DEVELOPING IN LONDON DELIVERING SUSTAINABLE GROWTH FINAL RESULTS 31 - - PowerPoint PPT Presentation

DEVELOPING IN LONDON DELIVERING SUSTAINABLE GROWTH

FINAL RESULTS 31 MARCH 2017

CITY NORTH N4

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

OVERVIEW OF TELFORD HOMES PLC

• Specialists in planning, designing and building developments in London
• Residential led alongside commercial uses, schools and religious buildings
• Focus on brownfjeld and regeneration opportunities
• A hands on developer with in-house construction expertise
• A fjrst class safety record and a focus on sustainability
• Concentrating on locations where the need for homes exceeds supply
• A respected partner with a strong reputation and brand
• A growing business with a development pipeline of over 4,000 homes
• Experienced management team leading a workforce of over 1,000

people each day

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www.telfordhomes.london

AMBITION AND STRATEGY

There is a chronic shortage of new homes in London. Our goal is to grow Telford Homes over the next five years to help address this shortage. This will involve doubling our output of new homes in one of the world’s greatest cities. Our strategy

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Increasing our average site size due to economies of scale

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Focusing on affordable non- prime locations for open market sale homes

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Broadening

• ur geographic

focus within London to access more

• pportunities

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Positioning Telford Homes as a key build to rent developer and partner across London

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Maintaining a strong forward sold position to limit risk

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Driving the evolution of our sustainability strategy

Ambition

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

AREA OF OPERATION

KEY BARNET ENFIELD HARINGEY CAMDEN HACKNEY WALTHAM FOREST REDBRIDGE HAVERING BARKING & DAGENHAM NEWHAM TOWER HAMLETS CITY GREENWICH LEWISHAM SOUTHWARK LAMBETH CROYDON MERTON WANDSWORTH HOUNSLOW EALING BRENT HARROW HILLINGDON BROMLEY SUTTON KINGSTON UPON THAMES RICHMOND UPON THAMES H&F K&C WESTMINSTER BEXLEY ISLINGTON

Traditional area of operation Expanded area of operation

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www.telfordhomes.london

VIBE E8

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

HIGHLIGHTS

• A record year exceeding expectations
• On track to deliver further substantial growth in profjt before tax
• Signifjcant security from forward sales underpinning growth forecasts
• Maintaining a growing dividend
• Increasing strategic focus on build to rent
• Individual sales market remains supported by a lack of supply
• Continued focus on our customers with excellent feedback received
• Successfully added to development pipeline in last few months

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www.telfordhomes.london

MARKET DATA

ECONOMIC GROWTH CHANGE IN AVERAGE PRIVATE RENTS INDEX ON A YEAR EARLIER LONDON POPULATION (M)

• VS. COMPLETIONS (000)

ANNUAL HOUSING STARTS IN LONDON (000)

30 20 10 30 20 10 9.2 8.7 8.2 7.7 7.2 6.7 12% 6% 0%

• 6%
• 12%

6% 4% 2% 0%

• 2%

2007 2008 2009 2012 2010 2013 2011 2014 2015 2007 2008 2009 2012 2010 2013 2015 2011 2014 2016 2007 2008 2009 2012 2010 2013 2011 2014 2015 2016 1992 1996 2000 2012 2004 2016 2008 Real Gross Value Added (GVA) growth (year on year), London and rest of UK London Rest of UK London Rest of UK Completions ('000) – London (LHS) Population (m) – London (RHS) Source: DCLG, ONS Source: DCLG Source: Experian data provided to GLA Source: DCLG

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

• Positive market factors continue to outweigh negative infmuences
• Imbalance between supply of homes and need in London
• Uncertainty created by EU referendum has not caused any

signifjcant concern

• Some sales launches briefmy deferred but demand remained robust
• Stability and rights of EU workers key issues in exit negotiations
• No signifjcant impact on labour or material costs to date
• Additional 3% stamp duty and phased removal of mortgage interest

relief mainly impacting UK based investors

• Strong rental demand continues to drive appetite from overseas and

build to rent investors

• Government support for building more homes is unlikely to change

THE LIBERTY BUILDING E14

MARKET CONTEXT

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www.telfordhomes.london

THE PAVILIONS N1

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

TELFORD HOMES SALES MIX

2013 2014 2015 2016 2017 100 80 60 40 20 % Year

Individual investors Build to rent investors Owner-occupiers

2017 2016 77% 24% 20% 69% 3% 7%

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www.telfordhomes.london

BERMONDSEY WORKS SE16

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

• Historic forward sales strategy has kept owner-occupier sales at low levels
• Most unable to commit to a purchase more than six months ahead
• f completion
• Signifjcant demand from this sector supported by Help to Buy
• Encouraging launch of residual homes at Bermondsey Works aimed at
• wner-occupiers
• Expect to hold back selected launches in the future to encourage

balanced sales mix

• Continued demand from investors in China and Hong Kong
• Successful launch of City North in November 2016 secured over £43

million of sales

• No other signifjcant launches in the year due to shift towards build to

rent sales

INDIVIDUAL SALES

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www.telfordhomes.london

THE FORGE E6

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

BUILD TO RENT

• Signifjcant step change in our build to rent activity over just 16 months
• Entered into four transactions since February 2016 comprising nearly 500

homes for over £230 million

• Secured sales with blue chip investors on forward funded basis needing no

debt and limited equity

• Working with L&Q, Notting Hill Housing and on two developments with

M&G Real Estate

• Already a recognised build to rent developer leading to multiple approaches

from other investors

• Valued partner to large scale investors due to construction expertise, delivery

record and fjnancial standing

• Expectation of longer term partnerships with key build to rent investors
• Would enable the purchase of land and bespoke build to rent design with a

secured sale already in place

• Build to rent will remain a strategic focus enabling accelerated growth and

reduced reliance on debt Proforma margin comparison

Individual sale Build to rent

Revenue 100 88 Land and build (76) (76) Gross profjt 24 12 Gross margin 24% 14% Selling expense (4) (1) Finance costs (4) Net profjt 16 11 Net margin 16% 13%

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GROUP INCOME STATEMENT

2013 2014 2015 2016 2017 Revenue £142.4m £140.8m £173.5m £245.6m £291.9m Gross profjt £31.4m £42.1m £53.9m £63.1m £63.2m Administrative expenses (£12.9m) (£14.1m) (£16.7m) (£19.2m) (£20.8m) Selling expenses (£7.9m) (£6.8m) (£9.2m) (£9.4m) (£5.1m) Operating profjt £10.6m £21.2m £28.0m £34.5m £37.3m Net fjnance costs (£1.6m) (£2.0m) (£2.9m) (£2.3m) (£3.2m) Profit before tax £9.0m £19.2m £25.1m £32.2m £34.1m Gross margin adjusted for interest 24.3% 31.9% 32.4% 26.5% 22.3% Operating margin adjusted for interest 9.7% 17.1% 17.5% 15.0% 13.4% Earnings per share 14.3p 26.4p 33.2p 39.3p 36.8p Dividend per share 4.8p 8.8p 11.1p 14.2p 15.7p

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

RESULTS AND MARGINS

• Record levels of revenue and profjt
• Increase in revenue despite reduction in open market completions

to 289 (2016: 482)

• Signifjcant increase in build to rent and affordable revenue
• Blended gross margin lower due to greater proportion of build to rent
• Margins expected to trend down towards target levels over time
• Selling expenses reduced due to changing sales mix therefore

fewer launches

• Signifjcant growth in profjts expected in the next two years
• Normal dividend policy to pay one third of earnings each year
• Dividend of 15.7 pence in excess of policy to offset dilution caused by

the placing in 2015 Revenue analysis Margin analysis

2017

Revenue £m Gross profit margin

Open market 153.5 25.4% Affordable 50.1 23.0% Build to rent 76.5 16.0% Other income 11.8 20.3% 291.9 22.3%

2016

Revenue £m Gross profit margin

Open market 195.9 27.3% Affordable 19.1 27.7% Build to rent 19.9 18.1% Other income 10.7 26.2% 245.6 26.5%

Open market Affordable Build to rent Other income

26% 8% 17% 8% 53% 80% 4% 4%

2017 2016

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GROUP BALANCE SHEET

2013 2014 2015 2016 2017 Non current assets £1.1m £2.2m £1.9m £2.1m £2.2m Inventories £132.5m £173.1m £277.2m £285.6m £339.4m Cash £23.7m £33.0m £39.7m £20.9m £39.8m Other current assets £19.4m £6.6m £11.5m £31.4m £42.9m Borrowings (£58.1m) (£28.1m) (£92.6m) (£38.2m) (£54.1m) Other liabilities (£45.9m) (£81.4m) (£117.3m) (£114.8m) (£165.9m) Net assets £72.7m £105.4m £120.4m £187.0m £204.3m Net assets per share 145p 177p 200p 250p 271p (Net debt) / net cash (£34.4m) £4.8m (£52.9m) (£17.3m) (£14.3m) Gearing 47% 0% 44% 9% 7%

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

BALANCE SHEET ANALYSIS

HORIZONS E14

• Strong balance sheet with net assets per share growing
• Increase in inventories as the Group pursues its growth strategy
• Majority of land within inventories either under construction or working

towards planning

• Land creditors of £28.4 million relate to sites where contracts exchanged

with deferred land payments

• £180 million revolving credit facility runs to March 2019 with four banks
• Headroom within the facility of £125 million at 31 March 2017
• Individual joint venture debt facilities secured as and when required
• £110 million facility signed for City North JV and £33 million facility for

Balfron JV

• Net debt reduced to £14.3 million and gearing to 7%
• Reduction due to developments completing and upfront payments on

build to rent contracts

• Debt levels anticipated to increase to enable growth, underpinned by

substantial forward sold position

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www.telfordhomes.london

SOUTH KILBURN NW6

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

DEVELOPMENT PIPELINE

• Pipeline now represents over 4,000 homes with a value of £1.5 billion
• More than fjve times the revenue generated in the year to 31 March 2017
• Acquisition strategy focused on non-prime opportunities below £1,000

per square foot

• Average anticipated price of open market homes in the pipeline is

£527,000 (2016: £513,000)

• Notable acquisition success since start of 2017 including £30 million site

in Bethnal Green

• Also acquired site for 120 homes with planning in Hackney Wick and

named preferred partner for 236 homes in South Kilburn

• South Kilburn will be Group’s fjrst development in Brent and also fjrst via

the ‘London Development Panel’

• All three sites expected to be marketed to individual customers
• Actively pursuing many other opportunities including those suitable for

build to rent

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www.telfordhomes.london

MANHATTAN PLAZA E14

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

OPERATIONS

• Well established culture of looking after people across the business
• Consistently high level of staff retention
• Operational capacity increasing to accommodate growth plans
• In-house construction expertise retaining control of delivery
• Strong supply chain relationships assisting when materials or skills are

in high demand

• Excellent Health and Safety record
• Increased focus on sustainability assisting partnership working and

community engagement

• Adopting modern methods of construction where possible and

monitoring new trends

• Commitment to quality and service endorsed by 99% customer

recommendation rate in 2016

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www.telfordhomes.london

STRATOSPHERE E15

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TELFORD HOMES Plc FINAL RESULTS 31 MARCH 2017

• Imbalance between supply of homes and need in London
• Underpins the Telford Homes business model and provides opportunity

for future growth

• Focus on build to rent including longer term partnerships
• Balance between developments for individual sale and build to rent
• Strong pipeline with new opportunities evaluated on an ongoing basis
• Substantial de-risked forward sold position of £546 million
• On track to deliver over £40 million profjt before tax in the year to

31 March 2018 and over £50 million in 2019

• Already secured over 80% of gross profjt for 2018 and over 60%

for 2019

• Confjdence in product, market and fjnancial outlook for the business

OUTLOOK

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www.telfordhomes.london

Telford Homes Plc

Telford House Queensgate Britannia Road Waltham Cross Hertfordshire EN8 7TF Tel: 01992 809 800 www.telfordhomes.london