TIDM44EB
RNS Number : 8519Y
London & Quadrant Housing Trust
10 May 2023
London & Quadrant Housing Trust Trading Update for the
period ending 31 March 2023
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated unaudited trading update for the twelve months
ended 31 March 2023 ('2023'). All statement of comprehensive income
comparatives are to L&Q's consolidated audited prior year
equivalent period being the twelve months ended 31 March 2022
('2022').
HIGHLIGHTS
-- There are 119,646 homes in management (2022: 118,770)
-- L&Q has completed 4,047 new residential homes (2022: 4,157)
-- Turnover was GBP1,176m (2022: GBP1,112m)
-- EBITDA(1) was GBP326m (2022: GBP327m)
-- EBITDA margin(2) was 23% (2022: 24%)
-- EBITDA margin (excluding sales)(3) was 33% (2022: 41%)
-- Gross sales EBITDA margin(4) was 18% (2022: 16%)
-- Net sales EBITDA margin(5) was 12% (2022: 8%)
-- EBITDA interest cover(6) was 176% (2022: 222%)
-- EBITDA social housing lettings interest cover(7) was 126% (2022: 125%)
-- Operating surplus was GBP289m (2022: GBP271m)
-- Debt to assets(8) was 40% (2022: 39%)
-- Gross debt to EBITDA (9) was 16.5x (2022: 16.9x)
-- Sales as a % of turnover(10) was 48% (2022: 50%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"L&Q's preliminary unaudited results reflect our stated
objectives to divert a greater level of expenditure towards our
resident's existing homes to address our strategic priorities of
health & safety, quality of homes and improving services.
Investment of GBP376m (2022: GBP262m) in our maintenance
programme is a material increase which will improve the quality of
our resident's homes. This programme has delivered, and will
continue to deliver, major internal and external works inclusive of
measures to address damp and mould, fire safety, energy efficiency
and wide-ranging estate improvements. In the financial year we have
completed intrusive inspections on 954 of the c. 1,800 buildings
where this is required by new building safety legislation, secured
393 EWS1 forms, begun remediation works on 61 buildings and have
replaced, installed or upgraded fire alarm systems benefiting
nearly 3,000 homes.
In progressing against our stated priorities, we have faced
strong inflationary pressures and uncovered further development
defects resulting in EBITDA at GBP326m (2022: GBP327m) which is
broadly in line with previous guidance.
L&Q has completed over 4,000 new residential homes of which
71% (2022: 61%) are for social housing tenures. During the final
quarter we saw early signs of recovery in sales rates and a pick-up
in land sales activity that has contributed to better-than-expected
sales margins. Of note, with the end of Help to Buy, we have seen,
and continue to expect an uplift in demand for shared ownership as
evidenced by higher reservation rates and higher than expected
first tranche percentages sold.
However, we remain cautious noting the potential threats of
prolonged cost inflation, increased pressure on existing services,
market sentiment, government legislation, the identification of
further development defects and impairment. Our 2023 unaudited
results exclude any provision for impairment that is subject to
audit review. Our current estimate suggests that this could be in
the range of GBP80m to GBP100m which will lower operating surplus
but will not impact EBITDA. This estimate is representative of the
adverse implications of build programme extensions as we address
defects, expected build cost inflation, tenure conversion, our
decision to hold back sites and a higher cost of capital.
In the medium term we are committed to lowering our risk profile
and are targeting lower debt metrics through a reduction in gross
capital expenditure. Our focus remains on our existing development
pipeline rather than new approvals meaning we expect to continue to
reduce the number of sites that we are operating from and homes in
the development pipeline.
This commitment has been demonstrated by a material reduction in
the projected cost to complete our development pipeline at GBP3.1bn
(2022: GBP4.1bn) and stabilised net debt at GBP5.3bn (2022:
GBP5.3bn) which is below guidance of GBP5.5bn to GBP5.6bn.
Available liquidity at GBP1.2bn demonstrates that we have a
well-capitalised balance sheet that can absorb risk."
FORWARD GUIDANCE FOR THE YEARING 31 MARCH 2024
We project EBITDA in the range of GBP400m to GBP420m and gross
capital expenditure(11) to be c. GBP850m, the peak in our
medium-term projections. Our projections for surplus after tax are
expected to be in the range of GBP300m to GBP320m. Net debt is
expected to be stable at c. GBP5.3bn. We expect to deliver c. 3,000
new residential homes of which c. 60% is expected to be for social
housing tenures.
Financial Metrics Forward Guidance to 31 March 2024
------------------------------------------------- ----------------------------------
EBITDA margin(2) 29% - 31%
EBITDA margin (excluding sales)(3) 45% - 47%
Gross sales EBITDA margin(4) 10% - 12%
EBITDA interest cover(6) 170% - 180%
EBTDA Social housing lettings interest Cover(7) 120% - 130%
Debt to assets(8) c. 39%
Gross debt to EBITDA(9) 13x - 14x
Sales as a % of turnover(10) c.40%
------------------------------------------------- ----------------------------------
HOUSING COMPLETIONS
L&Q, including joint ventures, has completed 4,047 (2022:
4,157) residential homes in the financial year. This comprises of
2,892 (2022: 2,532) completions for social housing tenures (71%)
and 1,155 (2022: 1,625) completions for market tenures. During that
same time 2,760 new build residential homes commenced on site
(2022: 2,103) with the majority of starts being later phases of
existing developments.
DEVELOPMENT PIPELINE
L&Q, including joint ventures, is operating from 161 (2022:
185) active sites. L&Q has approved an additional 1,222 (2022:
676) homes during the financial year bringing total homes in the
approved development pipeline to 25,594 (2022: 29,795), of which
85% are currently on site. Of the homes approved in the development
pipeline 56% are for social housing tenures and 44% are for market
tenures. L&Q holds a further potential 76,610 (2022: 75,484)
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 GBP3.1bn (2022: GBP4.1bn) of which GBP2.6bn (84%)
is currently committed (2022: GBP3.3bn).
UNAUDITED FINANCIALS
The 2023 unaudited financials exclude further adjustments that
are subject to audit review including but not limited to impairment
reviews and pension revaluation adjustments.
Statement of Comprehensive Income
2023 2022 Change
(GBPm) (GBPm)
----------------------------------------------------- -------- ----------------- -------
Turnover
Non-sales 745 699
Sales 431 413
----------------------------------------------------- -------- ----------------- -------
1,176 1,112 6%
Operating costs and cost of sales
Non-sales (608) (573)
Sales (376) (435)
----------------------------------------------------- -------- ----------------- -------
(984) (1,008) 2%
Surplus on disposal of fixed assets and investments 152 95
Share of profits from joint ventures 2 8 37
Change in value of investment property (83) 35
----------------------------------------------------- -------- ----------------- -------
Operating surplus 289 271 7%
Net interest charge (144) (102)
Other finance income/ (costs) (3) 3
Taxation 22 (18)
----------------------------------------------------- -------- ----------------- -------
Surplus for the period after tax 1 64 154 6%
----------------------------------------------------- -------- ----------------- -------
EBITDA and Net Cash Interest Paid
2023 2022 Change
(GBPm) (GBPm)
---------------------------------------- --------- --------- -------
Operating surplus 289 271
Change in value of investment property 83 (35)
Amortised government grant (26) (26)
Depreciation 99 97
Impairment - 90
Capitalised major repairs (119) (7 0 )
---------------------------------------- --------- --------- -------
EBITDA 326 327 -
---------------------------------------- --------- --------- -------
Net interest charge (144) (102)
Capitalised interest (42) (45)
---------------------------------------- --------- --------- -------
Net cash interest paid (186) (147) (27%)
---------------------------------------- --------- --------- -------
Statement of Financial Position
2023 2022 Change
(GBPm) (GBPm)
-------------------------------------------- --------- --------- --------
Housing properties 11,468 11,026 442
Other fixed assets 88 85 3
Investments 1,593 1,729 (136)
Net current assets 173 746 (573)
-------------------------------------------- --------- --------- --------
Total assets less current liabilities 13,322 13,586 (264)
-------------------------------------------- --------- --------- --------
Loans due > one year 5,124 5,521 (397)
Unamortised grant liabilities 2,082 2,083 (1)
Other long-term liabilities 365 395 (30)
Capital and reserves 5,751 5,587 164
-------------------------------------------- --------- --------- --------
Total non-current liabilities and reserves 13,322 13,586 264
-------------------------------------------- --------- --------- --------
Non-Sales Activities
2023 2022 Change (GBPm)
(GBPm) (GBPm)
---------------------------------------- --------- ----------------- --------------
Net rents receivable 679 640 39
Charges for support services 12 9 3
Amortised government grants 26 26 -
Other income 28 24 4
---------------------------------------- --------- ----------------- --------------
Turnover 745 699 46
--------- ----------------- --------------
Management costs (84) (65) (19)
Service costs (109) (94) (15)
Maintenance costs (257) (205) (52)
Support costs (13) (10) (3)
Depreciation & impairment (99) (149) 5 0
Other costs (46) (50) 4
---------------------------------------- --------- ----------------- --------------
Operating costs (608) (573) (35)
Surplus on disposal of fixed assets 152 95 57
Change in value of investment property (83) 35 (118)
---------------------------------------- --------- ----------------- --------------
Operating surplus 206 256 ( 50)
---------------------------------------- --------- ----------------- --------------
Arrears
Current tenant arrears for all tenures are at 5.67% (as at 31
March 2022: 5.61%).
Sales Activities
The cost of sales is inclusive of capitalised interest and
overhead costs:
2023 2022 Change (GBPm)
(GBPm) (GBPm)
-------------------------------------- --------- --------- -------------------
Property sales income 303 256 47
Land sales income 128 157 (29)
-------------------------------------- --------- --------- -------------------
Turnover from sales (excluding JV's) 431 413 18
Cost of property sales (248) (227) (21)
Cost of land sales (94) (111) 17
Operating costs (34) (44) 10
Impairment - (53) 53
-------------------------------------- --------- --------- -------------------
Total costs (excluding JV's) (376) (435) 58
-------------------------------------- --------- --------- -------------------
Operating Surplus (excluding JV's) 55 (22) 69
-------------------------------------- --------- --------- -------------------
Joint venture turnover 243 253 (10)
Joint venture cost of sales (209) (225) 16
Joint venture operating costs (6) (7) 1
Impairment of investment in JV's - 16 (16)
-------------------------------------- --------- --------- -------------------
Share of profits from joint ventures 28 37 (9)
-------------------------------------- --------- --------- -------------------
AVERAGE SELLING PRICE
The average selling price, including JVs, for outright market
sales during the financial year to date was GBP507k (2022:
GBP492k). 43% of outright market sales, excluding JVs, were
conducted under Help to Buy (2022: 64%). The average selling price
of first tranche shared ownership sales during the financial year
to date was GBP397k (2022: GBP404k) that reflects increasing
activity in the North-West with an average first tranche sale of
35% (2022: 34%).
SALES MARGINS
The cost of sales is inclusive of capitalised interest and
overhead costs but excludes impairment:
Shared Outright Land Sales Outright Sales 2023 2022 Change
Owner- Sales (Non-JV) (JV's)
ship
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
--------------------- -------- ---------------- ----------- --------------------- --------- ---------- --------
Turnover 147 156 128 243 674 666 8
Cost of sales (126) (122) (94) (209) (551) (563) 12
--------------------- -------- ---------------- ----------- --------------------- --------- ---------- --------
Gross profit 21 34 34 34 123 103 20
--------------------- -------- ---------------- ----------- --------------------- --------- ---------- --------
Gross EBITDA margin 14% 2 2 % 27% 14% 18% 15% 3%
--------------------- -------- ---------------- ----------- --------------------- --------- ---------- --------
Operating costs (12) (12) (10) (6) (40) (51) 11
--------------------- -------- ---------------- ----------- --------------------- --------- ---------- --------
Operating surplus 9 22 24 28 83 52 31
--------------------- -------- ---------------- ----------- --------------------- --------- ---------- --------
Net EBITDA margin 6% 14% 19 % 12% 12% 8% 6%
--------------------- -------- ---------------- ----------- --------------------- --------- ---------- --------
UNSOLD STOCK
As at 31 March 2023, L&Q, including joint ventures, held
1,278 completed homes as unsold stock with a projected revenue of
GBP194m. Projected revenue for shared ownership assumes a first
tranche sale of 25%.
Of the total unsold stock, 13% has been held as stock for less
than one month and 89% is for shared ownership, a tenure where we
would expect to continue to show a higher comparative level of
unsold stock due to bulk handovers in short time periods and
limitations to pre-sale meaning gradual sales rates. In the
financial year, L&Q has handed over 1,506 and sold 1,071 shared
ownership homes.
L&Q's forward order book excluding joint ventures consists
of 25 exchanged homes with projected revenue of GBP3m and 249
reservations with projected revenue of GBP31m.
Tenure Projected Revenue No. of Homes <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 149 1 ,136 1 54 209 121 414 238
Outright Sale
(non-JV's) 30 78 4 6 9 27 32
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
JV's 179 1,214 158 215 130 441 270
Outright Sale
(JCA's) 1 4 - - - - 4
Outright Sale
(JCE's) 14 60 6 - 4 38 12
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 15 64 6 - 4 38 16
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 194 1,278 164 215 134 479 286
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
NET DEBT AND LIQUIDITY
As at 31 March 2023, net debt (excluding derivative financial
liabilities) was GBP5,294m (as at 31 March 2022: GBP5,314m) and
available liquidity within the group in the form of committed
un-drawn revolving credit facilities and non-restricted cash was at
GBP1,222m (as at 31 March 2022: GBP1,179m). Approximately 54% of
L&Q's loan facilities and 65% of drawn loan facilities are at a
fixed cost. L&Q has GBP576m of debt maturities within the next
12 months (GBP316m drawn) with heads of terms agreed to extend
GBP550m of debt facilities for a weighted duration of c.
5-years.
UNENCUMBERED ASSETS
2023 2022
---------------------------------------------------------------------------- --------- ---------
No. of homes under management 119,646 118,434
No. of social housing homes provided as collateral against debt facilities (56,927) (59,258)
No. of private rented homes provided as collateral against debt facilities (1,295) (1,107)
---------------------------------------------------------------------------- --------- ---------
Total no. of unencumbered homes under management 61,424 58,069
% of homes under management held as collateral against debt facilities 49% 51%
Unencumbered asset ratio(12) 46% 44%
---------------------------------------------------------------------------- --------- ---------
L&Q CREDIT RATINGS
As at date of trading statement release:
Rating Agency S&P Moody's Fitch
------------------------- ------------ ------------ ------------
Long-term credit ratings A-/Negative A3/Negative A+/Negative
------------------------- ------------ ------------ ------------
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 + impairment / turnover from sales
including joint ventures
(5) Operating surplus from sales + 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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TSTFLFVREVIAIIV
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