On track as market recovery builds momentum

Today’s interim results show that Springfield remains on track to meet FY24E expectations for both earnings and, helped by profitable land sales, debt reduction – amid gathering signs of recovery in all three of Springfield’s sectors: private sales, affordable housing and, as Scotland’s rent controls end, private rental. We maintain our FY24E and FY25E estimates but suggest our volume forecasts may be conservative. We believe the Barratt Redrow deal could highlight Springfield’s low valuation.

On track as market recovery builds momentum

Forterra’s FY23E trading update for the 12 months to 31 December guides to adjusted EBITDA ‘slightly ahead’ of its expectations despite brick volumes falling by over a third during the year. We have raised our adjusted PBT and EPS estimates for FY23E and introduced forecasts for FY24E taking our cue from the cautious tone in the outlook statement, which cites uncertainties ahead of a general election. However, we suggest Forterra’s large housebuilding customers could outperform this view.

Profit guidance raised despite sharp sales fall

Watkin Jones’s FY23 results, to 30 September, were closely aligned with guidance in its October trading update, with adjusted loss before tax slightly lower than our estimate and net cash higher. Booming demand continues to push up rents and the forward-funding market is ‘showing early signs of recovery’. The group is maintaining its guidance for FY24E and is seeking to diversify revenue and boost performance in its core markets.

FY results in-line, guidance maintained

Springfield has confirmed in its first-half trading update that it is ‘confident of meeting market expectations’ for profitability and debt reduction for the full year to May. We retain our FY24E PBT estimate and introduce forecasts for FY25E that show 26% growth in adjusted PBT and a further substantial decline in debt. We expect the Group’s recovery prospects will be supported by shortages of housing across all tenures and the major economic stimulus from the newly created Highlands freeport.

Profitability and debt reduction on track

Severfield has reiterated its FY24E guidance after delivering a 17% increase in underlying PBT despite ‘challenging’ market conditions. We retain our profitability and cash flow estimates for FY24E and FY25E, with higher margin assumptions offsetting lower revenue projections. In our view, the long-term outlook continues to be underpinned by new markets, such as datacentres and nuclear work – plus a recent revival in London office work – with further growth likely from the group’s expansion in the EU and India.

Guidance reiterated after H1 profits increase

Forterra has indicated that recent industry-wide data showing declines in brick deliveries as a result of lower housebuilding volumes is likely to impact its expected FY23 volumes, leading the group to moderate current year guidance for revenue and PBT. Forterra has responded by outlining further steps to align production with demand, but notes that heightened political focus on increasing housing supply reinforces its long-term confidence.

Housebuilding slowdown dampens demand

Watkin Jones’s FY23E year-end trading update is broadly in line with our expectations, albeit with slightly higher costs than previously signalled but significantly better net cash and no change to the remedial works provision. Encouragingly, guidance for FY24E is unchanged, with progress in forward sales of student and private assets to institutional investors. Data from both student and private rental markets continues to show huge under-supply.

FY23E outlook dips slightly; FY24E unchanged

Springfield’s FY results to 31 May were in line with its July update guidance, a resilient performance amid challenges, in our view. Following the update, we stated we would review our FY24E estimates in light of guidance at the results. This remains cautious and the Group is now focusing squarely on cutting debt by realising value from its quality landbank. We do, however, believe there could be upside from a revival in affordable housing.

Focused on cutting debt in uncertain market

We are maintaining our forecasts for FY24E and beyond after this morning’s AGM statement from Severfield, which confirms that trading in the first five months has been in line with the group’s expectations, aided by its strong balance sheet. This is despite more challenging conditions in recent months due to building cost inflation, while the long-term outlook continues to be underpinned by new markets, such as datacentres and ‘giga-factories’, and the group’s expansion in the EU and India.

FY outlook on track amid ‘positive’ markets

Forterra’s first-half results to June and FY23E guidance were largely outlined in its 11 July trading update. The outlook for FY24E remains uncertain; but even with no improvement in housebuilding volumes, the group believes profitability could be supported by its own initiatives and a lower overhang of bricks. We suspect, however, that the underlying market could improve.

Resilient H1, scope for ongoing improvements

Watkin Jones has issued new guidance for FY23E, recognising ‘a greater degree of risk’ regarding anticipated forward-funding transactions completing by the 30 September year-end, with lower profitability also expected for FY24E, while it has identified other impairments and charges. We have downgraded our estimates accordingly. Also, CEO Richard Simpson has stepped down and CIO Alex Pease has taken the role on an interim basis.

Transaction risks cloud current outlook

Springfield’s FY23E period-end trading update confirms that profits will be in line with expectations despite challenging UK economic conditions and specific headwinds in the affordable housing and private rental sectors in Scotland. However, the group has cautioned on the near-term outlook in the private sales market. For now, we maintain our FY24E forecasts until greater visibility emerges at the September results on the private market and, possibly, more supportive policy on affordable housing.