in service delivery to customers, utilising resources efficiently and .... drivers. Good. ⢠Good understanding of cost
Delivering Customer Value
VALUE FOR MONEY REPORT 2013-2014
Value for Money
Creating the right balance between economy, efficiency and effectiveness 2
Contents Introduction4 Section 1
5
Section 2 - VfM Strategy7 Section 3 - Return on Assets11 Section 4 - F inancial Control & Performance Management
24
Section 5 - A chievement and Reinvestment of Efficiency Savings28 Section 6 - Customer Scrutiny37 Section 7 - U nderstanding Costs and Outcomes44 Section 8 - O verall Self-Assessment55 Section 9 - Appendix 157
3
1
Introduction
Since its inception in 2005, VfM has always been a cornerstone of financial and resource management at the Trust. The efficient and proper use of the Trust’s resources is fully integrated in the way the Trust is managed, and VfM is a key consideration in decision making across the organisation. Whilst it is recognised that there is always scope for further improvement, the Trust has a strong track record in the delivery of VfM initiatives and VfM is well-embedded in the strategic and operational thinking of the Trust’s Board, Management and staff. This has become known as Social Value for Money, and incorporates both financial and non-financial resource utilisation and benefits realisation. This Self-Assessment provides information on how the Trust ensures it delivers value and makes appropriate decisions around investment of resources. The Trust’s key strengths and areas for improvement are analysed across the following areas: • VfM strategy • Return on assets • Financial control and performance management • Achievement and reinvestment of efficiency savings • Customer scrutiny • Understanding our costs and outcomes • Overall self-assessment This Self-Assessment also sets out the Trust’s performance against the requirements of the HCA Value for Money Standard (Appendix 1).
4
1.1
The Trust’s Approach to VfM
Since 2005 the Trust has been, and continues to be, committed to achieving continuous improvement in service delivery to customers, utilising resources efficiently and effectively to gain the maximum value from its service provision, and generating capacity to deliver new affordable housing to the residents of Trafford into the future. At the Trust, VfM is about delivering customer value, identifying the “sweet spot” of cost, quality and customer satisfaction (or aspiration) levels in setting service standards. In all areas of activity, the Trust strives to obtain the maximum benefit from the resources available, achieving the right balance between economy, efficiency and effectiveness, but also ensuring equity. As well as measuring financial value, the Trust seeks to recognise the social value it creates, in order to assess the achievement of ‘Social Value for Money’.
1.2
SOCIAL VALUE
Social Value for Money
At the January 2013 Staff Conference, the concept of ‘Social Value for Money was launched to all staff through an interactive presentation entitled ‘Adding Value’. Building upon the previous strength of VfM within the Trust’s culture, this sought to introduce all staff to the concept of social value, and the social impact of activities across the Trust:
What is Social Value?
It’s our IMPACT on...
It’s our WIDER IMPACT on... Training & Employment
Housing Health
Value for Money
CO
M M U NITIE
FA
S
Quality of Living
Reduce ASB/Crime
M ILIES
LOCAL BUSINESSES
Access to Services
Wealth
Empowerment
LOCAL GOVERNMENT HEALTH
INDIVIDUALS
Wellbeing
Support Local Economy
SCHOOL FIRE POLICE
CENTRAL GOVERNMENT
Improve Health
Partnership working Shaping the Future
...EVERYTHING WE DO.
5
1.2
What is Social Value?
In order to bring to implement Social Value for Money across the Trust, a VfM Project was approved with the following objectives to be delivered by March 2015: • Undertake a VfM & Efficiency Review; identify deliverable, sustainable efficiency savings of at least £100k per annum • Create a VfM register and monitor plans to ensure targets are delivered • Develop a new approach to VfM that engages staff, Board Members and customers, and embeds VfM throughout the business • Develop and obtain Board approval of a VfM Strategy that can be used as a business tool to support the embedding of VfM throughout the business • Ensure the performance framework includes benchmarking information and analysis that can assist management and staff to identify opportunities for VfM initiatives • Ensure VfM is considered as part of the budget setting, business planning, project management and business development processes • Support Audit, Risk & Compliance (ARC) Committee and Board in their oversight of VfM, ensuring they have the appropriate information on the cost and quality of services to make informed decisions • Develop staff engagement mechanisms to support a culture of Continuous Improvement • Consider linkages to Impact Assessment/SROI methodology • Develop a revised Procurement Strategy to obtain maximum value from supply chain management To date the Trust has undertaken significant work to embed Social Value for Money, in particular focussing on developing a methodology to understand the Social Return on Investment of activities (Section 3.7); gaining a better understanding of the relationship between cost and quality of service delivery, and using this to inform decision making (Section 7) and linking efficiency savings achieved to reinvestment decisions (Section 5). 6
The project is ongoing and progressing well, with the following deliverables achieved to date: • Board-approved VfM Strategy which defines the Trust’s approach to VfM • VfM & Efficiency Review undertaken by KPMG, identifying c.£500k potential opportunities for efficiency savings • Resultant Action Plan formulated to deliver c.£400k efficiency savings • Formation of a VfM Project Group, comprising members from all areas of the business, to drive VfM across the Trust • Robust benchmarking framework in place, with third-party assurance from HouseMark as to the appropriateness of the Trust’s cost allocation methodology • Establishment of a methodology for the measurement of Social Return on Investment, in partnership with the New Economics Foundation (NEF) Key deliverables for 2014/15 include: • Production of 2013/14 VfM Self-Assessment • Formation of a VfM Delivery Group from across the business, to ensure VfM is embedded and to monitor the implementation of approved initiatives • Development of a VfM Benchmarking Framework to monitor and compare the cost and quality of services, including consideration of the most appropriate methods of benchmarking different services • Development of an Efficiency and VfM Initiative Implementation Monitoring Framework • Implementation of a regular VfM reporting cycle to Audit, Risk & compliance Committee (ARCC) • Training and engagement of staff, Board members and customers • Embedding VfM in the existing Customer Involvement Structures • Project to review Procurement Strategy and Policies across the organisation
VFM Strategy
2
The Trust’s approach to VfM is outlined in the VfM Strategy, which was approved by Board in September 2012 and is reviewed bi-annually. The VfM Strategy underpins the Trust’s Business Plans for the forthcoming three years, with the Plan for each area of the business stating how it will deliver VfM, and is inherent in the annual budget setting process. The VfM Strategy defines the principles underpinning the achievement of VfM as being: • Economy: spending less - the price paid for what goes into providing a service. Delivering services at optimum cost, through minimising the cost of resources. • Efficiency: spending well – a measure of productivity and performance, how much is obtained in relation to what is put in.
• Effectiveness: spending wisely – the impact that is achieved, how far the intended outcomes are achieved. • Equity: spending fairly – ensuring benefits are distributed fairly, that customers do not receive differing services for reasons other than need.
Stron g fi bud nan ge c tin
n ma control l a i & g
erfo n rm di com anc n pa re
ts & cos ey ur th g o how ers e & o oth t
go isin ue Maxim r val fo
To deliver the Customer Promise, invest in our neighbourhoods and support our communities, maximising Customer Value
l fu n i e n M ea & r
de lue live a r Customer V
t
o
pp cr ortu ea tio nities n
po m on rt itor ing ing
Promot ing a
ion culture reat c in e ev u l U n der a ent m e s g ta a p
we do ing yth er
v
Central to the Trust’s VfM Strategy is the Strategic Vision for the achievement of customer value, which is defined as “to deliver our Promise to customers, invest in our neighbourhoods and support our communities, maximising Customer Value”. The Strategy sets out five strategic aims to support delivery of this vision:
Strategic Aims • To promote and embed a Value Creation culture in everything we do – to deliver Customer Value • To ensure strong financial management, budgeting and control • To understand our costs and performance and how they relate to others • To maximise opportunities for value creation • To have meaningful monitoring and reporting
The Strategy is represented as a central Vision, with five strategic aims circling the Vision. The strategic aim of promoting a Value Creation Culture encircles the other four strategic aims, to reflect that to have a truly embedded approach to VfM, there needs to be an appropriate understanding by management.
7
2
VFM Strategy
As part of the work to define the Trust’s VfM Strategy, an externally facilitated workshop was held with the Senior Management Team to better understand the Trust’s approach to VfM and identify priorities for improvement. The table below shows the results of the VfM Maturity Self-Assessment and subsequent actions taken to address areas identified as relatively weak: Aspect Culture and leadership (with regard to VfM)
Self-Assessment and comments Weak • VfM is not branded • Managers have a detailed understanding of the cost/ performance of services in their area • Do all staff truly understand what VfM means
Strategy
Weak • Trust makes year on year efficiency savings • Current VfM Strategy is now out of date
Understanding costs & performance drivers Effective challenge & scrutiny
Understanding social returns – measuring of outcomes
Prioritisation, decision making & opportunity cost
Comparators & benchmarking
Good • Good understanding of costs/performance • Could improve understanding of performance drivers and how these impact on cost
Action taken • VfM and Social VfM relaunched to all staff at conference in January 2013 • Ideas Unlimited (staff suggestion scheme) has own brand and is actively promoted throughout the business • Timetable in place to roll out VfM training to all staff during 2014/15 • Updated Strategy approved by Board in September 2012 • VfM reporting cycle in place, with regular reporting to ARCC • Updated Strategy approved by Board in September 2012 • VfM reporting cycle in place, with regular reporting to ARCC
Good - Excellent • Robust budget and performance monitoring by both management and Board Weak • Assessing the social impact of services and investment decisions and evaluating the outcomes for customers is difficult
• Framework for measuring SROI developed in partnership with NEF • SROI assessments undertaken for specific activities; further SROI assessments in pipeline for 2014/15
Good - Excellent • Robust budget setting and monitoring processes • Customer Promise sets out what services and standards customers should expect; budgets set to deliver Promise Good • Wide range of financial and non-financial KPIs, including benchmark data • Learning from peers is inconsistent; do we investigate/ seek to understand where others perform better?
Reporting and self-assessment
Weak • Robust financial and performance reporting • Lack of clarity on how VfM is reported and monitored
8
• VfM reporting cycle in place, with regular reporting to ARCC • VfM Self-Assessment presented to Board in August each year
VFM Strategy
2
The Strategy also incorporates an Action Plan setting out what has been done and what will be done to meet the objectives set out in the Strategy: Key Action
Progress
Aim 1: To promote and embed a Value Creation culture in everything we do - to deliver Customer Value To consider implementation of a Staff Suggestion Scheme to encourage staff to identify and implement service improvement or cost saving ideas – possible a 3 month short term scheme
Staff suggestion scheme, ‘Ideas Unlimited’ has been introduced as an ongoing, long-term scheme. To date 35 suggestions have been received, of which 11 have been taken forward for scoping
To consider implementation of a Customer Suggestion Scheme to encourage customers to make VfM suggestion
The VfM Project Team is currently considering how to increase customer involvement in driving VfM as part of Phase 2 of the project
To review ways of launching the Customer Value concept and staff suggestion scheme, possibly using the Staff Conference
Ideas Unlimited and the concept of Social Value for Money launched at the Staff Conference in January 2013
To run a pilot project to assess whether employee Service & Process Improvement Groups could assist in service improvement
The Business Intelligence Team has been expanded to include a Service Improvement function, which works in collaboration with the business to review services and processes with a view to improving efficiency and effectiveness
Aim 2:To ensure strong financial management, budgeting and control To review the current supplier payment systems and assess whether a new software solution should be implemented
An electronic invoice processing system, eBis, has been implemented. The system is fully integrated with the Open Accounts finance system and allows invoices to be scanned and distributed electronically, with escalation, approval and payment controlled through electronic workflow processes and controls
To review the current supplier approval process and develop an approved supplier list and contract database
• Enhanced controls have been implemented around the setup of new suppliers, to include credit checking, management sign off and validation of payment details • Business Case currently being drafted to undertake a fundamental review of procurement practices across the Trust. This will include a review and consolidation of the supplier list
To review the budget setting process to assess whether it can be developed to ensure alignment with the Aims of this Strategy
The 2014/15 budget was formulated alongside the operational Business Plans, which have considered VfM (see Section 5.4)
9
2
VFM Strategy
Key Action
Progress
Aim 3:To understand our costs and performance and how they compare to others To develop a VfM performance framework of performance indicators that evidence VfM and service improvement
Comprehensive framework in place to measure quantitative and qualitative performance results against targets and benchmarks. Phase 2 of VfM Project will include implementation of a VfM Register to capture VfM achievements across the business
To develop the Trust’s approach to Social Return on Investment
ROI methodology has been developed in partnership with NEF. SROI reviews undertaken in respect of sheltered housing and proposed development in Old Trafford. Programme of SROI reviews for 2014/15 currently being drafted, to include CleanStart and Youth Team activities
AIM 4:To maximize opportunities for Value Generation For consultants to undertake an Efficiency Review assessing opportunities for efficiency gains and service improvements, to review the recommendations of the review and implement the selected recommendations
Review undertaken by KPMG. Identified £500k of potential savings, of which £400k were taken forward for implementation
To undertake a review of Procurement processes and develop a new Procurement Strategy and Procurement Action Plan
As above - Business Case currently being drafted to undertake a fundamental review of procurement practices across the Trust
Aim 5:To have meaningful monitoring and reporting To develop a reporting framework to monitor and report on the achievement of service improvements and efficiency gains
As above - Phase 2 of VfM Project will include implementation of a VfM Register to capture VfM achievements across the business
To develop a reporting framework for reporting VfM to customers and stakeholders meeting the requirements of the Regulatory Framework
• 2013/14 VfM Self-Assessment to be summarised at a strategic level in the Annual Report & Financial Statements, with the full document also made available. Key facts from the 2013/14 VfM Self-Assessment will be included in the Tenants’ Report in a customer-friendly manner • These documents to be published and cross-referenced on the Trust’s website. Hard copies will be made available on request. Annual Report & Financial Statements Tenants’ Report
To develop a methodology for reporting the Social Return on Investment of the use of the Trust’s resources
10
Results from SROI reviews have been (and will continue to be) reported to Board and included within the VfM Self-Assessment
Return on Assets Historically, the approach to VfM relating to the Trust’s physical assets has focussed on four elements: • maximising the value of assets held to increase the financial capacity of the Trust
3
employed. During 2014/15, projects will be undertaken to better understand how value is driven from asset utilisation, enabling Board and Management to understand:
• maximising rental income generation from the Trust’s portfolio
• the financial return of individual assets
• the cost and quality of improvements to existing homes and
As well as physical (property) assets, the Trust recognises that one of its key assets is its workforce. The Trust is an organisation run based on its values, with staff satisfaction and motivation recognised as vital to achieve increased productivity, improved service delivery and maximise efficiency. Section 3.8 sets out how the Trust assesses the value generated through the workforce.
• obtaining best value in the development of new homes The Trust recognises that there is a need to ‘get smarter’ in its management of the asset portfolio, to ensure it achieves maximum value from assets
3.1
• the social value of assets and activities
What is Social Value?
INVESTMENT IN ASSETS VS VALUATIOn
The Trust invests a significant amount of resource each year into maintaining and improving the quality of its existing asset base. Since transfer, the Trust has invested over £170m in its homes – c.120m in the first five years to bring homes to DHS, and c.£12m each year thereafter to further improve and maintain the quality of the housing it provides. This investment was funded through a combination of loans secured on the Trust’s assets and reserves. The Trust’s investment in its assets is reflected in the current and future projected stock valuation. Each year Savills, the Trust’s valuers, undertake a valuation of the Trust’s existing housing assets using the EUVSH valuation basis. As the graph above demonstrates, the Trust has seen growth in its asset value (and therefore potential funding capacity) from £55m in its first year to £208m at 2013/14. Based on the current funding covenant of 110% asset cover, this valuation would enable further borrowing of c.£44m. Further growth is expected to take the Trust’s asset value to c.£250m within the next five years, and the Trust will be undertaking a project during 2014/15 to assess how
Valuation (EUV-SH) at 31st March Cumulative Investment
to maximise its debt capacity in terms of its funding arrangements and the delivery of new investment. 11
3.2
Maximising Rental Income
Each year, a detailed report is presented to Board, setting out the proposed options for the annual rent increase. This includes 30-year projections and impact on the Trust’s Long-Term Financial Plan. Board consider both commercial and social consequences of any proposed change in rents, including whether any particular customer group will be disproportionately affected. Since transfer, the Trust has followed the Government’s Rent Restructuring guidance, and in every year has applied the maximum permissible rent increase in order to fund the ongoing investment programme and service improvements. To maximise the return on assets, Board have also opted to adopt the permitted tolerances, aiming to move rents to Target Rent + 5% for General Needs and Target Rent + 10% for Sheltered and Supported Housing. In 2013/14 the Trust undertook detailed market analysis of its rents, which showed that demand for Trust properties remains strong; rents remain competitive when compared to other Registered Providers (RPs) operating within Trafford, and rents remain affordable (based on the NEF definition of affordability of a maximum ratio of 25% rent : income). The Trust has also periodically undertaken exercises to consider the historic valuation of its assets. It was felt the value assigned at transfer was understated, and Board and Management were keen to ensure the additional value resulting from the improvement programme was recognised in the valuation. These revaluations have resulted in projected increases in revenue from rents of over c.£60m over 30 years. In July 2013 the Government announced changes to the policy for rent setting from 2015, moving from a formula based on RPI + 0.5% to CPI + 1%. The Trust has modelled the impact of this on its 30 year Long Term Financial Plan and Board are confident this will not have a detrimental impact on the Trust’s finances. The Government also announced the removal of the ability to charge up to £2 per week for those properties where Actual Rent is lower than Target Rent. This has had a significant impact on the Trust’s
12
projected income; at April 2015 the Trust anticipates around 1,100 property rents will remain below target. It is estimated that rental income will be reduced by c.£2m over 5 years, c.£10m over 10 years, and continue to increase exponentially ad infinitum, as illustrated below: IMPACT: REMOVAL OF +£2 CONVERGENCE
Current Approved LTFP
Removal of +£2 from 2015
Whilst this does not affect the Trust’s financial viability, which remains strong, this has reduced the Trust’s potential capacity for future development activity. The Trust has therefore considered alternative models to fund development activity, as set out in Section 3.4. In 2014/15 a project will also commence to explore alternative rent setting models, considering the balance of price and service provision, potential for differential pricing, and the potential impact of Affordable Rents on future demand.
Cost and Quality of Existing Homes
3.3
As well as increasing the Trust’s asset value, it is important that the Trust’s customers, for whom these assets are their home, are satisfied with the quality of their home. 2013/14 saw the Trust achieve 100% of its homes at Decent Homes Standard. The Trust uses HouseMark benchmarking to compare its level of investment in existing homes and satisfaction achieved with other RPs: DIRECT MAJOR & PLANNED WORKS COST* PER UNIT
SATIsfaction with QUALITY of home
Upper Median Quartile
Lower Median Quartile Upper Median Quartile Benchmarks not yet published
Upper Quartile Lower Median Quartile
Benchmarks not yet published
*Comparative prior year costs have been inflated to 2013/14 levels based on 2.5% inflation p.a.
DIRECT major & Planned works cost* per satisified customer
The graphs above demonstrate that, over the previous four years, the Trust has reduced its average investment spend per property and seen a continued trend of increasing customer satisfaction year-on-year. During 2013/14 the Trust also achieved 100% of its homes meeting the Decent Homes Standard. When measured as a cost per satisfied customer, it can be seen, since 2010/11, that the Trust has reduced the level of investment per satisfied customer. In 2014/15, the Trust plans to invest £13.4m in its existing property portfolio, including the continued refurbishment programme within the Trust’s sheltered schemes, and planned replacement programmes relating to roofing, windows and doors and electrical systems.
13
3.3
Cost and Quality of Existing Homes
As well as assessing VfM in terms of customer satisfaction achieved, the Trust also utilises HouseMark data to compare its costs with those of similar RPs (ie North West LSVTs with 5,000 – 13,000 homes). Using the latest available benchmarking data (2012/13), the graph below illustrates that the Trust performs well in relation to its peers:
Upper Quartile
Comparative direct major & planned works cost per unit 2012/13
Upper Median Quartile Lower Median Quartile Lower Quartile
rgent investment in the coming year. Risks of U legislative breach, such as Health & Safety, Decent Homes Standard, Section 11 of the Landlord & Tenant Act, and/or risk to fabric or structure of building. Important investment in-year, could defer 1-2 years without material risk to building fabric/component. During 2013/14 the Trust, in partnership with Savills, undertook a Stock Condition Survey in relation to all existing housing assets. The Trust undertakes a Stock Condition Survey every five years, which informs the Asset Management Strategy and determines the level and nature of investment in existing homes over a thirty year period. This, in turn, informs both the Trust’s Long Term Financial Plan and the detailed Investment Programme and Budget for the next five years. In undertaking the survey, the Trust considered the current condition of assets and prioritised investment works using traffic light scoring matrix as follows: 14
imely and advisable investment in-year, could defer T up to 5 years without material risk. esirable enhancement investment but purely D discretionary. Management considered the findings of the survey against the above matrix and, through challenge of the investment ‘pattern’, was able to realise £6.0m of additional capacity across years 1-12 of the Long Term Financial Plan. This capacity will be directed towards new home development, and equates to approximately 40 new homes.
Development Activity
3.4
Since 2008, when the Trust entered into a contract with the Homes & Communities Agency as part of the 200811 National Affordable Housing Programme, the Trust has developed 276 new homes within Trafford. 2013/14 marked a significant ‘turning point’ whereby total new homes built exceeded total Trust homes sold under Right To Buy (RTB), as illustrated below:
Cumulative number of homes built and sold
05/06
10/11
06/07
11/12
07/08
12/13
08/09
13/14
09/10
Receipts from property sales are used to fund the development of new homes, and approximately two RTB sales generates sufficient funds to build one new home. To 2013/14, the Trust had spent £36m on new development, funded through a combination of RTB sales proceeds, grant funding and borrowing. In order to support development activity, the Trust has twice increased its borrowing facility with Barclays, from £90m to £110m in 2009, and a further £35m in 2011 to take total facility to £145m.
The Trust undertakes detailed scheme appraisals for all potential development opportunities using set parameters approved by Board, and assesses the impact of each potential development scheme on the Long Term Financial Plan (including detailed sensitivity analysis and risk assessment). The Board considers development proposals based on financial projections and social value delivered through schemes, such as community regeneration and addressing significant under-provision in an area. The development portfolio is designed to provide a balance between financial return, long-term sustainable housing provision and social value delivered through schemes, such as community regeneration and addressing significant under-provision in an area. 15
3.4
Development Activity
The Trust rigorously controls spending before and during each development project to ensure best value is being obtained from investment. The Trust has significantly outperformed initial projections in relation to development activity to date, with all programmes being delivered within 5% of original scheme projections, and returns from all Shared Ownership developments exceeding expectations, both in terms of sales receipts and speed of sale. The graphs below illustrate actual outturn of individual schemes compared to original scheme projections approved by Board: Completed developments Budget V Actual Costs
Budget Actual
The benefits delivered through these initiatives include: • provision of employment and training to 13 young people through the apprenticeship schemes As well as financial outperformance, the Trust has delivered significant social and environmental value through its development programme to date. Initiatives undertaken during 2013/14 include: • employment of apprentices by development partners
• supporting the local economy through supply chain and procurement practices • supporting local community regeneration, including:
• utilisation of local supply chain
• provision of labour and materials to support a project to refurbish a centre in Old Trafford that supports refugees and asylum seekers
• use of local labour on development projects (12% at Fiona Gardens, 40% at Lowther Gardens and 38% at Highfield Road)
• upgrading of local school, nursery and community centre facilities
• delivery of and involvement in community regeneration projects
• creation of community spaces, such as community gardens
• contracting with the Trust’s Social Enterprise, CleanStart, to undertake cleaning and clearance services 16
• provision of wider local employment opportunities through use of local labour on development projects
• contribution of £1,000 to assist in the upgrade of a local Scout hut
Development Activity • supporting the Trust’s Social Enterprise to provide employment opportunities to ex-offenders (41 supported to date, 49% into permanent employment, 12% reoffending rate well below national average) The Trust has ambitions to continue to develop new homes and to achieve growth, both in development activity and the wider business. The Trust has developed an ambitious Business Plan for its development activity, which defines two clear priorities for the Developer Business: • to develop Affordable Housing to grow the asset base of the Trust • to generate profits to be reinvested into the Trust
TRAFFORD HOUSING TRUST
The Business Plan is predicated on four main Value Propositions; development of Affordable and Specialist Housing (charitable), and development for Open Market Sale and Private Rental (non-charitable). The Operating Model for the Developer Business is summarised in the Plan as follows: Open Market Sale
Affordable Housing DEVELOPER Specialist Housing
Private Rental
THT - Capital Investment
Developer - Investment to Generate Capacity
THT - Financial Return
Developer - Investment to B uild More Affordable Homes
3.4
The Developer Plan was approved by Board in March 2014, following a high degree of debate and challenge as to the most appropriate balance of activities. Board considered the proposed portfolio over the next three years, and gave consideration as to the most appropriate balance between tenures, geography and property type. The final approved Plan was felt by Board to provide the most appropriate balance in delivering the Developer’s two priorities. This three-year Plan signifies a step-change in the level of development activity undertaken, and sets out the Trust’s most ambitious development plan to date. Detailed market analysis has been undertaken, utilising both in-house and third party expertise, in order to gain an understanding of current and future demand to inform development plans. The Plan will see: • expansion of development activity into noncharitable activities, such as development for outright sale and private rental • formation of a subsidiary company to undertake non-charitable development activity • the development of an additional 583 homes over three years, of which c.36% will be Affordable Housing • the generation of c.£10m profit through open market sales activity, to be invested in charitable development and non-development activities • delivery of social and environmental value through triple-bottom-line targets, including reducing carbon through a managed build process and use of sustainable buildings, and delivery of social value through responsible supply chain management. Consideration and management of financial and nonfinancial risk is included within the Business Plan, including robust scenario modelling to understand the impact of changes in grant, sales and other key variables on the overall viability of the Developer business. As development activity accelerates, the Trust will ensure rigorous controls around development spend, cashflows, social deliverables and product quality continue to operate effectively.
17
3.5
Future Focus
As well as the ambitions set out above, the Trust has recognised there is a need for it to improve its understanding of the return on assets being achieved, and to become ‘smarter’ in its management of its asset portfolio. This will focus in two areas: • understanding the financial return of individual assets • understanding the social value of assets
3.6
Financial Return on Assets
The Trust has undertaken a review to understand the financial return on categories of assets at a high level, as shown below: 2013/14 Category
Op Surplus £000
Capital Deployed £000
General Needs
8.5
113.6
Sheltered/ Supported
2.7
44.3
TOTAL
11.2
157.9
2012/13 ROA
Op Surplus £000
Capital Deployed £000
7.5%
104.3
2.0
38.8
9.8
143.1
7.5%
6.1%
7.1%
ROA
Op Surplus £000
Capital Deployed £000
7.8
92.9
1.9
42.1
9.8
135.0
7.5%
Capital deployed is the NBV of fixed assets held at 31 March each year
18
2011/12
5.3%
6.9%
2010/11 ROA
8.4%
4.6%
7.3%
Op Surplus £000
Capital Deployed £000
ROA
7.7
88.7
8.7%
1.5
43.0
3.6%
9.3
131.7
7.0%
3.6
Financial Return on Assets In 2010/11 the Return on Assets from the Sheltered and Supported portfolio was significantly lower than that of the General Needs portfolio. During 2010/11 the Trust undertook a detailed exercise to understand the financial performance of its Sheltered Housing provision. At the time of the exercise, the Trust had 21 Sheltered Housing schemes, some of which were
experiencing issues around demand, letability and/ or bad debts. The aim of the exercise was therefore to enable Board and Management to understand the financial performance of individual schemes, and the Sheltered Housing portfolio as a whole, in order to formulate an Action Plan to ensure the financial sustainability of Sheltered Housing provision.
The results of this exercise were as follows: £4.4m
Portfolio NPV
SALFORD
OVERALL:
9
3
9 STRETFORD
UMSTON 20
5
16
13
9
15
18 19
17 TRAFFORD
3
15
8
14 11
SALE
1
2
Scheme Positive >1£m
4
Total positive NPV
12
Total negative NPV
9
Scheme Negative
