MJ Gleeson PLC · LSE:GLE
MJ Gleeson — H1 2023 Earnings Presentation
54 slides from MJ Gleeson's earnings presentation, Feb 16, 2023
Slide 1: Results for the half year ended 31 December 2022
Results for the half year ended 31 December 2022 16 February 2023 1
Slide 2: Business Model
Business Model • Gleeson Homes We build and sell high-quality, low-cost homes to young, first-time buyers on low to average incomes, where they are needed, for people who need them most. • Gleeson Land We promote land, enhancing its value by securing mainly residential planning consent. 2 2
Slide 3: Initial observations
Initial observations Refreshed elevation: Contemporary • Gleeson Homes o Outstanding people o High quality and well-located land o Excellent product o The right business model o Restructuring operations for controlled growth • Gleeson Land o High quality portfolio of sites o Talented professional te
Slide 4: Overview
Overview Refreshed elevation: Rural • First half results reflect wider market downturn • Initial signs of recovery but pace as yet uncertain o Mortgage rates reducing o Cheaper to buy than rent o Selling prices robust – no pressure to reduce o Modest incentives, limited and targeted • Gleeson Homes
Slide 5: Gleeson Homes – organisational restructuring
Gleeson Homes – organisational restructuring • Enhancing capability for sustainable and well controlled growth • 9 regions will operate under two divisions and 6 management teams • Regional teams aligned on standard configuration • Supported by lean central services • £4m p.a. reduction in overhead
Slide 6: Financial Performance
Financial Performance 6
Slide 7: Results in line with expectations
Results in line with expectations • Revenue: £171.0m (H1 21/22: £173.5m) • Operating profit: £16.8m (H1 21/22: £25.2m) • PBT: £16.1m (H1 21/22: £24.7m) • EPS: 22.0 pence (H1 21/22: 34.4 pence) • Net cash: £13.5m (H1 21/22: £38.2m) • ROCE: 20.0% (H1 21/22: 22.9%) • Interim dividend: 5.0 pence (H1 21/
Slide 8: Income statement
Income statement H1 22/23 H1 21/22 Change Notes £m Gleeson Homes 166.7 150.2 +11% Homes sold down 4.1%, ASP up 15.6% Gleeson Land 4.3 23.3 -82% 1 site sold (H1 21/22: 3) Revenue 171.0 173.5 -1% Gleeson Homes 18.2 22.5 -19% Gleeson Land 1.4 5.5 -75% Group overhead (2.8) (2.8) Operating profit 16.8 25
Slide 9: Gleeson Homes
Gleeson Homes • Homes sold down 4.1% to 894 (H1 21/22: 932) • ASP up 15.6% to £186,400 (H1 21/22: £161,200) o Underlying selling prices up 11.2% o Average home size 2.92 bedrooms (H1 21/22: 2.83) 2-bed 20.9% (H1 21/22: 26.7%) 3-bed 66.1% (H1 21/22: 64.0%) 4-bed 13.0% (H1 21/22: 9.3%) • Turnove
Slide 10: Gleeson Homes
Gleeson Homes • Gross profit up 5.0% to £46.1m (H1 21/22: £43.9m) o Gross profit per home sold £51.5k (H1 21/22: £47.1k) o Gross margin on unit sales 27.7% (H1 21/22: 29.2%) Build cost inflation 10.3% and extended site duration Underlying selling price increases of 11.2% • Overheads up 29.5% to
Slide 11: Gleeson Homes
Gleeson Homes • Other operating income £0.2m (H1 21/22: £0.3m) • Operating profit £18.2m (H1 21/22: £22.5m) • Operating margin 10.9% (H1 21/22: 15.0%) • ROCE 24.0% (H1 21/22: 24.2%) 11
Slide 12: Forward order book
Forward order book • Reduced forward order book at start of financial year o Plots released for sale later in build Selling price and process - to optimise selling prices customer journey and improve the customer journey optimised Weak market • Weaker market conditions since September conditions sin
Slide 13: Gleeson Land
Gleeson Land • 1 land sale completed (H1 21/22: 3) o Total developable plots 200 (H1 21/22: 1,176) o 1 promotion sale (H1 21/22: 2 promotions and 1 option) o Gross profit per plot £15,555 (H1 21/22: £5,913) • Gross profit £3.1m (H1 21/22: £7.0m) • Overheads £1.7m (H1 21/22: £1.5m) • Operating profit
Slide 14: Balance sheet
Balance sheet 31 December 31 December 2022 2021 £ million Notes Gleeson Homes Land 102.0 84.9 £12,300 per plot (Dec 21: £10,900) WIP 192.1 129.4 £2.2m per site (Dec 21: £1.6m) Gleeson Land Land & WIP 32.7 30.4 71 sites (Dec 21: 71 sites) Total inventories 326.8 244.7 Other assets 33.4 42.1 £15m Glee
Slide 15: Cash flow
Cash flow H1 22/23 H1 21/22 Notes £ million Profit before tax 16.1 24.7 Depreciation and other 3.0 2.6 Working capital movements (29.2) (10.2) Cash (used in)/generated from operating activities (10.1) 17.1 Tax (0.6) (5.8) Unwind of Corporation tax debtor from June 2022 Interest and finance costs (0.
Slide 16: Dividends
Dividends • Interim dividend of 5.0 pence per share (H1 21/22: 6.0 pence) • Paid on 3 April 2023 to shareholders on the register at close of business on 3 March 2023 • Dividend policy maintained: FY earnings cover of between 3 and 5 times 16
Slide 17: Operational Review
Operational Review 17
Slide 18: Gleeson Homes
Gleeson Homes 18
Slide 19: Refreshed elevation: Rural
Refreshed elevation: Rural Our Vision:: Building Homes. Changing Lives. Our Mission: Changing lives by building affordable, quality homes. Where they are needed, for the people who need them most. 2 bedroom semi-detached “Cork” Saxon Grange, Lincolnshire 19
Slide 20: Reservations . . . signs of recovery
Reservations . . . signs of recovery Reservation rates similar Rates reduced significantly Rates have doubled, but to last year until mini- following the mini-budget are still below prior year budget in September 2022 in September 2022 Gross ■ Cancellations Gross ■ Net ■ Cancellations ■ Net Gross ■
Slide 21: Build and sales sites
Build and sales sites • Build sites o 3 sites opened o 87 average sites during the 6 months to December 2022 (H1 21/22: 82 sites) • Sales sites o 68 sites at December 2022 o 66 average sites during the 6 months to December 2022 (H1 21/22: 61 sites) • Site opening paused until strength of market reco
Slide 22: Site pipeline
Site pipeline • Pipeline up 2.0% to 16,561 plots on 168 sites o 87 active build sites o 5 owned, not yet active o 76 conditionally purchased sites • 8.4 years supply • Average cost c.£13,000 per plot (31 Dec 21: £11,700) • Land remains available at sensible prices 22
Slide 23: Refreshing our product
Refreshing our product Refreshed elevation: Urban • High quality design and build • Refreshed product… more attractive, improved specification and simpler to build • Well advanced on Future Homes requirements o Deploying ASHP solution for Part L • Exploring improved site viability through layout and
Slide 24: Remaining highly affordable
Remaining highly affordable • Affordable for low income buyers o Mortgage payments 25% take home pay v UK average 39% o National Living Wage increasing 9.7% in April 2023 • Attractive to value driven buyers o Significantly lower cost than other housebuilders • Low cost of ownership o £149 p/w mortga
Slide 25: Mortgage rates and availability
Mortgage rates and availability • Mortgage rates reducing – 5 year fixed available at 4.79%* • Healthy mortgage product availability o 450+ products for 85% LTV / 150+ products for 90% LTV • End of Help to Buy (March 2023) not expected to impact demand o 2% of current purchasers using HtB in H2 • Al
Slide 26: Selling prices firm . . . incentives modest
Selling prices firm . . . incentives modest Extras • Selling prices stable since September 2022 (average per plot completed, £) o No discounting £2,727 • Extras increasing to average c.£2,700 (FY22: £2,500, FY23 H1: £3,250) Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 • Incentives have increased
Slide 27: Signs of recovery
Signs of recovery • Web traffic up against last quarter Net reservation rates required to achieve full year sales • Leads and visitor rates up and similar to prior years Full year FY23 sales volume Reservation rate 1,850 full year sales 0.61 • Conversion rates lower than prior years 1,650 full year
Slide 28: Gleeson Land
Gleeson Land 28
Slide 29: Our Vision: Promoting Land. Unlocking Value.
Our Vision: Promoting Land. Unlocking Value. Our Mission: We promote land through the complex planning system. Unlocking value for landowners and delivering sustainable and attractive site for new homes. Matthewsongreen, Wokingham, Berkshire Illustrative site layout 29
Slide 30: Promoting land. Unlocking value.
Promoting land. Unlocking value. • A top-4 promoter • Recent corporate activity highlights key role of land promoters o Planning success rate high o No land ownership, no land value risk o Land promoters deliver 2 out of every 5 large* consented sites to housebuilders • Lack of supply supporting con
Slide 31: Pipeline ripe – planning congested
Pipeline ripe – planning congested • Active in the period o 4 planning applications submitted (FY22: 10, H1 FY22: 5) o 4 sites granted permission (FY22: 4) • High-quality portfolio o 16 sites awaiting a planning decision (June 2022: 16 sites, Dec 2021: 15 sites) Of which, 4 sites awaiting appeal (
Slide 32: Pipeline overview
Pipeline overview • 71 sites (Dec 21: 71 sites) • 18,775 plots (Dec 21: 21,155 plots) • 1,525 plots on 6 sites consented / resolution to grant (June 2022: 1,206 plots on 3 sites) As at 31 December As at 31 December As at 30 June 2022 2022 2021 No. Sites Plots No. Sites Plots No. Sites Plots Planning
Slide 33: Summary and Outlook
Summary and Outlook 33
Slide 34: Summary and outlook
Summary and outlook • Initial signs of recovery but pace and strength as yet uncertain o Expect to deliver between 1,650 & 1,850 homes in full year • Momentum building as affordability improves o Mortgage rates reducing o Cheaper to buy a Gleeson home than rent • Restructuring the Homes business o R
Slide 35: Q&A
Q&A 35
Slide 36: Appendices
Appendices 36
Slide 37: Gleeson Homes model
Gleeson Homes model We build high-quality, low-cost homes primarily for young, first-time buyers, where others don’t • 4 out of 5 sites in areas in need of regeneration • 3 out of 5 sites are brownfield • Sites well located with good transport links and access to employment • We build what our custo
Slide 38: Our customers
Our customers • 7 out of 10 first time buyers • Paid overtime – able to save deposit • 29 years old - median age o 78% are 35 years old or younger o 2% are 21 years old or younger • 42% single, 58% couples o 44% of single buyers are female • 6% cash buyers Anna, 26 and Daniel, 30 3 bedroom detached
Slide 39: Home in time for their new baby
Home in time for their new baby Buyer names: Dorrena and Paul Occupations: Teacher and Recruitment Officer Date of purchase: July 2022 Development: Briar Lea Park, Longtown, Cumbria House type: Lisburn, 3 bedroom semi-detached Purchase price: £143,995 Mortgage cost: £350 per month Previous rent cost
Slide 40: From rent trap to family home
From rent trap to family home Buyer names: Jordan, 29 and Alexa, 25 Occupations: Agricultural Manufacturer and Teaching Assistant Date of purchase: September 2022 Development: Bracken Park, Louth House type: Longford, 4 bedroom detached home Purchase price: £249,995 Mortgage cost: £900 per month Pre
Slide 41: From flat to 4 bedroom home
From flat to 4 bedroom home Buyer name: Laurynas, 28 and Karolina, 27 Occupation: Logistics Worker and Water Technician Date of purchase: September 2022 Development: Petersmiths Park, Newark, Nottinghamshire House type: 4 bedroom detached Carlow Purchase price: £236,995 Mortgage cost: £700 Previous
Slide 42: An affordable family home
An affordable family home Buyer names: Emily, 27 and Reece, 26 Occupations: Stay at home Mum and Maintenance Technician Date of purchase: November 2022 Development: Model Walk, Creswell, Nottinghamshire House type: 4 bedroom detached Waterford Purchase price: £233,995 Mortgage cost: £750 Previous re
Slide 43: Gleeson Homes – what we don’t do
Gleeson Homes – what we don’t do 43
Slide 44: Buying still cheaper than renting
Buying still cheaper than renting Average Gleeson Number of 90% LTV Rented house – Rented houses Price (31 Dec 22 bedrooms Mortgage new lettings and flats FOB) 2 bed £146,000 £149 £167 £143 3 bed £192,000 £196 £208 £163 4 bed £252,000 £257 £345 £258 All mortgage payments based on Mortgage payments o
Slide 45: Energy efficient homes – affordable to run
Energy efficient homes – affordable to run • Gleeson homes use 49% less energy Energy consumption p.a. (kWh) 2-bed 3-bed 4-bed house house house o 1% EPC rated “A” (FY22: nil) o 96% EPC rated “B” (FY22: 97%) Existing housing stock Gas (kWh) 11,400 15,150 18,400 • Average energy bills capped under th
Slide 46: Affordable for low income buyers
Affordable for low income buyers • The National Living Wage (NLW) is increasing by 9.7% on 1 April 2023 to £10.42 per hour • A couple on NLW in full time employment: o can afford to buy a home costing £192,650* o can afford to buy on any Gleeson site • Median household income of a couple buying a Gl
Slide 47: Affordable for first time buyers
Affordable for first time buyers • First time buyers spend a lower proportion of take- home pay on mortgage payments: o Mortgage costs currently represent 29% against average over the last 40 years of 25% o Affordability in the North is still more affordable than the rest of England has averaged ove
Slide 48: Attractive to value-driven buyers
Attractive to value-driven buyers Gleeson ASP vs Other new build ASP* • Gleeson homes selling prices significantly below (£,000) other developers new build prices o £336,000 average new build house price in 287 England* 272 262 250 o £268,000 average price charged by other housebuilders in Gleeson’s
Slide 49: Lower cost of ownership
Lower cost of ownership • Rental costs in the UK have risen 12%* in the last 12 months • Ownership costs lower than renting o £167 weekly cost of renting a 2-bed house o £149 weekly mortgage cost of a Gleeson 2-bed home o Interest rates can rise by a further 1% before owning costs the same as rentin
Slide 50: Organisational structure
Organisational structure Graham Prothero Stefan Allanson CEO CFO Mark Knight Guy Gusterson, Chief Executive, Gleeson Homes Managing Director, Formerly Divisional Chairman Keepmoat Gleeson Land Homes, Ops Dir/MD Miller Homes, David Formerly Managing Director, Strategic Wilson Homes Land and Regenerat
Slide 51: Sustainability Review
Sustainability Review 51
Slide 52: Sustainability
Sustainability • Focused on Environment, Communities & People o UNSDG 11: “Sustainable Cities & Communities” o Target 1: “Access for all to adequate, safe and affordable housing” o A couple on the Government’s National Living Wage can afford to buy a Gleeson home on any one of our developments • Uni
Slide 53: Progress on emissions
Progress on emissions • Concrete Bricks o Reduces embodied CO2e by 4% (circa 1.8 tonnes) per home o 6% of homes in H1 o Targeting 27% in FY24 • EV charging points o 8% of homes include electric vehicle (“EV”) charging points o Targeting 14% in FY24 • Trials: o Generators with battery storage o Suppl
Slide 54: Thank you
Thank you MJ Gleeson plc 5 Europa Court, Sheffield Business Park Sheffield S9 1XE 54