builders for generations
MJ Gleeson Group plc
Report and Accounts
for the year ended 30 June 2014
Contents
Financial Highlights
Chairman’s Statement
Strategic Report
Key Performance Indicators (KPIs)
Financial Review
Operating Risk Statement
Corporate Social Responsibility Report
Chairman’s Introduction
Board of Directors
Corporate Governance Statement
Directors’ Report
Remuneration Committee Chairman’s
Summary Statement
Remuneration Policy Report
Annual Report on Remuneration
Statement of Directors’ Responsibilities
Independent Auditor’s 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
1
2
4
7
8
12
14
19
20
22
27
32
33
39
45
46
48
49
50
52
54
79
80
KnowsleyLane,Huyton.
Front cover image: Carlisle Park, Swinton.
MayorofRedcarandCleveland,CllrVicJeffries,and
RegionalDirector,EdAlder,atNewcomenPark,Redcar.
MJ Gleeson Group plc
MJ Gleeson Group plc
The Group is engaged in:
housebuilding on brownfield land in the North of England with a particular emphasis on
low cost homes for local communities;
strategic land trading, primarily in the South of England, and benefiting from the
enhancement of the value of green field sites by securing residential planning consents.
Financial highlights
2014
2013
Operatingprofitcontinuing operations
£12.1m
£6.0m
GleesonHomes operating profit
£9.4m
£4.0m
101%
135%
GleesonStrategicLand operating profit
£4.8m
£3.5m
40%
Revenue
£’000
2010
33,231
2011
41,210
2012
40,807
2013
60,656
2014
81,442
Earningspershare
continuingoperations
(p)
2010
(0.75)
2011
1.87
2012
5.51
2013
19.14
2014
33.36
Profitbeforetax
continuingoperations
NetAssetspershare
£’000
2010
(646)
2011
1,106
2012
3,026
2013
5,779
2014
12,160
(p)
2010
2011
186
188
2012
190
2013
212
2014
241
Page 1
MJ Gleeson Group plc
Chairman’s Statement
Another year of excellent progress as the Group continues to
benefit from its unique business model.
DermotGleeson,Chairman
I am pleased to report another year of excellent progress as the
Group continues to benefit from its unique business model and
to implement its growth strategy.
Gleeson Homes substantially increased unit sales by 38% to 561
units (2013: 406 units). This increase in volume was accompanied
by a modest improvement in selling prices and the maintenance
of a very stringent approach to cost control. As a result the
division has once again achieved a significant uplift in
profitability, helping drive a doubling of operating profit for the
Group as a whole.
In addition, Gleeson Homes continued to substantially expand its
land bank, taking advantage of the relatively low land prices in
our target geographies in the North of England.
Gleeson Strategic Land also made strong progress during the year,
increasing profits by 40%. This increase reflects both a high level
of success in securing residential planning consents for sites in
the South of England and the continuing strength of the demand
for such sites, once consented, from volume house builders.
CllrJohnRobinsonopeningshowhomeatFerndaleCourt,
Wingate.
Page 2
Financialperformance
Group revenues increased 34% to £81.4m (2013: £60.7m). The
Group recorded an operating profit from continuing operations
of £12.1m, an increase compared to the previous year of 101%
(2013: £6.0m). Discontinued operations incurred a post-tax loss
of £0.2m (2013: post-tax profit £1.3m).
Profit for the year attributable to equity holders of the parent
company, including an exceptional deferred tax credit of £8.3m
(2013: £4.2m), totalled £17.4m (2013: £11.4m).
Net assets increased by 14.3% to £128.1m (2013: £112.1m),
representing net assets per share of 241p (2013: 212p). Cash and
cash equivalents at 30 June 2014 totalled £13.7m (2013: £9.9m).
Normalised basic earnings per share, which excludes the impact
of recognising unrecognised tax losses, was 17.2p (2013: 10.6p).
Marketcontext
Unlike a number of other regions, such as central London, in
which a period of high house price inflation is now being followed
by some limited downward adjustments in values, the
regeneration areas within the North of England in which Gleeson
Homes operates have only experienced very modest price rises
in the last two years and house prices are expected to remain
broadly stable for the foreseeable future. Our confidence in this
respect is reinforced by the fact that mortgage providers take a
very favourable view of both the value for money offered by
Gleeson Homes' product range and the financial dependability of
our core customer base of hard working, low income families
committed to home ownership.
Employees
The average number of employees during the year increased to 217
(2013: 201). The number at the year end was 228 (2013: 215).
The Group’s strong performance during the year is a result of the
commitment and professionalism of our employees and, on
behalf of the Board, I would like to congratulate and thank them.
MJ Gleeson Group plc
Dividends
Against the background of the Group’s strong financial
performance and our confidence in the prospects for the current
year and beyond, the Board is recommending a final dividend for
the year of 4.9 pence per share (2013: 2.0 pence per share).
Combined with the interim dividend, this will give a total
dividend for the year of 6.0 pence per share, an increase
compared to the previous year of 140% (2013: 2.5 pence per
share). Subject to shareholder approval at the Annual General
Meeting (“AGM”), the final dividend will be paid on 17 December
2014 to shareholders on the register at close of business on 21
November 2014.
Prospects
The outlook for the Group remains highly encouraging.
Similarly, demand for low cost family homes continues to be
strong amongst Gleeson Homes’ core customer base and our
forward order book is at a record high of £44.2m (2013: £25.9m).
Our commitment to ensuring that our homes remain affordable
to buyers on low incomes means that we do not anticipate a
significant increase in sales prices. However, the substantial
increase in the size of the land bank achieved over the last year
means that there is considerable scope to generate significant
further, year on year, profit growth by means of an increase in
sales volume.
The appetite of the volume housebuilders for consented land in
the South of England remains strong and Gleeson Strategic Land
expects to achieve a substantial increase in the number of sites
sold in the current financial year.
DermotGleeson
Chairman
CllrsBrian&ChristinaO’HareatKnowsleyLane,Huyton.
Page 3
MJ Gleeson Group plc
Strategic Report
GROuPBuSiNESSES
The Group consists of two distinct but complementary
businesses: housebuilding on brownfield land in the North of
England and strategic land trading, primarily in the South of
England.
GleesonHomes
A housing regeneration specialist building homes for people on
low incomes on brownfield land in the North of England.
The key features of the Gleeson Homes business model are:
• Successfullandpurchase. We have a very carefully targeted
land buying strategy that has clearly defined and challenging
hurdle rates. We partner with local authorities and private
land owners to acquire land in socially and economically
deprived areas which will benefit from urban regeneration.
• Drivingdownbuildingcosts. We build traditional 2, 3 and 4
bedroom detached and semi-detached homes. We ensure that
our homes are built with good quality but inexpensive products
to the specification that our customers require.
• Lowoverheads. We ensure that overhead costs are kept low
by having small and similarly structured management teams in
each operating region and continuously measuring their
relative performance.
• Enablingthecustomer. We offer our customers a large range
of bespoke financial packages to enable them to become
homeowners.
GleesonStrategicLand
A land promotion business that enhances the value of land by
securing residential planning consents. The primary focus is on
sites in the South of England likely to be attractive to volume
housebuilders.
The key features of the Gleeson Strategic Land business model are:
• Achievingmutuallybeneficialagreementswithlandowners.
We enter into agreements with landowners to promote their
land through the planning process.
• Promotionthroughtheplanningprocess. The division’s team
of land surveyors and town planners, along with legal and
technical experts, steer the land through the planning process
with a view to achieving a commercially attractive residential
planning consent.
• Realising value. We strive to ensure that the best value is
achieved for all stakeholders by managing the sale of the
consented site to a developer.
Page 4
DiSCONtiNuEDOPERAtiONS
GleesonCapitalSolutions: The Group commenced winding down
this business unit in 2011. The Group sold its last PFI investment
in February 2013.
BuildingandEngineeringContracting: The Group sold certain
contracts, assets and liabilities of the Building Contracting
Division and Engineering Division in 2005 and 2006 respectively.
The activity of this business unit is now limited to the resolution
of occasional contractual claims.
StRAtEGiCPRiORitiES
The strategy of the Group is to build a larger and increasingly
profitable business by increasing the number of housebuilding
sites in its target markets, increasing its housebuilding land
pipeline and improving profitability on individual unit sales. Our
strategic priorities are set out below:
increasedhousebuildingfootprint: We will increase the number
of selling outlets throughout the North of England, particularly
in areas of urban regeneration, which will lead to increased sales
volumes and profitability.
improved margins: We will continue to control development
costs and acquire land in line with our defined and challenging
hurdle rates.
Build quality, sustainable homes: We will build good quality
homes to the specification that our customers require. We will
ensure that our homes are energy efficient and have low running
costs. We will use appropriate construction methods to build
efficiently and overcome any potential labour shortages.
increasedlandpipeline:We will continue to acquire land, at
appropriate cost, in socially and economically deprived areas,
which would benefit from urban regeneration.
Progress planning applications: We will progress planning
applications on strategic land sites where we consider there to
be strong prospects for residential housing planning permission
to be achieved.
Cash generation: We will maintain an appropriate capital
structure, minimise financing costs, and continue to improve
returns to shareholders.
Robusthealth&Safety:We will continue to improve the safety
culture and will maintain a high level of compliance with health
and safety standards.
MJ Gleeson Group plc
three main “High Street” institutions, offering our customers a
more competitive choice. Despite the tightening of qualifying
criteria under the Mortgage Market Review, our customers have
been able to qualify for loans on reasonable terms.
The business unit continued to take advantage of the relatively
low land prices in the North of England to build up a substantially
enlarged land pipeline. During the year, 12 sites were purchased
which added 1,180 plots to the pipeline. A further 24 sites that
have been conditionally purchased are expected to add a further
1,815 plots to the pipeline in the near future. When and if these
acquisitions are completed, the land pipeline will total in excess
of 5,065 plots. Impaired plots now represent only 4% of the land
bank. In addition to owned and conditionally purchased plots,
there are a further 1,600 plots which are being actively
considered for acquisition.
BuSiNESSPERFORMANCE
GleesonHomes
Gleeson Homes’ results for the year were as follows:
Revenue
Operating profit
2014
2013
£70.6m
£9.4m
£47.9m
£4.0m
During the year, 561 homes were sold, an increase of 38% on the
prior year’s total of 406. During the year Gleeson Homes had on
average 33 selling outlets open compared to 28 during the prior
year. The outlets were located in County Durham, Derbyshire,
Merseyside, Manchester, Newcastle, Nottinghamshire, Tyneside
and Yorkshire. The number of outlets is expected to increase
during the course of the current financial year to in excess of 40.
The Average Selling Price (“ASP”) for the homes sold in the year
was £121,000 (2013: £118,000). Our expected ASP is usually in
the range of £115,000 to £120,000 in order to ensure our homes
remain affordable to our customers. On a small number of sites,
where demand has been exceptionally high, selling prices have
increased, which has given rise to the moderate overall increase
in the ASP.
The proportion of homes sold from newer, higher margin sites
rose from 75% in the prior year to 84%.
Gross profit margin increased to 29.2% (2013: 27.8%) due to a
combination of the continued improvement in the mix of homes
sold from the new, higher margin sites, an increase in the ASP and
the maintenance of a very stringent approach to cost control.
The increase in the volume of homes sold along with the
improved gross profit margin has resulted in gross profit
increasing by 55% to £20.6m (2013: £13.3m).
Included within the Operating Profit is an exceptional credit of
£0.8m (2013: £1.0m) relating to, as in the previous year, the
partial reversal of a debtor provision.
Gleeson Homes has a large range of bespoke packages to assist
customers to become homeowners. The Government’s Help to
Buy schemes have been popular with many of our customers,
with 46% of the homes sold in the year utilising this scheme, but
our own packages are also attracting a healthy level of interest.
Lenders currently have an appetite for mortgage lending and
there has been growth in mortgage availability outside of the
AlfrescodiningatParsonGreen,Sheffield.
Page 5
MJ Gleeson Group plc
Strategic Report continued
GleesonStrategicLand
Revenue
Operating profit
2014
2013
£10.8m
£4.8m
£12.7m
£3.5m
Demand for residential land in the South of England from the
major housebuilders remained strong throughout the year. As a
result, the business unit was able to complete seven land sales,
with a combined acreage of 85 acres, with the potential to
deliver 617 plots for development.
During the year, seven new sites were secured by means of either
option, promotion, or subject to planning agreements. These
covered 236 acres, with the potential to deliver 1,445 houses. In
addition, heads of terms have been agreed for a further 6 sites
covering 216 acres, with the potential for 1,365 plots.
Gleeson Strategic Land continues to progress the portfolio
through the planning system. The business currently has four
sites with planning permission and two further sites with
resolutions to grant planning permission subject to entering into
legal agreements. These sites have the potential to deliver 1,480
plots, a nursing home and 40 assisted living units. A further 16
sites are the subject of either submitted planning applications
or lodged planning appeals and have the potential to deliver
approximately 2,000 plots and 100 acres of commercial land.
During the current financial year, planning applications are
expected to be submitted on a further 9 sites, potentially
delivering a further 3,500 plots.
At the year end, Gleeson Strategic Land’s portfolio totalled 3,802
acres (2013: 3,582 acres), of which 155 acres (2013: 155 acres)
were wholly or part owned by the Group, 2,037 acres (2013:
2,162 acres) were held under option and 1,610 acres (2013: 1,265
acres) were the subject of promotion agreements. The
geographic bias of the portfolio is towards the South of England,
predominantly in: Buckinghamshire, Dorset, Essex, Hampshire,
Hertfordshire, Kent, Oxfordshire, Surrey, Sussex and Wiltshire.
The 65 sites have the potential to deliver 21,500 plots.
September 2012
PastureRise, LazenbyApril2014
Page 6
MJ Gleeson Group plc
Key Performance Indicators (KPIs)
RevenueMeasures
The strength of revenue is an important measure of the success
of the business plan. The Group’s revenue has doubled over the
past three years.
Gleeson Homes has forward sales at 30 June each year, being
the value of homes that have been reserved or exchanged. The
forward sales have significantly increased over the past three
years as the division has grown.
Revenue (£m)
40.8
2012
60.7
2013
81.4
2014
Gleeson Homes:
forward sales
(£m)
10.8
2012
25.9
2013
44.2
2014
ProfitMeasures
The Group’s operating margin is an important measure of the implementation of the business plan. As Gleeson Homes has become
established in its restructured form, the Group’s operating profit margin has improved, resulting in a significant increase in
profitability.
Operating
margin
6.7%
2012
9.9%
2013
14.8%
2014
Profit before tax
(£m)
3.0
2012
CashMeasure
The cash balance is used as a measure of the strength of the
balance sheet and to confirm that the Group has the funds
necessary to fulfil its growth strategy.
Cash and cash
equivalents (£m)
13.9
12.2
2014
13.7
5.8
2013
9.9
2012
2013
2014
ReturnMeasures
The return measures illustrate how the business plan is improving shareholders’ returns over time. A combination of revenue and
margin improvements is delivering growth in the return on invested capital .
Return on
capital employed
13.7%
10.2%
Net assets per
share (pence)
190
212
241
3.6%
2012
2013
2014
2012
2013
2014
Non-FinancialKPis
Land is a key raw material for the Group’s businesses .
Gleeson Homes:
land pipeline,
plots
3,790
3,860
5,065
Gleeson Strategic
Land: gross acres
3,653
3,582
3,802
2012
2013
2014
2012
2013
2014
Page 7
MJ Gleeson Group plc
Financial Review
HiGHLiGHtS
Revenue
increasedby34%to
£81.4m
34%
Profitbeforetax
increasedby110%to
£12.2m
110%
Normalised
earnings
pershare*
increasedby62%
to17.2pence
62%
Netassets
pershare
increasedby14%to
241pencepershare
14%
Dividendfor
theyear
increasedby140%to
6.0pence
140%
* Normalised earnings per share exclude the
impact of recognising unrecognised tax losses of
£8.3m in 2014 (2013: £5.3m).
Page 8
ConsolidatedStatementofComprehensiveincome
Revenue increased by 34% in the year to £81.4m (2013: £60.7m).
The revenue of Gleeson Homes increased by 47% to £70.6m
(2013: £47.9m) due to a combination of the 38% increase in
volume to 561 homes sold (2013: 406 homes) and a 2.9% increase
in the average selling price to £121,000 (2013: £118,000).
Revenue for Gleeson Strategic Land decreased by £1.9m to
£10.8m as the majority of the transaction in the year to 30 June
2014 were promotional agreements, whereby only the Group’s
fee is recorded as revenue rather than the full land value.
Gross profit increased by 48.2% to £26.7m (2013: £18.0m). The
gross profit of Gleeson Homes increased by 54.9% to £20.6m
(2013: £13.3m) due to the increase in volume, the continuing
reduction of units sold from older lower margin sites, improved
margin being recorded due to our stringent approach to cost
control and the inclusion of an exceptional credit of £0.8m due
to the reversal of a debtor provision (2013: £1.0m). The gross
profit of Gleeson Strategic Land increased by 29.6% to £6.1m
(2013: £4.7m) primarily due to the increase in acres sold during
the year.
Administrative expenses include the sales & marketing costs for
Gleeson Homes, along with the administrative overheads for the
whole Group. Overall Administrative expenses increased by
£2.6m (22%). Sales & marketing costs increased by £1.1m being
an increase of 27% in order to service new sites and generate
increased revenue of 47%. Recurring administrative overheads
increased by £1.0m mainly due to increased employment and
recruitment costs.
Discontinued operations incurred a loss of £0.2m during the year
(2013: profit £1.3m). The loss relates to the costs of Gleeson
Construction Services, whose only activity is limited to resolving
occasional contractual claims from the businesses that were sold
in 2005 and 2006. The profit in 2013 included the profit on disposal
of the Group’s last remaining PFI investment, totalling £1.4m.
Financing
Financial income of £0.5m (2013: £0.4m) consists primarily of
the unwinding of discounts on deferred receipts. Interest earned
on unwinding of deferred receipts was higher than the prior year
as a result of a higher level of deferred receipts outstanding.
There is no interest on joint venture loans recorded within
discontinued operations for the current year as the joint venture
was disposed of in February 2013 at which point interest ceased
to be accrued (2013: £0.2m).
Financial expenses of £0.4m (2013: £0.6m) consist of interest
MJ Gleeson Group plc
payable on bank loans and overdrafts, bank charges and interest
and unwinding of discounts relating to deferred payments.
Financial expenses are lower in the current year, primarily due
to the interest expense on deferred payments for land
acquisitions being lower due to a lower level of deferred
payments outstanding. The cost of bank charges increased in the
year due to the entering into a three year £20m facility.
tax
A net tax credit for continuing operations, of £5.5m (2013:
£4.3m) has been recorded for the year. The tax credit includes
an exceptional credit relating to deferred tax of £8.3m (2013:
£4.2m). Deferred tax assets relating to unused tax losses have
been recognised to the extent that it is probable that taxable
profits will be available against which the asset can be utilised.
The Group now has £57.6m (2013: £67.9m) of tax losses, of which
£49.2m have been recognised as a deferred asset, which can be
carried forward indefinitely.
The tax charge attributable to discontinued operations was £0.1m
(2013: £10k), so the total tax credit was £5.4m (2013: £4.3m).
The net deferred tax asset recorded within the Statement of
Financial Position totals £10.5m (2013: £5.0m).
Earningspershare
Basic earnings per share improved by 52% to 32.9p (2013: 21.7p).
The normalised basic earnings per share, which excludes the
impact of recognising unrecognised tax losses of £8.3m (2013:
£5.8m) improved by 62% to 17.2p (2013: 10.6p).
Dividend
Against the background of significant improvements in the results
of Gleeson Homes’ and Gleeson Strategic Land, the Board has
proposed a final dividend of 4.9 pence per share (2013: 2.0 pence
per share). Combined with the interim dividend, the dividend for
the full year totals 6.0 pence per share being an increase of 140%
on the prior year (2013: 2.5 pence per share).
Statementoffinancialposition
During the year to 30 June 2014, shareholders’ funds increased
by £16.0m to £128.1m (2013: £112.1m). Net assets per share
increased to 241 pence, an increase of 14% year on year
(2013: 212 pence).
September 2012
FerndaleCourt,WingateApril2014
Page 9
MJ Gleeson Group plc
Financial Review continued
In the year, non-current assets increased by £5.4m to £25.4m
(2013: £20.0m). The primary reason for this increase is the £5.5m
increase in the deferred tax asset balance from £5.0m to £10.5m
following the recognition of tax losses. The non-current trade
receivable and other receivable represents deferred receivables
from shared equity loans provided to our customers. The carrying
value of this receivables portfolio was £8.1m at 30 June 2014
(2013: £7.8m). The Government’s Help to Buy scheme
commenced during 2013 and has resulted in a much reduced
need from customers for the Group’s equity support.
Current assets increased by £7.0m to £127.2m (2013: £120.2m),
with inventories increasing by £3.9m to £100.7m (2013: £96.8m),
and cash balances increasing by £3.8m to £13.7m (2013: £9.9m).
Total liabilities decreased by £3.5m to £24.5m (2013: £28.0m),
with non-current liabilities decreasing by £1.9m to £0.1m (2013:
£2.0m) and current liabilities decreasing by £1.6m, to £24.4m
(2013: £26.0m). Gleeson Homes had drawn down on the
Government’s Get Britain Building Fund in the year to 30 June
2013, with £2.2m outstanding at that date, of which £1.9m was
non-current. At 30 June 2014 the Get Britain Building liability
stood at £1.9m all of which is now due within 12 months. Land
creditors within Trade and Other payables totalled £7.6m
(2013: £9.8m).
Cashflow
The Group generated £3.8m (2013: £3.9m utilised) of cash in the
year, resulting in a net cash balance at 30 June 2014 of £13.7m
(2013: £9.9m).
Operating cash flows before working capital movements,
generated £12.1m (2013: £4.2m). Investment in working capital
of £6.4m (2013: £12.9m) resulted in cash generated from
operating activities of £5.3m (2013: £8.9m utilised. Cash
generated from investing activities totalled £0.3m (2013: £2.8m),
with £3.3m of the cash generated in the prior year due to the
sale of the Group’s last PFI investment. Net cash flows from
financing activities utilised £1.8m (2013: £2.1m generated),
including £1.6m (2013: £0.3m) on dividend payments.
treasuryriskmanagement
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 deposits funds only 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.
Bankfacilities
The Group entered in to a three year £20m revolving working
capital facility with Lloyds Bank Commercial Banking in
December 2013. The facility provides the Group with the
additional flexibility and capacity for growth.
Pension
The Group contributes to a defined contribution pension scheme.
A charge of £0.5m (2013: £0.4m) was recorded in the Income
Statement for pension contributions. The Group has no exposure
to defined benefit pension plans.
BroadParkHappyBuyer,SarahKerrigan-February2014
JoylonHarrison
Chief Executive Officer
26 September 2014
AlanMartin
Chief Financial Officer
26 September 2014
Page 10
MJ Gleeson Group plc
May2013
BroadPark,SouthElmsallApril2014
Page 11
MJ Gleeson Group plc
Operating Risk Statement
In common with other organisations, the Group faces risks that may affect its performance. The Group has established and operates
a system of internal control and risk management procedures, in order to identify, control and monitor the risks at various levels within
the organisation. These risks include but are not limited to the following:
Risk
Description
Mitigation
Economicenvironment
The
impact of economic fragility and
Any uncertainty in the wider economy,
• Sites are selected to meet the needs of the
government austerity measures.
including government austerity measures,
local community.
will affect buyer confidence and the demand
• Prices and incentives are regularly reviewed.
for new houses. This could have a negative
• Lead indicators of the housing market,
impact on revenues, profits, cash generation
such as visitors to sites and reservation
and the carrying value of the Group’s assets.
rates are closely monitored.
• A cautious approach to debt funding is
maintained.
Mortgageavailability
The limited availability of mortgages for first
The availability of mortgage
finance,
• Gleeson Homes provides a range of
time buyers.
particularly the deposit requirements for first
customer assistance packages.
time buyers, is crucial to customer demand.
• We continually innovate to find additional
Restrictions on mortgages granted could
ways to assist customers to buy a home.
reduce demand for new homes and impact on
• We work with key lenders to ensure
the Group’s revenues and profits.
products are appropriate.
Land
An inability to source sufficient land at an
Gleeson Homes needs to acquire consented
• We have a clearly defined strategy and
acceptable cost to meet the Group’s business
land at appropriate prices and in appropriate
geographic focus.
needs.
areas in the North of England in order to
• There is a formal appraisal process and
construct and sell homes to deliver profit.
rigorous adherence to rates of return.
Gleeson Strategic Land needs to acquire
control of land in the South of England so that
it can promote it through the planning system
and subsequently sell it in order to deliver
profit.
Planningpolicyandregulations
The potentially damaging uncertainties in the
Increased complexity in some aspects of the
• We have a very high level of in-house
planning regime may affect the Group’s
planning process may slow down, or increase
expertise devoted to monitoring and
ability to secure planning consents on a
the cost of, the delivery of consented land for
complying with planning regulations and to
timely basis.
development or sale and so impact on the
achieving
implementable
planning
Group’s revenues and profits.
consents.
• We consult with central government,
parliament and local authorities, both
directly and via industry bodies, in order to
understand proposed changes to regulations
and to highlight potential issues.
Page 12
MJ Gleeson Group plc
Risk
People
Description
Mitigation
The loss of key staff or the failure to attract,
• We have programmes that generously
An inability to attract, develop or retain good
develop and retain people with the right skills
reward the achievement of performance
people.
may have a detrimental impact on the
targets.
business.
• The Group encourages employee share
ownership.
• Our apprenticeship schemes enable us to
identify and secure the loyalty of talented
individuals at an early age.
• We perform regular performance and
development reviews.
• We monitor staff turnover and benchmark
remuneration against competitors.
Availabilityofrawmaterialsand
subcontractors
Shortages or increased cost of materials or
• The Group has multiple suppliers for both
An inability to secure materials and skilled
skilled labour, the failure of key suppliers, or
labour contracts and material supplies.
labour on a timely basis at suitable prices.
the
inability to secure supplies upon
• The Group seeks to partner with the supply
appropriate credit terms could increase costs
chain.
and delay construction.
Health&Safety
A failure to prevent unsafe practices within
Health and safety breaches can result in
• Our documented policies and procedures
our construction activities, causing injury or
injuries to employees, subcontractors and
are regularly reviewed and modified in
death.
site visitors, delays
in construction,
order to ensure continuous improvement.
additional cost,
reputational damage,
• Dedicated Health & Safety personnel
criminal prosecution and civil litigation.
ensure implementation and adherence to
these policies and procedures.
• Performance is reviewed both by local
management and the main Board.
Latentdefects
Financial losses may arise from latent defects
The Group may be exposed to latent defects
• We have experienced personnel, dedicated
that may arise on completed projects during
which occur during the liability period on
to dealing with such claims.
the liability period.
completed construction contracts that have
• Insurance policies are in place to minimise
not been transferred to the purchaser of the
Group liabilities, wherever possible.
relevant construction business. Although
•
The provisions relating to completed
subcontractors will normally resolve such
contracts are reviewed on a regular basis.
defects, the Group will become liable if the
subcontractor
is no
longer
trading,
potentially resulting in additional cost.
Page 13
MJ Gleeson Group plc
Corporate Social Responsibility Report
The Group 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.
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. There were 2 reportable injuries
in the year under the Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations (“RIDDOR”). In the previous
3 years the Group reported zero, one and two injuries per year
respectively under RIDDOR.
The overall Accident Incidence Rate (“AIR”) was 268 in spite of
a further sizable increase in construction activity and is below
the house building industry average of 330 injuries per 100,000
employees, as published by the HBF (Housebuilders Federation)
and the Health & Safety Executive. The AIR is an industry-wide
indicator of health & safety performance.
Communitymatters
The Group is heavily engaged in 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
enhancements to the environment and the life of the community
itself. The Group understands the importance of involving the
community before and during the construction of our
developments, and leaving a beneficial legacy once our works
are complete. The following are just some of the ways the Group
helps local communities:
theLivingWage:We are the first major house builder to be
accredited as a Living Wage employer.
Secured by Design: Gleeson Homes was chosen by the
Chief Police Officers Association to work with them to
produce a new Secured by Design National House Type Approval
Scheme for new homes. This partnership has resulted in the
ability of house builders to register their house designs when
built to this standard, on a National database and this will save
time when planning applications are being made. Secured by
Design comprises a series of practical standards that will ensure
that complying homes will be appropriately secure. Gleeson
Homes was the first company to be registered under the
new scheme.
the Gleeson Community Sports Foundation: Our sports
foundation provides sponsorship opportunities for local junior
sports clubs. Local teams are invited to apply annually for
funding towards sports kit.
Engagement with local schools: We work with schools to
educate children on the dangers of playing on building sites.
NewcomenPrimarySchoolHealthandSafetytalk
Page 14
MJ Gleeson Group plc
Webuildhomesinareasthatareofteninchallengingcommunitiesandcrimepreventionisoftena
seriousproblem.AsaresultofthiswehavebeenworkingwiththeAssociationofChiefPoliceOfficers
toproduceaSecuredbyDesignNationalHousetypeApprovalscheme.
theobjectoftheexercisehasbeentoprovidesuperiorlevelsofsecurityatnoadditionalcosttothe
homebuyer,whilstalsodemonstratingareasonableapproachtocrimeprevention.
Asaresultofourcloseinvolvementindesigningtheschemewearethefirsthousebuildertosignup
forthenewNationalHousetypeApprovalScheme.
GleesonHomesacceptingthefirstSecuredbyDesignHousetypeapprovalawardgiventoadeveloper
Background: Michael Brooke (SBD Development Officer, SBD), Tony Lee (Gleeson’s Technical Director), Maxine Baxter (Gleeson’s Sales
Manager Yorkshire Region), Dan Burgoyne (Gleeson’s Technical Manager), John Shillito (South Yorkshire Police Force ALO)
Foreground – Bryan Simpson (Gleeson’s Regional Director Yorkshire) and Richard Childs (SBD Managing Director)
Page 15
MJ Gleeson Group plc
Corporate Social Responsibility Report continued
ApprenticeshipSchemes: We are dedicated to giving people the
opportunity to start a career in the housebuilding industry. We
provide training packages for local unemployed people to include
apprenticeships in conjunction with a local college.
Localjobsforlocalpeople – We are committed to giving priority
of employment to people living within two miles of each site. We
will assist local labour initiatives and make lasting contributions
to the local community and economy.
DesignforDisability – We carry out alterations to our homes free
of charge for disabled occupants. We acknowledge that people
with apparently identical disabilities may have totally different
needs and we are happy to adapt our homes to suit their
individual needs, such as installing wet rooms and changes to the
internal configuration.
Environmentalmanagementsystems
The Group’s business units each have an environmental
management system which controls how environmental
performance is managed. At the operational level, the
environmental management system is contained within our
construction planning.
The Group’s environmental strategy is focused on:
• minimisation of environmental risk and maximisation of
environmental opportunity; and
• ensuring knowledge and understanding is at a level where all
employees are aware of the environmental responsibilities
involved in their job.
NewApprentices2014
Back Row L-R: Connor Hallinan, 17, Apprentice Bricklayer. Joe Fynan, 17, Apprentice Joiner. Alex Wilson, 17, Apprentice Joiner. Curtis
Mune, 18, Apprentice Joiner. Jak Corrie, 16, Apprentice Bricklayer.
Front Row L-R: Jack Pringle, 16, Apprentice Bricklayer. Liam Brown, 17, Apprentice Bricklayer. Joseph Felce, 18, Apprentice Bricklayer.
Kyle Shepherd, 16, Apprentice Joiner.
Page 16
MJ Gleeson Group plc
Gleeson is the first major housebuilder to become accredited
to the Government’s Living Wage initiative.
the Living Wage is an hourly rate of pay which is set independently and updated annually. the
accreditation applies to all Gleeson’s directly employed and regularly contracted staff and all
subcontractorshavealsojoinedtheprogramme.
Wastemanagement:minimisationandrecycling
Site waste management plans are put in place at the start of
each project. Suitable recovery or disposal arrangements are
made for all waste. Arrangements are identified for dealing with
all waste in line with Environmental Agency recommendations.
timberpolicy
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.
Greenhousegasreporting
Our greenhouse gas emissions for the year ended 30 June 2014
were calculated in accordance with the financial control
approach under the UK Government’s GHG Protocol Corporate
Accounting and Reporting Standard (revised edition) and emission
factors for Company Reporting 2014.
The calculation incorporates the six Kyoto gasses including
carbon dioxide, methane, nitrous oxide and hydro-
fluorocarbons and reports them in terms of carbon dioxide
equivalents (CO2e).
Page 17
MJ Gleeson Group plc
Corporate Social Responsibility Report continued
CO2 emissions
tonnesCO2e
2014
Individual employee performance is regularly reviewed using the
Group’s Performance Development Review process and
objectives and targets are set for personal development.
Scope 1 – Emissions from combustion of fuel
Scope 2 – Electricity, heat, steam and cooling
purchased for own use
Total emissions
Emission per £m revenue
975
367
1,342
16.48
Ourpeople
It is the Group’s policy to ensure that it provides a safe,
professional and stable working environment, that all employees
are afforded equal opportunities and are free from unlawful
discrimination regardless of their age, sex, sexual orientation,
colour, race, religion or ethnic origin and that disabled persons
are not disadvantaged.
At 30 June 2014, we employed 228 people, comprising 157 males
and 71 females. Our senior management team comprises 18
employees of which 3 (17%) are female.
The Group believes its employees are fundamental to its success
and has continued to invest in them through training and
development programmes. The Group actively encourages all of
its employees to be fully engaged in the identification of their
own training needs in order to achieve their full potential and to
meet the requirements of the business.
We have continued to increase the number of apprentices within
the Group to support the Group’s growth strategy. By the year
end there were 21 apprentices employed by the Group (2013:
12) and we anticipate that further development of the
apprenticeship programme will continue over future years.
All of the Group’s site-based employees are accredited under the
Construction Skills Certification Scheme.
Charitabledonations
Charitable donations in 2014 totalled £10,700 (2013: £10,225).
StrategicReportApprovalStatement
The Strategic Report, contained in pages 4 to 18 has been
approved by the Board of Directors and is signed on its behalf by
JolyonHarrison
Chief Executive Officer
26 September 2014
has
design
HollyGristofMonteneyPrimary
School and the Lord Mayor of
Sheffield,CouncillorRippon,are
shownopeningtheKildareshow
home at Parson Green where
Holly’s
been
replicated. We often run a
‘designabedroom’competition
with schools local to our sites.
this is where the pupils are
invited to design their dream
bedroom.thewinnerischosen
and their design replicated in
oneofourshowhomes.
Page 18
MJ Gleeson Group plc
Chairman’s Introduction
I am pleased to have the opportunity to introduce this report which describes our corporate governance arrangements during the year
ending 30 June 2014 and explains how these arrangements have worked for the benefit of the Company and its shareholders.
As a premium listed company on the London Stock Exchange, the Group is subject to the UK Corporate Governance Code. The Board
believes that compliance with this Code assists it to provide the Group with ethical and effective leadership.
As Chairman, I am responsible for the leadership of the Board and for ensuring that it fulfils its responsibilities to all of the Group’s
stakeholders.
The three main requirements of the Board’s successful operation are:
• the maintenance of an appropriate balance among Board members of relevant skills and experience;
• the timely and regular provision to all Board members of the information that they need to monitor the performance of the Group’s
business units and to understand the conditions in which they are operating;
• the presence of non-executive directors with sufficient expertise and independence to challenge the executive directors constructively
on operational issues and to contribute to the development of corporate strategy.
Appointments to the Board are always made on merit against objective criteria and the Board strongly supports the principle of
boardroom diversity. The Board, its Committees and individual Directors are subject to annual performance evaluation and, although
this is not a requirement of the Code, all Directors are subject to annual re-election by shareholders.
The Board considers that this Annual Report is fair, balanced and understandable.
The remainder of this report contains the narrative reporting variously required by the Code, the Listing Rules, and the Disclosure Rules
and Transparency Rules.
DermotGleeson
Chairman
26 September 2014
Page 19
MJ Gleeson Group plc
Board of Directors
DermotGleeson,MA(Cantab)
Chairman
Joined the Board in 1975. Appointed Chief Executive in 1988 and Chairman in 1994. Relinquished
the post of Chief Executive in 1998. Currently a Non-Executive Director of GB Group Holdings Limited
(the parent company of GB Building Solutions Limited, previously Gleeson Building Limited).
Previously employed in the Conservative Party Research Department, the European Commission and
Midland Bank International Limited. Formerly, a Trustee of the British Broadcasting Corporation,
Chairman of the Major Contractors Group, a Board Member of the Housing Corporation, a Director
of the Construction Industry Training Board and a Trustee of the Institute of Cancer Research. He is
Chairman of the Nomination Committee.
JolyonHarrison,FCiOB,FioD,FCMi
ChiefExecutiveOfficerandManagingDirector,GleesonHomes
Appointed to the Board in July 2010 and appointed Chief Executive on 1 July 2012. Jolyon joined the
Group in November 2009 as Managing Director of Gleeson Homes. He 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 Home Builders Federation.
Formerly a member of the North East Housing Board and a Council member of the National House
Building Council. He is the Board member responsible for health and safety matters.
AlanMartin,BSc,ACA
ChiefFinancialOfficerandCompanySecretary
Appointed to the Board in January 2009. Alan joined the Group in November 2006 as Group Financial
Controller from Psion PLC where he held a similar role. Alan qualified as a Chartered Accountant in
1990, following which he specialised in corporate recovery with PricewaterhouseCoopers in London
and in Sydney, Australia.
Page 20
MJ Gleeson Group plc
RossAncell,ACA(NZ)
Non-ExecutiveDirector
Appointed to the Board in October 2006. Ross is Chairman of Churngold Construction Holdings Limited
and Independent Non-Executive Director of Galaxy Entertainment Group Limited (listed in Hong Kong).
He is the Senior Independent Director and Chairman of the Remuneration Committee and member of
the Audit and Nomination Committees.
ColinDearlove,BA,FCMA,CGMA
Non-ExecutiveDirector
Appointed to the Board in December 2007. Colin was at Barratt Developments 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. He is Chairman of the Audit Committee and member
of the Remuneration and Nomination Committees.
ChristopherMills
Non-ExecutiveDirector
Appointed to the Board in January 2009. Founder of Harwood Capital Management Group and
formerly Chief Investment Officer of J O Hambro Capital Management Limited from 1993 to 2011.
He is also Chief Executive and Investment Manager of North Atlantic Smaller Companies Investment
Trust PLC, a UK listed investment trust. Christopher is a director of several publicly quoted
companies, including Catalyst Media Group plc, Bioquell PLC and Cyprotex PLC.
Page 21
MJ Gleeson Group plc
Corporate Governance Statement
The Board remains committed to achieving and maintaining a
high standard of corporate governance.
independent advice, at the Company’s expense. Training is
arranged, as required.
During the period under review, the Company, as a premium
listed company, was subject to the September 2012 edition of
the UK Corporate Governance Code issued by the Financial
Reporting Council (“FRC”). The Code recognises that not all of
its provisions are necessarily relevant to smaller listed companies
and the Code states that departures from its provisions should
not be automatically treated as breaches of the Code. The
Directors believe that the Code is correctly applied as and where
relevant to the Company and are satisfied that in areas of
departure from the Code the departure is for good reason.
Further explanations of how the main principles and the
supporting principles have been applied are set out on page 25.
BoardofDirectors
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;
• acquisition of land;
• 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 six Directors, four
of whom are Non-Executive. All directors served throughout the
year to 30 June 2014. The Directors’ biographies are set out on
pages 20 and 21.
On joining the Board, arrangements are made for all new
Directors to meet their colleagues and other senior management,
to ensure an adequate induction to the Group.
On resignation, any concerns raised by an outgoing Director are
circulated by the Chairman to the remaining members of the
Board.
Directors and Officers’ Insurance is procured through the
Company’s Insurance Brokers, Arthur J Gallagher International.
The 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.
Conflictsofinterest
Following the introduction of s.175 of the Companies Act 2006
on 1 October 2008 and the authority given by shareholders at the
2008 AGM 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.
Boardeffectiveness
The roles of the Chairman, Dermot Gleeson, and the Chief
Executive Officer, Jolyon Harrison, are clearly defined and they
act in accordance with the main and supporting principles of the
Code.
All of the Directors have access to the advice and services of the
Company Secretary and may, in furtherance of their duties, take
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;
Page 22
MJ Gleeson Group plc
facilitating the contribution of the Non-Executive Directors; and
ensuring constructive relations between the Executive and Non-
Executive Directors.
The Chairman is in regular contact with the Chief Executive
Officer to discuss current matters and has visited Group
operations outside the Board meeting calendar to meet divisional
directors and managers.
Boardbalanceandindependence
During the year, Ross Ancell and Colin Dearlove were the Board’s
independent Non-Executive Directors and
fulfilled the
requirement that a “smaller company”, as defined by the Code,
should have two such directors. Ross Ancell is the Senior
Independent Non-Executive Director.
Board
No of scheduled meetings
Attendance
Dermot Gleeson
Ross Ancell
Colin Dearlove
Christopher Mills
Jolyon Harrison
Alan Martin
6
6
6
6
4
6
6
Audit Remuneration Nomination
Committee Committee
1
Committee
4
3
*
4
4
*
**
**
***
3
3
*
***
**
1
1
1
*
**
**
* 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 the meetings to which he was invited.
Neither Dermot Gleeson, Chairman, who has previously been
Executive Chairman and, prior to that, has held the post of
Chairman and Managing Director, nor Christopher Mills, who
represents a major shareholder, North Atlantic Value LLP, are
considered to be “independent” within the definition of that
term contained in the Code.
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.
A primary duty within the Nomination Committee’s Terms of
Reference is that candidates for appointment to the Board will
be based upon merit. The Board recognises the benefits of
diversity and we consider that diversity includes, but is not
limited to, personal attributes, gender, ethnicity, age, disability
and religious beliefs. Our aim is to promote equality, respect
and understanding and to avoid discrimination. Whilst we value
the recommendation of the Davies Report, we do not have a
specific objective for the number of female Directors. We do
not currently have any female main Board Directors and we are
committed to ensuring that appointments made by the Board,
and at senior management level, are made on merit.
The Nomination Committee will ensure that it only uses
executive search firms which have signed up to the voluntary
Code of Conduct addressing gender diversity and best practice,
that females are given the same consideration and opportunity
as male applicants and that gender diversity is considered
specifically when drawing up a list of potential candidates.
BoardandCommitteemeetings
During the year, the Board met on six occasions. Board packs,
which include a formal agenda, are circulated in advance of such
meetings. Attendance by individual Directors at Board meetings
and by members at Committee meetings was as follows:
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.
Boardevaluation
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 the other 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.
Page 23
MJ Gleeson Group plc
Corporate Governance Statement continued
Riskmanagementandinternalcontrol
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 Code. This process
takes the form of a formal Risk Management Policy supported by
financial and management controls that are operated Group-
wide and which are subject to both internal review by the Chief
Financial Officer and external review as part of the statutory
audit carried out by the Auditor.
The Group’s system of internal control includes the following
processes:
• The Board and management committees meet regularly to
monitor performance against key performance indicators
which include cash management and financial and operational
measures. A variety of financial and non-financial reports 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
role effectively. Key objectives and
opportunities for improvement are identified through annual
performance and development reviews.
their
• 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 Chief Financial Officer 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
Page 24
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.
Whistleblowingarrangements
The Company has operated a ‘whistleblowing’ arrangement
throughout the year whereby all employees of the Group are
able, via an independent external third party, to confidentially
report any malpractice or matters of concern they have regarding
the actions of employees, management and Directors and any
breaches of the Company’s Anti-Bribery and Corruption Policy.
Anti-briberyandcorruptionpolicy
The Company values its long-standing reputation for ethical
behaviour and integrity. Conducting its business with a zero
tolerance approach to all forms of corruption is central to these
values, the Group’s image and reputation. The Company policy
sets out the standards expected of all Group employees in
relation to anti-bribery and corruption and the Board has overall
responsibility for ensuring this policy complies with the Group’s
legal and ethical obligations and that everyone in our
organisation complies with it.
This policy is also relevant for third parties who perform services
for or on behalf of the Group. The Group expects those persons
to adhere to this policy or have in place equivalent policies and
procedures to combat bribery and corruption.
Shareholderrelations
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 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.
MJ Gleeson Group plc
The Company uses the Investor Relations section of its website,
www.mjgleeson.com, to publish statutory documents and
communications to shareholders, such as the Annual Report and
Financial Statements, the Half-yearly Report, as its default
method of publication. The website is designed to be a
communication tool for present and potential investors and
includes all London Stock Exchange announcements and press
releases over the past twelve months and also links to the
websites of the Group’s business units.
Compliancestatement
The Company has complied with the vast majority of the
provisions of the September 2012 edition of the UK Corporate
Governance Code applicable to all premium listed companies.
The following provisions are those where the Company is not
strictly in compliance with the Code. For the reasons stated the
Directors believe that the Company’s stance is justified in this
respect.
A.3.1, B.1.1
Dermot Gleeson, Chairman, has previously been Executive
Chairman and, prior to that, has held the post of Chairman and
Managing Director. The Board has considered the guidance set
out in the Code and believes that it is in the Company’s best
interests that Dermot Gleeson be retained as Chairman.
A.4.2, B.6.3
The performance of the Chairman is appraised by both the Non-
Executive and Executive Directors. As MJ Gleeson Group plc is a
smaller listed company, it is felt that this is the most appropriate
approach.
NominationCommittee
The Nomination Committee (“the Committee”) is a Board
Committee consisting entirely of Non-Executive Directors. The
members of the Committee are Dermot Gleeson (Chairman), Ross
Ancell and Colin Dearlove.
The Committee met once during the year. Attendance at this
meeting by the Committee members is shown in the table on
page 23.
The principal responsibility of the Committee is to consider
succession planning and appropriate appointments to the Board
and to senior management, so as to maintain an appropriate
balance of skills, knowledge and experience within the Company.
The 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.
RemunerationCommittee
The Remuneration Committee is responsible for setting the
remuneration of the Chairman and the Executive Directors. The
members of the Remuneration Committee are Ross Ancell
(Chairman) and Colin Dearlove. The Committee met four times
during the year to 30 June 2014 to discuss, consider and approve
the policy and remuneration of the Chairman and the Executive
Directors. The Committee’s key action during the course of the
year was the review and implementation of the Company’s
remuneration policy. In addition the Committee considered in
detail the Executive Directors’ remuneration, annual bonus plan
and long term incentive plan.
Further details of the remuneration policy and the package for
each Director serving during the year to 30 June 2014 are set out
in the Remuneration Report on pages 33 to 44.
AuditCommittee
The Audit Committee (“the Committee”) is a Board Committee
consisting entirely of Non-Executive Directors. The members of
the Committee are Colin Dearlove (Chairman) and Ross Ancell.
Colin Dearlove, as Chairman of the Committee, has recent
relevant financial experience as Group Finance Director of
Barratt Developments plc. Ross Ancell also has recent relevant
financial experience as Chairman of Churngold Construction
Holdings Limited.
The Chairman invites the Chief Executive Officer and the Chief
Financial Officer, and other senior management to attend, along
with the Group’s Auditors, when required. The Committee met
on four occasions during the year, with both members being in
attendance for all meetings. The Committee regularly meet with
the auditor and the internal auditor without the presence of the
Company’s management.
Page 25
MJ Gleeson Group plc
Corporate Governance Statement continued
Priorities
The Committee’s key priorities are the effective governance over
the Group’s financial reporting, the adequacy of related
disclosures, the performance of the Group Risk management
function and the management of the Group’s systems of internal
control, business risks and related compliance activities. The
Committee also reviews and monitors the performance and
independence of the Group’s external auditor, the provision of
additional services to the Group by the auditor and oversees the
Group’s relationship with them.
The significant issues considered by the Committee during the
year have been assessed by determining the key risks of
misstatement of the Group’s financial statements relating to:
• the carrying value of the Group’s inventories and profit
recognition;
• the recognition of deferred tax assets.
The Committee monitors the effectiveness of the internal
controls exercised over the key processes employed by the Group
in site development activities and the forecasting of future costs.
The Committee receives regular reporting as to management’s
adherence to the Group’s policies and procedures in both of
these critically important areas of the business. Similarly the
Committee ensures the approach adopted by management in
recovering the cost of both land and work in progress remains in
line with established Group policies and procedures through
regular risk monitoring reports.
The Committee receives regular reports regarding the homes
sales and the costs and possible future costs relating to individual
sites. The Committee has reviewed the assumptions adopted by
management supporting the margin to be recognised on sale of
individual units and concluded that they are appropriate.
The Committee has reviewed the assumptions adopted by
management supporting the quantum of tax losses that will
probably be used against future profits. The Committee has
concluded that these assumptions are appropriate resulting in
the recognition of deferred tax assets.
The other key actions of the Committee during the year were:
• whether the Group can continue to adopt the going concern
basis in preparing the accounts;
• review of half year and annual results;
• review of the Group’s Risk Register; and
• review of legacy contracts of the discontinued operations.
Committee meetings generally take place prior to Board
meetings and the Committee Chairman provides the Board with
Page 26
a report on the activity of the Committee and the matters of
particular relevance to the Board in the conduct of their work.
Externalaudit
KPMG LLP is the Group’s external auditor and they produce a
detailed audit plan identifying their assessment of key risks each
year. For the 2014 financial year the primary risks identified were
in relation to the margin to be recognised on the sale of homes
and the carrying value of the Group’s land and work in progress.
The Committee formulates and oversees the Company’s policy
on monitoring external auditor objectivity and independence in
relation to non-audit services. The auditor is excluded from
undertaking a range of work on behalf of the Group to ensure
that the nature of non-audit services performed or fee income
earned relative to the audit fees does not compromise, and is
not seen to compromise, the auditor’s independence, objectivity
or integrity. The auditor is therefore not allowed to carry out
appraisal or valuation services, management functions and
litigation support, actuarial services, legal, accounting or
remuneration services on behalf of the Group. From time to time
non-audit services are put out to tender to a number of suitable
firms. The ratio of audit fees to non-audit fees paid to the
auditor in 2014 financial year was 1 to 2.
The Committee has reviewed and is satisfied with the
performance of KPMG LLP. Details of the audit fee and fees paid
to KPMG LLP for non-audit services are on page 61.
The Committee assesses the effectiveness of the external audit
process annually with the auditor and the Company’s
management. The Committee holds private meetings with the
auditor on an annual basis. Matters discussed include the
auditor’s assessment of business risks and management activity
thereon, the transparency and openness of interactions with
management and confirmation that there has been no restriction
in scope placed on them by management. The Committee ensure
that the auditor has exercised its professional scepticism.
The auditor is required to rotate the audit partner responsible
for the Group audit every five years. The current lead audit
partner has now been in place for five years, which means that
this will be the last year that he is involved with the audit.
At the request of the Board, the Audit Committee considered
whether the 2014 Annual Report taken as a whole was fair,
balanced and understandable and whether it provided the
necessary information for shareholders to assess the Company’s
performance, business model and strategy. The Audit Committee
was satisfied that, taken as a whole, the Annual Report is fair,
balanced and understandable.
Directors’ Report
The Directors have pleasure in presenting the Annual Report and
the audited Financial Statements for the year ended 30 June 2014.
StrategicReport
In accordance with the requirements of the Companies Act 2006,
we present a fair review of the business during the year to 30
June 2014 and of the position of the Group at the end of the
financial year along with a description of the principal risks and
uncertainties faced in the Strategic Report on pages 4 to 18.
Corporategovernancestatement
The Disclosure Rules and Transparency Rules require certain
information to be included in a corporate governance statement
in the Directors’ Report. Information that fulfils the
requirements of the corporate governance statement can be
found in Governance on pages 22 to 26.
ResultsandDividends
The results are set out in the Consolidated Statement of
Comprehensive Income on page 48. The principal active
subsidiary companies affecting the profit or net assets of
the Group in the year are listed in note 15 to the Financial
Statements.
An interim dividend of 1.1 pence per share was paid to
shareholders on 4 April 2014 (2012: 0.5 pence). The Board
proposes to pay, subject to shareholder approval at the 2014
AGM, a final dividend of 4.9 pence per share (2013: 2.0 pence)
in respect of the 2014 financial year on 17 December 2014 to
shareholders on the register at the close of business on
21 November 2013. On this basis, the total dividend for the year
will be 6.0 pence per share (2013: 2.5 pence).
BusinessReview
The review of the development and performance of the business
of the Group during the year and the future outlook of the Group
is set out in the Chairman’s Statement on pages 2 and 3 and the
Strategic Report (Business Performance) on pages 5 to 10. Details
of the principal risks and uncertainties that the Company faces
are set out in the Strategic Report on pages 12 and 13. The key
performance indicators are set out in the Strategic Report on
page 7. The Group’s policy in respect of financial instruments is
set out within the Accounting Policies on page 54 to 58 and
details of credit risk, capital risk management, liquidity risk and
interest rate risk are given respectively in note 19.
GoingConcern
The Group’s business activities, together with the factors likely
to affect its future development, performance and position, are
MJ Gleeson Group plc
set out in the Strategic Report (Business Performance) on pages
4 to 6. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the
Strategic Report (Financial Review) on pages 8 to 10.
The Group meets its day-to-day working capital requirements
through its cash resources and the secured loan facility, which
was entered into in December 2013 with a renewal date of
December 2016. The current economic conditions create
uncertainty for all businesses over a number of risk areas. As part
of their regular going concern review the Directors specifically
address all the risk areas that they consider material to the
assessment of going concern. The report arising from these
discussions is made available to the auditors and the conclusion
is that the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational
existence for the foreseeable future and thus they continue to
adopt the going concern basis of accounting in preparing the
annual Financial Statements.
Politicaldonations
The Company made no political donations in the year or in the
previous year.
DirectorsandDirectors’interests
The current Directors of the Company and their biographical
details are shown on pages 20 and 21. None of the Directors have
any contracts of significance with the Company.
The beneficial and non-beneficial interests of the Directors and
their connected persons in the shares of the Company at 30 June
2014 and as at the date of this report are disclosed in the
Remuneration Report on page 41. Details of the interests of the
Executive Directors in share options and awards of shares can be
found on pages 41 to 42 within the same report.
AppointmentandreplacementofDirectors
In accordance with Code provision B.7.1, the Board has
determined that all Directors will be subject to annual re-
election by shareholders. The Company’s Articles of Association
(“Articles”) provide that at each AGM at least one-third of the
Directors shall retire from office and shall be eligible for
reappointment. In any event, at the next AGM of the Company,
to be held on 12 December 2014, all of the Directors will,
voluntarily, offer themselves for re-election. Of the Directors
standing for re-election, Jolyon Harrison and Alan Martin hold
service contracts that may be terminated by the Company with
a notice period of one year.
Page 27
MJ Gleeson Group plc
Directors’ Report continued
Sharecapital
The Company has one class of share in issue, being ordinary
shares with a nominal value of 2 pence each, with no right to
fixed income. During the year 277,597 shares were issued to
satisfy shares vesting under the Performance Share Plan. As at
26 September 2014, the Company has issued share capital of
53,697,481 ordinary shares, with a nominal value of £1.1m.
Further details are given in note 28.
Substantialshareholdings
On 26 September 2014, the shareholdings noted below,
representing 3% or more of the issued share capital, had been
notified to the Company. In addition, as at 26 September 2014,
Capita IRG Trustees Limited held 281,805 ordinary shares as
trustees of the Employee Share Purchase Plan.
Nameofshareholder
Number
ofshares
Proportion
oftotal
North Atlantic Value LLP
13,655,000
25.43%
Schroder Investment Management
Limited
Mrs J C Cooper & spouse*
7,305,510
2,815,365
13.60%
5.24%
* of which 542,800 are held in discretionary trusts of which she is a Trustee.
Directors’indemnity
Directors risk personal liability under civil and criminal law for
many aspects of the Company’s main business decisions. As a
consequence the Directors could face a range of penalties
including fines and/or imprisonment. In keeping with normal
market practice, the Company believes that it is prudent and in
the best interests of the Company and their best interests to
protect the individuals concerned from the consequences of
innocent error or omission.
As a result, the Company operates a Directors and Officers’
liability insurance policy in order to indemnify Directors and
other senior officers of the Company and its subsidiaries, as
recommended by the Corporate Governance Code. This insurance
policy does not provide cover where the Director or officer has
acted fraudulently or dishonestly.
In addition, subject to the provisions of and to the extent
permitted by relevant statutes, under the Articles, the Directors
and other officers throughout the year, and at the date of
approval of these Financial Statements, were indemnified out of
the assets of the Company against liabilities incurred by them in
the course of carrying out their duties or the exercise of their
powers.
Page 28
Employees
We are committed to ensuring that all employees, potential
recruits and other stakeholders are treated fairly and equitably.
The principles of equality and diversity are important to us and
advancement is based upon individual skills and aptitude
irrespective of sex, sexual orientation, race, colour, age,
disability, nationality or marital/civil partnership status. Full
consideration is given to the diverse needs of our employees and
potential recruits and we are fully compliant with all current
legislation. Our culture is aimed at ensuring that employees can
grow to their full potential. We seek to improve employee
retention by providing benefits that employees want including
the Group stakeholder pension (including life assurance
arrangements), private medical insurance, childcare vouchers
and income replacement (PHI) arrangements. Employee share
ownership continues to be encouraged through participation in
the Group Share Purchase Plan.
We are committed to developing our employees in order that
they can maximise their career potential and achieve their
aspirations and our aim is to provide rewarding career
opportunities in an environment where equality of opportunity
is paramount. Our policy for selection and promotion is based
on an assessment of an individual’s ability and experiences; we
take full consideration of all applicants on their merits and have
processes and procedures in place to ensure that individuals with
disabilities are given fair consideration.
Every possible effort is made by the Group to retain and support
employees who become disabled whilst in the employment of the
Group.
Employeeinvolvement
The Group regularly provides its employees with information on
matters of concern to them. We consult with our employees in
order to ensure that their views can be taken into account when
making decisions. We utilise our intranet site to disseminate
information and engage with our employees via manager
briefings.
Healthandsafety
The health and safety of our employees and others is paramount.
Further information on our approach to health and safety is
provided in the Corporate Responsibility Report on page 14.
MJ Gleeson Group plc
Restrictionsonvoting
A shareholder shall not be entitled to vote at any general
meeting or class meeting in respect of any shares held by him
unless all calls and other sums presently payable by him in
respect of that share have been paid.
Deadlinesforvotingrights
Full details of the deadlines for exercising voting rights in respect
of the resolutions to be considered at the AGM to be held on
12 December 2014 are set out in the Notice of AGM.
Dividendsanddistributions
The Company may, by ordinary resolution, declare a dividend to
be paid to the shareholders but no dividend shall exceed the
amount recommended by the Board. The Board may pay interim
dividends and also any fixed rate dividend whenever the financial
position of the Company justifies its payment in the opinion of
the Board.
Windingup
Under the Articles, if the Company is in liquidation, the liquidator
may, with the sanction of a special resolution of the Company
and any other authority required by law:
• divide among the shareholders in specie the whole or any part
of the assets of the Company and, for that purpose, value any
assets and determine how the division shall be carried out as
between the shareholders or different classes of shareholders;
or
• vest the whole or any part of the assets in trustees upon such
trusts for the benefit of shareholders as the liquidator with the
like sanction shall think fit.
Variationofrights
The Articles specify that the special rights attached to any class
of shares may, either with the consent in writing of holders of
three-fourths of the issued shares of that class or with the
sanction of a special resolution passed at a separate meeting of
such holders (but not otherwise), be modified or abrogated.
Greenhousegasemissions
All disclosures concerning the Group’s greenhouse gas emissions,
as required to be disclosed under regulations introduced by the
Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 are contained in the Corporate Responsibility
Report forming part of the Strategic Report on page 17 to 18.
DisclosureofinformationtoAuditor
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 Auditor is
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 auditor is
are aware of that information.
Shareholderadditionalinformation
Following the implementation of the EU Takeover Directive in
the UK, the Company is required to disclose certain additional
information where not covered elsewhere in this Annual Report.
Rightsandobligationsattachingtoshares
Subject to the Companies Act 2006 and other shareholders’
rights, any share may be issued with such rights and restrictions
as the Company may by ordinary resolution decide or, if no such
resolution has been passed or so far as the resolution does not
make specific provision, as the Board of Directors for the time
being of the Company (the Board) may decide. Subject to the
Companies Act 2006, the Articles and any resolution of the
Company, the Board may deal with any unissued shares as it may
decide.
AmendmenttotheArticlesofAssociation
Any amendments to the Articles of Association may be made in
accordance with the provisions of the Companies Act 2006 by way
of special resolution.
Voting
Under and subject to the provisions of the Articles and subject
to any special rights or restrictions as to voting attached to any
shares, on a show of hands, every shareholder present in person
shall have one vote and on a poll every shareholder who was
present in person or by proxy shall have one vote for every share
of which he is the holder. Under the Companies Act 2006,
shareholders are entitled to appoint a proxy to exercise all or
any of their rights to attend and to speak and vote on their behalf
at a general meeting or class meeting.
Page 29
MJ Gleeson Group plc
Directors’ Report continued
transferofshares
Under and subject to the restrictions in the Articles, any
shareholder may transfer all or any of his shares in certificated
form by transfer in writing in any usual form or in any other form
which the Board may approve. The Board may, save in certain
circumstances, refuse to register any transfer of a certificated
share not fully paid up. The Board may also refuse to register
any transfer of certificated shares unless it is:
• in respect of only one class of shares;
• in favour of no more than four transferees;
• duly stamped or exempt from stamp duty;
• delivered to the office or at such other place as the Board may
decide for registration; and
• accompanied by the certificate for the shares to be transferred
and such other evidence (if any) as the Board may reasonably
require to show the right of the intending transferor to transfer
the shares.
Repurchaseofshares
Subject to the provisions of the Companies Acts and to any rights
conferred on the holders of any class of shares, the Company may
purchase all or any of its shares of any class, including any
redeemable shares.
AppointmentandreplacementofDirectors
The Directors shall not, unless otherwise determined by an
ordinary resolution of the Company, be less than three nor more
than 15 in number. Directors may be appointed by the Company
by ordinary resolution or by the Board. A Director appointed by
the Board shall retire from office at the next AGM of the
Company but shall then be eligible for re-appointment. The
Board may appoint one or more Directors to hold any office or
employment under the Company for such period (subject to the
Companies Act) and on such terms as it may decide and may
revoke or terminate any such appointment. At each AGM any
Director who has been appointed by the Board since the previous
AGM and any Director selected to retire by rotation shall retire
from office. At each AGM, one-third of the Directors who are
Page 30
subject to retirement by rotation or, if the number is not an
integral multiple of three, the number nearest to one-third but
not exceeding one-third shall retire from office. In addition,
there shall also be required to retire by rotation any Director
who at any AGM of the Company shall have been a Director at
each of the preceding two AGMs of the Company, provided that
he was not appointed or re-appointed at either such AGM and he
has not otherwise ceased to be a Director and been re-appointed
by general meeting of the Company at or since either such AGM.
The Company may, by ordinary resolution of which special notice
has been given in accordance with the Companies Act, remove
any Director before his period of office has expired
notwithstanding anything in the Articles or in any agreement
between him and the Company. A Director may also be removed
from office by the service on him of a notice to that effect signed
by or on behalf of all the other Directors, being not less than
three in number. The office of a Director shall be vacated if:
i. he is prohibited by law from being a Director;
ii. he becomes bankrupt or makes any arrangement or
composition with his creditors generally;
iii. he is or may be suffering from a mental disorder as referred
to in the Articles;
iv. for more than six months he is absent, without special leave
of absence from the Board, from meetings of the Board held
during that period and the Board resolves that his office be
vacated; or
v. he serves on the Company notice of his wish to resign.
PowersoftheDirectors
The business of the Company shall be managed by the Board
which may exercise all the powers of the Company, subject to
the provisions of the Articles and any ordinary resolution of the
Company. The Articles specify that the Board may exercise all
the powers of the Company to borrow money and to mortgage
or charge all or any part of its undertaking, property and assets
and uncalled capital and to issue debentures and other
securities, subject to the provisions of the Articles.
takeoversandsignificantagreements
The Company is a party to the following significant agreements
that take effect, alter or terminate on a change of control of the
Company following a takeover bid:
• the Company’s share schemes and plans; and
• the £20m revolving credit facility whereby upon a ‘change of
control’ all amounts become due and payable.
informationrights
Beneficial owners of shares who have been nominated by the
registered holder of those shares to enjoy information rights
under Section 146 of the Companies Act 2006 are required to
direct all communications to the registered holder of their
shares, rather than to the Company’s registrars Capita Asset
Services, or to the Company directly.
Auditor
KPMG LLP, has signified its willingness to remain in office and
resolutions re-appointing KPMG LLP as auditor and authorising
the Directors to fix the remuneration will be put to the
forthcoming AGM.
AnnualGeneralMeeting
The Notice of the AGM to be held on 12 December 2014, together
with details of the Resolutions to be considered, is set out in a
separate circular.
MJ Gleeson Group plc
Specialbusiness
As special business at the AGM, the Directors will seek
shareholders’ approval of Resolutions as follows:
1. Resolution 12 seeks shareholders’ authority for the allotment
of Ordinary shares up to an aggregate maximum nominal
amount of £357,980 (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 31 December 2015 whichever is earlier.
2. Resolution 13 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 £53,697 which is equivalent to
approximately 5% of the Company’s issued equity share capital
as at 26 September 2014.
3. Resolution 14 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 £107,395, being equivalent to
approximately 10% of the issued share capital as at 26
September 2014. 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 EPS targets included in
employee share incentive schemes will be adjusted to take
account of any buyback.
4. Resolution 15 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
AlanMartin
Company Secretary
26 September 2014
Page 31
MJ Gleeson Group plc
Remuneration Committee Chairman’s
Summary Statement
Dear Shareholder
introduction
I am pleased to take this opportunity to set out the Group’s
remuneration strategy and the way it has been implemented
during the past year. In accordance with the new regulations
governing the disclosure and approval of directors’ remuneration,
our remuneration report has been split into two parts:
• our Policy on Directors’ remuneration, which sets out our
future remuneration policy; it will be the subject of a binding
shareholder vote at the forthcoming AGM;
• the Annual Report on Remuneration, which describes how the
policy was implemented in the year to June 2014 and will be
implemented in the year to June 2015; it will be the subject
of an advisory shareholder vote.
During the year, the Remuneration Committee (“the Committee”)
reviewed the remuneration policy for Executive Directors and the
Chairman. The Board as a whole reviewed the policy for the other
Non-Executive Directors. Although we concluded that the current
policy for Directors’ remuneration was suitable, we took the
opportunity to ensure it remains fit for purpose for future years.
During the year to 30 June 2014, the Committee undertook its
regular annual review of the Executive Directors’ base salaries,
agreed the performance targets for the annual bonus for 2014
and proposed changes to the Performance Share Plan which were
agreed by shareholders at the 2013 AGM. The changes to the
Performance Share Plan approved by shareholders include
granting the Remuneration Committee the power to make awards
of shares worth three times a participant’s annual salary at the
date of award in any financial year, though it is intended that
only the Chief Executive will receive the maximum level of
award, and the power to set alternative vesting dates for awards
other than the third anniversary of the date of award.
2014remunerationoutcomes
The Group continued to perform well during the year to 30 June
2014. The performance condition for Executive Directors’ 2014
annual bonuses was achievement of Group profit before tax
(before exceptional items) of between £7.7m and £12.2m. The
Group achieved profit before tax of £12.2m, which is an increase
of 110% against previous year pre-exceptional results.
Accordingly, annual bonus payments for 2014 will be made at
100% of base salary, to be paid in cash.
Vesting of the long term incentive plan awards, which matured
in December 2013, was based upon a three year performance
condition which ended in 30 June 2013. The performance
condition was based on total shareholder return achieving £2.10
by the end of the performance period. The share price was £2.92
on 30 June 2013 and so the performance condition was met in
full and 100% of the award will vest to the participants. By
December 2013, the third anniversary of the share awards, the
Group’s market capitalisation had grown by 165%.
2015remuneration
The focus of the remuneration policy for the Executive Directors
is to have a significant proportion of remuneration performance-
related and linked closely to the Group’s long term strategy.
The maximum earnable under the annual bonus scheme will
again be 100% of base salary. The performance conditions for
the year to 30 June 2015 remain linked to profit targets.
The base salary for the year to 30 June 2015 for both the Chief
Executive Officer and the Chief Financial Officer have been
increased by 5%, which is comparable to the increases received
to other employees with similar levels of performance within the
Group.
The Committee would welcome your support for the remuneration
resolutions to be tabled at the forthcoming AGM.
Yours sincerely
Ross Ancell
Chairman, Remuneration Committee
26 September 2014
Page 32
MJ Gleeson Group plc
Remuneration Policy Report
This part of the report sets out the remuneration policy for the
Group and has been prepared in accordance with The Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. The policy has been developed
taking into account the principles of the UK Corporate
Governance Code 2012 and the views of our major shareholders
and describes the policy to be applied from 2015 onwards. The
policy report will be put to a binding shareholder vote at the
Annual General Meeting on 12 December 2014. This policy is
intended to apply for the 3 years beginning on the date of
approval at the 2014 Annual General Meeting.
Policyoverview
In setting the remuneration policy for the Executive Directors, the
Committee takes into account the following general principles
which are:
• to attract, retain and motivate the best possible person for
each position, while aligning remuneration with shareholder
interests;
• to ensure that the remuneration packages are simple and fair
in design so that they are valued by participants;
• to ensure that the fixed element of remuneration (salary,
pension and other benefits) is determined in line with market
rates, taking account of
individual performance and
experience, and that a significant proportion of the total
remuneration package is determined by performance;
• to recognise the importance of rewarding exceptional
performance (but not under-performance) in both the short
and long term;
• to set carefully all financial and TSR performance targets and
associated sliding scale ranges to ensure that performance is
incrementally rewarded and that executives are not
inadvertently motivated to take inappropriate business risks
(including environmental, social and governance risks);
• to provide a significant proportion of performance linked pay
in shares allowing executives to build significant shareholdings
in the business, therefore, aligning the executive’s interests
with those of the Company’s shareholders.
Componentsofdirectors’remuneration
The key elements of the remuneration package for each Director
are set out in the table below:
BaseSalary
Purposeandlinktostrategy:Set to attract, retain and motivate talented individuals.
Operation
Maximum opportunity
Performance targets
There is no prescribed maximum annual
increase, though increases for executive
directors will not normally exceed the
average salary increases across the
Group.
N/A
Current salary levels are set out in the
Annual Report on Remuneration.
Salaries are normally reviewed annually.
Salary levels are set with reference to:
• personal performance;
• company performance;
• inflation and earnings forecasts;
• state of the market place generally;
• increases elsewhere in the Group;
• similar roles in the workforce generally.
The Committee may on occasion recognise a
change in circumstances such as assumed
additional responsibility or an increase in the
scale or scope of the role.
Page 33
MJ Gleeson Group plc
Remuneration Policy Report continued
Benefits
Purposeandlinktostrategy:To provide market competitive benefits to aid retention.
Operation
Maximum opportunity
Performance targets
The value of benefits is based on the
underlying cost to the Group and
individual circumstances. There is no
prescribed maximum but benefits are in
line with market practice.
N/A
The Company provide cash benefits and benefits
in kind to Executive Directors. These include but
are not limited to:
• company car or cash equivalent;
• private fuel;
• private medical insurance – family cover
• life insurance;
• permanent health insurance,
• annual health check;
• holiday and sick pay;
• professional subscriptions;
• reimbursement of expenses incurred on Group
matters.
Other benefits may be provided where
appropriate.
Pension
Purposeandlinktostrategy:To offer market competitive retirement benefits to aid retention.
Operation
Maximum opportunity
Performance targets
The Company will contribute to the Group’s defined
contribution pension scheme, or to personal pension
arrangements at the request of the individual. The
Company contributes at an agreed percentage of
salary.
The Company may also consider a cash
alternative (e.g. where a director has reached
the HMRC’s lifetime or annual allowance limit).
The maximum Company contribution or
pension allowance is 25% of salary.
N/A
Directors who are members of the
pension scheme may elect to exchange
part of their salary in return for pension
contributions, which will reduce their
National Insurance Contributions.
Page 34
MJ Gleeson Group plc
AnnualBonus
Purposeandlinktostrategy:To incentivise the achievement of key financial and strategic targets for the forthcoming year without
encouraging excessive risk taking.
Operation
Maximum opportunity
Performance targets
Normally payable in cash, but CEO may elect to
have his bonus payable in shares.
Maximum opportunity of 150% of base
salary.
Performance targets are reviewed annually by
the Committee.
The Committee has the discretion to override the
formulaic outturn of the bonus to determine the
appropriate level of bonus payable where it
believes the outcome is not truly reflective of
performance and to ensure fairness to both
shareholders and participants. Clawback
provisions apply for overpayments due to
material misstatement or error.
Long-termincentivePlan(“LtiP”)
At least 100% of the bonus will be based
on financial objectives (for example
PBT), set relative to the Group’s budget.
No more than 50% of the bonus may be
based on non-financial, strategic and/or
personal objectives to provide a
rounded assessment of Group and
management’s performance.
The financial targets incorporate an
appropriate sliding scale range around a
challenging target.
Purposeandlinktostrategy:To focus motivation on the long-term performance of the Group and reward shareholder value
creation.
Operation
Maximum opportunity
Performance targets
Awards of up to 300% of base salary for
the Chief Executive and 200% for other
Directors.
The awards are subject to performance
conditions based on an absolute TSR
target and a fairness test, which would
consider
financial
the underlying
performance of the company, including,
but not limited to, the profitability of
the company and shareholder value
creation
the ability of
shareholders to access this value
creation through the liquidity of the
shares.
including
Awards of performance shares, structured as nil
cost options with vesting dependant on the
achievement of performance conditions over
periods of up to 3 years.
Performance targets are reviewed by the
Committee for each new award.
Amounts equivalent to any dividends or share-
holder distributions may be made in respect of
awards at vesting, if the Committee so determines.
Clawback provisions apply for overpayments due
to material misstatement or error.
HMRCapprovedall-employeescheme
Purposeandlinktostrategy:HMRC approved all-employee schemes are to encourage employees to take a stake in the business,
which aligns their interest with that of shareholders.
Operation
Maximum opportunity
Performance targets
Executive Directors are eligible to participate in
all-employee schemes.
Maximum is subject to HMRC approved
limits.
N/A
Page 35
MJ Gleeson Group plc
Remuneration Policy Report continued
FeesforNon-ExecutiveDirectors
Purposeandlinktostrategy:To reflect the time commitment and responsibilities of the role
Operation
Maximum opportunity
Performance targets
Fees are determined by the Board as a whole.
They are set at levels with reference to sector,
FTSE SmallCap and general Non-Executive
Director benchmarking data as appropriate.
Fees are paid in cash and are not performance
related. Additional fees are paid to the
Chairmen of the Audit and Remuneration
Committees
additional
reflect
responsibilities.
the
to
As with the Executive Directors, there is
no
annual
increase.
prescribed maximum
N/A
Current fee levels are set out in the
Annual Report on Remuneration.
There are no benefits or incentive schemes for
Non-Executive Directors
Selectionofperformancemeasuresandtargetsetting
In the selection of performance measures the Committee takes
into account the Group’s strategic objectives and short and long-
term business priorities. The performance measures selected
rewards the delivery of stretching financial performance and the
creation of shareholder value.
The performance targets chosen are set in accordance with the
Group’s operating plan and are reviewed annually to ensure they
are sufficiently stretching. In selecting the targets the
Committee also takes into account analysts’ forecasts, economic
conditions and the Committee’s expectation of performance over
the relevant period.
Remunerationpolicyforthebroaderemployeepopulation
The executive remuneration framework set out in this report
follows similar principles as that applied to the Group’s senior
leadership team to ensure our senior management team is
rewarded on a consistent basis. Any differences that exist arise
either because of the Remuneration Committee’s assessment of
business need and commercial necessity. The principles that
underpin our executive remuneration philosophy also cascade
throughout the organisation, although quantum will vary by level
and the provision of certain components of remuneration (such
as benefits, allowances and long-term incentives) will vary by
seniority.
in line with the rules of each scheme or plan together with any
relevant laws and regulations. However, it is important that the
Committee retains appropriate discretion (as is customary) over
the administration and operation of the incentive plans.
Discretion will include, but is not limited to, the following in
relation to incentive schemes:
• Who is invited to participate or receive grants of awards;
• The size and timing of award grants or payments;
• Discretion required when changes or adjustments are required
in special circumstances (e.g. change of control, rights issues,
special corporate or dividend events, or change in business
strategy);
• The annual review of performance measures and targets for
the annual bonus and incentive schemes (including LTIP) from
year to year;
• The determination of vesting (or payment), and the treatment
of leavers and vesting for leavers;
• The annual review of performance measures and weighting,
and targets for incentive plans over time;
• As permitted by HMRC and other regulations, in respect of
Sharesave and any Share Incentive Plans.
Howthecommitteewilluseitsdiscretion
Incentive plans including annual bonus and LTIP will be operated
In relation to incentive schemes including annual bonus and LTIP,
the Committee may adjust performance measures and/or targets
Page 36
MJ Gleeson Group plc
if these have ceased to be appropriate provided that such
adjusted measures or targets will not be materially less difficult
to satisfy. Any use of the above discretions would, where
relevant, be explained in future Directors Remuneration Reports
and may, as appropriate, be the subject of consultation with the
Company’s major shareholders.
Legacyarrangements
For the avoidance of doubt, in approving the Policy report,
authority is given to the Company to honour any commitments
entered into with current and former Directors that have been
disclosed previously to shareholders. It is also part of this policy
that we will honour payments or awards crystallising after the
effective date of this policy but arising from commitments
entered into prior to the effective date of the new policy, or at
a time when the relevant individual was not a Director of the
Company. The Company will also have the authority to meet any
claims against the Company arising as a result of a Director’s
termination.
illustrationofapplicationofremunerationpolicy
The following charts illustrate the future remuneration packages
of the CEO and CFO under the policy set for 2014 onwards for
three indicative levels of performance – minimum, on-target and
maximum:
Chief Executive Officer
£1,966,107
LTIP
Annual Bonus
Fixed
£926,607
31%
20%
58%
19%
£454,107
100%
Minimum
49%
On-Target
23%
Maximum
Chief Financial Officer
£770,223
LTIP
Annual Bonus
Fixed
£481,473
12%
£308,223
24%
30%
30%
100%
Minimum
64%
On-Target
40%
Maximum
For the purpose of this analysis, the following assumptions have
been made:
• Fixed elements comprise base salary, pension and other
benefits. As an example, for the CEO fixed elements comprise
salary of £378,000, pension of £56,700 and benefits of £19,107.
• Base salary levels applying on 1 July 2014.
• Benefit levels are assumed to be the same as the year ended
30 June 2014.
• Minimum performance assumes no award under the annual
bonus and no vesting is achieved under the performance share
plan.
• On target performance assumes 50% of annual bonus is earned
and threshold vesting for the performance share plan.
• Maximum performance assumes full bonus payout and full
vesting under the performance share plan.
• Share price movement has been excluded from the above
analysis.
Serviceagreementsandpolicyinrespectoflossofoffice
All Executive Directors’ service agreements are terminable on 12
months’ notice. In circumstances of termination on notice, the
Committee will determine an equitable compensation package,
having regard to the particular circumstances of the case. The
committee has discretion to require notice to be worked or to
make payment in lieu of notice or to place the director on garden
leave for the notice period.
In case of payment in lieu of notice or garden leave, base salary,
employer pension contributions and employee benefits will be
paid for the period of notice served on garden leave or paid in
lieu of notice.
No payments will be made for annual bonus to Executives under
notice.
Awards under the Long Term Incentive Plan will be determined
by the Plan rules which contain discretionary good leaver
provisions for designated reasons (i.e. participants who leave
early on account of injury, disability, death, a sale of their
employer or business in which they were employed, statutory
redundancy, retirement or any other reason at the discretion of
the committee). In these circumstances a participant’s awards
will not be forfeited on cessation of employment and instead will
vest on the normal vesting date. In exceptional circumstances,
the committee may decide that the participant’s awards will vest
early on the date of cessation of employment. In either case, the
extent to which the awards will vest depends on the extent to
which the performance conditions have been satisfied and a pro
rata reduction of the awards will be applied by reference to the
Page 37
MJ Gleeson Group plc
Remuneration Policy Report continued
elements (on a one-time basis or ongoing) when it considers
these to be in the best interests of the Group (and therefore
shareholders). Any such payments would be based solely on
remuneration lost when leaving the former employer and would
reflect the delivery mechanism, time horizons and performance
requirement attaching to that remuneration.
In the case of an internal appointment, any variable pay element
awarded in respect of the prior role may be allowed to pay out
according to its terms on grant, adjusted as relevant to take into
account the appointment. In addition, any other ongoing
remuneration obligations existing prior to appointment may
continue, provided that they are put to shareholders for approval
at the first AGM following their appointment.
The Committee may also agree that the Company will
compensate executives, both internal and external, for certain
relocation expenses as appropriate.
Statementofconsiderationofemploymentconditions
elsewhereintheGroup
The Committee does not consult with employees on Directors’
remuneration but regularly reviews the remuneration of staff
throughout the Group to ensure that it is attuned to general pay
and conditions when considering the remuneration of executive
pay. For example, in determining salary increases for the
executive directors, the Committee looks at salary increases
across the Group.
Statementofconsiderationofshareholderviews
The Committee consults with major shareholders and their
representative bodies on remuneration matters, particularly if
any material changes are proposed to the remuneration policy.
In these instances the Committee seeks feedback from investors
and develops and considers its proposals in the light of this
feedback.
time of cessation (although the committee has discretion to
disapply time pro rating if the circumstances warrant it).
The service agreements do not contain specific provisions for
enhanced payments in the event of a change of control of the
Company.
The dates of the Executive Directors’ service agreements who
served during the year are:
Jolyon Harrison
Alan Martin
1 July 2012
11 December 2008
ChairmanandotherNon-ExecutiveDirectors’termsof
engagement
The Chairman and the Non-Executive Directors are not
employees; they have letters of appointment which set out their
duties and responsibilities. The dates of each Non-Executive
Director’s original appointment are as follows:
Non-Executive
Director
Dateoforiginal
appointment
Expiryof
currentterm
Dermot Gleeson
27/11/1975
30/09/2014
Ross Ancell
01/10/2006
30/09/2014
Colin Dearlove
03/12/2007
02/12/2014
Christopher Mills
01/01/2009
31/12/2014
All Non-Executive Directors have specific terms of engagement
being an initial period of three years which thereafter may be
extended on an annual basis, subject to re-election at each AGM.
The appointment of the Chairman may be terminated on six
months’ notice and the appointment of the other Non-Executive
Directors may be terminated on one month’s notice.
Recruitmentpolicy
Salaries for new hires will be set to reflect their skills and
experience and the market rate for the role. The remuneration
of a new Executive Director will include salary, benefits, pension,
participation in the annual bonus and LTIP schemes normally in
for Executive Directors’
accordance with
remuneration. The maximum opportunity levels in relation to
the annual bonus and LTIP will apply. If it is considered
appropriate to appoint a new Director on a below market salary
(for example, to allow them to gain experience in the role) their
salary may be increased to a market level by way of a series of
above inflation increases over two to three years. In addition,
the Committee may offer additional cash and/or share-based
the policy
Page 38
MJ Gleeson Group plc
Annual Report on Remuneration
theRemunerationCommittee
During the year under review the Committee was chaired by Ross Ancell. The other committee member is Colin Dearlove. Both of the
directors are independent Non-Executive Directors and they have no personal financial interest in matters to be decided, no potential
conflicts of interest arising from cross directorships and no day-to-day involvement in running the business. Biographical details of the
members of the Committee are show on pages 20 and 21, and details of their attendance at the meetings of the Committee during the
year ended 30 June 2014 are shown on page 23.
RoleandresponsibilitiesoftheRemunerationCommittee
The Committee’s primary purpose is to make recommendations to the Board on the Group’s framework for executive remuneration.
The Board has also delegated responsibility to the Committee for determining the remuneration, benefits and contractual arrangements
of the Chairman and the Executive Directors. No individual is involved in deciding their own remuneration.
The Committee has written terms of reference, which are available at www.mjgleeson.com, and its responsibilities include:
• Recommending to, and agreeing with, the Board the policy for executive and senior management remuneration;
• Agreeing the terms and conditions of employment for Executive Directors, including their annual remuneration and pension
arrangements, and reviewing such provisions for senior management;
• Agreeing the measures and targets for any performance related bonus and share schemes;
• Agreeing the remuneration of the Chairman of the Board;
• Ensuring that, on termination, contractual terms and payments made are fair both to the Company and the individual so that failure
is not rewarded;
• Agreeing the terms of reference of any remuneration consultants it appoints.
AdvisorstotheRemunerationCommittee
The Committee is supported by the Head of Human Resources (Julie Kershaw until May 2014 and then Caroline Lee) and the Company
Secretary (Alan Martin).
The Committee appoints consultants to provide specific advice to the Committee. During the year both Towers Watson and BDO were
engaged by the Remuneration Committee to provide advice. Towers Watson were appointed by the Committee to provide it with
independent advice in relation to the quantum of grants and performance measures of the Performance Share Plan, along with advice
on legislative requirements and market practice. Towers Watson fees for this work amounted to £19,435. BDO were engaged by the
Committee to provide specific advice regarding the rules of the Performance Share Plan. BDO fees for this work amounted to £7,960.
The Remuneration Committee is satisfied that the advice provided by both firms is objective and independent and that no conflict of
interest arises as a result of other services.
Page 39
MJ Gleeson Group plc
Annual Report on Remuneration continued
implementationofPolicyintheyearto30June2014
SingletotalfigureofremunerationforeachDirector
This table and the associated footnotes have been audited by KPMG LLP.
2014
2013
Salary
&fees Benefits
£'000
£'000
Annual
Bonus
£'000
Value
ofLtiP
award
vesting Pension
£'000
£'000
total
£'000
Salary
&fees Benefits
£'000
£'000
Annual
bonus
£'000
Value
ofLtiP
award
vesting Pension
£'000
£'000
total
£'000
Chairman
Dermot Gleeson
80
-
-
Executive Directors
Jolyon Harrison
Alan Martin
Non-Executive Directors
Ross Ancell
Colin Dearlove
Christopher Mills
360
220
19
19
360
220
30
30
25
-
-
-
-
-
-
745
38
580
-
-
-
-
-
-
-
-
80
80
-
-
-
-
80
54
55
793
321
514
185
-
-
-
30
30
25
30
30
25
20
19
-
-
-
262
964
48
1,615
150
551
46
951
-
-
-
-
-
-
-
-
-
30
30
25
109 1,472
671
39
412
1,515
94
2,731
During the year no Director waived his entitlement to any emoluments.
Notestothesingletotalfigureremuneration
taxablebenefitsprovidedtoExecutiveDirectors
The main benefits available to the Executive Directors during the year to 30 June 2014 (and their associated values) were car allowance
for both of £13,000, car fuel of £5,167 for Jolyon Harrison and £5,066 for Alan Martin and private medical insurance of £940 for Jolyon
Harrison and £1,156 for Alan Martin. This package of benefits is unchanged from 2013.
Determinationofannualbonus
The annual performance-related bonus for the year to 30 June 2014 was based upon achievement against the financial measure of
Profit before Tax, for both continuing and discontinued operations, before accruing for Executive Directors bonuses (the “Profit
Measure”), with the following target figures and straight line vesting between the relevant target figures.
target
Threshold
Target
Profit
measure
Bonusachievable
aspercentageofsalary
£7.7m
£12.2m
0%
100%
The Profit Measure achieved for the year to 30 June 2014 was £12.6m, as per the basis of calculation above, and exceeded that of the
prior year by 55%. As a result, the annual bonus payments for 2014 will be made, in cash, at 100% of base salary.
Page 40
MJ Gleeson Group plc
LongtermincentivePlan–performanceshareplan
The LTIP columns refer to the Company’s Performance Share Plan, which delivers free shares to the Executive Directors subject to
performance targets being reached.
In the year to 30 June 2014 no shares under the Performance Share Scheme were due to vest.
In the year to 30 June 2013 share awards made to Jolyon Harrison and Alan Martin in December 2010 achieved their performance
targets. The target for the shares was that the share price over the three year period of 1 July 2010 to 30 June 2013, would achieve
£2.10, on a Total Shareholder Return basis, with the final three months of the performance period being averaged to avoid fluctuations.
2010PSPawards
Jolyon Harrison
Alan Martin
Numberofsharesawarded
Numberofsharesvesting
Valueofsharesvesting*
242,857
138,888
242,857
138,888
£963,646
£551,102
* The shares vested on 15 July 2014. The Performance Share awards have been valued at 3.968 being the mid-market price on the day the shares vested,
plus £0.086 which is the value of the dividend equivalent payable on the awards that vested. The dividend equivalent is based on the dividends to
shareholders with record dates occurring between 17 December 2010, being the date of grant and 15 July 2014, being the vesting date.
Pension
The Executive Directors are eligible to participate in the MJ Gleeson Group Pension Plan, a defined contribution arrangement and both
Executive Directors are members of the Plan. The CEO receives pension contributions of 15% of salary (2014: £54,000) and the CFO
receives pension contributions of 25% of salary (2014: £55,000).
Loss of office payments or payments to past Directors
No loss of office payments or payments to past Directors were made in the year under review.
Directors’shareholdingsandshareinterests
The share interests of the Directors serving during the year and of their connected persons in the ordinary share capital of the
Company are as shown below:
Director
Dermot Gleeson
Jolyon Harrison
Alan Martin
Ross Ancell
Colin Dearlove
Christopher Mills
1 Shares are held in name of North Atlantic Value LLP, of which Christopher Mills is a Member.
There are no share ownership requirements for the Directors.
30June
2014
30June
2013
1,053,086
1,053,086
1,302,386
1,301,760
11,404
10,817
–
–
–
–
13,655,0001
13,927,0001
Page 41
MJ Gleeson Group plc
Annual Report on Remuneration continued
Directors’interestinsharesundertheLongtermincentiveScheme
Director
J Harrison
A Martin
30June
2013
Granted Exercised
during
year
during
year
Lapsed
inyear
Scheme
PSP
PSP
242,857
423,015
665,872
PSP
138,888
138,888
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Shareprice
totalinterests
outstanding
atdate at30June
Datefrom
Shares whichshare
maybe
exercised
vestedbut
2013 un-exercised
ofaward
£1.26
£1.52
242,857
423,015
665,872
– 15/07/2014
– 05/11/2015
£1.26
138,888
– 15/07/2014
138,888
• No payment was made in relation to the grant of the performance shares.
• The middle market price on 30 June 2014 was 374 pence and the range during the year to 30 June 2014 was from 293 pence to
455 pence.
totalshareholderreturnperformance
We have chosen to compare the Company’s total shareholder return performance over the last five years the total shareholder return
for the FTSE Small Cap Index, of which the Company is a member, and a comparator index of listed housebuilders. The Comparator
Group consists of a group of listed housebuilders comprising Barratt Developments, Bellway, Bovis Homes, Crest Nicholson, Persimmon,
Redrow, Taylor Wimpey and Telford Homes.
MJGleeson&index
Comparison:
30June2009to
30June2014
MJ Gleeson Group
FTSE Small Cap
Housebuilders
800
700
600
500
400
300
200
100
0
Jun 09
Jum-10
Jum-11
Jun-12
Jun-13
Jun-14
Page 42
MJ Gleeson Group plc
ChiefExecutiveOfficer’sremuneration2010to2014
Year
ChiefExecutive
2014
Jolyon Harrison
2013
Jolyon Harrison2
2012
N/A 3
2011
Chris Holt 4
2010
Chris Holt
Singlefigureof
totalremuneration
£
Annualbonuspaidagainst
maximumopportuity
%
LtiPawardsvestingagainst
maximumopportuity
%
739,107
1,614,646
-
416,608
326,388
100%
81%
-
0%
40%
-1
100%
-
-1
0%
1 No LTIP vesting in this year
2 Jolyon Harrison appointed Chief Executive from 1 July 2012
3 No Chief Executive was appointed during this year.
4 This is the total remuneration for Chris Holt who retired from the Board on 30 September 2010.
The Board did not appoint a replacement Chief Executive until 1 July 2012.
ChiefExecutiveOfficer’schangeinremuneration
Set out below is a comparison of the change in remuneration of the Chief Executive from 2013 to 2014, compared to the change in
remuneration of the Group’s salaried employees. We have selected the salaried workforce as this includes 164 junior to senior employees
with the most relevant pay structure.
Chief Executive
Salaried employees
Percentagechangefrom2013to2014
Annualsalary
Bonus
Valueoftaxablebenefits
12%
9%
37%
15%
-5%
6%
The annual bonus of the Chief Executive increased significantly more that the average of salaried employees as 100% of entitlement is
being paid in 2014, whereas in 2013 achievement against targets resulted in 81% of the bonus entitled being paid.
Relativeimportanceofspendonpay
Set out below is the amount spent on remuneration for all employees of the Group (including Executive Directors) and the total amounts
paid in distributions to shareholders over the year.
Remuneration for all employees
Total distributions paid
2014
£m
9.96
1.64
2013
£m
9.06
0.26
Difference Differenceas
percentage
%
inspend
£m
0.90
1.38
9.9%
530%
Page 43
MJ Gleeson Group plc
Annual Report on Remuneration continued
iMPLEMENtAtiONOFtHEPOLiCYFORtHEYEARtO30JuNE2015
ExecutiveDirectors
Basesalaries
After taking into consideration the increases to Group employees’ salaries on 1 July 2014 (monthly paid employees generally received
a 3.5% base salary increase), general market conditions and increases received by other employees with similar levels of performance,
who received increases up to 10.4%, the Committee has awarded salary increases of 5% to the Executive Directors from 1 July 2014.
D Jolyon Harrison
Alan Martin
Basesalary Fortheyear
to30June
from1July
2013
2014
£
£
378,000
360,000
231,000
220,000
Annualbonus
The maximum bonus that can be earned in the year will be 100% of base salary.
In line with the Group’s strategy to increase profitability, the Committee has decided that the most appropriate performance condition
for the 2015 annual bonus will be based on profit before tax. The targets are based on figures which are commercially sensitive, but
which will be disclosed in the next Annual Report on Remuneration. The Committee considers that the target it has set is stretching.
The bonus continues to be subject to robust clawback provisions.
LongtermincentivePlanawards
The Committee intends to make awards to the Executive Directors in the year to 30 June 2015, in line with the disclosed policy on page
35. These awards are expected to be at 300% and 100% of salary for Jolyon Harrison and Alan Martin respectively. The performance
measures are expected to include an absolute TSR target share price and a fairness test, which would consider the underlying financial
performance of the company, including, but not limited to, the profitability of the company and shareholder value creation including
the ability of shareholders to access this value creation through the liquidity of the shares.
Pension
There are no changes to pension benefits for 2015; current arrangements are set out on page 41.
ChairmanandNon-ExecutiveDirectors’fees
The Committee has agreed that the Chairman’s fee for 2015 should be increased by £10,000, making his fee from 1 July 2014 £90,000.
The Board as a whole determine the fees for the Non-Executive Directors. The Board has agreed that the fees from 1 July 2014 should
increase by £5,000 to £30,000 plus an additional fee of £5,000 for extra responsibilities in chairing the Audit and Remuneration
Committees.
Page 44
MJ Gleeson Group plc
Statement of Directors’ Responsibilities
StAtEMENtOFDiRECtORS'RESPONSiBiLitiESiNRESPECtOFtHEANNuALREPORtANDtHEFiNANCiALStAtEMENtS
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 judgements 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.
ResponsibilitystatementoftheDirectorsinrespectoftheannualfinancialreport
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, 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 issuer and
the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties
that they face.
By order of the Board
JHarrison
Director
26 September 2014
AMartin
Director
Page 45
MJ Gleeson Group plc
Independent Auditor’s Report
iNDEPENDENtAuDitOR’SREPORttOtHEMEMBERSOF
MJGLEESONGROuPPLCONLY
Opinionsandconclusionsarisingfromouraudit
1 Ouropiniononthefinancialstatementsisunmodified
We have audited the financial statements of M J Gleeson plc
for the year ended 30 June 2014 set out on pages 48 to 78. 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 2014 and of the Group’s profit for the year then
ended;
• the Group financial statements have been properly prepared
in accordance with International Financial Reporting
Standards as adopted by the European Union (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.
2 Ourassessmentofrisksofmaterialmisstatement
In arriving at our audit opinion above on the financial
statements the risks of material misstatement that had the
greatest effect on our audit were as follows:
Carryingamountofinventories(£100.7m)
Refer to page 26 (Audit Committee Report), page 56
(accounting policy) and page 68 (financial disclosure).
• The risk: The recognition of gross profit on sales of
completed buildings and serviced land and the carrying
value of work-in-progress are both dependent upon the
group’s estimation of future selling prices and build costs.
Sales prices have inherent uncertainty due to changes in
market conditions; adverse movements in sale prices can
affect the valuation of WIP. Build costs can vary with market
conditions and may also be incorrectly estimated due to
errors in build cost modelling and unforeseen events during
construction. As work-in-progress is held at the lower of cost
and net realisable value, errors in these estimates may
result in the group failing to identify when net realisable
value is below cost and therefore a failure to record the
necessary reduction in carrying value. The risk is higher
where there is significant work in progress but low levels of
sales. As gross margin is recognised for completed sales in
Page 46
relation to whole site selling prices and build costs, margin
recognition is also at risk of error.
• Our response: In this area our audit procedures included,
among others, assessing profit recognition for plot sales
against that recorded previously and against future site
forecasts and testing that appropriate amounts of work in
progress were transferred to the Income Statement on plot
sales. We assessed the historical accuracy of forecast costs
against actual amounts incurred, analysed plot numbers
reserved or contracted versus those held in inventory and
assessed the reasonableness of forecast sales prices against
those currently being achieved. We also performed
procedures to identify higher risk sites based on risk
indicators (high inventory values at year-end, low margin
sites, and slow selling sites), and assessed the margins
achieved in the year and forecast plot sales in the future.
We have also considered the adequacy of the Group’s
disclosures about the degree of estimation involved in
arriving at the valuation.
RecognitionofaDeferredtaxAsset(c£9.8m)
Refer to page 26 (Audit Committee Report), page 57
(accounting policy) and page 73 (financial disclosure).
• The risk: The risk relating to the recognition of deferred tax
assets arises due to the uncertainty over the probability that
future taxable profits will be available against which unused
tax losses can be utilized; historically there have been low
levels of profitability. The utilisation of the losses is
dependent upon a number of assumptions made in
Management forecasts including future land and house
selling prices, and the effects of trends in the housing
market in general.
• Our response: In this, area our audit procedures included,
among others, a review of the profit and cash flow forecasts
for the period over which the deferred tax asset is expected
to be realised, performing sensitivity analysis over the key
assumptions and matching the forecast profitability to the
legal entities in which the losses exist. The inputs into the
forecast have been checked to ensure they are appropriate
and consistent with our understanding of future activities.
We have also considered the adequacy of the Group’s
disclosures in respect of tax and uncertain tax positions.
3 Ourapplicationofmaterialityandanoverviewofthescope
ofouraudit
The materiality for the group financial statements as a whole
was set at £0.9 million. This has been determined based on a
benchmark of profit before tax (of which it represents 7.5%),
which we consider to be one of the principal considerations
MJ Gleeson Group plc
• 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.
Under the Listing Rules we are required to review:
• the Directors’ Statement, set out on page 27, in relation to
going concern; and
• the part of the Corporate Governance Statement on pages
22 to 26 relating to the Company’s compliance with the nine
provisions of the 2010 UK Corporate Governance Code
specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scopeofreportandresponsibilities
As explained more fully in the Directors’ Responsibilities
Statement set out on page 45, the Directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view. A description of
the scope of an audit of financial statements is provided
on
at
www.frc.org.uk/auditscopeukprivate.
Council’s website
Reporting
Financial
the
This report is made solely to the Company’s members as a body
and is subject to important explanations and disclaimers
regarding our responsibilities, published on our website at
www.kpmg.com/uk/auditscopeukco2013a, which are incorporated
into this report as if set out in full and should be read to provide
an understanding of the purpose of this report, the work we have
undertaken and the basis of our opinions.
ChrisHearld(SeniorStatutoryAuditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 The Embankment
Neville Street
Leeds LS1 4DW
26 September 2014
Page 47
for members of the company in assessing the financial
performance of the group.
We agreed with the Audit Committee to report to it all
corrected and uncorrected audit misstatements we identified
during our audit with a value in excess of £45,000 in addition
to other audit misstatements below that threshold if there is
evidence of a systematic error, or if the item is unusual.
Audits were performed for components covering 100% of Group
revenue, 100% of Group profit before taxation and 100% of
Group total assets. The audits undertaken for the key reporting
components of the company were all performed to component
materiality levels, which were set individually for each
subsidiary and ranged from £0.4m to £0.9m. These audits were
all completed by the Group audit team.
4 OuropiniononothermattersprescribedbytheCompanies
Act2006isunmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the
Companies Act 2006; and
• the information given in the Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements.
5 We have nothing to report in respect of the matters on
whichwearerequiredtoreportbyexception
Under ISAs (UK and Ireland) we are required to report to you
if, based on the knowledge we acquired during our audit, we
have identified other information in the annual report that
contains a material inconsistency with either that knowledge
or the financial statements, a material misstatement of fact,
or that is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our audit and the directors’
statement that they consider that the annual report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the group’s performance, business
model and strategy; or
• the Audit Committee Report does not appropriately address
matters communicated by us to the Audit Committee.
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
MJ Gleeson Group plc
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2014
Continuingoperations
Revenue
Cost of sales before reinstatement of inventories and contract provisions
Reinstatement of inventories and contract provisions
Cost of sales
Grossprofit
Administrative expenses
Operatingprofit
Financial income
Financial expenses
Profitbeforetax
Tax for the period before recognition of additional deferred tax asset on losses brought forward
Recognition of additional deferred tax asset on losses brought forward
Tax
Profitfortheyearfromcontinuingoperations
Discontinuedoperations
(Loss)/profit for the year from discontinued operations (net of tax)
Profitfortheyearattributabletoequityholdersoftheparentcompany
Othercomprehensiveincome
Share of joint venture's cashflow hedges
Note
2013
£000
2013
£000
81,442
60,656
(55,497)
(43,641)
4
800
1,028
(54,697)
(42,613)
26,745
18,043
(14,681)
(12,034)
12,064
6,009
485
(389)
417
(647)
12,160
5,779
(2,827)
8,326
82
4,238
5,499
4,320
17,659
10,099
(231)
1,344
17,428
11,443
-
118
7
7
4
8
3
totalcomprehensiveincomefortheyearattributabletoequityholdersofparentcompany
17,428
11,561
Earningspershareattributabletoequityholdersofparentcompany
Basic
Diluted
Earningspersharefromcontinuingoperations
Basic
Diluted
The notes on pages 54 to 78 form part of these financial statements.
10
10
10
10
32.92p
21.69 p
32.36p
21.46 p
33.36p
19.14 p
32.79p
18.94 p
Page 48
Consolidated Statement of Financial Position
at 30 June 2014
MJ Gleeson Group plc
Non-currentassets
Plant and equipment
Investment property
Investments in joint ventures
Other investments
Investments in subsidiaries
Trade and other receivables
Deferred tax assets
Currentassets
Inventories
Trade and other receivables
Cash and cash equivalents
totalassets
Non-currentliabilities
Loans and borrowings
Provisions
Currentliabilities
Loans and borrowings
Trade and other payables
Provisions
UK corporation tax
totalliabilities
Netassets
Equity
Share capital
Share premium account
Capital redemption reserve
Retained earnings
totalequity
Group
2014
£000
Group
2013
£000
Company
2014
£000
Company
2013
£000
Note
11
12
13
14
15
17
24
16
17
26
20
22
20
21
22
28
1,268
1,467
571
15
748
15
18
-
-
4,896
4,896
4,896
-
8,116
10,513
-
16,707
7,797
5,032
-
354
39
-
-
4,896
32,062
-
407
25,379
19,955
21,975
37,404
100,717
12,794
13,687
96,820
13,401
9,936
-
62,769
4,842
-
66,535
3,583
127,198
120,157
67,611
70,118
152,577
140,112
89,586
107,522
-
(75)
(75)
(1,885)
(85)
(1,970)
(1,933)
(308)
-
-
-
-
-
-
-
-
(22,182)
(25,509)
(7,296)
(22,220)
(214)
(82)
(236)
-
-
(79)
-
-
(24,411)
(26,053)
(7,375)
(22,220)
(24,486)
(28,023)
(7,375)
(22,220)
128,091
112,089
82,211
85,302
1,063
6,436
120
1,058
6,343
120
1,063
6,436
120
1,058
6,343
120
120,472
104,568
74,592
77,781
128,091
112,089
82,211
85,302
The financial statements were approved by the Board of Directors on 26 September 2014 and were signed on its behalf by:
JHarrison
Director
AMartin
Director
The notes on pages 54 to 78 form part of these financial statements.
Page 49
MJ Gleeson Group plc
Consolidated Statement of Changes in Equity
for the year ended 30 June 2014
GROuP
At1July2012
totalcomprehensiveincomefortheperiod
Profit for the period
Othercomprehensiveincome
Cashflow hedges
totalcomprehensiveincomefortheperiod
transactionswithowners,recordeddirectlyinequity
Contributionsanddistributionstoowners
Share issue
Purchase of own shares
Share-based payments
Dividends
transactionswithowners,recordeddirectlyinequity
At30June2013
totalcomprehensiveincomefortheperiod
Profit for the period
totalcomprehensiveincomefortheperiod
transactionswithowners,recordeddirectlyinequity
Contributionsanddistributionstoowners
Share issue
Purchase of own shares
Share-based payments
Dividends
transactionswithowners,recordeddirectlyinequity
Share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Retained
earnings
£000
Note
total
£000
1,055
6,114
120
93,105
100,394
-
-
-
3
-
-
-
3
-
-
-
229
-
-
-
229
-
11,443
11,443
-
-
-
-
-
-
-
118
118
11,561
11,561
-
(15)
181
(264)
(98)
232
(15)
181
(264)
134
1,058
6,343
120
104,568
112,089
-
-
5
-
-
-
5
-
-
93
-
-
-
93
-
-
-
-
-
-
-
17,428
17,428
17,428
17,428
-
(28)
144
98
(28)
144
(1,640)
(1,640)
(1,524)
(1,426)
9
9
At30June2014
1,063
6,436
120
120,472
128,091
Page 50
MJ Gleeson Group plc
Share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Retained
earnings
£000
Note
total
£000
1,055
6,114
120
73,396
80,685
-
-
3
-
-
-
3
-
-
229
-
-
-
229
-
-
-
-
-
-
-
4,352
4,352
4,352
4,352
-
116
181
(264)
33
232
116
181
(264)
265
1,058
6,343
120
77,781
85,302
-
-
5
-
-
-
5
-
-
93
-
-
-
93
-
-
-
-
-
-
-
(1,662)
(1,662)
(1,662)
(1,662)
-
(31)
144
98
(31)
144
(1,640)
(1,640)
(1,527)
(1,429)
9
9
COMPANY
At1July 2012
totalcomprehensiveincomefortheperiod
Profit for the period
totalcomprehensiveincomefortheperiod
transactionswithowners,recordeddirectlyinequity
Contributionsanddistributionstoowners
Share issue
Own shares disposed
Share-based payments
Dividends
transactionswithowners,recordeddirectlyinequity
At30June2013
totalcomprehensiveincomefortheperiod
Loss for the period
totalcomprehensiveincomefortheperiod
transactionswithowners,recordeddirectlyinequity
Contributionsanddistributionstoowners
Share issue
Purchase of own shares
Share-based payments
Dividends
transactionswithowners,recordeddirectlyinequity
At30June2014
1,063
6,436
120
74,592
82,211
Page 51
MJ Gleeson Group plc
Consolidated Statement of Cashflow
for the year ended 30 June 2014
Operatingactivities
Profit before tax from continuing operations
(Loss)/profit before tax from discontinued operations
Depreciation of plant and equipment
Impairment of investments in subsidiaries
Reinstatement of investments in subsidiaries
Share-based payments
Profit on sale of investment property
Profit on sale of assets held for sale
Share of loss of joint ventures (net of tax)
Capitalisation of available for sale assets
Financial income
Financial expenses
Dividends received
Group
2014
£000
Group
2013
£000
Company
2014
£000
Company
2013
£000
Note
12,160
(131)
5,779
1,354
(1,609)
4,359
-
-
12,029
7,133
(1,609)
4,359
3
11
828
-
-
144
(313)
(21)
13
-
(426)
(485)
389
-
597
-
-
181
-
(1,372)
107
(2,443)
(570)
647
(117)
28
153
-
144
-
-
-
-
27
138
(1,000)
181
-
-
-
-
(1,021)
(1,081)
287
(77)
133
(4,117)
Operatingcashflowsbeforemovementsin workingcapital
12,145
4,163
(2,095)
(1,360)
Increase in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Decrease/(increase) in amounts due from subsidiary undertakings
(3,897)
(20,325)
995
(3,484)
-
(2,075)
9,490
-
132
191
-
8
(319)
(7,979)
-
3,945
Cashgenerated/(utilised)inoperatingactivities
5,759
(8,747)
2,173
(9,650)
Tax received
Interest paid
-
(477)
19
(133)
-
(432)
6
(133)
Netcashflowsfromoperatingactivities
5,282
(8,861)
1,741
(9,777)
Page 52
MJ Gleeson Group plc
Group
2014
£000
Group
2013
£000
Company
2014
£000
Company
2013
£000
Note
-
244
490
194
-
3,314
157
-
345
117
11
(629)
(1,144)
-
-
-
-
-
1,021
77
(7)
-
-
-
-
1,169
4,117
(21)
(1,000)
investingactivities
Proceeds from disposal of assets held for sale
Proceeds from disposal of available for sale assets
Proceeds from disposal of investment property
Interest received
Dividends received
Purchase of plant and equipment
Investments in subsidiaries
Netcashflowsfrominvestingactivities
299
2,789
1,091
4,265
Financingactivities
Increase in loans and borrowings
Repayment of borrowings
Proceeds from issue of shares
Purchase of own shares
Own shares disposed
Dividends paid
-
2,193
(260)
98
(28)
-
-
232
(15)
-
-
-
98
(31)
-
9
(1,640)
(264)
(1,640)
Netcashflowsfromfinancingactivities
(1,830)
2,146
(1,573)
-
-
232
-
116
(264)
84
Netincrease/(decrease)incashandcashequivalents
Cashandcashequivalentsatbeginningofyear
3,751
9,936
(3,926)
13,862
1,259
3,583
(5,428)
9,011
Cashandcashequivalentsatendofyear
26
13,687
9,936
4,842
3,583
Page 53
MJ Gleeson Group plc
Notes to the Financial Statements
for the year ended 30 June 2014
1. ACCOuNtiNGPOLiCiES
MJ 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.
Statementofcompliance
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").
Basisofpreparation
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 Statement of Comprehensive Income of
the parent company is not presented as part of these accounts. The loss of the parent company for the financial year amounted to £1,662,000
(2013: profit £4,342,000).
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
Basisofconsolidation
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.
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 value. 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 Statement of
Comprehensive Income.
Revenuerecognition
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 homes sales, other than construction contracts, is recognised when contracts to sell are completed and title has passed.
Revenue from property and land sales is recognised at the earlier of when contracts to sell are completed and title has passed or when
unconditional contracts to sell are exchanged.
Revenue from rental income from investment properties is recognised as the Group becomes entitled to the income.
Revenue from construction services activities represents the value of work carried out during the year, including amounts not invoiced.
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.
Appropriate provision against claims from customers or third parties is made in the year in which the Group becomes aware that a claim may
arise.
Segmentreporting
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 Chief Executive Officer 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 plant and equipment.
Page 54
MJ Gleeson Group plc
impairment:Financialassets
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-financialassets
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.
Exceptionalitems
Items that are both material in size and unusual or infrequent in nature are presented as exceptional items in the Statement of Comprehensive
Income. 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; asset impairments, including land, work-
in-progress and amounts recoverable on construction contracts and recognition of deferred tax asset for previously unrecognised tax losses.
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 Statement of Comprehensive Income on a straight-
line basis over the period of the lease.
Financialincomeandexpenses
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 Statement of Comprehensive Income
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 Statement of Comprehensive Income using the effective interest method.
Plantandequipment
Depreciation is charged so as to write off cost of assets over their estimated useful lives, using the straight-line method, on the following bases:
Plant and machinery
between 3 and 6 years
Depreciation of these assets is charged to the Statement of Comprehensive Income.
Page 55
MJ Gleeson Group plc
Notes to the Financial Statements continued
investmentproperties
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 Statement
of Comprehensive Income 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; and
iii) a review of submitted offers where the properties were being marketed for sale.
Jointventures
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 Statement of Comprehensive Income 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 Statement of Comprehensive Income in share of joint venture results net of any related deferred tax.
Otherinvestments
Other investments are stated at fair value, with any resultant gains or losses taken to equity.
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 of cost or net realisable
value.
Amountsduefromconstructioncontractcustomers
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).
Availableforsalefinancialassets
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. Gains and losses arising from changes in fair value
with respect to impairment losses, cashflows and interest are recognised in profit in the year. 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.
tradereceivables
Trade receivables are initially measured at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised in the Statement
of Comprehensive Income 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.
Cashandcashequivalents
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. The Group had no bank overdrafts at the year end.
Discontinuedoperations
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 Statement of Comprehensive Income (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.
Page 56
MJ Gleeson Group plc
Loansandborrowings
Loans and borrowings are initially measured at cost and are subsequently reviewed to ascertain whether a fair value adjustment is required.
tradeandotherpayables
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 Statement of Comprehensive Income 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
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.
Employeebenefits
Obligations for contributions to defined contribution pension schemes are charged to the Statement of Comprehensive Income in the period to
which the contributions relate.
Shareoptions
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 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.
OwnsharesheldbyEmployeeBenefittrusts
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.
Criticalaccountingjudgementsandkeysourcesofestimationuncertainty
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.
Page 57
MJ Gleeson Group plc
Notes to the Financial Statements continued
The key judgement and sources of estimation uncertainty at the balance sheet date are:
Landandwork-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
a 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.
investmentsandinvestmentsinsubsidiaries
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.
Availableforsalefinancialassets(sharedequity)
Management has reviewed the valuation of the available for sale financial assets in the light of current market conditions, expected house price
inflation, cost of money and the expected time to realisation of the assets and is therefore subject to a degree of inherent uncertainty.
Deferredtax
Management has reviewed the recognition of tax losses within the Group. The management has assessed that it is now probable that all tax
losses within the Gleeson Homes and Gleeson Strategic Land divisions will be utilised in full in future years and these have been fully recognised
at 30 June 2014. The judgement to recognise the deferred tax asset is dependent upon taxable profits arising in the same company as the losses
originally arose and the Group’s expectations regarding future profitability including site revenue and cost forecasts for future years which contain
a degree of inherent uncertainty.
Adoptionofnewandrevisedstandards
For the year ended 30 June 2014, the Group has adopted the following standards:
IFRS 10 'Consolidated Financial Statements' which clarifies consolidation principles.
IFRS 11 'Joint Arrangements' which clarifies the accounting requirements for joint arrangements.
IFRS 12 'Disclosure of Interests in Other Entities' (issued October 2012) which clarifies disclosure requirements.
IFRS 13 'Fair Value Measurement' which defines fair value and requires disclosure about fair value measurement.
IAS 28 'Investments in Associates and Joint Ventures' which specifies the accounting treatment of investments.
IAS 32 'Financial Instruments: Presentation' which clarifies the treatment of the tax effect of a distribution to holders of equity instruments
Standardsnotyetapplied
There are a number of standards and interpretations issued by the International Accounting Standards Board that are effective for
financial statements after this reporting period. The following have not been adopted by the Group in preparing the accounts for the year ended
30 June 2014:
Standard
IFRS 14 'Regulatory Deferral Accounts' (issued 30 January 2014)*
IFRS 15 'Revenue from Contracts with Customers' (issued 28 May 2014)*
IAS 38 'Intangible Assets' (issued May 2014)*
IAS 39 'Financial Instruments: Recognition and Measurement' (issued June 2013)
Effectiveforperiods
beginningonorafter
1 January 2016
1 January 2017
1 January 2016
1 January 2014
The application of these standards and interpretations 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.
* not yet endorsed by the EU
Page 58
MJ Gleeson Group plc
2. SEGMENtALANALYSiS
For management purposes, the Group is organised into the following two operating divisions:
• Gleeson Homes
• Gleeson Strategic Land
Segment information about the Group's operations, including joint ventures, is presented below:
Note
2014
£000
2013
£000
Revenue
Continuingactivities:
Gleeson Homes
Gleeson Strategic Land
Discontinuedactivities
totalrevenue
Profitonactivities
Gleeson Homes
Gleeson Strategic Land
Group Activities
Financial income
Financial expenses
Profit before tax
Tax
Profit fortheyearfromcontinuingoperations
(Loss)/profit for the year from discontinued operations (net of tax)
Profit fortheyearattributabletoequityholdersoftheparentcompany
70,646
10,796
47,940
12,716
81,442
60,656
3
100
1,146
81,542
61,802
9,408
4,844
14,252
(2,188)
485
(389)
12,160
5,499
4,007
3,450
7,457
(1,448)
417
(647)
5,779
4,320
17,659
10,099
3
(231)
1,344
17,428
11,443
All rental income from investment properties, totalling £32,000 (2013: £4,000), is reported within the Gleeson Homes segment. The revenue in
the Gleeson Homes segment relates to the sale of residential properties and land. All revenue for Gleeson Strategic Land segment is in relation
to the sale of land.
Balance sheet analysis of business segments:
Gleeson Homes
Gleeson Strategic Land
Group Activities / Discontinued Operations
Net cash
2014
Assets
£000
2014
Liabilities
£000
2014
Netassets
£000
99,614
33,336
5,940
13,687
(16,436)
(4,022)
(4,028)
-
83,178
29,314
1,912
13,687
2013
Assets
£000
92,190
31,471
6,515
9,936
2013
Liabilities
£000
2013
Net assets
£000
(18,314)
(5,442)
(4,267)
-
73,876
26,029
2,248
9,936
152,577
(24,486)
128,091
140,112
(28,023)
112,089
Other information:
Continuingoperations:
Gleeson Homes
Gleeson Strategic Land
Group Activities
All the Group’s operations are carried out in the United Kingdom.
2014
Capital
additions
£000
2014
Depre-
ciation
£000
2013
Capital
additions
£000
622
-
7
629
794
6
28
828
1,122
1
21
1,144
2013
Depre-
ciation
£000
565
5
27
597
Page 59
MJ Gleeson Group plc
Notes to the Financial Statements continued
3. DiSCONtiNuEDOPERAtiONS
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 is treated as a discontinued operation.
The Group disposed of certain assets and liabilities of the Gleeson Building Division of Gleeson Construction Services to GB Building Solutions Ltd,
in a prior period and is treated as a discontinued operation.
In the prior year, the Group disposed of the remaining joint venture investment in the Gleeson Capital Solutions division. There is no further
business within the division and is treated as discontinued.
The Group has closed its Gleeson Commercial Property Development division and it is treated as discontinued.
2
-
2
-
-
-
2
-
2
5
7
Note
10
Gleeson
Construc-
tion
Services
2013
£000
1,144
(1,106)
38
(156)
-
-
(118)
-
(118)
(15)
Total
2013
£000
1,146
(1,106)
40
(104)
1,372
(107)
1,201
153
1,354
(10)
(133)
1,344
2014
p
(0.44)
2014
£000
(83)
-
(83)
2013
p
2.55
2013
£000
(30)
3,642
3,612
Gleeson
Commercial
Property
Develop-
ments
2014
£000
Gleeson
Capital
Solutions
2014
£000
Gleeson
Construc-
tion
Services
2014
£000
Note
Gleeson
Commercial
Property
Develop-
ments
2013
£000
Gleeson
Capital
Solutions
2013
£000
total
2014
£000
100
(46)
54
(185)
-
-
(131)
-
(131)
(100)
-
-
-
52
1,372
(107)
1,317
153
1,470
-
100
(46)
54
(185)
-
-
(131)
-
(131)
(23)
(154)
(231)
1,470
Revenue
Cost of sales
Grossprofit
Administrative expenses
Profit on sale of assets
held for sale
Share of profit of joint
ventures (net of tax)
Operating(loss)/profit
Financial income
7
(Loss)/profitbeforetax
Tax
(Loss)/profit fortheyear
fromdiscontinuedoperations
-
-
-
-
-
-
-
-
-
(77)
(77)
-
-
-
-
-
-
-
-
-
-
-
Loss/earningspershare:impactofdiscontinuedoperations
Basic
The cashflow statement includes the following relating to operating (loss)/profit on discontinued operations:
Operating activities
Investing activities
Page 60
MJ Gleeson Group plc
4. ExCEPtiONALitEMS
impairmentofinventoriesandcontractprovisions
At 30 June 2014, the Group conducted a review of the net realisable value of the land and work-in-progress carrying values of its sites in the light
of the condition of the UK housing market. 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.
Deferredtaxontaxlosses
During the year, the Group recognised £8,326,000 (2013: £4,238,000) of previously unrecognised deferred tax asset in relation to tax losses
available to offset against future profits.
Exceptional income may be summarised as follows:
Re-instatement of inventories and contract provisions
Tax
2014
£000
800
8,326
9,126
2013
£000
1,028
4,238
5,266
In the year ended 30 June 2014, £800,000 (2013: £1,028,000) of exceptional income was reported in the Gleeson Homes division and £8,326,000
(2013: £4,238,000) as tax.
5. ExPENSESANDAuDitOR’SREMuNERAtiON
Profit for the year is stated after charging/(crediting):
Staff costs
Depreciation of plant and equipment (continuing operations)
Profit on sale of investment properties
Rental income from investment properties
Auditor’s remuneration for:
• Audit of these financial statements
• Audit of financial statements of subsidiaries pursuant to legislation
• Taxation services
• Other services relating to taxation
• Other services
Note
6
2014
£000
9,961
828
(334)
-
10
60
44
46
39
2013
£000
9,056
597
-
(4)
10
55
35
-
38
Page 61
MJ Gleeson Group plc
Notes to the Financial Statements continued
6. StAFFCOStS
Wages and salaries
Redundancy
Share-based payments
Social security costs
Other pension costs
Note
23
Group
2014
£000
8,302
14
147
1,047
451
9,961
Group
2013
£000
7,572
19
181
817
467
9,056
The average monthly number of employees (including Directors) during the year was:
Gleeson Homes
Gleeson Strategic Land
Group Activities
The average number of people employed by the Company (including Directors) during the year was 10 (2013: 10).
Directors'remuneration
Full details of the Directors' remuneration is provided in the audited part of the Directors' Remuneration Report on pages 39 to 44.
7. FiNANCiALiNCOMEANDExPENSES
Continuingoperations
Discontinuedoperations
total
Group
Financialincome
Interest on bank deposits
Interest on joint venture loans
Other interest
Unwinding of discount on deferred receipts
Financialexpenses
Interest on bank overdrafts and loans
Bank charges
Interest and unwinding of discount on deferred payments
2014
£000
7
-
17
461
485
(48)
(240)
(101)
(389)
2013
£000
45
-
-
372
417
(3)
(130)
(514)
(647)
Netfinancialincome/(expense)
96
(230)
Note 19 discloses any further exposure for the Group to interest rate risk.
2014
£000
-
-
-
-
-
-
-
-
-
-
Page 62
Company
2014
£000
Company
2013
£000
792
-
18
169
69
1,048
Group
2014
No.
197
10
10
217
788
7
34
86
61
976
Group
2013
No.
182
9
10
201
2013
£000
45
153
-
372
570
(3)
(130)
(514)
(647)
2013
£000
-
153
-
-
153
-
-
-
-
2014
£000
7
-
17
461
485
(48)
(240)
(101)
(389)
153
96
(77)
MJ Gleeson Group plc
8. tAx
Continuingoperations
Discontinuedoperations
total
Group
Currenttax:
Adjustment in respect of prior years
Note
2014
£000
(6)
(6)
2013
£000
(12)
(12)
Deferredtax:
Current year (credit)/expense
Impact of rate change
24
24
(5,876)
383
(4,336)
28
Corporationtax (credit)/expensefortheyear
(5,493)
(4,308)
2014
£000
88
88
6
6
12
2013
£000
88
88
2014
£000
82
82
2013
£000
(4)
(4)
-
2
2
(5,870)
389
(4,336)
30
(5,481)
(4,306)
totaltax
(5,499)
(4,320)
100
10
(5,399)
(4,310)
Reductions in the UK corporation tax rate from 24% to 23% (effective 1 April 2013) and to 21% (effective 1 April 2014) were substantively enacted
on 3 July 2012 and 2 July 2013 respectively. A further reduction to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013.
The weighted average rate of corporation tax was 22.50% (2013: 23.75%) of the estimated assessable profit for the year.
The charge for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:
Profit before tax on continuing operations
Profit before tax from discontinued operations
Profit beforetax
taxchargeatstandardrate
Tax effect of:
Non-taxable income
Expenses that are not deductible in determining taxable profits
Tax reliefs not recognised in the Statement of Comprehensive Income
Utilisation of tax losses not previously recognised
Recognition of tax losses not previously recognised
Changes in tax rates
Adjustments in respect of prior years
tax creditandeffectivetaxratefortheyear
9. DiViDENDS
Amounts recognised as distributions to equity holders in the year:
Interim dividend for the year ended 30 June 2014 of 1.1p (2013: 0.5 p) per share
Final dividend for the year ended 30 June 2013 of 2.0p per share
2014
%
Note
3
2014
£000
12,160
(131)
12,029
2013
£000
5,779
1,354
7,133
2013
%
2,707
22.5
1,694
23.8
-
287
(538)
-
(8,326)
389
82
(5,399)
-
2.4
(4.5)
-
(69.2)
3.2
0.7
(44.9)
(326)
119
-
(1,605)
(4,235)
30
13
(4,310)
2014
£000
582
1,058
1,640
(4.6)
1.7
-
(22.5)
(59.4)
0.4
0.2
(60.4)
2013
£000
264
-
264
The proposed final dividend for the year ended 30 June 2014 of 4.9p per share (2013: 2.0p per share) makes a total dividend for the year of 6.0p per
share (2013: 2.5p per share).
The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these Financial Statements.
The total estimated dividend to be paid is £2,631,000.
Page 63
MJ Gleeson Group plc
Notes to the Financial Statements continued
10. EARNiNGSPERSHARE
Fromcontinuinganddiscontinuedoperations
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
attributable to equity holders of the parent company
Profit from continuing operations
(Loss)/profit from discontinued operations
Profit for the purposes of basic and diluted earnings per share
Numberofshares
Weighted average number of ordinary shares for the purposes of basic earnings per share
Effect of dilutive potential ordinary shares:
Share options
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Fromcontinuingoperations
Basic
Diluted
Fromdiscontinuedoperations
Basic
Diluted
Fromcontinuinganddiscontinuedoperations
Basic
Diluted
NormalisedEarningspershare
fromcontinuinganddiscontinuedoperations
Profit for the purposes of basic and diluted earnings per share
Excluding the impact of recognising unrecognised tax losses
Normalised earnings
Basic
Diluted
Page 64
2014
£000
2013
£000
17,659
(231)
10,09L
1,344
17,428
11,443
2014
No.000
2013
No. 000
52,941
52,758
915
564
53,856
53,322
2014
p
33.36
32.79
2014
p
(0.44)
(0.44)
2014
p
32.92
32.36
2013
p
19.14
18.94
2013
p
2.55
2.52
2013
p
21.69
21.46
2014
£000
17,428
(8,326)
2013
£000
11,443
(5,840)
9,102
5,603
2014
p
17.19
16.90
2013
p
10.62
10.51
11. PLANtANDEquiPMENt
Costorvaluation
At 1 July 2012
Additions
Disposals
At 30 June 2013
Additions
Disposals
At 30 June 2014
Accumulateddepreciation
At 1 July 2012
Charge for the year
Disposals
At 30 June 2013
Charge for the year
Disposals
At 30 June 2014
Netbookvalue
At 30 June 2014
At 30 June 2013
At 1 July 2012
MJ Gleeson Group plc
Group
Plantand
machinery
£000
Company
Plantand
Machinery
£000
2,532
1,144
(6)
3,670
629
(29)
4,270
1,610
597
(4)
2,203
828
(29)
3,002
1,268
1,467
922
729
21
(6)
744
7
-
751
682
27
(4)
705
28
-
733
18
39
47
The Group has recorded a depreciation expense of £828,000 (2013: £597,000), of which £183,000 (2013: £204,000) has been charged in cost of
sales and £645,000 (2013: £393,000) in administrative expenses.
The Company has recorded a depreciation expense of £28,000 (2013: £27,000), all of which has been charged in administrative expenses.
12. iNVEStMENtPROPERtY
Group
Costorvaluation
At 1 July 2012
At 30 June 2013
Disposals
At 30 June 2014
Investment properties are included at Directors' valuation.
Freehold
investment
property
£000
748
748
(177)
571
Page 65
MJ Gleeson Group plc
Notes to the Financial Statements continued
13. iNtEREStiNJOiNtVENtuRES
Shareofresultsandinvestmentinjointventures
At 1 July
Share of loss in joint ventures (net of tax) for the year
Cashflow hedges
At 30 June
Share of profit in joint ventures is included within the Gleeson Capital Solutions division.
thefollowingtableshowstheaggregateamountsinrespectofGroupshareofjointventures:
Current assets
At 30 June
Revenue
Expenses
Loss before tax
Tax
Loss for the year
2014
£000
15
-
-
15
2014
£000
15
15
-
-
-
-
-
2013
£000
15
(107)
107
15
2013
£000
15
15
402
(509)
(107)
-
(107)
There are no significant contingent liabilities in the joint ventures.
Jointventures
Jointventure
Genesis Estates (Manchester) Ltd
Principalactivity
Residential property
development
Percentageof
equityheld
Classof
shares
Countryof
incorporation
Yearend
date 1
50%
Ordinary
shares
England
26 March
1 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.
14. OtHERiNVEStMENtS
GroupandCompanyotherinvestments
At 1 July
At 30 June
Otherinvestments
total
2014
£000
4,896
4,896
2013
£000
4,896
4,896
2014
£000
4,896
4,896
2013
£000
4,896
4,896
The other investments represent equity in GB Group Holdings Limited, details of which are provided below.
The Directors consider that the carrying amount of other investments approximates to their fair value.
Page 66
MJ Gleeson Group plc
GBBuildingSolutionsLimitedandGBGroupHoldingsLimited("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.
Following a review of the investment, no indicators of impairment have been identified.
15. iNVEStMENtSiNSuBSiDiARiES
Cost
At 1 July 2012
Subscription to shares
Impairment in investments
Impairment reversal
At 30 June 2013
Repayment of investment
Impairment in investments
At30June2014
Subsidiary
under-
takings
£000
30,200
1,000
(138)
1,000
32,062
(15,202)
(153)
16,707
The repayments in the year and the prior year reflect the reduction in the share capital of a number of subsidiary companies within the Group.
Investments in subsidiary undertakings are included in the balance sheet at cost less any provision for diminution in value. At 30 June 2014 and
30 June 2013, the company impaired its investment in Gleeson Construction Services where the net assets were below the cost of the investment.
Principalsubsidiaryundertakings
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.
RegisteredinEnglandandWalesandoperateintheunitedKingdom
Subsidiary
Gleeson Construction Services Limited
Gleeson Developments Limited
Gleeson Regeneration Limited
Gleeson Strategic Land Limited 1
Principalactivity
Construction services
House building, housing regeneration and strategic land trading
House building and housing regeneration
Strategic land trading
Gleeson Developments (North East) Limited
House building and housing regeneration
A full list of the subsidiary companies within the Group will be filed at Companies House with the Company's Annual Return.
1 Shares held by Gleeson Developments Limited
Page 67
MJ Gleeson Group plc
Notes to the Financial Statements continued
16. iNVENtORiES
Work-in-progress
17. tRADEANDOtHERRECEiVABLES
Currentassets
Trade receivables
Amounts due from construction contract customers
VAT recoverable
Prepayments and accrued income
Amount due from subsidiary undertakings
Non-currentassets
Available for sale financial assets
2014
£000
2013
£000
100,717
96,820
100,717
96,820
Note
18
Group
2014
£000
11,971
15
61
747
-
Group
2013
£000
8,746
677
320
3,658
-
Company
2014
£000
Company
2013
£000
70
-
-
318
62,381
92
-
-
136
66,307
12,794
13,401
62,769
66,535
8,116
7,797
-
-
20,910
21,198
62,769
66,535
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, represent receivables in respect of shared equity properties. These 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 19 for reference to credit risk associated with trade receivables.
The Company recharges subsidiaries for all staff-related costs, insurance and interest on intercompany loans. The total costs recharged for the
year totalled £5,868,000 (2013: £5,511,000).
The Company charges interest at Bank of England base rate plus 1% on £66,493,000 (2013: £73,447,000) of the unimpaired intercompany loan
adjusted for bank balances held within the company. At 30 June 2014, the adjusted figure was £59,883,000 (2013: £67,663,000).
18. CONStRuCtiONCONtRACtS
Contracts in progress at the balance sheet date:
Amounts due from contract customers included in trade and other receivables
Contract costs incurred plus recognised profits less recognised losses to date
Less: progress billings
Note
17
Group
2014
£000
15
15
Group
2013
£000
677
677
43,338
(43,323)
89,501
(88,824)
15
677
Amounts due to contract customers included in trade and other payables represent the balance of advances received on construction contracts
at the year end. At 30 June 2014, retentions held by customers for contract work amounted to £142,000 (2013: £663,000).
Page 68
MJ Gleeson Group plc
19. FiNANCiALiNStRuMENtS
Riskexposure
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.
Cashandcashequivalents
Cash and cash equivalents comprises cash and short-term deposits with a maturity of three days or less held by the Group and the Company. The
carrying amount of these assets equals their fair value.
Creditrisk
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 2014, the Group's most significant credit risk, a local authority, accounted for £3,057,000 (2013: £2,836,000, a deferred receipt from
a property investor) of the trade and other receivables carrying amount. The Group's turnover with this customer in the year is £nil (2013: £nil).
The Group's remaining credit risk is spread over a large number of counterparties and customers.
tradereceivablesageing
The ageing of gross trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 121-365 days
Past due more than one year
All trade receivables are from UK customers.
Group
2014
£000
11,248
16
68
78
561
11,971
Group
2013
£000
7,659
487
44
9
547
8,746
Company
2014
£000
Company
2013
£000
-
-
-
-
70
70
-
-
-
-
92
92
Trade receivables past due more than one year largely represent retentions within the Gleeson Homes division. 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
Balance at 30 June
Marketrisk
The Group has no significant exposure to currency risk or equity risk.
Group
2014
£000
74
-
74
Group
2013
£000
Company
2014
£000
Company
2013
£000
91
(17)
74
74
-
74
91
(17)
74
Page 69
MJ Gleeson Group plc
Notes to the Financial Statements continued
interestraterisk
The Group closely monitors its exposure to variations in interest rates 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 £136,000 (2013: £99,000) based on the cash
balance at the year end. A 1% decrease would cause income to fall by the same amount.
Liquidityrisk
The Group entered into a £20,000,000 three year credit facility with Lloyds Bank plc on 5 December 2013 and has moved all banking to Lloyds
Bank plc. On securing this facility, the Group withdrew from its £5,000,000 facility with The Co-operative Bank 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
2014
Effective
interest
rate
%
0.00
0.20
2014
Due
within
oneyear
£000
9,686
4,001
13,687
2013
Effective
interest
rate
%
0.00
0.38
2013
Due
within
one year
£000
6,436
3,500
9,936
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting
agreements:
Non-derivativefinancialliabilities
Asat30June2014
Trade and other payables 1
Asat30June2013
Trade and other payables 1
Carrying Contractual
cashflows
amount
£000
£000
6mths
orless
£000
6-12mths
£000
1-2yrs
£000
2-5yrs
£000
Morethan
5yrs
£000
21,743
(21,837)
(14,223)
(3,099)
(4,178)
21,743
(21,837)
(14,223)
(3,099)
(4,178)
24,784
(24,803)
(12,599)
(2,622)
(8,597)
24,784
(24,803)
(12,599)
(2,622)
(8,597)
(337)
(337)
(985)
(985)
-
-
-
-
1
Includes loans and borrowings; 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.
Exposuretocurrencyrisk
The Group has no exposure to foreign currency risk.
Fairvalues
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.
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. Gains and losses arising from changes in fair value
with respect to impairment losses, cashflows and interest are recognised in profit in the year. 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.
Page 70
MJ Gleeson Group plc
The table below analyses financial instruments measured at fair value, into a fair value hierarchy based on the valuation technique used to
determine fair value.
Level 3: inputs for assets or liabilities that are not based on observable market data.
Available for sale financial assets
Note
17
2014
Level3
£000
8,116
8,116
2014
total
£000
8,116
8,116
2013
Level3
£000
7,797
7,797
2013
total
£000
7,797
7,797
interestbearingloansandborrowings
Fair value is based on discounted expected future principal and interest cash flows.
Capitalriskmanagement
In line with the disclosure requirements of IAS 1, Presentation of Financial Statements, the Group regards its capital as being the equity as shown
in the Statement of changes in equity.
Note 28 to the Financial Statements provides details regarding the Company's share capital movements in the period. There were no breaches of
any requirements with regard to any relevant conditions imposed by either the UKLA or the Company's Articles of Association during the period
under review.
The primary objective of the Group's capital management is to ensure that it maintains investor, creditor and market confidence, to support its
business and to maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in the 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.
20. LOANSANDBORROWiNGS
The Group has secured borrowings under the Government's Get Britain Building scheme. Under this scheme, finance has been provided for 50%
of the construction costs of the properties. The loan is repayable in full by February 2015 and no further drawings are available under the facility.
At 30 June 2014, the amount drawn under the facility was £1,933,000 (2013: £2,193,000) with the balance split between current and non-current
liabilities based on expected repayment date.
GetBritainBuildingloan
Non-current liabilities
Current liabilities
The Directors consider that the carrying amount of loans and borrowings approximates their fair value.
The Company does not have any loans and borrowings.
Group
2014
£000
-
1,933
1,933
Group
2013
£000
1,885
308
2,193
Page 71
MJ Gleeson Group plc
Notes to the Financial Statements continued
21. tRADEANDOtHERPAYABLES
Currentliabilities
Trade payables
Other taxation and social security
VAT payable
Accruals and deferred income
Amount due to subsidiary undertakings
Group
2014
£000
18,115
461
107
3,499
-
22,182
Group
2013
£000
Company
2014
£000
Company
2013
£000
21,273
377
107
3,752
-
25,509
135
244
107
686
6,124
7,296
215
225
107
366
21,307
22,220
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 2013
Provisions used during the year
Provisions released during the year
At30June2014
Non-current
Current
Group
Onerous
leases
£000
321
(19)
(13)
289
75
214
289
total
£000
321
(19)
(13)
289
75
214
289
Restructuring
The restructuring costs are to cover the cost of the redundancies where existing employees could not be retained within the Group.
Onerousleases
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 3 years. Market conditions
have a significant impact on the assumptions for future cash flows.
At 30 June 2014, the Company did not have any provisions (2013:£Nil).
23. EMPLOYEEBENEFitS
Definedcontributionpensionplan
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 Statement of Comprehensive Income of £451,000 (2013: £371,000) represents contributions payable to the
defined contribution pension plan by the Group at rates specified in the plan rules. At 30 June 2014, contributions of £53,000 (2013: £47,000)
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 Statement of Comprehensive Income of £69,000 (2013: £81,000) represents contributions payable to the
defined contribution pension plan by the Company at rates specified in the plan rules.
Page 72
MJ Gleeson Group plc
24. DEFERREDtAx
Group
The deferred tax assets recognised by the Group and movements thereon during the current and prior year are as follows:
At 1 July 2012
Credit to income
Impact of rate change
At 30 June 2013
(Charge)/credit to income
Impact of rate change
At 30 June 2014
An analysis of the deferred tax balances for financial reporting purposes is as follows:
Deferred tax assets
Deferred tax liabilities
Plantand
machinery
£000
653
99
(27)
725
(111)
(97)
517
Losses
£000
-
4,238
-
4,238
5,991
(283)
9,946
Short-term
timing
differences
£000
72
-
(3)
69
(10)
(9)
50
Group
2014
£000
10,513
-
10,513
total
£000
725
4,337
(30)
5,032
5,870
(389)
10,513
Group
2013
£000
5,032
-
5,032
Reductions in the UK corporation tax rate from 24% to 23% (effective 1 April 2013) and to 21% (effective 1 April 2014) were substantively enacted
on 3 July 2012 and 2 July 2013 respectively. A further reduction to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013.
The deferred tax asset is recognised at the year end substantively enacted rates of 20% and 21% based on anticipated date of usage (2013: 23%).
In the year, the Group has recognised £5,991,000 (2013: £4,238,000) of previously unrecognised deferred tax asset in relation to tax losses
available to offset against future profits. These losses are recognised to the extent that it is probable that future taxable profits will be available
against which they can be used and the prevailing tax rate at that time. In the prior year, the deferred tax asset was only partially recognised in
respect of these losses due to the uncertain conditions in the housing market at that time.
At the balance sheet date, the Group has gross tax losses of £57,612,000 (2013:£67,935,000) of which £49,159,000 (2013: £19,858,000) have
been recognised as deferred tax asset. The Group has unrecognised tax losses of £8,456,000 (2013: £48,077,000) available for offset against
future profits. 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 2012
Credit to income
Impact of rate change
At 30 June 2013
(Charge)/credit to income
Impact of rate change
At 30 June 2014
Plantand
machinery
£000
Short-term
timing
differences
£000
420
5
(18)
407
(7)
(52)
348
-
-
-
-
7
(1)
6
total
£000
420
5
(18)
407
-
(53)
354
At the balance sheet date, the Company had unused tax losses of £5,772,000 (2013: £7,347,000) available for offset against future profits. No
deferred tax asset has been recognised in respect of these losses. Losses may be carried forward indefinitely.
Page 73
MJ Gleeson Group plc
Notes to the Financial Statements continued
25. OPERAtiNGLEASEARRANGEMENtS
Operatingleases:lessee
Minimum lease payments under non-cancellable operating leases
recognised as an expense for the year
Minimum lease payments
Group
2014
£000
Group
2013
£000
389
389
421
421
At the balance sheet date, the Group had 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
Group
2014
Landand
buildings
£000
389
726
182
1,297
Group
2013
Land and
buildings
£000
395
1,058
211
1,664
The Company had no minimum lease payments under non-cancellable operating leases.
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.
In the current year, onerous lease provisions of £19,000 were released (2013: £156,000). See note 22 for details.
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.
Operatingleases:lessor
The Group's total future minimum sub-lease receipts expected under non-cancellable sub-leases as at 30 June 2014 is £576,000 (2013: £770,000).
These receipts are included within the minimum rent receivables table below.
The Company has £nil (2013: £nil) future minimum sub-lease receipts.
Minimum rental income under operating leases recognised as revenue for the year
Group
2014
£000
196
Group
2013
£000
64
Included in the figures above is £164,000 (2013: £60,000) which relates to properties which the Group had previously occupied as operating lease
lessees and have now sublet. The balance of £32,000 (2013: £4,000) 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
Page 74
Group
2014
Landand
buildings
£000
Group
2013
Land and
buildings
£000
192
384
-
576
195
575
-
770
26. ANALYSiSOFCASHANDCASHEquiVALENtS
At 1 July 2012
Cashflow
At 30 June 2013
Cashflow
At30June2014
27. BONDSANDSuREtiES
MJ Gleeson Group plc
Group
£000
Company
£000
13,862
9,011
(3,926)
(5,428)
9,936
3,583
3,751
13,687
1,259
4,842
GroupandCompany
As at 30 June 2014, the Group had bonds and sureties of £6,825,000 (2013: £6,798,000) 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.
28. SHARECAPitAL
Issued and fully paid Ordinary shares:
At the beginning of the year
Shares issued
At the end of the year
2014
No.000
2014
£000
2013
No. 000
52,876
278
1,058
5
52,730
146
53,154
1,063
52,876
2013
£000
1,055
3
1,058
Ordinaryshares
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 2014 was 53,154,084 (2013: 52,876,487).
At 30 June 2014, the Employee Benefit Trusts ("EBT") held 92,000 (2013: 118,000) shares at a cost of £344,000 (2013: £345,000). The shares are
held in the EBT for the purpose of satisfying options that have been granted under the employee share ownership plans. Of these ordinary shares,
the right to dividend has been waived on none of these shares (2013: Nil).
Details of share options are given in note 29.
Page 75
MJ Gleeson Group plc
Notes to the Financial Statements continued
29. SHARE-BASEDPAYMENtS
During the year to 30 June 2014, the Group had two 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:
Shareoptionsgrantedafter7November2002
Arrangement
Contracturallife
Vestingcondition
Share purchase plan
10 years
From 1st 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. The shares purchased by the employees
are immediately exercisable. The Group matching shares are only
exercisable after 3 years.
Settlementbasis
Equity
Performance share plan (PSP)
Grant date 17/12/2010
3 years
For executive directors and senior executives. The award vested in part
in the year ending 30 June 2014 with the balance vesting post year end.
Post year end the scheme vested in full.
Equity
Performance share plan (PSP)
Grant date 5/11/2012
3 years
For the Chief Executive Officer 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 2012 to 30 June 2015.
None of these shares are currently exercisable.
Equity
Fair value is used to measure the value of the outstanding options.
Sharepurchaseplan
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.
Performanceshareplan
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.
PSP
17/12/10
PSP
5/11/12
£1.26
£2.10
45%
1.56%
3 years
1.69%
£0.50
£1.52
£3.50
36%
1.50%
3 years
0.27%
£0.23
Dateofgrant
The model inputs were:
Share price at grant date
Total shareholders return target
Expected volatility
Expected dividends
Expected life
Risk-free interest rate
Fair value of one option
Page 76
MJ Gleeson Group plc
Expected volatility was determined by calculating the historical volatility of the Company's share price. For the 17/12/10 scheme the volatility
was measured over the previous 3 years.
Further details of the option plans are as follows:
Dateofgrant
Outstanding at 30 June 2012
Granted in the year
Forfeited
Exercised
Outstanding at 30 June 2013
Granted in the year
Forfeited
Exercised
Outstanding at 30 June 2014
Remaining contractural 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
Shareoptionsgrantedpriorto7November2002
Dateofgrant
Outstanding at 1 July 2012
Exercised
Outstanding at 30 June 2013
Lapsed
Outstanding at 30 June 2014
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
Sharepur-
chaseplan
Monthly
No.of
shares
81,518
13,367
(11)
(25,307)
69,567
7,871
(184)
(2,667)
PSP
17/12/10
No.of
shares
839,049
-
-
-
PSP
5/11/12
No.of
shares
-
423,015
-
-
839,049
423,015
-
(18,055)
(277,597)
-
-
-
74,587
543,397
423,015
Rolling
scheme
-
£3.68
£1.93
0.0 years
1.5 years
-
£3.32
n/a
-
n/a
n/a
Sharepur-
chaseplan
Monthly
No.of
shares
1,347
(800)
547
(7)
540
Rolling
scheme
-
n/a
£1.93
Page 77
MJ Gleeson Group plc
Notes to the Financial Statements continued
30. CAPitALCOMMitMENtS
At 30 June 2014, the Group had no capital commitments (2013: £799,000).
31. RELAtEDPARtYtRANSACtiONS
identityofrelatedparties
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.
transactionswithkeymanagementpersonnel
The Group's key management personnel are the executive and non-executive Directors, as identified in the Directors' Remuneration Report on
pages 39 to 44.
Other than disclosed in the Directors' Remuneration Report, there were no other transactions with key management personnel in either the
current or proceeding year.
Provisionofgoodsandservicestojointventures
Leeds Independent Living Accommodation Company Ltd
Sales to related parties were made at market rates.
Purchaseofgoodsandservicesfromjointventures
There have been no purchases of goods from joint ventures.
Amountsowedbyandowedtojointventures
The amounts owed by joint ventures, are shown below:
Prepayments and accrued income
2014
£000
-
-
2014
£000
31
31
2013
£000
163
163
2013
£000
31
31
Note
17
The amounts owed to joint ventures at 30 June 2014 totalled £Nil (2013: £Nil).
identityofrelatedpartieswithwhichtheCompanyhastransacted
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
Page 78
Administrativeexpenses
2014
£000
5,868
5,868
2013
£000
5,511
5,511
Receivablesoutstanding
Payablesoutstanding
2014
£000
2013
£000
2014
£000
2013
£000
62,381
66,307
6,124
21,307
62,381
66,307
6,124
21,307
Five Year Review
for the years ended 30 June
Revenue
Operating profit/(loss)
Net finance income/(cost)
Profit/(loss) before tax
Tax credit/(charge)
Profit/(loss) after tax
Discontinued operations
Profit for year attributable to
equity holders of the parent company
Total assets
Total liabilities
Net assets
Total dividend per share
Earnings/(loss) per share from continuing operations
Net assets per share
MJ Gleeson Group plc
2014
£000
2013
£000
2012
£000
2011
£000
2010
£000
81,442
60,656
40,807
41,210
33,231
12,064
96
6,009
(230)
2,724
302
899
207
12,160
5,779
3,026
1,106
5,499
4,320
(130)
(123)
17,659
10,099
2,896
(231)
1,344
710
983
528
(1,017)
371
(646)
255
(391)
3,528
17,428
11,443
3,606
1,511
3,137
152,577
140,112
116,220
120,517
131,380
(24,486)
(28,023)
(15,826)
(21,364)
(33,537)
128,091
112,089
100,394
99,153
97,843
p
3.10
33.36
241
p
0.50
19.14
212
p
5.00
5.51
190
p
-
1.87
188
p
15.00
(0.75)
186
Page 79
MJ Gleeson Group plc
Advisers
BANKERS
Lloyds Bank Plc
14 Church Street, Sheffield S1 1HP
SOLiCitORS
Simmons & Simmons
CityPoint, One Ropemaker Street, London EC2Y 9SS
REGiStEREDAuDitORS
KPMG Audit Plc
1 The Embankment, Neville Street, Leeds LS1 4DW
StOCKBROKERSANDFiNANCEADViSERS
N+1 Singer
One Bartholemew Lane, London EC2N 2AX
REGiStRARS&tRANSFEROFFiCE
Capita Asset Services
The Registry, Bourne House, 34 Beckenham Road
Beckenham, Kent BR3 4TU
REGiStEREDOFFiCE
MJ Gleeson Group plc
Sentinel House, Harvest Crescent, Ancells Business Park
Fleet, Hampshire GU51 2UZ
Registered Number
479529
Page 80
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 Woodrow Press Limited.
ISO 14001
REGISTERED FIRM
MJGLEESONGROuPPLC
Sentinel House
Harvest Crescent, Ancells Business Park
Fleet, Hampshire GU51 2UZ
Tel: 01252 360 300
Fax: 01252 621 666
Email: enquiries@mjgleeson.com
www.mjgleeson.com