Record £60.5m surplus underpins Metropolitan’s development plan to deliver 3,300 new homes by 2019
7 September 2015
Metropolitan’s sustained commercial strength has enabled it to build new homes, buy new land and invest in improving its existing stock.
In 2014/15 the organisation invested £112.7m in buying land and building new homes; and £9.4m in capital repair works and improvements to its existing homes.
At a time when public funding is limited, Metropolitan’s achievements have only been possible because of its continued financial strength – with every penny of its £60.5m surplus being reinvested in new homes and communities.
The delivery of healthy surpluses and consistent levels of free cash flow over the past two years mean that Metropolitan can comfortably meet its interest covenants through the core lettings business surplus. It also has the capacity to take on more debt and, consequently, a more ambitious development plan.
The charitable organisation announced last year its target of delivering 3,300 new homes by 2019 – irrespective of a housing market downturn.
One year on from its dramatic financial turnaround, Metropolitan’s 2014/2015 financial statements show:
- A 50% year-on-year increase in net surplus to £60.5m (up from £40.2m in 2013-4) building on last year’s strong underlying business performance
- Operating margin in the top quartile of financial performers in the G15 group of housing associations at 39% (up from 32% in 2013-14) driven by tight cost control and efficiency in the business
- A total of £45m free cash generated – a key measure of the business’s core operational performance
- Gearing below 60% (standing at 59.2%) for the first time in five years.
Plan to phase in an in-house repairs service
In line with its commitment to strive continuously to improve operational performance, later in this financial year Metropolitan will work towards delivering repairs and maintenance services itself, through an in-house contractor. This will operate in the East Midlands to start with, and will later be rolled out to London areas. However, in the East of England, where Metropolitan’s housing stock is too spread out to make an in-house service a practical, cost-effective proposition, Metropolitan will continue to provide a repairs service through a contractor.
Rent arrears reduced and bad debt at a historic low
This year saw general needs rent arrears reduced from £8.81m to £8.17m (an historic low for the organisation) and more than £1m recovered from former tenants.
Arrears of customers affected by welfare reforms, including the under-occupancy charge, have reduced by more than £100,000 since April 2014. More widely, the organisation’s financial inclusion team helped to reduce arrears by more than £368,000.The reduction was achieved through improved procedures and better customer insight, which meant the organisation was able to target support to customers who were having difficulties making payments.
Housing with Care and Support
Metropolitan’s Care and Support business (previously the Metropolitan Support Trust) ceased to exist as a separate legal entity in January 2015, becoming fully integrated into the organisation. From April 2015 the Care and Support team, which had a successful year, reporting a surplus of over £1m (up from £0.8m in 2013-2014), took on the daily management of over 6,000 Metropolitan properties where support services are delivered.
The team won key contracts and expanded its services in East Anglia. The new contracts – which included a mental health re-enablement service commissioned by Essex Mental Health Trust and a BME (black and minority ethnic) mental health service contract commissioned by Nottingham City Clinical Commissioning Group – were of particular strategic importance to Metropolitan as it looks to build its presence in the mental health market.
Helping customers achieve the greatest possible levels of personal independence
The organisation’s overarching plan and vision is to help its customers achieve the greatest possible levels of personal independence. It has identified independence measures such as securing employment, transitioning from high intensity care and support, and home ownership as “independence steps” – for example, this year, through partnerships with other organisations, Metropolitan helped 372 customers into employment and completed three sector-based work academies. In all, the organisation helped its customers achieve 4,754 independence steps against a target of 1,000 for the year.
Overview and forward looking statement
Brian Johnson, Metropolitan Chief Executive, said: “Our financial position is solid, with our operating margin in the top quartile at 39%.Every penny of our surplus will be reinvested in social housing and the communities we serve. At a time when public funding is limited, none of this would be possible without our sustained commercial strength.
“Taking into account recent policy changes announced in the first Budget of the new Parliament, we are evaluating the affordability of our development pipeline in a changed world – as any responsible company would. We are confident that our plan will remain in place thanks to the financial strength that we have worked so hard to create over the last three years.
“As we look ahead, we will measure our success through three simple goals: financial strength, delivering new homes and supporting our customers in achieving greater personal independence.”