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North-east housebuilder Stewart Milne in rude health for sale, bosses say

Construction stock workers on a project of housebuilder Stewart Milne.
Construction stock workers on a project of housebuilder Stewart Milne.

Soaring fuel bills are a major factor in record forward sales at Stewart Milne Homes (SMH), according to bosses at the up-for-sale north-east housebuilder.

Stewart MacGregor and Fraser Park, chief executive and finance director respectively at the parent, Stewart Milne Group (SMG), said pressure on household budgets was not, so far, hitting property sales.

To the contrary, people are prioritising their homes and often contemplating house purchases, while at the same time making sacrifices elsewhere in their lives, they said.

One of the reasons people are so keen to move to modern new, energy-efficient homes, such as those sold by SMH, is the chance to reduce their energy costs, the pair added.

Stewart Milne Group finance director Fraser Park.
Stewart Milne Group finance director Fraser Park.

The comments came as SMG announced a narrowing of losses and 13% jump in turnover during the year to October 31 2021.

SMH – based in Westhill, Aberdeenshire – has benefited from pent-up demand, following Covid lockdowns, as well as changing market trends and house price inflation in some areas where it builds homes.

The market on its own doorstep has been in the doldrums for years but Mr MacGregor said there were now signs of that changing, with average prices in and around Aberdeen rising for the first time since 2015.

Strong demand in Dundee

SMH has also been encouraged by strong demand in Dundee, where it is on the hunt for more development sites.

Ballumbie Rise, Dundee, is one of SMH’s fastest-selling projects to date. The firm is moving forward plans for second phase, with 150 new homes, after recently winning a planning appeal.

Ballumbie Rise, Dundee.
Ballumbie Rise, Dundee.

Mr Fraser said 76% of the total sales targeted by SMH for 2022 were already secured.

That, together with an improving north-east market, a more efficient housebuilding operation – “significantly” driving up profit margins – and a big revamp for its range of homes, mean SMG is well-positioned for future growth, the firm’s finance chief added.

Sale of the business expected before the end of 2022

Mr MacGregor revealed a sale of SMH is likely to take place before the end of this year.

There is “good interest” in the business from a range of potential buyers, he added.

It follows the recent announcement that multi-millionaire Stewart Milne – SMG’s principal shareholder – was to retire.

SMG is now wholly focused on housebuilding, having last year sold kit home business, Stewart Milne Timber Systems (SMTS) to Fife-based timber giant James Donaldson & Sons for an undisclosed sum.

Stewart Milne
Stewart Milne has said he wants to spend more time with family and friends, splitting his time in homes in Aberdeen, Perthshire, Turkey and Florida.

Mr MacGregor said the collapse into administration last year of Countesswells Development Limited (CDL), the wholly-owned subsidiary of SMG behind the £800 million Countesswells scheme in the west of Aberdeen, was “disappointing”.

CDL’s directors blamed disruption caused by the oil and gas downturn, as well as the Covid-19 pandemic.

SMG posted pre-tax losses of £8.1m for 2020-21, following a trading deficit of £71.5m the year before.

The group highlighted operating profits of £13.5m before one-off items in the latest period, up from £800,000 previously.

Turnover raced ahead to £305.5m last year, from £269.7m in 2019-20.

Stewart Milne Group chief executive Stuart MacGregor.
Stewart Milne Group chief executive Stuart MacGregor.

SMG – launched in 1975 as Stewart Milne Construction – said it had exceeded targets in its business plan, achieving significant improvements in performance and a return to sustainable, profitable growth.

Margins would have been “substantially higher” had it not been for challenges in the north-east housing market, the company added.

Reduced borrowings and increased profitability following the sale of SMTS will be reflected in the next set of accounts, the firm said.

While overall unit numbers decreased from 836 to 828 during the 2020-21 trading year, private home sales increased by 10% to 668.

Turnover at SMTS grew to £94m, from £65m previously, which SMG said reflected an element of catch-up on delayed orders from the prior financial year and the increased trend of UK housebuilders towards more sustainable, modern methods of construction.

SMG’s trading performance during 2019-20 was affected by Covid and the revaluation of land acquired prior to both the 2008 financial crisis and 2015 oil and gas downturn.

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