Gleeson profit hit by fire safety pledge costs

Gleeson has reported a 2% increase in annual pre-tax profit after its bottom line was hit by the need to put aside £12.9m for the fire safety developer pledge.

The housebuilder, in its results for the year to 30 June, reported pre-tax profit of £42.6m up slightly from £41.7m last year. However without the ‘exceptional’ fire safety cost pre-tax profit would have increased 33.1% to £55.5m.

The firm’s provision of £12.9m for meeting costs of the fire safety developer pledge was made after a “detailed assessment” of buildings, it said. Gleeson signed the pledge committing to fixing serious fire safety issues in blocks over 11 m in height without using government funds.

It said: “This is management’s best estimate of the life-critical fire-safety remediation costs for these buildings based on reviews and surveys completed to date. We are in the process of undertaking a programme of intrusive inspections and fire risk assessments, where permitted by the building owners.”

Gleeson increased its overall turnover 29.4% to £373.4m, while boosting its home sales by 10.4% to 2,000, hitting its five-year target to double sales.

It said a 14.7% increase in average selling price to £167,300 had “more than offset significant material and labour cost increases”, pushing its gross profit margin on home sales up from 28.5% to 29%

It said: “The increase in the volume of homes sold, average selling price and gross profit margin resulted in gross profit increasing by 28.0% to £96.9m.”

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Gleeson Land, the group’s land promotion business, reported profit of £13.8m, compared to £13.7m the previous year. It said Natural England’s nutrient neutrality requirements has held up planning on nine sites.

It said: “The supply of consented land has been adversely impacted by planning delays which are affecting both developers and land promoters alike.

“The planning process has been slowed by staff shortages in local councils and local authorities holding back on reviewing their Local Plans whilst potential changes in planning policy are uncertain. Natural England’s guidance on nutrient neutrality, together with phosphate and nitrate mitigation requirements, has also caused further delays across the industry.”

However, Gleeson also said the its land business has benefitted from strong demand for housebuilders “looking to re-stock their immediate and short-term land pipelines.”

It said: “Gleeson Land is also benefitting from the shortage of high-quality consented land, exacerbated by congestion in the planning system. The delays and complexities in the planning system serve only to fuel demand and maintain land prices as developers bid for consented land.”