MJ Gleeson (LON:GLE) reported what management described as a “robust performance in a subdued market” for the six months ended December 25, with higher group revenue but lower operating profit as the homebuilder navigated weak seasonal demand, continued incentives, and cost inflation.
Trading backdrop: subdued demand but early signs of improvement
Chief Executive Graham Proctor said the autumn selling season “turned into a bit of a damp bonfire night,” but noted that the group’s net reservation rate rose 9% year-on-year to 0.48 despite remaining below 0.5. Completions in the first half increased about 6% to 848 homes.
Management emphasized that while mortgage availability was described as strong and interest rates are trending down, confidence remains a key missing ingredient in buyer decision-making. Executives also noted growing web traffic and argued the affordability metrics and savings rates suggest underlying demand is building, even if it has not translated into faster sales rates yet.
Financial results: revenue up, operating profit down
Finance Director Stefan Allert outlined the group’s first-half performance:
- Group revenue increased 9.6% year-on-year, with growth in both divisions.
- Group operating profit fell 17.6%.
- Interest costs increased by £0.7 million to £2.2 million, reflecting higher average borrowings.
- Profit before tax was £2.0 million excluding £0.3 million of exceptional costs.
The board declared an interim dividend of 4p per share, unchanged year-on-year, payable April 7 to shareholders on the register as of March 6.
Gleeson Homes: higher volumes, bulk sales and overheads pressure profitability
In Gleeson Homes, revenue rose 5.9% through a combination of higher prices and volumes. The division also recorded its first completions to partners, delivering 37 plots, and it completed “significantly higher” bulk sales than the prior year. Private bulk completions increased to 190 from 95 a year earlier, which management said diluted margin.
Allert reported that average selling prices were up 2.5% on a reported basis, while underlying like-for-like prices rose 1.7%. Gross profit increased 4% to £33.4 million, but gross margin fell to 19.8% due to:
- the greater mix of bulk sales,
- extended preliminaries as slower-selling sites stayed open longer,
- continued incentives averaging about 4.5%, and
- build cost inflation marginally exceeding underlying price increases.
Operating profit in the division fell to £7.0 million as overhead costs rose £3.4 million, driven by pay inflation (about 3.2%), national insurance changes referenced as having increased in April 2025, increased IT and cybersecurity investment, and differences in bonus and share-based payment accruals.
Despite the trading environment, management highlighted an improving forward order book, up 64% to 978 plots. The largest increase came from partnerships forward orders, rising to 382 from 105, while open market forward orders increased 20% year-on-year to 416. Bulk forward orders increased by 36.
Project Transform: operating restructure and margin focus
Proctor said Project Transform is central to rebuilding margin and operational control, calling it “impossible to overstate” in importance. He said the company has moved to the second phase of its restructure, completing an operating redesign for Gleeson Homes.
Key changes described on the call included:
- Moving to a single division with six regions, including scaling Greater Manchester/Merseyside down to a “skeleton team” while rebuilding the land pipeline.
- Shifting responsibility for land, marketing, and finance closer to regions, with land directors now reporting to regional managing directors rather than a central function.
- Adopting a customer care model intended to hand over units “defect-free after eight weeks,” aimed at improving customer experience and allowing site teams to focus on build quality and pace.
- Tightening overheads by no more than 25 roles.
Management said the second phase will generate exceptional costs in the second half, with cash people costs not exceeding £1.5 million and potential write-offs of up to £3.0 million for pre-development costs on old land assets in Greater Manchester. Annualized cost savings were estimated at about £1.0 million.
On margins, Proctor noted ongoing pressures from build cost inflation (he cited about 2.7% in the first half), extended preliminaries, and regulatory headwinds. He also said the company is switching to more “supply and fix” groundworkers rather than labor-only, which he estimated would add roughly 2.5% to the cost of those groundworks on appraisals, but argued it should improve pace, reliability, and quality over time.
He added that there may be opportunity to reduce incentives and improve sales extras if demand improves. Management also highlighted a revamped in-house part-exchange offer, implemented rapidly ahead of January, which it said is already “working really well” with controls in place around unit types, pricing discipline, and regional balance sheet exposure.
Planning constraints, site openings, and partnerships; Gleeson Land gaining momentum
Management repeatedly pointed to planning as a major constraint. Proctor called planning “the biggest single impediment” to Gleeson Homes’ ability to grow, referencing 43 sites awaiting planning. The company purchased nine sites in the first half and opened nine sites, aiming to open eight more in the second half. Executives said reaching an average of 10 net new sites annually is targeted for FY2027, and the company plans to open 12 new sales outlets in the second half, which Proctor said is “really key” for second-half sales.
In Q&A, management said Gleeson Homes has adjusted its land buying mix to include some shorter-term sites closer to planning certainty, which can raise average plot costs. Allert noted that Gleeson Homes purchased over 2,300 plots across 17 sites in the last 12 months at an average cost of £17,800.
Gleeson Partnerships, described as a “fledgling” business, generated its first revenues and profits in the first half, and management said it continues to see interest from housing associations and private rented sector (PRS) investors. The company signed three new agreements in the first half, has eight sites under development, and discussions progressing on a further 11, while continuing to target partnerships at 20% of the business.
Gleeson Land completed three site sales in the first half (none in the prior-year period), generating £2.0 million of gross profit, though provisions on work-in-progress increased by £0.7 million, resulting in reported gross profit of £1.3 million and a reduced first-half loss of £0.6 million. Proctor highlighted the sale of a site in Chipping Norton acquired since the land strategy was refreshed, which he said represented an unusually quick turnaround for strategic land. The division signed four new promotion agreements and submitted 15 planning applications in the six-month period, which he described as a record level of activity.
Looking ahead, management said current market expectations remain achievable, but emphasized that outcomes depend heavily on the next several weeks of trading given the sensitivity of margins to sales rates, incentives, and the availability and pricing of bulk sales. Proctor said the company will provide an update in April with “a bit more knowledge” on the trajectory of demand and the outlook for the full year.
About MJ Gleeson (LON:GLE)
MJ Gleeson plc comprises two divisions: Gleeson Homes and Gleeson Land.
Gleeson Homes, under the banner of “Building Homes. Changing Lives” builds high-quality affordable homes across the Midlands and North of England. To meet customer demand, and without compromising affordability, the range of homes available extends from one-bed apartments to five-bedroom houses. With a two-bedroom home available from £100,000, a key objective is to ensure that on all of our developments, a meaningful proportion of homes are affordable to a couple earning the National Living Wage.
