REG - Sovereign Housing - Q4 Investor Statement

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13/06/2024 12:00

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RNS Number : 3356S  Sovereign Housing Capital Plc  13 June 2024

Sovereign Network Group's Quarterly Performance Update covering unaudited Q4
results for the financial year 2023/24

Sovereign Housing Association trading as Sovereign Network Group (SNG)

Sovereign Network Group is the sixth largest housing association in the UK in
terms of unit size with over 84,000 homes, with a core geographical focus in
the South of England and London.  SNG continues to be one of the largest
developers of social tenure developments with an ambition to develop 25,000
homes over the next 10 years.

Quarter 4 Performance Update - period to 31 March 2024

 

Sovereign Network Group's unaudited underlying financial performance continued
to see growth in surplus vs prior year excluding the impact of one-off
activities or accounting adjustments.  Core lettings turnover improved year
on year, however Q4 FY24 turnover declined compared to Q4 FY23 as a result of
a one-off development transaction that occurred in Q4 FY23.

Q4 FY24 sales are in line with the overall run rate for the year, but a
decrease from Q3 FY24 where there was an exceptional increase in sales.
 Handovers saw 62 additional units compared to Q3 FY24.

The combined development programme has continued at pace with 572 handovers in
the quarter.  Sales of 176 units bolstered overall performance. In comparison
to this quarter last financial year SNG has sold an additional 41 units and
delivered 11 additional handovers.

In total for FY24, SNG delivered 2,015 new homes including schemes at Cleve
Wood (Thornbury), Dabbs Hill (LB Ealing) and Horlicks Quarter (Slough).

 

Treasury and Golden Rules

The SNG Board agreed a set of Golden Rules that support the strategic goals of
the business, protect long-term financial strength as well as a single 'A'
investment grade credit rating.  The Golden Rules focus on 6 key measures:

·    Interest cover and Gearing are the primary two financial covenants in
our loan agreements. The Board has set a prudent level of headroom against
these covenants, ensuring the long-term financial resilience and viability of
the business.

·    Ensuring sufficient liquidity is in place to meet business
requirements, balancing between minimising the cost of carry and holding a
prudent level of liquidity.

·    EBITDA MRI interest cover has been included as a Golden Rule to
manage expenditure on existing stock at a level that is sustainable whilst
delivering for our customers. SNG have no EBITDA MRI-linked covenants.

·    Operating margin has been set in line with our aspirational corporate
strategy to ensure we continue delivering value for our customers and remain
financially resilient.

·    Sales as a percentage of turnover to limit reliance on sales income,
with a large majority of revenue being derived from core cashflow.

The below table sets out the Golden rules based at SNG combined level.

 Category                           Golden rule                Threshold   31 Mar 2024
 Cashflow                           Liquidity policy           18 months+  £902m cash and available undrawn facilities equating to 20 months liquidity
                                                                           following the £400m bond issuance in January 2024. Documentation underway to
                                                                           extend a number of revolving credit facilities which would extend this
                                                                           further.
                                    EBITDA-MRI Interest cover  >100%       130.3%
 Statement of Comprehensive Income  Operating Margin           >23%        20.2%.  The Board set a minimum target above our current operating margin at
                                                                           23% to hold the business to account to deliver efficiency savings through
                                                                           integration and transformation. This is in line with our expectation, and we
                                                                           expect to meet this Golden Rule in the future as we progress through
                                                                           integration and transformation.
                                    Sales as a % of Turnover   <35%        14.4%
 Covenants                          Interest cover             >145%       234%
                                    Gearing                    <60%        49%

 

As at 31st March 2024, for SNG, total long-term facilities were £4,517
million, of which £3,616 million was drawn, providing £902m of available
liquidity facilities, in addition to cash and cash equivalents of c. £60m.
There continues to be significant headroom against Interest Cover and Gearing
covenants across all SNG facilities.

SNG has an A3 (Outlook: Stable) rating with Moody's.

SNG has an A (Outlook: Negative) with S&P.

SNH has an A (Outlook: Negative) with Fitch.

Customer Services

 

SNG launched 24/7 View My Documents on its self-serve portal for its customer
to allow them to download rent letters and service charge statements. Before
this, customers had to email or call SNG if they wanted a copy.

SNG also partnered with Citizens Advice Opens to run a free Energy Outreach
Programme. This provided customers with impartial advice on how to improve
energy efficiency, save money and access the very best energy deals.

409 individual household assessments were completed through the programme,
which led to SNG delivering:

·    310 household focused energy packs

·    163 warm packs

·    85 referrals for ongoing support from either our SNG's Customer
Income Advice (CIA), Debt Advice or Employment Support services

·    101 referrals to the Pocket Power switching service

 

Communities and Sustainability

 

Over the last year, SNG have generated £99.4m of social value through
activity across Community Investment and the wider organisation. We have
integrated measuring the wellbeing impact of damp and mould repairs, accessing
home insurance, our Customer Income Advice service and tenancy sustainment
activity with Your Own Place. We have significantly exceeded our target of
£75m across the organisation.

SNG continues to make good progress existing core stock with an overall
average RdSAP score of 72.82% and EPC C rating of 73.36%.

 

Corporate Affairs

 

SNG has continued to actively engage with MPs, Parliamentary Candidates, local
government leaders and policy influencers from all major parties with a focus
on securing sustainable long-term rent settlements, as well as, promoting the
development of good, affordable homes through planning reform and access to
land. We are actively engaged in sector partnerships and commissioned recently
published research on behalf of a group of housing associations in the South
East that sets out the scale of the affordable housing deficit in the region.

SNG has formally responded to the Government's consultations on regulation of
the sector including Awaab's Law, the Consumer Standards, and the Competence
and Conduct Standard. We have also responded to consultations related to
brownfield planning, street votes, allocations and ASB, and the Future Homes
Standard.

ENDS

For more information, please contact:
Anup Dholakia, Treasury Director, Sovereign Network Group 07920205992

Charles Pitt, Corporate Affairs Director, Sovereign Network Group

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.

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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