Gleeson slumps to pre-tax loss after being hit by £13m in one-off costs

Gleeson has reported a pre-tax loss after being hit by one-off restructuring and remediation costs as higher inflation squeezed its margins.

The housebuilder for the year to 30 June racked up a £2.7m loss, a fall of 90% on the £20.5m profit the year before. Its operating profit also fell from £24m to £2.4m.

The group incurred one-off exceptional items in the year totalling £13.6m. Around £7m of this was to carry our remedial works on legacy developments needed to ensure adoption of roads and other services by local authorities.

The accounts also recognised £6.5m of costs relating to the group’s restructuring under its Project Transform project.

Gleeson also undertook two regional restructures, merging its Greater Manchester and Merseyside region with Cumbria to create a North-west region and in July integrating its East Yorkshire region into the Yorkshire South and West region to create a single Yorkshire unit.

The restructure cost Gleeson £2m, including redundancy costs of £1.8m. The firm created 35 new roles but made 56 people redundant.

As part of the restructure the division aborted 12 conditionally purchased sites, meaning it recognised an impairment of £4.5m.

Graham Prothero, chief executive of Gleeson, said: “This was a year of intense activity, implementing fundamental business change under Project Transform.

“We have professionalised the business in its structure, systems and most importantly its people, expediting the transition from a ‘large small business’ to a well-controlled and efficient volume homebuilder.”

Without the one-off exceptional costs, Gleeson’s adjusted operating profit is still down on last year at £16m compared to £25.3m a year ago. It said this was due to the delay of a significant transaction in Gleeson Land and reduced margins at Gleeson Homes.

The group’s gross margin fell from 20.7% to 18.6% as “selling prices were insufficient to recover the impact of build cost inflation during the year of 4.5%”.

And it warned: “Build cost inflation continues to outpace selling price increases, and this along with continuing regulatory and tax burdens which continue to be imposed on residential development, will slow the pace of margin recovery.

“With subdued market conditions expected to continue, we are focused on managing the business as efficiently as possible and taking a prudent stance on cash, working capital and site acquisitions, enabling us to maintain the strength of our balance sheet.”

The drop in profit was despite Gleeson increasing its turnover from £366m to £410m, completing 1,968 homes in the year, up 10% year-on-year.