Springfield Properties ‘on track’ to hit ?55 million debt target
Springfield Properties has sounded a more positive tone in its latest trading update, despite the continued drag of high interest rates, mortgage affordability and reduced homebuyer confidence.
The stock exchange statement covering the six months ended 30 November 2023 showed that demand in private housing remained stable, but subdued, while £24m of new affordable-only housing contracts were entered into.
Two profitable land sales[1] were agreed in the first half, for a total of £9.3m, with the group “confident of signing other agreements in the near term”.
Net bank debt at the end of November was circa £94m, but is “on track” to meet targets of reducing debt to around £55m by 31 May 2024.
The increase in net bank debt over the six-month period primarily reflects £11m in scheduled deferred payments relating to the group’s acquisitions of Tulloch Homes[2] and Mactaggart & Mickel Homes[3], and £6m in contracted payments for land.
The board also noted that the £18m additional term loan that the group secured in September to provide extra surety against the challenging market backdrop has not been utilised.
Crucially, build cost inflation continues to reduce and is expected to be around 4% during the first half next year, with greater availability of materials and labour returning in Scotland.
In private housing, reservation rates remained stable, but subdued, throughout the period.
Demand compared with the prior year period continued to be impacted by high interest rates, mortgage affordability and reduced homebuyer confidence, resulting in lower completions and reservations than during the previous comparable period.
Springfield maintained its approach of only pursuing new affordable housing contracts that have a 12 to 18 month delivery timeframe, which should bring lower pricing risk.
The board expects results for the first half of 2024 to be in line with management expectations.
“While there remains uncertainty in the near-term market, the group is confident of meeting market expectations for the year to 31 May 2024, with growth anticipated in H2 over H1 across the business, in line with usual seasonality, and with a significant contribution from land sales,” read the trading update.
“Looking further ahead, the board is encouraged by the early indications of a return in homebuyer confidence, with inflation reducing and the Bank of England holding interest rates for two consecutive months.”
The interest being received in land bank sales – “at attractive valuations” – reflects the market preparing for an upturn in trading conditions, Springfield stated.
This land bank currently consists of around 6,500 owned plots and strategic options over a further 3,255 acres, equating to circa 33,000 plots. This includes a strong landholding in the Highlands, where new housing is recognised as a key infrastructure requirement to support the creation of the Inverness and Cromarty Firth Green Freeport.
“The fundamentals of the business and of the housing market in Scotland remain strong, there is an undersupply of housing across all tenures, which is becoming more acute – as evidenced by three local authorities, including Edinburgh and Glasgow Councils, recently declaring housing emergencies.”
Springfield’s interim results are expected to be announced in February.
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References
- ^ land sales (www.insider.co.uk)
- ^ Tulloch Homes (www.insider.co.uk)
- ^ Mactaggart & Mickel Homes (www.insider.co.uk)
- ^ sign up here for free (www.insider.co.uk)
References
- ^ land sales (www.insider.co.uk)
- ^ Tulloch Homes (www.insider.co.uk)
- ^ Mactaggart & Mickel Homes (www.insider.co.uk)
- ^ sign up here for free (www.insider.co.uk)
References
- ^ land sales (www.insider.co.uk)
- ^ Tulloch Homes (www.insider.co.uk)
- ^ Mactaggart & Mickel Homes (www.insider.co.uk)
- ^ sign up here for free (www.insider.co.uk)