Trading Statement

Karbon Homes Limited

26 June 2023

 

Karbon Homes Group

26.06.2023

Karbon Homes Group trading update for the period ending 31 March 2023

·    Karbon Homes Group (KHG) is today issuing its consolidated trading update for the period ended 31 March 2023.

·    These figures are unaudited and for information purposes only. 

Highlights for the period ending 31 March 2023

·    KHG own and manage 31,771 homes

·    Karbon Homes Limited maintained its G1/V1 status from the Regulator for Social Housing on 11th January 2023, following a stability check.

·    Turnover (excl. asset sales) for the period was £165.6m (2022: £155.2m)

·    Operating surplus (excl. asset sales) for the period was £43.7m (2022: £40.2m)

·    Overall operating margin (excl. asset sales) was 26.4% (2022: 25.9%)

·    The surplus after tax for the period was £30.1m (2022: £27.2m)

·    Gearing as at 31 March 2023 was 34.9% (2022: 34.6%)

·    Return on capital employed for the period was 3.7% (2022: 3.9%)

Commenting on the results, Andrew Thompson; Assistant Director: Treasury said:

'We are pleased to report that Karbon Homes Group has maintained positive performance in the financial year to 31st March 2023, and will highlight some of our key indicators in this unaudited release. This comes ahead of the publication of our audited accounts and ESG reporting under the Sustainability Reporting Standard for Social Housing, which are both due to be published in July.

Karbon has continued to invest and push forward with a number of new and exciting projects which will help us deliver on our strategic aims of providing good, quality homes, delivering excellent customer service and shaping strong, sustainable places for our communities.

Our commitment to playing our part in tackling the UK's housing crisis is unwavering, and we aim to build over 4,000 new homes across the North East and Yorkshire by 2028. A key part of this plan is our strategic partnership with Homes England.  We have had another strong year in terms of the provision of high quality affordable new homes, delivering 529 new homes across the group in a variety of tenures and geographies. In addition to this, we were pleased to exceed our target for our ongoing pipeline of homes, commencing on site this year with a further 762 homes versus our target of 511. 

The net zero carbon challenge also remains a key focus for us, as we try to help both our existing and new customers deal with the pressures faced by households in terms of their ongoing energy bills.  All of the new homes we have delivered this year benefit from an EPC rating of 'B' or above, and we continue to pilot the use of energy efficient technologies in our development schemes.  Our existing homes have also enjoyed significant investment this year as part of our ongoing capital works programmeDuring 2022/23 we have invested £30.5m in a range of capitalised repairs, compared to £20.3m in the prior year; an increase of 50%.  We have been able to continue improving the energy performance of our existing homes and strengthen our systems for tackling damp and mould as a result of our financial strength and solid interest cover metrics, all of which benefits our customers.  We are pleased to report that over 70% of our homes are at EPC C rating or above, as a result of these improvements.

Our customers continue to speak very highly of Karbon too.  Our customer satisfaction scores continue to remain high, with a Net Promoter Score of +39.8 for the year, meaning that our customers willingness to recommend Karbon to others is at a level considered to be 'excellent'.  We have particularly seen  a lot of demand for our money, debt and benefits advice service, where we've been able to help our customers maximise their benefit income.  During 2022/23, we generated almost £4m of income gains for our customers which have proved vital during the current cost of living crisis in the UK.

In terms of our strategic aim around 'place', we've also begun work on a number of deeper place-based interventions in areas where we have a large concentration of homes.  In Stanley, in County Durham, we've worked closely with customers, stakeholders and community organisations to help us understand what we can do to develop opportunities for the economy of the town to grow and to help residents live more prosperous lives.  Following months of research, Karbon published its Fair Foundations report in January 2023, outlining the practical ways that we hope to address the long-standing challenges of left behind places in the UK.

Finally, during 2022/23, we were pleased to strengthen our presence in Yorkshire following the merger of our subsidiary York Housing Association, with Leeds and Yorkshire Housing Association, to create a larger c 3000 home subsidiary called 54 North Homes.The merger aims to deliver better outcomes for our customers as well as economies of scale in our repairs and new homes development programmes in Yorkshire.

The progress of 2022/23 has been underpinned by Karbon maintaining the highest rating for both the governance and viability standard (G1/V1) with the Regulator of Social Housing.  Our external ratings agency (S&P Global), also noted in their annual review in May 2023, that they forecast that Karbon ''will maintain relatively strong financial metrics despite the challenges affecting the social housing sector'', and were complimentary of Karbon's experienced management team who are delivering the Group's strategy consistently with its operational capacity.  We were very pleased that this led to S&P improving the rating outlook to A 'positive' this year, which gives us a great foundation to continue to deliver for our communities.

Unaudited Financial Metrics
	31-Mar	31-Mar
	2023	2022
	Actual	Actual
	£'000	£'000
Statement of Comprehensive Income
Turnover (excl. asset sales)	165,604	155,186
Turnover (incl. asset sales)	172,476	163,186
Operating surplus (excl. asset sales) (Note 10)	43,708	40,180
Operating surplus (incl. asset sales) (Note 10)	46,981	43,989
Surplus after tax (Note 10)	30,107	27,152
Margins
Overall operating margin (excl. asset sales) (Note 1)	26.4%	25.9%
Overall operating margin (incl. asset sales) (Note 2)	27.2%	27.0%
Key Financial Ratios
EBITDA MRI interest cover (Note 3)	163.2%	184.6%
Gearing (Note 4)	34.9%	34.6%
ROCE (Note 5)	3.7%	3.9%
	31-Mar	31-Mar
	2023	2022
Liquidity
24 month liquidity requirement (£'000) (Note 6)	152,201	126,359
Cash and undrawn facilities (£'000) (Note 7)	235,492	247,070
Unencumbered stock (no of properties)	8,281	7,067
Value of unencumbered stock (average of EUV and MV, £'000) (Note 8)	331,977	258,915
Loan security excesses (average of EUV and MV, £'000) (Note 9)	217,776	157,151
Credit Rating
S & P	'A'; Outlook Positive - May 2023

Notes:

1) Operating margin excluding asset sales removes the gain or loss on disposal of housing properties.

2) Operating margin including asset sales includes all activity

3) Earnings before interest, tax, depreciation and amortisation, major repairs included is defined as: (Operating surplus - Disposal of assets - Outright sales and first tranche SO surpluses + Depreciation & impairment - Amortisation - Capitalised major repairs) / Interest paid

(reflecting the 'S&P Global methodology for rating public and non profit social housing providers', published 1st June 2021)

4) Gearing is defined as: Group Net Debt / Group Housing assets at historic cost less depreciation (RSH VFM Gearing definition).

Karbon have chosen to include cash held in non ring-fenced investment accounts as available cash, 2023: £38.7m (2022: £92.3m).  Removing this would result in the gearing calculations being 2023: 38.2% (2022: 43.9%).

5) Return on capital employed is defined as Operating Surplus (incl asset sales) / Total Assets less current liabilities

6) 24 month cashflow requirements

7) Cash, investments and undrawn revolving credit facilities

8) Value of stock not held by a lender or security trustee, at average £36k per unit

9) Value of excess security held with current lenders or security trustees

10) In order to show our underlying operating margin metrics, any negative goodwill arising on acquisitions or mergers has been excluded from these figures, 2023: £53.5m (2022: £8.6m).

This trading update contains certain forward looking statements about the future outlook for Karbon Homes Group. These have been prepared and reviewed by Karbon only and are unaudited.

Forward looking statements inherently involve a number of uncertainties and assumptions. Although the Directors believe that these statements are based upon reasonable assumptions on the publication date,

any such statements should be treated with caution as future outlook may be influenced by factors that could cause actual and audited outcomes and results to be materially different.

Additionally, the information in this statement should not be construed as solicitation/recommendation to invest in Karbon's bonds

For further information, please contact:

Andrew Thompson, Assistant Director: Treasury

07917 642957

https://www.karbonhomes.co.uk/corporate/

 

END