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L&Q surplus nearly halves in ‘challenging’ year
L&Q has reported an expected sharp drop in annual surplus as rising fire safety and maintenance costs hit the London-based giant.
The 102,000-home landlord said its post-tax surplus slid 45% to £191m in the year to 31 March 2019. Turnover in the period was also down, falling 9% to £937m.
The group, which is in the process of acquiring Manchester-based Trafford Housing Trust, warned in January that its annual surplus would be significantly down, partly due to a property market downturn and rising costs, including a £40m higher-than-expected fire safety and maintenance bill.
The landlord has previously identified 15 of its blocks with aluminium composite material cladding, in the wake of the Grenfell Tower tragedy. It has set aside £50m for remediation work with repairs expected to be done by the end of 2019.
Last month L&Q revealed that it was selling 150 discounted homes in response to the stagnant housing market.
In an email obtained by Inside Housing, prior to its last update the association said it had also been hit by the cost of “health and safety, and improving the quality of our existing homes”. This includes Portway House, which has hit the headlines, and “15 other challenging schemes”.
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In an update yesterday, Waqar Ahmed, group finance director at L&Q, branded it a “challenging year” and pointed to a “backdrop of political and economic uncertainty”. He blamed the surplus shortfall on “increased maintenance expenditure”, a reduction in turnover and profit, and “increased interest costs”.
L&Q noted that these are unaudited figures, with full audited results due by July.
Despite the reduced surplus, L&Q revealed in its results that it had started 6,428 residential units in the year to March 2019, nearly tripling the figure from the previous year.
The group completed a total of 2,874 units, up slightly from 2,453 the prior year. This comprised of 1,582 units for social housing and 1,292 open market dwellings. Around half of the open market units were sold under Help to Buy, netting an average value of £578,000.
On social housing lettings operating margin fell to 39%, down from 46% in 2018. Operating margin across all lettings was 41%, down from 45%. Net margin on sales halved to 9%.
Looking ahead, Mr Ahmed said that the group expects a stronger performance in the current year with a post-tax surplus between £250m and £270m. L&Q also expects to complete around 3,200 new units.
Mr Ahmed said: “We remain confident in our future prospects supported by the strength of our balance sheet, our geographical expansion, the proposed acquisition of Trafford Housing Trust, our ability to service debt and our strong liquidity position.”
