Buccleuch's MDS Estates reports surge in annual profits

[Zardoz Greek]

Buccleuch Estates' parent company MDS Estates reports surge in annual profits

The firm, parent company of the 10th Duke of Buccleach's group of firms, sees operating profits almost double to £26.6m

BY SCOTT MCCULLOCH 18 JUL 2017
http://www.insider.co.uk/news/buccleuch-estates-parent-company-mds-10821530

The 10th Duke of Buccleuch said the effect of new Financial Reporting Standards102 rules 'has been to flatter the financial performance for the year'

The MDS Estates Ltd, the parent company of the 10th Duke of Buccleuch's group of firms, has reported a surge in annual profits, largely from accounting gains on the value of investment property.

Turnover in the 2016 year to 31 October fell nearly 22 per cent to £29.9m (2015: £38.2m and gross profit fell to £10.7m, down from £12.6m in 2015.

However a £20.1m gain on the value of investment property (2015: £5.5m) served to almost double operating profits to £26.6m, up from £13.4m in 2015.

Pre-tax profits for the year jumped to £22.1m, up from £7.0m in 2015.

Total comprehensive income for the year was £14.4m, up from £5.2m in 2015.

It its first year reporting results under new Financial Reporting Standards102 rules (FRS102), the group said the new accounting treatment “flatter the underlying performance”.

The MDS Estates Ltd, parent company to Scottish registered The Buccleugh Estates Ltd, said trading in traditional activities such as agriculture, forestry, rural property and heritage tourism had been “challenging” in the period.


Turnover from commercial property dropped to £5.7m (2016: £15.7m) and woodland turnover dipped to £6.2m, down from £6.9m in 2015.

Revenue from estate activities rose to £10.5m (2015: £9.8m) and farming revenue rose to £5.3m, up from £4.4m in 2015.

In a business review statement opening the 2016 audited accounts to 31 October, The 10th Duke of Buccleuch said “significant presentational changes” arise from the adoption of FRS102, which require “certain amounts to be recognised within profitability which would not have been under previous accounting principles”.

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He adds: “The effect in including these amounts in the year has been to flatter the financial performance for the year by £15.004m, suggesting an underlying loss of £592k for the group against an underlying profit of £200k in the prior year calculated on the same basis.”

In commercial property, MDS Estates notes following the strong growth recorded in the 2015 year, most of the property sectors in which it operates “flat lined” in 2016 though profitability was maintained as the group realised “mature projects”.

Residential property continued to “perform well” with strong demand for “oven ready” land from large public and mid-sized housebuilders with the exception of London where headline pricing has dipped.

The group notes a highlight in the 2016 year was the completion of the £8.9m stableyard and park development at Dalkeith, “creating a high-end retail and food destination together with a major children’s play attraction on the outskirts of Edinburgh”.

Profits from the disposal of tangible assets rose to £8.4m, up from £6.2m in 2015.

Looking ahead the group said it plans to accelerate its re-investment strategy through both new and existing joint ventures.

MDS Estates notes operating profit included government framing grants totalling £1.4m (2015: £1.7m) and government woodland grants of £327,000 (2015: £151,000).

The 10 Duke of Buccleuch describes the Land Reform Act 2016 covering land reform and farm tenancies, which passed in April, as “long on ambition” and believes much of the “detail and practicability” will be dealt with in secondary legislation.

He said: “Regrettably, land use has been ignored, despite the promising pilots undertaking in Aberdeenshire and the Borders.

“These challenges will need to be addressed when debated in a port-CAP environment, which will require a conversation with UK and Scottish taxpayers on what hey wish to achieve with their subsidies; a conversation that has not been had for over 40 years.”

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MDS Estates notes it employed 386 staff on average in the 2016 year, up from 353 in 2015, though full-time employee numbers dipped to 249, down from 262 in 2015.

The highest paid director's pay rose to £746,000, up from £665,000 in 2015.

Net debt at the 2016 year end totalled £106.3 million, down from £124.0 million in 2015, with bank loans reduced to £100.5 million, down from £119.8 million the prior year.

John Glen, chief executive Buccleuch, said: “Trading in our traditional areas of agriculture, forestry, rural property and heritage tourism has been challenging during the reporting period and, as expected, capital growth in the commercial property market slowed following a particularly strong progression the previous year.

“In contrast, our plan to create a major energy park at Glenmuckloch in Dumfries and Galloway continues to progress and planning consent was granted for an industrial-scale pumped hydro storage scheme up to 400MW.

“This followed the consent for 26MW of wind power on the same site last year.

“We hope to progress this and other renewable energy projects in coming years.”