Springfield (SPR) has reported encouraging H1 results, reiterating full year expectations and confidence in longer term growth prospects. The strategy to maximise cash generation is bearing fruit, costs are being carefully controlled and there are signs of market recovery, both in terms of Affordable contract successes and, more recently, a pick-up in Private Housing activity since mid-January. Springfield has one of the largest land banks in Scotland and an excellent reputation in both Private and Affordable Housing. With increasing confidence in forecasts and improving market sentiment, we believe the 40%+ discount to sector peers is unwarranted and reiterate our ED Fair Value/Share of 130p (Price/ Book multiple of c.1.0x).
Trading in line, debt reduction well on track
Springfield is on track to report results for FY’24 in line with market expectations, including the target to reduce net bank debt to £55m by 31st May. Debt reduction is a clear priority for management and today’s results highlight the progress that has been made in realising cash from the land bank in recent periods. The Group entered an agreement for a profitable land sale for £5.2m during the period and a further two agreements totalling £12.8m post period end. Advanced discussions are underway for further profitable land sales with an encouraging level of interest being seen.
Green shoots ahead of Spring selling season
There have been several signs in recent weeks that the housing market has made a bright start to
2024, particularly in Scotland. These include January’s RICS survey, which highlighted an
improvement across all sales market activity indicators, and recent house price inflation data (Halifax
recording +4% in January in Scotland versus +2.5% for the wider UK). Encouragingly, Springfield has
also seen an increase in Private Housing activity. It is too early to extrapolate but the average weekly
reservation rate since mid-January has been 62% higher than for the year to that point.