Mj Gleeson Plc · LSE:GLE
Mj Gleeson — H1 FY2024 Earnings Presentation
56 slides from Mj Gleeson's earnings presentation, Feb 15, 2024
Slide 1: Results for the half year ended 31 December 2023
Results for the half year ended 31 December 2023 15 February 2024 1
Slide 2: Contents
Contents Overview 3 Graham Prothero Financial Performance 7 Stefan Allanson Operations & Strategy 19 Graham Prothero Graham Prothero Summary & Outlook 31 Graham Prothero CEO Appendices 34 Stefan Allanson CFO 2
Slide 3: Overview
Overview 3
Slide 4: Robust performance
Robust performance Gleeson Homes: • 769 homes sold (H1 22/23: 894) • Improvement in net reservation rates: • 0.41 per site per week (H1 22/23: 0.36) • Return to 5-star quality • Refreshed product and broader marketing strategy being successfully implemented • Operational efficiencies delivered, redu
Slide 5: Margin pressures addressed
Margin pressures addressed • Restructuring and new management teams identified cost issues on older sites • Remedial actions addressing historical failures to comply with planning conditions and poor workmanship • Margin impact to be recognised on completion of house sales in FY24 and FY25 • Signifi
Slide 6: Encouraging recent trading
Encouraging recent trading • Improved sales rate over the last five weeks: Last 5 weeks* • 5 weeks to 9 February 2024: 0.50 Net reservations excl. multi-unit sales (5 weeks to 10 February 2023: 0.46) • Pricing remains resilient, with continuing support from incentives • Sales price changes on Boxing
Slide 7: Financial Performance
Financial Performance 7
Slide 8: Group income statement
Group income statement £ million H1 23/24 H1 22/23 Change Notes Gleeson Homes 142.3 166.7 -14.6% Homes sold down 14.0%, ASP down 0.8% Gleeson Land 9.2 4.3 114.0% 1 site sold & final phases of site sold in 2019 (H1 22/23: 1) Revenue 151.5 171.0 -11.4% Gleeson Homes 10.2 18.2 -44.0% Gleeson Land 1.0 1
Slide 9: Gleeson Homes: a robust delivery
Gleeson Homes: a robust delivery • 769 homes sold (H1 22/23: 894) • Including 169 multi-unit sales (H1 22/23: nil) • ASP £185,000 (H1 22/23: £186,400) • Underlying* selling prices up 1.6% • Gross prices up 4.0% • Average incentive £7,000/3.8% (H1 22/23: £1,900) • Customer extras £2,600/1.4% per home
Slide 10: Gleeson Homes: benefits of restructuring
Gleeson Homes: benefits of restructuring • Gross profit down 24.3% to £34.9m (H1 22/23: £46.1m) • Gross profit per home sold £45.3k (H1 22/23: £51.5k) • Gross margin on unit sales 24.5% (H1 22/23: 27.7%) • Multi-unit sales at 10% - 15% discounts • Cost increases on older sites nearing completion • B
Slide 11: Gleeson Homes: outturn reflects a challenging market
Gleeson Homes: outturn reflects a challenging market • Other operating income £0.2m (H1 22/23: £0.2m) • Operating profit £10.2m (H1 22/23: £18.2m) • Operating margin 7.2% (H1 22/23: 10.9%) • ROCE* 10.9% (H1 22/23: 24.0%) *Return on capital employed is calculated based on earnings before interest and
Slide 12: Gleeson Homes: building the forward order book
Gleeson Homes: building the forward order book • Forward order book up 84% from December 2022 • Partial recovery in demand over last 12 months • Multi-unit arrangements • Four signed in June 2023 • Two small arrangements signed in H1 • Expect to end the year with a stronger forward order book assumi
Slide 13: Gleeson Homes: build and sales sites
Gleeson Homes: build and sales sites • Planning delays impacted build and sales site starts • Build sites • 3 sites opened (H1 22/23: 3 sites opened) • Building on 76 sites (H1 22/23: 87 sites) • Expect c80 sites by June 2024 • Sales outlets • 2 sites opened for sales (H1 22/23: 10 outlets opened) •
Slide 14: Gleeson Homes: a growing pipeline
Gleeson Homes: a growing pipeline • Pipeline up 9.7% to 18,168 plots on 177 sites • 76 active build sites • 12 owned, not yet active • 89 conditionally purchased sites • High quality pipeline to support growth • Average cost c.£14,800 per plot (31 Dec 2022: £13,000) • Land still available at sensibl
Slide 15: Gleeson Land
Gleeson Land • 1 land sale completed (H1 22/23: 1 land sale) • 200 developable plots (H1 22/23: 200) • Gross profit per plot £14,855 (H1 22/23: £15,555) • Gross profit £2.9m (H1 22/23: £3.1m) • Overheads £1.9m (H1 22/23: £1.7m) • Operating profit £1.0m (H1 22/23: £1.4m) • ROCE 1.5% (H1 22/23: 15.7%)
Slide 16: Group balance sheet
Group balance sheet 31 December 31 December £ million 2023 2022 Notes Gleeson Homes Land 98.2 102.0 £12,800 per plot (December 22: £12,300) WIP 227.4 192.1 £3.0m per site (December 22: £2.2m, June 23: £2.6m) Gleeson Land Land 14.0 14.7 70 sites (December 22: 71 sites) WIP 18.5 18.0 Total inventories
Slide 17: Group cash flow
Group cash flow £ million H1 23/24 H2 22/23 Notes Profit before tax 7.2 16.1 Depreciation and other 4.3 3.0 Depreciation, provisions, finance costs and SBP charges Working capital movements (24.6) (29.2) Reflects investment in Part L in FY23 & increased stocks Cash generated from operating activitie
Slide 18: Capital allocation policy supports growth
Capital allocation policy supports growth • Interim dividend of 4.0 pence per share (H1 22/23: 5.0 pence) • To be paid on 2 April 2024 to shareholders on the register at close of business on 1 March 2024 • Company’s established dividend cover policy of between 3 and 5 times 18
Slide 19: Operations & Strategy
Operations & Strategy 19
Slide 20: Gleeson Homes
Gleeson Homes 20
Slide 21: Market context
Market context • Planning system under-resourced and tortuous • Build cost inflation / deflation has been uneven • Mortgage rates reducing • Affordability strong at low-cost end of market • Buyer confidence key Source: Bank of England 21
Slide 22: Prepared for return to growth
Prepared for return to growth • Regional operating structure in place with capacity for growth • Strategic initiatives being implemented to drive growth • Product refresh complete • Marketing broadened to wider demographic • Intense focus on upskilling sales teams • Strong pipeline of sites will sup
Slide 23: Remaining highly affordable
Remaining highly affordable • Affordable for low-income buyers • Mortgage payments 19% take home pay v UK average 38%* • National Living Wage (NLW) increasing by 9.8% in April 2024 • A couple on the NLW will be able to afford a home costing £211,513 • 38% higher than Gleeson’s average 2-bed home • H
Slide 24: The route to 3,000 homes p.a.
The route to 3,000 homes p.a. • Under supplied market segment, with strong underlying demand for high-quality affordable homes FY24 Medium-term – stable market scenario • Business well-positioned to achieve growth: Sales rate* 0.43 0.60 • 101 pipeline sites Sales outlets 65** 100 • Opening 30 sales
Slide 25: Progress in partnerships
Progress in partnerships • Gleeson design, price and quality attractive to a range of partnership investors • Discussions with a number of high-quality partners • Partnership developments accretive to existing growth plans • Forward funding structure enhances returns • Opportunity to develop and de-
Slide 26: Gleeson Land
Gleeson Land 26
Slide 27: Implementing the growth strategy
Implementing the growth strategy • Team strengthened to 20 experienced technical, land and planning experts • Organised into three distinct regions • Senior appointments with regional expertise • Market-leading data analytics capabilities delivering increased opportunities • Expect to build the pipe
Slide 28: Success in site acquisitions
Success in site acquisitions • Market remains competitive, but seeing a good level of opportunities • One new site secured in the period for 104 plots (13 acres) • A further 6 sites with offers accepted and being progressed in H2 for c2,800 plots (475 acres) • New research & analytics being leverage
Slide 29: NPPF: Planning is failing the country
NPPF: Planning is failing the country 44% drop in average annual funding in local government planning departments since 2010 • Political compromise has fundamentally weakened the 50%+ fewer staff in local government planning departments NPPF 60+ local authorities that have withdrawn housing plan
Slide 30: Navigating the system
Navigating the system • 1 planning application submitted (FY23: 11, H1 FY23: 4) • 4 sites granted permission (FY23: 6) • Planning consent refused on 4 sites, of which 3 via appeal • These sites will be promoted through the local plan process • 11 sites awaiting a planning decision (June 2023: 18 sit
Slide 31: Summary & Outlook
Summary & Outlook 31
Slide 32: Summary & outlook
Summary & outlook • Robust trading performance despite market conditions • Improved operations to drive efficiency and support growth • Encouraged by recent trading uptick, anticipating continued gradual recovery • Remain confident in delivery of current year expectations and medium-term objectives
Slide 33: Q&A
Q&A 33
Slide 34: Appendices
Appendices 34
Slide 35: Gleeson Homes and Gleeson Land
Gleeson Homes We build and sell high-quality, low-cost homes where they are needed, for people who need them most. Gleeson Land We promote land, enhancing its value by securing mainly residential planning consent. 35
Slide 36: Gleeson Land – Pipeline
Gleeson Land – Pipeline • 70 sites (Dec 22: 71 sites) • 17,574 plots (Dec 22: 18,775 plots) • 1,660 plots on 9 sites with consent / resolution to grant (June 2023: 1,400 plots on 6 sites) As at 31 December As at 30 June As at 31 December 2023 2023 2022 No. Sites Plots No. Sites Plots No. Sites Plots
Slide 37: Significantly cheaper to buy than rent
Significantly cheaper to buy than rent 85% LTV 90% LTV Rented house – Number of Average Gleeson mortgage mortgage new lettings bedrooms price (cost per week) (cost per week) (cost per week) 2 bed £153,400 £141 £153 £196 3 bed £189,400 £174 £189 £248 4 bed £249,800 £229 £249 £346 All mortgage payment
Slide 38: Customer demographics & case studies
Customer demographics & case studies 38
Slide 39: Customer demographics
Customer demographics • Change in demographic due to affordability and quality: • First-time buyers: up from 50% to 55% (80% two years ago) • Over 55 year olds: still 20% (10% two years ago) • Cash buyers: down from 10% to 5% (5% two years ago) • Loan to Income: down to 3.2x earnings (3.3 times two
Slide 40: Our case studies: Alicia and Billy
Our case Alicia and Billy studies Buyer name: Occupation: Billy and Alicia, both 25 Infantry Soldier and Marketing Executive Date of purchase: October 2023 Development: Rainsborough Park, West Yorkshire House type: 2-bedroom, semi-detached Mayfield Purchase price: £161,995 Mortgage: £741 per month B
Slide 41: Our case studies: Natalie and James
Our case Natalie and James studies Buyer name: Occupation: James and Natalie, both 24 HGV Driver and Video Editor Date of purchase: September 2023 Development: Moorland Green, Tyne and Wear House type: 3-bedroom, detached Kildare Purchase price: £130,896 through the First Homes scheme Mortgage: £731
Slide 42: Our case studies: Damon and Francesca
Our case Damon and Francesca studies Buyer name: Occupation: Damon and and Francesca, both 66 Retired Date of purchase: April 2023 Development: Calluna Grange, Cumbria House type: 4-bedroom detached Blessington Purchase price: £255,995 Mortgage: No mortgage After making the decision to move from Bri
Slide 43: Our case studies: Michelle
Our case Michelle studies Buyer name: Occupation: Michelle, 45 Mental Health Worker Date of purchase: September 2023 Development: Firbeck Fields, Worksop House type: 3 bedroom, detached Brandon Purchase price: £219,000 Mortgage: £575 per month After living in her two-bedroom semi-detached home for 2
Slide 44: Refreshed marketing
Refreshed marketing 44
Slide 45: Then and now
Then and now Sales centre and development signage 2024 2022 45
Slide 46: Then and now
Then and now Sales centres and livery 2021 2022 2024 46
Slide 47: Sustainability
Sustainability 47
Slide 48: Operating sustainably
Operating sustainably • Safety Health and Environment (SHE) software platform to improve analysis of SHE data • Achieved score of 87% employee engagement maintaining our upper quartile engagement across all companies • Gained ILM recognition for our commitment to learning and development • Engaged w
Slide 49: Market Backdrop
Market Backdrop 49
Slide 50: Land, planning & housebuilding
Land, planning & housebuilding Planning approvals Appeals dismissed Net additional dwellings (South East, South West and Midlands) (South East, South West and Midlands) (England) Government target 50 Source: Planning Inspectorate Casework Database, HBF/Glenigan, New Housing Pipeline Q3 2023 report D
Slide 51: Healthy supply chain
Healthy supply chain • Materials: • Availability high • Call-off periods & delivery times back to normal • Fuel prices falling • Labour: • Availability good • Lower rates for bricklayers, groundworkers, roofers & joiners • Build cost inflation: • -3.6% lower in 12 months to December 2023 • +1.3% hig
Slide 52: Structural under-supply of quality, affordable homes
Structural under-supply of quality, affordable homes • Shortage of affordable homes in North of England and Household tenure Midlands: (millions of households) • 4.1 million households renting • 0.6 million households on Local Authority waiting lists • 2.1 million adults living with parents • Little
Slide 53: Mortgage rates and costs
Mortgage rates and costs • Buyers still adjusting to higher cost of buying • Alternative products available following end of HtB in March 2023 t Midlands • First Homes, Shared Ownership, Deposit Unlock, HtB Best available first-time-buyer mortgage rates: Mortgage guarantee, Own New 5-yr fixed 2-yr f
Slide 54: Cost of home ownership
Cost of home ownership • Selling prices remain low • £340,600 average new build house price in England* • £272,600 average price charged by other housebuilders in Gleeson’s regions • 47% higher than Gleeson’s average selling price of £185,000 • Rental costs for a typical 3-bed house in the North and
Slide 55: House prices – North of England isn’t North London
House prices – North of England isn’t North London • Price increases since 2007 vary by region: • London up 93% • North of England & East Midlands up 46% • Below rise in RPI of 79% • Since 2014: • National Living Wage up 65% • Gleeson prices up 53% • Since August 2022: • London house prices down 1%
Slide 56: Thank you
Thank you MJ Gleeson plc 5 Europa Court, Sheffield Business Park Sheffield S9 1XE 56