Gleeson blames mini-budget as sales, reservations fall

Sheffield-based affordable house builder MJ Gleeson plc said it completed the sale of 894 homes during the half-year to December 31, about 4.1% fewer than the same period of 2021.

The firm said gross reservations during the seasonally quieter six weeks before Christmas were 22.2 per week, 25% lower than the 29.5 gross reservations per week in the same period of 2021.

In a trading update, Gleeson said: “This reflected the weaker market and considerably higher mortgage costs as a consequence of the mini-budget in September 2022.

“Despite this, selling prices have remained stable.”

Graham Prothero joined the Gleeson board as CEO on January 1, succeeding James Thomson, who replaced Dermot Gleeson as non-executive chairman.

Gleeson said cancellation rates reduced during the six weeks to Christmas, with 6.5 plot cancellations per week compared to 11.5 plot cancellations per week in the previous six weeks to mid-November.

“The company is continuing to successfully secure land which meets strict hurdle rates whilst tightly managing working capital on both land purchases and new build sites until the pace of the market’s recovery becomes clearer,” added Gleeson.

“Net cash balances at 31 December 2022 were £13.5m (31 December 2021: £38.2m).

“Gleeson Homes acquired three sites during the period and opened three new build sites.

“The division had 87 active build sites (31 December 2021: 83) and was actively selling on 68 sites (31 December 2021: 60) and the company expects to be selling on circa 66 sites by 30 June 2023.

“Gleeson Land sold one site during the period.

“The business has had several recent planning successes, and a further three sites are being actively progressed for sale.

“Gleeson Land is continuing to see strong demand for high quality consented land from housebuilders looking beyond the current wider uncertainty in the housing market.

“Gleeson Homes enters the second half of the financial year with a forward order book of 319 plots (31 December 2021: 616 plots).

“However, we are cautiously optimistic of a recovery during 2023, due to a number of factors, including that mortgage rates continue to fall from the highs experienced in October 2022, and the need for low-cost, high-quality homes remains acute.

“A couple earning the National Living Wage (which is set to increase by 9.7% on 1 April 2023) can still afford to buy a home on any one of our sites. 

“In addition, there continues to be growing interest from new customers who might previously have considered a more expensive property built by another developer but in the current economic environment are attracted by Gleeson’s more affordable price points.

“As previously stated, the outturn for the current financial year is dependent upon the pace of recovery in the housing market over the coming months. 

“A further update will be provided with the interim results on 16 February 2023.”