TIDM56TE
RNS Number : 5205U
Sovereign Housing Capital Plc
23 November 2023
Sovereign Network Group's Quarterly Performance Update covering
Q2 year 2023/24
Sovereign Housing Association trading as Sovereign Network Group
(SNG)
Sovereign Housing Association and Network Homes Ltd completed
their merger on 2(nd) October 2023, creating the sixth largest
housing association in the UK in terms of unit size with over
84,000 homes, and a core geographical focus in London and the South
of England. SNG will be one of the largest developers of social
tenure developments with an ambition to develop 25,000 homes over
the next 10 years.
Notwithstanding the merger completing after the 30(th)
September, we have set out standalone results of both Sovereign
Housing Association and Sovereign Network Homes as well as a
combined view of the consolidated Sovereign Network Group.
Quarter 2 Performance Update -period to 30 September 2023
Sovereign Housing Association has made a strong start to the
year with our unaudited management accounts for Q2 2023/24 showing
turnover, operating surplus and overall surplus higher than both Q1
2023/24 and Q2 last year. There has also remained strong with sales
increasing compared to Q1 and Q2 last year, with a small increase
in unit completions at 345 for this quarter compared to 335 in Q1
2023/24, though unit completions are down on Q2 2022/23 as we
experience a slowdown in development sites.
Sovereign
Standalone Q2 FY24 Q1 FY24 variance Q2 FY23 variance
GBPm GBPm GBPm GBPm GBPm
-------- -------- --------- ------ -------- --------- --------
Turnover 123.8 115.2 8.6 7.5% 113.3 10.5 9.2%
-------- -------- --------- ------ -------- --------- --------
Operating
Surplus 42.3 39.1 3.2 8.3% 36.2 6.1 16.9%
-------- -------- --------- ------ -------- --------- --------
Retained
Surplus 23.0 21.7 1.3 5.8% 22.2 0.7 3.3%
-------- -------- --------- ------ -------- --------- --------
units units units units units
-------- -------- --------- ------ -------- --------- --------
Sales 144 92 52 56.5% 147 (3) (2.0%)
-------- -------- --------- ------ -------- --------- --------
Unit Completions 345 335 10 3% 414 (69) (16.7%)
-------- -------- --------- ------ -------- --------- --------
Sovereign Network Homes has also made a strong start to the
year, with turnover, operating surplus and retained surplus all
higher than Q1 2023/24, and turnover and retained surplus higher
than Q2 2022/23. Sales has also continued to perform strongly
completing 41 homes in Q2 2023/24 compared to 20 in Q1 2023/24.
Sovereign Q2 FY
Network Homes 24 Q1 FY24 Variance Q2 FY23 Variance
------------------
GBPm GBPm GBPm % GBPm GBPm %
------ -------- -------- -------- -------- ------ -------
Turnover 51.9 51.4 0.5 1.0% 48.4 3.5 7.2%
------ -------- -------- -------- -------- ------ -------
Operating
Surplus 9.0 7.4 1.6 20.9% 9.1 (0.1) (1.2%)
------ -------- -------- -------- -------- ------ -------
Retained
Surplus 2.3 0.7 1.7 252.0% 1.8 0.5 30.2%
------ -------- -------- -------- -------- ------ -------
Units Units Units Units Units
------ -------- -------- -------- -------- ------ -------
Sales 41 20 21.0 105.0% 43 (2.0) (4.7%)
------ -------- -------- -------- -------- ------ -------
Unit Completions 75 199 (124.0) (62.3%) 50 25.0 50.0%
------ -------- -------- -------- -------- ------ -------
The table below reflects what Sovereign Network Group's historic
combined position would have looked like and provides a simplified
overview of the merged group whereby we have added both sets of
data together. As we continue our integration journey, alignment of
accounting policies and consolidation reporting will be a key
focus.
Consolidated Sovereign Network Group
Q2 FY
24 Q1 FY24 Variance Q2 FY23 Variance
GBPm GBPm GBPm % GBPm GBPm %
------ -------- -------- -------- -------- ------- -------
Turnover 175.7 166.6 9.1 5.5% 161.7 14.0 8.6%
Operating
Surplus 51.3 46.5 4.8 10.3% 45.3 6.0 13.2%
Retained
Surplus 25.3 22.4 2.9 13.1% 24.0 1.3 5.3%
Units Units Units Units Units
Sales 185 112 73.0 65.2% 190 (5.0) (2.6%)
Unit Completions 420 534 (114.0) (21.3%) 464 (44.0) (9.5%)
------ -------- -------- -------- -------- ------- -------
Treasury and Golden Rules
Sovereign and Network have historically operated with a set of
financial Golden Rules that underpin treasury and risk management
activity. SNG are currently aligning Golden Rules following the
merger and will report on these new measures in Q3 2023/24,
following Board approval. These are not expected to materially
differ from what was previously reported by Sovereign and Network.
Definitions are currently being aligned and thresholds will reflect
the risk appetite of the new group.
As at 30(th) September 2023, for SNG, total long-term facilities
were GBP4,129 million, of which GBP3,474 million were drawn,
providing GBP654m of available liquidity facilities and cash. Cash
equivalent balances totalled GBP85.8 million. The Treasury team is
currently finalising new facilities of GBP135m following successful
completion of the merger consent process, further improving our
available liquidity position. There continues to be significant
headroom against Interest Cover and Gearing covenants across all
SNG facilities. Additional headroom has been created where some of
our previous tightest covenants were amended as part of the merger
consent process with lenders reflecting a more market standard
covenant position.
Moody's upgraded SNG outlook from 'negative' to stable' on the
27(th) October 2023, reflecting the change in the UK Sovereign
outlook. SNG now has an A3 (Stable) rating with Moody's. Read the
full Moody's report [pdf, 1MB]
S&P have recently published their annual rating review for
SNG, downgrading our credit rating from A+ 'negative' outlook to A
'negative' outlook. This rating downgrade reflects a weakening of
the financial metrics of SNG due to increased spend in our existing
homes and development pipeline. Ultimately, this is driven by SNG
corporate strategy to deliver social purpose and really make a
difference for our existing and new customers by investing in our
existing customers homes while delivering our strategy towards net
zero and developing new social homes which are critically needed
across our geographies. The investment in existing stock and new
stock should also have the benefit of reducing costs for responsive
repairs long term. Read the full S&P report [pdf, 265KB]
ESG
Combined ESG reporting is still a work in progress. Sovereign
Housing Association continues to make good progress improving
existing core stock moving from 71.2% EPC C at June 2023 to 71.7%
as at September 2023. 24.9% of our core stock is at EPC B or better
with an overall average RdSAP score of 72.6. Sovereign Network
Homes has c. 67% of core stock at EPC C or above, with 25% at EPC B
or better. SNG has c. 70% of combined core stock at EPC C or
better.
We have entered contracts with 3 contractors to support our
retrofit journey, with work expected to begin in Feb 2024 targeting
1,000 properties in the first year and we expect to make strong
progress on our journey towards net zero.
We have both published our standalone annual ESG reports, which
are available on our Investor webpage and also our Streamlined
Energy and Carbon Reporting (SECR) and Carbon balance sheet report
for 2022/23, with Sovereign Housing Association Total Carbon
Emissions of 11,224.95 tCO2e . Read the full report - Streamlined
Energy and Carbon Reporting (SECR) [pdf, 4MB], and Read the Carbon
Balance Sheet for the 2022-23 year [PDF, 3MB].
Corporate Affairs
SNG representatives attended the National Housing Federation
(NHF) Summit in September and CEO Mark Washer spoke on a panel on
regeneration. Tom Titherington (Chief Investment and Development
Officer) hosted a dinner for developers and other stakeholders at
the Chartered Institute of Housing (CIH) South West conference in
Bristol. Anup Dholakia (Director of Corporate Finance) spoke at the
NHF's Treasury in Housing conference. Patrick Wallace (Finance
Director - Operations) and Nadia Dowling (Head of Digital Delivery)
both spoke at the Social Housing Strategy Forum and James Mclarin
(Head of External Affairs) spoke at the Inside Housing
communications conference.
Ahead of the two main party conferences in October, Nicole Sharp
(Chief Customer Officer) met with candidates and councillors at the
Liberal Democrat Party Conference and Jim Dyer (Director of Built
Environment) spoke on a panel. Maria Miller, MP for Basingstoke,
was briefed in Sovereign House on the proposed regeneration scheme
at Basingstoke West.
ENDS
For more information, please contact:
Graeme Gilbert, Treasury Director, Sovereign Housing Association
07392130856
Charles Pitt, Corporate Affairs Director, Sovereign Housing
Association 07887524378
Disclaimer The information contained herein (the "Trading
Update") has been prepared by Sovereign Housing Association Limited
trading as Sovereign Network Group (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.
https://www.sovereign.org.uk/investors
www.sng.org.uk/working-with-us/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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END
IR FEFFWDEDSESF
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