REG - Optivo Finance PLC - Trading Statement for six months to 30 Sep 2020

Moody'sAnnouncement

20/11/2020 10:55

RNS Number : 0194G
  
Optivo Finance PLC
  
20 November 2020
  
 

This is Optivo's unaudited trading update for the six months to 30 September 2020
"The first half of 2020/21 has seen us all adapting to new ways of living, working and delivering essential services and I'm proud of Optivo's contribution.  To our residents, colleagues and business partners - thank you.
The second half will be about consolidating what we've learned and fine-tuning our business model for the future.  Here at Optivo we're well prepared with robust plans and strong finances.
We'll continue taking care of our residents, communities, staff and homes while also building more much-needed new homes in collaboration with our public and private sector strategic partners."
Sarah Smith, Chief Financial Officer

17 November 2020
Highlights
·    Supporting thousands of residents with their wellbeing and into jobs and training
·    Housing operations, repairs & maintenance fully adjusted to new ways of working
·    All development sites are open and working safely through the second lockdown
·    High volume of first tranche sales enquiries and reservations, valuations are stable
·    New build pipeline now refocused on affordable rent and low cost home ownership
·    Building safety & energy efficiency costs reassessed and covered in financial plan
·    £300m debt raised and £150m deferred bond funding agreed; £788m (31/3/20: £542m) liquidity now covers all currently forecast funding needs until 2022
·    Moody's outlook resolved: credit rating changed from A2 (negative) to A3 (stable)
·    Sector-first ESG transparency report published at optivoinvestors.co.uk
·    G1/V1 regulatory judgement[1].
 
Key financial indicators




Income & expenditure (£m)


FY 2019/20

audited


H1 2019/20

unaudited


H1 2020/21 unaudited




Total turnover


322


162


154




            Non-sales turnover
            Initial sales turnover


291
31


148
14


146
8




Cost of initial sales


(25)


(11)


(7)




Operating costs


(224)


(107)


(100)




Surplus on fixed asset property sales


17


6


7




Operating surplus


90


50


54




Operating margin excluding sales


23%


28%


31%




Net interest costs


(45)


(23)


(24)




Surplus after interest


45


27


30




Cash flows (£m)


FY 2019/20

audited


H1 2019/20

unaudited


H1 2020/21 unaudited


 




Cash from operations


108


5


45


 




Investing activities


(206)


(15)


(66)


 




Financing activities


155


(26)


(18)


 




Net change in cash


57


(36)


(39)


 




 




Balance sheet (£m)


31.3.2020
audited


30.9.2019
unaudited


30.9.2020 unaudited




Total assets


3,400


3,247


3,409




Total debt [2]


1,485


1,366


1,492




Cash & cash equivalents


137


95


98




 
Half-year earnings are in line with our revised budget, which we re-profiled for coronavirus impacts. In March we exited the loss-making Ealing Care Alliance PFI care and facilities management service contract, our last care operations activity.
Net maintenance spend is significantly down on budget and this has boosted our operating margin.  But we expect to return to a full-year operating margin similar to 2019/20.  Since July we've seen our teams work to catch up on the backlog of repairs and major works delayed during lockdown.  We intend to have caught up on the majority of planned works by the end of the financial year subject to any further restrictions that may arise from the second 'lockdown'. 
Building safety remains a priority, and we're keeping up with all new guidance and regulation.  We've budgeted £133 million over the next six years to assess and carry out remedial fire safety works where needed.
We've stress tested our cash flows to ensure we can cover a prolonged economic disruption.  We have all the funds we need to deliver our existing investment commitments and ample financial flexibility to maintain our operations.
 
Operations & asset management




Key operational indicators [3]


FY 2019/20


H1 2019/20


H1 2020/21




Void rental losses


1.6%


1.6%


1.7%




Overall rent arrears


4.3%


4.7%


4.5%




 




Resident satisfaction


FY 2019/20


H1 2019/20


H1 2020/21




Service


95%


96%


89%




Repairs


98%


97%


98%




Neighbourhoods


91%


91%


93%




 
At the start of the coronavirus crisis nominations from our Local Authority partners virtually ceased.  General needs voids performance is now showing sustained improvement and is in line with budget.  Voids in our independent living schemes remain high and with the pandemic ongoing and lockdowns still a reality, these will take time to work through.
We increased our provision for bad debts at the end of 2019/20.  We are supporting our residents through difficult adjustments in household budgets and we now have over 8,600 residents on Universal Credit - an increase of over 1,500 since April.  While we've seen a slight increase in arrears as anticipated this year, they are stable at around 4.54% against 4.5% target at 30 September.  By 30 October arrears had reduced to 4.44%.
We're working hard to regain the ground we lost on resident satisfaction scores during the first lockdown and we're better prepared now for the second lockdown.  We've launched phase 2 of our Residents' Resilience Project and in the last six weeks we've made 16,000 support calls to residents helping those who may be furloughed, looking for a new job, or struggling with money.  We've also launched an online campaign, called 'We Can', to help our residents findnew jobs, improve their CV and access vital benefits.
 
Development & sales




Investment in new homes (£m)


FY 2019/20

audited


H1 2019/20

unaudited


H1 2020/21 unaudited




Spent during the period


183


132


76




Future spend in contract


512


377


583




 




New homes


FY 2019/20

audited


H1 2019/20

unaudited


H1 2020/21 unaudited




Started in the period


1,500


652


193




Completed in the period


838


145


89




In contract at the reporting date


2,558


2,734


2,828




Number of sites in contract


36


43


37




 




New homes available for sale


31.3.2020

audited


30.9.2019
unaudited


30.9.2020 unaudited




Open market sales


0


0


8




Shared ownership first tranche
            Unsold over six months


279
83


222
170


258
208




 
Interest in shared ownership remains strong, there is demand for viewings and reservations of homes, although progress to completion is taking longer than usual.  Valuations remain high and we are working hard to take advantage of the market while it's strong. But with a second lockdown, the market not operating for a period and delayed handovers, we're not expecting to hit the number of sales budgeted this year. 
We continue to monitor sales performance of all development sites. We have converted a further 120 homes in our development pipeline from open market sale to shared ownership.  This leaves us with just 288 (10%) open market sale homes from a total committed programme of 2,828.
We've moved the focus of our new financial plan even further towards grant-funded affordable homes. 
 
Financing




Key metrics


31.3.2020

audited


30.9.2019

unaudited


30.9.2020 unaudited




Cash and cash equivalents (£m)


137


95


98




Available debt facilities (£m)


405


515


690




Interest rate profile:
            % of net debt on fixed basis
            Weighted average duration
            Weighted average debt cost
            Derivative mark-to-market


 
85%
13 years
3.79%
£171m


 
92%
14 years
3.94%
£172m


 
94%
12 years
3.79%
£174m




 
In April we increased our liquidity by £300 million through a new £150 million 2035 public bond sale and £150 million participation in the Bank of England's Covid Corporate Financing Facility (CCFF).
In September we tapped our 2043 bond and agreed a sale of £100 million in notional amount, which will raise £150 million proceeds in March 2022, to refinance the CCFF.
We have £100 million further 2035 retained bonds and £50 million 2043 retained bonds available for sale and welcome enquiries for sale on a deferred settlement basis.
 
External ratings




 


31.3.2020


30.9.2019


30.9.2020 




RSH governance judgement


G1


G1


G1




RSH financial viability judgement


V1


V1


V1




Moody's credit rating


A2

(negative)


A2

(negative)


A3

(stable)




 
In October Moody's updated our credit rating from A2 (negative outlook) to A3 (stable outlook)[4] and again confirmed our rating after their action to downgrade the UK sovereign credit rating.  Moody's identify our profitable core business, market position, strong balance sheet and unencumbered asset position, financial policies, stress testing, grant flexibility and liquidity as credit strengths.
 
Calendar
Financial year end                                                                          31 March 2021
Full year trading update                                                                 May 2021
Audited financial statements                                                         July 2021
Property security valuations for listed bonds                              by 31 July 2021
 
More information
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://optivoinvestors.co.uk/
 
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.

 


[1] Regulator of Social Housing's in-depth assessment is in progress and their updated judgement is due later this year.


[2] Excluding capitalised debt arrangement costs


[3] Figures based on general needs and housing for older people (HOPS)


[4] https://optivoinvestors.co.uk/getmedia/f1aa0550-e580-4efd-9277-5b0d32ff4016/credit-rating-oct-2020-published.pdf.aspx?ext=.pdf


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