TIDM51GC
RNS Number : 7864S
Affinity Sutton Capital Markets PLC
22 March 2016
AFFINITY SUTTON GROUP LIMITED
UPDATE FOR THE PERIOD ENDING 31 DECEMBER 2015
This statement is Affinity Sutton Group's Update covering the
period to 31 December 2015. As the first such update produced by
the Group it covers the first nine months of financial year
2015/2016 (FY 15/16). In future we will publish these updates
quarterly and will aim to produce them well within 15 working days
of the quarter end.
FY 15/16 has seen significant activity across the business
designed to improve our performance over the medium term. Financial
performance has exceeded budget expectations, in part as a result
of strong results in our "build for sale" activity. External
factors, such as the government's Autumn Statement and the Housing
and Planning Bill, continue to play a large part in the life of the
sector and inform the development of our strategy. Initiatives such
as the voluntary Right to Buy and Pay to Stay, as well as
de-regulation proposals, will have an impact in due course, but it
is far from clear at this stage precisely what that will be.
Financial Performance
The three quarters to December saw strong performance with a net
surplus of GBP99 million (2015: GBP80.7 million), GBP22 million
ahead of budget due largely to a combination of better than
forecast performance from build for sale, and interest rates
falling inside our budget assumptions. Strong cashflows from sales,
including return on investment from joint ventures, also improved
liquidity and reduced anticipated debt levels. The margin on stock
sold was 24.9% compared with a budget of 18.5%.
Our internal matrix of financial "golden rules" were all met at
the end of Quarter 3, (although operating costs per unit were 0.2%
above target).
Development of new homes has been strong with completions
totalling 715 by December (2015: 963). The reduction against
2014/15, which was a record year for the Group's development
activity, was largely a result of the end of the government's
2011/15 Affordable Homes Programme. Total investment was GBP120
million, slightly under expected spend levels. The supply chain, in
London and the South East particularly, has continued to prove
challenging, with significant increases in build costs, and a
challenging environment for the acquisition of land.
Liquidity remains strong, and was enhanced in the period by the
extension of existing revolving credit facilities (RCF) and the
completion of a GBP75 million RCF with a new lender to the Group.
At December 2015 total cash and undrawn facilities stood at GBP524
million.
Operational Performance
Customer satisfaction has continued to perform well throughout
the year and remained above the 80% target at 81% at the end of
December.
At the start of FY 15/16 the outsourced element of our day to
day repairs function was brought in house. Since then performance
has improved significantly with both voids and day to day repairs
performance now within target completion times and ahead of last
year's performance levels.
The period saw strong performance across the majority of
operational areas. In particular, arrears performance, customer
handling and repairs all compare well to FY 14/15. The one
exception in the period is that our occupancy rate is slightly
lower than target. We are working hard to address performance and
are actively letting as many empty properties as possible,
utilising tenant incentives and new marketing campaigns to increase
demand.
Future Foundations Programme
The Group's change programme, which incorporates a move to an
Enterprise Resource Planning (ERP) systems solution, has progressed
well over the year. In July 2015 we signed contracts with Hitachi
Solutions Ltd to act as Systems Integrator to work with us to
implement a Microsoft Dynamics environment. Following that we have
been working with the Hitachi team through high level and then
detailed design of the new system. We expect this stage to conclude
in the Summer, to be followed by the build stage. Phase 1 of the
ERP roll out is currently expected in the second half of 2017.
Beyond ERP, the Future Foundation's Programme has already
delivered changes in the year, including the successful rollout of
a new customer portal with enhanced functionality, and the launch
of "Two Way Street", a campaign aimed at residents to provide
clarity around their responsibilities.
Merger with Circle Housing Group Limited (Circle)
Our discussions with Circle continue and good progress is being
made to bring the two organisations together later this year.
Announcements have been made on the key top designate non executive
and executive positions.
Outlook
Our build for sale programme, which is centred on London and
weighted towards sales delivered through joint venture vehicles
with private developers and house builders, is expected to continue
to perform strongly as the year progresses, with both sales and
profits expected to exceed budget. We do not expect 2016's figures
to be materially affected by any potential downturn in the prime
London property market.
This year's shift to accounting under FRS102 will have an impact
on our year end accounts, although we expect at this stage the
effect to be most obvious in terms of disclosures on the balance
sheet, with negative and positive movements in the Income and
Expenditure Account expected largely to net off. In particular, the
rent reduction on 1 April 2016 introduced by government is a
trigger event for the purposes of an impairment review of housing
assets. That review is underway but is not expected at this stage
to have a material impact on the year end position.
Disclaimer
The information contained herein (the "Trading Update") has been
prepared by Affinity Sutton Group Limited (the "Parent") and its
subsidiaries (the "Group"), including Affinity Sutton Capital
Markets 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 profit 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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