Telford Homes 'in good shape'

Telford Homes, the builder of homes in East London, is on course to match full-year forecasts and is confident enough in the housing recovery to start work at new sites next year.Profit before exceptional items for the six months ended 30 September leapt to £6.5m from £0.3m a year ago on revenue up to £85.9m from £35.6m. Write-downs to the value of land and work in progress halved from £1.4m a year ago to £0.7m this time. None are expected in the second half due to the change in market sentiment in East London over the last few months.The company said full-year numbers are expected to be heavily weighted towards the first half as there are fewer pre-sold properties left to complete. It legally completed 224 open market homes (government-backed affordable housing) during the period, almost double the 119 reported the year before."We've been through difficult, dark times, but come out in very good shape, evidenced by the reinstatement of the dividend," chief executive Andrew Wiseman told ShareCast. The firm is paying out 0.75p a share."We don't expect any fireworks next year, but solid demand should underpin the recovery in the housing market." Wiseman said his company was now looking to start building at open market residential developments in 2010. By the end of November, Telford had either completed or re-sold 470 of the 613 pre-sold homes that were due to complete between 1 October 2008 and 31 March 2010.There are glimmers of hope for first-time buyers as well, says Wiseman, as the number of 90% home loans picks up, but he points out these aren't available for buy-to-let investors. For those guys the maximum loan-to-value is now about 65%, down from 80% when they bought some of Telford's flats. The shortfall in mortgage finance is about £50,000 for many, forcing them to sell up before completion.A total of 57 pre-sold homes have failed to reach completion since 1 April, but 44 have subsequently been re-sold to new buyers. The group has sold 48 more homes in Woodford and Romford in Essex since the start of its new financial year, plus 52 off-plan at developments completing from 2010, mostly in Greenwich.Because Telford hasn't bought any new land and restricted spending on work in progress over the last 18 months, it expects output of completed homes to fall over the next two financial years followed by growth supported by a less leveraged balance sheet."Overall, we are in a strong position, having focused on cash generation and reducing debt levels during the period," Wiseman says. "An ongoing shortage of new homes, related demand for rental properties and regeneration led by the 2012 Olympics all support the board's long term confidence in East London."Telford shares have done well since April, surging more than fives times from 20p to about 100p now. But Wiseman is still unhappy with the discount to net asset value (135p) despite being as low as one tenth at one stage. It traded at a premium before the housing crash.