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Springfield improves margin despite challenges

30 Sep 20 Scottish housebuilder Springfield Properties has improved its gross margin and recorded an adjusted profit before tax of £10.2m, despite this year’s challenges.

The group’s full-year results were impacted by the delivery of handovers scheduled for April and May 2020 being delayed due to the lockdown. For the previous two years, these months had accounted for 30% of the Group’s annual revenue. The sales contracts are under the Scottish missive system and the revenue anticipated for the last two months of 2019/20 is expected to be recognised in the first half of the current financial year.

It temporarily closed all operations on 24 March and implemented a series of cost mitigation measures. Since resuming operations, Springfield has experienced a strong increase in demand that it sees as reflecting both pent-up demand and the increasing desire for buyers to move out of city centres and into larger homes with gardens - the type of home that it builds.

Despite the challenges, the gross margin for 2020/2021 was 18.9%, an increase from the 18.0% of the previous financial year. The adjusted profit before tax of £10.2m was down on the £16.5m of 2018/19.

The group said that there has been excellent progress in delivering the order book and significant increase in demand since resuming operations. It has received reservations for 24% more private homes in Q1 2020/21 than in Q1 2019/20. It has delivered two affordable developments since resuming operations and reports a solid pipeline for the remainder of the year. The group anticipates total revenue for full year 2020/21 to be significantly higher than in 2019/20.

The number of homes completed dropped to 727 homes from 952 in 2018/19.

Successful acquisition integration drove the margin improvement, it said. The company expanded its geographical presence with strategic land acquisitions in Inverness. In addition, it entered a collaboration agreement with Sigma PRS Management to deliver homes in the private rented sector.

There was also significant progress in advancing plans for its land bank, with the proportion with planning permission increasing to 49.7% from the 28.4% in place at 31st May 2019. The latest results report a total land bank of 15,882 plots (31st May 2019: 15,938) with a gross development value of £3.3bn (31st May 2019: £3.2bn)

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Private housing delivery brought in revenue of £98.9m (2018/19: £143.3m) with 419 completions (2018/19: 630).

Highlights of its programme of ‘village’ developments included the launch of sales at a third scheme development, Linkwood in Elgin. It also secured planning for 3,042 homes at Durieshill in Stirling, Springfield's largest development to receive planning and the largest detailed planning consent to have been granted in Scotland. The project is expected to generate a gross development value of £649m.

Affordable housing brought in revenue of £43.4m (2018/19: £42.9m) with 308 completions (2018/19: 322). This included the delivery of the first affordable housing at a village development at Bertha Park, Perth. Springfield signed an £18.2m agreement with West of Scotland Housing Association for the first phase of affordable homes and commercial units at Dalmarnock as part of Clyde Gateway, Scotland’s largest regeneration programme. It also signed an £18.5m agreement with PfP Capital for the development of 104 apartments at The Wisp in Edinburgh. It completed handovers at the first development under the Group’s local authority framework agreement for 10 affordable-only developments, and progressed four other developments.

Springfield Properties chief executive officer Innes Smith said:  “During the year, ahead of the Covid-19 pandemic, we were delivering on our strategy, with notable successes across the business. We progressed the development of our large, high-quality land bank and expanded geographically. We continued to deliver great places to live against a backdrop of sustained demand for housing in Scotland.

“As a result of the lockdown, the completion of homes scheduled to take place in April and May 2020 was postponed into 2020/21, however, with these sales under contract, we were able to complete the homes for handover to our customers early in the current financial year.

“Since resuming operations, we have seen a strong increase in demand, with private reservations 24% above the same period last year. This reflects both the pent-up demand and the increasing desire for buyers to move out of city centres and into larger homes with gardens, which is the type of home that Springfield offers. We are delivering on a solid pipeline in affordable housing, with £38.8m of contracted revenue. We are in a strong financial position, having increased our credit facility during the year, and as we have recommenced handovers post period end, our net debt position has reduced. Consequently, we look to the future with confidence.”

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