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G15 landlord reports deficit after more than £32m in impairments and write-downs
A2Dominion has reported a net deficit of £12.8m for the last financial year, after more than £32m in impairments and write-downs.
The reported deficit by the G15 landlord comes just days after the English regulator placed the association on its gradings under review list.
The Regulator of Social Housing said A2Dominion could be downgraded to a non-compliant grade following an investigation.
The landlord’s deficit on £12.8m in 2022-23 contrasts with the £40.4m surplus it reported in the previous year.
A2Dominion said its annual figures reflect its increased investment in existing homes to ensure they are safe and comply with new regulations, as well as significant increases in its operational costs and planned fall in sales income.
It told the stock market: “A significant part of the association’s reduced operating margin and operating surplus (£50.3m) comes as a result of the economic conditions the organisation and sector is now facing.”
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This figure included £16.9m of impairments of active development schemes, £7.9m of abortive costs for schemes deemed no longer viable, and a further £7.6m of scheme write-downs within cost of sales.
Combined, these £32.4m of costs have contributed towards A2Dominion’s reduced operating margin of 11.2%, compared to 20.2% in 2022.
Without these costs in the last financial year, its operating margin would have stood at 19.5%.
The association highlighted a planned reduction in its sales and development programme which, coupled with construction delays, led to a fall in sales income of £40.6m.
It also increased its investment into maintaining and improving its homes from £39.6m to £54.7m in 2022-23.
The landlord’s overall annual turnover was also down more than £75m year-on-year to £389.1m.
However, A2Dominion maintains that its “balance sheet remains strong”, with £1.04bn of net assets and over £350m of available undrawn facilities.
The association said this demonstrates its ability to weather the current and future challenges the economic environment presents.
Looking ahead, A2Dominion plans to invest more into redevelopment and service improvements.
Ian Wardle, chief executive at A2Dominion, said: “A2Dominion hasn’t been immune to the tough economic challenges. This year’s financial performance has felt the full impact with rising inflation, interest rates and energy costs, alongside tougher market conditions for construction and a reduced sales and development programme.
“We’ve also chosen to continue significant investments into remediating our tall and complex buildings and improving core landlord services.
“All these factors have contributed towards significant rises in our operational costs and pressures on our profitability. Work is already underway to reduce our operating expenses, borrowings and interest costs, which will help ensure our continued financial sustainability and resilience over the medium to longer term.
“Overall, we continue to be a financially strong organisation, with many of our services performing well. However, we also recognise that there are some important areas where we need to improve and we are committed to putting this right.”
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