TIDM56TE
RNS Number : 9263H
Sovereign Housing Capital Plc
05 August 2019
Sovereign Housing Association's Quarterly Performance Update
Quarter 1: 01 April to 30 June 2019
The following report represents Sovereign Housing Association's
first quarterly update for investors, covering our ongoing
financial, development and operational performance as well as the
latest unaudited financials.
About Sovereign
Sovereign is one of the largest housing associations in the
country, owning and managing around 58,000 homes across the south.
We are committed to maintaining good quality homes and services and
investing in creating great communities.
Sovereign is one of the leading providers of new affordable
homes, aiming to deliver 1,900 new homes a year through section 106
opportunities and direct delivery through land-led developments and
regeneration schemes.
While not-for-profit, Sovereign is a major business. The
organisation has annual turnover of GBP402m, invested GBP238m last
year in new development and its asset base would be worth GBP11bn
on the open market. Investment is secured from operating surpluses
and from government through loans and capital grant, supported by
long-term debt and revolving credit facilities from a group of core
relationship banks and investors.
Sovereign's ratings are among the strongest in the affordable
housing sector.
Ratings 2020 Q1 2019 Q1 Outlook Change
---------------------------- -------- -------- --------- -------
Regulator of Social Housing G1/V1 G1/V1 -
S&P A+ Negative
Moody's A2 Stable
---------------------------- -------- -------- --------- -------
FY 2019/2020 Q1 Trading Update
Highlights
-- Sovereign completed 482 residential units in the first quarter of 2020 (2019 Q1: 411)
-- There are 58,163 units in management (2019: 56,934)
-- Turnover for the quarter was GBP100.5m (2019 Q1: GBP97.4m)
-- Operating surplus for the quarter was GBP38.9m (2019 Q1: GBP42.2m)
-- Net margin on all sales was 24.6% (2019 Q1: 22.1%)
-- The surplus for the quarter was GBP25.6m (2019 Q1: GBP27.4m)
-- A GBP229m joint venture deal with Crest Nicholson to deliver 920 new homes in Bristol
Commenting on the results, Barry Nethercott, Sovereign Chief
Financial Officer, said:
"Sovereign has delivered an excellent operational and financial
performance over the first quarter of 2019/20, building much needed
homes and investing to support our residents and their
communities.
"As well as creating an exciting GBP229m joint venture with
Crest in Bristol, we continue to take great strides in our
ambitious plans to build 1,900 homes a year, taking greater control
through land-led opportunities.
"To help deliver our development aspirations, we agreed a
ground-breaking three-year GBP250m unsecured revolving credit
facility, syndicated across five lenders. It will provide the
flexibility and liquidity we need to decide on the best time to
approach the debt capital markets to raise long-term funding."
Note: Figures quoted in the update are based on management
accounts which are subject to review and further adjustments, for
example in the areas of pensions, investment property valuation and
taxation.
Financial update
A new three-year (+1+1 extensions), GBP250m unsecured revolving
credit facility syndicated across five lenders has helped increase
liquidity to GBP572m by the end of the quarter. This provides
Sovereign with funding to support our net cash flow for the next
two years. We have also successfully restructured an existing
GBP50m facility with NatWest.
Together, these will provide significant additional liquidity
and covenant headroom to support our ambitious plans to take more
control through land-led developments and funding our development
programme. This deal will also give us financial security through a
potentially uncertain political and economic period, providing both
flexibility and liquidity.
We have further strengthened our treasury expertise with the
appointment of Graeme Gilbert as Treasury Director from 1 July.
Graeme was previously Deputy Group Treasurer at Marks and
Spencer.
Development update
Sovereign continues to deliver strong development and sales
performance.
During quarter 1, Sovereign completed the build phase of 482 new
homes; this is 71 homes (17.3%) more than the 411 homes delivered
in the same quarter last year. We invested GBP96m developing new
homes, that's GBP34m (55.1%) more than the same quarter 1 last
year. We continue to make good progress towards securing a pipeline
programme that will deliver 1,900 new homes a year, including
entering into a GBP229m joint venture deal with Crest Nicholson to
deliver 920 new homes within the next phase of a 2,700 home
residential community at Harry Stoke, Bristol. The homes at this
site are set to be delivered over the next seven years, with
infrastructure works due to start this summer. Crest Nicholson and
Sovereign are long-standing partners, with successful previous
developments including Centenary Quay in Southampton, Tadpole
Garden Village in Swindon and Harbourside in Bristol.
Actual sales prices achieved exceeded target. We completed 139
first tranche and open market sales, generating GBP3m of profit.
Our latest sales forecast predicts higher than target sales for the
full year, generating GBP21m profit for the Group, GBP4m more than
budget. Consequently, quarter end operating surplus was 38.7%,
marginally ahead of our initial budget.
Housing properties ended the quarter GBP22m ahead of target at
GBP3,741m due mainly to three significant schemes moving ahead of
budget phasing.
More widely we are significantly shifting our development
strategy to a more land led programme, aiming for 50% in 5 years
time. We will in future report on progress towards this.
Operational update
Sovereign operates a dedicated customer contact centre, which
received 160,000 contacts during quarter one, the majority being by
telephone. Call quality was rated higher than target at 91% (target
85%) and the number of residents moving to online contact via our
portal is higher than ever with over 1,200 registrations this
quarter.
Tenancy management performed strongly. Arrears, re-let times and
voids are all better than target, and the impact of Universal
Credit is less than anticipated. Re-lets are taking 12 days on
average against a target of 15 and voids are tracking at 0.5%
against a target of 0.7%. Universal credit arrears are 5.18%
(target 5.91%) and non-Universal Credit arrears are 2.18% (target
2.87%).
The Group carried out 50,000 responsive repairs, a third more
than anticipated for the quarter. 93% of repairs were completed on
time, slightly lower than the 94% target.
GBP4m capital was invested in existing stock during quarter one,
replacing 1,216 individual components in our homes.
Compliance and assurance performance across our six key health
and safety themes of gas safety, electrical safety, fire safety,
legionella management, asbestos safety and lift safety is strong.
100% of fire risk assessments have been completed on time.
The Government consultation 'Building a Safer Future' sets out a
new regulatory system for taller buildings. It is clear that the
new regulatory framework will require a very different approach
from landlords and we are preparing our response to the
consultation. Meanwhile we are already investing in improved health
and safety works in some of our buildings based on good practice
guidance.
Sovereign has pledged GBP3m towards community investment per
annum and has appointed a Communities Director to ensure that these
funds make a significant contribution to improving the lives of our
residents.
Unaudited financials
Statement of Comprehensive Income 2020 Q1 2019 Q1 Change
(GBPm) (GBPm)
-------------------------------------- -------- -------- --------
Turnover 100.5 97.4 3.2%
Operating costs and cost of sales (63.6) (56.5) (12.5%)
Share of profits from Joint Ventures 0.3 0.0 -
Surplus on disposal of fixed assets
and investments 1.7 1.4 26.0%
-------------------------------------- -------- -------- --------
Operating Surplus 38.9 42.2 (7.8%)
Interest (13.3) (14.9) 10.4%
-------------------------------------- -------- -------- --------
Surplus for the period 25.6 27.4 (6.4%)
-------------------------------------- -------- -------- --------
Statement of Financial Position 2020 Q1 2019 Change
Q1
(GBPm) (GBPm)
--------------------------------------- -------- --------- -------
Housing properties 3,741 3,498 6.9%
Other tangible fixed assets 42 40 5%
Investment 154 137 12.4%
Net current assets 34 22 54.5%
--------------------------------------- -------- --------- -------
Total assets less current liabilities 3,971 3,697 7.4%
--------------------------------------- -------- --------- -------
Loans due > one year 1,732 1,565 10.7%
Unamortised grant liability 291 288 1.0%
Other long term liabilities 120 92 30.3%
Capital and reserves 1,827 1,751 4.34%
--------------------------------------- -------- --------- -------
Total non-current liabilities and
reserves 3,971 3,697 7.4%
--------------------------------------- -------- --------- -------
Financial Metrics 2020 Q1 2019 Q1 Change
--------------------------------- ---------- ---------- --------
Operating margin([1]) 38.7% 43.4% (10.7%)
EBITDA MRI %([2]) 42.2% 48.6% (13.3%)
Leverage([3]) 42.9% 41.7% 3.0%
Net debt per unit in management GBP29,780 GBP27,490 8.3%
--------------------------------- ---------- ---------- --------
ENDS
For more information, please contact:
Graeme Gilbert, Treasury Director, Sovereign Housing Association
- 01635275109 / 07392130856/ Graeme.Gilbert@Sovereign.org.uk
Tim Abbott, Head of External Affairs, Sovereign Housing
Association - 01635279581 / 07920501696/
Tim.Abbott@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.
www.sovereign.org.uk/investors
[1] Operating surplus / turnover
[2] (Operating surplus + depreciation + amortisation +
impairment + capitalised major repairs) / (turnover - grant
amortisation)
[3] Net debt (excluding derivative financial liabilities) /
total assets less current liabilities
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
QRFBDGDISBGBGCU
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