REG - Sovereign Housing - 3rd Quarter Results

LMS CapitalAnnouncement

31/01/2022 17:25

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RNS Number : 2025A  Sovereign Housing Capital Plc  31 January 2022

Sovereign Housing Association's Quarterly Performance Update covering the
9-month period to 31 December 2021

2022 Q3 Trading Update 31 December 2021

During this busy quarter, we have seen an improvement in our customer
satisfaction scores to 79% over the period and our Customer Service Centre has
seen a strong performance, with customer call wait times reduced to less than
a minute from a target of fewer than two minutes.

We are also pleased to publish our inaugural Environmental, Social and
Governance (ESG) report
(https://assets-eu-01.kc-usercontent.com/c783d326-05c6-0106-90ef-624f23b543bd/ed6e974e-e7d6-47e3-8791-5aed581b5df1/ESG%20Report%202021_Final.pdf)
. We believe we are performing well against the measures set out in the
Sustainability Reporting Standard for Social Housing. This is only the start
of our ESG journey, by further embedding ESG within the business we will make
good progress through the delivery of our Homes and Place Standard.

Despite the difficult environment our Operations teams are working hard to get
our empty homes into a lettable condition for our customers and Development
teams are working with our contractors to take delivery of new houses. The
programmes continue to face headwinds with specific risks around materials
shortages and increased prices, along with longer lead times to fill
vacancies.

In September 2021, we identified gaps in our historical data relating to
statutory safety checks for communal areas. We immediately established a
recovery programme to establish which blocks required up-to-date safety checks
and those programmes are now complete or scheduled to be completed by the end
of February 2022. We referred ourselves to the Regulator and on 26 January
2022 we were issued with a Regulatory notice.

For more details see our full statement
(https://www.sovereign.org.uk/press-release/regulatory-notice) .

Quarter 3 Performance Update

 

Our unaudited management accounts for Q3 2021/22 show operating surplus and
overall surplus declining slightly, as expected, as we continue to face
headwinds as mentioned above (Q2 £36.4m and £21.9m, Q3 £32.5m and £19.6m).

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, we are monitoring closely and expecting to be slightly
ahead of last year's 1,099 units, with current full year expectations to
deliver close to 1,200 units.

·    Homes in management of 60,607

·    Turnover was £106.0m (Q2 21/22: £104.9m) +1%

·    Operating surplus was £32.5m (Q2 21/22: £36.4m) -11%

·    Overall surplus was £19.6m (Q2 21/22: £21.9m) -11%

·    New homes completions YTD of 751 driven by the impact of the Covid
variant, resource and material shortages

·    Current development pipeline of 8,513 homes

·    121 sales completions (Q2 21/22: 121 sales) unchanged.

 

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,
instantly available financing was £508m which equates to 35 months of
forecast headroom. Considering the cashflow requirements included in the
latest business plan we expect to need extra financing in the next financial
year 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.

We continue to maintain headroom against all our Golden Rules.

 

 Protection principle             Forecast  Trend  Threshold     Headroom   Definition
 Liquidity                        35        ˅      ˂ 18 months   17 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                      15.6%     ˅      ˂ 40%         24.4%      Sales / turnover

                                                                 £101.7m
 Performance                      32.9%     ˄      ˃ 30%         2.9%       Operating surplus (excluding all development and asset sales) / turnover on

          rolling three year basis
                                                                 £10.1m
 Sustainability - interest cover  234.3%    ˅      ˃121%         113%       10% minimum level of headroom against all lenders' interest cover covenants

                                                                 £68m

                                                                            Tightest covenant

                                  £141m            ˃110%         124%

                                                                 £75m
 Sustainability - gearing         44.6%     v      ˂71.25%       27%        5% minimum headroom against all lenders' gearing covenants

                                                                 £1221m

                                                                            Tightest covenant

                                  £2048m           ˂75%          30%

                                                                 £1393m

 

Corporate Affairs

 

Sovereign is actively engaging with political stakeholders on social housing
regulation, including submissions to the Levelling-Up, Housing and Communities
Select Committee inquiry into the regulation of social housing and the
government's consultation on new Tenant Satisfaction Measures.

 

We are working closely with Homes England to address the challenges faced by
leaseholders in buildings requiring fire safety remediation or the removal of
unsafe cladding and we were recently successful in a bid for funding to
support this work. We await the outcome of the government's recent commitment
that leaseholders should not have to pay for this work themselves.

 

In January 2022, Mark Washer met with Steve Brine MP to visit a new scheme in
Winchester, along with development partners Berkeley.

 

The Chair of our Resident Board Partnership, Joyce Ward, was awarded an MBE in
the New Year's Honours List, in recognition of her contribution to the social
housing sector.

 

ENDS

For more information, please contact:

Graeme Gilbert, Treasury Director, Sovereign Housing Association
07392130856 Graeme.Gilbert@Sovereign.org.uk (about:blank)

Jane Carmichael, PR Specialist, Sovereign Housing Association

07825 054673 Jane.Carmichael@Sovereign.org.uk (about:blank)

 

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.

 

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