15 August 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 £80.4m (Jun-22: £72.8m), 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 £20.8m (Jun-22: £23.1m), driven by investment in homes, services to customers and cost inflation  

·   Arrears of 3.1% consistent with prior year (Jun-22: 2.9%)

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 £3.9m 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 £80.4m (Jun-22: £72.8m).  This was driven by growth in social housing lettings turnover, which increased by 11.2% to £68.5m (Jun-22: £61.6m), 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 £6.6m (Jun-22: £7.3m).  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 £75.6m (Jun-22: £69.2m) 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 £20.8m (Jun-22: £23.1m) and operating surpluses including fixed asset sales decreased by 18.3% to £21.4m (Jun-22: £26.2m).  Surpluses from social housing lettings decreased by 4.5% to £21.2m (Jun-22: £22.2m). 

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 £0.7m, representing 3.4% of total operating surplus (Jun-22: £1.6m / 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 £0.7m and 41% (Jun-22: £3.1m / 44%).  Sales in the prior year were supported by the sale of an office, for which proceeds / surpluses were £2.3m / £1.1m.    

The overall net surplus after tax, which incorporates interest costs, was £10.8m in comparison to £13.9m in the prior year.  This was due to lower surpluses on fixed asset sales (£2.4m) and operating surpluses (£2.3m), net of lower net interest costs (£1.6m).  

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 £57.2m in the period (Jun-22: £57.4m).  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 £1,327m (Jun-22: £1,198m).  Net debt comprised nominal values of £881m in bond issues, £80m in private placements and £441m in term loan and revolving credit facilities, partially offset by cash and equivalents of £62m and non-cash accounting adjustments of £13m. 

Platform's weighted average cost of finance was 3.33% (Jun-22: 3.28%). 

Platform had sufficient liquidity as at 30 June 2023 (c£470m 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

[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 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.