Trafalgar New Homes Plc
The Group benefits from availability of bank finance on competitive terms, Combe Bank Homes Ltd having established a strong asset base and income cover over cost of borrowing, a sound track record even during the exceptionally difficult market conditions following the 2008 financial crisis, and good relationships with a range of lenders. This is an advantage over many competitors who are unable to raise bank finance at all. The Chief Executive also has cash resources available to invest as required. The market listing of the shares may in due course be a further source of capital funding. The Group intends to capitalise upon its funding sources to acquire and develop prime new build land sites on a favourable cost base, where opportunities arise and it is prudent to do so.
The Group is focused on its niche market of developments consisting 4 to 20 units. Competition to purchase development sites in this unit size range is low, as these sites are too small for national and major regional house builders who require greater scale to cover administrative overheads, and are too large to be funded by the small jobbing builder. Within this niche market, there are opportunities to negotiate land acquisitions on favourable terms.
The Group has a small management team with fast and easy lines of communication, and key decisions can be taken quickly and positively.
The Group outsources construction work and professional services, thereby operating a minimal Head Office operation with low fixed overheads, and can thereby scale the trading activity up or down very quickly to react to changing market conditions and opportunities.
Effective implementation of this strategy will be judged by achievement of anticipated increased earnings per share.
Principal risks & uncertainties
Set out below are certain risk factors which could have an impact on the Group's long term performance. The factors discussed below should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties facing the Group.
The principal risks and uncertainties facing the Group are:
1. Any possibility that lending criteria from the Group’s bankers may harden with little prior notice.
2. Construction costs may escalate and eat into gross profit margins.
3. Heavy overheads may be incurred especially when projects have been completed and before others have been commenced.
4. The Group could pay too much for land acquisitions.
5. The Group might fail to adhere to good corporate governance policies.
6. The Group’s reliance on key members of staff.
The Group considers that it mitigates these risks with the following policies and actions:
1. The Group affords its bankers and other lenders a strong level of asset and income cover and maintains good relationships with a range of funding sources from which it is able to secure finance on favourable terms.
2. Construction costs are outsourced on a fixed price contract basis, thereby passing on to the contractor all risk of development cost overspend, including from increased material, labour or other costs.
3. Most other professional services are also outsourced, thus providing a known fixed cost before any project is taken forward and avoiding the risk that can arise in employing in-
4. Land buying decisions are taken at board level, after careful research by the Directors personally, who have substantial experience of the house building industry, potential construction issues and the local market.
The Group focuses on a niche market sector of new home developments in the range of 4 to 20 units. Within this unit size, competition to purchase development sites from land buyers is relatively weak, as this size is unattractive to major national and regional house builders who require a larger scale to justify their administration and overheads, whilst being too many units for the jobbing builder to finance or undertake as a project. Within this market, there are opportunities to negotiate land acquisitions on favourable terms. Many competitors who also focus on this niche have yet to recapitalise and are unable to raise finance.
5. The Group has a rigorous corporate governance policy appropriate for a publicly quoted company now listed on AIM.
6. Many of the activities are outsourced and each of the Directors is fully aware of the activities of all members of staff enabling adequate cover when needed.
The quality fitted kitchen in the studio apartment at Meade Court, Edenbridge. The project consisted of nine 2 bedroom apartments including a fabulous third floor penthouse, and additionally a ground floor shop, a studio apartment, and a refurbished cottage. Parking and lift to all floors. All sold.
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in the transcript of an interview between
Stockopedia and Chris Johnson, CEO Trafalgar New Homes Plc