Financial performance and statements

The Group generated a surplus for the year of £3.9m (2023: £5.6m) at an operating margin of 40% (2023: 48%). The fall in the surplus for the year was as a result of a material increase in expenditure on maintenance and management costs. Excluding the gain on the disposal of properties, the operating margin fell to 33% (2023: 41%). An increase in the level of capitalised major repairs to £5.6m (2023: £3.1m) also contributed to the decline in the level of EBITDA MRI interest cover to 1.0 times (2023: 1.3 times). The Group does not have any loan covenants that are based on EBITDA MRI.

Turnover from social housing lettings rose 7% to £33.8m (2023: £31.5m), primarily due to inflation linked rent increases. There was very little contribution from newly built homes, as a consequence of the low levels of development activity in the last few years. In contrast, operating costs on social housing lettings increased by 20%, rising to £21.8m (2023: £18.1m). Responsive maintenance costs increased to £6.6m (2023: £4.6m), influenced by a significant investment in rectifying damp & mould issues. The housing depreciation charge reflects the extension of the useful economic lives (UELs) of kitchens (from 15 to 20 years) and bathrooms from (20 to 30 years). The revised kitchen and bathroom UELs are consistent with the findings of recent stock condition surveys. The effect of this change was to reduce the charge by £0.5m. Management costs increased by £0.9m due to salary inflation, an increase in compensation payments and stock condition and damp & mould surveys. As a result, the operating margin on social housing lettings fell to 35% (2023 43%).

Turnover from first tranche sales was £2.6m (2023: £1.3m) and generated a margin of 25% (2023: 32%). There were no open market sales in the year.

The Group’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. Interest cover, on this measure, was 165% for the year

At the year end, the Group had committed debt funding of £268m. Available liquid resources of £46m (cash holdings of £9m and undrawn loan facilities of £37m) 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 £37m is committed until 2028. At the year end, Hastoe Capital plc held £50m of retained bonds.

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