Gleeson shares hit amid falling home sales and margins

Shares of Sheffield-based affordable house builder MJ Gleeson plc fell roughly 10% after it published a trading update for the half-year ended December 31, 2023.

The group said Gleeson Homes completed the sale of 769 homes during the half-year, 14% fewer than the half-year to December 31, 2022, “reflecting the weaker conditions experienced across the housing market during 2023.”

However, Gleeson Homes entered the second half of the financial year with a forward order book of 586 plots (31 December 2022: 319 plots).

Net reservation rates during the half-year period were 0.41 per site per week (half-year to 31 December 2022: 0.36 per site per week).

“Additional costs relating to a number of older sites, along with the cumulative impact of current market conditions including extended site durations, sales incentives and multi-unit sales, are now expected to result in full year gross margins falling below expectations by circa 1.5% to 2.0%,” said MJ Gleeson.

“Gleeson Land completed the sale of one site during the half year to 31 December 2023 (H1 2023: three sites sold). We have recently commenced marketing a further four sites.

“Reflecting the significant investment in bringing forward a higher proportion of home starts before June 2023 the group will report net debt of £18.7m at 31 December 2023 (30 June 2023: net cash £5.2m). The cash impact of this investment is expected to unwind over the next two years.

“Against the backdrop of stabilising interest rates the board anticipates a recovery in demand for low-cost housing in the seasonally busier selling period over the coming weeks and months.

“Gleeson Homes also continues to negotiate further multi-unit sales and expects to enter into agreements over the coming months for delivery of homes in the current and next financial year.”