REG - London & Quadrant - Trading Statement
London & Quadrant Housing Trust Trading Update for the year ending 31 March 2021
London & Quadrant Housing Trust ('L&Q') is today issuing its consolidated trading update for the year ended 31 March 2021 ('2021'). All comparatives are to L&Q's consolidated audited prior year equivalent period being the year ended 31 March 2020 ('2020').
HIGHLIGHTS
· There are 118,181 units in management (as at 31 March 2020: 115,003)
· L&Q has completed 2,699 residential homes (2020: 2,439)
· Turnover was £1,051m (2020: £915m)
· EBITDA1 was £382m (2020: £303m)
· EBITDA margin2 was 31% (2020: 26%)
· EBITDA margin (excluding sales)3 was 49% (2020: 42%)
· Gross sales margin4 was 18% (2020: 17%)
· Net sales margin5 was 10% (2020: 13%)
· EBITDA / interest cover6 was 260% (2020: 193%)
· EBITDA social housing lettings interest cover7 was 182% (2020: 137%)
· Operating surplus was £313m (2020: £279m)
· Debt to assets8 was 41% (2020: 41%)
· Gross Debt / EBITDA9 was 14.4x (2020: 18.5x)
· Sales as a % of turnover10 was 47% (2020: 46%)
Commenting on the results Waqar Ahmed, Group Director, Finance said:
"L&Q's preliminary unaudited results show EBITDA at £382m, a 26% year-on-year increase and net debt at £5,385m, a £45m year-on-year decrease. We have delivered a material improvement in EBITDA margins, interest coverage and debt metrics that are ahead of Q3 guidance and reflect stronger than expected financial performance during the Covid-19 pandemic, particularly in relation to completions, sales and rent arrears.
Available liquidity at greater than £1.1bn demonstrates that we have been successful in implementing prudent measures to conserve cash flows. Our strong liquidity position leaves us well placed to address future external uncertainty that is supported by the strength of our balance sheet and the financial resilience and flexibility that we have demonstrated.
Despite the on-set of the Covid-19 pandemic, housing completions at 2,699 (2020: 2,439) are up 11% year-on-year of which 57% (2020: 49%) are for social housing tenures which further demonstrates our commitment to our social purpose and to lower our risk profile. While the pandemic has impacted our repairs and maintenance service, we invested £186m (2020: £231m) in our residents' homes including £25m (2020: £35m) implementing additional fire measures. The expectation, as reflected in our forward guidance for the year ending 31st March 2022 is that we divert a greater level of expenditure towards our resident's existing homes as we implement our five year corporate strategy that sets out how we will put our existing customers first, ensuring that their homes are safe, high quality and supported by excellent services in thriving communities."
FORWARD GUIDANCE FOR THE YEAR ENDING 31ST MARCH 2022
The following assumes that current market conditions continue.
We project EBITDA to be in the range of £340m to £360m and gross capital expenditure11 to be in the range of £900m to £1bn. Included within our EBITDA projections are c.£30m of costs assigned to conduct fire remedial and safety works. Our projections for surplus after tax are expected to be in the range of £230m to £250m. Net debt is expected to be in the range of £5.7bn to £5.8bn.
Financial Metrics
Forward Guidance to 31 March 2022
EBITDA margin2
26%
EBITDA margin (excluding sales)3
40%
Net sales margin5
11%
EBITDA interest cover6
233%
Social housing lettings EBITDA interest Cover7
152%
Debt to assets8
43%
Gross debt to EBITDA9
16x
Sales as a % of turnover10
48%
HOUSING COMPLETIONS
L&Q, including joint ventures, has completed 2,699 (2020: 2,439) residential homes in the financial year. This comprises of 1,556 (2019/20: 1,188) completions for social housing tenures and 1,143 (2020: 1,251) completions for market tenures. During that same time 3,818 new build residential homes commenced on site (2020: 3,945).
DEVELOPMENT PIPELINE
L&Q, including joint ventures, is operating from 185 (2020: 158) active sites. L&Q has approved an additional 1,994 residential homes during the financial year bringing total homes in the approved development pipeline to 32,482 (2020: 29,504), of which 64% are currently on site, representing a significant investment in new supply and affordable output. Of the homes approved in the development pipeline 60% are for social housing tenures and 40% are for market tenures. L&Q holds a further potential 81,568 (2020: 70,614) 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 £5.2bn (2019/20: £5.3bn) of which £4.5bn (85%) is currently committed (2020: £4.6bn).
UNAUDITED FINANCIALS
The unaudited financials exclude further adjustments that are subject to audit review:
Statement of Comprehensive Income
2021
(£m)
2020
(£m)
Change
Turnover
Non-sales
683
645
Sales
368
270
1,051
915
15%
Operating costs and cost of sales
Non-sales
(488)
(504)
Sales
(350)
(228)
(838)
(732)
14%
Surplus on disposal of fixed assets and investments
59
64
Share of profits from joint ventures
37
25
Change in value of investment property
4
7
Operating surplus
313
279
23%
Net interest charge
(100)
(117)
Other finance income/ (costs)
(2)
16
Taxation
(1)
1
Pre-exceptional surplus for the period after tax
210
179
17%
EBITDA and Net Cash Interest Paid
2021 (£m)
2020 (£m)
Change
Operating surplus
313
279
Change in value of investment property
(4)
(7)
Amortised government grant
(24)
(24)
Depreciation
97
91
Impairment
30
24
Capitalised major repairs
(30)
(61)
EBITDA
382
303
26%
Net interest charge
(100)
(117)
Capitalised interest
(48)
(42)
Net cash interest paid
(148)
(159)
(11%)
Statement of Financial Position
2021 (£m)
2020 (£m)
Change (£m)
Housing properties
10,855
10,555
330
Other fixed assets
78
81
(3)
Investments
1,590
1,622
(32)
Net current assets
512
926
(414)
Total assets less current liabilities
13,061
13,184
(123)
Loans due > one year
5,152
5,528
(376)
Unamortised grant liabilities
2,130
2,105
25
Other long term liabilities
342
324
18
Capital and reserves
5,437
5,227
210
Total non-current liabilities and reserves
13,061
13,184
(123)
Non-Sales Activities
2021
(£m)
2020
(£m)
Change (£m)
Net rents receivable
630
590
40
Charges for support services
10
9
1
Amortised government grants
24
24
-
Other income
19
22
(3)
Turnover
683
645
38
Management costs
(59)
(64)
5
Service costs
(89)
(80)
(9)
Maintenance costs
(156)
(172)
16
Support costs
(13)
(10)
(3)
Depreciation & impairment
(121)
(103)
18
Other costs
(50)
(75)
25
Operating costs
(488)
(504)
16
Surplus on disposal of fixed assets
59
64
(5)
Operating surplus
254
205
49
Sales Activities
The cost of sales is inclusive of impairment, capitalised interest and overhead costs:
2021 (£m)
2020 (£m)
Change (£m)
Property sales income
277
177
100
Land sales income
91
93
(2)
Turnover from sales (excluding JV's)
368
270
98
Cost of property sales
(247)
(150)
(97)
Cost of land sales
(64)
(63)
(1)
Operating costs
(39)
(15)
(24)
Total costs (excluding JV's)
(350)
(228)
(122)
Operating Surplus (excluding JV's)
18
42
(24)
Joint venture turnover
218
263
(45)
Joint venture cost of sales
(178)
(228)
50
Joint venture operating costs
(3)
(10)
7
Share of profits from joint ventures
37
25
12
AVERAGE SELLING PRICE
The average selling price, including JV's, for outright market sales during the financial year to date was £495k (2020: 612k) of which 63% were conducted under Help to Buy (2020: 74%). The average selling price of first tranche shared ownership sales during the financial year to date was £427k (2020: 387k) with an average first tranche sale of 33% (2020: 34%).
SALES MARGINS
The cost of sales is inclusive of impairment, capitalised interest and overhead costs:
Shared
Owner-
ship
Outright
Sales (Non-JV)
Land Sales
Outright Sales (JV's)
2021
2020
Change
(£m)
(£m)
(£m)
(£m)
(£m)
(£m)
Turnover
66
211
91
218
586
533
53
Cost of sales
(54)
(193)
(64)
(178)
(489)
(441)
(48)
Gross profit
12
18
27
40
97
92
11
Gross margin
18%
9%
30%
18%
18%
17%
1%
Operating costs
(5)
(18)
(16)
(3)
(42)
(25)
(17)
Operating surplus
7
-
11
37
55
67
(12)
Net margin
11%
2%
13%
17%
10%
13%
(3%)
UNSOLD STOCK
As at 31st March 2021, L&Q, including joint ventures, held 575 completed homes as unsold stock with a projected revenue of £116m. Projected revenue for shared ownership assumes a first tranche sale of 25%. Of the total unsold stock, 31% has been held as stock for less than one month.
L&Q's forward order book excluding joint ventures consists of 65 exchanged sales with projected revenue of £9m and 215 reservations with projected revenue of £49m.
Tenure
Projected Revenue (£m)
No. of Units
<1 Month
1-3 Months
3-6 Months
6-12 Months
>12 Months
Shared Ownership
46
377
134
73
78
60
32
Commercial units
2
1
0
0
0
0
1
Outright Sale (non-JV's)
38
91
21
2
13
0
55
Total excluding JV's
86
469
155
75
91
60
88
Outright Sale (JV's)
30
106
25
34
19
5
23
Total Joint Ventures
30
106
25
34
19
5
23
Total Unsold Stock
116
575
180
109
110
65
111
NET DEBT AND LIQUIDITY
As at 31 March 2021, net debt (excluding derivative financial liabilities) was £5,385m (as at 31 March 2020: £5,430m) and available liquidity within the group in the form of committed un-drawn revolving credit facilities and non-restricted cash was at £1,159m (as at 31 March 2020: £606m). Approximately 54% of L&Q's loan facilities and 65% of drawn loan facilities are at a fixed cost.
UNENCUMBERED ASSETS
2021
2020
No. of units under management
118,181
115,003
No. of social housing units provided as collateral against debt facilities
(60,085)
(55,013)
No. of private rented units provided as collateral against debt facilities
(1,107)
(1,107)
Total no. of unencumbered units under management
56,989
58,833
% of units under management held as collateral against debt facilities
52%
49%
Unencumbered asset ratio12
44%
42%
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+/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 / turnover from sales including joint ventures
5 Operating surplus from sales / 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 future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.
For further information, please contact:
James Howell, Head of External Affairs 020 8189 1596
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