Scottish housebuilder’s earnings climb on inexpensive houses enhance and £63m land sale

Springfield Properties shares jumped on Monday morning after the housebuilder said it expected annual profits to be ‘significantly ahead’ of forecasts.

The group boasted strong margin improvement for the first half despite building fewer homes and posting a 13 per cent slump in revenues amid continued weak demand.

It credited higher margins to ‘sustained’ cost control, as well as a 216 per cent increase in land sales and the completion of low-margin legacy contracts in the last financial year.

Operating profits soared by 27 per cent to £6.1million in the six months ending November, while pre-tax profits nearly tripled to £3.5million. 

While the firm noted that some affordable home schemes experienced short-term delays ahead of the Scottish Budget due to public funding concerns, the segment helped boost gross margins by three percentage points to 17.7 per cent. 

Shares in the Scottish housing developer climbed 9.7 per cent to 108.1p in early trading, making them one of the AIM All-Share Index’s top performers.

Outlook: Springfield Properties shares jumped on Monday after the company said it expected annual profits to be ‘significantly ahead’ of forecasts

Springfield completed 361 homes over the period, against 432 the previous year, mainly owing to a lower private housing forward order book.

Although economic conditions remain weak, the Elgin-based group said private home reservation rates were ‘showing signs of improving’ following recent interest rate cuts.

Innes Smith, chief executive of Springfield, said: ‘The housing market continues to be influenced by the wider economy, and subdued confidence resulted in a dip in reservation rates from mid-December. 

‘However, we are currently seeing an increase in visitor levels, bolstered by the reduction in interest rates earlier this month, giving us optimism that reservation rates will recover in the near term.’

Springfield further revealed that it had signed a £64.2million deal with Barratt Redrow to sell the industry giant 2,480 plots of undeveloped land across Central Scotland.

The business said proceeds from the transaction will come in tranches over the next four years and go towards eliminating its outstanding debts.

Following the deal, Springfield will concentrate its activities in the North of Scotland, hoping to capitalise on the region’s green infrastructure boom.

Scottish and Southern Electricity Networks (SSEN) plans to invest £31billion and create about 37,000 jobs by upgrading the area’s electricity transmission network.

In addition, the Inverness and Cromarty Firth Green Freeport in the Scottish Highlands is anticipated to generate over 10,000 local jobs.

Smith said: ‘The requirement for new housing in the Highlands and Moray is substantial, driven by the need to house the increased population resulting from the incoming green infrastructure and the economic growth in the region.

‘With significant land holdings across the Highlands and Moray and an established presence, Springfield is uniquely placed to deliver on this increased demand for homes.’