Plat Hg Fin 55 Regulatory News (17YE)

26 November 2020

Results for the six months ended 30 September 2020

Highlights

· The onset of the Covid-19 pandemic dominated much of the half year with our key priority throughout being the safety and wellbeing of our residents and employees

· Whilst it affected many parts of our operations, normal levels of activity are largely restored and our people's dedication and the resilience of our business resulted in continued robust financial performance

· Turnover increased 5.2% to £134.3m (2019: £127.7m)

· Operating surplus increased 6.8% to £54.8m (2019: £51.3m)

· Strong shared ownership sales performance since lockdown restrictions eased

· Completed reshaping of board to align capabilities with future group strategy

· Successful £350m (£50m retained) bond issue, extending liquidity horizon to 2023 and enhancing confidence in delivering for our communities amidst current uncertainties

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 (so excludes shared ownership properties) and tenant payment methods

(4) Current tenant arrears is as at 30 September 2019 and gearing is as at 31 March 2020

(5) Figures are in respect of the 12 months ended 30 September 2019 and 2020; excluding one-off loan prepayment costs, EBITDA-MRI interest cover would have been 251% in respect of the 12 months ended 30 September 2020

Elizabeth Froude, Platform's CEO commented:

"Through this difficult period, we have remained true to our strategic direction, whilst protecting our residents, staff and financial strength. It is pleasing to report strong results and our current direction of travel means we should deliver full year operating surplus consistent with last year.

During lockdown we continued letting and selling homes as well as supporting our more needy residents via our hardship fund. Our proactive engagement with residents has ensured we retain sight of where we are most needed and allowed us to maintain good income collection.

By doing this, we have also been able to continue investing in both wider digital services for customers and maintenance and improved energy efficiency of our homes. We've also delivered more much needed homes across the Midlands. Looking ahead, we are making good progress on acquiring development sites to build more quality homes to help address the huge demand for housing.

We have continued to strengthen our board, executive and senior leadership, putting us in a strong position to provide a platform for more customers to prosper in an uncertain world."

Conference call for the credit community to be hosted by

Elizabeth Froude, CEO and Rosemary Farrar, CFO

26 November 2020, 11.00am (UK time)

Disclaimer

These materials have been prepared by Platform Housing solely for use in publishing and presenting its results in respect of the six months ended 30 September 2020. For the purposes of this disclaimer, "materials" shall mean the results press release and related investor presentation slides dated 26 November 2020, the oral presentation of the slides by Platform Housing and related question-and-answer session and any materials distributed at, or in connection with, that presentation.

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.

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.

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.

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.

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.

Operating review

Introduction

The world has changed beyond recognition in recent months due to the Covid-19 pandemic which is likely to be with us for the foreseeable future. It has had significant operational impacts on us and required colleagues to change the way we do business and interact with customers. Even more than ever, the safety and wellbeing of our colleagues, residents, suppliers and other partners is critical to Platform. The dedication of colleagues who have remained hugely committed and worked tirelessly, whilst staying safe, to maintain our operations and serve our customers and communities at this very difficult time has been inspiring.

Our success in responding to the demands placed on us with agility, empathy and speed and the strength, resilience and reliability of our business model ensured strong results for the first half of the year. Both operating and overall surpluses and related margins were ahead of last year. This was due to the effects of the Covid-19 pandemic and the related lockdown, particularly the reduction in non-essential maintenance and repairs activities that temporarily lowered costs in these areas. We remain strongly focused on managing controllable costs but, as the reduced maintenance and repairs costs will unwind in the balance of the year, we anticipate our full year results will be consistent with last year.

We have continued to reorganise our business following the Fortis/Waterloo merger and subsequent changes to the board and executive team. In the first half, we agreed the structure of our senior management reporting to the executive team who will be key to delivering our post-merger strategy. At the same time we have continued to strengthen our governance structures and procedures and the visibility of data in conjunction with improvements in IT.

We are acutely conscious at this time of staying connected and aware of our colleagues' wellbeing. Their engagement and productivity remains good and we are working hard to retain as much normality as possible whilst we build our future capability.

Service review

Supporting our customers, welfare benefits and arrears

Covid-19 has had significant impacts on the physical, mental and economic welfare of our residents and we have redoubled our support for them in this challenging period. One sign of the economic stress is the growth in the known number of residents receiving Universal Credit ('UC'), from 8,734 at 31 March 2020 to 10,934 customers at 30 September 2020, although this partly reflects the ongoing migration from legacy welfare benefits to UC. This growth may accelerate as Covid-19 related job support schemes reduce in scope.

Our support for customers in need has included an increased focus on tenant support and rent collection by managing customer accounts proactively and offering advice and guidance to customers in financial difficulties. These initiatives have been enhanced by the expansion of our hardship fund which disbursed over £160,000 in the first half of the year including approximately £130,000 to customers and £30,000 to foodbanks within our communities. Its capacity to support customers has been expanded for the balance of the current financial year. This has helped reduce the risk that customers take on expensive debt.

These measures have helped to keep arrears in check. Overall current tenant arrears were 3.31% at 30 September 2020 (30 September 2019: 2.90%).

Overall current tenant arrears are compared against the same time in the prior year as there is an element of seasonality that would affect comparability with the 2.87% arrears figure as at 31 March 2020. Over the last year, arrears have increased reflecting a number of factors including the moratorium on enforcing legal proceedings on customers in arrears, introduced as part of the UK's Covid-19 response. This ended in September 2020 and we can now seek possession of homes consistent with our normal practice once we have investigated all other possible actions. The dynamics of arrears amongst UC recipients has had different directional impacts on overall arrears. Reducing arrears has been a recent change by the DWP aligning direct payments to when rent is due where previously there was a lag. However, the increased proportion of our residents in receipt of UC has placed upward pressure on overall arrears as UC recipient arrears are structurally higher than average partly due to the known delay in new recipients starting to receive their benefits even where migrating from other benefits.

Given the elevated arrears position and challenging macroeconomic environment, we have increased our bad debt provisions by approximately 16% year on year.

Voids management

It was also challenging to let properties during lockdown, with restrictions preventing customers accessing potential new homes and our maintenance teams having to prepare properties for re-letting on a slower but safer basis. In addition, we have seen higher than usual tenancy cessations as people opt to move either back to or nearer family. However, new digital ways of working have enabled contactless customer engagement to facilitate lettings. At 30 September 2020, we had 620 vacant homes (31 March 2020: 550), including just over 200 units in shared ownership stock. Whilst challenges remain, we are working hard to return the voids position to a more normal level.

PlatformONE

In the first half of the year, we delivered the initial phase of our post-merger integration PlatformONE ERP project and our new corporate telephone solution into our customer hub. This will offer our residents an enhanced service, increased first call resolution and provide us with new insights into customer behaviours.

We will also shortly launch our new customer portal, initially allowing customers to log repair requests, set up direct debits, make payments and update account details at a time that suits them. Further functionality is due to be added such as contactless sign ups, arrears arrangements and scheduling of housing officer visits.

The next phase of the programme is currently in development and will deliver functionality focused on streamlining back office housing functions such as anti-social behaviour and tenancy management. It will also deliver new capabilities for our shared ownership sales team, enhancing lead management and marketing capabilities, helping turn more leads into sales.

The benefits of the programme will be felt by both customers and the organisation as automation releases staff capacity in our customer hub and operations teams. We expect to see efficiencies with less resource required to perform functions and more agile customer interactions, leading to increased customer satisfaction.

Asset management

Throughout lockdown we worked hard to maintain compliance and other essential maintenance activity, whilst protecting our residents and colleagues. We also quickly restarted planned works wherever possible, such as heating installations during the critical summer work period. Repairs satisfaction of 90% has remained high during this period of change but slightly below our target of 92%. Gas and fire risk assessment compliance was 99.2% and 99.3% at 30 September 2020 (31 March 2020: 99.6% and 99.0%).

The expansion of Platform Property Care ('PPC'), our internal maintenance business, continues as planned and we are on track with our objective of migrating at least 85% of our external maintenance contracts to PPC by 31 March 2021. PPC now covers our entire portfolio, providing responsive repairs, voids works and the majority of gas compliance.

Environmental, social and governance ('ESG')

Many ESG themes are deeply embedded in our sector and indeed are the foundation of our role providing affordable homes to those ill-served by the commercial market. At Platform, we continue to make a strong social contribution, for example, having built more homes for social rent in England than any other social housing provider in the last 2 years.

Our governance has also been strengthened and improved in transparency in recent years. During the first half, we completed the reshaping of the board to align its capabilities with our future strategy. More details are provided below under 'Board and senior management changes'. We also finalised the structure and responsibilities of board committees that play a critical role in supporting the work of the board.

We're evolving a focused agenda to deliver environmental improvements in our housing stock and to apply demanding standards for new housing stock. We are committed to developing this agenda although this will take time and there may be operational and financial trade-offs.

An important step in this journey has seen us commit to be an early adopter of The Good Economy's Sustainability Reporting Standard for the UK social housing sector. This will enhance the structure and consistency of ESG reporting within Platform and across our sector.

A number of other initiatives are underway to enhance our environmental performance which will benefit residents through reduced energy bills and fuel poverty. Whilst the business has one of the more energy efficient housing portfolios amongst peers (with an estimated 74% of stock having an energy performance certificate ('EPC') rating of C or better at 30 September 2020), we have recently committed to achieving 100% EPC C ratings well in advance of the government's target of 2030. This programme is expected to have an aggregate cost of £50-75 million.

As part of enhancing our properties' energy performance, we are improving the efficiency of energy systems in our homes. We are currently installing a combined hydrogen and gas heating system that, together with solar panels and battery storage, should reduce energy consumption and costs to 272 homes by an estimated 30%. In addition, retro-fitting of over 150 air source heat pumps will be completed this year. Grounds maintenance equipment is being actively replaced with electric powered equivalents and we are also trialling electric vehicle use by maintenance operatives as we aim to decarbonise our fleet.

Development review

Strategy

Platform's core purpose is to enhance life prospects for as many people as possible across the Midlands by delivering high quality affordable homes and related services. We aim to expand to address the ever growing demand for our services including by increasing our development programme such as in partnership with Homes England and to reflect customer and government requirements wherever possible.

Our development plans are focused on gradually increasing our annual home completions up to 2,000 in the coming years. To enable this we are taking a number of steps including capitalising on existing knowledge and relationships to deepen our influence in existing geographic areas in which we operate, expanding into adjacent geographies and gaining better delivery control via land-led development. We are also alive to government desire to ensure home ownership options are available for more residents which will influence future access to grant funding. To support our strategy, we have recently recruited a new executive director for growth and development who has already put in place critical enablers such as enhancing our land acquisition capabilities and refining our strategy to optimise shared ownership sales as we increase our build programme and move to an environment where partial home ownership may be a somewhat more significant part of our offering than today.

Home building programme

During the first half, our home building programme saw good progress. New home starts and land acquisition progressed well, supporting our ambition to deliver a growing and more land-led building programme, and we expect to achieve our full year target for 1,100-1,200 home completions which reflects adjustments for the effects of the UK's initial Covid-19 lockdown.

We completed 393 new homes in the half year that were all for affordable tenures - 32% for social rent, 31% for affordable rent and 37% for shared ownership. Whilst this was down from 601 in the prior year, the shortfall was significantly influenced by the Covid-19 lockdown in the first quarter and the 284 completions in the second quarter were similar to the 299 delivered in the comparable period of the prior year. As at 30 September 2020, Platform owned a total of 45,838 homes (31 March 2020: 45,510 homes).

Looking at our new homes pipeline, there were 297 housing starts in the half year with the balance of the year expected to see over 1,100 further housing starts. Within this overall programme, development starts under our strategic partnership with Homes England (under which we will receive £72 million in grant funding over the period to March 2023 to deliver 1,800 affordable homes) were 272 units in the first half with a further 600-700 new starts expected in the balance of the year. We expect the new starts programme under the Homes England framework will be of similar scale next financial year to this year. Our overall new homes pipeline has been supported by acquiring 3 major new sites on which around 500 homes will be built.

Development expenditure on new homes was £100m in the period, only modestly below the £105m incurred in the prior year. This included a significantly greater proportion of land purchase costs as we look to expand our development programme in the coming years. Period end development expenditure contractual commitments of £171m are slightly lower than the prior year-end position of £183m.

Governmental and regulatory developments

In recent months, the government has put forward a number of fundamental policy proposals with the dual purpose of retaining strength in our economy and the construction of new homes. They impact all areas of construction from planning to tenure mix and residents' ability to buy in to home ownership. These proposals have been consulted on and are intended to be implemented from 1 April 2021.

They do however all impact on the ability of the social housing sector to deliver affordable homes for both rental and ownership, markets to which we contribute significantly. We are actively engaged with policymakers to ensure they understand the potential effects of proposed changes so that all stakeholders understand our ability to deliver more homes and tolerate the ambiguity that change would bring. We remain committed to our position as a current strategic partner for Homes England. But our most fundamental tenet is to protect the resilience of our business for the long-term future.

Board and senior management changes

During the first half, Platform completed a process to both replace retiring board members and identify where additional skills and knowledge were required in order to successfully deliver our new strategy.

Having been appointed Chair designate in January 2020, in July 2020 John Weguelin, former Chief Executive Officer of Zenith Bank, became Chair of Platform. He replaced Dennis Sleath who retired at the same time.

In May 2020, Sebastian Bull, former Chief Financial Officer of Associated British Ports, and Paula Smith, current Finance Director of Strategy and Transformation at Openreach, were appointed as Non-Executive Directors. A further Non-Executive was appointed in July 2020, Heena Prajapat, former Global Vice President and Chief Information Officer of Harsco Environmental.

Another three new Non-Executive Directors were appointed in August and September 2020, Tony King, former Group Treasurer of Sanctuary Group, John Anderson, former Regional Chair of Berkeley Group, and Luciano Zonato, current Interim Programme Director - Customer & Viewer Service Transformation at ITV.

These appointments bring significant experience relevant to delivering our new strategy such as in digital, housing development, customer service, finance, infrastructure and treasury.

In addition to Dennis Sleath's retirement noted above, Philip Dearing and Jeff Sharnock also retired in July 2020. We wish them all well in their future endeavours.

The above changes mean that the boards of Platform Housing Group Limited and Platform Housing Limited now consist of 11 non-executive directors and 1 executive director.

In relation to our Executive Team, we welcomed Gerraint Oakley as Executive Director - Growth and Development. He has over 30 years' experience in property, estate and asset management, development and urban regeneration, most recently as a regional managing director of Keepmoat Homes. And having joined initially on an interim basis, Rosemary Farrar became Platform's permanent Chief Finance Officer.

Financial review

Turnover

In the 6 months to 30 September 2020, total turnover grew 5.2% to £134.3m (2019: £127.7m).

Social housing lettings turnover increased 3.8% to £112.8m (2019: £108.7m), partly reflecting the first rent increase we have been able to make for 4 years implemented in phases from 1 April 2020. The maximum increase permitted was CPI (from September 2019) plus 1%. The effects of the rent increase on turnover were supported by a year on year increase in social housing units, particularly shared ownership properties, together with an increase in other grants turnover due to furlough receipts. Growth in social housing lettings turnover was held back by higher void costs driven by the impacts of the Covid-19 pandemic.

Shared ownership first tranche sales performed well, significantly improving once the initial Covid-19 lockdown restrictions were lifted, with turnover increasing 14.4% to £14.3m (2019: £12.5m). This reflected an 8.5% increase in sales to 178 units (2019: 164 units) (with 132 in Q2 2020/21) as well as a higher average share of properties sold than in the prior year. With new shared ownership completions of 146 units and transfers into shared ownership from other property categories of a further 2 units, unsold shared ownership stock declined from 241 units at 31 March 2020 to 211 units at 30 September 2020.

Total social housing turnover of £128.6m (2019: £122.8m) accounted for 95.8% (2019: 96.2%) of Platform's total turnover in the period.

Turnover from non-social housing activities increased 16.3% to £5.7m (2019: £4.9m) driven mainly by developments for sale of £2.3m (2019: £0.3m), due to the pre-agreed sale of 15 new properties to City of Lincoln council.

Operating costs and costs of sale

Total costs increased 4.1% to £79.5m (2019: £76.4m) with operating costs decreasing 0.8% to £65.5m (2019: £66.0m) and costs of sale increasing 34.6% to £14.0m (2019: £10.4m).

Social housing lettings operating costs make up most of our costs and they fell 1.8% to £59.7m (2019: £60.8m) driven by the initial Covid-19 lockdown restrictions limiting our repairs and maintenance activities to urgent and compliance related tasks. Management costs were also lower year on year. Partially offsetting this was increased service charges, depreciation and bad debts as well as higher development services costs due to less capitalisation given lower home completions. The second half of the year is expected to see the lower year to date maintenance costs unwind. As a result of the dynamics described above, our unit social housing costs, calculated using the definition in the Regulator of Social Housing's ('RSH') Value for Money ('VfM') standard, improved 4.9% to £2,338 (year to 31 March 2020: £2,458).

Shared ownership cost of sales increased slightly ahead of related turnover due to additional build costs on a more complex new build scheme. The increase in cost of sales, related to developments for sale, reflects a pre-agreed arrangement to sell 15 properties at cost to City of Lincoln council whereas in the prior year there were no similar sales.

Interest costs

Total net interest payable in the six months ended 30 September 2020 increased 33.2% to £27.3m (2019: £20.5m). This was principally due to one-off loan prepayment costs of £6.4m and, excluding this, net interest payable increased 2.0% to £20.9m (2019: £20.5m) due to higher average debt balances.

Surpluses and margins

It is key to generate strong sustainable surpluses as 100% is reinvested and, combined with funding from financial markets and government grants, enables us to invest in our existing homes and services and build more urgently needed affordable homes.

Operating surpluses and margins improved versus the prior year due to the increased turnover and lower costs in our core social housing lettings activities outlined above. The overall surplus after tax, taking into account, versus operating surplus measures, principally interest costs, declined 10.0% to £30.6m (2019: £34.0m) driven by one-off loan prepayment costs of £6.4m (2019: £nil). The different measures of surplus and related margins for the current and prior year are set out below.

Notes

(1) Excluding gains on disposal of property, plant and equipment

(2) Excluding one-off loan prepayment costs of £6.4m in the six months ended 30 September 2020

The table below sets out the key drivers of the variance in Platform's surplus after tax between the first six months of the current and prior years.

Notes

(1) Shared ownership first tranche sales and developments for sale

Treasury review

Recent financing activity

In July 2020, Platform successfully implemented the next stage of its debt capital markets strategy, completing a very successful inaugural own name bond issue - a £350m (with £50m retained, meaning £300m was raised upfront) 35 year issue. The 1.625% coupon and 1.706% yield achieved represent all time record lows for both the social housing sector and all single A rated issuance by corporates in the long-dated sterling bond market.

Also during the period, Platform prepaid a £20m legacy loan on terms that provided a net present value benefit and immediately enhanced its cash flow based coverage ratios.

Actions related to the Covid-19 pandemic

To mitigate potential heightened liquidity risks arising from the Covid-19 pandemic, Platform took various actions, in particular accessing £100m under the Bank of England's Covid Corporate Financing Facility. We also temporarily increased our minimum cash holdings from £10m to £65m. These actions were then supplemented by the bond issue referred to above.

Debt and liquidity

At 30 September 2020, Platform's net debt was £1,088.5m (31 March 2020: £1,076.2m). Net debt comprised nominal values of £576.7m in bond issues, £80.0m in private placements and £662.5m in term loan and revolving credit facilities, partially offset by £221.2m in cash and cash equivalents and £9.5m in unamortised financing fees and other accounting adjustments.

The average cost and average life of Platform's gross drawn nominal debt at 30 September 2020 was 3.39% and 22 years respectively (31 March 2020: 3.80% and 19 years) with the enhanced metrics driven by the recent bond and, for cost of debt, the loan prepayment referred to above.

As at 30 September 2020, Platform had sufficient liquidity (approximately £800m including undrawn committed facilities and cash and cash equivalents) to meet all its forecast needs until the first quarter of 2023, taking into account projected operating cash flows, forecast investment in new and existing properties, debt service costs and maturities and forecast grant receipts.

Financial ratios

Platform monitors its performance against various financial ratios, including VfM metrics reported to the RSH, and ratios it needs to comply with under its financing arrangements.

Gearing, measured as the ratio of net debt to the net book value of housing properties, was 42.8% at 30 September 2020 (31 March 2020: 43.5%), comfortably within Platform's target of maintaining gearing below 50%. Gearing was also comfortably within the tightest financial covenant in its banking arrangements that is determined using the gross book value of housing properties.

EBITDA-MRI interest cover for the 12 month rolling period to 30 September 2020 was 198% (year ended 31 March 2020: 203%; 12 months to 30 September 2019: 224%), adversely affected by one-off loan prepayment costs of £6.8m and £6.4m incurred in November 2019 and July 2020 respectively. Excluding these amounts, EBITDA-MRI interest cover was 251% (year ended 31 March 2020: 232%; 12 months to 30 September 2019: 224%). Even including the loan breakage costs, this ratio remains well above Platform's target minimum (150%) and tightest financial covenant in its banking arrangements that is determined on a different basis.

It is expected that at the next year end these ratios will reflect a catch up in development and maintenance expenditures following Covid-19 led reductions in the first half of the year.

At 30 September 2020, Platform had over 6,000 unencumbered properties with an estimated value of approximately £360m providing the business with substantial financial flexibility to raise additional financing given its existing substantial cash and undrawn facilities resources and our current liquidity horizon.

Review of value for money performance for year ended 31 March 2020

To assist in assessing Platform's performance, we plan to include in our half year results releases an assessment of our performance against the RSH's VfM metrics for the prior financial year in the context of a group of other major social housing providers. This analysis is helpful as these metrics are defined by the RSH and reported on across the sector providing a greater degree of comparability. This information is currently not available when we publish our full year results and the RSH's own assessment of these metrics for the last financial year across the whole sector is not yet available.

We have included data published by Platform and 13 other major social housing providers in this assessment and our performance versus this group on the metrics is set out in the table below. The providers included in the analysis are set out in the footnotes to the table.

Notes

(1) Sample of social housing providers includes Platform Housing, Bromford, Clarion, Guinness Partnership, Karbon Homes, Metropolitan Thames Valley, Midland Heart, Notting Hill Genesis, Optivo, Orbit, Peabody, Riverside, Sanctuary and Sovereign Housing. We may evolve the precise make-up of the sample in future

(2) Definitions of these metrics are set out at https://www.gov.uk/government/publications/value-for-money-metrics-technical-note/value-for-money-metrics-technical-note-guidance-june-2020

(3) Unweighted or simple average of performance across the selected group of social housing providers

(4) Platform metrics as at or for 12 months ended 30 September 2020 are reinvestment: 8.6%; new supply: 2.6% and 0.0%; gearing: 42.8%; EBITDA-MRI interest cover: 198%; social housing CPU: £2,338; operating margins: 43.7% and 38.0%; and return on capital employed 4.1%

(5) A low focus on building non-social housing is viewed as giving a strong ranking due to property market risks related with such activities

(6) CPU: cost per unit; SHL: social housing lettings

Platform continues to perform strongly across these metrics.

Our strong reinvestment reflects our commitment to sustained significant but prudent investment supported by our strong margins and cash flows, competitive cost of debt and grant funding from Homes England. This is core to our key purpose of alleviating the Midlands housing shortage and providing enhanced life prospects for as many local people as possible.

Our substantial investments in housing properties flow through to our new supply metrics where the significant focus given to social housing developments over non-social is evident.

On the two credit metrics monitored by the RSH, we sit broadly at the average point on gearing whilst ranking strongly in terms of EBITDA-MRI interest cover, even more so once account is taken of the £6.8m one-off loan prepayment costs we incurred in the year to 31 March 2020.

Our performance on headline social housing cost per unit, operating margins and return on capital employed are interlinked. It was recently reported that Platform had the lowest cost per unit in the sector for the year ended 31 March 2019. We expect to maintain a leading position on this metric in the year ended 31 March 2020 and rank best amongst the group assessed here. This metric is the key driver of our superior margins.

Outlook

Platform has delivered a robust financial performance in a challenging environment. As outlined above, we expect some of the factors that assisted our performance in the first half to unwind as the year progresses so that, for the full year, operating surplus is likely to be broadly consistent with our last financial year. In the longer term, our resilient financial and operational model leave us well placed to continue delivering our long-term objectives centred on alleviating the Midlands housing shortage and providing enhanced life prospects for more local people.

Financial Statements

Legal Status

Platform Housing Group Limited ('Platform Housing Group') is incorporated in England under the Co-operative and Community Benefit Societies Act 2014 and is registered with the Regulator of Social Housing as a Private Registered Provider of Social Housing.

Platform Housing Group comprises the following entities:

Basis of Accounting

The following financial statements have been prepared in accordance with applicable United Kingdom Accounting Generally Accepted Accounting Practice (UK GAAP), the Statement of Recommended Practice for registered housing providers: Housing SORP 2018 Update and Financial Reporting Standard 102 ('FRS 102'). Platform Housing Group is a Public Benefit Entity under the requirements of FRS 102. The financial statements presented in this document are unaudited and have not been reviewed by external auditors.

The financial statements comply with the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2019. Following the implementation of FRS 102, housing properties are stated at deemed cost at the date of transition and additions are recorded at cost. Investment properties are recorded at valuation. The statements are presented in sterling and are rounded to the nearest £1,000.

As a Public Benefit Entity, The Group applies the 'PBE' prefixed paragraphs of FRS102.

Statement of Comprehensive Income for the Six Months ended 30 September 2020

The Group's results all relate to continuing activities.

Statement of Financial Position at 30 September 2020

Consolidated Statement of Changes in Reserves

Consolidated Statement of Cash Flows for the period ended 30 September 2020

Social housing properties in management at end of period

\* The equity proportion of a shared ownership property is counted as one unit.

Group

Impairment losses

Housing properties are assessed at each reporting date to determine whether an indicator of impairment exists. Where there is evidence of impairment, an assessment is carried out to estimate the recoverable amount of the asset. The recoverable amount is the higher of the fair value less costs to sell and value in use.

The current Covid - 19 pandemic has been determined to be an indicator for impairment. A full review of assets was undertaken in May 2020 but no evidence of impairment was found. Asset values continue to be monitored and no impairment has occurred in the period.