Telford Homes PLC - Interim Results

Highlights

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Total revenue in H1 2019 increased by 31 per cent to £129.6m (H1 2018: £99.3m)

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Total profit before tax in the period rose by 16.1 per cent to £10.1m (H1 2018: £8.7m)

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Increased interim dividend by 6.3 per cent to 8.5 pence (H1 2018: 8.0 pence)

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Remain confident in long-term strategy of delivering an increased number of much needed homes in non-prime locations of the chronically undersupplied London market

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Strategic shift towards build to rent over the last three years well timed and this sector is expected to form a significant part of the London market going forward

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Telford Homes is at the forefront of build to rent in London delivering over 1,750 homes in the sector and working with multiple institutional partners

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Progressing towards a full build contract with Greystar after planning secured for 894 build to rent homes at Parkside, Nine Elms

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Exchange of contracts expected shortly with major institutional partner for 257 homes at Equipment Works, Walthamstow

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Partnering with an established property owner to develop 700 homes in East London, representing a key milestone in the Group's long-term growth strategy

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Excellent progress made in process to identify long term institutional investment partner to accelerate build to rent activity

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Continuing to secure individual open market sales, particularly for homes priced under £600,000, despite short-term market uncertainty

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Substantial development pipeline of £1.65 billion of future revenue comprising just over 5,000 homes

Jon Di-Stefano, Chief Executive of Telford Homes, commented: "Telford Homes made pleasing progress during the first half of the financial year, despite an increasingly uncertain economic and political backdrop.  Our strategic shift towards purpose built rental homes sold to institutional investors continues to be beneficial to our risk profile and growth potential whilst also being well timed in terms of the changing requirements of our typical customers in London.

We are committed to our strategy which is built upon a fundamental undersupply of homes in non-prime locations in London and our belief that short-term market sentiment does not alter the long-term structural imbalance between housing supply and housing need. These factors, coupled with our excellent reputation as a trusted build to rent partner and the associated change in our business model, give us the confidence to look forward to more success in future years."

Outlook

In our trading update on 10 October 2018 we reiterated our original target of exceeding £50 million of total pre-tax profit for the year to 31 March 2019.  We also identified that the greatest risk to achieving that target was approximately 90 homes that were still to be sold of which 25 were priced above £600,000.  Since that date we have made good progress and now have just under 60 sales still to achieve of which 20 are priced above £600,000.  However, the uncertainty arising from Brexit and indeed the wider political situation remains a concern across the sector making it difficult to accurately predict sales rates over the coming months.  Individual sales already secured, combined with existing construction contracts for build to rent and subsidised affordable housing and new construction contracts that are expected to be exchanged before 31 March 2019, would amount to total profit before tax in excess of £40 million.  This provides us with a strong base to work towards our £50 million target by securing further individual sales that will complete in the remainder of financial year.

We are committed to our strategy which is built upon a fundamental undersupply of homes in non-prime locations in London and our belief that short-term market sentiment does not alter the long-term structural imbalance between housing supply and housing need.  These factors, coupled with our excellent reputation as a trusted build to rent partner, the associated change in our business model and the new opportunities this growing sector brings, give us the confidence to look forward to more success in future years.