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Increased fire safety spend and revaluations contribute to Southern’s 40% surplus drop
Southern Housing’s surplus has fallen by 40% this year, which it said was the result of increased fire safety spend and commercial property valuations.
The 28,000-home landlord reported a post-tax surplus of £23.3m for the financial year 2019/20, down from the £38.6m posted for the previous 12 months.
The fall in surplus was a third consecutive yearly drop for the association, which holds most of its homes in London and the South East. It reported a post-tax surplus of £62m in 2016/17, £44.9m in 2017/18 and £38.6m in 2018/19.
Commenting on this year’s surplus drop, Southern said that increased investment in building safety and one-off commercial property revaluations had impacted its net surplus.
It added that the property revaluations were a reflection of wider economic headwinds at the end of the financial year.
The accounts for the year also revealed an £8.2m increase in fire safety spend compared with the previous year. Part of this increased spend was on the creation of a new primary authority within the association, set up to provide expert fire safety advice and undertake joint inspections of buildings with the group.
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Southern said it had also now procured or carried out EWS forms – for external wall systems – and type 4 fire risk assessments on all of its 44 buildings taller than 18m. The association also said it is looking to extend its inspection programme to 1,400 buildings but would prioritise these using a risk-based analysis.
Southern’s turnover for the year totalled £236.4m – a £6.4m increase on the previous year.
Shared ownership sales income was £15.2m, down from £24.9m in 2018/19, while total open market income hit £47.3m, up from £35.4m last year. Social housing lettings accounted for 69% of income.
The association said that the differences in increased income from different tenures represent the variations in its development programme and that it expects most of its sales income to come from shared ownership this year.
The number of assets held for sale totalled £22.1m of Southern’s stock, including 15 unsold private sale units and 128 for shared ownership.
Its operating margin overall fell slightly – from 31% last year to 26% this year.
A total of 419 new homes were completed in the past 12 months, with work starting on 799. Last year the association completed 315 homes, with 1,266 under construction.
The association did see a 10% increase in customer satisfaction for the year, with the percentage of tenants satisfied with Southern’s service rising from 73% to 83% in the past 12 months.
Southern's full response
Amanda Holgate, executive director, resources at Southern Housing Group said: “Our increased investment in building safety and one-off commercial property revaluations impacted our net surplus. However, the latter is a reflection of the wider economic headwinds at the end of the financial year. We have a target for operating cost efficiencies of at least £2.5m this year and are making good progress against this savings programme. Our financial position remains very strong, with a robust balance sheet, low gearing, a good asset base available for security as well as high levels of liquidity.
“No one should be complacent about building safety. During the year we significantly increased our investment in our safety programme, with an additional £8.2m compared with the prior year. We have created a specialist building safety team in-house and our long-term financial plan includes a fully funded programme of inspection and remediation works.
“A ten-point increase in customer satisfaction this year shows our efforts to improve services are already starting to pay off. We are confident that our invigorated approach to resident involvement will enable us to further improve this score. Our customer scrutiny panel and its associated steering groups are critical components of our strategy for continual service improvement.
“Fluctuations in turnover from open market and shared ownership sales reflect year-on-year tenure variations in our development programme. This year we expect most of our sales turnover to come from shared ownership units.”
