Scottish house builder Springfield Properties has secured an additional £18m loan with the Bank of Scotland to protect against a possible 12-month shutdown north of the border.
The new 12-month loan term extends the firm’s credit facility to £85m, with the new loan of £18m obtained on similar terms as its existing credit facility
Even before the Scottish government had called a halt to all non-essential construction, Springfield had already temporarily closed down all of its sites under construction on 24 March as the UK went into lockdown.
The firm says the new credit facility has been arranged as the Covid-19 situation continues to evolve and “until there is clarity on the duration and severity of these events it is not possible to know when operations will recommence.”
The firm also says that financial modelling has demonstrated that “this additional support gives Springfield sufficient headroom, should it be necessary, to withstand even the most unlikely event of a 12-month shutdown.”
Springfield has already taken a number of actions to preserve its cash position during the current pandemic.
Cancellation of the interim dividend was notified on 24 March and over 90% of the group’s workforce has been furloughed under the UK government’s Job Retention Scheme.
In addition, of the core team still working, executive and non-executive directors have agreed to a voluntary 50% reduction in base salary until further notice, and at least until sales recommence, with 30% deferred and 20% forgone. All senior managers still working have agreed to a 20% voluntary reduction in base salary over the same period.
Additional measures that significantly reduce the group’s monthly running costs include the delay or cancellation of future land purchases, postponement of office rental and financial lease payments, and curtailment of all non-essential spend.
The company says it is too early to accurately estimate the potential impact on the group’s financial results. However, its board believes the group is in a strong position to withstand the impact of Covid-19 and once a return to work is permitted, Springfield will continue to deliver against its strong order book.
Springfield’s contracted revenues from private and affordable housing currently stand at over £110m. This includes £44m of largely constructed private housing, much of which would have handed over to clients in April and May 2020.
These homes are contracted under the Scottish missive system and are underpinned by the banks’ three-month extension to mortgage offers. The affordable housing element consists of £66m of affordable housing revenue from construction contracts already underway.
The group claims its position is further strengthened by a significant volume of private house reservations, while the company is in possession of what its directors’ believe to be the largest land bank in Scotland.
Innes Smith, CEO of Springfield, said: “Throughout the COVID-19 pandemic our first priority has always been the health and safety of our workforce and the wider community and I am proud of the response of our employees to the crisis. Thanks to their support for our actions, the enhanced facility from the Bank of Scotland puts us in a strong financial position for the time when it is safe, once again, to resume business.
“We are also working to maintain strength in our supply chain, hence our commitment to paying all of our contractors and sub-contractors in full and with minimum delay. While the impact of the disruption is still unknown, Scotland will continue to need more good quality housing to address its housing shortage and I believe that Springfield is in a very strong position to meet this demand once our business can restart.”
The news comes hot on the heels of industry bodies today calling on the Scottish government to gradually begin to reopen building sites.