Stewart Milne Group: Where did it all go wrong?

North-east construction tycoon Stewart Milne should have been enjoying his retirement by now.

The former Aberdeen Football Club chairman had hoped to be spending a lot more of his time between homes in Aberdeen, Perthshire, Turkey and Florida.

And he had expected his pension pot to be boosted by around £7.5 million from the sale of a luxury mansion in Bieldside Aberdeen.

But the 73-year-old’s house remains unsold after nore than 18 months^[1].

And he’s just watched his business, Stewart Milne Group (SMG), collapse nearly 50 years after he founded it^[2].

Mr Milne has been trying to sell Dalhebity House in Bieldside, Aberdeen, for more than 18 months. Image: Savills

SMG put itself up for sale in April 2022^[3].

The sale process and Mr Milne’s retirement plans were put on hold^[4] for a while after the catastrophic mini-Budget introduced during Liz Truss’s brief reign as prime minister.

But last July SMG said market conditions had improved and it was speaking to suitors again^[5].

The group also reported its best annual profits – £16.5 million from continuing operations at the pre-tax level – for almost a decade. Figures were boosted by a £48.1m gain from the sale of a £100m turnover timber systems business in December 2021.

Stewart Milne Homes’ Charleston Cove development in Aberdeen. Image: Kami Thomson/DC Thomson

SMG would have been in the red again – after losses of £13.1m in the 2020-21 trading year – were it not for the sale of Stewart Milne Timber Systems to Fife-based James Donaldson & Sons for an undisclosed sum^[6].

But chief executive Stuart MacGregor and chief financial officer Fraser Park told The Press and Journal new homes in Scotland and north-west England were selling well.

SMG also reported a “strong” cash position at the year end, October 31, 2022, with £15.8m left in the kitty after the firm repaid £61m of debt to the Bank of Scotland.

Housebuilder’s bullish outlook

According to accounts lodged at Companies House, the bank later extended a £114m overdraft until June 30 2024.

SMG was bullish last summer about the prospects for a takeover deal, with bosses reporting a “serious level of interest” in the business.

So, what happened and why has the bank seemingly pulled the rug from under SMG?

Mr Milne insists there was a way forward for SMG

According to Mr Milne, SMG received two takeover bids amid “significant interest”.

He added: “The bank has not accepted either bid and withdrawn its funding, which left the directors with no option but to appoint administrators.

“I tried everything I could to find a way to achieve a better outcome for the business and the people who depend on it.”

According to Mr Milne, one of the bids could have delivered a “comparable, financial return to administration” and, crucially, allowed the business to continue to operate.

But the bank’s patience ran dry

But from the bank’s point of view, market prospects are no longer as rosy as they were in the initial post-pandemic phase, when there was a burst in property buying activity.

The cost-of-living crisis and higher interest rates have curtailed demand. Many parts of the UK have suffered a corresponding drop in house prices.

Bank of Scotland’s patience after years of relatively high debt levels at SMG wore thin.

The Bank of Scotland withdrew support. Image: Stuart Reynolds/Shutterstock

A spokeswoman for the bank highlighted “several years of support and forbearance” as well as “multiple maturity extensions” to SMG’s borrowing.

Meanwhile, sources have told The Press and Journal profits at the Westhiill, Aberdeenshire-based housebuilder were just not big enough to keep SMG’s security holder on side.

We’ve also learned the two offers for the business, including one from Mr Milne, came much too late in the day to make them a “viable” option.

The business, we were told, could not be saved.

More housebuilding woes

SMG is not the only Scottish housebuilder to hit the skids recently.

Shares in Alternative Investment Market-listed Springfield tumbled on September 20 after it revealed a slump in profits^[7].

It also warned of reduced market demand and announced a freeze on new projects.

Since then, Elgin-based Springfield has been focused on reducing its debt “to be in a stronger position for when normalised market demand returns”.

A key part of this are land sales to bring in cash without hurting the development pipeline.

A Springfield showhome. Image: Springfield Properties

Last month Springfield said demand for its private sector homes “remains stable but subdued”^[8].

Despite the sluggish sales, the company was confident of meeting market expectations for the year to May 31 2024. Further down the line, it expects to benefit from increased demand for homes to support the new Inverness and Cromarty Firth Green Freeport.

Springfield builds homes in Aberdeen, Aberdeenshire and Moray, as well as on Tayside and in Fife and the central belt^[9].

References

1. ^{^} remains unsold after nore than 18 months (www.pressandjournal.co.uk)
2. ^{^} collapse nearly 50 years after he founded it (www.pressandjournal.co.uk)
3. ^{^} put itself up for sale in April 2022 (www.pressandjournal.co.uk)
4. ^{^} put on hold (www.pressandjournal.co.uk)
5. ^{^} speaking to suitors again (www.pressandjournal.co.uk)
6. ^{^} sale of Stewart Milne Timber Systems to Fife-based James Donaldson & Sons for an undisclosed sum (www.pressandjournal.co.uk)
7. ^{^} slump in profits (www.pressandjournal.co.uk)
8. ^{^} “remains stable but subdued” (www.pressandjournal.co.uk)
9. ^{^} Aberdeen, Aberdeenshire and Moray, as well as on Tayside and in Fife and the central belt (www.springfield.co.uk)