TIDMSPR
RNS Number : 5589W
Springfield Properties PLC
13 December 2023
13 December 2023
Springfield Properties plc
("Springfield", the "Company", the "Group" or the "Springfield
Group")
Trading Update
Trading in line with management expectations - on track to meet
debt reduction target
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 six months ended
30 November 2023.
-- Trading in H1 2024 has been in line with management expectations
o Demand in private housing remained stable but subdued
o Recommenced signing new affordable-only housing contracts,
with c. GBP24.0m of new contracts entered into
-- Two profitable land sales agreed in H1 2024 for a total of
GBP9.3m with funds to be received by the end of the financial year,
and confident of signing other agreements in the near term
-- Net bank debt at 30 November 2023 of c. GBP94.0m (not
including the c. GBP8.8m outstanding proceeds from recent land
sales) and on track to meet target of reducing net bank debt to c.
GBP55.0m by 31 May 2024 (31 May 2023: GBP61.8m)
-- Build cost inflation continues to reduce - expected to be c.
4% for H1 2024 - and there is greater availability of materials and
labour
-- Confident of meeting market expectations for FY 2024
Focus on debt reduction
As noted in the Group's final results announcement of 20
September 2023, the Board adopted a strategy focusing on reducing
debt to be in a stronger position for when normalised market demand
returns. A key element of this is the active pursuit of land sales
to accelerate cash realisation from its large land bank and without
impacting the Group's development pipeline. During the period, the
Group entered into two agreements for profitable sales of land for
a total consideration of GBP9.3m, and is confident of signing other
such agreements in the near term.
The Group continues to carefully manage working capital by
commencing to build private homes when they are reserved and
maintaining tight control over costs across the Group. Build cost
inflation has also continued to reduce as anticipated , and is
expected to be c. 4% for H1 2024.
The Group's net bank debt was c. GBP94.0m as at 30 November
2023. This figure does not include the c. GBP8.8m of outstanding
proceeds from contracted land sales to be received by the end of
the financial year, with additional profitable sales expected in H2
2024. The Group remains on track to meet its target of reducing net
bank debt to c. GBP55.0m by 31 May 2024 (31 May 2023:
GBP61.8m).
The increase in net bank debt over the six-month period
primarily reflects GBP11.0m in scheduled deferred payments relating
to the Group's acquisitions of Tulloch Homes and Mactaggart &
Mickel Homes and GBP6.0m in contracted payments for land. It also
reflects the usual working capital cycle, with work-in-progress at
the end of the first half for delivery in the second half of the
year.
The Board also notes that the GBP18.0m additional term loan that
the Group secured in September 2023 to provide extra surety against
the challenging market backdrop has not been utilised.
Private housing performance
In private housing, reservation rates remained stable, but
subdued, throughout the period and to date. 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 in H1
2023.
The selling prices in private housing remained stable, supported
by the established reputation of the high quality and higher
specification housing of the Group's brands.
Affordable housing performance
The Group continues to be encouraged by the demand that it is
receiving in affordable housing having recommenced engaging with
providers during the period. As previously announced, since 31 May
2023 the Group has signed affordable housing contracts totalling c.
GBP24.0m for delivery in the second half of the year and beyond,
and it is in advanced negotiations regarding further contracts that
it expects to be awarded in H2 2024. The Group has maintained its
approach of only pursuing new affordable housing contracts that
have a 12-18 month delivery timeframe, which bring lower pricing
risk.
Summary & Outlook
The Group 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.
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. Build cost inflation continues to moderate and
there is greater availability of materials and subcontractors. The
interest that the Group is receiving in its land bank - and at
attractive valuations - reflects the market preparing for an upturn
in trading conditions.
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. The Group offers high
quality, energy efficient homes in popular locations across the
country and it has an excellent track record of delivering
developments exclusively dedicated to affordable housing. This is
further supported by the Group having one of the largest land banks
in Scotland, with c. 6,500 owned plots and strategic options over a
further 3,255 acres, equating to c. 33,000 plots as at 30 November
2023. This includes a strong landholding in the Highlands region,
where new housing is recognised as a key infrastructure requirement
to support the creation of the Inverness and Cromarty Firth Green
Freeport, which is due to bring GBP3.0bn of investment and c.
10,000 new jobs into the region.
In addition, the decisive actions that the Group has taken
during the current year put it in a stronger position to deliver
future growth as more favourable economic and trading conditions
return.
Accordingly, the Board remains confident in the Group's
prospects and in its ability to generate shareholder value.
The Group will provide further details in its interim results
announcement, which is expected to be announced in February
2024.
Enquiries
Springfield Properties
Sandy Adam, Chairman
Innes Smith, Chief Executive Officer
Iain Logan, Chief Financial 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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