31st Mar 2006 07:04
Gleeson(M J)Group PLC31 March 2006 M J GLEESON GROUP PLC Strategic Review Following a comprehensive strategic review focused on the creation ofshareholder value, Gleeson has decided to concentrate on, and substantiallyincrease its involvement in, three related areas: • Housing Regeneration • Commercial Property Development • Strategic Land Trading With regard to the Group's other activities: • The Group's highly regarded Engineering Division and Concrete Repairs Limited, which is the market leader in its sector, are both performing strongly. However, neither sits well within the Group's new business model. Moreover, the Board is aware that both businesses are likely to be of considerable interest to a range of parties who are committed to growth in the UK construction sector. The Board's objective will be to secure purchasers who can offer good value to shareholders, whilst providing enhanced career opportunities for the employees concerned. • The Group will undertake an orderly sale of its commercial property investment portfolio and non-housing PFI investments. • Gleeson Homes' activities outside the housing regeneration sector will be substantially reduced. In consequence, there will be a significant reduction in its non-strategic land holdings. Housing Regeneration The Group's regeneration operations will comprise: housing for sale, mainly onland provided by local authorities and other public bodies; maintenance andrefurbishment services for social housing providers, particularly in the contextof the Government's Decent Homes Initiative; and social housing PFI projects.Each of these three areas offers continuity of work over extended contractualperiods, reliable margins, improved returns on capital, and very substantialopportunities for growth. Gleeson Regeneration already has a very strong position as a partner of choicefor local authorities and other public bodies seeking to promote affordablehousing for sale. The division's existing portfolio of development agreementsand appointments as preferred bidder is expected to generate the constructionand sale of more than 7,000 homes over the next 10 years, and further successesare anticipated. Maintenance and refurbishment services will be provided by Powerminster, theGroup's mechanical and electrical services provider, which has a long andsuccessful track record in this sector, and by Gleeson AssetCare, a recentlyformed subsidiary, which will concentrate on building services. The introduction of a more flexible regulatory regime has led to a substantialincrease in the number of social housing PFI projects being offered to themarket. Gleeson's leading and successful role in the largest such scheme todate, Plymouth Grove in Manchester, means that it is well positioned to benefitfrom the considerable growth anticipated in this area. Commercial Property Development Gleeson Properties currently has 16 commercial property schemes in progress and,against the background of a strong investment market and an improving level ofdemand from occupiers, the Board believes that there is scope for significantlyexpanding this development programme. In future, however, all completed projectswill be sold rather than retained as long-term investments, thus making itpossible to recycle capital more aggressively. Strategic Land Trading In 2005, Gleeson established Gleeson Strategic Land to manage and substantiallyexpand its strategic land bank, which has been assembled over the last 15 yearsand currently comprises about 2,500 acres. Henceforth, virtually all of thesites for which Strategic Land secures planning permission will be soldexternally, thus enabling the Group to continue to benefit from its considerableexperience and expertise in this area, whilst avoiding the costs and risksassociated with building for sale. Gearing The disposals arising from the refocusing of the Group's priorities (includingthat of Gleeson MCL, announced last Friday, for a consideration of £23.3m) willreduce its gearing very substantially and facilitate the financing of theexpansion of its continuing operations. Cost Base The Group's new strategy will enable it to make considerable reductions incentral and divisional costs. Gleeson's central services will be relocated toFleet in Hampshire, where Gleeson Homes is based. Gleeson's current Head Officein Cheam, Surrey, will be sold. The Board It has been decided to reduce the size of the Main Board and to ensure that ithas a majority of non-executive directors. Responsibility for the Group'soperational management will be vested in an Executive Board. With effect from 1 April 2006, only two executives - the Group Chief Executiveand the Finance Director - will serve as Main Board Directors; and, over thecoming months, the composition of the non-executive element of the Board will bealtered in the light of the requirements arising from the Group's new strategicdirection. Dermot Gleeson will continue to serve as Chairman. The Executive Board will include the Group Chief Executive, the FinanceDirector, and the Managing Directors of the Group's principal current businessstreams. Capital Structure Once implementation of this strategy has been completed and net borrowings havebeen reduced, further consideration will be given to the optimal capitalstructure for the ongoing business. Conclusion Following last year's sale of Gleeson Building and last week's sale of GleesonMCL, the Group's new strategic direction will further reduce construction riskand strengthen the Group's position in growth markets where it already has astrong track record. Furthermore, the focus on regeneration and land trading will generate betterreturns on capital employed and unlock for shareholders the hidden value of theGroup's long-term regeneration agreements and strategic land options. A review is underway to establish whether it might also be in shareholders'interests for the Company to move to the Alternative Investment Market (AIM). Enquiries: M J Gleeson Group plc 020-8644 4321Terry Massingham (Chief Executive)Paul Wallwork (Finance Director) Close Brothers Corporate Finance LimitedPeter Alcaraz 020-7655 3139 Bankside Consultants LimitedCharles Ponsonby 020-7367 8851 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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