The group 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, but there was a downturn in sales rates from October 2022 onwards.

Housebuild completions reduced to 146 units for the year (2022 165 units). Pre-tax profits were materially lower at £0.385m following an exceptional impairment charge of £1.2m in respect of a historic landbank purchase and the impact of higher borrowing costs.

Joint managing director of Scotia Homes, Richard Begbie, commented: “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 in Angus. This is a strategically important step for Scotia as it has enabled the group to develop a relationship with HGP who bring extensive sector experience 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 their site in Brechin. The NextGeneration Benchmark was designed for assessing the corporate sustainability of the largest housebuilders in the UK, but recently the service offering has been expanded to support all housebuilders, regardless of size, to improve their sustainability performance.

Mr Begbie went on to say: “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 explained: “2023 was the most difficult period that the residential housebuilding industry has faced for over 15 years. 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 landbank and work-in-progress which increased to over £50m as at the year end, representing an increase in excess of £20m over the past two years. The quality of our landbank 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 is strong with net assets of over £25m. The group has remained in compliance with its banking covenants throughout the difficult period and has its revolving credit facility with Bank of Scotland committed until June 2025. Scotia also continues to benefit from strong shareholder support in growing the business and the new funding arrangement with HGP further enhances its funding resources.

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. I would like to thank all of our colleagues for their ongoing hard work and commitment in continuing to deliver high quality houses for our customers.”

Mr Gerrard and Mr Begbie were speaking after Companies House released Scotia Homes (Holdings) Limited Report & Accounts for the year ended 30th June 2023.

Scotia Homes has current and future developments in Aberdeen, Arbroath, Aviemore, Ballater, Blairgowrie, Brechin, Braemar, Ellon, Forfar, Inverness, Kincraig, Kintore, Laurencekirk, Nairn, Newmacher, Old Meldrum, Perth and Tarves.