TIDM38EO
RNS Number : 0548B
Metropolitan Funding PLC
31 May 2023
Metropolitan Funding PLC
Thames Valley Housing Association (TVHA) announcesunaudited
consolidated results for the year ended 31 March 2023.
The TVHA group (trading as Metropolitan Thames Valley or MTVH),
one of the UK's leading providers of affordable housing and care
and support services, announces unaudited consolidated results for
the year ended 31 March 2023.
Headlines
-- Underlying Operating Surplus before non-recurring (building
safety-related) expenses down 15% to GBP122m (2022: GBP143m).
-- Reported Operating Surplus is GBP109m (2022: GBP122m). Operating margin 28% (2022:30%)
-- Total Revenue GBP388m (2022: GBP414m) due to reduced market sale revenues.
-- Non-sales income 88% of total turnover (2022: 85%).
-- 657 new homes completed (2022: 712 homes) of which 493 (2022: 326) were affordable.
-- GBP869m of available cash and facilities.
-- Net debt to EBITDA 11.6x (2022: 11.4x).
-- S&P credit rating A- (negative outlook) and A Stable from Fitch Rating.
-- RSH grading G1/V2.
-- No changes to the Board.
-- Kush Rawal appointed Executive Director of Customer Services.
Geeta Nanda, Chief Executive of Metropolitan Thames Valley,
commented:
" This year, we have maintained our robust financial status. The
increased share of non-sales revenue reflects the Board's
de-risking strategy and supports the public credit rating. Overall,
Development-related activities, including the SO Resi brand and
asset sales have generated a surplus of GBP45m and we have less
than GBP5m unreserved stock over 90 days at 31 March 2023. MTVH's
aftersales business has continued to deliver strong results posting
a GBP38m surplus. Despite the high inflationary environment we have
been able to control costs, with underlying Opex (excluding energy
inflation impact and fire safety) up only 6% to GBP278m.
The business retains a strong liquidity position and generates
significant amounts of cash from operating activities. We are
pleased to have retained an A rating from Fitch Ratings and an A-
rating from Standard & Poor's (S&P) Group (noting the move
to negative outlook as a result of the sovereign rating down grade
in Autumn 2022).
We have made further progress this year towards fulfilling the
goals of our five-year strategy and serving people better every
day. We spent GBP138m on maintaining existing homes and our
in-house contractor, 'Metworks', continues to perform well.
Meanwhile, we continue to invest in new homes, with GBP202m spent
on acquiring land and building homes. As such, we are strongly
placed to continue delivering good homes and quality homes services
to residents, enabling more people to live well.
However, with a funding squeeze across the sector, we have had
fewer resources at our disposal and built fewer homes than last
year. The challenging economic and financial environment has
impacted not only residents, but the entire sector including our
organisation. Rising inflation has seen an increase in a variety of
costs, including construction, while significant expenses such as
building safety costs have reduced resources. At the same time,
growing interest rates have made borrowing more costly. These
challenges have contributed to a slightly reduced surplus this
year.
The external environment has required us to be increasingly
innovative. We have established a joint venture partnership with
Legal & General Affordable Homes, which will harness the
expertise of a major financial institution to deliver over 2,500
affordable homes over the next seven years in London and the
South-East. Meanwhile, we have also implemented creative solutions
to provide the services residents want and need. For example, we
established multiple community kitchens in response to the acute
cost of living crisis being experienced by so many, as well as
providing comfortable 'Warm spaces' allowing people to congregate
offsetting high energy costs. To this end, we have also delivered
GBP3m in financial gains to residents who need help, a significant
increase on last year."
Results overview
Revenue from Housing operations (including supported housing and
market rent) was GBP358m (2022: GBP347m) with non-sales income
representing 88% (2022: 85%) of turnover. Sales revenue was GBP30m
(2022: GBP59m) with an average sales margin of 11% (2022: 16%). We
built 657 new homes (2022: 712 new homes) in the year, investing
GBP202m (2022: GBP161m) in new housing. Our Social Housing
operating margin (excluding fire safety costs) was 28% (2022: 29%)
slightly lower as a result of cost inflation, particularly with
regard to energy, where we expect some recovery through service
charges in future periods. Operating margin was 28% (2022: 30%)
with dilutive sales margins offset by accretive post-sales
margins.
Liquidity remains strong at GBP869m (2022: GBP774m). Drawn
borrowings are GBP1.9bn (2022: GBP2.0bn).
Our partnership integration activities are complete, and we
continue to deliver on the wider VFM savings that are embedded in
our Corporate Plan.
Operations review - Customer Services (including Care and
Support)
Social housing letting revenue was GBP321m (2022: GBP309m), with
underlying rental income up 3.9% in line with the inflation
settlement. We invested GBP30m (2022: GBP41m) in property
improvements, while our overall spend on fire safety was GBP13m
(2022: GBP13m net of GBP8m recovery). Our total spend on the
existing estate was GBP138m (2022: GBP138m) prioritising property
compliance, condition and customer satisfaction issues. Social rent
arrears closed the year at 5.2% (2022: 5.1%). We continue to
proactively contact vulnerable customers offering support and
financial advice, as well as assisting new claimants on to
Universal Credit, to limit upward pressure on arrears.
Operations review - New homes development and sales
First tranche revenues were GBP26m (2022; GBP42m). We sold 214
First Tranche units at an average 10% surplus margin (2022: 339
units at 12% margin). In addition we sold 17 outright sale units at
an average underlying margin of 13% (2022: 38 units at 25%). As at
31 March 2023, MTVH held 48 unreserved completed units (2022:
168).
During the year we completed 427 staircasing transactions which
delivered GBP15.7m of operating surplus at a 33% margin (2022:
GBP20.3m at 36% from 455 completions). In addition, we completed
179 Homebuy loan redemption transactions, achieving GBP6.2m of
operating surplus at a 44% margin (2022: GBP8.1m at a 42% margin
from 237 completions). Surplus derived from Right to Buy disposals
decreased by GBP0.7m to GBP2.1m and surplus from asset sales
increasing to GBP14.2m (2022: GBP6.5m).
The future development pipeline remains strong at 3,858 units
(2022: 5,490 units) which reflects the Board's decision to reduce
the newbuild programme, particularly the market sale exposure in
future years. During the year we completed the Clapham Park Joint
Venture with the appointment of Countryside and have now started on
site with the first phases.
Debt and facilities
Net debt (excluding derivative financial instruments) at 31
March 2023 is GBP1.7bn (2022: GBP1.8bn) following another year of
good cash generation boosted by sales market and lower than
expected development spend. The Net Cash Inflow for the year from
Operating and Investing activities was GBP110m (2022 GBP141m).
Available liquidity (cash and committed secured undrawn
facilities) is significantly higher at GBP869m (2022: GBP774m) as a
result of the delivery of the asset disposals and the early receipt
of cash grants. Gearing (on the Historic Cost basis) reduced to 36%
(2022: 38%). Interest cover was around 1.55 times (2022: 1.71
times) on an EBITDA- MRI basis.
The Standard & Poor's credit rating was confirmed in
December 2022 at A- (negative outlook) following the UK sovereign
downgrade. Fitch Ratings maintained the A Stable rating from the
setup of the EMTN programme in 2021.
The Board expects to announce full audited consolidated results
for the year ended 31 March 2023 later in the summer.
2023 2022 %
GBPm GBPm
-------- -------- ------
Revenue 387.6 414.3 -6%
-------- -------- ------
Cost of sales -26.1 -48.3 -46%
-------- -------- ------
Operating costs -286.4 -262.4 9%
-------- -------- ------
Surplus from disposal of fixed assets
and investments 38.2 37.5 2%
-------- -------- ------
Share of Surplus from Joint Ventures 8.4 2.3 265%
-------- -------- ------
Underlying Operating Surplus 121.7 143.4 -15%
-------- -------- ------
Non-recurring operating costs -12.6 -21.3 -40%
-------- -------- ------
Operating Surplus 109.1 122.1 -11%
-------- -------- ------
Net interest payable -79.0 -74.9 -5%
-------- -------- ------
Surplus on investment disposal -1.6 -100%
-------- -------- ------
Fair value adjustments 3.3 -5.3 -162%
-------- -------- ------
Taxation 0.4 -100%
-------- -------- ------
Total Surplus 33.4 40.7 -18%
-------- -------- ------
Actuarial gain in respect of pension
schemes 23.0 21.2 8%
-------- -------- ------
Change in fair value of hedged financial
instruments 23.9 12.1 98%
-------- -------- ------
Total comprehensive income for the
year 80.3 74.0 9%
-------- -------- ------
Housing properties 4,728.5 4,617.9 2%
-------- -------- ------
Investment properties and other fixed
assets 100.9 102.2 -1%
-------- -------- ------
Investments 188.4 204.5 -8%
-------- -------- ------
Net current assets -39.1 -17.1 -129%
-------- -------- ------
Total Assets less current liabilities 4,978.7 4,907.5 1%
-------- -------- ------
Amounts due to be repaid in more than
one year 2,320.5 2,305.1 1%
-------- -------- ------
Pension liabilities 24.9 49.5 -50%
-------- -------- ------
Capital and reserves 2,633.3 2,552.9 3%
-------- -------- ------
Total non-current liabilities and
reserves 4,978.7 4,907.5 1%
-------- -------- ------
Consolidated Statement of Cashflows for the
year ended 31 March 2023 (unaudited)
2023 2022 %
------------- -------------- -----
GBPm GBPm
------------- -------------- -----
Net cash from Operating Activities 245.7 254.4 -3%
------------- -------------- -----
Net cash from Investing Activities -135.9 -113.9 -19%
------------- -------------- -----
Net cash used in Financing Activities -67.9 -145.2 53%
------------- -------------- -----
Net movement in cash and cash
equivalents 41.9 -4.7 NA
------------- -------------- -----
Cash and cash equivalents carried
forward 193.5 151.6 28%
------------- -------------- -----
Sales revenue and margins
(unaudited) 2023 2022
Revenue Margin Revenue Margin
-------- ------- -------- -------
First Tranche 26.0 10% 42.1 12%
-------- ------- -------- -------
Outright Sales 4.4 13% 17.1 24%
-------- ------- -------- -------
Staircasing 48.0 33% 55.8 36%
-------- ------- -------- -------
RTB / RTA 3.8 54% 6.0 46%
-------- ------- -------- -------
Redemptions 14.1 44% 19.1 42%
-------- ------- -------- -------
Fixed Asset Sales 45.4 31% 24.3 27%
-------- ------- -------- -------
Outlook
The UK economy remains uncertain, with high inflation, rising
interest rates and volatile energy costs all affecting spending and
investment decisions. Inflation and Interest rates remain above BoE
targets, and we are affected by the decisions of policy-makers. Our
rent increase for FY24 has been capped at 7%, well below our
inflation expectations, and this constrains margins. If rent
increases for FY25 are capped below inflation again, this will have
a further adverse effect. Similarly, the rising cost of debt will
put increasing pressure on Interest Cover ratios as our fixed rate
contracts expire, further reducing the capacity to deliver on our
corporate objectives.
Whilst wholesale energy costs have fallen back, embedded
inflation is still pushing up the cost base and salary
expectations. Construction and maintenance costs are also rising
relatively quickly, although we have fixed price contract
mitigation for development schemes in flight.
MTVH announced in April, that as a result of the changes to the
Defective Premises Act, it will not be recharging Leaseholders for
fire remediation costs. The current MTVH collaborative approach to
remediation has resulted in most contractors acknowledging
construction failures and agreeing to remediate at their own
expense or otherwise to accept the major responsibility for the
costs. All non-recoverable costs including for Leaseholders, will
be a charge to MTVH. In response to this rising cost pressure,
which is being felt across the sector, the Board has made the
decision to reduce its development programme, and in particular
reducing future exposure to outright sales risk.
Enquiries
Please contact:
Donald McKenzie , Director of Corporate Finance, at
donald.mckenzie@mtvh.co.uk or on (W) 0203-535-4434 or (M) 07738
714126
This information for investors is also available on our website:
https://www.mtvh.co.uk/about-us/investors/
Notes
-- Operating margin is operating surplus divided by turnover
-- Net debt is borrowings (excluding derivatives) less cash and cash deposits
-- Gearing is net borrowings divided by net housing properties at cost
-- Interest cover is earnings before interest, tax and
depreciation/amortisation less capitalised major repairs, divided
by net interest costs
-- Prior year comparative figures are the unadjusted aggregate
of pre-partnership entity reported results
Disclaimer
The information in this Preliminary Results announcement has
been prepared by the Thames Valley Housing Association group 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 preliminary 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.
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