Clarion grows its surplus 61% despite investing more in its properties

First tranche shared ownership sales generated a turnover of £150.1m, up from £125.7m the previous year, while turnover from open market sales grew from £87.7m to £157.3m.

And separately, joint venture sales generated an additional £94m in turnover and £12m in operating surplus for the group when compared to the prior year.

Social housing rental income increased by £16m, predominantly driven by the 1.5 per cent, CPI rent plus one, rent increase.

Clarion grew its surplus despite investing £638m in social housing, including £136m in its existing homes. This was up from £95m the previous year, driven by a record £40m spent on fire safety and £502m on building new properties, the same amount as the previous year.

Mark Hattersley, chief financial officer at Clarion, told Social Housing that the organisation has been investing more in repairs and maintenance, a long-term focus for the group, and spending funds on improving the quality of stock and decarbonisation.

He said: “I think it’s a very strong set of financial results. But those results haven’t come at as a result of cost-cutting; we have still increased our investment in properties, investment in repairs and maintenance.”

Clarion’s operating costs rose by £51m to £569m, driven by £20m of exceptional costs relating to the decant of Clare House and works on the Eastfields Estate as well as £16m in routine repairs spend.

The £20m consisted of £8m on other social housing costs mainly for leaseholder buy-backs, a £3m impairment, £7m of management costs predominately for decants and decommissioning, and £2m of repairs.

As a result, although operating margin improved, it was still below target.

Mr Hattersley said the majority of the exceptional costs were linked to Clare House, where Clarion spent money on vacating the properties, temporary accommodation and buying properties back from leaseholders after finding out that some of the remedial work appeared to be incomplete.

In September last year, residents were moved out of 22-storey Clare House in Bow, east London, after surveys found that the building had non-compliant cladding and a dangerous structure.

Meanwhile, the Eastfields Estate in Mitcham, south London, was one of the major cases featured by ITV News in summer 2021, revealing the very poor conditions that some tenants were living in.

At the time, the Ministry of Housing, Communities and Local Government (now the Department for Levelling Up, Housing and Communities) said that “conditions in the homes highlighted in this case were appalling” and that it had made it “clear this is unacceptable”.

Clarion, which has committed to a £1.3bn regeneration programme across the site and two others in south London that will deliver 2,800 homes, acknowledged that it had fallen short of the standards it expects for tenants.

In September 2021 it published a ‘lessons learned’ report, which acknowledged that its approach in managing homes “nearing the end of their life” was “not robust enough”.

When asked about Clarion’s progress on its quality journey and whether it expects further exceptional costs, Mr Hattersley said: “It’s a one-off and we’re looking at options for the building going forward.

“I don’t expect any more exceptional costs. I don’t expect any – you never know what arises, [but] there’s nothing expected. The Eastfields site was a very high-profile incident for us.

“We put our hands up, we made some mistakes with the regeneration site. Regeneration in the sector is incredibly difficult, time-consuming and expensive.

“We took our eye slightly off the ball, and we probably didn’t reflect the slipping timelines and think we still need to do some investment in the properties. We are absolutely committed to giving people warm, dry homes. They should be dry, comfortable, safe and secure and we made some mistakes on that estate.

“And we did a lessons learned [report] and we published that for the sector. And we’ve spent and invested in remedying those mistakes, and we’re moving forward.

“We have got a number of regeneration estates, and we take the lessons learned to making sure we’re applying to other estates. But in terms of regenerating them, the long-term solution is 10, 20, 30-year projects.
 
“So, we can’t promise that everything is going to be great in the next five years. But that doesn’t preclude that people should have safe, dry homes.
 
“Building on history, we absolutely did take it on the chin. We apologise for what we did. We are focused on improving. And we have to regain trust and confidence and that takes time, but we are committed to doing that.”

Clarion delivered a record 2,276 new homes in 2021-22, a rise from 2,126 the previous year but below its 2,800-home target. Of these new homes, 86 per cent were for affordable tenures.

The current development pipeline stands at 21,742 homes.

Mr Hattersley said: “Completions stepped up. You have to recognise they would have been contracted the year before that. The market is tough, and we fell short of our targets. We would have liked to deliver more but we’ve always said targets are contingent on market conditions.

“So, we’re excited and I think the next couple of years are going to be similar. It’s going to be hard to drive significant growth in that area but we gradually want to move the number up when and as we can.”

Mr Hattersley said that with £1.1bn of liquidity in March, Clarion does not need to raise additional funding but after entering into two joint ventures during 2021-22, the group plans to embark on more.

He said: “I’m comfortable where we are in a liquidity and funding point at this point in time.”

Clarion’s gearing has dropped slightly in the year from 54.6 per cent to 53.4 per cent.