Gleeson margins take up to 2% hit

Housebuilder and land trader Gleeson has revealed that its full year gross margins are falling below expectations by between 1.5% to 2% as it battles “legacy issues”. 

In a trading update for the half-year ending 31 December 2023, it was revealed that Gleeson Homes completed the sale of 769 homes, 14% fewer than the same period in 2022.

The group, which is due to publish its full results on 15 February 2024, reported net debt of £18.7m at 31 December 2023, compared to 30 June 2023 when it had £5.2m net cash. 

“The reason for the early update is that we’re seeing a number of effects on our margins. Most of those are market-wide, but we’ve got another element which is tidying up some costs on older sites,” Gleeson CEO Graham Prothero told Housing Today.

“We’re having to address some of the features of the older Gleeson. Some quite aggressive interpretations on planning were made.”

“Last year we put in new management teams, who have surfaced and dealt with some of these issues.  

“Building doesn’t always go to plan, but when you get a series of legacy hits from decisions taken years ago, you’ve got nowhere else to go. So we had to draw attention to them.”

Gleeson Homes entered the second half of the financial year with a forward order book of 586 plots, compared to the same period of 2022’s 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).

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Gleeson Land completed the sale of just one site during the half year to 31 December 2023.

Last year Prothero restructured Gleeson and centralised its decision-making processes.

Housing Today understands the “legacy issues” referred to by Prothero include problems with cost forecasts made at a regional level, and efforts to keep costs lower that ended up being more expensive to remediate.

In September, the low-cost housebuilder said pre-tax earnings fell to £31.5m from £55.5m in 2022 as turnover dropped by over 12% to £328m.

Gleeson had already reported in June that the number of homes sold in its 2023 financial year dropped by 14% to 1,723 after the fall out from the economic turmoil in the wake of the mini budget. 

“We’ll have more detail in February, obviously. Our net reservation rate might be unexciting [for the financial period] but it is better than last year and is broadly what we expected,” Prothero said.

The Gleeson CEO “expects a pick up into Spring” supported by better mortgage rates. “Affordability is in a better place for our buyers than it has been,” he said.

Gleeson, which has a “medium term” strategy to grow completions from 1,723 to 3,000 homes per annum, said in September that the share of first-time buyers acquiring its homes had dropped from 80% to 50% in the first half of 2023 given the cancellation of Help to Buy and rising mortgage costs.