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Network Homes surplus dips for second consecutive year
Network Homes is the latest housing association to report a drop in its surplus, as it continued to feel the effect of a decline in housing sales and government plans to trim housing association rents.
The company’s most recent accounts showed that its surplus for the year to March 2018 was £44.3m, down from £51.8m a year previously. It is the second year that the company has seen a drop in surplus after a bumper year in 2016 when it booked £155.3m thanks to a healthy housing market.
During the last year it sold fewer homes, it said, as buyers became more hesitant because of wider political and economic uncertainty. Its report showed that it sold 60 private homes during the 12-month period, down from 66 in the previous year and 239 at its peak in 2016.
Network Homes’ operating margin also dipped slightly, from 32.3% to 30.1% for the same reasons. Over 75% of its total turnover came from its social housing activities.
However, it was able to transfer a further £44.4m to reserves, bringing total reserves to £372.2m, and its overall asset base rose to £1.77bn, from £1.59bn a year previously.
Gearing rose to 53% as it put further investment into its development programme.
Bernadette Conroy, chair of Network Homes, which owns and manages more than 20,000 homes across London, Hertfordshire and the South East, said: “The board has set a clear strategic
objective to maximise growth within our resources... The board believes Network Homes should ‘sweat assets’ in pursuit of this strategy. This year we invested £73m in new development activity and £14.8m in maintaining and improving our existing properties”
During the year, the company completed 284 homes, with 224 for social or affordable rent and 60 for outright sale. A further 270 homes were practically complete and will transfer to the company’s management this year. It started 773 homes in 2017/18 and bought 687 more, and has a current pipeline of around 3,200 new homes before 2020.
During the year the company undertook its first offsite construction scheme, and signed a joint venture with property developer Stanhope to produce 550 homes in Southall, London.
Its total loan facilities were almost £1.1bn of which £842m had been drawn.
Network Homes’ customer satisfaction improved in the year to more than 87% as the company nears its 90% target.
The company also said it had taken legal advice during the year in order to come up with solution to fire safety issues in some of its buildings. Network Homes has four schemes with ACM cladding which failed the government’s tests, although only one of the blocks is fully clad.
It said that it would be in a position to start remediation work "shortly" and announced plans to recruit additional technical roles in order to help it build safe blocks in the future.
All its blocks of ten storeys or more will also be fitted with sprinklers.
Helen Evans, chief executive, acknowledged that as universal credit is rolled out there would be "growing pressure" on the company’s income streams.
"Our cost base will also come under pressure as we manage the implications of change not just in fire safety regulation, but in all likelihood wider consumer regulation of housing associations," she said.
Network Homes has begun to reduce the size of its senior management team as part of cost-cutting measures which were outlined in a ’value for money strategy’ which the housing association published in April.
Update at 10.30am on 2.10.2018
Due to an error, an earlier version of this story was based upon figures from Network Homes’ 2016/17 accounts, rather than the 2017/18 figures as intended. This has now been rectified and we are happy to correct the record.
Housing association financial statements 2017/18
Click on the links below to read more reports about individual associations' financial statements:
A2 Dominion reports £92.5m surplus
Aster sees 12% jump in surplus despite margin drop
BPHA sees surplus jump after shared ownership sales boost
Clarion's surplus falls for second year running
Housing & Care 21 records increased surplus
Metropolitan sees surplus fall due to post-Grenfell costs
Midland Heart records £47.8m surplus
Network Homes surplus dips for the second consecutive year
Notting Hill and Genesis post reduced combined surplus
Optivo sees turnover fall in first results since merger
Orbit surplus boosted by jump in value of private rented units
Paradigm surplus drops after £5.6m loan breakage cost
Places for People boosts surplus to £130m
Southern sees dip in surplus due to pensions and safety costs
Sovereign boosts surplus thanks to open market sales
Stonewater increases surplus by 38%
Swan surplus slides after £3.2m cladding provision
Vivid posts increased surplus post-Merger
