SPRINGFIELD Properties began trading on the stock exchange this morning after raising £25 million in an initial public offering (IPO).
The Elgin-based business placed 23.5 million shares at 106p ahead of the launch on the alternative investment market (AIM), giving it a market value of £87m, with current shareholders retaining 70 per cent of the stock.
Sandy Adam, executive chairman of Springfield, said: “The level of support shown by our new investors on our admission to AIM is gratifying. It is a real endorsement of the work our employees have put into building a strong and growing business.”
Springfield revealed its plans to float on September 11, one month after announcing it had broken through the £100m turnover mark and made a £6.7m profit as it completed 620 homes.
Mr Adam said investment funds in both London and Edinburgh had bought shares, confident in the company’s vision of “playing a significant part in the delivery of the many new homes needed across Scotland”.
Scotland has a target of delivering 50,000 affordable homes by 2021, but in 2016 just 16,498 new homes were built, with planning delays cited as one of the main reasons for completions being 34 per cent below pre-recession levels.
Springfield is currently working on five “villages” which will provide 10,000 new homes. The IPO funds will be used in part to develop these villages.
Mr Adam said the company had looked at a private equity sale and raising bank debt, but the IPO suited the company best.
“Bank financing, I’m uncomfortable taking on too much debt,” said Mr Adam. “I’m very cautious about that. On the private equity side, it can cause more of a conflict in the company. It’s quite expensive money, so when we looked at the flotation it was more attractive. It increases the size of the company, we have the same amount of capital tied up, but it’s a bigger company now so it works well for us, and investors can share in the future growth of the company.”
Springfield Properties was established in 1956 by Mr Adam’s grandfather. The group’s business model focusses on securing land for residential use which often requires considerable remediation works and significant investment in infrastructure prior to commencing development.
The group has a land bank of more than 10,000 plots, with a gross development value of £1.8 billion, of which 41.4 per cent had planning permission as of August 31, equating to approximately 17 years of development at current levels of activity.
“Now we’ve secured financing the future is rosy job-wise. It underpins the 500 [current] jobs and it means we’re able to expand and take on more people,” said Mr Adam.
He said there were “no difficulties” in finding skilled labour.
“The flotation means employees will get the opportunity to share in the growth of the company through option schemes," he added.
An initiative to allow staff to invest in the firm has been live for more than five years, with 75 existing employee shareholders.
Springfield has set aside 1.3m shares for employee option schemes.
Mr Adam said the company had no current plans to build south of the Border, but “any business takes opportunities when they come along.”
The company’s board consists of Mr Adam; Innes Smith, chief executive; Michelle Motion, finance director; and two non-executive directors in former RBS executive Roger Edey, who has been on the board ten years, and Rettie & Co partner Matthew Benson.
Mr Adam said the company was looking for a third non-executive director.
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