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Stonewater gets merger boost, but repair costs hit margin and interest cover
Stonewater has seen its annual surplus more than double after acquiring another smaller landlord, but its margin took a knock from higher repair costs.
The 39,000-home association reported a surplus of £131.4m in the year to the end of March 2024, up from £53.8m the year before.
The jump was mainly due to a £120.7m one-off gain from taking on 1,650-home Surrey-based housing association Mount Green as a subsidiary in February.
It is the second year in a row Stonewater’s bottom line has been boosted by the takeover of a Surrey-based landlord after 550-home Greenoak became a subsidiary in early 2023.
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In its most recent year, Stonewater also booked a £1m gain from acquiring 15-homes from another small Surrey landlord, Puttenham and Wanborough Housing Society, in January.
Despite the latest gains, Stonewater branded it a “challenging year” due to the “tough economic environment”.
On an operating basis, the landlord’s surplus slid by 8% to £60.5m.
Operating costs jumped by nearly £30m to £187.2m due to higher repairs and maintenance spending, it said, reflecting a trend seen across the sector.
In its annual report, Stonewater said: “The overall costs reflect increased volumes of repairs, ongoing maintenance and improvements for our customers’ existing homes and the investment in our transformation programme to drive future efficiencies.”
The association’s overall operating margin slipped to 19.3% against a target of 25.5%, as it spent an extra £15m on reactive repairs.
The extra spending also hit Stonewater’s EBITDA MRI (earnings before interest, tax, depreciation, amortisation, major repairs included) interest cover figure – a key indicator of liquidity and investment capacity – which fell to 79.3% against a target of 124%.
Writing in the annual report, Nicholas Harris, chief executive of Stonewater, said: “It is fair to say that this year has been an especially testing one for customers, colleagues and for the entire sector as a whole because of the ongoing cost of living crisis and the continuing tough operating environment.
“I’m pleased to report that we are weathering the storm.”
Despite more investment on its existing stock, Stonewater bucked the sector trend by increasing its completions.
The landlord built 1,185 homes in the year, up from 963 the previous 12 months. However, the figure is down on its annual target of 1,500 homes, based on its 2022-2030 strategic plan.
Of the homes delivered in the latest year, 867 were for affordable rent, social rent or Rent to Buy. A total of 318 were for shared ownership.
Stonewater’s turnover increased to £271m, compared with £239m the previous year. Its rental income rose by £24.5m due to building more homes, acquisitions and rent increases.
The association’s revenue was slightly dragged down by a £1.4m fall in income from open market sales.
Total debt at year-end was £1.96bn, up from £1.86bn at the same point last year. A total of £353m is currently undrawn. Gearing was 53.2%, down from 54.1% the pervious year.
Stonewater, which was formed nearly 10 years ago through a merger of Raglan Housing and Jephson Group, currently has a G1/V1 rating for governance and financial viability with the English regulator.
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