24th May 2005 07:00
Telford Homes PLC24 May 2005 TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 Telford Homes, the London-based house builder specialising in the redevelopmentof sites within residential areas principally in East and North London, todayannounces its financial results for the year ended 31st March 2005. Highlights • Turnover for the year up 42% to £58.2 million (2004 - £41.1 million) • Contracts exchanged on 373 properties (2004 - 271 properties), including 225 private homes at an average price of £245,000 • Affordable homes represent 39% of properties sold in the year demonstrating that this is a major component of our business • Profit before tax up 17% to £7.8 million (2004 - £6.6 million) • Basic earnings per share of 19.0 pence (2004 - 18.6 pence), the smaller increase reflecting the dilution of the share placing in March 2004 • Final dividend proposed of 3.7 pence per share - total annual dividend of 5.5 pence per share (2004 - 4.5 pence per share) • Creation of two operating divisions to assist in achieving ambitions of future growth • Playing a major role in the regeneration of East London where many more development opportunities exist • Several major developments under construction and a healthy development pipeline to drive future growth • Tougher market in the last six months but success achieved due to our distinctive strengths • Despite market conditions current trading is good with 104 properties exchanged or sold, subject to contract to contribute to our results for 2006 Commenting on the results, Andrew Wiseman, Chief Executive of Telford Homes,said: "Market conditions have been tougher over the last six months yet, despite this,we have achieved success due to our detailed knowledge of the area; theexceptional standard of our product; our ability to continue selling toinvestors some of whom are repeat purchasers; and the strength of ourrelationships with housing associations. I believe these market conditions willremain until interest rates start moving down and consequently securing saleswill still represent a challenge, however I am confident the Company cancontinue to be successful and produce another year of growth. " For further information, please contact: Telford Homes PlcAndrew Wiseman, Chief Executive 020 8498 6789Jon Di-Stefano, Financial Director Shore CapitalGraham Shore, Alex Borrelli 020 7408 4090 TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 CHIEF EXECUTIVE'S REVIEW Financial results Once more I can report on an excellent set of results for Telford Homes.Turnover has grown by 42% to £58.2 million and profit before tax has grown by17% to £7.8 million. Earnings per share have increased to 19.0p from 18.6p, the smaller increasereflecting the dilution of the share placing in March 2004. The directors areproposing a final dividend of 3.7p, making a total of 5.5p for the year. Property sales and affordable housing Contracts were exchanged on 373 properties in the year comprising 225 privatehomes, 147 affordable homes and one commercial unit. The private homes were exchanged at an average price of £245,000 compared to£209,000 last year. This increase is due entirely to the specific locations inwhich we have been developing and is not a reflection of changes in generalmarket prices, which have remained broadly constant in East London over the pastyear. Developments closer to Canary Wharf and the City will always attract higherprices and at Tequila Wharf on Commercial Road, E14 we sold 106 private homes inthe year at an average price of £250,000. In addition we have sold properties atEquinox, Island Gardens, E14 and Estilo on the Wenlock Basin, N1 where averageprices are above £300,000. These have been offset by the sale of our moretraditional product, for example at Cubix, Brock Place, E3 where we exchangedcontracts on 48 private homes in the year at an average price under £200,000. This year we will be marketing the remaining units at Island Gardens and Estiloand I expect the average price to remain around £250,000 while these propertiesare being sold alongside our traditionally priced developments. Developments wehave in the pipeline are moving back towards our traditional price levels andthis is part of our strategy in the current marketplace. Affordable homes represent 39% of properties exchanged in the year, whichdemonstrates that this is a major component of our business. Housingassociations fund the construction of affordable homes over the course of thebuilding work and therefore while margins may be lower in some cases, the returnon capital from these contracts is excellent. We are particularly pleased tohave secured the sale of three whole developments for affordable housing.Bethnal Green & Victoria Park Housing Association have purchased a 35 unitdevelopment at Carr Street, E14 and ASRA Greater London Housing Association havepurchased 55 units across two sites in Lea Bridge Road, E10. The sites in LeaBridge Road are being developed as part of our ongoing partnership with JamesSmith Estates Plc. These sales will deliver secured revenues at our typicalmargin and will continue to contribute to revenue and profit in the coming year. Operating divisions In November 2004 the directors undertook a strategic review which concluded thatthe Company could achieve significant growth within its target markets. Thefinancial resources and strategies are in place for this growth but the reviewidentified that a change in the operational structure of the business would helpus achieve our ambitions. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 CHIEF EXECUTIVE'S REVIEW (continued) This change involved the creation of two new operating divisions reporting intothe main board of Telford Homes. These divisions are called Telford Homes Altoand Telford Homes Metro. It is typical in our industry for a number ofgeographic operating divisions to report into a group board. However it remainsone of our strengths that we operate in a relatively small area primarily inEast and North London. The board decided that this concentration of our businessshould continue to maximise the benefit of the excellent relationships we haveestablished in this locality. In addition it is clear that the regeneration ofsome of these neighbourhoods has barely commenced and therefore many moredevelopment opportunities exist. These divisions will concentrate on different types of construction with Metrodeveloping complex infill sites with shorter construction periods andconsequently higher returns on capital and Alto developing our larger flagshipdevelopments. Planning and development pipeline The planning environment remains difficult in some cases, with planning appealsnow taking around 14 months to be heard. We have maintained our closerelationships with planners and local councils and have achieved severalplanning consents during the year including our major joint development with theRoyal Bank of Scotland at Warton Road, Stratford. In addition we have purchased, or agreed to purchase subject to planning, anumber of new development sites. Our development pipeline, being properties thatwill produce profit in future years not including those built for joint venturepartners, consists of 559 units with planning consent and 354 units subject tothe planning process. Development sites We are currently active either in design or construction on 15 separatedevelopment sites. Abbotts Wharf, our development of 201 homes on the LimehouseCut, E14 is almost complete and handovers will commence shortly. We completedand handed over 169 homes during the last financial year and this number will besubstantially higher this year. Our customer service team has been strengthenedto maintain consistently high standards in product finish and after salesservice. Our balance of product quality and service excellence has brought theCompany a high level of repeat purchasers and recommendations from satisfiedcustomers. We expect to commence development of 162 private homes, 87 affordable homes andcommercial space at Warton Road, Stratford in the Summer of this year and thisdevelopment will contribute to our results for the next three years. Developmentcontinues at our other flagship developments, Tequila Wharf, E14, IslandGardens, E14, and Estilo, N1, which will all be completed during 2006. We also have a number of smaller sites of between eight and 35 units thatcontinue to form a vital part of our business and are typical of theopportunities that arise for development in East London. People As a result of creating the new operating structure I have outlined above, theCompany underwent an internal re-organisation and appointed new people to themanagement team. Mark Parker has joined us from the Barratt Group to become the Managing Directorof Telford Homes Metro. Mark has many years experience in the industry and is avaluable asset to the Company. Mark Duffield has been appointed TechnicalDirector and Jeremy Brett, Construction Director of Telford Homes Metro. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 CHIEF EXECUTIVE'S REVIEW (continued) John Fitzgerald has been promoted to become the Managing Director of TelfordHomes Alto. John was previously Construction Director of Telford Homes Plc wherehe built up a first class construction team. Chris Dreher has been promoted tobecome the Commercial Director of Telford Homes Alto. The directors of the new divisions will take over the operational management ofthe business and the role of the main board of Telford Homes will increasinglyfocus on the overall strategy and direction of the Company. In thesecircumstances it is appropriate to have a smaller board. As a result of thesechanges John Fitzgerald, Mark Duffield and Jeremy Brett have all stepped downfrom the board of Telford Homes Plc and therefore resigned as directors witheffect from the close of business on 31st March 2005. I thank each of them fortheir contributions to the board during the first growth phase of Telford Homes. Outside of the operational changes we have continued to add strength to theCompany, bringing in new people in every department. This included the creationof a new role, early in the year, to concentrate on partnerships with affordablehousing providers and acquiring regeneration opportunities both from thesehousing associations and from local councils. I see this as increasinglyimportant for Telford Homes as public sector landowners look for partnershipswith 'hands on' construction companies. The importance of employing quality personnel with the ability to cope withcontinued expansion cannot be overstated and all of our employees have beeninstrumental in our success. We will continue to add to the team and maintain aninfrastructure that can deliver future growth. Current trading and outlook Market conditions have been tougher over the last six months yet, despite this,we have achieved success due to our detailed knowledge of the area; theexceptional standard of our product; our ability to continue selling toinvestors some of whom are repeat purchasers; and the strength of ourrelationships with housing associations. To date, due to contracts exchanged and properties sold, subject to contract, wehave a total of 104 properties contributing to our results for 2006. We have anumber of development launches planned over the year and these will drive salesfor the next 12 months. I believe these tougher market conditions will remain until interest rates startmoving down and consequently securing sales will still represent a challenge,however I am confident the Company can continue to be successful and produceanother year of growth. Andrew WisemanChief Executive TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 FINANCIAL REVIEW Results for the year The year to March 2005 has been a further year of expansion for Telford Homes.Our results were in line with our expectations and we have continued to sellproperties early in the development process both to investors and housingassociations, securing future cash flow and maintaining the Company on a soundfinancial platform. Operating results Turnover increased to £58.2 million compared with £41.1 million last year. Ananalysis of properties sold in the year is given in the Chief Executive'sreview. Gross profit increased to £13.3 million compared to £10.4 million last year andour gross margin reduced to 22.8% from 25.3%. The margin has fallen over thelast three years and this decline is in accordance with our forecasts in anenvironment where sales prices have been stable and where we appraise new sitesseeking to achieve a margin in excess of 20%. In certain situations, whereaffordable housing is provided as part of a large scale private development, weare undertaking contracts for housing associations at a margin below 20% inreturn for cash payments over the course of the construction period. Thesecontracts have an excellent return on capital but have an impact on the overallgross margin of the business. Our operating margin has reduced to 16.3% from 18.2% in line with the fall inthe gross margin. Overheads were £3.8 million and represent 6.6% of turnovercompared to 7.0% last year. We maintain a tight control on all of our costswhile ensuring that we attract and retain quality people who will enable us toachieve our plans for the future. In that regard employee related costsrepresent over 75% of our overheads. I expect overheads as a percentage ofturnover to continue to fall over time as the business grows. Interest Interest paid in the year was £1.8 million compared to £0.9 million last year.Bank loans at the year end were £33.1 million, substantially within ourfacilities. The base rate for interest rose during the year from 4% to 4.75% andwhile this directly increases our finance costs we have offset this by carefulcontrol of our cash flow and by undertaking a number of schemes where paymentson account from housing associations have reduced the funding required frombanks. Profit before tax Profit before tax has increased to £7.8 million from £6.6 million. We are undertaking an increased number of larger schemes with longer periods ofconstruction and this has impacted on our pre-tax return on equity of 34.0% andpre-tax return on capital of 18.3%. However this still represents a good rate ofreturn in a fast growing business and we are constantly seeking opportunitiesthat will deliver higher returns such as the affordable housing contractsmentioned above. Our partnership with James Smith Estates Plc now extends tothree sites covering in excess of 80 properties and on these developments thereare no land payments and therefore we achieve much higher returns on capital. Taxation The effective tax charge for the year is 29.6% with a prior year over provisionand a deferred tax liability having offsetting effects. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 FINANCIAL REVIEW (continued) Dividends A final dividend of 3.7p has been proposed which, together with the interimdividend of 1.8p paid in January 2005, makes a total for the year of 5.5p. Thetotal dividend last year was 4.5p. The dividend is covered 3.4 times by earningsper share. The final dividend is expected to be paid on 15th July 2005 toshareholders on the register on 24th June 2005. Earnings per share Earnings per share increased to 19.0p from 18.6p and the weighted average numberof shares in issue was 28.8 million. Balance sheet Net assets at 31st March 2005 were £25.2 million representing a net asset valueper share of 86.5p. Total assets were £73.5 million with the majority being workin progress on development sites and debtors awaiting legal completion ofproperties where we have exchanged contracts. These assets convert into cash aswe exchange and complete our homes. Finance As in previous years we have bank facilities in place to provide 70% ofdevelopment land and construction expenditure with repayments made fromcompletion monies received. Our facilities with Allied Irish Bank include a revolving loan facility of £22million. We have also secured site specific funding with the Royal Bank ofScotland totalling £60 million including joint venture funding. Interest ischarged on the majority of this funding at rates of between 1.25% and 1.75% overthe base rate. Our combined overdraft facility stands at £2.5 million and is intended to covershort term funding only. With cash balances at the year end of £4.1 million weare not currently utilising this facility. Gearing at 31st March 2005 was 132% increased from 92% last year. This level ofgearing is not excessive where the realisable value of much of our stock issecured by binding contracts with purchasers early in the development process. Cash flow We maintain a detailed cash flow forecast as part of our management informationsystems. This extends for a number of years into the future and is subject tocontinual re-assessment. The cash flow position is reported to the board and ourbanking partners on a monthly basis and is instrumental in the strategy of theCompany. Jonathan Di-StefanoFinancial Director TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 PROFIT AND LOSS ACCOUNT Note Year ended Year ended 31st March 2005 31st March 2004 £000 £000 Turnover 58,245 41,051 Cost of sales (44,947) (30,674) Gross profit 13,298 10,377 Administrative expenses (3,827) (2,893) Operating profit 9,471 7,484 Interest receivable 79 47Interest payable and similar charges (1,780) (916) Profit on ordinary activities before taxation 7,770 6,615 Taxation on profit on ordinary activities 2 (2,303) (1,897) Profit on ordinary activities after taxation 5,467 4,718 Dividends paid and proposed 3 (1,596) (1,247) Retained profit for the year 3,871 3,471 Earnings per share: Basic 4 18.96p 18.57p Diluted 4 18.45p 17.96p The Company has no other recognised gains and losses other than those includedin the profit and loss account. All activities are in respect of continuing operations. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 BALANCE SHEET Note As at As at 31st March 2005 31st March 2004 (restated - note 1) £000 £000 Fixed assets Tangible assets 775 583 Current assets Stocks and work in progress 28,576 24,444Debtors 40,052 25,533Cash at bank and in hand 4,067 848 72,695 50,825 Creditors - amounts falling due within one year (48,191) (29,921) Net current assets 24,504 20,904 Total assets less current liabilities 25,279 21,487 Creditors - amounts falling due after more than (58) (75)one year Provision for liabilities and charges (24) - Net assets 25,197 21,412 Financed by: Capital and reserves Called up share capital 5 2,912 2,912Share premium 6 12,300 12,310Profit and loss account 9,985 6,190 Equity shareholders' funds 7 25,197 21,412 TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 CASH FLOW STATEMENT Note Year ended Year ended 31st March 2005 31st March 2004 £000 £000 Cash outflow from operating activities 8 (4,334) (2,912) Returns on investments and servicing of financeInterest received 79 47Interest paid (1,768) (904)Hire purchase interest (12) (12) (1,701) (869) Taxation (2,226) (2,244) Capital expenditurePurchase of tangible fixed assets (367) (93)Sale of tangible fixed assets 51 65Purchase of own shares (216) (325)Sale of own shares 95 68 Equity dividends paid (1,394) (882) Cash outflow before financing (10,092) (7,192) FinancingIssue of ordinary share capital - 5,055Expenses of share issue (10) (201)Increase in bank loans 13,454 3,092Capital element of hire purchase payments (133) (145) 13,311 7,801 Increase in cash 3,219 609 Reconciliation of net cash flow to movement innet debt Increase in cash 3,219 609Increase in bank loans (13,454) (3,092)Capital element of hire purchase payments 133 145Increase in debt arising from cash flow (10,102) (2,338)Inception of hire purchase agreements (109) (99)Movement in net debt in the period (10,211) (2,437) Net debt brought forward (18,988) (16,551) Net debt carried forward 9 (29,199) (18,988) TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 NOTES 1 Basis of preparation The financial information set out above does not constitute statutory accountswithin the meaning of section 240 of The Companies Act 1985. Statutory accountsfor the year ended 31st March 2005 will be delivered to the Registrar ofCompanies and sent to all shareholders shortly. An unqualified audit report hasbeen given on the accounts. The results for the year ended 31st March 2004 andthe balance sheet of that date are an extract from the statutory accounts forthat year, which have been filed with the Registrar of Companies and on whichthe Company's auditors also gave an unqualified report. The Company has adopted Urgent Issues Task Force Abstract 38: 'Accounting forESOP trusts' and the amended Urgent Issues Task Force Abstract 17: 'Employeeshare schemes' for the results to 31st March 2005. As a result of this, sharesheld by the share incentive plan, previously recognised as an investment in ownshares on the balance sheet, are now recognised as a deduction fromshareholders' funds. The value of these shares at 31st March 2004 was £255,000and this amount has been reclassified from investments in own shares to theprofit and loss reserve in the restated balance sheet as at that date.Shareholders' funds at 31st March 2004 are therefore reduced from £21,667,000 to£21,412,000. 2 Taxation Taxation has been calculated on profit for the year ended 31st March 2005 at theestimated effective rate of tax of 30% adjusted for prior year over or underprovisions and movements in deferred tax. 3 Dividends paid and proposed Year ended Year ended 31st March 2005 31st March 2004 £000 £000 Interim dividend paid at 1.8p (1.5p) per ordinary share 525 378Final dividend proposed at 3.7p (3.0p) per ordinary share 1,071 869 1,596 1,247 4 Earnings per share Year ended Year ended 31st March 2005 31st March 2004 Weighted average number of shares in issue 28,834,816 25,403,384Dilution - effect of share options 795,720 869,203Diluted weighted average number of shares in issue 29,630,536 26,272,587 Profit on ordinary activities after taxation £5,467,000 £4,718,000 Earnings per share:Basic 18.96p 18.57pDiluted 18.45p 17.96p TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 NOTES (continued) 5 Share capital As at As at 31st March 2005 31st March 2004 £000 £000 Authorised100,000,000 ordinary shares of 10p each 10,000 10,000 Allotted, called up and fully paid29,120,740 (29,120,740) ordinary shares of 10p each 2,912 2,912 6 Share premium £000 At 1st April 2004 12,310Costs arising from shares issued (10) At 31st March 2005 12,300 7 Equity shareholders' funds £000 Profit for the year 5,467Dividends paid and proposed (1,596) 3,871Costs arising from shares issued (10)Purchase of own shares (216)Sale of own shares 95Write down in value of own shares 45 3,785 At 1st April 2004 restated (note 1) 21,412 At 31st March 2005 25,197 TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2005 NOTES (continued) 8 Reconciliation of operating profit to cash flow from operating activities Year ended Year ended 31st March 2005 31st March 2004 £000 £000 Operating profit 9,471 7,484 Depreciation 271 240Write down in value of own shares 45 2Profit on sale of tangible fixed assets (38) (15)Increase in stocks and work in progress (4,132) (4,634)Increase in debtors (14,569) (7,331)Increase in creditors 4,544 1,396Movement in provisions 74 (54) Cash outflow from operating activities (4,334) (2,912) 9 Analysis of change in debtnet At 1st April Cash flows Inception of At 31st March finance leases 2004 2005 £000 £000 £000 £000 Cash at bank and in hand 848 3,219 - 4,067Bank loans (19,662) (13,454) - (33,116)Hire purchase liabilities (174) 133 (109) (150) (18,988) (10,102) (109) (29,199) ________________________________________________________________________________ 10 Annual report and AGM Copies of this announcement are available from the Company at 3 BuckinghamCourt, Rectory Lane, Loughton, Essex IG10 2QZ. The Company's annual report for the year ended 31st March 2005 will be posted toshareholders in early June. The Annual General Meeting will be held at the Registered Office of the Companyon 7th July 2005 at 12.30pm and a notice of the meeting will be sent out withthe annual report. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Telford Homes