"We've been keeping our heads down while we've been restructuring and that's why none of the broking houses follows us at the moment," admits MJ Gleeson's (GLE) chief financial officer, Alan Martin. But while that means there's no analysts' earnings estimates, it's clear that the housebuilder and strategic land specialist is recovering fast - full-year figures for the year to the end of June revealed an operating profit before exceptional items of £0.3m; a big improvement on last year's £2.5m underlying loss.
- Cash balance - no debt
- Well-placed to benefit from demand for land
- Housing side now profitable
- Shares trade well below net assets
- No regular dividend
- No broker coverage at present
That restructuring effort has involved selling or winding down various non-core operations, including the disposal of three private financial initiative projects (PFIs) for a net £0.3m. That has left Gleeson focused on two businesses - building houses on brownfield sites in northern England, and buying greenfield sites in southern England with a view to boosting the land's value by obtaining planning consent.
That latter operation is especially significant because housebuilders are increasingly looking to keep costs down by taking less land through the planning process themselves. Last year, for example, Barratt Developments (BDEV) pushed just 701 plots through the planning system from its 10,500-acre bank of land without permission. "Housebuilders have increased their appetite for over-ready land", notes Mr Martin.
Gleeson has been making good progress on the back of that trend and, in the year to end-June, it made five land sales for a combined 115 acres and also secured five new sites covering 228 acres - taking the total land bank to 3,653 acres. The strategic land unit's turnover jumped 41 per cent year on year to £8.2m, lifting operating profit there by 37 per cent to £3.7m.
MJ GLEESON (GLE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 131p | MARKET VALUE: | £69m | |
| TOUCH: | 129-132p | 12-MONTH HIGH: | 132p | LOW: 96p |
| DIVIDEND YIELD: | nil* | PE RATIO: | 19 | |
| NET ASSET VALUE: | 191p | NET CASH: | £13.9m | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 94.6 | -20.8 | -39.9 | 2.00 |
| 2009 | 43.0 | -50.7 | -102.0 | nil |
| 2010 | 46.5 | 0.45 | 1.30 | nil* |
| 2011 | 41.4 | 1.54 | 3.02 | nil* |
| 2012 | 41.9 | 3.80 | 6.93 | nil |
| % change | +1 | +147 | +129 | - |
Normal market size:2,000 Matched bargain trading Beta: 0.18 No broker coverage at present *Excludes special dividends: 15p in 2010 and 5p in 2011 | ||||
The housebuilding side has also been transformed, albeit after painful writedowns on land bought at the peak of the cycle. True, divisional turnover fell 8 per cent year on year to £32.6m, but only because of a shift away from lower-margin sales to registered social landlords. In fact, last year's £0.4m divisional operating loss was turned into £0.3m operating profit - reflecting an increase in private sales, from 170 units to 255, where margins are higher. And while the average selling price fell from £138,000 a unit to £118,000, this merely reflected the closing out of a high-price sales outlet in Ashford.
Gleeson also has no debt pile to worry about and, at the full-year stage, reported a healthy net cash pile that's equivalent to 26p a share - that should help finance additional land purchases. And while Gleeson didn't pay a dividend in 2012, it has, in recent years, returned significant amounts of capital to shareholders through special dividends. Moreover, management reckons that land-bank sales could generate sufficient cash flow to enable regular dividend payments to begin in 2013.
