Optivo Finance PLC Optivo 2020/21 unaudited preliminary results (4885Z)

TIDM20SY

RNS Number : 4885Z

Optivo Finance PLC

21 May 2021

OPTIVO

2020/21 UNAUDITED PRELIMINARY RESULTS

"Results for 2020/21 underline the financial resilience of our business model, and validate our decisions over a number of years to focus our investments in core social housing activity. This year we've also shown an operational resilience of which we're proud, with arrears down and extensive mobilisation of customer facing and social impact teams to help residents through the Covid-19 crisis.

Our operational track record, financial standing and ESG credentials enable us to continue sourcing long-term low-cost capital and attract strong partners to work with for investment in safe, high-quality and energy-efficient homes that deliver a vital counter-cyclical boost to our recovering economy.

Our priorities are clear. With requirements evolving, we're investing more in building safety and energy efficiency programmes. To keep our financial metrics where we want them, we're easing our pace of development growth and weighting future projects to affordable lettings rather than sales.

Finally, in keeping with our longstanding commitment to resident involvement, we're embracing consumer regulation and are excited to support the Regulator of Social Housing in delivering its widened remit in this area."

Sarah Smith, Chief Financial Officer

21 May 2021

Investment case highlights

   --    45,000 homes 
   --    Moody's A3 (stable) credit rating 
   --    ESG transparency report published at optivoinvestors.co.uk 
   --    G1/V1 regulatory judgement reconfirmed after 2020 in-depth assessment 
   --    2035, 2043 and 2048 secured GBP bonds listed on London Stock Exchange 

Key financial indicators

 
    Income & expenditure (GBPm)      FY 2018/19   FY 2019/20   FY 2020/21 
                                                                unaudited 
 Total turnover                         314          322          331 
 Of which: Non-sales turnover           285          291          285 
   Initial sales turnover                29           31           46 
 Operating surplus                      103           90          103 
 Operating margin excluding sales       29%          23%          25% 
 Surplus after interest                  61           46           53 
----------------------------------  -----------  -----------  ----------- 
 
 
        Balance sheet (GBPm)          31.3.2019   31.3.2020   31.3.2021 
                                                               unaudited 
 Social housing assets (historic 
  cost)                                 2,729       2,927       3,080 
 Investment properties (valuation)       157         147         127 
 Total debt                             1,281       1,485       1,490 
 Cash & cash equivalents                 81          137          87 
-----------------------------------  ----------  ----------  ----------- 
 

Residents' Resilience Project 2020/21

   --    134,457 proactive support calls 
   --    2,288 seniors living alone contacted and supported 
   --    554 residents given access to digital devices 
   --    805 households given food and fuel support 
   --    2,444 food parcels delivered 
   --    3,493 residents given financial or employment support 
   --    1,246 people helped into jobs or training 

Lettings

 
  General needs and HOPS (1)    FY 2018/19   FY 2019/20   FY 2020/21 
  key operational indicators                               unaudited 
 Void rental losses                0.9%         1.6%         1.1% 
 Overall rent arrears              4.3%         4.3%         4.1% 
-----------------------------  -----------  -----------  ----------- 
 

Note: (1) Housing for older people

We delivered a creditable general needs and HOPS lettings result, with both voids and arrears lower than this time last year in spite of the pandemic disruption.

Void losses in our student accommodation portfolio were higher however, with students vacating university halls when term-time learning went online, and holiday lettings affected by lockdown and travel restrictions. During the year we disposed of our direct-let student accommodation halls in Southampton and our former office in South London. We partly offset void losses through home working and saving on travel expenses.

Asset management

 
 Expenditure on homes (GBPm)    FY 2018/19   FY 2019/20   FY 2020/21 
                                                           unaudited 
 Routine maintenance                28           31           28 
 Planned maintenance                33           40           49 
 Major repairs                      9            8            7 
-----------------------------  -----------  -----------  ----------- 
 

By focusing on essential repairs and maintenance and adopting safe working practices we avoided falling too far behind on our property upkeep.

 
 Resident satisfaction    FY 2018/19   FY 2019/20   FY 2020/21 
 Service                     96%          95%          89% 
 Repairs                     97%          98%          97% 
 Neighbourhoods              91%          91%          92% 
-----------------------  -----------  -----------  ----------- 
 

While services were affected by lockdown, the 89% service satisfaction score is still good.

Development & sales

 
 Investment in new homes (GBPm)    FY 2018/19   FY 2019/20   FY 2020/21 
                                                              unaudited 
 Spent during the period              245          183          208 
 Future spend in contract             404          512          498 
--------------------------------  -----------  -----------  ----------- 
 
 
      Number of new homes        FY 2018/19   FY 2019/20   FY 2020/21 
                                                            unaudited 
 Started in the period             1,003        1,500        1,002 
 Completed in the period            985          838          577 
 In contract at the reporting 
  date                             2,096        2,558        2,828 
 Of which: Affordable rent         1,082        1,225        1,764 
   Shared ownership                  841          917          813 
   Open market sales                 173          416          251 
 Number of sites in contract         40           36           41 
------------------------------  -----------  -----------  ----------- 
 
 
        Number of new homes           31.3.2019   31.3.2020   31.3.2021 
         available for sale                                    unaudited 
 Open market sales                        0           0           7 
 Shared ownership first tranche          262         279         250 
   Of which unsold over six months        27          83          106 
-----------------------------------  ----------  ----------  ----------- 
 

We rephased construction timetables due to lockdown and to accommodate safe working practices upon re-opening, and spent less on new homes than we expected at the start of the year. Sales performance was almost at pre-pandemic budget level and above our post-pandemic revised forecast. We target a further 1,000 starts in 2021/22.

Financing

 
  Funding sources (GBPm)     31.3.2019   31.3.2020   31.3.2021 
                                                      unaudited 
 Cash and cash equivalents      81          137          87 
 Available bank facilities      380         405         640 
 Retained bonds held: 
   2035                          -           -           100 
   2043                           -           -         0 (2) 
   2048                          100          - 
                                                          - 
--------------------------  ----------  ----------  ----------- 
 

Note: (2) In September 2020 we agreed to increase our 2043 bond by GBP150 million notional. We entered into a forward purchase agreement with investors to sell GBP100 million for delivery in March 2022. We will retain GBP50 million for future sale. The new bonds will be created through updates to previous bond documentation to be published in the coming months.

 
          Key metrics             31.3.2019    31.3.2020    31.3.2021 
                                                             unaudited 
 Interest rate profile: 
   % of net debt on fixed basis       76%          85%          91% 
   Weighted average duration        10 years     13 years     11 years 
   Weighted average debt cost        4.24%        3.79%        3.64% 
   Derivative mark-to-market        GBP148m      GBP171m      GBP136m 
-------------------------------  -----------  -----------  ----------- 
 

We took steps to increase funding headroom by issuing a new 2035 bond in April 2020. In May we accessed the Bank of England's Covid Corporate Financing Facility (CCFF), which we've since rolled over to March 2022. In September we tapped our existing 2043 bond by GBP150 million selling part for settlement on a deferred basis to refinance CCFF.

We reduced our cost of capital through liability management steps in respect of a legacy aggregator finance arrangement.

And we improved the efficiency of our secured debt platform by creating a new Numerical Apportionment Security Trust Deed to support our future bond issuance.

External ratings

 
                                   31.3.2019      31.3.2020      31.3.2021 
 Regulator of Social Housing 
  Governance judgement                 G1             G1             G1 
  Financial viability judgement        V1             V1             V1 
 Moody's 
   Rating                              A2             A2             A3 
   Outlook                           (stable)      (negative)      (stable) 
-------------------------------  ------------  --------------  ------------ 
 

In October Moody's updated our credit rating from A2 (negative outlook) to A3 (stable outlook) and again confirmed our rating after their decision 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.

In 2020 the Regulator of Social Housing successfully completed our regulatory in-depth assessment on a virtual basis.

Investor calendar

   Property security valuations for 2035 bond                    by 31 May 2021 
   Property security valuations for 2043 & 2048 bonds      by 31 July 2021 
   Audited financial statements                                          July 2021 
   ESG Transparency Report                                             July 2021 
   Moody's annual review                                                   Summer / Autumn 2021 
   Half-year end                                                                  30 September 2021 
   Half-year trading update                                                 November 2021 

We look forward to arranging investor meetings over the Summer after publication of our annual financial statements.

More information

https://optivoinvestors.co.uk/

Tariq Kazi

Director of Corporate Finance

[e-mail]

020 8036 2293

ABOUT OPTIVO

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-denominated bonds listed on the London Stock Exchange.

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May 21, 2021 10:23 ET (14:23 GMT)