TIDM99WK
RNS Number : 2506H
Housing 21
22 November 2022
Housing 21
Trading update for the six months ended 30 September 2022
Housing 21 is today issuing a trading update for the six months
ended 30 September 2022 which includes various financial and
operational information. The financial information is unaudited and
provided for information purposes only.
Highlights
-- We completed 104 properties in the period taking our overall
property portfolio to 22,308 owned and/or managed properties (31
March 2022: 22,204 ; 30 September 2021: 21,951) with an expectation
to complete 316 units by end of the financial year
-- Turnover increased by 9.6% to GBP119.8 million (September 2021: GBP109.3 million)
-- Operating surplus was up 8.4% to GBP18.0 million (September 2021: GBP16.6 million)
-- EBITDA-MRI interest cover(1) was 179% (September 2021: 128%)
-- Gearing as at 30 September 2022 was 41.8% (March 2022: 42.6%)(2)
-- Liquidity horizon currently extends to March 2024
Notes
1. EBITDA-MRI interest cover is in respect of the 6 months ended 30 September.
2. Gearing calculated using the Regulator of Social Housing's
gearing metric; adjusting for the value of private finance
initiative and public private partnership assets, primarily within
Oldham Retirement Housing Partnership Limited, gearing was 31.4%
(31 March 2022: 31.4%).
Operating review
Despite the current challenges the sector is facing, we have
delivered a strong performance in the first half of the year and
our results are ahead of budget expectations. Whilst some of this
is due to timing of cyclical maintenance, new developments have
been commissioned sooner than anticipated, voids have improved, and
we have been relatively sheltered from inflationary revenue cost
increases to date.
Our development programme is performing largely in-line with
expectations in our business plan in terms of completions, however,
there have been fewer starts on sites due to delays in planning and
high inflation in construction prices is making the financial
viability of schemes coming forward challenging. First Tranche
Sales are behind budget but underlying demand remains strong.
Despite achieving better rate increases than budget, we are
experiencing some challenges with our care services, as we are
making greater use of more expensive agency employees and
recruitment continues to be problematic. We are embarking on one of
our largest recruitment drives to date and with the introduction of
our Extra Care Academy, which looks to provide a career path for
Care Workers with ambitions to one day progress to management
level, we are looking to attract more care workers into the sector
and significantly reduce the use of agency employees by 31 March
2023.
Void performance continues to improve and at the end of
September there were 282 units void (31 March 2022: 284 units).
Income lost through voids (re-let and major repairs) was 1.6% of
rent and service charge income during the six months ended 30
September 2022. (31 March 2022 : 2.2%).
We continue to be at the forefront of the housing sector for
energy efficiency and 99% of our properties achieved at least EPC C
at 30 September 2022 (31 March 2022: 99%). With only three schemes
left to complete, this is significantly ahead of the government's
2030 target. 25% of our properties are at EPC B level and all new
developments from 2020/21 onwards are expected to achieve this
higher standard.
Financial review
Turnover, costs and surpluses
A summary of financial performance for the six months ended 30
September 2022 compared to the same period in the prior financial
year is set out below.
6 months ended 30 September 2021 2022 Change
GBPm GBPm
-------------------------------------- ------- -------- -------
Turnover 108.4 119.8 10.5%
Social housing lettings 74.0 82.4 11.4%
Shared ownership first tranche
sales 10.6 11.0 3.8%
Outright sales(1) - 0.9 100%
Other social housing activities 2.8 3.3 17.9%
Care services 19.2 20.4 6.3%
Other non-social housing activities 1.8 1.8 0%
Operating costs and costs of
sale (92.0) (101.9) 10.8%
Gain on disposal of other assets 0.2 0.1 50.0%
Operating surplus 16.6 18.0 8.4%
====================================== ======= ======== =======
Notes
(1) Outright sales units still represent older persons housing
and have been developed as part of a wider scheme.
Turnover increased 10.5% to GBP119.8 million (2021: GBP108.4
million) primarily reflecting increased shared ownership and
outright sales, higher care income from contractual price
increases, the annual inflationary rent increase and the effect of
new schemes coming onboard.
Overall costs increased at a similar rate when compared to
turnover, an increase of 10.8% to GBP101.9 million (2021: GBP92.0
million) driven particularly by development cost of sales, linked
to the increase in activity (shared ownership and outright sales of
85 units versus 81 in the prior year) and higher care costs through
the use of agency employees. Service costs have increased but are
fully recovered from residents via their service charge. We
continue to catch up on cyclical maintenance work that was delayed
during the pandemic and much like the rest of the sector we are
starting to see increased costs due to high inflation and supply
chain disruption. Depreciation has also increased from the
on-boarding of new schemes.
Development
In the six months ended 30 September 2022, development spend
amounted to GBP 24.8 million offset by grants of GBP8.5m.
One scheme completed which added 104 properties (34 rent; 46
shared ownership and 24 outright sale) to our property portfolio. A
further six schemes are expected to complete by 31 March 2023,
bringing total completions for the year to 316. We anticipate a
further three schemes to start on site by 31 March 2023.
Acquisitions
The Board recently approved a strategy to also grow through
acquisitions. As providers look to rationalise their operations and
dispose of non-core activities, this presents an opportunity to
acquire further high-quality older persons housing for a lower
price compared to new development. We are in discussions with
several providers, with the opportunity to on-board 514 properties
by the end of the financial year where heads of terms have been
agreed.
Treasury and financing
31 March 2022 30 September 2022
------------------------------------------ -------------- ------------------
Gross debt GBP689m GBP683m
Cash including short term investments GBP225m GBP219m
Net debt GBP464m GBP464m
Housing property value GBP1,315m GBP1,326m
Gearing 42.6% 41.8%
Cash and undrawn committed facilities(1) GBP236.1m GBP225.7m
Liquidity horizon June 2024 June 2024
------------------------------------------ -------------- ------------------
Notes
(1) Cash for these purposes includes only unrestricted cash
At 30 September 2022, Housing 21 had net debt of GBP464 million
(31 March 2022: GBP464 million) and gearing, as measured using the
Regulator of Social Housing's (RSH) value for money gearing metric,
of 41.8% (31 March 2022: 42.6%). However, including short term
investments but adjusting for the value of private finance
initiative and public private partnership assets, primarily within
Oldham Retirement Housing Partnership Limited (debt associated with
these projects is included in the RSH gearing calculation), gearing
was 31.4% (31 March 2022: 31.4%).
Our liquidity at 30 September 2022 was sufficient to meet all
forecast financing needs until June 2024, taking into account
projected operating cash flows, forecast investment in new and
existing properties, potential acquisitions, debt service costs and
maturities and forecast grant receipts.
However, we continue to actively manage our treasury portfolio
and our liquidity requirements in the short term will primarily
consist of new revolving credit facilities. We anticipate putting
additional facilities in place by June 2023 to maintain compliance
with our golden rules whilst considering our longer-term funding
strategy.
Standard & Poor's credit rating
As a reminder on 25 July 2022, S&P published the updated
rating for Housing 21 as 'A-' with a stable outlook.
The Standard and Poor's rating report included the following
comments:
"We note positively that 99% of H21's units have an energy
performance certificate of C or above, and we think the group is
better positioned than many of its peers to achieve the
environmental targets that the sector aims to meet."
Outlook
Following an announcement of a mid-year unbudgeted pay award for
our employees, anticipated cost increases in the second half of the
year and a slowdown in sales, we expect our full year operating
outturn to be GBP29.8m which is behind budget. However, through
higher returns on deposits and lower interest costs, this mitigates
the above, so the overall outturn of GBP11.3 million is expected to
be largely in-line with budget.
Disclaimer
These materials have been prepared by Housing 21 solely for use
in publishing and presenting its results for the six months ending
30 September 2022.
These materials do not constitute or form part of and should not
be construed as, an offer to sell or issue, or the solicitation of
an offer to buy or acquire securities of Housing 21 in any
jurisdiction or an inducement to enter into investment activity. No
part of these materials, nor the fact of their distribution, should
form the basis of, or be relied on or in connection with, any
contract or commitment or investment decision whatsoever. Neither
should the materials be construed as legal, tax, financial,
investment or accounting advice.
These materials contain statements with respect to the financial
condition, results of operations, business and future prospects of
Housing 21 that are forward-looking statements. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur
in the future. There are a number of factors that could cause
actual results and developments to differ materially from those
expressed or implied by these forward-looking statements, including
many factors outside Housing 21's control
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END
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