TIDMSPR
RNS Number : 4385G
Springfield Properties PLC
19 July 2023
19 July 2023
Springfield Properties plc
("Springfield", the "Company", the "Group" or the "Springfield
Group")
Trading Update
Springfield Properties (AIM: SPR), a leading housebuilder in
Scotland focused on delivering private and affordable housing,
provides the following update on trading for the year ended 31 May
2023.
Summary
-- Full year 2023 revenue expected to be approximately GBP330m,
representing year-on-year growth of 28% and the Group's highest
ever annual turnover despite the turmoil in the housing market
-- Revenue growth driven by the full year contribution from the
acquisitions of Tulloch Homes and Mactaggart & Mickel Homes
-- Profit before tax for FY 2023 expected to be in line with market expectations
-- Strategic decision taken to pause entering long-term affordable housing contracts
-- Implemented cost savings of c. GBP3.0m on an annualised basis
in direct response to market conditions
-- High-quality land bank of c. 16,300 plots at 31 May 2023,
with over half having planning permission, and a GDV of c.
GBP3.5bn
-- Net debt reduced to GBP68.0m at year end (30 November 2022: GBP73.7m)
-- Progress made against the first-year objectives set within
the Group's ESG strategy that was published during the year
The Group expects to report its highest annual revenue of
approximately GBP330m for the 12 months to 31 May 2023 (2022:
GBP257.1m), representing year-on-year growth of 28%. This increase
was driven by the acquisitions of Tulloch Homes in December 2021
and the Scottish housebuilding business of Mactaggart & Mickel
Group ("Mactaggart & Mickel Homes") in June 2022, reflecting
their first full 12-month contributions. In total, the Group
completed over 1,300 homes during the year (2022: 1,242).
The Group expects to report profit before tax for 2023 in line
with market expectations. As previously announced, the reduction in
profit compared with the prior year reflects the impact of
significant build cost inflation, particularly on fixed-price
contracts in affordable housing, affecting margins across the
Group.
Private housing
Revenue and completions increased significantly in private
housing, primarily reflecting the contributions from Tulloch Homes
and Mactaggart & Mickel Homes. However, the Group also
delivered organic revenue growth in private housing. The average
selling price for private housing increased to approximately
GBP290k (2022: GBP245k). This partly reflects the higher sales
prices associated with Mactaggart & Mickel Homes, but also an
increase in prices across the Group's private housing.
The challenging market backdrop impacted reservation rates as
increased mortgage rates combined with ongoing cost-of-living
pressures reduced affordability and homebuyer confidence. In
particular, there was a sharp reduction in sales levels following
the UK Government's mini-budget, which remained low for an
approximately three-month period. While there was recovery in the
second half of the year, the forward order book at year end was
below that of the previous year, as expected.
Affordable housing
In affordable housing, there was a reduction in revenue, as
expected, as the Group took a cautious approach to entering into
new long-term affordable housing contracts, which it has maintained
since year end. However, the Group is pleased to note that, in June
2023, the Scottish Government increased the affordable housing
investment benchmarks by 16.9%. This is expected to enable housing
associations to increase the price of affordable housing contracts
to progress the building programmes required to meet the
Government's affordable housing targets.
Land bank
As at 31 May 2023, the Group's land bank consisted of c. 16,300
plots (31 May 2022: 16,652), of which over half had planning
permission (31 May 2022: 52.1%). The gross development value
("GDV") of the land bank at year end was c. GBP3.5bn (31 May 2022:
GBP3.5bn). The Group strengthened its land bank during the year
with the acquisition of Mactaggart & Mickel Homes, comprising a
total of 701 plots in highly desirable locations within the Central
Belt of Scotland. However, overall, the number of plots at year end
was lower than the same point of the previous year as the Group's
focus has been on building out its existing land bank and reducing
land buying activity in response to market conditions. The Group
also realised value from its land bank with the strategic sale of
land (of 60 plots) to a national housebuilder, as previously
announced, and will seek similar opportunities going forward. The
Group's land bank ensures it is well-placed for when market
conditions improve.
Decisive response to market conditions
The Group took decisive action during the year, which has been
maintained post period end, to address the uncertain market
conditions. As noted, the Group temporarily halted entering new
large long-term affordable housing contracts and adopted a cautious
approach to new site launches in private housing. Other actions
include reducing land buying activity; pausing recruitment and
reducing staffing levels in areas most impacted by the market
downturn; and maintaining tight cost control, including identifying
synergies across the business. As a result of these actions, the
Group has delivered savings of approximately GBP3.0m on an
annualised basis. As noted, the Group also made a strategic land
sale during the year and will consider further opportunities as
they develop where the terms and price are desirable.
Alongside these actions, the Group's private housing is
supported by the Scottish missive system, which ensures that
customers are contracted into the purchase much earlier in the
build programme.
Building sustainably
Already benefitting from decades of experience in modern methods
of construction and providing air-source technology as an
alternative to gas, the Group took further action to improve the
sustainability, quality and efficiency of its homebuilding. This
includes completing a review into the design, construction and
plotting efficiency to refine the house-type range across the
Group's brands. Good progress has been made against the first-year
objectives set within the Group's ESG strategy that was published
during the year. In addition, the acquisition of Mactaggart &
Mickel Homes included a timber frame factory near Glasgow, which
complements the Group's facility in Elgin, further reducing the
Group's carbon footprint.
The Group will provide further details in its final results
announcement, currently expected to be announced in September
2023.
Innes Smith, CEO of Springfield Properties, said:
" Against a challenging market backdrop, we delivered our
highest annual revenue, reflecting our acquisitions as well as
organic growth in private housing. While our margins were impacted
by significant build cost inflation, particularly in affordable
housing, we took decisive action to address this.
"We remain cautious about the near-term outlook, particularly
given the softening in demand following the increase in rates by
the Bank of England to 5%. We are closely monitoring the economy
and buyer behaviour in both the housing and land market and
carefully managing our activities to limit our exposure in the
slower sales environment. This will also ensure that we can respond
quickly when normalised demand returns. With over half of our
large, high-quality land bank having planning permission, we are
well-positioned for when market conditions improve. We are also
encouraged that the Scottish Government has now increased its
affordable housing investment benchmarks, supporting the viability
of affordable housing projects going forward.
"Moreover, the fundamentals of the housing sector in Scotland
remain strong. There is an undersupply of housing, which is being
exacerbated by the current conditions, and there is greater
affordability in Scotland compared with the UK as a whole.
"Above all, we remain committed to delivering great quality
housing for our communities and value for our broader stakeholders
both now and in the years to come."
Enquiries
Springfield Properties
Sandy Adam, Chairman
Innes Smith, Chief Executive Officer +44 1343 552550
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Singer Capital Markets
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Shaun Dobson, James Moat, Oliver Platts
(Investment Banking) +44 20 7496 3000
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Gracechurch Group
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Harry Chathli, Claire Norbury +44 20 4582 3500
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Analyst Research
Equity Development and Progressive Equity produce freely
available research on Springfield Properties plc, including
financial forecasts. This is available to view and download
here:
https://www.thespringfieldgroup.co.uk/news/updates-and-analyst-reports
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END
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