Sovereign sees surplus drop nearly a quarter as repair costs bite

Management costs related to its social housing activities also rose just over a quarter to £92m. 

The group spent £135.5m on its existing stock in the 2022-23 year, up from £118.4m the year before. Its annual report flagged that 14,000 cases of damp and mould had been “proactively managed”.

Writing in Sovereign’s annual report, chair Paul Massara said: “The last year was challenging on a number of fronts including managing supply chains, recruiting new staff and the financial pressures bought about by inflation and a price cap on rents.”

The drop in surplus came despite a six per cent increase in turnover to £448.2m. This was helped by a six per cent rise in social housing rent income to £358.2m and shared ownership sales up a fifth to £69.8m. 

However the group’s overall operating margin slid from 29.9 per cent in 2021-22 to 23.1 per cent in the most recent full year.

Sovereign performed strongly on development, completing 1,672 homes in the 2022-23 year, up 40 per cent on last year’s figure of 1,196. It spent £303m on developing new homes, compared to £290m the prior year. 

The group’s EBITDA MRI interest cover, a key indicator of an organisation’s ability to cover ongoing finance costs, fell to 121.4 per cent, down from 203 per cent the previous year. 

Gearing rose to 46.9 per cent, compared to 45.8 per cent the year before.

Sovereign currently has a G1/V2 grading with regulator. Last month it had its G1 status reinstated after being downgraded last summer over health and safety data issues.

It was handed a V2 along with a clutch of other landlords last November due to the current wider economic climate. 

The group’s merger with Network Homes is expected to complete in October and will create an 82,000-home organisation. 

Sovereign manages homes across Berkshire, Hampshire, Oxfordshire, Gloucestershire, Dorset, Devon, Wiltshire, the West of England and the Isle of Wight.