Metropolitan turns it around as surplus doubles in a year
Published by Max Salsbury for 24dash.com in Housing and also in Finance
Metropolitan turns it around as surplus doubles in a yearImage: Housing via Shutterstock
Social landlord Metropolitan has seen its net surplus almost double in a year, two years after the Homes and Communities Agency began monitoring it over financial risk concerns.
The 38,000-home provider's results for 2013/14 show:
• Group net surplus of £40.2 million (a 97% increase on the previous year) – based on cost reductions rather than sales activity.
• Operating margin of 32% compared with 15% two years ago – moving from £36.7m in 2012 to £82.1m in 2014.
• A total of £33.5m savings in operating costs over the past two years which represent a 19% reduction, equating to £907 per unit.
Metropolitan says that its savings were delivered as a result of a drive to "do things better, to procure goods and services efficiently, and to reduce back office costs".
Sarah Mussenden, executive director of finance, said: “These results show that the decisions we’ve made over the last 18 months have delivered significant improvements to our financial position. We still have work to do but we are exactly where we wanted to be at this point in our two-year turnaround programme.
“Our key priorities have been to increase our surplus and to improve our operating margin – both of these goals have been achieved. We have taken £33.5m worth of costs out of the business in the last two years and that is what has driven the performance.”
Because of its bountiful surplus is based on cost savings rather than sales activity, Metopolitan says it now has the capacity to take on more debt and, consequently, a more ambitious development plan.
The housing association now plans to deliver 3,300 'affordable' homes in the next five years, spending in excess of £730m.
It also saw its care and support business generate a positive return this year, following "fundamental changes to operations and contracts".
Brian Johnson, Metropolitan's chief executive, said: “At the start of our two-year turnaround programme we were very clear that getting our basic costs down was the priority and these results show that we have made significant progress in a short period of time.
“Our results have not been dependent on sales activity. A huge chunk of our surplus was from the efficiencies we have made to our operations. So when the next housing downturn happens and we – and all associations – have to rein back a little on development, our operating surplus will still be very strong. That is what the financial markets care about and that is what will give us the capacity in the future to borrow more money.
“Every penny that we have in surplus is reinvested in housing and communities – that’s what we’re here to do and our strong financial performance this year will help us to deliver far more for the communities we serve in the future.”