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Large London housing association sees half-year surplus drop 79% as sales turnover falls
Notting Hill Genesis (NHG) has pointed to the “challenging economic backdrop” after reporting a 79% decrease in half-year surplus caused by a sharp fall in sales and higher operating costs.
The 67,000-home landlord posted a surplus of £18.3m in the six months to the end of September, compared to £87m in the same period last year.
The group’s surplus was also lower year-on-year as in its previous first half it made £30m in gains on financial derivatives.
Patrick Franco, chief executive of NHG, branded it “a resilient performance… against an increasingly challenging economic backdrop”.
Like other G15 landlords, such as Southern Housing, NHG has seen a dramatic drop in sales amid a tough housing market.
In its half-year update, NHG reported an 82% fall in sales turnover to £12m. It sold 42 homes compared to 242 in the same period last year.
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However it said the fall was “in line with the new build sales programme which is budgeted to be much lower in 2023-24 overall and is weighted towards the second half”.
At the end of the six-month period, NHG had 10 unsold homes, compared to 115 at the same point last year.
On shared ownership, the group said it had seen fewer shared owners staircasing due to the economic conditions. It led to NHG’s surplus on the sale of fixed assets more than halving to £11m.
Turnover from rent and service charges rose 6% to £318.5m.
However this was offset by the group’s operating costs increasing by 18% to £253.4m due to the “high inflationary environment”.
Completions and starts in the period were not disclosed, but NHG said it spent £119.1m on development.
However it warned: “Due to the political environment and the ensuing market uncertainties, the group board and management continue to review the carrying value of investments.”
In its last financial year, NHG booked write-downs on eight schemes.
In line with other social landlords, NHG’s repairs and safety spending is also rising. The group said it invested an extra £15.1m in this area.
This included £32.8m on compliance such as lifts, fire risk action and remedial works, the group said.
It comes after it emerged in September that NHG had paid out £6.9m in compensation to residents over building safety defects on two estates.
A total of £9.6m was spent on planned investment works, including energy improvements, cyclicals and upgrading kitchens and bathrooms, NHG said.
Amid an ongoing focus on social housing conditions, NHG has said it expects to spend £500m over the next 10 years to improve the quality of its homes.
Elsewhere, the landlord’s update revealed that its operating margin on social housing lettings slid from 28.2% in last year’s first half to 9.7%. The group’s overall margin was 23.4% against 33.2% last year.
Rent arrears were 10.4% compared to 9.7% in 2021-22. Net debt edged up to £3.46bn, while it retained undrawn facilities of £914.1m.
Mr Franco added: “The group remains financially strong, which allows us to continue building new homes, as well as investing to improve our existing homes and estates.”
Looking ahead, the group concluded: “Higher expenditure on repairs and lower shared ownership staircasing receipts are expected to continue to bring adverse pressures on the financial surplus for the year.”
In its last full year, NHG recorded a pre-tax surplus of £106.1m.
The group currently has an interim chief financial officer, Susan Hickey, who took over in May after the exit of Yomi Okunola after less than two years in the job. Ms Hickey previously spent 10 years at Peabody and more recently led troubled landlord Swan.
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