Optivo’s pre-tax surplus hit by valuation impacts and fire safety costs

News03 Aug 2020 Former Member

Optivo has reported a sharp drop in full-year surplus after its financial assets were hit by lower interest rates, while fire safety costs increased.

Optivo has reported that its pre-tax surplus in the year to the end of March 2020 fell 79 per cent to £18m (picture: Getty)

Optivo has reported that its pre-tax surplus in the year to the end of March 2020 fell 79 per cent to £18m (picture: Getty)

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Optivo has reported a sharp drop in full-year surplus after its financial assets were hit by lower interest rates, while fire safety costs increased #UKHousing #SocialHousingFinance

The G15 landlord, which operates around 45,000 homes, said pre-tax surplus in the year to the end of March 2020 fell 79 per cent to £18m.

Optivo reported a slight rise in turnover to £322m, but its bottom line was hit by a fall in the value of its standalone financial instruments as a result of falling interest rates. The movement in ‘fair value’ led to a loss of £22.8m. It also lost £5.1m on the value of its investment properties.

Optivo spent £7.8m on fire risk assessments and follow-up actions in the year, and it is delivering a £15.5m fire safety programme in the current financial year.

Writing in Social Housing earlier this year, Paul Hackett, chief executive of Optivo, said that the association has budgeted £80m on fire safety costs over the next six years.

Meanwhile, in a recent update, fellow G15 landlord Clarion said it would spend £100m over the next five years on fire safety work.

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Optivo revealed that it has spent £103 more per property on fire safety work than it spent last year.

Overall, operating costs rose 10 per cent to £224m. Maintenance spend rose £9m (13 per cent) to £79m.

Service charge costs of £28m outweighed its income of £26m, which it said was “mainly due to additional fire safety spend and managing agents fees not yet recovered”.

Optivo also said it experienced a much higher volume of voids in 2019/20 than the previous year.

It had started to see voids fall in the last quarter of the year, but these have risen again in the first quarter of the new financial year (2020/21) as a result of the COVID-19 crisis.

The association has also increased the provision for rent bad debts by £1.5m, which it said was in anticipation of difficulties for residents “in the short term until Universal Credit claims are approved to support them”.

In the year, Optivo started 1,500 homes, of which 81 per cent were affordable tenures.

The landlord completed 838 new homes, all deemed affordable, and had a further 3,064 new homes under construction as of the end of the last financial year.

Optivo launched a new five-year strategic plan in April called ‘Co-creating our Future’.

But writing in the annual report, chair Sir Peter Dixon said that “clearly the world has drastically changed and we are very aware that our ability to achieve it has been made much harder”.

He added: “We will now need to reassess our financial plans, but as we’ve shown our ability to adapt quickly will be key to our ongoing resilience.”

Accounts Finance Housing Association/RP London South East

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