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19 Nov 2008 14:29
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Wednesday 19Β NovemberΒ 2008
M J GLEESON GROUP PLC
INTERIM MANAGEMENT STATEMENTΒ
Gleeson, the urban regeneration and strategic land specialist,Β is today issuing its Interim Management Statement, covering the periodΒ sinceΒ 1 JulyΒ 2008, as required by the UK Listing Authority's Disclosure and Transparency Rules.
The Interim Management Statement contains forward looking statements which:
have been made by the Directors in good faith,Β based on the information available to them up to the time of their approval of thisΒ Statement; and
should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, that underlie such forward looking information.
This Interim Management Statement has been prepared for the Group as a whole.Β Β It therefore emphasises matters which are significant for the parent company and its subsidiaries when viewed as a single unit.
Our Operations
Gleeson operates as a residential housebuilder,Β with a particular focus on the physical, social and economic regeneration of urban areasΒ in partnership withΒ orΒ forΒ public bodies. The Group has a specialist business unit that takes the lead in developingΒ PFIΒ opportunities that bring work to the Group's various business units.Β Β In addition, the Group operates a strategic land development business that enhances the value of land, principally held under option, through the planning process, and a facilities management business that focuses on the long-term planned and reactive maintenance programmes of housing andΒ property owning organisations. The Group's commercial property development business, as announcedΒ in March 2007, is no longer committing to new projects and is in the process of developing out and disposing of its current portfolio in an orderly manner.
Market Conditions
In itsΒ PreliminaryΒ Announcement, issued onΒ 26Β SeptemberΒ 2008, the Group stated thatΒ there had been no improvement in market conditionsΒ in the first three months of the current financial year.Β Β In the period sinceΒ 26 September 2008, the financial markets haveΒ remainedΒ veryΒ troubled and there have been further falls in credit volumes.Β Β ThisΒ continuingΒ reduction in liquidity,Β combined with a growing lack of confidence in the economic outlook for theΒ UK,Β has reinforcedΒ the difficultiesΒ to which the GroupΒ isΒ exposed in the housing and commercial property markets.Β Β In consequence,Β housingΒ sales volumesΒ have continued to fall,Β putting further pressure onΒ selling prices.Β These trading difficulties have impacted both the Group's balance sheet and operations as followsΒ -:
Impact on the Group'sΒ Balance Sheet
Gleeson Regeneration & Homes andΒ GleesonΒ StrategicΒ LandΒ has undertaken a valuation exercise of the land and work in progressΒ of itsΒ business and concluded that it is appropriate to provide for a reduction in valueΒ of this asset class estimatedΒ atΒ Β£5.6m or approximatelyΒ 7% of this asset class.
Gleeson Commercial Property DevelopmentsΒ has undertaken a valuation exercise of its remainingΒ commercialΒ property portfolio and concluded that it is appropriate to provide for a reduction in value of these assets estimatedΒ atΒ Β£4.0m or approximately 22% of this asset class.Β
ImpactΒ on theΒ Group's Operations
The Preliminary Announcement stated that the Board would continue to keep the Group's, already much reduced, cost base under very close review.Β Β As a consequence of the continuingΒ downturn inΒ the markets inΒ which it operates,Β the Group has decided toΒ implementΒ aΒ furtherΒ cost reductionΒ programme in order toΒ conserve cash andΒ protect shareholder value.
ThisΒ programmeΒ is expected to result in a total charge toΒ this year'sΒ Income Statement estimated at Β£1.6m. The annualised benefitΒ in future yearsΒ is estimatedΒ atΒ Β£3.7mΒ (of which Β£1.6mΒ will be realised in the current financial year)Β and the annualised cash saving is estimatedΒ atΒ Β£3.5m.Β Β The programmeΒ includesΒ the followingΒ measures:
Head Office - aΒ charge to the Income Statement of Β£0.6m,Β with Β£0.5m forΒ redundanciesΒ andΒ Β£0.1m forΒ the remaining office space occupied under lease at Fleet in Hampshire, where the Head Office is currently based.Β Β It is the intention of the Group to exit theΒ FleetΒ premises byΒ 30 SeptemberΒ 2009.Β From September 2009, the Group's significantly reduced Head Office will be based inΒ SheffieldΒ within the offices of Powerminster Gleeson Services.
Gleeson Capital Solutions - aΒ charge to the Income Statement of Β£0.5m,Β with Β£0.3m forΒ redundanciesΒ andΒ Β£0.2m forΒ office spaceΒ held under lease,Β which is being exited. The reorganised business will relocate to the GleesonΒ RegenerationΒ & HomesΒ officesΒ in Bury, Greater ManchesterΒ fromΒ FebruaryΒ 2009.Β
Gleeson Regeneration & HomesΒ andΒ GleesonΒ StrategicΒ LandΒ - aΒ charge to the Income Statement of Β£0.5m, with Β£0.3m for redundancies and Β£0.2m for office space held under lease which is being exited.Β Β These redundancies are planned to occur up to MarchΒ 2009.
The total charge to the Income StatementΒ for the asset writedowns and theΒ provisionsΒ for the cost reduction programmeΒ will be Β£ 11.2m, which will be treated as an exceptional item in the Interim Financial Statements.
The Group is committedΒ to givingΒ a very high priority to cash management.Β Β HousebuildingΒ work in progress and overheads are being subjectedΒ to rigorous review and control.Β Β Where appropriate,Β the GroupΒ is prepared selectively to rent rather than sell completed properties, especially flats, in order to secure higher returns in the longer term.
The Group has maintained a net cash positive balance during the period and has not drawn down any of itsΒ Β£50mΒ bankΒ facility.
UntilΒ general economic conditions improve,Β trading conditions in both the housing and commercial property markets are likely to remain very difficult.Β However, the measures described above for further reducing cost and increasing cashΒ conservation will enhance the Group's ability to manage the considerable challenges ahead.Β
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M J Gleeson Group plc Integration House RyeΒ Close AncellsΒ BusinessΒ Park Fleet Hampshire GU51 2QG |
By order of the Board Dermot Gleeson Chairman |
Enquiries:
M J Gleeson Group plc 01252-360 300
Paul Wallwork (Group Chief Executive)
Chris Holt (Group Finance Director)
Bankside Consultants Limited
Charles Ponsonby 020-7367 8851
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