22 April 2015
Telford Homes (AIM: TEF), the London-focused residential property developer, is pleased to provide the following trading update ahead of its preliminary results for the year ended 31 March 2015, which will be announced on Wednesday, 27 May 2015.
- Consistently strong demand with contracts exchanged on 661 open market properties in the year to 31 March 2015, a significant increase on the prior year (2014: 515)
- Developing in areas of non-prime, inner London where demand exceeds supply and property prices have continued to increase at a modest rate
- Operating profit margin expected to be higher than last year (2014: 17.1 per cent before interest)
- Profit before tax for the year to 31 March 2015 anticipated to be above current market expectations
- Development pipeline as at 31 March 2015 remains over £1 billion of future revenue, with over 50 per cent of this forward sold
- 93 per cent forward sold for the year to 31 March 2016
- £180 million corporate loan facility secured in March 2015, supporting the Group's growth plans over the next few years
Following another year of strong trading conditions in the Group's non-prime, inner London locations the Board is pleased to confirm that profit before tax for the year to 31 March 2015 is anticipated to be above market expectations. Both gross and operating profit margin are expected to be higher than the previous year, assisted by some commercial property sales at higher than anticipated prices and cost inflation being less than the Board's prudent estimates.
The Group expects margins to return to normal levels over the next few years due to a combination of factors including homes completing that were sold in previous years, more modest price inflation and greater increases in some material and labour costs. These cost pressures are being closely monitored and are not expected to have a significant impact on the Board's longer term forecasts.
Telford Homes operates in relatively affordable areas of inner London that are benefitting from ongoing regeneration. Whilst property prices in London's prime markets have seen some cooling off in recent months, demand for the Group's properties remains strong and prices have seen controlled and steady growth in an environment of continued undersupply of new homes. These conditions will sustain the London property market in the long term and underpin the Group's growth plans. The Group's customers are also benefitting from a cheaper and more readily available supply of mortgage finance, arising from lower interest rates and greater competition amongst mortgage providers.
The Group exchanged contracts for the sale of 661 open market properties in the year to 31 March 2015, an increase of 28 per cent over last year (2014: 515) at an average price of £459,000 (2014: £400,000). Forward sold properties continue to generate immediate cash receipts from deposits taken and enhance longer term earnings and cash flow visibility. The Group is already 93 per cent sold in terms of open market homes expected to legally complete in the year to 31 March 2016.
Recent successful sales launches include Manhattan Plaza in E14, which is located close to Canary Wharf and will benefit from the new Crossrail station due to open in 2018. The launch started in London less than two weeks ago and is ongoing overseas with 50 per cent of the 120 open market apartments already sold. Earlier in 2015 the Group launched The Junction, E1 where half of the 26 open market homes have been sold and The Town Apartments located in Kentish Town, where all 15 open market homes sold out in a single weekend.
In 2014 Telford Homes announced that its development pipeline had exceeded £1 billion in future revenue for the first time following a number of significant site purchases. Since that date the Group has acquired a site in Redclyffe Road, Upton Park and will submit a planning application for more than 170 homes later this year. The Group is also looking at many other opportunities and has recently agreed terms with one of its affordable housing partners on a regeneration scheme with planning permission for over 100 homes.
The time taken to achieve planning consents remains a restriction on increasing the supply of new homes and can cause delays to the Group's planned development programmes. In recent months the Group has finally received a resolution to grant planning consent for a development on Caledonian Road, N1, and expects to complete on the site purchase shortly. The development will consist of 96 open market apartments along with 60 affordable homes and construction is anticipated to commence in the next few months.
After taking account of the high volume of completions in the second half of the year, the development pipeline as at 31 March 2015 remains at more than £1 billion of future revenue and over 50 per cent of this is forward sold.
As announced in March 2015, the Group has secured a £180 million banking facility provided by its existing banking partners, HSBC, RBS and Santander, and a new partner, Allied Irish Bank. This facility, which extends to March 2019, provides the finance to support the current pipeline and the Group's growth plans.
With the UK General Election approaching, tackling the housing shortage is high on all political party agendas and there is a consensus that more needs to be done which should be positive for the housebuilding industry. The Board is not concerned by any individual policy proposals announced to date, given the Group's typical price point, and so far there has been no sign of any short term impact on demand in the weeks leading up to the Election.
Telford Homes remains focused on relatively affordable locations in London that are experiencing high demand from owner-occupiers, investors and tenants due to a long term shortage of supply. The Group has maintained its strong pre-sold position and has a development pipeline that extends into 2019. With the new £180 million bank facility in place, the Board is confident that Telford Homes can maintain and supplement this pipeline and that there are many opportunities in the Group's areas of operation. This will assist in achieving the Board's stated long term forecasts including a significant increase in both output and profits over the next few years.
Jon Di-Stefano, Chief Executive of Telford Homes, commented: "Telford Homes is operating in areas of London that benefit from a stable property market and yet still suffer from a shortage of supply. Demand for the Group's homes has remained very strong and I am pleased to report that the Board anticipates exceeding current market expectations for profits in the year to 31 March 2015.
"Given our substantial forward sold position and a development pipeline of over £1 billion, the Group's earnings visibility is exceptionally strong. The Board expects significant growth in output and profits over the next few years and remains very confident in the long term prospects for Telford Homes."
For Further information:
|Telford Homes Plc|
Jon Di-Stefano, Chief Executive
Kate Rogers, Financial Director
Tel: +44 (0) 1992 809 800
|Shore Capital - Nomad and Joint Broker|
|Pascal Keane / Patrick Castle||Tel: +44 (0) 20 7408 4090|
|Peel Hunt LLP - Joint Broker|
|Alex Vaughan / Hugh Preston||Tel: +44 (0) 20 7418 8900|
|Quincy Allan / Henry Harrison-Topham||Tel: +44 (0) 20 7398 7710|
For further information, please see www.telfordhomes.london