TIDM44EB
RNS Number : 9538A
London & Quadrant Housing Trust
08 February 2022
London & Quadrant Housing Trust Trading Update for the
period ending 31 December 2021
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated unaudited trading update for the nine months
ending 31 December 2021 ('2021 Q3'). All statement of comprehensive
income comparatives are to L&Q's consolidated unaudited prior
year equivalent period being the nine months ending 31 December
2020 ('2020 Q3').
HIGHLIGHTS
-- There are 118,519 units in management (as at 31 March 2021: 117,788)
-- L&Q has completed 2,852 new residential homes (2020 Q3: 1,763)
-- Turnover was GBP828m (2020 Q3: GBP689m)
-- EBITDA(1) was GBP287m (2020 Q3: GBP301m)
-- EBITDA margin(2) was 29% (2020 Q3: 37%)
-- EBITDA margin (excluding sales)(3) was 45% (2020 Q3: 56%)
-- Gross sales margin(4) was 18% (2020 Q3: 15%)
-- Net sales margin(5) was 12% (2020 Q3: 7%)
-- EBITDA / interest cover(6) was 256% (2020 Q3: 271%)
-- EBITDA social housing lettings interest cover(7) was 154% (2020 Q3: 206%)
-- Operating surplus was GBP276m (2020 Q3: GBP270m)
-- Debt to assets(8) was 40% (2020 Q3: 42%)
-- Sales as a % of turnover(10) was 49% (2020 Q3: 38%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"L&Q's unaudited Q3 trading results are in line with
expectations and previous guidance for the financial year ending 31
March 2022 is unchanged.
Financial performance on non-sales activities continues to
reflect our stated objectives to increase investment in residents'
homes and services as we deliver against our priorities of safety
and quality and gross and net sales margins continue to show
improvement.
Whilst, as expected, operating expenditure has increased,
L&Q continues to deliver against its commitment to tackle the
UK housing crisis through investment in new homes. In the nine
months to 31 December 2021, L&Q has completed 2,852 new
residential homes of which 59% are for social tenure. Completions
continue to exceed pre-Covid levels, and the tenure mix continues
to demonstrate our commitment to our social purpose and lowering
our risk profile.
In January 2022, L&Q followed up on its commitment to
sustainability and the wider ESG agenda through the issue of a
GBP300m Sustainability Linked Bond, a first from the social housing
sector. On 25 January 2022, L&Q published is first
Sustainability Report to complement our Sustainability Finance
Framework. The Sustainability Report outlines our comprehensive
approach to measure and manage impact, with transparency at the
forefront."
The Sustainability Report can be found at the following link
https://www.lqgroup.org.uk/media-centre/news/lq-publishes-sustainability-report
FORWARD GUIDANCE FOR THE YEARING 31 MARCH 2022
The following assumes that current market conditions continue
and are unchanged from the guidance issued in our last trading
statement.
We project EBITDA to be in the range of GBP330m to GBP350m and
gross capital expenditure(11) to be in the range of GBP900m to
GBP1bn. Included within our EBITDA projections are c.GBP30m of
costs assigned to conduct fire remedial and safety works. Our
projections for surplus after tax are expected to be in the range
of GBP220m to GBP240m. Net debt is expected to be in the range of
GBP5.6bn to GBP5.7bn.
Financial Metrics Forward Guidance to 31 March 2022
-------------------------------------------------- ----------------------------------
EBITDA margin(2) 23% - 25%
EBITDA margin (excluding sales)(3) 38% - 40%
Net sales margin(5) 9% - 11%
EBITDA interest cover(6) 210% - 225%
Social housing lettings EBITDA interest Cover(7) 120% - 135%
Debt to assets(8) 43%
Gross debt to EBITDA(9) 17x - 18x
Sales as a % of turnover(10) c.50%
-------------------------------------------------- ----------------------------------
HOUSING COMPLETIONS
L&Q, including joint ventures, has completed 2,852 (2020 Q3:
1,763) residential units in the financial year to date. This
comprises of 2,057 (2020 Q3: 988) completions for social housing
tenures and 795 (2020 Q3: 775) completions for market tenures.
During that same time 1,405 new build residential units commenced
on site (2020 Q3: 2,159).
DEVELOPMENT PIPELINE
L&Q, including joint ventures, is operating from 197 (2020
Q3: 178) active sites. L&Q has approved an additional 634 (2020
Q3: 1,774) residential units during the financial year bringing
total units in the approved development pipeline to 31,274 (2020
Q3: 31,916), of which 69% are currently on site, representing a
significant investment in new supply and affordable output. Of the
units approved in the development pipeline 59% are for social
housing tenures and 41% are for market tenures. L&Q holds a
further potential 74,864 (2020 Q3: 72,799) 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 GBP4.7bn (2020 Q3: GBP5.4bn) of which GBP3.8bn
(81%) is currently committed (2020 Q3: GBP4.2bn).
UNAUDITED FINANCIALS
The unaudited financials exclude further adjustments that are
subject to audit review:
Statement of Comprehensive Income
2021 Q3 (GBPm) 2020 Q3 (GBPm) Change
----------------------------------------------------- --------------- --------------- -------
Turnover
Non-sales 522 515
Sales 306 174
----------------------------------------------------- --------------- --------------- -------
828 689 20%
Operating costs and cost of sales
Non-sales (357) (304)
Sales (272) (173)
----------------------------------------------------- --------------- --------------- -------
(629) (477) (31%)
Surplus on disposal of fixed assets and investments 51 37
Share of profits from joint ventures 26 21
Change in value of investment property - -
----------------------------------------------------- --------------- --------------- -------
Operating surplus 276 270 2%
Net interest charge (76) (75)
Other finance income/ (costs) - -
Taxation 1 -
----------------------------------------------------- --------------- --------------- -------
Surplus for the period after tax 201 195 3%
----------------------------------------------------- --------------- --------------- -------
EBITDA and Net Cash Interest Paid
2021 Q3 (GBPm) 2020 Q3 Change
(GBPm)
---------------------------------------- --------------- -------- -------
Operating surplus 276 270
Change in value of investment property - -
Amortised government grant (19) (18)
Depreciation 71 69
Impairment - -
Capitalised major repairs (41) (20)
---------------------------------------- --------------- -------- -------
EBITDA 287 30 1 (5%)
---------------------------------------- --------------- -------- -------
Net interest charge (76) (75)
Capitalised interest (36) (36)
---------------------------------------- --------------- -------- -------
Net cash interest paid (112) (111) (1%)
---------------------------------------- --------------- -------- -------
Statement of Financial Position
2021 Q3 (GBPm) 31 March 2021 (GBPm) Change (GBPm)
-------------------------------------------- --------------- --------------------- --------------
Housing properties 11,032 10,906 126
Other fixed assets 81 78 3
Investments 1,678 1,592 86
Net current assets 632 484 148
-------------------------------------------- --------------- --------------------- --------------
Total assets less current liabilities 13,423 13,060 372
-------------------------------------------- --------------- --------------------- --------------
Loans due > one year 5,326 5,152 174
Unamortised grant liabilities 2,125 2,123 2
Other long-term liabilities 358 372 (14)
Capital and reserves 5,614 5,413 201
-------------------------------------------- --------------- --------------------- --------------
Total non-current liabilities and reserves 13,423 13,060 363
-------------------------------------------- --------------- --------------------- --------------
Non-Sales Activities
2021 Q3 2020 Q3 Change (GBPm)
(GBPm) (GBPm)
------------------------------------- --------- -------- --------------
Net rents receivable 482 475 7
Charges for support services 9 8 1
Amortised government grants 19 18 1
Other income 12 14 (2)
------------------------------------- --------- -------- --------------
Turnover 522 515 7
--------- -------- --------------
Management costs (48) (43) (5)
Service costs (68) (66) (2)
Maintenance costs (138) (97) (41)
Support costs (10) (10) -
Depreciation & impairment (71) (69) (2)
Other costs (22) (19) (3)
------------------------------------- --------- -------- --------------
Operating costs (357) (304) (53)
--------- -------- --------------
Surplus on disposal of fixed assets 51 37 14
------------------------------------- --------- -------- --------------
Operating surplus 216 248 (32)
------------------------------------- --------- -------- --------------
Sales Activities
The cost of sales is inclusive of impairment, capitalised
interest and overhead costs:
2021 Q3 (GBPm) 2020 Q3 (GBPm) Change (GBPm)
-------------------------------------- --------------- --------------- --------------
Property sales income 198 143 55
Land sales income 108 31 77
-------------------------------------- --------------- --------------- --------------
Turnover from sales (excluding JV's) 306 174 132
Cost of property sales (177) (131) (46)
Cost of land sales (71) (22) (49)
Operating costs (24) (20) (4)
-------------------------------------- --------------- --------------- --------------
Total costs (excluding JV's) (272) (173) (99)
-------------------------------------- --------------- --------------- --------------
Operating Surplus (excluding JV's) 34 1 33
-------------------------------------- --------------- --------------- --------------
Joint venture turnover 179 138 41
Joint venture cost of sales (148) (112) (36)
Joint venture operating costs (5) (5) -
-------------------------------------- --------------- --------------- --------------
Share of profits from joint ventures 26 21 5
-------------------------------------- --------------- --------------- --------------
AVERAGE SELLING PRICE
The average selling price, including JV's, for outright market
sales during the financial year to date was GBP488k (2020 Q3:
GBP488k) of which 57% were conducted under Help to Buy (2020 Q3:
50%). The average selling price of first tranche shared ownership
sales during the financial year to date was GBP412k (2020 Q3:
GBP435k) with an average first tranche sale of 34% (2020 Q3: 36%).
The year-on-year movements in average selling prices reflect a
higher proportion of sales conducted in our Trafford and Counties
regions.
SALES MARGINS
The cost of sales is inclusive of impairment, capitalised
interest and overhead costs:
Shared Outright Land Sales Outright Sales (JV's) Q3 2021 Q3 2020 Change
Owner- Sales (Non-JV)
ship
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Turnover 85 113 108 179 485 312 173
Cost of sales (70) (107) (71) (148) (396) (265) (131)
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Gross profit 15 6 37 31 89 47 42
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Gross margin 18% 5% 34% 17% 18% 15% 3%
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Operating costs (6) (8) (10) (5) (29) (25) (4)
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Operating surplus 9 (2) 27 26 60 22 38
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Net margin 11% (2%) 25% 15% 12% 7% 5%
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
UNSOLD STOCK
As at 31 December 2021, L&Q, including joint ventures, held
855 completed homes as unsold stock with a projected revenue of
GBP148m. Projected revenue for shared ownership assumes a first
tranche sale of 25%. Of the total unsold stock 21% has been held as
stock for less than one month. The increase in unsold stock
reflects a high quantity of handovers in short periods due to
previous construction delays caused by Covid-19 and in certain
locations, particularly in London, there is strong competition from
Help to Buy for shared ownership sales.
L&Q's forward order book excluding joint ventures consists
of 50 exchanged homes with projected revenue of GBP9m and 262
reservations with projected revenue of GBP42m.
Tenure Projected Revenue No. of Homes <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 72 620 131 203 63 176 47
Outright Sale
(non-JV's) 47 125 18 25 28 10 44
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
JV's 118 745 149 228 91 186 91
Outright Sale
(JCA's) 0 0 0 0 0 0 0
Outright Sale
(JCE's) 29 110 33 44 0 11 22
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 34 110 33 44 0 11 22
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 148 855 182 272 91 197 113
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
NET DEBT AND LIQUIDITY
As at 31 December 2021, net debt (excluding derivative financial
liabilities) was GBP5,421m (as at 31 March 2021: GBP5,385m) and
available liquidity within the group in the form of committed
un-drawn revolving credit facilities and non-restricted cash was at
GBP1,083m (as at 31 March 2021: GBP1,159m). Approximately 54% of
L&Q's loan facilities and 63% of drawn loan facilities are at a
fixed cost.
UNENCUMBERED ASSETS
Q3 2021 31 March 2021
---------------------------------------------------------------------------- --------- --------------
No. of units under management 118,519 117,788
No. of social housing homes provided as collateral against debt facilities (56,358) (60,085)
No. of private rented homes provided as collateral against debt facilities (1,107) (1,107)
---------------------------------------------------------------------------- --------- --------------
Total no. of unencumbered units under management 61,054 56,596
% of units under management held as collateral against debt facilities 48% 52%
Unencumbered asset ratio(12) 44% 44%
---------------------------------------------------------------------------- --------- --------------
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+/Stable
------------------------- ---------- ---------- ----------
Notes:
(1) Operating surplus - change in value of investment properties
- amortised government grant + depreciation + impairment -
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
the 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 8189 1596
www.lqgroup.org.uk
END
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