Strong financial results underpin exceptional year for L&Q

Published on 04/07/2017

L&Q today announces record financial results which provide a strong platform to enable the delivery of 100,000 new homes, invest more in services and communities, provide support for the most vulnerable in society and tackle Britain’s construction skills shortage.

Amid the uncertainty of Brexit, the charitable housing association has committed to an historic development programme, a £250m foundation to support communities and employment, a dedicated care and support business and a brand new £5m a year training academy.

Partnership working is crucial to delivering L&Q’s ambitious strategic objectives, and during 2016/17 a number of high profile partnerships were formed.

Joining forces with East Thames Limited in December 2016 means that L&Q now owns and manages more than 90,000 homes across London and the South East, with an estimated open market value of £23bn. More than 86% of these homes are affordable for people on low incomes.

The expertise within East Thames has also been used to create L&Q Living, a care and support arm to provide for the needs of the vulnerable and older people.

In February 2017, L&Q acquired Gallagher Estates, a strategic land business that controls 42,500 land plots in the South and South Midlands. This takes L&Q’s total development plots to over 85,000 as the housing association explores new ways of securing its’ growth objectives of enabling the delivery of 100,000 new homes.

In August 2016, L&Q also announced a joint venture partnership with Trafford Housing Trust, which will deliver 2,000 new homes across Greater Manchester and the North West over the next four years. This is an example of how L&Q can help other like-minded charitable organisations to unlock additional development capacity to help tackle the national housing crisis.

While the Trafford and Gallagher deals have expanded L&Q’s geographical horizons, the core area remains London and the South East of England.

To cement this commitment, L&Q and the Mayor of London have recently announced a landmark strategic partnership which will see £8bn invested in 20,000 new homes across the capital – 12,000 of which will be genuinely affordable.

Waqar Ahmed, Group Director of Finance at L&Q, said: “Britain’s housing crisis will only be solved if organisations like L&Q forge relationships with like-minded partners and put forward bold, long-term plans.

“The strategic partnerships we formed during the year have significantly changed L&Q in terms of size, geography and customer profile, but we have reaffirmed our social mission to make sure that at least half of the new homes we build are genuinely affordable to people on low incomes.

“Quality, safety, local responsiveness and customer satisfaction are paramount, so these homes will be well designed, well built, well managed and well maintained.”

Safety

The health and safety of residents has always been a top priority for L&Q. In the wake of the tragic incident at Grenfell Tower, immediate action is being taken to review fire safety procedures. 

Mr Ahmed said: “All our fire risk assessments are currently up to date, and we visit sheltered housing schemes and tower blocks over six storeys high once a year to review fire safety. However, we are now taking another look at what more we can do to ensure the safety of our residents. 

“We are carrying out additional safety reviews of all blocks over six storeys. And, while the circumstances behind the fire are still unclear, we have taken the extra precaution of surveying the cladding on these blocks.

“We will consider all possible methods of mitigating fire risk - cost will not, and never has been, a barrier to providing the most appropriate solution. This work is an immediate priority for L&Q and we have set aside the necessary staffing and budgetary resources to deliver solutions quickly.”

 

Performance

While 2016/17 was a year of exceptional change, L&Q retained its focus on the main social objectives of providing affordable quality homes, improving customer experience and investing in communities.

During the year, L&Q completed 2,552 new homes, of which 1,536 were affordable (917 for rent, and 619 for shared ownership). Building work started on 2,590 more homes, and a further 4,190 were approved.

More than £120m was spent in the year maintaining and improving our existing properties.

A further £7m was invested through the L&Q Foundation to support the Group’s objectives in tackling financial exclusion, unemployment, enhancing community cohesion and providing positive opportunities for young people.

Excellent performance is only possible with a talented and motivated workforce. L&Q worked hard to retain the confidence and support of staff throughout all the changes, and the Group retained its Investors in People Gold award, Great Places to Work accreditation and a place in the Stonewall Equality Index.

 

Refinancing

Upon completion of the merger with East Thames, L&Q successfully negotiated a £2.6bn strategic refinance package supported by key bank relationships.

Mr Ahmed said: “To deliver our ambitious strategic objectives, we needed to adapt our capital structure that allows simplicity and flexibility and more flexible covenant structures that not only support our ambition to enable the delivery of 100,000 homes, but also provide flexibility between social and commercial activities.”

 

Financial strength

In addition to the refinance package, L&Q’s achievements last year and future ambitions are underpinned by a strong set of financial results:

  • The Group delivered a record pre-exceptional surplus before tax of £332m, a £53m increase from the previous year. L&Q remains a net investor of cash and every penny of the surplus was reinvested in its social mission;
  • Turnover increased by 20% to £756m (2016: £628m), 74% (2016: 77%) of which is from social housing activities
  • The operating margin on social housing lettings increased to 50% (49% in 2016), which is among the best in the sector;
  • Social housing cost per home was just £3,043, which is 8% lower than last year and amongst the lowest in the sector;
  • Rent arrears are 3.5% (3.3% in 2016) on general needs provision, through a proactive approach to rent collection and managing the risks of welfare reform. This puts L&Q in the top quartile amongst its peers;
  • Gearing being net debt to total assets less currently liabilities is within internally set parameters at 40% and EBITDA MRI to interest payable is at 508%.
  • Revenue reserves stand at £4.2bn (2016: £4.0bn).

Value for money

L&Q has a long track record for delivering value for money, achieving more and delivering better services for less money. A detailed VfM statement is published today alongside the financial accounts.

The year ahead

Mr Ahmed said: “We recognise that we are in a period of potential economic uncertainty and the hung Parliament and ongoing Brexit negotiations also suggest political uncertainty, but we have flexibility, strong relationships with investors and solid credit ratings to support our objectives.

“The year ahead is primarily about consolidation. L&Q and East Thames will be integrating systems, organisational culture and processes as soon as practically possible to create a new regional structure, and delivering the 2017/18 budget will achieve the first £10m of our £38m a year efficiency drive.

“Above all else though, we will make sure we remain anchored by our social roots. This means increasing the supply of quality and safe affordable homes, and continuing to invest in services for our customers and our communities.”

The full set of L&Q’s 2017 Financial Accounts is available on this website.

For more information, please contact James Howell, Press & External Affairs Manager at L&Q, on 0300 456 9998 (ext 5154) or email jhowell@lqgroup.org.uk

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