10 July 2008
Telford Homes Plc (AIM:TEF), the residential developer in East London noted for regeneration projects within public sector partnerships, announces that, at the Annual General Meeting of the Company held earlier today, all resolutions put to shareholders were duly passed.
Andrew Wiseman, Chief Executive, gave the following statement:
During the first three months of the new financial year we have legally completed the sale of 94 open market homes with just one contract failure. Against a background of media reports continuing to focus on worsening market conditions, we have continued to make sales, albeit at a slower rate, at our two sales outlets, Queen Mary's Gate in Woodford and Nayland Court in Romford. At Queen Mary's Gate we have sold six apartments, subject to contract, in the last five weeks and have just nine still to sell on the completed first phase.
Our ability to de-risk the business by achieving pre-sales at new developments including Greenwich Creekside and Avant-Garde, Bethnal Green Road, will play a part in determining how quickly the Company can increase investment in the development pipeline. One of our key strengths is our partnerships with housing associations and the Housing Corporation and, regardless of market conditions, we would be well placed to benefit from an increase in funding to this sector.
Control of cash remains the focus of the business. Until such time as market conditions improve, we will only be investing in new land where the initial equity requirement is minimal and where cash inflows are certain. In addition we are prioritising working capital investment in affordable housing on some sites which are already under development but where open market sales have not yet been made.
The key issue in our operating cash flow for the next year is the receipt of monies from legal completions where contracts have already been exchanged. The nine months from October 2008 to June 2009 represent a busy period of anticipated completions with over 500 open market homes expected to be handed-over during this time.
The availability and cost of mortgage finance together with satisfactory valuations by lenders' surveyors will be significant factors in determining how successful these will be. Our historic policy of transparent net pricing, together with our pro-active approach to working with customers, lenders and valuers, gives us confidence that we will keep failures to a minimum.
We have strong support from each of our banks and continue to have no concerns regarding existing facilities. We are seeking bank finance for new developments as and when they receive a planning consent although the decision to commence development will depend upon our confidence in achieving sales in each case.
Change in accounting policy
On 28 May 2008 we reported that we expected new accounting guidance to require a change to our accounting policy for revenue and profit recognition and be effective for the year ended 31 March 2010.
IFRIC 15 issued on 3 July 2008 confirms that open market sales of real estate will need to be accounted for on legal completion of the properties rather than on a percentage of completion basis. The accounting for affordable homes sold under construction contracts remains unchanged.
After careful consideration we have decided to adopt IFRIC 15 earlier then required for the year ended 31 March 2009. Although it remains the case that a change in the method of accounting makes no difference to the financial health or day to day operation of the business, it is clear that any uncertainty over future accounting policies is not helpful. IFRIC 15 will have a significant impact on reported revenue and profit in each year and on the reported net assets of the Company and early adoption will remove any need to report the current year under two sets of accounting policies. In addition, as the change will mean that a significant proportion of profits already recognised on exchange of contracts will now be deferred into the future when completions occur, there will be a substantial tax saving in the first year of adoption. With the current focus on cash this is a major argument in favour of early adoption of IFRIC 15.
The restatement of the figures in accordance with IFRIC 15 is a significant exercise and we expect to report audited restated figures for the year ended 31 March 2008 during September 2008, in advance of our interim results for the current year.
For further information:
|Telford Homes Plc|
|Andrew Wiseman, Chief Executive||Tel: +44 (0) 1992 809 800|
|Jon Di-Stefano, Financial Director|
|Graham Shore||Tel: +44 (0) 020 7408 4090|
|Henry Harrison-Topham / Chris Lane||Tel: +44 (0) 20 7398 7708|