Stewart Milne Group returns to profit and growth
A strategic review and “streamlined approach” have contributed to a return to profit for Stewart Milne Group.
Reporting accounts for the year ended 31st of October 2021, revealing a £36 million increase in turnover and a £12.7m rise in profit, the housebuilder said it has exceeded the targets in its business plan with significant improvements in performance and a return to sustainable, profitable growth.
Turnover has risen from £270m in October 2020 to £306m. Operating profit, before exceptional items, has increased from £0.8m to £13.5m in the same period.
During the financial year, the group completed a strategic review which included the re-design of its entire homes range to meet the changing trends of buyers. This streamlined approach to the design and delivery of its quality family homes, along with other efficiencies, have helped drive up gross margins from 13% to 16%. These margins would have been substantially higher had it not been for the continuing challenges, as a result of the oil and gas downturn, in the North-east Scotland market and are, therefore, anticipated to rise as this market continues to pick up.
The strategic review included the decision to realise the value in its timber systems business by pursuing a sale and focusing on its core housebuilding business. As a result of the successful sale, concluded in December 2021, the group has substantially reduced its borrowings and generated considerable profit which will be reflected in the next year’s accounts. The sale did, however, incur preliminary costs and an associated refinancing in this year’s accounts but total exceptional costs dramatically reduced from £59.2m to £8.7m.
Stewart Milne Group chief executive, Stuart MacGregor, said: “Having delivered exceptional and substantially improved performance and completed our strategic review, we have exceeded the targets we set ourselves in recovering from the protracted downturn in North-east Scotland and the impact of Covid across all our operations.
“Our streamlined approach, central to which was the new homes range, has enabled us to capitalise on the favourable market conditions over the past eighteen months. Working effectively with sub-contractors and suppliers, we have overcome the unprecedented challenges in the supply chain, including the availability and rising costs of people and goods.
“With our strategic review now complete and no major impairment of land assets anticipated, combined with favourable market conditions, which are set to continue in the near-term, we are incredibly well-positioned for strong, sustainable and profitable growth.”
Stewart Milne Home’s turnover in the year to 31 October 2021 was £209m, which represents an increase of £16m, from £193m the previous year. While unit numbers decreased from 836 to 828, the sale of private homes increased by 10% to 668 over the period.
Turnover from Stewart Milne Timber Systems also increased to £94m from £65m. This reflects an element of catch-up on delayed orders from the prior financial year and the increased trend of UK housebuilders for sustainable, modern methods of construction.
In the two years to 31 October 2020, the group reported a total impairment of £71m in its land bank, which related to assets either acquired prior to the financial crash in 2008 or in the North-East of Scotland prior to 2015 and the beginning of the region’s downturn.
Taking into account interest and exceptional items of £8.7m, this resulted in an overall loss of £8.1m and compares to a loss of £71.5m for the twelve months up to 31 October 2020.
Fraser Park, finance director of Stewart Milne Group, added: “These results underline the successful implementation of our strategic review. They recognise the efforts of our talented people in rising to the challenges of the past few years through innovation, digitalisation and high standards of design which are delivering elegant, spacious family homes in carefully planned communities, shaped around the way in which people want to live today.
“Customer demand in both North West England and Central Scotland has remained high while we saw an upturn in both demand and pricing in North East Scotland, following a five year period of year on year sales price decline in the region. The market sentiment in this region is more positive than it has been since 2015 and we will continue to review opportunities here as the local economy strengthens.
“During the year, we invested in a number of new sites across all our regions and our current forward sales position is the strongest we have seen in many years. This, coupled with our improved competitiveness and financial position, signal supreme confidence in the future, sustainable and profitable growth of the business.”
Last month, Stewart Milne Homes executive chairman Stewart Milne revealed he is to put the housebuilding business up for sale.