Gleeson makes housing affordable for young buyers

Customers have been queuing up at Gleeson's sales offices

The Sheffield-based firm, which specialises in building houses on land that no-one else wants to buy and turning it into a desirable area that rejuvenates the local economy, reported a 17 per cent leap in profits to £33m in the year to June 30. The average selling price has been cut to £122,700 from £125,700 last year, making its houses far more affordable than rivals.

Gleeson sold 1,013 homes, up from 904 last year. The group said it has broken through the 1,000 milestone and it is setting a new milestone target of 2,000 homes a year within the next five years.

The group said affordability remains very attractive and demand is exceeding supply.

Gleeson’s CEO Jolyon Harrison said 92 per cent of its customers are first time buyers and 75 per cent are below the age of 35.

“Young people want to buy their own home and we are satisfying that demand,” he said.

“Quite often our customers don’t have the deposit. Our Save and Build scheme allows them to save up for a deposit while we build their house and we hold the price for a year.”

Gleeson now has a waiting list for customers and each new site always attracts queues.

“All the people in the queues have been qualified by a mortgage adviser. They can all afford to buy the houses and on a normal day we will get 15 to 20 people queuing,” said Mr Harrison.

The group’s average selling price was reduced to £122,700 after a scheme in Manchester with an average selling price of £140,000 came to an end.

Gleeson is also trying to help customers by keeping prices low.

“We’ve changed the mix and we are selling more two bedroom semi-detached properties. We are making buying a house more affordable,” said Mr Harrison.

The group said it has seen no impact from the recent political upheaval.

“Our customers aren’t interested in Brexit,” said Mr Harrison.

“If you are a couple struggling financially, the way to save money is to buy a home. You can go from paying £80 a week on rent to £52 a week for a mortgage repayment.”

The group is paying out a total dividend of 24p per share, representing a big rise of 66 per cent.

“We are not only growers, we are returners. This reflects our confidence in the future. We’ve got plenty of cash,” said Mr Harrison.

Analyst Charlie Campbell at Liberum said: “The 66 per cent increase in dividend shows management’s confidence in the prospects for continued growth with limited capital requirements, as it buys land very cheaply, and the strong balance sheet.

“Increases in the landbank and active sites suggest a good start to growing units by around 20 per cent per year to hit its target of doubling in size in five years.“

Analyst James Tetley at N+1 Singer said: “Gleeson’s 2017 results confirm another year of excellent growth for both divisions.

“Pre-tax profit and earnings per share increased by 17 per cent and 14 per cent respectively and were both slightly ahead of our recently upgraded forecasts.

“The statement strikes a confident tone and once more highlights the scale of the opportunity for Gleeson’s unique model, underscored by the new 2,000 home target. We nudge up our 2018 and 2019 earnings per share forecasts by 1 per cent. The one surprise in the statement is the scale of the dividend hike - up 66 per cent to 24.0p versus our 19.5p forecast.”