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Stonewater’s surplus halves as costs bite
Large national landlord Stonewater has seen its annual surplus halve, despite a rise in turnover, after a jump in spending on maintaining and operating its homes.
The 34,500-home landlord reported a post-tax surplus of £23.9m in the year to the end of March 2022, compared with £48.8m the previous year. The reduced surplus came despite turnover rising 7% to £225.4m.
The knock to its bottom line was partly caused by a 13% rise in operating costs to £139.6m.
Stonewater, which operates across 139 local authority areas in England, pointed to “large increases” in maintenance, service charge costs, legal and professional costs, and depreciation.
Many housing associations saw their maintenance bills increase in the past financial year due to catch-up work following coronavirus lockdowns and post-Brexit material and labour shortages.
In its annual report, Stonewater said the economic environment has been “challenging” due to the pandemic and Brexit, while warning that recent “inflationary pressures have been exacerbated by the war in Ukraine, coupled with significant increases in UK energy costs”.
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The association‘s bottom line was also affected by losses of £2.6m from movements in fair value of non-hedging instruments, compared with a £5.9m gain the previous year.
Income from social housing lettings rose 3% to £187m year-on-year, Stonewater said. Despite the increase, its operating surplus from social housing rent was £52.9m – down from £61m the previous year.
Management, service charge, maintenance, and major repairs costs all increased. The jump in costs hurt the landlord’s overall operating margin, which was 24.3% – down from 32.6% the year before.
Stonewater’s completions recovered in the year, with 836 homes handed over, compared with 671 the previous year.
While a record for the landlord, the figure was well down on its target of 1,110. Delays were blamed on the planning process, as well as coronavirus and Brexit.
The completions consisted of 568 affordable rent, social rent, Rent to Buy homes; 263 shared ownership; and two open market sales.
The association, which has a G1/V1 rating from the English regulator, said it is on track to hit its target of 1,500 completions by the 2023-24 financial year and is aiming to build 7,500 homes over the next five years.
Stonewater secured £37.4m income from first tranche shared ownership sales, but this only resulted in an operating surplus of £7m due to cost of sales. Rent arrears were 5.4% at year-end.
Net debt increased to £1.7bn, up from £1.5bn the previous year. Undrawn facilities totalled £472m. Stonewater’s gearing figures rose to 49.4%, compared with 46.5% the year before.
Nicholas Harris, chief executive at Stonewater, branded it a “good set of results”.
He added: “Our surplus before tax reflects our financial agility, our trading performance, the interest paid on our borrowings, and the movement in the valuation of part of our derivatives portfolio. Our borrowings have increased as we look to build more homes for those in need.”
In June, Stonewater announced a plan to take on small Woking-based Greenoak Housing Association as a subsidiary.
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