MJ Gleeson H2 Earnings Call Highlights

Key Points

• Revenue increased 12.1% to £410 million as home completions rose nearly 10% to 1,968, but adjusted profit before tax fell to £10.8 million. Higher build costs, incentives, multi-unit sales and delayed land transactions pressured margins and earnings.
• Gleeson Homes’ operating margin narrowed to 5.0% from 6.4%, while the company recorded £13.6 million in exceptional charges, including restructuring, site impairments and legacy adoption provisions.
• Partnership delivery expanded, accounting for 320 homes and supported by eight new agreements, while Gleeson Land’s results were hurt by three delayed site sales. Management expects fiscal 2027 results to be in line with market expectations, though land-sale timing remains uncertain.

MJ Gleeson LON: GLE reported higher revenue for the year ended June 2026 as increased home completions and its first full year of partnership delivery lifted volumes, though group profit declined amid margin pressure in housebuilding and delayed land transactions.

The group said revenue rose 12.1% to £410 million, while adjusted profit before tax fell to £10.8 million and adjusted earnings per share totaled 14.1 pence. The board proposed a final dividend of 1 pence per share, bringing the full-year dividend to 5 pence, which it described as prudent given the less certain market environment.

Chief Financial Officer Stefan Allanson said lower operating profit principally reflected “significant site delays in Gleeson Land” and margin compression at Gleeson Homes. Group interest costs increased by £1.7 million to £5.2 million, reflecting higher average borrowings, higher borrowing costs and increased IFRS 9 discounting charges on long-term payables.

Homes volumes rise, but margins narrow

Gleeson Homes completed 1,968 homes during the year, an increase of almost 10%. The result included 320 homes delivered to partnership buyers, representing about 16% of total volume, and 301 homes sold to multi-unit buyers, or roughly 15% of annual volume.

Gleeson Homes revenue increased nearly 15% to £400 million, including £4.4 million from two land sales. Gross profit rose 3.3% to £74.5 million. However, the division’s operating margin declined by 140 basis points to 5.0%.

Allanson said build-cost inflation of about 4.5% exceeded underlying reservation selling-price growth of 2.2% during the year. The larger mix of multi-unit sales also weighed on margins, although the company offset about one-third of the impact through overhead efficiencies.

Selling prices rose 3.8%, helped by a stronger house-type and regional mix, but incentives remained elevated at around 4.8% of open-market selling prices. The company said it was seeing limited selling-price inflation, currently estimating an annualized rate of about 1%, while build costs were continuing to increase at an estimated 3% to 4% rate.

The company also introduced its own part-exchange program during the second half. It said the program broke even and supported 58 additional sales during the year. At year-end, the balance sheet included £7.1 million of part-exchange assets across 46 properties.

Restructuring and legacy provisions

MJ Gleeson recorded £13.6 million of exceptional items during the year. These included £2 million of cash restructuring costs, a £4.5 million non-cash impairment related to 12 conditionally purchased sites and one owned site, and a £7.1 million provision for legacy site adoption costs.

The legacy adoption provision covers expected costs over the next three to four years at 81 completed sites, some dating back a decade. The company said the work is largely needed to secure local-authority adoption of roads and related infrastructure, with issues such as gravel drives requiring rectification.

The company has reorganized Gleeson Homes into four principal operating regions and strengthened the leadership team, including new regional managing directors and director-level hires. It also shifted land buying into the regional structure, with the stated aim of giving regional managers greater ownership of budgets, profit and loss performance, and local land decisions.

Management said it had also tightened land-buying criteria and shifted its focus toward more densely populated suburban “chimney pot” locations. It has moved away from approximately 13 sites in the northwest and east coast of Yorkshire that no longer met its criteria or hurdle rates.

Gleeson Homes operated from an average of 67 build sites and 56 sales outlets during the year. Management expects average site numbers to be lower in the current year and broadly similar in fiscal 2028, as slower planning decisions, portfolio rationalization and a more cautious approach to balance-sheet risk affect the opening profile.

Partnership strategy gains traction

The company said partnership delivery is becoming an increasingly important component of its housebuilding strategy. It signed eight additional partnership agreements during the year, supporting the year-end forward order book. Overall forward orders were up by three plots, with open-market forward orders unchanged at 402.

Management said the first partnership completions had helped establish the group’s credibility with prospective investors and housing partners. Of the 320 partnership units delivered, more than 60 were sold under a “golden brick” model, in which the company begins receiving payments during the construction period.

MJ Gleeson said it is seeking to progress toward more forward-funded partnership arrangements, potentially including funding for infrastructure and, ultimately, participation at the land-acquisition stage. It is also developing a dedicated product range for partnership customers, expected to be available in the second half of the current year.

Scott Stothard, divisional chair of Gleeson Homes, said cancellation rates remained broadly in line with previous levels. The company said it was not currently seeing mortgage-rate increases as a major driver of cancellations, although management cited weaker consumer confidence, higher mortgage rates and concerns about living costs as factors affecting market sentiment.

Land sales delayed, pipeline expands

Gleeson Land completed five site sales during the year, generating £4.8 million of gross profit before an additional £1.4 million of portfolio provisions. With overheads of £4.1 million, the division reported a £700,000 loss.

Three expected site sales were delayed into the current year, including one particularly large transaction. Management said it expects the large site to receive technical consent during the current calendar year, after which the buyer would have approximately six to eight weeks to exercise its option. Two smaller delayed sales are also expected to proceed in the current year.

Despite planning delays and more cautious developers, the company said its land portfolio continued to attract interest. Gleeson Land submitted 18 planning applications during the year and had 24 sites awaiting decisions. It also added promotion agreements, with management citing 15 new agreements exchanged during the year, including two conditional agreements.

Net borrowings stood at £2.6 million at year-end, while net assets were approximately £300 million and land creditors were £15.5 million. The group generated £16.9 million of operating cash flow, led by £22 million from Gleeson Homes.

Looking ahead, the board said it expects to deliver an overall fiscal 2027 result in line with current market expectations, while cautioning that the timing of Gleeson Land transactions remains difficult to predict.

About MJ Gleeson (LON:GLE)

MJ Gleeson plc comprises two divisions: Gleeson Homes and Gleeson Land. Gleeson Homes, under the banner of "Building Homes. Changing Lives" builds high-quality affordable homes across the Midlands and North of England. To meet customer demand, and without compromising affordability, the range of homes available extends from one-bed apartments to five-bedroom houses. With a two-bedroom home available from £100,000, a key objective is to ensure that on all of our developments, a meaningful proportion of homes are affordable to a couple earning the National Living Wage.

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