Telford Homes

East London property developer Telford Homes (TEL) has reported a slump in profits from £7.3m to £3m as it reduced the number of new properties built.

In results for the year to March the company exchanged contracts on a total of 368 open market properties, an increase of 45% on the same period last year, but the fall in profits came due to the developer's decision to reduce the number of new builds constructed amidst a challenging economy. CEO Andrew Wiseman noted that 'as anticipated the Group's strategy during the recession has resulted in reduced output and margins.'

Speaking to Growth Company Investor Wiseman argued that resilient East London property prices were being driven by factors that included 'the employment centres in The City and Canary Wharf, the strength of the West End and the impact of the new Westfield in Stratford and The Olympics next year.'

However he argued that buyers were facing the problem of having to face large deposits on properties, adding that the company had sold 170 out of 257 properties at its recently constructed Avant-garde development to wealthy buyers from the Far East, where the development had been marketed. Looking forward he noted that with cuts from the government in the amount of affordable housing to be built, the business would increasingly focus on open-market sales.

Following the results analysts at house broker Shore Capital lowered their forecasts for both 2012 and 2013 to £2.5m (from £4m) and £7.5m (from £8m) on turnover of £127m and £138m. A dividend per share of 3p and 3.5p is pencilled in for 2012 and 2013, respectively. EPS of 3.6p and 11.2p are forecast for 2012 and 2013.

Shares in Telford were recommended this January by Growth Company Investor at 81.5p and they have gained 0.25p since, currently trading at 81.75p. With the Olympics coming next year and the Westfield to open this September in Stratford, East London looks a relatively solid place to invest in property for the time being. Hold.