Midas share tips: Builder MJ Gleeson is growing stronger


MJ Gleeson is a strong business that is growing stronger. Originally recommended by Midas in December 2011 at 104p, the shares had risen to 570p by last March and today they are 612.5p.

The company unveiled robust half-year results last month, accompanied by a 44 per cent increase in the interim dividend to 6.5p – a real expression of confidence about its prospects.

This optimism is well placed. Gleeson specialises in building affordable homes in the North – homes where monthly mortgage payments are cheaper than council house rent. 

Lifted: MJ Gleeson is a strong business that is growing stronger

Lifted: MJ Gleeson is a strong business that is growing stronger

Demand for these properties is so great that queues form round the block every time Gleeson opens a new site.

 The company has even begun to bring in burger vans, providing bacon sandwiches for would-be homeowners.

Customers tend to be low-earning couples in their 20s, around 70 per cent of whom voted for Brexit in last year’s referendum. 

Chief executive Jolyon Harris, who spends time on new sites, says sentiment is noticeably more upbeat following the vote to leave the EU, particularly as economic growth remains relatively strong and wages are starting to rise.

Gleeson is expected to build about 1,000 new homes this year and hopes to increase that number to 3,000 over the next few years, moving as far south as Northampton and the north of East Anglia. 

The Government’s White Paper on housing, released last month, should help that ambition, as it broadens the definition of affordable homes, which should simplify planning applications.

Profits for the year to June are expected to go up by 9 per cent to £30.3 million, rising to £33 million next year. The annual dividend is likely to show a 34 per cent increase to 19.5p, moving up to 21.3p in 2018. 

Over the longer term, profits should increase materially as Gleeson builds more homes.

Midas verdict: Gleeson shares have proved a rewarding investment over the past six years, but the company should continue to deliver. Shareholders should hold on to their stock, while long-term investors could also see value in these shares.

Five-year profits plan on track at Hays

BONUS: Alistair Cox could unveil a special dividend

BONUS: Alistair Cox could unveil a special dividend

Hays operates in 33 countries, finding permanent, contractual and temporary jobs for white collar and professional workers.

Midas last looked at the firm in October 2014, with the shares at 116p. Today they are 159.75p and chief executive Alistair Cox is on track with a five-year plan to take profits from £125 million in 2013 to almost £250 million by next year.

The firm’s three largest markets are Germany, Australia and the UK. 

In the six months to December, fees in Germany grew by 10 per cent and Australia 11 per cent, but in the UK they fell by 10 per cent. 

The fall was especially marked in the public sector, but private sector activity was slow too, with firms reluctant to hire permanent staff, especially in the weeks after the referendum.

But confidence is returning and activity has been increasing in recent weeks. Echoing Gleeson’s experience, Cox suggests that the further firms are from London, the more optimistic they seem.

Globally, Hays derives almost 60 per cent of its profits from temporary and contractual work.

Brokers expect annual profits of £197 million in the year to June 30, up 14 per cent from 2016. A 3p dividend is pencilled in but there is every chance of a special payout of about 3p. Next year, a basic 3p could be supplemented by a special of 5p or more.

Midas verdict: Hays’ UK arm has not fared well recently but the rest of the group is making good progress.  The shares dipped following the Brexit vote but have recovered strongly since, and the prospect of special dividends adds to the attractions. A solid buy, particularly for income-seekers.

The car market is changing rapidly as consumers increasingly adopt lease vehicles rather than buy them outright.

The car market is changing rapidly as consumers increasingly adopt lease vehicles rather than buy them outright.

Car retailer offers new investment to retailers

Lookers derives a third of its profits from new car sales and the rest from used cars, repair and maintenance. 

The shares have been badly tarred with the Brexit brush, starting 2016 at 185p, slumping to 92p in June and only partially recovering since – to 123.75p.

This seems unjustified. Only last week, on the day of the Budget, Lookers delivered a 7 per cent increase to £77 million in underlying 2016 profits and a 17 per cent hike in the dividend to 2.36p. 

Chief executive Andy Bruce is more confident about the business than he has ever been, 2017 has started well and business has been brisk so far in March – a crucial month for car sales.

The car market is changing rapidly as consumers increasingly adopt lease vehicles rather than buy them outright.

These plans now account for the vast majority of new car sales and a growing proportion of the used market too.

Lookers derives significant income from servicing and repairs and is beefing up its capacity to cope with rising demand. The group is highly acquisitive, too. 

One of the biggest dealerships in the UK, it still has a market share of just 6 per cent, so there is plenty of scope for growth.

Midas verdict: Car salesmen are notoriously upbeat and Bruce is no exception. But he has done a great job since taking the helm in 2014 and this is not reflected in the share price. At 123.75p, existing shareholders should hold and there is mileage for new investors, too.

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