TIDM44EB
RNS Number : 1345V
London & Quadrant Housing Trust
05 August 2020
London & Quadrant Housing Trust Trading Update for the
period ending 30 June 2020
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated trading update for the three months ended 30 June
2020 ('2020 Q1').
All statement of comprehensive income comparatives are to
L&Q's consolidated unaudited prior year equivalent period being
the three months ended 30 June 2019 ('2019 Q1') that do not include
the trading activities of Trafford Housing Trust ('THT') which was
acquired by L&Q on 1 October 2019.
Highlights:
-- There are 113,580 units in management (as at 31 March 2020: 113,525)
-- L&Q has completed 150 residential units (2019 Q1: 691)
-- Turnover was GBP209m (2019 Q1: GBP178m)
-- EBITDA(1) was GBP96m (2019 Q1: GBP55m)
-- EBITDA margin(2) was 44% (2019 Q1: 31%)
-- EBITDA margin (excluding sales)(3) was 57% (2019 Q1: 35%)
-- Gross sales margin(4) was 20% (2019 Q1: 10%)
-- Net sales margin(5) was 8% (2019 Q1: 4%)
-- EBITDA / interest cover(6) was 260% (2019 Q1: 144%)
-- EBITDA social housing lettings interest cover(7) was 213% (2019 Q1: 118%)
-- Operating surplus was GBP84m (2019 Q1: GBP58m)
-- Debt to assets(8) was 42% (2019 Q1: 42%)
-- Sales as a % of turnover(10) was 25% (2019: 46%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"As expected, the Covid-19 pandemic has caused a significant
amount of disruption to our business, particular on construction
sites which has led, and will continue to lead to handover delays
of new residential units. However, through the decisive actions
taken as announced in our last trading statement released on 15 May
2020, we have demonstrated resilience and flexibility in order to
conserve cash flows whilst fulfilling our commitments to our
customers. Our Q1 results further reflect that our reactive repairs
service has only undertaken emergency work and those works that are
deemed to be critical to families' wellbeing while remaining safe
in their homes.
We acted quickly at the outset of the pandemic and, in line with
our commitment to health and wellbeing of our employees and
subcontractors, took the decision to temporarily close all of our
construction sites and offices. During Q1 we have, in accordance
with Government guidelines, implemented core service recovery plans
to address the gradual and careful reopening of constructions sites
and sales and marketing suites, the management of backlog reactive
maintenance repairs, the restarting of planned maintenance works
and customer support inclusive of income recovery. As at the date
of this trading statement release, all construction sites are open
and operational.
Our Q1 trading results demonstrate the strength of our core
operations and improving activity in the sales market that gives us
the confidence to release forward guidance. Whilst economic
uncertainty still exists, we remain confident that L&Q retains
the financial flexibility to adapt supported by our strong balance
sheet and liquidity position"
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 as updated in the last trading statement released on 15 May
2020. L&Q's Pandemic Crisis Response Team continue to monitor
service delivery and key trends across all business activities
daily with notable trends from the period 31 March 2020 to 31 July
2020 outlined below:
-- Rolling 4 week arrears have increased from 5.04% to 6.05%
(6.64% for social tenures and 4.11% for non-social tenures);
and
-- 42% of projected residential sales have completed achieving
46% of projected profits. This in line with our expectations.
Forward Guidance to the year ending 31 March 2021
The following is subject to uncertainty on future business
disruption caused by Covid-19. Included within these projections
are the assumption that rent arrears double from pre Covid-19
levels and the assumptions that L&Q will achieve c50% of its
pre Covid-19 anticipated sales activity for the year ending 31
March 2021.
We project EBITDA to be in the range of GBP300m to GBP325m, net
debt to be in the range of GBP5.9bn to GBP6.0bn and capital
expenditure(11) to be in the range of GBP575m to GBP625m. Included
within our EBITDA projections are GBP15m of costs assigned to
conduct fire remedial and safety works. Our projections for surplus
after tax are expected to be in the range of GBP200m to
GBP215m.
Financial Metrics Forward Guidance to 31 March 2021
-------------------------------------------------- ----------------------------------
EBITDA margin(2) 27%
EBITDA margin (excluding sales)(3) 42%
Net sales margin(5) 8%
EBITDA interest cover(6) 209%
Social housing lettings EBITDA interest Cover(7) 160%
Debt to assets(8) 42%
Gross debt to EBITDA (9) 18.3x
Sales as a % of turnover(10) 44%
-------------------------------------------------- ----------------------------------
Housing Completions
L&Q, including joint ventures, has completed 150 (2019 Q1:
691) residential units in the financial year. This comprises of 91
(2019 Q1: 345) completions for social housing tenures and 59 (2019
Q1: 346) completions for market tenures. During that same time, 760
new build residential units commenced on site (2019 Q1: 1,409). The
year on year fall in completions and starts on site reflect the
business disruption caused by Covid-19.
Development Pipeline
L&Q, including joint ventures, is operating from 158 (2019
Q1: 173) active sites. L&Q has approved an additional 141
residential units during the financial year bringing total units in
the approved development pipeline to 28,403 (2019 Q1: 30,202).
During Q1, L&Q has reclassified 3 sites from the development
pipeline to strategic land plots meaning that L&Q holds a
further potential 72,042 (2019 Q1: 68,266) strategic land
plots.
Of the units approved in the development pipeline 64% are for
social housing tenures and 36% are for market tenures. Some 66% of
the approved pipeline (18,819 units) is on site (2019 Q1: 63%).
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 GBP5.3bn (2019 Q1: GBP7.0bn) of which GBP4.3bn
(81%) is currently committed (2019 Q1: GBP4.9bn).
Unaudited Financials
The unaudited financials exclude further adjustments that are
subject to audit review:
Statement of Comprehensive Income 2020 Q1 2019 Q1 Change
(GBPm) (GBPm)
----------------------------------------------------- --------- --------- -------
Turnover
Non-sales 169 151
Sales 40 27
----------------------------------------------------- --------- --------- -------
209 178 17%
Operating costs and cost of sales
Non-sales (98) (107)
Sales (38) (27)
(136) (134) 1%
Surplus on disposal of fixed assets and investments 9 9
Share of profits from joint ventures 2 5
Change in value of investment property - -
----------------------------------------------------- --------- --------- -------
Operating surplus 84 58 45%
Net interest charge (26) (29)
Other finance income/ (costs) (1) 2
Taxation - -
----------------------------------------------------- --------- --------- -------
Surplus for the period after tax 57 31 26
----------------------------------------------------- --------- --------- -------
Capitalised Interest (12) (9)
----- ----
Statement of Financial Position 2020 Q1 31 March 2020 Change (GBPm)
(GBPm) (GBPm)
-------------------------------------------- -------- -------------- --------------
Housing properties 10,539 10,334 205
Other fixed assets 79 81 (2)
Investments 1,614 1,590 24
Net current assets 1,027 974 53
-------------------------------------------- -------- -------------- --------------
Total assets less current liabilities 13,259 12,979 280
-------------------------------------------- -------- -------------- --------------
Loans due > one year 5,588 5,528 60
Unamortised grant liabilities 2,112 2,120 (8)
Other long term liabilities 524 353 171
Capital and reserves 5,035 4,978 57
-------------------------------------------- -------- -------------- --------------
Total non-current liabilities and reserves 13,259 12,979 280
-------------------------------------------- -------- -------------- --------------
Non-Sales Activities
Activity 2020 Q1 (GBPm) 2019 Q1 (GBPm) Change (GBPm)
------------------------------------- --------------- --------------- --------------
Net rents receivable 157 140 17
Charges for support services 2 2 -
Amortised government grants 6 6 -
Other income 4 3 1
------------------------------------- --------------- --------------- --------------
Turnover 169 151 18
------------------------------------- --------------- --------------- --------------
Management costs (13) (12) (1)
Service costs (22) (18) (4)
Maintenance costs (28) (41) 13
Support costs (3) (2) (1)
Depreciation & impairment (23) (19) (4)
Other costs (9) (15) 6
------------------------------------- --------------- --------------- --------------
Operating costs (98) (107) 9
------------------------------------- --------------- --------------- --------------
Surplus on disposal of fixed assets 9 9 -
------------------------------------- --------------- --------------- --------------
Operating surplus 80 53 27
------------------------------------- --------------- --------------- --------------
Capitalised Major Repairs (5) (16) 11
--------------------------- ---- ----- ---
Sales Activities
The cost of sales is inclusive of capitalised interest and
overhead costs:
Activity 2020 Q1 (GBPm) 2019 Q1(GBPm) Change (GBPm)
-------------------------------------- --------------- -------------- --------------
Property sales income 18 25 (7)
Land sales income 22 2 20
-------------------------------------- --------------- -------------- --------------
Turnover from sales (excluding JV's) 40 27 13
Cost of property sales (17) (20) 3
Cost of land sales (14) (1) (13)
Operating costs (7) (6) (1)
-------------------------------------- --------------- -------------- --------------
Total costs (excluding JV's) (38) (27) (11)
Operating Surplus (excluding JV's) 2 - 2
-------------------------------------- --------------- -------------- --------------
Joint venture turnover 16 87 (71)
Joint venture cost of sales (14) (82) 68
Joint venture operating costs - - -
-------------------------------------- --------------- -------------- --------------
Share of profits from joint ventures 2 5 (3)
-------------------------------------- --------------- -------------- --------------
Average Selling Price
The average selling price, including JV's, for outright market
sales during the financial year to date was GBP468k (2019 Q1:
GBP494k) of which 75% were conducted under Help to Buy (2019 Q1:
95%). The average selling price of first tranche shared ownership
sales during the financial year to date was GBP431k (2019 Q1:
GBP440k) with an average first tranche sale of 35% (2019 Q1:
38%).
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 Q1 2019 Q1 Change
(GBPm) (Non-JV) (GBPm) (JV's) (GBPm)
(GBPm)
(GBPm) (GBPm)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Turnover 6 12 22 16 56 114 (58)
Cost of sales (5) (12) (14) (14) (45) (103) 58
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Gross profit 1 - 8 2 11 11 -
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Gross sales
margin 16% - 36% 12% 20% 10% 10%
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Operating costs (1) (2) (4) - (7) (6) (1)
Operating surplus - (2) 4 2 4 5 (1)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Net sales margin - - 18% 12% 8% 4% 4%
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Unsold Stock
As at 30 June 2020, L&Q, including joint ventures, held 463
completed units as unsold stock with a projected revenue of
GBP138m. Projected revenue for shared ownership assumes a first
tranche sale of 25%. Of the total unsold stock, 11% has been held
as stock for less than one month.
L&Q's forward order book excluding joint ventures consists
of 53 exchanged units with projected revenue of GBP10m and 120
reservations with projected revenue of GBP35m. On 24 July 2020
L&Q completed a bulk sale for 70 units generating GBP26m of
revenue. These units are included within the unsold units held for
more than 12 months.
Tenure Projected Revenue No. of Units <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 12 109 3 6 21 70 9
Outright Sale
(non-JV's) 98 230 1 20 4 121 84
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
Joint Ventures 110 339 4 26 25 191 93
Outright Sale
(JV's) 28 124 46 38 14 10 16
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 28 124 46 38 14 10 16
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 138 463 50 64 39 201 109
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Net Debt and Liquidity
As at 30 June 2020, net debt (excluding derivative financial
liabilities) was GBP5,537m (as at 31 March 2020: GBP5,430m) and
available liquidity within the group in the form of committed
un-drawn revolving credit facilities and non-restricted cash was at
GBP788m (as at 31 March 2020: GBP595m). Approximately 52% of
L&Q's loan facilities and 59% of drawn loan facilities are at a
fixed cost.
Unencumbered Assets
2020 Q1 31 March 2020
---------------------------------------------------------------------------- ---------- ---------------
No. of units under management 113,580 113,525
No. of social housing units provided as collateral against debt facilities (54,516 ) (55,013)
No. of private rented units provided as collateral against debt facilities (1,107 ) (1,107)
---------------------------------------------------------------------------- ---------- ---------------
Total no. of unencumbered units under management 57,917 57,405
% of units under management held as collateral against debt facilities 49% 49%
Unencumbered asset ratio(11) 42% 41%
---------------------------------------------------------------------------- ---------- ---------------
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) Capitalised development expenditure + acquisition of
investment property + purchase of other fixed assets
(12) 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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