Affordable Housing continues to secure and deliver refurbishment and new build social housing projects.

Affordable Housing delivered an operating profit of £21.0m (2007: £25.5m) on revenue that fell to £377m (2007: £398m) in line with our expectations, reflecting the effect of tightened credit conditions for home buyers. The division achieved a margin of 5.6% (2007: 6.4%), which was impacted by the fall in open market housing volumes.

Affordable Housing continued to secure and deliver refurbishment and new build social housing projects, which helped to largely offset the impact of the downturn in open market housing. The affordable housing sector remains a key Government priority and the recent announcement to accelerate spending in this area is encouraging. In addition the Government’s Decent Homes Programme has been extended until 2012 in England, and longer still in Wales and Scotland, providing an optimistic outlook for this sector over the medium-term. In 2008, refurbishment projects under this programme contributed around half of the division’s revenue.

Tough credit conditions contributed to a slowing of demand for open market affordable homes in 2008, which is expected to continue in 2009. In response to these conditions, Lovell has introduced a new shared equity scheme which is showing significant take up. In addition, the division’s ‘tenure blind’ approach to housing development, which means that homes across a mixed tenure scheme are built to a similar standard, is providing the opportunity to switch homes destined originally for the open market to additional stock for Registered Social Landlords.

Lovell has completed three schemes in the year as a Homes and Communities Agency partner and the partnership will continue to generate a significant number of opportunities for the business as a direct recipient of Government grants for development. Additionally Compendium, our joint venture business with the Riverside Group, offers a full one-stop approach to design, sale and management of large scale residential regeneration projects which has been successfully applied in the completion of the first two years of its five year Coalville project in Stoke-on-Trent.

The forward order book stands at £1.3bn (2007: £1.5bn). Affordable Housing continues to focus in the short-term on refurbishment and new build social housing, reducing production costs and selling units designated for open market sale to Registered Social Landlords. The division’s success in these areas will help to offset the impact in 2009 of the ongoing downturn in open market house sales.