TIDM94BD
RNS Number : 9543G
Incommunities Treasury PLC
30 November 2020
Incommunities Group Limited
Consolidated Financial Report for the 6 Months Ended 30(th)
September 2020
Incommunities Group Limited ('Incommunities', the 'Group') is
one of the leading providers of affordable housing in the UK and is
pleased to announce its consolidated results for the 6 months ended
30(th) September 2020.
These results are unaudited and are for information purposes
only.
1. Headlines
1.1 Despite the ongoing Covid-19 pandemic, the Group's financial
performance remains strong. However, there continues to be much
uncertainty as a result of the pandemic and the Group continues to
be prudent in its forecasts for the remainder of the year.
1.2 During the period, the Group Board authorised the issue of
GBP25m of the current GBP50m retained bond. The approach to market
is being discussed with the Group's Treasury advisors and it is
expected that an announcement will be made shortly.
1.3 The Group's Chief Executive announced her retirement during
the period and is due to leave in early 2021. Following an
extensive recruitment process her replacement will be joining the
Group in February 2021.
1.4 During the period, the Group commenced a project to replace
its stock inventory control system. This will significantly
increase the efficiency with which the Group manages its stock and
have a corresponding beneficial effect on the future delivery and
costs of the repairs service.
1.5 Following the UK Government climate emergency declaration in
2019, and in light of the recent focus on the role of Social
Housing in tackling climate change, the Group has prepared a new
10-year Sustainability Strategy to deliver rapid change at
Incommunities focusing on carbon reduction, sustainable housing
development, low carbon transport and affordable warmth.
1.6 During the period, the Group continues to deliver on new
development schemes and has set a revised 10-year development
target. Details of the Group's property development activities are
set out in Section 5.
2. Financial and Operating Highlights
2.1 Income and expenditure amounts are for the 6 months ended
30(th) September 2020. Comparatives are for the prior year
corresponding period (PYCP) (6 months ended 30(th) September 2019).
Balances and other financial information are as at 30(th) September
2020. Comparatives are as at the prior year end (PYE) (31(st) March
2020), unless otherwise stated.
2.2 The Statement of Comprehensive Income for the 6 months ended
30(th) September 2020 and the Statement of Financial Position as at
31(st) March 2020, together with the comparatives, are set out in
Appendix 1.
2.3 Other financial information for 30(th) September 2020 and
the corresponding comparatives are set out in Appendix 2.
2.4 A number of key financial performance indicators and
financial loan covenant calculations, based on the results for
30(th) September 2020 and the corresponding comparatives, are set
out in Appendix 3.
2.5 The financial and operating highlights are as follows:
Income and Expenditure
-- Turnover for the period is GBP49,941k (PYCP: GBP49,141k)
-- Turnover from social housing lettings for the period is
GBP47,975k (96.1%) (PYCP: GBP47,040k (95.7%))
-- Operating surplus for the period is GBP14,088k (PYCP: GBP12,617k)
-- Operating margin for the period is 28.2% (PYCP: 25.7%)
-- Net interest payable for the period is GBP5,304k (PYCP: GBP5,386k)
-- Surplus for the period is GBP8,784k (PYCP: GBP7,231k)
-- Interest cover is 3.37 (PY: 2.56)
Balances and Capital Expenditure
-- IGL owns and manages 21,892 units (PYE: 21,885 units), and
had a leasehold interest in 1,106 units (PYE: 1,106 units)
-- Housing properties at cost (excluding accumulated
depreciation) are GBP622,822k (PYE: GBP614,818k)
-- Investment in existing and new housing properties during the
period is GBP8,841k (PYCP: GBP12,463k)
-- New social housing units developed and acquired during the period is 32 (PYCP: 76)
-- Total loans (net of loan issue costs) is GBP285,332 (PYE: GBP298,898k)
-- Gearing (Assets) is 43.6% (PYE: 46.4%)
-- Net debt per unit is GBP11,983 (PYE: GBP12,579)
-- Income and expenditure reserves are GBP48,631k (PYE: GBP39,847k)
Other Information
-- S&P Credit Rating (23(rd) November 2020) is A+/Stable
-- Regulatory Judgement (23(rd) November 2020) is G2 - Governance, and V1 - Financial Viability
3. Results Overview
3.1 The Group continues to generate the majority of its income
from social housing activities. The Group has produced a positive
set of results in the 6-month period to 30(th) September 2020. This
has been aided by the coming to an end of the statutory reduction
in rents of 1.0% per annum. In addition, the pandemic has resulted
in a temporary reduction in property costs and provided
supplementary income from the Government's Furlough Scheme.
3.2 The Group also continues to benefit from the recent loan
restructuring exercise, which has resulted in a continuing
reduction in interest payable.
3.3 The Group's financial covenants, including Interest Cover,
Gearing (Assets) and Net Debt per Unit are all within set
parameters and show improvement in comparison with the prior
year.
3.4 The annual review of the S&P credit rating was announced
in March 2020 as A+ (stable). The Group's Regulatory Judgement was
changed in November 2020 to G2-Governance. This continues to meet
the requirements on governance set out in the Governance and
Financial Viability Standard. The Group's Regulatory Judgement
remains at V1-Financial Viability.
4. Comments on Results
4.1 Greg Robinson, Assistant Chief Executive - Resources, commented:
"Incommunities is pleased to announce a solid set of results,
which fully reflect the impact of the Covid-19 pandemic, reducing
some operating costs, whilst income collection has remained strong.
The continuing impact of the loan refinancing exercise is
particularly pleasing, which has resulted in a significant
reduction in interest payable. Not only has this exercise reduced
the interest payable, it is also providing additional funds for an
accelerated development programme, and has reduced the Group's
funding risk."
4.2 Geraldine Howley, Group Chief Executive, commented:
"The success of our refinancing exercise means we are able to
continue to invest in new housing stock and improve the services to
our customers. The past 6-month period has been exceptional, but
the underlying strength of our business is reflected in these
financial results. Our investment in digital technology, such as
Dynamic Repairs Scheduling and an Active Asset Management system
has helped the Group maintain services and systems throughout the
Covid-19 pandemic and will continue to yield financial benefits
into the future.
"The Group remains fully aware of the potential effects of the
Covid-19 pandemic on our business, and I can confirm we have taken
the necessary steps to deal with this and mitigate the impacts. We
continue to monitor the pandemic closely and make appropriate plans
and take appropriate actions."
5. Property Development Programme
5.1 The Group develops its housing properties through a
dedicated subsidiary, BCHT Development Company Limited. During the
6 months ended 30(th) September 2020, the Group delivered 14 new
housing properties over one scheme. All of these properties related
to affordable housing. The Group also purchased 18 S106
properties.
5.2 At 30(th) September 2020, the Group has some 65 units in
development over a number of schemes. These consist of affordable
housing and rent-to-buy units.
5.3 Following the loan restructuring exercise, the Group
continues to progress its future property development programme.
Further announcements on the Group's revised 10-year development
programme will be made in due course.
6. Funding Facilities
6.1 Total loans (net of loan issue costs) at 30(th) September
2020 are GBP285,332k (PYE: GBP298,898k). No additional loans have
been drawn during the period. The reduction in debt of GBP13,566k
is made up of GBP13,500k in repayments of the Barclay's RCF, a
repayment of GBP1k against other loans, a discount on issue of
GBP16k re-credited to the bond, and a write-off of GBP81k made to
the fair value adjustment on consolidation.
6.2 At the period end, the Group's consolidated loan portfolio is made up of the following:
Funder Facility Facility Debt Amount Available Final Repayment
Type Amount GBP'000 Amount Date
GBP'000 GBP'000
Bond Fixed Rate 250,000 200,000 50,000 21 Mar 2049
Barclays Fixed Rate 40,000 40,000 0 26 Nov 2043
------------ --------- ------------ ---------- ----------------
Variable
Barclays Rate 55,000 37,500 17,500 20 Feb 2025
------------ --------- ------------ ---------- ----------------
Variable
NatWest Rate 40,000 0 40,000 08 Feb 2029
------------ --------- ------------ ---------- ----------------
Variable
RBS Rate 20,000 10,000 10,000 12 Jul 2029
------------ --------- ------------ ---------- ----------------
THFC Fixed Rate 650 650 0 31 Oct 2023
------------ --------- ------------ ---------- ----------------
Other loans Fixed Rate 277 277 0 30 Sep 2051
------------ --------- ------------ ---------- ----------------
405,927 288,427 117,500
-------------------------- --------- ------------ ---------- ----------------
Discount on
issue (1,582) 1,582 21 Mar 2049
--------- ------------
Loan issue
costs (2,925) 2,925 21 Mar 2049
--------- ----------------
Fair value
adj. 1,412 (1,412) 30 Sep 2051
--------- ------------ ----------
Total 405,927 285,332 120,595
--------- ------------ ---------- ----------------
6.3 Interest Cover for the 6 month period is 3.37 (PYE: 2.56)
and Gearing (Assets) at the period-end is 43.6% (PYE: 46.4%).
7. Outlook
7.1 Due to the Covid-19 pandemic there remains some uncertainty
about the future operating environment. However, the current
economic environment remains relatively benign with low interest
rates and low inflation. We anticipate that there will be some
pressure going forward on wage increases, which form a significant
element of our operating expenditure, but this should be
manageable
7.2 The Covid-19 pandemic aside, the business outlook is
relatively positive with continuing opportunities for growth and
development and the Group's improved operational and financial
capacity to take advantage of these opportunities.
7.3 On a more cautionary note, the impact of Covid-19 on the
delivery of our repairs service inevitably means we will need to
address this backlog next year, this will mean a reduction in
operating margin and surplus more aligned to our business plan.
7.4 As noted in Section 1, the Group is looking to issue GBP25m
of its GBP50m retained bond, through its subsidiary Incommunities
Treasury PLC to support its development programme and to allow it
to take advantage of the opportunities available where these
compliment the Group's existing activities and meet with its strict
appraisal criteria.
Enquiries: Please contact Greg Robinson, Assistant Chief
Executive - Resources, on 01274 257 013 or at
Greg.Robinson@Incommunities.co.uk
Disclaimer
The information in this announcement has been prepared by
Incommunities 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 the Parent,
the Issuer or any other 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.
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 30(th) September 2020
Consolidated Statement of Comprehensive 6 Months 6 Months Movement Change
Income Ended 30.9.20 Ended 30.9.19 GBP'000 %
GBP'000 GBP'000
Turnover 49,941 49,141 800 1.6%
---------------------------------------- -------------- -------------- -------- -------
Cost of Sales 0 (1,013) 1,013 100%
---------------------------------------- -------------- -------------- -------- -------
Operating Costs:
---------------------------------------- -------------- -------------- -------- -------
Operating Expenditure (37,048) (38,354) 1,306 3.4%
---------------------------------------- -------------- -------------- -------- -------
Gain on Sale and Disposal of
Housing Properties and Other
Fixed Assets 1,195 2,843 (1,648) (58.0%)
---------------------------------------- -------------- -------------- -------- -------
Operating Surplus 14,088 12,617 1,471 11.7%
---------------------------------------- -------------- -------------- -------- -------
Net I nterest Payable and F
inance Costs (5,304) (5,386) 82 1.5%
---------------------------------------- -------------- -------------- -------- -------
Surplus Before Tax 8,784 7,231 1,553 21.5%
---------------------------------------- -------------- -------------- -------- -------
Taxation 0 0 0 0%
---------------------------------------- -------------- -------------- -------- -------
Surplus for the Period 8,784 7,231 1,553 21.5%
---------------------------------------- -------------- -------------- -------- -------
Actuarial Gain on Pension Schemes 0 0 0 0%
---------------------------------------- -------------- -------------- -------- -------
Total Comprehensive Income
for the Period 8,784 7,231 1,553 21.5%
-------------- -------------- -------- -------
Consolidated Statement of Financial 30.9.20 31.3.20 Movement Change
Position GBP'000 GBP'000 GBP'000 %
Fixed Assets 439,100 440,072 (972) (0.2%)
-------------------------------------- --------- --------- -------- -------
Current Assets 18,710 22,282 (3,572) (16.0%)
-------------------------------------- --------- --------- -------- -------
Current Liabilities (10,413) (12,861) 2,448 19.0%
-------------------------------------- --------- --------- -------- -------
Net Current Assets 8,297 9,421 (1,124) (11.9%)
-------------------------------------- --------- --------- -------- -------
Total Assets Less Current Liabilities 447,397 449,493 (2,096) (0.5%)
-------------------------------------- --------- --------- -------- -------
Longer Term Liabilities (361,880) (372,760) 10,880 2.9%
-------------------------------------- --------- --------- -------- -------
Pension Schemes Liabilities (36,886) (36,886) 0 0%
-------------------------------------- --------- --------- -------- -------
Total Net Assets 48,631 39,847 8,784 22.0%
-------------------------------------- --------- --------- -------- -------
Income and Expenditure Reserve 48,631 39,847 8,784 22.0%
-------------------------------------- --------- --------- -------- -------
Total Reserves 48,631 39,847 8,784 22.0%
--------- --------- -------- -------
*The consolidated results for the 6 months ended 30(th)
September 2020 and the corresponding prior period do not include a
provision for corporation tax payable or receivable in the period,
or any movements on pension schemes liabilities, both of which form
part of the year-end adjustments.
Appendix 2
Other Financial Information for 30(th) September 2020
Other Financial Information 6 Months 6 Months Movement Change
Ended 30.9.20 Ended 30.9.19 GBP'000 %
GBP'000 GBP'000
Turnover from Social Housing
Lettings 47,975 47,040 935 2.0%
----------------------------------- -------------- -------------- -------- -------
Surplus on Social Housing Lettings 13,776 11,193 2,583 23.1%
----------------------------------- -------------- -------------- -------- -------
Amortisation of Government Grants 413 412 1 0.2%
----------------------------------- -------------- -------------- -------- -------
Depreciation of Housing Properties (8,738) (8,698) (40) (0.5%)
----------------------------------- -------------- -------------- -------- -------
Depreciation of Other Assets (318) (387) 69 17.8%
----------------------------------- -------------- -------------- -------- -------
Capitalised Major Repairs 4,523 4,434 89 2.0%
----------------------------------- -------------- -------------- -------- -------
Investment in New Build Properties 4,318 8,029 (3,711) (46.2%)
----------------------------------- -------------- -------------- -------- -------
New Social Housing Units Developed 32 76 (44) (57.9%)
----------------------------------- -------------- -------------- -------- -------
Other Financial Information 30.9.20 31.3.20 Movement Change
GBP'000 GBP'000 GBP'000 %
Total Units Owned and Managed 22,998 22,991 7 0.0%
---------------------------------- --------- --------- -------- ------
Total Units Owned 22,663 22,656 7 0.0%
---------------------------------- --------- --------- -------- ------
Historic Cost of Properties
(excl. Accumulated Depreciation) 622,822 614,818 8,004 1.3%
---------------------------------- --------- --------- -------- ------
Cash and Cash Equivalents 13,769 13,903 (134) (1.0%)
---------------------------------- --------- --------- -------- ------
Total Loans (net of Loan Issue
Costs) (285,332) (298,898) (13,566) (4.5%)
---------------------------------- --------- --------- -------- ------
Appendix 3
Key Financial Performance and Indicators and Financial Covenants
for
30(th) September 2020
Key Financial Performance Indicators 6 Months 6 Months
Ended Ended
30.9.20 30.9.19
Turnover from Social Housing Lettings (1) 96.1% 95.7%
Operating Margin on Social Housing Lettings
(2) 28.7% 23.8%
Social Housing Costs per Unit (GBP) (3) GBP1,684 GBP1,824
Operating Margin (4) 28.2% 25.7%
EBITDA-MRI to Net Interest (5) 3.43 3.13
Net Margin (6) 17.6% 14.7%
Return on Capital Employed (7) 3.1% 2.8%
-------------------------------------------- -------- --------
Financial Covenants 30.9.20 31.3.20
Interest Cover (8) 3.37 2.56
Gearing (Assets) (9) 43.6% 46.4%
Net Debt per Unit (10) GBP11,983 GBP12,579
----------------------- --------- ---------
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 for the period / 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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