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Clarion’s surplus drops as spend on customer service and safety increases
Clarion, the UK’s biggest housing association, has revealed a 13% drop in its nine-month operating surplus as it upped investment levels in customer service and safety and felt the continued impact of a weaker property market.
The 126,000-home landlord reported that its operating surplus in the nine-months to the end of December was down from £230m in the same period last year to £199m for the first nine months of 2019/20.
“The reduction in operating surplus continues to reflect an increased focus on customer service and safety, alongside careful management of our development sales programme,” Clarion said in a stock exchange filing last week.
The landlord has been affected by a faltering property market, particularly in London, like many of its G15 peers. These associations have also been hit by increased fire safety costs following the Grenfell Tower fire.
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Today, Clarion revealed that revenue from outright sales and shared ownership rose from £66.5m the prior year to £88.4m.
Surplus on development sales, however, fell to £7m, which it said was in line with “prevailing market conditions”. The margin on these sales was 14.5%, compared with 30% in the same nine month period in 2018/19.
Clarion said: “Although lower than the prior year, this margin is at a more normalised level in line with expectations for this point in the cycle.”
The association said that the year-on-year variance was also partially driven by an increased investment in frontline and enabling services of £10m and an additional £9m depreciation.
Clarion said 1,237 new homes have been completed since last April, of which 86% were for affordable tenures.
Last summer, the association reported a pre-tax surplus of £154m, a slight drop from the £158m it posted in 2017/18. At the time Clarion revealed it was spending £124m on refurbishing existing homes and trialling sprinklers as part of a fire safety programme and moving ahead with a £541m capital investment in building new affordable homes.
The group revealed today that its fixed assets have risen to £7.3bn from £7.12bn. However, drawn debt in the nine months rose from £3.89bn to £4.01bn.
Clarion has been strengthening its board in the past year. Last month it appointed Theresa May’s former chief of staff Gavin Barwell as a non-executive director.
Mr Barwell has previously said that he expects to appear before the second phase of the Grenfell Inquiry, which kicked-off yesterday, as he was housing minister in the lead up to the fire.
The group has also appointed Tom Smyth, a vice-chair in financing advisory and an advisory partner at Rothschild & Co, to the board, alongside Graham Farrant, chief executive of Bournemouth, Christchurch and Poole Council; and Amanda Metcalfe, brand and marketing lead at the Crown Estate.
