Springfield Properties (AIM: SPR), a leading housebuilder in Scotland delivering private, affordable and PRS housing, is pleased to announce that it has entered an agreement to acquire the Scottish housebuilding business of Mactaggart & Mickel Group Ltd (“Mactaggart & Mickel”), which has been delivering high-quality housing across the Central Belt of Scotland for almost 100 years. The total consideration is £46.3m, comprising £10.5m cash paid on completion and a deferred cash consideration of £35.8m to be paid proportionally as homes are sold over the next five years (the “Acquisition”). The Acquisition will be funded from Springfield’s internal resources and existing debt facilities with Bank of Scotland.
Under the terms of the Acquisition, the Group has acquired six live private and affordable sites with work in progress with a fair value of approximately £15m and fixed assets. The Group has also acquired a brand licence to build homes as Mactaggart & Mickel on a further 11 private and affordable sites, which will transfer to Springfield as homes are sold in line with the payments of the deferred consideration. The total 17 sites, of which 16 have planning permission and equating to the delivery of c. 700 homes, have a gross development value of c. £230m. The Group expects to generate gross margins on these sites materially in line with margins delivered by the rest of the Group. Springfield intends to retain all of Mactaggart & Mickel’s housebuilding business employees.
The Acquisition also includes Timber Systems, a timber frame factory near Glasgow. The Group already constructs 90% of its homes from timber kits and the addition of a second timber frame factory will secure kit supply and increase capacity for future growth while further reducing its carbon footprint. Springfield will retain all of Timber Systems’ employees.
In addition, Springfield and Mactaggart & Mickel have established a strategic alliance with an agreement that gives Springfield opportunities for future acquisitions of sites from Mactaggart & Mickel’s remaining land bank of approximately 2,300 acres across Scotland.
The housebuilding business of Mactaggart & Mickel is a premium brand housebuilder primarily targeting the larger private home market. The land bank is in highly desirable locations within the Central Belt of Scotland, expanding the Group’s footprint in areas with a higher price point.
The payment of the deferred cash consideration is subject to an annual minimum payment of £7.7m from the second year following completion. Each annual minimum payment will be reduced by any excess deferred consideration paid by the Group over the annual minimum payment in the prior year. The Group has the option to defer any year’s minimum payment by 12 months.
The consideration for the Acquisition will initially be satisfied from the Group’s existing cash and debt facilities and the deferred consideration will be paid proportionally as homes are completed. It will also partly utilise the Group’s existing uncommitted land purchase budget for the next five years.
The Acquisition is expected to be earnings enhancing in the current year to 31 May 2023. For the year to 31 May 2022, the Group expects to report results in line with market expectations, with good revenue growth and a better-than-expected reduction in net debt to c. £39.0m at year end (30 November 2021: £43.0m). Further details will be provided in the Group’s full year results announcement, which is expected to be published in September 2022.
Innes Smith, Chief Executive Officer of Springfield Properties, commented: “We are very pleased to welcome Mactaggart & Mickel’s Scottish housebuilding business into the Springfield Group. As well as bringing another premium brand into the Group, this acquisition gives us land, with planning permission, in areas of significant demand. The structure of the acquisition – with the majority of the payment to be made as homes are completed – de-risks the deal and creates an effective and efficient means of acquiring land.
“The addition of a timber frame facility in the Central Belt, alongside our existing facility in Elgin, secures our supply of timber kits and provides further capacity to support our next stage of growth. It will also reduce our carbon footprint by enabling local manufacture of all kits.
“We welcome our new colleagues to the Group and look forward to working together to continue delivering high-quality homes across Scotland.”
Paul McAninch, Group Finance Director of Mactaggart & Mickel, added: “We welcome this agreement with Springfield, which we believe provides a strong platform for growth for both parties.
“Our company has had a proud tradition as a leading housebuilder in Scotland, which is built on the work of its dedicated teams.
“This tradition will continue, and I’m pleased that there will be continuity of employment as a result of this agreement. I’d like to thank all our staff for their dedication over the years as we look to our second century as a successful business. I’d also like to wish transferring colleagues every success for their future.”
|Sandy Adam, Chairman Innes Smith, Chief Executive Officer||+44 1343 552550|
|Singer Capital Markets|
|Shaun Dobson, Rachel Hayes, James Moat (Investment Banking)||+44 20 7496 3000|
|Harry Chathli, Claire Norbury||+44 20 7618 9100|
Background to, and rationale for, the Acquisition
Mactaggart & Mickel is a family-owned, award-winning group of companies operating in the UK construction industry. Established as a housebuilding company in Scotland in 1925, and following diversification, comprised seven divisions: Homes, which operated predominantly in Scotland; Timber Systems; Investments; Strategic Land; Commercial Property; Private Rental Sector (Lettings); and Contracts. Springfield has agreed to acquire the majority of what constituted Mactaggart & Mickel’s Homes and Timber Systems divisions.
The housebuilding business of Mactaggart & Mickel is a premium brand housebuilder primarily targeting the three- to five-bedroom private home market in highly desirable locations within the Central Belt of Scotland. The Acquisition complements Springfield’s previous acquisitions of Dawn Homes, Walker Group and Tulloch Homes, enhancing the Group’s presence across Scotland, whilst expanding its footprint into areas with a higher price point.
The Acquisition is in line with Springfield’s stated growth strategy. It partly utilises the Group’s existing budget for land purchases for the next five years and therefore supports the Group’s existing forecasts and enhances visibility for future years. The Group will benefit from expanding its land bank through one transaction rather than multiple individual purchases. In addition, the Group has potential upside from a strategic alliance regarding possible purchases of further sites from Mactaggart & Mickel’s remaining land bank of approximately 800 acres of freehold land and 1,500 acres of option land across central Scotland (the “Strategic Land Bank”).
For over twenty years, Springfield has utilised its own off-site timber frame factory in Elgin, north Scotland, and uses timber frame construction in 90% of its homes. As part of the Acquisition, the Group has acquired an additional timber frame factory outside Glasgow, in the heart of the Central Belt of Scotland. This will enable all of the Group’s timber frames to be manufactured off-site at the Group’s own factories, thereby increasing surety of timber kit supply, increasing capacity for future growth and reducing the Group’s carbon footprint as it will no longer be transporting timber frames from the Elgin factory to the Central Belt.
Mactaggart & Mickel’s housebuilding business will continue to operate from Glasgow, with its three directors – Peter Shepherd, Joanne Casey and Marion Forbes – reporting into Martin Egan, Springfield’s Chief Operating Officer.
The Mactaggart & Mickel housebuilding business is an excellent cultural fit with the Group as another well-respected brand that strongly promotes an ethos of looking after customers and building quality homes. Joanne Casey is an industry member of the New Homes Quality Board, which is developing a new Code and framework for quality and consumer protection that housebuilders must follow across the UK from 2023. Mactaggart & Mickel achieves consistently outstanding levels of customer satisfaction, and has been awarded a 5 star rating in the Home Builders Federation annual survey for 10 consecutive years. Regularly receiving recognition for its developments from industry awards, Mactaggart & Mickel has been named housebuilder of the year (What House; 2017 and Homes for Scotland; 2013 and 2014) and is renowned across the UK for its performance in the Supreme NHBC Pride in the Job Awards.