ELLON-based housebuilder Scotia Homes has reported a 32% increase in turnover to £53.8 million for the year ended June 30, 2023.
However, operating profit dipped from £4.4 million to £2.7 million during the period.
The group revealed it had a ‘strong’ start to the financial year with a ‘good’ level of forward sales and higher average selling prices due to the changing sales mix. There was a downturn in sales rates from October 2022 onwards and house build completions reduced to 146 units, compared with 165 in 2022.
Pre-tax profits were materially lower at £385,000 following an exceptional impairment charge of £1.2 million in respect of a historic land bank purchase and the impact of higher borrowing costs, Scotia explained.
Richard Begbie, joint MD of Scotia Homes, said, “Our 2023 results demonstrate a resilient trading performance considering the challenges that we faced with successive increases in mortgage interest rates, the cost-of-living squeeze on consumers, and high levels of inflation during the period. We have taken the necessary steps to realign our housebuilding activity to the reduced sales rates.”
During the year, the group formed a joint venture with the Housing Growth Partnership (HGP) to progress a site in Brechin. This was described as a ‘strategically important step’ for the business as it has enabled it to develop a relationship with HGP and has also diversified the group’s funding sources. Scotia was also recognised as the first housebuilder in the UK to receive the Gold Award from the NextGeneration initiative for its site in Brechin. The NextGeneration benchmark was initially designed for assessing corporate sustainability of the largest housebuilders, but recently the service offering has been expanded to support all housebuilders, regardless of size.
Mr Begbie added, “A combination of continuing cost inflation and downward pressure on selling prices have significantly impacted our gross margins during the year with a reduction of almost 7% to 17.2%. This remains in line with other regional housebuilders but significantly below historic levels.”
Chairman Gary Gerrard described 2023 as the ‘most difficult period’ the residential housebuilding industry has faced for over 15 years. He stated, “Not since the financial crisis in 2008 have we seen such a dramatic slowdown in new house sales and our colleagues have had to work so hard in extremely challenging circumstances. Notwithstanding this, the group has continued substantial investment in its land bank and work-in-progress which increased to over £50 million as at the year end, representing an increase in excess of £20 million over the past two years.
“The quality of our land bank is the bedrock of our business and we believe that with this ongoing investment, Scotia is uniquely positioned to capitalise on the market recovery.”
Scotia’s consolidated balance sheet shows net assets of over £25 million.
Mr Gerrard added, “Our board continues to monitor market conditions closely and is using incentives such as part-exchange, assisted sale and mortgage subsidy to support sales levels. During the year, the group completed the acquisition of Ellon-based Caledonia Homes (Scotland) Limited and the benefits of having our own in-house manufacturing facility for timber kits is already apparent. We are creating significant operational benefits and cost savings, as well as supporting our sustainability agenda.
“The high levels of build cost inflation have subsided and with interest at or close to their peak, there is renewed confidence across the sector that 2024 will see the start of a sustained recovery. Since the beginning of January 2024, we have seen an increasing level of customer enquiries, particularly for our Aviemore site in the Cairngorm National Park.”
