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REG - Peabody Capital No 2 - Trading Update

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RNS Number : 9467H  Peabody Capital No 2 PLC  29 November 2022

Peabody Group including Peabody Trust, Catalyst Housing Limited, Peabody
Capital PLC, Peabody Capital No.2 PLC

 

Trading update for the 6 months to September 30, 2022

 

This is an unaudited, consolidated trading update for Peabody Group including
Catalyst Housing Limited, Town & Country Housing, Peabody Capital Plc and
Peabody Capital No.2 Plc for the six months ending 30 September 2022.

 

On 1 April 2022 Peabody and Catalyst joined together, with Catalyst Housing
Limited becoming a subsidiary of Peabody Trust. The joining together of the
two organisations will create a responsive, locally focused organisation which
will be better connected with customers. The scale of the organisation
provides the scope to invest and innovate more in services, homes,
communities, technology and people. The legal process continues to run to
timetable, and it is expected that the transfer of engagements of Catalyst
Housing Limited into Peabody Trust will complete in April 2023.

 

The combination of high inflation, higher and rising interest rates, labour
and material shortages and an economic downturn represents a very challenging
time for our customers, for our colleagues and for Peabody as a whole. We
welcome the recent conclusion of the rent consultation process which provides
a financial base from which we can now plan to meet those challenges. Our
priority remains our customers and their safety. We will continue to allocate
our resources accordingly and are actively taking steps to prioritise our
investment as we respond to the challenging economic environment

 

Highlights for the Peabody Group

                                    6 months to September 2022  6 months to September 2021

 Highlights
 Homes in management                104,540                     67,732
 Homes completed in the period      1,004                       502
 Turnover (£m)                      515                         346
 Operating margin                   27%                         36%
 Surplus for the period (£m)        85                          87
 Drawn debt (£m)                    4,445                       2,963
 Available facilities (£m)          1,722                       1,116
 Cash (£m)                          113                         110

 

Eamonn Hughes, CFO of Peabody, made the following comments on the half-year
results:

 

"Our trading performance continues to be in-line with expectations and remains
robust despite challenging economic conditions. Arrears continue to hold at
normal levels, and we are working hard to help our customers access all of the
support available to them through the cost of living crisis. Our substantial
investment in building safety, maintenance and placemaking activities has
continued despite rising cost challenges. This resulted in an increase in
capital expenditure and operating costs leading to an expected reduction in
overall margin in the period. While lower than the corresponding period, sales
margins are at budgeted levels, and we expect to achieve our target sales
volumes for the full year.

 

Our liquidity position remains strong with access to substantial cash and
undrawn facilities post-merger. We continue to lead the way on ESG, highlights
in the last month include publishing our second report under the Sustainable
Reporting Standard for Social Housing and holding a successful jobs fair."

 

Continuing investment in our existing homes

 

So far this year we have invested £65m in our existing homes including £34m
on building safety despite the current challenges of inflation and labour and
material shortages. We continue to aim to strike the right balance between
completing the building safety programme and increasing regular investment in
existing homes. Ensuring customers are safe and comfortable in their home is a
priority and will continue to be so.

 

We also focusing our resources on damp, mould and condensation in our homes,
with a dedicated team to help manage complex cases, as well as proactive
reviews and audits, whilst piloting new approaches and utilising technology to
help solve recurring problems. There is more to do, and we are committed to
increasing planned investment in existing homes.

 

New homes development and sales

 

In response to the current economic environment, we are carefully managing our
development programme and maintaining appropriate flexibility on the level of
future spend and commitments. Our sales performance in the year to date has
been positive, margins on completed sales are consistent with the second half
of 2021-22 and our expectations. This includes completions on the first phase
of our regeneration of Thamesmead. At the 30 September, we had sold or
exchanged on more than three-quarters of the full year sales budget. We are
monitoring closely the impact of rising mortgage costs and movements in market
pricing on sales performance in what remains of this financial year.

 

Staircasing has continued to perform well, demonstrating the strength of the
shared ownership product and our investment in Joint Ventures in recent years
is also starting to provide benefits generating a surplus in the first half of
the year

 

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

 

 Unsold new homes - Peabody Group at 30 September 2022       Reserved /
                                                             exchanged       Available   Total
 3 - 6 months                                               21              67           88
 Over 6 months                                              42              95           137

Funding and liquidity

 

We retain very strong access to liquidity, with £1.8 billion of cash and
undrawn facilities to ensure that we can continue to operate and deliver for
the benefit of our residents in challenging times. We continue to have very
low gearing compared to the sector. Break costs associated with the merger
incurred in the period were £6m, substantially lower than originally
budgeted. We continue to have over 80% of our borrowing at fixed rates, giving
good protection against expected interest rate rises. Our average borrowing
cost is less than 4% demonstrating our ability to absorb increased borrowing
costs on our remaining floating rate debt.

 

Ratings update

 

In October both S&P Global and Moody's put Peabody's ratings (A- S&P
Global, A3 Moody's) on negative outlook, in response to their reassessment of
the outlook for the UK sovereign to negative.  Peabody continues to produce a
robust financial performance with a low level of gearing, high liquidity and a
strong balance sheet. We have built flexibility into our operations to respond
to current economic challenges, with appropriate mitigating actions,
underpinned by a robust business plan. We remain committed to holding a strong
credit rating.

 

Peabody continues to have a G1 (Governance) and V2 (Viability) rating from the
Regulator of Social Housing.

 

ESG

 

Peabody remains at the forefront of promoting ESG credentials for the sector.
In October we published our second detailed report under the Sustainable
Reporting Standard for Social Housing
https://www.peabodygroup.org.uk/media/16377/esg_report_2022.pdf
(https://www.peabodygroup.org.uk/media/16377/esg_report_2022.pdf)  including
information on both Peabody and Catalyst. We will shortly publish our revised
Sustainability Strategy.

 

Board and executive changes

 

Zebrina Hanley will leave the Peabody Trust Board on 30 November 2022.

Matthew Martin and Ann Bentley will join the Board on 1 December 2022.

 

Elly Hoult will join the Peabody executive team early in the New Year. Ash Fox
will step down from the Peabody executive team with effect from 30 November
2022 and Sarah Thomas in March 2023.

 

 

 

 

 

 Statement of Comprehensive Income - Peabody Group
                                                                                               6 months to September 2022                           6 months to September 2021

                                                                                               £m                                                   £m
 Turnover - from core operations                                                                                    383                                                  254
 Turnover - from sales                                                                                               132                                                92
 Turnover                                                                                                          515                                                  346
 Operating costs                                                                                                    299                                                  186
 Cost of sales                                                                                                       121                                                   80
 Surplus staircasing/disposal of fixed assets                                                                         42                                                   44
 Operating surplus                                                                                                   137                                                  124
 Net interest costs(3)                                                                                                 66                                                   37
 JV Surplus                                                                                                           14                                                       -
 Surplus for the period(2)                                                                    85

                                                                                                                                                   87

 Operating margin                                                                             27%                                                  36%
 Sales margin %                                                                               8%                                                   13%
 EBITDA - MRI %(1)                                                                            209%                                                 323%

 1 - operating surplus excluding depreciation and amortisation, less
 capitalised repairs / interest expense
 2 - revaluations of investment properties are performed at year end only

 3 - excludes £6m break costs incurred as a result of the merger process

 

Enquires

Please contact Anthony Marriott, Director of Treasury & Corporate Finance
at anthony.marriott@peabody.org.uk (mailto:anthony.marriott@peabody.org.uk)

 

 

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