Hyde explores merger with non-compliant London landlord

Hyde is rated G1/V2 by the RSH. It has a credit rating of A+ (with negative outlook) from Fitch and A- (with stable outlook) from S&P Global, after the latter downgraded it by one notch in July.

Any merger would require a focus on governance and viability issues identified at THCH by the regulator. In its March 2023 regulatory judgement, the RSH said that it lacked assurance that THCH had a robust business planning, risk and control framework, while THCH’s board had “not been managing its affairs with an appropriate degree of skill, diligence, prudence and foresight”.

Mark Thrasher, the association’s chair, said at the time that it was committed to addressing the regulator’s concerns to improve its resilience.

In a release to the media today, Hyde said that the proposed merger would include commitments to provide a new dedicated ‘in-house’ repairs service for its residents, and to speed up investment in “homes, shared spaces, communities and building safety projects”.

There would also be a “continued local presence, with a team that knows their community and is accessible to residents”, which would adopt Hyde’s neighbourhood model, and a “real voice for residents”.

The combined group would also “play [its] part” in building new homes, including social housing.

Commenting on the announcement, Anita Khan, chief executive of Tower Hamlets Community Housing, said: “This is an exciting opportunity for THCH. We chose Hyde as a potential partner because our goals and values strongly align with their dedication to the community and commitment to doing more.

“We understand that some residents might feel uneasy about the idea of joining a larger housing association, but this partnership will strengthen our ability to provide local services. THCH will continue to be a part of the community, making decisions with a deep understanding of our residents’ unique challenges and opportunities.

“With Hyde’s financial strength, we can do even more of what residents have asked for – safe and decent homes, great services, and stronger communities, all tied together with a real voice in how things work. We want to hear from our residents and will keep everyone updated on the benefits this partnership will bring.”

Andy Hulme, chief executive of Hyde, said: “THCH provides homes in a thriving and diverse part of east London, neighbouring areas where we operate ourselves. It’s a great organisation that shares our commitment to customers and communities.

“We’re at early stages of our conversations with the THCH team, but we wanted to let our customers and stakeholders know as soon as possible. There’s no change expected for existing customers, and we’ll keep people updated as we move forwards.”

THCH reported a deficit before tax of £9.4m in its accounts to the year ending 31 March 2023 at the group level, an increase from a restated deficit of £463,000 in 2022. This was despite annual turnover for the year increasing to £26.5m, up from £22.6m in 2022.

The report attributed the increased deficit to an impairment charge of £6.3m relating to fire remediation spend on housing properties, write-offs of £0.7m relating to insurance claims, and provisions of £1.2m against debtors.

Meanwhile, Hyde reported pre-tax surplus of £117,5m in 2023, (or £60.3m before swap movements), compared with £94m (£62.1m before swaps) in 2022.

In July, S&P’s rating on Hyde downgraded the association by one notch (from ‘A’), over what it described as the “delayed recovery” of financial metrics while the group maintains new homes targets in spite of weaker performance.

The ratings agency highlighted the group’s “extremely strong market position” supported by low vacancy rates, but flagged that exposure to sales would remain “well above one-third of total revenues” through its forecast period, meaning that the group’s performance was “less predictable”. However, S&P viewed the management team as “experienced and capable of delivering its targets”.

“The group has a strong track record of prudent financial policies that are accompanied by robust internal limits,” S&P said in its July report. Hyde’s Mr Hulme said at the time that the group is ambitious to improve outcomes for customers and has “robust plans and mitigation measures in place” to manage the risks it faces.