North-east builder Stewart Milne Group has record forward sales, fuelling expectations of a long-awaited return to the black.
Finance director Fraser Park said yesterday the company was on track for profitability during the 12 months to October 2021.
It comes after the firm, based in Westhill, near Aberdeen, secured advance reservations for more than 70% of the 700-plus homes it plans to build this year.
Its developments include Ballumbie Rise in Dundee and Monarch’s Rise in Arbroath.
They have proved so popular the company has embarked on an urgent land hunt for more Tayside sites.
The group’s timber-kit homes division also started the year with a strong forward order book, worth more than £200 million.
Poor Aberdeen property market
SMG’s last reported pre-tax profits came in the year to June 2015, before the knock-on impact of a severe economic downturn in the north-east sent it hurtling into the red in 2015-16.
Further pre-tax losses were reported for 2016-17 and 2017-18, with the group then changing its financial year-end to October 31.
Accounts just lodged for the 16-month period from July 1 2018 to October 31 2019 were adversely impacted by poor market conditions in the north-east, as well as exceptional charges of £43m.
These one-offs included SMG writing down the value of land that was either acquired before the 2008 financial crisis and left undeveloped, or under development in the north-east, having been purchased before 2015 and the oil and gas downturn.
They also included restructuring costs.
SMG turned over nearly £379m in the period, generating operating profits of £7.2m before the one-offs. But pre-tax losses widened to £48.5m, compared with losses of £3.9m in the previous 12 months.
Impacted by Covid-19
The impact of Covid-19, which shut down construction for three months last year, as well as restructuring and a review of its land bank affected the group’s trading to October 2020.
But SMG said Stewart Milne Homes, its housebuilding arm, had delivered a “positive trading performance” in the latter part of last year, with sales “significantly ahead” of 2019 across all its regions.
Mr Park said: “These historic 2019 accounts and the Covid-impacted 2020 performance mark a transitional period for us, clearing the way for fundamental changes that are making us more competitive and more profitable.
“These include a review of our cost base, the introduction of an entire new housing range, an accelerated build strategy and greater efficiencies, driven by adopting digitalisation.”
Chief executive officer Stuart MacGregor added: “The rapidly-rising demand for modern methods of construction, along with our focus on building high-value, high-growth, long-term partnerships with our housebuilder customers provides us with confidence for the continued growth of the timber systems business as the market normalises.
“We’re also seeing record levels of sales demand for our homes, with the strongest forward sales position in our history.
“There is unprecedented demand for quality, family homes in suburban and rural locations, where a strong sense of community and more space have become more of a priority.
“This is an extremely strong trend which plays very well to our traditional strengths.
“The major steps we’ve taken to improve profitability and competitiveness, and bolster our position in the regions where we see the strongest demand and greatest growth potential, underline our confidence in the next five years.”
In November the housebuilder announced a series of job cuts.