Mj Gleeson Share Discussion Threads

[battlebus2] 28/9/2012 19:40

Took a while to clear that 150k sale of yesterday but it should be blue skies now.

[galles] 28/9/2012 17:57

Spob, in which case, here goes...


Housebuilders rise above downturn
By Gill Plimmer
Margins increase as cheaper land purchases feed through

House prices are falling, mortgage lending is stagnant and the economy is in recession for the second time in three years – yet housebuilders are reporting record increases in profits and their share prices are up 50 per cent in the year to date.

Crest Nicholson , which suffered badly during the global financial crisis, is poised to relist on the stock market; while Redrow, another of the worst hit, could be taken private by its founder Steve Morgan. Why the sudden upsurge in activity, given that housebuilders themselves remain consistently bearish about a speedy recovery in the housing market?

Charlie Campbell, analyst at Liberum Capital, says housebuilders do not need an improvement in the housing market to deliver an increase in profits. "You can be bullish on the sector without being bullish on house prices," he says. "All housebuilders need is a stable housing market and for new housing to outperform existing and those are exactly the conditions we have now."

Crucially, most of the hard work has been done. Housebuilders were savaged during the financial crises as home sales halved and land values plummetted. Smaller construction companies went bust while the listed players were forced to downsize, tap shareholders for cash and write down land bought at the height of the housing boom in 2007. According to Knight Frank, land prices had fallen by as much as 60 per cent at the end of 2009 from their peak two years earlier.

But housebuilders including Barratt Homes, Taylor Wimpey, Bovis Homes, Berkeley and Redrow also exploiting falling prices to buy land cheaply. Some such as Galliford Try even gambled on the property market by raising almost £120m to buy land at distressed prices.

Now the bets have paid off. Chastened by the recession, housebuilders are focusing on profitability rather than sales. They have built more lucrative family homes rather than apartments, targeted London and the south-east, and gained from government schemes such as NewBuy – which allows those struggling to get on to the housing ladder to buy a new home with a deposit of just 5 per cent. Around 20 per cent of sales have been through shared equity schemes including the recently extended First Buy scheme, with Persimmon, Bovis and Barratt the biggest users, according to research by Liberum.

But the biggest savings have been on land. Housebuilders are progressively getting rid of land that was acquired expensively in the boom years of 2006 and 2007. More than half of Barratt's homes to be sold this year are now built on land bought since 2008; for Galliford Try the figure is almost 75 per cent. This has delivered sharp growth in margins, from 9 per cent last year to 11 per cent across the sector this year, with Liberum predicting they will increase a further percentage point in 2013.

Varde, the distressed debt fund which owns most of Crest Nicholson, is keen to capitalise on the change in the sector's valuation by seeking a stock market listing estimated at around £500m. Rachel Wareing, analyst at Panmure, says sector valuations are their most positive in years. "For someone like Crest who has sat the downturn out, they now have the opportunity to get much better value than they would have a year ago," she says.

Steve Morgan, who founded Redrow in 1974, has different motives. He believes the market is undervaluing the stock and is proposing to take the company private for around £660m.

However, an argument over the prospects for growth in the housebuilding sector are at the heart of a debate with Fidelity, one of Britain's most influential investors, which is opposed to the takeover. While Fidelity argues that the company is worth at least 220p a share, Redrow argues that the 2,500 plots bought at the height of the market will weigh on any recovery.

Mr Campbell of Liberum believes the fundamental drivers behind the sector remain positive. "We are still not building enough homes to meet the needs of the country," he says. "This should mean that demand for new homes continues to hold up well, so long as mortgage supply doesn't deteriorate any further."

[spob] 28/9/2012 15:58

Galles 26 Sep'12 - 22:13 - 135 of 136

That'll infringe on the copyright spob



Ha, i wouldn't worry about that.

The FT infringes on others copyright all the time on their FT Alphaville blog, which i read every day. It's par for the course.

And truth be told, much of the FT coverage is biased in some way or is propagating an underlying agenda. On top of that clearly most hacks are just filling space and haven't the foggiest what they are on about.

I only read their articles to disect the unbiased factual elements. Their opinions in regard to such facts count for nothing in my humble opinion.

[battlebus2] 28/9/2012 14:27

MJ Gleeson Group PLC
Thu 27 September 2012

A A A
Recommendation type: Growth

Jonas Crosland
"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.

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.

[galles] 26/9/2012 22:13

That'll infringe on the copyright spob, but essentially, the article states that
housebuilders do not necessarily need an improvement in the housing market for increased profits, a stable housing market coupled with new housing outperforming existing would already do the job. This along with most housebuilders buying land on the cheap during the downturn resulting in improved margins etc makes the sector an attractive buy

[spob] 26/9/2012 14:28

care to post that article

thanks

[galles] 26/9/2012 14:02

Article on FT yesterday covered housebuilders' increased profitability despite house prices falling, mortgage lending stagnating and the economy in recession for the second time in three years. Most welcoming!

Housebuilders rise above downturn
Margins increase as cheaper land purchases feed through

[stluke] 21/9/2012 08:28

Both this and ESS part of OIG portfolio, NAV was over £3.00 recently so likely to be higher now with results like these, especially off the back of another holding it has in ECK. Share price only £2.55 so should revalue soon.

[cockneyrebel] 21/9/2012 08:10

Business turing around, house building doing well now like other builders imo. 190p+ NAV - looks very cheap on that basis imo.

CR

[battlebus2] 21/9/2012 07:45

Yes what a contrast. Like the dividend for 2013.

[deswalker] 21/9/2012 07:38

I'm happy with those results ...

[battlebus2] 20/9/2012 08:26

Results tomorrow if i'm right.

[battlebus2] 22/8/2012 12:15

A couple of decent increases in builders profits over the last few days bodes well for here.Inland annouced a decent deal this AM aswell. Results around a month away.

[battlebus2] 07/8/2012 18:23

Very fancy!

[deswalker] 07/8/2012 08:57

We have a fancy new website ....

[battlebus2] 05/8/2012 21:30

Forgot to mention Des that our friend Chris Mills also a major GLE shareholder is making his presence felt again at Quarto Group, seems his patience is running out and he has called a special meeting. Interesting times to come their i believe.

[battlebus2] 27/7/2012 08:25

Still catching up after a few weeks in the States and i see we have moved up to the 120 level again and are looking rather solid at this level. Confidence is rising here imv looking forward to the next results.

[battlebus2] 04/7/2012 07:53

Thanks Des.

[deswalker] 04/7/2012 07:50

One has to go back and compare these numbers with those given in earlier IMS's, the Interims and last year's Finals to get a real flavour of what is going on at GLE. They don't always spell it out as clear as they might.

Ofcourse the increase in building sites from 11 to 28 during the year is the most obvious sign of expansion but IMO the real growth strategy being followed is the expansion of the landbank.

During the year cash balances have reduced by £4m of which £2.6m is accounted for by the special dividend. So for a Group cash outflow of £1.4m the Homes landbank has gone from circa 2,400 plots to circa 3,700 plots or over 50% !!

Also they say that Strategic Land sold five sites during the year but the Interims tell us that only two were sold in H1 so they've sold another three in H2 which weren't previously disclosed.

So to conclude, in my opinion because of the dual business model with Homes & Strategic Land and also the net-cash position giving them added bargaining power, they are rapdily baking in some strong NAV uplifts in coming years. Remember that all land is booked at the lower of cost and net-realisable-value.

[battlebus2] 04/7/2012 07:24

First statement from our new CEO is a good one. Increases across the board.

[gingerplant] 02/7/2012 08:32

Thanks Des

I've been picking up a few more in dribs and drabs when cash allows.

David

[battlebus2] 02/7/2012 08:10

Yes maybe an early deal or two would be nice.

[deswalker] 02/7/2012 08:08

As I posted a while back, indications based on activity levels and chats with a couple of staff lead me to believe that the company has been transformed since JH came on board and that they have big expansion plans.

[battlebus2] 02/7/2012 07:55

Yep a very "excited" tone. Maybe he'll get off to a brisk start.