REG - Springfield Props. - Acquisition of Scottish housebuilding business

Springfield PropertiesAnnouncement

22/06/2022 07:00

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RNS Number : 7141P  Springfield Properties PLC  22 June 2022

22 June 2022

 

Springfield Properties plc

("Springfield" or the "Group")

 

Acquisition of Mactaggart & Mickel's housebuilding business

Springfield acquires premium Scottish housebuilding business and timber frame
factory

 

Springfield Properties (AIM: SPR), a leading housebuilder in Scotland
delivering private, affordable and PRS housing, is pleased to announce that it
has entered an agreement to acquire the Scottish housebuilding business of
Mactaggart & Mickel Group Ltd ("Mactaggart & Mickel"), which has been
delivering high-quality housing across the Central Belt of Scotland for almost
100 years. The total consideration is £46.3m, comprising £10.5m cash paid on
completion and a deferred cash consideration of £35.8m to be paid
proportionally as homes are sold over the next five years (the "Acquisition").
The Acquisition will be funded from Springfield's internal resources and
existing debt facilities with Bank of Scotland.

 

Under the terms of the Acquisition, the Group has acquired six live private
and affordable sites with work in progress with a fair value of approximately
£15m and fixed assets. The Group has also 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 total 17 sites, of which 16 have planning
permission and equating to the delivery of c. 700 homes, have a gross
development value of c. £230m. The Group expects to generate gross margins on
these sites materially in line with margins delivered by the rest of the
Group. Springfield intends to retain all of Mactaggart & Mickel's
housebuilding business employees.

 

The Acquisition also includes Timber Systems, a timber frame factory near
Glasgow. The Group already constructs 90% of its homes from timber kits and
the addition of a second timber frame factory will secure kit supply and
increase capacity for future growth while further reducing its carbon
footprint. Springfield will retain all of Timber Systems' employees.

 

In addition, Springfield and Mactaggart & Mickel have established a
strategic alliance with an agreement that gives Springfield opportunities for
future acquisitions of sites from Mactaggart & Mickel's remaining land
bank of approximately 2,300 acres across Scotland.

 

The housebuilding business of Mactaggart & Mickel is a premium brand
housebuilder primarily targeting the larger private home market. The land bank
is in highly desirable locations within the Central Belt of Scotland,
expanding the Group's footprint in areas with a higher price point.

 

The payment of the deferred cash consideration is subject to an annual minimum
payment of £7.7m from the second year following completion. Each annual
minimum payment will be reduced by any excess deferred consideration paid by
the Group over the annual minimum payment in the prior year. The Group has the
option to defer any year's minimum payment by 12 months.

 

The consideration for the Acquisition will initially be satisfied from the
Group's existing cash and debt facilities and the deferred consideration will
be paid proportionally as homes are completed. It will also partly utilise the
Group's existing uncommitted land purchase budget for the next five years.

 

The Acquisition is expected to be earnings enhancing in the current year to 31
May 2023. For the year to 31 May 2022, the Group expects to report results in
line with market expectations, with good revenue growth and a
better-than-expected reduction in net debt to c. £39.0m at year end (30
November 2021: £43.0m). Further details will be provided in the Group's full
year results announcement, which is expected to be published in September
2022.

 

Innes Smith, Chief Executive Officer of Springfield Properties, commented: "We
are very pleased to welcome Mactaggart & Mickel's Scottish housebuilding
business into the Springfield Group. As well as bringing another premium brand
into the Group, this acquisition gives us land, with planning permission, in
areas of significant demand. The structure of the acquisition - with the
majority of the payment to be made as homes are completed - de-risks the deal
and creates an effective and efficient means of acquiring land.

 

"The addition of a timber frame facility in the Central Belt, alongside our
existing facility in Elgin, secures our supply of timber kits and provides
further capacity to support our next stage of growth. It will also reduce our
carbon footprint by enabling local manufacture of all kits.

 

"We welcome our new colleagues to the Group and look forward to working
together to continue delivering high-quality homes across Scotland."

 

Paul McAninch, Group Finance Director of Mactaggart & Mickel, added: "We
welcome this agreement with Springfield, which we believe provides a strong
platform for growth for both parties.

 

"Our company has had a proud tradition as a leading housebuilder in Scotland,
which is built on the work of its dedicated teams.

 

"This tradition will continue, and I'm pleased that there will be continuity
of employment as a result of this agreement. I'd like to thank all our staff
for their dedication over the years as we look to our second century as a
successful business. I'd also like to wish transferring colleagues every
success for their future."

 

 

Enquiries

 

 Springfield Properties
 Sandy Adam, Chairman                    +44 1343 552550

 Innes Smith, Chief Executive Officer

 Singer Capital Markets
 Shaun Dobson, Rachel Hayes, James Moat  +44 20 7496 3000

 (Investment Banking)

 Luther Pendragon
 Harry Chathli, Claire Norbury           +44 20 7618 9100

 

 

Further Detail

 

Background to, and rationale for, the Acquisition

 

Mactaggart & Mickel is a family-owned, award-winning group of companies
operating in the UK construction industry. Established as a housebuilding
company in Scotland in 1925, and following diversification, comprised seven
divisions: Homes, which operated predominantly in Scotland; Timber Systems;
Investments; Strategic Land; Commercial Property; Private Rental Sector
(Lettings); and Contracts. Springfield has agreed to acquire the majority of
what constituted Mactaggart & Mickel's Homes and Timber Systems divisions.

 

The housebuilding business of Mactaggart & Mickel is a premium brand
housebuilder primarily targeting the three- to five-bedroom private home
market in highly desirable locations within the Central Belt of Scotland. The
Acquisition complements Springfield's previous acquisitions of Dawn Homes,
Walker Group and Tulloch Homes, enhancing the Group's presence across
Scotland, whilst expanding its footprint into areas with a higher price point.
 

 

The Acquisition is in line with Springfield's stated growth strategy. It
partly utilises the Group's existing budget for land purchases for the next
five years and therefore supports the Group's existing forecasts and enhances
visibility for future years. The Group will benefit from expanding its land
bank through one transaction rather than multiple individual purchases. In
addition, the Group has potential upside from a strategic alliance regarding
possible purchases of further sites from Mactaggart & Mickel's remaining
land bank of approximately 800 acres of freehold land and 1,500 acres of
option land across central Scotland (the "Strategic Land Bank").

 

For over twenty years, Springfield has utilised its own off-site timber frame
factory in Elgin, north Scotland, and uses timber frame construction in 90% of
its homes. As part of the Acquisition, the Group has acquired an additional
timber frame factory outside Glasgow, in the heart of the Central Belt of
Scotland. This will enable all of the Group's timber frames to be manufactured
off-site at the Group's own factories, thereby increasing surety of timber kit
supply, increasing capacity for future growth and reducing the Group's carbon
footprint as it will no longer be transporting timber frames from the Elgin
factory to the Central Belt.

 

Mactaggart & Mickel's housebuilding business will continue to operate from
Glasgow, with its three directors - Peter Shepherd, Joanne Casey and Marion
Forbes - reporting into Martin Egan, Springfield's Chief Operating Officer.

 

The Mactaggart & Mickel housebuilding business is an excellent cultural
fit with the Group as another well-respected brand that strongly promotes an
ethos of looking after customers and building quality homes. Joanne Casey is
an industry member of the New Homes Quality Board, which is developing a new
Code and framework for quality and consumer protection that housebuilders must
follow across the UK from 2023. Mactaggart & Mickel achieves consistently
outstanding levels of customer satisfaction, and has been awarded a 5 star
rating in the Home Builders Federation annual survey for 10 consecutive years.
Regularly receiving recognition for its developments from industry awards,
Mactaggart & Mickel has been named housebuilder of the year (What House;
2017 and Homes for Scotland; 2013 and 2014) and is renowned across the UK for
its performance in the Supreme NHBC Pride in the Job Awards.

 

 

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