TIDM44EB
RNS Number : 7889I
London & Quadrant Housing Trust
09 August 2023
London & Quadrant Housing Trust Trading Update for the
period ending 30 June 2023
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated unaudited trading update for the three months
ended 30 June 2023 ('2023 Q1'). All statement of comprehensive
income comparatives are to L&Q's consolidated unaudited prior
year equivalent period being the three months ended 30 June 2022
('2022 Q1').
HIGHLIGHTS
-- There are 108,825 homes owned or managed (as at 31 March 2023: 108,261)
-- L&Q has completed 701 new residential homes (2022 Q1: 1,295)
-- Turnover was GBP242m (2022 Q1: GBP244m)
-- EBITDA(1) was GBP67m (2022 Q1: GBP94m)
-- EBITDA margin(2) was 27% (2022 Q1: 26%)
-- EBITDA margin (excluding sales)(3) was 37% (2022 Q1: 42%)
-- Gross sales EBITDA margin(4) was 5% (2022 Q1: 15%)
-- Net sales EBITDA margin(5) was (7%) (2022 Q1: 10%)
-- EBITDA / interest cover(6) was 119% (2022 Q1: 231%)
-- EBITDA social housing lettings interest cover(7) was 108% (2022 Q1: 192%)
-- Operating surplus was GBP68m (2022 Q1: GBP89m)
-- Debt to assets(8) was 40% (2022 Q1: 39%)
-- Sales as a % of turnover(10) was 23% (2022 Q1: 51%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"L&Q's Q1 trading results continue to reflect our stated
objectives to divert a greater level of expenditure towards our
resident's existing homes through our GBP3bn major works investment
programme to address our strategic priorities of health &
safety, quality of homes and improving services. In the year to
date we have invested GBP77m (2022 Q1: GBP62m) in our maintenance
programme which continues to deliver major internal and external
works inclusive of measures to address damp and mould, fire safety,
energy efficiency and wide-ranging estate improvements.
Our Health has carried out over 20,000 homes visits and
installed nearly 14,000 humidity sensors. We have completed
inspections on 1,031 of the c. 1,800 buildings where this is
required by new building safety legislation, begun remediation
works on 74 buildings and have replaced, installed or upgraded fire
alarm systems benefiting nearly 3,000 homes.
Our commitment to lower our risk profile and focus on our
existing development pipeline is reflected by the continued
reduction in homes approved of 24,934 (2022 Q1: 28,261), the
projected cost to complete of GBP3.0bn (2022 Q1: GBP4.0bn) and
declining housing starts and completions. In the year to date we
have completed 701 new residential homes (Q1 2022: 1,295) of which
75% (Q1 2022: 62%) are for social housing tenures. For the
financial year ending 31 March 2024 we expect c 1,100 starts and c
3,000 handovers.
We continue to remain cautious noting prolonged cost inflation
and increasing mortgage rates which is impacting buyer
affordability. Reservations for outright sales remain subdued,
however, the shared ownership market continues to be resilient
despite market headwinds."
FORWARD GUIDANCE FOR THE YEARING 31 MARCH 2024
L&Q's forward guidance is unchanged from our last trading
statement, but in recognition of prolonged inflation expectations
and higher interest rates we expect EBITDA / interest metrics to be
at the lower end of guidance. 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 701 (2022 Q1:
1,295) residential units in the financial year to date. This
comprises of 523 (2022 Q1: 807) completions for social housing
tenures (75%) and 178 (2022 Q1: 488) completions for market
tenures. During that same time 10 new build residential units
commenced on site (2022 Q1: 698) with the majority of starts being
later phases of existing developments.
DEVELOPMENT PIPELINE
L&Q, including joint ventures, is operating from 160 (2022
Q1: 192) active sites. L&Q has approved an additional 92 (2022
Q1: 206) homes during the financial year bringing total units in
the approved development pipeline to 24,934 (2022 Q1: 28,261), of
which 85% are currently on site. Of the homes approved in the
development pipeline 57% are for social housing tenures and 43% are
for market tenures. L&Q holds a further potential 83,050 (2022
Q1: 75,780) 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 GBP3.0bn (2022 Q1: GBP4.0bn) of which GBP2.5bn
(83%) is currently committed (2022 Q1: GBP3.3bn).
UNAUDITED FINANCIALS
The unaudited financials exclude further adjustments that are
subject to audit review.
Statement of Comprehensive Income
2023 Q1 (GBPm) 2022 Q1 (GBPm) Change
----------------------------------------------------- --------------- --------------- --------
Turnover
Non-sales 199 1 81
Sales 43 63
----------------------------------------------------- --------------- --------------- --------
242 244 ( 1 %)
Operating costs and cost of sales
Non-sales (141) (127)
Sales (46) (59)
----------------------------------------------------- --------------- --------------- --------
(187) (186) (1%)
Surplus on disposal of fixed assets and investments 14 16
Share of profits from joint ventures (1) 15
Change in value of investment property - -
----------------------------------------------------- --------------- --------------- --------
Operating surplus 68 89 ( 24 %)
Net interest charge (49) (30)
Other finance income/ (costs) (4) -
Taxation - -
----------------------------------------------------- --------------- --------------- --------
Surplus for the period after tax 15 59 ( 75 %)
----------------------------------------------------- --------------- --------------- --------
EBITDA and Net Cash Interest Paid
2023 Q1 (GBPm) 2022 Q1 (GBPm) Change
---------------------------------------- --------------- --------------- -------
Operating surplus 68 89
Change in value of investment property - -
Amortised government grant (7) (6)
Depreciation 26 2 5
Impairment - -
Capitalised major repairs (20) (14)
---------------------------------------- --------------- --------------- -------
EBITDA 67 94 (29%)
---------------------------------------- --------------- --------------- -------
Net interest charge (49) (30)
Capitalised interest (8) (11)
---------------------------------------- --------------- --------------- -------
Net cash interest paid (57) (41) (39%)
---------------------------------------- --------------- --------------- -------
Statement of Financial Position
2023 Q 1 (GBPm) 3 1 March 2023 (GBPm) Change (GBPm)
-------------------------------------------- ---------------- ----------------------- --------------
Housing properties 11,388 11,350 38
Other fixed assets 80 8 8 (9)
Investments 1,568 1,559 9
Net current assets 5 43 165 378
-------------------------------------------- ---------------- ----------------------- --------------
Total assets less current liabilities 13,579 13,163 416
-------------------------------------------- ---------------- ----------------------- --------------
Loans due > one year 5,547 5,124 423
Unamortised grant liabilities 2,057 2,065 (7 )
Other long-term liabilities 364 379 (15)
Capital and reserves 5,610 5,595 15
-------------------------------------------- ---------------- ----------------------- --------------
Total non-current liabilities and reserves 13,579 13,163 4 16
-------------------------------------------- ---------------- ----------------------- --------------
Non-Sales Activities
2023 Q1 2022 Q1 Change (GBPm)
(GBPm) (GBPm)
---------------------------------------- --------- -------- --------------
Net rents receivable 1 83 167 16
Charges for support services 3 3 -
Amortised government grants 6 6 -
Other income 7 5 2
---------------------------------------- --------- -------- --------------
Turnover 199 1 81 18
--------- -------- --------------
Management costs (20) (19) (1)
Service costs (28) (24) (4)
Maintenance costs (58) (48) (10)
Support costs (3) (3) -
Depreciation & impairment (26) (25) (1)
Other costs (6) (8) 2
---------------------------------------- --------- -------- --------------
Operating costs (141) (127) (14)
Surplus on disposal of fixed assets 14 16 ( 3)
Change in value of investment property - - -
---------------------------------------- --------- -------- --------------
Operating surplus 7 2 70 ( 1)
---------------------------------------- --------- -------- --------------
Arrears
Current tenant arrears for all tenures are at 5.26% (as at 31
March 2023: 5.67%)
Sales Activities
The cost of sales is inclusive of capitalised interest and
overhead costs:
2023 Q1 (GBPm) 2022 Q1 (GBPm) Change (GBPm)
-------------------------------------- --------------- --------------- --------------
Property sales income 43 6 1 (18)
Land sales income - 2 (2)
-------------------------------------- --------------- --------------- --------------
Turnover from sales (excluding JV's) 43 63 (20)
Cost of property sales (41) (52) 11
Cost of land sales - - -
Operating costs (5) (7) 2
Impairment - - -
-------------------------------------- --------------- --------------- --------------
Total costs (excluding JV's) (46) (59) 1 3
-------------------------------------- --------------- --------------- --------------
Operating Surplus (excluding JV's) (3) 4 (7 )
-------------------------------------- --------------- --------------- --------------
Joint venture turnover 14 118 (104)
Joint venture cost of sales (13) (101) 88
Joint venture operating costs (2) ( 2) -
Impairment of investment in JV's - - -
-------------------------------------- --------------- --------------- --------------
Share of profits from joint ventures ( 1) 15 (16)
-------------------------------------- --------------- --------------- --------------
AVERAGE SELLING PRICE
The average selling price for outright market sales during the
financial year to date was GBP414k (2022 Q1: GBP565k). The average
selling price of first tranche shared ownership sales during the
financial year to date was GBP401k (2022 Q1: GBP393k) with an
average first tranche sale of 32% (2022 Q1: 37%).
SALES MARGINS
The cost of sales is inclusive of capitalised interest and
overhead costs but excludes impairment:
Shared Outright Land Sales Outright Sales 2023 Q1 2022 Q1 Change
Owner- Sales (Non-JV) (JV's)
ship
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
------------------ -------------- ---------------- ----------- ----------------- -------- ------------ --------
Turnover 3 4 9 - 14 57 1 81 (124)
Cost of sales (32) (9) - (13) (54) (153) 99
------------------ -------------- ---------------- ----------- ----------------- -------- ------------ --------
Gross profit 2 - - 1 3 28 (25)
------------------ -------------- ---------------- ----------- ----------------- -------- ------------ --------
Gross EBITDA
margin 6% - - 7% 5% 15% (10%)
------------------ -------------- ---------------- ----------- ----------------- -------- ------------ --------
Operating costs (2) (1) (2) (2) (7) (9) 3
------------------ -------------- ---------------- ----------- ----------------- -------- ------------ --------
Operating surplus - (1) (2) ( 1) (4) 19 (23)
------------------ -------------- ---------------- ----------- ----------------- -------- ------------ --------
Net EBITDA margin - (11%) - (7%) (7%) 10% (2 7 %)
------------------ -------------- ---------------- ----------- ----------------- -------- ------------ --------
UNSOLD STOCK
As at 30 June 2023, L&Q, including joint ventures, held
1,382 completed homes as unsold stock with a projected revenue of
GBP216m. Projected revenue for shared ownership assumes a first
tranche sale of 25%.
Of the total unsold stock, 23% has been held as stock for less
than one month and 88% 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 year to
date, L&Q has handed over 360 and sold 268 shared ownership
homes.
L&Q's forward order book excluding joint ventures consists
of 50 exchanged homes with projected revenue of GBP7m and 265
reservations with projected revenue of GBP34m.
Tenure Projected Revenue No. of Homes <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 159 1 ,211 2 59 112 250 1 94 396
Outright Sale
(non-JV's) 47 1 19 55 1 - 31 32
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
JV's 206 1,330 3 14 113 250 225 428
Outright Sale - - - - - - -
(JCA's)
Outright Sale
(JCE's) 10 52 4 7 1 28 12
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 10 52 4 7 1 28 12
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 216 1,382 318 120 251 253 440
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
NET DEBT AND LIQUIDITY
As at 30 June 2023, net debt (excluding derivative financial
liabilities) was GBP5,449m (as at 31 March 2023: GBP5,294m) and
available liquidity within the group in the form of committed
un-drawn revolving credit facilities and non-restricted cash was at
GBP1,044m (as at 31 March 2023: GBP1,222m). Approximately 54% of
L&Q's loan facilities and 63% of drawn loan facilities are at a
fixed cost.
UNENCUMBERED ASSETS
2023 Q1 31 March 2023
---------------------------------------------------------------------------- --------- --------------
No. of homes owned or managed 108,825 108,261
No. of social housing homes provided as collateral against debt facilities (55,775) (56,927)
No. of private rented homes provided as collateral against debt facilities (1,295) (1,295)
---------------------------------------------------------------------------- --------- --------------
Total no. of unencumbered homes owned or under management 51,755 50,039
% held as collateral against debt facilities 52% 54%
Unencumbered asset ratio(12) 44% 45%
---------------------------------------------------------------------------- --------- --------------
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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TSTGZGGRRLMGFZG
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