TIDM44EB
RNS Number : 7775N
London & Quadrant Housing Trust
03 February 2021
London & Quadrant Housing Trust Trading Update for the
period ending 31 December 2020
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated trading update for the nine months ended 31
December 2020 ('2020 Q3').
All statement of comprehensive income comparatives are to
L&Q's consolidated unaudited prior year equivalent period being
the nine months ended 31 December 2019 ('2019 Q3') and include the
trading activities of Trafford Housing Trust ('THT') that was
acquired by L&Q on 1 October 2019.
Highlights:
-- There are 116,860 units in management (as at 31 March 2020: 115,003)
-- L&Q has completed 1,763 residential units (2019 Q3: 1,997)
-- Turnover was GBP689m (2019 Q3: GBP638m)
-- EBITDA(1) was GBP301m (2019 Q3: GBP214m)
-- EBITDA margin(2) was 37% (2019 Q3: 25%)
-- EBITDA margin (excluding sales)(3) was 56% (2019 Q3: 40%)
-- Gross sales margin(4) was 15% (2019 Q3: 15%)
-- Net sales margin(5) was 7% (2019 Q3: 7%)
-- EBITDA / interest cover(6) was 271% (2019 Q3: 180%)
-- EBITDA social housing lettings interest cover(7) was 206% (2019 Q3: 130%)
-- Operating surplus was GBP270m (2019 Q3: GBP215m)
-- Debt to assets(8) was 42% (2019 Q3: 43%)
-- Sales as a % of turnover(10) was 38% (2019 Q3: 44%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"Our Q3 results provide us with the confidence to improve our
forward guidance metrics for the financial year ending 31 March
2021. We expect EBITDA to be in a range of GBP325m to GBP350m (Q2:
GBP300m to GBP325m) and net debt to be in the range of GBP5.6bn to
GBP5.7bn (Q2: GBP5.8bn to GBP5.9bn). Our revised projections
reflect stronger than expected operational performance during the
Covid-19 pandemic, particularly in relation to completions, sales
and rent arrears. Our projections also reflect the considerable
progress that we have made against our stated objective to conserve
cash flows through a reduction in capital and operating
expenditure.
Available liquidity at greater than GBP1.1bn continues to
demonstrate our ability to generate cash flow that provides
financial resilience and flexibility. Our strong liquidity position
leaves us well placed to address future external uncertainty that
is supported by the strength of our balance sheet. The release of
our new five-year strategy under the leadership of Fiona
Fletcher-Smith, appointed as Chief Executive on 11 January 2021,
will set out how we will put existing customers first, ensuring
that their homes are safe, high quality and supported by excellent
services and thriving communities. We have no intention of stopping
building homes - they are core to our social mission - but the pace
of delivery will ease in the short term."
Forward Guidance to the year ending 31 March 2021
The following remains subject to uncertainty on future business
disruption caused by Covid-19 and assume current market conditions
continue for the remainder of the financial year; and that there
are no further imposed lockdowns that create disruption to our
construction sites.
We project EBITDA to be in the range of GBP325m to GBP350m (Q2:
GBP300m to GBP325m) and capital expenditure (11) to be in the range
of GBP550m to GBP600m (Q2: GBP575m to GBP625m). Included within our
EBITDA projections are GBP27m (Q2: 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 GBP225m to GBP240m
(Q2: GBP200m to GBP215m). Net debt is expected to be in the range
of GBP5.6bn to GBP5.7bn (Q2: GBP5.8bn to GBP5.9bn).
Financial Metrics Forward Guidance to 31 March 2021
-------------------------------------------------- ----------------------------------
EBITDA margin(2) 28%
EBITDA margin (excluding sales)(3) 45%
Net sales margin(5) 11%
EBITDA interest cover(6) 249%
Social housing lettings EBITDA interest Cover(7) 179%
Debt to assets(8) 43%
Gross debt to EBITDA (9) 15.3x
Sales as a % of turnover(10) 49%
-------------------------------------------------- ----------------------------------
Housing Completions
L&Q, including joint ventures, has completed 1,763 (2019 Q3:
1,997) residential units in the financial year. This comprises of
988 (2019 Q3: 982) completions for social housing tenures and 775
(2019 Q3: 1,015) completions for market tenures. During that same
time 2,159 new build residential units commenced on site (2019 Q3:
2,454).
Development Pipeline
L&Q, including joint ventures, is operating from 178 (2019
Q3: 169) active sites. L&Q has approved an additional 1,998
residential units during the financial year bringing total units in
the approved development pipeline to 31,916 (2019 Q3: 50,937). Of
the units approved in the development pipeline 61% are for social
housing tenures and 39% are for market tenures. Some 67% of the
approved pipeline (21,314 units) is on site (2019 Q3: 39%). L&Q
holds a further potential 72,799 (2019 Q3: 58,900) 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 GBP5.3bn (2019 Q3: GBP6.7bn) of which GBP4.2bn
(79%) is currently committed (2019 Q3: GBP5.6bn).
Unaudited Financials
The unaudited financials exclude further adjustments that are
subject to audit review:
Statement of Comprehensive Income 2020 Q3 2019 Q3 Change
(GBPm) (GBPm)
----------------------------------------------------- --------- --------- -------
Turnover
Non-sales 515 477
Sales 174 161
----------------------------------------------------- --------- --------- -------
689 638 8%
Operating costs and cost of sales
Non-sales (304) (333)
Sales (173) (152)
(477) (485) (2%)
Surplus on disposal of fixed assets and investments 37 44
Share of profits from joint ventures 21 18
Change in value of investment property - (1)
----------------------------------------------------- --------- --------- -------
Operating surplus 270 214 26%
Net interest charge (75) (89)
Other finance income/ (costs) - (5)
Taxation - 1
----------------------------------------------------- --------- --------- -------
Surplus for the period after tax 195 121 54
----------------------------------------------------- --------- --------- -------
Capitalised Interest (36) (30)
----- -----
Statement of Financial Position 2020 Q3 31 March 2020 Change (GBPm)
(GBPm) (GBPm)
-------------------------------------------- -------- -------------- --------------
Housing properties 10,721 10,555 166
Other fixed assets 77 81 (4)
Investments 1,644 1,622 22
Net current assets 799 926 (127)
-------------------------------------------- -------- -------------- --------------
Total assets less current liabilities 13,241 13,184 57
-------------------------------------------- -------- -------------- --------------
Loans due > one year 5,376 5,528 (152)
Unamortised grant liabilities 2,123 2,105 18
Other long term liabilities 320 324 (4)
Capital and reserves 5,422 5,227 195
-------------------------------------------- -------- -------------- --------------
Total non-current liabilities and reserves 13,241 13,184 57
-------------------------------------------- -------- -------------- --------------
Non-Sales Activities
Activity 2020 Q3 (GBPm) 2019 Q3 (GBPm) Change (GBPm)
------------------------------------- --------------- --------------- --------------
Net rents receivable 475 436 39
Charges for support services 8 7 1
Amortised government grants 18 18 -
Other income 14 16 (2)
------------------------------------- --------------- --------------- --------------
Turnover 515 477 38
------------------------------------- --------------- --------------- --------------
Management costs (43) (42) (1)
Service costs (66) (59) (7)
Maintenance costs (97) (122) 25
Support costs (10) (7) (3)
Depreciation & impairment (69) (60) (9)
Other costs (19) (43) 24
------------------------------------- --------------- --------------- --------------
Operating costs (304) (333) 29
------------------------------------- --------------- --------------- --------------
Surplus on disposal of fixed assets 37 44 (7)
------------------------------------- --------------- --------------- --------------
Operating surplus 248 188 60
------------------------------------- --------------- --------------- --------------
Capitalised Major Repairs (20) (43) 23
--------------------------- ----- ----- ---
Sales Activities
The cost of sales is inclusive of capitalised interest and
overhead costs:
Activity 2020 Q3 (GBPm) 2019 Q3 (GBPm) Change (GBPm)
-------------------------------------- --------------- --------------- --------------
Property sales income 143 127 16
Land sales income 31 34 (3)
-------------------------------------- --------------- --------------- --------------
Turnover from sales (excluding JV's) 174 161 13
Cost of property sales (131) (109) (22)
Cost of land sales (22) (20) (2)
Operating costs (20) (23) 3
-------------------------------------- --------------- --------------- --------------
Total costs (excluding JV's) (173) (152) (21)
Operating Surplus (excluding JV's) 1 9 (8)
-------------------------------------- --------------- --------------- --------------
Joint venture turnover 138 220 (82)
Joint venture cost of sales (112) (193) 81
Joint venture operating costs (5) (9) 4
-------------------------------------- --------------- --------------- --------------
Share of profits from joint ventures 21 18 3
-------------------------------------- --------------- --------------- --------------
Average Selling Price
The average selling price, including JV's, for outright market
sales during the financial year to date was GBP488k (2019 Q3:
GBP524k) of which 50% were conducted under Help to Buy (2019 Q3:
70%). The average selling price of first tranche shared ownership
sales during the financial year to date was GBP435k (2019 Q3:
GBP384k) with an average first tranche sale of 36% (2019 Q3:
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 Q3 2019 Q3 Change
(GBPm) (Non-JV) (GBPm) (JV's) (GBPm)
(GBPm)
(GBPm) (GBPm)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Turnover 34 109 31 138 312 381 (69)
Cost of sales (29) (102) (22) (112) (265) (322) 57
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Gross profit 5 7 9 26 47 59 (12)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Gross sales
margin 14% 6% 29% 19% 15% 15% -
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Operating costs (2) (7) (11) (5) (25) (32) 7
Operating surplus 3 - (2) 21 22 27 (5)
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Net sales margin 9% - (6%) 15% 7% 7% -
------------------ ------------------ ----------------- ----------- ----------------- -------- -------- -------
Unsold Stock
As at 31 December 2020, L&Q, including joint ventures, held
686 completed units as unsold stock with a projected revenue of
GBP207m. Projected revenue for shared ownership assumes a first
tranche sale of 25%. Of the total unsold stock, 52% have been held
as stock for less than one month.
L&Q's forward order book excluding joint ventures consists
of 74 exchanged units with projected revenue of GBP29m and 281
reservations with projected revenue of GBP63m.
Tenure Projected Revenue No. of Units <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 40 321 167 27 61 17 49
Outright Sale
(non-JV's) 92 179 65 25 0 6 83
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
Joint Ventures 132 500 232 52 61 23 132
Outright Sale
(JV's) 75 186 122 33 3 8 20
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 75 186 122 33 3 8 20
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 207 686 354 85 64 31 152
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Net Debt and Liquidity
As at 31 December 2020, net debt (excluding derivative financial
liabilities) was GBP5,532m (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
GBP1,109m (as at 31 March 2020: GBP595m). Approximately 54% of
L&Q's loan facilities and 64% of drawn loan facilities are at a
fixed cost.
Unencumbered Assets
2020 Q3 31 March 2020
---------------------------------------------------------------------------- --------- ---------------
No. of units under management 116,860 115,003
No. of social housing units provided as collateral against debt facilities (60,085) (55,013)
No. of private rented units provided as collateral against debt facilities (1,107) (1,107)
---------------------------------------------------------------------------- --------- ---------------
Total no. of unencumbered units under management 55,668 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:
investors@lqgroup.org.uk
James Howell, Head of External Affairs 020 0189 1596
www.lqgroup.org.uk
END
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