MJ Gleeson reports fall in home sales

Low-cost housebuilder MJ Gleeson reported a decline in home sales year-on-year in a trading update on Friday, amid challenging economic conditions and the impact of higher interest rates on buyer confidence.

The London-listed firm said that during the 2023 financial year, Gleeson Homes completed the sale of 1,723 homes, down from 2,000 homes in the prior year.

In the second half of the year, 829 homes were sold, compared to 1,068 homes a year earlier.

The board said the downturn in the wider economy and the immediate impact of higher interest rates had affected buyer confidence.

Despite the decline in sales volume, selling prices remained resilient due to a shortage of supply in the market

That helped to offset the increased costs of materials and labour, with the average selling price of Gleeson homes sold during the fiscal year increasing 11.3% to £186,200.

The second half saw a significant shift in buyer demographics, the company explained, with first-time buyers accounting for around 50% of open-market reservations, compared to 71% in the 2022 financial year.

Additionally, more than 20% of sales were made to purchasers over 55 years old, compared to 10% in the previous year.

Gleeson Homes finished its restructuring in the period, reducing the number of regional management teams from nine to six and adopting a standardised operating structure.

That resulted in annualized administrative overhead cost savings of £3.2m, although with a one-off cost of £1m, with the savings set to be realized from the 2024 financial year onwards.

Reservation rates for the last six months improved slightly to 0.64 net reservations per site per week, compared to 0.62 in the same period of the prior year.

Excluding the four multi-unit sale agreements, Gleeson Homes said its reservation rate was 0.44 per site per week, net of 19% cancellations.

As the new financial year started, Gleeson said it had a stronger forward order book of 665 plots, compared to 319 plots at the end of December and 618 plots at the end of June last year.

Gleeson opened three new build sites during the 2023 period, bringing the total to 82 sites, of which 71 were actively selling.

The availability of land at reasonable prices continued to be favourable for the company.

Its pipeline of owned and conditionally-purchased sites increased 3.3% to 17,375 plots on 173 sites as at 30 June.

Out of those , 9,701 plots on 84 sites had been conditionally purchased, subject to receiving planning permission.

Looking ahead, the company said it believed that demand from first-time buyers would continue at the levels seen in recent months.

Additionally, Gleeson said it expected increased interest from value-driven buyers attracted by the company's more affordable price points and high-quality homes.

In the land promotion division, Gleeson Land appointed a new managing director, Guy Gusterson, during the year.

The division sold three sites with the potential to deliver 413 plots for housing development.

Its portfolio at the end of the financial year included six sites with planning permission or a resolution to grant, which had the potential to deliver 1,400 plots.

Additionally, there were 18 sites awaiting a planning decision, with the potential to deliver 4,285 plots.

Despite planning delays and economic uncertainties, mid-size and regional housebuilders remained active buyers of high-quality consented land, according to the company.

MJ Gleeson ended the year with cash balances of £5.2m and no debt - a positive outcome considering the significant investment made during the period to accelerate new home starts.

The firm said its results for the 2023 financial year were set to be in line with market expectations.

“We are pleased with the year's performance in a challenging economic environment,” said chief executive officer Graham Prothero.

“We have taken advantage of the quieter market to restructure Gleeson Homes, putting the business in great shape to grow as the market recovers.

“We are also very excited about the longer-term prospects for the business and look forward to setting out later today why we believe that Gleeson is well-placed to scale significantly over the long-term, realising its true potential.”

At 1113 BST, shares in MJ Gleeson were down 1.56% at 379p.

Reporting by Josh White for Sharecast.com.