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S&P revises Places for People’s outlook to negative due to merger activity and stock investment
Large landlord Places for People (PfP) has seen its outlook downgraded from stable to negative by S&P Global Ratings.
The credit ratings agency said the shift was due to the risk that higher costs from investment in existing stock and ongoing development could weaken PfP’s financial metrics “on a sustained basis”.
S&P also pointed to the risks of the landlord’s aspirations to absorb “weaker entities”. It said, however, that the integration of Origin Housing as a subsidiary would not “materially impact PfP’s financials”.
Origin, a non-compliant landlord, formally joined PfP in April.
In February, PfP received approval for a merger with another small landlord, South Devon Rural Housing Association.
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S&P said it expected PfP’s financial metrics to recover, “but remain weaker than historical ones due to continued high investments in existing homes and debt funding of new homes”.
It added that the landlord’s performance would improve with the “moderation of investments in existing homes and rent increases outpacing cost growth”.
S&P explained it could lower the rating in the next two years if PfP’s EBITDA (earnings before interest, tax, depreciation, amortisation) margins remained around 15% and interest cover was “substantially” below 100% on a sustained basis.
The agency expects the association’s margins to gradually improve, but remain below 20% up to 2027.
A revision back to a stable outlook is also possible, “if management’s actions to contain costs are effective” and PfP performs in line with S&P’s base-case scenario.
“We project that PfP’s management will recover its financials indicators after two fairly weak years,” the agency said.
“This is underpinned by balancing cost pressures, delivering efficiencies in its repairs model, cost controls, and rents growth outpacing costs inflation.”
It added that PfP’s liquidity position is anticipated to be “very strong” over the next 12 months.
S&P also revised its outlook for PfP’s finance vehicle, Places for People Treasury, to negative from stable.
It affirmed the landlord’s A- long-term issuer credit rating and its A- rating of its issued debt.
PfP’s most recent annual accounts revealed it delivered 1,750 homes in 2023-24, up from 1,326 the previous year.
The association reported a turnover of £831.6m, down from £849.6m the previous year, while its reserves increased from £877.8m to £949.9m in 2023-24.
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