- New-build market weaker than hoped
- Lack of land sales to impact earnings
- Planning delays mean fewer completions
Low-cost housebuilder MJ Gleeson (GLE) delivered an unexpected profit warning on Tuesday (3 June) saying ‘headwinds’ in the new-build market and a lack of disposal gains meant it would miss its full-year margin targets.
The shares, which had traded more or less sideways since January, dropped as much as 144p or 28% shortly after the open before recovering to 410p for a loss of 106p or 21%, making them the worst performer in the FTSE All-Share.
RECOVERY REMAINS ELUSIVE
Despite the steady rise in average house prices and stiff competition in the mortgage market, the new-build housing market is nowhere near as strong as most developers had hoped at the start of this year.
For low-cost provider Gleeson, the pace of the recovery ‘has not been sufficient’ to offset the cumulative impact on its gross margin of various headwinds including increased build costs, flat selling prices, the continued use of incentives and several bulk sale transactions.
As a result, Gleeson Homes’ gross margin for 2025 will be 1% lower than it had previously forecast when it released its interim results in February.
To make matters worse, the full-year operating profit target for Gleeson Homes included the profit contribution from the disposal of some of its extensive land holdings in East Yorkshire, which will now not take place.
Therefore, operating profit at Gleeson Homes will be between 15% and 20% below consensus forecasts.
Finally, planning delays have meant the firm will be selling from fewer sites than it had previously forecast, suggesting completions are likely to be short of estimates, although the company offered no hint as to the numbers involved.
