Springfield saw strong build and sales activity throughout the year with high demand experienced across the business. This resulted in significant growth in revenue in private and affordable housing, ahead of market expectations set at the beginning of the year, with private housing continuing to be the largest contributor to its revenue.
Springfield remains positioned in an interesting part of the market, with anticipated sustained demand occurring across the country. It could also benefit from the post-pandemic demand for housing we think will also occur.
Shares in Springfield Property seem to be responding today. Stock was trading at the 165 level and looking sluggish but it now seems to be in more demand, up at 171. The share has been a solid returner over the six month period too, up from about 132 at the start of the year. We have seen several legs up since then. It is already close to the 52 week high of 175, It has been a consistent performer in the last 12 months.
Significant year-on-year growth for Springfield
At the end of the year, Springfield Properties made strategic land sales across two of its large developments in the Central Belt to two national housebuilders. As a result, it expects to report revenue for full year 2020/21 of approximately £215m and profit in line with recently upgraded market expectations, reflecting significant year-on-year growth. It also substantially reduced net debt to approximately £21m at 31 May 2021 compared with £71m at the same point of the prior year.
In private housing, Springfield achieved excellent sales at its developments across Scotland, reflecting the increased desirability for the type of housing it offers. This includes homes that are larger, with space for home offices and with gardens, which are in semi-rural locations. In particular, completions at Springfield’s Linkwood Village in Elgin and at three developments launched under its Dawn Homes and Walker Group brands made an important contribution to the revenue growth in private housing.
In affordable housing, Springfield Properties delivered a substantial increase in revenue and completions in the second half of the year over the first half, representing significant growth for the full year over 2019/20. The Group also signed contracts for, and commenced work on, multiple new affordable developments that are due to be delivered in the current year. This progress is supported by the continued commitment of the Scottish Government to the delivery of affordable housing, with over £3.4bn earmarked for affordable housing funding through to March 2026 (as announced in February 2021).
“We have achieved our highest ever annual revenue – exceeding £200m for the first time – based on significant growth in both our private and affordable housing,” explained Innes Smith, CEO of Springfield Properties. “We have substantially reduced our net debt position, demonstrating our ability to generate cash, and our strategic land sales towards the end of the year reflect our capacity to realise value from our large, high-quality land bank.”
A key driver of growth has been the greater popularity of the spacious homes in the market, with private gardens and easy access to surrounding greenspace. At the same time, there continues to be a chronic undersupply of housing of all tenures across Scotland.
Springifled’s PE ratio stands at 17.92. It is not the cheap value play it was last summer, and we do worry about its proximity to the ATH, but we still think the company could benefit from further macro tailwinds in the post-pandemic housing recovery scenario.
