MJ Gleeson plcReport and Accounts2015builders for generations MJ Gleeson plc
Our twin track strategy - the development of low
cost homes for open market sale in the North of
England and strategic land sales in the South -
continues to deliver excellent results, which provide
strong grounds for optimism concerning the
Group’s future prospects.
Gleeson Homes is on track to achieve its medium
term target of 1,000 unit sales per annum.
Moreover, it believes that there are excellent
opportunities for further volume growth beyond this
figure, primarily through the roll-out of its distinctive
and highly successful business model across a
wider geographical area.
Meanwhile, Gleeson Strategic Land continues
to see robust demand for consented land from a
wide range of housebuilders. The division has a
strong pipeline of sites, covering 3,936 acres (2014:
3,802 acres) and, against the background of the
Government’s strong commitment to maintaining
the new National Planning Policy Framework, it is
confident that it will continue to enjoy a high level of
success in promoting commercially attractive sites
through the planning system.
Contents
1
2
Financial Highlights
Chairman’s Statement
4 Strategic Report
5 Group Businesses
8
Strategic Development and
Priorities
10 Business Performance
12 Key Performance Indicators
(KPIs)
14 Financial Review
18 Operating Risk Statement
20 Corporate Social Responsibility
Report
28 Corporate Governance
29 Chairman’s Introduction
30 Board of Directors
32 Corporate Governance Statement
39 Directors’ Report
44 Remuneration Committee
Report
45 Chairman’s Summary Statement
46 Remuneration Policy Report
52 Annual Report on Remuneration
58 Financial Statements
59 Statement of Directors’
Responsibilities
Independent Auditor’s Report
60
62 Consolidated Statement of
Comprehensive Income
63 Consolidated Statement of Financial
Position
64 Consolidated Statement of Changes
in Equity
66 Consolidated Statement of Cashflow
68 Notes to the Financial Statements
Further Information
97 Five Year Review
98 Corporate Directory
98 Shareholder Information
98 Financial Calendar
Financial Highlights
Group revenue
+44%
2015: £117.6m, 2014: £81.4m
Profit before tax
+42%
2015: £17.3m, 2014: £12.2m
Net cashflow 1
+44%
2015: £8.1m, 2014: 5.7m
Normalised
earnings per share 2
+99%
Operating profit
before exceptional
costs
+107%
Dividend for the
year
+67%
2015: 34.2 pence, 2014: 17.2 pence
2015: £23.3m, 2014: £11.3m
2015: 10.0 pence, 2014: 6.0 pence
1 From operating and investing activities.
2 Normalised earnings per share exclude the impact of exceptional restructuring costs (£1.2m) and the provision against investment
(£4.9m) (2014: recognising previously unrecognised tax losses of £8.3m).
Ferndale Court, County Durham
1
1
Chairman’s Statement
Financial performance
Group revenues increased by 44.4% to
£117.6m (2014: £81.4m). The Group
recorded an operating profit from
continuing operations of £22.0m, an
increase compared to the previous
year of 82.7% (2014: £12.1m). This
strong result was after deducting
exceptional restructuring costs of
£1.2m (2014: £0.8m exceptional credit
from the reinstatement of impaired
inventory) relating to the intro-
duction of a new parent company.
The post-tax loss from discontinued
operations was £0.2m (2014: £0.2m).
Pre-exceptional profit before tax was
£23.4m. In March 2015 the Group
announced that it had been notified
that GB Group Holdings Ltd, in which
Gleeson had a 25% shareholding, had
appointed Administrators. The
Group has accordingly taken a
provision of £4.9m for the carrying
value of this investment. After this
and the exceptional restructuring
costs, reported profit before tax
was £17.3m (2014: £12.2m). Profit
for the year attributable to equity
holders of the parent company was
£12.2m (2014: £17.4m including a
non-recurring exceptional deferred
tax credit of £8.3m).
Net assets increased by 6.6% to
£136.5m (2014: £128.1m),
representing net assets per share of
254p (2014: 241p). Cash and cash
equivalents at 30 June 2015 totalled
£15.8m (2014: £13.7m).
Normalised basic earnings per share,
excluding the impact of exceptional
costs (£1.2m) and provisions against
investments (£4.9m), grew to 34.2p
(2014: 17.2p).
Market context
Gleeson Homes continues to enjoy
high levels of demand, in particular
from its core customer base of
families on low incomes who have
a strong desire to own their own
home. Reservations in the current
year to date are at record levels.
Our customers are continuing to
benefit both from the Government’s
Help to Buy Scheme, which has been
extended to 2020, and from Gleeson
Homes’ very rigorous control
of costs, which means that our
selling prices remain exceptionally
affordable. These factors, along
with the continuing growth of real
incomes, should ensure that any
eventual rise in interest rates will
have a very limited impact on our
customers’ ability to buy.
Gleeson Homes is making excellent
progress towards achieving its
current strategic objective of 1,000
unit completions per annum. As
set out in the Strategic Report we
are reviewing the opportunities
for substantial growth beyond this
figure, primarily by rolling out the
division’s distinctive and highly
successful business model across a
wider geographical area.
Gleeson Strategic Land is still
experiencing robust demand for
green field sites in the South of
England from a wide range of
housebuilders who are keen to take
advantage of favourable market
conditions. Against the background
of the Government’s strong
commitment to maintaining the new
National Planning Policy Framework,
the division is confident that it will
continue to enjoy a high level of
success in obtaining commercially
attractive planning consents.
In the current year, the division
has already completed the sale
of a 100 acre site with planning
consent for a major commercial
development and it expects to sell a
number of additional consented
sites shortly.
I am pleased to
be able to report
another year of
strong and profitable
growth.
Gleeson Homes increased unit
sales by 33.9% to 751 units
(2014: 561 units). Cost pressures
continued to be very effectively
contained and there was a
modest increase in selling prices.
The division further increased its
land pipeline, taking advantage
of the relatively low land prices
in our target areas in the North
of England to add 33 sites,
comprising 3,366 plots, to its
development pipeline.
Gleeson Strategic Land increased
operating profit by 68.2%. This
reflected both a high level of
success in securing residential
planning consents and the
continuing strength of demand
for such sites once consented.
2
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Board and people
During the year the Chief Financial
Officer, Alan Martin, resigned in
order to pursue other opportunities
following the Board’s decision to
relocate all of the Group’s finance
function to Sheffield. He has been
succeeded by Stefan Allanson. I am
delighted to welcome Stefan to the
Group, and on behalf of everyone at
Gleeson, I’d like to thank Alan once
again for his significant contribution
over the last eight years.
Employees
The average number of employees
during the year increased to 266
(2014: 217). The actual number of
employees at the year-end was 290
(2014: 228).
The Group’s strong performance
during the year reflects the immense
commitment and professionalism
of our employees. On behalf of the
Board, I would like to congratulate
and thank them.
The Board aims to maintain dividend
cover between two and three times
earnings for the foreseeable future.
Dividends
Reflecting the Group’s strong
financial performance and our
confidence in the prospects for the
current year and beyond, the Board
is recommending a final dividend
for the year of 7.3 pence per
share (2014: 4.9 pence per share).
Combined with the interim dividend,
this will give a total dividend for the
year of 10 pence per share (2014:
6.0 pence per share), an increase
compared to the previous year
of 66.7%. Subject to shareholder
approval at the Annual General
Meeting (“AGM”), the final dividend
will be paid on 17 December 2015 to
shareholders on the register at close
of business on 20 November 2015.
Summary and outlook
We have a very strong presence
in the two sectors of the housing
market in which we specialise and
market conditions in both sectors
remain favourable. Against this
background, the Board is confident
that the Group has considerable
scope to grow both revenue and
profits in the current year and
beyond.
Dermot Gleeson
Chairman
25 September 2015
Creating safe, sustainable and vibrant communities
THE GLEESON APPRENTICESHIP SCHEME
At the start of the 2015/2016 academic year, Gleeson Homes will employ 30 young
apprentices across the three operating regions and in 2015 we introduced a new office
based apprenticeship scheme. Find out more on page 22
THE GLEESON COMMUNITY CHALLENGE
In March 2015 Gleeson launched the Gleeson Community Challenge which gave South
Yorkshire based non-profit organisations the opportunity to apply for a makeover of their
facilities worth £10,000 with all the work to be completed by Gleeson’s construction team.
Find out more on pages 24 and 25
YOURWATCH
This year our commitment to safer communities was enhanced with the launch of our very
own version of neighbourhood watch called YourWatch. Find out more on page 21
ENGAGEMENT WITH LOCAL SCHOOLS
We continue to work with local schools, educating primary level children on the dangers
of playing on building sites, working with them on specific ‘building’ related projects and
running competitions for pupils. Find out more on page 22
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
3
Strategic Report
5
8
Group Businesses
14 Financial Review
Strategic Development and Priorities
18 Operating Risk Statement
10 Business Performance
20 Corporate Social Responsibility Report
12 Key Performance Indicators (KPIs)
Before development began in 2010
4
Burnham Walk, Bradford, 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Group Businesses
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.
Gleeson Homes
Gleeson Strategic Land
No part exchange
Limited competition
Sustainable model
Positive
regeneration
credentials,
acceptable
to planners
Government
home ownership
stimulation
Nationwide
economic
growth
Significant and
motivated target
audience
Strong drivers for
increasing UK
housing stock
Planning expertise
and strong local
authority relationships
High demand,
low supply of
consented land
Improving
planning environment
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
5
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Gleeson Homes
Gleeson Homes: A housing regeneration specialist, working in challenging
communities to provide new homes for sale to people on low incomes in the
North of England.
Gleeson continues to build significant value for shareholders as well as also delivering a unique social benefit in helping
people on lower incomes move from the ‘rent trap’ into home ownership. Our homes are affordable enough to be
sold to a couple on the current minimum wage and quite often mortgage repayments are less than comparable council
house rents.
Key features of the Gleeson Homes business model
► COMMUNITY REGENERATION: Over the years, Gleeson has played a key role in regenerating challenging
communities. Through establishing strong relationships with local authorities, Gleeson has created a ‘virtuous
circle’ where it acquires and redevelops legacy sites, where there is an obvious need for social and economic
regeneration and builds homes at affordable prices and enables home ownership. This ‘virtuous circle’ will continue
to underpin the business and allows for future geographic expansion.
► SUCCESSFUL LAND PURCHASE: We partner with local authorities
and private land owners to acquire land in socially and
economically deprived areas which will benefit from
community regeneration. We have a very carefully
targeted land buying strategy that has clearly
defined and challenging hurdle rates.
► DRIVING DOWN BUILDING COSTS: We build traditional
two, three and four bedroom detached and
semi-detached homes. We ensure that our good
quality homes are built to the specification that our
customers require.
► LOW OVERHEADS: We ensure that overhead costs are
kept low by having small and similarly structured
management teams in each operating region and
continuously measure their relative performance.
► ENABLING THE CUSTOMER: We offer our customers a
range of bespoke financial packages to enable them to
become homeowners.
Gleeson Homes
builds low cost
homes for people
on low incomes in
areas of industrial
decline and social
and economic
deprivation.
6
6
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Gleeson Strategic Land
Gleeson Strategic Land: 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 a wide range of
developers.
Key features of the Gleeson Strategic Land business model
► ACHIEVING MUTUALLY BENEFICIAL AGREEMENTS WITH LANDOWNERS: We enter into agreements with landowners
to promote their land through the planning process.
► PROMOTION THROUGH THE PLANNING PROCESS: 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.
Strategic Land
specialises in identifying
opportunities and
successfully manages
them through the
planning system.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
7
7
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Strategic Development and Priorities
The strategy of the Group is to build a larger and
increasingly profitable business by increasing the number
of housing regeneration sites in its target markets,
increasing its housebuilding land pipeline and improving
profitability on the sale of individual units and of land
with residential planning permission.
and regenerates local communities in areas of social
deprivation. This is recognised by local authorities and
results in more opportunities for us to acquire brownfield
land at low prices, leading to increased sales volumes
and profitability whilst keeping average selling prices
(“ASPs”) low.
As Gleeson Homes approaches its medium-term objective
of 1,000 unit completions per annum, and expects to
do so in the near future, a number of opportunities for
further growth are being considered.
IMPROVE MARGINS: We will continue to control
development costs and acquire land in line with our
defined and challenging hurdle rates.
Gleeson Homes has a proven and successful business
model. Whilst this has been centred on the North and
North-West, where there remains significant untapped
potential, it is clear that the model would be equally
successful across many other parts of the UK where there
is an urgent imperative for community regeneration but
which is held back by a lack of developers prepared to
rehabilitate legacy brownfield sites or able to provide an
affordable product for people on low incomes.
Gleeson Homes has proven to be alone in recognising
both the need and the opportunity and, working
alongside local authorities, has played a key role in
regenerating whole communities, allowing people
to continue living in, or return to, their home
neighbourhoods.
Drawing on the same model that has underpinned
the Company’s success in the North and North-West,
Gleeson Homes has analysed the rest of the UK on a
strict affordability basis to determine where it might, in
future, look to further roll-out its product. The results
indicate a potential addressable population of three
times its current geographic market.
Whilst it is early days, and no decisions have been taken
in terms of which areas might be targeted first for roll-
out, it is clear that the business has significant scope for
future growth.
In the meantime, our strategic priorities remain as set
out below:
INCREASE HOUSEBUILDING FOOTPRINT: We will increase
the number of developments throughout our existing
and new operating areas and particularly in areas of
community regeneration need. Our business enables
people on lower incomes to become homeowners
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.
INCREASE LAND PIPELINE: We will continue to acquire
land, at appropriate cost, in socially and economically
deprived areas, which would benefit from community
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.
ROBUST HEALTH & SAFETY: We will continue to improve
our safety culture and will maintain a high level of
compliance with health and safety standards
Discontinued operations
BUILDING AND ENGINEERING CONTRACTING
The Group sold certain contracts, assets and liabilities
of the Building Contracting Division and Engineering
Division in 2005 and 2006. The activity of this business
unit is now limited to the resolution of occasional
contractual claims. During the year a restructuring was
completed, the purpose of which was to segregate the
continuing businesses of the Group from the Group’s
legacy building contracting and engineering businesses.
This reorganisation was in the form of a Scheme of
Arrangement which is more fully explained on page 13.
8
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Members of Burnley Borough Council joined
Gleeson’s management team to launch the new
show homes on the Barden Clough development.
The new homes are being built on land cleared as
part of the Housing Market Renewal Programme and
are an affordable alternative to the smaller terrace
properties which dominate the area.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
9
9
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Business Performance
Gleeson Homes
Units sold
+34%
Revenue
+36%
2015: 751 plots, 2014: 561 plots
2015: £96.1m, 2014: £70.6m
751 homes were sold, an increase
of 34% on the prior year’s total
of 561. During the year Gleeson
Homes had on average 39 selling
outlets open compared to 33
during the prior year. The outlets
were located in Cleveland, County
Durham, Derbyshire, Lancashire,
Greater Manchester, Merseyside,
Northumberland, Nottinghamshire,
Tyne and Wear, South Yorkshire
and West Yorkshire. The number
of outlets is expected to increase
during the course of the current
financial year to in excess of 45.
The Average Selling Price (“ASP”)
for the homes sold in the year was
£123,750 (2014: £121,500). The
increase is influenced by the mix of
outlets and plot-types. 81% of homes
sold in the year were at a price below
£140,000 (2014: 78%). Overall, our
aim is to keep ASP increases modest
in order to ensure that our homes
remain affordable to our customers.
The proportion of homes sold from
newer, higher margin sites rose from
84% in the prior year to 89%.
Gross profit margin increased
to 31.5% (2014: 29.2%) due to
a combination of the continued
improvement in the mix of homes
sold from the new higher margin
sites, an increase in the average
selling price, lower land costs 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 46.6% to £30.3m
(2014: £20.6m).
There were no exceptional operating
profit items in 2015. In 2014 an
exceptional credit of £0.8m relating
to the partial reversal of a debtor
provision was included in operating
profit. Operating profit has broadly
doubled in each of the last two years.
Gleeson Homes has a large range of
bespoke packages to assist customers
to become homeowners. The
Government’s Help to Buy Scheme
has been popular with many of our
customers, with 46% of the homes
GLEESON HOMES MARGIN (%)
Gross profit
Operating profit
27.8%
29.2%
20.4%
0.9%
13.3%
8.4%
31.5%
18.1%
2012
2013
2014
2015
11.3%
-1.1%
2011
Operating profit
+85%
2015: £17.4m, 2014: £9.4m
sold in the year utilising this scheme.
We continue to offer our own range
of support packages that are used by
the majority of our customers who
are not using Help to Buy.
Lenders continue to have an
appetite for mortgage lending and
there has been growth in mortgage
availability outside of the 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 continued to
be able to qualify for loans on
reasonable terms.
Gleeson Homes 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, 20 sites were purchased
which added 1,203 plots to the
pipeline. A further 13 sites that
have been conditionally purchased
are expected to add a further
2,163 plots to the pipeline in the
near future. When and if these
acquisitions are completed, the land
pipeline will total in excess of 7,496
plots. Impaired plots now represent
only 1.7% (2014: 4%) of the land
pipeline. In addition to owned
and conditionally purchased plots,
there are a further 460 plots which
are being actively considered for
acquisition.
10
10MJ Gleeson Group plc: Report and Accounts for the year ended 30 June 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Business Performance
Gleeson Strategic Land
Revenue
+99%
2015: £21.5m, 2014: £10.8m
Operating profit
+68%
2015: £8.1m, 2014: £4.8m
Gross acres
+3.5%
2015: 3,936 acres, 2014: 3,802 acres
The increase in the revenue of
Strategic Land reflected the fact
that more transactions than in the
previous 12 months involved the
sale of sites owned by the Group.
The turnover generated by the sale
of such sites is recorded at full
land value, whereas the turnover
recorded for the sale of sites
that are subject to promotional
agreements is recorded at the level
of the fees receivable. The operating
profit increase was primarily due to
an increase in acres sold, including
both owned and promoted sites,
during the year.
The performance during the year
reflected the continuing robust
demand for consented land from
a wide range of housebuilders in
good quality areas of the South of
England. As a result, the business
unit was able to complete on three
land sales and unconditionally
exchange on a further two sites.
During the year eight new sites were
secured by means of either option or
promotion agreement. Two of these
sites are allocated in Local Plans and
four others will shortly be the subject
of planning applications. In addition
heads of terms have been agreed in
respect of a further five sites.
The Business unit continues to
actively manage the strategic
land portfolio and currently has
planning permission on seven sites
and resolutions to grant consent on
a further five sites. A further nine
sites have planning applications
submitted or are subject to
planning appeals and applications
are expected to be submitted on a
further eight sites.
At the year end, Gleeson Strategic
Land’s portfolio totalled 68 sites
comprising 3,936 acres (2014: 3,802
acres), of which 159 acres (2014: 155
acres) were wholly or part owned
by the Group, 2,073 acres (2014:
2,037 acres) were held under option
and 1,704 acres (2014: 1,610 acres)
were the subject of promotion
agreements. The geographic bias
of the portfolio is towards the
South of England, predominantly in
Buckinghamshire, Devon, Dorset,
Essex, Hampshire, Hertfordshire,
Kent, Oxfordshire, Somerset, Surrey,
Sussex and Wiltshire. The 68 sites
have the potential to deliver circa
21,150 plots.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
MJ Gleeson Group plc: Report and Accounts for the year ended 30 June 2015
11
11
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Key Performance Indicators (KPIs)
REVENUE MEASURES
The strength of revenue is an
important measure of the success
of the business plan. The Group’s
revenue has nearly doubled over
the past three years.
Revenue
+44%
Revenue (£m)
£117.6m
£81.4m
£60.7m
2015: £117.6m, 2014: £81.4m
2013
2014
2015
PROFIT MEASURES
Operating margin (%)
Profit before tax (£m)
The Group’s operating margin
is an important measure of the
implementation of the business
plan. The Group’s operating profit
margin has nearly doubled in each
of the last three years.
Profit before tax increased by
42% in the year.
CASH MEASURE
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.
RETURN MEASURES
The return measures illustrate
how the business plan is improving
shareholders’ returns over
time. It is based on EBIT1 before
exceptional items expressed
as a percentage of average net
assets after deducting deferred
tax balances and cash. A
combination of revenue and margin
improvements is delivering growth
in the return on capital employed
which has more than doubled in
the last two years.
18.7%
£17.3m
14.8%
9.9%
£12.2m
£5.8m
2013
2014
2015
2013
2014
2015
Cash and cash
equivalents
+15.5%
2015: £15.8m, 2014: £13.7m
Cash and cash equivalents (£m)
£15.8m
£13.7m
£9.9m
2013
2014
2015
Return on capital employed (%)
Net assets per share (pence)
21.1%
254p
13.7%
10.2%
241p
212p
2013
2014
2015
2013
2014
2015
1 EBIT: earnings before interest and tax
12
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
NON-FINANCIAL KPIs
Land is a key raw material for the
Group’s businesses
Gleeson Homes land pipeline (plots)
Gleeson Strategic Land (gross acres)
7,496
3,582
3,802
3,936
5,065
3,860
2013
2014
2015
2013
2014
2015
FORWARD SALES
Gleeson Homes has forward sales at 30 June 2015 of £42.6m (2014: £44.2m; 2013 £25.9m) being the value of
homes that have been reserved or exchanged. Whilst forward sales are lower than last year this reflects a change
in our reservation policy which does not now permit reservations to be accepted on established sites until a unit
has achieved a certain level of construction. This has the advantage of reducing the cancellation rate, being more
accurate with completion dates, being able to monitor costs more accurately and taking advantage of any house
price rises.
It should be noted that the financial
result of the parent company
in the results of the Group for
the year ended 30 June 2015
include the results of MJ Gleeson
plc (the new holding company),
being consolidated under merger
accounting rules. However, the
results of the Company, being newly
incorporated in the year, have no
comparative figures.
Investments
The Group entered the year holding
only one significant minority
investment, in GB Group Holdings
Limited (GBGH). The Group’s
investment in GBGH was made
in 2005 in order to facilitate a
management buyout of the Group’s
building contracting division. During
the year the Group was notified that
GBGH went into administration.
The Group has fully provided for
the £4.9m carrying value of this
investment as an exceptional, non-
cash item.
Restructuring
On 19 December 2014 the new
holding company of the Group,
MJ Gleeson plc, had its shares
admitted to the premium listing
segment of the official list of the
London Stock Exchange as part
of the Group’s restructuring. On
23 December 2014 the old Group
holding company, MJ Gleeson
Group plc (which is now MJ Gleeson
Group Limited) declared and paid
a dividend in specie, the effect of
which was to make each of Gleeson
Developments Limited, Gleeson
Regeneration Limited and Gleeson
Developments (North East) Limited a
wholly-owned subsidiary of
MJ Gleeson plc.
The old Group holding company, MJ
Gleeson Group Limited (which itself
wholly-owns Gleeson Construction
Services Ltd) is now also a wholly-
owned subsidiary of MJ Gleeson plc.
The purpose of the restructuring
was to segregate the continuing
businesses of the Group from the
Group’s legacy building contracting
and engineering businesses.
MJ Gleeson plc also carried out a
court approved reduction of capital
designed to create a reserve of
profits to support the payment
of future dividends. This capital
reduction became effective on
22 January 2015.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
13
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Financial Review
Highlights
• Revenue increased by 44.4% to £117.6m
• Profit before tax increased by 42.0% to £17.3m (before exceptional items
increased by 106% to £23.4m)
• Normalised earnings per share* increased by 99.0% to 34.2 pence
• Net assets per share increased by 5.5% to 254 pence per share
• Dividend for the year increased by 66.7% to 10 pence per share
* Normalised earnings per share exclude the impact of exceptional restructuring costs (£1.2m) and the provision against
investment (£4.9m)(2014: recognising previously unrecognised tax losses - credit of £8.3m).
GROUP PROFIT BEFORE TAX (BEFORE EXCEPTIONAL ITEMS) - BRIDGE
The chart below shows the major drivers of growth in profit before tax and exceptional items during the year.
£1.4m
£2.4m
£6.6m
£3.9m
(£2.3m)
£23.4m
£11.4m
Year ended
June 2014
Homes:
volume increase
Homes:
gross margin
increase
Homes:
higher
land sales
Strategic Land:
higher profit
Admin/
finance:
cost increase
Year ended
June 2015
Consolidated Statement of
Comprehensive Income
Revenue increased by 44.4% in the year to £117.6m
(2014: £81.4m). The revenue of Gleeson Homes
increased by 36.0% to £96.1m (2014: £70.6m) due to a
combination of the 33.9% increase in homes sold to 751
(2014: 561) and a 1.9% increase in the average selling
price to £123,750 (2014: £121,500). Revenue for Gleeson
Strategic Land increased by £10.7m to £21.5m due to
significantly higher turnover values per transaction in
2015 attributed to a similar level of transactions in 2015
to those in 2014.
Gross profit increased by 50.7% to £40.3m (2014:
£26.7m). The gross profit of Gleeson Homes increased by
46.6% to £30.3m (2014: £20.6m) due to the increase in
volume, the continuing reduction of units sold from older
lower margin sites and improved margin being recorded
due to our stringent approach to cost control. The gross
profit of Gleeson Strategic Land increased by 64.4% to
£10.0m (2014: £6.1m) 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
14
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
expenses increased by £3.6m (24.3%). However this
included £1.2m in respect of exceptional restructuring
costs. Additionally £0.7m was incurred for redundancy
and compensation for loss of office. Administrative costs
excluding the restructuring costs and the redundancy and
compensation costs increased by £1.6m (11.0%). Sales
& marketing costs increased by £0.6m being an increase
of 10.9% in order to service new sites and generate
increased revenue of 36.0%. Recurring administrative
overheads increased by £1.1m mainly due to increased
employment and recruitment costs.
Operating profit from continuing operations was £22.0m
(2014: £12.1m) an increase of 82.7% over last year.
This strong result was after deducting exceptional
restructuring costs of £1.2m (2014: £0.8m exceptional
credit from the reinstatement of impaired inventory).
Growth in operating profit has been driven by
Gleeson Homes which contributes over two thirds of the
Group’s profits.
OPERATING PROFITS (EXCLUDING GROUP OVERHEADS)
Gleeson Homes
Gleeson Strategic Land
£17.4m
£9.4m
-£0.4m
£2.7m
£0.3m
£4.0m
£3.7m
£3.5m
£4.8m
£8.1m
2011
2012
2013
2014
2015
Discontinued operations incurred a loss of £0.2m during
the year (2014: loss £0.2m). This related to the costs
of Gleeson Construction Services Limited, whose only
activity is limited to resolving occasional contractual
claims from the businesses that were sold in 2005
and 2006.
Provision for diminution in value of
investment
During the year the Group was notified that GB Group
Holdings Ltd went into administration. The Group has
fully provided for the £4.9m carrying value of this
investment.
Financing
Financial income of £0.5m (2014: £0.5m) 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.
Financial expenses of £0.4m (2014: £0.4m) consist of
interest 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.
Profit for the year
The profit for the year attributable to equity holders was
£12.2m (2014: 17.4m which included an exceptional tax
credit of £8.3m not recurring in 2015). The 2014 profit
excluding the tax credit was £9.1m.
Tax
A tax charge for continuing operations of £4.8m
(2014: £2.8m) has been recorded for the year resulting
largely from an increase in the effective tax charge
mainly due to non-tax deductible restructuring costs
incurred. This compares to a net tax credit of £5.5m
in 2014 due to an exceptional tax credit relating to
deferred tax of £8.3m which was a one off adjustment.
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 £31.0m (2014:
£57.6m) of tax losses, of which £25.9m is recognised as a
deferred asset, which can be carried forward indefinitely.
The tax charge attributable to discontinued operations
was £nil (2014: £0.1m).
The net deferred tax asset recorded within the
Statement of Financial Position totals £5.7m
(2014: £10.5m).
Earnings per share
Reported basic earnings per share reduced by 30.8%
to 22.8p (2014: 32.9p). The normalised basic earnings
per share, which excludes the impact of exceptional
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
15
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Financial Review (continued)
restructuring costs of £1.2m and a provision for the
diminution in value of investment of £4.9m improved by
99.0% to 34.2p (2014: 17.2p).
£0.1m (2014: £0.3m). Net cash flows from financing
activities utilised £6.0m (2014: £1.8m), including £4.1m
(2014: £1.6m) on dividend payments.
Dividend
Against the background of significant improvements in
the results of the Group and our confidence in the short
term outlook, the Board has proposed a final dividend
of 7.3 pence per share (2014: 4.9 pence per share).
Combined with the interim dividend, the dividend for the
full year totals 10 pence per share being an increase of
66.7% on the prior year (2014: 6.0 pence per share). The
Board aims to maintain dividend cover between two and
three times earnings for the foreseeable future.
Treasury risk management
The Group’s cash balances are centrally pooled and
invested, ensuring the best available returns are
achieved consistent with retaining sufficient liquidity for
the Group’s operations. The Group deposits funds only
with financial institutions which have a minimum credit
rating of A.
As the Group operates wholly within the UK, there is no
requirement for currency risk management.
Statement of financial position
During the year to 30 June 2015, shareholders’ funds
increased by £8.4m to £136.5m (2014: £128.1m). Net
assets per share increased to 254 pence, an increase of
5.5% year on year (2014: 241 pence).
In the year, non-current assets increased by £1.6m
to £27.0m (2014: £25.4m). The main reasons for the
change is the £4.8m decrease in the deferred tax asset,
the reduction in the carrying value of the investment
from £4.9m to nil and the increase in trade and other
receivables of £11.5m.
Current assets increased by £14.4m to £141.6m (2014:
£127.2m), with inventories increasing by £7.5m to
£108.2m, trade and other receivables increasing by
£4.7m to £17.5m (2014: £12.8m) and cash balances
increasing by £2.1m to £15.8m (2014: £13.7m).
Total liabilities increased by £7.6m to £32.1m
(2014: £24.5m). This was mainly due to trade and
other payables of £31.8m (2014: £22.2m) being £9.6m
higher and the reduction in loans and borrowings, which
stood at £1.9m in 2014 being repaid in the year.
Cash flow
The Group generated £2.1m (2014: £3.8m) of cash in the
year, resulting in a net cash balance at 30 June 2015 of
£15.8m (2014: £13.7m).
Bank facilities
The Group entered in to a three year £20m revolving
working capital facility with Lloyds Bank plc in December
2013. The facility was reinstated in December 2014
following the implementation of the Scheme of
Arrangement. The facility provides the Group with
additional flexibility and capacity for growth. None of
these available funds were drawn down at the balance
sheet date.
Pension
The Group contributes to a defined contribution pension
scheme. A charge of £0.5m (2014: £0.5m) was recorded
in the Income Statement for pension contributions. The
Group has no exposure to defined benefit pension plans.
Jolyon Harrison
Chief Executive Officer
25 September 2015
Operating cash flows before working capital movements,
generated £17.9m (2014: £12.1m). Investment in
working capital of £14.3m (2014: £6.4m) resulted in cash
generated from operating activities of £8.4m (2014:
£5.8m). Cash generated from investing activities totalled
Stefan Allanson
Chief Financial Officer
25 September 2015
16
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
At the start of the 2015/2016 academic year,
Gleeson Homes will employ 30 young apprentices
across the three operating regions. Find out more on page 22
17
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
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 of risk
Mitigation
Economic environment
The impact of economic
fragility and government
austerity measures.
Any uncertainty in the wider economy,
including government austerity
measures, will affect buyer confidence
and the demand for new houses.
This could have a negative impact on
revenues, profits, cash generation and
the carrying value of the Group’s assets.
• Sites are selected to meet the needs of the local
community;
• Prices and incentives are regularly reviewed;
• Lead indicators of the housing market, such as visitors to
sites and reservation rates, are closely monitored; and
• A cautious approach to debt funding is maintained.
Mortgage availability
The limited availability of
mortgages for first time
buyers.
The availability of mortgage finance,
particularly the deposit requirements for
first time buyers, is crucial to customer
demand. Restrictions on mortgages
granted could reduce demand for new
homes and impact on the Group’s
revenues and profits.
• Gleeson Homes provides a range of customer assistance
packages;
• We continually innovate to find additional ways to assist
customers to buy a home; and
• We work with key lenders to ensure products are
appropriate.
Land
An inability to source
sufficient land at an
acceptable cost to
meet the Group’s
business needs.
Gleeson Homes needs to acquire
consented land at appropriate prices
and in appropriate areas in the North of
England in order to construct and sell
homes to deliver profit.
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.
• We have a clearly defined strategy and geographic focus;
and
• There is a formal appraisal process and rigorous
adherence to rates of return.
Planning policy and
regulations
The potentially damaging
uncertainties in the
planning regime may
affect the Group’s
ability to secure
planning consents on
a timely basis.
Increased complexity in some aspects
of the planning process may slow down,
or increase the cost of, the delivery of
consented land for development or sale
and so impact on the Group’s revenues
and profits.
• We have a very high level of in-house expertise devoted
to monitoring and complying with planning regulations
and to achieving implementable planning consents; and
• 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.
People
An inability to attract,
develop or retain good
people.
The loss of key staff or the failure to
attract, develop and retain people with
the right skills may have a detrimental
impact on the business.
• We have programmes that appropriately reward the
achievement of performance targets;
• 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.
18
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Risk
Description of risk
Mitigation
Availability of
raw materials and
subcontractors
An inability to secure
materials and skilled
labour on a timely basis
at suitable prices.
Health & safety
A failure to prevent
unsafe practices within
our construction
activities, causing
injury or death.
Latent defects
Financial losses may
arise from latent defects
that may arise on
completed projects
during the liability
period.
Shortages or increased cost of materials
or skilled labour, the failure of key
suppliers, or the inability to secure
supplies upon appropriate credit
terms could increase costs and delay
construction.
Health and safety breaches can result
in injuries to employees, subcontractors
and site visitors, delays in construction,
additional cost, reputational damage,
criminal prosecution and civil litigation.
The Group may be exposed to latent
defects which occur during the liability
period on completed construction
contracts that have not been transferred
to the purchaser of the relevant
construction business. Although
subcontractors will normally resolve
such defects, the Group will become
liable if the subcontractor is no
longer trading, potentially resulting in
additional cost.
• The Group has multiple suppliers for both labour
contracts and material supplies; and
• The Group seeks to partner with the supply chain.
• Our documented policies and procedures are regularly
reviewed and modified in order to ensure continuous
improvement;
• Dedicated Health & Safety personnel ensure
implementation and adherence to these policies and
procedures; and
• Performance is reviewed both by local management and
the main Board.
• We have experienced personnel, dedicated to dealing
with such claims;
• Insurance policies are in place to minimise Group
liabilities, wherever possible;
• The provisions relating to completed contracts are
reviewed on a regular basis; and
• The company has segregated the continuing businesses
of the Group from the Group’s legacy building
contracting and engineering businesses.
Corporate liquidity
The Group needs
appropriate banking
facilities for its short
term liquidity and long
term funding needs.
The Group may be unable to meet short
term liabilities as a result of failure to
manage liquidity.
Lack of liquidity may also limit the
Group’s ability to take advantage of
business opportunities as they become
available and consequently a possible
impediment to future growth.
• The Group maintains strong financial disciplines;
• Cash generation is controlled by robust budgeting,
forecasting and cash management disciplines; and
• Regular contact with investors and lenders to ensure
adequate bank facilities are in place with appropriate
covenants and headroom.
Financial irregularity
The Group could suffer
loss from significant fraud
or the misrepresentation
of financial results.
Negative publicity could have an adverse
effect on the Group’s reputation and
the Group could experience lower
confidence levels from customers and
suppliers.
• The Group has financial and management controls
designed to segregate duties and minimise opportunities
for fraud. Financial reporting processes are the subject
of rigorous and timely management reviews.
Credit risk
The Group could
suffer loss as a result
of default from
customers.
The Group has exposure to receivables
on deferred payment terms particularly
on certain land sales.
• The Group maintains security over land sold on deferred
terms.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
19
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Corporate Social Responsibility Report
Community Matters
Over the past twelve months Gleeson has enhanced its commitment to
the local communities in which we build new homes with the introduction
of two new elements to the Community Matters Programme, The Gleeson
Community Challenge and the unique YourWatch neighbourhood watch
scheme.
The Gleeson Community Sports Foundation
Gleeson’s Community Sports Foundation goes from strength to strength and in the last five years we have sponsored
38 junior sports teams across our three operating regions with four teams gaining continued sponsorship in following
years. The Foundation pays for sports kit for teams located near our developments. For our teams this funding is
pivotal in allowing the organisers to provide activities and supervision to young people who may otherwise turn to
anti-social behaviour.
Dudley Hill U14s Rugby
Team in Bradford were
able to provide kit for their
whole team thanks to the
Gleeson Community Sports
Foundation.
Junior football team MAGS AC
celebrate another successful
year and on-going sponsorship
from the Gleeson Community
Sports Foundation. The team is
located in Huyton, one of the
North West’s most deprived areas,
where high unemployment and
low aspirations are common-
place. The area is now undergoing
a large scale regeneration with
Gleeson currently transforming
three sites into homes for private
sale to local people.
20
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Your Watch
This year our commitment to safer communities was enhanced with the
launch of our very own version of neighbourhood watch called YourWatch.
The YourWatch scheme has brought
the traditional Neighbourhood Watch
scheme into the 21st century by
making it an online, quick response
system which encourages local
residents on Gleeson developments
to send us notifications when they
witness unusual or anti-social behaviour or if they are the victim of crime.
Once a notification is received we create an alert which is sent out to all
residents on the particular development asking them to be vigilant and
report any further incidents to us. The system ensures complete anonymity
for those sending notifications.
All our residents are automatically enrolled in the scheme when they
complete on their new home, although they can opt out if they wish.
Over 1000 households currently subscribe to the scheme and it has proven
extremely popular amongst our communities. Within 10 minutes of the
scheme’s launch we received our first notification from a resident of one of
our Manchester developments. We subsequently issued email notifications
to all residents on the development requesting them to contact us with any
information relating to the incident and asking them to be vigilant.
We recommend that our customers report crime to the Police’s 101 number
and we also work closely with the Police’s Community Support Officers on our
developments to ensure the information we collect is communicated across
the wider community.
Our updated modern and user-friendly version of neighbourhood watch is a
dramatic improvement on the old version and has been rolled out on all of
our sites.
Secure by design
Continuing with the fight against crime, Gleeson was chosen by the Association
of Chief Police Officers to help them produce a Secured by Design National
Housetype Approval Scheme and we were the first national housebuilder to sign
up to the scheme which provides superior levels of security on all Gleeson’s
new homes at no extra cost to the buyer.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
21
The images to the left were taken from a surveillance camera at Burnham Walk in Bradford and show someone stealing a boiler from one of our homes. YourWatch was used to communicate with residents which led to the burglar being identified and to a prosecution being pursued. Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Corporate Social Responsibility Report (continued)
Engagement with local schools
We continue to work with local schools, educating primary level children
on the dangers of playing on building sites, working with them on specific
‘building’ related projects and running competitions for pupils to design
their ‘dream’ bedroom which we then recreate in our show home.
Plans are now underway to expand our school partnerships to secondary
level education, working with children aged 11 to 18 on projects which
will see them assist in the design of environmentally sustainable gardens
for our show homes on selected developments.
The Gleeson Apprenticeship Scheme
At the start of the 2015/2016 academic year, Gleeson Homes will employ 30 young apprentices across the three
operating regions.
In 2015 we introduced a new office based apprenticeship scheme, Construction Contracting Operations, which allows
young people the opportunity to gain a broad knowledge of construction operations whilst studying for an NVQ at a
local college.
CHRISTOPHER RICHARDS, NORTH EAST
TOM DUGGAN. YORKSHIRE & THE MIDLANDS
Christopher Richards joined the apprenticeship
scheme two years ago and impressed us from the
outset. He has just completed his NVQ in joinery and
is now a Trainee Assistant Site Manager for Gleeson
Homes working across our North East developments.
Geoff Pykett, Construction Director said,
“Christopher showed real determination throughout
his apprenticeship. As well working really hard at
college he always went that ‘extra mile’ on site to
get the job done and proved himself indispensable to
Site Managers.”
Tom Duggan, age 17, is the first apprentice to join
Gleeson Homes in an office based role. Tom is
working from our Yorkshire regional office and spends
time in key departments such as Land & Planning,
Commercial and Technical whilst studying for a NVQ
at Doncaster College one day per week.
“The scheme is giving me the opportunity to get
a real understanding of how all the different
departments work together. The ability to put into
practice what I learn at college is priceless and it’s
great to go on site and look at the end result.”
22
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Local homes for local people
“When our daughter Amelia was
born we were desperate to move
out of our draughty rental house
& move closer to family. We never
through we could afford to buy so
we were amazed to find out we
could purchase a Gleeson home
with Help to Buy and the mortgage
repayments were £150 less than our
previous rent.”
Anne & Richard Saunders
“When our children flew the nest we wanted to start afresh in a new
home. We initially thought we would need to move to another area
of the city and could probably only afford an apartment. Then we
found out Gleeson was building new homes in our community. We
have worked hard all our lives & it’s nice to think we have a brand
new home to show for it.”
Jean & Steve Buddin
“We were desperate to move out of
our parents’ homes but wanted to
stay in the area. We looked at other
developments close by but they
were too expensive. The prices of
Gleeson’s homes are so affordable
and they gave us 5% towards our
deposit which was a big help.”
Kim Bennion & Dave Stogden
“Picking the right house and right location was essential as Sarah
will be living here whilst I complete my career in the RAF. Getting on
the property ladder after leaving the armed forces is a well known
problem. However we can’t believe how much space you get for your
money in a Gleeson home.”
James & Sarah Dempsey
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
23
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Corporate Social Responsibility Report (continued)
The Gleeson Community Challenge
In March 2015 Gleeson launched the Gleeson
Community Challenge which gave South Yorkshire
based non-profit organisations the opportunity to
apply for a makeover of their facilities worth
£10,000 with all the work to be completed by Gleeson’s construction team.
The competition was run in conjunction with South Yorkshire’s local radio station, Hallam FM, with regular adverts
and live DJ announcements publicising the competition. Gleeson was also the main sponsor of the radio station’s
Superhero Day which raised money for the Cash for Kids charity.
24 local organisations applied for the makeover with applications ranging from replacement floors in a scout hut to a
new garden in a woman’s refuge.
The winning project was submitted by Croft House Settlement & Community Centre in the heart of Sheffield which
offers facilities to local community groups, many of which are from inner city locations and help disadvantaged
people. The Centre is used by over 400 people each week including a children’s marching band, martial arts groups
and Gamblers Anonymous meetings.
The works were undertaken by Gleeson’s own apprentices along with
subcontractors and volunteers from Gleeson’s Yorkshire office with the
works completed in just one month.
24
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
The scope of the project
The Croft House Settlement & Community Centre, which is housed in an old church building, struggles to raise money
for maintenance and was in desperate need of a new kitchen and hot water system.
Gleeson’s construction team appealed to our subcontractors for help and in addition to providing the centre with a
brand new kitchen we were also able to renovate the whole entrance area of the building including new floors and
furnishings, painting and new toilet facilities.
Before the renovation
After the renovation
Benefitting the community
The Belong Day Care Centre is a registered charity offering people with learning difficulties a meeting place, organised
activities and the opportunity to gain new skills as well as respite for their carers.
After struggling to find affordable premises for the group in Sheffield city centre they approached Croft House
Settlement who were happy to offer them a room at a price they could afford.
Support Worker, Sharon Briarley, explains how the Community Challenge will benefit Belong. “Without Croft House
we would have struggled to continue running our group in Sheffield. Thanks to Gleeson’s Community Challenge
the centre has been transformed into a welcoming ‘home from home’ for our members. We have already used the
new kitchen for cookery activities and we are considering opening a community café in the new entrance area. The
transformation is amazing”
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
25
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Corporate Social Responsibility Report (continued)
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 and 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 was
one reportable injury in the year and one dangerous
occurrence under the Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations (“RIDDOR”). In the
previous three years the Group reported two, zero, and
one injuries per year respectively under RIDDOR.
The overall Accident Incidence Rate (“AIR”) was 121 in
spite of a further sizable increase in construction activity
and is below the housebuilding industry average of 361
injuries per 100,000 employees, as published by the HBF
(Home Builders Federation) and the Health & Safety
Executive. The AIR is an industry-wide indicator of
health & safety performance.
Environment management systems
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.
Waste management: minimisation
and recycling
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.
Timber policy
The Group has a timber purchasing policy which requires
that all timber provided or used in the manufacture of its
products must be obtained from a certified sustainable
source. The Group complied with this policy throughout
the year.
Greenhouse gas reporting
Our greenhouse gas emissions for the year ended 30 June
2015 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).
CO2 emissions
Tonnes CO2e
2015
Scope 1: Emissions from combustion of fuel
1,362
Scope 2: Electricity, heat, steam and
cooling purchased for own use
Total emissions
Emissions per £m revenue
336
1,698
14.46
Our people
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 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 2015, we employed 290 people, comprising
206 males and 84 females. Our senior management team
comprises 13 employees of which two (23%) are female.
The Group believes its employees are fundamental to
its success and has continued to invest in them through
26
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
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.
Individual employee performance is regularly reviewed
using the Group’s Performance Development Review
process and objectives and targets are set for personal
development.
We have continued to increase the number of
apprentices within the Group to support the Group’s
growth strategy. By the end of the financial year there
were 25 apprentices employed by the Group (2014: 21).
In September 2015 10 apprentices will be commencing
their 1st year of the apprenticeship programme, 11
commencing in their 2nd year and nine commencing in
their third year.
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.
Charitable donations
Charitable donations in 2015 totalled £20,550
(2014: £10,700).
STRATEGIC REPORT APPROVAL STATEMENT
The Strategic Report, contained in pages 4 to 27
has been approved by the Board of Directors and is
signed on its behalf by
Jolyon Harrison
Chief Executive Officer
25 September 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
27
Corporate Governance
29 Chairman’s Introduction
30 Board of Directors
32 Corporate Governance Statement
39 Directors’ Report
Before development began in 2013
28
MJ Gleeson Group plc: Report and Accounts for the year ended 30 June 2015
Tanfield Gardens, Hartlepool, 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Chairman’s Introduction
I am pleased to have the opportunity to introduce this report which describes our corporate governance arrangements
during the year ended 30 June 2015 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; and
• 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.
Dermot Gleeson
Chairman
25 September 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
29
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Board of Directors
Jolyon Harrison
Chief Executive Officer
and Managing Director,
Gleeson Homes
2
1
Dermot Gleeson
Chairman
3
Stefan Allanson
Chief Financial Officer and
Company Secretary
4
Ross Ancell
Non Executive Director
5
Colin Dearlove
Non-Executive Director
Christopher Mills
Non-Executive Director
6
30
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
5 Colin Dearlove
BA, FCMA, CGMA
Non-Executive Director
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
the Senior Independent Director,
Chairman of the Audit Committee
and member of the Remuneration
and Nomination Committees.
6 Christopher Mills
Non-Executive Director
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
and Cyprotex.
1 Dermot Gleeson
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. 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.
2 Jolyon Harrison
FCIOB, FIoD, FCMI
Chief Executive Officer and
Managing Director, Gleeson
Homes
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 nearly
50 years of housebuilding
experience, most recently as
founder and Chairman of Pelham
Construction/North Country
Homes Group and prior to that as
Managing Director of Shepherd
Homes and Chairman of York
Housing Association. Currently
Chairman of JDP Rooflines
Limited, MSP Technologies 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.
3 Stefan Allanson
ACMA, MCT
Chief Financial Officer and
Company Secretary (from
July 2015)
Appointed to the Board in July
2015. Stefan joined the Group
in June 2015 as Chief Financial
Officer designate from Keepmoat
Limited where he held the Deputy
Chief Financial Officer role.
Stefan qualified as an accountant
in 1994, following which he held
senior finance roles at Honda
Motor Co Limited, BTP plc,
TheSkillsMarket Limited and the
Vita Group Limited.
4 Ross Ancell
ACA, (NZ)
Non-Executive Director
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
Chairman of the Remuneration
Committee and a member
of the Audit and Nomination
Committees.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
31
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Corporate Governance Statement
The Board remains committed to achieving and maintaining a high standard
of corporate governance.
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 36.
Board of Directors
The Board is responsible to shareholders for the success
of the Group. Its role is to set the strategic and financial
framework within which the Group operates, to monitor
and review the performance of each of the business
units and to ensure that the risks faced by the Group
are effectively managed. To facilitate this, the Board
and its committees are provided with relevant and
timely information in advance of all meetings and when
otherwise required. Due to the size and structure of the
Group, all significant decisions are taken at Board level.
There is a formal schedule of matters that are reserved
for a decision of the Board or its committees; these
include the approval of:
• strategy and financial policy;
• banking arrangements and any changes to them;
• interim and annual financial statements;
• risk management and internal control policy;
• major capital expenditure;
• acquisition of land;
• acquisitions and disposals;
• Board structure and composition; and
• terms of reference of the Board’s sub-committees.
All these matters were reviewed 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 2015 including Mr
Alan Martin who resigned as Chief Financial Officer and
Company Secretary in July 2015. Mr Stefan Allanson was
appointed Chief Financial Officer and Company Secretary
in July 2015. The Directors’ biographies are set out on
page 31.
All of the Directors have access to the advice and
services of the Company Secretary and may, in
furtherance of their duties, take independent advice,
at the Company’s expense. Training is arranged, as
required.
On 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.
Conflicts of interest
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
32
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
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.
Board effectiveness
The roles of the Chairman, Dermot Gleeson, and the
Chief Executive Officer, Jolyon Harrison, are clearly
defined and they act in accordance with the main and
supporting principles of the Code.
The Chairman is responsible for leadership of the Board
and ensuring its effectiveness. This role includes ensuring
that the Directors receive accurate, timely and clear
information; facilitating the contribution of the Non-
Executive Directors; and ensuring constructive relations
between the Executive and Non-Executive Directors.
The Chairman is in regular contact with the Chief
Executive Officer to discuss current matters and has
visited Group operations outside the Board meeting
calendar to meet divisional directors and managers.
Board balance and independence
During the year, Ross Ancell and Colin Dearlove were
the Board’s independent Non-Executive Directors and
fulfilled the requirement that a “smaller company”, as
defined by the Code, should have two such directors.
Colin Dearlove is the Senior Independent Non-Executive
Director.
Ross Ancell will have completed nine years’ service on
the Board at the date of the 2015 AGM in December
2015. Mr Ancell has provided assurances to the Board
of his continued independence and that there are no
circumstances which are likely to affect, or could appear
to affect, his judgement. The Board greatly values Ross
Ancell’s expertise and understanding of the Group’s
operations and strategy and is wholly confident that he
will continue to behave independently in character and
judgement in the interests of all our shareholders. We
have consulted our two largest shareholders and both are
supportive of the Board’s assessment that Ross should
continue to be regarded as an independent director.
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.
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
L-R: Colin Dearlove, Ross Ancell, Stefan Allanson,
Jolyon Harrison, Dermot Gleeson and Christopher
Mills at a Board Meeting in 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
33
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Corporate Governance Statement (continued)
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 to 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.
Board and Committee meetings
During the year, the Board met on five occasions.
Normally six Board meetings are held each year. However
a further scheduled Board meeting that would normally
have taken place in the last week of June was moved, for
reasons of practical convenience to 1 July 2015. Board
packs, which include a formal agenda, are circulated
in advance of such meetings. Attendance by individual
Directors at scheduled Board meetings (including the
1 July meeting referred to above) and by members at
Committee meetings is shown in Figure 1 below.
The main purpose of these meetings is to permit the
Board to receive regular reports on the performance
of the Group and address a wide range of key issues,
including health & safety, operational performance, risk
management and corporate strategy. Additional Board
meetings may be convened from time to time in response
to specific circumstances.
During the course of the year, the Non-Executive
Directors met without the Executive Directors present,
both with and without the Chairman being present.
The minutes of all meetings of the Board and of each of
its Committees are recorded by the Company Secretary.
As well as recording the decisions taken, the minutes
reflect any queries raised by the Directors and record any
unresolved concerns.
Board evaluation
During the year, under the leadership of the Chairman,
the Board undertook an evaluation of its own
performance. This was based on completion of a detailed
questionnaire and individual discussions between the
Chairman and the Directors. Being a smaller listed
company, it was not considered necessary to have this
year’s Board evaluation externally facilitated. Similarly,
the Chairman of each of the Audit, Remuneration and
Nomination Committees conducted a performance review
of each Board Committee. Ross Ancell, as the Senior
Independent Director, conducted an evaluation of the
Chairman’s performance in conjunction with his Non-
Executive Director colleagues and with input from 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.
Risk management and internal control
The Directors acknowledge their responsibility for the
Group’s risk management procedures and systems of
FIGURE 1: ATTENDANCE BY INDIVIDUAL DIRECTORS AT SCHEDULED BOARD MEETINGS
Number of scheduled meetings
Attendance
Dermot Gleeson
Ross Ancell
Colin Dearlove
Christopher Mills
Jolyon Harrison
Alan Martin
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
6
6
6
6
5
6
6
3
*
3
3
*
3**
3**
5
*
5
5
*
5**
5**
2
2
2
2
*
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.
34
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
• The Chief Financial Officer has responsibility for
the internal audit process and reports to the Audit
Committee on such matters; and
• Procedures are in place that require operating unit
management to refer all investment and divestment
decisions that exceed prescribed limits in the first
instance to the Group Capital Committee and then
thereafter to the Board, for approval.
Regular reviews are undertaken in order to identify any
changes in procedure that may be required in the light of
changing circumstances.
The overall Risk Management and Internal Control process
is reviewed by both the Audit Committee and the Board.
The Board also confirms that the formal risk management
process was reviewed during the year and continued to
operate up to the date of approval of these Accounts.
Whistleblowing arrangements
The Company has operated a ‘whistleblowing’
arrangement throughout the year whereby all employees
of the Group are able, via an independent external third
party, to confidentially report any malpractice or matters
of concern they have regarding the actions of employees,
management and Directors and any breaches of the
Company’s Anti-Bribery and Corruption Policy.
Jolyon Harrison CEO
and Stefan Allanson CFO
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 Auditors.
The Group’s system of internal control includes the
following processes:
• The Board and management committees meet
regularly to monitor performance against key
performance indicators which include cash
management and financial and 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 their role effectively. Key objectives
and opportunities for improvement are identified
through annual performance and development reviews;
• Each business function has defined procedures
and controls to identify and minimise business,
operational and financial risks. These procedures
include segregation of duties, provision of regular
performance information and exception reports,
approval procedures for key transactions and the
maintenance of proper records. Compliance with
these procedures and controls is certified annually by
management;
• The Group’s programme of insurance covers the
major risks to the Group’s assets and business and is
reviewed annually;
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
35
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Corporate Governance Statement (continued)
Colin Dearlove and
Ross Ancell
Anti-bribery and corruption policy
The Company values its long-standing reputation
for ethical behaviour and integrity. Conducting its
business with a zero tolerance approach to all forms
of corruption is central to these values, the Group’s
image and reputation. The Company policy sets out the
standards expected of all Group employees in relation
to anti-bribery and corruption and the Board has overall
responsibility for ensuring this policy complies with the
Group’s legal and ethical obligations and that everyone
in 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.
Shareholder relations
There is dialogue with institutional shareholders,
including presentations following the publication of the
Interim and Final Results and, as appropriate, at other
times during the year. Feedback from these meetings is
provided to the Board.
The Board also welcomes the interest of private investors
and believes that, in addition to the Annual Report and
the Company’s website, the AGM is an ideal forum at
which to communicate with investors and encourage
their participation. At the AGM, the Chairman, together
with the Chairmen of the Audit, Remuneration and
Nomination Committees, will be available to answer any
relevant questions.
The 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.
Compliance statement
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.
B.1.1: Ross Ancell will have completed nine years’
service on the Board at the date of the 2015 AGM in
December 2015. Mr Ancell has provided assurances
to the Board of his continued independence and that
there are no circumstances which are likely to affect,
or could appear to affect, his judgement. The Board
greatly values Ross Ancell’s expertise and understanding
of the Group’s operations and strategy and is wholly
confident that he will continue to behave independently
in character and judgement in the interests of our
shareholders. We have consulted our two largest
shareholders and both are supportive of the Board’s
assessment that Ross should continue to be regarded as
an independent director.
A.4.2, B.6.3: The performance of the Chairman is
appraised by both the Non-Executive and Executive
Directors. As MJ Gleeson plc is a smaller listed company,
it is felt that this is the most appropriate approach.
Nomination Committee
The Nomination Committee (“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 twice during the year. Attendance
at this meeting by the Committee members is shown in
the table on page 34.
36
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
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.
Remuneration Committee
The Remuneration Committee (“the 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 five times
during the year to 30 June 2015 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 2015 are set out in the Remuneration Report on
pages 46 to 57.
Audit Committee
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 three occasions during the year,
with both members being in attendance for all meetings.
The Committee regularly meets with the auditors and the
internal auditor without the presence of the Company’s
management.
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; and
• the continued 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 sales
of homes and the costs and possible future costs relating
to individual sites. The Committee has reviewed the
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
37
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Corporate Governance Statement (continued)
assumptions adopted by management supporting the
profit margin to be recognised on sale of individual
homes 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 to offset future taxable 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
• receives reports from the Chief Financial Officer on
internal audit matters;
• 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 a report on the activity of the Committee and
the matters of particular relevance to the Board in the
conduct of their work.
External audit
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 2015 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
Dermot Gleeson and Christopher Mills
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 2015
financial year was 1 to 1.2.
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
disclosed on page 76.
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 audit partner was changed during the year as the
previous partner had served a term of five years.
At the request of the Board, the Audit Committee
considered whether the 2015 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.
38
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Directors’ Report
The Directors have pleasure in presenting the Annual Report and the
audited Financial Statements for the year ended 30 June 2015.
Strategic Report
In accordance with the requirements of the Companies
Act 2006, we present a fair review of the business during
the year to 30 June 2015 and of the position of the
Group at the end of the financial year together with a
description of the principal risks and uncertainties faced
by the Group in the Strategic Report on pages 4 to 27.
Corporate Governance Statement
The Disclosure 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 28 to 38.
Results and dividends
The results are set out in the Consolidated Statement
of Comprehensive Income on page 62. The 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 2.7 pence per share was paid to
shareholders on 2 April 2015 (2014: 1.1 pence). The
Board proposes to pay, subject to shareholder approval
at the 2015 AGM, a final dividend of 7.3 pence per share
(2014: 4.9 pence) in respect of the 2015 financial year on
17 December 2015 to shareholders on the register at the
close of business on 20 November 2015. On this basis,
the total dividend for the year will be 10.0 pence per
share (2014: 6.0 pence).
Business review
The review of the development and performance of
the business of the Group during the year and the
future outlook of the Group is set out in the Chairman’s
Statement on pages 2 and 3 and the Strategic Report
(Business Performance) on pages 10 to 11. Details of the
principal risks and uncertainties faced by the Group are
set out in the Strategic Report on pages 18 to 19. The
key performance indicators are set out in the Strategic
Report on pages 12 to 13. The Group’s policy in respect
of financial instruments is set out within the Accounting
Policies on pages 68 to 72 and details of credit risk,
capital risk management, liquidity risk and interest rate
risk are given in note 19 to the Financial Statements.
Going concern
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position, are set out in the Strategic Report (Business
Performance) on pages 10 to 11. The financial position
of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Strategic Report
(Financial Review) on pages 14 to 16.
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
and re-stated in December 2014 with an expiry date of
December 2016. 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.
Political donations
The Company made no political donations in the year or
in the previous year.
Directors and Directors’ interests
The current Directors of the Company and their
biographical details are shown on page 30 to 31. 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 2015 and as at the date of this
report are disclosed in the Remuneration Report on page
55. Details of the interests of the Executive Directors in
share options and awards of shares can be found on page
55 within the same report.
Appointment and replacement of Directors
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
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
39
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Director’s Report (continued)
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 11 December
2015, all of the Directors will, voluntarily, offer
themselves for re-election. Of the Directors standing
for re-election, Jolyon Harrison and Stefan Allanson
hold service contracts that may be terminated by the
Company with a notice period of one year.
shares were issued by the old holding company MJ
Gleeson Group plc to satisfy shares vesting under the
Performance Share Plan. On 18 December 2014, the new
holding company, MJ Gleeson Group plc (“Company”)
issued 53,697,480 shares to the former shareholders of
the old holding company MJ Gleeson Group plc. On the
same day the 53,697,480 shares of MJ Gleeson Group plc
were cancelled.
Scheme of Arrangement
On 19 December 2014 the Group completed a Scheme
of Arrangement (“Scheme”) to change its corporate
structure by introducing a new holding company. The
purpose of the restructure was to protect the continuing
businesses of the Gleeson Group from potential liabilities
of the legacy building contracting and engineering
businesses and contracts, the majority of which were
disposed of in 2005 and 2006. The old Group holding
company, MJ Gleeson Group plc and its subsidiary
Gleeson Construction Services Limited are now held
indirectly by the new holding company MJ Gleeson plc.
The Court approved Scheme of Arrangement also
approved a capital reduction of the old holding company,
since renamed MJ Gleeson Group Limited, to reduce its
net asset position to an amount which would cover any
potential future liabilities. The capital reduction became
effective on 22 January 2015.
Share capital
Under the Scheme of Arrangement (“Scheme”) the share
capital of MJ Gleeson Group plc was cancelled and the
shareholders of that company received one share of
MJ Gleeson plc for each share it previously held in
MJ Gleeson Group plc. With effect from 18 December
2014 the rights attaching to the new MJ Gleeson plc
shares were the same as those attaching to the MJ
Gleeson Group plc shares immediately prior to 18
December 2014. Upon the implementation of the
Scheme, the new MJ Gleeson plc shareholders will have
the same voting rights and the same proportionate
interest in the profits, net assets and dividends of
MJ Gleeson plc as they previously had as a MJ Gleeson
Group plc shareholder. In order to reflect the book value
of MJ Gleeson Group plc, the new MJ Gleeson plc shares
issued under the Scheme had a nominal value of 146
pence each, while the old MJ Gleeson Group plc shares
had a nominal value of 2 pence each. However, following
the confirmation of the capital reduction of MJ Gleeson
plc on 21 January 2015, the nominal value of the new
MJ Gleeson plc shares reduced to 2p each.
During the period prior to the Scheme, 543,397
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.
As at 25 September 2015 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.
Substantial shareholdings
On 25 September 2015, the shareholdings noted below,
representing 3% or more of the issued share capital,
had been notified to the Company. In addition, as at
25 September 2015, Capita IRG Trustees Limited held
238,125 ordinary shares as trustees of the Employee
Share Purchase Plan.
Name of Shareholder
Number of
shares
Proportion
of total
North Atlantic Value LLP
12,055,000
22.45%
Schroder Investment
Management Limited
Mrs J C Cooper &
spouse*
BlackRock Investment
management (UK)
7,467,689
13.91%
2,815,367
5.24%
1,710,584
3.19%
* of which 542,800 shares are held in discretionary trusts of
which Mrs J C Cooper 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
40
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
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.
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.
Employee involvement
The Group regularly provides its employees with
information on matters of concern to them. We consult
with our employees in order to ensure that their views
can be taken into account when making decisions. We
utilise our intranet site to disseminate information and
engage with our employees via manager briefings.
Health and safety
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 26.
Greenhouse gas emissions
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 26.
Disclosure of information to Auditor
The Directors who held office at the date of approval
of this Directors’ Report confirm that, so far as they
are each aware, there is no relevant audit information
of which the 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 aware of
that information.
Shareholder additional information
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.
Rights and obligations attaching to shares
Subject to the Companies Act 2006 and other
shareholders’ rights, any share may be issued with such
rights and restrictions as the Company may by ordinary
resolution decide or, if no such resolution has been
passed or so far as the resolution does not make specific
provision, as the Board of Directors (“Board”) for the
time being of the Company may decide. Subject to the
Companies Act 2006, the Articles and any resolution of
the Company, the Board may deal with any unissued
shares as it may decide.
Amendment to the Articles of Association
Any amendments to the Articles of Association (“Articles”)
may be made in accordance with the provisions of the
Companies Act 2006 by way of special resolution.
Voting
Under and subject to the provisions of the Articles and
subject to any special rights or restrictions as to voting
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
41
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Director’s Report (continued)
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.
Restrictions on voting
A shareholder shall not be entitled to vote at any general
meeting or class meeting in respect of any shares held by
him unless all calls and other sums presently payable by
him in respect of that share have been paid.
Deadlines for voting rights
Full details of the deadlines for exercising voting rights in
respect of the resolutions to be considered at the AGM to
be held on 11 December 2015 are set out in the Notice of
the AGM.
Dividends and distributions
The Company may, by ordinary resolution, declare a
dividend to be paid to the shareholders but no dividend
shall exceed the amount recommended by the Board.
The Board may pay interim dividends and also any fixed
rate dividend whenever the financial position of the
Company justifies its payment in the opinion of the
Board.
Winding up
Under the Articles, if the Company is in liquidation, the
liquidator may, with the sanction of a special resolution
of the Company and any other authority required by law:
• divide among the shareholders in specie the whole
or any part of the assets of the Company and, for
that purpose, value any assets and determine how
the division shall be carried out as between the
shareholders or different classes of shareholders; or
• vest the whole or any part of the assets in trustees
upon such trusts for the benefit of shareholders as the
liquidator with the like sanction shall think fit.
Variation of rights
The Articles specify that the special rights attached
to any class of shares may, either with the consent in
writing of holders of three-fourths of the issued shares
of that class or with the sanction of a special resolution
passed at a separate meeting of such holders (but not
otherwise), be modified or abrogated.
Transfer of shares
Under and subject to the restrictions in the Articles,
any shareholder may transfer all or any of 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.
Repurchase of shares
Subject to the provisions of the Companies Acts and to
any rights conferred on the holders of any class of shares,
the Company may purchase all or any of its shares of any
class, including any redeemable shares.
Appointment and replacement of Directors
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 Acts) 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 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
42
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Information rights
Beneficial owners of shares who have been nominated by
the registered holder of those shares to enjoy information
rights under Section 146 of the Companies Act 2006 are
required to direct all communications to the registered
holder of their shares, rather than to the Company’s
registrars 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.
Annual General Meeting
The Notice of the AGM to be held on 11 December 2015,
together with details of the Resolutions to be considered,
will be set out in a separate circular.
Deadlines for voting rights
Full details of the deadlines for exercising voting rights
in respect of the resolutions to be considered at the AGM
will be set out in the Notice of the AGM.
By order of the Board
Stefan Allanson
Company Secretary
25 September 2015
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
Acts, 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.
Powers of the Directors
The business of the Company shall be managed by the
Board which may exercise all the powers of the Company,
subject to the provisions of the Articles and any ordinary
resolution of the Company. The Articles specify that
the Board may exercise all the powers of the Company
to borrow money and to mortgage or charge all or any
part of its undertaking, property and assets and uncalled
capital and to issue debentures and other securities,
subject to the provisions of the Articles.
Takeovers and significant agreements
The Company is 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.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
43
MJ Gleeson Group plc: Report and Accounts for the year ended 30 June 2015
Remuneration Committee Report
45 Chairman’s Summary Statement
46 Remuneration Policy Report
52 Annual Report on Remuneration
44
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Chairman’s Summary Statement
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. Our remuneration
report is split into two parts as follows:
• our Policy on Directors’ remuneration, which sets out
our approved future remuneration policy; and
• the Annual Report on Remuneration, which describes
how the policy was implemented in the year to June
2015 and the plans for the year to June 2016.
Last year, the Remuneration Committee (“the Committee”)
reviewed the remuneration policy for Executive Directors
and the Chairman and the policy was approved by
shareholders at last years AGM. The Board reviewed the
policy for the other Non-Executive Directors.
During the financial year the Committee undertook its
regular annual review of the Executive Directors’ base
salaries and agreed the performance targets for the
annual bonus for 2015.
The Committee also approved a proposal to implement
a new long term incentive plan for Executive Directors
and senior executives which 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 performance
condition is based on total shareholder return for the
three financial years from 1 July 2014 to 30 June 2017.
The proposal was subsequently approved by the Board
and the award was made on 30 September 2014.
Outcome of 2015 remuneration issues
The Group continued to perform well during the year to
30 June 2015. The performance condition for Executive
Directors’ 2015 annual bonuses was achievement of
Group profit before tax (before exceptional items) of
between £12.9m and £17.9m. The Group achieved profit
before tax (before exceptional items and the accrual of
Executive Director bonus payments) of £24.0m, which
is an increase of 90.5% against the previous year pre-
exceptional profit before tax. Accordingly, annual bonus
payments for 2015 will be made at 100% of base salary,
to be paid in cash.
Vesting of the December 2010 long term incentive plan
awards, which matured in December 2013, was based
upon a three year performance condition which ended
on 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 and vested to the
participants. In the year to 30 June 2014, 277,597 of
the share awards were exercised out of a total award
of 895,708 shares. Of this total, 74,714 awards lapsed
leaving a balance of 543,397 awards remaining to be
exercised during the year ended 30 June 2015. These
remaining 543,397 share awards were duly exercised
during the year thereby completing the 2010 plan.
No other long term incentive plan awards vested in
the year ended 30 June 2015. However, the November
2012 long term incentive award for the Chief Executive
achieved the three year performance condition which
ended on 30 June 2015. The performance condition
was based on total shareholder return achieving £3.33
by the end of the performance period on 30 June 2015.
The share price was £4.36 on 30 June 2015 and so the
performance condition was met in full. Accordingly the
423,015 share award will vest to the Chief Executive on
the third anniversary of the plan on 5 November 2015.
2016 Executive Directors’ remuneration
The focus of the remuneration policy for the Executive
Directors continues to have a significant proportion of
remuneration performance-related and linked closely to
the Group’s long term strategy.
The maximum amount payable under the annual
bonus scheme will again be 100% of base salary. The
performance conditions for the year to 30 June 2016
remain linked to profit targets. The base salary of the
Chief Executive Officer for the year to 30 June 2016
has been increased by 5%, which is comparable to the
increases received by other employees with similar levels
of performance within the Group.
The Chief Financial Officer, Mr Alan Martin, resigned from
his position and from the Board with effect of
31 July 2015. Mr Stefan Allanson was appointed as Chief
Financial Officer and Company Secretary designate on 29
June 2015 and was confirmed as Chief Financial Officer
and appointed to the Board on 31 July 2015. The base
salary of Mr Martin for the year to 30 June 2015 was
£231,000. The base salary of Mr Allanson with effect from
his date of appointment on 29 June 2015 is £180,000.
The Committee would like to thank shareholders for their
past support and look forward to your endorsement of
remuneration issues at the forthcoming AGM.
Ross Ancell
Chairman
Remuneration
Committee
25 September 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
45
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
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,
the UK Corporate Governance code for 2014 and the
views of our major shareholders and describes the policy
to be applied from 2015 onwards. The policy report was
approved by shareholders at the Annual General Meeting
held on 12 December 2014 and this policy will apply for
the three years from the date of that approval.
Policy overview
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 Total Shareholder
Return (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); and
• 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.
Components of Directors’ remuneration
The key elements of the remuneration package for each Director are set out in the table below:
Element
BASE SALARY
Purpose and link
to strategy
Set to attract, retain and motivate talented individuals.
Operation
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; and
• 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.
Maximum opportunity There is no prescribed maximum annual increase, though increases for executive directors
will not normally exceed the average salary increases across the Group.
Current salary levels are set out in the Annual Report on Remuneration.
Performance targets
N/A
46
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Element
BENEFITS
Purpose and link
to strategy
Operation
To provide market competitive benefits to aid retention
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; and
• reimbursement of expenses incurred on Group matters.
Other benefits may be provided where appropriate.
Maximum opportunity The value of benefits is based on the underlying cost to the Group and individual
circumstances. There is no prescribed maximum but benefits are in line with market practice
Performance targets
N/A
Element
PENSION
Purpose and link
to strategy
Operation
To offer market competitive retirement benefits to aid retention
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).
Maximum opportunity The maximum Company contribution or pension allowance is 25% of salary.
Directors who are members of the pension scheme may elect to exchange part of their salary
in return for pension contributions, which will reduce their National Insurance Contributions.
Performance targets
N/A
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
47
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Remuneration Policy Report (continued)
Element
ANNUAL BONUS
Purpose and link
to strategy
To incentivise the achievement of key financial and strategic targets for the forthcoming year
without encouraging excessive risk taking.
Operation
Normally payable in cash, but CEO may elect to have his bonus payable in shares.
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.
Maximum opportunity Maximum opportunity of 150% of base salary.
Performance targets
At least 100% of the bonus will be based on financial objectives (for example profit before
tax), 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.
Element
LONG-TERM INCENTIVE PLAN (“LTIP”)
Purpose and link
to strategy
To focus motivation on the long-term performance of the Group and reward shareholder value
creation.
Operation
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 shareholder 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.
Maximum opportunity Awards of up to 300% of base salary for the Chief Executive and 200% for other Directors.
Performance targets
The awards are subject to performance conditions based on an absolute TSR target and a
fairness test, which would consider the underlying financial performance of the company,
including, but not limited to, the profitability of the company and shareholder value creation
including the ability of shareholders to access this value creation through the liquidity of the
shares.
Element
HMRC APPROVED ALL-EMPLOYEE SCHEME
Purpose and link
to strategy
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
Executive Directors are eligible to participate in all-employee schemes.
Maximum opportunity Maximum is subject to HMRC approved limits.
Performance targets
N/A
48
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Element
FEES FOR NON-EXECUTIVE DIRECTORS
Purpose and link
to strategy
Operation
To reflect the time commitment and responsibilities of the role.
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 to reflect the additional
responsibilities.
There are no benefits or incentive schemes for Non-Executive Directors.
Maximum opportunity As with the Executive Directors, there is no prescribed maximum annual increase.
Current fee levels are set out in the Annual Report on Remuneration.
Performance targets
N/A
Selection of performance measures and
target setting
In the selection of performance measures the
Committee takes into account the Group’s strategic
objectives and short and long-term business priorities.
The performance measures selected 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.
Remuneration Policy for the broader
employee population
The executive remuneration framework set out in this
report follows similar principles as that applied to the
Group’s senior leadership team to ensure our senior
management team is rewarded on a consistent basis.
Any differences that exist arise either because of the
Remuneration Committee’s assessment of business need
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.
How the Committee will use its discretion
Incentive plans including annual bonus and LTIP will
be operated in line with the rules of each scheme or
plan together with any relevant laws and regulations.
However, it is important that the Committee retains
appropriate discretion (as is customary) over the
administration and operation of the incentive plans.
Discretion will include, but is not limited to, the
following in relation to incentive schemes:
• Who is invited to participate or receive grants of awards;
• 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; and
• As permitted by HMRC and other regulations, in
respect of Sharesave and any Share Incentive Plans.
In relation to incentive schemes including annual bonus
and LTIP, the Committee may adjust performance
measures and/or targets if these have ceased to be
appropriate provided that such adjusted measures or
targets will not be materially less difficult to satisfy. Any
use of the above discretions would, where relevant, be
explained in future Directors Remuneration Reports and
may, as appropriate, be the subject of consultation with
the Company’s major shareholders.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
49
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Remuneration Policy Report (continued)
Legacy arrangements
For the avoidance of doubt, in approving the Policy
report, authority is given to the Company to honour
any commitments entered into with current and
former Directors that have been disclosed previously
to shareholders. It is also part of this policy that we
will honour payments or awards crystallising after
the effective date of this policy but arising from
commitments entered into prior to the effective date of
the new policy, or at a time when the relevant individual
was not a Director of the Company. The Company will
also have the authority to meet any claims against the
Company arising as a result of a Director’s termination.
Illustration of the application of
Remuneration Policy
The 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:
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 £397,000, pension of
£56,700 and benefits of £19,107;
• Base salary levels applying on 1 July 2015;
• Benefit levels are assumed to be the same as the year
ended 30 June 2015;
• 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 pay out and
full vesting under the performance share plan; and
• Share price movement has been excluded from the
CHIEF EXECUTIVE OFFICER
above analysis.
Fixed
Annual bonus
LTIP
£473,107
100%
£969,357
31%
20%
49%
£2,061,107
58%
19%
23%
Minimum
On-target
Maximum
CHIEF FINANCIAL OFFICER
Fixed
Annual bonus
LTIP
£344,000
13%
£209,000
26%
£569,000
32%
32%
100%
61%
37%
Minimum
On-target
Maximum
Service agreements and policy in respect
of loss of office
All Executive Directors’ service agreements are
terminable on 12 months’ notice. In circumstances of
termination on notice, the Committee will determine an
equitable compensation package, having regard to the
particular circumstances of the case. The Committee
has discretion to require notice to be worked or to make
payment in lieu of notice or to place the director on
garden leave for the notice period.
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.
50
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
In exceptional circumstances, the committee may decide
that the participant’s awards will vest early on the date
of cessation of employment. In either case, the extent
to which the awards will vest depends on the extent to
which the performance conditions have been satisfied
and a pro rata reduction of the awards will be applied
by reference to the time of cessation (although the
committee has discretion to 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:
Executive Director
Date of service agreement
Jolyon Harrison
1 July 2012
Alan Martin*
11 December 2008
* Resigned effective on 31st July 2015
Chairman and other Non-Executive Directors’
terms of engagement
The Chairman and the Non-Executive Directors are not
employees; they have letters of appointment which set
out their duties and responsibilities. The dates of each
Non-Executive Directors’ original appointment are as
follows:
Non-Executive Director
Date of original
appointment
Expiry of
current term
Dermot Gleeson
27/11/1975
30/09/2015
Ross Ancell
Colin Dearlove
01/10/2006
30/09/2015
03/12/2007
02/12/2015
Christopher Mills
01/01/2009
31/12/2015
All Non-Executive directors have specific terms of
engagement being an initial period of three years which
thereafter may be extended on an annual basis, subject
to re-election at each AGM. The appointment of the
Chairman may be terminated on six months’ notice and
the appointment of the other Non-Executive Directors
may be terminated on one month’s notice.
Recruitment policy
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 accordance with
the policy for Executive Directors’ 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 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.
Statement of consideration of employment
conditions elsewhere in the group
The Committee does not consult with employees on
Directors’ remuneration but regularly reviews the
remuneration of staff throughout the Group to ensure
that it is attuned to general pay and conditions when
considering the remuneration of executive pay. For
example, in determining salary increases for the
Executive Directors, the Committee looks at salary
increases across the Group.
Statement of consideration of shareholder
views
The Committee consults with major shareholders and
their representative bodies on remuneration matters,
particularly if any material changes are proposed to the
remuneration policy. In these instances the Committee
seeks feedback from investors and develops and
considers its proposals in light of this feedback.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
51
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Annual Report on Remuneration
The Remuneration Committee
During the year under review the Committee was chaired by Ross Ancell. The other committee member is Colin
Dearlove. Both of the directors are independent Non-Executive Directors and they have no personal financial
interest in matters to be decided, no potential conflicts of interest arising from cross directorships and no day-to-day
involvement in running the business. Biographical details of the members of the Committee are show on page 31,
and details of their attendance at the meetings of the Committee during the year ended 30 June 2015 are shown on
page 34.
Role and responsibilities of the Remuneration Committee
The Committee’s primary purpose is to make recommendations to the Board on the Group’s framework for executive
remuneration. The Board has also delegated responsibility to the Committee for determining the remuneration,
benefits and contractual arrangements of the Chairman and the Executive Directors. No individual is involved in
deciding their own remuneration.
The Committee has written terms of reference, which are available 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; and
• Agreeing the terms of reference of any remuneration consultants it appoints.
Remuneration Committee: support and advice
The Committee is supported by the Head of Human Resources (Caroline Lee until July 2015 and then Beth Broughton
from July 2015) and the Company Secretary (Alan Martin until July 2015 and then Stefan Allanson from August 2015).
52
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
The Remuneration Committee’s Annual Report on Remuneration for the year ended 30 June 2015 is set out
below, including remuneration for the year ended 30 June 2015 and the proposed implementation of the
approved Remuneration Policy for 2016.
The auditor is required to report on the following information up to and including the note on loss of office payments
or payments to past Directors.
SINGLE TOTAL FIGURE OF REMUNERATION FOR EACH DIRECTOR FOR THE YEAR ENDED 30 JUNE 2015
Salary
& fees
£000
Benefits
£000
Annual
bonus
£000
Value
of LTIP
award
vesting
£000
Pension
£000
2015
2015
2015
2015
2015
Salary
& fees
£000
Benefits
£000
Annual
bonus
£000
Value
of LTIP
award
vesting
£000
Pension
£000
2014
2014
2014
2014
2014
Total
£000
2015
Total
£000
2014
Chairman
Dermot Gleeson
90
-
-
-
-
90
80
-
-
Executive Directors
Jolyon Harrison
Alan Martin
Non-Executive Directors
Ross Ancell
Colin Dearlove
Christopher Mills
378
231
19
19
378
231
964
551
57
1,796
58 1,090
360
220
19
19
360
220
40
40
30
-
-
-
-
-
-
-
-
-
-
-
-
40
40
30
30
30
25
-
-
-
-
-
-
-
-
-
-
-
-
-
80
54
55
793
514
-
-
-
30
30
25
809
38
609 1,515
115 3,086 745
38
580
-
109 1,472
During the year no Director waived his entitlement to any emoluments.
Notes to the single total figure of remuneration
Taxable benefits provided to Executive Directors
The main benefits available to the Executive Directors during the year to 30 June 2015 (and their associated values)
were car allowance for both executives 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 2014.
Determination of annual bonus
The annual performance-related bonus for the year to 30 June 2015 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
Bonus achievable as
percentage of salary
12.9
17.9
0%
100%
The Profit Measure achieved for the year to 30 June 2015 was £24.0m, as per the basis of calculation above, and
exceeded that of the prior year by 90.1%. As a result, the annual bonus payments for 2015 will be made, in cash, at
100% of base salary.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
53
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Annual Report on Remuneration (continued)
Long Term Incentive Plan – Performance Share Plan
The LTIP columns refer to the Company’s Performance Share Plan, which delivers shares to the Executive Directors
subject to performance targets being reached.
In the year to 30 June 2015 the 2010 Performance Share Plan vested on 15 July 2014. The performance Share awards
were valued at £3.968 being the mid-market price on the day the shares vested, plus £0.86 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.
In the year to 30 June 2015 share awards were made to a number of senior employees including Jolyon Harrison and
Alan Martin.
2014 PSP awards
Jolyon Harrison
Alan Martin
Number of
shares awarded
Number of
shares vesting
Threshold award,
£4.80, 20% of award
Target award, £6.00,
100% of award
290,769
59,231*
290,769
-
279,138
1,744,615
-
-
* This award has now lapsed following the resignation of Mr Martin effective on 31 July 2015
In the year to 30 June 2014 no shares under the Performance Share Scheme were due to vest. However the November
2012 long term incentive award for the Chief Executive Officer, Mr Jolyon Harrison, achieved the three year
performance condition which ended on 30 June 2015. The performance condition was based on total shareholder
return achieving £3.33 by the end of the performance period on 30 June 2015. The share price was £4.36 on 30 June
2015 and so the performance condition was met in full. Accordingly the 423,015 share award will vest to the Chief
Executive Officer on the third anniversary of the plan on 5 November 2015. The award will be valued at the mid-
market share price on the day that the shares vest plus the value of the dividend equivalent payable on the awards
that vest. The dividend equivalent is based on dividends to shareholders with record dates occurring between 5
November 2012, being the date of the grant and 5 November 2015, being the vesting date.
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 of 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.
2010 PSP awards
Jolyon Harrison
Alan Martin
Number of
shares awarded
Number of
shares vesting
242,857
138,888
242,857
138,888
Value of
shares vesting
£963,646
£551,102
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 (2015: £56,700) and the CFO received pension contributions of 25% of salary (2015: £57,750).
Loss of office payments or payments to past Directors
No loss of office payments or payments to past Directors was made in the year under review. However £631,000 was
accrued in the year in respect of the loss of office payment due to Alan Martin consequent to his resignation from the
Board effective 31 July 2015.
54
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Directors’ shareholdings and share interests
The share interests of the Directors serving during the year and of their connected persons in the ordinary share
capital of the Company are as shown below:
Director
Dermot Gleeson
Jolyon Harrison
Alan Martin (resigned effective 31 July 2015)
Ross Ancell
Colin Dearlove
Christopher Mills
30 June 2015
30 June 2014
1,066,846
1,472,218
55,412
–
–
1,053,086
1,302,386
11,404
–
–
12,055,0001
13,655,0001
1 Shares are held in name of Harwood Capital LLP, of which Christopher Mills is a Member
There are no share ownership requirements for the Directors.
Directors’ interest in shares under the Long Term Incentive Scheme
Director
Scheme
J Harrison
A Martin
PSP
PSP
PSP
30 June
2013
Granted
during year
Exercised
during year
Lapsed in
year
423,015
-
-
-
290,769
59,231*
-
-
-
-
-
-
*Following the resignation of Alan Martin, this award has now lapsed
Total
interests
outstanding
at 30 June
2014
423,015
290,769
59,231*
Share price
at date of
award
£1.52
£3.94
£3.94
Shares
vested
but not
exercised
Date from
which share
may be
exercised
-
-
-
5/11/2015
30/09/2017
30/09/2017
The middle market price on 30 June 2015 was £4.36 and the range during the year to 30 June 2015 was from £3.25 to
£4.50 pence.
Total shareholder return performance
We have chosen to compare the Company’s total shareholder return performance over the last five years with the total
shareholder return for the FTSE Small Cap Index, of which the Company is a member, and a comparator index of listed
housebuilders. The Comparator Group consists of a group of listed housebuilders comprising Barratt Developments,
Bellway, Bovis Homes, Crest Nicholson, Persimmon, Redrow, Taylor Wimpey and Telford Homes.
Total shareholder return is the sum of share price appreciation and dividends paid during the year.
MJ GLEESON PLC AND INDEX COMPARISON: JUNE 2009 TO JUNE 2015
MJ Gleeson plc
Housebuilders
FTSE Small Cap
700
600
500
400
300
200
100
0
Jun 2010
Jun 2011
Jun 2012
Jun 2013
Jun 2014
Jun 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
55
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Annual Report on Remuneration (continued)
Chief Executive Officer’s remuneration 2011 to 2015
Year
Chief Executive
2015
2014
2013
2012
2011
Jolyon Harrison
Jolyon Harrison
Jolyon Harrison2
N/A3
Chris Holt4
Single figure of total
remuneration
£
Annual bonus paid against
maximum opportunity
%
LTIP awards vesting against
maximum opportunity
%
1,795,453
793,107
1,614,646
-
416,608
100
100
81
-
0
100
-1
100
-
-1
Footnotes:
1 No LTIP vested during that year
2 Jolyon Harrison appointed Chief Executive from 1 July 2012
3 No Chief Executive was appointed during 2012.
4 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.
Chief Executive Officer’s change in remuneration
Set out below is a comparison of the change in remuneration of the Chief Executive Officer from 1 July 2014 to 30
June 2015, compared to the change in remuneration of the Group’s salaried employees. We have selected the salaried
workforce as this includes 120 junior to senior employees with the most relevant pay structure. Certain employees
have been excluded from this number due to differences in pay structures including those working part time and those
who are weekly paid.
Chief Executive
Average of salaried employees
Percentage change from 2014 to 2015
Annual salary
%
5
5.6
Bonus
%
5
8
Value of taxable
benefits
%
(15.4)
5.8
Relative importance of spend on pay
Set out below is the amount spent on remuneration for all employees of the Group (including Executive Directors) and
the total amounts paid in distributions to shareholders over the year.
Remuneration for all employees
Total distributions paid
2015
£m
13.8
4.1
2014
£m
10.0
1.6
Difference in spend
£m
3.8
2.4
Difference
%
38
150
56
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Implementation of the policy for the year to 30 June 2016
EXECUTIVE DIRECTORS
BASE SALARIES
After taking into consideration the increases to Group employees’ salaries on 1 July 2015 (monthly paid employees
generally received a 5.03% base salary increase), the Committee has awarded salary increases of 5% to the Executive
Directors from 1 July 2015.
Jolyon Harrison
Alan Martin (resigned 31 July 2015)
Stefan Allanson1(appointed 31 July 2015)
1 New CFO – no salary review to be held in July 2015
Base salary
from 1 July 2015
£
396,900
231,000
180,000
Base salary
for the year
to 30 June 2015
£
378,000
231,000
-
Annual Bonus
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 2016 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 claw back
provisions.
Long Term Incentive Plan awards
In the year to 30 June 2016 the 5 November 2013 share award of 423,015 shares to the Chief Executive Officer will
vest on 5 November 2015 as the performance conditions have been met in full (see page 54 above). The award will be
valued at the mid-market share price on the day that the shares vest plus the value of the dividend equivalent payable
on the awards that vest. The dividend equivalent is based on dividends to shareholders with record dates occurring
between 5 November 2012, being the date of the grant and 5 November 2015, being the vesting date.
The Committee proposes to make awards to the Executive Directors in the year to 30 June 2016, in line with the
disclosure policy on page 48. These awards are expected to be at 300% and 100% of salary for Jolyon Harrison and
Stefan Allanson 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 2016; current arrangements are set out on page 54.
Chairman and Non-Executive Directors fees
The Committee has agreed that the Chairman’s fee for 2016 should increase by £15,000, to £105,000 with effect
from 1 July 2015 which includes the additional fee of £10,500 for chairing the Nominations Committee. The Board
as a whole determine the fees for the Non-Executive Directors. The Board has agreed that the fees should increase
by £9,500 to £39,500 with effect from 1 July 2015. It was also agreed that the additional fee in relation to the extra
responsibilities in chairing a Board Committee will increase by £5,500 to £10,500 with effect from 1 July 2015.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
57
Financial Statements
59
Statement of Directors’ Responsibilities
64 Consolidated Statement of Changes in Equity
60
Independent Auditor’s Report
66 Consolidated Statement of Cashflow
62 Consolidated Statement of Comprehensive Income
68 Notes to the Financial Statements
63 Consolidated Statement of Financial Position
58
MJ Gleeson Group plc: Report and Accounts for the year ended 30 June 2015
Barnburgh View, Goldthorpe
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Statement of Directors’ Responsibilities
Statement of Directors’ responsibilties
in respect of the Annual Report and the
Financial Statements
The Directors are responsible for preparing the Annual
Report and the Group and parent company financial
statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group
and parent company financial statements for each
financial year. Under that law they are required to
prepare the Group financial statements in accordance
with IFRSs as adopted by the EU and applicable law and
have elected to prepare the parent company financial
statements on the same basis.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Group and parent company and of their profit or loss
for that period. In preparing each of the Group and
parent company financial statements, the Directors are
required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are reasonable
and prudent;
Under applicable law and regulations, the Directors
are also responsible for preparing a Directors’ Report,
Directors’ Remuneration Report and Corporate
Governance Statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the company’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Responsibility statement of the Directors in respect of
the annual financial report
We 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 Strategic Report 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.
• state whether they have been prepared in accordance
By order of the Board
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.
J Harrison
Director
25 September 2015
S Allanson
Director
25 September 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
59
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Independent Auditor’s Report
Independent Auditor’s Report to the Members
of MJ Gleeson plc only
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of
MJ Gleeson plc for the year ended 30 June 2015 set
out on pages 62 to 95. 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 2015 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 Our assessment of risks of material misstatement
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:
Carrying amount of Inventories (£108.2m)
Refer to page 37 and 38 (Audit Committee), page 70
(accounting policy) and page 83 (notes).
The risk: Inventories, relating to work-in-progress
of sites under development, represent 64% of total
assets. As work-in-progress is held at the lower of
cost and net realisable value, the carrying amount is
dependent on estimates of total build costs (including
future costs to completion) and future selling
prices. Additionally, as the gross profit recognised
on individual sales depends on the carrying value of
work in progress relating to that site, these estimates
also impact the timing of profit recognition. Actual
build costs may differ from those forecast due to
both changing market conditions, and unforeseen
events during construction. Sales prices have inherent
uncertainty due to changes in market conditions.
Incorrect estimates of selling prices and future costs
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 in this area is greater where there is
significant work in progress and/or low margins.
Our response: In this area our audit procedures
included tests of the group’s controls over site
valuations, sales prices, and the authorisation and
recording of costs. We focused our detailed testing on
the higher risk sites (high inventory values at year-
end, low margin or slow rates of sale). For a sample
of such sites with a deemed higher risk, we assessed
the historical accuracy of forecast costs against actual
amounts incurred and assessed the reasonableness of
forecast selling prices against those currently being
achieved.
We assessed the level of gross margin achieved on
individual sites against that recorded previously and
against future forecasts. We also tested whether
appropriate amounts of work in progress were
transferred to the Income Statement on plot sales in
order to consider inclusion of these transactions in the
appropriate period. Further, we compared the
carrying amount of inventory on individual sites
against sales reservations and agreed contracts to
assess realisable value.
We have also considered the adequacy of the Group’s
disclosures about the degree of estimation involved in
arriving at the carrying value of work in progress.
Recognition of deferred tax asset
In our audit report for the year ended 30 June 2014
we included the recognition of a deferred tax asset as
one of the risks of material misstatement that had the
greatest effect on our audit, as it was the first year
that a deferred tax asset had been recognised. We
consider this risk to be less significant in the current
year, as no new trading losses were incurred during
the year and the existing deferred tax asset has been
significantly reduced through the offset of trading
profits. The remaining deferred tax asset is expected
to be utilised within the next two financial years.
3 Our application of materiality and an overview of
the scope of our audit
The materiality for the group financial statements
as a whole was set at £1.1 million determined with
reference to a benchmark of group profit before tax,
normalised to exclude this year’s exceptional items as
60
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
disclosed in note 4, of £6.1m, of which it represents
4.7% (prior year 7.5% of profit before tax).
Under the Companies Act 2006 we are required to
report to you if, in our opinion:
We report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding
£55,000, in addition to other identified misstatements
that warrant reporting on qualitative grounds.
Audits for group reporting purposes were performed
over all the Group’s components covering 100% of
Group revenue, profit before taxation and total
assets. These audits were performed to component
materiality levels, which were set individually for
each component and ranged from £0.3 million to
£0.7 million, having regard to the mix of size and risk
profile of the Group across the components. These
audits were all completed by the Group audit team.
• 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:
4 Our opinion on other matters prescribed by the
• the Directors’ statement, set out on page 39, in
Companies Act 2006 is unmodified
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 which we are required to report by exception
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.
relation to going concern; and
• the part of the Corporate Governance Statement
on page 36 relating to the company’s compliance
with the ten provisions of the 2012 UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities
Statement set out on page 59, 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 the Financial Reporting
Council’s website at www.frc.org.uk/auditscopeukprivate.
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/auditscopeukco2014a,
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.
Johnathan Pass (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 The Embankment, Neville Street, Leeds, LS1 4DW
25 September 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
61
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2015
Continuing operations
Revenue
Cost of sales before reinstatement of inventories and contract provisions
Reinstatement of inventories and contract provisions
Cost of sales
Gross profit
Administrative expenses before restructuring costs
Exceptional restructuring costs
Administrative expenses
Operating profit
Exceptional provision for diminution in value of investments
Financial income
Financial expenses
Profit before tax
Tax for the period before recognition of additional deferred tax asset on losses
brought forward
Exceptional deferred tax recognition of additional tax asset on losses brought
forward
Tax
Profit for the year from continuing operations
Discontinued operations
Loss for the year from discontinued operations (net of tax)
Total comprehensive income for the year attributable to equity holders of
parent company
Earnings per share attributable to equity holders of parent company
Basic
Diluted
Earnings per share from continuing operations
Basic
Diluted
The notes on pages 68 to 95 form part of these financial statements.
Note
2015
£000
2014
£000
117,588
(77,287)
-
(77,287)
40,301
(17,019)
(1,236)
(18,255)
22,046
(4,896)
496
(383)
17,263
81,442
(55,497)
800
(54,697)
26,745
(14,681)
-
(14,681)
12,064
-
485
(389)
12,160
(4,848)
(2,827)
-
(4,848)
12,415
8,326
5,499
17,659
(207)
(231)
12,208
17,428
22.77 p
22.61 p
32.92 p
32.36 p
23.16 p
22.99 p
33.36 p
32.79 p
4
4
4
7
7
4
8
3
10
10
10
10
62
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Consolidated Statement of Financial Position
at 30 June 2015
Non-current assets
Plant and equipment
Investment property
Investments in joint ventures
Other investments
Investments in subsidiaries
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Provisions
Current liabilities
Loans and borrowings
Trade and other payables
Provisions
UK corporation tax
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Retained earnings
Total equity
Group
2015
£000
Group
2014
£000
Company
2015
£000
Note
11
12
13
14
15
17
24
16
17
26
22
20
21
22
8
28
1,236
506
15
-
-
19,606
5,668
1,268
571
15
4,896
-
8,116
10,513
10
-
-
-
20,800
-
-
27,031
25,379
20,810
108,222
17,530
15,809
100,717
12,794
13,687
-
56,108
848
141,561
127,198
56,956
168,592
152,577
77,766
(59)
(75)
-
-
(31,790)
(214)
-
(32,004)
(1,933)
(22,182)
(214)
(82)
(24,411)
-
(1,916)
-
-
(1,916)
(32,063)
(24,486)
(1,916)
136,529
128,091
75,850
1,074
23
-
135,432
1,063
6,436
120
120,472
1,074
23
-
74,753
136,529
128,091
75,850
The financial statements were approved by the Board of Directors on 24 September 2015 and were signed on its
behalf by:
J Harrison
Director
S Allanson
Director
The notes on pages 68 to 95 form part of these financial statements.
Reg. No. 9268016
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
63
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Consolidated Statement of Changes in Equity
for the year ended 30 June 2015
GROUP
At 1 July 2013
Share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Retained
earnings
£000
Note
Total
£000
1,058
6,343
120
104,568
112,089
Total comprehensive income for the period
Profit for the period
Total comprehensive income for the period
Transactions with owners, recorded directly
in equity
Contributions and distributions to owners
Share issue
Purchase of own shares
Share-based payments
Dividends
Transactions with owners, recorded directly
in equity
9
-
-
5
-
-
-
5
-
-
-
-
17,428
17,428
17,428
17,428
93
-
-
-
-
-
-
-
-
(28)
144
98
(28)
144
(1,640)
(1,640)
93
-
(1,524)
(1,426)
At 30 June 2014
1,063
6,436
120
120,472
128,091
-
-
-
-
-
-
12,208
12,208
12,208
12,208
Total comprehensive income for the period
Profit for the period
Total comprehensive income for the period
Transactions with owners, recorded directly
in equity
Contributions and distributions to owners
Share issue
Issue of preference shares
Redemption of preference shares
11
50
(50)
55
-
-
-
-
-
-
-
-
66
50
(50)
-
-
(25)
266
Scheme of arrangement with shareholders
77,324
(6,468)
(120)
(70,736)
Share reduction
Purchase of own shares
Share-based payments
Dividends
(77,324)
-
-
-
9
-
-
-
-
-
-
-
-
77,324
(25)
266
(4,077)
(4,077)
Transactions with owners, recorded directly
in equity
11
(6,413)
(120)
2,752
(3,770)
At 30 June 2015
1,074
23
-
135,432
136,529
64
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
COMPANY
Total comprehensive income for the period
Loss for the period
Total comprehensive income for the period
Transactions with owners, recorded directly
in equity
Contributions and distributions to owners
Share issue
Issue of preference shares
Redemption of preference shares
Scheme of arrangement with shareholders
Share reduction
Purchase of own shares
Share-based payments
Dividends
Transactions with owners, recorded directly
in equity
At 30 June 2015
Share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Retained
earnings
£000
Note
Total
£000
-
-
-
-
-
-
(1,220)
(1,220)
(1,220)
(1,220)
1,074
23
50
(50)
77,324
(77,324)
-
-
-
1,074
1,074
9
-
-
-
-
-
-
-
23
23
-
-
-
-
-
-
-
-
-
-
-
-
1,097
50
(50)
77,324
77,324
(64)
161
-
(64)
161
(1,448)
(1,448)
-
75,973
77,070
-
74,753
75,850
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
65
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Consolidated Statement of Cashflow
for the year ended 30 June 2015
Note
3
11
Operating activities
Profit before tax from continuing operations
Loss before tax from discontinued operations
Depreciation of plant and equipment
Share-based payments
Profit on sale of investment properties
Loss on sale of other property, plant and equipment
Profit on sale of assets held for sale
Capitalisation of available for sale assets
Financial income
Financial expenses
Dividends received
Group
2015
£000
Group
2014
£000
Company
2015
£000
17,263
12,160
(1,220)
(207)
(131)
-
17,056
12,029
(1,220)
798
266
(171)
104
(50)
(22)
(496)
383
-
828
144
(313)
-
(21)
(426)
(485)
389
-
4
161
-
-
-
-
(539)
207
(5,000)
(6,387)
Operating cash flows before movements in working capital
17,868
12,145
Impairment of investment
Increase in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Increase in amounts due from subsidiary undertakings
Cash generated/(utilised) in operating activities
Tax paid
Interest paid
Net cash flow surplus/(deficit) from operating activities
Investing activities
Proceeds from disposal of available for sale assets
Proceeds from disposal of investment properties
Proceeds from disposal of plant and equipment
Dividends received
Interest (paid)/received
Purchase of plant and equipment
Investments in subsidiaries
Net cash flow surplus/(deficit) from investing activities
4,896
-
(7,506)
(3,897)
-
-
(16,420)
995
9,602
(3,484)
(251)
1,748
-
-
(55,609)
8,440
5,759
(60,499)
(79)
(383)
-
(477)
(79)
(207)
7,978
5,282
(60,785)
735
236
15
-
(3)
(870)
-
113
244
490
-
-
194
(629)
-
-
-
5,000
538
(14)
-
(20,800)
299
(15,276)
11
66
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Financing activities
Repayment of borrowings
Proceeds from issue of shares
Purchase of own shares
Dividends paid
Net cash flow (deficit)/surplus from financing activities
Group
2015
£000
Group
2014
£000
Company
2015
£000
Note
(1,933)
66
(25)
(4,077)
(5,969)
(260)
98
(28)
(1,640)
(1,830)
-
78,421
(64)
(1,448)
76,909
9
Net increase in cash and cash equivalents
2,122
3,751
848
Cash and cash equivalents at beginning of year
13,687
9,936
-
Cash and cash equivalents at end of year
26
15,809
13,687
848
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
67
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements
for the year ended 30 June 2015
1 Accounting policies
MJ Gleeson plc (“the Company”) is a company incorporated in the United Kingdom.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”) and
equity account the Group’s interest in joint ventures.
Statement of compliance
Both the Company financial statements and the Group financial statements have been prepared and approved by the Directors in
accordance with International Financial Reporting Standards as adopted by the European Union (“IFRSs”).
Basis of preparation
Assets and liabilities in the financial statements have been valued at historic cost except where otherwise indicated in these
accounting policies.
Judgements made by management in the application of IFRSs, that have significant effect on the financial statements and estimates,
include the carrying value of land held for development, work in progress, investment in subsidiaries, loans to joint ventures,
amounts recoverable on contracts and trade receivables.
The Company has taken advantage of section 408 of the Companies Act 2006 and consequently the Statement of Comprehensive
Income of the parent company is not presented as part of these accounts. The loss of the parent company in the financial year
amounted to £1,220,000.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and all its subsidiary undertakings.
Joint ventures are accounted for using the equity method of accounting.
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.
Revenue recognition
Revenue represents the fair value of work done on contracts performed during the year on behalf of customers or the value of
goods and services delivered to customers. Revenue is recognised as follows:
• Revenue from 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.
68
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating
segments’ operating results are reviewed regularly by the 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.
Impairment: Financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred
after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, if no impairment loss had been recognised.
Impairment: Non-financial assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses
are recognised in profit or loss.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, if no impairment loss had been recognised.
Exceptional items
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 assets 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.
Financial income and expenses
Finance income comprises interest income on funds invested, dividend income and the unwinding of discounts on deferred
receipts. Interest income is recognised as it accrues, using the effective interest rate 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 rate method.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
69
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
Plant and equipment
Depreciation is charged so as to write-off the cost of assets over their estimated useful lives, using the straight-line method, on
the following bases:
Plant and machinery between 3 and 6 years
Depreciation of these assets is charged to the Statement of Comprehensive Income.
Investment properties
Investment properties, which are largely ground rent properties held to earn rentals and/or for capital appreciation, are stated
at their fair values at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are
included in the 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 are being marketed for sale.
Joint ventures
A joint venture is an entity over which the Group is in a position to exercise joint control through participation in the financial
and operating policy decisions of the venture. The joint venture entity operates in the same way as other enterprises, except
that a contractual arrangement between the venturers establishes joint control over the economic activity of the entity. Joint
ventures are accounted for using the equity method of accounting. The Group’s share of the results of joint ventures is reported
in the 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 the
share of joint venture results, net of any related deferred tax.
Other investments
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.
Amounts due from construction contract customers
Amounts due from construction contract customers represent the value of work carried out at the balance sheet date, less a
provision for foreseeable losses less progress billings (see revenue recognition accounting policy).
Available for sale financial assets
Available for sale financial assets due after more than one year, which represent receivables in respect of shared equity properties,
are recorded at fair value, being the amount receivable by the Group discounted to present day values. 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.
Trade receivables
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.
70
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Cash and cash equivalents
Cash and cash equivalents comprise cash in 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.
Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical
area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of or has been abandoned.
Discontinued operations are presented in the 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.
Loans and borrowings
Loans and borrowings are initially measured at cost and are subsequently reviewed to ascertain whether a fair value adjustment
is required.
Trade and other payables
Trade and other payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective
interest rate method.
Tax
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the 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.
Employee benefits
Obligations for contributions to defined contribution pension schemes are charged to the Statement of Comprehensive Income in
the period to which the contributions relate.
Share options
The share option schemes allow employees to acquire shares in the ultimate parent company; these awards are granted by the
ultimate parent company. The fair value of options granted is recognised as an employee expense, with a corresponding increase
in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured using 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 accounts.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
71
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
Own shares held by Employee Benefit Trusts
The Group has elected to treat the Employee Benefit Trusts (“EBT”) as separate legal entities and as subsidiaries of the parent. Any
loan made to the EBT is accounted for as an intercompany loan with the parent. These shares are not treasury shares as defined
by the London Stock Exchange.
Dividends
Dividends are recorded in the Group’s financial statements when paid. Final dividends are recorded in the Group’s financial
statements in the period in which they receive shareholder approval.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods.
The key judgement and sources of estimation uncertainty at the balance sheet date are:
Land and work in progress
Valuations which include an estimation of costs to complete and remaining revenues are carried out at regular intervals throughout
the year, during which site development costs are allocated between units built in the current year and those to be built in future
years. These assessments include a degree of inherent uncertainty when estimating the profitability of a site and in assessing any
impairment provisions which may be required.
The Group conducted a review of inventory and, following cost savings and improvements in sales values, impairments which had
been made in 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.
Investments and investments in subsidiaries
Investments and investments in subsidiaries are stated at the lower of cost and net realisable value, which is dependent upon
management’s assessment of future trading activity and is therefore subject to a degree of inherent uncertainty.
Available for sale financial assets (shared equity)
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.
Deferred tax
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 2015. The judgement to recognise the deferred tax asset is dependent upon taxable profits
arising in the same company as the losses originally arose and the Group’s expectations regarding future profitability including site
revenue and cost forecasts for future years which contain a degree of inherent uncertainty.
Adoption of new and revised standards
For the year ended 30 June 2015, the Group has adopted the following standards:
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 28
IAS 32
‘Consolidated Financial Statements’ which clarifies consolidation principles.
‘Joint Arrangements’ which clarifies the accounting requirements for joint arrangements.
‘Disclosure of Interests in Other Entities’ (issued October 2012) which clarifies disclosure requirements.
‘Fair Value Measurement’ which defines fair value and requires disclosure about fair value measurement.
‘Investments in Associates and Joint Ventures’ which specifies the accounting treatment of investments.
‘Financial Instruments: Presentation’ which clarifies the treatment of the tax effect of a distribution to holders of
equity instruments
72
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Standards not yet applied
There are a number of standards and interpretations issued by the International Accounting Standards Board that are effective for
financial statements after this reporting period. The following have not been adopted by the Group in preparing the accounts for
the year ended 30 June 2015:
IFRS 14
IFRS 15
IAS 38
IAS 39
‘Regulatory Deferral Accounts’ (issued 30 January 2014)1
‘Revenue from Contracts with Customers’ (issues 28 May 2014)1
‘Intangible Assets’ (issued May 2014)1
‘Financial Instruments: Recognition and Measurement’ (issued June 2013)
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.
1 Not yet endorsed by the EU.
2 Segmental analysis
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:
Revenue
Continuing activities:
Gleeson Homes
Gleeson Strategic Land
Discontinued activities
Total revenue
Profit on activities:
Gleeson Homes
Gleeson Strategic Land
Administrative expenses
Exceptional restructuring costs
Exceptional provision for diminution in value of investments
Financial income
Financial expenses
Profit before tax
Tax
Profit for the year from continuing operations
Note
2015
£000
2014
£000
96,078
21,510
70,646
10,796
117,588
81,442
3
237
100
117,825
81,542
17,384
8,147
9,408
4,844
25,531
14,252
(2,249)
(1,236)
(4,896)
496
(383)
17,263
(4,848)
12,415
(2,188)
-
-
485
(389)
12,160
5,499
17,659
Loss for the year from discontinued operations (net of tax)
3
(207)
(231)
Profit for the year attributable to equity holders of the parent company
12,208
17,428
All rental income from investment properties, totalling £nil (2014: £32,000), 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.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
73
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
Balance sheet analysis of business segments:
Gleeson Homes
Gleeson Strategic Land
Group Activities/Discontinued
Operations
Net cash
Other information:
Continuing operations:
Gleeson Homes
Gleeson Strategic Land
Group Activities
2015
Assets
£000
94,960
51,756
2015
Liabilities
£000
(5,788)
(13,213)
2015
Net assets
£000
89,172
38,543
6,067
(13,062)
(6,995)
15,809
-
15,809
2014
Assets
£000
99,614
33,336
5,940
13,687
2014
Liabilities
£000
(16,436)
(4,022)
2014
Net assets
£000
83,178
29,314
(4,028)
1,912
-
13,687
168,592
(32,063)
136,529
152,577
(24,486)
128,091
2015
Capital
additions
£000
868
-
2
870
2015
Depre-
ciation
£000
786
2
10
798
2014
Capital
additions
£000
622
-
7
629
2014
Depre-
ciation
£000
794
6
28
828
All the Group’s operations are carried out in the United Kingdom.
74
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
3 Discontinued operations
The Group disposed of certain assets and liabilities of the Gleeson Engineering Division of Gleeson Construction Services to Black
and Veatch Limited (“B&V”) in a prior period and 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 Limited, 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.
Gleeson
Commercial
Property
Develop-
ments
2015
£000
Gleeson
Capital
Solutions
2015
£000
Note
Gleeson
Commercial
Property
Develop-
ments
2014
£000
Gleeson
Capital
Solutions
2014
£000
Revenue
Cost of sales
Gross (loss)/profit
Administrative expenses
Profit on sale of assets held
for sale
Share of loss of joint
ventures (net of tax)
Operating loss
Financial income
Loss before tax
Tax
Loss for the year from
discontinued operations
7
-
-
-
-
-
-
-
-
-
-
Gleeson
Const-
ruction
Services
2015
£000
237
(275)
(38)
Total
2015
£000
237
(275)
(38)
(169)
(169)
-
-
-
-
(207)
(207)
-
-
-
-
-
-
-
-
-
-
-
-
(207)
(207)
-
-
-
(77)
-
(207)
(207)
(77)
-
-
-
-
-
-
-
-
Loss per share: impact of discontinued operations
Basic
Note
10
2015
p
(0.39)
The cashflow statement includes the following relating to operating loss on discontinued operations:
Operating activities
2015
p
(73)
-
-
-
-
-
-
-
-
-
-
-
Gleeson
Const-
ruction
Services
2014
£000
100
(46)
54
Total
2014
£000
100
(46)
54
(185)
(185)
-
-
-
-
(131)
(131)
-
-
(131)
(131)
(23)
(100)
(154)
(231)
2014
p
(0.44)
2014
p
(83)
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
75
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
4 Exceptional items
Reinstatement of inventories and contract provisions
Tax
Exceptional restructuring costs
Exceptional provision for diminution in value of investments
2015
£000
-
-
(1,236)
(4,896)
(6,132)
2014
£000
800
8,326
-
-
9,126
Restructuring costs
Reorganisation costs of £1,236,000 were incurred on consultancy and legal costs relating to the Scheme of Arrangement as detailed
in Note 29.
Provision for diminution in value of investments
The Group made a provision against it’s investment in GB Building Solutions Limited and GB Group Holdings Limited (“GBGH”)
which went into administration on 9 March 2015.
Impairment of inventories and contract provisions
At 30 June 2015, 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 (FY15: £nil; FY14: £800,000) within the Balance Sheet, the Group has partially reversed the impairment previously
made.
Deferred tax on tax losses
During the year, the Group recognised £nil (2014: £8,326,000) of previously unrecognised deferred tax asset in relation to tax losses
available to offset against future profits.
During the year exceptional income of £nil (2014: £800,000) and the tax credit of £nil (2014: £8,326,000) in the Gleeson Homes
division. The reorganisation costs of £1,236,000 (2014: £nil) and the provision for diminution was reported in value of £4,896,000
(2014 £nil) was reported under Group activity.
5 Expenses and Auditor’s remuneration
Profit for the year is stated after charging/(crediting):
Staff costs
Depreciation of plant and equipment (continuing operations)
Profit on sale of 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
2015
£000
13,772
798
(221)
11
63
32
25
33
2014
£000
9,961
828
(334)
10
60
44
46
39
76
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
6 Staff costs
Wages and salaries
Redundancy
Compensation for loss of office
Share-based payments
Social security costs
Other pension costs
Note
23
The average monthly number of employees (including Directors) during the year was:
Gleeson Homes
Gleeson Strategic Land
Group Activities
Group
2015
£000
Group
2014
£000
Company
2015
£000
10,930
8,302
89
632
266
1,312
543
13,772
14
-
147
1,047
451
9,961
Group
2015
No.
249
10
7
266
181
89
632
15
37
49
1,003
Group
2014
No.
197
10
10
217
The average number of people employed by the Company (including Directors) during the year was seven.
Directors’ remuneration
Full details of the Directors’ remuneration is provided in the audited part of the Directors’ Remuneration Report on pages 44 to 57.
7 Financial income and expenses
Group
Financial income
Interest on bank deposits
Other interest
Unwinding of discount on deferred receipts
Financial expenses
Interest on bank overdrafts and loans
Bank charges
Interest and unwinding of discount on deferred payments
Continuing operations
Total
2015
£000
4
1
491
496
-
(383)
-
(383)
2014
£000
7
17
461
485
(48)
(240)
(101)
(389)
2015
£000
4
1
491
496
-
(383)
-
(383)
2014
£000
7
17
461
485
(48)
(240)
(101)
(389)
Net financial income
113
96
113
96
Note 19 discloses any further exposure for the Group to interest rate risk.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
77
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
8 Tax
Group
continuing operations
Group
discontinued operations
Group
total
Current tax:
Adjustment in respect of prior years
Deferred tax:
Current year expense/(credit)
Adjustment in respect of prior years
Impact of rate change
Deferred tax expense/(credit)
for the year
Note
2015
£000
3
3
2014
£000
(6)
(6)
24
24
24
4,959
(5,876)
(54)
(60)
-
383
4,845
(5,493)
Total tax
4,848
(5,499)
2015
£000
-
-
-
-
-
-
-
2014
£000
88
88
2015
£000
3
3
2014
£000
82
82
6
-
6
4,959
(5,870)
(54)
(60)
-
389
12
4,845
(5,481)
100
4,848
(5,399)
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 20.75% (2014: 22.5%) 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
Loss before tax from discontinued operations
Profit before tax
Tax charge at standard rate
Tax effect of:
Note
3
2015
£000
17,263
(207)
17,056
2015
%
2014
£000
12,160
(131)
12,029
2014
%
3,539
20.7
2,707
22.5
Expenses that are not deductible in determining taxable profits
1,313
7.7
287
2.4
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
-
110
-
(60)
(54)
-
(538)
0.6
-
(4.5)
-
-
(8,326)
(69.2)
(0.4)
(0.3)
389
82
3.2
0.7
Tax charges/(credit) and effective tax rate for the year
4,848
28.4
(5,399)
(44.9)
78
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
9 Dividends
Amounts recognised as distributions to equity holders in the year:
Interim dividend for the year ended 30 June 2015 of 2.7p (2014: 1.1 p) per share
Final dividend for the year ended 30 June 2014 of 4.9p per share
2015
£000
2014
£000
1,448
2,629
4,077
582
1,058
1,640
The proposed final dividend for the year ended 30 June 2015 of 7.3p per share (2014: 4.9p) makes a total dividend for the year of
10.0p (2014: 6.0p).
The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these
Financial Statements. The total estimated dividend to be paid is £5,370,000.
10 Earnings per share
Continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purposes of basic earnings per share, being net profit attributable to equity
holders of the parent company
• Profit from continuing operations
• Loss from discontinued operations
Profit for the purposes of basic and diluted earnings per share
Number of shares
2015
£000
2014
£000
12,415
17,659
(207)
(231)
12,208
17,428
2015
No. 000
2014
No. 000
Weighted average number of ordinary shares for the purposes of basic earnings per share
53,614
52,941
Effect of dilutive potential ordinary shares:
• Share options
383
915
Weighted average number of ordinary shares for the purposes of diluted earnings per share
53,997
53,856
Continuing operations
Basic earnings per share
Diluted earnings per share
Discontinued operations
Basic loss per share
Diluted loss per share
Continuing and discontinued operations
Basic earnings per share
Diluted earnings per share
2015
p
23.16
22.99
2015
p
(0.39)
(0.39)
2015
p
22.77
22.61
2014
p
33.36
32.79
2014
p
(0.44)
(0.44)
2014
p
32.92
32.36
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
79
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
Normalised earnings per share from continuing and discontinuing operations
Profit for the purposes of basic and diluted earnings per share
Adjusted for the impact of exceptional costs/(credits) in the year
Normalised earnings
Normalised basic earnings per share
Normalised diluted earnings per share
11 Plant and equipment
Cost or valuation
At 1 July 2013
Additions
Disposals
At 30 June 2014
Additions
Disposals
At 30 June 2015
Accumulated depreciation
At 1 July 2013
Charge for the year
Disposals
At 30 June 2014
Charge for the year
Disposals
At 30 June 2015
Net book value
At 30 June 2015
At 30 June 2014
At 1 July 2013
2015
£000
12,208
6,132
18,340
2015
p
34.21
33.96
2014
£000
17,428
(8,326)
9,102
2014
p
17.19
16.90
Group
Plant and
machinery
£000
Company
Plant and
machinery
£000
3,670
629
(29)
4,270
870
(1,106)
4,034
2,203
828
(29)
3,002
798
(1,002)
2,798
1,236
1,268
1,467
-
-
-
-
14
-
14
-
-
-
-
4
-
4
10
-
-
The Group has recorded a depreciation charge of £798,000 (2014: £828,000), of which £100,000 (2014: £183,000) has been charged
in cost of sales and £698,000 (2014: £645,000) in administrative expenses.
The Company has recorded a depreciation charge of £4,000, all of which has been charged in administrative expenses.
80
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
12 Investment property
Group
Cost or valuation
At 1 July 2013
Disposals
At 30 June 2014
Disposals
At 30 June 2015
Investment properties are included at Directors’ valuation.
13 Interest in joint ventures
Share of results and investment in joint ventures
At 1 July 2014 and 30 June 2015
Share of profit in joint ventures is included within the Gleeson Capital Solutions division.
The following table shows the aggregate amounts in respect of Group share of joint ventures:
Current assets
At 30 June
There was no profit and loss activity during the year.
There are no significant contingent liabilities in the joint ventures.
Joint ventures
Freehold
investment
property
£000
748
(177)
571
(65)
506
2015
£000
15
2015
£000
15
15
2014
£000
15
2014
£000
15
15
Genesis Estates (Manchester) Ltd
Residential property
development
50%
Ordinary
shares
England
26 March
Principal activity
Percentage
of equity held
Class
of shares
Country of
incorporation
Year end date1
1 Where the year end date of the joint venture is not coterminous with that of the Group, management accounts are used to incorporate the joint
venture’s share of results in line with the Group’s year end date.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
81
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
14 Other investments
Group other investments
At 1 July 2014
Provision for diminuation in value
At 30 June 2015
Other investments
2015
£000
4,896
(4,896)
2014
£000
4,896
-
4,896
The Directors consider that the carrying amount of other investments is nil.
Other investments represent equity investment of £4,896,000 in GB Building Solutions Limited and GB Group Holdings Limited
(“GBGH”). The investment in voting and non-voting ordinary shares that in total provide voting rights for 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 represents the Group 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. The shareholding structure
means all significant operational decisions are taken by the Executive Directors and consequently the Group, and Dermot Gleeson,
are not able to exert significant influence. The Group are able to 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.
On 9 March 2015, the Group was advised that GBGH had entered administration and as a consequence full provision has been made
against the value of the investment
15 Investments in subsidiaries
Cost
Additions
At 30 June 2015
Company
£000
20,800
20,800
Investments in subsidiary undertakings are included in the balance sheet at cost less any provision for diminution in value.
Principal subsidiary undertakings
All subsidiaries are registered in England and Wales and operate in the United Kingdom. MJ Gleeson plc owns 100% of the ordinary
share capital of the subsidiaries unless otherwise stated:
The following are the principal subsidiary undertakings of MJ Gleeson plc:
MJ Gleeson plc
Gleeson Developments Limited
Gleeson Regeneration Limited
Principal activity
Holding company
House building, housing regeneration and strategic land trading
House building and housing regeneration
Gleeson Strategic Land Limited1
Strategic land trading
Gleeson Developments (North East) Limited
House building and housing regeneration
82
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
The following are the other subsidiary companies of MJ Gleeson plc:
Colroy Limited3
Haredon Developments Limited3
Gleeson Capital Solutions Ltd
Principal activity
Dormant
Ceased trading - Collection of ground rents on leasehold
developments
Provision of bid management, accounting and operations
management services to joint venture companies in the PFI industry
Gleeson Classic Homes Limited1
Dormant
Gleeson Construction Services Limited2
Construction services
Gleeson Homes (Holdings) Limited
Gleeson Homes (Southern) Limited2
Gleeson Housing Developments Limited2
Gleeson PFI Investments Limited
Dormant
Dormant
Dormant
Investment in equity shares and loan stock of project companies
delivering services under the UK Government’s Private Finance
Initiative
Gleeson Properties Limited
In run off - Commercial property development
Gleeson Properties (Kingley) Limited3
Gleeson Properties (Petersfield) Limited3
Dormant
Dormant
Gleeson Services Limited
Intermediate holding company
KW Cannock Properties Limited4
MJ Gleeson (International) Limited
Dormant
Non-trading
MJ Gleeson Group Limited
MJG (Management) Limited
Oakmill Properties Limited3
Oakmill Residential Limited3
Sindale Properties Limited2
1 shares held by Gleeson Developments Limited
2 shares held by MJ Gleeson Group plc
3 shares held by Gleeson Properties Limited
4 shares held by Gleeson Homes (Holdings) Limited
Intermediate holding company
Non-trading
Non-trading
Dormant
Dormant
16 Inventories
Land held for development
Work in progress
2015
£000
2014
£000
47,767
46,401
60,455
54,316
108,222
100,717
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
83
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
17 Trade and other receivables
Current assets
Trade receivables
Amounts due from construction contract customers
VAT recoverable
Prepayments and accrued income
Available for sale financial assets
Amount due from subsidiary undertakings
Non-current
Current
Note
18
Group
2015
£000
Group
2014
£000
Company
2015
£000
28,142
11,971
162
18
484
554
15
61
747
7,938
8,116
-
-
37,136
20,910
19,606
17,530
37,136
8,116
12,794
20,910
-
-
168
-
55,778
56,108
-
56,108
56,108
Included within trade and other receivables is £19,606,000 (2014: £8,116,000) for the Group and £nil (2014: £nil) for the Company
expected to be recovered in more than 12 months.
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 £2,939,000.
The Company charges interest at Bank of England base rate plus 1% on £68,307,000 of the unimpaired intercompany loan
adjusted for bank balances held within the company. At 30 June 2015, the adjusted figure was £57,853,000.
18 Construction contracts
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
2015
£000
18
18
Group
2014
%
15
15
33,137
43,338
(33,137)
(43,323)
-
15
At 30 June 2015, retentions held by customers for contract work amounted to £nil (2014: £142,000).
84
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
19 Financial instruments
Risk exposure
MJ Gleeson plc operates a central treasury function providing services to the Group. The treasury function arranges loans and
funding, invests any surplus liquidity and manages financial risk. The treasury function is not a profit centre and no speculative
trades are permitted or executed. It operates within specific policies, agreed by the Board, to control and monitor financial risk
within the Group. Prudent and controlled use of financial instruments is permitted where appropriate, principally to reduce
fluctuation in interest costs.
Cash and cash equivalents
Cash and cash equivalents comprises cash and short-term deposits with a maturity of three days or less held by the Group and the
Company. The carrying amount of these assets equals their fair value.
Credit risk
The Group’s principal financial assets are trade and other receivables and investments.
The Group’s and Company’s credit risk is primarily attributable to its trade and other receivables. The amounts presented in the
balance sheet are net of allowance for doubtful debts, estimated by the Group’s management based on prior experience and their
assessment of specific circumstances.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit
ratings assigned by international credit rating agencies.
At 30 June 2015, the Group’s most significant credit risk was a local authority and amounted to £2,419,000 (2014: £3,057,000, 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 (2014: £nil). The Group’s remaining credit risk is spread over a large number of counterparties and
customers.
Trade receivables ageing
The ageing of gross trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 121-365 days
Past due more than one year
Group
2015
Group
2014
Company
2015
27,907
11,248
162
-
36
9
190
16
68
78
561
-
-
-
-
28,142
11,971
162
All trade receivables are from UK customers.
Trade receivables past due more than one year are largely 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
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Group
2015
74
(74)
-
Group
2014
Company
2015
74
-
74
-
-
-
85
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
Market risk
The Group has no significant exposure to currency risk or equity risk.
Interest rate risk
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 £158,000 (2014: £136,000) based
on the cash balance at the year end. A 1% decrease would cause income to fall by the same amount.
Liquidity risk
The Group entered into a £20,000,000 three year credit facility with Lloyds Bank plc on 5 December 2013 and all banking is
conducted by Lloyds Bank plc. As at 30 June 2015 the Group had not drawn on the facility.
In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective
interest rates at the balance sheet date and the periods in which they reprice:
Bank balances
Short term deposits
Net cash
2015
Effective
interest
rate
%
0.00
0.20
2015
Due
within
one year
£000
15,809
-
15,809
2014
Effective
interest
rate
%
0.00
0.20
2014
Due
within
one year
£000
9,686
4,001
13,687
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements:
Non-derivative financial liabilities
Carrying
amount
£000
Contractual
cash flows
£000
6 mths
or less
£000
6-12
mths
£000
As at 30 June 2015
30,431
(30,431)
(19,913)
(10,436)
Trade and other payables 1
30,431
(30,431)
(19,913)
(10,436)
1-2
years
£000
(82)
(82)
As at 30 June 2014
Trade and other payables 1
21,743
21,743
(21,837)
(14,223)
(21,837)
(14,223)
(3,099)
(3,099)
(4,178)
(4,178)
(1) Includes loans and borrowings; excludes amounts due to construction contract customers.
2-5
years
£000
More than
5 years
£000
-
-
(337)
(337)
-
-
-
-
The non-derivative financial liabilities of the Company in the current and prior year are predominantly intercompany balances
which are payable on demand. The external balances are payable within 6 months.
Exposure to currency risk
The Group has no exposure to foreign currency risk.
86
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Fair values
The fair value of the Group’s financial assets and liabilities are not materially different from the carrying values. The following
summarises the major methods and assumptions used in estimating the fair values of financial instruments.
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.
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 liability that are not based on observable market data.
Available for sale financial assets
Note
17
2015
Level 3
£000
7,938
2015
Total
£000
7,938
2014
Level 3
£000
8,116
2014
Total
£000
8,116
Interest bearing loans and borrowings
Fair value is based on discounted expected future principal and interest cash flows.
Capital risk management
In line with the disclosure requirements of IAS 1, Presentation of Financial Statements, the Group regards its capital as being the
equity as shown in the Statement of Changes in Equity.
Note 28 to the Financial Statements provides details regarding the Company’s share capital movements in the period and there
were no breaches of any requirements with regard to any relevant conditions imposed by either the 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
and 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 Loans and borrowings
The Group had secured borrowings under the Government’s Get Britain Building scheme. The loan was repaid in full during the year.
Get Britain Building loan
Current liabilities
At 30 June 2015 the Company did not have any loans or borrowings.
Group
2015
£000
-
-
Group
2014
£000
1,933
1,933
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
87
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
21 Trade and other payables
Current liabilities
Trade payables
Other taxation and social security
VAT payable
Accruals and deferred income
Amount due to subsidiary undertakings
Group
2015
£000
Group
2014
£000
Company
2015
£000
28,021
18,115
566
225
461
107
2,978
3,499
-
-
404
267
208
869
168
31,790
22,182
1,916
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 2014
Provisions used during the year
At 30 June 2015
Non-current
Current
Group
Onerous
leases
£000
289
(16)
273
59
214
273
Group
Total
£000
289
(16)
273
59
214
273
Onerous leases
Onerous leases relate to sublet and vacant properties. Where the rent receivable on the properties is less than the rent payable, a
provision based on present value of the net cost is made to cover the expected shortfall. The lease commitments range from one
to three years. Market conditions have a significant impact on the assumptions for future cash flows.
At 30 June 2015, the Company did not have any provisions.
23 Employee benefits
Defined contribution pension plan
The Group operates a defined contribution pension plan. The assets of the pension plan are held separately from those of the Group
in funds under the control of the trustees.
Group
The total pension cost charged to the Statement of Comprehensive Income of £543,000 (2014: £451,000) represents contributions
payable to the defined contribution pension plan by the Group at rates specified in the plan rules. At 30 June 2015, contributions
of £64,000 (2014: £53,000) 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 £49,000 represents contributions payable to the
defined contribution pension plan by the Company at rates specified in the plan rules.
88
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
24 Deferred tax
Group
The deferred tax assets recognised by the Group and movements thereon during the current and prior year are as follows:
At 1 July 2013
(Charge)/credit to income
Impact of rate change
At 30 June 2014
Restatement
Charge to income
Impact of rate change
At 30 June 2015
Plant and
machinery
£000
725
(111)
(97)
517
35
(31)
-
Short-term
timing
differences
£000
69
(10)
(9)
50
(20)
-
-
Losses
£000
4,238
5,991
(283)
9,946
39
(4,928)
60
Total
£000
5,032
5,870
(389)
10,513
54
(4,959)
60
521
5,117
30
5,668
An analysis of the deferred tax balances for financial reporting purposes are as follows:
Deferred tax assets
Group
2015
£000
Group
2014
£000
5,668
10,513
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 (2014: 23%).
In the year, the Group has recognised £nil (2014: £5,991,000) 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 £30,976,000 (2014:£57,612,000) of which £25,821,000 (2014:
£49,159,000) have been recognised as deferred tax asset. The Group has unrecognised tax losses of £8,868,000 (2014: £8,456,000)
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 year are as follows:
The Company had no recognised deferred assets or liabilities at the balance sheet date.
At the balance sheet date, the Company had unused tax losses of £893,000 available for offset against future profits. No deferred
tax asset has been recognised in respect of these losses. Losses may be carried forward indefinitely.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
89
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
25 Operating lease arrangements
Operating leases: lessee
Minimum lease payments under non-cancellable operating leases recognised as an
expense for the year
Minimum lease payments
Group
2015
£000
392
392
Group
2014
£000
389
389
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
Land and
buildings
2015
£000
387
558
226
Group
Land and
buildings
2014
£000
389
726
182
1,171
1,297
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 £16,000 were released (2014: £19,000). 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.
Operating leases: lessor
The Group’s total future minimum sub-lease receipts expected under non-cancellable sub-leases as at 30 June 2015 is £384,000
(2014: £576,000). These receipts are included within the minimum rent receivables table below.
The Company has no future minimum sub-lease receipts.
Minimum rental income under operating leases recognised as revenue for the year
Group
2015
£000
196
Group
2014
£000
196
Included in the figures above is £192,000 (2014: £164,000) which relates to properties which the Group had previously occupied as
operating lease lessees and are now sublet. The balance of £nil (2014: £32,000) relates to investment properties.
90
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
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
26 Analysis of cash and cash equivalents
At 1 July 2013
Cashflow
At 30 June 2014
Cashflow
At 30 June 2015
27 Bonds and sureties
Group
Land and
buildings
2015
£000
192
192
384
Group
£000
9,936
3,751
13,687
2,122
15,809
Group
Land and
buildings
2014
£000
192
384
576
Company
£000
-
-
-
848
848
Group and Company
As at 30 June 2015, the Group had bonds and sureties of £7,283,000 (2014: £6,825,000) 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.
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
91
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
28 Share capital
Issued and fully paid ordinary shares:
At the beginning of the year
Shares issued during year
At the end of the year
Ordinary shares
2015
No. 000
2015
£000
2014
No. 000
2014
£000
-
53,697
53,697
-
1,074
1,074
-
-
-
-
-
-
The Company has one class of Ordinary share which carries no rights to fixed income.
On 19 December 2014 the parent company of the Group became MJ Gleeson plc replacing MJ Gleeson Group plc. Under a Scheme
of Arrangement (“Scheme”) entered into by the former parent company (see Note 29), the share capital of MJ Gleeson Group plc
was cancelled and the shareholders of that company received one share of MJ Gleeson plc for each share it previously held in
MJ Gleeson Group plc.
With effect from 19 December 2014 the rights attaching to the new MJ Gleeson plc shares were the same as those attaching to the
MJ Gleeson Group plc shares immediately prior to 19 December 2014. Upon the implementation of the Scheme, the new MJ Gleeson
plc shareholders will have the same voting rights and the same proportionate interest in the profits, net assets and dividends of
MJ Gleeson plc as they previously held as a MJ Gleeson Group plc shareholder.
In order to reflect the book value of MJ Gleeson Group plc, the new MJ Gleeson plc shares issued under the Scheme had a nominal
value of 146 pence each, while the old MJ Gleeson Group plc shares had a nominal value of 2 pence each. However, following the
confirmation of the capital reduction of MJ Gleeson plc on 22 January 2015, the nominal value of the new MJ Gleeson plc shares
was reduced to 2p each.
The number of Ordinary shares of 2p in issue as at 30 June 2015 was 53,697,480 (2014: Nil).
At 30 June 2015, the Employee Benefit Trusts (“EBT”) held 70,000 (2014: 92,000) shares at a cost of £306,000 (2014: £344,000).
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 (2014: Nil).
Details of share options are given in note 30.
29 Scheme of Arrangement
On 19 December 2014 the Group completed a Scheme of Arrangement to change its corporate structure by introducing a new
holding company. The purpose of the restructure was to protect the continuing businesses of the Gleeson Group from potential
liabilities of the legacy building contracting and engineering businesses and contracts, the majority of which were disposed of in
2005 and 2006. The old Group holding company, MJ Gleeson Group plc and its subsidiary Gleeson Construction Services Ltd, are
now held indirectly by the new holding company, MJ Gleeson plc.
The Court approved Scheme of Arrangement also approved a capital reduction of the old holding company, since renamed
MJ Gleeson Group Limited, to reduce its net asset position to an amount which would cover any potential future liabilities.
The capital reduction became effective on 22 January 2015.
92
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
30 Share-based payments
During the year to 30 June 2015, 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.
Following the implementation of the Scheme of Arrangement (See Note 29) (“Scheme”) on 18 December 2014, all share based
payment arrangements in place at that time in respect of the shares of MJ Gleeson Group PLC were replaced on a one for one basis
with shares in MJ Gleeson PLC. It is the intention of the Directors that awards under the MJ Gleeson Group PLC employee share
plans will not vest early as a result of the Scheme but will continue on the same basis under the MJ Gleeson PLC employee share
plans, other than they will ultimately deliver MJ Gleeson PLC shares rather than MJ Gleeson Group PLC shares.
A summary of the share-based payment arrangements now reflecting shares in MJ Gleeson PLC are shown below:
Share options granted after 7 November 2002
Arrangement
Share purchase
plan
Contractural
life
10 years
Performance
share
plan (PSP)
3 years
Performance
share
plan (PSP)
Performance
share
plan (PSP)
3 years
3 years
Vesting conditions
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.
For Executive Directors and senior executives the award vested in whole on
the third anniversary of the date of grant on 17 December 2013 as all the
performance conditions were met. The performance condition was based on the
total shareholder return for the three financial years from
1 July 2010 to 30 June 2013.
For the Chief Executive Officer the award will vest in whole on the third
anniversary of the date of grant on 5 November 2015 as the performance
conditions have been met. The performance condition was based on the total
shareholder return for the three financial years from 1 July 2012 to 30 June 2015.
For Executive Directors and senior executives the award will vest in whole or
in part on or after the third anniversary of the date of grant if performance
conditions have been met. The performance condition is based on the total
shareholder return for the three financial years from 1 July 2014 to 30 June 2017.
None of the shares are currently exercisable.
Settlement
basis
Equity
Equity
Equity
Equity
Fair value is used to measure the value of the outstanding options.
Share purchase plan
The fair value of each share granted in the share purchase plan is equal to the share price at the date of the grant. Shares are
granted on a monthly basis.
Performance share plan
The fair value per option for the performance share plan scheme has been calculated using a modified Monte Carlo model. The
inputs into the model at each grant date and the estimated fair value were as follows: The input for expected dividends has been
set at 0% as the award vests according to the increase in share price after adding back any dividends paid.
Date of grant
The model inputs were:
• Share price at grant date
• Total shareholders return target
• Expected volatility
• Expected dividends
• Expected life
• Risk-free interest rate
• Fair value of one option
PSP
17/12/10
PSP
05/11/12
PSP
30/09/14
£1.26
£2.10
45%
1.56%
£1.52
£3.50
36%
1.50%
£3.90
£4.80
32%
2.00%
3 years
3 years
3 years
1.69%
£0.50
0.27%
£0.23
1.27%
£1.44
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
93
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Notes to the Financial Statements (continued)
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 three years.
Further details of the option plans are as follows:
Date of grant
Outstanding at 1 July 2013
Granted in the year
Forfeited
Exercised
Outstanding at 30 June 2014
Granted in the year
Forfeited
Exercised
Outstanding at 30 June 2015
Share purchase plan
MJ Gleeson
Group plan
MJ Gleeson
Group 2014 plan
PSP
PSP
PSP
Monthly
No. of shares
Monthly
No. of shares
17/12/10
No. of shares
05/11/12
No. of shares
30/09/14
No. of shares
69,567
7,871
(184)
(2,667)
74,587
4,414
(261)
(20,628)
58,112
-
-
-
-
-
839,049
423,015
-
(18,055)
(277,597)
-
-
-
543,397
423,015
-
-
-
-
-
3,827
-
-
-
-
(543,397)
-
-
-
573,888
(27,591)
-
3,827
-
423,015
546,297
Remaining contractual life
Rolling scheme
Rolling scheme
nil
0.3 years
3 years
Weighted average exercise price
Weighted average share price at date of
exercise - current year
Weighted average share price at date of
exercise - prior year
-
£1.17
£3.68
-
n/a
n/a
-
n/a
£3.32
-
n/a
n/a
-
n/a
n/a
Share options granted prior to 7 November 2002
Date of grant
Outstanding at 1 July 2013
Lapsed
Outstanding at 30 June 2014
Lapsed
Outstanding at 30 June 2015
Share purchase plan
MJ Gleeson
Group plan
MJ Gleeson
Group 2014 plan
Monthly
No. of shares
Monthly
No. of shares
547
(7)
540
-
540
-
-
-
-
-
Remaining contractual life
Rolling scheme
Rolling scheme
Weighted average exercise price
Weighted average share price at
date of exercise - current year
Weighted average share price at
date of exercise - prior year
n/a
n/a
n/a
n/a
n/a
n/a
Outstanding at 30 June 2015
62,479
58,652
3,827
94
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
31 Capital commitments
At 30 June 2015, the Group had no capital commitments (2014: £nil).
32 Related party transactions
Identity of related parties
The Group has a related party relationship with its joint ventures and key management personnel.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
Transactions with key management personnel
The Group’s key management personnel are the Executive and Non-Executive Directors, as identified in the Directors’ Remuneration
Report on pages 52 to 57.
In the year, the Group purchased cladding materials from a company, JDP Contracting Services Ltd, in which Jolyon Harrison is a
director. During the current year the Group purchased £20,000 (2014: £19,000) of goods from the company. The terms were at
normal market rates and payment terms. There were no guarantees provided.
Other than disclosed above and in the Directors’ Remuneration Report, there were no other transactions with key management
personnel in either the current or preceding year.
Provision of goods and services to joint ventures
There has been no provision of goods and services to joint ventures
Purchase of goods and services from joint ventures
There have been no purchases of goods from joint ventures.
Amounts owed by and owed to joint ventures
The amounts owed by joint ventures are shown below:
Prepayments and accrued income
2015
£000
-
-
2014
£000
31
31
The amounts owed to joint ventures at 30 June 2015 totalled £Nil (2014: £Nil).
Identity of related parties with which the Company has transacted
The Company receives charges from various suppliers in respect of services for the whole Group. The Company allocates and
consequently invoices these charges to subsidiaries.
Related party transactions
Subsidiaries
Related party transactions
Subsidiaries
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
Admini-
strative
expenses
2015
£000
2,939
2,939
Admini-
strative
expenses
2014
£000
-
-
Receivables
outstanding
2015
£000
55,776
55,776
Receivables
outstanding
2014
£000
Payables
outstanding
2015
£000
Payables
outstanding
2014
£000
-
-
168
168
-
-
95
Further Information
97 Five Year Review
98 Corporate Directory
98
Shareholder Information
98 Financial Calendar
98
Information Regarding Our Website
96
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Five Year Review
Revenue
Operating profit
Provision for diminution in value of investments
Net finance income/(cost)
Profit before tax
Tax (charge)/credit
Profit after tax
2015
£000
2014
£000
2013
£000
2012
£000
2011
£000
117,588
81,442
60,656
40,807
41,210
22,046
12,064
6,009
2,724
(4,896)
113
-
96
17,263
12,160
(230)
5,779
-
-
(4,848)
5,499
4,320
12,415
17,659
10,099
899
-
207
1,106
(123)
983
302
3,026
(130)
2,896
Discontinued operations
Profit for year attributable to
equity holders of the parent company
(207)
(231)
1,344
710
528
12,208
17,428
11,443
3,606
1,511
Total assets
Total liabilities
Net assets
Total dividend per share paid in the year
Earnings/(loss) per share from continuing
operations
Earnings/(loss) per share - normalised
Net assets per share
168,592
152,577
140,112
116,220
120,517
(32,063)
(24,486)
(28,023)
(15,826)
(21,364)
136,529
128,091
112,089
100,394
99,153
pence
7.60
23.16
34.21
254
pence
3.10
33.36
17.19
241
pence
0.50
19.14
13.66
212
pence
5.00
5.51
0.01
190
pence
-
1.87
(3.59)
188
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
97
Strategic Report
Corporate
Governance
Remuneration
Committee Report
Financial
Statements
Further
Information
Further Information
Corporate directory
REGISTERED OFFICE
MJ Gleeson plc
6 Europa Court, Sheffield Business
Park, Sheffield, S9 1XE
AUDITOR
KPMG LLP
1 The Embankment, Neville Street,
Leeds, LS1 4DW
REGISTERED NUMBER
9268016
Incorporated in England and Wales
BANKERS
Lloyds Bank plc
14 Church Street, Sheffield, S1 1HP
COMPANY SECRETARY
Stefan Allanson
WEBSITE
www.mjgleeson.com
Shareholder information
SHAREHOLDER ENQUIRIES
Any shareholder with enquiries
should, in the first instance,
contact our registrars using the
address provided in the
Corporate Directory.
Financial calendar
Financial year end
Full year results announced
Ex-dividend date for final dividend
Record date for final dividend
Annual General Meeting
Final dividend payment
SOLICITORS
Simmons & Simmons
City Point, One Ropemaker Street,
London, EC2Y 9SS
SHARE PRICE INFORMATION
London Stock Exchange
Symbol: GLE
30 June 2015
28 September 2015
19 November 2015
20 November 2015
11 December 2015
17 December 2015
STOCKBROKERS AND FINANCE
ADVISORS
N+1 Singer
One Bartholemew Lane,
London, EC2N 2AX
REGISTRARS AND TRANSFER
OFFICE
Capita Asset Services
The Registry, Bourne House,
34 Beckenham Road, Beckenham,
Kent BR3 4TU
INVESTOR RELATIONS
MJ Gleeson plc
6 Europa Court, Sheffield Business
Park, Sheffield, S9 1XE
Email: enquiries@mjgleeson.com
Tel: 0114 261 2900
Fax: 0114 261 2939
Information regarding our websites
For more information on our homes, investor relations and career opportunities please visit www.mjgleeson.com.
98
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
99
100
MJ Gleeson plc: Report and Accounts for the year ended 30 June 2015
The paper in this report is a Forest Stewardship Council (“FSC”) certified
product, produced with a FSC mixed sources pulp which is fully recyclable,
biodegradable and chlorine free. It is manufactured within a mill which
complies with the international environmental ISO 14001 standard.
The report has been printed using environmentally friendly vegetable based
inks. Formulated on the basis of renewable raw materials, vegetable oils
are non-hazardous and from renewable sources. Over 90% of solvents and
developers used are recycled for further use and recycling initiatives are in
place for all other waste associated with this production.
The print house chosen for production of this report is FSC and ISO 14001
certified with strict procedures in place to safeguard the environment through
all processes, including ongoing initiatives to reduce carbon footprint.
ISO 14001
REGISTERED FIRM
MJ GLEESON PLC6 Europa Court, Sheffield Business Park, Sheffield S9 1XETel: 0114 261 2900 Fax: 0114 261 2939 Email: enquiries@mjgleeson.com www.mjgleeson.comThank you!We would like to thank our employees who are essential to our recent success.Their skill and dedication has been invaluable in making Gleeson what it is today.