Springfield Properties Share Discussion Threads

[wskill] 01/11/2023 10:55

Good to see directors are still awarding themselves shares not too sure why maybe the top of market purchase of building companies well done chaps on that or even, the need to stop paying dividends another pat on the back there then there is the selling off building plots at any price they can get ,

Surely gentlemen this is unwarranted your salaries are not small and are more than enough for your very poor efforts in management of this company .

[gn100] 27/10/2023 09:25

Hi CJohn - What I said above is pretty well the summary of the IC article. From my position I am a holder of several UK HBs and SPR. Like any other long-term holder I am underwater on all of them but I will not be selling as I fully understand the cyclic nature of these Cos but SPR is definitely the weakest because of it's balance sheet. However they are taking the right steps to rectify this among them the non-payment of a divi which demonstrates their resolve in this matter.

Regarding the timing of their land purchases - hindsight is a wonderful thing, as I often find out with my share purchases. I will not be selling (unless the story seriously changes). One can always take a little comfort with the knowledge that the UK is a small landmass with a green belt policy and an increasing population. In the long term they have to be housed somewhere, plus the already mentioned need of politicians to buy votes.

[cjohn] 27/10/2023 08:51

Hi GN100, have a look at the Going Concern section of the latest report.

They go into some detail about downside scenarios. And have taken the precaution of increasing the available headroom.

My feeling is that they have a viable plan to reduce gearing this coming year by a realistic amount, in what will be very trying circumstances.

There is a very fair criticism further up the thread about the timing of their acquisitions: they could maybe have paid less, if they'd waited.


BTW was unable to read anymore than the first few lines of the IC article.

Would you be prepared to provide a summary? Thanks.

[gn100] 26/10/2023 14:21

An article in yesterday's IC. For those who can't access it, the summary is that the large ones will recover in time but there is worse to come. They place great store on most of the large UK HBs as having plenty of cash and strong balance sheets which will protect them from disaster but yields may well get cut. SPR balance sheet, as they have fully admitted, is over-indebted although I take the point that they are looking to reduce.
Another unknown is what house purchase incentives Govs may use pre election to try to buy votes.



GN

[cjohn] 26/10/2023 13:16

I bought my first tranche of shares on 5th October, and another recently.

My opinion hasn't changed. Debt is too high as the Company itself accepts. And is taking steps to reduce it.

There is more risk involved with this Company than with some other housebuilders.

I also hold another couple of housebuilders one in UK, one in Spain. I have larger holdings in those companies as risk is less.

But I regard SPR as having an attractive risk/reward ratio.

[makinbuks] 19/10/2023 13:49

You seem to have changed your position from P280 on 5th Oct. Whilst I would like to buy back in I feel your purchases are a little too soon. I think 2024 calendar year is set to be pretty grim for house builders. They might need to make almost 20 such sales to clear their debt

[cjohn] 18/10/2023 18:25

Since the RNS of the land sale, I've been buying more of these. The suggestion that other land sales are to come will mean they're likely to hit their debt reduction targets.

[edmonda] 16/10/2023 13:01

"Land sale – delivering on cash generation strategy"

Springfield has announced the sale of c.9.5 acres of land for £5.2m in cash (£0.5m to be received in the coming days, £4.7m on completion). This is a profitable land sale, which is in keeping with the Group’s focus on debt reduction in an uncertain housing market. This again illustrates the value within the Group’s large landbank and discussions are ongoing with other housebuilders and affordable housing providers about a number of sites.

Springfield has one of the largest landbanks 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 - see link here: - 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 research report:

[value hound] 16/10/2023 09:06

Sale equivalent to 7.7% of net debt, but helps "pivot" in the right direction and "...a number of our sites, which we hope to complete in the near term" sounds pretty unequivocal?

[cjohn] 05/10/2023 15:44

aldriglikvid 6 Sep '23 - 10:38 - 266 of 279,

"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)."




Unfortunately, this is a misunderstanding, aldrigilkvid.

The latest balance sheet has £70.6m of bank debt AND total deferred consideration of £35m.

You should take a look at the detailed information on possible downside scenarios in the Going Concern section of the annual report. They have increased their bank facilities, because in a plausible scenario, their peak debt levels would go above £100m and they'd breach their previous headroom.

This of course accounts for the stopping of the dividend and the emphasis in recent updates on getting debt down.

My feeling is that they have done one too many acquisitions. And as a result, there's undoubtedly more risk associated with this housebuilder than many others.

[swiss paul] 21/9/2023 20:13

Good brieifng by Innes and team today

[scotches] 20/9/2023 20:21

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 17:51

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

[jonwig] 20/9/2023 17:21

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 16:57

@Jonwig, the results are out already.

[jonwig] 20/9/2023 16:30

#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 16:25

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 16:07

50% of NAV. Irresistible.

[jonwig] 20/9/2023 14:51

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

[edmonda] 20/9/2023 13:29

"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 13:29

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 10:38

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 18:54

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.