REG - Springfield Props. - Interim Results
20/02/2024 07:00
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RNS Number : 6813D Springfield Properties PLC 20 February 2024
20 February
2024
Springfield Properties plc
("Springfield", the "Company", the "Group" or the "Springfield Group")
Interim Results
Springfield Properties (AIM: SPR), a leading housebuilder in Scotland focused
on delivering private and affordable housing, announces its interim results
for the six months ended 30 November 2023.
Financial Summary
H1 2024 H1 2023 Change
£m £m
Revenue 121.7 161.9 -25%
Private housing revenue 87.7 118.6 -26%
Affordable housing revenue 25.4 27.9 -9%
Contract housing revenue 1.9 10.6 -82%
Other revenue* 6.7 4.8 +39%
Gross margin 14.7% 14.0% +70bps
Administrative expenses** 12.6 14.7 -14%
Operating profit 4.8 7.6 -37%
Adj. operating profit** 5.6 8.2 -32%
Profit before tax 1.2 5.9 -80%
Adj. profit before tax** 2.0 6.6 -70%
Basic EPS (p) 1.00 4.24 -76%
Adj. basic EPS** (p) 1.59 4.68 -66%
Net bank debt 93.4 67.8 +38%
* Includes land sales of £5.2m (H1 2023: £3.7m)
** Adjusted to exclude exceptional costs of £0.9m (H1 2023: £0.6m) (See the
Financial Review for further detail)
H1 2024 Operational Summary
· Total completions of 432 (H1 2023: 673), in line with management
expectations, reflecting entering the year with a lower forward order book due
to challenging market conditions
· Private housing demand continued to be impacted by high interest
rates, mortgage affordability and reduced homebuyer confidence
· Recommenced engaging with affordable housing providers following the
Scottish Government increasing the affordable housing investment benchmarks
o Affordable housing contracts totalling c. £40.0m have been signed since
31 May 2023 for delivery in H2 2024 and beyond
· In response to market conditions, the Board adopted a strategy
focusing on maximising cash generation to reduce the Group's debt by year end,
including through:
o carefully managing working capital and curtailing speculative private
housing development by only commencing building homes when they are reserved
o sustained focus on cost control, with administrative expenses, excluding
exceptional items, being reduced to £12.6m (H1 2023: £14.7m)
o actively pursuing land sales to accelerate cash realisation from the
Group's large land bank - with sales totalling £18.0m agreed during and post
period, of which £15.0m is expected to be received in H2 2024
o pausing dividend payments until the bank debt is materially reduced
· Total owned land bank of 6,421 plots (31 May 2023: 6,712 plots), 86%
with planning permission (31 May 2023: 83%), and strategic options over a
further 3,217 acres (31 May 2023: 3,255 acres), equating to c. 32,200 plots -
one of the largest land banks in Scotland
· Progress made against the first-year objectives set within the
Group's ESG strategy and became the first housebuilder to participate in
NextGeneration's Core sustainability benchmarking initiative
Current Trading and Outlook
· On track to report results for FY 2024 in line with market
expectations, including meeting target to reduce net bank debt to
c. £55.0m by 31 May 2024
· Private housing reservation rates in calendar year 2024 are showing
initial signs of recovery with a return in homebuyer confidence
· Demand remains strong in affordable housing, with the Group confident
of signing further contracts in the near term
· Advanced negotiations are underway for further profitable land sales
· The Scottish Government's emergency rent cap is due to end on 1 April
2024, which offers the prospect of a return of investment in Scotland by
private rented sector ("PRS") providers
· Build cost inflation is continuing to reduce and stabilising around
2.5%
· Long-term fundamentals of the Scottish housing market remain strong
with an undersupply of housing across all tenures and greater private housing
affordability than the UK as a whole
· With a large number of sites with planning already in place, the
Group is able to quickly accelerate site development as market conditions
improve and is well-placed to satisfy pent-up demand for high-quality, energy
efficient housing in attractive locations across the country
Innes Smith, Chief Executive Officer of Springfield Properties, commented:
"Trading for the first half of the year was in line with our expectations, and
reflects the challenging market conditions experienced across the industry. To
mitigate the impacts of the downturn and ensure we are in a stronger position
for when trading conditions recover, we took decisive actions to maximise cash
generation and reduce our debt by year end. A key element of this was actively
pursuing profitable land sales. We are pleased to have agreed sales worth
£18m so far and we expect to conclude negotiations for further sales in the
near term.
"Looking ahead, we are encouraged by the improvement in private housing
reservations that we have experienced in recent weeks and the signs of
increasing homebuyer confidence, as has been reported by other housebuilders.
We are receiving strong demand in affordable housing - and have already signed
contracts worth c. £40m since 31 May 2023. We are also hopeful that the
ending of the Scottish Government's emergency rent cap in April 2024 will
enable a return of PRS activity. Alongside this, build cost inflation is
continuing to reduce and is expected to stabilise at low levels. We are on
track to meet our year-end target for net bank debt, which will continue to
reduce in the next financial year.
"The fundamentals of our business and our position within the Scottish housing
market remain strong. We have one of the largest land banks in Scotland with
over 6,421 owned plots, 86% of which has planning permission, and a further
3,217 acres of strategic land. We have an excellent reputation of offering
high quality, energy efficient homes in desirable locations in key housing
markets, and a track record of delivering developments exclusively for
affordable housing. In addition, there is an undersupply of housing of all
tenures, which can only be addressed through building new homes. As a result,
while there remains uncertainty in the near term, with our position having
been strengthened through the decisive action that we have taken, we remain
confident in Springfield's prospects."
Enquiries
Springfield Properties
Sandy Adam, Chairman +44 1343 552550
Innes Smith, Chief Executive Officer
Iain Logan, Chief Financial Officer
Singer Capital Markets
Shaun Dobson, James Moat, Oliver Platts +44 20 7496 3000
Gracechurch Group
Harry Chathli, Claire Norbury, Henry Gamble +44 20 4582 3500
Results Investor Webinar
Innes Smith, Chief Executive Officer, Iain Logan, Chief Financial Officer, and
Martin Egan, Chief Operating Officer, will be presenting to retail
shareholders via a webinar hosted by Equity Development at 12.45pm GMT on 22
February 2024. Investors can register their attendance for the webinar at the
following link:
https://www.equitydevelopment.co.uk/news-and-events/spr-investor-presentation-22feb2024
(https://www.equitydevelopment.co.uk/news-and-events/spr-investor-presentation-22feb2024)
A video recording of the presentation will be available shortly
afterwards here
(https://www.equitydevelopment.co.uk/research/tag/springfield-properties) .
Operational Review
In line with management expectations, the Group completed 432 homes in the six
months to 30 November 2023 (H1 2023: 673). This reflects the challenging
market conditions that resulted in the Group entering the year with a lower
forward order book than the previous year. With private housing reservations
significantly impacted by high interest rates, mortgage affordability and
reduced homebuyer confidence, the Group took the strategic decision to curtail
speculative private housing development by only commencing building homes when
they are reserved. The Board's focus is on maximising cash generation in order
to reduce the Group's debt.
A key element of this is the active pursuit of profitable land sales to
accelerate cash realisation from its large land bank, with one agreement being
signed during the period and two post-period end. Springfield has one of the
largest land banks in Scotland with 6,421 owned plots - 86% with planning
permission - and strategic options over a further 3,217 acres enabling the
Group to make land sales without impacting the Group's medium term development
pipeline.
During the period, the Group was pleased to recommence engaging with
affordable housing providers. This followed reducing cost price inflation and
an increase to the Scottish Government affordable housing investment
benchmarks. The Group's focus is on short-term contracts with lower pricing
risk, and it has been encouraged by the interest it is receiving, having
entered into c. £40m of contracts since 31 May 2023.
As a result of the decisive actions that have been taken during the period,
and with continued careful cost control, the Group is in a stronger position
to deliver future growth as more favourable economic and trading conditions
return.
Land Bank
A key element of the Group's strategy to reduce net debt is the active pursuit
of land sales. Land buying activity was also significantly reduced. The Group
entered an agreement for a profitable sale of land for £5.2m during the
period and a further two agreements totalling £12.8m post period. The Group
is in advanced discussions regarding further profitable land sales and
continues to be encouraged by the interest it is receiving in its land bank, a
large proportion of which already has planning permission.
At 30 November 2023, the Group had 6,421 owned plots (31 May 2023: 6,712) and
strategic options over a further 3,217 acres (31 May 2023: 3,255), equating to
c. 32,200 plots. This equates to five years of activity for the owned land
bank and 25 years for the strategic land bank.
Of the owned land bank, 86% (31 May 2023: 83%) had planning permission
(including detailed and outline planning), which provides an asset for cash
generation. The gross development value of the owned land bank at 30 November
2023 was £1.7bn (31 May 2023: £1.9bn).
Approximately 14% of the land under strategic option had planning permission
(31 May 2023: c. 14%).
At period end, the Group was active on 50 developments (31 May 2023: 50) and
during the period seven developments were completed and seven new developments
became active.
Private Housing
The Group entered the period with a lower forward order book than the previous
year, with reservation rates having been impacted in FY 2023 by increased
mortgage rates combined with ongoing cost-of-living pressures reducing
affordability and homebuyer confidence. There was a further negative impact
on demand at the beginning of the period following the Bank of England
increasing interest rates to 5% towards the end of June 2023. Sales levels
remained low over the summer weeks, with a traditional seasonal dip during the
school holidays, which continued once schools reopened in August. As a result,
and as described further above, the Group decided, in September, to
significantly curtail its speculative development activities and only build
homes when a reservation is secured. Reservation rates remained subdued, but
stable, throughout the remainder of the period. Consequently, the number of
private home completions for the period was 279 compared with 429 for the
first half of 2023.
However, the Group is pleased to note that there has been an improvement in
reservation rates, with the average weekly reservation rate since mid-January
2024 being 62% higher than for the Group's financial year to that point. While
near-term uncertainty remains, the Group is encouraged by the indications of a
return in homebuyer confidence.
The average selling price ("ASP") for private housing during the period
increased to £314k (H1 2023: £277k). This reflects increased selling prices
across all the Group's brands as well as changes in the housing mix.
As at 30 November 2023, the Group was active on 32 private housing
developments (31 May 2023: 32), with three active developments added during
the period and three developments completed. In total, as at 30 November 2023,
the owned private housing land bank consisted of 4,574 plots (31 May 2023:
5,075), of which 89% had planning permission (31 May 2023: 86%).
Village Developments
Springfield Villages are large, standalone developments that include
infrastructure and neighbourhood amenities. Each Village is designed to
deliver approximately 3,000 homes, primarily for private sale, but also
include affordable, and at Bertha Park, PRS housing, with ample green space
and community facilities.
The Group has three Villages that are well underway and already home to
thriving communities: Dykes of Gray, Dundee; Bertha Park, Perth; and Elgin
South (formally 'Linkwood Village'), Elgin. During the period, a section 75
agreement was reached with Stirling Council for 3,042 homes at Durieshill. The
Village was granted planning in 2019 and is believed to be the largest
detailed planning consent to have been granted in Scotland to date. With the
section 75 now in place, the Group has all consents required to commence work
on site, which is expected in calendar year 2024. At Elgin South, where there
were 27 completions in H1 2024 (H1 2023: 12), with a new phase of homes being
released for sale during the period.
In total (including homes delivered under contract), there were 46 private
housing completions at the Villages during the period (H1 2023: 60).
Affordable Housing
During the period, the Group recommenced engaging with affordable housing
providers, with a focus on 12-18 month contracts with lower pricing risk. This
followed the Scottish Government increasing the affordable housing investment
benchmarks and a reduction in levels of cost price inflation, which has
enabled housing associations to increase the price of affordable housing
contracts.
The Group is encouraged by the demand that it is receiving in affordable
housing, which offers high revenue visibility with low capital exposure and
strong cash flow dynamics. As previously announced, since 31 May 2023 the
Group has signed contracts with affordable housing providers totalling
c. £40.0m for delivery in the second half of the year and beyond, and is in
advanced negotiations regarding further contracts that it expects to be
awarded in H2 2024. The signed contracts include a contract with Highland
Housing Alliance, signed post period, that comprises a bulk sale element for
£4.2m, which is due to complete during the current financial year, and a
design and build element, worth £11.2m, with the majority to be recognised in
the next financial year. This bulk sale will support the Group's overall sales
rates as well as its efforts to maximise cash generation.
During the period, the Group completed 144 affordable homes (H1 2023: 175).
This reduction reflects the Group's decision in the previous year to pause
entering new affordable-only contracts until the economics became more
attractive in the inflationary environment. Average selling price was £177k
(H1 2023: £159k). This increase is partly due to the contribution to revenue
from a contract signed on 31 May 2023 to deliver 55 homes at Deans South in
Livingston. The number of active affordable housing developments was 15 at 30
November 2023 (31 May 2023: 15), with four active developments added during
the period and four developments completed. This included completing handovers
of another affordable-only development under the Group's local authority
framework agreement with Moray Council, bringing the total number of projects
completed in this framework to six.
As at 30 November 2023, the total owned affordable housing land bank consisted
of 1,847 plots (31 May 2023: 1,637), of which 78% had planning permission (31
May 2023: 79%).
Contract Housing
In contract housing, the Group provides development services to third party
private organisations and receives revenue based on costs incurred plus fixed
mark up. To date, this has largely consisted of services provided to Bertha
Park Limited, including homes across all tenures - private, affordable and PRS
housing.
At 30 November 2023, the contract housing land bank with planning consent
consisted of 594 plots (31 May 2023: 603). The nine homes completed during the
period (H1 2023: 69) comprised six private homes, two affordable homes and one
PRS home at Bertha Park Village. The reduction reflects no new phases of
private housing having been released, as the Group adopted a cautious approach
in private housing as described above, and the Group having completed its
existing PRS contract, which made a significant contribution to H1 2023
contract housing revenue. As previously noted, the Group's strategy to expand
PRS activity was put on hold following the introduction of rent control by the
Scottish Government in FY 2023. However, the Group is hopeful that
opportunities to build more PRS homes, particularly in its Village
developments, will return with the Scottish Government's emergency rent cap
scheduled to end on 1 April 2024.
Financial Review
Revenue H1 2024 H1 2023 Change
£'000 £'000
Private housing 87,674 118,626 -26.1%
Affordable housing 25,452 27,843 -8.6%
Contract housing 1,862 10,634 -82.5%
Other 6,697 4,827 +38.7%
TOTAL 121,685 161,930 -24.9%
For the six months ended 30 November 2023, revenue was £121.7m (H1 2023:
£161.9m), reflecting a reduction in revenue across most of the business as
described above. Private housing remained the largest contributor to Group
revenue, accounting for 72.1% (H1 2023: 73.3%) of total sales, with affordable
housing contributing 20.9% (H1 2023: 17.2%), contracting contributing 1.5% (H1
2023: 6.6%) and other revenue, which primarily consists of land sales,
contributing 5.5% (H1 2023: 3.0%).
Gross profit was £17.9m (H1 2023: £22.7m) due to the lower revenue. Gross
margin increased slightly to 14.7% (H1 2023: 14.0%), which primarily reflects
the improvement in gross margin in affordable housing. For H1 2024, build cost
inflation was c. 4%, compared with a peak of c. 30% during the prior year.
Administrative expenses, excluding exceptional items, were £12.6m (H1 2023:
£14.7m). This reflects the cost savings implemented and rationalisation
across the Group, generating annualised savings of c. £4m.
Finance costs were £3.7m (H1 2023: £1.7m), which represents greater bank
interest payments due to the rise in interest rates and the increase in bank
debt.
Exceptional items were £0.9m (H1 2023: £0.6m), which mainly relates to
restructuring costs involved with reducing the ongoing cost base of the Group.
Operating profit was £4.8m (H1 2023: £7.6m). Excluding exceptional items,
operating profit was £5.6m (H1 2023: £8.2m). Statutory profit before tax was
£1.2m (H1 2023: £5.9m) and adjusted profit before tax and exceptional items
was £2.0m (H1 2023: £6.6m).
Basic earnings per share (excluding exceptional items) were 1.59 pence (H1
2023: 4.68 pence). Statutory basic earnings per share were 1.00 pence (H1
2023: 4.24 pence).
Net bank debt at 30 November 2023 was £93.4m (31 May 2023: £61.8m; 30
November 2022: £67.8m). This figure does not include the £15.0m of
outstanding cash proceeds from land sales agreed during and post period that
are to be received by the end of the financial year.
The increase in net bank debt over the six-month period primarily reflects
£11.0m in scheduled deferred payments relating to the Group's acquisitions of
Tulloch Homes (being the last such payment) and Mactaggart & Mickel Homes
and £6.0m in contracted payments for land. It also reflects the usual working
capital cycle, with work-in-progress at the end of the first half, which will
unwind as houses complete in the second half of the year. The Group remains on
track to meet its target of reducing net bank debt to c. £55.0m by 31 May
2024.
During the period, a term loan of £18.0m was put in place with a repayment
date of 30 September 2024 to provide the Group with additional flexibility and
surety during the uncertain market conditions. For further details on the
Group's borrowings, see note 14.
Customer Satisfaction
The Group has set a target of 100% customer satisfaction to encourage
continuous improvement and is pleased to report satisfaction levels of 96%
from customers surveyed during the first half of the year - an increase over
the 92% achieved for H1 2023. All reservations during the period were managed
under new operating procedures that were implemented in accordance with the
New Homes Quality Board Code of Practice, which the Group activated in April
2023.
A programme to refresh websites of the Group's brands continued, with a new
website for Tulloch Homes launched in October 2023 and Mactaggart & Mickel
Homes post period. The websites are now part of a shared platform, ensuring a
consistently high user experience for customers as well as simplifying website
management for the Group.
In addition, during the period, the Group successfully passed its external
surveillance audit for its ISO 9001 (Quality Management) management system.
Build Quality and Efficiencies
Following a review of the house types offered across its brands, the Group has
streamlined its portfolio down to the most popular homes that are most
efficient to build and capable of accommodating future building standards to
maximise energy efficiency. The entire new range can be built efficiently
from timber kits at the Group's own factories and maximise the use of modern
methods of construction on site. The greater build efficiency will mitigate
the cost increases associated with new regulation. For all new planning
applications, homes for each brand are now selected from a portfolio of 40
house types ranging from 700sq.ft to 2,500sq.ft offering two bed to five bed
homes. Architecturally, the new portfolio has protected the quality, space and
character in house design, which differentiates the Group from other volume
housebuilders. This includes a mix of elevations for the interesting
streetscapes that Springfield is renowned for. The consistent build approaches
will enable the Group to increase the quality of its housing delivery.
Environment & People - ESG
The delivery of energy efficient homes within sustainable communities remains
at the heart of the Group's activities. The Village developments, in
particular, showcase the quality of the Group's award-winning placemaking
abilities.
During the period, the Group became the first housebuilder across the UK to
participate in NextGeneration's Core, which is a sustainability benchmark for
small to medium-sized home builders. The assessment confirmed the Group's
strengths in multiple areas, including its investment in employees,
place-making abilities and community engagement. It attested to the Group's
lead across the UK on the delivery of homes without fossil fuels, with over a
decade of experience in the use of air source heating systems, as well as a
head start in the use of modern methods of construction, delivering well
insulated homes constructed from timber kits.
The Group published an update on its ESG strategy in September 2023. A key
part of this was the development of the Group's pathway to net zero before
2045 with plans aligned with the Science Based Targets Initiative.
In addition, during the period, the Group successfully passed its external
surveillance audit for its ISO 14001 (Environment Management) management
system.
Markets
Within a UK context, the Scottish market is typically more stable than the
broader market and the South of England in particular. This is reflected in
the lower levels of house price inflation in recent years. With many regions
experiencing a decline in average house prices, it is notable that the average
house price in Scotland is expected to grow by 1.5% in 2024 (source: Rettie
(https://rettiecdn.co.uk/493590/ret00030_company-wide_doc_a4_14pp_final-1.pdf)
). This is partly due to the greater affordability in Scotland, characterised
by lower loan to income levels with data showing that it is cheaper to buy a
home than rent privately. The Group's private housing is also supported by the
Scottish missive system, which ensures that customers are contracted into the
purchase much earlier in the build programme.
Market conditions for Springfield and housebuilders across the UK were
challenging during the first half of the year, particularly within private
housing, which has continued post period. However, there was improvement
compared with prior periods, with a reduction in build cost inflation to below
5% and greater availability of materials and subcontractors. This is
particularly beneficial for affordable housing, which, along with the Scottish
Government increasing the affordable housing investment benchmarks, has become
more attractive.
Mortgage lenders have also already made significant downward shifts on
mortgage rates and the appetite from lenders for new build homes has remained
strong. The green credentials Springfield offers, with homes four times more
efficient than many on the second-hand market, help lenders meet their own
sustainability targets.
The Scottish Government rent policies continued to dampen demand from PRS
investors. However, with the emergency rent cap due to end on 1 April 2024,
the Group is hopeful that PRS providers will resume activity in Scotland in
the near future. With a large land bank in areas of high demand, and having
successfully delivered the first houses built specifically for private rent
in Scotland, the Group is well positioned to benefit from any return of PRS
housing development.
In addition, the Group is receiving strong interest in its land bank - and at
attractive valuations - which reflects the market preparing for an upturn in
trading conditions.
The fundamentals of the housing market in Scotland remain strong. There is an
undersupply of housing across all tenures, which is becoming more acute - as
evidenced by three local authorities, including Edinburgh and Glasgow
Councils, declaring housing emergencies and new Homes for Scotland research
finding that a quarter of households in Scotland have a housing need. New
housing is recognised as a key infrastructure requirement to support economic
development, such as the creation of the Inverness and Cromarty Firth Green
Freeport, which is due to bring £3.0bn of investment and c. 10,000 new jobs
into the region. With a strong landholding in the Highlands region, the Group
is well-placed to assist in delivering this infrastructure.
Dividend
As announced at the time of the FY 2023 results, while recognising the
importance of dividend payments to shareholders, the Board has resolved not to
declare a dividend until the Group's bank debt is materially reduced. The
Group's focus is on managing cash flow and reducing its debt so that it is
well positioned for as normalised market demand returns.
Outlook
The Group remains on track to report results for the year to 31 May 2024 in
line with market expectations, including a reduction in net bank debt to c.
£55.0m. The Board's confidence is based on the decisive actions taken in the
first half, the strong interest it is receiving in affordable housing and in
its land bank along with the improvement experienced in recent weeks in
private housing reservation rates. Alongside this, build cost inflation
continues to reduce and is expected to stabilise at around 2.5%.
Looking further ahead, the Group is encouraged by the indications of a return
in homebuyer confidence, with the average weekly reservation rate since
mid-January 2024 being 62% higher than for the Group's financial year to that
point. The interest that the Group is receiving in its land bank - and at
attractive valuations - reflects the market preparing for an upturn in trading
conditions. In addition, with the Scottish Government's emergency rent cap due
to end on 1 April 2024, the Group is hopeful that PRS providers will
recommence investing in Scotland.
The fundamentals of the business and of the housing market in Scotland remain
strong. The undersupply of housing, which is across all tenures, is
intensifying. The Group offers high quality, energy efficient homes in popular
locations across the country under multiple well established, reputable
brands. It has an excellent track record of delivering developments
exclusively dedicated to affordable housing and was the first housebuilder to
deliver houses specifically built for PRS. The Group has one of the largest
land banks in Scotland, 86% of which has planning permission. In addition, the
decisive actions that the Group has taken during the period, and continues to
take, put it in a stronger position to deliver future growth as more
favourable economic and trading conditions return.
Accordingly, while there remains near-term uncertainty, particularly in
private housing, the Board is confident in the Group's prospects for returning
to growth and in its ability to generate shareholder value.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE HALF YEAR ENDED 30 NOVEMBER 2023
Unaudited Period to Unaudited Period to Audited Year to
30 November 2023 30 November 2022 31 May 2023
Note
£000 £000 £000
Revenue 4
121,685 161,930 332,132
Cost of sales
(103,745) (139,235) (284,177)
Gross profit 4
17,940 22,695 47,955
Administrative expenses before exceptional items
(12,618) (14,713) (27,955)
5 (852) (643) (720)
Exceptional items
Total administrative expenses (13,470) (15,356) (28,675)
Other operating income
302 215 688
Operating profit
4,772 7,554 19,968
Finance income
63 66 133
Finance costs
(3,665) (1,700) (4,812)
Profit before taxation
1,170 5,920 15,289
Taxation 6
21 (896) (3,216)
Profit for the period and total comprehensive income 4
1,191 5,024 12,073
Profit for the period and total comprehensive income is attributable to:
- Owners of the parent
company
1,191 5,024 12,073
Earnings per share
Basic earnings per share 7
1.00p 4.24p 10.19p
Diluted earnings per share 7
0.97p 4.12p 9.90p
The Group has no items of other comprehensive income.
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED BALANCE SHEET - AS AT 30 NOVEMBER 2023
Unaudited Unaudited Audited
30 November 2023 30 November 2022 31 May
2023
Non-current assets Note £000 £000 £000
Property, plant and equipment 7,010 7,778 7,816
Intangible assets 5,824 5,665 5,953
Deferred taxation 1,784 1,893 1,783
Accounts receivable 5,000 5,381 5,000
19,618 20,717 20,552
Current assets
Inventories 276,783 283,786 277,633
Trade and other receivables 20,774 25,721 22,588
Corporation tax - 149 -
Cash and cash equivalents 10,097 19,369 8,909
307,654 329,025 309,130
Total assets 327,272 349,742 329,682
Current liabilities
Trade and other payables 33,797 62,954 55,788
Deferred consideration 10 3,752 14,023 11,785
Short-term obligations under lease liabilities 1,776 1,677 1,884
Provisions 12 721 821 1,710
Corporation tax 89 - 362
Bank overdraft 3,816 - -
43,951 79,475 71,529
Non-current liabilities
Long-term bank borrowings 99,696 87,208 70,673
Long-term obligations under lease liabilities 3,490 4,148 4,016
Deferred taxation 3,004 3,651 3,615
Deferred consideration 10 21,680 27,954 24,332
Contingent consideration 11 2,000 2,000 2,000
Provisions 12 2,206 1,819 2,884
132,076 126,780 107,520
Total liabilities 176,027 206,255 179,049
Net assets 151,245 143,487 150,633
Equity
Share capital 9 148 148 148
Share premium 9 78,744 78,744 78,744
Retained earnings 72,353 64,595 71,741
Equity attributable to owners of the parent company 151,245 143,487 150,633
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED Statement of Changes in Equity
FOR THE PERIOD ENDED 30 NOVEMBER 2023
Share capital Share premium Retained earnings Total
Note £000 £000 £000 £000
1 June 2022 148 78,744 64,635 143,527
Total comprehensive income for the period - - 5,024 5,024
Dividends 8 - - (5,568) (5,568)
Share-based payments - - 504 504
30 November 2022 148 78,744 64,595 143,487
Total comprehensive income for the period - - 7,049 7,049
Share-based payments - - 97 97
31 May 2023 148 78,744 71,741 150,633
Total comprehensive income for the period - - 1,191 1,191
Share-based payments - - (579) (579)
30 November 2023 148 78,744 72,353 151,245
The share capital accounts record the nominal value of shares issued.
The share premium account records the amount above the nominal value for
shares issued, less share issue costs.
Retained earnings represents accumulated profits less losses and
distributions. Retained earnings also includes share-based payments.
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED Statement of Cash Flows
PERIOD to 30 NOVEMBER 2023
Unaudited Unaudited Audited
Period to 30 November 2023 Period to 30 November 2022 Year to 31 May
2023
Cash flows generated from operations £000 £000 £000
Profit for the period 1,191 5,024 12,073
Adjusted for:
Exceptional items 852 643 720
Taxation charged (21) 896 3,216
Finance costs 3,665 1,700 4,812
Finance income (63) (66) (133)
Adjusted operating profit before working capital movement 5,624 8,197 20,688
Exceptional items (852) (643) (720)
Gain on disposal of tangible fixed assets (103) (91) (312)
Gain on disposal of investment - (158) (158)
Share-based payments (579) 504 601
Non-cash movement - 95 -
Amortisation of intangible fixed assets 130 123 255
Depreciation of tangible fixed assets 1,210 1,061 2,257
Operating cash flows before movements in working capital 5,430 9,088 22,611
Decrease/(increase) in inventory 850 (8,346) (3,251)
Decrease/(increase) in trade and other receivables 1,858 (4,023) (404)
Decrease in trade and other payables (23,633) (6,170) (10,818)
Net cash (used in)/generated from operations (15,495) (9,451) 8,138
Taxation paid (863) (1,153) (2,900)
Net cash (outflow)/inflow from operating activities (16,358) (10,604) 5,238
Investing activities
Purchase of property, plant and equipment (91) (172) (478)
Proceeds on disposal of property, plant and equipment 133 109 427
Proceeds on disposal of investment - 678 678
Deferred consideration paid on acquisition of subsidiary (10,692) (4,450) (6,138)
Acquisition of subsidiary, net of cash acquired - (11,212) (15,867)
Purchase of intangible assets - (30) (30)
Interest received 1 - -
Net cash used in investing activities (10,649) (15,077) (21,408)
Financing activities
Proceeds from bank loans 29,023 36,722 20,187
Payment of lease liabilities (1,185) (973) (2,147)
Dividends paid - (5,568) (5,568)
Interest paid (3,459) (1,521) (3,783)
Net cash inflow from financing activities 24,379 28,660 8,689
Net (decrease)/increase in cash and cash equivalents (2,628) 2,979 (7,481)
Cash and cash equivalents at beginning of period 8,909 16,390 16,390
Cash and cash equivalents at end of period 6,281 19,369 8,909
The accompanying notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL StatementS
FOR THE PERIOD ENDED 30 NOVEMBER 2023
1. Organisation and trading activities
Springfield Properties PLC ("the Group") 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, IV30 6GR.
The consolidated interim financial statements for the Group for the six month
period ended 30 November 2023 comprise the Company and its subsidiaries. The
basis of preparation of the consolidated interim financial statements is set
out in Note 2 below.
The financial information for six month period ended 30 November 2023 is
unaudited. It does not constitute statutory financial statements within the
meaning of Section 434 of the Companies Act 2006. The consolidated interim
financial statements should be read in conjunction with the financial
information for the year ended 31 May 2023, which has been prepared in
accordance with International Accounting Standards in conformity with the
requirements of the UK adopted international accounting standards. The
statutory financial statements for year ended 31 May 2023 have been delivered
to the Registrar of Companies. The auditors' report on those financial
statements was unqualified, did not draw attention to any matters by way of
emphasis, and did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006.
2. Basis of preparation
The interim financial statements have been prepared in accordance with IAS 34
- Interim Financial Reporting and in accordance with UK adopted international
accounting standards.
The interim financial statements have been prepared on a going concern basis
and under the historical cost convention, except for contingent consideration.
The preparation of financial information requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. These are also disclosed in the 31 May
2023 year-end financial statements and there have not been any changes.
Although these estimates are based on management's best knowledge of the
amounts, events or actions, actual events may ultimately differ from those
estimates.
The interim financial statements do not include all financial risk information
and disclosures required in the annual financial statements and they should be
read in conjunction with the financial information that is presented in the
Group's audited financial statements for the year ended 31 May 2023. There has
been no significant change in any risk management polices since the date of
the last audited financial statements.
Going Concern
The Group's performance in the six months to November 2023 is in line with
management expectations and the Group is on track to report results for the
year to May 2024 in line with market expectations, including meeting the
target to reduce net bank debt to c. £55m.
Challenging market conditions resulted in the Group entering the year with a
lower forward order book than the previous year. The Group took the strategic
decision to curtail speculative private housing development by only commencing
building homes when they are reserved.
The Board's focus is on maximising cash generation in order to reduce the
Group's debt to be in a stronger position for when normalised market demand
returns. A key element to reduce debt is the active pursuit of land sales.
During the period, the Group entered into an agreement for a profitable sale
of land for a consideration of £5.2m; sales totalling £12.8m were agreed
post period; and the Group is in discussions regarding further land sales.
The Group is encouraged by the demand that it is receiving in affordable
housing. As previously announced, since May 2023 the Group has signed
affordable housing contracts totalling c. £40.0m for delivery in the second
half of the year and beyond, and is in advanced negotiations regarding further
contracts that it expects to be awarded in H2 2024.
The Group continues to have a strong relationship with the Bank of Scotland -
the revolving credit facility of £87.5m has an expiry date in January 2025
and the Group also has a £12.5m overdraft facility in place until September
2024 as well as an £18.0m term loan which is repayable by September 2024.
The Group prepared revised projections in December 2023 to cover the years to
May 2024 and May 2025 - these projections form the basis of the assessment to
confirm the appropriateness of the going concern basis being adopted for the
preparation of these consolidated interim financial statements.
The Directors are confident that the Group has adequate resources to continue
in operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing these half year
financial statements.
3. Accounting Policies
The accounting policies used in preparing these interim financial statements
are the same as those set out and used in preparing the Group's audited
financial statements for the year ended 31 May 2023.
Principal risks and uncertainties
As with any business, Springfield Properties PLC faces a number of risks and
uncertainties in the course of its day to day operations.
The principal risks and uncertainties facing the Group are outlined within our
latest annual financial statements for the year ended 31 May 2023. We have
reviewed these risks and uncertainties which remain relevant for both the 6
months to 30 November 2023 and the full financial year to 31 May 2024. We
continue to manage and mitigate these where relevant.
Exceptional items
Exceptional items are those material items which, by virtue of their size or
incidence, are presented separately in the consolidated 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, costs relating to changes in share capital structure
and restructuring costs.
Restructuring costs relate to a review of our business to identify areas for
greater efficiency and rationalisation.
4. Segmental Analysis
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.
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
Revenue £000 £000 £000
Private residential properties 87,674 118,626 253,362
Affordable housing 25,452 27,843 53,931
Contracting 1,862 10,634 19,681
Other 6,697 4,827 5,158
Total Revenue 121,685 161,930 332,132
17,940 22,695 47,955
Gross Profit
Administrative expenses (12,618) (14,713) (27,955)
Exceptional items (852) (643) (720)
Other operating income 302 215 688
Finance income 63 66 133
Finance expense (3,665) (1,700) (4,812)
Profit before tax 1,170 5,920 15,289
Taxation 21 (896) (3,216)
Profit for the period 1,191 5,024 12,073
5. Exceptional items
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Restructuring costs 852 276 349
Acquisition and other transaction related costs (1) - 367 371
Exceptional items 852 643 720
(1) Acquisition and other tractions costs relating to acquiring
the business of Mactaggart and Mickel Group Limited
6. Taxation
The results for the six months to 30 November 2023 include a tax credit of
1.8% on profit before tax (November 2022: tax charge of 15.1%; May 2023:
21.0%), representing the best estimate of the average annual effective tax
rate expected for the full year, applied to the pre-tax income of the six
month period.
7. Earnings per share
The calculation of the basic (and diluted) earnings per share is based on the
following data:
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to
31 May 2023
Earnings £000 £000 £000
Profit for the period attributable to owners of the company 1,191 5,024 12,073
Adjusted for the impact of tax adjusted exceptional costs in the year 689 521 652
Adjusted earnings 1,880 5,545 12,725
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
Number of Shares
Weighted average number of ordinary shares for the purpose of basic earnings 118,508,946 118,469,399 118,478,254
per share
Effect of dilutive potential ordinary shares: share options 4,148,351 3,377,930 3,507,257
Weighted average number of ordinary shares for the purpose of diluted earnings 122,657,297 121,847,329 121,985,511
per share
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
Earnings per ordinary share
Basic earnings per share 1.00p 4.24p 10.19p
Diluted earnings per share 0.97p 4.12p 9.90p
Adjusted per ordinary share ((1))
Basic earnings per share 1.59p 4.68p 10.74p
Diluted earnings per share 1.53p 4.55p 10.43p
(1) Adjusted earnings is presented as an additional performance
measure and it stated before exceptional items and is used in adjusted EPS
calculation.
8. Dividends
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Final dividend - y/e 31 May 2022 - 5,568 5,568
- 5,568 5,568
While recognising the importance of the dividend to shareholders, the Board
has resolved not to propose an interim dividend for FY 2024 as a measure to
preserve liquidity in response to market conditions.
9. Share Capital
The Company has one class of ordinary share which carries 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 December 2022 118,469,399 148 78,744
Share issue 26,602 - -
At 31 May 2023 118,496,001 148 78,744
Share issue 87,308 - -
At 30 November 2023 118,583,309 148 78,744
During the period, 87,308 (May 2023: 26,602) shares were issued in
satisfaction of share options exercised for a consideration of £109 (May
2023: £33).
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) £362,300 paid April 2022 (ii) £6,137,700 paid December 2022
and (iii) £6,500,000 paid August 2023. The outstanding discounted amount
payable at the period end is £nil (30 November 2022: £12,611,876; 31 May
2023: £6,493,552).
As part of acquiring the business of Mactaggart & Mickel Group Limited,
there is a further £30,781,108 of deferred consideration payable. This is
payable quarterly in arrears as homes are sold over 5 years, commencing in
September 2023. The outstanding discounted amount payable at the period end is
£25,431,557 (30 November 2022: £29,365,111; 31 May 2023: £29,623,127).
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Deferred consideration < 1 year 3,752 14,023 11,785
Deferred consideration > 1 year 21,680 27,954 24,332
25,432 41,977 36,117
11. Contingent consideration and contingent liabilities
As part of the purchase agreement of Dawn Homes Holdings Limited there is 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 provision of £2,000,000 based on
80% probability. The outstanding amount payable at the period end included
within Provisions is £2,000,000 (30 November 2022: £2,000,000; 31 May 2023:
£2,000,000).
The remaining £500,000 has been treated as a contingent liability due to the
uncertainty over the future payment.
Contingent consideration Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Dawn Homes Holdings Limited 2,000 2,000 2,000
2,000 2,000 2,000
Contingent liabilities Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Dawn Homes Holdings Limited 500 500 500
500 500 500
12. Provisions
Dilapidation provisions are included for all rented buildings within the
Group. Maintenance provisions relate to costs to come on developments where
the final homes have been handed over. In the prior period, an onerous lease
provision had been created due to the closure of the Walker office in
Livingston.
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Dilapidation provision 179 177 169
Onerous contracts provision 585 - 353
Maintenance provision 2,163 2,463 4,072
2,927 2,640 4,594
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Provisions < 1 year 721 821 1,710
Provisions > 1 year 2,206 1,819 2,884
2,927 2,640 4,594
13. Transactions with related parties
Other related parties include transactions with a retirement scheme in which
the directors are beneficiaries, and close family members of key management
personnel. During the period dividends totalling £nil (November 2022:
£1,854k; May 2023: £1,854k) were paid to key management personnel.
During the period the Group entered into the following transactions with
related parties:
Sale of goods Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Bertha Park Limited ((1)) 1,907 8,090 13,751
Other entities which key management personnel have control, significant 19 45 76
influence or hold a material interest in
Key management personnel 27 189 244
Other related parties 46 17 1
1,999 8,341 14,072
Sales to related parties represent those undertaken in the ordinary course of
business.
Purchase of goods Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Entities which key management personnel have control, significant influence or 10 17 325
hold a material interest in
Other related parties 314 118 1,616
324 135 1,941
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022
Audited
Year to 31 May 2023
Rent paid to £000 £000 £000
Entities which key management personnel have control, significant influence or
hold a material interest in
81 81 162
Key management personnel - 3 3
Other related parties 50 50 100
131 134 265
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022
Audited
Year to 31 May 2023
Interest received from £000 £000 £000
Bertha Park Limited ((1))
63 63 125
63 63 125
The following amounts were outstanding at the reporting end date:
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022
Audited
Year to 31 May 2023
Amounts receivable £000 £000 £000
Bertha Park Limited ((1)) 6,804 10,022 8,524
Entities which key management personnel have control, significant influence or
hold a material interest in
10 4 5
Key management personnel 18 40 -
Other related parties 15 4 -
6,847 10,070 8,529
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022
Audited
Year to 31 May 2023
Amounts payable £000 £000 £000
Entities which key management personnel have control, significant influence or
hold a material interest in
18 32 62
Other related parties 643 43 678
661 75 740
Amounts owed to/from related parties are included within creditors and debtors
respectively at the period-end. No security has been provided on any
balances.
Transactions between Group companies, which is a related party, have been
eliminated on consolidation and are not disclosed in this note.
((1) Bertha Park Limited, a company in which Sandy Adam and Innes Smith are
shareholders and directors.)
14. Analysis of net debt
Unaudited Period to 30 November 2023 Unaudited Period to 30 November 2022 Audited
Year to 31 May 2023
£000 £000 £000
Cash in hand and bank 10,097 19,369 8,909
Bank borrowings (103,512) (87,208) (70,673)
Net bank debt (93,415) (67,839) (61,764)
Lease (5,266) (5,825) (5,900)
Net debt (98,681) (73,664) (67,664)
Deferred consideration (25,432) (41,977) (36,117)
(124,113) (115,641) (103,781)
Reconciliation of net cashflow to movement in net debt is as follows:
At 30 November 2023
At 1 June 2023 New Leases Cashflow Fair Value
£000 £000 £000 £000 £000
Cash in hand and bank 8,909 - 1,188 - 10,097
Bank borrowings (70,673) - (32,839) - (103,512)
Net bank debt (61,764) - (31,651) - (93,415)
Lease (5,900) (490) 1,185 (61) (5,266)
Net debt (67,664) (490) (30,466) (61) (98,681)
Deferred consideration (36,117) - 10,692 (7) (25,432)
(103,781) (490) (19,774) (68) (124,113)
The Group has a revolving credit facility of £87.5m with an expiry date of
January 2025. The facility attracts an interest rate of 2.15% per annum above
Bank of England SONIA (Sterling overnight index average response rate). A term
loan of £18.0m is in place with a repayment date of 30 September 2024. The
facility attracts an interest rate of 2.75% per annum above Bank of England
SONIA. An overdraft facility of £12.5m is in place until 30 September 2024
and attracts an interest rate of 3.0% per annum above Bank of England base
rate.
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. END IR SFUESUELSESERecent news on Springfield Properties
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