Performance Analysis As with many other small developing registered providers, Arhag does not have an even development programme of new units through a pipeline of schemes under the course of construction. It has some years where there are no completions of new units and in other years new schemes are completed and new homes are delivered. This year Arhag added a further 21 units in Newham, which have been delivered into management by way of an intermediate/affordable rent leasing scheme with a developer which has further units potentially available for management. Reinvestment in our housing stock has reduced from levels experienced prior to the pandemic with access to and completion of works in our residents’ homes being restricted. Although the additional 21 units were delivered during the year, these are leased units and as a consequence there is no capital investment associated with them to increase the Reinvestment % ratio. Gearing measures the ratio of net debt to the carrying value of our housing assets using a concept similar to mortgage lenders’ loan to value ratio and illustrates the strength of an association’s balance sheet and its capacity for future new supply. Median gearing ratios across the sector have changed little from Sector Scorecard results published for 2019 and 2020 and Arhag’s improvements on this ratio has elevated it to the 2nd quartile of the sector. The carrying value of our housing properties was reduced during the year through a combination of the disposal of the 5 units in south London and the continued depreciation of the components of our homes. Our net debt was also reduced through the scheduled repayment of £1.2m of our debt with various lenders. Our operating cost base has remained high in 2022 as a consequence, primarily, of our continued investment in fire safety testing, gas and electric safety certification and resulting works. At Arhagwe are committed to reducing our operating cost base and althoughwe continue these important customer-facing health & safety programmes we are constantly looking to become more efficient in our use of the incomewe receive. VfMMetrics Target 2023 2022 Quartile 2021 2020 2019 Reinvestment (%) 0.7% 0.4% 4th 0.3% 1.0% 9.0% New supply delivered – Spcial (%) 0% 2% 1st 0% 0% 8% New supply delivered – non-social (%) 0% 0% 2nd 0% 0% 0% Gearing (%) 31% 32% 2nd 34% 37% 35% EBITDAMRI Interest Cover (%) 141% 174% 3rd 187% 181% 329% Social housing cost per unit £5,642 £4,994 3rd £5,511 £4,749 £5,921 Operating Margin (%) – Social lettings 19% 21% 3rd 12% 23% 17% Operating Margin (%) – Overall 19% 21% 3rd 12% 22% 17% Return on capital employed (%) 1.7% 2.7% 3rd 2.4% 2.6% 2.0% Performance against Targets set last year Arhag improved in 2021/22 against the targets set last year in six of the Regulator’s nine VfMmeasures, was on target in both of the ‘New supply delivered’ measures and did not achieve target in its Reinvestment expenditure. The table below shows our performance over the last 4 years and our targets for next year. Additionally, it provides ‘sector-wide’ quartile information showing where Arhag’s 2022 performance would have placed it in 2021. Targets for the year ahead are taken from the Budget for 2022/23. Quartile comparisons are taken by reference to the Sector Scorecard results for 2021 across the housing sector and as such includes a wide variety of associations. Annual Report 2021-2022 33
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