TIDM42RA
RNS Number : 6293G
Bromford Housing Group Ltd
16 November 2022
Bromford Housing Group
16 November 2022
Bromford Housing Group trading update for the period ending 30
September 2022
-- Bromford Housing Group (BHG) is today issuing its
consolidated trading update for the six months ended 30 September
2022 (2022 HY). These figures are unaudited and for information
purposes only.
Highlights (Bromford Housing Group for the period ending 30
September 2022)
-- BHG owns and manages 46,018 homes (45,047 homes as at 30 September 2021)
-- BHG continues to maintain its G1 / V1 ratings and A+ / A2 credit ratings
-- Turnover for the period was GBP141m (2021 HY: GBP142m)
-- Social housing turnover for the period was GBP119m (2021 HY: GBP112m)
-- Social housing turnover contributed to 84% of total turnover (2021 HY: 79%)
-- Operating surplus for the period was GBP56m (2021 HY: GBP64m) *
-- Operating margin on social housing lettings was 35% (2021 HY: 36%)
-- Overall operating margin (including asset sales) was 39 % (2021 HY: 45%) *
-- Overall operating margin (excluding asset sales) was 33% (2021 HY: 33%)
-- Net margin on shared ownership sales (first tranche) was 24% (2021 HY: 23%)
-- Net margin on outright sales was 18% (2021 HY: 18%)
-- The surplus after tax for the period was GBP33m (2021 HY: GBP42m) *
-- Asset gearing as at 30 September 2022 was 39% (2021 HY: 38%)
-- EBITDA-MRI interest cover as at 30 September 2022 was 1.9x (2021 HY: 1.9x)
* In 2021 HY we divested from several local authority areas
outside of our core geography, and these strategic property sales
generated a gain on disposal of GBP11m. With our strategic
disposals well progressed, our ongoing disposal activity is much
smaller in number and 2022 HY generated a gain on disposal of
GBP3m. This is the key driver for our overall margin (including
asset sales) and surpluses falling, whilst our core margins have
remained stable from the prior year.
Commenting on the results, Robert Nettleton, Chief Executive
Officer, said:
"We are pleased to report another strong set of financial
results as we continue to support our customers in a challenging
operating environment.
At the end of March, we committed to bringing down our backlog
of repairs and we are now back to normal levels of service.
At the end of July, we experienced a malicious attempt to access
our systems from outside our organisation. Cyber security risk and
business continuity planning feature prominently on our risk
register. The training and planning we had in place enabled us to
identify the issue early to ensure there was no data breach; and
allowed us to meet our obligations to our customers whilst we
systematically investigated and reintegrated our technology. We
maintained a 100% compliance record across all areas of health and
safety. Our neighbourhood coaching service was supplemented by a
dedicated customer contact line to respond to emergencies.
As we close the period, we are pleased to have operations back
to business as usual. We are proud of our response to this
incident, leading to customer advocacy being maintained at over
80%.
Over the summer, the regulator of social housing (RSH) completed
our latest in-depth assessment re-affirmed our G1 / V1 status in
September.
In the period, we developed over 500 new homes and one in five
of these homes continue to be delivered in-house through Bromford
Developments Limited. We continue to target delivery of c.1,200 new
homes per annum as our development operations mature to a steady
state.
We have responded to government on the consultation for the rent
cap and have pro-actively modelled the impact of the proposed
levels of cap, rising inflation and higher costs of new funding. As
a fundamental component to this work, we are implementing a
strategic cost review to identify efficiency savings across the
business. We will do this whilst we continue to support our
colleagues and without compromising delivery to our customers as we
work through the challenges we face with the rising cost of
living."
Paul Walsh, Chief Finance Officer, said:
"We are pleased to have maintained our strong financial
performance, with our social housing revenue growing from GBP112m
to GBP119m, delivered at a core social housing margin of 35%. This
is under budget and prior year performance as a result of
delivering our catch up repairs.
Our shared ownership margin (24%) and sales margins (18%) have
outperformed budget to return levels similar to prior year. This
reflects the strength of the housing market in our area of
operation. Whilst we expect some slowdown in sales activity as
mortgage rates continue to rise, we are well on our way to meeting
our annual sales target of 220 to 240 homes, with 158 sale
completions in the period. We do not land bank, and do not hold
excessive levels of WIP or stock; we closed the period with only 40
unsold homes, of which 25 are now reserved.
In 2021 HY, we completed significant strategic disposal activity
outside of core geography, the success of which has led to lower
levels of ongoing disposals. Adjusting for the exceptional nature
of this activity, our overall surplus for the period remains in
line with the prior year, and budget, at GBP33m."
Imran Mubeen, Director of Treasury, said:
"As we continue to drive our sustainability agenda, we have
adopted the sustainability reporting standard and published our
first sustainability impact report 'building a sustainable future'.
We look forward to delivering our report as an annual update to set
out further progress over the coming years.
We continue to benefit from significant headroom against our
funder covenants and with the rising rate environment, have
continued to refinance legacy debt. Our loan book is now over 95%
optimised.
As we develop new iterations of the business plan, we
proactively run our shadow credit analysis to identify routes to
safe harbour on both ratings in the single A space. Whilst Moody's
and S&P Global have both revised our ratings outlook to
negative, this is only as a result of their revision of the UK
sovereign outlook to negative and is in line with the sector. There
are no factors specific to us which have resulted in these changes,
and we look forward to meeting both agencies in December.
We will provide an annual non-deal investor update in January
2023, when we will set out the impact of any confirmed rent cap and
strategic cost review on our updated business plan."
Development: housing completions and pipeline (2022 HY)
Unit Type Housing completions
2022 HY
------------------- --------------------
Social rent 216
Affordable rent 163
Shared ownership 130
Open market sales -
Total 509
-- BHG expects to complete c.1,200 new homes for the fiscal year
ending 31 March 2023; having completed 509 new homes in the first
half of the year, of which 107 were delivered by our in house
construction team.
-- BHG continues in its strategic partnership with Homes England
which delivers GBP240m of grant funding to build 4,000 homes by
2029.
Sales: performance and unsold stock (2022 HY)
Unit Type Sales
2022 HY
-------------------------------- ---------
First Tranche Shared Ownership 156
Open market sales 2
Total 158
-- BHG has completed 158 sales in 2022 HY; generating turnover
GBP2m more than budgeted. BHG expects to complete 220 - 240 sales
for the fiscal year ending 31 March 2023.
-- BHG holds 40 unsold homes at 30 September 2022, of which 25
are now reserved. BHG only holds 8 homes which have remained unsold
for over six months.
Unaudited Financial Metrics
Statement of comprehensive income 30-Sep-22 30-Sep-22 30-Sep-21
Actual Budget Actual
----------------------------------------- ---------- ---------- ----------
Turnover from social housing lettings GBP119m GBP120m GBP112m
Turnover GBP141m GBP140m GBP142m
Operating surplus (including asset GBP56m GBP55m GBP64m
sales)
Surplus after tax GBP33m GBP32m GBP42m
----------------------------------------- ---------- ---------- ----------
Margins 30-Sep-22 30-Sep-22 30-Sep-21
Actual Budget Actual
----------------------------------------- ---------- ---------- ----------
Operating margin(1) on social housing
lettings(2) 35% 37% 36%
Overall operating margin(3) (excluding
asset sales) 33% 32% 33%
Overall operating margin(3) (including
asset sales) 39% 39% 45%
Operating margin on shared ownership(4)
(first tranche) 24% 15% 23%
Operating margin on outright sales(5) 18% 8% 18%
----------------------------------------- ---------- ---------- ----------
Key financial ratios 30-Sep-22 30-Sep-22 30-Sep-21
Actual Budget Actual
EBITDA MRI interest cover(6) 1.9x 1.8x 1.9x
Social housing interest cover(7) 1.9x 1.9x 1.8x
Asset gearing(8) 39% 39% 38%
Net debt per unit(9) GBP26k GBP28k GBP25k
---------------------------------- ---------- ---------- ----------
Liquidity 30-Sep-22
Actual
------------------------------------ -------------
18 month liquidity requirement(10) GBP215m
Cash and undrawn facilities(11) GBP530m
Liquidity ratio(12) 2.5x
Unencumbered stock 11,491 homes
-------------------------------------- -------------
Credit ratings
--------------- --------------
Moody's A2 (negative)
S&P A+ (negative)
--------------- --------------
Notes:
(1) Operating surplus / Turnover
(2) General Needs, Supported housing, Affordable rent and Low
cost home ownership tenures
(3) Operating margin including asset sales includes all
activity; operating margin excluding asset sales removes gain or
loss on disposal of assets
(4) Operating surplus on First tranche shared ownership sales /
Turnover from First tranche shared ownership sales
(5) Operating surplus on outright sales / Turnover from outright
sales
(6) (Operating surplus + Depreciation + Amortisation -
Capitalised major repairs) / Net interest paid
(7) Operating surplus on Social housing lettings / Net interest
paid
(8) Net debt / Housing assets at historic cost
(9) Net debt / Total units owned and managed
(10) 18 month cashflow requirement - 20% of sales income +
GBP25m
(11) Cash and undrawn Revolving Credit Facilities (RCF)
(12) Cash and undrawn facilities / 18 month liquidity
requirement
This trading update contains certain forward-looking statements
about the future outlook for BHG. These have been prepared and
reviewed by Bromford only and are unaudited. Forward-looking
statements inherently involve a number of uncertainties and
assumptions. Although the Directors believe that these statements
are based upon reasonable assumptions on the publication date, any
such statements should be treated with caution as outlook may be
influenced by factors that could cause actual and audited outcomes
and results to be materially different. Additionally, the
information in this statement should not be construed as
solicitation or recommendation to invest in Bromford's bonds.
For further information, please contact:
Imran Mubeen, Director of Treasury
07711 221464
https://www.bromford.co.uk/investorrelations/
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END
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