Investors

Overview

Given the challenging external conditions, ClwydAlyn performed well during 23/24.

We maintained strong liquidity, ending 23/24 with cash balances of £55.8m.

Our turnover for 2024/25 is budgeted at just under £64m and our operating margin remaining at 20%. We are on site with over 470 new homes and have recently been awarded £4m grant to invest in decarbonisation projects and the opportunity to bid for a further £2m. All new homes are constructed to EPC A standard.

The handover of our latest Extra Care Home has been delayed by several months and will now not be open until the autumn causing budget pressures, however this has been offset by the successful lobbying of the Welsh Government to substantially increase fees paid for care and supported living schemes. These fees increased by 7.8% which was not in the original budget.

We saw a reduction in voids during 23/24 and these have remained stable for the first quarter of the year. Our expenditure is currently forecast to remain within budget. In July we re-let our gas supply contract and saw a £1.1m reduction in the annual contracted cost. Most of this saving will be passed on to tenants as lower service charges.

At the end of 23/24, an issue emerged across the sector regarding the administrative requirements of the new Renting Homes Wales Act. Non-compliance has the potential to bring with it a financial liability. This is currently the subject of legal action in the high court and ClwydAlyn is awaiting the outcome. We do not expect that the implications of this judgement will be material for ClwydAlyn.

We are continuing to invest in fire safety works across our complex buildings. One extra care scheme has just been awarded £3m grant towards structural works that include fire safety. In addition, we had a programme to replace £1m of fire doors across our properties and this has now completed. Unlike in England, sprinklers have been mandatory on all new builds including houses since 2016, so a large proportion of our stock has these fitted.

There has been significant turbulence in the Welsh Senedd with the newly elected leader stepping down along with his cabinet. This creates delays in policy support from Welsh Government, however they recently announced their continuation of the existing social rent policy meaning that rent for next year can be set at CPI+1%.

Cashflow

Cashflow throughout 23/24 was very strong with £40m drawn on the bond and over £40m received in grants. Cash has continued to be strong in 24/25 and we continue to hold a minimum of 24 months-worth of funds or facilities available for drawdown.

We do not build properties to sell and rely on a relatively small amount (£1m per year) of income from disposal of surplus properties and staircasing of shared ownership. Despite increased interest rates there is still reasonable interest from residents in staircasing and we are on target to reach our budget.

Rating

We were pleased to retain our ‘A Stable’ credit rating with Standard and Poor’s after their review in July 24. Our Moody’s rating was reviewed in October 23 and remained at A3. However, we were pleased that Moody’s improved our outlook from ‘negative’ to ‘stable.’

Staffing

In April 24, our Executive Director of People retired, her replacement started in July.

Our Executive Director of Resources has left to take up a post with a larger English RP. The recruitment process is complete, and we are delighted to announce the appointment of Sandy Murray to the Position of Executive Director of Resources.

Sandy takes up the position on the 1st of October 2024. In the interim, should you have any queries you can contact the Company Secretary – rachel.storr-barber@clwydalyn.co.uk or the Chief Financial Officer – adam.fletcher@clwydalyn.co.uk.

We are delighted to announce the appointment of Sandy Murray to the Position of Executive Director of Resources. Sandy holds a Fellowship with CIMA and an MBA from the Bradford University School of Management. Sandy brings a wealth of housing association experience and has previously worked for Accent and South Lakes Housing. Since 2020, Sandy has worked in the private sector for Bender UK LTD (https://www.bender-uk.com/) as their Finance Director with the responsibility for finance, HR and IT.

Sandy has been a Non-Executive Director since 2011 for various organisations and more recently as a Board Member for the Riverside Group and Chair of their Governance and Remuneration Committee. (https://www.riverside.org.uk/about-us/our-team/group-board/)

Sandy takes up the position on the 1st of October 2024. In the interim, should you have any queries you can contact the Company Secretary – rachel.storr-barber@clwydalyn.co.uk or the Chief Financial Officer – adam.fletcher@clwydalyn.co.uk.

PenArian Housing Finance PLC

ClwydAlyn Housing Limited

We are delighted to announce our S&P Credit opinion for July 2024.  ClwydAlyn’s outlook has remained as ‘A’ stable.

Here is the full version of the rating: S&P Full Analysis Report.

The association is aware that the requirements of the Renting Homes (Wales) Act has resulted in the potential for some Welsh RSLs being non-compliant with the EICR (Electric Installation Condition Report) requirements, specifically related to the issuing of certificates to customers for domestic properties and communal areas. The financial impact of this issue is not expected to be material to the association, and there is no expected impact on the financial statements or the covenant compliance position.

Financial Update Winter 2023/24

Given the challenging external conditions, ClwydAlyn has performed well during 23/24.

We maintain strong liquidity, ending 22/23 with cash balances of £22m and a further £16m in grant received during the first week of April. Alongside this we received £20m in May from a deferred bond sale with a further £20m received in November. We also have an undrawn £25m RCF. Strong cashflow has also meant we have generated significant income from deposits as interest rates increased.

Our turnover is budgeted at just over £58m and our operating margin is currently 20% with forecast operating surplus slightly lower than budgeted for at £10.5m. Arrears have risen over the past year, and we have invested resources in employing early intervention officers to provide targeted support. Voids remain higher than anticipated, partly driven by older properties being returned requiring higher than normal works. However, we have seen an improvement in our care schemes as void levels return to their pre-pandemic levels. We have continued to access Welsh Government funding to bring some long-term voids back into use.

In November we were awarded £2m grant in-year towards decarbonisation costs. This is in addition to the £1.7m we received last year, and we expect this funding to be repeated next year. In November the Welsh Government published its new Welsh Housing Quality Standard, which all housing associations will be required to adopt. While there are some challenges in the new standard, there were no surprises and decarbonisation is at the heart of it.

We do not build properties to sell and rely on a relatively small amount (£1m per year) of income from disposal of surplus properties and staircasing of shared ownership. Despite increasing interest rates there is still reasonable interest from residents in staircasing and we are on target to reach our budget.

We are continuing to invest in fire safety works across our complex buildings. One extra care scheme and one care home have had approximately £2m spent on improvements and these have been funded by grant from the Welsh Government. In addition, we had a programme to replace £1m of fire doors across our properties and this has now completed. Unlike in England, sprinklers have been mandatory on all new builds including houses since 2016 so a large proportion of our stock has these fitted.

Our development plan had slowed significantly during Covid and began to pick up pace during last year and we have around 450 properties currently on site. We expect around 150 new homes to be handed over during this financial year. Wales still has a very supportive grant regime for new build, with grant typically 60% of any scheme. WG also launched a scheme to contribute to any additional costs incurred due to high inflation.

All new homes built by us are to EPC A standard.

One contractor went into administration at the end of the previous financial year who had been due to deliver 177 homes for us. These contracts are currently being re-let. Two local companies have won the tenders, and we are finalising the contracts. Welsh Government has agreed to support any additional costs with increased grant.

Approximately 60% of ClwydAlyn’s income is derived from government sources – housing benefit, supporting people grant, council-funded care home placements and other contracts, which while being constrained by budget pressures in councils are low risk once awarded. The strain on

Council budgets has meant that we have had to work hard with them to ensure that they are able to pay reasonable rates for both supported living and care.

This leaves 40% paid by tenants directly to the company. Of this, 15% is paid by residents in care and extra care schemes and 25% from general needs. Given the increasing pressures we are seeing on residents, we are offering support and advice to ensure they can manage their rents and access benefits and other financial support.

The current economic turmoil has significantly impacted on costs for the business during the year with pay, materials and food all increasing. Our insurance cover was retendered and saw a significant increase; however, this was covered by our corporate contingency budget. This contingency was also used to cover the costs of Storm Babet where we experienced flooding to around 20 of our properties. Our electricity contract was retendered in December and the new rates are approximately 30% lower than the existing contract. The vast majority of this is passed on to tenants through service charge reductions.

In partnership with another housing association, our board also agreed to set up a new joint venture company – Onnen – which will deliver part of our decarbonisation retrofit works. It will directly deliver some works but is also expected to work with the local SMEs and supply chains to grow the local market and capacity to deliver these works on behalf of both housing associations. It started trading earlier in the year and is on course to deliver against its approved business plan.

During 2022/23 we were approached by a small housing charity to transfer their portfolio of 12 houses to us. This was agreed and the transfer completed in September. The transfer value of the houses was just under £1m.

Despite the pressures on our budget, the current year-end forecast is that we will only be £700k below our budgeted operating surplus of £11.2m.

Our net surplus will be £1m higher than budget due to the small stock transfer being at a £500k higher value than expected and the additional interest income from cash deposits.

In November the Welsh Government announced that housing associations could raise rents for 24/25 by up to 6.7%. This matched the September CPI inflation and was broadly in line with expectations. This means that while 2024/25 will be challenging, it is within the scope of existing planning scenarios.

We retained our ‘A Stable’ credit rating with Standard and Poor’s after their review in July 23. Our Moody’s rating was reviewed in October 23 and remained at A3. However, we were pleased that Moody’s improved our outlook from ‘negative’ to ‘stable’.

In September a number of long-serving board members stood down. We appointed a new chair of the board – Cris McGuiness – who is currently the Chief Financial Officer for Riverside Housing. We also appointed a new Chair of Assurance – Rob Morton – who until recently was the Director of Resources at Honeycomb Housing Group and has recently taken up a new position with Norwood, a Supported Living Charity, as the Director of Finance.  A further 3 appointments were made to the board with backgrounds in Programme Management, Procurement, and Equality, Diversity and Inclusion.  In addition, we appointed a cyber security specialist to our Assurance Committee and an asset and property specialist to our Property Committee.

ClwydAlyn is pleased to announce it has issued £20m of retained bonds on the PenArian Housing Finance 3.212% 2052 issue for settlement on a deferred basis.

The transaction will provide it with part of the funding required to meet its obligations over the next two years under the planned development programme.

We are delighted to announce that ClwydAlyn Housing Limited has appointed Savills Financial Consultants for a term of 5 years to provide treasury advice and support to ClwydAlyn and PenArian Housing Finance PLC.

We are delighted to announce an update to our Moody’s Credit opinion.  ClwydAlyn’s outlook has changed to stable from negative.  The long-term rating for ClwydAlyn Housing is A3 Stable.

The full version of the rating can be found on the Moody’s website below.

ClwydAlyn Housing Limited | Reports | Moody’s (moodys.com)

ClwydAlyn Housing Association Financial Statements are available through our website.  The results are in line with our budget for the year.

https://www.clwydalyn.co.uk/wp-content/uploads/2023/09/ClwydAlyn-Full-accounts.pdf

PenArian Housing Finance PLC

ClwydAlyn Housing New Chair Appointment

We are happy to announce that Cris McGuinness has been appointed as the new Chair of ClwydAlyn.  Cris is currently Chief Financial Officer at Riverside where she is responsible for finance and development and brings with her many years of senior housing experience. A KPMG trained Chartered Accountant, she has previously held positions at The Guinness Partnership, North Herefordshire Homes and Adactus Housing Group. 

In addition to joining the ClwydAlyn Board, Cris will be joining the PenArian Board as a non-executive member.

PenArian housing Finance PLC New Chair Appointment

We are happy to announce that Rob Morton has been appointed as the new Chair of PenArian.  Rob joined the ClwydAlyn Board in 2019 and has over 20 years’ experience in commercial and financial roles having worked in the private finance initiative sector and most recently social housing.  Rob is a fellow member of the Chartered Institute of Management Accountants.

Financial Update Summer 2023

Given the challenging external conditions, ClwydAlyn has performed well during 22/23. Its (unaudited) final year end position shows an operating surplus of £10.3m against a budgeted £11.1m. Final audited accounts will be presented to the board in September.

We maintained strong liquidity and ended the year with cash balances of £22m and received a further £16m in grant during the first week of April. Alongside this we had an undrawn £25m RCF with £20m subsequently received in May 23 from a deferred bond sale with a further £20m due in November 23.

It was a particularly turbulent year for the company, with some large movements in income and expenditure. However, we continued to benefit from strong relationships with Welsh Government (WG) which meant we supported some national initiatives and accessed significant grants.

We were awarded £1.7m in-year towards decarbonisation costs (and a further £4m spread over the following 2 years) along with £1m to set up a ‘carbon zero hub’ for North Wales providing advice and support to other housing associations and public bodies on decarbonisation.

We were also contracted to run the Welsh Government’s refugee ‘Welcome Centre’ in Bangor. We did this to support the re-housing of vulnerable people in need. While the cost of £1.3m was fully covered by WG, we made no surplus, pulling our operating margin down. WG also agreed to a one-off bonus payment to all care staff to acknowledge their efforts during Covid. We paid this to staff and were reimbursed, but again this pulled our margin down.

We had around a dozen houses that were long-term voids and due for disposal. WG launched a scheme to provide houses for homeless people which offered 80% of the costs of refurbishing vacant properties. We took up the grant and refurbished the properties. This was a very positive outcome for us and our tenants but meant our property sales were £700k below budget.

Voids continued at a higher level, partly driven by an ongoing reluctance of families to place loved ones in care homes due to the impact of Covid. This improved significantly during the year but had a large initial impact. We are also seeing properties being returned requiring more work than in previous years, delaying the date they can return into stock. We have recruited additional trades staff and are reviewing our processes to try to speed up the turnaround time.

A review of our care portfolio in 21/22 concluded we should exit the specialist nursing care market. We received an offer for our only nursing home which was accepted and the 22/23 budget assumed disposal at the end of Q1. However, after a protracted process the buyer pulled out late in the day. We had to reinstate the income and expenditure into our forecasts causing income and expenditure to increase by £2m.

Our development plan had slowed significantly during Covid and began to pick up pace during the year with around 550 properties on site at the end of the financial year. This is significantly higher than previous years. Wales still has generous grant levels for new build, with grant typically 50-60% of any scheme. WG also launched a scheme to contribute to any additional costs incurred due to high inflation. It led to us accessing record amounts of capital grant from WG, with £53m paid to us in-year (including £16m received in the first week of April 23), equivalent to 18% of the total development grant available in the whole of Wales. A further 450 new homes have been submitted for planning or are being worked up to planning stage.

One contractor went into administration at the end of the year who had been due to deliver 177 homes for us. These contracts are currently being re-let.

ClwydAlyn does not rely on market sales, and other than disposing of a few surplus assets and some staircasing sales, is not exposed to the housing sales market. Our sales income for the year was £700k.

Approximately 60% of ClwydAlyn’s income is derived from government sources – housing benefit, supporting people grant, council-funded care home placements and other contracts, which while being constrained by budget pressures in councils are low risk once awarded.

This leaves 40% paid by tenants directly to the company. Of this, 15% is paid by residents in care and extra care schemes and 25% from general needs. Given the increasing pressures we are seeing on residents, we are offering support and advice to ensure they can manage their rents and access benefits and other financial support.

The current economic turmoil has significantly impacted on costs for the business with utilities, fuel, materials and food all seeing significant rises. The budget contained a contingency amount to cover some of these costs and savings were identified to reduce expenditure.

We are also stepping up our investment in decarbonisation and have obtained over £1.7m of grant funding from Welsh Government in year to support this. Our board also agreed to set up a new joint venture company which will deliver a large part of our retrofit works. It will directly deliver some works but is also expected to work with the local SMEs and supply chains to grow the local market and capacity to deliver these works on behalf of both housing associations.

During the year we were approached by a small housing charity to take over their portfolio of 12 houses. This was agreed and the transfer will complete during 23/24.

Despite the pressures on our budget, the current year-end forecast is that we will only be £800k below our budgeted operating surplus of £11.1m.

In November the Welsh Government announced that housing associations could raise rents for 23/24 by up to 6.5%. This is similar to England and higher than ClwydAlyn had expected in its business plan. This means that while 2023/24 will be challenging, it is within the scope of existing planning scenarios.

Ratings

We were pleased that we retained our ‘A Stable’ credit rating with Standard and Poor’s after their review in July 23. Our Moody’s rating was reviewed in October 22 and remained at A3. Moody’s announced that it was putting most housing associations on negative outlook due to the macro-economic climate and this included ClwydAlyn. However, underlying financial performance remains steady.

Treasury

ClwydAlyn was the first housing association in Wales to secure a publicly listed bond through PenArian Finance Ltd from the capital markets. The value of the Bond was £250 million of which £160 million refinanced existing debt with a further £90 million retained for future investment.

During 2021/2022 £25 million was drawn from the Bond. In May 2022 a further deferred draw down was agreed with £20 million received in May 2023 and £20 million due in November 2023. This funding was agreed ahead of the recent surge in interest rates and so is attractively priced.

In June 22 ClwydAlyn extended the existing bond which was due to expire with £25m still undrawn. In July 2022 ClwydAlyn carried out a tap on the Bond of £150 million which has increased the overall value of the Bond to £400 million with £175 million still available to draw.

During the year, the company’s revolving credit facility was reduced to £25m and the interest cover covenant amended to exclude reference to major repairs.

Liquidity remains high with £32m of grant received in March / April 23 to forward fund development projects, £20m bond drawn down in May, the undrawn £25m RCF available and the remaining £20m deferred bond sale due in November. The weighted average cost of capital also remains low at 3.47% and all loans are at fixed rates mitigating the increasing interest rates.

ClwydAlyn Housing Association Financial Statements are available through our website https://www.clwydalyn.co.uk/investors/ along with a Financial Update

The result is in line with our budget for the year.

£150,000,000 3.212 per cent. Secured Bonds due 2052 (the New Bonds) (to be consolidated and form a single series with the existing £250,000,000 3.212 per cent. Secured Bonds due 2052)

To view the full document, please paste the following URL into the address bar of your browser.

http://www.rns-pdf.londonstockexchange.com/rns/1910T_1-2022-7-20.pdf

A copy of the Prospectus has also been submitted to the National Storage Mechanism and will shortly be available for inspection at:

https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

PenArian Housing Finance Plc will immediately purchase the New Bonds on 22 July 2022 (as such the New Retained Bonds) and the New Retained Bonds will be held on the Issuer’s behalf until a future sale (whether in full or in part).  Any sale of New Retained Bonds is subject to market conditions.

For further information, please contact:

Address:      PenArian Housing Finance Plc
72 Ffordd William Morgan
St Asaph Business Park
St Asaph
Denbighshire
LL17 0JD

Telephone:    01745 536811
Email:            paul.mcgrady@clwydalyn.co.uk

ClwydAlyn is pleased to announce it has issued £40m of retained bonds on the PenArian Housing Finance 3.212% 2052 issue for settlement on a deferred basis.

The transaction will provide it with part of the funding required to meet its obligations over the next two years under the planned development programme.

ClwydAlyn has again received the top rating from Welsh Government in its Housing Regulation, Regulatory Judgement.

The full report shows ClwydAlyn is Compliant and Green for both Governance (including tenant services) and Financial Viability.

ClwydAlyn Housing Association Financial Statements are available through our website https://www.clwydalyn.co.uk/investors/ along with a Financial Update

The result is in line with our budget for the year.

ClwydAlyn Housing Limited’s rating with Moody’s have been upgraded to A3 Stable. Moody’s felt that there were improvements in financial management and governance. The upgraded rating was also in part due to our revenue stability from low-risk social housing as well as the fact we operate in a strong regulatory environment.

At the same time, Moody’s upgraded the rating on the £250 million bond issued by PenArian Housing Finance PLC to A3 Stable

The full Moody’s report is available through our investor page.