Stewart Milne gets set to rebuild profits following lockdown loss

Scottish housebuilder Stewart Milne Group has signalled a return to profitability after revealing that it racked up a pre-tax loss of £71.5 million last year during the height of pandemic-related disruptions to operations.

Finance director Fraser Park said house sales in the current year to the end of October would top 700 with turnover in a range of £270-£300 million. That compares to turnover of £269.7m in the previous 12 months, when 836 homes were sold.

Mr Park said the reduction in units sold this year was a reflection of the continuing uncertainty within the market at the start of the financial period, prompting Stewart Milne to set itself more conservative targets. During the comparable 12 months prior to the pandemic, the group sold 871 homes and generated revenues of £308.8m.

The group has been boosted by the full return of operations within its timber systems business, which supplies materials both to its own housebuilding operations and those of major nationals such as Barratt and Taylor Wimpey.

READ MORE: Coronavirus: unprecedented demand for suburban and rural homes in Scotland

With main factories in Aberdeen and Oxfordshire and a new “spoke” facility in Falkirk, timber systems suffered a 32 per cent decline in revenues to £65m last year as a direct result of the shut-down of building sites and factories. However, forward orders are now at record levels – double that prior to Covid – driven by the post-pandemic recovery in the UK housing market.

Mr Park said the business has not experienced Brexit-related disruptions as it is supplied from within the UK. However, the cost of timber has increased significantly to levels that he said could remain until the first quarter of next year.

Last year’s loss included £59m of exceptional items, £43m of which was linked to write-downs on the value of the company’s land bank. This included land acquired prior to the financial crisis of 2008 and land under development in the north-east of Scotland that was purchased before the oil and gas downturn of 2015 hit the housing market.

Most of the remaining exceptional charges were linked to restructuring also largely related to the weak market in Aberdeenshire, where the company has recorded “sustained losses” since 2015. This led to the merger of its two Scottish homes divisions and the loss of about 80 job announced in November of last year. The group now employs approximately 880 people.

READ MORE: Scottish housebuilder Stewart Milne cuts jobs in spite of ‘short-term spike’ in UK housing market activity

Headed by executive chairman Stewart Milne, the family-owned group undertook a comprehensive overhaul of its housing range during the first lockdown last year and has now introduced about 30 new house types designed to better meet people’s needs in the wake of the pandemic.

Mr Park said the group is now in a strong position to meet demand where it is highest in core markets of Scotland and the north-west of England.

“The demand for new homes shows no signs of letting up and, having used lockdown to accelerate the most ambitious and comprehensive redesign of our homes in the group’s history, we are well-placed to capitalise on this,” he said. “Our streamlined homes business in Scotland, a focus on digitalisation and our new range of home will play a major role in our competitiveness and profitable growth over the next five years.

“These new designs, which cater for the changing needs of families now and in the future, take account of the increasing demand for flexible space, indoors and outdoors – a growing trend following the coronavirus-imposed lockdowns.”

READ MORE: Stewart Milne forecasts £550m of home sales after redesign

The group has also extended its banking facilities with the Bank of Scotland to March of next year, with an option to extend further to July 2022, subject to certain conditions.

Group chief executive Stuart MacGregor said: “The strength of our current exceptional trading performance, coupled with our extended banking facility, allows us to continue to grow the business across our core markets in both Scotland and North West England where the demand for quality, family homes is at its highest.

“Investment in our product and manufacturing innovation and capacity in our timber systems business is ensuring we are able to keep up with the extremely strong demand which has resulted in our record order book value.”

The Herald Scotland

The Herald Scotland

The Herald is a Scottish broadsheet newspaper founded in 1783. The Herald is the longest running national newspaper in the world and is the eighth oldest daily paper in the world. The title was simplified from The Glasgow Herald in 1992