Investor relations

A man signing some paperworkOptivo brings together the best of Viridian Housing and AmicusHorizon.

We’re building a new business which will be known for:
  • Keeping customers at the heart of everything we do
  • Exceptional customer service
  • Building communities
  • Social impact as well as bricks and mortar
  • Meeting housing need at all levels
  • Influencing housing policy
  • A great employee offer
  • Innovation and efficiency.
As a new organisation we’ll respond positively to the challenges of the housing crisis, building more new homes than we could as separate organisations.

In March 2018 Optivo launched its second bond issue of £250 million into the capital markets. We briefed investors ahead of the bond issue. To access the presentation, please read our terms and conditions here.

Through efficiency we’ll create more financial capacity to fulfil our social purpose and make a difference to our customers. From 2021 we aim to build 1,500 high quality new homes each year. This will make us one of the largest developers in the housing association sector.
 

Efficiency


It’s a time of unprecedented change for housing associations and their residents, and we’re responding positively to this challenge.

We’re driving efficiency as measured through improvements to our operating margin and reducing unit costs. We’re committed to delivering value for money across all parts of our business, and have identified a number of themes:  
  • Embedding a culture of cost awareness, efficiency and value
  • Driving out waste from our processes
  • Continuing to make the most of our assets 
  • Using our scale to drive value from the services we buy from others
  • Measuring our costs and benchmarking them using independent evaluation.
Viridian and AmicusHorizon have a good track record of keeping rent arrears low and rent loss through empty homes to a minimum. We’ll build on this success as Optivo. 

Customer expectations are changing, and we need to respond with  greater flexibility, speed, and efficiency. We’ll do this  through innovation offering more and better services online, and by using technology to automate processes. We’ll work with our residents and staff to offer exceptional services, efficiently.

Moody's Credit Rating

Moody’s Credit Update – March 2018

On 1 March Moody’s affirmed Optivo’s A2 Issuer rating with a stable outlook, and assigned an A2 rating to Optivo’s proposed issuance of £250m senior secured bonds, also with a stable outlook, through finance vehicle Optivo Finance plc.

Moody’s commented:
“Optivo’s A2 issuer rating is supported by robust profitability, sufficient interest coverage ratios, and a strong liquidity position. The rating also takes into account a moderate, but rising level of debt, an expected increase in development activity, and integration risk from the recent merger.”

Moody’s noted constraints on the rating as Optivo’s gearing ratio will rise from its current 41% to 50% by 2022. Also, whilst 60% of units developed will be for social rented or key worker accommodation, the remaining 40% will be for outright sale or shared ownership, exposing Optivo to the cyclical housing market.

However:
“Optivo’s strong liquidity position mitigates the risk of cash shortfall which could stem from the development or sales programme. Projected immediately available liquidity for FY2018 is more than sufficient to cover the next two years of forecast net cash need.”

Moody’s issued a full update to Optivo’s credit analysis on 6 March.

Find out more about Moody’s Credit Opinion here.


Moody’s Credit Rating Update - September 2017

On 26 September 2017 Moody’s downgraded the 40 rated UK housing associations by one notch, with the outlook changed from negative to stable in each case. Optivo’s credit rating changed to A2 from A1.

This action followed the recent downgrade of the UK’s sovereign rating from Aa1 with negative outlook to Aa2 with stable outlook. The rationale for the downgrade is the negative impact of the decision to leave the EU Single Market and customs union on the country’s economic growth prospects. This effect impacts in turn on the UK’s credit profile and exacerbates pressure on fiscal consolidation.

The follow-on downgrade of housing association credit ratings reflects the close economic, financial and institutional linkages between the sovereign and sub-sovereign sectors.

Moody's Credit Update - June 2017

Moody’s assigned an A1 rating to Optivo following the merger of AmicusHorizon and Viridian Housing, withdrawing the A2 rating of AmicusHorizon Limited.

Optivo is now the parent company for AmicusHorizon Finance PLC, the issuing vehicle for the 2012 bond issuance, now also rated A1.

In March 2017 Moody’s placed the AmicusHorizon rating under review for upgrade ahead of the anticipated merger with Viridian Housing.
 

On issuing Optivo’s A1 rating Moody’s stated: 

Optivo’s rating is supported by debt metrics and interest coverage ratios aligned with A1 peers. Optivo benefits from Viridian’s historically low level of indebtedness, with the new entity expected to register 42% debt to assets at cost and 3.7x debt to revenue in FYE2018.

Optivo also benefits from a historic turnaround in AmicusHorizon’s profitability, with operating margins strengthening from 21% in FY2013 to 29% in FY2016, driving a material improvement in Social Housing Letting Interest Coverage (SHLIC) from 0.9x to 1.4x in the same period."


Moody’s expect these improvements to continue, demonstrated by forecasts of 27-29% operating margin, and SHLIC of 1.6x over the next two years.

Cash Flow Volatility Interest Cover (CVIC) is also expected to remain in-line with A1 peers, forecast at 1.5x in FY2018, rising to over 2.0x in the following year.


Moody’s also stated:

The rating action also takes into account the merger’s credit challenges, which include an increase in development plans in the medium term.

The increase in net capex is forecast to weaken the merged entity’s liquidity coverage metric to 1x as of FY2019. Mitigating this is the merged entity’s large proportion of unencumbered assets, equivalent to an estimated £1.1 billion in borrowing capacity.

This leaves ample borrowing headroom, even after accounting for the £275 million of additional debt that management plans to take on between FY2018 and FY2021. Moreover, Optivo’s treasury policies are clear and robust, which will likely ensure adequate liquidity levels are maintained
."
 

Moody’s summarise Optivo’s credit strengths as:

  • Strong proportion of low-risk social housing letting with improved profitability
  • Manageable debt levels, appropriate interest coverage ratios
  • Strong regulatory framework
and credit challenges as:
  • Larger development programme will increase exposure to sales risk and challenge the liquidity metric
  • Implementation and strategic risks surrounding merger
  • Government policy changes make operating environment more challenging for housing associations.

Secured Bonds

Optivo £250 million issue March 2018

Optivo launched a second bond issue of £250 million into the capital markets in March 2018 with a coupon of 3.283%.

Optivo provided a total of 2,336 property units of various tenures as security for the bond issue. The security valuation of £310.8 million provides a surplus of 10% over the full £250 million issue, of which £100 million is retained.

The valuation can be viewed here: Optivo Bond Security Valuation 2018


Optivo £150 million issue March 2012 (as AmicusHorizon)

AmicusHorizon launched its debut £150 million bond issue into the capital markets in March 2012 with a coupon of 5.25%.

AmicusHorizon issued £100 million of bond initially, at a spread of 215bps over the 4.5% 2042 gilt, with an all in yield of 5.362%. The remaining £50 million of bonds were sold in July 2013 for settlement in September 2013, at a spread of 120 bps with an all in yield of 4.681%. 

Security for the bond issue was re-valued in July 2018, with the valuation showing a surplus of approximately 4% over the required asset cover.

View our bond security valuations here: 

Financial Performance


The annual financial statement for Optivo for the year ending 2017/18 and our investor presentation are available below.

Read our Financial statement  View our Investor Presentation

For more information about our financial statement please contact Tim Luckhurst, Head of Treasury, on 020 8726 8713 or email tim.luckhurst@optivo.org.uk.

You can also view our Trading Update for March 2018.

Read a copy of our 2016/17 proforma and unaudited non-statutory set of financial statements for Optivo as the combined financial statements of AmicusHorizon Ltd and Viridian Housing.

Prior year Financial Statements for AmicusHorizon and Viridian can be found here.


Optivo Finance plc

The most recent records for Optivo Finance plc are reflected in the AmicusHorizon Finance plc Financial Statements. Please read the most recent Financial Statements for the year ended 31 March 2017 here.