Springfield Properties (SPR) 

Springfield has entered into a strategic collaboration with Barratt for the development of the Group’s Durieshill site. Springfield and Barratt will work together to develop this new, sustainable 3,000 home village within commuting distance of Edinburgh and Glasgow. Barratt has made a cash payment of £10m to Springfield and will, in consideration for half the land at Durieshill, provide and fund the infrastructure development for the entire site over the next five years. This is an innovative arrangement with a first-rate partner that will de-risk and accelerate the development of Durieshill. We expect today’s news to be very well received and increase our Fair Value / share to 140p (from 130p), based on sector average multiples. 

Scotland’s largest detailed planning application for new housing 

Spanning nearly 600 acres, Durieshill is one of the largest detailed planning applications for housing development to be approved in Scotland to date, with a Gross Development Value of c. £776m. 

Accelerating and de-risking one of Springfield’s largest developments 

Barratt has made a cash payment of £10m to Springfield for the profitable sale of the initial 34 acres of land, reducing Springfield’s bank debt to £41m as of 31st May, well below the stated target of £55m. More significantly, Barratt will, in consideration for half the land at Durieshill, provide and fund the infrastructure development for the entire site over the next five years. This will materially accelerate the development of the site, whilst also eliminating Springfield’s requirement to tie up capital for the next five years, minimising development risk and optimising the Group’s return on capital. 

Market indicators supportive, particularly in Scotland 

Zoopla’s House Price Index for April was published last week (30th May). On their measurement, house price inflation was -0.1% for the UK, but with regional variations. They highlight 1.4% price growth in Scotland in contrast with negative inflation in London and the South of England. 

Fair Value estimate increases to 140p 

Given today’s positive news, which de-risks and accelerates the development of Durieshill with an excellent partner, we increase our ED Fair Value to 140p (from 130p). This is based on sector average ratings (FY’24 P/E of 17.5x and P/Book of 1.0x) and looks undemanding to us, despite being 50% higher than the current share price.

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