TIDM51GC
RNS Number : 3184D
Affinity Sutton Capital Markets PLC
25 April 2017
QUARTERLY PERFORMANCE UPDATE
Clarion Housing Group's Quarterly Performance Update covering
the period to 31 March 2017
Clarion Housing Group announces the following update ahead of
its Annual Report for the year ended 31 March 2017, which will be
released in July. Overall strong financial and operational
performance was seen during the quarter. Good progress was made to
further integrate the legacy operations of Circle and Affinity
Sutton and move towards a simplified Clarion Housing Group legal
structure. Interim targets to address localised service level
issues at Circle raised in the HCA Regulatory Notice of December
2016 were all met or surpassed. The Group also took advantage of a
favourable market to increase the development pipeline
significantly, in line with the ambition to build 50,000 homes over
a decade.
We remain confident that we have the right plans in place to
deliver on our strategy.
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 and investment
property. Comparison to prior year performance represents a simple
addition of the two legacy parts of the Group.
Financial performance
The Group expects to report an annual net surplus (after
taxation) of GBP159 million (2016: GBP231 million).
The annual surplus is broadly in line with expectations, but is
down against 2015/16 because of a smaller sales programme and the
gain on the annual revaluation of investment properties which is
not yet available but will be reflected in the statutory
accounts.
Full year operating margin is expected at 36.0% for social
housing operations (2016: 36.8%), despite one off costs relating to
merger and elevated levels of cyclical repairs costs. The
management accounts report sales income of GBP104.7 million (2016:
GBP228.2 million), a reduction in volume in line with expectations.
Sales margin is reported as 33.8% (2016: 33.3%) which would be a
GBP36 million contribution towards overall results. Overall sales
performance remains better than expectations reflecting a
disciplined strategy helped by a market which has held up well,
despite the headwinds coming from the macro economic
environment.
The draft Statement of Financial Position shows Housing Fixed
Assets at 31 March of GBP6.5 billion (2016: GBP6.4 billion)
reflecting solid development performance, as detailed further in
this update.
Cash generation during the year was strong from both rental and
sales activity. This helped to partially offset the need to
increase debt to fund investment in new housing - drawn debt at 31
March was GBP3.28 billion (2016: GBP3.26 billion). Strong liquidity
(cash and undrawn facilities) was maintained during the year
finishing at 31 March at GBP976 million (2016: GBP1.09 billion)
whilst committed and fully secured loan facilities stood at GBP4.10
billion (2016: GBP4.18 billion).
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 the year.
Operational performance
Overall customer satisfaction ended the year at 76.4% (FY2016:
78.0%). This compares well within the sector but is below our long
term target of 80%. Our continued ability to maintain a good
service to customers is core to our strategy and we expect to
improve this position over time as we deal with the service
delivery issues identified in the HCA's December 2016 regulatory
notice.
Considerable progress has already been made here and despite the
far-reaching change across the Group during the year as a result of
the merger, operational performance saw improvement in some key
areas. Calls answered within target for example, rose to 86.0%
across the Group at the end of the year (2016: 77.4%) due in part
to a number of changes implemented at regional customer contact
centres. Repairs completed on time increased to 95.6% (2016:
77.4%), again driven by process changes. Occupancy rates remain
high at 98.4% for the year, boosted by a sustained marketing
campaign to re-let properties in parts of the North East, whilst
current tenant arrears are well within target at 3.52% (2016:
3.25%). We are also on track with the interim targets we set to
address service level issues which were the subject of the HCA
Regulatory Notice.
Sales volumes, particularly shared ownership, remain buoyant and
we have ended the year with total sales of 515, of which 419 were
shared ownership. A total of 164 units were held in stock at 31
March, about 75% of which have since been reserved, exchanged or
sold. At 34% sales margin is excellent and an indication of the
continued strength of the UK property market and a well executed
sales strategy.
During the quarter we started construction of 797 units bringing
the total starts since merger to 946 and the total for the year to
1,837. In the same period we completed 423 units bringing the total
for the year to 1,334. Internal approval was obtained for a further
1,720 homes during the quarter (GBP464 million gross investment
value) which increased the current pipeline to circa 8,000 homes.
This includes a recently announced strategic partnership with
Southwark Council which will deliver over 600 homes in the borough,
subject to exchange of contracts.
Customer satisfaction with new build products and services for
the year was high at 85% whilst average defects per unit for the
year was low at only 1.9.
Integration
Consolidation of the separate housing associations (HAs) in the
former Circle Housing Group has continued to progress well. Roddons
successfully transferred its engagements to Circle 33 on 1 February
2017 leaving just five of the original nine HAs. Good progress is
being made with the remaining HAs - we expect the next transfer to
be Mole Valley in a matter of weeks with Merton Priory Homes
following in early summer 2017.
Once consolidation of the former Circle HAs is complete we will
bring together Circle 33 and Affinity Sutton Homes to establish a
single housing association landlord under Clarion Housing Group. In
addition to legal and regulatory approvals, this will also involve
carrying out a resident consultation. Exact timescales are
dependent on the aforementioned consolidation, but we anticipate
that this single landlord will be in place by the end of 2017.
Investment Association Recommendations
We welcomed the recent publication by the Investment Association
of "Governance and Disclosure Guidelines for Housing Associations".
Whilst for some issuers these guidelines may prompt significant
change, the Group already either adheres to or has been working on
meeting all of the key guidelines detailed in the paper.
We already have the intention of publishing half-yearly accounts
with effect from the current financial year and we have recently
improved the functionality of the clarionhg.com investor pages with
an alerting service (please visit
https://www.clarionhg.com/finance-and-investors/investor-alerts/).
Nevertheless, where we can improve we will put in place plans to do
so, where it makes sense.
Board update
As of 1 April 2017, Neil Goulden has succeeded Sir Robin Young
as Chairman of Clarion Housing Group. Sir Robin stood down
following the successful completion of the merger between Affinity
Sutton and Circle Housing. Neil was previously Deputy Chairman of
Clarion Housing Group and prior to the merger was Chairman of
Affinity Sutton.
Please visit
https://otp.tools.investis.com/clients/uk/clarion_house_group/rns/regulatory-story.aspx?cid=2143&newsid=848093
for the full announcement.
Outlook
The recent government decision to call a General Election has
the immediate effect of increasing uncertainty in our operating
environment. It also prompts questions over the future of policy
announcements contained within the recent Housing White Paper. With
a robust financial profile the Group is well positioned to respond
to events as they unfold. Nevertheless we shall continue to
maintain close scrutiny of the potential for any impact to our
plans, the range of mitigating action available to us and the
trigger points at which to take action.
S
Disclaimer
The information contained herein (the "Trading Update") has been
prepared by Clarion Housing Group Limited (the "Parent") and its
subsidiaries (the "Group"), including Affinity Sutton Capital
Markets plc, Circle Anglia Social Housing Plc and Circle Anglia
Social Housing 2 Plc (the "Issuer") 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 Issuer 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 a pro t 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.clarionhg.com
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