Sanctuary turnover tops £1bn as surplus drops more than £20m due to Swan rescue

“The primary driver for this decrease is the impact of a full year of Swan finance costs,” the landlord said, as it expects to see “the benefits of the rescue of Swan” over the longer term.

“Much progress has been made to date in stabilising Swan and limiting its losses and exposures,” Sanctuary added. “Completion of remaining system integration activities and debt reduction, through targeted disposals of non-operational assets, will facilitate Swan transitioning to a stable financial footing.”

Sanctuary completed its rescue of Swan in February 2023, after the troubled housing association faced severe financial difficulties and regulatory non-compliance.

Swan’s standalone credit rating has seen “a marked improvement from BB- to A following the rescue”.

Sanctuary’s surplus before tax of £207m was 153.1% higher than in 2023 due to a £162.7m net gain on acquisitions from its merger with Northern landlord Johnnie Johnson, which concluded earlier this year.

Its group operating surplus reached £215.2m, marking a 4.8% increase on the previous year. The underlying operating surplus was £206.7m, up £12.3m from last year, which reflects “continued growth across all businesses”. 

Operating margin dropped slightly from 21.8% to 19.8%, due to “inflationary cost pressures experienced throughout the sector”. Sanctuary said “improved operational metrics and efficiencies” had “partially mitigated the impact”.

Sanctuary’s EBITDA MRI interest cover was 105%, compared to 119.4% last year, which it said showed “solid cash interest cover performance” coupled with “record levels of reinvestment spend”.

Its largely fixed-rate debt, in addition to “timely accessing of the capital markets”, meant the impact of rising interest costs have been minimised.

Sanctuary also said that its affordable housing business “benefited from an increase in revenue from existing homes” along with additional revenue from new affordable homes, leading to an extra £37.5m compared to the previous year.

Its accounts show that revenue from the sale of non-Swan developed properties decreased 35.1% to £59.8m due to reduced sales volumes.

Revenue derived from shared ownership and outright sales in its “modest development programme” dropped further year on year to only 8%, compared to 13% last year.

Ed Lunt, chief financial officer at Sanctuary, said: “We are pleased with our financial results for the year and the group remains in robust financial health.

“A more stable economic landscape combined with our investment-grade credit ratings places the group in a strong, financially sustainable position to pursue our strategic objectives, deliver to our customers and fulfil our wider social purpose.”

The latest accounts paint a different picture on the impact of the Swan merger as last year Sanctuary posted a surplus before tax of £101.3m, largely thanks to a £38.5m net gain on acquisitions from the troubled landlord.