Scotland’s only quoted housebuilder’s interims delivered strong growth in volumes and margins and an upbeat statement on current trading. Revenue rose 38% YoY, while adj PBT almost doubled. This appears to leave Springfield comfortably on track to meet our FY 2019E estimates. We are not changing these but note that the latest half year has already made a significantly stronger contribution to our FY estimate than H1 2018 to the FY 2018 out-turn.
Revenue rose 38% to £75.7m for the six months to November, slightly higher than the 34% YoY increase we estimate for the FY – which will be augmented by an initial contribution from Walker Group, acquired on 1 February. PBT rose by 99%, helped by an increase in gross margin from 15.4% to 17.2% and better overhead recovery. The proposed interim dividend was lifted by 20%, slightly more than the 18.9% increase we have factored in for this year’s full pay-out. Net debt grew as anticipated, from £13.7m to £25.3m. On an annualised measure, ROCE improved from 10.6% to 12.7%.
We have not changed any of our estimates, for more detail see our initiation note, Local hero, 12 February 2019.The H1 2019 PBT equates to 38% of our FY 2019E estimate, compared with a first half contribution of 31% to last year’s out-turn. In particular, our assumptions for Affordable Housing look undemanding, given the strong performance, with gross profit up 89%.
Given the strong first half and the positive dynamics for private and affordable housing in Scotland, the board “remains confident of continuing to deliver sustained growth and of achieving full year results in line with market expectations”.
Latest data from the HMRC and RICS reinforces the broader theme in our initiation, that housing transaction volumes and pricing in Scotland are more positive than in most of the rest of the country. New housing demand should be further underpinned by a relative under-supply of private housing north of the border and the Scottish Government’s commitment to support the delivery of 50,000 new affordable homes by 2021.
The latest historic PTBV of 1.43x compares with an average of 1.83x for the major UK housebuilders. Based on our FY 2019 estimate, the stock yields 3.6%.