38OI Anchor 51

Anchor Hanover Group

27 November 2024

Anchor Trading Statement for six months to 30 September 2024

Unaudited trading update for the six months to 30 September 2024 for Anchor Hanover Group, trading as Anchor

Anchor, England's largest provider of specialist housing and care for people in later life, announces its trading highlights and unaudited financial results for the first half of the 2024/25 financial year.

Highlights

·  Turnover was £332.5m (September 2023: £308.4m, 7.8% increase), with higher rental income, care fees and occupancy levels driving the year-on-year increase.

·    EBITDA was £64.7m (September 2023: £50.9m, 27.1% increase).

·    EBITDA margin (excluding property sales) was 20.0% (September 2023:17.0%).

·   EBITDA MRI was £39.9m (September 2023: £22.5m, 77.3% increase), reflecting stronger EBITDA and a slower pace of planned works delivery in the first half year compared with the same period in FY24.  Delivery is set to accelerate in the final six months, in line with full year expectations.

·   Operating margin was 9.3% (September 2023: 6.5%), with lower utility costs combining with higher income to offset pay and property-related costs that remain exposed to higher inflation.

·    Gearing was 28.6% (September 2023: 30.7%), comparatively low for the social housing sector.

·    Liquidity remains strong with undrawn facilities and cash of £283.1m.

·    EBITDA MRI Interest Cover was 2.3x (September 2023: 1.4x), attributable to higher income and lower capitalised repairs.

·    A+ stable rating from Standard & Poor's ("S&P") affirmed in March 2024 (first issued March 2021).

·   G1/V1 governance and viability rating from the Regulator of Social Housing reaffirmed in November 2023.

The consistency of Anchor's corporate strategy and the financial strength and resilience of the Group through economic uncertainty and political change have enabled continuing progress to be made against the four strategic themes of the corporate plan: more and better homes; more opportunities for colleagues; being more efficient; and being more influential on behalf of older people.

Anchor's low gearing, carefully managed debt profile and strong liquidity position provide both stability and a strong platform for growth, with our investment activities and business operations managed within a highly effective risk control framework and in line with conservative fiscal policies.

Our on-going change programme sustains our focus on margin improvement and advances the transformation of our service offer so that residents continue to live in safe, affordable and well-maintained homes, and have better, more efficient ways to interact with us.  In addition, our new Care Strategy - with its focus on care quality outcomes, financial sustainability, resident satisfaction and the colleague experience - is expected to unlock significant and lasting benefits.

We welcome the direction of travel signalled by the government in the Autumn Budget to bring more financial stability to the sector. The commitment to consult on a new, five-year social housing rent settlement, £500m of investment into the existing Affordable Homes Programme and £3.4bn made available to fund decarbonisation will help support our commitment to increase the number of new, affordable homes and make improvements to our existing homes. However, in common with others in the sector, we are mindful of the challenges posed by changes to employer National Insurance thresholds and rates.  The impacts of all these changes will be reflected in our updated long-range plans.

Operational highlights

Anchor's strong reputation for providing high quality services, coupled with robust underlying demand, has seen continued high levels of occupancy in both rented housing (September 2024: 98.9%, March 2024: 98.7%), and in care (September 2024: 90.1%, March 2024: 88.9%).

Operating costs have benefited from a continued focus on efficiency to drive margin improvement and derive best value for money for the Group and its residents.

A targeted reduction in agency usage across the care portfolio has seen agency spend as a percentage of total care staffing costs come down year-on-year (September 2024: 7.1%, September 2023: 14.0%), benefiting financial margins and service delivery.

The successful forward purchasing of gas and electricity on a flexible basis continues to provide benefits both to Anchor and to our residents, reducing the energy-related component of our service charges and improving the affordability of our homes.

Such measures have provided a partial offset to inflation-linked increases to pay and property-related costs, and contributed to an operating margin of 9.3%, which is up year-on-year (September 2023: 6.5%) and when compared with the annualised result to 31 March 2024 (5.8%).

Property sales have been lower than expectations in the first half of the year and are expected to remain so for the remainder of FY25 while revised sales and marketing strategies take effect.

EBITDA MRI to September 2024 of £39.9m (September 2023: £22.5m) is comparatively better due principally to stronger EBITDA performance as well as the slower pace of delivery of capitalised major repairs (MRI) in the current year. MRI spend to September 2024 was £24.8m compared with £28.4m for the six months to September 2023, where the delivery for the same period last year was a greater proportion of the annual programme. As planned, MRI spend is accelerating in the second half of FY25 to meet full year programme expectations.

Net debt and liquidity

As at 30 September 2024, net debt was £801.8m (September 2023: £822.6m) with net cash inflows before loan drawdowns of £16.0m reducing net debt.

In July 2024, Anchor made further drawdowns totalling £100m from its private placement shelf facilities with Legal & General Investment Management and Sunlife Capital Management.  This takes the total drawings on these facilities to £125m as we continue to increase our provision of affordable and energy-efficient homes for people in later life.

Liquidity headroom increased following these drawdowns and overall liquidity remains strong with undrawn available loan facilities and cash of £283.1m (September 2023: £155.0m). Together with the retained bond capacity of £100m nominal value, we remain well-positioned to deliver on our strategic objectives.

Acquisitions and development

The growth in Anchor's care portfolio has continued with the acquisition of a 65-bed, luxury care home in Roundhay, Leeds, in October 2024. Anchor now owns and manages 121 care homes across England.

In our housing portfolio, 96 new homes were completed, and 395 homes started on site in the six months to 30 September 2024, as part of a larger current Board-approved pipeline of ca. 1,400 homes.

Our core aim is to deliver an average of at least 500 new homes per year over a rolling 10-year period. The programme will be split with an approximate mix of 70% for social or affordable rent and up to 30% of older people's shared ownership (OPSO) homes. Our developments will mostly be mixed tenure independent living schemes, predominantly apartments for older people with a local mix of low rent and shared ownership homes. Some schemes will be delivered for 100% social or affordable rent, where appropriate and supported by our Local Authority partners. This mix of tenures will deliver a positive contribution to Anchor's long-term financial plan.

Our new homes will be environmentally sustainable, meeting a minimum average SAP rating of 87 and increasing in line with our Environmental Sustainability and Net Zero Carbon Strategy to achieve net zero readiness by 2050. 

Residents and colleagues

We welcome the new Consumer Standards set by the Regulator of Social Housing that came into effect on 1 April 2024 and in due course we will attract a rating that will sit alongside our G1/V1 regulatory ratings. The benefit of new regulation is greater scrutiny and transparency over the ways in which we ensure our residents are safe in their homes and are listened to.

We continue to place an emphasis on tangible resident engagement, safety, and inclusion. Our change programme centres around service and technology improvements that deliver an efficient, affordable service that meets the diverse needs of our residents.

We acknowledge that our colleagues and customers continue to feel the effects of rising costs and we continue to provide a broad range of initiatives to support those who need it most. In the past six months our BeWise team has secured £5.6m additional cash for residents by way of access to additional benefits; up 60% from September 2023 (£3.5m).

We have ringfenced £0.3m into a hardship fund that supports residents and colleagues with household bills. The issuance of vouchers under this scheme was up 20% year-on-year.

Our continued accreditation as a Living Wage Employer means we are committed to paying colleagues the new Real Living Wage rate announced in October 2024. Anchor was the first large provider of care and housing to pay all colleagues at or above the Real Living Wage. It continues to be part of a reward and wellbeing offer to attract and retain staff in a competitive marketplace. We are also proud to have the prestigious Gold status accreditation from Inclusive Employers for our approach to colleague diversity and inclusion.

Thank you

The Board is pleased to present these half year results which evidence the continuing dedication and commitment of our colleagues to deliver the services on which our residents depend.  We are similarly very grateful to the many partners and stakeholders who work with us for the benefit of our residents.

Amanda Holgate, Chief Financial Officer

27 November 2024

Unaudited Financial Statements for the six months to September 2024

Comparatives are with Anchor's consolidated, audited year end results to 31 March 2024 and unaudited results for the six months ended September 2023.

1.     Group operating surplus including property proceeds, less amortisation of social housing grant, less Government capital grants taken to income, add back depreciation and impairment attributed to retirement housing to let and residential care homes, add back goodwill amortisation, less improvements to existing properties capitalised

2.     EBITDA MRI including property proceeds, divided by interest and financing costs less interest receivable

3.     Net debt divided by historical cost of completed properties

Anchor Hanover Group                                

Derya Filiz

Head of External Communications

2 Godwin Street

Bradford

BD1 2ST

07713 085004

derya.filiz@anchor.org.uk

communications@anchor.org.uk