The pandemic caught the tail end of the financial year and has not yet affected landlords’ balance sheets. Dominic Brady finds out whether associations can ride out the chaos
Each year, towards the end of summer, a flurry of housing associations publish their annual accounts.
The accounts act as barometers for associations’ financial performance, giving insight into the issues and major outgoings in the sector.
This time around, the sector finds itself in an unusual position.
With the pandemic just catching the tail end of the 2019/20 financial year, its impact is yet to be seen. Nevertheless, the accounts allow us to see how the sector’s biggest players were performing before the coronavirus crisis hit, and whether they had a solid financial foundation to ride out the maelstrom caused by the subsequent lockdown period.
Surplus: £49m (2019: £6m)
Homes managed: 57,836 (2019: 56,623)
Homes started: 1,300 (2019: n/a)
Operating margin: 27% (2019: 36%)
Turnover: £465m (2019: £411m)
Percentage turnover from social housing lettings: 72% (2019: 79%)
Metropolitan Thames Valley Housing (MTVH) saw a sharp increase in its surplus, although it does need to be considered in the context of its merger from 2018. In the past three years, its post-tax surplus has gone from £100m in 2017/18 to £6m in 2018/19 and back up to £49m in 2019/20.
MTVH missed a target of 29% for its operating margin and blamed higher sales volumes, impairment charges and year-end provision for bad debt caused by COVID-19.
Surplus: £42.3m (2019: £22.4m)
Homes managed: 33,271 (2019: 32,354)
Homes started: 835 (2019: 549)
Operating margin: 28% (2019: 30%)
Turnover: £189m (2019: £190.7m)
Percentage turnover from social housing lettings: 90.1% (2019: 89.1%)
Midlands-based Stonewater’s surplus nearly doubled in the year, owing to the association securing £22.4m through stock rationalisation, up from £10.4m the year before. Its involvement in the government’s Voluntary Right to Buy pilot scheme secured the association £10.7m.
Due to the coronavirus crisis, the landlord has deferred updating its strategic plan for 2020-2025 and will continue to work towards its existing plan.
Surplus: £10.5m (2019: £15.7m)
Homes managed: 12,381 (2019: 12,280)
Homes started: 252 (2019: 207)
Operating margin: 29.6% (2019: 35.3%)
Turnover: £71.2m (2019: £74.3m)
Percentage turnover from social housing lettings: 86% (2019: 80.3%)
Grand Union Housing Group completed a restructure of funding deals this year, which it said would provide improved gearing covenants and on-lending capacity.
The landlord also secured a £30m revolving credit facility, and combined with the restructured finance facilities it hopes to fund nearly 2,000 new homes over the next five years. Social housing lettings accounted for a much bigger portion of its turnover, rising from 76.3% to 86%.
Surplus: £168m (2019: £154m)
Homes managed: 124,399 (2019: 124,333)
Homes started: 2,572 (2019: 2,663)
Operating margin: 35% (2019: 35%)
Turnover: £842m (2019: £816m)
Percentage turnover from social housing lettings: 79.7% (2019: 82%)
The UK’s largest association posted solid results as key financial indicators remained stable or improved across the board.
Clarion cited its growth in surplus and turnover as evidence of its financial health when the pandemic hit. However, first-quarter results published for the three months to 30 June show the impact the pandemic has had: investment in new homes dropped by nearly a quarter and investment in existing homes was halved.
Surplus: £52.4m [pre-tax] (2019: £76.9m)
Homes managed: 102,686 (2019: 101,281)
Homes started: 5,642 (2019: 6,002)
Operating margin: 23% (2019: 24.2%)
Turnover: £763m (2019: £735.4m)
Percentage turnover form social housing lettings: 54% (2019: 55%)
Sanctuary’s post-tax surplus dropped by nearly a third (31%), while completions also fell by 35%. The surplus drop was partly due to higher than usual figures from 2018/19 due to one-off fixed asset sales.
The association also had to part with £8.6m to pay off legacy debt this year. Despite this, Sanctuary remained committed to increasing housing supply and had 5,642 homes on site and in development at the reporting date.
Surplus: £122m (2019: £148m)
Homes managed: 66,364 (2019: 55,869)
Homes started: 2,380 (2019: 1,002)
Operating margin: 24% (2019: 26%)
Turnover: £662m (2019: £565m)
Percentage turnover from social housing lettings: 64% (2019: 66%)
London-based Peabody saw its surplus tumble by £26m, but it more than doubled its new home starts. The landlord also increased its spend on existing stock from £84m to £113m, which is largely due to post-Grenfell fire safety works.
Peabody saw a slight decrease in social housing lettings as a proportion of total turnover. The 2% decline mirrors a 2% increase in its market sales, which rose from 16% in 2018/19 to 18% in 2019/20.
Surplus: £48.4m (2019: £69m)
Homes managed: 44,480 (2019: 43,674)
Homes started: 1,592 (2019: 947)
Operating margin: 30% (2019: 33%)
Turnover: £270.8m (2019: £257m)
Percentage turnover from social housing lettings: 78% (2019: 76%)
Bromford’s surplus took a nosedive in the year due to a one-off adjustment from its acquisition of Severn Vale Housing in January 2019. The association was active in its pursuit of private finance and struck a deal for a £100m private placement with Legal & General.
Elsewhere, Bromford saw home starts increase by two-thirds, which shows its ambition following its selection as a Homes England strategic partner.
Surplus: £59m (2019: £56m)
Homes managed: 37,384 (2019: 36,222)
Homes started: 1,173 (2019: 1,192)
Operating margin: 28% (2019: 29%)
Turnover: £249m (2019: £233m)
Percentage turnover from social housing lettings: 72.3% (2019: 75%)
LiveWest saw a significant boost to turnover generated from non-social housing sources, as it secured £69m through shared ownership and private sale – up from £59m last year.
However this is not likely to continue and LiveWest said the economic uncertainty from the crisis will “influence the scale of our non-social development”. It also expects to halve the number of homes delivered in 2020/21 when compared with this year.
Notting Hill Genesis
Surplus: £98.1m (2019: £107.2m)
Homes managed: 66,453 (2019: 66,000)
Homes started: 665 (2019: 1,018)
Operating margin: 25.3% (2019: 25.6%)
Turnover: £731.5m (2019: £670.6m)
Percentage turnover from social housing lettings: 65% (2019: 70%)
Notting Hill Genesis (NHG) continued to struggle through a difficult London sales market, and this was underlined when it had 610 unsold market sale and shared ownership homes. This came despite NHG transferring a number of homes to rented tenure, selling 596 individual homes and 75 shared ownership homes to Hounslow Council. To overcome this, NHG has scaled back development and investment in new homes.
Surplus: £19.5m (2019: 23.9m)
Homes managed: 35,142 (2019: 35,185)
Homes started: 1,401 (2019: 1,837)
Operating margin: 25.1% (2019: 17.7%)
Turnover: £320.4m (2019: £372.2m)
Percentage turnover from social housing lettings: 66% (2019: 56%)
After being rebuked by the Regulator of Social Housing for its exposure to market sales, A2Dominion significantly reduced its turnover from market sale developments.
The G15 landlord also saw a reduction in completions, with the number of homes finished in the year falling by 52% from 875 to 415.
Surplus: £115.7m [pre-tax] (2019: £114.4m)
Homes managed: 48,287 (2019: 48,797)
Homes started: 1,042 (2019: 1,877)
Operating margin: 31.8% (2019: 36.3%)
Turnover: £364.4m (2019: £450.2m)
Percentage turnover from social housing lettings: 68% (2019: 53%)
Hyde made waves after it revealed it was looking to become the first existing association to set up a for-profit provider – chief executive Peter Denton said there is no longer enough capital in the sector.
The association boosted its liquidity to an all-time high which it said would see it through the worst of the pandemic. But fire safety provided a hit to finances, with Hyde increasing spend in this area by a fifth, from £16.8m to £20.2m.
Surplus: £23.2m (2019: £38.6m)
Homes managed: 30,130 (2019: 28,000)
Homes started: 802 (2019: n/a)
Operating margin: 26% (2019: 31%)
Turnover: £236.8m (2019: £230.5m)
Percentage turnover from social housing lettings: 69% (2019: 70%)
Southern Housing Group saw its surplus hit as a result of increased fire safety spend and commercial property valuations. The landlord has also increased spend on the creation of a new primary authority to provide expert fire safety advice.
Fire safety is a running theme: the housing association came under pressure after Woking Council put it on notice to remove dangerous cladding from one of its blocks.
Surplus: £22.2m (2019: £6m [pre-tax])
Homes managed: 27,197 (2019: <27,000)
Homes started: n/a (2019: 500)
Operating margin: 28.5% (2019: 25.9%)
Turnover: £135.6m (2019: £129.4m)
Percentage turnover from social housing lettings: 87% (2019: 90%)
Karbon Homes saw a recovery in its surplus this year. Last year’s hit was down to interest paid on loan breakage costs and dwindling values of properties it had invested in. This year, Karbon was picked as one of 14 partners for Legal & General’s affordable housing arm.
Surplus: £17.2m (2019: £19.5m)
Homes managed: 21,072 (2019: 21,009)
Homes started: 1,195 (2019: 539)
Operating margin: 17% (2019: 19%)
Turnover: £192.3m (2019: £186.4m)
Percentage turnover from social housing lettings: 75.4% (2019: 79%)
Housing 21 said the impact of COVID-19 is expected to become clear next year, and it claimed any related costs will be offset by the deferral of some of its capital works. The landlord will be hoping to bounce back after the regulator downgraded it from G1/V1 to G2/V1, a move it called “disappointing”.
Surplus: £28.5m (2019: £38.8m)
Homes managed: 22,743 (2019: 23,059)
Homes started: 624 (2019: 422)
Operating margin: 37% (2019: 39%)
Turnover: £149.6m (2019: £159.6m)
Percentage turnover from social housing lettings: 90.3% (2019: 86.4%)
PA Housing saw its surplus drop by around a quarter. This was partially due to operating costs rising by £8m. Fire safety spend and direct maintenance costs were £2.5m higher than the budget it set aside. PA also failed to hit its target of 400 completed homes by the end of the year.
Surplus: £18m (2019: £87.6m)
Homes managed: 43,155 (2019: 42,857)
Homes started: 1,500 (2019: 1,003)
Operating Margin: 23% (29%)
Turnover: £322m (2019: 314m)
Percentage turnover from social housing lettings: 92% (2019: 94%)
Optivo put its head above the parapet by being the first to brave the capital debt markets during the pandemic, a move which ultimately paid off with a £250m bond. However, there were significant falls in it its surplus from £87.6m to £18m though Optivo noted that this is after £22.8m fair value movements of financial instruments because they chose not to hedge account.