REG - Incommunities Trsry. - Half-year Report

NatwestAnnouncement

23/12/2024 16:45

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RNS Number : 1734R  Incommunities Treasury PLC  23 December 2024

Incommunities Limited trading update and unaudited financial results for the
period ended 30 September 2024

Incommunities Treasury Plc's parent company, Incommunities Limited (IC), is
pleased to announce the release of its unaudited half-year financial
statements for the period ended 30 September 2024.

Incommunities Limited is one of the largest Registered Providers in
Yorkshire owning and managing 22,836 homes properties mainly across Bradford
and Huddersfield, of which 22,816 are social housing properties, highlighting
our commitment to provide and maintain high-quality affordable housing for
our communities.

Regulatory Judgement

We are pleased to report a regulatory upgrade to G1 (announced in September
2024). The G1 rating means that Incommunities now meets the highest standards
for managing risks and controlling the organisation and complements our
retention of V1.

Our G1/V1 rating means:

·      G1: The highest governance rating a housing provider can
achieve, showing that Incommunities meet the regulator's governance
requirements.

·      V1: The highest viability rating, showing that Incommunities
meet viability requirements and have the financial capacity to deal with a
wide range of adverse scenarios.

 

Please see the Incommunities news page for additional details
https://www.incommunities.co.uk/news/top-marks-were-celebrating-our-governance-upgrade-1798
(https://www.incommunities.co.uk/news/top-marks-were-celebrating-our-governance-upgrade-1798)

Financial and operational highlights

The year-to-date (YTD) financial performance to September delivered a net
surplus of £5.7m compared to the budget of £4.2m. This is a 36% (£1.5m)
better-than-expected result. YTD Interest cover is strong at 307%.

The strong YTD position is mainly driven by:

Lower interest costs (£0.7m) - See refinancing section for details

Lower bad debt costs (£0.2m)

Lower salary costs (£0.2m)

Increased surplus from property sales; 1(st) tranche sales (£0.2m), fixed
asset sales (£0.2m)

KPI performance

                                             Annual Target  P6 Actual
 Regulatory                                  24/25          24/25
 Reinvestment                                14.00%         5.12%
 New Supply Delivered - Social Housing       0.90%          0.20%
 New Supply Delivered - Non-Social Housing   0.00%          0.00%
 Gearing (Net Debt / Housing Assets)         64.00%         58.73%
 EBITDA-MRI Interest Cover                   44.00%         110.31%
 Headline Social Housing CPU                 £5,050         £2,337
 Operating Margin - Social Housing Lettings  13.00%         13.95%
 Operating Margin - Overall                  12.00%         14.49%
 Return on Capital Employed                  2.70%          1.70%

                               September (6 monthly)
                               Minimum      Actual
 Covenants                     24/25        24/25
 Barclays - Interest Cover     1.40%        3.07%
 ABN AMRO - Interest Cover     1.10%        3.62%
 NatWest/RBS - Interest Cover  1.50%        3.07%
 NatWest/RBS - EBITDA          £16.3m*      £22.2m
 Barclays - Gearing            60%          48%
 ABN AMRO - Gearing            65%          48%
 NatWest/RBS - Gearing         65%          48%

*£28m pa pro-rated

·    Investment programme - YTD spend of £8.4m. IC remains committed to
improving the lives of our tenants through investment in their homes.

·    Development programme - YTD spend of £15.4m. IC generated £0.3m
from first tranche sales and received £0.7m in grant income.

·    Liquidity - Remains strong, the cash position at the period was
£8.9m, with further undrawn facilities of £195m (including £25m retained
bond).

·    Funder Covenants - All funder covenants have been met

Refinancing

Liquidity: Placed an additional £100 million of new RCF funding in addition
to extending the tenor of existing debt, bringing the total available bank
facility amount to £255 million. Injecting flexibility into the business plan
without the immediate need for long-term debt and extending the liquidity to
October 2027.

Cost of Capital: The overall financing lowered the cost of capital without
reducing the weighted average life of the loans. This enhances the efficiency
of the bank portfolio, measured by both reduced cost and reduced refinancing
risk. Borrowing costs were lowered though a combination of reduced margins and
elimination of the credit adjustment spread on variable rate borrowing.

a.    On the total facility amount, the weighted average margin was reduced
from 1.56% to 1.28% (-28bps).

Covenants: Successful negotiation of EBITDA only covenant condition that will
support the strategic ambition, particularly for safe, good quality homes.

Business outlook

Despite a challenging economic climate, Incommunities has been able to exceed
expectations in its mid-year performance figures. The upgrade to G1 testament
of the robustness of our strategic oversight and approach to risk management.
We launched a new Corporate Strategy
(https://www.incommunities.co.uk/our-strategy) in Apil 2024 that provides a
clear strategic direction over the next 5 years. The Strategy clarifies that
Our Vision is to create the best customer experience to improve everyday
lives. With our customers at the heart of the strategy we're focussed on
delivering across three areas for them: Homes, Services and Communities. This
is underpinned by our change programme with improvements in service and
efficiency defined. Addressing the issue of damp and mould continues to be big
focus for us and we have been able to reduce cases from 30% of our properties
to 3%, work is ongoing to reduce this further. We are undertaking surveys to
understand the condition of all our homes and the insight this gives will
allow us to formulate rigorous investment plans, including delivery of our
sustainability ambition.

With the 1(st) half of the year now behind us we're looking to build on this.
Some headline outturn expectations include:

-              248 new homes delivered with a spend of £49.5m in
the year

-              Damp and mould investment of £3.8m

-              Sustainability (grant funded) program worth net
£3.3m (£6.4 Capex, £3.2m grant)

-              Component replacements worth approx. £14.5m

-              FRA compliance waking watch of £3.4

-              Regulatory and Ratings updates due early in 2025.

Economic Outlook

On 30 October, the UK Government announced that housing associations would be
allowed to increase rents by CPI+1% for a period of five years. The Government
has also made clear its intention to increase housebuilding by unblocking
planning delays and it has announced some increases to grant funding.  These
are welcome announcements which will have a positive impact on our financial
plans, however development of new social housing in the current climate
remains difficult.

Our strategic change programmes are expected to continue to improve KPI
performance. As indicated by our V1 grading from the Regulator of Social
Housing, our business plan is rigorously stress tested and is sufficiently
resilient to even the harshest of adverse conditions. These factors suggest a
cautiously optimistic outlook for Incommunities in 2025, with a focus on
maintaining and improving existing housing stock while navigating financial
and regulatory challenges.

Appendix

Statement of Comprehensive Income

                                            September (6 monthly)       March (Annual)
                                            Actual        Actual        Budget     Actual
                                            24/25         23/24         24/25      23/24
 Income
 Rent & Service Charges                     57,407        52,817        116,222    105,832
 Other Income                               3,512         947           2,226      6,310
 Amortised Grants                           470           417           1,061      909
                                            61,389        54,181        119,508    113,051
 Expenditure
 Core Operating Costs                       (44,611)      (36,890)      (87,680)   (83,744)
 Depreciation                               (8,152)       (8,205)       (17,353)   (16,660)

 Net interest                               (5,331)       (3,455)       (12,088)   (9,449)
 Surplus on disposal (current & fixed)      2,438         3,015         4,444      5,890
                                            (55,656)      (45,535)      (112,677)  (104,012)

 Net Surplus                                5,733         8,646         6,832      9,088

 FRS102 Pension - Actuarial gain            0             (858)         0          612
 Gift Aid                                   0             0             0          5
 Corporation tax                            0             19            0          0
 Total Comprehensive Income                 5,733         7,807         6,832      9,705

 Statement of Financial Position

                                                         September (6 monthly)       March (Annual)
                                                         Actual        Actual        Budget     Actual
                                                         24/25         23/24         24/25      23/24
 Fixed Assets                                            524,955       482,903       558,822    508,105
 Current Assets                                          18,794        27,270        17,201     24,342
 Current Liabilities                                     (21,158)      (23,915)      (16,491)   (20,311)
 Net Current (Liabilities) / Assets                      (2,364)       3,355         709        4,031
 Total Assets Less Current Liabilities                   522,591       486,258       559,531    512,136
 Creditor: Amounts Falling Due After More Than One Year  (412,652)     (380,844)     (447,882)  (407,318)
 Provisions For Liabilities:
 Pension Scheme - Defined Benefit Liability              (1,405)       (1,421)       (1,405)    (1,405)
 Other Provisions                                        (40)          (1,816)       (652)      (652)
 Total Net Assets                                        108,494       102,177       109,593    102,761

 Income And Expenditure Reserve                          108,494       102,177       109,593    102,761
 Total Reserves                                          108,494       102,177       109,593    102,761

Disclaimer

These materials have been prepared by Incommunities solely for use in
publishing and presenting its results for the six months ending 30 September
2024.

 These materials do not constitute or form part of and should not be
construed as, an offer to sell or issue, or the solicitation of an offer to
buy or acquire securities of Incommunities in any jurisdiction or an
inducement to enter into investment activity. No part of these materials, nor
the fact of their distribution, should form the basis of, or be relied on or
in connection with, any contract or commitment or investment decision
whatsoever. Neither should the materials be construed as legal, tax,
financial, investment or accounting advice.

These materials contain statements with respect to the financial condition,
results of operations, business and future prospects of Incommunities that are
forward-looking statements. By their nature, forward-looking
statements involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ materially
from those expressed or implied by these forward-looking statements, including
many factors outside Incommunities' control.

 

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