Telford Homes Regulatory News (TEF)

23 Jun 2009 12:00



Telford Homes Plc

("Telford Homes" or the "Company")

Acquisition of Clifford Contracting Limited

Telford Homes plc (AIM:TEF), the residential property developer in East London noted for regeneration projects within public sector partnerships, has entered into an agreement for the purchase of Clifford Contracting Limited ("CCL"), a contracting business supplying services to residential developers, from Puma VCT Plc, Puma VCT II Plc, Puma VCT III Plc and Puma VCT IV Plc (together the "Sellers"). CCL is estimated to have recorded an operating profit of £35,000 in the financial year to 30 April 2009.

The purchase price paid by the Company for the ordinary shares of, and loan notes issued by, CCL is £6,328,500, comprising £5,695,650 in new loan notes (the "Loan Notes") and the allotment and issue of 1,130,089 new ordinary shares, fully paid, in the share capital of the Company (the "Consideration Shares").  CCL holds cash balances amounting to £6,328,500.  The Loan Notes, which are repayable on or around 23 June 2014 or at any time at the Company's option, will be secured against property (primarily failed completions) to be transferred to Telford Homes (Properties) Limited ("THP"), a wholly owned subsidiary, by the Company.  The maximum loan to value is 75%. Interest is payable monthly in arrears at an annual rate of 4.5% until 31 October 2009 after which the annual rate increases to 8.88% per annum.  The interest rate further increases on £2,297,141 of the Loan Notes from 30 September 2010 and on the balance of Loan Notes from 30 September 2011 unless previously repaid by the Company which it intends to do.

The Company has, today, made application to the London Stock Exchange for the admission to trading on AIM of the 1,130,089 Consideration Shares of 10p each. The new shares are expected to be admitted to trading on AIM on 30 June 2009.

The Directors believe that, in addition to a contracting business, the acquisition provides the Company with a very flexible form of funding for failed completions and unsold properties with limited restrictions and covenants and more advantageous terms than would typically be the case with bank financing.

The Sellers have agreed to grant the Company a call option (the "Call Option Agreement") pursuant to which the Company has the right to repurchase the Consideration Shares for an aggregate consideration of £1.00 upon repayment in full of the Loan Notes. Because the Call Option Agreement entitles the Company to make an off-market purchase of its own shares, it can be entered into only following authorisation by a special resolution of the Company.

The Company will send a circular to shareholders later today convening a general meeting for the purposes of obtaining the necessary shareholders' consent.  In the meantime, copies of the Call Option Agreement will be available for inspection at the Company's registered office at First Floor Stuart House, Queensgate, Britannia Road, Waltham Cross, Hertfordshire EN8 7TF as required by the Companies Act.

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Notes to Editors

Telford Homes is an established house builder focusing on the regeneration of brownfield sites in the East and North London area. The Company'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 use.

The Company's successful record of selling properties at an early stage in the development allows greater visibility.  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. The Company's affiliations with housing associations in the area have meant that during this downturn in the open housing market the Company is able to focus more intently on 100% affordable housing schemes, as well as making a greater proportion of current developments affordable housing.

Telford Homes has secured funding of £57 million from the Homes and Communities Agency ("HCA") across four of Telford's own sites and three estate regeneration partnership projects with Eastend Homes. This funding enables the Company to develop affordable housing sites with security of sales already in place.

The Greater London Authority is predicting an increase of 800,000 in London's population over the next ten years, and forecasts that the city will need 30,000 new homes per year throughout this period. This huge pressure on the supply of new homes creates significant demand for Telford's services in this region.

For further information, please see www.telfordhomes.plc.uk