TIDM99WK
RNS Number : 5634G
Housing 21
19 July 2023
Housing 21: Unaudited trading update for the year ended 31 March
2023
Housing 21 is today issuing a trading update for the year ended
31 March 2023 which includes various financial and operational
information. The financial information is unaudited and provided
for information purposes only.
Housing 21 is a leading, not for profit, provider of Retirement
Living and Extra Care and our core purpose and commitment is to
provide high quality housing with care or support enabling older
people of modest means to live well with dignity and autonomy.
Highlights
-- We completed on 289 new properties, acquired 427 properties
from Notting Hill Genesis, created 16 additional properties through
remodelling existing schemes and disposed of 51 properties giving a
net increase of 681 properties in the year taking our overall
property portfolio to 22,885 owned and/or managed properties (31
March 2022: 22,204)
-- Turnover increased 12.1 percent to GBP251.5 million (2022:
GBP224.4million), namely due to an increase in service charge
income which is profit neutral.
-- Operating surplus (1) was down 14.6 percent to GBP26.4 million (2022: GBP30.9 million)
-- Gearing as at 31 March 2023 was 40.7 percent (31 March 2022: 42.6 percent) (2)
-- EBITDA-MRI interest cover was 130.9 percent (2022: 126 percent(3) )
-- Liquidity horizon currently extends to April 2025.
Notes
(1) Operating surplus includes first tranche and outright sales
of newly developed properties and other gains on property
sales.
(2) Gearing calculated using the Regulator of Social Housing's
gearing metric which excludes monies held on short term deposit;
adjusting for this and the value of private finance initiative and
public private partnership assets, primarily within Oldham
Retirement Housing Partnership Limited, gearing was 35.1 percent
(31 March 2022: 31.4 percent).
(3) 2022 EBITDA-MRI excludes GBP14.0 million of break costs
incurred in the repayment of the legacy RPI debt. Including this,
the EBITDA MRI is 83 percent.
Operating review
We continue to operate in a difficult financial and political
environmental, often impacted by factors outside of our control.
We're acutely aware of the impact the cost-of-living crisis is
having on our residents and our employees but through the
establishment of our award winning Heling Hands Fund, which aims to
offer a one-off grant for emergencies or an unexpected bill, the
expansion of our 'Tenancy Guru' service whose aim is to maximise
benefits available and claimed additional GBP5million of benefits
for our residents this year alone and offering a mid-year pay award
to our lowest paid employees has helped them navigate these
difficult times.
Despite these challenges we finished the year with an outturn of
GBP26.4 million (2022: GBP30.9 million) and with higher returns on
our investments giving an overall outturn of GBP9.7 million (2022:
GBP11.9 million, excluding exceptional items). This includes
impairments of GBP1.6 million, split between GBP0.8m on our market
rent portfolio and GBP0.8m on a development scheme, and a GBP1.2
million cumulative adjustment to income on one of our PFI projects
due to higher inflation forecasts in the coming years impacting
when income is recognised, however the project remains profitable.
Excluding these, our outturn would have been GBP12.5 million which
is better than expected.
Our development programme performed largely in-line with budget
in terms of completions and we completed on 289 properties across
six schemes and continue to work towards delivering at least 400
properties per annum. Starts on sites were down on the previous
year due to delays in planning, grant approvals and the upward
trend in construction prices making the financial viability of
schemes coming forward challenging. We have a very healthy
programme of prospects and hope that in future we will be able to
meet our development goals, despite the continuing challenges of
planning approvals and other pressures. First tranche and outright
sales were behind budget, but underlying demand remains strong. We
are not reliant on these sales to meet our banking covenants or our
treasury golden rules.
Whilst there was a slight drop in new developments, we did see a
strong increase in acquisition opportunities and in February 2023
we purchased seven Extra Care schemes (427 properties) from Notting
Hill Genesis together with the care contracts.
We have also taken the opportunity to review our portfolio and
have taken the decision to sell a small portfolio of market rent
stock for older persons and expect these to be sold by September
2023. When costs to dispose are included, we are expected to make a
loss of GBP0.8million and as such have included an impairment to a
similar value in our year-end outturn.
At 31 March 2023 there were 304 units void (31 March 2022: 284
units). Despite this small increase in the number of properties,
income lost through voids (re-let and major repairs) was 1.7
percent for the year ending 31 March 2023 (31 March 2022: 2.2
percent) as we are seeing more back-to-back lets, reducing the time
our properties are empty.
Despite achieving better care rate increases than budget, we are
still experiencing some challenges with our care services. Agency
usage is still higher than we would like but did reduce in the
second half of the year. We remain committed to attracting more
Care Workers into the sector by professionalising care as a career
through initiatives such as the industry-first Extra Care Academy
and the 50p hourly enhancement for qualified employees introduced
this year.
We continue to be at the forefront of the housing sector for
energy efficiency and 99.4 percent of our properties achieved at
least Energy Performance Certificate (EPC) C at 31 March 2023 (31
March 2022: 99 percent). This is significantly ahead of the
Government's 2030 target and 32 percent of our properties are at
EPC B level and all new developments are expected to achieve this
higher standard. The properties not yet achieving the minimum
standard are where residents have refused the works and will be
completed once the property becomes vacant or work is being
undertaken as part of a wider project,
Financial review
Turnover, costs and surpluses
A summary of financial performance for the 12 months ended 31
March 2023 compared to the same period in the prior financial year
is set out below.
12 months ended 31 March 2022 2023 Change
GBPm GBPm
------------------------------------- -------- -------- --------
Turnover 224.4 251.5 12.1%
Social housing lettings 152.4 178.6 17.2%
Shared ownership first tranche
sales 22.4 20.0 (10.7%)
Other social housing activities 6.0 6.8 13.3%
Care services 38.2 42.5 11.3%
Other non-social housing activities 5.5 3.6 (34.5%)
Operating costs and costs
of sale (194.1) (225.4) 16.1%
Gain on disposal of other housing
properties 0.6 0.3 (50.0%)
Operating surplus 30.9 26.4 (14.6%)
===================================== ======== ======== ========
Turnover increased 12.1 percent to GBP251.5 million (2022:
GBP224.4 million) primarily reflecting higher service charge income
(however this is profit neutral and is offset by higher service
charge costs), higher care income from contractual price increases,
the annual inflationary rent increase and the impact of new
properties coming on board.
Overall costs increased ahead of turnover, by 16.1 percent to
GBP225.4 million (2022: GBP194.1 million) in part because of an
increase in planned maintenance (which was expected), the impact of
our growth over recent years and inflation increasing our cost
base. The biggest increase was in service charges, but these are
fully recovered from our residents. Care costs increased due to
high rates of agency employees and people costs increased due to an
unbudgeted mid-year pay award. Depreciation has also increased from
the onboarding of new schemes.
Growth and investment
In the 12 months ended 31 March 2023, development spend amounted
to GBP59.7million (2022: GBP48.2million). Six schemes completed
comprising 289 properties (199 rent; 66 shared ownership and 24
outright sale). We have another 11 schemes on -site, comprising 519
units (470 rent and 49 shared ownership) however three developments
have paused while new contractors are sought following the
administration of the original contractor. This often results in
higher costs to completion and remediation works, triggering an
impairment assessment. In year we have recognised an impairment of
GBP0.8 million on a development in Cornwall.
At least five more schemes are expected to commence construction
by 31 March 2024. We work alongside Homes England to help deliver
our growth ambitions and continue to have grants approved through
their continuous market engagement programme, in addition to
working with local authority partners to access additional support.
For the year just gone, we received GBP15.9million (2022:
GBP23.5million) in capital support.
In addition, we spent GBP30.3million investing in our existing
properties and GBP64.5million acquiring properties from other
register providers and buying back shared ownership and leasehold
properties.
Treasury and financing
31 March 2022 31 March 2023
--------------------------------------- -------------- --------------
Gross debt GBP689m GBP680m
Cash including short term investments GBP225m GBP129m
Net debt GBP464m GBP551m
Housing property value GBP1,315m GBP1,434m
Gearing 42.6% 40.7%
Cash and undrawn committed facilities GBP236.1m GBP132.5m
(1)
Liquidity horizon June 2024 April 2025
--------------------------------------- -------------- --------------
Notes
(1) Cash for these purposes includes only unrestricted cash
At 31 March 2023, Housing 21 had net debt of GBP551 million (31
March 2022: GBP464 million) and gearing, as measured using the
Regulator of Social Housing's ('RoSH') value for money gearing
metric, of 40.7 percent (31 March 2022: 42.6 percent). However,
including short term investments and 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 RoSH gearing calculation),
gearing was 35.1 percent (31 March 2022: 31.4 percent).
Our liquidity at 31 March 2023 is sufficient to meet all
forecast financing needs until March 2025, considering projected
operating cash flows, forecast investment in new and existing
properties, debt service costs and maturities and forecast grant
receipts.
In May 2023, we agreed a new GBP50 million revolving credit
facility. We plan to raise additional finance later in the current
financial year to ensure on-going compliance with our Treasury
Golden Rules.
Standard and Poor's credit rating
On 25 July 2022, S&P affirmed the rating for Housing 21 as
'A-' with a stable outlook.
RSH
Housing 21 is rated G1/V1 by the Regulator of Social Housing,
reaffirmed in November 2022.
Outlook
In the next 12 months we will continue to grow, partly through
acquisition, with the purchase of an additional 547 units already
agreed. The economic environment remains challenging with inflation
not falling as fast as expected and interest rates still rising. We
expect our outturn for 2023/24 to increase to GBP13.3 million. We
were exempt from the RoSH' seven percent rent cap, so our rents
will rise by 11.1 percent, which reflects September 2022 CPI plus
one percent. However, we have made a charitable donation of GBP200
to each household, excluding our leasehold portfolio and those
households managed on behalf of other organisations, along with
expanding our Helping Hands Fund to help with the rising cost of
living.
We are currently in consultation with the ExtraCare Charitable
Trust regarding a potential merger, with a decision expected by the
end of 2023.
Disclaimer
These materials have been prepared by Housing 21 solely for use
in publishing and presenting its results for the year ended 31
March 2023.
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 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 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 several 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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