Housing developer MJ Gleeson is ready for growth when homebuyer confidence returns, though that may take some time. Full-year results from the Sheffield-based builder highlight early signs of market improvements, including interest rate cuts and positive signals from the new Government.
Gleeson reported a 5.2% rise in revenue to £345.3 million for the year ending in June, although pre-tax profits fell by 21.3% to £24.3 million, and group operating profits dropped to £28.6 million from £33.6 million. During the same period, the company sold 1,772 homes, an increase from the 1,723 homes sold the previous year. The firm aims to deliver 3,000 homes annually, a goal that could potentially triple pre-tax profits and help Gleeson regain its status as the country’s fastest-growing housebuilder.
The reduction in profitability was mitigated by last year’s restructuring of Gleeson’s homes division, which incurred costs of £1 million and resulted in reduced headcount. The restructuring consolidated the division from three and nine regional management teams into two divisions and six regional management teams. CEO Graham Prothero noted that the division had exceeded expectations, delivering an operating profit of £30.4 million, a decline of 13.4%.
Furthermore, the reduction in interest rates in July has boosted customer confidence, creating optimism among Gleeson executives that this trend will continue in the coming months. The homes division’s net reservation rates improved in the 10 weeks up to September 6, 2024, rising to 0.50 per site per week compared with 0.39 per site per week in the same period last year. However, the cancellation rate slightly increased to 0.11 per week from 0.10.
Meanwhile, the group’s land division experienced a significant increase in revenue and operating profits, jumping by 117% to £16.3 million and by 120% to £2.2 million, respectively. These profits were constrained by the
vagaries of the planning system,
according to the firm. However, with several sites nearing planning approval or already in the sale process, the division is expected to improve its figures in 2025.
Gleeson Homes signed its first partnership agreement during the year, followed by a second agreement post-period in August. Diversifying into partnerships aims to complement the open market business by reducing risk, enhancing efficiency, and leveraging economies of scale while accelerating growth. The firm received a strong customer recommendation score of 95.3%, achieving five-star status in each of its six regions.
Graham Prothero stated,
Having outlined our strategy for growth last year, we are delighted to have signed Gleeson Homes’ first partnership agreement during the year, followed by a second post-period end in August. Diversifying into partnerships will complement our open market business, reducing risk, enhancing efficiency and leveraging economies of scale while accelerating our growth.
He also emphasised that while profits in the land division were held back by the planning system, the business has continued to implement its growth strategy. This includes deepening regional presence and embedding data and analytics throughout its processes, positioning Gleeson for future growth. With a strong land pipeline and a more stable planning environment anticipated post-election, the business is optimistic about its future.
MJ Gleeson has faced a challenging year with a decline in pre-tax profits. However, strategic restructuring, increased revenues, and promising market signals offer a hopeful outlook. The company is well-positioned for growth, supported by a robust land pipeline and strong customer approval ratings.
