Trading Update

16 October 2014

Telford Homes Plc (AIM:TEF), the London focused residential property developer, is pleased to give the following trading update ahead of its interim results for the six months ended 30 September 2014, which will be released on Wednesday, 26 November 2014.

Highlights

• Strong demand for Telford Homes product continues with over 500 open market sales since 1 April 2014
• Tremendous success at the October launch of Stratosphere, E15 with over 200 sales already achieved, a record number for a single site launch for Telford Homes
• £16.3 million contract signed with Workspace to redevelop the first phase of Poplar Business Park with a gross development value (“GDV”) in excess of £75 million
• Development pipeline now over £1 billion of future revenue for the first time in the Group’s history
• Group well on track to deliver on growth and profit expectations for the next four years

Current trading

The Board is very pleased to confirm that Telford Homes continues to see strong demand for its homes in London and between contracts exchanged and properties sold, subject to contract, the Group has already sold more than 500 open market homes since 1 April 2014.  This compares favourably with the 515 contracts exchanged in the year to 31 March 2014.

The long-term prospects for the London market remain excellent with demand for somewhere to live continuing to exceed the supply of new homes.  The dynamics of anticipated population growth, a strong local economy and increasing job opportunities underpin the Group’s plans to significantly grow its output over the next few years.  Suggestions of a price bubble in London are unfounded in the locations that Telford Homes is operating in, where the Group focuses on building the right product at relatively affordable prices especially when compared to prime Central London.  As the Board predicted, the rate of price inflation experienced by the Group has necessarily slowed as affordability constraints on both mortgage payments and rents act as a welcome restraint, however prices are certainly not falling.  Ongoing control of the mortgage market by both individual lenders and the Bank of England is preventing a credit fuelled bubble and as such property prices are able to find their natural level.

Sales

There is no greater evidence of the strength of demand for the Group’s product than the success already achieved at the launch of Stratosphere, E15, a spectacular 36 storey tower in the heart of Stratford.  The Board is delighted to report that over 200 of the 307 open market homes have already been sold, subject to contract, the best result that Telford Homes has ever achieved at a single launch.  The launch commenced on 2 October 2014 with over 100 sales achieved in the UK and the remainder are being sold to overseas investors at events that continue until the end of October.

The Group continues to market some of its developments to investors, both in the UK and overseas, as the sales achieved are ensuring homes are being built for the many people who want, or need, to rent properties in London.  Rental demand remains exceptionally strong given the lack of supply of new homes and the Group’s investor customers do not leave their properties empty.

The success achieved at Stratosphere follows similar launches earlier this year of Stratford Central, where 151 of 157 open market homes have been sold and Vibe in Dalston where 79 of 81 homes in the first release were sold.  Completions across these three developments commence with Vibe in late 2016 and conclude at Stratosphere in late 2018 and therefore the sales further enhance the Group’s strong pre-sold position many years in advance.  The Group has also maintained a healthy rate of sales at its on-site sales centres and on smaller development launches to both owner-occupiers and investors.

Development pipeline 

Telford Homes announced on 30 September 2014 that the Group’s development pipeline had exceeded £1 billion of future revenue for the first time in its history.  This follows the £16.3 million contract agreed with Workspace PLC to progress the first of three phases of redevelopment of the Poplar Business Park, E14.  The first phase represents 170 homes with a total residential GDV in excess of £75 million.  Reaching £1 billion in future pipeline revenue is a significant milestone illustrating the Group’s increased capacity to deliver substantial future growth in both output and profit.

Outlook 

London remains one of the most robust property markets in the world.  The Group’s strategy of building homes in locations where customers want to live and can afford to live, in an environment of chronic under supply, is resulting in continued sales success, launch after launch.  With a significant development pipeline and an increasingly strong forward sold position the Board has even greater confidence in its expectations for the substantial growth of Telford Homes over the next few years.

Jon Di-Stefano, Chief Executive of Telford Homes, commented:  “The Board believes in the long-term prospects of the London market.  Our phenomenally successful launch at Stratosphere is further evidence that we are delivering the right type of property, in the right location at the right price.  The Group now has more than £1 billion of future revenue in its development pipeline and we are already well on track to deliver the previously reported expectation of pre-tax profits in excess of £120 million over the four years to 31 March 2018.”

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