L&Q announces record financial results to boost its transformation plans
L&Q announces record financial results to boost its transformation plans
L&Q today announces record financial results which will enable £200 million investment in its existing homes, a radical transformation of its services, and a renewed pledge to deliver its social purpose.
In the last financial year, the L&Q Group delivered turnover in excess of £1 billion and a record post-tax surplus of £348 million. L&Q remains a net investor of cash, and all of the surpluses will be re-invested back into the housing association’s core social mission.
Other highlights include:
- The Regulator for Social Housing confirmed L&Q’s top-tier V1 and G1 ratings for financial viability and governance following an in-depth assessment;
- Thanks to the strength of its investor relationships, L&Q raised £1 billion through two separate bond issuances and completed its refinancing strategy;
- L&Q completed over 200,000 repairs and kept 94% of repairs appointments that residents asked for. At the same time, 86% of residents said they were satisfied with their last repair.
- 2,453 new homes were completed, and building work started on 2,698 more. Of the completed homes, 1,342 were for social housing
The results for 2017/18 have been achieved in the context of major transition, as East Thames was fully integrated into L&Q, and the aftermath of the Grenfell Tower tragedy.
L&Q remains wholly committed to building 100,000 new homes over the next decade, but the priority now is to drive up satisfaction among existing residents. These financial results will allow L&Q to fund identified improvements and generate upper quartile performance.
Waqar Ahmed, Group Finance Director, said: “L&Q has delivered record results under exceptional circumstances, and this gives us the platform to make our biggest ever investment in our social purpose and transform the business for the benefit of our residents, colleagues and stakeholders.
“We are going to invest £200 million every year in our existing homes and invest £150 million in technology over the next five years to deliver improved efficiency and better customer service. We are going to transform lives with our £250 million community foundation, build the capability of the organisation to enable growth, and create a new united culture for the combined organisation.”
Mr Ahmed added: “It is clear to our leadership team that we have some work to do to improve the services we offer to our residents, and our new corporate plan establishes exactly how we will do that. We are determined to provide the resources necessary to achieve swift improvement.”
NOTES TO EDITORS
The following figures are selected highlights from L&Q’s Financial Statements 2018. The full statements can be downloaded here
The Group results for the year include the first full year results for both East Thames and Gallagher Estates companies since they joined the Group in December 2016 and February 2017 respectively. The Group:
- Invested £173 million in improving and maintaining existing homes (£120 million in 2017);
- Completed new homes to the value of £714 million, while adding £860 million to building work already in progress;
- Invested £7 million in community investment initiatives through the £250 million fund made available to the L&Q Foundation;
- Turnover for the period was £1,026 million (£756 million in 2017), of which 60% was from social housing activities (74% in 2017);
- Headline social housing cost per home under the sector scorecard definition was £3,923, and expected to be among the lowest in the sector and is a key driver for the targeted 50% operating margin on social housing lettings as part of the Group’s transformational programme.
- Rent arrears are 3.5% (3.5% in 2017) on general needs provision, through a proactive approach to rent collection and managing the ongoing risks of welfare reform. This puts L&Q in the top quartile among its peers;
- Sales margins at 20% (27% in 2017) reflect the increased land sales in Gallagher whilst property sales margins have remained consistent despite an increasingly more challenging outright sales market;
- Total reserves stand at £4.58 billion (£4.23 billion in 2017);
- The open market value of the Group’s assets are now an estimated £26.4 billion;
- Gearing being net debt to total assets less currently liabilities is within internally set parameters at 43% and EBITDA MRI to interest payable is at 288%.
Resident safety is paramount, so L&Q’s response in the aftermath of the Grenfell fire was swift and extensive. Working with the London Fire Brigade, works were re-prioritised and additional improvements to fire safety were made. This included the implementation of a 24hr waking fire watch, and carrying out stringent “Type 4” Fire Risk Assessments on high rise blocks.
The additional costs previously forecast have now materialised and have increased operating costs, including the writing off of ACM cladding on affected blocks. These one-off costs have impacted both operating margins on social housing lettings (46%, compared with 50% in 2017)).
L&Q has committed to covering the cost of removing and replacing cladding and insulation. An additional £50m has been set aside over the next three years for this and any other remedial or improvement works that are necessary, some of which have already been reflected in this year’s financial statements. Should further investment be required, L&Q will make additional provision, and it is continuing to work closely with the fire authorities, following all updated advice and guidance issued since the tragedy.
By forging strong relationships and working together, L&Q can guarantee more investment in homes, communities, apprenticeships, jobs, innovative methods of construction and economic growth.
Over the last year, existing relationships have gone from strength to strength, while significant new partnerships have been formed:
- L&Q’s strategic land teams at Gallagher Estates continue to operate in the Midlands, but are also expanding their geography to align with L&Q’s operations in the wider South East. In spring 2018, L&Q drew down the first land from Gallagher Estates, purchasing a site for 450 new homes in Leamington and another site for 250 new homes in Wavendon;
- Under the Laurus Homes brand, the partnership between L&Q and Trafford Housing Trust is on track to build 2,000 new homes across the North West by the end of 2020. Schemes are already underway in Greater Manchester and Cheshire;
- L&Q’s strategic partnership with the Mayor of London is delivering 20,000 new homes across the capital (12,000 genuinely affordable), while the joint venture with the GLA at Barking Riverside is creating a new town the size of Windsor;
- A ground-breaking new £100m initiative between L&Q and nine BME housing associations, supported by the GLA, will unlock small sites across the capital and create hundreds of new affordable homes;
- L&Q has recently completed a landmark £100 million “positive incentive loan” with BNP Paribas. The deal means L&Q will get a discount on the margin of the loan if it helps 600 unemployed residents a year back into work;
- L&Q and Homes England have just announced a landmark strategic partnership that will accelerate delivery of quality new affordable homes outside of London.
L&Q is a regulated charitable housing association and one of the UK’s most successful independent social businesses. The L&Q Group houses around 250,000 people in more than 95,000 homes, primarily across London and the South East.
Everything we do begins with social purpose. Our roots go back to the ‘new wave’ of housing associations created in the 1960’s, born out of a growing social consciousness around housing and homelessness. We set out to provide quality, affordable homes for the most vulnerable in society and it is that same fundamental mission that drives us today.
L&Q’s vision is that everyone has a quality home they can afford, and we combine our social purpose with commercial drive to create homes and neighbourhoods everyone can be proud of.
Our core tenure is social rented housing. On average, our residents living in these homes pay less than 50% of market rents, making them genuinely affordable for people on lower incomes. We are absolutely committed to preserving this housing, and building more of it.
We focus on the needs of our existing social housing residents by investing in their homes, local communities and services. We also create high quality homes for private rent, shared ownership and outright sale.
In response to the housing and affordability crisis, we will build 100,000 new homes over ten years. Of these, 60,000 homes will be built or funded by L&Q, whilst a further 40,000 will come through partnerships. Crucially, at least 50% of these new homes will be genuinely affordable, with a target of 60% in London.
As a charitable organisation, our role goes beyond providing homes and housing services. We are a long-term partner in the neighbourhoods where we work. We hope to build aspiration, opportunity and confidence in our communities through our £250 million L&Q Foundation and our skills academy. Our care and support subsidiary, L&Q Living, also offers housing and other assistance to meet the evolving needs of older and vulnerable people in our society.