Eamonn Hughes of Peabody reflects on the past financial year and how the London-based group freed up capacity for future spending while navigating the impacts of the pandemic
Following a comprehensive assessment during the pandemic, the Regulator of Social Housing recently confirmed its existing assessment of Peabody’s governance and financial viability (G1/V2). The judgement notes our plans to invest in building safety and the maintenance of our existing homes, as well as a large and diverse programme of regeneration and development.
Ensuring the safety of our residents is our top priority, and measures we’ve taken in 2020/21 provide a strong base for continuing high levels of investment in the years to come. We’re also ambitious and committed to delivering more genuinely affordable homes, using our strong balance sheet to make a positive social impact and create great homes and places.
The regulatory ratings reflect our careful financial planning and sound risk management. At the onset of COVID-19, we did an emergency revised budget to ensure that we could withstand even the most extreme scenarios.
“We protected employees who were unable to work due to government restrictions by accessing the government’s job retention scheme, topping up wages to 100 per cent”
Greater levels of uncertainty demand greater flexibility and nimble financial management, and we were able to deliver this. We supported and protected thousands of people through our financial inclusion work and co-ordinated resident well-being programme.
We managed rising rent arrears effectively by offering tailored solutions and welcomed the significant government interventions for people and businesses. We have seen first-hand the positive impact of the £20 uplift to Universal Credit for our residents and we will continue to make the case for its retention as the country recovers from the pandemic. We also protected employees who were unable to work due to government restrictions by accessing the government’s job retention scheme, topping up wages to 100 per cent.
These actions combined putting our values into practice with robust financial management and controls so we can achieve our ambitions.
There was an inevitable impact on responsive repairs, planned investment works and development sites during the first lockdown. However, as we noted in our half-year results last November, our financial performance has ultimately been very resilient and delivery has been closely managed in a constrained year.
The revised short-term financial plan prioritised investment towards the safety of our customers, and we were able to budget in a dynamic way to release further investment as we met quarterly milestones on rent receipts and sales income throughout the year.
“There was an inevitable impact on responsive repairs, planned investment works and development sites during the first lockdown”
Our full-year results, which are unaudited, show that we were able to collect 99 per cent of rent and generate sales revenue of £127m, ahead of our original budget for the year. In 2020/21 we were able to invest around £350m in new and existing homes including a £33m spend on capital works relating to building safety. Our financial capacity was supplemented by taking on new debt, and we are looking forward to securing more sustainability-linked loans in the year to come.
Back in March 2020, HM Treasury announced a number of measures designed to support companies that make a material contribution to the UK economy. Alongside other housing associations we were able to access the Bank of England’s Covid Corporate Financing Facility. This helped us strengthen our liquidity and overall financial capacity to keep investing throughout the pandemic.
In the last quarter of 2020/21, we were also able to restructure some fixed-rate interest agreements on £40m worth of loans to free up future spending capacity. This generated an in-year cost but will create capacity to bring forward further investment in asset management and building safety in the years to come.
Having demonstrated that we are well placed to withstand unforeseen economic challenges, we have been able to take this action now to give us more capacity to deliver future investment, including on fire safety. This is an important programme and we will actively pursue all possible avenues to protect Peabody and our leaseholders financially from additional costs.
In the period we also made progress in key strategic areas despite the headwinds. Peabody’s board has committed to achieving net zero in our day-to-day business operations by 2030 and in our rented homes by 2050. We appointed a new sustainability director, who will lead an integrated team towards this goal, and early work will include an expanded energy advice service for residents.
“We acquired a major site at Dagenham where we will work with the community, the council and the Mayor of London to deliver more than 3,000 new homes and a new public park for the borough”
We also launched our 30-year green infrastructure plan for Thamesmead and appointed a diverse masterplanning team to work with us on our Thamesmead Waterfront joint venture with Lendlease. With the potential for more than 11,500 new homes, this is the largest development in Peabody’s history and it is a tremendously exciting opportunity to achieve good growth in the town. We also acquired a major site at Dagenham where we will work with the community, the council and the Mayor of London to deliver more than 3,000 new homes and a new public park for the borough.
In the year to come we will continue to actively mitigate risk, closely manage our financial capacity, and protect and grow our income to deliver on our priorities.
Eamonn Hughes, chief financial officer, Peabody