Sovereign boosts surplus thanks to open market sales

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.

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.”