G15 landlord handed ‘negative’ outlook by S&P

Like many of its peers, NHG is cutting its development plans to spend more on improving its existing stock. 

However S&P said: “As the group increases spending on its existing properties, we anticipate that NHG’s financial performance will remain structurally weaker through our forecast period when compared to our previous expectations.” 

NHG’s fire remediation costs will also remain “elevated” as the group has set aside around £50m in provisions, according to S&P.

“We estimate this will be spent in the next four years and will weigh on its financial performance,” the agency said. 

Despite this, S&P maintained its long-term issuer credit rating on NHG at A-.

S&P flagged that NHG has made “steady progress” on getting its homes to Energy Performance Certificate Band C or above, with 79 per cent of stock now at that level.

The landlord’s liquidity position is also expected to remain “very strong” over the next 12 months, helped by access to the capital markets, according to the agency. 

Rent increases will also help NHG’s margins to recover, but are likely to remain below 20 per cent, S&P said. 

The agency also said there is a “moderately high likelihood” that NHG would receive “timely extraordinary government-related support in case of financial distress”.

However S&P’s standalone credit profile on NHG was revised down from BBB+ to BBB.

“We estimate that since the group carries larger investments on its existing properties, its adjusted EBITDA margins will structurally weaken compared to our previous expectations,” S&P said. 

An NHG spokesperson said: “We are pleased S&P has reaffirmed its A- credit rating for Notting Hill Genesis. We plan, over the next 10 years, to invest £770m in improving the quality of our homes.

“Higher interest rates and build costs have altered the economics of development so we have reduced our development plans in order improve our existing homes.

“We have a clear plan for funding this investment and have made appropriate strategic choices to ensure its delivery.”

NHG currently has a G1/V2 rating with the Regulator of Social Housing, but does not yet have a consumer grade.