Springfield buys Tulloch Homes for £56m

Springfield Properties, Scotland’s only listed house builder, has announced the conditional £56.4 million acquisition of Thistle SPV2 Limited, the owner of Tulloch Homes, the Inverness-based company focused on the Scottish Highlands.

To help fund the deal, Elgin-based Springfield Properties, which is building a number of new communities throughout Scotland, sold shares to new and existing investors in an oversubscribed placing at a 4.4% discount to raise £22 million.

The deal involves an initial cash payment of £43.4 million and a deferred cash payment of £13 million.

Springfield also said it has increased its revolving credit facility with Bank of Scotland and established new term loan facilities to help fund the acquisition.

“The amount available under the company’s revolving credit facility has been increased from £64.5 million to £87.5 million,” said Springfield.

“Part of the increase under the revolving credit facility will be used to fund a portion of the initial cash consideration in relation to the acquisition …

“Three term loan facilities, totalling £43.2 million, were established under the company’s facilities agreement, for the purposes of financing the acquisition.

“The bridging finance facilities will be repaid using the net cash of Tulloch Homes on completion and the proceeds of the placing.”

On current trading, Springfield said: “In the company’s results for the year ended 31 May 2021, published on 14 September 2021, the company noted that it had entered the 2022 financial year delivering against a strong order book, was continuing to receive excellent demand across the business and expected to report strong growth for the year to 31 May 2022 (on an underlying basis, to exclude the contribution from land sales in 2021).

“This momentum has been maintained throughout the first half of the 2022 financial year, with good reservations in private housing and the company continuing to deliver against its record order book in affordable housing.

“The company will also commence receiving income from housing for the private rented sector this financial year.

“With sustained house price inflation and active management of cost and supply chain pressures, the company continues to trade in line with market expectations for FY2022.

Notwithstanding the increase in the company’s share capital as a result of the acquisition and the placing, the company intends to pay a final dividend per ordinary share in respect of the year ending 31 May 2022 in line with previous expectations.”

Springfield CEO Innes Smith said“This is another great acquisition for Springfield — and our third since coming to the market in 2017.

“Tulloch Homes has an excellent reputation for building high-quality homes in the Scottish Highlands in and around Inverness.

“This is an area of high demand where we have been organically building a presence in recent years.

“As a result, it will significantly strengthen our foothold in an area of strategic importance and accelerate our growth, being earnings enhancing from the current year.

“We welcome all of the Tulloch Homes employees to the Springfield group and we look forward to working together to continue to grow our business.”

Analysts at Progressive Equity Research wrote: “Scotland’s only quoted housebuilder, Springfield Properties, has acquired Highlands developer, Tulloch Homes, for an enterprise value of £56.4m — a premium of only 6% over pro-forma NAV.

“The group states that it will be earnings enhancing in the current financial year, and significantly so in FY2023E.

“We have upgraded our estimates accordingly.

“Tulloch strengthens Springfield’s presence in the economically vibrant region around Inverness.

“The consideration is to be part-funded by a £22m placing, with a £13m deferred element effectively funded by Tulloch’s strong cashflow.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.