TIDM56TE
RNS Number : 8195W
Sovereign Housing Capital Plc
22 August 2022
Sovereign Housing Association's Quarterly Performance Update
covering Q1 year 2022/23
Quarter 1 Performance Update
Our unaudited management accounts for Q1 2022/23 show operating
surplus and overall surplus in-line with Q1 last year and a step-up
from last quarter. Ongoing inflation impacts continue to create
headwinds throughout our supply chain and show no sign of
abating.
Q1 FY23 Q4 FY22 Var. Q1 FY22 Var.
GBPm GBPm GBPm % GBPm GBPm %
================== ======= ======= ===== ====== ======= ==== ======
Turnover 113.8 109.0 4.8 4.4 102.7 11.1 10.8
======= ======= ===== ====== ======= ==== ======
Operating Surplus 37.9 26.2 11.7 44.7 37.6 0.3 0.8
======= ======= ===== ====== ======= ==== ======
Retained Surplus 24.2 12.4 11.8 95.2 23.0 1.2 5.2
======= ======= ===== ====== ======= ==== ======
# # # % # #%
======= ======= ===== ====== ======= ==== =====
Sales 152 141 11 7.8 116 36 31.0
======= ======= ===== ====== ======= ==== ======
Unit Completions 125 445 (320) (71.9) 166 (41) (24.7)
======= ======= ===== ====== ======= ==== ======
The war in Ukraine and ongoing cost of living challenge is
having a broad range of impacts across the organisation, ranging
from the obvious increased costs of materials to continued lower
Customer Satisfaction scores reflecting anxiety felt by our
customers. Despite these challenges we have seen favourable results
from both our Sales and our Staircasing activities, suggesting the
housing market remains strong.
The development programme has continued to be challenging due
primarily to resource and material availability issues impacting
the whole of the building sector, however we were able to add an
additional 125 units during the past quarter.
Treasury and Golden Rules
We held a non-deal roadshow with a number of our Investors in
Edinburgh and London providing an update on our business. This
presentation is available on our website for any investors that
were unable to attend. As part of this presentation, we informed
our Investors that we have created a Sustainable Finance Framework
Sustainable Finance Framework for any future debt issuances, with a
Second Party Opinion provided by Sustainalytics.
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 GBP453m
which equates to 23 months of forecast headroom and we are in
discussions about extending some of these existing facilities.
Considering the ongoing cashflow requirements included in the
latest business plan we also expect to need extra financing in
2022/23 to fund development spend and maintain liquidity in line
with our Golden Rule.
There is significant headroom against our Interest Cover and
Gearing Golden Rules, creating protection against our underlying
debt facility covenants. However we have fallen below our internal
Operating margin Golden rule, which is set at the upper quartile of
the Housing Association sector. This is driven by the combination
of continued cost pressures the business is experiencing across our
property services and increased spend in our Transformation
programme which will support the long term performance of the
business and recovery of operating margin above 30%.
Protection Forecast Trend Threshold Headroom Definition
principle
Liquidity 23 18 months 5 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 16.7% 40% 23.3% Sales / turnover
--------- ------ ---------- --------- ----------------------------
Operating surplus
(excluding all development
and asset sales)
/ turnover on rolling
Performance 29.7% 30% -0.3% three year basis
--------- ------ ---------- --------- ----------------------------
10% minimum level
of headroom against
121% 140% all lenders' interest
Sustainability cover covenants
- interest
cover 261.1% 110% 151% Tightest covenant
--------- ------ ---------- --------- ----------------------------
5% minimum headroom
against all lenders'
71.25% 26% gearing covenants
Sustainability
- gearing 45.5% 75% 30% Tightest covenant
--------- ------ ---------- --------- ----------------------------
Corporate Affairs
CIH Southeast
Mark Washer gave a keynote address at CIH Southeast in Brighton
on asset management and development alongside Osama Bhutta,
Director of Communications, Policy and Campaigns at Shelter and
Jessica Levy, Director of Communications at the Federation of
Master Builders.
In the evening of 11 May Sovereign hosted a dinner for over 30
developers, land agents, sector leaders and members of Sovereign's
SLG.
Research launch - 21 May 2022, Westminster
On 21 May Sovereign launched a new research report Retrofit for
the future: tenant attitudes to decarbonising social housing in
Westminster. This qualitative research examines customers' current
views on the environment and climate change, and how these might
influence how they engage with our decarbonisation strategy.
Lord Greenhalgh, Minister of State at the Department for
Levelling-Up, Housing and Communities spoke at the launch, along
with Mark Washer and Paul Massara. They were joined by guests from
Sovereign, including customers who took part in the research, civil
servants, academics and others from the sector.
NHF independent panel launched
The National Housing Federation has appointed an independent
panel to look into quality in housing association homes, chaired by
Helen Baker, chair of Shelter. Mark Washer will sit on the Quality
and Trust Steering group that is overseeing the work.
The panel has been set up in response to stories, especially on
ITN, focusing on poor quality homes in housing associations.
You can find our more here .
S
For more information, please contact:
Graeme Gilbert, Treasury Director, Sovereign Housing Association
07392130856 Graeme.Gilbert@Sovereign.org.uk
Charles Pitt, Corporate Affairs Director, Sovereign Housing
Association
07887524378 Charles.Pitt@Sovereign.org.uk
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
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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
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information, future developments, occurrence of unanticipated
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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
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is subject to change without notice.
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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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