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Mon April 22 2024

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Springfield puts PRS work on hold

20 Sep 22 Scottish house-builder Springfield Properties has suspended its expansion into the private rented sector pending clarity on government policy.

Finance director Michelle Motion, chairman Sandy Adam and chief executive Innes Smith – pictured in 2017
Finance director Michelle Motion, chairman Sandy Adam and chief executive Innes Smith – pictured in 2017

Springfield recently built 125 homes for the private rented sector (PRS) with Sigma Capital at Bertha Park Village in Perth and has started on its first mid-market rent housing to be offered at Bertha Park, which is a form of affordable housing for those in work where housing associations use grants to enable market rents to be discounted.

However, strategic plans to expand PRS activity with Sigma have been put on ice due to emergency legislation that is being introduced in Scotland to protect tenants by freezing rents and imposing a moratorium on evictions until at least 31 March 2023. This is expected to be a temporary measure to support families facing high fuel bills this winter.

Springfield said that it still thinks PRS could be good business but any decisions on the expansion of this activity “will wait until the policy environment is clearer”.

The news came as Springfield posted annual results showing double-digit growth in revenue and profit.

For the year to 31st May 2022, Springfield Properties grew revenue by 19% to £257.1m (2021: £216.7m) and pre-tax profit by 10% to £19.7m (2021: £17.9).

The 1,242 completions was a new record for the company, boosted by the acquisition of Inverness-based Tulloch Homes for £54.4m in December 2021. Since the end of the financial year Springfield has also acquired the Scottish housebuilding business of Mactaggart & Mickel.

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The impact of the Tulloch acquisition was particularly marked in the private housing division, which completed 712 homes during the year (2021: 559).

With Springfield enjoying highest ever order book, 405 affordable homes were completed (2021: 363). In contract housing, where the company provides development services to third party private organisations, 125 homes were completed (2021: 51). This was the Bertha Park work for Sigma.

Profits would have been even higher but for rocketing inflation and the collapse of three subcontractors.

“The cost-of-living crisis is affecting every business and, as with the rest of the housebuilding industry, the group continued to face material and labour supply constraints and inflationary cost pressures. In addition, three of the group's subcontractors went out of business and, while Springfield was able to source materials and labour elsewhere, it was at a higher price and delayed some of the group's build programmes. This particularly affected recognised revenue and gross margin in affordable housing, which was also impacted by the contribution from two large construction contracts that had been signed in early 2020 and, accordingly, modelled on much lower estimated costs.”

Summarising the results, chief executive Innes Smith commented: "This year we achieved our highest ever annual profit and revenue with strong results across private, affordable and contract housing. I am pleased at how we managed the material and supply chain pressures facing our industry so that, while not immune, we were able to mitigate much of the impact. In keeping with our strategy, we significantly expanded our business with the acquisitions of Tulloch Homes and, post period, the Scottish housebuilding business of Mactaggart & Mickel – two high quality housebuilders with land in areas of strategic importance. We also achieved a milestone with the delivery of our first housing for the private rented sector.

"We entered the 2023 financial year delivering against a strong order book in private housing, reflecting sustained demand for the type of homes that we provide and the expansion of our business. We have excellent visibility over full year private revenue forecasts based on homes delivered, missived and reserved. While the challenging economic backdrop will impact our affordable and PRS housing activity in the short term as we await decisions from the Scottish government, we are on track to deliver another year of revenue and profit growth overall. Moreover, the fundamentals of the housing market in Scotland remain strong with high demand for homes across all tenures coupled with a national shortage in housing supply. As a result, the board continues to look to the future with confidence and to delivering sustainable value for all of our stakeholders."

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