Telford Homes

HOLD

14/01/2011 Ben Jaglom

East London property developer Telford Homes (TEF) reported a fall in profits for the six months to September.

The AIM-quoted company unveiled pre-tax profits of £2m (2009: £5.7m) on revenue that fell £27.7m to £58.2m. The number of homes legally completed by Telford fell from 224 in 2009 to 133.

Borrowings of £75.6m were reported, with a cash position of £22m coming in at £11.6m lower than the same period last year.

CEO Andrew Wiseman also announced that he would be stepping down as chief executive, to be replaced by finance director Jon Di-Stefano, who has held his role for eight years, with Wiseman to stay on at the company he helped found in 2000 as chairman.

Wiseman told Growth Company Investor the fall in profits and sales at the company was due to its strategy of not acquiring any new land in 2008 and 2009, dramatically reducing the availability of new homes for sale.

Looking forward he is perhaps unsurprisingly enthusiastic about the future prospects for east London. He contends that next spring the Olympics in London will create a ‘buzz’ in east London and insists the Crossrail project is likely to boost prospects for the area. Wiseman is also seeing strong demand from investors in Asia for London properties.

For the year to March 2011 house broker Shore Capital forecasts pre-tax profits to fall £5.5m to £2.5m, with profits of £4m and £8m pencilled in for 2012 and 2013 respectively. Forecast to pay a dividend per share of 2.5p, 3.0p and 3.5 in 2011, 2012, and 2013, respectively the shares are trading on a 3.1 per cent prospective yield.

Last recommended by Growth Company Investor in August of 2008, the shares have declined 16.8% since and are currently trading at 81.5p. While the company is slowing down its new land purchases, the shares offer a generous dividend and the demand for new homes in London remains strong. Hold.