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Housing association Midland Heart has had its credit rating upgraded thanks to improvements in its financial performance.
Credit ratings agency Moody’s has ranked the 33,000-home association as A1, making it the joint highest-rated association in the agency’s portfolio.
Moody’s said the upgrade was the result of “a marked improvement in realised financial performance”.
It added that Midland Heart has recently improved its interest cover ratios, a measure of how easily the association can pay interest on its outstanding debts.
In addition, Moody’s said, Midland Heart has strong liquidity to cover its spending plans, which only cover “a relatively low risk development programme”.
This action by Moody’s returns Midland Heart to the rating it held until September last year, when the agency downgraded its entire housing association portfolio over fears that the UK would leave the European Union’s single market and customs union.
Midland Heart’s operating margins have improved over the past two years, increasing from 25% in 2015/16 to 35% in 2017/18, thanks to its savings and efficiency programme.
The association’s level of debt has decreased since 2016/17, and Moody’s predicted that it will decrease again in 2018/19. Comparing it to other housing associations with similar credit ratings, Moody’s noted that Midland Heart has more space for extra borrowing than the average.
According to the Moody’s judgement, the decision was partly because Midland Heart’s development programme is “relatively moderate”.
Over the next five years, the association plans to build homes equivalent to only 10% of its current stock size. It is aiming to build 450 homes in 2018/19, increasing to 600 a year by 2020/21.
Most of these homes – 68% – are set to be social housing, with 25% of them set aside for shared ownership. Only a small proportion will be available for outright sale and market rent, the riskier of tenures.
It is the second Midlands-based housing association to have its credit rating upgraded by Moody’s in two weeks, after WM Housing saw its rating rise to A2.
Glenn Harris, chief executive of Midland Heart, said: “Moody’s upgrade of Midland Heart’s rating to A1 is fantastic news and a true testament to the dedication and hard work of our colleagues. This puts us on a very strong financial footing as we prepare to launch our next corporate plan and continue planned investment in our portfolio.
"Furthermore, this upgrade endorses the planned, sustainable increase to our development programme over the next five years which will see us delivering high-quality housing that is affordable to rent in the Midlands.”
Click on the links below to read more reports about individual associations' financial statements:
A2 Dominion reports £92.5m surplus
Aster sees 12% jump in surplus despite margin drop
BPHA sees surplus jump after shared ownership sales boost
Clarion's surplus falls for second year running
Housing & Care 21 records increased surplus
Metropolitan sees surplus fall due to post-Grenfell costs
Midland Heart records £47.8m surplus
Network Homes surplus dips for the second consecutive year
Notting Hill and Genesis post reduced combined surplus
Optivo sees turnover fall in first results since merger
Orbit surplus boosted by jump in value of private rented units
Paradigm surplus drops after £5.6m loan breakage cost
Places for People boosts surplus to £130m
Southern sees dip in surplus due to pensions and safety costs
Sovereign boosts surplus thanks to open market sales
Stonewater increases surplus by 38%
Swan surplus slides after £3.2m cladding provision
Vivid posts increased surplus post-Merger