TIDM44EB
RNS Number : 0927L
London & Quadrant Housing Trust
11 May 2022
London & Quadrant Housing Trust Trading Update for the
period ending 31 March 2022
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated unaudited trading update for the year ended 31
March 2022 ('2022'). All statement of comprehensive income
comparatives are to L&Q's consolidated audited prior year
equivalent period being the year ended 31 March 2021 ('2021').
HIGHLIGHTS
-- There are 118,770 units in management (2021: 117,788)
-- L&Q has completed 4,157 new residential homes (2021: 2,699)
-- Turnover was GBP1,113m (2021: GBP1,052m)
-- EBITDA(1) was GBP354m (2021: GBP374m)
-- EBITDA margin(2) was 26% (2021: 30%)
-- EBITDA margin (excluding sales)(3) was 43% (2021: 48%)
-- Gross sales EBITDA margin(4) was 15% (2021: 18%)
-- Net sales EBITDA margin(5) was 10% (2021: 11%)
-- EBITDA / interest cover(6) was 235% (2021: 254%)
-- EBITDA social housing lettings interest cover(7) was 128% (2021: 175%)
-- Operating surplus was GBP315m (2021: GBP307m)
-- Debt to assets(8) was 39% (2021: 41%)
-- Gross Debt / EBITDA(9) was 15.6x (2021: 14.7x)
-- Sales as a % of turnover(10) was 50% (2021: 46%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"L&Q's preliminary unaudited results are in line with
expectations and previous guidance for the financial year ending 31
March 2022 driven by EBITDA at GBP354m (previous guidance of
GBP330m-GBP350m) and a reduction in net debt which is GBP66m lower
year-on-year at GBP5.3bn (previous guidance of
GBP5.6bn-GBP5.7bn).
Financial performance on non-sales activities continues to
reflect our stated objectives of more focus on and investment in
the safety of our residents and colleagues, to increase investment
in residents' homes and to focus on delivering reliable, repeatable
and consistent services. A clear illustration of this is the
material increased investment that we have made in our residents'
homes with major repair spend at GBP71m (2021: GBP34m) and total
maintenance spend of GBP273m (2021: GBP192m).
In the last year we have completed over 400 building safety
inspections and have previously announced that we would cover the
costs of any remediation works needed to homes built by our
in-house construction arm, protecting over 1,100 leaseholders from
being charged for this work. We have launched the largest major
works investment programme in the history of L&Q. This will
support us to deliver major internal and external works to tens of
thousands of homes, as well as wide-ranging estate improvements,
fire safety works and activity to reduce carbon emissions. We have
put residents front and centre of what we do and where necessary
have restructured our teams to provide more locally responsive and
visible support to our residents and partners.
Whilst, as expected, operating expenditure has increased, the
past year has ended with the largest number of home completions in
L&Q's history. Of the 4,157 completions, 61% are for social
tenures, which demonstrates our continued commitment to social
purpose, and lowering our risk profile. Quality is paramount to us,
and customers are reporting 90% satisfaction with the quality of
their new homes, showing that our rigorous approach is paying off.
During the year, we also started building an additional 2,100
homes.
The expectation, as reflected in our forward guidance for the
year ending 31 March 2023 is that we will continue to divert a
greater level of expenditure towards our resident's existing homes.
Whilst we expect to deliver a marginally higher number of home
completions and start work on c 3,600 new homes in the year ending
31 March 2023, thereafter annual development levels are expected to
fall to c.3,000 as we plan to build out our 30,000-home pipeline
over the next decade.
We will also continue to proactively support residents impacted
by the higher cost of living. Specialist teams have been recruited
as part of our housing management restructure to support the most
vulnerable residents, and the L&Q Foundation will continue to
invest in a range of far-reaching initiatives that tackle fuel and
food poverty, educational programmes and opportunities for young
people."
The publication of L&Q's audited financial statements and
its externally assured sustainability report will be released via
RNS and placed on our website by 30 September 2022.
FORWARD GUIDANCE FOR THE YEARING 31 MARCH 2023
The following assumes that current market conditions
continue.
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
GBP950m. Included within our EBITDA projections is a c.30% increase
in total maintenance costs including c.GBP45m of gross costs
assigned to conduct fire remedial and safety works. Our projections
for surplus after tax are expected to be in the range of GBP260m to
GBP280m. Net debt is expected to be in the range of GBP5.6bn to
GBP5.7bn.
Financial Metrics Forward Guidance to 31 March 2023
-------------------------------------------------- ----------------------------------
EBITDA margin(2) 24% - 26%
EBITDA margin (excluding sales)(3) 35% - 37%
Gross EBITDA sales margin(4) 12% - 14%
EBITDA interest cover(6) 200% - 220%
Social housing lettings EBITDA interest Cover(7) 120% - 135%
Debt to assets(8) 41%
Gross debt to EBITDA(9) 17x - 18x
Sales as a % of turnover(10) c.47%
-------------------------------------------------- ----------------------------------
HOUSING COMPLETIONS
L&Q, including joint ventures, has completed 4,157 (2021:
2,699) residential units in the financial year. This comprises of
2,532 (2021: 1,556) completions for social housing tenures and
1,625 (2021: 1,143) completions for market tenures. During that
same time 2,103 new build residential units commenced on site
(2021: 3,818).
DEVELOPMENT PIPELINE
L&Q, including joint ventures, is operating from 185 (2021:
185) active sites. L&Q has approved an additional 676 (2021:
1,994) residential units during the financial year bringing total
units in the approved development pipeline to 29,795 (2021:
32,482), 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 75,484 (2021: 81,568) 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 GBP4.1bn (2021: GBP5.2bn) of which GBP3.3bn (80%)
is currently committed (2021: GBP4.5bn).
UNAUDITED FINANCIALS
The unaudited financials exclude further adjustments that are
subject to audit review. Included within the unaudited financials
is a GBP76m provision for impairment (GBP36m in relation to fixed
assets that we intend to hold for lettings and GBP40m in relation
to current assets that we intend to sell) of which c. 80% is
attributable to three schemes or 2% of the 185 sites that L&Q
is operating from. The provision for fixed asset impairment is due
to build cost inflation and L&Q's strategic decision to change
the deliverable tenure at one scheme whilst current asset
impairment reflects increased build costs, programme delays, known
defects and known offers for land values where schemes are being
transferred to joint ventures. There has been no provision for
impairment against land schemes held within L&Q Estates.
Statement of Comprehensive Income
2022 (GBPm) 2021 (GBPm) Change
----------------------------------------------------- ------------ ------------ -------
Turnover
Non-sales 700 684
Sales 413 368
----------------------------------------------------- ------------ ------------ -------
1,113 1,052 6%
Operating costs and cost of sales
Non-sales (542) (494)
Sales (422) (350)
----------------------------------------------------- ------------ ------------ -------
(964) (844) (14%)
Surplus on disposal of fixed assets and investments 96 59
Share of profits from joint ventures 33 37
Change in value of investment property 37 3
----------------------------------------------------- ------------ ------------ -------
Operating surplus 315 307 3%
Net interest charge (102) (100)
Other finance income/ (costs) 3 (2)
Taxation (9) 3
----------------------------------------------------- ------------ ------------ -------
Surplus for the period after tax 207 208 -
----------------------------------------------------- ------------ ------------ -------
EBITDA and Net Cash Interest Paid
2022 (GBPm) 2021 (GBPm) Change
---------------------------------------- ------------ ------------ -------
Operating surplus 315 307
Change in value of investment property (37) (3)
Amortised government grant (26) (25)
Depreciation 97 99
Impairment 76 30
Capitalised major repairs (71) (34)
---------------------------------------- ------------ ------------ -------
EBITDA 354 374 (5%)
---------------------------------------- ------------ ------------ -------
Net interest charge (102) (100)
Capitalised interest (49) (48)
---------------------------------------- ------------ ------------ -------
Net cash interest paid (151) (148) (2%)
---------------------------------------- ------------ ------------ -------
Statement of Financial Position
2022 (GBPm) 2021 (GBPm) Change (GBPm)
-------------------------------------------- ------------ ------------- --------------
Housing properties 11,043 10,906 137
Other fixed assets 85 78 7
Investments 1,692 1,592 100
Net current assets 784 484 300
-------------------------------------------- ------------ ------------- --------------
Total assets less current liabilities 13,604 13,060 544
-------------------------------------------- ------------ ------------- --------------
Loans due > one year 5,521 5,152 369
Unamortised grant liabilities 2,083 2,123 (40)
Other long -term liabilities 380 372 8
Capital and reserves 5,620 5,413 207
-------------------------------------------- ------------ ------------- --------------
Total non-current liabilities and reserves 13,604 13,060 544
-------------------------------------------- ------------ ------------- --------------
Non-Sales Activities
2022 2021 Change (GBPm)
(GBPm) (GBPm)
---------------------------------------- --------- -------- --------------
Net rents receivable 642 630 12
Charges for support services 12 9 3
Amortised government grants 26 25 1
Other income 20 20 -
---------------------------------------- --------- -------- --------------
Turnover 700 684 16
--------- -------- --------------
Management costs (64) (62) (2)
Service costs (94) (90) (4)
Maintenance costs (202) (158) (44)
Support costs (13) (10) (3)
Depreciation & impairment (132) (121) (11)
Other costs (37) (53) 16
---------------------------------------- --------- -------- --------------
Operating costs (542) (494) (48)
Surplus on disposal of fixed assets 96 59 37
Change in value of investment property 37 3 34
---------------------------------------- --------- -------- --------------
Operating surplus 291 252 39
---------------------------------------- --------- -------- --------------
Sales Activities
The cost of sales is inclusive of capitalised interest and
overhead costs:
2022 (GBPm) 2021 (GBPm) Change (GBPm)
-------------------------------------- ------------ ------------ --------------
Property sales income 268 277 (9)
Land sales income 145 91 54
-------------------------------------- ------------ ------------ --------------
Turnover from sales (excluding JV's) 413 368 45
Cost of property sales (239) (240) 1
Cost of land sales (99) (64) (35)
Operating costs (32) (39) 7
Impairment (52) (7) (45)
-------------------------------------- ------------ ------------ --------------
Total costs (excluding JV's) (422) (350) (72)
-------------------------------------- ------------ ------------ --------------
Operating Surplus (excluding JV's) (9) 18 (27)
-------------------------------------- ------------ ------------ --------------
Joint venture turnover 253 218 35
Joint venture cost of sales (225) (178) (47)
Joint venture operating costs (7) (3) (4)
Impairment of investment in JV's 12 - 12
-------------------------------------- ------------ ------------ --------------
Share of profits from joint ventures 33 37 (4)
-------------------------------------- ------------ ------------ --------------
AVERAGE SELLING PRICE
The average selling price, including JV's, for outright market
sales during the financial year to date was GBP492k (2021: GBP495k)
of which 64% were conducted under Help to Buy (2021: 63%). The
average selling price of first tranche shared ownership sales
during the financial year to date was GBP404k (2021: GBP427k) with
an average first tranche sale of 34% (2021: 33%). The year-on-year
movements in average selling prices reflect a higher proportion of
sales conducted in our North-West and Suburban regions.
SALES MARGINS
The cost of sales is inclusive of capitalised interest and
overhead costs but excludes impairment:
Shared Outright Land Sales Outright Sales (JV's) 2022 2021 Change
Owner- Sales (Non-JV)
ship
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
--------------------- -------- ---------------- ----------- ---------------------- ------- ------- -------
Turnover 117 151 145 253 666 586 80
Cost of sales (98) (141) (99) (225) (563) (482) (81)
--------------------- -------- ---------------- ----------- ---------------------- ------- ------- -------
Gross profit 19 10 46 28 103 104 (1)
--------------------- -------- ---------------- ----------- ---------------------- ------- ------- -------
Gross EBITDA margin 16% 7% 32% 11% 15% 18% (3%)
--------------------- -------- ---------------- ----------- ---------------------- ------- ------- -------
Operating costs (8) (10) (14) (7) (39) (42) 3
--------------------- -------- ---------------- ----------- ---------------------- ------- ------- -------
Operating surplus 11 - 32 21 64 62 2
--------------------- -------- ---------------- ----------- ---------------------- ------- ------- -------
Net EBITDA margin 9% - 22% 8% 10% 11% (1%)
--------------------- -------- ---------------- ----------- ---------------------- ------- ------- -------
UNSOLD STOCK
As at 31 March 2022, L&Q, including joint ventures, held
1,102 completed homes as unsold stock with a projected revenue of
GBP213m. Projected revenue for shared ownership assumes a first
tranche sale of 25%. Of the total unsold stock 29% has been held as
stock for less than one month and during the quarter unsold stock
for greater than six months reduced by 20%.
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 69 exchanged homes with projected revenue of GBP13m and 283
reservations with projected revenue of GBP47m. Of the 331 of unsold
stock in joint ventures, 71% are either reserved or exchanged.
Tenure Projected Revenue No. of Homes <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 8 1 684 106 147 2 31 167 3 3
Outright Sale
(non-JV's) 34 8 7 8 29 28 20 2
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
JV's 115 7 71 114 176 2 59 187 3 5
Outright Sale
(JCA's) 3 19 6 11 1 1 0
Outright Sale
(JCE's) 95 312 196 50 40 2 24
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 98 331 202 61 41 3 24
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 213 1,102 316 237 300 190 59
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
NET DEBT AND LIQUIDITY
As at 31 March 2022, net debt (excluding derivative financial
liabilities) was GBP5,314m (2021: GBP5,380m) and available
liquidity within the group in the form of committed un-drawn
revolving credit facilities and non-restricted cash was at
GBP1,179m (2021: GBP1,159m). Approximately 54% of L&Q's loan
facilities and 63% of drawn loan facilities are at a fixed
cost.
UNENCUMBERED ASSETS
2022 2021
---------------------------------------------------------------------------- --------- ---------
No. of units under management 118,770 117,788
No. of social housing homes provided as collateral against debt facilities (59,258) (60,085)
No. of private rented homes provided as collateral against debt facilities (1,107) (1,107)
---------------------------------------------------------------------------- --------- ---------
Total no. of unencumbered units under management 58,405 56,596
% of units under management held as collateral against debt facilities 51% 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 + current asset impairment) /
turnover from sales including joint ventures
(5) ( Operating surplus from sales + current asset impairment) /
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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