Accounts for newly merged Swan reveal £130m deficit after huge impairment from problem schemes

It added: “At a subsidiary level, these challenges have led to cost overruns, delays to works and thus sales have been slower to materialise.” 

Swan’s debt increased as a result of loans to its subsidiaries, it said. 

Most of the association’s development schemes were handled by its subsidiary, Swan Commercial Services, which operated its modular housing facilities and built homes for another subsidiary, Swan New Homes. 

“This meant that all the commercial risk involved in constructing these homes was held by the Swan Group rather than passed to contractors as is more common in the sector,” the accounts said. 

Swan also booked a £16.6m impairment on its second modular factory, where it signed a 15-year lease in 2020 but is being decommissioned, along with its other modular factory.

However, it said a “full estimate” of discontinuing its modular operations – a decision that was taken in December, so outside the reporting period for these accounts – cannot yet be made.

Swan also reported a sharp drop in turnover in its last financial year. Revenue fell 43% to £108m as sales of homes, including shared ownership, slid 64% to £39.7m.  

The landlord pointed to sales on two sites, but said due to cost increases, caused by completion delays and the pandemic, no profit had been made. 

Writing in the accounts, chair Pat Billingham, who was appointed in October 2021, acknowledged it had been a “difficult and challenging year” for Swan.

She said the downgrade to a non-compliant G3/V3 by the regulator in December 2021 had a “major impact” and forced it to consider the value of its assets. 

However, she added: “It is clear that there have been serious failures of internal controls and governance oversight relating to business planning, risk, control and assurance and the effective management of those issues leading to the current position.”

Ms Bellingham also said the landlord had “gained some understanding” of how it had got to the present situation as it “worked through the solutions” and taken “immediate remedial corrective action to manage risks and secure the future”. 

Swan has been in “close dialogue” with the Regulator of Social Housing, Homes England, the Greater London Authority and other key stakeholders, including its lenders and local authority partners, she added. 

Swan said that following a detailed strategic review, it is refocusing on “core operations and core development schemes moving forward”. 

The landlord also breached the Home Standard in May last year after it was found to have around 1,500 overdue fire safety remedial actions. Swan said it has a “robust improvement plan” in place to “remedy these shortcomings”.