In addition, directors and senior managers have taken voluntary salary reductions.
In accordance with Scottish government guidance on Covid-19, Springfield temporarily closed down all of its sites under construction and its kit factory on 24th March. It also closed its sales and administrative offices to the public, with employees working from home wherever possible.
In light of the situation, the group agreed the additional £18m, 12-month, term loan facility with Bank of Scotland, increasing the total credit facility to £85m.
The company said that financial modelling has demonstrated to the board that this additional support gives Springfield sufficient headroom, should it be necessary, to withstand even the most unlikely event of a 12-month shutdown. The board modelled several cash flow scenarios that assumed different lengths of shutdown as well as the adoption of various mitigating actions. Beyond continued liquidity, the fundamental basis of the models was the punctual payment of Springfield’s employees, suppliers and sub-contractors throughout the period.
Springfield CEO Innes Smith 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 subcontractors 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 group has taken a number of actions in order to preserve its cash position. Cancellation of the interim dividend was notified on 24th March. 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. This involves 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.
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 under way.
The group said that its position is further strengthened by a significant volume of private house reservations on which the Group continues to work, with customers, to secure a missive (contract). In addition, Springfield is in possession of what the directors believe to be the largest land bank in Scotland.