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Platform Housing Group primed for growth as it finalises amalgamation

Insight04 Dec 2019Sarah Williams

How is “the biggest organisation that nobody’s heard of” taking control of its future? Sarah Williams meets Platform Housing Group’s chief executive Elizabeth Froude and finance director Andy Howarth

Elizabeth Froude and Andy Howarth

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A year on from its merger, Platform Housing is on track to fully amalgamate its group as it sets out its plans for growth @housingmagazine reports #ukhousing #socialhousingfinance

In the driving seat – how Platform Housing Group is taking control of its future #ukhousing #socialhousingfinance

£200m of new funding as Platform Housing gets set for full amalgamation of group #ukhousing #socialhousingfinance

Platform Housing Group is on track to fully amalgamate its group a year after its merger, as it resets its loan book and prepares to enter the capital markets next year.

The group has set out a number of strategies with a view to gaining “control of what [it] wants to do”, the provider’s new group chief executive Elizabeth Froude has said.

In an interview with Social Housing, Ms Froude and group finance director Andy Howarth said that the measures include working towards gaining a first credit rating for the provider, which has previously accessed the capital markets through aggregator Blend and is a shareholder in MORhomes.

This could extend to exploring the creation of Platform’s own Euro Medium-Term Note (EMTN) Programme, which would make the housing association one of just five to have one.

Key to achieving the autonomy the group seeks is the full amalgamation of the treasury functions of legacy organisations Waterloo Housing and Fortis Living, as opposed to the ‘two-track’ treasury approach it had adopted in the first year.

That approach essentially meant that borrowing has needed to be assigned to one or other of the legacy organisations within the group, in accordance with its loan agreements.

“Because of that issue of having to raise money in one organisation or the other, that’s why we’re very keen to amalgamate the two organisations, and that’s why the target is to get it done this [financial] year”

Platform’s accounts for the 2019 financial year put group total facilities at £1.4bn, with £1.16bn drawn and £239m available. Those accounts – likely for the last time – break down debt at the subsidiary level, citing bank finance of £735m for Waterloo and £323m for Fortis, and bond finance of £190m for Waterloo and £153m for Fortis.

These facilities include new debt secured in September 2018, a month before merger – slices of £110m and £70m to Waterloo and Fortis respectively from The Housing Finance Corporation’s Blend Funding, as well as a £135m facility with Lloyds, used to support the group during its lender negotiations.

Mr Howarth says that the funds were raised “jointly but independently… just in case there was any delay with the merger date”.

He adds: “Because of that issue of having to raise money in one organisation or the other, that’s why we’re very keen to amalgamate the two organisations, and that’s why the target is to get it done this [financial] year.”

Now, through a process to renegotiate its loans, the provider expects to complete the full amalgamation of the group by the end of the financial year.

The road to amalgamation has involved renegotiating its loan terms, as well as bringing in additional liquidity. At the initial point of merger, the new facility with Lloyds supported “a little bit of refinancing”, Mr Howarth says, with Platform retaining all its legacy lenders, but with some requiring an adjustment to their existing exposure.

Then, in the process leading to full amalgamation, all lenders except Newcastle Building Society remained with the group, and Platform decided to prepay its loan and part ways with the lender.

Mr Howarth says that the overall costs of the path to amalgamation have been minimal: “Throughout the process we have only incurred break costs of £6.7m.”

During the process, Platform also went to market for expressions of interest to raise £200m for liquidity purposes. It signed £25m of new facilities with Santander and extended its existing £100m facility with the bank, which was due to expire in May 2020.

In October, Platform agreed a further £175m in revolving credit facilities (RCFs) from MUFG and recent sector entrant National Australia Bank (NAB), bringing the group’s overall loan book to £1.565bn, up from facilities of £1.401bn at the financial year end.

The new RCFs, both for an initial five-year term with options to extend, are for £75m with MUFG, and another five-year term on £100m with NAB.

“There are a lot of people setting up their own EMTN Programmes and that’s something we’re quite interested in – so watch this space”

“The objective was to get some new lenders into the group at the right price, and we’re very pleased [with the result]. We liked the pricing, we liked the flexibility,” Mr Howarth says. “The direction of travel for us was to make sure we stay liquid, make sure that we’re doing business with people who see the vision and want to do business with us into the future. It’s also finding people who aren’t just looking at bank lending, but have a broader offer in the future.”

This may include supporting Platform in a future entry to the capital markets.

He adds: “With a development programme that’s rising to 2,000 units a year, we’ve got a requirement to go back to the market, every year to 18 months for another £250m, so the five-year funding target is going to be about £1bn. So quite clearly you are in serious capital market territory.”

Mr Howarth says that an own-name public bond is the “ultimate objective”. He adds: “There’s so much activity in the space at the moment; private placements, foreign private placements. But on the other hand, there are a lot of people setting up their own EMTN Programmes and that’s something we’re quite interested in – so watch this space.”

Just four other providers – A2Dominion, Clarion, Places for People and most recently LiveWest – have an EMTN Programme of their own. Meanwhile aggregators such as Blend and MORhomes (for which Platform is a shareholder), offer access.

While continuing to support the work of the aggregators, Mr Howarth says: “I think the size of organisation we are now, we really should be engaging with the market directly, not through an intermediary.”

Platform reported surplus before tax of £66.87m for the year, down slightly from £73.49m in 2018, due in part to investment in maintenance and safety; meanwhile turnover grew to £273.57m from £243.47m last year. At the year end, it owned and managed 44,095 homes.

“Last year, we built more affordable and social housing for Homes England than any other partner”

From ‘good’ to ‘great’

With ambitious development plans, Platform’s scale is set to grow further. In 2019, the group delivered 1,598 new homes, of which 458 were for social rent, 683 were for affordable rent and 457 were for shared ownership.

It has set a goal of delivering 2,000 annually by 2023, and is currently on track to deliver around 1,600 this year, with 600 for shared ownership and the rest at social and affordable rents.

“Last year, we built more affordable and social housing for Homes England than any other partner,” Ms Froude says.

“Whereas one-third of other people’s programmes might be oriented around market sales, all of ours is just growing our balance sheet [with assets] and growing our financial metrics, so I think that in itself gives that ability to keep growing at a steady rate.”

This commitment to social and affordable rents and to growing the group’s asset base is something the group will not “forfeit” as it moves towards a targeted 2,000 homes a year by 2023, Ms Froude says.

Describing Platform as “the biggest organisation that nobody’s heard of”, Ms Froude says that it now has an “opportunity to go from good to great”.

She adds: “Platform has been doing quite well without really pushing itself to be different, and I think what’s happened since the merger is that it now sees that it’s a very big organisation and it’s realised the scale and the potential that it has.”

In support of these ambitions is a process to ensure Platform has greater autonomy over its activities – from current and future funding through to its repairs service, development and operations.

“I think that we have something to offer the housing sector in the Midlands, in terms of a way forward”

Migrating the business to a new, single IT platform within two years is one such aim, alongside expanding the former Fortis Property Care – now Platform Property Care – across the business to deliver the majority of its maintenance programmes. The 2019 accounts set out ambition to grow turnover for the division to £50m by 2023, from £6.5m last year.

Meanwhile, when it comes to development, Platform is keen to take as proactive a role in delivery as possible.

Ms Froude says: “We’ve got a new development strategy going back to the board in December, and while we do that we want to take the opportunity to look at how we could take more ownership of sites, holistically, to allow us to ensure delivery on time, and to own the quality standards a bit more.”

Partnerships will also be key, from ongoing conversations around “big partnerships” with councils to offering a helping hand to smaller players, Ms Froude says. “We are the biggest landlord in the Midlands, and while there are a few that are almost as big as us, there are lots and lots that are much smaller.

“[These are] good organisations with a real desire to develop homes, but without the financial capacity or the skillset to do it. I think that we have something to offer the housing sector in the Midlands, in terms of a way forward.”

Platform, which became a £71.8m Homes England strategic partner in October 2018, is keen to secure funding for the next round from 2022 – if political headwinds allow. But Ms Froude is confident about her organisation’s ability to weather a range of conditions.

“I think no matter what flavour of politician we have, housing is going to remain a very high priority, and no matter what they do to the funding around this, I think we’ve got the financial capacity to deliver what we want to deliver.”