TIDM17YE
RNS Number : 7161A
Platform HG Financing PLC
26 May 2023
26 May 2023
Platform HG Financing Plc
Platform Housing Group's Trading Statement for the Year to March 2023
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 5.8% to GBP248.2m (Mar-22: GBP234.6m)
-- Total turnover growth of 1% to GBP300m (Mar-22: GBP296.9m),
with 94.4% coming from core social housing activities
-- Robust shared ownership sales margins of 17.7% / 45% on first
tranche / staircasing (Mar-22: 19.9% / 43%)
-- Operating surpluses reduced 11.5% to GBP79.6m (Mar-22:
GBP89.9m), driven by investment in homes, services to customers and
increased maintenance and energy costs
-- 55% increase to investment in existing homes, reflecting
component replacement and energy efficiency works
-- Increased spend on customer focussed activities: front line
colleagues recruited to enhance the customer experience
-- Arrears of 2.6% consistent with prior year (Mar-22: 2.4%)
-- A+ (stable outlook) credit rating with S&P affirmed
-- Highest governance and viability ratings of G1 / V1 with Regulator for Social Housing
At or for the year ended 31 March 2022 2023 Change
---------------------------------------- ---------- ---------- --------
Turnover GBP296.9m GBP300.0m 1.0%
Social housing lettings turnover GBP234.6m GBP248.2m 5.8%
Operating surplus(1) GBP89.9m GBP79.6m -11.5%
New homes added 1,171 1,114 -4.9%
Investment in new homes GBP201.3m GBP250.9m 24.6%
Investment in existing homes GBP15.7m GBP24.4m 55.4%
Share of turnover from social housing
lettings 79.0% 82.7% +3.7ppt
Social housing lettings margin(2) 35.2% 31.3% -3.9ppt
Current tenant arrears(3)(4) 2.4% 2.6% +0.2ppt
Gearing(2)(4) 42.3% 43.4% +1.1ppt
EBITDA-MRI interest cover(2) 188% 187% -1.0ppt
---------------------------------------- ---------- ---------- --------
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 March (as opposed to accumulated over the period to March)
(5) Investment in existing homes includes capital expenditure on
maintenance and decarbonisation works
Elizabeth Froude, Platform's CEO commented:
"The environment in which we and all businesses are operating
continues to be difficult and the impacts of cost inflation very
visible. Our results for the year reflect our need to focus on
making the standard of our homes and lives of our residents our
primary focus.
The reduction in Operating Surplus (GBP9.7m) reflects this with
GBP8.7m additional expenditure on maintenance and investment in our
existing homes. We focussed on accelerating catch-up on backlogged
repairs and invested GBP5.5m on sustainability works such as air
source heating systems and photovoltaic panels.
We have also continued to build much needed new homes and
retained our focus on building affordable tenures in the year,
adding 1,114 homes to our stock, with all developed homes EPC B or
above. Our shared ownership sales programme was smaller year on
year, due to the timing of scheme handovers and our focus on
quality standards. At the end of the year we had only 29 homes
available for sale and are seeing continued demand for our homes
with values, first tranche proportions and staircasing holding
above budgeted levels.
The demand for our customer Wellbeing Fund continues to assist
those customers most in need, assisting with some of the most basic
items such as food, energy costs and furniture or white goods, and
as the year progressed, our Board took the decision to increase the
fund to GBP2m.
Damp & mould was the most recent issue to impact our sector
and the strength of our asset data and our use of technology as an
organisation has been powerful in helping us to verify and
prioritise the homes needing more focus. Whilst we currently have
no Category 1 cases we, like all landlords, are dealing with the
tail of a flurry of activity. We are seeing damp, mould and
condensation as a new compliance category and are treating it as
such as we anticipate it being an issue for some time as it is
exacerbated by fuel poverty.
Despite all of this our financial metrics remain strong and rank
amongst the best in sector, with any degradation being
intentionally applied to improve the quality of homes and services,
a theme which will continue in the coming year, as life continues
to be hard for those we serve.
I hope you find our results to represent a strong organisation,
focussing on its core purpose and strategy despite the headwinds as
we strive to deliver the highest standards for our investors and
stakeholders."
Financial review
Turnover
In the year to 31 March 2023 total turnover increased by 1% to
GBP300m (Mar-22: GBP296.9m).
Social housing lettings turnover increased by 5.8% to GBP248.2m
(Mar-22: GBP234.6m) 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 down
31.8% to GBP33.3m (Mar-22: GBP48.8m) due to timing of the
development cycle. The demand for shared ownership homes remains
robust, with margins and unsold homes performing in line with the
prior year as outlined later in this report.
Turnover from all social housing activities of GBP283.1m
(Mar-22: GBP285.2m) accounted for 94.4% (Mar-22: 96.1%) of
Platform's total turnover in the period.
Surpluses and margins
Operating surpluses excluding fixed assets sales decreased by
11.5% to GBP79.6m (Mar-22: GBP89.9m) and operating surpluses
including fixed asset sales decreased by 8.9% to GBP90.4m (Mar-22:
GBP99.2m). Surpluses from social housing lettings decreased by 6%
to GBP77.6m (Mar-22: GBP82.6m).
Operating margins were 26.5% excluding fixed asset sales
(Mar-22: 30.3%), 30.1% including fixed asset sales (Mar-22: 33.4%)
and 31.3% from social housing lettings (SHL) (Mar-22: 35.2%).
Operating surpluses and margins have been affected by higher levels
of investment into improving the energy efficiency of our homes,
improving services for customers and cost inflation. Over 500 homes
were retrofitted with low carbon heating systems and photovoltaic
panels which, when added to other works, resulted in expenditures
to improve the sustainability of homes of over GBP5.5m. Revenue
maintenance expenditures increased by 22% to GBP59.7m (Mar-22:
GBP46.6m) as a consequence of cost inflation, a shortage of labour
availability (impacting sub-contractor costs) and higher volumes of
maintenance works as the backlog of jobs established during covid
has been cleared. In the year to March over 9,400 jobs were
completed from the backlog at a cost of GBP2.3m.
Service costs of GBP27.5m (Mar-22: GBP22.6m) have increased at
twice the rate of associated incomes as higher costs, driven by
rising energy prices, 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.
Shared ownership sales surpluses were GBP5.9m, representing 6.5%
of total operating surplus (Mar-22: GBP9.7m / 9.8%), with
associated margins of 17.7% (Mar-22: 19.9%).
Staircasing sales of shared ownership properties, where a
customer buys a further stake in their home, continue to perform
robustly with surpluses and margins of GBP6.4m and 45% (Mar-22:
GBP6.3m / 43%).
The overall net surplus after tax, which incorporates interest
costs, and is stated before pension actuarial valuations (which are
expected to be favourable), was GBP47.5m in comparison to GBP42.9m
in the prior year. There were a number of one-off costs and incomes
in the current and prior year including favourable loan breakage
costs/credits (GBP10.5m), one-off depreciation charges (GBP5.6m)
and maintenance costs incurred in the current year in order to
clear the backlog of jobs (GBP2.3m). When these are adjusted for,
surplus after tax of GBP33.7m is GBP9.2m lower than the prior year
figure of GBP42.9m, driven by investment into sustainability,
customer focus and cost inflation as outlined above.
Outlook
For the year to March 2024 turnover is expected to continue to
grow as a consequence of rental increases of 7% and new units
coming into management. Operating costs are expected to continue to
be affected by continued reinvestment into the sustainability of
our homes, however, some favourable movements are expected as
one-off maintenance backlog costs fall away and service charges
begin to better reflect costs. When taken together these movements
may have a positive impact on margins.
Development review
Platform's home building programme continues to produce new
affordable homes for those in need across the Midlands. There were
1,114 new homes added in the year (Mar-22: 1,171), with 962
completions and a further 152 homes taken on as part of stock
acquisitions. Of these, 223 (20%) were built for social rent, 486
(44%) for affordable rent and 405 (36%) for shared ownership. All
new homes developed had an EPC rating of B and above as Platform
continue to push towards bringing all homes to an EPC rating of C
or better by 2030, and all homes to net zero carbon emissions by
2050. Development expenditures were GBP251m in the period (Mar-22:
GBP201m). At 31 March 2023, Platform owned a total of 48,082 homes
(Mar-22: 47,119).
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, although these things have
improved over the course of the year. Resourcing challenges in
local authorities have caused delays in negotiation and signing off
planning, highways and building control agreements and
certification. In addition, higher standards have been set for the
quality of homes accepted from developers, which has slowed some
homes being handed over as we improve the standard of new homes
provided to our customers.
To mitigate the risk of cost inflation, 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. As a further mitigation of cost increases the Group
is in discussions with Homes England in relation to increasing
grant levels on its 2021-26 Affordable Homes Programme bid.
There were 340 shared ownership sales in the year (Mar-22: 457),
with sales down due to the timing of the development cycle. The
number of unsold units at the end of the period was 87 (Mar-22: 70)
. The majority of these units (58 out of 87) were reserved for
purchase.
Outlook
Platform remains committed to developing in a prudent and
sustainable manner, without compromising financial strength.
Development costs and labour challenges may affect the scale of our
programme, however, these issues have been easing over the course
of the year and projected completions for the year to March 2024
are up on the prior year at approximately 1,300 homes, with a
further 1,600 homes expected to start on site.
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, the shared ownership product (which Platform is
principally exposed to) is a sub-set of housing that has its own
demand drivers, including buyers migrating from outright sales when
affordability is stressed. Platform has no outright market sale
units in its committed development pipeline.
The Group does not invest in speculative land and has no
material actual or expected impairment in development sites.
Treasury review
Ratings activity
Platform retained its A+ (stable outlook) rating following
S&P's annual review in January 2023. Platform is also rated A+
(negative outlook) by Fitch earlier in the year (October 2022),
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 GBP1,275m (Mar-22: GBP1,161m). 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 GBP118m and
non-cash accounting adjustments of GBP11m.
Platform's weighted average cost of finance was 3.33% ( Mar-22 :
3.28%).
Platform had sufficient liquidity as at 31 March 2023 (cGBP525m
including undrawn committed facilities, short term investments and
cash and cash equivalents) to meet all forecast needs until into
2026 (with new finance required in 2024 to maintain 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 43.4% (Mar-22: 42.3%). Gearing has
increased in the last year as large cash balances (following bond
issuances) has been deployed to fund development, maintenance and
sustainability expenditures. Gearing was comfortably within
Platform's target of maintaining gearing below 55%.
EBITDA-MRI interest cover was 187% (Mar-22: 188%) and 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 sustainability objectives. However, such
objectives will be completed in a controlled way, ensuring that
these key credit ratios 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
year ended 31 March 2023.
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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