L&Q reveals full details of forecast surplus cut to investors

L&Q also told investors its surplus for the first nine months of 2018/19 is £142m for the nine months up to 31 December, down from the £262m surplus for the same period last year.

In the email revealed yesterday, David Montague, its chief executive, said the landlord would deal with the financial pressure by freezing non-discretionary recruitment, a likely halt to staff bonuses, a delay to some stock improvement work and seeking higher returns from developments.

In the statement today, Waqar Ahmed, group finance director at L&Q, said that the “ongoing political and economic uncertainty continued to weigh on consumer sentiment particularly in London”.

Mr Ahmed said this “period of uncertainty” combined with L&Q’s decision to increase investment in health and safety and quality of its homes led to the reduced performance.

L&Q’s increased expenditure in maintenance for the 12 months to 31 March was £40m higher than its initial budget for projects across the year.

The surplus was also impacted by a £20m increase in operating costs, the update revealed, which was said to be a result of changes to accounting rules and an increase on project interest costs.

The drop in demand for homes to buy was reflected in the association’s net margin on open market sales, including shared ownership which fell to 7% in the nine-month period, down from 16% for the same period last year.

Operating margins on all lettings fell to 43%, compared with 51% in Q3 last year.

Despite the cost pressures, L&Q and its joint ventures had completed 2,158 units in the first three quarters of the year, up from the 1,430 for Q3 in 2017/18.

This included 1,140 for social housing tenures, nearly double last year’s figure of 582, and 1,018 for market tenures, up from 848 last year.

It said it was projecting 2,900 completions this year and 5,500 starts – which would be record figures for the sector in recent years and top the 2,443 completions and 2,692 starts last year. However, the figure would be down on the 3,236 completions it had projected for the year.

Including joint ventures, the housing association is operating on 155 active development sites, up from 127 last year.

L&Q said it has approved an additional 4,798 residential units during the financial year to date bringing total units in the development pipeline to 46,000, of which 12,600 are on site.

The projected cost of the entire development pipeline is estimated at £5.4bn through to 2033.

Mr Ahmed said: “Despite the challenges presented to us, we are confident that the excellent progress that we have made against our current priorities, our ability to adapt where necessary and to act prudently will ensure that our long-term corporate objectives remain achievable.

“While market conditions remain tough and we continue to be more selective about new business opportunities, the strength of our balance sheet and our ability to service debt means that our long-term ambitions are unchanged.”