Telford Homes sees profit fall and warns London market to remain ‘subdued’
Housebuilder Telford Homes has reported a 13% fall in annual profits as it shifted focus to the build to rent market and battled against a “subdued” London market.
The London-focused group posted pre-tax profits to £40.1 million for the year to March 31, down from £46 million the previous year.
It originally had a profit target of £50 million in its sights but said Brexit uncertainty had held back the individual sale market in the capital while it was also hit by two build contract delays.
It recently also warned that 2019-20 results would take a knock because of delays to its key project at City North in Finsbury Park.
In its annual results, it said the London sales market would remain lacklustre throughout 2019.
But Telford put faith in is strategy to shift towards lower margin build to rent developments and said profits are expected to return to growth in the next financial year.
While build to rent developments offer lower profit margins, they offer greater revenue growth prospects and helped boost the group’s sales to a record £354.3 million, up 12% on the previous year.
Sales from this part of the market now account for 31% of total revenues, up from 21% the year before.
The developer’s change in strategy comes as it believes there is significant support from politicians and investors for build-to-rent
developments in London to help solve the capital’s housing crisis.
Jon Di-Stefano, chief executive of Telford Homes, said there remains a “long-term structural imbalance between housing supply and housing need in London”.
He added: “Our business model is increasingly focused on build to rent housing and the reduced risk and lower capital requirements it brings.
“Despite some challenges, our performance in the year to March 31 2019 represents a great achievement for Telford Homes, with revenue at an all-time high due primarily to an increased proportion of build to rent contracts.”