Shares in Scottish housebuilder Springfield Properties have fared well since the company’s initial public offering (IPO) last month.
After Springfield raised £25m from the float on the Alternative Investment Market (AIM), the shares jumped about 10% to 116p, valuing the company at £95m. So what is driving investors’ enthusiasm?
The money was raised to accelerate the growth of the business, which started out as a market garden company in the 1950s and switched to housebuilding in the 1990s.
“We discovered it was easier to make money from planting houses than planting carrots,” says Sandy Adam, the executive chairman and grandson of the group’s founder.
Today, Springfield has two sides to its business, the affordable housing and private divisions. Adam believes there is plenty of scope to grow both.
We discovered it was easier to make money from planting houses than planting carrots - Sandy Adam, Springfield
“On the affordable side, the Scottish government is targeting 50,000 homes during the current parliament and with 150,000 on council house waiting lists in Scotland we’ve got plenty of work to do on that side of the business,” he says.
“On the private side, we’ve secured the land for five villages, totalling 10,000 plots. They’re all zoned and we have made a start on a couple of them.
“We have a role, like all housebuilders, in tackling the biggest issue of the day - the housing shortage. It’s a huge opportunity and a huge responsibility and one we relish.”
The housebuilder has no immediate plans to expand beyond its Scottish heartlands in order to fulfil its growth target, which Adam says is to more than double revenue to £220m in five years.
He is confident in the outlook for the market north of the border.
Homes are a lot more affordable in Scotland. They are priced around 3.3 times income - Sandy Adam, Springfield
“Homes are a lot more affordable in Scotland,” says Adam. “Homes here are priced around 3.3 times income, compared with London where it’s more than 10 times.”
However, he adds that if the right opportunity arose, Springfield would be open to venturing into northern England “as we understand that market and geographically it makes sense”.
He cites the company’s £49m acquisition in 2011 of Redrow’s Scottish business as an example of how the company is willing to be opportunistic.
“We didn’t expect Redrow to put its Scottish business up for sale five or six years ago, but we were ready to buy it when it did,” he says.
After last month’s successful float, Adam says he is now back to the day job - and that does not just involve increasing revenue and profit. For Adam, it is also about ensuring his staff are happy and continue to be motivated.
Of Springfield’s 500 staff, 75 have taken part in a share scheme the company has offered its employees for the past eight years. By the time of the AIM listing, those 75 staff owned 4% of the company.
Adam believes that ensuring the company’s staff are well rewarded will be vital to its growth plans. “If the employees are given opportunities to grow with the company, then the shareholders will be happy with the results,” he says.
Investors in the IPO will be happy with the initial stock market reaction. Now it is up to Springfield to deliver on its ambitious growth plan.