Springfield Properties has reported pre-tax profits down 5% from £6.2 million to £5.9m for the half-year to the end of November.
The Scottish house builder blamed September’s mini-budget for knocking market confidence, while the Scottish government’s rent controls saw it pause affordable home building.
However, revenue rose 85.6% from £87.3m to £161.9m, primarily driven by growth in private housing, along with a strategic land sales and increased revenue from contract housing.
Organic growth was also boosted by the acquisitions of Tulloch Homes and Mactaggart & Mickel Homes during the period.
Springfield's latest financial updated noted the "significant impact" of build cost inflation, particularly on fixed-price contracts in affordable housing, affecting margins across the group.
Action taken to address market conditions, resulted in expected annualised cost savings of approximately £3m.
The business completed 429 private homes during the second half of last year, compared to 197 during the first - although much of this was down to recent acquisitions of other house builders.
Reduced homebuyer confidence impacted private housing reservations towards the end of the period, according to the statement.
The strategic decision was taken to temporarily pause entering new long-term affordable housing contracts until market conditions improve, with only 175 affordable housing completions during the second half - compared to 204 during the first - as build cost inflation rose due to the industry-wide model of fixed-price contracts.
Springfield reported progress with the delivery of its first contract for private rented sector housing (PRS), with final handovers occurring post period.
But plans for the delivery of further PRS housing were withdrawn, following the Scottish Government’s intervention in rent control.
The proportion of land bank with planning permission at 30 November 2022 was 55% - up from 52.1% at 31 May 2022 - with planning approval obtained for 753 homes. An additional 533 homes with planning were received through the Mactaggart & Mickel deal.
The total land bank of 16,975 plots has a gross development value of £3.7bn.
Chief executive Innes Smith commented: “This has been a challenging period for the housebuilding industry, with significant headwinds having a combined effect, which largely offset the excellent growth that we achieved in private housing.
“The UK Government’s mini-budget in September reduced the confidence of homebuyers and the cost of mortgages increased significantly.
“Our affordable housing business was greatly impacted by build cost inflation and, with the Scottish Government still to review its affordable housing investment benchmark, it is not currently possible to continue building affordable homes at the same pace as we have in the past.
“Our plans to deliver additional homes for families through PRS were unfortunately withdrawn as a result of the Scottish Government’s intervention in rent control - plus, while one land sale to a house builder was achieved, the industry-wide stalling of land purchases meant that we could not secure acceptable value for additional sales.“
Smith continued: “We have taken decisive action in response to these conditions - we’ve paused entering new long-term affordable housing contracts and reduced our fixed cost base - and we’ve made a strategic land sale on good terms; reduced land buying activity; and are approaching new site openings with caution.
“The foundations of Springfield remain strong - we offer high quality, energy efficient homes in popular locations across Scotland and have a large land bank, over half of which has planning - this, combined with the actions we are taking as we focus on reducing our net debt position, provides a platform from which we can take advantage as the markets continue to improve.”
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