Springfield hit by headwinds but conditions improve
Housebuilder Springfield Properties said the market had taken a hit from last September’s mini-budget while the Scottish government’s rent controls saw it cancel plans to build affordable homes.
These and other headwinds, such as rising costs, saw pre-tax profit for the half year to the end of November fall 5% from £6.2 million to £5.9m.
Revenue increased by 85.6% to £161.9m (H1 2022: £87.3m). This primarily reflects significant growth in private housing along with a strategic land sale and increased revenue in contract housing.
There was a significant impact from build cost inflation, particularly on fixed-price contracts in affordable housing, affecting margins across the group.
While the group said it maintains a strong financial position, given the continued market uncertainty, the board has taken the decision not to propose an interim dividend
Decisive action has been taken during, and post period across the business to address the market conditions, resulting in expected annualised cost savings of approximately £3m.
Innes Smith, chief executive, said it had been a “challenging period for the housebuilding industry” but there were signs that market conditions are improving.
“The UK government’s mini-budget in September reduced the confidence of homebuyers and the cost of mortgages increased significantly,” he said.
“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“Our plans to deliver additional homes for families through PRS were unfortunately withdrawn as a result of the Scottish Government’s intervention in rent control.”
He added that the industry-wide stalling of land purchases meant that the company could not secure acceptable value for additional sales to one that completed.
“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,” he said.
“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.”
He insisted that the foundations of Springfield remain strong and said the company has a large land bank, over half of which has planning.
“This, combined with the actions we are taking as we focus on reducing our net debt position, provides an excellent platform from which we can take advantage as the markets continue to improve and we remain confident in our future prospects and ability to generate shareholder value.”