Now known as a housebuilder, Springfield Properties can trace its roots back to 1956 when Wilfred Adam established a market garden business.
The firm’s focus has since shifted to planting foundations rather than seeds, constructing its first homes on the site of the original garden. It has grown to about 500 staff and turnover in its most recent annual results exceeded £100 million for the first time.
Its chief executive, Innes Smith, was promoted to the role in 2012 after joining in 2005 as finance director. As well as his change in duties, the firm has recently made the leap from private to public company by listing on London’s Alternative Investment Market in a move valuing the company at £87m.
And Smith jokes that he’d be locked up if he now made any public forecasts about profit and turnover. One of the changes brought about by the initial public offering (IPO), which took place in October, “is just trying to keep quiet on certain things – there is a change in culture”, he says.
The flotation was once a “distant dream”, Smith explains, but came under serious consideration at the end of 2016 with subsequent major preparatory efforts once the final decision was taken. And he says the step, which raised £25m by placing 23,584,906 new shares at 106p each, “has been a fantastic confirmation from the market that the story we thought was good, they agreed with us, and everything’s gone to plan”.
The main driver of the IPO was to fund the construction of five new “village” housing developments incorporating a total of 10,000 homes on completion, with the sites, near Edinburgh, Stirling, Dundee, Elgin and Perth, expected to involve net cash outflows of £8m to £12m for each.
Smith says that the sites are self-contained communities housing amenities such as schools, dentists, doctors, shops, bowling greens, football pitches and allotments.
Some, such as Dykes of Gray at Dundee, are already up and running, while planning permission has just been obtained for Elgin South for 2,500 houses, and work is under way on a site of the same size just outside Stirling at Durieshill.
Smith draws attention to such projects creating not just employment but communities to live in. “We’re running a business here, and obviously we make money, but to actually do something good at the same time, it’s a very pleasing thing.”
The group runs private and affordable housing divisions, with the latter boosted by the Scottish Government’s target of building 50,000 affordable homes by 2021, with the £3 billion plan unveiled last year.
However, it recently emerged that the total relevant homes completed in Scotland per quarter since the middle of last year averaged at just 1,808, well below the 2,673 needed to reach the target in time.
Nonetheless, few can dispute the need for affordable housing, as stifled household incomes lag behind robust housing prices and the ever-growing deposit required to get on the housing ladder. A recent study found that deposits needed by first-time buyers are set to rocket to £58,204 and £32,291 in Edinburgh and Glasgow over the next ten years. The latest data from Registers of Scotland found that the average price of a property north of the Border in September 2017 was about £145,000, a year-on-year increase of 3.1 per cent.
Smith says it is crucial to acknowledge that some people can afford housing, and some need help.
“We’ve got a social responsibility to provide both,” he says. “We take great pride in being able to do that, because society is about mixing all sorts of folks. I’m not into exclusive developments – I do believe that we should be an inclusive society.”
Furthermore, Smith sees affordable housing as a key driver of Springfield’s growth as well as boosting Scotland’s housing stock. The firm said at the time of its IPO that covering both affordable and private housing creates two separate revenue streams, cutting the group’s exposure to the Scottish private housing market cycle.
Springfield’s first affordable home was built in 2002, with Smith adding that it has delivered about 2,000 such properties in the past ten years.
The firm, which has offices in Elgin and Larbert, moved into housebuilding in the early 1990s. It has doubled in size every five years and in the 12 months to May completed 620 homes and saw pre-tax profit climb to £6.7m, a year-on-year jump of nearly a third. Turnover increased by 22 per cent to £111m.
As for whether the firm has seen any knock-on effect from the tightening of consumer purse strings as inflation outstrips wage growth, Smith says its sales have been resilient.
The business tries to differentiate itself from peers, he says, for example with customers able to go online and choose say, carpets and paint colours, viewing a computer-generated image of the result on-screen.
Such a strategy is inspired by the car market, Smith continues, in terms of “the level of choices and the sophistication of how you make your selections – we’ve really been trying to mirror that”. Other hi-tech offerings being considered include power points to charge electric cars, amid the increasing level of state support for this type of vehicle.
Smith’s route into business involved the Heriot-Watt University graduate qualifying as a chartered accountant with KPMG, and joking that he chose accountancy as it came first in the alphabet as one of his options, ahead of being an actuary.
However, it gave him exposure to many different businesses, and “it all comes back down to the same thing – it’s about supplying a product to a customer”.
He held financial leadership roles at RK Carbon Fibres, SGL Technic and Gael Force, joining Springfield after meeting current chairman Sandy Adam, grandson of Wilfred, and appreciating his vision for the business. He now says that he is so entrenched in the business that “if you cut me in half, you’ll see a Springfield house”, adding: “I’m from Moray, Springfield obviously originated from Moray, and for an area that’s considered pretty remote in Scotland, to grow the company up to £100m and to float on the stock exchange [makes you] really proud.”
Smith cites the firm’s £49m acquisition of fellow housebuilder Redrow’s Scottish business in 2011 as pivotal, seeing it move out of its Moray base to the whole of Scotland. The deal “was a huge stepping stone for us to grow the company”.
Yet while housebuilding activity has been propping up Britain’s construction sector, it faces hurdles such as a skills shortage, and according to one estimate nearly 20 per cent of workers on housebuilding sites are from the EU.
But Smith believes the biggest challenge from the perspective of Springfield and the authorities “is to get the infrastructure in place that housing needs… the model we’ve got just now isn’t really working and we need to all get together and come up with some solution”.
Returning to the outlook for Springfield specifically, he praises the fact that it is now listed, but stresses that it is setting its sights high to maintain growth.“You reach the peak of the mountain [with the IPO], and there’s another mountain ahead of you because now we’ve got to perform in the market. That’s a different pressure – but one we’re definitely up for.”