TIDM17YE
RNS Number : 2742J
Platform HG Financing PLC
15 August 2023
15 August 2023
Platform HG Financing Plc
Platform Housing Group's Trading Statement for the Quarter to June 2023
The following report provides a trading update for Platform
Housing Group (Platform), covering unaudited financial performance,
development and treasury activities.
Highlights
-- Turnover growth of 10% to GBP80.4m (Jun-22: GBP72.8m), with
94% of revenues coming from core social housing activities
-- Increased spend on customer focussed activities: front line
colleagues recruited to enhance the customer experience
-- Investment in existing homes up 95%
-- Operating surpluses reduced 10% to GBP20.8m (Jun-22:
GBP23.1m), driven by investment in homes, services to customers and
cost inflation
-- Arrears of 3.1% consistent with prior year (Jun-22: 2.9%)
At or for the quarter ended 30
June 2022 2023 Change
---------------------------------------- --------- --------- ---------
Turnover GBP72.8m GBP80.4m 10.4%
Social housing lettings turnover GBP61.6m GBP68.5m 11.2%
Operating surplus(1) GBP23.1m GBP20.8m -10.0%
New homes completed 209 289 38.3%
Investment in new homes GBP55.4m GBP57.2m -0.3%
Investment in existing homes(5) GBP2.0m GBP3.9m 95.0%
Share of turnover from social housing
lettings 84.6% 85.2% +0.6ppt
Social housing lettings margin(2) 36.1% 30.9% -5.2ppt
Current tenant arrears(3)(4) 2.9% 3.1% +0.2ppt
Gearing(2)(4) 43.1% 44.7% +1.6ppt
EBITDA-MRI interest cover(2) 235% 217% -18.0ppt
---------------------------------------- --------- --------- ---------
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 30 June (as opposed to accumulated over the period to June)
(5) Investment in existing homes includes capital expenditure on
maintenance and decarbonisation works
Elizabeth Froude, Platform's CEO commented:
Our new financial year has continued with the same business
priorities we had last year, to put all customer services and
wellbeing at the heart of our decision making and actions.
The difficult economic environment for our customers means we
are still seeing high demand for our Wellbeing Fund, however from
our proactive engagement with our customers we are seeing arrears
holding steady.
We are continuing with our commitment to improving the quality
and energy efficiency of our existing homes and our spend year to
date at GBP3.9m is almost double that of this time last year.
It is early in the financial year and our current margins are
lower than the full year expectations. In addition to the increased
investment in our existing homes, responsive repairs levels remain
high and are utilising higher levels of sub-contracted labour than
would be considered our standard operating model. This was
anticipated last year at which time we started a sizeable
recruitment campaign, which is on-boarding a growing number of
trades operatives to our already sizeable in-house maintenance
business, which will see costs on repairs come down over the rest
of the year as we transition out of the reliance on external
contractors.
Whilst our sales numbers, which are all shared ownership homes,
are slightly lower than last year they continue at a steady rate
and some of the delay in handovers is due to us setting a lower
tolerance on defects at handover, again for the benefit of our
customers. We remain active in the land and partnerships market and
have a growing pipeline of new homes which will allow us to ensure
delivery on our commitment as a key Strategic Partner for Homes
England.
I do not underestimate that the year will be difficult for us
all, but we are staying close to regional trends and remain
focussed on being a good landlord with an engaged workforce,
investing in the resources and technology required to perform well
in both areas.
Financial review
Turnover
In the quarter to 30 June 2023 total turnover increased by 10.4%
to GBP80.4m (Jun-22: GBP72.8m). This was driven by growth in social
housing lettings turnover, which increased by 11.2% to GBP68.5m
(Jun-22: GBP61.6m), 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 9.6%
to GBP6.6m (Jun-22: GBP7.3m). This was in part due to timing as
stringent handover control checks delayed units coming into
management, which pushed back revenues but ensured quality.
Turnover from all social housing activities of GBP75.6m (Jun-22:
GBP69.2m) accounted for 94.0% (Jun-22: 95.1%) of Platform's total
turnover in the period.
Surpluses and margins
Operating surpluses excluding fixed assets sales decreased by
10% to GBP20.8m (Jun-22: GBP23.1m) and operating surpluses
including fixed asset sales decreased by 18.3% to GBP21.4m (Jun-22:
GBP26.2m). Surpluses from social housing lettings decreased by 4.5%
to GBP21.2m (Jun-22: GBP22.2m).
Operating margins were 25.9% excluding fixed asset sales
(Jun-22: 31.7%), 26.7% including fixed asset sales (Jun-22: 36.0%)
and 30.9% from social housing lettings (Jun-22: 36.1%). Operating
surpluses and margins have been affected by higher levels of
investment into existing homes, improving services for customers
and cost inflation.
Shared ownership sales surpluses were GBP0.7m, representing 3.4%
of total operating surplus (Jun-22: GBP1.6m / 6.1%), with
associated margins of 10.6% (Jun-22: 21.9%). Margins were lower due
to higher proportions of sales this quarter coming from homes
acquired (already completed) from house builders, which attract a
lower margin (in comparison to schemes developed wholly by
Platform).
Sales of fixed assets, which include sales in whole or part to
existing customers, had surpluses and margins of GBP0.7m and 41%
(Jun-22: GBP3.1m / 44%). Sales in the prior year were supported by
the sale of an office, for which proceeds / surpluses were GBP2.3m
/ GBP1.1m.
The overall net surplus after tax, which incorporates interest
costs, was GBP10.8m in comparison to GBP13.9m in the prior year.
This was due to lower surpluses on fixed asset sales (GBP2.4m) and
operating surpluses (GBP2.3m), net of lower net interest costs
(GBP1.6m).
Outlook
Turnover is expected to continue to grow as a consequence of
rental increases of 7% and new units coming into management.
Investment into existing homes and customer services will continue,
however, at a lower rate than in the first quarter, which may have
a positive effect on margins.
Development review
Platform's home building programme continues to produce new
affordable homes for those in need across the Midlands. There were
289 new homes added in the quarter (Jun-22: 209). Of these, 79
(27%) were built for social rent, 71 (25%) for affordable rent and
139 (48%) 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
GBP57.2m in the period (Jun-22: GBP57.4m). At 30 June 2023,
Platform owned a total of 48,356 homes (Jun-22: 47,281).
The development programme was impacted by rising costs in the
quarter which particularly affected contractors, but because the
majority of development contracts are on a fixed price basis there
was less direct financial impact on Platform. Cost increase
requests for schemes on site have been received from some
contractors and in a small number of cases Platform are increasing
payments where it is advantageous to do so. Some of these cost
increases have been mitigated with higher grant rates provided by
Homes England. The speed of development continues to be affected by
resourcing challenges in local authorities, which have caused
delays to planning, highways and building control agreements and
certification.
There were 60 shared ownership sales in the quarter (Jun-22:
77). The number of unsold units at the end of the period was 166
(Jun-22: 63) . Unsold homes have increased due to a larger number
of acquisitions from house builders taking place (as mentioned
above), for which marketing can only start after handover has taken
place. This has resulted in selling times being extended for these
homes. Selling times excluding these homes has remained consistent
and demand for the shared ownership product more generally has
remained robust, with no significant pressure on prices
experienced. Of the 166 unsold at June, 97 were reserved for
purchase.
Outlook
Platform remains committed to developing in a prudent and
sustainable manner, without compromising financial strength.
Projected completions for the year to March 2024 are up on the
prior year at c1,300 homes, with a further c1,500 homes expected to
start on site.
Platform has no outright market sale units in its committed
development pipeline, does not invest in speculative land and has
no material actual or expected impairment in development sites.
Treasury review
Ratings activity
Platform is rated A+ (stable outlook) by S&P and A+
(negative outlook) by Fitch. The negative outlook for Fitch is
linked to the UK Sovereign rating outlook, which has been negative
since the 'mini-budget' in the UK in September 2022.
Debt and liquidity
Net debt was GBP1,327m (Jun-22: GBP1,198m). Net debt comprised
nominal values of GBP881m in bond issues, GBP80m in private
placements and GBP441m in term loan and revolving credit
facilities, partially offset by cash and equivalents of GBP62m and
non-cash accounting adjustments of GBP13m.
Platform's weighted average cost of finance was 3.33% ( Jun-22 :
3.28%).
Platform had sufficient liquidity as at 30 June 2023 (cGBP470m
including undrawn committed facilities, short term investments and
cash and cash equivalents) to meet all forecast needs until into FY
25/26 (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 44.7% (Jun-22: 43.1%). Gearing has
increased slightly in the last year as large cash balances
(following bond issuances) have 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 217% (Jun-22: 235%) 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
three months ended 30 June 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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END
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