VISION, PRESENT AND FUTURE STRATEGY

 

Oakdene Homes Plc believes that for smaller companies operating in the property sector, profit can be generated more predictably through site purchase, enhancing planning opportunities and adding value by imaginative and individual design, rather than being involved in actual house construction.

 

The Group specialises in "brownland sites", provided they are in a good residential location. These sites are acquired with a view to preparing them for residential construction, obtaining all the necessary planning, environmental and other permissions.

The Group has a highly skilled and capable management team with a proven track record. A short chain of command facilitates quick and decisive reaction to profitable opportunities.

 

Once suitable land for development is acquired, and the appropriate planning permission obtained, construction work is contracted-out on a fixed price basis. The Group has long established relationships with a number of builders for this purpose, and requires chosen builders to enter into fixed price contracts that oblige the builder to meet an agreed construction programme and it is the builder who is at risk for damages and penalties for late or non-performance. This approach protects the Group from construction risks arising from cost overruns and escalations. All new construction carries a Zurich 10 year guarantee.

 

Builders are paid on a stage payment basis. This means that the Group only pays the builder for work done once the work has been completed to the stage in question as detailed in the contract and an independent certifying surveyor appointed by the Group and its bankers has certified the completion of the work. The Group is able to refuse to pay the builder for work done if it considers the builder is in default under the terms of its contract. Therefore the financial risk of poor workmanship, work failing to be done or late completion is minimal, as the financial penalty and damages fall on the builder. In making payment in arrears, the company is protected against the consequences of its builders becoming insolvent or ceasing business.

 

Development sites are financed for purchase and development from a preferred list of lenders. Generally funding is drawn down only against production of professional architects/surveyors certificates of work to date. Balance finance comes from the company's own resources.

 

Future Strategy

Housebuilding is an activity that investors can take an interest in, because most people are interested in houses that they are living in, or would like to live in. It is a user friendly, pleasurable product. Investors should be able to enjoy the products they are investing in, this makes the investment more interesting in its own right.

 

Housebuilding is an undervalued sector, and yet at the current time and in the current market existing and future market supply is recognised as falling significantly short of long term demand.

 

The Group aims to continue to grow organically. It has capacity within its operation to increase its land holding, increase turnover and increase profitability by following its model. The Group has grown substantially by its acquisition of the Trigrange portfolio in 2002, the Honeygrove franchise in January 2005 and the Newhaven Marina site in December 2005. It will continue grow by further future acquisition as appropriate and profitable opportunities arise. The value of a company generally, and in particular in the house building sector, tends to be geared to an increase in turnover, i.e. the price earning ratio tends to go up with the increased turnover achieved. Therefore we look for acquisitions, mergers and consolidations with other companies, where this will be of benefit to shareholders. The company has the management skills, financial resources, and determination to expand. It has a successful record at integrating acquisitions quickly and cost effectively. Increasing turnover will increase the price earnings ratio and increase the shareprice, adding value to shareholders.