17th Sep 2018 12:54
LONDON (Alliance News) - High demand for land in England led to double-digit rises in annual profit and revenue for MJ Gleeson PLC, prompting a big dividend hike.
Shares in the housebuilder and urban regeneration specialist were up 1.9% at 709.20 pence on Monday at midday.
For the financial year to the end of June, Gleeson reported pretax profit of GBP37.0 million, up 12% from GBP33.0 million the year before, on revenue that rose by 23% to GBP196.7 million from GBP160.4 million.
Gleeson's pretax profit outcome outperformed Liberum's forecasts of GBP35.9 million.
Gleeson said it will pay a final dividend of 23.0 pence per share, up from 17.5p a year before, resulting in a total payout of 32.0p, up 33% from 24.0p the prior year.
Gleeson's land pipeline, including conditionally purchased sites, rose to 12,852 plots from 11,588 the year before.
The Gleeson Homes division sold 1,225 units, up from 1,013 the year before, and the average selling price rose to GBP125,200 from GBP122,700. The price increase resulted from house price inflation generally, plus Gleeson's mix of site locations and the mix of 2, 3 and 4-bedroom homes it sold.
Two thirds of Gleeson Homes' customers are under the UK government's Help to Buy scheme, with Gleeson's highest priced home sold under the scheme at GBP197,995, significantly below the current Help to Buy limit of GBP600,000.
Shore Capital said it found this discrepancy particularly noteworthy.
"Gleeson is a heavy user of help to buy (HTB - around 65% which may appear uncomfortable but when considering the use amongst eligible buyers for the larger, national house builders usage there is now close to 55-60% this is less of an issue) but Gleeson remains, in our view, the only builder that uses the scheme fully as it was intended: to create incremental new buyers who would otherwise not be capable of buying rather than allowing buyers to fund a larger home," said analyst Robin Hardy.
"Therefore, while HTB may be under threat of re-focusing, we believe that any major revisions to permitted household incomes or maximum price would affect Gleeson less than almost all other house builders," Hardy added.
The division's growth was attributed by Gleeson to strong demand for low-cost homes in the North of England, with build costs remaining at a controllable level and land continuing to be available at good prices.
MJ Gleeson said it is on-track to nearly double sales in Gleeson Homes to 2,000 units per annum over the five years from 2017 to 2022.
To achieve this target, Gleeson Homes is looking to grow its pipeline of purchased sites by acquiring land and investing in new office locations. Gleeson now has eight area offices in the North and Midlands and two pilot offices in Northumberland and Cumbria. The division has 149 sites in its acquisition pipeline.
Meanwhile in the Strategic Land division, Gleeson made 10 land sales during the year, leaving it with a portfolio of 61 sites with the potential to deliver 22,838 plots.
Demand from bidders for consented greenfield sites in the South of England remains strong despite of uncertainties caused by Brexit, Gleeson said.
"Management has expressed confidence in future demand and the sustainability of cash flows through the significant step-up in the dividend," commented analysts at Liberum. "Demand for homes is said to remain strong and the division has the pipeline in place to deliver targeted volume growth - management says that it is 'comfortably on track' to achieve the target of doubling volumes by 2022. Gleeson has a higher than average weighting to the first time buyer (87% v 35% to 50%) which is where demand is proving much more resilient."
Gleeson Chairman Dermot Gleeson said: "Our twin track strategy - the development of low-cost homes for open market sale in the North of England and the Midlands and strategic land sales in the South - delivered another excellent year of increased volumes, profit and cash.
"Against this background, the board is confident that the group's unique business model will continue to deliver significant growth in both revenue and profits in the current year and beyond."
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