L&Q strengthens margins but sees a fall in new build homes

For the 2019/20 year, L&Q’s turnover is down from £937m to £914m. 

Investment in existing homes was down on last year by £30m, to £61m, while planned and reactive maintenance spend rose by almost six per cent to £168m, including a 45 per cent increase in fire safety spend to £35m.

The unaudited results follow a £148m fall in surpluses a year earlier, along with increased pressure on margins, as L&Q responded to the fire safety and quality agendas, while taking a hit on sales. Today’s results exclude fair value for the Trafford Housing Trust takeover.

L&Q is the largest owner of high-rise towers in the sector, and in the aftermath of the Grenfell Tower tragedy it committed to a five-fold increase on its original £50m of safety spend. The plan means an extra £250m on its £1.1bn of investment over five years.

In November, L&Q confirmed that it had paused new scheme approvals. The association said it is “reappraising existing commitments” amid more challenging market conditions.

The latest results show that the number of units in L&Q’s management – including garages and commercial units – rose from 103,917 to 113,525 as Trafford HT was included in the figures following its acquisition in October.

The group is continuing to pursue an ambition of delivering 100,000 homes in a decade.

However, while L&Q started nearly 6,500 homes in the previous year, it has completed 2,439 in the 2019/20 financial year, which is around 400 fewer homes than in 2018/19.

Of the completions, just under half were for social tenures.

The average selling price for L&Q’s homes has increased to £612,000, of which 74 per cent were conducted under Help to Buy.

Unsold homes continue to be a problem. More than half of L&Q’s 526 unsold homes – worth £133m – have been stalled for up to six or 12 months.

The group also started 3,945 new build residential units on site, down 40 per cent from the 6,428 a year earlier.

Coronavirus impacts and mitigations

Setting out its COVID-19 mitigations, the group said it continues with plans to prepare for the phased remobilisation of construction and planned maintenance work sites smoothly and safely and “as soon as the time is right”.

It has put in place an extra £300m of committed loan facilities, taking liquidity to more than £800m.

The group has also removed £66m of non-essential operating expenditure for the current financial year ending 31 March 2021, and postponed £300m of capital expenditure.

Its maintenance spend remains restricted to priority repairs and fire safety.

The group has also booked a £3m bad debt provision, included within the unaudited 2019/20 results.

Meanwhile, it has rolled out a recruitment freeze and a pause on pay increases. It confirmed at an earlier date that it had furloughed around 100 staff members.

In terms of the impact on tenants and residents, L&Q reported that 957 payment deferral requests had to date been made by residents on a portfolio of 113,525 units, while its rolling four-week arrears have increased from 5.04 per cent to 5.43 per cent, including 6.03 per cent for social tenures and 3.35 per cent for non-social tenures.

That equates to £3m between 31 March and 7 May 2020. 

Meanwhile, 47 per cent of projected residential sales have completed, achieving 50 per cent of projected profits, demonstrating “continued demand supported by the ability to sell homes remotely”.

Including joint ventures, L&Q is operating from 158 active sites.