OREANDA-NEWS. Current trading is in line with expectations for the nine months ended 31 December 2015.  We are ahead of budget by ?1.5m and are forecasting a year end surplus before tax of ?36m (2014/15 re-stated ?32m) with an operating margin of 29%, compared to 26% (re-stated) for year ended 31 March 2015.  The results reported are unaudited.

Operations

The Autumn Statement did not send shock waves through our sector as July's Emergency Budget did.  We will be following the Right to Buy pilots closely as for us the extension of Right to Buy represents a significant cash flow risk.

Operating performance remains strong and we believe we are on track to have the best KPI performance of any landlord in the UK with over 10,000 homes.  At 97.8% resident satisfaction is running ahead of our 96.4% target.  Our average re-let time is currently 10.1 days.  Current tenant arrears are 2.96%.

Mergers and Partnerships

Our talks with Viridian HA are continuing, and we are working towards signing Heads of Terms during March.  We will share more detail at that stage.

We were delighted during December to learn we have been selected as the preferred partner of Southwark and London Diocesan Housing Association (SLDHA). SLDHA has just under 300 rented homes, predominantly located in our core operating are of south London. They approached us looking for a larger partner to help them improve efficiency whilst maintaining and continuing to improve operating performance for residents.  Subject to approvals from the HCA, lenders and both Boards we anticipate SLDHA transferring their engagements into our principal HA, AmicusHorizon Ltd, during Summer 2016.

Investment

Having completed 526 homes during 2014/15, 2015/16 represents a lull in development spend as we procure contracts for the 2015-2018 programme.  We have development contracts in place for 265 homes across 10 sites. Within the next 12 months we anticipate expenditure on new build homes of ?69.8m. We plan to deliver 153 new homes between now and December 2016.

We currently have 14 Shared Ownership 1st tranche properties unsold, however all have been reserved.

It remains to be seen whether and how Government's push for new build development will manifest itself in our operating areas. We have had several s106 opportunities fall through in response to changes to the s106 regime.

Asset Disposals

Our strategic disposal of under-performing assets continues. These are mainly London street properties with high values and high maintenance costs, as well as poor sound and thermal insulation.  In the nine months to 31 December we have disposed of 13 such properties. We are, however, behind our target for the year. We expect to catch up with forecast in the final quarter.

Balance Sheet

We drew no additional debt facilities this quarter.  Our outstanding debt balance at the quarter end was ?688m.  We have a further ?30m available undrawn from a fully secured loan facility.  Our cash balance increased during the quarter from ?97m to ?105m.  We expect to end the financial year with similar levels of debt and cash.

Unaudited Financial Results

Unaudited financial results for the period to 31 December 2015 are below.

 

Nine months to 31 Dec 2015

 

?000
 

Group

Company
     

Turnover

129,113

128,869

Cost of sales

(6,321)

(6,321)

Operating expenditure

(82,463)

(81,940)

Operating surplus

40,329

40,608

Gain on disposal of property

8,962

8,662

Interest receivable

442

439

Interest and financing costs

(24,063)

(24,062)

Increase in investment property valuations

    

Surplus before taxation

25,670

25,647

 Property held as investment was valued at March 2015; we will carry out a further valuation at March 2016.  Figures include an estimate for properties expected to be impaired at year end and an increase in SHPS pension deficit charged in year following latest triennial valuation.

Next Update

We will share a trading statement for the full year in April 2016. We will publish audited financial statements for the year ending 31 March 2016 in July 2016.