23rd May 2006 07:01
Telford Homes PLC23 May 2006 EMBARGOED FOR RELEASE AT 7.00AM ON 23 MAY 2006 TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 Telford Homes, the London-based house builder specialising in the redevelopmentof sites within residential areas principally in East and North London, todayannounces its preliminary results for the year ended 31st March 2006. Highlights • Turnover for the year up 36% to £79.3 million (2005 - £58.2 million) • Contracts exchanged on 762 properties (2005 - 373 properties), including 329 private homes at an average price of £245,000 • Affordable homes represent 55% of properties sold in the year and this is a key element of the business both today and in the future • All homes at Icona, on the edge of the Olympic Park in Stratford, now sold with completion due in early 2008 • Profit before tax up 29% to £10.0 million (2005 - £7.8 million) • Basic earnings per share of 24.0 pence (2005 - 19.0 pence) • Final dividend proposed of 4.6 pence per share to be paid on 14th July 2006 to shareholders on the register on 23rd June 2006 - total annual dividend of 7.0 pence per share (2005 - 5.5 pence per share) • Major site purchases have increased our development pipeline to 1,659 properties compared to 913 last year • Relocation to new head office providing platform to drive further expansion • Significant sales launches planned for 2006 at a new site in Stratford and our major development in South Woodford • Expect 2006/7 to be another successful year for Telford Homes Commenting on the results, Andrew Wiseman, Chief Executive of Telford Homes,said: "We believe that the development opportunities in East London are greater thanever. With our positioning as a local specialist and our close relationshipswith the affordable housing sector, we are well placed to benefit from this inthe future. In the next few months we are launching 'One Stratford' and 'QueenMary's Gate', South Woodford and current interest in these as well as otherdevelopments, gives me confidence that 2006/7 will be another successful yearfor Telford Homes." For further information, please contact: Telford Homes PlcAndrew Wiseman, Chief Executive 01992 809800Jon 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 2006 CHIEF EXECUTIVE'S REVIEW Financial results I am extremely pleased to report another year of growth with turnover up 36% to£79.3 million and profit before tax up 29% to £10.0 million. Earnings per share have increased to 24.0p from 19.0p and the directors areproposing a final dividend of 4.6p, making a total of 7.0p for the year. Property sales and affordable housing Contracts were exchanged on 329 private homes, 421 affordable homes and 12commercial units making a total of 762 properties in the year. Included in thisfigure are 290 homes being constructed under joint ventures where we recognisehalf of the turnover and profit from the development. Last year we exchangedcontracts on 373 properties in total, a number we have more than doubled thisyear. The private homes were sold at an average price of £245,000 which is unchangedfrom last year. Our average price is indicative of the specific locations wherewe are selling properties each year and is not a reflection of changes ingeneral market prices. This year we have seen underlying prices rise byapproximately 10% in some parts of East London primarily due to the success ofLondon's bid for the 2012 Olympic Games. The Company's high rate of growth over the last five years has been madepossible by our ability to sell properties at an early stage in the developmentprocess which secures future cash flow and allows us to commit funds to new landpurchases. This year has been no different and we have sold all 249 homes at Icona, ourjoint venture development with the Royal Bank of Scotland, in Warton Road,Stratford. This development is expected to be completed in early 2008. In mystatement for the interim results in November 2005 I reported that this site hadbeen included within a Compulsory Purchase Order (CPO) issued by the LondonDevelopment Agency (LDA). I can now report that, as expected, we have completeda legal agreement with the LDA which releases the site from the CPO. Developmentof the site has been ongoing and the CPO has not resulted in any delays to theconstruction programme. In addition we had sold 47 of the 69 private homes at Cosmopolitan, ourdevelopment on the Great Cambridge Road in Enfield, by the end of the year.These properties will be completed towards the end of 2007. There are also anumber of smaller developments where all or most of the properties have beensold several months prior to completion. At all of these developments turnoverand profit will continue to flow into the business as construction proceeds. This year we have also been marketing higher priced properties at Estilo,Wenlock Road N1 and Equinox, Island Gardens E14 where the average prices areabove £300,000. I am pleased to report that the 43 private apartments at Estiloare now all sold with the final few proceeding to contract since the year end.Completions will commence in the next few weeks. At Equinox recent sales havebeen particularly strong and we have now sold over 70% of the private apartmentswith the development due to be completed in July. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 CHIEF EXECUTIVE'S REVIEW (continued) Affordable homes again represent a substantial proportion of properties sold at55% and this remains a key element of our business both today and in the future.Provision of affordable housing on individual sites can vary from none to 50% ofthe properties depending on size and location of the development. The affordablehomes are usually sold prior to any construction taking place and this year ourfigures include two significant sites where the main private sale launches arescheduled for later in 2006. These are the 118 affordable homes at our majordevelopment in South Woodford sold to Circle Anglia and 122 homes at our newsite in High Street, Stratford sold to Toynbee Housing Association. Both ofthese sales involve a substantial up front payment from the housing associationupon granting an interest in the land, with the remaining proceeds beingreceived over the course of the construction of the development. Operating divisions Excellent design and construction is the heart of our business and the split ofour operations into two divisions, Telford Homes Alto and Telford Homes Metro,has proved to be extremely successful. Both divisions have risen to thechallenge of managing their part of the Company. Mark Parker, the Managing Director of Metro, and John Fitzgerald, the ManagingDirector of Alto, have built strong teams and this has allowed the Company toexpand while still maintaining day to day relationships at a senior level. Planning and development pipeline During the last year we have purchased or agreed to purchase a number of newdevelopment sites, some of them with planning consent, some without planningconsent and some subject to achieving a detailed consent. Our knowledge of theplanning environment has enabled us to achieve a number of planning consents inthe last year despite the various difficulties that create delays in theprocess. In July 2005 we purchased the former halls of residence of Queen Mary andWestfield College in South Woodford with planning consent for 441 homes. We hopeto increase this to almost 500 homes later in the year. This development willresult in turnover and profit over the course of the next four years. Theentrance to the site features a grade II listed building set in landscapedgrounds where we have constructed a striking sales centre and over half of the16 private houses currently under construction have been sold. Construction ofthe private apartments is due to commence in June with a sales launch of thefirst phase planned for September under the development name of Queen Mary'sGate. In March 2006 we completed the purchase of a site in High Street, Stratford for£18.5 million. This site has planning permission for 301 homes together withcommercial space and a community centre and will feature a 22 storey tower.Demolition has now commenced and following the success of sales at Icona inStratford we expect to release the 179 private homes for sale in the next fewmonths under the development name of One Stratford. In addition, we have been chosen as the development partner for East End Homeson their redevelopment of the British Estate in Mile End. This is expected toprovide some 170 private apartments over the next two to three years. We lookforward to furthering our relationships with all of our affordable housingpartners both on individual sites and on wider estate regeneration schemes. Our development pipeline, being properties that will produce profit in futureyears not including those built for joint venture partners, consists of 1,159properties with planning consent and 500 properties subject to the planningprocess. This is a total of 1,659 properties in the pipeline compared to 913last year and these properties are currently forecast to provide gross profitstotalling in excess of £65 million, more than 3.5 times gross profit in 2006. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 CHIEF EXECUTIVE'S REVIEW (continued) Development sites We are currently undertaking design or construction on over 20 development sitesand during the year we completed and handed over a total of 281 properties.Cubix, Brock Place E3 was completed at the end of 2005 and incorporated a publiclandscaped park for the enjoyment of residents and the local community. Thedevelopment has recently won the 'Best New Starter Home' award at the EveningStandard Homes and Property Awards. Over the next few months we will be completing in excess of 400 properties andour Customer Service team has been expanded in order to manage efficiently thehand over of these properties whilst maintaining our excellent customer servicerecord. In March 2006 the Company was included in a survey of customersatisfaction alongside 30 of our competitors and finished second in the overallrankings. People Another year of growth has been complemented by growth in employee numbers whichstarted the year at 81 and finished at 113, equivalent to a new person every 11days. Telford Homes places great value on each employee and has an exceptionallygood staff retention record. As a natural result of increasing numbers the Company relocated to a new headoffice in Waltham Cross, Hertfordshire at the start of 2006. This building hasbeen secured on a ten year lease and will provide us with an appropriateplatform from which to drive further expansion over the next decade. Current trading and outlook The market has seen gradual improvement over the last six months and theCompany's performance has been very encouraging with reduced use of incentivesand good sales rates at all of our developments. Sales at our higher priced developments have been particularly pleasing withEstilo, Wenlock Road N1 now sold out and Equinox, Island Gardens E14 sellingwell in the last three months. Properties priced under £250,000 have matchedthis performance and we have every reason to look forward with optimism that astable market will continue through 2006 and 2007. To date, due to contracts exchanged since 31st March 2006 and properties sold,subject to contract, we have a total of 54 private homes and 35 affordable homescontributing to our results for 2007. We believe that the developmentopportunities in East London are greater than ever. With our positioning as alocal specialist and our close relationships with the affordable housing sector,we are well placed to benefit from this in the future. In the next few months weare launching 'One Stratford' and 'Queen Mary's Gate', South Woodford andcurrent interest in these as well as other developments, gives me confidencethat 2006/7 will be another successful year for Telford Homes. Andrew WisemanChief Executive22nd May 2006 TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 FINANCIAL REVIEW Results for the year Our performance this year has exceeded our expectations both in marginpercentages and total profits. We have continued to maximise the use of ourcash, improving return on equity, and ensuring the Company can look to thefuture from a stable financial position. Operating results Turnover increased to £79.3 million from £58.2 million last year. An analysis ofproperties sold in the year is given in the Chief Executive's review. Gross profit increased to £18.2 million from £13.3 million with gross marginimproving to 23.0% from 22.8%. While unit sales were in line with ourexpectations the margin has been improved by a combination of lower thananticipated use of sales incentives and price increases caused by the decisionto award the 2012 Olympic Games to London. We continue to appraise new sites to achieve a gross margin of 20% except fordevelopments where high returns on equity can be secured in exchange for lowermargins. These situations occur where land payments are being deferred or salesproceeds are being received earlier than usual and we expect a few suchsituations to assist the rapid growth of the Company over the next few years. The operating margin is constant at 16.3% with overheads at £5.3 million being6.7% of turnover. In 2005 this percentage was 6.6% and usually we would expectthe percentage to fall gradually over time. This year our successful office movehas resulted in some one-off costs and a number of additional ongoing costs inkeeping with the increase in the size of the business. In addition we haveallowed for higher bonus payments to reward employees across the business fortheir contribution to the profitability of the Company. Interest Interest paid in the year was £3.1 million compared to £1.8 million last year.Interest cover was 4.5 which is well within acceptable limits given our desireto continue the growth of the business. Bank loans at 31st March 2006 were £69.0million against total facilities of £99.0 million. The base rate for interest remained stable over the year and we have managed tosecure some funding at rates below our usual levels and therefore have enjoyedsome cost savings as a result of this. Profit before tax Profit before tax increased to £10.0 million from £7.8 million last year. Pre-tax return on equity improved to 35.5% from 34.0% last year and we are verykeen to maintain this at a high level in order to make our money work harder.Recent land purchases have been extremely positive for return on equity. At South Woodford we are paying 35% of all private sales proceeds asconsideration for the land with £10 million of this paid up front. The remainderwill not be due until each private sale property is ready for hand over and thishelps to minimise the immediate cash investment into the development. At High Street, Stratford the purchase price of £18.5 million was offset byreceipt of £5.4 million from Toynbee Housing Association as part of theirpayment for the 122 affordable properties. Bank finance provided a further £13million making our own initial investment negligible. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 FINANCIAL REVIEW (continued) Taxation The effective tax charge for the year is 29.7% with a prior year over provisionand a deferred tax liability having offsetting effects. The fact that many of our sites require significant remediation works to removepollutants prior to development, is enabling us to take advantage of tax rulesthat allow for such expenditure to be taken as a 150% deduction for taxpurposes. Dividends A final dividend of 4.6p has been proposed which, together with the interimdividend of 2.4p paid in January 2006, makes a total for the year of 7.0p whichis covered 3.4 times by earnings per share. The total dividend last year was5.5p also covered 3.4 times. The final dividend is expected to be paid on 14th July 2006 to shareholders onthe register on 23rd June 2006. Earnings per share Earnings per share increased to 24.0p from 19.0p and the weighted average numberof shares in issue was 29.4 million. Balance sheet Net assets at 31st March 2006 were £32.1 million representing a net asset valueper share of 107.8p. Total assets were £113.1 million with the majority beingwork in 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 £77 million, including joint venture funding. 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 £7.2 million weare not currently utilising this facility. Gearing at 31st March 2006 was 193% increased from 132% last year. We areentirely comfortable with gearing at this level and we constantly monitor thecertainty of future cash inflows against exposure to debt. Our business model ofselling properties at an early stage of construction reduces the risk ofcarrying debt as the sales revenue, secured by exchanging contracts, will beused to repay the loan. Internally we calculate 'uncovered gearing' whichexcludes debt matched by the value of contracts exchanged on a givendevelopment. This was 60% at 31st March 2006. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 FINANCIAL REVIEW (continued) 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. Share price The share price on 31st March 2006 was 187.5p (31st March 2005 - 140.5p), with ahigh in the year of 188.0p and a low of 137.5p. International Financial Reporting Standards Telford Homes will adopt International Financial Reporting Standards (IFRS) forthe year ended 31st March 2008. As a part of the process of conversion we havealready explored all current international standards that may have an impact onthe accounting policies currently employed by the Company. However the nature ofthese new regulations is such that they are constantly evolving over time andtherefore this process will continue up until the date of adoption. Over thenext year we will ensure that the financial statements for 2007 can be convertedinto the international format including all of the disclosure changes that willbe required. These can then be used as comparatives for the first full year ofadoption in 2008. Jonathan Di-StefanoFinancial Director22nd May 2006 TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 PROFIT AND LOSS ACCOUNT Note Year ended Year ended 31st March 2006 31st March 2005 restated (note 3) £000 £000 Turnover 79,280 58,245 Cost of sales (61,060) (44,947) Gross profit 18,220 13,298 Administrative expenses (5,314) (3,827) Operating profit 12,906 9,471 Interest receivable 201 79Interest payable and similar charges (3,083) (1,780) Profit on ordinary activities before taxation 10,024 7,770 Taxation on profit on ordinary activities 2 (2,982) (2,303) Profit on ordinary activities after taxation 7,042 5,467 Dividends paid 3 (1,809) (1,394) Retained profit for the year 5,233 4,073 Earnings per share: Basic 4 24.0p 19.0p Diluted 4 23.4p 18.5p 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 2006 BALANCE SHEET Note As at As at 31st March 2006 31st March 2005 restated (note 3) £000 £000 Fixed assets Tangible assets 871 775 Current assets Stocks and work in progress 45,547 28,576Debtors 59,454 40,052Cash at bank and in hand 7,211 4,067 112,212 72,695 Creditors - amounts falling due within one year (80,711) (47,120) Net current assets 31,501 25,575 Total assets less current liabilities 32,372 26,350 Creditors - amounts falling due after more than (75) (58)one year Provision for liabilities (167) (24) Net assets 32,130 26,268 Financed by: Capital and reserves Called up share capital 5 2,981 2,912Share premium 6 12,656 12,300Profit and loss account 6 16,493 11,056 Equity shareholders' funds 7 32,130 26,268 TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 CASH FLOW STATEMENT Note Year ended Year ended 31st March 2006 31st March 2005 £000 £000 Cash outflow from operating activities 8 (25,797) (4,334) Returns on investments and servicing of financeInterest received 201 79Interest paid (3,072) (1,768)Hire purchase interest (11) (12) (2,882) (1,701) Taxation (2,407) (2,226) Capital expenditurePurchase of tangible fixed assets (589) (367)Sale of tangible fixed assets 351 51Purchase of own shares - (216)Sale of own shares 128 95 Equity dividends paid (1,809) (1,394) Cash outflow before financing (33,005) (10,092) FinancingIssue of ordinary share capital 425 -Expenses of share issue - (10)Increase in bank loans 35,837 13,454Capital element of hire purchase payments (113) (133) 36,149 13,311 Increase in cash 3,144 3,219 Reconciliation of net cash flow to movement innet debt Increase in cash 3,144 3,219Increase in bank loans (35,837) (13,454)Capital element of hire purchase payments 113 133Increase in debt arising from cash flow (32,580) (10,102)Inception of hire purchase agreements (133) (109)Movement in net debt in the year (32,713) (10,211) Net debt brought forward (29,199) (18,988) Net debt carried forward 9 (61,912) (29,199) TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 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 2006 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 2005 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 Financial Reporting Standard 21 'Events after thebalance sheet date' for the results to 31st March 2006. As a result of thisdividends declared for an accounting period, after the balance sheet date, areno longer recognised as a liability at the balance sheet date (note 3). 2 Taxation Taxation has been calculated on profit for the year ended 31st March 2006 at theestimated effective rate of tax of 30% adjusted for prior year over or underprovisions and movements in deferred tax. 3 Dividends paid Year ended Year ended 31st March 2006 31st March 2005 (restated) £000 £000 Final dividend paid in July 2005 of 3.7p (July 2004 - 1,093 8733.0p)Interim dividend paid in Jan 2006 of 2.4p (Jan 2005 - 716 5211.8p) 1,809 1,394 As stated in note 1 the Company has adopted FRS 21 'Events after the balancesheet date' and as a result dividends declared for an accounting period, afterthe balance sheet date, are no longer recognised as a liability at the balancesheet date. Profit and loss reserves as at 31st March 2004 have been restated from£6,190,000 by the value of the final dividend proposed for the year of £869,000resulting in restated reserves of £7,059,000. The dividend recognised in the results for the year ended 31st March 2005 isrestated to be the final dividend declared and paid for the year ended 31stMarch 2004 of £873,000 together with the interim dividend declared and paid forthe six months ended 30th September 2004 of £521,000 and profit and lossreserves have been restated accordingly. The dividend recognised in the results for the year ended 31st March 2006 is thefinal dividend declared and paid for the year ended 31st March 2005 of£1,093,000 together with the interim dividend declared and paid for the sixmonths ended 30th September 2005 of £716,000. The final dividend proposed for the year ended 31st March 2006 is 4.6p perordinary share. This dividend was declared after 31st March 2006 and theliability of £1,371,000 has not been recognised in the balance sheet inaccordance with FRS 21. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 NOTES (continued) 4 Earnings per share Year ended Year ended 31st March 2006 31st March 2005 Weighted average number of shares in issue 29,356,371 28,834,816Dilution - effect of share options 727,290 795,720Diluted weighted average number of shares in issue 30,083,661 29,630,536 Profit on ordinary activities after taxation £7,042,000 £5,467,000 Earnings per share:Basic 24.0p 19.0pDiluted 23.4p 18.5p 5 Share capital As at As at 31st March 2006 31st March 2005 £000 £000 Authorised100,000,000 ordinary shares of 10p each 10,000 10,000 Allotted, called up and fully paid29,807,472 (29,120,740) ordinary shares of 10p each 2,981 2,912 6 Reserves Share capital Share premium Profit and loss Total account £000 £000 £000 £000 At 1st April 2005 as 2,912 12,300 9,985 25,197previously reportedFinal dividend proposed for - - 1,071 1,071year ended 31st March 2005At 1st April 2005 restated 2,912 12,300 11,056 26,268 Arising on issue of shares 69 356 - 425during the yearSale of own shares - - 128 128Write down in value of own - - 76 76sharesRetained profit for the year - - 5,233 5,233At 31st March 2006 2,981 12,656 16,493 32,130 The change in accounting policy as a result of the adoption of FRS 21 (note 3)is reflected in the restated figures as at 1st April 2005. TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 NOTES (continued) 7 Equity shareholders' funds £000 Profit for the year 7,042Dividends paid (1,809) 5,233Arising on issue of shares during the year 425Sale of own shares 128Write down in value of own shares 76 5,862 At 1st April 2005 restated (note 6) 26,268 At 31st March 2006 32,130 8 Reconciliation of operating profit to cash flow from operatingactivities Year ended Year ended 31st March 2006 31st March 2005 £000 £000 Operating profit 12,906 9,471 Depreciation 312 271Write down in value of own shares 76 45Profit on sale of tangible fixed assets (37) (38)Increase in stocks and work in progress (16,971) (4,132)Increase in debtors (19,402) (14,569)(Decrease) increase in creditors (2,824) 4,544Movement in provisions 143 74 Cash outflow from operating activities (25,797) (4,334) 9 Analysis of change in net debt At 1st April Cash flows Inception of At 31st March finance leases 2006 2005 £000 £000 £000 £000 Cash at bank and in hand 4,067 3,144 - 7,211Bank loans (33,116) (35,837) - (68,953)Hire purchase liabilities (150) 113 (133) (170) (29,199) (32,580) (133) (61,912) TELFORD HOMES PLC ('Telford' or 'the Company') Preliminary results for the year ended 31st March 2006 NOTES (continued) ________________________________________________________________________________ 10 Annual report and AGM Copies of this announcement are available from the Company at First Floor,Stuart House, Queensgate, Britannia Road, Waltham Cross, Herts, EN8 7TF. The Company's annual report for the year ended 31st March 2006 will be posted toshareholders in early June. The Annual General Meeting will be held at the Registered Office of the Companyon 6th July 2006 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