Q4 Trading Statement

London & Quadrant Housing Trust
10 May 2024
 

London & Quadrant Housing Trust Trading Update for the period ending 31 March 2024

 

 

London & Quadrant Housing Trust ('L&Q') is today issuing its consolidated unaudited trading update for the twelve months ended 31 March 2024 ('2024'). All statement of comprehensive income comparatives are to L&Q's consolidated audited prior year equivalent period being the twelve months ended 31 March 2023 ('2023').

 

HIGHLIGHTS

 

·    There are 109,439 homes owned or managed (2023: 108,326)

·    L&Q has completed 2,955 new residential homes (2023: 4,047)

·    Turnover was £1,119m (2023: £1,176m)

·    EBITDA1 was £349m (2023: £313m)

·    EBITDA margin2 was 29% (2023: 22%)

·    EBITDA margin (excluding sales)3 was 40% (2023: 32%)

·    Gross sales EBITDA margin4 was 13% (2023: 19%)

·    Net sales EBITDA margin5 was 6% (2023: 10%)

·    EBITDA interest cover6 was 144% (2023: 169%)

·    EBITDA social housing lettings interest cover7 was 129% (2023: 132%)

·    Operating surplus was £366m (2023: £162m)

·    Debt to assets8 was 40% (2023: 40%)

·    Gross debt to EBITDA9 was 16.1x (2023: 17.4x) 

·    Sales as a % of turnover10 was 35% (2023: 48%)

 

Commenting on the results Waqar Ahmed, Group Director, Finance said:

 

"L&Q's preliminary unaudited results continues to reflect our stated objectives to divert a greater level of expenditure towards our resident's existing homes to address our strategic priorities of health & safety, quality of homes and improving services.

 

We invested £328m (2022: £378m) in our maintenance programme and began the first year of our c£3bn 15 year Major Works programme. This programme will improve the safety, comfort and environmental performance of our resident's homes, maintaining all our homes to the Decent Homes Standard and bringing up all homes to a minimum Energy Performance Certificate (EPC) C status. As part of our transformation programme, we entered into contracts for new housing and finance management systems which will enhance operational efficiency and the service we offer to our residents.

 

In the year, L&Q completed almost 3,000 new residential homes of which 68% (2023: 71%) are for social housing tenures. Due to higher mortgage rates, sales were subdued though demand remained stable for shared ownership. First tranche sales were maintained at 31% (2023: 35%). Sales as a percentage of overall turnover continued to fall and was 35% (2023: 48%).

 

EBITDA was higher year on year at £349m (2023: £313m) but lower than guidance as a result of further development defects and prolonged cost inflation. Our 2023 unaudited results exclude any provision for impairment that is subject to audit review. Our current estimate suggests that this could be in the range of £25m to £65m which will lower operating surplus but will not impact EBITDA.

 

We retained a well-capitalised balance sheet with net debt broadly stable at £5.4bn (2022: £5.3bn) and available liquidity of £1bn. We remain committed to lower our risk profile. The projected cost to complete our development pipeline continues to reduce and stands at £2.5bn (2023: £3.1bn). We are also lowering risk and improving our ability to offer more focussed customer service by divesting of some homes outside our core strategic areas of London and Manchester via our stock rationalisation programme.

 

FORWARD GUIDANCE FOR THE YEAR ENDING 31 MARCH 2025

 

We project operating surplus between £410m - £430m and EBITDA in the range of £320m to £340m. We forecast gross capital expenditure11 to be c. £560m, the peak in our medium-term projections. We expect to deliver c. 2,600 new residential homes of which c. 80% is expected to be for social housing tenures.

 

Financial Metrics

Forward Guidance to 31 March 2025

EBITDA margin2

29% - 31%

EBITDA margin (excluding sales)3

20% - 25%

Gross sales EBITDA margin4

c8%

EBITDA interest cover6

145% - 155%

EBTDA Social housing lettings interest Cover7

140% - 150%

Debt to assets8

<38%

Gross debt to EBITDA9

<15x

Sales as a % of turnover10

< 25%

 

HOUSING COMPLETIONS

L&Q, including joint ventures, has completed 2,955 (2023: 4,047) residential homes in the financial year. This comprises of 2,017 (2023: 2,892) completions for social housing tenures (68%) and 938 (2023: 1,155) completions for market tenures (32%). During that same time 813 new build residential homes commenced on site (2023: 2,760) with the majority of starts being later phases of existing developments.

DEVELOPMENT PIPELINE

L&Q, including joint ventures, is operating from 133 (2023: 161) active sites. L&Q has approved an additional 6 (2023: 1,222) homes during the financial year bringing total homes in the approved development pipeline to 21,209 (2023: 25,594), of which 83% are currently on site. Of the homes approved in the development pipeline 59% are for social housing tenures and 41% are for market tenures. L&Q holds a further potential 83,062 (2023: 76,610) 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 £2.5bn (2023: £3.1bn) of which £2.0bn (80%) is currently committed (2023: £2.6bn).

UNAUDITED FINANCIALS

The unaudited financials exclude further adjustments that are subject to audit review.

Statement of Comprehensive Income

 

2024  

(£m)

2023

 (£m)

Change

Non-sales

825

746


Sales

294

431


 

1,119

1,176

(5%)

Operating costs and cost of sales

 

 

 

Non-sales

(589)

(687)


Sales

(274)

(415)


 

(863)

(1,102)

 22%

Surplus on disposal of fixed assets and investments

118

152

 

Share of profits from joint ventures

8

19

 

Change in value of investment property

(16)

(83)

 

Net interest charge

(211)

(144)

 

Other finance income/ (costs)

(8)

(4)

 

Taxation

-

25

 

Surplus for the period after tax

147

40

268%

 

EBITDA and Net Cash Interest Paid

 

2024

 (£m)

2023

 (£m)

Change

Operating surplus

366

162


Change in value of investment property

16

83


Amortised government grant

(26)

(26)


Depreciation

102

99


Impairment

(9)

111


Capitalised major repairs

(100)

(117)


EBITDA

349

313

12% 

 

 

 

 

Net interest charge

(211)

(144)


Capitalised interest

(32)

(42)


Net cash interest paid

(243)

(186)

(31%) 

 

Statement of Financial Position

 

2024

(£m)

 2023

(£m)

Change

(£m)

Housing properties

11,581

11,354

227

Other fixed assets

87

88

(1)

Investments

1,652

1,569

83

Net current assets

362

174

188

Total assets less current liabilities

13,682

13,185

497

 

Loans due > one year

 

5,516

 

5,124

 

392

Unamortised grant liabilities

2,021

2,065

(44)

Other long-term liabilities

383

381

2

Capital and reserves

5,762

5,615

147

Total non-current liabilities and reserves

13,682

13,185

497

 

Non-Sales Activities

 

2024

 (£m)

2023

(£m)

Change (£m)

Net rents receivable

754

679

75

Charges for support services

12

12

-

Amortised government grants

26

26

-

Turnover

825

745

80

Management costs

(80)

(84)

4

Service costs

(123)

(109)

(14)

Maintenance costs

(245)

(257)

12

Support costs

(12)

(13)

1

Depreciation & impairment

(96)

(176)

80

Other costs

(33)

(48)

15

Operating costs

(589)

(687)

98

Surplus on disposal of fixed assets

118

152

(34)

Change in value of investment property

(16)

(83)

67

Operating surplus

338

127

211

 

Arrears

 

Current tenant arrears for all tenures are at 5.31% (as at 31 March 2023: 5.67%).

Sales Activities

 

The cost of sales is inclusive of capitalised interest and overhead costs:

 

2024

 (£m)

2023

 (£m)

Change (£m)

Property sales income

211

303

(92)

Land sales income

83

128

(45)

Turnover from sales (excluding JV's)

294

431

(137)

Cost of property sales

(209)

(248)

39

Cost of land sales

(48)

(94)

46

Operating costs

(20)

(38)

8

Impairment

3

(35)

38

Total costs (excluding JV's)

(274)

(415)

141

Operating Surplus (excluding JV's)

20

16

4

Joint venture cost of sales

(110)

(207)

97

Joint venture operating costs

(9)

(18)

9

Impairment of investment in JV's

-

1

1

Share of profits from joint ventures

8

19

(11)

 

AVERAGE SELLING PRICE

 

The average selling price, including JVs, for outright market sales during the financial year to date was £530k (2023: £507k). The average selling price of first tranche shared ownership sales during the financial year to date was £412k (2023: £397k) with an average first tranche sale of 32% (2023: 35%).

 

SALES MARGINS

 

The cost of sales is inclusive of capitalised interest and overhead costs but excludes impairment:

 

 

Shared

Owner-

ship

Outright

Sales (Non-JV)

Land Sales

Outright Sales (JV's)

2024

 2023

Change

 

(£m)

(£m)

(£m)

(£m)

(£m)

(£m)

 

Turnover

131

80

83

127

421

674

(253)

Cost of sales

(125)

(84)

(48)

(110)

(367)

(549)

182

Gross profit

6

(4)

35

17

54

125

(71)

Gross EBITDA margin

5%

5%

42%

13%

13%

19%

6%

Operating costs

(9)

(6)

(5)

(9)

(29)

(56)

27

Operating surplus

(3)

(10)

30

8

25

69

(44)

Net EBITDA margin

(2)%

(13)%

36%

6%

6%

10%

4%

 

UNSOLD STOCK

 

As at 31 March 2024, L&Q, including joint ventures, held 902 (2023:1,278) completed homes as unsold stock with a projected revenue of £126m. Projected revenue for shared ownership assumes a first tranche sale of 25%.

 

Of the total unsold stock, 26% has been held as stock for less than one month and 91% 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 meaning gradual sales rates. In the year, L&Q has handed over 966 and sold 1,032 shared ownership homes. 53 stock units are being used as show homes.

 

L&Q's forward order book excluding joint ventures consists of 44 exchanged homes with projected revenue of £6m and 215 reservations with projected revenue of £30m.

 

Tenure

Projected Revenue (£m)

No. of Homes

<1 Month

1-3 Months

3-6 Months

6-12 Months

>12 Months

Shared Ownership

103

819

223

109

25

217

245

Outright Sale (non-JV's)

13

39

8

3

3

2

23

Total excluding JV's

116

858

231

112

28

219

268

Outright Sale (JCA's)

-

-

-

-

-

-

-

Outright Sale (JCE's)

10

44

6

6

6

15

11

Total Joint Ventures

10

44

6

6

6

15

11

Total Unsold Stock

126

902

237

118

34

234

279

 

NET DEBT AND LIQUIDITY

 

As at 31 March 2024, net debt (excluding derivative financial liabilities) was £5,459m (as at 31 March 2023: £5,294m) and available liquidity within the group in the form of committed un-drawn revolving credit facilities and non-restricted cash was at £1,009m (as at 31 March 2023: £1,222m). Approximately 54% of L&Q's loan facilities and 62% of drawn loan facilities are at a fixed cost. L&Q has £216m of debt maturities within the next 12 months.


UNENCUMBERED ASSETS

 

 

2024

 

2023

No. of homes owned or managed

109,439

108,326

No. of social housing homes provided as collateral against debt facilities

(55,772)

(56,924)

No. of private rented homes provided as collateral against debt facilities

(1,295)

(1,295)

Total no. of unencumbered homes owned or under management

52,372

50,107

% of homes under management held as collateral against debt facilities

52%

54%

Unencumbered asset ratio12

45%

45%

 

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/Stable

A+/Negative


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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