Springfield eyes further deals as it sets course for record profits
SCOTTISH housebuilder Springfield Properties has underlined its appetite for further acquisitions as it reported bumper trading for the first six months of its current financial year.
Elgin-based Springfield hiked its operating profit by 75 per cent to £6.4 million in the six months to November 30, putting it on course to deliver record annual profits for the full year. Profits were driven by an increase in the number of new home completions, up to 379 from 280 over the comparable period a year earlier, which helped boost revenue by 38% to £75.7m.
Chief executive Innes Smith said the housing market in Scotland was showing no signs of being affected by the lack of clarity surrounding the UK’S troubled exit from the European Union (EU).
Mr Smith, who highlighted the company’s progress in developing new villages in Perth, Dundee, Stirling and Elgin, said: “This is the 10th year of uncertainty in Scotland. For various reasons, be it planning, availability of land, availability of materials, we are constantly building less houses than the market demands. We are about 6,000 to 8,000 short of that figure, so we have got an under-supply and overdemand of housing, and we have low interest rates and availability of finance. So the underlying market is very strong.
“People still need houses to move into, and despite the uncertainty, the general public and their buying habits are largely unaffected by the big ‘B’ word. I think it does affect the politicians and the investors, but for the general buying public it is business as usual.”
Springfield made its second acquisition since floating on the stock market after period-end, bringing Livingston-based Walker Group into the fold this month for £31m. The deal strengthened its position in the east of Scotland and saw Springfield take over five active sites with a gross development value of £100m, with five further sites valued at over £300m in the pipeline.
The Walker deal followed the company’s acquisition of west of Scotland-focused Dawn Homes for £20.1m last May, and Mr Smith said more deals could follow.
Mr Smith, who has previously told The Herald that the firm’s stock market listing has given it the financial firepower to pursue acquisitions, said: “Part of our growth strategy is to acquire land. One way to acquire land is if it is embedded in a company. Another way is by buying it and taking it through the planning process, and another way is by developing the villages.
“We will look at all opportunities as they come along, and we will consider them at the time they arise. We never rule anything in, [and] never rule anything out.”
The six-month period saw Springfield complete 234 new homes in its private housing division, up from 184 last time, and 145 affordable homes, up from 96.
The average selling price it achieved for private homes dipped to £227,000 from £234,000, but increased to £132,000 from £122,000 for affordable homes. It attributed both movements to changes in its sales mix.
Mr Smith declined to comment directly on this week’s controversy around fellow housebuilder Persimmon, which according to one press claim faces being locked out of the Help to Buy scheme in England. That followed claims that Persimmon’s profits – and the enormous bonuses it has paid to senior executives – have effectively been subsidised by its participation in the scheme, which involves the Government providing first-time buyers with deposits. Persimmon yesterday became the first UK housebuilder to report profits of more than £1 billion.
Mr Smith noted that Springfield sells homes through the separate Help to Buy scheme for Scotland, which account for around 15% of its sales, and added: “What Help to Buy does is that it enables people to buy houses – that is the most important part of this. Without Help to Buy, the first-time buyers wouldn’t be getting on the market. I think that is getting lost in the story.”
Shares in Springfield ended the day up 2.89%, or 3.5p, at 124.5p.
Buying habits are largely unaffected by the big ‘B’ word