REG - Sovereign Housing - 1st Quarter Results

LMS CapitalAnnouncement

22/08/2022 17:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220822:nRSV8195Wa&default-theme=true

RNS Number : 8195W  Sovereign Housing Capital Plc  22 August 2022

Sovereign Housing Association's Quarterly Performance Update covering Q1 year
2022/23

 

Quarter 1 Performance Update

 

Our unaudited management accounts for Q1 2022/23 show operating surplus and
overall surplus in-line with Q1 last year and a step-up from last quarter.
Ongoing inflation impacts continue to create headwinds throughout our supply
chain and show no sign of abating.

 

                      Q1 FY23    Q4 FY22    Var.               Q1 FY22    Var.
                      £m         £m         £m       %         £m         £m      %
 Turnover             113.8      109.0      4.8      4.4       102.7      11.1    10.8
 Operating Surplus    37.9       26.2       11.7     44.7      37.6       0.3     0.8
 Retained Surplus     24.2       12.4       11.8     95.2      23.0       1.2     5.2
                      #          #          #        %         #          #       %
 Sales                152        141        11       7.8       116        36      31.0
 Unit Completions     125        445        (320)    (71.9)    166        (41)    (24.7)

 

The war in Ukraine and ongoing cost of living challenge is having a broad
range of impacts across the organisation, ranging from the obvious increased
costs of materials to continued lower Customer Satisfaction scores reflecting
anxiety felt by our customers. Despite these challenges we have seen
favourable results from both our Sales and our Staircasing activities,
suggesting the housing market remains strong.

The development programme has continued to be challenging due primarily to
resource and material availability issues impacting the whole of the building
sector, however we were able to add an additional 125 units during the past
quarter.

Treasury and Golden Rules

We held a non-deal roadshow with a number of our Investors in Edinburgh and
London providing an update on our business.  This presentation is available
on our website for any investors that were unable to attend.  As part of this
presentation, we informed our Investors that we have created a Sustainable
Finance Framework Sustainable Finance Framework
(https://preview-assets-eu-01.kc-usercontent.com/c783d326-05c6-0106-90ef-624f23b543bd/c5c7c50b-324e-4aad-8e75-796b3cc1f7f6/Sovereign%20Housing%20Association%20Sustainable%20Finance%20Framework.pdf)
for any future debt issuances, with a Second Party Opinion
(https://assets-eu-01.kc-usercontent.com/c783d326-05c6-0106-90ef-624f23b543bd/f036b7f4-6ace-4a22-9a05-a2d5bfed695c/Sovereign%20Housing%20Association%20Sustainable%20Finance%20Framework%20Second-Party%20Opinion.pdf)
 provided by Sustainalytics.

Sovereign operates within a number of Financial Golden Rules that underpin our
treasury and risk management. We have a minimum liquidity Golden Rule,
instantly available financing was £453m which equates to 23 months of
forecast headroom and we are in discussions about extending some of these
existing facilities. Considering the ongoing cashflow requirements included in
the latest business plan we also expect to need extra financing in 2022/23 to
fund development spend and maintain liquidity in line with our Golden Rule.

There is significant headroom against our Interest Cover and Gearing Golden
Rules, creating protection against our underlying debt facility covenants.
However we have fallen below our internal Operating margin Golden rule, which
is set at the upper quartile of the Housing Association sector.  This is
driven by the combination of continued cost pressures the business is
experiencing across our property services and increased spend in our
Transformation programme which will support the long term performance of the
business and recovery of operating margin above 30%.

 

 Protection principle             Forecast  Trend  Threshold     Headroom  Definition
 Liquidity                        23        ˅      ˂ 18 months   5 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                      16.7%     ˄      ˂ 40%         23.3%     Sales / turnover

 Performance                      29.7%     ˅      ˃ 30%         -0.3%     Operating surplus (excluding all development and asset sales) / turnover on

         rolling three year basis

 Sustainability - interest cover  261.1%    ˅      ˃121%         140%      10% minimum level of headroom against all lenders' interest cover covenants

                                                                           Tightest covenant

                                                   ˃110%         151%
 Sustainability - gearing         45.5%     ˅      ˂71.25%       26%       5% minimum headroom against all lenders' gearing covenants

                                                   ˂75%          30%       Tightest covenant

 

Corporate Affairs

 

CIH Southeast

Mark Washer gave a keynote address at CIH Southeast in Brighton on asset
management and development alongside Osama Bhutta, Director of Communications,
Policy and Campaigns at Shelter and Jessica Levy, Director of Communications
at the Federation of Master Builders.

In the evening of 11 May Sovereign hosted a dinner for over 30 developers,
land agents, sector leaders and members of Sovereign's SLG.

Research launch - 21 May 2022, Westminster

On 21 May Sovereign launched a new research report Retrofit for the future:
tenant attitudes to decarbonising social housing
(https://www.sovereign.org.uk/about-us/research/retrofit-for-the-future) in
Westminster. This qualitative research examines customers' current views on
the environment and climate change, and how these might influence how they
engage with our decarbonisation strategy.

Lord Greenhalgh, Minister of State at the Department for Levelling-Up, Housing
and Communities spoke at the launch, along with Mark Washer and Paul Massara.
They were joined by guests from Sovereign, including customers who took part
in the research, civil servants, academics and others from the sector.

 

NHF independent panel launched

 

The National Housing Federation has appointed an independent panel to look
into quality in housing association homes, chaired by Helen Baker, chair of
Shelter. Mark Washer will sit on the Quality and Trust Steering group that is
overseeing the work.

 

The panel has been set up in response to stories, especially on ITN, focusing
on poor quality homes in housing associations.

 

You can find our more here
(https://www.housing.org.uk/news-and-blogs/news/independent-panel-on-quality-in-housing-association-homes/)
.

 

ENDS

For more information, please contact:

Graeme Gilbert, Treasury Director, Sovereign Housing Association
07392130856 Graeme.Gilbert@Sovereign.org.uk (about%3Ablank)

Charles Pitt, Corporate Affairs Director, Sovereign Housing Association

07887524378 Charles.Pitt@Sovereign.org.uk
(mailto:Charles.Pitt@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 (http://www.sovereign.org.uk/investors)

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.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  QRFBSGDIGSDDGDD