Profits hit by rising timber costs at Borders construction firm Oregon
RISING timber costs and the depreciation of the pound in the wake of the Brexit vote have impacted on the bottom line of Selkirk construction firm Oregon Timber Frame, despite the business reporting a 10 per cent rise in revenues.
For the year to the end of December 2017 the firm saw revenues increase from £21.7 million to £23.7m, but after its cost of sales figure rose by 11% to £19.5m, pre-tax profits fell by 5% to £1.8m.
Writing in Oregon’s accounts, which were filed at Companies House this week, firm chairman Rod Lawson said: “Gross and net margins continue to be affected both by the depreciation of the pound as a result of the EU referendum vote and increased demand for raw materials.
“Material costs have been rising and it is expected that margins in the current year could be lower than last year.”
Timber prices rose by around 20% during 2017, in part because more and more firms are following Oregon’s lead by using timber as a primary construction material, leading to a scarcity of supply. Oregon has been designing, manufacturing and building structural timber frame houses for builders and developers since it was founded in 1998.
While much of its focus is on the Scottish market, Mr Lawson said the business has invested in equipment and IT systems over the last few years with a view to increasing the amount of work it does south of the Border.
“In view of the large potential housing market in England efforts are being made to diversify geographically and service clients in that market,” he said.
The firm, which employs just over 140 people, has already completed projects in Shrewsbury, Weymouth and Plymouth.
Earlier this year the firm’s management team bought out all external shareholders, bringing an end to the relationship it had had with business angel group Archangel Investors since it invested in Oregon at launch.
Archangels had held 15% of the company’s equity. The management team bought back a further 7.5% of shares that were owned by other investors.
In total 68,818 shares were bought back at a total cost to the business of £2.4m.
Looking ahead, while Mr Lawson said that the housing market “continues to be strong”, he added that it remains exposed to interest rate rises and other pressures in the wider economy. If the housing market remains buoyant he expects turnover to increase by a further 10% this year, he said.
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