Notting Hill Genesis unaudited trading update for the financial year ending 31 March 2022

FY 2021/22 trading update

Notting Hill Genesis (NHG) intends to publish its full-year (FY) 2021/22 audited accounts by the end of July. In the unlikely event of a delay beyond July, we will notify the market of the updated timing via an RNS announcement.

Ahead of publication of our FY 2021/22 audited accounts we provide within this announcement an update on:

§ Operational performance

§ Key events and areas of focus

§ ESG and our Sustainable Finance Framework (SFF)

§ Development and sales

§ Treasury position

Operational update

Over the last year we successfully managed the challenges of covid, whilst also developing coherent strategies to address the demands of building safety and net zero carbon. We are aware of the overall global economic pressures and taking action to mitigate the adverse impact on our residents and business.

The covid pandemic has affected our business, slowing down sales and lettings and increasing tenant arrears. These impacts were however anticipated and effectively managed. We are gradually finding life returning to normal, with strong improvements in all areas. We are holding all our governance meetings in person and encourage our suppliers, auditors and other partners to meet us face to face whenever possible.

Now that we can revisit our residents at home, we are moving forward our repairs programme. We have made a strategic decision to invest more in our homes so that we can continue to let them for generations to come. We are committed to making our buildings safer and secure. Our 'Re:new' programme will upgrade our homes towards net zero carbon requirements and improve the fabric of our homes to make them warmer and easier to heat. We have budgeted significant investment over the next decade to guarantee the longevity of our stock and improve living conditions for all our residents. Alongside this, we also delivered 1,346 new homes.

We deployed a significant fire safety programme of rectification of facades and firestopping on our taller buildings. Where possible, we have required the original contractor to put things right and have sought government funding, insurance monies and third-party contributions. Nevertheless, a significant cost must be borne by our organisation and sufficient funds have been set aside to deal with what remains to be done. Throughout, we have done our utmost to keep all affected residents assured about their safety and to help any leaseholders who need to sell their homes. Our communication programme has been extensive.

The combination of two years of merger integration, followed by two years of covid restrictions, has impacted on our efficiency and effectiveness. We enter the new financial year with a strategy focused on making the organisation more customer-centric, improving homes and neighbourhoods, maximising value for money in our service delivery and deepening our commitment to safety and the green agenda.

Figure 1: A summary of key operational performance indicators

Key events and areas of focus

§ Canada Water sale: we previously reported the sale of NHG's remaining interest in a site in the Canada Water area of Southwark to Art Invest Real Estate. The site sold for £140m with a £60m balance payable. A further £30m was paid on 31 December 2021 and the balance of £30m is due in September 2022 

§ The Paragon estate: following decant of all the blocks in October 2020 due to safety concerns, we carried out a series of surveys and investigations to determine the baseline condition of all 6 blocks at Paragon and to inform on full remediation cost

§ Fire remedial works: the safety of our homes and customers is paramount to what we do. We have removed ACM from the 7 schemes with buildings over 18m that we were responsible for. We have also carried out 681 visual surveys and 370 intrusive surveys (including all buildings over 18m) and reduced waking watch by installing temporary alarms. We have completed remedial works on a further 17 blocks in addition to the ACM works. We are still confident that the overall net cost will be within what we have provided for (£173m) in our strategic plan

At the commencement of financial year 2021/22, the Board set a budgeted surplus of £82.7m. Despite challenges faced, our finances have remained strong and robust. After taking account of the above factors, we expect to publish results that show a surplus significantly higher than this.

ESG and our SFF

NHG has issued a sustainable finance framework which can be accessed from our website. We estimate that around 12,000 homes will require investment to reach an EPC 'C' level or better. We estimate that this will cost just over £20m and these improvements will be delivered by 2030.

There is an expectation that our stock will need to be carbon neutral by 2050. This is likely to cost about £700m on current estimates. However, there is a high level of uncertainty as to the costs and, indeed, the appropriate technology. Given this, we have factored these costs (apart from the first £20m referred to in the previous paragraph) into the final 20 years of the 30-year business plans.

Making our ESG performance information more accessible will demonstrate to our residents and other stakeholders the positive impact that we are making against these goals. It will demonstrate that by investing in our organisation, stakeholders are contributing to positive social and environmental impacts.

We aim to develop new affordable and sustainable homes, as well as improving the sustainability of our existing homes. Through our strategic objectives we will carry out our mission to "build and maintain quality affordable homes, creating diverse and thriving communities." Residents are at the core of everything we do.

Development and sales update

We plan to continue to expand our business through development growth. We have set a target to deliver 7,000 new homes by 2027 by delivering 1,400 homes per year. The programme will be composed of about 70% regulated affordable homes. Figure 2 below details breakdown by tenure.

Figure 2: Composition of development targets

The overall amount of money spent on new homes in 2021/22 was £335m; an increase of £82m in comparison to 2020/21. We are forecasting an increase to £388m in 2022/23 which will continue to grow in future years.

The following table provides details of acquisitions, starts and completions in 2021/22 compared to 2020/21. The joint venture sales are managed by our JV partner and are not included in the unsold homes numbers.

Figure 3: Development programme as at 31 March 2022

During 2021/22 we saw solid sales performance, reducing our unsold homes by 50%. This was achieved through plot sales and the sale of 160 homes at Brent House to an institutional investor on a bulk basis.

Of the 275 homes unsold as at 31 March 2022, 65% have been unsold for over six months.

Figure 4: Unsold homes as at 31 March 2022

Treasury update

As at 31 March 2022, NHG had £1,041.2m of available liquidity, comprising £964.7m of undrawn available bank facilities and £76.5m cash. Our average life of drawn debt is 15.6 years and our average costs of drawn debt is 4.04%.

Figure 5: Group debt position as at 31 March 2022

Figure 6: NHG debt maturity profile

Our fixed / floating mix as at 31 March 2022 was as follows:

As at 31 March 2022 our security and unencumbered asset position was as follows:

Under the £2,000,000,000 secured note programme, 2,245 units are currently charged to the numerical apportionment security pool.

This trading update contains certain forward-looking statements about the future outlook for NHG. Although the Directors believe that these statements are based upon reasonable assumptions, any such statements should be treated with caution as future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

Enquiries

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