Optivo Finance PLC Optivo 2018-19 full year trading update (0289Z)

TIDM20SY

RNS Number : 0289Z

Optivo Finance PLC

14 May 2019

OPTIVO TRADING UPDATE

FULL YEAR 2018-19

This is Optivo's unaudited trading update for the twelve months ended 31 March 2019.

Highlights

 
 Financial KPIs*                2018-19 (unaudited)   2017-18 
 Turnover                             GBP314m         GBP317m 
                               --------------------  -------- 
 Operating surplus                    GBP102m         GBP117m 
                               --------------------  -------- 
 Surplus before tax                   GBP89m          GBP90m 
                               --------------------  -------- 
 Net interest costs                   GBP41m          GBP42m 
                               --------------------  -------- 
 Operating margin (excluding 
  sales)                               28.3%           30.5% 
                               --------------------  -------- 
 

* excluding pensions adjustments

 
 Strategic KPIs                   2018-19 result   2018-19 target 
 Residents' net promoter score          62               56 
                                 ---------------  --------------- 
 Residents using our services 
  online                               53%              45% 
                                 ---------------  --------------- 
 Staff feel proud to work for 
  Optivo                               81%              75% 
                                 ---------------  --------------- 
 Staff say Optivo is a great 
  employer                             77%              75% 
                                 ---------------  --------------- 
 Helping people into jobs and 
  training                            1,122             870 
                                 ---------------  --------------- 
 New homes started                    1,003            1,000 
                                 ---------------  --------------- 
 
   --    2018-19 was Optivo's first full year of operation. 
   --    We met and exceeded our strategic KPIs. 

-- The decrease in turnover was in large part a result of no open market sales during 2018-19 as there were no completions of properties for the open market sales tenure (2017-18: GBP12.5m).

-- 2018-19 was the third of four years in which social housing rents decrease by 1% before returning to CPI+1% growth in 2021.

-- The decrease in operating surplus was due to a lower surplus on asset disposals (GBP13m vs GBP20m) and zero surplus on open market outright sales (2017-18: GBP4m).

-- Higher revaluation movements this year (GBP28m vs GBP11m) compensated for the operating surplus fall, keeping our surplus before tax broadly level with last year.

Core operations

For our core business of General Needs, Supported Housing and Housing for Older People operational income KPIs for Optivo for the year to date were as follows:

 
 Voids                             2018-19     2017-18 
 Void rental losses as a % 
  of annual rent debit              0.92%       0.59% 
                                 ----------  ---------- 
 Average vacant properties        39.3 days   26.5 days 
  re-let time, excluding voids 
  for major works 
                                 ----------  ---------- 
 

We carried a higher level of voids this year while readying properties for asset disposals. The rise in re-let times was concentrated in 23 sheltered housing schemes in our Midlands region, and our review of these is underway.

 
 Rent arrears at year-end         March 2019       March 2018 
 0 to 4 weeks                   GBP3.4m, 1.62%   GBP3.5m, 1.68% 
                               ---------------  --------------- 
 5 to 6 weeks                   GBP0.7m, 0.32%   GBP0.7m, 0.32% 
                               ---------------  --------------- 
 7 to 12 weeks                  GBP1.5m, 0.73%   GBP1.5m, 0.71% 
                               ---------------  --------------- 
 13 weeks or more               GBP3.6m, 1.74%   GBP2.6m, 1.25% 
                               ---------------  --------------- 
 Total rent arrears of annual   GBP9.3m, 4.41%   GBP8.2m, 3.96% 
  rent debit 
                               ---------------  --------------- 
 

Out-turn rent arrears for the year were in line with our expectations and financial plan.

Property development

At 31 March we were in contract to deliver 2,020 homes (March 2018: 2,054) across 39 sites, with remaining capital commitments on these sites of GBP361m (March 2018: GBP363m). In December 2018 we entered into a 50/50 Joint Venture with Linden Homes to develop a site in Kent. This will deliver a further 76 homes for Optivo with remaining capital commitments of GBP19m.

We had 262 Shared Ownership 1st tranche properties that were practically complete and available for sale, of which 158 were ready for occupation (March 2018: 65), and no open market sale unsold units (March 2018: 0).

The increase in unsold homes in part reflects a relatively large number of shared ownership completions (223) during Q4. At year end we had 27 homes unsold for more than six months (March 2018: 7 homes).

Liquidity

At the end of the financial year we had available undrawn facilities of GBP380m (March 2018: GBP606m) and GBP61m (March 2018: GBP82m) unencumbered cash and deposits available. We sold GBP25m retained bonds after the financial year end in April 2019.

Our outstanding debt balance was GBP1,281m (March 2018: GBP1,089m).

Optivo and Optivo Finance plc are rated A2 by Moody's.

Unaudited Financial Results

 
 Statement of Consolidated Income     2018-19   2017-18 
                                        GBPm      GBPm 
-----------------------------------  --------  -------- 
 Turnover                               314       317 
 Cost of Sales                         (19)      (21) 
 Operating Expenditure                 (206)     (199) 
 Surplus on disposal of fixed 
  assets                                13        20 
-----------------------------------  --------  -------- 
 Operating Surplus                      102       117 
-----------------------------------  --------  -------- 
 Surplus on commercial property 
  disposals                              -         4 
 Interest receivable                     1         1 
 Interest and financing costs          (42)      (43) 
 Fair value movements                   28        11 
-----------------------------------  --------  -------- 
 Surplus before taxation                89        90 
-----------------------------------  --------  -------- 
 Hedge reserve movement                  -       (141) 
-----------------------------------  --------  -------- 
 Surplus/(deficit) before taxation      89       (51) 
-----------------------------------  --------  -------- 
 

-- The figures exclude pension adjustments which we are reviewing as part of year-end accounting processes.

-- Fair value movements represent the movement on Optivo's investment property and interest rate derivatives. Optivo has opted not to apply hedge-accounting.

Next Update

We will publish a half-year financial update after 30 September 2019.

Notes

Optivo is a charitable Housing Association owning and/or managing 44,000 homes across London, the South East and the Midlands.

Contact for more information

https://www.optivo.org.uk/about-us/investors.aspx

Tariq Kazi

Head of Treasury

[e-mail]

020 8036 2293

DISCLAIMER

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 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 [e-mail] or visit www.rns.com.

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May 14, 2019 12:35 ET (16:35 GMT)