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 2012 which will be released on 28 November 2012.
- Strong sales achieved, exchanging contracts on 218 open market properties in the six months to 30 September 2012
- London property market remains buoyant in our area of operation with demand from both overseas and UK buyers
- Significant increase in profits expected for the period with a total of 252 legal completions achieved (H1 2011: 125) and considerably improved margins
- Profit before tax for the year to 31 March 2013 anticipated to be in line with market expectations and heavily weighted to the first half of the financial year
- The Group already anticipates profits ahead of market expectations for the year to 31 March 2014 due to pre-sales secured at higher than expected margins
- Extended debt facility of £90 million provides sufficient headroom to develop all existing schemes and acquire new sites
Telford Homes has continued to secure sales at a strong and consistent rate with 218 contracts exchanged in the six months to 30 September 2012. The Group has achieved further significant success selling certain developments to investors, mainly overseas, who are particularly attracted to the inner London locations that are now the core of the Group’s land buying strategy. The key driver of these sales is strong rental yields driven by high tenant demand, which in turn is a function of restricted mortgage finance and a lack of supply of homes coming to the market. It is a common misconception that overseas investors are leaving properties empty; this is not the case and in fact, along with UK based investors, they are stimulating the market in London in the absence of other forms of finance. Although availability of mortgage finance is showing some signs of improvement this dynamic is likely to remain for some time to come. However, the Group continues to be successful in selling to owner-occupiers and again inner London locations are in high demand with many buyers getting financial assistance from family members.
The Group has continued to acquire new sites and now has a development pipeline that is expected to deliver approximately five years of gross profit based on market forecasts for the year to 31 March 2013. Despite this, net debt has remained at a low level and was £31.9 million at 30 September 2012 (31 March 2012: £54.6 million), although this is projected to increase significantly with the development of recently acquired sites.
The Group has secured additional debt finance by successfully negotiating an increase in its corporate loan facility from £70 million to £90 million with its three existing banks. The extended facility ensures that the Group has sufficient bank finance available to develop all of its existing schemes and to acquire new sites over the next few years.
The Group is now 85 per cent sold in terms of the open market homes expected to legally complete in the year to 31 March 2013 and over 50 per cent sold for the year to 31 March 2014. The strength of London as a global city, its international appeal, transport connections and a shortage of new homes make the Group’s area of operation particularly attractive, especially on the back of a very successful Olympic Games.
The Group expects to report a significant increase in profits for the first six months of the year based on 252 open market legal completions (H1 2011: 125) and considerably improved margins. The results for the full year will be heavily weighted to the first half and the Group currently anticipates that profits for the year to 31 March 2013 will be in line with market expectations. However due to pre-sales secured at higher than expected margins, the Group already anticipates that profits for the following year to 31 March 2014 will be ahead of market expectations. Telford Homes is now delivering on the profit growth that has been forecast for the last two years, and with a significant development pipeline already in place and an increased bank facility, is well placed to continue that growth in the future.
Jon Di-Stefano, Chief Executive of Telford Homes, commented: "We expect to report significant profit growth for the first six months of the year which will underpin our confidence in achieving market expectations for the full year to 31 March 2013. The Group is 85 per cent sold for the current year and already 50 per cent sold for the following year and, with margins much improved, we already anticipate improving on the current market forecast for the year to 31 March 2014.
"Our development pipeline can deliver five years of gross profit based on the current year and we are selling well to both investors and owner-occupiers. The market fundamentals in London remain strong and the Board is looking forward to continuing the growth of the business over 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|
|Pascal Keane||Tel: +44 (0) 20 7408 4090|
|Henry Harrison-Topham / Joanne Shears||Tel: +44 (0) 20 7398 7709|