Telford cuts £10m off full-year profit guidance

28th Feb 2019 11:19

(Sharecast News) - Residential property developer Telford Homes slashed its full-year profit guidance by a minimum of £10m on Thursday, sending its shares south.Telford warned investors that pre-tax profits now looked set to come in at roughly £40m, much lower than its previous forecast of £50m due to slower-than-expected sales and margins pressured by incentives.The AIM-listed outfit also cautioned the hit on sales rates and margins would likely continue into 2020.As part of an effort to offset the impact, Telford revealed that it would put an "even greater focus" on build-to-rent properties in London, with the vast majority of those living in the Capital renting.Telford said it continued to view build-to-rent as "the future of increasing housing delivery in London", stating that it anticipates build-to-rent projects to make up more than 50% of its development pipeline before the end of the calendar year.It will also take a £5m hit to profits due to two build contracts being delayed until the beginning of its next fiscal year as a result of planning issues."We believe that build to rent housing will be one of the keys to solving London's housing crisis and we expect to significantly increase our output of homes under this new model over the next five years," said chief executive Jon Di-Stefano.Elsewhere, analysts at Peel Hunt reiterated their 'buy' rating on Telford but cut their target price on the stock to 350p from 400p.Peel Hunt said: "Conditions in the London residential sales market remain subdued and combined with some planning and construction delays, which are largely out of the group's control, leads us to materially reduce near term profit forecasts."However, build-to-rent is to be a larger part of the business than previously guided which will significantly de-risk the development pipeline, underpin output growth and reduce gearing."As of 1120 GMT, Telford shares had slumped 16.07% to 293.77p.