REPORT AND FINANCIAL STATEMENTS

Transcription

1 GREENSQUARE GROUP LIMITED REPORT AND FINANCIAL STATEMENTS -

2 GREENSQUARE GROUP LIMITED REPORT AND FINANCIAL STATEMENTS Year ended 31 March

3 REPORT AND FINANCIAL STATEMENTS CONTENTS BOARD MEMBERS, EXECUTIVE DIRECTORS, ADVISORS AND BANKERS 1 CHAIR S STATEMENT 2 REPORT OF THE BOARD 4 OPERATING AND FINANCIAL REVIEW 9 INDEPENDENT AUDITOR S REPORT 29 GROUP INCOME AND EXPENDITURE ACCOUNT 30 ASSOCIATION INCOME AND EXPENDITURE ACCOUNT 30 STATEMENT OF TOTAL RECOGNISED SURPLUSES AND DEFICITS 31 NOTE OF HISTORICAL COST SURPLUSES AND DEFICITS 31 RECONCILIATION OF MOVEMENT IN FUNDS 31 GROUP BALANCE SHEET 32 ASSOCIATION BALANCE SHEET 33 GROUP CASH FLOW STATEMENT 34 NOTES TO THE FINANCIAL STATEMENTS 35

4 BOARD MEMBERS, EXECUTIVE DIRECTORS, ADVISORS AND BANKERS Board: Chair Vice Chair Other Members Hilary Gardner Wendy Hall MBE Derek Cash Alice Copping Paul McLaughlin Jeni Parsons Helena Taylor Knox Eleanor Thompson Kerry Law (from 30 July ) Angie Clapp (deceased 9 February ) Bill Fishlock (to 24 September ) Howard Toplis - co-opted annually Executive Directors: Chief Executive Executive Director (Finance) Executive Director (Development) Executive Director (Place) Executive Director (Commercial Services) Executive Director (Customers and Communities) Executive Director (Organisational Development and Corporate Services) H. Toplis (from 24 July D. Ashmore (to 9 August ) T Jackson V O Brien A Smith T Pritchard A Cornelius (to 11 April ) C Dixson (to 13 September ) Secretary: Registered office: Registered numbers: Industrial and Provident Society Homes and Communities Agency External auditors: M Arnold Barbury House Stonehill Green Swindon SN5 7HB No R No. L4515 Grant Thornton UK LLP Chartered Accountants Victoria Street Bristol, BS1 6FT Principal solicitors: Anthony Collins 134 Edmund Street Birmingham B3 2ES Bevan Brittan Blake Lapthorn Kings Orchard Tarlo Lyons 1 Queens Street Harbour Court Bristol Compass Road BS2 0HQ Portsmouth 1

5 CHAIR S STATEMENT In my statement last year I was pleased to announce that the board had recruited Howard Toplis as our new Group Chief Executive to succeed Dave Ashmore who stood down in August. The Board asked Howard in his first 6 months to undertake a review of our strategy and direction of travel. Whilst the Board knew we had much to be proud of, we were also keen to have the benefit of a fresh pair of eyes and allow our new Group Chief Executive to develop, with the Board, a refreshed strategy going forward. The Board have acknowledged that whilst our performance is good in many areas, our current operation and structure is expensive and our customer satisfaction levels can be better. We have charged our well established communities boards with the overarching objective of improving customer satisfaction by really getting to grips with what drives satisfaction and then ensuring we act on the findings. In the coming year we are planning to undertake a thorough review of our business plan, as well as looking to rationalise our loan portfolio and group structure both of which are cumbersome and expensive. We have also set ourselves a target of achieving upper quartile performance across all our operational activities. Achieving all these objectives will make us a leaner and more cost effective organisation but more importantly give us more choices over how we can utilise the resulting savings to continue to improve services to our customers. Notwithstanding this, the last 12 months have as ever produced some notable achievements and success some of which, particularly involving our staff, I am keen to highlight: In January, we were awarded Gold Standard by Investors in People. The Gold Standard is awarded to less than 4% of Investors in People accredited organisations and demonstrates our focussed commitment to the development and success of our people and desire to continually improve and grow ; One of our Community Development Workers in Oxford, Fran Gardner, was awarded a High Sheriffs Award. These are awarded annually to recognise people who have made an outstanding contribution to the communities in which they live and work; Our Executive Director (Development), Vic O Brien was awarded a Churchill Travelling fellowship by the Winston Churchill Memorial Trust. Vic travelled to the USA in October to investigate the operation of the USA Low Income Housing Tax Credit System. As government grant for new affordable homes remains low, his findings are being considered with much interest by the Chartered Institute of Housing and the Homes and Communities Agency (HCA) as the USA model may have useful elements we can use in the UK; We completed a further sale and leaseback project with AVIVA which allowed us to purchase 189 homes from the Guinness Trust in Oxfordshire. Following an approach by Cottsway Housing Association, we effectively took over the majority of their development programme totalling 176 homes including 2 extra care developments. This was achieved in a very short period by the hard work of our development, finance and supported housing teams and with the full support of the HCA. Our financial performance has reflected this successful growth. Group turnover is now 62.7m, an increase of 6.4m from last year. Adjusted net surplus, after excluding one off exceptional items such as a revaluation impairment, shows an underlying result of 4.1m. Total Group reserves have increased by 44.7m, largely as a result of the valuation of our properties; and Finally, whilst writing this report, the HCA has just published their updated regulatory judgement for GreenSquare and I am delighted that we have retained our G1 and V1 grading. In the current robust regulatory environment, this is a fantastic achievement for which all staff and board members should take credit and be proud of. 2

6 CHAIR S STATEMENT continued I would particularly like to thank 3 key people. Ann Cornelius our Executive Director (Customers and Communities), left us in April to take up the position of Chief Executive of Coastline Housing Association in Cornwall. Ann has worked for GreenSquare, and previously Westlea, for over a decade and made a significant contribution to the organisation during that time. We all wish her well for the future. Bill Fishlock, one of our board members, stood down in September after completing his maximum term of office. Bill was instrumental in advising and guiding the Executive and Board in the establishment of our commercial subsidiary GreenSquare Homes and our in house construction company, GreenSquare Construction, and chaired both organisations. The Board will miss his sound commercial acumen and wise words. Finally it was with great sadness that in February of this year Angie Clapp, one of our most active resident board members passed away. Angie fought her short illness bravely and with great humour to the end. Angie was a powerful and passionate advocate for and on behalf of residents, rightly believing that they should be at the very heart of everything that Westlea and subsequently GreenSquare did. Never afraid to challenge the status quo, she could be feisty and vocal if she thought something wasn't fair, right or good enough. She had a dry and often wicked sense of humour and a great sense of fun. She cared about people and would help anyone who needed a friend or an advocate. She is hugely missed by us all. As a lasting reminder of Angie s life, in particular her huge contribution to GreenSquare, especially championing the rights of residents, the Board have decided to establish 2 annual awards in her memory, one for an individual resident, the other for a group of residents who can demonstrate achievement in working with and improving the lives of other residents in their community. So in conclusion it has been another good year for GreenSquare and I am proud that the Board have asked me to remain as Chair for another 4 years. It is everyone s contributions, staff and board members alike that make GreenSquare the successful organisation it is and I thank you all. Hilary Gardner Chair 22 July 3

7 REPORT OF THE BOARD The Board of GreenSquare Group Limited is pleased to present its report together with the audited financial statements for the year ended 31 March. GreenSquare Group ( the Group ) comprises GreenSquare Group Ltd (the Association) and its subsidiaries Westlea Housing Association Limited, Oxford Citizens Housing Association Limited, GreenSquare Community Housing Limited, Oxbode Housing Association Limited, GreenSquare Homes Limited, GreenSquare Construction Limited, GreenSquare Energy Limited, and GreenSquare Estates Limited. The financial statements are prepared on a group basis thus reflecting activities of the subsidiary companies as well as the Association. Principal activities GreenSquare is a not-for-profit organisation overseen by a Management Board. Its subsidiaries provide and manage affordable rented housing and develop private housing for rent and sale. As well as managing over 11,500 properties, GreenSquare is a major developer of new affordable housing and is a lead development partner under the Homes and Communities Agency (HCA) National Affordable Housing Programme. The group now employs 525 staff on a full time equivalent basis. Any surpluses made by the subsidiaries are retained within the group. GreenSquare is a major provider of housing, regeneration, care and support and commercial services across Wiltshire, Oxfordshire, Gloucestershire, Swindon and the surrounding areas. Business review and future developments Details of the group s performance for the year and factors likely to affect its future development are contained within the Operating and Financial Review that follows this report. Efficiency The Board is committed to delivering an effective and efficient service to residents and other stakeholders, and uses a range of strategies to increase efficiency including re-evaluating procurement policies, partnering with contractors for new build and reducing staff turnover, sickness and absenteeism. Employees Our people are the key to our success. We aim to be an employer of choice in the area in which we work, and are proud to have been awarded the Investors In People gold accreditation. We are serious about investing in our people and offer training and development opportunities. Resident involvement in governance The involvement of our residents is pivotal in how we shape and develop our services. We have Resident Board members, a ground-breaking Resident Scrutiny Panel and Communities Boards. Three Communities Boards led by residents allow us to consider how we can really deliver innovative resident involvement in the strategic decision making of the business. Membership of these boards is made up of residents and independent members who are selected following an open and robust selection process. The Communities Boards are sub committees of the main board with delegated powers and responsibilities for residents. They make sure that the services within their respective neighbourhoods are kept under close review, allocating funding to support community projects and feeding local information into Board discussions. Health and safety The Board is very much aware of its responsibilities on all matters relating to health and safety. The Group has adopted robust health and safety policies, and provides Board and staff training and education on health and safety matters. 4

8 REPORT OF THE BOARD continued Board members and executive directors Those Board members who served during the period and the Group s Executive Directors are set out on page 1. This year there have been changes to both Board and executive team, as follows: One of our longest serving Board members Bill Fishlock, stood down in September after completing his maximum term of office. It was with great sadness that Angie Clapp, one of our most active resident Board members passed away in February. Kerry Law, formerly chair of our resident scrutiny panel joined the Board in July. The Executive Directors are the Group Chief Executive and other members of the Group s senior management team. They act as executives within the authority delegated by the Board and have been employed directly by GreenSquare, providing services via an intra group agreement. GreenSquare provides a range of central services governance, finance, development, human resources and information technology to its subsidiaries, under the scope of an intra-group agreement. Dave Ashmore, Group Chief Executive, retired in August and we were pleased to welcome Howard Toplis as new Group Chief Executive from July. Catherine Dixson, Executive Director (Organisational Development and Corporate Services) resigned during the year. The other Executive Directors served throughout the year. The Chief Executive holds no interest in the Association's shares and has been co-opted to, and acts within, the authority delegated by the Board. The Group has insurance policies which indemnify its Board members and Executive Directors against liability when acting for the Association. The Board The Board comprises up to twelve non-executive members and is responsible for the Group and Association's strategy, policy framework and managing the affairs of the Group. The Board members are drawn from a wide background bringing together professional, commercial and local experience. The Board delegates the day-to-day management and implementation of that framework (via the intra group agreement) to the Group Chief Executive and other members of the Group s executive team. Independent and Tenant Board members are selected by a panel of Board members (including the Chair and the Group Chief Executive) following public advertisement for recruitment. Service contracts The Executive Directors are employed on the same terms as other senior managers - their notice periods are three months. Pensions The Executive Directors are members of either the Social Housing Pension Scheme or the Wiltshire County Council Pension Fund, both defined benefit (final salary) pension schemes. They participate in the schemes on the same terms as all other eligible staff and the Group contributes to the schemes on behalf of its employees. Other benefits The Executive Directors are entitled to other benefits such as the provision of cash allowances in lieu of a company car. Full details of their individual remuneration packages are included in note 12 to the audited financial statements. 5

9 REPORT OF THE BOARD continued Remuneration policy The Remuneration Committee, comprising the Chair and a minimum of two other Board members, is responsible for setting the Group's remuneration policy for its executive directors and other staff. The Committee pays close attention to remuneration levels in the sector in determining the remuneration packages of the executive directors. Basic salaries are set having regard to each executive director s responsibilities and pay levels for comparable positions. Statement of the Responsibilities of the Management Board for the Report and Financial Statements The Board is responsible for preparing the report and financial statements in accordance with applicable law and regulations. Industrial and Provident Society legislation requires the Board to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under the Industrial and Provident Society legislation the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and surplus or deficit of the association and Group for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards and the Statement of Recommended Practice (SORP) Accounting by Registered Social Housing Providers update 2010, have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and Association and enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to It is also responsible for safeguarding the assets of the Association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as each member of the Board is aware: there is no relevant audit information of which the association's auditors are unaware; and the Board have taken all the steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The Board are responsible for the maintenance and integrity of the corporate and financial information on the Group s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. NHF Code of Governance The Group complies with the principal recommendations of the NHF Code of Governance (revised) and has adopted a number of policies and procedures to help achieve these objectives. 6

10 REPORT OF THE BOARD continued Internal controls assurance The Board acknowledges its overall responsibility, applicable to all organisations within the Group, for establishing and maintaining the whole system of internal control and for reviewing its effectiveness. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and to provide reasonable, and not absolute, assurance against material misstatement or loss. The process for identifying, evaluating and managing the significant risks faced by the Association is ongoing and has been in place throughout the period commencing 1 April up to the date of approval of the annual report and financial statements. Key elements of the control framework include: Board approved terms of reference, including a detailed intra-group agreement between the Association and its subsidiaries, supported by detailed service level agreements and delegated authorities for Group Audit and Remuneration Committees; clearly defined management responsibilities for the identification, evaluation and control of significant risks; robust strategic and business planning processes with detailed financial budgets and forecasts; review of the Association s risks by the Board and Group Audit Committee; formal recruitment, retention, training and development policies for all staff; established authorisation and appraisal procedures for all significant new initiatives and commitments; appraisal of major development projects by the Group Development Committee; a sophisticated approach to treasury management which is subject to external review on a regular basis; regular reporting to senior management and the Board/appropriate committee of key business objectives, targets and outcomes; Board approved whistleblowing, disciplinary and capability policy which covers expectations of fraud and code of conduct; detailed policies and procedures in each area of the Association s work; and regular monitoring of loan covenants and requirements for new loan facilities. A monitor on fraud is maintained and reviewed by the Group Audit Committee at every meeting. During the year there was an alleged fraud reported within a subsidiary s housing management department. This was reported to the HCA. An internal review was undertaken by Internal Auditors and the outcomes reported to the Group Audit Committee in April and action on recommendations monitored by Group Audit Committee. There were no other reportable frauds reported during the period under review. The Board cannot delegate ultimate responsibility for the system of internal control but has delegated authority to the Group Audit Committee to regularly review the effectiveness of the system of internal control. The Group Audit Committee was formed to oversee the internal control framework for all companies within the Group. The means by which the Group Audit Committee reviews the effectiveness of the system of internal control include considering risk reports, internal audit reports, fraud reports, management assurances, the external management letter and specialist reviews on areas such as treasury, health and safety, and efficiency. The Group Audit Committee received and considered reports from management on these risk management and control arrangements at each meeting during the year and the Board received its risk report quarterly during the year. 7

11 REPORT OF THE BOARD continued The Group Audit Committee has received the Executive Director (Finance) annual review of the effectiveness of the system of internal control for the Group, and the annual report of the internal auditor, and has reported its findings to the Board. Going concern The Group s business activities, its current financial position and factors likely to affect its future development are set out within the Operating and Financial Review. The Group has in place longterm debt facilities (including 70.2 million of undrawn facilities at 31 March ), which provide adequate resources to finance committed reinvestment and development programmes, along with the Group s day to day operations. The Group also has a long-term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders covenants. After making enquiries the Board has a reasonable expectation that the Association has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months after the date on which the report and financial statements are signed. For this reason, it continues to adopt the going concern basis in the financial statements. Annual General Meeting The annual general meeting will be held on 23 September. Auditors A resolution to reappoint Grant Thornton UK LLP as auditors will be proposed at the forthcoming Annual General Meeting. The report of the Board was approved on 22 July and signed on its behalf by: H Gardner Chair 8

12 OPERATING AND FINANCIAL REVIEW - HIGHLIGHTS - FIVE YEAR SUMMARY For the year ended 31 March Group Income and Expenditure account '000 '000 Total turnover 62,665 56,238 48,516 44,975 45,341 Income from lettings 53,007 49,097 44,243 41,739 41,170 Operating surplus 11,132 13,054 11,325 9,965 10,285 Surplus for the year (excluding exceptional revaluation and acquisition items) 4,060 4,488 2, ,070 Group Balance Sheet Housing properties net of capital grants and depreciation 622, , , , ,206 Net current assets/(liabilities) 20,466 20,310 3,267 (4,169) 4,291 Loans (due over one year) 312, , , , ,067 Provisions Net pension liability 7,939 6,678 6,381 4,978 10,135 Reserves : revenue 50,069 48,377 34,111 32,505 23,373 : designated : revaluation 278, , , , ,294 : total 328, , , , ,715 Accommodation figures Total housing stock managed at year end (number of units): 11,520 11,105 10,264 9,935 9,880 In development

13 OPERATING AND FINANCIAL REVIEW Activities GreenSquare Group is a major provider of housing, regeneration, care and support and commercial services across Wiltshire, Oxfordshire, Gloucestershire, Swindon and the surrounding areas. We have the following key business streams: general needs housing for rent, primarily by families who are unable to rent or buy at open market rates; supported housing and housing for older people who need additional housing-related support or additional care; low-cost home ownership, primarily shared ownership whereby residents purchase a share in the equity of their homes and pay rent to the Association on the remainder; development construction services provided by our in house subsidiary, Tidestone leading to value for money savings and the potential for any profits to be reinvested in the Group s charitable activities; and property investment and maintenance of public open spaces undertaken by our commercial subsidiary Oakus. As well as managing over 11,500 properties, we are a major developer of new affordable housing and a lead development partner under the Homes and Communities Agency (HCA) National Affordable Housing Programme (NAHP). The Group s focus remains on its social housing activities and these are expected to continue to constitute over 80% of the Group s activities by turnover. Business and financial review GreenSquare Group has delivered another year of positive financial performance. Reported surplus for the year was 0.3m (: 13.5m) on a turnover of 62.7m (: 56.2m). However on a like for like basis the adjusted net surplus, if one off exceptional items such as revaluation impairments and gifts on acquisition are excluded, shows an underlying result of 4.1m (: 4.5m). We see maintaining strong financial strength and sustainability as one of our key corporate objectives, because without it we will not be able to achieve our broader aims. We have continued to invest in both our existing housing stock and undertake a series of new developments, for both sale and rent. The Group continues to track progress against its requirements under the Affordable Homes Programme and we continue looking forward to future development opportunities. After transfers the Group s reserves stand at 328.3m (: 283.5m). There were no significant changes to accounting policies in the current year. Objectives and strategy Our mission is housing people, building communities. The achievement of this is underpinned by four key vision statements: Develop good quality housing to meet a wide and growing range of needs. Create places where people want to live, and support a good quality of life. Provide the range and quality of services our customers want. Grow our activities and improve our financial strength and sustainability. The Board and senior management have developed a series of key performance objectives to monitor performance against this vision. These objectives are reviewed annually by the Board in order to support our commitment to continuous service improvement. 10

14 OPERATING AND FINANCIAL REVIEW continued Vision Objectives Outcomes Develop good quality We will develop a range of We will have a broader housing to meet a wide and homes for rental and range of rental and growing range of needs ownership in mixed ownership options and a developments in line with more diverse income, our business plan and Homes and Communities which means greater stability. Agency (HCA) contract by Satisfaction with our new March homes will exceed 90% We will continue work in We will have delivered 555 our four renaissance areas. new homes with the following mix of tenures: 30% affordable rent 30% outright sale 10% shared ownership 30% market rent We will have submitted planning applications for all areas by March Create places where people want to live, and support a good quality of life We will meet our two-year improvement targets for satisfaction with neighbourhood, handling of antisocial behaviour (ASB), and home. We will, each year, develop communities plans and evaluate and report on progress for each of our neighbourhood areas. We will be implementing our Creating Social Value strategy. We will have reduced tenancy turnover by 5% and increased resident satisfaction with: neighbourhood to 85%; how ASB is handled to 70%; and their home to over 86%. We will have achieved above average performance for satisfaction with landlord service (88%) and we listen and act on customers views (73%). We will have reviewed the measurements of sustainability that we use to allocate funding and resources during /15. 11

15 OPERATING AND FINANCIAL REVIEW continued Vision Objectives Outcomes Provide the range and quality We will be successfully We will have successfully of services our customers supporting our customers managed the transfer to want and managing the changes universal credit, which will to the business in response see arrears not exceeding to the impact of welfare 3.5% of rent. reform. We will be actively We will work with residents to complete a review of our resident involvement activities. By March 2015 we will have secured new support engaging with 10% of all GreenSquare residents and have increased satisfaction with how we listen to and act on customers views to 73%. contracts that individually By June we will have will strengthen our business plan. We will be operating one launched Greenview, our new interactive resident involvement website. virtual contact centre We will have secured at across the Group for all customers by March 2015 and be delivering our customer access strategy. least five new contracts that either improve the business plan or at very least are cost neutral. We will work with residents We will reduce our call to improve digital inclusion. volume by 5%. We will achieve 90% satisfaction with the outcome of customers last contact with us. We will achieve an hourly cost of 32 for customer service delivery across the group. We will deliver our digital inclusion action plan. 12

16 OPERATING AND FINANCIAL REVIEW continued Vision Grow our activities and improve our financial strength and sustainability Objectives We will grow our commercial activities Energy, Construction and Homes to deliver services and profitability to enhance the quality of life of our customers. Oxbode will be fully integrated into the GreenSquare Group from April Our value for money work will ensure that we continue to deliver against our business plan. We will be a local employer of choice, maintaining our high level of staff engagement. We will have the IT infrastructure, IT and facilities required to support the needs of the business. We will continue to actively pursue opportunities to take over homes from other housing associations who are looking to rationalise their stock. We will develop and maintain robust governance structures to meet the changing needs of GreenSquare and to maximise effectiveness and efficiency. Outcomes By March 2015, our commercial activities will account for 25% of total turnover. We will have achieved full harmonisation of information technology (IT) systems, human resource and housing policies and procedures. We will form a new Communities Board covering the Marden and Oxbode areas from 1 April. We will have met the benchmarks outlined in our financial golden rules. We will simplify the existing loan portfolio, seeking to generate long term interest cost savings. We will simplify the current group structure and generate long term efficiency savings. We will review and implement a new approach to procedures that minimises waste and maximises value to our residents and customers. Our staff engagement will have exceeded 80%. We will have reduced helpdesk calls by 15% and reduced downtime by 50%. We will have grown our stock by 2% by transferring homes from other organisations. We will have achieved a positive regulatory judgement from the Homes and Communities Agency. 13

17 OPERATING AND FINANCIAL REVIEW continued Value for Money Statement 1. Introduction and principles This statement is for our residents, stakeholders, Board members and staff. It sets out where we are on providing an efficient service for all our customers, and creating value for money within GreenSquare. This is the second year we have provided such a statement. The staff and Board members at GreenSquare define value for money as the relationship between effectiveness, efficiency and economy, often described as the value chain. Value for money is high where there is a good balance between all 3 low costs, high productivity and successful outcomes. We aim to be accountable to our residents, partners and regulator by setting out here our past performance and future aspirations. Overview Creating value for money is seen as essential within GreenSquare as it creates choices of what we can do to further our social and charitable objectives. Created value can be applied to: improving our existing homes and raising resident satisfaction; and/or building new homes to help address the lack of housing supply in the areas where we operate; and/or helping to improve the life chances of our residents and/or the communities where they live. Therefore there is a compelling drive to deliver value for money at GreenSquare. There are some areas where we have continued to improve and also some areas where we have identified we need to do better and which we have plans to tackle. Consequently this value for money statement seeks to achieve two overriding objectives: To outline our value for money performance; and To outline the Board s way forward for value for money, and what decisions it has already taken to raise performance in this area. 2. The contents of this statement into 5 areas: Our long term aspirations Managing and monitoring value for money Our performance to date including benchmarking and the social and financial return we achieve from our assets, and value for money achievements The Board s way forward driving more value for money How the Board gains assurance that we are doing what we say we are 3. Our longer term aspirations Overall we want to be as efficient as we can whilst providing excellent services to our residents. We define this aim as achieving top quartile performance (i.e. within the top 25% when compared to similar housing organisations) on services in a number of areas, particularly in customer satisfaction, and being in the best quartile on cost. There is a way to go on this, as set out in the rest of this statement. 14

18 OPERATING AND FINANCIAL REVIEW continued Value for Money Statement continued 4. How we manage and monitor value for money Within the value for money statement last year, GreenSquare detailed the ways it manages and monitors value for money. In summary the key aspects of this remain: the business planning cycle which includes comprehensive cost reviews and challenge, including seeking 5% efficiency savings year on year; performance reporting focused on value for money; a value for money team meeting regularly to drive changes through the business; co-regulation of value for money with the resident scrutiny panel; use of professional advisers; good contract management; rigorous project management; and periodic service reviews looking at cost and service quality. We also highlighted our Greenstates, a one-page statement of costs, performance, and areas for improvement for each of our service areas. 5. Our Performance to Date a) Understanding our performance: performance over time We have reviewed the key indicators which we think are relevant to stakeholders on our value for money and determined these to be as follows: Social Housing Operating Margin Management and Maintenance Costs per Unit Void Losses Efficiency/Procurement Savings Cost of funds. With the exception of efficiency/procurement savings which are covered later on, we have set out below our performance in each of these over the recent period. Social Housing Operating Margin (Earnings before interest, tax and depreciation EBITDA) Generating a good operating margin is fundamental to ensuring the organisation is generating sufficient funds to enable it to invest in its operations going forward. The charts below show our core turnover and operating margin (these exclude financial impairments due to acquisition of properties): 100 Social Housing Turnover and EBITDA m Turnover EBITDA 15

19 OPERATING AND FINANCIAL REVIEW continued Value for Money Statement continued 60.00% Social Housing EBITDA % 40.00% 20.00% EBITDA % 0.00% Management and Maintenance Costs per Unit We monitor our overall management and maintenance costs per unit as part of our value for money Management Cost per Unit Management Cost per Unit Our management costs have risen, partly to cope with managing the impact of welfare reform, and reflecting other pressures in the business. We recognise from benchmarking (see below) that we need to improve. Our management costs in /14 grew by 0.3%, significantly below inflation. Maintenance per Unit 1,400 '000 1,300 1,200 1, Maintenance per Unit We currently have a low level of spend on maintenance but are reviewing investment in our assets. Void Losses Voids are loss of rent where there is no tenant. Voids losses are an area of focus for the Group and a pilot for the lean process reviews (see below, section 7 value for money systems) will be focussed in this area in /15. 16

20 OPERATING AND FINANCIAL REVIEW continued Value for Money Statement continued 1.70% 1.50% 1.30% 1.10% 0.90% 0.70% 0.50% Void Losses Void Losses Void losses are showing an improving performance over time. Cost of Funds 4.50% 4.40% 4.30% 4.20% 4.10% Cost of Funds Cost of Funds Our cost of funds (e.g. interest costs) are relatively low but may go up as interest rates rise. At the year ended 31 st March the element of variable debt was approximately 18% of total drawn facilities. b) Understanding our current performance: benchmarking costs and income To better understand our existing performance on costs we have looked at our absolute and relative (i.e. how our costs compare with others) costs, through benchmarking. Background on benchmarking: We gain a full assessment and richer picture of GreenSquare's value for money performance by comparison to other similar registered providers. Consequently, a key focus for this year s value for money statement is how GreenSquare benchmarks against others. We use 2 key sources of benchmarking to assess performance. They are the Shape-Up analysis (by FSMB) and Housemark. Clearly benchmarking reports are only available after the financial reporting is complete, therefore this analysis takes the Shape Up results for year ended 31st March results and then adds the data from these financial accounts for the year ended 31 st March. The benchmarking in Shape-Up compares GreenSquare to a peer group of 100 similar housing association/groups. Where there is similar analysis from Housemark the benchmarking has shown a consistent story with the Shape-Up results. Results: For performance to date the following areas are described: growth; revenue and cost structure; surplus and interest; bad debts and arrears; and balance sheet. Growth: In 2012/13, our total assets grew by 12.7% compared to the peer group of 4.2% and this puts us in the top quarter of the peer group. In /14 that growth was 5.2%. This shows that GreenSquare is maximising its financial capacity to build more new homes for those in housing need. 17

21 OPERATING AND FINANCIAL REVIEW continued Value for Money Statement continued Revenue and cost structures: The total revenue per unit for 2012/13 was 5,064, compared to the sector average of 5,884. For /14 it has improved to 5,439. This remains relatively low compared with peers. However, it does highlight the significant housing benefit savings that GreenSquare creates for government when comparing rents paid by residents in receipt of housing benefit to the level of benefits that would be required to pay market rents in the private rented sector. In 2012, the Board recognised that staff cost per the number of staff employed was 34,596 compared to the peer group of 30,060 and consequently implemented a new reward strategy. The new strategy undertook to remove that salary differential over a period of time. As a result these financial statements show a cost of 34,356, an improvement of 0.7% from the previous year. The spend on maintenance was 1,103 per home in 2012/13. That placed GreenSquare in the top quarter within the peer group of the lowest spenders in this area. In /14 this was 1,177, an increase of 6.7%. Whilst financially this demonstrates good value for money, it needs to be set in the context of less favourable benchmarks of resident satisfaction. This cost versus satisfaction relationship is addressed in more detail below in the section on The Board s way forward - driving more value for money. Surplus and Interest: the balance sheet records GreenSquare's assets at valuation whereas many housing associations have continued to use the lower cost figure. The impact of that is the GreenSquare Operating Surplus is reduced because of a higher depreciation charge. In order to benchmark consistently, if that variance is removed then the Operating Margin (before interests and tax) is 28%, which is above the peer group average of 25.9%. For the /14 business plan, the Board agreed to generate surpluses for development projects and in June the Board agreed to take an additional step to support the National Housing Federation Ambition to Deliver and thereby advocates creating a profit for purpose. Consequently, the relatively higher Operating Surplus will help support our vision. However, we have also identified that there are two costs drivers noted above that need to be addressed: the higher than average staff cost (currently being addressed through the reward strategy); and the lower than average maintenance costs (this will be continued to be addressed through improved efficiency measures, i.e. continue with the downward pressure on costs), and the re-assessment of the long-term asset management needs of our homes, particularly in North Wiltshire. Voids, bad debts and arrears: for 2012/13, we demonstrated positive performance in this area, with the exception of losses from bad debts as a percentage of gross rents and service charges at 0.8%, which was above the peer group average of 0.7%. In /14 our results show this has been tackled with an improvement to 0.7%. Balance sheet: As noted above in Growth, GreenSquare has a recent history of maximising the use of its balance sheet capacity to help deliver its charitable objectives Consequently the debt per unit for 2012/13 was 25,400, compared to the average of 22,100 and lower quartile of 27,400. That desire to maximise the balance sheet capacity has continued and the debt per unit has increased to 27,400, putting balance sheet capacity to use in furthering our overall aims. Summary: Our rents are lower when compared to its peer group, whilst our growth is greater. Both of those results are a positive outcome from a focus on value for money. In financial terms, the lower maintenance spend is positive in that it creates value to invest in new homes or communities. However, we are reviewing the impact of this on our residents through a comprehensive re-evaluation of options for the housing assets, based on their return on investment together with their social and environmental return. The Board has also identified continued scope to improve our operating performance on voids and arrears is average. In addition, we have identified that overall our operating costs are high and are under increased scrutiny to ensure GreenSquare is efficient, and that its operating cost separates out the cost of being a landlord, and the extra work that we undertake to improve the resident s life chances and their communities. 18

22 OPERATING AND FINANCIAL REVIEW continued Value for Money Statement continued c) Understanding our performance: satisfaction Resident satisfaction is fundamental to us proving value for money and more focus has been given to the 3 resident led Communities Boards to help improve this. We have recently moved to the Star system to collate this resident feedback data and the results for the last two years on our landlord service are shown below: 100% 95% 90% 85% 80% 75% 70% Landlord Service Landlord Service There has been an improvement in our overall performance, but the Board will remain focused on improvement from bottom quartile in the Housemark benchmarking to achieve median performance of 88% and ultimately our aim of over 90% to be in the top quartile. d) Understanding our performance: financial return on assets Are we holding and investing in the right assets? A full strategic asset review has been carried out in /14 which has identified 16 areas of focus to ensure we are maximising the return on our assets. During early /15 we will conduct detailed analysis of each of the areas involving looking at long term net present values and customer satisfaction levels. Following this review due to be completed by July 2015 recommendations and action plans will be presented to the Board for consideration. The areas for potential improvement are listed below: Sheltered housing schemes Precast reinforced concrete (PRC) properties Small land sites with development potential Land holdings with no development potential Regeneration areas Estates with sustainability issues High value properties Three storey flats Two bedroom flats Properties with scope to extend Open spaces with potential to enhance the neighbourhood Energy efficiency Under occupation supply and demand. Garage sites Supported housing Potential acquisitions to support regeneration. The value of our properties The existing use value (EUV) is a formal valuation of our stock by external valuers. The valuation is a measure of the total income we receive from our homes less the running costs of the homes over the lifetime of the homes, all added up. Increasing values indicates that the return on our assets is increasing. Over recent years we have had 5 valuations for Westlea s stock, and 3 for OCHA s. The results are set out below. 19

23 OPERATING AND FINANCIAL REVIEW continued Value for Money Statement continued ExisFng Use ValuaFons OCHA Westlea e) Understanding our performance: Social return on investments - improved outcomes for residents: We invest in dedicated teams to help support residents who might be either in arrears, or likely to get into arrears, and help them maintain their tenancies. Not only does this help people to keep debt to a minimum, it can also reduce mental health problems and be a positive outcome for the wider communities in which they live. Working collaboratively with other agencies, such as the local Credit Unions and Citizens Advice also enables us to offer a holistic approach to financial inclusion. In /14 150,000 was invested in the Wiltshire CAB who helped 491 of our residents resolve problems with debts and benefits issues of 717,000. Our in-house Tenancy Sustainment Team conservatively prevented 29 evictions, saving 168,000. Dealing with anti-social behaviour (ASB), which affects the wider community, ensures successful tenancies and prevents others from moving away. Working with the local Crime and Safety Partnerships produces better outcomes for customers and avoid costly duplication. Our investment in this service resolved 23 cases in /14. The GreenSquare Energy Advisors is an award winning team that work with those customers most at risk of fuel poverty. Since establishing the team, they have saved our residents over 385,000 per annum in utilities costs. We continue to develop and support our customers who can further their skills and training through the GreenSquare Academy. This year over 120 residents took part and recorded satisfaction levels of over 92%. 44 residents completed courses with a formal accreditation. Understanding our performance: Social return on investment - improved outcomes for the communities where GreenSquare works We invest in community initiatives. The Board agreed an investment of 1.50 per property per week back into the community. The decisions about investment in community initiatives is based on priorities set by our resident led Communities Boards Action Plans. These projects: o o o improve the areas around our homes; and/or foster community; and/or improve individual wellbeing. 20

24 OPERATING AND FINANCIAL REVIEW continued Value for Money Statement continued The review of these projects through our Impact Assessments show that for the majority there has been a real benefit for communities. Where an Impact Assessment does not support this work then the project is reviewed. Some examples of successful projects are detailed below. Project Inspire has worked with 65 young people through support and learning. 46 have gained nationally recognised awards and qualifications, and this has directly helped 39 young carers, 21 with learning difficulties and 21 in danger of becoming excluded from education, employment or training. This project was match funded with 25,000 and cost GreenSquare 469 per participant. Without any additional cost, we have been working with Aspire Oxford, a charity providing grounds maintenance services that train and employ ex offenders, to cover our Oxfordshire estates grounds maintenance. Aspire save the public purse over 1,000,000 each year and 98% of trainees do not re-offend. Our estate clean up days continue. These cost just over 5 for each for the 842 residents who took part. Over 80% of the materials collected were able to be recycled or recovered; they also attracted 3,000 of investment from partners. Our Communities Boards have been working to complete their Communities Plans with 27 local consultation events. These projects have successfully collaborated with such organisations as the Wiltshire Wildlife Trust, Anybody Can Cook, and the Open Blue Trust. Understanding our performance: Social return on investment - new homes, and the rent dividend In /14 we built 283 new homes investing 44m into the local community Homes Under Management Homes Under Management In total we now own and manage over 11,500 homes. The vast majority of these properties are at rent levels significantly below market levels which creates a rent dividend we are effectively investing in our community or the UK economy which a private landlord would have retained. The average rent we charge p.a. is 96 per week which is 59 below the average market rent. Given that about half of our rents are covered by housing benefit we are saving those residents that pay the rent themselves collectively 15.45m a year and we also are saving the government the same sum in reduced housing benefit compared with housing our residents in the private sector. 21