London & Quadrant Housing Trust Trading Update for the period ending 31 December 2020
London & Quadrant Housing Trust ('L&Q') is today issuing its consolidated trading update for the nine months ended 31 December 2020 ('2020 Q3').
All statement of comprehensive income comparatives are to L&Q's consolidated unaudited prior year equivalent period being the nine months ended 31 December 2019 ('2019 Q3') and include the trading activities of Trafford Housing Trust ('THT') that was acquired by L&Q on 1 October 2019.
Highlights:
· There are 116,860 units in management (as at 31 March 2020: 115,003)
· L&Q has completed 1,763 residential units (2019 Q3: 1,997)
· Turnover was £689m (2019 Q3: £638m)
· EBITDA1 was £301m (2019 Q3: £214m)
· EBITDA margin2 was 37% (2019 Q3: 25%)
· EBITDA margin (excluding sales)3 was 56% (2019 Q3: 40%)
· Gross sales margin4 was 15% (2019 Q3: 15%)
· Net sales margin5 was 7% (2019 Q3: 7%)
· EBITDA / interest cover6 was 271% (2019 Q3: 180%)
· EBITDA social housing lettings interest cover7 was 206% (2019 Q3: 130%)
· Operating surplus was £270m (2019 Q3: £215m)
· Debt to assets8 was 42% (2019 Q3: 43%)
· Sales as a % of turnover10 was 38% (2019 Q3: 44%)
Commenting on the results Waqar Ahmed, Group Director, Finance said:
"Our Q3 results provide us with the confidence to improve our forward guidance metrics for the financial year ending 31 March 2021. We expect EBITDA to be in a range of £325m to £350m (Q2: £300m to £325m) and net debt to be in the range of £5.6bn to £5.7bn (Q2: £5.8bn to £5.9bn). Our revised projections reflect stronger than expected operational performance during the Covid-19 pandemic, particularly in relation to completions, sales and rent arrears. Our projections also reflect the considerable progress that we have made against our stated objective to conserve cash flows through a reduction in capital and operating expenditure.
Available liquidity at greater than £1.1bn continues to demonstrate our ability to generate cash flow that provides financial resilience and flexibility. Our strong liquidity position leaves us well placed to address future external uncertainty that is supported by the strength of our balance sheet. The release of our new five-year strategy under the leadership of Fiona Fletcher-Smith, appointed as Chief Executive on 11 January 2021, will set out how we will put existing customers first, ensuring that their homes are safe, high quality and supported by excellent services and thriving communities. We have no intention of stopping building homes - they are core to our social mission - but the pace of delivery will ease in the short term."
Forward Guidance to the year ending 31 March 2021
The following remains subject to uncertainty on future business disruption caused by Covid-19 and assume current market conditions continue for the remainder of the financial year; and that there are no further imposed lockdowns that create disruption to our construction sites.
We project EBITDA to be in the range of £325m to £350m (Q2: £300m to £325m) and capital expenditure11 to be in the range of £550m to £600m (Q2: £575m to £625m). Included within our EBITDA projections are £27m (Q2: £15m) of costs assigned to conduct fire remedial and safety works. Our projections for surplus after tax are expected to be in the range of £225m to £240m (Q2: £200m to £215m). Net debt is expected to be in the range of £5.6bn to £5.7bn (Q2: £5.8bn to £5.9bn).
Financial Metrics | Forward Guidance to 31 March 2021 |
EBITDA margin2 | 28% |
EBITDA margin (excluding sales)3 | 45% |
Net sales margin5 | 11% |
EBITDA interest cover6 | 249% |
Social housing lettings EBITDA interest Cover7 | 179% |
Debt to assets8 | 43% |
Gross debt to EBITDA 9 | 15.3x |
Sales as a % of turnover10 | 49% |
Housing Completions
L&Q, including joint ventures, has completed 1,763 (2019 Q3: 1,997) residential units in the financial year. This comprises of 988 (2019 Q3: 982) completions for social housing tenures and 775 (2019 Q3: 1,015) completions for market tenures. During that same time 2,159 new build residential units commenced on site (2019 Q3: 2,454).
Development Pipeline
L&Q, including joint ventures, is operating from 178 (2019 Q3: 169) active sites. L&Q has approved an additional 1,998 residential units during the financial year bringing total units in the approved development pipeline to 31,916 (2019 Q3: 50,937). Of the units approved in the development pipeline 61% are for social housing tenures and 39% are for market tenures. Some 67% of the approved pipeline (21,314 units) is on site (2019 Q3: 39%). L&Q holds a further potential 72,799 (2019 Q3: 58,900) 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 £5.3bn (2019 Q3: £6.7bn) of which £4.2bn (79%) is currently committed (2019 Q3: £5.6bn).
Unaudited Financials
The unaudited financials exclude further adjustments that are subject to audit review:
Statement of Comprehensive Income | 2020 Q3 | 2019 Q3 | Change |
Turnover | |||
Non-sales | 515 | 477 | |
Sales | 174 | 161 | |
689 | 638 | 8% | |
Operating costs and cost of sales | |||
Non-sales | (304) | (333) | |
Sales | (173) | (152) | |
(477) | (485) | (2%) | |
Surplus on disposal of fixed assets and investments | 37 | 44 | |
Share of profits from joint ventures | 21 | 18 | |
Change in value of investment property | - | (1) | |
Operating surplus | 270 | 214 | 26% |
Net interest charge | (75) | (89) | |
Other finance income/ (costs) | - | (5) | |
Taxation | - | 1 | |
Surplus for the period after tax | 195 | 121 | 54 |
Capitalised Interest | (36) | (30) |
Statement of Financial Position | 2020 Q3 (£m) | 31 March 2020 | Change (£m) |
Housing properties | 10,721 | 10,555 | 166 |
Other fixed assets | 77 | 81 | (4) |
Investments | 1,644 | 1,622 | 22 |
Net current assets | 799 | 926 | (127) |
Total assets less current liabilities | 13,241 | 13,184 | 57 |
Loans due > one year | 5,376 | 5,528 | (152) |
Unamortised grant liabilities | 2,123 | 2,105 | 18 |
Other long term liabilities | 320 | 324 | (4) |
Capital and reserves | 5,422 | 5,227 | 195 |
Total non-current liabilities and reserves | 13,241 | 13,184 | 57 |
Non-Sales Activities
Activity | 2020 Q3 (£m) | 2019 Q3 (£m) | Change (£m) |
Net rents receivable | 475 | 436 | 39 |
Charges for support services | 8 | 7 | 1 |
Amortised government grants | 18 | 18 | - |
Other income | 14 | 16 | (2) |
Turnover | 515 | 477 | 38 |
Management costs | (43) | (42) | (1) |
Service costs | (66) | (59) | (7) |
Maintenance costs | (97) | (122) | 25 |
Support costs | (10) | (7) | (3) |
Depreciation & impairment | (69) | (60) | (9) |
Other costs | (19) | (43) | 24 |
Operating costs | (304) | (333) | 29 |
Surplus on disposal of fixed assets | 37 | 44 | (7) |
Operating surplus | 248 | 188 | 60 |
Capitalised Major Repairs | (20) | (43) | 23 |
Sales Activities
The cost of sales is inclusive of capitalised interest and overhead costs:
Activity | 2020 Q3 (£m) | 2019 Q3 (£m) | Change (£m) |
Property sales income | 143 | 127 | 16 |
Land sales income | 31 | 34 | (3) |
Turnover from sales (excluding JV's) | 174 | 161 | 13 |
Cost of property sales | (131) | (109) | (22) |
Cost of land sales | (22) | (20) | (2) |
Operating costs | (20) | (23) | 3 |
Total costs (excluding JV's) | (173) | (152) | (21) |
Operating Surplus (excluding JV's) | 1 | 9 | (8) |
Joint venture turnover | 138 | 220 | (82) |
Joint venture cost of sales | (112) | (193) | 81 |
Joint venture operating costs | (5) | (9) | 4 |
Share of profits from joint ventures | 21 | 18 | 3 |
Average Selling Price
The average selling price, including JV's, for outright market sales during the financial year to date was £488k (2019 Q3: £524k) of which 50% were conducted under Help to Buy (2019 Q3: 70%). The average selling price of first tranche shared ownership sales during the financial year to date was £435k (2019 Q3: £384k) with an average first tranche sale of 36% (2019 Q3: 34%).
Sales Margins
The cost of sales is inclusive of capitalised interest and overhead costs:
Activity | Shared Owner-ship (£m) | Outright Sales (Non-JV) (£m) | Land Sales (£m) | Outright Sales (JV's) (£m) | 2020 Q3 (£m) | 2019 Q3 (£m) | Change |
Turnover | 34 | 109 | 31 | 138 | 312 | 381 | (69) |
Cost of sales | (29) | (102) | (22) | (112) | (265) | (322) | 57 |
Gross profit | 5 | 7 | 9 | 26 | 47 | 59 | (12) |
Gross sales margin | 14% | 6% | 29% | 19% | 15% | 15% | - |
Operating costs | (2) | (7) | (11) | (5) | (25) | (32) | 7 |
Operating surplus | 3 | - | (2) | 21 | 22 | 27 | (5) |
Net sales margin | 9% | - | (6%) | 15% | 7% | 7% | - |
Unsold Stock
As at 31 December 2020, L&Q, including joint ventures, held 686 completed units as unsold stock with a projected revenue of £207m. Projected revenue for shared ownership assumes a first tranche sale of 25%. Of the total unsold stock, 52% have been held as stock for less than one month.
L&Q's forward order book excluding joint ventures consists of 74 exchanged units with projected revenue of £29m and 281 reservations with projected revenue of £63m.
Tenure | Projected Revenue (£m) | No. of Units | <1 Month | 1-3 Months | 3-6 Months | 6-12 Months | >12 Months |
Shared Ownership | 40 | 321 | 167 | 27 | 61 | 17 | 49 |
Outright Sale (non-JV's) | 92 | 179 | 65 | 25 | 6 | 83 | |
Total excluding Joint Ventures | 132 | 500 | 232 | 52 | 61 | 23 | 132 |
Outright Sale (JV's) | 75 | 186 | 122 | 33 | 3 | 8 | 20 |
Total Joint Ventures | 75 | 186 | 122 | 33 | 3 | 8 | 20 |
Total Unsold Stock | 207 | 686 | 354 | 85 | 64 | 31 | 152 |
Net Debt and Liquidity
As at 31 December 2020, net debt (excluding derivative financial liabilities) was £5,532m (as at 31 March 2020: £5,430m) and available liquidity within the group in the form of committed un-drawn revolving credit facilities and non-restricted cash was at £1,109m (as at 31 March 2020: £595m). Approximately 54% of L&Q's loan facilities and 64% of drawn loan facilities are at a fixed cost.
Unencumbered Assets
2020 Q3 | 31 March 2020 | |
No. of units under management | 116,860 | 115,003 |
No. of social housing units provided as collateral against debt facilities | (60,085) | (55,013) |
No. of private rented units provided as collateral against debt facilities | (1,107) | (1,107) |
Total no. of unencumbered units under management | 55,668 | 58,883 |
% of units under management held as collateral against debt facilities | 52% | 49% |
Unencumbered asset ratio12 | 42% | 41% |
L&Q Credit Ratings - as at date of trading statement release
Rating Agency | S&P | Moody's | Fitch |
Long-term credit ratings | A-/Stable | A3/Stable | A+/Negative |
Notes:
1 Operating surplus + depreciation and impairment - amortised government grant - 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 / turnover from sales including joint ventures
5 Operating surplus from sales / 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 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 0189 1596 |
END
Expert Introduction
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My expertise is demonstrated through my ability to interpret and analyze the financial information provided in the article, including metrics such as turnover, EBITDA, EBITDA margin, net sales margin, debt to assets ratio, and forward guidance projections. I can also provide insights into the impact of market conditions, operational performance, and strategic initiatives on the financial results and future outlook of the London & Quadrant Housing Trust.
Concepts in the Article
The article "London & Quadrant Housing Trust Trading Update for the period ending 31 December 2020" contains several key concepts related to financial metrics, forward guidance, housing completions, development pipeline, financial statements, sales activities, net debt, liquidity, and credit ratings. Let's explore these concepts in detail.
Financial Metrics and Forward Guidance
- Turnover
- EBITDA
- EBITDA margin
- Net sales margin
- Debt to assets
- Forward guidance projections for EBITDA, net debt, and capital expenditure
- EBITDA interest cover and social housing lettings EBITDA interest cover
- Gross debt to EBITDA
- Sales as a % of turnover
Housing Completions and Development Pipeline
- Number of completed residential units for social housing and market tenures
- New build residential units commenced on site
- Active development sites
- Approved development pipeline for social housing and market tenures
- Potential strategic land plots
- Projected cost of the development pipeline
Unaudited Financials
- Statement of Comprehensive Income
- Statement of Financial Position
- Non-sales activities
- Sales activities
- Average selling price
- Sales margins
- Unsold stock
- Forward order book
Net Debt and Liquidity
- Net debt
- Available liquidity
- Unencumbered assets
- Credit ratings
Forward-Looking Statements
- Caution regarding forward-looking statements
These concepts provide a comprehensive view of the financial performance, operational activities, and future outlook of London & Quadrant Housing Trust as of the trading update for the period ending 31 December 2020. If you have specific questions or need further details on any of these concepts, feel free to ask!