Pocket Living records fourth consecutive loss

London-focused specialist housing developer Pocket Living has fallen to a fourth consecutive loss despite seeing turnover increase in the last twelve months.

The firm, which specialises in affordable small flats for first time buyers, has published accounts showing it has narrowed its pre-tax loss from the £18.9m reported in the 2021 calendar year to £13.9m in 2022.

Pocket Living Ltd said its turnover grew by 54% in the period from £17.7m last year to £27.3m, however this figure remains less than half its 2020 level of £56.2m.

A spokesperson for the business said Pocket remained confident of future growth, and had managed to deliver a “strong” increase in revenue and move into new sectors, despite a “highly challenging year” for developers.

However, the year saw Pocket’s balance sheet position worsen, with the group reporting net liabilities of £34.2m, rising from £22.4m in 2021. However, Pocket said in comments in the accounts that its particular financing structure worsened the appearance of its balance sheet, given that its principal backer and immediate parent, Related London Pocket Holdings Ltd, provided its support in the form of loans.

If Related London’s backing was registered as equity, rather than loans, it said, Pocket would instead record a balance sheet deficit of just £6.9m.

In a going concern statement in notes to the accounts, Pocket said: “The Group’s ultimate parent, The Related Companies LP, has given assurance of financial support to the group that it will provide necessary financial support to ensure that the group and the company continues as a going concern in the foreseeable future.”

Pocket secured funding of up to £100m from Lloyds Bank in February this year to further its development ambitions, with three schemes scheduled to complete this year and two further pipeline schemes earmarked for completion in 2024.

In February Pocket said it wants to deliver 1,500 homes over the next five years, which it aims to fund in part through the Lloyds Bank facility. An initial £24.2m debt facility from Lloyds will fund its 149-home development at Sheepcote Road in Harrow.

However, the developer said in the accounts that it had suffered another blow in recent months when its contractor on the 48-home Heights scheme by Charlton Athletic football stadium, Claritas, went bust in June. Pocket said it was “exploring various routes for completion of the scheme” but that the collapse of Caritas would inevitably “delay completion” of the project.

Last year Pocket founder Marc Vlessing told Housing Today that it had experienced difficulties on other schemes, including Addiscombe Grove in Croydon and Habard Close, where the contractor also went bust, which resulted in significant write-downs. He said then that 2021 had been a “particularly difficult” year for the business given those project issues.

Last year the firm said the business expected that 2023 would also be loss-making, before the firm returns to profitability in 2023-25 as “the majority of our committed pipeline sales come on to the market”.

This year’s account said the company’s focus in the year was delivering homes while “managing the operating environment and, in particular, cost pressures.”

Pocket’s parent company Related London is understood to be owned by businesses controlled by US real estate magnate Stephen Ross.

A spokesperson for Pocket said 2022 was a “highly challenging year for developers”, due to a combination of “high inflation, rising borrowing costs, and the cost of living crisis”.

They said: “Despite these challenges, Pocket Living has recorded strong revenue growth of nearly £10m, secured a major expansion into new sectors, and has maintained a healthy development pipeline where demand for affordable homes continues to massively outstrip supply.

“While the market continues to remain volatile and strong headwinds prevail, we are confident that we will continue to grow the business to meet the social and economic imperative of housing more of our key city makers.”