MJ Gleeson PLC · LSE:GLE
MJ Gleeson — FY2023 Earnings Presentation
61 slides from MJ Gleeson's earnings presentation, Sep 14, 2023
Slide 1: Results for the year ended 30 June 2023
Results for the year ended 30 June 2023 14 September 2023 1
Slide 2: Contents
Contents Overview 3 Graham Prothero Financial Performance 6 Stefan Allanson Operations & Strategy 19 Graham Prothero Graham Prothero, CEO Summary & Outlook 38 Graham Prothero Appendices 41 Stefan Allanson, CFO 2
Slide 3: Overview
Overview 3
Slide 4: Results overview
Results overview Gleeson Homes: • Robust performance in a challenging market • Moderate sales rate, supported by first multi-unit sales • Taken advantage of quieter market to restructure • Focus on build quality and customer journey • Clear route to 3,000 homes p.a. in the medium-term Gleeson Land:
Slide 5: Recent trading
Recent trading Last 9 weeks (to 1 September 2023) • Typical seasonal summer slowdown in reservations Net reservations down • Stable cancellation rates 20% v prior year • Proactive initiatives expected to stimulate growth: 0.64 Gross reservations • Elevated product offering 0.53 Cancellations • Refre
Slide 6: Financial Performance
Financial Performance 6
Slide 7: Results in line with expectations
Results in line with expectations • Revenue: £328.3m (2022: £373.4m) • Operating profit: £33.6m (2022: £56.8m) • PBT: £31.5m (2022: £55.5m) • EPS: 42.9p (2022: 78.1p) • Net cash: £5.2m (2022: £33.8m) • ROCE: 13.0% (2022: 25.4%) • Total dividend: 14p (2022: 18p) FY23 results are stated before £1.0m e
Slide 8: Income statement
Income statement Year ended Year ended £ million 30 June 2023 30 June 2022 Change Notes Homes 320.8 334.6 -4.1% Homes sold -13.9%, ASP +11.3% Gleeson Land 7.5 38.8 -80.7% 3 sites sold (2022: 6) Revenue 328.3 373.4 -12.1% Homes 35.0 51.2 -31.6% Gleeson Land 1.0 11.1 -91.0% Group overhead (2.4) (5.5)
Slide 9: Gleeson Homes
Gleeson Homes • Homes sold down 13.9% to 1,723 (2022: 2,000) • ASP up 11.3% to £186,200 (2022: £167,300) • Underlying selling prices up 7.6% • Customer extras £2,800 per home (2022: £2,500) • Average home size 2.90 bedrooms (2022: 2.83) • 2-bed 22.3% (2022: 25.9%) • 3-bed 65.1% (2022: 65.0%) • 4-bed
Slide 10: Gleeson Homes
Gleeson Homes • Gross profit down 10.7% to £86.5m (2022: £96.9m) • Gross profit per home sold £50.2k (2022: £48.4k) • Gross margin on unit sales 27.0% (2022: 29.0%) • Build cost inflation 3.4%, increased incentives and extended site durations • Underlying selling price increases of 7.6% • Overheads
Slide 11: Gleeson Homes
Gleeson Homes • Other operating income £0.4m (2022: £0.4m) • Operating profit £35.0m (2022: £51.2m) • Operating margin 10.9% (2022: 15.3%) • ROCE 16.1% (2022: 28.2%) *FY23 results are stated before £1.0m exceptional restructuring costs and FY22 results are stated before £12.9m exceptional building s
Slide 12: Rebuilding the forward order book
Rebuilding the forward order book • Reduced forward order book at start of financial year • Plots were being released for sale later in the build process - optimising selling prices and improving the customer journey • Weak market conditions since September 2022 reduced the forward order book at 31
Slide 13: Build and sales sites
Build and sales sites • Build sites • 3 sites opened (2022: 23 sites opened) • Expect to open over 20 sites by June 2024 • Expect between 80 & 85 sites by June 2024 • Sales sites • 71 sites at year end (2022: 61) • 68 average sites during the year (2022: 63) • Pause in new build sites will impact nu
Slide 14: Site pipeline
Site pipeline • Pipeline up 3.3% to 17,375 plots on 173 sites • 82 active build sites • 7 owned, not yet active • 84 conditionally purchased sites • 10.1 years supply • Average cost c.£14,300 per plot (2022: £12,500) • Land still available at sensible prices • Cost per plot less than 10% of ASP 14
Slide 15: Gleeson Land
Gleeson Land • 3 land sales completed (2022: 6 land sales) • All promotion sales (2022: 3 option sales, 3 promotion sales) • 413 developable plots (2022: 1,443) • Gross profit per plot £8,800 (2022: £9,550) • Gross profit £3.6m (2022: £13.8m) • Overheads £2.6m (2022: £2.7m) • Operating profit £1.0m
Slide 16: Balance sheet
Balance sheet 30 June 30 June £ million 2023 2022 Notes Homes Land 97.1 100.0 £12,100 per plot (2022: £11,400) WIP 214.0 157.1 £2.61m per site (2022: £1.81m) – reflects c£30m investment ahead of Part L Land Land 15.5 13.7 70 sites (2022: 71 sites) WIP 18.0 16.1 Total inventories 344.6 286.9 Other as
Slide 17: Cash flow
Cash flow Year ended Year ended £ million 30 June 2023 30 June 2022 Notes Profit before tax 30.5 42.6 Depreciation and other 5.8 19.1 Depreciation, provisions, finance costs and SBP charges Working capital movements (45.9) (41.8) Reflects investment ahead of Part L Cash generated from operating acti
Slide 18: Dividends
Dividends • Recommended final dividend of 9 pence per share • Paid on 24 November 2023 • Total dividend for the year 14 pence per share • Dividend cover of 3.1 times • Capital allocation policy supports growth agenda • Dividend cover to remain between 3 and 5 times 18
Slide 19: Operations & Strategy
Operations & Strategy 19
Slide 20: A sustainable business
A sustainable business • Strategy focused on Communities, Environment, People • UNSDG 11: "Sustainable Cities & Communities” • Target 1: “Access for all to adequate, safe and affordable housing“ • A couple on the government’s National Living Wage can afford a house on every Gleeson development • Com
Slide 21: Market and structural pressures
Market and structural pressures • Customers still adjusting to the higher cost of buying • First-time buyers inhibited by loss of Help to Buy • Pricing remains firm • Good mortgage availability • Build cost inflation has been uneven • Planning system remains congested • CMA market study inconclusive
Slide 22: Gleeson Homes
Gleeson Homes 22
Slide 23: Delivering in a challenging environment
Delivering in a challenging environment • Performance in line with expectations, with 1,723 completions • Open-market sales rate subdued; supplemented by four multi-unit sales for a total of 377 homes representing 115 completions in 2023 • Shared ownership offering will improve sales rate – expected
Slide 24: Restructuring
Restructuring Development • Restructure delivers a leaner and more scalable business • Each region capable of 500 homes p.a Regional office • 6 regional management teams across the same geographic coverage, under a standardised operating structure • Trialing more efficient local sales hub model • Ab
Slide 25: Remaining highly affordable
Remaining highly affordable • Affordable for low-income buyers • Mortgage payments 26% take home pay v UK average 39% • National Living Wage (NLW) increased 9.7% in April 2023 • A couple on the NLW can afford a home costing £192,654 • 28% higher than Gleeson’s average 2-bed home • Higher than Gleeso
Slide 26: Elevating the offering
Elevating the offering • Two-year elevation refresh process complete • New range reflects diversity of locations and changing customer preferences • Able to build at greater density where necessary • New elevations maintain margins whilst utilising the same materials and design quality as higher ASP
Slide 27: Refocusing our marketing and sales
Refocusing our marketing and sales • Proactively targeting wider demographics including STBs, down-sizers and retirees • Tailored and data-led marketing initiatives and incentives • Enhanced sales processes, including lead management • Launched our Sales Academy, providing continuous learning and tr
Slide 28: Opportunities in partnerships
Opportunities in partnerships • Forward funding structure enhances returns • Access to land • Opportunity to develop and de-risk larger, more efficient sites • Developer skillset • Increasingly receiving approaches from local authorities, housing associations and PRS • Dedicated team but low additio
Slide 29: Gleeson Land
Gleeson Land 29
Slide 30: Expanding the footprint
Expanding the footprint • Gleeson Land is a top 4 promoter • Sale of 3 sites during the year, with the potential to deliver 413 homes • Lack of supply supporting demand for high quality, consented sites • Increased caution among the major housebuilders is extending timetables • Strong pipeline of si
Slide 31: Growth strategy
Growth strategy • Build on our solid foundations and the business’ growth potential • Increase market share in the South East and South West • Deepen coverage of high demand, high value areas in Northern Home Counties and Midlands • Market-leading data analytics capabilities • Medium-term growth pot
Slide 32: Pipeline ripe – planning congested
Pipeline ripe – planning congested • Active in the period • 11 planning applications submitted (2022: 10) • 6 sites granted permission (2022: 4) • High-quality portfolio • 18 sites awaiting a planning decision (2022: 16) • Of which, 8 sites awaiting appeal (2022: 6) • 6 sites currently with permissi
Slide 33: Pipeline overview
Pipeline overview • 70 sites (June 2022: 71 sites) • 17,831 plots (June 2022: 20,241 plots) • 1,400 plots on 6 sites with consent / resolution to grant (June 2022: 1,206 plots on 3 sites) As at 30 June 2023 As at 30 June 2022 No. Sites Plots No. Sites Plots Planning consented / resolution to grant 6
Slide 34: Summary & Outlook
Summary & Outlook 34
Slide 35: Summary & outlook
Summary & outlook • Restructure implemented to support efficiency and expansion • Carefully managing site investment as demand environment develops • Gleeson Homes’ demand expected to improve through Autumn and Spring selling seasons, supported by: • Elevated product offering • Refreshed sales & mar
Slide 36: Q&A
Q&A 36
Slide 37: Appendices
Appendices 37
Slide 38: Gleeson Homes and Gleeson Land
Gleeson Homes We build and sell high-quality, low-cost homes where they are needed, for people who need them most. Gleeson Land We promote land, enhancing its value by securing mainly residential planning consent. 38
Slide 39: Buying still cheaper than renting
Buying still cheaper than renting 85% LTV 90% LTV Rented house – Number of Average Gleeson mortgage mortgage new lettings bedrooms price (cost per week) (cost per week) (cost per week) 2 bed £144,300 £149 £161 £196 3 bed £188,800 £195 £210 £245 4 bed £246,900 £255 £275 £345 All mortgage payments bas
Slide 40: Jess
Jess Buyer name: Jess, 38 Occupation: Field Sales Manager at Gleeson Homes Date of purchase: May 2023 Development: Greymoor Meadows, Carlisle House type: Cork, 2-bedroom semi-detached Purchase price: £122,584 Previous rent cost: Cash purchase, no mortgage From selling Gleeson homes to living in her
Slide 41: Annie
Annie Buyer name: Annie, 50 Occupation: International Contracts Manager Date of purchase: April 2023 Development: Petersmiths Park, Nottinghamshire House type: Longford, 4-bedroom detached Purchase price: £257,995 Mortgage cost: £312 per month Annie previously lived in a 3-bedroom semi-detached home
Slide 42: Henry and Harry
Henry and Harry Buyer names: Harry, 24 and Henry, 21 Occupations: Both work for a telecommunications company Date of purchase: December 2022 Development: Willows Park, Accrington House type: Kerry, 2-bedroom semi-detached Purchase price: £144,995 Mortgage cost: £436 per month After initially moving
Slide 43: Kaity and Keelan
Kaity and Keelan Buyer names: Kaity, 26 and Keelan, 27 Occupations: Pharmacy Technician and Fencing Contractor Date of purchase: December 2022 Development: Grangemoor Park, Northumberland House type: Cork, 2-bedroom semi-detached Purchase price: £125,000 – 50% shared ownership Mortgage cost: £239 pe
Slide 44: Urban Refresh
Old Style Urban Refresh Simplified detailing Single brick solution Verge detailing modernised Grey door option
Slide 45: Rural Refresh
Old Style Rural Refresh Arched Heads Cottage style windows Traditional canopy variations Simplified brick detailing Reed green door option
Slide 46: Contemporary Refresh
Old Style Contemporary Refresh Feature window Modern anthracite frames Streamlined detailing Contemporary door / canopy Modern dormer style to specific types
Slide 47: Stone Refresh
Old Style Old Style Stone Refresh Cottage style windows Traditional canopy variations Simplified window head detailing Black doors
Slide 48: Render elevations
Render elevations Render to front elevation Brick soldier course heads and sills Lean to canopy to front door Brick corbels
Slide 49: Sustainability
Sustainability 49
Slide 50: 47 tonnes CO2e to build a Gleeson home
47 tonnes CO2e to build a Gleeson home • 47t CO2e for every Gleeson home built • 2t Scope 1 and 2 • 45t Scope 3 (construction and infrastructure) • Scope 1 and 2 emissions • Reduced by 16% in 3 years to 2.09t per home • Concrete bricks – 4% (1.7 tonnes) less CO2e • 14% of homes sold this year • 32%
Slide 51: Operating sustainably
Operating sustainably • Implementing improved health & safety management system • Real Living Wage accredited – first housebuilder to commit • Senior Ecologist appointed 2023 • Full TCFD and SASB reporting • FairTax Foundation – first housebuilder to be accredited, achieved for the third year runnin
Slide 52: 2024 sustainability targets
2024 sustainability targets Target Key actions 1. Health and safety incident rate (“AIIR”) will HomeSafe management training; New software for completion of safety inspections; Deliver targeted, themed campaign to embed health and safety be lower than the industry average in the culture; Deliver enh
Slide 53: Market Backdrop
Market Backdrop 53
Slide 54: Capital Markets Day, July 2023
Capital Markets Day, 7 July 2023 54 Petersmiths Park, Ollerton, Nottinghamshire
Slide 55: Land & planning
Land & planning Planning rejection rate (%major Rejection rate for of major developments) residential developments (%) • Government policies and environmental issues are having an impact on planning and housing starts in England • Planning taking longer and more uncertain – but rejection rate stable
Slide 56: Healthy supply chain and costs softening
Healthy supply chain and costs softening • Materials: Availability high Call-off periods & delivery times back to normal Fuel prices falling Prices beginning to ease • Labour: Availability good Lower rates for bricklayers, groundworkers, roofers & joiners • Build cost inflation: • +10% in 12 months
Slide 57: Structural under-supply of quality, affordable homes
Structural under-supply of quality, affordable homes • Shortage of affordable homes in North of England and Household tenure Midlands: (millions of households) 4.1 million households renting 0.6 million households on Local Authority waiting lists 2.1 million adults living with parents • Little choic
Slide 58: Mortgage rates and costs
Mortgage rates and costs • Buyers still adjusting to higher cost of buying • Mortgage rates up in recent weeks, but are below October 2022 peak Best available first-time-buyer mortgage rates: • Alternative products available following end of HtB in March 2023 5-yr fixed 2-yr fixed Variable 85% LTV 5
Slide 59: Cost of home ownership
Cost of home ownership • Selling prices remain low • £340,600 average new build house price in England* • £272,600 average price charged by other housebuilders in Gleeson’s regions • 54% higher than Gleeson’s average selling price of £186,200 • Rental costs in the UK have risen 3.2%* in the last 7 m
Slide 60: House prices – North of England isn’t North London
House prices – North of England isn’t North London • Price increases since 2007 vary by region: London up 97% North of England & East Midlands up 47% Below rise in RPI of 86% • Since 2014: National Living Wage up 65% Gleeson prices up 53% • Since August 2022: London house prices down 3% North of Eng
Slide 61: Thank you
Thank you MJ Gleeson plc 5 Europa Court, Sheffield Business Park Sheffield S9 1XE 61