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Sovereign warns over completions as building material shortages bite amid pandemic
Sovereign has seen its first-quarter completions come in 60% below its budgeted forecast after it felt the ongoing impact of sector-wide building material shortages and the coronavirus pandemic.
The Hampshire-based landlord, which operates around 60,000 homes across the South and West of England, has also warned that its full-year completions will be down on its budgeted total as a result.
In the three months to the end of June, Sovereign handed over 166 new homes, against a budget of 415.
Sovereign’s completions figure was only just ahead of last year’s first-quarter of 135, which was severely hit by the shutdown of building sites during the first lockdown.
James Gibson, development director at Sovereign, told Inside Housing that the association’s output was being affected on “almost” every one of its sites.
“Trade teams having to isolate when ‘pinged’, supply delays of some materials and decorators being called to decorate schools ahead of a September reopening are all ongoing impacts of COVID,” he said.
Mr Gibson added that the wildfires in the US were also affecting supplies, with timber being redirected to the American market.
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Concrete supplies were also being affected and scaffolding was “directed to national infrastructure projects as a priority”, according to Mr Gibson.
But he added: “We are still receiving reports of strong sales demand for new build homes. Our development partners have recently informed us that sales rates are double that of a typical year even during the summer period when sales routinely decline.”
The sector has been grappling with dwindling supplies of building materials and rising prices amid the dual impact of Brexit and the pandemic on the supply chain.
Looking ahead, Sovereign said it expects its annual completions to come in below its budget of 1,900, but ahead of last year’s total of 1,099.
Its current development pipeline remains “in excess of 6,700 homes”, the association said.
On sales, Sovereign completed 116 transactions in the quarter, which was 33% down on the last quarter of the 2020/21 financial year. The landlord blamed the drop on “lower handover of units from developers”.
As a results, the group posted an 8% drop in quarterly turnover to £102.7m.
Despite this, Sovereign’s net surplus in the three months rose 20% to £23m. This was due to a “larger surplus on sales of existing properties mainly through staircasing transactions and a reduction in operating costs driven by lower depreciation charges and lower office and IT costs, the latter two due to COVID slowing the return to offices”, a spokesperson said.
In its last full-year to the end of March 2021, Sovereign posted a 1.7% fall in surplus to £78m on a slightly increased turnover of £417.4m. Its bottom line was partly dragged down by a rise in interest and financing costs after the association issued the remaining £125m of a £375m bond originally from November 2019.
