14 February 2022

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

Highlights

·   Strong turnover growth of 11.7% to £223.8m (Q3 20/21: £200.4m)

·   Strong shared ownership sales volumes and values demonstrating robust housing market in areas of operation - year to date sales of 457 (Q3 20/21: 272)

·  Impacts of Covid-19 and Brexit experienced in supply chains for maintenance and development activities, affecting materials costs, labour availability and completions 

·   Operating surpluses reduced by 8.8% to £70.3m (Q3 20/21: £77.1m) driven by maintenance expenditures, one-off depreciation charges and higher void levels

·  Arrears performing well, little impact noted from the end of Government support measures.  Moving forward arrears expected to be under pressure as customers are affected by rising energy costs

·  Full year projected to be below budget, with outlook for the year to March 2023 affected by voids and maintenance pressures coupled with the impact of national insurance and pensions cost increases.  This will be mitigated to some extent by rental inflationary increases of over 4%

·   Development of a net zero carbon plan underway

·   A+ rating affirmed by S&P shortly after quarter end

·   Sale of £50m (2055) retained bonds achieving an all-in rate of 1.76%

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/value-for-money-metrics-technical-note-guidance-june-2020

(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 nine months to December)

Elizabeth Froude, Platform's CEO commented:

"It is my pleasure to share our third quarter results, which show a strong core business still delivering on its strategic objectives, despite what must be acknowledged as a difficult trading environment.

Whilst our margins are lower than this time last year, this is mostly as a result of two strategic changes, namely loan breakage costs and a depreciation adjustment on review of asset holding costs. 

We are still carrying investment and repairs backlogs which although reducing, will push programme spend forward into the coming financial year.

The staff, materials and supply chain issues we encounter are being seen across the sector, although we do now have mitigation plans in place to move forward.

Void levels, which are directly affected by lockdown cycles, are currently higher than we would like and we have refocussed resources from planned programme works to accelerate the return to letting of much needed housing.

Our Development and Sales activities remain strong and this is reflected in our ongoing solid gearing and liquidity levels.

Year-end expectations are for a full financial year with similar margins to current levels." 

Financial review

Turnover

In the year to 31 December 2021 total turnover grew 11.7% to £223.8m (Q3 20/21: £200.4m).

Social housing lettings turnover increased by 3.4% to £174.9m (Q3 20/21: £169.2m) as a result of inflationary rental increases and a year-on-year increase in social housing units. 

Shared ownership first tranche sales continue to perform strongly.  Turnover from these sales was £12m in the quarter, £4.9m higher than the prior year (Q3 20/21: £7.1m). 

Turnover from social housing activities of £215.4m (Q3 20/21: £192.9m) accounted for 96.2% (Q3 20/21: 96.3%) of Platform's total turnover in the period. 

Surpluses and margins

Operating surpluses excluding fixed assets sales decreased by 8.8% to £70.3m (Q3 20/21: £77.1m) and operating surpluses including sales decreased by 5.3% to £76.7m (Q3 20/21: £81.0m).  Surpluses from social housing lettings decreased by 15.2% to £64.1 (Q3 20/21: £75.6m). 

Operating margins were 31.4% excluding fixed asset sales (Q3 20/21: 38.5%), 34.3% including sales (Q3 20/21: 40.4%) and 36.7% from social housing lettings (Q3 20/21: 44.7%). 

Operating surpluses and margins were adversely affected by one-off depreciation charges, higher maintenance expenditures and increased voids.  Maintenance expenditures have been affected by higher materials costs, labour availability and an element of catch up to compensate for delayed programmes.  The prior year was characterised by subdued maintenance as activity was curtailed during the first national lockdown, affecting the comparative figures.  Voids have been adversely affected by delays in repairs caused by staff shortages.  Operating margins have also been affected by a larger proportion of turnover being generated from shared ownership sales (that have relatively lower margins). 

If one-off depreciation charges of £5.8m are adjusted for surpluses movements are revised as below:

Shared ownership sales surpluses were £7.8m, representing 10.2% of total operating surplus (Q3 20/21: 10.6%), with associated margins of 19.7% (Q3 20/21: 17.2%). 

Staircasing sales of shared ownership properties, where a customer buys a further stake in their homes, had another strong quarter with 40 sales completed (Q3 20/21: 26), earning a surplus and margin of £1.6m and 48% (Q3 20/21: £0.8m / 40%).     

The overall surplus after tax, which incorporates interest costs, was £33.6m (Q3 20/21: £41.2m), driven by the items outlined above in combination with one-off loan breakage costs exceeding the equivalent prior year cost by £2.3m.  When one-off depreciation and loan breakage costs are adjusted for net surpluses after tax are in line with the prior year. 

Outlook

For the fourth quarter turnover is expected to grow in line with new units coming into management, inflationary rental increases (that occur later in the year for some properties) and further sales activity. The economic environment is expected to be challenging, with increased costs and supply chain issues set to continue as the year progresses.  Major works programmes are expected to experience an element of catch up, which will impact expenditures. 

Development review

Developments have continued in line with projections in quarter three, with 256 homes completions (31 December 2020: 248).  Of these, 39 (15%) were built for social rent, 117 (46%) for affordable rent and 100 (39%) for shared ownership.  At 31 December 2021, Platform owned a total of 46,968 homes (31 December 2020: 46,046).

Development expenditures were £62m in the quarter (31 December 2020: £51m).  Expenditures included c£15m in relation to the acquisition of land for a large development in Gloucestershire, expected to deliver 272 units, the majority of which are for affordable tenures. 

There were 135 shared ownership sales in the quarter (Q3 20/21: 92), making a total for the year to date of 457 (Q3 20/21: 272).   Unsold shared ownership units were 124 (Q3 20/21: 209) of which 85 were reserved. 

Outlook

Projected completions have been revised downwards due to timing, with supply chain issues and planning delays holding up schemes in the year to date.  Completions of 1,200 to 1,300 homes are expected for the year to March 2022.  The size of the programme remains consistent, with homes completions expected to recover in future years. 

Sales are expected to continue to perform strongly, with, high levels of reservations off plan set to continue into the fourth quarter. 

Platform continues to look towards more land led housing development sites to support a growing building programme.  The Group does not invest in speculative land and has no actual or expected impairment in development sites.  

Treasury review

Recent financing activity

The Group sold £50m retained bonds in December 2021.  The bonds were part of the 2055 £350m bonds issued in July 2020 and the only outstanding retained in issue.  At the point of sale a favourable gilt allowed for an all-in rate of 1.76%.

Ratings activity

Platform is rated A+ (stable outlook) by both S&P and Fitch.  Shortly after the quarter end S&P re-affirmed the rating (https://www.platformhg.com/our-ratings-).      

Debt and liquidity

Net debt was £1,139.4m (Q3 20/21: £1,104.3m).  Net debt comprised nominal values of £881.9m in bond issues, £80.0m in private placements and £494.7m in term loan and revolving credit facilities, partially offset by £304.6m in cash and cash equivalents and £12.6m in unamortised financing fees and other accounting adjustments.

Platform's weighted average cost of finance was 3.28% (Q3 20/21: 3.40%), benefitting from the low all-in rates achieved on the two capital markets transactions in September (£250m sustainability bonds) and December (£50m retained bonds) 2021, in addition to the repayment of a £33m legacy facility, which also enhanced the flexibility and consistency of funding covenants.  

Platform had sufficient liquidity as at 31 December 2021 (over £825m including undrawn committed facilities and cash and cash equivalents) to meet all its forecast needs until 2024, 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 42% at December 2021 (December 2020: 42.8%). Gearing has reduced in the last year as development expenditures have been largely funded through operating cash surpluses, including strong levels of shared ownership and fixed asset sales. Gearing was comfortably within Platform's target of maintaining gearing below 50%.

EBITDA-MRI interest cover for the quarter to December 2021 was 196% (December 2020: 226%).  The movement from the prior year is largely driven by increases to maintenance costs due to high inflation and a catch up in repairs.  The ratio remains well above Platform's guideline minimum (120%) and tightest financial covenant in its banking arrangements.

Outlook

Gearing and EBITDA-MRI interest cover ratios are expected to remain well within Platform's targets.  Some upwards pressure in gearing and downwards pressure to interest cover is expected as Platform pushes ahead with its strategic development and maintenance objectives. 

For more information please contact:

Investor enquiries

Ben Colyer - +44 7918 160990 / +44 1684 579 566

[email protected]

Media enquiries

[email protected]

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 2021. 

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.