Landlord increases annual spend on improving stock by 12%
L&Q has missed targets for operating margin and interest cover but says short-term balance sheet pressure is “acceptable” in order to invest more in existing homes and support long-term outcomes.
The 106,000-home landlord, in its annual financial statement, reported an overall operating margin of 17%, down from 24% year-on-year and below its target of 21%. Similarly, its social housing lettings operating margin was 28%, below its target of 30% but higher than its G15 peers.
The group’s EBITDA-MRI interest cover – which measures interest to earnings – was also below its 150% target at 143%.
The landlord, which invested a record £415m in improving existing homes in 2025/26, stressed performance against its business health targets “isn’t the only driving factor when making decisions.”
It said: “We have placed greater focus on what the right thing to do is, making conscious decisions to invest more in homes, spend more on maintenance in response to the increased demand we have seen, particularly following the introduction of Awaab’s law.”
L&Q said it has made a “deliberate choice to increase investment in existing homes, regulatory compliance and resident services.”
It added: “We accept that this places short-term pressure on some margin and interest cover measures, but supports better long-term outcomes and a more sustainable operating model.”
It said its longer-term outlook shows recovery in its margins and interest cover in 2027/28.
The £415m spend on existing stock is a 12% increase on the £371m reported the previous year. Of the £415m, £143m is capitalised.
L&Q’s audited accounts confirmed its turnover fell slightly from £1.1bn to £1bn as previously announced. Its surplus increased from £23m to £44m after exceptional items but its operating surplus fell from £367m to £245m.
The group’s operating surplus from social housing lettings dropped by £48m to £217m, while shared ownership first tranche sales surplus fell by £9m to £3m and there was also an £8m drop in surplus from market sales . This was offset by a rise in surplus on disposal of fixed assets from £149m to £173m.
The G15 landlord completed 2,055 homes in the year, just 14 homes below its target of 2,069. The figure was an 11% drop on the 2,316 completed in 2024/25.
L&Q said the drop in completions reflected “the continued re-shaping” of its development programme and its increased strategic focus on investment in existing homes. The group did start work on 1,250 homes in the year, which was in excess of its target and more than double the 519 figure for the previous year.
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