Housebuilder MJ Gleeson not expecting any improvement in housing market

The Sheffield firm saw a sharp drop in profits despite seeing improved revenue figures

Housebuilder MJ Gleeson has cut is dividend to shareholders after issuing a sombre update on the state of the housing market.

The Sheffield firm, which specialises in affordable homes in the North and the Midlands, has issued results for the year up to the end of June, in which its revenues rose 12.1% to £410m. But operating profit over the same period fell sharply to £2.4m, with that figure having stood at £24m a year earlier.

The company completed 1,968 homes during the year, up by nearly 10% on the previous period, but its land division struggled, seeing a 43% drop in revenues and reporting a £700,000 loss.

Gleeson said that, with no apparent upturn in the housing market, it was focussing on internal efficiencies and taking a “prudent stance on cash, working capital and site acquisitions”.

The company’s forward order book of 848 plots was almost identical to the previous year, though its land pipeline reduced by almost 5,000 to 14,927 plots. Average selling prices increased by 3.8% to £201,000.

Gleeson CEO Graham Prothero said: “I am pleased to report that in a subdued market we delivered a robust performance underpinned by the delivery of 1,968 homes, up by nearly 10% against the prior year. Gleeson Homes entered the new financial year with a forward order book of 848 homes.

“During the year we moved at pace to implement significant structural and operating changes under Project Transform. As a result, Gleeson Homes has been overhauled and is a much-improved business, with strengthened leadership at both executive and regional levels, more effective processes and clearer reporting lines. It is in a much stronger position to manage through the challenging market environment we are experiencing today.

“To optimise Gleeson Homes’ performance, we are also working hard on a number of business initiatives including enhancing our partnerships strategy, land-buying, product design, customer journey and brand identification. Importantly, recognising that this subdued market may not improve anytime soon, we are focused on managing the business as efficiently as possible and taking a prudent stance on cash, working capital and site acquisitions.

“Gleeson Land had to adapt to a slowdown in sales owing to a more cautious land market. The business continued to strengthen its portfolio submitting a record number of 18 planning applications and securing 13 high-quality new sites.

“Looking ahead, given the market backdrop, an absolute priority is to maintain the strength of our balance sheet. Along with our focus on managing the business prudently, the board has also taken the view that the dividend should reflect the challenging environment, proposing a lower final dividend in line with our capital allocation policy. This will give us greater flexibility in deploying capital for the medium-term benefit of the business.”