Strong demand for low cost homes boosts Gleeson

Urban regeneration housebuilder MJ Gleeson reported a very strong first half as completions rose by 31 per cent in the six months to December 31.
Gleeson's environmentally friendly gravel drives have not met with Barnsley Council's approvalGleeson's environmentally friendly gravel drives have not met with Barnsley Council's approval
Gleeson's environmentally friendly gravel drives have not met with Barnsley Council's approval

This was way ahead of guidance given at the AGM last month that first half volumes would rise by "more than 15 per cent".

The Sheffield-based group said trading for the first half is expected to comfortably exceed last year's first half results.

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The group's CEO Jolyon Harrison said: "There's a really big need for low cost homes for people on low incomes - particularly in Yorkshire.

"We are supplying that need. We've got 60 odd sites throughout the North of England and 30 planning applications. Things are going well.

"We are really proud of the 30 per cent increase. The only issue we have is building the houses. Building is a challenge, but our guys have really stepped up to that challenge."

Mr Harrison said that whilst "most local authorities love what we do", it will not build any more houses in Barnsley following a disagreement about Gleeson's environmentally friendly drives.

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"Barnsley Council don't like our environmentally friendly gravel drives so we won't build any more houses in Barnsley," he said.

"If Barnsley would like to change their minds we will talk to them. There are plenty of other places we can build."

He said the council has objected to the look of the gravel drives.

"They say the gravel spills onto the road. It doesn't," he said.

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"Tarmac is horrible stuff. It's not environmentally friendly. Gravel soaks up the rain and you don't get so much water running off as you do with tarmac."

Barnsley Council was contacted about Gleeson's claims on Thursday afternoon, but said it would need more time to respond.

Gleeson Homes completed the sale of 593 units in the first half, an increase of 31 per cent on the previous half year’s total of 451 unit completions.

Gleeson Strategic Land sold three sites, the same number as the previous half-year. These were smaller sites and​,​ as indicated in the AGM ​statement issued on December 7​,​ this will lead to the division’s first half results being lower than th​e previous​ ​first half. However second​ ​half results ​will be higher than the comparable second half the year before.

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The ​group said results for the full year to June ​30, ​2018 will be in line with its expectations.

A​nalysts welcomed the news.

​Charlie Campbell at Liberum said: "Gleeson’s half year trading update, covering the six months to the end of December, revealed that the first half finished very strongly, with Homes completing 31​ per cent​ more units, considerably exceeding guidance given at the AGM that ​first half​ volumes would rise by ​'​more than​'​ 15​ per cent​.

"Our confidence for the full year has been further strengthened.​"

Mr Campbell said Liberum's first half pre-tax profit expectations have been raised from £12.4m to £13.4m, up 18​ per cent on the​ £11.4m achieved in 2016/17​.​

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Active sites rose by 16​ per cent ​to 58 (from 50 last year) and ​the group said that it hopes​ to​ increase these to approaching 70 by the end of the year.

​"​This would give Gleeson a 19​ per cent​ increase in sites between June 2017 and June 2018, underpinning targets to double volumes in Homes by 2022, and giving us comfort in our 2018 unit completion estimate of 1,200 ​- ​up 19​ per cent​ year on yea​r," said Mr Campbell.

​"​Strategic Land is also said to be experiencing strong demand. It sold ​three​ sites in ​the first half​ and has 10 more sites where sale negotiations are continuing.

​"​Gleeson has a target of doubling Homes’ output by 2022. It made a good start to 2018 with 23​ per cent​ more sites, 25​ per cent​ more land and a 100​ per cent​ larger order book.​"​

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G​leeson now has​ nine regional offices now compared ​with​ three in 2014.

Analysts at N+1 Singer said in a note: "MJ Gleeson has reported a very strong conclusion to ​its first half​.

​"​Growth at group level has been driven by an acceleration in unit completions within Gleeson Homes, which continued through to the end of the calendar year. Gleeson completed the sale of 593 homes, ​up ​31​ per cent​ year on year, considerably higher than early December AGM statement guidance of ​'​more than 15​ per cent'​ and a significant step up on the 12​ per cent​ volume growth reported last year.​"​

Gleeson has reported that customers are queuing up on site opening days as more home buyers look to buy houses in former pit villages and other deprived areas in the North of England.

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The 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, said demand remains strong.

Gleeson has said the Government’s Help to Buy scheme remains popular. A hefty 63 per cent of Gleeson's customers took advantage of Help to Buy last year and this look set to continue in 2018 whatever happens to the economy.

Gleeson will report ​its first half results on Monday February ​19.