M J Gleeson Group PLC
Report and Accounts
for the year ended 30 June 2010
Revenue
Profit/(loss) before tax
continuing operations
Shareholders’ funds
Net cash
Dividend
Net assets per share
* The results for 2009 have been restated. For details see Note 11.
2010
2009*
£46.5m
£43.0m
£0.4m £(50.7)m
£97.8m £102.4m
£18.4m
£10.9m
£7.9m
186p
-
195p
Contents
Financial Summary
Board of Directors
Chairman’s Statement
Business Review and Directors’ Report
Directors Remuneration Report
Corporate Governance
Statement of Directors’ Responsibilities
Independent Auditors’ Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cashflow
Notes to the Financial Statements
Five Year Review
Advisers
Inside front cover
2
4
8
22
28
33
34
36
37
38
40
42
76
Inside back cover
M J Gleeson Group PLC
Moving forward with confidence
Following a period of restructuring and
consolidation, the Group is now concentrating
its efforts in the following areas:
estate regeneration and housing development on brownfield land
in the North of England;
enhancing the value of land options by achieving residential
planning consents on greenfield sites, primarily in the South
of England;
investing in social housing Private Finance Initiative schemes.
urban housing regeneration
strategic land trading
Page 1
M J Gleeson Group PLC
Board of Directors
Group
Chris Holt
BSc, MBA, CIMA, 59
Group Chief Executive
Joined
in May
the Board
2007. Appointed Group Chief
in January 2009.
Executive
Previously
Finance
Director and, prior to that, held
the position of Interim Group
Finance Director since August
2006. Chris has over 30 years of
widespread financial experience
with internationally renowned
businesses, most recently with
Foster Wheeler, the global
engineering and construction
contractor and power equipment
supplier. Chris will retire from
the Board on 30 September 2010
following the successful sale of
Powerminster which took place
on 30 June 2010.
January
Alan Martin
BSc, ACA, 44
Group Finance Director
2009.
Appointed
Previously Group
Financial
Controller, a position he had held
since November 2006. Formerly
Group Financial Controller, Psion
PLC.
Alan qualified as a
Chartered Accountant in 1990,
following which he specialised in
with
corporate
PricewaterhouseCoopers
in
London and in Sydney, Australia.
Upon the retirement of Chris
Holt as Group Chief Executive,
Alan will continue as Group
Finance Director but will also
take up, with effect from
1 October 2010, the role of
Chief Operating Officer with
responsibility
Human
Resources, Company Secretariat,
Internal Audit and IT.
recovery
for
Jolyon Harrison
FCIOB, FIoD, FCMI, 62
Managing Director, Gleeson
Regeneration & Homes
Appointed to the Board on
1 July 2010. Joined the Group in
November 2009 as Managing
Director of Gleeson Regener-
ation & Homes. Jolyon has over
40 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. Currently
Chairman of York Housing
Association, JDP Rooflines Limited
and the Yorkshire region of the
Federation.
Home Builders
Formerly a member of the North
East Housing Board and a
Council member of the National
House Building Council.
Dermot Gleeson
MA (Cantab), 61
Non-Executive Chairman
Joined the Board
in 1975.
Appointed Chief Executive in
1988 and Chairman in 1994.
Relinquished the post of Chief
Executive in 1998. Member of the
Nomination Committee. Currently
a Non-Executive Director of GB
Group Holdings Limited (the
parent company of GB Building
Solutions Limited, previously
Limited).
Gleeson Building
Previously employed
in the
Conservative Party Research
Department,
European
Commission and Midland Bank
International Limited. Formerly,
a Trustee of the British Broad-
casting Corporation, Chairman
of the Major Contractors Group,
Director
the Housing
Corporation and Director of
Construction Industry Training
Board.
the
of
Page 2
M J Gleeson Group PLC
Board of Directors continued
October
Ross Ancell
ACA (NZ), 57
Non-Executive Director
2006.
Appointed
Senior
Independent Director.
Chairman of the Nomination
Committee and member of
the Audit and Remuneration
Committees. Executive Chairman
and controlling shareholder of
Churngold Group of Companies.
Non-Executive
Independent
Director of Galaxy Entertain-
ment Group Limited, and
Non-Executive Chairman, Taylor
Containers.
Terry Morgan
MSc, 61
Non-Executive Director
Appointed November 2006.
Independent Director. Chairman
of the Remuneration Committee
and member of the Audit
and Nomination Committees.
Currently Chairman of Crossrail
Limited and Non-Executive
Director of Mitie Group PLC.
Formerly Chief Executive of
Tube Lines Limited, Group
Managing Director – Operations
and Group HR Director of BAe
Systems plc, Managing Director
of Royal Ordnance plc at British
Aerospace plc and Managing
Director - Land Rover Vehicles,
Rover Group plc.
Colin Dearlove
BA, FCMA, 58
Non-Executive Director
Appointed December 2007.
Independent Director. Chairman
of the Audit Committee and
member of the Remuneration
and Nomination Committees.
Colin was at Barratt Develop-
ments PLC from 1981 to 2006
where he held a number of
senior finance positions with the
most
recent being Group
Finance Director, from 1992
until his retirement in 2006.
January
Christopher Mills, 57
Non-Executive Director
2009.
Appointed
Currently Chief
Investment
Officer of J O Hambro Capital
Management Limited which he
joined in 1993. He is also Chief
Investment
and
Executive
Manager of North Atlantic Smaller
Companies
Investment Trust
PLC, a UK listed investment
trust. Christopher has been a
director of several publicly
quoted companies,
including
Castle Support Services PLC,
Catalyst Media Group plc,
Inspired Gaming Group plc,
Prime Focus London PLC and
Sirvis IT plc.
Page 3
M J Gleeson Group PLC
Chairman’s Statement
Dermot Gleeson
Chairman
During the year, conditions in the housing market showed modest
signs of improvement. The steep fall in selling prices experienced
in the previous two years levelled off and there was some
easing of the credit conditions required by mortgage providers.
Against
this background, the Group, which has net cash
balances, recommenced construction on a number of mothballed
developments and has begun selectively to purchase new residential
sites, taking advantage of depressed land prices in the North
of England.
Financial overview
As explained in the Finance Review, the prior year results have been
restated due to a change in accounting policy for our Grove Village
regeneration project and the reclassification of Powerminster Gleeson
Services as a discontinued operation.
Revenue from continuing operations increased by £3.5m to £46.5m
(2009: £43.0m). This increase reflected an increase of £9.4m by
Gleeson Strategic Land, which achieved the sale of three significant
sites during the year, and an increase of £11.1m by Gleeson
Commercial Property Developments, which disposed of its remaining
properties. These increases were offset by a reduction of £17.1m
by Gleeson Regeneration & Homes, due to a 44% decrease in housing
unit sales, mitigated by a 17% increase in the average selling
price (“ASP”).
Profit for the year attributable to equity holders of the parent
company totalled £3.1 m (2009: loss £51.5m).
A profit before tax from continuing operations of £0.4m (2009: loss
£50.7m) was recorded, which included exceptional credits of £3.5m
(2009: charge £41.3m) relating to the partial reversal of asset
valuation write-downs.
Page 4
Discontinued operations, which this year includes the trading result
and profit on sale of Powerminster Gleeson Services, generated a
post-tax profit of £2.5m (2009: £1.8m).
The year end total equity attributable to equity holders of the
parent company decreased by 4% to £97.8m (2009: £102.4m),
representing net assets per share of 186p (2009: 195p). Net cash at
30 June 2010 was £18.4m (2009: £10.9m), an increase of £7.5m.
Both the equity and cash figures reflect the payment of the £7.9m
special dividend paid in March 2010.
Business review
The Group’s continuing operations comprise ongoing business units
and business units in run-off.
The Group’s ongoing business units – Gleeson Regeneration & Homes,
Gleeson Strategic Land, and Gleeson Capital Solutions – all improved
their year on year trading results.
“During the year, conditions in the housing
market showed modest signs of improvement.
The steep fall in selling prices experienced in
the previous two years levelled off and there
was some easing of the credit conditions
required by mortgage providers.”
Gleeson Regeneration & Homes unit sales decreased by 44% to
174 (2009: 313). This reflected its strategy to build to demand in
the private sector (2010: 129 units, 2009: 156 units) as well as a
significant reduction in units sold to Registered Social Landlords
(“RSLs”) (2010: 45 units, 2009: 157 units). ASP increased by 17%, from
£112,000 to £131,000. Exceptional credits of £2.8m were recorded
due to the partial reversal of asset valuation write-downs. This
reversal is due to greater than anticipated success in reducing
construction costs (£1.9m), along with higher than forecast selling
prices (£0.9m). One new site (43 units) was purchased during the year
and a further four sites (217 units) have been conditionally purchased
since the year end.
Gleeson Strategic Land had a successful year, completing three
significant land sales and the sale of three smaller plots. The
business unit added to its portfolio of options and now has 3,862
acres (2009: 3,755 acres) under option.
M J Gleeson Group PLC
Chairman’s Statement continued
Gleeson Capital Solutions recorded a profit of £0.3m (2009: loss
£0.6m). In the year, no PFI investments were sold and no new PFI
projects reached financial close.
on 30 June 2010 for total cash proceeds of £6.6m and a pre-tax gain
of £1.9m. The sale reflected concerns over decreasing revenues,
reducing margins and an uncertain business climate. An operating
profit of £0.6m (2009: £1.0m) was recorded.
The Group’s business units in run-off comprise Gleeson Commercial
Property Developments and Gleeson Building Contracting Division
within Gleeson Construction Services Limited.
Gleeson Commercial Property Developments disposed of its remaining
developments, recording a profit of £0.5m (2009: loss £8.0m) of which
£0.7m was an exceptional credit (2009: charge £7.5m).
Gleeson Building Contracting Division recorded a loss of £0.1m
(2009: £0.1m).
Group Activities (the central overhead) reduced by 47% to £1.9m
(2009: £3.6m). There were no exceptional items (2009: charge
£0.6m).
The Group’s discontinued operations are Gleeson Engineering
Division within Gleeson Construction Services Limited and
Powerminster Gleeson Services.
Board
The Board currently comprises three Executive Directors, four Non-
Executive Directors (three of whom are considered to be
independent) and myself as Non-Executive Chairman.
“The short term outlook for housing demand
remains difficult to predict.”
The sale of Powerminster Gleeson Services Limited makes it an
appropriate time for Chris Holt, Group Chief Executive, to retire
from the Board. As announced on 30 June 2010, this will take effect
from 30 September 2010. Chris has been a magnificent and
immensely professional Group Chief Executive and I and my
colleagues owe him a huge debt of gratitude.
Gleeson Engineering Division recorded a loss of £0.1m (2009: £0.2m).
Powerminster Gleeson Services was sold to Morgan Sindall Group plc
Alan Martin will combine his current role as Group Finance
Director with that of Chief Operating Officer, with additional
responsibility for Human Resources, Company Secretariat, Internal
Audit and IT.
Vale Croft, Bolsover, Derbyshire.
Page 5
M J Gleeson Group PLC
Lastingham Green, Bradford
Gleeson Regeneration and Homes’ newest
development in its initial phases. The
foundations for the first property can be
seen at the front of the site.
Page 6
Chairman’s Statement continued
Jolyon Harrison, who since November 2009 has been Managing
Director of Gleeson Regeneration & Homes, was appointed to the
Board with effect from 1 July 2010.
Employees
The average number of employees reduced in the year to 285 (2009:
311), and the number at the year end, following the disposal of
Powerminster Gleeson Services, was 95 (2009: 286).
The Board would like to thank all employees for their commitment
and continuing dedication during the year, especially given the
difficult market conditions with which the Group has had to
contend.
Dividends
During the year, the Group reviewed its short and long term cash
needs and concluded that the Group had cash in excess of its
requirements. Accordingly, the Board decided to pay a special
dividend of 15p a share on 31 March 2010. The dividend payment
totalled £7.9m.
The Board does not propose a final dividend for the year ended 30
June 2010.
Current trading and prospects
Although trading to date during the current year has been in line
with expectations, the short term outlook for housing demand
remains difficult to predict. However, the Board has been
encouraged by the achievements over the last year of both Gleeson
Regeneration & Homes and Gleeson Strategic Land and believe that
both are well placed to meet the challenges ahead.
Dermot Gleeson
Chairman
M J Gleeson Group PLC
In August 2010, the Lord Mayor and Lady Mayoress
of Bradford, along with Sarah Humphries, Gleeson
Regeneration and Homes’ Sales Manager kick off
the building work on Plot 1, Lastingham Green,
Bradford.
Page 7
M J Gleeson Group PLC
Business Review and Directors’ Report
unit has reduced build and labour spend. However, the longer term
strategy is to grow the business in the North of England and the
business unit has recently recommenced the purchase of land for
development.
Gleeson strategic Land: This business unit focuses on the purchase
of options over land in the South of England, with the objective of
enhancing the value of the sites concerned by securing residential
planning consents.
Gleeson Capital solutions: This business unit manages the Group’s PFI
investments in social housing and takes the lead in securing new PFI
opportunities that offer good investment returns, while also providing
development opportunities for Gleeson Regeneration & Homes.
Group activities: comprise the Board, Company Secretariat and
Group Finance.
Businesses in run-off
Gleeson Commercial property Developments: during the year, the
Group completed the sale of its remaining developments. This
business unit is no longer trading.
engineering and Building Contracting: the Group sold certain
contracts, assets and liabilities of the Engineering Division in October
2006 to Black & Veatch Limited and of the Building Contracting
Division in August 2005 to Gleeson Building Limited (now GB Building
Solutions Limited), a management buy-out vehicle. The run-off
activity of the former is reported as a discontinued operation, whilst
that of the latter is reported as a continuing operation.
Chris Holt
Group Chief Executive
Management has reacted to the uncertain trading conditions by
continuing to reduce costs in both overhead and build costs. We have
taken advantage of the lower value of land by securing an additional
site in the North of England during the year and since year end, we have
conditionally purchased a further four sites in the North of England.
Group Businesses anD sTraTeGy
Gleeson is predominantly a housebuilder in the North of England,
focused on the regeneration sector and with particular emphasis on
creating sustainable communities.
The Group comprises ongoing businesses and businesses in run-off:
ongoing businesses
Gleeson regeneration & Homes: This business unit focuses on
estate regeneration and housing development on brownfield land in
the North of England. In response to market conditions, the business
The Brambles, Doe Lea,
Chesterfield, Derbyshire
page 8
M J Gleeson Group PLC
Business Review and Directors’ Report continued
OPERATING RISk STATEMENT
The Group has established risk management procedures, involving the identification, control and monitoring of risks at various levels
within the organisation. However, there are other significant risks out of the Group’s control which could affect its business, which include
but are not limited to the following:
Risks common to the Group
Funding
The Group must have sufficient cash resources and facilities to finance its operations.
Health & safety
The Group must have adequate systems and procedures in place to mitigate, as far as possible, the dangers
inherent in the execution of work in the Group’s continuing businesses.
People
Insurance
The Group must attract and retain the right people to ensure the Group’s long-term success.
The Group must maintain suitable insurance arrangements to underpin and support the many areas in which
the Group is exposed to risk or loss.
Information technology
The Group must have suitable systems to ensure that a reliable flow of information operates throughout
the Group and that the risk of system loss is mitigated by appropriate contingency plans.
Risks specific to Gleeson Regeneration & Homes
Economic conditions
The housebuilding industry is sensitive to availability of mortgage finance,employment levels, private and
buy-to-let housing demand, interest rates, and consumer confidence.
Risks specific to Gleeson Strategic Land
Planning
The uncertainty resulting from the coalition Government’s amendments to the planning system may impact
upon the timing of achieving planning consents.
Risks specific to Gleeson Capital Solutions
Government policy
The business unit is dependent upon the Government’s continued commitment to PFI procurement as a
means of funding regeneration projects.
Bid costs
Substantial bid costs can be incurred, without recovery, when seeking to win new projects.
Risks specific to businesses in run-off
Engineering and Building Contracting
Completion of
retained projects
Latent defects
These businesses must complete outstanding work on retained projects within the provisions made by
management.
The Group is exposed to any latent defects that may arise within 12 years of completion of a project.
Rectification of the defects must be completed within the provisions made by management.
Page 9
M J Gleeson Group PLC
Business Review and Directors’ Report continued
PERFORMANCE
GLEESON REGENERATION & HOMES
The business unit’s results for the year were as follows:
Revenue
Operating loss
2010
2009
£22.7m
£1.3m
£39.8m
£33.3m
Included within these results were the following exceptional items:
Non-cash valuation write down of
land and work in progress
Restructuring costs
2010
2009
£2.8m
£(27.0)m
-
£(0.3)m
£2.8m
£(27.3)m
Jolyon Harrison was appointed Managing Director of this business
unit in November 2009.
In response to historically low levels of customer demand, the
business unit has placed a strong emphasis on conserving cash,
reducing overhead and construction cost, and rigorously aligning
construction work-in-progress to sales rates. The number of house
types has been reduced, build specifications have been simplified
and new build methods and procedures have been implemented to
improve efficiency and drive down costs.
The business unit has seven regeneration sites, all of which – apart
from Ashford, Kent - are in the North of England. In addition, the
business unit has two non-regeneration sites, one of which is in the
North of England. During the year, the business unit purchased one
site and subsequent to the year end it conditionally purchased a
further four sites.
During the year, 174 (2009: 313) units were sold, of which private
sales totalled 129 (2009: 156) and sales to RSLs totalled 45 (2009:
157). ASP for private sales was £140,000 (2009: £130,000) and for
sales to RSLs was £103,000 (2009: £97,000). The increase in ASP for
private sales reflected a change in product mix year-on-year with a
higher proportion of units being sold off in the South.
Page 10
Stanhope, Ashford, kent
M J Gleeson Group PLC
Business Review and Directors’ Report continued
unit sales as recognised in revenue
Private sales
RSL sales
Total
unit sales as handed over
Private sales
RSL sales
Total
Market sector analysis
Private sales – 1 & 2 beds
Private sales – 3 beds
Private sales – 4 beds
Private sales – 5 or more beds
RSL sales
Total
Product mix analysis
Apartments
Three storey
Room in roof
Traditional – other
RSL Sales
Total
2010
units
129
45
174
2010
units
129
64
193
2010
units
55
56
15
3
64
2010
%
74
26
100
2010
%
67
33
100
2010
%
28
30
8
1
33
193
100
2010
units
35
1
5
88
64
2010
%
18
1
2
46
33
193
100
2010
ASP
£000
140
103
131
2010
ASP
£000
140
104
127
2010
ASP
£000
102
150
154
498
104
127
2010
ASP
£000
123
625
359
126
104
127
2009
Units
156
157
313
2009
Units
156
221
377
2009
Units
63
57
30
6
221
377
2009
Units
52
40
10
54
221
377
2009
%
50
50
100
2009
%
41
59
100
2009
%
17
15
8
2
58
100
2009
%
13
11
3
14
59
100
2009
ASP
£000
130
97
112
2009
ASP
£000
130
97
112
2009
ASP
£000
97
142
154
264
99
112
2009
ASP
£000
88
141
267
138
99
112
Page 11
M J Gleeson Group PLC
Business Review and Directors’ Report continued
GLEESON STRATEGIC LAND
GLEESON CAPITAL SOLuTIONS
Revenue
Operating profit/(loss)
2010
2009
£10.5m
£1.1m
£2.2m
£(5.9)m
Gleeson Capital Solutions holds investments in four PFI projects,
namely Grove Village, an estate regeneration project in Manchester;
Stanhope, an estate regeneration project in Ashford, Kent;
Avantage, an extra care homes project in Cheshire; and Leeds
Independent Living, a social housing project in Leeds. During the
year, the project in Cheshire achieved build completion.
Revenue
Operating profit/(loss)
2010
2009
-
-
£0.3m
£(0.6)m
During the year, no projects achieved financial close (2009: none).
The business unit is currently bidding for a regeneration project in
Manchester. In the year, speculative bid costs of £0.1m (2009:
£0.3m) were incurred, which were expensed.
The business unit completed three significant land sales in the year
and sold off a smaller parcel of land and some houses.
A number of the major housebuilders have re-entered the land
market in order to replenish their depleted land stocks and the
business unit anticipates selling two significant residential sites
during the remainder of the current financial year. In addition,
it will shortly be marketing a small commercially consented site
in Kent.
During the year, three new options were secured covering 195 acres.
In addition, heads of terms have been agreed for a further seven
options covering 230 acres.
At the year end, the portfolio totalled 3,862 acres (2009: 3,755
acres), most of which are in Southern England (Buckinghamshire,
Dorset, Essex, Hampshire, Hertfordshire, Kent, Oxfordshire, Surrey,
Sussex and Wiltshire).
Regional Planning Policy – The previous Government’s Regional
Planning Policy has been abandoned as part of a move away from a
“top down” approach to housing delivery in favour of a policy of
“localism”, which permits Local Authorities to identify their own
housing number requirements. We await firm details of how this
will evolve and to what extent it will impact upon our business in
terms of both constraints and opportunities.
Planning Applications – There is currently one planning application
for a 152 unit site awaiting consent. A further three applications
are to be lodged in the near future. These are expected to deliver
circa 350 units.
Planning Consents – During the year, planning consent was secured
on four sites, which means that the Group currently holds in excess
of 1,250 plots of consented residential land.
Grove Village, Manchester
Page 12
M J Gleeson Group PLC
Business Review and Directors’ Report continued
POwERMINSTER GLEESON SERVICES
GLEESON CONSTRuCTION SERVICES
2010
2009
Continuing operations
Revenue
Operating profit
Operating margin
£17.4m
£18.7m
£0.6m
3.6%
£1.0m
5.3%
Revenue
Operating loss
2010
2009
£0.1m
£0.0m
£(0.1)m
£(0.1)m
On 30 June 2010, the Group sold Powerminster Gleeson Services to
Morgan Sindall Group plc.
GLEESON COMMERCIAL PROPERTy
DEVELOPMENTS
The Group retained sufficient assets and liabilities after the disposal
of its Gleeson Building Contracting Division in August 2005 for the
results of these retained assets and liabilities to be classified as
continuing.
The business unit continued to resolve contractual matters within
the provisions set by management, with the loss recorded being its
running costs.
Although the results of this business are included within
continuing operations, the business is in run-off, as announced on
30 March 2007.
Discontinued operations
During the year, the Group disposed of the five remaining
commercial property sites generating a turnover of £13.2m
(2009: £2.1m). An operating profit of £0.5m (2009: loss £8.0m) was
recorded including an exceptional credit of £0.7m (2009: charge
£7.5m), which related to the partial reversal of asset valuation
write-downs.
The Group has now concluded the disposal of its commercial
property developments.
Revenue
Operating loss
2010
2009
£0.7m
£3.8m
£(0.1)m
£(0.2)m
The Group disposed of sufficient assets and liabilities of its Gleeson
Engineering Division in October 2006 such that the results of these
retained assets are classified as discontinued.
The retained element of the Gleeson Engineering Division recorded
an operating loss for the year of £0.1m (2009: £0.2m), which
represented its running costs.
GROuP ACTIVITIES
The charge for the year, which relates to the Board, Company
Secretariat and Group Finance, was £1.9m (2009: £3.6m), of which
£nil (2009: £0.6m) was exceptional.
Page 13
M J Gleeson Group PLC
BusinessReviewandDirectors’Reportcontinued
GleesonStrategicLandrecordedanoperatingprofitof£2.2m(2009:
loss£5.9m)onrevenueof£10.5m(2009:£1.1m).Therewereno
exceptionalitemswithintheoperatingresultfortheyear(2009:
charge£5.5m).
GleesonCapitalSolutionsrecordedanoperatingprofitof£0.3m
(2009:loss£0.6m)onrevenueof£nil(2009:£nil).Therewereno
exceptionalitemswithintheoperatingresultfortheyear(2009:
charge£0.5m).NoprojectsforwhichGleesonCapitalSolutionsis
biddingachievedfinancialcloseduringtheyear.
Gleeson Commercial Property Developments made an operating
profit of £0.5m (2009: loss £8.0m) on revenue of £13.2m (2009:
£2.1m).Includedwithintheoperatingprofitisanexceptionalcredit
of£0.7m(2009:charge£7.5m),whichrelatedtothepartialreversal
ofassetvaluationwrite-downs.
Gleeson Construction Services, the continuing element of which
comprisestherun-offoftheGleesonBuildingContractingDivision,
recordedrevenueof£0.1m(2009:£nil),onwhichanoperatingloss
of£0.1m(2009:£0.1m)wasrecorded.
Discontinued operations
DiscontinuedoperationscomprisePowerminsterGleesonServices,
which was sold to Morgan Sindall Group on 30 June 2010, and
GleesonConstructionServices,beingthoseassetsandliabilitiesof
theGleesonEngineeringDivisionwhichwerenotsoldtoBlack&
VeatchinOctober2006.
Powerminster Gleeson Services recorded an operating profit of
£0.6m(2009:£1.0m)onrevenueof£17.4m(2009:£18.7m).The
profitonthesaleofPowerminsterGleesonServicestotalled£1.9m.
TheGleesonEngineeringDivisionofGleesonConstructionServices
generatedrevenueof£0.7m(2009:£3.8m).Anoperatinglossof
£0.1m(2009: £0.2m)wasrecorded.
interest
Net interest income of £0.8m (2009: £0.9m) was lower due to
reducedaveragenetcashbalancesmaintainedbytheGroup,along
withreducedinterestrates.
Tax
Anettaxcreditforcontinuingoperations,excludingtaxforjoint
ventures,of£0.2m(2009:charge£2.6m)hasbeenrecordedinthe
IncomeStatement.TheGroupnowhas£89.9m(2009:£89.0m)of
taxlosseswhichcanbecarriedforwardindefinitely.
alan Martin
GroupFinanceDirector
Finance review
Overview
Thefinancialresultsfortheyearreflectedthecontinuinguncertain
tradingenvironment.
The profit before tax from continuing operations of £0.4m
(2009:loss£50.1m)includedexceptionalcreditsof£3.5m(2009:
charge £41.3m). The exceptional credits comprise the partial
reversal of asset valuation write-downs, with £2.8m relating to
GleesonRegeneration&Homesand£0.7mtoGleesonCommercial
PropertyDevelopments.
Key performance indicators
continuing operations
Revenue
Operatingloss
2010
2009
£46.5m
£43.0m
£(0.3)m
£(51.6)m
continuing operations
GleesonRegeneration&Homesrecordedanoperatinglossof£1.3m
(2009: £33.3m) on revenue of £22.7m (2009: £39.8m). Included
withintheoperatinglossisanexceptionalcreditof£2.8m(2009:
charge £27.3m), which related to the partial reversal of asset
valuation write-downs. The accounting treatment of the only
regenerationsitetobeaccountedforasalongtermcontractwas
changed during the year to a unit sales basis, which is now
consistent with the Group’s other housebuilding projects. The
change was made in light of guidance provided by IFRIC 15
AgreementsfortheConstructionofRealEstate,whichtheGroup
hasadoptedearly.
Page 14
M J Gleeson Group PLC
Business Review and Directors’ Report continued
The total tax credit, including tax on discontinued operations
and tax attributable to joint ventures, was £0.1m (2009: charge
£1.9m). The net deferred tax asset recorded within the Balance
Sheet totals £1.1m (2009: £0.6m).
Earnings per share
Basic and diluted earnings per share were 6.0p (2009: loss 98.7p).
For continuing operations only, the basic and diluted earnings per
share were 1.3p (2009: loss 102.3p).
Dividend
During the year, the Group reviewed its short and long term cash
needs and concluded that the Group had cash in excess of its
requirements. Accordingly, the Board decided to pay a special
dividend of 15p a share on 31 March 2010. The dividend payment
totalled £7.9m.
The Board does not propose a final dividend for the year ended
30 June 2010.
Acquisitions
The Group acquired the balance of the share capital of
two joint ventures during the year. In October 2009, the Group
acquired the 50% of the share capital of Oakmill Properties
Limited (“Oakmill”) that it did not own for £1. Oakmill had
developed a residential and commercial site in Barnes, London
and at the time of acquisition the residential properties had yet to
be sold. The remaining properties in the development were sold
during the year.
In February 2010, the Group acquired the 50% of the share capital
of Denbigh Gleeson (Cap Green) Limited (“Denbigh”) that it did not
own for £1. Denbigh had developed a commercial site in Luton,
which at the time of the acquisition was partly let. The Group sold
the freehold of the site during the year.
Disposals
The Group sold Powerminster Gleeson Services Limited to Morgan
Sindall Group plc on 30 June 2010. The cash proceeds totalled
£6.6m, with the net cash inflow of £3.8m after taking account of
the costs of disposal and cash transferring with the company.
The gain on disposal, after tax, totalled £1.9m. As the disposal
occurred on the final day of the financial year, the trading results
of Powerminster Gleeson Services for the full year have been
included within the Group’s results. The entity is treated as a
discontinued operation and prior year results have been restated
within the Income Statement.
Balance sheet
At 30 June 2010, shareholders’ funds totalled £97.8m (2009:
£102.4m). Non-current assets decreased to £16.6m (2009: £22.1m)
due to the reduction of plant and equipment with the disposal of
Powerminster Gleeson Services and a reduction in the loans to joint
ventures. Net current assets were broadly in line with the prior year
at £84.3m (2009: £84.4m).
Cash flow
The Group generated a cash inflow for the year of £7.5m (2009:
£11.0m outflow), resulting in a net cash balance at 30 June 2010 of
£18.4m (2009: £10.9m).
Operating cash flows, including working capital movements,
generated £14.2m (2009: utilised £20.4m). There were no
taxes paid or received during the year (2009: net receipt £3.4m).
Cash inflows from investing activities totalled £1.4m (2009:
£6.4m), with £3.8m net receipt from the sale of Powerminster
Gleeson Services set off by £2.8m cash outflow from loans to joint
ventures and other investments. Net cash flows from financing
activities utilised £7.9m (2009: £nil), due to dividend payments
(2009: £nil).
Treasury risk management
The Group’s cash balances are centrally pooled and invested,
ensuring the best available returns are achieved consistent with
retaining sufficient liquidity for the Group’s operations. The Group
only deposits funds with financial institutions which have a minimum
credit rating of AA.
As the Group operates wholly within the UK, there is no requirement
for currency risk management.
Bank facilities
Following a review of the Group’s banking facilities, which were to
expire in June 2010, the Board concluded that the Group had no
further need for its revolving credit facility and terminated this in
March 2010.
The review of the Group’s banking needs demonstrated that the only
requirement was for a letter of credit facility. Subsequent to the
year end, the Group signed a £5m letter of credit and bonding
facility with Santander.
Pension
The Group contributes to a defined contribution pension scheme. A
charge of £0.6m (2009: £0.7m) was recorded in the Income
Page 15
M J Gleeson Group PLC
Business Review and Directors’ Report continued
Statement for pension contributions. The Group has no exposure to
defined benefit pension plans.
uncertainty, particularly over the level of demand for the Group’s
goods and services and the availability of bank finance in the
foreseeable future.
Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position, are set
out in the Business Review. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are described
above. In addition, the notes to the financial statements include
the Group’s objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures to
credit risk and liquidity risk.
The Group meets its day-to-day working capital requirements
through its cash resources. The current economic conditions create
The Group’s forecasts and projections show that the Group is able
to operate without the need for debt finance for the foreseeable
future.
After making enquiries, the Directors have a reasonable expectation
that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the annual Report and Accounts.
Montreal Gardens,
North Huyton, Liverpool
Page 16
M J Gleeson Group PLC
Business Review and Directors’ Report continued
CORPORATE SOCIAL RESPONSIBILITy REPORT
The Group’s environmental strategy is focused on:
Introduction
Gleeson recognises the importance that its activities have on all its
stakeholders, including shareholders, employees, customers, the
supply chain and the communities in which it operates.
• minimisation of environmental risk and maximisation of environ-
mental opportunity; and
• ensuring knowledge and understanding is at a level where all
employees are aware of the environmental responsibilities
involved in their job.
Corporate governance
Details of the Group’s corporate governance are included in the
Corporate Governance Statement on pages 28 to 32 which form part
of the Directors’ Report.
Health & safety
Health and Safety is of paramount importance to the Group and is
considered to be a key risk.
There have been no prohibition or improvement notices issued to
the Group during the year. Two injuries have been reportable under
the Reporting of Injuries, Diseases and Dangerous Occurrences
Regulations (“RIDDOR”), neither of which was classed as a major
injury. In the previous year, the Group reported three injuries
under RIDDOR.
The overall accident incidence rate (“AIR”) was 680 (2009: 513), a
32% increase. This increase is a reflection of the reduced number of
employees rather than an increase in the number of incidents. The
AIR is an industry-wide indicator as to health & safety performance.
The Group’s AIR remains significantly below the construction
industry average of 906, as published by the Health & Safety
Executive.
During the year, the Royal Society for the Prevention of Accidents
awarded the Group its gold medal, for achieving a very high level
of health & safety performance. In addition, the Group was also
awarded the coveted President’s Award for the second year running.
Environment
Each of the Group’s operating business units continued to remain
accredited to ISO14001: 2004, the international standard for
environmental management.
Environmental management systems
The Group’s business units each have an environmental management
system which controls how environmental performance is managed.
At the operational level, each site carries out a project
environmental risk assessment and develops an environmental plan,
dependent on the complexity of the job and the risks encountered.
waste management: minimisation & recycling
Site waste management plans are put in place at the start of each
project and form part of the specific site environmental plan.
Suitable recovery or disposal arrangements are made for all wastes.
Arrangements are identified for dealing with all waste in line with
environmental agency recommendations.
Timber policy
The Group has a timber purchasing policy which requires that all
timber provided or used in the manufacture of its products must be
obtained from a certified sustainable source. The Group complied
with this policy throughout the year.
Communities
The core activity of the Group is housing regeneration and its work
is therefore at the heart of the communities where this regeneration
takes place. The Group is committed to improving these
communities and creating positive and long term enhancement of
the environment and the life of the community itself.
The Group’s approach to its corporate social responsibilities is
evidenced by examples of positive engagement with the
communities within which it works, to the benefit of all its
stakeholders.
Human resources
The year under review has seen the Group restructure and change
to support its business strategy. This has impacted on our
employees, resulting in a number of compulsory redundancies,
whilst ensuring key skills and capabilities are retained, and new
opportunities created in selected areas to meet our current and
future business needs.
The Group has consulted with all of its employees affected by the
changes and every effort has been made to ensure they have been
dealt with in a fair and consistent manner.
It is the Group’s policy to ensure that it provides a safe, professional
and stable working environment, that all employees are afforded
Page 17
M J Gleeson Group PLC
Business Review and Directors’ Report continued
equal opportunities and free from unlawful discrimination regardless
of their age, sex, colour, race, religion or ethnic origin and that
disabled persons are not disadvantaged.
encourages all of its employees to be fully engaged with their own
training and development programmes in order to achieve their full
potential and to meet the needs of the business and its customers.
Throughout this period of change, the Group’s employees have
remained loyal and committed with the voluntary turnover rate and
sickness absence rate below the national average.
Individual employee performance is regularly reviewed using the
Group’s Performance Development Review process and objectives
and targets are set for personal development.
The Group believes its employees are fundamental to its success
and future growth and therefore, despite the ongoing economic
challenges, it has continued to invest in its employees through
relevant training and development programmes. The Group actively
The Group’s commitment to having all site-based employees
qualified and Construction Skills Certification Scheme (“CSCS”)
carded remains an objective.
The Grange, Retford,
Nottinghamshire
Page 18
M J Gleeson Group PLC
Business Review and Directors’ Report continued
will retire from the Board on 30 September 2010, all remaining
Directors will, voluntarily, offer themselves for re-election in order
to make themselves more accountable to shareholders. Of the
Directors standing for election or re-election this year, Alan Martin
and Jolyon Harrison hold service contracts that may be terminated
by the Company with a notice period of one year. Directors’
biographies are shown on pages 2 and 3.
Directors’ interests
The Directors held the following beneficial interests in the ordinary
share capital of the Company:
Director
22 Sept
2010
30 June
2010
30 June
2009
Dermot Gleeson
1,028,986
1,028,986
1,017,156
Ross Ancell
Terry Morgan
Colin Dearlove
Christopher Mills
Chris Holt
Alan Martin
–
4,851
–
–
4,851
–
–
4,851
–
9,532,250a
9,532,250a
9,532,250a
18,151
6,492
18,151
6,024
–
4,177
N/A
Joy Baldry
Company Secretary
Results and dividends
During the year, the Group made a profit after taxation of £3.1m
(2009: loss of £51.5m). The Directors have decided not to propose
a final dividend. The total distribution for the year was £7.9m
(2009: nil).
Directors
During the year, the following served as Directors:
Dermot Gleeson
Non-executive Chairman
Jolyon Harrison
1,065,450
1,055,450b
Chris Holt
Executive Director
Alan Martin
Executive Director
Ross Ancell
Non-executive Director and Senior
Independent Director
Terry Morgan
Non-executive Director
Colin Dearlove
Non-executive Director
Christopher Mills
Non-executive Director
Subsequent to the year end, Jolyon Harrison was appointed to the
Board on 1 July 2010.
At the next Annual General Meeting of the Company, to be held on
10 December 2010, Jolyon Harrison, having been appointed to the
Board since the last Annual General Meeting, will stand for
re-appointment. Pursuant to the Articles, Terry Morgan and Colin
Dearlove will retire by rotation and, being eligible, will offer
themselves for re-election. With the exception of Chris Holt, who
(a) Shares are held in name of North Atlantic Value LLP, of which Christopher
Mills is a Member
(b) On 1 July 2010, the date of his appointment to the Board
Share capital
The Company has issued share capital of 52,643,985 ordinary shares
of two pence each, as at 22 September 2010. Further details are
given in note 28. The number of ordinary shares in issue has
increased by 50,000 shares since the date of publication of the last
Report and Accounts, following the issue of shares awarded under
the Company’s Employee Share Purchase Plan.
Substantial shareholdings
On 22 September 2010, the shareholdings noted below, representing
3% or more of the issued share capital, had been notified to the
Company. In addition, as at 22 September 2010, Capita IRG Trustees
Limited held 1,028,317 ordinary shares as trustees of the Employee
Share Purchase Plan and Bank of New York Nominees Limited held
67,898 ordinary shares on behalf of Lloyds TSB Offshore Trust Company
Limited in its capacity as trustee of the employee shares schemes.
Page 19
M J Gleeson Group PLC
Business Review and Directors’ Report continued
Name of shareholder
Number
of shares
Proportion
of total
receive a dividend where declared or paid out of profits available
for such a purpose.
North Atlantic Value LLP
Schroder Investment Management Ltd
Guinness Peat Group plc
Mrs J C Cooper & spouse*
9,532,250
7,119,762
3,500,421
2,809,615
Legal & General Investment Management
2,068,246
Barclays plc
1,843,779
18.12%
13.53%
6.65%
5.34%
3.93%
3.50%
* of which 542,800 are held in discretionary trusts, of which she is a Trustee.
Property, plant and equipment
Information relating to changes in property, plant and equipment is
given in note 12 to the financial statements.
Creditor payment policy
Payment terms are agreed with the Group’s suppliers and every
effort is made to adhere to these terms. Payments are made when
it can be confirmed that goods and/or services have been provided
in accordance with the relevant contractual conditions. The Group’s
average trade creditor payment period at 30 June 2010 was 59 days
(2009: 45 days).
Disclosure of information to Auditors
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 Auditors are unaware,
and each Director has taken all the steps that he ought to have
taken as a Director to make himself aware of any relevant audit
information and to establish that the auditors are aware of that
information.
Takeovers directive
Pursuant to s.992 of the Companies Act 2006 which implements the
EU Takeovers Directive, the Company is required to disclose certain
additional information. The following gives those disclosures which
are not covered elsewhere in this Annual Report.
The structure of the Company’s share capital is shown on page 19
and within note 28. The rights of shareholders are set out in the
Company’s Articles of Association (“Articles”). The holders of
ordinary shares are entitled to receive the Company’s reports and
accounts, to attend and speak at general meetings of the Company,
to exercise voting rights in person or by appointing a proxy, and to
The Company’s Articles give the Board power to appoint Directors and
also require Directors to retire and submit themselves for election at
the following Annual General Meeting. A Director who retires in this
way is eligible for election, but is not taken into account when
deciding how many Directors should retire by rotation at the Annual
General Meeting. Pursuant to the Articles, at every Annual General
Meeting, at least one-third of the current Directors must retire by
rotation. The Articles themselves may be amended by special resolution.
Once again, at this year’s Annual General Meeting, those Directors who
are not retiring by rotation will, voluntarily, offer themselves for re-
election in the interests of good corporate governance.
The Board of Directors is responsible for the management of the
business of the Company and may exercise all the powers of the
Company subject to the provisions of the Company’s Memorandum
and Articles. The Articles contain specific provisions and restrictions
regarding the Company’s power to borrow money. Powers relating
to the issuing and buying back of shares are also included in the
Articles and shareholders are asked to renew such powers each year
at the Annual General Meeting.
The agreements that alter or terminate upon a change of control of
the Company following a takeover have been identified as the M J
Gleeson Group plc Share Purchase Plan, the M J Gleeson Group
Savings-Related Share Option Scheme, the M J Gleeson Group
Performance Share Plan, the Bond Facility Agreement provided by
Zurich Insurance plc and the Bank Facility Agreement provided by
Santander UK plc. In the event of a takeover of the company the
share option schemes/plans would vest and the bank and bond
facility agreements would potentially lapse.
Auditors
KPMG Audit plc was re-appointed by the members at the last Annual
General Meeting and is considered to be independent. The Directors
will propose a resolution to the members at the Annual General
Meeting to be held on 10 December 2010 to re-appoint KPMG Audit
plc as Auditors and to fix its remuneration. KPMG Audit plc has
indicated its willingness to continue in office.
Annual General Meeting
The Notice of the Annual General Meeting to be held on 10
December 2010, together with details of the Resolutions to be
considered, is set out in a separate circular.
Page 20
M J Gleeson Group PLC
Business Review and Directors’ Report continued
Special business
As special business at the Annual General Meeting, the Directors will
seek shareholders’ approval of Resolutions as follows:
1. Resolution 11 seeks shareholders’ authority for the allotment of
Ordinary shares up to an aggregate maximum nominal amount of
£350,960 (being the nominal amount equal to one third of the
issued share capital of the Company) in substitution for all
existing authorities. This authority will expire at the conclusion
of the next Annual General Meeting or 15 months from the date
of the passing of this resolution.
2. Resolution 12 asks shareholders to waive their pre-emption rights
for a further year in respect of any rights issue and in respect of
the allotment of shares having a maximum aggregate nominal
value of £52,644 which is equivalent to approximately 5% of the
Company’s issued equity share capital as at 22 September 2010.
issued share capital as at 22 September 2010. The Directors would
exercise this authority only if they believed that to do so would
be in the interests of shareholders generally and would be likely
to result in an increase in earnings per share. Any earnings per
share targets included in employee share incentive schemes will
be adjusted to take account of any buyback.
4. Resolution 14 asks shareholders’ approval to call General Meetings
other than Annual General Meetings on not less than 14 clear days’
notice.
By order of the Board
3. Resolution 13 has been prepared in connection with the renewal
of the general authority to the Company to make market
purchases of its own shares having a maximum aggregate nominal
value of £105,287, being equivalent to approximately 10% of the
Joy Baldry
Company Secretary
22 September 2010
Page 21
M J Gleeson Group PLC
Directors’ Remuneration Report
Introduction
This report has been prepared in accordance with the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations
2008. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the
Board has applied the principles relating to Directors’ remuneration.
The Act requires the Auditors to report to the Company’s members on the elements of the Remuneration Report that require audit and to
state whether in their opinion the report has been properly prepared. To facilitate this, the report has been divided into separate sections
for audited and unaudited information. Shareholders’ approval of this report will be sought at the forthcoming Annual General Meeting.
INFORMATION NOT SuBJECT TO AuDIT
Remuneration Committee
The Remuneration Committee (“Committee”) is a Board Committee consisting entirely of Non-Executive Directors. The following Directors
were members of the Committee during the year ended 30 June 2010:
Terry Morgan (Chairman)
Ross Ancell
Colin Dearlove
The Secretary of the Committee is Joy Baldry, Company Secretary.
The Committee is responsible for recommending to the Board the Group’s remuneration policy for the Chairman of the Company, the
Executive Directors and such other key employees as the Board may designate. The Committee is also responsible for determining targets
for any performance-related pay schemes, the policy and scope of pension arrangements and service agreements, termination payments
and compensation commitments for the Executive Directors. In addition, the Committee gives guidance to the Group Chief Executive on
pay policy matters for the Group as a whole. The terms of reference of the Committee are available on the Group’s website, or on request
from the Company Secretary, and will also be available at the location of the Annual General Meeting for a period of 15 minutes in advance
of the Meeting.
The Committee meets formally up to three times a year and at such other times as the Chairman of the Committee shall require. The
Committee consults the Chairman of the Company, the Group Chief Executive and the Head of Human Resources concerning its proposals.
These individuals are not involved in the decisions regarding their own remuneration. During the year, the Committee received external
professional advice from BDO Stoy Hayward LLP on remuneration and share scheme issues. BDO Stoy Hayward LLP was selected and
appointed by the Remuneration Committee and has no other connection with, nor provided any other services to, the Group.
No one other than a Committee member is entitled to be present at meetings unless invited by the Chairman of the Committee.
In formulating its recommendations, the Committee considered pay and employment conditions throughout the Group and complied with
the Combined Code.
The Committee met three times during the year and all members were in attendance.
Remuneration policy
It is the Group’s policy to:
• set the remuneration of Executive Directors at a level which will attract and retain executives of appropriate ability, experience and
integrity to manage the affairs of the Group;
Page 22
M J Gleeson Group PLC
Directors’ Remuneration Report continued
• reward Executive Directors and senior managers below Board level appropriately for their contributions to the success of the Group but
with reference to mid-market remuneration levels offered by similar companies within the sector;
• ensure that a significant proportion of the Executive Directors’ overall remuneration is performance-related so that their interests are
more closely aligned with those of the shareholders;
• ensure that the performance targets in the short and long-term incentive plans are challenging and are likely to result in significantly
enhanced total shareholder return; and
• ensure that regular contact is maintained with the principal shareholders regarding remuneration matters.
The Committee believes that its policy is appropriate for the Group and has no intention to amend it in the current year. Nevertheless,
the policy will be kept under regular review.
Basic salary
The Committee reviews and makes recommendations regarding the basic salary of the Executive Directors to the Board annually. In making
its recommendations, the Committee has regard to the salaries paid to executives of comparable companies in the house-building sector.
Consideration is also given to the wider remuneration environment, particularly in companies of a similar size, and the performance and
responsibilities of the Executive Directors. Basic salary is the only element of remuneration that is pensionable.
Benefits in kind
Benefits in kind comprise free family medical insurance, a fuel card and a company car or a car allowance.
Performance-related remuneration
Annual bonus
For the year ended 30 June 2010, the Committee resolved to re-introduce a bonus scheme for Executive Directors which had been
suspended during the prior year due to adverse market conditions. For the year ended 30 June 2010, the Executive Directors who held
office during that year participated in an annual bonus scheme under which they may potentially receive 100% of their respective base
salaries for achieving target performance. The targets and range over which the bonus vests are set by the Committee and are designed to
be challenging and to produce an equitable distribution of additional profits earned by superior performance between the executive team
and shareholders. The performance measures for the year ended 30 June 2010 were determined by the Committee to be based on achieving
a certain level of profit before tax and also achieving a closing cash balance above a certain level.
For the year ended 30 June 2010, the minimum, but not the maximum, profit before tax level was achieved, resulting in 70% of bonus related
to profit becoming payable. The cash target level was also achieved, resulting in 10% of the bonus relating to cash becoming payable.
For senior managers below Board level, similar bonus arrangements are in place in order to incentivise and potentially reward them through
their ability to improve the performance of their respective business units.
Share option schemes
The current Executive Directors hold share options under the M J Gleeson Group Sharesave Scheme (“Sharesave Scheme”). As is normal
for such schemes, share options issued under the Sharesave Scheme are not subject to any performance criteria. Details of the options
held by Directors, identifying those granted during the year, are set out in the tables on page 27.
Performance Share Plan
The M J Gleeson Group plc Performance Share Plan (“Plan”) was approved by shareholders in 2007. The Plan generally provides for
provisional awards of shares worth up to 200% of an executive’s basic salary each year. The intention is to make awards to Executive
Directors worth up to 100% of their basic salary, but for other senior participants to receive awards worth up to 50% of their basic salary.
Such awards will vest on the third anniversary of the date of award to the extent that the performance targets have been met. For the
awards that were granted in December 2007 to vest, the Committee resolved to impose targets for total shareholder return (“TSR”) over
Page 23
M J Gleeson Group PLC
Directors’ Remuneration Report continued
the three financial years from 1 July 2007 to 30 June 2010. No awards were made to the Executive Directors under the Plan for the year
ended 30 June 2010. Current outstanding awards are shown within the table on page 27.
Long Term Incentive Plan
In view of the introduction of the Performance Share Plan, the Remuneration Committee reviewed the operation of the Long Term Incentive
Plan (“LTIP”) introduced in 2003. The LTIP has not been utilised during this or the previous financial year and it is envisaged that henceforth
the Performance Share Plan will be the primary incentive plan to reward Directors and certain members of the senior management team.
None of the Executive Directors currently hold shares in the LTIP.
Share Purchase Plan
In addition to the schemes noted above, to encourage employee participation in the success of the Group, a Share Purchase Plan is
operated. All employees, including the Executive Directors, with more than one year’s service are entitled to participate. This permits up
to 5% of salary (up to a maximum of £125 per month) to be invested in the Company’s shares, which the Company matches on a one share
for every three purchased by the employee. Shares procured under the scheme must be held for at least three years. Alan Martin, as an
Executive Director who held office during the year, participated in this scheme.
Pensions
Alan Martin is a member of the Company’s defined contribution pension scheme, which is open to all qualifying employees. The Company
contributes a percentage of basic salary to the scheme. Chris Holt ceased to be a member of the Company pension scheme in August 2007
and since that date has been provided with a cash alternative to the Company contribution.
External appointments
None of the Executive Directors currently holds any non-executive appointments elsewhere.
Performance graph
The graph to the right shows a comparison of the total shareholder return for the Company for each of the last five financial years
set against the total shareholder return for the FTSE Small Capitalisation Index and a comparator index of listed housebuilders. This Index,
of which the Company is a member, is considered to be the most appropriate index against which to measure performance, as it reflects
the performance of a range of other companies of a similar size that are quoted on the London Stock Exchange. The Comparator Group
consists of a peer group of listed housebuilders comprising Barratt Developments, Bellway, Bovis Homes, Persimmon, Redrow, Taylor Wimpey
and Telford Homes.
MJ Gleeson & Index Comparison – 30/06/2005 to 30/06/2010
Housebuilders
FTSE Small Cap
M J Gleeson Group
200
150
100
50
0
June 2005
June 2006
June 2007
June 2008
June 2009
June 2010
Page 24
M J Gleeson Group PLC
Directors’ Remuneration Report continued
Service contracts
In accordance with the Combined Code, it is the policy of the Company that the service contracts of all Directors appointed to the Board
will be rolling and have notice periods of one year or less unless it is necessary to offer a longer period initially. In line with this policy, all
of the Executive Directors who served during the year had service contracts that may be terminated by the Company with a notice period
of one year.
If the Company exercises its right of termination for any reason (other than in circumstances of misconduct), it will generally pay the
Director concerned all remuneration and benefits to which he is entitled for any unexpired period of notice, plus any accrued bonus.
Details of the service contracts of the Executive Directors who served during the year are set out below:
Director
Chris Holt
Alan Martin
Date of latest
service contact
Date appointed
to the Board
Date last
elected/re-elected
Date next due for
election/re-election
01/05/2007
01/05/2007
11/12/2009
Will retire from Board on 30/09/2010
01/01/2009
01/01/2009
11/12/2009
10/12/2010
Non-Executive Directors
In the past, each of the Non-Executive Directors has been appointed for a three-year period. In future, as each Non-Executive Director’s
letter of appointment approaches renewal, the term of appointment will be for one year. Non-Executive Directors’ remuneration is set
by the Board and is benchmarked against the remuneration paid to Non-Executive Directors of similar organisations but having regard to
the exceptionally difficult trading conditions being faced by the Group. The fees paid to the Non-Executive Directors during the year
ended 30 June 2010 are set out in the table on page 26 and comprise the whole of their remuneration. They are not entitled to participate
in any of the employee benefit schemes and are not eligible to join the pension scheme. Save for any fees due for any unexpired period
of notice or term of appointment, no compensation is due on termination of their appointment.
Details of their letters of appointment are set out below:
Director
Date
appointed to
the Board
Date first
elected by
the members
Date of
most recent
letter of
appointment
Date of
expiry
Date last
elected/
re-elected
Date next
due for
election/
re-election
Period since
first elected
(complete
years)
Dermot Gleeson
27/11/1975
04/02/1976
01/10/2009
30/09/2010
11/12/2009
10/12/2010
Ross Ancell
Terry Morgan
01/10/2006
10/01/2007
01/10/2009
30/09/2010
11/12/2009
10/12/2010
01/11/2006
10/01/2007
01/11/2009
31/10/2010
11/12/2009
10/12/2010
Colin Dearlove
03/12/2007
12/12/2008
21/11/2007
30/11/2010
11/12/2009
10/12/2010
Christopher Mills
01/01/2009
11/12/2009
01/01/2009
31/12/2012
11/12/2009
10/12/2010
34
3
3
1
0
The notice period for Dermot Gleeson as Non-Executive Chairman is six months. The letters of appointment for the other Non-Executive
Directors provides for a notice period of one month.
Page 25
M J Gleeson Group PLC
Directors’ Remuneration Report continued
INFORMATION SuBJECT TO AuDIT
Directors’ emoluments
The emoluments of the Directors for the years ended 30 June 2010 and 30 June 2009 are shown below:
Note
Fee/Basic
£000
Bonus
£000
Benefits
in kind
£000
Subtotal
£000
Pension
£000
Total
2010
£000
Total
2009
£000
Chairman
Dermot Gleeson
Executive Directors
Chris Holt
Alan Martin
Non-Executive Directors
Ross Ancell
Terry Morgan
Colin Dearlove
Christopher Mills
Former Directors
a
b
41
208
130
30
30
30
25
-
53
52
-
-
-
-
1
65
16
-
-
-
-
42
326
198
30
30
30
25
-
-
33
-
-
-
-
42
119
326
231
30
30
30
25
273
91
35
35
35
13
609
(a) With effect from 1 August 2009, the Chairman voluntarily reduced his fee from £55,000 to £40,000 per year.
(b) Chris Holt is entitled to remuneration and benefits for any unexpired period of notice as a result of his retirement following the sale of Powerminster
Gleeson Services. The payment will be included in the remuneration report for the year ended 30 June 2011.
494
105
82
681
33
714
1,210
Page 26
M J Gleeson Group PLC
Directors’ Remuneration Report continued
Share options and awards
Director
Chris Holt
Alan Martin
Granted/
awarded
during
year
Exercised
during
year
Options
lapsed
–
–
–
–
–
–
–
–
–
–
–
–
30 June
2009
1,947
184,615
1,947
52,800
1. No payment was made in relation to the grant of any options.
2. No performance criteria apply to the Sharesave Scheme options.
30 June
2010
1,947
184,615
1,947
52,800
Scheme
SAYE
PSP
SAYE
PSP
Exercise
price
276.00p
325.00p
276.00p
325.00p
Market
value on
date of
exercise
Date from
which
option
may be
exercised
Expiry
–
–
–
–
21/12/10
21/06/11
14/12/10
14/12/13
21/12/10
21/06/11
14/12/10
14/12/13
3. The middle market price on 30 June 2010 was 113 pence and the range during the year to 30 June 2010 was from 67 pence to 141 pence.
4. During the year, a charge of £92,000 (2009: credit £78,000) was recorded in the Income Statement for share options awarded to the Executive Directors.
Approval
This Report was approved by the Board on 22 September 2010.
By order of the Board.
Joy Baldry
Company Secretary
22 September 2010
Page 27
M J Gleeson Group PLC
Corporate Governance
The Board is committed to the principles of corporate governance contained in the June 2008 Financial Reporting Council’s Combined Code
on Corporate Governance which is appended to the Listing Rules of the Financial Services Authority (“the Combined Code”) and for which
the Board is accountable to shareholders and will continue to take a practical view of the financial implications for their implementation
to a group of its size.
Statement of compliance with the Combined Code
The Company has complied with the Combined Code’s provisions throughout the year, save that the Chairman has previously served as an
Executive Director.
Board of Directors
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 business units 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;
• acquisitions and disposals;
• Board structure and composition;
• terms of reference of the Board’s sub-committees
all of which were considered by the Board during the year.
At the date of this report, the Board comprises eight Directors, five of whom are Non-Executive. Chris Holt will be retiring from the Board
with effect from 30 September 2010. Neither the Non-Executive Chairman, who has previously served in an executive capacity, nor
Christopher Mills, who represents a major shareholder, North Atlantic Value LLP, is considered to be “independent” within the definition
of that term contained in the Combined Code. All other Non-Executive Directors are independent. The Directors’ biographies are set out
on pages 2 and 3.
Following the introduction of s.175 of the Companies Act 2006 on 1 October 2008 and the authority given by shareholders at the 2008
Annual General Meeting to the Directors to authorise conflicts of interest, the Board has procedures in place to deal with conflicts of
interest. Under s.175, all Directors are under a duty to consider their positions fully at all times. They must advise the Chairman
immediately or, if the Chairman is conflicted, he must advise the Senior Independent Director. If a conflict is identified, permission or
refusal to authorise a conflict is given by the non-conflicted Directors subject to the appropriate quorum requirement being met without
counting the conflicted Director. The Board may vary or terminate the authorisation should the facts change or should the Board feel it
is no longer appropriate for such authorisation to be in place. A register of authorisations is maintained by the Company Secretary which
includes date of authorisation, expiry and comments on any special circumstances which might include the requirement of a conflicted
Director to absent himself from Board discussions or be precluded from receiving Board papers.
Ross Ancell is the Senior Independent Non-Executive Director.
Dermot Gleeson, Non-Executive Chairman, has previously been Executive Chairman and, prior to that, held the post of Chairman and
Managing Director. The Board has considered the guidance set out in the Combined Code and believes that it is in the Company’s best
interests that Dermot Gleeson be retained as Chairman.
Page 28
M J Gleeson Group PLC
Corporate Governance continued
The roles of Chairman and Group Chief Executive are separate and have been so throughout the financial year. 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.
Chris Holt, as Group Chief Executive, is, subject to the schedule of matters reserved for a decision of the Board, responsible for all operational
matters, for making strategic proposals to the Board and for the presentation of the annual business plan for approval by the Board.
During the year, the Board met on 9 scheduled occasions. Board packs, which include a formal agenda, are circulated in advance of such
meetings. Attendance by individual Directors at Board meetings and by members at Committee meetings was as follows:
No of scheduled meetings
Attendance
Dermot Gleeson
Ross Ancell
Terry Morgan
Colin Dearlove
Christopher Mills
Chris Holt
Alan Martin
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
9
9
9
7
9
9
9
9
5
*
5
5
5
*
**
**
3
*
3
3
3
*
***
*
2
2
2
2
2
*
***
*
*
Not a member of this Committee.
** Whilst not a member of this Committee, the Director was in attendance at all meetings.
*** Whilst not a member of this Committee, the Director was in attendance for part of certain meetings.
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 & 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.
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.
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.
On resignation, any concerns raised by an outgoing Director are circulated by the Chairman to the remaining members of the Board.
Page 29
M J Gleeson Group PLC
Corporate Governance continued
Directors’ and Officers’ Insurance is procured through the Company’s Insurance Brokers, Aon Limited. Its terms and conditions are reviewed
annually.
The Board continues to support the Malpractice Reporting Policy. The Policy has been communicated internally and is available for review
on the website.
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. Similarly, the Chairman of each of the Audit,
Remuneration and Nomination Committees conducted a performance review of each Board Committee. Ross Ancell, 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 both Executive Directors. The outcome and conclusions reached from the conduct of these evaluations were discussed
by the Board at its September Board Meeting. It was concluded that the Board, its Committees and the Chairman continued to perform
effectively and also that the reduced size of the company made it appropriate to reduce the annual number of Board meetings.
Audit Committee
The Audit Committee operates under the chairmanship of Colin Dearlove. The other members of the Committee who served during the
year were:
Ross Ancell
Terry Morgan
The Chairman invites the Group Chief Executive, Group Finance Director and other senior management to attend, along with the Group’s
Auditors, when required.
The Committee’s formal terms of reference, which are reviewed annually, are available on the website and require it to:
• consider the appointment and fees of the Auditors;
• agree the nature and scope of the Audit;
• address the findings of the Audit;
• review and report to the Board on the half yearly and annual financial statements and on the Interim Management Statements;
• address any major accounting issues that arise;
• consider the position with regard to internal control, risk management and Internal Audit; and
• consider the award of any non-audit work to the Auditors.
The Committee meets at least three times a year and is afforded the opportunity to meet with the Auditors in the absence of the
Executive Directors.
The Committee receives a report from the Auditors highlighting any concerns and setting out management’s response to any matters raised.
The Group Finance Director has responsibility for risk management and internal control and attends all Audit Committee meetings to which
he is invited to report on these matters.
During the year under review, the Audit Committee reviewed the independence of the Auditors. This included information about policies
and processes for maintaining independence, monitoring compliance with relevant requirements and ethical guidance, and consideration
of all relationships between the Group and the Auditors and their staff. The Audit Committee concluded that the Auditors were independent.
Page 30
M J Gleeson Group PLC
Corporate Governance continued
The Audit Committee approves all non-audit services proposed to be undertaken by the Auditors. During 2010, in accordance with its
terms of reference, the Audit Committee approved the appointment of KPMG as tax advisors to replace Brebners following a review of
scope of work, performance and cost.
Remuneration Committee
Details of the Remuneration Committee are given in the Directors’ Remuneration Report which is set out on pages 22 to 27.
Nomination Committee
The Nomination Committee is chaired by Ross Ancell, Senior Independent Director. The other members of the Committee who served
during the year were:
Dermot Gleeson
Terry Morgan
Colin Dearlove
The Committee’s formal terms of reference, which are reviewed annually, are available on the 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;
• put in place plans for succession, in particular to the Chairman and Chief Executive; and
• make recommendations regarding the continued service (or not) of the Executive and Non-Executive Directors.
All Board appointments and re-appointments are considered by the Nomination Committee. In considering any new appointments to
the Board, the balance of skills, knowledge and experience on the Board are evaluated, together with the role to be filled and the
capabilities required to do so. All appointments are made on merit. Following the successful fulfilment since November 2009 of his role
as Managing Director of the Regeneration & Homes business, Jolyon Harrison was appointed as an additional Executive Director with effect
from 1 July 2010. There have been two scheduled meetings of the Committee, during one of which its annual review of the Board was
carried out.
Investor relations
There is dialogue with institutional shareholders, including presentations following the publication of the Interim and Final 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 Annual General Meeting (“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 and Nomination Committees, will be available to answer any
relevant questions.
The text of the resolutions to be considered at the AGM appears in the Notice of Meeting. All proxy cards are to be returned to the
Company’s registrar which will collate the results and report to the Board. The number of proxy votes cast for and against each resolution
will be announced at the AGM and will also be set out in the subsequent Regulatory News Service announcement, a copy of which will be
made available on the website.
Detailed reviews of the performance and financial position of the Group’s operations are included in the Directors’ Report and Business
Review. The Board uses these, together with the Chairman’s Statement and this Report on Corporate Governance, to present a balanced
and understandable account of the Group’s position and prospects.
Page 31
M J Gleeson Group PLC
Corporate Governance continued
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. 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 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 Combined 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 Group Finance Director and external review as part of the statutory audit carried out by the Auditors.
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 operations measures. A variety of financial and non-financial reports is 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 business function 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.
• The Group’s programme of insurance covers the major risks to the Group’s assets and business and is reviewed annually.
• The Group Operations Director has responsibility for the internal audit process and reports to the Audit Committee on such matters.
• Procedures are in place that require operating unit management to refer all investment and divestment decisions that exceed prescribed
limits in the first instance to the Group Capital Committee and then thereafter to 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 overall Risk Management and Internal Control process is reviewed by both the Audit Committee and the Board. The Board also confirms
that the formal risk management process was reviewed during the year and continued to operate up to the date of approval of these
Accounts.
Page 32
M J Gleeson Group PLC
Statement of Directors’ Responsibilities
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNuAL REPORT AND THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the Group and Parent Company Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under that law
they are required to prepare the Group Financial Statements in accordance with IFRSs as adopted by the EU and applicable law and have
elected to prepare the Parent Company Financial Statements on the same basis.
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 Parent Company and of their profit or loss for that period. In preparing each of the Group and
Parent Company Financial Statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's
transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure
that its Financial Statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. Under applicable law and
regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Responsibility statement of the directors in respect of the annual financial report
We, the Directors of the Company, confirm that to the best of our knowledge:
• the Financial Statements of the Group and of the Company have been prepared in accordance with IFRSs as adopted in the EU in
accordance with applicable United Kingdom law and give a true and fair view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the Directors' Report includes a fair review of the development and performance of the business and the position of the Group, together
with a description of the principal risks and uncertainties that face the Group.
By order of the Board
C Holt
Group Chief Executive
A Martin
Group Finance Director
22 September 2010
Page 33
M J Gleeson Group PLC
Independent Auditors’ Report
INDEPENDENT AuDITORS' REPORT TO THE MEMBERS OF M J GLEESON GROuP PLC
We have audited the Financial Statements of M J Gleeson Group Plc for the year ended 30 June 2010 set out on pages 36 to 75. The
financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the EU and, as regards the Parent Company Financial Statements, as applied in accordance with the provisions of
the Companies Act 2006.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an
Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditors
As explained more fully in the Directors' Responsibilities Statement set out on page 33, the Directors are responsible for the preparation
of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Financial Statements
in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the Financial Statements
A description of the scope of an audit of Financial Statements is provided on the APB's web-site at www.frc.org.uk/apb/scope/UKP.
Opinion on Financial Statements
In our opinion:
• the Financial Statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 30 June 2010 and
of the Group's profit for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• the Parent Company Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied
in accordance with the provisions of the Companies Act 2006; and
• the Financial Statements 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.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;
• the information given in the Directors' Report for the financial year for which the Financial Statements are prepared is consistent with
the Financial Statements; and
• information given in the Corporate Governance Statement set out on pages 28 to 32 with respect to internal control and risk management
systems in relation to financial reporting processes and about share capital structures is consistent with the Financial Statements.
Page 34
M J Gleeson Group PLC
Independent Auditors’ Report continued
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Parent Company Financial Statements and the part of the Directors' Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of Directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules we are required to review:
• the Directors' statement, set out on page 16, in relation to going concern; and
• the part of the Corporate Governance Statement relating to the Company's compliance with the nine provisions of the 2006 Combined
Code specified for our review.
Chris Hearld (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
London
22 September 2010
Page 35
M J Gleeson Group PLC
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2010
2010
2010
Before Exceptional
items
Note 4
£000
exceptional
items
£000
Note
2010
£000
2009
Before
exceptional
items
£000
Restated
Note 11
2009
Exceptional
items
Note 4
£000
Restated
Note 11
2009
£000
Restated
Note 11
Continuing operations
Revenue
Cost of sales
Gross profit/(loss)
46,534
(43,507)
-
46,534
43,030
-
43,030
2,803
(40,704)
(41,760)
(33,917)
(75,677)
3,027
2,803
5,830
1,270
(33,917)
(32,647)
Administrative expenses
(7,281)
710
(6,571)
(12,408)
(7,341)
(19,749)
Profit on sale of investment and owner-occupied
properties
Share of profit of joint ventures (net of tax)
13
57
361
-
-
57
361
340
498
-
-
340
498
Operating (loss)/profit
(3,836)
3,513
(323)
(10,300)
(41,258)
(51,558)
Financial income
Financial expenses
Profit/(loss) before tax
Tax
7
7
8
1,086
(316)
-
-
1,086
(316)
1,444
(576)
-
-
1,444
(576)
(3,066)
3,513
447
(9,432)
(41,258)
(50,690)
235
-
235
(2,609)
-
(2,609)
Profit/(loss) for the year from continuing operations
(2,831)
3,513
682
(12,041)
(41,258)
(53,299)
Discontinued operations
Profit for the year from discontinued operations (net
of tax) and gain from sale of discontinued operation
3
Profit/(loss) for the year attributable to
equity holders of the parent company
Other comprehensive income
Cashflow hedges
Total comprehensive income for the year
Earnings/(loss) per share attributable to
equity holders of the parent company
Basic and diluted
Earnings/(loss) per share from
continuing operations
Basic and diluted
10
10
The notes on pages 42 to 75 form part of these financial statements.
Page 36
2,455
3,137
(75)
3,062
6.00
1.30
1,844
(51,455)
-
(51,455)
(98.71)
(102.25)
Consolidated Statement of Financial Position
at 30 June 2010
M J Gleeson Group PLC
Non-current assets
Property, plant and equipment
Investment properties
Investments in joint ventures
Loans and other investments
Investments in subsidiaries
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
UK corporation tax
Cash and cash equivalents
Total assets
Non-current liabilities
Provisions
Deferred tax liabilities
Current liabilities
Trade and other payables
Provisions
UK corporation tax
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Retained earnings
Total equity
Group
2010
£000
Note
Group
2009
£000
Restated
Note 11
Group
2008
£000
Restated
Note 11
Company
2010
£000
Company
2009
£000
12
12
13
14
15
18
24
17
18
26
22
24
21
22
28
150
873
2,124
9,380
1,650
1,140
1,888
1,875
3,278
3,050
71
-
-
14,582
21,860
4,896
-
-
-
32,001
3,012
1,053
1,962
862
11,674
3,889
-
620
82
-
-
4,896
34,021
-
475
16,592
22,084
45,626
37,588
39,474
76,077
20,266
22
73,702
33,355
2
18,423
10,926
107,829
35,561
2,130
21,875
-
-
48,651
124,231
-
-
20,546
24,428
114,788
117,985
167,395
69,197
148,659
131,380
140,069
213,021
106,785
188,133
(3,063)
-
(3,803)
(291)
(4,364)
(328)
(3,063)
(4,094)
(4,692)
-
-
-
-
-
-
(28,898)
(31,914)
(51,326)
(32,282)
(47,931)
(1,571)
(1,624)
(3,266)
(5)
(5)
-
(483)
(5)
(273)
(5)
(30,474)
(33,543)
(54,592)
(32,770)
(48,209)
(33,537)
(37,637)
(59,284)
(32,770)
(48,209)
97,843
102,432
153,737
74,015
139,924
1,053
5,969
120
1,052
5,861
120
1,047
5,611
120
1,053
5,969
120
1,052
5,861
120
90,701
95,399
146,959
66,873
132,891
97,843
102,432
153,737
74,015
139,924
The financial statements were approved by the Board of Directors on 22 September 2010 and were signed on its behalf by:
C Holt
Director
A Martin
Director
The notes on pages 42 to 75 form part of these financial statements.
Page 37
M J Gleeson Group PLC
Consolidated Statement of Changes in Equity
for the year ended 30 June 2010
GROuP
At 1 July 2008
Share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Note
Retained
earnings
£000
Restated
Note 11
Total
£000
Restated
Note 11
1,047
5,611
120
152,461
159,239
Effect of change in accounting policy (Note 11)
-
-
-
(5,502)
(5,502)
At 1 July 2008 (restated)
1,047
5,611
120
146,959
153,737
Total comprehensive income for the period
Loss for the period
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Share issue
Purchase of own shares
Share-based payments
Transactions with owners, recorded directly in equity
-
-
5
-
-
5
-
-
250
-
-
250
-
-
-
-
-
-
(51,455)
(51,455)
(51,455)
(51,455)
-
(161)
56
(105)
255
(161)
56
150
At 30 June 2009
1,052
5,861
120
95,399
102,432
Total comprehensive income for the period
Profit for the period
Other comprehensive income
Cashflow hedges
Total comprehensive income for the period
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
9
-
-
-
1
-
-
-
1
-
-
-
108
-
-
-
108
-
-
-
-
-
-
-
-
3,137
3,137
(75)
(75)
3,062
3,062
-
(108)
220
109
(108)
220
(7,872)
(7,872)
(7,760)
(7,651)
At 30 June 2010
1,053
5,969
120
90,701
97,843
Page 38
Consolidated Statement of Changes in Equity continued
M J Gleeson Group PLC
COMPANy
At 1 July 2008
Total comprehensive income for the period
Loss for the period
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Share issue
Purchase of own shares
Share-based payments
Transactions with owners, recorded directly in equity
Share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Note
Retained
earnings
£000
Restated
Note 11
Total
£000
Restated
Note 11
1,047
5,611
120
134,379
141,157
-
-
5
-
-
5
-
-
250
-
-
250
-
-
-
-
-
-
(1,072)
(1,072)
(1,072)
(1,072)
-
(472)
56
(416)
255
(472)
56
(161)
At 30 June 2009
1,052
5,861
120
132,891
139,924
Total comprehensive income for the period
Loss for the period
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Contributions and distributions to owners
Share issue
Own shares disposed
Share-based payments
Dividends
Transactions with owners, recorded directly in equity
-
-
1
-
-
-
1
-
-
108
-
-
-
108
-
-
-
-
-
-
-
(58,384)
(58,384)
(58,384)
(58,384)
-
18
220
109
18
220
(7,872)
(7,872)
(7,634)
(7,525)
9
At 30 June 2010
1,053
5,969
120
66,873
74,015
Page 39
M J Gleeson Group PLC
Consolidated Statement of Cashflow
for the year ended 30 June 2010
Operating activities
Profit/(loss) before tax from continuing operations
Profit before tax from discontinued operations
Depreciation of property, plant and equipment
Goodwill on acquisition of subsidiaries
Impairment of investments in subsidiaries
(Restatement)/impairment of loans to joint ventures
Share-based payments
Profit on sale of investment and owner-occupied properties
Profit on sale of other property, plant and equipment
Profit on disposal of investment in subsidiary
Share of profit of joint ventures (net of tax)
New ground rents capitalised
Financial income
Financial expenses
Dividends received
Group
2010
£000
Note
Group
2009
£000
Restated
Note 11
Company
2010
£000
Company
2009
£000
3
12
13
447
2,455
(50,690)
(58,528)
(1,078)
963
-
-
2,902
(49,727)
(58,528)
(1,078)
251
(50)
-
(710)
220
(57)
-
(1,936)
(361)
-
289
-
-
5,950
56
(340)
(22)
-
(498)
(3)
17
-
-
-
220
-
-
-
-
-
2
-
5,589
-
56
-
(27)
(605)
-
-
(1,086)
(1,628)
(1,098)
(2,602)
316
-
576
156
274
-
(3,464)
(1,380)
Operating cash flows before movements in working capital
(511)
(45,347)
(62,697)
229
Decrease in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Decrease/(increase) in amounts due from subsidiary undertakings
7,026
9,233
34,127
12,645
(1,569)
(21,798)
-
(234)
358
-
-
60,220
-
930
(437)
(210)
Cash generated/(utilised) from operating activities
14,179
(20,373)
(2,353)
512
Tax received
Tax paid
Interest paid
-
(2)
3,398
-
-
-
(237)
(490)
(216)
197
-
(208)
Net cash flows from operating activities
13,940
(17,465)
(2,569)
501
Page 40
Consolidated Statement of Cashflow continued
M J Gleeson Group PLC
Group
2010
£000
Note
Group
2009
£000
Restated
Note 11
Company
2010
£000
Company
2009
£000
Investing activities
Proceeds from disposal of subsidiary undertakings, net of cash disposed
Proceeds from dissolution of investments in joint ventures
Proceeds from disposal of investment and owner-occupied properties
Proceeds from disposal of other property, plant and equipment
Interest received
Dividends received
Purchase of property, plant and equipment
Net (increase)/decrease in loans to joint ventures and other investments
3,816
-
324
1
291
-
(195)
(2,809)
-
1,659
2,492
42
910
-
-
-
-
954
-
3,464
(84)
1,403
(6)
2,020
1,483
-
-
27
2,661
1,380
(84)
-
Net cash flows from investing activities
1,428
6,422
6,432
5,467
Financing activities
Proceeds from issue of shares
Purchase of own shares
Own shares disposed
Dividends paid
109
(108)
-
9
(7,872)
255
(161)
-
-
109
-
18
(7,872)
255
(472)
-
-
Net cash flows from financing activities
(7,871)
94
(7,745)
(217)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
7,497
10,926
(10,949)
(3,882)
21,875
24,428
5,751
18,677
Cash and cash equivalents at end of year
26
18,423
10,926
20,546
24,428
Page 41
M J Gleeson Group PLC
Notes to the Financial Statements
for the year ended 30 June 2010
1. ACCOuNTING POLICIES
M J Gleeson Group plc ("the Company") is a company incorporated in the United Kingdom.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”) and equity account
the Group’s interest in joint ventures.
Statement of compliance
Both the Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance
with International Financial Reporting Standards as adopted by the EU ("IFRSs").
Basis of preparation
Assets and liabilities in the financial statements have been valued at historic cost except where otherwise indicated in these accounting policies.
Judgements made by management in the application of IFRSs that have significant effect on the financial statements and estimates include the
carrying value of land held for development, work-in-progress, investment in subsidiaries, loans to joint ventures, amounts recoverable on
contracts and trade receivables.
The Company has taken advantage of section 408 of the Companies Act 2006 and consequently the Income Statement of the parent company is
not presented as part of these accounts. The loss of the parent company for the financial year amounted to £57,520,000 (2009: £1,078,000).
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
The following accounting policy changes have been made:
Changes in accounting policies
1. Overview
As of 1 July 2009, the Group has changed its accounting policies in the following areas:
•
•
•
Determination and presentation of operating segments
Presentation of financial statements
Agreements for the construction of real estate
2. Determination and presentation of operating segments
As of 1 July 2009, the Group determines and presents operating segments based on the information that internally is provided to
the Group Chief Executive, who is the Group’s chief operating decision maker. This change in accounting policy is due to the adoption of
IFRS 8 Operating Segments. Comparative segment information has been re-presented in conformity with the transitional requirements
of the standard. Since the change in accounting policy only impacts presentation and disclosure aspect, there is no impact on earnings
per share.
3. Presentation of financial statements
The Group applies revised IAS 1 Presentation of Financial Statements (2007), which became effective for periods beginning on or after
1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all
non-owner changes in equity are presented in the consolidated statement of comprehensive income. Comparative information has been re-
presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects
there is no impact on earnings per share.
4. Agreements for the construction of real estate
As of 1 July 2009, the Group has changed the accounting treatment for one of its regeneration sites from complying with IAS 11 “Long Term
Contract Accounting” to complying with the sale of goods within the scope of IAS 18 “Revenue”. The change in accounting policy is due to
the issuance of IFRIC 15 “Agreements for the Construction of Real Estate”, which provides guidance on how certain agreements should be
accounted for.
Following the change in policy, revenue from the Grove Village project is now recognised when contracts to sell the property are completed
and title has passed. Previously, revenue was based upon costs incurred plus sales margin. The change in policy has been implemented in
accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, with comparative figures being restated. The
detail of the changes in accounting policy are set out in note 11.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and all its subsidiary undertakings. Joint ventures
are accounted for using the equity method of accounting.
Page 42
Notes to the Financial Statements continued
M J Gleeson Group PLC
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.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any
excess of the fair value of consideration given for the acquisition over the fair values of the identifiable net assets acquired is recognised as
goodwill. In circumstances where the fair values of the identifiable net assets exceed the cost of acquisition, the excess is immediately recognised
in the income statement.
Revenue recognition
Revenue represents the fair value of work done on contracts performed during the year on behalf of customers or the value of goods and services
delivered to customers. Revenue is recognised as follows:
•
•
•
•
Revenue from construction services activities represents the value of work carried out during the year, including amounts not invoiced.
Revenue from property sales is recognised at the earlier of when contracts to sell are completed and title has passed or when unconditional
contracts to sell are exchanged.
Revenue from homes sales, other than construction contracts, is recognised when contracts to sell are completed and title has passed.
Revenue from rental income from investment properties is recognised as the Group becomes entitled to the income.
Revenue and margin on construction contracts are recognised by reference to the stage of completion of the contract at the accounts date. The
stage of completion is determined by valuing the cost of the work completed at the accounts date and comparing this to the total forecasted
cost of the contract. Full provision is made for all forecasted losses. Variations in contract work, claims and incentive payments are included to
the extent that it is probable that they will result in revenue and that they are capable of being reliably measured.
Prudent provision against claims from customers or third parties is made in the year in which the Group becomes aware that a claim may arise.
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. All operating segments' operating results
are reviewed regularly by the Group's CEO to make decisions about resources to be allocated to the segment and to assess its performance, and
for which discrete financial information is available. Inter-segment pricing is determined on an arm’s length basis. 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 property, 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.
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognised
in profit or loss.
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.
Page 43
M J Gleeson Group PLC
Notes to the Financial Statements continued
Exceptional items
Items that are both material in size and unusual or infrequent in nature are presented as exceptional items in the income statement.
The Directors are of the opinion that the separate recording of exceptional items provides helpful information about the Group's underlying
business performance. Examples of events that may give rise to the classification of items as exceptional are the restructuring of existing and
newly-acquired businesses, gains or losses on the disposal of businesses or individual assets and asset impairments, including land, work-in-
progress and amounts recoverable on construction contracts.
Restructuring costs
Restructuring costs are recognised as exceptional items in the income statement when the Group has a detailed plan that has been communicated
to the affected parties. A liability is accrued for unpaid restructuring costs.
Leasing
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over
the period of the lease.
Finance income and expenses
Finance income comprises interest income on funds invested, dividend income and the unwinding of discounts on deferred receipts. Interest
income is recognised as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date that
the Group’s right to receive payment is established.
Finance expenses comprise interest expense on borrowings and unwinding of the discount on deferred payments and provisions. All borrowing
costs are recognised in the income statement using the effective interest method.
Owner-occupied property, plant and equipment
The Group had no owner-occupied property at the year end.
Depreciation is charged so as to write off cost or valuation of assets (other than land, which is not depreciated) over their estimated useful lives,
using the straight-line method, on the following bases:
Owner-occupied - leasehold properties
Plant and machinery
Motor vehicles
period of the lease
between 3 and 6 years
3 years
Depreciation of these assets is charged to income.
Investment properties
Investment properties, which are largely ground rent properties held to earn rentals and/or for capital appreciation, are stated at their fair
values at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are included in the income
statement in the period in which they arise.
The Group's freehold investment properties are carried at Directors' valuation. The following assumptions have been used to determine the fair
value:
i) a review of the current prices of similar properties in the same location and condition,
ii) a review of the current and future rental income for current and future leases and the cash outflows that are expected in respect of these
properties,
iii) a review of submitted offers where the properties were being marketed for sale.
Joint ventures
A joint venture is an entity over which the Group is in a position to exercise joint control through participation in the financial and operating
policy decisions of the venture. The joint venture entity operates in the same way as other enterprises, except that a contractual arrangement
between the venturers establishes joint control over the economic activity of the entity. Joint ventures are accounted for using the equity
method of accounting. The Group's share of the results of joint ventures is reported in the income statement as part of the operating profit and
the net investment disclosed in the balance sheet. Revaluation gains and losses which arise on investment properties are recognised in the
income statement in share of joint venture results net of any related deferred tax.
Loans and other investments
Loans are originally stated at fair value and subsequently carried at amortised cost less impairment. Other investments are stated at fair value,
with any resultant gains or losses taken to equity.
Page 44
Notes to the Financial Statements continued
M J Gleeson Group PLC
Inventories
Inventories are valued at the lower of cost and net realisable value. 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 values at original purchase date. Land options are included in inventories at the lower cost or net
realisable value.
Amounts due from construction contract customers
Amounts due from construction contract customers represent the value of work carried out at the balance sheet date, less a provision for
foreseeable losses less progress billings (see revenue recognition accounting policy).
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.
Trade receivables
Trade receivables are measured at initial recognition at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised
in the 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.
Derivative financial instruments
Derivative financial instruments (interest rate swaps) are used in joint ventures to hedge long term interest rate risk. These are recorded in the
joint venture at fair value. The fair value of interest rate swaps is the Group share of the estimated amount that the joint venture would receive
or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap
counterparties. The gain or loss on remeasurement to fair value is recognised immediately in the income statement of the joint venture. However,
where derivatives qualify for hedge accounting, recognition of the effective part of the hedge of any gain or loss on the derivative financial
instrument is recognised directly in the hedging reserve of the joint venture. Any ineffective portion of the hedge is recognised immediately in
the income statement of the joint venture.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits, other short-term highly liquid investments that are readily convertible to a
known amount of cash and are subject to an insignificant risk of changes in value and bank overdrafts. The Group had no bank overdrafts at the
year end.
Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of
operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of or has been abandoned.
Discontinued operations are presented in the income statement (including the comparative period) as a single line entry recording the gain or
loss of the discontinued operation and the gain or loss recognised on the remeasurement to fair value less costs to sell. If the discontinued
operations are sold, the net gain or loss from the sale is also recognised in the single line entry.
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 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 following temporary differences are not provided for: the initial recognition of goodwill; the initial
Page 45
M J Gleeson Group PLC
Notes to the Financial Statements continued
recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating
to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future and the Group can control the timing of
the reversal. 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
Obligations for contributions to defined contribution pension schemes are charged to the income statement in the period to which the contributions
relate.
Share options
The share option schemes allow employees to acquire shares in the ultimate parent company; these awards are granted by 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 either the Binomial valuation model, the Black-Scholes valuation model or the Monte Carlo valuation
model, 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.
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 parent. Any loan made
to the EBT is accounted for as an intercompany loan with the parent. These shares are not treasury shares as defined by the London Stock
Exchange.
Dividends
Dividends are recorded in the Group's financial statements when paid. Final dividends are recorded in the Group's 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 IFRSs 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:
Land and work-in-progress
Valuations which include an estimation of costs to complete and remaining revenues 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.
The Group conducted a review of inventory and, following cost savings and improvements in sales values, impairments which had been made in
the prior year were reversed to the extent that they were no longer required. The review was conducted on a site by site basis, using valuations
that incorporated selling price, based on local management and the Board’s assessment of market conditions existing at the balance sheet date.
Investments and investments in subsidiaries
Investments and investments in subsidiaries are stated at the lower of cost and net realisable value, which is dependent upon management's
assessment of future trading activity and is therefore subject to a degree of inherent uncertainty.
Page 46
Notes to the Financial Statements continued
M J Gleeson Group PLC
Loans to joint ventures
Loans to joint ventures are stated at the lower of the value of the loan and net realisable value, which is dependent upon management's assessment
of future trading activity of the joint venture and is therefore subject to a degree of inherent uncertainty.
Amounts recoverable on contracts and trade receivables
Management has reviewed the recoverability of amounts recoverable on contracts and trade receivables and, following significant write downs
in the prior year, no further provisions were deemed to be required.
Available for sale financial assets (shared equity)
Management has reviewed the valuation of the available for sale financial assets in 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.
Adoption of new and revised standards
For the year ended 30 June 2010, the Group has adopted the following standards:
IAS 1 (revised)
‘Presentation of Financial Statements’ as described earlier in this note, this impacts only on presentation of the financial
statements.
IFRS 8
‘Operating Segments’, as described earlier in this note, this impacts only on the presentation of the financial statements.
IAS 23 (revised)
‘Borrowing Costs’ requires the capitalisation of borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset (one that takes a substantial period of time to get ready for use) as part of the cost of the
asset. The adoption has had no impact on the results of the Group.
IFRS 2 (revised)
‘Share-based Payments’. The amendment to IFRS 2 requires non-vesting conditions to be taken into account in the estimate
of the fair value of the equity instruments. The adoption has had no impact on the results of the Group.
IFRS 3 (revised)
‘Business Combinations’ requires transaction costs to be expensed rather than included as costs of the acquisition. The
adoption has had no impact on the results of the Group.
IFRIC15
‘Agreements for the construction of real estate’ provides guidance on whether the construction of real estate should be
accounted for under IAS 11 or IAS 18. Details of the restatement due to the change in treatment of the Grove Village
regeneration project from long term contract to sale of goods is described in note 11.
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 has not been adopted by the Group in preparing the accounts for the year ended 30 June
2010:
Standard
IAS 24 ‘Related Party Disclosure’
Due for adoption y/e
30 June 2011
The application of this standard and interpretation is not expected to have a material impact on the Group’s reported financial performance or
position. However, they may give rise to additional disclosures being made in the financial statements.
Page 47
M J Gleeson Group PLC
Notes to the Financial Statements continued
2. SEGMENTAL ANALySIS
For management purposes, the Group is organised into the following six operating divisions:
• Gleeson Regeneration & Homes focuses on estate regeneration and housing development on brownfield land in the North of England.
• Gleeson Strategic Land focuses on the purchase of options over land in the South of England.
• Gleeson Capital Solutions manages the Group's Private Financing Initiative investments in social housing.
• Powerminster Gleeson Services includes the provision of property maintenance, installation and facilities management in the construction
industry in the UK. This division was sold on 30 June 2010.
• Gleeson Commercial Property Developments is engaged in commercial property development in the UK.
• Gleeson Construction Services includes constructions services in the UK.
In prior years, the operating divisions Gleeson Regeneration & Homes, and Gleeson Strategic Land were reported as a single division. The revised
segments reflect the basis of how the operating results of the business are reviewed by the Group Chief Executive and the Board in accordance
with IFRS 8. There have been no further changes in the analysis.
Segment information about the Group's continuing operations, including joint ventures, is presented below:
Revenue
Continuing activities:
Gleeson Regeneration & Homes
Gleeson Strategic Land
Gleeson Capital Solutions
Gleeson Commercial Property Developments
Gleeson Construction Services
Discontinued activities:
Gleeson Construction Services
Powerminster Gleeson Services
Total revenue
Profit/(loss) on activities
Gleeson Regeneration & Homes
Gleeson Strategic Land
Gleeson Capital Solutions
Gleeson Commercial Property Developments
Gleeson Construction Services
Group activities
Financial income
Financial expenses
Profit/(loss) before tax
Tax
Profit/(loss) for the year from continuing operations
2010
£000
2009
£000
Restated
Note 11
22,741
10,490
-
13,231
72
39,815
1,066
30
2,086
33
46,534
43,030
666
17,419
3,828
18,681
18,085
22,509
64,619
65,539
(1,307)
2,191
282
480
(68)
1,578
(1,901)
1,086
(316)
447
235
682
(33,256)
(5,904)
(614)
(8,028)
(142)
(47,944)
(3,614)
1,444
(576)
(50,690)
(2,609)
(53,299)
Profit for the year from discontinued operations and gain on sale of discontinued operations (net of tax)
2,455
1,844
Profit/(loss) for the year attributable to equity holders of the parent company
3,137
(51,455)
All rental incomes from investment properties, totalling £18,000 (2009: £84,000), are reported within the Gleeson Commercial Property
Developments segment, with the balance of the Gleeson Commercial Property Developments segment revenue being sale of commercial properties.
All revenue for the Gleeson Construction Services segment is in relation to long term contracts. The revenue in the Gleeson Regeneration &
Homes segment relates to the sale of residential properties and land. Service revenues are reported by Gleeson Capital Solutions.
Page 48
Notes to the Financial Statements continued
M J Gleeson Group PLC
Balance sheet analysis of business segments:
Gleeson Regeneration & Homes
Gleeson Strategic Land
Gleeson Capital Solutions
Powerminster Gleeson Services
Gleeson Commercial Property Developments
Gleeson Construction Services
Group Activities
Net cash
Other information:
Continuing operations:
Gleeson Regeneration & Homes
Gleeson Capital Solutions
Powerminster Gleeson Services
Group Activities
2010
Assets
£000
2010
Liabilities
£000
2010
Net assets
£000
59,684
30,951
8,808
(10,274)
(10,203)
(398)
-
-
119
6,496
6,899
18,423
(1,477)
(7,602)
(3,583)
-
49,410
20,748
8,410
-
(1,358)
(1,106)
3,316
18,423
2009
Assets
£000
Restated
Note 11
2009
Liabilities
£000
Restated
Note 11
2009
Net assets
£000
Restated
Note 11
57,944
32,427
3,579
5,524
11,550
12,170
5,949
10,926
(11,902)
(4,069)
(570)
(4,059)
(2,066)
(12,734)
(2,237)
-
46,042
28,358
3,009
1,465
9,484
(564)
3,712
10,926
131,380
(33,537)
97,843
140,069
(37,637)
102,432
2010
Capital
additions
£000
2010
Depre-
ciation
£000
2009
Capital
additions
£000
2009
Depre-
ciation
£000
62
-
127
6
195
76
-
158
17
251
3
-
-
84
87
95
43
150
1
289
All the Group’s operations are carried out in the United Kingdom.
3. DISCONTINuED OPERATIONS
The Group disposed of certain assets and liabilities of the Gleeson Engineering Division of Gleeson Construction Services to Black and Veatch
Limited (“B&V”) in a prior period and treated this as a Discontinued Operation. A small number of contracts were legally retained but the
operations were taken over by B&V on the Group’s behalf on a cost plus basis. Consequently, the Group has no involvement in the day-to-day
running of these contracts and acts as an intermediary. At the time of the sale, the remaining costs to complete the contracts were considered
insignificant in relation to the separately identifiable division as a whole.
On 30 June 2010, the Group disposed of the Powerminster Gleeson Services division to Morgan Sindall Group Plc. The results for the prior year
have been restated to reflect the discontinued nature of this division.
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Gain on disposal of discontinued operations
Financial income
Profit before tax
Tax
Profit for the year from discontinued operations
Note
2010
£000
2009
£000
Restated
Note 11
18,085
(15,514)
22,509
(19,585)
2,571
2,924
(2,052)
(2,145)
7
519
1,936
-
2,455
-
2,455
779
-
184
963
881
1,844
Page 49
M J Gleeson Group PLC
Notes to the Financial Statements continued
The post-tax gain on the disposal of discontinued operations was determined as follows:
Consideration received, satisfied in cash
Property, plant and equipment
Deferred tax assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liabilities
Gain before costs
Costs relating to sale
Gain on disposal of discontinued operations
Effect of disposal on the financial position of the Group
Consideration received, satisfied in cash
Costs relating to sale
Cash and cash equivalents disposed of
Net cash inflow
Earnings per share: impact of discontinued operations
Basic
Diluted
The cashflow statement includes the following relating to operating profit on discontinued operations:
Operating activities
4. ExCEPTIONAL ITEMS
2010
£000
1,443
25
3,339
1,785
(2,636)
(291)
2010
p
4.70
4.70
2010
£000
2,455
2,455
2010
£000
6,610
(3,665)
2,945
(1,009)
1,936
2010
£000
6,610
(1,009)
(1,785)
3,816
2009
p
Restated
Note 11
3.54
3.54
2009
£000
Restated
Note 11
963
963
Note
10
10
Impairment of inventories and contract provisions
At 30 June 2010, the Group conducted a review of the net realisable value of the land and work-in-progress carrying values of its sites in light of
the condition of the UK housing market. In the prior year, where the estimated net present realisable value was less than its carrying value
within the balance sheet, the Group impaired the carrying value. In the current year, where the estimated net present realisable value is greater
than the carrying value within the balance sheet, the Group has partially reversed the impairment previously made.
Impairment of amounts due from construction contracts
At 30 June 2010, the Group conducted a review of the net realisable value of amounts due from construction contracts in light of the condition
of the UK housing market. In the prior year, where the estimated net present realisable value was less than its carrying value within the balance
sheet, the Group impaired the carrying value. See note 17.
Page 50
Notes to the Financial Statements continued
M J Gleeson Group PLC
Impairment of loans to joint ventures
At 30 June 2010, the Group conducted a review of the net realisable value of loans to joint ventures in light of the condition of the UK commercial
property market. In the prior year, where the estimated net present realisable value was less than its carrying value within the balance sheet,
the Group impaired the carrying value. See note 14. Where the estimated net present realisable value of a previously impaired loan is more
than its carrying value within the balance sheet, the Group has partially reversed the impairment previously made.
Restructuring costs
During the prior year, the Group incurred significant costs in relation to reorganising and restructuring the business, including redundancy costs,
where existing employees could not be retained within the Group.
Exceptional income/(costs) may be summarised as follows:
Re-instatement/(impairment) of inventories and contract provisions
Re-instatement/(impairment) of loans to joint ventures
Restructuring costs
Gleeson Regeneration & Homes
Gleeson Strategic Land
Gleeson Capital Solutions
Gleeson Commercial Property Developments
Group Activities
5. ExPENSES AND AuDITORS' REMuNERATION
Profit/(loss) for the year is stated after charging/(crediting):
Staff costs
Depreciation of property, plant and equipment (continuing operations)
Depreciation of property, plant and equipment (discontinued operations)
Profit on sale of other property, plant and equipment
Profit on sale of investment and owner occupied properties
Rental income from investment properties
Direct expenses for investment properties
Auditors' remuneration for:
• Audit of these financial statements
• Audit of financial statements of subsidiaries pursuant to legislation
• Taxation services
2010
£000
2,803
710
-
2009
£000
Restated
Note 11
(33,917)
(5,950)
(1,391)
3,513
(41,258)
2010
£000
2,803
-
-
710
-
2009
£000
Restated
Note 11
(27,250)
(5,452)
(469)
(7,513)
(574)
3,513
(41,258)
Note
6
2010
£000
12,278
93
158
-
(57)
(18)
-
25
80
62
2009
£000
Restated
Note 11
14,181
139
150
(22)
(340)
(84)
9
38
116
-
The 2009 depreciation figures have been restated for the reclassification of the Powerminster Gleeson Services division as discontinued follow
the sale of the division on 30 June 2010. See note 11.
Page 51
M J Gleeson Group PLC
Notes to the Financial Statements continued
6. STAFF COSTS
Wages and salaries
Redundancy
Share-based payments
Social security costs
Other pension costs
Note
29
23
Group
2010
£000
9,704
730
220
1,064
560
Group
2009
£000
11,322
857
56
1,286
660
12,278
14,181
Company
2010
£000
Company
2009
£000
1,162
310
111
127
127
1,837
1,352
493
(47)
185
177
2,160
The average monthly number of employees (including Directors) during the year was:
Group
2010
No.
Group
2009
No.
Gleeson Regeneration & Homes
Gleeson Strategic Land
Gleeson Capital Solutions
Powerminster Gleeson Services
Gleeson Commercial Property Developments
Group Activities
56
6
5
199
1
18
285
The average number of people employed by the Company (including Directors) during the year was 18 (2009: 29).
Directors' remuneration
Full details of the Directors' remuneration is provided in the audited part of the Directors' Remuneration Report on pages 22 to 27.
7. FINANCIAL INCOME AND ExPENSES
Continuing operations
Discontinued operations
Total
Group
Financial income
Interest on bank deposits
Interest on joint venture loans
Other interest
Unwinding of discount on deferred receipts
Financial expenses
Interest on bank overdrafts and loans (restated)
Bank charges (restated)
Unwinding of discount on deferred payments
2010
£000
60
416
172
438
2009
£000
144
159
459
682
1,086
1,444
(2)
(164)
(150)
(316)
(16)
(301)
(259)
(576)
Net financial income
770
868
Note 20 discloses any further exposure for the Group to interest rate risk.
2010
£000
2009
£000
2010
£000
60
416
172
438
-
-
184
-
184
-
-
-
1,086
1,628
(2)
(164)
(150)
(316)
(16)
(301)
(259)
(576)
184
770
1,052
-
-
-
-
-
-
-
-
-
-
Financial expenses have been restated to analyse separately interest on bank overdrafts and loans, and bank charges. The restatement has no
impact on the income statement or net assets.
Page 52
80
6
7
187
2
29
311
2009
£000
144
159
643
682
Notes to the Financial Statements continued
M J Gleeson Group PLC
8. TAx
Group
Continuing operations
Discontinued operations
Total
Note
2010
£000
2009
£000
Restated
Note 11
2010
£000
2009
£000
Restated
Note 11
Current tax:
Corporation tax
Adjustment in respect of prior years
Deferred tax:
Current year (credit)/expense
Adjustment in respect of prior years
24
24
Corporation tax (credit)/expense for the year
Joint ventures tax expense for the year
Total tax
-
(19)
(19)
(63)
(153)
(235)
141
(94)
-
(338)
(338)
2,947
-
2,609
189
2,798
-
-
-
-
-
-
-
-
Corporation tax was 28% for 2010 (2009: 28%) of the estimated assessable profit for the year.
The charge for the year can be reconciled to the profit per the income statement as follows:
-
(924)
(924)
43
-
(881)
-
(881)
2010
%
2009
£000
Restated
Note 11
-
(1,262)
(1,262)
2,990
-
1,728
189
1,917
2009
%
Restated
2010
£000
-
(19)
(19)
(63)
(153)
(235)
141
(94)
2009
£000
Restated
(50,690)
189
(50,501)
963
(49,538)
852
28.0
(13,871)
28.0
(700)
97
-
329
(500)
-
(172)
(94)
(23.0)
3.2
-
10.8
(16.4)
-
(5.7)
-
(18)
(35)
12,629
(3)
2,812
403
(3.1)
1,917
-
0.0
0.1
(25.5)
0.0
(5.7)
(0.8)
(3.9)
Note
13
3
2010
£000
447
141
588
2,455
3,043
Profit/(loss) before tax on continuing operations
Add joint venture tax for the year
Profit before tax from discontinued operations
Profit/(loss) before tax
Tax charge at standard rate
Tax effect of:
Non-taxable profits on disposal of discontinued operations
Expenses that are not deductible in determining taxable profits
Tax reliefs not recognised in the income statement
Losses arising in the year carried forward
Utilisation of tax losses not previously recognised
Losses from prior years no longer recognised
Adjustments in respect of prior years
Tax (credit)/charge and effective tax rate for the year
The 2009 results have been restated for the reclassification of the Powerminster Gleeson Services division as discontinued following the sale of
the division on 30 June 2010. See note 11.
9. DIVIDENDS
Amounts recognised as distributions to equity holders in the year:
Special dividend paid on 31 March 2010 of 15p (2009: nil p) per share
There is no final dividend proposed for the year ended 30 June 2010 (2009: nil p per share)
2010
£000
7,872
7,872
-
2009
£000
-
-
-
Page 53
M J Gleeson Group PLC
Notes to the Financial Statements continued
10. EARNINGS/(LOSS) PER SHARE
From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purposes of basic earnings per share, being net profit or loss attributable to
equity holders of the parent company
Profit/(loss) from continuing operations
Profit from discontinued operations
Profit/(loss) 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 options
2010
£000
2009
£000
Restated
Note 11
682
2,455
(53,299)
1,844
3,137
(51,455)
2010
No. 000
2009
No. 000
52,260
52,126
-
-
Weighted average number of ordinary shares for the purposes of diluted earnings per share
52,260
52,126
From continuing operations
Basic and diluted
From discontinued operations
Basic and diluted
From continuing and discontinued operations
Basic and diluted
11. RESTATEMENT OF COMPARATIVES
2010
p
1.30
2010
p
4.70
2010
p
6.00
2009
p
(102.25)
2009
p
3.54
2009
p
(98.71)
IFRIC 15 'Agreements for the construction of real estate'
IFRIC 15 ‘Agreements for the construction of real estate’ was issued on 3 July 2008 and is mandatory for periods beginning on or after 1 January
2010. The Group has taken up the option for the early adoption of IFRIC 15 in these accounts. Following the clarification contained within
IFRIC 15, the Group has revised the revenue recognition on the Grove Village regeneration project from that of a long term contract to that of
unit sales.
The Group has reported current year results in line with IFRIC 15 and restated both the prior year results and balance sheet.
Page 54
Notes to the Financial Statements continued
M J Gleeson Group PLC
Disposal of Powerminster Gleeson Services and subsidiaries
On 30 June 2010, the Group disposed of Powerminster Gleeson Services Ltd. The Group has reclassified results in the prior year as discontinued
resulting in the restatement of the consolidated statement of comprehensive income.
Effect on consolidated statement of comprehensive income year ended 30 June 2010
Continuing operations
Revenue
Cost of sales
Gross loss
Administrative expenses
Operating loss
Restatement of consolidated statement of comprehensive income
for the year ended 30 June 2009
2009
Previously
reported
£000
Note
2009
2009
IFRIC 15 Powerminster
disposal
£000
restatement
£000
2010
IFRIC 15
adjustment
£000
(352)
(3)
(355)
(232)
(587)
2009
Restated
£000
Continuing operations
Revenue
Cost of sales
Gross (loss)/profit
Administrative expenses
Profit on sale of investment and owner-occupied properties
Share of profit of joint ventures (net of tax)
Operating (loss)/profit
Financial income
Financial expenses
(Loss)/profit before tax
Tax
(Loss)/profit for the year from continuing operations
Discontinued operations
Profit for the year from discontinued operations (net of tax) and gain
from sale of discontinued operation
(Loss)/profit for the year attributable to equity holders
of the parent company
Earnings per share attributable to equity holders of the parent company
Basic and diluted
Earnings per share from continuing operations
Basic and diluted
54,999
(89,552)
6,712
(1,915)
(18,681)
15,790
43,030
(75,677)
(34,553)
4,797
(2,891)
(32,647)
(21,444)
340
498
(229)
-
-
1,924
-
-
(19,749)
340
498
(55,159)
4,568
(967)
(51,558)
1,444
(576)
-
-
-
-
1,444
(576)
(54,291)
4,568
(967)
(50,690)
(2,652)
-
43
(2,609)
(56,943)
4,568
(924)
(53,299)
920
-
924
1,844
(56,023)
4,568
-
(51,455)
(107.48)
8.77
-
(98.71)
(109.25)
8.77
(1.77)
(102.25)
13
7
7
8
3
10
10
Page 55
M J Gleeson Group PLC
Notes to the Financial Statements continued
Restatement of consolidated statement of comprehensive income
for periods prior to the year ended 30 June 2009
Continuing operations
Revenue
Cost of sales
Gross loss
Administrative expenses
Operating loss
Cumulative
adjustment
to 2008
and prior
periods
£000
(31,299)
26,597
(4,702)
(800)
(5,502)
Restatement of consolidated statement of financial position
Non-current assets
22,084
-
22,084
45,626
-
45,626
2009
Previously
reported
£000
2009
IFRIC 15
restatement
£000
2009
Restated
£000
2008
Previously
reported
£000
2008
IFRIC 15
restatement
£000
2008
Restated
£000
50,080
57,911
2
10,926
23,622
(24,556)
-
-
73,702
33,355
2
10,926
81,667
67,225
2,130
21,875
26,162
(31,664)
-
-
107,829
35,561
2,130
21,875
118,919
(934)
117,985
172,897
(5,502)
167,395
141,003
(934)
140,069
218,523
(5,502)
213,021
(37,637)
-
(37,637)
(59,284)
-
(59,284)
103,366
(934)
102,432
159,239
(5,502)
153,737
1,052
5,861
120
96,333
103,366
-
-
-
(934)
(934)
1,052
5,861
120
95,399
1,047
5,611
120
152,461
-
-
-
(5,502)
1,047
5,611
120
146,959
102,432
159,239
(5,502)
153,737
Current assets
Inventories
Trade and other receivables
UK corporation tax
Cash and cash equivalents
Total assets
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Retained earnings
Total equity
Page 56
Notes to the Financial Statements continued
12. PROPERTy, PLANT AND EquIPMENT AND INVESTMENT PROPERTIES
M J Gleeson Group PLC
Freehold
investment
property
£000
Owner-
occupied
property
£000
Plant and
machinery
£000
Group
Cost or valuation
At 1 July 2008
Additions
Disposals
At 30 June 2009
Additions
Disposals
Disposal of subsidiaries
At 30 June 2010
Accumulated depreciation
At 1 July 2008
Charge for the year
Disposals
At 30 June 2009
Charge for the year
Disposal of subsidiaries
At 30 June 2010
Net book value
At 30 June 2010
At 30 June 2009
At 30 June 2008
Total
£000
6,219
84
(1,980)
4,323
195
(1)
(2,973)
6,195
84
(1,956)
4,323
195
(1)
(2,973)
1,544
1,544
4,336
273
(1,936)
2,673
251
(1,530)
4,344
289
(1,960)
2,673
251
(1,530)
1,394
1,394
150
150
1,650
1,650
24
-
(24)
-
-
-
-
-
8
16
(24)
-
-
-
-
-
-
16
1,859
1,875
3,278
3
(2,141)
1,140
-
(267)
-
873
-
-
-
-
-
-
-
873
1,140
3,278
Depreciation expense of £137,000 (2009: £144,000) has been charged in cost of sales and £114,000 (2009: £145,000) in administrative expenses.
Lease rentals relating to the lease of owner-occupied leasehold and investment leasehold properties are included in the income statement and
disclosed in note 25.
Investment properties are included at directors' valuation which is not materially different from historical cost.
Page 57
M J Gleeson Group PLC
Notes to the Financial Statements continued
Company
Cost or valuation
At 1 July 2008
Additions
Disposals
At 30 June 2009
Additions
At 30 June 2010
Depreciation
At 1 July 2008
Charge for the year
Disposals
At 30 June 2009
Charge for the year
At 30 June 2010
Net book value
At 30 June 2010
At 30 June 2009
At 1 July 2008
Plant and
machinery
£000
831
84
(208)
707
6
713
831
2
(208)
625
17
642
71
82
Total
£000
831
84
(208)
707
6
713
831
2
(208)
625
17
642
71
82
-
-
Depreciation expense of £17,000 (2009: £2,000) has been charged in administrative expenses.
13. INTEREST IN JOINT VENTuRES
Share of results and investment in joint ventures
At 1 July
Share of results for the year
Share of tax expense
Share of profit in joint ventures (net of tax) for the year
Dissolutions
Transfer of joint ventures to subsidiary
Cashflow hedges
At 30 June
2010
£000
502
(141)
2010
£000
1,888
361
-
(50)
(75)
2,124
2009
£000
687
(189)
2009
£000
3,050
498
(1,660)
-
-
1,888
Share of profit in joint ventures is included within the Gleeson Capital Solutions division.
The transfer of joint ventures to subsidiary, which is reported as part of the Gleeson Commercial Property Developments division, is in respect
of the acquisition of the remaining 50% of the ordinary shares in Oakmill Properties Ltd and of the remaining 50% of the ordinary shares of Denbigh
Gleeson (Cap Green) Ltd.
Page 58
Notes to the Financial Statements continued
The following table shows the aggregate amounts in respect of Group share of joint ventures:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Cashflow hedges
Revenue
Expenses
Profit before tax
Tax
Profit for the year
M J Gleeson Group PLC
2010
£000
5,342
40,258
(3,890)
(39,511)
2,199
(75)
2,124
13,034
(12,532)
502
(141)
361
2009
£000
9,616
19,881
(7,601)
(20,008)
1,888
-
1,888
2,507
(1,820)
687
(189)
498
There are no significant contingent liabilities in the joint ventures.
Joint venture
Principal activity
Avantage (Cheshire) Holdings Limited
Extra care housing
Chrysalis (Stanhope) Holdings Ltd
Social housing regeneration
Genesis Estates (Manchester) Limited
Gleeson Black and Veatch Joint
Venture Partnership
Graftongate Gleeson Limited
Grove Village Holdings Limited
Residential property
development
Construction
Development and investment
in commercial properties
PFI project company
established to design,
refurbish, construct and
provide facilities management
services for a social housing
development in Manchester
Leeds Independent Living Accommo-
dation Company Holdings Ltd
Assisted housing
Marlborough Gleeson (Peterborough)
Limited
Marlborough Gleeson (Wolverton 2)
Limited
Property development
Property development
Ravensbank Redditch LLP
Property development
Stirling Water (2003) Ltd
Management services to
Scottish Water Solutions Ltd
Percentage of
equity held
Class of shares
Country of
incorporation
year
end date 3
33%
33%
50%
50%
50%
49%
33%
50%
50%
50%
41% 1
C Ordinary shares
England
31 March
Ordinary shares
Ordinary shares
England
England
31 December
26 March
England
30 June
A Ordinary shares
England
31 December
C Ordinary shares 1
England
31 March
A Ordinary shares
England
31 December
Ordinary shares
England
30 June
Ordinary shares
England
30 June
Ordinary shares
England
31 May
B Ordinary shares
Scotland
31 March
The Gleeson Capital Solution Partners
Joint Ventures Partnership
Construction - Engineering
35% 2
England
30 June
1
2
Control is normally based upon the level of shareholding. However, the Articles of Association of each of the companies define that certain decisions
have to be taken unanimously by the shareholders, effectively negating the power of the controlling entity.
All decisions have to be taken unanimously by the shareholders.
3 Where the year end date of the joint venture is not coterminous with the Group's, management accounts are used to incorporate the joint venture's
share of results in line with the Group's year end.
Page 59
M J Gleeson Group PLC
Notes to the Financial Statements continued
Class of shares
The following describes the voting rights for those joint ventures which have issued A, B and C shares.
Avantage (Cheshire) Holdings Ltd
A, B and C shares rank pari passu in all respects except as provided within Articles of Association with respect to appointment and removal of
Directors, transfer of shares and voting at general meetings.
Graftongate Gleeson Ltd
A and B shares rank pari passu in all respects except as provided within Articles of Association with respect to appointment and removal of
Directors, transfer of shares and voting at general meetings.
Grove Village Holdings Limited
A, B and C shares rank pari passu in all respects except as provided within Articles of Association with respect to appointment and removal of
Directors, transfer of shares and voting at general meetings.
Leeds Independent Living Accommodation Company Holdings Ltd
A, B and C shares rank pari passu in all respects except as provided within Articles of Association with respect to appointment and removal of
Directors, transfer of shares and voting at general meetings.
Stirling water (2003) Ltd
Separate classes of shares rank pari passu except as provided within Articles of Association with respect to appointment and removal of Directors,
transfers of shares and voting at general meetings.
14. LOANS AND OTHER INVESTMENTS
Group loans & other investments
At 1 July
Additions
Disposals
Repayments
Reclassified on acquisition of joint venture as subsidiary
(Restatement)/impairment of loans to joint ventures
Joint venture loans
Loans & other investments
Total
2010
£000
9,686
3,022
-
-
(8,934)
710
2009
£000
14,866
1,648
(530)
(348)
-
(5,950)
2010
£000
4,896
-
-
-
-
-
2009
£000
6,994
-
-
(2,098)
-
-
2010
£000
14,582
3,022
-
-
(8,934)
710
2009
£000
21,860
1,648
(530)
(2,446)
-
(5,950)
At 30 June
4,484
9,686
4,896
4,896
9,380
14,582
At 30 June 2010, the Group conducted a review of the net realisable value of loans to joint ventures in light of the condition of the UK commercial
property market. Where the estimated net present realisable value is less than its carrying value within the balance sheet, the Group has impaired
the carrying value.
Company loans & other investments
Loans & other investments
Total
2010
£000
4,896
4,896
2009
£000
4,896
4,896
2010
£000
4,896
4,896
2009
£000
4,896
4,896
At 1 July
At 30 June
Page 60
Notes to the Financial Statements continued
M J Gleeson Group PLC
Joint venture loans
The Group has made the following unsecured loans to:
Group
Avantage (Cheshire) Limited
Chrysalis (Stanhope) Limited
Denbigh Gleeson (Cap Green) Ltd 1
2010
£000
1,764
956
-
Interest
rate
Terms
2009
£000
-
-
3,423
10.72%
10.50%
Base +2%
Graftongate Gleeson Limited
9
7
Base +2%
Grove Village Holdings Limited
Oakmill Properties Ltd 2
1,755
-
1,610
4,646
9.07%
Base +2%
4,484
9,686
27 years
27 years
Repayable on disposal of property owned by
joint venture.
Repayable on disposal of property owned by
joint venture.
25 years
Repayable on disposal of property owned by
joint venture.
1
2
The loan to the joint venture has been partially impaired in the prior year and no interest was accrued on the loan. The impairment was partially reversed
in the year. The company is now a subsidiary.
Interest was not accrued in the year as only the carrying value is recoverable. The company is now a subsidiary.
Joint venture loans are repaid at the earlier of the sale of the investment or the expiry of the term.
Loans and other investments
Equity in GB Group Holdings Limited
Group
2010
£000
4,896
4,896
Group
2009
£000
4,896
4,896
Company
2010
£000
4,896
4,896
Company
2009
£000
4,896
4,896
Interest
rate
%
Terms
-
N/A
GB Group Holdings Limited (“GBGH”)
The Group has £4,896,000 invested in voting and non-voting ordinary shares that in total provide voting rights over 20% of the equity with the
remainder of the voting rights owned equally by the three executive directors. The operating and financial policies of GBGH are set by the three
executive directors. Dermot Gleeson sits on the Board of GBGH, in an oversight role as Non-Executive Director, to monitor the performance
of GBGH in the light of the Group's investment in it. The shareholding structure and the fact that all significant operational decisions are taken
by the executive directors means that the Group, and Dermot Gleeson, are not able to exert any significant influence. The Group can prevent
GBGH from departing from the original business plan, which was to engage in contracting in the construction sector. There are no
transactions of significance between the parties. The asset is treated as an investment because the Group has no significant control or influence
over the company.
15. INVESTMENTS IN SuBSIDIARIES
Cost
At 1 July 2008
Repayments
Impairment
Disposal to subsidiary undertaking
At 30 June 2009
Additional share capital
Repayments
At 30 June 2010
Subsidiary
under-
takings
£000
Long-term
loan to
subsidiary
£000
40,490
(457)
(5,589)
(423)
34,021
11,000
(13,020)
32,001
400
(400)
-
-
-
-
-
-
Total
£000
40,890
(857)
(5,589)
(423)
34,021
11,000
(13,020)
32,001
The repayments reflect the reduction in the share capital of a number of non-operational companies within the Group.
Investments in subsidiary undertakings are included in the balance sheet at cost less any provision for diminution in value.
Page 61
M J Gleeson Group PLC
Notes to the Financial Statements continued
Principal subsidiary undertakings
The following are the principal subsidiary undertakings of M J Gleeson Group plc. M J Gleeson Group plc owns 100% of the ordinary share capital
of the subsidiaries, all of which are incorporated in England.
Registered in England and wales and operate in the united kingdom
Subsidiary
Principal activity
Gleeson Capital Solutions Limited
Provision of bid management, accounting and operational services
Gleeson Construction Services Limited
Construction services
Gleeson Developments Limited
House building, housing regeneration and strategic land trading
Gleeson PFI Investments Limited
Investment in equity shares and loan stock of project companies delivering services under the
Government's Private Finance Initiative
Gleeson Properties Limited
Commercial property development
Gleeson Regeneration Limited
House building, housing regeneration and strategic land trading
Gleeson Strategic Land Limited
Strategic land trading
A full list of the subsidiary companies within the Group will be filed at Companies House with the Company's Annual Return.
16. ACquISITIONS OF SuBSIDIARIES
On 16 October 2010, the Group acquired an additional 50% of the ordinary shares in Oakmill Properties Ltd for £1, satisfied in cash. This took the
Group's shareholding to 100%. The company is a property development company. In the eight months to 30 June 2010, the subsidiary contributed
a net loss of £2,000 to the consolidated net profit for the year. If the acquisition had occurred on 1 July 2009, Group revenue would have been
unchanged at £46,534,000 and profit would have been unchanged at £3,137,000. In determining these amounts, management has assumed that
the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition occurred on 1 July 2010.
On 1 February 2010, the Group acquired an additional 50% of the ordinary shares in Denbigh Gleeson (Cap Green) Ltd for £1, satisfied in cash.
This took the Group's shareholding to 100%. The company is a property development company. In the five months to 30 June 2010, the subsidiary
made neither profit nor loss. If the acquisition had occurred on 1 July 2009, Group revenue would have been unchanged at £46,534,000 and
profit would have been unchanged at £3,137,000. In determining these amounts, management has assumed that the fair value adjustments that
arose on the date of acquisition would have been the same if the acquisition occurred on 1 July 2010.
Effect of acquisitions
The acquisitions had the following effect on the Group’s assets and liabilities.
Acquiree’s net assets at the acquisition date:
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net identifiable assets and liabilities
Carrying value of investment in joint venture
Goodwill on acquisition
Consideration paid £1, satisfied in cash
Net cash outflow
Recognised
& book
values on
acquisition
£000
9,402
1
-
(9,303)
100
(50)
(50)
-
-
Goodwill has arisen on the acquisition because the Group has previously waived charges to the joint venture. The goodwill has been written back
to the income statement during the year as the properties held within the companies have been sold.
Page 62
Notes to the Financial Statements continued
17. INVENTORIES
Work-in-progress
Land options
M J Gleeson Group PLC
2010
£000
2009
£000
Restated
Note 11
68,073
8,004
65,219
8,483
76,077
73,702
During the year, there was a write up to net realisable value of work-in-progress of £2,803,000 in relation to work-in-progress previously impaired.
During the prior year, there was a write down to net realisable value of work-in-progress of £26,299,000 to leave a remaining value of £23,985,000
in respect of this work-in-progress as at 30 June 2009. During the year there was a write down to net-realisable value of land options of £180,000
(2009: £7,618,000) to leave a remaining value of £nil (2009: £86,000) in respect of these land options as at 30 June 2009.
The prior year work-in-progress has been restated upwards by £23,622,000, being the change in treatment of the Grove Village regeneration
project from long term contract to sale of goods as a result of a review of the contract in light of IFRIC 15. See note 11. In addition land options
have been analysed separately from work-in-progress. The total of inventories remains unchanged.
18. TRADE AND OTHER RECEIVABLES
Current assets
Trade receivables
Amounts due from construction contract customers
VAT recoverable
Prepayments and accrued income
Amount due from subsidiary undertakings
Non-current assets
Available for sale financial assets
Other receivables
Note
19
Group
2010
£000
16,729
2,487
218
832
-
Company
2010
£000
Company
2009
£000
Group
2009
£000
Restated
Note 11
21,183
9,400
-
2,772
-
554
-
-
508
47,589
284
-
227
172
123,548
20,266
33,355
48,651
124,231
3,012
-
1,962
-
-
-
-
-
23,278
35,317
48,651
124,231
Prior year trade receivables has been restated downwards by £12,164,000 and the amounts due from construction contract customers restated
downwards by £12,392,000, being the change in treatment of the Grove Village regeneration project from long term contract to sale of goods as
a result of a review of the contract in light of IFRIC 15. See note 11.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value and includes an allowance for
doubtful debts 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 are recorded at fair value, being the amount receivable by the Group discounted
to present day values. The difference between the nominal 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.
See note 20 for reference to credit risk associated with trade receivables.
The Company recharges subsidiaries for all staff-related costs, insurance, IT and interest on intercompany loans. The total costs recharged for
the year totalled £5,977,000 (2009: £10,510,000).
See note 4 for details of exceptional write-down of amounts due from construction contract customers in prior year.
The Company charges interest of Bank of England base rate plus 1% on £59,432,000 of the intercompany loan adjusted for bank balances held
within the company. At the 30 June 2010, this figure was £61,738,000 (2009: £67,900,000).
Page 63
M J Gleeson Group PLC
Notes to the Financial Statements continued
19. CONSTRuCTION CONTRACTS
Contracts in progress at the balance sheet date:
Amounts due from contract customers included in trade and other receivables
Amounts due to contract customers included in trade and other payables
Contract costs incurred plus recognised profits less recognised losses to date
Less: progress billings
Note
18
21
Group
2010
£000
Group
2009
£000
Restated
Note 11
2,487
(629)
1,858
9,400
(2,374)
7,026
1,047,554
(1,045,696)
1,392,179
(1,385,153)
1,858
7,026
At 30 June 2010, retentions held by customers for contract work amounted to £936,000 (2009: £1,386,000).
Amounts due to contract customers included in trade and other payables represent the balance of advances received on construction contracts
at the year end.
Prior year amounts due from contract customers included in trade and other receivables has been restated downwards by £12,392,000, contract
costs incurred plus recognised profits less recognised losses to date has been restated downwards by £63,313,000 and progress billings have been
restated downwards by £50,921,000, being the restatement due to the change in treatment of the Grove Village regeneration project from long
term contract to sale of goods as a result of a review of the contract in light of IFRIC 15. See note 11.
20. FINANCIAL INSTRuMENTS
Risk exposure
M J Gleeson Group plc 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, principally to reduce fluctuation in interest costs.
Cash and cash equivalents
Cash and cash equivalents comprises cash and short-term deposits with an original maturity of three days or less 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 balance sheet
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 and derivative financial instruments is limited because the counterparties are banks with high credit ratings
assigned by international credit rating agencies.
At 30 June 2010, the Group's most significant customer, a housebuilder, accounted for £7,677,000 (2009: £11,405,000) of the trade and other
receivables carrying amount. The Group's turnover with this customer is £9,793,000 (2009: £342,000). The Group has no other significant
concentration of credit risk, with exposure spread over a large number of counterparties and customers.
Page 64
Notes to the Financial Statements continued
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
M J Gleeson Group PLC
Group
2010
£000
11,674
885
121
532
3,517
Group
2009
£000
Restated
Note 11
15,624
348
982
809
3,420
16,729
21,183
Company
2010
£000
Company
2009
£000
328
-
50
-
176
554
122
7
11
-
144
284
The prior year not past due has been restated downwards by £12,164,000, being the treatment of the Grove Village regeneration project from
long term contract to sale of goods as a result of a review of the contract in light of IFRIC 15. See note 11.
All trade receivables are from UK customers.
Trade receivables past due more than one year largely represent balances due within the Gleeson Construction Services division and relate to
final settlements on contracts. The amounts payable are being finalised and are included at expected realisable value.
In addition to the above, the Company has intercompany receivables which are repayable on demand.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1 July
Impairment loss recognised
Transferred on disposal of investment in subsidiary
Balance at 30 June
Market risk
The Group has no significant exposure to currency risk or equity risk.
Group
2010
£000
Group
2009
£000
Company
2010
£000
Company
2009
£000
28
-
(4)
24
104
(76)
-
28
24
-
-
24
100
(76)
-
24
Interest rate risk
The Group is exposed to variations in interest rates on its borrowings. It closely monitors this exposure and, if this is significant as a result of the
quantum of debt and level of interest rates, will hedge the exposure using approved financial instruments such as interest rate swaps. At the
year end, the Group had no debt or related interest rate swaps.
A 1% increase in interest rates would improve the annual income of the Group and Company by £184,000 (2009: £109,000) based on the cash
balance at the year end. A 1% decrease would cause income to fall by the same amount.
Certain of the Group's joint ventures use interest rate swaps to manage their exposure to interest rate movement on their bank borrowings. The
Group's share of the interest rate swap contract with notional value of £15,113,000 (2009: £10,407,000) has fixed interest payments at an average
rate of 5.14% (2009: 5.18%) for periods up until 2035.
Group share of interest payable by non-recourse funded joint ventures on hedged instruments:
Interest payable:
Within one year
Within two to five years
After five years
Group
2010
£000
1,101
4,119
11,111
Group
2009
£000
Company
2010
£000
Company
2009
£000
742
4,152
12,074
1,101
4,119
11,111
742
4,152
12,074
16,331
16,968
16,331
16,968
Page 65
M J Gleeson Group PLC
Notes to the Financial Statements continued
Liquidity risk
The Group voluntarily reduced the committed revolving credit facility from £50,000,000 to £15,000,000 in October 2009, as the majority of the
facility was not required. The Group then voluntarily terminated the facility in full in March 2010, prior to the contractual termination date of
June 2010, as the facility was not required. The Group meets its day-to-day liquidity requirements through cashflow. The Group entered into a
£5.0m letter of credit facility in August 2010 with Santander UK Plc.
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 and the periods in which they reprice:
Bank balances
Short term deposits
Net cash
2010
Effective
interest
rate
%
0.00-0.07
0.41
2010
Due
within
one year
£000
9,038
9,385
18,423
2009
Effective
interest
rate
%
0.00
0.30
2009
Due
within
one year
£000
1,301
9,625
10,926
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting
agreements:
Non-derivative financial liabilities
As at 30 June 2010
Trade and other payables 1
As at 30 June 2009
Trade and other payables 1
Carrying Contractual
cash flows
amount
£000
£000
6 mths
or less
£000
6-12 mths
£000
1-2yrs
£000
2-5yrs
£000
More than
5yrs
£000
21,140
(21,197)
(12,412)
21,140
(21,197)
(12,412)
(871)
(871)
(4,741)
(3,073)
(4,741)
(3,073)
(100)
(100)
19,397
(19,397)
(11,782)
(1,133)
(1,520)
(4,962)
19,397
(19,397)
(11,782)
(1,133)
(1,520)
(4,962)
-
-
1
Excludes amounts due to construction contract customers
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 6 months.
Exposure to currency risk
The Group has no exposure to foreign currency risk.
Fair values
The fair value 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.
Interest bearing loans and borrowings
Fair value is based on discounted expected future principal and interest cash flows.
Capital management
In line with the disclosure requirements of IAS 1, Presentation of Financial Statements, the Company regards its capital as being the issued share
capital.
Note 28 to the Financial Statements provides details regarding the Company's share capital movements in the period and there were no breaches
of any requirements with regard to any relevant conditions imposed by either the UK Listing Authority or the Company's Articles of Association
during the period under review.
Page 66
Notes to the Financial Statements continued
M J Gleeson Group PLC
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 to 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.
21. TRADE AND OTHER PAyABLES
Current liabilities
Amounts due to construction contract customers
Trade payables
Other taxation and social security
VAT payable
Accruals and deferred income
Amount due to subsidiary undertakings
Note
19
Group
2010
£000
629
18,692
367
548
8,662
-
Group
2009
£000
Company
2010
£000
Company
2009
£000
2,374
16,575
370
339
12,256
-
-
723
313
492
735
30,019
-
856
325
-
995
45,755
28,898
31,914
32,282
47,931
The Directors consider that the carrying amount of trade payables approximates their fair value.
There is no interest charge to the Company for amounts due to subsidiaries.
22. PROVISIONS
At 1 July 2009
Provisions made during the year
Provisions used during the year
Provisions released during the year
Unwinding of discounts
At 30 June 2010
Non-current
Current
Group
Restruc-
turing
costs
£000
605
444
(529)
-
-
Group
Group
Onerous
leases
£000
4,822
223
(764)
(267)
100
Total
£000
5,427
667
(1,293)
(267)
100
520
4,114
4,634
-
520
520
3,063
1,051
3,063
1,571
4,114
4,634
Restructuring
During the year ended 30 June 2010, there was a further £444,000 provided for restructuring cost (2009: £789,000) to cover the cost of the
redundancies where existing employees could not be retained within the Group.
Onerous leases
Onerous leases relate to sublet and vacant properties. 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. The lease commitments range from 1 to 7 years. Market conditions
have a significant impact on the assumptions for future cash flows.
During the year ended 30 June 2010, there was a further provision of £223,000 (2009: £302,000) for onerous property leases and to cover lease
guarantees that are expected to be claimed on a vacant investment property.
Page 67
M J Gleeson Group PLC
Notes to the Financial Statements continued
At 1 July 2009
Provisions made during the year
Provisions used during the year
At 30 June 2010
Non-current
Current
Company
Restruc-
turing
costs
£000
273
310
(100)
483
-
483
483
Company
Total
£000
273
310
(100)
483
-
483
483
Restructuring
In the year, the Company provided for £310,000 in relation to the sale of Powerminster Gleeson Services (2009: £nil) to cover the cost of the
redundancies where existing employees could not be retained within the Company.
23. 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 income statement of £559,000 (2009: £660,000) represents contributions payable to the defined contribution
pension plan by the Group at rates specified in the plan rules. At 30 June 2010, contributions of £57,000 (2009: £48,000) 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 £127,000 (2009: £177,000) represents contributions payable to the defined contribution
pension plan by the Company at rates specified in the plan rules.
24. 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 2008
Charge to income
At 30 June 2009
Credit to income
Capital allowances transferred on sale of subsidiary
At 30 June 2010
An analysis of the deferred tax balances for financial reporting purposes is as follows:
Deferred tax asset
Deferred tax liabilities
Page 68
Property,
plant and
machinery
£000
623
(141)
482
203
266
951
Short-term
timing
differences
£000
126
(37)
89
13
-
Total
£000
3,561
(2,990)
571
216
266
102
1,053
Losses
£000
2,812
(2,812)
-
-
-
-
Group
2010
£000
1,053
-
1,053
Group
2009
£000
862
(291)
571
Notes to the Financial Statements continued
M J Gleeson Group PLC
On 28 July 2010 a change in corporate tax rates was substantively enacted, with corporation tax reduced from 28% to 27% with effect from 1 April
2011. As this change was after the balance sheet date, deferred tax balances have not been calculated based on the new rate. Further reductions
in the corporate tax rate have also been proposed along with reduced rates of capital allowances. An accurate calculation of the impact of the
proposed changes is not possible, however the reduction in the corporate tax rate is not considered likely to have a material impact.
The deferred tax liability for the prior year of £291,000 is included within Property, plant and machinery in the previous table. This liability
reduced from £291,000 to £Nil in the current year.
At the balance sheet date, the Group has unused tax losses of £89,934,000 (2009: £89,004,000 (restated)) available for offset against future
profits. No deferred tax asset has been recognised in respect of these losses (2009: £Nil). Losses may be carried forward indefinitely against
future taxable profits.
Company
The deferred tax assets recognised by the Company and movements thereon during the current and prior year are as follows:
At 1 July 2008
Credit to income
At 30 June 2009
Credit to income
At 30 June 2010
Property,
plant and
machinery
£000
Short-term
timing
differences
£000
469
6
475
131
606
-
-
-
13
13
Total
£000
469
6
475
144
619
At the balance sheet date, the Company had unused tax losses of £6,277,000 (2009: £6,093,000) available for offset against future profits. No
deferred tax asset has been recognised in respect of these losses. Losses may be carried forward indefinitely.
25. OPERATING LEASE ARRANGEMENTS
Operating leases: lessee
Minimum lease payments under non-cancellable operating leases
recognised as an expense for the year
Minimum lease payments
Group
2010
£000
Group
2009
£000
Company
2010
£000
Company
2009
£000
1,527
1,527
1,955
1,955
47
47
57
57
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 buildings
Plant and equipment
Plant and equipment
Group
2010
£000
1,370
2,081
409
3,860
Group
2009
£000
1,478
3,042
588
5,108
Group
2010
£000
29
14
-
43
Group
2009
£000
338
312
-
650
Company
2010
£000
Company
2009
£000
29
14
-
43
62
32
-
94
Plant and equipment leases are entered into for a three year term. Land and building lease terms vary between one to ten years, depending on
market conditions.
During the year, £223,000 (2009: £302,000) was provided for onerous leases. Note 22 provides details of this provision.
Page 69
M J Gleeson Group PLC
Notes to the Financial Statements continued
Where possible, the Group always endeavours to sub-lease any vacant space on short-term lets. An onerous lease provision is recognised where
the rents receivable over the lease term are less than the obligation to the head lessor. The Group's investment properties are also leased to a
number of tenants for varying terms.
Operating leases: lessor
The Group's total future minimum sub-lease receipts expected under non-cancellable sub-leases as at 30 June 2010 is £1,271,000 (2009:
£1,992,000). These receipts are included within the minimum rent receivables table below.
The Company has no (2009: £nil) future minimum sub-lease receipts.
Minimum rental income under operating leases recognised as revenue for the year
Group
2010
£000
Group
2009
£000
689
923
Included in the figures above is £671,000 (2009: £839,000) which relates to properties which the Group had previously occupied as operating
lease lessees and have now sublet. The balance of £18,000 (2009: £84,000) relates to investment properties.
At the balance sheet date, the minimum rent receivables under non-cancellable operating leases are as follows:
Within one year
Within two to five years
After five years
26. ANALySIS OF CASH AND OVERDRAFTS
At 1 July 2008
Cashflow
At 30 June 2009
Cashflow
At 30 June 2010
27. BONDS AND SuRETIES
Land and buildings
Group
2010
£000
550
721
-
Group
2009
£000
822
1,170
-
1,271
1,992
Group
Cash
and cash
equivalents
£000
Group
Total
£000
Company
Cash
and cash
equivalents
£000
21,875
(10,949)
21,875
(10,949)
18,677
5,751
Company
Total
£000
18,677
5,751
10,926
10,926
24,428
24,428
7,497
7,497
(3,882)
(3,882)
18,423
18,423
20,546
20,546
Group and Company
As at 30 June 2010, the Group had bonds and sureties of £6,704,000 (2009: £14,151,000) provided by financial institutions in support of ongoing
contracts.
The Directors have determined that the Group and Company require no specific provision for bonds, sureties or guarantees for subsidiary
companies.
Page 70
Notes to the Financial Statements continued
M J Gleeson Group PLC
28. SHARE CAPITAL
Issued and fully paid Ordinary shares:
At the beginning of the year
Shares issued
At the end of the year
2010
No. 000
2010
£000
2009
No. 000
52,594
50
1,052
1
52,344
250
52,644
1,053
52,594
2009
£000
1,047
5
1,052
Ordinary shares
The Company has one class of Ordinary share which carries no rights to fixed income.
The number of Ordinary shares of 2p in issue as at 30 June 2010 was 52,643,985 (2009: 52,593,985).
At 30 June 2010, the Employee Benefit Trusts ("EBT") held 1,367,000 (2009: 1,345,000) shares at a cost of £1,670,000 (2009: £1,100,000). The
shares are held in the EBT for the purpose of satisfying options that have been granted under the executive and employee share ownership plans.
Of these ordinary shares, the right to dividend has been waived on 67,898 shares.
Details of share options are given in note 29.
29. SHARE-BASED PAyMENTS
During the year to 30 June 2010, the Group had seven share-based payment arrangements.
The recognition and measurement principles in IFRS 2 have not been applied to those options granted before 7 November 2002 in accordance
with the transitional provisions in IFRS 1 and IFRS 2.
A summary of the share-based payment arrangements are shown below:
Arrangement
Contractual life
Vesting conditions
Long term incentive plan
(LTIP)
3 years
For executive directors, 50% of any bonus payable under the annual
bonus plan is invested in shares of the Company and must be held for
3 years. The Company will match these shares on a 1:1 basis if an
EPS target of RPI plus 5% is achieved over the 3 year holding period.
Settlement basis
Equity
Share save scheme (SAYE)
3 years 6 months Options granted at a discount to market value at the date staff are
Equity
invited to join the scheme.
1997 Executive scheme
7 and 10 years
EPS growth of RPI plus 2% pa or net assets growth of RPI plus 3% over
a 3 year period. For the options granted during the year ended 30 June
2006 the base EPS has been set at 30p. These options will lapse if the
above conditions are not met by the third anniversary of the grant.
Equity
Share purchase plan
10 years
From 1 March 2009 the Group matches shares purchased by
employees on a 1 for 3 basis. Prior to this date the Group matched
shares purchased by employees on a 4 for 3 basis.
1991 Executive scheme
10 years
EPS growth in excess of the growth in the RPI.
Special Arrangement
3 years
For senior executives shares will vest if executive remains in
employment for 3 years following grant of options.
Performance Share Plan
(PSP)
3 years
For executive directors and senior executives the award will vest in
whole or in part on or after the third anniversary of the date of grant
if performance conditions have been met. The condition is based on
the total shareholder return on the three financial years from 1 July
2007 to 30 June 2010.
Equity
Equity
Equity
Equity
Page 71
M J Gleeson Group PLC
Notes to the Financial Statements continued
Share options granted after 7 November 2002
Fair value is used to measure the value of the outstanding options.
SAyE
The fair value per option for the SAYE scheme has been calculated using a modified Black-Scholes 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
Exercise price
Expected volatility
Expected dividends
Expected life
Risk-free interest rate
Fair value of one option
SAyE
01/02/06
SAyE
01/02/07
SAyE
01/02/08
£3.74
£2.88
24%
2.96%
3 years
4.35%
£1.06
£4.05
£2.87
25%
2.10%
3 years
5.40%
£1.47
£3.17
£2.76
25%
2.90%
3 years
4.28%
£0.73
Expected volatility was determined by calculating the historical volatility of the Company's share price over the previous 7 years.
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.
Special Arrangement
The fair value of each share granted in this plan is equal to the share price at the date of the grant.
Performance Share Plan
The fair value per option for the Performance Share Plan scheme 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:
The input for expected dividends has been set at 0% as the award vests according to the increase in share price after adding back any dividends
paid.
Date of grant
The model inputs were:
Share price at grant date
Exercise price
Expected volatility
Expected dividends
Expected life
Risk-free interest rate
Fair value of one option
PSP
21/12/07
£3.10
£3.25
24%
0.00%
3 years
4.64%
£0.82
Expected volatility was determined by calculating the historical volatility of the Company's share price over the previous 7 years.
Page 72
Notes to the Financial Statements continued
Further details of the option plans are as follows:
M J Gleeson Group PLC
LTIP
Share save scheme (SAyE) 1997 Executive scheme
Share
purchase
plan
Special
Arrange-
ment
Perfor-
mance
Share
Plan
01/11/05
No. of
shares
01/02/06
No. of
shares
01/02/07
No. of
shares
01/02/08
No. of
shares
03/01/06
No. of
shares
03/04/06
No. of
shares
Monthly
No. of
shares
01/05/07
No. of
shares
14/12/07
No. of
shares
7,796
41,456
77,644
96,075
100,000
350,000
-
-
-
-
-
-
-
-
-
-
-
-
-
(16,414)
(47,798)
(50,879)
(100,000)
(350,000)
-
(7,796)
-
-
-
-
-
-
-
-
-
25,042
29,846
45,196
-
-
-
-
-
-
(25,042)
(5,293)
(11,681)
-
-
-
-
24,553
33,515
-
-
-
-
-
-
-
272,601
145,332
(5,242)
-
(123,689)
- 289,002
26,682
-
-
(273)
-
-
(56,308)
-
22,000
-
-
-
-
1,159,406
(516,576)
-
-
-
22,000
-
-
(22,000)
-
642,830
-
-
(168,023)
-
- 259,103
- 474,807
Date of grant
Outstanding at
1 July 2008
Granted in the year
Forfeited
Lapsed
Exercised
Outstanding at
30 June 2009
Granted in the year
Forfeited
Lapsed
Exercised
Outstanding at
30 June 2010
Remaining contractual life
nil
nil
nil
0.67
years
nil
nil
Rolling
scheme
nil
0.5
years
Weighted average exercise
price
Weighted average share
price at date of exercise
- current year
Weighted average share
price at date of exercise
- prior year
-
-
£0.75
£2.88
£2.87
£2.76
£3.18
£3.69
-
£4.20
£3.25
-
-
-
-
-
-
-
-
-
-
£1.10
£1.02
-
-
-
-
Share options granted prior to 7 November 2002
Outstanding at 1 July 2008
Exercised
Outstanding at 30 June 2009
Lapsed
Outstanding at 30 June 2010
Remaining contractual life
Weighted average exercise price
Weighted average share price at date of exercise - current year
Weighted average share price at date of exercise - prior year
1991
Executive
scheme
27/11/00
No. of
shares
16,000
-
16,000
(10,000)
Share
purchase
plan
Monthly
No. of
shares
15,187
(4,920)
10,267
(1,140)
6,000
9,127
0.41 years
£1.55
-
-
Rolling
scheme
-
£1.10
£1.02
Page 73
M J Gleeson Group PLC
Notes to the Financial Statements continued
30. CAPITAL COMMITMENTS
There are no capital commitments at 30 June 2010 (2009: £nil).
31. 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 Directors' Remuneration Report on
pages 22 to 27.
The Group has entered into a contract with a company, JD Plastics & Rooflines Ltd, in which Jolyon Harrison is a director for the supply and
fitting of cladding materials. During the year, the Group purchased £17,000 (2009:£nil) of goods and services from the company, leaving a balance
payable by the Group of £1,000 in relation to contract retentions. The terms were at normal market rates and payment terms. There were no
guarantees provided.
Other than disclosed above and in the Directors' Remuneration Report, there were no other transactions with key management personnel in either
the current or proceeding year.
Provision of goods and services to joint ventures
Gleeson Capital Solutions
Sales to related parties were made at market rates.
Purchase of goods and services from joint ventures
There have been no purchases of goods from joint ventures.
Amounts owed by and owed to joint ventures
The amounts owed by joint ventures are shown below:
Loans and other investments
Prepayments and accrued income
2010
£000
800
800
2009
£000
527
527
Note
14
2010
£000
4,484
61
4,545
2009
£000
Restated
9,686
46
9,732
The comparatives have been restated due to the change in treatment of the Grove Village regeneration project from long term contract to sale
of goods as a result of a review of the contract in light of IFRIC 15.
The amounts owed to joint ventures at 30 June 2010 totalled £13,000 (2009 £Nil). These are shown as trade payables.
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. In the prior year, £5,950,000
was provided for doubtful debts in respect of amounts owed by related parties. In the current year, £710,000 of this provision has been
released.
Page 74
Notes to the Financial Statements continued
M J Gleeson Group PLC
Group pension scheme
Details of cost and the amounts due to the Group pension scheme are included in note 23.
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.
Related party transactions:
Subsidiaries
Subsidiaries
Administrative expenses
2010
£000
5,977
5,977
2009
£000
10,510
10,510
Receivables outstanding
Payables outstanding
2010
£000
2009
£000
2010
£000
2009
£000
47,589
123,548
30,019
45,755
47,589
123,548
30,019
45,755
Page 75
M J Gleeson Group PLC
Five Year Review
Revenue
Operating (loss)/profit
Finance income/(costs)
Profit/(loss) before tax
Tax
Profit/(loss) after tax
Discontinued operations
Profit/(loss) for year attributable to
equity holders of parent company
Total assets
Total liabilities
Net assets
Total dividend per share
Earnings/(loss) per share from continuing operations
Net assets per share
IFRS
2010
£000
IFRS
2009*
£000
Restated
IFRS
2008*
£000
Restated
IFRS
2007*
£000
Restated
IFRS
2006*
£000
Restated
46,534
43,030
71,125
165,497
165,279
(323)
770
(51,558)
(23,897)
868
3,559
2,487
2,662
(10,022)
(3,901)
447
(50,690)
(20,338)
5,149
(13,923)
235
682
(2,609)
(5)
(791)
369
(53,299)
(20,343)
4,358
(13,554)
2,455
1,844
2,003
23,140
22,318
3,137
(51,455)
(18,340)
27,498
8,764
131,380
140,069
213,021
253,394
274,896
(33,537)
(37,637)
(59,284)
(76,732)
(123,233)
97,843
102,432
153,737
176,662
151,663
p
15.00
1.30
186
p
-
(102.25)
195
p
2.00
(38.97)
294
p
9.20
8.40
339
p
8.50
(26.49)
294
*
The 2006 to 2009 results have been restated for the reclassification of the Powerminster Gleeson Services division as discontinued follow the sale of the
division on 30 June 2010. In addition, the results have been restated due to the change in treatment of the Grove Village regeneration project from long
term contract to sale of goods as a result of a review of the contract in light of IFRIC 15.
Page 76
Advisers
BANkERS
Santander UK Plc
Davidson House, Forbury Square, Reading RG1 3EU
MERCHANT BANkERS
DC Advisory
60 Threadneedle St, London EC2R 8HP
SOLICITORS
Simmons & Simmons
CityPoint, One Ropemaker Street, London EC2Y 9SS
REGISTERED AuDITORS
KPMG Audit Plc
8 Salisbury Square, London EC4Y 8BB
STOCkBROkERS
Singer Capital Markets Limited
One Hanover Street, London W15 1YZ
REGISTRARS & TRANSFER OFFICE
Capita Registrars
The Registry, Bourne House, 34 Beckenham Road
Beckenham, Kent BR3 4TU
REGISTERED OFFICE
M J Gleeson Group plc
Integration House, Rye Close, Ancells Business Park
Fleet, Hampshire GU51 2QG
Registered Number
479529
The paper in this report is a FSC certified product, produced with an FSC
mixed sources pulp which is fully recyclable, biodegradable & Chlorine free.
It is manufactured within a mill which complies with the international
environmental ISO 14001 standard.
It has been printed using environmentally friendly vegetable based inks,
formulated on the basis of renewable raw materials, vegetable oils are non-
hazardous from renewable sources. Over 90% of solvents and developers are
recycled for further use and recycling initiatives are in place for all other
waste associated with this production. The printers are FSC and ISO 14001
certified with strict procedures in place to safeguard the environment through
all their processes and are working on initiatives to reduce their Carbon
Footprint.
Designed and produced by Complete Design Limited.
Printed by Fox Print Services LLP.
ISO 14001
REGISTERED FIRM
M J GLeeson GrouP PLC
Integration House, Rye Close
Ancells Business Park, Fleet GU51 2QG
Tel: 01252 360 300
Fax: 01252 621 666
Email: enquiries@mjgleeson.com
www.mjgleeson.com