Revenue for the six months ended 30 November 2023 fell by 25% compared with the same period one year previously (from £161.9 million to £121.7m), after private housing revenue decreased by 26% compared with the first half of 2023 and affordable housing revenue dropped 9%. Operating profit is down 37% to £4.8m and net bank debt is up 38% to £93.4m.

Springfield said demand for private housing continued to be impacted by high interest rates, mortgage affordability and reduced homebuyer confidence. It highlighted that it has now recommenced engaging with affordable housing providers following the Scottish Government’s move to increase the affordable housing investment benchmarks, with affordable housing contracts totalling around £40 million having been signed since 31 May 2023 for delivery in the second half of 2024 and beyond.

Total completions of 432 (H1 2023: 673), were in line with management expectations,  and reflect “entering the year with a lower forward order book due to challenging market conditions”, the firm added.

In response to market conditions, the Springfield board adopted a strategy focusing on maximising cash generation to reduce the group’s debt by year end, including through:

• carefully managing working capital and curtailing speculative private housing development by only commencing building homes when they are reserved
• sustained focus on cost control, with administrative expenses, excluding exceptional items, being reduced to £12.6m (H1 2023: £14.7m)
• actively pursuing land sales to accelerate cash realisation from the Group’s large land bank - with sales totalling £18.0m agreed during and post period, of which £15.0m is expected to be received in H2 2024
• pausing dividend payments until the bank debt is materially reduced

Springfield said that its total owned land bank of 6,421 plots (31 May 2023: 6,712 plots), 86% with planning permission (31 May 2023: 83%), and strategic options over a further 3,217 acres (31 May 2023: 3,255 acres), equate to c. 32,200 plots - one of the largest land banks in Scotland.

In all, the group said it is “on track to report results for FY 2024 in line with market expectations, including meeting target to reduce net bank debt to c. £55.0m by 31 May 2024.”

Innes Smith, CEO of Springfield Properties, said: “Trading for the first half of the year was in line with our expectations, and reflects the challenging market conditions experienced across the industry. To mitigate the impacts of the downturn and ensure we are in a stronger position for when trading conditions recover, we took decisive actions to maximise cash generation and reduce our debt by year end.

“A key element of this was actively pursuing profitable land sales. We are pleased to have agreed sales worth £18 million so far and we expect to conclude negotiations for further sales in the near term. Looking ahead, we are encouraged by the improvement in private housing reservations that we have experienced in recent weeks and the signs of increasing homebuyer confidence, as has been reported by other housebuilders.

“We are receiving strong demand in affordable housing – and have already signed contracts worth c. £40 million since 31 May 2023. We are also hopeful that the ending of the Scottish Government’s emergency rent cap in April 2024 will enable a return of PRS activity. Alongside this, build cost inflation is continuing to reduce and is expected to stabilise at low levels. We are on track to meet our year-end target for net bank debt, which will continue to reduce in the next financial year.

“The fundamentals of our business and our position within the Scottish housing market remain strong. We have one of the largest land banks in Scotland with over 6,421 owned plots, 86% of which has planning permission, and a further 3,217 acres of strategic land. We have an excellent reputation of offering high quality, energy efficient homes in desirable locations in key housing markets, and a track record of delivering developments exclusively for affordable housing.

“In addition, there is an undersupply of housing of all tenures, which can only be addressed through building new homes. As a result, while there remains uncertainty in the near term, with our position having been strengthened through the decisive action that we have taken, we remain confident in Springfield’s prospects.”