News blog

Telford Homes

  • BY: Andrew Hore |
  • POSTED: 27/05/2009 |

Increased focus on social housing has helped Telford Homes to cope with the weak housing market.

The residential developer is focusing on the social housing market so that it can continue to generate revenues and make use of its land bank. There is £34.6m of affordable housing revenue contracted but not yet recognised.

There have been 18 defaults - including one block of 14 homes - out of the 613 homes sold for completion between October 2008 and March 2010. So far 220 have been legally completed. Management believes the number of defaults will end up between 60 and 80 homes. The 10% deposits will be retained on these homes.

A change in accounting rules means that profits are less flattering than before and they are also less easy to smooth from year to year because revenues are only recognised when the sale is completed. Even so, profits held up well. They fell from £6.54m to £4.34m, on revenues from £96.8m to £107m in the year to March 2009. The profit was struck after a £2.9m land value write down and £100,000 of redundancy costs.

The shares recovered 9.5p to 60p a share following the results announcement. Telford is valued at £22.8m. The NAV is 130p a share. The share price discount reflects the high borrowing levels.

Net debt was just over £107m at the end of March 2009. The land bank and work in progress was valued at £178m. Borrowings have been reduced since then and Telford should get a significant tranche of its £57m worth of social housing grants from the Homes and Communities Agency during the year.

House broker Shore Capital forecasts 2009-10 profits of £6.9m and net debt of £75.4m at the end of March 2010. The broker even thinks that Telford might restore dividend payments having stopped them last year.

There are signs that more people are viewing homes at the moment but viewing levels are still lower than a couple of years ago. 

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