Optivo Finance PLC Trading Statement for six months to 30 Sep 2019 (1108U)

TIDM20SY

RNS Number : 1108U

Optivo Finance PLC

20 November 2019

OPTIVO TRADING UPDATE

HALF YEAR 2019-20

This is Optivo's unaudited trading update for the six months to 30 September 2019.

Financial highlights

 
 GBPm                                  H1 2019/20     H1 2018/19    FY 2018/19 
                                        unaudited      unaudited      audited 
 Turnover                                  162            161           314 
 Operating surplus                         50             59            103 
 Surplus before tax                        28             38            88 
 Total assets                             3,247          2,907         3,142 
 Total borrowings                         1,366          1,147         1,281 
 Available undrawn borrowing 
  facilities                               515            543           380 
 RSH* governance judgement                 G1             G1            G1 
 RSH financial viability judgement         V1             V1            V1 
 Moody's credit rating                A2 (negative)   A2 (stable)   A2 (stable) 
-----------------------------------  --------------  ------------  ------------ 
 

* Regulator of Social Housing

Commenting on these results Sarah Smith, Chief Financial Officer, said:

"We forecast lower surplus this year because of sector headwinds, but we have the financial capacity and flexibility to keep on delivering great services to our residents, prioritise safety and keep delivering more affordable housing.

Sales: Shared ownership first tranche sales are slower than anticipated. Our unsold homes are down by 40 (to 222), of which 170 are more than six months old. Many of these are reserved and we are converting some to social housing rented tenures. Our liquidity, and the relatively modest scale of our sales programme, mean we have comfortably absorbed the working capital impact. We have no unsold market sales homes at present.

Safety: The Grenfell fire has led directly to fresh thinking around fire safety. We are seeing higher works costs arising from Fire Risk Assessments. We anticipate more costs as more information and guidance come out. We will continue to prioritise resident safety. We no longer have any ACM cladding on buildings above four storeys. We are testing other cladding materials. In common with our peers we expect higher maintenance costs for the medium term.

Voids: We have experienced higher void rates during this period compared with our previous experience. This has reduced rental incomes and increased maintenance costs. We expect to make progress towards normalising our void re-let times in coming months.

Taken together these three factors - slower first tranche sales, higher maintenance costs and higher voids and void costs - mean we now forecast a lower FY 2019/20 surplus than in 2018/19. We can absorb these impacts within a financial strategy built to be robust."

Strategic key performance indicators

 
                                    H1 2019/20   H1 2018/19   FY 2018/19 
                                      actual       actual       actual 
 Provide sector leading service 
 - Residents recommend us (NPS*)       55.4          65           62 
 - Residents online                   57.4%         47%          54% 
 Value our people 
 - Staff say we are a great 
  employer                            79.5%         77%          77% 
 - Staff feel proud to work 
  for us                              77.6%         82%          81% 
 Maximise our social impact 
 - New homes started                   652          274         1,003 
 - People into jobs and training       748          486         1,122 
 Ensure a sustainable business 
 - Operating margin                   27.7%         34%          29% 
 - SHIFT*                              Gold         Gold         Gold 
---------------------------------  -----------  -----------  ----------- 
 

*1 Net Promoter Score

*2 Sustainable Homes for Tomorrow Award

Statement of consolidated income

 
 GBPm                             H1 2019/20   H1 2018/19   FY 2018/19 
                                   unaudited    unaudited     audited 
 Turnover excluding sales            148          147          285 
 Operating costs                    (107)        (100)        (204) 
 Initial sales turnover               14           14           29 
 Initial sales cost of sales         (11)         (7)          (19) 
 Other property sales (net)           6            5            12 
                                 -----------  -----------  ----------- 
 Operating surplus                    50           59          103 
 Interest costs (net)                (23)         (21)         (42) 
 Fair value property movements        -            -            29 
 Other                                1            -           (2) 
                                 -----------  -----------  ----------- 
 Surplus before tax                   28           38           88 
-------------------------------  -----------  -----------  ----------- 
 

Note: half-year figures exclude movements in the fair value of investment properties, unhedged instruments and pensions adjustments. We measure and recognise these at year end.

Core business lettings - General Needs and Housing for Older People

 
                                     H1 2019/20   H1 2018/19   FY 2018/19 
 Void rental losses as a % of 
  annualised rent debit                 1.6%         0.7%         0.8% 
 Average vacant properties re-let    69.5 days     37 days      39 days 
  time, excluding voids for major 
  works 
----------------------------------  -----------  -----------  ----------- 
 

-- We have had a higher than usual number of voids, nearly half without any notice, and some Local Authorities have been slower than expected with nominations. Properties have been returned to us in poorer condition than prior experience, so needing more work to re-let.

-- These factors have all contributed to higher re-let times. We're taking steps with contractors and Local Authority partners to speed up void works and re-letting. We expect these measures will help normalise routine new general needs re-let times by early next year.

-- We have started tenure conversion on some of our 23 sheltered housing schemes with high voids, where we have assessed underlying demand patterns have changed.

 
 Rent arrears                     30/9/2019       30/9/2018       31/3/2019 
 0 to 4 weeks                   1.4%, GBP2.9m   1.6%, GBP3.3m   1.6%, GBP3.3m 
 5 to 6 weeks                   0.4%, GBP0.8m   0.4%, GBP0.9m   0.3%, GBP0.7m 
 7 to 12 weeks                  0.9%, GBP1.9m   0.9%, GBP1.9m   0.7%, GBP1.5m 
 13 weeks or more               2.0%, GBP4.3m   1.9%, GBP3.8m   1.7%, GBP3.5m 
 Total rent arrears of annual   4.7%, GBP9.9m   4.8%, GBP9.9m   4.3%, GBP9.0m 
  rent debit 
-----------------------------  --------------  --------------  -------------- 
 

-- Arrears performance was in line with expectations and our financial plan. We continue to support tenants migrating to Universal Credit where applicable.

Development & sales

 
 Delivery               H1 2019/20   H1 2018/19   FY 2018/19 
 New homes started         652          274         1,003 
 New homes completed       145          259          985 
---------------------  -----------  -----------  ----------- 
 
 
 Contractual commitments          30/9/2019    30/9/2018   31/3/2019 
  (Optivo / Joint Venture) 
 Homes                            2,734 / 46     2,180     2,020 / 76 
 Number of sites                    43 / 1        50         39 / 1 
 Remaining capital commitments 
  (GBPm)                           366 / 7        380       361 / 19 
-------------------------------  -----------  ----------  ----------- 
 
 
 Unsold homes                      30/9/2019   30/9/2018   31/3/2019 
 First tranche shared ownership 
  / over six months                222 / 170    72 / 24    262 / 27 
 Open market sales                     0           0           0 
--------------------------------  ----------  ----------  ---------- 
 

Funding & liquidity

 
 Treasury portfolio              30/9/2019   30/9/2018   31/3/2019 
  (GBPm) 
 Total borrowings                  1,366       1,147       1,281 
 Undrawn committed facilities       515         543         380 
 Cash and deposits                  71          84          60 
------------------------------  ----------  ----------  ---------- 
 

-- In the half-year we sold our GBP100 million remaining 2048-maturity retained bonds and we arranged three new medium-term revolving credit facilities totalling GBP200 million.

   --    We also arranged GBP25 million near-term loans and retired GBP17.5 million legacy debt. 
   --    We have enough liquidity to meet our future capital commitments. 

Credit rating

In August Moody's updated their outlook on our external credit rating from A2 (stable outlook) to A2 (negative outlook) in view of our future planned development-led debt increases. Moody's reaffirmed the rating in November.

Regulator

The Regulator of Social Housing reconfirmed our G1/V1 judgements, following their annual review and financial stability check of our business plan.

Next Update

We will publish a full-year financial update after 31 March 2020.

Notes

Optivo is a charitable Housing Association owning and/or managing 45,000 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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November 20, 2019 10:46 ET (15:46 GMT)