94BD Incommun.tr.49

Incommunities Limited trading update and unaudited financial results for the period ended 30 September 2024

Incommunities Treasury Plc's parent company, Incommunities Limited (IC), is pleased to announce the release of its unaudited half-year financial statements for the period ended 30 September 2024. 

Incommunities Limited is one of the largest Registered Providers in Yorkshire owning and managing 22,836 homes properties mainly across Bradford and Huddersfield, of which 22,816 are social housing properties, highlighting our commitment to provide and maintain high-quality affordable housing for our communities.

Regulatory Judgement

We are pleased to report a regulatory upgrade to G1 (announced in September 2024). The G1 rating means that Incommunities now meets the highest standards for managing risks and controlling the organisation and complements our retention of V1.

Our G1/V1 rating means:

·      G1: The highest governance rating a housing provider can achieve, showing that Incommunities meet the regulator's governance requirements. 

·      V1: The highest viability rating, showing that Incommunities meet viability requirements and have the financial capacity to deal with a wide range of adverse scenarios.

Please see the Incommunities news page for additional details https://www.incommunities.co.uk/news/top-marks-were-celebrating-our-governance-upgrade-1798

Financial and operational highlights
The year-to-date (YTD) financial performance to September delivered a net surplus of £5.7m compared to the budget of £4.2m. This is a 36% (£1.5m) better-than-expected result. YTD Interest cover is strong at 307%.
The strong YTD position is mainly driven by:
Lower interest costs (£0.7m) - See refinancing section for details
Lower bad debt costs (£0.2m)
Lower salary costs (£0.2m)
Increased surplus from property sales; 1^st tranche sales (£0.2m), fixed asset sales (£0.2m)  

KPI performance

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*£28m pa pro-rated

·    Investment programme - YTD spend of £8.4m. IC remains committed to improving the lives of our tenants through investment in their homes.

·    Development programme - YTD spend of £15.4m. IC generated £0.3m from first tranche sales and received £0.7m in grant income.

·    Liquidity - Remains strong, the cash position at the period was £8.9m, with further undrawn facilities of £195m (including £25m retained bond).

·    Funder Covenants - All funder covenants have been met

Refinancing

Liquidity: Placed an additional £100 million of new RCF funding in addition to extending the tenor of existing debt, bringing the total available bank facility amount to £255 million. Injecting flexibility into the business plan without the immediate need for long-term debt and extending the liquidity to October 2027.

Cost of Capital: The overall financing lowered the cost of capital without reducing the weighted average life of the loans. This enhances the efficiency of the bank portfolio, measured by both reduced cost and reduced refinancing risk. Borrowing costs were lowered though a combination of reduced margins and elimination of the credit adjustment spread on variable rate borrowing.

a.    On the total facility amount, the weighted average margin was reduced from 1.56% to 1.28% (-28bps).

Covenants: Successful negotiation of EBITDA only covenant condition that will support the strategic ambition, particularly for safe, good quality homes.

Business outlook

Despite a challenging economic climate, Incommunities has been able to exceed expectations in its mid-year performance figures. The upgrade to G1 testament of the robustness of our strategic oversight and approach to risk management. We launched a new Corporate Strategy in Apil 2024 that provides a clear strategic direction over the next 5 years. The Strategy clarifies that Our Vision is to create the best customer experience to improve everyday lives. With our customers at the heart of the strategy we're focussed on delivering across three areas for them: Homes, Services and Communities. This is underpinned by our change programme with improvements in service and efficiency defined. Addressing the issue of damp and mould continues to be big focus for us and we have been able to reduce cases from 30% of our properties to 3%, work is ongoing to reduce this further. We are undertaking surveys to understand the condition of all our homes and the insight this gives will allow us to formulate rigorous investment plans, including delivery of our sustainability ambition.

With the 1^st half of the year now behind us we're looking to build on this. Some headline outturn expectations include:
-              248 new homes delivered with a spend of £49.5m in the year
-              Damp and mould investment of £3.8m
-              Sustainability (grant funded) program worth net £3.3m (£6.4 Capex, £3.2m grant)
-              Component replacements worth approx. £14.5m
-              FRA compliance waking watch of £3.4
-              Regulatory and Ratings updates due early in 2025.

Economic Outlook

On 30 October, the UK Government announced that housing associations would be allowed to increase rents by CPI+1% for a period of five years. The Government has also made clear its intention to increase housebuilding by unblocking planning delays and it has announced some increases to grant funding.  These are welcome announcements which will have a positive impact on our financial plans, however development of new social housing in the current climate remains difficult.

Our strategic change programmes are expected to continue to improve KPI performance. As indicated by our V1 grading from the Regulator of Social Housing, our business plan is rigorously stress tested and is sufficiently resilient to even the harshest of adverse conditions. These factors suggest a cautiously optimistic outlook for Incommunities in 2025, with a focus on maintaining and improving existing housing stock while navigating financial and regulatory challenges.

Appendix

Statement of Comprehensive Income  

 Statement of Financial Position  

Disclaimer

These materials have been prepared by Incommunities solely for use in publishing and presenting its results for the six months ending 30 September 2024.

 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.