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Wrekin Hse 48 | LSE:67TS | London | Bond |
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TIDM67TS
RNS Number : 3394O
Wrekin Housing Group Ltd (The)
07 October 2021
Wrekin Housing Group Limited
Financial Report for the Year Ended 31 (st) March 2021
Wrekin Housing Group Limited ('Wrekin', 'the Group') is pleased to announce its consolidated results for the year ended 31 (st) March 2021.
This report is for information purposes only.
1. Headlines
1.1 Despite the impact of the Covid-19 pandemic and the first national lock-down being introduced just days before the start of the financial year, the Group produced a strong performance for the year in both financial
and operational terms. In summary:
-- Following an initial period when responsive repairs services were restricted to the provision of essential repairs only, the Group very quickly returned to a position of being able to deliver its "same day" repairs service to customers as usual;
-- The Group continued to provide care and support services to customers of those services throughout the pandemic, adopting COVID-secure methods of working;
-- After a short period of closure at the beginning of the lockdown period, all the Group's construction sites opened up and the development programme remained substantially on track, with 277 new homes completed during the year (86.6% of the original target, with the remaining properties being completed in early 2021/22);
-- Approximately 25% of the original 2020/21 planned maintenance programme, which could not be delivered during the first quarter of 2020/21, will be rolled forward to 2021/22 but all essential compliance, health and safety and regulatory elements of the programme were prioritised and successfully completed during the year;
-- The Group received GBP625,000 under the government Coronavirus Job Retention Scheme.
1.2 In April 2020 the Group carried out additional stress testing on its business plan to model the likely potential impacts of the pandemic and identified mitigating actions to deal with them, principally relating to more substantial rescheduling of non-critical planned maintenance work. Procedures for the reporting of financial information to the executive management team and the Board have been enhanced. In fact, with income collection rates being maintained at pre-pandemic levels and costs being well-controlled within the agreed budget, those mitigating actions did not need to be deployed.
1.3 The recoverability of income was not adversely affected by the pandemic and levels of arrears and bad debts were maintained at pre-pandemic levels throughout the year. Rent losses from void properties were higher than in previous years, due to lettings being suspended during the first few months of the pandemic, but performance in this area is now back to pre-pandemic levels.
1.4 During the year, the Group issued GBP25m of the GBP50m retained bond. The issue achieved a price of 108 basis points over gilts, providing an all-in cost of funds of 1.92%.
1.5 In February 2021 the Group had its scheduled In Depth Assessment from the Regulator of Social Housing. As a result of this assessment the Group's regulatory judgement was reconfirmed as G1 (Governance) and V1 (Financial Viability) in April 2021.
1.6 In August 2021 Standard and Poor conducted their annual review of the Group's credit rating and this was reconfirmed as A (Stable).
2. Financial and Operating Highlights
2.1 The Statement of Comprehensive Income for the year ended 31 (st) March 2021 and the Statement of Financial Position as at 31 (st) March 2021, together with the comparatives for the prior year are set out in Appendix 1.
2.2 Other supporting financial information for the year ended 31 (st) March 2021 and the corresponding comparatives are set out in Appendix 2.
2.3 A number of key financial performance indicators and financial loan covenant calculations, based on the results for the year ended 31 (st) March 2021 and the corresponding comparatives are set out in Appendix 3.
2.4 The financial and operating highlights are as follows:
Income and Expenditure
-- Turnover for the year is GBP95,709k (2020: GBP92,093k)
-- Turnover from social housing lettings for the year is GBP76,242k (79.7%) (2020: GBP73,533k (79.8%))
-- Operating surplus for the year is GBP26,289k (2020: GBP27,784k) -- Operating margin is 27.5% (2020: 30.2%)
-- Interest payable for the year is GBP15,955k (2020: GBP69,965k, including GBP52,067k loan breakage costs
-- Surplus for the year before tax is GBP10,399k (2020: GBP41,911k deficit) -- Interest cover is 2.00 (2020: 0.45)
Balance Sheet and Capital Expenditure
-- Wrekin owns and manages 13,041 units (2020: 12,965 units). It also retains the residual freehold interest in 648 properties previously disposed of under the Right to Buy or Right to Acquire provisions (2020: 643)
-- Housing properties at cost (excluding accumulated depreciation) are GBP764,528k (2020: GBP716,636k)
-- Investment in existing and new housing properties for the year is GBP55,832k (2020: GBP54,566k)
-- New social housing units developed during the year is 277 (2020: 251) -- Total debt is GBP489,649k (2020: GBP523,228k) -- Gearing (Assets) is 59.7% (2020: 62.0%) -- Net debt per unit is GBP35,212 (2020: GBP34,514) -- Income and expenditure reserves are GBP34,868k (2020: GBP31,907k)
3. Results Overview
3.1 During the prior year of 2019/20 the Group completed its major refinancing exercise. As part of that exercise it incurred GBP52,067k of costs to break existing fixed rate loans, leading to a deficit for 2019/20 before tax of GBP41,911k. Without the breakage costs the Group would have recorded a pre-tax surplus of GBP10,156k, compared with the pre-tax surplus for 2020/21 of GBP10,399k.
3.2 Turnover increased by 3.9% in 2020/21, to GBP95,709k, but operating costs increased by 8.3%, from GBP67,962k in 2019/20 to GBP73,604k in 2020/21. Operating surplus therefore reduced from GBP27,784k (a margin of 30.2%) to GBP26,289k (a margin of 27.5%). This was mainly due to the fact that the Group booked an impairment charge of GBP2,439k in 2020/21 in respect of two of its housing schemes that have been earmarked for demolition and redevelopment. This charge has also had a significant impact on the margin from social housing lettings and the social housing cost per unit metrics.
3.3 There has been a significant year on year increase in the pension fund deficit with the Shropshire County Pension Fund, an LGPS pension, of GBP9,899k. To limit future liabilities the Group took the decision to close the scheme to new entrants with effect from 1 September 2020, replacing this scheme with a new defined contribution scheme for employees joining the Group after that date.
3.4 Surpluses on disposal of housing assets (which covers properties sold under the Right to Buy and Right to Acquire provisions) reduced from GBP3,674k in 2019/20 to GBP1,664k in 2020/21. Whilst the number of Right to Acquire and Right to Buy sales remained broadly constant in both years, the 2019/20 figure was increased due to the Group's participation in the pilot Voluntary Right to Buy scheme in 2019/20, which came to an end at the beginning of the 2020/21 financial year.
3.5 In 2020/21 the Group booked an increase in the fair value of assets of GBP2,520k (a reduction of GBP21k in 2019/20). This relates to the Group's small portfolio of market rent properties which were revalued by an independent external valuer during the year.
3.6 The Group met its financial loan covenants (interest cover and gearing) with a considerable degree of headroom against funders' requirements.
4. Property Development Programme
4.1 The Group has an ambitious development programme which aims to deliver just over 2,300 new homes over the period from 2020/21 to 2024/25, with the majority of those homes being developed via the Group's development subsidiary, Strata Housing Services Limited. The Group is on track to deliver this plan, having completed 277 new homes in 2020/21, mostly for rent at affordable and social rent levels, together with a small number of shared ownership properties, and a further 2,096 forecast to be completed over the next 4 years.
4.2 During 2020/21 the Group continued to deliver its Asset Renewal Strategy, under which older, uneconomic properties are sold on the open market as they become void, with the proceeds reinvested to support the development programme. 73 properties were sold in 2020/21 under this strategy, which was the 16(th) year of its operation. The aim of the strategy at its inception was to ensure that the Group added three new properties for every two disposed of under the strategy. In fact, it has been considerably more successful than this, with an average of 2.68 new properties added for each property sold.
5. Funding Facilities
5.1 During the year, the Group issued GBP25m of the GBP50m retained bond. The issue achieved a price of 108 basis points over gilts, providing an all-in cost of funds of 1.92%.
5.2 Total loans (net of loan issue costs) stand at GBP489,649 (2020: GBP523,228). The reduction in loans during the year primarily represents the repayment of revolving bank facilities as cash collateral was replaced with property security.
5.3 At the year end, the Group's loan portfolio was made up as follows: Funder Fixed/Variable Facility Drawn Undrawn Final Repayment Amount Amount Amount Date GBP'000 GBP'000 GBP'000 ------------- ------------- -------- Bond Fixed Rate 250,000 225,000 25,000 22/10/2048 ---------------- ------------- ------------- -------- ---------------- Nat West Fixed Rate 21,560 21,560 0 29/03/2040 ---------------- ------------- ------------- -------- ---------------- Nat West Fixed Rate 25,640 25,640 0 31/03/2036 ---------------- ------------- ------------- -------- ---------------- Santander Fixed Rate 70,000 70,000 0 22/10/2029 ---------------- ------------- ------------- -------- ---------------- Variable Nat West Rate 50,000 0 50,000 22/10/2029 ---------------- ------------- ------------- -------- ---------------- Variable AIB Rate 40,000 30,000 10,000 22/10/2026 ---------------- ------------- ------------- -------- ---------------- Nat West Fixed Rate 23,800 23,800 0 31/03/2026 ---------------- ------------- ------------- -------- ---------------- Variable Lloyds Rate 75,000 75,000 0 22/10/2024 ---------------- ------------- ------------- -------- ---------------- First Abu Dhabi Variable Bank Rate 50,000 0 50,000 22/10/2023 ---------------- ------------- ------------- -------- ---------------- Total 606,000 471,000 135,000 ------------- ------------- ---------------- Discounts/Premiums on issue (net) (1,225) ------------- ------------- -------- ---------------- Fair value adj. 19,874 ------------- ------------- ---------------- Total 489,649 ------------- ------------- -------- ----------------
6. Outlook
6.1 The organisation has managed the impact of the pandemic well and the outlook is relatively positive with continuing opportunities for growth through the Group's development programme. The Group is well-placed to deal with the implementation of the new fire and building safety regulations, having only 3 high rise blocks in its portfolio, none of which present any issues with regard to cladding. As a result of its long-standing, significant development programme and Asset Renewal Strategy, the Group is also well-placed to ensure that all its properties meet at least EPC Band C energy ratings by 2030. Achieving the net zero carbon target by 2050 presents a significant challenge to the Group, as it does to the sector as a whole, particularly against the backdrop of inflationary pressures on construction and repairs materials and shortages of skilled labour, but a significant amount of work has already been undertaken in developing the Group's approach in this area.
6.2 The confirmation of both the Group's strong regulatory judgement and its credit rating were significant achievements over the last few months and a recognition of the strength of the Group's current position.
The Group signed its financial statements for the year ended 31st March 2021 in August 2021. These are available on the Investor Information section of the Wrekin Housing Group website at https://www.wrekin.com/Pages/Corporate/investor-information.
Enquiries: Please contact Jon Lamb, Executive Director of Finance, on 01952 217059 or at jon.lamb@wrekin.com
Disclaimer
The information in this announcement has been prepared by Wrekin 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 any 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. Forecast financial results quoted are unaudited. We do not undertake to update or revise such public statements as our expectations change in response to events.
Appendix 1
Consolidated Results for the Year Ended 31 (st) March 2021
Consolidated Statement of Comprehensive 2021 2020 Movement Income GBP'000 GBP'000 GBP'000 ------------- -------------- -------------- Turnover 95,709 92,093 3,616 ---------------------------------------- ------------- -------------- -------------- Operating Costs (73,604) (67,962) (5,642) ---------------------------------------- ------------- -------------- -------------- Gain on Sale and Disposal of Housing Properties 1,664 3,674 (2,010) ---------------------------------------- ------------- -------------- -------------- Movement in the fair value of assets 2,520 (21) 2,541 ---------------------------------------- ------------- -------------- -------------- Operating Surplus 26,289 27,784 (1,495) ---------------------------------------- ------------- -------------- -------------- Interest Receivable and similar income 65 270 (205) ---------------------------------------- ------------- -------------- -------------- Interest payable, financing and similar costs (15,955) (69,965) 54,010 ---------------------------------------- ------------- -------------- -------------- Surplus/(Deficit) Before Tax 10,399 (41,911) 52,310 ---------------------------------------- ------------- -------------- -------------- Taxation (122) 1 (123) ---------------------------------------- ------------- -------------- -------------- Surplus/(Deficit) for the Year 10,277 (41,910) 52,187 ---------------------------------------- ------------- -------------- -------------- Actuarial (Loss)/Gain on Pension Schemes (7,316) (5,306) (2,010) ---------------------------------------- ------------- -------------- -------------- Total Comprehensive Income / (Expense) for the Year 2,961 (47,216) 50,177 ---------------------------------------- ------------- -------------- -------------- Consolidated Statement of Financial 2021 2020 Movement Position GBP'000 GBP'000 GBP'000 -------------- ------------- ------------- Fixed Assets 675,701 637,560 38,141 -------------------------------------- -------------- ------------- ------------- Current Assets 45,426 88,714 (43,288) -------------------------------------- -------------- ------------- ------------- Current Liabilities (25,055) (21,744) (3,311) -------------------------------------- -------------- ------------- ------------- Net Current Assets 20,371 66,970 (46,599) -------------------------------------- -------------- ------------- ------------- Total Assets Less Current Liabilities 696,072 704,530 (8,458) -------------------------------------- -------------- ------------- ------------- Longer Term Liabilities (599,719) (621,037) 21,318 -------------------------------------- -------------- ------------- ------------- Pension Schemes Liabilities (60,639) (50,740) (9,899) -------------------------------------- -------------- ------------- ------------- Total Net Assets 35,714 32,753 2,961 -------------------------------------- -------------- ------------- -------------
Restricted Reserve 846 846 0 -------------------------------------- -------------- ------------- ------------- Income and Expenditure Reserve 34,868 31,907 2,961 -------------------------------------- -------------- ------------- ------------- Total Reserves 35,714 32,753 2,961 -------------------------------------- -------------- ------------- -------------
Appendix 2
Other Financial Information for the Year Ended 31 (st) March 2021
Other Financial Information 2021 2020 Movement GBP'000 GBP'000 GBP'000 Turnover from Social Housing Lettings 76,242 73,533 2,709 Surplus on Social Housing Lettings 20,139 24,657 (4,518) Amortisation of Government Grants 982 894 88 Depreciation of Housing Properties (12,663) (12,038) (625) Depreciation of Other Assets (685) (696) 11 Capitalised Major Repairs 6,159 7,677 (1,518) Investment in New Build Properties 49,673 46,889 2,784 New Social Housing Units Developed 277 251 26 Total Units Owned and Managed (Units) 13,041 12,965 76 Total Units Owned (Units) 12,970 12,872 98 Historic Cost of Properties (excl. Accumulated Depreciation) 764,528 716,636 47,892 Cash and Cash Equivalents 32,944 78,966 (46,022) Total Debt (489,649) (523,228) 33,579 ----------------------------------- --------- -------------- --------
Appendix 3
Key Financial Performance Indicators and Financial Covenants for the Year Ended 31 (st) March 2021
Key Financial Performance Indicators 2021 2020 Turnover from Social Housing Lettings (1) 79.7% 79.8% Operating Margin on Social Housing Lettings (2) 26.4% 33.5% Social Housing Costs per Unit (GBP) (3) GBP3,803 GBP3,433 Operating Margin (4) 27.5% 30.2% EBITDA-MRI to Net Interest (5) 2.05 0.46 Net Margin (6) 10.7% (45.5%) Return on Capital Employed (7) 3.8% 3.9% Interest Cover (8) 2.00 0.45 Gearing (Assets) (9) 59.7% 62.0% Net Debt per Unit (10) GBP35,212 GBP34,514 -------------------------------------------- --------- ---------
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 (excl. Depreciation and amortisation) / Total units owned and managed
4 Operating surplus / Turnover 5 Adjusted operating surplus / Net interest payable
(Adjusted operating surplus = operating surplus + depreciation of housing properties + depreciation of other assets - capitalised major repairs - amortisation of government grants)
6 Surplus / (Deficit) for the year (excl. Refinancing costs) / Turnover 7 Operating surplus / Total assets less current liabilities 8 Adjusted operating surplus / Net interest payable
(Adjusted operating surplus = operating surplus + 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 owned
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