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Scottish house builder reports 80% fall in profits and rising debt in half-year results
A Scottish house builder has reported an 80% slump in pre-tax profits and a 38% rise in net debt in its half-year results.
Springfield Properties said private housing demand continued to be affected by high interest rates, mortgage affordability and reduced buyer confidence.
It added that it had signed affordable housing contracts worth a total of £40m since May 2023 for delivery in the second half of the financial year “and beyond”.
The company, Scotland’s only listed house builder, recorded profit before tax of £1.2m for the six months to 30 November 2023, down from £5.9m in the same period the previous year.
Private housing revenue collapsed 26% year on year to £87.7m, while affordable housing revenue fell 9% to £25.4m.
In the same period, net bank debt rose to £93.4m, up from £67.8m in 2022. Springfield has begun a programme of land sales to cut its debt, including an £8.7m sale agreed earlier this week.
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The group has sold £18m worth of land since October, of which £15m is expected to be received in the second half of the 2023-34 financial year. Springfield said it was on target to reduce net bank debt to around £55m by 31 May 2024.
Over the six-month period, Springfield completed 432 homes, down from 673 in 2022-23. The builder said this was “in line with management expectations” as it entered the year with a lower forward order book due to challenging market conditions.
Earlier this month, the Moray-based firm announced it had made a return to the affordable housing market by agreeing a £15m deal with developer Highland Housing Alliance.
Springfield had previously paused affordable housing deals after a drop in revenue. It came following a profit warning in late 2022.
The developer said it had recommenced engaging with affordable housing providers following the Scottish government increasing the affordable housing investment benchmarks.
In response to the difficult conditions, Springfield said it would focus on “maximising cash generation” to reduce its debt by year end.
It would curtail speculative private housing development by only commencing building homes when they are reserved and reduce administrative expenses to £12.6m (down from £14.7m the previous year). It will also pause dividend payments until the bank debt is materially reduced.
Innes Smith, chief executive of Springfield Properties, said: “To mitigate the impacts of the downturn and ensure we are in a stronger position for when trading conditions recover, we took decisive actions to maximise cash generation and reduce our debt by year end.”
Looking ahead, he said: “We are encouraged by the improvement in private housing reservations that we have experienced in recent weeks and the signs of increasing homebuyer confidence, as has been reported by other house builders.”
He added: “We are receiving strong demand in affordable housing – and have already signed contracts worth c. £40m since 31 May 2023.”
