Telford Homes Plc (AIM:TEF), the residential property developer in East London noted for regeneration projects within public sector partnerships, is pleased to give the following trading update ahead of its interim results for the six month period ended 30 September 2010 which will be released on 1 December 2010.
Performance in line with expectations for the period
A total of 206 new sales achieved since 1 April 2010
133 open market completions in the period down from 224 last year due to the Group developing a greater proportion of affordable housing during the recession
Cash holdings at 30 September of £22.0 million (31 March 2010: £33.6 million) including HCA grant held for future expenditure
Total borrowings of £67.6 million (31 March 2010: £70.8 million) with new site acquisitions offset by repayments from open market completions
Cautious approach to new investment maintained in the light of continued uncertainty over the economic environment
Current market conditions
The Group has achieved 206 new sales since 1 April 2010 assisted by successful overseas sales events. The last few weeks have seen a continued steady rate of UK sales such that performance remains in line with management expectations. There were 133 open market completions in the first half of the year (H1 2009: 224) also in line with expectations given the focus on developing more affordable housing during the recession. Lower open market output as well as lower margins will reduce reported profits for a period of time but this was anticipated and the Board expects the Group to meet market expectations in the current financial year.
The Group's secured grant programme with the Homes and Communities Agency (HCA) continues with several sites now nearing completion and the receipt of the final grant tranches. There are expected to be significant cuts in the future grant programme and the Group is not acquiring any new sites where grant funding is a requirement of the scheme until the levels available in the future become more certain. Telford Homes' record of delivery in its partnership with the HCA will give the Group an excellent chance of securing future grant allocations.
The Group has been active in land acquisition over the last six months and has begun to exercise options over the open market sites on some of its estate regeneration projects. In addition the Group was presented with the opportunity to acquire the other 50% of its joint venture with The Royal Bank of Scotland at Greenwich Creekside, at cost with payment deferred, and this transaction was completed on 17 September 2010. This acquisition will enhance profits in future years.
The Group has not increased its overall level of borrowing in the last six months although this is expected in the future when more sites for open market homes will be purchased and developed. Good progress is being made in negotiating a longer term corporate banking facility and this is currently being put to the credit committees of four banks.
The Board remain cautious in their outlook in light of the uncertain economic environment and an expectation that the mortgage market will see little improvement before early 2012. However trading conditions in East London have been steady and the Group continues to benefit from the 2012 Olympics as a result of the improving infrastructure and regeneration which positions the area for long term growth. Over time the increasing shortage of new homes will create further opportunities for significant growth and the long term prospects for Telford Homes remain strong.
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