Pandemic hits stock disposal plan and housing starts
Clarion has reported a 27% decrease in its net surplus, as it paused planned sales of stock because of the pandemic.
The giant housing association, in its report for the year to 31 March 2021, revealed an operating surplus of £258m, 12% down on the £293m reported the previous year. Its net surplus fell 27% from £168m to £122m over the same period. Housing association surpluses are calculated by deducting expenses from income (see explainer below).
The association said the drop was down to its decision to temporarily pause its stock rationalisation programme, meaning profit from the disposal of property fell from £59m to £25m.
An unspecified one-off £16m ‘breakage receipt’- money paid to Clarion due to the exit of a contract- in the previous year also contributed to the drop. In 2017 Clarion outlined plans to sell 10,000 homes over 10 years to shrink its geographic footprint and drive efficiencies. This ambition hasn’t changed despite the pause.
The financial statements also quantified Clarion’s expected drop in development. The organisation started 2,335 homes in 2020/21, a 9% decrease on the 2,572 the previous year. Completions however held steady at 2,126 homes compared with 2,101 in 2019/20. The group has a development pipeline of 20,000 homes.
The group increased its turnover by 12% to £944m. Shared ownership first tranche sales income increased by £52m to £125.7m, open market sales revenue jumped from £53.7m to £87.7m and social housing rental income increased by £20m.
Clarion increased its spending on fire safety remedial work to £27m, up from £18m. It is now planning to invest £150m in fire safety over four years, up from £100m previously stated.
Mark Hattersley, chief financial officer of Clarion, said: “I am pleased we are able to report a strong operational and financial performance today, underpinned by the completion of a record number of new homes. That we have managed to achieve so much in the face of an unprecedented challenge is a real testament to the resilience, and dedication of our staff.”
Clarion was last month appointed development partner for the £3bn Tendring Colchester Borders Garden Community project which is expected to deliver 9,000 homes. Clarion’s commercial development arm Latimer will act as master developer alongside housebuilder Mersea Homes on the joint project for Tendring district council, Colchester borough council and Essex county council.
Latimer earlier this week announced a deal to acquire a 0.44 acre brownfield site in Manchester city centre on the Islington Wharf development. Latimer will take on 106 properties built by Waterside Places, a strategic joint venture between Muse Developments and the Canal & River Trust.
What are housing association surpluses?
Housing association surpluses are calculated by deducting expenses from income. They differ from profit as they are not paid to shareholders but instead re-invested in building homes and funding services.
Associations are required to post surpluses to maintain lender and investor confidence, assure the regulator of an organisation’s viability and to ensure the business is well-positioned to cope with unforeseen events. Surpluses can be used as future working capital to enable organisations to fund development while reducing their reliance on grant, debt or other types of funding.