TIDM20SY
RNS Number : 9745N
Optivo Finance PLC
26 May 2020
OPTIVO
2019/20 UNAUDITED PRELIMINARY RESULTS
"Our immediate priority is supporting our residents, colleagues,
suppliers, local authorities, NHS and community partners to manage
the risk of COVID-19. In turn we're grateful for our colleagues'
hard work and our residents' and partners' support. We've
successfully adapted and continue to adapt our services to work
with latest guidance.
Counter-cyclical investment in the housing sector will help
bring our economy out of this crisis and we're ready to play our
part. We've delivered full-year results in line with our previous
half-year trading update. We have G1/V1 regulatory judgement, A2
Moody's credit rating and strong balance sheet with GBP800 million
liquidity on tap, now covering our current committed capital
expenditure 1.6 times.
We've co-created our new 2020-25 strategic plan with input from
2,200 residents and 500 colleagues. And while we set our goals
before this crisis began, our aim remains true. We still intend to
invest financial resources wisely, improving our existing homes,
making them more energy-efficient, meeting Government's new
building safety requirements, and building high quality new
homes.
Unaudited results for the 2019/20 financial year are in line
with our mid-year forecast, reflecting increasing fire safety works
costs, higher voids, and slower first tranche sales."
Sarah Smith, Chief Financial Officer
26 May 2020
2019/20 financial highlights
Income & expenditure (GBPm) 2017/18 2018/19 2019/20
unaudited
Total turnover 317 314 322
Non-sales turnover 295 285 291
Initial sales turnover 22 29 31
Cost of initial sales (21) (19) (25)
Operating costs (199) (204) (224)
Surplus on fixed asset property
sales 20 12 17
Operating surplus 117 103 90
Net interest costs (42) (42) (48)
Surplus after interest 75 61 42
--------------------------------- -------- -------- -----------
Cash flows (GBPm) 2017/18 2018/19 2019/20
unaudited
Cash from operations 101 59 75
Investing activities (113) (223) (173)
Financing activities (28) 141 154
Net change in cash (40) (23) 56
---------------------- -------- -------- -----------
Balance sheet (GBPm) 31.3.2018 31.3.2019 31.3.2020
unaudited
Total assets 2,836 3,142 3,412
Total debt (excl capitalised
fees) 1,089 1,281 1,478
Available undrawn facilities 606 380 405
Cash & cash equivalents 104 81 137
------------------------------ ---------- ---------- -----------
Key financial indicators 2017/18 2018/19 2019/20
unaudited
Homes in management (excl leasehold) 42,133 42,857 43,215
Headline social housing cost GBP4,246 GBP4,189 GBP4,407
per unit
Net debt per unit GBP23,378 GBP28,000 GBP31,184
Net debt to turnover 3.1 3.8 4.2
-------------------------------------- ---------- ---------- -----------
Bank loan financial covenants 2017/18 2018/19 2019/20
unaudited
Interest cover ( annually > 100%
test ) 262% 240% 169%
Gearing ( <= 65% test ) 35% 39% 45%
---------------------------------- -------- -------- -----------
We delivered full year earnings in line with our mid-year
forecast, which had been revised down from budget to reflect
increased fire safety works costs, higher voids, and slower first
tranche sales. In March we exited the loss-making Ealing Care
Alliance PFI care and facilities management service contract, our
last care operations activity.
Our balance sheet grew during the year in line with our
long-term financial plan. We funded organic growth in housing
assets by increasing our bank loans and selling our 2048 retained
bonds. In early April we increased our liquidity by a further
GBP300 million, through a new GBP150 million long term public bond
sale and other short term financing. We continue to report housing
properties at historic cost.
We've reforecast our 2020/21 budget for COVID-19 and also stress
tested our liquidity to ensure we can cover a prolonged disruption.
We have all the funds we need to deliver our existing investment
commitments and ample financial flexibility to maintain our
operations.
COVID-19
We're reaching out directly to residents, especially to help
older and vulnerable people cope with the crisis
Residents
We've made 29,000 pro-active wellbeing phone calls and supported
hundreds with food access, benefits advice and help coping with
isolation. Our rent arrears are currently stable, but we're
prepared for an increase. Our financial inclusion team are busy
helping residents manage money and get wider support, and our Covid
Money Advice service has had 7,000 hits. We've moved more resource
into this team and also into the teams supporting residents exposed
to domestic violence. We're doing all we can to ensure our NHS
keyworker accommodation is a safe and secure haven for NHS staff
working in acute treatment hospitals.
People & culture
Most colleagues are working from home and our productivity is as
high as ever. We expect to continue for some time with the
arrangements we've had in place since lockdown began. Noting the
Prime Minister's announcements on 10 May, it's clear that lockdown
advice hasn't fundamentally changed for us, for now. We're very
mindful of colleagues' own wellbeing and the need to balance work
with private responsibilities. Where we've taken the decision to
furlough colleagues whose normal work couldn't carry on, we've
handled it sensitively and only as a last resort after redeploying
colleagues wherever possible across the business.
Operations & asset management
In line with guidance we've moved to emergency-only repairs
service, alongside statutory safety compliance work which is also
continuing. There are instances where we're unable to gain access
to a property because a resident is self-isolating or is vulnerable
and needs to be shielded from exposure. We're keeping a full record
of all details to share with the Regulator of Social Housing, with
whom we're in regular dialogue.
We have extended our definition of emergency repairs to pick up
other urgent work to maintain properties in good condition, and
we're tracking our maintenance work against normal seasonal trends.
This allows us to forecast and manage any backlog of repairs to
address once lockdown eases. We've implemented safe working
procedures. We're also monitoring our supply chain and we are
reassured of continuity.
Development & sales
Two-thirds of our construction sites are currently open with
safe working practices in effect, up from one third a month ago,
and more sites continue to open. Sales activity is continuing
through digital viewings, albeit at reduced levels. All previously
approved development schemes not yet contracted are being reviewed
for continuing viability. Since March all new development
commitments now require Board approval.
Financing
We've reforecast our 2020/21 budget and rebuilt our long-term
financial plan to accommodate this sharp economic shock. We've
stress tested our income collection and working capital and
increased our available liquidity headroom by GBP300 million in
April. This prudent step ensures we have more than enough liquidity
to manage through the crisis.
Outlook
As the full extent of disruption to our economy becomes clearer,
we'll keep a prudent eye on our financial plan and development
programme, and will keep under review our plan targets approved in
March ahead of lockdown.
2017-20 Strategic plan results
Key performance indicators 2017/18 2018/19 2019/20
unaudited
Maximise our social impact
New homes started 912 1,003 1,500
People into jobs & training 1,045 1,122 1,256
Ensure a sustainable business
Operating margin excluding sales 31% 29% 23%
Sustainable Homes for Tomorrow - Gold Gold
Provide a sector leading service
Residents Net Promoter Score 66 62 55
Residents online 43% 54% 61%
Value our people
Staff say we are a good employer 76% 77% 80%
Staff feel proud to work for
us 84% 81% 79%
--------------------------------------------- -------- -------- -----------
Operations & asset management
Resident satisfaction 2017/18 2018/19 2019/20
unaudited
Service 97% 96% 95%
Repairs 96% 97% 98%
Neighbourhoods 93% 91% 91%
----------------------- -------- -------- -----------
Key operational indicators 2017/18 2018/19 2019/20
unaudited
Void rental losses 0.6% 0.9% 2.2%
Vacant properties re-let time 27 days 39 days 87 days
Overall rent arrears 4.0% 4.3% 4.2%
------------------------------- -------- -------- -----------
Notes:
(1) Figures based on general needs and housing for older people
(HOPS)
(2) Re-let times exclude voids for major works
Our void rental losses rose due to a greater number of
properties unexpectedly becoming void in year, more work needed to
improve properties returned to us in poor condition, and slower
Local Authority nominations to bring in new residents. Before the
impact of COVID-19 we had stabilised our void position and in March
had started to see an improvement. Since then, we are letting in
line with guidance, and are not reletting vacant homes to older
people, so we expect voids will temporarily rise again.
Our arrears performance was in line with expectations and our
financial plan. Throughout the year we continued to support
residents migrating to Universal Credit where applicable. We've
assessed our COVID-19 exposure to rental income delays or losses
and made a provision in our accounts, subject to external audit. So
far, however, we have not experienced any significant increase in
arrears.
Building safety remains a priority. We have 102 blocks over 18
metres or 6+ storeys, as well as 3,367 lower-rise blocks. We've
budgeted GBP80 million over the next six years to cover higher-rise
block remediation where needed, Hackitt review and Grenfell inquiry
phase 1 recommendations, and actions arising from our own fire risk
assessments. We're currently studying the cost implications of
Government's new approach to building safety announced in April,
which includes bringing lower-rise buildings in scope for more
work.
Development & sales
New homes 2017/18 2018/19 2019/20
unaudited
Started in the year 912 1,003 1,500
Completed in the year 470 985 693
In contract at year end 2,014 2,096 2,558
On site at year end 1,375 1,393 2,200
Number of sites n/a 40 36
------------------------- -------- -------- -----------
New homes available for sale 31.3.2018 31.3.2019 31.3.2020
unaudited
Open market sales 0 0 0
Shared ownership first tranche 65 262 279
Unsold over six months 7 27 83
-------------------------------- ---------- ---------- -----------
Investment in new homes (GBPm) 2017/18 2018/19 2019/20
unaudited
Spent during the year 156 245 258
Future spend in contract at year
end 356 404 512
---------------------------------- -------- -------- -----------
Early in 2019 we moved our financial plan focus even more
towards grant-funded affordable homes. Wherever feasible we took
open market sales risk out of our plans.
In the latter part of 2019 Board reviewed our sales exposure and
agreed to convert 43 homes to rental tenures. With development
diversified across a number of sites and adequate liquidity already
in place, we have the financial flexibility to review each site and
make decisions on a site-by-site basis. Further reviews of sites is
ongoing.
Financing
Key metrics 31.3.2018 31.3.2019 31.3.2020
unaudited
Cash and cash equivalents (GBPm) 104 81 137
Debt facilities (GBPm) 1,675 1,661 1,938
Drawn 1,089 1,281 1,478
Available 606 380 460
Interest rate profile:
% of net debt on fixed basis 101% 76% 85%
Weighted average duration 13 years 10 years 13 years
Weighted average debt cost 4.42% 4.24% 3.79%
Derivative mark-to-market GBP146m GBP148m GBP171m
---------------------------------- ----------- ----------- -----------
During the year we sold GBP100 million remaining 2048-maturity
retained bonds and arranged GBP250 million new funding of which
GBP75m was unsecured.
After the financial year end, on 7 April 2020, we completed a
new GBP250 million 15 1/2 year public bond issue. We immediately
repurchased and retained GBP100 million for future sale within 3
years. We also agreed GBP150 million unsecured short term funding
from other sources, taking total liquidity to GBP800 million.
External ratings
31.3.2018 31.3.2019 31.3.2020
RSH governance judgement G1 G1 G1
RSH financial viability judgement V1 V1 V1
Moody's credit rating A2 A2 A2 (negative)
(stable) (stable)
---------------------------------- ----------- ----------- --------------
The Regulator of Social Housing (RSH) was due to conduct an
In-Depth Assessment (IDA) with us during 2020. RSH have notified us
they are deferring their IDA programme for now, due to COVID-19
disruption.
In March Moody's announced our rating was unchanged after their
periodic review.
Calendar
Audited financial statements July 2020
Property security valuations for listed bonds by 31 July 2020
Half-yearly trading update after 30 September 2020
More information
Optivo owns and/or manages homes across London, the South East
and the Midlands. Optivo is registered in England with limited
liability under the Co-operative and Community Benefit Societies
Act 2014 (with registered number 7561) and is a Registered Provider
of Social Housing whose activities are regulated by the Regulator
of Social Housing (with registered number 4851). As such, Optivo
has charitable status but is exempt from registration with the
Charity Commission.
Optivo Finance plc (company number 07933814) is a wholly owned
subsidiary of Optivo and is an issuer of GBP public bonds listed on
the London Stock Exchange.
https://www.optivo.org.uk/about-us/investors.aspx
Tariq Kazi
Head of Treasury
tariq.kazi@optivo.org.uk
020 8036 2293
IMPORTANT NOTE
This update contains certain 'forward-looking' statements
reflecting, among other matters, our current views on markets,
activities and prospects. Actual outcomes may differ materially.
Such statements are a correct reflection of our views only on the
publication date and no representation or warranty is given in
relation to them, including as to their completeness or accuracy or
the basis on which they were prepared. Financial results quoted are
unaudited. No reliance should be placed on the information
contained within this update. We do not undertake to update or
revise such public statements as and when our expectations change
in response to events. This update is neither recommendation nor
advice. This is not an offer or solicitation to buy or sell any
securities.
This information is provided by RNS, the news service of the
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END
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