Notting Hill Genesis Half year trading statement to 30 September 2021 (8389R)

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RNS Number : 8389R

Notting Hill Genesis

09 November 2021

Notting Hill Genesis Trading Update

Six months ended 30 September 2021

Overview

Notting Hill Genesis (NHG) was formed in April 2018 from the merger of Notting Hill Housing and Genesis Housing Association. We build and maintain quality, affordable homes, creating diverse and thriving communities. This is our primary purpose, and everything else we do supports that aim. We are one of the largest housing associations in England, providing around 66,000 homes across London and the south east.

The first half of the year was dominated by various lockdowns due to the Covid-19 coronavirus pandemic. We continued to evaluate the potential impact on various areas of the business, which is discussed further throughout the trading update.

The following trading update compares our unaudited accounts for the six months ended 30 September 2021 with the unaudited equivalent position, being the six months ended 30 September 2020.

Statement of comprehensive income

 
                                                6 months           6 months 
                                                ended 30           ended 30 
                                                Sep 2021           Sep 2020   Movement 
                                                    GBPm               GBPm       GBPm 
                                       -----------------  -----------------  --------- 
 Turnover                                          419.3              483.9     (64.6) 
 Cost of sales                                   (117.5)            (147.7)       30.2 
 Operating costs                                 (216.2)            (190.2)     (26.0) 
 Surplus on disposal of fixed assets                29.1                9.2       19.9 
 Gains from joint ventures                           0.8                3.0      (2.2) 
                                       -----------------  -----------------  --------- 
 Operating surplus                                 115.5              158.2     (42.7) 
                                       -----------------  -----------------  --------- 
 Net interest payable                             (66.1)             (71.5)        5.4 
 Movements in respect of financial 
  derivatives                                        5.5                2.1        3.4 
                                       -----------------  -----------------  --------- 
 Surplus to 30 September                            54.9               88.8     (33.9) 
                                       -----------------  -----------------  --------- 
 

Trading update

Overall, turnover decreased by 13.3% to GBP419.3m, while operating surplus decreased by 27.0% to GBP115.5m from GBP158.2m. The decline in surplus can be attributed to the reduction of private sales, down 41.5% from GBP177.5m to GBP103.8m primarily due to a higher level of sales, last year, at Canada Water, Wooddene and Manor Place Depot sites.

We sold 314 homes (30 September 2020: 243 homes) during the six months ended 30 September 2021. Due to the higher number of units staircased, the surplus on sale of fixed assets increased by 216.3% from GBP9.2m to GBP29.1m.

Operating costs have increased by 13.7% from GBP190.2m to GBP216.2m. This is mainly due to the increase in accelerated depreciation in respect to the write-off of cladding on buildings, and flood costs.

Joint venture income has decreased by 73.3% from GBP3.0m to GBP0.8m.

Net interest paid has decreased by 7.6% to GBP66.1m due to the reduction of drawn loans by GBP92.0m and the utilisation of the Bank of England Covid Corporate Finance facility for approximately 18 months at a favourable rate.

The fair value movement of hedged financial derivatives has resulted in a positive movement of GBP5.5m (30 September 2020: GBP2.1m).

Statement of financial position

 
                                30 Sep 2021   31 Mar 2021   Movement 
                                       GBPm          GBPm       GBPm 
                               ------------  ------------  --------- 
 Housing properties                 6,591.5       6,594.1      (2.6) 
 Other tangible assets                122.4         118.6        3.8 
 Investment properties              1,139.8       1,109.5       30.3 
 Net current assets                    99.2         185.0     (85.8) 
                               ------------  ------------  --------- 
 Total assets less current 
  liabilities                       7,952.9       8,007.2     (54.3) 
                               ------------  ------------  --------- 
 Loans due in more than one 
  year                              2,962.6       3,048.1    (101.2) 
 Unamortised grant liability        1,157.8       1,165.3      (7.5) 
 Other long-term liabilities          288.2         312.7      (8.8) 
 Capital and reserves               3,544.3       3,481.1       63.2 
                               ------------  ------------  --------- 
 Total funding                      7,952.9       8,007.2     (54.3) 
                               ------------  ------------  --------- 
 

Investment and debt analysis

Housing properties have decreased by GBP2.6m during the six months ended 30 September 2021. The decrease is mainly due to the disposal of housing assets of GBP60.3m and deprecation charge of GBP37.4m, which has been partially offset by GBP91.7m spend on affordable homes under development. The group has also incurred GBP5.2m capitalised reinvestment work on existing properties during the period.

We completed 683 properties (30 September 2020: 442 properties) since 1 April 2021, of which 269 (39%) (30 September 2020: 81 (18%)) were specifically built for social or affordable rent. An additional 36 (30 September 2020: 41) homes have been delivered via stock transfers or the purchase and repair programme.

We currently have more than 8,921 (30 September 2020: 10,082) homes in our overall development programme, of which 60% (30 September 2020: 61%) are designated as affordable or social tenure types. The movement of 1,161 relates primarily to handovers and sale of part the Aylesbury Estate first development scheme (581 homes).

Investment properties have increased by 2.7%, which is primarily due to additional spend on investment properties under development. Investment properties are revalued annually by an external third party valuer at 31 March. Investment properties have not been revalued at 30 September in either year.

Due to the pandemic and the ensuing market uncertainties, the 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 2021 was GBP3,293.8m (as at 31 March 2021: GBP3,379.3m) and undrawn facilities as at September 2021 were GBP820.1m (as at 31 March 2021: GBP879.3m).

We continue to monitor the impact of the Covid19 crisis on every area of operations where restrictions were placed. However, we remain a financially robust organisation with substantial liquidity. We also retain good relationships with our principal lenders and are ready and able to access the capital market as necessary.

Work has recommenced on our development pipeline and remediation and is likely to affect cashflow, which we continue to manage carefully. Furthermore, we issued a GBP250m sustainable bond in June 2021, and repaid the GBP300m Bank of England Covid Corporate Finance facility.

Other financial information

 
                          6 months    6 months 
                          ended 30    ended 30 
                          Sep 2021    Sep 2020            Movement 
                              GBPm        GBPm                GBPm 
                        ----------  ----------  ------------------ 
 Capitalised interest          4.7         8.7              (4.0) 
                        ----------  ----------  ------------------ 
 Housing depreciation         37.4        25.7              11.7 
                        ----------  ----------  ------------------ 
 Other depreciation            4.4         4.9               (0.5) 
                        ----------  ----------  ------------------ 
 

The decrease in capitalised interest is mainly attributable to the carrying value of on-site schemes at 30 September 2021, which is GBP242.9m lower than the carrying value of schemes on-site at 30 September 2020.

Housing depreciation has increased in the six months to September 2021 due to costs associated with the write-off of cladding.

Key performance statistics

 
                                             6 months    6 months 
                                             ended 30    ended 30 
                                             Sep 2021    Sep 2020   Movement 
                                                    %           %          % 
                                           ----------  ----------  --------- 
 Surplus as % of turnover                        13.1        18.4      (5.3) 
                                           ----------  ----------  --------- 
 Operating margin                                27.6        32.7      (5.1) 
                                           ----------  ----------  --------- 
 Operating margin - social housing 
  lettings                                       25.0        33.7      (8.7) 
                                           ----------  ----------  --------- 
 Surplus as % of income from lettings            22.4        36.7     (14.3) 
                                           ----------  ----------  --------- 
 Rent losses (voids and bad debts 
  as % of rent and service charges 
  receivable)                                     2.7         2.6      (0.1) 
                                           ----------  ----------  --------- 
 Rent arrears (gross arrears as 
  % of rent and service charges 
  receivable)                                    10.2         9.0      (1.2) 

                                           ----------  ----------  --------- 
 Interest cover (surplus before 
  interest payable, depreciation 
  and amortisation of housing properties 
  as % of interest payable)                     267.0       246.0       21.0 
                                           ----------  ----------  --------- 
 

Gearing (total loans as a % of housing properties at cost) fell from 40.0% at 31 March 2021 to 39.1% at 30 September 2021.

Full year position

Following the evacuation of approximately 1,000 residents across the Paragon six-block residential development in west London in October 2020, we continue to monitor the situation carefully. Over the past year, we have endeavoured to rehouse all social tenants, either within our own stock or in suitable alternatives with other providers and to buy back leasehold/shared ownership interests. These activities continue; currently, we have more than 85% vacant possession and are reviewing future options.

The board set a budgeted surplus of GBP46.5m for the six months ended 30 September 2021, and we achieved GBP54.9m, an uplift of GBP8.4m. Full year budgeted surplus to 31 March 2022 remains at GBP82.7m. The budget includes no allowance for mark to market movements in financial derivatives, or for movements in the value of investment properties.

 
 For further information, please 
  contact: 
 Financial enquiries 
                                             -------------- 
 Yomi Okunola, Chief Financial 
  Officer                                     07506 713 236 
                                             -------------- 
 Media enquiries 
                                             -------------- 
 Kate Jeffreys, Director of Communications    020 3815 0072 
                                             -------------- 
 

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November 09, 2021 09:27 ET (14:27 GMT)