|
H1 18/19 |
H1 17/18 |
Change |
|
|
|
|
|
|
|
Revenue |
£118.3m |
£77.4m |
+52.8% |
|
|
|
|
|
|
Profit before tax |
£22.3m |
£13.7m |
+62.8% |
|
|
|
|
|
|
Cash balances |
£27.8m |
£26.7m |
+4.1% |
|
|
|
|
|
|
ROCE |
29.5% |
26.0% |
+350 bp |
|
|
|
|
|
|
EPS |
33.2p |
20.6p |
+61.2% |
|
|
|
|
|
|
Dividend per share |
11.5p |
9.0p |
+27.8% |
An excellent start to the year and confident in the outlook. On track to deliver results at least in line with expectations for the full year.
Gleeson Homes:
· Unit sales increased 16.5% to 691 units (H1 17/18: 593)
· Average selling price up 2.4% to £127,400 (H1 17/18: £124,400)
· Gross profit increased 17.3% to £27.8m (H1 17/18: £23.7m)
· Operating profit increased 13.8% to £14.0m (H1 17/18: £12.3m)
· Land pipeline of 12,966 plots (June 2018: 12,852 plots)
· 10 area offices (June 2018: 8 area offices & 2 pilot offices)
Gleeson Strategic Land:
· Completed 3 land sales with planning for 483 plots (H1 17/18: 3 land sales, 133 plots)
· Operating profit increased 291% to £9.0m (H1 17/18: £2.3m) due to sales of larger sites
· 9 sites with planning permission (June 2018: 9 sites)
Dermot Gleeson, Chairman of MJ Gleeson, commented:
“The Group has once again delivered an excellent performance, increasing operating profit in both divisions.
“Gleeson Homes' growth plans remain on track.
“We see no signs of customer caution and demand remains robust.
“Land remains available at sensible prices in both existing and new geographic areas. The two pilot offices in Penrith, Cumbria and Ashington, Northumberland have become full area offices, increasing the number of area offices to ten.
“Gleeson Strategic Land completed the same number of site sales as in the first half of the prior year, but the sites sold were significantly larger this half.
“Demand for consented sites remains strong from both large and medium-sized developers.
“Against this background, the Board is confident that the Group will deliver a result for the full year at least in line with expectations.”
CHAIRMAN'S STATEMENT
I am delighted to report an excellent first half performance.
Group profit before tax increased 62.8% to £22.3m (H1 17/18: £13.7m) following strong performances in both Gleeson Homes and Gleeson Strategic Land.
Gleeson Homes
Gleeson Homes builds and sells low-cost homes to people on lower incomes in the Midlands and North of England. Seven out of eight customers are first time buyers who are highly motivated by the desire to own their own home in areas underserved by traditional housebuilders.
During the period the division achieved growth in both volume and profit.
Revenue increased 19.4% to £88.0m (H1 17/18: £73.7m), reflecting a 16.5% rise in the total number of units sold from 593 to 691.
The average selling price (“ASP”) for the units sold in the period increased 2.4% to £127,400 (H1 17/18: £124,400) reflecting modest price increases and the effect of plot mix and development mix.
Gross margin on units sold in the period decreased 60 basis points to 31.6% (H1 17/18: 32.2%), as expected, due to cost increases arising from increased build rates and changes in development mix.
Operating margin decreased 70 basis points to 16.0% (H1 17/18: 16.7%) and operating profit increased 13.8% to £14.0m (H1 17/18: £12.3m).
During the period, 69% (H1 17/18: 63%) of unit sales benefited from the Government's Help to Buy scheme. In addition, our own bespoke purchaser assistance packages continued to prove attractive.
At 31 December 2018, we were selling from 67 sites, an increase of eight sites on the corresponding period last year. We expect to open a significant number of sites during the coming months and anticipate that the number of active selling sites will be approaching 70 by June 2019.
The pipeline of owned plots increased during the period by a net 488 plots to 6,963 plots. The total pipeline of owned and conditionally purchased plots increased by 114 plots to 12,966 plots on 144 sites at December 2018 (June 2018: 12,852 plots on 149 sites). During the period 12 new sites were added to the pipeline, while 13 sites were either completed or did not proceed to purchase and 4 sites were either merged with existing sites or sold.
Demand for our low-cost homes remains strong; we are actively sourcing sites in existing and new areas within our target geographic regions.
In July 2017 we announced our intention to double completions to 2,000 units per annum within five years. We are confident that we will achieve this.
Dividend and Dividend Timetable
In light of these strong results and our confidence in the future, the Board is declaring an interim dividend of 11.5 pence per share, an increase of 27.8% over the prior year (H1 17/18: 9.0 pence per share).
The interim dividend will be paid on 5 April 2019 to shareholders on the register at close of business on 8 March 2019. The ex-entitlement date will be 7 March 2019.
The Board aims to maintain a progressive dividend policy in which the interim dividend represents one third of the total dividend and earnings covers the total dividend between 1.75 times and 2.75 times.
Summary & Outlook
The Group has once again delivered an excellent performance, increasing operating profit in both divisions.
Gleeson Homes' growth plans remain on track.
We see no signs of customer caution and demand remains robust.
Land remains available at sensible prices in both existing and new geographic areas. The two pilot offices in Penrith, Cumbria and Ashington, Northumberland have become full area offices, increasing the number of area offices to ten.
Gleeson Strategic Land completed the same number of site sales as in the first half of the prior year, but the sites sold were significantly larger this half.
Demand for consented sites remains strong from both large and medium-sized developers.
Against this background, the Board is confident that the Group will deliver a result for the full year at least in line with expectations.
Financial Overview
Income Statement
Group revenue increased 52.8% to £118.3m (H1 17/18: £77.4m), with revenue growth in both Gleeson Homes and Gleeson Strategic Land.
Group gross profit increased 42.0% to £38.2m (H1 17/18: £26.9m).
The Group's operating profit increased 63.2% to £22.2m (H1 17/18: £13.6m). Net interest income of £0.1m (H1 17/18: £0.1m) resulted in profit before tax increasing 62.8% to £22.3m (H1 17/18: £13.7m).
The tax charge for the period was £4.0m (H1 17/18: £2.4m) reflecting an effective rate of 18.0% (H1 17/18: 17.4%). The profit after tax from continuing operations was £18.3m (H1 17/18: £11.3m). Discontinued operations recorded a loss of £0.1m (H1 17/18: £0.2m loss). The profit for the period attributable to equity holders was £18.1m (H1 17/18: £11.2m).
Balance Sheet, Cash Flow & Return on Capital Employed
Total shareholders' equity stood at £194.3m at 31 December 2018 compared to £173.7m at 31 December 2017. This equates to net assets per share of 355.9 pence (31 December 2017: 318.3 pence).
Return on capital employed increased by 350 basis points to 29.5% due to the significant increase in Gleeson Strategic Land profit during the period.
Cash outflows from operating and investing activities reduced by £3.1m to £1.0m outflow (H1 17/18: £2.1m inflow) due to increased build activity in Gleeson Homes.
The Group's net cash balance at 31 December 2018 was £27.8m (31 December 2017: £26.7m).
Risks and Uncertainties
The Group is subject to a number of risks and uncertainties as part of its activities. The Board regularly considers these and seeks to ensure that appropriate processes are in place to identify, control, and monitor these risks. The directors consider that the principal risks and uncertainties facing the Group are those outlined on pages 30 to 31 of the Annual Report and Accounts for the year ended 30 June 2018.
Dermot Gleeson
Chairman