L&Q reports sales boost as social housing margin dips on back of response to Grenfell

Increased sales activity have boosted L&Q’s operating surplus by 21 per cent to over £300m.

In a trading update covering the nine months to December 2017, the 98,000-home landlord revealed a £311m operating surplus, £22m ahead of budget.

Group finance director Waqar Ahmed said this was “primarily as a result of better than expected sale completions on outright sale and shared ownership tenures”.

L&Q also posted a record turnover of £701m, up 49 per cent on the same period in 2016.

The previous year’s figure did not include revenue from East Thames or Gallagher Estates, which became subsidiaries of L&Q in December 2016 and February 2017 respectively.

However, L&Q’s operating margins on social housing lettings fell from 52 per cent to 50 per cent, partly in relation to increased maintenance costs associated with its response to the Grenfell Tower fire.

Mr Ahmed said: “The like-for-like decrease in operating margins reflects increased maintenance costs as a result of our direct and immediate response to the Grenfell Tower tragedy. However, the 50 per cent operating margin on our core social housing business is in line with our medium term target of 50 per cent.”

L&Q has set aside £50m over three years to cover any potential costs associated with its response to Grenfell. It has 220 tower blocks over six storeys tall. Of those, there are 12 buildings across seven schemes that have the aluminium composite material (ACM) cladding which failed government safety tests following the Grenfell Tower fire.

Martin Watts, group treasury director, would not be drawn on what the Grenfell fund has so far been spent on but did say the landlord was “undertaking a process of removing and replacing cladding in towers that have failed government tests”.

Mr Watts said the overall margin of 50 per cent was “in line with medium-term targets” and “out-performed” its housing association peers.

“We are still in a period of rent cuts and it is a top quartile performance,” he added.

L&Q’s margin on non-social housing lettings from 61 per cent to 51 per cent. Net margin on sales increased from 17 per cent to 19 per cent.

As a result of its nine-month performance and expected receipts from Gallagher Estates, L&Q has increased its prediction for its full-year surplus to £320-340m. The previous prediction put its surplus as £310-330m.