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We had another solid financial performance this year. Our surplus, before tax and impact of derivatives, was £115.7m (2018/19: £114.4m). While this was a modest net increase on the previous year, we took a reasonable and prudent approach to our year end position and reviewed the impact of coronavirus on our financial statements.
Adjusting for the impact of COVID-19 impairment, net fire safety works and other non-core operating costs, our adjusted surplus of £161.3m was 19.6% higher than last year and demonstrates our strong underlying surplus.
These results provide a sensible platform from which to grow through the short term COVID-19 crisis and in the medium and longer term, helping us meet the ambitions of our 2050 Strategic Plan, A great home for everyone launched in April 2020.
Our position was confirmed by the Regulator of Social Housing’s Regulatory Judgement in April 2020, which saw us retain our G1/V2 rating. The G1 rating demonstrates our robust governance and our V2 rating shows our solid financial position, combined with our commitment to investing in our homes and to deliver more affordable homes in the future.
S&P awarded us an A rating, with a Stable outlook, in July 2020. Additionally, Fitch awarded us an A+ Stable rating in October 2019. However, due to the downgrade of the UK’s Issuer Default Rating caused by the impact of COVID-19, along with other housing associations, this outlook was changed to A+ Negative in May 2020.
- Adjusted surplus rose 20% to £161.3m (2018/19: £134.8m)
- Surplus before tax and derivatives of £115.2m (2018/19: 114.4m)
- Further reduction in gearing to 44.7% (2018/19: 50.4%)
- Liquidity at an all-time high of £828.3m (2018/19: £606.6m)
- Reserves of £609.1m (2018/19 £504.4m), doubling over the last five years.
View and download our financial statement (PDF, 29MB) for 2019/20.
Operating margin is an indicator of the profitability of all parts of our business. Our core operating margin (excluding building safety costs, profit from development sales and one-off costs) decreased from 36.3% to 31.8%. This was a result of investing in our data and technology capability and in improvements to customer services and ways of working.
Our adjusted surplus from development sales, including through joint ventures, was £22.1m (2018/19: £49.2m). This decrease was the result of phasing of development schemes, being completed in 2019/20, and the impact of COVID-19 at the end of the year.
Social housing operating costs
Social housing operating costs per home increased in 2019/20 to £4,445, mainly due to extra spend on compliance and responsive maintenance, investment in IT and data and continued investment in customer services. Management costs increased, due principally to building safety related work. Service charge and maintenance costs also increased, the result of building safety work and higher responsive maintenance and void repairs costs.
Investing in our homes
Stock investment increased to 7.4%, compared with 4.3% in 2018/19, reflecting our investment in new property and construction work and our continuing investment in maintaining homes. We spent £70m on maintenance and major repairs in 2019/20. Future planned investment includes ‘business as usual’ fire safety works which will, following completion of the recladding and safety programme of our tall buildings in 2020/21, focus on our lower rise properties.
We made a number of operating efficiencies this year, including:
- Lowering insurance premiums by £1.05m
- Investing in our IT systems, saving £0.2m in running costs
- Proactive management of council tax bills, saving £0.3m
- Reviewing our water utilities spend, saving £0.2m
- Selling our procurement frameworks, generating £0.3m
- Proactive management of our gas and electricity utilities, saving £0.2m
- Implementation of the first phase of our customer first programme, saving £0.2m.