Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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February 15, 2024

GLE | Economy – Weak construction output pulls GDP into ‘technical recession’

Company news

MJ Gleeson (GLE, 500p, £ 286m mkt cap)

Low-cost housebuilder, focused on north of England, and strategic land enabler, focused on south. HY (Dec) results. Rev -11%, £152m; PBT -55%, £7.2m; EPS -56%, 9.6p; interim div -20%, 4.0p; net debt, £18.7m (HY 23 net cash, £13.5m.

Trading: Gleeson Homes – completions -14%; rev -15%, £142m; gross margin, 24.5% (27.7%); op profit -44%, £10.2m. H1 net reservations per site per week, 0.41 (0.36); five weeks to 9 Feb, 0.50 (0.46). “We are encouraged that early signs of recovery in buyer confidence are emerging, with net reservations per site over the last five weeks up 9% on the same period last year. Gleeson Land – rev +114%, £9.2m; gross margin, 10.9% (72.1%); op profit -29%, £1.0m. One land sale completed in H1 (one). In addition, the completion of the final four phases of a site sold in 2018/19 was brought forward at the request of the developer. Portfolio, in which the group has a beneficial interest of 84%, comprised 70 sites with the potential to deliver 17,574 plots (70 sites; 17,831 plots). “We have reviewed the portfolio in respect of the changes to the National Planning Policy Framework. This is likely to delay some planning strategies, reducing the benefit of the appeal route, but does not imply any significant write-downs. We are experienced in navigating these complexities and have extensive expertise in promoting sites through the local plan process.

Outlook: “The group is seeing encouraging signs of a recovery in demand. The company remains confident in delivering results for the year in line with expectations and reaffirms its medium term targets as outlined at the July capital markets day”.

Economic data

Construction output. Quarterly construction output fell by 1.3% in Q4 23 compared with the previous quarter, ONS. The decline came solely from a decrease in new work (-5.0%), as repair and maintenance increased by 4.0%. Monthly construction output fell 0.5% in volume terms in December, solely from a decrease in new work (-1.1%), as repair and maintenance increased 0.4% on the month. At the sector level, three out of the nine sectors saw a fall in December, with the main contributors to the monthly decrease seen in infrastructure new work, and private housing repair and maintenance, which decreased 6.4% and 1.1%, respectively. Annual construction output increased by 2.0% in 2023 compared with 2022; this is the third consecutive year of annual growth. The annual rate of construction output price growth was 3.1% in the 12 months to December 2023, down from the record annual price growth in June 2022 of 10.7%. Total construction new orders decreased by 13.1% in Q4 2023 compared with Q3; this quarterly fall came mainly from the private commercial and industrial sectors, which decreased 18.1 % and 27.6% respectively. Construction output was the weakest of the three sectors that fed into this morning’s worse than expected 0.3% fall in GDP for Q4, triggering a ‘technical recession’.  Next release, 13 March.

Contruction Index
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