Finance

L&Q Group financial statements 2006

L&Q’s mission is to create places where people want to live, but our ability to do this is dependent on our continued financial strength.

A key measure of this strength is our annual surplus, which the Group seeks to maintain and improve through increased efficiency, measured risk taking and investment in areas which compliment our core social housing activities. All of our surpluses are invested in new affordable housing and improved services.

Over the next five years, the Group will use its financial strength to:

• Fund much needed, larger family homes entirely from our reserves, giving residents greater choice and helping to avoid overcrowding.

• Improve sustainability including increased energy efficiency.

• Create thriving and sustainable communities by investing more of our reserves into Quadrant Community Investment.

• Strengthen service quality by putting more people into the front line and investing more into training, development and resident involvement.

• Invest £380 million into improving and maintaining the quality of our homes in management.

• Invest £150 million into the acquisition of land and development of new homes in advance of grant.

• Provide 24,000 new affordable homes.

This year the Group reported a turnover of £183 million and a surplus of £35 million, compared with a turnover of £148 million and annual surplus of £29 million in the previous year. This places us in a very strong position and enables us to respond more creatively, confidently and competitively to the need for new affordable homes and thriving neighbourhoods.

The majority of the increase in our surplus arose from careful control of management and interest costs, combined with the inclusion of L&Q Beacon and L&Q Beaver for their first full year in the Group. Early year deficits in the former Nucleus Group are in line with their approved business plan, and will convert into a surplus position next year.

Non-social housing activities, such as the sale of homes which fail to meet our quality standards, and surpluses arising when shared owners purchase more of their homes, continue to form a vital part of our annual surplus, but every member of the Group is required to ensure that it does not become dependent upon sales. This year our surplus from property sales amounted to almost £20 million. This includes £7 million from shared ownership staircasing sales and £4 million in L&Q Beacon and L&Q Beaver to fund Government quality standards.

Our financial performance continues to improve year on year, with investment in homes increasing from £53 million to £67 million, management costs per home and rent arrears levels reducing and key financial covenants with lenders remaining comfortably ahead of their requirements. Tower and L&Q have seen an increase in their level of borrowing from using the Group’s £150 million land banking and development in advance of grant facility. This ensures that we can guarantee delivery of a steady stream of completed, high quality affordable homes.

On the capital side, the Group invested £217 million into the provision of new homes, bringing the overall cost of its asset base to £2.3 billion. This was funded by capital grant of £1.3 million, loans of £745 million and reserves of £200 million. By investing our revenue reserves into new affordable housing, we have kept our borrowing to a minimum, and enabled the Government to deliver more homes for less public subsidy.

This year a new accounting requirement has been introduced which requires all companies to demonstrate that they can meet their pension fund commitments when they fall due. L&Q has set aside a provision of £23 million to do this.

The Group’s housing asset base is now valued, on an open market basis, at £5.4 billion – an increase of £370 million on last year. This asset strength will help us to borrow on the very best of terms, and ensure that the Group can continue to invest in homes and services in a climate of change, new challenges and new competitors.

If you would like a copy of L&Q's financial statements for 2005-2006 2004-2005, 2003-2004, 2002-2003 or 2001-2002 you can download them from the publications page.

Should you need a copy of the accounts for one of our subsidaries, please contact Sharon Smith at financeadmin@lqgroup.org.uk

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