PRELIMINARY RESULTS 31 MARCH 2014 Developing in London
Where we build 1 TELFORD HOMES Plc Preliminary Results 31 March 2014
Highlights • Buoyant London market • Strong forward sales position • No sales through ‘Help to Buy’ • Not enough homes to meet demand • Operating where people want to live and can afford to live • Substantial increase in margins, profits and dividends • New equity and deposits on forward sales driving investment in new opportunities • Development pipeline increased by 40 per cent • Net cash and zero gearing AVANT-GARDE • More than £120 million of cumulative pre-tax E1 profit over the next four years 2 www.telfordhomes.plc.uk
Percentage of expected open market completions that have already been sold 100% 98% 80% 72% 60% 40% 27% 20% 2015 2016 2017 0% 3 TELFORD HOMES Plc Preliminary Results 31 March 2014
STRATFORD Sales performance CENTRAL E15 • Continuing sales success with contracts exchanged on 515 open market properties in the year • Exceeds the 492 open market completions thereby increasing the forward sold position • £341 million of revenue secured but not yet recognised at 31 March 2014 (2013: £280 million) • Achieved without any significant launches in the second half of the year • Enhanced by phenomenal success of Stratford Central development in recent weeks • Most of the 157 open market homes already sold for over £70 million • More than 60 sales at a UK only sales launch held ahead of similar events overseas • Stratford Central completes in the year to 31 March 2018 • Therefore secured forward sales four financial years ahead for the first time 4 www.telfordhomes.plc.uk
Our customers • Split of sales has changed slightly in favour of owner-occupiers and UK based investors • Respected brand and reputation for quality and service • Many repeat purchasers buying at recent sales events • There has been negative commentary on marketing London property to overseas investors • Investors are not leaving properties empty and instead invest to secure a rental return • Telford Homes will continue to sell a proportion of its homes overseas • Strong demand from potential tenants who either cannot afford to buy or do not want to buy PARKSIDE QUARTER E14 5 TELFORD HOMES Plc Preliminary Results 31 March 2014
Breakdown of open market contracts exchanged in the year to 31 March 2014 33% 32% 35% UK investors Owner-occupiers Overseas investors 6 www.telfordhomes.plc.uk
7 TELFORD HOMES Plc Preliminary Results 31 March 2014
London market HORIZONS E14 • Strategy to secure forward sales to control risk and enhance profit and cash flow visibility • Success has allowed the Board to manage sales releases to take advantage of improving prices • Underlying price inflation in our locations of between 10 and 15% • Concerns over property bubble overlook the underlying imbalance between supply and demand • Imbalance leads to increasing prices but only if those who want to live in London can afford to do so • Mortgage availability has improved but much better controlled than in 2007 • Purchasers typically less than 80% LTV mortgages and still no sales through ‘Help to Buy’ • Our developments are affordable to many prospective owners and tenants 8 www.telfordhomes.plc.uk
PARLIAMENT HOUSE SE1 Group income statement 2014 2013 Revenue £140.8m £142.4m Gross profit £42.1m £31.4m Gross margin adjusted 31.9% 24.3% for interest Operating profit £21.2m £10.6m Operating margin adjusted 17.1% 9.7% for interest Profit before tax £19.2m £9.0m EPS 26.4p 14.3p Dividend per share 8.8p 4.8p 9 9 TELFORD HOMES Plc TELFORD HOMES Plc Preliminary Results 31 March 2014 Preliminary Results 31 March 2014
Increasing profits • Sales prices significant factor in increasing margins • Gross margin of 31.9% compares favourably with target margin on appraising land of circa 24% • Increasing profit from affordable housing contracts due to higher open market prices • Robust control of construction costs resulting in savings on developments completed in the year • Already budgeting for future cost increases as construction activity picks up • Selling expenses reduced but recognition depends on timing and success of development launches • Maintaining policy of paying one third of earnings in dividends • Total dividend for the year increased by 83% 10 www.telfordhomes.plc.uk
Group balance sheet March March 2014 2013 Non current assets £2.2m £1.1m Inventories £173.1m £132.5m Cash £33.0m £23.7m Other current assets £19.4m £6.6m Borrowings (£58.1m) (£28.1m) Other liabilities (£45.9m) (£81.4m) Net assets £105.4m £72.7m Net cash (debt) £4.8m (£34.4m) Gearing 0% 47% ABODE Uncovered gearing 0% 0% E3 11 TELFORD HOMES Plc Preliminary Results 31 March 2014
Cash and debt finance • Cash balances remain high but proportion committed to future land and development costs • £20 million of equity raised in June 2013 • Deposits received on forward sales exceed £45 million at 31 March 2014 • Reduction in gross borrowings with net cash position at year end • Gearing and uncovered gearing both zero • Net debt and gearing expected to increase as the Group invests in existing and new developments • Loan facility of £120 million expiring 30 September 2016 • Significant financial headroom to add to the development pipeline 12 www.telfordhomes.plc.uk
THE Partnerships BOATYARD E14 • Affordable housing accounts for around a third of the homes on each development • Contributed 17.5% of revenue for the year to 31 March 2014 • Long term partnerships built up to secure best value on each development • These partners are also important sources of new development opportunities • Many of the Group’s development sites have been purchased from public sector landowners • These relationships are vital in a competitive land market 13 TELFORD HOMES Plc Preliminary Results 31 March 2014
14 www.telfordhomes.plc.uk
15 TELFORD HOMES Plc Preliminary Results 31 March 2014
Development pipeline • New equity and deposits on forward sales being used to strengthen pipeline • Pipeline at 31 March 2014 expected to deliver over £875 million of future revenue (2013: £627 million) • Represents more than six times the revenue reported for the year to 31 March 2014 • Developing in up and coming inner London locations • Not involved in the increasingly expensive prime central London market • New sites spread across many boroughs but all well connected to the heart of the city • Cash and undrawn debt available to fund further acquisitions STRATFORD PLAZA • Broad spread of site sizes to manage return on capital E15 • Pre-tax ROCE of 17.5% in the year to 31 March 2014 (2013: 11.2%) 16 www.telfordhomes.plc.uk
VIBE, DALSTON E8 17 TELFORD HOMES Plc Preliminary Results 31 March 2014
The planning process • Acquiring a number of sites without planning or subject to planning • Only when the Board is confident of achieving a satisfactory consent • Excellent track record of achieving consents in a challenging environment • Majority of risk removed by knowledge of process and working in partnership with all interested parties • Consent achieved for 181 homes at Stratford Central earlier this year • 47 homes and a church at Hackney Square, Frampton Park • 101 homes and a new school at Vibe in Dalston • 18 homes at Allcroft Road, Camden after protracted discussions and an appeal 18 www.telfordhomes.plc.uk
Quality and customer service • Telford Homes brand represents consistent delivery of high quality, desirable new homes • Quality of developments recognised by many awards • NHBC A1* rating enables 20% deposits to be taken from customers rather than usual 10% • New Customer Relations team to manage the ‘customer experience’ • Working alongside Sales team and Customer Service team • Enhanced ability to look after customers when their purchase is years ahead of delivery • 98% recommendation rate in 2013 19 TELFORD HOMES Plc Preliminary Results 31 March 2014
FIELDER APARTMENTS, BOW TRINITY E3 20 www.telfordhomes.plc.uk
CITYSCAPE E1 21 TELFORD HOMES Plc Preliminary Results 31 March 2014
Outlook • London remains one of the strongest and most robust property markets in the world • Operating in locations where our customers want to live and can afford to live • ‘Strong demand and not enough supply’ underpins long term growth plans • Sales being achieved at increasing prices • Reporting significantly higher margins and profits • Considerable level of forward sales already achieved for year to 31 March 2015 and beyond • Pre-sold position and substantially increased pipeline give good visibility over future profits • Board expects pre-tax profit to double again by 31 March 2018 • Anticipate that cumulative pre-tax profit over the next four financial years will exceed £120 million • Positioning Telford Homes as one of the most significant developers in London 22 www.telfordhomes.plc.uk
Telford Homes Plc Telford House Queensgate Britannia Road Waltham Cross Hertfordshire EN8 7TF
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