REG - Aster Treasury Plc - Trading Statement

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10/05/2023 12:30

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RNS Number : 9671Y  Aster Treasury PLC  10 May 2023

ASTER GROUP

Trading Update - 31 March 2023

10 May 2023

Aster Group issues its unaudited Group trading update for the twelve months
ended 31 March 2023, with comparatives to the audited financial statements for
the 12 months ended 31 March 2022.

Full Year Highlights

Finance and governance

•     We remain in a stable financial position and ended the year with a
turnover of £301.2m, operating profit of £68.0m and a profit before tax of
£54.8m

•     Standard and Poor's (S&P) affirmed our 'A+ rating' and
'negative' outlook reflecting our new homes programme, our efficient cost
controls and our recent acquisition of Enham Trust

•     Despite the challenges the sector has faced over the past year,
our strong operational management and financial stability remain robust and we
continue to hold our governance and viability ratings at the highest levels of
G1 / V1 from the Regulator.

Growing our Group and investing in our new entities

•     Our acquisition of Central and Cecil Housing Trust (C&C) in
2022 has seen us improving services and develop homes including our first
development contract in London

•     In October 2022, we welcomed disability charity Enham Trust into
our Group, allowing Enham to continue to deliver against its purpose of
supporting disabled people to live, work and enjoy life. The Trust brings more
than 350 affordable homes, four specialist care homes and over 150 acres of
land into the Group. The Trust has retained its name, heritage, and charity
status. During the first six months of the acquisition, we invested £0.6m in
repairs and maintenance of Enham's properties and have helped stabilise its
care services. Further investment is planned over the next 12 months.

 

Providing safe, well-maintained homes and modern, reliable customer services

·    We're modernising our services to meet the changing landscape we
operate in. Our 'customer first' culture is centred around us making sure
every customer receives a good service, first time, delivered excellently,
with a strong local focus. Crucial to this is understanding and prioritising
what matters most to our customers and delivering services in the most
accessible and inclusive way possible

·    We're a landlord providing quality, affordable homes to thousands of
people and we're continuing to invest in our properties. This year we spent
£80.1m on repairs and maintenance to make sure our quality, affordable homes
continue to be great places to live

·    We have a good understanding of our homes to make sure they are up to
standard, and so we can target where resources are needed now, plan for
long-term investment and develop our strategy for responsibly sourcing
materials. However, we want the data we hold on our homes to be deeper, so
we've been carrying out a full stock condition survey, which also includes
C&C and Enham Trust properties, at a total cost of £3.1m. We are one of
only a few housing associations that has taken this vital step. We have now
surveyed most of our homes and will continue to survey the rest throughout the
year

·    We listen to what our customers say and use data and insight to
provide services that predict and prevent potential problems. This allows us
to continually improve our customer journeys. Over 50% of our total customers
are now registered to our online portal 'MyAster'. Our newly developed Live
chat service has been a great way for our customers to get in touch directly
with a member of our team. Their feedback continues to help us shape and
improve our digital platforms by adding more features and providing accessible
ways for customers to reach us. In October 2022 the success of MyAster meant
we were selected as Finalists for the Institute of Customer Service's
'Customer Satisfaction Innovation' award and shortlisted for the UK Housing
'Digital Landlord of the Year' award

·    Customer voice remains at the heart of our operations. These two-way
conversations are critical to us in providing scrutiny and bringing customers
on our modernisation journey by helping co-design our services. It also
provides them and us with assurances that we are focusing our efforts in the
right places. In March 2023 we received external accreditation from Tenant
Participation Advisory Service (Tpas) which supports and champions tenant
involvement and empowerment in social housing across England. This
accreditation reflects our commitment to customer engagement, involvement and
influence

·    We're always finding ways to innovate. We're trialling new
technologies to see how we can offer more ways to interact with us virtually
to provide an easier and quicker service for our customers. During the year,
over 7,000 customers shared their views and experiences via our engaged
customer groups, consultations and complaints and compliments service. We've
carried out 92 customer consultations which have resulted in a number of
changes to our service offer during the year

·    The safety of our customers is our priority. We've introduced a new
dedicated property safety team which instil our 'safety first' approach across
the business. They are focused on making sure we are responding to the
Building Safety Act and keeping our customers and colleagues safe. With regard
to fire safety specifically, we have surveyed all our blocks, and only have
six which are over 18 metres high and five that require non-urgent remedial
works. We've continued to achieve a high level of performance on our Gas
Servicing Compliance (99.9%), Electrical Testing Compliance (99.3%), Fire Risk
Assessments (99.8%), and Decent Homes Compliance (99.9%)

·    Further to £350,000 funding from Homes England, we have partnered
with Test Valley Borough Council to provide five homes to help rough sleepers
off the streets in Hampshire. All five properties have now been purchased with
four customers now settled in their home, with the final customer soon moving
in. Over the next 30 years, these five properties will continue to provide
homes for people who are at risk of rough sleeping, or who have been sleeping
rough in the borough

·    We recognise we have a part to play in tackling climate change. We
remain committed to ensuring all our stock is at least an energy performance
certificate (EPC) rating of C or above before the government's deadline of
2030, lowering our carbon footprint and protecting the biodiversity of our
communities. At 31 March 2023, 84.3% of our properties with an EPC were rated
at C or above, exceeding the national average of EPC D. We're developing a
broader strategy which will include greening our fleet. This year through
Aster Solar and external grant funding from the European Regional Development
Fund (ERDF) via Low Carbon Dorset, we completed a mini solar panel pilot
targeting off mains gas homes in rural Dorset

 

·      As a member of the South West Net Zero Hub (SWNZH), in March 2023
we were selected by the Government's Social Housing Decarbonisation Fund Wave
2 (SHDF), to receive over £500,000 of grant funding. This project will see us
improve the energy efficiency of over 100 of our least energy efficient homes
over the next two years to EPC C, helping continue our wider retrofit activity
in Dorset, Somerset, and Wiltshire.

 

Empowering our colleagues, customers and communities to thrive

·    We're relentless in our mission to extend our impact in our
communities. This is achieved in a number of ways including through our
day-to-day services and the Aster Foundation, which has now completed its
first year as an official registered charity. During 2022/23, the Aster
Foundation helped over 9,200 people through its programmes including mental
wellness, financial wellbeing and employment. The charity's social incubator,
inc., is now in its third year supporting social entrepreneurs and attracts
some of the brightest minds tackling social challenges

·    We are continuing to evolve our colleague offer so we attract and
retain the best talent. Ultimately, this will ensure our customers receive the
best possible experience from us. As part of our transformation journey -
'Programme Experience' - we have continued to find ways to better support our
people and nurture a supportive and inclusive culture

·    We're creating a sustainable employment offer which has compelling
job opportunities across our teams based on what our customers need. In
practice, this includes us developing our people in our contact centre to
better support customers when they first contact us, through to our trades who
are out in our communities so that at a local level, they are given the
flexibility and support they need so we retain the best talent

·    This year saw us launch our diversity and inclusion (D&I)
principles, and our Board diversity and neurodiversity training programmes, to
help underpin everything we do. We've also introduced LGBTQ+, gender, race and
heritage, disability confident and carers colleague networks. These groups
provide supportive spaces for colleagues and are critical to inform future
plans

·    Our aim is to become the number one employer in our sector. We're
delivering this through our flexible colleague offer which breaks the mould in
items such as women's health, mental wellbeing, and restorative practice.
Further to our menopause-friendly accreditation last financial year, our
menopause support programme continued this year to receive recognition. We won
the 'Best Benefits to Support Menopause' award and the 'Best Support Group' at
the Menopause Friendly Awards. We were also recognised by the Restorative
Justice Council (RJC) as a Registered Restorative Organisation for the third
year running

·    We're keen to measure the benefits we're bringing to our communities
and this year launched our second Economic Impact Report in September 2022.
Working with research agency, Development Economics, it found we delivered
close to £250m in economic value (up by 13% compared to the last time we did
the study in 2019) and created over 3,000 direct and indirect jobs during
2020/21.

Building as many homes as we can, offering a range of housing options

·    We are pleased to have achieved our strongest ever result for
development with over 1,300 new homes delivered this year. This has been a
particularly significant achievement given the challenges faced. 698 of those
homes were for affordable rent, 466 were shared ownership, 17 for market rent
and 171 sold on the open market. We also signed one of our biggest Section 106
deals to date which will see us deliver just under 300 affordable homes in
Fiddington, Tewkesbury with Persimmon Homes

·    We also released our third Environmental, Social and Governance (ESG)
report (https://www.aster.co.uk/ESG-2022) covering the 12 months to 31 March
2022; benchmarking our credentials against the United Nation's Sustainable
Development Goals (UN SDGs) and the newer Sustainability Reporting Standard
(SRS) for social housing.

 

Financial and operating performance

Unaudited profit before tax for the year ended 31 March 2023 was £54.8m and
includes a gain on acquisition of £12.5m. Excluding this gain, underlying
profit before tax is £42.3m. Housing properties (net of depreciation) have
increased to £2,220m from £2,053m at 31 March 2023.

 

 Consolidated Statement of Comprehensive Income (£000)                          12 months    12 months

March 2023
March 2022
 Turnover                                                                      301,217      240,933
 Operating costs                                                               (253,477)    (188,618)
 Surplus on sale of housing property, plant and equipment                      20,309       22,609
 Operating Profit                                                              68,049       74,924
 Profit on disposal of other property, plant, equipment and intangible assets  -            8
 (Impairment)/reversal of impairment of housing assets                         (87)         137
 Share of profit in joint ventures                                             1,624        2,631
 Increase in fair value of investment properties                               107          1,153
 Net finance expense                                                           (27,420)     (27,664)
                                                                               42,273       51,189
 Gain on acquisition                                                           12,549       119,409
 Profit before tax for the year                                                54,822       170,598

 

 Financial indicators                                                        12 months     12 months

March 2023
March 2022
 Operating margin (excluding surplus on sale of housing property, plant and  15.8%        21.8%
 equipment) ¹
 Social housing operating margin²                                            20.5%        25.6%
 EBITDA MRI interest cover³                                                  177.2%       182.5%
 Gearing⁴                                                                    51.0%        50.0%

 

The Group's revenue continued to be focused on low-risk affordable housing
with 71% related to the provision of affordable housing, 20% from first
tranche shared ownership sales and the remaining 9% from social housing
support services, non-social housing support services and other sources.

Demand for routine repairs remains high. Further to the backlog from the
pandemic and the February 2022 storms, we managed to meet these high demands
during the first half of the year. Despite these challenges, we're pleased to
report that our overall customer satisfaction was 77% as at March 2023
(includes our general needs and HOPS customers across Aster Group and C&C
only versus 82% at March 2022).

This year the focus on the standard of social housing homes has remained in
the spotlight. Addressing any work related to condensation, damp and mould
issues in particular remains a key priority. We want to be as proactive and
preventive as we can and work with specialists where needed to help us address
the root causes on any problems. As such, we have taken several proactive
steps to address these issues which are making real positive impact. We have
created a dedicated workstream to tackle these issues, rolled out specialist
training to surveyors on diagnosing damp and mould in properties, and
increased our surveying capacity to ensure we are inspecting homes as soon as
possible.

We are targeting investment in our homes in the right places, informed by
data. Our stock condition survey has and will help inform our investment in
major repairs and planned work this year and into the future.

Our overall operating margin was 15.8%, down from 21.8% in the comparative
period due to significant inflationary increases across the business, our team
managing an increased demand of repair work and additional investment in our
stock following the initial outcome from our stock condition survey.

Affordable housing rental income continues to grow increasing £18.5m to
£190.6m reflecting our new developed properties being let together with
properties acquired and annual rent increases. Rent arrears have been tightly
managed and remained strong at 1.8% (March 2022: 1.8%) against a target of 3%
of associated revenue. Our approach to collecting rent is one based on making
sure our customers are financially included, able to sustain their tenancies
and benefit from a flexible, person-centred service. Our financial wellbeing
team is central to this approach meaning our customers can manage their
finances effectively and feel supported. Void losses for the Group's general
needs and sheltered stock were improved for the period at 0.7% (March 2022:
0.8%), compared to the target of 0.8%.

Sales of shared ownership homes and open market sales homes (predominantly
delivered through joint ventures) totalled 556 units for the year ended 31
March 2023 (March 2022: 540). We continue to see high demand for shared
ownership properties, with first tranche sales of £60.5 m for the year (422
units) at an average sales percentage of 45%. In the current climate,
customers are drawn to shared ownership due to its lower risk. The average
reservation rate this year was 38 properties per month and average sales time
for such properties was ten weeks, from property handover to completion
against a target of 26 weeks. As at 31 March 2023, the Group had 94 completed
shared ownership homes (March 2022: 50) available for sale, of which 70 were
reserved (March 2022: 49).

Other asset sales continue to perform ahead of budget for the period due to
the continuation of our Void Disposal Programme (VDP) and an upturn in sales
from staircasing of shared ownership homes, again due to the market
conditions.

The gain on acquisition relates to our acquisition of Enham Trust on 1 October
2022, with the comparative period relating to Central and Cecil Housing Trust
(C&C) which was acquired on 1 January 2022. Both have been recognised as
non-exchange transactions.

 

Debt and liquidity

Net debt during the period has increased to £1,108m from £1,002m at March
2022. Liquidity at 31 March 2023 was £402.6m (21 months of our net cash
spend), consisting of committed and available undrawn facilities of £219.0m,
cash and cash equivalents of £93.6m and retained bonds of £90.0m. During the
year £50m of guaranteed fixed rate secured bonds were sold.

 

Development

We have performed positively over the year both in terms of new business and
the number of handovers and homes completed. As mentioned above, we completed
1,312 homes, the highest number of handovers ever within a financial year.
This was comprised of 1,164 affordable homes, 17 market rent units and 131
homes developed with our joint venture partner. We also acquired a further 82
properties in Wandsworth. We boosted our forward programme by contracting on
40 schemes which will provide 1,706 homes. This included a number of land-led
developments, a large developer-led scheme of nearly 300 homes with Persimmon
and our first schemes in London, since C&C joined the Group.

 

As a Homes England Strategic Partner we have secured £114 million to deliver
1,550 homes by March 2028. This funding continues to support the delivery of
our land led schemes. £10.2m of grant was drawn down during the year against
the expenditure of nearly £12m, across 248 homes. Build cost inflation
pressures continue to be a concern, which although have eased, we don't expect
to return to normal levels of inflation for some time. However, as the
majority of our programme is developer-led (fixed price) our exposure is
limited. The planning system continues to present challenges for the housing
sector and we have experienced long delays in achieving planning consents and
clearing planning conditions. The issue of nitrate neutrality also continues
to delay the process, but we are working diligently to connect with the right
stakeholders to find ways to speed things up where we can.

 

Board and executive team changes

Aster Group Ltd: The members of the Executive Board are Bjorn Howard, Chris
Benn, Rachel Credidio, Dawn Fowler-Stevens, Emma O'Shea and Amanda Williams.

 

There were no changes to the Board during the year to 31 March 2023.

 

Aster Treasury plc: There were no changes to the membership of the board.

 

 

Aster Group credit rating and governance

Aster Treasury plc is rated A+ (negative) by Standard and Poor's (December
2022), and G1/V1 by the Regulator of Social Housing (January 2022).

 

Notes:

¹ Demonstrates the profitability of operating assets before exceptional
expenses. Defined as operating profit, excluding surplus on sale of property,
plant and equipment, as a percentage of total turnover.

 

² Demonstrates the profitability of social housing operating assets before
exceptional expenses. Defined as operating profit derived from social housing
activities, excluding surplus on sale of property, plant and equipment, as a
percentage of total turnover.

 

³ Seeks to measure the level of surplus generated compared to interest
payable. It is a key indicator for liquidity and investment capacity. EBITDA
MRI is Earning before interest, tax, depreciation, amortisation, excluding
profit on disposal of property, plant and equipment, but including the cost of
capitalised major repairs (major repairs included). Interest includes the
group's interest payable plus interest capitalised during the year but
excluding interest on the net pension liabilities.

 

⁴ Calculated as net debt (loans less cash) as a proportion of social housing
assets. Shows how much of the social housing assets are made up of debt, and
the degree of dependence on debt finance. It also sets out the potential
capacity for further borrowing which can be used to fund the future
development of new housing.

 

For more information, please contact:

Chris Benn, Chief financial officer - Chris.benn@aster.co.uk
(mailto:Chris.benn@aster.co.uk)

https://www.aster.co.uk/corporate/about-us/investor-relations
(https://www.aster.co.uk/corporate/about-us/investor-relations)

 

 

Disclaimer

 

The information contained herein (the "Trading Update") has been prepared by
Aster Group Limited (the "Parent") and its subsidiaries (the "Group"),
including Aster Treasury plc (the "Issuer") and is for information purposes
only. The information contained in the Trading Update is unaudited.

The Trading Update 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.

Statements in the Trading Update, including those regarding possible or
assumed future (or other) performance of the Group as a whole or any member of
it, industry growth or other trend projections may constitute forward-looking
statements and as such involve risks and uncertainties that may cause actual
results, performance or developments to differ materially from those expressed
or implied by such forward-looking statements. Accordingly, no assurance is
given that such forward-looking statements will prove to have been correct.
They speak only as at the date of the Trading Update and neither the Parent
nor any other member of the Group undertakes any obligation to update or
revise any forward- looking statements, whether as a result of new
information, future developments, occurrence of unanticipated events or
otherwise. The information contained in the Trading Update is unaudited.
Trading Updates may be based on Management Accounts rather than draft
financial statements so may not take into account all consolidation and other
adjustments as required for the financial statements. These include, but are
not limited to, corporation tax, fair value of investment properties, fair
values relating to business combinations, balance sheet reclassifications
between fixed and current asset housing stock and defined benefit pension
costs such as interest and current service cost adjustments. The group does
not anticipate these adjustments will have a material effect on the outputs.

None of the Parent, any member of the Group or anyone else is under any
obligation to update or keep current the information contained in the Trading
Update. The information in the Trading Update is subject to verification, does
not purport to be comprehensive, is provided as at the date of the Trading
Update and is subject to change without notice.

No reliance should be placed on the information or any projections, targets,
estimates or forecasts and nothing in the Trading Update is or should be
relied on as a promise or representation as to the future. No statement in the
Trading Update is intended to be a profit estimate or forecast. No
representation or warranty, express or implied, is given by or on behalf of
the Parent, any other member of the Group or any of their respective
directors, officers, employees, advisers, agents or any other persons as to
the accuracy or validity of the information or opinions contained in the
Trading Update (and whether any information has been omitted from the Trading
Update). The Trading Update does not constitute legal, tax, accounting or
investment advice.

END

 

 

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