Doing things right, Providing value for money. Value for Money Statement 2015

Transcription

1 Doing things right, Providing value for money Value for Money Statement 2015

2 We re Flagship Group, the overarching brand for Flagship Homes and RFT Services. We are well managed, financially strong and our operating profits are invested back into the business. Everything we do supports our core purpose of providing homes for people in need. So our focus is on doing things right. We do this by continually looking for new ways to do things better: providing value for money, driving revenue and profitability, and using the proceeds to deliver better services and more new homes. flagship-group.co.uk

3 Flagship Group Value for Money Welcome We define Value for Money (VfM) as achieving the best possible results with the available resources. VfM is a continuous process that is essential to the protection of social housing assets and optimising our capacity to meet housing need. Our approach is built around a culture of continuous improvement and the concept of right first time linked to a preference for long-term value over short-term savings. This self-assessment includes a review of progress during 20/15 and outlines our plans and aspirations for 2015/16 and beyond. The Board s key focus for VfM during 20/15 was to increase our operating margin, achieve high levels of service and improve our business resilience. Financial strength is vital in a period of unprecedented change and uncertainty for the sector. An improved surplus means that we can service our debts, maintain the confidence of investors and maximise our capacity to deliver. We see it as essential to drive efficiency so we are less vulnerable to market fluctuations, policy changes and the regulatory environment. Our surplus creates capacity to deliver our business purpose providing homes for people in need. The Board believes that debt levels must be sustainable and, therefore, an increasing proportion of the cost of new homes must be met from our own resources through efficiency savings and profitable commercial activities, such as homes for outright sale, rather than extra borrowing.

4 4 Flagship Group Value for Money 2015 The targets set by the Board for 20/15 were stretching. Whilst we did not meet them all, we have delivered an impressive set of results. Highlights include: 39% operating margin (20: 36.6%) 1.8m reduction in maintenance spend 1.5m surplus from first portion of sales 0.3m reduction in void loss 2.4% arrears (20: 2.1%) 1.1m surplus from asset disposals 88% customer satisfaction (20: 84%) 1.2m annualised interest savings 20.3% net margin (20: 15.4%) 217 new homes handed over (20: 51) Secured an A1 credit rating a sign of our financial strength Became a partner in the Affordable Homes Programme Streamlined, agile governance flagship-group.co.uk

5 Flagship Group Value for Money During the year the Board agreed a new five-year corporate plan for 2015/16 onwards. This includes details of how we will measure progress, and annual performance milestones to allow the Board to monitor performance. Flagship s objectives in the corporate plan are anchored on four themes and nine goals: 1. Customers 2. Finances Deliver outstanding customer service Provide more new homes Grow our business Deliver profitable new activities Increase operating surplus 3. People Develop skilled and talented people Develop the Flagship Way 4. Systems Optimise our property assets Reduce waste

6 6 Flagship Group Value for Money 2015 Customers New homes completed Outright sale Market rent Shared ownership Affordable Committed Comparison to: Measure Benchmark Customer Satisfaction with: Repairs 91.0% 85.0% 80.9% FHG dir* of travel FHG to peer group Rangers Service 94.5% New Homes 90.1% 95.0% Re-lets 77.9% /16 16/17 17/18 18/19 19/20 New homes handed over N/A Build cost per unit 120k 120k N/A Deliver outstanding customer service Our Customer Operations Group (COG) plays an important independent role representing customer views at Flagship. It helps identify areas for review, and helps to shape services from a customer perspective. The Board has shared the content of the self-assessment with COG. Operational housing staff are based in eight regional hubs across four strategic areas. Services are delivered via 60 Community Managers, each responsible for around 350 homes and providing a single point of contact. Our Community Managers are supported by 26 Community Rangers, providing a handyman service to our customers and assisting with void clearance, cleaning and gardening. This customer-focussed but streamlined approach helps keep arrears to a minimum and delivers high levels of customer satisfaction. Maintenance services are delivered though our in-house maintenance company RFT. To improve the efficiency and quality of the repairs service we have two distribution centres stocking our most frequently used items, strategically located to minimise the delivery times of materials to site. Having this level of insight and control over one of our most important customer services has been critical to improving customer satisfaction. This year we started recording customer satisfaction on our Rangers service, new homes and re-lets. We have been pleased with the performance of the Rangers service and new homes, but customer satisfaction in our re-let properties is not yet where we want it to be. Analysis of the comments given by 242 customers (15%) since October 20 reveals mixed feelings about the quality of these properties. To ensure our rating improves in this area, we have instigated a review of the way we manage void properties with the aim of redesigning the service to better meet the needs of customers. The redesign started in July 2015 and the roll-in of the new service will proceed from September. Provide more new homes During the year we delivered 217 new affordable homes: a significant increase on recent years, but less than our objective for the year. The shortfall was partly due to a combination of developer delays and a strategic decision to withdraw from one large scheme where a shared ownership staircasing restriction would have made the scheme unattractive for our customers (limited mortgage availability) and unviable for us. We plan to increase our development programme over the next five years funded by the efficiencies we generate, alongside additional debt. We aim to build a total of 1,867 new homes by flagship-group.co.uk FHG key: High Medium Low * Direction

7 Flagship Group Value for Money People Our planning framework ensures that the goals we agree in our corporate plan are cascaded through the organisation so that each member of staff has a set of personal objectives aligned to our goals. Develop skilled and talented people Our people strategy has taken into account the changes to the external environment, and is aligned to the delivery of our business objectives. We recognise the need to develop commercial skills. We aim to attract, develop, and retain the best talent to deliver outstanding customer service and sustainable growth. Our talent is one of our most valuable assets. Talented staff identifying business improvements are critical to our success. Our planning framework ensures that the goals we agree in our corporate plan are cascaded through the organisation so that each member of staff has a set of personal objectives aligned to our goals. Develop the Flagship Way Over the last 12 months we have refined and adapted our method of continuous improvement, creating the Flagship Way. The Flagship Way involves understanding what our customers need and designing our services from their perspective. By only doing the work required to fulfil those customer needs and ensuring we get service right first time, we will deliver an effective and efficient service that will release resources to invest in new homes, enhance existing assets and improve services delivering greater social value as a result.

8 8 Flagship Group Value for Money 2015 Finances 000 Own development of one home contribution from rent, grant and conversions 200,000 Value from rent Rent from 1 conversion 180,000 Grant Average cost of 160,000 new home 0, , ,000 80,000 60,000 40,000 20,000 0 _ Basildon South Cambs East Cambs Colchester Braintree Forest Heath St Edmondsbury Norwich Mid Suffolk South Norfolk Ipswich Tendring Broadland Suffolk Coastal North Norfolk Waveny Kings Lynn & Win Babergh Breckland No. of conversions needed to balance dev costs Fenland Great Yarmouth Grow our business Reduced capital grants and welfare reforms have encouraged us to take a more commercial approach to growth exploring profitable new revenue streams. At this stage the plans are modest but we recognise they increase our risk profile. Stress testing and multi-variant scenario modelling of our business plan have become even more important to ensure our social assets are not compromised. Business plan assumptions are reviewed regularly, supported by both internal and external data, alongside our strategic risk map that identifies and assesses risks to our business. We concluded that the areas to the west and south of our operations have high levels of financial viability. Here we can build new affordable homes with fewer subsidies. Strategically this is where we are planning to focus our development programme. We will continue to build in other less financially viable areas only where we can secure appropriate external funding or cross-subsidise to make the schemes viable. The decision to re-enter the shared ownership market was sound, adding 6.2m to our income and generating a healthy 1.5m surplus. To support our growth aspirations, during 20/15 we reviewed the financial viability of new build within the 22 local authority areas we operate in. Whilst there is high demand for affordable housing across all areas, there are considerable variations in financial viability. The graph above illustrates the average financial viability of the 22 local authorities and, based on future rent projections, the reliance on cross-subsidies to balance the cost of a typical development scheme. flagship-group.co.uk

9 Flagship Group Value for Money Our market rent portfolio continued to perform well. Growth in the year was small turnover of 0.7m was 2.4% higher than 20. Operating margins remained strong at 62.3% but fell slightly from 20 (71.8%) following a catch-up of responsive repairs across the portfolio. We began to expand the portfolio during the year. We have set a clear hurdle rate for investment return to ensure we only add homes that provide the right balance of risk and reward. We are positioned well for the coming year with commitments in place for 13 homes and a further 61 homes under consideration a projected 70% increase. Our student accommodation outperformed against budget and delivered a 0.6m operating surplus. Excluding 20 that included some one-off items, the student portfolio has shown steady improvements in operating surplus and margin over the last four years. The operating margin for the year was 20%, a rise from % in Deliver profitable new activities Over the next five years, we intend to invest in new commercial activity where this generates profit that we can use to increase our supply of homes. The risk and reward must be carefully balanced so we have set clear investment hurdle rates for any new proposals alongside a robust risk assessment. Our plans include a small number of homes for outright sale. Towards the end of the year we secured our first commercial maintenance contract that will generate 75k additional income. This is an important first, manageable step in understanding and delivering a broader range of profitable commercial services.

10 10 Flagship Group Value for Money 2015 Finances Comparison to: Measure Benchmark Social Housing margin 41.4% 38.6% 30.6% FHG dir* of travel FHG to peer group Market rent margin 62.3% 71.8% N/A Student margin 19.7% 29.5% N/A Total operating margin 39.0% 36.6% 26.5% Return on assets 7.1% 6.7% 4.9% Cash generated per unit 2,970 2,406 2,060 Cost of capital 4.0% 4.8% 4.6% Benchmark data based on the 20/15 results of the 30 largest HAs.** Increase operating surplus Our turnover increased by 7.7m (6.9% growth) and our operating margin improved to 39% due to savings in responsive maintenance and overheads. As a result we improved our operating surplus to 46.2m (.1% growth). The net surplus of 24.1m ( 17.1m in 20/15) is the highest recorded by Flagship and was helped by improved asset sales and treasury management. This provides us with more resources to invest in new homes and services. Asset sales delivered a better than expected surplus of 1.1m: 0.6m shared ownership staircasing surplus 1.0m asset disposal programme surplus 0.5m Right to Buy deficit (as a result of sharing agreements with two local authorities) Work on the treasury portfolio delivered a number of significant benefits that help position us well for the future: 1.2m annual savings from work to blend and extend embedded fixes in our loans Cost of capital reduced to 4.0% 50m surplus security released from existing loans 50m revolving credit facility agreed 2,970 cash generated per home (20: 2,406) due to improved operating margins The improved net surplus helped push our return on assets to 6.7% higher than the budget (4.0%) and previous year (3.7%). Our arrears management continued to perform well, ending the year at 2.4% a small increase on last year. We worked hard to improve our void performance and delivered a 0.3m reduction in void loss. The average number of void properties was reduced by 40%, with 150 homes empty at the end of the year. Our void turnaround is not yet where we want it to be. We have, however, tackled a number of difficult-to-let properties, many of which had been void for over 100 days. Having cleared these long-term voids, we expect to see a significant improvement in void re-let days over the coming year. flagship-group.co.uk FHG key: High Medium Low * Direction, ** Housing Associations

11 Flagship Group Value for Money m Rent arrears ( ) social stock Total Arrears Arrears HB** 5.0 Arrears Non HB** % of Debit Apr May Jun Jul Aug Sep Oct Nov Dec Jan 15 Feb 15 Mar % of Debit Void properties per month social stock Average time re-let units were void social stock Number of voids Days Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 15 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 15 Benchmark comparison to: Measure Benchmark FHG dir* of travel FHG to peer group Average weekly rent N/A Current arrears % 2.4% 2.1% 3.23% Void loss % 0.87% 1.2% 1.2% Rent collection % 99.3% 99.5% 99.3% FHG key: High Medium Low * Direction, ** Housing Benefit

12 12 Flagship Group Value for Money 2015 Systems Optimise our assets The overall value of our organisation is a reflection of the underlying value of its assets and the return on those investments. Best value is achieved if we understand housing demand, asset costs, values and yields so we can invest in assets which generate the best financial and social returns. Our housing stock is mostly let at social rent and more than 76% of our homes are houses typically two and three bedroomed. Our 22,000 homes are spread across 22 local authorities in East Anglia. 69% are located in three local authorities Breckland, Suffolk Coastal and Forest Heath. flagship-group.co.uk

13 Flagship Group Value for Money Stock age profile Stock by tenure 7,000 6,000 5,000 4,000 3,000 2,000 Social rent 91% Intermediate rent 0.4% Shared ownership 5% Market rent 1% Student 3% Other 0.3% 1,000 0 < >100 Unknown Years Homes by bedrooms Homes by type 1 bedroom 4,541 2 bedrooms 9,071 3 bedrooms 7,682 4 bedrooms bedrooms 78 Demand by town average bids per property per town Ipswich Stowmarket North Walsham Red Lodge Colchester Mundesley Norwich Newmarket Lowestoft Kings Lynn Mildenhall Braintree Fakenham Felixstowe Stalham Cambourne Thetford Brandon Woodbridge Long Stratton Leiston Dereham Saxmundham Aldeburgh Watton Attleborough Swaffham Houses 16,757 Flats 5,331 Average bids Framlingham Wickham Market Narborough

14 Flagship Group Value for Money 2015 Systems Financial Measures Comparison to: Measures: Benchmark Repair end to end time (days) # Total repair cost for property FHG dir* of travel FHG to peer group N/A 2,271 1,979 2,342 # Repair end-to-end time includes all responsive and planned works. Efficient and effective maintenance is a key part of optimising our assets. Our own maintenance service through RFT provides the ability to use the Flagship Way to deliver a unique service designed around our customers. We take the view that there are two customers: the customer who lives in the property and pays rent; and the property itself, which requires the right level of investment to continue providing value over the long term. Total spend on maintenance (including component replacement) has reduced by 1.8m. A number of improvements were made to the service to deliver greater productivity and an improved customer experience. We made good progress in using our Geographic Information System. Mapping of boundary and land ownership data is around 70% complete and has resulted in the following savings: 55k grounds maintenance 10k fencing repairs We continue to operate a service that fixes the problems raised by customers but also any other repairs identified on site. Over 45% of all repairs are identified by our own operatives. We have identified a number of properties that when void will be subject to a viability review. The review assesses local demand, property condition and open market value, and determines the best financial and social outcome for the property. During the year we disposed of 26 properties. We are in the process of redeveloping a number of schemes that were no longer viable but will deliver better value with some investment and bring important local assets back into use. During the year, two schemes were successfully remodelled. One, at a cost of 700k, put nine flats back into service and added c 45k rent. The second, a major 3.5m refurbishment of a Victorian workhouse, brought 32 homes back into use and will add c 175k to the annual rent. flagship-group.co.uk VfM key: High Medium Low

15 Flagship Group Value for Money We made good progress in using our Geographic Information System. Mapping of boundary and land ownership data is around 70% complete and has resulted in the following savings: 55k grounds maintenance 10k fencing repairs As part of creating a strategic approach to asset management we obtained a valuation of each of the 22,000 properties and established the gross rental yield which ranges from 7.7% to 12.0% depending on area. The results from our yield analysis, the new build financial viability insights, and external data on house price inflation help to shape our development programme and strategic approach to asset management. The low yielding areas correspond with areas we have identified as having the highest capital appreciation. These are areas where shared ownership and outright sales can generate the best cross-subsidy for our areas of lower financial viability. They are also where homes for rent are likely to have a long-term positive effect on our balance sheet as their capital values grow more quickly. The high yielding areas correspond to those where it is more difficult to develop financially viable schemes. In these areas, where we are unable to find viable schemes or cross-subsidise, we will look to build further economies of scale through stock acquisitions where stock rationalisation brings operating efficiencies to both Flagship and the selling organisation. At this stage we recognise there is more to do in understanding asset performance. In 2015/16 we will develop our NPV (Net Present Value) analysis of assets in order to inform an Asset Management Strategy that genuinely shapes our investment, conversion and disposal plans.

16 16 Flagship Group Value for Money 2015 Reduce waste Reduce waste We are now in our second year of thinking differently through the Flagship Way. Each year we will complete a number of service reviews to identify and drive out waste. Once a review has been completed our teams are engaged in a constant cycle of improvement using our three-stage process: Check understanding the what and why of current performance Redesign designing the system around a clear customer purpose Roll-in implementing the redesign in carefully managed stages During 20/15 we have used the Flagship Way to improve our services in responsive repairs, planned works, sub-contracting, payroll, legal services and internal audit. As a result we brought legal services in-house and set up our own internal audit service. Whilst we are aware there is still much to do, we are gaining traction and now have some important building blocks in place to drive forward our agenda for continuous improvement and sustainable growth. The Flagship Way is the fundamental concept behind our new repair service. We have redesigned the booking system to provide a more flexible service for our customers that has led to a reduced number of cancelled appointments. Other improvements in the year include an increased number of stock lines in our distribution centres, out of hours van stock replenishment, intelligent call routing to reduce telephony costs and a fleet review that will deliver significant fuel savings in the coming year. Together with further planned productivity improvements, these changes will improve repairs performance and efficiency in the flagship-group.co.uk Other VfM gains this year included: 113k annual saving from new fuel cards 102k annual saving from mobile telephony 75k grant funding obtained to support homelessness prevention 40k annual saving from retender of Geographic Information System software 33k annual saving from retender of insurance 25k annual savings from procurement framework agreements 23k cashback from procurement card transactions 20k annual saving from retender of printers coming year. The results of our work to reduce waste and improve efficiency are summarised in the table to the right. The table compares our performance over the last two years with the latest available published data from the statutory accounts of the top 30 largest HAs. We have also included our aims for We have made progress in most areas, with only rent collection and arrears marginally worse than the previous year but outperforming the peer group. Despite reductions in maintenance spend we continue to spend more per unit than the peer group. This is consistent with our strategy to ensure that at each visit to one of our homes we repair not just the reported issues but all issues identified by our operatives.

17 Flagship Group Value for Money Comparison to: Measure Unit 2016 Projected 2015 Actual 20 Actual FHG Direction of travel FHG to peer group Peer Group Operating margin % 39.0% 39.0% 36.6% 26.0% Net margin % 20.9% 20.3% 15.5% 19.9% Return on public capital invested (RPCI) % 10.0% 10.3% 7.2% 8.5% Interest cover % 257% 250% 216% 245% Cash generated per unit managed 2,760 2,977 2,406 2,060 Average cost of funding % 3.9% 4.0% 4.8% 4.7% Void loss % 0.8% 0.9% 1.2% 1.2% Current arrears % 2.2% 2.4% 2.1% 4.3% Rent collection % 99.5% 99.3% 99.5% 99.3% Management cost per unit Social Housing N/A Maintenance cost per unit charged to income and expenditure Social Housing 1,154 1,254 1,320 1,015 Total maintenance cost per unit 1,918 1,955 2,045 1,298 Debt per unit 26,650 26,976 27,066 22,801 VfM key: High Medium Low

18 18 Flagship Group Value for Money 2015 Social Value Delivering social value is an important part of many of the services we deliver. 91% of our homes are let at social rent (on average 70% of market rent). In addition to our core housing management and maintenance service, last year we also provided a number of care and support services. Whilst these only delivered a small financial return they helped in the delivery of our overall social purpose. Beyond direct service provision, taking social value into account is an important aspect of how we deliver our services. Through our repairs service we aim to work with local suppliers wherever possible. Their knowledge and local presence, and the wider positive impact on the local economy, are an important part of doing business in the region. Local suppliers accounted for: 95% of our sub-contractor spend. 48% of our materials spend. Highlights include: 746 cases dealt with through our housing advice surgeries and drop-in clinics. 376 families helped by our housing support team. 162 customers are now able to live at home independently. 122 households prevented from becoming homeless through swift interventions. 11 customers with learning difficulties were provided with essential life skills. 58 (72%) Flagship Young People s Services (FYPS) customers engaged in employment, education, training and volunteering programmes. 62 (76%) FYPS customers have signed up for the Passport to Independence. 65 FYPS customers have now moved into their first homes. 10 apprenticeships filled across the Group 25k waived fees for gas and electrical safety checks on mutual exchanges. 50k 94k has been invested in community initiatives including garden equipment, play areas and a skate park. has been spent on neighbourhood events organised by the Housing team. flagship-group.co.uk

19 Flagship Group Value for For Money

20 20 Flagship Group Value for Money 2015 flagship-group.co.uk

21 Flagship Group Value for Money VfM Plans for 2015 / 16 Value for Money is a continuous process of evaluation and improvement and we firmly believe the Flagship Way is the most effective way to achieve it. Despite our strong operating margins we still believe there is more we can do. Over the next two years we are embarking on an ambitious programme of efficiency savings. The Flagship Way will help us towards our targets of 8m annualised efficiency savings, 45% operating margin and 90% customer satisfaction by March Future VfM gains identified for 2015/16 include: 2m 200k 200k saving on responsive repairs reduction in void loss (and increased customer satisfaction) cost avoidance replace repair van tracking software with in-house solution 100k saving from procurement activity: mobile telephony; print and design; transactional banking; grounds maintenance; and cleaning 50k saving from legal services review by bringing the service in-house 39k RFT fleet savings by switching to more economical vehicles 250 new affordable homes 50 additional homes at market rent 1,000 surplus assets released from loan security (c 49m of additional security headroom) 87% customer satisfaction Secure additional long-term fixed rate funding that lowers overall cost of capital Secure more grant to build more homes through Continuous Market Engagement process

22 22 Flagship Group Value for Money 2015 Conclusion We aim to build a culture of learning and continuous improvement through the Flagship Way. We see VfM and the Flagship Way as one and the same driving efficiency and effectiveness to deliver the best possible results with the available resources. We have made improvements in a number of areas this year but our intention is to do more, particularly around understanding asset performance, improving the void and repairs service and strengthening our efforts around social value. Doing things right and improving our performance in these key areas will create capacity to provide more new homes. flagship-group.co.uk

23 flagship-group.co.uk

24 flagship-group.co.uk Flagship Group Keswick Hall, Norwich, Norfolk NR4 6TJ