Bromford 48 Regulatory News (42RA)

Bromford Housing Group

18 November 2019

Bromford Housing Group trading update for the period ending 30 September 2019

·; Bromford Housing Group (BHG) is today issuing its consolidated trading update for the six months ending 30 September 2019 (2019 HY).

·; There have been no changes to the Group structure in the period, with Merlin Housing Society Limited (Merlin) and Severn Vale Housing Society (Severn Vale) joining the Group in FY 2018/19. The HY 2018 figure comparators include Merlin who joined the Group in July 2018, but not Severn Vale who joined the Group later in January 2019.

·; These figures are unaudited and for information purposes only.

Highlights (Bromford Housing Group for the period ending 30 September 2019)

·; BHG own and manage 42,944 homes (42,735 as at 31 March 2019)

·; BHG have maintained their G1 / V1 rating further to a post-merger In Depth Assessment (IDA). 

·; BHG have entered into a strategic partnership with Homes England, securing £66m of grant funding

·; BHG have disposed of 86 homes in Newcastle under Lyme and Staffordshire Moorlands, effectively removing presence from these local authority areas as part of our strategic focus on our Top 4 areas

·; Turnover for the period was £137m (2018 HY: £124m)

·; Social housing turnover contributed to 79% of total turnover (2018 HY: 78%)

·; Operating surplus for the period was £50m (2018 HY: £46m)

·; Operating margin on social housing lettings was 35% (2018 HY: 41%)

·; Overall operating margin (including asset sales) was 37% (2018 HY: 37%)

·; Overall operating margin (excluding asset sales) was 33% (2018 HY: 34%)

·; Net margin on shared ownership (first tranche) was 21% (2018 HY: 21%)

·; Net margin on outright sales was 15% (2018 HY: 20%)

·; The surplus after tax for the period was £30m (2018 HY: £28m)

·; Asset gearing as at 30 September 2019 was 39%

·; Interest cover as at 30 September 2019 was 2.2x

Commenting on the results, Lee Gibson, Chief Financial Officer, said:

"It has been another successful period for the Bromford Housing Group as we pursue our new Corporate Strategy. We continue to focus on our core business of social housing which contributes to almost 80% of turnover and we are pleased to have delivered to budget once again. We have also rationalised our geographical focus, undertaking strategic disposals programmes to extricate from two local authority areas. We will undertake further stock rationalisation as we focus our delivery to our Top 4 areas.

We continue to pursue our ambition of delivering 13,100 new homes by 2028 and have de-risked our approach to development through our strategic partnership with Homes England and also through working with a number of leading developers through the Bromford Construction Partnership. We have completed 497 homes over the past six months and remain on track to meet this year's delivery target. We are aware that market sales are down against budget due to a re-profiling our sales activity and we would expect to recover most of this in the period to 31 March 2020."

Imran Mubeen, Head of Treasury, added:

"The period saw the expected regrade of our Moody's rating to A2 to align with the development aspirations and associated borrowings in our new business plan. We continue to benefit from one of the strongest dual credit rating platforms in the sector, which we will pro-actively monitor and maintain through internal shadow credit rating on all future Group business plans. After the regrade, the strength of our credit profile and the headroom in our existing interest cover and metrics was once again realised in the issue of our third bond at sector leading rates in 18 months.

We continue to benefit from strong levels of liquidity and look forward to working with funders and investors to maintain this position. We continue to rationalise and optimise our existing loan book and we are also pro-actively pursuing our ESG agenda to issue ESG linked debt in the near future."

Development: housing completions (2019 HY)

·; BHG expect to complete more than 1,000 new homes for the financial year ending 31 March 2020; having completed 497 new homes in the financial year to date (451 of which represent affordable housing tenure and 46 open market sale).

·; BHG entered into a strategic partnership with Homes England in April 2019, securing £66m of grant funding, enabling us to work together to achieve our ambitious development programme target. We are currently on track to deliver c. 1,400 new homes committed through the partnership in the period to 31 March 2024.

·; BHG have also launched the Bromford Construction Partnership, a collaboration worth £160m with four construction partners (EG Carter, Speller Metcalfe, Lovell and Galliford Try) to deliver up to 400 new homes per year and has entered into a partnership with Taylor Wimpey to deliver 455 new homes at the Innsworth site in Gloucestershire.

Development: pipeline

·; BHG continue to plan to deliver c. 13,100 new homes by 2028 under its New Homes Programme. In the pursuit of this development strategy, BHG are engaging in discussion to explore joint venture arrangements with third parties to optimise commercial return with risk mitigation.

Unaudited Financial Metrics

Notes:

1Operating surplus / Turnover

2General Needs, Supported housing, Affordable rent and Low cost home ownership tenures

3Operating margin including asset sales includes all activity; operating margin excluding asset sales removes gain or loss on disposal of assets

4Operating surplus on First tranche shared ownership sales / Turnover from First tranche shared ownership sales

5Operating surplus on outright sales / Turnover from outright sales

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

7Operating surplus on Social housing lettings / Net interest paid

8Net debt / Housing assets at historic cost

9Net debt / Total units owned and managed

1018 month cashflow requirement - 20% of sales income + £25m

11Cash and undrawn RCF

This trading update contains certain forward looking statements about the future outlook for BHG. These have been prepared and reviewed by Bromford 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 or recommendation to invest in Bromford's bonds.

For further information, please contact:

Imran Mubeen, Head of Treasury

07711 221464

https://www.bromford.co.uk/investorrelations/