MJ Gleeson flags margin pressure as costs rise and price growth remains week

MJ Gleeson has maintained full-year guidance despite flagging pressure on margins linked to higher costs and limited house price growth. 

The housebuilder has been buoyed by monetary easing, with the Bank of England lowering interest rates by another 25 basis points to 4.75 per cent last week, amid a sustained easing of inflationary pressures.

MJ Gleeson told shareholders the rate cut should ‘bolster buyer confidence’ over the key spring selling season, relieving weakness in the UK housing market.

According to consensus forecasts, analysts expect the Sheffield-based construction company to build 1,862 homes and make £28million in pre-tax profits for the 2025 financial year.

From July to the start of November, MJ Gleeson reported that its weekly net reservation rate rose to 0.56 per site, compared to 0.47 over the same time last year.

However, the group noted that its homes segment was still experiencing pressure on margins, partly due to multi-unit sales, increased building costs and greater sales incentives.

MJ Gleeson also flagged ‘limited relief from increasing selling prices’. 

It anticipates selling on a smaller average number of sites than the prior year even though it expects to open far more sales locations – 27 against just four in the 2024 fiscal year.

But the business said proposed changes the UK Government could make to planning reforms should ‘beneficially impact the timing of certain sites’.

The new Labour Government has promised to construct 1.5 million new homes over five years, partly by employing more planning officers and developing on lower-quality’ grey belt’ land.

Only 183,610 new properties were built across the UK in the 12 months to March 2024, 13 per cent down on the previous year, according to recent Office for National Statistics figures.

Founded in 1903, MJ Gleeson completed 1,772 new houses in the year ending June, just 49 more than in the preceding 12 months.

Higher underlying sales prices helped its overall revenue increase by 5.2 per cent to £345.3million, but costs at several legacy sites led to the company’s pre-tax profits slumping by 21.3 per cent to £24.8million.

MJ Gleeson shares were flat at 556p on Friday morning and have gained around 18 per cent over the past year.

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