Springfield has released a strong H1 update, confirming a continuation of recent momentum through the first half. This has been driven by the rebound in sales and build activity in private housing post lockdown. Cash generation has been excellent with net debt halving in six months to £34m at the end of November. A strong forward order book on both sides of the business underpins full year expectations, whilst the ongoing development of the Villages (including the recent planning consent for PRS housing at Bertha Park) supports medium term growth ambitions. The shares remain modestly valued relative to sector peers.
Companies: Springfield Properties PLC
Scotland’s only quoted housebuilder has issued a positive trading update for the six months to 30 November, highlighting sales activity that had “rebounded strongly” and, significantly, net debt falling by more than half since the May year end. The Group predicts further acceleration in growth in H2 “in line with market expectations”, driven by pent-up demand after Scotland’s extended lock-down and underpinned by a large contracted pipeline. We maintain all our estimates. We also examine Springfield’s growing ‘ESG’ commitment, particularly its sustainability initiatives.
Springfield Properties has been granted planning approval for its first private rental sector (PRS) development, a move which progresses Scotland’s only quoted housebuilder’s move into delivery of a third tenure choice, which, in our view, improves its cashflow and risk profile.
Springfield has been granted planning approval for 75 private rental sector (PRS) homes at Bertha Park. This is a positive step, opening up a new revenue stream for the Group as part of its mixed-tenure offering at the Villages. It is Springfield’s first development to be approved for PRS housing. We expect more to follow, supporting Springfield’s significant medium term growth ambitions. The shares have recovered from recent lows but continue to trade at a substantial discount to peers on P/E and P/B metrics.
Scotland’s only quoted housebuilder’s home completions and cashflow have recovered sharply from the country’s prolonged lockdown, with delayed sales fuelling what the Group predicts will be a strong first half to the current financial year. Today’s FY 2020 results, to May, show the impact of the lockdown in the final two months, which normally account for almost a third of sales, but confirm that delayed sales are expected to add to strong underlying demand in H1 2021, with debt having fallen by over £25m in four months and a 2p final dividend proposed. Our reinstated forecasts assume PBT surpassing the previous record by FY2022E and debt continuing to fall.
Whilst Springfield’s FY20 results reflect the impact of lockdown on the final quarter, demand has returned strongly over recent months. Recent reservations (+24% in Q1) are indicative of pent up demand and increasing interest in the homes that Springfield builds (family homes with gardens in attractive areas). The resumption of the dividend is a mark of the Board’s confidence in current year prospects, whilst the 15,000+ plot land bank underpins medium term growth ambitions. We reintroduce forecasts within this note and highlight a very undemanding rating relative to peers (6x Dec’21 P/E, 0.7x P/B).
Today’s full year trading update highlights the severe impact of the lockdown at what is traditionally Springfield’s busiest time of year. More importantly, looking forward, construction has now recommenced on all sites and all sales offices reopened last week. It proved to be a record week for reservations, suggesting significant pent up demand and brighter prospects for FY21. Springfield is now focusing on delivering its strong order book and growing its sales pipeline. We believe the Group will rebound strongly, noting its reputation for building high quality family homes in good locations and an excellent track record of growth over many years.
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.
First minister Nicola Sturgeon announced yesterday that the construction industry is now able to move to the next phase of its restart plan. This means moving from pre-start site preparation to a “Soft start” on site. This will be a gradual return with workers following strict social distancing and hygiene controls. Provided that these measures are in place, building can re-commence with immediate effect. As at the time of its last update, Springfield reported contracted revenues of £110m, including £44m of largely constructed private housing, and £66m of affordable housing revenue from construction contracts already underway. We expect Springfield to return to site swiftly and safely as employees return from furlough (90% furloughed during lockdown). This is clearly positive news, which will allow the Group to begin to catch up on sales which had been due to complete in April and May. Yesterday also brought confirmation that the Help to Buy scheme in Scotland will be extended for a further year to March 2022, another welcome development for the industry.
Springfield has issued a second COVID-19 update, confirming a significant £18m extension to its credit facility with Bank of Scotland. The additional term loan increases the total facility to £85m and has been agreed on similar terms to the existing facility. A number of stress tests have been carried out, concluding that the Group remains in a strong financial position with the ability to operate within its new facilities even in the event of a highly unlikely full year shutdown of operations. Further mitigating actions have been taken in addition to the measures set out in the 24th March update. It is not yet possible to gauge when operations will recommence but when they do, Springfield will continue to deliver against its current contracted revenues of £110m.
Scotland’s only quoted housebuilder has agreed an additional term loan, on similar terms to its existing facility and which the Board estimates will provide it with sufficient headroom to withstand the “most extreme of a range of highly stressed modelling scenarios: a full year shutdown”. It has also outlined a range of mitigating actions and strong contracted revenues.
Red Dwarf, the very British sci-fi comedy franchise, ran for 11 seasons – most recently in 2017; and The Promised Land is a feature-length TV movie – out this year. Yes, the programme is an acquired taste. Strangely, too, many episodes are impacted by a virus or three (physiological, not main-frame).
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Scotland’s only quoted housebuilder has this morning updated its guidance in response to the escalating response to Covid-19. The outbreak has not negatively impacted its completions or reservations to date. However, First Minister Nicola Sturgeon’s advice to close building sites across Scotland and the impact of the public being advised to stay at home has created uncertainty and the group will update on trading in due course. Although the company reports a “strong” financial position, Springfield has, like numerous peers, withdrawn its forthcoming dividend to preserve cash.
The COVID-19 situation is evolving rapidly. There had been no impact on completions or reservation to date but First Minister Nicola Sturgeon yesterday advised the closing of building sites across Scotland in order to prevent the spread of the virus. Further guidance is expected to be given by the Scottish Government on this matter and Springfield will update the market in due course. Net debt as at 30th November was £56m. The Group has a £67m credit facility with Bank of Scotland, with whom it has maintained a very constructive dialogue over the past few weeks regarding the availability of additional funding if required. The interim dividend of 1.4p (£1.4m in cash terms) has been cancelled in the interests of liquidity. We place forecasts under review at this stage and will reinstate forecasts as visibility improves.
Springfield has signed an agreement worth £18.2m with West of Scotland Housing Association (WSHA) for the development of 114 affordable homes and two commercial units in Dalmarnock, Glasgow. The contact award strengthens the Group’s revenue visibility over the next two years and provides a reminder of Springfield’s credentials in this important segment of the market. Having fallen along with peers in the recent market weakness, the shares trade on a current year P/B rating of 1.2x and P/E of 8.5x with a 4.3% yield.
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Boohoo has delivered strong results over the peak trading period for the four months ended 31 December 2020. Group revenue is +40% YOY, with robust growth seen across all brands and regions. The Agenda for Change programme is progressing at pace, demonstrating the Group’s commitment to setting a new standard for ethical supply chains in the fashion industry.
Companies: boohoo group Plc
SCE is raising £20m through a placing and open offer as the future commercial pipeline now justifies building the next manufacturing cell (“Cell 2”). Cell 2 will essentially double production capacity and transform the potential of the business. When operating at full capacity, we estimate that SCE would be capable of £35m revenues, £15m EBIT and £12.5m Earnings. This would equate to EV/EBIT of 7.1x and P/E of 9.5x based on the enlarged capital base. Recent trading updates have highlighted that trading is strong and in line with expectations, while longer term ASP expectations have increased significantly.
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Residential for rent developer and manager Watkin Jones today posted FY 2020 results, in which profits, cash and dividend beat our estimates by c. 4 - 5%. We have maintained our FY 2021E forecasts and introduced estimates for FY 2022E. Our growth assumptions are supported by further evidence in the statement of a revival in forward funding by institutional investors for both the Group’s build-to-rent and student accommodation developments. A new strategy is aimed to trial the private residential sales division more to affordable housing, in line with WJ’s low-risk, capital-light model.
Companies: Watkin Jones Plc
The group’s year-end trading update highlights that the group is on track with its growth and expansion strategy. At the end of the year, a couple of COVID and Brexit-related delays to customer ordering were seen, which have reduced revenue by £0.7m. Nevertheless, operating profits are in line with expectations due to continued cost control. Our forecasts have therefore been adjusted accordingly. The investment case remains sound and this doesn’t alter our view of the company’s prospects, where we forecast a robust scale up over the next few years, focused on significant growth opportunities in the EVs, Medical and Aerospace markets.
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Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
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InnovaDerma raised £4.0m to (i) strengthen the balance sheet following the impact of COVID-19 on current trading and (ii) grow its global Direct-to-Consumer (DTC) and E-Commerce capacity in the UK and new geographic markets, thereby enabling the company to accelerate sales and take advantage of the opportunities expected to exist post COVID restrictions being eased. With a clear plan for growth, to be executed by its new CEO, we introduce new forecasts for FY 2021 and 2022 that assume some gradual easing of restrictions in the UK in the spring, with an adjusted pre-tax loss of c.£0.9m in 2021 (positive EBITDA in H2) returning to c.£0.3m profit in FY 2022 on the back of revenues returning to pre-pandemic levels, including higher international contributions. We introduce a target price of 90p, with scope for this to be raised as the new CEO executes on the growth plan, which is based on a peer group EV/Sales multiple of 1.6x.
Companies: InnovaDerma PLC
The Character Group’s (Character) AGM statement confirms the strong start to the year noted in its preliminary results. Revenues in the first four months were ahead by more than 30% and management expects that profitability for the first half to February 2021 will be significantly higher than in the same period last year. While there are more challenges facing the Company in the second half, assuming these do not worsen the Board believes the Group will achieve current market expectations. Our forecasts for FY2021 were raised significantly in December and we are encouraged that despite the temporarily deteriorating macros, current market expectations are still valid. When some normality returns to the market Character will be exceptionally well positioned with a strong balance sheet and a product range in strong demand.
Companies: Character Group plc
This brief but important update has underlined that Galliford Try is coping admirably with the seemingly constantly changing COVID restrictions, with all sites open (as they have been since the start of the financial year in July 2020) and trading at “normal” levels – in line with management expectations.
Crucially, a return of profitability and dividends (as previously flagged) is expected with the half year results, due to be released on 4th March. Consensus is for a 2.5p dividend for the year ending in June 2021, growing rapidly to 4.0p for 2022 and 5.4p for 2023.
Companies: Galliford Try Holdings PLC
Today’s Q1 trading update indicates that sales have levelled out at c.£2m per quarter, reflecting current lower levels of demand in light of ongoing restrictions related to the COVID pandemic. The reorganisation and cost reduction measures undertaken by management last year have enabled the Group to maintain a positive EBITDA and there has been a slight increase in orders in the new financial year. Zytronic entered the new year in a strong financial position with £14m net cash. The stable sales pattern should enable us to reintroduce forecasts in due course and the current rating remains very modest indeed based on preCOVID levels of profitability
Companies: Zytronic plc
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The group has issued another positive trading update confirming full-year revenue 25% ahead of our original projection made in March and a LBITDA 39% lower than originally forecast and 81% lower than the previous year. We anticipate further revenue growth in 2021 but also an increase in LBITDA as management invests further in a number of growth initiatives. We expect the 2022 financial year to reflect the benefit of the strategic investment programme as the business progresses towards breakeven.
Companies: Eve Sleep PLC
Recent news has been positive. Notably, the Group announced a ground-breaking £27.5m contract award with a new OEM customer in mid-September. Trading has been more resilient than we expected at the start of the Covid-19 pandemic, demonstrated by the positive full year pre-close update issued today. Revenue for the year to 31 December (£2m) is in-line with our forecast but gross cash is better, by c.£250k. Operational developments continue apace, and reflecting a healthy pipeline and expanding workforce, a dedicated HR executive has been hired. Confidence in the medium-term demand for the Group’s products has improved with recent contract wins; management now believes its Knowsley factory, when fully built-out, will be able to generate £75m of revenue each year against £50m, previously. Our estimates are unchanged pending the full May statement but with a stronger medium-term outlook, we lift our valuation to 65p from 57p.
The impacts of COVID-19 on trading were visible in the H121 outturn but management actions resulted in an improved net cash position at the period end. Walker Greenbank will be renamed the Sanderson Design Group as part of a wider strategic improvement programme. Noting a solid start to H2 so far, management’s messaging is rightly still cautious about the market outlook but it is encouraging to see the combination of close operational control and strategic improvement are running in parallel.
Companies: Sanderson Design Group PLC