Mj Gleeson Plc · LSE:GLE
Mj Gleeson — FY2022 Earnings Presentation
56 slides from Mj Gleeson's earnings presentation, Sep 15, 2022
Slide 1: Results for the year ended 30 June 2022
Results for the year ended 30 June 2022 15 September 2022 1
Slide 2: Results for the year ended 30 June 2022
Results for the year ended 30 June 2022 Overview 3 James Thomson Financial Highlights 5 Stefan Allanson Sustainability 15 Stefan Allanson Business and Strategic Review 20 James Thomson Summary and Outlook 44 James Thomson 2
Slide 3: Overview
Overview 3
Slide 4: Outstanding results
Outstanding results • Medium-term strategic target of 2,000 homes by 2022 achieved • Resilient profit growth: • Gleeson Homes operating profit up 37% • Strong performance by Gleeson Land • Group PBT up 33% • Affordability continuing to underpin strong ongoing demand • Lower cost homes with low energ
Slide 5: Financial Highlights
Financial Highlights 5
Slide 6: Record performance and strong financial position
Record performance and strong financial position • Revenue: £373.4m (2021: £288.6m) up 29.4% • Operating profit: £56.8m* (2021: £43.1m) up 31.8% • PBT: £55.5m* (2021: £41.7m) up 33.1% • EPS: 78.1p* (2021: 58.2p) up 34.2% • Net Cash: £33.8m (2021: £34.3m) down £0.5m • ROCE: 25.4%* (2021: 21.4%) up 40
Slide 7: Income statement
Income statement Year ended Year ended Change Notes £ million 30 June 2022 30 June 2021 Homes 334.6 265.8 +26% Homes sold up 10.4%, ASP up 14.7% Gleeson Land 38.8 22.8 +70% 6 sites sold of which 3 via option Revenue 373.4 288.6 +29% Homes 51.2 37.4 +37% Gleeson Land 11.1 11.1 Group overhead (5.5) (5
Slide 8: Gleeson Homes – unrelenting demand
Gleeson Homes – unrelenting demand Homes sold • Homes sold up 10.4% to 2,000 (2021: 1,812) 2,000 1,812 o H2 volumes up 24.0% on prior year H2 1,529 1,225 1,068 861 H2 • ASP up 14.7% to £167,300 (2021: £145,800) 838 1,072 632 261 H1 o Underlying selling prices up 11.8% 951 932 o Customer extras £2,50
Slide 9: Gleeson Homes – strong margins
Gleeson Homes – strong margins Gross profit per home sold (£'000) 48.4 • Gross profit up 28.0% to £96.9m (2021: £75.7m**) 40.9 38.8 41.6 36.4 o Gross profit per home sold £48.4k (2021: £41.6k) • Build cost inflation c8% o Gross margin on unit sales 29.0% (2021: 28.5%) • Overheads up 19.7% to £46.1m
Slide 10: Gleeson Homes – record performance
Gleeson Homes – record performance Operating profit* 51.2 £ million • Other operating income £0.4m (2021: £0.2m) 37.4 30.1 • Operating profit up 36.9% to £51.2m (2021: £37.4m) 26.2 • Operating margin up 120 bp to 15.3% (2021: 14.1%) 9.0 • ROCE up 540 bp to 28.2% (2021: 22.8%) 2018 2019 2020 2021 202
Slide 11: Gleeson Land – robust performance
Gleeson Land – robust performance Site sales (number of plots) • 6 land sales completed (2021: 8) 1,970 1,978 1,755 133 o Total developable plots 1,443 (2021: 1,978) 745 1,443 483 o 3 option sales, 3 promotion sales (2021: 8 promotions) Plots H1 1,837 o Gross profit per plot £9,550 (2021: £6,910) 1,
Slide 12: Balance sheet
Balance sheet 30 June 30 June 2022 2021 £ million Notes Homes Land 100.0 82.1 £11,400 per plot (2021: £9,900) WIP 157.1 126.2 £1.81m per site (2021: £1.56m) Land Land 13.7 15.5 71 sites (2021: 71 sites) WIP 16.1 16.2 Total inventories 286.9 240.0 Other assets 46.9 38.8 £24m Gleeson Homes, £19m Glees
Slide 13: Cash flow
Cash flow Year ended Year ended Notes £ million 30 June 2022 30 June 2021 Profit before tax 42.6 41.7 Depreciation and other 19.1 5.3 Includes £12.9m building safety provision Working capital movements (41.8) (10.7) Cash generated from operating activities 19.9 36.3 Tax (7.1) (10.2) Interest and fin
Slide 14: Dividends
Dividends Dividends 34.5p • Recommended final dividend of 12.0 pence per share 32.0p • Total dividend for the year 18.0 pence per share • Capital allocation policy supports growth agenda Pence per share 23.0 23.0 18.0p 15.0p • Dividend cover to remain at between 3 and 5 times 12.0 10.0 Final • Final
Slide 15: Sustainability
Sustainability 15
Slide 16: Sustainability
Sustainability • Strategy focused on the Environment, Communities and People o UNSDG 11: "Sustainable Cities & Communities" o Target 1: "Safe and affordable housing for everyone" o A couple on the Government's minimum wage* can afford to buy a Gleeson home on any one of our developments • TCFD and S
Slide 17: Progress on sustainability targets
Progress on sustainability targets Target Outcome 1. Health and safety incident rate (“AIIR”) AIIR decreased to 55 (1 RIDDOR) and below will be reduced to the industry average or ✓ industry average. lower in the year 2. Our employee engagement will be Employee engagement score of 90%, this places ma
Slide 18: New sustainability targets
New sustainability targets Target Key actions 1. Health and safety incident rate (“AIIR”) will Enhance temporary works training, campaign on slips, trips and be lower than the industry average in the falls, training on underground services and utilities, spot checks year on monthly focus areas, digi
Slide 19: 45 tonnes CO2e to build a Gleeson home
45 tonnes CO2e to build a Gleeson home • 45t CO2e for every Gleeson home built o 2t Scope 1 and 2 o 43t Scope 3 (construction and infrastructure) • Scope 1 and 2 emissions being reduced o Reduced by 9% in 2021 to 1.86t o On target for 1.75t by 2023 • Air-source heat pumps replacing gas boilers from
Slide 20: Business and Strategic Review
Business and Strategic Review 20
Slide 21: 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. 21
Slide 22: Gleeson Land
Gleeson Land 22
Slide 23: Our Vision and Mission: Gleeson Land
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 sites for new homes. Land south of Barnham Station Illustrative site layout plan 23
Slide 24: Promoting land. Unlocking value.
Promoting land. Unlocking value. • Gleeson Land a top-4 promoter Operating cash flow • Land promoters deliver 2 out of every 5 large consented sites 16.9 to housebuilders • Gleeson Land more attractive following recent corporate 11.3 activity – interests aligned with landowners 9.4 £ million • Plann
Slide 25: Pipeline ripe – planning congested
Pipeline ripe – planning congested • Number of sites awaiting a planning decision has increased to Planning applications submitted 16 (2021: 15, 2020: 7, 2019: 6) Number of sites • Of which, 6 sites awaiting appeal (2021: 5, 2020: 0, 2019: 0) • 10 planning applications submitted (2021: 10, 2020: 6,
Slide 26: Pipeline overview
Pipeline overview • 71 sites (2021: 71 sites) • 20,241 plots (2021: 22,315 plots) • 1,206 plots on 3 sites consented / resolution to grant (2021: 2,210 plots on 6 sites) As at 30 June 2022 As at 30 June 2021 At 30 June 2022 No. Sites Plots No. Sites Plots Planning consented / 3 1,206 6 2,210 Plannin
Slide 27: Gleeson Homes
Gleeson Homes 27
Slide 28: Our Vision and Mission: Gleeson Homes
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” Canal Walk, Burnley 28
Slide 29: 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 30: Our customers
Our customers • 3 out of 4 first time buyers • 3 out of 5 key workers • Paid overtime – able to save deposit • 29 years old - median age o 74% are 35 years old or younger o 5% are retired o 2% are 21 years old or younger • 50% Single, 50% couples o 50% of single buyers are female • 7% cash buyers Am
Slide 31: Gleeson Homes – what we don’t do
Gleeson Homes – what we don’t do 31
Slide 32: Large, underserved market
Household tenure Large, underserved market North of England & (millions of households) South of England & • 1 in 3 households in England are renting Midlands East o 1 million 21 to 35 year olds living at home in the North & Midlands 7.7 8.2 4.1 4.9 o 4.1 million rented homes in the North and Midland
Slide 33: Attractive to value-driven buyers
Attractive to value-driven buyers • Gleeson homes ASP significantly below other new build companies o £327,000 average newbuild house price in England* o £266,000 average price charged by other housebuilders in Gleeson’s regions o 59% higher than Gleeson’s average selling price of £167,300 *Source:
Slide 34: Affordable for low income buyers
Affordable for low income buyers • The National Living Wage (NLW) increased by 6.6% in April 2022 to £9.50 per hour • A couple on NLW in full time employment: o can afford to buy a home costing £175,644* o can afford to buy on any Gleeson site • Median household income of a couple buying a Gleeson h
Slide 35: Mortgage availability
Mortgage availability Buyer source of funding • Mortgage market remains robust o 13,600 mortgage products available Cash buyers • Help to buy ends March 2023 4% 6% 6% o Not expected to impact demand or affordability 95% mortgage 44% • Alternatives available: 69% 53% o First Homes, Home Reach, Deposi
Slide 36: Energy efficient homes – affordable to run
Energy efficient homes – affordable to run Energy consumption p.a. (kWh) • Gleeson homes use 49% less energy 2-bed 3-bed 4-bed o 97% EPC rated “B” house house house • Average energy bills capped under the Government’s energy plan Existing housing stock Gas (kWh) 11,400 15,150 18,400 o Average energy
Slide 37: Lower cost of ownership
Lower cost of ownership • Average mortgage payments in the UK are £8,000 p.a. • Rental costs in the UK have risen 12%* in the last 12 months • Average energy bills rising to £2,500 p.a. from October • Ownership costs significantly lower than renting o £184 weekly cost of rent and energy bills o £153
Slide 38: Affordable at higher interest rates
Affordable at higher interest rates • Gleeson buyers spend a lower proportion of take-home pay on mortgage payments: o Mortgage payments 25% of the take home pay of a typical couple buying a 3-bed Gleeson home o The UK average in Q2 2022 was 32% for first time buyers* o Even if rates rise by another
Slide 39: Industry backdrop
Industry backdrop ISSUE IMPACT / MITIGATION • Supply chain • Strong relationship with suppliers and sub- • Material costs and sub-contractor rates contractors has avoided site stoppages • Energy costs • Strong selling prices more than covering costs • Wage inflation, skills shortages • Increasing Ap
Slide 40: Strong demand – growing footprint
Strong demand – growing footprint Build sites • Demand 87 • Sales releases managed to optimise price and customer 81 journey 69 71 o FOB 618 plots (2021: 841 plots) 65 20 26 Build sites 6 not yet • Selling faster - days from sales release to fully reserved Number of sites actively down from 49 days
Slide 41: Growing pipeline of sites
Growing pipeline of sites Pipeline (plots) 16,814 15,863 • Pipeline up 6.0% to 16,814 plots on 160 sites 13,575 13,801 o 87 active build sites 12,852 8,336 o 5 owned, not yet active 7,933 Conditionally Number of plots purchased o 68 conditionally purchased sites 7,050 6,952 Owned 6,377 • 8.4 years s
Slide 42: Investment programme: delivering results
Investment programme: delivering results • 9th Region established – West Yorkshire • Refreshed house-type elevations • 90.7% customer satisfaction • Top decile employee engagement • Improved H&S – AIIR at 55 (industry average 239) • Reduced emissions – Scope 1&2 reduced 9% • NHQC-ready (July 2022) •
Slide 43: Strong platform for regional growth
Strong platform for regional growth • 3 Divisions: Yorkshire and Midlands, North Eastern, North West • 9 Regions o Lincolnshire: possible next regional office o Capacity to deliver 500 home sales p.a. in each region • Sales rate increasing to meet demand o 31.7 homes sold per site (2021: 28.3 homes)
Slide 44: Summary and Outlook
Summary and Outlook 44
Slide 45: Summary and outlook
Summary and outlook • An excellent performance in FY2022 • Strong start to current financial year • Affordability attracting core demographics and value-driven customers • Land market resilient • Investment programme delivering significant benefits • Well-positioned to deliver further profitable gro
Slide 46: Q&A
Q&A 46
Slide 47: Appendices
Appendices 47
Slide 48: Single first-time buyer
Single first-time buyer Buyer name: Amber, 29 Occupation: NHS Clerk Date of purchase: April, 2022 Development: Linkswood Park, Rotherham House type: Kerry, 2 bedroom semi-detached Purchase price: £117,775 Mortgage cost: £379 per month Previous rent cost: £550 per month (1 bedroom flat) Single first-
Slide 49: Family first-time buyers
Family first-time buyers Buyer names: Ben 32, Rebecca, 36 and children Occupations: Armed Forces Chef, and Hairdresser Date of purchase: December, 2021 Development: Dane Park, Hull House type: Renmore, 3 bedroom detached Purchase price: £176,000 Mortgage cost: £600 per month, 30 year, Forces Help to
Slide 50: Couple, first-time buyers
Couple, first-time buyers Buyer name: Katie, 24 and Liam, 24 Occupation: Recruiter and Glass Blower Date of purchase: June 2021 Development: Greencroft View, Stanley, County Durham House type: Kilkenny, 3 bedroom detached Purchase price: £139,995 Mortgage cost: £400 per month, 30 year, Help to Buy B
Slide 51: Retired buyers
Retired buyers Buyer names: Julie, 68 and Neville, 66 Occupations: Retired Carer and retired Engineer Date of purchase: November 2021 Development: Barnburgh View, Goldthorpe, Barnsley House type: Wicklow, 3 bedroom semi-detached Purchase price: £164,995 Mortgage cost: Mortgage free Julie and Neville
Slide 52: Contemporary
Refreshed elevations: Contemporary Artist illustration: 4 bedroom detached “Longford” – Contemporary elevation 52
Slide 53: Urban
Refreshed elevations: Urban Artist illustration: 3 bedroom semi-detached “Fergus” – Urban elevation 53
Slide 54: Rural
Refreshed elevations: Rural Artist illustration: 3 bedroom detached “Liffey” – Rural elevation 54
Slide 55: Organisational structure
Organisational structure James Thomson Stefan Allanson CEO CFO Steve Gamble Mark Knight James Pitt Land and Planning Director Chief Executive, Gleeson Homes Managing Director, Gleeson Formerly Land Director at Gladedale Formerly Divisional Chairman Keepmoat Land Homes. 20+ years land buying Homes, O
Slide 56: Thank you
Thank you MJ Gleeson plc 5 Europa Court, Sheffield Business Park Sheffield S9 1XE