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Southern Housing warns of more write-downs as sales slow
Southern Housing has warned it expects more write-downs on development schemes as the impact of delays and a tough sales market take their toll.
In its latest half-year update, the 78,000-home landlord revealed that its sales volumes had “slowed considerably”, while contractors going bust and a shortage of materials and labour were leading to ongoing delays on sites.
In its last full year, Southern booked impairments totalling £26.7m across seven sites due to falling sales values.
The association’s update this week said: “We expect to recognise further impairments during the second half of the financial year.”
Southern is not the only G15 landlord to have suffered impairments amid the tough conditions, as Notting Hill Genesis revealed in September it had booked write-downs on eight sites.
Southern Housing, which was formed from a merger between Southern Housing Group and Optivo in December last year, reported revenue of just £3m for open market sales in the six months to the end of September.
In its last full year, turnover from market sales was £67m.
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On shared ownership, the number of first-tranche homes unsold for over six months was 153 at the end of September. This compared with 59 unsold homes for over six months at the end of March.
Income from shared ownership sales in the half year was £19m, compared with £60m in its last full year.
The association said that due to the slowdown in sales, it had converted 29 homes from sales tenures to rentals in the half-year period.
Sarah Smith, chief financial officer at Southern, warned about potential action needed to deal with the financial challenges.
“If we don’t recover our delayed sales revenue and profits by the full-year date and some instead falls into future years, then we could carry a higher debt level and interest costs than our initial budget for a period of time,” she wrote in the half-year report.
“If we need to, we’ll target cost savings elsewhere in our budgets and consider further steps such as converting more unsold homes to rental tenures.”
Southern completed 213 homes in its half year. In its last full year, there were 1,089 handovers. A total of 216 homes were started during this six-month period.
It comes after the landlord revealed earlier this year that it is reducing starts of new builds to around 250 a year.
The association is also spending more to improve homes after facing scrutiny over poor standards.
It was around one year ago that Southern Housing Group – the precursor to Southern Housing before its merger with Optivo – was named and shamed by housing secretary Michael Gove alongside five other landlords for letting tenants down.
In its update, Southern said it now expecting to spend £1.4bn on asset management over its next five financial years.
In the first six months of its current financial year, the association has already spent £50m on planned maintenance compared with £66m in its previous full year.
Southern’s unaudited half-year surplus was £21m on an overall turnover of £301m. In its last full year, the landlord reported a surplus of £40m on revenue of £642m.
The Housing Ombudsman is currently running a special investigation into Southern’s complaint-handling process.
Southern told Inside Housing last month that it had not taken a decision on decanting residents from a block with fire safety issues after criticism from a residents group.
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