TIDM85FA
Notting Hill Genesis
18 May 2021
Notting Hill Genesis trading update for the financial year
ending 31 March 2021
FY 2020/21 Trading Update
Notting Hill Genesis ("NHG") intends to publish its FY 2020/21
audited accounts by the end of July. In the unlikely event of a
delay beyond July, we will notify the market of the updated timing
via an RNS announcement.
Ahead of publication of our FY 2020/21 audited accounts we
provide within this announcement an update on:
-- Operational performance
-- Key events and areas of focus
-- ESG and our Sustainable Finance Framework
-- Development and sales
-- Treasury position
Operational Update
Operationally, the year has been dominated by COVID-19.
Administrative staff transferred to working from home during the
week commencing 16 March 2020 and most have not been in the office
since. We expect to operate a hybrid model going forwards, with
most office staff returning to their respective office for part of
the time.
Initially, COVID-19 had a considerable effect on development,
with most sites closing completely, however most opened up again
quickly, albeit with some delayed expenditures.
We initially provided emergency repairs only, including repairs
to the homes of vulnerable people and communal repairs. We are
continuing to carry out routine gas safety inspections with a
99.93% level of compliance at 31 March 2021. Full repairs were
re-instated in summer 2020 and this has been the case through most
of the financial year. Although some major works were delayed,
preparations to re-start are in place and we expect to implement a
full asset repairs programme, including major and cyclical works,
in 2021/22.
The pandemic has led to increases in re-let times and arrears,
particularly within the market rent business. We do however have
plans in place to address this going forward and anticipate
(subject to no further lockdowns) that re-let metrics will be back
to pre-pandemic levels by the end of 2022, albeit arrears metrics
will take longer and are dependent on the courts being fully
opened.
During 2019/20 we completed the transformation of our operating
model, which means that each resident has a nominated housing
officer. We had intended to visit all residents in person as part
of this but have instead been regularly talking to them by phone.
This has allowed us to, for example, ensure access to food banks
for isolated customers. With lockdown restrictions lifting, we are
now planning to roll out face to face visits.
We have also implemented significant improvements to our IT
systems as part of the new operating model with a particular focus
on "Workwise", our proprietary system for allowing tenants access
to their own information and to enable them to initiate
transactions such as repairs or complaints.
We operate a number of extra care facilities across London for
elderly people, many of whom are at particular risk from COVID-19.
During the pandemic, we have followed Public Health England
guidelines and were able to secure the required staffing cover for
our homes through a successful recruitment drive for additional
staff.
Summary of Key Operational Indicators
Figure 1: A summary of key operational performance
indicators
Indicator Description FY FY 2020
2021
Number of homes let as a % of those
Occupancy available 98.00% 98.89%
------------------------------------------ ------- --------
Re-let time Number of days taken to re-let a home 66 38 days
days
------------------------------------------ ------- --------
Rent collection
rate Rent collected as a % of rent receivable 100.50% 99.35%
------------------------------------------ ------- --------
Current tenant arrears as a % of annual
Current Arrears rent due 5.50% 4.70%
------------------------------------------ ------- --------
Housing Benefit Tenants who have some/all rent paid
Tenants by Housing Benefit direct 36% 38%
------------------------------------------ ------- --------
Universal Credit Tenants who have some/all rent paid
Tenants by Universal Credit direct 20% 15%
------------------------------------------ ------- --------
Homes with landlord's gas certificate
Gas servicing as % of those requiring one 99.93% 99.86%
------------------------------------------ ------- --------
Key Events and Areas of Focus
-- Canada Water sale - as reported in our RNS announcement on 29
June 2020, NHG completed the sale of its remaining interest in a
site in the Canada Water area of Southwark on 26 June 2020. The
site sold for GBP140m to Art Invest Real Estate with GBP10m paid
before 31 March 2020, GBP70m on 26 June 2020 and the balance
payable in January 2022. After settling liabilities relating to the
scheme, this led to net proceeds of about GBP62m in FY 2020/21.
-- Aylesbury sale - NHG is the key partner with the London
Borough of Southwark for the regeneration of the Aylesbury Estate.
It was expected that we would build around 3,500 homes over a
period of about 20 years. During 2020/21, the Borough approached
NHG and asked if we would return the first two parts of the estate
to them in return for a payment of NHG's sunk costs. The first site
(of 229 homes) was on site and the second (of 352 homes) about to
start. We agreed, and the transaction was completed on 31 March
2021. This led to a receipt of GBP63m, although GBP24m of grant was
returned to the GLA on the same day.
-- The Paragon estate - On 19 October 2020 NHG announced that it
was to undertake a comprehensive safety review across this
development in Brentford, West London which was completed in 2006
by Berkeley First, part of The Berkeley Group plc. Following expert
advice provided by consultants employed by NHG, all residents
living in the Paragon - about 1,000 people in total - were asked to
leave immediately to protect their health and safety while further
investigative work was undertaken. All residents living in the
Paragon estate were able to access safe alternative accommodation
that week. The investigations will establish the full extent of any
required structural and fire safety works at the development and
identify next steps. These are not yet complete however. NHG has
been liaising with customers around long term housing solutions. As
part of this, NHG has offered to buy back the leasehold homes
(including shared ownership) on the estate and at 31 March 2021, we
had purchased 73 of the 105 leasehold homes at an aggregate cost of
GBP21.7m.
-- Fire Remedial Works - Following the events at Grenfell Tower
and in response to subsequent guidance and legislation, we have
comprehensively assessed potential risks in our buildings. We have
initially focused on buildings that are over 18m high, as well as
more recently completed buildings where we may still have a claim
against contractors. Most contractors have been positively engaged
in rectifying any faults related to them. Our best estimate at the
moment is that the gross cost of rectification that will have to be
borne by NHG is about GBP230m. We expect to recover some of this
from the Building Safety Fund, from the NHBC and from leaseholders,
leaving a likely net cost of about GBP173m which has been included
in our business plans.
At the commencement of financial year 2020/21, the Board set a
budgeted surplus of GBP101.2m. After taking account of the above
factors, we expect to publish results that show a surplus
significantly higher than this.
ESG and our Sustainable Finance Framework
A robust ESG framework within our organisation is very important
to us and we embed ESG principles across our entire business. To
ensure we are able to report on our ESG performance in a
transparent, consistent and comparable way, we will adopt the newly
created Sustainability Reporting Standard for Social Housing
("SRS").
Making our ESG performance information more accessible will
demonstrate to our residents and other stakeholders the positive
impact that we are making against these goals. In particular, it
will demonstrate that by investing in our organisation,
stakeholders are contributing to positive social and environmental
impacts.
We aim to develop new affordable and sustainable housing, as
well as improving the sustainability of our existing housing stock.
Through our strategic objectives we will carry out our mission to
"build and maintain quality affordable homes, creating diverse and
thriving communities." Customers are at the core of everything we
do.
The establishment of our Sustainable Finance Framework aligns
our strategic sustainability objectives with our funding and
financial strategy. NHG has selected a number of eligible areas
which are fundamental elements of our business model and deliver
the most positive societal and environmental impacts. Our
identified Eligible Assets, in line with ICMA and LMA principles,
will comprise of Affordable Housing and Green Buildings.
This Framework will be used to govern all forms of green, social
and sustainable finance including, but not limited to, Public
Bonds, Private Placements, Revolving Credit Facilities and Bank
Loans (together known as "Sustainable Financing Instruments"). The
Framework has been verified by DNV and can be found on our Investor
Relations website www.nhg.org.uk/sustainability along with the DNV
Second Party Opinion.
Development and Sales Update
When Notting Hill merged with Genesis in April 2018, we planned
to build 2,700 homes per annum. However, in late 2018, we reviewed
the speed of our sales and decided to reduce our development
programme. This led to a reduction in spend on new housing from
GBP654m in 2018/19, to GBP470m in 2019/20 and GBP335m in
2020/21.
We have now reset our aims as set out below, to target 1,400
homes per annum going forward. This includes a greater proportion
of homes for low cost rental (including Social, Affordable and
London Affordable Rent).
Figure 2: Composition of Development targets
Tenure April 2018 % of overall Updated % of overall
- Development developments Development developments
ambitions Ambitions
(per annum) by 2026
(per annum)
Low cost rental 690 26% 500 36%
---------------- ------------- -------------- -------------
Shared ownership 970 36% 350 25%
---------------- ------------- -------------- -------------
Intermediate market
rent - 0% 150 11%
---------------- ------------- -------------- -------------
Market rent 520 19% 200 14%
---------------- ------------- -------------- -------------
Private sale 520 19% 200 14%
---------------- ------------- -------------- -------------
Total 2,700 1,400
---------------- ------------- -------------- -------------
The following table provides details of acquisitions, starts and
completions in 2020/21 compared to 2019/20. Note that some homes
have been converted from sale tenures to rental tenures after
construction commenced. The first table is based on their original
intended use and the tenure transfers are shown in the second table
below. The joint venture sales are being managed by our JV partner
and are not included in the unsold homes numbers.
Despite disruption caused by the COVID-19 pandemic, NHG
completed 1,962 homes in 2019/20 and 1,342 homes in 2020/21.
Figure 3: Development programme as at 31 March 2021
Acquisitions Starts Completions
Tenure 2020/21 2019/20 2020/21 2019/20 2020/21 2019/20
--------- --------- --------- --------- --------- ---------
Low cost rental 354 140 465 321 391 604
--------- --------- --------- --------- --------- ---------
Shared ownership 206 72 290 190 495 581
--------- --------- --------- --------- --------- ---------
Market rent - 152 - 152 37 259
--------- --------- --------- --------- --------- ---------
Private sale 219 154 192 2 299 392
--------- --------- --------- --------- --------- ---------
Joint ventures - - - - 120 126
--------- --------- --------- --------- --------- ---------
Total 779 518 947 665 1,342 1,962
--------- --------- --------- --------- --------- ---------
During 2020/21 we completed a large number of homes intended for
sale on a shared ownership and outright sale basis. Given the
slowdown in the sales market, as a result of the pandemic, we
converted a number of homes to rental tenures. The following table
details our unsold homes throughout 2020/21.
Of the 548 homes unsold as at 31 March 2021, 35% have been
unsold for over six months.
Figure 4: Unsold homes as at 31 March 2021
Category Shared Private 2020/21 2019/20
ownership sale Total Total
Unsold homes as at 1 April 376 234 610 605
---------- ------- ------- -------
Homes completed - as originally
intended 495 299 794 973
---------- ------- ------- -------
Homes transferred to London
Living Rent tenure (43) - (43) (165)
---------- ------- ------- -------
Homes transferred to market
rent tenure (105) (123) (228) (132)
---------- ------- ------- -------
Homes transferred between
sales tenures 34 (34) - -
---------- ------- ------- -------
Homes sold on a plot by plot
basis (336) (141) (477) (596)
---------- ------- ------- -------
Bulk sale to private investor (108) - (108) (75)
---------- ------- ------- -------
Unsold homes as at 31 March
(Units) 313 235 548 610
---------- ------- ------- -------
Treasury Update
As at 31 March 2021, NHG had GBP923.3m of available liquidity,
comprising GBP879.3m of undrawn available bank facilities and
GBP44m cash. Our average life of drawn debt is 15.3 years and our
average costs of drawn debt is 3.93%.
Figure 5: Group Debt Position as at 31 March 2021
GBP'm Facilities Drawn Undrawn
Notting Hill Genesis 3,480.7 2,734.5 746.2
Notting Hill Home Ownership
Limited 279.2 146.1 133.1
Folio Treasury Limited 250.0 250.0 -
GenFinance II plc 250.0 250.0 -
Other subsidiaries 6.0 6.0 -
---------------------------- ---------- ------- -------
Group 4,265.9 3,386.6 879.3
---------- ------- -------
Figure 6: NHG Debt Maturity Profile
Years Debt maturity Debt maturity
GBP'm %
2022 333.4 9.8%
2023 49.3 1.5%
2024 71.0 2.1%
2025 30.9 0.9%
2026 27.8 0.8%
2027-31 815.9 24.1%
2032-41 953.0 28.1%
> 2041 1,105.2 32.6%
3,386.6 100.0%
Our fixed / floating mix as at 31 March 2021 was as follows:
Target
Category Lower Central Upper Actual
----- ------- -----
Fixed 50% 75% 95% 93%
----- ------- ----- ------
Floating 5% 20% 40% 5%
----- ------- ----- ------
Inflation-Linked 0% 5% 15% 2%
----- ------- ----- ------
As at 31 March 2021 our security position and unencumbered asset
position was as follows:
Units Security Value
(GBPm)
Charged & allocated 38,723 7,296
-------- --------------
Numerical apportionment security
pool 2,245 357
-------- --------------
Unencumbered 17,402 2,753
-------- --------------
Under the GBP2,000,000,000 Secured Note Programme, 2,245 units
are currently charged to the Numerical Apportionment Security
Pool.
This trading update contains certain forward looking statements
about the future outlook for NHG. Although the Directors believe
that these statements are based upon reasonable assumptions, any
such statements should be treated with caution as future outlook
may be influenced by factors that could cause actual outcomes and
results to be materially different.
Enquiries
Investor enquires in relation to his trading update should be
directed to:
Paul Phillips Andrew Sugden
Chief Financial Officer Corporate Finance Director
Email: paul.phillips@nhg.org.uk Email: andrew.sugden@nhg.org.uk
Telephone: 020 3815 0031 Telephone: 020 3815 0356
Media enquires in relation to his trading update should be
directed to:
Wayne Tuckfield
News and Media Manager
Email: Wayne.Tuckfield@nhg.org.uk
Telephone: 020 3815 0184
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