Wren Homes

Having settled in after moving home from Plus Markets to AIM with a £5.8m placing, upmarket retirement home-builder Wren is looking to gear up its sales push and is pondering moving into care homes too.

The company currently has 90 units in development across four sites in its heartland of leafy Surrey, with average selling prices of around £350,000 per apartment. However, it can take a year to sell off a whole site and chief executive Paul Treadaway admitted ‘there’s always one or two left at the end’.

In the pipeline, explained Treadaway, is Wren’s ‘£100 million’ land bank for residential properties, on which the company has signed options to buy once planning permission is agreed.

Demographics are a big factor in the company’s favour. According to the Office of National Statistics, around one in six people is currently aged over 65 and by 2021 it will move up to more than one in five. Wren currently focuses on the ‘active retired’, not needing care, relying on the demand for retirees to downsize their homes for Wren ones to release equity. Three or four sizeable competitors operating in the upmarket space, plus downmarket leader McCarthy & Stone, mean it’s no walk in the park for Wren.

However, a number of weighty backers seem to have some belief in the company, joining the register at the undemanding 36p float price, including financial behemoths HSBC and Allianz Cornhill, wily stock market investor Luke Johnson and Peter Webb’s Eaglet Investment Trust. Management hold about half the shares.

House broker JM Finn estimates £2m pre-tax profits from £4m sales for the year to July, giving a prospective price-earnings ratio of 11.5. That is above the housebuilding sector average – but retirement homes specialist McCarthy & Stone was recently bought out for an earnings multiple of around 20 times, suggesting Wren’s shares might reward in the long-term.