Sovereign Housing Capital Plc 1st Quarter Results (8884J)

TIDM56TE

RNS Number : 8884J

Sovereign Housing Capital Plc

26 August 2021

Sovereign Housing Association's Quarterly Performance Update covering the 3-month period to 30 June 2021

2022 Q1 Trading Update 30 June 2021

Sovereign is pleased to report strong progress for the first quarter of the new 2021/22 financial year, based on unaudited management accounts.

Annual Report 2020/21

We are pleased to share our annual accounts, which were signed off by the Board and our auditors and are now available on our website. As highlighted in the annual report, Sovereign delivered a strong set of results despite the ongoing impact of the global pandemic.

We also completed the Annual 30 year Business Plan and performed detailed stress testing. The Board endorsed our Business Plan and we submitted our Financial Forecast Return (FFR) and associated Business Plan documentation to the Regulator of Social Housing in June.

Quarter 1 Performance Update

Sovereign's operational and financial performance for the first quarter of 2021/22 has continued to be robust, despite the economic climate. Our unaudited management accounts show operating surplus and overall surplus improving versus the last quarter and on track vs year to date budget. However, the development programme has continued to be slower than expected due primarily to resource and material availability issues impacting the whole of the building sector, and whilst we are expecting a shortfall vs the full year budget of 1.900 units, we will be well ahead of last year's 1,099 units.

Homes in management of 60,425

   --    Turnover was GBP102.7m (Q4 20/21: GBP111.6m) -8% 
   --    Operating surplus was GBP37.6m (Q4 20/21: GBP34.3m) +9% 
   --    Overall surplus was GBP23.0m (Q4 20/21: GBP19.1m) +20% 

-- New homes completions of 166, 88% of which were for affordable tenures against a budget of 415, driven by the impact of the Covid variant, resource and material shortages

   --    Current development pipeline is in excess of 6,700 homes 

-- 116 sales completions, due to lower handover of units from developers (Q4 20/21: 173 sales) -33%.

-- We received re-confirmation of the highest ratings for Governance and Viability from the Regulator of Social Housing's stability check, retaining our G1/V1 status.

Treasury and Golden rules

Sovereign operates within a number of Financial Golden Rules that underpin our treasury and risk management. We have a minimum liquidity Golden Rule, whereby we require cash and immediately available finances to be in place to cover all net expenditure excluding all uncommitted or aspirational development spend and all sales income for at least the following 18 months. Instantly available financing was GBP701m which equates to 51 months of forecast headroom under our Liquidity Golden Rule, this has increased due to delays in development caused primarily by resource and material constraints. Considering the cashflow requirements included in the latest business plan we expect to need extra financing in the next financial year.

In addition, following significant work to review our security pools to ensure we have an appropriate level of asset cover and headroom on our facilities, we now have over 4,000 properties ready to charge for any future funding opportunities, with an estimated value of over GBP400m and a further 16,000 properties unsecured. There is significant headroom against our Interest Cover and Gearing Golden Rules creating protection against our underlying debt facility covenants.

We continue to maintain significant headroom against all our Golden Rules.

 
   Protection principle     Forecast    Trend   Threshold    Headroom               Definition 
        Liquidity           51 months           >18 months   33 months   18 months as a minimum, 
                                                                          where available cash plus 
                                                                          committed and ready-to-draw 
                                                                          borrowing facilities (excluding 
                                                                          retained bonds) must exceed 
                                                                          forecast cash flows excluding 
                                                                          all uncommitted development 
                                                                          spend and all income from 
                                                                          development sales and asset 
                                                                          sales. 
                           ----------  ------  -----------  ----------  --------------------------------- 
       Market Risk            17.1%                <40%        22.9%     Sales / turnover 
                                                              GBP97.9m 
                           ----------  ------  -----------  ----------  --------------------------------- 
       Performance            33.3%                >30%        3.3%      Operating Surplus (Exc. 
                                                              GBP11.5m    all development and asset 
                                                                          sales) 
                           ----------  ------  -----------  ----------  --------------------------------- 
 Sustainability: Interest    275.7%               >121%        155%      10% Minimum level of headroom 
           Cover             GBP175m                           GBP98m     against all lender's interest 
                                                                          cover covenants. 
                           ----------  ------  -----------  ----------  --------------------------------- 
                                                  >110%        166%      Tightest Covenant 
                                                              GBP105m 
                           ----------  ------  -----------  ----------  --------------------------------- 
 Sustainability: Gearing      42.7%              <71.25%        29%      5% Minimum headroom against 
                             GBP1969m                         GBP1320m    all lenders' gearing covenants. 
-------------------------  ----------  ------  -----------  ----------  --------------------------------- 
                                                   <75%         32%      Tightest Covenant 
                                                              GBP1493m 
-------------------------  ----------  ------  -----------  ----------  --------------------------------- 
 

Environmental, Social and Governance (ESG)

The quarter has seen work commence on our inaugural Environmental, Social and Governance (ESG) report, which we will publish in Autumn 2021. This follows our involvement in the creation of the Sustainability Reporting Standard for Social Housing, a new ESG standard for the UK social housing sector.

Our Equality, Diversity and Inclusion (EDI) strategy has now been launched and we are now moving to action to deliver our commitments. One example is we are now running unconscious bias training for interviewing managers and another is actively targeting an increase in the number of women in trades roles. A working group has been created to discuss the cultural and tangible challenges in attracting and retaining women in these roles and how to overcome them.

Corporate Affairs

In May we published our Homes and Place Standard , which marks our commitment to building and maintaining good quality homes and better places to live. This will guide how we grade our assets and bring them up to standard, meeting our ambition to be net zero by 2050. We are engaging with local authorities and talking through the implications of our regeneration and replacement programme for local communities. Tom Titherington, Chief Investment and Development Officer, addressed the Climate Change and Sustainability in Housing conference on green disposals.

Also, during the period, our Chief Executive Mark Washer met with Luke Hall MP, Minister for Regional Growth and Local Government, to talk about the role of social housing in helping to regenerate the high street and showed him round a new development in Yate, just outside Bristol.

Note: Figures quoted in the update are based on unaudited management accounts which are subject to review and further adjustments, for example in the areas of pensions, investment property valuation and taxation.

S 

For more information, please contact:

Graeme Gilbert, Treasury Director, Sovereign Housing Association 07392130856 [e-mail]

Jane Carmichael, PR Specialist, Sovereign Housing Association

07825 054673 [e-mail]

Disclaimer The information contained herein (the "Trading Update") has been prepared by Sovereign Housing Association Limited (the "Parent") and its subsidiaries (the "Group"), including Sovereign Advances Ltd, Sovereign Housing Capital PLC (the "Issuers") and is for information purposes only.

The Trading Update should not be construed as an offer or solicitation to buy or sell any securities issued by the Parent, the Issuers or any other member of the Group, or any interest in any such securities, and nothing herein should be construed as a recommendation or advice to invest in any such securities.

Statements in the Trading Update, including those regarding possible or assumed future or other performance of the Group as a whole or any member of it, industry growth or other trend projections may constitute forward-looking statements and as such involve risks and uncertainties that may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, no assurance is given that such forward-looking statements will prove to have been correct. They speak only as at the date of the Trading Update and neither the Parent nor any other member of the Group undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, occurrence of unanticipated events or otherwise.

None of the Parent, any member of the Group or anyone else is under any obligation to update or keep current the information contained in the Trading Update. The information in the Trading Update is subject to verification, does not purport to be comprehensive, is provided as at the date of the Trading Update and is subject to change without notice.

No reliance should be placed on the information or any projections, targets, estimates or forecasts and nothing in the Trading Update is or should be relied on as a promise or representation as to the future. No statement in the Trading Update is intended to be an estimate or forecast. No representation or warranty, express or implied, is given by or on behalf of the Parent, any other member of the Group or any of their respective directors, officers, employees, advisers, agents or any other persons as to the accuracy or validity of the information or opinions contained in the Trading Update (and whether any information has been omitted from the Trading Update). The Trading Update does not constitute legal, tax, accounting or investment advice.

www.sovereign.org.uk/investors

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August 26, 2021 05:33 ET (09:33 GMT)