TIDM51GC
RNS Number : 0103V
Affinity Sutton Capital Markets PLC
24 January 2017
QUARTERLY PERFORMANCE UPDATE
Following successful completion of the merger between Affinity
Sutton and Circle Housing Group to become Clarion Housing Group
this statement is Clarion Housing Group's Quarterly Performance
Update covering the period to 31 December 2016.
Integration
During the Quarter the programme of consolidation of separate
housing associations in the former Circle Housing Group continued.
Wherry and Mercian successfully transferred their engagements to
Circle 33 on 30 September 2016, and on 1 December 2016 South Anglia
transferred into Circle 33. We expect the next transfer to be
Roddons in February, with the remaining consolidation to take place
during 2017.
The Board and its Committees were operating in a shadow capacity
from the Spring of 2016. The Board and each of its Committees have
met in the two months since merger as Clarion Housing Group. Where
relevant, decisions were ratified at the point of merger. Having
made good progress populating the new staffing structure prior to
completion we were operational on day one. Board, management and
staff are now focused on fully integrating the legacy
organisations.
Q3 Financial performance
Note: In this section comparison to actual and budget
performance represents a simple addition of the two legacy parts of
the Group.
STATEMENT OF COMPREHENSIVE INCOME
The Q3 management accounts show a year to date net surplus of
GBP141.1million (2015/16: GBP142.4m). This is ahead of budget,
largely due to an earlier than planned asset disposal.
-- Social housing operations remain financially strong with an
overall operating margin (excluding development for sale) of 39.8%
(2015/16: 38.8%), broadly in line with budget.
-- Sales (excluding returns from joint ventures) - year to date
income of GBP49.2million (2015/16: GBP79.1 million) has been
generated. Sales volumes are below budgeted level, with units sold
to date at 343, which compares to a budget of 492. We have
experienced delays in construction with a number of schemes which
have slipped into the final quarter. However, sales margin remains
strong with a year to date position of 39.2%, well ahead of the
budget of 22.6%. Sales margin contributed GBP19.3m (8.3%) of the
operating surplus.
STATEMENT OF FINANCIAL POSITION
Housing Fixed Assets now stand at GBP6.5 billion, a GBP0.1
billion increase from 31 March 2016 reflecting an increase in
housing stock.
Liquidity levels (cash and undrawn facilities) remain strong
despite some scheduled facility amortisation. At the end of
December liquidity stood at GBP1.02 billion; total facilities were
GBP4.11 billion.
FINANCIAL "GOLDEN RULES"
Our internal matrix of financial "Golden Rules", which are
designed to create a framework for financial planning and
monitoring were all met at the end of Q3.
Operational performance and Regulatory Notice
While the main subsidiaries Affinity Sutton Homes and Circle 33
continue to operate as legally separate landlords, we are measuring
operational performance of each individually, as well as across the
Group. Overall, operational performance remains good within
Affinity Sutton, with customer satisfaction and repairs
satisfaction all above target. The percentage of repairs completed
on time is also strong across both organisations, with Group
performance above target at 97.1%. Group arrears performance is
good at 3.81% whilst occupancy rates remain high, at 98.4%.
Localised operational performance issues at Circle Housing Old
Ford were raised in the Homes and Communities Agency's (HCA)
Regulatory Notice, issued on 21 December. We have responded to the
HCA and are confident that we have the right balance of
determination, skills and experience to address these issues. Some
of the improvements required will take time, but we are already
putting a programme in place to transform the way services are
delivered. This has already yielded some early improvements - for
example we are now answering calls in our contact centre more
quickly. Over the coming months we will work closely with
residents, the HCA and other stakeholders to ensure our services
and performance, and that of our contractors, meet the expectations
our residents can reasonably expect and the standards set by the
regulator. Sustained improvement will require investment but this
will not have a material financial impact on the organisation.
Land acquisitions and development
Our pipeline of homes approved or under development has
increased significantly since October and now stands at circa
6,500. Significant schemes include a site that will deliver 300
homes in Conningbrook, Ashford where we have exchanged contracts
and an 18-acre site in Cambridgeshire to develop 159 homes. A build
contract was also awarded to Newby for circa 260 units to be
developed in York city centre, subject to a planning deal due to
complete by the end of Q4.
Moody's rating and Governance and Viability gradings
As we anticipated following completion of the merger, Moody's
downgraded the long-term issuer rating of Clarion Housing Group to
A2 with a negative outlook in December, in line with the rating of
Circle Housing prior to merger. Moody's notes, however, that
Affinity Sutton had a history of successful mergers. Moody's also
notes our credit strengths, which include our sizable balance
sheet, strong operating margins, good liquidity position supported
by strong unencumbered assets and robust treasury policy, and a
strong regulatory framework. The negative outlook reflects the
sector wide risks on the housing association sector following the
UK vote to leave the EU.
On 15 December 2016 the HCA issued us with a G2 governance
rating and a V1 viability rating. This was as we anticipated and
reflects the HCA's new regulatory approach which stipulates that
interim judgements on newly merged providers will be based on a
starting assumption that the lower of the two existing grades will
apply. The rating was not changed by the later issue of the
Regulatory Notice. We continue to work towards a G1 grade.
Government's Autumn Statement announcement
We were pleased with the tone adopted by the government in
November's Autumn Statement, particularly around the decision to be
more flexible in the tenure mix that housing associations can
deliver using grant. Grant funding now totalling GBP4.7 billion, an
increase of GBP1.4 billion, will be available to build homes across
affordable rent, shared ownership and Rent to Buy tenures.
This information is provided by RNS
The company news service from the London Stock Exchange
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