Gleeson disposals cut debt by 85%

MJ Gleeson has pulled its soaring debt down thanks to a seven-month burst of activity that has seen the group selling off much of the family silver.

Twelve months ago, Gleeson’s debt stood at £102m, but the massive scale of the group’s disposal programme has led to an improvement of £87m, thanks to a combination of sales and working capital reduction.

Gleeson’s latest annual financial results (12 months to 30 June) show cash debt down to £15m.

“We anticipate being net-cash positive by Christmas and the second half will see strong cash generation,” said Paul Wallwork, interim chief executive.

“Today’s message is that we are not selling any more businesses going forward. In just seven months, from the announcement in March of the strategic review, we have sold three businesses in the public arena and have got excellent value for our shareholders. It has transformed our risk profile.”

Wallwork joined Gleeson in January as successor to finance director Colin McLellan. He moved up into the hot seat after Terry Massingham resigned as chief executive in July.

As a newcomer, Wallwork can summarise Gleeson’s past troubles dispassionately.

These stemmed from troubles in both its construction and traditional housebuilding operations, although it was construction that “took us into a nightmare scenario”.

Wallwork said: “The board looked at the risk/reward ratio in contracting and decided it was not one that Gleeson wanted to stay with. We had an alternative – it might have been very different if we hadn’t have had.”

Gleeson’s traditional housebuilding division came unstuck because of three fundamental problems.

“It was over-extended because the geographical spread was too large,” said Wallwork. “Also, the price point [i.e. range of selling prices] was too large, running from £100,000 right up to £2m. And finally, we had an issue with our design complexity.”

The latest results show turnover down to £390m (£520m). There was a loss of £3m from on-going operations (loss of £18m).

*

Segmental analysis: Gleeson Group

(12 months to 30 June) (£m)

Continuing turnover Operating profit/loss

2006 2005 2006 2005

Homes 140 160 -12 15

Property 3 9 11 17

Construction 250 360 7 -39

* figures exclude central costs of £6m (£3m). * construction turnover figures include a discontinued component of £52m (2006) and £70m (2005)

[Contract Journal, 1 November 2006, p11]