Redrow's Scottish arm snapped up by Elgin builder

Published on Thursday 30 June 2011 22:44

HOUSEBUILDER Redrow yesterday sold its loss-making Scottish operations to Springfield Properties in a deal that is set to nearly triple the Elgin-based firm's turnover to £100 million.

Family-owned Springfield hailed the 49m purchase as "transformational", allowing it to push ahead with its expansion into the Central Belt.

The deal will rank the Moray housebuilder among Scotland's larger property companies, edging closer to the likes of Aberdeen-based Stewart Milne, which turned over 250m in 2010, and Edinburgh's Cala Group, with 170m in sales.

Springfield, founded in 1956, will pay Redrow 5m up front and then the 44m balance in instalments over the next three years as housing developments are sold. The firm expects to hit the 100m annual sales mark within five years.

London-listed Redrow has eight active Scottish sites - at Anniesland, Braehead, Dalkeith, Dunfermline, Inverkip, Kilwinning, Lenzie and Motherwell - which are expected to add a total of 200m in sales and produce more than 800 homes.

The North-east firm is also taking on several "legacy" sites - such as homes already built but not sold and part-exchange properties - so Redrow can immediately exit Scotland.

The Welsh group shocked the industry in April by signalling the pull-out, describing the performance of the division as "not acceptable" after pre-tax losses of 1.7m in the year to 30 June, 2010, on a turnover of 31m.

Sandy Adam, Springfield's chairman and grandson of its founder, told The Scotsman: "We approached Redrow after it announced it wanted to dispose of its Scottish operations and, after some negotiation, we reached a deal that suited both parties.

"Initially it wanted us to pay a higher price up front but that wasn't going to be possible and, in the end, it just wanted to get out of Scotland to focus on the south of England.

"Although we have no other deals on the go at the moment, we're still on the lookout for other acquisitions, both of sites or, if the right thing came up, other companies too."

Adam said the Redrow takeover would be financed out of Springfield's existing banking facilities, which the company moved to HSBC last year.

He added: "The business was loss-making because Redrow purchased most of its land at the height of the property boom in the mid-2000s.

"Redrow had already taken write-downs on the value of its land and so we've been able to buy the land at a more canny price. Turning a profit on it shouldn't be a problem."All 60 staff from Redrow's Scottish unit will transfer across to Springfield under European Union employment rules, swelling the Elgin company's workforce to about 280.

Adam said it was "too early" to talk about any redundancies as a result of the takeover and that he is launching a review into the company's staffing levels.

Springfield initially intends to turn Redrow's Larbert office into its Central Belt base while retaining its head office in Elgin.

Adam revealed that Springfield grew its pre-tax profits to 2.5m in the year to 31 May, up from just under 1.9m in the previous 12 months. The rise came on the back of turnover increasing to 39m from 34.6m.

Redrow chairman Steve Morgan said: "The board is pleased to have secured a buyer for our operation in Scotland. Springfield is a successful Scottish house builder and the transaction will substantially increase its presence in the Central Belt.

"The transaction will also provide our customers and employees with a good home for the future."