TIDM44EB
RNS Number : 7474F
London & Quadrant Housing Trust
09 November 2022
London & Quadrant Housing Trust Trading Update for the
period ending 30 September 2022
London & Quadrant Housing Trust ('L&Q') is today issuing
its consolidated unaudited trading update for the six months ended
30 September 2022 ('2022 Q2'). All statement of comprehensive
income comparatives are to L&Q's consolidated unaudited prior
year equivalent period being the six months ended 30 September 2021
('2021 Q2').
HIGHLIGHTS
-- There are 120,270 units in management (as at 31 March 2022: 118,434)
-- L&Q has completed 2,151 new residential homes (2021 Q2: 1,997)
-- Turnover was GBP533m (2021 Q2: GBP535m)
-- EBITDA(1) was GBP164m (2021 Q2: GBP205m)
-- EBITDA margin(2) was 23% (2021 Q2: 32%)
-- EBITDA margin (excluding sales)(3) was 36% (2021 Q2: 51%)
-- Gross sales EBITDA margin(4) was 15% (2021 Q2: 17%)
-- Net sales EBITDA margin(5) was 9% (2021 Q2: 11%)
-- EBITDA interest cover(6) was 194% (2021 Q2: 276%)
-- EBITDA social housing lettings interest cover(7) was 140% (2021 Q2: 173%)
-- Operating surplus was GBP172m (2021 Q2: GBP193m)
-- Debt to assets(8) was 39% (2021 Q2: 41%)
-- Sales as a % of turnover(10) was 51% (2021 Q2: 48%)
Commenting on the results Waqar Ahmed, Group Director, Finance
said:
"L&Q's operating performance and unaudited Q2 trading
results are broadly line with expectations. To offset the latest
market inflation and interest rate assumptions, L&Q has lowered
its guidance on gross capital expenditure through to the year
ending 31 March 2023 resulting in a corresponding reduction in
guidance for net debt. However, we expect short-term interest costs
to be materially higher than our previous expectations meaning that
we have lowered our EBITDA / interest guidance.
In the year-to-date, EBITDA and margins from property sales
activities have delivered marginally ahead of expectations, most
notably due to higher than expected first tranche sales percentages
on shared ownership. However, sales volumes are below expectations
due to handover delays and EBITDA generated from land sales has
been impacted by timing delays. Those timing delays are expected to
be reversed by year end.
Whilst our EBITDA guidance for the remainder of the financial
year remains unchanged, wider economic uncertainty, a continuation
of financial market volatility and its impact on the mortgage
market, supply chain constrains and the pressures on cost of living
caused by inflation and interest rates have the potential to impact
our residents, those looking to purchase our properties and our
forward guidance.
During Q2 2022, L&Q followed up on its commitment to measure
and report on progress against specific sustainability objectives
in accordance with the Sustainability Reporting Standard for Social
Housing, a key part of our strategy to build transparency and
collaboration. L&Q's Sustainability Report and Performance
Tables can be found at the following link:
www.lqgroup.org.uk/about-landq/sustainability-at-lq "
FORWARD GUIDANCE FOR THE YEARING 31 MARCH 2023
The following includes adjustments made to our inflation and
interest rate forecasts for the remainder of the financial year
based on current market expectations.
We project EBITDA to be in the range of GBP330m to GBP350m
(unchanged) and gross capital expenditure(11) to be in the range of
GBP850m to GBP900m (previous guidance GBP900m to GBP950m). Included
within our EBITDA projections is a c.30% increase in total
maintenance costs including c.GBP45m of gross costs assigned to
conduct fire remedial and safety works (unchanged). Our projections
for surplus after tax are expected to be in the range of GBP260m to
GBP280m (unchanged). Net debt is expected to be in the range of
GBP5.5bn to GBP5.6bn (previous guidance GBP5.6bn to GBP5.7bn).
L&Q has lowered its forward guidance for EBITDA interest
cover (previous guidance 200% - 220%) and Gross debt to EBITDA
(previous guidance 17x - 18x). All other guidance for financial
metrics is unchanged from our last trading update.
Financial Metrics Forward Guidance to 31 March 2023
------------------------------------------------- ----------------------------------
EBITDA margin(2) 24% - 26%
EBITDA margin (excluding sales)(3) 35% - 37%
Gross sales EBITDA margin(4) 12% - 14%
EBITDA interest cover(6) 180% - 200%
EBTDA Social housing lettings interest Cover(7) 120% - 135%
Debt to assets(8) 40%
Gross debt to EBITDA(9) 16x - 17x
Sales as a % of turnover(10) c.48%
------------------------------------------------- ----------------------------------
HOUSING COMPLETIONS
L&Q, including joint ventures, has completed 2,151 (2021 Q2:
1,997) residential units in the financial year to date. This
comprises of 1,474 (2021 Q2: 1,227) completions for social housing
tenures and 677 (2021 Q2: 770) completions for market tenures.
During that same time 1,173 new build residential units commenced
on site (2021 Q2: 1,190).
DEVELOPMENT PIPELINE
L&Q, including joint ventures, is operating from 185 (2021
Q2: 199) active sites. L&Q has approved an additional 952 (2021
Q2: 257) residential units during the financial year to date
bringing total units in the approved development pipeline to 28,341
(2021 Q2: 31,739), of which 75% are currently on site. Of the units
approved in the development pipeline 55% are for social housing
tenures and 45% are for market tenures. L&Q holds a further
potential 75,551 (2021 Q2: 81,102) 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 GBP4.0bn (2021 Q2: GBP4.9bn) of which GBP3.4bn
(85%) is currently committed (2021 Q2: GBP4.1bn).
UNAUDITED FINANCIALS
The unaudited financials exclude further adjustments that are
subject to audit review.
Statement of Comprehensive Income
2022 Q2 (GBPm) 2021 Q2 (GBPm) Change
----------------------------------------------------- --------------- --------------- --------
Turnover
Non-sales 3 68 347
Sales 1 65 188
----------------------------------------------------- --------------- --------------- --------
533 5 35 -
Operating costs and cost of sales
Non-sales (272) (22 4 )
Sales (152) (173)
----------------------------------------------------- --------------- --------------- --------
(424) (39 7 ) 7%
Surplus on disposal of fixed assets and investments 3 9 3 6
Share of profits from joint ventures 2 6 19
Change in value of investment property (2) -
----------------------------------------------------- --------------- --------------- --------
Operating surplus 1 72 193 ( 11 %)
Net interest charge (62) (51)
Other finance income/ (costs) - (1)
Taxation - -
----------------------------------------------------- --------------- --------------- --------
Surplus for the period after tax 1 10 141 ( 22 %)
----------------------------------------------------- --------------- --------------- --------
EBITDA and Net Cash Interest Paid
2022 Q2 (GBPm) 2021 Q2 (GBPm) Change
---------------------------------------- --------------- --------------- -------
Operating surplus 1 72 19 3
Change in value of investment property 2 -
Amortised government grant (13) (1 2 )
Depreciation 5 1 4 6
Impairment ( 7) -
Capitalised major repairs (4 1 ) (2 1 )
---------------------------------------- --------------- --------------- -------
EBITDA 164 2 05 (20%)
---------------------------------------- --------------- --------------- -------
Net interest charge (6 2 ) (5 1 )
Capitalised interest (2 2 ) (2 3 )
---------------------------------------- --------------- --------------- -------
Net cash interest paid (8 4 ) (7 4 ) (14%)
---------------------------------------- --------------- --------------- -------
Statement of Financial Position
2022 Q 2 3 1 March 2022 Change
(GBPm)
(GBPm) (GBPm)
-------------------------------------------- --------- ----------------- --------
Housing properties 11,2 34 11,0 26 208
Other fixed assets 85 8 5 -
Investments 1,6 82 1,728 (46)
Net current assets 71 9 747 (28)
-------------------------------------------- --------- ----------------- --------
Total assets less current liabilities 13,7 20 13,586 134
-------------------------------------------- --------- ----------------- --------
Loans due > one year 5,543 5,521 22
Unamortised grant liabilities 2,073 2,083 (1 0)
Other long-term liabilities 407 39 5 12
Capital and reserves 5,69 7 5,5 87 110
-------------------------------------------- --------- ----------------- --------
Total non-current liabilities and reserves 13,7 20 13,586 134
-------------------------------------------- --------- ----------------- --------
Non-Sales Activities
2022 Q2 2021 Q2 Change (GBPm)
(GBPm) (GBPm)
---------------------------------------- --------- -------- --------------
Net rents receivable 3 37 321 16
Charges for support services 6 6 -
Amortised government grants 1 3 13 -
Other income 1 2 7 5
---------------------------------------- --------- -------- --------------
Turnover 3 68 3 47 21
--------- -------- --------------
Management costs (40) (30) (1 0 )
Service costs (50) (45) (5)
Maintenance costs (107) (84) (2 3 )
Support costs (6) (7) 1
Depreciation & impairment (51) (46) (5)
Other costs (18) (12) ( 6)
---------------------------------------- --------- -------- --------------
Operating costs (272) (224) (4 8 )
Surplus on disposal of fixed assets 3 9 3 6 3
Change in value of investment property (2) - ( 2)
---------------------------------------- --------- -------- --------------
Operating surplus 1 33 1 59 ( 26)
---------------------------------------- --------- -------- --------------
Arrears
Current tenant arrears for all tenures are at 5.85% (as at 31
March 2022: 5.61%).
Sales Activities
The cost of sales is inclusive of capitalised interest and
overhead costs:
2022 Q2 (GBPm) 2021 Q2 (GBPm) Change (GBPm)
-------------------------------------- --------------- --------------- --------------
Property sales income 1 46 155 (9)
Land sales income 1 9 33 (14)
-------------------------------------- --------------- --------------- --------------
Turnover from sales (excluding JV's) 1 65 1 88 (23)
Cost of property sales (1 16 ) (138) 22
Cost of land sales (26) (21) (5)
Operating costs (17) (14) ( 3)
Impairment 7 - 7
-------------------------------------- --------------- --------------- --------------
Total costs (excluding JV's) (1 52 ) (17 3 ) 21
-------------------------------------- --------------- --------------- --------------
Operating Surplus (excluding JV's) 13 1 5 (2 )
-------------------------------------- --------------- --------------- --------------
Joint venture turnover 198 1 16 82
Joint venture cost of sales (16 8 ) (94) (7 4 )
Joint venture operating costs (4) ( 3) ( 1)
Impairment of investment in JV's - - -
-------------------------------------- --------------- --------------- --------------
Share of profits from joint ventures 2 6 19 7
-------------------------------------- --------------- --------------- --------------
AVERAGE SELLING PRICE
The average selling price, including JVs, for outright market
sales during the financial year to date was GBP538k (2021 Q2:
GBP504k). 43% of outright market sales, excluding JVs, were
conducted under Help to Buy (2021 Q2: 83%). The average selling
price of first tranche shared ownership sales during the financial
year to date was GBP393k (2021 Q2: GBP407k) with an average first
tranche sale of 36% (2021 Q2: 33%). The lower than comparative
average selling price for first tranche shared ownership sales
reflects a larger percentage of sales being conducted in the
North-West of England.
SALES MARGINS
The cost of sales is inclusive of capitalised interest and
overhead costs but excludes impairment:
Shared Outright Land Sales Outright Sales (JV's) 2022 Q2 2021 Q2 Change
Owner- Sales (Non-JV)
ship
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
--------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Turnover 74 72 19 198 363 3 04 59
Cost of sales (6 3 ) (5 3 ) (26) (16 8 ) (3 10 ) (253) (5 7 )
--------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Gross profit 11 19 (7) 30 53 5 1 2
--------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Gross EBITDA margin 15% 2 6 % - 15% 15% 17% (2%)
--------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Operating costs (6) (6) (5) (4) (2 1 ) (17) (4)
--------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Operating surplus 5 13 (12) 26 32 34 (2)
--------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
Net EBITDA margin 7% 18% - 13% 9% 11% (2%)
--------------------- -------- ---------------- ----------- ---------------------- -------- --------- -------
UNSOLD STOCK
As at 30 September 2022, L&Q, including joint ventures, held
1,339 completed homes as unsold stock with a projected revenue of
GBP211m. Projected revenue for shared ownership assumes a first
tranche sale of 25%.
Of the total unsold stock, 15% has been held as stock for less
than one month and 80% is for shared ownership, a tenure where we
would expect to continue to show a higher comparative level of
unsold stock due to bulk handovers in short time periods and
limitations to pre-sale. In the year to date, L&Q has sold 527
shared ownership homes and handed over 494 shared ownership
homes.
L&Q's forward order book excluding joint ventures consists
of 91 exchanged homes with projected revenue of GBP23m and 294
reservations with projected revenue of GBP54m.
Tenure Projected Revenue No. of Homes <1 Month 1-3 Months 3-6 Months 6-12 Months >12 Months
(GBPm)
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Shared Ownership 118 1 ,074 1 62 1 70 368 27 8 96
Outright Sale
(non-JV's) 67 1 53 13 55 14 4 6 25
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total excluding
JV's 185 1,227 175 225 382 324 121
Outright Sale
(JCA's) 1 6 - - - 5 1
Outright Sale
(JCE's) 25 106 31 37 5 11 22
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Joint
Ventures 26 112 31 37 5 16 23
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
Total Unsold Stock 211 1,339 206 262 387 340 144
------------------- ------------------ ------------- --------- ----------- ----------- ------------ -----------
NET DEBT AND LIQUIDITY
As at 30 September 2022, net debt (excluding derivative
financial liabilities) was GBP5,309m (as at 31 March 2022:
GBP5,314m) and available liquidity within the group in the form of
committed un-drawn revolving credit facilities and non-restricted
cash was at GBP1,145m (as at 31 March 2022: GBP1,179m).
Approximately 54% of L&Q's loan facilities and 64% of drawn
loan facilities are at a fixed cost. L&Q has GBP10m of
refinancing risk within the next 12 months.
UNENCUMBERED ASSETS
2022 Q2 31 March 2022
---------------------------------------------------------------------------- --------- --------------
No. of units under management 120,270 118,434
No. of social housing homes provided as collateral against debt facilities (58,198) (59,258)
No. of private rented homes provided as collateral against debt facilities (1,295) (1,107)
---------------------------------------------------------------------------- --------- --------------
Total no. of unencumbered units under management 60,777 58,069
% of units under management held as collateral against debt facilities 49% 51%
Unencumbered asset ratio(12) 44% 44%
---------------------------------------------------------------------------- --------- --------------
L&Q CREDIT RATINGS
As at date of trading statement release:
Rating Agency S&P Moody's Fitch
------------------------- ------------ ------------ ------------
Long-term credit ratings A-/Negative A3/Negative A+/Negative
------------------------- ------------ ------------ ------------
L&Q's credit ratings have been placed on negative watch as a
direct result of the UK Sovereign rating being placed on negative
watch by S&P, Moody's and Fitch.
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 + impairment / turnover from sales
including joint ventures
(5) Operating surplus from sales + impairment / 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
the future outlook may be influenced by factors that could cause
actual outcomes and results to be materially different.
For further information, please contact:
investors@lqgroup.org.uk
James Howell, Head of External Affairs 020 8189 1596
www.lqgroup.org.uk
END
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