Sovereign Housing Capital Plc 2022 Q2 Trading Update 30 September 2021 (3816S)

TIDM56TE

RNS Number : 3816S

Sovereign Housing Capital Plc

15 November 2021

Sovereign Housing Association's Quarterly Performance Update covering the 6-month period to 30 September 2021

2022 Q2 Trading Update 30 September 2021

Sovereign is pleased to report good progress for the first half of the new 2021/22 financial year based on unaudited management accounts, although headwinds continue with specific risks around materials shortages and increased prices, along with longer lead times to fill vacancies.

Quarter 2 Performance Update

Our unaudited management accounts for the first half of 2021/22 show operating surplus and overall surplus declining marginally versus the last quarter (Q1 GBP37.6m and GBP23m vs Q2 GBP36.4m and GBP21.9m). 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, we are monitoring closely and expecting to be more in line with last year's 1,099 units.

   --    Homes in management 60,572 
   --    Turnover was GBP104.9m (Q1 21/22: GBP102.7m) +2% 
   --    Operating surplus was GBP36.4m (Q1 21/22: GBP37.6m) -3% 
   --    Overall surplus was GBP21.9m (Q1 21/22: GBP23m) -5% 

-- New homes completions YTD of 458 against a budget of 857, driven by the impact of the Covid variant, resource and material shortages

   --    Current development pipeline of 7,175 homes 
   --    121 sales completions (Q1 21/22: 116 sales) +4%. 

-- Highest ratings for Governance and Viability from the Regulator of Social Housing's stability check, G1/V1 status. We received confirmation of A+ outlook stable by S&P with the latest available report found on our

Investor page.    https://www.sovereign.org.uk/investors 

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, instantly available financing was GBP684m which equates to 50 months of forecast headroom. This continues to be high 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. 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        Forecast    Trend   Threshold   Headroom    Definition 
  principle 
 Liquidity         50                  18 months   32 months   18 months as a minimum, 
                                                                where available case 
                                                                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. 
                  ----------  ------  ----------  ----------  ---------------------------- 
                                                   23.5% 
 Market risk       16.5%               40%          GBP98.8m   Sales / turnover 
                  ----------  ------  ----------  ----------  ---------------------------- 
                                                               Operating surplus 
                                                                (excluding all development 
                                                   2.8%         and asset sales) 
   Performance     32.2%               30%          GBP9.7m     / turnover 
                  ----------  ------  ----------  ----------  ---------------------------- 
 Sustainability    272.5%              121%        152%        10% minimum level 
  - interest                                        GBP92m      of headroom against 
  cover                                                         all lenders' interest 
                    GBP166m             110%        163%        cover covenants 
                                                    GBP99m 
                                                                Tightest covenant 
                  ----------  ------  ----------  ----------  ---------------------------- 
 Sustainability    45.1%               71.25%      26%         10% minimum level 
  - gearing                                         GBP1202m    of headroom against 
                                                                all lenders' interest 
                    GBP2068m            75%         30%         cover covenants 
                                                    GBP1374m 
                                                                Tightest covenant 
                  ----------  ------  ----------  ----------  ---------------------------- 
 

Environmental, Social and Governance (ESG)

We look forward to publishing our inaugural Environmental, Social and Governance (ESG) report, which is at final draft stage and is going through its Governance review process. Once signed off we will publish this on our website, expected December 2021.

Corporate Affairs

Given the importance Sovereign is placing on decarbonisation, we have been keen to positively influence the national agenda by speaking at a number of key events. Sovereign was present at the Labour and Conservative Party Conferences. Tom Titherington, Chief Investment and Development Officer spoke on a panel at Labour Conference 'A net zero future: Leading the decarbonisation of the UK's homes' alongside the Shadow Housing Minister Mike Amesbury MP, Deputy Mayor of London Tom Copley, Chief Executive of the National Housing Federation Kate Henderson and the Chair of the G15, Geeta Nandy. Sovereign CEO Mark Washer represented Sovereign on the same panel at the Conservative Conference alongside Lord Callanan, Parliamentary Under Secretary of State at the Department for Business, Energy and Climate Change (BEIS).

On Tuesday 19 October, Sovereign's Chair hosted a dinner at One Great George Street, Westminster to discuss decarbonisation of social housing. Guests included Matt Harrison, the lead civil servant for the Decarbonisation of Social Housing at BEIS. He briefed the guests on the government's new Heat and Building's strategy.

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

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.

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November 15, 2021 05:14 ET (10:14 GMT)