Progress

Housing Group

Presentation by

Debbie Atherton & Helen Lecky

Finance Team

March 2014

Today’s Discussion

• Who are the finance team?

• What services do the team provide?

• Cash is King!

• What are our challenges and how can they

become our opportunities?

• Value for Money

• Your feedback

BINGO TIME!!!!

Overview of the Progress Finance

Team

Operations Director Finance

Project Accountancy

Group Accountancy

TreasuryProcurement

& Purchase to pay

Database

What do we do in Finance?

Project Accountancy

Planning our finances in the long term

Setting our rents and service charges

Financial assessing our new developments

Treasury Management

Managing cash in our bank accounts

Borrowing loans from banks using our properties as

security

Accountancy

Producing and managing our budgets

Reporting our financial position

Procurement & Purchase to Pay

Paying our suppliers and customers for their

services

Procuring services at the best price and for good

quality

Database Team

Processing our rent and other payments

Set up direct debits to collect rent & arrears

payments

Database Team

Management of posting rent and other

income

Responsible for setting up and calculating

direct debits for payments

Update housing benefit entitlements

Coordinate annual rent and service charge

increase process

Our Database Team Challenges

Need to ensure we have robust systems for the collection

and posting of income ensuring there are as many options

to pay as possible and that payments are receipted to

accounts on a timely basis

Welfare Reform - Increase in number of transactions and

changes to how payments are made

Having systems in place to offer more flexible direct debit

payments to collect any day when introduction of Universal

Credit

Our Database Team

Opportunities

Look at methods of payment and tailor these to our

customers, for example: introduction of automated

telephone payments, able to pay rent over the telephone 24

hours a day

Review and streamline processes for income collection

Ensure value for money when looking at different methods

of payment

Transaction Payments

Between 2012 and 2013 we had an increase of 6% in the

number of transactions to 32,000 with internet payments

and direct debits increasing

Our payment methods:

Swipe Cards – Post Office 0.49p

- Paypoint 0.52p

- Payzone 0.32p

Direct Debits 0.07p

Card & Internet Payments 0.49p

Cheques 0.25p

Project Accountancy

Challenges:

– Ensure 30 year business plans remain strong

and are suitably “stress tested” to consider

future uncertainty

Opportunities:

– Upcoming HCA bid round to develop more

Affordable Homes

– Tax planning opportunities – minimising cash

leaving the Group

Group Accounts

Challenges:

• Major change to accounting standards from April 2015

• Implementation of new accounting system with streamkined

processes

Opportunities:• Assessment of our properties to see which are loss making

• Annual budget process to ensure financially strong to

deliver our priorities

Our Treasury Challenges

Decreasing security (we can borrow average £44k for each property but have to

spend average £100k) existing houses have to “top up”

No long term funding of 30 years from banks

Universal Credit – Direct Payments will create increased bank transactions

Maintain covenant compliance.

Ensure we borrow money at best time – what‟s going to happen to interest

rates?

Ensure there is sufficient funding for all the development we want to do.

Not giving the banks any opportunity to make our existing loans more

expensive.

Our Treasury Opportunities

New funding at the right time could make long term savings for the

Group.

Process improvements for transaction posting will improve customer

service and customer information.

Fixing loans at low interest rates frees up more money to spend on

existing homes and new developments.

Maintaining and improving financial strength attracts better funding

deals.

VFM - includes assessments on properties that cost a lot of money

and whether they are good for the company. Decreasing costs and

losses will achieve higher valuations.

How much we’ve borrowed (and what

it costs)

Total Group Borrowings 31 Dec 2013 £millions

263

11792

50

4

0

50

100

150

200

250

300

TOTAL NPHA PCHA NFHL GRP

•Total Interest Payments per year £12million

• If interest rates rise 1% = Extra £2.6million cost every year

What do we have to offer?

Each house is worth a loan of

• New Progress £ 44,000

• New Fylde £ 31,000

• Supported properties £182,000

Security (houses) For Loans Dec 13 £m

£325.46

£46.61

£35.89

£21.65 Already Used

Available for agreed loans

Free but need bank'spermission

Free for more borrowing

Where have all the banks gone? (and

what does that mean?)

• Interest per year paid now £12million

• Interest per year with new funder £17.2million

This would mean £5million less to be spent on your homes

Banks borrowing rates 2008 vs 2013

1.64%

0.61%

0.30% 2.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2008 2013

Margins (lenders"profit")

Interest

Banks available

2008 2013

10 6

• Credit crunch has meant lots of mergers….and banks still struggling….

Procurement and Purchase to

Pay

• Management of Procurement and

purchasing processes

• Compile and publicise tender opportunities

• Manage Group Supplier list

• Invoice processing for all the Group

• Make payment to all suppliers

Our Procurement Challenges

Current economic environment means that suppliers are very keen to obtain

business but also more at risk of failure.

Increasing levels of legislation

Social Value Act

Late Payment Legislation

Changes to Public Procurement Regulations

Advances in technology and changes to the payment environment

Supporting smaller businesses to embrace new technologies and processes

Resistance to change both from staff and suppliers to new technologies and

processes (essential if we are to achieve VFM processes)

Our Procurement Opportunities

Opportunity to increase further develop our social value measurement.

Increase use of technology for publicising and tendering contract

opportunities.

Improved processes utilising new technologies.

Opportunity to increase local suppliers and their engagement with

Progress Futures

Continue to review the Group‟s procurement arrangements to achieve

value for money across all types of purchase.

Other Challenges and

Opportunities

Our challenges:

Welfare Reform – arrears and voids

Keeping up with technology to improve our services

Changing needs of our customers

Our opportunities:

Going digital – investment to improve services

Remodelling our sheltered schemes

Downsizing options

Importance of cash management…………

Cash is King!

Cash In flows 2012/13

Grants

Received

£4.8m

Loans

Drawndown

£12.5m

Disposal

Proceeds

£1.0m

Operating

income -

e.g. rent,

service

charges,

other

operating

income

£64.1m

Cash Out Flows 2012/13

Operating

costs - e.g.

management,

maintenance,

service costs

£36.2m

Purchase of

other fixed

assets £0.7m

Loans Repaid

£0.5m

MR

(Component

additions)

£3.5m

Net Interest

£11.4m

Corporation

Tax £0.1m

Acquisition &

construction

£28.3m

Total Cash Flows

• Rents

• Services Charges

• External Income

• Grant Receipts (C)

• Loans Advanced (C)

• Maintenance

• Management

• Property Acquisition (C)

• MR (Components) (C)

• Loan Repayments (C)

• Interest Charges

• Pension Contributions

• IT equipment & software (C)

• Office Costs

Ins Outs

Value for Money (VFM)

Where, why and how do we spend our

money?

What are our achievements last year?

What are our targets this year?

How do we compare with others?

What are your thoughts….?

What does VFM mean for Progress?

• Our strategy enables us to:

Maintain and improve our existing properties

Manage our liabilities i.e. how much we owe

Deal with external challenges such as

welfare reform

Continue our developments providing new

homes to new customers

QUIZ: Where are we spending

money next year?

£18m, 22%

£19m, 23%

£12m, 15%£2m, 3%

£15m, 19%

£15m, 18%

0, 0%

Where are we spending money

next year?

MAINTENANCE£18m22%

DEVELOPMENT ADMIN£1m2%

DEVELOPMENT PROPERTY£18m21%

INTEREST PAYABLE£12m15%

INFORMATION TECHNOLOGY PROJECTS

£2m3%

CORPORATE RUNNING COSTS£10m12%

SUBSIDIARY RUNNING COSTS£5m6%

SERVICE COSTS£9m11%

SUPPORT COSTS£6m8%

2014/15 EXPENDITURE

MAINTENANCE

DEVELOPMENT ADMIN

DEVELOPMENT PROPERTY

INTEREST PAYABLE

INFORMATION TECHNOLOGY PROJECTS

CORPORATE RUNNING COSTS

SUBSIDIARY RUNNING COSTS

SERVICE COSTS

SUPPORT COSTS

What do we look at?

• Maximise our income

• Look at our properties – are they cost

effective to maintain? Do we need to

remodel or sell?

• All areas of expenditure

• How we buy goods and services

• How we minimise loss to the Group i.e.

insurance, fraud

Our recent achievements –

Assets and Income

• Remodelled sheltered bedsit

accommodation in Fylde

• Disposed of pre-cast concrete properties

• Bring service charges in-house for Progress

Care

• Resident warden service reviewed

Our recent achievements – Cost

• Senior management and governance

changes – reduction in numbers

• Joint working between NPHA and NFH

• Digital communication

• External assessment of our Tenancy

Enforcement service

• Active treasury management

Our recent achievements –

Procurement

• Reviewed 19 contracts c£4.2m

• Fixed price procurement incl materials and

heating spares

• Grounds maintenance contract

• White goods contract

• E-tendering system to reduce admin and

costs

How do we compare?

• We benchmark with Housemark, the HCA

Global Accounts and internal reviews

• Ask our customers via customer involvement

with 99.1% stating „good‟ or „ok‟ VFM

• Scrutiny Panel service reviews for ASB and

responsive repairs action plan

• Tenant satisfaction top quartile

• Higher than average management cost per

unit

Our targets for continued

improvement…

• c£1.7m procurement contract reviews

including grounds maintenance for PCHA

• Demonstration of efficiencies arising from IT

investment

• Review PCHA subcontractors

• Continued joint working NPHA and NFH

• Growth of social alarm services

Your feedback is important to

us…

What are your priorities?

Are we spending in the right areas?

Any ideas of improving value for money?