S&P raises outlook for two housing associations

However, the credit ratings agency projects that rental revenue from acquired units and significant development grants will reduce the group’s debt funding need more than S&P had assumed, resulting in relatively strong credit metrics.

S&P said: “We understand that Karbon will receive a significant amount of grant funding that, combined with cash proceeds from a previously issued bond and higher-than-expected rental revenue from recently acquired units, [will] support better adjusted debt metrics than we had projected.”

S&P said it forecasts that the group’s non-sales adjusted EBITDA will be higher than what the credit ratings agency had assumed – and, combined with lower-than-expected debt levels, will lead to better-than-forecast debt metrics.

Paul Fiddaman, chief executive of Karbon Homes, said: “This is a very welcome result and a testament to the efforts we’ve made at all levels of the organisation over the past 12 months, in continuing to deliver against our ‘Stronger Foundations Strategy’, whilst in the midst of a turbulent economic and political backdrop.

“This has been a challenging time for our customers too, dealing with the increased costs of living, as well as for our supply chain in delivering new homes and investing in our existing homes.

“Yet, through the dedication of our colleagues, our board and our external partners, we believe Karbon is well placed to respond positively to these challenges, making sure we can continue to work towards our mission of providing strong foundations for life across the communities we serve.’’

CKH

S&P said CKH’s positive outlook reflects its view that the management’s proactive and effective cost-containment measures will allow the group to sustain strong financial and debt metrics despite inflationary pressure on costs.

It said that CKH’s proactive and effective cost-saving measures and the flexibility within its business plan will allow the group to contain debt accumulation and maintain stable interest coverage.

The credit ratings agency said the 12,300-home Peterborough-based housing association will maintain a strong S&P Global Ratings-adjusted EBITDA margin at close to 30 per cent.

S&P said it factors in that the group reprofiled some of its investments in existing stock and deferred uncommitted developments. CKH reduced its exposure to risky operations by decreasing its sales activities performed through joint ventures, S&P added.

The credit ratings agency said: “We expect that CKH’s prudent and consistent management policies will shield its financial and debt metrics from inflationary headwinds.”

Claire Higgins, chief executive of CKH, said: “I am absolutely delighted that our hard work in the face of an exceptionally challenging time has been recognised by S&P.

“Despite the extensive economic pressures facing the sector as a whole, we have remained flexible and able to respond to the constantly changing economic and political landscape.

“Whilst we remain determined to grow and build new, desperately needed affordable homes, our primary commitment remains with our existing residents and communities.”

Wheatley Group

S&P said Wheatley’s stable outlook reflects its view that strong demand for the group’s properties and prudent planning will somewhat offset the pressures from cost growth outpacing rent increases and increasing investment in existing and new assets.

It said it expects that a gradual recovery in S&P Global Ratings-adjusted non-sales EBITDA and a favourable cost of debt will help the 61,200-home Scottish social landlord maintain relatively solid interest coverage.

The credit ratings agency said: “The rating affirmation reflects our view that Wheatley’s management will prudently execute its business plan while keeping enough financial headroom to mitigate current operating challenges stemming from inflationary pressures, increasing investment needs in existing assets, and tightened funding conditions.”

S&P also affirmed its A+ long-term issuer credit rating on Wheatley’s subsidiary, Wheatley Homes Glasgow, and its A long-term issuer credit rating to Lowther Homes, Wheatley’s commercial arm.

The credit ratings agency said the rating on Lowther is one notch lower than that on Wheatley, reflecting Lowther’s status as a “highly strategic entity” within the group.

Steven Henderson, chief executive of Wheatley, said: “In these particularly challenging times, it is an outstanding achievement to be among an elite group of housing providers in the UK to hold an A+ (stable outlook) rating.

“It is further validation of our strong financial position and the vision set out in our five-year strategy, ‘Your Home, Your Community, Your Future’.

“It is also testament to the outstanding work carried out each and every day by over 3,000 staff across the west, east and south of Scotland who are making homes and lives better for customers in our communities.”