Miller counts on steady growth as UK housing market recovers

While the firm built fewer homes in 2011 at a lower average selling price, profit margins on those sales jumped from 5 per cent previously to 11 per cent. As a result, the core division booked a £900,000 profit compared with hefty losses a year earlier.

Accounts for the Edinburgh-based group – whose activities also span construction, property development and mining – include numerous one-off charges linked to a financial restructuring that has allowed Miller to raise £160m of fresh equity.

That deal, led by new majority shareholder GSO Capital Partners, was finalised at the end of February.

Excluding exceptionals, Miller Group made an overall profit of £20.8m before interest payments on debts which stood at nearly £707m prior to refinancing. Interest charges resulted in a pre-exceptional loss of £30.4m, though this was down from £55.8m previously.

Miller said those costs would fall dramatically as a result of the restructuring, which has boosted the group’s net assets by £414.5m.

“Our interest bill will be roughly half of what it has been historically,” he said.

Total group sales fell, as expected, from £663m to £588m.

The underlying improvement in the housing division, where sales reached £270.6m, is being driven by higher profit margins on homes built on cheaper land acquired since the market collapse.

The group sold 1,632 homes last year at an average price of £161,000, down from 1,915 and £168,000 previously.

Finance director John Richards said the proportion of expensive legacy land would continue falling, with profit margins on old and new to reach the “upper teens” in the current year.

Miller expects to acquire a further 25 sites this year, with an emphasis on the Midlands and south of England, where the housing market is the strongest. About 40 per cent of its homes are built in this region, versus 35 per cent in the north of England and 25 per cent in Scotland.

The firm’s other core division, construction, reported a profit of £7.4m before interest and exceptionals. Turnover was down nearly 19 per cent at £238.6m as the flow of government-backed projects slowed, though that is expected to improve.

Miller has already secured £200m worth of new construction work so far this year, more than twice the value of projects in hand at this same time last year.

The firm’s property division made £10.2m before exceptional charges, while mining contributed £7.5m.

GSO Capital, a subsidiary of US private equity group Blackstone, is Miller’s majority shareholder at 54 per cent following the refinancing. Other lenders who supported the deal include Royal Bank of Scotland, which now owns 23 per cent of the business, plus Lloyds and National Australia Bank with a combined 10 per cent.

Merchant bank Noble Grossart has a 5 per cent stake, while the remaining 8 per cent is held by existing shareholders and management, including the chief executive.

“The timing of this deal is good in that we see some steady recovery in our markets,” Miller added.