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 preliminary results for the year ended 31 March 2010 which will be released on 26 May 2010.
Full year figures expected to be materially ahead of market expectations
Successful year, with 389 open market sales legally completed during the period (2009: 350)
Grant programme with the Homes and Communities Agency ("HCA") increased to £73 million with £47 million received to date
Net debt reduced in the period by £70 million to £37.2 million (2009: £107.2 million)
Steady and improved sales environment in the East London housing market
£7.2 million (net of expenses) raised via a placing of new shares in February 2010 in order to take opportunities for growth
Current market conditions
The year to 31 March 2010 has been successful, and the Group has achieved 389 open market completions (2009: 350). The market in East London has improved over the last six months and in particular sales in the first quarter of 2010 were better than anticipated such that the Board expects the results for the full year to be materially ahead of market expectations.
The Group has continued to achieve completions on pre-sold homes but has also been able to re-sell properties where the original buyer failed to complete, most significantly at the OneStratford and SoBow developments. A steady rate of new sales has also been secured at Queen Mary's Gate, Woodford and Nayland Court, Romford. The Group has achieved a better level of pricing, with overall sales and prices being ahead of management's expectations.
The housing market in East London has shown positive signs of recovery, with regeneration surrounding the build up to the 2012 Olympics continuing to stimulate demand. The market has been robust since September 2009 despite the continued restrictions on mortgage finance particularly for new build apartments. In order to secure a proportion of pre-sales on some developments, Telford Homes has marketed to overseas investors in the last few months and this has led to over 70 new sales being secured, particularly at Greenwich Creekside.
Affordable housing and HCA grants
Telford Homes continues to work closely with affordable housing providers in East London, and this strategy allowed the Group to reduce its exposure to the open market during the economic downturn. In particular, the Group's position as a partner of the HCA and the ability to secure attractive planning permissions has seen its grant programme extended to £73 million of which £47 million has been received to date. The balance will be received over the next three years on completion of 534 affordable homes.
Net debt has reduced by £70 million during the period from £107.2 million at 31 March 2009 to £37.2 million. This has been achieved due to substantial debt repayments on achieving completions, the grant receipts held for future expenditure, the placing funds received in March and by controlling investment in new land and expenditure on work in progress.
Following the successful placing of new shares for cash in February 2010 raising £7.2 million, net of expenses, Telford Homes is in a position to develop more homes for open market sale upon sites in its ownership and within estate regeneration projects for Eastend Homes subject to agreeing appropriate bank finance. The Group's negotiations to secure this bank finance and for other opportunities are progressing as planned.
Telford Homes has performed well during the year, achieving planning permissions, benefiting from its partnerships with housing associations and the HCA and an improved housing market in East London. This coupled with a strengthened balance sheet following the placing and continued support from banking partners allows the Board to view the future with increased optimism.
Andrew Wiseman, CEO of Telford Homes, commented: "The Board is very pleased with the achievements over the past year and the number of completions secured will put the Group's results ahead of market expectations for the full year. We had been prudent in our approach and adopted a strategy which ensured that Telford Homes was well positioned through the downturn. Having completed the share placing in February, we are now in a strong position to pursue specific opportunities, developing sites which we already own for open market sale and exercising options on estates owned by Eastend Homes. We are optimistic about the prospects for the Group, with sustained confidence in the market in East London given the shortage of supply of new homes in the area."
Telford Homes is an established residential property developer focusing on the regeneration of brownfield sites in the East and North London area. The Group's strong public sector partnerships afford it a certain level of security of sales before commencing development. Whilst the majority of every scheme is residential, often some commercial units are required as a condition of the planning consent, which may be used for office space, retail units, or community facilities.
Telford Homes has an excellent track record of working with housing associations and has forged many strong relationships, and typically part of every development is sold for affordable housing.
Telford Homes has secured grant funding of £73 million from the Homes and Communities Agency ("HCA") across five of Telford's own sites and three estate regeneration partnership projects with Eastend Homes. This funding enables the Group to develop affordable housing sites with sales to housing associations already secured.
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