TIDM44EB
RNS Number : 9689M
London & Quadrant Housing Trust
15 May 2020
London & Quadrant Housing Trust Trading Update for the
period ending 31 March 2020
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated trading update for the year ended 31 March 2020
('2020').
These consolidated unaudited results include the trading
activities of Trafford Housing Trust ('THT') from 1 October to 31
March 2020. All comparatives are to L&Q's consolidated audited
financial statements for the year ended 31 March 2019 ('2019').
Highlights:
-- There are 113,525 units in management (2019: 103,917)
-- L&Q has completed 2,439 residential units (2019: 2,874)
-- Turnover was GBP914m (2019: GBP937m)
-- EBITDA(1) was GBP302m (2019: GBP236m)
-- EBITDA margin(2) was 26% (2019: 22%)
-- EBITDA margin (excluding sales)(3) was 39% (2019: 40%)
-- Gross sales margin(4) was 17% (2019: 13%)
-- Net sales margin(5) was 10% (2019: 8%)
-- EBITDA / interest cover(6) was 189% (2019: 166%)
-- EBITDA social housing lettings interest cover(7) was 134% (2019: 111%)
-- Operating surplus was GBP297m (2019: GBP305m)
-- Debt to assets(8) was 41% (2019: 40%)
-- Gross debt to EBITDA(9) was 18.5x (2019: 21.3x)
-- Sales as a % of turnover(10) was 45% (2019: 46%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"L&Q's preliminary unaudited results show EBITDA at GBP302m
and net debt at GBP5.4bn with better than expected performance on
margins, interest coverage and debt metrics compared to Q3
guidance, further reflecting the expected stabilisation in
financial results. Surplus after tax at GBP202m excludes a material
credit to the statement of comprehensive income that will be
applied to the audited financial statements to represent the fair
value of THT on acquisition.
The year-on-year improvement in EBITDA reflects the prudent
measures that L&Q has implemented during the course of the
financial year as we continue to focus on our priorities being the
safety of our residents, the quality of the homes and services we
provide and delivering on our social purpose. We completed 2,439
(2019: 2,874) residential units of which 49% are for social housing
tenures, invested GBP61m (2019: GBP91m) in our existing stock and
spent GBP168m (2019: GBP159m) on planned and reactive maintenance
including GBP35m (2019: GBP24m) implementing additional fire safety
measures.
We have planned extensively for the inevitable material impact
that COVID-19 will have on future trading performance and have put
in place a number of mitigating measures in order to conserve cash
flows. Given this ongoing uncertainty we have temporarily suspended
financial guidance until the overall impact of COVID-19 becomes
clearer. However, we remain confident that L&Q retains the
financial flexibility to adapt to a changing economic outlook
supported by our strong balance sheet, robust liquidity position
and G1/V1 ratings, the highest possible ratings for governance and
viability as reaffirmed by the Regulator of Social Housing in March
2020."
COVID-19 Update
On 24 March 2020, L&Q issued a RNS outlining its response to
COVID-19 inclusive of actions taken to date and headline mitigating
actions. This included, in the interest of customer and employee
safety, the immediate closure of all L&Q construction
sites.
L&Q's Pandemic Crisis Response Team are monitoring service
delivery and key trends across all business activities daily with
notable trends from the period 31 March 2020 to 7 May 2020 outlined
below:
-- There have been 957 payment deferral requests made by
residents on a portfolio of 113,525 units;
-- Rolling 4 week arrears have increased from 5.04% to 5.43%
(6.03% for social tenures and 3.35% for non-social tenures)
equating to a GBP3m increase in arrears; and
-- 47% of projected residential sales have completed achieving
50% of projected profits, demonstrating continued demand supported
by the ability to sell homes remotely.
Detailed mitigating actions that have been implemented to date
are set out below:
-- Completion of multivariate stress-tests and contingency planning;
-- GBP300m increase in debt facilities, materially increasing
available liquidity which stands at over GBP800m;
-- Removal of GBP66m of non-essential operating expenditure for
the financial year ending 31 March 2021;
-- Postponement of GBP300m of capital expenditure during the
financial year ending 31 March 2021;
-- Maintenance spend restricted to priority repairs and fire safety;
-- Additional GBP3m bad debt provision included within these preliminary and unaudited results;
-- Recruitment freeze and a freeze on pay increases;
-- Successful launch of virtual property tours; and
-- Plans to prepare for the phased remobilisation of
construction and planned maintenance work sites smoothly and safely
and as soon as the time is right.
Housing Completions
L&Q, including joint ventures, has completed 2,439 (2019:
2,874) residential units in the financial year. This comprises of
1,188 (2019: 1,582) completions for social housing tenures and
1,251 (2019: 1,292) completions for market tenures. During that
same time, 3,945 new build residential units commenced on site
(2019: 6,428).
Development Pipeline
L&Q, including joint ventures, is operating from 158 (2019:
157) active sites. L&Q has approved an additional 2,947
residential units during the financial year bringing total units in
the approved development pipeline to 50,000 (2019: 50,400). Some
39% of the approved pipeline (19,500 units) is on site.
The future projected cost of the entire development pipeline
(including work in progress and developments not yet committed or
on site) that extends until the financial year ending 31 March 2040
is estimated at GBP6.6bn (2019: GBP6.8bn) of which GBP5.5bn (83%)
is currently committed. L&Q holds a further potential 50,125
(2019: 46,800) strategic land plots.
Unaudited Financials
The unaudited financials exclude further adjustments that are
subject to audit review:
Statement of Comprehensive Income 2020 2019 Change
(GBPm) (GBPm)
----------------------------------------------------- --------- --------- -------
Turnover
Non-sales 645 597
Sales 269 340
----------------------------------------------------- --------- --------- -------
914 937 (2%)
Operating costs and cost of sales
Non-sales (472) (420)
Sales (243) (319)
(715) (739) 3%
Surplus on disposal of fixed assets and investments 65 50
Share of profits from joint ventures 25 20
Change in value of investment property 8 37
----------------------------------------------------- --------- --------- -------
Operating surplus 297 305 (3%)
Net interest charge (116) (110)
Other finance income/ (costs) 21 (9)
Taxation - 16
----------------------------------------------------- --------- --------- -------
Surplus for the period after tax 202 202 -
----------------------------------------------------- --------- --------- -------
Capitalised Interest (43) (33)
----- -----
Statement of Financial Position 2020 2019 Change (GBPm)
(GBPm) (GBPm)
-------------------------------------------- -------- --------- --------------
Housing properties 10,334 9,469 865
Other fixed assets 81 69 12
Investments 1,590 1,649 (59)
Net current assets 974 966 8
-------------------------------------------- -------- --------- --------------
Total assets less current liabilities 12,979 12,153 826
-------------------------------------------- -------- --------- --------------
Loans due > one year 5,528 5,011 517
Unamortised grant liabilities 2,120 2,039 81
Other long term liabilities 353 327 26
Capital and reserves 4,978 4,776 202
-------------------------------------------- -------- --------- --------------
Total non-current liabilities and reserves 12,979 12,153 826
-------------------------------------------- -------- --------- --------------
Non-Sales Activities
Activity 2020 (GBPm) 2019 (GBPm) Change (GBPm)
------------------------------------- ------------ ------------ --------------
Net rents receivable 590 550 40
Charges for support services 10 9 1
Amortised government grants 24 23 1
Other income 21 15 6
------------------------------------- ------------ ------------ --------------
Turnover 645 597 48
------------------------------------- ------------ ------------ --------------
Management costs (63) (57) (6)
Service costs (81) (71) (10)
Maintenance costs (168) (159) (9)
Support costs (11) (8) (3)
Depreciation & impairment (93) (91) (2)
Other costs (56) (34) (22)
------------------------------------- ------------ ------------ --------------
Operating costs (472) (420) (52)
------------------------------------- ------------ ------------ --------------
Surplus on disposal of fixed assets 65 50 15
------------------------------------- ------------ ------------ --------------
Operating surplus 238 227 11
------------------------------------- ------------ ------------ --------------
Capitalised Major Repairs (61) (91) 30
--------------------------- ----- ----- ---
Sales Activities
The cost of sales is inclusive of capitalised interest and
overhead costs:
Activity 2020 (GBPm) 2019 (GBPm) Change (GBPm)
-------------------------------------- ------------ ------------ --------------
Property sales income 176 185 (9)
Land sales income 93 155 (62)
-------------------------------------- ------------ ------------ --------------
Turnover from sales (excluding JV's) 269 340 (71)
Cost of property sales (148) (179) 31
Cost of land sales (63) (118) 55
Operating costs (32) (22) (10)
-------------------------------------- ------------ ------------ --------------
Total costs (excluding JV's) (243) (319) 76
Operating Surplus (excluding JV's) 26 21 5
-------------------------------------- ------------ ------------ --------------
Joint venture turnover 263 167 96
Joint venture cost of sales (228) (142) (86)
Joint venture operating costs (10) (5) (5)
-------------------------------------- ------------ ------------ --------------
Share of profits from joint ventures 25 20 5
-------------------------------------- ------------ ------------ --------------
Average Selling Price
The average selling price, including JV's, for outright market
sales during the financial year was GBP612k of which 74% were
conducted under Help to Buy. The average selling price of first
tranche shared ownership sales during the financial year was
GBP387k with an average first tranche sale of 34%.
Sales Margins
The cost of sales is inclusive of capitalised interest and
overhead costs:
Activity Shared Owner-ship Outright Sales Land Sales Outright Sales 2020 2019 Change
(GBPm) (Non-JV) (GBPm) (JV's) (GBPm)
(GBPm)
(GBPm) (GBPm)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Turnover 60 116 93 263 532 507 25
Cost of sales (49) (99) (63) (228) (439) (439) -
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Gross profit 11 17 30 35 93 68 25
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Gross sales
margin 18% 15% 32% 13% 17% 13% 4%
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Operating costs (6) (10) (16) (10) (42) (27) (15)
Operating surplus 5 7 14 25 51 41 10
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Net sales margin 8% 6% 15% 10% 10% 8% 2%
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Unsold Stock
As at 31 March 2020, L&Q, including joint ventures, held 526
completed units as unsold stock with a projected value of GBP133m.
Of these, 26% have been held as stock for less than one month.
L&Q's forward order book excluding joint ventures consists of
45 exchanged units with projected revenue of GBP6m and 143
reservations with projected revenue of GBP36m.
Tenure Projected Revenue No. of Units <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 16 147 33 2 18 82 12
Outright Sale
(non-JV's) 86 259 30 4 77 92 56
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
Joint Ventures 102 406 63 6 95 174 68
Outright Sale
(JV's) 31 120 73 16 8 11 12
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 31 120 73 16 8 11 12
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 133 526 136 22 103 185 80
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Net Debt and Liquidity
As at 31 March 2020, net debt (excluding derivative financial
liabilities) was GBP5,430m (2019: GBP4,886m) and available
liquidity within the group in the form of committed un-drawn
revolving credit facilities and non-restricted cash was at GBP595m
(2019: GBP751m). Since 31 March 2020, L&Q has secured an
additional GBP300m of committed loan facilities increasing
available liquidity to over GBP800m. Approximately 50% of L&Q's
loan facilities and 54% of drawn loan facilities are at a fixed
cost.
Unencumbered Assets
2020 2019
---------------------------------------------------------------------------- --------- ---------
No. of units under management 113,525 103,917
No. of social housing units provided as collateral against debt facilities (55,013) (48,993)
No. of private rented units provided as collateral against debt facilities (1,107) (1,107)
---------------------------------------------------------------------------- --------- ---------
Total no. of unencumbered units under management 57,405 53,817
% of units under management held as collateral against debt facilities 49% 48%
Unencumbered asset ratio(11) 41% 42%
---------------------------------------------------------------------------- --------- ---------
L&Q Credit Ratings - as at date of trading statement
release
Rating Agency S&P Moody's Fitch
------------------------- ---------- ---------- ------------
Long-term credit ratings A-/Stable A3/Stable A+/Negative
------------------------- ---------- ---------- ------------
Notes:
(1) Operating surplus + depreciation and impairment - amortised
government grant - capitalised major repairs +/- actuarial
losses/gains in pension schemes
(2) EBITDA / (turnover + turnover from joint ventures -
amortised government grant)
(3) EBITDA from non-sales activities / turnover from non-sales
activities
(4) Gross profit from sales / turnover from sales including
joint ventures
(5) Operating surplus from sales / turnover from sales including
joint ventures
(6) EBITDA / net cash interest paid
(7) EBITDA from social housing lettings / net cash interest
paid
(8) Net debt (excluding derivative financial liabilities) /
total assets less current liabilities
(9) Gross debt / EBITDA
(10) Sales turnover (including joint ventures) / (turnover plus
turnover from joint ventures)
(11) 100% less (loans due after more than 1 year + derivative
liabilities + unamortised grant liability) / total assets less
current liabilities
This trading update contains certain forward looking statements
about the future outlook for L&Q. Although the Directors
believe that these statements are based upon reasonable
assumptions, any such statements should be treated with caution as
future outlook may be influenced by factors that could cause actual
outcomes and results to be materially different.
For further information, please contact:
James Howell, Head of External Affairs 0300 456 9998
Cathryn Rowley, Assistant Director,
Communications 0300 456 9998
www.lqgroup.org.uk
END
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END
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