Company Registration No. SC031286 (Scotland)
SPRINGFIELD PROPERTIES PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2019
CONTENTS
Strategic Report
Company Information
Financial Highlights
Executive Chairman’s Statement
Chief Executive’s Statement
Chief Financial Officer’s Review
Company Overview and Risks
Corporate Governance
Board of Directors
QCA Code Compliance
Audit Committee Report
Remuneration Committee Report
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Financial Statements
Consolidated Profit and loss Account
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Company Statement of Cash Flows
Notes to the Company Financial Statements
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COMPANY INFORMATION
DIRECTORS:
Mr Sandy Adam
Mr Innes Smith
Ms Michelle Motion
Mr Roger Eddie (non-executive)
Mr Matthew Benson (non-executive)
Mr Nick Cooper (non-executive)
Mr Colin Rae (non-executive)
SECRETARY:
Mr Andrew Todd
REGISTERED OFFICE:
Alexander Fleming House
8 Southfield Drive
ELGIN
IV30 6GR
COMPANY REGISTRATION NUMBER:
SC031286 (Scotland)
INDEPENDENT AUDITOR:
NOMINATED ADVISER AND BROKER:
SOLICITORS:
Johnston Carmichael LLP
Commerce House
South Street
ELGIN
IV30 1JE
N+1 Singer LLP
1 Bartholomew Lane
London
EC2N 2AX
Kerr Stirling LLP
10 Albert Place
STIRLING
FK8 2QL
Burness Paull LLP
50 Lothian Road
Festival Square
EDINBURGH
EH3 9WJ
Pinsent Masons LLP
141 Bothwell Street
GLASGOW
G2 7EQ
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
The Directors’ present their strategic report for the Group for the year ended 31 May 2019.
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED 31 MAY 2019
Group
Revenue
Group
Completions
+36%
2019: £190.8m
2018: £140.7m
+24%
2019: 952 homes
2018: 770 homes
Group
Adjusted
PBT*
+69%
2019: £16.5m
2018: £9.8m
Private Homes
Revenue
+41%
2019: £143.3m
2018: £101.9m
Affordable
Homes
Revenue
+15%
2019: £42.9m
2018: £37.3m
Group
Revenue
Gross profit
Adjusted operating profit*
Adjusted profit before tax*
Earnings per share*
Net debt
2018/19
£m
190.8
34.3
17.6
16.5
13.92p
29.6
2017/18
£m
140.7
22.1
10.7
9.8
10.78p
15.3
Change
%
+35.6%
+55.1%
+65.3%
+69.2%
+29.1%
+93.8%
*Adjusted excludes exceptional items. Exceptional items are costs relating to acquisition of Walker Group (2018 - Dawn Homes and IPO costs relating to
existing ordinary shares).
Strategic and Operational Highlights
£31m net acquisition of Walker Group
Increased land bank by 3,462 plots to 15,938 plots
Achieved strong revenue and gross margin growth across the business
Gross development value of land bank increased to £3.2bn
Strong first full year contribution from Dawn Homes
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
EXECUTIVE CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 MAY 2019
I am pleased to report another year of strong growth for Springfield. We increased our revenue from both
private and affordable housing and achieved significant improvement in gross margin. We made great
progress with our Village developments, with the most advanced becoming attractive new places with new
communities putting down roots. We expanded our geographic presence and the scale of our business with
the acquisition of Walker Group, a provider of high-quality homes in the Edinburgh commuter belt, and by
securing land for a fifth Village development at Gavieside. This operational and financial progress across the
Group puts us in a stronger position than ever before.
People
The skill and hard work of our employees are a vital part of our success. We now have over 700 employees
and more than 400 subcontractors, which makes us one of Scottish housebuilding’s leading employers.
During the year, we welcomed the team from Walker Group to Springfield. We have been very pleased with
the expertise they have added and with how well the acquisition has become integrated in the Group.
We believe that if we look after our employees they, in turn, will look after our customers. We are proud of
how well we retain employees, with the average length of service being 5.1 years, staff retention being 89%
in the year to May 2019 and ten of the original fourteen Springfield staff are still working with the Group today.
This loyalty is also reflected in the number of employees who have invested in our Save As You Earn Scheme
to share in the success of our business, with over 68% of employees having joined the scheme when it
launched in November 2017.
One of the most rewarding aspects of my job is seeing people develop their true potential and reach levels
they never thought were possible. A key part of our ethos is training and development, and we encourage
our employees to take new opportunities to help them grow. This improves job satisfaction for our employees
and helps make sure we have the right people, with the right skills to support growth. We also work with
external partners in the public and private sectors to bring in new talent. Currently we are supporting 21% of
staff in further education, training and apprenticeships.
On behalf of the Board, I would like to thank all of our employees for their continued hard work and dedication.
I would also like to extend my thanks to our subcontractors and suppliers for their valued contribution to our
business.
Community
At Springfield, we are passionate about supporting the local community in areas where we are building
homes. This can involve sponsorships, running local events, fundraising for local charities, donating to
foodbanks or providing talks at local schools, and we were active in doing this during the year. We also work
with local communities as part of the planning process.
At our Villages, we are delivering attractive, welcoming and sustainable new places. We already build the
homes our customers want and now we are creating the places they want to live, new villages which include
everything a community needs to become established and thrive. At the design stage we pay great attention
to including public spaces, indoor and outdoor. At an early stage of development, we complete key aspects
such as playparks and central landscaping and we create opportunities for people in the Village to come
together.
We were delighted this year with the installation of public art at Dykes of Gray, in partnership with Dundee
City Council. The project, which is ongoing, is contributing to giving this new place and its community a sense
of identity. To celebrate the first installation, we held a BBQ for the Dykes of Gray community, including
activities for children. The project also led to our engagement with local schools on arts projects.
The vision of our designers is shaping the new built environment of the future Scotland, it is a great privilege
to be able to design and build new Villages throughout our country. We are very aware that with this privilege
comes the knowledge that our work will be on view for centuries to come and the responsibility to create
places that can flourish.
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
EXECUTIVE CHAIRMAN’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
In delivering affordable housing, we help Local Authorities and Housing Associations provide much needed
new affordable homes to meet the current national shortfall. We are particularly proud of the specialist
facilities that we provide, primarily for the elderly but also bespoke properties with modifications for people
with disabilities or health issues. This year, we have begun building apartments specially designed for those
aged over 55. The blocks include lifts and measures to help manage declining memory in older age enabling
people to live independently for longer.
Housing market
We continue to be supported by strong market drivers in both private and affordable housing. The demand
for housing in Scotland is outstripping supply at a time when interest rates are low and there is good mortgage
availability, supporting an increase in average house prices. For the first half of calendar year 2019, house
prices in Scotland increased by 1.3% annually – compared with 0.9% for the UK as a whole. Indeed, average
house prices in Scotland have grown faster than the UK annual rate in all but two months since December
2017. Sales volumes in Scotland for 2019 to end April increased over the same period in 2018, compared
with a decline for the UK as a whole, further indicating a buoyant market. The Scottish Government continues
to focus on bolstering levels of affordable housing as it seeks to hit its target of building 50,000 new affordable
homes by 2021.
Dividends
The Board is pleased to recommend a final dividend of 3.2p per share (2017/18: 2.7p), subject to shareholder
approval at the next AGM, with an ex-dividend date of 31 October 2019, a record date of 1 November 2019
and a payment date of 18 November 2019. This brings the total dividend for the year, including the interim
dividend already paid, to 4.4p per share (2017/18: 3.7p), an 18.9% increase over the previous year.
We remain confident in Springfield’s prospects and expect to continue to pay a regular dividend in line with
our dividend policy.
Board
I would like to thank my colleagues on the Board for their ongoing support and contribution as we delivered
another year of growth and significantly scaled up our business. At the beginning of the year, I was delighted
to welcome Nick Cooper to the Board of Springfield. Having worked for several companies during a period
of accelerated growth, Nick brings extensive corporate and operational experience and is a great resource
to the Board. The Board was further strengthened last week with the addition of Colin Rae, a Chartered
Quantity Surveyor with nearly 40 years’ experience in the construction and housebuilding industries. He most
recently held leadership positions at Places for People, one of the largest development, regeneration and
property management companies in the UK, including Group Executive Development Director. Colin brings
considerable industry experience and expertise in building large-scale development and regeneration
projects across Scotland and the wider UK.
We value dialogue with our shareholders and the AGM is an important opportunity for this communication.
We were pleased to see so many shareholders at our first AGM as a public company and we look forward to
another great attendance this year.
The Board also recognises the importance of strong corporate governance. We continue to establish policies
and procedures as we expand our business to ensure that we are complying with corporate governance
regulation and meeting standards of best practice.
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
EXECUTIVE CHAIRMAN’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Future
Throughout our history, Springfield’s strategies have been designed to secure growth and future-proof the
business. We have been successful in achieving this in the past and this continues to be our focus for the
future.
It is nearly two years now since we floated Springfield on AIM. The flotation and the capital raised have
helped Springfield to continue its expansion and growth. Indeed, with the opportunities we have been able
to take as a result of listing on AIM, growth in the last two years has exceeded my original expectations.
At the core of our success is our dedication to customers and quality. We believe that everyone in Scotland
deserves a great place to live. There is a need for more homes countrywide and we address this need by
providing high-quality homes for private sale, whether to first time buyers or those already on the housing
ladder, and by providing affordable homes through our partnerships with Housing Associations and Local
Authorities.
Our strength in delivery is thanks to our highly experienced Board and senior management team; our in-
house expertise; the skills of our employees who are able to develop projects from start to finish, including
complex sites; and our strong reputation and relationships with our partners. These strengths are part of our
culture and are the basis for our future success.
While our primary focus is now on progressing our existing land bank and embedding our acquisitions, we
continually monitor the market for opportunities to accelerate our growth via geographic expansion. This can
be achieved through negotiation with individual landowners, as is the case with our recent expansion into
Inverness and the Highlands, as well as through bulk additions with acquisitions such as Dawn Homes and
Walker Group.
In conclusion, with our strong land bank of nearly 16,000 plots progressing through planning towards
development with private and affordable housing, the great progress that we’re making with our Village
developments and sustained market drivers, we are well-positioned for continued growth. On behalf of the
Board, I thank our shareholders for their support and look forward to providing further updates on our
achievements.
Sandy Adam
Executive Chairman
23 September 2019
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT
FOR THE YEAR ENDED 31 MAY 2019
This was another great year for Springfield as we delivered on all of our targets and strengthened our ability
to deliver sustained growth. In particular, our investments in the acquisition of Dawn Homes, Walker Group
and our four high calibre managing directors have greatly enhanced our business. None of this would have
been possible without the skill and hard work of our employees, for which we thank them. With a great
product, an able team and sustained demand for housing in Scotland, we have established a solid pipeline
and remain on track to deliver continued growth in line with market expectations.
Operational Review
Springfield made significant operational progress during the year to 31 May 2019, with strong growth in sales
and completions, a substantial increase in the land bank as well as the scale of the business and excellent
progress on the Village developments.
Total completions increased 23.6% to 952 homes (2017/18: 770), reflecting growth in our delivery
of private and affordable housing.
Our acquisition of Walker Group added 10 new developments and strengthened our presence in
Edinburgh’s commuter belt, where house prices and price growth are above the national average.
Dawn Homes, which we acquired at the end of the previous financial year, continued to perform
strongly, in line with management’s expectations.
Early in the year, we secured our fifth Village development at Gavieside, Livingston, which is also
in Edinburgh’s commuter belt.
Land Bank
At year end we were active on 43 developments (31 May 2018: 41) and during the year:
22 new active developments were added while 20 developments were completed;
the land bank was increased by 27.7% to 15,938 plots (31 May 2018: 12,476);
overall, we secured 4,719 plots in 21 locations;
we added 994 consented plots over 13 developments to the land bank, including 533 plots on 7
developments from the Walker Group acquisition; and
as of 31 May 2019, 28.4% of our land bank had planning consent (31 May 2018: 39.5%).
The expansion in the land bank was primarily through the acquisition of Walker Group during the year which
added 10 developments in a single transaction and significantly strengthened the Group’s visibility over
projections for the next three years, as well as securing land for a new Village at Gavieside, Livingston.
The change in the proportion of plots with planning primarily reflects the expansion in the size of the total
land bank with the addition of new plots at an earlier stage of development.
Private Housing
We deliver private homes on developments of various size, across Central, West and the North of Scotland
under our Springfield, Dawn Homes and Walker Group brands. This includes the standalone Village
developments, each with up to 3,000 plots and the infrastructure and amenities needed for a village
community to become established. Springfield homes are differentiated by their high-quality specification and
a wide variety of personalised finishes.
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
During the year, in private housing delivery:
we completed 630 homes, representing an increase of 37.0% over the previous year (2017/18:
460);
the average selling price of our private housing was £227k compared with £222k for 2017/18;
our active private housing developments grew to 29 (31 May 2018: 23), with 14 active developments
added during the year while eight developments were completed;
in total, the private housing land bank was expanded to 11,511 plots on 62 developments (31 May
2018: 8,757 plots on 50 developments);
we added 805 consented plots for private housing to the land bank, including 533 from the Walker
Group acquisition and 5,020 plots were the subject of planning applications; and
as at 31 May 2019, 29.6% of private plots had planning consent (31 May 2018: 41.7%), with 43.6%
of plots going through the planning process and 26.7% at the pre-planning stage.
The increase in average selling price was primarily due to the addition of Walker Group, which operates in
locations where there are higher average property prices, and rising property prices.
Village Developments
We made excellent progress in the development of our Villages, with their appeal strengthening as they
become increasingly established.
At Dykes of Gray near Dundee, 178 homes were occupied as at 31 May 2019 (31 May 2018: 108). We
continued to progress the development of community infrastructure, including extensive planting throughout
the Village, particularly in central areas, and the opening of a grass sports pitch and cycling and walking
routes. A third party began construction of a children’s nursery post period and a convenience store is
expected to open in the first half of the current financial year, which reflects Dykes of Gray becoming
sufficiently established to support new businesses. During the year, we received planning approval to remix
an area which will broaden the offer at the Village, and a planning application was submitted for the next
phase of Dykes of Gray comprising 218 homes with community infrastructure, including a primary school.
The planning decision on this application is expected in the first half of the current financial year.
At Bertha Park near Perth, the first owners moved in during the year and 34 homes were occupied by 31
May 2019. Development of the central landscape features progressed and works, led by the Local Authority,
on a new major road that connects the Village directly to Perth were completed and have facilitated a public
transport link. The first six business units also reached an advanced stage of construction with occupation
expected to begin from October. Post period, during August, Bertha Park Secondary School was opened to
its first pupils. The school is the first entirely new secondary school to be established in Scotland for more
than 15 years and is the first Microsoft Flagship School in the UK.
We commenced on-site construction at Linkwood, Elgin, where the first phase will comprise 870 homes and
community facilities, provided by third parties, including a primary school, which is under construction, and a
sports centre, which opened post period. At Durieshill, Stirling, which is a 3,042-home Village development,
proposals are at an advanced stage with planning consent expected towards the end of 2019.
During the year, we secured approximately 400 acres of zoned land at Gavieside, Livingston, which is in the
Edinburgh commuter belt, for a fifth Village development. We designed the masterplan, which generated an
increase in the anticipated number of plots to 2,500 and, post period, we submitted a detailed planning
application for the first phase 502 homes, play areas and up to eight business units, which will provide
employment and services for local people.
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Other Private Housing Highlights
We progressed sales of private homes on 25 developments during the year (excluding Walker Group
acquisition), which have a total of 506 homes. Private housing, excluding the contribution from Villages, made
up 81% of total private housing revenue (2017/18: 84%).
In the North of Scotland, highlights included receiving planning consent for, and launching sales of, a further
113 houses at Meadow Lea, Nairn, and the submission of a planning application to build an additional 316
homes in nearby Forres, with a decision expected in the first half of the current financial year. In both
locations, sales rates have consistently demonstrated the popularity of this area, with buyers camping out
overnight to secure a home at the sales launch of Meadow Lea and 30 homes being sold in the year at
Forres. A further highlight was selling 56 homes during the year at one of our Elgin developments, The
Range.
The launch of sales at Dornoch extended the Group’s geographical reach to the North of Inverness, and we
increased our presence in quality locations in the Highlands by securing a development in Beauly, for 25
private homes. Post period, we achieved a key milestone with a land acquisition in Inverness, which will be
a development for approximately 90 homes at Easterfield. This adds to our developments at Drumnadrochit
and Ardersier, expanding our geographic reach and strengthening our foothold in the Highland region of
Scotland.
At The Wisp, a large development area for 200 homes in South East Edinburgh, there were 38 completions.
We received a planning permission in principle for the next phase of housing and submitted the planning
application for 139 apartments, comprising 104 private and 35 affordable homes. Elsewhere in Central
Scotland, good progress was made in sales and construction at Kinross, including the opening of a show
home, and 66 homes were handed over at Hamilton Road, Motherwell.
Advances were made on the Dawn Homes developments, which we acquired at the end of the previous year,
including the submission of a detailed planning application for 147 homes at Neilston, which is located on the
outskirts of Glasgow, and an application for 149 homes in Glenmavis, Airdrie. Planning Application Notices
have also been submitted for 100 homes in Irvine. Consent was granted, post period, for the second phase
of 70 homes at Cambuslang.
We also moved forward with the Walker Group developments following the acquisition in the second half of
the year. At Dalhousie South, immediately post period, we received planning approval for 240 private homes
and approval for 78 homes at Dalhousie B where we started construction. At Tranent, near Edinburgh,
planning permission in principle for 561 homes was also released immediately after the period.
Affordable Housing
We develop affordable housing in partnership with Local Authorities, Housing Associations or other public
bodies. This can be alongside private housing under Section 75 Agreements with Local Authorities (whereby
private developers agree to make a contribution of housing, money or infrastructure as a condition of planning
permission) or on standalone developments that consist entirely of affordable homes.
9
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
During the year, in affordable housing delivery:
the number of completions grew to 322 homes (2017/18: 310);
the average selling price increased to £133k (2017/18: £120k) due to changes in sales mix; and
at 31 May 2019, we were operating on 14 active affordable housing developments (31 May 2018:
18), of which six were affordable-only developments (31 May 2018: 13) with the reduction due to the
timing of the release of planning consents.
During the year, the total affordable housing land bank increased to 4,427 plots on 41 developments
(31 May 2018: 3,719 plots on 43 developments);
we secured planning consent for 189 affordable housing plots and 2,133 plots were the subject of
planning applications; and
at 31 May 2019, 25.3% of our affordable housing plots had planning (31 May 2018: 34.4%), with
48.2% of plots going through the planning process and 26.5% at the pre-planning stage.
Key advances during the year include making good progress under our local authority framework agreement
for 10 developments. At one of the developments, for 28 homes, we started on-site work at the beginning of
the year, began handover of homes in the second half, and completed handovers, post period, by mid-July.
We also commenced construction at a further two developments under the framework, for a total of 72 homes,
and secured build contracts for another two of the developments totalling of 61 homes, with work
commencing on-site, post period, in early July.
Plans for 237 affordable homes in Dalmarnock were approved post period. The development is part of the
Clyde Valley Regeneration project and will include a retail space and urban apartments with construction due
to start on-site in the coming months.
During the year, we progressed the construction of 54 affordable homes and six adjoining commercial units
at Bertha Park. The handover of these homes and buildings is expected to take place in the first half of this
current financial year. This is the first affordable housing to be delivered at any of our Village developments
and is the initial phase of an expected 750 affordable homes to be built at Bertha Park over the next 30 years.
Our pipeline of affordable housing was also expanded with the acquisition of Walker Group, which did not
build affordable housing whereas development of its current land bank will require 346 affordable homes to
be built. Since the acquisition, we have progressed three Walker Group developments in this regard: a
planning application for 70 affordable homes in Dalhousie, Midlothian was submitted in August 2019; plans
are scheduled to be submitted in the first half of this financial year for 69 homes in West Calder, West Lothian;
and we are in early-stage discussions with Midlothian Council for a development at Windygoul, Bonnyrigg.
Improving Delivery
During the year, we implemented a number of measures to increase production capacity and efficiency at
our timber kit factory in Elgin. Capacity was increased with the staged addition through the year of three
further workstations, taking the total to nine. Efficiency measures included upgrades such as the installation
of a new air extraction system, provision of a higher capacity electrical supply cable, and forming new
walkways to improve the flow of materials and workers around the factory. This also enabled the full utilisation
of certain equipment to reduce some manual processes, which reduces production time. These measures
increased the potential for each workstation from 100 kits per year to approximately 120. During the year,
the factory produced kits for 823 homes, a 36.9% increase over the previous year when 601 kits were
produced.
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Springfield made progress in making its developments more environmentally sustainable with an initiative to
use an eco-friendlier asphalt mix for road surfacing. The product incorporates plastic waste that would
otherwise have gone to landfill or incineration, which enables a reduction in the amount of bitumen as well
as increasing the durability and longevity of the road surface. It has been initially used on a section of road
at our Linkwood Steadings development in Elgin, and to resurface the yard at our kit factory, establishing
Springfield as the first housebuilder in the UK to use this waste plastic mix in place of some of the bitumen
in its roads. We have begun suggesting in planning applications the use of waste plastic in roads and
pavements.
Our homes are designed to be energy efficient and we regularly adopt measures to make them more
environmentally sustainable and to reduce running costs for customers, consistently going beyond regulatory
requirements. A key aspect of the design process is the ongoing assessment of our options for improving
energy efficiency. As a result, we are adding to the design of Springfield homes the cabling required for an
electric car charging point to be fitted, and already the cabling has been installed in many homes; air source
heat pumps or energy efficient boilers with gas saver units are used to heat homes; and light tunnels are
provided in some homes. In wider environmental initiatives, electric car charging points are installed at our
offices, the use of plastic in offices is discouraged and recycling encouraged, and recycling on sites has been
reviewed, resulting in a reduction in waste being sent to landfill and cost savings.
During the second half of the year, we improved our customer surveying process by engaging an external
company that conducts telephone interviews to measure customer satisfaction whereas previously we sent
forms to customers. This has increased the rate and speed of responses, improved the consistency of
surveying and analysis, and enables action to be taken quickly if required. Over 90% of customers surveyed,
who had moved into a Springfield home between December 2018 and May 2019, responded that they would
recommend Springfield to a friend or relative.
Strengthened Organisation
This year, we significantly expanded and strengthened our organisation – above all, with the acquisition of
Walker Group. This greatly enhanced our sales presence in the east of Central Scotland, within the Edinburgh
commuter belt. We also retained Walker Group’s premises in Livingston and all of the company’s 53 staff.
The integration of the business has progressed positively and Walker Group continued to trade as expected.
Following our acquisition of Dawn Homes at the end of the 2017/18 financial year, we focused this year on
embedding that acquisition, which provided us with a presence in a new region, west of Central Scotland,
and an established supply chain. Dawn Homes has continued to perform strongly, in line with management’s
expectations.
At the beginning of the 2018/19 year, we established a new group operating structure, including a Group
Operating Board comprising four managing directors for North Scotland (private housing), Central Scotland
(private housing), Dawn Homes and Partnerships (affordable housing) respectively; and the directors of the
respective corporate functions. Subsequently, the managing director for Central Scotland (private housing)
also became responsible for running Walker Group following the acquisition of that business. This structure
has enhanced operational efficiency across the Group and supported the increase in scale of the business.
The Group is benefitting from the addition of further strong sales, land and planning, and commercial teams
from Dawn Homes and Walker Group, and is leveraging the significant experience and capabilities gained
from the combination of the three businesses. We plan to effect Group-wide supply chain efficiencies over
the coming year. Movement of staff around the Group is broadening opportunities for employees, and
individual corporate functions are beginning to offer their services Group-wide, which is expected to further
increase efficiencies and improve performance.
11
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Outlook
We entered the 2019/20 financial year in a stronger position than ever before, with a presence in almost all
of the key geographies within Scotland and an enhanced operational structure. Our land bank provides
activity for at least the next 16 years at current sales rates, and our primary focus is on progressing our active
sites and developing the future sites. We are also continuing to embed the acquisitions of Walker Group and
Dawn Homes, and are realising benefits increasingly across the Group.
We continue to see good growth across our business. In particular, our Village developments are progressing
well and their appeal is strengthening as they become increasingly established with further amenities for
residents with the opening of other businesses.
Both private and affordable housing markets are supported by strong market drivers. The demand for housing
in Scotland continues to outstrip supply at a time when interest rates are low and mortgage availability is
good. House price growth in Scotland is ahead of that in the rest of the UK. The Scottish Government
continues to focus on bolstering levels of affordable housing as it seeks to hit its target of building 50,000
new affordable homes by 2021.
As a result, the Board of Directors remains confident of continuing to deliver sustained growth, in line with
market expectations, and delivering shareholder value.
Innes Smith
Chief Executive Officer
23 September 2019
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SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF FINANCIAL OFFICER’S REVIEW
FOR THE YEAR ENDED 31 MAY 2019
This was another year of strong growth for Springfield, we are delighted to report increases in completions,
sales and profit before tax.
Revenue for the year to 31 May 2019 was 35.6% higher than the previous year at £190.8m (2017/18:
£140.7m). Growth was primarily driven by the 40.6% increase in revenue from private housing, which
remained the largest contributor to Group revenue, accounting for 75.1% of total sales. There was revenue
growth from affordable housing of 15.1% as well as an increase in other income, largely relating to the
recognition of revenue from the sale of land under the land swap with a major housebuilder to exchange 62
plots at Dykes of Gray for land in Kinross.
Revenue
Private housing
Affordable housing
Other*
TOTAL
2018/19
£’000
143,260
42,906
4,638
190,804
2017/18
£’000
101,867
37,272
1,584
140,723
Change
+40.6%
+15.1%
+192.8%
+35.6%
*Principally the recognition of revenue under the land swap as well as construction-only projects, typically on
land not owned or controlled by Springfield where we receive fees for design and construction work.
Gross profit for 2018/19 increased by 55.1% to £34.3m (2017/18: £22.1m), with a consolidated gross margin
improvement of 230 basis points to 18.0% (2017/18: 15.7%). The increase in gross margin primarily reflects
margin improvement on private housing due to the Group having completed in the previous year all but one
of the lower margin legacy sites as well as the positive impact in 2018/19 of the Dawn Homes and Walker
Group properties, which generate a slightly higher margin.
Total administrative expenses for 2018/19 were £18.2m compared with £12.2m for the previous year. The
increase reflects the larger scale of the business, including the addition of Dawn Homes and Walker Group
and the appointment of new managing directors to enhance the Group’s operating structure.
Profit before tax increased by 73.3% to £16.0m (2017/18: £9.2m). On an adjusted basis, excluding £0.6m of
exceptional items in both 2018/19 and 2017/18 respectively, profit before tax increased by 69.2% to £16.5m
(2017/18: £9.8m).
Basic EPS (excluding exceptional items) increased by 29.1% to 13.92p for 2018/19 compared with 10.78p
for 2017/18 and return on capital employed (“ROCE”) for the year ended 31 May 2019 was 14.6% compared
with 11.3% for the prior year.
Net debt at 31 May 2019 was £29.6m compared with £25.3m at 30 November 2018 and £15.3m at 31 May
2018 due to the acquisition of Walker Group.
Michelle Motion
Chief Financial Officer
23 September 2019
13
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
COMPANY OVERVIEW AND RISKS
FOR THE YEAR ENDED 31 MAY 2019
Review of the Business
The principal business of the Group continued to be that of property development. The Chairman’s Statement
on page 4 and the CEO’s Statement on page 7 detail activities and development of the business over the
year.
Financial and Business Highlights
Springfield achieved growth across all areas of the business. Financial and business highlights are detailed
in the introduction to this report at page 3.
Key Performance Indicators
2019 Vs 2018
Financial
Homes
Revenue
Gross profit margin
Adjusted profit before tax*
Net debt
Land Bank
2018/19
2017/18
Change
952
770
£190.8m
£140.7m
18.0%
£16.5m
£29.6m
15.7%
£9.8m
£15.3m
15,938 plots
12,476 plots
24%
36%
230 bps
69%
94%
28%
*Adjusted excludes exceptional items. Exceptional items are costs relating to acquisition of Walker Group (2018 - Dawn Homes and IPO costs relating to
existing ordinary shares).
Personnel
Number of employees up to 705 in May 2019 from 593 in May 2018.
134 employees, 19% of the workforce were in training or apprenticeships in May 2019, which, as a
percentage, is lower than last year as a result of the acquisition of Walker Group where the percentage
of employees in training was low. Subsequently the Group’s apprenticeship scheme has been rolled out
at Walker Group providing 11 new apprenticeships. By July 2019 21% of the workforce was in formal
training, consistent with last year.
Gender Diversity
At 31 May 2019 employee gender diversity was:
Directors
Senior Managers
Employees
Male
5
34
558
Female
1
15
92
14
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
COMPANY OVERVIEW AND RISKS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Environmental
Our homes are designed to be energy efficient and we regularly adopt measures to make them more
environmentally sustainable, taking designs beyond the latest environmental standards and reducing the
environmental impact of our homes overall.
Within the regulatory requirements when designing homes, we work to optimise the following: improving
profitability, reducing environmental impact and minimising energy bills for customers.
Quality Management
The Group is accredited to ISO 19011-2015 standard. During 2019 improvements actioned as a result of
quality management was 168 (2018: 266).
Key Risks and Uncertainties
The principle risks and uncertainties identified and mitigated against include: market, credit, liquidity, price /
sales, cash flow, resources, legal and regulatory, health and safety, land supply, planning and funding.
Market, credit and liquidity risk are dealt with in Note 27 of the consolidated financial statements.
Price / Sales Risk
The risk of facing reduced demand in an area is mitigated by the following factors:
regular reviews of market conditions, product range, pricing and geographic spread to make sure the
right homes are delivered in the right places at a profitable price;
customer service, quality of build and customer satisfaction are monitored to maintain reputation;
monitoring of and representations in relation to changes in government housing policy, including by the
CEO as an executive board member of Homes for Scotland, allows forward planning to mitigate risks
identified as result of changes in policy; and
any reduction in mortgage availability or affordability in the private market is mitigated by growth of the
affordable housing side of the business.
Cash Flow Risk
Detailed budgeting and regular review of our forecasts allows efficient management of future cash flows.
Resources Risk
The labour market is competitive and there is some upward pressure on building material prices.
Strategies in place to maintain Springfield’s reputation as a good employer and ensure the appropriate supply
of skills includes:
annual remuneration and reward review;
annual training review for every employee;
developing the workforce by maintaining the percentage of employees in training, further education or
apprenticeships at 20% or above;
a Board led culture of empowerment; and
the introduction in June 2019 of the offer of free gym memberships for all employees
Upward pressure on materials prices is being mitigated by:
actively seeking alternative suppliers and materials;
standardising materials and products across the Group to add to buying power; and
negotiating deals directly with manufacturers.
15
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
COMPANY OVERVIEW AND RISKS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Legal and Regulatory Risk
The Group has an in house legal department which advises and supports the group with legal compliance.
Health and Safety Risk
There are health and safety risks inherent to construction. Health and safety is the first agenda item at every
board meeting. The Group has an in house health and safety department which ensures overall compliance
by:
monitoring health and safety standards across sites with regular visits;
taking action where required;
advising on safe practice at the outset of projects;
initiating training; and
introducing or updating applicable policies or procedures.
Land Supply Risk
The risk of securing sufficient land is mitigated by a healthy and growing supply of land owned or secured by
contract in a growing spread of geographic locations which will appeal to our range of customers. Land is
brought forward, through the planning system, in tranches considered by the Board to be sufficient to allow
the Group to achieve its plans for growth. Acquisitions offer further mitigation with the bulk addition of land
spanning the planning pipeline in new geographic locations.
Planning Risk
Delays in receiving planning consents could interrupt business. Planning is dealt with internally by expert
planners who have good relationships with local authorities and who are supported by a full architectural and
design team. The Board reviews the balance of land held at the various stages of planning to ensure an
appropriate flow of consented land.
Funding Risk
The Group has bank facilities, securing funding until 2022 which have appropriate covenants and sufficient
headroom in place. The Group and funders communicate regularly.
Financial Risk Management Objectives
Details of the Group’s financial risk management objectives are set out in Note 27 to these consolidated
financial statements.
Future Developments
The future development of the Group is dealt with in the Chairman’s Statement.
Charitable Donations and Community Support
During the year the Group made payments of £6,130 (2018: £17,793) to local charities and £21,090 (2018:
£1,440) to national charities.
Springfield looks for opportunities to engage with the community in towns where we are building. We aim to
help young people achieve more and to help those who are disadvantaged. Staff visit schools to support a
variety of initiatives including careers information, mentoring, and charitable programmes.
16
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
COMPANY OVERVIEW AND RISKS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Mentoring programmes also see young people join us for work placements and we support Developing the
Young Workforce and staff act as mentors for Career Ready students. We sponsor youth sports teams and
some individual young athletes and we support the Duke of Edinburgh’s Award in Moray.
With the conclusion of Springfield’s six year headline sponsorship of The European Pipe Band
Championships Springfield have become headline sponsors of Scottish Squash, This has enabled the
resurrection of the Scottish Squash Open, now the Springfield Scottish Squash Open. The sponsorship is
also enabling Scottish Squash to develop the game in communities around Scotland and to support its elite
players.
On behalf of the Board
Sandy Adam
Executive Chairman
23 September 2019
17
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
Sandy Adam, Executive Chairman
(Sits on Nomination Committee)
Sandy is the grandson of the founder of Springfield and has worked for the Company since the 1980s leading
its change from a market garden business into a housebuilder in 1988. Sandy has been Executive Chairman
of the Company since 2004 and has been the driver behind many of the Group’s key commercial decisions
including the focus on affordable housing, geographic expansion and the acquisition of Redrow’s Scottish
assets, Dawn Homes and Walker Group. Sandy has over 25 years of experience in the Scottish housing and
property markets, including his role as Chairman of Homes for Scotland between 2014 and 2015, and leads
the Group’s land buying team.
Innes Smith, Chief Executive Officer
After graduating from Heriot Watt University in 1991, Innes qualified as a Chartered Accountant with KPMG
before moving into industry as financial controller at SGL Technic, a subsidiary of RK Carbon Fibres (now
called SGL Carbon Fibres Limited), a NASDAQ and Deutsche Börse listed company. Subsequently Innes
was promoted to Finance Director at SGL Technic and after five years moved to Gael Force. Innes joined
Springfield in 2005 as Finance Director and was appointed Chief Executive Officer at Springfield in October
2012 after seven years with the Company. In his role as Chief Executive Officer, Innes has grown the scale
of the Group with annual revenue increasing from £53 million to £191 million and completions increasing
from approximately 300 to over 950 per year. Innes was appointed to the Board of Homes for Scotland in
2016.
Michelle Motion, Chief Financial Officer
Michelle joined Springfield as Finance Director in 2013. Michelle has over 20 years of experience within the
property and construction industry, previously working for Morrison Developments Limited, a subsidiary of
AWG plc, a FTSE 250 company, and the house building company Avant Group, previously known as
Gladedale Group. Michelle graduated with a BA in Accounting and an MBA and is a qualified accountant
from the Chartered Institute of Management Accountants.
Roger Eddie, Non-Executive Director
(Chair of Remuneration and Nomination Committees, sits on Audit Committee)
Roger worked for the Bank of Scotland for 32 years, latterly as Director of the North of Scotland Real Estate
Team. Roger sits on the Board of the Port of Cromarty Firth and of their Cruise Highland subsidiary. Roger
joined Springfield as a non-executive Director on 13 November 2008.
Matthew Benson, Non-Executive Director
(Chair of Audit Committee, sits on Remuneration and Nomination Committees)
Matthew graduated from Oxford University and began his career with Morgan Stanley, working in
international finance in London. Matthew then established his own consultancy business focused on the
structuring and planning of high quality residential and leisure projects. Matthew joined Rettie & Co as a
Director in 2002 and heads up the Investment and Development teams, with particular focus on Build to Rent
and affordable housing in Scotland. Matthew is a member of the Advisory Board of Kleinwort Hambros private
bank and was the founding chair of bio-tech businesses EctoPharma Limited and Ryboquin Limited. Matthew
was appointed to the Board as a non-executive Director in 2011.
Nick Cooper, Non-Executive Director
(Sits on Audit, Remuneration and Nomination Committees)
Nick is a qualified solicitor with over 20 years’ board experience with UK-listed and private companies. From
2010 to 2015, he was Corporate Services Director at Cable & Wireless Communications plc, which he joined
from Cable & Wireless plc, where from 2006 to 2010 he was General Counsel and Company Secretary. His
previous in-house legal and corporate experience includes roles at Energis Communications Ltd, JD
Wetherspoon plc, The Sage Group plc and Asda Group plc. Nick is currently a Non-Executive Director of
AIM-listed CPP Group plc and a number of private start-up companies.
18
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
BOARD OF DIRECTORS (CONTINUED)
Colin Rae, Non-Executive Director (Appointed 16 September 2019)
Colin is a Chartered Quantity Surveyor with nearly 40 years’ experience in the construction and housebuilding
industries. From 2002 to 2019, he held leadership positions at Places for People one of the largest
development, regeneration, property management and leisure companies in the UK. Most recently he was
Group Executive Development Director responsible for a UK-wide mixed tenure development programme of
c.£200 million. Previous experience includes project management roles at The EDI Group, and Woolwich
Homes Ltd, as well as surveyor positions at Millar Brown Associates and Gibson & Simpson. Colin is a
director of Homes for Scotland, he is a Member of the Royal Institution of Chartered Surveyors (MRICS) and
holds a BSc in Quantity Surveying from Napier University.
19
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE
FOR THE YEAR ENDED 31 MAY 2019
This corporate governance report intends to give shareholders a clear understanding of the Group's
corporate governance arrangements and their operation within the Group during the year, including analysing
compliance with the Quoted Companies Alliance’s 2018 Corporate Governance Code (“the QCA Code”).
The QCA Code provides a robust framework which enables the Group to maintain high standards of
corporate governance. It sets out ten principles and each principle and the Group's actions are set out below.
Sandy Adam, in his capacity as Chairman, is responsible for ensuring the Group has the necessary corporate
governance framework in place and that the ten principles are followed and in place across the Group.
1.
Strategy and Business Model
The Group focuses on developing a mix of private and affordable housing in Scotland. The Group operates
within two markets – private housing and affordable – with the belief that this combination is key to sustained
long term growth.
Private:
Private housing is delivered via Springfield Properties plc and its subsidiaries: Walker Group and Dawn
Homes. We focus on sourcing land in areas with high growth potential and, subsequently, progress
developments through the planning process. We are motivated by making Scotland a better place to live and
we value the idea that when purchasing a new home it should feel like 'YOUR home'. We offer “Choices” and
“It’s Included” customer incentives so that customers receive many features as standard along with the ability
to customise their own home.
Affordable:
Our affordable housing operation focuses on developing land into (i) standalone sites that consist entirely of
affordable homes; and (ii) developing affordable housing on the Group’s private developments as a condition
of receiving planning permission. With over 130,000 households on local authority waiting lists, there is a
substantial need for affordable housing in Scotland. The Scottish Government has set a target of building
50,000 affordable homes by 2021. We have built over 1,500 affordable houses in the last five years and we
aim to further increase the size of our affordable housing business.
In order to support our strategy we have a wealth of skills in-house to allow us to develop 'difficult' sites (often
involving several land owners) that require considerable remediation works and/or significant investment in
infrastructure prior to commencing development. Our in-house staff increase our ability to competitively
purchase such sites.
Further details on our strategy and business model are discussed in the Chairman’s statement on pages 4-
6.
2.
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good relationships with shareholders. The Chairman is responsible
for ensuring that appropriate channels of communication are established between the Executive Directors
and shareholders, ensuring shareholders’ views are shared with the Board.
Along with the opportunity to ask questions by email or telephone throughout the year, we conduct bi-annual
investor presentations organised by our nominated advisor, N+1 Singer. The presentations provide us with
a regular opportunity to understand the needs and expectations of Springfield’s shareholders. These
roadshows are held in London and Edinburgh. Shareholder relations are also managed through regular
regulatory announcements.
We maintain a corporate website (https://www.springfield.co.uk/investor_relations). It contains a range of
information required by AIM Rule 26 including our annual and half year reports, trading statements and all
regulatory announcements. We regularly distribute press releases to national and local press with news and
at
updates
https://www.springfield.co.uk/news.
projects. All
the Group’s
releases
current
found
press
can
on
be
20
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
2. Understanding Shareholder Needs and Expectations (continued)
All shareholders are invited to attend Springfield’s annual general meeting (AGM). Details of the AGM are
available to download from our corporate website. Voting at the AGM will be conducted by a poll and the
results announced to the market and displayed on our website as soon as possible after the meeting. The
Board recognises the AGM as an important opportunity to meet shareholders and the Directors are available
to listen to the views of shareholders informally immediately following the AGM.
3. Wider Stakeholder and Social Responsibilities
Everyone in Scotland deserves a decent place to live. Through delivering private and affordable housing, we
aim to fulfil that promise. However, we cannot do that alone. We maintain strong relationships with all
stakeholders including employees, customers, national & local government and local communities.
Employees (current): The Chairman and CEO meet bi-annually with all employees in departmental groups
to hear employees’ needs, interests and expectations. During these discussions key achievements of the
groups are discussed as well as future goals. Employees have the opportunity to ask questions and provide
feedback. We currently have 705 employees at 31 May 2019 and are proud that many of our employees
have chosen to remain with Springfield with the average length of service being 5.1 years. We undertake an
annual pay review in June and all of our current employees at June 2019 were paid at least 3% above
minimum wage. Springfield recognise gender diversity and are confident that male and female employees
are paid fairly and appropriately for work of equal value. The construction industry has typically been
dominated by men, however we have seen proportionally more women joining us to begin a career in
construction. You can read more about our findings in the Gender Pay Gap Report on our website. The
Group has a series of data protection policies which have been updated, along with providing training for
staff, to ensure compliance with the General Data Protection Regulation (GDPR).
Employees (training & education): At May 2019 we supported 134 (19.1%) staff in further education,
training and apprenticeships. This includes 110 apprenticeships.
Employees (future): The Group has a strong focus on education and training. We encourage student
placement programmes and we have placed 19 university students in a variety of work experience roles over
the past two years. As a direct result of these placements Springfield has offered full-time employment to 4
of the students who now work for us, or will do after completion of their degree. We have recently introduced
an ‘ideas’ initiative where our employees are encouraged to be creative and suggest any ideas they have for
the Group. Some of these ideas have already been actioned and have reduced our costs e.g. installing
wireless doorbells.
Customers: Customer views are sought via In-house Research Limited who contact our customers around
nine weeks after handover of their home and gather feedback. Each managing director will action any points
required as a result of this feedback.
National & Local Government: Our CEO is a director of Homes for Scotland, the voice of the home building
industry in Scotland, representing some 200 companies and organisations which together deliver 95% of
new homes built for sale each year and a significant proportion of Affordable Housing. Through Homes for
Scotland we engage with the Scottish Government, local government and utility companies. Any direct
contact with the Scottish Government is also governed by the Lobbying (Scotland) Act 2016 and we comply
with all requirements of that Act.
Communities: For individual projects, we work with local communities as part of the planning process. Any
new development that has more than 50 units or covers two hectares requires us to hold a community
consultation. This event allows members of the local community to gather information on the proposed
development, ask questions and provide their feedback on the proposals. We take these comments on board
when taking developments forward.
21
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
3. Wider Stakeholder and Social Responsibilities (continued)
Environment: We have implemented several environmentally friendly policies and initiatives including
installation of electric car charging points in our staff car parks and cabling for electric car charging points in
all our private homes. We recently put in our first ‘waste plastic road’ using the equivalent of 6,000 plastic
bottles or 17,042 plastic bags. These ‘waste plastic roads’ are up to 60% stronger than a standard road due
to the flexible properties of the plastic. Springfield is the first UK housebuilder to do this, and we intend to
work with local authorities to use recycled plastic roads on all of our developments across Scotland. Our
affordable housing operation has a variety of environmentally friendly approaches to their sites which includes
air source heat pumps, energy efficient boilers with gas saver units and the provision of water butts in gardens
which are connected to down pipes enabling the collection of rainwater which can then be used for things
such as watering the garden.
Alongside the planning process, we support the communities in which we build. This can involve
sponsorships, running or sponsoring local events, fundraising for local charities and providing talks at local
schools.
4. Embedding Risk Management
Springfield operates processes to identify, measure, manage and monitor those risks which impact the
Group’s business. The focus of our risk management framework is to ensure we are managed in a
sustainable and controlled way within our risk tolerance. Material risks and control matters are reported to
the Board via regular reports from the Group’s senior executive team who in turn meet on a regular basis
with risk and control issues being discussed at those meetings.
Given the environment in which it operates the Board has a strong focus and attention on Health and Safety
issues. It receives a personal report from the CEO on health and safety matters at each meeting and meets
regularly with the Group’s director for Health & Safety so that it can discuss any matters directly with him.
The Board also maintains a system of internal controls to safeguard shareholders’ investment and assets
and for reviewing its effectiveness. The Board reviews the effectiveness of the Group's system of internal
controls on an ongoing basis. Annual budgets are prepared, and detailed management reports are presented
to the Board and used to monitor financial performance and compliance with the Group’s policies and
procedures. All controls are covered including financial and operational controls to manage risk. Board
meetings are also used to consider the Group’s major risks. All potential areas of financial risk are regularly
monitored and reviewed by Directors and management and preventative or corrective measures are taken
as necessary.
5. Maintaining a Well-Functioning Board
The skills and experience of the Board are set out in their biographical details on pages 18-19. All Directors
receive regular and timely information on the Group’s operational and financial performance. Relevant information
is circulated to the Directors in advance of meetings. The Board meets at least bi-monthly. As Springfield has
developed, the composition of the Board has been under constant review to ensure that it remains
appropriate to the managerial requirements of the Group. As such the Board identified that an additional Non-
Executive Director would be highly beneficial to the Board, accordingly Nick Cooper was appointed to the
Board on 1 June 2018 following a thorough assessment of potential candidates’ skills and suitability for the
role.
The Board consider Nick Cooper and Matthew Benson to be independent Directors for the purpose of the
Corporate Governance Code. From 13 November 2019 Roger Eddie will have completed eleven years'
service as a Director. Having considered his independence in the context of the Corporate Governance Code,
the Board is also satisfied that Mr Eddie will remain independent from 13 November 2019, notwithstanding
his length of service.
22
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
5. Maintaining a Well-Functioning Board (continued)
Andrew Todd, as Company Secretary, attends all Board and committee meetings. Andrew is a solicitor
qualified in Scotland and ensures Board and committee meetings are conducted in accordance with all
relevant legal and regulatory requirements.
One third of the Directors retire annually in rotation in accordance with Springfield's articles of association.
This enables the shareholders to decide on the election of the Board.
6. Director Skills and Capabilities
As mentioned under principle 5, all Directors and their professional experience, are set out on pages 18-19.
The skills, experience and knowledge of each Director gives them the ability to constructively challenge
strategy and decision making and scrutinise performance. All Directors are offered appropriate coaching and
training to develop their knowledge and ensure they remain up to date in relevant matters for which they have
responsibility as a member of the Board. The Board receives regular updates from its advisors.
All six members of the board bring relevant sector experience through their extensive and varied careers
throughout the housing, financial, consulting and legal sectors. The board believes that its members possess
the required qualities and skills necessary to effectively oversee and execute the Group’s strategy.
7. Evaluation of Board Performance
The Board identified the potential benefits of appointing a further Non-Executive Director to increase the
knowledge and skills of the board and for succession planning.
Additionally, the effectiveness of the Board and its committees is kept under review in accordance with
corporate governance best practice. Springfield’s Board currently does not have a formal review process,
rather its effectiveness is assessed in an informal manner by the Chairman on an on-going basis. During the
year 2019/20, the Board will formalise a self-evaluation process, selecting criteria against which it will
consider the quality of its performance, as well as specifying the frequency of such evaluations.
8. Corporate Culture
The Board believes that everyone deserves a decent place to live. In other words, there is a need for good
housing for every member of every community in Scotland. Where this need is not met Springfield aims to
provide high quality homes for private sale to first time buyers and those already on the housing ladder and
provide affordable homes through its partnership arm which works with housing associations and local
authorities.
Dedication to customers is at the heart of the Springfield culture. We offer our customers a wide choice of
options on design, fixtures and fittings through our online “Choices” initiative and we build trust through our
“It’s Included” promise and our after sales service. Customer satisfaction statistics are an integral part of how
we manage our business and incentivise our key people. Our CEO presents our customer satisfaction
statistics at each board meeting.
The Group have received numerous awards for customer service and for the sites we build. Most recently,
the Dawn Homes Limited site at Camas Walk, Cambuslang was a recipient of the Commended and Highly
Commended Sites NHBC award for 2019.
The Board believes that high levels of customer service are only deliverable by talented and engaged
employees. With strong local roots in the North of Scotland many of our employees joined the business in its
early stages of development and have remained with us as we’ve grown and most recently become a public
company listed on AIM. Ten of the original fourteen Springfield employees are still with the Group today –
the majority in promoted positions. As a result we benefit from the loyalty and commitment of employees who
have played a major part in building the business and in many cases have taken the opportunity to share in
its success via our SAYE Scheme. The Board works hard to promote the same levels of loyalty and
engagement in its new recruits throughout Scotland.
23
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
8. Corporate Culture (continued)
Now that Springfield is listed on AIM there is an additional need to recruit professionals in key areas across
the business. To support our objectives and to maintain a high level of professionalism and customer service
the Board’s policy is that ‘the best person for the job’ is recruited to support the existing professionals in its
in-house teams of planning, engineering, marketing, design, finance, legal and governance and health and
safety teams. Taken together the Board are committed to the development of Springfield whilst at the same
time preserving the culture and ethos which has resulted in the Group's growth to date.
The Group has adopted, and will operate as applicable, a code for Directors’ and applicable employees
dealings in securities in accordance with Rule 21 of the AIM Rules for Companies.
9. Maintaining Good Governance
As an AIM listed group, the Board recognises the importance of applying sound governance principles in the
successful running of the Group. We embrace the principles contained in the QCA Corporate Governance
Code (QCA Code) for Small and Mid-Size Quoted Companies where appropriate. We are also mindful of the
changes to the governance requirements for AIM listed companies. Given the size and nature of Springfield
and composition of the Board, in so far as is practical and appropriate, we formally adopt and adhere to the
QCA Code.
Springfield operates processes to identify, measure, manage and monitor risks which impact the Group’s
business within acceptable limits identified by the Board. Further details on our approach to risk are set out
in response to principle 4 above.
Springfield reviews its governance structures regularly. In June 2018, Springfield appointed a third Non-
Executive Director to provide a balance between executive and Non-Executive Directors on the Board.
Meanwhile, day-to-day operational responsibility has been delegated to four managing directors: Dave Main
for the North of Scotland projects, Martin Egan for the West of Scotland projects, Peter Matthews for the
Central Belt projects and Tom Leggeat for the Partnerships projects delivering affordable housing across the
Group.
The Board as a whole takes responsibility for ensuring the Company maintains appropriate corporate
governance practices. In addition the Chairman and CEO take responsibility for obtaining feedback from key
stakeholders.
The Board is supported by the Audit, Remuneration and Nomination Committees.
The Audit Committee is responsible for determining and reviewing matters relating to the financial affairs of
the Company. The Committee examines reports received from management and the Company’s auditor in
relation to the accounts, as well as the internal control systems utilised throughout the Group.
The Remuneration Committee reviews and sets the terms and conditions of the Directors’ appointment, along
with their remuneration and benefits package and makes recommendations to the Board in relation to the
allocation of share options to employees under our Share Plans. The Committee meets at least three times
a year.
The Nomination Committee’s role is to consider the selection and re-appointment of Directors, and make
nominations of candidates to fill vacancies on the Board. The Committee also regularly reviews the structure,
size and composition of the Board, providing recommendations for change where appropriate.
Further information can be found in the Audit and Remuneration Committees’ reports on pages 26 and 29.
24
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
10. Communicating Governance and Performance
The Company recognises the importance of maintaining a good relationship with shareholders and
stakeholders, communicating to them through the Annual and Half-Year Reports, the Annual General
Meeting (AGM), bi-annual presentations and other trading updates.
A range of corporate information is available to shareholders, investors and the public in the investor section
of our website (www.springfield.co.uk/investor_relations), with all press releases regarding news and updates
the news section of our website
on
(www.springfield.co.uk/news).
the Group’s current projects being posted
in
Results from the AGM are announced to the market and displayed on the website after the meeting.
Andrew Todd
Company Secretary
23 September 2019
25
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT
FOR THE YEAR ENDED 31 MAY 2019
Statement from the Chairman of the Audit Committee
On behalf of the Board, I am pleased to present the Audit Committee Report for the year to 31 May 2019.
This report provides shareholders with an overview of the activities carried out by the Committee during the
year. The committee ensures the financial performance of the Group is properly measured and reported.
Committee Members
The Audit Committee comprises Matthew Benson (Chairman), Nick Cooper and Roger Eddie.
All members of the Committee are independent Non-Executive Directors. Both Roger Eddie and Matthew
Benson have worked within the financial industry and have recent and relevant financial experience.
Other members of the Board occasionally attend Committee meetings when requested by invitation. In the
year to 31 May 2019 the Audit Committee met three times and other members of the Board attended two of
those meetings. The Chief Financial Officer attended all three Audit Committee meetings.
Responsibilities
The Audit Committee, inter alia, determines and examines matters relating to the financial affairs of the Group
including the terms of engagement of the Company’s auditor and, in consultation with the auditor, the scope
of the annual audit. It receives and reviews reports from management and the Company’s auditor relating to
the half yearly and annual accounts and the accounting and internal control and risk management systems
in use throughout the Group reviewing the Group’s overall risk appetite and strategy and monitors, on behalf
of the Board, current risk exposures. The Committee monitors the integrity of the financial statements
produced by the Group and makes recommendations to the Board on accounting policies and their
application. The Committee receives reports from compliance functions within the Group and is responsible
for reviewing and approving the means by which the Group seeks to comply with its regulatory obligations.
The Committee also ensures that the arrangements for employees and contractors to raise concerns
confidentially about possible wrongdoing in financial reporting (or other matters) are proportionate and allow
for independent investigation. The duties of the Audit Committee are set out in its terms of reference. These
are regularly reviewed to ensure they remain applicable and up-to-date with legislation, regulation and best
practice.
The Audit Committee meets at least twice a year. Since 1 June 2018, the Committee has met three times to
consider the planning of the statutory audit and to review the Group’s draft half year and full year results prior
to Board approval and to consider the external auditor’s detailed reports.
Internal Audit
The Group does not currently have an internal audit function. The Committee considered the size and nature
of the Group and believes that existing management within the Group is able to derive assurance as to the
adequacy of internal control and risk management systems without the introduction of an internal audit
function. As the Group continues to grow rapidly the Committee is currently considering implementing an
internal audit process during the next financial year.
Risk Management and internal controls
The Group has a range of internal controls, policies and procedures in place, some of which are discussed
on pages 20 to 25 of the Governance Report. There is a framework of risk management within the Group for
risk management. The Audit Committee works alongside the Board to review, and where necessary suggest
changes to, the current systems in place.
The Audit Committee is satisfied that the current systems in place are operating effectively.
26
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Anti-bribery
The Group has a zero tolerance anti-bribery and corruption policy in place. The policy is contained within
employee handbooks and provides guidance on what constitutes bribery and corruption. Line managers are
responsible for ensuring employees comply with this policy and maintain the Group’s image and reputation.
The Board is ultimately responsible for ensuring this policy complies with the Group’s legal and ethical
obligations.
External Audit
Johnston Carmichael were re-appointed for the year to 31 May 2019. The Audit Committee monitors the
relationship with the external auditor to ensure independence and objectivity at all times. The Audit
Committee also reports to the Board on the independence, objectivity and effectiveness of the external
auditor. Johnston Carmichael have been the external auditor for The Group since 2008 with David McBain
as the Partner. David McBain is rotating off as signing partner this year. The Audit Committee has
recommended that Johnston Carmichael are appointed for the next financial year. The Group will look to
tender this position in future financial years, Johnston Carmichael also carry out ad-hoc VAT work, process
reviews, due diligence and other ad-hoc works for the Group. Any non-audit work carried out by Johnston
Carmichael is undertaken by a separate team from the audit team to ensure segregation of duty. The Audit
Committee is made aware of any non-audit work being carried out by Johnston Carmichael. The fees paid
for non-audit work are included in the table at note 7.
External Audit process
Johnston Carmichael prepare an audit plan. This plan sets out the scope and timetable of the audit as well
as the areas to be specifically targeted. The plan is provided to the Audit Committee for approval in advance
of the audit. On completion of the audit, the findings are presented to the Audit Committee by the auditor for
discussion. There were no significant areas of concern highlighted by the auditor this year.
The Chief Financial Officer has regular contact and communication with the auditor during the year. This
allows for any areas of concern or of significance to be raised with the auditor throughout the year.
27
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Main issues discussed and conclusions
The table below highlights the issues discussed at the audit close meeting.
Issue
How it was addressed by the Committee
Revenue recognition
Revenue from private housebuilding is recognised
when the house is handed over although the timing
may require management judgement in determining
when ownership has transferred.
Profit recognition
The group under contracts construction which takes
place over a period of time. There is a significant
element of judgement involved in estimations of
these construction contracts surrounding costs to
complete and the overall expected profit margin.
Business combinations and asset purchases
During
acquisition transaction.
the year
the Group completed one
Matthew Benson
Chairman of the Audit Committee
23 September 2019
The Committee reviewed the existing revenue
recognition policies in light of the adoption of IFRS
15. The committee satisfies
the
accounting policies for revenue are compliant with
the new standard.
itself
that
The Committee monitors the cost value report
process and the effectiveness of the internal
controls exercised over these processes.
the
The Committee reviewed and discussed
Group’s accounting for these acquisitions and
satisfied itself that it was appropriate.
28
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT
FOR THE YEAR ENDED 31 MAY 2019
Introduction
This report outlines the Group’s remuneration policy for its Directors and shows how that policy was applied
during the financial year ending on 31 May 2019.
Springfield is not required to comply with Schedule 8 to the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 and is under no obligation to prepare, or seek shareholder
approval of, a Directors’ remuneration report. This section of the annual report has, therefore, been prepared
on a voluntary basis and in order to fulfil the relevant requirements of AIM Rule 19.
Committee Members and Meetings
In the period of twelve months to 31 May 2019, the Remuneration Committee comprised:
Roger Eddie (Chairman);
Matthew Benson; and
Nick Cooper.
Each of the above individuals is an independent Non-Executive Director who has no personal financial
interest (other than as a shareholder) in the matters decided.
its
terms of
Under
the Group’s website at
(www.springfield.co.uk/investor_relations), the Remuneration Committee is required to meet at least three
times a year.
(a copy of which
is available on
reference
Committee Responsibilities
The main responsibilities of the Remuneration Committee are:-
to set the overall remuneration policy for the Group’s Executive Directors (and certain other senior
employees); and
within the terms of that policy, to determine the terms and conditions of employment of those
individuals and the level of their remuneration (including short-term and long-term incentives).
The remuneration of the Non-Executive Directors is determined by the Board as a whole within limits set out
in Springfield’s articles of association. The Non-Executive Directors do not participate in performance related
bonus or share based incentive arrangements.
Remuneration Policy for Executive Directors
The overarching aim of the Group’s remuneration policy is to attract and retain the highest calibre individuals
as Executive Directors and ensure they are appropriately and fairly rewarded for performance in a manner
that is both as straightforward as possible and appropriate for Springfield’s size and stage of development.
During the financial year to 31 May 2019, the overall remuneration package for Executive Directors consisted
of the following elements:-
Basic Salary;
Annual Bonus;
Pension Contributions;
Participation in an “all employee” SAYE share option scheme; and
Other standard benefits.
Long Term Incentive Plan;
Further disclosures in relation to each of the above elements are provided below.
29
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Basic Salaries
Each Executive Director receives a base salary, the level of which reflects the particular individual’s
experience and performance, the nature and complexity of their work and the market in which the Group
operates.
The Committee reviews the Executive Directors’ salaries annually, with any increases taking effect on 1 June
each year. As at 31 May 2019, the annual rates of base salaries for the Executive Directors were:
Sandy Adam - £95,000
Innes Smith - £210,000 and
Michelle Motion - £159,000
The above salary levels reflect the Committee’s previously stated intention (details of which were set out in
last year’s report) that, in the initial period following admission to AIM, the Executive Directors’ pre-admission
salaries would be increased at an enhanced rate to ensure that they reached a level that was competitive
when compared to other similarly sized organisations in the Group’s sector. The Committee can confirm
that, following the increases that were awarded on 1 June 2019 (which will be disclosed in next year’s
remuneration report), this exercise has been completed with the result that, for financial years commencing
on or after 1 June 2020, any salary raises for Executive Directors will normally reflect those applied to the
wider workforce.
Annual Bonus
Under the Group’s annual bonus scheme for Executive Directors, individuals have the opportunity to receive
a cash award that is linked to the achievement of specified targets that are aligned to the Group’s corporate
plan for the period in question. For each year of the scheme’s operation, the Committee specifies a maximum
opportunity (as a percentage of salary) for each participant.
For the financial year to 31 May 2019, the maximum bonus opportunity for Innes Smith and Michelle Motion
was 75% of salary and the following table identifies the measures used, their respective weightings and the
bonus award derived from the level of achievement over the year:
Measure
Weighting
(as a % of maximum opportunity)
Bonus earned as a result of
performance against specific
measure in the relevant year1
(as a % of maximum opportunity
Innes Smith
Michelle Motion
Innes Smith
Michelle Motion
Profit before tax
Return on capital employed
Gross margin
Customer satisfaction
50%
20%
20%
10%
50%
25%
25%
0%
Total bonus (% of maximum opportunity) = (a)
Maximum opportunity (% of base salary) = (b)
Total bonus earned (% of base salary) = (a) x (b)
42%
12%
15%
7%
76%
75%
57%
39%
11%
17%
0%
67%
75%
50%
Notes:
1 For each measure, the Committee specified a sliding scale of achievement (between threshold and maximum) which was used
to determine the level of award actually paid in respect of that element. For each of the financial measures, the threshold level
required the Company to at least achieve the relevant budget figure set by the Board for the year. In the case of “customer
satisfaction”, the Company adopted its own long standing measurement processes.
30
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Under the terms of the Group’s annual bonus scheme for Executive Directors, the Committee has the
discretion to reduce or defer the awards that would otherwise be payable to the relevant individuals in
accordance with the above table where it is appropriate having regard to the health and safety performance
of the Company over the period in question. No such reduction or deferral was deemed necessary in respect
of the financial year to 31 May 2019.
For the avoidance of doubt, Sandy Adam did not participate in the annual bonus scheme for the financial
year to 31 May 2019.
Pensions
During the year, the Group made contributions to pension plans for the Executive Directors. These
contributions were at a rate of 5% of basic salary in respect of Sandy Adam, and at the rate of 10% of basic
salary in respect of both Innes Smith and Michelle Motion.
Long Term Incentive Plan
During the year to 31 May 2019, discretionary long term incentives were provided through the operation of
the following arrangements that were first introduced in October 2017 as part of the process surrounding the
Group’s admission to AIM:
The Springfield Properties PLC Company Share Option Plan (the “CSOP”), which allows tax
advantaged options to be granted over the Company’s shares to selected employees of the Group
(including Executive Directors); and
The Springfield Properties PLC Employee Share Option Plan (the “ESOP”) which enables non-tax
advantaged options to be granted to the same category of individuals.
Options granted under the CSOP and ESOP generally vest after three years and the price per share payable
on their exercise will normally be equal to the market value of a share on the date they were originally granted.
In the case of the CSOP and ESOP grants made to Innes Smith and Michelle Motion during the financial
year to 31 May 2019 and earlier periods (details of which are included in the table set out on page 33), no
additional performance conditions require to be satisfied before the relevant options can be exercised.
However, in light of feedback received from shareholders, this aspect of the Company’s remuneration policy
has recently been reviewed by the Committee and it has been decided that, for awards granted under these
arrangements to Executive Directors during the financial year to 31 May 2020 (and in later periods), vesting
will also normally be dependent on the achievement of stretching targets that are linked to the long-term
performance of the Company. Details of the specific measures and targets that are applied will be disclosed
in next year’s remuneration report.
Given the size of his existing shareholding in the Group, Sandy Adam does not currently participate in either
of the above long-term incentive plans.
Save As You Earn (“SAYE”)
At the same time as establishing the CSOP and ESOP, the Group also adopted the Springfield Properties
PLC SAYE Option Scheme (the “SAYE Scheme”). Under this tax advantaged arrangement, all employees
(including Executive Directors) can be invited to apply for the grant of options over the Group’s shares that
are linked to a three-year savings contract. The price per share payable on the exercise of these options is
set by the Board at the date invitations are issued, but cannot be less than 80% of the market value of a
share on that date.
No grants were made under the SAYE Scheme during the year to 31 May 2019. Details of the options
granted under this arrangement to Innes Smith and Michelle Motion in earlier periods are set out on page 33.
For the same reason stated above in relation to the CSOP and ESOP, Sandy Adam does not currently
participate in the SAYE Scheme.
31
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Remuneration in the Year
During the year to 31 May 2019, the Directors received the following remuneration:
Basic
salary/fees
Annual
Bonus
Taxable
benefits1
Pension
contributions
2019
Total
£000
£000
£000
£000
£000
95
210
159
35
35
35
-
119
80
-
-
-
8
8
8
-
-
-
5
21
16
-
-
-
108
358
263
35
35
35
569
199
24
42
834
630
2018
Total
£000
61
275
249
24
21
-
Executive Directors
Sandy Adam
Innes Smith
Michelle Motion
Non-Executive Directors
Matthew Benson
Roger Eddie
Nick Cooper2
Notes:
1 The taxable benefits figure in the above table for each of the Executive Directors relates to a range of benefits provided by the
Group including a car allowance and life and health assurance.
2 Nick Cooper was appointed as a Non-Executive Director on 1 June 2018.
The above table does not include the value of share options held by the Directors, details of which are set
out below.
32
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Share Options
Details of options over the Group’s shares that have been granted to Executive Directors under the CSOP,
ESOP and SAYE Scheme and which were outstanding during the year to 31 May 2019 are as follows:
Director
Earliest exercise
date and date of
Scheme
Date of grant
vesting Exercise price
Number
of
shares
Innes Smith
CSOP
16 October 2017
16 October 2020
106p
28,301
ESOP
16 October 2017
16 October 2020
106p
208,019
SAYE
8 November 2017
1 December 2020
84.8p
21,226
ESOP
1 October 2018
1 October 2021
122.5p
257,142
Michelle Motion
CSOP
16 October 2017
16 October 2020
106p
28,301
ESOP
16 October 2017
16 October 2020
106p
84,906
SAYE
8 November 2017
1 December 2020
84.8p
21,226
ESOP
1 October 2018
1 October 2021
122.5p
129,795
None of the above options are subject to performance conditions. During the year to 31 May 2019, no share
options held by Executive Directors lapsed or were exercised.
Directors’ Interests in the Group’s Shares
Directors’ interests in the Group’s shares are disclosed in the Directors’ Report (page 36).
Roger Eddie
Chairman of the Remuneration Committee
23 September 2019
33
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 MAY 2019
The Directors present their annual report and the audited financial statements of the Group for the year ended
31 May 2019.
Principal Activity and Business Review
This information is included within the Strategic Report above, as part of the ‘Review of the Business’ under
the Amendment to the Companies Act 2006 of s.414C(2a).
Directors
The Board comprised the following Directors who served throughout the year and up to the date of this report:
Name
Position
Mr Sandy Adam
Mr Innes Smith
Ms Michelle Motion
Mr Roger Eddie
Mr Matthew Benson
Mr Nick Cooper
Mr Colin Rae
Results and Dividends
Executive Chairman
Chief Executive Officer
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (Appointed on 16 September 2019)
The results for the year are set out on page 44.
Interim ordinary dividends were paid amounting to £1,156k (2018: £821k) equating to 1.2p (2018: 1.00p) per
share.
The Board is proposing a final dividend of 3.2p per share subject to shareholder approval at the next Annual
General Meeting to be held on 23 October 2019. Taking into account the interim dividend of 1.2p (2018:1.0p)
per share already declared and paid, this equates to a total dividend of 4.4p (2018: 3.70p) per share.
Employee Consultation
The Group’s policy is to consult and discuss with employees’ representatives matters likely to affect their
interests.
The Group places considerable value on the involvement of its employees and has continued to keep them
informed on matters affecting them as employees and on various factors affecting the performance of the
Group.
Disabled Persons
The Group’s policy is to recruit disabled workers for those vacancies they are able to fill. All necessary
assistance with initial training courses is given. Once employed, a career plan is developed so as to ensure
suitable opportunities for each disabled person. Arrangements are made, wherever possible, for retraining
employees who become disabled, to enable them to perform work identified as appropriate to their aptitude
and abilities.
34
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
DIRECTORS’ REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Equal Opportunities
This is achieved through formal and informal meetings. Equal opportunities are given to all employees
regardless of their gender, marital status, sexual orientation, disability, age, race, and religion or belief.
Post Year End Events
There are no post year end events to report.
Going Concern
The Directors have a reasonable expectation 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. Further details regarding the adoption of the going concern basis can be found in Note
2.4 of the consolidated financial statements.
Disclosure of Information to the Auditor
In the case of each of the persons who are Directors of the Group at the date when this report is approved:
•
•
so far as each Director is aware, there is no relevant audit information of which the Group’s auditor is
unaware; and
each of the Directors has taken all steps that they ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish that the auditor is aware of that information.
This information is given and should be interpreted in accordance with the provisions of Section 418 of the
Companies Act 2006.
Board of Directors
The Group supports the concept of an effective Board of Directors leading and controlling the Group. The
Board of Directors is responsible for approving Group policy and strategy. It meets regularly and has a
schedule of matters specifically reserved to it for decision. All Directors have access to advice from
independent professionals at the Group's expense. Training is available for new and existing Directors as
necessary. Biographical details are set out on pages 18-19.
Internal Control
The Directors acknowledge that they are responsible for the Group's system of internal control and for
reviewing the effectiveness of these systems. The risk management process and systems of internal control
are designed to manage rather than eliminate the risk of the Group failing to achieve its strategic objectives.
It should be recognised that such systems can only provide reasonable and not absolute assurance against
material misstatement or loss. The Group has well established procedures which are considered adequate
given the size of the business.
35
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
DIRECTORS’ REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2019
Auditor
The Board as a whole considers the appointment of the external auditor and their independence, specifically
including the nature and scope of non-audit services provided.
Remuneration
The remuneration of the Executive Directors has been fixed by the Remuneration Committee as a whole.
The Board seeks to provide appropriate reward for the skill and time commitment required so as to retain the
right calibre of Director at a cost to the Group which reflects current market rates.
Details of Directors’ fees and of payments made for professional services rendered are set out in the
Remuneration Report on page 29.
Directors’ Interests in Shares
Name of Director
Sandy Adam
- Direct
-
Indirect
Innes Smith
- Direct
-
Indirect
Michelle Motion
Roger Eddie
Matthew Benson
Number of
ordinary
shares
% of ordinary share
capital and voting
rights
24,900,000
18,908,322
1,158,009
44,419
52,999
47,170
28,302
45,139,221
25.8%
19.6%
1.2%
0.0%
0.1%
0.1%
0.0%
46.8%
Financial Risk Management Objectives and Policies
Details of the Group’s financial risk management objectives and policies are set out in Note 27 to these
consolidated financial statements.
Strategic Report
The Group has chosen in accordance with the Companies Act 2006, s.414C(11) to set out in the Group’s
Strategic Report information required by Large and Medium-Sized Companies and Groups (Accounts and
Reports) Regulations 2008, Sch. 7 to be contained in the Directors’ Report. It has done so in respect of
future developments.
On behalf of the Board
Sandy Adam
Executive Chairman
23 September 2019
36
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
FOR THE YEAR ENDED 31 MAY 2019
The Directors are responsible for preparing the Strategic Report, Directors’ Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare group and parent company financial statements for each
financial year. Under that law the Directors have elected to prepare group financial statements in accordance
with International Financial Reporting Standards (“IFRS” as adopted by the European Union (“EU”)) and have
also elected to prepare the parent company financial statements in accordance with IFRS as adopted by the
EU. Company law requires that the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the group and the parent company and
profit or loss of the group for that period. In preparing these financial statements, the Directors are required
to:
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether applicable IFRSs have been followed, subject to any material departures disclosed and
explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the group and parent company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the group’s and parent company’s transactions and disclose with reasonable accuracy at any time the
financial position of the group and parent company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group
and parent company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Group's website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
Sandy Adam
Executive Chairman
23 September 2019
37
SPRINGFIELD PROPERTIES PLC
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SPRINGFIELD
PROPERTIES PLC
Opinion
We have audited the financial statements of Springfield Properties Plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the year ended 31 May 2019 which comprise the Consolidated Profit and Loss
Account, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Cash Flows, the Company Balance Sheet, the Company Statement of Changes
in Equity, the Company Statement of Cash Flows and the related notes to the financial statements, including
a summary of significant accounting policies. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union and, as regards the Parent Company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s
affairs as at 31 May 2019, and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in accordance with the provisions of Companies Act
2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Statements section of our report. We are independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusion relating to Going Concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements
is not appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the Group’s or the Parent Company’s ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
38
SPRINGFIELD PROPERTIES PLC
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SPRINGFIELD
PROPERTIES PLC (CONTINUED)
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Risk of incorrect recognition of revenue
The Group has recorded revenue in the
year of £190.8m which is a key metric of
business performance.
to estimates of
Recognition of revenue on affordable
housebuilding construction contracts is
contractual
linked
performance as activity progresses which
is
judgemental, albeit such
estimates of performance are certified by
or agreed with the housing association
customer.
inherently
Private housebuilding sales involve less
inherent judgements as any recognition of
any income is deferred until control has
passed to the customer although the
timing of recognition of property sales
around
require
year-end
management judgements.
can
the
For a sample of affordable housing contracts, we agreed
that the sales value recognised to date was in line with
surveyor reports as certified by or agreed with the housing
association customer, and that these had correctly been
recognised in the reported revenue figure.
For private house sales we were able to agree, for a sample
of sites that had an associated materials cost or time record
entry, that a house was either sold and included in reported
revenue or was still under construction and included within
work-in-progress. Where the house was included in reported
revenue, we obtained copies of the sales pack and
confirmed the date the missives were settled and the
amount of consideration for the sale was accurately
recognised in the nominal ledger.
Substantive testing regarding missives concluded in the last
two working days of the year and first week of the following
accounting period was also undertaken to confirm that all
private house sales were recognised in the appropriate
accounting period.
No issues were noted in the above testing.
39
SPRINGFIELD PROPERTIES PLC
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SPRINGFIELD
PROPERTIES PLC (CONTINUED)
Key audit matter
How our audit addressed the key audit matter
Construction contracts and private
housebuilding sites profit recognition
The Group has reported a gross profit of
£34.3m. Gross profit is largely a function of
margins recognised on both construction
contracts and private housebuilding sites.
The Group prepares Cost Valuation
Reports (“CVRs”) for each site which
provide estimated site margins and which
provide the basis for margin recognition as
activity progresses at each site.
The inherent estimates involved in this
process present a risk of incorrect profit
recognition.
Management override of controls
Inherent in the construction industry, which
requires some key judgements to be
exercised, is the need for a level of
management
the
oversight
systematic recording of transactions.
over
Ensuring that this judgement is applied to
the quality and accuracy of
improve
financial reporting is a key audit risk as
there is potential for undue management
bias to be exercised in this process.
We undertook a review of previous year estimates against
current year actual (for completed sites) or latest current
year estimates for ongoing sites based on the latest CVRs
and conclude that the Group’s estimation processes provide
a reliable basis for margin recognition.
We also reviewed CVRs prepared after the financial year-
end for any significant differences in estimated margin
relative to the year-end position. No significant differences
were noted.
We reviewed latest CVR site forecasts and confirmed that
any loss-making contracts had been provided for in full.
Using data analytical tools, we undertook a review of all
journal entry activity during the period and subsequent to the
year-end to identify any activity that met certain risk-criteria
pre-determined by us as auditor.
Our findings in these areas confirm our assertion that there
had been no unexplained or unusual activity that could
suggest manipulation of the financial statements.
limited cases,
In
identified
journal activity
management estimates which were subject to separate
audit verification and assessment based on supporting
management explanations and subsequent corroboration.
review
40
SPRINGFIELD PROPERTIES PLC
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SPRINGFIELD
PROPERTIES PLC (CONTINUED)
Our application of materiality
The scope of our audit was influenced by the application of materiality. We define materiality as the magnitude
of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Materiality was determined as follows:
Group
£800,000
Parent Company
£425,000
We determined that 5% of profit before
tax of the Group was an appropriate
measure
trading
for a profit-oriented
business.
We determined that 5% of profit
before tax of the Company was an
appropriate measure for a profit-
oriented trading business.
60% of financial statement materiality.
60% of financial statement materiality.
Materiality
Measure
Financial
statements as a
whole
(Overall materiality)
Performance
materiality used to
drive the extent of
testing
Communication of
misstatements
to
the Directors
£16,000 (2% of overall materiality) and
any misstatements below that threshold
that, in our view, warrant reporting on
qualitative grounds.
£8,500 (2% of overall materiality) and
any misstatements
that
threshold that, in our view, warrant
reporting on qualitative grounds.
below
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed
above and in light of other relevant qualitative considerations in forming our opinion.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in
the financial statements. In particular, we looked at where the Directors made subjective judgements, for
example in respect of significant accounting estimates that involved making assumptions and considering
future events that are inherently uncertain. As in all audits, we also considered the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the Directors that
represented a risk of material misstatement due to fraud.
41
SPRINGFIELD PROPERTIES PLC
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SPRINGFIELD
PROPERTIES PLC (CONTINUED)
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is
a material misstatement in the financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the Group and the Parent Company and its environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or
the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the Parent Company, or returns adequate for our
audit have not been received from branches not visited by us; or
the Parent Company financial statements and the part of the Directors’ remuneration report to be audited
are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 37, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or
the Parent Company or to cease operations, or have no realistic alternative but to do so.
42
SPRINGFIELD PROPERTIES PLC
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SPRINGFIELD
PROPERTIES PLC (CONTINUED)
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at http://www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
David McBain (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
Chartered Accountants
Statutory Auditor
Commerce House
South Street
Elgin
IV30 1JE
43
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MAY 2019
Notes
4
2019
Pre –
Exceptional
Items
£000
Exceptional
Items
£000
2019
Post –
Exceptional
Items
£000
2018
Post –
Exceptional
Items
£000
190,804
(156,470)
34,334
-
-
-
190,804
140,723
(156,470)
(118,580)
34,334
22,143
11
(17,673)
(565)
(18,238)
(12,183)
584
384
-
-
584
384
21
126
17,629
(565)
17,064
10,107
416
(1,511)
16,534
(3,111)
-
-
(565)
-
416
(1,511)
15,969
(3,111)
147
(1,039)
9,215
(1,854)
13,423
(565)
12,858
7,361
13,413
(565)
12,848
7,353
10
13,423
-
10
(565)
12,858
8
7,361
13.92p
(0.58)p
13.34p
10.02p
13.79p
(0.58)p
13.21p
9.99p
6
9
10
13
13
Revenue
Cost of sales
Gross profit
Administrative expenses
Share of profit before interest
and taxation
Other operating income
Operating profit/(loss)
Interest receivable and similar
income
Finance costs
Profit/(loss) before tax
Tax
Profit for the year and total
comprehensive income
Profit for the year and total
comprehensive income is
attributable to:
-Owners of the parent
company
-Non-controlling interests
Earnings per share
Basic earnings, on profit for
the year (pence per share)
Diluted earnings, on profit for
the year (pence per share)
The Group has no items of other comprehensive income.
The accompanying notes on pages 48 to 76 form an integral part of these financial statements.
44
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED 31 MAY 2019
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Accounts receivable
Current assets
Inventories and work in progress
Accounts receivable
Cash and cash equivalents
Total assets
Current liabilities
Accounts payable
Short-term obligations under finance lease
Corporation tax
Non-current liabilities
Long-term borrowings
Long-term obligations under finance lease
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Equity attributable to owners of the parent
company
Non-controlling interest
Total equity
Note
14
15
16
18
17
18
25
19
22
21
22
23
24
24
2019
£000
4,977
1,649
1,481
903
9,010
148,649
20,144
3,062
171,855
2018
£000
4,492
600
1,018
870
6,980
105,630
19,104
12,015
136,749
180,685
143,729
43,697
1,012
2,018
46,727
31,000
624
13,954
45,578
92,305
33,910
1,020
1,139
36,069
25,000
1,254
2,394
28,648
64,717
88,560
79,012
120
50,118
38,292
88,530
30
88,560
120
50,105
28,767
78,992
20
79,012
These financial statements were approved by the Board of Directors on 23 September 2019.
Signed on behalf of the Board by:
Sandy Adam
Executive Chairman
Company number: SC031286
The accompanying notes on pages 48 to 76 form an integral part of these financial statements.
45
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2019
Share
capital
Share
premium
Retained
earnings
Notes
£000
£000
£000
Non-
controlling
interest
£000
1 June 2017
Share issue
Total comprehensive
income for the year
Share option reserves
Dividends
31 May 2018
Share issue
Total comprehensive
income for the year
Share option reserves
Dividends
31 May 2019
24
12
24
24
12
73
47
-
-
-
10,285
39,820
-
-
-
22,017
-
7,353
218
(821)
12
-
8
-
-
120
50,105
28,767
20
79,012
-
-
-
-
13
-
-
-
120
50,118
-
12,848
434
(3,757)
38,292
-
10
-
-
30
13
12,858
434
(3,757)
88,560
Total
£000
32,387
39,867
7,361
218
(821)
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
transaction costs.
Retained earnings represents accumulated profits less losses, and distributions. Retained earnings also
includes share option reserves.
The accompanying notes on pages 48 to 76 form an integral part of these financial statements.
46
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR TO 31 MAY 2019
Operating activities
Note
Profit for the year after taxation (excluding exceptional items)
Adjusted for:
Taxation charged
Finance costs
Interest receivable and similar income
Exceptional items
Gain on disposal of tangible fixed assets
Share option employment costs
Share of joint venture profit
Depreciation and impairment of tangible fixed assets
Operating cash flows before movements in working
capital
Decrease in inventory
Decrease/(Increase) in accounts and other receivables
(Decrease)/Increase in accounts and other payables
Net cash generated from operations
Income taxes paid
Net cash inflow from operating activities
Investing activities
Payments to acquire intangible assets
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Net purchase of subsidiary undertakings
Interest received and similar income
Net cash used in investing activities
Financing activities
Proceeds from issue of shares
Cost from issue of shares
Proceeds from bank loans
Repayment of bank loans
Proceeds paid to related parties
Repayment of other borrowings
Payment of finance leases obligations
Dividends paid
Interest paid
11
6
24
16
14
15
24
12
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
25
2019
£000
13,423
3,111
1,511
(416)
(565)
(270)
434
(420)
1,591
18,399
948
653
(3,978)
16,022
(2,868)
13,154
-
(1,549)
368
2018
£000
7,919
1,854
1,039
(147)
(558)
(45)
218
(21)
1,088
11,347
6,230
(7,314)
4,166
14,430
(1,714)
12,716
(600)
(752)
62
(20,891)
(14,719)
98
19
(21,974)
(15,990)
13
-
68,000
(62,000)
-
-
(1,065)
(3,757)
(1,324)
(133)
(8,953)
12,015
3,062
42,180
(2,312)
-
(22,500)
(4,647)
(2,929)
(849)
(821)
(1,168)
6,954
3,680
8,335
12,015
47
The accompanying notes on pages 48 to 76 form an integral part of these financial statements.
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
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, IV30 6GR.
The Group consists of Springfield Properties PLC and its subsidiaries Glassgreen Hire Limited, DHomes
2014 Holdings Limited, Walker Holdings (Scotland) Limited and SP Sub 2018 Limited.
The Group also indirectly includes Dawn Homes Limited, Dawn (Robroyston) Limited, DHPL Limited and
Dawn Homes (Johnstone) Limited who are subsidiaries of DHomes 2014 Limited and its jointly owned entity
DHHG 1 Limited.
The Group also indirectly includes Walker Group (Scotland) Limited, Perten Limited, Walker Residential
(Scotland) Limited, Walker Group (Land & Projects) Limited, Walker Contracts (Scotland) Limited and Craig
Developments Limited who are subsidiaries of Walker Holdings (Scotland) Limited.
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 statements of Springfield Properties PLC have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted for use in the European Union (“EU”) applied in accordance
with the provisions of the Companies Act 2006.
The financial statements have changed layout from last year to show Group and Company information
separately. The change in presentation is more appropriate as the group grows so that the financial
statements are easier to read between group and company. The accounting policies apply to both Group
and Company.
The Group has adopted all the standards and amendments to existing standards which are mandatory for
accounting periods beginning on 1 June 2018. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet effective.
At 31 May 2019 the following new and revised IFRSs relevant to the Group are issued but are not yet
effective:
IFRS 16 Leases
Amendments to IFRS 9 Prepayment Features with Negative Compensation
IFRIC 23 Uncertainty over Income Tax Treatments
Effective date
1 January 2019
1 January 2019
1 January 2019
IFRS 16 Leases will be effective for the Group from 1 June 2019. The key effect of this standard will be to
require the Group to create a long term depreciating “right of use” asset and corresponding lease liability for
leases currently classified as operating leases and charged over the lease term in accordance with the
current standard IAS 17 Leases. The Group operate a number of such operating leases, principally in relation
to office properties and vehicles. If IFRS 16 was applied from 1 June 2018, both fixed assets and other
payables would have been increased by £3,277,410 at 31 May 2019. There would be no material impact to
the reported profit from operations.
Of the other IFRSs and IFRICs, none are expected to have a material effect on the financial statements.
48
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
2. Summary of Significant Accounting Policies (continued)
2.1
Basis of accounting (continued)
Following the implementation of IFRS 15, Revenue from Contracts with Customers, revenue has been
reviewed to ensure that it is reported in line with IFRS 15. There is no material impact to the financial
statements for the current and prior year.
IFRS 9 Financial Instruments came into effect on 1 January 2018 replacing IAS 39 Financial Instruments:
Recognition and Measurement and requires changes to the classification and measurement of certain
financial instruments from that under IAS 39. The new standard has been applied fully retrospectively and
on review the majority of the Group’s and Parent Company financial assets and liabilities will continue to be
accounted for on an identical basis under IFRS 9 as they were under IAS 39. There is no material effect
from applying IFRS 9 for expected credit losses.
The financial statements have been prepared under the historical cost convention.
2.2
Basis of consolidation
The consolidated financial statements incorporate those of Springfield Properties PLC and its subsidiaries
(i.e. entities that the group controls through its power to govern the financial and operating policies so as to
obtain economic benefits) and jointly controlled entities.
All financial statements are made up to 31 May 2019.
The jointly owned entity is accounted for using the equity method.
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
Any consideration of the foreseeable future involves making a judgement, at a particular point in time, about
future events which are inherently uncertain.
At the time of approving the financial statements, the Directors have a reasonable expectation that the group
has adequate resources to continue in operational existence for the foreseeable future. Thus the Directors
continue to adopt the going concern basis of accounting in preparing the financial statements.
2.5.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable net of VAT and trade
discounts.
Revenue is recognised at the fair value of the consideration received or receivable on legal completion.
49
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
2. Summary of Significant Accounting Policies (continued)
2.5.
Revenue recognition (continued)
Private house sales
Revenue on private house sales is recognised when control has been transferred to the purchaser which will
normally occur at handover / legal completion.
Construction contracts
Revenue from construction contracts is generated from affordable housing contracts and is recognised based
on the measured value of work completed as construction progresses. The measured value of work is based
on certified valuations which consider the stage of completion of contracts.
Contract expenses are recognised as incurred unless they create an asset related to future contract activity.
An expected loss on a contract is recognised immediately in the profit and loss account.
Revenues derived from variations on contracts are recognised only when they have been accepted by the
customer.
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.
2.6.
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.
2.7.
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
2.8.
Borrowing costs
Borrowing costs relating to qualifying assets are capitalised. All other borrowing costs are recognised as an
expense in the profit and loss account as they are incurred.
2.9.
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 end date.
50
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
2. Summary of Significant Accounting Policies (continued)
2.9.
Taxation (continued)
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 balance sheet date.
The carrying amount of deferred tax assets is reviewed at each reporting end 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 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.
2.10. 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.
2.11. 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
Plant and machinery
Fixtures, fittings & equipment
Motor vehicles
- 2% and 5% straight line
- 2-5 years straight line
- 2-5 years straight line
- 4-5 years straight line
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.
2.12.
Intangible Fixed Assets
Intangible assets comprise of market related assets (e.g. trademarks, imprints & brands) and goodwill on
acquisition.
Market Related Assets
Market-related assets are expected to have an infinite 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.
51
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
2. Summary of Significant Accounting Policies (continued)
2.12.
Intangible Fixed Assets (continued)
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 or reversals of impairment losses are recognised immediately in the profit and loss
account.
Goodwill on associated companies is included in the carrying amount of the investments.
2.13. Fixed asset investments
Interests in subsidiaries and jointly owned entities 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 or reversals of impairment losses are recognised immediately in
the profit and loss account. Costs associated with the acquisition of subsidiaries and jointly owned entities
are recognised in the profit and loss account as an exceptional item.
Jointly owned entities are accounted using the equity method of accounting. The Group’s investment
includes the share of profit/losses.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating
policies of the entity so as to obtain benefits from its activities.
Entities in which the group has a long term interest and shared control under a contractual arrangement are
classified as jointly controlled entities.
2.14.
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.
2.15.
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 of the invoiced value of the goods purchased and includes attributable direct costs, labour
and production 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.
52
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
2. Summary of Significant Accounting Policies (continued)
2.15.
Inventories and work in progress (continued)
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.
2.16. Construction contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised
by reference to the measured valuation of work of the contract activity at the reporting end date. Variations
in contract work, claims and incentive payments are included to the extent that the amount can be measured
reliably and its receipt is considered probable.
When it is probable that total contract costs will exceed contract turnover, the expected loss is recognised as
an expense immediately.
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 the
contract costs incurred where it is probable that they will be recovered.
The “percentage of completion method” is used to determine the appropriate amount to recognise in a given
period. The stage of completion is measured by the proportion of contract costs incurred for work performed
to date compared to the estimated total contract costs.
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.
Loans and receivables
The group’s financial assets fall into loans and receivables category.
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Financial assets included in loans and receivables 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 amortised cost and discounted at a market rate of interest. The
discount is being spread over the development the loan is financing.
53
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
2. Summary of Significant Accounting Policies (continued)
2.17. Financial instruments (continued)
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. 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 other than trade payables which are measured at historic cost fall into
the other financial liabilities category.
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. Provisions
Deferred consideration payments are valued based on the probability-weighted average of the economic
outflow of payment. An annual review will be performed on the deferred consideration.
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.
54
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
2. Summary of Significant Accounting Policies (continued)
2.21.
Leases
A lease is classified at the inception date as a finance lease or an operating lease.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessees. All other leases are classified as operating leases.
Finance leases are capitalised at the commencement of the lease at the inception date fair value of the
leased property or, if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between the finance charges and the reduction of the lease liability so as
to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are charged to the profit and loss account.
Operating lease payments, including any lease incentives received, are recognised in the profit and loss
account on a straight-line basis over the term of the lease except where another more systematic basis is
more representative of the time pattern in which economic benefits from the lease asset are consumed.
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 direct
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
transaction 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.
3. Critical accounting estimates and judgements in applying accounting policies
In the application of the group’s accounting policies the Directors are required to make judgements, estimates
and assumptions which affect reported income, expenses, assets, liabilities and disclosure of contingent
assets and liabilities. The estimates and associated assumptions are based on historical experience,
expectations of future events and other factors that are believed to be reasonable under the circumstances.
Actual results in the future could differ from such estimates. The estimates and underlying assumptions are
reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next year are:
55
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
3. Critical accounting estimates and judgements in applying accounting policies (continued)
3.1. Work in progress measurement on construction contracts
The group undertakes construction contracts which takes place over a period of time and revenues and
profits are recognised as the group performs under these contracts. The group regularly reviews these
estimates to ensure they reflect the latest known position. The total work in progress value of £148,649k
(2018: £105,630k) is impacted by the estimates involved in the construction contracts in relation to costs to
complete and therefore expected profit margin.
3.2. Work in progress measurement on private house sales
The recognition of costs expensed against properties sold at sites remaining under construction requires
estimation of costs to complete at these sites. These estimates impact the total work in progress value
recognised of £148,649k (2018: £105,630k). The group regularly reviews these estimates to ensure they
reflect the latest known position.
3.3. Fair value assessment
The Group undertakes a fair value assessment of all assets and pays particular attention to work in progress
as part of the acquisition process. The fair value assessment is a one-off exercise. These estimates are
arrived at on arms-length basis and where appropriate third-party valuations are acquired. These estimates
impact the total work in progress value recognised of £43,727k (2018: £29,650k).
4. Revenue
Analysis of the Group’s revenue is as follows:
Revenue
Private residential properties
Affordable housing
Other revenue
Revenue from the sale of goods as reported in the profit and loss account
Operating Income
Profit before interest and tax from JV
Finance income
2019
£000
143,260
42,906
4,638
190,804
384
584
416
192,188
2018
£000
101,867
37,272
1,584
140,723
126
21
147
141,017
For affordable housing revenue, the Group has taken advantage of the practical expedient in IFRS 15 from
the disclosure of information relating to its remaining performance obligations as revenue is recognised in
accordance with right to invoice which is based on work completed, as certified by a third party valuation.
For affordable housing combined contracts, revenue is recognised in line with the individual contract price as
long are the contract terms are deemed to be normal commercial practice within the industry.
56
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
5. 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.
Revenue
Private residential properties
Affordable housing
Other
Total Revenue
Gross Profit
Administrative expenses
Operating Income
Profit before interest and tax from JV
Finance income
Finance expenses
Exceptional items
Profit before tax
Taxation
Profit for the period
6. Operating profit
2019
£000
143,260
42,906
4,638
190,804
34,334
(17,673)
384
584
416
(1,511)
(565)
15,969
(3,111)
12,858
2018
£000
101,867
37,272
1,584
140,723
22,143
(11,625)
126
21
147
(1,039)
(558)
9,215
(1,854)
7,361
Operating profit is stated after charging / (crediting):
Depreciation of owned tangible fixed assets
Depreciation of tangible fixed assets held under finance leases
Gain on disposal of tangible fixed assets
Cost of inventories recognised as an expense
Exceptional items
Operating lease charges
Notes
14
14
11
2019
£000
754
837
(270)
156,470
565
459
2018
£000
470
618
(45)
118,580
558
284
57
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
7. Auditor’s remuneration
Fees payable to the group’s auditor for the audit of the group and company
annual accounts
Fees payable to the group’s auditor for the audit of the company’s subsidiaries
Fees payable to the group’s auditor and their associates for other services to the
group and company - other non-audit services
2019
£000
55
55
64
174
2018
£000
44
6
77
127
8. Staff costs
The average monthly number of employees (including Executive Directors) for the continuing operations was:
Building staff
Administrative staff
Wages and salaries
Share based payments
Social security costs
Pension costs
Directors’ Remuneration
2019
409
277
686
2019
£000
28,273
434
3,266
964
32,937
2018
368
200
568
2018
£000
18,126
218
1,701
574
20,619
Full details of the Directors’ remuneration, for current Directors, is provided in the audited part of the Directors’
Remuneration Report on page 29.
Directors’ remuneration for all Directors who resigned during the year were:
June to October 2017
Remuneration for qualifying services
Company pension contributions to defined contribution schemes
2019
£000
-
-
-
2018
£000
87
14
101
The group operates a defined contribution pension scheme for all qualifying employees. The assets of the
scheme are held separately from those of the group in an independently administered fund.
The charge to the profit and loss account in respect of defined contribution schemes was £964k (2018:
£574k). Contributions totalling £156k (2018: £109k) were payable to the fund at the year-end and are included
in creditors.
58
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
9. Finance costs
Interest on bank overdrafts and loans
Interest on hire purchase contracts
Other interest
10. Taxation
Current tax
UK corporation tax on profits for the current period
Adjustments in respect of prior periods
Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior periods
2019
£000
1,202
113
196
1,511
2019
£000
3,117
(7)
3,110
16
(15)
1
3,111
The charge for the year can be reconciled to the profit per the income statement as follows:
Profit before tax
Tax at the UK corporation tax rate of 19% (2018- 19%)
Effects of:
Tax effect of expenses that are not deductible in determining taxable profit
Exceptional items – no deductions
Adjustments in respect of prior years
Depreciation on assets not qualifying for tax allowances
Deferred tax adjustments in respect of prior years
Land remediation relief
Adjust deferred tax to closing average rate
Tax charge for period
11. Exceptional Items
Acquisition and other transaction related costs (1)
Existing share capital conversion to AIM (2)
2019
£000
15,969
3,034
(12)
107
(7)
4
(15)
(4)
4
3,111
2019
£000
565
-
565
2018
£000
908
95
36
1,039
2018
£000
1,872
(27)
1,845
23
(14)
9
1,854
2018
£000
9,215
1,751
31
106
(27)
4
(14)
(6)
9
1,854
2018
£000
255
303
558
(1) Acquisition and other transactions related costs relate to the costs incurred relating to the work undertake for the acquisition of Walker Holdings (Scotland) Limited and
its subsidiaries and jointly owned companies (2018 - DHomes 2014 Holdings Limited and its subsidiaries and jointly owned companies).
(2) Existing share capital conversion to AIM relates to costs incurred relating to the work undertaken for the Initial Public Ordering (IPO) for existing ordinary shares.
59
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
12. Dividends
Total dividend payment
Weighted average number of ordinary shares in issue
Dividend per share (pence per share)
13. Earnings per share
2019
£000
3,757
96,333,642
3.90
2018
£000
821
82,083,642
1.00
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
2019 assumes that all shares have been included in the computation based on the weighted average number
of days since issue.
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).
Profit for the year attributable to owners of the Company
Adjusted for the impact of exceptional costs in the year
Normalised earnings
2019
£000
12,848
565
13,413
2018
£000
7,353
558
7,911
Weighted average number of ordinary shares for the purpose of basic
earnings per share
Effect of dilutive potential shares: share options
Weighted average number of ordinary shares for the purpose of diluted
earnings per share
96,336,885
73,412,651
953,235
201,061
97,290,120
73,613,712
Earnings per ordinary shares
Basic earnings per share (pence per share)
Diluted earnings per share (pence per share)
Underlying earnings per ordinary shares (1)
Basic earnings per share (pence per share)
Diluted earnings per share (pence per share)
13.34
13.21
13.92
13.79
10.02
9.99
10.78
10.75
(1) Underlying earnings is presented as an additional performance measure and is stated before exceptional items.
60
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
14. Property, Plant and Equipment
Land &
buildings
£000
Plant &
machinery
£000
Fixtures,
fittings &
equipment
£000
Motor
vehicle
£000
Cost
At 1 June 2017
Acquisition of Subsidiary
Additions
Disposals
At 31 May 2018
Acquisition of subsidiary
Additions
Disposals
At 31 May 2019
Accumulated depreciation
At 1 June 2017
Depreciation charge
Disposals
At 31 May 2018
Depreciation charge
Disposals
At 31 May 2019
Net book value
At 31 May 2019
At 31 May 2018
At 31 May 2017
675
-
6
-
681
2
-
-
683
33
19
-
52
21
-
73
610
629
642
4,253
1
2,507
(175)
6,586
160
1,655
(788)
7,613
2,327
831
(166)
2,992
1,331
(696)
3,627
593
-
211
(4)
800
35
250
(112)
973
577
104
(3)
678
142
(107)
713
3,986
260
3,594
122
1,926
16
750
7
61
(116)
702
-
72
(202)
572
531
134
(110)
555
97
(201)
451
121
147
219
Total
£000
6,271
8
2,785
(295)
8,769
197
1,977
(1,102)
9,841
3,468
1,088
(279)
4,277
1,591
(1,004)
4,864
4,977
4,492
2,803
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance
leases or hire purchase contracts:
Net book value:
Plant and machinery
Motor vehicles
Total depreciation charge
2019
£000
2,198
78
2,276
2018
£000
2,691
90
2,781
837
618
Fixed assets with the carrying value of £2,276k (2018: £2,781k) are pledged as security.
61
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
15. Intangible fixed assets
Goodwill
Marketing-
related assets
Cost
At 1 June 2017
Additions
At 31 May 2018
Additions
Disposals
At 31 May 2019
Amortisation and impairment
At 1 June 2017 and 31 May 2018
Impairment
Disposals
At 31 May 2019
Net book value
At 31 May 2019
At 31 May 2018
£000
-
-
-
1,049
-
1,049
-
-
-
-
1,049
-
Total
£000
-
600
600
1,049
-
1,649
-
-
-
-
£000
-
600
600
-
-
600
-
-
-
-
600
600
1,649
600
Marketing-related assets comprises of brand name and licences which have been measured at cost. Market-
related assets are expected to have an infinite useful life.
Goodwill has arisen due to the acquisition of Walker Holdings (Scotland) Limited. A Fair Value assessment
has been performed resulting in an adjustment of £11,886,000 to stock. IAS 12 requires that deferred taxation
should be recognised on this adjustment. The deferred consideration has been discounted in the financial
statements at a market rate. These have resulted in goodwill of £1,048,835 being recognised in the financial
statements (note 16).
16. Fixed assets investments
Cost
Loans to joint ventures
Investment in joint ventures
2019
£000
807
674
1,481
2018
£000
764
254
1,018
Movement in fixed asset investments
Cost
At 1 June 2018
Additions
Share of profit after tax
At 31 May 2019
Investment
in joint
venture
£000
254
-
420
674
Loans to joint
venture
Total
£000
£000
764
43
-
807
1,018
43
420
1,481
62
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
16. Fixed assets investments (continued)
The Group’s aggregate share of joint ventures at the year-end is as follows:
Profit before interest and tax
Interest
Taxation
Profit after tax
Share of assets
Current assets
Share of liabilities
Liabilities due with one year
Liabilities due after one year or more
Share of net assets
2019
£000
584
(62)
(102)
420
2019
£000
2018
£000
21
-
-
21
2018
£000
2,331
4,365
(564)
(1,093)
674
(1,081)
(3,030)
254
Walker Holdings (Scotland) Limited was acquired on 31 January 2019 and the fair value of the assets and
liabilities are disclosed in the table below:
Net assets at date of Acquisition
£000
£000
£000
Book value Revaluation
adjustment
Fair Value
to Group
Fixed assets
Intangible fixed asset - Goodwill
Stock and work in progress
Accounts receivable
Bank
Accounts payable
Corporation tax
Deferred tax
At 31 January 2019
Discharged by:
Consideration paid - Cash
Deferred consideration
197
-
31,851
1,723
41,509
(13,765)
(626)
-
60,889
-
1,049
11,886
-
-
-
-
(2,021)
10,914
197
1,049
43,727
1,723
41,509
(13,765)
(626)
(2,021)
71,803
62,400
9,403
71,803
Goodwill has arisen due to the acquisition of Walker Holdings (Scotland) Limited. A Fair Value assessment
has been performed resulting in an adjustment of £11,886,000 to stock. IAS 12 requires that deferred taxation
should be recognised on this adjustment. The deferred consideration has been discounted in the financial
statements at a market rate. These have resulted in goodwill of £1,048,835 being recognised in the financial
statements (see note 15).
63
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
17. Inventories and work in progress
Work in progress
Land under development is included in work in progress
Accounts receivable in relation to construction contracts
Accounts payable in relation to construction contracts
Retentions held by customers for contract work
Advances received from customers for contract work
Included within inventories is £41,006k (2018: £27,009k) pledged as security.
18. Accounts receivable
Amounts falling due within one year
Trade receivables
Other receivables
Prepayments and accrued income
2019
£000
148,649
148,649
2018
£000
105,630
105,630
2019
£000
10,003
10,003
2019
£000
299
299
2019
£000
1,538
(299)
1,239
2018
£000
9,770
9,770
2018
£000
448
448
2018
£000
1,275
(448)
827
2019
£000
9,546
9,351
1,247
20,144
2018
£000
9,916
8,484
704
19,104
The Directors consider the carrying amount of the receivables approximates to their fair value.
The Group’s exposure to credit risk is limited by the fact that the Group generally receives cash at the point
of legal completion of its sales. There are certain categories of revenue where this is not the case; for
instance, housing association revenues or land sales where management considers that the ratings of these
various debtors are good and therefore credit risk is low. Loans to related parties have also been assessed
as low credit risk based on the expected profitability of their future contracts. Any assets which expose the
Group to credit risk can be spread over a considerable number of properties. As such, the Group has low
concentration of credit risk, with exposure spread over a large number of customers. The maximum exposure
to credit risk at 31 May 2019 is represented by the carrying amount of each financial asset.
Amounts falling due after one year
Trade receivables
Other receivables
Deferred tax asset (see note 23)
2019
£000
548
141
214
903
2018
£000
735
135
-
870
64
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
19. Accounts payable
Trade creditors
Other taxation and social security
Other creditors
Accruals and deferred income
2019
£000
23,413
1,083
1,612
17,589
43,697
The Directors consider the carrying amount of the accounts payable approximates to their fair value.
20. Financial assets and liabilities
Assets
Loans and receivables at amortised cost
Total
Liabilities
Measured at amortised cost
Total
2019
£000
23,455
23,455
2019
£000
74,773
74,773
2018
£000
21,152
546
977
11,235
33,910
2018
£000
32,050
32,050
2018
£000
60,637
60,637
Included within loans and receivables is a loan to a related party which is valued at amortised cost. £275k
(2018: £127k) has been recognised as interest received in the profit and loss account. Market rate interest
has been used (note 27).
The above amortised costs figures are deemed to be approximate to their fair values.
21. Borrowings
Secured borrowings:
Bank loans
Less: payable within one year
Payable after one year
2019
£000
31,000
31,000
-
31,000
2018
£000
25,000
25,000
-
25,000
The bank loan comprises of a revolving credit facility which is repayable by 31 January 2022 and is secured
over certain of the group's properties. The facility attracts an interest rate of 2% per annum above the Bank
of England Base Rate.
65
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
22. Obligations under hire purchase contracts
Finance lease and hire purchase payments represent rentals payable by the group for certain items of plant
and machinery and are secured by the assets under lease in question.
Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of
the assets. All leases are on a fixed repayment basis and no arrangements have been entered into for
contingent rental payments.
Minimum lease payments
2019
£000
1,079
642
1,721
(85)
1,636
2018
£000
1,128
1,322
2,450
(176)
2,274
Present value of
minimum lease payments
2018
£000
1,020
1,254
2,274
2019
£000
1,012
624
1,636
Within 1 year
Two to five years
Less: unearned finance income
23. Provisions
Deferred taxation
Deferred consideration
Deferred consideration
Acquisition of DHomes 2014 Holdings Limited (“Dawn”)
Acquisition of Walker Holdings (Scotland) Limited (“Walker”)
Deferred consideration movement
Opening Balance
Additions on acquisition (discounted)
Deemed interest in year
Closing balance
As part of the purchase agreement of DHomes 2014 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 we can achieve planning
approval; or (ii) or the site is zoned for housing. The Directors have assessed the likelihood of the land being
zoned and have included a deferred consideration of £2,000,000 based on 80% probability.
As part of the purchase agreement of Walker Holdings (Scotland) Limited there is a further £10,375,000 to
pay. This can be broken down into: (i) £2,187,500 payable on the first anniversary of the acquisition date (31
January 2020); (ii) £2,187,500 payable on the second anniversary of the acquisition date (31 January 2021);
(iii) £4,000,000 payable when outline planning is granted at Carlaverock and (iv) £2,000,000 payable when
detailed planning is granted at Carlaverock. (iii) and (iv) probability has been assessed at 98% and 95%
respectively. This has been discounted at a market rate of interest. £9,593,418 is recognised as a provision
at the year end.
66
2019
£000
2,361
11,593
13,954
2019
£000
2,000
9,593
11,593
2019
£000
2,000
9,403
190
11,593
2018
£000
394
2,000
2,394
2018
£000
2,000
-
2,000
2018
£000
-
2,000
-
2,000
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
23. Provisions (continued)
Deferred Taxation
Fixed assets –
temporary
differences
Other
temporary
differences
–
2017 Profit and
Loss
Account
£000
18
£000
43
On
Acquisition
2018
£000
61
-
Profit and
Loss
Account
£000
7
On
Acquisition
2019
£000
-
£000
68
2
45
(9)
9
340
333
(6)
1,752
2,079
340
394
1
1,752
2,147
Deferred tax liability
Deferred tax assets (note 18)
24. Share capital
2019
£000
2,361
(214)
2,147
2018
£000
394
-
394
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
transaction costs.
Ordinary shares of £1 - allotted, called up and
fully paid
At 1 June 2018
Share issue
At 31 May 2019
Number of shares
Share capital
£000
96,333,642
15,919
96,349,561
120
-
120
Share
premium
£000
50,105
13
50,118
During the year 15,919 shares (2018: nil) were issued in satisfaction of share options exercised.
Share based payments
During the year the Group operated three share based schemes.
Share related share options scheme
The Group operates a Savings related Share Option Scheme which is open to all employees. Grant options
were made in December 2017 and become exercisable after 3 years, subject to employees remaining in
continuous employment. Employees enter into a savings contract with the Yorkshire Building Society who
administers the scheme. The options are granted at a 20% discount of the share price at the date of grant
and lapse if not exercised within six months of maturity. Special provisions apply to employees who leave
their employment for ill health, redundancy or retirement.
67
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
24. Share Capital (continued)
Long-Term Incentive Plan (LTIP)
The Group operates a LTIP for senior management to retain and align their interests with shareholders. The
LTIP is split into a CSOP and ESOP scheme.
Fair Value of share options
Options are valued using the Black-Scholes option-pricing model. No performance conditions are included
in the fair value calculation.
Savings Related Share Option Scheme
CSOP
2019
2018
Number of
shares
Weighted
average
exercise
price (pence)
Number of
shares
Weighted
average
exercise price
(pence)
1,033,382
182,024
-
-
1,215,406
110.59
121.94
-
-
112.29
-
1,061,683
(28,301)
-
1,033,382
-
110.46
106.00
-
110.59
Options at the beginning of the
year
Granted during the year
Lapsed during the year
Exercised during the year
Options at the year end
Share Option
Grant Price
(p)
CSOP – 16th October 2017
CSOP – 4th December 2017
CSOP – 8th December 2017
CSOP – 15th January 2018
CSOP – 3rd May 2018
CSOP – 16th May 2018
CSOP – 1st October 2018
CSOP – 5th October 2018
ESOP
106.00
112.00
111.00
110.50
134.00
134.00
122.50
118.50
Number of
shares at year
end
799,869
24,553
27,027
27,149
22,388
132,396
156,708
25,316
Exercise price
(p)
Vesting
Period
106.00
112.00
111.00
110.50
134.00
134.00
122.50
118.50
3
3
3
3
5
5
5
5
2019
2018
Number of
shares
Weighted
average
exercise
price (pence)
Number of
shares
Weighted
average
exercise price
(pence)
596,524
1,675,233
-
-
2,271,757
110.29
122.49
-
-
119.29
-
597,048
(524)
-
596,524
-
110.29
106.00
-
110.29
Options at the beginning of the
year
Granted during the year
Lapsed during the year
Exercised during the year
Options at the year end
68
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
24. Share Capital (continued)
Share Option
ESOP – 16th October 2017
ESOP – 15th January 2018
ESOP – 3rd May 2018
ESOP – 16th May 2018
ESOP – 1st October 2018
ESOP – 5th October 2018
Grant Price
(p)
106.00
110.50
134.00
134.00
122.50
118.50
Number of
shares at year
end
503,631
1,810
72,761
18,332
1,672,279
2,954
Exercise price
(p)
Vesting
Period
106.00
110.50
134.00
134.00
122.50
118.50
5
5
7
7
7
7
Savings Related Share Option Scheme (continued)
SAYE
Options at the beginning of
the year
Granted during the year
Lapsed during the year
Exercised during the year
Options at the year end
2019
2018
Number
of shares
Weighted
average
exercise
price (pence)
Number of
shares
Weighted
average
exercise price
(pence)
3,030,643
-
(296,900)
(15,919)
2,717,824
84.80
-
84.80
84.80
84.80
-
3,129,975
(99,332)
-
3,030,643
84.80
84.80
84.80
-
84.80
Share Option
Grant Price
(p)
SAYE – 16th October 2017
112.00
Number of
shares at year
end
2,717,824
Exercise price
(p)
Vesting
Period
84.80
3
Inputs used to determine fair value of options
Expected volatility
Risk free interest rate
Expected dividends
Fair value of options
Charge per option
CSOP
29.00%
0.49%
-
34.00p
32.00p
ESOP
29.00%
0.49%
-
39.00p
37.00p
SAYE
29.00%
0.49%
-
37.00p
35.00p
Expected volatility was calculated using historical share price information of the house-building sector.
CSOP and ESOP - no shares have vested in the year and none can be exercised at the year-end.
SAYE – 15,919 of shares were exercised during the year.
Charge for share based incentive schemes
The total charge for the year relating to employee share-based plans were £434k (2018: £218k), all of which
related to equity-settled share-based payment transactions.
69
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
25. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following as
at 31 May:
Cash at bank and in hand
2019
£000
3,062
3,062
2018
£000
12,015
12,015
At 31 May 2019, the group had available £36,000k (2018: £37,000k) of undrawn committed borrowing
facilities.
26. Capital risk management
The group manages its capital to ensure that the group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the group consists of equity attributable to equity holders of the parent company and
its subsidiary, comprising issued capital, reserves and retained earnings, all as disclosed in the balance
sheet. The group is not subject to externally imposed capital requirements other than those included, from
time to time, in the financial covenants associated with bank borrowing.
27. Financial risk management
The group is exposed to a variety of financial risks which result from both its operating and investing activities.
The group’s risk management is coordinated by the Board of Directors, and focuses on actively securing the
group’s short to medium term cash flows by minimising the exposure to financial markets.
27.1. Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will
affect the group’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising
the return on risk.
Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The group’s exposure to the interest rate risk relates primarily to its floating
rate borrowings.
The responsibility for setting the level of fixed rate debt lies with the Board and is continually reviewed in the
light of economic data provided by a variety of sources.
Financial liabilities at fixed rate
Financial liabilities at floating rate
Non-interest-bearing financial liabilities
2019
£000
1,636
31,000
42,137
74,773
2018
£000
2,274
25,000
33,363
60,637
70
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
27. Financial risk management (continued)
27.1. Interest Risk (continued)
Interest rate sensitivity analysis
The table below details the group’s sensitivity to increase or decrease of floating interest rates by 0.5%, which
the Directors consider to be a reasonable possible change. The analysis was applied to loans and borrowings
(financial liabilities) based on the assumption that the amount of liability outstanding as at the balance sheet
date was outstanding for the whole year.
Bank of England base rate
31 May 2019
Interest rate
–0.5%
£000
155
Interest rate
+0.5%
£000
(155)
Bank of England base rate
31 May 2018
Interest rate
–0.5%
£000
125
Interest rate
+0.5%
£000
(125)
(Loss) / profit
Limitations of sensitivity analysis
The above tables demonstrate the effect of a change in a key assumption while other assumptions remain
unchanged. In reality, there is a correlation between the assumptions and other factors. It should also be
noted that these sensitivities are non-linear and larger or smaller impacts should not be interpolated or
extrapolated from these results. The sensitivity analysis does not take into consideration that the group’s
assets and liabilities are actively managed. Additionally, the financial position of the group may vary at the
time that any actual market movement occurs.
Other limitations in the above sensitivity analysis include the use of hypothetical market movements to
demonstrate potential risk that only represent the group’s view of possible near-term market changes that
cannot be predicted and the assumption that all interest rates move in an identical fashion.
This analysis is for illustrative purposes only, as in practice market rates rarely change in isolation of other
factors that also affect group’s financial position and results.
Management believe that fair value of the loans, borrowings and finance lease obligations approximates their
carrying amounts as the majority of obligations bear interest rates approximating market rates at 31 May
2019.
27.2.
Liquidity Risk
Liquidity risk is the risk that the group will be unable to meet its liabilities as they fall due. The group’s objective
is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts,
medium to long term borrowings and hire purchase contracts. The Directors continually assess the balance
of capital and debt of the Group. They consider the security of capital funding against the potentially higher
rates of return offered by debt financing in order to set an efficient but stable balance appropriate to the size
of the Group.
The Board reviews projects against build programmes and contractual agreements to avoid any risk of
incurring contractual penalties or damaging the Group’s reputations, which would in turn reduce the Group’s
ability to borrow at optimal rates. Covenant tests are continually reviewed to ensure covenant criteria is met
in the event of deterioration in market conditions.
71
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
27. Financial risk management (continued)
27.2.
Liquidity Risk (continued)
The maturity profile of the group and parent company’s financial liabilities based on contractual undiscounted
payments (including interest payments) is as follows:
31 May 2019
Accounts payable
Borrowings
Hire purchase
31 May 2018
Accounts payable
Borrowings
Hire purchase
27.3
Credit risk
Carrying
amount
£000
42,137
31,000
1,636
74,773
Carrying
amount
£000
33,363
25,000
2,274
60,637
Total minimum
future payment Within 1 year
£000
42,137
-
1,079
43,216
£000
42,137
31,000
1,721
74,858
Total minimum
future payment Within 1 year
£000
33,363
-
1,128
34,463
£000
33,363
25,000
2,451
60,814
Within 1-2
years
£000
-
-
549
549
Within 1-2
years
£000
-
25,000
939
25,939
Within 2-5
years
£000
-
31,000
93
31,093
Within 2-5
years
£000
-
-
384
384
The nature of Scotland’s housing industry and the legal framework surrounding it results in the Group having
a low exposure to credit risk.
Credit risk is the risk that a customer may default or not meet its obligations to the group on a timely basis,
leading to financial losses to the group.
The group’s maximum exposure to credit risk in relation to each class of recognised financial asset is the
carrying amount of those assets as indicated in the balance sheet. At the balance sheet date, there was no
significant concentration of credit risk to the group.
The group manages credit risk actively monitoring their level of trade receivables and following up when they
are overdue more than 3 months.
The ageing profile of trade receivables was:
Current
Overdue 90 days
31 May 2019
31 May 2018
Total book
value
£000
9,435
111
9,546
Allowance for
impairment
£000
-
-
-
Total book
value
£000
8,554
1,362
9,916
Allowance for
impairment
£000
-
-
-
72
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
27. Financial risk management (continued)
27.3. Credit Risk (continued)
During the year, the group had no allowance for impairment for trade receivables.
The ageing profile of other receivables was:
Current
Overdue 90 days
31 May 2019
31 May 2018
Total book
value
£000
9,351
-
9,351
Allowance for
impairment
£000
-
-
-
Total book
value
£000
8,484
-
8,484
Allowance for
impairment
£000
-
-
-
During the year, the group had no allowance for impairment for other receivables.
28. 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 £1,759k (2018: £384k) were paid to key management personnel (Board
of Directors and the members of the Operational Board). Dividends were paid to Board of Directors as follows:
Name of Director
Mr Sandy Adam
Mr Innes Smith
Ms Michelle Motion
Mr Matthew Benson
Mr Roger Eddie
Mr Nick Cooper
The remuneration of Key Management Personnel was £1,825k (2018: £1,538k).
2019
£000
1,708
46
2
2
1
-
1,759
2018
£000
374
10
-
-
-
-
384
73
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
28. Transactions with related parties (continued)
During the year the group entered into the following transactions with related parties:
Bertha Park Limited (1)
AW & JG Adam Limited (2)
DHHG 1 Limited (3)
Other entities which key management personnel
have control, significant influence or hold a
material interest in
Key management personnel
Other related parties
Sale of goods
2019
£000
15,821
7
5,756
184
19
806
22,593
2018
£000
5,471
2,741
577
266
44
35
9,134
Purchase of goods
2018
£000
-
-
-
2019
£000
-
-
-
11
-
287
298
363
650
200
1,213
Sales to related parties represent those undertaken in the ordinary course of business.
Included within purchases from key management personnel is £nil (2018: £600k) from Sandy Adam, Director,
to terminate annual licence fee in respect of the group’s use of a trademark.
Entities which key management personnel have
control, significant influence or hold a material
interest in
Key management personnel
Other related parties
Interest paid
Rent paid
2019
£000
2018
£000
2019
£000
-
-
-
-
-
12
15
27
184
5
132
321
2018
£000
162
-
134
296
Interest received:
Entities which key management
personnel have control, significant influence or
hold a material interest in (short-term)
The following amounts were outstanding at the reporting end date:
Amounts receivable:
Bertha Park Limited (1)
DHHG 1 Limited (3)
Other entities which key management personnel have control, significant
influence or hold a material interest in (short-term)
Key management personnel
Other related parties
2019
£000
2018
£000
188
188
102
102
2019
£000
9,152
564
97
-
37
9,850
2018
£000
8,948
930
86
2
-
9,966
74
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
28. Transactions with related parties (continued)
Accounts payable:
Entities which key management personnel have control, significant influence
or hold a material interest in (short-term)
James Adam
Other related parties
2019
£000
2018
£000
-
770
46
816
57
1,419
-
1,476
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 £15,821k (2018: £5,471k) in relation to a build contract. At
the year-end £4,389k (2018: £4,231k) is included in trade debtors and included within other debtors is a loan
of £4,763k (2018: £4,717k) at the year-end.
(2) AW & JG Adam Limited a company in which Sandy Adam is a Director. During the year sales of £7k
(2018: £2,741k) were made to AW & JG Adam Limited in relation to a build contract. £nil (2018: £nil) was
included within debtors at the year end.
(3) DHHG 1 Limited is a jointly owned entity of Dawn Homes Limited, which Michelle Motion is a Director.
During the year the group made sales to DHHG 1 Limited totalling £5,756k (2018: £577k) in relation to a
build contract and management fees. At the year-end £564k (2018: £930k) was due from DHHG 1 Limited.
29. Contingencies, commitments and guarantees
In the ordinary course of the group's business the group is required to enter into performance bond
arrangements. The group's bankers have provided such guarantees in the ordinary course of business
totalling £4,436k (2018: £206k).
29.1. Contingent Liabilities
The company acquired the entire share capital of DHomes 2014 Holdings Limited and its subsidiaries and
joint ventures, for a consideration of £20,085,000, which includes deferred consideration of £2,500,000. The
deferred consideration is for land and paid 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 reviewed the
probability of the land being zoned for planning and included £2,000,000 as a provision (see note 23), the
remaining £500,000 has been treated as a contingent liability due to the uncertainty over future payment.
The company acquired the entire share capital of Walker Holdings (Scotland) Limited and its subsidiaries
and joint ventures, for a consideration of £72,775,000, which includes a deferred consideration of
£10,375,000. This can be broken down into: (i) £2,187,500 payable on the first anniversary of the acquisition
date (31 January 2020); (ii) £2,187,500 payable on the second anniversary of the acquisition date (31
January 2021); (iii) £4,000,000 payable when the council grant outlined planning concern at Carlaverock and
(iv) £2,000,000 payable when the council grant detailed planning concern at Carlaverock. This has been
discounted at a market rate of interest to £9,593,418 and is included within provisions (see note 23), the
remaining £180,000 has been treated as a contingent liability due to the uncertainty over the future payments.
75
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2019
29. Contingencies, commitments and guarantees (continued)
29.2. Capital Commitments
Acquisition of property, plant and equipment
Call and put options for the purchase of plots for development
29.3. Operating lease commitments
2019
£000
517
2,725
2018
£000
700
4,919
Operating lease payments represent rentals payable by the group for certain of its assets. Leases are with
an option to extend on completion. At 31 May the group had outstanding commitments for future minimum
lease payments under non-cancellable operating leases, which fall due as follows:
Within one year
Two to five years
Over five years
2019
£000
692
1,576
1,009
3,277
2018
£000
348
1,131
1,231
2,710
76
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
AS AT 31 MAY 2019
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Accounts receivable
Current assets
Inventories and work in progress
Accounts receivable
Cash and cash equivalents
Total assets
Current liabilities
Accounts payable
Short-term obligations under finance lease
Corporation tax
Non-current liabilities
Long-term borrowings
Long-term obligations under finance lease
Provision
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Total equity
Note
1
2
3
5
4
5
12
6
9
8
9
10
11
11
2019
£000
3,262
600
54,431
196
58,489
78,960
21,639
1,165
101,764
2018
£000
2,892
600
19,627
135
23,254
76,212
17,835
8,505
102,552
160,253
125,806
34,302
493
890
35,685
31,000
183
11,593
42,776
78,461
81,792
120
50,118
31,554
28,360
555
866
29,781
15,000
676
2,054
17,730
47,511
78,295
120
50,105
28,070
81,792
78,295
As permitted s408 Companies Act 2006, the company has not presented its own profit and loss account and
related notes. The company’s profit for the year was £6,806,761 (2018: £6,906,949).
These financial statements were approved by the Board of Directors on 23 September 2019.
Signed on behalf of the Board by:
Sandy Adam
Executive Chairman
23 September 2019
Company number: SC031286
Company accounting policies are in line with Group – See Group note 2
The accompanying notes on pages 80 to 93 form an integral part of these financial statements
77
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MAY 2019
Share
capital
£000
Share
premium
£000
Retained
earnings
£000
Notes
11
73
47
-
-
-
120
-
-
-
-
120
10,285
39,820
-
-
-
50,105
13
-
-
-
50,118
21,766
-
6,907
(821)
218
28,070
-
6,807
434
(3,757)
31,554
Total
£000
32,124
39,867
6,907
(821)
218
78,295
13
6,807
434
(3,757)
81,792
comprehensive
1 June 2017
Issue of share capital
Total
income for the year
Dividends
Share options reserve
31 May 2018
Issue of share capital
Total
income for the year
Share options reserves
Dividends paid
31 May 2019
comprehensive
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
transaction costs.
Retained earnings represents accumulated profits less losses and distributions. Retained earnings also
includes share option reserves.
Company accounting policies are in line with Group – See Group note 2
The accompanying notes on pages 80 to 93 form an integral part of these financial statements.
78
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CASH FLOWS
YEAR TO 31 MAY 2019
Operating activities
Profit for the year after taxation (before exceptional items)
Adjusted for:
Taxation charged
Finance costs
Interest receivable and similar income
Gain on disposal of tangible fixed assets
Exceptional items
Depreciation and impairment of tangible fixed assets
Share option employment costs
Operating cash flows before movements in working capital
(Increase)/decrease in inventory
Increase in accounts and other receivables
Increase in accounts and other payables
Net cash generated from operations
Income taxes paid
Net cash inflow from operating activities
Investing activities
Payments to acquire intangible assets
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Purchase of subsidiary company
Dividends received
Interest received and similar income
Net cash used in investing activities
Financing activities
Proceeds from issue of shares
Cost from issue of shares
Proceeds from bank loans
Repayment of bank loans
Repayment of other borrowings
Proceeds paid to related parties
Payment of finance leases obligations
Dividends paid
Interest paid
Net cash inflow from financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
1
11
2
1
3
11
12
2019
£000
7,372
1,704
1,168
(297)
(122)
(565)
909
434
10,603
(2,519)
(447)
2,625
10,262
(1,791)
8,471
-
(1,374)
217
(62,400)
37,000
22
(26,535)
13
-
68,000
(52,000)
-
-
(555)
(3,757)
(977)
10,724
(7,340)
8,505
1,165
Company accounting policies are in line with Group – See Group note 2
The accompanying notes on pages 80 to 93 form an integral part of these financial statements.
2018
£000
7,465
1,727
973
(147)
-
(558)
544
218
10,222
5,999
(6,636)
3,516
13,101
(1,612)
11,489
(600)
(659)
1
(17,585)
-
19
(18,824)
42,180
(2,312)
-
(22,500)
(2,929)
(4,647)
(388)
(821)
(1,067)
7,516
181
8,324
8,505
79
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
1. Property, Plant and Equipment
Cost
At 1 June 2017
Additions
Disposals
At 31 May 2018
Additions
Disposals
At 31 May 2019
Accumulated depreciation
At 1 June 2017
Depreciation charge
Disposals
At 31 May 2018
Depreciation charge
Disposals
At 31 May 2019
Net book value
At 31 May 2019
At 31 May 2018
At 31 May 2017
Land and
buildings
£000
Plant and
machinery
£000
Fixtures,
fittings &
equipment
£000
675
6
-
681
-
-
681
33
19
-
52
21
-
73
608
629
642
1,952
1,503
-
3,455
1,138
(463)
4,130
893
421
-
1,314
755
(372)
1,697
2,433
2,141
1,059
593
211
(4)
800
236
(96)
940
577
104
(3)
678
133
(92)
719
221
122
16
Total
£000
3,220
1,720
(4)
4,936
1,374
(559)
5,751
1,503
544
(3)
2,044
909
(464)
2,489
3,262
2,892
1,717
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance
leases or hire purchase contracts:
Net book value:
Plant and machinery
Total depreciation charge
2019
£000
971
971
422
2018
£000
1,500
1,500
324
80
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
2.
Intangible fixed assets
Cost
1 June 2017
Additions
At 31 May 2018
Additions
Disposals
At 31 May 2019
Amortisation and impairment
At 1 June 2017 and 31 May 2018
Impairment
Disposals
At 31 May 2019
Net book value
At 31 May 2019
At 31 May 2018
Marketing-related assets
£000
-
600
600
-
-
600
-
-
-
-
600
600
Marketing-related assets comprises of brand name and licences which have been measured at cost. Market-
related assets are expected to have an infinite useful life.
3.
Fixed Asset Investments
Cost
Investment in subsidiaries
Provision for impairment
Impairment
Net book value
2019
£000
2018
£000
91,431
19,627
(37,000)
-
54,431
19,627
On 31 January 2019, the company acquired the entire share capital of Walker Holdings (Scotland) Limited
and its subsidiaries, Walker Group (Scotland) Limited, Perten Limited, Walker Residential (Scotland) Limited,
Walker Group (Land & Projects) Limited, Walker Contracts (Scotland) Limited and Craig Developments
Limited for an initial consideration of £72,595,000. The purchase agreement also includes a deferred
consideration payment of £10,195,000. The costs relating to the acquisition is included within the profit and
loss account as an exceptional item which is in line with the accounting policy for fixed assets investments.
The deferred consideration estimated economic outflow has been assessed as £10,195,000 (see
consolidation note 29.1). This has been discounted at 6% to present value. At 31 January 2019, this was
calculated as £9,403,215. Deemed interest of £190,203 has been processed through the company profit and
loss account to 31 May 2019. This has resulted in deferred consideration being £9,593,418 at 31 May 2019
(note 10).
Walker Holdings (Scotland) 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. Walker Holdings (Scotland) Limited has contributed revenue of £13,600,000 and profit
before tax of £3,400,000 from the acquisition date of 31 January 2019 to 31 May 2019. If the acquisition of
Walker Holdings (Scotland) Limited had taken place at 1 June 2018 then the acquisition would have produced
a combined revenue of £45,600,000 and profit after exceptional items and before tax of £10,500,000.
81
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
3. Fixed asset investments (continued)
Movement in fixed asset investments
Cost
At 1 June 2017
Additions
At 1 June 2018
Additions
At 31 May 2019
Provisions for impairment
At 1 June 2017 and 1 June 2018
Impairment
At 31 May 2019
Net Book Value
At 31 May 2019
At 31 May 2018
Share in
group
undertakings
£000
42
19,585
19,627
71,804
91,431
Total
£000
42
19,585
19,627
71,804
91,431
-
(37,000)
(37,000)
-
(37,000)
(37,000)
54,431
54,431
19,627
19,627
Subsequent to acquisition, a dividend of £37,000k was received from Walker Holdings (Scotland) Limited.
During the year, the company also purchased 100% of the share capital of SP SUB 2018 Limited. This
company has yet to trade.
82
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
3. Fixed asset investments (continued)
Details of the company’s subsidiaries and jointly owned entities at 31 May 2019 are as follows:
Name of Undertaking
Nature of Business
Class of
Shares Held
% Held
Glassgreen Hire Limited
Hire of plant and machinery
Ordinary
96%
DHomes 2014 Holdings Limited
Holding Company
Ordinary
100%
Dawn Homes Limited *
Dawn (Robroyston) Limited *
Housebuilder/
Construction
Housebuilder/
Construction
Ordinary
100%
Ordinary
100%
DHPL Limited *
Buying and selling of own real
estate
Ordinary
100%
Dawn Homes (Johnstone) Limited *
Walker Holdings (Scotland) Limited
Walker Group (Scotland) Limited *
Housebuilder/
Construction
Housebuilder/
Construction
Housebuilders/
property development/
management services
Ordinary
100%
Ordinary
100%
Ordinary
100%
Perten Limited *
Dormant
Ordinary
100%
Walker Residential (Scotland) Limited
*
Dormant
Ordinary
100%
Walker Group (Land & Projects)
Limited *
Dormant
Ordinary
100%
Walker Contracts (Scotland) Limited * Dormant
Ordinary
100%
Craig Developments Limited *
Sale of residential property
Ordinary
100%
SP SUB 2018 Limited
Dormant
Ordinary
100%
DHHG 1 Limited *
Housebuilder/
Construction
Ordinary
50%
*Indirectly held
83
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
4.
Inventories and work in progress
Work in progress
Land under development is included in work in progress
Accounts receivable in relation to construction
contracts
Accounts payable in relation
contracts
to construction
Retentions held by customers for contract work
Advances received from customers for contract
work
Included within inventories is £23,224k (2018: £27,009k) pledged as security.
5.
Accounts receivable
Amounts falling due within one year
Trade receivables
Other receivables
Amounts due from group undertakings
Prepayments and accrued income
2019
£000
78,960
78,960
2018
£000
76,212
76,212
2019
£000
9,993
9,993
2019
£000
149
149
2019
£000
1,528
(149)
1,379
2018
£000
9,760
9,760
2018
£000
340
340
2018
£000
1,265
(340)
925
2019
£000
8,721
8,814
3,422
682
21,639
2018
£000
8,809
8,474
104
448
17,835
The Directors consider the carrying amount of the receivables approximates to their fair value.
The company’s exposure to credit risk is limited by the fact that the company generally receives cash at the
point of legal completion of its sales. There are certain categories of revenue where this is not the case; for
instance, housing association revenues or land sales where management considers that the ratings of these
various debtors are good and therefore credit risk is low. Loans to related parties have also been assessed
as low credit risk based on the expected profitability of their future contracts. Any assets which expose the
company to credit risk can be spread over a considerable number of properties. As such, the company has
low concentration of credit risk, with exposure spread over a large number of customers. The maximum
exposure to credit risk at 31 May 2019 is represented by the carrying amount of each financial asset.
84
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
5.
Accounts receivable (continued)
Amounts falling due after one year
Other receivables
Deferred tax asset (see note 10)
6.
Accounts payable
Trade creditors
Other taxation and social security
Other creditors
Amounts due to group undertakings
Accruals and deferred income
2019
£000
140
56
196
2019
£000
15,994
811
222
7,996
9,279
34,302
2018
£000
135
-
135
2018
£000
15,528
547
421
760
11,104
28,360
The Directors consider the carrying amount of the accounts payable approximates to their fair value.
7.
Financial assets and liabilities
Assets
Loans and receivables at amortised cost
Total
Total Liabilities
Measured at amortised cost
Total
2019
£000
22,262
22,262
2019
£000
65,017
65,017
2018
£000
26,027
26,027
2018
£000
44,044
44,044
Included within loans and receivables is a loan to a related party which is valued at amortised cost. £275k
(2018: £127k) has been recognised as interest received in the profit and loss account. Market rate interest
has been used (note 14).
8.
Borrowings
Secured borrowings:
Bank loans
Less: payable within one year
Payable after one year
2019
£000
31,000
31,000
-
31,000
2018
£000
15,000
15,000
-
15,000
The bank loan comprises of a revolving credit facility which is repayable by January 2022 and is secured
over certain of the company's properties. The facility attracts an interest rate of 2% per annum above the
Bank of England Base Rate.
85
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
9.
Obligations under hire purchase contracts
Finance lease and hire purchase payments represent rentals payable by the company for certain items of
plant and machinery and are secured by the assets under lease in question.
Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of
the assets. All leases are on a fixed repayment basis and no arrangements have been entered into for
contingent rental payments.
Minimum lease payments
Present value of minimum
lease payments
Within 1 year
Two to five years
Less: unearned finance income
10.
Provisions
2019
£000
523
186
709
(33)
676
2018
£000
617
708
1,325
(94)
1,231
Deferred taxation (now an asset – see note 5)
Deferred consideration
Deferred consideration
Acquisition of DHomes 2014 Holdings Limited (“Dawn”)
Acquisition of Walker Holdings (Scotland) Limited (“Walker”)
Deferred consideration movement
Opening Balance
Additions on acquisition (discounted)
Deemed interest in year
Closing balance
2019
£000
493
183
676
2019
£000
-
11,593
11,593
2019
£000
2,000
9,593
11,593
2019
£000
2,000
9,403
190
11,593
2018
£000
555
676
1,231
2018
£000
54
2,000
2,054
2018
£000
2,000
-
2,000
2018
£000
-
2,000
-
2,000
As part of the purchase agreement of DHomes 2014 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 a deferred consideration of £2,000,000 based on 80% probability.
As part of the purchase agreement of Walker Holdings (Scotland) Limited there is a further £10,375,000 to
pay. This can be broken down into: (i) £2,187,500 payable on the first anniversary of the acquisition date (31
January 2020); (ii) £2,187,500 payable on the second anniversary of the acquisition date (31 January 2021);
(iii) £4,000,000 payable when outline planning is granted at Carlaverock and (iv) £2,000,000 payable when
detailed planning is granted at Carlaverock. (iii) and (iv) probability has been assessed at 98% and 95%
respectively. This has been discounted at a market rate of interest. £9,593,418 is recognised as a provision
at the year end.
86
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
10.
Provisions (continued)
Deferred Taxation
Fixed assets –
differences
Other
differences
–
temporary
temporary
Deferred tax liability
Deferred tax assets (note 5)
11.
Share Capital
2017
£000
Profit &
Loss
Account
£000
43
(5)
38
18
(2)
16
2018
£000
61
(7)
54
Profit &
Loss
Account
£000
32
(142)
(110)
2019
£000
-
(56)
(56)
2019
£000
93
(149)
(56)
2018
£000
54
-
54
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
transaction costs.
Ordinary shares of £1 - allotted, called up and
fully paid
Number of
shares
Share capital
£000
Share premium
£000
At 1 June 2018
Share issue
At 31 May 2019
96,333,642
15,919
96,349,561
120
-
120
50,105
13
50,118
During the year 15,919 shares (2018 - nil) were issued in satisfaction of share options exercised.
Share based payments
During the year the Company operated three share based schemes.
Share related share options scheme
The Company operates a Savings related Share Option Scheme which is open to all employees. Grant
options were made in December 2017 and become exercisable after 3 years, subject to employees remaining
in continuous employment. Employees enter into a savings contract with the Yorkshire Building Society who
administers the scheme. The options are granted at a 20% discount of the share price at the date of grant
and lapse if not exercised within six months of maturity. Special provisions apply to employees who leave
their employment for ill health, redundancy or retirement.
Long-Term Incentive Plan (LTIP)
The Company operates a LTIP for senior management to retain and align their interests with shareholders.
The LTIP is split into a CSOP and ESOP scheme.
87
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
11.
Share Capital (continued)
Fair Value of share options
Options are valued using the Black-Scholes option-pricing model. No performance conditions are included
in the fair value calculation.
Savings Related Share Option Scheme
CSOP
Number
of shares
1,033,382
182,024
-
-
1,215,406
2019
Weighted
average
exercise price
(pence)
Number
of shares
2018
Weighted
average
exercise price
(pence)
110.59
121.94
-
-
112.29
-
1,061,683
(28,301)
-
1,033,382
-
110.46
106.00
-
110.59
Options at the beginning of the
year
Granted during the year
Lapsed during the year
Exercised during the year
Options at the year end
Share Option
Grant Price
(p)
CSOP – 16th October 2017
CSOP – 4th December 2017
CSOP – 8th December 2017
CSOP – 15th January 2018
CSOP – 3rd May 2018
CSOP – 16th May 2018
CSOP – 1st October 2018
CSOP – 5th October 2018
ESOP
Options at the beginning of the
year
Granted during the year
Lapsed during the year
Exercised during the year
Options at the year end
106.00
112.00
111.00
110.50
134.00
134.00
122.50
118.50
Number
of shares
596,524
1,675,233
-
-
2,271,757
Number of
shares at year
end
799,869
24,553
27,027
27,149
22,388
132,396
156,708
25,316
Exercise price
(p)
Vesting
Period
106.00
112.00
111.00
110.50
134.00
134.00
122.50
118.50
3
3
3
3
5
5
5
5
2019
Weighted
average
exercise price
(pence)
Number
of shares
2018
Weighted
average
exercise price
(pence)
110.29
122.49
-
-
119.29
-
597,048
(524)
-
596,524
-
110.29
106.00
-
110.29
88
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
11.
Share Capital (continued)
Savings Related Share Option Scheme (continued)
Share Option
ESOP – 16th October 2017
ESOP – 15th January 2018
ESOP – 3rd May 2018
ESOP – 16th May 2018
ESOP – 1st October 2018
ESOP – 5th October 2018
Grant Price
(p)
106.00
110.50
134.00
134.00
122.50
118.50
Number of
shares at year
end
503,631
1,810
72,761
18,332
1,672,279
2,954
Exercise price
(p)
Vesting
Period
106.00
110.50
134.00
134.00
122.50
118.50
5
5
7
7
7
7
SAYE
2019
2018
Number
of shares
Weighted
average
exercise price
(pence)
Number
of shares
Weighted
average
exercise price
(pence)
Options at the beginning of
the year
Granted during the year
Lapsed during the year
Exercised during the year
Options at the year end
Share Option
3,030,643
-
(296,900)
(15,919)
2,717,824
Grant Price
(p)
SAYE – 16th October 2017
112.00
84.80
-
84.80
84.80
84.80
-
3,129,975
(99,332)
-
3,030,643
84.80
84.80
84.80
-
84.80
Number of
shares at year
end
2,717,824
Exercise price
(p)
Vesting
Period
84.80
3
Inputs used to determine fair value of options
Expected volatility
Risk free interest rate
Expected dividends
Fair value of options
Charge per option
CSOP
29.00%
0.49%
-
34.00p
32.00p
ESOP
29.00%
0.49%
-
39.00p
37.00p
SAYE
29.00%
0.49%
-
37.00p
35.00p
89
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
11.
Share Capital (continued)
Savings Related Share Option Scheme (continued)
Expected volatility was calculated using historical share price information of the house-building sector.
CSOP and ESOP - no shares have vested in the year and none can be exercised at the year-end.
SAYE – 15,919 of shares were exercised during the year.
Charge for share based incentive schemes
The total charge for the year relating to employee share-based plans were £434k (2018 - £218k), all of which
related to equity-settled share-based payment transactions.
12.
Cash and Cash Equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following as
at 31 May:
Cash at bank and in hand
2019
£000
1,165
1,165
2018
£000
8,505
8,505
At 31 May 2019, the company had available £36,500k (2018- £25,000k) of undrawn committed borrowing
facilities.
13.
Capital risk management
The company manages its capital to ensure that the company will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the company consists issued capital, reserves and retained earnings, all as disclosed
in the balance sheet. The company is not subject to externally imposed capital requirements other than those
included, from time to time, in the financial covenants associated with bank borrowing.
14.
Financial risk management
The company is exposed to a variety of financial risks which result from both its operating and investing
activities. The company’s risk management is coordinated by the Board of Directors, and focuses on actively
securing the company’s short to medium term cash flows by minimising the exposure to financial markets.
14.1 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will
affect the company’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising
the return on risk.
90
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
14.
Financial risk management (continued)
14.1 Market risk (continued)
Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The company’s exposure to the interest rate risk relates primarily to its
floating rate borrowings.
The responsibility for setting the level of fixed rate debt lies with the Board and is continually reviewed in the
light of economic data provided by a variety of sources.
Financial liabilities at fixed rate
Financial liabilities at floating rate
Non-interest-bearing financial liabilities
Interest rate sensitivity analysis
2019
£000
676
31,000
33,341
65,017
2018
£000
1,231
15,000
27,813
44,044
The table below details the company’s sensitivity to increase or decrease of floating interest rates by 0.5%,
which the Directors consider to be a reasonable possible change. The analysis was applied to loans and
borrowings (financial liabilities) based on the assumption that the amount of liability outstanding as at the
balance sheet date was outstanding for the whole year.
Bank of England base rate
31 May 2019
Bank of England base rate
31 May 2018
Interest rate
+0.5%
£000
(155)
Interest rate –
0.5%
£000
155
Interest rate
+0.5%
£000
(75)
Interest rate –
0.5%
£000
75
(Loss) / profit
Limitations of sensitivity analysis
The above tables demonstrate the effect of a change in a key assumption while other assumptions remain
unchanged. In reality, there is a correlation between the assumptions and other factors. It should also be
noted that these sensitivities are non-linear and larger or smaller impacts should not be interpolated or
extrapolated from these results. The sensitivity analysis does not take into consideration that the company’s
assets and liabilities are actively managed. Additionally, the financial position of the company may vary at
the time that any actual market movement occurs.
Other limitations in the above sensitivity analysis include the use of hypothetical market movements to
demonstrate potential risk that only represent the company’s view of possible near-term market changes that
cannot be predicted and the assumption that all interest rates move in an identical fashion.
This analysis is for illustrative purposes only, as in practice market rates rarely change in isolation of other
factors that also affect group’s financial position and results.
Management believe that fair value of the loans, borrowings and finance lease obligations approximates their
carrying amounts as the majority of obligations bear interest rates approximating market rates at 31 May
2019.
91
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
14.
Financial risk management (continued)
14.2 Liquidity Risk
Liquidity risk is the risk that the company will be unable to meet its liabilities as they fall due. The company’s
objective is to maintain a balance between continuity of funding and flexibility through the use of bank
overdrafts, medium to long term borrowings and hire purchase contracts. The Directors continually assess
the balance of capital and debt of the Company. They consider the security of capital funding against the
potentially higher rates of return offered by debt financing in order to set an efficient but stable balance
appropriate to the size of the Company.
The Board reviews projects against build programmes and contractual agreements to avoid any risk of
incurring contractual penalties or damaging the Company’s reputations, which would in turn reduce the
Company’s ability to borrow at optimal rates. Covenant tests are continually reviewed to ensure covenant
criteria is met in the event of deterioration in market conditions.
The maturity profile of the company’s financial liabilities based on contractual undiscounted payments
(including interest payments) is as follows:
31 May 2019
Accounts
payable
Borrowings
Hire purchase
31 May 2018
Accounts
payable
Borrowings
Hire purchase
14.3 Credit risk
Carrying
amount
£000
Total minimum
future payment Within 1 year
£000
£000
Within 1-2
years
£000
Within 2-5
years
£000
33,341
31,000
676
65,017
33,341
31,000
709
65,050
33,341
-
523
33,864
-
-
186
186
-
31,000
-
31,000
Carrying
amount
£000
Total minimum
future payment Within 1 year
£000
£000
Within 1-2
years
£000
Within 2-5
years
£000
27,813
15,000
1,231
44,044
27,813
15,000
1,325
44,138
27,813
-
617
28,430
-
15,000
522
15,522
-
-
186
186
Credit risk is the risk that a customer may default or not meet its obligations to the company on a timely basis,
leading to financial losses to the company.
The company’s maximum exposure to credit risk in relation to each class of recognised financial asset is the
carrying amount of those assets as indicated in the balance sheet. At the balance sheet date, there was no
significant concentration of credit risk to the company.
The company manages credit risk actively monitoring their level of trade receivables and following up when
they are overdue more than 3 months.
92
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2019
14.
Financial risk management (continued)
14.3 Credit risk (continued)
The ageing profile of trade receivables was:
Current
Overdue 90 days
31 May 2019
31 May 2018
Total book
value
£000
8,632
89
8,721
Allowance for
impairment
£000
-
-
-
Total book
value
£000
7,473
1,336
8,809
Allowance for
impairment
£000
-
-
-
During the year, the company had no allowance for impairment for trade receivables.
The ageing profile of other receivables was:
Current
Overdue 90 days
31 May 2019
31 May 2018
Total book
value
£000
8,814
-
8,814
Allowance for
impairment
£000
-
-
-
Total book
value
£000
8,474
-
8,474
Allowance for
impairment
£000
-
-
-
During the year, the company had no allowance for impairment for other receivables.
93