TIDM67TS
RNS Number : 3394O
Wrekin Housing Group Ltd (The)
07 October 2021
Wrekin Housing Group Limited
Financial Report for the Year Ended 31 (st) March 2021
Wrekin Housing Group Limited ('Wrekin', 'the Group') is pleased
to announce its consolidated results for the year ended 31 (st)
March 2021.
This report is for information purposes only.
1. Headlines
1.1 Despite the impact of the Covid-19 pandemic and the first
national lock-down being introduced just days before the start of
the financial year, the Group produced a strong performance for the
year in both financial
and operational terms. In summary:
-- Following an initial period when responsive repairs services
were restricted to the provision of essential repairs only, the
Group very quickly returned to a position of being able to deliver
its "same day" repairs service to customers as usual;
-- The Group continued to provide care and support services to
customers of those services throughout the pandemic, adopting
COVID-secure methods of working;
-- After a short period of closure at the beginning of the
lockdown period, all the Group's construction sites opened up and
the development programme remained substantially on track, with 277
new homes completed during the year (86.6% of the original target,
with the remaining properties being completed in early
2021/22);
-- Approximately 25% of the original 2020/21 planned maintenance
programme, which could not be delivered during the first quarter of
2020/21, will be rolled forward to 2021/22 but all essential
compliance, health and safety and regulatory elements of the
programme were prioritised and successfully completed during the
year;
-- The Group received GBP625,000 under the government Coronavirus Job Retention Scheme.
1.2 In April 2020 the Group carried out additional stress
testing on its business plan to model the likely potential impacts
of the pandemic and identified mitigating actions to deal with
them, principally relating to more substantial rescheduling of
non-critical planned maintenance work. Procedures for the reporting
of financial information to the executive management team and the
Board have been enhanced. In fact, with income collection rates
being maintained at pre-pandemic levels and costs being
well-controlled within the agreed budget, those mitigating actions
did not need to be deployed.
1.3 The recoverability of income was not adversely affected by
the pandemic and levels of arrears and bad debts were maintained at
pre-pandemic levels throughout the year. Rent losses from void
properties were higher than in previous years, due to lettings
being suspended during the first few months of the pandemic, but
performance in this area is now back to pre-pandemic levels.
1.4 During the year, the Group issued GBP25m of the GBP50m
retained bond. The issue achieved a price of 108 basis points over
gilts, providing an all-in cost of funds of 1.92%.
1.5 In February 2021 the Group had its scheduled In Depth
Assessment from the Regulator of Social Housing. As a result of
this assessment the Group's regulatory judgement was reconfirmed as
G1 (Governance) and V1 (Financial Viability) in April 2021.
1.6 In August 2021 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 2021 and the Statement of Financial Position as at 31
(st) March 2021, 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 2021 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 2021 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 GBP95,709k (2020: GBP92,093k)
-- Turnover from social housing lettings for the year is
GBP76,242k (79.7%) (2020: GBP73,533k (79.8%))
-- Operating surplus for the year is GBP26,289k (2020: GBP27,784k)
-- Operating margin is 27.5% (2020: 30.2%)
-- Interest payable for the year is GBP15,955k (2020:
GBP69,965k, including GBP52,067k loan breakage costs
-- Surplus for the year before tax is GBP10,399k (2020: GBP41,911k deficit)
-- Interest cover is 2.00 (2020: 0.45)
Balance Sheet and Capital Expenditure
-- Wrekin owns and manages 13,041 units (2020: 12,965 units). It
also retains the residual freehold interest in 648 properties
previously disposed of under the Right to Buy or Right to Acquire
provisions (2020: 643)
-- Housing properties at cost (excluding accumulated
depreciation) are GBP764,528k (2020: GBP716,636k)
-- Investment in existing and new housing properties for the
year is GBP55,832k (2020: GBP54,566k)
-- New social housing units developed during the year is 277 (2020: 251)
-- Total debt is GBP489,649k (2020: GBP523,228k)
-- Gearing (Assets) is 59.7% (2020: 62.0%)
-- Net debt per unit is GBP35,212 (2020: GBP34,514)
-- Income and expenditure reserves are GBP34,868k (2020: GBP31,907k)
3. Results Overview
3.1 During the prior year of 2019/20 the Group completed its
major refinancing exercise. As part of that exercise it incurred
GBP52,067k of costs to break existing fixed rate loans, leading to
a deficit for 2019/20 before tax of GBP41,911k. Without the
breakage costs the Group would have recorded a pre-tax surplus of
GBP10,156k, compared with the pre-tax surplus for 2020/21 of
GBP10,399k.
3.2 Turnover increased by 3.9% in 2020/21, to GBP95,709k, but
operating costs increased by 8.3%, from GBP67,962k in 2019/20 to
GBP73,604k in 2020/21. Operating surplus therefore reduced from
GBP27,784k (a margin of 30.2%) to GBP26,289k (a margin of 27.5%).
This was mainly due to the fact that the Group booked an impairment
charge of GBP2,439k in 2020/21 in respect of two of its housing
schemes that have been earmarked for demolition and redevelopment.
This charge has also had a significant impact on the margin from
social housing lettings and the social housing cost per unit
metrics.
3.3 There has been a significant year on year increase in the
pension fund deficit with the Shropshire County Pension Fund, an
LGPS pension, of GBP9,899k. To limit future liabilities the Group
took the decision to close the scheme to new entrants with effect
from 1 September 2020, replacing this scheme with a new defined
contribution scheme for employees joining the Group after that
date.
3.4 Surpluses on disposal of housing assets (which covers
properties sold under the Right to Buy and Right to Acquire
provisions) reduced from GBP3,674k in 2019/20 to GBP1,664k in
2020/21. Whilst the number of Right to Acquire and Right to Buy
sales remained broadly constant in both years, the 2019/20 figure
was increased due to the Group's participation in the pilot
Voluntary Right to Buy scheme in 2019/20, which came to an end at
the beginning of the 2020/21 financial year.
3.5 In 2020/21 the Group booked an increase in the fair value of
assets of GBP2,520k (a reduction of GBP21k in 2019/20). This
relates to the Group's small portfolio of market rent properties
which were revalued by an independent external valuer during the
year.
3.6 The Group met its financial loan covenants (interest cover
and gearing) 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 277 new homes in 2020/21, mostly for rent at affordable
and social rent levels, together with a small number of shared
ownership properties, and a further 2,096 forecast to be completed
over the next 4 years.
4.2 During 2020/21 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. 73 properties were
sold in 2020/21 under this strategy, which was the 16(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 2.68 new properties
added for each property sold.
5. Funding Facilities
5.1 During the year, the Group issued GBP25m of the GBP50m
retained bond. The issue achieved a price of 108 basis points over
gilts, providing an all-in cost of funds of 1.92%.
5.2 Total loans (net of loan issue costs) stand at GBP489,649
(2020: GBP523,228). The reduction in loans during the year
primarily represents the repayment of revolving bank facilities as
cash collateral was replaced with property security.
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 250,000 225,000 25,000 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 0 50,000 22/10/2029
---------------- ------------- ------------- -------- ----------------
Variable
AIB Rate 40,000 30,000 10,000 22/10/2026
---------------- ------------- ------------- -------- ----------------
Nat West Fixed Rate 23,800 23,800 0 31/03/2026
---------------- ------------- ------------- -------- ----------------
Variable
Lloyds Rate 75,000 75,000 0 22/10/2024
---------------- ------------- ------------- -------- ----------------
First Abu Dhabi Variable
Bank Rate 50,000 0 50,000 22/10/2023
---------------- ------------- ------------- -------- ----------------
Total 606,000 471,000 135,000
------------- ------------- ----------------
Discounts/Premiums
on issue (net) (1,225)
------------- ------------- -------- ----------------
Fair value adj. 19,874
------------- ------------- ----------------
Total 489,649
------------- ------------- -------- ----------------
6. Outlook
6.1 The organisation has managed the impact of the pandemic well
and the outlook is relatively positive with continuing
opportunities for growth through the Group's development programme.
The Group is well-placed to deal with the implementation of the new
fire and building safety regulations, having only 3 high rise
blocks in its portfolio, none of which present any issues with
regard to cladding. 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. 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, but a significant amount of work has
already been undertaken in developing the Group's approach in this
area.
6.2 The confirmation of both the Group's strong regulatory
judgement and its credit rating were significant achievements over
the last few months and a recognition of the strength of the
Group's current position.
The Group signed its financial statements for the year ended
31st March 2021 in August 2021. 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 2021
Consolidated Statement of Comprehensive 2021 2020 Movement
Income GBP'000 GBP'000 GBP'000
------------- -------------- --------------
Turnover 95,709 92,093 3,616
---------------------------------------- ------------- -------------- --------------
Operating Costs (73,604) (67,962) (5,642)
---------------------------------------- ------------- -------------- --------------
Gain on Sale and Disposal of
Housing Properties 1,664 3,674 (2,010)
---------------------------------------- ------------- -------------- --------------
Movement in the fair value
of assets 2,520 (21) 2,541
---------------------------------------- ------------- -------------- --------------
Operating Surplus 26,289 27,784 (1,495)
---------------------------------------- ------------- -------------- --------------
Interest Receivable and similar
income 65 270 (205)
---------------------------------------- ------------- -------------- --------------
Interest payable, financing
and similar costs (15,955) (69,965) 54,010
---------------------------------------- ------------- -------------- --------------
Surplus/(Deficit) Before Tax 10,399 (41,911) 52,310
---------------------------------------- ------------- -------------- --------------
Taxation (122) 1 (123)
---------------------------------------- ------------- -------------- --------------
Surplus/(Deficit) for the Year 10,277 (41,910) 52,187
---------------------------------------- ------------- -------------- --------------
Actuarial (Loss)/Gain on Pension
Schemes (7,316) (5,306) (2,010)
---------------------------------------- ------------- -------------- --------------
Total Comprehensive Income
/ (Expense) for the Year 2,961 (47,216) 50,177
---------------------------------------- ------------- -------------- --------------
Consolidated Statement of Financial 2021 2020 Movement
Position GBP'000 GBP'000 GBP'000
-------------- ------------- -------------
Fixed Assets 675,701 637,560 38,141
-------------------------------------- -------------- ------------- -------------
Current Assets 45,426 88,714 (43,288)
-------------------------------------- -------------- ------------- -------------
Current Liabilities (25,055) (21,744) (3,311)
-------------------------------------- -------------- ------------- -------------
Net Current Assets 20,371 66,970 (46,599)
-------------------------------------- -------------- ------------- -------------
Total Assets Less Current Liabilities 696,072 704,530 (8,458)
-------------------------------------- -------------- ------------- -------------
Longer Term Liabilities (599,719) (621,037) 21,318
-------------------------------------- -------------- ------------- -------------
Pension Schemes Liabilities (60,639) (50,740) (9,899)
-------------------------------------- -------------- ------------- -------------
Total Net Assets 35,714 32,753 2,961
-------------------------------------- -------------- ------------- -------------
Restricted Reserve 846 846 0
-------------------------------------- -------------- ------------- -------------
Income and Expenditure Reserve 34,868 31,907 2,961
-------------------------------------- -------------- ------------- -------------
Total Reserves 35,714 32,753 2,961
-------------------------------------- -------------- ------------- -------------
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 76,242 73,533 2,709
Surplus on Social Housing Lettings 20,139 24,657 (4,518)
Amortisation of Government
Grants 982 894 88
Depreciation of Housing Properties (12,663) (12,038) (625)
Depreciation of Other Assets (685) (696) 11
Capitalised Major Repairs 6,159 7,677 (1,518)
Investment in New Build Properties 49,673 46,889 2,784
New Social Housing Units Developed 277 251 26
Total Units Owned and Managed
(Units) 13,041 12,965 76
Total Units Owned (Units) 12,970 12,872 98
Historic Cost of Properties
(excl. Accumulated Depreciation) 764,528 716,636 47,892
Cash and Cash Equivalents 32,944 78,966 (46,022)
Total Debt (489,649) (523,228) 33,579
----------------------------------- --------- -------------- --------
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) 79.7% 79.8%
Operating Margin on Social Housing Lettings
(2) 26.4% 33.5%
Social Housing Costs per Unit (GBP) (3) GBP3,803 GBP3,433
Operating Margin (4) 27.5% 30.2%
EBITDA-MRI to Net Interest (5) 2.05 0.46
Net Margin (6) 10.7% (45.5%)
Return on Capital Employed (7) 3.8% 3.9%
Interest Cover (8) 2.00 0.45
Gearing (Assets) (9) 59.7% 62.0%
Net Debt per Unit (10) GBP35,212 GBP34,514
-------------------------------------------- --------- ---------
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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