Incommunities Half Year Result to September 2023.

Incommunities Treasury PLC

27 December 2023

 

Incommunities Limited trading update and unaudited financial results for the period ended 30 September 2023

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 2023. 

Incommunities Limited is one of the largest Registered Providers in Yorkshire owning and managing 22,672 homes properties mainly across Bradford and Huddersfield, of which 22,652 are social housing properties, highlighting our commitment to provide and maintain high-quality affordable housing for our communities.

The YTD financial performance to September delivered a net surplus of £7.8m compared to the budget of £6.1m. This is a 28% (£1.7m) better-than-expected result. For comparison purposes, this is approx. £0.4m (6%) higher than the same period last year. YTD Interest cover is strong at 151% .
The strong YTD position is mainly driven by;
- lower salary cost (£0.4m)
- lower depreciation (£0.1m)
- increased surplus from property sales (£0.5m 1^st tranche, £0.5m fixed asset)

KPI performance:

	September (6 monthly)
	Budget	Actual
Metrics	23/24	22/23
Regulatory
Reinvestment	7.97%	7.57%
New Supply Delivered - Social Housing	0.69%	0.40%
New Supply Delivered - Non-Social Housing	0.00%	0.00%
Gearing (Net Debt / Housing Assets)	65.08%	60.08%
EBITDA-MRI Interest Cover	104.26%	109.35%
Headline Social Housing CPU	£2,168	£2,226
Operating Margin - Social Housing Lettings	14.08%	17.74%
Operating Margin - Overall	13.54%	18.42%
Return on Capital Employed	3.04%	2.57%
	September (6 monthly)
	Minimum	Actual
Covenants	23/24	23/24
Interest Cover*	1.10%	1.51%*
Gearing	70.00%	44.00%
Net debt per unit	£23,000	£13,096
*based on interest payable for this purpose - interest paid varies over the year and would distort

·    Investment programme - YTD spend of £12.0m. IC remains committed to improving the lives of our tenants through investment in their homes.

·    Development programme - YTD spend of £22.7m. IC generated £0.5m from first tranche sales and received £0.8m in grant income.

·    Liquidity - Remains strong, the cash position at the period was £16.7m, with further undrawn facilities of £112m (including £25m retained bond).

·    Funder Covenants - All funder covenants have been met

Business Outlook

IC is committed to putting customers at the heart of what we do. We have continued to enhance the visibility and management performance across the business in support of the journey back to G1. The figures presented demonstrate a real turning point for us as we look to ramp up investment across our stock portfolio (underpinned by stock condition surveys and associated strategies) whilst continuing to deliver on our development ambition.
Some of the expectations for the 2^nd half of the year (forecasted outturn)
-              218 new homes delivered with a spend of £56.0m in the year
-              Damp and mould investment of £1.7m
-              Sustainability (grant funded) program worth net £2.1m (£4.9 Capex, £2.8m grant)
-              2,905 component replacements worth approx. £16.1m

As with previous years, we continue to monitor all potential risks the group could face. Risk management a core component of our wider governance and internal control framework. We continue to operate under challenging market conditions with the potential to impact sales and prices and we are seeing emerging themes not too dissimilar to those impacting the housing sector and industry more widely including cyber threats and pressures on the supply chain. The Board continue to monitor the potential impact and remains well-placed to navigate the current economic volatility through regular stress testing of the business plan and relevant mitigation plans.

Inflation - CPI inflation had dropped to 4.6% in October 23 (from a high of 11.1% in October 22). This remains above the Bank of England's 2.0% inflationary target. Inflationary pressures have been factored into our future financial performance both for the remainder of the current year as well as future years through stress testing of the financial plan.

Interest Rates - The base rate has been gradually increasing over the past 12 months and has plateaued at 5.25% since August 2023. Incommunities protects its loan portfolio against the impact of base rate increases on financing costs. The debt portfolio is 92% fixed, against a minimum limit of 60% fixed in our Treasury Management Policy (TMP). This gives a strong degree of mitigation against interest rate risk.

Cost, Material and Labour Availability - Cost pressures and scarcity of materials and labour in the repairs markets have been flagged as issues facing the delivery of the day-to-day repairs, investment and new build programmes. Volatility in the energy market and other global markets linked to the conflict in Ukraine and Gaza will add to these pressures. The cost pressure around utilities has been reflected in the half year financial position.

Executive Appointments 

Anthony Brown left Incommunities and his role as Interim Executive Director of Assets in November 2023. We wish him well for the future and thank him for the contribution he made to reshape the Assets team at Incommunities.

Appendix

 Statement of Comprehensive Income  

	September (6 monthly)		March (Annual)
	Actual	Actual	Budget	Actual
	23/24	22/23	23/24	22/23
Income
Rent & Service Charges	52,817	49,529	106,327	99,589
Other Income	947	1,124	2,076	2,406
Amortised Grants	417	416	886	898
	54,181	51,069	109,288	102,893
Expenditure
Core Operating Costs	(36,890)	(34,050)	(76,261)	(81,399)
Depreciation	(8,205)	(8,274)	(18,013)	(16,554)
Net interest	(3,455)	(5,202)	(10,214)	(11,254)
Surplus on disposal (current & fixed)	3,015	3,821	4,117	7,257
	(45,535)	(43,705)	(100,370)	(101,950)
Net Surplus	8,646	7,364	8,918	943
FRS102 Pension - Actuarial gain	(858)	0	0	51,324
Gift Aid	0	0	0	14
Corporation tax	19	0	0	0
Total Comprehensive Income	7,807	7,364	8,918	52,281

Statement of Financial Position  

	September (6 monthly)		March (Annual)
	Actual	Actual	Budget	Actual
	23/24	22/23	23/24	22/23
Fixed Assets	482,903	436,461	511,662	456,808
Current Assets	27,270	27,999	12,650	13,813
Current Liabilities	(23,915)	(13,361)	(18,970)	(20,391)
Net Current (Liabilities) / Assets	3,355	14,638	(6,320)	(6,578)
Total Assets Less Current Liabilities	486,258	451,099	505,342	450,230
Creditor: Amounts Falling Due After More Than One Year	(380,844)	(356,059)	(400,460)	(352,623)
Provisions For Liabilities:	0	0	0	0
Pension Scheme - Defined Benefit Liability	(1,421)	(44,478)	(1,421)	(1,421)
Other Provisions	(1,816)	(913)	(173)	(1,816)
Total Net Assets	102,177	49,648	103,288	94,370
Income And Expenditure Reserve	102,177	49,648	103,288	94,370
Total Reserves	102,177	49,648	103,288	94,370

Disclaimer

These materials have been prepared by Incommunities solely for use in publishing and presenting its results for the six months ending 30 September 2023.

 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.

 

END