Company Registration No. SC031286 (Scotland)
SPRINGFIELD PROPERTIES PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
CONTENTS
Strategic Report
Company Information
Financial Highlights
Executive Chairman’s Statement
Chief Executive’s Statement
Chief Financial Officer’s Review
Company Overview and Risks
Streamlined Energy and Carbon Reporting
Corporate Governance
Board of Directors
QCA Code Compliance and Section 172 Statement
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
Page
3
4
5
8
13
15
18
21
23
29
32
39
43
44
50
51
52
53
54
83
84
85
86
2
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 Advisory 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
3
STRATEGIC REPORT
The Directors’ present their strategic report for Springfield Properties plc (the “Company”) and its Group of
companies (“Springfield” or the “Group”) for the year ended 31 May 2020.
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED 31 MAY 2020
Group
Revenue
Group
Completions
Group
Adjusted PBT*
Private Homes
Revenue
Affordable Homes
Revenue
2020:
£144.4m
2019: £190.8m
2020:
727 homes
2019: 952 homes
2020:
£10.2m
2019: £16.5m
2020:
£98.9m
2019: £143.3m
2020:
£43.4m
2019: £42.9m
Group
Revenue
Gross profit
Gross margin
Adjusted operating profit*
Adjusted profit before tax*
Earnings per share*
Net debt (excluding right of use
lease liabilities)
*Adjusted excludes exceptional items detailed at Note 11
Strategic and Operational Highlights
2019/20
£m
144.4
27.4
18.9%
12.1
10.2
8.33p
68.8
2018/19
£m
190.8
34.3
18.0%
17.6
16.5
13.92p
29.6
Change
%
-24.3%
-20.1%
+90bps
-31.3%
-38.2%
-40.2%
+132.4%
• On target to achieve revenue, margin and profit growth across the business until closure of sites
•
due to the COVID-19 pandemic
£18m additional bank term loan facility secured to secure additional capital in case of extreme
lockdown of 12 months
• Planning permission secured (subject to signed section 75 agreement) for 3,042 homes at
Durieshill, Stirling
Land bank 15,882 plots – 49.7% with planning achieved
•
• Gross development value of land bank of £3.3bn
• Strong first year contribution from Walker Group
4
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
EXECUTIVE CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 MAY 2020
This was another year of sustained strategic delivery for Springfield. We expanded our geographic presence,
significantly progressed the development of our Villages and entered a collaboration agreement to deliver
homes in the private rented sector with Sigma PRS Management Ltd adding the potential for a new revenue
stream. Securing planning permission for 3,042 homes at Durieshill, Stirling was an important highlight of
this year. Durieshill is Springfield's largest development to receive planning permission to date and the largest
detailed planning consent to have ever been granted in Scotland which will generate a GDV of £649m. I am
also pleased to note that we were able to achieve our target of increasing the Group’s gross margin.
In March 2020, Springfield was delivering good growth across the business, with a strong order book of
contracted revenue for the remainder of the year to 31 May 2020, and we were on track to achieve our
targets. However, as a result of the lockdown implemented in response to the COVID-19 pandemic, we
ceased all construction activity on 24 March and were therefore unable to complete the delivery of homes
scheduled to take place in April and May 2020, with a corresponding impact on our sales for the full year.
However, thanks to the actions taken by our management team combined with the support of our employees,
subcontractors and suppliers, once it was safe to recommence work on site post period end, we have been
able to effectively resume construction where our initial focus has been on completing and handing over
homes.
We were delighted to reopen our sales offices in June / July to exceptionally strong interest, with reservations
for 24% more private homes in Q1 2020/21 than in Q1 2019/20. This reflects both pent up demand and an
increased desirability for the type of housing Springfield offers with large gardens and surrounded by
greenspace.
People
The wellbeing of our workforce has always been a critical consideration for Springfield – and it has been our
first priority throughout the COVID-19 pandemic. We implemented a number of important measures to protect
the health, safety and wellbeing of our employees and the wider community during the uncertain times.
During the Scottish Government’s enforced lockdown, it was necessary to temporarily close all of our
operations. In order to support the business and protect jobs, over 90% of our workforce was furloughed
under the UK Government’s Job Retention Scheme with 80% brought back by the end of July. For those still
working, arrangements were made for employees to effectively do so from home. To protect cash flow until
sales resumed, the Non-Executive Directors and the Executive Management Team agreed to reduce their
base salaries by 50%, deferring 30% and 20% forgone, and all senior managers across the business agreed
to a 20% voluntary cut. Our CEO, Innes Smith, sent weekly updates to all staff and our HR team contacted
those on furlough to provide an opportunity to ask questions.
I am extremely proud of the response of our workforce to the crisis, both during lockdown and as we gradually
returned to work. Our teams have transitioned well to new ways of working – from greater use of technology
for engaging with customers and communicating with each other to social distancing measures on site. Their
support – along with that of our subcontractors and suppliers – has been vital in enabling Springfield to
effectively return to delivering great quality housing. On behalf of Springfield’s board, I would like to thank all
of our employees for their continued hard work and dedication.
Housing market
Following the COVID-19 lockdown, Scotland’s housing market has remained buoyant with demand
outstripping supply, supported by low interest rates and good mortgage availability. In recent months,
Scotland and the UK as a whole have seen record sales. In Scotland, this has been supported by
government initiatives including the extension of both the First Home Fund (which is not restricted by
property price) and Help to Buy (Scotland) to March 2022; and the raising of the Land and Buildings
Transaction Tax (Stamp Duty equivalent) zero rate threshold to £250,000 until March 2021.
As has been widely reported, there has been an increase in demand for the type of housing that we offer-
larger homes, with gardens, located within commuting distance of cities – particularly with our Villages,
which have ample green space alongside community facilities. A key theme in the Scottish Government’s
recently launched Programme for Government 2020-21 is the commitment to support the development of
‘20 minute neighbourhoods where people can live, work and learn in communities close to home’, and with
‘greenspace on your doorstep’.
5
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
EXECUTIVE CHAIRMAN’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
In affordable housing, the suspension of construction during lockdown disrupted progress towards reaching
the Scottish Government’s target of 50,000 new affordable homes by the end of this Parliament in 2021. In
addition, independent research suggests that there is a need for a further 53,000 affordable homes by 2026
and housing organisations in Scotland are now calling for this as a target for the next Parliamentary term.
With our strong partnerships with local authorities and housing associations, we are well-positioned to
deliver homes to help meet this demand and work towards our goal of ensuring everyone in Scotland has
a great place to live.
Key differences in the Scottish legal system have strengthened confidence in delivery. The Scottish missive
system means that customers are contracted into the purchase much earlier in the build programme. This
minimises the number of cancellations, secures the income stream and thereby reduces the amount of
speculative building. In addition, new homes that are built in Scotland are freehold where the buyer becomes
the sole owner of both the building and the land on which it stands. Consequently, our income streams are
not dependant on ground rents and the issue currently developing elsewhere in the UK does not apply.
Community
At our Villages, we have taken great care to create attractive, welcoming and sustainable new places that
include everything needed to establish a thriving community. We continued to expand the community
facilities with further playparks, public art and the opening, post period end, of convenience stores at Dykes
of Gray and Bertha Park. The store at Dykes of Gray, which was the first at one of our Village developments,
was established by a resident to much excitement in the community. The lifestyle on offer at our Villages
with handy amenities, beautiful landscape and plenty of open green space is increasingly desirable in a
post-COVID-19 environment.
In delivering affordable housing, we help local authorities and housing associations provide much needed,
new affordable homes in places people want to live. In doing so, we help the Scottish Government to meet
the current national shortfall. We have also continued to provide specialist facilities and modifications to our
homes when required, such as enhancements for wheelchair users.
We are passionate about supporting local communities across Scotland. This can involve sponsorships,
running local events, fundraising for local charities, offering site tours to school children or providing talks at
local schools, and we were active in doing this during the year. We actively participate in local career and
skills events, helping young people prepare for their future careers by undertaking mock interviews and
recruiting for our apprenticeship programmes. For the wider community, we contributed to an initiative led by
The Highland Council to restore a playpark in Nairn to make it a much loved community asset once again.
Springfield donated an eco-friendlier asphalt mix – which incorporates plastic waste and increases durability
and longevity – to resurface a road and car park at the playpark.
Dividends
During the year to 31 May 2020, we made £3.1m in dividend payments relating to the distributions for the
prior year. At the time of our half-year results in February 2020, we were pleased to propose an interim
dividend that was 16.7% higher than the interim dividend for H1 2018/19. However, with the onset of the
COVID-19 pandemic and uncertainty as to how the situation would develop, to preserve our cash position,
we took the decision to withdraw the proposed interim dividend.
The board of Springfield (the “Board”) recognises the importance of dividend payments to shareholders.
Accordingly, following a strong return to business after reopening post lockdown, we are pleased to propose
a final dividend for 2019/20 of 2 pence per ordinary share.
6
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
EXECUTIVE CHAIRMAN’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Board
I would like to thank my colleagues on Springfield’s board for their ongoing support and contribution. The
combination of their respective skills and experience have been invaluable, particularly in navigating these
uncertain times.
During the year, I was delighted to welcome Colin Rae to the Board. He brings considerable industry
experience and expertise in building large-scale development and regeneration projects across Scotland
and the wider UK, in particular during his time at Places for People where he held several leadership
positions. Colin is a former director of Homes for Scotland, the representative trade body for the
housebuilding sector in Scotland, and is a former chair of Turning Point Scotland, a social care charity that
specialises in supporting people facing the most complex and challenging situations.
We value dialogue with our shareholders and our annual general meeting (“AGM”) is an important
opportunity for this communication. We were delighted with the support shown at our October 2019 AGM –
with each resolution receiving over 93% approval and the average approval rate being 98%.
The Board also recognises the importance of strong corporate governance. Post period end, I have led a
review of how the Board functions, as discussed in our corporate governance section, and we are taking
steps to increase our effectiveness and enhance our stakeholder engagement. We continue to establish
policies and procedures as we develop our business to ensure that we are complying with corporate
governance regulation and meeting standards of best practice.
Future
Throughout our history, Springfield’s strategy has been to ensure our business is strongly positioned to be
able to navigate any unexpected events and secure sustainable growth. We have been successful in
achieving this in the past and we believe that we will continue to do so in the future. As noted, we are
supported by strong market drivers. The resilience of our business is enhanced by our strong management
team, diversified revenue streams – delivering private, affordable and, going forward, private rented sector;
and our large, high-quality land bank.
As we now focus on delivering our strong order book of contracted revenue, while also expanding our sales
pipeline, I would like to thank our shareholders for their ongoing support and we look forward to continuing
to provide great places for people to live.
Sandy Adam
Executive Chairman
28 September 2020
7
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT
FOR THE YEAR ENDED 31 MAY 2020
During the year to 31 May 2020, before the COVID-19 pandemic, we were delivering good growth across the
business, with a strong order book of contracted revenue to 31 May 2020, and the Group was on track to
achieve its targets. As a result of the lockdown, the completion of private homes scheduled to take place in
April and May 2020, which for the previous two years had accounted for 30% of revenue, was postponed
into the next financial year, which impacted full year sales. Nonetheless, despite this disruption, we delivered
727 new homes during the year – with our affordable housing revenue being marginally ahead of the previous
year at £43.4m (2018/19: £42.9m) while private housing revenue was £98.9m (2018/19: £143.3m). We also
achieved our target of improving gross margin by 90 basis points from 18.0% to 18.9% as we benefited from
the integration of the Walker acquisition. To secure headroom in the severe scenario of a full 12 month
lockdown, we agreed a 12 month increase in our credit facility to £85m. I am pleased to note that, while we
still have the surety of the facility, it is not being utilised.
Operational Review
Springfield made solid operational progress during the year to 31 May 2020. While total completions and
sales were impacted by lockdown, we achieved a number of strategic milestones and made excellent
progress on our Village developments.
• Reacted decisively and effectively to the challenges of the COVID-19 pandemic, with our first
priority being the health and safety of our workforce, customers and local communities
• Total completions were 727 homes (2018/19: 952)
• Expanded geographical presence with strategic land acquisitions in Inverness
• Progressing the development of our Land Bank, including receiving the largest detailed
planning consent to ever be granted in Scotland – for over 3,000 homes at Durieshill, Stirling
which will generate a GDV of £649m
• Diversifying revenue streams by entering a collaboration agreement with Sigma PRS
Management Ltd to deliver private rented sector housing
Land Bank
Springfield expanded the geographic reach of its land bank during the year, securing 747 plots in 13 locations,
in particular growing our footprint in the Highlands region. At year end, we had 44 active developments (31
May 2019: 43 active developments) and during the year:
•
•
•
11 new active developments were added to the land bank;
the proportion of the land bank with planning consent increased to 49.7% (31 May 2019: 28.4%);
and
as at 31 May 2020, the land bank consisted of 15,882 plots (31 May 2019: 15,938) with 3,769
consented plots over eight developments added during the year.
The increase in consented plots primarily relates to approval (subject to the receipt of section 75 agreement)
being received for 3,042 private and affordable homes at Durieshill, Stirling which is expected to generate a
GDV of £649m.
Private Housing
During the year, in private housing delivery:
• we completed 419 homes (2018/19: 630);
•
• we had 25 active private housing developments at year end (31 May 2019: 29), with three active
the average selling price of our private housing increased to £236k compared with £227k for 2018/19;
•
developments added during the year while seven developments were completed;
in total, the private housing land bank was 11,416 plots on 61 developments (31 May 2019: 11,511
plots on 62 developments);
• we gained planning consent for 2,507 plots across five developments; and
•
as at 31 May 2020, 49.7% of private plots had planning consent (31 May 2019: 29.6%), with 30.2%
(3,452 plots) going through the planning process and 20.1% at the pre-planning stage.
8
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Village developments
Springfield Villages are standalone developments that include infrastructure and neighbourhood amenities.
Each Village is designed to have up to approximately 3,000 homes, catering for around 7,000 residents. They
primarily offer private housing, but also include affordable housing and, as described below, will expand to
include private rented sector (“PRS”) housing.
Key developments during the year include the launch of sales at Linkwood, Elgin, which is our third Village
to have reached the sales phase and expands Springfield's Village offering to the north of Scotland. The first
homeowners moved in during the year, immediately prior to lockdown – with further homes handed over,
post period end, once operations resumed. Also during the year, a sports centre was opened by a third party
and construction of a primary school was progressed, which is due to complete in the Autumn 2020.
At Dykes of Gray near Dundee, where 222 Springfield homes were occupied at 31 May 2020, we continued
to progress the development of community infrastructure, including extensive planting, a second installation
of public art and the opening of two further playparks. The Village amenities were further strengthened with
the opening, post period end, of a convenience store.
At Bertha Park near Perth, Bertha Park Secondary School welcomed its first pupils, and has been a
significant draw for potential buyers. It 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. A convenience store was also
opened, post period end, at Bertha Park.
At Durieshill, Stirling, we received consent, subject to completing a section 75 agreement with Stirling
Council, for a 3,042-home development. This is our largest development to receive planning permission to
date and the largest detailed planning permission to be granted in Scotland, which is expected to generate a
GDV of £649m.
At Gavieside, Livingston, which is in the Edinburgh commuter belt, we have submitted a detailed planning
application for the first phase of 502 homes, play areas and up to eight business units.
Other private housing highlights
Outside of our Village developments, we completed 328 private homes during the year (2018/19: 506).
Private housing revenue excluding the contribution from Villages made up 78.4% of total private housing
revenue (2018/19: 81.5%).
During the year, we strengthened our geographic reach in the Highlands with strategic land acquisitions in
Inverness, at Easterfield for 90 homes and a further development for 100 homes at Milton of Culloden (both
of which will include a proportion of affordable housing). Other highlights included the launch of sales at
Banff; receiving consent for a 237-home development at Ferrylea; and receiving consent at Ardersier, near
Inverness, for a 116-home development (including 29 affordable homes). In Central Scotland, key highlights
during the year include receiving planning approval for 240 homes at Dalhousie South and planning
permission in principle for 561 homes at Tranent, both near Edinburgh.
Affordable Housing
During the year, in affordable housing delivery:
the number of completions was 308 homes (2018/19: 322);
the average selling price increased to £141k (2018/19: £133k);
•
•
• we expanded the number of active affordable housing developments to 19 at year end (31 May
2019: 14), of which nine were affordable-only developments (31 May 2019: six);
9
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
•
the total affordable housing land bank increased to 4,466 plots on 47 developments (31 May 2019:
4,427 plots on 41 developments);
• we secured planning consent for 1,262 affordable housing plots; and
•
as at 31 May 2020, 48.7% (2,175 plots) of our affordable housing plots had planning (31 May 2019:
25.3%), with 33.7% of plots going through the planning process and 17.6% at the pre-planning
stage.
Key operational highlights in affordable housing during the year include receiving planning consent for 237
affordable homes in Dalmarnock, in Glasgow and signing an agreement totalling £18.2m with West of
Scotland Housing Association. The agreement is for the development of the first phase of 144 affordable
homes and two commercial units. This development is part of the Clyde Gateway, which is Scotland’s largest
regeneration programme.
At The Wisp, a large development area for over 200 homes in south east Edinburgh, we received planning
consent for 139 affordable apartment homes (initially submitted as a mix of affordable and private). During
the year, we signed a £18.5m development agreement with PfP Capital for 104 apartments and a
development contract with another partner for the remaining 35 apartments.
As noted above, the affordable land bank was strengthened in the Highlands. This includes the acquisition
of two developments in Inverness (which include approximately 55 affordable homes) and we also received
planning consent for a total of 108 affordable homes at Ardersier and Ferrylea.
At our Village developments, we completed the first phase of handovers of affordable homes at Bertha Park
during the year, the first affordable housing to be delivered at any of our Villages. We also completed the
sale of two commercial units at Bertha Park (and are in advanced negotiations for the sale of a further three
units) and one at Dykes of Gray. As noted above, the commercial unit at Dykes of Gray and one at Bertha
Park were opened as convenience stores post period end.
Springfield continued to make good progress under its local authority framework agreement with Moray
Council for 10 affordable-only developments. We completed handovers at one development, commenced
construction on two developments and secured a contract for two developments totalling 66 homes.
Private Rented Sector
During the year we entered our first partnership for the private rented sector (“PRS”) with a collaboration
agreement to acquire and develop sites in Scotland for PRS with Sigma PRS Management Ltd (“Sigma”), a
wholly-owned subsidiary of Sigma Capital Group plc (AIM: SGM). We believe this strategic partnership with
another high-quality provider can offer a further revenue stream alongside our private and affordable housing,
with strong revenue and cash flow visibility where a development margin will be secured.
A number of Springfield sites, primarily Village developments, have been identified as potential sites for PRS
development. Subject to meeting certain criteria, Sigma will purchase part of these developments from
Springfield and will award Springfield a fixed-cost design and build contract to deliver housing on the acquired
land. Following handover, the homes will be owned, let and managed by Sigma under its 'Simple Life' brand,
which focuses on delivering quality homes for families. This is expected to increase the build out rate for our
Villages as well as enhance their ‘Village’ attributes through offering a range of tenures.
The first Village to receive PRS housing is expected to be Bertha Park, Perth where we plan to develop
approximately 75 two-, three- and four-bedroom homes.
10
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
COVID-19 Response
Since the start of the pandemic, our first priority has been the health and safety of our employees, customers
and the communities in which we operate. Consequently, in accordance with Scottish Government guidance,
on 24 March 2020 all of our sites under construction and our kit factory were temporarily closed. As a result,
we were unable to complete the delivery of homes scheduled to take place in April and May 2020, which for
the previous two years accounted for 30% of annual revenue. Our sales and administrative offices were also
closed to the public, with employees working from home wherever possible.
We undertook a number of actions to preserve our cash position during lockdown and in light of an uncertain
timescale. This included furloughing over 90% of our workforce under the UK Government's Coronavirus Job
Retention Scheme; cancelling our proposed interim dividend; voluntary salary reductions by Senior
Management and the Board of Directors; and measures to significantly reduce our monthly running costs,
such as the delay or cancellation of land purchases. We also agreed an additional £18m, 12-month term loan
facility with Bank of Scotland, increasing our total credit facility to £85m. Securing this additional capital gave
added confidence that we could pay our supply chain and overheads on time, even if lockdown extended to
a twelve month period.
I am extremely proud of how our management team and workforce responded to the lockdown, which lasted
longer for the construction industry in Scotland than in England. During a period of great uncertainty, we
acted swiftly and responsibly, and thanks to the dedication, skill and preparedness of our employees, we
were well-positioned for when operations could resume.
Operations on site recommenced from 15 June 2020 and all of our sales offices reopened on 29 June 2020.
Construction activity had resumed on every site by mid-July, with 80% of our staff brought back from furlough
by the end of the month. We continue to have COVID-19 safe-working protocols in place in compliance with
the Scottish Government Construction Sector Guidance, such as physical distancing. Our sales teams have
also successfully adapted to new ways of engaging customers as a result of the pandemic. In particular, this
includes greater use of technology, such as virtual walkthroughs of show homes and online reservations.
From the end of June 2020, we were able to commence handing over homes that had been nearing
completion prior to lockdown. In private housing, these homes were contracted under the Scottish missive
system and we had only one cancellation during lockdown. Our sales offices reopened to exceptionally strong
interest, reflecting pent up demand and the increased desirability for the type of housing that we offer. The
number of reservations received in Q1 2020/21 was 24% higher than in Q1 2019/20. We have also completed
handovers of two affordable projects since resuming operations.
We continue to closely monitor our costs, with all non-essential spend still curtailed and we have not yet
resumed future land purchases, focusing on delivering on our existing large and high-quality land bank. We
have also undertaken a review of our business to identify areas for greater efficiency and rationalisation,
including consolidating our Livingston operations at our office in Larbert. These measures will improve the
efficiency of our business, reduce overheads and strengthen our ability to navigate any potential future
challenges.
11
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Customer Satisfaction
Delivering a great service and quality homes to our customers has always been at the heart of what
Springfield offers. This year we enhanced our ability to listen to our customers by adopting a more formal
and in-depth approach through participating in the In-House survey, the largest independent research
Company specialising in housing in the UK. We are honoured that our Springfield, Dawn and Walker brands
were all strongly endorsed, receiving In-House Gold Standard Award with over 95% of customers surveyed
stating that they would recommend us and a Group Net Promoter Score (NPS) of 69. Springfield and Dawn
also received Outstanding Achievement Awards for the positivity of the word of mouth recommendations
they receive from customers.
We have sought means of assisting our customers with the particular challenges associated with the
COVID-19 pandemic. I am confident that these advancements, designed to serve our customers well today,
also serve to modernise the home buyer’s journey by offering digital based information and services.
Examples include web based 360 degree walkthroughs of our show homes, digital reservations with secure
online payments and a virtual home demonstration on the maintenance and use of a home which can be
referred to for years to come.
Outlook
We entered 2020/21 with a strong order book of contracted revenue in private and affordable housing as
completions for April and May were postponed into the new financial year. Since the recommencement of
operations towards the end of June we have made excellent progress in completing these and other
handovers as well as receiving significant interest across private and affordable housing.
In private housing, the strong interest reflects the pent up demand and the increasing desirability for the type
of private housing we offer with larger homes and plenty of green space. As a result, in the first quarter of
2020/21, and despite show homes being closed until 29 June we received reservations for 24% more homes
than in Q1 2019/20. Our private housing also continues to be supported by a buoyant housing market in
Scotland with demand outstripping supply supported by low interest rates and good mortgage availability.
In affordable housing we have delivered two developments since resuming operations and have a solid
pipeline for the remainder of the year, with £38.8m of contracted revenue. In addition, the suspension of
construction during lockdown disrupted progress towards reaching the Scottish Government’s target of
50,000 new affordable homes by the end of this Parliament in 2021 resulting in a continuing undersupply.
With our strong partnerships with local authorities and housing associations we are well-positioned to deliver
homes to help meet this demand.
As a result, and notwithstanding a further lockdown, we expect a significant increase in revenue for full year
2020/21 over 2019/20, with substantial visibility over the anticipated revenue based on homes delivered,
missived or reserved to date. Consequently, the Board of Springfield continues to look to the future with
confidence and to delivering shareholder value.
Innes Smith
Chief Executive Officer
28 September 2020
12
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF FINANCIAL OFFICER’S REVIEW
FOR THE YEAR ENDED 31 MAY 2020
Revenue for the year to 31 May 2020 was £144.4m (2018/19: £190.8m). The reduction in revenue was due
to the Group being unable to complete the delivery of handovers scheduled for April and May 2020 as a
result of the lockdown in response to the COVID-19 pandemic. For the previous two years, these two months
accounted for 30% of the Group’s annual revenue.
Private housing remained the largest contributor to Group revenue, accounting for 68.5% (2018/19: 75.1%)
of total sales. Affordable housing revenue continued to be strong and, despite the lack of completions in the
last two months of the year, achieved a small increase on the prior year.
Revenue
2020
£’000
2019
£’000
Change
Private housing
Affordable housing
Other*
TOTAL
-30.9%
+1.2%
-55.0%
-24.3%
*Principally land sale, plant hire revenues as well as construction only projects, typically on land not owned
or controlled by Springfield where we receive fees for design and construction work.
143,260
42,906
4,638
190,804
98,924
43,435
2,088
144,447
The Group achieved its target of increasing gross margin, which improved by 90 basis points to 18.9%
(2018/19: 18.0%). This primarily reflects the positive impact of the Walker Group properties, which generate
a slightly higher margin, as well as the Group benefitting from the ongoing integration of Dawn Homes and
Walker Group.
Total administrative expenses were £19.7m (2019: £18.2m) with the increase reflecting the larger scale of
the business, primarily the addition of Walker Group, which was acquired in the third quarter of the prior
financial year. This was partly offset by the cost mitigation measures that the Group implemented in response
to the COVID-19 pandemic. As noted above, the Group has undertaken a review, post period end, of its
business to identify areas for greater efficiency and rationalisation, and it expects these measures to reduce
expenses by approximately £1m on an annualised basis from the current financial year.
Exceptional items were £0.4m (2019: £0.6m) – This mainly relates to the cost of furloughed employees for
the months of April and May (£3.1m) when sites were closed, largely offset by grant income (£2.7m)
received under the UK Government’s Coronavirus Job Retention Scheme.
With respect to the impact of COVID-19, the furlough grant income received from the government has been
separately disclosed within the consolidated profit and loss account as exceptional, due to its incremental
nature. The direct furlough payroll costs are considered abnormal costs in the current year and consistent
with previous years, any direct payroll costs reflecting employee down time (abnormal production) is
expensed to the profit and loss account. Due to the COVID-19 pandemic and sites being closed across April
and May 2020, the quantum of direct employee down time in the current year is significant. The administrative
furlough payroll costs disclosed as exceptional are considered to be interdependent with the related
government grant income and while not being incremental or abnormal in nature, the government support
measures were key in protecting these jobs.
Despite a reduction in gross profit to £27.4m (2018/19: £34.3m), due to the cessation of business two months
prior to the year end, and having overheads for the full 12 month period net of other operating income of
£15.7m (2018/19: £17.2m), the Group made an operating profit of £11.7m (2018/19: £17.1m). Excluding
exceptional items, operating profit was £12.1m (2018/19: £17.6m).
Profit before tax and exceptional items was £10.2m (2018/19: £16.5m) reflecting the lower revenue.
Basic Earnings per share (excluding exceptional items) were 8.33 pence (2019: 13.92 pence) and return on
capital employed was 8.3% (2019: 14.6%).
13
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
CHIEF FINANCIAL OFFICER’S REVIEW (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
To strengthen the Group’s balance sheet in preparation for the potential of a prolonged period of shutdown,
Springfield secured an additional £18m, 12-month, term loan from Bank of Scotland. The term loan was
agreed on similar terms to the Group’s existing credit facility of £67m, which is in place until 31 January 2022.
The additional loan increased the Group’s total credit facility to £85m to secure sufficient capital in case of a
twelve-month lockdown. Of the total credit facility, the £18m that was secured in April 2020 has been fully
drawn, but is not currently being utilised.
Net debt (excluding right-of-use lease liability as described below) at 31 May 2020 was £68.8m compared
with £53.7m at 30 November 2019 and £29.6m at 31 May 2019. The primary reason for the increase is that
for the homes scheduled to be delivered in April and May 2020, the majority of build costs had already been
incurred, but the Group was unable to recognise the revenue during the year due to being unable to complete
the handovers. Following the recommencement of operations at the end of June, the Group has been
delivering against a strong order book for near-term revenue resulting in a reduction in the net debt position
as anticipated. As at 25 September 2020, net debt had been reduced to £41.9m and the Group expects this
trend to continue through the first half of the current financial year.
The Group has adopted IFRS 16 for its accounting period beginning on 1 June 2019 using the modified
retrospective approach. The effect of this is to replace previously recognised operating lease payments
under IAS17 with a right-of-use asset and liability under IFRS 16. The financial effect is that from 1 June
2019, the Group has recognised right of use assets totalling £2.5m with a corresponding lease liability for
the same amount. See Note 2.1 for further detail. The effect of adopting IFRS 16 is that the profit before tax
has decreased by £131k.
Michelle Motion
Chief Financial Officer
28 September 2020
14
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
COMPANY OVERVIEW AND RISKS
FOR THE YEAR ENDED 31 MAY 2020
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. Regular audits and
inspections of our construction activities are carried out to ensure our statutory obligations are met and that
we are continually looking at reducing our environmental impact.
Quality Management
The Group is accredited to ISO 9001-2015 standard. During 2019/2020 improvements completed as a result
of quality management were 111 (2018:/2019 187). Due to COVID-19 our external audit covering the financial
year 2019/2020 has been delayed until November 2020.
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 include:
•
•
•
•
•
•
•
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;
the introduction in June 2019 of the offer of free gym memberships for all employees
satellite television discount; and
launch of a green committee
15
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
COMPANY OVERVIEW AND RISKS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
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.
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.
In addition to the risks we currently manage, we have also had the COVID-19 pandemic added to our risk
register which is applicable to all areas of our operations, and we have developed suitable control measures
to allow the business to continue, taking into consideration current Government guidance and legislative
requirements.
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. Additional funding was secured to April 2021 when the business was closed due to the
COVID-19 pandemic. 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.
16
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
COMPANY OVERVIEW AND RISKS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Future Developments
The future development of the Group is dealt with in the Chairman’s Statement and Chief Executive’s
Statement.
Charitable Donations and Community Support
During the year the Group made payments of £17,067 (2019: £6,130) to local charities and £1,010 (2019:
£21,090) 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.
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.
Springfield are headline sponsors of Scottish Squash, this enabled the resurrection of the Scottish Squash
Open, now the Springfield Scottish Squash Open in 2019. The sponsorship is also enabling Scottish Squash
to develop the game in communities around Scotland and to support its elite players.
17
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
STREAMLINED ENERGY AND CARBON REPORTING
FOR THE YEAR ENDED 31 MAY 2020
Since gaining the first Gold Active Building standards sustainability certificate for an environmentally friendly
new home back in 2012 to being one of the first house builders in the UK to make infrastructure for vehicle
charging a standard feature in all new-build properties, the reduction of environmental impact of our homes
and operations across the Group remains an area of significant focus and innovation.
The environmental impact of our homes
New homes in Scotland are built to some of the highest technical standards in Europe, with the new Scottish
Government Building Standards in October 2015 resulting in a 75% reduction in carbon emissions compared
to 1990 levels.
Above and beyond these standards, as a responsible house builder, we recognise the most important indirect
environmental impact of our development activities is the ongoing impact of our new homes. The Group
focuses on building homes to high sustainability standards that benefit from eco-friendly design, Green
construction practices and enhancing the range of environmentally beneficial options for customers such as
the ability to order solar PV systems and the cabling for electric car charging points.
All timber used by the Group within the building of our homes is from sustainable sources and is either
Programme for the Endorsement of Forest Certification (PEFC), or Forestry Stewardship Council (FSC)
approved.
The environmental impact of our operations
We recognise our responsibility to mitigate the impact of our operations on climate change and are taking
steps to reduce this wherever possible. Energy saving measures taken across the Group include: -
•
the fitting of PV solar panels and electric car charging points at Springfield offices in Larbert and
Elgin;
LED lighting with motion sensing fitted at the Larbert office;
•
• Dawn Homes working towards paperless offices with sales offices and the admin office achieving
90% and 40% reductions respectively to date; and
• Walker Group has a number of PHEV vehicles and has ordered its first all-electric Company car
Across the Group cycle to work schemes are in place with car sharing and crew cabs for site operatives
actively encouraged.
As part of the Group’s ongoing efforts to improve energy efficiency and share best practice across the Group,
a Green Committee was established to discuss and implement ideas, proposed by employees. The
committee was set up shortly before the COVID-19 lockdown so we will report on their achievements in next
year’s annual report.
Continuing to innovate
In summer 2019, the Group took another step towards making its developments more environmentally
sustainable by becoming the UK’s first housebuilder to use waste plastic, that cannot currently be recycled,
to build a road on a housing development.
The product reduces the amount of bitumen needed in the asphalt mix. For every tonne of bitumen replaced,
the road surfacing carbon footprint is reduced by a tonne of carbon dioxide. The new surface looks like a
typical road, however, thanks to the flexible properties of plastic, it benefits from increased longevity and is
60% more durable than traditional asphalt.
In recent years the Group has invested in improvements to our timber kit factory in Elgin to improve efficiency
and increase the number of kits produced in a year. Part of this improvement included resurfacing the car
park and road in July 2019 using the same innovate waste plastic asphalt mix. The 2,800m2 road and car
park used 3.5 tonnes of the mixture which is the equivalent weight of 297,000 plastic bottles.
18
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
STREAMLINED ENERGY AND CARBON REPORTING (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Energy Use and Greenhouse Gas Emissions
For the financial year ended 31 May 2020
Scope 1 energy use and emissions from stationery combustion gas and
generator construction site fuel use
Scope 1 energy use and emissions from mobile combustion, transport and plant
construction site fuel use
Scope 2 energy use and emissions from electricity use
Scope 3 energy use and emissions from business mileage from staff’s own
vehicles
Total energy use and greenhouse gas emissions
Greenhouse gas emissions per home sold
Energy
Use mWh
Tonnes
CO₂e
2,194
5,074
1,229
1,469
9,966
533
1,288
314
357
2,492
3.42
Please note as this is the first year of reporting under Streamlined Energy and Carbon Reporting no
comparative years are available, 2020 will therefore form the baseline year.
Homes sold
Actual
Total
727
Private
419
Affordable
308
The intensity metric for energy use and greenhouse gas as noted above is higher than would normally be
expected due to the COVID-19 lockdown. Whilst the effect of the lockdown was the reduction of carbon
emissions for April and May, as these months are historically two of the highest months for the sales of new
homes, it disproportionally affects the intensity metric.
The Group controls the majority of all site emissions, proudly employing staff and controlling assets at all
stages of the build cycle including ground works through to completed homes. We own our timber kit
factory which supplies the majority of our kits for private homes. In doing so we are conscious that our
reported omissions may be marginally higher compared to those who have sub-contracted greater
elements of their site activity, but ultimately it affords us the opportunity moving forwards to better monitor
and improve such emissions by direct control and influence.
Methodology
Our Scope 1, Scope 2 and Scope 3 energy use and greenhouse gas emissions data for 2020 has been
independently produced from information provided by the Group to an external consultancy with expertise in
this area.
To calculate the footprint, data was collated from across the Group and from our suppliers to identify the
amount of energy used in our operations. The Group uses the most robust and accurate data source
available for each component of its energy use and carbon emission calculations. Assumptions and
estimations are only used when strictly necessary by means of the most robust data and assumptions
available.
Where actual emissions for the financial year are not available by the reporting date, the Group uses
of estimates for the last one to two months of the period.
Where actual emissions data from energy consumption is not available for an individual site, the Group
calculates an average energy consumption for its show homes, plots and site cabins across the actual
population that full data is held for and this average is then used. We do not consider refrigerant losses on
our air conditioning units to be material and as such these are not reported in our emissions data.
19
SPRINGFIELD PROPERTIES PLC
STRATEGIC REPORT
STREAMLINED ENERGY AND CARBON REPORTING (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Methodology (continued)
For business travel, the Group analyses fuel card usage, mileage information, expense claims and fuel
invoices to establish the level of scope 1 emissions. Each vehicle’s respective CO2e g/km rating is applied.
Where these are not available, estimates based on a representative sample of Company car or van users
are applied.
We do not consider train travel to be material and as such this is not reported in our emissions data.
Where emissions for the period that cover the financial year are not available, the Group pro-rates for
business mileage.
For site diesel, usage is based on litres delivered to site within the financial period.
Greenhouse gas (GHG) emissions are calculated in line with GHG Reporting Protocol – Corporate standard
and reported in line with the UK Government’s Guidance on Streamlined Energy and Carbon Reporting and
mandatory GHG reporting guidance.
The boundary has been set based upon operational control approach on our business activities and property
portfolio. There is alignment with our financial reporting and 100% of our energy consumption and carbon
emissions are UK based.
Sandy Adam
Executive Chairman
28 September 2020
20
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 trebling annual revenue and more than doubling the number of completions 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 is Chairman of the Port of Cromarty Firth and sits on the Board of their Cruise Highland
subsidiary. Roger joined Springfield as a Non-Executive Director in 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 was 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.
21
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
BOARD OF DIRECTORS (CONTINUED)
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. Nick
is currently General Counsel and Company Secretary of Johnson Matthey Plc. 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. Nick
joined Springfield as a Non-Executive Director in 2018.
Colin Rae, Non-Executive Director
(Sits on Audit, Remuneration and Nomination Committees)
Colin has over 35 years’ experience working in the construction and housebuilding industries, from chartered
quantity surveying through to development management. 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 executive member of the Group board with direct responsibility
for a UK-wide mixed tenure development programme of c£200 million. He has a particular interest in high
quality design in placemaking and offsite construction. A Member of the Royal Institution of Chartered
Surveyors, Colin now acts as “critical friend” with organisations active in the residential sector through his
Development Solutions business. He is also an Academician of The Academy of Urbanism and Member of
the Chartered Institute of Housing. Colin was appointed to the Board as a Non-Executive Director in 2019.
22
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE AND SECTION 172 STATEMENT
FOR THE YEAR ENDED 31 MAY 2020
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 for Small and Mid-Size
Quoted Companies (“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 operates within two markets – private housing and affordable – with the belief that this combination
is key to sustained long term growth. The Group focuses on developing a mix of private and affordable
housing in Scotland.
Private:
The Group delivers private housing via Springfield Properties Plc and its subsidiaries: Walker Group and
Dawn Homes. Sourcing land in areas with high growth potential is a priority for the Group with a view to then
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'. Through
our “Choices” and “It’s Included” customer incentives, our 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 158,000 applicants to local authority housing lists in March 2019
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 1,200 affordable houses in the last five years
and we aim to further increase the size of our affordable housing business.
We have an abundance of in-house skills to support our strategy and 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. The wealth of knowledge and expertise our in-house staff
provide increases our ability to competitively purchase ‘difficult’ sites. Further details on our strategy and
business model are discussed in the Chairman’s statement on pages 5-7.
2.
Section 172 Statement and Understanding Shareholder Needs and Expectations
Along with compliance with QCA Code, the Directors are required to include a statement of how they have
had regard to shareholders to promote the success of the Company, in accordance with section 172 of the
Companies Act 2006. This section along with pages 40 – 42 sets out how the Board has discharged its
duties.
Maintaining positive relationships with shareholders is important to the Board. 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.
Our shareholders have the opportunity to ask questions by email or telephone throughout the year and can
also attend bi-annual investor presentations organised by our nominated advisor, N plus1 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. Roadshows were held in 2019/2020 however for 2020/2021
given the ongoing COVID-19 pandemic presentations are being held virtually.
23
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
2.
Section 172 Statement and Understanding Shareholder Needs and Expectations (continued)
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
updates
at
https://www.springfield.co.uk/news.
the Group’s
projects. All
releases
current
found
press
can
on
be
All shareholders were invited to attend Springfield’s AGM. Details of this year’s AGM will be available to
download from our corporate website. 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, suppliers, national & local government and local communities.
With the COVID-19 pandemic in 2020 the health and safety of Springfield employees, customers and the
communities in which we operate have been of paramount importance. Consequently, in accordance with
Scottish Government guidance, on 24 March 2020 we temporarily closed down all of our sites under
construction and our kit factory, as well as closing our sales and administrative offices to the public with
employees working from home wherever possible.
Employees (current): Departmental Groups of employees meet with the Chairman and CEO bi-annually to
discuss employees’ needs, interests and expectations. During these meetings key achievements of the
Groups are discussed as well as future goals. Employees are also updated regularly by email to any major
news as it happens (and in line with market announcements). Employees have been updated by email and
text alerts weekly during the COVID-19 pandemic. Employees have the opportunity to ask questions and
provide feedback. We currently have 719 employees at 31 May 2020 and are proud that many of our
employees have chosen to remain with Springfield with the average length of service being 5.5 years. We
undertake an annual pay review most years and at June 2019 our current employees were paid at least 3%
above minimum wage. No pay review has taken place in the year 2019/2020 due to the COVID-19 pandemic.
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.
Employees (training & education): At May 2020 we supported 130 (18.1%) staff in further education,
training and apprenticeships. This includes 91 apprenticeships.
Employees (future): The Group has a strong focus on education and training. We encourage student
placement programmes and we have placed 17 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. One of the ideas that has already been actioned is the creation of an employee ‘Green
Committee’. Employees are encouraged to send environmentally friendly initiatives that they think Springfield
should adopt and these are considered and, if approved, actioned by the employee representatives who
make up the Green Committee.
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 actions any points
required as a result of this feedback.
24
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
3.
Wider Stakeholder and Social Responsibilities (continued)
Suppliers: The Group’s commercial and purchasing teams communicate closely with suppliers. During the
early weeks of the COVID-19 lockdown the Company contacted all major suppliers to provide reassurance
and direction during the uncertainty of sites closing and work stopping.
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 legislation.
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.
Environment: We have implemented several environmentally friendly policies and initiatives including
installation of electric car charging points in some of our staff car parks and cabling for electric car charging
points in all our private homes. In 2019 we 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. In 2020 our employee Green Committee was formed to consider, and
action environmentally friendly and sustainable initiative suggested by fellow employees.
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.
25
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
5.
Maintaining a Well-Functioning Board
The skills and experience of the Board are set out in their biographical details on pages 21-22. 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 Colin Rae was
appointed to the Board on 16 September 2019 following a thorough assessment of potential candidates’ skills
and suitability for the role.
The Board consider Colin Rae, Nick Cooper and Matthew Benson to be independent Directors for the
purpose of the QCA Code. From 13 November 2020 Roger Eddie will have completed twelve years' service
as a Director. Having considered his independence in the context of the QCA Code, the Board is also satisfied
that Mr Roger Eddie will remain independent from 13 November 2020, notwithstanding his length of service.
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 21-22.
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 seven 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. The Board implemented a formal review process in the year 2019/20.
Springfield’s human resources department prepared a self-evaluation criterion which was issued and
approved by the Board. The intention was to have the self-evaluation process completed in the year 2019/20
but this was delayed due to COVID-19. All directors completed self-evaluation reports in the first quarter of
2020/21 and the results of the exercise will be acted upon in the second quarter of 2020/21.
The Board’s effectiveness is also assessed in an informal manner by the Chairman on an on-going basis.
26
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
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 has received numerous awards for customer service and for the sites we build. Our Dawn Homes
Limited site at Camas Walk, Cambuslang was a recipient of the Commended and Highly Commended Sites
NHBC award for 2019. More recently, Springfield and both subsidiaries (Walker Group (Scotland) Limited
and Dawn Homes Limited) were each awarded the “In House Gold Award for Customer Satisfaction” over
the last year. This means that over 95% of our customers would recommend us to their friends and family.
Springfield and Dawn Homes Limited also received “Outstanding Achievement” awards for the positivity of
the word of mouth recommendations we receive from customers. These awards are a testament to the ethos
of the Group to provide our customers with a great house, a nice place to live and excellent customer service.
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 the AIM market operated by the London Stock Exchange plc (“AIM”). 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.
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 Code 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.
27
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
QCA CODE COMPLIANCE (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
9.
Maintaining Good Governance (continued)
Springfield reviews its governance structures regularly. In September 2019, Springfield appointed a fourth
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 Group 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 Group. The Audit Committee examines reports received from management and the Group’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 Remuneration 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
recommendations for the nominations of candidates to fill vacancies on the Board. The Nomination
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 29-38.
10.
Communicating Governance and Performance
The Group 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.
We maintain an investor relations section of our website which provides a range of corporate information to
shareholders, investors and the public (www.springfield.co.uk/investor_relations), with all press releases
regarding news and updates on the Group’s current projects being posted in the news section of our website
(www.springfield.co.uk/news).
Results from the AGM are announced to the market and displayed on the website after the meeting.
Andrew Todd
Company Secretary
28 September 2020
28
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT
FOR THE YEAR ENDED 31 MAY 2020
Statement from the Chairman of the Audit Committee
On behalf of the Board, I am pleased to present the Committee Report for the year to 31 May 2020. 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 Committee is comprised solely of independent Non-Executive Directors, being myself as Chairman and
the other Non-Executive Directors: Nick Cooper, Roger Eddie and Colin Rae. Both myself and Roger Eddie
have worked within the financial industry and have recent and relevant financial experience. The Board is
satisfied that I have significant and relevant experience to chair the Committee.
Responsibilities
The responsibilities and activities of the Committee include determining and examining matters relating to
the financial affairs of the Group including the terms of engagement of the Group’s auditor and, in consultation
with the auditor, the scope of the annual audit. It receives and reviews reports from management and the
Group’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 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.
Meetings
In the year to 31 May 2020, the Committee met three times (excluding meetings relating to the tender process
referred to on page 30) and twice since the year end. Since 1 June 2019 to 22 September 2020, the
Committee met five 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. Other
members of the Board occasionally attend Committee meetings when requested by invitation. In the year to
31 May 2020 the Chief Financial Officer and the Chairman attended two Committee meetings
Internal Audit
The Group does not currently have an internal audit function. The Committee has 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 will review on an annual basis the
requirement for implementing an internal audit process.
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 23-28 of the Governance Report. There is a framework of risk management within the Group for
risk management. The Committee works alongside the Board to review, and where necessary suggest
changes to, the current systems in place.
The Committee is satisfied that the current systems in place are operating effectively.
29
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
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 LLP were re-appointed for the year to 31 May 2020. The Committee monitors the
relationship with the external auditor to ensure independence and objectivity at all times. The Committee also
reports to the Board on the independence, objectivity and effectiveness of the external auditor. Johnston
Carmichael LLP have been the external auditor for the Group since 2008 with Stephen McIlwaine as the
signing partner this year. The Committee had recommended that this position is tendered for the next
financial year. During the year, a tender process took place involving four parties which included a detailed
interview and presentation process. BDO LLP have been appointed as external auditor which is expected to
be formally approved at the AGM in October 2020.
Johnston Carmichael LLP 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 LLP is undertaken by a separate
team from the audit team to ensure segregation of duty. The Committee is made aware of any non-audit
work being carried out by Johnston Carmichael LLP. The fees paid for non-audit work are included in the
table at note 7. The Committee held two days of audit tender scoping meetings in 2020.
External Audit process
Johnston Carmichael LLP 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 Committee for approval in advance
of the audit. On completion of the audit, the findings are presented to the 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.
30
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Main issues discussed and conclusions
The table below highlights the issues discussed at the audit close meeting.
Issue
Revenue recognition
How it was addressed by the Committee
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.
With sites closing at the end of March due to the
COVID-19 lockdown, the Committee reviewed the
revenue recognised around the year end. The
Committee satisfies itself that there is no issue
with revenue recognition.
Profit recognition
The Group undertakes construction contracts which
take place over a period of time. There is a
in
significant element of
estimations of
these construction contracts
surrounding costs to complete and the overall
expected profit margin.
judgement
involved
The Committee monitors the cost value report
process and the effectiveness of the internal
controls exercised over these processes.
IFRS 16 - Leases
During the year IFRS 16 became a reporting
requirement for the Group. As a lessee of building
premises, motor vehicles and office equipment, this
will result in a material adjustment to recognise
these within the balance sheet this year.
The Committee
disclosure
reviewed
requirements and satisfies itself that the accounting
treatment of leases under IFRS16 is correctly
reflected within the financial statements.
the
Matthew Benson
Chairman of the Audit Committee
28 September 2020
31
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT
FOR THE YEAR ENDED 31 MAY 2020
Introduction
This report outlines the Group’s remuneration policy for its Directors and shows how that policy was applied
during the financial year ended on 31 May 2020.
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 Rule 19 of the AIM Rules for Companies.
Committee Members and Meetings
In the period of twelve months to 31 May 2020, the 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.
summarised on
(which are
reference
Committee Responsibilities
The main responsibilities of the 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 2020, 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.
32
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Impact of the COVID-19 crisis on the Group’s remuneration arrangements for Executive Directors
As highlighted in the strategic report, the Group’s business was significantly disrupted by the COVID-19
pandemic. This included, amongst other things, the cancellation of the interim dividend previously
announced on 25 February 2020 and the placing of over 90% of the Group’s employees on furlough under
the UK Government’s Job Retention Scheme.
At the same time as the above decisions were being made, the Committee conducted a full review of the
Group’s remuneration structures for Executive Directors with the aim of ensuring that the pay arrangements
and outcomes for our senior leadership team appropriately reflected the experience of the Group’s
shareholders and its wider employee population during this difficult time. The agreed actions that were taken
following this review (which were arrived at in consultation with the Executive Directors and after taking into
account relevant guidance issued by institutional investors and their representative bodies) can be
summarised as follows:
• with effect from April 2020:
o
o
the salaries of Innes Smith and Michelle Motion were temporarily reduced by 20%, with the
payment of a further 30% of salary being deferred until further notice;
the salary of Sandy Adam was reduced by 100% until such time as the Group’s various sites
were re-opened and thereafter limited to 50% of the previous level until further notice;
•
•
no bonuses would be awarded to the Executive Directors for the financial year to 30 May 2020; and
no salary increases would be awarded to the Executive Directors in respect of the financial year
commencing on 1 June 2020 (which mirrored the approach taken in relation to the Group’s general
employee base).
Although not within the scope of the Committee’s responsibilities, it should also be noted that, for the same
reasons described above, the wider Board decided that, with effect from April 2020, the fees payable to the
Non-Executive Directors should be temporarily reduced by 20%, with the payment of a further 30% of those
fees being deferred until further notice.
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. With effect from 1 June 2019, the annual rates of base salaries for the executive directors were
increased to:-
• Sandy Adam - £112,500
•
Innes Smith - £225,000 and
• Michelle Motion - £180,000
The above salary levels (which are stated before the impact of the COVID-19 related reductions described
above represented the final increase made by the Remuneration Committee in accordance with its previously
stated intention of ensuring that, in the initial period following admission to AIM, the Executive Directors’ pre-
admission salaries should 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.
Going forward, any salary raises for Executive Directors will normally reflect those applied to the wider
workforce. In the case of the financial year that commenced on 1 June 2020 (and as explained above), this
approach resulted in no increase being applied to the above salary rates.
33
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Annual Bonus
Under the Group’s annual bonus scheme for Executive Directors (other than Sandy Adam who does not
participate in this arrangement), 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 2020, the maximum bonus opportunities for Innes Smith and Michelle Motion
were 100% of salary and 75% of salary respectively. The following table identifies the measures used and
their respective weightings:
Measure
Profit before tax
Return on capital employed
Gross margin
Customer satisfaction
Weighting
(as a % of maximum opportunity)
Innes Smith
Michelle Motion
50%
30%
10%
10%
50%
25%
25%
0%
As explained on page 33, the Committee concluded that, in light of the COVID-19 pandemic and its impact
on the business, no awards should be made under the Group’s annual bonus scheme for the year to 31 May
2020 irrespective of the level of achievement delivered against the above measures.
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
As part of the process surrounding the Group’s admission to AIM in October 2017, the following plans were
adopted in order to allow share-based incentives to be provided to the Executive Directors and other senior
managers:
• The Springfield Properties PLC Company Share Option Plan (the “CSOP”); and
• The Springfield Properties PLC Employee Share Option Plan (the “ESOP”).
The CSOP and the ESOP are relatively straightforward arrangements under which options over the
Company’s shares can be granted to selected employees of the Group (including Executive Directors).
These options normally vest after three years and, on exercise, require participants to pay a price equal to
the market value of a share on the date they were originally granted.
The CSOP and ESOP (the “Option Plans”) were used to grant options 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 37). The terms on which these grants were made do not require additional performance conditions
to be satisfied before the relevant options can be exercised.
During the early part of the financial year to 31 May 2020, the Committee undertook a detailed examination
of the form and structure of the Option Plans in order to determine whether they remained appropriate for the
Company. This exercise took into account feedback received from shareholders (particularly around the
Committee’s previous approach of not imposing additional performance conditions in relation to share-based
incentive plans) as well as recent developments in market and best practice.
34
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
The view reached by the Committee was that the Option Plans should be replaced with a new Performance
Share Plan or (“PSP”) under which key executives could be granted conditional “whole share” awards (i.e.
rights to acquire shares where the individual is required to pay a zero or negligible exercise price) the vesting
of which is normally conditional on both continued employment and the satisfaction of specified performance
measures.
The new PSP was adopted by the Board on 9 January 2020 and the initial awards were made pursuant to
its terms on that same date. Details of the grants made to the Executive Directors, which were publicly
announced on 13 January 2020, can be summarised as follows:
• Awards (in the form of “nominal cost” options) were granted to Innes Smith (over 127,828 shares
with a face value at grant equal to approximately 87% of salary) and Michelle Motion (over 68,176
shares with a face value at grant equal to approximately 58% of salary). This can be compared to
the last set of awards granted under the Option Plans to these individuals in October 2018 where
Innes Smith received an option over 257,142 shares with a face value at grant equal to 150% of
salary and Michelle Motion was granted an option over 129,795 shares with a face value at grant
equal to 100% of salary.
• The above PSP awards will normally vest on the third anniversary of grant but only if, and to the
extent that, certain performance conditions are satisfied. These conditions, which were set by the
Remuneration Committee at the time of grant and will be assessed over a total of three financial
years commencing with the one in which the grant was made, require the achievement of
stretching targets relating to earnings per share (75% weighting) and the Company’s net debt /
EBITDA ratio (25% weighting). The precise terms of these targets are commercially sensitive but
full details will be disclosed following their final assessment by the Committee at the expiry of the
performance period.
• The vesting of the above awards will also be conditional on continued employment by the
individuals (although market standard “good leaver” provisions apply in terms of which participants
who cease employment in prescribed circumstances will normally retain the right to a time pro-
rated proportion of their award that will remain subject to the originally imposed performance
conditions).
• Vested awards may be recovered and/or withheld where the Remuneration Committee determines
that (i) financial results have been materially misstated; (ii) there has been a miscalculation in
respect of award levels / performance conditions; (iii) a participant has been dismissed for gross
misconduct; or (iv) there are reputational reasons for applying these provisions.
• On a change of control, awards will be scaled-back on a pro-rata basis and vesting will be
dependent on performance up to the date of the transaction, but with the Remuneration Committee
retaining the discretion to waive the time pro-rata reduction if it considers it appropriate.
Given the size of his existing shareholding in the Group, Sandy Adam does not currently participate in any
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 2020. Details of the options
granted under this arrangement to Innes Smith and Michelle Motion in earlier periods are set out on page 36.
For the same reason stated above in relation to the Long Term Incentive Plans, Sandy Adam does not
currently participate in the SAYE Scheme.
35
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Remuneration in the Year
During the year to 31 May 2020, the directors received the following remuneration:
Basic
salary/fees1,2
Annual
Bonus
Taxable
benefits3
Pension
contributions
2020
Total
£000
£000
£000
£000
£000
Executive Directors
Sandy Adam
Innes Smith
Michelle Motion
Non-Executive Directors
Matthew Benson
Roger Eddie
Nick Cooper
Colin Rae4
Notes:
94
218
174
39
39
39
27
630
-
-
-
-
-
-
-
-
2019
Total
£000
108
358
263
35
35
35
-
8
8
8
-
-
-
-
5
21
17
-
-
-
-
107
247
199
39
39
39
27
24
43
697
834
1 In the case of the Executive Directors, the basic salary figures set out in this column (a) reflect the reductions described on page
33; and (b) include any amounts the payment of which was deferred to a later date (also as described on page 33).
2 In the case of the Non-Executive Directors, the fees figures set out in this column reflect (a) an increase in the annual fee rate
payable to these individuals (from £35,000 to £40,000) that came into effect on 1 June 2019; and (b) the reductions described on
page 33. These figures also include any amounts the payment of which was deferred to a later date (also as described on page
33).
3 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.
4 Colin Rae was appointed as a Non-Executive Director on 16 September 2019.
The above table does not include the value of share options held by the directors, details of which are set
out below.
36
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Share Options and PSP awards
Details of options over the Group’s shares that have been granted to executive directors under the CSOP,
ESOP, SAYE Scheme and PSP and which were outstanding during the year to 31 May 2020 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
PSP
9 January 2020
9 January 2023
0.125p
127,828
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
PSP
9 January 2020
9 January 2023
0.125p
68,176
Notes:
1 An overview of the performance conditions that must be satisfied before options granted under the PSP vest and become
exercisable is provided on page 35. Options granted under the CSOP, ESOP and SAYE Scheme are not subject to performance
conditions.
2 Awards granted under the PSP carry “dividend equivalent” rights that entitle the holder to receive the benefit of any dividends
declared on vested shares during the period from the date of grant to the date of vesting.
During the year to 31 May 2020, no share options held by Executive Directors lapsed or were exercised.
37
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Directors’ Interests in the Group’s Shares
Directors’ interests in the Group’s shares are disclosed in the Directors’ Report (page 41).
Roger Eddie
Chairman of the Remuneration Committee
28 September 2020
38
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 MAY 2020
The Directors present their annual report and the audited financial statements of the Group for the year ended
31 May 2020.
Principal Activity and Business Review
This information is included within the Strategic Report above, 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 16 September 2019)
The results for the year are set out on page 50.
On 24 March 2020 it was announced that the interim ordinary dividend previously announced on 27 February
2020 amounting to 1.4p (2019: 1.2p) per share was being withdrawn. This decision was made by the Group
as a result of the level of uncertainty created by the COVID-19 pandemic and to preserve cash. The Board
believed this to be an appropriate and prudent measure to preserve liquidity in these uncertain times.
The Board is proposing a final dividend of 2p per share subject to shareholder approval at the next Annual
General Meeting to be held on 30 October 2020. As no interim dividend was paid, this equates to a total
dividend of 2p (2019: 4.4p) 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.
Further information on the employee consultation and changes required as a result of the COVID-19
pandemic are set out in the QCA Code section.
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.
39
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
DIRECTORS’ REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
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
On 1 June 2020, the remaining shares in DHHG 1 Limited were purchased for consideration of £264,502.
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. The impact of COVID-19 has been considered as part of this assessment.
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 21-22.
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.
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.
40
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
DIRECTORS’ REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
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 36.
Directors’ Interests in Shares
Name of Director
Sandy Adam
- Direct
-
Indirect
Innes Smith
- Direct
-
Indirect
Michelle Motion
Roger Eddie
- Direct
-
Indirect
Nick Cooper
Indirect
-
Matthew Benson
Colin Rae
Number of
ordinary
shares
% of ordinary share
capital and voting
rights
24,918,300
18,890,022
908,009
44,419
52,999
22,170
25,000
25.5%
19.3%
0.9%
0.0%
0.1%
0.0%
0.0%
14,895
28,302
20,000
44,924,116
0.0%
0.0%
0.0%
45.9%
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.
Section 172 Compliance
A general duty is imposed on every Director by Section 172 of the Companies Act 2006 to act in a way they
consider, in good faith, would be most likely to promote the success of the Company for the benefits of its
shareholders as a whole. In doing so, the Directors should have regard to several matters including:
• The likely consequences of any decision in the long term;
• The interests of the Company’s employees;
• The need to foster the Company’s business relationships with suppliers, customers and others;
• The impact of the Company’s operations on the community and the environment;
• The desirability of the Company maintaining a reputation of high standards of business conduct;
and
• The need to act fairly as between members of the Company.
41
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
DIRECTORS’ REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
The Board factors stakeholder interest into long term policies and objectives. The business of the Company
requires engagement with shareholders, customers, local authorities, housing associations, employees and
suppliers.
The Board, when considering stakeholder interest, are responsible for ensuring the long-term policies and
objectives implement allow the Group to continue to consistently produce high quality homes and
developments.
The Executive Directors are responsible for the operations of the business whilst the Non-Executive Directors
are independent and are well positioned to provide objective judgement and scrutiny to decisions made by
the Board.
Information about our stakeholders and how the Board has discharged its duties are included on page 23 -
25
On behalf of the Board
Sandy Adam
Executive Chairman
28 September 2020
42
SPRINGFIELD PROPERTIES PLC
CORPORATE GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
FOR THE YEAR ENDED 31 MAY 2020
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
28 September 2020
43
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 2020 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 2020, 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.
44
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 £144.4m (2019 - £190.8m) as
detailed per note 4 and is a key metric of
business performance.
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.
to estimates of
Recognition of revenue on affordable
housebuilding construction contracts is
linked
contractual
performance as activity progresses which
judgemental, albeit such
is
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
require
year-end
around
management judgements.
can
the
For private house sales, we verified a sample from the
internal sales team report to 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. We also confirmed that
plots sold were no longer showing as available for sale per
the website.
Substantive testing regarding missives concluded in the first
month of the following accounting year have also confirmed
that all house sales were recognised in the appropriate
accounting period. We confirmed that there had been no
sales pre-year end in line with our expectations given site
closures at this time.
Substantive testing was also conducted on sales invoices
posted in the ledger in the final week of the year and first
week of the following year for non-private house sales to
confirm these had been recognised in the appropriate
accounting period.
No issues were noted in the above testing.
45
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
£27.4m (2019 - £34.3) as detailed per note
5. 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.
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.
No issues noted in the above testing.
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
improve
the quality and accuracy of
financial reporting is a key audit risk as
there is potential for undue management
bias to be exercised in this process.
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
No issues noted in the above testing.
46
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:
Materiality
Measure
Financial
statements as a
whole
(Overall materiality)
Group
£487,000
Parent Company
£373,500
We determined that 5% of profit before
tax of the Group was an appropriate
measure
trading
for a profit-oriented
business.
an
considered
While 5% of profit before tax of the
Parent Company would normally also
be
appropriate
measure for a profit-oriented trading
business, exceptional circumstances
resulting from COVID-19 and the
impact on the Company profit before
tax meant that an alternative basis
was selected.
A materiality level based on the
Parent Company’s position within the
overall Group, and in particular its
instead
turnover, was
share of
deemed more appropriate.
60% of financial statement materiality.
60% of financial statement materiality.
Performance
materiality used to
drive the extent of
testing
Communication of
misstatements
to
the Directors
£10,000 and any misstatements below
that threshold that, in our view, warrant
reporting on qualitative grounds.
threshold
£7,500 and any misstatements below
that
in our view,
that,
warrant
reporting on qualitative
grounds.
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.
47
SPRINGFIELD PROPERTIES PLC
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SPRINGFIELD
PROPERTIES PLC (CONTINUED)
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.
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 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.
48
SPRINGFIELD PROPERTIES PLC
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF SPRINGFIELD
PROPERTIES PLC (CONTINUED)
Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement set out on page 43, 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.
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.
Stephen McIlwaine (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
Chartered Accountants
Statutory Auditor
30 September 2020
Commerce House
South Street
Elgin
IV30 1JE
49
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MAY 2020
Notes
4
2020
Pre –
Exceptional
Items
£000
Exceptional
Items
£000
2020
Post –
Exceptional
Items
£000
2019
Post –
Exceptional
Items
£000
144,447
(117,096)
27,351
-
-
-
144,447
190,804
(117,096)
(156,470)
27,351
34,334
11
(16,520)
(3,145)
(19,665)
(18,238)
852
428
12,111
320
(2,273)
10,158
(2,093)
-
852
3,151
11,689
584
384
17,064
320
416
(2,273)
9,736
(2,093)
(1,511)
15,969
(3,111)
2,723
(422)
-
-
(422)
-
8,065
(422)
7,643
12,858
8,068
(3)
8,065
(422)
7,646
12,848
-
(422)
(3)
7,643
10
12,858
8.33p
(0.44)p
7.89p
13.34p
8.24p
(0.43)p
7.81p
13.21p
11
6
9
10
13
13
Revenue
Cost of sales
Gross profit
Administrative expenses
Share of JV 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 54 to 82 form an integral part of these financial statements.
50
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED 31 MAY 2020
Non-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Investments
Accounts receivable
Current assets
Inventories and work in progress
Accounts receivable
Cash and cash equivalents
Total assets
Current liabilities
Accounts payable
Bank Term loan
Short-term obligations under finance lease
Lease liabilities
Corporation tax
Non-current liabilities
Long-term borrowings
Long-term obligations under finance lease
Lease liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Equity attributable to owners of the parent company
Non-controlling interest
Note
14
14
15
16
18
17
18
25
19
21
22
22
21
22
22
23
24
24
2020
£000
4,331
2,011
1,649
202
5,102
13,295
174,400
8,968
1,522
184,890
198,185
20,781
18,000
782
406
780
40,749
51,000
519
1,736
8,317
61,572
102,321
2019
£000
4,977
-
1,649
1,481
903
9,010
148,649
20,144
3,062
171,855
180,865
43,697
-
1,012
-
2,018
46,727
31,000
624
-
13,954
45,578
92,305
95,864
88,560
122
52,330
43,412
95,864
-
120
50,118
38,292
88,530
30
Total equity
88,560
These financial statements were approved and authorised for issue by the Board of Directors on 28
September 2020. Signed on behalf of the Board by:
95,864
Sandy Adam
Executive Chairman
The accompanying notes on pages 54 to 82 form an integral part of these financial statements.
Company number: SC031286
51
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2020
Share
capital
Share
premium
Retained
earnings
Notes
£000
£000
£000
Non-
controlling
interest
£000
1 June 2018
Share issue
Total comprehensive
income for the year
Share option reserves
Dividends
31 May 2019
Share issue
Total comprehensive
income for the year
24
12
24
Share option reserves
24
Acquisition of minority
interest
Dividends
31 May 2020
12
120
50,105
28,767
-
-
-
-
13
-
-
-
120
50,118
-
12,848
434
(3,757)
38,292
2,212
-
-
-
-
-
7,646
557
-
(3,083)
43,412
122
52,330
2
-
-
-
-
20
-
10
-
-
30
-
(3)
-
(27)
-
-
Total
£000
79,012
13
12,858
434
(3,757)
88,560
2,214
7,643
557
(27)
(3,083)
95,864
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 54 to 82 form an integral part of these financial statements.
52
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR TO 31 MAY 2020
Cash flows generated from 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 – cash movement
Gain on disposal of tangible fixed assets
Share option employment costs
Cost of sales – non cash movement
Share of joint venture profit
Amortisation of intangible fixed assets
Depreciation and impairment of tangible fixed assets
Operating cash flows before movements in working capital
(Increase)/decrease in inventory
Decrease in accounts and other receivables
Decrease in accounts and other payables
Net cash used (in)/ from operations
Income taxes paid
Net cash (outflow) / inflow from operating activities
Investing activities
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Net purchase of subsidiary undertakings
Interest received and similar income
Repayment of loan from JV
Net cash used in investing activities
Financing activities
Proceeds from issue of shares
Proceeds from bank loans
Repayment of bank loans
Payment of finance leases obligations
Dividends paid
Interest paid
11
6
24
30
30
30
12
Net cash inflow/(outflow) from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
25
2020
£000
8,065
2,093
2,273
(320)
(341)
(71)
557
550
319
8
2,356
15,489
(25,642)
6,533
(22,960)
(26,580)
(3,125)
(29,705)
2019
£000
13,423
3,111
1,511
(416)
(565)
(270)
434
310
(420)
-
1,591
18,709
638
653
(3,978)
16,022
(2,868)
13,154
(553)
101
(1,549)
368
(4,000)
(20,891)
38
828
98
-
(3,586)
(21,974)
26
38,000
-
(1,531)
(3,083)
(1,661)
31,751
(1,540)
3,062
1,522
13
68,000
(62,000)
(1,065)
(3,757)
(1,324)
(133)
(8,953)
12,015
3,062
53
The accompanying notes on pages 54 to 82 form an integral part of these financial statements.
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
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. DHHG 1 Limited has a financial year end date of 31 January.
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 Group has adopted all the standards and amendments to existing standards which are mandatory for
accounting periods beginning on 1 June 2019. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet effective.
IFRS 16 – Leases - The Group has adopted IFRS 16 for its accounting period beginning on 1 June 2019
using the modified retrospective approach. The effect of this is to replace previously recognised operating
lease payments under IAS17 with a right-of-use asset and liability under IFRS 16. IFRS 16 captures
agreements covering the Group’s rental of its existing premises in Elgin, Larbert, Livingston and Glasgow
along with the rent of certain office equipment and motor vehicles. The financial effect is that from 1 June
2019, the Group has recognised right of use assets totalling £2,501k with a corresponding lease liability for
the same amount. Depreciation is charged through the profit and loss account on a straight-line basis over
the term of the lease. Interest is calculated on the outstanding liability, using a market rate, and is charged
through the profit and loss account. Rent payments, which previously would have been charged to profit and
loss account (under the treatment of operating leases) are now treated as deductions of the applicable
outstanding lease liabilities on the balance sheet. In the year to 31 May 2020, the Group has charged
depreciation of £490k and interest expense of £151k through the profit and loss account and made lease
payments totalling £510k. The effect of adopting IFRS 16 is that the profit before tax has decreased by £131k.
The table below presents a reconciliation from operating lease commitments disclosed at 31 May 2019 to
lease liabilities at 1 June 2019:
Operating lease commitments disclosed under IAS 17 at 31 May 2019
Effect of discounting
Other adjustments including adjustments for short term leases and hindsight
adjustments
Lease liabilities recognised at 1 June 2019
£000
3,277
(702)
(74)
2,501
54
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
2. Summary of Significant Accounting Policies (continued)
2.1
Basis of accounting (continued)
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 2020.
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.
The Directors have considered the principal risks and uncertainties the Group faces and other factors
impacting the Groups future performance such as the COVID-19 pandemic. The Chief Executive’s Statement
on page 11 details a number of actions taken and those along with the significant debt reduction in Q1 of the
new financial year give the Directors comfort 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.
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.
55
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
2. Summary of Significant Accounting Policies (continued)
2.5.
Revenue recognition (continued)
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. Grants
Grants are recognised when it is reasonable to expect that the grants will be received and that all related
conditions will be met, usually on submission of a valid claim for payment. Revenue grants are credited to
the income statement as and when the relevant expenditure is incurred.
2.7.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense in the period in which
the services are received, unless those costs are required to be recognised as part of the cost of stock.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are
received.
Termination benefits are recognised immediately as an expense when the Group is demonstrably committed
to terminate the employment of an employee or to provide termination benefits.
2.8.
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
2.9.
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.
2.10. Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the profit and loss account because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the
reporting end date.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
56
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
2. Summary of Significant Accounting Policies (continued)
2.10. Taxation (continued)
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.
2.11. Exceptional Items
Exceptional items are those material items which, by virtue of their size or incidence, are presented
separately in the profit and loss account to enable a full understanding of the Group’s financial performance.
Transactions that may give rise to exceptional items include transactions relating to acquisitions and costs
relating to changes in share capital structure.
With respect to the impact of COVID-19, the furlough grant income received from the government has been
separately disclosed within the consolidated profit and loss account as exceptional, due to its incremental
nature. The direct furlough payroll costs are considered abnormal costs in the current year and consistent
with previous years, any direct payroll costs reflecting employee down time (abnormal production) is
expensed to the profit and loss account. Due to the COVID-19 pandemic and sites being closed across April
and May 2020, the quantum of direct employee down time in the current year is significant. The administrative
furlough payroll costs disclosed as exceptional are considered to be interdependent with the related
government grant income and while not being incremental or abnormal in nature, the government support
measures were key in protecting these jobs.
2.12. Property, Plant and Equipment
Tangible fixed assets are initially measured at cost and subsequently measured at cost net of depreciation
and any impairment losses. Depreciation is recognised so as to write off the cost of assets less their residual
values over their useful lives on the following bases:
Buildings
Plant and machinery
Fixtures, fittings & equipment
Motor vehicles
Right of use leased assets
Land is not depreciated.
- 2% and 5% straight line
- 2-5 years straight line
- 2-5 years straight line
- 4-5 years straight line
- over the lease term, straight line with no residual value
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds
and the carrying value of the asset and is credited or charged to the profit and loss account.
2.13.
Intangible Fixed Assets
Intangible assets comprise of market related assets (e.g. trademarks, imprints & brands) and goodwill on
acquisition.
Market Related Assets
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.
57
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
2. Summary of Significant Accounting Policies (continued)
2.13.
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.
2.14. 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.
2.15.
Impairment of fixed assets
At each reporting end date, the Group reviews the carrying amounts of its tangible fixed assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value-in-use. Any impairment loss and
reversal of losses are recognised in the profit and loss account.
2.16.
Inventories and work in progress
Property, including land held under development, acquired or being constructed for sale in the ordinary
course of business, rather than to be held for rental or capital appreciation, is held as stock and is measured
at the lower of cost and net realisable value.
Cost comprises 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.
58
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
2. Summary of Significant Accounting Policies (continued)
2.16.
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.
2.17. 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.
2.18. 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.
59
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
2. Summary of Significant Accounting Policies (continued)
2.18. 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 account. Expected credit losses are based on the difference between the contracted
cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate.
For trade receivables and, in the Parent Company, intercompany receivables, the Group applies a simplified
approach in calculating expected credit losses. The Group does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime expected credit losses at each reporting date.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire
or are settled, or when the Group transfers the financial asset and substantially all the risks and rewards of
ownership to another entity, or if some significant risks and rewards of ownership are retained but control of
the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third
party.
Financial liabilities
All of the Group’s financial liabilities 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.
2.19. 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.
2.20. 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.
2.21. 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.
60
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
2. Summary of Significant Accounting Policies (continued)
2.22.
Leases
Right of use assets are stated at the present value of the contractual payments due to the lessor over the
lease term. Right of use assets comprise the Group’s existing premises in Elgin, Larbert, Livingston and
Glasgow along with certain items of office equipment and motor vehicles.
Finance leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessees.
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.
The Group have elected not to recognise right of use assets and lease liabilities for short term and low value
assets. The lease payments associated with these leases are recognised as an expense on a straight-line
basis over the lease term.
2.23. 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.
2.24. 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:
61
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
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 £174,400k
(2019: £148,649k) 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 £174,400k (2019: £148,649k). 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 £nil (2019: £43,727k).
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 and services as reported in the profit and
loss account
Operating Income
Profit before interest and tax from JV
Finance income
2020
£000
98,924
43,435
2,088
2019
£000
143,260
42,906
4,638
144,447
190,804
3,151
852
320
384
584
416
148,770
192,188
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.
62
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
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
Net Exceptional items
Profit before tax
Taxation
Profit for the period
6. Operating profit
2020
£000
98,924
43,435
2,088
144,447
27,351
(16,520)
428
852
320
(2,273)
(422)
9,736
(2,093)
7,643
Operating profit is stated after charging / (crediting):
Depreciation of owned tangible fixed assets
Depreciation of tangible fixed assets held under finance leases
Depreciation of right of use assets
Gain on disposal of tangible fixed assets
Cost of inventories recognised as an expense
Exceptional items
Expenses relating to short term and low value leases
Notes
14
14
14
11
2020
£000
1,068
798
490
(71)
117,096
422
121
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
2019
£000
754
837
-
(270)
156,470
565
459
63
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
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
2020
£000
52
39
107
198
2019
£000
55
55
64
174
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
2020
437
273
710
2020
£000
26,526
557
3,389
1,227
31,699
2019
409
277
686
2019
£000
28,273
434
3,266
964
32,937
Full details of the Directors’ remuneration, for current Directors, is provided in the audited part of the Directors’
Remuneration Report on page 36.
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 £1,227k (2019:
£964k). Contributions totalling £154k (2019: £156k) were payable to the fund at the year-end and are included
in creditors.
64
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
9. Finance costs
Interest on bank overdrafts and loans
Interest on hire purchase contracts
Interest on right of use assets
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
2020
£000
1,561
76
138
498
2,273
2020
£000
1,929
101
2,030
61
2
63
2,093
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% (2019: 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
Other non reversing timing differences
Adjust deferred tax to closing average rate
Tax charge for period
11. Exceptional Items
Acquisition and other transaction related costs (1)
Wages costs for furloughed employees (2)
Grant furlough income (2)
2020
£000
9,736
1,850
30
15
101
5
2
(1)
102
(11)
2,093
2020
£000
81
3,064
3,145
(2,723)
422
2019
£000
1,202
113
-
196
1,511
2019
£000
3,117
(7)
3,110
16
(15)
1
3,111
2019
£000
15,969
3,034
(12)
107
(7)
4
(15)
(4)
-
4
3,111
2019
£000
565
-
565
-
565
(1)
(2)
Acquisition and other transactions related costs relate to the planning being achieved at Carlaverock which had previously been assessed as 98% likely –
see note 23 for further detail. This is a non-cash transaction. In the prior year acquisition and other related costs were the costs incurred relating to the work
undertaken for the acquisition of Walker Holdings (Scotland) Limited and its subsidiaries.
The £3,064k is the Company cost of all employees who were on furlough during the months of April and May 2020. The £2,723k is the furlough grant
income received from the UK government in relation to the furloughed employees for the months of April and May 2020.
65
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
12. Dividends
Total dividend payment
Weighted average number of ordinary shares in issue
Dividend per share (pence per share)
13. Earnings per share
2020
£000
3,083
96,349,561
3.20
2019
£000
3,757
96,333,642
3.90
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
2020 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
2020
£000
7,646
422
8,068
2019
£000
12,848
565
13,413
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
96,850,807
1,080,721
96,336,885
953,235
97,931,528
97,290,120
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)
7.89
7.81
8.33
8.24
13.34
13.21
13.92
13.79
(1) Underlying earnings is presented as an additional performance measure and is stated before exceptional items.
66
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
14. Property, Plant and Equipment
Land &
buildings
£000
Plant &
machinery
£000
Fixtures,
fittings &
equipment
£000
Motor
vehicle
£000
Cost
At 1 June 2018
Acquisition of Subsidiary
Additions
Disposals
At 31 May 2019
Additions
Disposals
At 31 May 2020
Accumulated depreciation
At 1 June 2018
Depreciation charge
Disposals
At 31 May 2019
Depreciation charge
Disposals
At 31 May 2020
Net book value
At 31 May 2020
At 31 May 2019
At 31 May 2018
681
2
-
-
683
288
-
971
52
21
-
73
22
-
95
876
610
629
6,586
160
1,655
(788)
7,613
785
(191)
8,207
2,992
1,331
(696)
3,627
1,606
(160)
5,073
3,134
3,986
3,594
800
35
250
(112)
973
166
(1)
1,138
678
142
(107)
713
185
-
898
240
260
122
Total
£000
8,769
197
1,977
(1,102)
9,841
1,252
(228)
10,865
4,277
1,591
(1,004)
4,864
1,866
(196)
6,534
702
-
72
(202)
572
13
(36)
549
555
97
(201)
451
53
(36)
468
81
4,331
121
147
4,977
4,492
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
2020
£000
3,332
171
3,503
2019
£000
2,198
78
2,276
Total depreciation charge for assets held under finance leases or hire purchase
1,065
837
Fixed assets with the carrying value of £3,503k (2019: £2,276k) are pledged as security.
Right of use Assets
Cost
At 1 June 2019
Depreciation
At 31 May 2020
Land &
buildings
£000
Plant &
machinery
£000
2,220
(357)
1,863
-
-
-
Fixtures,
fittings &
equipment
£000
29
(9)
20
Motor
vehicle
£000
252
(124)
128
Total
£000
2,501
(490)
2,011
67
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
15. Intangible fixed assets
Goodwill
Marketing-
related assets
Cost
At 1 June 2018
Additions
At 31 May 2019
Additions
Disposals
At 31 May 2020
Amortisation and impairment
At 1 June 2018 and 31 May 2019
Impairment
Disposals
At 31 May 2020
Net book value
At 31 May 2020
At 31 May 2019
At 31 May 2018
£000
-
1,049
1,049
8
-
1,057
-
8
-
8
1,049
1,049
-
£000
600
-
600
-
-
600
-
-
-
-
600
600
600
Total
£000
600
1,049
1,649
8
-
1,657
-
8
-
8
1,649
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 prior year acquisition of Walker Holdings (Scotland) Limited.
16. Fixed assets investments
Cost
Loans to joint ventures
Investment in joint ventures
2020
£000
-
202
202
Movement in fixed asset investments
Cost
At 1 June 2018
Additions
Share of profit after tax and dividends
At 1 June 2019
Additions
Share of loss after tax and dividends
Repayment of loan from joint venture
At 31 May 2020
Investment
in joint
venture
£000
254
-
420
674
-
(472)
-
202
Loans to joint
venture
£000
764
43
-
807
21
-
(828)
-
2019
£000
807
674
1,481
Total
£000
1,018
43
420
1,481
21
(472)
(828)
202
68
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
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
Dividend
(Loss) / profit after tax and dividends
Share of assets
Current assets
Share of liabilities
Liabilities due with one year
Liabilities due after one year or more
Share of net assets
17. Inventories and work in progress
Work in progress
2020
£000
852
(70)
(154)
(1,100)
(472)
2020
£000
2019
£000
584
(62)
(102)
-
420
2019
£000
419
2,331
(217)
-
202
(564)
(1,093)
674
2020
£000
174,400
174,400
2019
£000
148,649
148,649
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 £31,149k (2019: £41,006k) pledged as security.
2020
£000
4,186
4,186
2020
£000
712
712
2020
£000
1,682
(712)
970
2019
£000
10,003
10,003
2019
£000
477
477
2019
£000
1,538
(477)
1,061
69
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
18. Accounts receivable
Amounts falling due within one year
Trade receivables
Other receivables
Prepayments and accrued income
2020
£000
2,814
5,225
929
8,968
2019
£000
9,546
9,351
1,247
20,144
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 2020 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)
19. Accounts payable
Trade creditors
Other taxation and social security
Other creditors
Accruals and deferred income
2020
£000
415
4,484
203
5,102
2020
£000
3,427
2,574
668
14,112
20,781
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
2020
£000
14,593
14,593
2020
£000
89,536
89,536
2019
£000
548
141
214
903
2019
£000
23,413
1,083
1,612
17,589
43,697
2019
£000
23,455
23,455
2019
£000
74,773
74,773
Included within loans and receivables is a loan to a related party which is valued at amortised cost. £252k
(2019: £275k) has been recognised as interest received in the profit and loss account. A market rate of
interest has been charged (note 27).
The above amortised costs figures are deemed to be approximate to their fair values.
70
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
21. Borrowings
Secured borrowings:
Bank loans
Less: payable within one year
Payable after one year
2020
£000
69,000
69,000
18,000
51,000
2019
£000
31,000
31,000
-
31,000
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. The amount payable within one year relates to a Term loan which was drawn down
on 24 April 2020, attracts an interest rate of 2.5% above the Bank of England Base Rate and is repayable on
23 April 2021.
22. Obligations under hire purchase contracts and right of use leases
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. Right of use
leases are stated at the present value of the contractual payments due to the lessor over the lease term.
¤
2020
Hire
Purchase
Right
of use
Future minimum payments due:
Not later than one year
After one year but not more than five years
After five years
Less finance charges allocated to future periods
Present value of minimum lease payments is:
Not later than one year
After one year but not more than five years
After five years
£000
838
543
-
1,381
(80)
1,301
782
519
-
1,301
£000
531
1,240
963
2,734
(592)
2,142
406
922
814
2,142
23. Provisions
Deferred taxation
Deferred consideration
Deferred consideration
Acquisition of DHomes 2014 Holdings Limited (“Dawn”)
Acquisition of Walker Holdings (Scotland) Limited (“Walker”)
2019
Hire
Purchase
Right
of use
£000
1,079
642
-
1,721
(85)
1,636
1,012
624
-
1,636
£000
-
-
-
-
-
-
-
-
-
-
2020
£000
2,413
5,904
8,317
2020
£000
2,000
3,904
5,904
2019
£000
2,361
11,593
13,954
2019
£000
2,000
9,593
11,593
71
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
23. Provisions (continued)
Deferred consideration movement
Opening Balance
Additions on acquisition (discounted)
Deemed interest in year
Transfer to P&L – exceptional item
Payments made
Closing balance
2020
£000
11,593
-
338
81
(6,108)
5,904
2019
£000
2,000
9,403
190
-
-
11,593
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 was 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.
During the year (i) and (iii) were paid leaving £3,903,775 recognised as a provision at the year end
representing the discounted values of (ii) and (iv).
Deferred Taxation
Fixed assets –
temporary
differences
Other
temporary
differences
Prior year
adjustment
–
2018 Profit and
Loss
Account
£000
7
£000
61
On
Acquisition
£000
-
2019
£000
68
Profit and
Loss
Account
£000
-
333
(6)
1,752
2,079
-
394
-
1
-
-
1,752
2,147
Deferred tax liability
Deferred tax assets (note 18)
61
2
63
2020
£000
2,413
(203)
2,210
2020
£000
68
2,140
2
2,210
2019
£000
2,361
(214)
2,147
72
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
24. Share capital
The Company has one class of ordinary share which carry full voting rights but no right to fixed income or
repayment of capital.
The share capital account records the nominal value of shares issued.
The share premium account records the amount above the nominal value received for shares sold, less
transaction costs.
Ordinary shares of 0.125p - allotted, called up
and fully paid
At 1 June 2019
Share issue
At 31 May 2020
Number of shares
Share capital
£000
96,349,561
1,511,402
97,860,963
120
2
122
Share
premium
£000
50,118
2,212
52,330
During the year 30,660 shares (2019: 15,919) were issued in satisfaction of share options exercised.
On 31 January 2020, 1,480,742 shares (2019: nil) were issued to satisfy the first anniversary payment for
Walker Holdings (Scotland) Limited as detailed in note 23.
Share based payments
During the year the Group operated four 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.
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, ESOP and Performance Share Plan (“PSP”) scheme. The PSP was introduced
during the year and under which key executives could be granted conditional “whole share” awards (i.e. rights
to acquire shares where the individual is required to pay a zero or negligible exercise price) the vesting of
which is normally conditional on both continued employment and the satisfaction of specified performance
measures.
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.
73
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
24. Share Capital (continued)
Savings Related Share Option Scheme
CSOP
2020
2019
Number of
shares
Weighted
average
exercise
price (pence)
Number of
shares
Weighted
average
exercise price
(pence)
1,215,406
95,930
(71,225)
1,240,111
112.29
108.50
112.98
111.95
1,033,382
182,024
-
1,215,406
110.59
121.94
-
112.29
Options at the beginning of the
year
Granted during the year
Lapsed during the year
Options at the year end
Share Option
CSOP – 16th October 2017
CSOP – 8th December 2017
CSOP – 15th January 2018
CSOP – 3rd May 2018
CSOP – 16th May 2018
CSOP – 1st October 2018
CSOP - 4th September 2019
Grant Price
(p)
106.00
111.00
110.50
134.00
134.00
122.50
108.50
Number of
shares at year
end
780,554
27,027
27,149
22,388
132,396
154,667
95,930
Exercise price
(p)
Vesting
Period
106.00
111.00
110.50
134.00
134.00
122.50
108.50
3
3
3
5
5
5
5
2020
ESOP
Number
of shares
Options at the start of the year
Granted during the year
Lapsed during the year
Options at the year end
2,271,757
-
(104,730)
2,167,027
Share Option
ESOP – 16th October 2017
ESOP – 15th January 2018
ESOP – 3rd May 2018
ESOP – 16th May 2018
ESOP – 1st October 2018
Grant Price
(p)
106.00
110.50
134.00
134.00
122.50
Weighted
average
exercise
price (pence)
119.29
-
120.51
119.23
Number of
shares at year
end
491,735
1,810
72,761
18,322
1,582,399
Number of
shares
2019
Weighted
average
exercise price
(pence)
596,524
1,675,233
-
2,271,757
Exercise price
(p)
106.00
110.50
134.00
134.00
122.50
110.29
122.49
-
119.29
Vesting
Period
5
5
7
7
7
74
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
24. Share Capital (continued)
SAYE
Options at the start of the year
Lapsed during the year
Exercised during the year
Options at the year end
Share Option
2020
Number
of shares
2,717,824
(250,365)
(30,660)
2,436,799
Weighted
average
exercise
price (pence)
84.80
84.80
84.80
84.80
2019
Number of
shares
3,030,643
(296,900)
(15,919)
2,717,824
Weighted
average
exercise price
(pence)
84.80
84.80
84.80
84.80
SAYE – 16th October 2017
112.00
Grant Price
(p)
Number of
shares at year
end
2,436,799
Exercise price
(p)
Vesting
Period
84.80
3
2020
PSP
Granted during the year
Options at the year end
Share Option
Number
of shares
376,936
376,936
Grant Price
(p)
PSP – 9th January 2020
0.13
Inputs used to determine fair value of options
Weighted
average
exercise price
(pence)
0.13
0.13
Number of
shares at year
end
376,936
Exercise price
(p)
Vesting
Period
0.13
3
Expected volatility
Risk free interest rate
Expected dividends
Fair value of options
Charge per option
CSOP
ESOP
29.00%
0.49%
-
34.00p
32.00p
29.00%
0.49%
-
39.00p
37.00p
SAYE
29.00%
0.49%
-
37.00p
35.00p
PSP
7.50%
-1.18%
5.00%
131.13p
131.13p
Expected volatility was calculated using historical share price information of the house-building sector for the
CSOP and ESOP and the 12 month average Springfield share price prior to the grant of the PSP options.
CSOP and ESOP - no shares have vested in the year and none can be exercised at the year-end.
SAYE – 30,660 (2019: 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 £557k (2019: £434k), all of which
related to equity-settled share-based payment transactions.
75
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
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
2020
£000
1,522
1,522
2019
£000
3,062
3,062
At 31 May 2020, the Group had available £16,000k (2019: £36,000k) 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.
27.2. Interest 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
2020
£000
3,443
69,000
17,093
89,536
2019
£000
1,636
31,000
42,137
74,773
76
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
27. Financial risk management (continued)
27.2. 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 2020
Interest rate
–0.5%
£000
345
Interest rate
+0.5%
£000
(345)
Bank of England base rate
31 May 2019
Interest rate
–0.5%
£000
155
Interest rate
+0.5%
£000
(155)
(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
2020.
77
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
27. Financial risk management (continued)
27.3.
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.
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 2020
Accounts payable
Borrowings
Hire purchase &
Right of use
31 May 2019
Accounts payable
Borrowings
Hire purchase
27.4
Credit risk
Carrying
amount
£000
17,093
69,000
3,443
89,536
Total minimum
future
payment
£000
17,093
69,000
Within
1 year
£000
17,093
18,000
Within 1-2
years
£000
-
51,000
Within 2-5
years
£000
-
-
Greater
than
5 years
£000
-
-
4,115
90,208
1,369
36,462
828
51,828
954
954
964
964
Carrying
amount
£000
42,137
31,000
1,636
74,773
Total minimum
future payment Within 1 year
£000
42,137
-
1,079
43,216
£000
42,137
31,000
1,721
74,858
Within 1-2
years
£000
-
-
549
549
Within 2-5
years
£000
-
31,000
93
31,093
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.
78
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
27. Financial risk management (continued)
27.4. Credit Risk (continued)
The Group manages credit risk actively monitoring their level of trade receivables and following up when they
are overdue more than three months. The ageing profile of trade receivables was:
Current
Overdue 90 days
31 May 2020
31 May 2019
Total book
value
£000
2,686
128
2,814
Allowance for
impairment
£000
-
-
-
Total book
value
£000
9,435
111
9,546
Allowance for
impairment
£000
-
-
-
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 2020
31 May 2019
Total book
value
£000
10,125
-
10,125
Allowance for
impairment
£000
-
-
-
Total book
value
£000
9,351
-
9,351
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 £1,446k (2019: £1,759k) 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 Colin Rae
Mr Nick Cooper
The remuneration of Key Management Personnel was £1,465k (2019: £1,825k).
2020
£000
1,402
38
2
1
2
1
-
1,446
2019
£000
1,708
46
2
2
1
-
-
1,759
79
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
28. Transactions with related parties (continued)
During the year the Group entered into the following transactions with related parties:
Bertha Park Limited (1)
DHHG 1 Limited (2)
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
2020
£000
14,911
2,519
1,249
32
5
18,716
2019
£000
15,821
5,756
191
19
806
22,593
Purchase of goods
2019
£000
-
-
2020
£000
-
-
232
-
-
232
11
-
287
298
Sales to related parties represent those undertaken in the ordinary course of business.
Rent paid
Entities which key management personnel have
control, significant influence or hold a material
interest in
Key management personnel
Other related parties
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 (2)
Other entities which key management personnel have control, significant
influence or hold a material interest in (short-term)
Other related parties
2020
£000
153
3
104
260
2020
£000
260
260
2020
£000
6,755
26
3
-
6,784
2019
£000
184
5
132
321
2019
£000
188
188
2019
£000
9,152
564
97
37
9,850
80
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
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
2020
£000
2019
£000
15
283
-
298
-
770
46
816
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 £14,911k (2019: £15,821k) in relation to a build contract. At
the year-end £2,411k (2019: £4,389k) is included in trade debtors and included within other debtors is a loan
of £4,344k (2019: £4,763k) at the year-end.
(2) 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 £2,519k (2019: £5,756k) in relation to a
build contract and management fees. At the year-end £26k (2019: £564k) 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 £4,360k (2019: £4,436k).
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. During the year (i) and (iii) were paid leaving £3,903,775 as a
provision at the year end (see note 23), the remaining £100,000 has been treated as a contingent liability
due to the uncertainty over the future payments.
81
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR TO 31 MAY 2020
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
2020
£000
-
1,550
2019
£000
517
2,725
30. Analysis of Net Debt
The Analysis of net debt is as follows:
Cash in hand and bank
Finance lease
Bank borrowings
Right of use lease liability
Net Debt
Reconciliation of net cashflow to movement in net debt is as follows:
Net debt’ as previously reported
Implementation of IFRS16
Net debt at beginning of year, as adjusted
Decrease in cash in the year
Increase in bank borrowings
New finance leases
Repayment of lease liabilities
Other non-cash movements
Net Debt
31. Post Balance Sheet Events
2020
£000
1,522
(1,301)
(69,000)
(68,779)
(2,142)
(70,921)
2020
£000
(29,574)
(2,501)
(32,075)
(1,540)
(38,000)
(699)
1,531
(138)
(70,921)
2019
£000
3,062
(1,636)
(31,000)
(29,574)
-
(29,574)
2019
£000
(15,258)
-
(15,258)
(8,953)
(6,000)
(428)
1,065
-
(29,574)
On 1 June 2020, the remaining shares in DHHG 1 Limited were purchased for consideration of £264,502.
82
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
AS AT 31 MAY 2020
Non-current assets
Property, plant and equipment
Right of use assets
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 borrowings
Short-term obligations under finance lease
Lease liabilities
Corporation tax
Non-current liabilities
Long-term borrowings
Long-term obligations under finance lease
Lease liabilities
Provision
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Total equity
Note
1
1
2
3
5
4
5
12
6
8
9
9
8
9
9
10
11
11
2020
£000
2,669
1,497
600
54,467
4,608
63,841
99,194
14,791
794
114,779
2019
£000
3,262
-
600
54,431
196
58,489
78,960
21,639
1,165
101,764
178,620
160,253
19,666
18,000
245
241
361
38,513
51,000
-
1,347
5,904
58,251
96,764
81,856
122
52,330
29,404
34,302
-
493
-
890
35,685
31,000
183
-
11,593
42,776
78,461
81,792
120
50,118
31,554
81,856
81,792
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 £376,430 (2019: profit of £6,806,761).
These financial statements were approved by the Board of Directors on 28 September 2020.
Signed on behalf of the Board by:
Sandy Adam
Executive Chairman
28 September 2020
Company number: SC031286
Company accounting policies are in line with Group – See Group note 2. The accompanying notes on pages
86 to 99 form an integral part of these financial statements
83
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MAY 2020
Share
capital
£000
Share
premium
£000
Retained
earnings
£000
Notes
1 June 2018
Issue of share capital
Total comprehensive income
for the year
Dividends paid
Share options reserve
31 May 2019
Issue of share capital
Total comprehensive income
for the year
Dividends paid
Share options reserve
31 May 2020
11
120
-
-
-
-
120
2
-
-
-
122
50,105
13
-
-
-
50,118
2,212
-
-
-
52,330
28,070
-
6,807
(3,757)
434
31,554
-
376
(3,083)
557
29,404
Total
£000
78,295
13
6,807
(3,757)
434
81,792
2,214
376
(3,083)
557
81,856
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 86 to 99 form an integral part of these financial statements.
84
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CASH FLOWS
YEAR TO 31 MAY 2020
Cash flows generated from 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 – cash movement
Depreciation and impairment of tangible fixed assets
Share option employment costs
Cost of sales – non cash movement
Operating cash flows before movements in working capital
Increase in inventory
Decrease/(increase) in accounts and other receivables
(Decrease)/increase in accounts and other payables
Net cash (used in)/generated from operations
Income taxes paid
Net cash (outflow)/inflow from operating activities
Investing activities
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
Proceeds from bank loans
Repayment of bank loans
Payment of finance leases obligations
Dividends paid
Interest paid
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Note
1
11
1
10
11
15
15
15
Cash and cash equivalents at end of year
12
2020
£000
719
289
2,116
(273)
-
(262)
1,306
557
550
5,002
(20,125)
5,407
(18,039)
(27,755)
(891)
(28,646)
(446)
1
(4,000)
-
33
(4,412)
26
38,000
-
(714)
(3,083)
(1,542)
32,687
(371)
1,165
794
Company accounting policies are in line with Group – See Group note 2
The accompanying notes on pages 86 to 99 form an integral part of these financial statements.
2019
£000
7,372
1,704
1,168
(297)
(122)
(565)
909
434
350
10,953
(2,869)
(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
85
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
1. Property, Plant and Equipment
Land and
buildings
£000
Plant and
machinery
£000
Fixtures,
fittings &
equipment
£000
Cost
At 1 June 2018
Additions
Disposals
At 31 May 2019
Additions
Disposals
At 31 May 2020
Accumulated depreciation
At 1 June 2018
Depreciation charge
Disposals
At 31 May 2019
Depreciation charge
Disposals
At 31 May 2020
Net book value
At 31 May 2020
At 31 May 2019
At 31 May 2018
681
-
-
681
288
-
969
52
21
-
73
21
-
94
875
608
629
3,455
1,138
(463)
4,130
1
-
4,131
1,314
755
(372)
1,697
855
-
2,552
1,579
2,433
2,141
Total
£000
4,936
1,374
(559)
5,751
446
(1)
800
236
(96)
940
157
(1)
1,096
6,196
678
133
(92)
719
162
-
881
215
221
122
2,044
909
(464)
2,489
1,038
-
3,527
2,669
3,262
2,892
The net book value of tangible fixed assets held under finance leases at 31 May 2020 is £1,935k (2019:
£971k). Depreciation charge on tangible fixed assets held under finance leases was £266k (2019: £422k)
Leases – Right of use assets
Cost
At 1 June 2019
Depreciation
At 31 May 2020
Land and
buildings
£000
Plant and
machinery
£000
Fixtures,
fittings &
equipment
£000
1,736
(259)
1,477
-
-
-
29
(9)
20
Total
£000
1,765
(268)
1,497
86
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
2.
Intangible fixed assets
Cost
1 June 2018
Additions
At 31 May 2019 and 31 May 2020
Amortisation and impairment
At 1 June 2018 and 31 May 2019
Impairment
At 31 May 2020
Net book value
At 31 May 2020
At 31 May 2019
Marketing-related assets
£000
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
2020
£000
2019
£000
91,467
91,431
(37,000)
(37,000)
54,467
54,431
During the year the Company purchased the remaining 4% share capital of Glassgreen Hire Limited for
consideration of £36,000.
Impairment is as a result of a £37,000k dividend from Walker Holdings (Scotland) Limited the month after the
acquisition.
87
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
3. Fixed asset investments (continued)
Movement in fixed asset investments
Cost
At 1 June 2018
Additions
At 31 May 2019
Additions
At 31 May 2020
Provisions for impairment
At 1 June 2018
Impairment
At 31 May 2019
Impairment
At 31 May 2020
Net Book Value
At 31 May 2020
At 31 May 2019
At 31 May 2018
Share in
Group
undertakings
£000
19,627
71,804
91,431
36
91,467
-
(37,000)
(37,000)
-
(37,000)
Total
£000
19,627
71,804
91,431
-
91,431
-
(37,000)
(37,000)
-
(37,000)
54,467
54,467
54,431
54,431
19,627
19,627
88
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
3. Fixed asset investments (continued)
Details of the Company’s subsidiaries and jointly owned entities at 31 May 2020 are as follows:
Name of Undertaking
Nature of Business
Class of
Shares Held
% Held
Glassgreen Hire Limited
Hire of plant and machinery
Ordinary
100%
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
All of the above have a registered office address of:
Alexander Fleming House 8 Southfield Drive Elgin IV30 6GR
89
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
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 to construction
contracts
Retentions held by customers for contract work
Advances received from customers for contract
work
Included within inventories is £16,435k (2019: £23,224k) 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
2020
£000
99,194
99,194
2019
£000
78,960
78,960
2020
£000
4,186
4,186
2020
£000
212
212
2020
£000
1,682
(212)
1,470
2019
£000
9,993
9,993
2019
£000
149
149
2019
£000
1,528
(149)
1,379
2020
£000
2,708
4,771
6,779
533
14,791
2019
£000
8,721
8,814
3,422
682
21,639
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 2020 is represented by the carrying amount of each financial asset.
90
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
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
2020
£000
4,484
124
4,608
2020
£000
2,167
1,836
195
5,774
9,694
19,666
2019
£000
140
56
196
2019
£000
15,994
811
222
7,996
9,279
34,302
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
2020
£000
23,879
23,879
2020
£000
88,451
88,451
2019
£000
22,262
22,262
2019
£000
65,017
65,017
Included within loans and receivables is a loan to a related party which is valued at amortised cost. £252k
(2019: £275k) 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
2020
£000
69,000
69,000
(18,000)
51,000
2019
£000
31,000
31,000
-
31,000
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. The amount payable within one year relates to a Term loan which was drawn
down on 24 April 2020, attracts an interest rate of 2.5% above the Bank of England Base Rate and is
repayable on 23 April 2021.
91
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
9.
Obligations under hire purchase contracts and right of use leases
Finance lease and hire purchase payments represent rentals payable by the Company for certain items of
plant and machinery and buildings 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. Right of use leases are stated at the present value of the contractual payments due to the lessor
over the lease term.
¤
2020
Hire
Purchase
Right
of use
Future minimum payments due:
Not later than one year
After one year but not more than five years
After five years
Less finance charges allocated to future periods
Present value of minimum lease payments is:
Not later than one year
After one year but not more than five years
After five years
£000
259
-
-
259
(14)
245
245
-
-
245
£000
333
882
849
2,064
(476)
1,588
241
629
718
1,588
10.
Provisions
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
Transfer to P&L
Payments made
Closing balance
2019
Hire
Purchase
Right
of use
£000
523
186
-
709
(33)
676
493
183
-
676
£000
-
-
-
-
-
-
-
-
-
-
2020
£000
5,904
5,904
2020
£000
2,000
3,904
5,904
2020
£000
11,593
-
338
81
(6,108)
5,904
2019
£000
11,593
11,593
2019
£000
2,000
9,593
11,593
2019
£000
2,000
9,403
-
190
-
11,593
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 was 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. During the year (i) and (iii) were paid leaving £3,903,775
recognised as a provision at the year end representing the discounted values of (ii) and (iv).
92
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
10.
Provisions (continued)
Deferred Taxation
Fixed assets –
differences
Other
differences
–
temporary
temporary
Deferred tax assets (note 5)
11.
Share Capital
2018
£000
Profit &
Loss
Account
£000
61
(7)
54
32
(142)
(110)
2019
£000
93
(149)
(56)
Profit &
Loss
Account
£000
-
(68)
(68)
2020
£000
(124)
(124)
2020
£000
93
(217)
(124)
2019
£000
(56)
(56)
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 0.125p - allotted, called up
and fully paid
Number of
shares
Share capital
£000
Share premium
£000
At 1 June 2019
Share issue
At 31 May 2020
96,349,561
1,511,402
97,860,963
120
2
122
50,118
2,212
52,330
During the year 30,660 shares (2019: 15,919) were issued in satisfaction of share options exercised.
On 31 January 2020, 1,480,742 shares (2019: nil) were issued to satisfy the first anniversary payment for
Walker Holdings (Scotland) Limited as detailed in note 10.
Share based payments
During the year the Company operated four 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, ESOP and Performance Share Plan (“PSP”) scheme. The PSP was introduced
during the year and under which key executives could be granted conditional “whole share” awards (i.e. rights
to acquire shares where the individual is required to pay a zero or negligible exercise price) the vesting of
which is normally conditional on both continued employment and the satisfaction of specified performance
measures.
93
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
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 of the CSOP and ESOP.
Savings Related Share Option Scheme
CSOP
Number
of shares
1,215,406
95,930
(71,225)
1,240,111
2020
Weighted
average
exercise price
(pence)
Number
of shares
2019
Weighted
average
exercise price
(pence)
112.29
108.5
112.98
111.95
1,033,382
182,024
-
1,215,406
110.59
121.94
-
112.29
Options at the beginning of the
year
Granted during the year
Lapsed during the year
Options at the year end
Share Option
CSOP – 16th October 2017
CSOP – 8th December 2017
CSOP – 15th January 2018
CSOP – 3rd May 2018
CSOP – 16th May 2018
CSOP – 1st October 2018
CSOP – 4th September 2019
Grant Price
(p)
106.00
111.00
110.50
134.00
134.00
122.50
108.50
Number of
shares at year
end
780,554
27,027
27,149
22,388
132,396
154,667
95,930
Exercise price
(p)
Vesting
Period
106.00
111.00
110.50
134.00
134.00
122.50
108.50
3
3
3
5
5
5
5
ESOP
Options at the beginning of the
year
Granted during the year
Lapsed during the year
Options at the year end
Number
of shares
2,271,757
-
(104,730)
2,167,027
2020
Weighted
average
exercise price
(pence)
Number
of shares
2019
Weighted
average
exercise price
(pence)
119.29
-
120.51
119.23
596,524
1,675,233
-
2,271,757
110.29
122.49
-
119.29
94
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
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
SAYE
Grant Price
(p)
106.00
110.50
134.00
134.00
122.50
Number of
shares at year
end
491,735
1,810
72,761
18,322
1,582,399
Exercise price
(p)
Vesting
Period
106.00
110.50
134.00
134.00
122.50
5
5
7
7
7
2020
2019
Number
of shares
Weighted
average
exercise price
(pence)
Number
of shares
Weighted
average
exercise price
(pence)
Options at the beginning of
the year
Lapsed during the year
Exercised during the year
Options at the year end
Share Option
2,717,824
(250,365)
(30,660)
2,436,799
Grant Price
(p)
SAYE – 16th October 2017
112.00
84.80
84.80
84.80
84.80
3,030,643
(296,900)
(15,919)
2,717,824
84.80
84.80
84.80
84.80
Number of
shares at year
end
2,436,799
Exercise price
(p)
Vesting
Period
84.80
3
PSP
2020
Granted during the year
Options at the year end
Share Option
Number
of shares
376,936
376,936
Grant Price
(p)
PSP – 9th January 2020
0.13
Inputs used to determine fair value of options
Weighted
average
exercise price
(pence)
0.13
0.13
Number of
shares at year
end
376,936
Exercise price
(p)
Vesting
Period
0.13
3
Expected volatility
Risk free interest rate
Expected dividends
Fair value of options
Charge per option
CSOP
ESOP
29.00%
0.49%
-
34.00p
32.00p
29.00%
0.49%
-
39.00p
37.00p
SAYE
29.00%
0.49%
-
37.00p
35.00p
PSP
7.50%
-1.18%
5.00%
131.13p
131.13p
95
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
11.
Share Capital (continued)
Savings Related Share Option Scheme (continued)
Expected volatility was calculated using historical share price information of the house-building sector for the
CSOP and ESOP and the 12 month average Springfield share price prior to the grant of the PSP options.
CSOP and ESOP - no shares have vested in the year and none can be exercised at the year-end.
SAYE - 30,660 (2019: 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 £557k (2019: £434k), 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
2020
£000
794
794
2019
£000
1,165
1,165
At 31 May 2020, the Company had available £16,000k (2019: £36,000k) 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.
96
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
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
2020
£000
1,833
69,000
17,618
88,451
2019
£000
676
31,000
33,341
65,017
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 2020
Bank of England base rate
31 May 2019
Interest rate
+0.5%
£000
(345)
Interest rate –
0.5%
£000
345
Interest rate
+0.5%
£000
(155)
Interest rate –
0.5%
£000
155
(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
2020.
97
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
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 2020
Accounts
payable
Borrowings
Hire purchase
& right of use
31 May 2019
Accounts
payable
Borrowings
Hire purchase
14.3 Credit risk
Carrying
amount
£000
Total minimum
future payment
£000
Within 1
year
£000
Within 1-2
years
£000
Within 2-5
years
£000
17,618
69,000
1,833
88,451
17,618
69,000
2,323
88,941
17,618
18,000
592
36,210
-
51,000
313
51,313
-
-
569
569
Greater
than 5
years
£000
-
-
849
849
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
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 three months.
98
SPRINGFIELD PROPERTIES PLC
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MAY 2020
14.
Financial risk management (continued)
14.3 Credit risk (continued)
The ageing profile of trade receivables was:
Current
Overdue 90 days
31 May 2020
31 May 2019
Total book
value
£000
2,595
113
2,708
Allowance for
impairment
£000
-
-
-
Total book
value
£000
8,632
89
8,721
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 2020
31 May 2019
Total book
value
£000
9,114
-
9,114
Allowance for
impairment
£000
-
-
-
Total book
value
£000
8,814
-
8,814
Allowance for
impairment
£000
-
-
-
During the year the Company had no allowance for impairment for other receivables.
15.
Analysis of Net Debt
The Analysis of net debt is as follows:
Cash in hand and bank
Finance lease
Bank borrowings
Right of use lease liability
Net Debt
Reconciliation of net cashflow to movement in net debt is as follows:
Net debt’ as previously reported
Implementation of IFRS16
Net debt at beginning of year, as adjusted
Decrease in cash in the year
Increase in bank borrowings
Repayment of lease liabilities
Other non-cash movements
Net Debt
2020
£000
794
(245)
(69,000)
(68,451)
(1,588)
(70,039)
2020
£000
(30,511)
(1,765)
(32,276)
(371)
(38,000)
714
(106)
(70,039)
2019
£000
1,165
(676)
(31,000)
(30,511)
-
(30,511)
2019
£000
(7,726)
-
(7,726)
(7,340)
(16,000)
555
-
(30,511)
99