L&Q's Financial Strength

2007/2008 was a challenging yet successful year for L&Q financially. Despite the impact of the losses associated with Ujima and operating in a harsher economic environment, we’ve achieved a strong financial performance.

L&Q’s accounts reflect the start of the five-year strategy we embarked on last year of greater investment in our services, homes and neighbourhoods and in providing more affordable homes at lower grant rates. This means making full use of our financial capacity, combining our annual surplus with a higher level of borrowing, whilst maintaining flexibility to respond to the unexpected.

2007/2008 IN FIGURES
*Annual surplus: £44 million (down slightly from £46 million in 2007/2008)
*Turnover: £244 million (up from £193 million)
*Operating cost per home: £3,006 (down from £3,098)
*Housing management cost per home (general needs): £496 (down from £521)
*Spend on routine, planned and major repairs: £86 million (up from £70 million)
*L&Q now owns and manages over 56,000 homes (up from nearly 51,000 homes)
*The vacant possession value of our housing portfolio has reached £8.8 billion
*Our average cost of debt has reduced from 6.38% to 5.94%
*We now have a loan book of £1.3 billion

Our increased turnover reflects both organic growth and the inclusion of Threshold, which joined L&Q on 31 March 2007, being reflected in the accounts for the first time. The financial effects of Ujima will not fully impact on L&Q’s accounts until next year, although their results since they joined us in January 2008 are reflected in the L&Q accounts for 2007/2008.

THE FUTURE
Going forward, like most housing associations, we face the challenge of an uncertain economic climate combined with increasing costs, reducing grant rates and continued pressure to deliver efficiencies. The biggest risk posed to us by the credit crunch is the potential lack of available credit and the increase in pricing of debt. We also face increasing costs to bring properties up to Decent Homes standards, to address the sustainability agenda and to support the switch to digital TV.

However, L&Q is in a strong position to ride out these pressures. In February 2008 we received £121 million, the largest single grant allocation, from the Housing Corporation under its National Affordable Housing Programme for 2008-2011. We have sufficient undrawn loan facilities in place for the next three years, and continue to closely monitor our finances.

Because our financial plan isn’t dependent on the sale of homes, some delay in our sales programme this year will not compromise our ability to invest in existing homes and services. We are managing our exposure from our larger sales programme for the future by carefully planning new projects to ensure they are financially viable taking into account current market conditions. By strengthening our reporting procedures and developing our ‘alternate use’ strategy we will ensure that we can respond quickly to changing conditions.

The Government’s housing targets are very challenging, especially given the current economic uncertainty, but L&Q remains focused on their delivery.

This article is taken from the October issue of Creating Places Magazine

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