Good afternoon, everyone. Thank you very much for joining this afternoon, and it's great to see so many with us today. I have great pleasure in introducing Innes Smith and Michelle Motion, the CEO and CFO of Springfield Properties, the only quoted house builder in Scotland. They will be introducing you to the business and highlighting the investment opportunity. First, Alastair Stewart, one of our most experienced analysts at Progressive and who has been covering the U.K. house builders for many years, will explain how the Scottish system is very different to the U.K. and why Springfield's differentiated model is so attractive. We're going to aim to keep this to about 40 minutes so that there's plenty time for Q&A. Next slide, please. You're currently all muted.
If you wish to ask a question at the end, the easiest method is to click on the raise hand symbol that you should see in the top right-hand of your screen, and I will invite you to speak. Or alternatively, if you wish to type your question, please expand the control panel by clicking on the orange arrow pointing to the left and entering it into the question section, and I will then ask it on your behalf. If you want to download a copy of the presentation, you'll find that in the handout section, together with a copy of Alastair's latest research notes. You will receive an email after the webinar asking for your feedback, so if you'd be kind enough to fill it in, I'd be extremely grateful. Please note that this webinar is being recorded. Many thanks for your time, and over to you, Alastair.
Thank you very much, Emily, and again, welcome to everyone and to Innes and Michelle. I imagine quite a few of the attendees will have had experience of the major U.K., or should I say, English house builders. Without stealing too much of Innes' and Michelle's thunder, I'd like to provide a bit of context in order to highlight what I think are areas of differentiation between the Scottish housing market and Springfield's distinguished business model, which they'll go on to describe in detail with the English market and the approach of the larger quoted house builders south of the border, who you may be more familiar with. The following couple of slides summarize the economic dynamics underpinning the Scottish housing market, the quite distinguished legal framework in Scotland, and briefly how Springfield's unique model differs with the U.K.-wide developers.
The first slide looks at what I see as the positive dynamics underpinning the outlook for demand and particularly pricing in Scotland. Looking at the bottom left-hand chart, since the market emerged from the global financial crisis in 2009, prices in Scotland have risen by only 15%, while for the U.K. as a whole it's been 50%, while London and the Southeast have been stronger, with the capital rising, almost doubling, and the Midlands roughly in line with the average U.K. growth of 50%, and the Northwest, for instance, about 30%. I believe there's a lot of scope for catch-up. That will be driven in particular by affordability. If you look at the chart in the bottom right corner, you'll see there's a marked difference in the house price to household incomes ratio. It's four for Scotland, five for the rest of the U.K., and 9x for London.
House prices are far more affordable in Scotland, and I believe that over time, the balance will even up. Pricing is particularly important for margins, probably explaining why the more English-focused house builders profitability has reflected margin growth rather than volumes. A number of them in the recent past have been flattered by their exposure to Central London, which, for instance, Barratt and Redrow are now attempting to exit. Second slide, please. There are also fundamental volume drivers in Scotland, such as the forecast population growth and the relatively low home ownership rate, 58% in Scotland versus 63% in England. There's also lower population density, resulting in what could be deemed as a less competitive land market or more affordable land market, and allowing those bigger homes with gardens that people are clamoring for in the wake of the COVID crisis.
The slide also highlights the very different legal framework, in particular the missives system, where basically, you're contracted to a house purchase much earlier in the system. It's much more secure and less speculative than in the more ad hoc English system, where gazumping and gazundering have been the bane of many buyers' and sellers' lives. This helps both first-time buyers but also allows for more certainty for those trading up and into new homes. An important distinction is that old Springfield homes are sold freehold, in contrast to the controversial English leasehold practices, which prompted the Competition and Markets Authority to launch an investigation into some of the biggest house builders recently. Innes will describe in detail Springfield's differentiated model, including the focus on family homes and the village concept.
However, one contrast with the number of the biggest English house builders I'd point to is that affordable housing is an end in itself rather than a means to an end. Springfield's private house building business provides a proportion of affordable housing as required by the S75 planning requirements north of the border, which is the equivalent of the Section 106 south of the border. They also develop in partnership with local housing authorities, housing associations, and other public bodies with an attractive risk in capital employed profile. It has also entered a new partnership with Sigma, to provide a three level of tenure of private rental. Finally, this is a personal view, the housing designs are clean-cut and modern without some of the classical twirls that some English developers indulge in. Over to you, Innes and Michelle. Thanks very much.
Okay. Thank you, Alastair. I think you've left me something to speak about. Just thanks to the private investors for joining us. By a year and a half ago, we realized that we weren't reaching out and getting an opportunity to speak to you guys, that's why we appointed Progressive Equity Research. We now have their projections out, which you can see, and see how the business is projected to perform. It's good today to get the opportunity to actually speak to you guys, albeit not in person, but virtually, that we can tell you a bit about us personally, and you can also get to ask us some questions. Next slide. Okay, just to tell you a bit about us. I don't know if Sandy Adam is watching this, but if he is, flattery will get you everywhere.
Sandy is the founder, and if it wasn't for him, we wouldn't be here. 30 years ago, Sandy, originally a farmer, discovered that planting houses was way more profitable than planting carrots. He went from there and used the money he made from one field to buy two fields, and so on. Sandy's still involved in the business, still the main shareholder, and Sandy has the final decision on all land purchases. To this date, Sandy has still retained, I think, 99% of his shares that he had when we floated. None of the money that we've raised in going to the market has been for Sandy. It has all been for expansion of the business. We come to me. I'm Chief Exec Officer. I've been at Springfield for 15 years. Joined originally as Finance Director. I'm a chartered accountant, originally qualified at KPMG.
About eight years ago, nine years ago, I became CEO. I'm also a member of Homes for Scotland 2016. Joined them in the executive board, which obviously gives a lot of information on the industry. Finally, we've got Michelle, who you can see on your screen there. Michelle is the CFO, an MBA qualified CIMA accountant. Michelle's been with us for seven years, and has been with us throughout most of the growth that we've recently seen, with good experience from other construction housebuilders. Next slide, please. Okay. Springfield is a leading Scottish housebuilder. We're actually, and kind of unbeknownst to a lot of people, we build the third largest amount of houses in Scotland. I think Barratt and Persimmon are higher, it's ourselves, it's the other guys. We are a pretty decent concern in our market here.
We're a builder of private houses, which includes villages, which I will go into later on, and affordable homes. Affordable homes are effectively what used to be council homes, where we work with housing associations or councils. We're almost across the whole of Scotland, and to date, we've sold about 6,000 houses. We've a good reputation. We've got a gold standard in-house award with over 95% customer approval and 69% net promoter score. 70%, I think, is considered world-class, so that is strong. We've got a very strong financial record. Up to 2019, we were at 21% growth in our sales. Earnings per share were 31% above IPO forecast, and we were on track to deliver our figures as of February 2020 for our year end May 2020, up until COVID obviously hit.
We've made two strategic acquisitions since we came to the market in 2017, which expanded our operations into the east, which is Edinburgh, and for the west, which would be Glasgow for the non-Scottish viewer here. We have a large land bank, some GBP 3.3 billion, which we'll tell you a bit about, covering most of Scotland, which is I think 15 years plus of a land bank, which is obviously a long time. In Scotland, the same dynamics as across the rest of the U.K. Demand for housing is outstripping supply. 25,000 houses a year is what's been, by all bodies, is what's needed for the Scottish market, and it's been somewhere between 18,000 to 22,000 for most of the year. There is a big demand there. Scottish government is driving growth in the private and affordable housing, very much in the affordable housing.
We'll tell you a bit more about that as to why the Scottish government promotes affordable council houses so strong. Finally, we return to dividend paying this year after canceling the interim dividend in February for obvious reasons, and we were able to announce a dividend in our year's results. Just over on the right there, you can see some of the brands we acquired, Dawn Homes and Walker Group, and then you've got the Springfield one. Next slide, please. Tell you a bit about the history of Springfield. I mentioned we started off as a market garden company, and that had a big supermarket open next to it. The obvious decision was to close down and develop houses. Sandy, being entrepreneurial, decided to build them himself and took on his own staff. Didn't use subcontractors. Employed people locally. We launched our Choices program.
Choices is labeled a lot by the Scottish missive system, which I'll tell you about. Basically, if you go onto our website, you can look at one of our houses, and you can choose carpets, you can choose paint colors on walls, you can look at the kitchen worktops, the kitchen flooring, the tiles, and you basically can tailor your house to your own requirements, within reason obviously. There's an interactive model where you can look. Around about 2005, we decided to get into the affordable housing market. We had realized that there were some pieces of land, maybe weren't perfect for private residential, but there was a demand from the council, so we could work out a way how we could make money on it. We now have one of our biggest customers is the council and government, and they're reasonably good at paying.
We, 2007, I can remember Sandy inviting me around to his house. Growth, we'd been growing about 30% a year, and he said, "This is not going to carry on. We need to start taking steps to try and protect the business." At that point, we sold a third of our land bank to one of the big nationals. We focused more on the affordable housing, and we stopped building speculatively and played it safe. We kind of sat and looked a bit foolish for about six months, and then from nowhere, the credit crunch came. We were in a good position then because we had cash in the bank, and we had de-risked our business. From there, 2010, we started buying sites from administrators, down in the central belt of Scotland. We had half-finished sites to give us a presence there.
Then 2011, Redrow put an advert in a paper basically saying their Scottish business was for sale for GBP 50 million. We sent a letter to Steve Morgan, Redrow chairman, and managing director, John Tutte, and said, "Look, we're very, very interested in your business. We think we can take it on from you. We can't pay GBP 50 million. We're only turning over about GBP 25 million, GBP 30 million," at that point. "What we'll give you is GBP 5 million up front, and we'll pay you over the next three years when you sell each of these houses." For us, it represented a really good return on capital employed. For them, it meant they could sell the business cleanly. Fortunately, Steve Morgan gave Sandy a phone back and said, "Yes, you've got a deal. We want this done.
Let's do it in six weeks." We did the deal, and sure enough, 2014, we were able to pay them in full. That kind of gave us a great, if you like, great central location. What it gave us was the logistics, gave us the supply chain, and gave us the staff, and it was a really good experience acquiring that business. 2013, we secured Dundee. Dundee is one of our villages. I will tell you a bit more about villages as we get there. 2016, we really went into the affordable housing in a significant effort because the Scottish Government in 2016 announced 50,000 affordable homes over the next five years. Next slide, please. Private housing overview. We deliver private housing over various developments, various sizes.
The most notable are the villages, and we have five villages, and they take up a large part of our land bank. A village is basically an area of land that a council has identified on the edge of a town, and it has its own amenities, its own facilities. It has football pitches, might have a school, and might have medical practice. Various things, but it's a self-contained area with its own nameplate. What we found was around about 2004, 2005, that none of the nationals were looking at these. We were a private company at that point, and we thought, "Well, this is a good way of getting in there." We paid the landowners up over significant time periods, and what it gives us is control of very large sites. We are differentiated from our competitors by a high-quality specification.
We've got the It's Included brand, which basically, bedrooms come with cupboards, gardens come with turf, all of these things that you would expect as standard, we include them with our houses. You get integrated microwaves and integrated dishwashers and washing machines, et cetera. We find certainly, it is an important point to make, we certainly found after the credit crunch, by offering a better spec, it was a safer sale because the people that were buying houses at that point were the people with money. People with money tend to want better quality for their money. They don't want less quality and cheaper homes. They want better homes, that's what we offer. The private housing accounts for 68% of our group revenue. What we have in Scotland is we've got a very high revenue visibility with the Scottish missive system.
Sales are secured three to six months ahead of completion. Just to explain about the missives system. In Scotland, when you buy a house, you sign a contract through your lawyer. In order to sign that contract, you need to have proof of funding, proof of mortgage, and that missive is a legally binding contract that is extremely difficult to get out of. In the English system, you have the exchange contracts, which basically you can resile in the week before handover. What that means is that we're sitting here in November, and we've got a year end of May, so we can be very confident as to how we're going to do up to our year end because a lot of those sales are secured and missived, and they're locked in.
It means our work in progress has security against it, which is obviously a strong position to be in. Okay, next slide. Just a bit more about our villages. We have a village in Dundee, which has now got about 300 homes in it. I think in the appendix, there's a case study of that. We've got 300 houses built there, and you can see some of the pictures and what it looks like. We have one in Perth, which is up to 3,000 houses, planning permission detailed for 1,000 houses. We have one in Elgin South, where we've also sold houses for the first time. Another two in the pipeline, one in Stirling, where we've got the largest planning permission, we believe, ever in Scotland, detailed planning permission for 3,000 houses. We've got another one going through, which is near Livingston, round about the Edinburgh commuter belt.
They're situated in semi-rural locations, including the commuter belt around the Scottish cities. What this gives us is, it effectively gives us a dripping roast that once we have planning, once we secure the land, once we've started on it, we have potential to do either land swaps with competitors, which we did with Persimmon on our Dundee site, or we have potential to do sales to other house builders. Obviously, the target now that we've got this up to, I think, it's about 15,000 plots in our land bank, is to sweat those assets as much as we possibly can. Moving on to the next slide. Just to give you a bit of background on the affordable housing. Again, I've touched on this, Alastair touched on it. We developed these in partnership with local housing authorities, housing associations or other public bodies.
This can either be as part of in Scotland, what's called a Section 75 agreement, which is alongside the private development, so 25% of the site has to be affordable, or it can be a 100% dedicated affordable site. What happened in 2016 was that the Scottish Government actually announced that they were going to increase the affordable housing provision over the parliamentary term from 30,000 to 50,000. We recognize that's a 67% increase in houses they were looking at providing, and clearly that wasn't going to come from the private allocation because that wasn't going up by 67%. We went out and identified a number of affordable-only sites. We would basically look for a site in an area that had transport, had schooling, had healthcare facilities.
Maybe it wasn't in the best part of town, but it was going to be an area that wasn't ideal for private housing. What we would do is agree a deal with the landowner that we would be able to promote this for affordable housing. We would go and knock on the door of the council and say, "We've identified a piece of land. Is this something that interests you?" If it interests the council, and we then had a customer tied, we would then go through the planning. On receipt of planning, we would buy the land from the landowner. We would sell the land with a linked contract to a construction contract to the housing association, and we then get paid over the next 12 to 18 months on a monthly basis. Cash flow-wise, this is extremely positive.
Again, this accounts for something like 30% of our revenue. What it gives us is great visibility on our sales going 12 to 18 months out. Again, obviously the COVID happened and we withdrew our projections, as most of the market did. We've recently reintroduced our projections. Not our projections, Alastair's projections, obviously, which you can look at. That's because we're confident that those projections can be achieved. Just to mention on the Scottish Government, when I mentioned that they set a target of 50,000 houses, they actually allocated GBP 3 billion worth of funding for that. Effectively, there's a GBP 60,000 grant for each house. The way we control the costs on that are, it's all our own designs. We've built probably about 2,000 of these houses. We know what we're doing on that side.
The revenue is guaranteed because the revenue is set on benchmark prices, and we know how much we can get for each house type. The real key is making sure that you've got control of the infrastructure and that you've done the right engineering work to make sure that it's still profitable. We make a lower margin on this. Around about 17% is our target. Tends to range between 15% and 17%. Obviously as it's relatively, well, it's very secure because it's blue-chip money from the government, you've got the visibility, if you like, of the revenue forward. We really do like this part of the business. Next slide, please. The next market we're looking at entering into is the PRS market.
Like I say, we came down to London in 2017, and we were asked by various investors about PRS, and we didn't really know that much about it because it wasn't really if it was happening in Scotland, it was happening with flats. It wasn't really happening with housing, and it wasn't really happening in the area we worked in. We obviously looked into it and started to understand a bit. This year or last year, Sigma, who are big PRS movers in England, managed to secure government funding, I think about GBP 30 million, from the Building Scotland Growth Fund, and they are now in the market to develop PRS. They've done a lot of work with Countryside. I think probably 30% of Countryside's business, about GBP 300 million, is with Sigma, and it works two ways.
Sigma will also give Countryside work as well as Countryside giving Sigma the properties. We signed a collaborative agreement with Sigma to provide houses. Now, we're currently going through planning on our village in Perth. The reason we see PRS as very important is because this is a market that it's kind of untested in Scotland, families for rental. The way we see it with our village is because with the longevity of the village, that we'll have an affordable, which is obviously the revenue is very visible and secured. We would then have our private side, which is more speculative, but then we've got the PRS in the middle, which would be very secure, and we'd sell off at about 75 houses.
What that gives us from the PRS side is, they're potential customers in the future for the private side. We think that Sigma have a proven model that's working very well in England. Using their Simple Life brand, we're very pleased to team up with them. Like I say, we've got one development that's going through planning. All information I obviously give here is in the public domain. That is actually going to planning over the next couple of months, and is already going through the system. We'd be hopeful to start on that soon. Finally, I can hand over to Michelle, and you can do some presenting.
The next slide just shows you our land bank. As Innes said, we have a large land bank, over 15,000 plots. Just under 50% of that land has planning, and a GDV on that land bank of GBP 3.3 billion. On 2019 results, that would be for 15, 16 years' worth of land. As obviously as we grow, that amount will come down. There's about 30% of that land bank owned on the balance sheet, the rest is all contracted. You can see there as well, the split between our private and affordable sites. Private, we just have over 11,000 plots. Again, just under 50% of that's planning. On affordable, over 4,000 plots, with 48.7% with planning. At the bottom you can see how many sites we're on. We're currently on 44 sites, 25 private, 19 affordable at May 2020.
We have 36 future private sites and 28 affordable private sites, and there's the GDV on them as well. The map just shows you where we are in Scotland. As you can see, in the north of Scotland around Inverness and Elgin, then central Scotland, with some other sites more towards the borders. We're not in Aberdeen. We've really stayed away from Aberdeen with just the oil situation. We are with everyone else.
Okay, next slide.
Then it's our team slide.
Okay. Just to repeat the point, the difference between Scotland and England, and that's our missives system, which gives us the secured revenue. You can just see two bar graphs there that you can see in Scotland, the risk period when we get a reservation is the first four or five weeks before we get a missive signed. Then we've got the houses, and best case scenario, it's largely on built and then we're just kind of under contract for the next four months while we complete the house and we are able to make it bespoke to the customer and they can choose their own kitchens, their own paint colors and all of that. There you compare it to the English system where there's a big risk system there, risk period where you're building the house.
I think this was best demonstrated with COVID where, as most of you are aware, on March 22nd or 23rd, Boris got up at 8:00 P.M. and said a few words about closing down and shutting down, and it wasn't really clear what was going on. Nicola Sturgeon went on immediately afterwards and it was very clear for us that we were shut down 9:30 P.M. on a Monday night, March 23rd, with a May 31st year end. Clearly the next day was a bit of a panic and we had to shut all the sites down.
When we came back, and we came back later than in England, we came back in July, effectively, out of all of the missives and the handovers that we had for what would've been our two busiest months of the year, April and May, only one missive had resiled, and that was because that couple had got divorced and everything had gone badly wrong. We didn't pursue that. There was no point in chasing it. It just shows you how resilient the system we have is. The other thing that we're keen to emphasize, and Alastair had touched on, is that in Scotland we only sell freehold. There is no leasehold. We don't do part exchange, we don't do shared equity and we don't do any leasehold. Next slide. Again, I got rather ahead of myself here. I kind of explained how the affordable housing system works.
As I say, you identify a partner, you source the land, you come up with a package, you get the planning consent from the Effectively the customer is the council that you're getting the planning permission from. You find they're very favorable towards you because it's something that they want. We sell the land and get the build contract and deliver the quality homes on time. Next slide. Okay. Just a bit again about the strong growth drivers in the Scottish market. The demand has been outstripping supply. There's very low interest rates and there has been good mortgage availability supported by Scottish Government initiatives. This is really a demand-led thing in that they're getting too much demand on mortgages and they're trying to slow down the market a bit.
I think the figures regarding sales and level of demand are extremely strong. Help to Buy in Scotland has already been extended to March 2022. It's important to emphasize that Help to Buy in Scotland is different to Help to Buy in England. Help to Buy in England is changing in March 2021 to first-time buyers only. In Scotland, Help to Buy is currently at GBP 200,000 is the limit. Our sales are something like average sales price GBP 232,000, so it's 15% of our sales are Help to Buy. It's not a major part of the business. It obviously helps first-time buyers get on. It's 15%, it's not the 20% you've got in England. Like I say, it's extended to March 2022.
The second thing we have in Scotland that you don't have in England is the First Home Fund. That's on a house price up to 250,000 where you can get a GBP 25,000 interest-free loan on a new build or on a second-hand home. Again, that helps first time buyers, and that too has been extended to March 2022. We have the same stamp duty or Land and Buildings Transaction Tax code here, a zero rate or stamp duty holiday to March 2021 as was seen in England. The 33% upsurge in demand following lockdown. Let me just have a look. Yes, I will come back to that further on. We have seen very First of all, the pent-up demand from being shut down and having three months production taken out of the cycle.
Yes, it could be argued demand is down by some, but production, 30% was taken out of the system, so the imbalance is still there. Affordable housing, I think COVID has shown us that, the housing supply and the progress of the housing provision definitely has an impact on levels of COVID spread. All governments, England and Scotland and Wales and Ireland, they're all looking at affordable housing policies and putting more money. It makes more sense to spend money on infrastructure, and clearly affordable housing is one of those infrastructure things, than to pay people for sitting at home. The final one is just the chart on the right there, which basically shows that there's been a shift in demand. I think we're all aware now that there's been a shift in demand for the type of housing. The people are working at home more.
That balance is going to change. I do believe people will look at their housing requirements and understand how important a good house and a good garden is. Here you can see right at the bottom there is living closer to work is 8% of customers, or 8% of people said that was an issue, 63% for a bigger garden or access to one. I have to say, the villages we've gone into, it was because we think they're good places to live, clearly they absolutely fit into all of the criteria and the highlights or the good points that are made here. We feel we're well-placed to take advantage of the changing market. Next slide, please. Okay. Again, we've obviously put our 2020 results out.
We were delivering good results, as we announced in our interims, up until the COVID pandemic struck. We were on track to deliver a record number of homes. We'd made really good progress in our village developments, and we'd managed to spread out our geographic reach to reach some new areas. Our integration of our businesses, Dawn and Walker, was all going very good. Affordable housing, we were ahead despite losing two months. We were ahead of our figures. The land bank, we'd significantly advanced the land bank with 50% now under planning, as Michelle had mentioned. We had just entered into the private rented sector with the signing of a collaboration agreement with Sigma, and we had announced a final dividend of GBP 0.02 per share. Next slide. Okay. We feel we're strongly positioned in the return from the lockdown.
As I say, I mean, the story of what happened to us in lockdown, it was kind of three stages. Stage 1 was make sure the people and the customers, staff, general public were safe. March 23rd, that week was spent making sure everything was secure, everything was safe, and we'd made sure everything was as safe as it could be. Stage 2 was making sure the business was safe. What we then did was we had a look at our business. Clearly we would have had a lot of revenues coming in in April and May, we would have had a lot of outgoings from all of the work that had been done in January, February, March.
We went to our bank, and we said we needed an additional loan, and we asked for GBP 18 million, which would cover us for 12 months with no sales. We felt it was important to let the market know that we had enough of facility to see us through pretty much any eventuality, because we didn't see for one second that this would last 12 months. We were able to do that, and the important thing there was that we were able to pay our supply chain and our suppliers. We're kind of big players, so it's important where we could get funding, that we carried on paying people and weren't responsible for businesses going bust, and we were able to keep our supply chain going and on side.
That really did pay dividends when we came back, because when we came back, the supply chain was in place and appreciated what we'd done. We'd watched England. One of the advantages, and it might not seem like an advantage at the time, but one of the advantages we had was watching England go back about a month before or six weeks before. What they did was they opened up the supply chain, and we were able to see there was a lot of pent-up demand and a lot of interest on Rightmove and Zoopla, and everyone was reporting good sales figures. What we saw was when we came back was exactly the same. For our first quarter, which is June, July, August, our reservations were 24% higher than the previous quarter, last year.
That's even more positive when you consider that one of those months, June, we were closed. It's really two months against three months, we're 24% up. With my work with Homes for Scotland, I get to see how the industry is doing, and even now, if I look at the latest figures going back 13 weeks, the latest 13-week period is still 26% up on the same period last year. We're still seeing strong demand, which is obviously a very good position to be in. The affordable housing market is looking very, very strong with good contracts and relationships in place and some good contracted revenue. We also took the time out to look at our business, and we made our business more efficient so that we were ready for whatever could come our way. We combined two offices, our Walker office and our Springfield Central office.
That resulted in some savings and some redundancies. We've obviously done that consolidation now, and we've got a much more streamlined business going forward. We've got significant revenue growth anticipated for 2021, with substantial visibility. As I say, when we did this for the market in October, we're now a month on from that, so we've even more visibility than we did then. We had a great land bank on March 23rd, and we've got a great land bank on 10th of November. With handovers resumed, the debt peaked at about GBP 70 million, I think in May 31st. We've now got that back down to GBP 41.9 million as of September. We're bank as we had, with the missives system and with our affordable work has got back to where it is.
I'll now hand over to Michelle to give you some key performance indicators and financial highlights. Next slide.
You can see there, just a group financial highlight for our year-end to May 2020. The first graph just shows you revenue, profit before tax, and gross margin. For revenue and profit before tax, we're really just back to where we were at May 2018 levels, due to being shut for two months. Obviously, it peaked last year. In terms of our gross margin, we've increased over the three years. It's 15.7% at May 2018, 18% at May 2019, and 18.9% at May 2020. The graph at the bottom just shows you our completions and our average selling price. Similar for the private homes, they were 419, very similar to where we were at May 2018. Actually, affordable has stayed the same, round about just over the 300 mark.
You can see that if we weren't closed there for the two months, April and May, we would've been so much higher in affordable. In terms of average selling price, that has gone up for both private and affordable over the three years. In terms of private, our average selling price was GBP 221 at May 2018, and that's risen to GBP 236 to May 2020. In terms of affordable, our average selling price was GBP 120,000, and that's risen to GBP 141,000. The KPIs on the right-hand side, revenue is GBP 144 million. Our completions are 727 over private and affordable. Gross margin, as I said, 18.9%. Operating margin at 8.4%. Our land bank, as we've talked about, is over 15,000 plots with a GDV on that land bank of GBP 3.3 billion. Our return on capital employed is 8.3%.
Now that is due to the lower return that's come down from last year, due to the lower return and our higher-than-average capital employed. The net debt at the year-end was just under GBP 70 million. We went to the market with the results. We were down to GBP 41.9 million, and we're still below that at this point. Next slide, please. Here you can see just our group results summary. I won't go through every line. Just to really point out that our exceptional items, you can see on our RNS, just the breakdown of that. That includes our salary costs for our direct employees who were on furlough and our admin staff. Offset against that is the furlough grant. That's why it comes out round about GBP 400,000. There's a very small IFRS adjustment in there.
Overall, our profit before tax at GBP 10.2 million versus GBP 16.5 million last year.
Yeah.
Next slide.
Just to point out on that slide, if you can just stay there, please. Our projections for 2019/20. Well, sorry, Alastair's projections, I keep forgetting that. Alastair's projections were around about GBP 215 million, GBP 216 million. We're something like GBP 70 million down from those two months, obviously our busiest months, April and May, not happening. Now if you take a margin of 19% on that GBP 70 million, you get to about GBP 13 million that you would expect to be off our profit. We actually ended up being at GBP 10.2 million against GBP 16.5 million. We were able to recover things, and the results were significantly better. We're on track for a very good year, even with that massive impact of losing GBP 70 million of sales, which we obviously have now fulfilled in this financial year. Next slide.
You can see there just the group balance sheet. Total assets, GBP 198 million. Other liabilities at the year-end were sitting at GBP 33.5 million. Now that's come down significantly from last year. That's due to us paying all our supply chain, making sure our subcontractors, and our suppliers were paid before the year-end to make sure that nobody went out of business. Net debt sitting at GBP 68.8 million. Again, at a peak there. The note below tells you again that we were down to GBP 41.9 million. That movement is just down to the amount of completions we've had since we've opened back up. Overall net assets of GBP 95.9 million. Next slide.
Okay. When we came down to London in February, one of the things, it was kind of the day COVID broke, but one of the things all the investors were talking to us about was ESG and what were our credentials. We kind of quickly to Google what is ESG, and we discovered it's environmental, social, and governance. What we found was that we actually ticked almost every box, and we have, for many years, we've been promoting building a good house and an efficient house and doing the right thing. When we actually listed this, there's a couple of pages here. 57 of our developments use air source heat pumps as opposed to using gas. All of our houses are wired up ready for electric car points to be put in. We manufacture kits off-site in a factory, so it's all done off-site.
We've used recycled waste plastic in our roads. All of these things, we'd already been doing these things because we tend to live in the areas that we build. We'd always done the right thing. It was kind of always seemed the sensible thing to do. Our villages, you can see there, we won an award for the susdrain New Build Large Scale SuDS award. There you can see the pond. That's actually serving to get all of the waste, the surface water drainage collected in that pond there. It does a good thing. We've got a community liaison officer to deal with all of the customers in the villages. Something like 20% of our staff are in training or are apprentices. We recognize that we've got to train people and get the youth and reskilling people where appropriate. Good involvements with the schools.
We've also got a green committee to make sure that we're trying to be as innovative as we can. All of those things, we aim to get out there in a more formal way so that our investors can see that we're doing the right things as a business. Just to finish off with before the question part comes, summarize where Scottish housebuilder, we operate in a different market. I know we're always put in the same table as our English counterparts. Our work in progress, because of the revenue visibility and the missive system, we've got stronger, if you like, revenues secured going forward. Our work in progress has sales against it. We have the affordable business, which is government money and cash flow, very positive. We've got a very good land bank, which we spent a number of years bringing on.
When we first came to market in 2017, the initial reason was to raise GBP 25 million to progress these villages because we are under-capitalized for doing that ourselves. It's put us in a really good position with that asset now. There's an inherent commitment to ESG standards, enhancing the position for sustainable growth. It is a key thing when people are buying houses to see that you're doing the right thing. We're on track again for 2021 revenue to be significantly higher, and you can see us with projections and see what we're projecting to do. I now hand over to Alastair and Emily, who will take control of the meeting again. Hello.
Thank you very much, Innes. Just as a reminder, to ask your question, click on the Raise Hand icon that you should see in the top right-hand side of your screen, and I will be able to unmute you, or you can type your question into the Q&A box, and I will ask it on your behalf. We've already got a few questions coming. The first one is, as you said, Innes, it was good foresight to scale back in 2006 to 2008. What were the warning signs that made you nervous?
Well, a lot of this goes down to Sandy and his farming days of, when his dad told him whenever he wants to buy the cattle, that's when you don't buy. It was Sandy who was there as a young lad saying, "Calm down, calm down. All the bulls are going." The truth was, banks were coming and knocking on your doors and offering you money, which is a warning sign. Sandy's philosophy is when banks want to lend me money, I don't want to borrow. I want to borrow, they're not gonna lend me. There was house price inflation of 10%, 15% a year for two years, 2007, 2008. We were getting delays in planning and then ending up making 10% extra on it, so that we were putting a house up for sale and people were buying them and reselling them before moving in.
There were people queuing up overnight and staying out in the cold and we were providing bacon butties to people in the morning because they'd been queuing all night. There were just so many obvious factors that there was something just wasn't right that was going on there. The 125% mortgages. Madness.
Okay. Thank you. Next question. As you have described, Springfield's growth has been supported by acquisitions. Do you see prospects for future consolidation in Scotland, either by Springfield or other Scottish or U.K. house builders?
I think the acquisition, if we buy a piece of land, it takes us probably like two, three years to get a return or any cash flow coming back. You go through planning a year and a half, you're then building the house, and eventually you're getting money back, and it takes a long time to get a return. If you acquire a business, then, in both, the three cases that we've acquired companies, Redrow, Walker & Dawn Homes, then we're doing the deal on the Friday, and by the Sunday, we're getting sales figures, and by the next Friday we're getting cash in the bank. We don't really see it as acquiring companies. We're acquiring land and people and supply chains. The land is a key thing there, and we wouldn't buy a company unless it had a good land bank. Will there be opportunities going forward?
Yes, there will. Will we be limited to just Scotland? Well, not necessarily. We've got bigger ambitions. There's a point where because we're doing a higher spec houses, there's a point where you'll get to market saturation, and I think we should be willing to look at something, but only the key things. Is it a good land bank? Is there good people there? Has the business got a good reputation? The most important thing for myself and Sandy, is it at the right price? It's all very well and good someone selling their company, but if their expectations are unrealistic, then Michelle's not gonna want me and Sandy to do it, and we wouldn't come to investors and say, "Look what we're doing," unless it made sense.
Yeah, the entrepreneurial flair, if you like, at Springfield and the growth that we've shown, we aim to continue that and we're very passionate about keeping the business going.
Sure. William, would you like to ask your question? I've unmuted you. You may need to unmute yourself. William? I might have to come back to him. In terms of net debt, how important do you think it will be to reduce it, and what tools have you got to achieve this?
The net debt, we're a growth company, and we came to the market with debt, and we gave projections, and the key was to get net debt to where it died down to less than two over the years. We're a growth company. Money's never been cheaper to borrow. We do have a core debt there. We would argue that that debt is very manageable. When you compare that debt to sales that are secured and have the missives system behind them and the affordable revenues kind of contracted out. We think that's a better proposition than someone sitting with purely speculative stock, which is what a lot of our competitors have. We're trying to grow the company, we're trying to pay dividends, and we're trying to get debt down.
It's a few balls that are being juggled there. We recognize that for some investors who don't like debt, we're not the company for them. We're working towards a five-year plan. The one thing COVID has taught us is that the market will be the market, and you will be in flavor or not in flavor. We just need to focus on making sure our business is doing the right things over a sort of medium to long term, and come along for the journey if it suits you. If it's not for you at this point in time, then okay, go for the big guys. You won't get the growth and you won't get the excitement either.
Okay, thanks. Gavin has asked, "Future sites of 64, when?
Say it again.
Future sites of 64, when?
Okay, Michelle, do you want to answer that?
I think that's from the land bank.
Okay
they are over the next so many years. If you take one of the sites of one of the villages of 3,000 homes, that could be a 30-year site. Most of the sites will be much shorter, but the villages are certainly more longer term. It takes time to build a house. That's how many sites we've got, and there'll be quite a few that are in the next, say, three to five years, but there'll be more that are further out.
Despite the falls in the share price, why have the directors not bought any shares this year?
One of the reasons for floating, was to get more liquidity in the company and us buying shares actually defeats that purpose. It makes us more illiquid. Most investors want to see more liquidity as opposed to less liquidity. For me, for us personally, we did buy some shares to try and give the market an indication we still believed in it. Ultimately, we want more investors to be joining in with the business and that would be in conflict with that objective.
Sure.
Okay. "English housebuilders tend to have zero debt/cash. Seems you could sell land to Sigma to make it the same straight easier for analysts. Are you tempted?" From Gavin.
No. Like I say, we're running our business for what is best for us, not for analysts, and not so that we are compared on the same table as English house builders. We're not wanting to do the same as them. They are very good at what they do. They have a business model that works well for them. We are doing something different. I think if you look, you'll see ourselves, Gleeson and Countryside, we all do something a little different than the big guys. That's not saying we won't do the same as them when we get to the same life cycle that they're at. We're not at that life cycle, selling off land and giving away profit when we don't need to.
Like I say, our debt profile compared to our work in progress with the security of missives and the affordable housing, I keep repeating that, I think is a safer option than purely speculative work in progress. Their figures turn very quickly if they have three months of no sales.
What proportion of your sales are dependent upon Help to Buy schemes?
I think I said that, about 15%.
15%. Okay.
15, just make sure. 15. One five.
Okay. Next question. "In more normalized times, what sort of growth and operating margins do you target?
More normalized times. 2008, we had the credit crunch, we had the independence referendum, we've had Brexit, we've had countless elections. I don't know what a normalized time is. It's a genuine answer. The margins we are at are the best margins we can achieve with our market. The English margins we know are better, and they are better because Help to Buy inflated. Alastair did a very good paper, you can look at it online. Help to Buy inflated a lot of the English house builders and their reliance on Help to Buy. That 20% worked its way into sales price and didn't really impact on the costs immediately. We believe our margins are the margins we wanted.
Our margins historically, when you go back to pre-2018, were lower because the Redrow sites that we had acquired, because we kind of paid for them as we went, and we were left with the sort of slower selling ones. They did impact on our margins. The normal hurdle rate we look at is the same as the other guys. It's been 20% and 25% for private and 15%-17% for affordable. PRS is a different margin again, and we just really need to understand that model a little more fully when we come to the final negotiations with them.
Can you give an indication of whether you need more equity on the balance sheet to maintain your anticipated growth?
I think if we were to require capital to give us sales bigger than the projections Alastair's showing, then we would go to the market and raise the capital. We don't need capital with the projections that are out there. Basically, our projections were delayed by a year, or Alastair's projections were delayed by a year by COVID. We're going out to 2023 to about GBP 240 million-GBP 250 million. We don't need equity for that. If another opportunity came along, then we would go to the market and potentially raise equity.
Douglas asked, "Were you happy with the Redrow purchase? What were the margins like on the land?
Okay. I think if it wasn't for Redrow, I'm not sure we would have been sitting here. It gave us a huge geographic spread across the whole of Scotland, gave us some great individuals who are still with the business now. It gave us a central office. It gave us a presence. The margin, we made about 15% overall on that margin. As I said, it was very low because we were paying as we were going, then we accepted lower margins because obviously, it wasn't money down and then sell over the next five to eight years, so yeah, the Redrow deal was fantastic, and it certainly suited us at that point in time with the size of the business. Remember, we were GBP 25 million, GBP 30 million turnover, and we were spending GBP 50 million on a business which was 1x and 2.5x Our scale.
It was quite an undertaking and in all of our acquisitions, they've all gone well, but we've learned a lot, and we've learned something different every time. Things do go wrong. With hindsight, you would handle certain things differently, and you would deal with situations in another way, but I guess that's all part of the learning experience. The fact that we've now done three acquisitions, and they've all been successful by many different measurements, then I think we're a lot more experienced in doing that, and we can be, not complacent, but we need to stick to the same criteria as we have when acquiring something as we do going forward.
What do you think about the prospect for Scottish independence on your market? Do you have any contingency plans?
If someone could explain to me what Scottish independence actually is. I think kind of like Brexit and other things, the word independence, are we going to have walls and security guards at the borders and our own passports and our own currency? Who knows? Looking at people's emotions just now, is it any surprise people in Scotland are going towards a leader who's been reasonably clear with what she's saying and Boris Johnson I don't care what your political aspirations are. They've got Michael Gove representing Scotland for independence. Why on earth would you have that man representing anything? He's hated in Scotland. Yeah, I wouldn't take the poll that's being done at the moment as any real judgment as to what feelings will be like in a year or two years from now.
We dealt with the independence vote the last time in 2013 and 2014, and we were profitable throughout, and we were able to grow our business throughout. What might it do? It might scare some of the English companies off and give us more opportunities. In all uncertain times, there are opportunities and uncertain times tend to be when you can get the best deals. No, like I say, I don't believe We'll see what happens with Brexit, but certainly when we went around our roadshow last time, it wasn't the key question on everyone's lips. We will still need to buy things from England. They still need to buy things from us, and whether it happens or not, we'll deal with it, because it's important for both countries.
England will still be Scotland's main trading partner. It's important that if things do change that, I think, as before, it didn't affect us before, and I don't think it'll affect us again.
Donald has asked, "I invested with you some time ago, and I'm still losing money on my shares. What do you think the market is missing in terms of the weak share price?
I can only answer that if you compare us against the other guys and how we've moved, Taylor Wimpey at their peak were at GBP 240, and they're GBP 140 today, and everyone's saying, "Brilliant." They had a capital raise of GBP 500 at GBP 150, and we were at GBP 150, GBP 165. You wouldn't have been losing money when it was GBP 150, GBP 165, and COVID struck on February, March. The world is where it is just now, and money has gone away from house builders. Yesterday went up by 5% because a vaccine was found. Fundamentally, before COVID came, we had Brexit, we've had COVID. I don't know. I can't impact those things. I don't believe our share price is performing poorly compared to the other guys. It certainly seems to be trending and tracking the same. Alastair, you do a lot of comparisons.
Maybe you can answer that a bit.
Well, they have had the benefits of several years of house price inflation, especially in the south and southeast, where most of them were focused. That helped their margins. As you said, Help to Buy has helped them to profit. Arguably, Scotland's in a slightly different cycle time-wise. In terms of company strategy, and I'd say this to any good company, is just keep to your knitting and the market will eventually catch up.
Thanks, Alastair. We've got to 5:00 P.M. now, so we've come to the end.
Sorry, I've got one quick question, actually, I was hoping to ask myself. Has coronavirus and new working practices changed your appetite to off-site manufacturing, which is becoming quite a buzzword south of the border?
It's a good question. I don't know if I've got long enough now. Off-site manufacture inside and in a building, I think for COVID, you're actually better building outside because it doesn't transfer as well. I think you need to move on from At some point, COVID is going to be. There's vaccines coming. I wouldn't structure my business based on assumptions as to what's going to happen with COVID, sort of the medium term. The off-site manufacture is just better for health and safety generally because you're not working in outside conditions. You can assemble things. You can work to more production line operation. We've been doing it for many years. We do about 1,000 kits a year in our kit factory, and then the kits are then assembled on site.
To get a house to window water tight in Scotland is significantly quicker than the English build model. Yeah, it's not something I'd really thought. I think you could argue both ways with that, Alastair. Is it a good thing or a bad thing with COVID? COVID's just a bad thing full stop.
Great. All right. Thank you.
And-
And then finally-
Yes
...we've got one final question.
Okay
The desire for greater liquidity. Is there any chance of persuading Sandy to sell some of his shares?
Sandy is an entrepreneur, and we clearly don't think the share price is where it should be. I think the chances of getting Sandy to share with the share price is at GBP 1, and it was at GBP 1.50 six months ago with all the same things in place. Sandy's not stupid, so I think he will sell, and he will sell when the time is right. Over time, I think we will make things more liquid. I can't see in the immediate future, but I can understand someone's eagerness to buy GBP 1.
Sure. Well, thank you very much everyone for joining. I'm very grateful. If you could fill out the feedback form afterwards, I'd be extremely grateful. We'll follow up with the remaining questions with you all individually afterwards. Innes, can I pass over to you for some final remarks?
Just say we thank you for your interest and thank you for looking into us. If you've learned anything about us or you like what you hear, get in touch to either Alastair or get in touch with us. From time to time when things are right, we will show people around sites. We aim to do more roadshows and more speaking to private investors. That's why we engage Progressive Equity. Today, doing this was so we could reach out and speak to you and let you ask questions. There's no bad questions. They're all fair game. We will continue doing what we're doing. We believe we've got a good offering here. We think we've got a great asset with our land bank of 15,000. We've got a good product, well respected by customers with a good brand and a good reputation.
We've got good track record of delivering results and of making good acquisitions. If you want to join us on the journey, more than welcome. If not, maybe in the future.
Thank you very much, everyone.