15th Nov 2021 07:00
Incommunities Group Limited
Consolidated Financial Report for the 6 Months Ended 30th September 2021
|
Incommunities Group Limited
Consolidated Financial Report for the 6 Months Ended 30th September 2021
Incommunities Group Limited ('Incommunities', 'the Group') is one of the leading providers of affordable housing in the UK and is pleased to announce its consolidated results for the six months ended 30th September 2021.
These results are unaudited and are for information purposes only.
1. Headlines
The Group's budget and business plan for 2021/22 was fully revised for the likely impact of the continuing Covid-19 pandemic and post Brexit economic environment. It was approved by the Board in May 2021. In the updated budget, the year end 31 March 2022 forecast surplus was reduced, primarily as a result of additional provisions for void property losses and bad debts and the loss of income from the sale of social housing properties.
As at 30 September 2021, we have not yet seen an impact on income collection following the end of the Government support in relation to Covid-19 pandemic. The void losses and bad debts were also lower than expected.
The Group has however seen increase in operating costs comparing to the six months ended 30 September 2020, which is mainly driven by the increased level of work to address the backlog in repairs created during the lockdown measures introduced by the Government last year and the emerging increases in material and staff costs to deliver this work.
The Group continues to deliver on new development schemes and set revised 10-year development targets. Details of the Group's property development activities are set out in Section 5.
2. Financial and Operating Highlights
Income and expenditure amounts are for the six months ended 30th September 2021. Comparatives are for the prior year corresponding period (PYCP) (six months ended 30th September 2020). Balances and other information are as at 30th September 2021. Comparatives are as at the prior year end (PYE) (31st March 2021), unless otherwise stated. Please see Appendix 1 for details.
The financial and operating highlights are as follows:
Income and Expenditure
· Turnover for the period is £49.7m (PYCP: £49.9m)
· Turnover from social housing lettings for the period is £48.7m (98%) (PYCP: £47.9m 96.1%)
· Operating surplus for the period is £10.9m (PYCP: £14.1m)
· Operating margin (including gain on disposal of housing properties) is 22.1% (PYCP: 28.2%)
· Net interest payable in the period is £5.6m (PYCP: £5.3m)
· Surplus for the period is £5.4m (PYCP: £8.7m)
Balances and Capital Expenditure
· IGL managed 22,691 units (PYE: 22,651 units), and had a leasehold interest in 1,117 units (PYE: 1,117 units)
· Housing properties at cost less accumulated depreciation at the period-end is £434.3m (PYE: £431.8m)
· New homes completed in the period is 70 (PYCP: 32)
· Net debt at the period-end is ££281.9m (PYCP: £285.3m).
· Reserves at the period end are £27.1m (PYE: £21.6m)
Other Information
· S&P Credit Rating (March 2021) is A+/Negative
· Regulatory Judgement (23rd November 2020) is G2 - Governance, and V1 - Financial Viability
A number of financial performance indicators and measures, based on the consolidated results for 30th September 2021 and the comparatives, are set out in Appendix 2
3. Results Overview
The Group continues to generate most of its income from social housing activities. The half year outturn is in line with the budget, although there is still a backlog of work which needs to be addressed by the business. In line with the long-term asset strategy, the Group continues to invest in existing stock and new developments.
The Group's financial covenants, including Interest Cover, Gearing (Assets) and Net Debt per Unit, are well within the funders' requirements.
The annual review of the S&P credit rating was announced in March 2021 as A+/negative. This is a deterioration to the rating issued in March 2020 of A+/stable, reflecting the challenges facing the sector and the Group relating to future investment requirements for Health and Safety compliance and the push for carbon reduction.
4. Comments on Results
Francesco Elia, Executive Director of Finance (Interim), commented:
"Incommunities is pleased to announce a solid set of results for the six-month period, despite having to deal with the impact of the ongoing pandemic and external factors such as increased costs in materials and services. These external factors will no doubt continue for the remainder of the financial year, and we are taking steps to monitor the situation. We are strengthening our risk management framework including horizon scanning as well as instilling core financial disciplines within the business and actively engaging with our customers; suppliers and other stakeholders."
Rachael Dennis, Group Chief Executive, commented:
"We are refreshing our strategic priorities with a renewed focus on our customers, assets and people, as well as our financial performance and governance. A key focus in the first six months has been the simplification of our group structure and in September we converted to a Community Benefit Society. Our residents' safety continues to be of utmost importance, and we have also carried out a comprehensive review of our property compliance data, processes and systems. We are also embarking on a new build programme in partnership through the Homes England Strategic Framework which will ensure we continue to meet the needs of the communities within our geographical footprint."
5. Property Development Programme
The Group develops its housing properties through a dedicated subsidiary, BCHT Development Company Limited. Since April 2021 Incommunities have purchased 33 S106 properties directly from developers, with a further 35 purchased from another Registered Provider.
On 30th September 2021, the Group has 63 properties in development over several schemes. These consist of social, affordable and shared ownership properties.
The Group have been successful as part of the Together Housing Group Strategic Partnership bid agreed with Homes England to design and build 600 properties by 2026, which will benefit from Grant funding to deliver affordable, shared ownership, rent-to-buy and supported properties.
6. Funding Facilities
Total loans (net of loan issue costs) at 30th September 2021 are £281.9m (PYCP: £285.3m). No additional loans have been drawn during the period and £650k of THFC loan has been repaid.
At the period end, the Group's consolidated loan portfolio is made up of the following:
Funder | Facility Type | Facility Amount | Debt Amount | Available Amount | Final Repayment Date |
£'000 | £'000 | £'000 | |||
Bond | Fixed Rate | 250,000 | 225,000 | 25,000 | 21-Mar-49 |
Barclays | Fixed Rate | 40,000 | 40,000 | 0 | 26-Nov-43 |
Barclays | Variable Rate | 55,000 | 2,000 | 53,000 | 20-Feb-26 |
NatWest | Variable Rate | 40,000 | 0 | 40,000 | 08-Feb-29 |
RBS | Variable Rate | 20,000 | 10,000 | 10,000 | 12-Jul-29 |
Other loans | Fixed Rate | 276 | 276 | 0 | 30-Sep-51 |
Premium on issue |
|
| 7,928 | (7,928) | 21-Mar-49 |
Discount on issue |
|
| (1,548) | 1,548 | 21-Mar-49 |
Loan issue costs |
|
| (2,803) | 2,803 | 21-Mar-49 |
Fair value adj. |
|
| 1,140 | (1,140) | 30-Sep-51 |
Total |
| 405,276 | 281,993 | 123,283 |
|
Interest Cover for the 6-month period is 2.76 (PYE: 3.37) and Gearing (Assets) at the period-end is 42.1% (PYE: 45.2%). For definitions, please see Appendix 2.
7. Outlook
7.1 The RSH highlighted in its Sector Risk Profile 2021 that the UK public health and economic outlook remain unclear, the recovery remains fragile and operating margins have fallen in the sector.
During the Group's comprehensive review of risk management and assurance we have undertaken a detailed assessment of the economic outlook and associated risk considerations that could impact on the business through 2021/2022 and remain confident we are financially resilient.
7.2 As part of Group Chief Executive's review of the corporate strategy we are developing a 2-year operational plan with an emphasis on developing core business efficiency and enhancing the Group's performance culture. The Group recognises the challenge raised by future stock investment and meeting the challenge of environmental sustainability but is equally committed to ensuring the development programme is progressed.
Enquiries: Please contact Mark Wood, Director of Financial Services on 01274 257 013 or at [email protected]
Disclaimer
The information in this announcement has been prepared by Incommunities Group Limited and is for information purposes only. The Results Announcement should not be construed as an offer or solicitation to buy or sell any securities issued by the Parent, the Issuer or any other member of the Group, or any interest in any such securities, and nothing herein should be construed as a recommendation or advice to invest in any such securities.
This unaudited announcement contains certain 'forward-looking' statements reflecting, among other things, our current views on markets, activities and prospects. Actual and audited outcomes may differ materially. Such statements are a correct reflection of our views only on the publication date and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Financial results quoted are unaudited. We do not undertake to update or revise such public statements as our expectations change in response to events.
Consolidated Results for the 6 Months Ended 30th September 2021 and
Other Financial Information
Consolidated Statement of Comprehensive Income* | 6 Monthsto Sep. 21 |
| 6 Monthsto Sep. 20 |
| Movement |
| Percentage |
| £000's |
| £000's |
| £000's |
| % |
|
|
|
|
|
|
|
|
Turnover | 49,729 |
| 49,941 |
| (212) |
| -0.4% |
|
|
|
|
|
|
|
|
Operating Expenditure: |
|
|
|
|
|
|
|
Operating Costs | (41,043) |
| (37,048) |
| -3,995 |
| -10.8% |
Cost of Sales | 0 |
| 0 |
| 0 |
| 0% |
Gain on Disposal of Housing Properties | 2,306 |
| 1,195 |
| 1,111 |
| 93.0% |
|
|
|
|
|
|
|
|
Operating Surplus | 10,992 |
| 14,088 |
| -3,096 |
| -22.0% |
|
|
|
|
|
|
|
|
Interest receivable and Other Income | 9 |
| 19 |
| (10) |
| -52.6% |
Interest and Financing Costs | (5,628) |
| (5,323) |
| (305) |
| -5.7% |
|
|
|
|
|
|
|
|
Surplus Before Tax | 5,373 |
| 8,784 |
| -3,411 |
| -38.8% |
|
|
|
|
|
|
|
|
Taxation | 0 |
| 0 |
| 0 |
| 0% |
|
|
|
|
|
|
|
|
Surplus for the Period | 5,373 |
| 8,784 |
| -3,411 |
| -38.8% |
|
|
|
|
|
|
|
|
Actuarial Gain / (Loss) on Pension Schemes | 0 |
| 0 |
| 0 |
| 0% |
Total Comprehensive Income for the Period | 5,373 |
| 8,784 |
| -3,411 |
| -38.8% |
Consolidated Statement of Financial Position | 30 Sep. 2021 | 31 Mar.2021 | Movement | Change | |
| £000's | £000's | £000's | % | |
|
|
|
|
| |
Tangible Fixed Assets | 440,788 | 438,498 | 2,290 | 0.5 | |
Current Assets | 20,179 | 26,530 | -6,351 | -23.9 | |
Current Liabilities | (10,666) | (14,162) | 3,496 | 24.7 | |
Net Current Assets / (Liabilities) | 9,514 | 12,368 | -2,854 | -23.1 | |
Total Assets less Current Liabilities | 450,301 | 450,866 | -565 | -0.1 | |
Longer Term Liabilities | (359,136) | (365,188) | -6,052 | -1.7 | |
Pension Scheme Liabilities | (64,049) | (64,049) | 0 | 0 | |
Total Net Assets | 27,116 | 21,629 | 5,487 | 25.4% | |
Income and Expenditure Reserve | 27,116 | 21,629 | 5,487 | 25.4% | |
Total Reserves | 27,116 | 21,629 | 5,487 | 25.4% | |
\* The consolidated results for the 6 months ended 30th September 2021 and the corresponding prior period do not include a provision for corporation tax payable or receivable in the period, or any movements on pension schemes liabilities, both of which form part of year-end adjustments.
Other information
Other Financial Information | 6 M.E | 6 M.E | Movement | Change |
| 30 Sep. 2021 | 30 Sep. 2020 |
|
|
| £000's | £000's | £000's | % |
Turnover from social housing lettings | 48,752 | 47,975 | 777 | 1.6% |
Surplus on social housing lettings | 11,469 | 13,776 | -2,307 | -16.7% |
Amortisation of government grants | 422 | 413 | 9 | 2.2% |
Depreciation of housing properties | 8,593 | 8,738 | -145 | -1.7% |
Depreciation of other assets | 311 | 318 | -7 | -2.2% |
Capitalised major repairs | 3,974 | 4,523 | -549 | -12.1% |
Investment in new build properties | 8,648 | 4,318 | 4,330 | 100.3% |
New homes completed | 70 | 32 | 38 | 118.8% |
Other Financial Information | 6 M.E |
| Y.E |
| Movement |
| Change |
| 30 Sep. 21 |
| 31 Mar. 21 |
|
|
|
|
| £000's |
| £000's |
| £000's |
| % |
Total units owned and managed | 22,691 |
| 22,651 |
| 40 |
| 0.2% |
Total units owned | 22,320 |
| 22,280 |
| 40 |
| 0.2% |
Historic cost of properties (excl. accumulated depreciation) | 629,521 |
| 618,436 |
| 11,085 |
|
1.8% |
Cash and Cash Equivalents | 16,767 |
| 19,570 |
| -2,803 |
|
-14.3% |
Total loans | 281,993 |
| 298,868 |
| -16,875 |
|
-5.6% |
Financial Performance and Indicators for the 6 Months Ended 30th September 2021
Operating Results | 6 M.E 30 Sep.2021 | 6 M.E.30 Sep. 2020 |
Turnover from Social Housing Lettings 1 | 98% | 96.1% |
Operating Margin on Social Housing Lettings 2 | 23.5% | 28.7% |
Social Housing Cost per Unit (£) 3 | £1,818 | £1,710 |
Operating Margin (Incl. Gain on Disposal of Housing Properties) 4 | 22.1% | 28.2% |
EBITDA-MRI to Net Interest 5 | 2.76 | 3.43 |
Net Margin 6 | 10.8% | 17.6% |
Return on Capital Employed 7 | 2.4% | 3.1% |
Financial Covenants | 30 Sep. 2021 | 31 Mar. 2021 |
Interest Cover 8 | 2.70 | 3.37 |
Gearing (Assets) 9 | 42.1% | 45.2% |
Net Debt per Unit 10 | £12,510 | £13,197 |
Notes
1 Turnover from social housing lettings / Turnover
2 Operating surplus on social housing lettings / Turnover from social housing lettings
3 Revenue and capital social housing costs / Total units in management
4 Operating surplus (incl. gain on disposal of housing properties) / Turnover
5 Adjusted operating surplus / Net interest payable
(Adjusted operating surplus = operating surplus (incl. gain on disposal of housing properties) + depreciation of housing properties + depreciation of other assets - capitalised major repairs - amortisation of government grants)
6 Surplus for the period / Turnover
7 Operating surplus (incl. gain on disposal of housing properties) / Total assets less current liabilities
8 Adjusted operating surplus / Net interest payable
(Adjusted operating surplus = operating surplus (incl. gain on disposal of housing properties) + depreciation of housing properties - capitalised major repairs - amortisation of government grants)
9 Net financial indebtedness / Historic cost of properties (excl. accumulated depreciation)
(Net financial indebtedness equals total loans - cash and cash equivalents)
10 Net financial indebtedness / Total units in management
Related Shares:
Incommun.tr.49