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Combining social purpose with entrepreneurial drive

Posted on 18 September 2018

Today, Hyde is announcing its financial results and operational performance for the 12 months to 31 March 2018.

Financial highlights

  • Turnover increased by 8% to £339.6m (2017: £315.7m)
  • Core underlying surplus before tax and fire safety costs up by 4% to £102.6m (2017: £98.4m) with reinvestment into existing assets and building new homes being more than two and a half times this surplus
  • Exceptional fire safety costs of £11.8m (2017: nil)
  • Completion of a substantial financial restructuring in November 2017
    • Restructured £661m of loans and £915m of derivatives
    • Raised £725m new facilities (45% UK bank debt, 55% bond capital), including £325m new revolving credit facilities
    • Net impact of break costs £89m.
  • At the year-end we had £2.1bn of committed facilities, £515m of liquidity and a WACC of 4.65% (having fallen 0.93% in the year)
  • As announced separately last week, we created a value to society of £16,906 for each Hyde social tenancy; a total annual social value of at least £607m.

Operational and customer service highlights

  • Proactive response to post-Grenfell recommendations including part of the Group’s income from asset disposals being used to fully up front fund a £50m prudent budget for fire safety costs
  • Continued investment (£67m) in our properties, to improve 800 kitchens, 600 bathrooms and 1,000 heating systems
  • We let 1,789 homes and achieved 83% satisfaction with repairs
  • Introduced a new way of working for our housing management staff, replacing the traditional housing officer role with specialist roles to deliver an easier and better service to residents
  • Implemented a new service charge system to make charges for residents quicker, more accurate and more transparent.

Housing development highlights

  • Continued to develop new homes in line with our strategic plan
    • £184m invested in new homes with 1,285 completions
    • 4,643 homes under construction and 8,737 in the pipeline
  • Working in partnership and using innovative approaches to maximise delivery.

Examples of our successful partnerships:

  • £120m JV with Brighton and Hove Council for 1,000 affordable homes for local and key workers.
  • A second JV with Barratt London in Harrow, building over 1,150 homes through large-scale regeneration
  • £400m scheme at Rochester Riverside for 1,450 homes and other public facilities with Countryside Properties

Review

Hyde’s social purpose is to provide a home for those left behind by the market and for as many people as possible. We need to offer strong resident services and engagement and we wish to build more than our fair share of truly affordable homes. However, sticking to the way we have always done things is not going to be enough. We need to think more creatively about the ways we finance, build and manage homes and how we ensure we provide good landlord services.

Value in society

We commissioned and recently launched an independent report by consultant Bates Wells Braithwaite to better-understand and quantify the impact we are having as an organisation in society (our ‘social purpose’). It also helps identify the extent to which we contribute to societal change.

The study has concluded that, by creating safe and sustainable communities, and reinvesting any surplus we generate into building homes and improving our services, we are contributing to improved education, increased employment, better mental and physical health conditions, improving family relationships and increasing engagement with social services. This results in a total annual social value of each Hyde tenancy at £16,906 and Hyde’s total annual social value of at least £607m.

We have improved our financial flexibility

We are possibly in the best financial position in our 50 years, having completed our strategy of creating a modern, flexible financial framework, following our treasury refinancing in November 2017. This provides us with a fully-funded five-year development programme and greater resilience against any future economic or property market downturn.

We are thinking creatively for the future

We have an asset base with significant value and we should actively manage our assets while delivering our social purpose. Based on their existing use for social housing, our portfolio is valued at £2.9 billion. If valued on the basis of market value vacant possession, this rises to £10.5 billion. We are seeking to develop long-term plans as to what our demographic and housing needs will be in 2030, especially with a lifecycle approach to provision. This will guide our investment plans to ensure we optimise the use of our charitable capital for our core social purpose. A trial of this approach is currently underway in one of our key boroughs.

How Hyde is changing development

We are being more innovative with our development programme.

What is clear is that now is the time for greater collaboration between housing associations and the public and private sectors to tackle the barriers to making land (such as that owned by Homes England, Transport for London, Network Rail and the NHS) available for affordable homes.

Over the past twelve months, we have finalised a number of innovative partnerships with Brighton and Hove City Council, with Barratt London in Harrow and with a private housebuilder in Kent. We have also joined forces with three other housing associations to create Evera Homes; a collaborative development vehicle for the Cambridgeshire and Peterborough region. Between them, these projects will deliver many thousands of homes over the next decade.

In July Hyde was named as one of just eight housing associations to form a strategic partnership with Homes England, in a move that will deliver 14,280 additional homes for people priced out of the market.

We have been awarded grant funding worth £95.4 million enabling us to build 1,623 affordable homes for those who really need them. Because we already own or are under contract on the vast majority of the land needed to supply these new homes, we can confidently deliver this programme enabling us to fulfil our promise to provide homes for people in the south east of England.

We are being smarter about how we manage all our assets

As a responsible landlord, we review our property portfolio regularly, to ensure that it continues to best meet residents’ needs. So, when a property becomes empty, we will ensure it is of the standard we and our residents expect from a modern home. For example, we will check that it is economical to heat; that it meets modern energy efficiency expectations and that it is cost-effective to repair and keep in good condition. We look to sell homes not meeting these criteria, using the money to re-invest in building affordable homes that are more suitable, more efficient and easier to maintain – for both us and our residents.

We are also proactively examining the inherent opportunities in our 2,000+ garages, ancillary land and non-core commercial properties.

The Hyde Group Finance Director Peter Denton said:

“Over the past 15 years, housing associations, Hyde included, have moved from an environment of generous grant funding and stable rent uplifts to one where rent increases have fallen away and new homes are often funded through surpluses from building homes for sale. But, with Brexit six months away, it is no longer prudent to rely on a stable housing market as the only way of funding more affordable homes in London and the south east.

“Grants, traditional borrowing and cross-funding remain important but further innovation, such as a combination of joint ventures, better strategic asset management, investment and property management, effective cross-subsidy, alongside debt from third parties and innovative support structures from government and local authorities, is needed, if we are to build at the scale required.

“The challenge is on for housing associations to adapt once again, to ensure they deliver the supply of new homes the country needs and, through initiatives such as our social value work, explain why they are needed.

“We are determined that Hyde will be at the forefront of that adaptation and our performance in the last year is testament to that.”