By Scott Wright

STEWART Milne Group has reported a leap in profits and hailed the outlook for this year despite the cost-of-living crisis, as the housebuilder underlined its recovery from the pandemic and the protracted downturn of the economy in the north-east of Scotland.

The Aberdeen-based company, which was recently put up for sale by founder Stewart Milne, reported a £12.7 million rise in operating profits to £13.5m for the year ended October 21.

Turnover surged to £306m from £207m, with the builder benefitting from improving market conditions and increased demand, as well as the impact of its new home designs, which boosted margins from 13 per cent to 16%.

And chief executive Stuart MacGregor declared the company has yet to see any impact on demand from the cost-of-living crisis.

Mr MacGregor acknowledged that surging inflation was presenting a major challenge to household incomes. But while he noted that people in April will have seen the first effects of the surge in energy prices and the rise in National Insurance contributions, he said the company has continued to see “strong reservation rates since the turn of the month”.

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Mr MacGregor told The Herald: “I am not denying it is challenge for many people. Although mortgage rates have increased, they are still relatively affordable.

“In the areas in which we operate, which is Scotland and north-west England, although house prices have undoubtedly increased, they are still amongst the more affordable regions of the UK. If you were in London at the moment it would be a very different equation.”

The housebuilder, which was founded by the former long-standing Aberdeen Football Club chairman Stewart Milne in 1975, redesigned all of the homes it builds during the period in a move to drive efficiencies while also meeting the changing needs of home buyers.

The new homes take into account the huge growth in working from home seen since the pandemic started, with the bigger homes having studies or study areas. They are more energy efficient, the company said, which Mr MacGregor said will be attractive to buyers amid surging energy prices.

“We are really stressing the fact that new-build homes have a real significant advantage when it comes to carbon efficiency. That also translates very much through into spending power for people who buy homes,” he said.

Mr MacGregor also underlined the benefit the company was now seeing from the recovery of the economy in Aberdeen, following a “challenging” period between 2015 and 2020 sparked by the downturn in the oil and gas industry.

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He noted that the area had stabilised following a long period during which there was a glut of second-hand homes on the market, which had made it difficult to sell new builds.

Mr MacGregor said: “Ironically since Covid we have seen the market stabilise and begin to grow again; that is really encouraging after what were undoubtedly five really challenging years in Aberdeen. It is really good to see the market beginning to recover in Aberdeen. We have been operating in Aberdeen for 47 years now and know the market as well as anybody does.”

More generally, Stewart Milne described the outlook for the current year as “strong”, with Fraser Park, the company’s finance director stating that 76% of the homes planned for 2022 are already reserved.

He said: “The demand for the kind of homes we produce, the family homes that we deliver, is as strong as it was 18 months ago, and that is really encouraging to see. We have seen a move of people from city centres into more suburban and semi-rural locations, and that does not appear to be changing at all. People seem to be prioritising space and privacy; having some outdoor space is something that has been very important for house-buyers.”

The company added to its landbank during the year with the acquisition of site in Congleton in north-west England, and further land to expand its existing presence in Bishopton to the west of Glasgow. Mr MacGregor said acquiring land continues to be “very competitive” but remains “confident” of continuing to bring new areas to market.

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In April, Stewart Milne, the chairman and principal shareholder of the company, announced his decision to retire, leading to the business being placed on the market.

Asked if there was any update on the sale of the company, Mr MacGregor said the level of interest has been strong. It hopes to conclude the sale later this year.

Stewart Milne announced the sale of its timber frame business to Fife-based Donaldson Group in December, shortly after year-end. It said the sale had allowed it to “substantially” reduce borrowings and generated “considerable” profit, which it said will be reflected in next year’s results.

While the disposal incurred costs and associated refinancing in the accounts being reported, the company said total exceptional costs had reduced “dramatically” to £8.7m from £59.2m. The exceptional costs of £59.2m the previous year were dominated by a £43m impairment related to land; this related to sites in the north of Scotland which had been acquired before 2015. The company does not anticipate land asset impairments going forward.