TIDM44EB
RNS Number : 1308R
London & Quadrant Housing Trust
03 November 2021
London & Quadrant Housing Trust Trading Update for the
period ending 30 September 2021
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated unaudited trading update for the six months ending
30 September 2021 ('2021 Q2'). All statement of comprehensive
income comparatives are to L&Q's consolidated unaudited prior
year equivalent period being the six months ending 30 September
2020 ('2020 Q2').
HIGHLIGHTS
-- There are 119,760 units in management (as at 31 March 2021: 117,788)
-- L&Q has completed 1,997 new residential homes (2020 Q2: 700)
-- Turnover was GBP535m (2020 Q2: GBP450m)
-- EBITDA(1) was GBP205m (2020 Q2: GBP201m)
-- EBITDA margin(2) was 32% (2020 Q2: 40%)
-- EBITDA margin (excluding sales)(3) was 51% (2020 Q2: 57%)
-- Gross sales margin(4) was 17% (2020 Q2: 16%)
-- Net sales margin(5) was 11% (2020 Q2: 7%)
-- EBITDA / interest cover(6) was 276% (2020 Q2: 271%)
-- EBITDA social housing lettings interest cover(7) was 173% (2020 Q2: 216%)
-- Operating surplus was GBP193m (2020 Q2: GBP177m)
-- Debt to assets(8) was 41% (2020 Q2: 41%)
-- Sales as a % of turnover(10) was 48% (2020 Q2: 33%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"L&Q's unaudited Q2 trading results are in line with
expectations. We have revised our projections on EBITDA for the
financial year ending 31(st) March 2022 to be in the range of
GBP330m to GBP350m (previous guidance GBP340m to GBP360m). This
reflects our decision to accelerate a greater level of expenditure
towards our residents' homes as we commit to prioritising
investment in safety and the quality of existing homes and
services.
L&Q's focus on investment in residents' homes and services
has not diminished L&Q's commitment to tackling the UK housing
crisis through investment in new homes. In the six months to 30
September 2021, L&Q has completed 1,997 new residential homes
of which 61% are for social tenure. Completions exceed pre-Covid
levels, and the tenure mix continues to demonstrate our commitment
to our social purpose and lowering our risk profile.
During the quarter, L&Q outlined our commitment to
sustainability and the wider ESG agenda through the publication of
our Sustainability Finance Framework and our first Diversity
Report. Our Sustainability Finance Framework sets out how L&Q
will work to the spirit of the United Nation's Sustainable
Development Goals and includes four long-term targets; to be a net
zero carbon busines by 2050, to enable sustainable economic and
housing growth, to safeguard the environment and to collaborate
with others to achieve significant improvement in social impact and
social value. The publication of our first Diversity Report
documents the progress made in diversity and inclusion, as well as
future initiatives planned to continue improving colleague
representation"
Each of these documents can be accessed on our website
https://www.lqgroup.org.uk/media-centre/news
FORWARD GUIDANCE FOR THE YEARING 31ST MARCH 2022
The following assumes that current market conditions continue
and are materially 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) 16x - 17x
Sales as a % of turnover(10) c.50%
-------------------------------------------------- ----------------------------------
HOUSING COMPLETIONS
L&Q, including joint ventures, has completed 1,997 (2020 Q2:
700) residential units in the financial year. This comprises of
1,227 (2020 Q2: 456) completions for social housing tenures and 770
(2020 Q2: 244) completions for market tenures. During that same
time 1,190 new build residential units commenced on site (2020 Q2:
1,598).
DEVELOPMENT PIPELINE
L&Q, including joint ventures, is operating from 199 (2020
Q2: 158) active sites. L&Q has approved an additional 257 (2020
Q2: 358) residential units during the financial year bringing total
units in the approved development pipeline to 31,739 (2020 Q2:
30,472), 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 60% are for social
housing tenures and 40% are for market tenures. L&Q holds a
further potential 81,102 (2020 Q2: 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 GBP4.9bn (2020 Q2: GBP5.1bn) of which GBP4.1bn
(84%) is currently committed (2020 Q2: GBP4.1bn).
UNAUDITED FINANCIALS
The unaudited financials exclude further adjustments that are
subject to audit review:
Statement of Comprehensive Income
2021 Q2 (GBPm) 2020 Q2 (GBPm) Change
----------------------------------------------------- --------------- --------------- -------
Turnover
Non-sales 347 344
Sales 188 106
----------------------------------------------------- --------------- --------------- -------
535 450 19%
Operating costs and cost of sales
Non-sales (224) (201)
Sales (173) (103)
----------------------------------------------------- --------------- --------------- -------
(397) (304) (31%)
Surplus on disposal of fixed assets and investments 36 22
Share of profits from joint ventures 19 9
Change in value of investment property - -
----------------------------------------------------- --------------- --------------- -------
Operating surplus 193 177 9%
Net interest charge (51) (50)
Other finance income/ (costs) (1) (1)
Taxation - -
----------------------------------------------------- --------------- --------------- -------
Surplus for the period after tax 141 126 12%
----------------------------------------------------- --------------- --------------- -------
EBITDA and Net Cash Interest Paid
2021 Q2 (GBPm) 2020 Q2 Change
(GBPm)
---------------------------------------- --------------- -------- -------
Operating surplus 193 177
Change in value of investment property - -
Amortised government grant (13) (12)
Depreciation 46 46
Impairment - -
Capitalised major repairs (21) (10)
---------------------------------------- --------------- -------- -------
EBITDA 205 201 2%
---------------------------------------- --------------- -------- -------
Net interest charge (51) (50)
Capitalised interest (23) (24)
---------------------------------------- --------------- -------- -------
Net cash interest paid (74) (74) -
---------------------------------------- --------------- -------- -------
Statement of Financial Position
2021 Q2 (GBPm) 31 March 2021 (GBPm) Change (GBPm)
-------------------------------------------- --------------- --------------------- --------------
Housing properties 11,043 10,906 137
Other fixed assets 81 78 3
Investments 1,656 1,592 64
Net current assets 587 484 103
-------------------------------------------- --------------- --------------------- --------------
Total assets less current liabilities 13,367 13,060 307
-------------------------------------------- --------------- --------------------- --------------
Loans due > one year 5,324 5,152 172
Unamortised grant liabilities 2,121 2,123 (2)
Other long-term liabilities 368 372 (4)
Capital and reserves 5,554 5,413 141
-------------------------------------------- --------------- --------------------- --------------
Total non-current liabilities and reserves 13,367 13,060 307
-------------------------------------------- --------------- --------------------- --------------
Non-Sales Activities
2021 Q2 2020 Q2 Change (GBPm)
(GBPm) (GBPm)
------------------------------------- --------- -------- --------------
Net rents receivable 321 318 3
Charges for support services 6 5 1
Amortised government grants 13 12 1
Other income 7 9 (2)
------------------------------------- --------- -------- --------------
Turnover 347 344 3
--------- -------- --------------
Management costs (30) (28) (2)
Service costs (45) (44) (1)
Maintenance costs (84) (62) (22)
Support costs (7) (6) (1)
Depreciation & impairment (46) (46) -
Other costs (12) (15) 3
------------------------------------- --------- -------- --------------
Operating costs (224) (201) (23)
--------- -------- --------------
Surplus on disposal of fixed assets 36 22 14
------------------------------------- --------- -------- --------------
Operating surplus 159 165 (6)
------------------------------------- --------- -------- --------------
Sales Activities
The cost of sales is inclusive of impairment, capitalised
interest and overhead costs:
2021 Q2 (GBPm) 2020 Q2 (GBPm) Change (GBPm)
-------------------------------------- --------------- --------------- --------------
Property sales income 155 76 79
Land sales income 33 30 3
-------------------------------------- --------------- --------------- --------------
Turnover from sales (excluding JV's) 188 106 82
Cost of property sales (138) (68) (70)
Cost of land sales (21) (21) -
Operating costs (14) (14) -
-------------------------------------- --------------- --------------- --------------
Total costs (excluding JV's) (173) (103) (70)
-------------------------------------- --------------- --------------- --------------
Operating Surplus (excluding JV's) 15 3 12
-------------------------------------- --------------- --------------- --------------
Joint venture turnover 116 66 50
Joint venture cost of sales (94) (55) (39)
Joint venture operating costs (3) (2) (1)
-------------------------------------- --------------- --------------- --------------
Share of profits from joint ventures 19 9 10
-------------------------------------- --------------- --------------- --------------
AVERAGE SELLING PRICE
The average selling price, including JV's, for outright market
sales during the financial year to date was GBP504k (2020 Q2:
GBP458k) of which 83% were conducted under Help to Buy (2020 Q1:
40%). The average selling price of first tranche shared ownership
sales during the financial year to date was GBP407k (2020 Q2:
GBP382k) with an average first tranche sale of 33% (2020 Q2:
35%).
SALES MARGINS
The cost of sales is inclusive of impairment, capitalised
interest and overhead costs:
Shared Outright Land Sales Outright Sales (JV's) Q2 2021 Q2 2020 Change
Owner- Sales (Non-JV)
ship
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Turnover 59 96 33 116 304 172 132
Cost of sales (48) (90) (21) (94) (253) (144) (109)
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Gross profit 11 6 12 22 51 28 23
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Gross margin 19% 6% 36% 19% 17% 16% 1%
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Operating costs (3) (5) (6) (3) (17) (16) (1)
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Operating surplus 8 1 6 19 34 12 22
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Net margin 14% 1% 18% 16% 11% 7% 4%
------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
UNSOLD STOCK
As at 30 September 2021, L&Q, including joint ventures, held
740 completed homes as unsold stock with a projected revenue of
GBP143m. Projected revenue for shared ownership assumes a first
tranche sale of 25%. Of the total unsold stock 36% has been held as
stock for less than one month.
L&Q's forward order book excluding joint ventures consists
of 25 exchanged homes with projected revenue of GBP4m and 248
reservations with projected revenue of GBP41m.
Tenure Projected Revenue No. of Homes <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 60 506 146 36 207 74 43
Outright Sale
(non-JV's) 49 115 51 4 10 12 38
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
JV's 109 621 197 40 217 86 81
Outright Sale
(JCA's) 0 1 0 0 1 0 0
Outright Sale
(JCE's) 34 118 72 8 2 18 18
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 34 119 72 8 3 18 18
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 143 740 269 48 220 104 99
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
NET DEBT AND LIQUIDITY
As at 30 September 2021, net debt (excluding derivative
financial liabilities) was GBP5,471m (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 GBP1,065m (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
Q2 2021 31 March 2021
---------------------------------------------------------------------------- --------- --------------
No. of units under management 119,760 117,788
No. of social housing homes provided as collateral against debt facilities (56,521) (60,085)
No. of private rented homes provided as collateral against debt facilities (1,107) (1,107)
---------------------------------------------------------------------------- --------- --------------
Total no. of unencumbered units under management 62,132 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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