Affinity Sutton Capital Markets PLC Update for the period ending 30 June 2016 (1655F)

TIDM51GC

RNS Number : 1655F

Affinity Sutton Capital Markets PLC

25 July 2016

AFFINITY SUTTON GROUP LIMITED

UPDATE FOR THE PERIOD ENDING 30 JUNE 2016

Financial Performance

The management accounts for Quarter 1 (Q1) 2016/17 report saw strong performance with a net surplus of GBP33.7 million (2015/16: GBP33.9 million), this was GBP8 million ahead of budget due largely to a better than forecast performance from build for sale and interest rates continuing to fall inside our budget assumptions. The Statement of Financial Position (formerly the Balance Sheet) showed Housing Fixed Assets of GBP2.8 billion, broadly unchanged from 31 March 2016.

Strong cashflows totalling GBP18.3 million were generated from sales, including returns from investments from joint ventures. This delivered a margin on stock sold of 40% compared with a budget of 19%, and contributed GBP7m (21%) of the net surplus.

Liquidity levels (cash and undrawn facilities) remained largely unchanged during the quarter as a result of strong cashflow. At the end of June liquidity stood at GBP596 million. Total facilities were GBP1.74 billion.

At the end of Q1 following the referendum result in favour of the UK leaving the EU, swap rates fell by around 50 bps. This caused adverse mark-to-market movements on our interest rate swaps. These swaps are fully collateralised by property assets and at 30 June 2016 there was GBP67 million of headroom covering these positions, providing a significant buffer should swap rates fall any further.

Our internal matrix of financial "Golden Rules" were all met at the end of Q1.

Operational Performance

Completion of new homes totalled 199 by June 16 (2016: 180). Total investment was GBP24 million, slightly under expected spend levels.

Operational performance remains good with arrears and complaints handling better than our internal targets. The internal repairs companies continue to perform well with a repairs satisfaction score of 91.2% in May, the highest satisfaction index reported to date and considerably above the 85% target. The occupancy rate is marginally below target but remains a key focus for the operational lettings team.

Future Foundations Programme

The Group's change programme, which incorporates a move to an Enterprise Resource Planning (ERP) systems solution, continued to progress well during Q1. At the end of the Quarter we reached a key milestone in the programme with the completion of the detailed design stage of the new system. We now move on to the next stage when the system will be built. We remain on track for the roll-out of Phase 1 during the second half of 2017.

Merger with Circle Housing Group Limited (Circle)

Progress on our merger with Circle continues to be strong and positive. All key senior appointments have been filled and work continues to complete the appointment of staff into new management structures. The Shadow Board and Executive Team meet monthly and have agreed all the key governance arrangements in anticipation of the merger concluding in the Autumn. Over the next quarter we hope to be able to conclude negotiations to obtain consents from registration authorities, the regulator and funders. Immediate priorities post legal completion of the merger will be to conclude the simplification of the housing association structure across the enlarged group.

Outlook and the result of the referendum on EU Membership

On 23 June 2016 the country voted to leave the EU. This has led to economic and political instability and uncertainty. The most immediate impact for the Group was on the mark-to-market of its interest rate swaps referred to above. Beyond that we will watch developments over the coming weeks and months, and develop contingency plans to address that volatility. We will continue to monitor developments carefully in two areas in particular: the property market and the debt capital markets. Overall however, Affinity Sutton's strong financial position, including liquidity, means that it is well placed whatever the future economic environment might be.

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 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.

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END

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