Springfield Properties Share Discussion Threads

[swiss paul] 21/9/2023 19:13

Good brieifng by Innes and team today

[scotches] 20/9/2023 19:21

Scottish housebuilder Springfield Properties lost 10% of its stock market worth today after it suspended dividend payments and warned it does not expect to see “any material improvement in homebuyer confidence” before spring next year.

The Elgin-based company has embarked on a strategy to slash debt amid significantly lower levels of reservations in private housing, as it cited the impact of high interest rates, mortgage affordability and reduced confidence among the house-buying public.

It told the City that it had suspended dividend payments until its bank debt is “materially reduced” and unveiled a range of measures aimed to reduce net debt to around £55 million by May 31, 2024. The company's net debt had spiralled to £67.7m by May 31 this year from £38.1m the year before.

Springfield outlined the difficulties it is facing in the short-term as the housing market continues to come under pressure from the recent surge in interest rates. The base rate currently stands at 5.25% following 14 consecutive rises by the Bank of England's Montetary Policy Committee. It will unveil the result of its latest vote tomorrow, with economists forecasting a further quarter-point rise to 5.5%. The base rate had been at a record low of 0.1% as recently as December 2021.

Springfield said that it secured an additional £18m term loan and a 12-month extension to its overdraft facility to “ensure sufficient headroom” in the short term. It noted that it was actively pursuing land sales to accelerate the realisation of cash from its large land bank, carefully managing working capital, and pausing all speculative private housing development, noting that it will only build new homes where they have been reserved.

It also signalled its re-entry to new long-term affordable-only housing contracts, having paused activity in this area in its last financial year, amid concern over the Scottish Government’s affordable housing investment benchmarks. Those benchmarks were increased by 16.9% in June and Springfield said it has signed contracts for £9.7m on May 31 and another for £8.1m post-year end, with a further 13 under negotiation.

The company reported a 22% fall in pre-tax profits to £15.3m for the year ended May 31 amid significant cost inflation, and trimmed its profit expectations to £10m-£14m for 2024.

Chief executive Innes Smith declared that the “fundamentals of our business and our position within the Scottish housing market remain strong” despite the challenges the company was currently facing.

He said: “The fundamentals of the Scottish market remain extremely positive, which is why our confidence remains strong in the medium and long term.

“With Scotland one of the few places across the UK where it is still cheaper to buy than rent a home privately, affordability for home buyers is favourable. Plus, with house prices across Scottish regions holding strong, the market here has proven to be far more resilient than elsewhere.

“We are pleased to see mortgage rates begin to normalise for our customers and look forward to experiencing re-energised customer demand when buyers seize this good time to buy. We will build homes as they are reserved to react to levels of demand. And we will continue to offer our customers an unrivalled level of choice and specification, build them a highly energy efficient home, which keeps their running costs low, alongside our fantastic customer service.”

Springfield reported today that the 12 months to May 31 had been a year of record completions, which increased to 1,301 from 1,242.

Its private housing division saw strong growth, boosted by the acquisitions of Tulloch Homes and Mactaggart & Mickel Homes, with revenue climbing by 45% to £253.4m. But revenue from affordable housing dipped by 16% to £53.9m as margins came under pressure from build cost inflation and the fixed cost of contracts. It noted that the Scottish Government had now revised affordable housing investment benchmarks for inflation.

Springfield also said that during the year it had withdrawn plans for further projects in the private rented sector following the introduction of rent controls by the Scottish Government.

Shares in Springfield closed down 9.92%, or 6p, at 54.5p.

[jonwig] 20/9/2023 16:51

OK. Lots promised but needs to be delivered. Maybe take a year for visibility. Scottish government a hindrance.

[jonwig] 20/9/2023 16:21

Doh! I'd marked them for tomorrow and never checked. (Mind, if they'd come at 7:00 I would have seen them!)

[aldriglikvid] 20/9/2023 15:57

@Jonwig, the results are out already.

[jonwig] 20/9/2023 15:30

#272 - actually, the best sector performer recently was Vistry (VTY) thanks to its parnerships business model. This ought to benefit SPR.

Anyway, I look forward to tomorrow's figures.

[aldriglikvid] 20/9/2023 15:25

Pretty harsh reaction today, to be honest.

Plans to sell approx. 1000 plots for +£50m i.e. current amount of wholly owned plots (+6500) should exceed market cap (and debt) with a substantial margin.

Also, we shouldn't be more than 1 year from SPR returning to +£20m yearly PBT. Current market cap £58m.


All the other builders delivered the same results and outlook, but received a decent share rally afterwards. I guess it's the cancellation of the dividend that hurts.


Here at p/tangible book 0.35 one have to bid (I'd argue). What's not included in that price?

[davebowler] 20/9/2023 15:07

50% of NAV. Irresistible.

[jonwig] 20/9/2023 13:51

Results are tomorrow. I don't hold, but plan to - depending on what I read.

[edmonda] 20/9/2023 12:29

"Results in-line; Prioritising cash generation in FY24"

Springfield’s results to May ’23 are in line with expectations, confirming a record year of completions despite a challenging market backdrop. Decisive action has been taken to reduce costs (£4m annualised savings) and the main focus for FY24 is cash generation, which should result in a meaningful reduction in net debt by the year end. Whilst the broader market outlook remains uncertain in the near term, we are encouraged by recent developments in Affordable housing (increase in Scottish Government Affordable Housing Investment Benchmarks) and remain confident in the Group’s long term growth prospects, which are underpinned by the large land bank and a very strong market position (top three builder in Scotland).

As of 31st May, the Group had 6,712 owned plots and strategic options over a further 3,255 acres (equivalent of a further 33,000 plots). The gross development of the owned landbank is c.£1.9bn, providing firm underpinning for long term shareholder value. We recently initiated coverage (An undervalued, high quality growth story) and continue to see scope for a material re-rating of the shares. Our Fair Value / share is 110p, based on an undemanding rating of 0.9x Price/ Book.

Link to full research report & audio summary:

[wskill] 20/9/2023 12:29

Oh well should have waited before buying will give it a week or two before averaging down, now inflation is on a downward track interest rate cuts might not be far behind.

[aldriglikvid] 06/9/2023 09:38

July 2023 - "An undervalued, high quality growth story"
Link: hxxps://www.docdroid.net/9Vxp94v/spring1-pdf

August 2023: "Distinctive model in growth market"
Link: hxxps://www.docdroid.net/7Hk8wPO/spring2-pdf

As most of you probably know, Warren Buffets only net purchase the last quarter was three (3) different house-builders. Should you buy it now, trading at multi-year lows and sentiment at peak-fear? Or should we wait until the market recovers fully? Absolute no-brainer.

In short:
£65m mcap
~£16m in profit before tax this year
~18m in profit before tax next year

Over +15 000 plots on the balance sheet. On the balance sheet each plot is valued below £8k. However, Springfield occasionally sell plots themselves at +£80k a plot. Furthermore, use any available real estate portal and let me know if you can find wholly owned land at £8k a plot.

Debt is optically high because it's not bank debt in that sense, but recourse to a seller over 5 years (and based on actual sold plots, and can be deterred).

What are we looking at, 1 or 2 more interest increases? Tops. Housing demand isn't going anywhere.

I increased my position today at 60p.

[aldriglikvid] 05/9/2023 17:54

hxxps://fortune.com/2023/09/05/housing-market-lack-of-inventory-good-for-homebuilders-home-prices-kb-homes-ceo-says/

This is applicable for Springfield as well.

[aldriglikvid] 04/9/2023 08:44

Fully agree with your take! Also interesting to note that Goldman Sachs this morning said that ECB probably made their final rate increase. Irrespective if it's one, or no more, in the pipeline; we're near or at the absolute top of rate increases for this cycle. Only one way to go from here.

[wskill] 04/9/2023 08:18

Managed to get a few more this morning to add to Fridays buy not too easy to buy SPR and its not huge amounts I was after .
Yes I did also see it was interest free the £35.8m read a bit more at the weekend and maybe its going to be a little weaker the housing market over the next few years,so even with a weak market SPR looks well placed so am adding but WTFDIK I have been wrong before.

[wskill] 01/9/2023 09:42

Yes I saw that on the last transaction the £35.8m is payable over 5 years when plots are sold min £7.7m per year can also be deffer ed for 12 months, looks as is the final £6.5m to tulloch will have been paid recently .

[aldriglikvid] 01/9/2023 07:53

Lot's of confusion here: a sizeable part of that "debt" is close to 0 interest and payment to the seller to settle recent m&a's. It's conditioned by sold houses and are thus highly favourable for Springfield.

On top of that, the interest coverage of this behemoth is unreal. Do you guys even look at the numbers? They are producing 17-20m ebit this year, and next year. Annually.

[ssahoy18] 01/9/2023 07:42

arent you worried about the bank? comes due in a bit over a year, theyll need to generate lots of cash to stave the jackals off, no way theyre getting it renewed on the same terms if the enviornemnt is still like this

[wskill] 01/9/2023 07:25

Will check over the weekend how many plots the 2 latest brought to the table,interesting though if borrowings are less than plot values it could be a decent investment even in a falling house price environment.

[aldriglikvid] 01/9/2023 05:53

Immaterial amount of new plots, compared to the sizeable old landbank - valued close to zero at the balance sheet. This is one of the largest bargains out there. And yes, 2023 will be weak - but who doesn't think that? That's consensus.

[wskill] 31/8/2023 13:22

Landbank for the 2 acquisitions would surely be valued about present day sale values although not sure how many plots they had?

[aldriglikvid] 31/8/2023 12:26

Landbank sits at ca. 8-9k/plot on the balance sheet. If you look at public real estate portals, you can't buy plots in Scotland below 50k. When Springfield sold plots themselves, throughout this year and last year, it was sold at ca. 80k a piece.

[value viper] 28/8/2023 20:55

What are their tangible assets / land bank worth do we think ? Suspect this is a very big discount to that