REG - Metro Funding plc Metropolitan Housing - MTVH Unaudited Half-year Results 30 Sept 2023

Legal & GeneralAnnouncement

28/11/2023 10:15

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RNS Number : 7877U  Metropolitan Funding PLC  28 November 2023

Metropolitan Housing Trust Ltd / Metropolitan Funding PLC

Thames Valley Housing Association (TVHA), trading as MTVH, announces trading
update and unaudited consolidated financial results for the six months ended
30 September 2023

Strong H1 performance provides foundations for full year growth

Overview and highlights

o Despite high inflation and rising interest rates putting upward pressure on
costs and lowering housing market confidence our H1 2023 operating surplus
improved to £75.2m (H1 2022: £69.8m).

o Total revenue increased to £209m (H1 2022: £197.8m)

o Operating margin improved to 36.0% (H1 2022: 35.3%)

o Total surplus was £34.5m (H1 2022: £34.8m).

 

o Revenue from rent and service charges £175m (H1 2022: £161m) with rent
arrears slightly improving to c.5.3% (March 2022 c 5.7%).

o Following the Government's announcement of a 7% 2023/24 social rent cap, we
have committed to cap shared ownership rent increases at the same percentage
for FY 2024.

o We invested £16.5m in planned improvement works to our estate (H1 2022:
£14m) and fire safety spend was £5.3m (FY22 £8.1m).

o We remain committed to supporting residents during the cost of living crisis
and £338k was spent from the Hardship Fund in the half year.

 

o Our development programme is on track to deliver more than 815 new homes in
the full year through partnership projects such as Clapham Park and Westhorpe
Gardens.

o In H1 2023 we completed 293 new homes (H1 2022: 107)

o Sales of 116 units completed (H1 2022: 149)

 

o Our financial position remains strong and supports our strategy for
continued sustainable growth.

o £765m (March 2023: £725m) of available liquidity.

o S&P Group rating of A- (Negative outlook), following the UK sovereign
downgrade in October 2022.

o Fitch Ratings refreshed rating as A (Negative outlook) in October 2023.

o Ritterwald refreshed the Sustainable Housing Certification, moving MTVH up
to Frontrunner for both Social and Governance, and Ambassador for
Environmental criteria.

 

 

Geeta Nanda, OBE, Chief Executive, commented:

"Despite the challenging economic environment we have continued to invest in
homes, communities, business systems and processes to serve residents better
every day.

 

We are also investing to build the new homes the country needs. We completed
293 homes in the first half of the year and are on track to deliver 815 in the
full year. Excellent progress continues to be made at our flagship
regeneration scheme at Clapham Park, South London, with construction works on
the second phase of 520 new homes now underway.

 

We have affirmed our position as a market leader in shared ownership by
expanding our partnerships to provide sales and construction services for 12
other shared ownership providers, and through a new Joint Venture with Legal
& General Affordable Homes.

 

Our strong first half performance leaves us confident for the full year
outcome and our robust financial position is underscored by the A rating
awarded by Fitch Ratings and the A- rating from S&P Group."

 

 

Statement of comprehensive income

 

 £ million                            6 months    6 months    Movement

                                      ended 30    ended 30

                                      September   September

                                      2023        2022

 Turnover - rent and service charges  189.1       172.9

 Operating costs

                                      (149.5)     (128.9)
 Net surplus on rental operations     39.6        44.0        (4.4)
 Turnover - sales                     13.5        19.4

 Cost of sales                        (11.5)      (15.6)
 Net surplus on new build sales       2.0         3.8         (1.8)
 Surplus on disposal of fixed assets  32.5        25.8        6.7

 Gains from joint ventures            6.1         5.5         0.6
 Building Safety and non-recurring    (5.0)       (9.1)       4.1
 Operating surplus                    75.2        70.0        5.2
 Net interest payable                 (43.4)      (39.8)      (3.6)

 Gains on financial derivatives       2.7         4.6         (1.9)
 Surplus to 30 September              34.5        34.8        (0.3)

 

Senior Leadership Changes

Helen McTeer who has been with MTVH for over 11 years was appointed to the
role of Executive Director of Corporate Services in October 2023 following the
departure of Jane Long who took up a position as CEO of a children's hospice.

 

Trading overview

Turnover from core social housing (ie excluding home sales) was up 9% compared
to the same period last year.

Turnover from sales was lower as we sold 116 units in the first six months
(compared to 149 in the same period last year). At 30 September 2023, we had
170 unsold units, of which only 54 are unsold over 90 days, with a sales value
of £7.1m. While sales are currently in line with expectations, we remain
well-placed if the sales market weakens.

Operating surplus (including profit from disposals and after expensed fire
safety costs of £5m) was £5.2m higher than the same period last year at
£75.2m (2021: £69.9m).

Operating costs in the first six months were £111.0m (2022: £92.1m). In
FY23, the amount we spent on improvements to homes was weighted significantly
towards H2 whereas this year the spend will be more evenly profiled. H1 24
maintenance-related expenses were £12m higher compared to H1 23, but £10m
lower than H2 23. Year on year inflationary pressure also increased costs
relating to salaries, utilities and managing agents. Operating margin for the
first six months is 0.7 ppts higher at 36.0% (2022 35.3%).

Cashflow from operations (before interest and movements in debt) was £9.4m
higher than H1 last year, with increases in sales (including aftersales) and
disposals proceeds of £64.1m more than offsetting a £31.5m increase in
development expenditure. Investment in new development projects totalled
£124.1m (2022: £92.6m) in the period to 30 September and £16.5m (2022:
£14.0m) was spent on capitalised repairs to the existing estate. The
organisation completed 293 homes during the first half of the year (2022: 107)
and remains on track to deliver more than 815 new homes for the full year.

 

Underlying net interest costs (excluding mark to market movements on
derivatives) are £3.6m higher than the same period last year as variable
rates increase from historic lows. At 30 September 2023, we had £765m (Sep
2022: £747m) of available liquidity (both cash and committed facilities) and
total debt of £1,901m (2022 £1,908m). Liquidity management remains a key
focus to mitigate the impact of a wider economic downturn. At the same time,
our relatively low gearing, at 38%, and over £410m of available security
provides further resilience to shock.

 

Thames Valley Housing Association's Standard & Poor's credit rating was
downgraded to A- (Negative outlook) in October 2022 following the UK Sovereign
Rating downgrade.

Fitch Ratings refreshed the organisation rating as A (Negative) in October
2023.

Full-year outlook

This outlook statement is subject to uncertainty/unforeseen market and
business interruption as a result of uncertainty over the direction of
government policy. The economic and geopolitical environments remain
challenging, with persistently high levels of inflation and interest rates,
along with supply chain and labour shortages, and continuing concerns over
energy supplies.

 

Trading

The core housing business continues to perform well. Total revenue including
home sales is expected to be around c 5% higher than last year due to sales
revenues from strategic asset disposals. Underlying Operating surplus (before
any non-recurring charges) is also expected to be c 5% higher than FY23.

The rent regime of CPI+1% for Affordable Rents will apply an increase of 7.7%
to our social rents for FY25. This will boost revenues but margins will
continue to be squeezed as operating costs are expected to rise by more than
this. This will impact on our capacity to build new homes. MTVH is committed
to providing increased support for those who face financial hardship.

Investment in building safety

Fire safety and Damp and Mould works have increased investment to our existing
homes. This is a sector issue. The longer term impact of remediation
obligations has led to a reduction in our capacity to develop new homes,
particularly homes for sale.

We are continuing with our Safer Buildings programme driven by our desire to
put customer safety first. We have completed the review of blocks over 18m and
are substantially through our risk based review of blocks under 18m, to
determine the extent of any remediation requirements. In certain cases, there
has been a requirement to carry out further, more intrusive surveys. We have
access to NHBC and the government's Safer Buildings Fund where we meet
qualification requirements. We expect that developers/warranty providers will
pick up the costs of remediation for newer buildings where this relates to
construction defect. We will seek to either accelerate the remediation or
redevelop the at-risk blocks, having confirmed we would not seek recovery from
Leaseholders.

TVHA will report results for the year ended 31 March 2024, trading as
Metropolitan Thames Valley, in summer 2024.

 

Consolidated financials

 

Statement of comprehensive income

 

 

Statement of Financial Position

 

 

 

 

 

 

 

Cashflow

Enquiries

Please contact Donald McKenzie, Director of Corporate Finance, on
0203-535-4434/ 07738-714126 or at donald.mckenzie@mtvh.co.uk (about:blank)

 

This information for investors is also available on our website:

https://www.mtvh.co.uk/about-us/investors/

 

Notes

1)   Operating margin is operating surplus/turnover

2)   Thames Valley Housing Association (TVHA) is the parent of the group
trading under the brand of Metropolitan Thames Valley (MTVH). Metropolitan
Housing Trust (MHT) is a wholly owned subsidiary of TVHA and MHT owns 100% of
the shares of Metropolitan Funding Plc.

 Disclaimer

The information in this announcement of unaudited consolidated interim results
has been prepared by the Thames Valley Housing Association group and is for
information purposes only.

The unaudited results announcement should not be construed as an offer or
solicitation to buy or sell any securities, 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 results announcement contains certain 'forward-looking'
statements reflecting, among other things, our current views on markets,
activities and prospects. By their nature, forward looking statements involve
a number of risks, uncertainties or assumptions that could cause actual
results to differ materially from those expressed or implied by those
statements. Actual 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.
Accordingly undue reliance should not be placed on forward looking statements.

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