London housebuilder Telford Homes shook investors on Thursday as it slashed its profit outlook after project delays and a switch towards less lucrative build-to-rent schemes.
Shares tumbled 59.9p to 291.3p — more than 17% — as the City dumped the shares.
Telford admitted to a six-month delay at its City North scheme at Finsbury Park, where it has hit hold-ups “due to matters outside our control”. The firm is trying to coincide works with the building of a new entrance to Finsbury Park station but the six-month delay will mean £15 million in profits being booked in next year’s results. Telford has also seen “frustrating challenges” getting planning permission on a scheme in Bethnal Green.
Telford is doubling down on build-to-rent housing for institutional buyers rather than private house sales, which is less risky but lower margin. Chief executive Jon Di-Stefano said that from no involvement in build-to-rent three years ago, Telford would be up to 75% in “relatively short order”. It is set to announce a major partnership shortly.
“We believe that build to rent housing will be one of the keys to solving London’s housing crisis,” he added.
Peel Hunt’s Gavin Jago said: “Build-to- rent removes a significant amount of market risk and requires no debt and limited equity for development.”
Bovis Homes racked up a 47% rise in pre-tax profits to a £168.1 million last year and a 20% rise in the dividend as the firm continues its turnaround under boss Greg Fitzgerald.
Bovis, which now has a four-star rating for its homes after previous quality issues, also saw good demand in the first eight weeks of this year despite Brexit uncertainty.
