Release Date: September 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gleeson Homes delivered above expectations with a small increase in the number of homes sold.
- Restored five-star customer recommend score in all six regions.
- Increased land pipeline to 179 sites over 19,000 plots, providing a strong platform for growth.
- Strong improvement in open market sales with a 28% increase in net reservation rates over the comparable period in the prior year.
- Maintained a healthy cash balance of GBP12.9 million, reflecting strong cash generation in both divisions.
Negative Points
- Gleeson Land faced headwinds in planning, leading to a gap in sales for the first half of the current year.
- Group operating profit was GBP5 million lower than the previous year, driven largely by lower profits in Gleeson Homes.
- Gross profit margin for Gleeson Homes reduced to 24.1% due to higher incentives, lower extras, and cost increases on older sites.
- The performance of Gleeson Land is expected to be weighted to the second half of the year, with the first half representing a net cost.
- Concerns about the economic backdrop and negative commentary from the government have slightly plateaued the upswing in reservation rates.
Q & A Highlights
Q: To please on the medium-term outlook you were talking about. Just to be clear in terms of the sales outlet numbers we were talking about, is the idea just to confirm flat this year and then growing at about 10 net every year for the next three years, say sort of around 90 units in 2029 here? And then the supplemental is just the sort of cash flow dynamics that go around that because obviously I presume those are quite different cash drawdown related to that? And is the balance sheet in a position to fund that? Thank you.
A: (Graham Prothero, CEO) Okay. Good question. I think you'll grow on sales. I'll get Stephen to talk you through the cash flow implications, but they're not as daunting as they might sound. On the outlet numbers, I think you're just slightly conservative there. I think we -- I would like us to be slightly ahead of that, but Stefan may kick me under the table as I say that. But we are opening sites at pace. We're looking at 20 to 30 per annum. And as Mark will tell you, that is kind of front and center of my Board papers, actually, I've told my Board judge me by how are we getting these sites open. Stephen, do you want to talk about the cash?
A: (Stefan Allanson, CFO) Yes. And just on the average sales outlets this year, it's going to be lower than you have just reported the 5% low, something like that. It then grows at pace in the subsequent year. So FY26, next financial year, expected to grow. Well, I'll take the average for the next three, four years. It will grow by about 10 net sites, 10 net outlet per annum. And in terms of the cash flow, any other housebuilder, then yes, it's going to consume cash. We don't expect it will increase in homes. Hasn't done before when land costs were about 8% of revenue -- of projected revenue of the site. We don't expect it to now when land cost to about 8% of projected revenue on a site. And just to flesh that out a little bit, if you look at the average, we've invested on our 79 build sites at the end of the year. It was GBP3.8 million land and build rate, offset by some creditors to typically about 15% of the value of the land and build with Homes about GBP3.2 million per site. So we grow outlets by 10, that probably can be GBP32 million. And these are very rough numbers because it depends on the site and timing and everything else. It's on average. You open that many sites, you probably get to about that scale. So 10 sites. It's going to require GBP30 million to GBP35 million, but that's pretty much covered by. Without giving you a profit forecast, that's pretty much covered by earnings in the division.
Q: I've got a couple of them. Number one, if that's okay. Just to follow-up on the site opening plan. Just wonder what the sensitivities of that are? I mean are you building into that an assumption that things do get better in planning? And clearly, if they did get better, then maybe there's upside and neutrality of -- have you got sites locked up in that that might free up as well just to --? And then even if all of those good things did happen, do you have the capacity or the desire to grow any quicker than that 10 you've given us?
A: (Graham Prothero, CEO) Good question, Charlie. So we've got -- so you appreciate, when we're talking about opening sites next year and the year after, we're pretty close. We've either achieved or pretty close to planning on those sites. So Steve and the team and obsessing over this day and night. So we, I would say that fully, we're pretty much certain of our ability to get the planning for the sites that we need for the next 2.5 years. That's pretty well controlled. We've got good visibility of that. And the plan -- the budget what I'm referring to here, we factored in the difficult planning environment that we see today. So to be clear on that, I'm not -- our medium term target of 3,000 is not contingent upon planning suddenly becoming easier overnight. The reality is we know it won't. You know, even if we see these changes the NPPF, that's going to take a while to bed down. But I doubt we'll see that over the kind of medium terms. So as I said, kind of Guy's timescales, not Steve's, if you like. So we've got visibility. I'm not going to say -- I'm not going to be so bold to say we've got control. But we've got good visibility of the planning we need for that short and medium term. Nutrients is an interesting one. I think today we've got about 1,000 units. About 600 that are currently in planning, and about another 400 that we're getting ready to submit. So that's -- those are the sorts of numbers that we could see come forward. 606 units come forward very quickly if they resolve nutrients, but there are routes to solve it. We got and released 100 units a couple of months ago through the credit system. That's what operating effectively in the northeast, but not in the northwest. Don't stop me. So a resolution of nutrients would help the country, and it would certainly help Gleeson.
Q: Thank you. Adrian Kearsey from Panmure Liberum. Few if I may. On the building safety, you've got 17 buildings that need remediation. Do you assume a similar cost per building or is there quite a spread. So just try to each one at a time?
A: (Graham Prothero, CEO) No, because that's an easy one. It's a broad spread. There's no absolute elephants in their.
Q: In terms of the timeline for the partnership projects that you've sort of got in the pipeline. Could you perhaps sort of talk us through sort of what kind of time line you're expecting in terms of how long to secure, how long do you actually get foot space in the ground, and what's the likely duration for completion on those kind of projects?
A: (Graham Prothero, CEO) Yes. So they take a while to negotiate. Obviously, they are large and complex and ideally, you're negotiating them earlier and earlier in the process. So we're not going to be delivering those 47 units to Home group tomorrow. I think we may get the first ones away at the end of this year. Mark might throw something at me. But certainly through FY26, you'll see a very good proportion of the units under the Home group and the Citra deals delivered. And I think the tail end is in '27. So these things that's very typical. But it's difficult to generalize because it depends on whether it's a site where we have planning we're ready to go or whether it's a site
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
