Springfield Properties PLC on Tuesday said that high interest rates and low mortgage affordability continued to dampen private housing demand, but highlighted that demand for affordable housing remained ‘strong’.
The Scotland-focused builder of private and affordable housing said pretax profit fell 80% to £1.2 million in the six months to November 30, from £5.9 million a year prior.
Revenue declined 25% to £121.7 million from £161.9 million. This was largely driven by a 26% contraction in private housing revenue to £87.7 million from £118.6 million.
Affordable housing revenue declined 9.0% to £25.4 million from £27.9 million, while contract housing revenue plunged 82% to £1.9 million from £10.6 million.
Net bank debt as at November 30 increased 38% to £93.4 million from £67.8 million a year prior
Springfield emphasised high interest rates and low mortgage affordability impact private housing demand, albeit adding that demand in affordable housing remained ‘strong’, saying it is confident of signing further contracts in the near term.
‘Long-term fundamentals of the Scottish housing market remain strong with an undersupply of housing across all tenures and greater private housing affordability than the UK as a whole,’ it said.
Springfield said it is pausing dividend payments until bank debt is materially reduced. It had not paid any dividend a year ago either.
Looking ahead, the company expects to report results in line with market expectations for the current financial year ending May 31, including a net bank debt of around £55.0 million, which would be a reduction of 19% from £67.7 million at May 31, 2023, and of 41% from the just posted debt of £93.4 million as at November 30.
More positively, Springfield said: ‘While there remains near-term uncertainty, particularly in private housing, the board is confident in the group’s prospects for returning to growth and in its ability to generate shareholder value.’
Springfield shares rose 1.2% to 78.90 pence each on Tuesday morning in London. They are down 10% from a year ago.
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