Scotland’s only quoted housebuilder confirms it is on-track with its revenue and gross margin aims for the first half and confirms that, with “greater market certainty” post-election, it is confident in its future prospects. We are not changing our estimates for FY 2020E and beyond and continue to believe Springfield will outperform larger UK housebuilders’ growth, fuelled by under-supply of private and affordable homes north of the border.
Today’s trading statement, for H1 to November, confirms it is on target for revenue growth and gross margin improvement in line with the management’s expectations. This follows the good start to the year reported in its FY 2019 results and this momentum was maintained through the first half. We maintain our FY 2020E estimates, which imply 12% growth in EPS.
Shares in housebuilders have risen strongly since the emphatic General Election result and the RNS, the first official statement from the sector since then, hinted at the clearer political outlook: “with the UK entering a period promising greater market certainty, which will benefit our customers, our suppliers and our business, combined with a land bank providing work for at least 16 years and a skilled and dedicated workforce, we remain confident in our future prospects and in achieving our goals”.
We believe Springfield stands to benefit from Scotland’s under-supply of private and affordable housing – with the latter reflecting not only planning requirements on private-led developments, but also the company’s partnerships housing associations and councils to supply affordable homes in their own right. We have interpreted this as a ‘USP’ for the group in securing development opportunities in Scotland, where affordable housing is a political imperative.
The group has combined organic growth supplemented with two strategic acquisitions. Walker Group and Dawn Homes have both performed in line with management’s expectations and the group added a third string in September 2019 with a partnership agreement with urban regeneration specialist Sigma Capital Group to deliver private rented homes in Scotland. We believe this could offer new revenue and land opportunities.