L&Q’s capital expenditure continues to ramp up

The number of homes in the approved development pipeline also fell, from 12,717 to 9,807.

The future projected cost of the entire development pipeline extending until the financial year ending 31 March 2040, which includes work in progress and developments not yet committed or on site, was estimated at £2.3bn. Of this, £1.5bn was already committed.

This compares to a projected cost of £2.6bn in the third quarter of 2023-24, of which £2.2bn was already committed at the time.

Ed Farnsworth, executive group director for finance at L&Q, said: “Housing associations play a vital role in solving the housing crisis. We are seeking opportunities to continue to deliver affordable housing where it does not divert from our strategic aim to de-risk and invest in our existing homes.”

In its forward guidance for 2024-25, L&Q said it is expecting to deliver around 2,600 residential homes in the financial year, with 316 units scheduled to start in the fourth quarter. Around 80 per cent of handovers are expected to be for social housing tenures, the landlord added.

Mr Farnsworth, who took up his role at the start of January, said: “We also continue to rationalise stock that is either outside of our core geographies or uneconomic to maintain for the safety and comfort of our residents.”

During the year L&Q sold 201 homes to fellow London landlord RHP and announced plans to sell its private rent portfolio as it continued to focus on investment in existing stock.  

In the trading update, Mr Farnsworth said that interest cover measured on an EBITDA MRI basis was 170 per cent in the third quarter of 2024-25. This was a rise from 134 per cent in the same period in the previous year.

However, he added: “We expect this to reduce over the next quarter to our forward guidance level of 145-155 per cent as we increase investment in our homes and services.”

Elsewhere in the trading update, L&Q posted a post-tax surplus of £50m in the nine months to the end of December, a 51 per cent fall from £102m achieved in the same period in the previous year. The figure was impacted by a £120m cost from a ‘disposal of business interest’ during the period and a £9m increase in net interest charges.

Mr Farnsworth told Social Housing that the drop in post-tax surplus reflects the accounting impact of the sale of L&Q Estates in August 2024.

He said: “Its sale supported our strategic objectives of simplifying our business and generating additional cash revenue to reinvest in existing residents’ homes and services. The deal also aligned with a longer-term ambition to concentrate in our core areas of Greater London and Greater Manchester.

“This will allow us to focus our resources on areas where housing need is the greatest, and where we are in the strongest position to provide responsive, local services that offer the best value for residents.”

Over the same period, operating surplus rose from £268m to £342m and turnover increased from £761m to £803m.

“These results reflect continued delivery against our corporate strategy to provide better homes and services for our residents,” Mr Farnsworth said in the trading update. 

“Year-on-year performance has improved, resulting in an operating surplus of £342m (2023 Q3: £268m).”

L&Q reported net debt, excluding derivative financial liabilities, of £5.462bn at the end of December, a rise from £5.456bn as at 31 March 2024.

Available liquidity within the group increased from £1.009bn to £1.023bn over the same period.