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MTVH’s operating margin squeezed as COVID-19 impact takes hold
Metropolitan Thames Valley Housing (MTVH) has seen its operating margin fall below target in 2019/20, owing in part to the impact of the coronavirus pandemic.
Financial results for the 57,000-home landlord show that its operating margin fell from 36% in 2018/19 to 27% in 2019/20, below its target of 29%.
MTVH said the drop has been “driven primarily by higher sales volumes, some impairment charges and year-end provision for bad debt (£3m) in response to the COVID-19 emergency”.
Despite this the landlord has set an operating margin target for 2020/21 of 33.2%, which is based on efficiencies factored into the budget for reduced costs of disrepair, more effective void management and reduced overheads due to “staffing merger synergies”.
MTVH was formed in 2018 through a merger between Metropolitan and Thames Valley Housing.
Although there was a fall in its operating margin, the association recorded a marked rise in its post-tax surplus from £6m in 2018/19 to £49m in 2019/20.
“The improvement reflects the non-recurring costs incurred last year as a result of the merger and the loan book renegotiation,” MTVH said.
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Its “adjusted operating surplus”, which excludes non-recurring costs associated with the merger, fell from £154m in 2018/19 to £131m in 2019/20.
Operating surplus dipped from £149m to £127m, which MTVH said reflects the impact of £4m of non-recurring operating expenses relating to the merger integration cost and the £3m cost of exiting the Social Housing Pension Scheme.
“The quieter sales market also resulted in lower volumes from our shared equity operations, including shared ownership equity sales (‘staircasing’) and mortgage loan buy-backs (‘redemptions’),” MTVH said.
The organisation’s social lettings margin also dropped from 34% in 2018/19 to 28% in 2019/20, meaning it missed its target of 31%.
Geeta Nanda, chief executive of MTVH, said: “We entered 2019 looking forward to a period of transition and integration and although we’ve made significant progress in the year – serving our customers better every day along the way – inevitably COVID-19 has caused disruption.”
Ms Nanda noted that the backdrop for the housing sector was challenging with the sales market slowing on top of a politically turbulent 2019, which saw a divisive general election and Brexit.
She added: “We faced a housing crisis before the pandemic but things will worsen in a recession post coronavirus, and while building new homes is about addressing demand, it is also vital for the stimulus that housebuilding contributes to the economy.”
