TIDM17YE
RNS Number : 1649W
Platform HG Financing PLC
17 August 2022
17 August 2022
Platform HG Financing Plc
Platform Housing Group's Trading Statement for the Quarter to June 2022
The following report provides a trading update for Platform
Housing Group (Platform), covering unaudited financial performance,
development and treasury activities.
Highlights
-- Social housing lettings turnover growth of 6.6% to GBP61.6m (June-21: GBP57.8m)
-- High demand for shared ownership sales: margins up 3.7% to
22.1% (June-21: 18.4%) and unsold stock down by 131 to 63 (June-21:
194)
-- Marginal reduction in turnover due to the timing of shared
ownership completions driving overall turnover reduction of 2% to
GBP72.8m (June-21: GBP74.2m)
-- High cost inflation experienced in maintenance and development activities
-- Operating surpluses reduced 15.6% to GBP23.1m (June-21:
GBP27.4m), driven by reduction in sales activity and increased
maintenance costs
-- Arrears performing well, little impact noted from the end of UK Government support measures
-- Outlook margins for the year to March 2023 are expected to be
in line with those recorded in the quarter
At or for the quarter ended 30
June 2021 2022 Change
---------------------------------------- --------- --------- --------
Turnover GBP74.2m GBP72.8m -2.0%
Social housing lettings turnover GBP57.8m GBP61.6m 6.6%
Operating surplus(1) GBP27.4m GBP23.1m -15.6%
New homes completed 396 209 -47.2%
Investment in new and existing homes GBP51.7m GBP57.4m 11.1%
Share of turnover from social housing
lettings 77.9% 84.6% +6.7ppt
Social housing lettings margin(2) 43.9% 36.1% -7.8ppt
Current tenant arrears(3)(4) 2.9% 2.9% -
Gearing(2)(4) 41.4% 43.1% +1.7ppt
EBITDA-MRI interest cover(2) 282% 235% -47ppt
---------------------------------------- --------- --------- --------
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 30 June (as opposed to accumulated over the quarter to June)
Elizabeth Froude, Platform's CEO commented:
"As we start another financial year the background environment
continues to be inflationary and we have seen this crystalising in
the cost of all channels of expenditure for our homes. The shortage
of labour and materials has made it a slower start to the year than
we would have wanted, but we are now starting to see work backlogs
and development activity catching up. However, given the higher
costs of all elements in this area we have also seen the spend
figures coming in higher than anticipated.
That said our Social Housing Operating Margin remains among the
best in the sector and all business activities are still in a
strong place with voids declining, development starts picking up
and sales remaining strong in both margin and percentages of first
tranche.
We do however remain vigilant to the difficult times ahead and
maintain a watching brief on all controllable costs to mitigate any
erosion on our budgeted targets."
Financial review
Turnover
In the quarter to 30 June 2022 total turnover reduced by of 2%
to GBP72.8m (June-21: GBP74.2m).
Social housing lettings turnover increased by 6.6% to GBP61.6m
(June-21: GBP57.8m) as a result of inflationary rental increases
and a year-on-year increase in social housing units.
Turnover from shared ownership first tranche sales was GBP7.3m
in the quarter (June-21: 13.4m), with scheme completions down on
the prior year.
Turnover from all social housing activities of GBP69.2m
(June-21: GBP71.7m) accounted for 95.1% (June-21: 96.1%) of
Platform's total turnover in the period.
Surpluses and margins
Operating surpluses excluding fixed assets sales decreased by
15.6% to GBP23.1m (June-21: GBP27.4m) and operating surpluses
including sales decreased by 11.5% to GBP26.1m (June-21: GBP29.5m).
Surpluses from social housing lettings decreased by 12.4% to
GBP22.2m (June-21: GBP25.4m).
Operating margins were 31.7% excluding fixed asset sales
(June-21: 36.9%), 35.9% including sales (June-21: 39.8%) and 36.1%
from social housing lettings (June-21: 43.9%).
Operating surpluses and margins were adversely affected by
higher maintenance expenditures and void losses. Maintenance
expenditures have been affected by a shortage of labour
availability, impacting sub-contractor costs, cost inflation and
higher voids maintenance costs as work continues to reduce the
number of void properties. Revenue maintenance costs have increased
by 59% to GBP18.2m (June-21: GBP11.4m).
Shared ownership sales surpluses were GBP1.6m, representing 6.2%
of total operating surplus (June-21: GBP2.5m / 8.4%), with
associated margins of 22.1% (June-21: 18.4%).
Staircasing sales of shared ownership properties, where a
customer buys a further stake in their homes, experienced robust
surpluses and margins of GBP1.3m and 44% (June-21: GBP1.5m / 42%),
with total sales of 34 (June-21: 41).
The overall net surplus after tax, which incorporates interest
costs, was GBP13.9m (June-21: GBP18.6m), with the year-on-year
variance driven by the items outlined above, in combination with an
increase to interest costs of GBP1.3m.
Outlook
For the year to March 2023 turnover is expected to grow in line
with new units coming into management and inflationary rental
increases. Operating costs are expected to continue to be adversely
affected by higher maintenance costs. Overall margins are expected
to be in line with those for this quarter.
Development review
Developments during the quarter experienced some delays due to
supply chain disruption and planning delays. There are some
indications that materials shortages are beginning to soften but
building costs continue to rise along with inflation. Most new
build schemes on site are fixed price contracts, providing some
protection from increased costs in the short term, however, cost
increases are putting pressure on contractors and requests for
increased build costs both leading up to entering contract and
whilst on site continue to be experienced.
There were 209 homes completions in the quarter (30 June 2021:
396). Completions are down on the prior year due to timing, with
relatively higher completions expected in the coming quarters. Of
these, 50 (24%) were built for social rent, 89 (43%) for affordable
rent and 70 (33%) for shared ownership. Development expenditures
were GBP55m in the quarter (31 December 2020: GBP48m). At 30 June
2022, Platform owned a total of 47,281 homes (30 June 2021:
46,488).
There were 77 shared ownership sales in the quarter (30 June
2021: 158). The number of unsold units at the end of the quarter
was 63 (June 2021: 194), of which 51 were reserved.
Outlook
We are committed to developing in a prudent and sustainable way
and will not compromise financial strength. As such development
cost inflation, which is expected to persist in the short/medium
term, may affect the scale of our programme. In spite of this the
projected delivery for our identified and on-site programme for the
year remains unchanged at 1,100 to 1,200 homes.
Shared ownership sales are expected to pick up in the remainder
of the year, with targets unchanged following the first quarter.
There are currently no signs that the unfavourable economic
conditions are adversely affecting demand for shared ownership
homes. The cost of living squeeze may have a detrimental impact on
demand going forwards, however, it is also possible that those
looking to buy a home on an outright basis might be drawn towards
shared ownership when budgets are tighter.
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 completed the restructure of a GBP235m revolving credit
facility (RCF) with Lloyds Bank in the quarter. 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.
Debt and liquidity
Net debt was GBP1,198m (June-21: GBP1,096m). 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 GBP240m and
non-cash accounting adjustments of GBP14m.
Platform's weighted average cost of finance was 3.28% ( 30 June
2021 : 3.69%), benefitting from the low all-in rates achieved on
the two capital markets transactions in September 2021 (GBP250m
sustainability bonds) and December 2021 (GBP50m retained bonds)
2021.
Platform had sufficient liquidity as at 30 June 2022 (over
GBP775m 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 43.1% at 30 June 2022 (30 June 2021:
41.4%). 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 235% (30 June 2022: 282%). The
movement from the prior year is largely driven by increases to
maintenance costs due to high inflation. The ratio remains well
above Platform's target 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
three months ended 30 June 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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