Springfield Properties has signalled cautious optimism over the outlook for the housebuilding industry, following a challenging year that saw profits, revenue, and home completions fall as confidence ebbed from the market.

The Highland housebuilder highlighted an improving backdrop in the private market and a larger contracted order book in affordable housing after profits dropped sharply in its latest financial year.

Elgin-based Springfield reported a 36.7% fall in profit before tax to £9.7 million in the year ended May 31, as the firm cited the impact of high interest rates, pressure on mortgage affordability, the cost of living crisis, and reduced homebuyer confidence. Revenue plunged by 19.8% to £266.5m, as the number of homes completed by the group dipped to 878 from 1,301 in 2023, amid the challenging market conditions.

However, Springfield pointed to improving confidence over the outlook, with the firm reinstating the dividend after making progress in slashing debt. Net debt was reduced to £39.9m from £61.8m by the end of the financial year, ahead of the £55m targeted, as it raised £28.1m from land sales. It is no longer actively seeking to sell land.

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The results suggest the company is emerging from a difficult period, which saw it suspend dividends and embark on a strategy to reduce debt from September last year. Springfield said then that it did not expect to see “any material improvement in homebuyer confidence” before spring, with the housebuilder citing the impact of high interest rates, mortgage affordability, and reduced confidence among the home-buying public.

Now Springfield says it has entered the new financial year in a better position than the previous one, and highlighted the benefit to homebuyer confidence from lower inflation and the August cut in interest rates – the first since before the pandemic struck in early 2020.

And it insisted the long-term picture for the housebuilding market continues to look strong, as it highlighted that its expectation of demand arising in the Highlands from the development of the Inverness and Cromarty Firth Green Freeport and Scottish & Southern Energy Networks’ new powerlines, which will provide the UK with renewable energy.

Both projects are expected to bring thousands of temporary, permanent and in-direct jobs to the Highlands, leading to a rise in demand for housing across the region.

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Innes Smith, chief executive of Springfield Properties, told The Herald that the actions taken by the firm a year ago, when it was “probably at a low point in the cycle”, have borne fruit.

“We were very up front and said we are going to stop speculative build, we were not going to start new sites, we were going to sell land, we were going to sign affordable contracts,” he said.

“It was quite an ambitious plan, and we are pleased to announce today that all of the actions we took have got us into a position where we have exceeded our targets. We sold more land, we have ended up with better profit than we expected, but we are really well placed for the future.”

Mr Smith signalled that the optimism at Springfield has carried into the current year. He added that the August cut in interest rates, to 5% from 5.25%, has boosted consumer confidence, with sales “picking up” and evidence that the second-hand market is also improving. But he does not expect a further cut in interest rates when the Bank of England announces the latest decision by its Monetary Policy Committee tomorrow (Thursday).

Mr Smith said: “I guess what fills me with the most positivity is the movements in the Scottish economy regarding green [energy] and the upgrading of the power networks, which is a massive project. It doesn’t seem that people have really realised what is going on in Scotland at this point.”

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Asked how he believes the housing crises which have been declared across Scotland should be addressed, Mr Smith said the solution is simply to build more houses and to make it easier for housebuilders to do so.

He said: “We are in the midst of a housing emergency, and it seems to be that the answer would be to build more houses. My genuine belief is that more legislation very rarely leads to more houses. I think we need less legislation, and we really need to realise that it is an emergency, and in an emergency you need to take actions.”

Mr Smith added: “The government needs to enable housebuilding, not stop it. I think there is a realisation that maybe there have been a bit too many blockages over the last 10, 15 years. If we want more houses then we need to be more proactive with planning… and we need to find solutions for infrastructure. Along with housing, we need hospitals, we need schools, we need joined-up thinking, because we need to get the fabric of our society right for Scotland to be a successful country.”

Springfield signed an agreement with Barratt Developments during the year to accelerate the development of a new village comprising 3,000 homes over around 600 acres at Durieshill, near Stirling. The deal included the sale of a 34-acre site to Barratt for £10m, which helped Springfield realise value from its land-holding. Separately, Barratt will receive land in the coming years in exchange of providing the major infrastructure for the entire site.

Mr Smith said while mortgage affordability is improving, “we are not building enough houses”.

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​He noted: “There is huge demand for housing. People are desperate for houses. We need to be building more houses and the demand is certainly there. The affordability and confidence is coming back. I am certainly far more positive.

Mr Smith added: "We are stopping the land sales for the time being. For the time being we think our land bank is going to be very valuable going forward. We have a strong land bank [with] 5,500 plots, 90% of which have got planning [consent]."

The Springfield board has moved to reinstate the dividend, and recommended a dividend of 1p per ordinary share. It last paid a dividend in December 2022. Mr Smith said the resumption of the dividend sends a positive signal to investors.