Telford Homes Plc - Performance, Dividend, Balance Sheet, Social and Environmental Reporting - Example

TELFORD HOMES PLC

• The Company’s Overview

Telford Homes Plc is a company based in the United Kingdom whose main mandate is to develop properties. The company is headed by Andrew Wiseman, who is the Chairman of the Board. Other senior members within the company’s structure include Jonathan Di-Stephano, Katie Rodgers, John Fitzgerald, and also David Campbell. The firm is engaged in building houses in the UK. Some of the projects that the company has undertaken include the Stratford Plaza, Avant-garde, and Manhattan Plaza among others. The companies headquarter located at Telford House, Waltham Cross in the United Kingdom. The company mainly operated in East and Northern London. The company has its main offices in the United Kingdom; this has formed its main operation centers. Other offices for the company include the Telford House, Queens’s Gate, Waltham Cross, and also Britannia Road. The company operates in areas that are deemed affordable, normally referred to as the Inner London that is largely characterized by the ongoing regeneration. The business of the company majorly deals with the strengths that surrounding the UK. Some of this strength includes the international reputation, improved infrastructure, and also best economic performance of the country. London has always been faced with the problem of sufficient homes due to high demand and lower supply of the same. The imbalance has remained to be the reason why the company has always been building more homes. Based on its financial performance, the company has cash worth 39.7 Million Euros, net worth of 120.4 million Euros, assets, and liabilities worth 306.1 million Euros and 189.2 million Euros respectively (Markets.ft.com, 2016)

The company has been in operation for the last 15 years with over 7000 business activities under their name.

Industry Analysis

Recently the company acquired United House Development Ltd through mergers and acquisitions. Despite its strong influence in the market, the company also faced competition from other companies within its field. The company faces stiff competition from Berkeley Group Holding PLC, Basso Industry Corp and also AP Thailand PLC. Telford Homes PLC is one of the leading building company within the housebuilding industry in the United Kingdom. The housebuilding sector in the United Kingdom has outperformed the local domestic equity market with a rising value of 18% in 2014 (Markets.ft.com, 2016). Traditionally, the industry has been relying on the government to commission some of its social housing needs as either clients or sponsors. The government has played a key role to regulate the way the housebuilding sector carries out its operation. The volatility of the industry brought about by the busts and booms of the market brought forth restructuring within the industry’s performance. This is shown from the regional firms within the industry to specialize in housing. The outcome has enabled the industry to be more polarized than before. Concentration in the market has continued to occur, and the market share of the leading companies including the Telford Homes PLC has increased tremendously over the years. Major changes have occurred to a position where the market has been dominated by leading businesses that are dedicated to building houses.

• Company Performance

Revenue

Currently, the performance of the company since 2013 to 2015, have weighted the company through a greater number of market completions. The number of market completion for the last one year was 282 million Euros from 140 million Euros that was recorded in 2014 (Markets.ft.com, 2016). The performance balance for the last three years simply reflected the completion duration of the company’s development with the rest of the company’s project. The company registered a share of 139.6 million Euros and the gross profit of 37.4 million Euros. The gross profit was stated after paying for the loan interest that was capitalized within the company’s inventories. The company recorded a gross profit margin of 27.6% as of September 2015. This remained to be above the target of the company when they appraised its operation; the target was desired to 24%. In early 2014, the country faced high price inflation that brought about the sustainable market over one year that recorded an annual rate of 4-5% (Markets.ft.com, 2016). The company has managed to minimize its exposure to its cost inflation by placing orders with contractors at the beginning of the company’s program. The company has also managed to monitor material costs and labor by building its building to reduce their reliance on given materials. The company has recorded an increase in the administrative expense of 9.6 million Euros against the same period in 2014. This was as a result of higher employee expenses along the professional and legal fees to a figure of 5.8 million Euros due to successful launches of sales during the first semi-annual period. The operating margin for the company as at 30th September was 16.5% and this has continued to increase the target for the company which has always been 15%. The company also recorded a net finance cost of 1.1 million Euros as of 2015. This was also the same figure that the company recorded in 2014.

The revenue of the company set a record high in 2015. The company recorded revenue of 173.5 million Euros in 2015 while in 2014 it had total revenue of 140.8 million Euros. Revenue according to GAAP without the joint ventures was 140.4 million euros; this was more than what was achieved in 2014; 94.0 million euros (Markets.ft.com, 2016). The majority of revenues that the company recorded for the last three years were gotten from Bishopsgate. The increase in revenue for the last three years was attained despite a reduced number of the residential completion of open markets. The company expected a reduction in completion because of timing and handing over of the finished building properties. The company also recorded mean selling prices that increased to 439,000 million Euros in 2015 compared to 7.7 million Euros in 2014.

Over the five years, the company has also recorded increase in revenue from selling affordable housing throughout its construction period, and this has contributed to 20 -25% of revenues that the company derived from its development. The firm also recorded a gross profit of 53.9 million in 2015 from 42.1 million Euros in 2014 (Markets.ft.com, 2016). The gross profit of the company was stated after the firm incurred the loan interest that was capitalized within the inventories of the company. The gross margin increased by 32.4% in 2015 compared to 31.9% that was recorded in 2014. The increase in the gross profit margin is as a result of commercial sales higher than the cost inflation and the anticipated prices. The administrative expenses for the company were high in 2015 compared to 2014; 14.1 million Euros and 16.7 million Euros respectively. Higher administrative expenses are as a result of costs for the employees and the professional fees during the recent financing. This is important because it enabled the company to implement is growth strategies over the following years. Additionally, the selling cost was high in 2015 (9.1 million Euros) compared to 2014 (6.7 million euros).

Dividend

The company pays 30% of their earnings as dividends to the shareholders; the company also reached on paying 6 pence as their final dividends to its shareholders. In 2015, Telford Home PLC paid 5.1 pence as a dividend (Markets.ft.com, 2016). This made a total of 11.1 pence for the year. Telford Homes PLC declared a rise in the dividend in 2014 by 6.5 pence for each share. The current policy of the board has always been to incur 30 percent as dividends for every financial year. The company tends to raise its dividend payment above the present policy to reduce the dilution in the short term.

Balance Sheet and Cash

In 2015, the company recorded a net asset of 120.4 million euros; this was an increase in net asset compared to the figure that the company is recorded in 2014 (105.4 million euros). This is associated with the retained profit that the company had in 2014. The performance is equivalent to 199.8 pence that the company recorded during the same year (2014). Telford Home PLC has continued to invest in land, and a lot of work is in progress. In 2015, the company recorded inventories of 254.7 million euros compared to 156.2 million euros that the firm realized in 2014. The inventories of the company for the last three years are proved to get funds from equity and debt. This led to the debt of 55.3 million in 2015 an increase of 3.4 million euros that was realized in 2014 (Markets.ft.com, 2016). The company managed to exchange contract and entered into agreements with other companies to purchase various sites to planning. Over the years, the company has continued to benefit from its deposits that it receives as a result of forward sales. Such deposits have been proved to crucial equities and are channeled into cash for the company’s future investments. In 2013, the company recorded revenue of 142.4 million euros with a gross profit of 31.4 million euros. During the same year, the company recorded an inventory of 3.2 million euros and before incurring the interest, the company recorded a gross margin of 24.4%. The increase in value in 2013 was as a result of the greater completion of the open market. The rise in the gross margin was as a result of various sales prices that were attained from the cost control. The summary of the company’s performance is as shown in the chart below

Source: (Markets.ft.com, 2016)

Telford Homes PLC and its Peers

The section discusses the relative performance between Telford Homes PLC and Berkeley Group Holdings PLC. The two companies exist in household goods industry in consumer goods sector. The two companies are traded on the London Stock Exchange Alternative Investment Market. As of today, the latest price for Telford Homes PLC was 323.425 euros while the latest price for Berkeley Group Holdings PLC was 2909 euros. This places Berkeley on top of the performance scale compared to Telford Homes PLC. Consequently as of today, Berkeley Group Holding PLC has a rising change of 4% compared to Telford Homes PLC, which records a change of 0.8%. Additionally, Telford Homes PLC traded 187.41k shares compared to 440.96k that Berkeley Group Holding PLC traded. During the last trade, Berkeley traded at 2909 euros (Markets.ft.com, 2016). This was 19.665% increase for the last 52 weeks. For the last three years, Berkeley Group Holdings PLC grew its revenue from 30.82% (1.62 billion to 2.12 billion) to 44.59% (292.90 million to 423.50 million). The company recorded a growth margin of 32.84, a Net profit margin of 18.31% and operating margin of 23.04%. On the other hand, Telford Homes PLC recorded a gross margin of 27.01%, net profit margin of 12.26% and an operating margin of 16.71%. This is after the company recorded yearly growth in revenue by 49.37% (94.02million to 140.45 million) (Markets.ft.com, 2016). The net income also improved by 32.12% this is after it increased from 14.88 million to 19.66 million. Regarding the company’s growth rate, the earnings per share and dividends per share for the company recorded 26.55% and 26.14% increase respectively. On the other hand, Berkeley Group Holdings PLC recorded a flat rate for its dividends per share while earning per share recorded a 47.05% increase. Comparing the two companies, Telford Homes PLC measured a three year annualized basis and ranked the growth for the dividend per share to be relatively high. The dividend yield, growth rate and payout ratio for Telford was 0.03%, 40.88%, and 12.45% respectively. On the other hand, the dividend yield, growth rate and payout ratio for Berkeley Group Holding PLC was 0.04%, 0%, and 63.35% respectively. Regarding their balance sheet, Berkeley Group Holdings uses little debt to finance its capital structure. On the other hand, Telford Homes PLC has a debt to capital ratio of 31.80% (Markets.ft.com, 2016).

• Social and Environmental Reporting

Telford Homes PLC makes use of social and environmental reporting in its published financial statements in some ways. As regards to environmental reporting, the company lays emphasis on the need for sustainability by indicating its commitment to the design and construction of developments that reduce carbon and ecological impacts as well as enhance the efficiency of energy (Telford Homes, 2014). To attain this, the company reports that it utilizes renewable materials that have the capacity to be recycled and re-used (Telford Homes, 2014). In addition to this, the company seeks innovative ways through which it can carry out its activities and surpass the environmental expectations.

The company reports that it has a clear policy as regards to the environment (Telford Homes, 2014). This policy is communicated in each and every operation of the company. To ensure that the policy attains its goals and objectives, it is reviewed from time to time. This is to (or “intending to”) preventing pollution; complying with the relevant laws and regulations and to minimize negative environmental impacts. The company equally shows the accreditation of its system of environmental management, that is, BS EN ISO 14001:2004 (Telford Homes, 2013). This system is audited bi-annually by the British Standards Institution.

In its financial statements, Telford Homes PLC contends that it has an appropriate design strategy that conveys an improved building envelope (Telford Homes, 2013). As such, it makes a great contribution not only to reducing the requirements for energy but also reducing the developments’ carbon footprint. To ensure sustainable construction, the company makes a report to the effect that its buildings meet the criteria set out in the Code for Sustainable Homes (Telford Homes, 2014).

The social reporting in the financial statements of Telford Homes PLC captures two aspects: health and safety. According to the company, the health and safety of all its employees as well as outsiders is extremely vital (Telford Homes, 2014). A positive culture of safety is promoted by the Board within the business entity. Pesci and Andrei (2011) argue that such a policy is often manifested in the procedures and policies of an organization or company.

Telford Homes (2013) states that its conducts training and development of its employees to (or “intending to”) upholding the required standards of health and safety. The company indicates that it makes investments in training and development due to the industry’s necessity of having up-to-date knowledge and skills. All these are significant in ensuring that the activities of the business are successful and safe.

The company equally notes in its financial statements that health and safety are always the first agenda discussed in its board meetings that are conducted monthly (Telford Homes, 2014). The company also has a system for health and safety management that is credited to BS OHSAS 18001:2007 (Telford Homes, 2014). Just like its environmental system, this system is audited bi-annually by the British Standards Institution. This is to ensure that all the necessary requirements are met at any given point in time.