Midland Heart’s surplus boosted by stock swap and ‘record’ shared ownership sales

The biggest boost to Midland Heart’s bottom line was a 1,100-home stock swap with Orbit in June last year, which produced a surplus of £7.5m. 

However the landlord flagged that stripping out exceptional items in its accounts from the past two years, its operating surplus has remained “largely static”.

On development, Midland Heart saw its annual completions double to 700, against a pandemic-affected previous financial year. The most recent year’s performance came despite a “challenging operating environment” due to COVID-19 supply issues, plus materials and labour costs rising, the group said.

Writing in the landlord’s annual report, chair John Edwards said it is “on track” to deliver its target of building 4,000 new homes over its corporate plan period of 2019-25.

In its core social housing lettings division, income edged up to £182m, but the operating surplus fell to £54.9m. This was due to higher materials and labour costs for maintenance and extra spending on retrofitting and building safety, the landlord said.

This included fitting eight sprinkler systems in its “higher risk” retirement living schemes.

Despite this, the group’s overall operating margin rose to 36.3% compared to 33.8% the year before.

Rent arrears came down to 4.3% at year-end compared to 4.5% at the same point last year.

Net debt at the year-end was £499.6m, up from £473.5m at the same point last year.

Gearing was 45% against 44% the year before.

In the year, the group also signed a memorandum of understanding with British Gas to look at ways to make its existing stock more energy efficient.

The landlord said it has also developed the first UK homes to meet the new Future Homes Standard, which will reduce carbon emissions in the properties by 80%. The findings are being monitored by academics at the University of Birmingham.