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.
The cash payment of £10m reduces Springfield’s bank debt to £41m as of 31st May, well below the stated target of £55m. More significantly, Barratt infrastructure funding will materially accelerate the development of the site, whilst also eliminating Springfield’s requirement to tie up capital for the next five years, This minimises development risk to Springfield and optimises the group’s return on capital.
In addition, Zoopla’s House Price Index for April was published last week. 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.
Given today’s positive news, we increase our ED Fair Value / share 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 still looks undemanding to us.
