TIDM17YE
RNS Number : 0491Q
Platform HG Financing PLC
16 February 2023
16 February 2023
Platform HG Financing Plc
Platform Housing Group's Trading Statement for the Nine Months to December
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 7.1% to GBP187.4m (Dec-21: GBP174.9m)
-- Robust shared ownership sales margins of 20.1% / 45% on first
tranche / staircasing (Dec-21: 19.7% / 43%)
-- Total turnover growth of 2.1% to GBP228.5m (Dec-21: GBP223.8m)
-- 94.7% of turnover from social housing activities (Dec-21: 96.2%)
-- Operating surpluses reduced 5.1% to GBP66.7m, driven in
particular by increased maintenance and energy costs
-- A+ (stable outlook) credit rating with S&P affirmed
-- Stable outlook for full year margins
At or for the nine months ended
31 December 2021 2022 Change
---------------------------------------- ---------- ---------- ---------
Turnover GBP223.8m GBP228.5m 2.1%
Social housing lettings turnover GBP174.9m GBP187.4m 7.1%
Operating surplus(1) GBP70.3m GBP66.7m -5.1%
New homes completed 971 775 -20.2%
Investment in new homes GBP157.4m GBP163.2m 3.7%
Investment in existing homes(5) GBP9.5m GBP13.8m 45.3%
Share of turnover from social housing
lettings 78.2% 82.0% +3.8ppt
Social housing lettings margin(2) 36.7% 33.9% -2.8ppt
Current tenant arrears(3)(4) 2.7% 3.1% +0.4ppt
Gearing(2)(4) 42.0% 43.5% +1.5ppt
EBITDA-MRI interest cover(2) 196% 215% +19.0ppt
---------------------------------------- ---------- ---------- ---------
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
(3) Current tenant arrears includes all general needs tenants
(this excludes shared ownership properties)
(4) Figures as at 31 December (as opposed to accumulated over the period to December)
(5) Investment in existing homes includes capital expenditure on
maintenance and decarbonisation works
Elizabeth Froude, Platform's CEO commented:
"I am pleased to share our results for quarter 3 which deliver a
positive outcome in an ever difficult environment. The turnover in
our core social lettings business is up year on year by 7.1%, as a
result of both annual rental increases and a further 775 units
coming in to management.
Costs of maintenance and investment remain high as we continue
to reduce back-logged works and absorbed ongoing cost inflation.
This has meant a reduction in social housing lettings margin (36.7%
in Dec-21 to 33.9% in Dec-22). As a business, we have agreed with
our Board a short term reduction to our Golden Rule of 35% as we
step up the investment levels in existing stock. Given the current
cost of living crisis, we remain committed to energy improvement
works and supporting our customers, which is a commitment we will
see carried in to the coming 2023/24 financial year. In the nine
months to December we retrofitted approximately 200 homes,
improving the average Energy Performance Certificate rating of
those homes from an E to a C.
Our customer Wellbeing Fund continues to be in demand and gives
us a good insight in to the difficult environment our customers are
dealing with and much of the monies paid out are focussed on much
needed essentials. This has motivated our Board to increase the
total budget from GBP1.75m to GBP2.0m for this financial year.
Sales of shared ownership homes remains robust with strong
demand for our well-priced homes, with both first tranche
proportions and margins being above the prior year. We remain
focussed on delivering affordable homes of all tenures we build,
and the decline in sales turnover simply reflects the profiling of
our development programme. As at the end of December we had only 66
unsold units, almost all of which had completed in late
December.
Our Statement of Financial Position metrics remain amongst the
best in the sector with the increase in debt and gearing being as a
result of ongoing investment for future new homes.
Damp and mould has created higher volumes of customer and
stakeholder enquiries, complaints and surveying work. At Platform
we have a solid and clear process for dealing with these, to ensure
all cases reported are tracked to resolution and have increased
resources to accommodate current levels. We have re-run our damp
and mould training with all staff to ensure their ability to
support our customers and our in-house maintenance team are all
equipped with appropriate equipment to deal with the low level and
immediate cases they encounter."
Financial review
Turnover
In the period to 31 December 2022 total turnover increased by
2.1% to GBP228.5m (Dec-21: GBP223.8m).
Social housing lettings turnover increased by 7.1% to GBP187.4m
(Dec-21: GBP174.9m) as a result of inflationary rental increases
and a year-on-year increase in social housing units. The increase
in turnover was in spite of a slight increase in rental arrears as
customers begin to be affected by the cost of living crisis.
Turnover from shared ownership first tranche sales was down
29.6% to GBP27.8m (Dec-21: 39.5m) due to timing of the development
cycle. The demand for shared ownership homes remains robust, with
margins and unsold homes performing more favourably than the prior
year as outlined later in this report.
Turnover from all social housing activities of GBP216.3m
(Dec-21: GBP215.4m) accounted for 94.7% (Dec-21: 96.2%) of
Platform's total turnover in the period.
Surpluses and margins
Operating surpluses excluding fixed assets sales decreased by
5.1% to GBP66.7m (Dec-21: GBP70.3m) and operating surpluses
including fixed asset sales decreased by 1.2% to GBP75.8m (Dec-21:
GBP76.7m). Surpluses from social housing lettings decreased by 0.9%
to GBP63.5m (Dec-21: GBP64.1m).
Operating margins were 29.2% excluding fixed asset sales
(Dec-21: 31.4%), 33.2% including fixed asset sales (Dec-21: 34.3%)
and 33.9% from social housing lettings (SHL) (Dec-21: 36.7%). The
Platform Group Board have accepted a temporary divergence from the
golden rule for SHL margin (which targets 35% minimum), in order to
continue to invest in improving the quality and energy efficiency
of our homes and in continuing the programme for change and
improvement, at the same time as continuing to provide planned
services and support to our customers but recognising the pressure
of catch up works costs and the unprecedented levels of cost
inflation incurred in the year to date. No covenants are linked to
SHL margin and all other golden rules continue to be comfortably
met.
Operating surpluses and margins have been adversely affected by
higher maintenance and service expenditures. Revenue maintenance
expenditures have increased by 30% to GBP53.1m as a consequence of
cost inflation, a shortage of labour availability (impacting
sub-contractor costs) and higher volumes of maintenance jobs as a
consequence of clearing the backlog established during covid. In
the nine months to December over 9,000 jobs were completed from the
backlog at a cost of cGBP2m.
Service costs of GBP19.1m have increased at approximately twice
the rate of associated incomes as higher costs, associated in
particular with energy, have not been passed onto customers in
full. Service incomes will catch up to an extent in the following
year as new charges are set, but Platform may decide to implement
gradual increases over several years to protect customers.
Shared ownership sales surpluses were GBP5.6m, representing 7.4%
of total operating surplus (Dec-21: GBP7.8m / 10.2%), with
associated margins of 20.1% (Dec-21: 19.7%).
Staircasing sales of shared ownership properties, where a
customer buys a further stake in their home, continue to perform in
line with the prior year with surpluses and margins of GBP5.2m and
45% (Dec-21: GBP4.8m / 43%).
The overall net surplus after tax, which incorporates interest
costs, was GBP42.8m in comparison to GBP33.6m in the prior year due
to favourable loan breakage costs/credits in the prior/current
period (GBP10.5m) and one-off depreciation charges in the prior
period (GBP5.6m). When these are adjusted for, surplus after tax of
GBP26.7m is GBP6.9m lower than the prior year figure of GBP33.6m,
driven by increases to maintenance expenditures and service charges
as outlined above.
Outlook
For the year to March 2023 turnover is expected to continue to
grow in line with new units coming into management. Operating costs
are expected to continue to be adversely affected by higher
maintenance and service costs. Overall margins are expected to be
broadly in line with those for the year to date.
Development review
Platform's home building programme continues to produce new
affordable homes for those in need across the Midlands. There were
775 homes completions to December (Dec-21: 971), all of which had
an EPC rating of B and above. Of these, 201 (26%) were built for
social rent, 299 (39%) for affordable rent and 275 (35%) for shared
ownership. Development expenditures were GBP160m in the period
(Dec-21: GBP155m). At 31 December 2022, Platform owned a total of
47,767 homes (Dec-21: 46,968).
The development programme has been affected by an increase in
global demand for materials, the impact of Brexit and the war in
Ukraine. These have resulted in increases to materials and labour
costs, and extended supply times. Most schemes on site are subject
to fixed price contracts, providing some protection from cost
inflation in the short term. However, cost increase requests for
schemes on site continue to be experienced and for new schemes it
is becoming more difficult to enter into fixed price
arrangements.
There were 279 shared ownership sales to December (Dec-21: 457).
The number of unsold units at the end of the period was 66 (Dec-21:
124) . The majority of these units (51 out of 66) were handed over
during December 2022.
Outlook
Platform remains committed to developing in a prudent and
sustainable manner, without compromising financial strength.
Development cost inflation, which is expected to persist in the
short/medium term, may affect the scale of our programme. The
projected delivery for our identified and on-site programme for the
full year is approximately 1,100 homes.
There are currently no signs that the unfavourable economic
conditions are adversely affecting demand for shared ownership
homes. Higher interest rates and the cost of living squeeze may
have a detrimental impact on owner occupier housing demand going
forwards, however, it is also possible that those looking to buy a
home on an outright basis might be drawn towards the more
affordable shared ownership product. Platform has no outright
market sale units in its committed development pipeline.
The Group does not invest in speculative land and has no actual
or expected material impairment in development sites.
Treasury review
Ratings activity
Platform retained its A+ (stable outlook) rating following
S&P's annual review shortly after the period end. Platform is
also rated A+ (negative outlook) by Fitch, with the rating outlook
aligned to the UK Sovereign rating outlook, which was revised to
negative following the UK's 'mini-budget' in September 2022.
Debt and liquidity
Net debt was GBP1,244m (Dec-21: GBP1,139m). Net debt comprised
nominal values of GBP882m in bond issues, GBP80m in private
placements and GBP444m in term loan and revolving credit
facilities, partially offset by cash and equivalents of GBP150m and
non-cash accounting adjustments of GBP12m.
Platform's weighted average cost of finance was 3.32% ( Dec-21 :
3.28%).
Platform had sufficient liquidity as at 31 December 2022 (over
GBP550m including undrawn committed facilities and cash and cash
equivalents) to meet all its forecast needs until into 2024 (on top
of 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 43.5% at 31 December 2022 (Dec-21: 42%).
Gearing has increased in the last year due to cash and equivalents
being used for development expenditures. In addition, GBP25 million
of treasury deposits with a maturity in excess of three months
existed in December 2022, which did not qualify as cash and
equivalents for the purposes of the gearing calculation. Gearing
was comfortably within Platform's target of maintaining gearing
below 55%.
EBITDA-MRI interest cover was 215% (Dec-21: 196%). The movement
from the prior year is largely driven by one off breakage costs
that adversely affected the prior year comparative figure. The
ratio remains well above Platform's target minimum (120%).
Outlook
Some upwards pressure in gearing and downwards pressure to
interest cover is expected as Platform pushes ahead with its
strategic development and maintenance objectives. However, gearing
and EBITDA-MRI interest cover ratios are expected to remain well
within Platform's targets.
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 December 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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