TIDM44EB
RNS Number : 1600E
London & Quadrant Housing Trust
04 November 2020
London & Quadrant Housing Trust Trading Update for the
period ending 30 September 2020
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated trading update for the six months ended 30
September 2020 ('2020 Q2').
All statement of comprehensive income comparatives are to
L&Q's consolidated unaudited prior year equivalent period being
the six months ended 30 September 2019 ('2019 Q2') that do not
include the trading activities of Trafford Housing Trust ('THT')
that was acquired by L&Q on 1 October 2019.
Highlights:
-- There are 115,970 units in management (as at 31 March 2020: 115,003)
-- L&Q has completed 700 residential units (2019 Q2: 1,505)
-- Turnover was GBP450m (2019 Q2: GBP383m)
-- EBITDA(1) was GBP201m (2019 Q2: GBP129m)
-- EBITDA margin(2) was 40% (2019 Q2: 24%)
-- EBITDA margin (excluding sales)(3) was 57% (2019 Q2: 38%)
-- Gross sales margin(4) was 16% (2019 Q2: 14%)
-- Net sales margin(5) was 7% (2019 Q2: 6%)
-- EBITDA / interest cover(6) was 271% (2019 Q2: 166%)
-- EBITDA social housing lettings interest cover(7) was 216% (2019 Q2: 126%)
-- Operating surplus was GBP177m (2019 Q2: GBP130m)
-- Debt to assets(8) was 41% (2019 Q2: 42%)
-- Sales as a % of turnover(10) was 33% (2019 Q2: 45%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"As expected, our Q2 results continue to reflect the decisive
actions that we have taken during the onset of the Covid-19
pandemic to conserve cash flows whilst fulfilling our commitments
to our customers, outlining the resilience and flexibility that we
have in our business and the strength of our core rental
operations. We are well prepared for any further lock-down measures
that may be imposed by government supported by a strong balance
sheet and robust liquidity position and will continue to review
government guidelines as they become available and make any
necessary changes at the right time.
Whilst all construction sites are open and have been operational
since the summer, their initial closure at the onset of the
Covid-19 pandemic has led, and will continue to lead to handover
delays of new residential units as we adjust to revised working
practices. Throughout the quarter, we have continued to implement
core service recovery plans to address the management of backlog
reactive maintenance repairs and the restarting of planned
maintenance works which, together with our expectation for slightly
improving sales performance and the stabilisation of arrears is
reflected in our forward guidance for the year ending 31 March
2021."
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 is
the assumption that rent arrears double from pre Covid-19 levels
and the assumption 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 GBP5.8bn to GBP5.9bn 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) 43%
Net sales margin(5) 8%
EBITDA interest cover(6) 220%
Social housing lettings EBITDA interest Cover(7) 172%
Debt to assets(8) 43%
Gross debt to EBITDA (9) 17.5x
Sales as a % of turnover(10) 46%
-------------------------------------------------- ----------------------------------
Housing Completions
L&Q, including joint ventures, has completed 700 (2019 Q2:
1,505) residential units in the financial year to date. This
comprises of 456 (2019 Q2: 656) completions for social housing
tenures and 244 (2019 Q2: 849) completions for market tenures.
During that same time, 1,598 new build residential units commenced
on site (2019 Q2: 2,454).
Development Pipeline
L&Q, including joint ventures, is operating from 158 (2019
Q2: 174) active sites. L&Q has approved an additional 358
residential units during the financial year bringing total units in
the approved development pipeline to 30,472 (2019 Q2: 31,575). Of
the units approved in the development pipeline 62% are for social
housing tenures and 38% are for market tenures. Some 70% of the
approved pipeline (21,348 units) is on site (2019 Q2: 65%). L&Q
holds a further potential 72,799 (2019 Q2: 56,900) strategic land
plots.
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 GBP5.1bn (2019 Q2: GBP6.9bn) of which GBP4.1bn
(80%) is currently committed (2019 Q2: GBP5.2bn).
Unaudited Financials
The unaudited financials exclude further adjustments that are
subject to audit review:
Statement of Comprehensive Income 2020 Q2 2019 Q2 Change
(GBPm) (GBPm)
----------------------------------------------------- --------- --------- -------
Turnover
Non-sales 344 307
Sales 106 76
----------------------------------------------------- --------- --------- -------
450 383 17%
Operating costs and cost of sales
Non-sales (201) (218)
Sales (103) (76)
(304) (294) 3%
Surplus on disposal of fixed assets and investments 22 25
Share of profits from joint ventures 9 16
Change in value of investment property - -
----------------------------------------------------- --------- --------- -------
Operating surplus 177 130 36%
Net interest charge (50) (60)
Other finance income/ (costs) (1) 2
Taxation - -
----------------------------------------------------- --------- --------- -------
Surplus for the period after tax 126 72 54
----------------------------------------------------- --------- --------- -------
Capitalised Interest (24) (17)
----- -----
Statement of Financial Position 2020 Q2 31 March 2020 Change (GBPm)
(GBPm) (GBPm)
-------------------------------------------- -------- -------------- --------------
Housing properties 10,677 10,555 122
Other fixed assets 78 81 (3)
Investments 1,600 1,622 (22)
Net current assets 1,038 926 112
-------------------------------------------- -------- -------------- --------------
Total assets less current liabilities 13,393 13,184 209
-------------------------------------------- -------- -------------- --------------
Loans due > one year 5,589 5,528 61
Unamortised grant liabilities 2,128 2,105 23
Other long term liabilities 323 324 (1)
Capital and reserves 5,353 5,227 126
-------------------------------------------- -------- -------------- --------------
Total non-current liabilities and reserves 13,393 13,184 209
-------------------------------------------- -------- -------------- --------------
Non-Sales Activities
Activity 2020 Q2 (GBPm) 2019 Q2 (GBPm) Change (GBPm)
------------------------------------- --------------- --------------- --------------
Net rents receivable 318 282 36
Charges for support services 5 4 1
Amortised government grants 12 12 -
Other income 9 9 -
------------------------------------- --------------- --------------- --------------
Turnover 344 307 37
------------------------------------- --------------- --------------- --------------
Management costs (28) (26) (2)
Service costs (44) (40) (4)
Maintenance costs (62) (81) 19
Support costs (6) (5) (1)
Depreciation & impairment (46) (38) (8)
Other costs (15) (28) 13
------------------------------------- --------------- --------------- --------------
Operating costs (201) (218) 17
------------------------------------- --------------- --------------- --------------
Surplus on disposal of fixed assets 22 25 (3)
------------------------------------- --------------- --------------- --------------
Operating surplus 165 114 51
------------------------------------- --------------- --------------- --------------
Capitalised Major Repairs (10) (32) 22
--------------------------- ----- ----- ---
Sales Activities
The cost of sales is inclusive of capitalised interest and
overhead costs:
Activity 2020 Q2 (GBPm) 2019 Q2 (GBPm) Change (GBPm)
-------------------------------------- --------------- --------------- --------------
Property sales income 76 74 2
Land sales income 30 2 28
-------------------------------------- --------------- --------------- --------------
Turnover from sales (excluding JV's) 106 76 30
Cost of property sales (68) (63) (5)
Cost of land sales (21) - (21)
Operating costs (14) (13) (1)
-------------------------------------- --------------- --------------- --------------
Total costs (excluding JV's) (103) (76) (27)
Operating Surplus (excluding JV's) 3 - 3
-------------------------------------- --------------- --------------- --------------
Joint venture turnover 66 176 (110)
Joint venture cost of sales (55) (154) 99
Joint venture operating costs (2) (6) 4
-------------------------------------- --------------- --------------- --------------
Share of profits from joint ventures 9 16 (7)
-------------------------------------- --------------- --------------- --------------
Average Selling Price
The average selling price, including JV's, for outright market
sales during the financial year to date was GBP458k (2019 Q2:
GBP524k) of which 40% were conducted under Help to Buy (2019 Q2:
78%). The average selling price of first tranche shared ownership
sales during the financial year to date was GBP382k (2019 Q2:
GBP376k) with an average first tranche sale of 35% (2019 Q2:
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 Q2 2019 Q2 Change
(GBPm) (Non-JV) (GBPm) (JV's) (GBPm)
(GBPm)
(GBPm) (GBPm)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Turnover 16 60 30 66 172 252 (80)
Cost of sales (15) (53) (21) (55) (144) (217) 73
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Gross profit 1 7 9 11 28 35 (7)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Gross sales
margin 6% 12% 30% 17% 16% 14% 2%
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Operating costs (1) (5) (8) (2) (16) (19) 3
Operating surplus - 2 1 9 12 16 (4)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Net sales margin - 3% 3% 14% 7% 6% 1%
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Unsold Stock
As at 30 September 2020, L&Q, including joint ventures, held
426 completed units as unsold stock with a projected revenue of
GBP119m. Projected revenue for shared ownership assumes a first
tranche sale of 25%. Of the total unsold stock, 39% has been held
for less than one month.
L&Q's forward order book excluding joint ventures consists
of 35 exchanged units with projected revenue of GBP13m and 262
reservations with projected revenue of GBP76m.
Tenure Projected Revenue No. of Units <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 21 180 89 2 12 26 51
Outright Sale
(non-JV's) 62 146 25 0 11 55 55
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
Joint Ventures 83 326 114 2 23 81 106
Outright Sale
(JV's) 36 100 52 11 12 5 20
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 36 100 52 11 12 5 20
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 119 426 166 13 35 86 126
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Net Debt and Liquidity
As at 30 September 2020, net debt (excluding derivative
financial liabilities) was GBP5,499m (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 GBP901m (as at 31 March 2020: GBP595m). Approximately
52% of L&Q's loan facilities and 60% of drawn loan facilities
are at a fixed cost. On 20 October 2020, L&Q issued GBP250m of
2.000% secured debentures due 2038 that further increases
short-term available liquidity.
Unencumbered Assets
2020 Q2 31 March 2020
---------------------------------------------------------------------------- --------- ---------------
No. of units under management 115,970 115,003
No. of social housing units provided as collateral against debt facilities (59,612) (55,013)
No. of private rented units provided as collateral against debt facilities (1,107) (1,107)
---------------------------------------------------------------------------- --------- ---------------
Total no. of unencumbered units under management 55,251 58,883
% of units under management held as collateral against debt facilities 52% 49%
Unencumbered asset ratio(12) 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
Martin Watts, Director of Treasury 0300 456 9998
www.lqgroup.org.uk
END
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