Springfield Properties (SPR:55p), a housebuilder in Scotland, reported annual results in line with July’s pre-close trading update, but has reduced earnings guidance for the coming year. The board’s focus is firmly on cash generation to reduce net debt, which increased from £38mn to £67mn in the 2022-23 financial year, primarily due to payments on acquisitions.
In June 2022, the group acquired the Scottish housebuilding and timber operations of Mactaggart & Mickel. Springfield has paid a third of the £46.3mn consideration on the debt-funded acquisition, with the balance due over a five-year period as homes are sold. The premium housebuilder primarily targets the private home market in highly desirable locations centred around Glasgow and Edinburgh, and complements the previous acquisitions of Dawn Homes, Walker Group and Tulloch Homes. Springfield made the first deferred payment of £6.1mn on the Tulloch acquisition, too.
Like all housebuilders, demand for homes is being impacted by high interest rates, which reduces mortgage affordability and homebuyer confidence. The directors don’t see any prospect of the situation materially improving before Spring 2024, so feel it prudent to now limit the group’s exposure, only commencing the build of a home once it has been reserved. The focus is on maximising cash generation from work-in-progress and seeking land sales to release cash from a valuable land bank to cut net debt to £55mn by the 2023-24 financial year-end.