Springfield Properties' completions and reservations are declining
- Springfield Properties' net debt was around £94m as of November 30
Scottish housebuilder Springfield Properties says demand in its private housing business has remained 'stable but subdued' in the six months to November 30.
The group's net debt at November 30 was approximately £94m, excluding £8.8m of outstanding proceeds from contracted land sales due to be received by the end of the financial year.
But Springfield said it remained on track to meet its target of reducing net bank debt to £55 million by May 31, 2024.
The group said buyer demand continues to be impacted by higher interest rates, mortgage affordability and “reduced homebuyer confidence,” resulting in lower completions and reservations than at the same point a year ago.
Housebuilding in Scotland: Scottish housebuilder Springfield Properties says demand in its private housing business remained 'stable but subdued'
It said: 'The increase in net bank debt over the six-month period primarily reflects £11 million of planned deferred payments relating to the Group's acquisitions of Tulloch Homes and Mactaggart & Mickel Homes and £6 million of contractual payments for land .
'It also reflects the usual working capital cycle, with work in progress at the end of the first half and delivery in the second half of the year.'
In September, the group's shares fell sharply when the group announced plans to stop paying dividends in an effort to pay down its debt.
In the six months to November 30, the group entered into two 'profitable land sales' agreements for a total of £9.3m. It said it is “confident of signing further such agreements in the near future.”
Springfield added: 'The Group continues to manage working capital carefully by commencing construction of private homes as they are reserved and keeping costs tightly under control across the Group.'
Construction cost inflation continued to decline and is expected to reach around 4 percent in the first half of 2024.
The group said sales prices in the private residential sector remained 'stable' over the period.
Springfield Properties said it was “encouraged” by demand in its affordable housing business.
It added: 'The Group has maintained its approach of only pursuing new affordable housing contracts with a delivery time of 12 to 18 months, which carry lower price risk.'
Looking ahead, the group expects results for the first half of 2024 to be in line with management expectations.
It said: 'While uncertainty remains in the near-term market, the Group is confident it will meet market expectations for the year to 31 May 2024, with growth expected in the second and first half across the business, in line with usual seasonality, and with a significant contribution from land sales.
'Looking further ahead, the Council is encouraged by the early signs of a return to homebuyer confidence, with inflation easing and the Bank of England holding rates steady for two months in a row.
'Construction cost inflation continues to moderate and there is greater availability of materials and subcontractors. The interest the Group receives in its land bank – and at attractive valuations – reflects the market preparing for an improvement in trading conditions.”
Springfield Properties shares rose 2.7 percent or 2.00p to 76.00p on Wednesday morning.