REG - Springfield Props. - Final Results and Publication of Annual Report
20/09/2022 07:00
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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
£m £m
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 21.5 19.1 +13%
profit
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 £1.1m (2021: £0.6m) (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 £54.4m (being £77.9m less cash acquired of £23.5m), of
which £13.0m 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 £3.5bn (31 May 2021: £3.1bn)
· 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:
"This 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, we significantly expanded our business with the
acquisitions 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 +44 1343 552550
Innes Smith, Chief Executive Officer
Singer Capital Markets
Shaun Dobson, James Moat, Rachel Hayes +44 20 7496 3000
(Investment Banking)
Gracechurch Group
Harry Chathli, Claire Norbury +44 20 4582 3500
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
(https://attendee.gotowebinar.com/register/7607709394238917387) .
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 £245k (2021:
£248k) 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 £159k (2021: £146k)
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 £54.4m (being £77.9m less cash
acquired of £23.5m), of which £13.0m 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 £46.3m. 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 £257.1m (2021:
£216.7m). 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
£'000 £'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 £35.9m to £174.5m.
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 £64.3m (2021: £52.9m). 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
£5.9m having been moved from private housing and £2.2m 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 £43.1m (2021: £38.8m) 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 £20.9m (2021:
£19.4m). 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 £1.1m (2021: £0.6m). This mainly relates to the cost
of the Tulloch Homes acquisition.
Operating profit grew by 12.6% to £21.5m (2021: £19.1m). Excluding
exceptional items, operating profit increased by 14.1% to £22.6m (2021:
£19.8m). Adjusted profit before tax and exceptional items increased by 12.4%
to £20.8m (2021: £18.5m) and statutory profit before tax by 10.1% to £19.7m
(2021: £17.9m).
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 £77.9m less cash acquired of £23.5m being a net
consideration of £54.4m, which comprised an initial consideration of £41.4m
and deferred consideration of £13.0m.
The initial consideration of £41.4m was funded through an equity raising and
an increased bank revolving credit facility. In December 2021, the Group
raised gross proceeds of £22.0m 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 £64.5m, which was put in place for
three years in September 2021 with an expiry date in January 2025, was
extended in November 2021 to £87.5m to help part fund the Tulloch acquisition
on similar terms to the existing facility.
Net debt at 31 May 2022 was £38.1m compared to £20.8m 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 (http://www.thespringfieldgroup.co.uk)
COnsolidated PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 May 2022
2022 2021
Note £000 £000
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 7 15.24p 14.16p
year
Adjusted earnings per share is a non-GAAP measure.
The Group has no items of other comprehensive income.
COnsolidated BALANCE SHEET
FOR THE YEAR ENDED 31 May 2022
2022 2021
Non-current assets Note £000 £000
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
143,527 111,230
Net assets
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 YEAR ENDED 31 MAY 2022
Share capital Share premium Retained earnings Total
Note £000 £000 £000 £000
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 £000 £000
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
(16,505) 17,498
(Increase)/decrease in inventory
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 (£), rounded to the
nearest £000, 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 £64.5m, which was put in place for three
years in September 2021 with an expiry date in January 2025 was extended in
November 2021 to £87.5m 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 £5,000) 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 £000 £000
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
£000 £000
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
£000 £000
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
£000 £000
Redundancy costs 141 389
Acquisition and other transaction related costs ((1)) 859 -
Other acquisition and other transaction related costs ((2)) 100 -
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 £nil (2021:
£2,318k) is the Company cost of all employees who were on furlough during the
prior year. The grant furlough income £nil (2021: £2,085k) 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 £4,557,827 (2021: £1,957,644). 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 £1,775,716 (2021:
£1,316,186). 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
£000 £000
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 109,022,146 99,436,929
per share
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 111,819,469 101,204,538
per share
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 adjustment Fair Value
to Group
Net assets at date of Acquisition £000 £000 £000
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
£11,693k 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 £32,026,206 and
profit before tax of £4,096,435 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 £57,884,397 and loss after exceptional items and before tax of
£2,265,811.
9. Bank borrowings
2022 2021
Secured borrowings: £000 £000
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 £64.5m, 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 £87.5m 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 £13,000,000 of deferred consideration payable. This can be broken
down into: (i) £362,330 payable on 24 April 2022 (ii) £6,137,670 payable on
1 November 2022 and (iii) £6,500,000 payment on 1 July 2023. The outstanding
discounted amount payable at the period end is £12,574,228 (2021: £nil).
2022 2021
£000 £000
Deferred consideration < 1 year 6,119 -
Deferred consideration > 1 year 6,455 -
12,574 -
11. Contingent consideration
As part of the purchase agreement of Walker Holdings (Scotland) Limited, there
was a further £6,000,000 payable which is included within liabilities.
£4,000,000 is payable when outline planning is granted at Carlaverock and
£2,000,000 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 £nil (2021: £1,900,000).
£2,000,000 was paid during the year.
As part of the purchase agreement of DHomes 2014 Limited there was a further
£2,500,000 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 £2,000,000 based on 80%
probability. The outstanding amount payable at the period end included
within liabilities is £2,000,000 (2021: £2,000,000). The remaining £500,000
(20% on the £2,500,000 still to be paid) has been treated as a contingent
liability due to the uncertainty over the future payment.
2022 2021
£000 £000
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
£000 £000
Dilapidation provision 150 185
Onerous lease provision - 200
Maintenance provision 2,496 825
2,646 1,210
2022 2021
£000 £000
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 - allotted, called up and fully paid Number of shares Share capital Share premium
£000 £000
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 £727,647. 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 £22,000,000.
Expenses of £723,816 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 £2,343k (2021: £1,415k)
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
£000 £000
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
£000 £000 £000 £000
Bertha Park Limited ((1)) 18,691 8,989 371 -
Other entities which key management personnel have control, significant 83 118 45 33
influence or hold a material interest in
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
£000 £000
Entities which key management personnel have control, significant influence or 170 176
hold a material interest in
Key management personnel - 11
Other related parties 107 128
277 315
Interest received:
Entities which key management 125 355
personnel have control, significant influence or
hold a material interest in (short-term)
125 355
The following amounts were outstanding at the reporting end date:
2022 2021
£000 £000
Amounts receivable:
Bertha Park Limited ((1)) 9,167 6,772
Other entities which key management personnel have control, significant 54 3
influence or hold a material interest in (short-term)
Key management personnel 39 3
Other related parties 1 3
9,261 6,781
2022 2021
£000 £000
Accounts payable:
Entities which key management personnel have control, significant influence or - 8
hold a material interest in (short-term)
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
£18,225k (2021: £8,989k) in relation to a build contract. At the year-end
£3,983k (2021: £1,772k) is included in trade debtors and included within
other debtors is a loan of £5,125k (2021: £5,000k) at the year-end. During
the year the Group had purchases from Bertha Park Limited of £371k (2021:
£nil) 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
£000 £000
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 June 2021 New Leases On acquisition Cashflow Fair Value At 31 May 2022
£000 £000 £000 £000 £000 £000
Cash and cash equivalents 15,826 - (22,921) - 16,390
23,485
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
£46.3m. 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 £15.0m 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
£30.8m.
The acquisition also included Timber Systems, a timber frame factory near
Glasgow, for a consideration of £0.5m. 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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