Published today (18 March 2015), the Homes and Community Agency’s (HCA) 2014 global accounts show that turnover increased by 5% to £15.6 billion and the operating margin increased from 25.9% in 2013 to 26.5% in 2014.
Surpluses for the sector have continued to rise and total £2.4 billion for 2014, an increase of 22% compared to 2013. The entire surplus generated is retained by providers and are reinvested in their businesses. Analysis of the surplus by the HCA shows that a significant proportion of the surplus are driven by cyclical factors such as historically low interest rates and a strong housing market in parts of the country.
The gross book value of the sector’s assets has increased by £6.8 billion to £132.7 billion as providers build new homes and invest in their existing stock.
Total debt raised in the year was £5.6 billion (up from £5.5 billion in 2013). This was split between approximately £2.3 billion of incremental growth in debt, and £3.3 billion of refinancing or restructuring existing facilities. During 2013/14 providers issued £2.9 billion of bonds in the debt capital markets, similar to the amount raised in the previous year. The market for bond financing has continued to expand, with an increased range of institutions buying provider paper and a variety of structures being established.
Matthew Bailes, HCA’s Director of Regulation said:
“The accounts illustrate that the strong performance of the sector in 2012 to 2013 has continued into 2013 to 2014. The sector remains a compelling lending prospect for both the banks and capital markets, with the strong asset base, predictable income streams and government support through housing benefit and regulation combining to produce favourable pricing. The sector is also currently benefiting from favourable macro-economic conditions including low interest rates and a strong housing market in parts of the country.
For the majority of providers, 2014 was the second year in which they were required to publish value for money (VfM) self-assessments. The sector has increasingly got to grips with the requirements of the standard. In general, self-assessments were more detailed, with a greater number of providers setting out their evidence of how they meet the specific requirements set out in the VfM standard. As part of our VfM standard, we have encouraged providers to think more about the value locked up in their assets.
Looking forward, the new Governance and Financial Viability Standard comes into effect from 1 April 2015 and will strengthen the expectations on providers to actively manage risk in a more complex and risky operating environment.
The global accounts will be highlighted at the National Housing Federation’s Housing Finance Conference in Warwick, 18 and 19 March. The accounts are being published at the same time as a consultation on changes to the accounting direction for providers. The changes are required to reflect revisions to the regulatory framework.