TIDM85FA
Notting Hill Genesis
25 November 2020
Notting Hill Genesis Trading Update
6 months ended 30 September 2020
Overview
Notting Hill Genesis (NHG) is one of the largest housing
associations in England, providing around 66,000 homes across
London and the South East. NHG works in the community, providing
homes for lower-income households. This is our primary purpose, and
everything else we do supports that aim.
The COVID-19 coronavirus pandemic has evolved rapidly in 2020,
and NHG has evaluated the potential impact of this on various areas
of the business. This is discussed in further detail throughout the
trading update.
The following trading update compares the NHG unaudited accounts
for the six months ended 30 September 2020 with the unaudited prior
year equivalent position, being the six months ended 30 September
2019.
Consolidated Statement of Comprehensive Income
6 months
ended 30 6 months ended
Sep 2020 30 Sep 2019 Movement
GBPm GBPm GBPm
----------------- ------------------------------------------- -----------------------------------
Turnover 483.9 343.5 140.4
Cost of sales (147.7) (59.9) (87.8)
Operating costs (190.2) (200.0) 9.8
Surplus on
disposal of
fixed
assets 9.2 13.3 (4.1)
Gains from joint
ventures 3.0 11.8 (8.8)
----------------- ------------------------------------------- -----------------------------------
Operating
surplus 158.2 108.7 49.5
----------------- ------------------------------------------- -----------------------------------
Net interest
payable (71.5) (60.7) (10.8)
Movements in
respect of
financial
derivatives 2.1 3.7 (1.6)
----------------- ------------------------------------------- -----------------------------------
Surplus to 30
September 88.8 51.7 37.1
----------------- ------------------------------------------- -----------------------------------
Trading Update
Overall, turnover increased by 40.9% to GBP483.9m, while
operating surplus increased by 45.5% to GBP158.2m from GBP108.7m.
The growth in surplus can be attributed to increase in private
sales up 587.4% from GBP25.8m to GBP177.5m primarily due to sales
at the Canada Water, Wooddene and Manor Place Depot sites.
We sold 243 homes (30 September 2019: 337 homes) during the 6
months ended 30 September 2020. Due to the lower number of units
staircased and less favourable surplus achieved on other sales, the
surplus on sale of fixed assets decreased by 30.8% from GBP13.3m to
GBP9.2m.
Joint venture income has decreased by 74.4% from GBP11.8m to
GBP3.0m as there has been less sales activity in this area in
2020.
Net interest paid has increased by 17.8% to GBP71.5m due to the
additional finance costs in relation to the sale of the Canada
Water site and the reduction in interest capitalised.
The fair value movement of hedged financial derivatives has
resulted in a positive movement of GBP2.1m (30 September 2019:
GBP3.7m).
Consolidated Statement of Financial Position
As at 30 As at 31
Sep 2020 March 2020 Movement
GBPm GBPm GBPm
---------- ------------ ---------
Housing properties 6,648.5 6,593.0 55.5
Other tangible assets 128.9 133.1 (4.2)
Investments 1,075.5 1,064.2 11.3
Net current assets 404.1 454.2 (50.1)
---------- ------------ ---------
Total assets less current
liabilities 8,257.0 8,244.5 12.5
---------- ------------ ---------
Loans due in more than one
year 3,296.8 3,364.7 (67.9)
Unamortised grant liability 1,229.8 1,212.2 17.6
Other long-term liabilities 303.1 322.1 (19.0)
Capital and reserves 3,427.3 3,345.5 81.8
---------- ------------ ---------
Total funding 8,257.0 8,244.5 12.5
---------- ------------ ---------
Investment and Debt Analysis
Housing properties have increased by 0.8% during the 6 months
ended 30 September 2020. We have completed 442 properties (30
September 2019: 630 properties) since 1 April 2020, of which 81
(18%) (30 September 2019:127 (20.2%)) were specifically built for
social or affordable rent. An additional 41 (30 September 2019:
128) homes have been delivered via stock transfers or the purchase
and repair programme. We currently have over 10,082 (30 September
2019: 12,540) homes in our overall development programme, of which
61% (30 September 2019: 58%) are designated as affordable or social
tenure types. The movement of 2,458 relates primarily to handovers,
651 as a result of aborted schemes and 803 homes on the sale of the
Canada Water site.
Investments have increased by 1.1%, which is primarily due to
expenditure on market rent properties in our Folio business.
Investment properties are revalued annually by an external third
party valuer at 31 March. Investment properties have not been
revalued at 30 September in either year.
Due to the COVID-19 pandemic and the ensuing market
uncertainties, the Board and management continue to review the
carrying value of investments. Management have also considered the
likelihood of recovery of all debtors with specific consideration
to the level of arrears, and likelihood of non-payment.
Group debt as at 30 September 2020 was GBP3,418.3m (as at 31
March 2020: GBP3,486.2m) and undrawn facilities as at September
2020 was GBP879.6m (as at 31 March 2020: GBP474.5m).
It is currently difficult to measure the potential impact of
Covid 19 crisis on every area of operations on which restrictions
remain in place. However, NHG remains a financially robust
organisation with substantial liquidity. NHG retains good
relationships with its principal lenders, and is ready and able to
access the capital market as necessary.
Principal Financing Activities
During the half year, the Bank of England confirmed NHG as
eligible to access its Covid Corporate Finance Facility from July
2020 with a limit of GBP300.0m. As at 30 September, GBP255.0m had
been utilised.
In addition, our market rent subsidiary, Folio London Limited
secured GBP250.0m by issuing a seven year bond. The bond was
secured on 1,523 homes in London and Chelmsford. The yield was
1.248%. The bond was priced on 21 September 2020 and the proceeds
received on 5 October 2020. The funds were used to reduce intra
group financing.
Other financial information
6 months 6 months
ended 30 ended 30
Sep 2020 Sep 2019 Movement
GBPm GBPm GBPm
---------- ---------- ------------------
Capitalised interest 8.7 11.9 (3.2)
---------- ---------- ------------------
Housing depreciation 25.7 26.1 (0.4)
---------- ---------- ------------------
Other depreciation 4.9 4.0 0.9
---------- ---------- ------------------
The decrease in capitalised interest is mainly attributable to
the carrying value of on-site schemes at 30 September 2020, which
is GBP243.0m lower than the carrying value of schemes on site at 30
September 2019. In addition, the impact of the first UK-wide
lockdown due to COVID-19 in March 2020, meant that some development
sites halted construction for some time. All developments are now
back on site.
Housing depreciation has remained broadly consistent year on
year.
Key performance statistics
6 months 6 months
to 30 Sep to 30 Sep
2020 2019 Movement
% % %
----------- ----------- ---------
Surplus as % of turnover 18.4 15.1 3.3
----------- ----------- ---------
Operating margin 32.7 31.6 1.1
----------- ----------- ---------
Operating margin - Social Housing
lettings 33.7 25.5 8.2
----------- ----------- ---------
Surplus as % of income from lettings 36.7 22.2 11.2
----------- ----------- ---------
Rent losses (voids and bad debts
as % of rent and service charges
receivable) 2.6 2.8 (0.2)
----------- ----------- ---------
Rent arrears (gross arrears as
% of rent and service charges
receivable) 9.0 7.7 1.3
----------- ----------- ---------
Interest cover (surplus before
interest payable, depreciation
and amortisation of housing properties
as % of interest payable) 246.0 205.6 40.4
----------- ----------- ---------
Gearing (total loans as a % of housing properties (including
investment properties and unsold homes) fell from 40.7% at 31 March
2020 to 40.5% at 30 September 2020.
Full year position
We are currently undertaking a comprehensive safety review
across a six-block residential development in West London, the
Paragon, following receipt of expert advice regarding the
construction of the buildings. Approximately 1,000 residents were
asked to vacate their homes to protect their health and safety,
while further investigative work is being carried out.
The financial impact on NHG arising from the Paragon works will
be included in the financial statements for the year ending 31
March 2021.
The Board set a budgeted surplus of GBP50.1m for the 6 months
ended 30 September 2020, achieving GBP88.8m, with a full year
budgeted surplus to 31 March 2020 of GBP101.2m. Although the
current operating environment is more volatile than usual, and the
costs arising at the Paragon remain uncertain, we currently expect
to achieve the budgeted surplus.
Neither the budget, nor the year end estimate include allowances
for mark to market movements in financial derivatives, or for
movements in the value of investment properties.
For further information, please
contact:
Financial enquiries
--------------
Paul Phillips, Chief Financial
Officer 020 3815 0031
--------------
Media enquiries
--------------
Kate Jeffreys, Director of Communications 020 3815 0072
--------------
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END
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