Telford Homes’ (LON:TELF) 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.
AGM comments confirm FY19 on track
AGM comments point to a robust London housing market with broadly based demand continuing and we detect no change in tone regarding market temperature. We are reminded that profitability will again be weighted towards H2 and we assume that this reflects the phasing of visible projects that are currently underway.
Well-defined strategy and market themes
Having attained record profitability of £46m PBT in FY18, management has set the target of delivering over £50m PBT in FY19 and consistent returns to shareholders. Two well-developed themes are the shortage of new housing in the London heartland, and strong and rising institutional investor interest in the build-to-rent (BTR) subsector. Together, these aspects are underpinning Telford’s rebalancing towards larger but lower-risk (through forward sale) projects, which also facilitate increased business scale. The latest example cited is Equipment Works (a mixed-use development located in Walthamstow, E17) where negotiations are underway for the sale of all 257 of the site’s proposed BTR homes to a single investor. Looking ahead, Telford is also actively exploring potential longer-term BTR investor partnership arrangements and further updates here in due course may provide additional insight into future strategic progress.
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