The CEO of Elgin-based house builder Springfield Properties plc has called on the Scottish Government to take action to address Scotland’s housing emergency “which must include the removal of the rent cap barriers to attract PRS (private rented sector) investment north of the border.”
Springfield is building a number of new communities throughout Scotland.
In a trading update for the year ended May 31, 2024, Springfield said its revenue expected to fall to £266 million from £332.1 million, “reflecting challenging conditions experienced within the housing market.”
The firm expects total completions of 870, down from 1,301 in the prior year.
However, profit before tax is “expected to be slightly ahead of market expectations due to good profits being made from land sales of £28m during the period.”
Springfield’s bank debt was reduced to £40 million as at May 31, 2024, ahead of its stated target of £55 million.
Total owned land bank of c. 5,600 plots, c. 88% with planning permission, and strategic options over a further c. 3,150 acres, equating to c. 31,500 plots, c. 3,915 of which already have planning – one of the largest land banks in Scotland
Looking ahead, Springfield said it is on track to meet market expectations for FY 2025, with revenue remaining stable year-on-year.
“During the year to 31 May 2024, market conditions were challenging with subdued homebuyer confidence and reduced affordable housing activity,” said Springfield.
“The group’s key focus during the period was reducing its debt to its stated target of £55m. An important element of this was the active pursuit of land sales to accelerate cash realisation from its large land bank.
“During the year, the group completed land sales of £28m of sites that do not affect the group’s near-term development pipeline.”
As at May 31, Springfield’s owned land bank consisted of 5,600 plots (31 May 2023: 6,712), of which 88% had planning permission (31 May 2023: 83%), and it had strategic options over a further 3,150 acres (31 May 2023: 3,255 acres), equating to 31,500 plots, of which 3,915 already have planning.
“The group continues to have one of the largest land banks in Scotland, which has mostly been secured off market without planning,” said Springfield.
“This results in a very low average cost per plot and enables the group to realise maximum value over the long term from its sites.
“With a high proportion of sites having planning already in place, and a strengthened balance sheet, the group will be able to accelerate site development as market conditions improve and it is well-placed to satisfy pent-up demand for high-quality, energy efficient housing in desirable locations across the country.
“An area of particular interest is the Highlands of Scotland with the group well- placed to meet the expected sharp increase in housing demand thanks to its land holdings around the Inverness and Cromarty Firth Green Freeport.”
Springfield Properties CEO Innes Smith said: “A key priority for the year was reducing our debt, and we’re pleased that we have exceeded our target.
“This was achieved through securing profitable land sales, which, alongside continued cost control, has enabled us to deliver better-than-expected profit. While the challenging market conditions impacted revenue for the year and our private housing forward orderbook, we are cautiously optimistic about the year ahead.
“Many fundamentals that underpin homebuyer confidence are set to strengthen, including a new UK government, decreasing inflation and an anticipated interest rate reduction. Alongside this, we remain on track to deliver strong growth in FY 2025 in affordable housing, offsetting the expected small decline in our private sales.
“Looking forward, we trust that the Scottish Government will take action to address Scotland’s housing emergency, which must include the removal of the rent cap barriers to attract PRS investment north of the border.
“With one of the largest land banks in Scotland, and with a high proportion of sites already having planning in place, we are well-positioned to benefit from any resumption in PRS activity, which would represent an upside to our forecasts.
“In addition, thanks to our land holdings in the Highlands, we are set to benefit from the expected sharp increase in housing demand around the Inverness and Cromarty Firth Green Freeport.
“Accordingly, while the market currently remains subdued, we are trading in line with our expectations and are encouraged by the signs for optimism. In addition, with the strengthening of our balance sheet, we are well-positioned to be able to capitalise on the pent-up demand for high-quality, energy efficient housing as market conditions improve.”