Property group prepared to ride out turbulence

PROPERTY group MJ Gleeson said that the continued drop in the number of mortgage approvals and a downturn in consumer confidence is having a significant impact on the group’s operations.

In February 2008 the group said that the half year to December 31, 2007 had been a time of extremely challenging market conditions for the house building industry.

In an interim management statement the Hampshire-based group – which has been heavily involved in the regeneration of Sheffield – said that since February market conditions have deteriorated further with more substantial deposits required by most lenders.

The group said these developments had  resulted in a considerably lower number of visitors to its housing sites which are substantially based in the north of England – including a site in Sheffield.

The group said it was pleased to announced the end of its dispute with Devonshire Green Holdings (DGHL) which was due to take Gleeson to the High Court next month over a damages claim relating to the residential and retail complex West One in Sheffield, which was completed in June 2004.

Gleeson said it had reached a settlement and would pay DGHL £4.1m – adding that the figure would have an effect on its full year figures.

In reaction to the current market conditions the group said it was keeping land purchases to a minimum and construction work in progress and overheads were being subjected to “rigorous review and control”.

The board said it would also resist the temptation to sell  “land at a discounted value merely in order to meet year end targets”.

Gleeson said it had experienced a “significant slowing down in the number of legal completions” which was more pronounced on the group’s large estate regeneration projects, undertaken in collaboration with public bodies, rather than on its brownfield projects in the private sector.

Chief executive Paul Wallwork said: “In order to protect shareholder value in what is likely to be a very protracted period of market uncertainty, the group is committed to maintaining a very high priority to cash management and to the protection of the group’s strong balance sheet. Where appropriate the group is prepared selectively to rent rather than to sell completed properties, especially flats, in order to secure higher returns in the longer term.”

On a positive note the group said that it was heartened by public commitments from the Government to finding an effective solution to what they recognise to be an important social problem.

Mr Wallwork added that the group’s strong focus on housing regeneration should enable it to generate substantial rewards for shareholders in the longer term.

The group also announced it hopes shortly to achieve financial close on the Leeds Independent Living PFI project which will yield a success fee and a long-term revenue stream from property management services.

Gleeson operates as a residential house builder with a particular focus on the physical, social and economic regeneration of urban areas in partnership with or for public bodies.