- Results seen ‘significantly ahead’ of estimates
- Prices and volumes driven by strong first time-buyer demand
- Substantial pipeline of future developments
Sheffield-based MJ Gleeson (GLE) became the latest house builder to surprise the market with news that its full year results would be well ahead of market forecasts.
Everything seems to be going the company’s way at the moment, with strong demand from first-time buyers driving up selling prices, while labour and material shortages have eased since the start of 2022.
Gleeson shares gained as much as 7% to 552p in early trading, although by mid-morning they had drifted back to 526p for a gain of 2%.
STRONG DEMAND
The firm has two divisions, one building affordable housing in the Midlands and northern England and another working with landowners in the south of the country to promote their land to housebuilders.
Gleeson Homes completed the sale of 2,000 homes in the year to June, an increase of 10.4% on what was already a very active prior-year period due to delayed completions from lockdowns.
Average selling prices rose by nearly 15% to £167,300, still well below the average national home price of between £270,000 and £290,000, based on the latest Halifax and Nationwide building society figures.
The majority of the increase was due to higher selling prices to offset input cost inflation, with around a fifth of the increase due to a more favourable mix of housing.
Encouragingly, the time from plot release to private reservation fell sharply during the year from 49 days to just 34 days, reflecting the lack of availability of good-quality, affordable homes for first-time buyers.
Land continues to be available at ‘sensible’ prices, with the pipeline of 16,814 plots across 160 sites representing over eight years of future sales.
The board expects ‘strong first-time buyer demand, intensified by the acute shortage of new homes, will continue unabated over the medium term’.
Meanwhile, Gleeson Land sold six sites with the potential to deliver 1,443 plots for housing development.
Like rival Vistry (VTY), Gleeson flagged difficulties in the planning system which are delaying the progress of sites which are attractive to housebuilders, but it has a healthy portfolio of 71 sites with the potential to deliver over 20,000 housing plots as well as 25 acres of commercial land.
RAISED GUIDANCE
Given the strong sales performance for the year, the firm expects results to be ‘significantly ahead of market expectations’.
The S&P consensus for pre-tax profits for the 12 months to June is currently £48.5 million.
‘This is a very strong out-turn for the year’, said chief executive 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.
‘We have 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’, Thomson added.
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