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Rising tide lifts Springfield Properties

The housing group has benefited from strong end markets
February 26, 2019

Springfield Properties (SPR) is in growth mode. Buoyed by rising property prices in Scotland – which are outpacing the rest of the UK – the group has seen a rapid expansion of revenues, margins and profits.

IC TIP: Buy at 124p

However, it has not come cheaply. Net debt rose to £25.3m in the six months to November 2018, up 85 per cent on the same period in 2017, which management attributed to increased working capital needs.

The bulk of the group’s sales came from private housing. The division completed 234 homes in the period, up 27 per cent on 2017. Management has been increasingly focused on developing 'village' sites, which have 1,000-3,000 plots plus local amenities. It secured 400 acres of zoned land for its fifth such village, in Livingston in the Edinburgh commuter belt. The group anticipates it will be able to develop 2,500 plots on the site.

Meanwhile, affordable housing is becoming an increasingly important area for the group. It accounted for 25 per cent of revenues in the first half, up from 21 per cent last year. Sales grew 63 per cent to £19.1m, and management expects the recent Walker Group acquisition to boost the division further. Walker builds private housing, but its land bank currently requires 346 affordable homes to be developed due to government requirements.

House broker N+1 Singer is forecasting adjusted EPS of 13.1p for 2019, up from 9.3p in FY2018.

SPRINGFIELD PROPERTIES (SPR)  
ORD PRICE:124pMARKET VALUE:£119m
TOUCH:120-127p12-MONTH HIGH:139pLOW: 104p
DIVIDEND YIELD:3.2%PE RATIO:11
NET ASSET VALUE:85pNET DEBT:31%
Half-year to 30 NovTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201754.82.773.451.00
201875.76.095.121.20
% change+38+120+48+20
Ex-div:07 Mar   
Payment:14 Mar