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Scotland’s only quoted housebuilder recorded its highest ever weekly number of reservations following the reopening of its sales offices after the prolonged construction lockdown north of the border. As a result, Q1 2021 sales are expected to be “significantly higher” Y/Y, after the inevitable disruption caused by Covid. In this morning’s FY 2020 trading update, the Group also highlighted the widely reported trend across the housing market to larger homes with gardens, Springfield’s ‘sweet spot’ in our view.
Lockdown shifts completions into FY 2021. As previously announced, the Group entered H2 2020, to May, with a strong order book and “good growth” across the business. But because of the lockdown, it was unable to complete the delivery of homes scheduled for April and May, which for the previous two years accounted for 30% of FY revenue, causing the majority of private completions for Q4 to be postponed into FY 2021.
Strong start to new year. All sites and sales offices were reopened by 29 June. The order book of contracted revenue is now over £110m, including £44m of largely constructed private housing, contracted under the Scottish missive system. FY 2020 revenue is thus expected to be some 25% lower, at c. £144m. Notably, Springfield achieved the same revenue in affordable housing as FY 2019, underlining, in our view, its resilience. It expects to report a higher gross margin and PBT of at least £9m.
Sound finances. Net debt at 7 July was £69m with a total credit facility of £85m. With operations restarted, a strong order book and “significant customer demand”, management expects a reduction in net debt.
Greater demand for ‘villages’ and affordable homes. The Group’s distinctive model could benefit in the near term from two trends highlighted in the update: buyers wanting “larger homes, with gardens, within commuting distance of cities” (served by Springfield’s ‘village’ concept) and an “even more acute” shortage of affordable housing.
Strong fundamentals. We believe that, once the logistical obstacles from Coronavirus normalise, the Scottish housing market should offer significant growth in volumes and prices, due to relative under-supply. Springfield’s proactive multi-tenure model was strengthened by last year’s collaboration with Sigma Capital, which offers growth with modest capital requirement. FY results are expected in October.
