’We didn’t develop these skills overnight’: Hill Holdings chief executive reveals how his small housebuilding firm is catching up with bigger players
The natural order of the housebuilding world has been in flux over the past few years.
Some of the big beasts have been forced to draw in their horns, while a few smaller firms have upped their activity.
Andy Hill, chief executive of Hill Holdings, the parent of contractor Hill Partnerships and housebuilder Hill Residential, has an anecdote to illustrate this situation. “Previously, we would have aspired to be like Countryside Properties in 20 years, and thought that was really good,” says Hill. “But now I guess our figures for 2011 won’t be hugely different to Countryside’s.”
The firm’s accounts for 2010, published last week, reveal that the company has a little way to go before it gets level with Countryside - Hill Holdings made a profit before tax and interest of £7.1m in 2010 against £8.2m for Countryside, but Countryside’s turnover was almost £93m higher than Hill’s.
Still, it has been a good few years for the Waltham Abbey-based company. Hill Partnerships, the largest of the two subsidiaries, had its eleventh successive year of growth in turnover and profit. In the year to 31 December 2010, it increased its turnover to £133.5m from £97.9m a year earlier. Its profit rose £700,000 to £3.8m.
Meanwhile, Hill Residential increased its turnover from £5.5m to £9.5m and its profit from £175,000 to £1.1m.
Hill says taking early writedowns on land “continued, steady financial performances”, which kept the confidence of its bankers and not having any shareholders to please helped the company to bounce back earlier than some other housebuilders.
Hill Residential has spent 18 months rebuilding its landbank - from £21m last year to about £38m today - as prices have fallen. It has about 15 flats as unsold stock, including several on a large site. It has found that buying lots of small sites in good locations and building homes to sell for more than £1m works well.
While the firm has weathered the recession, there are major funding cuts ahead in the affordable housing sector, which is a major source of its contracting work. Hill is confident that there will always be demand for affordable housing, but believes that other models may be needed to fund it.
The firm is already involved in one alternative financing method, namely joint ventures with housing associations. Joint ventures make up about a third of its residential work turnover and Hill predicts this will grow in future.
Other social housing contractors are forming joint ventures too, but Hill is unperturbed. “There are a lot of people trying to get onto the bandwagon, but we didn’t develop these skills overnight,” he says. “It does not worry me too much - I think we are ahead of the game.”
Housing for sale is another area in which the firm plans to expand. The firm will complete 1,850 homes this year, of which 150 will be for private sale. “We see our business model changing over a number of years and private sale could go up to 50%, but that will take many years to change,” he says, anticipating that the transformation could take about a decade. Big housing schemes in the pipeline include a project on a Homes and Communities Agency site in Stevenage and 169 homes as part of the redevelopment around Cambridge station.
The firm is on target to exceed its plans to grow turnover by £200m in the five years to 2012. Hill hopes the firm can achieve the same or greater growth to 2016. Such progress would help it follow in the footsteps of - and perhaps overtake - the big housebuilding names he admires.
Hill Holdings in numbers
Year ending 31 December 2010
Retained profit £4.9m