Plat Hg Fin 55 Regulatory News (17YE)

16 August 2021

Platform HG Financing Plc

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

Highlights

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) Lockdowns impacted lower new home completions in Q1 20/21

Elizabeth Froude, Platform's CEO commented:

"In this last quarter we have begun to experience the end of Covid-19 restrictions and the first signs that freedoms maybe returning to normal for our customers, people and partners. Restrictions and isolations continue to have an impact on development and major repairs programmes, but we are seeing these effects fall away, with development completions in the quarter up significantly on the prior year. We also expect our colleagues to begin to return to our offices, albeit at a significantly reduced level as we begin to establish our new ways of working.

It is pleasing to report that our robust model continues to deliver strong turnover growth, which is expected to continue for the year ahead. We expect to see some pressure on surpluses and margins relative to the prior year as maintenance programmes experience an element of catch up. We have closed this quarter with higher levels of voids than desirable however we have an active remediation plan in place. This will not threaten our commitment to strong financial metrics or our desire to push ahead with both the provision of more affordable housing for those who need it most across the Midlands and investment in energy efficiency improvements to our existing stock.

I thank our investor base for their continued support and look forward to further engagement in the coming months in line with our commitment to pro-active and transparent investor relations."

Financial review

Turnover

In the year to 30 June 2021 total turnover grew 18.3% to £74.2m (Q1 20/21: £62.7m).

Social housing lettings turnover increased by 3.0% to £57.8m (Q1 20/21: £56.1m) as a result of inflationary rental increases and a year-on-year increase in social housing units.

Shared ownership first tranche sales performed strongly in the quarter. Turnover from these sales was £13.5m in the quarter, £9.8m higher than the prior year (Q1 20/21: £3.7m) which was affected by the first national lockdown.

Turnover from social housing activities of £71.7m (Q1 20/21: £60.4m) accounted for 96.6% (Q1 20/21: 96.3%) of Platform's total turnover in the period.

Surpluses and margins

Operating surpluses excluding fixed assets sales decreased by 1.4% to £27.4m (Q1 20/21: £27.8m) and operating surpluses including sales increased by 1.8% to £29.5m (Q1 20/21: £29.0m). Growth in surplus excluding sales was lower than turnover growth as a result of higher maintenance activity during the first quarter and a higher level of voids following the lockdown period. This also accounted for the decrease in social housing lettings margins to 43.9% (Q1 20/21: 48.3%).

Operating margins from all activities decreased by 6.5% to 39.8% (Q1 20/21: 46.3%). These margins are lower than social housing lettings as they incorporate a number of lower margin activities. These include shared ownership sales and maintenance activity provided to other charitable organisations at cost. Shared ownership margins of 18.4% were broadly in line with the prior year (Q1 20/21: 18.8%).

The overall surplus after tax, which takes into account (in comparison with operating surplus measures) interest costs, increased by 1.1% to £18.6m (Q1 20/21: £18.4m). Margins on surplus after tax decreased by 4.4% to 25.0% (Q1 20/21: 29.4%) due to the relatively higher maintenance activity and a higher proportion of sales turnover as outlined above.

Outlook

The projected performance for the year to March 2022 includes continued turnover growth in line with new units coming into management, inflationary rental increases (that occur later in the year for some properties) and further sales activity. Margins are expected to remain at similar levels, with some downward pressures caused by further catch up on maintenance expenditures and the end of Covid-19 related support measures such as the Job Retention (furlough) Scheme. In addition, active investment into our existing housing stock will continue and will be supported by public sector energy grants already confirmed for our use.

Development review

Home building programme

During the quarter our home building programme continued to recover from the effects of Covid-19, with restrictions and isolations affecting progress, but not preventing completions exceeding any of the previous four quarters. A total of 396 new homes were developed in the quarter (Q1 20/21: 109), of which 72 (18%) were social rent, 146 (37%) shared ownership, 165 (42%) affordable rent, 10 (2%) rent to buy and 3 (1%) commercial properties. At 30 June 2021, Platform owned a total of 46,488 homes (30 June 2020: 45,597).

Development expenditure on new homes was £48m in the quarter, £13m higher than the prior year (Q1 20/21: £35m). The market for shared ownership properties has remained strong in the quarter, with 158 properties sold on a shared ownership basis (Q1 20/21: 46) (no properties for outright sale were developed / available for sale). Unsold shared ownership units reduced in the quarter from 206 in March 2021 to 194 (June 2020: 228). Of the 194 unsold, 125 (64%) were reserved for purchase.

Outlook

Platform is targeting approximately 1,500 completions for the year to March 2022 and continues to look towards more land led housing development sites to support a growing building programme. We do not invest in speculative land and have no actual or expected impairment in our development sites.

Covid-19 is expected to have a diminishing impact on development activity, with some effects felt in the second quarter, before tapering away. The end of the stamp duty holiday is not expected to have a material impact on sales, with the majority of shared ownership purchases coming in below the threshold for Stamp Duty Land Tax. The changes to shared ownership announced by the Government as part of the 2021-26 grant funded Affordable Homes Programme are expected to have a positive impact on demand for the product.

Treasury review

Recent financing activity

Platform is currently in the process of establishing a Sustainable Finance Framework, which will enable the Group to issue green, social and sustainability linked bonds from its £1 billion Euro Medium Term Note ("EMTN") programme. It is expected that the EMTN programme, rated A+ by S&P and Fitch, will be utilised during this financial year.

Ratings activity

Platform's outlook provided by Fitch was amended to 'stable' from 'negative' in the quarter. The outlook is linked to the UK Sovereign outlook, which was revised to 'stable' as a result of stronger resilience of the UK economy and public finances to the pandemic shock (see 'Fitch Revises the United Kingdom's Outlook to Stable; Affirms at 'AA-' ', dated 18 June 2021 at www.fitchratings.com).

Debt and liquidity

At 30 June 2021 Platform's net debt was £1,095.8m (30 June 2021: £1,083.4m). Net debt comprised nominal values of £582.1m in bond issues, £80.0m in private placements and £530.3m in term loan and revolving credit facilities, partially offset by £86.7m in cash and cash equivalents and £9.9m in unamortised financing fees and other accounting adjustments.

Platform had sufficient liquidity as at 30 June 2021 (approximately £600m including undrawn committed facilities and cash and cash equivalents) to meet all its forecast needs until half way through 2023, 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 41.4% at June 2021 (June 2020: 42.2%). Gearing was also comfortably within Platform's target of maintaining gearing below 50%.

EBITDA-MRI interest cover for the quarter to June 2021 was 218% (Q1 20/21: 212%). It remains well above Platform's guideline minimum (120%) and tightest financial covenant in its banking arrangements.

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 quarter ended 30 June 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.