Leading residential developer London Square has delivered a strong performance in its latest annual results – reflecting its absolute commitment to Greater London over the next decade by expanding its existing platform to deliver the entire eco system of tenures of affordable, private for sale and build to rent homes for people who want to work and live in London, whether renting or buying.
The latest results, year ended 31st March 2021, show increased operating profits, forward sales up and its land pipeline up by over 50 per cent to 3,543 homes, worth £1.7bn in gross development value.
Operating profit increased to £17m (2020: £10.8m), with an increase in gross profit margin to 21.3% (2020: 9.9%). The gross tangible asset value was up - £226.3m (2020: £200.7m) and the net tangible asset value increased to £148m (2020: £140.8m), with the Group maintaining a high level of liquidity, finishing the year with £33.8m of cash on the balance sheet.
The number of homes completed was 328 (2020: 559), which was above expectations given the outlook at the beginning of the year. The land pipeline increase to 3,543 homes (2020: 2,353) represents £1.7bn in gross development value (2020: £1.2bn).
Forward sales increased to £195.4m, up from £189m in 2020, a 3% growth year on year with affordable housing representing 52.4% of the value (2020: 49.4%), driven by the success achieved in London Square’s affordable housing and partnerships business.
• Residential sales – the Group has delivered a strong year given the circumstances of social distancing and lockdown
• Square Roots – launch of an Affordable Homes initiative in partnership with Federated Hermes
• London Square Partners – strategic initiative has progressed with a new development agreed with the London Borough of Waltham Forest, following contracts with Peabody and Clarion
• Strong cash management – despite the low activity forced by the COVID-19 pandemic, the Group has successfully maintained net gearing levels at 53% from 43% and finished the year in a good liquidity position (£33.8m cash) with a solid forward sales position, setting the Group up well for the next financial year.
The past year started with the UK being in full lockdown and heightened levels of uncertainty about the future. London Square was quick to respond, only losing two weeks to downtime across its development sites and with site productivity remaining above 80%, while implementing social distancing procedures. Office based staff were seamlessly transitioned to remote working. Sales staff adapted to selling virtually or maintaining social distancing where viewings were possible. By the midpoint of the year, the Group had adapted to its new trading environment, site activity was back up to full production and sales rates were exceeding those achieved in the prior year.
Looking forward, the Group will continue to grow the affordable housing initiative through Square Roots and capitalise on investor appetite through forward funding arrangements in the build to rent sector, while continuing to remain primarily a private sale residential development, investing a further £126.8m in development projects to this end.
We are realising our strategic ambition to create a unique platform to control an entire new eco-system of tenures and enabling us to deliver the numbers of affordable, private sale and Build To Rent homes required for people who want to work and live in London. Every prospective new site is now viewed through three lens for its potential – private for sale, affordable or Build To Rent - or a mix of all three tenures. The imbalance between supply and demand has been a long-term factor of the market, driven by long-term low level of housing development starts in the capital and a highly complex planning environment between the needs of local boroughs, the mayor and central government initiatives. This imbalance appears across all sectors of the residential market but is significantly impacting the provision of affordable housing in the market. The Group has been able to divert its resources to address this aspect of the market through the Square Roots initiative.