Karbon Homes Group: 6 month trading statement

Karbon Homes Group

14th December 2020

Karbon Homes Group trading update for the period ending 30 September 2020

· Karbon Homes Group (KHG) is today issuing its consolidated trading update for the period ended 30 September 2020.

· These figures are unaudited and for information purposes only. 

Highlights for the period ending 30 September 2020

· KHG own and manage 26,546 homes

· Turnover for the period was £67.9m (2019: £66.1m)

· Operating surplus (including asset sales) for the period was £20.8m (2019: £20.3m)

· Overall operating margin (including asset sales) was 31% (2019: 31%)

· Overall operating margin (excluding asset sales) was 30% (2019: 30%)

· Net margin on shared ownership (first tranche) was 30% (2019: 20%)

· The surplus before tax for the period was £12m (2019: £12m)

· Gearing as at 30 September 2020 was 48% (2019: 44%)

· Return on capital employed for the period was 2% (2019: 2%)

Commenting on the results, Scott Martin, Executive Director of Resources, said:

"The past six months has seen an unprecedented situation across the UK as a result of the Covid-19 pandemic. During this time, our focus has been on

the health and wellbeing of our colleagues, customers and those living in our communities.

As a landlord, we recognised the vital role we could play in offering local support during this very challenging time. We immediately identified our

most vulnerable customers (over 7,000) and contacted them to see if they needed any assistance from us.

We are also incredibly proud to have increased the volunteers for our Silver Talk service that provides a regular weekly call to those customers

who are experiencing isolation or loneliness. There are now 360 customers receiving a weekly call and we're receiving really positive feedback.

We know many customers have been struggling financially during this period and our Money Matters Team has offered a range of money advice

to 3,245 customers in this six-month period to 30th Sept 2020. This builds on our performance during the year to 31st March 2020, where we provided advice to

over 5,300 tenants, helping them to access an additional £6.5m of income.

Providing financial support locally was also important and so we invested over £120k to 104 charities and community groups who were delivering

vital support and services during the pandemic.

Towards the end of March, we prioritised all emergency and essential repairs and maintenance activity with 11,652 emergency and out of hours repairs

completed in this six-month period. As restrictions eased, we carefully reintroduced more services with detailed risk assessments and Covid-safe

measures in place to protect both colleagues and customers. We have continued to keep customers updated with any changes to our services with

regular communication and our Customer Relationship Team have been there to help throughout.

We believe our response to Covid-19 has helped us achieve high levels of customer satisfaction and we achieved a Net Promoter Score of +52

at the end of September 2020.

Despite the heavy restrictions across the UK, we are still making very good progress on our plan to build high quality affordable housing, and have

delivered 139 new homes in the first six months of this financial year.

We are expecting to be able to deliver on our business plan aim of 475 new homes this year as our building and construction partners re-group

in the second half of the year.

We were also very pleased to have issued our £100m retained bonds in June 2020, thus providing Karbon with excellent liquidity to support our strategy

in the years ahead.

We, therefore, look forward to continuing successes in delivering new homes whilst continuing to drive operating efficiencies and strong financial results.

Finally, we are pleased to update that, as of 9th Dec 2020, both boards of Karbon Homes Limited and Byker Community Trust have agreed to progress

towards formal partnership arrangements, building on the existing strong relationship between the two organisations. This process is due to complete

in readiness for the beginning of the next financial year 2021/22.

Our unaudited 6 monthly Group results and other key indicators are displayed below

Unaudited Financial Metrics

30-Sep

30-Sep

2020

2019

Actual

Actual

£'000

£'000

Statement of Comprehensive Income

Turnover

67,865

66,088

Operating Surplus (including asset sales)

20,809

20,339

Surplus before tax

11,742

11,959

Margins

Overall operating margin (incl. asset sales) (Note 1)

31%

31%

Overall operating margin (excl. asset sales) (Note 2)

30%

30%

Operating margin on shared ownership (first tranche) (Note 3)

30%

20%

Key Financial Ratios

Interest cover (EBITDA MRI) (Note 4)

281%

296%

Gearing (Note 5)

48%

44%

Return on Capital Employed (ROCE) (Note 6)

2%

2%

30-Sep

2020

Liquidity

24-month liquidity requirement (£'000) (Note 7)

98,508

Cash and undrawn facilities (£'000) (Note 8)

285,643

Unencumbered stock (no of properties)

4,497

Value of unencumbered stock (Avg of EUV and MV, £'000) (Note 9)

160,443

Loan security excesses (Avg of EUV and MV, £'000) (Note 10)

123,702

Credit Rating

S & P

A (stable): 27th May 2020

Notes:

1) Operating margin including asset sales includes all activity

2) Operating margin excluding assets sales removes gain or loss on disposal of assets

3) Operating surplus on First tranche shared ownership sales / Turnover from first tranche shared ownership sales

4) (Operating surplus + Depreciation + Amortisation - Capitalised major repairs) / Net interest paid

5) Group Net Debt / Group Housing assets at historic cost less depreciation (RSH VFM Gearing definition), differs to Karbon's banking gearing calculation

which is defined as Net Debt/Housing assets at historic cost, and informs our internal Golden Rules

6) Operating Surplus (incl. asset sales) / Total Assets less current liabilities

7) 24-month cashflow requirements

8) Cash and undrawn RCF (Revolving Credit Facilities)

9) Value of stock not held by a lender or security trustee, at average £35k per unit

10) Value of excess security held with current lenders or Prudential Trustees

This trading update contains certain forward-looking statements about the future outlook for Karbon Homes Group. These have been prepared and

reviewed by Karbon 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 future 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/recommendation to invest in Karbon's bonds

For further information, please contact:

Andrew Thompson, Assistant Director: Treasury

07917 642957

https://www.karbonhomes.co.uk/corporate/

END