In restoring Bromford’s stable outlook, the agency cited an improvement in core metrics including “the upward trajectory of profitability margins” despite the weakening operating environment. It highlighted that Bromford continues with its “strong performance of the underlying social housing portfolio” whilst pro-actively de-risking its business plan to reduce its exposure to sale activities and increasing its grant funding through its latest strategic partnership with Homes England.
S&P’s report states: “We consider that the management continues to demonstrate the skill and expertise required to manage Bromford’s diversity and scale of operations. The group’s strategy remained consistent in terms of energy efficiency targets in its existing assets, maintaining solid liquidity and pre-funding of the development plan. On energy efficiency, the group embedded these targets as a part of its wider environmental, social, and governance (ESG) framework, and it is also a key metric referenced in one of Bromford’s sustainability-linked facilities.”
It continues: “We view positively the management’s decision to spread out its development program to balance the cost pressures on existing assets. The tenure mix of the updated plan has also been revised favorably to incorporate a higher delivery of affordable homes, thus reducing the proportion of high-risk sales activities. We estimate that over our forecast period, sales exposure will average about 15% of revenues, well below the group’s golden rule of 30%.”
And the S&P report adds: “Liquidity remains a rating strength for Bromford, underpinned by the group’s comprehensive liquidity policies and golden rules. Over the next 12 months, we estimate sources of liquidity will cover uses by 2.2x.”
Bromford’s Director of Treasury Imran Mubeen said: “It is a fine balance to manage the increasing levels of investment to deliver our business plan in an ever-evolving operating environment, whilst also improving core financial metrics and profitability. The A+ rating affirms that we have achieved this in our performance throughout the pandemic. Importantly, the stable outlook reflects that we are well positioned to continue to deliver with operational and financial strength over the coming years as we meet the challenges of rising inflation, decarbonisation, fire safety and catch-up repairs on our existing homes, whilst also delivering over 11,000 new homes by 2029.
“Whilst we continue to benefit from strong levels of liquidity, we will be seeking over half a billion of additional investment over the next seven years. Our sector leading dual credit ratings, together with our accredited Sustainable Finance Framework, provide the perfect platform to return to the capital markets to execute our funding strategy.
“Ultimately, we are here to provide homes that enable our customers to thrive. As we emerge from the pandemic, and address the challenges ahead, we can only do that with a strong business plan and the credit strength to attract ongoing investment.”