Karbon 3.375% Regulatory News (46GV)

Karbon Homes Group

28/06/2024

Karbon Homes Group trading update for the period ending 31 March 2024

· Karbon Homes Group (KHG) is today issuing its consolidated trading update for the period ended 31 March 2024.

· These figures are unaudited and for information purposes only. 

Highlights for the period ending 31 March 2023

· KHG own and manage 32,664 homes

· Karbon Homes Limited maintained its G1/V1 status from the Regulator for Social Housing on 29th November 2023, following a stability check.

· Turnover (excl. asset sales) for the period was £191.4m (2023: £165.6m)

· Operating surplus (excl. asset sales) for the period was £43.7m (2023: £43.6m)

· Overall operating margin (excl. asset sales) was 22.8% (2023: 26.4%)

· The surplus after tax for the period was £28.0m (2023: £30.0m)

· Gearing as at 31 March 2024 was 34.7% (2023: 34.9%)

· Return on capital employed for the period was 3.3% (2023: 3.7%)

Commenting on the results, Scott Martin: Executive Director of Resources said:

'We are pleased to report that Karbon Homes Group has maintained positive performance in the financial year to 31st March 2024, and will highlight some of our key indicators in this unaudited release. This comes ahead of the publication of our

audited accounts and ESG reporting under the Sustainability Reporting Standard for Social Housing, both of which are due to be published in July.

Our operating margins have been impacted this year, like many other housing associations, by higher volumes of repairs requests combined with cost pressures in our supply chain.

However, despite this, Karbon has continued to invest in a number of new and exciting projects which will help us deliver on our strategic aims of providing good quality homes, delivering excellent customer service and shaping strong, sustainable places for our communities.

Our commitment to playing our part in tackling the UK's housing crisis is unwavering, and we aim to build over 2,600 new homes across the North East and Yorkshire between 2024/25 and 2027/28. A key part of this plan is our strategic partnership with Homes England, where 

we had another strong year in terms of the provision of high quality affordable new homes, delivering 644 new homes across the group in a variety of tenures and geographies.

The net zero carbon challenge also remains a key focus for us, as we try to help both our existing and new customers deal with the pressures faced by households in terms of their ongoing energy bills. All of the new homes delivered in the year benefit from an EPC

rating of 'B' or above and we continue to pilot the use of energy efficient technologies in our development schemes. We have also continued to significantly invest in our existing homes this year as part of our ongoing capital works programme.

During 2023/24 we have invested £29.2m in a range of capitalised planned maintenance (2023: £30.5m). Improving the energy performance of our existing homes and strengthening our systems and processes around issues of damp and mould has been possible

Delivering an excellent customer service has continued to be a key focus for us. Our customer satisfaction scores remain high, with a Net Promoter Score of +35.2 for the year, meaning that our customers willingness to recommend Karbon to others is at a level considered to be 'excellent'.

We believe a key part of this is our money, debt and benefits advice service, where we've been able to help our customers maximise their benefit income. During 2023/24, over

£5.3m of income gains were generated for our customers which have proved vital amidst the current cost of living crisis in the UK. This is over 30% more than was achieved in the previous year.

At the start of the financial year, we also began using the Regulator of Social Housing's new Tenant Satisfaction Measures to collect feedback from our customers. These measures aim to hold housing providers to account for our actions and give our customers greater

visibility of our performance. Our results for April 23 to March 24 can be found on the Karbon website at

https://www.karbonhomes.co.uk/tsm

In terms of our strategic aim around 'place', we've continued our work on a number of deeper place-based interventions in areas where we have a large concentration of homes. In Stanley (County Durham) we carried out an in-depth community consultation with local 

residents and key stakeholders, to understand how the town would like us to regenerate the Stanley Board School site, which is currently a derelict building on the high street and which we bought in 2023.

We are currently in the process of collecting and evaluating the feedback we have received and will be exploring a selection of potential options for its future use.

In Byker (a ward in the east end of Newcastle) we have also consulted with the local community on the first steps of our extensive £11m neighbourhood improvement plan for the Byker estate. We've drawn up plans for the first of the 11 neighbourhoods, Dunn Terrace, which includes a number of the environmental improvements that residents living in the neighbourhood told us they wanted to see.

Finally, during 2023/24, we were pleased to further strengthen our presence in the North East of England by completing the transfer of ownership of 439 homes from South Tyneside Housing Ventures Trust (STHVT) in July.

Later in 2023/24 we also commenced partnership discussions with Leazes Homes. These discussions reached completion in June 2024, bringing a further 759 homes into the Karbon Group. 

The mergers aim to deliver better outcomes for our customers as well as economies of scale in our repairs and new homes development programmes in the region.

The progress of 2023/24 has been underpinned by Karbon maintaining the highest rating for both the governance and viability standard (G1/V1) with the Regulator of Social Housing. Our external ratings agency (S&P Global), also noted in their annual review in May 2024,

that they forecast that Karbon ''will maintain relatively stable metrics despite the challenges in the social housing sector'', and were complimentary of Karbon's experienced management team who are delivering the Group's strategy consistently within its operational capacity and policy frameworks.

We continue to view these external validatons as a great foundation to continue to deliver for our communities.

Unaudited Financial Metrics

31-Mar

31-Mar

2024

2023

Actual

Actual

£'000

£'000

Statement of Comprehensive Income

Turnover (excl. asset sales)

191,404

165,604

Turnover (incl. asset sales)

195,600

172,476

Operating surplus (excl. asset sales) (Note 10)

43,681

43,639

Operating surplus (incl. asset sales) (Note 10)

46,125

46,912

Surplus after tax (Note 10)

28,015

29,970

Margins

Overall operating margin (excl. asset sales) (Note 1)

22.8%

26.4%

Overall operating margin (incl. asset sales) (Note 2)

23.6%

27.2%

Key Financial Ratios

EBITDA MRI interest cover (Note 3)

187.1%

162.8%

Gearing (Note 4)

34.7%

34.9%

ROCE (Note 5)

3.3%

3.7%

31-Mar

31-Mar

2024

2023

Liquidity

24 month liquidity requirement (£'000) (Note 6)

213,357

152,201

Cash and undrawn facilities (£'000) (Note 7)

229,620

235,492

Unencumbered stock (no of properties)

8,928

8,281

Value of unencumbered stock (average of EUV and MV, £'000) (Note 8)

388,207

331,977

Loan security excesses (average of EUV and MV, £'000) (Note 9)

267,821

217,776

Credit Rating

S & P

'A'; Outlook Positive 17th May 2024

Notes:

1) Operating margin excluding asset sales removes the gain or loss on disposal of housing properties.

2) Operating margin including asset sales includes all activity

3) Earnings before interest, tax, depreciation and amortisation, major repairs included is defined as: (Operating surplus - Disposal of assets - Outright sales and first tranche SO surpluses + Depreciation & impairment - Amortisation - Capitalised major repairs) / Interest paid

(reflecting the 'S&P Global methodology for rating public and non profit social housing providers', published 1st June 2021)

4) Gearing is defined as: Group Net Debt / Group Housing assets at historic cost less depreciation (RSH VFM Gearing definition).

Karbon have chosen to include cash held in non ring-fenced investment accounts as available cash, 2024: £5.4m (2023: £15.9m). Removing this would result in the gearing calculations being 2024: 35.1% (2023: 36.3%).

5) Return on capital employed is defined as Operating Surplus (incl asset sales) / Total Assets less current liabilities

6) 24 month cashflow requirements

7) Cash, investments and undrawn revolving credit facilities

8) Value of stock not held by a lender or security trustee, at average £43k per unit

9) Value of excess security held with current lenders or security trustees

10) In order to show our underlying operating margin metrics, any negative goodwill arising on acquisitions or mergers has been excluded from these figures, 2024: £4.5m (2023: £53.5m).

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

For further information, please contact:

Andrew Thompson, Assistant Director: Treasury

07917 642957

https://www.karbonhomes.co.uk/corporate/