Optivo Finance PLC Trading Statement for six months to 30 Sep 2021 (5835S)

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RNS Number : 5835S

Optivo Finance PLC

16 November 2021

OPTIVO

TRADING UPDATE FOR INVESTORS

SIX MONTHS TO 30 SEPTEMBER 2021

"The first half of 2021/22 saw us delivering a steady operational performance with profits ahead of budget due to seasonality in our planned repairs and maintenance expenditure. We expect full-year profits broadly around original budget level. We're looking forward to continuing our planned maintenance programme in line with budget in the second half of 2021/22 and delivering new homes in line with our development plans.

We maintained our strong financial position with our Moody's A3 (stable) credit rating reconfirmed and GBP736m committed liquidity (H1 2020: GBP788m) to cover our GBP421m development commitments (H1 2020: GBP583m). We also published our second annual ESG transparency report at www.optivoinvestors.co.uk."

Sarah Smith, Chief Financial Officer

16 November 2021

Key financial indicators

 
    Income & expenditure (GBPm)      FY 2020/21   H1 2020/21   H1 2021/22 
                                       audited     unaudited    unaudited 
 Total turnover                         332          154          175 
 Of which: Non-sales turnover           301          146          150 
   Initial sales turnover                 31           8           25 
 Operating surplus                      104           54           55 
 Operating margin excluding sales       24%          31%          26% 
 Surplus after interest 1                51           30           32 
----------------------------------  -----------  -----------  ----------- 
 

Note: (1) Before fair value, tax and pension scheme movements

This year we have budgeted for significant one-off fire safety remediation works costs and this continues to weigh on our operating margins. We expect to see compression to our operating margin over the full year as planned repairs and maintenance costs are, as last year, expected to be more heavily weighted towards H2.

 
        Balance sheet (GBPm)          31.3.2021    30.9.20      30.9.21 
                                       audited     unaudited    unaudited 
 Social housing assets (historical 
  cost)                                 3,083        2,972        3,152 
 Investment properties (valuation) 
  2                                       132         147           132 
 Total debt 3                           1,490       1,492        1,524 
 Cash & cash equivalents                   87           98           74 
-----------------------------------  ----------  -----------  ----------- 
 

Note: (2) Investment properties are revalued annually

Note: (3) Excluding capitalised debt arrangement costs

 
   Cash flows (GBPm)     FY 2020/21   H1 2020/21   H1 2021/22 
                           audited     unaudited    unaudited 
 Cash from Operations       141           45           59 
 Investing activities      (154)         (66)         (79) 
 Financing activities       (38)         (18)          8 
 Net change in cash         (51)         (39)         (13) 
----------------------  -----------  -----------  ----------- 
 

Key strategic indicators

 
 Resident satisfaction    FY 2020/21   H1 2020/21   H1 2021/22 
 Service                     89%          89%          88% 
 Repairs                     97%          98%          97% 
 Neighbourhoods              92%          93%          90% 
-----------------------  -----------  -----------  ----------- 
 

Our service score at 87.8% was almost in line with our 2021/2022 target of 88%. Results now out for 2020/21 show us once again top performer in our peer group for customer satisfaction.

We supported 156 residents into employment in H1. We exceeded our target for the proportion of our own staff that were satisfied with us as an employer.

Lettings

 
   General needs and HOPS 4     FY 2020/21   H1 2020/21   H1 2021/22 
  key operational indicators      audited     unaudited    unaudited 
 Void rental losses                1.1%         1.7%         1.0% 
 Overall rent arrears              4.1%         4.5%         4.1% 
-----------------------------  -----------  -----------  ----------- 
 

Note: (4) Housing for older people

Void losses from our social lettings portfolio were better than budgeted. We saw higher than expected voids from our commercial portfolio, driven mainly by student accommodation. Over the last year student accommodation has been impacted by the move to online study, lockdown measures and travel restrictions. Our position for the new academic year is a significant improvement, though there remains room for improvement, with 92% occupancy at the end of September.

Overall rent arrears are in line with other recent periods and are within acceptable levels. A large proportion of rent arrears can be attributed to residents who receive Universal Credit and we've been considering the likely impact of the end of the GBP20 uplift. Our Financial Inclusion Team continues to do a great job in providing information and helping residents on a wide range of financial matters including energy advice.

Asset management

 
 Expenditure on homes (GBPm)    FY 2020/21   H1 2020/21   H1 2021/22 
                                  audited     unaudited    unaudited 
 Routine maintenance                28           10           13 
 Planned maintenance                48           18           19 
 Major repairs                      7            7            8 
-----------------------------  -----------  -----------  ----------- 
 

Our maintenance costs were behind budget in H1 as access to some properties remained restricted. However, we expect an acceleration in maintenance activity in H2. Our surveys show that 97% of our residents are satisfied with the repair work we carry out.

Development & sales

 
 Investment in new homes (GBPm)    FY 2020/21   H1 2020/21   H1 2021/22 
                                     audited     unaudited    unaudited 
 Spent during the period              190           76          112 
 Future spend in contract             498          583          421 
--------------------------------  -----------  -----------  ----------- 
 
 
      Number of new homes        FY 2020/21   H1 2020/21   H1 2021/22 
                                  unaudited    unaudited    unaudited 
 Started in the period             1,002         193          211 
 Completed in the period            577           89          262 
 In contract at the reporting 
  date                             2,828        2,828        2,800 
 Number of sites in contract         41           37           41 
------------------------------  -----------  -----------  ----------- 
 
 
        Number of new homes           31.3.2021    30.9.2020    30.9.2021 
         available for sale            unaudited    unaudited    unaudited 
 Open market sales                        7            8            1 
 Shared ownership first tranche          250          258          172 
   Of which unsold over six months        106          208          95 
-----------------------------------  -----------  -----------  ----------- 
 

Supply chain issues in terms of materials and labour have been a feature of recent months across our industry as well as many others. Our full-year target to start construction of 815 new homes in 2021/22 remains unchanged.

There was only one property available for sale on the open market at the end of H1 and all together there have been 12 open market sales year-to-date.

Financing

 
  Funding sources (GBPm)     31.3.2021   30.9.2020    30.9.2021 
                              audited     unaudited    unaudited 
 Cash and cash equivalents      87           98           74 
 Available bank facilities      640         690          684 
 Retained bonds held: 
   2035                         100          100           0 
   2043                           0           0            0 5 
   2048                           0           0            0 
--------------------------  ----------  -----------  ----------- 
 
 
          Key metrics             31.3.2021    30.9.2020    30.9.2021 
                                    audited     unaudited    unaudited 
 Interest rate profile: 
   % of net debt on fixed basis       96%          94%          92% 
   Weighted average duration        11 years     12 years     12 years 
   Weighted average debt cost        3.64%        3.79%        3.62% 
   Derivative mark-to-market        GBP136m      GBP174m      GBP124m 
-------------------------------  -----------  -----------  ----------- 
 

Note: (5) In September 2020 we announced we would tap our 2043 bond by GBP150 million notional and we expect to complete documentation for this shortly, increasing the 2043 bonds to GBP300 million notional. At the same time we announced a forward purchase agreement with investors to sell GBP100 million notional amount (raising GBP151 million proceeds) of the newly created bonds for delivery in March 2022. After documentation is complete, we will deliver GBP100 million notional bonds to settle the forward purchase agreement and retain GBP50 million notional bonds to sell in due course.

We completed the sale of GBP100m of our 2035 retained bond in August. We used proceeds to repay legacy bank facilities and improve the security efficiency of our debt.

We're due to receive GBP151m proceeds from our 2043 bond tap in March 2022 in order to repay our Bank of England Covid Corporate Financing Facility borrowings.

We are in compliance with all financial and non-financial covenants.

External ratings

 
                                   31.3.2021      30.9.2020      30.9.2021 
 Regulator of Social Housing 
  Governance judgement                 G1             G1             G1 
  Financial viability judgement        V1             V1             V1 
 Moody's 
   Rating                              A3             A2             A3 
   Outlook                           (stable)      (negative)      (stable) 
-------------------------------  ------------  --------------  ------------ 
 

Moody's carried out their annual review in August this year and have reaffirmed our rating of A3 (stable outlook). Moody's cited our profitable core business, market position, strong balance sheet and unencumbered asset position, financial policies, stress testing, development flexibility and liquidity as credit strengths.

Investor calendar

   Financial year end                                                              31 March 2022 
   Full year trading update                                                     May 2022 
   Audited financial statements                                             July 2022 
   Investor update meetings                                                   August 2022 
   Property security valuations for listed bonds                 by 31 May 2022 (2035 bond) 

by 31 July 2022 (2043 & 2048)

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.

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.

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November 16, 2021 11:17 ET (16:17 GMT)