16 April 2014

Telford Homes Plc (AIM:TEF), the London focused residential property developer, is pleased to give the following trading update ahead of its preliminary results for the year ended 31 March 2014, which will be released on 28 May 2014.


  • Consistently strong demand with contracts exchanged on 515 open market properties in the year to 31 March 2014
  • Operating in areas of London where demand exceeds supply and where people want to live and can afford to live
  • 98% forward sold for the year to 31 March 2015, over 70% for 2016 and over 25% for 2017
  • Operating margin before interest expected to be in excess of 15% (2013: 9.7%)
  • Profit before tax for the year to 31 March 2014 anticipated to be more than double the previous year
  • Development pipeline increased by 40% to an anticipated £875 million of future revenue
  • Net cash position at 31 March 2014 and zero gearing (2013: 47%)
  • Board giving forward guidance that profit before tax expected to double again by 31 March 2018 with a cumulative total of £120 million anticipated over the next four financial years.

Current trading

The Board is delighted to confirm that once again Telford Homes will be reporting significant growth in margins, profits and the development pipeline for the year to 31 March 2014. The London property market has remained buoyant, with demand from those wanting to live in London remaining well in excess of the supply of new homes.

The Group exchanged contracts for the sale of 515 open market properties in the year and legally completed 492 open market properties in the same period resulting in a further advance on the already strong pre-sold position. As at 31 March 2014 the Group was 98 per cent sold in terms of open market homes expected to legally complete in the year to 31 March 2015, over 70 per cent sold for 2016 and over 25 per cent sold for 2017.

This has been achieved without any significant development launches in the second half of the financial year and with a number of major developments due to be launched in the next few months the pre-sold position is expected to increase further. These commence later this month with Stratford Central, E15, which is adjacent to the Westfield shopping centre. The 31 storey development will initially be launched to UK buyers and comprises 181 new homes, including 157 open market properties.

The Group's strategy is to target sales early in the development timeframe to control risk, enhance profit and cash flow visibility and to enable further investment in the development pipeline. However the Group's strong pre-sold position has enabled the Board to manage ongoing sales releases to take advantage of improving prices in inner London. The average price of the open market homes exchanged in the year to 31 March 2014 has increased to £400,000, up from £353,000 last year.

Telford Homes continues to operate in relatively affordable areas of inner London. As wider economic sentiment improves, the availability of mortgage finance has increased and yet a large proportion of the Group's sales are to buyers taking less than 80 per cent loan to value mortgages. The Group has still not made a sale through the government's ‘Help to Buy' scheme or any other similar product. The Board is confident that the market in the Group's specific area of operation, which does not include prime central London, is underpinned by the imbalance of demand and supply and remains affordable to prospective owners and tenants.

The Board has already reported that profit before tax for the year to 31 March 2014 will be significantly ahead of the original market expectations set in May 2013. The Board now expects profits to more than double compared to the previous year and therefore increase by more than 500 per cent over the last two years. The Group has been 100 per cent pre-sold for the year to 31 March 2014 for some time and therefore this continuing improvement on original forecasts has been driven by enhanced profit recognition on affordable housing contracts and robust cost control. The operating margin before interest for the year to 31 March 2014 is expected to be in excess of 15 per cent (2013: 9.7 per cent).

Development pipeline

The Group has continued to strengthen its development pipeline utilising the £20 million of equity raised in the share placing in June 2013 together with significant deposits received from pre-sales and trading profits. Given the number of opportunities that exist in East London, Telford Homes still acquires a large proportion of its development sites in its traditional heartland. However the Group continues to expand its interests in other locations including sites in Islington, Camden, Lambeth, Barnet and near The Oval in Southwark.

As a result of the Group's acquisitions over the last year, the development pipeline as at 31 March 2014 is anticipated to deliver future revenue of £875 million compared to £627 million as at 31 March 2013, an increase of 40 per cent. Due to the differing price points of many of the Group's developments the Board has decided to report the development pipeline in terms of expected future revenue rather than unit numbers. This should enable comparison with current trading levels. The Group's pipeline represents more than six times the anticipated revenue for the year to 31 March 2014.

Despite a number of new site acquisitions the Group will report a net cash balance at 31 March 2014 and therefore zero gearing (2013: 47 per cent). This will change as sites acquired subject to planning achieve consents and as construction continues on some of the Group's more significant developments.


London has one of the strongest and most robust property markets in the world and Telford Homes is operating in the right locations within that market where the Group's customers both want to live and can afford to live. Sales have been achieved at increasing prices and the Group is delivering significantly higher margins and profits with considerable levels of forward sales already achieved for the year to 31 March 2015 and beyond.

As a result of the pre-sold position and the substantially increased development pipeline the Group has good visibility over future profits. The Board expects to report more than a doubling of profit before tax for the year to 31 March 2014 but can also report that, assuming a stable market, it expects annual profit before tax to increase over the next four financial years such that it will more than double again by 31 March 2018. In total the Board is very pleased to give guidance at this early stage that it anticipates cumulative profit before tax over the next four financial years will be in excess of £120 million. Over 85 per cent of the anticipated revenue that will drive this significant increase is within the existing development pipeline.

The Board intends to maintain its current dividend policy of paying one third of after tax earnings in dividends and investing the rest back into the business because, given the expected long term strength and stability of London, Telford Homes has the ability to continue growing further into the future.

Jon Di-Stefano, Chief Executive of Telford Homes, commented: "The market in which Telford Homes operates remains very strong, and the Group is benefitting from this trading environment. Margins and profits have been increasing and profit before tax is expected to more than double in the year to 31 March 2014. In addition the Group has continued to invest in the development pipeline such that this represents future revenue of £875 million, a 40 per cent increase in the year.

"I am delighted that the Board has sufficient visibility over future profits to give forward guidance that cumulative profit before tax over the next four financial years to 31 March 2018 will exceed £120 million. This will represent a substantial increase in the size of Telford Homes and be achieved ahead of our previous expectations. Given our area of operation and our prospects for the future I am looking forward with confidence to the next few years."

For Further information:

Telford Homes Plc  
Jon Di-Stefano, Chief Executive Tel: +44 (0) 1992 809 800
Katie Rogers, Financial Director www.telfordhomes.plc.uk
Shore Capital  
Pascal Keane Tel: +44 (0) 020 7408 4090
Media enquiries:  
Abchurch Communications  
Henry Harrison-Topham / Joanne Shears  Tel: +44 (0) 20 7398 7709
joanne.sheares@abchurch-group.com www.abchurch-group.com