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12 Dec 2022 07:00
Incommunities Limited ("Group") trading update and unaudited financial results for the period ended 30 September 2022
Incommunities Treasury Plc's parent company, Incommunities Group Limited ("Group") is pleased to announce the release of its unaudited half year financial statements for the period ended 30 September 2022.
Incommunities Limited is one of the largest Registered Providers in Yorkshire owning and managing 22,674 homes properties mainly across Bradford and Huddersfield, of which 22,654 are social housing properties, highlighting our commitment to provide and maintain high-quality affordable housing for our communities.
Financial and operational highlights
Despite the ongoing macroeconomic pressures, the Group's financial performance remains strong. Over the first half of the year, the Group has delivered an operating surplus of £9.0mn from turnover of £51.7mn, equating to an operating margin of 17.4%. The net surplus after interest and other adjustments is £7.4mn.
Year to Date | Target | Actuals (1) |
Operating surplus/(deficit) (before fixed asset sales) | 18.0% | 17.4% |
Social Housing operating margin | 15.7% | 15.0% |
Liquidity ratio | >1 | 2.1 |
EBITDA-MRI Interest Cover | 174.5% | 243.8% |
· Housing fixed assets - housing properties at cost stood at £599mn, up from £593mn in FY22.
· Investment programme - investment to 30 September 2022 was £3.7mn. The Group remains committed to improving the lives of our tenants through investment in their homes.
· Development programme - for the six months to 30 September 2022, the Group gross spend was £11.8m on ten active schemes. The Group generated £0.6mn from first tranche sales on shared ownership properties and received a further £0.3mn in grant income.
· Liquidity - Remains strong, the cash position as of 30 September 2022 was £22.4mn, with further undrawn facilities of £105mn.
· Funder Covenants - All funder covenants have been met and are forecast to be met for the current financial year.
| Target | Forecast (2) |
Interest Cover | 110% | 130% |
Gearing | 70% | 43% |
Net Debt per Unit | £23,000 | £13,026 |
Notes
1. Unaudited accounts
2. Unaudited accounts
Business Outlook
We continue to monitor all potential risks the Group could face with successful risk management a core component of our wider governance and internal control framework. We continue to operate under challenging market conditions with the potential to impact sales and prices and we are seeing emerging themes not too dissimilar to those impacting the housing sector and industry more widely including cyber threats and pressures on the supply chain. The Board continue to monitor the potential impact and remain well placed to navigate the current economic volatility through relevant mitigation plans.
Inflation - CPI inflation rose to 11.1% in November 2022 and remains well above the Bank of England's 2.0% inflationary target. Inflationary pressures have been factored into our future financial performance for the remainder of the current year as well as future years through stress testing of the financial plan.
Rent Cap - Incommunities is subject to the Rent Standard which is currently set at Consumer Price Index (CPI) plus 1%. Based on September 2022 CPI figures (10.1%) and subject to no rent cap, this would equate to 11.1%. However, a consultation was launched on in August to invite views from social housing tenants and landlords on a proposed rent cap to understand how best to support households with the cost of living.
On 17th November 2022, the government confirmed a 7% rent cap on the amount by which housing associations could raise rents by from 1st April 2023.
Interest Rates - The base rate was increased from 2.25% to 3.0% on 3rd November 2022 by the Bank of England in response to the inflationary pressures in the economy. Incommunities protects its loan portfolio against the impact of base rates increases on financing costs. The debt portfolio is 98% fixed, against minimum limit of 60% fixed in our TMP. This gives a strong degree of mitigation against interest rate increases for Incommunities.
Cost, Material and Labour Availability - Cost pressures and scarcity of materials and labour in the repairs markets have been flagged as issues facing the delivery of the day-to-day repairs, investment and new build programmes. The large increases in energy costs in the global markets linked to the conflict in Ukraine will add to these pressures. The cost pressure around utilities has been reflected in the half year financial position.
COVID-19 - The business continues to monitor the impact of COVID-19. However, no impact on income or cash collection is being experienced. All housing operations are being delivered and the capital programmes for investment and new build are forecast to be delivered despite the pressures identified in the preceding paragraph. This is of course subject to any further government lockdowns that may be required in future.
Executive Appointments
Janey Carey joined Incommunities in September as Executive Director of Customer and Communities, bringing skills and previous experience of transforming strategic and operational housing services,
We are also pleased to announce the recent appointment of Catherine Bett, as Director of Finance. Catherine joins from Plus Dane Housing.
Shaeen Azam will be leaving Incommunities and her role as Executive Director of Finance later this month. We wish her well for the future and thank her for the contribution she has made to reshaping the finance team at Incommunities.
Appendix
Statement of Comprehensive Income to 30 September 2022
30 Sep 22 (3) £'000 | 30 Sep 21 £'000 | |
Rent and service charges income | 49,529 | 48,127 |
Other income | 1,722 | 1,449 |
Amortisation of Social Housing Grant | 416 | 422 |
Turnover | 51,667 | 49,998 |
| ||
Core operating costs | (34,428) | (32,577) |
Depreciation | (8,274) | (8,904) |
Surplus on fixed asset disposals | 3,601 | 2,306 |
Net Interest | (5,202) | (5,537) |
| ||
Net Surplus | 7,364 | 5,286 |
Statement of Financial Position as at 30 September 2022
30 Sep 22 (4) £'000 | 31 Mar 22 £'000 | |
Tangible fixed assets and investments | 436,461 | 431,543 |
Current assets | 27,999 | 25,523 |
Current liabilities | (13,362) | (16,076) |
Total assets less current liabilities | 451,098 | 440,990 |
| ||
Creditors due after more than one year | (356,971) | (354,228) |
Pension liabilities and other provisions | (44,478) | (44,478) |
Total net assets | 49,649 | 42,284 |
|
|
|
Total Reserves | 49,649 | 42,284 |
Notes
3. Unaudited accounts
4. Unaudited accounts
Disclaimer
These materials have been prepared by Incommunities solely for use in publishing and presenting its results for the six months ending 30 September 2022.
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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