Builder Cala upbeat on outlook for Scottish economy

Cala Group, the Edinburgh-based housebuilder, said it is 'particularly positive about where the Scottish economy's going' after reporting what it called a 'very strong' first half.
Cala said it was on track for its fifth consecutive year of record growth. Picture: ContributedCala said it was on track for its fifth consecutive year of record growth. Picture: Contributed
Cala said it was on track for its fifth consecutive year of record growth. Picture: Contributed

The group said in a trading update for the six months to 31 December that it was set to deliver a further record year of revenues and profits in 2017.

There was a 24 per cent year-on-year jump in net private reservations in the first half to 610 homes, and it is now 80 per cent sold for the full year.

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Chief executive Alan Brown told The Scotsman: “The business is in a really good place, and we’re expecting to deliver our fifth consecutive year of record profits and revenues.”

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Results for the full year to end-June 2016 showed that pre-tax profits topped £60 million for the first time in the group’s history, with revenues up 15 per cent to £587.1m.

Brown said the group is still on track to deliver revenues of about £1 billion by 2020, and described the first half as marking a “really good start” to its current financial year.

He added that Scotland traded “particularly” positively for the first six months with stability in the Aberdeen market, saying: “We are investing in all of our regions now and started to reinvest in our Aberdeen business and we are particularly positive about where the Scottish economy’s going.”

Additionally, he said the Central Belt is in fact “slightly more positive than the south-east of England”, with the latter still positive, and explained that prices north of the Border average at £360,000, with “very little” north of £1m.

Across the UK, Cala’s average selling prices fell in the first half to £504,000 from £529,000, which it said reflected a change to its product mix and lower exposure to homes valued at more than £1m.

Brown said the group’s growth strategy has overall focused on moving away from the upper end of the market “but in reality it’s just bringing it in line with the Scottish market”.

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He also stressed that as it looks to grow with bigger sites and “slightly smaller” houses, “we’re still very much at the premium end of that market. We’re still the Waitrose or BMW of housebuilding.”

The business, which started out in 1875 as the City of Aberdeen Land Association, was bought by private equity firm Patron Capital Partners and insurer Legal & General four years ago in a deal worth £210m, while in November, Chinese property developer Evergrande Group was named as a possible buyer of Cala.

As to whether any further M&A activity is on the cards, Brown would not confirm or deny speculation, adding: “At the end of the day we’re completely focused on strong trading performance.”

He highlighted the firm’s acquisition of housebuilder Banner Homes in 2014, saying: “That’s given us the critical mass that we needed so at the moment we’ve no intention of doing anything — buying or selling. [We’re] just building and selling homes.”