Circle Housing Group announces strong financial performance

Summary

Circle Housing Group, one of England’s largest housing associations, today publishes its financial results for the year ended 31 March 2016. Increasing its surplus to £85.8 million, the Group invested £116.6 million into building new and improving existing homes for the long-term benefit of those in housing need. This included completing 645 affordable homes and starting a further 648 during the year.

Throughout the year, Circle Housing Group invested an additional £9.1 million to continue to improve its repairs and maintenance service for customers. This resulted in a significant improvement to all performance measures, including achieving 96% of urgent and emergency repairs delivered on time, exceeding the sector benchmark of 89%. It also led to the restoration of a compliant Governance rating by the Homes and Communities Agency in June 2016.

Despite the difficult operating environment, the Group successfully improved the quality of its services for customers while bringing in even greater efficiencies. It improved its operating margin by 2% to 29%. This was achieved despite investing in IT and organisational change activities during the year that will initially save £25 million per year as part of managing the impact of the annual 1% reduction in social rents. This investment in a more efficient future operating model is set to increase operating margins to 31% over the next four years.

In order to continue these efficiencies, have faster decision making, stronger local focus and greater value for money, Circle Housing Group began consulting with residents and local stakeholders on proposals to simplify its structure and move to a single housing association model.

Circle Housing Group maintained its £3.3 million investment in social value activities. This delivered almost 15,000 customer interventions, helping them to become more financially resilient and independent and easing pressure on public services. This resulted in a social return on investment of £33.9m, equating to a 10x return for every pound invested.

In October, Circle Housing Group took advantage of favourable market conditions and raised £150 million through the private placement market. The notes were issued as a £100 million 15-year fixed rate tranche and a £50 million 10-year floating rate tranche. This enabled the Group to refinance existing revolving facilities for redrawing later, whilst further improving its very strong liquidity position.

Sir Robin Young, Chairman of Circle Housing said: “During a year of huge change, our vision of providing people in need with greater opportunities for independent, affordable and secure living is more important than ever. We reinvest our surplus into building quality homes, regeneration and supporting our customers to become more financially resilient and independent.

These results show the Group is financially strong and secure. In spite of additional financial challenges such as the annual 1% cut to our rental income and the proposed introduction of Right to Buy, we have successfully become a more efficient organisation and are in a strong position to tackle these.

“This robust financial performance puts us in an even stronger position to merge with Affinity Sutton, enabling us to invest more in our homes and communities.”

The 2015/16 full annual report and accounts, as well as the 2016 Corporate Responsibility report are available online by visiting www.circlegroup.org.uk

Group financial summary

£m

2014/15*

2015/16*

Turnover

424.6

439.2

Cost of sales

(38.2)

(30.3)

Operating costs

(273.1)

(283.2)

Operating surplus

113.3

125.7

Operating margin

27%

29%

Surplus on sale of fixed assets

13.8

22.9

Net interest and other financial income

(77.8)

(86.4)

Surplus

67.4

85.8

*2014/15 and 2015/16 results are presented under the new accounting framework, Financial Reporting Standard (FRS 102)

Group financial highlights

  • Increased surplus to £85.8m
  • Invested £116.6m into building new homes and improve existing homes
  • Improved operating margin by 2% to 29%
  • Turnover increased to £439.2m primarily due to an increase in market sale homes
  • Gearing at 53% (2015: 51%)
  • Group net debt £1,752.4m (2015: £1,818.7m)
  • Cash investments held of £183.6m, of which £99.7m is cash collateral
  • Undrawn loan commitments of £410.3m

Operational highlights

Circle Housing

  • Maintained low rent arrears levels of 2.7% (2015: 2.6%) despite economic challenges
  • Increased social housing activity, resulting in housing turnover of £413.6m (2015: £393.5m)
  • Continued the extensive consultation around proposed regeneration in the London Borough of Merton

Centra

  • Centra Care and Support increased its net contribution to the Group by £1.1m on a turnover of £25.6m
  • Focused on geographical areas that align with the Group’s stock profile and tenant base
  • Successfully renewed contracts, increased the scope and value of contracts, and won new contracts, including a five-year contract with Kent County Council for the installation of on-home telecare equipment and a four-year contract to provide specialist mental health service commissioned by Haringey Council
  • Private paying client base continues to grow, with 15% being new clients within the last 12 months