TIDM56TE
RNS Number : 8884J
Sovereign Housing Capital Plc
26 August 2021
Sovereign Housing Association's Quarterly Performance Update
covering the 3-month period to 30 June 2021
2022 Q1 Trading Update 30 June 2021
Sovereign is pleased to report strong progress for the first
quarter of the new 2021/22 financial year, based on unaudited
management accounts.
Annual Report 2020/21
We are pleased to share our annual accounts, which were signed
off by the Board and our auditors and are now available on our
website. As highlighted in the annual report, Sovereign delivered a
strong set of results despite the ongoing impact of the global
pandemic.
We also completed the Annual 30 year Business Plan and performed
detailed stress testing. The Board endorsed our Business Plan and
we submitted our Financial Forecast Return (FFR) and associated
Business Plan documentation to the Regulator of Social Housing in
June.
Quarter 1 Performance Update
Sovereign's operational and financial performance for the first
quarter of 2021/22 has continued to be robust, despite the economic
climate. Our unaudited management accounts show operating surplus
and overall surplus improving versus the last quarter and on track
vs year to date budget. However, the development programme has
continued to be slower than expected due primarily to resource and
material availability issues impacting the whole of the building
sector, and whilst we are expecting a shortfall vs the full year
budget of 1.900 units, we will be well ahead of last year's 1,099
units.
Homes in management of 60,425
-- Turnover was GBP102.7m (Q4 20/21: GBP111.6m) -8%
-- Operating surplus was GBP37.6m (Q4 20/21: GBP34.3m) +9%
-- Overall surplus was GBP23.0m (Q4 20/21: GBP19.1m) +20%
-- New homes completions of 166, 88% of which were for
affordable tenures against a budget of 415, driven by the impact of
the Covid variant, resource and material shortages
-- Current development pipeline is in excess of 6,700 homes
-- 116 sales completions, due to lower handover of units from
developers (Q4 20/21: 173 sales) -33%.
-- We received re-confirmation of the highest ratings for
Governance and Viability from the Regulator of Social Housing's
stability check, retaining our G1/V1 status.
Treasury and Golden rules
Sovereign operates within a number of Financial Golden Rules
that underpin our treasury and risk management. We have a minimum
liquidity Golden Rule, whereby we require cash and immediately
available finances to be in place to cover all net expenditure
excluding all uncommitted or aspirational development spend and all
sales income for at least the following 18 months. Instantly
available financing was GBP701m which equates to 51 months of
forecast headroom under our Liquidity Golden Rule, this has
increased due to delays in development caused primarily by resource
and material constraints. Considering the cashflow requirements
included in the latest business plan we expect to need extra
financing in the next financial year.
In addition, following significant work to review our security
pools to ensure we have an appropriate level of asset cover and
headroom on our facilities, we now have over 4,000 properties ready
to charge for any future funding opportunities, with an estimated
value of over GBP400m and a further 16,000 properties unsecured.
There is significant headroom against our Interest Cover and
Gearing Golden Rules creating protection against our underlying
debt facility covenants.
We continue to maintain significant headroom against all our
Golden Rules.
Protection principle Forecast Trend Threshold Headroom Definition
Liquidity 51 months >18 months 33 months 18 months as a minimum,
where available cash plus
committed and ready-to-draw
borrowing facilities (excluding
retained bonds) must exceed
forecast cash flows excluding
all uncommitted development
spend and all income from
development sales and asset
sales.
---------- ------ ----------- ---------- ---------------------------------
Market Risk 17.1% <40% 22.9% Sales / turnover
GBP97.9m
---------- ------ ----------- ---------- ---------------------------------
Performance 33.3% >30% 3.3% Operating Surplus (Exc.
GBP11.5m all development and asset
sales)
---------- ------ ----------- ---------- ---------------------------------
Sustainability: Interest 275.7% >121% 155% 10% Minimum level of headroom
Cover GBP175m GBP98m against all lender's interest
cover covenants.
---------- ------ ----------- ---------- ---------------------------------
>110% 166% Tightest Covenant
GBP105m
---------- ------ ----------- ---------- ---------------------------------
Sustainability: Gearing 42.7% <71.25% 29% 5% Minimum headroom against
GBP1969m GBP1320m all lenders' gearing covenants.
------------------------- ---------- ------ ----------- ---------- ---------------------------------
<75% 32% Tightest Covenant
GBP1493m
------------------------- ---------- ------ ----------- ---------- ---------------------------------
Environmental, Social and Governance (ESG)
The quarter has seen work commence on our inaugural
Environmental, Social and Governance (ESG) report, which we will
publish in Autumn 2021. This follows our involvement in the
creation of the Sustainability Reporting Standard for Social
Housing, a new ESG standard for the UK social housing sector.
Our Equality, Diversity and Inclusion (EDI) strategy has now
been launched and we are now moving to action to deliver our
commitments. One example is we are now running unconscious bias
training for interviewing managers and another is actively
targeting an increase in the number of women in trades roles. A
working group has been created to discuss the cultural and tangible
challenges in attracting and retaining women in these roles and how
to overcome them.
Corporate Affairs
In May we published our Homes and Place Standard , which marks
our commitment to building and maintaining good quality homes and
better places to live. This will guide how we grade our assets and
bring them up to standard, meeting our ambition to be net zero by
2050. We are engaging with local authorities and talking through
the implications of our regeneration and replacement programme for
local communities. Tom Titherington, Chief Investment and
Development Officer, addressed the Climate Change and
Sustainability in Housing conference on green disposals.
Also, during the period, our Chief Executive Mark Washer met
with Luke Hall MP, Minister for Regional Growth and Local
Government, to talk about the role of social housing in helping to
regenerate the high street and showed him round a new development
in Yate, just outside Bristol.
Note: Figures quoted in the update are based on unaudited
management accounts which are subject to review and further
adjustments, for example in the areas of pensions, investment
property valuation and taxation.
S
For more information, please contact:
Graeme Gilbert, Treasury Director, Sovereign Housing Association
07392130856 Graeme.Gilbert@Sovereign.org.uk
Jane Carmichael, PR Specialist, Sovereign Housing
Association
07825 054673 Jane.Carmichael@Sovereign.org.uk
Disclaimer The information contained herein (the "Trading
Update") has been prepared by Sovereign Housing Association Limited
(the "Parent") and its subsidiaries (the "Group"), including
Sovereign Advances Ltd, Sovereign Housing Capital PLC (the
"Issuers") and is for information purposes only.
The Trading Update should not be construed as an offer or
solicitation to buy or sell any securities issued by the Parent,
the Issuers or any other member of the Group, or any interest in
any such securities, and nothing herein should be construed as a
recommendation or advice to invest in any such securities.
Statements in the Trading Update, including those regarding
possible or assumed future or other performance of the Group as a
whole or any member of it, industry growth or other trend
projections may constitute forward-looking statements and as such
involve risks and uncertainties that may cause actual results,
performance or developments to differ materially from those
expressed or implied by such forward-looking statements.
Accordingly, no assurance is given that such forward-looking
statements will prove to have been correct. They speak only as at
the date of the Trading Update and neither the Parent nor any other
member of the Group undertakes any obligation to update or revise
any forward-looking statements, whether as a result of new
information, future developments, occurrence of unanticipated
events or otherwise.
None of the Parent, any member of the Group or anyone else is
under any obligation to update or keep current the information
contained in the Trading Update. The information in the Trading
Update is subject to verification, does not purport to be
comprehensive, is provided as at the date of the Trading Update and
is subject to change without notice.
No reliance should be placed on the information or any
projections, targets, estimates or forecasts and nothing in the
Trading Update is or should be relied on as a promise or
representation as to the future. No statement in the Trading Update
is intended to be an estimate or forecast. No representation or
warranty, express or implied, is given by or on behalf of the
Parent, any other member of the Group or any of their respective
directors, officers, employees, advisers, agents or any other
persons as to the accuracy or validity of the information or
opinions contained in the Trading Update (and whether any
information has been omitted from the Trading Update). The Trading
Update does not constitute legal, tax, accounting or investment
advice.
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