Springfield Properties H1 revenue up 86% to £162m

Elgin-based Springfield Properties, which is building a number of new communities throughout Scotland, said its revenue increased 85.6% to £161.9 million in the six months ended November 30, 2022, with adjusted profit before tax and exceptional items up 3.1% to £6.6 million.

However, the company’s shares initially fell as much as 10% as Springfield decided not to propose an interim dividend and said it will consider the payment of any final dividend for FY 2023 “in light of the position and outlook of the group at that time.”

The shares later regained most of the lost ground.

The firm reported a total land bank of 16,975 plots with gross development value (GDV) of £3.7 billion.

On private housing, Springfield reported that 429 private homes were completed (H1 2022: 197), reflecting the acquisitions of Tulloch Homes and Mactaggart & Mickel Homes and organic growth.

It said sales for this current financial year are largely protected by the Scottish missive system, with approximately 94% of market forecast private housing revenue for 2023 secured.

Springfield said reduced homebuyer confidence impacted private housing reservations towards the end of the period, but since the period end “the group has been encouraged by the reservation levels across its brands.”

On affordable housing, Springfield said a strategic decision was taken to “temporarily pause entering new long-term affordable housing contracts until market conditions improve” as it reported 175 affordable housing completions (H1 2022: 204), with “revenue and margin impacted by build cost inflation due to industry-wide model of fixed-price contracts.”

On contract housing, the company said it “progressed delivery of first contract for private rented sector (PRS) housing, with final handovers occurring post period” but that plans for the delivery of further PRS housing were withdrawn “following the Scottish Government’s intervention in rent control.”

Springfield said it completed a strategic land sale to generate £3.7 million and will consider further opportunities where the terms and price are desirable.

Springfield CEO Innes Smith said: “This has been a challenging period for the housebuilding industry with significant headwinds having a combined effect, which largely offset the excellent growth that we achieved in private housing.

“The UK government’s mini-budget in September reduced the confidence of homebuyers and the cost of mortgages increased significantly.

“Our affordable housing business was greatly impacted by build cost inflation and, with the Scottish Government still to review its affordable housing investment benchmark, it is not currently possible to continue building affordable homes at the same pace as we have in the past.

“Our plans to deliver additional homes for families through PRS were unfortunately withdrawn as a result of the Scottish Government’s intervention in rent control.

“Plus, while one land sale to a housebuilder was achieved, the industry-wide stalling of land purchases meant that we could not secure acceptable value for additional sales.

“We have taken decisive action in response to these conditions. We’ve paused entering new long-term affordable housing contracts and reduced our fixed cost base.

“We’ve made a strategic land sale on good terms; reduced land buying activity; and are approaching new site openings with caution. We are also encouraged by the signs that market conditions are improving.

“While it is too early to call a recovery, the green shoots we are experiencing and which are being seen across the industry, through increased reservations and visitor levels, are encouraging.”

Explaining the decision on its dividend, Springfield said: “While the group maintains a strong financial position, given the continued market uncertainty, the board has taken the decision not to propose an interim dividend for the six months ended 30 November 2022.

“The board recognises the importance of the dividend to shareholders, but believes that this, alongside other measures that the group is taking to preserve its cash position, is an appropriate and prudent measure to preserve liquidity in these uncertain times.

“The board will consider the payment of any final dividend for FY 2023 in light of the position and outlook of the group at that time.”

In its outlook, Springfield said: “Looking further ahead, the board is encouraged by the reservation levels experienced across its private housing business during January and February 2023.

“However, it is taking a cautious approach to future sales rates given the continued market uncertainty. The group is maintaining tight cost control and will continue to closely monitor market conditions to ensure it can respond in a timely manner as required …

“The large land bank, over half of which has planning permission already granted, provides visibility.

“As a result, and combined with the group focusing on reducing its net debt position, this provides Springfield with an excellent platform from which to take advantage of the next upturn in the market cycle.

“In addition, there remains an undersupply of all tenures of housing across Scotland, with the Scottish Government committed to investing in the delivery of more affordable homes and there being greater affordability of private housing compared with the UK as a whole.”