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Swan’s surplus dives as cost to fix ACM cladding remains uncertain
Swan has reported a drop in annual surplus of more than a third, while warning that the cost to replace Grenfell-style cladding remains uncertain.
The 11,000-home landlord reported a group post-tax surplus of £8.96m in the year to the end of March 2019, compared with £14.5m the prior year.
Swan previously identified two buildings partly clad in aluminium composite material (ACM), similar to that used on Grenfell Tower. It set aside a provision of £3.2m in its last financial year, but that has increased to £3.4m, its annual report revealed.
Work has been delayed on stripping and replacing the cladding on one of the unnamed blocks due to an on-going dispute.
Sawn said: “The absence of agreement with respect to one of the affected schemes concerning the nature and scope of work gives rise to a level of uncertainty in determining the upper range of cost that may be incurred.”
Work on the other scheme was expected to start this year after a settlement was agreed with a third party, the group said. The association is among a number of landlords and housing associations in disputes following checks on buildings done in the wake of the Grenfell Tower fire.
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Swan’s repairs and maintenance bill, excluding the provision for the ACM cladding work, was £10.7m.
The Essex-headquartered group said its bottom line has also been affected by loan positions and losses relating to its pension scheme.
Swan’s group turnover fell 11% to £81.1m, which it blamed on construction delays at two big housing schemes, meaning fewer private and first-tranche shared ownership sales.
The group’s overall operating margin was down slightly from 27.7% to 27.5%. However, its operating margin from social housing lettings rose to 47%, from 44.4% the prior year.
Turnover from social housing lettings edged up to £61.5m, leading to an increased surplus of £28.9m.
Swan reported it has a secured pipeline of 7,400 homes for development. It is aiming to build 10,000 new homes by 2027.
Tenant arrears improved in the year to 1.83% from 2.24% in the 2018 financial year.
The association is also investing in modular housing and opened a specialist 75,000 sq ft factory in Basildon, Essex, in 2017. At the time of the latest annual report, the group said the factory was moving into full production with the first homes occupied.
The factory specialises in manufacturing in cross-laminated timber (CLT), which has fallen foul of a government ban on combustible building materials.
However, Swan said at the time it will continue to build schemes below 18 metres using CLT.
The group’s 65-home Watts Grove development in Tower Hamlets, which is five storeys, is being touted as the the UK’s “first mid-rise, volumetric CLT scheme”.
Housing association financial statements 2018/19
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