TIDM20SY
RNS Number : 0194G
Optivo Finance PLC
20 November 2020
This is Optivo's unaudited trading update for the six months to
30 September 2020
"The first half of 2020/21 has seen us all adapting to new ways
of living, working and delivering essential services and I'm proud
of Optivo's contribution. To our residents, colleagues and business
partners - thank you.
The second half will be about consolidating what we've learned
and fine-tuning our business model for the future. Here at Optivo
we're well prepared with robust plans and strong finances.
We'll continue taking care of our residents, communities, staff
and homes while also building more much-needed new homes in
collaboration with our public and private sector strategic
partners."
Sarah Smith, Chief Financial Officer
17 November 2020
Highlights
-- Supporting thousands of residents with their wellbeing and into jobs and training
-- Housing operations, repairs & maintenance fully adjusted to new ways of working
-- All development sites are open and working safely through the second lockdown
-- High volume of first tranche sales enquiries and reservations, valuations are stable
-- New build pipeline now refocused on affordable rent and low cost home ownership
-- Building safety & energy efficiency costs reassessed and covered in financial plan
-- GBP300m debt raised and GBP150m deferred bond funding agreed;
GBP788m (31/3/20: GBP542m) liquidity now covers all currently
forecast funding needs until 2022
-- Moody's outlook resolved: credit rating changed from A2 (negative) to A3 (stable)
-- Sector-first ESG transparency report published at optivoinvestors.co.uk
-- G1/V1 regulatory judgement[1].
Key financial indicators
Income & expenditure (GBPm) FY 2019/20 H1 2019/20 H1 2020/21
audited unaudited unaudited
Total turnover 322 162 154
Non-sales turnover 291 148 146
Initial sales turnover 31 14 8
Cost of initial sales (25) (11) (7)
Operating costs (224) (107) (100)
Surplus on fixed asset property
sales 17 6 7
Operating surplus 90 50 54
Operating margin excluding sales 23% 28% 31%
Net interest costs (45) (23) (24)
Surplus after interest 45 27 30
Cash flows (GBPm) FY 2019/20 H1 2019/20 H1 2020/21
audited unaudited unaudited
Cash from operations 108 5 45
Investing activities (206) (15) (66)
Financing activities 155 (26) (18)
Net change in cash 57 (36) (39)
------------------------------------- ----------- ----------- -----------
Balance sheet (GBPm) 31.3.2020 30.9.2019 30.9.2020
audited unaudited unaudited
Total assets 3,400 3,247 3,409
Total debt [2] 1,485 1,366 1,492
Cash & cash equivalents 137 95 98
------------------------- ---------- ----------- -----------
Half-year earnings are in line with our revised budget, which we
re-profiled for coronavirus impacts. In March we exited the
loss-making Ealing Care Alliance PFI care and facilities management
service contract, our last care operations activity.
Net maintenance spend is significantly down on budget and this
has boosted our operating margin. But we expect to return to a
full-year operating margin similar to 2019/20. Since July we've
seen our teams work to catch up on the backlog of repairs and major
works delayed during lockdown. We intend to have caught up on the
majority of planned works by the end of the financial year subject
to any further restrictions that may arise from the second
'lockdown'.
Building safety remains a priority, and we're keeping up with
all new guidance and regulation. We've budgeted GBP133 million over
the next six years to assess and carry out remedial fire safety
works where needed.
We've stress tested our cash flows to ensure we can cover a
prolonged economic disruption. We have all the funds we need to
deliver our existing investment commitments and ample financial
flexibility to maintain our operations.
Operations & asset management
Key operational indicators [3] FY 2019/20 H1 2019/20 H1 2020/21
Void rental losses 1.6% 1.6% 1.7%
Overall rent arrears 4.3% 4.7% 4.5%
-------------------------------- ----------- ----------- -----------
Resident satisfaction FY 2019/20 H1 2019/20 H1 2020/21
Service 95% 96% 89%
Repairs 98% 97% 98%
Neighbourhoods 91% 91% 93%
----------------------- ----------- ----------- -----------
At the start of the coronavirus crisis nominations from our
Local Authority partners virtually ceased. General needs voids
performance is now showing sustained improvement and is in line
with budget. Voids in our independent living schemes remain high
and with the pandemic ongoing and lockdowns still a reality, these
will take time to work through.
We increased our provision for bad debts at the end of 2019/20.
We are supporting our residents through difficult adjustments in
household budgets and we now have over 8,600 residents on Universal
Credit - an increase of over 1,500 since April. While we've seen a
slight increase in arrears as anticipated this year, they are
stable at around 4.54% against 4.5% target at 30 September. By 30
October arrears had reduced to 4.44%.
We're working hard to regain the ground we lost on resident
satisfaction scores during the first lockdown and we're better
prepared now for the second lockdown. We've launched phase 2 of our
Residents' Resilience Project and in the last six weeks we've made
16,000 support calls to residents helping those who may be
furloughed, looking for a new job, or struggling with money. We've
also launched an online campaign, called 'We Can', to help our
residents findnew jobs, improve their CV and access vital
benefits.
Development & sales
Investment in new homes (GBPm) FY 2019/20 H1 2019/20 H1 2020/21
audited unaudited unaudited
Spent during the period 183 132 76
Future spend in contract 512 377 583
-------------------------------- ----------- ----------- -----------
New homes FY 2019/20 H1 2019/20 H1 2020/21
audited unaudited unaudited
Started in the period 1,500 652 193
Completed in the period 838 145 89
In contract at the reporting
date 2,558 2,734 2,828
Number of sites in contract 36 43 37
------------------------------ ----------- ----------- -----------
New homes available for sale 31.3.2020 30.9.2019 30.9.2020
audited unaudited unaudited
Open market sales 0 0 8
Shared ownership first tranche 279 222 258
Unsold over six months 83 170 208
-------------------------------- ---------- ----------- -----------
Interest in shared ownership remains strong, there is demand for
viewings and reservations of homes, although progress to completion
is taking longer than usual. Valuations remain high and we are
working hard to take advantage of the market while it's strong. But
with a second lockdown, the market not operating for a period and
delayed handovers, we're not expecting to hit the number of sales
budgeted this year.
We continue to monitor sales performance of all development
sites. We have converted a further 120 homes in our development
pipeline from open market sale to shared ownership. This leaves us
with just 288 (10%) open market sale homes from a total committed
programme of 2,828.
We've moved the focus of our new financial plan even further
towards grant-funded affordable homes.
Financing
Key metrics 31.3.2020 30.9.2019 30.9.2020
audited unaudited unaudited
Cash and cash equivalents (GBPm) 137 95 98
Available debt facilities (GBPm) 405 515 690
Interest rate profile:
% of net debt on fixed basis 85% 92% 94%
Weighted average duration 13 years 14 years 12 years
Weighted average debt cost 3.79% 3.94% 3.79%
Derivative mark-to-market GBP171m GBP172m GBP174m
---------------------------------- ----------- ----------- -----------
In April we increased our liquidity by GBP300 million through a
new GBP150 million 2035 public bond sale and GBP150 million
participation in the Bank of England's Covid Corporate Financing
Facility (CCFF).
In September we tapped our 2043 bond and agreed a sale of GBP100
million in notional amount, which will raise GBP150 million
proceeds in March 2022, to refinance the CCFF.
We have GBP100 million further 2035 retained bonds and GBP50
million 2043 retained bonds available for sale and welcome
enquiries for sale on a deferred settlement basis.
External ratings
31.3.2020 30.9.2019 30.9.2020
RSH governance judgement G1 G1 G1
RSH financial viability judgement V1 V1 V1
Moody's credit rating A2 A2 A3
(negative) (negative) (stable)
---------------------------------- ------------- ------------- -----------
In October Moody's updated our credit rating from A2 (negative
outlook) to A3 (stable outlook)[4] and again confirmed our rating
after their action to downgrade the UK sovereign credit rating.
Moody's identify our profitable core business, market position,
strong balance sheet and unencumbered asset position, financial
policies, stress testing, grant flexibility and liquidity as credit
strengths.
Calendar
Financial year end 31 March 2021
Full year trading update May 2021
Audited financial statements July 2021
Property security valuations for listed bonds by 31 July 2021
More information
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 public bonds listed on
the London Stock Exchange.
https://optivoinvestors.co.uk/
Tariq Kazi
Head of Treasury
tariq.kazi@optivo.org.uk
020 8036 2293
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.
[1] Regulator of Social Housing's in-depth assessment is in
progress and their updated judgement is due later this year.
[2] Excluding capitalised debt arrangement costs
[3] Figures based on general needs and housing for older people
(HOPS)
[4]
https://optivoinvestors.co.uk/getmedia/f1aa0550-e580-4efd-9277-5b0d32ff4016/credit-rating-oct-2020-published.pdf.aspx?ext=.pdf
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END
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