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Optivo’s surplus slides 79% amid valuation changes and rising costs
London housing association Optivo’s surplus fell by 79% in 2019/20 amid rising fire safety costs and valuation changes.
The 45,000-home landlord’s audited results show that it made an £18m net surplus in the last financial year, down from £87.6m in 2018/19.
Much of the decrease in earnings was driven by movements in the fair value of Optivo’s financial instruments, which fell by £22.8m, and its investment properties, which fell by £5m having increased by £28.6m in the previous year.
Optivo said the COVID-19 pandemic has reduced the fair value of its student accommodation by £6.1m.
However, the association’s £46m surplus before fair value movements was still 24.6% lower than 2018/19’s return of £61m.
Its operating costs increased by £20m (9.8%) to £224m, while the cost of sales rose an additional £5.8m (30.2%) to £24.9m.
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Rising fire safety bills and higher routine maintenance costs contributed to the increased operating costs, Optivo said, with service charge costs also growing £5m (22%) to outstrip income by £2m “mainly due to additional fire safety spend and fees yet to be recovered”.
Voids were also at a “much higher volume” in 2019/20 compared with the previous year, leading to a £3m increase in void loss, it added.
Bringing its repairs service in London fully in house “did not deliver savings as quickly as we planned” and will be a focus in 2020/21, Optivo admitted.
Overall per-unit costs were £4,425, up 4.2% from £4,246 in 2018/19.
The association’s operating surplus for 2019/20 was £90m, a 12.6% drop from the £103m achieved the year before. The operating margin was 23% – meaning Optivo missed its 28% target.
Turnover was £322m, a 2.5% rise from the £314m recorded for 2018/19. Of this, 92% was generated from social housing activities in 2019/20, compared with 94% the previous year.
Optivo uses a net promoter score to measure resident satisfaction. It achieved a score of 56 in 2019/20, four points below target, but it said it was considered “excellent” by independent customer satisfaction experts.
The association started 1,500 homes in 2019/20 – matching its target exactly and up from 1,003 in 2018/19 – and completed 838, all for affordable housing tenures.
