A2Dominion has published its Annual Report & Accounts for 2023/24, recording a turnover of £399.6 million (up by 2.7%) and an operating surplus of £48.7 million (up by 12.2%).
The housing association recorded an overall deficit of £21.0 million (2023: £12.8 million deficit) for 2023/24, which includes net interest charges and a reported downward movement in the valuation of investment property totaling £14.5 million.
The result reflects the Group’s decision, outlined in its new Corporate Strategy, to refocus finances on improvements to services and customers’ homes, as well as investing in building safety work. The last year saw a continued increase in investment in maintaining and improving properties to ensure customers’ homes are safe and comply with new regulations (£96.8m – 2023: £86.1m).
The Group will also be investing approximately £612 million in customers’ homes over the next five years, in line with its 2030 vision to provide homes people love to live in.
The Group’s end-of-year performance has also been impacted by impairments on schemes in development and the costs of aborting potential developments as the Group continues to assess schemes’ feasibility.
This reflects the Group’s new approach to property development, which focuses on regeneration and redevelopment of existing homes and neighbourhoods, and moves away from its previous emphasis on private sale homes via its FABRICA by A2Dominion brand.
In addition, the 38,000-home housing association decided to write-off the costs of a legacy IT programme and introduce a new approach to improving systems for customers and colleagues to drive service improvements and efficiencies that will be more cost effective in the medium term.
The change in direction for the London and South-East association is one of several initiatives that is helping to underpin work to improve its services and outcomes for customers, as well as return to a compliant regulatory grading after its regulatory downgrade in January 2024. The Group continues to review its cost base with several initiatives put in place to reduce costs and improve income generation.
Operating costs increased by 8.6% (2023: 17.1%) and continued to be affected by the rise in inflation including higher utilities and insurance costs of £4.8 million, with increases in: the costs of housing management including decants (£9.8m); leasehold (by £6.1m) and service charge (by £4.7m). Repairs costs increased by £7.7 million, driven by higher inflation, increased volumes of repairs and the cost of transitioning to a new joint venture repairs partnership.
In commercial activities, the Group’s end-of-year results were impacted by the planned reduction of its sales and development programme. Construction costs and delays also increased with some schemes rolling into 2024/25, leading to impairments on some current schemes (£12.6m).
A2Dominion’s balance sheet remains strong, with a Fitch A credit rating, more than £3.5bn of fixed assets and investments, and a reserves position of over £1bn.
With significant liquidity and a strong asset base, the Group has been taking the tough calls now to reset the business to ensure it is well prepared to meet the significant challenges faced across the wider housing sector in years to come so that we can do more to support customers and alleviate housing needs.
Ian Wardle, Chief Executive Officer of the A2Dominion Group, said: “Over the last year we’ve been open and transparent about the need to improve outcomes for our customers, all while dealing with the pressures of financial and regulatory change to the housing sector as a whole.
“Since I arrived at A2Dominion in 2022, the Board has been clear we needed to simplify the organisation and return to the roots and beating heart of a housing association, moving away from being a residential property group.
“This means we have had to take some tough calls to reset and pivot the organisation. These difficult decisions are being taken for the right reasons to support service improvement, adjust our development focus and write off some historic costs that we don’t believe will deliver what we need for customers and colleagues.
“Our strategic priorities outlined in this report look set to help achieve value for money, working first and foremost with – and listening to – customers, as well as other stakeholders to prioritise investment in our core services and communities. “Although the Group’s profitability continued to come under pressure from economic constraints, we’ve already taken action to reduce costs and improve income generation. But there is still work to do.
“Our underlying financial strength and potential is strong, and we will return to profitability as part of the improvements we are making.”
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