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L&Q’s operating surplus increases 10% during pandemic while services struggle
Giant housing association L&Q has hailed “strong financial performance” during the coronavirus pandemic as its operating surplus rose by 10% in 2020/21, but expressed concern about services to residents.
In financial results for the year to 31 March 2021, the landlord reported an operating surplus of £307m, up from £279m in 2019/20.
Overall surplus was £208m – a sharp drop on the £414m the previous year when a £235m gift on the acquisition of Trafford Housing Trust was included.
A like-for-like comparison put the surplus for 2020/21 £29m ahead of the margin for 2019/20, L&Q said.
Earnings before interest, taxes, depreciation, and amortization (EBIDTA) including major repairs was £374m, a 23% increase on the £303m the previous year, amid what L&Q called “stronger than expected financial performance during the pandemic, particularly in relation to completions, sales and rent arrears”.
Turnover ran into 10 figures, rising 15% from the £915m for 2019/20 to hit the highest the landlord has ever achieved at £1.05bn.
Of that, 57% was generated from core social housing lettings activities, down from 62% the previous year.
The group’s overall operating margin was behind its 27% target at 20%, but L&Q said it was “pleased” with that result “in a difficult and challenging year”.
Waqar Ahmed, group finance director of L&Q, said: “Despite the extraordinary operating environment of the past year, L&Q’s flexibility, agility, discipline, strong governance and the ongoing support of our lenders and investors demonstrate how financially robust the L&Q group is.”
However, the association badly missed some non-financial value for money goals, with only 67.6% of residents saying they found their landlord “easy to deal with” against a 90% aim and average minor void re-let times hitting 170 days – nearly eight times longer than the 22-day target.
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In its financial report, L&Q said it had chosen to “retrench some services” not deemed emergency or urgent during the pandemic and “cease spending where it was not essential in order to conserve cash”.
“This has clearly impacted our ability to deliver on our customer service targets and consequently means we did not achieve good value for money during the year,” it added.
“While acknowledging the unprecedented impact of the pandemic, we must not hide behind this as an excuse for everything.
“There have unfortunately been times in the past year when we have badly let our customers down with poor service and poor standards that cannot be blamed on the pandemic. It is not good enough and we must do better.”
London-based L&Q is among the largest landlords in the country, managing more than 107,000 homes.
Investment in its existing homes – including fire safety works – dropped 18% from £231m to £190m in 2020/21, with the association pointing to the pandemic’s impact on its repairs and maintenance service.
Earlier this month, L&Q unveiled plans to spend £1.9bn on its existing homes over the next seven years in what it claimed is the largest investment of its kind in the history of social housing.
Of that, £339m has been committed to fire safety works, with more than £100m already spent in this area since the Grenfell Tower fire in June 2017, including £20m on interim measures such as alarm systems or waking watches.
The £1.9bn announcement follows concern over the overall quality of services for L&Q residents, with several cases of unacceptable housing conditions highlighted by the media in recent years.
L&Q reported overall customer satisfaction of 71% in 2020/21, unchanged from the previous year.
The organisation has shifted its strategy to place more emphasis on existing stock, slashing its development target by 70%.
Despite the temporary closure of some of its sites during the early stages of the COVID-19 crisis, L&Q completed 2,699 homes during 2020/21.
That was up 11% from 2,439 the previous year, but missed the 3,363-home target for 2020/21 set before the onset of the pandemic.
Its investment in new housing during the year plummeted 43%, from £1.02bn in 2019/20 to £584m in 2020/21.
Of the 2020/21 completions, 58% were for affordable tenures, compared with 49% in 2019/20, which L&Q said demonstrates its “commitment to maximising its social purpose, while simultaneously lowering its risk profile for commercial activity”.
