Norwich-based housing association hit by rising interest and building safety costs

Flagship Housing Group has reported a 17% drop in its annual surplus.

The 32,000-home association, in its annual financial statement for the year to 31 March, reported a surplus of £49.2m, down £10m on the £59.2m for the previous year and £14.8m lower than it budgeted for.

The group said the main factors behind the drop included a £4m fall in the value of investment properties, which it said “acknowledges the impact of inflation on the longer-term profitability of the portfolio.”.

Net interest costs also increased by £3.4m, while the group also had to make a provision for £3.25m for fire safety remedial works relating to a scheme in Suffolk.

The group’s turnover was £250.2m, which was 18% higher than last year’s total of £231.9m, but was £11.2m below its budgeted amount. Its revenue from open market sales was lower than expected with 103 completions instead of the 130 budgeted for. It also received less income than expected from the Renewable Heat Incentive scheme, while development delays resulted in fewer rental homes available to let.

However, Flagship completed 750 homes in the year, up from the 655 it built last year. This total included 451 homes for affordable rent, 181 for shared ownerships, two for shared equity and 116 for open market sale.

Jonathan McManus, interim chief financial officer at Flagship, said: “The past financial year has seen a number of challenges with high levels of cost inflation and increased expenditure on repairs and maintenance to ensure we maintain compliant high-quality affordable homes.

“Despite these challenges we have delivered a really strong set of financial results which continues to be underpinned by our healthy liquidity position.”

The association also announced that McManus, who has held the position of interim CFO since December last year, will take up the position on a permanent basis from next month.