Social housing sector reports strong performance
While the social housing sector remains financially robust, providers need to make sure they are prepared to face an increasing array of risks. The Homes and Communities Agency (HCA) has published its 2013 Global Accounts of housing providers, which shows that the sector continues to benefit from historically low interest rates, has improved its operating margin on its core rental business and recorded a robust performance in its sales activity.According to the Social Housing Regulator's accounts, the sector continued to grow its asset base and recorded an aggregate surplus of £1.9 billion, which represents a nine per cent increase on 2012.It says the surplus was achieved through a combination of increased turnover attributable to inflation-linked rent rises and improved operating margins, offsetting additional interest costs associated with increased debt levels. Reserves grew to £23.3 billion - an increase of £2.7 billion, while the total net book value of the sector’s fixed assets rose by £5.2 billion, to £76.4 billion. Some 82 per cent of the sector's reserves had been re-invested into its fixed asset base as of March 2013.Providers continue to raise the debt needed to finance their growth and represent a good credit risk for investors. Total debt increased by £2.7 billion, to £23.3 billion. In addition, £3.2 billion of bonds were issued in the year, representing over two-thirds of the total value of new debt facilities arranged.However, the HCA warned that providers need to prepare themselves for changing economic conditions and potentially adverse alterations in the operating environment.Matthew Bailes, HCA's director of regulation, welcomed the news of the sector's strong performance but said providers need to manage risks effectively to ensure this continues."The sector needs to be prepared for changing economic conditions and potentially adverse changes to the operating environment - it is vital that boards effectively manage and mitigate an increasingly broad range of risk exposures," he said. "They need to understand interrelated risks and have strategies in place to deal with the financial impact of multiple risks crystallising at the same time."
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