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Financial Perspective at New Charter
Great Homes, Great Neighbourhoods, Great People
The New Charter Group was formed in March 2000 with the transfer of the
Tameside MBC housing stock and ancillary assets. It was, and remains,
a significant financial undertaking, and was charged with delivering
a massive programme of investment in the housing stock amounting to £224m
over a ten year period. Achievement of this programme,which is now substantially
complete, will remedy the levels of disinvestment which had grown due
to the lack of resources available to the Council, and will thereby ensure
that the pledges made to tenants prior to transfer are upheld. In March
2004 the Group decided to accelerate the pace at which this programme
of investment would happen, and also brought in a significant amount
of additional funds to address problems relating to the environment.
In November 2005 Aksa HA, (based in Oldham, but also owning stock in Tameside, Bury and Manchester) joined the Group..
The Group has growth as a clear objective, and a huge step was made in this context with the transfer of Gedling BC housing stock to Gedling Homes in November 2008. At that point Gedling Homes became a member of the New Charter Group.
The Group is clear that the viability of its business lies in the creation and maintenance of sustainable communities - a well rounded investment programme is the key to success.
External
Funding
As a Large Scale Voluntary Transfer, (LSVT), organisation
the financial structure of the Group is such that
the investment programme demands external funding.
At the point of transfer from the Council a long
term facility of £213m underpinned the Group's
finances. In March 2004 this was increased to a total
of £270m, in order to provide resources to
address environmental issues and start a new build
development programme. In June 2007 this was increased
again to £290m, providing yet more development
opportunities. This facility has been agreed with
a syndicate of funders, and is controlled through
the operation of a formal Facility Agreement with
the Nationwide Building Society which has extended
loan finance of £170m. Our other partner in
the syndicate is the Royal Bank of Scotland, (£120m).
In addition Aksa has a funding facility of £13m,
(Royal Bank of Scotland (£8m) and Dexia (£5m)),
which was raised to purchase leased properties and
for future development opportunities.
The creation of Gedling Homes was underpinned by a long term, (30 year), loan
facility of £35m provided by Lloyds TSB plc.
Income
The main income base is the Group's rental income stream
which is currently valued at £67m annually. The Group
is progressing towards meeting the Government's requirement
relating to "Rent Reforms". This means that by
2012 the rents payable on the Group's housing stock will
be at a level determined by a formula which reflects the
value of properties and relative earnings levels in the region.
This has been reflected in the annual approval by the Boards
of a "Rent Plan" which forms an integral element
of the Group's overall Business Plan.
Additionally other income amounts to £11m, which includes Gap Funding support
from the Government for Gedling Homes; grant related to development schemes and
other miscellaneous charges and income. in terms of prudent financial planning
the Group has assumed that there will be no income derived from asset sales.
Expenditure
The Group's primary objective is repairing, maintaining and
investing in its homes. Whilst the investment programme for
the stock transferred from Tameside Council in 2000 is now
substantially complete, 2010/11 is the second full year of
the Gedling Homes programme. This year we will spend £22m
investing in our stock, and this will be further enhanced
by responsive repairs; cyclical maintenance and ensuring
that gas safety chcecks are undertaken. We will spend £16m
on these activities. In total in 2010/11 we will spend £38m
- equivalent to over £2,000 for every one of our homes.
Delivery of this programme, investing in the Group's wider
regeneration role and the day-to-day management of the housing
stock together with the overall business and information
services infrastructure is estimated to cost around £27m.
The cost of servicing the loan finance is around £17m,
which reflects interest charges on borrowings in excess of £300m.
The Group is protected against adverse movements in interest
rates through its Treasury Management Strategy which seeks
to balance the opportunities of short term borrowing with
assurance about long term costs.
New Charter has a clear vision of growth. In this context
we are looking to enhance the development schemes we have
completed in recent years which have added nearly 500 homes
to our stock. We have set aside nearly £10m in 2010/11
for this activity.
Financial
Governance
The Boards of the Companies within the Group, under the overall direction
of the Board of New Charter Housing Trust, ("the Parent"),
are statutorily responsible for putting in place and implementing
effective financial control mechanisms. To facilitate this the Group
employs the services of Beevers & Struthers to provide the internal
audit function, with Baker Tilly as external auditor. These functions
are discharged through the formal operation of the Group's Audit
Committee. Similarly the Tenant Services Authority, (which replaced
the Housing Corporation in December 2008), exercises a regulatory
role with regard to the Registered Provider elements of the Group,
(New Charter Housing Trust Ltd; New Charter Homes Ltd; Gedling Homes
and Aksa HA). The Group operates a Finance Committee which has responsibility
for overall financial control and which reports to the Trust Board.
The nature and size of the Group's Loan Facility demands external
advice which is provided by JC Rathbone Associates Ltd.
Financial
Control
The Group discharges this responsibility through its Executive
Director of Corporate Resources and Deputy Group Chief Executive,
Martin Frost.
A key element of his responsibilities is ensuring effective financial
planning and control. Helen Whittingham, (Director of Resources),
has responsibility for this area which includes long term financial
planning; budget and final accounts issues and financial risk management.
Additionally, her role ensures that the strategic delivery of the
Corporate Plan is fully informed from a financial perspective
Julie Vickers is Director of Business Support, incorporating Revenues;
Information Systems and Payroll together with a wider responsibility
for ensuring that back office business support services are delivered
in a cost effective manner across the Group. A key element of her
role is to deliver an effective billing, collection and recovery
process for all revenues due to the Group, (around £67m annually).
Financial
Performance
An overview of financial performance in 2008/09 can be seen
in the Group's Annual Report, (on the Annual Reports page). Information
related to 2009/10 will be published on completion of the final accounts
for the year, which will be by September 2010. More detailed information
is also available in the Directors Report and Financial Statements
for each of the Group companies, which are available on the Financial
Reports' page.
The Tenant Services Authority was created in December
2008 and is responsible for ensuring that housing
associations are financially viable, (taking over
the role which was previously that of the Housing
Corporation).
The TSA issued its regulatory judgement
on the New Charter Group in January 2009 which
was that:
"The group meets the expectations
set out in the Regulatory Code in terms of financial
viability."
The TSA's Regulatory Judgement document is here...
The TSA public site: Tenant Services Authority
