TIDM85FA
RNS Number : 7284T
Notting Hill Genesis
16 November 2023
Notting Hill Genesis Trading Update
Six months ended 30 September 2023
Resilient performance delivered in more challenging operating
conditions.
The following trading update compares the group's unaudited
accounts for the six months ended 30 September 2023 with the
unaudited equivalent position, being the six months ended 30
September 2022.
Overview and highlights
-- An increase in rental income was offset by increased
operating costs, lower new home sales and higher spend on safety
and repairs, resulting in a reduction in operating surplus to
GBP78m.
o Operating costs increased by GBP38.2m, impacted primarily by
the high inflationary environment. Cost inflation has significantly
outpaced rental income because rent growth has generally been
capped at 7% to help resident affordability.
o Project phasing impacted the sale of new homes, which is
expected to be second half weighted and lower than the last
financial year.
o Lower volumes of shared ownership staircasing due to
challenging economic conditions and increasing pressure on
residents' finances.
o Additional GBP15.1m was spent on safety and repairs.
-- The organisation launched a new corporate strategy in the
period, 'Better Together', which sets out our vision for improving
the services and homes we provide as well as the estates and places
where our residents live. This includes a commitment to invest
GBP500m over the next 10 years to improve the quality of residents'
homes.
-- We continued to invest in our estate to create better homes
for our residents. This includes GBP32.8m on compliance costs such
as lifts, fire risk action and remedial works as well as GBP9.6m on
our planned investment programme, which includes energy improvement
works, cyclicals and upgrading kitchens and bathrooms.
-- We spent GBP0.6m on social value projects in our communities,
such as careers fairs and business incubators, which delivered
GBP11m of social value according to HACT's Social Value Insight
tool.
Patrick Franco, chief executive officer , said: "We have
delivered a resilient performance in the first half against an
increasingly challenging economic backdrop. Our rental income base
remained stable although a combination of increased operating
costs, higher spend on repairs and lower sales has resulted in a
reduction in operating surplus.
"The group remains financially strong, which allows us to
continue building new homes, as well as investing to improve our
existing homes and estates. We remain on track to deliver our
GBP46m planned investment programme for 2023/2024 creating better
homes for our residents, a key goal of our Better Together
strategy.
"We are acutely aware of the impact that the external
environment is having on our residents and the pressures they face
this winter. As an organisation we are focused on providing support
through the continuation of our community investment
programmes."
Statement of comprehensive income
GBP million 6 months ended 30 September 2023 6 months ended 30 September 2022 Movement
Turnover - rent and service
charges 318.5 301.4
Operating costs (253.4) (215.2)
--------------------------------- --------------------------------- ---------
Net surplus on rental operations 65.1 86.2 (21.1)
--------------------------------- --------------------------------- ---------
Turnover - sales 12.0 67.5
Cost of sales (10.7) (57.9)
--------------------------------- --------------------------------- ---------
Net surplus on new build
sales 1.3 9.6 (8.3)
--------------------------------- --------------------------------- ---------
Surplus on disposal of fixed
assets 11.0 26.6 (15.6)
Gains from joint ventures 0.7 1.7 (1.0)
--------------------------------- --------------------------------- ---------
Operating surplus 78.1 124.1 (46.0)
--------------------------------- --------------------------------- ---------
Net interest payable (66.5) (67.1) 0.6
Gains on financial derivatives 6.7 30.0 (23.3)
--------------------------------- --------------------------------- ---------
Surplus to 30 September 18.3 87.0 (68.7)
--------------------------------- --------------------------------- ---------
Trading update
Turnover increased by 5.7% to GBP318.5m, however operating costs
increased by 17.7%, driven by the challenging macroeconomic
environment.
The surplus on rental operations has fallen by GBP21.1m, with
higher expenditure on safety and repairs (GBP15.1m) and other
property costs (GBP4m). Results for 2022 included GBP2m surpluses
on extra care properties which were sold towards the end of
2022/23.
Turnover on sales has decreased from GBP67.5m to GBP12.0m. We
sold 41 homes during the six months ended 30 September 2023 (30
September 2022: 242 homes), in line with the new build sales
programme which is budgeted to be much lower in 2023/24 overall and
is weighted towards the second half. The unsold homes at 30
September 2023 was 10 homes (30 September 2022: 115 homes).
The challenging economic climate has resulted in a lower volume
of shared owners purchasing additional shares (known as
staircasing). As a result, the surplus on sale of fixed assets
decreased by 58.6% from GBP26.6m to GBP11.0m.
Net interest and financing costs reduced by GBP0.6m comprising
of GBP2.8m increase in interest payable from a combination of
rising interest rates, addition and drawing down of new revolving
credit facilities, offset by GBP3.4m of additional interest
capitalised on development schemes.
The fair value movement of hedged financial derivatives has
resulted in a positive movement of GBP6.7m (30 September 2022:
GBP30.0m). Further positive movements on fully effective hedges of
GBP24.8m (30 September 2022: GBP43.2m) have passed through other
comprehensive income and into reserves.
Statement of financial position
GBP million As at 30 September 2023 As at 31 March 2023 Movement
Housing properties 6,920.2 6,815.4 104.8
Other assets 113.6 114.6 (1.0)
Investments 1,187.2 1,177.4 9.8
Net current assets 250.4 183.9 66.5
------------------------ -------------------- ---------
Total assets less current
liabilities 8,471.4 8,291.3 180.1
------------------------ -------------------- ---------
Loans due in more than one
year 3,430.5 3,275.1 155.4
Unamortised grant liability 1,080.5 1,086.4 (5.9)
Other long-term liabilities 173.9 186.4 (12.5)
Capital and reserves 3,786.5 3,743.4 43.1
------------------------ -------------------- ---------
Total funding 8,471.4 8,291.3 180.1
------------------------ -------------------- ---------
Investment and debt analysis
Housing properties have increased by GBP104.8m to GBP6,920.2m at
30 September 2023. The increase is largely attributable to the
continued spend on the development programme of GBP119.1m, works on
existing properties GBP23.2m (including GBP9.7m capitalised fire
remediation works), offset by disposal of housing properties
through staircasing and other sales and depreciation charges.
Investments have increased during the six-month period by
GBP9.8m to GBP1,187.2m as at 30 September 2023, due to continued
investment in the PRS schemes at Kidbrooke and Aylesbury,
delivering 176 homes that are expected to be completed by 31 March
2024.
Due to the political environment and the ensuing market
uncertainties, the group board and management continue to review
the carrying value of investments. Management have also considered
the likelihood of recovery of all debtors with specific
consideration to the level of arrears, and likelihood of
non-payment.
Group debt as at 30 September 2023 was GBP3,460.8m net of
capital loan costs and loan premia (31 March 2023: GBP3,305.2) and
undrawn facilities as at 30 September 2023 were GBP914.1m (31 March
2023: GBP1,098.3m), an increase of GBP155.4m. Notting Hill Genesis
remains a financially robust organisation with substantial
liquidity. We retain good relationships with our principal lenders
and are ready and able to access the capital market as
necessary.
The development pipeline and the remediation works are
continuing and by their nature affect cashflow, which we continue
to manage carefully.
Other financial information
6 months 6 months Movement
ended 30 ended 30
GBP million Sep 2023 Sep 2022
Capitalised interest 7.8 4.4 (3.4)
---------- ---------- ---------
Housing depreciation 28.5 29.0 0.5
---------- ---------- ---------
Amortisation of intangible
assets 3.1 2.7 (0.4)
---------- ---------- ---------
Other depreciation 1.4 1.4 (0.0)
---------- ---------- ---------
The capitalisation of the group's borrowing cost has increased
due to higher levels of development work in progress, as well as an
increase in the interest rate on new drawings in the six-month
period.
Key performance statistics (group)
6 months 6 months
ended 30 ended 30
Sep 2023 Sep 2022
% %
---------- ----------
Surplus as % of turnover 5.5 23.6
---------- ----------
Operating margin 23.4 33.2
---------- ----------
Operating margin - social housing lettings 9.7 28.2
---------- ----------
Surplus as % of income from lettings 8.6 21.9
---------- ----------
Rent losses (voids and bad debts as %
of rent and service charges receivable) 2.3 2.5
---------- ----------
Rent arrears (gross arrears as % of rent
and service charges receivable) 10.4 9.7
---------- ----------
Interest cover (surplus before interest
payable, depreciation and amortisation
of housing properties as % of interest
payable) 158.0 225.4
---------- ----------
Gearing (total loans as a % of housing
properties at cost) 38.0 37.0
---------- ----------
Social value
Continued investment to create places and communities where
people can thrive for the long term, as well as providing
opportunities for residents to improve their skills, businesses and
employment prospects. For every GBP1 invested in socio-economic
programmes focussed on employment, training and apprenticeships, we
have seen social value returns of GBP24.84 (calculated using HACT's
Social Value Insight tool).
Regeneration sites at Grahame Park and Woodberry Down are good
examples of social value delivered by the Group. Across both
estates we invest in a range of projects, including finance and
employment support programmes, careers fairs and physical wellbeing
sessions. In the first half of the year we invested GBP0.6m in
schemes at these sites, which has delivered social value exceeding
GBP11m in the 6 months to September 2023.
Full-year position
Higher expenditure on repairs and lower shared ownership
staircasing receipts are expected to continue to bring adverse
pressures on the financial surplus for the year.
For further information, please
contact:
Financial enquiries
-------------------------
Susan Hickey, interim chief financial
officer susan.hickey@nhg.org.uk
-------------------------
Media enquiries
-------------------------
Sanctuary Counsel NHG@sanctuarycounsel.com
-------------------------
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END
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November 16, 2023 08:08 ET (13:08 GMT)
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