Trafalgar Prop Regulatory News (TRAF)

7 Dec 2005 09:20

7 DECEMBER 2005 TRAFALGAR NEW HOMES PLC ("TRAFALGAR" OR "THE COMPANY") COMMENCEMENT OF TRADING ON OFEX The Board of Trafalgar, a provider of affordable homes in London and Greater London, announces today the commencement of trading in the Company's shares on the Ofex market. HIGHLIGHTS * TRAFALGAR NEW HOMES AIMS TO BE RECOGNISED AS A LEADING PROVIDER OF HIGH QUALITY NEW HOME OPPORTUNITIES AT AFFORDABLE PRICES; * JOINS OFEX AS A PROFITABLE COMPANY; * THE COMPANY HAS RAISED A TOTAL OF GBP135,000 VIA A PLACING AT 25P-37P PER SHARE. THE PLACING PRICE WAS 37P WITH THE DISCOUNTED PRICE ONLY AVAILABLE TO SUBSCRIBERS FOR GBP30,000. SVS SECURITIES PLC IS ACTING AS CORPORATE ADVISER; * DIRECTORS SOLELY SEEK REMUNERATION BY DIVIDEND; AND * STRONG BOARD WITH A DEMONSTRABLE SECTOR TRACK RECORD. MARKET STATISTICS Placing Price 25P-37P Existing Ordinary Shares 5,403,904 New Ordinary Shares being issued under the Placing 514,815 Par value of Ordinary Shares 1P Gross proceeds of the Placing GBP 135,000 Net proceeds of the Placing received by the Company GPB 123,223.19 Cash following Placing GPB 123,223.19 Market capitalisation GBP 2,190,000 Director's shareholdings expressed as a percentage of the total 84.47% shares in issue Year End 31 MARCH 2005 KEY INFORMATION Following today's successful admission to Ofex, the Directors intend to raise an additional sum between GBP400,000 and GBP600,000 by way of an Offer for Subscription to members of the public. These additional funds will be used by the Directors to support work in progress and to expand the business by making further investments that fall in line with the strategy of the Company. The Company believes it will be able to meet the projections published in the Private Placement Memorandum. BACKGROUND Trafalgar New Homes was formed to exploit the opportunity of developing new property, based on the experience and track record of its founders. Trafalgar New Homes, which recognises the problems arising from inflated home prices caused in part by the current housing deficit in London, plans to develop and sell high quality new and affordable housing by redeveloping existing brownfield sites in secondary areas of London and greater London. The Directors of Trafalgar New Homes are currently operating on the strategy whereby once they have identified suitable land for development, the owner of the land is approached and an offer to buy the property for more than its valuation at that time is made. Trafalgar New Homes mitigates its risk by securing the land on an option - subject to planning agreement with a GBP1 deposit. This means that the vendor is unable to sell the land for 6 months and that should an acceptable planning permission be received, Trafalgar New Homes may purchase the property at the agreed price. It is important to note that this agreement does not commit Trafalgar New Homes to completing a purchase and that it may choose not to purchase the property even if planning permission has been successfully gained. Should this happen, the vendor would receive the planning permission free of charge, and is thus not severely disadvantaged. In the past, the Directors, through Trafalgar Developments, have successfully followed this business model and received planning permission. To facilitate the purchase and funding of the new builds, Trafalgar New Homes has arranged for a GBP3 million acquisition facility with Barclays Bank plc. DIFFERENTIATION TO SECTOR PEERS Trafalgar New Homes has an arrangement with two architects to work on a success-based fee, where they are not paid for their work in the planning application if planning is not received. This also reduces the risk to Trafalgar New Homes by reducing disbursement costs to around GBP1000 only. It also increases the chances of planning consent being received, as the architect is motivated to ensure the planning application is successful in order to receive his fee. In order to facilitate first time buyers taking that all important step onto the property ladder and to assist sales, the Directors at Trafalgar New Homes have decided to help individuals wishing to purchase a property they develop. As an incentive, the Company is willing to pay up to GBP750 of the removal costs, up to GBP500 of the legal fees involved and will contribute 5% towards the deposit necessary for a mortgage. The Directors are of the opinion that such a facility will not only help support their sales and marketing strategy, but will also help the Company differentiate itself from potential competitors and thus, help establish itself in the marketplace. The Company has very low infrastructure costs. PROPERTY PORTFOLIO Trafalgar New Homes currently owns a property in Heyford Road, Mitcham, Surrey, with a valuation of GBP2.55 million. This property was originally located and purchased by the Directors. The land was initially secured on an option - subject to planning agreement for GBP775,000. The land has been independently valued by Barclays Bank plc with planning for GBP1,000,000, representing an uplift of GBP225,000. CASE STUDIES The Directors have successfully worked together over the last few years, either through Trafalgar Developments Limited or Virk & Sheldrick Property Holdings, and have built up an impressive track record of investments. Examples of such transactions include: 2003 * 27 William Morris House: purchase price GBP230,000, uplift in equity after refurbishment GBP25,000 * 15 William House: purchase price GBP290,000, uplift in equity after refurbishment GBP180,000 * 89 Harley Road: purchase price GBP322,000, uplift in equity after refurbishment GBP190,000 * 34 William Morris Road: purchase price GBP285,000, uplift in equity after refurbishment GBP185,000 2004 * Wybourne Way: purchase price GBP135,000, gross profit of GBP43,000 from sale which took place within two months of purchase date * Elms: purchase price GBP135,000, uplift in equity after refurbishment GBP45,000 * St Johns: purchase price GBP170,000, uplift in equity after refurbishment GBP25,000 * 27 Gardenway: purchase price GBP150,000, uplift in equity after refurbishment GBP65,000 It was the identification of an opportunity to diversify into a new and potentially highly profitable area of property development that led to the formation of Trafalgar New Homes plc. In 2004, the Directors, through Trafalgar Developments, began to evaluate various city ordinance survey maps looking for property that could be redeveloped and sold for a profit. Over the short period of time that this exercise was conducted, several brownfield areas suitable for new home developments were identified, with Heyford Road in Mitcham, Surrey being one of them. Once the potential of Heyford Road was realised, the decision was taken to move forward with Trafalgar New Homes. THE MARKET IN LONDON Due to social changes, for example people waiting longer to get married and increasing divorce rates, the average household size has fallen, leading to many more households and an increased demand for housing. The greater economic prosperity, especially in London and the South East, has also added to increased demand for housing. Additionally, household composition has changed, with more students, migrants, lone parents and people from minority ethnic groups. London currently has a population of over 7 million people, living in over three million separate households. These include 500,000 pensioner households, 870,000 households with dependent children and 260,000 households with non- dependent children. London's population is growing and the GLA anticipates that this upward trend is set to continue, with the Mayor's London Plan predicting that London's population will be 8.1 million by 2016. The increase in prices across the housing market has widened the gap between primary and secondary areas. Secondary areas are commonly perceived by the market to be less desirable areas that fall on the outskirts of more expensive and exclusive areas. Rising home prices have increased the attractiveness of secondary areas to first time buyers who would like to own their home. Furthermore, the increase in rents attainable in primary areas has not kept pace with capital values, limiting the yield available to investors-landlords. For these buyers, the attraction of secondary areas is also becoming increasingly apparent as rents available for these properties are similar to those in many primary areas, even though capital values are lower. TRAFALGAR'S VIEW OF THE SECTOR The Directors recognise that the recent cooling of the housing market means that they are now launching into a more challenging environment, but believe that this is a return to more normal conditions compared with the rapidly increasing prices of the past few years. The Directors, along with many other experts, are of the opinion that the crash predicted and reported in the media is unlikely to occur. They believe that the current softening of prices is not a precursor to a major dip, but a short-term fluctuation that will allow for a more sustainable growth pattern in the longer term. The Directors believe that aligning their business model to this lower level of activity will place them in an excellent position to build a sustainable business with long term potential. THE BOARD The Directors of Trafalgar New Homes have a sum total of 20 years industry experience between them, and are all currently involved in the successful property development company Trafalgar Developments Limited. The strong Board comprises: MANAGING DIRECTOR ASHLEY SHELDRICK FINANCE DIRECTOR KULVIR VIRK AQUISITIONS DIRECTOR JOSEPH UPCHURCH SHARE OPTION SCHEME The Directors are proposing to implement a share option plan for the senior employees and Board members. The maximum aggregate amount which the Directors will allot under the scheme is that number which is equal to 10% of the fully diluted issued share capital of the Company following the closing of the Placing. The Options issued will not be exercisable at a price lower than 37p per Ordinary Share and will be exercisable at any time between 2 and 10 years following the close of the Placing, or earlier should the Company list on a recognised exchange or be sold. DETAILS REGARDING MAJOR SHAREHOLDERS CAN BE FOUND IN APPENDIX 1 DETAILS REGARDING PREVIOUS DIRECTORSHIPS OF THE BOARD ARE LISTED IN APPENDIX 2 DETAILS REGARDING RISK FACTORS CAN BE FOUND IN APPENDIX 3 Commenting today, Finance Director, Kulvir Virk, said: "GIVEN THE VISIBLE AND ENCOURAGING TURNAROUND OF THE OFEX MARKET IN THE LAST 12 MONTHS, THE BOARD BELIEVES THAT TODAY'S LISTING IS NOT ONLY TIMELY, BUT WILL ENABLE TRAFALGAR TO GROW WITHIN ITS EXPANDING AND LUCRATIVE MARKET SECTOR - WHILST ENHANCING ITS OVERALL PROFILE TO INVESTMENT AUDIENCES." ---ENDS--- ENQUIRIES: TRAFALGAR NEW HOMES PLC TEL: 020 8969 0123 Kulvir Virk BISHOPSGATE COMMUNICATIONS LTD TEL: 020 7430 1600 Dominic Barretto MOBILE: 07930 450 156 Nick Rome MOBILE: 07748 325 236 SVS SECURITIES PLC TEL: 020 7638 5600 Ian Callaway Kirsten Aldridge APPENDIX 1 BELOW IS THE NAME OF ANY SHAREHOLDER WHO HOLDS AN INTEREST IN 3% OR MORE OF THE ISSUED SHARE CAPITAL Kulvir Virk 35.90% Ashley Sheldrick 35.90% Joseph Upchurch 12.67% Connell Associates 3.38% Accelerator Investments Limited 4.79% APPENDIX 2 BELOW IS A LIST OF ANY PREVIOUS DIRECTORSHIPS (IN THE LAST 5 YEARS) HELD BY MEMBERS OF THE BOARD ------------------------------------------------------------------------------ |DIRECTOR |CURRENT DIRECTORSHIPS |PAST DIRECTORSHIPS | ------------------------------------------------------------------------------ |A B J |Trafalgar Developments (UK) |NONE | |SHELDRICK|Ltd | | ------------------------------------------------------------------------------ | |Grosvenor Construction (UK) | | | |Ltd | | ------------------------------------------------------------------------------ | | | | ------------------------------------------------------------------------------ |J E |Grosvenor Residential (UK) plc|NONE | |UPCHURCH | | | ------------------------------------------------------------------------------ | | | | ------------------------------------------------------------------------------ |K S VIRK |SVS Securities plc |Richmond Portfolio Building | | | |Construction Ltd* | ------------------------------------------------------------------------------ | |Trafalgar Developments (UK) |Richmond Portfolios Land & New | | |Ltd |Homes Ltd* | ------------------------------------------------------------------------------ | |SW2 Properties Limited | | ------------------------------------------------------------------------------ | |SVS (Nominees) Limited | | ------------------------------------------------------------------------------ | |Steiner Virk and Sims | | | |(Auditing) Limited | | ------------------------------------------------------------------------------ | |SVS Corporate Services Limited| | ------------------------------------------------------------------------------ APPENDIX 3 RISK FACTORS AN INVESTMENT IN TRAFALGAR NEW HOMES PLC IS SPECULATIVE AND INVOLVES RISKS AND UNCERTAINTIES. THE DIRECTORS CONSIDER THE FOLLOWING RISKS TO BE THE MOST SIGNIFICANT TO POTENTIAL INVESTORS. HOWEVER, THE RISKS LISTED DO NOT NECESSARILY COMPRISE ALL THOSE ASSOCIATED WITH AN INVESTMENT IN THE COMPANY: The following bullet points are taken from the Private Placement Memorandum: * The Ordinary Shares are not listed on any Stock Exchange and as a consequence an investment in the new Ordinary Shares may be very difficult to realise. It is intended that an application will be made for all the Ordinary Shares of the Company to be traded through OFEX, a facility managed by OFEX plc to allow trading in the shares of unquoted companies; * The value of the Company's Ordinary Shares may go down as well as up. Investors may therefore realise less than their original investment; * The success of the Group depends to a certain extent on the Directors. The loss of one or more of the Directors could have an adverse effect on the Group; * The success of the Company depends largely upon the expertise of the current Directors and their ability to identify and acquire suitable sites for development on attractive terms, and the success of such acquisitions; * Whilst the Directors of Trafalgar New Homes believe that there is significant demand for new build homes, it is not guaranteed that the public will make any home purchases; * Discretion of Management as to use of Proceeds: The anticipated use of the net proceeds of the Placing stated in this Memorandum represents the Group's best estimate based upon the current state of the business, operations and plans. Changes in circumstances, including conditions in the industry generally, could result in significant changes in the use of the proceeds of the Placing. The Company's Management will have significant discretion as to the use of the proceeds of the Placing and there is no assurance that such proceeds will be allocated in any specific manner or devoted to any specific uses; * The Company's capital requirements depend on numerous factors, including its ability to service current and future projects and its ability to carry out potential acquisitions. It is difficult for the Directors to predict accurately the timing and amount of the Company's capital requirements. If the plans or assumptions set out in the Company's business plan change or prove to be inaccurate, the Company may require further financing. Any additional equity financing may be dilutive to existing shareholders, and debt financing, if available, may involved restrictions on financing and operating activities. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion. * The ultimate success of the Company depends, in part, on the property prices in London and The Greater London Area remaining stable or rising. There is no guarantee that this will be the case. There is also no guarantee that the Company will be able to sell part or all of the development sites in which it invests; * If the Company finances any property investment utilising any form of borrowings than as a result of incurring such liabilities he Company will be vulnerable to fluctuations in interest rates. A higher level of borrowing also means that the Company would be vulnerable to any downturn in the UK property market; * The successful growth in the Company's assets will depend on it being able to acquire appropriate development sites and develop them on acceptable terms and thereafter the ability of the Company to sell part or all pf the properties in which it invests; * The successful development of development assets acquired may also depend on the Company being able to obtain suitable planning consents. There can be no certainty that such consents will, where applicable, be forthcoming; * It is likely that the Company will need to raise further funds in the future, either to complete a proposed site development or to raise further working or development capital for such an acquisition. There is no guarantee that the then prevailing market conditions will allow for such a fundraising or that new investors will be prepared to subscribe for ordinary shares at the same price as the Placing Price or higher. Shareholders may be materially diluted by any further issue of ordinary shares by the Company; * The Company's Ordinary shares are intended for capital growth and therefore may not be suitable as a short-term investment. Investors may therefore not realise their original investment. The investment described in this Memorandum may not be suitable for all of its recipients. Investors are accordingly advised to consult an investment adviser authorised under the Financial Services and Markets Act 2000 who specialises in investments of this kind before making their decision. ---ENDS---