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Sovereign boosts surplus thanks to open market sales

Sovereign grew its surplus from £89.1m to £103.9m in its first full year since completing its merger.

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Picture: Getty
Picture: Getty
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A large housing association has boosted its surplus with increased open market sale #ukhousing

Sovereign grows surplus to £89.1m, with jump in open market sales #ukhousing

The 57,000-home association’s biggest growth area was in open market sales, where it took 77.1% more turnover in 2018 than it did in 2017, growing from £9.1m to £16.1m.

Despite the growth in sales, Sovereign retained its A+ credit rating from agency Standard & Poor’s (S&P) and its A2 rating from Moody’s.

Both agencies have spoken of the risks in increased activity in private sales, and S&P has downgraded five large associations over the sales risk they are taking on.


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Operating costs rose slightly in the year from £193.5m to £197.8m. According to Sovereign, this was mainly due to the £4.1m it spent on replacing cladding and upgrading fire prevention services on one block of flats.

The rise in surplus was driven partly by a 53% increase in Sovereign’s income from disposals of property.

In the year, Sovereign sold 413 homes to other housing associations as part of its stock rationalisation programme – intended to make its stock more efficient. In its report, it said it would “continue to explore opportunities” to rationalise stock outside its main areas.

The group actually brought in less money in proceeds from house sales in 2018 – £54.1m – than it did in 2017, when it took in £72.1m.

Its cost of sales expenditure, however, was considerably lower, falling from £66m to £37.5m.


Related Files

Sovereign Annual Report and Financial Statements 2018 (1).pdfPDF, 4.4 MB

Sovereign’s surplus was also boosted by a drop in the amount it spent on interest and financing costs, from £64.3m to £58.1m.

This was almost entirely because of the £5.3m it was forced to pay out in 2017 in hedge break costs – amounts Sovereign had to pay to counterparties on hedge transactions.

This was the first annual report since new chief executive Mark Washer took over, having left the position of chief financial officer at Clarion, the UK’s largest housing association, following the appointment of Ruth Cooke as its new chief executive.

Mr Washer said: “As well as building homes, Sovereign is here to provide a great service and invest in building strong, successful communities.

“We want to maximise our social impact locally, listening and involving residents in how we do things, as well as providing employment and training services for those that want to change their lives. We’ll be increasing our efforts, and our investment, in supporting our communities in the years to come.”

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