"Use assets effectively and support sound financial health"
Sustained sound financial stewardship has enabled a bold refresh of the Business Strategy to be embarked on, with surpluses applied to delivering agreed purpose. The financial business plan has been used to inform investment in ambitions, this is carefully tested against potential risk scenarios. It was also agreed to start work on mapping key financial drivers, so that measures impacting these could be better understood and acted on.
The low interest environment capitalised on through treasury strategy and policy continues to secure benefit. As a not-for-profit business whose model relies heavily on debt borrowing, the lower the value of servicing this debt the higher the surpluses available to support business ambitions. Locking in low-cost borrowing as English Rural has sought to do also provides medium to longer term financial confidence.
Development subsidiary ER Homes Ltd has had another successful year and generated surpluses that are gift-aided back to English Rural. The buoyant rural property market has seen cautious financial projections exceeded when sales have completed.
During the year the Board agreed to implement the rent review by applying an increase of CPI+1%. Recognising the financial challenges facing some residents during the pandemic, £10,000 of hardship grants funded by third-party activity were distributed to those most in need. This approach has helped to ensure that residents are supported, income is managed in line with projections, and growth in arrears over the year has been minimal.
The level of investment in maintaining assets through a programme of planned and cyclical activity has increased within the refreshed Business Strategy. This higher investment is a recognition that the Association’s stock is aging, but also that the aspiration for quality homes is at the core of English Rural’s service offer. This is demonstrated by extending further investment into improving property performance, reducing carbon emissions and lowering household energy bills. A further 49 homes benefitted from a retro-fit programme of installing air-source heat pumps in place of older style electrical storage heating.
There was a substantial shift towards finding more digital and automated ways of working. Although these efficiency gains are often small in scale, the cumulative result is increased staff capacity and lower overall operational costs.
As English Rural borrows more to fund ambitions, treasury strategy is also used to manage the profile of debt, taking advantage of the continued low interest environment and hedging against future interest rate changes.
The average interest paid on debt at the end of the year was 3.40% (3.74% 2019/20). Borrowing potential has also been supported by making sure that, so far as possible, new homes can secure a Market Value Subject to Tenancies (MV-STT) value - this being higher than Existing Use Value Social Housing (EUV-SH), that reflects greater restrictions on property titles and rents. There have also been some retrospective changes to achieve this on legacy stock. The combined impact of these measures being the freeing up assets and increasing available cover for new borrowing.
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Continued gains from low-interest rate environment
Financial gains used to increase investment in purpose, including higher levels of investment in existing homes
Improvements to key financial metrics
Maintained income streams from ER Homes Ltd and third-parties
Staffing capacity gains through business improvements
Our affordable rural homes in Mistley, Essex, which were completed earlier this year
>> Planning for investment in existing homes has generated further discussion as part of the refresh of the Business Strategy due to the ageing profile of assets and heightened environmental ambitions. Improved use of asset data will help to inform and test how provision is made to support this.
>> Although the decision was reached after careful consideration to apply the permitted rent review in full, assessing the impact of this on households and making provision to support those in need was a valuable part of the Association’s offer.
