Revenue and underlying operating surplus up but housing association hit by higher non-recurring and fire safety costs

Metropolitan Thames Valley Housing (MTVH) has reported an £80.2m pre-tax deficit in its unaudited financial results for the 2023/24 financial year.


Source: Metropolitan Thames Valley Housing

Ian Johnson, chief financial officer at Metropolitan Thames Valley Housing

The 57,000 home-housing association incurred non-recurring and fire safety costs totaling £110m in the year.

The bulk of these expenses, amounting to £64m, were linked to addressing fire safety issues in blocks owned by leaseholders, exceeding 11m in height.

Additionally, £32m was attributed to the write-down of two decommissioned tower blocks in North London which are “end of life”.

The remaining £14m that makes up the non-recurring costs relates to other fire safety remediation expenses.

MTVH’s total revenue for the year to 31 March 2024 increased by 9% compared to the previous year, from £389m to £423m, while its underlying operating surplus increased from £121.7m to £126.6m.

The improvement in MTVH’s underlying operating surplus is attributed to last year’s 7.7% rent settlement, which MTVH’s chief financial officer Ian Johnson said has enabled the housing association to increase the amount it invests in its estate.

Johnson noted that “in previous years, we’ve probably seen inflation higher than that rent increase, but last year rents have increased probably a little bit ahead of inflation”. However, he added that for at least the two years before, rent increases were “well below inflation and lagged behind”.

On MTVH’s unaudited financial results, Johnson said: “It’s a strong performance, what turns that into a loss is our fire safety and decommissioning costs.”

Johnson added that the underlying surplus is improving, “but we feel the right thing to do now is make these decisions as accounting adjustments in respect of leaseholders and [decommissioning] these two blocks”.

He said that carrying out remediation works on the leaseholder blocks will “protect their position”, adding that “to make sure we’ve got the resources to do those works we’ve booked that as a charge this year, as a one-off”.

MTVH’s chief executive Geeta Nanda OBE, said that the priority for the two tower blocks is to decommission them and for tenants to be moved out, and that “there is no current plan [for the buildings] after that”.

Johnson stated that MTVH will not face recurring costs like the £64m estimated spend on remediating leaseholder-owned blocks and the £34m for decommissioning two blocks.

MTVH’s seven-year fire safety programme is worth a total £231 million, with a portion of this already having been spent. Over the upcoming seven years, approximately £150 million may be spent, although this will be calculated separately each year.

MTVH reported a “strong cash performance”, generating £268m in cash from operations, the same as in the 2023/24 financial year. Johnson said that this cash generation means MTVH can “use our own resources plus borrowing new resources to build new homes”.

In the previous financial year, MTVH built 892 homes, compared to 657 homes in the 2022/23 financial year. It has a target to build 1,000 new homes per year.

MTVH currently has 5,556 new homes in its 5-year pipeline compared to 3,858 this time last year. To deliver the pipeline, Johnson said MTVH will need to borrow more and is in a good position to do so with “good, strong underlying surplus results” and an A- rating from S&P. The ratings agency has also revised its assessment of the outlook for MTVH from negative to stable following the annual review in December 2023.

On the financial results, Nanda said: “The year to end-March 2024 has been one of significant progress towards our vision to provide more people with a decent home and the chance to live well. I am pleased to be able to report a strong underlying trading performance over the 12 months”.

She said that the increase in MTVH’s total revenue and underlying operating surplus ”is an excellent performance against a backdrop of rising inflation and interest rates over the year, which put upward pressure on both operating and interest costs. The performance reflects the decisions taken over recent years to lower the risk in our development programme, and to boost overall productivity through investment in new IT systems and the skills of our people”.

Nanda added: ”I will be stepping down as CEO in September and handing over to my successor. When we merged Metropolitan and Thames Valley Housing in 2018 to create MTVH our vision was to build a modern housing association of greater scale with the ability to bring more positive impact to peoples’ lives.

”We have invested in making this a reality through new systems, organisational design and the skills of our people and I am proud to see the strong culture, colleagues, leadership team and Board that make up MTVH Thames Valley Housing Association (TVHA) Consolidated Results today. I am confident that this team, under new leadership, will continue to deliver on our strategy to serve people better every day and our vision to provide decent homes and the chance to live well.”