MJ Gleeson: the only housebuilder with no debt?

MJ Gleeson is cash positive. While other housebuilders are urgently restructuring the repayment of their rising levels of debt, Gleeson’s chief executive Paul Wallwork emphasised that the group had no such worries.

“The housebuilding industry is in the worst economic situation in the last 30 years,” said Wallwork. “The cash is not coming in and every housebuilder - Persimmon, Bovis Homes, Redrow and Barratt – is quoting where they are in relation to debt, as the question being raised is ‘could housebuilders run out of cash’?

“At Gleeson we are not concerned as we are very well positioned.”

The position amongst private housebuilders is equally bad, Wallwork suggested, with corporate recovery teams active amongst several of them.

Wallwork said: “The group has maintained a net cash positive balance and has not drawn down any of its £50m [borrowing] facility.”

Even so, things are still somewhat bumpy for Gleeson.

Now a residential housebuilder, with a focus on the regeneration of brownfield sites in partnership with public bodies, it says that visitor numbers are “considerably lower” on its sites, which are mostly in Liverpool, Manchester and Sheffield.

Legal completions are also running at a slower pace, especially on Gleeson’s large estate regeneration projects undertaken in collaboration with public bodies. The situation on brownfield projects in the private sector is not so seriously affected.

Gleeson has undertaken a massive change since its strategic announcement back in March 2006 that many of its operations were non-core and a massive slimming-down was needed to put it back on an even keel.

During 2008 this on-going change has seen:

• the sale of PFI equity in the Boldon Schools project – at a profit
• the sale of the last two investment properties in Sheffield – at a profit.

Gleeson has taken a financial blow over a dispute over a historic project. It has been resolved out of court at a cost of £4.1m.

The alternative could have been worse as the client, Devonshire Green Holdings, issued a claim for damages in the High Court in March 2007 for £9.3m plus interest.

Gleeson’s building contracting division took on the project in 2001 to build Sheffield’s second largest development, a mix of commercial and residential, after Meadowhall. It was completed in 2004. There were changes to the contract after work commenced.

Wallwork said that existing provisions against other unresolved historic projects were still seen as being adequate.