MJGleeson Regulatory News (GLE)

19 Nov 2008 14:29



Wednesday 19 November 2008

M J GLEESON GROUP PLC

INTERIM MANAGEMENT STATEMENT 

Gleeson, the urban regeneration and strategic land specialist, is today issuing its Interim Management Statement, covering the period since 1 July 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, based on the information available to them up to the time of their approval of this 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.  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, with a particular focus on the physical, social and economic regeneration of urban areas in partnership with or for public bodies. The Group has a specialist business unit that takes the lead in developing PFI opportunities that bring work to the Group's various business units.  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 and property owning organisations. The Group's commercial property development business, as announced 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 its Preliminary Announcement, issued on 26 September 2008, the Group stated that there had been no improvement in market conditions in the first three months of the current financial year.  In the period since 26 September 2008, the financial markets have remained very troubled and there have been further falls in credit volumes.  This continuing reduction in liquidity, combined with a growing lack of confidence in the economic outlook for the UK, has reinforced the difficulties to which the Group is exposed in the housing and commercial property markets.  In consequence, housing sales volumes have continued to fall, putting further pressure on selling prices. These trading difficulties have impacted both the Group's balance sheet and operations as follows -:

Impact on the Group's Balance Sheet

Gleeson Regeneration & Homes and Gleeson Strategic Land has undertaken a valuation exercise of the land and work in progress of its business and concluded that it is appropriate to provide for a reduction in value of this asset class estimated at £5.6m or approximately 7% of this asset class.

Gleeson Commercial Property Developments has undertaken a valuation exercise of its remaining commercial property portfolio and concluded that it is appropriate to provide for a reduction in value of these assets estimated at £4.0m or approximately 22% of this asset class. 

Impact on the 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.  As a consequence of the continuing downturn in the markets in which it operates, the Group has decided to implement a further cost reduction programme in order to conserve cash and protect shareholder value.

This programme is expected to result in a total charge to this year's Income Statement estimated at £1.6m. The annualised benefit in future years is estimated at £3.7m (of which £1.6m will be realised in the current financial year) and the annualised cash saving is estimated at £3.5m.  The programme includes the following measures:

Head Office - a charge to the Income Statement of £0.6m, with £0.5m for redundancies and £0.1m for the remaining office space occupied under lease at Fleet in Hampshire, where the Head Office is currently based.  It is the intention of the Group to exit the Fleet premises by 30 September 2009. From September 2009, the Group's significantly reduced Head Office will be based in Sheffield within the offices of Powerminster Gleeson Services.

Gleeson Capital Solutions - a charge to the Income Statement of £0.5m, with £0.3m for redundancies and £0.2m for office space held under lease, which is being exited. The reorganised business will relocate to the Gleeson Regeneration & Homes offices in Bury, Greater Manchester from February 2009. 

Gleeson Regeneration & Homes and Gleeson Strategic Land - a charge to the Income Statement of £0.5m, with £0.3m for redundancies and £0.2m for office space held under lease which is being exited.  These redundancies are planned to occur up to March 2009.

The total charge to the Income Statement for the asset writedowns and the provisions for the cost reduction programme will be £ 11.2m, which will be treated as an exceptional item in the Interim Financial Statements.

The Group is committed to giving a very high priority to cash management.  Housebuilding work in progress and overheads are being subjected to rigorous review and control.  Where appropriate, the Group 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 its £50m bank facility.

Until general economic conditions improve, trading conditions in both the housing and commercial property markets are likely to remain very difficult. However, the measures described above for further reducing cost and increasing cash conservation will enhance the Group's ability to manage the considerable challenges ahead. 

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