REG - London & Quadrant - Trading Statement for FY Ending 31 March 2022
11/05/2022 11:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220511:nRSK0927La&default-theme=true
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 £1,113m (2021: £1,052m)
· EBITDA(1) was £354m (2021: £374m)
· 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 £315m (2021: £307m)
· 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 £354m (previous guidance of £330m-£350m) and a reduction in net debt
which is £66m lower year-on-year at £5.3bn (previous guidance of
£5.6bn-£5.7bn).
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 £71m (2021: £34m) and total
maintenance spend of £273m (2021: £192m).
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 YEAR ENDING 31 MARCH 2023
The following assumes that current market conditions continue.
We project EBITDA to be in the range of £330m to £350m and gross capital
expenditure(11) to be in the range of £900m to £950m. Included within our
EBITDA projections is a c.30% increase in total maintenance costs including
c.£45m 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 £260m to
£280m. Net debt is expected to be in the range of £5.6bn to £5.7bn.
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 £4.1bn (2021:
£5.2bn) of which £3.3bn (80%) is currently committed (2021: £4.5bn).
UNAUDITED FINANCIALS
The unaudited financials exclude further adjustments that are subject to audit
review. Included within the unaudited financials is a £76m provision for
impairment (£36m in relation to fixed assets that we intend to hold for
lettings and £40m 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 (£m) 2021 (£m) 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 (£m) 2021 (£m) 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 (£m) 2021 (£m) Change (£m)
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 (£m)
(£m) (£m)
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 (£m) 2021 (£m) Change (£m)
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 £492k (2021: £495k) 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 £404k
(2021: £427k) 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
(£m) (£m) (£m) (£m) (£m) (£m)
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 £213m. 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 £13m and 283 reservations with projected
revenue of £47m. Of the 331 of unsold stock in joint ventures, 71% are either
reserved or exchanged.
Tenure Projected Revenue (£m) No. of Homes <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
Shared Ownership 81 684 106 147 231 167 33
Outright Sale (non-JV's) 34 87 8 29 28 20 2
Total excluding JV's 115 771 114 176 259 187 35
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
£5,314m (2021: £5,380m) and available liquidity within the group in the form
of committed un-drawn revolving credit facilities and non-restricted cash was
at £1,179m (2021: £1,159m). 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 (mailto:investors@lqgroup.org.uk)
James Howell, Head of External Affairs
020 8189 1596
www.lqgroup.org.uk (http://www.lqgroup.org.uk)
END
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END TSTBKDBNFBKKQPD