TIDM67TS
RNS Number : 3327D
Wrekin Housing Group Ltd (The)
18 October 2022
Wrekin Housing Group Limited
Financial Report for the Year Ended 31 (st) March 2022
Wrekin Housing Group Limited ('Wrekin', 'the Group') is pleased
to announce its consolidated results for the year ended 31 (st)
March 2022.
This report is for information purposes only.
1. Headlines
1.1 Despite the ongoing impact of the Covid-19 pandemic, the
Group largely delivered a "business as usual" service throughout
2021/22, and performed very well in both operational and financial
terms. In summary:
-- 81.2% of all responsive repairs were completed on the day
they were reported, under the Group's flagship "same day, 7 days a
week, 8am till 8pm" repairs service;
-- The Group continued to provide care and support services to
customers of those services throughout the year, continuing to use
COVID-secure methods of working. Of the 13 CQC-registered sites
operated by the Group, 12 maintained their CQC rating of "good" and
the remaining home was rated as "outstanding." In financial terms
the provision of care and support services continues to be a
challenge, and the Group is reviewing its provision of dementia
care and learning disability care services to address this;
-- The Group delivered 318 new units in 2021/22 under its
development programme. This represented 84.6% of its original
target, with the shortfall accounted for by one large scheme which
was slightly delayed and completed in 2022/23;
-- The Group's planned maintenance programme (taking revenue and
capital items together) increased from GBP11,907k in 2020/21 to
GBP14,954k in 2021/22. This was due to the fact that approximately
25% of the original 2020/21 planned maintenance programme could not
be delivered during the first quarter of 2020/21, due to the
initial lockdown. In 2021/22 activity returned to more normal
levels and any "catch up" works from 2020/21 were completed in
2021/22.
1.2 During 2021/22 the enhanced financial reporting procedures
for the executive management team and the board, put in place at
the start of the pandemic, were maintained. The senior finance team
was strengthened, bringing in additional treasury management and
business planning expertise, which helped the Group to further
refine its approach to business planning and the stress testing of
plans. The combination of those measures meant that the Group
continued to function well despite the ongoing pandemic and the
increasingly challenging macroeconomic climate, to the extent that
most areas of performance returned to, or were maintained at,
pre-pandemic levels, without the necessity to deploy any
significant mitigating actions.
1.3 Income collection levels remained strong in 2021/22, as they
had done throughout the pandemic period. Year end arrears were just
0.55% of the total rent roll for the year, maintaining the
extremely high level of performance seen in this area achieved over
several years. Rent losses from void properties reduced in 2021/22
(from 1.42% of the total rent roll to 1.13%) and average time taken
to relet properties also reduced (from 33.5 days to 31.2 days).
Whilst average relet times did not return to pre-pandemic levels
during 2021/22, the positive trend seen during the year has
continued since the year end.
1.4 During the year, the Group issued the final GBP25m of its
retained bond. The issue achieved a price of 95 basis points over
gilts, providing an all-in cost of funds of 1.962%.
1.5 Following the In Depth Assessment from the Regulator of
Social Housing the Group's regulatory judgement was reconfirmed as
G1 (Governance) and V1 (Financial Viability) in April 2021. This
was further reconfirmed as a result of the Annual Stability Check
by the Regulator in autumn 2021.
1.6 In August 2022 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 2022 and the Statement of Financial Position as at 31
(st) March 2022, 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 2022 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 2022 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 GBP97,496k (2021: GBP95,709k)
-- Turnover from social housing lettings for the year is
GBP77,170k (79.2%) (2021: GBP76,242k (79.7%))
-- Operating surplus for the year is GBP26,609k (2021: GBP26,289k)
-- Operating margin is 27.3% (2021: 27.5%)
-- Interest payable for the year is GBP15,724k (2021: GBP15,955k)
-- Surplus for the year before tax is GBP10,904k (2021: GBP10,399k)
-- Interest cover is 2.01 (2021: 2.00)
Balance Sheet and Capital Expenditure
-- Wrekin owns and manages 13,115 units (2021: 13,041 units). It
also retains the residual freehold interest in 629 properties
previously disposed of under the Right to Buy or Right to Acquire
provisions (2021: 648)
-- Housing properties at cost (excluding accumulated
depreciation) are GBP824,574k (2021: GBP764,528k)
-- Investment in existing and new housing properties for the
year is GBP70,085k (2021: GBP55,832k)
-- New social housing units developed during the year is 318 (2021: 277)
-- Total debt is XXX (2021: GBP489,649k)
-- Gearing (Assets) is 57.1% (2021: 59.7%)
-- Net debt per unit is GBP36,092 (2021: GBP35,212)
-- Income and expenditure reserves are GBP54,557k (2021: GBP34,868k)
3. Results Overview
3.1 Turnover increased by 1.9% in 2021/22, to GBP97,496k from
GBP95,709k, but operating costs increased by 3.7%, from GBP73,604k
in 2020/21 to GBP76,335k in 2021/22. Gains on the sale of housing
properties increased by 67% as more customers exercised their
options under the Right to Buy and Right to Acquire legislation.
Hence, operating surplus increased from GBP26,289k (a margin of
27.3%) to GBP26,609k (a margin of 27.5%). The Group booked an
impairment charge of GBP1,720k in 2021/22 in respect of a large
housing scheme that has been earmarked for demolition and
redevelopment.
3.2 There has been a significant year on year reduction in the
pension fund deficit with the Shropshire County Pension Fund, an
LGPS pension, of GBP5,197k, largely as a result of an actuarial
gain of GBP8,856k (2020/21: actuarial loss of GBP7,316k). This was
due to shifts in actuarial assumptions regarding higher future
inflation expectations and a fall in the discount rate.
3.3 Surpluses on disposal of housing assets (which covers
properties sold under the Right to Buy and Right to Acquire
provisions) increased from GBP1,664k in 2020/21 to GBP2,786k in
2021/22. The number of Right to Acquire and Right to Buy sales rose
from 38 in 2020/21 to 53 in 2021/22, and average sale values also
increased, leading to the overall increase in the surplus.
3.4 In 2020/21 the Group booked an increase in the fair value of
assets of GBP2,662k (2020/21: GBP2,520k). This relates to the
Group's small portfolio of market rent properties which were
revalued by an independent external valuer during the year.
3.5 The Group met its financial loan covenants (interest cover
and gearing) and its asset cover covenants 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 318 new homes in 2021/22, mostly for rent at affordable
and social rent levels, together with a small number of shared
ownership properties, and a further 1,721 forecast to be completed
over the next 3 years.
4.2 During 2021/22 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. 77 properties were
sold in 2021/22 under this strategy, which was the 17(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 2.73 new properties
added for each property sold.
5. Funding Facilities
5.1 During the year, the Group issued the final GBP25m of the
GBP50m retained bond. The issue achieved a price of 95 basis points
over gilts, providing an all-in cost of funds of 1.962%.
5.2 Total loans (net of loan issue costs) stand at GBP505,027
(2021: GBP489,649). The increase in debt was due to funding being
drawn down to fund the Group's development programme.
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 250,000 250,000 0 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 2,500 47,500 22/10/2029
---------------- ------------- ------------- -------- ----------------
Variable
AIB Rate 40,000 22,000 18,000 22/10/2026
---------------- ------------- ------------- -------- ----------------
Nat West Fixed Rate 23,800 23,800 0 31/03/2026
---------------- ------------- ------------- -------- ----------------
Variable
Lloyds Rate 75,000 70,000 5,000 22/10/2025
---------------- ------------- ------------- -------- ----------------
First Abu Dhabi Variable
Bank Rate 50,000 0 50,000 22/10/2024
---------------- ------------- ------------- -------- ----------------
Total 606,000 485,500 120,500
------------- ------------- ----------------
Discounts/Premiums
on issue (net) 1,594
------------- ------------- -------- ----------------
Fair value adj. 17,933
------------- ------------- ----------------
Total 505,027
------------- ------------- -------- ----------------
6. Outlook
6.1 The organisation has managed the continuing impact of the
pandemic well and the outlook is relatively positive with
continuing opportunities for growth through the Group's development
programme, although cost pressures on development costs are
starting to have an impact on the viability of potential schemes,
meaning that the Group is becoming more selective in those that it
pursues.
6.2 The Group is only impacted to a limited degree by the
implementation of the new fire and building safety regulations. It
only has 3 high rise blocks in its portfolio, none of which present
any issues with regard to cladding, and a programme of works
required to improve compartmentation and upgrade some fire doors
has been undertaken, and any ongoing cost implications of increased
fire safety measures have been incorporated into future budgets for
planned maintenance.
6.3 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 and the expenditure to achieve this has again been
factored into future planned maintenance budgets. 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. The Group has continued
to develop its approach in this area and has undertaken some pilot
projects (e.g. fitting solar PV systems coupled with onsite battery
storage into a number of its properties, developing a small number
of modular and "off grid" Passiv Haus properties to assess their
performance and financial viability).
6.4 Maintenance of both the Group's strong regulatory judgement
and its strong credit rating were significant achievements over the
last few months and a recognition of the robustness of the Group's
current position.
6.5 Going forward the Group, in common with the whole housing
sector, is faced with cost pressures (particularly relating to
energy costs, insurance, development, repairs materials, pay costs
and interest costs) coupled with having to deal with the impact of
a rent cap. However, work is well advanced to rework the Group's
business plan to mitigate these impacts and ensure that the Group
maintains its robust financial position.
The Group signed its financial statements for the year ended
31st March 2022 in September 2022. 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 2022
Consolidated Statement of 2022 2021 Movement
Comprehensive Income GBP'000 GBP'000 GBP'000
-------- -------- --------
Turnover 97,496 95,709 1,787
--------------------------------- -------- -------- --------
Operating Costs (76,335) (73,604) (2,731)
--------------------------------- -------- -------- --------
Gain on Sale and Disposal of
Housing Properties 2,786 1,664 1,122
--------------------------------- -------- -------- --------
Movement in the fair value
of assets 2,662 2,520 142
--------------------------------- -------- -------- --------
Operating Surplus 26,609 26,289 320
--------------------------------- -------- -------- --------
Interest Receivable and similar
income 19 65 (46)
--------------------------------- -------- -------- --------
Interest payable, financing
and similar costs (15,724) (15,955) 231
--------------------------------- -------- -------- --------
Surplus/(Deficit) Before Tax 10,904 10,399 505
--------------------------------- -------- -------- --------
Taxation (71) (122) 51
--------------------------------- -------- -------- --------
Surplus/(Deficit) for the
Year 10,833 10,277 556
--------------------------------- -------- -------- --------
Actuarial (Loss)/Gain on Pension
Schemes 8,856 (7,316) 16,172
--------------------------------- -------- -------- --------
Total Comprehensive Income
/ (Expense) for the Year 19,689 2,961 16,728
--------------------------------- -------- -------- --------
Consolidated Statement of 2021 2020 Movement
Financial Position GBP'000 GBP'000 GBP'000
-------------- --------- --------
Fixed Assets 727,217 675,701 51,516
------------------------------- -------------- --------- --------
Current Assets 43,898 45,426 (1,528)
------------------------------- -------------- --------- --------
Current Liabilities (30,048) (25,055) (4,993)
------------------------------- -------------- --------- --------
Net Current Assets 13,850 20,371 (6,521)
------------------------------- -------------- --------- --------
Total Assets Less Current
Liabilities 741,067 696,072 44,995
------------------------------- -------------- --------- --------
Longer Term Liabilities (630,222) (599,719) (30,503)
------------------------------- -------------- --------- --------
Pension Schemes Liabilities (55,442) (60,639) 5,197
------------------------------- -------------- --------- --------
Total Net Assets 55,403 35,714 19,689
------------------------------- -------------- --------- --------
Restricted Reserve 846 846 0
------------------------------- -------------- --------- --------
Income and Expenditure Reserve 54,557 34,868 19,689
------------------------------- -------------- --------- --------
Total Reserves 55,403 35,714 19,689
------------------------------- -------------- --------- --------
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 77,170 76,242 928
Surplus on Social Housing Lettings 18,838 20,139 (1,301)
Amortisation of Government
Grants 1,074 982 92
Depreciation of Housing Properties (13,350) (12,663) (687)
Depreciation of Other Assets (717) (685) (32)
Capitalised Major Repairs 7,274 6,159 1,115
Investment in New Build Properties 62,811 49,673 13,138
New Social Housing Units Developed 318 277 41
Total Units Owned and Managed
(Units) 13,115 13,041 74
Total Units Owned (Units) 13,051 12,970 81
Historic Cost of Properties
(excl. Accumulated Depreciation) 824,574 764,528 60,046
Cash and Cash Equivalents 33,990 32,944 1,046
Total Debt (505,027) (489,649) (15,378)
----------------------------------- --------- -------------- --------
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) 79.2% 79.7%
Operating Margin on Social Housing Lettings
(2) 24.4% 26.4%
Social Housing Costs per Unit (GBP) (3) GBP3,984 GBP3,803
Operating Margin (4) 27.3% 27.5%
EBITDA-MRI to Net Interest (5) 2.06 2.05
Net Margin (6) 11.1% 10.7%
Return on Capital Employed (7) 3.6% 3.8%
Interest Cover (8) 2.01 2.00
Gearing (Assets) (9) 57.1% 59.7%
Net Debt per Unit (10) GBP36,092 GBP35,212
-------------------------------------------- --------- ---------
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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