Other landlords also expected to increase surpluses after build lull
L&Q records £95m surplus
London & Quadrant has generated what is thought to be the largest ever surplus by a social landlord.
In its financial report for 2011/12, seen exclusively by Inside Housing, the 68,600-home landlord revealed it had made a surplus of £95 million. This is more than twice last year’s figure of £44 million and 50 per cent more than the record £61 million generated by L&Q in 2009/10. The surplus is roughly a quarter of the £400 million generated by the 30 largest housing associations in total last year.
L&Q’s turnover grew from £327 million last year to £368 million (see box: The breakdown), while operating costs fell from £238 million to £224 million, the lowest level since 2007/08.
Waqar Ahmed, finance director at L&Q, put the high figure down to ‘a combination of issues’, including an efficiency programme that brought maintenance work in-house, saving £22 million over two years.
Around £12 million of the surplus is a result of the introduction of ‘component accounting’ regulations, whereby individual assets are displayed as capital, rather than revenue, on housing associations’ balance sheets.
Despite generating the record surplus, the association’s net outflow - the amount spent minus the amount recouped - of cash was around £100 million after it invested £262 million throughout the year. ‘We have to
generate surpluses because it demonstrates the long-term value of our business,’ Mr Ahmed said. ‘What [surpluses] enable us to do is maintain the supply of housing while there is diminishing grant.’
L&Q completed around 1,600 homes in 2011/12 and started on a further 1,400 last year. Mr Ahmed said the organisation intended broadly to match those figures in 2012/13. It has also used its strong performance to set aside £100 million for the L&Q Foundation which will invest in community projects.
The results are among the first to be published by a major social landlord this year. It is thought that several landlords, including Affinity Sutton and Orbit Group, will also reveal sharp increases in surplus when they publish results later this year, while Bromford Group this week revealed a surplus increase from £17 million to £22 million.
‘I wouldn’t be surprised if there was an uptick on last year,’ said Robert Grundy, director of housing investment consultancy at Savills. ‘We feel that quite a lot of associations sat on their hands while they were trying to work out whether the Homes and Communities Agency [affordable homes] programme would favour them. But I would expect them to come down again as people are getting back into developing.’
L&Q’s results also showed that chief executive David Montague’s annual total payments rose from £208,000 to £218,000 - a 4.8 per cent increase. An L&Q spokesperson said the increase was a result of performance-related bonuses and benefits, adding that Mr Montague’s salary had not increased since 2008.
‘The emoluments of all directors are reviewed and agreed on an annual basis by our governance and remuneration committee,’ said the spokesperson. ‘They are based on an individual assessment of pay scales prevailing the market and an assessment of performance against our corporate objectives.’
Surplus generated in 2011/12
Surplus generated in the 2010/11 period
London & Quadrant’s turnover in 2011/12
L&Q’s operating costs 2011/12
Investment made by L&Q throughout 2011/12
Homes completed by L&Q in 2011/12