Value for money
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Value for Money (VFM) is one of The Group Board’s high level objectives within the Strategic Plan and has been included in everything we do for many years.
The Regulator for Social Housing (RSH) has set a Value for Money Standard that we comply with.
Wrekin's vision and full set of objectives can be viewed here.
Value for Money (Objective 7)
- We will be relentless in our search for value and efficiency
- Ensure we have a sound financial base to sustain quality at minimum cost
- Have in place the right financial capacity at the right time to ensure business growth
- Understand the tipping point where optimum efficiency is secured without negative impacts on services
Deliverable | Progress to Date |
Refinance £200m of the debt portfolio by 2020 | Refinancing successfully completed in October 2019 |
Reduce operating costs by 1% each year until 2024 | Achieved in 2019/20. Budgetary pressures, such as increased costs of Health and Safety compliance, increased pension costs, and the ongoing implications of COVID 19 and preparations for Brexit, mean that this objective is unlikely to be met in 2020/21, and the objective may need to be reviewed. |
Have unit costs that are comparable to others | On track to achieve objective – no outlying VFM metrics in 2019/20 |
View our current Value for Money Strategy 2018 – 2021 (due for review in 2021).
Value for money 2019/20
Set out below are our value for money report metrics for 2019/20, which also form our annual self-assessment. They focus on our internal VFM metrics and the VFM metrics mandated by the Regulator of Social Housing.
The metrics include a 2020/21 target and forecast as at the end of Quarter 2.
Internal VFM metrics
Our results against the VFM metrics that we monitor internally are shown below. These are regularly reported to the Group board and either link back to specific items within the strategic plan, and therefore can be used to measure progress against the achievement of our strategic objectives, or provide a “health check” on the performance of the organisation.
Delivery of new homes
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 Forecast at Q2 | Link to Strategic Plan |
566 homes | 233 homes | 263 homes | 251 homes | 364 homes | 386 homes | Objective 4 – Asset Management Objective 7 – Value for Money |
The number of new homes completed reduced in 2018/19 and 2019/20 compared to 2017/18 as the Group’s previous debt portfolio came to the end of its term. Activity was scaled back to a level that was deliverable under the existing facilities, while the Group put in place a refinanced debt portfolio to fund its activities over the next five years.
With the successful completion of that project in October 2019, development activity began to increase again, although it will take a while for that activity to translate into completed homes. Hence the target for 2020/21 has been set at 364 with the Group then aiming to deliver an average of at least 500 homes per year over the remaining years to 2025. Latest forecasts suggest that the Group will slightly exceed the 2020/21 target, by 22 homes.
Total income from property disposals
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 Forecast at Q2 | Link to Strategic Plan |
£15.3m | £10.5m | £8.8m | £10.3m | £8.8m | £8.1m | Objective 4 – Asset Management Objective 7 – Value for Money |
Income from property disposals includes income from sales under the Asset Renewal Strategy, together with sales under the Right to Buy and Right to Acquire legislation. To a small extent in 2018/19 and to a much greater degree in 2019/20 it also included income from the Voluntary Right to Buy pilot project.
Although there was a reduction in the number of properties disposed of under the Asset Renewal Strategy in 2019/20 compared to previous years, income from disposals under the Voluntary Right to Buy pilot project was more than sufficient to compensate for this. As a result the business plan target was exceeded by £1.5m, which will be reinvested in the development of new homes and mean that a lower level of drawdown will be required against the Group’s current loan facilities.
Income from asset renewal sales is forecast to be slightly down in 2020/21 due to the pause in sales during the early months of the initial COVID-19 lockdown and, although this has been partly offset by additional RTB/RTA sales, these have not made up the whole gap.
Overall customer satisfaction
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 YTD Q2 | Link to Strategic Plan |
94% | 92% | 92% | 95% | 92% | 88% | Objective 5 – Customers Objective 7 – Value for Money |
After a slight reduction in 2018/19 (although it still met the target level set in the strategic plan) it is pleasing to note that the overall customer satisfaction percentage improved to 95% in 2019/20. Further analysis of customer satisfaction is shown below.
YTD figures for 2020/21 are below the target. This may be connected to the fact that surveys are now done by e-mail, SMS text message rather than telephone only and e-mail surveys produce lower results.
Satisfaction with | 2019/20 | 2018/19 |
How the Group deals with repairs and maintenance | 89% | 91% |
Being treated fairly and with respect | 96% | 90% |
The services provided by the Group | 95% | 92% |
Value for money for rent | 91% | 90% |
Views listened to and taken into account | 91% | 73% |
Neighbourhood as a place to live | 91% | 83% |
All the measures except one show an improvement in 2019/20, as compared with 2018/19, and the results in all categories remain strong when compared with others across the sector.
In 2020 the Group adopted the new Housemark STAR satisfaction survey system and the questions therefore will change in 2021/22.
Repairs service delivery – repairs completed on day reported
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 YTD Q3 | Link to Strategic Plan |
85.2% | 79.2% | 85.0% | 79.0% | 85.0% | 85.5% | Objective 4 – Asset Management Objective 5 – Customers Objective 7 – Value for Money |
The Group continues to offer customers a same day repairs service between the hours of 8am and 8pm, seven days a week. Performance in 2018/19 dropped below the target level due to initial issues with the introduction of new scheduling software and higher than normal vacancy levels within the trades teams. These issues have now been addressed and the new IT solution enables the Group to deliver a more efficient service to its customers, optimizing the utilization of its trades staff across the service.
The IT issues did persist into the first half of 2019/20, which had a negative impact on the measure. Even though performance improved significantly in the second half of the year, when it attained the target level of 85%, the cumulative position for the full year still fell short of the 85% target. Even given the issues detailed above, the Group’s service, where almost 4 out of every 5 repairs reported are consistently completed on the same day, is a sector leader.
Clearly the COVID-19 pandemic will have an impact on the 2020/21 figure too as the scope of the repairs service was reduced during the early part of the lockdown period and resources focused on the delivery of essential repairs only. The repairs service restarted and was fully operational by July 2020, but while the latest lockdown may hamper efforts to get back to 85% for the full 2020/21 year, we are currently on track to achieve this.
Rent collection
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 YTD Q3 | Link to Strategic Plan |
100.6% | 101.0% | 100.0% | 101.4% | 100.0% | 105.5% | Objective 5 – Customers Objective 7 – Value for Money |
Rent collection levels remained exceptionally high again in 2019/20, with collection of both current rents and recovery of some former tenant arrears contributing to collection figures in excess of 100% of the current rent roll.
COVID-19 had no impact on the 2019/20 figures (as lockdown measures were only imposed about a week before the financial year end). Rent collection figures for 2020/21 so far have remained strong and are almost unchanged from those experienced in previous years. The economic impacts of the pandemic may be felt more keenly as support for people via the government furlough scheme is wound down and redundancies become more widespread, although the Group has also performed well in collecting rent from the cohort of tenants on Universal Credit so far.
Arrears levels
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 YTD Q3 | Link to Strategic Plan |
0.51% | 0.39% | 0.50% | 0.42% | 0.50% | 0.55% | Objective 5 – Customers Objective 7 – Value for Money |
The picture with regard to arrears levels very much mirrors that given by the rent collection figures above, as would be expected. Current tenant rent arrears remain at the exceptionally low levels that have been achieved by the Group over recent years. Again, so far in 2020/21 arrears levels have not been adversely affected to any significant degree by the COVID-19 pandemic.
Rent loss from voids
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 YTD Forecast | Link to Strategic Plan |
1.34% | 0.65% | 1.24% | 0.72% | 1.18% | 1.47% | Objective 4 – Asset Management Objective 5 – Customers Objective 7 – Value for Money |
Rent loss from void properties was similar in 2019/20 to the level experienced in 2018/19 and once again it was well within the target included in the approved annual budget. The forecast for 2020/21 takes into account the fact that lettings were suspended for a number of weeks during the early part of the initial lockdown and, although performance has returned to normal levels since, it is unlikely that the target will be met for the full year.
Average relet times
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 YTD Q3 | Link to Strategic Plan |
15.41 days | 15.31 days | 17.00 days | 14.57 days | 17.00 days | 35.32 days | Objective 4 – Asset Management Objective 5 – Customers Objective 7 – Value for Money |
The time taken to relet void properties reduced once again in 2019/20 and was within the internal target set. COVID-19 has had an impact on the 2020/21 figures as relets were paused during the early part of the lockdown period and, although they have since resumed and are returning to normal levels of performance, it is unlikely that the target will be met for the full year.
Gas servicing
2017/18 Actual | 2018/19 Actual | 2019/20 Target | 2019/20 Actual | 2020/21 Target | 2020/21 YTD Q3 | Link to Strategic Plan |
100% | 100% | 100% | 100% | 100% | 100% | Objective 4 – Asset Management Objective 5 – Customers Objective 7 – Value for Money |
The Group maintained its excellent level of compliance performance again in 2019/20, with 100% of properties having a valid gas servicing certificate. During the initial COVID-19 lockdown period it proved somewhat more difficult to gain access to people’s homes as many customers were shielding or self-isolating. However, the situation was closely monitored, with servicing visits rearranged for dates after the shielding/self-isolation periods were completed and customers issued with carbon monoxide detectors in the interim.
As restrictions began to be lifted activity in this area resumed and returned to normal levels. The servicing programme was “front-loaded” to try to complete all services due by 31 March 2021 as early as possible, with the result that 100% of services were completed by the end of Quarter 3.
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Regulatory VFM metrics (bench marking)
Our results against the Regulatory VFM metrics are set out below.
In addition to showing our own results over the period from 2017/18 to 2019/20, we have compared them to the sector median and upper quartile figures, as contained in the 2019 Global Accounts published by the Regulator.
Reinvestment %
Metric | 2020/21 Forecast | 2019/20 Actual | 2018/19 Sector Median | 2018/19 Sector Upper Quartile | 2018/19 Actual | 2017/18 Actual |
Re-investment | 8.1% | 8.8% | 6.2% | 8.7% | 6.2% | 8.4% |
The reinvestment percentage metric, which measures the level of investment in the Group’s new and existing stock, increased in 2019/20, to 8.8%, which is virtually in line with the sector upper quartile level. This reflects the continued high level of investment in existing stock as part of the capitalized major repairs programme and the Group’s significant development activity.
During 2019/20 the Group spent £7.7m on improvements to existing properties (2019: £6.6m). As a result of sustained investment at this level over a number of years all the Group’s properties, apart from a small number that would have required remedial work had they not been earmarked for disposal under the asset renewal strategy, met the Decent Homes Standard. This has been the case for the last 11 years. The Group also invested £46.9m in new development in 2019/20 (2019: £29.5m) with development activity increasing over the latter part of the financial year, following the completion of the refinancing project.
The forecast for 2020/21 reduces slightly – although the development programme activity will be higher than in 2019/20, the latest forecast is that we will spend 75% of the original planned maintenance budget, which will reduce the figure for spend on existing stock. This reduction is as a result of the pause in activity during the early weeks of the first lockdown.
New supply delivered (social housing %)
Metric | 2020/21 Forecast | 2019/20 Actual | 2018/19 Sector Median | 2018/19 Sector Upper Quartile | 2018/19 Actual | 2017/18 Actual |
New supply of social housing | 3.0% | 2.0% | 1.5% | 2.5% | 1.8% | 4.4% |
Although the level of development activity, and therefore the amount of new supply of social housing delivered, was lower in 2018/19 and 2019/20 than in 2017/18, it was still significant. 251 new homes were completed in 2019/20 (2019: 233), equating to a new supply percentage of 2% (2019: 1.8%), placing the Group mid-way between the sector median and upper quartile figures.
This level of delivery has consistently placed the Group in the top 50 developers among social housing providers in terms of annual growth in percentage terms over the last few years. The small increase in the percentage in 2019/20 compared to 2018/19 reflects that fact that development activity increased in the latter part of the year in line with Group’s ambitious future plans.
The Group plans to complete a further 364 new homes in 2020/21, which would represent a new supply percentage of 3.0%, and a total of 2,364 over the period to 2024/25, with funding now in place to support this after the completion of the refinancing project.
New Supply delivered (non-social housing) %
The Group did not deliver any of this type of housing in either 2019/20 or 2018/19. The Group sees itself very much as a provider of social housing and so the Group board have not included this type of development in its strategy.
Many other providers develop properties for market-rent or outright sale to cross-subsidise their social housing development programme. However, the group board has taken the decision that these types of development, which expose the organisation to a higher degree of market risk, are outside of its risk appetite.
Gearing %
Metric | 2020/21 Forecast | 2019/20 Actual | 2018/19 Sector Median | 2018/19 Sector Upper Quartile | 2018/19 Actual | 2017/18 Actual |
Gearing | 66.5% | 71.9% | 43.4% | 53.9% | 62.9% | 63.8% |
The Group’s gearing percentage has always been higher than the sector median and upper quartile levels as a result of two things. Firstly, as an LSVT organisation, it has carried a higher level of debt than “traditional” associations since its inception, having borrowed significantly to fund that initial transfer transaction and the consequent initial major repairs programme. Secondly, over the last 10 years the Group has also engaged in significant development activity, as noted above, and has borrowed further to support this.
The increase in the gearing percentage in 2019/20 reflects the impact of the payment of breakage costs to terminate some fixed rate loans under the previous debt portfolio in order to gain more significant benefits under the new debt structure over the longer term. The Group’s current business plan shows that the gearing percentage will gradually reduce over the next five years as the current development programme is completed and the additional units completed start to show a positive return.
It is forecast to reduce in 2020/21 as some of the revolving credit facilities have been repaid as cash has been freed up from providing collateral against bond proceeds and future mark to market positions as that cash has been replaced with property security.
EBITDA MRI Interest Cover %
Metric | 2020/21 Forecast | 2019/20 Actual | 2019/20 Actual (excluding one-off refinancing costs) | 2018/19 Sector Median | 2018/19 Sector Upper Quartile | 2018/19 Actual | 2017/18 Actual |
EBITDA(MRI) Interest Cover | 172.1% | 40.2% | 157.3% | 184.0% | 238.0% | 133.5% | 136.1% |
The position with regard to the EBITDA MRI interest cover percentage is linked to that shown by the gearing percentage. The Group’s historical high level of borrowing as an LSVT and its high level of development activity (and consequent additional borrowing) means that this measure is below both the sector upper quartile and sector median measures. As noted elswhere in this report, during 2019/20 the Group completed a major refinancing exercise.
As part of this exercise the Group paid breakage costs of £52.1m to terminate a number of existing fixed rate loans in order to secure the more significant long term benefits of the refinancing package. In the table above the EBITDA (MRI) measure is calculated on two bases. The lower measure is using the figures as shown in the accounts (which is the method prescribed in the regulatory guidance). The higher figure shows the same calculation excluding the breakage costs to give an indication of the underlying EBITDA (MRI) position.
On this second basis the measure for 2019/20 has improved significantly compared to the two previous years due to the lower cost of debt, and therefore lower interest costs, achieved under the refinancing exercise, which had a positive impact over the latter months of 2019/20 and will have a more significant postive impact in future years, as can be seen from the 2020/21 forecast.
Headline social housing cost per unit
Metric | 2020/21 Forecast | 2019/20 Actual | 2018/19 Sector Median | 2018/19 Sector Upper Quartile | 2018/19 Actual | 2017/18 Actual |
Social Housing Cost per Unit | £3,537 | £3,622 | £3,690 | £4,690 | £3,343 | £3,269 |
Headline social housing costs per unit increased in 2019/20 but are still slightly below the 2018/19 sector median level. The main reason for the increase is additional expenditure incurred on existing stock to make fire safety and other improvements in the aftermath of the Grenfell fire.
It also reflects the fact that, whilst the Group was able to bear down on costs in the first two years of the four year period of rent cuts (to offset the impact of the reductions in rental income), this position became harder to sustain over the longer term, leading to a larger increases in costs per unit in 2018/19 and 2019/20. The current 2020/21 forecast is a slight improvement on 2019/20.
Operating margin (social housing lettings) %
Metric | 2020/21 Forecast | 2019/20 Actual | 2018/19 Sector Median | 2018/19 Sector Upper Quartile | 2018/19 Actual | 2017/18 Actual |
Operating Margin (Social Housing Lettings) | 30.5% | 33.5% | 29.2% | 34.6% | 36.0% | 35.7% |
The operating margin on social housing lettings reduced slightly in 2019/20, but it is still very close to the sector upper quartile figure for 2018/19, which indicates that the Group is operating efficiently. As noted above, the Group has invested in its existing stock during the year to improve fire safety measures and has had to cope with other cost pressures in a period when its income per property has reduced each year for the last four years.
The latest forecast for 2020/21 is a reduction on last year but is still above the sector median. Forecasts during the year have been made on a prudent basis during the COVID-19 pandemic and the final figure could still come back closer to that achieved in previous years.
Operating margin (overall) %
Metric | 2020/21 Forecast | 2019/20 Actual | 2018/19 Sector Median | 2018/19 Sector Upper Quartile | 2018/19 Actual | 2017/18 Actual |
Operating Margin (Overall) | 23.1% | 26.2% | 25.8% | 30.8% | 26.3% | 26.2% |
Overall operating margin has stayed constant over the last three years and is just above the 2018/19 sector median level. Given that the overall operating margin figure includes the Group’s care activities, which have lower margins than those achievable on its social housing activities, this again indicates that the Group is operating efficiently when compared across the whole sector.
Tracking the reduction in operating margin on social housing lettings above, the forecast for 2020/21 is for a small reduction compared to previous years.
Return on capital employed (ROCE) %
Metric | 2020/21 Forecast | 2019/20 Actual | 2018/19 Sector Median | 2018/19 Sector Upper Quartile | 2018/19 Actual | 2017/18 Actual |
Return on Capital Employed | 3.4% | 3.9% | 3.8% | 4.7% | 4.8% | 5.5% |
Return on capital employed has reduced over the last three years but it is still on a par with the sector median level for 2018/19. This is because the overall operating margin has stayed relatively constant over those years in percentage terms, but on a reduced turnover figure, meaning that the operating margin is a lower number in absolute terms.
Meanwhile, the net assets of the organisation (which represent the capital employed in the business) have increased as the organisation has made surpluses each year. The combination of these two factors has the direct consequence of reducing the ROCE ratio.
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Delivering social value
The Group contributes to the well-being of its tenants, the wider community and broader neighbourhoods in many ways. Although some of the benefits are hard to measure, we can provide some estimates based on the factual information we have. The Group will continue to work to ensure that the impact of these activities is maximised. For example:
- the tenancy sustainment team work with prospective and new tenants of the Group to ensure that they are ready to take on a tenancy and better equipped to sustain that tenancy over the longer term. The team undertake pre-tenancy assessments with prospective tenants, which include a robust budget and affordability discussion, ensuring they have the means and the skills to set-up and manage a home. In 2019/20 the team carried out 341 such assessments.
- the Money Matters service works to ensure that customers of the Group access the welfare benefits to which they are entitled and are as well prepared as possible to cope with the impacts of welfare benefit reform. During 2019/20 the Money Matters team successfully brought in more than £2.582m in additional benefits for our customers, engaging with 1,708 households and carrying out 594 pre-tenancy assessments and benefit checks
- maintaining our commitment to providing a range of good quality placements and training opportunities within the local community. During 2019/20 the group directly employed 20 apprentices and 11 trainees, gave 289 volunteer opportunities and provided 68 student work placement opportunities;
- using the Reviive furniture and recycling brand, now operated via the Group’s subsidiary Old Park Services Limited, to provide affordable furniture to both tenants and the wider community, as well as recycling unwanted furniture to reduce the impact on the environment with regard to landfill and CO2 emissions. During 2019/20 the Group continued to provide discounts to its tenants on Reviive’s standard prices and also continued to provide furniture packs to individuals setting up a home for the first time.
Learn more about social value and View our 2019/20 full Social Value Report.
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