Riverside boosts operating surplus, but posts deficit for second year running

Riverside added that it had focused on “strategic disposals” during the financial year, which generated a surplus of £21.3m.

The association’s EBITDA MRI (earnings before interest, tax, depreciation, amortisation, major repairs included) interest cover reached 52%, an improvement on the previous year’s 42%, but its target for 2024-25 is just 15%.

It said in a note that if £87m in capitalised major repairs was excluded from the calculation, the 2023-24 outcome would increase to 138%.

“Our EBITDA MRI is influenced by higher costs and the lower operating margins associated with our labour-intensive care and support business,” Riverside said, adding that it was also determined by “a relatively low rent base, especially in the North West of England”.

Riverside reported an overall group-level surplus, excluding the disposal of fixed assets, of £56.7m, which marked an increase in its operating margin to 8.6%.

The large landlord also made progress on its plans to rationalise its loan portfolio after the acquisition of One Housing, including restating loans with Barclays and Lloyds.

“Riverside elected to exit lending agreements with a number of non-core banks as part of the strategy to move financial covenant wording to a more uniform level and consolidate the debt portfolio with core lenders,” it said.

Riverside added that the “key transaction” in the period had been to issue £365m of notes via a private placement with five investors, three of whom were new.

The treasury team plans to raise an additional tranche of long-term fixed rate debt in the first half of the financial year and further fixed-rate funding after that.

During 2023-24, Riverside built 1,479 homes, with 1,257 homes developed for affordable rent and shared ownership.

Paul Dolan, chief executive of Riverside, said his first priority was “ensuring that we do better for our customers, invest in their homes and help the country address the ongoing housing crisis”.

“But to do that, the organisation has to be in the right shape. For me, that means completing the integration process we have started, which will help drive efficiency and create further financial capacity and resilience,” he added.

The landlord was downgraded to a G2 rating for governance after the merger was announced, but regained a G1 rating after an inspection by the English regulator. It continues to hold a V2 rating for financial viability.

The 75,000-home association announced in January that Mr Dolan would take on the job of chief executive in May.

Inside Housing previously reported that tenants and leaseholders of One Housing said the housing association had failed to address serious disrepair and levied huge service fees on tenants a year into its takeover by Riverside.

In August, Inside Housing revealed that Riverside would not be bidding on new Section 106 properties “for the foreseeable future”, focusing instead on existing properties and build contracts.