London landlord reports loss before tax of £80m due to fire safety remediation costs

Ian Johnson, chief financial officer at MTVH, told Inside Housing: “What we’ve done this year in respect of qualifying leaseholders is to take that cost upfront. It’s still got to be spent and we’ve still got to do those works, but we’ve booked the cost of doing that.”

Mr Johnson said the landlord was working with banks and investors as it dealt with remediation costs.

When asked how long it would take for the work to be done, he said: “We’re talking between five and seven years, I think.”

The 57,000-home landlord warned in January that its bottom line for the current financial year would be hit by £105m in provisions and write-downs relating to fire and building safety works.

“We’ve had a strong performance over the year financially, and also in terms of supporting our residents, but we are seeing more and more people in crisis,” Ms Nanda told Inside Housing, emphasising the support provided by housing associations.

Ms Nanda, who will be stepping down as chief executive in September, said in the trading update that MTVH had posted “a strong underlying trading performance over the 12 months” despite the remediation costs, which she added “do not adversely impact our liquidity position”.

Stripping out non-recurring and fire safety costs, the landlord’s underlying operating surplus “improved by over 4% to £126.6m from £121.7m”, while revenue increased by 9% to £423m.

“The longer-term impact of remediation obligations has also led to a reduction in our capacity to develop new homes, particularly homes for sale,” Ms Nanda said. However, she added that the landlord is still targeting “the delivery of circa 1,000 new homes per year”.

“We have reduced our development programme,” Ms Nanda told Inside Housing. “One of the things we took out was our Section 106 plans that we had in our business plan, and we focused really on our strategic partnership with the Greater London Authority (GLA) and Homes England.

“We have had a reduction in our programme, along with many other housing organisations, but we still want to ensure that we can continue to build new homes.”

MTVH said it has 5,556 new homes in its five-year pipeline compared with 3,858 in 2022-23, and delivered 892 homes in the period to 31 March 2024, up from 657 homes in the previous period.

The housing association’s operating margin for the last financial year was 4%, compared with 28% in the previous period. Its underlying operating margin – without the fire safety costs – was 30.1%, similar to the previous year’s 31.4%.

Turnover from core social housing increased by 9% to £351m, reflecting the 7% rent uplift under the sector rent settlement.

Ms Nanda said the rent settlement of 7.7% would “boost revenues but operating margins may not improve since operating costs are also expected to rise” and “only partly offsets increased costs incurred in FY24”.

“Similarly, the sustained high cost of debt continues to put pressure on interest cover ratios, reducing the capacity to deliver on our corporate objectives. This will impact on our capacity to build new homes,” she said.

Cashflow from operating activities was “strong” at an unchanged £268m, with £807m in available liquidity.

“This robust cash position supports our strategy to continue to invest in our customer experience, our existing properties, and the development of the new homes our country so desperately needs,” Ms Nanda said.

Total proceeds from the sale of properties reached £140m, up from £110m, and it invested £246m in new development, net of grant received, compared with £177m in FY23.

Turnover from sales remained flat at £30m, MTVH said, though 287 homes were sold compared with 231 in the previous period.

Underlying net interest costs were £10.6m higher, the association said, “as variable rates increase from historic lows”.

Ms Nanda also said MTVH was “committed to supporting residents during the cost of living crisis” and had increased the tenant welfare fund by 16% to £729,000.