MJ Gleeson ends year 'significantly ahead' of expectations

Low-cost housebuilder MJ Gleeson said in a trading update on Monday that its Gleeson Homes division achieved its medium-term goal of doubling home sales within five years, completing the sale of 2,000 homes during the financial year just ended, as it flagged full-year results “significantly ahead” of market forecasts.

The London-listed firm said that was an increase of 10.4% year-on-year for the 12 months ended 30 June, which was flattered by delayed completions carried over from the first Covid-19 lockdown.

Home sales in the second half were up 24% on the comparable period at 1,068 homes sold, compared to 861.

Gleeson said “strong” selling price increases offset “significant” material and labour cost rises across the sector, with availability of labour and materials easing throughout the second half.

The division’s average selling price during the year increased 14.7% to £167,300, due to underlying selling prices rising around 12%, and changes in mix.

It said the time taken from plot release to reservation reduced “significantly” during the year to 34 days, from 49 days in 2021, which the board put down to the ongoing shortage of “high-quality affordable homes available to young, first-time buyers”.

Reservation rates over the last eight weeks reflected continued confidence among Gleeson's customers and, at 0.54 net reservations per week, were up 16% on the same period last year.

On its outlook, Gleeson Homes said it opened 23 new build sites during the year, starting the new financial year at 87 sites, up from 81 a year ago, of which 61 were actively selling.

That was achieved despite “ongoing congestion” in the planning system, which was continuing to impact the time taken to obtain planning consent, agree pre-start conditions and acquire sites.

Land was still available at “sensible prices”, with the company’s pipeline of owned and conditionally purchased sites increasing 6% to 16,814 plots on 160 sites as at 30 June, representing more than eight years of sales, and of which 8,336 plots on 68 sites were conditionally purchased subject to receiving planning permission.

“Looking ahead, the board believes that strong first-time buyer demand, intensified by the acute shortage of new homes, will continue unabated over the medium term,” MJ Gleeson’s directors said.

“Crucially, the affordability of our homes will continue to help mitigate the impact of both inflationary pressures and higher interest rates on Gleeson customers.

“In addition to the lower cost of buying a Gleeson home compared to renting, Gleeson customers also see a significant reduction in energy bills when they move into well-insulated and energy-efficient Gleeson homes, which further reinforces demand.”

Looking at the Gleeson Land division, the company sold six sites during the year, with the potential to deliver 1,443 plots for housing development.

The firm said ongoing planning system difficulties were delaying the progress of viable sites expected to attract strong demand from housebuilders once planning consent was achieved.

It said the number of Gleeson Land sites awaiting a planning decision increased to 16 with the potential to deliver 3,559 plots for housing development, up from 15 sites and 3,020 plots awaiting a planning decision at the end of the 2021 financial year.

The portfolio of sites at 30 June included three sites with either planning permission or resolution to grant, and which had the potential to deliver 1,206 plots for housing development.

Gleeson said the portfolio comprised 71 sites, with the potential to deliver 20,241 plots, and 25 acres of commercial land.

Looking at the group as a whole, Gleeson said it ended the year with cash balances of £33.8m and no debt, compared to £34.3m cash and no debt a year ago.

“When the board signed the DLUHC pledge in respect of remediating any buildings over 11 metres with life-critical fire safety issues, it said that it was not aware of any such issues in respect of the 15 buildings it had been historically involved in developing but would undertake a further assessment to determine that this remained the case.

“That initial assessment has been concluded and the company is making good progress on undertaking a more comprehensive review which it expects to conclude by the end of the summer.

“Should any remedial works at any of the buildings be required, an appropriate provision will be taken in the results for the year ended 30 June.”

Following the “strong” performance, the board said it expected the results for the financial year ended 30 June to be “significantly ahead” of market expectations, and remained confident in its future prospects.

“This is a very strong out-turn for the year,” said chief executive officer James Thomson.

“I am particularly delighted that, by completing the sale of 2,000 homes during the year, we delivered on our strategic objective of doubling home sales within five years, meaning that we have been able to supply more affordable housing to those that need it most.”

Thomson said the company started the new financial year in a “strong” position.

“Notwithstanding the ongoing congestion in the planning system and the wider macro-economic environment, the board believes that the scale of pent-up demand for low-cost homes will continue to drive significant growth into 2023 and beyond.”

MJ Gleeson said it would report its audited full-year results for the 12 months ended 30 June on 15 September.

At 1022 BST, shares in MJ Gleeson were up 1.56% at 522p.

Reporting by Josh White at Sharecast.com.