Telford Homes PLC TEF Interim Results

  Telford Homes PLC (TEF) - Interim Results

RNS Number : 1421S
Telford Homes PLC
28 November 2012




Press Release 28 November 2012





                              Telford Homes Plc

                                      

                       ('Telford Homes' or the 'Group')

                                      

          Interim results for the six months ended 30 September 2012



Telford  Homes  Plc  (AIM:TEF),   the  London  focused  residential   property 
developer, today announces  its interim results  for the six  months ended  30 
September 2012.



Highlights

· Revenue increased significantly to £78.3 million (H1 2011: £58.6 million),
    including 252 open market completions (H1 2011: 125)
· Considerable improvement in margins with  gross margin before interest  of 
    23.8% and operating margin before interest  of 11.4% (year ended 31  March 
    2012: 17.6% and 6.2% respectively)
· Profit before tax  more than  quadrupled to  £6.5 million  (H1 2011:  £1.5 
    million)
· The Group has sold over 90% of the target open market completions for  the 
    year to 31 March 2013 and over 60% for the following year
· Strong demand from both owner-occupiers and investors in the inner  London 
    locations that are now the core of the Group's land buying strategy
· Reduction in net debt to £31.7 million (31 March 2012: £54.6 million)  and 
    gearing to 45.7%  (31 March 2012:  82.4%) with both  expected to  increase 
    again over the next 12 months as sites are acquired and developed
· Corporate loan facility increased to £90 million during the period
· The Board is confident that profits for the year to 31 March 2013 will  be 
    in line with market expectations and anticipates significant growth in the
    following year



Jon Di-Stefano,  Chief  Executive of  Telford  Homes, commented:  "I  am  very 
pleased to be able to report a quadrupling of profits in the first half of the
year and a  five percentage point  increase in our  operating margin. We  are 
achieving a strong rate  of sales to both  investors and owner-occupiers  with 
the Group now over 90 per cent  sold for this financial year and already  over 
60 per cent sold for the following year. Our development pipeline  represents 
five years of  gross profit based  on the  current year and,  with the  London 
market remaining buoyant, the Board expects Telford Homes to continue to  grow 
over the coming years."



                                   - Ends -





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 / Patrick Castle Tel: +44 (0) 20 7468 7910



Media enquiries:

Abchurch
Henry Harrison-Topham / Joanne Shears Tel: +44 (0) 20 7398 7709
joanne.shears@abchurch-group.com         www.abchurch-group.com





Copies of  this announcement  are available  from the  Group at  First  Floor, 
Stuart House, Queensgate, Britannia Road, Waltham Cross, Hertfordshire EN8 7TF
and on our website www.telfordhomes.plc.uk.



CHIEF EXECUTIVE'S STATEMENT



Telford Homes has  more than quadrupled  profit before tax  for the first  six 
months of  the year  and has  sold  over 90  per cent  of target  open  market 
completions for  the year  to 31  March  2013 and  over 60  per cent  for  the 
following year. Margins  are significantly  improved and the  market for  new 
homes in inner London has remained buoyant.



Results for the six months ended 30 September 2012

Revenue for the six  months ended 30 September  2012 was significantly  higher 
than the same period last year at £78.3 million (H1 2011: £58.6 million). This
increase is primarily driven by the  volume of open market completions with  a 
total of  252  open  market homes  legally  completed  in the  six  months  to 
September 2012 (H1 2011: 125 homes). The average selling price of these  homes 
increased to £288,000 (year ended 31 March 2012: £263,000) largely as a result
of different developments  completing in each  period but also  due to  higher 
underlying selling prices.  The increased  open market  revenue is  partially 
offset by a reduction in revenue  from the construction of affordable  housing 
as the Group returns to a more traditional split of open market and affordable
output. 



Total gross profit has increased to £16.8 million (H1 2011: £9.3 million)  and 
this is  stated after  expensing  loan interest,  which had  been  capitalised 
within inventories, of £1.9 million (H1 2011: £1.3 million). The gross  profit 
margin before  interest  of 23.8  per  cent has  increased  by more  than  six 
percentage points compared to the full year to 31 March 2012 (17.6 per  cent). 
This reflects  a combination  of increased  open market  prices combined  with 
tight control of construction costs  and less revenue and profit  attributable 
to lower margin affordable housing contracts.



Administrative expenses in the  period were higher at  £6.0 million (H1  2011: 
£4.8 million) largely due  to rising employee numbers  required to manage  the 
development pipeline and  an anticipated growth  in output over  the next  few 
years. Selling expenses have risen to £3.7 million (H1 2011: £2.0 million) due
partly to the greater number of completions in the period and also as a result
of the Group's success  in pre-selling homes under  construction that will  be 
delivered, and generate  profits, in future  financial years. Despite  higher 
administrative and  selling expenses,  the  operating margin  before  interest 
increased to 11.4  per cent compared  to 6.2  per cent in  the last  financial 
year.



Net finance costs have reduced to £0.5 million (H1 2011: £1.1 million) due  to 
lower interest hedging costs and less interest being expensed directly to  the 
income statement, which  occurs only  where there is  no activity  on a  given 
development site.



As a result, profit  before tax was considerably  higher than the same  period 
last year at £6.5 million (H1 2011: £1.5 million) and already more than double
the level reported for the year to  31 March 2012. Profit before tax for  the 
year to 31 March 2013 is expected  to be in line with market expectations  and 
therefore heavily weighted  to the first  half due entirely  to the timing  of 
completion of various developments.



Dividend

The Board is pleased  to declare an  increase in the  interim dividend to  2.0 
pence per share (H1 2011: 1.5 pence). The interim dividend, together with  the 
full year dividend payable in July 2013, is expected to be consistent with the
Board's stated intention  of paying around  a third of  earnings in  dividends 
each year.



The interim dividend will be paid on 11 January 2013 to those shareholders  on 
the register at the close of business on 14 December 2012.



Sales

The Group has  been achieving a  strong rate  of new sales  and has  exchanged 
contracts for the sale of 432 open market properties since 1 April 2012 with a
further 128 currently reserved subject to contract. This compares to 460  open 
market contracts exchanged in the year to 31 March 2012.



A large part of  this success has  been achieved through  the sale of  certain 
developments to individual investors up to  three years ahead of the  expected 
completion of the properties. These  investors, who are mainly based  overseas 
but include an  increasing number  of UK  buyers, are  all keen  to invest  in 
London and particularly the  inner London locations that  are now the core  of 
the Group's land buying strategy.



Following a number of other successful overseas launches this year, the  Group 
has sold an impressive 187 of the 198 open market homes at its Stratford Plaza
development in the last few  weeks. Of these, 140  were sold overseas and  the 
remaining 47  were  sold to  UK  investors.  The development  is  adjacent  to 
Stratford station and  the nearby  Westfield shopping  centre and  is due  for 
completion in the second half of 2015. Not only is this an exceptional result
for Telford  Homes but  it also  demonstrates recognition  of the  substantial 
investment that has already been made in  Stratford and that the area can  and 
will benefit from the success of the Olympic Games.



Investors are  generally being  attracted to  the strong  rental yields  being 
achieved across  the Group's  developments, which  are driven  by high  tenant 
demand caused by the inability of  many potential homeowners to buy their  own 
property and a restricted supply of homes coming to the market. These  buyers 
are stimulating  the  housing  market in  London  and  although  institutional 
investment in properties  for private rent  has become a  hot topic in  recent 
months, this  sector  is already  working  at  its most  basic  level  through 
individuals acquiring  small portfolios.  Despite this,  the Group  has  also 
agreed the sale of two smaller  developments entirely for private rent to  two 
different institutions in  recent weeks. These  developments comprise just  35 
open market homes between  them but, assuming the  sales proceed to  contract, 
this is  another  encouraging  sign  in terms  of  investment  in  residential 
property in London.



The mortgage market for UK buyers  has seen some improvement in recent  months 
but it  seems  unlikely  that  there  will be  a  substantial  change  in  the 
availability of finance  over the next  few years. However  Telford Homes  is 
developing in locations that attract buyers less affected by this  restriction 
and therefore  the  Group continues  to  be  successful in  selling  to  those 
owner-occupiers who require lower loan to value mortgages. The Group has made
over 200 sales to owner-occupiers since 1 April 2012 spread across a number of
its developments. The rate of sales achieved has meant that the Group has  not 
needed to  become involved  in some  of  the shared  equity schemes  that  are 
assisting purchasers  in  other parts  of  the country  including  the  recent 
government backed 'NewBuy' scheme.



Partnerships and affordable housing

Although the proportion of affordable housing being produced by the Group  has 
reduced since the end of  the market downturn, it still  accounts for up to  a 
third of the  homes on  each development. The  relationships and  partnerships 
that Telford Homes  has forged  in the  sector over  many years  are vital  in 
achieving  best  value   for  new   affordable  housing   and  sourcing   land 
opportunities.



Land buying and development pipeline

The Group's  strategy  is  to  acquire brownfield  land  within  inner  London 
boroughs excluding particularly high value 'prime' areas of Central London. As
expected, given  the  opportunities  in  the  area,  the  majority  of  recent 
acquisitions have been in East London but the Group has also purchased land in
Lambeth and Camden. The sites acquired predominantly have excellent links  to 
the City, Canary Wharf or  the West End and are  usually in transport zones  1 
and 2.



The Group is continuing to focus on sites that either already have a  planning 
consent or can be bought subject  to obtaining an appropriate consent.  There 
remains too much uncertainty over achieving reasonable planning permissions in
most London boroughs for the Group to take significant risks and  consequently 
only smaller sites will be acquired without a consent.



A number of new sites have been  acquired in the last six months with  several 
more progressing to  contract and,  including those,  the Group's  development 
pipeline is  currently expected  to deliver  gross profit  in excess  of  £130 
million from 1 October 2012 onwards. This is equivalent to over five years  of 
gross profit based on market forecasts for the year to 31 March 2013, the most
this has ever been in the  Group's history. All of this development  pipeline 
is expected to be delivered over the next three to four years.



Cash and borrowings

Total borrowings at 30 September 2012 were £47.0 million (31 March 2012: £67.0
million) and the  group held cash  balances of £15.3  million (31 March  2012: 
£12.4  million).   Net  debt   has  therefore   been  significantly   reduced 
predominantly due to  the number of  open market completions  in the  period. 
These completions resulted  in considerable cash  inflows and loan  repayments 
and outweighed  the  effects  of  on-going investment  in  land  and  work  in 
progress. As a result,  gearing has been  reduced to 45.7  per cent (31  March 
2012: 82.4 per  cent) and remains  at a much  lower level than  usual for  the 
Group. 



Net debt and gearing are expected to increase over the next 12 months as  more 
land is acquired and construction continues, particularly on some of the major
sites acquired in  the last  18 months. All  land and  construction costs  are 
funded 60 per cent by debt and 40 per cent by equity.



The Group successfully increased its corporate loan facility from £70  million 
to £90 million during the period.  This facility extends to 30 September  2014 
and is funding all of the  Group's current developments with the exception  of 
Avant-garde which  is  financed by  a  separate  facility with  HSBC.  At  30 
September 2012 there was  headroom within the corporate  loan facility of  £51 
million. This headroom is expected to fund the remaining construction costs on
existing sites and further site acquisitions.



Outlook

London has a strong international reputation and is widely regarded as a  safe 
haven for investment of all kinds. The housing market in London has  remained 
buoyant and the Group's area of operation fits with some of the locations that
are in most demand. In addition, a persistent shortage of supply of new  homes 
underpins this demand from both tenants and owner-occupiers.



Along with being over 90 per cent sold against expectations for the year to 31
March 2013 the Group  has exchanged contracts  for the sale  of more than  450 
open market properties  that will  complete in the  following three  financial 
years. Profit before tax in  the first six months  of the year has  increased 
more than  fourfold  and  the  operating margin  has  improved  by  over  five 
percentage points against the last full  year results. The Board is  confident 
that profits  for the  year to  31  March 2013  will be  in line  with  market 
expectations and  anticipates  significant  growth  beyond  this  given  sales 
already secured and the Group's substantial development pipeline.





Jon Di-Stefano

Chief Executive

27 November 2012

GROUP INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012



                                 Unaudited    Unaudited   Audited

                                  6 months     6 months      Year

                                     ended        ended     ended
                              30 September 30 September  31 March

                                      2012         2011      2012
                         Note         £000         £000      £000
Revenue                             78,324       58,603   124,352
Cost of sales                     (61,549)     (49,291) (105,432)
Gross profit                        16,775        9,312    18,920
Administrative expenses            (5,993)      (4,780)  (10,637)
Selling expenses                   (3,716)      (2,022)   (3,533)
Operating profit                     7,066        2,510     4,750
Finance income                          62           78       127
Finance costs                        (602)      (1,134)   (1,832)
Profit before income tax             6,526        1,454     3,045
Income tax expense        3        (1,547)        (420)     (759)
Profit after income tax              4,979        1,034     2,286
Earnings per share:
Basic                     5          10.2p         2.1p      4.7p
Diluted                   5           9.9p         2.1p      4.6p





All activities are in respect of continuing operations.











GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012





                                               Unaudited    Unaudited  Audited

                                                6 months     6 months     Year

                                                   ended        ended    ended
                                            30 September 30 September 31 March

                                                    2012         2011     2012
                                                    £000         £000     £000
Movement in excess tax on share options              164          (2)       54
Other comprehensive income (expense) net             164          (2)       54
of tax
Profit for the period                              4,979        1,034    2,286
Total comprehensive income for the period         5,143        1,032    2,340







GROUP BALANCE SHEET

AT 30 SEPTEMBER 2012



                                    Unaudited    Unaudited  Audited

                                 30 September 30 September 31 March

                                         2012         2011     2012
                                         £000         £000     £000
Non current assets
Property, plant and equipment             413          421      381
Deferred income tax assets                328            -      155
                                          741          421      536
Current assets
Inventories                           124,473      129,294  135,810
Trade and other receivables             8,824       14,850   16,861
Income tax receivable                       -          108        -
Cash and cash equivalents              15,275       14,557   12,419
                                      148,572      158,809  165,090
Total assets                          149,313      159,230  165,626
Non current liabilities
Hire purchase liabilities                   -         (11)      (3)
Deferred income tax liabilities             -         (12)        -
                                            -         (23)      (3)
Current liabilities
Trade and other payables             (29,796)     (32,604) (31,937)
Borrowings                           (46,997)     (60,210) (66,983)
Current income tax liabilities        (1,563)        (900)    (484)
Hire purchase liabilities                (11)         (16)     (16)
                                     (78,367)     (93,730) (99,420)
Total liabilities                    (78,367)     (93,753) (99,423)
Net assets                             70,946       65,477   66,203
Capital and reserves
Issued share capital                    4,960        4,900    4,950
Share premium                          37,581       37,075   37,503
Retained earnings                      28,405       23,502   23,750
Total equity                           70,946       65,477   66,203





GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 (UNAUDITED)



                                    Share   Share Retained  Total

                                  capital premium earnings equity
                                     £000    £000     £000   £000
Balance at 1 April 2012             4,950  37,503   23,750 66,203
Profit for the period                   -       -    4,979  4,979
Total other comprehensive income        -       -      164    164
Dividend on equity shares               -       -    (738)  (738)
Proceeds of equity share issue         10      78        -     88
Share-based payments                    -       -       71     71
Sale of own shares                      -       -      191    191
Purchase of own shares                  -       -     (72)   (72)
Write down in value of own shares       -       -       60     60
Balance at 30 September 2012        4,960  37,581   28,405 70,946





GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011 (UNAUDITED)



                                    Share   Share Retained  Total

                                  capital premium earnings equity
                                     £000    £000     £000   £000
Balance at 1 April 2011             4,900  37,075   22,765 64,740
Profit for the period                   -       -    1,034  1,034
Total other comprehensive expense       -       -      (2)    (2)
Dividend on equity shares               -       -    (611)  (611)
Share-based payments                    -       -       83     83
Sale of own shares                      -       -      174    174
Purchase of own shares                  -       -      (5)    (5)
Write down in value of own shares       -       -       64     64
Balance at 30 September 2011        4,900  37,075   23,502 65,477





GROUPSTATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2012 (AUDITED)



                                    Share   Share Retained   Total

                                  capital premium earnings  equity
                                     £000    £000     £000    £000
Balance at 1 April 2011             4,900  37,075   22,765  64,740
Profit for the year                     -       -    2,286   2,286
Total other comprehensive income        -       -       54      54
Dividend on equity shares               -       -  (1,348) (1,348)
Proceeds of equity share issue         50     428        -     478
Share-based payments                    -       -      157     157
Sale of own shares                      -       -      217     217
Purchase of own shares                  -       -    (510)   (510)
Write down in value of own shares       -       -      129     129
Balance at 31 March 2012            4,950  37,503   23,750  66,203

GROUP CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012



                                               Unaudited    Unaudited  Audited

                                                6 months     6 months     Year

                                                   ended        ended    ended
                                            30 September 30 September 31 March

                                                    2012         2011     2012
                                                    £000         £000     £000
Cash flow from operating activities
Operating profit                                   7,066        2,510    4,750
Depreciation                                         115           91      196
Write down in value of own shares                     60           64      129
Share-based payments                                  71           83      157
Loss (profit) on sale of tangible fixed                6         (14)     (13)
assets
Decrease (increase) in inventories                12,502      (2,856)  (7,452)
Decrease (increase) in receivables                 8,006        (639)  (3,516)
(Decrease) increase in payables                  (2,148)        4,022    3,511
                                                  25,678        3,261  (2,238)
Interest paid                                    (1,872)      (2,363)  (4,851)
Income tax paid                                    (477)            -    (757)
Cash flow from operating activities               23,329          898  (7,846)
Cash flow from investing activities
Purchase of tangible assets                        (154)        (154)    (220)
Proceeds from sale of tangible assets                  -           14       14
Interest received                                     62           78      127
Cash flow from investing activities                 (92)         (62)     (79)
Cash flow from financing activities
Proceeds from issuance of ordinary share              88            -      478
capital
Purchase of own shares                              (72)          (5)    (510)
Sale of own shares                                   191          174      217
Increase in bank loans                            14,928       25,431   63,618
Repayment of bank loans                         (34,771)     (30,099) (60,932)
Dividend paid                                      (738)        (611)  (1,348)
Capital element of hire purchase payments            (7)          (6)     (16)
Cash flow from financing activities             (20,381)      (5,116)    1,507
Net increase (decrease) in cash and cash           2,856      (4,280)  (6,418)
equivalents
Cash and cash equivalents brought forward         12,419       18,837   18,837
Cash and cash equivalents carried forward         15,275       14,557   12,419



NOTES



1 Basis of preparation
The interim accounts have  been prepared on the  basis of the recognition  and 
measurement requirements of International Financial Reporting Standards (IFRS)
in issue that are either endorsed by the EU and effective at 31 March 2013  or 
are expected to be endorsed and effective at 31 March 2013.



The interim accounts do not  constitute statutory accounts within the  meaning 
of Section 434  of the Companies  Act 2006.  The figures for  the half  years 
ended 30 September  2012 and  30 September  2011 are  unaudited. The  interim 
accounts were approved  by the  directors on 27  November 2012  and have  been 
reviewed by  the auditors  whose  review report  is  unqualified and  will  be 
included in the interim report distributed to shareholders.



The directors  have assessed  the Group's  projected business  activities  and 
available financial resources together with  detailed forecasts for cash  flow 
and relevant  sensitivity  analysis.  The directors  believe  that  the  Group 
remains well placed to  manage its business  risks successfully. After  making 
appropriate enquiries the  directors have  a reasonable  expectation that  the 
Group has  adequate resources  to continue  in operational  existence for  the 
foreseeable future.  Accordingly the  directors continue  to adopt  the  going 
concern basis in preparing the interim accounts.



The Group's statutory accounts for the year ended 31 March 2012 were  approved 
by the Board of directors on 29 May 2012, have been reported on by the Group's
auditors and  delivered to  the Registrar  of Companies.  The report  of  the 
auditors was unqualified and did not  contain statements under Section 498  of 
the Companies Act 2006.



The preparation  of  financial statements  in  conformity with  IFRS  requires 
management to  make  judgements, estimates  and  assumptions that  affect  the 
application of policies  and reported amounts  of assets, liabilities,  income 
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable  under 
the circumstances, the results  of which form the  basis of making  judgements 
about the  carrying value  of  assets and  liabilities  that are  not  readily 
apparent from other sources. Actual results may differ from these estimates.



The  significant  judgements  made  by  management  in  applying  the  Group's 
accounting policies and the  key sources of  uncertainty were principally  the 
same as  those applied  to the  Group's financial  statements as  at 31  March 
2012.





2 Accounting policies



Accounting convention

The interim accounts have been  prepared under the historical cost  convention 
and on  a basis  consistent  with the  accounting  policies in  the  financial 
statements for the year ended 31 March 2012.







3 Taxation
Taxation has  been  calculated on  the  profit for  the  six months  ended  30 
September 2012 at the estimated effective tax rate of 23.8% for current  taxes 
only (September 2011: 24.8%).



4 Dividends
The interim dividend declared  for the six months  ended 30 September 2012  is 
2.0 pence per ordinary share and is expected to be paid on 11 January 2013  to 
those shareholders on  the register at  the close of  business on 14  December 
2012. This dividend was declared after 30 September 2012.



The interim dividend paid for the six  months ended 30 September 2011 was  1.5 
pence per ordinary share  and the final  dividend paid for  the year ended  31 
March 2012 was 1.5 pence per ordinary share.



5 Earnings per share
Basic earnings per share is  calculated by dividing the earnings  attributable 
to ordinary shareholders  by the  weighted average number  of ordinary  shares 
outstanding during the year, excluding those held in the Share Incentive Plan,
which are treated as cancelled. For  diluted earnings per share, the  weighted 
average number of ordinary shares in issue is adjusted to assume conversion of
all dilutive potential ordinary shares.



Earnings per share have been calculated using the following figures:



                                           Unaudited      Unaudited    Audited
                                                                          Year

                                      6 months ended 6 months ended      ended

                                        30 September   30 September   31 March

                                                2012           2011       2012
Weighted average number of shares in      48,959,318     48,369,691 48,563,906
issue
Dilution - effect of share schemes         1,190,278         43,392    858,163
Diluted weighted average number of        50,149,596     48,413,083 49,422,069
shares in issue
Profit on ordinary activities after       £4,979,000     £1,034,000 £2,286,000
taxation
Earnings per share:
Basic                                          10.2p           2.1p       4.7p
Diluted                                         9.9p           2.1p       4.6p



6 Interim report


Copies of  this announcement  are available  from the  Group at  First  Floor, 
Stuart House,  Queensgate, Britannia  Road, Waltham  Cross, Hertfordshire  EN8 
7TF. The Group's interim  report for the six  months ended 30 September  2012 
will be posted to shareholders shortly and will be available on our website at
www.telfordhomes.plc.uk.



                                   - ENDS -

                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


IR BKODBABDDADB -0- Nov/28/2012 07:00 GMT