabilities.
A 1% increase in interest rates would improve the annual income of the Group and Company by £413,000 (2017: £340,000) based on
the cash balance at the year end. A 1% decrease would cause income to fall by the same amount.
Liquidity risk
The Group renewed a £20,000,000 three year credit facility with Lloyds Bank plc on 19 June 2018, extending the expiry date to March
2021. All banking is conducted with Lloyds Bank plc. As at 30 June 2018 the Group had not drawn on the facility.
In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective
interest rates at the balance sheet date:
Bank balances
2018
2017
Effective
interest
rate
%
0.25
Due
within
one year
£000
41,314
Effective
interest
rate
%
0.00
Due
within
one year
£000
34,052
MJ Gleeson plc Annual Report and Accounts 2018 / 95
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
16 Financial instruments continued
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements:
Non-derivative financial liabilities
Group
As at 30 June 2018
Trade and other payables
As at 30 June 2017
Trade and other payables
Carrying
amount
£000
Contractual
cash flows
£000
6 months
or less
£000
6-12 months
£000
1-2 years
£000
2-5 years
£000
More than
5 years
£000
(51,617)
(52,260)
(36,332)
(51,617)
(52,260)
(36,332)
(6,108)
(6,108)
(4,560)
(4,560)
(5,260)
(5,260)
(41,627)
(41,627)
(36,668)
(41,627)
(41,627)
(36,668)
(4,256)
(4,256)
(703)
(703)
–
–
–
–
–
–
The non-derivative financial liabilities of the Company in the current and prior year are predominantly intercompany balances which
are payable on demand. The external balances are payable within six months.
Exposure to currency risk
The Group has no direct exposure to foreign currency risk.
Fair values
The fair values of the Group’s financial assets and liabilities are not materially different from the carrying values. The following
summarises the major methods and assumptions used in estimating the fair values of financial instruments.
Available for sale financial assets
Balance at 1 July
Redemptions
Unwind of discount (finance income)
Fair value movement recognised in other comprehensive income
Balance at 30 June
Group
2018
£000
5,669
(703)
90
(59)
4,997
2017
£000
6,611
(902)
100
(140)
5,669
Available for sale financial assets represent shared equity loans advanced to customers and secured by way of a second charge on the
property sold. They are carried at fair value which is determined by discounting forecast cash flows for the residual period of the
contract. The difference between the nominal value and the initial fair value is credited over the deferred term to finance income, with
the financial asset increasing to its full cash settlement value on the anticipated receipt date.
Redemptions in the year of shared equity loans carried at fair value of £703,000 (2017: £902,000) generated a profit on redemption of
£167,000 (2017: £216,000) which has been recognised in other operating income in the consolidated income statement.
In addition, a net change in the value of available for sale financial assets of £31,000 (2017: £104,000) has been recognised in other
comprehensive income. This is made up as follows:
Fair value movement recognised in other comprehensive income
Fair value recycled through profit and loss
Total movement recognised in other comprehensive income
Group
2018
£000
(59)
90
31
2017
£000
(140)
36
(104)
Forecast cash flows are determined using inputs based on current market conditions and the Group’s historic experience of actual
cash flows resulting from such arrangements. These inputs are by nature estimates and as such the fair value has been classified as
Level 3 under the fair value hierarchy laid out in IFRS 13 “Fair value measurement”. There have been no transfers between fair value
levels in the financial year.
96 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
16 Financial instruments continued
Significant unobservable inputs into the fair value measurement calculation include regional house price movements based on the
Group’s actual experience of regional house pricing and management forecasts of future movements, the anticipated period to
redemption of loans which remain outstanding and a discount rate based on current observed market interest rates offered to private
individuals on secured second loans.
The key assumptions applied in calculating fair value as at the balance sheet date were:
• Forecast regional house price inflation: 2.0%
• Average period to redemption: 5.5 years
• Discount rate: 8%
The sensitivity analysis of changes to each of the key assumptions applied in calculating fair value, whilst holding all other
assumptions constant, is as follows:
Change in assumption
Forecast regional house price inflation – increase by 1%
Average period to redemption – increase by 1 year
Discount rate – decrease by 1%
Increase/
(decrease)
in fair value
(£000)
272
(278)
259
Capital risk management
In line with the disclosure requirements of IAS 1 “Presentation of financial statements” the Group regards its capital as being the
equity as shown in the statement of changes in equity.
Note 24 to the financial statements provides details regarding the Company’s share capital movements in the year.
The primary objective of the Group’s capital management is to ensure that it maintains investor, creditor and market confidence and to
support its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust
the capital structure, the Group may adjust the dividend payment to shareholders and issue or return capital to shareholders.
Neither the Company nor any of the subsidiaries are subject to externally imposed capital requirements.
17 Trade and other payables
Trade payables
Other taxation and social security
VAT payable
Accruals and deferred income
Amount due to subsidiary undertakings
Non-current
Current
Group
Company
2018
£000
33,142
1,149
1,927
15,399
–
51,617
9,176
42,441
51,617
2017
£000
23,635
877
–
17,115
–
41,627
703
40,924
41,627
2018
£000
126
90
–
698
65,793
66,707
–
66,707
66,707
2017
£000
180
136
–
665
68,164
69,145
–
69,145
69,145
Amounts due to subsidiary undertakings are unsecured, repayable on demand, and incur interest of 0% to 1% plus Bank of England
base rate.
MJ Gleeson plc Annual Report and Accounts 2018 / 97
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
18 Provisions
At 1 July 2016
Provisions made during the year
Provisions used during the year
At 30 June 2017
Provisions released during the year
At 30 June 2018
Non-current
Current
Dilapidations
£000
Group
Onerous
leases
£000
201
10
–
211
(52)
159
10
–
(10)
–
–
–
2018
£000
110
49
159
Total
£000
211
10
(10)
211
(52)
159
2017
£000
110
101
211
Dilapidations
The dilapidations provision covers the Group’s leased estate. The expected provision needed at the end of each lease is recognised
straight line over the term of the lease.
Onerous leases
Where the rent receivable on the properties is less than the rent payable, a provision based on present value of the net cost is made to
cover the expected shortfall.
Company
At 30 June 2018, the Company did not have any provisions (2017: £nil).
19 Employee benefits
Defined contribution pension plan
The Group operates a defined contribution pension plan. The assets of the pension plan are held separately from those of the Group in
funds under the control of the trustees.
Group
The total pension cost charged to the consolidated income statement of £741,000 (2017: £624,000) represents contributions payable
to the defined contribution pension plan by the Group at rates specified in the plan rules. At 30 June 2018, contributions of £90,000
(2017: £77,000) due in respect of the current reporting period had not been paid over to the pension plan. Since the year end, this
amount has been paid.
Company
The total pension cost charged to the income statement of £62,000 (2017: £53,000) represents contributions payable to the defined
contribution pension plan by the Company at rates specified in the plan rules.
98 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
20 Deferred tax
Group
The deferred tax assets recognised by the Group and movements thereon during the current and prior year are as follows:
At 1 July 2016
Adjustment in respect of prior year
(Charge)/credit to income
Credit to equity
Impact of rate change
At 30 June 2017
Adjustment in respect of prior year
(Charge)/credit to income
Charge to equity
Impact of rate change
At 30 June 2018
Plant and
equipment
£000
466
–
(22)
–
(49)
395
4
43
–
(2)
440
Short-term
timing
differences
£000
Shared-based
payments
£000
257
(19)
2
–
(26)
214
(1)
(61)
–
6
158
–
–
345
665
–
1,010
(30)
66
(237)
(7)
802
Losses
£000
3,844
19
(461)
–
(20)
3,382
60
(1,096)
–
(15)
2,331
Total
£000
4,567
–
(136)
665
(95)
5,001
33
(1,048)
(237)
(18)
3,731
Reductions in the UK corporation tax rate, to 19% with effect from 1 April 2017 and to 17% with effect from 1 April 2020, were
substantively enacted into law before the balance sheet date. In the opinion of the Directors, some timing differences are expected to
reverse prior to 1 April 2020, and some after 1 April 2020. Therefore deferred tax has been provided at a mixed rate between 19% and
17% for relevant timing differences on a company by company basis to arrive at the consolidated position. If all of the deferred tax
balances were restated at a rate of 17% rather than 19%, the total deferred tax asset would reduce by £424,000 to £3,307,000.
At the balance sheet date, the Group has gross tax losses of £21,215,000 (2017: £26,674,000) of which £12,349,000 (2017:
£17,808,000) have been recognised as a deferred tax asset. The Group has unrecognised tax losses of £8,866,000 (2017: £8,866,000)
available for offset against future profits. Losses may be carried forward indefinitely against future taxable trading profits.
Of the total deferred tax asset, £2,287,000 (2017: £2,049,000) is expected to be recovered within 12 months of the balance
sheet date.
Company
The deferred tax assets recognised by the Company and movements thereon during the current and prior year are as follows:
At 1 July 2016
Adjustment in respect of prior year
Credit/(charge) to income
Credit to equity
Impact of rate change
At 30 June 2017
Adjustment in respect of prior year
Credit to income
Credit to equity
Impact of rate change
At 30 June 2018
Plant and
equipment
£000
Short-term
timing
differences
£000
Shared-based
payments
£000
15
(13)
–
–
–
2
–
–
–
–
2
–
141
(10)
–
(16)
115
(114)
–
–
–
1
–
–
29
56
–
85
3
37
3
(4)
124
Total
£000
15
128
19
56
(16)
202
(111)
37
3
(4)
127
MJ Gleeson plc Annual Report and Accounts 2018 / 99
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
21 Operating leases
Operating leases – lessee
Minimum lease payments under non-cancellable operating leases recognised as an expense for the year
Group
2018
£000
543
543
2017
£000
717
717
At the balance sheet date, the Group has outstanding commitments for minimum lease payments under non-cancellable operating
leases, which fall due as follows:
Within one year
Within two to five years
After five years
Land and building lease terms vary between one to ten years, depending on market conditions.
The Company had no minimum lease payments under non-cancellable operating leases.
Operating leases – lessor
Minimum rental income under operating leases recognised for the year
Group
2018
£000
577
1,499
960
3,036
2017
£000
521
1,426
1,285
3,232
Group
2018
£000
–
2017
£000
192
The total rental income related to properties which the Group previously occupied as operating lease lessees and were sublet.
At the balance sheet date, the Group had no minimum rent receivables under non-cancellable operating leases (2017: £nil).
22 Cash and cash equivalents
At 1 July 2016
Cashflow
At 30 June 2017
Cashflow
At 30 June 2018
Group
£000
23,244
10,808
34,052
7,262
41,314
Company
£000
1,359
15,888
17,247
(8,773)
8,474
Cash and cash equivalents comprise cash at bank and demand deposits.
Bank guarantees
The Company, together with certain other companies in the Group, has given cross guarantees in respect of the bank facilities
available to Group undertakings in the normal course of business. At 30 June 2018, borrowings covered by these guarantees amount
to £nil (2017: £nil).
100 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
23 Bonds and securities
Group and Company
At 30 June 2018, the Group had bonds and securities of £22,537,000 (2017: £10,931,000) provided by financial institutions in support
of ongoing contracts.
The Directors have determined that the Group and Company require no specific provision for bonds, securities or guarantees for
subsidiary companies.
24 Share capital
Group and Company
Issued and fully paid ordinary shares:
At 1 July
Shares issued during year
At 30 June
2018
2017
Number 000
£000
Number 000
£000
54,120
467
54,588
1,082
10
1,092
54,120
–
54,120
1,082
–
1,082
Ordinary shares
The Company has one class of ordinary share which carries no rights to fixed income. All issued shares are fully paid.
The number of ordinary shares of 2p in issue at 30 June 2018 was 54,587,753 (2017: 54,120,495).
At 30 June 2018, the Employee Benefit Trusts (“EBT”) held 28,000 shares (2017: 50,000) at a cost of £219,000 (2017: £308,000) which
have not yet vested unconditionally. The shares are held in the EBT for the purpose of satisfying matched share awards that have been
granted under the employee share ownership plans. Of these ordinary shares, the right to dividend has been waived on none of these
shares (2017: nil).
All shares issued during the year were the result of share options being exercised; details of share options are given in note 25.
MJ Gleeson plc Annual Report and Accounts 2018 / 101
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 30 June 2018
25 Share-based payments
During the year to 30 June 2018, the Group had six share-based payment arrangements in operation. A summary of the share-based
payment arrangements are shown below:
Share purchase plan
Rolling scheme The Group matches shares purchased by employees on a 1 for
Equity
Contractual life
Vesting conditions
Settlement basis
Performance share plan (PSP)
September 2014
36 months
Performance share plan (PSP)
September 2015
36 months
Performance share plan (PSP)
October 2016
36 months
Long Term Incentive Plan (LTIP)
December 2016
31 months
Long Term Incentive Plan (LTIP)
September 2017
33 months
3 basis. The shares purchased by the employees are immediately
exercisable. The Group matching shares are only exercisable after
3 years.
For Executive Directors and senior executives the award vested in
whole on the third anniversary of the date of grant on 1 October 2017
as the performance condition was met. The performance condition
was based on the total shareholder return for the three financial
years from 1 July 2014 to 30 June 2017.
For the Executive Directors the award will vest in whole or in part on
the third anniversary of the date of grant of 30 September 2015 if the
performance condition has been met. The performance condition is
based on the total shareholder return for the three financial years
from 1 July 2015 to 30 June 2018.
For a senior executive the award will vest in whole or in part on or
after the third anniversary of the date of grant if the performance
condition has been met. The performance condition is based
on the total shareholder return for the three financial years from
1 July 2016 to 30 June 2019.
For the Executive Directors the award will vest in whole or in part
on 30 June 2019 if the performance condition has been met. The
performance condition is based on the total shareholder return
for the three financial years from 1 July 2016 to 30 June 2019.
For Executive Directors and senior executives the award will vest in
whole or in part on 30 June 2020 if the performance condition has
been met. The performance condition is based on the total
shareholder return for the three financial years from 1 July 2017 to
30 June 2020.
Equity
Equity
Equity
Equity
Equity
Fair value is used to measure the value of the outstanding options.
Share purchase plan
The fair value of each share granted in the share purchase plan is equal to the share price at the date of the grant. Shares are granted
on a monthly basis.
Performance share plan/long term incentive plan
The fair value per option has been calculated using a modified Monte Carlo model. The inputs into the model at each grant date and
the estimated fair value were as follows:
Date of grant
The model inputs were:
Share price at grant date
Total shareholder return target
Exercise price
Expected volatility
Expected dividends
Expected life
Risk-free interest rate
Fair value of one option
PSP
30/09/14
PSP
30/09/15
PSP
04/10/16
LTIP
12/12/16
LTIP
26/09/17
£3.90
£6.00
£0.00
32%
2.00%
3 years
1.27%
£1.44
£4.82
£6.15
£0.00
32%
2.00%
3 years
0.76%
£2.37
£5.95
£6.50
£0.00
30%
3.20%
3 years
0.30%
£3.15
£5.70
£6.50
£0.00
30%
n/a*
31 months
0.60%
£2.95
£6.50
£8.00
£0.00
36%
n/a*
33 months
0.50%
£3.40
* Awards made under the LTIP allows, on vesting, for an additional award of shares to be made to the option holder equivalent to the dividends paid over the vesting period
on the underlying shares.
102 / MJ Gleeson plc Annual Report and Accounts 2018
Strategic Report
Governance Report
Financial Statements
Other Information
25 Share-based payments continued
Expected volatility was determined by calculating the historical volatility of the Company’s share price; volatility was measured over
the previous 3 years.
Further details of the option plans are as follows:
Date of grant
Outstanding at 1 July 2016
Granted in the year
Forfeited
Exercised
Outstanding at 30 June 2017
Granted in the year
Forfeited
Exercised
Outstanding at 30 June 2018
Remaining contractual life
Weighted average exercise price
Weighted average share price at date
Share purchase plans
MJ Gleeson
Group plan
No. of shares
MJ Gleeson
Group 2014 plan
No. of shares
47,246
–
(40)
(8,280)
38,926
–
(4)
(11,707)
27,215
Rolling
scheme
–
9,782
6,378
(51)
(1,309)
14,800
5,701
(26)
(743)
19,732
Rolling
scheme
–
PSP
30/09/15
No. of shares
PSP
04/10/16
No. of shares
LTIP
12/12/16
No. of shares
LTIP
26/09/17
No. of shares
PSP
30/09/14
No. of shares
487,066
–
(19,808)
–
467,258
–
–
(467,258)
279,158
–
–
–
279,158
–
–
–
–
279,158
–
14,000
–
–
14,000
–
–
–
14,000
–
276,315
–
–
276,315
–
–
–
–
–
–
–
–
409,793
–
–
276,315
409,793
nil
–
3 months
–
15 months
–
12 months
–
24 months
–
of exercise – current year
£7.21
£6.37
Weighted average share price at date
of exercise – prior year
£5.76
£5.68
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
The total share-based payment cost charged to the consolidated income statement was £1,026,000 (2017: £660,000).
26 Capital commitments
At 30 June 2018, the Group had capital commitments of £nil (2017: £49,000). The Company had no capital commitments (2017: £nil).
27 Related party transactions
Identity of related parties
The Group has a related party relationship with its joint ventures and key management personnel. Transactions between the Company
and its subsidiaries, which are related parties, have been eliminated on consolidation.
Transactions with key management personnel
The Group’s key management personnel are the Executive and Non-Executive Directors, as identified in the Remuneration Report on
pages 54 to 69, and certain other senior managers.
On 7 December 2017, the Group entered into a conditional agreement to purchase an area of land from Jolyon Harrison, CEO, for
£98,750. The land, if purchased, will form part of a new Gleeson Homes site being developed in the ordinary course of business. The
price paid by the Group was supported by an independent valuation and approved by the Board.
In the year, the Group purchased cladding materials from a company, JDP Contracting Services Limited, in which Jolyon Harrison is a
Director. During the current year the Group purchased £38,000 (2017: £29,000) of goods from the company. The terms were at normal
market rates and payment terms. There were no guarantees provided. The amount owed to JDP Contracting Services Limited at 30 June
2018 was £3,000 (2017: £7,000). Jolyon Harrison did not receive any remuneration from JDP Contracting Services Limited.
Other than disclosed above, there were no other transactions with key management personnel in either the current or prior year.
Identity of related parties with which the Company has transacted
The Company receives charges from various suppliers in respect of services for the whole Group. The Company allocates and
consequently invoices these charges to subsidiaries.
Subsidiaries
Administrative expenses
Receivables outstanding
Payables outstanding
2018
£000
727
727
2017
£000
7,330
7,330
2018
£000
38,267
38,267
2017
£000
45,989
45,989
2018
£000
65,793
65,793
2017
£000
68,164
68,164
MJ Gleeson plc Annual Report and Accounts 2018 / 103
OTHER INFORMATION
Other Information
105 Five Year Review
106 Further Information
106 Corporate Directory
104
106 Shareholder Information
106 Financial Calendar
106
Information Regarding Our Websites
Strategic Report
Strategic Report
Governance Report
Governance Report
Financial Statements
Financial Statements
Other Information
Other Information
FIVE YEAR REVIEW
Revenue
2018
£000
2017
£000
2016
£000
2015
£000
2014
£000
196,741
160,384
142,065
117,588
81,442
Reinstatement of inventories and contract provisions
Exceptional restructuring costs
–
–
–
–
–
–
–
(1,236)
800
–
Operating profit
Provision for diminution in value of investments
Net finance income
Profit before tax
Tax (charge)/credit
Profit after tax
Discontinued operations
Profit for the year
Total assets
Total liabilities
Net assets
Total dividend per share for the year
Earnings per share from continuing operations
Earnings per share – normalised*
Net assets per share
36,854
32,963
28,166
22,046
12,064
–
165
–
49
–
72
(4,896)
113
–
96
37,019
33,012
28,238
17,263
12,160
(6,526)
(6,488)
(4,934)
(4,848)
5,499
30,493
26,524
23,304
12,415
17,659
(257)
(310)
(345)
(207)
(231)
30,236
26,214
22,959
12,208
17,428
242,785
(54,686)
215,742
180,640
168,592
152,577
(44,371)
(27,735)
(32,063)
(24,486)
188,099
171,371
152,905
136,529
128,091
pence
32.0
56.0
55.6
345
pence
pence
pence
pence
24.0
49.1
48.5
317
14.5
43.2
42.6
283
10.0
23.2
34.2
254
6.0
33.4
17.2
241
* Normalised earnings per share include discontinued operations and exclude the impact of exceptional costs.
MJ Gleeson plc Annual Report and Accounts 2018 / 105
MJ Gleeson plc Annual Report and Accounts 2018 / 105
FURTHER INFORMATION
Corporate Directory
Registered office
MJ Gleeson plc
6 Europa Court
Sheffield Business Park
Sheffield S9 1XE
Registered number
9268016
Incorporated in England and Wales
Company secretary
Stefan Allanson
WEBSITE
www.mjgleesonplc.com
Shareholder Information
Shareholder enquiries
Any shareholder with enquiries should,
in the first instance, contact our registrars
using the address provided in the
Corporate Directory.
Financial Calendar
Financial year end
Full year results announced
Ex-dividend date for final dividend
Record date for final dividend
Annual General Meeting
Final dividend payment
Information Regarding Our Websites
Auditor
PricewaterhouseCoopers LLP
Central Square
29 Wellington Street
Leeds LS1 4DL
Bankers
Lloyds Bank plc
14 Church Street
Sheffield S1 1HP
Solicitors
Simmons & Simmons
City Point
One Ropemaker Street
London EC2Y 9SS
Share price information
London Stock Exchange
Symbol: GLE
Stockbrokers and finance advisers
N+1 Singer
One Bartholemew Lane
London EC2N 2AX
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London EC2Y 9LY
Registrars and
transfer office
Link Asset Services
The Registry
34 Beckenham Road, Beckenham
Kent BR3 4TU
Investor relations
MJ Gleeson plc
6 Europa Court, Sheffield Business Park
Sheffield S9 1XE
Email: enquiries@mjgleeson.com
Tel: 0114 261 2900 Fax: 0114 261 2939
30 June 2018
17 September 2018
15 November 2018
16 November 2018
6 December 2018
14 December 2018
For more information on our homes, investor relations and career opportunities please visit www.mjgleeson.com.
106 / MJ Gleeson plc Annual Report and Accounts 2018
106 / MJ Gleeson plc Annual Report and Accounts 2018
The paper in this report is a Forest Stewardship Council (“FSC”) certified product, produced with a FSC mixed sources pulp which is
fully recyclable, biodegradable and chlorine free. It is manufactured within a mill which complies with the international environmental
ISO 14001 standard.
The report has been printed using environmentally friendly vegetable based inks. Formulated on the basis of renewable raw materials,
vegetable oils are non-hazardous and from renewable sources. Over 90% of solvents and developers used are recycled for further use
and recycling initiatives are in place for all other waste associated with this production.
The print house chosen for production of this report is FSC and ISO 14001 certified with strict procedures in place to safeguard the
environment through all processes, including ongoing initiatives to reduce carbon footprint.
THANK YOU!
We would like to thank our employees who are
essential to our success.
Their skill and dedication has been invaluable
in making Gleeson what it is today.
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MJ Gleeson plc
6 Europa Court, Sheffield Business Park,
Sheffield S9 1XE
Tel: 0114 261 2900 Fax: 0114 261 2939
Email: enquiries@mjgleeson.com
www.mjgleesonplc.com