REG - Peabody Cap - Peabody Trading Update

Marriott InternationalAnnouncement

14/07/2023 13:15

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RNS Number : 0815G  Peabody Capital PLC  14 July 2023

Peabody Group Trading Update (including Peabody Trust, Peabody Capital PLC,
Peabody Capital No.2 PLC)

Peabody Group announces the following unaudited information ahead of its
Annual Report for the year ended 31 March 2023 to be published during the
Summer.

Throughout the last 12-months, our priority has remained our residents and
their safety despite the challenging economic environment of high inflation,
rising interest rates and labour and material shortages. Margins have also
been put under pressure by these factors. But financial performance during the
year including from sales activity, has enabled us to continue to invest in
our existing homes. We have and will continue to allocate our resources
accordingly while realigning our organisation to get closer to residents
through locally focused services.

Turnover and sales performance

Peabody's turnover for the year exceeded £1.1bn.  Over £300m of this
related to market sales or first tranche shared ownership sales of new homes,
all built to a high energy efficiency EPC B standard. Our rents remain
substantially below market levels at an average of £127 per week and an
annual subsidy of over £600m. The impact of inflation on our underlying cost
base has inevitably led to pressure on margins.

Our sales performance was above expectations both in terms of the number and
value of homes sold. This reflects the importance of our land-led development
activity, focusing on location and the quality of the homes we offer for sale.
It is also important in helping to fund the development of new social rent
homes. We continue to closely monitor the impact of pricing, changing building
requirements and the cost of mortgages on our current development schemes as
we respond to the challenges that the sector faces.

Staircasing has continued to perform well, generating around £81m to be
reinvested back into improving the quality of our homes. This demonstrates the
strength of the shared ownership product.

The performance of sales and staircasing during the year has enabled us to
make the investment in our residents' homes that is needed to provide high
quality, safe, energy efficient homes for the future.

Investment in our existing homes

We now have over 107,000 homes under management within the Peabody Group. In
the 12 months to 31 March 2023, we invested £179m in our existing homes
including £66m on building safety. The building safety programme will
continue through 2023-24. This substantial investment in existing homes has
seen us focus on making our homes safer and more energy efficient. We have
also continued to invest in our proactive response to potential issues of
damp, mould and condensation in people's homes.

 

We secured £25m from the Government's Social Housing Decarbonisation Fund
(SHDF) which, together with our match funding of £25m, will enable us to
improve over 6,500 homes, making them more energy efficient, installing better
insulation, better ventilation and replacing doors and windows.

 

Over 75% of our homes are currently rated EPC C or above, but there is much
more to do. Further details will be published shortly in our Sustainability
Strategy, but we estimate that the cost of getting Peabody homes to achieve
EPC B could well exceed £1bn by 2050 and will constrain future development
capacity.

 

Investment in new homes

 

We invested over £550m in our new homes programme during the last year
completing 2,399 new homes and starting 2,376 homes.  Across the Group we
completed 604 homes at Social Rent, 251 for London Affordable Rent, 158 at
Affordable Rent and 861 for shared ownership, with an additional 525 market
sale homes generating a cross subsidy. Whilst still a substantial investment
building on our successful sales activity during the year, it is below
previous years. This reflects a rebalancing of our expenditure to focus on
existing homes and respond appropriately to the current economic environment.
We are carefully managing our development programme and maintaining
appropriate flexibility on the level of future spend and commitments.

Development and sales

Our unsold completed homes remain at low levels and continue to be subject to
tight monitoring.

 Unsold new homes - Peabody Group at 31 March 2023       Reserved /
                                                         exchanged       Available   Total
 3 - 6 months                                           19              59           78
 Over 6 months                                          60              95           155

 

Liquidity

We retain very strong access to liquidity, with £1.7 billion of cash and
undrawn facilities. This ensures we can continue to operate and deliver for
the benefit of our residents in challenging times. Limited levels of
amortisation mean that our liquidity will remain strong over the next 18
months and beyond.  During the year we acted decisively to protect ourselves
from further increases in interest rates with £286m in new hedging at an
average tenor of 6 years and an interest rate of 3.7%. Our gearing remains
very low for the sector, and we continue to have around 80% of our borrowing
on fixed rates. We retain over 34,000 unallocated or unencumbered properties
across the Group with a security value of around £4bn.

Ratings and certification

We are rated G1, V2 by the Regulator of Social Housing. We continue to hold an
A3 negative outlook rating from Moody's and an A- negative outlook rating from
S&P Global. During the year we achieved our second Ritterwald Certified
Sustainable Housing accreditation, with frontrunner status in two categories.

Transfer of engagements

The transfer of engagements of Catalyst Housing Limited into Peabody Trust
completed on 3 April 2023. This was followed by a similar exercise for
Rosebery Housing Association Limited into Town & Country Housing on 4
April. This consolidation of our structure allows us to move into the next
phase of transformation. We're now getting closer to residents through a
locally focused approach to service delivery, with more locally based teams
alongside better use of data and technology across our operations.

Note: Figures quoted in the update are based on unaudited management accounts,
which are subject to review and further adjustments.

Contact: Anthony Marriott, Director of Treasury & Corporate Finance or Ben
Blades, Assistant Director Corporate Affairs

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