Springfield is adopting new strategies to protect cashflow as demand for new housing slows.
Chief executive Innes Smith said: “Our priority is to maximise cash generation to reduce our debt to ensure that we maintain the value of our business. Accordingly, we are pausing all speculative private housing development. We will build based on sales and not sell based on build.
“We are actively pursuing land sales and will further reduce our cost base where necessary. We are also encouraged by the negotiations we are now having in affordable housing, which has strong cash flow dynamics,” he added.
Aided by the acquisitions of Tulloch Homes and Mactaggart & Mickel Homes, Springfield Properties hit new heights last year. For the year to 31st May 2023 revenue was up 29% to £332m with completions reaching 1,301 (2022: 1,242). However, profit before tax was down 22% at £15.3m (2022: £19.7m).
“While we were significantly impacted by the build cost inflation, particularly in affordable housing, we took decisive action to address this, resulting in annualised cost savings of £4.0m,” Innes Smith said.
“Trading conditions have remained tough into the new financial year as private housing reservations continue to be impacted by reduced homebuyer confidence. We do not expect to see any material improvement in homebuyer confidence before next spring.
“The fundamentals of our business and our position within the Scottish housing market remain strong. We have one of the largest land banks in Scotland with over 6,700 owned plots, 83% of which has planning permission, and a further 3,255 acres, equating to 33,000 plots, of strategic land. This is particularly valuable given the current planning difficulties being faced in Scotland. We have an excellent reputation of offering high quality, energy efficient homes in desirable locations in key housing markets. In addition, there is an undersupply of housing of all tenures, which is being exacerbated by the current conditions, and which can only be addressed through building new homes. The stability in house prices and the affordability in Scotland underpin the opportunities for medium-term growth.”