Upmarket housebuilder Cala has hailed a “transformational year” after it reported that profits more than doubled to £27.3 million.
The Edinburgh-headquartered firm said yesterday that its 117 per cent leap in pre-tax profits was just the start of a growth period that will see revenues triple over three years.
Sales grew more modestly in the 12 months to 30 June, reaching £294.2m, against £240.8m a year earlier. But the figures include only three months’ worth of contributions from Banner, the south of England-focused rival it swallowed in March for around £200m.
Chief executive Alan Brown said: “The last 12 months have been transformational for Cala. Record profits, significant land investment and the Banner acquisition mean it’s been a really good year.”
Brown pointed out that the firm had been “cash constrained” before its 2013 takeover by private equity firm Patron Capital, Legal & General and Electra.
“Now we’ve got three really good financial backers and have much greater firepower,” he said. “What we’ve been able to do in the last 12 months is effectively turn a £215m business, which we were the year before last, into what will be a £800m business the year after this. This 12-month period has been all about that transformation through investment in land and the acquisition of Banner homes.
“The gross margin this year at 22.7 per is a record and there’s an element, albeit a small one, of sales inflation in that. But obviously if we double the size of the business we would expect profits to grow as well.”
Cala is targeting turnover of around £500m in the current financial year, and expects to enjoy “increased synergies and benefits of scale” as it completes the integration of the two business by the end of this month.
Brown said the firm was finding it straightforward to build up its land bank and get planning permission in suitable places for its homes, which sell for an average of £423,000.
In the last financial year, the company’s owned and contracted land bank was increased by more than a quarter to 12,690 plots with a potential gross development value approaching £4.7 billion.
Brown said Cala’s expanded group of eight operating regions will be operating at full efficiency by 2016.
“All regions are doing well, with single-digit sales inflation. Aberdeen is particularly positive for us,” he said.
“The Scottish market is operating particularly well. It was quiet in the summer, particularly during the last four weeks before the referendum, but now there is less uncertainty it is in catch-up mode.”
Cala’s private equity backers will have been watching with interest as rival Miller Homes abandoned an attempt at flotation in recent weeks. It is thought Miller’s owners were seeking a valuation of at least £450m.
Brown conceded that flotation is one of the options for his paymasters but said it was not a priority for management, which is concentrating on its growth plans. Should they succeed, Patron and partners would be in for a significant premium over the approximately £215m they paid for Cala last year, even taking into account the cash spent on Banner.