G15 landlord targeting £14m of efficiencies this year
Southern Housing has posted a surplus of £5m for the year to 31 March.
The G15 landlord, in its financial statements, revealed it has moved back into surplus following a deficit of £28m the previous year that was largely due to a £30m loss from fair value movements of property and investments.
However, the group’s operating margin was 12%, below its target of 18%. Southern said was due to “several material adverse costs”, including write-downs, impairment charges and rising maintenance spend.
As previously announced the group wrote off £13m due to structural issues identified at the provider’s 60-home block at Station Approach in Woking. The group has rehoused residents and is working to resolve the issues and recover its costs.
The accounts reveal an impairment write off of £7 million and other social housing impairment of £4 million “bringing the total write down on schemes to £39 million”. The group was hit by costs relating to the collapse of contractor Henley Construct. As reported earlier this year by Housing Today, Southern has submitted a claim for £36m to the contractor’s liquidators for costs relating to two schemes the contractor was building for Southern.
The 80,000-home group has previously announced it is halting commitments to new development in a bid to reduce its EBITDA MRI interest cover.
Interest cover compares earnings to interest payments and is used as a measure of registered providers’ financial capacity. Entering into development commitments involves borrowing to part-finance schemes, which can worsen the interest cover metric.
However the figures for 2024/25 show Southern’s interest cover has again declined. Its EBITDA-MRI net cash interest cover (excluding sales) fell from 39% to 27%, below its target of 45.8%. However, in May it said this would have been 37% without the Woking scheme write-down.
The accounts show Southern’s spend on new development has dropped from £257m to £229m, while its starts fell by two-thirds from 345 to 127 homes.
The group completed 807 homes, up from 776 last year.
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Conversely, Southern has shifted spend towards improving homes. Its annual spend on existing stock rose from £247m to £286m. Spend on routine and planned maintenance to existing homes increased by £29 million to £201 million. The group’s total operating costs rose by £51m to £536m.
Paul Hackett, chief executive of Southern, said: “We continue to invest in our existing homes as the focus on housing conditions, particularly building safety and damp and mould, has intensified.
“We’re also delivering a repairs service improvement plan, the benefits of which we’ll see in the coming years. These activities have drawn resource we ordinarily would have used to build new homes, meaning our development activities remain on hold, although our ambition remains to ramp up from 2029.”
Southern increased its turnover from £609m to £674m year-on-year, while its operating surplus, excluding one-off costs, rose from £108m to £123m.
The group has been pursuing efficiencies since the merger between Southern Housing and Optivo in December 2022.
It said it has delivered £9 million in efficiencies since the merger and has identified a further £14 million in savings to be delivered in 2025/26.
It said: “These efficiencies are principally coming from our back-office functions and are focused on staff costs, insurance and technology costs. We expect to deliver further efficiencies over the next three years as we complete integration and shift our focus to transformation. “
The group reduced its rent arrears to 4.3%, below its target of 4.7%.
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