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For the purposes of the Takeover Code, Edison Investment Research is deemed to be connected with BCA Marketplace. Under Rule 20.1 Edison must not include any profit forecast, quantified financial benefits statement, asset valuation or estimate of other figures key to the offer, except to the extent that such forecasts, statements, valuations or estimates have been published prior to the offer period (as defined in the Takeover Code) by an offeror or the offeree company (as appropriate) in accordance with the requirements of the Code. Consequently we have removed our estimates until the Offer Period ends.
Telford Homes
FY19 results were in line with February guidance and the year ended with lower net debt than we had anticipated. The migration to a dominant Build to Rent (BTR)-led pipeline is well underway. The first developments of this type were handed over in the year and, together with the announced strategic partnerships, other live projects indicate good momentum in this sub-sector. As before, FY20 will reflect other project and open-market effects before earnings start to rebuild from FY21, consistent with our estimates. Telford’s valuation looks conservative if the company is able to sustain or exceed our projected FY22 EBIT over the long term.
Since announcing a strategic re-focusing of the group more towards the low risk, low capital intensity Build-to-Rent (BTR) market at the end of February, trading has been stable against our revised expectations. PBT for FY2019A came in at the expected £40m and we see no reason to change any forecasts: estimates and key metrics are summarised below. Trading conditions in the open market in London remain tough but units are still selling at all price points and there is little today left unsold in terms of finished stock. The BTR segment remains strong and is still attracting high levels of interest from a diverse range of investors from the UK and overseas. Re-focusing of the group towards this more attractive end-market should deliver long-term benefits of superior growth, lower risk, lower capital intensity and lower gearing. The shares are trading at more than 12% below NAV which we believe fails to reflect the positive changes now well in hand and implies an und
Telford Homes represents a pure play on London’s clear requirement for the delivery of more good-quality, new build homes. Management is continuing to orient development activities towards the more robust build to rent (BTR) subsector, although there will be a near-term dip in earnings as the pipeline transitions, factoring in isolated other project delays and current market conditions also. Regaining and sustaining historic profit levels would warrant a share price significantly ahead of the present valuation.
A 10 October update put down some clear markers for open-market sales to attain £50m+ group PBT in FY19 and for build-to-rent (BTR) sector expectations during H219. Some market risk remains evident at higher open-market price points and, with increasingly risk-averse UK equity market sentiment, Telford’s trading update was not well received. However, short-term market conditions are not distracting management from the development of an attractive pipeline of future project opportunities.
Telford Homes’ latest update is consistent with management comments accompanying FY18 results and the company is on track to deliver further progress in FY19. The share price has not kept step with business performance, perhaps influenced by wider cyclical sentiment. Project portfolio newsflow is likely to remain positive, and this should serve to re-connect internal progress and investor returns in our view.
One of the benefits of a public listing is that it provides a vital source of capital for businesses like Telford Homes. Indeed, since Jan’12 it has raised £70m in 2 tranches (£50m Oct’15 & £20m Jun’13) to develop thousands of desperately needed, high quality, affordable properties within inner London. In return, shareholders have seen PBT climb from £3.0m in FY12 to £46.0m today (see below), and been rewarded with a 475% appreciation in the stock from 79p to 460p. Which, when added to 75p of dividends, equates to an average annualised gain of 34% pa.
Need a reality-check on the daily hype surrounding the Capital’s housing market? Then look no further than Telford Homes, a specialist developer of ‘affordable’ studio, 1-3 bed apartments and ‘Build-to-Rent’ (BTR) schemes in inner London. Today the firm released another positive trading update, saying that results for the y/e March 2018, would not only be at “record” levels, but also adjusted PBT would come in >30% above LY (£34.1m) and “slightly ahead of expectations”. Accordingly we have nudged up our FY18 PBT forecast from £44.0m to £44.6m on LFL revenues 8% higher to £315m (vs £292m LY).
The markets have an uncanny knack of making fools out of us all. Back in 2012, I stupidly sold shares in Telford Homes - a specialist builder of affordable homes in ‘nonprime’ London boroughs. Happy enough at the time to pocket a >100% gain, only then to watch the price triple over the next 3 years!
Telford Homes’ trading update is a timely reminder that house building can’t always fall into neat six months tranches. Is also serves to remind us that demand for affordable housing in the London market remains strong and, combined with build to rent, provides excellent visibility through its strong forward order book, supported by a robust balance sheet. We expect continued growth over the next three years.
Telford Homes has published another positive set of full year results with record revenues and profits. The company has a large development pipeline, it enjoys excellent visibility through its forward order book and the balance sheet is robust. We expect continued growth over the next three years.
Telford Homes has published a positive full year trading update (FY to 31 March 2017). The company continues to trade well and will report record revenues and profits when it announces results in late May, with PBT ahead of market expectations.
H1 results were in line with expectations with PBT of £9.0m, EPS of 9.9p and DPS of 7.2p. The NAV / share is 253p. We expect the company to have a strong H2 based on its forward sales position and the timing of developments coming through. Telford has a strong balance sheet, a large development pipeline and impressive forward sales position, as well as good levels of demand for its product and geography from a diverse group of buyers. No change to forecasts at this stage.
Telford Homes is in as strong a position as it has ever been in the 15 years since flotation. The company has a strong balance sheet, with an expanded equity base and significant headroom on its banking facilities, a large development pipeline and impressive forward sales position, and good levels of demand for its product and geography from a diverse group of buyers.
We attended a site visit yesterday to several of Telford Homes’ sites at various stages of development. The trip provided good examples of regeneration in non-prime areas of London where Telford builds high quality homes at affordable prices. All sites that have launched are selling well, with a forward sales position of £700m as at the interims. Whilst there is lots of press commentary around a cooling London market, the differing supply and demand dynamics in the company’s areas of development continue to support its growth trajectory. With a significant institutional PRS deal announced on 15th February (Caledonian Road) and another deal in the pipeline, Telford expects Institutional PRS to form a significant part of its overall portfolio in the medium term. We continue to be positive on the prospects for PRS and believe this provides an opportunity to add considerable scale to the Group. Overall, the site visit reinforced our confidence in the Telford Homes model, the Group’s medium term prospects and the London mid-market.
We wrote after our lunch in February with Telford Homes and commented positively again in our pre-Election housing note “cycle not yet over, opportunities remain”. At that stage the group had just increased its banking facilities by 50% - a strong vote of confidence by the syndicate in both the company and the London mid-market for homes. Since then we have had the expected solid prelims, an upbeat AGM statement and last month the company invested £23m in acquiring four significant sites via the cash purchase of the UHD regeneration business. We continue to believe the company is very well-positioned for the medium term and see recent general concerns as overdone regarding Buy to Let and a cooling London market at the premium end. We consider Telford a core play on London ahead of the trading update in mid-October and remain positive on the PRS sector, where we think the group could in due course look to target institutional as well as private investors.
