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G15 landlord which posted £8.6m loss expects ‘difficult’ results to continue this year
A London housing association which posted a huge loss for 2019/20 is bracing itself for another “difficult” financial year with much of the ongoing impacts of COVID-19 and building safety work yet to be felt, its chief executive has warned.
One Housing’s annual accounts for the year to March 2020 revealed a pre-tax loss of £8.6m due in part to poor financial performance from its care arm and escalating fire safety costs in the wake of the Grenfell Tower tragedy.
Speaking to Inside Housing, Richard Hill, chief executive of the 17,000-home landlord, said: “We have been honest in the accounts that it was a tough year and this year will be difficult as well.
“The reason for that is 2020/21 will see the full year of COVID-19 affects on our care and support business; it only impacted on the final quarter of last year.”
“For large parts of the year people have not been moving into care homes and obviously we have had increased costs as well through the need for PPE and deep cleaning.”
Mr Hill could not provide any projections of losses or surplus expected for the current financial year.
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One Housing exited seven care and support contracts over the past two years worth £5m in revenue.
The group described the contracts as “uneconomic”, with Mr Hill suggesting this was due in part to its 2018 commitment to paying London Living Wage in all of its care homes effectively making some contracts unviable.
“We are not expected to exit a lot of contracts [in the coming year],” he said, adding: “Obviously the assurance that we will need is whether we can provide them at the quality they need to be provided.”
The housing association, which owns homes in and around London and is part of the G15 group of large housing associations based in the capital, also took a financial hit on some of its development schemes.
“Those were development schemes that we inherited and people were over-optimistic in the original appraisals, so we have had to take impairments to get them to the right value,” Mr Hill explained.
As with many other housing associations, One Housing is grappling with rising costs related to fire safety post-Grenfell, with several of its buildings needing remediation.
Mr Hill said One has made 28 applications to the government’s £1bn Building Safety Fund with a combined value of £45m but is yet to hear whether the bids have been successful.
The group expects to spend £265m over the next decade on fire safety work, half of which relates to dangerous cladding.
“Our annual turnover is around £200m so those costs will affect our development appetite and in this year we have reduced the number of homes we’re expecting to build but that is not a consequence of the 2019/20 results – it is a consequence of the long-term impact of building safety,” he said.
Another potential impact on the landlord’s finances is its exposure to derivatives – financial instruments that expose the holder to interest rate risks.
These floating rate loans amounted to a £6m loss for One in the year and if interest rates were to fall again in 2021, then this figure could grow.
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