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Housebuilder MJ Gleeson is growing fast, particularly in the south

MJ Gleeson is expanding its housebuilding operation while selling more land to other builders
February 22, 2016

Our growth Tip of the Year MJ Gleeson (GLE) delivered a sparkling first-half performance that saw operating profits up over 180 per cent at £11.3m, while shareholders were rewarded with a two-thirds jump in the dividend.

IC TIP: Buy at 598p

The strategic land operation, where the company pulls land through the planning process and sells it to housebuilders, accounted for a lion's share of the big increase in profits, with the number of sites sold doubling to four. This pushed operating profits up from £0.7m to £4.2m. There are currently 10 sites within the 3,849 acre portfolio that have planning consent; four of which could be sold in the current financial year.

Gleeson also builds homes at an affordable price, exclusively in the north of England. "Any couple in full-time employment can afford to buy one of our houses," says chief executive Jolyon Harrison. And unlike the broader housing market, average selling prices were up just £400 at £125,000. Benign material costs and the group's rapid payment scheme for sub-contractors helped to keep a lid on costs, helping to boost operating margins from 13 per cent to 15.4 per cent. Sales rose by nearly a quarter to 400 units, and plans are in place to expand the housebuilding side into new areas, with a new office in Liverpool scheduled to open in the second half.

Analysts at N+1 Singer are forecasting adjusted pre-tax profits for the year to June 2016 of £27.4m and EPS of 40.6p (from £23.4m and 34.3p in FY2015).

MJ GLEESON (GLE)
ORD PRICE:598pMARKET VALUE:£324m
TOUCH:585-604p12-MONTH HIGH:630pLOW: 350p
DIVIDEND YIELD:2.0%PE RATIO:18
NET ASSET VALUE:262pNET CASH:£9.6m

Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201442.63.96.22.7
201564.811.316.84.5
% change+52+189+172+67

Ex-div: 3 Mar

Payment: 4 Apr