Gleeson land division sale could benefit investors

Gleeson has said it hasnt seen any signs of customer caution

The division is expected to make around 29 per cent of the Sheffield-based firm’s profit and analysts value it at £130m.

Analyst Charlie Campbell at Liberum said if the business is sold, he would expect most of the proceeds to be returned to shareholders as the group’s balance sheet is already strong and the homes division can grow without absorbing cash.

Gleeson said that during the course of Lazard’s review, a number of third parties have expressed interest in the possibility of acquiring Strategic Land.

The firm said it is possible that a sale of the business may ensue, but it is by no means certain that this will be the outcome of the review.

Gleeson’s Strategic Land division is a land promotion business that enhances the value of land by securing mainly residential planning consents, predominantly in the South of England.

The division has 59 sites which could deliver 22,232 plots and 67 acres of commercial land.

Gleeson said a further announcement will be made if appropriate in due course.

Mr Campbell said: “Gleeson remains a preferred housebuilder due to its strong cash flow profile, very limited competition in its niche, and good affordability in its target markets.

“We expect the division to make £12m operating profit in the year to June 2019 (around 29 per cent of group operating profit). We value the division at £130m in our sum of the parts.

“Gleeson is one of the most cash generative housebuilders because of its relatively low cost of land. The low plot cost means that it has assembled a long land bank without excessive lock-up of cash, which has enabled rapid volume growth.

“Gleeson is expensive compared to the other housebuilders, but this is more than justified by its superior growth at lower risk.”

Gleeson has said it hasn’t seen any signs of customer caution despite the downturn in the economy. The firm has reported strong demand for its low-cost homes and expects its first half results to be significantly ahead of last year’s.

Gleeson’s chief executive Jolyon Harrison said: “We continue to see strong demand for our low-cost homes, supporting both increased build activity on existing sites and the opening of new sites across our target geographic area.

“Our target market remains strong and our customers have maintained their confidence. We do not see any signs of customer caution.”