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South West landlord retains A+ credit rating from S&P
Ratings agency S&P has affirmed its A+ credit rating for Plymouth Community Homes (PCH), alongside a positive outlook.
S&P revised PCH’s outlook to positive from stable last year and predicted the social landlord’s financial performance would improve.
Since then, S&P said its outlook remains positive because it thinks PCH can “maintain relatively strong metrics despite challenges in the sector” through cost controls and higher revenue from core operations.
This is despite the landlord having higher investment and debt levels than previously forecast, S&P said.
It expects the 16,000-home association to “ramp up debt-funded development of new homes and increase investments in existing assets, based on its 2024-2029 growth strategy”.
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“With increased development expected, we project sales activity will grow incrementally over our forecast period through 2027, yet remain less than 10% of the group’s adjusted operating revenue,” S&P said.
The ratings agency also expects PCH to continue to address issues brought out during stock condition surveys and carry out regeneration projects “without major setbacks”.
If PCH sustains its interest cover strength and liquidity while also maintaining specific EBITDA (earnings before interest, tax, depreciation and amortisation) margins and debt to non-sales EBITDA, S&P said it could raise its rating for the association.
S&P has forecasted, however, that PCH will see its adjusted EBITDA margins weaken in 2024-25 as the landlord battles higher costs related to responsive repairs and invests in its assets.
“That said, we anticipate PCH will look to target efficiencies and implement new technology and working practices to compensate for heightened investment and future regeneration projects,” the agency said.
S&P said it could revise the outlook to stable if investments in existing homes, cost pressures or debt-funded development mean credit metrics perform either in line with or weaker than its current projections.
Nick Jackson, executive director of business services and development at PCH, said: “This is a fantastic result, especially given the ongoing economic challenges facing businesses in the housing sector, and shows S&P judge our credit credentials to be stronger than others, despite the increased costs we have faced to deliver core services.
“Although we have low operating margins, our low debt metrics and prudent planning means we continue being a very attractive option for investors and the rating confirms this.”
Jonathan Cowie, chief executive of PCH, added that the result means the housing association has “a better credit rating than many multi-national companies”.
“This credit rating will be essential to help us attract the investment we need from funders so we can deliver on our business plan and expand our development work to build even more much-needed new affordable housing for local people,” Mr Cowie said.
PCH also recently retained its G1/V2 rating for governance and financial viability from the Regulator of Social Housing.
In November, Mr Cowie told Inside Housing that the landlord is working with a number of universities to create a new home standard, as well as focusing on data and digitisation to improve resident satisfaction.
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