Tuesday, 22 February 2011

More of the Same at Gleeson

Grove Village, Manchester
MJ Gleeson (GLE) released its interim results for the six months to 31 December 2010 today.

I reviewed MJ Gleeson on 26 January 2011 and, whilst being underwhelmed in general with what I found, saw some potential upside on the appointment of a new CEO and how they were going to spend their surplus cash (dividend and/or strategic acquisition).

I am not going to dissect the interim results to the same degree, as I am more interested in annual results spanning over a decade, but will give some high level thoughts.

6 Months to December 2010

NB all comparatives are to 6 Months to December 2009 unless otherwise stated

Revenue was down 24% primarily due to there being only one land sale rather than two, although house sales did increase 73%, albeit from a very low base. A second land sale has been agreed but not completed, so that will help FY11 results. Negative comment about the lack of supply in mortgages implies that the glory days of house-builders are far over the hills.

Overheads were slightly reduced, benefitting from the release of a prior provision.

A huge Profit After Tax of £0.1m was recorded, but at least it was in the black.

Cash generation was good, with cash balances increasing by £0.5m to £19m. Net Asset Value was £98m or 186p per share. No interim dividend was declared.


The shares reached the dizzy heights of 140p in the last few weeks, perhaps fuelled by speculation that there might be a special dividend or some other favourable news.

At the time of writing, the shares have fallen back to 126p, giving the company a market value of £73m.

Assuming that the cash balances are valued at par (about 19p per share), this means that the rest of the business (strategic land and houses to be sold) are still valued at a 35% discount to book cost.


No update on the CEO and no update on how and when they intend to spend that cash.

It is difficult to see any positive stimulus on the share price without any news. At least they are chugging away with what they've got, covering the overhead and maintaning the cash balance.

GLE will remain in my portfolio for the time being, but if I see an opportunity that is more favourable, I shall not be too sentimental about removing it. 

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