Moody’s Ratings has affirmed Sovereign’s ‘A2’ rating, reflecting the provider’s “large size” and “strong operating margin”.
In a recent research report, Moody’s, which provides global integrated risk assessment to advise investors, said: “The stable outlook on Sovereign’s rating reflects our view that its growing development and market sales risk is balanced by its strong profitability.
“It also reflects the stable operating environment for housing associations.”
The report added that the stable outlook is supported by Sovereign’s operating margin of 31% in fiscal 2020 being above the A2-rated peer median of 28% (fiscal 2020).
It said: “The strong profitability was driven by high margins on its social housing lettings, for which the group reported a margin of 35% in fiscal 2020 compared to 19% on its market sales for the year.”
The report noted that Sovereign is planning to take a more active approach to its asset management, including investing in and improving existing stock; it also noted Sovereign’s goal of achieving zero carbon by 2050.
The report acknowledged that COVID-19 has had an impact on development but states that Sovereign “remains committed to growth”, with an aim to increase its annual output of new homes to around 1,900 a year from 1,200 in 2017.
Responding to the report, Mark Washer, chief executive of Sovereign, said: “I am very pleased that we have had our A2 rating affirmed.
“This reflects our long-term commitment to investing in our homes and to building new homes.
“Our forward-looking and ambitious programme to improve our homes for customers and make all our homes more sustainable is also sound financial planning.”
Washer added: “Sovereign will be going into 2021 in robust financial health – we have strong assets and a strong enterprise profile.
“Whether it’s in our plans for new homes or to improve the lives of our existing customers, this is welcome recognition that we are delivering on our corporate plan.
“This is good news for Sovereign and reflects the hard work of colleagues across the organisation, delivering for our customers in a year like no other.”
Sovereign manages nearly 60,000 homes and aims to build around 1,900 new homes every year.
As part of its new five-year strategy, Sovereign has trebled its investment in community work, stepped up its development programme with a greater emphasis on major land-led schemes, and increased investment into the experience of its 140,000 customers and residents.
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