PERFORMANCE AND GOVERNANCE
Financial review
A summary of our financial position at the end of the 2023/24 financial year
Treasury management
At 31 March 2024, the Group had agreed loan facilities totalling £914.2m, of which £761.4m was drawn and £152.8m undrawn at the reporting date.
Loans totalling £830.8m are managed through the Group’s special purpose vehicles, Libra (Longhurst Group) Treasury plc and Libra (Longhurst Group) Treasury Nº 2 plc, with the balance of £83.4m being held directly within the Group.
In line with the Group’s approved treasury strategy, all new funding is arranged through one of our special purpose funding vehicles.
Treasury management
At 31 March 2024, the Group had agreed loan facilities totalling £914.2m, of which £761.4m was drawn and £152.8m undrawn at the reporting date.
Loans totalling £830.8m are managed through the Group’s special purpose vehicles, Libra (Longhurst Group) Treasury plc and Libra (Longhurst Group) Treasury Nº 2 plc, with the balance of £83.4m being held directly within the Group.
In line with the Group’s approved treasury strategy, all new funding is arranged through one of our special purpose funding vehicles.
Group loan facilities
The total loan facilities of £914.2m at 31 March 2024 is a decrease on the previous year (2023: £929.6m). The decrease in agreed facilities is due to facilities maturing during the year. The renewal of one of the Group’s revolving credit facilities has completed following the year-end with the inclusion of three key performance indicators linked to environmental, social and governance targets, aligning with our commitment to improving the lives of our customers and protecting and enhancing the communities we serve. This brings our sustainability-linked funding to a total of £175m. £50.0m of sales completed in April 2023 in relation to a forward bond sale, totalling £100.0m over this and the previous financial year.
The sale of bonds, together with existing undrawn revolving facilities and the sustainability-linked renewal following the year-end, provide sufficient liquidity as determined within the Group’s treasury management policy.
In total, £480.8m of total committed facilities have been either issued or are managed under Group loan facilities by Libra (Longhurst Group) Treasury plc and £350.0m by Libra (Longhurst Group) Treasury Nº 2 plc.
Our treasury management strategy is to maintain our hedging activity within flexible parameters, as defined within the treasury management policy.
The exact proportion of fixed rate borrowings (where the rate is fixed for 12 months or more) is set each year when the Board agrees the Group’s annual treasury strategy.
The level of fixed rate debt is determined by analysing how sensitive the Group’s cashflow forecast is to fluctuations in prevailing market interest rates, but subject always to the Group having at least 70 percent of its net position subject to fixed rates of interest, on a rolling five-year average basis.
The Group ensures that no more than 100 percent of its net exposure is fixed at any time.
Group loan facilities
The total loan facilities of £914.2m at 31 March 2024 is a decrease on the previous year (2023: £929.6m). The decrease in agreed facilities is due to facilities maturing during the year. The renewal of one of the Group’s revolving credit facilities has completed following the year-end with the inclusion of three key performance indicators linked to environmental, social and governance targets, aligning with our commitment to improving the lives of our customers and protecting and enhancing the communities we serve. This brings our sustainability-linked funding to a total of £175m. £50.0m of sales completed in April 2023 in relation to a forward bond sale, totalling £100.0m over this and the previous financial year.
The sale of bonds, together with existing undrawn revolving facilities and the sustainability-linked renewal following the year-end, provide sufficient liquidity as determined within the Group’s treasury management policy.
In total, £480.8m of total committed facilities have been either issued or are managed under Group loan facilities by Libra (Longhurst Group) Treasury plc and £350.0m by Libra (Longhurst Group) Treasury Nº 2 plc.
Our treasury management strategy is to maintain our hedging activity within flexible parameters, as defined within the treasury management policy.
The exact proportion of fixed rate borrowings (where the rate is fixed for 12 months or more) is set each year when the Board agrees the Group’s annual treasury strategy.
The level of fixed rate debt is determined by analysing how sensitive the Group’s cashflow forecast is to fluctuations in prevailing market interest rates, but subject always to the Group having at least 70 percent of its net position subject to fixed rates of interest, on a rolling five-year average basis.
The Group ensures that no more than 100 percent of its net exposure is fixed at any time.
Hedging activity
The Group’s hedging activity is within the treasury management policy’s agreed parameters, with a total of 94 percent fixed through a combination of embedded fixed rates and standalone derivatives. The ratio of fixed rate debt has reduced during the year because of a reduction in the notional value of standalone derivatives and resultant increased variable debt, along with revolving facility drawings, offset by an increase in fixed debt due to the April 2023 bond sale.
Hedging activity
The Group’s hedging activity is within the treasury management policy’s agreed parameters, with a total of 94 percent fixed through a combination of embedded fixed rates and standalone derivatives. The ratio of fixed rate debt has reduced during the year because of a reduction in the notional value of standalone derivatives and resultant increased variable debt, along with revolving facility drawings, offset by an increase in fixed debt due to the April 2023 bond sale.
Liquidity
At 31 March 2024, the Group had available cash of £13.6m (2023: 43.8m) and £152.8m (2023: £170.1m) of undrawn secured facilities available to draw of which £5,062k (2023: £5,805k) related to service charge balances held on behalf of leaseholders. The Group’s liquidity position remains strong, with sufficient cash and facilities to fund operational and capital expenditure for the next financial year and beyond.
Liquidity
At 31 March 2024, the Group had available cash of £13.6m (2023: 43.8m) and £152.8m (2023: £170.1m) of undrawn secured facilities available to draw of which £5,062k (2023: £5,805k) related to service charge balances held on behalf of leaseholders. The Group’s liquidity position remains strong, with sufficient cash and facilities to fund operational and capital expenditure for the next financial year and beyond.
Debt repayment profile
The majority of the Group’s loans have been arranged under long-term facilities with 85 percent of drawn facilities being for five years and beyond. The balance of 15 percent consists of short-term facilities with a final repayment date of within five years. The repayment profile for the drawn and undrawn debt held across the Group is summarised in the chart above. In total, 71 percent of committed facilities mature in more than five years, the majority of which relates to the two bonds maturing in 2038 (£250.0m) and 2043 (£350.0m). Of the £106.6m committed with a repayment profile of within one year, £100m relates to the revolving facility renewal that completed following the year-end.
Debt repayment profile
The majority of the Group’s loans have been arranged under long-term facilities with 85 percent of drawn facilities being for five years and beyond. The balance of 15 percent consists of short-term facilities with a final repayment date of within five years. The repayment profile for the drawn and undrawn debt held across the Group is summarised in the chart above. In total, 71 percent of committed facilities mature in more than five years, the majority of which relates to the two bonds maturing in 2038 (£250.0m) and 2043 (£350.0m). Of the £106.6m committed with a repayment profile of within one year, £100m relates to the revolving facility renewal that completed following the year-end.
Interest rate exposure
At 31 March 2024, the Group had a negative standalone interest rate swap exposure of £2.4m (2023: £3.8m), based on £52.5m (2023: £61.5m) of notional paying fixed rate and receiving three-month SONIA. All of the Group’s interest rate swaps allow for the mark to market (M2M) position to be covered by either property assets or cash. The unsecured threshold of £10m covered the M2M position at 31 March 2024. There is a further uncharged security allocated, should the M2M position surpass this threshold. The Group’s treasury management policy which is reviewed and approved annually, incorporates our objectives relating to treasury management activities together with policies and practices.
Interest rate exposure
At 31 March 2024, the Group had a negative standalone interest rate swap exposure of £2.4m (2023: £3.8m), based on £52.5m (2023: £61.5m) of notional paying fixed rate and receiving three-month SONIA. All of the Group’s interest rate swaps allow for the mark to market (M2M) position to be covered by either property assets or cash. The unsecured threshold of £10m covered the M2M position at 31 March 2024. There is a further uncharged security allocated, should the M2M position surpass this threshold. The Group’s treasury management policy which is reviewed and approved annually, incorporates our objectives relating to treasury management activities together with policies and practices.
Review of Group financial performance
The consolidated Group surplus for the year ended 31 March 2024 was £5.9m after tax, compared to a surplus of £7.4m for the same period in 2022/23. The Group’s total turnover for the year increased from £157.4m in 2022/23 to £171.5m in 2023/24. The increase in turnover is a result of increased social housing lettings turnover due to inflationary increases applied to rental income, arrears performance remaining strong at 1.54 percent (2023: 1.61 percent), and void losses, which have been at a heightened level, beginning to reduce. The turnover from social housing lettings as a percentage of turnover, has remained consistent year-on-year at 79.9 percent (2023: 79.8 percent).Overall, our turnover from social housing lettings was aligned with budget. The increase in operating costs, and further deterioration in the operating margin since the prior year, is due to several factors. The main challenge during the year continued to be repairs performance, with increased expenditure incurred whilst we worked hard to clear the backlog of overdue works and management costs also impacted, with heightened expenditure in relation to compensations, disrepair claims, disturbance payments and void utility expenditure. Further to this, rises in cost inflation experienced have impacted on our expenditure, most notably in relation to utility costs with increased and volatile wholesale gas prices over recent years.
Total interest and financing costs for the year were £30.9m up from £30.2m the previous year. Although the cost of borrowing reduced during the year, with an average rate of 4.3 percent compared to 4.4 percent in 2022/23, the increased interest and financing costs are reflective of the increased loan balances.
The net book value of the Group’s fixed assets grew by £94.9m in the year to £1.42bn at the end of March 2024. The increase in the recorded value of the fixed assets was realised through the increased investment in the provision of 611 new homes. Further to this, we’ve invested £28m (2023: £23m)] in our capital works programme, demonstrating our commitment to the Decent Homes Standard and providing the homes people want, where they’re needed. We secured £6m of funding from the Social Housing Decarbonisation Fund and have committed to spending £14m upgrading the energy performance of 581 homes, of which we’ve spent £6m during 2023/24. Total debt at the end of March 2024 increased to £761.4m from £709.5m the previous year due to the completion of the £50m forward bond sale in April 2023, along with the net impact of revolving facility drawings and loan facilities maturing. The pension liability has decreased to £16.4m from £16.6m due to the impact of market movements; a slightly higher discount rate, and slightly lower inflation and life expectancy assumptions. The cash flow hedge reserve reduced by a further £1.4m to £2.4m at the end of March 2024 due to a combination of a reduction in the Group’s swap portfolio and the movement in swap rates over the year. After peaking in the mid-financial year, a comparatively small increase in year-on-year swap rates has resulted in a reduced mark to market position.
Review of Group financial performance
The consolidated Group surplus for the year ended 31 March 2024 was £5.9m after tax, compared to a surplus of £7.4m for the same period in 2022/23. The Group’s total turnover for the year increased from £157.4m in 2022/23 to £171.5m in 2023/24. The increase in turnover is a result of increased social housing lettings turnover due to inflationary increases applied to rental income, arrears performance remaining strong at 1.54 percent (2023: 1.61 percent), and void losses, which have been at a heightened level, beginning to reduce. The turnover from social housing lettings as a percentage of turnover, has remained consistent year-on-year at 79.9 percent (2023: 79.8 percent).Overall, our turnover from social housing lettings was aligned with budget. The increase in operating costs, and further deterioration in the operating margin since the prior year, is due to several factors. The main challenge during the year continued to be repairs performance, with increased expenditure incurred whilst we worked hard to clear the backlog of overdue works and management costs also impacted, with heightened expenditure in relation to compensations, disrepair claims, disturbance payments and void utility expenditure. Further to this, rises in cost inflation experienced have impacted on our expenditure, most notably in relation to utility costs with increased and volatile wholesale gas prices over recent years.
Total interest and financing costs for the year were £30.9m up from £30.2m the previous year. Although the cost of borrowing reduced during the year, with an average rate of 4.3 percent compared to 4.4 percent in 2022/23, the increased interest and financing costs are reflective of the increased loan balances.
The net book value of the Group’s fixed assets grew by £94.9m in the year to £1.42bn at the end of March 2024. The increase in the recorded value of the fixed assets was realised through the increased investment in the provision of 611 new homes. Further to this, we’ve invested £28m (2023: £23m)] in our capital works programme, demonstrating our commitment to the Decent Homes Standard and providing the homes people want, where they’re needed. We secured £6m of funding from the Social Housing Decarbonisation Fund and have committed to spending £14m upgrading the energy performance of 581 homes, of which we’ve spent £6m during 2023/24. Total debt at the end of March 2024 increased to £761.4m from £709.5m the previous year due to the completion of the £50m forward bond sale in April 2023, along with the net impact of revolving facility drawings and loan facilities maturing. The pension liability has decreased to £16.4m from £16.6m due to the impact of market movements; a slightly higher discount rate, and slightly lower inflation and life expectancy assumptions. The cash flow hedge reserve reduced by a further £1.4m to £2.4m at the end of March 2024 due to a combination of a reduction in the Group’s swap portfolio and the movement in swap rates over the year. After peaking in the mid-financial year, a comparatively small increase in year-on-year swap rates has resulted in a reduced mark to market position.