Scottish housebuilder Springfield Properties increased PBT by 69% in FY 2019, beating our estimate by 3% and undershooting our debt assumptions. We maintain our latest estimates but believe the group is investing in potentially greater mid-term growth, by strengthening management and systems, planning further progress in affordable housing and extending its regional footprint, including into the rapidly growing city of Inverness.
Adjusted PBT for the 12 months to May rose by 69% to £16.5m, beating our estimate of £16.1m by 2.9%; adj EPS rose 29.1% to 13.9p, 4.2% ahead of our estimate of 13.3p; the dividend was increased by 18.9% to 4.4p, in line with our estimate. The gross margin improved from 15.7% to 18.0%, while margins for most major UK housebuilder have come under pressure. The ‘beat’ was largely due to a stronger than expected performance by a JV. YE net debt rose from £15.3m to £29.6m, £7.6m below our estimate.
We are not materially changing headline forecasts for FY 2020E and 2021E, but suspect they may be conservative, since we have again not assumed any contribution from the JV and have assumed that some of the larger Affordable Housing projects feed through later in the forecast period. We have also initiated a FY 2022 estimate, with YoY PBT growth of 9%.
The group, which sold 952 homes during the year appears to be creating a platform for further significant growth in output over the forecast period: with a new operational structure and regional heads; planning application submitted for its fifth ‘village’ development; an expanded landbank, including a move into Inverness, which has one of the fastest growing populations in Europe.
We continue to believe the outlook for the Scottish housing market is one of the healthiest in the UK, with a relative undersupply of private and affordable housing and faster growing prices than most English regions, according to RICS.
Springfield’s latest PTBV of 1.18x compares with 1.80x for the volume housebuilders and the FY 2020E P/E of 6.8x compares with 8.8x prospective average. The shares yield 4.9%, based on our FY 2020 dividend estimate.