TIDMSPR
RNS Number : 9346Z
Springfield Properties PLC
20 September 2022
20 September 2022
Springfield Properties plc
("Springfield", the "Company", the "Group" or the "Springfield
Group")
Final Results and Publication of Annual Report
Springfield Properties (AIM: SPR), a leading housebuilder in
Scotland delivering private, affordable and PRS housing, announces
its final results for the year ended 31 May 2022.
Financial Summary
2022 2021 Change
GBPm GBPm
Revenue 257.1 216.7 +19%
Private housing revenue 174.5 138.6 +26%
Affordable housing
revenue 64.3 52.9 +22%
Contract housing
revenue 16.5 8.1 +104%
Other revenue 1.8 17.0 -89%
Gross margin 16.8% 17.9% * 110bps
Adj. operating profit* 22.6 19.8 +14%
Operating profit 21.5 19.1 +13%
Adj. profit before
tax* 20.8 18.5 +12%
Profit before tax 19.7 17.9 +10%
Adj. basic EPS* (p) 15.63 14.41 +9%
Basic EPS (p) 14.74 13.79 +7%
Total dividend per
share (p) 6.20 5.75 +8%
* Adjusted to exclude exceptional costs of GBP1.1m (2021:
GBP0.6m) (See the Financial Review for further detail)
Operational Summary
-- Record year with 1,242 completions and revenue growth across the business
-- Acquired Tulloch Homes, an Inverness-based housebuilder
focused on building high-quality private housing in the Scottish
Highlands, for a net consideration of GBP54.4m (being GBP77.9m less
cash acquired of GBP23.5m), of which GBP13.0m is deferred
consideration, to accelerate growth, enhance earnings and
strengthen the Group's foothold in an area of high demand
-- Private housing
o 712 private homes were completed (2021: 559), reflecting
acquisition of Tulloch Homes and organic growth
o Excellent sales performance with significant increase in the
number of homes missived or reserved due to sustained demand and
expansion of the Group
o Cost and supply chain pressures successfully managed, with
gross margin maintained when taking into account regional and
housing-type mix
o Planning application submitted for a new, large development of
up to 1,000 homes in the Edinburgh commuter belt
-- Affordable housing
o 405 affordable homes were completed (2021: 363) as the Group
delivered against its highest ever contracted order book
o Revenue and margin on affordable-only sites impacted by cost
increases relating to:
- three subcontractors going out of business
- the contribution from two large, fixed-price, long-term
contracts that had been signed in early 2020
o Temporarily paused signing of new long-term fixed price
contracts until appropriate inflationary accommodations are
introduced
o Established new partnership with Aberdeenshire Council and
joined the Supplier Network of hub South West Scotland
-- Contract housing
o In contract housing, where the Group provides development
services to third party private organisations, 125 homes were
completed (2021: 51)
o This includes delivering the Group's first private rented
sector ("PRS") housing, with Sigma Capital plc ("Sigma")
-- Planning approval received for 255 plots and 1,558 plots with
planning were received through the Tulloch Homes acquisition ; the
proportion of land bank with planning permission was 52.1% (31 May
2021: 52.4%)
-- Total land bank of 16,652 plots at year end (31 May 2021:
15,281) with Gross Development Value ("GDV") of GBP3.5bn (31 May
2021: GBP3.1bn)
-- Post period, acquired the Scottish housebuilding business of
Mactaggart & Mickel, a premium brand housebuilder with a land
bank in highly desirable locations within the Central Belt of
Scotland, expanding the Group's footprint in areas with a higher
price point; acquisition includes a timber frame factory near
Glasgow
Innes Smith, Chief Executive Officer of Springfield Properties,
commented: "T his year we achieved our highest ever annual profit
and revenue with strong results across private, affordable and
contract housing. I am pleased at how we managed the material and
supply chain pressures facing our industry so that, while not
immune, we were able to mitigate much of the impact. In keeping
with our strategy, w e significantly expand ed our business with
the acquisition s of Tulloch Homes and, post period, the Scottish
housebuilding business of Mactaggart & Mickel - two high
quality housebuilders with land in areas of strategic importance.
We also achieved a milestone with the delivery of our first housing
for the private rented sector.
"We entered the 2023 financial year delivering against a strong
order book in private housing, reflecting sustained demand for the
type of homes that we provide and the expansion of our business. We
have excellent visibility over full year private revenue forecasts
based on homes delivered, missived and reserved. While the
challenging economic backdrop will impact our affordable and PRS
housing activity in the short term as we await decisions from the
Scottish Government, we are on track to deliver another year of
revenue and profit growth overall. Moreover , the fundamentals of
the housing market in Scotland remain strong with high demand for
homes across all tenures coupled with a national shortage in
housing supply. As a result , the Board continues to look to the
future with confidence and to delivering sustainable value for all
of our stakeholders. "
Enquiries
Springfield Properties
Sandy Adam, Chairman
Innes Smith, Chief Executive Officer +44 1343 552550
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Singer Capital Markets
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Shaun Dobson, James Moat, Rachel Hayes
(Investment Banking) +44 20 7496 3000
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Gracechurch Group
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Harry Chathli, Claire Norbury +44 20 4582 3 500
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Results Presentation
Sandy Adam, Chairman, Innes Smith, Chief Executive Officer, and
Michelle Motion, Chief Financial Officer, will be holding a
presentation for analysts at 9.00am BST today at the office of
Gracechurch Group, Fourth Floor, 48 Gracechurch Street, London,
EC3V 0EJ.
The management will be presenting to retail shareholders, via a
webinar hosted by Progressive Equity, at 2.00pm BST on 27 September
2022. Investors can register their attendance for the webinar
here.
Operational Review
During the year to 31 May 2022, the Group completed 1,242 homes,
an increase of 27.6% from the 973 completions in 2021, marking the
first time Springfield has delivered over 1,000 homes in a single
year. The Group also delivered its first PRS housing, which further
diversifies its revenue streams, and continued its strategic
expansion with the acquisition of Tulloch Homes during the year
and, post year-end, of the Scottish housebuilding business of
Mactaggart & Mickel.
The cost-of-living crisis is affecting every business and, as
with the rest of the housebuilding industry, the Group continued to
face material and labour supply constraints and inflationary cost
pressures. In addition, three of the Group's subcontractors went
out of business and, while Springfield was able to source materials
and labour elsewhere, it was at a higher price and delayed some of
the Group's build programmes. This particularly affected recognised
revenue and gross margin in affordable housing, which was also
impacted by the contribution from two large construction contracts
that had been signed in early 2020 and, accordingly, modelled on
much lower estimated costs.
However, Springfield was largely successful in the management of
the material and labour supply challenges and was able to mitigate
much of the impact during the year. As a result, in private
housing, gross margin was maintained taking into account regional
and housing mix. The high proportion of fixed-price contracts for
materials that Springfield had in place during the year as well as
house price inflation served to mitigate the impact of increased
costs in private housing. Similarly, its strong, established
relationships with subcontractors, together with a large directly
employed workforce, helped the Group maintain its labour force.
Springfield is proud that it has been recognised by both
customers and the industry and, in particular, was delighted to be
awarded Housebuilder of the Year at the Scottish Home Awards
2022.
Land Bank
During the year the Group significantly expanded its large,
high-quality land bank with the acquisition of Tulloch Homes,
comprising 1,791 plots of which 91% were owned and paid for, and
87% had planning permission. This particularly strengthened the
Group's presence in the Highlands region of Scotland, in and around
Inverness.
At 31 May 2022, the Group had 51 active developments (31 May
2021: 45 active developments) and during the year:
-- 15 developments were completed;
-- 23 new active developments were added to the land bank (of
which 11 were under Tulloch Homes);
-- planning was granted on 255 plots on five developments and
the Group received 1,558 plots with planning through the Tulloch
Homes acquisition, with the total consented land bank increasing to
8,680 plots, representing 52.1%, at 31 May 2022 (31 May 2021: 8,010
plots and 52.4%); and
-- the land bank consisted of 16,652 plots (31 May 2021: 15,281).
Post year-end, the Group's land bank was further strengthened
with the acquisition of the Scottish housebuilding business of
Mactaggart & Mickel, comprising a total of 17 sites, 11 of
which will transfer to Springfield as homes are sold. In addition,
the Group has established a strategic alliance with an agreement
that gives Springfield opportunities for future purchases of sites
from Mactaggart & Mickel's remaining land bank of approximately
2,300 acres across Scotland.
The Group's substantial land bank across Scotland also provides
opportunities for land sales. With demand expressed for the popular
locations and quality sites in the Group's control, Springfield is
confident that the Group's previous experience of selling or
swapping elements of its strategic land bank could be repeated.
Private Housing
The number of private home completions increased by 27.4% to 712
(2021: 559). This reflects growth across most of the Group's brands
and regions as well as the contribution from Tulloch Homes
following the acquisition. Business remained buoyant, with an
increase in the number of homes missived or reserved at 31 May 2022
compared with 31 May 2021. The Group currently has homes delivered,
missived or reserved representing approximately 75-80% of forecast
private housing revenue for 2023, in line with the visibility at
the same point last year.
The average selling price ("ASP") for private housing was
GBP245k (2021: GBP248k) reflecting the regional and housing-type
mix, with a larger proportion of revenue and completions in regions
of Scotland that typically have lower house prices. On an
underlying basis , the Group experienced a general increase in
sales prices , which offset cost price inflation to ensure gross
margin was maintained .
At 31 May 2022, Springfield was active on 31 private housing
developments (31 May 2021: 24), with 15 active developments added
during the year and 8 developments completed. In total, as at 31
May 2022, the private housing land bank consisted of 11,565 plots
on 74 developments (31 May 2021: 10,426 plots on 56
developments).
Planning consent was granted for 240 plots on 4 developments for
private housing, and the Group gained 1,281 private plots with
planning through the acquisition of Tulloch Homes. As at 31 May
2022, 52.2% (6,030 plots) of private housing plots had planning
consent (31 May 2021: 48.7%), with 24.7% going through the planning
process and 23.1% at the pre-planning stage.
In particular, during the year the Group submitted a planning
application for a new, large development of up to 1,000 homes. This
development is to be built on land that was purchased in the
previous year in Midlothian in the Edinburgh commuter belt. The
proposed development is designed as a new neighbourhood with a
distinct identity which will, following the Scottish Government's
20-minute neighbourhood model, integrate into existing settlements
where residents can easily access high quality services and
amenities.
Village developments
Springfield Villages are standalone developments that include
infrastructure and neighbourhood amenities. Each Village is
designed with the potential to deliver up to approximately 3,000
homes, with ample green space and community facilities. They
primarily offer private housing, but also include affordable
housing and, beginning with Bertha Park, include PRS housing. The
Group has three Villages that are already home to growing
communities; one Village that has received planning permission and
with the Section 75 agreement to follow; and a further Village
going through the planning process.
Total completions at Springfield Villages - including private,
affordable and contract housing - increased. In private housing,
there was an increase in completions at Dykes of Gray and also at
Bertha Park, which is delivered under contract. At Elgin South
(formerly 'Linkwood') Village, there were fewer completions than in
the previous year, which reflects the phasing of homes being made
available for sale.
There was also a continued expansion of amenities and
strengthening of community engagement at the Village developments.
This includes the hosting of community events, the establishment of
a school bus route and a public service through Dykes of Gray, and
Bertha Park and Dykes of Gray each gaining their own post box,
being symbolic of a 'place' being created. In addition, Bertha Park
was recognised as Development of the Year at the Scottish Home
Awards.
Affordable Housing
During the year under review, the Group achieved its highest
ever affordable housing revenue. The number of affordable home
completions increased by 11.6% to 405 (2021: 363). Average selling
price increased to GBP159k (2021: GBP146k) as a result of a change
in housing mix. However, revenue and margin in affordable housing
were impacted by price inflation. This was partly due to key
subcontractors going out of business, which necessitated the Group
finding replacement subcontractors that led to some delays and
higher costs . In particular, margin suffered from the delivery of
two large, long-term contracts that had been signed in early 2020
and was therefore based on expectations of lower material and
labour costs.
In affordable housing, the Group receives a fixed price for the
land sale and design and build contract . Revenue is recognised
over time as development progresses. The amount of revenue
recognised depends on stage of completion, which is based on the
development costs incurred as a proportion of the total expected
development costs. Affordable housing provides strong cash flow
dynamics with high visibility and low capital exposure. However,
revenue recognition and gross margin is impacted when costs
increase . Post year-end, the Group has undertaken a thorough
review of all existing contracted projects to reassess the
projected costs to completion, and the Group has taken a prudent
approach to this reassessment. As a result of this reassessment,
the margin and revenue recognised on some affordable contracts
during the year were lower than previously expected. The delivery
of the large contracts that Springfield signed in early 2020 are
now nearing completion.
Springfield has also taken the pragmatic decision to temporarily
pause entering into new large, long-term affordable contracts in
order to protect its margins. However, the longer-term fundamentals
of affordable housing remain strong and the Group expects to
recommence signing contracts when more normal market conditions
resume and following the Scottish Government's next affordable
housing investment benchmark review to reflect inflation, which is
expected to occur in November 2022. As a result of the action taken
in affordable housing, the Group is well positioned for when the
market normalises.
The number of active affordable housing developments was 18 at
31 May 2022 (31 May 2021: 19), with 8 active developments added
during the year and 9 developments completed. As at 31 May 2022,
the total affordable housing land bank consisted of 4,412 plots on
60 developments (31 May 2021: 4,055 plots on 48 developments).
Springfield expanded its partnership network with the signing of
its first contract with Aberdeenshire Council, for 38 homes at
Banff, which, as a relatively short-term project, is less exposed
to inflationary pressure. The Group also joined the Supplier
Network of hub South West Scotland, a public-private partnership
for the construction of community infrastructure, with a view to
providing affordable housing in a region spanning six local
authority areas in South West Scotland. Whilst Springfield is being
cautious about entering new projects, the expansion of its
partnership network strengthens its prospects for when normal
affordable housing activity resumes.
The Group continued to make progress under its local authority
framework agreement with Moray Council for 10 affordable-only
developments. The handover of two developments was completed during
the year, bringing the total number delivered under this agreement
to five.
As at 31 May 2022, 44.8% (1,975 plots) of affordable housing
plots had planning (31 May 2021: 52.7%), with 28.6% of plots going
through the planning process and 26.6% at the pre-planning
stage.
Contract Housing
In contract housing, the Group provides development services to
third party private organisations (compared with affordable housing
where the Group's services are delivered to local authorities,
housing associations or other public bodies). To date, contract
housing delivery has consisted of services provided to Bertha Park
Limited, the developer of the Bertha Park Village, under a
framework agreement. Springfield performs development services and
receives revenue based on costs incurred plus a fixed mark up. At
Bertha Park, the Group is delivering private, affordable and PRS
housing. The Group has reported contract housing revenue this year
as a separate revenue stream because of the increased materiality
of revenue now being generated from the provision of development
services to Bertha Park Limited, particularly due to beginning the
delivery of PRS housing.
At 31 May 2022, the contract housing land bank with planning
consent consisted of 675 plots (31 May 2021: 742). The 125 homes
completed during the year (2021: 51) comprised 49 private homes, 31
affordable homes and 45 PRS homes at Bertha Park Village. The Group
also commenced construction on the first Mid-Market Rent housing to
be offered at Bertha Park, which is a form of affordable housing
for those in work where housing associations utilise grants to
enable market rents to be discounted.
A key milestone was achieved with the delivery of Springfield's
first PRS housing, with Sigma, a high-quality PRS provider
specialising in suburban, family homes. The Group is delivering 75
purpose-built homes for families to rent privately at Bertha Park,
which, following handover, will be owned, let and managed by Sigma.
The delivery of PRS housing is expected to increase the build out
rate for the Village and underscores the Group's commitment to
develop mixed-tenure Villages that meet everyone's housing
needs.
Notwithstanding delivery of the contract at Bertha Park, the
Group's strategy to expand its PRS activity with Sigma is currently
on hold due to emergency legislation that is being introduced in
Scotland, as announced earlier this month, to protect tenants by
freezing rents and imposing a moratorium on evictions until at
least 31 March 2023. This is a temporary measure designed to
support families facing fuel poverty this winter, and Springfield
continues to believe that the delivery of PRS housing offers a
viable revenue stream in the longer term. Whilst this does not
impact the Group's existing agreement to deliver 75 PRS homes, any
decisions on the expansion of this activity will wait until the
policy environment is clearer.
Acquisitions
During the year, Springfield continued to execute on its stated
strategy of expanding via acquisition and into new territories to
accelerate growth. In December 2021, Springfield acquired Tulloch
Homes, an Inverness-based housebuilder focused on building
high-quality private housing in the Scottish Highlands, for a net
consideration of GBP54.4m (being GBP77.9m less cash acquired of
GBP23.5m), of which GBP13.0m is deferred consideration. Tulloch
Homes has performed well since the acquisition and has met all of
the targets and expectations that were set at the time of
purchase.
Tulloch Homes is a profitable, cash generative and well-run
housebuilder with significant land ownership in the Scottish
Highlands, in and around Inverness. The acquisition expanded
Springfield's land bank in an area of high and growing demand where
the Group has been strategically building a presence over the last
few years. The Group also gained a strong, established management
team and the acquisition has reinforced its supply chain
capabilities with access to labour and subcontractors in the local
area.
Since year-end, as announced on 22 June 2022, Springfield
acquired the Scottish housebuilding business of Mactaggart &
Mickel for a total consideration of GBP46.3m. Mactaggart &
Mickel is a premium brand housebuilder that has been delivering
high-quality housing across the central belt of Scotland for almost
100 years. Under the terms of the acquisition, the Group acquired
six live private and affordable sites with work in progress, and
acquired a brand licence to build homes as Mactaggart & Mickel
on a further 11 private and affordable sites, which will transfer
to Springfield as homes are sold in line with the payments of the
deferred consideration. The acquisition also included Timber
Systems, a timber frame factory near Glasgow. The addition of a
second timber frame factory, which complements Springfield's
existing facility in Elgin, will secure kit supply and increase
capacity for future growth while further reducing the Group's
carbon footprint.
Financial Review
For the year ended 31 May 2022, revenue increased by 18.6% to
GBP257.1m (2021: GBP216.7m). This reflected strong growth across
private, affordable and contract housing as well as the results
including a six-month contribution from Tulloch Homes, which was
acquired during the year.
Revenue 2022 2021 Change
GBP'000 GBP'000
Private housing 174,442 138,646 +25.9%
--------- --------- --------
Affordable housing 64,251 52,939 +21.4%
--------- --------- --------
Contract housing 16,494 8,142 +102.6%
--------- --------- --------
Other* 1,908 16,965 -88.8%
--------- --------- --------
TOTAL 257,095 216,692 +18.6%
--------- --------- --------
*Primarily land sales
Private housing remained the largest contributor to Group
revenue, accounting for 67.9% (2021: 64.0%) of total sales, and
increased by GBP35.9m to GBP174.5m. This significant growth was
driven mainly by the contribution from the Tulloch Homes
acquisition as well as increased sales on an organic basis.
Affordable housing achieved its highest ever revenue as the
Group delivered the substantial backlog of contracts that it had
signed towards the end of the prior year with revenue increasing to
GBP64.3m (2021: GBP52.9m). This was, however, slightly lower than
originally anticipated as a result of cost inflation - with
recognised revenue based on the stage of completion driven by
development costs incurred as a proportion of the total expected
development costs.
Starting from this year, the Group is presenting contract
housing separately owing to the increased significance of revenue
now being generated on this basis from services to Bertha Park
Limited, particularly due to the delivery of PRS housing. For the
prior year, the relevant amounts have been reclassified into
contract housing to allow a like-for-like comparison, with GBP5.9m
having been moved from private housing and GBP2.2m from affordable
housing.
There was a reduction in other revenue, which primarily consists
of land sales, owing to the two significant strategic land sales
that the Group completed in the prior year.
Gross profit increased by 11.1% to GBP43.1m (2021: GBP38.8m) due
to the significant growth in revenues. Gross margin was 16.8%
(2021: 17.9%), with margins largely maintained when excluding the
impact of regional or housing mix. There was an impact on gross
margin in affordable housing (where the Group works under
fixed-price contracts) due to the contribution to revenue from two
large, long-term contracts that had been signed in early 2020, as
well as from three subcontractors going out of business, which
necessitated finding replacements that were at a higher cost.
Administrative expenses, excluding exceptional items, were
GBP20.9m (2021: GBP19.4m). This reflects cost savings achieved from
the closure of the Group's Livingston office, which was offset by
the additional overheads for the Tulloch Homes business.
Accordingly, administrative expenses, excluding exceptional items,
as a proportion of revenue was 8.1% in 2022 compared with 9.0% in
2021.
Exceptional items were GBP1.1m (2021: GBP0.6m). This mainly
relates to the cost of the Tulloch Homes acquisition.
Operating profit grew by 12.6% to GBP21.5m (2021: GBP19.1m).
Excluding exceptional items, operating profit increased by 14.1% to
GBP22.6m (2021: GBP19.8m). Adjusted profit before tax and
exceptional items increased by 12.4% to GBP20.8m (2021: GBP18.5m)
and statutory profit before tax by 10.1% to GBP19.7m (2021:
GBP17.9m).
Basic earnings per share (excluding exceptional items) increased
by 8.5% to 15.63 pence (2021: 14.41 pence). Statutory basic
earnings per share grew by 6.9% to 14.74 pence (2021: 13.79 pence).
Return on capital employed (profit before interest and taxation
divided by average capital employed, which is calculated as the
average of 2022 and 2021 total assets less current liabilities) was
13.6% (2021: 14.3%).
During the year, on 1 December 2021, the Group acquired Tulloch
Homes for a total consideration of GBP77.9m less cash acquired of
GBP23.5m being a net consideration of GBP54.4m, which comprised an
initial consideration of GBP41.4m and deferred consideration of
GBP13.0m.
The initial consideration of GBP41.4m was funded through an
equity raising and an increased bank revolving credit facility. In
December 2021, the Group raised gross proceeds of GBP22.0m from the
issue of 15,714,286 new ordinary shares at a placing price of 140
pence per share. The Group's revolving credit facility with the
Bank of Scotland of GBP64.5m, which was put in place for three
years in September 2021 with an expiry date in January 2025, was
extended in November 2021 to GBP87.5m to help part fund the Tulloch
acquisition on similar terms to the existing facility.
Net debt at 31 May 2022 was GBP38.1m compared to GBP20.8m at 31
May 2021. This increase primarily reflects the cost of funding the
Tulloch Homes acquisition. Net debt to EBITDA was 1.6 times (2021:
1.0 times).
Customer Satisfaction
Springfield strives for excellence in customer service through
all stages of the house buying process and the quality of the
houses that the Group builds. Springfield is proud to offer
customers a high level of specification as standard as well as
significant choice. This year the Group achieved an overall
customer satisfaction rating of 93% customer satisfaction (2021:
92%) and an increased net promoter score of 59 (2021: 52). The
Group strives to ensure that 100% of its customers are happy with
their homes and feel well looked after and, within its new ESG
strategy, the Group has set this as its target to ensure customer
satisfaction increases year on year.
Quality management systems have continued to be a focus as the
Group aims to ensure continuous improvement and drive up standards
across its brands. ISO 9001 was recertified within the Springfield
brand following an in-period audit and plans are in place for these
quality processes to be rolled out across Group operations.
Springfield welcomed the publication, during the year, of the
New Homes Quality Board Code of Practice ("NHQB Code"), which aims
to improve consumer protection covering important aspects of the
new home construction, inspection and sales process. Post year-end,
in July, the Group registered with the New Homes Quality Board -
well ahead of the December 2022 deadline.
Environment & People - ESG
Springfield has always placed great importance on behaving
responsibly and instilling sustainability across its operations.
This time last year the Group committed to formalising its activity
under the broad spectrum of 'sustainability' in an ESG strategy and
the Group is very pleased to be launching that alongside these
annual results. Within Springfield's strategy entitled 'Environment
and People', the Group has identified areas of focus under
'Environment', 'Social' and under 'Governance' that matter to its
stakeholders and customers and are critical to its future success.
For each area, the Group has set new goals and committed to
measuring performance to ensure that the Group continually
improves.
This includes a commitment to achieving net zero by 2045, in
line with the Scottish Government aspirations, and Springfield will
aim to achieve this sooner. The Group is well established on the
route map to net zero with timber frame construction already being
used in over 90% of homes and vast experience gained in delivering
alternative energy technologies, such as air-source heating, with
over 50 developments having been completed, or being under
construction, without gas. The Group now has two off-site timber
frame factories and the timber used is sourced responsibly and
accredited by the Forest Stewardship Council or the Programme for
the Endorsement of Forest Certification.
During the year, the first electric van was introduced for
Springfield's timber kit factory, as part of the phasing in of a
fully electric fleet; all company cars are now zero emissions; and
the Group began providing the option of zero emission electric
vehicles for staff under the car allowance scheme. Springfield has
also increased its support for communities with the appointment of
a full-time Community Engagement Co-ordinator. This resource will
facilitate stronger engagement during the planning process and
support the creation of new communities within its larger
developments, in particular the Springfield Villages.
Markets
The demand for the type of housing that the Group offers remains
strong. Across its brands, Springfield provides an excellent
product in highly desirable areas. Families continue to be
particularly attracted to spacious homes with added room to work
and entertain and with private gardens and plenty of access to
green space. There also remains an undersupply of housing in
Scotland across all tenures, which can only be satisfied through
the building of new homes.
In private housing, the Group's core business, the demand
continues to be supported by a competitive mortgage market. New
build homes are increasingly attractive to lenders who are keen to
support the delivery of higher energy efficient homes as part of
their own contribution towards the road to net zero. Notably, the
Group has seen national lenders offer discounted interest rates for
higher energy performance and higher loan to value mortgages on new
builds to make greener homes more attainable for first time buyers,
reflecting the attractiveness of the significantly lower running
costs of new build homes, particularly given the current high
energy prices .
Key differences between the Scottish legal system and the rest
of the UK continue to result in the Group having strong visibility
over the private homes that it delivers. The Scottish missive
system, which ensures that customers are contracted into the
purchase much earlier in the build programme, supports supply chain
management, reduces risk and also enables buyers to customise their
homes at an early stage in the build process.
In affordable and PRS housing, whilst demand remains extremely
strong with 178,000 applicants on Local Authority housing lists,
the inflationary and regulatory environments are impacting the
ability of the industry to deliver new homes for these tenures. The
level of price inflation for materials and labour being experienced
poses challenges for the Group's affordable business given the
fixed price nature of its contracts. The Group has reassessed the
costs to completion for its ongoing affordable housing projects,
taking a prudent approach to anticipated cost changes. The Group
has also paused entering new, large, long-term affordable-only
contracts until conditions normalise.
In addition, the Scottish Government's 'Programme for
Government' announced earlier this month the introduction of
emergency legislation to protect tenants, thereby freezing rents
and imposing a moratorium on evictions until at least 31 March
2023, which has put on hold the Group's strategy to expand its PRS
activity with Sigma at this time. However, this regulatory change
is a temporary measure, designed to support families facing fuel
poverty this winter, and the Group believes opportunities in PRS
housing remain significant.
The Scottish Government's target to deliver 110,000 energy
efficient affordable homes by 2032 continues to provide the
long-term commitment that will allow the Group to build on its
strong partnerships with local authorities and housing
associations. In addition, an inflation-based review of the
Scottish Government's affordable housing investment benchmarks,
which determine the amount of grant available to the Group's
partners for each affordable home built , is expected to be
announced in November 2022. With a strong lobby pointing to the
current challenges and the resultant impact on housing supply in
Scotland, there is pressure on the Scottish Government to
respond.
Dividends
The Board is pleased to recommend a final dividend of 4.70 pence
per ordinary share, subject to shareholder approval at the next
Annual General Meeting, with an ex-dividend date of 3 November
2022, a record date of 4 November 2022 and a payment date of 16
December 2022. This brings the total dividend for the year,
including the interim dividend already paid, to 6.20 pence (2021:
5.75 pence).
Outlook
While the current economic environment poses certain
industry-wide challenges, the fundamentals of the housing market in
Scotland remain strong. There is an undersupply of housing across
all tenures, and demand continues for the types of homes that the
Group provides in popular locations across the country. There
continues to be good mortgage availability to support home buyers,
with a notable preference from lenders for high energy performance
that is achieved from new build homes. The Scottish Government
maintains its commitment to investing in the delivery of more
affordable homes and the Group's high-quality land bank lends
itself very well to the emerging suburban build-to-rent sector.
Springfield entered the 2023 financial year with a strong order
book in private housing. The Group has excellent visibility over
full year private housing revenue, with homes already delivered,
missived and reserved representing approximately 75-80% of 2023
private housing revenue forecasts. In addition, the Group will
benefit from the full year contribution of Tulloch Homes and
Mactaggart & Mickel. Accordingly, the Group is on track to
deliver significant growth in private housing in 2023, reflecting
sustained demand and the expansion of the business.
In affordable housing, to protect margins, the Group has paused
the signing of new long-term fixed price contracts until
appropriate inflationary accommodations are introduced. The Group
has also undertaken a thorough review of all existing projects and
reassessed costs to completion. Accordingly, the Group is well
positioned for when market conditions normalise in affordable
housing.
In addition, the temporary rent freeze announced by the Scottish
Government has put on hold the Group's strategy to expand its PRS
activity with Sigma at this time. Consequently, the Group expects
contract housing (PRS) revenue to be lower in 2023. However, the
Group expects to be able to mitigate part of this reduction through
the sale of some land that had been allocated for PRS.
Overall, the Group expects to deliver significant growth for the
year to 31 May 2023, with record revenue driven by the contribution
from private housing. Accordingly, with the solid foundations that
the Group has in place, the Board remains confident in
Springfield's prospects and in its ability to deliver shareholder
value, and continues to look to the future with confidence.
Publication of Annual Report
The Company's annual report and accounts for the year ended 31
May 2022 are being sent to shareholders today and have been made
available on the 'Financial Results and Reports' page of the
Company's website: www.thespringfieldgroup.co.uk
COnsolidated PROFIT AND LOSS ACCOUNT
FOR THE YEARED 31 May 2022
2022 2021
Note GBP000 GBP000
Revenue 3 257,095 216,692
Cost of sales (213,960) (177,895)
---------- ----------
Gross profit 43,135 38,797
Administrative expenses before
exceptional items (20,950) (19,422)
Exceptional items 5 (1,100) (622)
---------- ----------
Total administrative expenses (22,050) (20,044)
Other operating income 396 375
Operating profit 21,481 19,128
Finance income 134 367
Finance costs (1,889) (1,607)
Profit before taxation 19,726 17,888
Taxation 4 (3,652) (4,178)
---------- ----------
Profit for the year and total
comprehensive income 16,074 13,710
========== ==========
Profit for the year and total
comprehensive income is attributable
to:
Owners of the parent company 16,074 13,710
16,074 13,710
========== ==========
Earnings per share
Basic earnings on profit for
the year 7 14.74p 13.79p
Diluted earnings on profit
for the year 7 14.37p 13.55p
Adjusted earnings per share
Basic earnings on profit for
the year 7 15.63p 14.41p
Diluted earnings on profit
for the year 7 15.24p 14.16p
Adjusted earnings per share is a non-GAAP measure.
The Group has no items of other comprehensive income.
COnsolidated BALANCE SHEET
FOR THE YEARED 31 May 2022
2022 2021
Non-current assets Note GBP000 GBP000
Property, plant and equipment 5,799 4,539
Intangible assets 5,758 1,649
Investments 520 -
Deferred taxation 2,133 539
Accounts receivables 5,641 5,411
-------- ----------
19,851 12,138
-------- ----------
Current assets
Inventories 230,095 156,774
Trade and other receivables 21,363 23,683
Cash and cash equivalents 16,390 15,826
-------- ----------
267,848 196,283
-------- ----------
Total assets 287,699 208,421
Current liabilities
Trade and other payables 68,513 51,646
Short-term bank borrowings - 34,000
Deferred consideration 10 6,119 -
Short-term obligations under
lease liabilities 1,284 760
Provisions 821 -
Corporation tax 273 901
-------- ----------
77,010 87,307
-------- ----------
Non-current liabilities
Long-term bank borrowings 50,486 -
Long-term obligations under lease
liabilities 2,670 1,854
Deferred taxation 3,726 2,920
Deferred consideration 10 6,455 -
Contingent consideration 11 2,000 3,900
Provisions 12 1,825 1,210
-------- ----------
67,162 9,884
-------- ----------
Total liabilities 144,172 97,191
-------- ----------
Net assets 143,527 111,230
======== ==========
Equity
Share capital 13 148 128
Share premium 13 78,744 56,761
Retained earnings 64,635 54,341
-------- ----------
Equity attributable to owners
of the parent company 143,527 111,230
======== ==========
consolidated Statement of Changes in Equity
FOR THE YEARED 31 MAY 2022
Share capital Share premium Retained Total
earnings
Note GBP000 GBP000 GBP000 GBP000
1 June 2020 122 52,330 43,412 95,864
Share issue 6 4,431 - 4,437
Total comprehensive
income for the
year - - 13,710 13,710
Share-based payments - - 493 493
Dividends 6 - - (3,274) (3,274)
-------------- -------------- ---------- --------
31 May 2021 128 56,761 54,341 111,230
Share issue 13 20 21,983 - 22,003
Total comprehensive
income for the
year - - 16,074 16,074
Share-based payments - - 554 554
Dividends 6 - - (6,334) (6,334)
-------------- -------------- ---------- --------
31 May 2022 148 78,744 64,635 143,527
============== ============== ========== ========
The share capital account records the nominal value of shares
issued.
The share premium account records the amount above the nominal
value received for shares issued, less share issue costs.
Retained earnings represents accumulated profits less losses,
and distributions. Retained earnings also includes share-based
payments.
Consolidated Statement of Cash Flows
year to 31 May 2022
2022 2021
Cash flows generated from operations GBP000 GBP000
Profit for the year 16,074 13,710
Adjusted for:
Exceptional items 1,100 622
Taxation charged 3,652 4,178
Finance costs 1,889 1,607
Finance income (134) (367)
--------- ---------
Adjusted operating profit before working
capital movement 22,581 19,750
Exceptional items (1,100) (622)
Gain on disposal of tangible fixed assets (187) (148)
Share based payments 554 493
Non-cash movement 100 81
Amortisation of intangible fixed assets 161 61
Depreciation and impairment of tangible
fixed assets 1,724 2,175
--------- ---------
Operating cash flows before movements
in working capital 23,833 21,790
(Increase)/decrease in inventory (16,505) 17,498
Decrease/(increase) in accounts and
other receivables 4,253 (14,321)
Increase in accounts and other payables 7,503 32,037
--------- ---------
Net cash from operations 19,084 57,004
Taxation paid (3,522) (4,227)
--------- ---------
Net cash inflow from operating activities 15,562 52,777
--------- ---------
Investing activities
Purchase of property, plant and equipment (376) (206)
Proceeds on disposal of property, plant
and equipment 247 218
Deferred consideration paid on acquisition
of subsidiary (2,362) -
Acquisition of subsidiary, net of cash
acquired (41,525) 304
Interest received - 13
Purchase of intangible assets (84) -
--------- ---------
Net cash (used in)/from investing activities (44,100) 329
--------- ---------
Financing activities
Proceeds from issue of shares 22,728 2,249
Costs relating to share raise (724) -
Proceeds from bank loans 16,486 -
Repayment of bank loans - (35,000)
Payment of lease liabilities (1,437) (1,480)
Dividends paid (6,334) (3,274)
Interest paid (1,617) (1,297)
--------- ---------
Net cash inflow/(outflow) from financing
activities 29,102 (38,802)
--------- ---------
Net increase in cash and cash equivalents 564 14,304
Cash and cash equivalents at beginning
of year 15,826 1,522
--------- ---------
Cash and cash equivalents at end of
year 16,390 15,826
========= =========
NOTES TO THE FINANCIAL STATEMENTS
YEAR TO 31 MAY 2022
1. Organisation and trading activities
Springfield Properties PLC is incorporated and domiciled in
Scotland as a public limited Company and operates from its
registered office in Alexander Fleming House, 8 Southfield Drive,
Elgin, Morayshire, IV30 6GR.
2. Summary of significant accounting policies
The principal accounting policies adopted and applied in the
preparation of the financial statements are set out below.
These have been consistently applied to all the years presented
unless otherwise stated.
2.1. Basis of accounting
The financial information contained within this final results
announcement for the year ended 31 May 2022 and the year ended 31
May 2021 is derived from but does not comprise statutory financial
statements within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 May 2021 have been
filed with the Registrar of Companies and those for the year ended
31 May 2022 will be filed following the Company's annual general
meeting. The auditors' report on the statutory accounts for the
year ended 31 May 2022 and the year ended 31 May 2021 is
unqualified, does not draw attention to any matters by way of
emphasis, and does not contain any statement under section 498 of
the Companies Act 2006.
The financial statements of Springfield Properties PLC have been
prepared in accordance with UK adopted international accounting
standards. The Group has adopted all the standards and amendments
to existing standards which are mandatory for accounting periods
beginning on 1 June 2021.
The financial statements have been prepared under the historical
cost convention except for contingent consideration.
The following standards have been issued but have not been
applied by the Group in these financial statements. These
amendments to standards and interpretations had no significant
impact on the financial statements:
-- Amendments to IFRS 9, IAS 39 and IFRS 7 'Interest Rate Benchmark Reform 2'
The following new standards and amendments to standards have
been issued but are not effective for the financial year beginning
1 June 2021 and have not been early adopted:
-- Amendments to IAS 1 'Classification of Liabilities as Current or Non-current'
-- Amendments IAS 16 'Property, Plant and Equipment'
-- Amendments to IAS 37 'Onerous Contracts'
-- Annual Improvements to IFRS Standards 2018-2020
-- Amendments to IFRS 3 'Reference to the Conceptual Framework'
-- Definition of Accounting Estimates (Amendments to IAS 8)
-- Amendments to IAS 1 'Presentation of Financial Statements'
and IFRS Practice Statement 2 Making Materiality Judgements
-- IFRS 17 'Insurance Contracts'
The new standards and amendments to the standards noted above
are expected to have no significant impact on the financial
statements.
2.2. Basis of consolidation
The consolidated financial statements incorporate those of
Springfield Properties PLC and its subsidiaries and jointly
controlled entities. Where the company has control over an
investee, it is classified as a subsidiary. The company controls an
investee if all three of the following elements are present: power
over the investee, exposure to variable returns from the investee,
and the ability of the investor to use its power to affect those
variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these
elements of control. Contingent consideration is measured at its
fair value at the date of acquisition. If the contingent
consideration meets the definition of equity, it is not remeasured,
and settlement is accounted for within equity. Other contingent
consideration is remeasured at fair value at each reporting date
with subsequent changes in the fair value of the contingent
consideration recognised in the consolidated profit and loss
account.
All financial statements are made up to 31 May 2022.
All intra-Group transactions, balances and unrealised gains on
transactions between Group companies are eliminated on
consolidation.
2.3. Functional and presentation currencies
The financial statements are presented in Pound Sterling (GBP),
rounded to the nearest GBP000, which is also the currency of the
primary economic environment in which the Group operates (its
functional currency).
2.4. Going concern
The financial year ending 31 May 2022 was an excellent one for
the Group with record sales and profit levels.
The Group continues to have a strong relationship with the Bank
of Scotland - the revolving credit facility of GBP64.5m, which was
put in place for three years in September 2021 with an expiry date
in January 2025 was extended in November 2021 to GBP87.5m to help
part fund the Tulloch Homes acquisition on the same terms as the
existing facility.
Post year end , as announced on 22 June 2022, the Group acquired
the Scottish housebuilding business of Mactaggart & Mickel. The
Group's annual budget for the year ending 31 May 2023 was approved
at Board level on Wednesday the 25(th) of May 2022. In advance of
the completion of the Mactaggart & Mickel acquisition an
updated 3-year plan was prepared and approved by the Board on the
20 of June 2022.
In order to support the going concern period to 30 September
2023, the first two years (to May 2023 and May 2024) of the Board
approved 3-year plan to May 2025 forms the basis of the assessment
(base case forecast) to confirm the appropriateness of the going
concern basis being adopted for the preparation of the May 2022
Annual Report and Financial Statements.
The year to May 2023 has been updated to reflect the actual
months results for June and July 2022 as well as factoring in
margin changes on certain affordable developments. The forecasts
for May 2023 and May 2024 do not include any PRS revenues that were
not contracted at the date of the May 2022 Annual Report and
Financial Statements. There will be opportunities for PRS revenues
in the future.
Sensitivities have been run based on the updated May 2023 and
May 2024 numbers noted above. These involved increasing Private and
Affordable build costs by 5% and 7.5% (on an underlying basis this
represents a higher percentage increase due to the fact that for
most developments a number of sub-contractor packages have a fixed
price period) offset by removing land purchases that were not
contracted and that had no associated revenues in May 2023 or May
2024, other non-contracted payments were reviewed with some removed
as a mitigating action. In each of the scenarios run the Group was
still able to operate within existing banking facilities and
covenants.
Under the base case forecast the peak borrowing utilises 92.5%
of the bank facilities however by the year end in May 2023 the
facility utilisation is forecast to drop to around 60%. The Group
also has a large and high-quality land bank which provides another
source of comfort with the projections containing no land sales
despite a number of opportunities over the next 12 months.
The Directors are confident that the Group has adequate
resources to continue in operational existence for the foreseeable
future and are satisfied that the Group will generate sufficient
cash to meet its liabilities as and when they fall due for a period
of 12 months from signing these financial statements. The Directors
therefore consider it appropriate to adopt the going concern basis
in preparing the financial statements.
2.5. Revenue and profit recognition
Sale of private homes
Revenue on private home sales is recognised at a point in time
and the performance obligation is the transfer of the completed
property to the customer on legal completion and receipt of cash.
Revenue is measured at the fair value of the consideration received
net of VAT and trade discounts.
The Group's site valuation process determines the forecast
profit margin for each site. The valuation process acts as a method
of allocating land costs and construction costs of a development to
each individual plot based on the overall development margin and
drives the recognition of costs in the profit and loss account as
each plot is sold. Any changes in the forecast profit margin of a
site from changes in sales prices or costs to complete is
recognised across all homes sold in both the current period and
future periods.
Revenue on contracts recognised over time
Revenue from affordable housing contracts is recognised over
time as development progresses as the construction activity
enhances an asset controlled by the customer.
Where the outcome of a contract can be estimated reliably, the
amount of revenue recognised depends on the stage of completion.
This is based on the development costs incurred as a proportion of
the total expected development costs (the input method).
Contractual cashflows are determined by independent surveys of
work performed to date. These do not always align with the revenue
recognised on the underlying performance obligation and any
cashflows received that are in excess of the revenue recognised are
included as payments on account. Where the cashflows received are
less than revenue recognised the difference is included within
amounts recoverable on contracts.
Revenues derived from variations on contracts are recognised
only when they can be reliably measured. Where the outcome of a
construction contract cannot be estimated reliably, contract costs
are recognised as expenses in the period in which they are incurred
and contract revenue is recognised to the extent of contract costs
incurred where it is probable that they will be recoverable. When
it is probable that total contract costs will exceed contract
turnover, the expected loss is recognised as an expense
immediately.
Land Sales
Revenue from land sales is recognised on legal completion based
on fair value at transfer.
Plant Hire Revenue
Plant hire revenue represents amounts receivable for the
short-term hire of plant and equipment. Revenue is recognised when
the hire period commences and the customer benefits from the use of
the plant and equipment and is recognised evenly throughout the
hire period.
2.6. Grants
Grants are recognised when it is probable that the grants will
be received and that all related conditions will be met, usually on
submission of a valid claim for payment. Revenue grants are
credited to the profit and loss account as and when the relevant
expenditure is incurred.
2.7. Employee benefits
The costs of short-term employee benefits are recognised as a
liability and an expense in the period in which the services are
received, unless those costs are required to be recognised as part
of the cost of stock.
The cost of any unused holiday entitlement is recognised in the
period in which the employee's services are received.
Termination benefits are recognised immediately as an expense
when the Group is demonstrably committed to terminate the
employment of an employee or to provide termination benefits.
2.8. Retirement benefits
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
2.9. Net finance costs
Finance costs comprise interest payable on bank loans and the
unwinding of the discount from nominal to present day value of
provisions and lease liabilities. Finance income comprises the
unwinding of the discount from nominal to present day value of
shared equity. Interest income and interest payable is recognised
in the income statement on an accruals basis.
2.10. Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
profit and loss account because it excludes items of income or
expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the reporting
date.
Deferred tax
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax is not recognised on temporary differences arising
from the initial recognition of goodwill or other assets and
liabilities in a transaction that affects neither the tax profit
nor the accounting profit.
Deferred tax is measured on a non-discounted basis using the tax
rates and laws that have then been enacted or substantively enacted
by the reporting date.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the profit and loss account,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in
equity. Deferred tax assets and liabilities are offset when the
Group or Company has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and
liabilities relate to taxes levied by the same tax authority.
2.11. Exceptional items
Exceptional items are those material items which, by virtue of
their size or incidence, are presented separately in the profit and
loss account to enable a full understanding of the Group's
financial performance.
Transactions that may give rise to exceptional items include
transactions relating to acquisitions and costs relating to changes
in share capital structure as well as redundancy and restructuring
costs.
In the prior year the furlough grant income received from the
government was separately disclosed within the consolidated profit
and loss account as exceptional, due to its incremental nature. The
direct furlough payroll costs were considered abnormal costs in the
prior year and consistent with previous years, any direct payroll
costs reflecting employee down time (abnormal production) is
expensed to the profit and loss account. The administrative
furlough payroll costs disclosed as exceptional are considered to
be interdependent with the related government grant income and
while not being incremental or abnormal in nature, the government
support measures were key in protecting these jobs. See Note 5.
2.12. Property, plant and equipment
Tangible fixed assets are initially measured at cost and
subsequently measured at cost net of depreciation and any
impairment losses. Depreciation is recognised so as to write off
the cost of assets less their residual values over their useful
lives on the following bases:
Buildings - 2% and 5% straight line
Plant and machinery - 2-10 years straight line
Fixtures, fittings & equipment - 2-5 years straight line
Motor vehicles - 4-5 years straight line
Right of use leased assets - over the lease term, straight line with no residual value
Land is not depreciated
The gain or loss arising on the disposal of an asset is
determined as the difference between the sale proceeds and the
carrying value of the asset and is credited or charged to the
profit and loss account.
2.13. Intangible fixed assets
Intangible assets comprise of market related assets (e.g.
trademarks, imprints & brands) and goodwill on acquisition.
Market related assets
Trademark assets in relation to Springfield Properties PLC are
expected to have an indefinite useful life; however, impairment
reviews are performed annually. Any impairment losses or reversals
of impairment losses are recognised immediately in the profit and
loss account.
The brand asset in relation to Tulloch Homes has a 15 year
useful life and amortisation is charged on a straight line
basis.
Goodwill on acquisition
Goodwill on acquisitions of subsidiaries represents the excess
of the consideration transferred, the amount of any non-controlling
interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the fair value of the
net identifiable assets acquired.
Any impairment losses are recognised immediately in the profit
and loss account.
2.14. Fixed asset investments
Interests in subsidiaries are initially measured at cost and
subsequently measured at cost less any accumulated impairment
losses. The investments are assessed for impairment at each
reporting date and any impairment losses are recognised immediately
in the profit and loss account. Costs associated with the
acquisition of subsidiaries are recognised in the profit and loss
account as an exceptional item.
2.15. Impairment of fixed assets
At each reporting end date, the Group reviews the carrying
amounts of its tangible fixed assets to determine whether there is
any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment
loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value-in-use. Any impairment loss and reversal of losses
are recognised in the profit and loss account.
2.16. Inventories and work in progress
Property, including land held under development, acquired or
being constructed for sale in the ordinary course of business,
rather than to be held for rental or capital appreciation, is held
as stock and is measured at the lower of cost and net realisable
value.
Cost comprises the invoiced value of the goods purchased and
includes attributable direct costs, labour and overheads.
Net realisable value is the estimated selling price in the
ordinary course of the business, based on market prices at the
reporting date and discounted for the time value of money if
material, less estimated costs of completion and the estimated
costs necessary to make the sale. Any excess of the carrying amount
of stocks over its net realisable value is recognised as an
impairment loss in the profit and loss account.
At each reporting date, an assessment is made for impairment.
Any excess of the carrying amount of stocks over its estimated
selling price less costs to complete and sell is recognised as an
impairment loss in the profit and loss account.
Where sites are 'secured' via option agreements, these sites are
only included as stock when the agreement becomes
unconditional.
Options included as part of stock are stated at the lower of
cost and net realisable value.
2.17. Financial instruments
Financial instruments are recognised in the balance sheet when
the Group becomes party to the contractual provisions of the
instrument.
Financial assets and liabilities are offset, with the net
amounts presented in the financial statements, when there is a
legally enforceable right to set off the recognised amounts and
there is an intention to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Financial assets at amortised cost
Financial assets with fixed or determinable payments that are
not quoted in an active market. Financial assets are recognised
initially at cost. Subsequent to initial recognition they are
measured at amortised cost using the effective interest rate
method, less any impairment losses.
Loans outside the Group are valued at the recoverable amount and
a market rate of interest is charged.
Impairment of financial assets
The Group recognises an allowance for expected credit losses for
all debt instruments not held at fair value through profit and loss
account. Expected credit losses are based on the difference between
the contracted cash flows due in accordance with the contract and
all the cash flows that the Group expects to receive, discounted at
an approximation of the original effective interest rate.
For trade receivables and, in the Parent Company, intercompany
receivables, the Group applies a simplified approach in calculating
expected credit losses. The Group does not track changes in credit
risk, but instead recognises a loss allowance based on lifetime
expected credit losses at each reporting date.
Derecognition of financial assets
Financial assets are derecognised only when the contractual
rights to the cash flows from the asset expire or are settled, or
when the Group transfers the financial asset and substantially all
the risks and rewards of ownership to another entity, or if some
significant risks and rewards of ownership are retained but control
of the asset has transferred to another party that is able to sell
the asset in its entirety to an unrelated third party.
Financial liabilities
All of the Group's financial liabilities are measured at
amortised cost.
Other financial liabilities
Other non-derivative financial liabilities are initially
measured at historical cost less any directly attributable
transaction costs. Subsequent to initial recognition, these
liabilities are measured at amortised cost using the effective
interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability to the net
carrying amount on initial recognition.
Derecognition of other financial liabilities
Financial liabilities are derecognised when the Group's
contractual obligations expire or are discharged or cancelled.
2.18. Deferred consideration
Deferred consideration payments are initially recognised at fair
value at the date of acquisition which is based on the timing of
the cash outflows and an appropriate discount rate. It is
subsequently measured at amortised cost.
2.19. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities.
2.20. Dividends
Dividends are recognised as liabilities in the period in which
the dividends are approved and once they are no longer at the
discretion of the Company.
2.21. Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for leases of low value assets (less
than GBP5,000) and leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the Group's
incremental borrowing rate at commencement of the lease.
Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received.
Subsequent to initial measurement lease liabilities increase as a
result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease. Right of use assets comprise the Group's
existing premises in Elgin, Larbert, Inverness and Glasgow along
with certain items of office equipment and motor vehicles.
2.22. Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of a Group after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received net of share issue costs. Share capital
represents the amount subscribed for shares at nominal value.
The share premium account represents premiums received on the
initial issuing of the share capital. Any share issue costs
associated with the issuing of shares are deducted from share
premium, net of any related income tax benefits. Any bonus issues
are also deducted from share premium.
Retained earnings include all current and prior period results
as disclosed in the profit and loss account.
2.23. Share-based payments
Equity-settled share-based payments are measured at fair value
at the date of grant and recognised as an expense over the vesting
period. The amount recognised as an expense is adjusted for leavers
to the scheme. Fair value is measured by use of a relevant pricing
model.
2.24. Provisions
Provisions include dilapidations to cover the Group's leased
properties with an upfront liability recognised. Maintenance
provisions relate to the costs to come on developments where the
final homes have been handed over.
Provisions are liabilities of uncertain timing and amount.
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event and it is
probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate
can be made of the amount of the obligation.
3. Segmental reporting
A segment is a distinguishable component of the Group's
activities from which it may earn revenues and incur expenses,
whose operating results are regularly reviewed by the Group's chief
operational decision makers to make decisions about the allocation
of resources and assessment of performance and about which discrete
financial information is available. In identifying its operating
segments, management generally follows the Group's service line
which represent the main products and services provided by the
Group. The Directors believe that the Group operates in one
segment:
-- Housing building activity
As the Group operates solely in the United Kingdom segment
reporting by geographical region is not required.
2022 2021
Revenue GBP000 GBP000
Private residential properties 174,442 138,646
Affordable housing 64,251 52,939
Contracting housing 16,494 8,142
Other 1,908 16,965
--------- ---------
Total revenue 257,095 216,692
Gross profit 43,135 38,797
Administrative expenses (20,950) (19,422)
Exceptional items (1,100) (622)
Other operating Income 396 375
Finance income 134 367
Finance expenses (1,889) (1,607)
Profit before tax 19,726 17,888
Taxation (3,652) (4,178)
--------- ---------
Profit for the period 16,074 13,710
========= =========
4. Taxation
2022 2021
GBP000 GBP000
Current tax
UK corporation tax on profits for the current
period 3,358 4,016
Adjustments in respect of prior periods (311) (10)
------- -------
3,047 4,006
------- -------
Deferred tax
Origination and reversal of timing differences 486 158
Adjustments in respect of prior periods 119 14
605 172
------- -------
3,652 4,178
======= =======
The charge for the year can be reconciled to the standard rate
of tax as follows:
2022 2021
GBP000 GBP000
Profit before tax 19,726 17,888
======= =======
Tax at the UK corporation tax rate of 19% (2021:
19%) 3,748 3,399
Effects of:
Tax effect of expenses that are not deductible
in determining taxable profit 181 19
Exceptional items - no deductions - -
Adjustments in respect of prior years (311) (10)
Depreciation on assets not qualifying for tax
allowances (48) 17
Amortisation (26) -
Deferred tax adjustments in respect of prior
years 119 14
Land remediation relief (1) -
Other timing differences 23 (105)
Adjust deferred tax to closing average rate (33) 844
------- -------
Tax charge for period 3,652 4,178
======= =======
5. Exceptional items
2022 2021
GBP000 GBP000
Redundancy costs 141 389
Acquisition and other transaction related costs 859 -
(1)
Other acquisition and other transaction related 100 -
costs (2)
Wages costs for furloughed employees (3) - 2,318
------- --------
1,100 2,707
Grant furlough income (3) - (2,085)
------- --------
1,100 622
======= ========
(1) Acquisition and other transactions related costs for the
acquisition of Tulloch Homes Group Limited and its subsidiary
companies.
(2) Other acquisition and other transactions related costs
relate to the planning being achieved at Carlaverock which had
previously been assessed as 95% likely.
(3) The wages costs for furlough employees GBPnil (2021:
GBP2,318k) is the Company cost of all employees who were on
furlough during the prior year. The grant furlough income GBPnil
(2021: GBP2,085k) is the furlough grant income received from the UK
government in relation to the furloughed employees for the prior
year.
6. Dividends
On 9 December 2021, a final dividend of 4.5p (2021: 2.0p) per
share was paid to shareholders, amounting to GBP4,557,827 (2021:
GBP1,957,644). In respect of the current year, on 1 April 2022, an
interim dividend of 1.5p (2021: 1.3p) per share was paid to
shareholders, amounting to GBP1,775,716 (2021: GBP1,316,186). The
Directors propose that a dividend of 4.7p per share will be paid to
shareholders on 16 December 2022. This dividend is subject to
approval by shareholders at the Annual General Meeting and has not
been included as a liability in these financial statements. The
proposed final dividend for 2022 is payable to all shareholders on
the Company's Register of Members on the record date of 4 November
2022.
7. Earnings per share
The basic earnings per share is based on the profit for the year
divided by the weighted average number of shares in issue during
the year. The weighted average number of ordinary shares for the
year ended 31 May 2022 assumes that all shares have been included
in the computation based on the weighted average number of days
since issue.
In respect of diluted earnings per share the weighted average is
calculated by adjusting for all outstanding share options that are
potentially dilutive (i.e. where the exercise price is less than
the average market price of the shares during the year).
2022 2021
GBP000 GBP000
Profit for the year attributable to owners
of the Company 16,074 13,710
Adjusted for the impact of tax adjusted
exceptional costs in the year 970 622
------------ ------------
Adjusted earnings 17,044 14,332
============ ============
Weighted average number of ordinary shares
for the purpose of basic earnings per share 109,022,146 99,436,929
Effect of dilutive potential shares: share
options 2,797,323 1,767,609
------------ ------------
Weighted average number of ordinary shares
for the purpose of diluted earnings per
share 111,819,469 101,204,538
============ ============
Earnings per ordinary shares
Basic earnings on profit for the year 14.74p 13.79p
Diluted earnings on profit for the year 14.37p 13.55p
Adjusted earnings per ordinary shares (1)
Basic earnings on profit for the year 15.63p 14.41p
Diluted earnings on profit for the year 15.24p 14.16p
(1) Adjusted earnings is presented as an additional performance
measure and is stated before exceptional items and is used in
adjusted EPS calculation.
8. Acquisition of Tulloch Homes Holdings Limited
Book value Revaluation Fair Value
adjustment to Group
Net assets at date of Acquisition GBP000 GBP000 GBP000
Investment - 520 520
Property, plant and equipment 401 - 401
Intangible fixed asset 79 3,700 3,779
Inventories 45,017 11,693 56,710
Accounts receivable 2,049 - 2,049
Cash and cash equivalent
- acquired cash 23,485 - 23,485
Accounts payable (9,998) - (9,998)
Provisions (796) - (796)
Obligation under lease
liabilities (301) - (301)
Corporation tax 153 - 153
Deferred tax 2,317 (925) 1,392
At 1 December 2022 62,406 14,988 77,394
=========== ============ ===========
Discharged by:
Consideration paid - Cash 65,010
Deferred consideration 12,897
77,907
Less Goodwill 513
-----------
Total at 1 December 2022 77,394
===========
A fair value assessment has been performed resulting in an
adjustment of GBP11,693k to inventory. The deferred consideration
has been discounted in the financial statements.
Tulloch Homes Holdings Limited was purchased as it was a good
opportunity to acquire a well-run business with an excellent
reputation and to accelerate growth with live sites in new areas
and with a healthy land bank pipeline. Tulloch Homes Holdings
Limited has contributed revenue of GBP32,026,206 and profit before
tax of GBP4,096,435 from the acquisition date of 1 December 2021 to
31 May 2022. If the acquisition of Tulloch Homes Holdings Limited
had taken place at 1 June 2021 then the acquisition would have
produced a combined revenue of GBP57,884,397 and loss after
exceptional items and before tax of GBP2,265,811.
9. Bank borrowings
2022 2021
Secured borrowings: GBP000 GBP000
Bank loans 50,486 34,000
50,486 34,000
Less: payable within one year - 34,000
------- -------
Payable after one year 50,486 -
======= =======
The bank loan comprises of a revolving credit facility of
GBP64.5m, which was put in place for three years in September 2021
with an expiry date in January 2025 and was extended in November
2021 to GBP87.5m to part fund the Tulloch acquisition on the same
terms as the existing facility and is secured over certain of the
Company's properties. The facility attracts an interest rate of
2.15% per annum above Bank of England Sonia (Sterling overnight
index average response rate). The amount payable within one year in
the prior year related to a Term loan which was drawn down on 24
April 2020 and repaid in full in April 2021.
10. Deferred consideration
As part of the purchase agreement of Tulloch Homes Holdings
Limited, there was a further GBP13,000,000 of deferred
consideration payable. This can be broken down into: (i) GBP362,330
payable on 24 April 2022 (ii) GBP6,137,670 payable on 1 November
2022 and (iii) GBP6,500,000 payment on 1 July 2023. The outstanding
discounted amount payable at the period end is GBP12,574,228 (2021:
GBPnil).
2022 2021
GBP000 GBP000
Deferred consideration < 1 6,119 -
year
Deferred consideration > 1 6,455 -
year
------- -------
12,574 -
======= =======
11. Contingent consideration
As part of the purchase agreement of Walker Holdings (Scotland)
Limited, there was a further GBP6,000,000 payable which is included
within liabilities. GBP4,000,000 is payable when outline planning
is granted at Carlaverock and GBP2,000,000 payable when detailed
planning is granted at Carlaverock with probability was assessed at
98% and 95% respectively. The outstanding discounted amount payable
at the year-end is GBPnil (2021: GBP1,900,000). GBP2,000,000 was
paid during the year.
As part of the purchase agreement of DHomes 2014 Limited there
was a further GBP2,500,000 payable for an area of land if (i) we
make a planning application when we reasonably believe the council
will recommend approval; or (ii) it is zoned by the council. The
directors have assessed the likelihood of the land being zoned and
have included a liability of GBP2,000,000 based on 80% probability.
The outstanding amount payable at the period end included within
liabilities is GBP2,000,000 (2021: GBP2,000,000). The remaining
GBP500,000 (20% on the GBP2,500,000 still to be paid) has been
treated as a contingent liability due to the uncertainty over the
future payment.
2022 2021
GBP000 GBP000
Acquisition of DHomes 2014 Holdings Limited
("Dawn") 2,000 2,000
Acquisition of Walker Holdings (Scotland)
Limited ("Walker") - 1,900
2,000 3,900
======= =======
12. Provisions
Dilapidation provisions are included for all rented buildings
within the Group. An onerous lease provision has been created due
to the closure of the Walker office in Livingston. Maintenance
provisions relate to costs to come on developments where the final
homes have been handed over
2022 2021
GBP000 GBP000
Dilapidation provision 150 185
Onerous lease provision - 200
Maintenance provision 2,496 825
------- -------
2,646 1,210
======= =======
2022 2021
GBP000 GBP000
Provisions <1 year 821 -
Provisions >1 year 1,825 1,210
------- -------
2,646 1,210
======= =======
13. Share capital
The Company has one class of ordinary share which carry full
voting rights but no right to fixed income or repayment of capital.
The share capital account records the nominal value of shares
issued. The share premium account records the amount above the
nominal value received for shares sold, less share issue costs.
Ordinary shares of 0.125p Number of Share capital Share premium
- allotted, called up and shares GBP000 GBP000
fully paid
At 1 June 2021 102,077,526 128 56,761
Share issue 16,391,873 20 21,983
At 31 May 2022 118,469,399 148 78,744
============ ============== ==============
During the year 677,587 shares (2021: 2,539,270) were issued in
satisfaction of share options exercised for consideration of
GBP727,647. On 21 December 2021, 15,714,286 shares were issued as
part of the acquisition of Tulloch Homes Holdings Limited at 140p
per share for a consideration of GBP22,000,000. Expenses of
GBP723,816 are included within share premium relating to this share
raise.
14. Transactions with related parties
Other related parties include transactions with a retirement
schemes in which Directors and close family members of key
management personnel are beneficiaries. During the year dividends
totalling GBP2,343k (2021: GBP1,415k) were paid to key management
personnel (Board of Directors and the members of the Operational
Board).
The remuneration of the key management personnel (PLC Directors
and Group Directors) of Springfield Properties PLC is set out below
in aggregate for each of the categories specified in IAS 24 -
Related Party Disclosures:
2022 2021
GBP000 GBP000
Short-term employee benefits 3,537 3,539
Share-based payments 404 356
Post-employment benefits 169 181
4,110 4,076
======== ========
During the year the Group entered into the following
transactions with related parties:
Sale of goods Purchase of
goods
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Bertha Park Limited (1) 18,691 8,989 371 -
Other entities which key management
personnel have control, significant
influence or hold a material
interest in 83 118 45 33
Key management personnel 176 44 11 -
Other related parties 29 121 332 313
------- ------- ------- -------
18,979 9,272 759 346
======= ======= ======= =======
Sales to related parties represent those undertaken in the
ordinary course of business.
Rent paid
2022 2021
GBP000 GBP000
Entities which key management
personnel have control, significant
influence or hold a material
interest in 170 176
Key management personnel - 11
Other related parties 107 128
------- -------
277 315
======= =======
Interest received:
Entities which key management
personnel have control, significant influence
or
hold a material interest in (short-term) 125 355
---- ----
125 355
==== ====
The following amounts were outstanding at the reporting end
date:
2022 2021
GBP000 GBP000
Amounts receivable:
Bertha Park Limited (1) 9,167 6,772
Other entities which key management personnel
have control, significant influence or hold
a material interest in (short-term) 54 3
Key management personnel 39 3
Other related parties 1 3
------- -------
9,261 6,781
======= =======
2022 2021
GBP000 GBP000
Accounts payable:
Entities which key management personnel have
control, significant influence or hold a material
interest in (short-term) - 8
Other related parties 52 58
------- -------
52 66
======= =======
Amounts owed to/from related parties are included within
creditors and debtors respectively at the year-end. No security has
been provided on any balances.
Transactions between Group companies have been eliminated on
consolidation and are not disclosed in this note.
(1) Bertha Park Limited is a Company in which Sandy Adam and
Innes Smith are Directors. During the year the Group made sales to
Bertha Park Limited of GBP18,225k (2021: GBP8,989k) in relation to
a build contract. At the year-end GBP3,983k (2021: GBP1,772k) is
included in trade debtors and included within other debtors is a
loan of GBP5,125k (2021: GBP5,000k) at the year-end. During the
year the Group had purchases from Bertha Park Limited of GBP371k
(2021: GBPnil) in relation to a build contract. These were paid in
full during the year.
15. Analysis of net debt
The Analysis of net debt is as follows:
2022 2021
GBP000 GBP000
Cash in hand and bank 16,390 15,826
Bank borrowings (50,486) (34,000)
--------- ---------
(34,096) (18,174)
Lease liability (3,954) (2,613)
Net debt (38,050) (20,787)
========= =========
Reconciliation of net cashflow to movement in net debt is as
follows:
At 1 On acquisition Fair At 31
June 2021 New Leases Cashflow Value May 2022
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash and cash
equivalents 15,826 - 23,485 (22,921) - 16,390
Bank Borrowings (34,000) - - (16,486) - (50,486)
Lease (2,613) (2,396) (301) 1,437 (81) (3,954)
----------- ----------- --------------- --------- ------- ----------
Net Debt (20,787) (2,396) 23,184 (37,970) (81) (38,050)
=========== =========== =============== ========= ======= ==========
16. Subsequent events
Since year end, as announced on 22 June 2022, the Group acquired
the Scottish housebuilding business of Mactaggart & Mickel for
a total consideration of GBP46.3m. Mactaggart & Mickel is a
premium brand housebuilder that has been delivering high-quality
housing across the Central belt of Scotland for almost 100
years.
Under the terms of the acquisition, the Group acquired six live
private and affordable sites with work in progress for a
consideration of GBP15.0m and acquired a brand licence to build
homes as Mactaggart & Mickel on a further 11 private and
affordable sites, which will transfer to Springfield as homes are
sold in line with the payments of the deferred consideration of
GBP30.8m.
The acquisition also included Timber Systems, a timber frame
factory near Glasgow, for a consideration of GBP0.5m. The addition
of a second timber frame factory, which complements the Group's
existing facility in Elgin, will secure kit supply and increase
capacity for future growth while further reducing the Group's
carbon footprint.
The housebuilder's fixed assets and WIP were purchased by
Springfield M&M Homes Limited. Employees have been transferred
under a TUPE agreement.
The timber kit fixed assets and stock were purchased by
Springfield Timber Kit Systems Limited. Employees have been
transferred under a TUPE agreement and Springfield Timber Kit
Systems has taken over the lease of the building.
At the date of this report, the fair value assessment of assets
and liabilities acquired has not been completed. As such the
required disclosures relating to the fair value of assets acquired
and liabilities assumed at the acquisition date and the required
disclosures relating to revenue and profit have not been
included.
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END
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