Financial performance and statements

The Group generated a surplus for the year of £4.6m (2024: £3.9m) at an operating margin of 40% (2024: 40%).  The rise in the surplus for the year was due to costs being controlled below the level of rent inflation, with falls in the level of responsive maintenance and servicing costs, without customer detriment.  Excluding the gain on the disposal of properties, the operating margin rose slightly to 34% (2024: 33%).  A reduction in the level of capitalised major repairs to £3.9m (2024: £5.6m) also contributed to the rebound in the level of EBITDA MRI interest cover to 1.1 times (2024: 0.9 times).  The Group does not have any loan covenants that are based on EBITDA MRI.

Turnover from social housing lettings rose 8% to £36.7m (2024: £33.8m), primarily due to inflation linked rent increases.  There was contribution from newly built homes, but this was fairly minor, as a consequence of the low levels of development activity in the last few years.  Operating costs on social housing lettings only increased by 5%, rising to £22.9m (2024: £21.8m), despite the inclusion of a £0.5m impairment provision due to the expected sale of three hostels. Improved controls on responsive maintenance expenditure and savings on the servicing of renewable heating systems contributed to the relatively low increase in operating costs.  Management costs increased by 4%, primarily due to salary inflation.  As a result, the operating margin on social housing lettings rose to 38% (2024: 35%).

Turnover from first tranche sales was £1.2m (2024: £2.6m) and generated a margin of 18% (2024: 25%).  There were no open market sales in the year.

All the Group’s external debt is held by the Association.  The Association’s tightest interest cover covenant requires an earnings before interest, tax, depreciation and amortisation (EBITDA) measure to be a minimum of 120% of net interest costs. The Board has set a golden rule that interest cover, on this measure, should not fall below 130%.  Interest cover, on this measure, was 168% in the year.  The EBITDA would need to be £4.4m lower to breach the golden rule and £5.5m lower to breach the covenant, demonstrating that the Association has a comfortable level of headroom.

At the year end, the Group had committed debt funding of £264m.  Available liquid resources of £35m (cash holdings of £1m and undrawn loan facilities of £34m) are sufficient to meet the Group’s committed expenditure.  The Group’s drawn debt has limited refinancing risk with only around 20% of the Group’s debt maturing within the next ten years.  The undrawn loan facility of £34m is committed until 2028. At the year end, Hastoe Capital plc held £50m of retained bonds.

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