MJGleeson Regulatory News (GLE)

24 Jul 2006 10:00

Gleeson(M J)Group PLC24 July 2006 M J GLEESON GROUP plc Strategic Review Implementation, Trading Update and Board Change The Board of M J Gleeson Group plc announces an update on the implementation ofthe Group's strategic review, which was announced with the Interim Results on 31March 2006. An update is also provided on trading in advance of the announcementof the preliminary results, which is scheduled for October 2006. Strategic Review Implementation Against the background of the Group's decision to concentrate on housingregeneration, strategic land trading and commercial property development, goodprogress continues to be made both with the disposal programme, which hasgenerated significant profits, and with the implementation of a range ofmeasures designed to promote transformational change. •As previously announced, the sales of Gleeson MCL Limited and Concrete Repairs Limited have been completed. •As anticipated, a number of parties have expressed serious interest in acquiring the Group's Engineering Division and discussions regarding the sale of this division are continuing. •Gleeson Properties sold the bulk of its commercial property investments in June 2006 for £27.9m, all at figures above the 30 June 2005 valuations. In addition, negotiations in relation to the two remaining commercial propertyinvestments are now well advanced. Priorities for the half year to 31 December 2006 include: •a continued reduction in Gleeson Homes' activities outside the housing regeneration sector, involving the rundown of its non-strategic land holdings. This exercise, which is likely to continue into the second half of the current financial year to 30 June 2007, should free up a substantial amount of cash; and •the reduction of the Group's support costs in line with its reduced size. The Group also plans to dispose of its four remaining non-housing PFIinvestments, whose aggregate book value is £3.2m, in an orderly manner over thenext 18 months. Trading Update Cash generation during the second half of the year to 30 June 2006 wasexcellent, driven both by disposal activity and by a focus on working capitalmanagement. Accordingly, net debt at 30 June 2006 was circa £18m compared with£102.3m at 31 December 2005. It is anticipated that during the remainder of thecurrent year additional cash will be generated from the sale of the EngineeringDivision, from the completion of the remaining commercial property investmentsales and from the liquidation of the traditional house building work inprogress. By the end of this financial year the Group should be significantlycash positive. The Group's housing operations outside of the regeneration sector, which arebeing largely discontinued, had a very disappointing second half. On 24 May 2006the Group announced that the results of this business would be verysubstantially below market expectations. A review of the carrying value of itsnon-strategic land has revealed the need for substantial write-downs withrespect to a small number of sites. These, combined with below budget unit sales, will result in an overall loss for this business for the year to 30 June 2006. With regard to the continuing regeneration business, we are pleased to announcethat the Group has been appointed preferred bidder for a £70 million socialhousing PFI in Ashford, Kent. Gleeson Strategic Land, which has a land bank of approximately 2,500 acres, hasperformed broadly to budget. Similarly, Gleeson Property's development sales are in line with expectations. Despite the distractions caused by its planned disposal, the EngineeringDivision is expected to report results significantly ahead of budget. Powerminster, which is not part of the disposal programme, is expected to returnto profit after two years of losses. However, losses will be incurred on the closure of the Group Head Office inCheam in the half years to both 30 June 2006 and 31 December 2006. In addition, the Group will be reporting several one off profits arising fromthe strategy implementation programme. These will include profits on thedisposal of Gleeson MCL, Concrete Repairs and the commercial property investmentsales referred to earlier. Taking into account the transactions and expectations detailed above, the Boardcurrently anticipates a modest increase in net assets at 30th June 2006 and thatthe dividend will be at least maintained. In addition, strategic disposals areexpected to contribute to a further increase in net assets during the currentfinancial year. The changes that the Group is in the process of implementing are radical andinevitably disruptive in the short term. However, the Board remains entirelyconfident that its decision to refocus its activities will enhance shareholdervalue. In particular, the Board is convinced that housing regeneration - whichoffers continuity of work over extended contractual periods, reliable margins,improved returns on capital and very substantial opportunities for growth - is amuch more appropriate principal activity for the Group than traditional housebuilding. Board Change Terry Massingham, Chief Executive, has decided that, with immediate effect, hewill resign from the Board and leave the Group. The search for a successor,which will involve external consultants, has already commenced. Paul Wallwork,currently Finance Director, will assume the role of Interim Chief Executive,pending the appointment of a permanent successor. The recruitment of non-executive directors appropriate to the Group's changedstrategic direction is at an advanced stage. The Board remains fully committed to its new strategy, which is designed tounlock the Company's underlying value by focusing on Housing Regeneration,Strategic Land Trading and Property Development. Enquiries: MJ Gleeson Group plc Paul Wallwork, Chief Executive (interim) 0208 644 4321 Close Brothers Corporate Finance Peter Alcaraz, Director 0207 655 3100 Bankside Consultants Ian Seaton / Ian Payne 0207 367 8891/53 This information is provided by RNS The company news service from the London Stock Exchange