- End of the Help to Buy scheme potentially spells trouble
- Not immune to inflationary pressures
Shares in MJ Gleeson (GLE) have been rallying ever since it said in a January trading update that cancellation rates in the run-up to Christmas had dropped compared with the period right after the mini-Budget. Some of this good news was also reflected in its half-year results, but it wasn’t all positive.
Although net reservations per week for the four weeks to 10 February have doubled compared with the 10 weeks to Christmas, they are still down 45 per cent compared with the February comparator in 2022. For the reporting period, both profit and revenue are down – with the underlying margin constricted by “inflationary pressures exacerbated by the war in Ukraine [that] continue to put pressure on costs”.
The end of the Help to Buy scheme also spells trouble as it accounted for 47 per cent of sales during the period. Gleeson says that its homes are cheap enough at £186,400 on average to be affordable for its buyers even without the scheme, but time will tell.
None of this looks good for Gleeson, but it has some bull points. For one, consensus forecasts from FactSet price the shares at between 10 and 11 times earnings over the next two years, which is not unreasonable. Meanwhile, its dividend payments produce a decent yield at current prices and are covered by earnings at least three times, which is encouraging going into a period of economic difficulty. So, too, is its net cash position.
MJ Gleeson is well-positioned to see out the housing downturn, but we still recommend caution. Hold.
MJ GLEESON (GLE) | ||||
ORD PRICE: | 463p | MARKET VALUE: | £270mn | |
TOUCH: | 460-464p | 12-MONTH HIGH: | 711p | LOW: 331p |
DIVIDEND YIELD: | 3.7% | PE RATIO: | 10 | |
NET ASSET VALUE: | 477p | NET CASH: | £13.5mn |
Half-year to 31 Dec | Turnover (£mn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
2021 | 174 | 24.7 | 34.4 | 6.00 |
2022 | 171 | 16.1 | 22.0 | 5.00 |
% change | -2 | -35 | -36 | -17 |
Ex-div: | 02 Mar | |||
Payment: | 03 Apr |