Series of impairments reduces figure by £53m
Housing association giant L&Q Group has been forced to make major additional writedowns in its accounts wiping out more than a quarter of its expected surplus for the 2021/22 financial year.
The 107,000-home association said that the additional impairments reduced its anticipated surplus after tax by £53m from the £207m it reported in a trading update in May, to just £154m in its final audited accounts.
While the trading update had already included significant impairments, the further writedowns, revealed in a statement accompanying publication of its audited accounts, includes a £24m charge for “build defect liabilities” that had not originally been anticipated in the earlier trading update. It also included an additional £17m of fixed asset impairments and £12m of current asset impairments.
The writedown means the London-based association’s financial performance is well below that of the previous year, when the post-tax surplus was £208m, despite its turnover having risen to £1.11bn, and the association having completed construction of 4,157 homes – a record for the sector. It is the lowest surplus it has recorded for the last five years.
The change pushed the social landlord’s margin down to 24%, from 26% in the numbers given at the trading update, and compare with 30% last year.
In total, L&Q Group wrote off £56m against houses under development in the year, with the organisation referencing problems on three significant projects.
L&Q, which appointed its new chief executive Fiona Fletcher-Smith earlier this year, retains the highest ratings from the social housing rating for both financial viability and governance, and has “A” ratings from all three major credit ratings agencies.
Asked to further explain the change in its reported financial position, a spokesperson for L&Q said that while all the issues had been known when the trading statement was issued, financial rules meant it had to update its estimates for impairments as close as possible to the signing date of the financial statements, and at that later date additional information was available, such as around expected expenditure on build defects.
The spokesperson said: “The impairment reported is limited within a few challenging schemes in L&Q’s large and diverse development pipeline and is not a widespread issue.
“The impairment reported in the year end accounts reflects the most up to date assessment of development schemes as at the date of publication.”
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