​Sanctuary boosts development but misses overall build target

Sanctuary has increased its development by 14% despite a ‘turbulent year for the construction industry” which saw delays to schemes because of a contractor insolvency.

The housing association giant, in its financial statements for the year to 31 March, said that it completed 1,278 homes in 2022/23 including units built through joint ventures and consortia.

This is an increase on the 1,121 built last year but below its initial target of 1,500.

Sanctuary sold fewer homes in the year than it had hoped for with 307 units sold against its target of 532. However, this still generated £36.7m more revenue from sales than in the previous year.

Sanctuary, which manages 119,000-homes, said: “We delivered 1,278 new homes during the year and, while this is lower than expected, we remain fully committed to delivering affordable housing and communities in which people choose to live.”

As a result of its rescue takeover of troubled association Swan in February, Sanctuary has increased its build target next year from 1,137 to 1,420. This is still lower than the 1,500 target for 2022/23.

It said: “While we remain committed to building new homes for those who need them, we will not prioritise new housing above reinvestment in our existing home.”

As of 31 March 2023, the group had 4,760 homes in development (compared to 5,183 at the same stage last year) with 2,786 on-site (up from 2,362 year-on-year_

Sanctuary said insolvency of one of its contractors caused a delay to three of its development schemes.

It said: “Our ongoing success has been achieved despite it being another turbulent year for the construction industry as the recovery from the pandemic, coupled with the impact of the highest inflation rates seen for many years, has impacted on the financial health of our supply chain.”

Sanctuary increased its annual turnover by 16.2% from £812.5m to £943.8m. Its surplus near doubled from £58.6m to £101.3m, inflated by a £38.5m net gain from the association’s acquisition of 13,000-home Swan.

Its underlying surplus – which excludes one off gains and losses from deals and restructuring- increased by 23% to £58.1m.

>>See also: Sanctuary completes rescue takeover of Swan

>>See also: Can HAs keep development going again as the rest of the market slows?

The association’s margin tightened however, due in part to development costs it inherited from Swan but also because of the impact of inflation. It said it is focusing on reducing Swan’s development programme and reducing its debt in order to improve its ability to cover its interest costs. Swan has contracted for £81m of development.

Sanctuary’s operating margin however fell from 22% to 21.1%. It said: “It is expected that until Swan is fully integrated into the wider group, and its development programme reduced, there will be a modest impact on the group’s operating margin.”

“ The reduction in the current year underlying operating margin has resulted from increased investment in properties, increased development sales, and the impact of steeply rising cost inflation compared to modest rental income increases.”

It said that the group has “weathered” inflationary pressures through “fixed price contracts, an energy hedging strategy and part year pay awards.”