TIDM17YE
RNS Number : 7603M
Platform HG Financing PLC
26 May 2022
26 May 2022
Platform HG Financing Plc
Platform Housing Group's Trading Statement for the quarter to March
2022
The following report provides a trading update for Platform
Housing Group (Platform), covering unaudited financial performance,
development and treasury activities.
Highlights
-- Strong turnover growth of 10% to GBP296.9m (20/21: GBP269.9m)
-- Increase in shared ownership sales volumes and values
demonstrating robust housing market in areas of operation - year to
March sales of 563 (20/21: 408)
-- Impacts of Covid-19 and Brexit experienced in maintenance and
development activities, affecting materials costs, labour
availability and completions
-- Operating surpluses reduced by 11% to GBP90m (20/21:
GBP101.2m) and net surplus reduced by 21% to GBP44.4m (20/21
GBP56.1m) driven by one-off depreciation and loan breakage
costs
-- Arrears performing well, little impact noted from the end of
Government support measures. Moving forward arrears expected to be
under pressure as customers are affected by rising inflationary
pressures
-- GBP235m sustainability linked revolving credit facility established
-- A+ (stable) rating reaffirmed by S&P
-- Outlook financials for the year to March 2023 expected to be in line with those for 2022
At or for the year ended 31 March 2021 2022 Change
---------------------------------------- ---------- ---------- -------
Turnover GBP269.9m GBP296.9m 10.0%
Operating surplus(1) GBP101.2m GBP90.0m -11.1%
New homes completed 909 1,174 29.2%
Investment in new and existing homes GBP207.7m GBP199.6m -3.9%
Share of turnover from social housing
lettings 83.48% 79.01% -4.47%
Social housing lettings margin(2) 42.90% 35.08% -7.82%
Current tenant arrears(3)(4) 3.12% 2.49% -0.63%
Gearing(2)(4) 41.90% 42.40% 0.50%
EBITDA-MRI interest cover(2) 218% 204.5% -13.5%
---------------------------------------- ---------- ---------- -------
Notes
(1) Surplus excluding gains on disposal of property, plant and equipment
(2) Regulator for Social Housing Value for Money metric; for more information go to https://www.gov.uk/government/publications/value-for-money-metrics-technical-note/value-for-money-metrics-technical-note-guidance-june-2020
(3) Current tenant arrears includes all general needs tenants
(this excludes shared ownership properties)
(4) Figures as at 31 March (as opposed to accumulated over the year to March)
Elizabeth Froude, Platform's CEO commented:
"Although our net surplus is down year on year, we close in a
strong and stable position. The main drivers of the decrease are
one off events such as debt breakage costs and re-calculation of
asset life cycles, generating a one off depreciation catch up
cost.
Our core business is delivering good surpluses and cash
generation, and our sales team have continued to maintain a high
level of reserves for any units not sold at the end of the year. We
also continue to acquire development sites to facilitate our new
homes aspirations and commitments to Homes England as a strategic
partner.
As we close a very variable year in terms of operating
environment, we, like many others, are dealing with a number of
challenges and whilst clearing maintenance backlogs, are also
managing increasingly difficult supply chains and cost increases
for our future property investment.
We continue to invest in enhancing core systems and customer
facing services whilst we are stepping up our asset investments to
achieve improved energy efficiency and absorbing the increasing
cost of maintenance and construction. At the same time we are
maintaining compliance with our financial golden rules to protect
our strong financial credit metrics.
Again I hope these results are received and seen as a good
out-turn in a difficult environment."
Financial review
Turnover
In the year to 31 March 2022 total turnover grew 10% to
GBP296.9m (20/21: GBP269.9m).
Social housing lettings turnover increased by 4.1% to GBP234.6m
(20/21: GBP225.3m) as a result of inflationary rental increases and
a year-on-year increase in social housing units.
Shared ownership first tranche sales continue to perform
strongly. Turnover from these sales was GBP9.3m in the quarter
(20/21: 10.7m), providing a full year figure of GBP48.8m, GBP16.7m
higher than the prior year (20/21: GBP32.1m).
Turnover from all social housing activities of GBP285.2m (20/21:
GBP259.4m) accounted for 96.1% (20/21: 96.1%) of Platform's total
turnover in the period.
Surpluses and margins
Operating surpluses excluding fixed assets sales decreased by
11.1% to GBP90m (20/21: GBP101.2m) and operating surpluses
including sales decreased by 9.8% to GBP99.4m (20/21: GBP110.2m).
Surpluses from social housing lettings decreased by 14.8% to
GBP82.3m (20/21: GBP96.6m).
Operating margins were 30.3% excluding fixed asset sales (20/21:
37.5%), 33.5% including sales (20/21: 40.8%) and 35.1% from social
housing lettings (20/21: 42.9%).
Operating surpluses and margins were adversely affected by
one-off depreciation charges, higher maintenance expenditures and
increased voids. Maintenance expenditures have been affected by a
shortage of labour availability, cost inflation and an element of
catch up to compensate for delayed programmes. In addition, the
prior year was characterised by subdued maintenance as activity was
curtailed during covid lockdowns, affecting the comparative
figures. Voids have been adversely affected by unusual peaks in
handbacks due to Covid lockdowns and delays in repairs caused by
labour shortages. Operating margins have also been affected by a
larger proportion of turnover being generated from shared ownership
sales (that have relatively lower margins).
Excluding GBP5.6m of one-off depreciation charges, the variances
in surpluses are as follows:
One-off Adjusted
Operating surpluses 2022 depreciation - 2022 2021 Movement Movement
GBP'm GBP'm GBP'm GBP'm GBP'm %
Excluding fixed asset
sales 90.0 5.6 95.5 101.2 -5.7 -5.6%
Including fixed asset
sales 99.4 5.6 105.0 110.2 -5.2 -4.7%
From social housing
lettings 82.3 5.6 87.9 96.6 -8.8 -9.1%
Shared ownership sales surpluses were GBP9.7m, representing 9.8%
of total operating surplus (20/21: 5.5%), with associated margins
of 19.8% (20/21: 19%).
Staircasing sales of shared ownership properties, where a
customer buys a further stake in their homes, had another strong
quarter with 39 sales completed, (20/21: 35), earning a surplus and
margin of GBP1.5m and 44% (20/21: GBP1.5m / 41%).
The overall net surplus after tax, which incorporates interest
costs, was GBP44.4m (20/21: GBP56.1m), with the year-on-year
variance driven by the items outlined above, in combination with
one-off loan breakage costs exceeding the equivalent prior year
cost by GBP2.3m.
Outlook
In the coming year turnover is expected to grow in line with new
units coming into management and inflationary rental increases.
Sales turnover is expected to be slightly lower than the year to
March 2022 due to lower volumes of homes available to sell. Voids
are expected to improve, with new staff recruited to help with the
backlog of maintenance required and maintenance costs are expected
to remain high as the cost of materials and labour continue to be
elevated.
Development review
Developments during the fourth quarter continued to progress
largely as projected, subject to minor planning and utilities
delays. There were 199 homes completions in the quarter (31 March
2021: 267). Of these, 60 (30%) were built for social rent, 74 (37%)
for affordable rent, 51 (26%) for shared ownership and a further 14
(7%) for other tenures (no homes were completed for outright sale).
Development expenditures were GBP40m in the quarter (31 December
2020: GBP47m). At 31 March 2022, Platform owned a total of 47,123
homes (31 March 2021: 46,151).
There were 106 shared ownership sales in the quarter (31 March
2021: 136), making a total for the year of 563 (31 March 2021:
408).
Shared ownership sales
Year to March Year to March
2022 2021
Quarter
1 158 46
Quarter
2 164 132
Quarter
3 135 94
Quarter
4 106 136
-------------- --------------
563 408
Unsold shared ownership units were 70 (31 March 2021: 206) of
which 47 were reserved. The level of unsold shared ownership units
has reduced consistently throughout the year due to a number of
successful initiatives, including earlier and more targeted
marketing campaigns, clear targets and enhanced listings.
Outlook
Platform's development strategy continues to be focused on
delivering quality, sustainable, land-led schemes, ensuring that
homes completed are fit for future generations to come. These
standards, in combination with a very competitive land market, have
resulted in a moderation of growth in supply in the next year, with
1,100 to 1,200 homes expected to be completed in the year to March
2023.
Sales are expected to continue to perform strongly, supported by
high levels of reservations off plan. Total volumes of sales are
expected to be lower in the coming year due to the level of
completions.
The Group does not invest in speculative land and has no actual
or expected material impairment in development sites.
Treasury review
Recent financing activity
Platform renewed its GBP1bn EMTN programme in the quarter (of
which GBP750m is still available). The programme is supported by a
Sustainable Finance Framework, enabling the Group to issue social,
green and sustainability bonds.
Shortly after the quarter end Platform completed the restructure
of a GBP235m revolving credit facility (RCF) with Lloyds Bank. As
part of the restructure the facility was linked to sustainability
targets that centre on the energy efficiency of Platform's new and
existing homes, and the proportion of employees enrolled in
apprenticeship programmes. If these targets are achieved Platform
will benefit from a margin reduction on that RCF borrowing.
Ratings activity
Platform is rated A+ (stable outlook) by both S&P and Fitch.
S&P reaffirmed the rating (
https://www.platformhg.com/our-ratings- ) in the quarter. In
addition, the EMTN programme was rated in line with the Group
rating (A+) by both agencies.
Debt and liquidity
Net debt was GBP1,178m (20/21: GBP1,094m). Net debt comprised
nominal values of GBP882m in bond issues, GBP80m in private
placements and GBP490m in term loan and revolving credit
facilities, partially offset by cash and equivalents of
GBP274m.
Platform's weighted average cost of finance was 3.28% ( 31 March
2021 : 3.40%), benefitting from the low all-in rates achieved on
the two capital markets transactions in September (GBP250m
sustainability bonds) and December (GBP50m retained bonds) 2021, in
addition to the repayment of a GBP33m legacy facility, which also
enhanced the flexibility and consistency of funding covenants.
Platform had sufficient liquidity as at 31 March 2022 (over
GBP800m including undrawn committed facilities and cash and cash
equivalents) to meet all its forecast needs until 2024 whilst
maintaining 18 months of liquidity (in line with policy), taking
into account projected operating cash flows, forecast investment in
new and existing properties and debt service and repayment
costs.
Financial ratios
Platform monitors its performance against various financial
ratios, including Value for Money metrics reported to the Regulator
of Social Housing and ratios it is required to comply with under
its financing arrangements.
Gearing, measured as the ratio of net debt to the net book value
of housing properties, was 42.4% at 31 March 2022 (31 March 2021:
41.9%). Gearing has increased in the last year due to new funding
required for development expenditures. Gearing was comfortably
within Platform's target of maintaining gearing below 50%.
EBITDA-MRI interest cover was 205% (31 March 2022: 218%). The
movement from the prior year is largely driven by increases to
maintenance costs due to high inflation and a catch up in repairs.
The ratio remains well above Platform's guideline minimum
(120%).
Outlook
Gearing and EBITDA-MRI interest cover ratios are expected to
remain well within Platform's targets. Some upwards pressure in
gearing and downwards pressure to interest cover is expected as
Platform pushes ahead with its strategic development and
maintenance objectives.
For more information please contact:
Investor enquiries
Ben Colyer - +44 7918 160990 / +44 1684 579 566
investors@platformhg.com
Media enquiries
media@platformhg.com
Disclaimer
These materials have been prepared by Platform Housing solely
for use in publishing and presenting its results in respect of the
nine months ended 31 March 2022.
These materials do not constitute or form part of and should not
be construed as, an offer to sell or issue, or the solicitation of
an offer to buy or acquire securities of Platform Housing in any
jurisdiction or an inducement to enter into investment activity. No
part of these materials, nor the fact of their distribution, should
form the basis of, or be relied on or in connection with, any
contract or commitment or investment decision whatsoever. Neither
should the materials be construed as legal, tax, financial,
investment or accounting advice. This information presented herein
does not comprise a prospectus for the purposes of Regulation (EU)
2017/1129 as it forms part of domestic law by virtue of the
European Union (withdrawal) Act 2018 (the UK Prospectus regulation)
and/or Part VI of the Financial Services and Markets Act 2000.
These materials contain statements with respect to the financial
condition, results of operations, business and future prospects of
Platform Housing that are forward-looking statements. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. There are a number of factors that could cause
actual results and developments to differ materially from those
expressed or implied by these forward-looking statements, including
many factors outside Platform Housing's control. Among other risks
and uncertainties, the material or principal factors which could
cause actual results to differ materially are: the general
economic, business, political and social conditions in the key
markets in which Platform Housing operates; the ability of Platform
Housing to manage regulatory and legal matters; the reliability of
Platform Housing's technological infrastructure or that of third
parties on which it relies; interruptions in Platform Housing's
supply chain and disruptions to its development activities;
Platform Housing's reputation; and the recruitment and retention of
key management. No representations are made as to the accuracy of
such forward looking statements, estimates or projections or with
respect to any other materials herein. Actual results may vary from
the projected results contained herein.
These materials contain certain information which has been
prepared in reliance on publicly available information (the "Public
Information"). Numerous assumptions may have been used in preparing
the Public Information, which may or may not be reflected herein.
Actual events may differ from those assumed and changes to any
assumptions may have a material impact on the position or results
shown by the Public Information. As such, no assurance can be given
as to the Public Information's accuracy, appropriateness or
completeness in any particular context, or as to whether the Public
Information and/or the assumptions upon which it is based reflect
present market conditions or future market performance. Platform
Housing does not make any representation or warranty as to the
accuracy or completeness of the Public Information.
These materials are believed to be in all material respects
accurate, although it has not been independently verified by
Platform and does not purport to be all-inclusive. The information
and opinions contained in these materials do not purport to be
comprehensive, speak only as of the date of this announcement and
are subject to change without notice. Except as required by any
applicable law or regulation, Platform Housing expressly disclaims
any obligation or undertaking to release publicly any updates or
revisions to any information contained herein to reflect any change
in its expectations with regard thereto or any change in events,
conditions or circumstances on which any such information is
based.
None of Platform Housing, its advisers nor any other person
shall have any liability whatsoever, to the fullest extent
permitted by law, for any loss arising from any use of the
materials or its contents or otherwise arising in connection with
the materials. No representations or warranty is given as to the
achievement or reasonableness of any projections, estimates,
prospects or returns contained in these materials or any other
information. Neither Platform nor any other person connected to it
shall be liable (whether in negligence or otherwise) for any
direct, indirect or consequential loss or damage suffered by any
person as a result of relying on any statement in or omission from
these materials or any other information and any such liability is
expressly disclaimed.
Any reference to "Platform" or "Platform Housing" means Platform
Housing Group Limited and its subsidiaries from time to time and
their respective directors, representatives or employees and/or any
persons connected with them.
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