Housebuilder Torus Developments, a subsidiary of Liverpool city region housing association Torus, says ‘contractor solvency’ is its biggest challenge as it reports best-ever revenues of £77.3m. Tony McDonough reports
Torus Developments is reporting its “best ever” revenues of £77.3m for the year to March 31, 2023, thanks to growth in the shared ownership market.
However the development subsidiary of Liverpool city region-based housing association Torus, saw pre-tax profits fall significantly to £541,000 from more than £1.1m in the previous.
It said the business had emerged strong from the COVID pandemic but added rising costs in the building industry had led to more contractors going bust and was a big factor in delays to new schemes.
In its annual report just posted on Companies House, it explained: “Contractor solvency where schemes on site which have been affected by cost rises and delays have become the biggest single challenge to delivery.
“Torus Developments took a pragmatic approach to supporting contractors experiencing financial uncertainty but broader factors beyond the viability of individual schemes caused multiple contractor failures in 2022/23.
“In each instance, Torus has been able to put plans in place to ensure the resumption of construction work.”
It added that its contingency plans primarily involved appointing a sister construction outfit, HMS, to replace failed contractors. HMS is also a development subsidiary of the main £226m-turnover Torus group.
“Programme delivery, so a strong recovery in 2022/23 from the ongoing impacts of COVID-19 but economic factors, such as construction cost inflation, labour and material shortages and housing market changes have created a new level of impact,” the report added.
“The construction market risk issues saw increased evidence of higher works tender prices and indexation clauses being used for future inflationary uplifts.
“This approach has been welcomed by contractors, and provided Torus with great certainty of contractors’ ability to complete schemes in the future.”
Torus Developments said during the 2022/23 financial year it had pivoted towards property-based transactions with volume housebuilders and partnerships with developers such as Vistry Partnerships and Castle Green Homes.
This has meant more emphasis on offering homes for shared ownership. This is a Government-backed scheme to support people who are struggling to afford a full mortgage or deposit.
Shared ownership allows you to buy a share in a home of between 10% and 75%. You pay rent to the landlord for the portion you don’t own. In what is known as “stair casing” you can later buy a bigger share of the home and reduce your rental payments.
This change in approach led to Torus completing more than 200 sales of homes in the financial year, a 30% increase on its own full-year forecast.
In total, Torus Developments delivered 427 new homes for its parent in the reporting period and started work on a further 285 new homes. It currently has a five-year contract with Torus taking it to September 2026.
Based in St Helens, Torus has 40,000 homes in Merseyside and across the North West and aims to build a further 10,000 new homes by 2022.
In November Torus started work on a £6.6m scheme to build 40 new homes in St Helens. And in June it agreed a £35m deal, via Torus Developments, with housebuilder Northstone that will see 163 new homes built in Ellesmere Port and Wigan.
In 2020 Torus agreed to provide Torus Developments with a £21m revolving credit facility to fund the purchase of new sites.