Scottish house builder boosted by land sale after affordable housing delays
A Scottish developer is expected to report an annual profit ahead of expectations after a land sale, despite reporting delays to affordable housing due to uncertainty around government funding in the first of the year.
In its interim half-year results for the six months to 30 November 2024, Springfield Properties said the start of “certain affordable housing contracts was delayed due to uncertainty around availability of Scottish government funding”.
However, it reported that activity has increased following the Scottish Budget in December 2024, where the government restored its affordable housebuilding programme to £768m for 2025-26 after it was cut earlier in the year by a quarter.
Springfield explained in September that it agreed new contracts totalling more than £50m for affordable housing delivery. This was after it decided to temporarily stop entering new affordable-only fixed-price contracts last year.
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But it reversed the decision after the Scottish government increased affordable housing investment benchmarks by 16.9% in June 2023.
In its latest accounts, the house builder reported a pre-tax profit of £3.5m in the first half of 2024-25, up from £1.2m in the same period the previous year, “primarily reflecting the improvement in affordable housing gross margin, sustained focus on cost control and land sales”.
It also expects to report a profit for 2024-25 “significantly ahead of market expectations” due to a £64.2m land sale agreement with major developer Barratt.
The deal, expected to be completed by 31 May, involves the sale of 2,480 plots of undeveloped land with planning consent across six sites.
Springfield said the proceeds of the sale, which will be received over four years, will accelerate its debt reduction and help capitalise on the “significant growth opportunities emerging in the north of Scotland”. This includes an expected housing demand from an influx of an estimated 5,000 workers for a £31bn planned upgrade to the electricity network in the region.
The developer said it is “uniquely placed to capitalise on the substantial need for new housing to cater for the high population and economic growth expectations in the region”.
Springfield and Barratt have also entered into non-binding discussions regarding the possible sale of additional future land holdings on a number of other sites.
In the six months to November last year, Springfield completed 95 affordable homes, down from 144 in the previous year.
Government grant for affordable housing increased to £215,000, compared with £177,000 in the same period the previous year.
Springfield said: “With the Scottish Budget in December 2024 allocating £768m to affordable housing supply for 2025-26 – an increase over the prior year – Springfield has experienced an increase in activity in this area, with its partners resuming discussions and two contracts having been signed that will commence in the current year.
“As a result, while some of the affordable housing projects in the group’s pipeline will be initiated slightly later than previously anticipated, the group is pleased to note an increase in confidence among affordable housing providers.”
Its total completions reached 361, down from 432 in the first half of 2023-24.
Gross margin increased from 14.7% to 17.7%. Springfield’s adjusted profit before tax increased by 90% to £3.8m compared to £2m in the first half of 2024, “primarily reflecting the improvement in affordable housing gross margin, sustained focus on cost control and land sales”.
It also saw a substantial reduction in net bank debt to £62.9m from £93.4m in 2023-2024.
Springfield said it expects to achieve a net cash position, with no bank debt, by the end of the 2027 financial year.
Innes Smith, chief executive officer of Springfield, said the land sale “will enable us to realise the value of our assets, accelerate our plans to remove bank debt and focus on the significant opportunity in the North of Scotland where we are uniquely positioned to excel”.
He said: “New housing is required to cater for the thousands of workers needed to deliver the substantial green infrastructure development coming to the region and the ongoing population growth as result of the economic stimulus these projects will bring.
“With significant land holdings across the Highlands and Moray and an established presence, we are excellently positioned to capitalise on this opportunity.
“In addition, we continue to have a large high-quality land bank, with this deal demonstrating the long-term value of that asset.
“Accordingly, and with a significantly strengthened balance sheet, we continue to look to the future with confidence.”
Mr Smith said trading for the first half of the year was “in line with expectations”.
“While we are disappointed that some of our affordable housing projects were delayed due to uncertainty over availability of public funding, we are encouraged by the increase in activity in this area following the Scottish Budget in December,” he added.
