Shares of MJ Gleeson PLC (GB:GLE) crashed 8% on January 9 following a disappointing trading update from the British homebuilder. A weaker housing market induced by macro pressures and a stronger comparison base of the prior year has weighed on MJ Gleeson’s performance in the first half of Fiscal 2024. That said, the company is optimistic that its performance will improve in the upcoming seasonally busier selling period with steadying interest rates and demand recovery.
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MJ Gleeson is a low-cost housebuilder and land promoter operating through two units: Gleeson Homes and Gleeson Land. The company earns a majority of its revenue from its affordable homebuilding arm. Gleeson Homes engages in the development and sale of residential property. Meanwhile, Gleeson Land promotes land by enhancing its value and securing mainly residential planning consent. GLE shares have gained 42.1% in the past year.
Gleeson’s First Half Performance
For the half year ending December 31, 2023, Gleeson Homes sold 769 homes, down 14% from the comparative prior-year period. Even so, for the second half of Fiscal 2024, the unit already has a solid order book of 586 plots.
However, the company expects its full-year gross margins to decline by 1.5% to 2%. This is due to a slew of reasons, including additional expenses to maintain older sites, extended site durations, higher sales incentives, and multi-unit sales.
At the same time, Gleeson Land sold only one site during the reporting period, while it sold three sites in the first half of Fiscal 2023. The company disclosed that it has begun marketing four more sites. Also, as of December 31, 2023, MJ Gleeson’s net debt stood at £18.7 million due to higher investments in bringing inventories to the market.
Is MJ Gleeson a Buy or Sell?
On TipRanks, GLE stock has a Moderate Buy consensus rating based on only one Buy rating received in the past three months. RBC Capital analyst Anthony Codling has a Buy rating on GLE stock with a price target of 550.00p, implying 10.3% upside potential from current levels.
