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Clarion reveals half-year surplus up 37% despite ‘complex economic picture’
Clarion has confirmed that its half-year surplus has risen by more than a third despite a fall in revenue amid the “extremely challenging” housing market.
Clarion has confirmed that its half-year surplus has risen by more than a third despite a fall in revenue amid the “extremely challenging” housing market #UKhousingIn accounts published yesterday, the 125,000-home landlord reported a surplus of £93.3m in the six months to the end of September, compared to £68m in the same period last year.
The surplus figure is slightly higher than unaudited results released in October.
The UK’s largest housing association was helped by its cost of sales nearly halving to £42.8m as it completed fewer homes, plus lower interest and financing costs.
However, this was offset by Clarion’s turnover sliding by nearly £20m to £521.9m as its sales of open market and shared ownership homes fell.
“The open market sales environment remains extremely challenging with high interest rates and economic uncertainty creating weak demand,” the London-based landlord said. The group reported its results before the latest cut in interest rates by the Bank of England yesterday (18 December).
Clarion’s volume of shared ownership sales nearly halved as it sold 223 homes, compared to 398 in the same period last year, it reported.
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In the private sale market, the G15 provider completed 36 transactions in the six months at a negative gross margin of 10%. This compared to 129 in last year’s half-year at a break-even gross margin.
The group’s overall operating margin came in at 31%, up from 25% in last year’s half-year.
Clarion also revealed it booked a £10m impairment charge, primarily for a scheme where it said the original contractor had collapsed and completion costs are “significantly increased”.
On development, the group recorded 678 completions, a fall from 792 handovers in the same period last year. Despite this Clarion’s spending on development rose to £253m in the half-year, up from £196m year on year.
It comes as many landlords have been cutting their development ambitions amid the tough conditions.
Clarion said: “With a current pipeline of some 21,902 new homes, the group continues to focus on building new homes, primarily affordable, but also remains committed to ensuring we retain a robust and sustainable financial profile.”
Like many in the sector, Clarion is upping its spending on its existing stock. It spent £186m on maintaining and improving its homes, up from £177m in the first half of last year.
In October, the regulator handed Clarion a compliant C2 consumer grade, but said there were “some weaknesses” partly due to an “inconsistency of its understanding of the condition of its homes”.
The landlord is also continuing to offload homes and sold 780 properties to other registered providers in the half-year. Just over a year ago, a senior Clarion executive said it would only sell homes to landlords rated at least G1/V2.
In the half-year, Clarion had net debt of £4.6bn and undrawn facilities of just over £1bn. It held cash and cash equivalents of £65m, down from £102m at the end of its last full year.
Jock Lennox, Clarion’s group chair, said: “The broader economic picture remains complex, but Clarion’s long-term approach, prudent treasury management and strong balance sheet ensure we are well positioned to navigate this landscape with confidence.”
Clarion was upgraded to a V1 by the regulator in October and maintained its G1 status.
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