REG - Platform HG - Platform Housing Quarter Four Trading Statement

ABN Amro Bank NVAnnouncement

29/05/2024 08:15

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RNS Number : 1450Q  Platform HG Financing PLC  29 May 2024

 29 May 2024

 Platform HG Financing Plc

 Platform Housing Group's Trading Statement for the Year to March 2024

The following report provides a trading update for Platform Housing Group
(Platform), covering unaudited financial performance, development and treasury
activities.

 

Highlights

 

·   Turnover growth of 12.3% to £337m (Mar-23: £300m), with 94% of
revenues coming from core social housing activities (Mar-23: 94%)

·   Operating surpluses of £81.3m (Mar-23: £82.1m): additional incomes
reinvested in existing homes and services to customers

·   Investing in the future - investment in existing homes up over 60%

·   Arrears of 2.8% consistent with prior year (Mar-23: 2.6%)

·   Local Government (defined benefit) Pension Schemes closed to future
accrual

·   Credit rating of A+ (stable) with S&P and Fitch affirmed

·   Highest regulatory gradings ('G1/V1') affirmed following scheduled
In-depth Assessment

·   New £275m sustainability linked banking facilities

·   New £250m sustainable bond issued shortly after quarter end

 

 At or for the year 31 March                         2023            2024              Change

 Turnover                                            £300.0m         £337.0m           12.3%
 Social housing lettings turnover                    £248.2m         £274.2m           10.5%
 Operating surplus((1))                              £82.1m          £81.3m            -1.0%
 New homes completed                                      1,114            1,202       7.9%
 Investment in new homes                             £250.6m         £315.3m           25.8%
 Investment in existing homes                        £24.4m          £39.4m            61.5%
 Share of turnover from social housing lettings      82.7%           81.4%             -1.4ppt
 Social housing lettings margin((2))                 32.1%           30.2%             -1.8ppt
 Current tenant arrears((3)(4))                      2.6%            2.8%              +0.2ppt
 Gearing((2)(4))                                     43.4%           45.7%             +2.3ppt
 EBITDA-MRI interest cover((2))                      187%            142%              -45ppt

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

(6)   Adjustments following the exit of defined benefit pension schemes
still to be finalised / accounted for

 

Elizabeth Froude, Platform's CEO commented:

 

"At the start of this year we undertook a mid-term review of our 2021-26
Corporate Strategy. The outcomes were ones of simplification of priorities and
an ongoing commitment to all key delivery areas and our mission is one of
investing for the future of the organisation and our communities.  Our
highest priorities for this year were about investing to support the quality
of our homes, their energy standards and the services we deliver to our
customers.  This has remained our focus throughout the year and the areas of
increased expenditure reflect that.  Whilst our operating margin has declined
slightly as a result, it still remains one of the strongest in the sector and
directly reflects the priorities agreed.  We continue to focus on keeping
controllable costs as tight as possible, whilst improving our technology base,
which can be seen in our sector management cost per unit.

 

Investment in our existing homes has again stepped-up year on year from
£24.4m to £39.4m (up 61.5%), including an increase in energy improvement
works from £5.5m to £8.5m (up 55.5%) and 76% of our stock is now EPC C or
better.

 

We see every day the ongoing need for more affordable housing in our geography
and as a key Strategic Partner for Homes England remain committed to building
the much-needed new homes to help with waiting lists and overcrowding across
our Local Authority areas of operation.  This year again saw a step up in
both our starts on site (1,534 homes) and completions (1,202 homes) all of
which are affordable tenures.  We have strong partnerships and our pipeline
for new development is over 3,000 homes in contract or construction, all of
which will be EPC B or above and includes net zero carbon and 'zero bills'
homes as well.

 

The demand for Shared Ownership homes in our area of operation remains good
and any variation in sales figures reflect the timing of handover on
development schemes.  We do have very varied markets for sales and rental
across our geography and this is the primary variation in sales values.  We
are intentional in the type and price point of the properties we build to
ensure they are accessible for the people who work and live in our localities,
with many of our homes at a price point to make them accessible for key
workers.  Valuations continue to hold up and proportions being acquired as
first tranche are ahead of budget.

 

The scale of regulation and legislative change affecting customers and asset
management in the sector remains a focus and big demand for all landlords.
The new Consumer Standard was launched in April 2023.  In preparation for
this we undertook an exercise to baseline our business over the previous year
and we're pleased that satisfaction has improved from baseline levels.  The
number of complaints received has increased in the year, as has been seen
across the sector, and we are working hard to improve response times and to
embed lessons learned from complaints, to improve services.   We continue to
recruit at scale and invest in transformation of asset management systems and
processes to ensure we remain in control and are able to drive the best
outcomes for our residents through our investment and compliance programmes.
With our in-house maintenance business continuing to grow and in-source more
service areas we continue to deliver good compliance standards and strong
customer satisfaction with repairs at 87% at the year end."

 

Financial review

 

Turnover

In the year to 31 March 2024 total turnover increased by 12.3% to £337m
(Mar-23: £300m).  This was driven by growth in social housing lettings
turnover, which increased by 10.5% to £274.2m (Mar-23: £248.2m), as a result
of inflationary rental increases and a year-on-year increase in social housing
units.

 

Turnover from shared ownership first tranche sales of £40.7m was up on the
prior year (Mar-23: £33.3m) due to both higher numbers of sales, which were
23% up on the prior year, and higher average prices, which were 15% higher
than the prior year.

 

Turnover from all social housing activities of £316.6m (Mar-23: £283.1m)
accounted for 94% (Mar-23: 94%) of Platform's total turnover in the period.

 

Surpluses and margins

Operating surpluses excluding fixed assets sales of £81.3m were 1% lower than
the prior year period (Mar-23: £82.1m) and operating surpluses including
fixed asset sales decreased by 7.1% to £86.2m (Mar-23: £92.3m).  Surpluses
from social housing lettings increased by 4.1% to £82.9m (Mar-23: £79.6m).

 

Operating margins were 24.1% excluding fixed asset sales (Mar-23: 27.4%),
25.6% including fixed asset sales (Mar-23: 30.9%) and 30.2% from social
housing lettings (Mar-23: 32.1%).  Operating surpluses and margins have been
affected by additional investment in our homes, sustainability and the
customer experience, in combination with high-cost inflation and capped rental
increases.

 

Shared ownership sales surpluses were £6.1m (Mar-23: £5.9m), representing
6.8% of total operating surplus (Mar-23: 6.4%), with associated margins of
14.9% (Mar-23: 17.8%).  Margins were lower due to higher proportions of sales
coming from homes acquired (already completed) from house builders, which
attract a lower margin.  When these sales are adjusted for the margins in the
current year are in line with those in the prior.

 

Sales of fixed assets, which include subsequent staircasing sales of shared
ownership homes and homes acquired under the 'right to buy' scheme, had
surpluses and margins of £4.9m and 42% (Mar-23: £10.7m / 49%).  Sales in
the prior year were supported by the sale of an office, for which proceeds /
surpluses were £2.3m / £1.1m.  The current year has seen a slowdown of
shared ownership staircasing sales, which may be due to the increase in
mortgage rates experienced in the UK (and expectations that they may come down
again in future), prompting existing owners to 'wait and see' before
increasing their level of ownership. However, an equivalent slowdown has not
been noted to date in relation to shared ownership first tranche sales.

 

The overall net surplus after tax, which incorporates interest costs, was
£42.7m in comparison to £48m in the prior year, driven by lower surpluses on
fixed asset sales of £5.8m.

 

Development review

 

Platform's home building programme continues to produce new affordable homes
for those in need across the Midlands.  There were 1,202 new homes added in
the year to March 2024 (Mar-23: 1,114) and a record number of starts on site
of 1,534).  Of those completed, 225 (19%) were built for social rent, 408
(34%) for affordable rent, 544 (45%) for shared ownership and 25 (2%) for
rent-to-buy.  New homes developed had an average SAP score of 84, which
translates to an EPC rating of B, 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 £315m in
the period (Mar-23: £245m), with increased expenditures supporting both more
additions in the current year and an increase in future homes coming into
management.  At 31 March 2024, Platform owned a total of 49,181 homes
(Mar-23: 48,082).

 

The development programme has continued to see improvement in market
conditions, with continued easing in build cost inflation.  However, there is
a legacy from cost inflation to date, adversely affecting a small number of
development partners.  We continue with a customer-focused drive on quality
and sustainability. A new building specification was implemented in the period
for our land led schemes, which will deliver energy enhancements and thermal
efficiencies with a fabric-first approach, including a requirement for homes
to be gas free wherever possible.  Customer satisfaction for quality remains
above 80% at the year end and we are continuing to see the results of our
drive on quality with a 40% reduction in the number of defects (following
completion) reported year-on-year.

 

There were 418 shared ownership sales in the year to March 2024 (Mar-23:
340).  The number of unsold units at the end of the period was 222 (Mar-23:
87).  Unsold homes have increased due to a number of schemes that were
completed 'stock plots' acquired from developers, for which there is no
pre-completion marketing time.  For homes acquired in this way the average
time taken to sell was four months post completion, in comparison to two
months where homes in development can be marketed pre-completion. The unsold
homes are being actively marketed and considered to be a timing rather than a
demand issue, with robust levels of reservations persisting.  Of the 222
unsold at March 2024, 138 were reserved for purchase.

 

Platform does not invest in speculative land and has no material actual or
expected impairment in development sites.

 

Treasury review

 

Funding activity

 

Platform established two new revolving credit facilities totalling £275m in
January 2024 with National Australia Bank (£175m) and a new lender to
Platform, ABN Amro (£100m).  Both facilities are sustainability-linked
loans, with performance targets linked to the energy efficiency of new and
existing homes and black and minority ethnic representation in our
workforce.  The facilities will sit alongside £235m sustainability-linked
facilities with Lloyds Bank that are also sustainability linked, taking
Platform's sustainable finance to approximately 50% of the debt book.
Sustainability linked targets for the new facilities will be assessed starting
from the year to March 2025 and for Lloyds Bank, will be assessed for the
second year to March 2024, following all targets being achieved in the year to
March 2023.

 

Shortly after the period end Platform issued a £250m sustainable bond.  The
bond has a maturity of 26 years (2050), was issued with a spread of 0.83% and
coupon of 5.342%.  The proceeds from the bond will be used in accordance with
our Sustainable Finance Framework and allocated to projects that provide new
affordable and highly energy efficient homes, and improve the energy
efficiency of existing homes.

 

Ratings activity

Platform is rated A+ (stable outlook) by S&P and A+ (stable outlook) by
Fitch.  The rating with Fitch was affirmed in October 2023 and the rating
with S&P affirmed in January 2024.  Shortly after the period end (April
2024) the outlook for Fitch was revised from negative to stable, in line with
a similar movement in the UK Sovereign rating outlook, which had been negative
since the 'mini-budget' in the UK in September 2022.

 

Debt and liquidity

Net debt was £1,457m (Mar-23: £1,275m).  Net debt comprised nominal values
of £871m in bond issues, £80m in private placements and £550m in term loan
and revolving credit facilities, partially offset by cash and equivalents of
£31m and non-cash accounting adjustments of £13m.

 

Platform's weighted average cost of finance was 3.51% (Mar-23: 3.33%).

 

Platform had liquidity as at 31 March 2024 of £426m (including undrawn
committed facilities, short term investments and cash and cash equivalents),
which is sufficient to meet all forecast needs until into 2025.  This
liquidity horizon was extended further into 2026 following the £250m bond
issued in April 2024.

 

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 45.7% (Mar-23: 43.4%). 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 142% (Mar-23: 187%).  The year-on-year movement
is largely driven by an increase in investment into existing homes.  The
overall cover remains well above Platform's target minimum (120%).

 

For more information please contact:

 

Investor enquiries

Ben Colyer - +44 7918 160990

investors@platformhg.com (mailto:investors@platformhg.com)

 

Media enquiries

media@platformhg.com

 

 

Disclaimer

These materials have been prepared by Platform Housing Group Limited
("Platform") and its subsidiaries (the "Group"), including Platform HG
Financing plc (the "Issuer") and Platform Housing Limited, solely for use in
publishing and presenting its results in respect of the year ended 31 March
2024.

 

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 the Issuer or any other member of the Group 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 and the Group
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's control.  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 have 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 accuracy or validity of the information or opinions contained in these
materials or 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.

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