REG - Springfield Props. - Trading Update

Springfield PropertiesAnnouncement

11/07/2024 07:00

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RNS Number : 9734V  Springfield Properties PLC  11 July 2024

11 July 2024

 

Springfield Properties plc

("Springfield" or the "Group")

 

Trading Update

 

Springfield Properties plc (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 2024.

 

FY 2024 Summary

·    Bank debt reduced to c. £40m as at 31 May 2024, ahead of stated
target of £55.0m

·    Revenue expected to be c. £266m (2023: £332.1m), reflecting
challenging conditions experienced within the housing market

·    Profit before tax expected to be slightly ahead of market
expectations due to good profits being made from land sales of £28m during
the period

·    Total owned land bank of c. 5,600 plots, c. 88% with planning
permission, and strategic options over a further c. 3,150 acres, equating to
c. 31,500 plots, c. 3,915 of which already have planning - one of the largest
land banks in Scotland

·    Looking ahead, on track to meet market expectations for FY 2025, with
revenue remaining stable year-on-year

 

During the year to 31 May 2024, market conditions were challenging with
subdued homebuyer confidence and reduced affordable housing activity. The
Group's key focus during the period was reducing its debt to its stated target
of £55m. An important element of this was the active pursuit of land sales to
accelerate cash realisation from its large land bank. During the year, the
Group completed land sales of £28m of sites that do not affect the Group's
near-term development pipeline. This, combined with the Group's sustained
focus on cost control and carefully managing working capital, enabled a
significant reduction in bank debt to c. £40m as at 31 May 2024 (31 May 2023:
£61.8m), c. 27% ahead of the Group's target originally outlined in the FY
2023 results announced in September 2023.

 

The Group expects to report revenue of approximately £266m for the 12 months
ended 31 May 2024 (2023: £332.1m), with total completions of c. 870 (2023:
1,301). Profit before tax is expected to be slightly ahead of market
expectations due to good profits being realised on the land sales.

 

Private housing

 

The Group expects to report private housing revenue for FY 2024 of c. £185m
(2023: £253.4m), reflecting the impact of the market conditions. In line with
industry trends, the reduced homebuyer confidence resulted in the Group
entering the new financial year with a lower forward orderbook than at the
same point of the prior year. As previously noted, after a subdued start the
Group experienced a recovery in private housing demand from January 2024 and
it continues to experience a steady level of reservations with selling prices
also being maintained. Accordingly, the Group remains on track to deliver
private housing revenue for FY 2025 in line with market expectations.

 

Affordable housing

 

The Group expects to report affordable housing revenue of c. £46.5m (2023:
£53.9m). This reflects the Group's decision in FY 2023 to pause entering new
affordable-only contracts until the economics became more attractive. During
the year to 31 May 2024, the Group recommenced actively engaging with
affordable housing providers and signed affordable housing contracts totalling
over £50m for delivery during FY 2024 and beyond. Looking to FY 2025, the
Group continues to expect to report revenue in affordable housing in line with
market expectations, representing growth of approximately 40%.

 

Land bank

 

As at 31 May 2024, the Group's owned land bank consisted of c. 5,600 plots (31
May 2023: 6,712), of which c. 88% had planning permission (31 May 2023: 83%),
and it had strategic options over a further c. 3,150 acres (31 May 2023: 3,255
acres), equating to c. 31,500 plots, of which c. 3,915 already have planning.
As noted, a key element of the Group's strategy to reduce bank debt during the
year was the active pursuit of profitable land sales.

 

The Group continues to have one of the largest land banks in Scotland, which
has mostly been secured off market without planning. This results in a very
low average cost per plot and enables the Group to realise maximum value over
the long term from its sites.

 

With a high proportion of sites having planning already in place, and a
strengthened balance sheet, the Group will be able to accelerate site
development as market conditions improve and it is well-placed to satisfy
pent-up demand for high-quality, energy efficient housing in desirable
locations across the country. An area of particular interest is the Highlands
of Scotland with the Group well- placed to meet the expected sharp increase in
housing demand thanks to its land holdings around the Inverness and Cromarty
Firth Green Freeport.

 

Innes Smith, CEO of Springfield Properties, said:

 

"A key priority for the year was reducing our debt, and we're pleased that we
have exceeded our target. This was achieved through securing profitable land
sales, which, alongside continued cost control, has enabled us to deliver
better-than-expected profit. While the challenging market conditions impacted
revenue for the year and our private housing forward orderbook, we are
cautiously optimistic about the year ahead.

 

"Many fundamentals that underpin homebuyer confidence are set to strengthen,
including a new UK government, decreasing inflation and an anticipated
interest rate reduction. Alongside this, we remain on track to deliver strong
growth in FY 2025 in affordable housing, offsetting the expected small decline
in our private sales.

 

"Looking forward, we trust that the Scottish Government will take action to
address Scotland's housing emergency, which must include the removal of the
rent cap barriers to attract PRS investment north of the border. With one of
the largest land banks in Scotland, and with a high proportion of sites
already having planning in place, we are well-positioned to benefit from any
resumption in PRS activity, which would represent an upside to our forecasts.
In addition, thanks to our land holdings in the Highlands, we are set to
benefit from the expected sharp increase in housing demand around the
Inverness and Cromarty Firth Green Freeport.

 

"Accordingly, while the market currently remains subdued, we are trading in
line with our expectations and are encouraged by the signs for optimism. In
addition, with the strengthening of our balance sheet, we are well-positioned
to be able to capitalise on the pent-up demand for high-quality, energy
efficient housing as market conditions improve."

 

The Group will provide further detail in its final results, which are due to
be announced in September 2024.

 

Enquiries

 

 Springfield Properties
 Sandy Adam, Chairman                                          +44 1343 552550

 Innes Smith, Chief Executive Officer

 Iain Logan, Chief Financial Officer

 Singer Capital Markets
 Shaun Dobson, James Moat, Oliver Platts (Investment Banking)  +44 20 7496 3000

 Gracechurch Group
 Harry Chathli, Claire Norbury, Henry Gamble                   +44 20 4582 3500

 

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
(https://www.thespringfieldgroup.co.uk/news/updates-and-analyst-reports)

 

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