Shares of Elgin-based Springfield Properties, which is building a number of new communities throughout Scotland, climbed as much as 7% after it said full year 2023 revenue is expected to rise 28% to £330 million.
Springfield said in a trading update this would be the group’s highest ever annual turnover “despite the turmoil in the housing market.”
The group completed over 1,300 homes during the year.
The revenue growth was driven by a full year contribution from the acquisitions of Tulloch Homes and Mactaggart & Mickel Homes.
Full year profit before tax is expected to be in line with market expectations. “As previously announced, the reduction in profit compared with the prior year reflects the impact of significant build cost inflation, particularly on fixed-price contracts in affordable housing, affecting margins across the group,” said Springfield.
The firm reported a land bank of 16,300 plots at May 31, 2023 — with over half having planning permission — and a gross development value (GDV) of £3.5 billion.
The average selling price for private housing increased to £290,000 from £245,000.
“The challenging market backdrop impacted reservation rates as increased mortgage rates combined with ongoing cost-of-living pressures reduced affordability and homebuyer confidence,” said Springfield.
“In particular, there was a sharp reduction in sales levels following the UK Government’s mini-budget, which remained low for an approximately three-month period.
“While there was recovery in the second half of the year, the forward order book at year end was below that of the previous year, as expected …
“In affordable housing, there was a reduction in revenue, as expected, as the group took a cautious approach to entering into new long-term affordable housing contracts, which it has maintained since year end.
“However, the group is pleased to note that, in June 2023, the Scottish Government increased the affordable housing investment benchmarks by 16.9%.
“This is expected to enable housing associations to increase the price of affordable housing contracts to progress the building programmes required to meet the Government’s affordable housing targets.”
Springfield Properties CEO Innes Smith said: “Against a challenging market backdrop, we delivered our highest annual revenue, reflecting our acquisitions as well as organic growth in private housing.
“While our margins were impacted by significant build cost inflation, particularly in affordable housing, we took decisive action to address this.
“We remain cautious about the near-term outlook, particularly given the softening in demand following the increase in rates by the Bank of England to 5%.
“We are closely monitoring the economy and buyer behaviour in both the housing and land market and carefully managing our activities to limit our exposure in the slower sales environment.
“This will also ensure that we can respond quickly when normalised demand returns. With over half of our large, high-quality land bank having planning permission, we are well-positioned for when market conditions improve.
“We are also encouraged that the Scottish Government has now increased its affordable housing investment benchmarks, supporting the viability of affordable housing projects going forward.
“Moreover, the fundamentals of the housing sector in Scotland remain strong. There is an undersupply of housing, which is being exacerbated by the current conditions, and there is greater affordability in Scotland compared with the UK as a whole.
“Above all, we remain committed to delivering great quality housing for our communities and value for our broader stakeholders both now and in the years to come.”