TIDM44EB
RNS Number : 8272N
London & Quadrant Housing Trust
27 September 2023
London & Quadrant Housing Trust ('L&Q') - Publication of
Financial Statements
L&Q today announces the publication of its consolidated
audited financial statements for the financial year ended 31 March
2023 which demonstrate how the housing association is investing
record amounts to improve residents' existing homes while
transforming services and building new affordable homes.
All comparatives are to L&Q's consolidated audited financial
statements for the financial year ended 31 March 2022 ('2022').
Investment of GBP347m (2022: GBP262m) in L&Q's maintenance
programme during the year is a material increase which will address
its strategic priority of improving the quality and safety of
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 making this investment, L&Q has faced strong inflationary
pressures. Despite the challenges faced, EBITDA at GBP313m (2022:
GBP327m) was at a similar level to prior year performance. In the
year-ended 31 March 2023, L&Q achieved an operating surplus of
GBP162m (2022: GBP271m) and net debt was stabilised at GBP5.3bn
(2022: GBP5.3bn). Available liquidity at GBP1.2bn (2022: GBP1.2bn)
demonstrates that L&Q has a well-capitalised balance sheet that
can absorb risk
The financial statements can be accessed via the following
link:
https://www.lqgroup.org.uk/investors/financial-performance
A copy of this document will shortly be filed with the National
Storage Mechanism.
Highlights
For the year ended 31st March 2023, L&Q achieved turnover of
GBP1,176m (2022: GBP1,112m), EBITDA of GBP313m (2022: GBP327m) and
an underlying surplus after tax of GBP40m (2022: GBP154m).
-- Turnover increased by 6% to GBP1,176m (2022: GBP1,112m). Of
turnover, 55% (2022: 55%) was generated from core social housing
lettings activities. A further 38% (2022: 38%) was from market
sales activity (including shared ownership first tranche sales), 4%
(2022: 3%) from market rents and 3% from other activities (2022:
4%).
-- EBITDA fell by 4% to GBP313m (2022: GBP327m), EBITDA margin
was 22% (2022: 24%) and EBITDA interest cover was 169% (2022:
222%). The year-on-year decrease in EBITDA reflects our focus on
delivering our strategic objectives and provisions for build defect
liabilities (please see below 'Reconciliation of audited financial
statements against trading update').
-- Surplus after tax was GBP40m (2021: GBP154m). The lower like
for like performance is primarily due to a net impairment charge of
GBP109m (2022: GBP90m) and a downward valuation of investment
properties of GBP85m (2022: GBP35m upward valuation). L&Q's
surpluses will be re-invested back into ensuring the safety of
residents, the quality of homes and services, supporting
communities, and increasing the supply of new social housing.
-- Net debt reduced by GBP19m to GBP5,295m (2022: GBP5,314m) and
available liquidity remained constant at GBP1.2bn (2022: GBP1.2bn)
demonstrating continued success to conserve cash flows.
-- L&Q continues to maintain a strong financial position
with total assets less current liabilities at GBP13,185m (2022:
GBP13,586m) and net assets at GBP5,615m (2022: GBP5,587m). The
reduction of total assets less current liabilities is due to
GBP550m loans classified as creditors due within one year that as
at the publication date have been fully refinanced and extended by
a weighted average life of 5 years. The housing properties
portfolio grew by 3% to GBP11,354m (2022: GBP11,026m) .
-- Housing completions at 4,047 (2022: 4,157) of which 71%
(2022: 61%) were for social housing tenures. This further
demonstrates L&Q's commitment to maximising its social purpose,
while simultaneously, lowering its risk profile for commercial
activity.
-- L&Q invested GBP598m (2022: GBP531m) in new social
housing, demonstrating continued progress against our ambition to
tackle the housing crisis and GBP11m (2022: GBP0) in new market
rent properties. A further GBP51m (2022: GBP114m) was invested in
private housing for sale we develop ourselves and GBP62m (2022:
GBP76m) in joint venture partnerships. Profits generated from
non-social housing activities are re-invested in the delivery of
social housing.
-- L&Q invested GBP347m (2022: GBP262m) in residents' homes,
which includes investment in fire safety works. Building safety
remains a priority, with L&Q continuing the delivery of one of
the largest inspection and remediation programmes in the country,
covering some 1,900 buildings (low rise and high rise) containing
over 32,000 homes. L&Q has completed inspections on 1,031
buildings with 206 building requiring remediation (74 buildings
with remediation started and 13 buildings with remediation
complete).
-- L&Q's Major Works Investment Programme is the industry's
largest investment programme - almost GBP3bn over 15 years - to
improve the safety, comfort, and environmental performance of
resident's homes. This will see all L&Q homes maintained to the
Decent Homes Standard - a technical standard set by the government
for social housing.
-- In a year when the cost-of-living crisis has significantly
impacted many of the most vulnerable residents, the charitable
L&Q Foundation has played a vital role in supporting those who
need with L&Q investing GBP10m (2022: GBP9m) into the L&Q
Foundation. A core service offered is Pound Advice, which works
with a network of providers to give tailored support to people on a
range of financial advice and debt management issues. In 2023,
Pound Advice has helped more than 2,800 residents secure over GBP10
million. The gains made for residents have ranged from small
one-off grants to large payments of benefits and everything in
between. Additionally, L&Q's in-house tenancy sustainment
advisors supported 564 residents to manage their tenancies more
successfully. Alongside financial inclusion support, L&Q's
employment service helps people increase their incomes by finding
paid work. The team has helped over 500 people start work in the
last year.
-- Regulatory ratings are at G1 for governance and V2 for viability.
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"L&Q, and the wider housing sector, has experienced
significant financial pressures at a time when we are making record
levels of investment to improve the safety, quality and
sustainability of existing homes, transform services, deliver a
realistic year-on-year increase in new affordable homes, and
continue providing additional support to help improve the lives of
residents who need it most.
"These financial pressures mean we have to prioritise where
investment is directed, but through new approaches to working in
partnership with residents, we are ensuring the investment is
directed where residents need it most."
He added: "Our financial statements show an impairment of
GBP109m (2022: GBP90m), which has lowered operating surplus but has
no impact on EBITDA. The impairment represents the adverse
implications of build programme extensions as we address defects,
expected build cost inflation, tenure conversion, our decision to
land-bank sites and a higher cost of capital."
In the last financial year, L&Q completed 4,047 (2022:
4,157) new residential homes, of which 71% (2022: 61%) are for
social housing tenures. During the same period, building work
started on an additional 2,760 homes (2022: 2,103), with the
majority of these starts being later phases of existing
developments.
Mr Ahmed said: "Despite economic headwinds and market
uncertainty, we are committed to doing all we can to tackle the
housing crisis by building more high-quality homes. Homelessness
and overcrowding are two of the greatest issues facing Britain, and
they will only be alleviated by increasing the supply of social
housing.
"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.
"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."."
Reconciliation of audited financial statements against trading
update
On 10 May 2023, L&Q published its unaudited trading update
for the year ending 31 March 2023 that excluded any further
adjustments that are subject to audit review such as impairment and
provisions. In the trading statement, there was no provision made
for impairment, but guidance was given that L&Q estimated
impairment to be in the range of GBP80m to GBP100m.
Following the completion of the audit, the following adjustments
have been made compared to the trading statement:
-- A GBP84m impairment on fixed assets, GBP26m impairment on
current assets under development and GBP1m impairment release on
joint ventures schemes that increases operating costs and reduces
operating surplus and surplus after tax by GBP109m. There is no
impact on EBITDA.
-- A GBP15m net increase in provision for build defect
liabilities that increases operating costs and reduces EBITDA,
operating surplus and surplus after tax by GBP15m.
-- A decline in the change in value of investment properties of
GBP85m against GBP83m shown in the trading statement decreasing
operating surplus and surplus after tax by GBP2m. There is no
impact on EBITDA.
-- A GBP1m increase in depreciation that increases operating
costs and reduces operating surplus and surplus after tax by GBP1m.
There is no impact on EBITDA
-- A GBP2m reduction in capitalised major repairs that increases
EBITDA by GBP2m. There is no impact on operating surplus and
surplus after tax.
-- Tax credit on surplus on ordinary activities of GBP25m
against an initial estimate of GBP22m in the trading statement
increasing surplus after tax by GBP3m.
The following table discloses the impact that these adjustments
have had on applicable financial measures disclosed in the trading
statement:
Financial Measure Unaudited Trading Update for the Audited Financials for the period Change
period ending 31 March 2023 ending 31 March 2023
-------------------------- -------------------------------------- --------------------------------------
Operating Surplus GBP289m GBP162m (GBP127m)
Surplus after Tax GBP164m GBP40m (GBP124m)
EBITDA(1) GBP326m GBP313m (GBP13m)
EBITDA margin(2) 23% 22% (1%)
EBITDA interest cover(3) 176% 169% (7%)
Gross debt to EBITDA(4) 16.5x 17.2x 0.7x
-------------------------- -------------------------------------- -------------------------------------- ----------
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 / net cash interest paid
(4) Gross debt / EBITDA
ENDS
This update may contain certain forward-looking statements
reflecting, among other things, our current views on markets,
activities and prospects. Actual outcomes may differ materially.
Such statements are a correct reflection of our views only on the
publication date and no representation or warranty is given in
relation to them, including as to their completeness or accuracy or
the basis on which they were prepared.
For further information, please contact:
investors@lqgroup.org.uk
James Howell, Head of External Affairs 020 8189 1596
www.lqgroup.org.uk
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END
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