MJ Gleeson – low-cost home developer sees a 40% fall in profits this year
The half-time results to end December from MJ Gleeson (LON:GLE), the UK’s leading low-cost housebuilding group, showed a 1.4% fall in revenues to £171m and a 34.8% fall in pre-tax profits.
A lower forward order book in the first six months was further impacted by weaker sales after the mini-Budget.
However, average selling prices were up 15.6% at £186,400, perhaps reflecting higher cost prices.
Gleeson Homes’ customers are typically young, first-time buyers with a median income of £26,000.
The group’s current trading outlook notes that net reservations in the last four weeks have doubled from the low levels seen before Christmas but remain below the levels typically seen this time of the year.
The group, which sold 894 homes in the first half, is now targeting its full year completions at between 1,650 and 1,850 homes for the full year to end June 2023.
New CEO Graham Prothero stated that:
“We have an exciting opportunity to take Gleeson to the next level by delivering sustainable growth over the medium-term, across both our Homes and Land divisions.
At the same time as managing through the lower levels of current market demand, I want to ensure that the Group is in the best possible shape to take advantage of the recovery which we are beginning to see early signs of.
In terms of guidance: confidence, underpinned by improved mortgage rates, is slowly returning to the market, evidenced by improving net reservations.”
Broker’s analysts are estimating a 40% fall in adjusted pre-tax profits for the end-June year’s figures, to £31.7m (£55.5m) on the back of some £347m (£373m) sales, taking earnings down from 70p to 42p per share. The question is whether the 15p dividend will be retained.
Both Singer Capital Markets and Liberum Capital are rating the group’s shares as a Buy, with Singers looking for 606p and Liberum 560p as their Target Prices.
Gleeson’s shares held steady at 454p after the results.