"Use assets effectively and support sound financial health"
The importance of securing the best value out of our work and assets is not lost on English Rural and to show how we will achieve this a separate Value for Money Statement has been produced this year.
The benefit of examining value for money in this more forensic way is that it helps with a better understanding of performance across all areas of the organisation, and critically how these can be improved upon when needed. Considering this matter separately also provides an opportunity to highlight values that we know our residents and partners care about, to sit alongside those accepted as standard across the sector.
The annual refresh and testing of the long-term Financial Business Plan was more robust this year as a range of dynamic economic risks continue to worsen. By understanding our financial strengths and weaknesses, we can proactively protect the interests of those invested in our success, whilst at the same time commit funds to agreed purpose, across each of the seven strategic ambitions. The financial statements presented later in this report show a continued strong financial performance, largely consistent with budget forecasts.
The rent we receive is the most critical financial component of our financial health that underpins our ability to invest in services to residents and new homes. This year the Board considered the level of rent increase to pass onto residents exceptionally carefully, recognising the financial strain on household finances arising from cost-of-living pressures. Ultimately, they took the difficult decision to pass on the full increase permitted of 4.1% but sought to mitigate the impact of this on those struggling most by resourcing a financial support fund to sit alongside the increase. Where hardship is evidenced, residents are able to financially benefit from this fund.
One of the main reasons for passing on the rent increase in full was the need to make allowances for English Rural’s own cost increases, with spikes being seen in maintenance and building materials.
Work was started during the year to prepare for a new funding exercise, with this work due for completion towards the middle of 2022. Further funding of around £32m is being sought, partly to refinance an existing £12m revolving credit facility and to fund strategic ambitions to invest in improvements to existing homes and develop new ones over the next five years.
Careful treasury management continues to make sure money is borrowed and managed on competitive terms, with 82% of loans currently fixed and the average interest rate on all loans at 3.33%.
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.
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Increased focus on value for money through standalone statement
Robust updating and testing of the financial business plan
Overall improvements to key financial metrics
Increased income streams from ER Homes and third-parties
Residents supported through dedicated financial fund
Affordable homes at Forge Farm Row in the village of Hernhill, Kent
>> The scale and risk arising from economic uncertainty make financial planning more important than in previous years. The further deterioration of this risk, either in a way that complies or does not comply with economic norms needs to be carefully monitored. Testing of English Rural’s financial business plan showed that it was able to withstand significant shocks and had a range of measures to apply in response, providing resilience even in a perfect storm scenario. Continued monitoring of risk is vital so that strategic thinking remains adaptable and financial mitigation tactics can be applied quickly, should the need arise.
>> The level of rent increase to pass onto residents is always carefully considered, but this year even more so given the cost-of-living pressures that are known to be facing residents. The scenario for 2022/23 is likely to be even worse given the inflationary link to rent reviews and heightening pressures on household finances.
